It is a fact that the performance of our North American operations has fallen behind our initial projections, and we take this situation very seriously. We would like to take this opportunity to re-explain the factors behind this delay and the specific countermeasures we are currently implementing.

First, our initial hypothesis that Japanese anime IP prizes would see strong demand in North America yielded results beyond our expectations. However, we discovered that on-site replenishment could not keep pace with the speed at which these prizes were being cleared.

Upon implementing proper restock procedures at the affected locations, we confirmed a significant turnaround, with growth rates improving by as much as 248%. Having reaffirmed the robust demand for Japanese anime IP in North America, we have launched measures to normalize this replenishment cycle as quickly as possible.

   (Source: page 16 of “FY2026/1 3Q Earnings Presentation” disclosed on December 12, 2025)

First, we will introduce DX solutions to bring full visibility to prize replenishment and inventory management, which were previously left to the discretion of individual rounder. This will allow us to establish a robust system where both the U.S. headquarter and Japan can monitor and track the real-time operational status of every location.

(Source: page 16 of “FY2026/1 3Q Earnings Presentation” disclosed on December 12, 2025)

In addition, we have been conducting online training sessions for all sales managers responsible for rounders. By standardizing our guidance and management criteria, we aim to elevate the operational quality across the entire organization.

  (Source: page 16 of “FY2026/1 3Q Earnings Presentation” disclosed on December 12, 2025)

Additionally, regarding our PMI initiatives utilizing existing claw machines, current performance is outpacing the results announced in our third quarter earnings announcement. We would like to share these figures with you on a preliminary basis.

In our third quarter earnings announcement, we disclosed the “sales growth rates for locations where we maintained existing claw machines but refreshed the prizes with Japanese anime IP,” as shown in the graph below. This initiative is straightforward: while the machines themselves remain the same, we simply replace conventional prizes with Japanese anime IP ones.

(Source: page 17 of “FY2026/1 3Q Earnings Presentation” disclosed on December 12, 2025)

Subsequently, an analysis of sales data – with the observation period extended to December 19 – confirmed further growth at the same locations.

This initiative offers superior investment efficiency because it drives sales growth with zero capital investment; it requires no machine replacement and the prizes are recorded as cost of goods sold rather than Capex. Our conventional SWAP initiative involved Capex for replacing machines, which limited their implementation to high-efficiency locations. In contrast, this new approach achieves growth through prize replacement alone, allowing us to scale it across all locations.

  The feasibility of this initiative is rooted in the expansion of our business scale through roll-up M&A of mini-locations in North America. This growth has significantly enhanced our procurement power, enabling us to secure not only conventional small prizes but also large-scale Japanese anime IP prizes.

  To ensure we capture the demand of the current holiday season, we are working diligently to maximize our financial performance in tandem with the aforementioned operational improvements.