Yappli,Inc.

The Company currently recognizes no equivalent competitors in the no-code app development and operation platform market for large enterprises; however, if competitors offering similar services enter the market amid intensifying competition, there is a risk that the Company's competitive advantage could be lost. As countermeasures, the Company is promoting continuous product enhancement, strengthening entry barriers through patent acquisition, enhancing collaboration with external solutions, and building partner alliances.

If advances in AI technologies, including generative AI, cause companies to shift the focus of their IT investment toward AI-related areas, investment budgets for app development and digital experience enhancement could be curtailed or reallocated. While no material impact on order volume or price levels has occurred to date, failure to appropriately respond to changes in the market environment and investment trends could affect the Company's business and financial results. The Company is also advancing the use of new technologies, including generative AI, in its products, but securing security measures, data management systems, and specialized personnel also poses challenges.

The domestic mobile app market is characterized by rapid technological innovation, and accurately grasping technology trends and swiftly reflecting them in products is essential to maintaining competitive advantage. If the Company fails to respond appropriately to technological innovation, or if innovative technologies or services beyond expectations emerge, the Company's competitiveness could decline, affecting its business and financial results. As a countermeasure, the Company strives to keep abreast of technology trends through participation in various events and seminars and regular in-house study sessions.

The Company handles personal information entrusted to it by client companies through Yappli, and it is difficult to completely eliminate the risk of leakage or misappropriation of personal information due to malicious hacking, computer viruses, or other causes. Should an information leak occur, in addition to loss of social trust, it could have a material impact on the Company's business and financial results. As countermeasures, the Company has obtained Privacy Mark certification, formulated a basic information security policy, strictly manages access privileges, conducts regular security audits, and provides employee training.

The mobile apps provided through the Company's services require application to and approval from the platforms of Apple Inc. and Google LLC as a critical precondition, and the actions of these platform operators or significant specification changes could directly affect the Company's business development and operations. The Company's high degree of dependence on these external platforms means that a delayed response to specification changes could affect its business and financial results.

Since FY2023 (ending December 2023), the Company has shifted from an advance investment-focused growth strategy to a balanced growth strategy, achieving an operating margin of 14.6% in FY2025 (ending December 2025). For FY2026 (ending December 2026), the Company plans a certain scale of investment, primarily in advertising expenses and personnel costs, and manages investment efficiency with a target LTV/CAC ratio of 4 to 6 times; however, if advance investments fail to produce the expected results due to abrupt changes in the business environment or other factors, this could affect the Company's business and performance.

The Company Group's business consists of a single segment, the App Operation Platform Business, making it a structure that is susceptible to market changes. Should circumstances arise in which the Company's ability to respond is limited, such as continued overall market contraction, this could affect the Company's business and financial results. While the Company maintains a policy of flexibly responding to market changes, business diversification has not been undertaken at this time.

Continuous growth of the Company Group requires the placement of excellent personnel across various areas, and if personnel development and recruitment do not proceed smoothly, this could affect the Company's business and financial results. In particular, the utilization of new technologies, including generative AI, requires personnel with specialized expertise, and intensifying competition for recruitment is a concern. The Company is working on both developing existing personnel and recruiting excellent talent.

As the Company's business is primarily domestic, foreign exchange impact is considered relatively limited; however, in a yen depreciation phase, deteriorating business conditions for existing and target customers could lead to increased cancellations and adversely affect the acquisition of new customers. In addition, since server costs and some in-house tools are affected by exchange rates, expenses may increase as the yen depreciates.

The Company Group is subject to regulation under various laws, including the Telecommunications Business Act, and if privacy-related legislation is enacted or new laws regulating internet-related businesses are established or strengthened in Japan going forward, the Company's operations could be partially restricted, affecting its business and financial results. While the Company currently perceives no heightened regulatory tightening affecting its business, this warrants ongoing monitoring as a future risk given the international trend toward digital regulation.