LIFULL Co., Ltd.

LIFULL HOME'S employs a performance-based fee model, meaning that the number of matches provided to real estate operators directly affects revenue. If the number of inquiries declines due to changes in the business environment or a decrease in site traffic-generating ability, this will directly impact business performance. Intensifying competitive conditions and rising advertising unit costs could also contribute to a decline in traffic-generating ability.

Traffic to the Group's sites is largely generated via search engines, and the authority to determine display rankings rests with each search engine operator. If changes to search algorithms make it impossible to maintain high rankings, traffic-generating effectiveness will decline significantly, impacting business performance. The Group addresses this through SEO measures and branding promotions, but the scope for intervention by the Group is limited.

Most services depend on computer systems and communication networks, and if hardware or software failures, cyberattacks, unauthorized access, or server outages caused by sudden surges in access occur, some or all services may be suspended. This could result in lost revenue opportunities, reduced confidence in the systems, and damage claims. Although various security measures and backup systems have been established, complete elimination of this risk is difficult.

The Group holds large volumes of personal information, including names, addresses, phone numbers, and email addresses, as well as confidential information from business partners. If information is leaked, lost, or tampered with due to unauthorized external access or deficiencies in internal management systems, this could result in damage claims, administrative sanctions from regulatory authorities, and a loss of users and clients due to reputational damage. Measures such as establishing internal regulations, employee training, strengthening system security, and internal audits have been implemented, but the risk cannot be completely eliminated.

The Group actively pursues M&A and joint ventures as part of its growth strategy, but contingent liabilities or unrecognized liabilities may be discovered after an acquisition. In addition, if expected results are not achieved due to overvaluation of enterprise value, changes in the business environment, failure to integrate internal controls, or departure of key personnel, this could affect the Group's financial condition and business performance. Investment decisions are made following due diligence and approval processes, but it is difficult to completely avoid such risks.

Multiple competitors exist for services such as LIFULL HOME'S, Kenbiya, and LIFULL Kaigo, and internet-related services have low barriers to entry, making new entry easy. If competition intensifies due to the emergence of competitors with innovative technologies or business models, this will affect the Group's business performance. The Group continues to invest in strengthening its competitiveness, but there is a possibility that results as planned may not be achieved.

Each of the Group's businesses is based on ICT, and if technical or organizational factors cause delays in responding to advanced technologies, the services provided may become outdated, reducing user and client satisfaction. In addition, increased costs for purchasing network equipment and software, license fees, and development expenses to address new technologies could put pressure on business performance. The Group works to enhance service value through the active use of advanced technologies, but since ICT advances rapidly, continuous response is required.

The Group positions strengthening its compliance framework and internal control system as an important management issue, but internal controls have certain limitations and legal violations cannot be completely eliminated. If legal violations or administrative guidance occur, this could result in a decline in reliability and corporate image, leading to the departure of users and customers and litigation risk. Revisions to legal interpretations or tightening of regulations could also adversely affect business performance.

Against the backdrop of DX promotion across industries, there is a shortage of IT talent, along with rising employment conditions and intensifying competition for talent acquisition, creating a risk that securing excellent personnel will become difficult. If there is a shortage of research and development personnel or specialists in each service field, this could hinder efforts to strengthen service competitiveness and business operations, affecting business performance. The Group positions the continuous securing and development of talent as an important management issue, but intensifying competitive conditions could lead to talent attrition.

Rakuten Group, Inc. is a major shareholder of the Company and an other affiliated company, and maintains business relationships such as information listings and the outsourcing of property management for Rakuten STAY VILLA. If the current relationship is not maintained in the future, this could affect the Company's business development and capital policy. Although transaction volume is relatively small within the Group's overall revenue, changes in the broader relationship, including the capital relationship, could affect medium- to long-term strategy.