Appier Group, Inc.

The Group stores, transfers, and processes user data through its AI platform, and is required to comply with increasingly stringent personal information protection regulations worldwide (the amended Act on the Protection of Personal Information, data protection laws in various countries, etc.). Responding to regulatory changes may require substantial expenses, and could also lead to changes in demand for and awareness of AI marketing solutions, potentially impairing the Group's business growth capability. While measures such as establishing compliance systems and conducting training are being implemented, the Group states that complete elimination of this risk is difficult.

The Group's AI platform handles users' personal information and behavioral data, exposing it to the risk of information leakage or data loss due to unauthorized access or cyberattacks. In addition to the increasing sophistication and diversification of attack methods, the risk of becoming a target may also increase as market share expands, and if such an incident occurs, it could result in significant impacts such as damages, fines, reputational damage, and loss of customers. While measures such as the use of highly secure external services and the establishment of internal rules are being implemented, the Group states that complete elimination of this risk cannot be guaranteed.

The AaaS market in the marketing domain is relatively new, and competition with existing and new competitors is expected to intensify further going forward. Competitors may possess abundant financial resources, technological capabilities, brand recognition, and customer bases, and intensifying competition poses risks of decreased orders, declining market share, and downward pricing pressure. The Group's competitiveness depends on many factors, including AI provisioning capability, effectiveness, support quality, and brand recognition, and there is uncertainty regarding the Group's ability to maintain these.

The majority of the Group's revenue is recurring revenue from existing corporate customers, and maintaining the monthly customer churn rate and monthly customer revenue churn rate is a key factor in business performance. Acquiring new customers requires substantial sales and marketing expenses, and the Group currently has a high degree of dependence on the e-commerce and digital content industries, with challenges such as differentiation and regulatory compliance in expanding into other industries. If customer retention and acquisition do not proceed as expected, it could adversely affect the Group's business, results of operations, and financial condition.

AaaS solutions are evolving rapidly, and if the Group fails to keep pace with technological advances such as AI, the Group's products may lose their competitive advantage, adversely affecting the maintenance and expansion of the customer base. In addition, even if there is no issue with the Group's own products, there is a risk that declining trust in other companies' AI-related products could adversely affect the growth potential of the AI market as a whole. The Group continues to improve the quality of existing products and develop new products, but responding to technological innovation is key to the success or failure of the business.

The Group continues to make substantial research and development investments, and recorded software development assets of ¥11,397 million as of the end of the consolidated fiscal year under review. Due to the nature of the time lag between the point of investment and the point of service launch, customer demand for developed or improved services may fall significantly short of initial expectations, and if impairment is recognized, it could adversely affect the Group's results of operations and financial condition. There is also an impairment risk associated with goodwill of ¥8,426 million.

As of the end of the fiscal year ended December 2025, the Group held tax loss carryforwards of ¥19,137 million, and has recorded deferred tax assets against a portion of this amount. If it is determined that recoverability is not assured due to significant changes in business performance, or if tax reform (including changes in tax rates) or accounting standard revisions occur, deferred tax assets may be reduced, potentially affecting the Group's results of operations and financial condition. Given the large scale of the tax loss carryforwards, there is a risk that impacts on financial metrics could materialize depending on business performance trends.

The Group operates in 15 countries and regions, including Northeast Asia, the United States, EMEA, and Greater China, and increased geopolitical risk or a global economic downturn could lead to reduced demand and impaired new customer acquisition in key sales regions. This entails responding to differences in laws, tax systems, data regulations, culture, and business customs across countries, as well as difficulties in securing local talent and foreign exchange fluctuation risk. If the Group is unable to adequately address these risks, it could significantly adversely affect the realization of its global expansion strategy as well as its results of operations and financial condition.

The Group's products depend on external cloud servers such as Amazon Web Services and Google Cloud, and if services are suspended due to system errors, natural disasters, cyberattacks, contract termination, or other causes, this could result in damages to customers, reputational harm, and additional cost burdens. If migration to a new provider requires significant time and expense, there is also a risk that the platform could become unusable for an extended period. While measures such as regular data backups and continuous monitoring are being implemented, complete elimination of risks arising from external dependence is difficult.

Competition for recruiting AI scientists and software engineers is intense, and there is no guarantee of continued talent acquisition even within the recruitment base centered on Taiwan. In addition, Representative Director and CEO Yu Zhihan (Alex Yu) plays a central role in business strategy, corporate culture, and AI algorithm development, and unforeseen circumstances affecting him or other members of management, or the departure of key personnel, poses a risk of adverse effects on the business and results of operations. While the Group is strengthening its organizational structure through information sharing and delegation of authority via the Board of Directors and management meetings, the risk of dependence on specific individuals remains.