PROGRIT Inc.

The Company relies on internet advertising as its primary means of acquiring new customers. If cost-effectiveness deteriorates due to competitors adopting new strategies or other factors, there is a risk of reduced customer acquisition capacity/numbers and additional expenditure. The Company routinely analyzes cost-effectiveness to optimize spending, while also working to enhance advertising-independent customer acquisition through customer referrals.

The English coaching market is in a growth phase, and competition may intensify further due to scale expansion by competitors through M&A and entry by major overseas IT companies with AI-based learning platforms. The Company aims to maintain its first-mover advantage through differentiation of coaching services, accumulation and analysis of learning data, and service quality improvement, but intensifying competition could adversely affect its financial position and operating results.

The quality of the English coaching service depends heavily on consultants with high English proficiency, problem-solving ability, and communication skills. If the Company is unable to secure personnel with the necessary skills under appropriate conditions, there is a risk that service provision could be hindered. The Company continuously works to secure excellent personnel through recruitment advertising and recruitment events, but securing such personnel may become difficult due to intensifying competition in the labor market.

Correction work for the subscription-based English learning service is handled by outsourced Shadowing Advisors (SAs). If appropriate staffing cannot be arranged during a sudden surge in demand accompanying business expansion, there is a risk of significant disruption to service provision. The Company strives to secure SA personnel by improving correction efficiency and quality through system enhancements and expanding recruitment activities, but responding to unexpected surges in demand remains a challenge.

The Company is subject to regulations such as the Act against Unjustifiable Premiums and Misleading Representations, the Act on Specified Commercial Transactions, and the Subcontract Act. If these laws are further tightened, there is a risk that the Company could be forced to make significant changes to its operations. The Company has established a risk and compliance system centered on its administrative department, formulated and published its "Marketing Communication Policy," and worked to ensure thorough awareness among officers and employees, but costs associated with responding to stricter regulations and business constraints may arise.

The spread of highly accurate simultaneous interpretation and translation functions resulting from advances in AI technology may reduce the need to directly learn English, creating a risk that the overall English learning market could contract significantly. The Company expects demand for English in business settings to remain solid, but if the risk of demand decline materializes beyond expectations, it could affect the Company's financial position and operating results.

The Company's net sales are concentrated in the English Coaching Business, creating a risk that the entire business could be directly impacted by changes in the market environment or intensifying competition. While the Company is pursuing revenue diversification by increasing the weight of its subscription-based English learning service, the structure of dependence on a single business remains.

The Company holds a large amount of personal information in connection with its service provision, and the risk of information leakage or tampering due to unauthorized access or ransomware attacks has increased amid the recent sophistication of cyberattacks. The Company has obtained Privacy Mark certification and works to strengthen access restrictions, internal training, and continuous monitoring systems, but in the event of a leak or similar incident, claims for damages, loss of credibility, and substantial cost burdens could arise, potentially affecting the Company's financial position and operating results.

The language business-related field is undergoing rapid change, with a succession of new services utilizing AI and other technologies being introduced. The Company monitors the latest technology trends and user needs and continuously develops new technologies and services, but if it falls behind in responding to rapid environmental changes, this could lead to a decline in competitiveness and affect the Company's financial position and operating results.

Some courses of the Company's English coaching service PROGRIT are designated under the Ministry of Health, Labour and Welfare's educational training benefit system, which forms part of customers' motivation for enrollment. If changes to benefit conditions or stricter designation criteria result in exclusion from the program, this could affect customer acquisition numbers and revenue per customer, potentially adversely affecting the Company's financial position and operating results.