BETREND CORPORATION

The Company's core business is internet and mobile-related services, and adaptation to the latest infrastructure such as generative AI and high-speed communications is considered essential for sustainable growth. If the Company falls behind in responding to technological innovation, or if the associated costs exceed expectations, this may affect its business and financial results. As a countermeasure, the Company is concentrating investment in the CRM domain for BtoC companies and seeking to maximize investment efficiency by flexibly utilizing external development assets and generative AI.

In recent years, the risk of service disruption or information leakage arising from sophisticated cyberattacks using AI, unauthorized access to databases, and unexpected system failures has increased. Should such incidents occur, they could lead to customer cancellations and a sharp rise in incident response costs, potentially affecting operating results. As countermeasures, the Company has obtained ISO/IEC 27001 certification and the Privacy Mark, and has implemented the latest cloud monitoring technology, strengthened rapid incident response systems, and established failover redundancy through multiple data centers.

The Company handles personal information relating to the members of its client companies, and in the event of an information leak, the loss of social trust and the incurrence of substantial expenses could affect its business and financial results. The Company holds the Privacy Mark (obtained September 2005) and ISMS certification (ISO/IEC 27001, obtained March 2014), and strives to maintain its protection framework through the development of personal information protection regulations and thorough employee training.

Competition is fierce in the SaaS market for marketing, and if new entrants with proprietary AI technology or innovative ideas enter the BtoBtoC CRM domain, price competition or failure to differentiate could affect the Company's business and financial results. The Company has established a certain level of competitiveness and market recognition in the BtoBtoC CRM domain, and is working to enhance its competitiveness through continued functional improvements and additional investment tailored to customer needs, as well as by offering high switching costs through system integration with external partners.

If the IT investment and marketing investment sentiment of client companies declines due to a deterioration in domestic and international economic conditions caused by factors such as the conflict in Ukraine, the shrinking of the domestic market due to population decline and the aging society with fewer children, or a prolonged weak yen, this could lead to sluggish acquisition of new customers or a decrease in orders from existing customers, thereby affecting the Company's business and financial results. The Company's business model is centered on corporate clients, and its performance is structurally influenced by trends in client investment.

The betrend business is subject to legal regulations such as the Act on the Prohibition of Unauthorized Computer Access, the Act on Regulation of Transmission of Specified Electronic Mail, and the Act on the Protection of Personal Information. If future enactment or amendment of regulations targeting internet-related businesses restricts part of the Company's operations, or forces new responses, this may affect its business and financial results. As a countermeasure, the Company has established a system for thoroughly gathering information in advance regarding legal regulations and sharing the collected information with management in a timely manner.

The Company's CRM services operate under a stock-type business model with automatic annual renewal, making the retention of existing customers and the expansion of transaction value essential for continued growth. If the businesses of existing customers do not grow, or if the Company's service level fails to meet customer requirements, the anticipated retention rate and transaction expansion may not be achieved, potentially affecting business results. As countermeasures, the Company is developing additional functions for Smart CRM Service utilizing member behavior history data, as well as providing customization and support tailored to individual needs.

If the Company is unable to sufficiently secure personnel with sales and systems skills or management capabilities, if personnel development does not proceed smoothly, or if specific employees playing central roles leave the Company, this may affect its business strategy and operating results. As of the end of the fiscal year under review, the number of employees was small at 61, and there is also a risk that offshore development may become unsustainable. As a countermeasure, the Company aims to improve employee retention by enhancing employee benefits, such as sports incentive payments and health improvement courses.

Hideaki Inoue, the founder and Representative Director and President, leads the Company's management based on his extensive experience and knowledge in the software industry. If, for any reason, he becomes unable to continue his duties, this may affect operating results and future business development. While efforts are underway to transfer his knowledge and know-how for responding to environmental changes to senior management, and to optimize the delegation of authority, the degree of dependence on him remains high.

The Company is promoting overseas expansion, primarily in the Asia region, as part of its growth strategy, but differing legal regulations, business practices, and exchange rate fluctuations in each country may pose risks. In particular, increased costs associated with compliance with personal information protection regulations in each country, as well as penalties resulting from non-compliance, could affect the Company's business and financial results. As countermeasures, the Company is advancing prior review of legal regulations and their implementation into systems in collaboration with influential local partners in the countries of expansion, and is also considering exchange rate hedging measures in line with the scale of its expansion.