Rentracks CO.,LTD.

The proportion of financial sector projects (cashing, credit card issuance, etc.) in the revenue of the Performance-Based Advertising Service Business remains at a high level of approximately 40% in FY2026 (ending March 2026). If orders from advertisers decrease due to regulatory tightening or environmental changes in this industry, it could have a material impact on the business and results of operations. As a risk mitigation measure, the Company is strengthening sales efforts toward advertisers in other and new fields, but dependence remains high at this time.

The Group concentrates its management resources on the Performance-Based Advertising Service Business, creating a risk that its revenue base could be significantly impaired if it fails to respond promptly to changes in the business environment. Competition in the internet advertising market continues to intensify due to new technology development and new market entrants, and if the Group cannot establish a differentiating advantage, it may become difficult to acquire advertisers and partner site operators. The Group is considering cultivating new revenue pillars, but dependence on a specific business continues at present.

Partner site operators' customer acquisition depends on search engines and advertising delivery platforms such as those of LINE Yahoo Corporation and Google, and there is a risk that customer acquisition capability and advertising delivery efficiency could decline due to algorithm changes, specification changes, or tightened cookie usage regulations. If a decline in the customer acquisition capability of major partner sites occurs, it would affect both the Performance-Based Advertising Service Business and the Programmatic Advertising Agency Business. The Group is working to reduce this risk by diversifying advertising methods and customer acquisition channels, but dependence on major platforms continues.

Technological innovations, including generative AI, are rapidly changing advertising delivery methods, search behavior, content production, and marketing methods, and any delay in responding directly leads to a decline in competitiveness. The Group is promoting the use of such technologies to improve operational efficiency and service quality, but if it cannot respond in a timely manner to the rapid pace of market changes, it could affect the business and results of operations. The scope of impact from technological transformation across the entire internet advertising industry is broad, requiring continuous investment in response.

In the Programmatic Advertising Agency Business, the majority of intermediary amounts consist of LINE Yahoo Corporation's "LINE Yahoo Ads" and Google's "Google Ads," resulting in a business structure dependent on official agency contracts with both companies. If either company changes its business policy or does not renew the contract, it could cause significant disruption to the continuation of the Programmatic Advertising Agency Business. The Group strives to maintain good relationships, but it is difficult to completely eliminate risks arising from external factors.

The Group actively conducts pure investments centered overseas, and the amount recorded on the consolidated balance sheet at the end of the current fiscal year expanded to ¥1,308,346 thousand (from ¥599,891 thousand at the end of the previous fiscal year). During the current fiscal year, the Company recorded a valuation loss on investment securities of ¥118,391 thousand as an extraordinary loss, and if expected results are not achieved due to deterioration in the business environment of investee companies, etc., additional valuation losses could occur, affecting results of operations. Many acquisitions are made at prices exceeding the net asset value per share, and the risk is correspondingly high if excess earning power is not realized.

As a business operator handling personal information of customers and partner site operators, the Group faces risks of unauthorized external access and internal information leakage. The Group has taken measures such as obtaining Privacy Mark certification, strengthening security environments, and employee training, but if a leakage were to occur, it could affect the business and results of operations through claims for damages or loss of credibility. As a business operator subject to obligations under the Personal Information Protection Act, there is also a risk of legal violations.

Regulations and enforcement related to advertising display laws, including the Act against Unjustifiable Premiums and Misleading Representations, are being tightened, increasing the likelihood that advertisers will demand confirmation and reporting of partner sites' display status from the Group. If the Group's confirmation system is deemed insufficient, or if improper display occurs on a partner site, it could affect results of operations through suspension of advertising placements or loss of credibility. The Group is working to develop confirmation and monitoring systems, but there are limits to complete management given the large number of partner sites.

The Group has established overseas subsidiaries in 11 countries, including Vietnam, Thailand, and Indonesia, to conduct business operations, and actively engages in M&A and new business investments. However, there are risks such as differences in laws and business practices in each country, delays in developing internal controls, and failure to achieve expected returns. If impairment losses related to goodwill, fixed assets, or investment securities occur, it could have a material impact on results of operations. Strengthening internal control and governance systems remains an ongoing challenge as the number of group companies increases.

Eiji Kaneko, the founder and Representative Director, possesses extensive experience and knowledge regarding internet advertising and plays an extremely important role in determining management policy and business strategy. The Group is working to reduce this dependence through information sharing and delegation of authority to officers and executive staff, but if Mr. Kaneko becomes unable to continue his duties, it could have a material impact on the business and results of operations. Moving away from a founder-dependent management structure remains an important management challenge.