Editor’s Note: This article looks bad. I was worried about writing it but glad I waited to let it process mentally before I actually wrote it, because there are some things from a bigger picture that are worth pointing out. I’ll do so at the end of the article to prevent confusion.
Today, Falcom revealed their Q1 financial information. This information runs from Oct 1, 2015 to Dec 31, 2015. (Editor’s note: Falcom’s ‘End of Year’ is Sept 30th.) Please see the table below for the numbers:
| Total Sales | Operating Profit | Current Profit | QTR Net Income | |||||
|---|---|---|---|---|---|---|---|---|
| Q1 2016 | ¥340,000,000 ($2,964,000) |
? 45.4% | ¥151,000,000 ($1,316,000) |
? 64.7% | ¥152,000,000 ($1,325,000) |
? 64.4% | ¥106,000,000 ($924,000) |
? 61.9% |
| Q1 2015 | ¥623,000,000 ($5,431,000) |
? 97.5% | ¥428,000,000 ($3,731,000) |
? 224.5% | ¥426,000,000 (3,714,000) |
? 221.7% | ¥280,000,000 ($2,441,000) |
? 221.4% |
All conversions are approximations, and have been rounded accordingly.
Conversion rates valid as of 2/10/2016 @ 1:00am Central Time
2016 Quarter 2 Forecast
(In million yen increments.)
| Total Sales | Operating Profit | Current Profit | Share Price | |||||
|---|---|---|---|---|---|---|---|---|
| Q2 2016 | 460 | ? 40.2% | 100 | ? 75.8% | 100 | ? 75.6% | 67 | ? 76.5% |
| EOY 2016 | 1700 | ? 7.9% | 700 | ? 1.0% | 700 | ? 1.4% | 469 | ? 2.8% |
Quantitative Data Regarding Current Quarter
Operational Details
This company is a content maker that strives to reach out to customers across the world with its game contents and services filled with personality and character over multiple platforms.
For this quarter, manufactured goods from the company itself include Tokyo Xanadu (released on 9/27/2015), a new title which received the Future Class Award from the Japan Game Awards at Tokyo Game Show, competing alongside 473 exhibiting companies and 2004 titles.
Currently, the company is eagerly working on the upcoming Ys VIII -Lacrimosa of DANA-. With its first game released in 1987, the Ys series is an action RPG that has seen many titles on multiple platforms and localized into North America, Europe, and Asia. It stands alongside the ‘Kiseki’ series as one of the company’s masterpieces.
Licenses include Trails in the Sky SC Evolution, which was released on 12/27/2015. There have also been collaborative projects for Phantasy Star Online 2 (from Sega Games), and Taiko Master V (Bandai Namco Games).
Furthermore, along with currently available downloadable titles, North America saw the release of The Legend of Heroes Trails of Cold Steel for PS3 and PlayStation Vita, while Asia saw releases of Trails in the Sky FC Evolution and Ys Memories of Celceta. [Editor’s Note: European release of Cold Steel happens during Falcom’s Q2.]
Financially, licensing releases for this quarter reached 189 million yen (approx. $1,645,000), which is a 57.2% decrease from this quarter last year.
Detailed summaries and my observations can be found behind the cut….
Detailed Financial Summary
In thousand yen increments
| Prev. Year | Current Year | |
|---|---|---|
| Property Division | ||
| Current Assets | ||
| Cash on Hand | 3,052,949 | 3,395,102 |
| Accounts Receivable | 586,647 | 97,051 |
| Manufactured Goods | 2,487 | 1,627 |
| Raw Materials | 3,807 | 2,999 |
| Misc. | 40,324 | 31,484 |
| Current Assets Sum | 3,686,216 | 3,528,266 |
| Fixed Assets | ||
| Tangible Property | 7,389 | 6,640 |
| Intangible Fixed Assets | 5,374 | 4,742 |
| Misc. Fixed Assets | 157,139 | 156,040 |
| Fixed Assets Sum | 170,139 | 167,424 |
| Total Assets | 3,856,356 | 3,695,690 |
| Liabilities Division | ||
| Current Liabilities | ||
| Accounts Payable | 107,330 | 9,585 |
| Unpaid Corp. Taxes | 83,053 | 31,834 |
| Prize Reserves | 20,250 | 3,750 |
| Misc. | 120,383 | 90,322 |
| Current Liabilities Sum | 331,017 | 135,492 |
| Total Liabilities | 331,017 | 135,492 |
| Net Worth Division | ||
| Shareholder Equity | ||
| Capital Stock | 164,130 | 164,130 |
| Capital Surplus | 319,363 | 319,363 |
| Profit Surplus | 3,041,962 | 3,076,821 |
| Treasury Stock | ?117 | ?117 |
| Shareholder Equity Sum | 3,525,338 | 3,560,197 |
| Net Worth Sum | 3,525,338 | 3,560,197 |
| Sum of Liabilities and Net Worth | 3,856,356 | 3,695,690 |
Current Quarter Financial Statement
In thousand yen increments
| Q1 2015 10/1/2014 ~ 12/31/2014 |
Q1 2016 10/1/2015 ~ 12/31/2015 |
|
|---|---|---|
| Total Sales | 626,944 | 340,764 |
| Cost of Goods Sold | 52,955 | 44,396 |
| Sales Profit | 571,039 | 296,367 |
| Sales and Administrative Costs | 142,719 | 145,265 |
| Operating Profit | 428,319 | 151,102 |
| Earnings Outside of Business | ||
| Profit from Unpaid Dividends | 865 | 702 |
| Dividends Received | — | 286 |
| Sum of Earnings Outside of Business | 865 | 988 |
| Costs Outside of Business | ||
| Exchange Loss | 2,247 | — |
| Sum of Costs Outside of Business | 2,247 | — |
| Current Profits | 426,937 | 152,090 |
| Quarter Net Income Before Tax | 426,937 | 152,090 |
| Corporation, Municipal, and Enterprise Taxes | 112,601 | 30,231 |
| Corporation Tax Adjustment Sum | 34,230 | 15,040 |
| Sum of Misc. Corporation Taxes | 143,832 | 45,271 |
| Quarter Net Income | 280,105 | 106,818 |
Observations
As promised, I’m adding in some observations of these numbers.
Like I said in my first line, the report itself looks awful, and I’m sorry for that headline, since it seems very alarmist. However, when you look at the numbers from 2014/2015, you can see that this quarter last year had a massive jump of over 200% from the year before. So this seems like they’re stabling out again, in a sense. When looking at the numbers above, you can see that they are still posting a profit- so there is no loss in this picture at all.
As a result, though these numbers seem scary, it looks like Falcom is kind of holding stable still and coming back off of the massive sales high that was Sen no Kiseki II- remember this game broke their sales records, too, and they kept the pace going for quite a bit, it seems.
In the forecast, Falcom has seemingly predicted this trend, so it’s not out of the blue for them at this point. If they keep on track, then they should be close to their predicted numbers at the end of the year, which would put them a little higher over the 2015 EOY numbers.
Overall, it doesn’t look too bad, health-wise for the company. In fact, they seem to still be healthy, financially… this just proves that the Kiseki/Trails games are monster sellers in Japan. However, their stock has taken a hit for the lower numbers. As of close today they are sitting at 640 points, which is a 8.18% decrease from yesterday.
[ Falcom IR Report (PDF) ]
[ GameBiz Report ]
How about SC and NA Cold Steel sales?
There are no details on them in the financial report, unfortunately. Just some broad statements for licensed products.
I wonder why SC and NA-CS didnt appear in Q1 while EU-CS will appear in Q2.
Hope not because of bad sales..
I wonder why they didn’t appear in Q1 while eu CS will appear in Q2..
They don’t generally details the sales outside of Japan. All the licensed goods are lumped together in the report, and without details on what has caused the drop in the licensed numbers- Falcom will usually break them up in region in the EOY report, but not in the quarterly reports.