coly Q2 FY2027 Earnings Deep Dive: Profitable Core Operations and Progress on Major New Title Pipeline

For the second quarter of the fiscal year ending January 2027, coly Inc. reported revenue of ¥3.376 billion (down 0.1% YoY), maintaining a level largely consistent with the previous year. Meanwhile, the company recorded an operating loss of ¥850 million (compared to a loss of ¥95 million in the same period last year). Behind this superficial operating deficit lies a clear structural dynamic: the robust profitability of existing operations coupled with strategic upfront investments in major new titles currently in the peak stages of development.

This report provides a detailed analysis of the quarter's performance highlights, a breakdown of the revenue structure, growth in the media business, the impact of the proprietary "coly ID" platform, and the progress of the highly anticipated major pipeline and future growth strategies.

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1. Q2 FY2027 Performance Highlights

Key financial figures for the cumulative second quarter are as follows:

• Revenue : ¥3,376 million (down 0.1% YoY)
• Cost of Sales : ¥2,276 million (up 16.1% YoY)
• Gross Profit : ¥1,099 million (down 22.4% YoY)
• SG&A Expenses : ¥1,950 million (up 29.0% YoY)
• Operating Profit : -¥850 million (vs. -¥95 million in the same period last year)
• Ordinary Profit : -¥838 million (vs. -¥85 million in the same period last year)
• Quarterly Net Profit : -¥843 million (vs. ¥9 million in the same period last year)

By business segment, Mobile Online Game revenue was ¥1.786 billion (down 10.6% YoY), while Media Business revenue grew significantly to ¥1.59 billion (up 15.1% YoY). The expansion of the media business offset the year-over-year decline in the gaming segment—which faced a difficult comparison due to the anime broadcast effect in the previous year—allowing total revenue to remain flat.

Regarding the financial foundation, net assets reached ¥4.627 billion , maintaining an exceptionally high equity ratio of 76.5% . With cash and deposits secured at ¥1.95 billion , the company maintains a solid financial position to continue its development investments for new titles.

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2. Revenue Structure Analysis: Profitability of Existing Operations vs. Scale of Upfront Investment

To understand the factors behind the ¥850 million operating loss, it is essential to distinguish between the profitability of existing IP operations and new development projects.

As shown in the slide above, existing operations (games and media) generated a profit of +¥450 million . Flagship titles such as Stand My Heroes, Promise of Wizard, and Break My Case form a stable revenue base, with the operational efficiency of existing IP and the synergistic effects of media expansion functioning effectively.

Conversely, ¥1.3 billion was recorded as investment in new development and new businesses (-¥1.27 billion for games in development, -¥0.3 billion for new media initiatives). The company adopts an accounting policy of expensing game development costs immediately as R&D expenses rather than capitalizing them (as software in progress). Consequently, SG&A expenses swell significantly during peak development periods. This creates a lean cost structure that avoids future depreciation burdens or impairment risks post-release.

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3. Segment Trends and Progress of the "coly ID" Platform

Game Business

• Break My Case achieved its highest-ever monthly revenue in May, driven by successful 2nd-anniversary initiatives.
• Promise of Wizard surpassed 8 million cumulative downloads and continues to operate profitably.
• Stand My Heroes is executing initiatives leading up to its 10th anniversary, aiming to maintain and enhance IP value.

Media Business

• In addition to the permanent "coly more! Ikebukuro PARCO" store, the company expanded its footprint by relocating and opening the " coly more! Umeda NU Chayamachi " store.
• The company is strengthening experiential developments (EX) that bridge online and offline channels, including merchandise sales for proprietary IP, exclusive pop-up shops, and stage productions of Promise of Wizard and Stand My Heroes.

Profit Margin Improvement via "coly ID"

Introduced in August 2024 to reduce platform fees (up to 30%), the web-based billing service " coly ID " has begun integration with the company's e-commerce site and physical stores, "coly more!" and "coly cafe!." By incentivizing users with point rewards while simultaneously reducing payment processing fees, the service is contributing to an improvement in gross profit margins.

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4. Featured New Pipeline: Disney Sparkling Stars

The primary driver for future performance is the new smartphone game " Disney Sparkling Stars ," currently under development based on a licensing agreement with The Walt Disney Company (Japan) Ltd.

To further enhance quality, the development period for this title has been extended, with the service launch now scheduled for November 2026 . Pre-registrations, which began in June 2026, had already surpassed 500,000 by the end of August , and the first POP UP STORE held in late August was a major success, indicating extremely high user anticipation ahead of the release.

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5. Mid-to-Long-Term Growth Strategy and Title Schedule

Under the vision of " Making things more interesting " and the slogan "Life with coly," the company aims to become a leading player in the entertainment market for women.

Regarding the pipeline, in addition to the November 2026 release of Disney Sparkling Stars, development is underway for two unannounced new game titles , bringing the total to three new titles expected to transition into the monetization phase.

Full-year earnings forecasts for the fiscal year ending January 2027 remain undisclosed due to the high volatility in revenue associated with new title releases and the need for agile investment decision-making. However, the structure is designed to layer the revenue from new titles on top of the profitable base of existing IP.

In the mid-to-long term, the company is promoting the acceleration of proprietary IP development, the utilization of cutting-edge technologies such as AI, the fusion of digital and real-world experiences, and full-scale entry into global markets. The company has set goals to achieve ¥50 billion in revenue and to stably maintain a market capitalization of over ¥10 billion , which is the listing maintenance criteria for the Tokyo Stock Exchange Growth Market.