THH

Business Context and Reporting Period

Company: TryHard Holdings Ltd (Ticker: THH)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal Year Ended June 30, 2025
Business Overview: A Cayman Islands exempted company operating primarily in Japan through subsidiaries. The company operates in four segments: (1) Consultancy and management of nightclubs and entertainment venues; (2) Event curation (music festivals, outdoor events); (3) Sub-leasing of entertainment venues; and (4) Restaurant operations.
Recent Event: Completed an Initial Public Offering (IPO) on August 29, 2025, listing on the Nasdaq Capital Market.

Key Financial Metrics (Year Ended June 30, 2025)

Material Changes vs. Prior Period

• Revenue Growth: Total revenue increased by 2.2% (JPY 77.7 million) to JPY 3.54 billion. Growth was driven by the Consultancy and Management segment (+14.3%), offset by declines in Sub-leasing (-76.2%) and Restaurants (-17.9%).
• Profitability Decline: Net profit dropped significantly by 89% to JPY 15.1 million from JPY 137.4 million in 2024. Operating income turned negative (JPY 74.1 million loss) compared to a profit of JPY 148.2 million in 2024.
• Segment Performance:
  • Sub-leasing: Revenue collapsed due to the reclassification of a major sub-leasing arrangement as a finance lease, reducing recognized revenue.
  • Restaurants: Revenue declined due to the closure of a restaurant in Wakayama.
  • Event Curation: Revenue remained relatively flat, but gross margin compressed from 10.5% to 6.0% due to strategic losses on events to expand market presence.
• Operating Expenses: Increased by 22.5% to JPY 774.5 million, driven by higher legal/professional fees related to the IPO, increased staff costs, and a JPY 26.7 million allowance for expected credit losses.
• Liquidity: Cash and cash equivalents decreased by 85.8% to JPY 13.3 million, primarily due to operating cash outflows and payments for deferred offering costs.

Guidance, Outlook, and Risks

Management Outlook:

• Plans to expand the Consultancy and Management segment through strategic collaborations with advertising companies.
• Intends to increase self-produced events to maximize revenue control and brand visibility.
• Focus on optimizing restaurant operations to reduce fixed costs and improve margins.

Key Risks and Contingencies:

• Cybersecurity Incident: In July 2025, the company's IPO underwriter suffered a ransomware attack. Confidential company data provided during due diligence was likely exfiltrated. The company has no cyber liability insurance.
• Internal Controls: Management identified a material weakness in internal control over financial reporting due to a lack of competent personnel with IFRS/SEC expertise.
• Concentration of Control: CEO Rakuyo Otsuki controls approximately 70.48% of voting power via Series A Preferred Shares, limiting minority shareholder influence.
• Regulatory & Operational: High exposure to Japanese regulations regarding nightlife, noise, and alcohol; risks of event cancellations due to weather or pandemics; and reliance on key entertainers.

Investor Verification Checklist

• Cash Runway: Verify if the remaining cash balance of ~JPY 13.3 million (approx. $93k) is sufficient to cover operations for the next 12 months, given the negative operating cash flow of JPY 197.5 million in 2025.
• Sub-leasing Reclassification: Confirm the long-term impact of reclassifying sub-leasing arrangements as finance leases on future revenue recognition and margin stability.
• Related Party Transactions: Review the JPY 135.9 million in revenue and JPY 31.0 million in costs associated with "Music Circus Co." (an associate) to ensure arm's length pricing.
• Internal Control Remediation: Assess the timeline and cost for remedying the identified material weakness in financial reporting controls.
• Debt Covenants: Review loan agreements (totaling JPY 882.8 million) for covenants that may be triggered by the recent decline in profitability or liquidity.