Debt capacity remains beyond what the superficial Net Debt/EBITDA ratio suggests.

First and foremost, our borrowing covenants do not impose a uniform restriction which is “Net Debt/EBITDA = 3.0x.” We believe that temporarily exceeding the 3.0x threshold to execute high-quality M&A opportunities is well within an acceptable range, given the subsequent cash-generating capacity it would provide.

Furthermore, at the time of an M&A execution, while the “numerator (Net Debt)” increases, the EBITDA of the target company is added to the “denominator (EBITDA).” Consequently, the structure ensures that the Net Debt/EBITDA ratio does not increase as significantly as it might appear on the surface.

Let us provide a detailed explanation below.

• M&A simulation (until reaching a 3.0x leverage ratio)

The mechanical calculation for the case where Net Debt/EBITDA reaches 3.0x is as follows:

[The case where Net Debt/EBITDA reaches 3.0x]

※Assuming full debt financing and zero growth for the target company.

As shown, in the case of a reasonably priced M&A deal with an EV/EBITDA of 5.0x, even an additional investment of approximately 25.0 billion yen would still keep the Net Debt/EBITDA within the 3.0x range.

We have been in an aggressive investment phase and have maintained a negative free cash flow (FCF) until now; however, following a change in our capital allocation policy, we will now begin the full-scale reduction of interest-bearing debt (deleveraging) through operating cash flow.

If no new borrowing is undertaken, the “numerator (Net Debt)” will decrease through cash generation from existing businesses, meaning the Net Debt/EBITDA buffer will automatically expand over time.

Furthermore, stock-deal M&A is a means of pursuing M&A while preserving debt capacity. During the period of share price decline between December 2025 and March 2026, we acquired treasury stock at a low cost to be used as consideration for future M&A.