ASANTE INCORPORATED

The Group holds confidential business information and customers' personal information, and the risk of unauthorized access and information leakage is increasing due to the diversification and sophistication of cyberattacks in recent years. In the event of a leak, the Group may bear liability for damages and suffer a loss of social credibility, which could materially affect its business performance. As countermeasures, the Group has established a basic policy on information security, developed a cross-departmental incident response framework, and conducts regular security education and training.

Competition for talent is intensifying due to the declining birthrate, aging population, and tightening labor supply-demand balance. If the Group is unable to secure the necessary personnel for its business model, which is centered on door-to-door sales, its business development may be constrained, affecting its performance. In particular, the development of sales personnel with a high level of compliance awareness is essential, and a shortage of personnel could directly lead to lost sales opportunities. As countermeasures, the Group is working to improve the workplace environment, strengthen new graduate and mid-career recruitment activities, build a personnel system based on merit and performance, and enhance its employee education system.

The Group's core termite control construction service targets approximately 26 million wooden detached houses nationwide, but much of the demand remains latent, and there is a risk that weakening consumer sentiment and declining disposable income could make it more difficult for demand to materialize. Deterioration in domestic and overseas economic conditions, business trends, and the employment environment could significantly affect sales trends, thereby impacting the Group's financial position and business performance. The Group is addressing this through demand-stimulating measures and by expanding orders for other services with less seasonal variation.

The Group is subject to various laws and regulations, including the Act on Specified Commercial Transactions, as well as regulations related to construction, chemical handling, personal information protection, financial transactions, and labor affairs. Amendments, abolitions, or new enactments of laws and regulations, driven by heightened consumer protection and personal information protection awareness, could constrain the Group's business activities. There is also a risk that violations of laws and regulations could result in administrative sanctions such as business suspension orders. The Group strives to build a high level of compliance framework by combining group training utilizing its comprehensive training center in Shizuoka Prefecture with on-the-job training (OJT).

The Group conducts sales activities based on customer referrals obtained through business alliances with agricultural cooperatives and others. If an alliance agreement is terminated or revised unfavorably due to changes in a partner's business environment, the customer acquisition channel may shrink, potentially affecting the Group's financial position and business performance. Changes in the agricultural and regional economic environment surrounding its partners pose a risk of indirectly undermining the Group's revenue base. The Group seeks to diversify this risk by building alliance relationships with a variety of companies and organizations.

If the purchase prices of materials required for service provision or gasoline prices rise significantly due to changes in the socioeconomic environment, the resulting cost increases could squeeze profitability and affect the Group's financial position and business performance. Because the business model relies heavily on the use of vehicles for sales activities and construction work, fluctuations in fuel costs are a direct cost factor. The Group continuously works to reduce material and fuel costs.

Orders are concentrated from April to July (with May being the peak), when termite activity becomes more active, resulting in a tendency for business performance to be weighted toward the second quarter of the consolidated cumulative period. Sales trends during this period significantly affect full-year performance. Seasonal demand fluctuations are expected to continue, and there is a risk of a downturn in performance if unfavorable weather coincides with the busy season. The Group strives to level out performance through demand-stimulating measures during periods of latent demand and by expanding orders for other services with less seasonal variation.

In the door-to-door sales industry, there have been cases reported in the media of malicious operators violating laws and regulations and receiving business suspension orders, and a decline in credibility across the industry as a whole could spill over and affect the Group's performance. Growing consumer aversion to door-to-door sales due to reports of fraudulent home renovation practices poses a risk of increasing customer acquisition costs and lowering contract conversion rates. The Group continuously works to enhance employee education, strengthen its compliance framework, and improve the industry's image through various PR activities.

Because termite activity is affected by weather conditions, extreme weather events associated with climate change—such as extreme heat, heavy snow, and violent storms—could negatively impact demand for termite control construction services and door-to-door sales activities, including those conducted outdoors. There is also a transition risk that rising carbon prices and changes in reputation related to environmental measures could negatively affect profitability. The Group is addressing climate change under its mission of contributing to environmental issues by promoting the extended lifespan of existing housing.

As the Group actively promotes the introduction of systems to improve operational efficiency, its dependence on systems for business operations is increasing. If a system failure or a large-scale network delay occurs and becomes prolonged, it could cause delays in operations, affecting the Group's financial position and business performance. In particular, if core operations such as customer service, construction management, and sales support become dependent on systems, the impact of a failure could be far-reaching. The Group is working to establish a robust incident response framework while actively introducing systems that contribute to the efficiency of its various operations.