Fabrica Holdings Co., Ltd.

Dependence on Media4u Co., Ltd., which accounts for 61.7% of consolidated net sales, is extremely high, and if changes occur in the business strategies of its clients or if contracts are curtailed, the impact on the Group's overall performance could be substantial. Continued transactions are maintained through the trust built via the core service "Media SMS," but the risk of transaction fluctuations due to unforeseen factors cannot be eliminated.

The domestic corporate SMS delivery market, which is the Group's core business, is expanding rapidly, but there is a risk that market expansion may not proceed as anticipated due to the introduction of new legal regulations, technological innovations that could replace SMS, or changes in mobile carriers' policies. In addition, if competition for user acquisition intensifies due to new entrants or the expansion of existing competitors' services, this could affect the business and performance.

Media4u Co., Ltd. provides SMS delivery services through direct connection agreements with the four major mobile carriers—NTT DOCOMO, KDDI, SoftBank, and Rakuten Mobile—but if there are changes in the carriers' management policies, increases in SMS transmission unit prices, or an inability to continue contracts, the business foundation could be significantly impaired. At present, no factors that would hinder contract continuation have arisen, but this must be continuously monitored as a supplier concentration risk.

Through corporate SMS delivery services and SaaS services, the Group handles information belonging to numerous corporate clients and general users, making it a potential target for cyberattacks such as unauthorized access, malware, and DDoS attacks. As attack methods become increasingly sophisticated and complex year by year, if an attack occurs that exceeds the Group's security measures, service outages, information leaks, or data tampering could occur, potentially leading to liability for damages, administrative penalties, or brand damage. As countermeasures, the Group has implemented firewalls, access authority management, and regular vulnerability assessments.

The Group holds personal information through the provision of internet-related services and is subject to obligations under the Act on the Protection of Personal Information. If information leakage or misuse occurs due to intentional or negligent acts by related parties or business partners, this could result in legal liability including claims for damages, as well as damage to the credibility and brand of operated sites. Measures such as establishing personal information protection regulations and raising awareness through internal training have been implemented, but the risk cannot be completely eliminated.

In the internet-related market, where the pace of technological innovation, including generative AI, is extremely rapid, prompt responses to new technologies are required. Unexpected technological innovations may result in system development costs, and if the Group is unable to respond appropriately and in a timely manner to changes in the market environment, the competitiveness of its services could relatively decline. There is also a risk that the imperfect accuracy of AI technology outputs and tightening regulations such as the EU AI Act could lead to increased response costs and business constraints.

The Group's websites are heavily dependent on customer acquisition via search engines, and if SEO effectiveness declines due to algorithm changes made by search engine operators, customer acquisition capabilities could decrease significantly. Furthermore, the spread of information search services utilizing generative AI is changing users' information-gathering behavior, and the risk of decreased traffic via conventional search engines is becoming apparent. If the Group is unable to appropriately respond to these changes, it could affect the business and performance.

The Group has a policy of utilizing M&A to expand its business domains, but if the initially expected investment effects are not achieved due to changes in the business environment after M&A execution, the occurrence of contingent liabilities, or issues that were not identified during prior due diligence, impairment losses on fixed assets such as goodwill may occur. Risk avoidance measures through due diligence and examination of investment recovery potential are conducted prior to execution, but risks arising after the fact cannot be completely eliminated.

Representative Director, President and CEO Masato Taniguchi has played an extremely important role in overall management, from building the business foundation since the company's founding to promoting new AI and DX businesses, and if he becomes unable to perform his duties, this could have a material impact on the business and performance. Efforts are being made to reduce dependence through information sharing and delegation of authority at board meetings and regular meetings, but dependence on him remains high at present.

The Company and Media4u Co., Ltd. are registered with the Ministry of Internal Affairs and Communications as telecommunications carriers and are obligated to comply with the Telecommunications Business Act and related ministerial ordinances. If a violation of the Act or related orders or dispositions is found to impede the public interest, the operator registration could be revoked, posing a risk that the foundation of the SMS delivery business could be lost. At present, no matters falling under grounds for revocation have arisen, but continued maintenance of a legal compliance framework is essential.