Declining revenue and widening operating losses continue, with simultaneous improvement in earnings and liquidity the focus for FY2026-Q3

Revenue was ¥925 million in FY2026-H1, down 22.4% from ¥1,193 million in the same period of the previous fiscal year. The operating loss widened to ¥542 million from ¥384 million, an increase of ¥158 million. The ordinary loss also widened to ¥577 million from ¥382 million, while the interim net loss narrowed to ¥579 million from ¥633 million, a reduction of ¥54 million. At the operating level, the decline in revenue exceeded the benefit from cost reductions, while net income was affected by extraordinary and non-operating items, making it necessary to assess the operating loss and net loss separately.

By revenue category, in-game purchases from game operations were ¥883.220 million, down approximately 18.5% from ¥1,083.655 million in the same period of the previous fiscal year. Advertising revenue from game operations was ¥1.141 million, and contracted revenue from game development was ¥41.345 million, down from ¥3.173 million and ¥101.607 million, respectively. The decline in revenue therefore reflected weakness across the core in-game purchase, advertising and contracted revenue streams, rather than simply the front-loading of development costs for new titles. In FY2026-Q3, we will assess how much the contribution from the new app released on 23 July offset the decline in revenue, by looking for a recovery in in-game purchases.

Liquidity is as important a point as earnings. Operating cash flow in FY2026-H1 was an outflow of ¥624.227 million, while financing cash flow was an inflow of ¥499.702 million. Investing cash flow was an inflow of ¥78.842 million, leaving cash and deposits at ¥754.672 million at the end of the period, an equity ratio of 57.5% and net assets of ¥787 million. The company is compensating for its inability to generate cash from operations through financing and asset sales, among other measures. In Q3, the operating cash flow deficit, cash balance and details of financing cash flow need to be assessed together.

The company has historically identified operating losses and negative operating cash flow as significant events and explained that significant doubts and significant uncertainties regarding the going-concern assumption remained in FY2026-H1. For FY2025 as a whole, revenue was ¥2,170 million, the operating loss was ¥856 million and the net loss was ¥1,151 million. In FY2026-Q3, we will closely track whether the cumulative operating loss exceeds ¥542 million, whether in-game purchases reverse their year-on-year decline, and whether the company discloses its funding position at the end of Q3, including proceeds from the exercise of stock acquisition rights. As the company operates in a single Entertainment segment, segment profit is not disclosed, and the profitability of individual titles cannot be fully assessed from the earnings materials alone.