ECOMIC.,CO LTD

The BPaaS Business is experiencing rapid changes in the competitive environment due to the entry of diverse operators such as SaaS vendors, ERP vendors, and consulting firms. If intensified price competition, delayed response to technological innovation, or market share expansion by major operators occurs, this could lead to a decline in competitiveness and deterioration in profitability. The Group seeks to differentiate itself through services that combine operational know-how with technology.

The Group's business depends on the tax system and social insurance systems (health insurance, employee pension, and long-term care insurance). Responding to system revisions may require system modifications and business process reviews, resulting in additional costs. Changes in laws and regulations related to personal information and data handling could also affect the business. Depending on the content of system revisions, the business volume of client companies may fluctuate, which could also affect demand for the Group's services.

The Group operates as a single segment, the BPaaS Business, resulting in a revenue structure highly dependent on payroll calculation-related services. If demand declines in specific areas, contract terms change with major clients, or the competitive environment changes leading to a decrease in processing volume or unit prices, this could directly impact business performance. Although the Group is expanding its service areas, high dependence remains a risk factor.

The Group handles large volumes of personal information, including sensitive data such as payroll information and My Number data, and there is a risk of information leakage due to unauthorized access, cyberattacks, internal misconduct, human error, or inadequate management of outsourcing partners. If a leak occurs, this could result in compensation costs to client companies or their employees, or a decline in creditworthiness leading to reduced transactions with existing or future clients. The Group has worked to strengthen its information security framework through obtaining Privacy Mark certification (January 2006) and ISO/IEC 27001 certification (September 2021).

The Group's services rely heavily on cloud infrastructure and information systems. If failures in external cloud services, cyberattacks, system malfunctions, or communication disruptions occur, this could result in service outages or delays in business processing. As a result, this could affect client companies and lead to a decline in creditworthiness, potentially having a material impact on business performance. Due to the high degree of dependence on cloud infrastructure, it is difficult to completely eliminate the risk of failures caused by external factors.

The Group is promoting the use of technologies such as cloud services, RPA, and AI, but there is a risk of processing errors due to algorithm malfunctions, configuration deficiencies, or inadequate handling of unforeseen operations. If processing errors occur, this could lead to a decline in service quality and reduced customer trust, affecting business performance. In addition, failure to appropriately respond to regulations related to AI utilization or changes in customer requirements could result in a decline in competitiveness.

The Company has Eiko Qingdao (established in 2013) in Qingdao, Shandong Province, China, and Eiko Shanghai (made a subsidiary in 2025) in Shanghai, China, operating offshore functions and HR services for Japanese companies expanding into China. If the renminbi appreciates, labor costs rise, or Chinese laws are revised, this could affect the Group's business performance. With the subsidiarization of Eiko Shanghai, which is responsible for expanding the HR business in China, the weight of China business risk has increased.

Payroll calculation-related services tend to have revenue concentrated in the second half of the fiscal year due to the impact of year-end tax adjustment work (October to January). In the 29th fiscal period (FY2026 (ending March 2026)), third-quarter revenue accounted for 50.7% of the full-year total. There is a structural tendency for operating losses to continue in the first half (29th fiscal period: first quarter operating loss of ¥65,522 thousand, second quarter operating loss of ¥122,697 thousand), and fluctuations in demand for year-end tax adjustment work directly affect full-year business performance. This tendency could change if the payroll payment environment of client companies changes due to revisions to the current tax system or the spread of annual salary systems.

Sustainable growth of the Group requires securing and developing human resources well-versed in both business operations and IT, but intensifying competition for talent in the DX and AI fields is making it difficult to secure the necessary personnel. If personnel turnover occurs or training systems fall behind, this could lead to a decline in service quality, deterioration in productivity, and constraints on business expansion. In particular, as BPaaS services become more sophisticated, demand for specialized personnel is expected to increase further going forward.

If a large-scale disaster halts transportation methods such as mail and courier services, delivery to client companies may become impossible. In addition, power outages caused by natural disasters could cause significant disruption to operations that depend on computer systems and office equipment, and if a large number of employees are unable to come to work due to the spread of an epidemic, operational capacity could also decline. If these events occur, they could affect the Group's business performance.