Delivery Consulting Inc.

The Group's business is dependent on the domestic market, and if client companies' appetite for DX investment declines due to deteriorating economic conditions or a slowdown in the business cycle at home or abroad, this could have a material impact on business performance and financial condition. The business structure is such that the fundamental drivers of the business are determined by the IT investment trends of domestic client companies, embedding a vulnerability to changes in the macroeconomic environment. As a countermeasure, the Group conducts ongoing monitoring of market conditions, but disclosure of specific diversification measures remains limited.

If the Group is slow to respond to rapid technological evolution in areas such as generative AI, cloud, data analytics, and security, there is a risk that the competitiveness of its services will decline. In addition, if investment in unforeseen new technologies becomes necessary, additional costs may be incurred, which could have a material impact on business performance and financial condition. In the fast-changing IT industry, continuous technological refinement and the precision of investment decisions are key to business continuity.

The Digital Transformation Business has low barriers to entry for new participants and tends to face intensifying competition. If price competition intensifies due to the emergence of new products or services from competitors, this could have a material impact on business performance and financial condition. The Group is countering this through patent and trademark applications and registrations and branding based on added value, but the rise in price competition pressure carries the risk of directly squeezing profitability.

Competition to acquire personnel well-versed in new fields such as generative AI, cloud, and data analytics is intensifying, and if the Group is unable to sufficiently secure and develop the necessary personnel, or if turnover of hired personnel progresses, this could have a material impact on business performance and financial condition. The Group is implementing measures such as active recruitment activities, improvements to its personnel evaluation system, and training programs, but against the backdrop of intensifying competition in the IT talent market, securing personnel is positioned as the most critical issue for business expansion.

The Group has been an alliance partner of Salesforce (formerly Tableau) since 2013, providing implementation support for its products, and was certified as an official Tableau outsourcing supplier in 2020. If Salesforce changes its business policy leading to the dissolution of the business relationship or a significant change in trading terms, or if the market shrinks due to a decline in Tableau's competitiveness, this could have a material impact on business performance and financial condition. The Group is working to reduce its dependence by developing new tech partners, but the risk remains high if the development of alternative partners does not progress.

The Group procures the RPA engine essential to its product "ipaS Robo" from PKSHA Associates Co., Ltd., and if stable procurement becomes difficult due to a change in that company's business policy or other reasons, this could have a material impact on business performance and financial condition. The Group strives to secure a stable supply of the necessary volume through a master transaction agreement, but reliance on a single supplier inherently carries supply chain risk.

In the course of business operations, the Group handles personal information and confidential information, and if an information security incident occurs due to a cyberattack or similar cause, this could have a material impact on business performance and financial condition through a decline in social credibility and brand image, payment of damages, and other effects. The Group has obtained ISMS certification and has established an information management system, but as cyberattacks become more sophisticated and diverse, complete defense is difficult, and continuous strengthening of countermeasures is required.

Takuo Sakaguchi, who has served as Representative Director since the company's founding, plays an important role in formulating management policy and business strategy, and if, for any reason, the representative director were to step down, this could have a material impact on business performance and financial condition. The Group is working to build a management structure that does not depend on the representative director as the business expands, but currently the degree of dependence remains high.

The total number of potential shares from stock acquisition rights granted as incentives to directors and employees is 688,300 shares, equivalent to 14.2% of the total number of issued shares of 4,859,000 shares. If these stock acquisition rights are exercised, the value of shares held by existing shareholders and their voting rights ratio may be diluted. As the dilution rate of 14.2% is relatively high, the impact on existing shareholders is at a level that cannot be ignored.

The Group may undertake investments such as corporate acquisitions for the purpose of enhancing corporate value, and if the performance of the acquired company or investee does not grow as planned and the investment amount cannot be recovered, or if additional costs are incurred, impairment losses or other losses may occur, which could have a material impact on business performance and financial condition. The Group is also pursuing new business initiatives in parallel, and if investment recovery does not proceed as expected, this also carries the risk of lowering the overall profit margin of the Group.