JESCO Holdings,Inc.

In the domestic EPC business, in addition to relevant laws and regulations such as the Construction Business Act and the Telecommunications Business Act, the company holds licenses and permits including a general construction business license (valid until April 29, 2030), a specified construction business license, and electrical contractor registration. If a violation of laws or regulations occurs, the company could be subject to administrative dispositions such as business suspension orders or revocation of licenses, which could have a severe impact on business results and financial condition. The company positions compliance as the most important matter in its management policy and strives to strengthen its education, guidance, management, and supervision systems.

Of the group's 11 affiliated companies, 4 are overseas local subsidiaries. Changes in the political and economic conditions or legal regulations of the countries in which they operate could lead to reduced investment by Japanese companies or a decline in demand for local facility construction work. In addition, if there is a significant rise in local labor costs, a sharp increase in interest rate levels, or substantial fluctuations in foreign exchange rates, this could affect construction execution plans, profitability, and payment collection. These combined risks could significantly affect the profitability of the ASEAN EPC business.

Since the company procures a large amount of construction materials for the execution of its domestic EPC business and ASEAN EPC business, a sharp rise in material prices could increase construction costs, lower gross margins, and affect business results and financial condition. Dependence on a specific supplier (Yamato Denki Co., Ltd.) has declined to 3.9% in FY2025 (ending August 2025), but the risk of price fluctuations across the overall materials market continues to exist. The company strives to secure favorable purchasing terms by obtaining quotations from multiple material suppliers.

In the domestic EPC business and ASEAN EPC business, the company competes with many companies, both large and small. There is a risk that further intensification of price competition or improvements in the technical and service capabilities of competitors could relatively lower the company group's service capabilities. This could result in the loss of sales opportunities and a decrease in the number of construction projects, affecting business results and financial condition. Increases or decreases in private capital investment and public investment due to economic fluctuations also affect competition for orders.

Expansion of the domestic business requires holders of public qualifications such as electrical construction management engineer, telecommunications construction management engineer, electrician, radio operator, and telecommunications engineer, as well as qualifications specific to business partners. If the company is unable to secure and train personnel capable of carrying out construction work, this could lead to a decline in order-taking capacity and affect business results and financial condition. As countermeasures, the company is developing the cloud-based on-demand training program "JESCO Academy" and is engaging in strategic M&A aimed at securing engineers and qualification holders.

The company has obtained ISO 45001 occupational health and safety management system certification and strives to prevent accidents; however, should a serious accident occur, in addition to a significant impact on construction progress, the company could face constraints on its sales activities due to a loss of social credibility and loss of trust from business partners. There are also risks of litigation related to damages from warranty liability and product liability, as well as personal injury accidents at construction sites. These could affect business results and financial condition.

In the course of business operations, the company handles important information held by customers, such as technical data and customer data, and implements appropriate information management including cybersecurity measures. If important information were to leak due to unforeseen circumstances, this could lead to a decline in customer trust and the occurrence of liability for damages, affecting business results and financial condition. In addition, if the core business systems (general affairs, human resources, accounting, and construction management) experience failures due to human error, natural disasters, computer viruses, or other causes, this could also disrupt business operations.

In the domestic EPC business, the company is working to expand orders for solar power generation facility construction; however, depending on trends in government energy policy, including the feed-in tariff system, and trends in grid interconnection by electric utility companies, the solar power generation market may not expand as much as expected. If market expansion is not achieved, it may become difficult to secure orders in the renewable energy field, which could affect business results and financial condition.

In the domestic EPC business, revenue tends to be concentrated in specific quarters due to the progress of construction work and the timing of inspections and acceptance. Quarterly net sales for FY2025 (ending August 2025) showed a skewed pattern, with ¥2,411,452 million in the first quarter, ¥3,277,393 million in the second quarter, ¥3,380,760 million in the third quarter, and ¥3,777,611 million in the fourth quarter (all before consolidation adjustments), making it difficult to assess full-year performance based on the results of a single quarter. This seasonality is a factor that complicates investors' evaluation of business performance.

The company holds assets such as real estate for operational necessity, and there is a risk that impairment losses could occur if the market value of held assets declines significantly. In addition, if the profitability of real estate for sale declines significantly, this could result in valuation losses on inventory, affecting business results and financial condition. The structure is such that fluctuations in the real estate market directly affect the company's financial figures.