Intimate Merger, Inc.

Privacy protection regulations continue to be strengthened, including the enforcement of the amended Act on the Protection of Personal Information, which was influenced by GDPR and CCPA, and the introduction of the "external transmission rules" under the Telecommunications Business Act. In particular, if the attribute information collected in the DMP business is determined to constitute personal information under the amended Act on the Protection of Personal Information, this could result in a decrease in the total number of data points held by IM-DMP, a decline in service quality, and increased costs for implementing alternative technologies. The Company Group is addressing this through post-cookie solutions such as IM-UID, but if new regulations targeting common ID solutions or restrictions on the use of data related to generative AI arise, this could impact its business and results of operations.

Advances in automation technology on major platforms such as Google and Meta have led to a rapid shift among client companies toward "in-housing," whereby they manage their own advertising operations, resulting in a structural decline in demand for conventional operation outsourcing services. The Company Group is promoting a transition of its business model toward providing data infrastructure, but if there are unforeseen drastic changes in client needs or if the Group falls behind in responding to technological innovation, this could lead to a decline in competitiveness and the loss of client companies. In addition, as clients' data utilization needs expand beyond the advertising domain into the cross-tech domain, competition with new competitors may also arise.

The rapid proliferation of generative AI technology is lowering the technical barriers to data analysis, and the market environment is undergoing structural change, including a surge in demand across all industries for AI-ready data infrastructure. The Company Group is focusing on promoting the internal use of generative AI, establishing specialized organizations, and acquiring technical know-how, but if it falls behind in responding to technological innovation, or if it is unable to continue supplying data with a competitive advantage amid the ongoing commoditization of data, this could impact its business and results of operations. The Group is also simultaneously required to shift away from its conventional technology infrastructure in response to continued restrictions on cookie usage and stricter regulations, and there is a risk that technology response costs may increase.

Global inflation, rising interest rates, and prolonged geopolitical risk have heightened companies' cost-cutting awareness, and if client companies significantly reduce or freeze their marketing budgets and DX investments due to an economic downturn, there is a risk that demand for IM-DMP and related solutions could slow. The Company Group is addressing this by promoting a shift in its business model toward providing data infrastructure, but the structure in which it is affected by domestic and overseas economic conditions, companies' appetite for IT investment, and trends in the advertising industry remains in place. In particular, in the digital marketing domain, the movement to cut advertising spend against a backdrop of rising CPA is accelerating, raising concerns about a short-term impact on performance.

IM-DMP is rapidly expanding its connections with generative AI platforms, cloud data infrastructure (such as Snowflake), and business systems in the cross-tech domain, but there is a possibility that data linkage could be restricted due to changes in policy by these data utilization partners, changes in API specifications, or revisions to data usage terms. The Company Group positions its function as an infrastructure for supplying AI-ready data as a source of competitiveness, and the loss of linkage channels could directly impact its business foundation. The Group is promoting the development of new data distribution channels through alliances with partners in other industries as a key initiative, but the risk of dependence on external parties remains.

In addition to managing its own confidential information, the Company Group manages and operates confidential information entrusted by business partners as part of its business, and if information leakage or misuse occurs due to employees or business partners, or due to system malfunction, computer viruses, or unauthorized access, this could result in a loss of social trust and have a material impact on the Group's business and results of operations. Given the nature of the DMP business, which handles large volumes of internet behavioral data, the scope of impact in the event of a security incident could be extensive. The Company Group has established a strict information security management system, but risks associated with the increasing sophistication of cyberattacks continue to exist.

Representative Director Ryoji Yanashima possesses extensive knowledge and experience in web marketing know-how including DMP, new business planning, and gathering industry information, and plays an important role in the operation of the Company Group's business. If, for any reason, he becomes unable to continue performing his duties, this could impact the Group's business and results of operations. The Company Group is working to strengthen its management structure, delegate authority, and reinforce the development of next-generation talent, but the risk of dependence on a specific individual has not been completely eliminated.

The Company Group organizes its workforce with the minimum number of personnel necessary to execute its operations, and recognizes that securing, developing, and retaining excellent personnel is the most important issue for continued business expansion. Amid intensifying competition for talent in specialized fields such as generative AI and data infrastructure, if the Group is unable to secure and develop sufficient personnel when needed, or if there is an outflow of personnel, this could hinder ordinary business operations and impact the Group's business and results of operations. The Group is working to strengthen its recruitment activities and personnel systems, but due to its small organizational structure, the impact of the departure of individual personnel is relatively significant.

In addition to its existing ad technology domain, the Company Group is promoting entry into cross-tech domains such as finance, sales, and HR as a growth strategy, and this may give rise to competition with existing players unique to each industry, which differ from conventional competitors, as well as with new entrants specializing in data utilization. In addition, if major platform operators such as Google significantly change their data collection and utilization policies, or fully enter this domain, this could impact the Group's business and results of operations. The Group has achieved the No. 1 share of DMP adoption in the domestic market, but establishing a competitive advantage in the cross-tech domain remains a future challenge.

The Company Group's sales are affected by advertisers' allocation of advertising budgets, and there is a tendency for sales to be concentrated in December and March, which many advertisers set as their fiscal year-end. While this tendency has recently begun to be dispersed, sales and profits are more prone to fluctuation compared to industries with stable monthly performance, and if fluctuations are large and downside movements are pronounced, this could impact the Group's financial position and results of operations. While the ongoing transition of the business model toward providing data infrastructure is expected to smooth out seasonal fluctuations, at present the revenue structure remains dependent on advertising budgets.