IPS HOLDINGS CO.,LTD.

The Group has entered into the "SAP Japan PartnerEdge Channel Agreement VAR" with SAP, and the ERP Implementation Business constitutes a core business. If contract terms are amended or the contract is terminated for any reason, this could have a material impact on business performance. Note that this agreement is non-exclusive, and there are also domestic competitors that have concluded similar agreements.

In FY2025 (ended June 2025), SAP product-related sales accounted for 78.3% of the ERP Implementation Business's net sales, and the Maintenance & Other Business is also related to SAP ERP, indicating an extremely high degree of dependence on SAP products. If SAP products lose market competitiveness or SAP fails to adequately respond to new product development, this could have a material impact on the Group's business performance. No specific diversification measures against concentration risk on a particular vendor are disclosed at this time.

As SAP ERP penetration in the domestic market progresses, competition with competing partner companies that have concluded similar VAR agreements may intensify. Because the agreement is non-exclusive, if the Group is unable to maintain differentiation, there are concerns about the loss of order opportunities and deterioration of profitability due to price competition. The annual securities report does not describe specific competitive countermeasures.

In ERP implementation support, on-schedule cutover (completion and delivery) is required, and if the delivery date is extended due to the Group's responsibility, this will affect business performance. Given the nature of contract-for-work agreements, construction period delays carry the risk of additional costs and deterioration of client relationships. The annual securities report does not describe a specific management system for delay prevention.

As a contractor, the Group bears warranty liability for portions independently developed by the Group after cutover, and if a significant defect occurs, this could affect business performance. If issues arise in system development requiring remediation or damages, this carries the risk of financial burden and damage to customer trust. The annual securities report does not describe specific countermeasures such as provisions or insurance for defect risk.

Management recognizes that developing, securing, and retaining skilled engineers is essential for advancing the ERP Implementation Business, both in terms of service quality and development capability. If the necessary personnel cannot be secured, business development may be constrained, and particularly during phases of business expansion, shortages in the quality or quantity of personnel could become a constraint on growth. The annual securities report does not provide specific details on recruitment, training, or retention measures.