Beaglee Inc. FY2026 Q2 Earnings Deep Dive: Navigating Earnings Revisions, Structural Reform, and the Value of a Loyal Customer Strategy

Beaglee Inc. (Securities Code: 3981) reported a transitional second quarter for the fiscal year ending December 2026, with both revenue and profit falling below the same period last year against a backdrop of shifting market conditions and intensifying competition in the e-book sector. Consequently, the company announced a downward revision to its full-year earnings forecast. However, a closer look reveals that the company is undergoing a strategic restructuring that goes beyond mere "downsizing." This includes efficiency gains through the reduction of unprofitable advertising, the cultivation of loyal (high-ARPU) customers, strong performance in the external distribution of proprietary IP, and a proactive stance on shareholder returns.

This report provides a comprehensive analysis of the H1 performance, detailed segment-specific KPIs, the background behind the full-year forecast revision, and the company's outlook on shareholder returns and future growth strategies.

---

1. FY2026 Q2 Earnings Summary

The consolidated financial results for the first half (H1) of the fiscal year ending December 2026 are as follows:

• Revenue : ¥7,721 million (down 7.3% YoY)
• Adjusted EBITDA : ¥929 million (down 5.1% YoY)
• Operating Profit : ¥448 million (down 10.3% YoY)
• Ordinary Profit : ¥420 million (down 10.0% YoY)
• Net Income Attributable to Owners of Parent : ¥178 million (down 13.4% YoY)

Overall performance was weighed down by revenue declines in both the Platform segment, anchored by the flagship comic distribution service "Manga Oukoku," and the Content segment, which handles publishing and digital publishing. However, the fact that the decline in Adjusted EBITDA (-5.1%) was more contained than the decline in operating profit (-10.3%) suggests that the company is maintaining a certain level of cash-generating capability while absorbing fixed costs such as amortization.

---

2. Segment Analysis: Platform Segment

The Platform segment (operation of "Manga Oukoku," digital publishing of original works, etc.) reported H1 revenue of ¥5,088 million (down 2.7% YoY) and an operating profit of ¥265 million (a turnaround from a ¥50 million loss in the same period last year).

While the top line declined, the dramatic swing to profitability was driven by a major overhaul of advertising strategy and cost optimization . By shifting from mass-market acquisition to targeted spending focused on high-value customers, advertising expenses were reduced by ¥280 million compared to the previous year. This significantly improved segment margins despite the slight dip in revenue.

Key KPI Analysis for the Platform Segment

To understand the foundation of the service, it is essential to track MAU (Monthly Active Users) and ARPPU (Average Revenue Per Paying User).

The KPI trend slide above provides the most telling data regarding the current structural transformation of "Manga Oukoku."

As shown in the left graph, MAU has decreased by 29.5% YoY . This is a direct result of optimizing advertising spend and curbing indiscriminate promotions aimed at light users. Conversely, looking at the right graph, Paying ARPPU is up 9.4% YoY , and Consumption ARPPU is up 13.2% YoY , showing a steady upward trend.

This data signifies that the company has clearly pivoted from "broad and shallow user acquisition" to "retaining and cultivating heavy users (loyal customers)." The "value-back" initiatives and the expansion of original titles, which are strengths of "Manga Oukoku," have boosted engagement among core fans, leading to higher per-user spending. While the decline in MAU due to reduced new user inflow remains a challenge, the strategic policy of maintaining and improving a highly profitable customer base is directly reflected in these KPIs.

Furthermore, the external distribution of proprietary IP has been strong, with the title "Kono Otoko, Yuryo Bukken ni Tsuki" continuing its hit streak from Q1, contributing to the segment's overall profitability.

---

3. Segment Analysis: Content Segment

The Content segment (publishing of books and magazines, primarily through Bunkasha Co., Ltd., and digital publishing) faced a challenging H1, with revenue of ¥2,730 million (down 15.2% YoY) and an operating profit of ¥182 million (down 66.8% YoY).

Breakdown:

• Digital Revenue : ¥2,143 million (down 14% YoY)
• Print Publishing Revenue : ¥587 million (down 19% YoY)

The primary cause for the decline in revenue and profit is the maturation of the overall e-book market and intensifying competition from new entrants . Against the natural decay of backlist titles, the number of major new hits was lower than in the same period last year, leading to a decrease in average revenue per title. In the print sector, rising cost of sales due to higher material, printing, and manuscript fees has also pressured margins.

As a countermeasure, the company is actively promoting media mix strategies , such as TV drama adaptations (e.g., "DINKs no Tsuki-toka," "Inukai-san wa Kakure Dekiai Joushi") and TV anime adaptations (e.g., "Perfect Addiction"), in addition to deepening its focus on genres where it excels, such as works for women. Furthermore, the company is preparing for the creation of next-generation IP through the use of its YouTube channel "GUSH_&_Emo" and tie-up contests with major novel-posting sites like "Shousetsuka ni Narou."

---

4. Factors Behind Full-Year Forecast Revision and Future Solutions

Based on H1 progress and current market conditions, the company has revised (downward) its full-year consolidated earnings forecast for the fiscal year ending December 2026.

As shown in the revision table above, the full-year forecast figures have been updated as follows:

• Revenue : ¥17,091 million → ¥15,263 million (down 10.7% vs. previous forecast / down 8.7% YoY)
• Adjusted EBITDA : ¥2,441 million → ¥1,675 million (down 31.4% vs. previous forecast / down 28.6% YoY)
• Operating Profit : ¥1,491 million → ¥745 million (down 50.0% vs. previous forecast / down 45.5% YoY)
• Net Income Attributable to Owners of Parent : ¥721 million → ¥271 million (down 62.3% vs. previous forecast / down 60.3% YoY)

Structural factors and specific solutions are summarized below:

1. "Manga Oukoku" MAU Decline and Cost Impact :
   • Factors : Sluggish new MAU due to reduced advertising, and cost burdens including royalties.
   • Solutions : Reducing acquisition costs for younger and new demographics through SNS marketing (TikTok, Instagram, etc.) and continuing initiatives for heavy users. By further refining ad operations and eliminating one-time costs like head office relocation, the company expects Platform segment operating profit to improve compared to initial forecasts (to ¥461 million) despite lower revenue.
2. Digital Publishing Market Maturation and Hit Rate Stagnation :
   • Factors : Decrease in revenue per title and rising cost of sales.
   • Solutions : Hiring and training editorial staff and strengthening production lines using generative AI. Expanding genres such as light BL, GL, and general works for women.
3. Strengthening Overseas and External Distribution :
   • Factors/Measures : In response to the saturation of domestic e-book stores, the company is accelerating overseas licensing (e.g., North American expansion of the BL label "GUSH," multilingual YouTube support) and strengthening the supply of proprietary works to third-party platforms to diversify revenue streams.

---

5. Financial Soundness and Shareholder Return Policy

Despite the earnings revision, the company maintains a solid foundation in its financial structure and shareholder return policy.

On the balance sheet, the equity ratio has improved from 48.6% at the end of the previous year to 54.3% due to the repayment of interest-bearing debt. The D/E ratio remains low at 0.35 , reflecting a healthy financial position.

One of the most notable points for investors is the maintenance of the dividend policy.

Despite the significant downward revision in earnings, the company has decided to maintain its annual dividend forecast of ¥45 per share .

As shown in the slide, the company has introduced a new dividend policy: "A payout ratio of 30% or more and a DOE (Dividend on Equity) of 3.0% or more." While the downward revision to net income results in a mathematically high payout ratio of 92.7% , the company is using DOE (projected at 3.1%) as a floor indicator to realize stable dividends that are not swayed by short-term earnings fluctuations .

This approach demonstrates a management stance that decouples shareholder returns from short-term profit volatility, prioritizing capital efficiency and shareholder interests over the medium to long term.

---

6. Conclusion and Outlook for the Growth Story

Beaglee Inc.'s H1 of the fiscal year ending December 2026 can be characterized as a transitional period of structural transformation from "quantity (MAU/number of titles)" to "quality (ARPPU/hit efficiency/cost optimization)" in the face of a changing domestic e-book market.

Three points hold the key to the future growth story:

1. Revenue Restructuring Centered on Loyal Customers : Can the company maintain high ARPPU in "Manga Oukoku" while lowering new user acquisition costs through SNS promotions and generative AI?
2. IP Creation and Multi-Use Expansion : Can the company combine the editorial strength of the Bunkasha Group with platforms like "Shousetsuka ni Narou" to accelerate media mixes (dramas/anime) and overseas expansion?
3. Financial and Dividend Support : The structure of stable dividends (planned at ¥45 annually) based on a 54.3% equity ratio and a DOE of 3.0% or more provides a floor for shareholder value during this period of change.

Attention will be focused on whether the structural reforms and cost controls occurring behind the scenes of the current revenue and profit decline will serve as the foundation for a future re-expansion of profitability.