Stmn, Inc.

In the HR-related cloud service market, competitors—both large and small—are increasing, and there are concerns that price competition will intensify due to the emergence of low-cost, quickly deployed alternative services from startups leveraging AI technology. If the Group's competitive advantage declines, this could lead to a decrease in new contracts and an increase in cancellations by existing customers. As countermeasures, the Group is working to strengthen its one-stop integrated platform for non-desk workers and to provide compound added value through combined human support such as customer success and BPaaS deployment.

The internet and SaaS industries continue to undergo rapid technological innovation, and the rise of generative AI and other technologies is lowering barriers to software development, making the risk of service obsolescence increasingly apparent. If the Group is slow to respond to technological changes, or if it must incur substantial costs such as system investment and personnel expenses, this could adversely affect its financial position and business results. The Group strives to continuously monitor the latest technology trends and to expand service functionality and improve development productivity through active use of generative AI and external partners.

The majority of the Group's net sales are generated by the engagement platform "TUNAG," resulting in a high degree of dependence on a specific product. If TUNAG's performance deteriorates due to changes in the environment, technological innovation, or entry of competitors, this could have a direct and significant impact on the Group's overall financial position and business results. The Group is working to diversify revenue sources through the provision of the online community platform "FANTS" and the development of new businesses, but resolving this dependence will take a certain amount of time.

The Company has extended a monetary loan totaling ¥550,000 thousand to Taihei Onishi, Representative Director, President and Executive Officer CEO, for the purpose of acquiring shares, and has established a pledge on the Company shares he holds as collateral. If the market price of the Company's shares declines significantly such that the collateral value falls below the loan receivable, it will be necessary to record an allowance for doubtful accounts, which could adversely affect cash flows and financial position. There is also an inherent risk that, from a governance perspective, early resolution of this arrangement may be required in future market segment review examinations, etc.

The Group handles a large number of information assets, including personal information of client companies, and if important information were to be leaked externally for any reason, this could damage the Group's social credibility and give rise to liability for damages, thereby affecting its financial position and business results. As countermeasures, the Group has obtained the Privacy Mark and ISO/IEC 27001:2022 certification, conducts information security training for officers and employees, and applies these operations across Group companies. However, it is difficult to completely prevent unauthorized access or internal misconduct, and continuous strengthening of the system is required.

Because the Group employs a subscription-based revenue model, a certain level of cancellations occurs every year due to changes in client companies' usage conditions and business environment, and a certain number of cancellations is factored into budgets and business plans. If cancellations exceed expectations, this could reduce recurring revenue and affect financial position, business results, and cash flows. The Group strives to curb cancellations through accompanying support from customer success teams, but cancellations arising from external factors such as deterioration in client companies' business conditions cannot be fully controlled.

The applications provided by the Group are built on the cloud and are highly dependent on communication networks and infrastructure. If a system failure or network disconnection occurs due to a major program defect, natural disaster, unauthorized access, or other cause, this could damage the Group's social credibility and affect its financial position and business results. The Group prepares for such failures by enhancing server environments, strengthening security, and building system management structures, but it is difficult to completely eliminate unpredictable troubles.

There are foreign-currency-denominated or exchange-rate-linked transactions involving cloud infrastructure provided by overseas operators such as AWS, as well as web advertising and business software tools, and when the yen depreciates, costs such as cloud infrastructure usage fees (cost of sales) and advertising expenses, etc. (selling, general and administrative expenses) increase. The Group strives to improve operational efficiency through optimization of its system configuration and to achieve continuous cost reductions, but it is difficult to completely avoid exchange rate fluctuation risk arising from the macro environment. Yen depreciation exceeding expected levels could adversely affect the Group's financial position and business results.

Recruiting and developing excellent personnel is a key challenge for business expansion, but if hiring stagnates or internal personnel attrition progresses, this could lead to a decline in sales activities toward new customers and a decline in service levels for existing customers. Competition for talent in the IT and SaaS industries is intense, and there is a risk that it will become difficult for the Group to secure personnel at the level it requires. The Group is undertaking initiatives such as improving internal engagement using its own service "TUNAG," but it is also significantly affected by trends in the external labor market.

As a personal information handling business operator, the Group is obligated to comply with related laws and guidelines such as the Act on the Protection of Personal Information. If personal information is leaked, falsified, or improperly used, this could damage the Group's social credibility and give rise to liability for damages, thereby affecting its financial position and business results. In addition, in the platform business, if service users engage in inappropriate conduct such as posting content that violates laws or public order and morals, there is a risk that the Group could be held accountable as a provider of the trading venue. The Group addresses these risks through obtaining the Privacy Mark and ISO/IEC 27001:2022 certification and thorough internal training, but risks of stricter regulations or unforeseen violations remain.