COVER Corporation's second quarter turned on a game launch. The company released the smartphone title hololive Dreams worldwide on 23 July, and the company said related revenue ran well above its initial expectation. Second-quarter sales were ¥12.2bn, up 0.3% on a year earlier, after a weaker first quarter.
Profit moved faster than sales
Licensing and tie-up sales rose 73.8% in the quarter and 49.9% for the half, to ¥4.86bn, which COVER's half-year results release attributes largely to the game. Quarterly operating profit was ¥2.9bn, up 74.0%, with an operating margin of 24.2% against 14.0% a year earlier. COVER put the marginal profit rate at 53.7%, from 41.7%, and said the profitable game business improved its sales mix.
The release gives no standalone revenue figure for the game. It does say hololive Dreams topped the sales ranking on every platform where it was distributed, with more than 3 million downloads as of 4 November.
The half-year picture is mixed
For the six months to September, sales were ¥21.0bn, down 3.6%, and operating profit was ¥3.6bn, up 35.0%. COVER blamed the sales decline on a heavy concentration of large music releases and concerts in the prior-year period, lost merchandise sales tied to graduated talent, and a narrower range of standard goods. Streaming and content, live events and merchandising all fell.
Costs rose with the launch: the selling and administrative expense ratio was 33.8% in the quarter, against 32.8%, as large-scale advertising for the game added expense.
Guidance unchanged
COVER kept its full-year forecast at sales of ¥51.35bn and operating profit of ¥7.0bn. Half-year operating profit reached 102.8% of the forecast COVER revised on 24 September, and the company said it is still examining how the first-half upside affects the second half. Its budget treats a large smartphone game's contribution conservatively. A follow-up game, a mahjong title, is scheduled for release on 25 November.