3678.T

Core Growth Strategy Pillars

• Three core pillars for the mid-term management plan: 1) Expand position and market share in domestic electronic book distribution; 2) Accelerate overseas expansion of Japanese content; 3) Scale the regional creation (SC) business. Management confirmed solid progress across all three pillars in the past year.

Domestic Electronic Book Distribution Expansion

• Media Do holds the leading 30% market share in Japan's electronic book distribution, with large remaining expansion room in the 50% direct distribution segment. The firm is shifting from a traditional distributor to an essential publishing industry infrastructure provider.
• Key investments to capture share: 1) Build out BI tools for publisher sales data analysis, and centralized campaign management capabilities for electronic bookstores to reduce internal operational burdens for clients; 2) Strengthen proactive security against evolving hacking threats, with plans to double the level of security investment compared to peers to maintain publisher trust; 3) Target increasing market share to over 50% long-term, accepting near-term margin pressure to achieve this strategic goal.

Overseas Expansion via Seven Seas Acquisition

• In March 2026, Media Do acquired Seven Seas Entertainment, the world's largest translator-publisher of Japanese manga, for 80 million USD (~12.6 billion yen). Seven Seas is an independent firm with aligned corporate culture with Media Do, and holds a distribution partnership with Penguin Random House (PRH), the world's largest publisher, to reach over 240 countries and regions.
• Seven Seas delivered 7.8 billion yen in revenue and 1.6 billion yen in operating profit in its 2024 fiscal year, publishes over 1,000 new titles annually, has published over 5,000 total titles since founding, and has growing content volume driven by rising global demand for Japanese content. 90% of global book distribution is physical paper books, and Seven Seas gives Media Do access to an established physical distribution network that most small and mid-sized Japanese publishers lack to enter global markets. Paper book prices in the US are 3x higher than Japanese paper book prices for the same title, creating high margin expansion opportunities.
• The acquisition received strong positive reaction from the Japanese publishing industry, with 437 industry participants attending a post-acquisition briefing. Management plans to combine Media Do's domestic content connections with Seven Seas' global distribution to grow annual published titles to 2,000 long-term, and leverage Japanese government export subsidies to reduce translation and marketing costs.

SC (Sustainability Creation) Regional Creation Business

• The business has two core segments: entrepreneur support and sports-driven regional activation. The entrepreneur training platform launched in Tokushima in 2020 has expanded to over 50% of Japan's prefectures (20 planned, 26 including in-progress), and will enter Phase 2 focused on expanding to 46 prefectures and 5,000 members to increase the output of regional-focused entrepreneurs.
• The Tokushima Gambarous B.LEAGUE basketball team has achieved profitability after an initial first-year loss, turned a cumulative profit within three years, and qualified for the playoffs. A new partnership between xIB JAPAN and B.LEAGUE was announced to accelerate regional creation by connecting regional small businesses to B.LEAGUE's 55 clubs for collaboration opportunities.

• For the 2027 February full year (27/2 period), management guides consolidated revenue of 118.0 billion yen, an 8.7% year-over-year increase, driven by the Seven Seas acquisition and domestic growth.
• Operating profit is guided at 24.0 billion yen, a 2.2% year-over-year decrease, reflecting planned infrastructure investment for domestic market share expansion, the end of a high-margin legacy contract, and continued strategic investment in the SC business.
• EBITDA is guided at 41.0 billion yen, an 11.8% year-over-year increase, reflecting the operating profit contribution from the acquired Seven Seas business.
• Seven Seas will be consolidated starting from the second quarter of 27/2 period, so first quarter operating profit progress will be below the typical seasonal 25% level, but management remains committed to achieving the full-year operating profit target.
• The annual dividend per share is maintained at 40 yen, in line with the prior year, as a signal of management confidence in future growth. The payout ratio will be ~50%, which is above the firm's 30%+ total return target but aligned with the policy of maintaining or increasing dividends per share consistently.

For the 2026 February full year (26/2 period):

1. Electronic Book Distribution Segment: Total revenue grew 8.1% year-over-year, with existing distribution growing 5.0% and new distribution growing 3.1%, beating the initial forecast of 4.0% total growth. The segment delivered 4.91 billion yen in operating profit last fiscal year, with a planned 4.69 billion yen for 27/2 period, a 220 million yen decrease driven by planned infrastructure investment and the end of a high-margin contract. This segment accounts for approximately 76% of total consolidated revenue, as Media Do handles ~30% of Japan's total electronic book distribution market.
2. Strategic Investment Segment (comprising International Business, IP & Solution Business, and SC Business): Overall operating loss narrowed to 6.31 billion yen from 9.53 billion yen year-over-year, a 322 million yen improvement, but missed the initial 500 million+ yen improvement target due to underperformance. International Business recorded a 98 million yen operating loss from strengthening expansion infrastructure. Within IP & Solution Business, Nihon Bungeisha achieved 90 million yen year-over-year improvement but missed plan by 136 million yen due to H2 underperformance, leading to full goodwill impairment; Flyer achieved 21 million yen year-over-year improvement but missed plan by 69 million yen due to one-time M&A-related costs; other IP & Solution and SC Business outperformed initial forecasts on sales growth and cost cuts. Adjustments across segments totaled a 133 million yen negative impact from higher-than-planned translation system development costs for international expansion.

• Strategic Investment Segment: Nihon Bungeisha (within IP & Solution Business) saw larger-than-expected underperformance in the second half of 26/2 period, leading to a full goodwill impairment. While the practical book division hit record profit, the manga division is experiencing slower-than-expected improvement from operational reforms, with results delayed by the multi-volume nature of manga publishing.
• Profit Miss: EBITDA, operating profit, and net profit missed the initial 26/2 period forecast by ~10% due to delayed profit improvement at Nihon Bungeisha and Flyer, and higher-than-planned investment in translation system development for international expansion.
• Domestic Market Pressure: Long-term Japanese population decline and market maturity in the domestic electronic book market create natural headwinds for domestic growth, requiring strategic expansion into new markets to offset this trend.
• Security Risk: Evolving hacking tactics including AI-enabled attacks create growing risk of content leakage, requiring ongoing outsized investment in security to maintain industry trust.

Q: The Japanese government targets growing the overseas Japanese content market from 6 trillion yen to 20 trillion yen over ~10 years. What is a realistic growth expectation for the market, and how will Media Do benefit? / A: Management believes the government's 20 trillion yen target is achievable, as growing global access to Japanese anime via streaming platforms will create significant content shortage, and firms with large content libraries will capture the most benefit. Most streaming content originates from manga and book IP, so Media Do is well positioned as a major book content holder. Media Do's strategy has three layers: core physical book distribution via Seven Seas, secondary IP expansion into merchandise, anime and other adaptations, and potential long-term collaboration with partners on new retail expansion in overseas markets. The Seven Seas acquisition puts Media Do in a uniquely strong position to capture this growth compared to peers without an established global physical distribution network.

Q: What will be Seven Seas' contribution to 27/2 period consolidated results? / A: Seven Seas will be consolidated starting from Q2 27/2, contributing 9 months of results. The 27/2 contribution is guided at 280 million yen, reflecting the purchase price allocation timeline and partial year inclusion. Full year 28/2 will include a full 12 months of Seven Seas results, delivering a larger full year profit contribution. Seven Seas already generates 1.6 billion yen in annual operating profit, so it will be a solid contributor to group results from full year inclusion onward.

Q: What is the outlook for the Japanese manga boom in the US market? / A: Demand for Japanese manga has grown consistently post-Covid, and manga already takes up more retail shelf space in US bookstores than any other genre. It is not a temporary boom: manga drives foot traffic of younger consumers to physical bookstores, so retailers are motivated to maintain and expand their manga sections, creating sustained structural demand for more Japanese content.