Japan Living Warranty Inc.

The HomeworthTech Business is directly affected by housing and real estate market conditions, and the extended warranty outsourcing operations of the ExtendTech Business are influenced by demand trends for residential solar power generation and storage battery system equipment. If new housing starts and existing home transaction volumes decline, the renovation market shrinks, or demand for solar power generation systems weakens, this could impact business performance and financial condition. As a countermeasure, the Company is promoting the expansion of solutions offered and expansion into new business areas.

The warranty service industry has few regulatory barriers, making new entry easy, which creates risks of declining profitability due to intensifying competition and loss of uniqueness due to competitors offering similar services. This could affect business performance and financial condition. As a countermeasure, the Company seeks differentiation by consistently providing industry-first warranty and embedded finance service product development capabilities, a digital platform, mobile apps, system consulting including SaaS development, and digital marketing.

The Company transfers risks such as repair costs by entering into insurance contracts with non-life insurance companies for long-term warranty contracts (generally with warranty periods exceeding 2 years). However, if failures or defects occur that exceed the assumptions made when setting insurance premiums, this could lead to increased costs such as future increases in insurance premiums paid. In addition, if business alliances with non-life insurance companies are terminated, this could disrupt the customer acquisition system and affect business performance and financial condition. As a countermeasure, the Company strengthens its risk management system and customer acquisition system through contracts and alliances with multiple non-life insurance companies.

A certain proportion of operations in the Inspection & Repair Service are outsourced to external parties. If a contract with an outsourcing partner handling a large volume of work is terminated or the partner becomes insolvent, it may take time to select a replacement partner and commence transactions, creating a risk that reliable execution of ordered work and contracts becomes difficult. This could affect business performance and financial condition. The securities report does not describe specific measures for securing alternative partners, leaving room for improvement in risk management.

The Company is subject to regulation under multiple laws including the Payment Services Act, the Construction Business Act, the Architects Act, the Building Lots and Buildings Transaction Business Act, and the Installment Sales Act. If regulations are tightened or laws are significantly amended, this could affect business performance and financial condition. As of the end of the current consolidated fiscal year, no legal violations have occurred, and the Company addresses this through regular Risk and Compliance Committee meetings and compliance training. Note that there are licenses and permits with approaching renewal deadlines, such as the first-class architect office registration (due August 24, 2025) and the general construction business license (due September 13, 2025).

The HomeworthTech Business and ExtendTech Business acquire and hold large amounts of personal information. If information leakage occurs due to unauthorized external access or deficiencies in internal management systems, this could lead to claims for damages and loss of social credibility, affecting business performance and financial condition. As a personal information handling business operator subject to obligations under the Act on the Protection of Personal Information, the Company implements strict management in accordance with its privacy policy and internal regulations.

The Company operates numerous systems primarily for managing contracts with customers. If system malfunctions or outages occur due to natural disasters, accidents, unauthorized external access, or other causes, this could have a material impact on business performance and financial condition. While the Company has established systems such as enhanced security and multiple data server management, complete prevention is difficult, and the high dependence on systems inherent to the nature of the business heightens this risk.

Securing and developing excellent personnel is essential for expanding the scale of the company and developing its business. However, if recruitment plans do not proceed as planned or key personnel leave, this could affect business expansion and business performance. The Company actively conducts new graduate and mid-career recruitment activities and various internal training programs, but there is a risk that recruitment difficulties will continue against the backdrop of intensifying competition in the labor market.

If the development of internal management systems fails to keep pace with rapid business expansion, appropriate business operations may become difficult, potentially affecting business performance and financial condition. Recognizing that the effective functioning of corporate governance is essential to enhancing corporate value, the Company appropriately evaluates the effectiveness of internal controls and strengthens its internal management systems by taking appropriate and prompt corrective measures based on evaluation results.

If negative rumors spread about the extended warranty industry or the payment services industry, or if industry reputation deteriorates due to scandals or bankruptcies among competitors, this could affect the Group's business operations and creditworthiness. In addition, insufficient response to sustainability issues could lead to a decline in trust and loss of revenue opportunities. While company-wide measures are being implemented, responding to changes in the external environment remains a challenge.