Koei Tecmo Q1 Operating Profit Jumps 51%, Recurring Profit Soars 79%

Koei Tecmo achieved record highs across all profit levels in the April-June quarter. Revenue reached ¥17,368 million (+17.4%), operating profit ¥5,407 million (+51.3%), recurring profit ¥15,719 million (+79.2%), and net income attributable to owners of the parent ¥11,348 million (+86.9%). The entertainment segment benefited from strong sales of major titles released in the previous fiscal year, catalog sales, and new mobile titles. Non-operating income swelled to ¥12,556 million, including ¥4,335 million in interest income, ¥3,677 million in gains on sale of investment securities, and ¥1,821 million in redemption gains, significantly boosting recurring profit. Non-operating expenses of ¥2,246 million, such as ¥1,842 million in derivative valuation losses, were outweighed by the income. Net profit nearly doubled from a year earlier, with financial operations playing a notable role.

The Entertainment segment posted external sales of ¥15,911 million, up 17.3% year-on-year, and segment profit of ¥5,288 million, up 42.7%, driving overall growth. In packaged games, 'DEAD OR ALIVE 6 Last Round' launched in June and surpassed 1 million cumulative series sales. The Switch 2 version of 'Atelier Yumia' and additional content for 'Poko a Pokemon' also contributed. In mobile, two new IP-licensed titles began operations, and existing licensed titles maintained stable revenue. The location-based game 'Nobunaga's Ambition: Shutsujin' saw successful event campaigns. By brand: 'Shibusawa Kou' announced that 'Romance of the Three Kingdoms 14' exceeded 1 million cumulative series sales and that 'Nobunaga's Ambition: Hisho' is planned for this winter. 'ω-Force' announced 'Attack on Titan 3' for this winter. 'Team NINJA' revealed the Switch 2 version of 'Wo Long: Fallen Dynasty Complete Edition' and the new 'Wo Long 2: Wings of Ember'. 'Gust' released the Switch 2 version of 'Atelier Yumia' and announced 'Atelier Kalia'. The 'midas' brand held collaboration events in 'Nobunaga's Ambition: Shutsujin', and the AAA studio focused on new title development.

The Amusement segment revenue rose 6.3% to ¥1,120 million, with segment profit up 60.2% to ¥165 million. Existing amusement facilities performed well, and three new LCD software titles for pachinko/pachislot machines began operations.

The Real Estate segment revenue increased 7.1% to ¥334 million, with segment profit flat at ¥75 million. The live house KT Zepp Yokohama maintained high utilization.

The Other segment (venture capital, etc.) recorded revenue of ¥82 million and a segment loss of ¥122 million, an improvement from a ¥310 million loss a year ago.

Total assets at quarter-end stood at ¥333,923 million, up ¥20,261 million from the previous fiscal year-end, mainly due to increases in investment securities (¥25,440 million) and marketable securities (¥16,141 million), while cash and deposits decreased by ¥15,108 million. Liabilities rose ¥12,833 million to ¥53,959 million, primarily from the recording of ¥10,000 million in short-term borrowings and a ¥7,929 million increase in deferred tax liabilities related to investment securities valuation gains. Net assets increased ¥7,427 million to ¥279,963 million, with an equity ratio of 83.6%. Dividends are projected to fall to ¥48 per share for the full year (interim ¥0, year-end ¥48) from ¥66 the previous year, reflecting the expected decline in net profit to ¥31,000 million from ¥42,849 million. No share buyback was announced this quarter.

The company left its full-year forecast for FY2027 unchanged. It projects revenue of ¥90,000 million (up 1.8% year-on-year), operating profit of ¥32,000 million (down 13.9%), recurring profit of ¥42,000 million (down 26.3%), and net profit of ¥31,000 million (down 27.6%). First-quarter progress stood at 19.3% for revenue and 16.9% for operating profit, but the company noted that major title releases are concentrated in the second half and non-operating income depends on financial market conditions, so it did not revise the forecast at this time.

Key risks and challenges recognized by the company include:

• Continuing geopolitical uncertainty and a sluggish global economy could dampen consumer sentiment and affect game sales.
• Heavy reliance on hit titles, with performance subject to development delays and market reception.
• Non-operating income is vulnerable to financial market volatility, and fluctuations in foreign exchange and stock markets could widen swings in recurring profit.
• As indicated by the dividend cut, a year-on-year profit decline is expected, and restoring earnings power is urgent.