NEXYZ. Group Corporation

In the Embedded Finance Business, while adoption is increasing among multi-store enterprises and large-scale facilities, if such large-scale contracts are cancelled in succession due to an economic downturn or other factors, this could have a material impact on business performance. The energy-saving equipment market also carries the risk that price competition and market development could progress more rapidly than expected, given the presence of numerous competitors. While the Company addresses this by selecting business partners with proven track records, its response to a deterioration in the external environment remains limited.

For NEXYZ.ZERO, the Company records a cancellation adjustment reserve based on historical cancellation rates to cover expected future payments related to securitized receivables arising from customer cancellations. If cancellation rates rise due to an economic downturn or other factors and actual refunds exceed the amount of the recorded reserve, this could have a direct adverse effect on business performance. Because the reserve calculation relies on historical results, there is a risk of delayed response to abrupt changes in the environment.

In the Embedded Finance Business, procurement and construction costs related to equipment installation are funded through the securitization of receivables with financial institutions, meaning significant fluctuations in market interest rates directly affect funding costs. In addition, there is a risk that procurement prices for key products may rise due to exchange rate fluctuations or surging raw material prices. While the Company works to control these risks through partnerships with multiple banks and the use of securitization, it cannot completely avoid the impact on business performance in the event of a sharp rise in interest rates.

NEXYZ.ZERO handles a variety of products, including LED lighting, commercial refrigerators, air conditioning, and agriculture-related equipment. Should a serious defect or accident occur with any of these products, the Group would need to respond, potentially causing temporary disruption to sales activities. Furthermore, if the service image is significantly damaged due to defects or reputational harm, there is a risk that the impact on business performance could be prolonged. While the Company addresses this through the selection of reliable, proven business partners, the risk cannot be entirely eliminated.

In the Media & Promotion Business, since October 2022 the Company has offered Axel Japan, a flat-rate monthly promotional tool featuring celebrity endorsements, with the engagement of numerous entertainers and talent serving as a key differentiator. However, if such engagements cannot proceed as planned due to reputational damage or the departure of celebrities, the competitiveness of the service could decline, potentially affecting business performance. Securing alternative celebrities and establishing robust contractual arrangements remain challenges.

Advertising and sales promotion expenses of companies supported by the Media & Promotion Business tend to be reduced during economic downturns, and if an event occurs that affects the internet advertising market as a whole, this could impact the Group's business results and financial position. While internet advertising has grown to become a medium ranking after television and newspapers, it remains a highly economically sensitive expense category, making business performance susceptible to macroeconomic trends.

The Group makes extensive use of the names "Nexyz" and "Brangista" in the trade names and service names of its consolidated subsidiaries. If trouble or misconduct occurs at some Group companies or services, or if defamatory content spreads on social media, this could lead to a decline in the Group's overall brand image and loss of trust, potentially affecting business performance. Establishing a cross-group brand management framework remains an important challenge.

In the internet industry, new technologies and services are introduced frequently, and the Group responds by monitoring industry trends and incorporating relevant developments into its own services as appropriate. However, if the environment surrounding the internet changes rapidly, delays in response could cause services to become obsolete and lose competitiveness, while also requiring substantial additional investment, potentially affecting business performance.

Sales staff account for approximately 70% of the Group's total employees, and sales activities involving direct visits and remote meetings from offices nationwide form the foundation of business expansion. If securing personnel becomes difficult due to the declining birthrate, worsening labor shortages, or intensifying competition for hiring, this could lead to increased recruitment costs and rising labor expenses, potentially resulting in lost business opportunities and lower profitability. Rapid changes in the employment environment would have a particularly significant impact on a business model that relies heavily on sales capability.

The Group is a "personal information handling business operator" that handles customer personal information across a variety of services. Although it has established a robust security framework, including ISO/IEC 27001 certification and Privacy Mark certification, if personal information were to be leaked due to intentional external attacks or human error, this could result in loss of trust, litigation, and damage to the Group's brand image. In addition, business activities could be constrained by legal amendments or tightened regulations related to telemarketing, including the Act on Specified Commercial Transactions, the Act against Unjustifiable Premiums and Misleading Representations, the Consumer Contract Act, and the Antimonopoly Act.