logly,Inc.

The internet advertising market expanded to ¥3,651.7 billion in 2024, up 109.6% year on year, but development could be hindered by the introduction of legal regulations or changes in market conditions. In addition, competition is intensifying due to the diversification of ad delivery methods and sales menus, and there is a risk that demand for native advertising could shrink if innovative ad delivery technologies emerge. Since the Company's core business is the Native Advertising Platform Business, a deterioration in market conditions would directly affect its financial position and business results.

The native advertising market, the Company's primary business domain, tends to show slowing growth. If the Company fails to sufficiently differentiate its services or improve functionality, or if competition intensifies due to new entrants, the Company's market share and revenue could be squeezed. If it becomes difficult to maintain competitive advantage, this could have a material impact on the Company's financial position and business results.

The Company's revenue is concentrated in its native advertising delivery service, LOGLY Ads Context, resulting in an extremely high degree of dependence on this single service. If any problems arise in the growth of this service, the lack of alternative revenue sources could have a severe impact on the Company's financial position and business results. Diversifying the revenue base is an important management challenge.

Of the ¥963,252 thousand in purchases in FY2025 (ended March 2025), 34.4% (¥331,696 thousand) was concentrated with two companies, MicroAd, Inc. and The Sports Nippon Newspapers. If purchases decline significantly due to changes in ad inventory or transaction policies at either company, this could disrupt the Company's business operations and affect its financial position and business results. Although the Company states that it currently maintains good relationships with both companies, this risk remains ongoing.

Representative Director Hirokazu Yoshinaga possesses deep knowledge of the internet advertising industry and, as an engineer holding a Ph.D. in Engineering, developed the core technology (text processing and recommendation technology) underlying the Company's flagship service, LOGLY Ads Context. He plays a critical role in formulating management strategy. If he becomes unable to perform his duties for any reason, this could seriously affect business continuity and the execution of management strategy. The Company is working to develop its management structure to reduce this dependence, but the degree of dependence remains high at present.

The Company operates a native advertising platform based on big data analysis technology and continues to make human and capital investments to acquire new technologies. However, if the Company is slow to respond to new technologies or services, or if competitors develop innovative technologies, the Company's competitiveness could decline, affecting its financial position and business results. The advertising technology industry has a fast cycle of technological innovation, making continuous investment and response essential.

The Company's services are premised on 24-hour operation, and system stability is ensured through a redundant configuration utilizing AWS (Amazon Web Services). However, if the system is disrupted by external attacks such as computer viruses or hacking, software malfunctions, natural disasters, or other causes, the Company may become unable to provide its services, which could affect its financial position and business results. Although the Company has taken measures such as strengthening server equipment and implementing load balancing, complete preparedness against unpredictable events is difficult.

The Company states that there are currently no legal regulations that would materially affect business continuity; however, if new laws, administrative guidance, or regulations targeting the internet advertising market are enacted, this could affect business operations. In addition, although the Company has established an advertisement review system based on the Act against Unjustifiable Premiums and Misleading Representations, the Pharmaceuticals and Medical Devices Act, and other laws, if advertisements or media handled by the Company frequently violate laws or public order and morals, or if regulations are tightened, this could affect the Company's financial position and business results.

Since advertisers tend to concentrate their budget allocations in the latter half of the fiscal year and toward fiscal year-end, the Company's net sales and operating profit are structurally weighted toward the second half. As a result, there is a risk that discrepancies between the annual budget and actual results will concentrate in the second half, making it difficult to assess full-year performance based solely on first-half results. The greater variability of performance in the second half also affects the accuracy of investors' performance forecasts.

As of March 31, 2025, the Company had only 40 employees, and strengthening staffing, capability development, and internal management systems in line with business expansion remains a challenge. If the Company is unable to secure sufficient personnel to match its business expansion, appropriate business operations may become difficult, potentially affecting its financial position and business results. Although the Company is working to enhance its corporate governance, the vulnerability inherent in its small organizational size remains an ongoing risk factor.