IPS, Inc.

The Japan-Philippines-Singapore international submarine cable "Candle," scheduled for completion in March 2028, represents the largest capital investment in the Group's history, to be funded through phased borrowings. If construction is interrupted, delayed, or left incomplete, or if the sales plan is delayed, this could have a material impact on the Group's financial position and results of operations. As of the end of March 2026, the interest-bearing debt ratio stood at 24.8% and is expected to rise further going forward, entailing a risk of deteriorating financial soundness.

InfiniVAN holds a Provisional Authority (provisional license) under the CPCN required for the Philippine Domestic Telecommunications Business, but if the renewal of the PA is not approved, this could impede the Group's expansion of its International Telecommunications Business. In addition, the company has applied to the Philippine Congress for an extension of the deadline to comply with the stock offering obligation under R.A. 10898 (requiring at least 30% within five years of commencing operations), and if a violation of the law occurs, there is a risk of revocation of VAS registration or the CPCN. Although the Group continues to file applications for renewal of licenses and permits, continuation of the business could become difficult depending on the judgment of the regulatory authorities.

Due to the evolution of transmission technology increasing the speed of existing telecommunications lines and the installation of new lines, international telecommunications line rates per 1Mbps have been on a declining trend year by year. As the Company procures lines under long-term IRU contracts, there is a risk that it may become difficult to secure new contracts at prices below the procurement cost, as well as a risk of obsolescence of held lines. In addition, a notable shift among CATV operators in the Philippines from long-term IRU contracts to short-term lease contracts is a concern that could affect the revenue structure.

The Philippine domestic telecommunications market is oligopolized by two major operators, PLDT, Inc. and Globe Telecom, Inc., and if these suppliers sell directly to the Company's CATV operator customers, competition will intensify. Furthermore, the entry of the third mobile operator, Dito, and the strengthening of competitors' competitiveness, such as the joint use of telecommunications cables with Converge ICT Solutions, Inc., are advancing, raising the possibility that the Group could be placed at a disadvantage in price competition, making it difficult to acquire and retain customers. Deregulation of foreign capital restrictions is also expected to intensify competition through the entry of other foreign capital.

Line procurement for the International Telecommunications Business is concentrated among four companies: Telstra International Limited, Telekom Malaysia Berhad, PLDT, Inc., and Globe Telecom, Inc., and if supply is suspended, prices are raised, or quality issues occur, this could impede service provision. The call center system "AmeyoJ" used in the Domestic Telecommunications Business depends on a contract with Drishti-Soft Solutions (now Exotel Techcom), which can be terminated at any time with three months' notice, leaving no alternative means. If these supplier risks materialize, this could affect the Group's financial position and results of operations.

The Group procures and sells telecommunications services overseas, including in the Philippines, and fluctuations in exchange rates between the time of contract conclusion and settlement affect earnings. As of the end of March 2026, the Group held lease investment assets related to IRU transactions of ¥5,277 million and foreign-currency-denominated borrowings of ¥5,478 million, and revaluation due to exchange rate fluctuations directly affects the financial position. Fluctuations in the yen conversion rate used in preparing the consolidated financial statements may also affect business performance.

Demand for voice call services, IPSP's core offering, has been declining due to the spread of chat, email, SNS, and other alternatives, with voice communication accounting for approximately 30% of Domestic Telecommunications Business sales in the fiscal year under review. Call center operators are also advancing their shift toward chatbots and similar technologies, and the voice communication market is expected to shrink over the medium to long term. Although the Company is advancing a shift in its business structure toward call center systems and data center colocation services, among others, if this transformation does not proceed as expected, it could affect the Group's financial position and results of operations.

The Group operates eight group companies in the Philippines, and natural disasters such as typhoons and volcanic eruptions causing telecommunications system failures or paralysis of urban functions, as well as deteriorating security due to terrorist activities by anti-government organizations, could affect business activities. There is also a risk that rising wage levels could make it difficult to secure desired personnel, and issues with crude oil procurement and rising prices due to the impact of the situation in the Middle East have also arisen. If a submarine cable is severed due to an earthquake or accident, there is no detour route available, which could impede service provision and require a considerable amount of time for restoration.

SLACC is a joint venture between the Company and the chairman of Medical Corporation Shoyukai (with the Company holding approximately 50.5% of voting rights), and since selection of medical equipment and physician training, among other matters, are outsourced to the Shoyukai group, continuation of the Medical & Healthcare Business could become difficult if the joint venture relationship is dissolved. The long-term safety of LASIK (myopia correction surgery) has not been fully proven, and in the event of a medical accident, there is a risk of reputational decline and liability for damages. Although the Health Checkup & Screening Center SDPCC (SHSC) achieved quarterly profitability in the fourth quarter of 2025, annual profitability has not yet been achieved, and a risk remains regarding the recovery of upfront capital investment.

Representative Director Koji Miyashita plays an important role in formulating the Group's management policies and strategies and in driving business promotion, and if any unforeseen event were to occur affecting him, this could affect business development and results of operations. As of March 31, 2026, the Company on a standalone basis had only 31 employees, a small-scale organization, and its internal management system remains commensurate with this scale. If the organizational development and expansion of the internal management system in line with business expansion do not proceed smoothly, this could impede governance across the Group as a whole.