GungHo Online Entertainment,Inc.

Business Details

The Group is a single-segment company engaged in the planning, development, operation, and distribution of smartphone games, PC online games, and console games. While deepening its presence in the domestic market centered on its flagship title "Puzzle & Dragons (Puzzdora)," the Group diversifies revenue through the expansion of Ragnarok-related titles (Gravity Group) across Asia and the distribution of its own global titles. Apple Inc., Google LLC, and Razer Inc. are its major customers, with revenue derived from item purchases, monthly subscription fees, and license royalties.

Recent Overview

In Q1 FY2026, both net sales and operating profit improved significantly year on year

In the first quarter of FY2026 (January to March), net sales were ¥26,594 million (up 11.9% year on year), operating profit was ¥3,693 million (up 30.5% year on year), and ordinary profit was ¥4,575 million (up 41.9% year on year), with profit increasing at every stage. In addition to solid sales of Puzzdora, the new distribution of "Ragnarok: The New World" and "Ragnarok Origin Classic" by the Gravity Group contributed to consolidated performance. On the other hand, development costs, primarily outsourcing expenses, have trended upward as the number of titles in the new title pipeline increased from 5 to 9. Net assets decreased by ¥6,444 million from the end of the previous fiscal year to ¥144,888 million, due to dividend payments and the acquisition of treasury shares (treasury share balance increased from ¥43,908 million to ¥46,972 million). Full-year earnings guidance remains undisclosed.

Key Products

Growth Drivers

• Continued contribution to consolidated performance from new distribution of Ragnarok-related titles for the Asian market by the Gravity Group ("Ragnarok: The New World," "Ragnarok Origin Classic," etc.)
• Strengthened game development structure in preparation for global distribution, with the number of titles in the new title pipeline increased from 5 to 9
• Maximizing the value of existing IP through measures to maintain and expand Puzzdora's MAU (collaboration events, anniversary events, etc.)
• Boost to ordinary profit from expanded financial income, including interest received of ¥508 million (up 22.1% year on year)
• Progress in global diversification into Asian regions, including the Indonesian market, as well as North America and Latin America

Risks

• Maturation and flat trend in the domestic mobile game market, along with increasing difficulty in user retention due to diversification of leisure time toward video content and other media
• Risk of profit margin pressure from an increasing trend in development costs, primarily outsourcing expenses, associated with the expansion of the new title pipeline (from 5 to 9 titles)
• Impact on performance from foreign exchange rate volatility (foreign currency translation adjustment decreased from ¥2,689 million to ¥1,794 million)
• High dependence on sales to Apple Inc. and Google LLC, with risk of impact from platform policy changes
• Uncertainty in performance due to non-disclosure of full-year earnings guidance amid rapid short-term changes in the business environment
• Decrease in shareholders' equity due to dividend payments and acquisition of treasury shares (equity ratio declined from 71.9% to 67.6%)