CareerIndex Inc.

The rapid proliferation of generative AI is transforming user information-gathering behavior and search engine usage trends, which may affect customer acquisition structures and advertising effectiveness in the Marketing Business. In the DX Business as well, there is a risk that the competitive advantage of existing services could be undermined by the rise of competing services utilizing generative AI. In response, the Group is promoting efficiency improvements in production operations and active use of generative AI in new feature development, while establishing operational rules regarding the handling of personal and sensitive information.

The Marketing Business relies on the internet advertising market as its main business foundation, and there is a possibility that the introduction of new regulations, increased advertising costs due to oligopolization in specific areas, or a decline in advertising demand due to economic fluctuations could affect business performance. Internet advertising continues to compete with other advertising media, creating a structure in which changes in the market environment directly impact revenue. In response, the Group has established a system to continuously monitor the latest information on the business environment and technological developments.

The internet and system utilization services offered in the Marketing Business have relatively low barriers to entry, and increased competition from new entrants could lead to a decline in revenue. In the DX Business as well, SaaS-type services tend to attract numerous new entrants during the early stages of market formation, and the competitive environment is expected to intensify. The Group aims to differentiate itself by emphasizing the uniqueness of each service and leveraging group synergies in its business development.

The Marketing Business invests a substantial amount in advertising expenses relative to net sales, and there is a risk that rising costs for search-linked advertising and changes in ranking policies by search engine operators could push up customer acquisition costs. In addition, changes in user search behavior due to the spread of generative AI may affect the cost-effectiveness of customer acquisition. In response, the Group is working to expand the use of alliance marketing and to develop and cultivate new advertising media.

If personal information held by the Group were to be leaked externally due to unauthorized access or unforeseen circumstances, the resulting response costs, handling of damage claims, and loss of social credibility could affect the Group's business and performance. Even in the use of generative AI, the Group has established operational rules that prohibit the use of personal or sensitive information as training or input data. Multiple group operating companies have obtained Privacy Mark certification, and strict management is implemented from both administrative and physical perspectives, including access authorization settings.

If websites are damaged by external factors such as intrusion by computer hackers or computer viruses, this could force service suspension, affecting the Group's business, performance, and social credibility. Natural disasters, power outages, sudden increases in access, and system troubles caused by employee or officer error pose similar risks. The Group has implemented protection through security measures such as firewalls, uses cloud services equipped with uninterruptible power supply facilities and earthquake-resistant structures, and maintains a data backup system.

With the diversification of internet-based businesses, the introduction of legal amendments or new regulations could constrain or force changes to the Group's operations, thereby affecting its business and performance. In particular, legislation related to the use of generative AI is rapidly advancing both domestically and internationally, and responding to AI regulatory trends has become a new challenge. The Group has established employee education and awareness programs, and continues to monitor AI regulatory trends closely to ensure appropriate responses.

Representative Director, President and CEO Hirotaka Itakura and Senior Executive Officer and Group COO Keisuke Saito have been driving forces of the business since its establishment and play extremely important roles in decision-making regarding management policy, business strategy, and new business development. If these individuals become unable to perform their duties, or if the development and recruitment of next-generation executive personnel does not progress, the Group's business and performance could be affected. To avoid excessive reliance on specific individuals, the Group is strengthening its management structure and promoting the development and recruitment of executive personnel.

As of the end of the consolidated fiscal year, the total of goodwill and customer-related assets amounted to ¥1,685 million, and if the revenue of subsidiaries or acquired services declines significantly, impairment losses could occur, affecting business performance. Intangible assets arising from M&A and business acquisitions have reached a substantial scale, creating an inherent risk that deterioration in the business environment could directly impact the Group's finances. The Group monitors the revenue and financial condition of subsidiaries and each service on a monthly basis to ensure appropriate understanding of management conditions.

Representative Director, President and CEO Hirotaka Itakura held 57.31% of the Company's shares as of the end of the fiscal year, and if these shares were to be sold, it could affect the liquidity of the Company's shares and its market price. This high degree of share concentration inherently carries liquidity risk and share price volatility risk, raising concerns about potential impact on general shareholders. The Company takes appropriate measures, such as periodically confirming shareholding policies.