DAIICHIKOSHO CO. , LTD.

There is a risk that the commercial-use karaoke market will contract due to the closure of snack bars, izakaya, and karaoke box outlets, leading to a decrease in the shipment and installation volume of equipment. Intensifying competition with peers may also reduce sales volume and lower prices, putting pressure on business performance. In response, the Company is raising the equipment leasing ratio and building a stable revenue base through planned equipment replacement, while also allocating management resources to the elder business.

Changes in user needs and intensifying competition among outlets may lead to a decline in customer numbers and average spending per customer, worsening the performance of the Karaoke & Restaurant Outlets business. In addition, increases in part-time labor costs resulting from changes in social insurance and labor condition systems may also put pressure on earnings. In response, the Company is promoting cost reductions through combined karaoke and dining outlets, pursuing added value by brand, and driving efficient operations through IT adoption.

There is a risk that declining sales volumes of music CDs and DVDs, driven by digitalization and the spread of streaming, will affect the performance of the Music Software business. In addition, if the resale price maintenance system is abolished due to a review of the Antimonopoly Act, price competition may intensify and selling prices may decline. In response, the Company is actively leveraging its enka and kayokyoku music assets and promoting measures to enhance synergies with the karaoke business.

Large-scale natural disasters such as earthquakes, floods, and typhoons, as well as outbreaks of infectious diseases such as novel influenza or COVID-19, may cause extended temporary store closures or reduced operating hours, potentially having a material impact on business performance and financial position. In response, the Company operates a Risk and Compliance Committee based on the "Group Risk Management Basic Regulations," and has established a system whereby, in the event of a serious loss, the "Group Crisis Management Regulations" are invoked to set up a response headquarters led by the President and Representative Director.

Amendments or changes to relevant laws and regulations, including the Companies Act, Copyright Act, Labor Standards Act, Food Sanitation Act, and Fire Service Act, may impose new constraints on business activities. There is a risk that increased compliance costs and business restrictions resulting from stronger regulation could affect business performance and financial position. In response, the Company sets challenges for improving internal control standards in each business segment and conducts regular inspections, while also endeavoring to provide advance explanations to relevant government authorities through karaoke industry associations.

In an industry undergoing rapid technological innovation, there is a risk that it may become difficult to allocate the funds and resources needed for new product development and new service offerings, or that delays in development may hinder timely responses to market needs. If new products and services fail to gain market acceptance due to diversifying user needs, future growth and profitability may decline. In response, the Company uses market research and decides on market launches on the premise of maximizing spillover effects across business segments.

If the network is disconnected or a system outage occurs due to a natural disaster, accident, unauthorized external access, or human error, services such as karaoke distribution may be suspended, leading to reduced reliability. Reduced service reliability may lead to customer attrition and affect business performance. In response, the Company has implemented redundancy for critical parts of its distribution center, installed firewalls, email security, and antivirus software, and adopted multilayered defense measures against cyberattacks.

If important information, such as customer personal information or song and singing data from communication karaoke, is leaked for any reason, there is a risk that loss of public trust and pursuit of liability could affect business performance and financial position. Since the Company also offers services that utilize personal information, the importance of information management is particularly high. In response, the Company has established an information security framework that combines restrictions on available terminals and strict management of access rights with cyberattack countermeasures.

Production of the commercial-use karaoke equipment "DAM" depends on OEM outsourcing to companies outside the Group, and if contract terms with the outsourcing partner change or the contract is terminated, product supply may be disrupted, potentially having a material impact on business performance and financial position. High dependence on a specific company can readily lead to reduced bargaining power and heightened supply risk. In response, the Company adopts a policy of diversifying its business partners to the extent possible and avoiding concentration on a single company.

There is a risk that if operating real estate, goodwill, and tangible and intangible fixed assets fail to generate expected cash flows due to deviations from plans or market changes, impairment losses may occur, affecting business performance and financial position. In addition, price fluctuations in held securities and investment securities may also affect business performance. If interest rates rise more than expected, although the Company has a large proportion of fixed-rate borrowings, there is also a coexisting risk of increased funding costs.