TAY TWO CO.,LTD. Q3 FY2026 earnings call

Corporate Vision & Growth Strategy

• The company pursues the group vision of "Connecting local communities and the world through reuse", leveraging synergies across four core business segments: reuse brick-and-mortar stores, reuse e-commerce, reuse B2B, and global reuse.

Reuse Brick-and-Mortar Store Segment Updates

• New store expansion: Opened Furuichi Aeon Mall Fukuoka in November 2025, bringing the total number of shopping mall locations to 45 stores. Opened Furuichi Kurayoshi Store, a 300-tsubo suburban roadside location, in July 2025, the first new roadside location in an extended period. The new store achieved single-month profitability in August 2025 (one month after opening) and offers a diversified mix of products beyond entertainment categories.
• Total store network: As of the end of November 2025, the company operates 175 total stores including directly operated and franchise locations.
• Product diversification: The company is rolling out expanded product categories across 15 stores (including existing locations). While this initiative still contributes a small share of total revenue currently, management will continue monitoring these pilot programs to inform future product mix changes for store locations.
• Digital transformation (DX) for efficiency: Electronic purchase processing has been rolled out to all stores as of November 2025, to further improve operational efficiency. Trading card inventory search machines have been installed at approximately 80% of directly operated stores. For the company's typically compact store footprints, the digital search machines reduce required display space, freeing up floor space for other product categories. Management expects stable operation of this system will improve trading card department efficiency and enable smoother expansion of other product lines.

Reuse E-Commerce Segment Updates

• Subsidiary Yamatoshi Co. maintains stable operating performance at its new facility (the new headquarters/warehouse construction was completed, which drove the increase in fixed assets on the balance sheet). While this was a large capital investment, the business operates with a profit model that allows full payback of the investment within a maximum of 3 years.

Reuse B2B & Global Segment Updates

• B2B: The company's original business tool TAYS, an automatic reading and appraisal machine for trading cards, continues to see steady incoming inquiries amid stable market conditions, with ongoing solid demand. Management plans to expand distribution of the tool to more business customers in preparation for future sales initiatives starting from the next fiscal year.
• Global: The company currently operates one subsidiary store in Taiwan, sourcing product from Japan to supply the location. Product sells through at a fast pace and has received positive feedback from local customers. Going forward, the company will focus on improving local logistics infrastructure while accelerating development for the second and subsequent store locations in Taiwan.

Balance Sheet Updates

• Inventory balance increased compared to the end of the prior fiscal year, as the company built up inventory in preparation for the year-end and New Year sales season.
• The increase in fixed assets is primarily attributable to new store openings and the construction of the new headquarters for subsidiary Yamatoshi Co.
• To maintain flexible working capital financing, long-term borrowings decreased while short-term borrowing balances increased.

Corporate Social Responsibility Initiative

• To commemorate the 35th anniversary of the Furuichi store brand, the company ran the "Future-Bound, Okayama Support Project" reuse product donation initiative, as a gesture of gratitude to Okayama (the company's founding location). The company donated 1 million yen in cash and 2,245 reuse items to 13 child welfare institutions in Okayama Prefecture. Management plans to consider making this type of initiative a regular activity going forward.

For the 9-month cumulative period of the 2026 February fiscal year (third quarter cumulative):

1. New and used games: Strong performance driven by the launch of new game consoles, contributing a 4 percentage point increase in overall revenue contribution share compared to the prior year. This segment was a key driver of total revenue growth.
2. New and used trading cards (トレカ): Performance remained strong on a year-over-year basis, supported by stabilized market pricing, with ongoing solid sales growth.
3. New and used hobbies: Strong year-over-year performance, contributing to overall gross profit expansion.
4. Used books: This is the only underperforming segment relative to plan, with an expected continued gradual contraction. It currently accounts for 6% of total company revenue.

Aggregate segment performance: Total cumulative consolidated revenue hit 30 billion yen (a 15.7% year-over-year increase, the highest third quarter cumulative revenue since 2010 February fiscal year). New products overall accounted for a 3 percentage point higher revenue contribution share than the prior year, driven mostly by the growth of new games. Operating profit reached 0.95 billion yen (a 144.1% year-over-year increase), and net profit attributable to the parent was 0.54 billion yen. Strong performance across the game, trading card, and hobby segments drove a large increase in gross profit, outpacing the increase in selling, general and administrative expenses from business expansion, leading to the large profit growth.

• Full year 2026 February fiscal year consolidated guidance is maintained at 40 billion yen in total revenue and 1.1 billion yen in operating profit. Management notes that year-to-date performance has been on track to meet expectations.
• All medium- to long-term target financial numbers are maintained unchanged from prior guidance.
• The full year dividend per share guidance is maintained at 4 yen per share, unchanged from the initial announcement at the start of the fiscal year. The company maintains a policy of consistent dividends tied to performance, balancing shareholder returns and strengthening the financial base.
• Management is maintaining full year guidance at this point to account for potential seasonal impacts in the fourth quarter and potential impacts from the sale of investment securities that was disclosed separately as a subsequent event.

• The used book category is underperforming relative to plan and is expected to continue a gradual contraction trend. While management notes it still serves as an effective customer acquisition tool justifying continued operation at a scaled size, the segment's contraction creates ongoing pressure on overall revenue growth from that category.
• The new product and category pilot initiatives in brick-and-mortar stores are still in early stages, with small current revenue contribution, and there is uncertainty around their future contribution to top-line growth.
• No other explicit operational risks or failures were discussed in the provided transcript.

No question and answer section was included in the provided earnings call transcript. Only the management presentation portion was transcribed.