LTS, Inc.

The Group provides consulting and digital utilization services centered on business process management, and corporate IT investment sentiment is expected to remain at a high level. However, if domestic and overseas economic conditions or business trends deteriorate, or if unforeseen factors impede market expansion, this could lead to a slowdown in new customer acquisition or a decrease in orders from existing customers. This may affect the Group's financial position and operating results.

In the fiscal year under review, there exists a business partner accounting for a level close to 10% of consolidated net sales, indicating a high degree of dependence on a specific customer. If the contract with such business partner is terminated unexpectedly within a short period due to changes in the partner's management policy or business performance, or if the Group is forced to accept contract changes such as scale reductions, the impact on business performance would be significant. The Group is working to expand its sales base through proactive sales activities aimed at acquiring new customers.

Competition for talent in the IT and consulting industry is intensifying, and if the recruitment, retention, and development of talented personnel do not proceed as planned, or if such personnel leave the company, this may result in a decline in competitiveness and service levels. In addition, rising recruitment costs could become a constraint on business expansion. Personnel are positioned as the Group's most important management resource, and establishing a system for continuous recruitment and development remains a challenge.

In providing its services, the Group may receive confidential and personal information from customers, and if information leakage, tampering, or unauthorized use occurs, this would have a significant impact on the Group's social credibility. Costs associated with responding to such incidents, including damages, may arise, potentially affecting the Group's financial position and operating results. The Group addresses this risk through thorough compliance with confidentiality obligations by officers and employees and the development of information management systems.

In the Professional Services business, projects are accepted based on estimates that ensure an appropriate profit margin according to difficulty and man-hours; however, if man-hours increase significantly due to unforeseen troubles or schedule changes, unprofitable projects may occur. Although the Group implements project management including personnel management, progress management, and budget management, if such circumstances occur, this would affect the Group's financial position and operating results.

Hiroaki Kabashima, Representative Director, President and Executive Officer, is one of the founding members of the Company and plays an important role in formulating and deciding management policy and business strategy and in driving business forward. If, for any reason, he becomes unable to continue his duties, this may affect the Group's financial position and operating results. The Group is working to build a system that does not rely excessively on a specific individual by strengthening its management and governance structure and developing management executives.

In the Professional Services business, some operations are outsourced to external partner companies. If quality issues arise at such external partner companies, if there is a shortage in securing the necessary number of consultants, or if outsourcing costs rise sharply, this would impede the smooth provision of services and active order-taking activities. While the Group currently maintains stable business relationships, if such circumstances occur, this may affect the Group's financial position and operating results.

The Platform Business's "Assign Navi" service is provided via the internet, and if a large-scale system failure occurs due to major program defects, increased load from a surge in access, unauthorized access, natural disasters, or other causes, this would adversely affect the trust relationship with service users. Although the Group strives for stable service operations through enhancements to server equipment, strengthening of security functions, and development of internal systems, if a failure occurs, this may affect the Group's financial position and operating results.

The Group may make investments, including M&A and capital participation, aimed at strengthening ties with and expanding the scale of business with technology companies that realize digital shift and productivity improvement. If expected profits or synergy effects cannot be secured due to sudden changes in the market or competitive environment after an acquisition or due to unforeseen circumstances, this may result in significant losses such as valuation losses on investment securities and impairment of goodwill. The Group's policy is to conduct thorough research and consideration of market trends, financial conditions, profitability, and the feasibility of investment recovery when carrying out such transactions.

Part of the Professional Services business falls under worker dispatching business as defined by the Worker Dispatching Act, and is conducted under a license granted by the Minister of Health, Labour and Welfare (validity period: August 1, 2024 to July 31, 2029). If, for any reason, the Company or its officers violate the said Act, this may result in an order to suspend all or part of the business, revocation of the license, or other measures, which could significantly impede business activities. In addition, the enactment of new legal regulations may also adversely affect the speed of business development and the Group's financial position.