RUNSYSTEM CO.,LTD. Q2 FY2026 earnings call

Core Business Priorities Aligned with Management Philosophy

• Management philosophy: "Enrich people, enrich local communities, enrich society, enrich our team" — all operations are guided by this framework
• Three core focused priorities: 1) Strengthen the System Business based on real-world store operation experience to develop differentiated solutions; 2) Continue innovating to make the amusement industry more enjoyable, safe, healthy, and operationally efficient; 3) Maintain strict adherence to basic operational standards, driving sustainable growth with all internal and external stakeholders

Entertainment Business Key Updates

• 26 years of operating experience as a pioneer of Japan's integrated cafe industry, with three core strengths
• Key strengths: 1) 26 years of accumulated large-scale member data (4 million mobile members) and end-to-end franchise/direct operation expertise; 2) Full in-house development of all store operation systems, with a continuous feedback-improvement cycle from real store deployment, including systems for unmanned membership registration, self-service entry, remote customer support, QR key access, and self-checkout (deployed for over 15 years); 3) Ongoing innovation trials: test deployment of JIQOO RACING sim racing space at the Takadanobaba location (utilizing unused space, good fit for unmanned/labor-saving stores), test deployment of joint-developed facial recognition entry/exit management at Takadanobaba to test real-world usability, upcoming opening of the fully self-service Smart Darts location at Narimasu Station South Exit with in-house developed pre-booking, automatic entry/exit, and remote support, targeting 100 nationwide Smart Darts locations after initial testing, and expansion of remote customer support systems to external clients (already deployed at some hotels, with plans to scale the offering)

System Business Key Updates

• Core positioning as a growth driver leveraging synergy with the company's own store operations, with three core strengths
• Key strengths: 1) Differentiated system development drawing on in-store operation expertise (rare for system firms to operate their own retail store network), with a continuous development-deployment-feedback-improvement cycle that delivers more practical, usable solutions; 2) Full lineup of labor-saving system solutions for store operations (entry/exit management, remote support, reservation management, and more), adaptable to industries beyond amusement including healthcare, long-term care, local government, hospitality, and retail; addresses Japan's structural labor shortage, delivers 10-40% labor cost reduction, 30-100% recruitment cost reduction, and 0-100% training cost reduction for client stores; 3) Flexible customization for small stores, with lower pricing and easier deployment than large enterprise system offerings, plus a mixed business model that combines one-time sales with recurring subscription revenue from system usage and maintenance fees, creating stable recurring profit and lower upfront costs for clients, a win-win structure

Progress on Listing Maintenance Compliance Initiatives

• Current status: The company's trading market capitalization is currently below the 1 billion yen listing maintenance requirement
• Four active initiatives to meet requirements: 1) Growth strategy: Position System Business as the growth driver, leverage synergies with Entertainment Business, leverage the unique strength of being a system firm that operates integrated cafe stores to grow revenue and corporate value; 2) Strengthen IR/PR: Increase proactive disclosure of corporate direction and new initiatives (including recent announcements of the Smart Darts opening and biometric/facial recognition system deployment), with plans to increase disclosure frequency going forward; 3) Enhance shareholder returns: Early 2025 new shareholder return announcements delivered some stock price improvement, with plans to add new medium/long-term shareholder benefits beyond the existing shareholder offering; 4) Increase floating share ratio: Continue requesting trading partners and existing block holders to sell holdings into the open market, currently on track to hit the 30% floating share ratio target by the end of March 2026

The company operates three business segments. 1. Entertainment Business: Positioned as the company's stable revenue base, centered on the Jiyu-Kukan (Jiuyukukan) chain of integrated cafes, with 78 total locations (30 directly operated, 48 franchised). This segment delivered solid revenue and profit in the first half, with total customer visits reaching approximately 3.94 million and 4 million mobile members, and has delivered stable consistent profitability. 2. System Business: Positioned as the company's core growth driver, with 35 years of operating history and 14+ years of external sales focus. The segment has delivered strong growth, with over 400 POS system installations and over 6,000 IoT device installations across both internal and external clients, and posted solid revenue and profit in the period. 3. Real Estate Business: Focuses on stable management of rental real estate assets, delivering consistent steady revenue with no major volatility reported. Company-wide aggregate first half results: 3.363 billion yen in total revenue, 99 million yen in operating profit, and 86 million yen in ordinary profit, with year-over-year revenue and profit growth, and the Entertainment and System segments performing broadly on plan.

• Management maintains full-year FY2026 March term guidance at 5.8 billion yen in total revenue and 170 million yen in operating profit; no upward or downward revision was announced in this call
• The company targets national expansion to 100 Smart Darts locations after collecting operational data from the first opening, as part of its long-term growth strategy for the Entertainment Business
• Management expects sustained long-term growth for the System Business, driven by rising demand for labor-saving solutions from Japan's ongoing structural labor shortage, with significant room for expansion across multiple industry verticals

• The company currently does not meet the Tokyo Stock Exchange's listing maintenance requirement for traded market capitalization, which creates de-listing risk if the requirement is not met by the deadline
• New innovation initiatives (including sim racing, facial recognition entry, and Smart Darts) are currently in test deployment; customer adoption levels and future profitability are still uncertain, and these initiatives may not deliver expected growth
• System Business growth is dependent on continued market demand for labor-saving solutions; slower-than-expected adoption of these solutions by client industries could limit the segment's growth

No question and answer section was included in the provided transcript.