Transaction Media Networks, Inc. | 5258 (TSE Growth)
Strategy Advisors, Inc.

Company Report

Kenichiro Yoshida

August 9, 2024

Hirotaka Kandachi

A Pioneer in Cloud-Based Electronic Stock Price and Volumes(‘000 Shares)
Payment Services with Huge Potential in 1,500(¥)
3,000
Transaction Platform Services
1,000

2,000

500

1,000

Transaction Media Networks, Inc. (TMN) launched Japan's first cloud-based ecash service in February 2011, followed by credit card and QR/barcode payment
services. Japan's electronic payment ratio is 39% in 2023, up from 21% in 2017.
The government is aiming for 80% in the future and TMN will reap the benefits.

TMN's inimitabilities are (1) high technological barriers to entry in the frequently
used e-cash payment, (2) exquisite positioning in the payment industry throughan open strategy and (3) a merchant acquisition channel in partnership withmajor credit card companies and Square, a major global payment provider.
These are the sources of the company's competitive advantage.

24/8

24/6

24/4

23/12

23/10

24/2

0

23/8

The current growth driver is stock revenue as measured by the number ofconnected terminals, which continues to increase by 10,000 units per month(960,000 units at the end of FY3/2024). In addition to subscription revenues
linked to the number of terminals, pay-per use revenues from QR/Barcode
payment services are growing remarkably.

0

Volume (right axis)
Stock price (left axis)

Source: Strategy Advisors

Key Indicators
Stock Price (5/31/24)

401

YTD High (2/28/24)

743

YTD Low (5/30/24)

345

The company forecasts a 32% increase in sales and a 6% increase in EBITDA for

52-Week High (7/4/23)

1,978

FY3/2025. However, operating income is expected to decline by 60% due to one-

52-Week Low (5/30/24)

345

Shares on Issue (mn)36.9Market Capitalization (\ bn)

14.8

EV (\ bn)

3.4

Equity Ratio (3/24 Actual, %)42.4

PER (3/25 CoE, Times)

63.0

PBR (3/24 Actual, Times)

1.4

Yield
CoE,
%)
PBR (3/25(actual,times)

0.0

time costs associated with the data center relocation. On the other hand, for
FY3/2026, the company expects an 18% increase in net sales, a doubling of
EBITDA and a 7-fold increase in operating income to a record high profit levels.
TMN's EV/EBITDA multiple for FY3/2025 is 1.3 times and is significantly
undervalued relative to peer companies. Its steady long-term growth in theelectronic payment business has barely been factored in the current share price.
After the expected first delivery of the cloud POS systems to a major retail chain
this fiscal year, TMN will be able to acquire both payment and purchase data
automatically. It will lead to the earnest launch of the transaction platform
services and will raise expectations for further long-term growth.

Source: Strategy Advisors

Japanese GAAP FY
Consolidated

Sales

YoY

OP

YoY

RP

YoY

NP

YoY

EPS

DPS

(\ mn)(%)(\ mn)
income(%)(\ mn)
income(%)(\ mn)

(%)

(\)

(\)

3/21

(Millions
6,451

-21

yen)
155

-90.6

(Millions
159

-90.4

yen) 99

-91.1

3.1

0.0

3/22

7,139
of yen)11711(Millions

358.7

712
of yen)

347.8

-386
(Millions-489.9

-12.2

0.0

3/23

7,831

9.7

560
of yen)

-21.2

535

-24.9

673
of yen)-274.4

21.2

0.0

3/24

10,370

32.4

777

38.8

766

43.2

585

-13.1

15.85

0.0

3/25 CoE

13,645

31.6

312

-59.8

286

-62.7

235

-59.8

6.38

0.0

3/26 CoE

16,109

18.1

2,075

565.1

2,053

617.8

1,508

541.7

40.83

NA

Source: Strategy Advisors. Based on Company Data1

Transaction Media Networks, Inc. | 5258 (TSE Growth)
Table of Contents
1.

Company Overview - Japan’s Leading Electronic Payment Gateway Firm ............................................... 5（１）

Pioneer of Cloud-Based e-cash Payment Gateway Services ........................................................... 5（２）

Aiming for Further Growth in the Transaction Platform Business Using Payment and Purchase Data ... 8

2.

Payment Services - Continuous Growth of Stock Revenue is Expected .................................................. 9（１）

Stable Growth Stock Revenue Accounts for 70% of Total Sales ...................................................... 9（２）

Flow Revenues (32% of Total Revenues) ...................................................................................13（３）

Stock Revenue (68% of Sales) .................................................................................................133.

Competitive Advantage Created by Inimitability ................................................................................17（１）

High Barriers to Entry for Frequently Used e-cash Payments ........................................................17（２）

Unique Positioning with Extensive Collaborative Relationships with Various Major Players in the Payments Industry ....19（３）

Capability to Leverage Shareholders & Other Partners for Customer Development ..........................20

4.

Domestic & Overseas Payment

Services Providers ...........................................................................22（１）

Domestic Payment Service Providers .........................................................................................22（２）

Global PSP Companies .............................................................................................................22

5.

Comparison with GMO Financial Gate ...............................................................................................25

6.

Japan's Electronic Payment Market ..................................................................................................28

7.

Profile of President Atsushi Otaka ....................................................................................................31

8.

TMN's DNA: “Do the Impossible” .....................................................................................................33（１）

Cloud-Based Electronic Payment System that No-One Had Ever Made ...........................................33（２）

The Co-Op Kobe Project: TMN Did the Impossible ......................................................................33

9.

TMN's Growth Strategy ..................................................................................................................35（１）

Long-Term Vision for Further Expansion of Payment Services & Full-Scale Development of Transaction Platform Services 35（２）

Expansion of Terminals & Increase in Payment Volumes Will be the Medium to Long-Term Growth Driver in Payment Services ..36

（３）

Accelerating Growth Through Aggressive M&A and Capital Alliances .............................................38

10.

Transaction Platform Services Overview and its Future Potential ..........................................................41（１）

Cloud POS Business Essential for Purchasing Data Acquisition ......................................................41（２）

nextore Digital Platform Services with Payments as a Starting Point ..............................................42（３）

In-House Prepaid/Data Hub .....................................................................................................43

11.

Current Performance Trends ...........................................................................................................45（１）

Full-Year Results for FY3/2024 .................................................................................................45（２）

Full-Year Earnings Forecast for FY3/2025 & Full-Year Earnings Target for FY3/2026 ........................47（３）

Target for FY2030: Consolidated Net Sales of \100 billion............................................................49

12.

ESG .............................................................................................................................................51

13.

Valuation ......................................................................................................................................53

14.

Risk Factors ..................................................................................................................................57

2

Transaction Media Networks, Inc. | 5258 (TSE Growth)
Executive Summary
Commercialized Japan‘sFirst Cloud-Based e-cash
Service Which had Been
Considered Impossible

TMN, listed on the TSE Growth Market in April 2023, is one of the largest
electronic payment gateway providers in Japan; and has been executing its
corporate DNA through its mission of “Do the Impossible" and its vision of “A
Company that Creates New Ways of Life” ever since. In 2011, the company
became the first firm in Japan to successfully supply cloud-based e-cash
payment service and has since expanded its services to include credit card,
QR/Barcode payment services and in the process connecting 960,000 payment
terminals at more than 1,000 merchants with 45 payment services, the largest
in Japan.

Japan's Electronic Payment
Market Benefits Greatly
from Accelerating Growth

The size of the domestic electronicpayment market is growing at an accelerating
pace, thanks in part to strong policy support: with the percentage of electronic
payments in 2023 at 39.3%, up from 21.3% in 2017. TMN will benefit greatly
from the expansion of Japan's electronic payment market.

Stock Revenue Accounts for
68% of Sales in FY3/2024.
High Growth in QR/Barcode
Payment Transaction Value
Accelerates Growth

TMN's sales can be roughly divided into (1) flow revenue (development andsales of payment terminals) prior to the introduction of payment services by its
customers, such as supermarkets and drugstores, and (2) stock revenue, whichkicks-in after the introduction of payment services. The growth driver is theincrease in the number of connected terminals in operation, which in turn drives
growth in stock income. Stock revenue was \7 billion in FY3/2024, up 25.6%
from the previous year, accounting for 68% of total company sales.
The number of connected terminals in operation at the end of March 2024 was
960,000, up 16% from the end of the previous fiscal year. TMN's stock revenue
is composed of a subscription fee linked to the number of active terminals andthe number of payment services provided, plus pay-per-use revenues based on
the amount of QR/barcode payment transactions. Additionally, TMN plans to
introduce a pay-per-use fee for credit cards in the future.

TMN's Unique Competitive
Advantages and its
Inimitabilities

OP will Decline in FY3/2025
Due to One-Time Expenses
due to their Data Center
Relocation. But Record-High
OP is Expected in FY3/2026

TMN's competitive advantages are (1) high barriers to entry in frequently usede-cash payment gateway services (only a few companies in Japan are involvedin e-cash payments based in the cloud), (2) exquisite positioning with leading
electronic payment players based on its open strategy and (3) strong
relationships with major credit card companies as its shareholders. All of these
are inimitabilities that TMN has built up since its establishment.
In FY3/2024, the company's performance consolidated results were strong,with sales of \10.370 billion (+32.4% YoY), operating income of \770 million(+38.8% YoY) and EBITDA of \2.389 billion (+11.8% YoY) thanks to steady
growth in stock revenue. The company forecasts a 32% increase in sales and a
3.5% increase in EBITDA for FY3/2025. However, operating profit is expected
to decline by 60% due to a one-time expense of \627 million for the relocationof their data center. On the other hand, for FY3/2026, the company is targetingan 18% increase in net sales, a doubling of EBITDA and a 7-fold increase inoperating income to record high profits.

3

Transaction Media Networks, Inc. | 5258 (TSE Growth)
Delivery of Cloud POS thisSummer Will be a Trigger to
Accelerating the Transaction
Platform BusinessAlong with electronic payment service, TMN will be fully developing its
transaction platform business, which collects, integrates, stores, analyzes andprovides various data related to payments and purchases. President Atsushi
Otaka has been aiming to develop a data business since the company was
founded and the cloud POS business is nicely positioned as a means of acquiring
data.
Sales in the transaction platform business have begun to rise with theimplementation of "nextore" and in-house prepaid service, with deliveries ofcloud POS to major retail chains starting in FY2024. This is expected to lead tothe launch of the transaction platform business, since TMN will be able toautomatically collect both payment and purchase data, including cashtransactions.

Valuations are Significantly
Lower than Electronic
Payment Providers in theSame Industry

TMN's stock price has been on a downtrend since last summer and as a result,
it is undervalued compared to otherelectronicpayment providers. Its
EV/EBITDA multiple of 1.3 times based on FY3/2025 company estimates is
extremely low compared to GMO FG's 27.0 times and GMO PG's 19.2 times,
both based on FY9/2024 forecasts. We believe huge potential of the transaction
platform business, as well as the steady growth the electronic paymentbusiness, which is expected to grow at least over the next five years, has notbeen factored in at all.
The timing for TMN to attract attention in the stock market is likely to be when
the company announces the upcoming large-scale introduction of cloud POS,
which was mentioned at the financial FY3/2024 results meeting that thecompany plans to introduce 5,000 units in stages. This will not only contributethe commercial deployment of the cloud POS business but will also help
positively impact other transaction platform business components, such as Data
Hub, which stores POS data.

4

Transaction Media Networks, Inc. | 5258 (TSE Growth)
1. Company Overview - Japan’s Leading
Electronic Payment Gateway Firm
Launched Japan's First
Cloud-Based e-cash
Payment Service

Traditionally Expensive andLess Extendable Rich-Client
Terminals Have Been theNorm（１） Pioneer of Cloud-Based e-cash Payment Gateway Services
TMN, which listed on the Growth Market of the Tokyo Stock Exchange on April
4, 2023, was the first company in Japan to launch a cloud-based (thin-client
method) e-cash payment service, back in 2011. The term "thin-client" refers toa system design method in which most of the data processing is performed on
the server side and the client terminal (in TMN's case, the payment terminal)
performs only the minimum necessary data processing.
Before the development of thin-client payment services, rich-client services andterminals were the mainstream choice. But since rich-client services were lessextendable than thin-client services, each service had its own payment terminalat the merchant store and several electronic payment terminals were placednext to the cash register.
In addition, the rich-client method requires high-level machine specifications toprocess payments at the payment terminal itself in order to perform paymenttransactions. E-cash payment terminals are also expensive, costing \250,000\300,000 per unit.

Development of Thin-Client
Payment Services has Led to
the Widespread Use of
Inexpensive Terminals in
Japan

In cloud-based (thin-client method) payment services, only the functions ofreading and writing necessary information from e-cash are left in the payment
terminal, while other functions are processed in the cloud-based system (TMN's
data center). As a result, this has encouraged lower terminal costs and provided
a major push for the spread of e-cash payment terminals in Japan.
By converting to a thin-client method, TMN was also able to simultaneously
achieve excellent scalability to support various payment services withoutchanging the terminals and high-level security by maintaining all security
information in a robust data center. The technological hurdle of building apayment system in the cloud environment is high and is still a source of TMN'scompetitive advantage today.

Gateway Capable ofSupporting 45 Payment
Brands, the Most in the
Industry

TMN has continued to develop not only e-cash, which was developed at thevery beginning, but also credit card, debit, prepaid and QR/barcode payment
services, as seen in Figure 2. TMN has developed a gateway service that
supports 45 payment services with a single terminal. TMN is one of the largest
companies in Japan that can handle such a large number of services. Whilst
there are other companies in the industry that offer a large number of services
through alliances with other companies, TMN is one of the very few companies
in Japan that can offer this service on its own.

Connects to 960,000
Payment Terminals at Morethan 1,000 Merchants

TMN is connected to 960,000 payment terminals (as of the end of March 2024)
installed at more than 1,000 companies; mainly in the retail industry processing
daily payments. The target customers include supermarkets, convenience
stores, drugstores, department stores, restaurants, commercial facilities, gas

5

Transaction Media Networks, Inc. | 5258 (TSE Growth)stations, leisure facilities and financial institutions.
Figure 1. Diagram of Thin and Rich Clients

Application processing
Security processing

Read function

Rich-client method
Lower terminal
introduction cost
Approx.1/2-1/3

Thin-client method(Cloud based)

Excellent scalability
Various payment methods
are supported within one
payment terminal

High security
Keys and negative data
are stored at the TMN
centerP

Source: Company Data

6

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 2. 45 Services that TMN's Gateway Can Provide

Source: Company Data7

Transaction Media Networks, Inc. | 5258 (TSE Growth)（２） Aiming for Further Growth in the Transaction Platform Business
Using Payment and Purchase Data
Transaction Platform
Business: Aiming to be a
Gateway for All Kinds ofDigital Data

The idea behind TMN ,established by the current president and founder, Atsushi
Otaka, is to acquire data generated by purchasing behavior and utilize it for thedevelopment of new products and services. Through the introduction of cloud
POS and other transaction platform services, the company aggregates various
data related to purchasing, including electronic as well as cash payments, andprovides it to manufacturers and distributors. As a result, TMN aims to enrich
the consumer experience. In the future, TMN will establish a system to collectand utilize not only payment data, but also various data related to purchasing
activities and mobility, such as Cloud POS.
Sales of the transaction platform business were \0.07 billion in FY3/2022 and\0.12 billion in FY3/2023. FY3/2024 sales were about \0.72 billion or about
7% of the company's total sales. For more details on the transaction platformbusiness and its specific development, please refer to Section 10 of this report.

Figure 3. History of TMN

2008

Established as a joint venture of Mitsubishi
Corporation and Toyota Financial Services Corporation

2011

TMN’s Service adopted by NTT DATA’s ”INFOX”

2013

TMN’s Service adopted by JCB Group’s ”JET-S”

2018

E-Cashサービス提供開始時期
Japan‘s first cloudbased e-cash
service

Credit Card

J-DebitHouse
Prepaid

QR/
Barcode2019
2020

TMN’s Service adopted for Sumitomo Mitsui Card’s
terminal ”stera”

2022

Capital and business alliance with MUFG Bank, Ltd.

2023

IPO on TSE Growth Market*1: An electronic payment method in which only the minimum necessary functions, such as reading a card, are installed on the payment terminal,
and all remaining processing is performed in the cloud (i.e., on the server side).
*2: <Source> “Cashless Roadmap 2022” published by Payments Japan Association (TMN Translation)

Source: Company Data8

Transaction Media Networks, Inc. | 5258 (TSE Growth)
2. Payment Services - Continuous Growth of Stock
Revenue is Expected（１） Stable Growth Stock Revenue Accounts for 70% of Total Sales
Broadly Classified into Flowand Stock Revenue

TMN's sales revenue (business model) can be divided into two main categories:
flow revenue and stock revenue. The disclosed breakdown of sales is in fivecategories: (1) development sales, (2) terminals sales, (3) registration fees, (4)gateway service fees and (5) QR/barcode settlement fees. Figure 4 shows theflow of those sales categories as TMN introduces its services to merchants.

Flow Revenue is the Entry
Point to Stock Revenue

Once it is decided that TMN's services will be introduced, for example in thecase of TMN's main customer, a major retailer, they develop a connection
between the retailer's core system and TMN's systems. The sales forcustomization in this case is (1) development sales. When a major retailer
purchases a terminal from TMN, it generates payment terminals sales (2). Thus,
flow revenue is a transitory activity in itself, but it is sales that occur at the flow
revenue stage that flow into the stock revenue stage and derive income
thereafter.

3 Types of Stock Revenue

Once the TMN payment gateway is connected to the merchant's payment
terminal, the merchant can register the terminal with TMN and use TMN's
services. The merchant makes a contract with each payment service provider,and TMN connects the payment services contracted by the merchant to the
TMN gateway. At this time, a registration fee will be charged based on thenumber of services to be introduced (3).
When introducing e-cash and credit card services, a subscription gateway
service fee (4) is generally charged. In addition, when QR/Barcode payment
services are introduced, a pay-as-you-go (5) QR/barcode settlement fee ischarged based on the amount of settlement transactions.

9Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 4. Breakdown of TMN Sales & Timeline, Before and Afterthe Introduction of Payment Services

Source: Company Data10

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 5. TMN's Basic Business Model(Data) Item

Revenue Model

Development Sales
Development of sales and new

Recognized According toservices through system

Development

customization.
Responds to the individual needs

Flow
Revenueof merchants, such as connecting
merchants at the time-of-service
introduction and adding payment

Amounts vary depending on
the size of each project. The
recording method also varies
depending on the project.

services.

Recorded at the Time
Terminal Salesof SaleSales from settlement terminal.

Terminal price x number of units
soldCollected at the Start ofRegistration Fees

Use

Commission sales to be

Proportionately prorated,registered and set up at the TMN

monthly charge that is allocateddata center at the start ofto the accounting period andpayment terminal usage.

recorded monthly (number ofterminals x number of services)

Stock

Gateway Service Fees

Revenue

Settlement transaction usage
fees, obtained mainly frommerchants, etc.

Subscription Fee
Number of terminals x number ofservices

QR/Barcode Settlement
ChargePay-Per-Use

Commission sales from TMN to（GMV (of each service) x

merchants through payment

commission rate

settlements
Source: Strategy Advisors. Based on Company Data

11

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 6. Sales Breakdown and Composition of Stock Income (¥ mn)
16,00080%

12,000

60%

8,000

40%

4,000

20%

0

25/3

26/3

18/3

19/3

20/3

21/3

22/3

23/3

24/3

(CoE)

(CoE)

41

85

188

216

165

216

723

949

1,872

Development Sales

1,470

1,235

1,116

820

897

636

861

648

780

Terminal Sales

1,077

1,574

3,266

1,459

1,364

1,360

1,730

2,358

1,997

Others

QR/Barcode Settlement Fees

0

0

22

188

486

1,147

2,231

3,021

4,052

Registration Fees

268

473

1,209

631

728

647

537

505

599

Gateway Service Fees

1,209

1,608

2,367

3,133

3,496

3,822

4,285

4,684

5,209

Stock ratio(right axis)

36%

42%

44%

61%

66%

72%

68%

67%

68%

0%

Source: Strategy Advisors. Based on Company Data

12

Transaction Media Networks, Inc. | 5258 (TSE Growth)（２） Flow Revenues (32% of Total Revenues)① Development Sales (8% of Sales)
High Profit Margins on
Development Sales Due tothe Company’s Extensive
Track Record and theInability of Other
Companies to Imitate

Development sales occur when TMN's payment service requires customization
to connect to the merchant's system (POS system or core system).
Development support for payment service providers is also included indevelopment sales. The value of orders received ranges from several million
yen to several hundred million yen, but the timing of occurrence, development
period and scale vary from case to case. Profit margins are high because othercompanies cannot handle these projects and TMN has already built up a wealthof development experience.
② Terminal Sales (17% of Sales)

Most of the Terminals to be
Sold are Going to be InHouse Proprietary Productfrom FY3/2024

Increase in Handset Sales
in FY3/2020 Backed byGovernment Subsidies

The company generates terminal sales when merchants purchase payment
terminals through TMN, at prices ranging from \30,000 to more than \100,000
per unit. The company sells both in-house proprietary and third-party payment
terminals. Gross profit margins vary, ranging from 25-30% to 10-15%,
respectively. The majority of sales in FY3/2024 came from TMN's in-houseproprietary payment terminals.
Figure 6 shows that Terminal sales in FY3/2020 totaled \3.3 billion, doublingfrom \1.6 billion in FY3/2019 and dropping to \1.5 billion in FY3/2021. This
was largely due to the "Cashless Consumer Cash-back Program," which was
implemented over a nine-month period from October 2019 to June 2020. The
Ministry of Economy, Trade and Industry subsidized the diffusion of payment
terminals to medium and small businesses. The government subsidized 2/3 ofthe cost of electronic payment terminals and 1/3 was borne by electronic
payment providers, thus reducing the burden on merchants to zero. The
government also subsidized commissions during the same period (commission
rate of 3.25% or less, 1/3 of which was borne by the government) to encourage
the spread of electronic payments in Japan.
（３） Stock Revenue (68% of Sales)③ Registration Fees (5%)

High Commissions &Profit Margins

Registration Fees are generated when merchants connect their payment system
to the TMN's Electronic payment gateway system. Although this is a one-timesale received at the time of connection; for accounting purposes, several
hundred yen per contract is recorded as a registration fee each month during
the relevant period, since it is recorded proportionally over the contract period.
Gross profit margin is high.
④ Gateway Service Fees (41%)

Subscription Contract
Related to e-cash & Credit

Amongst the three main payment services handled by TMN (e-cash, credit card,
and QR/barcode), payment processing fees for e-cash and credit cards are fixed13

Transaction Media Networks, Inc. | 5258 (TSE Growth)
Card Payments

and recorded monthly as Gateway Service Fees based on the number ofservices introduced. TMN intends to develop contracts on a pay-per-use basis
for credit card services, which is common in the industry.
TMN has been disclosing the payment processing volume (GMV) and numberof transactions processed by the company for each of the three main payment
services since FY3/2024 3Q results. 31% of the GMV in FY3/2024, \4.6 trillion,
was for credit cards, 52% e-cash and 17% were for QR/barcodes. 20% of the
2.4 billion transactions in FY3/2024 were on credit cards. 63% were e-cash and
17% were QR/barcodes. Of the 2.4 billion transactions in FY3/2024, credit cards
accounted for 31%, e-cash 52% and QR/barcode 17% of transactions
respectively. In FY3/2024, credit cards accounted for 20%, e-cash 63% andQR/barcodes 17% of the 2.4 billion transactions processed in FY3/2024.

Figure 7.

Changes in Gateway Service Fees since FY 3/2018 (¥ mn)

5,000

100
4,684

4,000

80

4,285
3,822
3,496

3,000
2,000
1,000

60

3,133

40

2,367
1,608

1,209

20

Gateway Service Fees(¥ mn)

Number of connecting terminals(mil units, right axis)

0

0
18/3

19/3

20/3

21/3

22/3

23/3

24/3

25/3
(CoE)

Source: Strategy Advisors. Based on Company Data

⑤ QR/barcode Settlement Fees (22%)
QR/Barcode Settlement
Fees are Charged on a
Pay-Per-Use Basis

When a merchant installs a QR/barcode in a payment terminal, TMN receives acommission fee equal to the amount of the QR/barcode payment transaction(GMV) multiplied by a certain commission rate, which becomes TMN's sales.
The commission rate is several tens of basis points, and a pay-per-use modelis adopted where sales grow in proportion to the settlement amount of paymenttransactions. As seen in Figure 7, the number of QR/barcode paymenttransactions has been growing steadily in Japan as a whole and the commission
rate has been set so that the company can reap the upside growth.
The QR/barcode payment business model is the same as the general credit cardbusiness model. When a QR/barcode payment service firm such as PayPay

14

Transaction Media Networks, Inc. | 5258 (TSE Growth)wholesales to TMN at 3% for example, TMN's sales are determined by thepercentage or "spread" that TMN adds to the wholesale price. In other words,
TMN sells to merchants the 3% received from the QR/barcode servicer plus the
spread to the merchant; so that TMN's sales are the 3% plus the spread of the
QR/barcode payment GMV. Since TMN pays the servicer 3% of the GMV, thegross profit margin is the spread multiplied by GMV.
Among the Current Numberof Connecting Terminals in
Operation, QR/Barcode
Connections have Much
Room for Expansion

As for QR/Barcode payments, only a small portion of the 960,000 terminals isconnected and there is significant room to increase the number of connections
when merchants upgrade to multi-payment terminals.

Expect a Further Increasein the Number ofConnecting Terminals by
Connecting to the stera
Terminals Marketed by
SMCC

TMN is in charge of the e-cash and QR code payment system and mobile
terminals for the electronic payment terminal/service, stera, sold by SMCC. The
structure of the system contributes to sales from (1) Terminal Sales (only forstera mobile), (2) Registration Fees, (3) Gateway Service Fees and (5)QR/barcode Settlement Fees when transactions are made using stera
terminals. The number of installed stera terminals exceeds 300,000 units, ofwhich the terminals at merchants that accept e-cash and QR/barcode payments
are partially connected to TMN's gateway system.

As seen in Figure 8, while the value of QR/barcode payment transactions inJapan expanded 2.6 times from 2020 to 2022, the value of QR/barcode
payment transactions using TMN payment services grew 5.8 times over thesame period, growing faster than that of general market expansion.

Figure 8.

QR/Barcode Settlements at Comparison of TMN’s

Processing. Amount with the Amount Used in the Domestic Market

QR/Barcode Payment Expansion
Amount used in domestic market ＊1(JPY Billions)

2.6x

120,000

TMN’s Processing Amount(JPY Billions)

80,0002,000

40,000

1,000

0

5.8x

3,000

0

2020
2020年

2021
2021年

2022
2022年

2020
2020年

2021
2021年

2022
2022年

*1: <source> “Cashless Roadmap 2022” published by Payments Japan Association

Source: Company Data

15

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 9.

Trends in Registration Fees & Terminal Sales (\ MN)

3,500
Registration Fees

3,000

Terminal Sales

2,500
2,000
1,500
1,000
500
0
18/3

19/3

20/3

21/3

22/3

23/3

24/3

25/3
(CoE)

Source: Strategy Advisors. Based on Company Data

Figure 10. Gateway Service Fees & QR/Barcode Settlement Fees ( ¥ MN)
9,000
8,000

QR/Barcode Settlement Charge
Gateway Service Fees

7,000

3,021

6,000

2,231

5,000
1,147

4,000

188

3,000

22

2,000

2,367

1,000
0

1,209

18/3

3,133

486
3,496

3,822

4,285

4,684

1,608

19/3

20/3

21/3

22/3

23/3

24/3

25/3
(CoE)

Source: Strategy Advisors. Based on Company Data

16

Transaction Media Networks, Inc. | 5258 (TSE Growth)
3. Competitive Advantage Created by Inimitability
Jay B. Barney, a professor of Strategic Management at the University of Utah
David Eccles School of Business, has identified "inimitability" as a resource thatprovides a company with a competitive advantage. Inimitability means that itis difficult for other companies to imitate and there is significant costdisadvantage to obtain, develop or duplicate the resource/capability.
Strategy Advisors believe that TMN’s competitive advantage by inimitability
are (1) high barriers to entry in e-cash payments used frequently, (2) exquisite
positioning in the payments industry through TMN’s open strategy and (3)merchant acquisition channels through alliances with major shareholder credit
card companies and Square, a major global payments service provider.

（１） High Barriers to Entry for Frequently Used e-cash Payments
Background of the Birth of
E-cash in Japan

E-cash in Japan got its start in November 2001 with the issuance of the “Suica”,
transportation IC card ticket. Around the same time, Sony-affiliated BitWalletlaunched "Edy," which was widely used as a means of payment at stores, etc.
Since March 2004, “Suica” has been used not only for transportation but also
for shopping. In around 2007, Seven-Eleven, the largest convenience store
chain in Japan started issuing "nanaco" and Aeon group started issuing"WAON," ushering in a period of widespread use of e-cash.
According to the Bank of Japan, the total number of issued e-cash cards as ofDecember 2023 had reached 533.08 million. This is based on data provided byeight major companies, including Rakuten Edy, Suica (JR East), ICOCA (JRWest), SUGOCA (JR Kyushu), Kitaca (JR Hokkaido), PASMO (private railway
companies), nanaco (Seven & I) and WAON (AEON).

Japan has 4.2 e-cash
Cards, Per Capita

Figure 11 shows the current situation for electronic payment methods in theworld's major countries. As of 2021, e-cash is prevalent in Japan, South Korea,
Australia and Germany. The average number of e-cash cards held per capita inJapan in 2021 is 4.2, higher than the 3.7 per capita for debit cards and 2.4 percapita for credit cards. Compared to credit cards, e-cash cards are mainly used
for smaller transaction amounts and the debit cards account for only about 1%of payment transactions, but e-cash cards can be considered an electronic
payment method with a very high frequency of payment.

High Barriers to Entry
Due to Technical Hurdles &Strict Operational Regimes

Although e-cash has thus become widely accepted in Japan, as mentioned
above, the technical difficulty of building systems in a cloud environment ishigh. In addition, the need for large investments to meet strict security
standards poses a high barrier to entry. 50% of TMN's employees are engaged
in development work and the company complies with international security
standards and has its own servers in a contracted data center.

17

Transaction Media Networks, Inc. | 5258 (TSE Growth)Company Which Operates eCash Gateway Businesses
Are Very Few

There are only a few e-cash gateway operators, including TMN, with TMN
estimated to have a large market share in the retail industry (excludingtransportation-related and station ticket gates).
Using general-purpose e-cash as a hook, for which consumer demand is high,TMN is expanding its merchant clients. In addition to supporting the largest
number of payment services in the industry, TMN's strength lies in its ability tosell and contract not only e-cash, but also QR/barcode payment, credit cards
and points, all as a set. To combine with merchants' systems, TMN becustomizing its product to each company's system. Vendor switching by
merchants is not a simple task, resulting in a low churn rate.

Figure 11. Electronic Payment Methods Held in Major Countries (# of Methods)

18

Transaction Media Networks, Inc. | 5258 (TSE Growth)（２） Unique Positioning with Extensive Collaborative Relationships
with Various Major Players in the Payments Industry
The 5-Layers that Make Up
the Payments Industry

In the payments industry, as seen in Figure 12, there are five players in thepayment industry by value chain: (1) payment brands, (2) issuers (cardissuers)/acquirers (companies that acquire and manage merchant contracts),(3) payment networks, (4) gateways/payment agents and (5) payment
terminals. TMN is directly involved in (4) and (5) and collaborates withcompanies in (1), (2), and (3) through various ways in addition to directtransactions. In the case of (4) and (5), TMN often competes with othercompanies in the same industry; but in some cases, depending on the services
provided, TMN also collaborates with and supports other companies in theirbackyard.
As mentioned above, TMN serves as a gateway connecting merchant vendors
with an industry-leading 45 services, including credit cards, e-cash andQR/barcodes, under its payment brands.

Deep Collaboration with
Shareholder Credit Card
Companies

TMN has close ties with credit card companies that are involved in the issuer
and acquirer businesses: JCB, Sumitomo Mitsui Card, UC Card and Toyota
Finance are shareholders of TMN. TMN provides e-cash and other services as awhite label to these shareholder card companies when they offer services to
mid-size and smaller merchants that TMN does not directly reach.

Partnership with Two
Major Payment Networks

TMN is connected to two major payment networks, INFOX, which is affiliatedwith NTT Data, and JET-S, which is affiliated with Japan Card Network, a
subsidiary of JCB. Additionally, TMN's cloud-based e-cash and QR code/barcode
payment gateways are also used in the new payment platform stera, which
Sumitomo Mitsui Card entered a partnership with VISA in September 2020.

White Label to Credit Card
Companies and Square

In gateway payment services, TMN itself directly markets and provides services
mainly to large retailers. At the same time, there are but a few other companies
in the payment industry that prioritize their own systems for credit cards and
QR codes/barcode payments and use TMN's payment systems for e-cash.

Develop an Open Strategy
to Collaborate with Various
Players in the Payments
Industry

For payment terminals, there are many domestic and foreign terminal
manufacturers; TMN sells its own terminals, but almost all terminals sold inJapan can be connected to TMN's payment service. Global payment service
provier Block’s Square e-cash service offered in Japan is white-labeled byTMN.
TMN has an open strategy to collaborate extensively with many players in thepayment industry to expand its surface, taking advantage of its e-cash service,
which has few competitors, although it competes with each player in some partsof the industry. The company plans to respond flexibly to future market
restructuring and the new player entries.

19

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 12. Relationships between Players and TMN by Value Chain

Players per Value Chain
Payment
BrandsIssuer/Acquirer

Payment
Networks

Gateway/
Payment AgentあPayment
Terminals

Collaboration/Competition
with TMN

Online industry players and mobile
carriers entering the QR code
payment market

Connecting all brands to support
retailers

Credit Card is a guarded territory,
where many issuers also are
acquirers

TMN’s shareholding card companies
serving as sales base to acquire
merchants

stera newly entering the payment
network field dominated by INFOX andJET-S
The range of supported services varies
greatly on gateway providers (TMN is a
one-stop service)
TMN Domain
Several domestic/overseas terminal
manufacturers are present
POS connections for large merchantsrequire extensive customization
TMN Domain

Connected to all three majordomestic networks

TMN

Many industry players have adopted
TMN’s e-cash gateway
Competition for Credit and QR/Barcode
gateway is present
Open strategy to connect with othercompanies' devices, as well as codevelopment of terminals
Competition as terminal manufacturers
Collaboration Competition

Source: Company Data

（３） Capability to Leverage Shareholders & Other Partners
for Customer Development
TMN's Target Customer

TMN categorizes retailers in Japan that are customers of the electronic paymentbusiness as large retailers (sales of \2 trillion or more), middle retailers (salesof \50 billion to less than \2 trillion), and long-tail retailers (sales of \50 billion
or less). Large retailers include several companies such as Seven & i, Aeon andFast Retailing, while middle retailers and long-tail retailers include a variety ofbusiness categories such as supermarkets, drugstores, specialty store chains
and restaurants.

Two Types of Sales
Strategies Based on
Business Size

TMN has two sales strategies: direct sales by TMN itself for many of the large
and middle retailers and white-label services (customer acquisition) for othermiddle retailers and long-tail retailers through partners such as credit cardcompanies, which are TMN's shareholders.

TMN’s Strength is that it can
Customize & Develop Each
Customer's IT System

For merchants subject to direct sales, the TMN system line is coupled to themerchant's POS cash register at the merchant's store. In general, POS (Pointof Sales) is a generic term for a service that provides information on sales
performance trends, such as the date, time, quantity, and price of products

20

Transaction Media Networks, Inc. | 5258 (TSE Growth)sold; but the payment industry customarily uses the term merchant POS torefer to all terminals that are not CCT (Credit Card Terminal) terminals and arecapable of processing payments.
Customized development is a prerequisite for linking with customers' systems,
but since there are few e-cash gateway operators with the development
capabilities to do so, TMN has a competitive advantage. Major retail chains
update their POS systems on a regular basis, such as once every five years, so
TMN's sales activities are often targeted to coincide with these updates.
Reach Long-Tail Retailers
with White Labels

At the same time, for middle and long-tail retailers, customer acquisition is
operated by white labels through partners. Partners include the credit cardcompanies as mentioned above as well as Square, which operates a global
electronic payment service business.

Figure 13. Sales and Support Structure based on Customer and Business Size

Source: Company Data

21

Transaction Media Networks, Inc. | 5258 (TSE Growth)
4. Domestic & Overseas Payment
Services Providers（１）

Domestic Payment Service Providers

3 Types of Payment
Service Providers

Payment service providers (PSP’s) can be broadly classified into three types:(1) those that specialize in brick and mortar stores, (2) those that provide bothonline and brick and mortar stores and (3) those that specialize in online stores.

TMN & GMO FG Specialize inReal Stores, GMO PG Alone
Specializes in Online

TMN and GMO Financial Gate (hereafter GMO FG) are companies that specializein (1) brick and mortar stores, providing payment services as a gateway
between various payment services and merchants for retail and food service,
etc. GMO Payment Gateway (hereafter GMO PG) is a company that specializesin (3) online stores. Although GMO PG specializes in online payment services, itis the parent company of GMO FG with a 56.51% stake as of March 2024, so
on a consolidated basis, it can be considered as (2), which handles both online
and brick and mortar store services.

Digital Garage & GMO
Consolidated are
Online & Real

Digital Garage, Inc. <TSEP 4819> also belongs to (2) as it operates both faceto-face and online payment businesses. Digital Garage's main business is nonface-to-face payments, and it has a joint venture with Toshiba Tec Corporation
called TD Payment, which operates a face-to-face payment business. Similarly,
SB Payment Service, a SoftBank Group company, is engaged in online and faceto-face payment services.
（２） Global PSP Companies

Block and Adyen Provide
Payment Services forReal Stores

The global payment service providers include Block (ts payment service
business being Square), Adyen, PayPal and Stripe. Of the four companies, all
but Stripe is publicly traded.

Square is the World's First
Mobile Card Reader

Block was founded by Jack Dorsey, founder of Twitter (now X) and his cofounder Jim McKelvey, both of whom founded Square in 2009 to develop theworld's first mobile card reader in 2010. The company changed its name to
Block in December 2021.

TMN Handles Square’s
e-cash Payments

In addition to the United States, Square operates in nine other countries,
including Canada, Japan, the United Kingdom, France, Spain, Ireland, Australia,
and New Zealand. It entered Japan market in May 2013, and as mentioned
above, TMN supports Square’s e-cash payments.

Block's Revenue Sources are
Square, a Payment Service
and Cash App, a Personal
Wallet App

Currently, the Block’s two main businesses are Square, a credit card payment
service since its inception, and Cash App, the No. 1 downloaded app in thefinancial services sector on iOS and Android, which allows users to easilytransfer and pay funds between individuals and invest in stocks and bitcoin.
Gross profit has surpassed Square since 2022 and continues to grow at a high
rate.

22

Transaction Media Networks, Inc. | 5258 (TSE Growth)
Block's gross profit for FY12/2023 was U$7.505 billion, consisting of Square
U$3.129 billion, Cash App U$4.323 billion, and others were U$0.053 billion;
operating loss for FY12/2023 was -U$279 million, with adjusted EBITDA of
U$1.798 billion.
Square had U$209.6 billion in payment transaction value in 2023 (+12.4% YoY)
and 4 billion payment transactions. The growth rate of payment transaction
value slowed from over 20% in 2022.
Adyen Originated in the
Netherlands & Integrates
Online & In-Person
Payments

Adyen is a global payment services company founded in 2006 in the
Netherlands. In 2023, the company reported operating revenues of €1.863
billion, gross profit of €1.626 billion, EBITDA of €743 million and operating
income of €657 million.

Adyen has Offices in
27 Cities Worldwide &Operations in JapanThe company has offices in 27 cities around the world, mainly in Europe, butalso in North America, South America, Asia, the Middle East and Australia. In
Japan, the company launched its face-to-face closing solutions business in
December 2022; with EMEA (Europe, Middle East, and Africa) accounting for
55%, North America for 27%, Asia Pacific for 11% and other countries for 7%of sales in 2023.
The value of payment transactions was € 970.1 billion (+26.4%) and thenumber of payment transactions was 23 billion. Of the total value of paymenttransactions, POS payments through face-to-face sales grew to €159.9 billion(+42.0%), continuing their high growth rate.

23

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 14. Comparison of Payment Services Firms - Performance and Profitability
Transaction
Media
Networks

Payment Processing

GMO
Financial
Gate

Block

Adyen

Block

Adyen

(Square)(Square)Yen

Yen

Equivalent

Equivalent

1$=\141.6

1€=\156.5
970.1

€ bn

NA

159.9

€ bn

23.0

4

23

7,420

6,601

52

17,8881,062,708

291,560

829

1,407

-39,365

2,389

1,818

585

OPM (%)EBITDA Margin (%)

Volume (¥ tn)
Face-to-Face
Transactions Volume(¥ bn)
Average Payment
Amount (¥)
Net Sales (¥ mn)
Operating Profit(¥ mn)EBITDA (¥ mn)
Net Income (¥ mn)

4.6

5.2

29.7

151.8

209.6

4.6

5.2

NA

25.0

2.4

0.61

4.0

1,917

8,525

10,370

$ bn

42

€

7,505

1,863

€ mn

102,821

-278

657

€ mn

254,597

116,280

1,798

$ mn

743

€ mn

904

1,416

109,237

10

$ mn

698

€ mn

8.0%

7.9%

-3.7%

35.3%

23.0%

10.2%

24.0%

39.9%

24.0%

$

39.9%

Note: Data for Block and Adyen are for the full year ending December 31, 2023.
Source: Prepared by Strategy Advisors

24Transaction Media Networks, Inc. | 5258 (TSE Growth)
5. Comparison with GMO Financial Gate
GMO FG's Business Modelis the SameGMO Financial Gate (hereafter GMO FG) is a similarly listed company thatprovides a variety of electronic payment services to real stores as a one-stop
store.

GMO FG Slightly
Outperforms TMN in Termsof Payment Processing
Volume (GMV), but TMN
Significantly Outperforms
GMO FG in Terms of
Numbers of Transactions

The value of settlement transactions between April 2023 and March 2024 is\4.6 trillion for TMN and \5.2 trillion for GMO FG, with GMO FG exceeding TMN
by approximately 13%. The number of settlement transactions is 2.4 billion for
TMN and 0.6 billion for GMO FG, and the settlement transaction value pertransaction is significantly higher for GMO FG at approximately \8,670
compared to approximately \1,920 for TMN. This is because TMN's payment
processing is dominated by e-cash, which mainly handles small-value
payments, while GMO FG processes only credit and debit cards.

Stock Revenue for TMN &Initial Revenue for
GMO FG Account for 70%
of Total Sales

Comparing the sales composition of the two companies, TMN's stock revenue
accounted for 68.0% in FY3/2024. On the other hand, GMO FG's initial revenue,
mainly from terminal sales, accounted for 67.3% of its total sales from April
2023 to March 2024, making up a high component of non-recurring revenue.

TMN has been Aggressively
Investing in Software &HardwareComparing profit margins from April 2023 to March 2024, GMO FG and TMN
have an operating margin of 7.87% and 7.99%, respectively. On the other
hand, TMN's EBITDA margin of 23.0% is higher than GMO FG's 10.2%, as TMN
is aggressively investing in software and expanding its data center facilities tomeet the growing demand for payment services and the development oftransaction platform services.

GMO FG's Initial Sales Grew
Due to stera Terminal Sales,
etc.

GMO FG's growth was largely due to continued growth in initial sales with thelaunch of the stera terminal in July 2020. This also led to the expansion of GMV
due to the increase in credit processing. However, the expansion of stera sales
has also been positive for TMN, with higher service usage fees due to anincrease in the number of connected terminals and high growth in QR/Barcode
settlement fees also contributing to the increase in stera terminals and theassociated increase in the number of payment transactions.

TMN has a Higher Share of
Stock Income, and its
Performance is Relatively
StableIn general, TMN's performance is more stable due to the higher ratio of stockincome. Going forward, the explosive growth effect of stera is expected tosubside; while TMN is expected to see an increase in sales of terminals such as
nextore and an increase in the number of credit card transactions, which is
expected to narrow the growth gap between the two.

TMN Will Use the Payments
Business as a Hook to
Develop Transaction
Platform Services

The two companies have different visions for the future: TMN plans to expand
into transaction platform services by collecting, analyzing and utilizing not only
payment data, but also purchase data from its cloud POS business (currently indevelopment), which will be explained later in this report. GMO FG on the other
hand, aims to expand its revenue opportunities by providing various solution
assets to major corporate groups, in addition to its payment services.

25

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 15. Quarterly Payment Processing Volumes of TMN & GMO FG(\ Trillions)
1.6
1.5
1.4
1.3
1.2
1.1
1.0

TMN

0.9

GMO FG

0.8
0.7
0.6
22/06

22/09

22/12

23/03

23/06

23/09

23/12

24/03

Source: Prepared by Strategy Advisors

Figure 16. Number of Settlement Transactions by Quarter for TMN &GMO FG (Billions)
0.7
0.6
0.5
TMN

0.4

GMO FG

0.3
0.2
0.1

0.0
22/06

22/09

22/12

23/03

23/06

23/09

23/12

24/03

Source: Prepared by Strategy Advisors

26

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 17. Breakdown of GMO FG's Sales & Recurring Revenue Composition (¥ MN)
18,00060.0%

15,00050.0%

12,000

40.0%

9,000

30.0%

6,000

20.0%

3,000

10.0%

0

19/9

20/9

21/9

22/9

23/9

Initials (left axis)

1213

2236

5,166

7,163

11,117

Spread (left axis)

666

661

765

950

1,152

Fee (left axis)

159

305

534

1,317

2,397

Stock (left axis)

340

488

624

866

1,244

Recurring rate (right axis)

49.0%

39.4%

27.1%

30.4%

30.1%

0.0%

Source: Prepared by Strategy Advisors based on GMO FG data.

27

Transaction Media Networks, Inc. | 5258 (TSE Growth)
6. Japan's Electronic Payment Market
Japan's Electronic Payment
Ratio is Increasing Year-byYear, at an Accelerating Rate

In Japan, where TMN provides services, the electronic payment ratio reached39.3% in 2023. This is an increase of 3.3% year-on-year and has been risingsince 2010. The rate of increase in the electronic payment ratio is accelerating
due to various policy boosts in 2019, as well as the COVID-19 pandemic.

Japanese Government
Provides Policy Support
for Cashless Transactions

The upward trend began to become more pronounced in 2017, the year thegovernment established the electronic payment ratio as a KPI in its growthstrategy. In the "Growth Strategy Follow-Up" approved by the Cabinet in June
2019, the Japanese government set the goal of "doubling the electronic
payment ratio to around 40% by June 2025." The achievement of this goal has
become quite realistic.

Significant Growth of QR/Barcode Payments

A breakdown of electronic payments shows that QR/Barcode payments
surpassed debit cards in 2020 and e-cash in 2022 to become the second mostused payment method in Japan. TMN's pay-per-use business model is designed
to capture the growth of QR/Barcode payments and will continue to benefit
from this growth.

Credit Cards Transactions
Increasing Steadily

Credit card transactions have been increasing steadily since 2010. As mentioned
above, TMN expects further sales growth from credit cards by developing
contracts on a pay-per-use basis, which is common in the industry.

Growth in e-cash Payment
Transactions is Slowing

On the other hand, e-cash experienced negative growth in 2021 due to the
reduction of brick and mortar store hours during COVID-19 pandemic but
turned positive in 2022. The increasing penetration and use of e-cash suggeststhat it is maturing compared to credit cards and QR/barcodes. TMN is aware ofthis trend and plans to continue the current subscription business model for ecash for the time being. (The contract in stera applies for a pay-per use contractfor e-cash.)Compared to OtherCountries, Japan Has Much
Upside in Going Cashless

Based on the "Red Book" published by the Bank for International Settlements(BIS), which includes statistical data on payments in major countries, acomparison of Japan's electronic payment ratio in 2021 with other countries
shows that Japan's electronic payment ratio is 32.5%, which is still low
compared to the United Kingdom (65.1%), Singapore (63.8%), the UnitedStates (53.2%) and other countries.
The Japanese government has stated that it will promote the necessary support
with the aim of achieving an electronic payment ratio of 40% by June 2025
and, in the future, an electronic payment ratio of 80%, the highest level in theworld. This will be a strong tailwind for TMN’s payment business. The ratio ofelectronic payments in 2023 is 39.3% and is steadily increasing.

28

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 18. Trends in Japan's Electronic Payment Amounts & Ratios (\ Trillion)
180

45.0%
39.3%

code settlement

160

electronic money

36.0%

debit

140

32.5%

credit

30.0%

26.8%
24.1%

100
80
60

35.0%

29.7%

Cashless total (right axis)

120

13.2%

14.1%

15.1% 15.3%

16.9%

18.2%

40.0%

20.0%

25.0%

21.3%

20.0%
15.0%

40

10.0%

20

5.0%

0

0.0%
2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

Source: Prepared by Strategy Advisors, Based on Data from the Ministry of Economy, Trade and Industry.

29Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 19. Electronic Payments in Japan by Service (\ Trillions)
Calendar Year

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

41.8

46.3

49.8

53.9

58.4

66.7

73.4

74.5

81.0

93.8

105.7

2.7%

10.7%

7.7%

8.2%

8.2%

14.2%

10.1%

1.4%

8.8%

15.8%

12.7%

14.1%

15.4%

16.5%

18.0%

90.2%

90.7%

89.7%

86.8%

85.3%

84.5%

83.5%

0.5

0.5

0.4

0.9

1.1

1.3

1.7

2.2

2.7

3.2

3.7

-12.7%

-4.4%

-7.7%

108.2%

26.9%

18.3%

28.1%

25.8%

25.1%

19.3%

13.7%

0.2%

0.2%

0.1%

0.3%

1.7%

1.8%

2.1%

2.5%

2.8%

2.9%

2.9%

3.1

4.0

4.6

5.1

5.2

5.5

5.8

6.0

6.0

6.1

6.4

27.1%

28.0%

15.7%

10.8%

1.1%

5.4%

5.0%

4.9%

-1.1%

1.9%

5.3%

1.1%

1.3%

1.5%

1.7%

8.0%

7.5%

7.0%

7.0%

6.3%

5.5%

5.1%

-

-

-

-

-

0.2

1.0

3.2

5.3

7.9

10.9

NA

NA

NA

NA

NA

NA

512.5%

230.0%

66.3%

50.3%

37.5%

-

-

-

-

-

0.2%

1.2%

3.7%

5.6%

7.1%

8.6%

45.4

50.7

54.9

60.0

64.7

73.5

81.9

85.8

95.0

111.0

126.7

Processing
VolumeCredit(YoY）
Percentage in
CLProcessing
Volume

Debit

(YoY)
Percentage in
CLProcessing
VolumeE-Cash(YoY)
Percentage in
CLProcessing
VolumeCode(YoY)
Settlement
Percentage in
CLElectronic

Processing

Payment

Volume

Total

(YoY)

15.3%

16.9%

18.2%

20.0%

21.3%

24.1%

26.8%

29.7%

32.5%

36.0%

39.3%

Volume

296.7

300.1

301.2

299.9

303.3

305.2

305.8

288.6

292.0

308.5

332.4

Private Final
Consumption
Expenditure

Source: Prepared by Strategy Advisors, based on data from the Ministry of Economy, Trade and Industry.

30

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 20. Electronic Payment Ratios in Major Countries (2021)

95.3%
83.8%

72.8%
65.1%

63.8%

63.6%

53.2%

50.4%

46.6%
32.5%
22.2%

韓国

中国

オーストラリア英国

シンガポール

カナダ

米国

フランス

スウェーデン日本

ドイツ

Source: "Cashless Roadmap" by the Cashless Promotion Council, Japan

7. Profile of President Atsushi Otaka
Atsushi Otaka Has Been in
the Technology Business
Since his Younger Days

Mr. Atsushi (Alex) Otaka, CEO and is also the founder of TMN, was born in 1970.
Due to his father's work relocation, he spent his middle and high school in the
U.S. He then attended college at Fordham University in New York, where hemajored in theoretical physics.
He joined Mitsubishi Corporation in 1992 and was assigned to the OptoElectronics Team in the then Technology Department 1. In this department, hemainly represented overseas research institutes to Japanese companies andfrom early on he was at the forefront of cutting-edge technologies.
Mr. Otaka oversaw agency work for the Battelle Memorial Institute in the U.S.,
which developed copiers, holograms, barcodes, and other products. At the time,
the Battelle Memorial Institute was also operating a research institute for the
U.S. Department of Energy and Mr. Otaka was facilitating commissioned
research for Japanese companies in a wide range of fields, including electronics,
electronic materials, and energy, such as nuclear power.

Support for Overseas
Development of SONY's
Contactless Card FeliCa

Since the late 1990s, Mitsubishi Corporation had been supporting the overseas
deployment of SONY's contactless card technology, FeliCa. Mr. Otaka was
responsible for the introduction of FeliCa into overseas transportation systems
and he realized the introduction of FeliCa technology in transportation payment
systems such as Octopus Card in Hong Kong and EZ Link in Singapore.

Initial FeliCa Terminal
Were Expensive

Since the first half of 2000’s, Felica-based e-cash payment operators have been
trying to introduce e-cash payment systems to retailers in Japan, but the e-31Transaction Media Networks, Inc. | 5258 (TSE Growth)
cash payment terminals at that time were rich-client systems with built-in
settlement functions and were extremely expensive at \200,000-\300,000 perunit; making their introduction and therefore the marketing promotion of ecash payment terminals difficult and so it did not progress well.
FeliCa Development
Engineer Joined Mitsubishi
Corporation & Encouraged
the Firm to Convert to ThinClient Terminals

In 2005, Susumu Kusakabe, a key member of the FeliCa development team,left Sony and joined Mitsubishi Corporation. Mr. Otaka, Mr. Kusakabe and others
thought that the price of a terminal could be reduced to about \50,000 per unit
by using a thin-client system in which the terminal is always connected to theInternet, the main payment functions are processed at the center (cloud), andthe functions on the terminal are minimized. To achieve this, they studied andverified the solution of technical issues such as security assurance on theInternet and payment speed in the thin-client method.

TMN is Established as a JV
between 2 Leading
Japanese Companies forthe Development of the
Payment Infrastructure
Business
Data Utilization Business
Oriented from the Beginning

As thin-client payment services will be public infrastructure, and after
considering the neutrality and the continuity of the business, Mr. Otaka decided
that a joint business partner was needed to launch this service. In March 2008,
he founded TMN through a joint venture between Mitsubishi Corporation andToyota Financial Service (TFS), a financial subsidiary of the Toyota Group.
Mr. Otaka believes that as technology evolves, data will become the root ofvalue in the near future, and he was oriented toward establishing a system forcollecting data and a data asset business.
The thin-client payment service business is the first step in this direction. By
openly collaborating with various businesses, including multiple credit cardcompanies, the service will be deployed throughout Japan; and as the businessexpands, TMN will establish its position as an infrastructure provider and build
a foundation for collecting data other than payment data through network
connections with numerous businesses, including merchant businesses. As TMN
expands its business, it can be said that it has established its position as an
infrastructure provider and is building a foundation for collecting data other thansettlement data through network connections with a large number ofbusinesses, including merchant businesses.

32

Transaction Media Networks, Inc. | 5258 (TSE Growth)
8. TMN's DNA: “Do the Impossible”（１） Cloud-Based Electronic Payment System that No-One Had Ever
Made
TMN's mission is "Do the Impossible." and its vision is "A Company that Creates
New Ways of Life”. TMN questions the common sense of the world, challenging
what is considered unthinkable by the world and producing results. By securely
managing the various data of consumers, TMN aims to meet needs that have
not yet been met and create new lifestyles through products, services, andexperiences.
The Mission is “Do the
Impossible”

After nearly three years of development, TMN overcame several hurdles andrealized cloud computing for e-cash payment, which was said to be impossibleat that time. This was the first episode of “Do the Impossible”, and this DNA isembodied in the most recent project and has been passed down since thecompany's founding.

Improving Corporate Valueby Completing Complex,"Impossible" Projects

Many IT firms are reluctant to take on complex and difficult projects due to therisk of losing money or not being able to complete the project. TMN does notjudge each project solely based on profitability or probability. TMN is consciousof increasing the return on investment of technology accumulated in thedevelopment process, thereby increasing the return on the company as awhole.
TMN also believes that the successful completion of such complex projects will
improve the company's capabilities and external credibility. The company aims
not only to achieve profit and loss from the project alone, but also to increase
its long-term enhancement of corporate value, considering the ripple effects
within and outside the company.
（２） The Co-Op Kobe Project: TMN Did the Impossible

A Good Example of aTransactional Platform
Service, Where TMN "Didthe Impossible"

Co-op Kobe is a consumer cooperative consisting of eight businesses: homedelivery, stores, electric power, co-sponsorship and service, production,
welfare, culture and seminar house, and has approximately 1.73 million
members.
Co-op Kobe had a need for a point card balance management system and TMN
was called in as one of the companies to propose a solution to the difficult
problem of integrating and managing user data that had been managed
separately across multiple businesses, even at the household level. Thanks totheir efforts, TMN won the bid, in which major IT vendors participated, and the
project with Co-op Kobe began.
The reason TMN won the competition over the other vendors was that TMN
understood the "needs" of Co-op Kobe and proposed the creation of "needs"
that had not yet surfaced, which is TMN's brand message; although it was the33Transaction Media Networks, Inc. | 5258 (TSE Growth)most complex and difficult big proposal.
Visualization of Individual& Household Purchasing
Behavior ThroughIntegration of Membership
Information

Co-op Kobe's projects have made the following "impossible" things happen.
①

Membership information, which had been managed by each business, wascentralized, enabling management by household unit in addition toindividual members.

②

Introduced a single point service by centralizing and standardizing the point
service issued for each business.

③

The previously separate point function and prepaid e-cash function was
integrated into a single "Co-op card" for Co-op Kobe members and the Coop card was also introduced to the smartphone application with centralized
member information. Smartphone payments can now be used for in-store
purchases.

These were made possible by utilizing the TMN’s technologies of cloudcomputing, in-house prepaid and data management in the transaction platformbusiness. Strategy Advisors believes that this is an example of concreating thecompany's mission of "Do the Impossible”.
Transaction Platform
Services Efforts Begin for
Fully-Fledged Data
Utilization

The results of this effort to build an infrastructure to centrally manage
membership information, prepaid point services and other services haveenabled the horizontal expansion of prepaid services and other services to otherco-ops. Last year, another consumer cooperative Eucorp decided to adopt
TMN's in-house prepaid service.
In addition, TMN, Co-op Kobe and Mitsubishi Shokuhin, which has deep
expertise in understanding consumers gained through its support to retailers,have started information processing efforts to maximize the attractiveness of
Co-op Kobe by utilizing this platform.

34

Transaction Media Networks, Inc. | 5258 (TSE Growth)
9. TMN's Growth Strategy（１） Long-Term Vision for Further Expansion of Payment Services &Full-Scale Development of Transaction Platform Services
Eyeing the Developmentof Transaction Platform
Services from the Very
Beginning of theCompany's Existence

Transaction platform services (accumulation and analysis of payment andpurchasing data, etc.) is a data asset business that TMN has been aiming forsince its inception in 2008.

TMN1.0 & TMN2.0 to
Launch Full-Scale Payment
Services and TMN3.0 to
Launch Transaction
Platform Business“TMN1.0" refers to the launch of the e-cash payment service business,"TMN2.0" refers to business expansion through the expansion of payment
services (business domain) such as credit card and QR/barcode settlement. And"TMN3.0" refers to transaction platform services through the development ofservices other than payment services and the collection and utilization ofpurchasing data and other information.

Current Position is a
Starting Point in TMN 3.0

The company will continue to expand on two axes: the business areas inpayment services & customers/merchants through the acquisition of new
projects.

Payment services are the first step in this process, while expanding the businessand has the aspects of building relationships with customers and merchantsand establishing its position as an infrastructure provider. Figure 21 shows
TMN's future business expansion organized along the three axis of information,business areas and customer & merchants.

At the same time, the company has entered a phase of full-fledged developmentof its transaction platform services. At the same time, TMN is further expanding
their business domain by developing non-payment services such as POS mainly
for customers and affiliated stores of payment services. The company believes
now it is at the point where they have begun to enter the "TMN 3.0" phase.
By promoting TMN3.0 and becoming a gateway for various data, the company
aims to expand its transaction platform services in a more multi-dimensional
way; including the development of services in collaboration with consumer
goods manufacturers and financial institutions in the mid to long-term.
TMN have been Refining
their Development andService Delivery Capabilities
for TMN 3.0

Through the realization of TMN2.0, TMN has established their position as an
infrastructure provider and built relationships with customers and member
stores; and through the completion of difficult projects such as the cloud-based
e-cash payment service, which competitors said to be impossible. In addition,
through the development of cloud-based e-cash settlement services and therealization of difficult services such as the integration of Co-op Kobe's
membership information, which was said to be impossible at the time, thecompany has improved its development and service delivery capabilities, mainly
through its in-house engineers and has built up its corporate strength.

35

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 21. Conceptual Diagram of Growth Strategies

TMN1.0:

TMN2.0:Pioneer of cloud-based
e-payment
Information

TMN3.0:Transaction Platform Service

Safe and Secure Social
As a gateway for all digital data
Infrastructure（Overwhelming “Surface”）
Information
Information

Business Areas

Business Areas
Transaction Platform
Service

Payment

Payment（45 services)
Payment(e-cash)Customer & merchants

Customer & merchants“Volume” expansion（ Accumulation of information ）Customer & merchants

Current Three-dimensional expansion throughPosition changes in “Quality”（Use of information）

Source: Company Data

（２） Expansion of Terminals & Increase in Payment Volumes Will be
the Medium to Long-Term Growth Driver in Payment Services
TMN's payment service business is expected to grow over the medium to longterm as the percentage of Japan's electronic payment ratio grows. The twomain drivers of growth in stock income will be the increase in the number ofterminals and the increase in payment volume.
Room to Develop Nearly 3
million CCT & POS
Terminals at Merchants

To expand the number of terminals, in addition to "Retailor expansion strategy"
to encourage new merchants to connect to the TMN gateway, the company isalso working on "Market expansion strategy " to connect to terminals other thanCCT terminals and POS terminals.
As for strategy to expand the number of retailers, as mentioned above, TMN
will promote direct sales and indirect sales by providing white labelling to credit
card companies, which are its shareholders, and to Square. In Japan, it is said
that there are 4 million POS and CCT terminals installed, but since most of the
960,000 payment terminals connected to TMN’s gateway are POS/CCT
terminals, there is room to develop around 3 million additional terminals.
In terms of strategy to expand the market, the company is working to installand connect payment terminals not only to POS/CCT terminals, which are thecurrent mainstream of TMN gateway connection terminals; but also, to vending
machines and automatic seller machines for route buses and parking lots, etc.

36

Transaction Media Networks, Inc. | 5258 (TSE Growth)
Potential to Connect Morethan 8 million Units if
Vending Machines, Payment
Machines etc., areConsidered

In Japan, it is estimated that there are about 4 million vending and teller
machines installed. As seen in Figure 22, it is estimated that the total potential
market, including POS and CCT terminals, is about 8 million units in Japan.

Cross-Selling of Payment
Services, Expansion ofPayment Volumes by Adding
QR/Barcode Settlement

By adding payment services to already connected terminals, the amount of
payment transactions per connected terminal can be expanded. For example, if
a merchant that had previously only subscribed to e-cash were to add
QR/barcode services, TMN would be able to generate new revenue from
QR/barcode settlement fees.

AEON Pay Available from
August 2023

In August 2023, the company began handling "AEON Pay," a QR/barcode
settlement service. Since TMN's payment services are provided in the cloud, it
is easy to add payment services to existing payment terminals. "AEON Pay" cannow be used by supermarkets, drugstores, convenience stores, home centers,
transportation companies and local governments that have already installed
TMN services.

In recent supermarkets, customers are increasingly making their own payments
at multiple self-service payment terminals in a row after the cashier hasscanned the merchandise. Thus, the market is likely to grow even larger as
multiple payment terminals are being installed next to the cash register,whereas in the past only one system was installed next to the cash register.
Furthermore, electronic payment is spreading to areas where cash payment has
been the mainstream, such as coin-operated parking lots and outdoor payment
at event venues and the potential for the number of terminals is huge.

37Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 22. Multi-Dimensional Expansion of the Number of Installed Terminals &Expansion of Electronic Payment Processing Volumes

Source: Company Data

（３） Accelerating
Alliances

GrowthThrough

Aggressive

M&A

and

CapitalTMN is also pursuing an inorganic growth strategy through M&A and capitalalliances using the funds raised through its IPO and has already announced two
capital alliances in FY3/2024.
①
WebSpace, a Distribution
Solutions Company,
becomes a Consolidated
Subsidiary

Acquisition of WebSpace Co., Ltd. (share acquisition completed on
12/26/2023, acquisition price \890 million)

Since its founding in 1998, WebSpace is a company that has developed its
business around retail systems ("Parallel Net"), primarily POS and EOS(replenishment ordering system) and MMK collection agency services for utility
bill and other payment.
MMK's "MMK Collection Window Service," a collection agency service for barcoded payment slips (for payment of telephone, electricity, and other utility bills)
provided by Shinkin Information Service and WebSpace, has been installed in
more than 10,000 stores, including supermarkets and drugstores. The service
has a proven track record and has built a broad customer base ranging from38

Transaction Media Networks, Inc. | 5258 (TSE Growth)major retail chains to small and medium-sized stores.
The synergy desired will be to strengthen the service menu for mutual
customers by incorporating TMN's payment service and WebSpace's "MMKCollection Window Service". In addition, by utilizing WebSpace's POS system,
TMN is looking to accelerate the development of its own cloud POS system.
Scheduled to be Reflectedin Consolidated Financial
Results from FY3/2025

The impact of capital participation in WebSpace on consolidated results for
FY3/2024 is M&A brokerage fees ¥53 million, which is recorded in sales, generaland administrative expenses. The inclusion of WebSpace in the consolidated
financial results is scheduled to begin in FY3/2025.
②

Formed Capital Alliancewith Global Communication
Planning, a Credit
Settlement Gateway
Business

Capital alliance with Global Communication Planning Co., Ltd. <TSEG 4037>(14.90% stake, \200 mn acquisition fund)Global Communication Planning is a company that operates a credit card
payment gateway in the payment business area and was originally involved with
TMN as a development partner in the early 2010s.
Since TMN will also focus on the credit card settlement business, the twocompanies intend to utilize Global Communication Planning Co., Ltd.'s
knowledge and to promote development efficiency through collaboration
between the two companies.
Figure 23. WebSpace's Financial Condition & Operating Results
for the Past 3 Years (\ MN)
Accounting Period

FY 6/2021

FY 6/2022

FY 6/2023

Net Assets

337

373

414

Total Assets

1,745

1,793

1,242

68,467.56

75,768.77

74,176.89

1,076

1,160

1,264

Operating Income

13

55

59

Ordinary Income

15

57

60

Net Income

11

35

41

2,260.35

7,301.21

8,408.12---

Net Assets Per Share (¥)
Net Sales

EPS (¥)
Dividend Per Share

Source: Strategy Advisors. Based on Company Data

39

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 24. Global Communication Planning's Financial Position &Operating Results for the Past 3 Years (\ MN)
Accounting Period

FY 6/2021

FY 6/2022

FY 6/2023

Net Assets

781

1,138

340

Total Assets

1,336

1,514

1,571

Net Assets Per Share (\)

374.4

456.74136.38Net Sales

2,078

1,588

1,549

Operating Income (Loss)

199

△55

△273

Ordinary Income (Loss)

191

△82

△297

Net Income (Loss)

126

△91

△773

Net Income (Loss)

61.39△39.18△310.40

Per Share (\)
Source: Strategy Advisors. Based on Company Data40

Transaction Media Networks, Inc. | 5258 (TSE Growth)
10. Transaction Platform Services Overview and
its Future Potential
TMN, which has set its sights on acquiring purchasing data since its inception,
started with an electronic payment approach and has gradually developed as atransaction platform services to access purchasing data other than payment
data.
Transaction platform is intended to securely store all data collected in the TMN
gateway, including payment information (whether electronic or cash), marketingand product information; and to build a mechanism to process the information
so that it can be used for advanced data analysis and linked to a variety ofservices. TMN provides services such as in-house prepaid cards and cloud POS
to acquire data at the same time as revenue is generated, and to visualize andotherwise utilize the data.
（１） Cloud POS Business Essential for Purchasing Data Acquisition
Developed Cloud POS by
Leveraging the Strength of
the Electronic Payment
Infrastructure

TMN's strength in the transaction platform services is its network connection to
the POS systems of major retail chains through its payment gateway business,and its ability to leverage its track record of 960,000 payment terminals
connected to its gateway in a wide area to develop new services such as cloud
POS and in-house prepaid.

Cloud POS Enables Data
Acquisition of "Who" &"What" Purchases

TMN's cloud POS is hardware-independent and can be installed on POS
hardware, tablets, etc. currently used in stores. In addition, because of the cloudenvironment, retailers benefit from relatively low costs with flexible functionality
additions after installation. Payment terminals can acquire “where”, “when” and“how much” data, while POS can acquire “what” data related to purchased goods
and services in addition to these data. In addition, by linking “who” data from
ID-POS and in-house prepaid, one to one marketing becomes possible.

Large-Scale Adoption in
Major Retail Chain is
Scheduled from FY3/2025

TMN's cloud POS is currently being tested at a major retail chain and is in the
final stages of full-scale commercialization. A large-scale installation of 5,000
units will be phased in starting in FY3/2025, and this will be a major step forwardin the development of the transaction platform services.

Linking Large Volumes of
POS Data Acquired Using
Cloud POS to Data Hub

Data Hub, which has been in service since June 2024, is a service that collects,
stores, and utilizes data, and is one of the key components of the transaction
platform services. The Data Hub service is offered in conjunction with Cloud POS
to store large amounts of data from POS.
In addition, as mentioned above, Co-op Kobe centrally manages its point service
and membership information, in addition to providing an in-house prepaid
system. The CDP (Customer Data Platform), a data platform for collecting andintegrating the association's customer data, is being built based on TMN's Data
Hub service.

41

Transaction Media Networks, Inc. | 5258 (TSE Growth)
Purchase Data is Gathered
by TMN at No Cost

TMN believes that the most important thing in the information transaction
platform business, or in other words, data management, is to keep dataacquisition costs down. As data distribution and trading become more prevalent
in the future, the price of data will likely increase and the cost of purchasingdata will also rise. As cloud POS and in-house prepaid systems are introduced,
all payment and purchase data, including cash, will be processed at TMN's data
centers, which will automatically accumulate these data. This will also proceed
in a way that generates income from merchants, which can be an extremely
effective business model.

Transaction Platform
Services Targets\20 trillion in Advertising& Distribution Spendingin Japan

TMN aims to generate revenue by providing the acquired purchase data andcustomer information to consumer goods manufacturers and distributors whowill become its customers in the future. The advertising and sales promotion
market for consumer goods in Japan is said to be worth \20 trillion, including
approximately \4 trillion in annual advertising expenditures by consumer goods
manufacturers and approximately \16 trillion in “distribution countermeasure
expenditures” such as rebates and sales promotion. TMN believe that it cangenerate revenue from this advertising-related market by realizing one-to-one
marketing, etc. based on a variety of data.
Specifically, manufacturers will be able to utilize real-time purchasing andpayment data to develop completely new products and marketing strategies,
and to further improve the efficiency of production and inventory adjustment.
Retailers will also be able to utilize customer and purchase data to develop
efficient and effective promotions.
（２） nextore Digital Platform Services with Payments as a Starting Point

nextore Enables
Distribution of Apps to
Support Store Operations
Other than Payment

While most of the transaction platform service, such as cloud POS, are for large
retail chains ; the nextore business is a payment-based digital platform service
for small chains and individual stores that starts with payments and is a major
contributor to contribute significantly to the sales in the transaction platformbusiness in FY3/2024. Nextore not only consolidates various electronic payment
methods into a single terminal, but also enables the expansion of functions otherthan payment by implementing an application platform for business support for
stores developed by Tance Co., Ltd. on TMN's mobile terminal (UT-P10). Tance
is a joint venture between JCB Group's Japan Card Network and TIS, a major
system integrator, providing platforms and DX support.
The applications that can be provided include those with functions such ascommon points and duty-free processing and aims to improve the efficiency ofstore operations and increase sales. nextore's model is to charge according to
the use of the applications on the platform. The first two business applications,“yoboca,” a call notification service, and “QR Order,” a self-ordering service, havealready been added to the “tance mall” lineup as of April 19, 2024.

nextore's Sales in
FY3/2024 are Mainly from
Terminal Sales; Expect JCB

Initially, regional banks were the channel partners, but with the start ofcollaboration with the JCB Group, nextore terminal sales totaled 7,000 units in
FY2024/3, with a sales value of about \600 million. JCB subsidiary Japan Card42

Transaction Media Networks, Inc. | 5258 (TSE Growth)Group's Sales Force

Network has 854,000 connected terminals (as of the end of March 2023), and
it is possible that some of these terminals will be replaced by the moresophisticated nextore. If the installation of terminals progresses well, thecontribution of payment and application usage fees is expected to increase. In
addition, given JCB Group has close relationships with regional banks, TMN
hopes to create new financial services for small retail chains and individual
merchants through a three-way partnership that includes regional banks.
（３） In-House Prepaid/Data Hub

TMN Undertakes System
Development & Operationsfor Making Prepaid Cards
for Each Company

When a merchant business issues its in-house prepaid card, TMN takes over theoperation of the entire back-end system. When issuing prepaid cards,
consumers enter their membership information to create a card, so the data canbe obtained in a form that links membership information with payment data.
TMN has introduced both the system and sales based on the number of users,
as well as the advantage of being able to obtain payment data linked to member
information necessary for data management. On the other hand, merchants
have the advantage of being able to introduce electronic payment systems withlower settlement fees than with credit cards.
For the in-house prepaid business, the business model is to receive development
sales on an initial basis and a fixed monthly fee based on the number of cards
issued on a stock basis.

Data Hub to Consolidate& Manage Big Data from
In-House Prepaid & Cloud
POS

With its Data Hub service, TMN aims to contribute to the improvement ofretailers' profitability by providing data visualization and utilization through thesafekeeping (data preservation), connection (data linkage) and discovery (dataanalysis) of a variety of large volumes of data, including POS data. In addition,
while distribution industry associations, including manufacturers andwholesalers, are discussing the commonization and standardization of productmaster code, the current situation is that product master codes differ amongmajor retailers and the firm is considering the linkage of such master data fordata utilization.

43

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 25. Specific Efforts in Transaction Platform Services

Source: Company Data

44

Transaction Media Networks, Inc. | 5258 (TSE Growth)11.

Current Performance Trends（１） Full-Year Results for FY3/2024
Operating Income for theFirst Nine Months of theCurrent Fiscal Year
Increased 30.7% YoY

TMN's consolidated business results for FY3/2024, announced on May 14, 2024,
showed a double-digit increase in both sales and profit, with sales of \10.371
billion (+32.4% YoY) and operating income of \777 million (+32.4% YoY). The
company will begin disclosing consolidated results from FY3/2024, taking into
account the ¥0.53 billion in brokerage fees associated with the M&A of
WebSpace Corporation, whose stock acquisition was completed on December
26, 2023. The results of WebSpace is scheduled to be included from April 2024.

Pay-As-You-Go QR/Barcode
Reimbursement Fees Drive
Sales Growth

The cumulative results for the five sales components were: 1) development
sales: \861 million (+35.4% YoY), 2) sales of payment terminals: \1.730 billion(+27.2% YoY), 3) registration setup fees: \537 million (-17.1% YoY), 4) center
utilization fees: \4.285 billion (+12.1% YoY) and 5) QR/barcode settlement fees
QR/barcode settlement fees, in particular, drove sales growth.

In the Transaction Platform
Services Business, nextore
Contributed Significantly toSales

In addition, the increase in sales of nextore led to a significant increase in othersales to \723 million (+233.8% YoY).

45

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 26. Quarterly Business Performance Trends (¥ MN)
23/3

24/3

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

1,691

1,932

1,919

2,287

2,305

2,304

2,917

2,842

(YoY change)

NA

NA

NA

NA

36.31%

19.25%

52.01%

24.27%Development Sales

130

171

138

195

187

132

135

406

(YoY change)

NA

NA

NA

NA

43.85%-22.81%-2.17%

108.21%

Terminal Sales

238

363

266

492

402

361

489

476

(YoY change)

NA

NA

NA

NA

68.91%-0.55%

83.83%-3.25%

Registration Fees

179

168

156

142

138

140

133

124

(YoY change)

NA

NA

NA

NA

-22.91%-16.67%-14.74%-12.68%Gateway Service Fees

932

938

967

983

1,033

1,059

1,085

1,105

(YoY change)

NA

NA

NA

NA

10.84%

12.90%

12.20%

12.41%

QR/Barcode Settlement

167

229

338

412

461

527

609

633

(YoY
change)Charge

NA

NA

NA

NA

176.05%130.13%80.18%

53.64%

Others

42

60

52

61

81

82

463

95

(YoY change)

NA

NA

NA

NA

92.86%

36.67%

790.38%55.74%

Gross Profit

494

667

624

775

789

763

790

977

29.21%

34.52%

32.52%

33.89%

34.23%

33.12%

27.08%

34.38%

SGA

437

477

476

611

620

595

611

665

Operating Profit

56

190

148

164

169

168

179

311

(YoY change)

NA

NA

NA

NA

201.79%-11.58%20.95%

89.63%

3.31%

9.83%

7.71%

7.17%

7.33%

7.29%

6.14%

10.94%

0

1

1

-27

-7

1

1

-6

Ordinary Income

56

191

149

137

162

169

180

305

(YoY change)

NA

NA

NA

NA

189.29%-11.52%20.81%

122.63%

3.31%

9.89%

7.76%

5.99%

7.03%

7.34%

6.17%

10.73%Net Income

55

181

152

283

161

157

162

156

EBITDA

464

602

534

537

552

565

583

739

NA

NA

NA

83.3

87.0

90.0

93.0

96.0

858

885

1,010

973

1,065

1,110

1,195

1,230

480

490

510

500

560

600

600

640

Total Sales(Gross Profit Margin)(Operating Profit Margin)
Non-Operating Income (Loss)(Ordinary Income Margin)

Number of Connected
Terminals (10,000)
Annual Settlements
Processing Amount (GMV)(\ Billions)
Annual Number of Payments
Process settlement
Transactions (Millions)

Source: Company Data46

Transaction Media Networks, Inc. | 5258 (TSE Growth)（２） Full-Year Earnings Forecast for FY3/2025 & Full-Year Earnings
Target for FY3/2026
Company Forecasts Higher
Sales & Lower Income in
FY3/2025

For the fiscal year ending March 31, 2025, the company expects a significant
increase in net sales due to continued business growth and the contribution ofsales from WebSpace, which was acquired in the fiscal year ending March 31,
2024. On the other hand, the company expects a decrease in profit due toplanned increase in expenses for relocation of data centers (hereinafter DC).
The company forecasts net sales of \13.645 billion (+31.6% YoY), operating
income of \312 million (-59.7% YoY) and net income of \235 million (-59.7%
YoY), while forecasting EBITDA of \2.526 billion (+5.8% YoY).

Company Targets Record
Profits in FY3/2026

The company expects that the impact of the DC relocation costs and otherexpenses will be removed in FY3/2026, and that the number of large prospective
projects will increase in the same fiscal year, resulting in higher sales and profits
compared to FY3/2024 and FY3/2025, and record-high profits. The company
targets sales of \16.109 billion (+18.1% YoY), operating profit of \2.075 billion(+563.4% YoY), net income of \1.508 billion (+540.0% YoY) and EBITDA of\5.03 billion (+99.1% YoY).

Expect to Increase
Revenues in the Stock andFlow Businesses &WebSpace Towards
FY3/2026

FY3/2025 and FY3/2026 sales by stock, flow and WebSpace Co., Ltd. businessmodels are visible in Figure 27. The company expects an increase in sales foreach of stock, flow and WebSpace. In terms of stock revenue, QR/barcode
settlement fees and gateway service fees, both of which are expanding in themarket, are expected to grow. As for flow revenues, cloud POS, which isscheduled to be introduced to large-scale merchants from FY3/2025, is expected
to drive sales, while WebSpace is also expected to grow through synergies withexisting businesses.

TMN Expects Operating
Income to Decline in
FY3/2025 but is Aiming
for Record-High in
FY3/2026

For the projected operating income trends into FY3/2026, please refer to Figure
28. The purpose of the DC relocation is to strengthen the scalability and securityof the DC and to contribute to the expansion of the settlement system and theconstruction of an infrastructure system to further promote transaction platform
services.
Since it is difficult to put the e-payment system on a public cloud for security
reasons, it must be prepared on-premises at TMN. TMN has to purchase its own
servers and install them in the DC, and while this is a costly investment, it isalso a barrier to entry.

Minor Impact on Operating
Income with Due to the
Inclusion of WebSpace Co.,Ltd.

From FY3/2025, the results of WebSpace, which became a subsidiary in
FY3/2024, will be included; but the impact on consolidated operating income for
FY3/2025 and FY3/2026 targets is expected to be negligible as it will be offset
by amortization of goodwill.

47

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 27. Net Sales by Business Model (¥ MN)
18,0001,600
1,480

12,000
0

4,649

3,956

3,315
6,000
8,209

7,054

9,860

0
3/24(Actual)Stock

3/25(CoE)
Flow

3/26(CoE)

Webspace

Source: Strategy Advisors. Based on Company Data

Figure 28. Change in Operating Income Through FY3/2026 (\ MN)

Source: Company Data48

Transaction Media Networks, Inc. | 5258 (TSE Growth)（３） Target for FY2030: Consolidated Net Sales of \100 billion
Aim to Achieve Sales of\100 billion through New
Businesses and M&A in
Addition to Steady Growthof Existing Businesses

TMN announced its long-term vision in its FY3/2024 financial resultspresentation, targeting consolidated sales of \100 billion by FY2030, of which\40 billion (\9.64 billion in FY3/2024) is in the settlement domain and \60 billion(\720 million in FY3/2024) is in the information processing domain.

Aiming to Scale fromFY2027 Utilizing
Transaction Platform Area

The transaction platform, including cloud POS, which has been set to be
introduced on a large scale from FY3/2025, will contribute to the DX of eachcompany and we assume that companies will begin to respond to the "2025
cliff" indicated in the METI's DX report around 2027. Figure 29 shows expected
rapid sales growth, including through M&A, starting immediately after FY2026
and beyond.

In the Payments Area,
Aiming Capture Credit Card
Transactions

In the payments area, the company plans to achieve sales of \40 billion by
combining organic growth through the steady accumulation of stock income andinorganic growth through M&A and new businesses that are not extensions ofexisting businesses. In particular, the company plans to achieve organic growththrough sales growth in the payment area, such as through the acquisition of acredit card settlement gateway with a large transaction volume.

In the transaction platform
area, aim to increase sales
through new businesses
and M&A

In the transaction platform area, organic growth is expected to come fromexisting businesses such as cloud POS and in-house prepaid, as well as Data
Hub and nextore. In terms of inorganic growth, the company expects to achievesales of \60 billion through new transaction platform Service and M&A.

49

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 29. Firm Goals by 2030

Source: Company Data50

Transaction Media Networks, Inc. | 5258 (TSE Growth)
12.

ESG

No Disclosure of Carbon
Dioxide Emissions Under
the TCFD

TMN was newly listed in April 2023, just one year and two months ago and since
it is in Tokyo Stock Exchange’s Growth market, the level of ESG information is
not yet sufficient. While the TSE Prime market requires disclosure in line with
the TCFD, the Standard and Growth markets are voluntary. However, TMN's data
centers and other facilities use electricity and as such it is expected to disclose
Scope 1, 2, 3, and other carbon dioxide emissions in the future and to present
future reduction targets. TMN has also started to consider TCFD disclosure.

Promoting Electronic
Payments Reduces Carbon
Emissions

According to the "Cashless Roadmap 2023" disclosed by theCashless Promotion
Council, the carbon dioxide emissions for a ¥1,000 payment using cash is 1.06g,
whereas for electronic payment shopping it is 0.34g. Therefore, TMN is reducing
its carbon footprint by promoting its core business and going cashless.

Company with Audit
Committee, Voluntary
Nominating Committee &Compensation Committee

The institutional design of TMN's Board of Directors is a company with an audit
committee. It has a voluntary Nomination and Compensation Committee chairedby the President and Representative Director and consisting of two internal
directors and three external directors, a total of five members.

3 out of 10 Board Members
are Independent Outside
Directors

Of the 10 directors for FY2024/3, 4 are internal (Atsushi Otaka, Ken Tanimoto,
Michitaka Komatsubara, and Toru Nishiwaki) and 6 are external. Of the outside
directors, three are independent: Saori Kanno (president of a foreign cosmetics
company), Shinji Sakai (full-time Audit Committee member), Yukitoshi Sanada(university professor, Audit Committee member), and Hiroki Yanagisawa(lawyer, Audit Committee member). The two non-independent outside directors
are Mr. Hiroya Nishimura (major shareholder: Mitsubishi Corporation) and Mr.
Yusuke Tomimoto (major shareholder: Toyota Financial Service). The
percentage of independent outside directors is 40%, and the percentage offemale directors is 10%. The Audit Committee consists of three outside
directors.

Appointment of 3 New
Directors & Retirement of
One Director at the General
Meeting of Shareholders
Held on June 26, 2024

Mr. Hiroya Nishimura and Mr. Yusuke Tomimoto resigned as of March 31, 2024.
Mr. Toru Nishiwaki will retire at the end of his term of office at the Ordinary
General Meeting of Shareholders that was held on June 26, 2024. At the same
meeting, Kenji Yamauchi was newly appointed as an in-house director, andTakashi Sato (major shareholder: Mitsubishi Corporation) and Tateyuki Sawada(major shareholder: Toyota Financial Services Corporation) were appointed as
outside directors.

Ratio of Female Managers
in FY3/2024 is 4.3%, Lower
Than the Average of TSE
Listed Companies

According to TMN's annual securities report for the fiscal year ended March 31,
2024, the percentage of women in management positions is 4.3%. Of the 2,456
listed companies whose FY3/2023 financial results were compiled by Tokyo
Shoko Research, the average is 9.4%; this is clearly lower than the averageamong the 1,706 companies that listed the "female managers ratio " in theirsecurities reports.
TMN's male employees took 57.1% of available parental leave in FY3/2024.
52.5% was the rate for the 1,522 listed companies whose fiscal year ended

51

Transaction Media Networks, Inc. | 5258 (TSE Growth)March 31, 2023, as compiled by Tokyo Shoko Research, Inc.

52

Transaction Media Networks, Inc. | 5258 (TSE Growth)
13.

Valuation

Share Price Has Been on a
Downward Trend Since July4, 2023, after Early Highs
Soon After Listing

TMN listed its shares on Tokyo Stock Exchange’s Growth market on April 4,
2023. At the time of listing, the company issued new shares at \930 per share.
From there the shares rose steadily until July, hitting a high of \1,978 on July4, 2024, after which began a downward trend leading to a historic low of \401
on August 5, 2024.

TMN's Fundamentals are
Not Well Understood by aWide Range of Investors

The sluggishness of the TSE Growth market is a factor, but it is also likely that
TMN is not widely understood by general investors as it has only been on themarket for 15-months.

Current Major Shareholders
are Mainly Operating
Companies of StrategicPartners, Which Poses a
Liquidity Challenge

As of March 2024, 52.29% of the top 10 largest major shareholders, excluding
the 3rd-ranked Custody Bank of Japan (trust account) and 9th-ranked Nomura
Trust & Banking (investment trust account), are investors of TMN from its
founding or credit card companies with which TMN has collaborated with.
According to Nikkei Company Information, the holdings of domestic and foreign
institutional investors are very small, at 28.8% by individual investors and 1.2%
by foreigners and there may be liquidity and other issues.
Figure 30. List of Major Shareholders as of March 31, 2024
Order

Major Shareholders

Number of Shares

Shareholding

Held (‘000 Shares)

Ratio (%)

1

Mitsubishi Corporation

9,414.1

25.48

2

Toyota Financial Services Corporation

3,305.3

8.94

3

Custody Bank of Japan, Ltd.

2,613.6

7.07

4

JCB Co., Ltd.

1,396.4

3.78

5

Sumitomo Mitsui Card Co., Ltd

1,396.4

3.78

6

UC CARD Co., Ltd.

1,396.4

3.78

7

Toyota Finance Corporation

989.8

2.67

8

Internet Initiative Japan Inc.

733.3

1.98

9

Nomura Trust and Banking Co., Ltd.

728.3

1.97

10

Dai Nippon Printing Co., Ltd.

697.1

1.88

22,670.7

61.33

Total Amount
Source: Company Data

Leaving the Electronic
Payment Business Alone at
a Lower Price than Other
Companies in the Industry,
Even When Evaluated Onlyin the Electronic Payment
Business

At this point, it is difficult to factor in the future potential of transaction platform
services and its projected cash flow. However, even if we look at the electronic
payment business alone, the company's valuation is low compared to its peers:
as of May 31, FY3/2025, the company's P/E ratio was 62.9 times based on
FY3/2025 EPS of \6.4 as of August 7, but a P/E ratio of 20.7 times to EPS of\19.4, excluding the one-time (expected) cost related to the data center
relocation. GMO-FG and GMO-PG's FY3/2025 P/E ratios are 60.7 times and 40.5

53

Transaction Media Networks, Inc. | 5258 (TSE Growth)
times to FY9/2025 EPS of \103.41 and \204.68 respectively.
EV/EBITDA Multiple OneThird that of Peers

However, since net income is attributed to the parent company, which is thebasis for EPS, is affected by depreciation and amortization of development
investments, etc., we believe it is better to compare the two using EBITDA,
which is also TMN's KPI. Since there is no EBITDA in the company's forecast,
Figure 31, we compared TMN's EBITDA (ordinary income + depreciation +amortization of goodwill + interest expense) for the past 12-months as of March2024 and its EV (market capitalization + interest-bearing debt - cash and cash
equivalents) as of March 2024. We are left with an extremely low multiple at
8.5 times, compared to GMO FG's 40.2 times for GMO FG and GMO PG's 24.0
times. We also believe that the growth potential of the electronic paymentbusiness, which is expected to grow steadily and at a high rate over the next
five years or so, has not been factored in at all.
As seen in Figure 32, the historical EV/EBITDA multiples for GMO FG and GMO
PG have devalued since 2022. Nevertheless, GMO FG and GMO PG are stillvalued at EV/EBITDA multiples of over 40-times and 20-times respectively,
after that this decline.

Focus on Further
Expansion of Cloud POS

The timing of the announcement of the large-scale introduction of the cloud
POS system is expected to be the focus of attention in the stock market in thenear future. At the FY3/2024 financial results meeting, it was mentioned thatthe company plans to introduce 5,000 units in phases. This will not only markthe full-scale launch of the cloud POS business, but will also spread to othertransaction platform services, such as Data Hub, which stores POS data.

54

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 31. Comparison of Valuations with Peers
Transaction

GMO

GMO

Block

Media

Payment

Financial(Square)Networks

Gateway

Gate

Adyen

Block

Adyen

(Square)Yen
Base
Equivalent

FY

1$=151.41\

1€=163.24\

FY3/2024

LTM

LTM

FY12/2023

FY12/2023

FY12/2023

FY12/2023

23,196731,12175,548

7,902,281

7,943,242

52,191$ mn

48,660€ mn

EV (2024/03)

20,343643,716

73,032

7,456,033

6,638,128

49,244$ mn

40,665€ mn

EBITDA (\ MN)

2,389

26,805

1,818

301,484

123,078

2,129

$ mn

786

€ mn

Net Income (\ MN)

585

15,676904

70,604109,287

499

$ mn

698

€ mn

EV/EBITDA

8.5

24.0

40.2

23.1

51.7

23.1

51.7

PER

39.7

46.6

83.6

104.7

69.7

104.7

69.7

EPS (CoE)

6.4

204.7

103.4

516.7

4,615.2

3.4

28.3

Market Capitalization(\ MN)* Forecasts for TMN, GMO PG, and GMO FG are based on company estimates, while those for Block and Adyen are based on theFact Set consensus estimates.
Source: Prepared by Strategy Advisors

55

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 32. Comparison of Valuations with Peers (EV/EBITDA)
200.00180.00160.00140.00120.00TMN
GMO PG
GMO FG

100.00
80.00
60.00
40.00
20.00
0.00

Source: Prepared by Strategy Advisors

56

Transaction Media Networks, Inc. | 5258 (TSE Growth)
14.

Risk Factors

Although there are no major risks to watch for at this point, the following fourrisks can be identified that may prevent the company's performance fromgrowing as much as expected.
① Risk that deliveries of cloud POS to a major retail chain planned for FY3/2025
will be postponed. The delivery performance of the first delivery is extremely
important, increasing the likelihood that the subsequent development of thetransaction platform services will be delayed.
② Risk of not being able to cross-sell payment services or expand QR/barcode
payment volume due to increased competition. TMN has established strong
barriers to entry in e-cash, where competition is low; but there are many
competitors in credit card and QR/barcode payment services.
③ Risk of revenue opportunity losses and customer confidence losses due
to natural disasters, large-scale communication failures and system failurescaused by human error, etc. There is the risk of data center relocation
planned for FY3/2025 not going smoothly.
④ Risk of customer information leakage. Leakage of personal information suchas credit card numbers, names, addresses, telephone numbers and e-mailaddresses to outside parties could result in security incident response costs
and a loss of public trust in TMN.

57

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 33. Consolidated Statement of Income (¥ MN)
3/25

3/26

CoE

CoE

10,37013,645

16,1099.69%

32.42%

74.24%

55.34%

897

636

861

648

780

-26.52%

9.39%-29.10%35.38%

1.89%-9.41%

3,266

1,459

1,364

1,360

1,730

2,358

1,997

46.15%

107.50%-55.33%-6.51%-0.29%

27.21%

73.38%

15.43%

268

473

1209

631

728

647

537

505

599

NA

76.49%

155.60%-47.81%15.37%-11.13%-17.00%-21.95%

11.55%

1,209

1,608

2,367

3,133

3,496

3,822

4,285

4,684

5,209

NA

33.00%

47.20%

32.36%

11.59%

9.32%

12.11%

22.55%

21.56%

0

0

22

188

486

1,147

2,231

3,021

4,052

(YoY)

NA

#DIV/0!

#DIV/0!

754.55%158.51%136.01%94.51%

163.38%81.62%

Others

41

85

188

216

165

216

723

949

1,872

(YoY)

NA

107.32%121.18%14.89%-23.61%30.91%

234.72%339.35%158.92%

2,214

2,358

2,862

1,915

2,279

2,562

3,321

54.42%

47.38%

35.03%

29.69%

31.92%

32.72%

32.03%

1,457

2,063

1,219

1,760

1,568

2,002

2,492

Operating Profit

757

295

1,643

154

711

560

829

802

802

(YoY)

NA

-61.03%456.95%-90.63%361.69%-21.24%48.04%

43.21%-3.26%

OPM

18.61%

5.93%

20.11%

2.39%

9.96%

7.15%

7.99%

5.88%

4.98%

-2

-1

5

4

1

-25

-11

-5

-5

Ordinary Income

755

294

1,648

158

712

535

818

797

797

(YoY)

NA

-61.06%460.54%-90.41%350.63%-24.86%52.90%

48.97%-2.57%

18.56%

5.91%

20.17%

2.45%

9.97%

6.83%

7.89%

5.84%

4.95%

NA

NA

NA

0

-1

5

5

NA

NA

NA

159

711

540

540

Income Taxis

NA

NA

NA

60

1,097

-132

-132

Net Income

728

219

1,110

98

-385

672

637

732

732

(YoY)

NA

-69.92%406.85%-91.17%-492.86%-274.55%-5.21%

8.93%

14.91%

FY

3/18

3/19

3/22

3/23

3/24

Total Revenue

4,068

4,977

8169

6451

7,139

7,831

NA

22.35%

64.14%-21.03%10.67%

1,470

1,235

1,116

820

NA

-15.99%-9.64%

1,077

1,574

(YoY)

NA

Registration Fees
(YoY)

(YoY)
Development Sales(YoY)
Terminal Sales

Gateway Service Fees
(YoY)
QR/Barcode
Settlement Fees

Gross Profit
Gross Profit Margin
SGA

Non-Operating
Income/Loss

Net Profit Margin
Extraordinary
Income/Loss
Profit Before Income
Taxis

3/20

3/21

Source: Company Data58

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 33. Consolidated Balance Sheet (¥ MN)
FY

3/18

3/19

3/20

3/21

3/22

3/23

3/24

Cash and Deposits

1,907

1,583

2,533

2,168

3,419

2,861

13,173

1,110

1,034

1,044

1,345

Inventories

264

549

504

621

Others

507

221

205

1,043

4,049

5,223

4,614

16,182

Construction In Progress

269

14

85

445

Others

699

778

558

1,420

Property, Plant and Equipment

968

792

643

1,865

0

0

0

537

4,113

4,001

4,070

6,699

Deferred Tax Asset

129

0

147

120

Investment Securities

0

0

0

286

511

355

482

784

Accounts Receivable

Current Assets

Goodwill
Intangible Assets

2,346

2,457

3,170

Investments and Other Assets
Total Non-Current Assets

2,808

3,991

4,524

5,592

5,148

5,194

9,348

Total Assets

7,167

7,246

9,322

9,641

10,372

9,808

25,530Accounts Payable - Trade

53

149

68

206

Accounts Payable - Other

700

390

779

0

Short – Term Debt

1,014

507

5

167

Advances Received

0

2,528

2,009

1,764

661

1,684

8,735

425

262

189

1,690

2,192

4,497

4,734

12,562

Long–Term Debt

15

8

3

1,560

payable Pension Cost / Salary Allowance
Accrued

88

101

115

178

Others

40

0

1

401

143

109

119

2,139

Deposits Received
OthersCurrent Liabilities

Non-Current Liabilities
Total Liabilities

1,295

1,154

2,119

2,335

4,606

4,852

14,700Capital

9,812

9,812

9,812

3,053

3,553

3,553

6,151

Capital Surplus

3,100

3,100

2,581

3,053

3,553

708

3,306

Retained Earnings

18,28819,97321,021

1,195-1,345673

1,258

Shareholders' Equity

25,326

27,07029,629

7,302

5,761

4,934

10,714

Stock Acquisition Rights

2,254

1,646

123

5

5

22

40

0

0

0

76

76

7,203

7,306

5,766

4,956

10,830

Valuation Difference on Other Securities
Total Net Assets

5,872

6,092

Source: Company Data

59

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 34. Consolidated Operating Cash Flow Chart (\ MN)
FY

3/21

3/22

3/23

3/24

Depreciation

1,206

1,464

1,601

1,615

Loss (Gain) on Valuation of Investment

1

0

0

0

Interest and Dividends Received

0

0

0

0

Interest Payments

-2

-4

0

0

298

1,023

1,177

-165

352

180

-2,259

1,040

2,110

2,804

533

-451

-167

-101

-476

-1,860-1,177-1,277-2,455

0

0

0

-200

Increase (Decrease) in Deposits Received
Other Operating Cash Flows
Cash Flows from Operating Activities

Purchase of Property, Plant and Equipment
Purchase of Intangible Assets
Purchase of Investment Securities
Purchase of Shares of Subsidiaries Resulting in

7,710

Change in Scope of Consolidation
Cash Flows from Investing Activities-2,311-1,344-1,377

4,589

Proceeds from Short-Term Borrowings

970

0

0

0

Repayment of Short-Term Debt

0

-500

-500

0

Issuance of Shares

0

1,000

0

5,195

Redemption and Cancellation of Shares

00-1,5000

Other Financing Cash Flows

-64

-14

15

-5

Cash Flows from Financing Activities

906

486

-1,985

5,190-1,271

766

1,427

5,122

Free Cash Flow

Source: Company Data60

Transaction Media Networks, Inc. | 5258 (TSE Growth)Figure 35. Stock Indicators, ROE and KPI’s
FY

3/19

3/20

EPS (¥)

3,493

17,632

BPS (¥)

96,731Dividend Per Share (¥)

3/25

3/26

CoE

CoE

3/22

3/23

3/24

3.13

-12.23

21.19

15.85

6.38

40.83

114,362

232

179

160

292

293

NA

NA

NA

0

0

0

0

0

NA

Dividend Payout Ratio

NA

NA

0.00%

0.00%

0.00%

0.00%

0.00%

NA

Closing Price (¥)

NA

NA

NA

NA

NA

628

529

529

PER (Times)

NA

NA

NA

NA

NA

39.6

82.9

13.0

PBR (Times)

NA

NA

NA

NA

NA

2.1

1.8

NA

63.0

63.0

NA

NA

NA

36,93736,943

NA

NA

NA

NA

NA

NA

0

0

NA

NA

NA

NA

NA

NA

36,93736,943

NA

NA

NA

NA

NA

NA

23,196

19,543

NA

84.1%

77.3%

75.73%

55.54%

50.30%

41.97%

41.97%NA

Interest-Bearing Debt

NA

NA

1,029

515

8

1,728

1,728

NA

D/E Ratio

NA

NA

0.14

0.09

0.00

0.16

0.16

NA

EV (Enterprise Value)

NA

NA

NA

NA

NA

11,751

8,098

NA

1,079

2,667

1,367

2,180

2,137

2,441392

2,526

5,030

NA

NA

NA

NA

NA

4.81

3.21

NA

3.7%

16.7%

1.35%

-6.69%

13.58%

5.40%

ROIC (Capital Invested)

NA

NA

1.14%

-6.14%

13.94%

4.75%

ROIC (Business Assets)

NA

NA

1.45%

-9.93%

15.85%

6.97%)

Number of Employees

217

236

275

249

254

30

50

59

70

83

96

1.1

1.7

2.6

3.1

3.7

4.6

9

12

15

17

20

24

Shares Issued & O/standing (TN)
Number Of Treasury Stock(‘000 Shares)
Number Of Shares of Treasury
Stock Excluded (‘000 Shares)
Market Capitalization (\ MN)
Shareholders' Equity Ratio

EBITDA (¥ MN)
EV/EBITDA Multiple
ROE

Number of Connected Terminals(10,000)
Annual Settlement Processing
Transaction Value (GMV) (¥ TN)
Annual Number of Settlements
Processed (Billions of Times)

3/21

Note: Stock price indices for FY3/25 (company forecast) and FY2/26 (company target) are based on the closing price on August
7. Balance sheet items are as of FY3/2024.
Source: Company Data

61

Transaction Media Networks, Inc. | 5258 (TSE Growth)Disclaimer

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