Netyear Group Corporation

The Company's business is highly dependent on the knowledge and capabilities of individual personnel, making the continuous securing and development of talented personnel essential. While the Company is engaged in recruiting activities, improving the working environment, and expanding educational programs, if these efforts do not proceed as planned, they may become a constraining factor for competitiveness and business expansion, potentially reducing medium- to long-term growth.

Revenue is highly dependent on client companies' DX budgets and marketing budgets. If client budgets shrink due to heightened uncertainty in the external environment—such as resource price increases stemming from geopolitical risk, price inflation, and US tariff policies—there is a risk that orders and net sales will decrease. New customer acquisition may also not proceed as planned, which could affect business operations, performance, and financial condition.

In addition to specialized competitors, the Company faces a severe competitive environment with entrants from consulting firms, advertising agencies, SIers, and sole proprietors, and new competitors may emerge due to the rapid development of generative AI technology. Since the Company's services are not protected by patents or similar rights, there is a risk of technology and know-how obsolescence. If efforts to maintain competitive advantage do not achieve the expected results, this could have a significant impact on performance and financial condition.

There is a risk that work hours exceeding initial estimates may occur due to specification changes and other factors, causing projects to become unprofitable. If intensifying competition for orders or personnel shortages lead to increased outsourcing costs and reduced estimation accuracy, overall business profitability may deteriorate, affecting performance and financial condition. The Company addresses this through visualization of profitability by project and by customer, and by strengthening reviews at the time of order receipt and requirements definition.

The pace of innovation in internet-related technologies is extremely rapid, and advances in generative AI technology in particular have the potential to transform society and lifestyles. If unexpected innovative technologies are developed and the Company's response is delayed, the competitiveness of its services could decline, significantly affecting business operations and performance. The Company is focusing on acquiring knowledge and know-how regarding new technologies, but keeping pace with the speed of technological change remains a challenge.

The Company utilizes AI technology, including generative AI, to improve operational efficiency and enhance services, but business activities may be restricted by new regulations or guidelines established by governments in various countries. If issues such as rights infringement, leakage of confidential information, or lack of accuracy occur in AI outputs, this could damage the Company's social credibility and result in liability for damages, adversely affecting performance and financial condition. The Company strives to reduce this risk through establishing internal regulations and thorough internal training, but states that complete elimination of the risk is difficult.

As of March 31, 2026, NTT DATA holds a voting rights ownership ratio of 48.5%, and based on the substantive control criterion, the Company is a consolidated subsidiary of NTT DATA. NTT DATA is in a position to influence the Company's management decisions through the appointment and dismissal of directors via the shareholders' meeting, and NTT DATA's interests may not align with those of other shareholders. If NTT DATA's management policy or business strategy changes significantly, or if there is a major change in its shareholding ratio in the future, this could have a significant impact on the Company's business operations, performance, and financial condition.

Due to a customer's management policy or strategy, transactions with a specific customer may expand rapidly, resulting in relatively high dependence on that specific customer. If transactions with a major customer decrease sharply due to changes in the customer's strategy or operational troubles, this could affect performance and financial condition. The Company strives to prevent excessive dependence through balanced order-taking activities, but a situation of high dependence may arise due to constraints on personnel resources and other factors.

If leakage, falsification, or unauthorized use of confidential information or personal information handled by the Company occurs, this could have a material impact on performance and financial condition due to response costs, claims for damages, loss of credibility, and suspension of transactions with customers. The Company has obtained Privacy Mark certification (certification number 11820395) and intends to continuously strengthen system security measures and employee training.

Deliveries and acceptances are concentrated in March, the fiscal year-end month for many customers, and in the fiscal year under review, 30% of net sales, 58% of operating profit, and 58% of ordinary profit were recorded in the fourth quarter (net sales for March alone were ¥632 million, 17% of full-year net sales). If deliveries and acceptances are not completed as scheduled due to changes in client companies' schedules or shortages of personnel resources, this could affect financial condition and performance. The Company strives to conduct order-taking activities and project management with seasonal factors in mind, but it is difficult to completely eliminate the impact of external factors.