SHANON Inc.

The growth rate of the domestic marketing automation market has been slowing, and competition for existing customers (replacement) is increasing. If competitors engage in intensified price competition or large-scale promotions backed by their capital strength, the Company Group may fail to achieve its expected share gains despite implementing strategic pricing measures and new plans aimed at reclaiming the position of "No. 1 domestic MA." This could adversely affect the Company Group's business and performance.

The Company Group has made the implementation of cutting-edge technologies, including generative AI, into its products a key priority, and adopts a policy of rapidly incorporating external technologies. However, if the pace of technological innovation exceeds expectations, or if implemented AI features fail to meet customer needs, there is a risk that product competitiveness may decline. In addition, the emergence of new legal regulations or ethical issues related to AI use could also affect the Company Group's business and performance.

The Company Group prioritizes "profit maximization" above all else, promoting thorough cost management and optimization of LTV (customer lifetime value). If marketing expenses for acquiring new accounts increase beyond expectations, or if the shift to lower-priced plans progresses further than anticipated, causing a significant decline in ARPU (average revenue per user), reform of the revenue structure may be delayed, potentially preventing the achievement of target profit margins.

The Company Group aims to build a lean, elite organization through the use of technology, and adopts a management policy that does not presuppose simple increases in headcount. If the development of existing personnel does not proceed as planned, if core personnel with advanced expertise leave the Company Group, or if AI adoption and automation of internal operations fail to produce sufficient results, this may lead to stagnation in business operations and declining productivity, potentially hindering business expansion.

The Company Group is a listed company with Innovation Co., Ltd. as its parent company (holding a 56.71% equity stake), and strives to maintain management independence and establish a fair decision-making process. If changes to the parent company's group management policy occur, or if governance to ensure independence does not function sufficiently, this could harm the interests of minority shareholders or constrain the Company Group's independent business development.

The Company Group complies with legal regulations such as the Act on the Protection of Personal Information and the Act on Regulation of Transmission of Specified Electronic Mail, and has established a rigorous information management system through ISMS and Privacy Mark (PMS) certification. Future strengthening of legal regulations concerning AI use, as well as international trends regarding privacy protection such as Cookie regulations, may constrain service provision. Such regulatory changes could directly affect the Company Group's business model and revenue.

The Company Group has established an information management system through ISMS and Privacy Mark certification; however, in the event of an information leak or cyberattack, loss of social credibility and the occurrence of liability for damages could have a material impact on the Company Group's financial position and business results. As a SaaS provider handling customers' marketing data, information security incidents pose a risk directly linked to business continuity.

The Company Group's business infrastructure depends on Amazon Web Services (AWS) cloud computing services. The Company Group has implemented measures such as ensuring redundancy through the use of multiple geographic regions and availability zones, conducting regular vulnerability assessments, and maintaining continuous monitoring. Nevertheless, in the event of a large-scale AWS outage or system downtime caused by unforeseen events, service provision could be disrupted, potentially affecting the Company Group's business and performance.

The Company Group pays a portion of usage fees for services provided by overseas operators, including AWS, in foreign currencies. If the yen depreciates further than expected, this could affect the Company Group's business and performance through increased costs. Since revenue is primarily denominated in yen, exchange rate fluctuations represent an asymmetric risk on the cost side.