JUSTSYSTEMS CORPORATION

The software business has a high level of fixed costs such as personnel expenses and a high marginal profit ratio, giving it a structure in which fluctuations in net sales have a greater impact on profit compared with other industries. If the technologies and know-how currently held become obsolete due to rapid technological innovation, this could have a material impact on business results and financial condition. The Group continues to plan and develop new products and services for both individual and corporate customers, taking a policy of avoiding dependence on a single product.

It takes a certain amount of time for new products and services to generate sufficient revenue, and sales may become sluggish due to misjudgment of the market, intensifying competition, or inadequate internal systems. In such cases, there is a risk that the investment required for development cannot be recovered, affecting business results and financial condition. While the Group's policy is to focus on acquiring new customers, the lead time to monetization is a financial risk factor.

If the Company is sued by a third party for infringement of intellectual property rights, it may become necessary to discontinue the provision of products and services or pay damages. In addition, if the Group's claims against third-party infringement of its own intellectual property rights are not upheld, there is a risk that its competitive advantage could be undermined. Furthermore, unforeseen circumstances such as the bankruptcy of a licensor could make it difficult to continue using licensed intellectual property rights.

In its businesses for individuals and corporations, the Group holds personal information and confidential information for a large number of customers, and there is a risk that information systems could be halted or information lost, leaked, or falsified due to disasters, software defects, computer virus infections, unauthorized access, and the like. Should such an event occur, it could disrupt business operations and affect business results and financial condition. The Group implements appropriate security measures and stable operation measures utilizing information systems.

Natural disasters such as earthquakes and typhoons, or the spread of serious infectious diseases, could cause human and physical damage as well as the suspension of information systems and network failures, disrupting business operations. As part of its BCP, the Group is working to implement remote work for employees and promote the use of various systems. In addition, the Group regards climate change as an issue and is considering initiatives such as CO2 reduction activities that have high effectiveness and cost efficiency.

If an event occurs that violates laws and regulations, there is a risk of loss of social credibility, litigation, and liability for damages, which could affect business results and financial condition. The Group has established compliance-related rules and a code of conduct, has developed a management framework for its internal control system, and is working to instill and enhance compliance awareness throughout the Group.

There is an ongoing need to hire engineers capable of responding to rapid technological innovation and to develop personnel with diverse strengths to compete successfully in the market. If hiring and development do not proceed as planned, this could disrupt business operations and affect business results and financial condition. Amid intensifying competition to acquire IT talent, securing excellent personnel has become an important management issue for the Group.

If a significant decline in land prices or similar events occur, the application of accounting standards related to impairment of fixed assets could affect business results and financial condition. If the book value of fixed assets is determined to exceed their recoverable amount, an impairment loss must be recorded, which directly affects net income for the period and net assets.

KEYENCE CORPORATION holds 43.96% of the Company's total issued shares, and the Company is an equity-method affiliate of KEYENCE CORPORATION. If there is a future change in KEYENCE CORPORATION's management policy that results in a significant change in its voting rights ownership ratio in the Company, this could affect the Group's business operations. The Company maintains a policy of continuing to ensure sufficient mutual independence.