Regarding the information provided by MSCI, the percentage of our revenue derived from gambling has been corrected to 0.17%, which more accurately reflects our current situation.

Previously, our revenue ratio from the amusement poker business was incorrectly recorded on the MSCI platform. As a result, certain institutional investors – who otherwise would have considered purchasing our shares – faced difficulties in executing trades due to restrictions within their investment mandates.

The previously noted inaccuracies have been resolved, and we are now engaging in transparent communication with institutional investors based on our actual gambling-related revenue ratio of 0.17%.

We have already received inquiries from institutional investors who were previously unable to purchase our shares due to these internal restrictions. Following detailed discussions regarding our actual revenue structure, they have gained a clear and accurate understanding of our business.

Moving forward, we remain committed to timely and accurate information disclosure to ensure market integrity.

This transaction was decided upon following careful screening in accordance with that policy and was reached after a highly selective process.

The company has already established itself as one of the largest players in Malaysia as a brand that provides a high-quality karaoke experience.

Furthermore, compared to our domestic karaoke business, the company boasts higher profit margins and has consistently generated stable cash flow; therefore, it does not require radical restructuring post-acquisition.

Additionally, regarding the acquisition price, we have determined that the recoupment period based on free cash flow is well within our investment criteria.

The company’s integration into our group marks a significant first step in expanding Japanese-style karaoke culture overseas.

By leveraging the brand power and customer base that “Loud Speaker” possesses in Malaysia and combining them with our operational expertise, we aim to create new entertainment value.

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While our North American business remains our top company-wide priority at present, we acknowledge that some may have concerns regarding the potential strain on resource allocation given this acquisition.

In this regard, we would like to clarify that this project will not require significant additional resources post-acquisition; we are bringing a company with an already stable earnings base into the group at an attractive valuation.

Besides, regarding PMI (Post-Merger Integration), we have structured it so that our Karaoke Business Division will lead the efforts, separate from the teams handling North America and Amusement operations; therefore, there will be no competition for management resources.

Consequently, we believe that maintaining our focus on North America and steadily advancing this project are fully compatible, which is why we decided to proceed with this announcement.

To put it simply, we do not see AI as replacing our physical “Entertainment Platform.” Instead, we believe “Entertainment Platform” will remain vital in the AI era, and that leveraging AI to drive operational efficiency will serve as a tailwind for our business.

In the current AI-driven stock market, the keyword “HALO (Heavy Asset Low Obsolescence)” is gaining significant attention (literally translated, this refers to a group of stocks that “possess heavy assets and do not easily become obsolete,” meaning stocks that are less susceptible to the influence of AI). The primary criterion for HALO is whether or not AI is capable of replicating the company’s products or services.

From that perspective, we believe that no matter how convenient digital technology or AI becomes, the human desire for “physical experiences” – those enjoyed directly through the five senses – will not easily disappear.

Our core business portfolio includes the following types of physical entertainment;

• Amusement arcades: A physical platform that provides a tangible anime experience, allowing fans to immerse themselves in the popularity of their favorite series through all five senses.
• Karaoke: “Singing,” an ancient form of entertainment that has endured throughout human history, having never been weeded out.
• Photography studios: An experience that turns commemorative photography into an event, documenting life’s milestones.
• Foreign currency exchange machines: A physical infrastructure that handles “cash” – an indispensable element of Japan’s inbound tourism demand.

Our “Entertainment Platform” operates on a business model of “building attractive venues (physical distribution networks) and continuously refreshing the content with the latest trends.”

Even as AI generates an endless stream of new entertainment, we believe that we are unlikely to be fully replaced as long as our store network serves as the “physical gateway” for people to experience that content.

Precisely because the world is changing so rapidly through digital advancement, we feel that our physical locations – which cannot be easily moved or replicated – have ultimately become one of our core strengths.

On the other hand, there is significant room for improving operational efficiency and enhancing the customer experience through AI-driven digitalization. Accordingly, we are leveraging AI to strengthen our physical service offerings.

For instance, by utilizing AI to streamline store operations and provide personalized services tailored to each guest, we aim to further unlock the inherent appeal of our physical locations.

The trend toward AI integration is irreversible, and we view it as a powerful tailwind that will maximize the value of our physical locations.

A defining feature of GENDA is that 99 of our employees – representing more than half of our standalone workforce – are technology professionals driving AI and DX (Digital Transformation). Notably, this group of tech talent is larger than our administrative team responsible for M&A execution.

Each of these professionals brings a specialized career in technology and data, leveraging their expertise to implement industry-disrupting DX initiatives.

Please refer to the following materials for details regarding our specific initiatives.

• Amusement: “Project PAO”

Previously, determining the optimal allocation of prizes to stores – deciding exactly “which items and quantities to send where” – was impossible to do manually, resulting in cumbersome Excel files with tens of thousands of rows. We implemented an AI that uses brute-force computation to evaluate countless distribution patterns, minimizing both inventory waste and opportunity loss. This has led to a dramatic improvement in accuracy, reducing the standard deviation of the variance between order plans and actual store allocations from 32.6 down to 4.9.

(For reference: page 28 of “FY2025/1 2Q Earnings Presentation”)

• Karaoke: “BanBan AI Agent”

To address operational bottlenecks involving high call volumes and cumbersome manual documentation, we developed an in-house manual ChatBot powered by Generative AI. This initiative significantly reduced manual reference times for field staff and decreased incoming call volumes, alleviating the workload on our headquarters. By building this solution in-house, we achieved an approximate 40% reduction in operational costs compared to external SaaS alternatives.

(For reference: page 22 of “FY2026/1 1Q Earnings Presentation”)

• Foreign currency exchange machines: “MEO” in AI-driven route optimization

We have transitioned the entire process of identifying machines requiring replenishment, assigning transport vehicles, and planning routes – tasks previously handled manually – to an AI system that makes these decisions holistically based on cash balances and usage frequency. Furthermore, the AI factors in recent dispensing trends and staffing schedules to predict the optimal cash amounts required for each replenishment.

(For reference: page 22 of “FY2026/1 2Q Earnings Presentation”)

Regarding recent stock market trends, we have gained many valuable insights through our ongoing dialogues with investors.

Concerning the movements in our company’s stock price, while acknowledging both firm-specific and macroeconomic factors, we recognize that our primary focus must remain on internal execution and delivering results.

With this in mind, we have also received insightful commentary regarding the impact of the current macroeconomic environment; while this is just one perspective, we would like to share it with you.

1. Shorting high-beta stocks as part of a market-neutral strategy

Through our ongoing dialogues with investors, we have received feedback that in the current market environment, there is a notable adoption of so-called market-neutral strategies. This involves adjusting exposure by combining long positions in global AI-related stocks with short positions in other growth stocks that exhibit high correlations in risk and growth characteristics.

We have been informed that, given the tendency for AI-related stocks to exhibit high volatility, high-beta stocks are sometimes selected as a basket for the short side of these trades.

In this context, it has been suggested that our stock, which carries a relatively high beta, may also be included as a pair for risk adjustment purposes.

• Selling points of the entertainment sector in the context of “AI substitutability”

Furthermore, there was an opinion that when increasing “long” positions in AI-related sectors, it is necessary to execute “short” positions in other sectors from a risk-adjustment perspective, and that in doing so, sectors with the potential for AI substitutability are selected.

In this context, some investors hold the view that stocks susceptible to being replaced by AI – led by entertainment and gaming – are sometimes targeted as part of a pair trade for risk adjustment.

Additionally, it has been pointed out that concerns about the entertainment sector being replaced by AI are influencing sector selection, leading to scenarios where entertainment-related stocks are collectively targeted for short-selling.

The “JPX Startup 100 Index” is a stock price index calculated and published by JPX Market Innovation & Research, Inc. It comprises 100 of Japan’s leading high-growth startups.

The index includes companies listed on the Tokyo Stock Exchange (TSE) Growth Market, as well as those that have recently transitioned from the Growth Market. Selection is based on two key metrics designed to measure startup potential: (1) revenue growth rate and (2) market capitalization growth rate.

The defining characteristic of this index is its focus on “growth potential” rather than mere company size. By being selected, we expect to gain increased visibility among institutional investors who specialize in small- and mid-cap stocks.

Furthermore, as the index is adopted for financial products such as ETFs and investment trusts, it will generate “mechanical” buying demand through passive management. This is expected to improve share price stability and market liquidity, providing a stronger foundation for more favorable future financing.