Kakaku com : Summary of Main Questions and Answers at Results Briefing for the First Quarter of the Fiscal Year ending March 31, 2024

Summary of Main Questions and Answers at the Results Briefing for

Q1 of the Fiscal Year ending March 2024, held on August 3, 2023

• Consolidated Results

Q: Is there any change in the progress or outlook for each business? (Annual outlook by business were: Kakaku.com +5%, Tabelog +20%, Kyujin Box +30%, new media and solutions/finance +5%)

1. Although there is a change in the outlook for Kakaku.com because new products in durable goods have not fully returned, but we do not expect much change for the full year. Q1 saw a 40% revenue increase for Kyujin Box compared to the previous year, but this does not mean that there will be a decline in Q2 and onwards, so the outlook is slightly brighter in this area.

1. Is the operating profit for Q1 below the internal plan? If yes, please tell us what the factors were.

1. Operating income for Q1 was slightly below the internal plan, but it was not significantly lower. This was due to an increase in advertising expenses and sales agency commissions, as well as a slight increase in subcontracting expenses, mainly for Tabelog's new businesses such as Tabelog Order and Tabelog Note, and there were also some one-off expenses.

1. Is it correct to assume that profit will increase from Q2 onward? Should we consider that the hurdle for achieving the full-year profit forecast (operating profit JPY27,100 million, OPM 40%) has been raised somewhat?

1. It is difficult to say since we are only one month into Q2, but our internal plan is to increase profits, and we believe we will be able to achieve this goal. I don't think it will be too hard.

1. The Kakaku.com business's forecast for the full year is +5% compared to last year, which is a large discrepancy from Q1 results, and from your explanation I did not get the impression that it would turn around in Q2 and onward. What will be the driver for company-wide profit growth

going forward?

1. Firstly, compared to last year, advertising cost, commissions, outsourcing and personnel costs have increased by about JPY1.4 billion. This increase was due in part to one-time expenses, and in part to the fact that we are controlling advertising expenses, depending on the time of year, by increasing or decreasing the amount of advertising. We hope you understand that there were a few irregularities in the cost of Q1.
   Secondly, in our annual plan, sales are higher in Q2 than in Q1, yet fixed costs remain the same. Therefore, Q2 is more profitable. Rather than turning profitable, we believe that Q2 will probably progress in line with the Company's plan.

1. Regarding your advertising strategy for H2, in which mediums and to which demographic will you be advertising Kakaku.com, Tabelog and Kyujin Box? Also, how was the response to your

advertising in Q1?

1. We had quite a good response in Q1. Cost-effectiveness wasn't bad, but I think cost was a little high. In H2, we plan to increase advertising a bit more, especially for Kyujin Box. In addition to the regular online advertising we are doing now, we would like to intensify video advertising, including on YouTube, to further expand brand awareness. As for Tabelog, the business itself has

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stabilized, and we intend to conduct appropriate advertising, mainly online advertising, in the same manner as we did up to Q1.

Q: Are there any costs in Q1 which have been brought forward from Q2? What are the operating expenses by quarter?

1. We are not particularly ahead of schedule. The operating margin was 33.7% in Q1, and I think it will probably be around 37% in Q2 if we continue to make good progress. Also, the budget is slightly stronger in H2. We hope to achieve an operating profit of over 40% in H2, which would allow us to achieve an operating profit of 40% for the full year.

1. Is there any progress or updates on the joint development and cooperation with Digital Garage?

1. There are a few updates. We have started experiments and sales activities in the areas where we are collaborating, and although I cannot give you any figures, we are making good progress. We have also established a joint venture with Digital Garage to start an e-commerce-related business, which we have reported previously, and we believe that we have made a good start to jointly launch the business.

Q: Regarding the introduction of generative AI into your own services, when do you envision a full- scale release? Also, should we expect costs to increase in conjunction with increased usage? How should we think bout costs related to services using generative AI.

1. We are currently in the experimental stage for a full-scale release. As for the introduction of generative AI into our services, there are many different ways to introduce AI and many different types of AI, so at this point we are not yet at a stage where we can assume which AI we will adopt and what kind of costs will increase as a result. At this time, expenses relating to the inclusion of AI are not included in our budget for this fiscal year.?

• Kakaku.com

1. I think that a certain level of revenue decline is inevitable for the Kakaku.com business, but I am concerned about the extent of decline in consumables due to fluctuations in search ranking and the accelerating decline in revenue for advertising. Is this just due to external factors? Is there any indication that there is a limit to what can be done with changes to your system or UI

updates?

1. The biggest factor is the external environment. As for the shopping business, it is not that there are internal factors since the trend is almost the same as sales of PCs and home electronics at electronics retailers. There are no specific changes to the system, but in terms of updating the UI, we have not been able to make any major UI updates to our smartphone site in the past year or two. We have significant updates planned over H2. I think that is where we can expect a lot.

1. What are the chances that the Kakaku.com business will recover? Strong sales in the consumer electronics industry are expected from July onward based on the financial results of related companies. What is the impact of the current heat wave on your business?

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1. Overall it's not going to be as bad as Q1. The advertising business in particular, is getting much closer to the planned numbers, with advertising coming from sources other than consumer electronics and PCs. So, we think it will recover a lot. Then there is the impact of the heat wave, but it is not as if air conditioners and other products sold in the heat wave represent a large percentage of our total sales. I think the impact of the heat wave is almost negligible.

• Tabelog

1. The growth of the promotion service is weak compared to the growth of the online reservation service. Is this because restaurants are cautious due to shortage of staff? Or has advertising become less of a priority because they can attract customers without it? Also, might there be a delayed increase in the number of restaurants subscribing to the promotion service from restaurants currently using the online reservation service? With rising demand for dining out,

including tourists, restaurants will probably have more money to spend.

1. The growth in the promotion service is roughly in line with our plan for Q1. As you mentioned, the current environment for restaurants, including the labor shortage, has not been improving, and growth in the promotion service, which involves fixed costs, has not been accelerating. Rather than being able to attract customers without advertising, the current situation is overwhelmingly due to factors such as having to shorten business hours or not being able to serve customers because of a shortage of staff. However, this situation will probably not get any worse. As for our company, we hope that by growing online reservations, we can promote DX in restaurants to help alleviate the labor shortage.

1. What trends are you seeing before and after the reclassification of COVID as class 5? I believe the number of restaurants subscribing to the promotion service is gradually recovering, but are you seeing any changes in acquisitions and cancellations? Also, why did the ARPU for the

promotion business drop in Q1?

1. The reason for the drop in ARPU in Q1 is the downgrading of subscriptions by restaurants. Due to the downgrading, ARPU dropped, and with ARPU multiplied by the number of stores under contract, revenue was not as strong as it could have been. After the reclassification of COVID to class 5, the number of people going out and eating out has increased. Normally, the number of online bookings in Q1 would be much lower than in Q3 and Q4 due to seasonality, but the fact that the number has increased is an indication of the significant impact of the reclassification to class 5. Regarding acquisitions and cancellations, there has been no sudden change in cancellations, but compared to last year, there has been a gradual decline. We consider this a very positive trend.

Q: What is the outlook for the number of online reservations from Q2 onwards?

1. The number of reservations is steadily progressing with our internal plan of achieving a total of 22 million reservations in the last three months of the fiscal year.

1. How did the number of online reservations in Q1 compare to the company's plan?

1. You can assume that Q1 is almost 100% in line with the company's plan.

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1. Can you provide some color as to why the ARPU for the online reservation service increased?

1. The number of contracted restaurants itself is steadily increasing, but at the same time, with the reclassification of COVID as class 5, the number of online reservations increased in Q1. I hope you understand that ARPU has increased in conjunction with these increases.

1. Please tell us why the number of monthly users has decreased compared to last year.

1. Regarding the number of monthly users, there are various ways to analyze the numbers, but I am not concerned since it has not changed much. While the number of monthly users does not change that much, I hope that more and more users will be able to use Tabelog as a one-stop service when dining out, from finding a restaurant to making a reservation.

Q: How is the plan to strengthen the sales team and increasing the number of sales staff progressing?

1. As I mentioned before we plan to increase Tabelog's sales staff by 30% plus by Q4. We have not secured that many yet, but as of Q1, we are generally progressing as planned.

• Kyujin Box

1. Results for Q1 have exceeded your annual growth target of 30%. Which had the greater impact, the external environment, or the effects of your company's measures? Also, is there a possibility

that results for the current fiscal year will exceed 30%?

1. There is little influence from external factors. We believe growth is largely due to client expansion and higher unit prices and conversion rates. Also, since Q1 exceeded 40%, a 30% increase in the second and subsequent quarters would average above 30%, but there are periods of growth and periods of no growth, depending on the season or month. We have not changed our target of 30% year-over-year for the full year.

1. While the rate of sales growth is accelerating, advertising and commissions expenses appear also seem to be expanding. If you were to control costs in the future, would Kyujin Box be able to maintain its sales growth? What is the optimal balance between expenses and revenue?

1. Both advertising and commission expenses are expanding. We are thinking that commission fees might increase a little more to expand our client base. However, regarding advertising expenses, it is very difficult to find a balance with revenue growth. Most of our advertising is done online, but the way we spend our advertising budget also depends on how much advertising our competitors are doing. There is a time to be offensive and a time to be defensive. It is difficult for us to consider optimal advertising cost on our own. Q1 was a time, when we were on the offensive, to increase revenue by increasing traffic, even if it meant spending a bit of money. We believe this resulted in the 42% increase in revenue. This does not mean that our spend on advertising is on an increasing trend.

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