Strengthening the earnings base and establishing a highly productive business structure

「In the trading card business, in addition to further expanding the flagship store, we will create synergies with crafty and スパイラルセンス, which have become wholly owned subsidiaries, and strengthen the business foundation by establishing an integrated structure encompassing physical stores, e-commerce, and development functions.」

「The Group has adopted expansion of the trading card business and healthcare business as its growth strategy and, to accelerate the early transformation of its overall business into a high-margin structure, raised funds on 11 November 2024 through the issuance of stock acquisition rights by third-party allotment. It is now moving urgently to transform its business structure, including through active M&A using the funds raised and fundamental reallocation of existing resources.」

「Our growth strategy is to rebuild the advertising business as an earnings base, develop the trading card business, which is expected to grow, and the highly profitable healthcare business into new core businesses, and transform the overall business into a high-margin structure.」

「Under these conditions, we are making significant investments centered on the advertising business for medium- to long-term business growth. We developed the advertising delivery platform “AXEL MARK DSP,” equipped with an ID-less targeting system suited to the post-cookie era, for advertisers, and began providing it in January 2024.」

「Under these conditions, since the previous fiscal year we have determined that significant investment centered on the advertising business is necessary for medium- to long-term business growth and have been developing a new advertising delivery platform using AI (artificial intelligence). We are also investing in the working environment through active personnel expansion and reinforcement of the organizational structure to expand the business.」

「During the second quarter, some business partners experienced a reaction following the end of the COVID-19-related demand surge in the advertising business. We also intensified development of a new advertising delivery platform using AI (artificial intelligence) while continuing to invest in the working environment through active personnel expansion and reinforcement of the organizational structure. Through human capital management that maximizes the potential of our people, the source of corporate growth, we aim to enhance corporate value.」

「Under these conditions, we determined that significant investment centered on the advertising business was necessary for medium- to long-term business growth and began making investments. Specifically, in addition to starting development of a new advertising delivery platform that leverages expertise developed in the advertising business, we are actively expanding our workforce, strengthening our organizational structure, and investing in the working environment. Through human capital management that maximizes the potential of our people, the source of corporate growth, we aim to enhance corporate value. Through these initiatives, we will work to expand revenue scale and improve profit margins over the medium to long term.」

「Although the Company achieved operating profitability for 2 consecutive fiscal years through the current fiscal year, it determined that further significant investment in the business was necessary for medium- to long-term growth.」

「Under these conditions, during the third quarter we continued to invest in additional development and personnel expansion aimed at expanding the advertising business. This strengthened our sales structure and expanded orders from business partners, enabling us to achieve quarterly operating profitability for the second consecutive quarter.」

「Under these conditions, during the second quarter accounting period, the Company achieved a return to operating profitability for a quarterly accounting period, despite continuing investments such as additional development to improve advertising delivery logic and staff expansion to grow the advertising business, owing in part to increased orders from new customers through strengthened sales efforts and controls on company-wide expenses.」

「The Company achieved full-year operating profitability in the previous fiscal year. During the cumulative first quarter, although the advertising business continued to perform steadily and the effects of cost improvements implemented by the end of the previous fiscal year were evident, we also made investments to strengthen the operation of the business by intensifying development of the advertising system and expanding sales and planning personnel to further expand the core advertising business, in which investment had previously been restrained to generate earnings.」

「Against this business environment, during the current fiscal year we worked to rebuild our earnings base through the transformation of our business structure and reductions in company-wide expenses, initiatives pursued since the previous fiscal year, and developed our business with the aim of returning to profitability for the full year.」

「In terms of revenue, we sought to expand advertising revenue, mainly in the digital content and e-commerce areas, and strengthen earnings power by developing new functions and services using data in the profitable advertising business. In addition, following the withdrawal from unprofitable businesses in the previous fiscal year, we worked to improve our earnings structure by downsizing offices, optimizing the business operations structure, and reducing fixed costs such as expenses for common departments. As a result, although the cumulative operating loss for the first three quarters reflects the operating loss recorded in the first quarter, when the effects of the earnings structure improvements had not yet fully contributed, we began recording operating profit on a quarterly basis from the second quarter, when those effects made a full contribution. We continued to record operating profit in the third quarter and expect to record operating profit in the fourth quarter as well.」

「Against this market backdrop, we completed in the previous quarter the transformation of our business structure and cost-control measures that we had pursued since the previous fiscal year, and are aiming to achieve full-year operating profitability in the current fiscal year. During the second quarter, the advertising business performed steadily, and the cost-control effects of the business structure transformation enabled us to return to operating profitability for the quarter.」

「To achieve full-year operating profitability, we completed during the cumulative first quarter under review the business-structure transformation centered on the advertising business and cost-control measures that we had pursued since the previous fiscal year.」

「During the current consolidated fiscal year, the Group worked to transform its business structure with the aim of achieving profitability in the following consolidated fiscal year. In the following consolidated fiscal year, we expect to further reduce selling, general and administrative expenses during the first quarter, complete the transformation of the business structure, and see the effects of earnings improvement from the second quarter onward.」

「The Group pursued its business under a management policy for the fiscal year ending September 2020 that called for withdrawing from unprofitable businesses, transforming the business structure by replacing its core businesses, and implementing structural reforms to achieve profitability.」

「① Maintaining and expanding revenue by focusing on priority genres in the game business, optimally allocating development and operations personnel, and diversifying risk and increasing revenue opportunities through contract development and alliances with other companies, ② maintaining and expanding revenue in the advertising business and strengthening earnings power through the development of new functions and services using data, ③ improving profitability by selecting and concentrating on services offered in the and Experience business, ④ strengthening earnings power through the transition and reorganization of the business structure, including the development of the IoT business, and ⑤ working to secure financing and stabilize cash management.」

「Accordingly, we will continue to transform the business structure in the game business, expand the advertising network and enhance services for advertisers in the advertising business, strengthen planning and sales in the aE business, create new businesses based on data accumulated through newly launched IoT services in addition to existing businesses, promote collaboration among businesses under a multi-business structure, allocate funds and internal resources appropriately, improve productivity by selecting and concentrating on businesses, and formulate and implement marketing strategies focused on cost effectiveness.」

「① Maintaining and expanding revenue by reviewing the investment-and-return title portfolio in the game business and optimally allocating development and operations personnel, ② expanding revenue by expanding ADroute in the advertising business into the PC segment, ③ improving profitability and expanding revenue by selecting and concentrating on services offered in the and Experience business, ④ diversifying risk and increasing revenue opportunities through alliances with other companies for projects, including new projects, and ⑤ working to secure financing and stabilize cash management.」

「① Maintaining and expanding revenue by reviewing the investment-and-return title portfolio in the game business and optimally allocating development and operations personnel」

「We will continue to analyze and provide feedback on quantitative data for content offered in the game business, expand the advertising network and enhance services for advertisers in the advertising business, strengthen planning and sales in the and Experience business, promote collaboration among businesses under a multi-business structure, allocate funds and internal resources appropriately, improve productivity by selecting and concentrating on businesses, and formulate and implement PR strategies focused on cost effectiveness.」

「To achieve its management philosophy of “Connecting the world through fun” on a lasting basis, the Group recognizes that strengthening its earnings base and establishing a highly productive business structure are important management issues.」