USS Co.,Ltd.

The USS Group is subject to legal regulations such as the Secondhand Articles Dealers Act and environmental/recycling-related laws, and there is a possibility that new legal regulations not currently foreseeable may be established in the future. If pointed out by regulatory authorities, business activities may be restricted, potentially affecting business performance. Although every effort is made to secure rights through legal procedures, the risk of regulatory changes cannot be completely eliminated.

Soliciting new members, retaining existing members, and promoting auction participation are core measures for the USS Group, but if competitors offer superior services or major exhibitors choose other sales channels, these measures may be hindered. Deterioration of reputation due to the conduct of officers or employees could also cause member attrition. Since erosion of the member base directly leads to a decrease in auction trading volume, this risk is fundamental to the business.

The Auto Auction business is heavily dependent on the procurement of vehicles for exhibition, and if vehicle supply becomes insufficient, it may become impossible to hold auctions at the optimal scale. Currently, procurement relies to some extent on major exhibitors, and there is a risk that changes in conditions such as fees may affect the number of vehicles these dealers put up for auction. There is no guarantee that the necessary number of exhibited vehicles can be secured on a continuous basis, raising concerns about the impact on the business and results of operations.

The USS Group has experienced declines in the auction contract conclusion rate (the proportion of exhibited vehicles for which sales contracts were concluded) in the past. A decline in the contract conclusion rate could dampen exhibitors' willingness to participate, leading to a vicious cycle that reduces the number of vehicles exhibited. Since the contract conclusion rate is affected by market conditions and the competitive environment, continuous monitoring and countermeasures are required.

Japan's automobile distribution market is mature with little room for significant growth, and if the USS Group is unable to expand its market share, this could lead to a decline in revenue and lower growth rates. Aggressive business expansion by competitors, mergers and alliances, or the establishment of new used-car distribution channels by automaker-affiliated sales companies could become a strong competitive pressure. Intensifying competition also carries the risk of undermining the advantage of the fee and pricing levels set by the USS Group.

In the fields of on-site auctions and the provision of auction information via the internet, rapid technological innovation and changes in customer demand are characteristic of the market, and the response to these will determine the USS Group's future success. If competitors broadly adopt advanced e-commerce technologies, the USS Group may be forced to incur substantial expenses to respond, straining its financial resources and requiring changes to its business plans. There is a risk that the continuous provision of competitive services cannot be guaranteed.

The USS Group is pursuing business expansion through the establishment of new auction venues and the acquisition of or alliances with peer companies, but there is a possibility that securing members and exhibited vehicles at newly established or acquired venues may be insufficient. In acquisitions and mergers, there is a risk that uncertain factors such as contingent liabilities, off-balance-sheet liabilities, and defects in rights may remain, and there are also concerns about the increased management burden accompanying the expansion and increasing complexity of the organization. If difficulties arise in obtaining necessary licenses and permits, plans may be delayed or cancelled.

Regarding goodwill acquired through business acquisitions and other assets held by the USS Group subject to impairment accounting, if it is determined that the book value cannot be recovered through future cash flows, an impairment loss will be recognized. The recognition of an impairment loss could directly and adversely affect the results of operations and financial position. Changes in the future profitability of held assets are a key factor in impairment risk.

The administrative operations of consolidated subsidiaries are centrally managed by the Company's Head Office, and if a system failure occurs, it could affect operations as a whole. Additionally, due to the nature of membership-based auctions, the Group holds member information including personal data, and in the event of a leak, this could damage confidence in the USS Group and affect business performance. Although measures such as data backups have been implemented, the risk cannot be completely eliminated.

If natural disasters such as earthquakes, typhoons, and tsunamis, or fires occur, this could have a material impact on the business, financial position, and results of operations due to interruption of operations at facilities, inability to provide services, and substantial recovery costs. In the event of a pandemic, there is a risk that in-person services may be suspended and auctions may be forced to close or halt, and there are concerns about a sharp contraction in domestic auction transactions due to sluggish new car sales and a decline in used car exports. Furthermore, there is a possibility of lost transactions and difficulty in collecting receivables due to deterioration in the financial condition of members.