SANKYO CO.,LTD. Q4 FY2025 earnings call

• Overall Financial and Market Milestones

  • For the 2025 March fiscal year, SANKYO achieved record-high operating profit and net profit, driven by strong growth in the high-margin pachislot segment
  • Became the first company in the industry to capture annual top market share in both pachinko and pachislot markets
  • Improved overall consolidated margin as the high-margin pachislot segment increased its revenue contribution
  • Equity capital ratio decreased 1.3 percentage points year-over-year to 84.2%

• Medium-Term Strategic Direction (SANKYO VISION 25-27)

  • Core targets: Maintain top pachinko market share, achieve 15%+ pachislot market share, and reach ROE of 15%+
  • Pachinko segment: Positioned as the core stable revenue business, with strategy focused on diverse product offerings and active development of new licensed tie-in machines
  • Pachislot segment: Positioned as the key growth business, with increased resource allocation focused on aggressive launches of smart pachislot models and development of machines with new gameplay mechanics
  • Growth outcome: Pachislot expansion has reduced historical earnings volatility tied solely to pachinko performance, improving growth outlook and operational stability

• New Business Development

  • Prioritizes growth in core pachinko/pachislot business while pursuing new ventures with synergies to core operations
  • Current initiatives include a business alliance with Comseed, participation in manga and anime production committees, and remains in an early seeding phase focused on capturing long-term synergies

• Capital Management and Shareholder Returns

  • Follows a performance-linked dividend policy centered on a 40% consolidated payout ratio, plus opportunistic share repurchases
  • Announced a share repurchase program of up to 30 million shares totaling 60 billion yen to improve capital efficiency and support the 15%+ ROE target
  • Management assesses current PBR above 1.0 and ROE above the 15% target as healthy, but notes that single-digit PER has persisted for a long period, leaving room for upward improvement
  • Plans to drive PER improvement and enterprise value growth through increased ROE, stronger information disclosure, and progress on new business and sustainability initiatives

1. Pachinko Machine Related Business: Recorded year-over-year decrease in both revenue and profit, driven primarily by no new Evangelion series title releases under the Bisty brand, leading to a large drop in sales volume. The business launched 8 new titles in the fiscal year, 2 fewer than the prior year, and secured 3 consecutive years of top unit-based market share with 26.4% share in 2024. 2. Pachislot Machine Related Business: Achieved significant year-over-year revenue and profit growth, driven by strong sales of new titles under the SANKYO brand and increased production to meet demand. The business launched 6 new titles (1 more than the prior year) plus additional production for 3 legacy titles. It recorded 19.3% unit-based market share in 2024, exceeding the 15% medium-term target and capturing first-time top market share. As of 2025 March fiscal year end, this segment accounts for 33.1% of consolidated revenue, up from a 5-year average of 13.5%, and its revenue is 3.6x the 5-year average. Other operating costs: Selling commissions decreased by 4.417 billion yen due lower Bisty pachinko sales, while R&D expenses increased by 3.163 billion yen to support product lineup expansion per the medium-term plan.

• Overall market outlook has tightened relative to initial medium-term plan projections: Parlor operators have become more stringent in机型 selection and setting appropriate launch volumes, and pachislot replacement demand stabilized after smart pachislot installations reached ~50%, leading to lower-than-expected total pachislot sales
• Revised 2025 (calendar) total industry sales volume projections: Lowered pachinko from 900,000 units to 850,000 units, and lowered pachislot from 900,000 units to 700,000 units
• Revised 2026 March fiscal year consolidated guidance: Lowered revenue from 200 billion yen to 185 billion yen, and lowered operating profit from 73 billion yen to 63 billion yen. The downward revision reflects margin pressure from changed sales mix, higher costs for pachislot quality improvements, and reduced recycling benefits
• Share price target for 2026 March fiscal year: Despite the lower profit forecast, the planned share repurchase will boost EPS, so the annual dividend is expected to remain in line with the original medium-term plan amount, resulting in a forecast annual dividend of 90 yen per share, a 10 yen reduction from the prior year
• Market share guidance: Pachinko share is not expected to reach the 30% target in 2025, but management targets 30%+ share by the final medium-term plan year (2027). Pachislot is targeted to maintain 15%+ share going forward and consolidate its position in the top market tier
• Product launch plans: 9 new pachinko titles and 7 new pachislot titles are planned for the 2026 March fiscal year. Management expects new LT3.0 Plus pachinko models launching in July and new bonus trigger pachislot models launching in June to drive market growth

• Industry demand risk: The overall pachislot replacement demand has cooled off faster than expected after smart pachislot penetration reached ~50%, with total industry sales volume falling below initial projections
• Competitive and operational risk: Parlor operators have adopted a more stringent approach to new model selection and volume planning, creating a more challenging market environment than the management initially projected when developing the 2025-2027 medium-term plan
• Margin risk: Changed sales mix across pachinko and pachislot, higher production costs for pachislot quality improvements, and reduced recycling benefits are expected to compress overall margins in the 2026 March fiscal year

No question and answer section was included in the provided earning call transcript.