We are working diligently on these improvements.

• The circumstances surrounding the discovery of the operational errors in the North American business

In North America, our business model involves acquiring stores en masse through M&A and either replacing or supplementing non-character plush prizes in claw machines with Japanese IP prizes that are popular in the region. Immediately following this transition, store sales surged significantly -approximately tripling – and the turnover rate for prizes improved.

However, upon investigating a group of stores where sales began to decline some time after the transition, it was discovered that these locations had been left for extended periods with insufficient prize replenishment.

The failure to keep up with prize replenishment was not due to a lack of management on the ground, but rather a “judgment error” during the PMI (Post-Merger Integration) process. In North America, we expanded our scale to approximately 12,000 locations by acquiring NEN in 2024, followed by Player One, BARBERIO, VENUplus and Newo Enterprises in 2025. During the integration of these companies, we standardized all operations based on those of Player One, as it was the largest entity and had the most established operational framework.

The issue was that Player One was a company primarily focused on “manned arcade locations (approximately 110 stores).” Under that same operational model, instructions were issued to NEN – which primarily consists of “unmanned mini-locations (approximately 10,000 stores)” – to “deposit collected cash at the bank every single day.” As a result, NEN’s approximately 200 field merchandisers were overwhelmed by the high-hurdle task of visiting four to five locations daily while also making bank runs, despite the fact that distances between stores in North America are unlike Japan and require one to two hours of driving. Consequently, the frequency of patrols for the primary purpose of prize replenishment decreased by 40%.

• Countermeasures

We noticed the decline in sales around November 2025, and after conducting an on-site investigation, we identified “operational chaos caused by daily bank deposits” as the root cause and decided to abolish this rule. As a result, the frequency of patrols has been on a recovery trend since February.

• The “Kiddleton Force” AI business app and the Timeline for operational normalization

To ensure that our field merchandisers can perform replenishment tasks efficiently, we have introduced our internally developed AI business application, “Kiddleton Force.” This app improves the operational efficiency of field merchandisers by utilizing AI to calculate optimal replenishment routes and perform image processing to monitor prize stock levels.

The application was developed based on systems and content that have already proven successful in our domestic operations.

One is the “AI for calculating cash replenishment routes” used in the foreign currency exchange machine business. In this business, we replaced the manual, human-led process of planning cash replenishment routes with an internally developed AI tool. Specifically, we have the AI perform calculations based on various variables, such as;

• which exchange machines should be replenished (taking into account factors such as daily usage frequency and currency levels)
  • which areas should be prioritized
  • what is the most efficient route to take

As a result, the number of replenishments per person increased by 20%. Due to this, revenue from the foreign currency exchange machine business has grown year-on-year in every month since joining GENDA, and a comparison of EBITDA for the 11 months before and after joining the group shows a 1.5-fold increase in profit.

The second is “GiGO NAVI,” an app used by staff at our domestic “GiGO” amusement arcades. This contributes to the standardization of tasks that previously relied on manuals, Excel, and human experience or intuition – such as checking per-machine revenue and prize inventory levels (which formerly required returning to the back office to check), as well as integrating operation manuals and digitizing inventory auditing.

Based on these tools, which have already delivered proven results within the company, we developed “Kiddleton Force,” the business application for our North American operations.

In the vast territory of the U.S., “Kiddleton Force” is more than just a route navigation tool; the AI calculates the optimal route by considering every variable – such as prize sales trends, cash accumulation, travel time between locations, and contract terms with installation sites – and displays “where and how to travel today” on the app.

The AI learns the differences in sales speeds for each individual prize and provides specific instructions on “which prize should be placed in which machine,” without relying on the intuition of on-site staff.

Furthermore, by uploading photos after prize replenishment to the app, the status of restocking at that specific location can be confirmed at a glance. Additionally, we have built a system where sales data from each game machine – which previously had to be reported manually to headquarters – is now automatically analyzed by AI and converted into a database simply by taking a photo and uploading it to the app.

Although the systems are now in place, it will take some time before every field merchandiser at every location can fully execute this cycle. For this reason, while we remain in a recovery phase during the first half of this fiscal year, we expect these improvement measures to take full effect starting from the second half, leading to a full-scale recovery in earnings.

• New store openings

Additionally, against the backdrop of our expanding network of locations in North America, bulk installation contracts with major nationwide chains are gaining momentum.

As previously reported, regarding Walmart, we plan to progressively withdraw from the small spaces currently housing only one or two mini claw machines. Instead, we intend to open new locations in tenant sections that are five to ten times larger in floor area.

In addition to AMC, one of the world’s largest movie theater chains, we are also making progress with store openings in other major chains. We have signed a contract with AMC to open locations in 170 sites, with installations scheduled to be completed by April. With Applebee’s, a restaurant chain operating over 1,500 locations across the U.S., we have initially signed an agreement to open in 85 stores.