How much will the major upward revision to the first-half operating profit forecast offset the Q1 decline in revenue and earnings?

FY2027-Q1 revenue was ¥8,825 million, down 8.3% year on year; operating profit was ¥651 million, down 33.0%; ordinary profit was ¥598 million, down 35.8%; and net profit for the quarter was ¥415 million, down 40.1%. The full-year forecasts remain unchanged at revenue of ¥51,350 million and operating profit of ¥7,000 million, leaving Q1 operating profit at only 9.3% of the full-year forecast. Judging solely from the standalone Q1 figures, the start toward the full-year plan was weak.

The first-half forecast announced on 24 September, however, left revenue unchanged at ¥22,270 million while raising operating profit from ¥1,930 million to ¥3,500 million, ordinary profit from ¥1,930 million to ¥3,400 million, and net profit from ¥1,350 million to ¥2,300 million. The operating profit revision was ¥1,570 million, or 81.3%, making it significant that profit was raised sharply without an increase in the revenue forecast. The company attributed the revision to the initial momentum of its smartphone game and performance above plan in the licensing and tie-up businesses.

Subtracting Q1 actual revenue of ¥8,825 million from the first-half revenue forecast of ¥22,270 million implies that standalone Q2 revenue must reach ¥13,445 million. Similarly, subtracting Q1 actual operating profit of ¥651 million from the revised first-half forecast of ¥3,500 million implies standalone Q2 operating profit of ¥2,849 million. This corresponds to an operating margin of approximately 21.2% in standalone Q2, well above Q1's 7.4%. Actual results will also reflect seasonality, including the second-half weighting, and changes in the revenue mix, so a simple comparison has limitations. At the next results announcement, however, it will be necessary to break down which businesses generated this profit accumulation.

The key question is not only whether first-half operating profit reached ¥3,500 million. The disclosures on revenue by business, cost of sales and selling, general and administrative expenses should be reviewed to determine how much game-related revenue contributed to licensing and tie-up sales, whether merchandise shortages and the transition of e-commerce operations have been resolved, and whether the upfront increase in fixed costs continued into Q2. Even if first-half results exceed the forecast, the extent to which the company explains the sustainability of the upside into the second half will be important.