WILLTEC Co.,Ltd.

The manufacturing staffing business and engineer staffing business are operated based on the "Worker Dispatch Business License" from the Minister of Health, Labour and Welfare, with three companies holding licenses: Wiltec Co., Ltd. (valid until July 2026), Watt Consulting Co., Ltd. (valid until October 2027), and Partner Co., Ltd. (valid until January 2031). If a violation of laws and regulations or a disqualifying event under the license requirements occurs, the company may be subject to penalties such as license revocation under Article 14 of the Worker Dispatch Act, which could have a material adverse effect on the business and operating results. The Group addresses this through thorough compliance and education/awareness of relevant laws and regulations, but license renewal is a prerequisite for business continuity.

Employees of the Group have opportunities to access confidential information related to clients' production plans and product manufacturing, creating a risk of leakage of personal information and customer information. If information is leaked, the Group may be subject to legal liability including damages claims, which could have a material adverse effect on the business and operating results. The Group addresses this through appropriate access permission settings, establishment of basic regulations for personal information management and information security management regulations, and employee education.

For the Group, whose core businesses are the Manufacturing Contracting & Staffing Business and the Engineer Staffing Business, recruiting and retaining personnel forms the foundation of business development. If recruitment and retention do not proceed as planned due to intensifying competition in the labor market, this could adversely affect the business and operating results. The Group has implemented measures to improve retention rates, such as introducing web interviews and establishing its own training centers, but there is a risk that securing sufficient personnel may become difficult depending on labor market conditions.

While the Group promotes the conversion of dispatched employees to indefinite-term employment from a legal compliance perspective, if a workplace cannot be secured after a dispatch or contracting agreement with a customer ends, employment maintenance costs for indefinite-term employees will arise, potentially adversely affecting operating results. In situations where securing workplaces is difficult, there is a risk of increased fixed cost burden, and this structural impact grows larger as the scale of business expands.

The Manufacturing Contracting & Staffing Business and the Engineer Staffing Business face numerous competitors, and the industry is one where M&A is actively pursued, with intensifying competition over business scale expansion expected. If the Group is unable to maintain its share of existing customers or develop new customers as planned due to the effects of competition, this could adversely affect the business and operating results. The Group has adopted a policy of responding through a combination of expanding share with existing customers, developing new customers, and pursuing M&A.

The Group's clients are centered on manufacturers related to electronic components, electrical equipment, and information and communication equipment, accounting for approximately 20% of consolidated net sales. If market conditions deteriorate or production fluctuates in these client industries, the Group's sales could fluctuate sharply, adversely affecting operating results. Given the structure whereby the Group absorbs clients' cost variability by responding to increases and decreases in their production, the Group is susceptible to the business cycles of specific industries.

If client manufacturers relocate their manufacturing sites overseas, resulting in a decrease in domestic manufacturing sites or production volume, orders for the Group's domestic Manufacturing Contracting & Staffing Business could decrease, adversely affecting the business and operating results. If the hollowing-out of domestic manufacturing progresses, there is a risk that it could lead to a medium- to long-term shrinkage of the business foundation.

In the Manufacturing Contracting and EMS Business, the Group bears responsibility for labor management, and if compensation claims or lawsuits arise that exceed the scope of labor insurance coverage, this could adversely affect operating results. In addition, there is a similar risk if product defect issues under the Product Liability Act materialize, leading to product recalls and damages liability, in cases where insurance coverage is insufficient. The Group strives for appropriate operations through means such as obtaining certification as a superior and appropriate manufacturing contracting operator, but it is difficult to completely eliminate such risks.

The Group has overseas consolidated subsidiaries in Vietnam and Myanmar, and there is a risk that the business environment could change significantly due to shifts in each country's political and economic conditions, legal system revisions, natural disasters, or the outbreak of conflict. In particular, Myanmar is in a politically unstable situation, and if unforeseen changes occur, this could adversely affect the business and operating results. The Group addresses this by gathering the latest information from government offices, business partners, and experts in each country, but it is difficult to completely avoid such risks.

The Group positions M&A as an important means of growth strategy, and evaluates acquired goodwill and intangible assets as reflecting future earning power. However, if unexpected events occur or become apparent after the execution of an M&A, or if it is determined that the initially expected earnings will not be achieved due to deterioration of the business environment, an impairment loss may be recognized, potentially adversely affecting the business and operating results. The Group addresses this through thorough due diligence and careful judgment by the Board of Directors, but future uncertainties cannot be completely eliminated.