Applied Co.,Ltd

The Group may implement strategic alliances, including corporate acquisitions and capital tie-ups, aimed at expanding existing businesses or entering new businesses. Although sufficient analysis and consideration are conducted, if the business plan following an acquisition or alliance does not progress as initially planned, this may adversely affect business performance. As a countermeasure, a thorough prior analysis and review process has been established, but risks arising from changes in the external environment remain.

Under the policy of continuing to open new stores, the Group plans to fund capital expenditure primarily through borrowings from financial institutions to cover any shortfall in internal reserves. If deterioration in financial conditions makes new fundraising difficult, the Group may be unable to open stores as planned, which could hinder its business expansion plans. Reliance on borrowings from financial institutions as the primary fundraising method may constitute a financial vulnerability.

The Group is working to expand its sales infrastructure by developing stores and sales offices to capture new demand. However, if such expansion does not proceed as planned, or if the operating results of newly established locations fall short of plan, this may affect the business plan and performance. Delays in store opening plans or failure to make new locations profitable carry the risk of extending the investment recovery period.

The Group thoroughly manages performance by segment, and unprofitable stores and sales offices for which recovery is not expected are closed based on established closure criteria. When a location meeting the closure criteria is closed, a closure loss may be recorded, affecting business performance and financial condition. This is accompanied by the risk of recording impairment losses on fixed assets in conjunction with the application of impairment accounting.

The shipping unit prices of personal computers, the Group's core products, are subject to fluctuation, and price changes exceeding the range anticipated by the Group may occur due to factors such as manufacturer or supplier circumstances. Although the Group implements sales measures to enhance added value, if price fluctuations exceed expectations, this may adversely affect business performance. The Group's concentration of business on PC sales heightens its sensitivity to price fluctuation risk.

While the Group implements purchasing policies and inventory control measures to reduce inventory risk for merchandise and products, if for some reason it ends up holding large amounts of obsolete inventory, this may affect business performance and financial condition. PC-related products have a short technological innovation cycle, giving the industry a relatively high inherent risk of inventory obsolescence.

Competition with other companies in the same industry exists in all regions where the Group operates, and the Group seeks to differentiate itself through the quality, pricing, product range, and personal service of its proprietary products. However, if a competitor opens a new store near one of the Group's sales locations, this may lead to customer attrition and intensified price competition, adversely affecting business performance. Intensifying competition can also serve as a trigger for impairment risk.

The Group conducts credit sales through its SI Sales Department targeting universities and government agencies, as well as its Special Equipment Sales Department, which mainly wholesales to distribution channels; the risk of bad debts expands as sales increase. Although credit and collection management for corporate customers and business partners is conducted carefully based on credit management regulations, if a receivable counterparty falls into financial distress and becomes insolvent, the resulting inability to collect accounts receivable may have a material impact on business performance and financial condition.

Some private-brand personal computers are manufactured by overseas contract manufacturers, and some products handled are imported from overseas, with settlement in both cases denominated in US dollars. If the yen depreciates sharply over a short period, procurement costs for overseas-manufactured products may rise, potentially forcing changes to procurement plans and affecting business performance. There is no explicit description in the securities report of specific countermeasures such as foreign exchange hedging.

The Group handles a large volume of personal information through services such as membership-based technical support, extended warranty programs, point cards, broadband line application intermediary services, and used equipment purchasing. Although the Group has established basic policies and customer information management regulations based on the Personal Information Protection Act, if an unforeseen leakage of personal information occurs, this may damage trust and result in legal liability, adversely affecting business performance.