The number of amusement arcade stores and the number of M&A sourcing are disclosed as KPIs. For details, please refer to page 3 of the “Financial Results for the Third Quarter of the Fiscal Year Ending January 31, 2024.

https://ssl4.eir-parts.net/doc/9166/ir_material_for_fiscal_ym3/145597/00.pdf#page=3

On the other hand, from a performance perspective, as a company that focuses on M&A as a pillar of its growth strategy, we place the greatest importance on “EBITDA (operating income + depreciation and amortization + amortization of goodwill),” which represents the Group’s consolidated annual cash flow generation capacity, and “Net income before amortization of goodwill,” an indicator similar to net income under IFRS.

Currently, we are executing a large number of M&A projects. However, in light of the fact that all of the target companies in past projects have adopted Japanese GAAP, a trend that is likely to continue, we have adopted Japanese GAAP rather than IFRS in order to ensure flexibility in our M&A and accounting practices. Therefore, we will incur a certain amount of “goodwill amortization expense” (which does not occur under IFRS) as our M&A strategy progresses in the future.

If we change to IFRS, our operating income and net income will increase by the amortization of goodwill, but this will not increase our intrinsic corporate value.

Since enterprise value is only the sum of future free cash flow (after adding back goodwill amortization and other non-cash items) discounted by the time value, and since we repeatedly finance each M&A project based on the target company’s ability to generate cash flow.

We believe that it would be more appropriate for investors to focus on our ability to generate cash flow when judging the fair value of our company, which is growing through M&A, and we believe this is important in order to more accurately convey our company’s situation. For this reason, we disclose “EBITDA” and “Net income before amortization of goodwill” in our earnings announcements and forecasts, including our financial statements, in addition to the usual step-by-step profit and loss.