9166.T

2026 January Full Year Performance Achievements

• Adjusted EBITDA of 22.8 billion yen and adjusted net income of 9.4 billion yen met initial full-year targets, driven by both M&A and organic growth, with contributions from expanded GiGO exclusive prizes, integration of karaoke equipment dealers, and growth of the foreign currency exchange business.
• Strong balance sheet with 50.6 billion yen in goodwill, 112.4 billion yen in interest-bearing debt, 32.4 billion yen in cash and cash equivalents, resulting in net interest-bearing debt of 80 billion yen, and a Net Debt/EBITDA ratio of 2.7x, with sufficient remaining borrowing capacity. Goodwill impairment since founding has remained extremely limited despite 3 consecutive years of high M&A activity.

Strategic Updates

• Accounting Change: Will adopt IFRS starting from Q4 of 2027 January fiscal year. Under IFRS, approximately 5 billion yen in goodwill amortization will no longer be counted, and operating lease on-balance sheet processing is expected to increase EBITDA by over 15 billion yen, operating profit by over 5 billion yen, and net income by over 5 billion yen compared to previous Japanese GAAP.
• Disclosure Change: Going forward, the company will only disclose guidance for three core adjusted metrics (revenue, adjusted EBITDA, adjusted net income) to clearly reflect underlying business performance. Adjusted net income adds back goodwill and intangible asset amortization related to M&A, consistent with industry practice for M&A-focused companies.
• M&A Strategy Revision: Previously prioritized M&A speed and completed two consecutive years of public offerings for M&A. The company has adopted a new policy that it will not conduct public offerings for M&A reserve funds for at least the next 3 years. It will now strictly select M&A targets, target 5 billion yen in free cash flow generation from existing businesses next fiscal year, and transition to a self-sustaining growth phase. All new M&A will only proceed if they contribute to EPS growth.
• Shareholder Return Policy: Initiated a dividend starting from 2027 January fiscal year, with a total planned dividend of 1.5 billion yen. The company will prioritize growth investment while following a disciplined policy of annual dividend increases, starting with the 2027 January interim dividend. Shareholder benefit terms have been updated: the daily upper limit for GiGO crane game use has been increased from 500 yen to 1,000 yen, and HillValley popcorn and LEMONADE by Lemonica lemonade have been added as benefit options. For treasury share purchases, the company views this as distinct from general shareholder returns: shares held are an important currency for future M&A. The company will conduct irregular, opportunistic purchases when it judges its valuation is below intrinsic value, to acquire M&A currency at a low cost, which will reduce future acquisition consideration and support long-term shareholder value growth.

North America Operational Improvement Initiatives

• The root cause of the prize restocking shortage was that the daily bank deposit process used by the acquired Player One (focused on manned stores) was incorrectly applied to the National Entertainment Network (NEN) network of mostly unmanned locations. This left staff overwhelmed by unfamiliar deposit work, cutting store patrol frequency by 40% and leading to insufficient restocking.
• To resolve the issue, GENDA dispatched 10 Japan-based AI specialists to the region for 3 months, and the CEO and CSO each spent 2 weeks on-site in February to develop and implement countermeasures. Root solutions have already been implemented:
  • Eliminated daily bank deposits for unmanned stores to reduce operational burden.
  • Launched the custom North American operational app Kiddleton Force, which integrates GENDA's domestic AI-optimized patrol and restocking technology to standardize and improve rounder (field staff) efficiency. The app generates daily optimized visit routes and task prioritization, unifies all reporting workflows, uses AI image analysis to automate meter reading, and eliminates manual data entry. It also enables central management of restocking compliance across 12,000 North American locations.
  • Implemented 4 weekly online training sessions for all rounders to standardize best practices for prize display and other core tasks, to improve customer experience across all locations.
  • Consolidated 14 North American legal entities into 3 on March 1, optimizing management resources. Synergies from headcount reduction and consolidated insurance procurement are expected to deliver 930 million yen in annual cost savings starting this fiscal year.
• Additional North American growth initiatives:
  1. New Store Openings: Secured bulk placement contracts with major U.S. chains, including a 170-location placement deal with AMC (to be completed by April), an initial 85-location deal with Applebee's, and plans to relocate existing small Walmart placements to new 5x-10x larger in-store locations.
  2. Add-on Installations: Add new crane machines to 1,700 existing mini locations, with 800 locations to be completed this fiscal year and the full program completed next fiscal year. This initiative has lower cost and faster payback than full location SWAP, and lifts sales of existing machines via increased foot traffic.
  3. Japanese IP Prize Expansion: Japanese IP now accounts for 54% of total prize purchases in North America, up from 0% 4 years ago, with a target of 60%-70% longer term. Launched the new high-precision mini figure line Figuno, with the first collection featuring My Hero Academia characters. Leveraging digital marketing strategies proven at domestic GiGO (including PULSE dynamic advertising aligned with inventory levels) to attract

• Full-year 2027 January fiscal year consolidated EBITDA guidance has been raised from the previous 28 billion yen to 30 billion yen, a 2 billion yen upward revision. This reflects full-year contributions from M&A completed in the prior fiscal year and stronger-than-expected organic growth in domestic business, which more than offsets a 1 billion yen downward revision to the North American business contribution. Full-year adjusted net income guidance is 10.6 billion yen, representing 36% year-over-year EBITDA growth from 22.8 billion yen in 2026.
• Adjusted EBITDA will exceed 45 billion yen after IFRS adoption in Q4 2027 due to on-balance sheet operating lease accounting. The full-year earnings profile remains seasonally weighted to the second half. Adjusted net income is expected to decline year-over-year in Q1 2027, due to the second-half seasonality of newly acquired photo studio and European businesses, and the seasonal weighting of GAGA content slate to H2 2027.
• 2027 January fiscal year North American revenue is projected to grow 16.4 billion yen year-over-year to 45 billion yen: 10.6 billion yen of growth comes from full-year M&A contributions, and 5.8 billion yen comes from organic growth driven by operational improvements and new initiatives. The first half of 2027 North American targets have been downward revised due to lingering impacts from prior operational issues, but operations are expected to fully normalize in the second half of 2027, and the business is expected to get back on track with the original mid-term plan within approximately 6 months, meeting all original targets from the 2028 fiscal year onward.
• The foreign currency exchange business is targeting 2.3 billion yen in EBITDA for 2027 January fiscal year, and the company plans to aggressively expand unit count primarily to major domestic retail chains, as the business delivers high IRR and ROIC that meets the company's strict organic investment criteria.
• Free cash flow guidance: Based on the original 28 billion yen EBITDA plan, after subtracting ~5 billion yen in taxes and 6.5 billion yen in maintenance CAPEX, the company expects 16.5 billion yen in core free cash flow from operations. After allocating 11.5 billion yen to high-priority organic growth CAPEX (focused on new GiGO stores and foreign currency exchange machine expansion), the company expects to generate 5 billion yen in remaining free cash flow, a 15 billion yen improvement from the prior year's negative 10 billion yen. This enables self-financing of investment and eliminates the need for external capital raising, aligned with the revised M&A strategy. The higher 30 billion yen EBITDA plan is expected to deliver even stronger free cash flow than this base plan.
• Adjusted EPS for 2027 January fiscal year is expected to be at least 57.71 yen.

1. Domestic Amusement (GiGO): Core business that accounts for approximately 70% of total group sales and profit. In 2026 January fiscal year, GiGO launched 200 exclusive prize items, and expanded these exclusive items to stores acquired via M&A, lifting brand awareness by approximately 2x year-over-year. Same-store sales growth for existing domestic amusement locations remained at a high level throughout the full year. 2. Karaoke: Completed M&A of karaoke equipment dealers Onitsu and Kaji Corporation, merging the two to form ENNE, which now manages over 30,000 units, making it the undisputed industry-leading dealer in the sector. 3. Foreign Currency Exchange Machine: Completed M&A of the business at an EV/EBITDA multiple of 4.7x. Leveraged GENDA's AI technology to optimize collection and restocking routes, delivering very high investment return. Every month since the acquisition, the business has achieved year-over-year revenue growth. Pre-consolidation EBITDA was 1 billion yen, which grew to 1.5 billion yen in 2026 January fiscal year. 4. North America: North American business recorded approximately 1 billion yen negative impact on full-year 2026 EBITDA due to operational integration issues. 2026 January fiscal year actual revenue was 28.6 billion yen. Adjusted EBITDA for the full year 2026 January fiscal year: consolidated adjusted EBITDA hit 22.8 billion yen, adjusted net income hit 9.4 billion yen, total consolidated revenue hit 170.7 billion yen, which is 152.7% year-over-year. Adjusted operating income was 13.3 billion yen, 127.2% year-over-year.

• North American Operational Integration Risk: Integration of 5 acquired North American businesses led to incorrect operational process standardization that caused a 40% reduction in store patrol frequency and persistent prize restocking shortages, which negatively impacted 2026 Q3 EBITDA and will weigh on North American performance in the first half of 2027. While full normalization is expected by the second half of 2027, the new Kiddleton Force app is still being rolled out and adopted by field staff, and as of the earnings call, only about 50% of target locations are operating at the desired operational standard, with full 100% implementation targeted for summer 2027.
• Return on Investment Risk: Large-scale M&A investment in North America has pulled the group's overall ROIC down to approximately 8%, due to the delayed profit recovery from operational issues. The company recognizes that improving ROIC is a key priority to rebuild market confidence.
• Market Valuation Risk: The company's share price has remained depressed despite the earlier announcement of capital policy changes, which management acknowledges has caused disappointment for shareholders. The company must deliver on its operational improvement targets for North America to rebuild market trust.

Q: What was the trend of EBITDA by quarter in 2026 January fiscal year, especially the change from Q3 to Q4, and what is the impact on 2027 guidance?

A: Q3 2026 saw large negative impacts from the North American operational error, but Q4 showed recovery. However, incremental fixes across locations will take time, so the issue will impact the first half of 2027, which is why the first half target has been slightly downward revised. Full normalization is expected in the second half of 2027. M&A is paused for the time being, so all growth will be organic for the foreseeable future. The company estimates that the underlying run-rate revenue for North America, once fully consolidated, is around 40 billion yen.

Q: Can you confirm the root cause of the prize restocking problem and the timeline for full resolution? Is it correct that the problem arose from applying Player One's manned store processes to NEN's unmanned network?

A: It is correct that we found the root cause was the unnecessary daily bank deposit requirement that overwhelmed NEN staff. We already completed one-time intensive restocking for the December holiday season, but to maintain consistent restocking we needed to fix the root cause, so we dispatched a team from Japan to investigate and develop the full set of solutions including Kiddleton Force. The February visit by management was already scheduled as part of post-M&A integration strengthening, not a response to a sudden new issue. We have reallocated internal resources to prioritize North America and are focused on delivering results this year. Your understanding that full recovery will not come until the second half of 2027 is correct.

Q: What is GENDA's free cash flow plan for 2027 January fiscal year?

A: The core framework of the plan has not changed from the Q3 disclosure, but the EBITDA base has increased from 28 billion yen to 30 billion yen, so performance will be even better than the original plan. The original plan projected 16.5 billion yen in operating free cash flow after tax and maintenance CAPEX, with 11.5 billion yen allocated to organic growth CAPEX (focused on new GiGO stores and foreign currency exchange machines), leaving 5 billion yen in net free cash flow. This is a 15 billion yen improvement from last year's negative 10 billion yen, so we no longer need external financing, which is the basis for our new capital policy. This does not include M&A investment, which we will still pursue but only for strictly selected targets, outside of the core organic free cash flow plan. North America has not yet reached positive free cash flow, which is correctly accounted for in the plan.

Q: What are your responses to the ongoing share price depression?

A: We recognize that we have disappointed shareholders with the recent share price performance, and we take this seriously. We see two key priorities to address this: first, we need to deliver on the already announced revised M&A strategy, capital allocation, and financing discipline to demonstrate our commitment to capital market expectations, which we have already internally organized for and will continue to execute consistently. Second, we need to improve the performance of the large North American M&A investment and reverse the recent decline in ROIC. ROIC has fallen to 8% primarily because North America has increased the denominator (invested capital) and profit generation is delayed, but ROE remains stable at 15.7% due to disciplined leverage focused on EPS growth. Going forward, M&A in North America is paused, so the denominator will stop growing, and operational normalization will increase the numerator, so ROIC is expected to reverse upward. We will also focus organic investment only on high ROIC projects, which will improve overall investment efficiency across the company, with North America being the key driver of this improvement. We are confident we can get the business back on track in the second half of 2027, which will rebuild market confidence. Opportunistic share repurchases at the current depressed valuation have allowed us to acquire treasury shares cheaply for future M&A, which will reduce future acquisition costs and support long-term shareholder value.

Q: What is the current status of operational improvement in North America, and how many stores still have outstanding issues?

A: We have now built a system that allows headquarters in Japan to visually check store performance, so we can execute one-time event-focused improvements like setting up the ideal store layout for Christmas across all locations at once. The key challenge now is sustaining this performance long-term, which is what the new process and app infrastructure we just implemented is designed to achieve. The Kiddleton Force app launched in early March and is still getting incremental updates and being adopted by staff, so it is difficult to give an exact number of problem locations, but a reasonable estimate is that we are at about 50% of our target operational standard today. We are targeting 100% of the desired standard by summer 2027, and full stable performance through the second half of the year.