6238.T

• Core Business Strengths and Weaknesses

  • Shared strengths: Capability to create 'kawaii' (cute) original content; Worldview Business has strong IP acquisition and creative execution capabilities, with access to both popular seasonal IP and long-running staple IP from partners like Sanrio and Walt Disney Japan; Girls' Trend Business has specialized marketing capabilities from over 300 annual group interviews with target consumers, supported by strong image processing technology and a large user base for its Pictolink web service linked to print seal machines.
  • Shared weaknesses: Historically manufacturer-focused with underinvestment in marketing and branding; post-Covid decline in arcade foot traffic has hit Girls' Trend Business performance; limited in-house expertise for overseas business expansion.
  • Current strategic priorities: Partner with external specialists to build in-house marketing capabilities; collaborate with trading companies to accelerate overseas expansion leveraging the company's IP, print seal machine, and 'kawaii' strengths.

• Worldview Business Operational Progress

  • The overall crane game prize market continues to grow ~5% annually, driven by expansion into new channels including convenience store mini claw machines beyond traditional amusement facilities. The company maintains steady sales via balanced use of both seasonal popular IP and staple long-running IP.
  • Overseas sales growth is led by strong demand in the U.S. market. High-price hobby products have restructured from prior overexpansion across many low-margin IP to a focused portfolio of high-quality, popular, high-margin IP, with all 2025 product planning completed and locked in for stable profit going forward.
  • The company has strong trusted partnerships with Sanrio and Walt Disney Japan for original art plush products, with its Milky Boa Winnie the Pooh collection earning strong popularity and partner recognition.

• Girls' Trend Business Operational Progress

  • The company runs a free Pictolink membership program for middle school students to build future user loyalty, as data shows free middle school members are far more likely to become paying players after entering high school. As of Q2 end, 300,000 middle school students are free members (1 in 5 of all Japanese female middle school students), growing organically via word of mouth. 63% of paid members have transitioned to the unified 550 yen premium pricing, with remaining carrier-specific transitions expected to further increase this share over time, and the share of middle school players among total users has increased steadily post-Covid.
  • Key initiatives include a new senior leadership team for the segment appointed to accelerate decision-making and strengthen IP collaboration; ongoing 30th anniversary print seal machine marketing campaigns that have already earned strong media attention including coverage on NHK News 7; and development of a new 2026 spring/summer print seal machine model with new consumer value.

• New Business Operational Progress

  • Beyblade X Evolution Battle launched on Switch and Steam post-Q2, and the company aims to recover segment performance leveraging the global popularity of the Beyblade IP. The anime The Dark History of the Reincarnated Villainess is currently broadcasting this fall, contributing steady revenue. Ordott apparel will continue evaluation this year with a target of reaching profitability, with exit still on the table if improvement does not materialize.

• Capital Allocation and M&A

  • The company has allocated 5 billion to 6 billion yen of its 15 billion yen annual operating cash flow to strategic investments including M&A, minority investments, share buybacks, and joint ventures, with 3 billion to 4 billion yen reserved for shareholder returns. M&A will first focus on high-synergy businesses adjacent to Worldview Business, with evaluation of Girls' Trend Business adjacencies to follow after capabilities are built. The company maintains its medium-term vision targets of 15%+ ROE, 10%+ operating margin, 60 billion yen total revenue, and 6 billion yen operating profit by fiscal 2027.

• Management maintains full year guidance with no changes to published targets, as the strong performance of Worldview Business is expected to continue through H2. Girls' Trend Business is currently facing near-term headwinds but management expects ongoing initiatives to drive improving performance starting next fiscal year. New Business remains slightly uncertain but management expects home console software launches to deliver a full year result in line with plan.
• For Worldview Business, management expects continued sales growth in the U.S. market if current market conditions hold, supported by ongoing new channel expansion, with additional growth opportunities in China and Southeast Asia.
• For Girls' Trend Business, the 30th anniversary campaigns scheduled for Q4 and the March fiscal year end are expected to drive growth in play counts, with a full year target of 31 million total play cycles (up from 30 million last year). The benefit of unified membership pricing will continue to accrue through the first half of next fiscal year as remaining legacy memberships transition to the new pricing structure.
• The company targets reaching 500,000 middle school free Pictolink members (1 in 3 of all Japanese female middle school students) to build long-term user loyalty for Girls' Trend Business.
• Management is targeting a return to pre-Covid play count levels for print seal machines within 5 years, with an aspiration of achieving recovery within 3 years.

1. Sekai-kan (Worldview) Business: This segment delivered strong growth, with Q2 cumulative operating profit reaching 148.0% of the prior year period. Crane game prizes hit 103.8% of prior year revenue in Q2, with full H1 revenue matching last year's level. Overseas e-commerce grew to 196.7% of prior year Q2 revenue and 168.9% for H1. High-price hobby products turned from a prior year loss to a significant profit this period, with improved profit margins alongside revenue growth. The lottery sub-segment saw volatile revenue due to incomplete development infrastructure, with only one title launched in Q2. A 96 million yen positive profit impact came from favorable exchange rate movements this half. Operating profit for the segment grew 181.7% year-over-year in Q2. 2. Girls' Trend Business: This segment recorded a year-over-year revenue decline to 95.7% and operating profit decline to 86.5% for H1, reflecting continued drops in print seal play counts and paid membership numbers. However, Q2 operating profit improved to 858 million yen from Q1's 663 million yen, driven by the impact of unified Pictolink paid membership pricing. As of Q2 end, 80 million out of 126 million total paid members are premium members, with pricing unified to 550 yen including tax across both app and web (up from prior tiered pricing of 330 yen to 450 yen). Play count decline slowed to 92.8% of prior year in Q2 from 89.6% in Q1, showing early signs of improvement. Middle school student new memberships grew 1.35x year-over-year. 3. Furyu New Business: This segment reduced its cumulative operating loss to -49 million yen from -270 million yen in the prior year period, a 40 million yen improvement, following prior year business portfolio rationalization and exit from underperforming lines. Home console software revenue declined to 69.7% of prior year, as the newly launched original RPG Valley underperformed expectations. Anime revenue declined due to the lapping of last year's Laid-Back Camp Season 3 Blu-ray release, but profit exceeded last year's level from ongoing royalty distributions. The contact lens and mobile game businesses were exited, reducing overall revenue. The Ordott apparel sub-segment reduced its deficit via fixed cost cuts.

• Sustained decline in print seal play counts: Girls' Trend Business has still not recovered to pre-Covid play count levels, particularly among college and older age groups, and recovery could take multiple years or may not fully materialize if current marketing initiatives do not deliver expected results.
• Geopolitical risk: Rising geopolitical tensions between the U.S. and China could negatively impact the company's growing sales in China, and could also reduce inbound demand for crane game prizes in Japan. The company is evaluating contingency plans to offset any China sales decline with growth in other regions, and could shift IP-based marketing tests to other markets if China market access becomes constrained.
• New product and launch risk: The Valley home console game underperformed in Q2, and the success of the newly launched Beyblade X Evolution Battle is still uncertain, creating near-term pressure on New Business results.
• U.S. trade policy risk: While current tariff conditions have not impacted performance, unexpected changes to U.S. trade policy related to China could create downside risk for the company's growing U.S. business.

Q: How does Q2 segment progress compare to your original full year plan? / A: Worldview Business is progressing relatively well, performing in line or slightly above initial expectations. Girls' Trend Business has underperformed, as play counts did not exceed prior year levels after summer as originally expected, leading to a more cautious near-term outlook. New Business saw an unexpected downside miss in home console software, but management expects the upcoming Beyblade launch to drive a recovery and keep full year results on track.

Q: What is driving the rapid growth of Worldview Business in the U.S., and what is your outlook for next year? / A: Growth is primarily driven by the overseas expansion of Round One, a Japanese amusement operator that has steadily opened new locations in North America, with Furyu supplying consistent product volumes to these new stores. If current trade conditions remain stable, new channel development will continue to drive sales growth in the U.S. next year, but geopolitical shifts between the U.S. and China could create downside risk.

Q: What were the goals of the recent leadership changes in Girls' Trend Business, and are there early signs of impact? / A: The changes had two core goals: first, to speed up decision-making by placing more aggressive, action-oriented leaders in key roles, which has already delivered results with faster specification approval for new print seal machine models. Second, to deepen IP collaboration, as past IP collaborations were superficial and failed to meet core IP fan demand. Cross-functional teams including Worldview Business staff are now working on deeper IP integrations, with results expected from the second half of this fiscal year through early next year.

Q: How do you expect Chinese geopolitical tensions to impact your overall business? / A: There is currently no material negative impact on the company's Chinese e-commerce sales, but if tensions escalate, a temporary drop in Chinese sales is possible, and the company is planning for alternative regional coverage. Some planned IP marketing tests tied to Chinese movie releases have been delayed, but the company can shift these tests to cinemas in Japan or other regions if needed. Inbound demand for crane game prizes is the most exposed area to negative impacts from the current environment, which the company acknowledges as a clear risk factor.