iRidge, Inc.

In internet-related markets, new technologies and services are being introduced one after another, and if the Group falls behind in responding to environmental changes, its competitiveness may decline. In addition, if substantial expenditure becomes necessary to develop and respond to new technologies and services, this could adversely affect business performance. As a countermeasure, the Group is engaged in continuous technology and service development and securing excellent personnel.

In the App Business and Business Produce-related markets, business performance may be affected by intensifying competition with other companies, the emergence of new business models, or unforeseen changes in market structure. There is also a risk of decreased sales if customer companies in diverse sectors such as retail, transportation, and finance reduce related budgets due to economic downturn or sluggish consumption. The Group is working to enhance customer value and expand its business domains through the execution of the five growth strategies set out in its medium-term management plan.

If costs exceed initial estimates due to project management issues or increased work hours resulting from specification changes, it may become necessary to record valuation losses on work in process or provisions, which could affect business performance. The input method (based on estimated total costs) is applied for revenue recognition in development operations, and there are cases where estimated total costs need to be revised due to additions or changes in customer requirements. The Group is working to improve estimation accuracy, but because each project is highly individual, complete elimination of this risk is difficult.

Due to the impact of the timing of customer companies' budget execution, there is a tendency for sales to be concentrated in March. If sales recognition is delayed to the following consolidated fiscal year due to project progress delays or fluctuations in the timing of acceptance inspections, this could affect the performance for that fiscal year. The Group aims to achieve stable revenue growth by increasing the proportion of recurring (stock-type) revenue.

To strengthen market competitiveness, the Group is advancing investment in software, and capitalizes development costs for which future revenue generation and cost reduction are deemed certain. If the revenue-generating effect is significantly impaired due to major changes in future plans or obsolescence of services, impairment of software may become necessary, which could affect business performance. Given the characteristics of an industry with rapid technological innovation, the risk of impairment to asset value continuously exists.

Although prior due diligence is conducted when implementing M&A or capital/business alliances, if problems that could not be identified through prior due diligence arise—such as the occurrence of contingent liabilities or the discovery of unrecognized liabilities—or if business plans do not progress as scheduled, it may become necessary to record impairment of shares of affiliated companies, investment securities, or goodwill. There is also a risk that the business domain and revenue structure may change as a result of M&A and similar activities.

Securing, retaining, and developing excellent personnel is important for improving competitiveness and expanding business, but if this does not proceed as planned, or if excellent personnel leave the company, this may become a constraining factor for competitiveness and business scale expansion. As a small organization with 273 employees, business execution in some cases depends on specific individuals, making the organization structurally susceptible to such impacts becoming apparent.

Personal information may be obtained through app development and marketing support activities, and if leakage or unauthorized use occurs, this could affect business performance through claims for damages or a decline in social credibility. While the Group has obtained Privacy Mark certification and established an appropriate protection system, risks of system failures due to unauthorized access or computer viruses also coexist.

With the expansion of new businesses and services such as the cloud-based work hour management service "Co-Assign," additional investment in personnel recruitment and system development may occur, and it may take time to generate stable revenue. If new services and new businesses do not proceed as planned, there is a risk that the investment may not be recovered, and additional risk factors specific to such ventures may arise.

The Company grants stock options in the form of share subscription rights to officers and employees, and is considering continued use of this system going forward. If these share subscription rights are exercised, new shares will be issued, which may dilute the share value and voting rights ratio of existing shareholders. In addition, the Company currently does not pay dividends, and its policy is to prioritize strengthening internal reserves for growth investment for the time being, with the timing of shareholder returns yet to be determined.