Toei Animation : Financial results briefing Second Quarter of FY2026.3 Q&A

About this update from Toei Animation Co., Ltd.

TOEI ANIMATION Financial results briefing Second Quarter of FY2026.3 Q&A [Question 1] Questions regarding the Medium-Term Management Plan. In the final year of the target period, profitability declined with net sales of 200 billion yen and operating profit of 50 billion yen. What were the reasons for this? [Answer 1] As explained earlier, this medium-term management plan positions the next five years as a "preparation period" for building a new business foundation, as we aim to establish the "world-renowned Toei Animation brand" in the next decade. We plan to invest proactively across various areas to strengthen existing businesses and pursue new ventures. Although this will temporarily result in lower profitability, we are confident that within five years, we will have established the foundation for further global expansion. Thereafter, we expect to see improvements in both profit levels and overall profitability. Please remain optimistic. [Question 2] The Dragon Ball Store is set to open in November. What are your goals for it? Could you also tell us about the potential for future expansion? [Answer 2] To answer your question, the first Dragon Ball-only store-not just for our company, but the first in the world-will open at Tokyo Station on November 14. Dragon Ball is a huge hit that has been loved for years across generations and countries. Nevertheless, there is still room for growth, and we hope you will understand that this store is just one of the ways we express our commitment to continuously taking on new challenges. Aside from the store's profitability, we hope that by effectively communicating the work's universe and the appeal of its characters in this store, we can further enhance engagement with fans and appeal to audiences beyond existing fans. We believe this will significantly contribute to enhancing the value of the IP itself. [Question 3] I would like to ask about the improvement in shareholder returns among the KPIs in the Medium-Term Management Plan. There is mention about total payout ratio. Is the company also considering share buybacks? [Answer 3] As stated in the medium-term management plan, we have adopted a stable dividend policy with a target total payout ratio of approximately 50%, dividend payout ratio of 40%, and the current dividend level as the lower limit. For the total payout ratio, we are targeting 50% by the final year of the medium-term plan. In addition to existing dividends, we will also look to return value to shareholders through special dividends, commemorative dividends, and share buybacks. When implementing specific capital reductions, we will make a comprehensive decision based on the performance level at that time and strategic investment projects. However, we will keep a strong focus on capital efficiency and operate in a way that ensures we do not unnecessarily hoard cash. [Question 4] Regarding the 50 billion yen in inorganic investments during the medium-term management plan, are there any priority areas? What other projects do you have in sight? [Answer 4] As explained earlier, this medium-term management plan includes approximately 50 billion yen in inorganic investments. The three key focus areas are enhancing IP, strengthening studios, and exploring business synergies. At this time, we cannot disclose specific project names or investment amounts by sector. However, we have narrowed down candidate projects from a long list to a short list and are in the process of working on them individually with management. We will keep you updated. [Question 5] In the segment-specific sales forecast for the final year of the Medium-Term Management Plan, the net sales ratio for Sales of Goods and event operations is growing. Are there any particular reasons for placing emphasis on these areas? Given that this is a business with significant overhead costs, I would like to ask about your policy from the perspective of profit margins. [Answer 5] As mentioned in the explanation of the next medium-term plan earlier, we plan to significantly expand both the sales scale and the composition ratio of Sales of Goods and event operations over the next five years. When we say Sales of Goods and event operations, we primarily mean businesses conducted in close connection with fans and users, such as events and shops. I think this field still has room to grow compared to our current core businesses of video and licensing business. In this sense, I believe that devising creative ways to increase customer contact points will greatly contribute to not only this segment but also to enhancing the value of IP itself, which forms the foundation of our company's business. As we expand the scale of our business in the future, we will also aggressively strive to improve efficiency and rationalization- something only possible with a certain level of scale and continuity. [Question 6] How are the three pillars of global strategy-Export business, Local production for local consumption, and Hollywood-style business-being streamlined in this medium-term management plan? [Answer 6] Of the three pillars of our global strategy explained earlier, in this medium-term plan, we position IPs introduced as local production and local consumed and Hollywood-style as newly created IPs outside Japan. Export business IPs are categorized as global IPs and growth/development IPs. They are all included and categorized from the perspective of the IP portfolio axis. This change in categorization is due to a change in our approach to promoting IPs previously categorized as export business IPs, as we plan to expand globally using Hollywood-style and local production for local consumption methods going forward. Moreover, IPs created through locally production for local consumption methods may also be exported to other regions of the world, including Japan. Please bear in mind that this does not mean we are toning down our existing overseas strategy. We are nearing the day when we can deliver works produced in the conventional Hollywood-style and local production for local consumption style. So please keep your expectations high. [Question 7] The latest Precure film is doing well at the box office. What are the reasons for its success? Also, how do you plan to grow the Precure IP going forward? [Answer 7] The latest Precure movie released this September was a hit, grossing over 1.15 billion yen at the box office. It has continued to perform steadily for several years now. There are many factors behind this success. I believe one of them is the broadening of its fan base, based on a history of over 20 years of continuous broadcasting. Generally, Precure is seen as an anime targeting preschool girls, but it now enjoys enthusiastic support from adults in their 20s and 30s as well. This is believed to be a key factor behind the success of the movie. Going forward, we plan to aggressively leverage the depth of this fanbase to produce spin-off works and merchandising initiatives that reach not only children but various generations. Above all, we believe that our ability to deliver new works without interruption will remain a strength that other IPs cannot duplicate. [Question 8] In September, shares owned by Fuji Television were sold. What changes occurred in the shareholder composition? [Answer 8] On September 10, FMH sold its shares in our company (10,575,000 shares / approximately 30 billion yen) to the overseas market. Thanks to strong demands from institutional investors in Europe, US, and Asia that significantly exceeded our fundraising target, we have been able to broadly distribute allocations to other leading institutional investors, with influential SWFs and LOs at the core. This has increased the proportion of overseas investors to approximately 20%. Furthermore, circulating stock ratio increased by 5% to 32%, and the improvement in liquidity/daily trading volume was very effective for building future stock prices. [Question 9] Regarding the work Girls Band Cry , a new production was announced. What are your plans for its future? [Answer 9] Our original series Girls Band Cry, which premiered last April, has been growing its fanbase steadily and performing well even after the completion of 13-episodes. A distinctive characteristic of this work is that the anime and real-life band are simultaneously developed to mutually boost each other's momentum. This approach has worked perfectly; the band successfully sold out their September Budokan live concert, and a compilation of the TV anime will be released in theaters in October and November. In addition, popularity has been growing remarkably not only in Japan but also across Asia, led by China. Our overseas licensing business is booming. Many fans from overseas also attended the Budokan live concert I just mentioned. We also recently announced that we will be producing a new film, so we will be planning various events to build it into our flagship production in the future. [Question 10] Could you tell us your current exchange rate sensitivity and impact of foreign exchange? [Answer 10] As I explained earlier, since most of our sales come from overseas markets, a weaker yen is basically positive for our earnings. Due to the complex nature of individual contract terms and confidentiality restrictions, we are unable to disclose our foreign exchange sensitivity. However, I will talk about it as much as I can. By region, sales are highest in Asia, followed by North America and Europe. Many businesses in Asia also trade in US dollars, thus US dollar transactions dominate the overall volume. In terms of segments, overseas film and licensing are affected by fluctuations in foreign exchange rates. By the way, the USD/JPY budget rate set at the beginning of the term was 145 yen. During the first half of the year, the settlement rate was approximately 145.6 yen on a simple average basis, so the impact on performance was minimal. For the second half of fiscal year 2025, we are planning at 145 yen. Although we have not disclosed details, we have been proactively addressing exchange rate trends since the year before last, including locking in rates for certain large transactions using forward contracts. The yen continues to be weak against other currencies, but the macroeconomic environment remains unpredictable given the monetary policies of the Federal Reserve and the Bank of Japan. We will continue to act cautiously and appropriately. Fin.

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