OPRO Co., Ltd.

The software industry to which the company belongs has many existing competitors, and barriers to new entry are low since large investments or licenses are not required. If price competition intensifies due to the emergence of new products and services from competitors, it could materially affect business performance and financial condition. As countermeasures, the company is pursuing feature enhancements and new service offerings, actively filing and registering patents and trademarks, and branding through added value.

Approximately 90% of sales are derived from services linked with Salesforce Japan, making the continuation of the OEM partner agreement and ISVforce partner agreement fundamental to the business. If these agreements are terminated due to breach of contract, difficulty in performance, changes in the counterparty's business policy, or a decline in competitiveness, it could materially affect business activities. In the medium term, the company aims to strengthen the relationship by expanding linked services, while in the long term it aims to reduce dependence through partnerships with other companies' services.

The company's business is dependent on the domestic market and is directly affected by trends in customer companies' DX (digital transformation) investment. If customers' appetite for DX investment declines due to worsening domestic and overseas economic conditions or an economic slowdown stemming from the prolonged Russian invasion of Ukraine or exchange rate fluctuations, it could materially affect business performance and financial condition. The company seeks to capture demand through the provision of high-value-added services and the development of new services.

The software industry is characterized by rapid technological innovation, and there is a risk that the company's existing technologies and know-how could become obsolete. Delays in responding could lead to a decline in service competitiveness and require unplanned technology investment, potentially materially affecting business performance and financial condition. Given the industry's high fixed-cost ratio, a decline in sales tends to result in a large decline in profit, resulting in high profit volatility risk. The company addresses this through continuous support for IT engineers' skill development.

In the course of business, the company handles confidential information, and if an information security incident occurs due to a cyberattack or other cause, it could materially affect business performance and financial condition through a decline in social credibility and brand image and payment of damages. The company has obtained ISO27001 (ISMS certification, acquired May 2016) and ISO27017 (cloud security certification, acquired May 2018), and has established an information management system.

Securing, developing, and retaining talented personnel is the most critical issue for business expansion. If the company is unable to sufficiently secure or develop the necessary personnel, or if turnover of hired personnel progresses, it could materially affect business performance and financial condition. The company is working on developing and retaining new graduates and mid-career hires through active recruitment activities, improvements to the personnel evaluation system, and training programs, but there is no guarantee that these measures will be effective.

The company may handle personal information, such as business card information, in administrative operations and client-site work, and if such information is leaked externally, it could materially affect business performance and financial condition through a decline in sales due to loss of trust and payment of damages, among other factors. The company works to ensure security management through the establishment of a personal information management system, acquisition of Privacy Mark certification, and the appointment of personal information protection managers in each department.

Kazunori Satomi, who has served as Representative Director and President since the company's founding, plays a critical role in formulating management policy and business strategy. If he were to step down for any reason, it could materially affect business performance and financial condition. While the company is working to build a management structure that does not depend on the representative as the business expands, the current degree of dependence remains high.

The company outsources system design, construction, and other work to partner companies. If these partner companies are unable to secure sufficient technical capability or number of engineers, or if outsourcing costs rise sharply, it could hinder the smooth provision of services and active order-taking activities, potentially materially affecting business performance and financial condition. Currently, the company maintains long-term, stable relationships with partner companies and focuses on securing engineers.

The company records software related to its cloud services business as intangible fixed assets. If profitability declines significantly due to changes in the business environment and the invested amount becomes unrecoverable, an impairment loss may occur, potentially affecting performance. The company seeks to reduce impairment risk by strengthening earnings power through the expansion of recurring revenue and the recurring revenue ratio.