DreamArts Corporation

The domestic SaaS market has multiple competitors, and against the backdrop of the spread of cloud adoption, new entrants of various scales are expected. Some competitors possess greater capital strength, technological capability, sales capability, and customer base than the Group, and there is a risk that intensifying price competition could relatively weaken the Group's competitiveness. The Group seeks to build value-added branding through strengthening product development capabilities and continuous product improvement and service quality enhancement.

The IT industry undergoes rapid technological innovation, and if unforeseen technological innovation causes abrupt changes in the internet environment, the Group may face difficulty responding appropriately to changes in the business environment. Additional investment required for new technological elements may also affect financial condition and operating results. The Group is working on the development, improvement, and sophistication of products and services utilizing AI technology, including promotion of the new AI utilization concept "DAPA (DreamArts Practical AI)."

The Group's services are provided via the internet and are highly dependent on communication networks and infrastructure. If a large-scale system failure occurs due to natural disasters, accidents, program defects, unauthorized access, or other causes, service provision could be halted, potentially affecting operating results and financial condition. As countermeasures, the Group utilizes the cloud platforms of Amazon Web Services and Microsoft to implement redundant backup management and enhanced security, and has established a cloud monitoring center operating 24 hours a day, 365 days a year.

In the course of its business, the Group handles information assets such as personal information and confidential information of client companies, and if information is leaked externally due to cyberattacks, computer virus infection, employee error, natural disasters, or other causes, there is a risk of claims for damages or litigation. Information leakage could have a significant impact not only on financial condition and operating results but also on the company's social credibility. The Group has established a comprehensive information security management framework, including obtaining ISMS third-party certification, establishing the "Dream Arts Security Charter," and setting up a "Security Committee" reporting directly to the president.

The Group's services are built on Microsoft Azure, Amazon Web Services, and FJcloud-V (Niftycloud), and if these cloud platforms experience market contraction, significant specification changes, or changes in management strategy, this could affect operating results and financial condition. The Group maintains a structure of distributing and combining use of multiple cloud platforms to reduce dependency risk on any specific environment, but dependency on the major platforms remains high.

It is difficult to accurately investigate and grasp the status of third parties' intellectual property rights, and if the Group's services are alleged to infringe third-party intellectual property rights, depending on the content and outcome of litigation and the amount of damages, this could affect financial condition, operating results, and the company's social credibility. In addition to actively acquiring patent and trademark rights, the Group is working on investigations in collaboration with outside experts, awareness-raising activities for officers and employees, and strengthening internal management systems.

The Group has adopted a subscription-based recurring revenue model, and continuous growth requires, in addition to acquiring new customers, preventing churn among existing customers and improving unit prices. If economic deterioration leads client companies to curtail IT investment, or if churn exceeds expectations, this would directly affect operating results and financial condition. The Group is working to formulate and execute optimal marketing activities and sales strategies, as well as to improve product quality.

Continuous business expansion and mid- to long-term enhancement of corporate value require the recruitment, development, and retention of excellent talent, but if the Group is unable to secure necessary personnel as planned, or if talent attrition occurs, this could affect operating results and financial condition. This is set against a backdrop of intensifying competition for talent in the IT industry. The Group is promoting measures to accommodate diverse working styles, such as enhancing training curricula, operating a fair personnel evaluation system, remote work, and full flextime systems.

The Group has established a consolidated subsidiary in Dalian, China, to which it outsources part of its product development, testing, and support operations, but if changes occur in China's domestic political and economic conditions, the enactment or revision of laws and regulations, or social unrest such as terrorism, conflict, or riots, this could disrupt business operations. Furthermore, natural disasters, outbreaks of infectious disease, sharp exchange rate fluctuations, or foreign exchange restrictions could also affect operating results and financial condition. The Group is working with local accounting firms and law firms to respond appropriately.

Founder and Representative Director & President Mr. Takaaki Yamamoto plays an important role in determining and executing management policy and business strategy, and if any unforeseen circumstances befall him or circumstances arise that force him to step down, this could affect financial condition and operating results. In addition, he and his asset management company hold 33.1% of the company's shares, creating a concentration risk in the shareholder composition. The Group is working to establish a management structure that eliminates excessive dependence on a specific individual, through information sharing at the Board of Directors and division head meetings and through the organization of division of duties.