SAN HOLDINGS,INC.

Since the quantitative aspect of funeral demand is determined by the number of deaths, although the median estimate by the National Institute of Population and Social Security Research projects an average annual increase of just under 1% over the next 10 years, actual figures for each fiscal year may diverge from the estimates. Even if market share and the average unit price per funeral remain unchanged, single-year performance may fluctuate to some degree due to changes in the number of deaths within the Group's business areas.

The annual number of deaths has seasonality, with December through February being the busy season, resulting in a structure where operating revenue is higher in the second half than in the first half. Since the busy season (particularly January to February) coincides with the period when influenza cases increase, the Group's performance may be affected depending on the severity of that year's influenza outbreak.

Memorial ceremonies such as corporate funerals, farewell gatherings, and joint funerals tend to be larger in scale compared to ordinary funerals, but since the number of such cases handled is limited, both the number of cases and amounts vary from year to year. Large-scale funerals exceeding ¥5 million account for around 10% of Kōeki-sha Co., Ltd.'s total funeral execution revenue, and fluctuations in the number and value of such cases handled may affect the Group's performance.

The funeral services industry has low barriers to entry due to the absence of legal regulations or administrative guidance, and mutual aid associations for ceremonial occasions are focusing on funerals while entrants from other industries such as railway companies, retailers, consumer co-ops, agricultural cooperatives, and hotels are expanding nationwide. Furthermore, the emergence of internet-based funeral referral businesses is further intensifying competition, and future new entrants may bring about changes in the competitive environment that affect the Group's performance.

Natural disasters such as typhoons, heavy rains, and large-scale earthquakes may damage funeral halls owned or operated by the Group, potentially causing temporary suspension of operations. Although the Group has measures in place such as utilizing other halls within the Group or external facilities and obtaining property insurance, there is no guarantee that these measures will sufficiently cover the impact on business or resulting losses.

The occurrence and spread of infectious diseases place significant restrictions on people's movement and gatherings, and in the worst case, may restrict the form of funerals themselves, resulting in situations where a face-to-face farewell with the deceased cannot take place. This may affect the Group's performance through a decrease in the number of attendees and smaller-scale funerals, as well as difficulty in conducting large-scale funerals such as corporate funerals and farewell gatherings.

The Group holds fixed assets primarily consisting of tangible fixed assets related to funeral halls, and if it is determined that profitability has declined due to changes in the business environment or business conditions and sufficient cash flow cannot be generated, the recognition of impairment losses may affect performance and financial condition. In addition, regarding the substantial goodwill arising from the acquisition of shares of Kizuna Holdings Co., Ltd. in September 2024, an impairment loss may be recognized if the profitability of the target business declines.

Substantial goodwill has been recognized as a result of the acquisition of shares of Kizuna Holdings Co., Ltd. in September 2024, and although efforts are being made to improve the profitability of the relevant business, an impairment loss may be recognized if profitability declines. Should an impairment loss be recognized, it may have a material impact on the Group's business results and financial position.

The Group's food and beverage business is subject to regulation under the Food Sanitation Act, and while the Group has appointed food sanitation managers and implements strict hygiene management, in the event that food poisoning occurs, the Group may be ordered to dispose of food products, and its business license may be revoked, or it may be prohibited from operating or ordered to suspend operations for a certain period. Such measures may affect the Group's performance.

The Group holds a large amount of personal information through its funeral contracting business and other operations, and has obtained Privacy Mark certification and established a compliance framework for the Personal Information Protection Act. However, if personal information is leaked due to an unforeseen event, it may lead to a decline in social credibility, a substantial financial burden, and damage to the company's image. These may affect the Group's performance.