SPRIX, Ltd.

The number of elementary, junior high, and high school students in Japan is gradually declining due to the ongoing decrease in the birthrate, and this trend is considered certain to continue going forward. The Group is seeking to expand its business scale through aggressive new school openings and expansion into new areas, but if the decline in student numbers or the school opening plans do not proceed as planned, this could impact business performance. Since the main target market of the education service business is structurally shrinking, this is a risk that concerns the very foundation of the medium- to long-term growth strategy.

The education service business operated by the Group has low barriers to entry, and competition is intensifying among numerous existing operators, while many new entrants are also emerging. The Group strives to improve quality and add value through the improvement of instructional operations based on quantitative analysis and systematization, but depending on the actions of competitors, the Group may not be able to maintain its competitiveness, which could impact business performance. The structural characteristic of low entry barriers is a factor in the continuous deterioration of the competitive environment.

The brand value of the core business, "Mori Juku," is fundamental to customer acquisition, and if the Group fails to provide educational services that satisfy customers, or if reputational damage or unforeseen incidents occur, the brand value may decline, leading to a decrease in student numbers. Brand damage carries the risk of not only short-term deterioration in business performance but also long-term loss of the customer base. The Group continuously works to enhance its brand value, but it is difficult to completely eliminate the risk of sudden damage caused by external factors.

Changes to the education system by administrative authorities, such as revisions to entrance examination systems and the Courses of Study, occur repeatedly, causing changes in customer needs. The Group responds through information gathering, textbook revisions, and new service development, but if changes in the education system or customer needs occur on a scale that exceeds the Group's response capabilities, this could impact business performance. The unpredictability of the frequency and scale of system changes increases the difficulty of responding.

The Group holds a large volume of sensitive personal information belonging to customers, including names, addresses, and academic records, and if an intentional or negligent leak occurs due to related parties, the Group could face legal liability, including claims for damages. The Group works to prevent leaks through the establishment of personal information handling regulations and information system management regulations, as well as employee training, but there is a risk that a decline in trust could impact the business and business performance. Given the nature of the education service business, which handles customer information including that of minors, the social impact is also significant.

If cyberattacks from external sources, such as ransomware or unauthorized access, or system failures caused by large-scale natural disasters or human error occur, this could lead to serious damage to the Group's systems, information leaks, and damage to social credibility. The Group implements system enhancements and security measures, but the methods of cyberattacks are becoming increasingly sophisticated and diverse, making complete defense difficult. Since system failures directly lead to the suspension of classroom operations, this is also a risk to business continuity.

For the Group, human resources are an important management resource, and securing personnel in line with recruitment plans is essential for medium- to long-term growth. If the securing and development of human resources does not proceed as planned due to sudden changes in the management environment, or if an unexpectedly large number of employees resign at the same time, this could impact business performance. The Group addresses this through education and training systems and incentive programs, but intensifying competition in the labor market is increasing the risk of difficulty in hiring.

The Group is pursuing new business initiatives for sustainable growth, but since it takes a certain amount of time for these businesses to generate stable earnings, this may lower the profit margin of the Group as a whole. If new businesses do not progress as expected due to future changes in the management environment, and sufficient returns on investment are not achieved, this could impact business performance. The uncertainty of new businesses carries the risk of also affecting the profitability of existing businesses.

The Group holds tangible fixed assets and intangible fixed assets such as goodwill, and if the profitability of the business significantly declines, impairment losses may occur, impacting business performance. The Group examines indications of impairment every year and adopts a policy of appropriately addressing them as necessary, but if the deterioration of the business environment exceeds expectations, there is a risk that large-scale impairment losses could be recorded. In particular, if the amount of goodwill recorded in connection with franchise expansion and new store openings increases, the impact would be even greater.

The Group operates the self-directed learning cram school "Jiritsu Gakushu RED" through franchising, and provides continuous guidance on classroom operations to franchisees, but if a franchisee commits a breach of contract or similar act beyond the Group's guidance, this could impact business performance and brand image. Due to the nature of the franchise business, it is difficult to completely control the actions of franchisees, and there is a risk that problems with individual franchisees could spread to damage the brand of the Group as a whole.