Risk Information

Relationship with GMO Internet Group

Our Position within the GMO Internet Group

The Group is part of the GMO Internet Group, a corporate group centered around GMO Internet Group, Inc. (hereinafter referred to as "GMO Internet Group"). As of the end of December 2025, GMO Internet Group, Inc. directly holds 90.59% of the Company's voting rights and indirectly holds 1.42%.

GMO Internet Group operates under the corporate slogan "Internet for Everyone" and is engaged in various businesses, including the Internet Infrastructure Business, Internet Security business, Internet Advertising and Media Business, Internet Finance business, Crypto Assets business, and Incubation business. Among these businesses, the Group is positioned as a core company responsible for the Internet Infrastructure Business and Internet Advertising and Media Business within the GMO Internet Group.

As a result, any changes in GMO Internet Group’s fundamental policies regarding the Group could impact the Group's business operations and financial performance.

Furthermore, as of January 1, 2025, based on the absorption-type company split agreement dated June 25, 2024, entered into with GMO Internet Group, Inc., new shares were issued as consideration for the business succession. As a result, GMO Internet Group, Inc. now holds 90% or more of the Company's voting rights.

Additionally, on March 31, 2025, the Company acquired the shares of eight overseas subsidiaries centered on the Internet Infrastructure Business held by GMO Internet Group, Inc., as well as loan receivables related to said business.

Furthermore, GMO Internet Group, Inc. announced in a timely disclosure dated July 29, 2025, that it had sold a portion of the Company's common shares to help the Company meet the listing maintenance standards.

Concurrent Directorships with GMO Internet Group, Inc.

Among the Company's 7 directors (4 Directors excluding Directors who are Audit and Supervisory Committee Members, and 3 Directors who are Audit and Supervisory Committee Members), 3 individuals also serve as executives at GMO Internet Group, Inc. Their positions in the Company, their names, and their respective roles at GMO Internet Group, Inc. are as follows:

Furthermore, the proposal "Election of 4 Directors (excluding Directors who are Audit and Supervisory Committee Members)" will be submitted as an agenda item (matter for resolution) to the Annual General Meeting of Shareholders scheduled to be held on March 18, 2026. If this resolution is approved and adopted, there will be no changes to the above situation.

Mr. Masatoshi Kumagai and Mr. Masashi Yasuda, who serve as non-executive directors, have been appointed to provide advice on the business of the Group. However, the management policies of GMO Internet Group may have an impact on the Group's business operations and financial performance.

Ensuring Independence from GMO Internet Group, Inc.

In the Group's business activities and management decisions, all operations are independently executed and developed based on its own decision-making process. Additionally, the concurrent roles held by executives at GMO Internet Group, Inc. do not hinder the Company's independent management decisions. The Company considers that the Group's management autonomy is fully ensured, maintaining independence from GMO Internet Group, Inc.

Regarding the Group's business transactions, the status of transactions with GMO Internet Group, Inc. is outlined in Section ② above. However, the majority of the Group's business transactions are conducted with general companies that do not have capital relationships with the Company.

Furthermore, when the Group conducts transactions with GMO Internet Group, Inc. or other companies within its group, it carefully assesses the appropriateness of transaction terms by comparing them with those of third-party transactions before execution. In particular, for resolutions involving transactions or actions that could result in conflicts of interest with minority shareholders, the Company establishes a special committee centered on Independent Outside Directors who are Audit and Supervisory Committee Members each time such transactions arise, ensuring a system to make decisions from an independent and objective standpoint.

Business Activities of Each Business in the Group

Internet Infrastructure Business

In the Internet Infrastructure Business, we have internalized our development structure to provide products and services that meet customer needs. We offer one-stop services that serve as the foundation for individuals, corporations, and local governments to disseminate information and conduct economic activities on the Internet. Most of these are recurring (stock-type) revenue products, which form a solid recurring revenues base for the Group. However, in the cloud and hosting service field, due to low barriers to entry, there are many competitors in the industry, resulting in intense competition.

To address the increasingly sophisticated and diverse customer needs, the Group adopts a multi-brand strategy. However, if competition further intensifies due to factors such as price wars, it could impact the Group's financial performance. In addition, domain coordination and management are centrally handled by ICANN (The Internet Corporation for Assigned Names and Numbers), a private nonprofit organization based in the U.S. Depending on ICANN’s actions, there could be effects on the development of the Company's business.

For our Internet connection services, we procure network lines from telecommunications carriers. If the terms of these agreements were to deteriorate due to contract changes or other factors, it could also impact the Group’s financial performance.

Internet Advertising and Media Business

In the Internet Advertising and Media Business, we aim to establish a dominant market position and are strengthening our capabilities in the ad technology field and enhancing the development of our proprietary products and media, in order to adapt to the anticipated complexities and multifaceted changes in the Internet advertising market. However, if there are delays in responding to new technologies or if services are provided that diverge from user preferences, the number of users for each platform the Group handles may decline, potentially affecting the sales of ad inventory on those platforms.

Furthermore, if any of the Internet advertising media operators the Group deals with are found to be involved in so-called “ad fraud,” advertising exposure from affected advertisers may decrease, leading to a reduction in the Group’s advertising volume, which could impact the Group's financial performance.

The Internet Advertising and Media Business includes companies that act as authorized agencies for LY Corporation and Google Inc., and a significant portion of the Group’s consolidated transaction volume is comprised of products from these two companies. While we currently maintain good relationships with these partners, changes in their business strategies, contract renewal terms, or industry trends could result in decreased transaction volumes, which may affect the financial performance of the Group.

Global Business Development and Business Activities with Global Companies

The Group is promoting operations at global offices and business alliances with global companies in order to respond to business expansion and technological innovation. These partnerships comply with local laws and regulations; however, the implementation or revision of laws related to the import and export of services, taxation systems such as tariffs, corporate mergers or dissolutions of local companies, or other unforeseen local legal or governmental policy changes may result in administrative recommendations, procedural requirements, or orders and guidance by authorities. These may restrict the execution of such business and could impact the Group’s financial condition and business performance.

In addition, if global companies are affected by social or political turmoil such as war, terrorism, conflict, riots, or other factors, it could impact the Group’s business activities.

Information Security

The Group, through its business activities, handles sensitive information from users and business partners, including personal information. The Company recognizes that maintaining a robust and appropriate information asset management system is a critical priority.

However, in the event of a leakage of information related to users or business partners from the Group, its social credibility may be significantly damaged, which could have a serious impact on the Group's financial performance and business continuity.

System Management

The Group specializes in Internet-related services and, in some cases, outsources critical operations such as Internet connection and data center maintenance.

As a result, if system failures occur in areas beyond the Group's control—such as unauthorized access by malicious third parties, hardware or software defects (including so-called bugs), or other disruptions—part or all of the network systems used in the Group's business may malfunction. This could lead to the loss or alteration of important data, unauthorized acquisition of data by third parties, or suspension of transactions.

These incidents could not only result in lost revenue opportunities but may also expose the Group to significant claims for damages from third parties, administrative guidance from regulatory authorities, suspension of business operations, or other administrative sanctions, potentially having a serious impact on the Group's business activities and financial performance.

Compliance

Maintenance of Legal and Regulatory Compliance Systems

The Group recognizes the need for continuous enhancement of comprehensive risk management and is striving to ensure thorough compliance throughout the organization. The Group is strengthening its compliance framework through initiatives such as the operation of an Internal Audit Office reporting directly to the President and CEO, the internal whistleblowing system (GMO Internet Helpline System), implementation of internal control systems under the Financial Instruments and Exchange Act, and the establishment and operation of internal control systems under the Companies Act.

However, in cases where compliance systems fail to keep up with rapid business expansion or sudden increases in personnel, the Group may not be able to completely avoid compliance-related risks, including individual or organizational misconduct. If any legal violations occur, it could affect the Group’s financial performance.

Various Laws and Regulations

Telecommunications Business Act

This law was enacted to ensure the proper and rational operation of telecommunications services, in consideration of their public nature, to protect user interests, promote sound development of telecommunications, and enhance public welfare. The Company is a registered telecommunications carrier under this Act. As such, the Company is subject to regulations concerning the prohibition of censorship, protection of communication privacy, obligations relating to operations and equipment, interconnection of facilities, handling of specific user information, and regulations on the external transmission of user information (Cookie regulations).

The Group has implemented various measures to comply with these obligations. However, there is no guarantee that such measures are sufficient, and the Group may be subject to guidance or recommendations from regulatory authorities. In some cases, the Group could face increased contract cancellations or decreased new contracts, which may impact the Group's financial performance.

Act on Control and Improvement of Amusement Businesses

This law aims to preserve public morals and a clean environment and to prevent actions that may hinder the sound development of young people. It restricts the hours and locations of adult entertainment and related businesses, prohibits minors from entering such premises, and promotes the proper conduct of such businesses. The law primarily regulates those who directly operate adult entertainment businesses.

Under this law, providers of services such as server space and rental servers used in conjunction with Internet access may be subject to a duty to make efforts to prevent the transmission of obscene images if they become aware that such images have been recorded by a video-transmitting adult entertainment business on their servers. Therefore, this law may also apply to the Group.

The Group clearly states in its service terms with users that users are responsible for the content of websites they operate, and it actively raises awareness of legal compliance. Through such voluntary regulations, the Group seeks to prevent the distribution of illegal or harmful content. However, there is no guarantee that these measures are sufficient, and the Group may face administrative guidance, complaints, damage claims, or recommendations from users, viewers, related parties, or regulatory authorities regarding the websites operated by its users.

Act on Prohibition of Unauthorized Computer Access

This Act was enacted to prevent crimes involving computers via telecommunications lines and to maintain the order of telecommunications realized through access control functions, thereby contributing to the sound development of an advanced information and telecommunications society. It prohibits unauthorized access to computers.

Administrators of computers connected to telecommunications lines are also subject to a duty to take necessary measures to defend against unauthorized access. The Group, as an administrator of such systems, is subject to this obligation.

Act on the Limitation of Liability for Damages of Specified Telecommunications Service Providers and the Right to Demand Disclosure of Identification Information of the Senders

In light of the expansion of information distribution via the Internet and other means, this act stipulates the limitation of liability for damages of specified telecommunications service providers, such as providers and server administrators/operators, and the right to demand the disclosure of sender identification information, with the aim of contributing to the proper distribution of information via specified telecommunications.

In conducting certain business operations, the Group is subject to this act as a specified telecommunications service provider. Under certain circumstances, the Group's liability for damages in cases where rights are infringed upon by the distribution of information via specified telecommunications is exempted by this act. On the other hand, since this act affects the expressive activities of information senders, the Group is required to make extremely critical and appropriate judgments when implementing measures such as transmission prevention measures stipulated in the act.

In light of the purpose of the act, the Group strives for careful operation to ensure appropriate judgments. However, if such judgments are deemed inappropriate in lawsuits or other proceedings, the Group may be subject to administrative guidance, complaints, claims for damages, or recommendations from users, other related parties, or administrative agencies.

Act on Specified Commercial Transactions

This Act was enacted to ensure fairness in specified commercial transactions (such as door-to-door sales and mail order), to prevent potential harm to consumers, and to promote sound development of the national economy through proper distribution of goods and services. It sets out administrative regulations such as mandatory disclosure of business names, prohibitions on improper solicitation and false or exaggerated advertising, as well as civil rules including the introduction of opt-in rules for advertising emails, cooling-off periods, and caps on damages.

Given the increasing problems with returns, unsolicited advertising emails, and credit card information leaks in Internet transactions, this Act also applies to e-commerce transactions.

Since the Group's Internet Advertising and Media Business and the email distribution of advertisements to users fall under the scope of this Act, amendments to the Act may impose further restrictions on these business activities and marketing efforts.

Act on Regulation of Transmission of Specified Electronic Mail

This law was enacted to prevent disruption to email communications caused by the mass distribution of profit-oriented advertisements and to create a sound environment for email usage. It mandates that senders of specified commercial emails include contact information and comply with related obligations.

This law has shifted from an opt-out model to an opt-in model, strengthened enforcement, and enhanced international cooperation. The Group's Internet Advertising and Media Business and the distribution of advertising emails to users are regulated under this law. Therefore, amendments to the law may impose additional restrictions on the operation and promotional advertising of this business.

Act on the Protection of Personal Information

In light of the expanded use of personal information accompanying the development of an advanced information and telecommunications society in recent years, this act aims to protect the rights and interests of individuals while taking into consideration the usefulness of personal information regarding its proper handling. It imposes obligations on business operators handling personal information concerning the specification of the purpose of use and restrictions on use, ensuring propriety in acquisition, ensuring the accuracy and up-to-dateness of personal data, security control measures, and restrictions on disclosure or provision to third parties.

Under this act, the Group bears a legal obligation to provide appropriate explanations to and obtain the consent of users and other providers of personal information regarding its use, and to take appropriate management measures for such personal information. In addition to this legislation, the Group is required to operate its businesses in compliance with guidelines concerning the protection of personal information established by regulatory authorities or industry associations regarding the handling of personal information.

Act on Development of an Environment that Provides Safe and Secure Internet Use for Young People

This law was enacted in light of the widespread availability of harmful content on the Internet. It aims to enable youth to use the Internet in a safer and more secure manner, thereby protecting their rights.

Under this law, the Group's services that involve server management—such as Internet connection, hosting, and bulletin board services—are subject to obligations such as providing filtering services and restricting access to harmful content for youth. Additionally, any deletion or restriction of information under this law may affect freedom of expression. Therefore, when identifying and restricting harmful content, the Group is required to make careful and appropriate decisions.

The Group strives for prudent operation to ensure such decisions are appropriate. However, if a court or administrative body later deems its decision inappropriate, the Group may be subject to complaints, damage claims, administrative guidance, or recommendations from content creators or other related parties.

Act against Unjustifiable Premiums and Misleading Representations

This law aims to protect consumers by prohibiting unfair premiums and misleading representations in product and service transactions that could hinder consumers’ independent and rational choices.

The Group makes efforts to properly display product and service details and prices on websites, to ensure promotional campaigns comply with legal requirements, and to provide internal training on this law.

However, if a product or service purchased by a user is defective, or if false or misleading advertisements are issued by the Company or its business partners, or if a regulatory body or consumer determines that an advertisement is inappropriate, the Group may face complaints, compensation claims, class actions, or administrative penalties such as surcharge orders. These situations may significantly impact the Group's business activities and financial performance, or damage the Group's social credibility.

Potential Legal Actions

In the Group's Internet Infrastructure Business, a wide range of information, products, and services across all fields are provided via the Internet, and stable service operations are essential. However, in the event of system failures caused by natural disasters, DDoS attacks by malicious third parties, unauthorized access to the Company's facilities, or other incidents beyond foreseeable technical defense capabilities, there is a risk of significant damage to users or third parties.

To address this, the Group has implemented measures such as uninterruptible power supplies, 24/365 system monitoring and customer support with backup systems, and security enhancements. The Group also includes disclaimers in its service agreements. Nonetheless, lawsuits or compensation claims may still be filed against the Group by users or third parties.

In addition, recognizing the importance of intellectual property rights, the Group takes measures to protect IP and prevent infringement. However, there remains the possibility of lawsuits being filed against the Group by third parties claiming IP infringement and seeking damages or injunctions.

If such lawsuits or legal actions occur, they may significantly affect the Group's business operations and financial performance, and could harm the Group's social credibility.

Talent Acquisition and Development

As the Group expands and the workload increases, the Group recognizes that securing and developing talented personnel across all business areas is a critical management priority. To address this, the Group is actively strengthening its business planning and management structures, conducting proactive hiring, and focusing on enhancing organizational development and talent training through various educational programs.

However, if changes occur in the employment environment or labor supply and demand, the Group may need to revise existing business strategies, slow down the pace of business development, and diversify its recruitment methods, which could result in increased costs and may impact the Group’s financial performance and financial position.

Intangible Assets

Intellectual Property

The Group strives for lawful business operations and legal protection by registering patent rights, utility model rights, design rights, trademark rights, copyrights, and other intellectual property rights, or by obtaining licenses to use them. However, if the Group's intellectual property rights cannot enjoy legal protection for any reason, or if decisions such as the invalidation or revocation of their registration or validity are finalized through legal procedures, it could adversely affect the Group's business and financial performance.

Furthermore, although the Group conducts prior registration rights searches to the extent possible in advance to avoid infringing on the rights of third parties, there is a possibility of unintentional omissions in the search results being discovered, or that the Group may be subject to attacks such as infringement lawsuits from third parties aiming to obtain large amounts of money through settlements, regardless of whether an actual infringement exists. As a result, if substantial defense costs, settlement costs, or other expenses arise in relation to disputes, or if certain restrictions are imposed on the Group's business scope, it could have a material impact on the Group's financial performance.

Goodwill

The Group records goodwill arising from corporate acquisitions and organizational restructurings. If indications of impairment emerge due to factors such as a deterioration in the financial performance of the companies to which the goodwill relates, and the recoverable amount falls below the carrying amount of the goodwill, it will be necessary to recognize an impairment loss on the goodwill, which could impact the Group's financial performance and financial position.

New Business Development and Business Investment

The Group may establish new companies, invest in existing companies, or develop joint ventures as a means of business expansion and growth. These investment activities are reviewed through internal committees consisting of key members with specialized knowledge, where profitability and risk analyses are carefully examined to provide a system of checks and balances in determining whether to proceed with the investment.

However, it is difficult to accurately predict the business conditions of the investment targets or the impact of new businesses on the Group. If, after the investment, unforeseen factors arise—such as the discovery of previously unidentified liabilities, the occurrence of contingent liabilities not detected during due diligence, or if investment activities or new businesses do not progress as planned—there is a risk that investment recovery may become difficult, which could have a significant impact on the Group’s financial performance.

Organizational Reform

The Group is committed to continuously reviewing the functions of existing organizations, while also implementing measures such as cost optimization and asset reduction. Depending on the progress of these initiatives, if significant temporary expenses arise due to the restructuring of existing organizations, businesses, or operations, it may impact the Group's financial performance and financial position.

Market

Interest Rate Fluctuations

The Group procures necessary funds primarily through borrowings from financial institutions and the issuance of corporate bonds. Therefore, if interest rates rise due to changes in monetary policy or financial markets, procurement costs will increase, which could impact the Group's financial performance and financial position.

Exchange Rates

The Group prepares its consolidated financial statements after converting the net sales, expenses, assets, liabilities, etc., of its overseas consolidated subsidiaries into yen. In addition, some of the Group's businesses involve making expenditures in foreign currencies to overseas companies. Although the Group strives to mitigate exchange rate fluctuation risks through hedging transactions utilizing derivatives such as forward exchange contracts, fluctuations in foreign exchange rates could have a material impact on the Group's financial performance.

Natural Disasters, etc.

In the event of earthquakes, lightning strikes, typhoons, tsunamis, severe weather, or other natural disasters, or prolonged power outages, fires, the spread of diseases, radioactive contamination, intense solar winds, falling meteorites, or other disasters that are difficult to address, it could have a material impact on the operation or continuity of the Group's business. The Group is advancing the formulation of business continuity plans assuming all possible scenarios; however, if human and physical damage caused by the materialization of these risks is severe, the continuity of the Group's business itself may become impossible.