FB CARE SERVICE CO.,LTD.

Nursing care fees are revised once every three years, with the most recent revision implemented in April 2024. The next revision is scheduled for April 2027, and an interim revision to address rising prices and labor costs is also planned for 2026. Changes to unit prices, regional unit price classifications, and benefit limit amounts directly affect profitability. If system reforms disadvantageous to users and operators are implemented due to deterioration of social security finances, this could lead to a decrease in the number of users or unit sales prices.

Facility designation under the Nursing Care Insurance Act is premised on compliance with staffing, facility, and operational standards as well as labor laws, and violations may result in revocation or suspension of designation. In particular, if organizational involvement of the company in fraudulent conduct is recognized, there is a risk that, under the joint liability system, all facilities of the same service type could be denied new designation or renewal. While all standards are currently satisfied, continuous maintenance of a management system centered on a compliance officer is required.

Capital expenditures associated with the opening of new nursing care facilities are financed through borrowings from financial institutions, and the ratio of interest-bearing debt to total assets has remained at a high level, at 40.7% for FY2025 (ended March 2025) and 36.9% for FY2026 (ended March 2026). Dependence on interest-bearing debt is expected to remain at a high level going forward as new facilities continue to open, and there is a risk that increased funding costs due to rising market interest rates or difficulty in raising funds as planned could hinder facility opening plans.

Securing qualified personnel such as nurses, care managers, and certified care workers is a prerequisite for business operations, but competition for employment with other companies in the same industry and medical institutions is intense, and the domestic shortage of nursing care workers has become a structural issue. If personnel recruitment does not proceed as planned, this could lead to a reduction in service scale at existing facilities or delays in the opening of new facilities, affecting earnings plans. While the company is responding through the use of overseas personnel and diversity promotion, continued turnover could also lead to increased training costs and a decline in workplace quality.

While demand for nursing care services is expanding due to the aging population, there are concerns about business expansion by competitors and increasing entry from other industries. If similar facilities or welfare equipment rental operators newly enter the areas where the company operates, revenue could be pressured by a decrease in users or intensified price competition. The company counters this through one-stop services via regional dominant expansion, but changes in the competitive environment could affect financial condition and business performance.

New openings of community-based services and specified facility residential care for the elderly require public solicitation and selection based on each municipality's nursing care insurance business plan, and there is a risk that business expansion plans cannot be carried out if there is no public solicitation itself or if selection is not received due to total volume regulation. While the company has maintained a high occupancy rate of 96.6% as of the end of March 2025 and 96.1% as of the end of March 2026, failure to reach conventional utilization rates after new facility openings could also affect financial condition and business performance.

Due to the nature of services targeting elderly people requiring nursing care, there are high risks of falling accidents, sudden changes in condition, and outbreaks of infectious diseases, and an outbreak within a facility could lead to reduced occupancy rates and damage to reputation. Users of visiting services such as Day Service may also refrain from using such services. While each facility has formulated a BCP and established infection control manuals, if a highly lethal virus or similar causes a halt in social and economic activities, this could cause serious disruption to business activities.

As the company handles large volumes of sensitive personal information, including users' medical history and past illnesses, there is a risk of legal liability and loss of trust in the event of an information leak. While the company has established personal information handling regulations and information security management regulations, implemented document management checks, cyberattack countermeasures, and SNS monitoring, there is a possibility that countermeasures may not keep pace with the increasing sophistication of cyberattacks.

The company applies the "Accounting Standard for Impairment of Fixed Assets" to fixed assets such as nursing care facilities, and if cash flow deteriorates due to a decline in facility occupancy rates or worsening business environment, impairment treatment may become necessary, potentially affecting financial condition and business performance. While the company strives to reduce risk through an evaluation process based on opening standards and monitoring after opening, restrictions on withdrawal based on long-term lease contracts (early termination penalties) could also be a factor increasing financial burden.

Representative Director and Chairman Hideki Yanagisawa, together with relatives and an asset management company, hold 53.0% of the voting rights of the total number of shares issued, resulting in structurally low stock liquidity. If the shareholdings of major shareholders decrease in the future, this could affect market price and voting rights exercise conditions, and maintaining compliance with the listing maintenance standards of the Tokyo Stock Exchange Standard Market (such as tradable share market capitalization) also remains an ongoing challenge.