Summary
1H revenue and profit declined YoY. However, standalone 2Q revenue rose from 1Q, and on the same day the company disclosed that results had exceeded its forecast. Based on the 3Q cumulative plan, implied standalone 3Q revenue is JPY 4,480M and operating income is JPY 483M (our estimate). This implies growth in both revenue and profit vs. standalone 2Q. The first check is whether the drivers behind the 2Q beat continued into 3Q. The company cited the new title's contribution and lower outsourcing costs. Next, we will examine equity-method investment losses in non-operating items, along with taxes and non-controlling interests, to gauge results at the recurring profit line and below. The company discloses guidance only for the following quarter. As a result, the full-year outlook will be presented for the first time at 3Q results, and it will be a key focus, including assumptions for a new title slated for release within the year.
Key Points for Next Quarter
| Key Points & Focus | Implications |
|---|---|
Plan Achievement3Q cumulative Revenue and Operating Income vs. company plan | The 3Q cumulative plan calls for Revenue of JPY 11,351M and Operating Income of JPY 1,012M. Standalone 3Q Revenue of JPY 4,480M is required, +23.7% vs. standalone 2Q of JPY 3,622M (our estimate). |
ProfitabilityStandalone 3Q Gross Profit Margin and SG&A trends | The plan implies a standalone 3Q Operating Income Margin of 10.8% (our estimate). We will check whether margins keep improving from 8.0% in standalone 2Q and 7.0% in the prior-year quarter. |
Recurring Profit and BelowEquity-method investment losses and income tax adjustments | The standalone 3Q plan assumes net non-operating items of JPY -159M (our estimate). 1H equity-method investment losses were JPY 257M. Whether 3Q losses exceed this level will determine whether Recurring Profit of JPY 682M is achieved. |
Balance Sheet / Working CapitalAccounts receivable and contract assets, borrowings, cash and deposits | Accounts receivable and contract assets stood at JPY 1,887M at end-2Q, up JPY 489M from the prior fiscal year-end. Borrowings were JPY 724M. We will check whether receivables are converting to cash as the new title's revenue is collected. |
Full-Year OutlookLevel of full-year guidance to be disclosed at 3Q results | Under the company's policy of disclosing only next-quarter guidance, the full-year outlook is expected to be announced for the first time at 3Q results. The benchmark is prior fiscal year Operating Income of JPY 2,079M. |
Key Issues from Previous Results (FY12/2026 2Q Results)
1H Revenue was JPY 6,871M (-23.6%) and Operating Income was JPY 529M (-71.3%). Both declined against a high prior-year base. That said, standalone 2Q Revenue rose +11.5% from 1Q to JPY 3,622M, and Operating Income of JPY 288M also exceeded 1Q (our estimate). The company does not disclose full-year guidance and only publishes next-quarter guidance. Progress against the 3Q cumulative plan and the full-year outlook to be presented at 3Q results are therefore the central issues.
1. Achievement of the 3Q Cumulative Plan and Full-Quarter Contribution from the New Title
- Previous Quarter: 1H Revenue of JPY 6,871M represents 60.5% of the 3Q cumulative plan of JPY 11,351M (our estimate).
- Previous Quarter: In its same-day variance disclosure, the company attributed the 2Q beat to the outperformance of "Inazuma Eleven Cross," launched in June.
- This Quarter Check: 3Q is the first quarter with a full-period contribution from the title. We will check whether standalone 3Q Revenue of JPY 4,480M is achieved (our estimate).
- Key Metric: Achievement rate vs. 3Q cumulative Revenue of JPY 11,351M and Operating Income of JPY 1,012M.
- Key Metric: Comparison with prior-year standalone 3Q results (Revenue of JPY 3,650M).
2. Gross Profit Margin Recovery and SG&A Balance
- Previous Quarter: 1H Gross Profit Margin was 56.7%, below 65.8% in the prior-year period (our estimate).
- Previous Quarter: Standalone 2Q Gross Profit Margin improved to 59.1% from 54.1% in 1Q (our estimate).
- This Quarter Check: We will check whether the outsourcing cost reductions cited by the company continued to contain Cost of Goods Sold in 3Q.
- This Quarter Check: Standalone 2Q SG&A was JPY 1,853M, up +22.2% from 1Q (our estimate). The focus is how new-title launch costs trend in 3Q.
- Key Metric: Standalone 3Q Operating Income Margin. The plan implies 10.8%, to be compared with 8.0% in standalone 2Q (our estimate).
3. Equity-Method Investment Losses and Results at Recurring Profit and Below
- Previous Quarter: 1H equity-method investment losses narrowed to JPY 257M from JPY 959M in the prior-year period.
- Previous Quarter: Distributions received fell to JPY 73M from JPY 197M in the prior-year period.
- Previous Quarter: The company booked income tax adjustments of JPY -125M. As a result, Interim Net Income Attributable to Owners of Parent Company of JPY 383M exceeded Recurring Profit of JPY 358M.
- This Quarter Check: The standalone 3Q plan factors in net non-operating items of JPY -159M (our estimate). We will monitor the trend in equity-method gains/losses.
- This Quarter Check: Deferred tax assets rose to JPY 160M from JPY 34M at the prior fiscal year-end. We will check the 3Q breakdown of income taxes and the trend in profit attributable to non-controlling interests.
- Key Metric: Achievement rates vs. 3Q cumulative Recurring Profit of JPY 682M and Quarterly Net Income Attributable to Owners of Parent Company of JPY 622M.
- Key Metric: Planned 3Q cumulative EPS of JPY 13.34.
4. Receivables Collection and Balance Sheet Trends Including Borrowings
- Previous Quarter: Accounts receivable and contract assets stood at JPY 1,887M at end-2Q, up JPY 489M from the prior fiscal year-end.
- Previous Quarter: The company raised JPY 600M in new long-term borrowings, bringing interest-bearing debt to JPY 724M.
- Previous Quarter: 1H operating CF was JPY -181M, and cash and deposits stood at JPY 5,618M.
- This Quarter Check: We will check whether receivables that grew with the new title's revenue recognition were converted to cash in 3Q.
- Key Metric: End-3Q balances of accounts receivable and contract assets, cash and deposits, and borrowings (vs. prior fiscal year-end and end-2Q).
5. First Disclosure of Full-Year Outlook and Pipeline Timing
- Previous Quarter: Citing a rapidly changing business environment, the company's policy is to publish guidance only for the following quarter.
- This Quarter Check: We will review the full-year outlook to be presented for the first time at 3Q results, along with the new-title assumptions embedded in it.
- This Quarter Check: The new title slated for release within the year will not contribute to 3Q. Its impact is expected to appear in 4Q P&L.
- Key Metric: Full-year Operating Income outlook vs. prior fiscal year actual of JPY 2,079M.
- Key Metric: Implied standalone 4Q Revenue and Operating Income levels.
Key Timely Disclosures During the Quarter
- 2026/10/09Announcement of the Title "hololive Mahjong -Holojan-" and Launch of Pre-Registration - A new title developed in collaboration with COVER, slated for release within 2026. It will not affect 3Q P&L. Key checks are 4Q revenue and advertising expenses, and how the title is factored into the full-year outlook. A correction was disclosed on 10/13.
- 2026/09/04Announcement of the Release of Console Game "The Eminence in Shadow: Phantom Echoes" - Slated for release in 2027, the title is not expected to contribute to 3Q or 4Q revenue. It is a medium-term positive, as it diversifies revenue sources beyond smartphones.
Previous Quarter Results (FY12/2026 2Q Actual)
The company operates an online game business centered on smartphones and reports a single segment. Its core revenue streams are in-game payment revenue from titles it develops and operates, plus revenue from contract development and collaborations. The earnings release (tanshin) contains no medium-term plan targets or full-year plan. Instead, the company publishes cumulative guidance for the following quarter each quarter. 1H revenue and profit declined YoY, but profit items came in above the company's forecast.
| Item | Amount | YoY | vs. Company Plan | Notes |
|---|---|---|---|---|
| Revenue | JPY 6,871M | -23.6% | - | Standalone 2Q was JPY 3,622M, +11.5% vs. 1Q (our estimate) |
| Operating Income | JPY 529M | -71.3% | - | Operating Income Margin fell to 7.7% from 20.5% in the prior-year period (our estimate) |
| Recurring Profit | JPY 358M | -68.0% | - | Booked equity-method investment losses of JPY 257M |
| Interim Net Income Attributable to Owners of Parent Company | JPY 383M | -53.7% | - | Booked income tax adjustments of JPY -125M |
| EPS | JPY 8.20 | -53.8% | - | JPY 17.73 in the prior-year period |
Note: The tanshin does not include a company forecast for 1H, so "vs. Company Plan" is shown as "-". The same-day variance disclosure states that each profit item exceeded the forecast. The YoY change rates shown in the tanshin for the 3Q cumulative forecast (e.g., Revenue +26.3%) match comparisons against prior-year 1H results. Against the actual prior-year cumulative period (FY12/2025 3Q cumulative), the plan implies Revenue of -10.2%, Operating Income of -51.8%, and Recurring Profit of -54.1% (our estimate).
Progress vs. 3Q Cumulative Plan (Recurring Profit Basis): 52.5% (Prior-Year Period: -) Note: As the company does not disclose a full-year plan, the 3Q cumulative plan of JPY 682M is used as the denominator (our estimate). The prior-year 3Q cumulative plan is not included in the previous materials and is shown as "-".
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