Revenue +40.1% and adjusted EBITDA of JPY 11.2B marked a record high. With the earnings skew toward 2H intensifying, the focus shifts to progress against the full-year adjusted EBITDA target of JPY 30B

Key Positives From The 2Q Results

Contributions from companies brought into the group via M&A, combined with growth in existing operations, drove revenue to JPY 103,664M (+40.1% YoY) and adjusted EBITDA to JPY 11,206M (+21.1% YoY). GAAP operating income declined on higher depreciation and goodwill amortization, but the underlying earnings power of existing operations — excluding one-off M&A-related expenses — continued to grow. The conversion of domestic amusement facilities to the crane-game "Oasis" format and the achievement of monthly profitability in North America underpin a strengthening earnings base.

• Adjusted EBITDA of JPY 11,206M (+21.1% YoY), with an adjusted EBITDA margin of 10.8% (our estimate)
• M&A-related expenses fell to JPY 399M (from JPY 669M a year earlier), derived by back-calculation from the adjusted EBITDA definition (our estimate)
• Revenue at the five converted stores grew versus pre-conversion levels; "Oasis Super Center Trial Kamiiso" was up 673% YoY
• North American amusement achieved its first-ever monthly profit at every P&L level in July 2026 on improved route efficiency
• Revenue progress of 48.2% (vs. 43.3% a year earlier) is running ahead of last year and tracking well against the full-year plan of JPY 215,000M (our estimate)
• An interim dividend of JPY 4.00 is planned (vs. JPY 0 in the prior year), with a full-year forecast of JPY 8.00. The company repurchased 3,396,900 shares for JPY 1,966M

Key Concerns From The 2Q Results

Gross profit margin fell to 20.8% (from 23.4%; our estimate), and with SG&A +37.4%, depreciation +63.4% and goodwill amortization +52.0%, GAAP operating income fell -30.4%. Adding interest expense of JPY 1,133M (+75.4% YoY), recurring profit declined -53.8% and the company posted an interim net loss attributable to owners of the parent company of JPY -322M. Even on an adjusted basis, interim net income was only flat YoY, and on a per-share basis dilution is evident.

• Adjusted interim net income of JPY 2,728M (+0.1% YoY); on a per-share basis JPY 14.95, down -7.1% from JPY 16.09 a year earlier
• Adjusted EBITDA progress of 37.4% trails the 40.5% achieved a year earlier (our estimate; prior-year figure back-calculated from the YoY change rates in the full-year plan)
• Interest-bearing debt of JPY 99,647M (borrowings + bonds; our estimate), with the equity ratio down to 28.3% from 29.2% at the prior year-end
• Goodwill of JPY 51,003M and customer-related assets of JPY 14,809M account for 28.8% of total assets; amortization burden and goodwill recoverability remain ongoing issues
• Content & Promotion external customer revenue of JPY 2,081M (-20.5% YoY), reflecting volatility from the distribution slate mix

Focus Areas / Items To Monitor Going Forward

• The 2H earnings contribution from GENDA Playnation Entertainment, where the seasonal skew has intensified, and the scale of 2H build-up required to hit full-year adjusted EBITDA of JPY 30,000M
• The sustainability of monthly profitability at GENDA Americas in North America, plus the fixed-cost increase and payback pace from new Walmart locations
• The pace of increase in depreciation, goodwill amortization and M&A-related expenses, and the timing of a return to GAAP profitability

Key Financial Highlights

Gross profit margin, M&A-related expenses, the YoY change in adjusted interim net income per share, and the YoY changes in operating CF and adjusted EBITDA are our estimates. M&A-related expenses are back-calculated from the definition "adjusted EBITDA = operating income + depreciation + goodwill amortization + M&A-related expenses." The decline in GAAP operating income was driven primarily by a JPY 2,398M increase in depreciation and a JPY 813M increase in goodwill amortization. The interim net loss reflects income taxes of JPY 1,407M booked against interim income before income taxes of JPY 1,110M.

Performance By Business Segment

Entertainment Platform revenue rose +41.5% with adjusted segment profit +27.5%, driven by format conversions and new openings in domestic amusement, same-store growth in karaoke, and contributions from companies acquired in the prior year. In Entertainment Content, Character MD grew on expanded prize merchandise supply, while Content & Promotion saw revenue decline, leaving the segment margin at a low 2.7%.

Segment Performance Table

Revenue is on a "total" basis including inter-segment sales. Adjusted segment profit is the company-disclosed figure on a pre-M&A-related expense, pre-amortization operating income basis. Margins are our estimates.

Revenue by service is on a revenue-from-contracts-with-customers basis. YoY changes are our estimates.

Progress Rate Versus Full-Year Guidance

Revenue progress of 48.2% is ahead of the 43.3% recorded a year earlier, while adjusted EBITDA progress of 37.4% trails the prior year's 40.5% (both our estimates). Management attributes the intensified 2H skew in consolidated earnings to seasonality at UK-based GENDA Playnation Entertainment and other factors; achieving full-year guidance therefore requires a 2H adjusted EBITDA build-up of JPY 18,794M (our estimate).

Progress rates are our estimates. The full-year plan does not disclose GAAP operating income or net income, so comparisons are made on a Non-GAAP basis.

• The holiday park business at UK-based GENDA Playnation Entertainment is skewed to 2H, so its contribution in the interim period was relatively small
• Management notes that the 2H skew in consolidated earnings has intensified with the addition of companies acquired in the prior year

Changes To Guidance

No change from the full-year consolidated guidance announced on 12 March 2026 (revenue JPY 215,000M, adjusted EBITDA JPY 30,000M, adjusted net income JPY 10,600M). The plan already incorporates the intensified 2H skew, so monitoring progress will hinge on capturing overseas seasonal demand in the second half.

Commentary On Shareholder Returns

For FY January 2027, an interim dividend of JPY 4.00 is planned (no dividend in the prior year), with a year-end dividend of JPY 4.00 for a full-year total of JPY 8.00; there is no revision to the dividend forecast. The interim dividend is to be resolved at the Board meeting on 30 September 2026, with payment scheduled to commence on 23 October 2026. Under Board resolutions dated 12 December 2025 and 1 May 2026, the company repurchased 3,396,900 shares for JPY 1,966M, bringing treasury shares to 6,277,976 at period-end. The company has also announced an expansion of its shareholder benefit program Notice Regarding Expansion of the Shareholder Benefit Program.

Financial Position

M&A and store investment were funded via borrowings and bonds, leaving interest-bearing debt at approximately JPY 99.6B and the equity ratio at 28.3%, down from the prior year-end. Short-term borrowings were refinanced into long-term borrowings and bonds, with current liabilities down JPY 18,378M and non-current liabilities up JPY 24,745M — evidence of a lengthening debt maturity profile.

Disclosures Released Alongside The Earnings Announcement

Major Announcements During The Quarter

Large-Shareholding Filings / Material Proposals Over The Past Year

• Midas Capital: 28.53%→28.53% (2026/09/09) – Held as a stable shareholder; filing prompted by conclusion of material agreements such as pledge agreements
• Midas Capital: 28.55%→28.53% (2026/06/12) – Held as a stable shareholder; filing prompted by conclusion of material agreements such as pledge agreements
• Midas Capital: 28.79%→28.55% (2026/06/02) – Held as a stable shareholder; decrease in holding ratio
• Hisashi Kataoka (joint holder: Scarsdale): 13.63%→13.63% (2026/05/28) – Held as a stable shareholder; filing prompted by amendments to pledge agreements
• Hisashi Kataoka (joint holder: Scarsdale): 14.01%→13.63% (2026/05/15) – Held as a stable shareholder; ratio declined due to an increase in shares outstanding
• Capital Research and Management Company: 7.05%→5.49% (2026/04/22) – Pure investment for overseas investment trusts
• Capital Research and Management Company: 9.16%→7.05% (2026/03/06) – Pure investment for overseas investment trusts
• Capital Research and Management Company: 9.18%→9.16% (2026/01/09) – Pure investment for overseas investment trusts