HYOJITO Co., Ltd.

With the spread of online map services and navigation apps, the necessity of the core NAVITA map as a guide map may diminish, creating a risk of declining media value. This could make it difficult to acquire and retain customers, potentially having a direct adverse impact on the performance of the NAVITA Business, which accounts for a large proportion of sales. The Company is working to improve convenience through measures such as accommodating color vision deficiency, adding multiple functions, and linking with web services.

Due to the diversification of advertising methods and changes in advertising sponsors' preferences, there is a risk that opportunities to be chosen for the transportation advertising and outdoor advertising media proposed by the Group may decrease. If this leads to sponsors leaving or a decline in the contract renewal rate for the NAVITA Business, it could adversely affect business performance and financial condition. The Company is working to enhance media value through digital signage conversion and integration with web services.

The Company uses multiple IT systems for business processing and management, and if a serious failure occurs due to an accident, disaster, or human error, it could have a significant impact on business operations. In addition, if the ongoing partial renewal of core systems does not proceed as planned, there is a risk of delays in operational efficiency improvements and constraints on business expansion. The Company is focusing on system enhancement and security measures.

The NAVITA Business requires securing a certain number of sales staff due to the large number of installation locations, and since the number of applications varies significantly by prefecture, there are regions where securing personnel is difficult. In technology-related areas, hiring specialized personnel is essential, and if personnel acquisition and development do not proceed as planned, there is a risk of declining competitiveness and constraints on business expansion. The Company aims to achieve early productivity and retention through focused recruitment activities and enhanced education and training systems.

The Group holds personal information of employees and customers as a personal information handling business operator, and if a leak to outside parties occurs, it could adversely affect business performance and financial condition due to loss of social credibility and the occurrence of damage compensation costs. Although the Company strives for proper management based on the Personal Information Protection Act, risks from cyberattacks and human error cannot be eliminated.

Chairman of the Board Taishi Yoshida (including affiliated companies) holds 33.54% of total issued shares, and founder Hajime Kurimoto (including affiliated companies) holds 30.54%, together accounting for 64.08%. If both individuals were to sell their shares in the future, it could affect the market price, trading conditions, and the exercise of voting rights. Both individuals are said to have a policy of serving as stable shareholders while also giving consideration to the interests of minority shareholders.

If NAVITA units or advertising display facilities are damaged by a large-scale natural disaster, or if digital signage and lighting become unusable due to power-saving measures, it may become difficult to provide the prescribed services, potentially adversely affecting business performance. A prolonged economic slowdown due to the spread of a new infectious disease could pose a similar risk. The Company is working on disaster preparedness measures, including migrating core system servers to the cloud.

The NAVITA Business and Ad & Promotion Business are subject to regulations under local government ordinances based on the Outdoor Advertisement Act, while the Sign Business is subject to regulation under the Construction Business Act. If a legal violation occurs, the Company may be subject to sanctions such as suspension from bidding or revocation of licenses, which could adversely affect business performance and financial condition. The Company is working to build and strengthen its legal compliance system through headquarters management of licensing periods and a sign manual.

Regarding fixed assets held by each head office, branch office, and sales office, if it is determined that an asset group showing signs of impairment due to a significant deterioration in the business environment or other factors cannot generate sufficient future cash flows, an impairment loss may be recorded. Recording an impairment loss would have a direct adverse impact on business performance and financial condition. The Company regularly monitors changes in operating income/loss and recoverable amounts to identify signs of impairment.

There are many competitors in the Ad & Promotion Business and Sign Business, and intensifying sales competition and price competition may make it difficult to acquire and retain customers. If the Company loses its competitive advantage, there is a risk of adverse effects on business activities, performance, and financial condition. The Company strives to maintain and enhance its competitive advantage through media development and improved customer service.