SEIGAKUSHA CO.,LTD.

The declining birthrate is reducing the absolute number of children who could become cram school students, and there are concerns that motivation to enroll may weaken due to simplification of entrance exams and other factors. In the childcare industry, the number of children on nursery waiting lists is on a declining trend due to government policies expanding capacity, creating a risk of declining demand for childcare facilities. In response, the company focuses its business areas on regions where the impact of the declining birthrate is relatively moderate, operates multiple brands, and expands its customer base through offerings such as "Ichie Juku," which specializes in medical school and highly competitive university preparation.

Cram schools require full-time and contract teachers as well as capable university-student instructors, while childcare facilities require staff holding childcare worker qualifications; human resources are a critical management resource that directly determines the quality of education and childcare provided. If the securing and development of personnel does not proceed as planned, it may hinder the execution of new classroom opening plans and, due to a decline in service quality, may result in an inability to meet the needs of cram school students and other customers. In response, the company is working to develop and retain talent through the introduction of long-term internships, utilization of internal recruiting from university students, active mid-career hiring, various training programs, and fair personnel evaluation and reward systems.

There are numerous competing cram schools providing educational services for high school and university entrance exam preparation, and competing services are increasing as online content becomes more sophisticated with the emergence of generative AI and other technologies. In the childcare industry as well, competitors are increasing as capacity expands to eliminate nursery waiting lists. In response, the company is promoting differentiation through unique educational content, promotion of its track record of exam success, the launch of "Online Individual Tutoring Free Step Link One," and the implementation of early childhood education programs at its childcare facilities.

In the event of a large-scale earthquake or other disaster, or the spread of an infectious disease, it may become difficult to carry out some or all operations in the areas where the company conducts business, potentially having a material impact on business performance. In response, the company has established disaster-response manuals, conducts disaster and crime-prevention drills, ensures means of communication with parents and guardians, and has built a business continuity framework by offering online classes and introducing a work-from-home system.

The company holds personal information relating to a large number of cram school students and others, and if this information were to leak outside the company for any reason, it could damage the company's reputation and have a material impact on business performance. In response, the company thoroughly works to prevent information leakage through the establishment of internal regulations, thorough dissemination of these regulations to employees, and measures to control the removal of data outside the company.

As dependence on information systems in business activities increases year by year, damage from cyberattacks and computer viruses is increasing and becoming more sophisticated, and a serious system failure could impact business performance through disruption of operations. In response, the company is working to reduce the risk of system failures and ensure availability by migrating key systems to the cloud and building redundancy into communication routes, while also conducting awareness-raising activities on cyberattacks and related risks for all employees.

As of the end of March 2026, of the 329 cram school classrooms and other facilities, 46.8% were located in Osaka Prefecture and 76.0% in the Kinki region as a whole, creating a risk that deterioration in population and economic trends in the Kinki region would directly impact business performance. In response, the company first opened a location in Tokyo in 2011 and has since expanded the proportion of classrooms in the Kanto region to 22.8% as of the end of March 2026, while also offering online classes regardless of the student's commuting area.

As of the end of March 2026, the company operated 50 franchise classrooms under the "Kobetsu Shido Gakuin Free Step" (individual tutoring academy) brand, and if for any reason a franchise classroom is unable to provide services at the same level as company-operated classrooms, it could damage brand value and impact business performance. In response, the company designates areas for classroom openings and selects franchisees who share the company's philosophy, and conducts regular inspections and operational guidance through supervisors with classroom management experience.

"Kaisei Hoikuen," "Kaisei Petit Hoikuen," and "Iterasu Hoikuen" nursery facilities are operated under licenses and authorizations related to the establishment of childcare facilities, and if such licenses or authorizations were revoked or operations were suspended for any reason, this could impact business performance. In response, the company complies with the various conditions and relevant laws and regulations required to maintain its licenses and authorizations, and has established a framework for operating authorized childcare facilities under the guidance of government authorities.

The company records tangible fixed assets such as classroom facilities, goodwill related to business acquisitions, and intangible fixed assets such as software, creating a risk of recognizing impairment losses if future cash flows fall short of initial projections. In response, when opening new classrooms, the company makes capital investment decisions only after thorough discussion among management, and when acquiring businesses, decisions are made after fully examining synergy effects, profitability, and future prospects.