bet consolidation lifts full-year revenue target to JPY 15.4B. Focus shifts to an H2 operating profit turnaround led by MiiS LIFT BRUSH and to rebuilding the balance sheet.

Key Positives From The 2Q Results

The H1 operating loss widened to JPY 299M. However, OPM improved 2.6pt YoY to -10.0% from -12.7% (our estimate). WinC's monthly P&L recovered after the August launch of MiiS LIFT BRUSH. The acquisition of bet, which is profitable and debt-free, strengthens the H2 earnings base. Management believes the sources of losses were identified and addressed in H1 and that H2 marks the start of a recovery phase.

• Revenue:
  JPY 2,983M (+85.6% YoY). Growth came from the consolidation of Kanarabo and longer consolidation periods for the clinics and HaD. OPM improved 2.6pt YoY (our estimate).
• WinC Monthly P&L:
  WinC's standalone monthly operating P&L bottomed at -JPY 45M in August. It improved to -JPY 2M in September and +JPY 10M in October (forecast), putting a return to profit within sight after the MiiS LIFT BRUSH launch.
• bet Acquisition:
  bet (watch7) became a wholly owned subsidiary for JPY 1,000M. FY26/2 business profit was JPY 158M, implying an acquisition price of ~6.3x business profit (our estimate).
• Revised Full-Year Forecast:
  The plan calls for an operating loss of JPY 211M (prior year: -JPY 399M) and adjusted EBITDA of JPY 75M, a return to positive territory. H2 operating income is planned at +JPY 88M.
• Portfolio Clean-Up:
  Goodwill for the MOVE business was impaired, so it will incur no further goodwill amortization from H2 onward. The exit from low-synergy deals (RiLi, MOVE, KLab) is now largely in sight.

Key Concerns From The 2Q Results

A JPY 323M extraordinary loss cut net assets to JPY 508M. The equity ratio halved to 9.3% from 19.2% at the prior FY-end. The remaining JPY 950M of consideration for bet shares is due by end-March 2027, well above the JPY 300M of cash and deposits at the interim period-end. The method of capital raising and the degree of dilution will determine shareholder value going forward.

• Goodwill And Leverage:
  Goodwill of JPY 2,121M equals 417% of net assets (company disclosure). The D/E ratio rose to 6.88x from 3.25x at the prior FY-end (our estimate).
• Payment Terms:
  If JPY 500M of the consideration is not paid by 2027/3/31, the seller can reclaim the bet shares at no cost. The JPY 50M advance payment is also non-refundable under the contract.
• Going-Concern Disclosure:
  Operating CF remains negative, and the filing flags events or conditions that raise material doubt about the going-concern assumption. The H1 operating CF of -JPY 11M was propped up by a JPY 297M increase in trade payables.
• Downward Revision:
  Operating income for existing businesses was cut by JPY 374M from the initial plan. The main drivers were a cancelled large transaction (-JPY 149M) and a surge in clinic CPA (-JPY 164M).
• Margin Dilution:
  bet consolidation is expected to lower GPM to ~24% for the full year and ~17% in H2 (company disclosure). Earnings will become more exposed to swings in watch prices and inbound demand.

Focus Areas / Items To Monitor Going Forward

• Sustainability Of The WinC Recovery
  : MiiS LIFT BRUSH targets FY sales of more than JPY 500M. Delivery on the 3Q plan (consolidated operating loss of JPY 30M; -JPY 54M for existing businesses alone) will test the credibility of the H2 profitability plan.
• Funding For The bet Acquisition
  : We will watch the funding method (debt or equity) and timing for the remaining JPY 950M, the resulting recovery in the equity ratio, and the extent of dilution.
• Progress Rate On bet PMI
  : The key question is whether the retail mix and gross margins (B2B 3.1%→4.0%; retail 6–7%→10–12%) improve as planned after the rebranding to GINZA SEVEN.

Key Financial Highlights

• Gross Margin And Operating Income Drivers:
  The GPM decline reflects two factors: a higher share of low-margin businesses, and the prior-year reclassification of delivery costs and EC fees into SG&A. At the operating level, Kanarabo and HaD contributed profit and WinC's loss narrowed. These gains were outweighed by a JPY 260M rise in corporate costs and goodwill amortization and a JPY 71M decline at the clinics (company disclosure; managerial accounting basis).
• Quarterly Trend:
  On a standalone quarterly basis, 2Q revenue was JPY 1,666M (+26.5% QoQ). The operating loss was JPY 158M versus JPY 141M in 1Q (our estimate). Adjusted EBITDA was -JPY 63M in 1Q and -JPY 84M in 2Q (company disclosure).

Performance By Business Segment

The company reports a single segment, the Brand Produce Business. On a managerial accounting basis, revenue growth was led by Kanarabo (+JPY 1,502M), the clinics (+JPY 175M) and HaD (+JPY 107M). WinC (-JPY 146M) and RCP and others (-JPY 258M) were the main drags.

Segment Performance Table

Progress Versus Full-Year Guidance

Progress against the full-year revenue plan is only 19.3%. However, JPY 9,124M of the JPY 15,444M plan comes from bet, which will be consolidated for December–March. Progress against the JPY 6,321M plan for existing businesses is 47.2%, above the prior year's H1 revenue share of 38.9% (both our estimates). The H1 operating loss was JPY 299M against a full-year plan of -JPY 211M, which implies H2 operating income of +JPY 88M. The 3Q monthly plan still shows losses of JPY 11M in October and JPY 42M in November. A return to profit therefore depends on bet consolidation from December and on MiiS marketplace sales events.

Changes To Guidance

Full-year guidance was revised. bet consolidation lifts revenue by more than 2.3x, while operating income was cut into negative territory to reflect shortfalls in existing businesses. Adjusted net income has been dropped from disclosure because one-off items now distort it too heavily for it to reflect underlying earnings power. Operating income and adjusted EBITDA will serve as the key metrics going forward. Net income attributable to owners of the parent remains undisclosed, citing difficulty in estimating tax expenses, among other reasons.

• Revenue:
  JPY 6,602M → JPY 15,444M (+133.9%)
• Operating Income:
  JPY 50M → -JPY 211M
• Adjusted EBITDA:
  JPY 324M → JPY 75M (-76.9%)
• Net Income:
  Net income attributable to owners of the parent remains undisclosed. Adjusted net income (previously JPY 128M) has been removed from disclosure.
• Reasons For Revision:
  Operating income for existing businesses is now -JPY 324M, JPY 374M below the previous plan. The breakdown is: cancellation of a large transaction (-JPY 149M), clinics (-JPY 164M), existing WinC brands (-JPY 85M), Kanarabo (-JPY 39M), corporate costs (-JPY 22M) and other (-JPY 7M). Upside at Matsumura Shoten and others (+JPY 92M) partially offset these declines. bet adds revenue of JPY 9,124M and operating income of JPY 113M.

Commentary On Shareholder Returns

The annual dividend forecast was maintained at JPY 0 (prior year: JPY 0). There were no share buybacks and no changes to buyback policy. During the period, 50,000 shares were issued on the exercise of stock acquisition rights, bringing shares outstanding to 3,468,520.

Financial Position

Debt-funded M&A has left goodwill and interest-bearing debt far exceeding shareholders' equity. The extraordinary loss pushed the equity ratio down to 9.3%. With the remaining bet payment approaching, rebuilding the balance sheet through capital reinforcement is the top priority.

• Cash Flow:
  Operating CF was -JPY 11M (prior year: -JPY 154M), investing CF -JPY 225M (incl. -JPY 113M for business acquisitions) and financing CF -JPY 162M. FCF was -JPY 237M (our estimate).
• bet Debt Position:
  bet is debt-free, so its consolidation adds no interest-bearing debt (company disclosure). However, the remaining JPY 950M of consideration must still be paid separately.

Disclosures Released Alongside The Earnings Announcement

Major Announcements During The Quarter

Large-Shareholding Filings / Material Proposals Over The Past Year

• ULTIMATE CLASSIC INVESTMENT LLC: New → 11.2% (2026/03/05, amended report) - Pure investment. Respects current management's policies and supports medium- to long-term enhancement of corporate value
• ULTIMATE CLASSIC INVESTMENT LLC: 11.2% → 11.3% (2026/05/01, amended report) - Pure investment. Filed due to a change in representative
• ULTIMATE CLASSIC INVESTMENT LLC: 11.3% → 12.3% (2026/06/07) - Pure investment. Holding ratio increased by 1% or more
• ULTIMATE CLASSIC INVESTMENT LLC: 12.3% → 10.9% (2026/08/12) - Pure investment. Holding ratio decreased by 1% or more