FURYU CORPORATION Q4 FY2025 earnings call

Overall Financial Highlights

• Full year consolidated revenue hit 44.3 billion yen, with operating profit of 2.2 billion yen, driven by strong performance from the World View Business segment, while weakness in the Girls' Trend Business pulled down overall group profit.
• The firm completed a strategy of selecting and concentrating resources in FY2025, exiting underperforming non-core businesses to focus on higher growth core segments.

World View Business Operational Updates

• Domestic crane game prize demand remains solid: the overall market continues to grow at a 5% annual rate supported by ongoing strong inbound demand, even as new arcade store growth slows. The firm maintains a diversified character portfolio, with new breakout characters such as Puppet Sunsun and Esther Bunny growing to outperform legacy characters, supporting 37% annual revenue growth for the segment.
• Overseas merchandise is growing 1.5x year-over-year, with strong demand for Japanese characters across China, other Asian markets, and Europe. The firm is accelerating shipments to North America now that Trump-era tariff impacts have partially eased.
• High price-tier hobby completed restructuring in FY2025 to focus on high-margin products, achieved a profitable operating structure, and 70% of planned orders for FY2026 are already secured.

Girls' Trend Business Operational Updates

• The core challenge is converting newly acquired middle school users to frequent players after they transition to high school. The firm is shifting its historical product-focused strategy to increase investment in user engagement, promotion, and communication to reactivate lapsed and infrequent users.

Furyu New Business Operational Updates

• The firm is spinning off its anime business into a new dedicated subsidiary, Furyu Pictures, scheduled for establishment in June 2025. The new subsidiary will bring in experienced industry talent, build an in-house studio capability, and align anime production with the firm's existing character merchandising capabilities to increase monetization. The subsidiary will prioritize developing female-friendly IPs that support high-margin plush merchandise sales.
• Console gaming will focus on growing long-tail profit from existing titles, while launching new original titles (such as Vallet) and expanding distribution via digital channels like Steam to grow overseas digital sales.
• The Oldot apparel business will target full profitability in FY2026.

Mid-Term Vision

• The firm maintains its unchanged mid-term targets: ROE of 15% or higher by FY2028, consolidated revenue of 60 billion yen and operating profit of 6 billion yen by FY2027 (2027 March Fiscal Year).
• The firm maintains a shareholder return policy targeting progressive dividends with a 40% payout ratio reference and 5% DOE reference, aiming to maintain or increase ordinary dividends continuously.

1. Sekai-kan (World View) Business: In Q4 FY2025, revenue reached 115.7% of the prior year period, and operating profit reached 210.5% of the prior year period (more than double year-over-year). This segment is the current revenue driver for the firm, with performance supported by strong ongoing demand for crane game prizes (boosted by inbound tourism to Japan, solid growth for both large and mini crane prizes, and continued strong forward order book), fast-growing overseas merchandise sales led by Chinese market demand, and now turned profitable for the high price-tier hobby business after prior restructuring. Mid price-tier hobbies and lottery merchandise also performed steadily.

2. Girls' Trend Business: In Q4 FY2025, revenue was 89.4% of the prior year period, and operating profit was 62.4% of the prior year period, delivering a decline in both revenue and profit for the full year. While total new user acquisition (especially among middle school students) hit 1.5x year-over-year in Q4, exceeding pre-COVID levels, per-user play frequency has stagnated for transitioning high school age users, leading to overall lower total play counts and a decline in total paid PictLink members. Premium member counts have remained stable, supporting higher average revenue per user, offsetting some weakness.

3. Furyu New Business: Full year segment losses were sharply compressed after exiting non-core businesses. The smartphone game business was fully exited, and the color contact lens business was divested to concentrate management resources. In Q4 FY2025, no new console game releases were launched, but download sales of older titles grew steadily, delivering stable profit. Anime business revenue grew 36.6% year-over-year, with long-tail profitability from existing titles led by Yuru Camp△. The apparel brand Oldot reduced fixed costs and further compressed losses. Overall, the segment significantly reduced its net loss in FY2025 and is targeting full profitability for FY2026.

• For FY2026 (March 2026 Fiscal Year), the firm guides total consolidated revenue of 45 billion yen, operating profit of 3 billion yen, ordinary profit of 3 billion yen, and net income attributable to parent shareholders of 2.15 billion yen.
• World View Business: Guides continued growth in both revenue and profit, with growth led by overseas expansion focused on the fast-growing Chinese market, alongside resumed growth in North America following the easing of tariff impacts. The firm maintains a 150 JPY/USD foreign exchange assumption, and has reduced foreign exchange exposure via forward contracts: sensitivity is now 25 million yen per 1 JPY/USD move, down from over 70 million yen previously.
• Girls' Trend Business: Guides growth in both revenue and profit. It expects total play counts of 31 million (up from 30 million in FY2025), and guides PictLink total paid members to decline to 1.24 million from 1.37 million as it shifts the member mix to higher-value premium members. The business will unify all PictLink membership tiers into a single tier to improve customer clarity, increase average revenue per user, and drive profit growth.
• Furyu New Business: Guides full net profitability for the segment in FY2026, supported by the prior year's exit of non-core businesses, with stable profit contributions from console games and anime driven by long-tail sales of existing titles.
• The firm maintains its unchanged mid-term targets of 60 billion yen revenue, 6 billion yen operating profit by FY2027, and 15%+ ROE by FY2028.

• Girls' Trend Business faces execution risk in improving per-user play frequency: the firm has historically been strong in product development but weak in user marketing and re-engagement, and the success of its new marketing-focused strategy is unproven. There is also market risk that the long-standing core value proposition of "enhanced photo editing" for print sticker machines has become saturated among younger consumers, requiring successful product repositioning which carries development and launch risk.
• Overseas expansion carries geopolitical and regulatory risk, including lingering residual tariff impacts in North America, and market access and partnership uncertainty in overseas markets including China.
• Achieving the mid-term operating profit target of 6 billion yen by FY2027 is aggressive: current operating profit is 2.2 billion yen, with next year guided at 3 billion yen, requiring very strong growth over the remaining two years to hit the target, creating material performance risk.

Q: What are the key growth drivers for hitting the mid-term 6 billion yen operating profit target with only two years remaining? / A: Management confirms the target is challenging, and identifies two core growth drivers. First, overseas expansion of character merchandising has very large untapped potential, with strong growth already in the current period, so success in capturing this market and expanding margins will be a core determinant of hitting the target. The firm is currently exploring strategic partnerships with domestic and local overseas partners to build out overseas operational capabilities, as it lacks in-house overseas experience. Second, Girls' Trend Business is a core profit pillar for the firm, so restoring profit growth by improving per-user play frequency is the second key requirement for hitting the target. Management notes the firm has historically been weak at user re-engagement, so it is open to strategic partnerships to improve capabilities in this area.

Q: Why was the 4Q FY2025 graduation season weak for print sticker machines, and what is the plan to improve this next year? / A: Management confirms that the company successfully grew new middle school user acquisition 1.5x year-over-year in 4Q, hitting pre-COVID levels, but failed to convert these new users to frequent players once they entered high school. The issue was not user acquisition, but ineffective communication and promotion strategy to encourage repeat play, which is a recognized internal weakness. To address this, the firm plans to partner with external marketing and branding specialists to improve user engagement ahead of next year's graduation season.

Q: Is the long-standing "enhanced editing" value proposition for print sticker machines saturated, and how is the product strategy changing? / A: Management agrees with this assessment, noting that the firm has competed for over a decade solely on this value proposition, and internal teams already recognize that this focus is no longer sufficient. The company has already begun testing new product concepts that move beyond enhanced editing, and has shifted marketing research to target non-users instead of only existing users to identify new value propositions that resonate with teenage consumers, competing with other popular leisure destinations like karaoke and coffee shops. It will run PDCA cycles to improve new concepts alongside its new marketing strategy.

Q: What is the distribution and pricing model for Chinese overseas merchandise sales, and what are your growth plans for the market? / A: Sales are currently focused online, primarily via bilibili (which attracts core IP fans) and Tmall. Most products are lightly customized versions of the firm's domestic crane game prizes, priced around 1200 yen to 1300 yen, with higher- and mid-price range figures also sold on bilibili. Management notes there is a clear correlation between inbound tourism to Japan (where consumers play Furyu crane games) and demand for the firm's products in China, and the company is actively discussing potential offline retail expansion for the future, alongside potential price increases with platform partners if market demand supports it.

Q: What is the rationale for spinning off the new anime subsidiary, and what is its competitive advantage? / A: The spin-off was triggered by industry consolidation that created an opportunity to attract experienced, talented anime producers to Furyu. The firm's unique advantage is that it already has existing character merchandising and monetization capabilities, so it can align anime production with downstream merchandising (especially high-margin plush toys) to maximize total IP profit. The firm plans to target popular SNS-friendly female-oriented IPs for anime adaptation to leverage its existing strength in the girls' trend space, creating a full pipeline from IP development to merchandising monetization.