We think that your concern about the dilution caused by a follow-on offering is general and understandable.

Although we wanted to respond to this kind of question as soon as possible, as an issuing entity, we were not institutionally allowed to mention the issue expressly before the follow-on offering was completed. Therefore, we would appreciate it very much if you could kindly understand that today is the earliest possible date to respond to your question, immediately after the completion of the follow-on offering.

In conclusion, we will explain that “even though the number of shares increased through the follow-on offering, earnings per share have increased because the growth in earnings has greatly exceeded it” in a later part. However, first, let us give you a hypothetical example to help you intuitively understand that.

For example, we made the previous follow-on offering of 10.0 billion yen in July 2024 and this follow-on offering of 18.5 billion yen in May 2025. If we made a follow-on offering of 28.5 billion yen in total at 969 yen (instead of 1,021 yen) in July 2024, and even if we did not spend a single yen of the 28.5 billion yen raised, earnings per share (EPS) would have increased (EPS indicates IFRS-basis net income (net income before amortization of goodwill)).

This has occurred because our debt capacity has significantly increased through the follow-on offerings and, most of all, we regard EPS as our most important indicator and have achieved an “increase in earnings” that far exceeds the “increase in the number of shares.” This is because the following factors have compositely worked:

・Carefully select M&A with high returns “for creditors + shareholders” to be made by the target company on a stand-alone basis without synergies

・From there, furthermore, utilize borrowings as much as possible to the appropriate extent, and maximize returns for “shareholders”

・From that launch pad, further raise returns by creating synergies through PMI

Next, let us show you the actual story with actual results. First, we will explain the actual results of last year’s follow-on offering (c.10.0 billion yen), which led to significant growth in EPS.

Last year’s follow-on offering (c. 10.0 billion yen) was promptly used for M&As, and as a result;

・While the number of shares increased by approximately +7% (dilution ratio by follow-on offering),

・Adjusted Net income before amortization of goodwill increased by +31% (excluding tax effects, intrinsic performance increased by +97%)and,

・EPS increased by +19% (division between the two, the denominator further increased by stock delivery M&A).

We have disclosed that we will promptly use this follow-on offering (about 18.5 billion yen) for attractive M&As along with borrowings within one year, though,

・The number of shares increased by approximately +10.9% (dilution ratio by follow-on offering),

・We will increase net income before amortization of goodwill as same as last, then

・We will keep maximizing EPS. As same as last year, let us run the numbers as follows.

First, let us assume the following as a simplified premise in M&A (to show that this does not include any arbitrariness and help you understand the growth in M&A, we prepared spread sheet for you).

⓪  Our Net Debt (net interest-bearing debt) before the follow-on offering: 62.5 billion yen

    (Forecast consolidated EBITDA for the next fiscal year after the acquisition of Player One is 25.0 billion yen and Net Debt / EBITDA is 2.5x)

①The amount of cash raised by the follow-on offering and to be allotted to future M&As: 15.5 billion yen

(As disclosed, 3.0 billion yen out of 18.5 billion yen, which is a disposable amount, is supposed to be allotted to acquire Player One)

②The amount to be allotted to future M&As through stock delivery / exchange: 17.7 billion yen

(Number of shares (10%) possible to issue only for M&As as curve-out even during lock-up period)

③The amount of cash raised by interest-bearing debt and to be allotted to future M&As: 60.0 billion yen

(Net Debt / EBITDA is 2.7x after pro-forma basis. Debt financing can go up to 88.4 billion yen if 3.0x)

④Valuation of M&A: EV / EBITDA 5.0x

(As a result, what is practically assumed here is valuation 5.0x (same level of our M&A track records) but growth after M&A is none, or a case we acquire at 6.0x and EBITDA increased by 20% after M&A)

➄Further, no organic growth to simplify

(However, growth in existing businesses in Japan and in the US is as already disclosed)

Under the above assumption, we will calculate EBITDA, net income before amortization of goodwill and EPS, which are our three KPIs.

First, it is assumed to be possible to allot 93.2 billion yen, the total of ①, ② and ③, to future M&As.

The increased amount of EBITDA is +18.6 billion yen, calculated by dividing 93.2 billion yen by 5.0x (in this analysis, it is assumed that although we acquired Player One with EV / EBITDA 8.5x but no growth, to simplify this analysis. However, we actually assume 75% growth in EBITDA in the medium to long term, and the real EV / EBITDA post synergy is expected to be 4.8x).

If we assume that net income before amortization of goodwill is the same as margin of forecasted EBITDA of 25.0 billion yen and forecasted net income before amortization of goodwill of 9.5 billion yen for the next fiscal year (i.e. acquire a company in the same business category through M&A with the same borrowing conditions) to simplify this analysis, net income before amortization of goodwill will increase approximately +7.1 billion yen.

Although EPS is affected by the number of shares, even if the stock price conservatively remains at 969 yen, the offer price, when conducting M&A with stock mentioned in ② (which means the stock price will not go up but the number of shares increased), EPS will be 82.51 yen, +41% increase against 58.40 yen before the follow-on offering.

In fact, under the above assumption, even if we will not commence the next follow-on offering in the future, the effects on our KPI can be calculated as follows (the whole amount of follow-on offering in ① is assumed to be allotted to M&A within one year as disclosed).

・EBITDA:
　25.0 billion yen (forecast for FY2027/1)  →  +18.6 billion yen   →  43.6 billion yen

・Net income before amortization of goodwill:
　95.0 billion yen (forecast for FY2027/1)  →  +7.1 billion yen     →  16.6 billion yen

・EPS (no forecast for FY2027/1):
　58.40 yen (before follow-on offering)      →  +41%                      →  82.51 yen

We prepared those calculations based on mechanical calculations which eliminate arbitrariness as much as possible just for your reference because we received a lot of inquiries centered on concerns about dilution from our shareholders.

On the other hand, of course, this does not present our official forecast and will significantly change depending on future M&As. We will promptly disclose information when it is necessary to disclose.

Finally, If the fund raised through a follow-on offering were used to repay past debt or to invest in business retention, it would depress EPS, and the “dilution” argument would be inescapable.

With that perspective, the extreme and hypothetical example at the beginning is the same as a case that the whole amount of 28.5 billion yen was allotted to past investment, and even in that case EPS would have increased as presented.

In fact, the whole amount of our follow-on offering will be used for M&A to be paid from today on. The actual results show that EPS significantly increased after the previous follow-on offering as we have already explained earlier.

Last Wednesday, which was the day before yesterday, 18.5 billion yen, the funds from our investors, were safely deposited into our ordinary account. Same as last, we will immediately resume investment in a group of M&A projects which are expected to increase earnings more than an increase in the number of shares.

Since we held funds which are a little less than twice the amount of the previous follow-on offering, we will use them very carefully on behalf of our shareholders.

※ Notes on the financial simulations:

The aforementioned case study is a mechanical simulation of how our EPS would change if we were to acquire 100% of another entertainment company under certain assumptions (assumptions regarding the financing of the acquisition, the use of proceeds, and post-acquisition synergies). This is not an indication that we intend to acquire a particular entertainment company, nor is it a forecast of our future EPS. The figures used in this simulation would yield different results if different assumptions are used in the simulation. Each of the assumptions used in this simulation was made independently by the Company for the purpose of this simulation. This is neither an indication nor a guarantee that the actual acquisition (including the financing and post-acquisition synergies assumed therein) will be executed or realized on similar terms. In addition, there is no assurance that we will acquire other entertainment companies in the future.