Hit Co., Ltd.

The top four media by revenue (Shibuhachi Hit Vision, OMOSAN Synchro, Synchro 7 Shibuya Hit Vision, and Tsutaya Ebisubashi Hit Vision) account for a highly concentrated structure exceeding 50% of total revenue. If the operating status of these core media deteriorates for any reason, the impact on business performance would be significant. While the company seeks to diversify revenue sources by releasing new media every year, there is a risk that this may not proceed as planned.

The advertising business is susceptible to domestic and international economic fluctuations, and there is a risk that advertising placements on outdoor media may decline due to economic downturns, price increases, significant exchange rate fluctuations, or cuts in advertising budgets. The company seeks to mitigate this impact by investing in media installation locations with differing characteristics, such as urban/downtown areas including Shibuya, Ikebukuro, and Dotonbori, and roadside locations; however, if an overall economic downturn or a sharp rise in procurement costs occurs both domestically and internationally, this could adversely affect business performance and financial condition.

Outdoor advertising media face the risk of a significant decline in media value due to environmental changes in the installation area (such as reduced visibility from the construction of adjacent buildings, or changes in pedestrian flow due to district redevelopment). Additionally, even media that comply with legal regulations may face difficulty continuing operations due to complaints from surrounding residents. While the company has built a response framework through the active collection of information on surrounding area development plans and complaint management regulations, a decline in the value of core media would directly and adversely affect business performance.

Through its Singapore subsidiary HIT SINGAPORE, the company plans to expand its outdoor advertising business into ASEAN countries, with total planned investment and financing of ¥300 million from FY2026 (ending June 2026) through FY2028 (ending June 2028). Political, social, or economic turmoil in the countries of expansion, or unforeseeable changes in laws and regulations, could force changes to the overseas business strategy. Although the company has set withdrawal criteria of cumulative losses exceeding ¥300 million and three consecutive years of operating losses, if investment recovery does not proceed as planned, this could adversely affect business performance and financial condition.

LED panels and other equipment used in digital media are primarily sourced from China, creating a risk of increased procurement costs or supply instability due to terrorism, conflict, or shifts in political and economic conditions. While the company states that it can limit the impact by procuring alternatives from Taiwan, South Korea, the United States, and elsewhere, this constitutes a compound risk, as a halt or decline in advertising placements from outside Japan could occur simultaneously.

Transactions with OOH Media Solutions, a subsidiary of Dentsu Inc., accounted for 23.7% (¥1,049,147 thousand) of revenue for the fiscal year ended June 2025, representing a high degree of dependence. Although the current relationship is stable, with multiple officers and employees regularly engaging in exchange and information sharing, if any issue were to arise in this business relationship for any reason, it could have a material adverse effect on business performance and financial condition.

The company is subject to numerous laws and regulations, including the Outdoor Advertisement Act, the Landscape Act, the Building Standards Act, and the Road Act, and holds outdoor advertising business registrations/notifications in nine municipalities: Chiba City, Saitama City, Tokyo, Osaka City, Sapporo City, Nagoya City, Sendai City, Kanagawa Prefecture, and Yokohama City (valid through 2026-2027). If laws are abolished, revised, or newly enacted, or if outdoor advertising business registration is revoked or renewal is denied, this could seriously impede business continuity. The Risk and Compliance Committee conducts impact assessments of amended laws.

The remarkable growth of internet advertising has created an environment in which advertisers can choose from a variety of advertising methods, creating a risk that budget allocation to outdoor advertising may shrink. In addition, significant changes in pedestrian flow accompanying Japan's population decline could fundamentally transform the value of outdoor advertising media. While the company provides services for effectively combining outdoor advertising with internet advertising campaigns, if advertisers' shift toward internet advertising proceeds beyond expectations, this could adversely affect business performance and financial condition.

The company's business model involves leasing building walls and rooftops from real estate owners to install advertising media, meaning that the impact on business performance would be significant if lease agreements for key media were terminated. Officers and employees regularly interact with real estate owners to maintain and strengthen close relationships, and the company currently considers the possibility of contract termination for key media to be limited; however, the risk of contract termination due to deteriorating relationships cannot be ruled out.

As of the end of June 2025, interest-bearing debt stood at ¥1,522,785 thousand (23.6% of total assets), with an equity ratio of 52.4%. There is a risk of increased interest burden, higher procurement interest rates, or difficulty raising funds due to additional financing associated with future business expansion. In addition, since fixed assets are recognized for each advertising medium, a decline in media value or deterioration of the business environment could result in impairment losses, which could adversely affect business performance and financial condition.