Cybozu, Inc.

Technological innovations such as the Web, the internet, cloud computing, AI, and machine learning are advancing rapidly, and industry standards and user needs are also changing quickly. If the Group is slow to respond to new technologies and needs, the products, services, and cloud service environment it provides may become obsolete, potentially leading to a decline in competitiveness relative to competitors. The Group is addressing this through the continuous development of new products and services.

The Group provides products, services, and cloud services that depend on the internet environment. If a system failure occurs due to natural disasters, power outages, war, terrorism, malware, unauthorized access, or similar causes, it could have an extremely significant impact on the cloud business. It may also be difficult to fully secure alternative sales or service delivery routes, raising concerns about the impact on performance. The Group continuously implements measures to ensure the stable operation of its systems.

As business expands, hiring and developing specialized personnel in each business is essential. If intensifying competition for talent makes it difficult to hire excellent personnel, or if a significant number of current employees leave the Group, this could affect its business, operating results, and financial condition. While the Group does not currently recognize any material impediments, it continues to strengthen its recruitment and training systems.

For affiliated companies in which the Group has invested, recoverability may decline due to changes in the business environment. In addition, due to the low liquidity of these investments, business restructuring may not be achievable at the desired timing or method, potentially resulting in a partial or total loss on the investment or the need for additional capital contributions, which could affect operating results.

In global business expansion, unavoidable risks exist, including changes in laws and regulations of various governments, changes in social, political, and economic conditions, exchange rate fluctuations, infrastructure failures, tax system changes, transfer pricing taxation, protectionist trade regulations, credit risk arising from different business customs, difficulty in securing personnel, and the outbreak of disease. There is also a possibility that the recovery of invested capital may not proceed as planned, or that withdrawal from a market may become necessary. The Group is promoting its global expansion while recognizing these risks.

There are limited means to prevent third parties from imitating the concepts and UI of business software products. If illegal copying or the distribution of imitation products occurs in overseas markets (particularly in China and the Asia region), or if another company registers a trademark for the Group's brand, this could have a significant impact on sales activities, business performance, and financial activities. In addition, if a change in the license of embedded OSS or infringement of third-party rights is discovered, product replacement or modification may become necessary. The Group works to protect its intellectual property rights as much as possible through trademark and patent applications.

Legal frameworks concerning security, personal information protection, and intellectual property protection related to cloud services are being developed both in Japan and overseas, but their interpretation has not yet been established. Such legal developments could expand the scope of business operators' responsibilities or impose business regulations, potentially constraining the Group's business. The Group continues to closely monitor trends in legal amendments related to software license agreements and cloud service terms.

If trade secrets, customer information, or similar data are leaked, the Group's credibility could be damaged, potentially affecting its business development and performance. In particular, the destruction, loss, or leakage of data in cloud services has a direct impact on business profitability, and deficiencies in compliance with the Personal Information Protection Act or in fulfilling information disclosure obligations for consumer protection could also affect profitability. The Group strives to improve security levels, enhance information disclosure, supervise outsourcing partners, and evaluate internal controls.

Lawsuits seeking injunctions against sales or damages on the grounds of infringement of intellectual property rights may be filed against the Group's products, technologies, or services. As disclosed on July 18, 2025, a lawsuit seeking damages has been filed alleging that the Group's products infringed a patent, and the Group is responding to this through its legal counsel. Particularly in the United States and elsewhere, litigation costs and damages awards can be substantial, potentially having a significant impact on the Group's financial condition and operations.