Risk Factors

The following are the main risks that management recognizes may significantly affect the financial position, operating results and cash flow of our consolidated companies among the business and accounting matters in the securities report.

Our Group determined the matters relating to the future in this text at the end of March 2025.

As of the end of FYE2026, the Group had 7,629 technicians, of whom 64.7% (4,938) were on permanent contracts. If economic conditions in the industries to which the Group’s customers belong deteriorate, the Group may face less-favorable contractual terms and conditions, higher labor costs for technicians on standby, early termination of dispatch contracts for their term, etc. Because the Group employs a large number of permanently employed technicians, during an economic downturn, the labor cost burden of permanently employed technicians on standby may increase, which may affect the Group's operating results and financial position. In addition, in the construction industry, to which the Group’s main customers belong, overall construction investment is on an increasing trend, driven by robust public and private-sector capital investment. However, the industry continues to face structural problems such as the aging of technicians and a shortage of young technical employees. If trends in construction investment fluctuate considerably in the future due to factors such as sizeable reduction in public projects and depressed private construction in line with fluctuations in economic conditions or a deterioration in the economic climate, this may affect order intake.

With Japan’s overall population expected to decline, if the markets in which the Group operates continue to contract, or if competition to recruit new graduates and mid-career technicians intensifies further, this may affect the Group’s business operations and operating results. On the other hand, the construction industry, to which the Group's major customers belong, continues to face structural problems such as the aging of technicians and a shortage of young technical employees. In addition, under the Labor Standards Act after being amended under the “Act on the Arrangement of Related Acts to Promote Work Style Reform,” regulations on the maximum of overtime work in the construction industry have been applied since April 2024, which further intensifies labor shortages. Domestic demand for technical personnel is expected to remain persistently high, and if the Group can meet customer needs by continually strengthening its recruitment framework, this could present a growth opportunity for the Group.

Kosuke Kiyokawa, our founder and president, has been the chief executive officer since our foundation. He holds our shares both directly and indirectly through an asset management company. The CEO has a wealth of experience and knowledge about personnel dispatching and placement not only for the construction industry, but also for the machine design, semiconductor, and SES industry. Accordingly, he plays an extremely important role in determining and executing management policies and business strategies.

Our Group has established a management structure that does not excessively rely on the CEO. Officers and executive managers share information in Board of Directors’ meetings and Medium-Term Management Monitoring Meetingsgroup management meetings. We have also strengthened our management organization. Nevertheless, if it becomes difficult for Kosuke to continue our operations for some reason, it may affect determination and execution of management policies and business strategies. As a result, that may affect our Group’s business results and financial position.

Our Group operates business under a governance structure that does not rely on specific persons – including the Board of Directors. Accordingly, we do not see any problems that should be noted in our current structure. Therefore, we believe it is unlikely that such risks will manifest.

The Group acquired all shares of TRYT Inc. and TRYT Engineering Inc. (at the total acquisition cost of 29,243 million yen) in March 2026. Through the share acquisition, the Group intends to integrate the strengths and customer base of TRYT Engineering Inc. with the know-how and customer base it has built to date. By enhancing its customer service capabilities throughout Japan, the Group aims to expand sales opportunities, secure a diverse pool of high-quality dispatched technicians, and further increase its contribution to the domestic construction market.

In implementing acquisitions and mergers, business alliances, new businesses, etc., the Group carefully considers and executes them only when, based on certain internal criteria, it judges that they will contribute to the Group's future operating results. However, if the anticipated synergies fail to materialize, or if such businesses deviate significantly from the initially assumed earnings plan, etc., the Group may not achieve its expected results.

The Group has recorded a significant amount of goodwill on its consolidated balance sheet as a result of the acquisition. As of the end of FYE2026, goodwill (27,809 million yen) accounted for 58.6% of consolidated total assets (47,471 million yen). The Group believes that this goodwill appropriately reflects the business value and future profitability of each business. However, if it is determined that the expected benefits will be significantly impaired over time due to changes in the business environment, competitive conditions, or other factors, or if the applicable discount rates or long-term growth rates fluctuate significantly due to rising interest rates, market contraction, or other factors, an impairment loss may arise, which may affect the Group's operating results and financial position.

The Group procures funds for investments, including M&A, through borrowings from financial institutions. If interest rates rise sharply, or if cost burdens such as interest expense increase amid a long-term rise in interest rates, etc., this could adversely affect the Group's operating results and financial position.

Our Group employs approximately 7,629 dispatched engineers. We also recruit a large number of dispatched engineers (as of FYE 2026). Therefore, we are working to secure the quality of personnel at recruitment, to enhance management of dispatched engineers including labor management with an emphasis on compliance, to strengthen our education and training structure, and to improve employee satisfaction.

Nevertheless, disputes may arise with dispatched engineers about occupational health and safety and employment relations. These may impact our business activities. As a result, that may affect our Group’s business results and financial position.

If an engineer our Group has dispatched suffers an injury, illness, disability or death while working at or commuting to a dispatch destination, our Group is obliged to provide accident compensation as the employer. Our Group attempts to grasp risks in the working environment of dispatch destinations in advance by conducting periodic interviews with our dispatched engineers. However, if an occupational accident occurs, it may affect our Group’s business results and financial position.

Our Group strives to operate business that does not result in conflicts or occupational accidents among dispatched engineers. We do this by establishing an internal control structure while thoroughly complying with laws and regulations. Accordingly, we believe it is unlikely that such risks will manifest.

Since personnel dispatch and job placement businesses in Japan are subject to regulations under the Labor Standards Act, as well as the Worker Dispatch Law and the Employment Security Act, the Group conducts confirmations and controls within its business processes to prevent any acts or events that would violate these laws and regulations, and works to monitor and prevent such risks on an ongoing basis. However, if the guidance policies of supervisory authorities are strengthened, or if the Group's initiatives are not sufficiently reflected at client worksites, the Group may become subject to dispositions such as the revocation of business licenses or suspension of business.

Furthermore, if future amendments to relevant laws and regulations or tighter guidance policies from supervisory authorities, etc., lead client companies to reconsider their use of dispatching and subcontracting, resulting in a decline in demand, this may affect the Group's operating results and financial position.

Our Group thoroughly complies with laws and ordinances by establishing education opportunities for employees as necessary. We are also reducing the risk of lawsuits in the relations with our business partners. Nevertheless, if a lawsuit or dispute arises relating to us due to unforeseen circumstances, the costs we will incur and the loss in our social trust due to such a lawsuit and compensation for damages may affect our Group’s business results and financial position.

Our Group strives to operate business that does not result in lawsuits or disputes. We do this by establishing an internal control structure while thoroughly complying with laws and ordinances. Nevertheless, our Group cannot control the content and timing at which such risks caused by external factors manifest. Therefore, we recognize that it is difficult to predict their level of impact in advance.

Our Group’s dispatched employees may learn the confidential information of our customers in operations. We also handle the personal information of dispatched engineers (e.g., their names, addresses and telephone numbers) in the dispatching business. To that end, we are ensuring the appropriate handling of information and information equipment. We are achieving this by establishing and operating various information security regulations. We also acquire privacy marks and educate and train our officers and employees.

Our Group has strengthened network security and are taking measures against data loss and leakage in our information systems.

If confidential information or personal information our Group possesses is leaked externally despite taking the above measures, claims for damages may affect our business results and financial position. Data loss or leakage in our Group’s information systems may also interfere with the operation of our business.

Our Group strives to appropriately operate our personal information structure. Accordingly, we believe it is unlikely that such risks will manifest.

Our Group thoroughly complies with laws and ordinances by establishing education opportunities for employees as necessary. We are also reducing the risk of lawsuits in the relations with our business partners. Nevertheless, if a lawsuit or dispute arises relating to us due to unforeseen circumstances, the costs we will incur and the loss in our social trust due to such a lawsuit and compensation for damages may affect our Group’s business results and financial position.

Our Group strives to operate business that does not result in lawsuits or disputes. We do this by establishing an internal control structure while thoroughly complying with laws and ordinances. Nevertheless, our Group cannot control the content and timing at which such risks caused by external factors manifest. Therefore, we recognize that it is difficult to predict their level of impact in advance.

Our Group’s dispatched employees may learn the confidential information of our customers in operations. We also handle the personal information of dispatched engineers (e.g., their names, addresses and telephone numbers) in the dispatching business. To that end, we are ensuring the appropriate handling of information and information equipment. We are achieving this by establishing and operating various information security regulations. We also acquire privacy marks and educate and train our officers and employees.

Our Group has strengthened network security and are taking measures against data loss and leakage in our information systems.

If confidential information or personal information our Group possesses is leaked externally despite taking the above measures, claims for damages may affect our business results and financial position. Data loss or leakage in our Group’s information systems may also interfere with the operation of our business.

Our Group strives to appropriately operate our personal information structure. Accordingly, we believe it is unlikely that such risks will manifest.

Our Group has sales bases across Japan. Accordingly, we will respond promptly and accurately if a natural disaster (e.g., earthquake, tsunami or typhoon) strikes. However, if an unexpected large-scale disaster strikes, it may be difficult for us to operate certain businesses. We also have a large number of engineers and customer bases due to the nature of our personnel business. This means we assume it will take an enormous workload to confirm the safety of our dispatched engineers and to adjust contract details. Therefore, that may affect our business operation, business results and financial position.

Also, in cases where unknown infectious diseases spread worldwide in the same manner as the novel coronavirus (COVID-19), in additional to incurring considerable losses in its business activities, such as due to construction companies or other business partners interrupting the operation of construction sites over the long term in order to prevent infectious diseases or to construction work decreasing, the Group may experience a serious impact in its valuable personnel or an impact in its business, business results or financial condition.

Our Group is working to reduce these risks. However, we cannot mitigate and avoid them just with our own risk management measures. If these risks manifest, they may have an impact according to the frequency with which they materialize and their size. However, we recognize that it is difficult to definitively predict their level of impact.

Our Group strives to operate business that does not result in grounds to suspend our business, revoke our licenses or to abolish our business. We are achieving this by establishing an internal control structure while thoroughly complying with laws and ordinances. Accordingly, we believe it is unlikely that such risks will manifest.

On the other hand, the construction industry, to which the Group's major customers belong, continues to face structural problems such as the aging of technicians and a shortage of young technical employees. In the event that there is an increase in the shift to permanent employment of dispatched technical employees, or a reduction in dispatching contracts by customers of the Group, or an increase in switching to direct employment contracts, and it happens at a speed that exceeds the Group’s ability to deal with it, there may be an impact on the orders received, etc. As a result, the operating results and financial condition of the Group may be affected.

The revision of the Worker Dispatch Law, which came into effect on April 1, 2020, asks us to select one of two methods: (i) (1)client company equal and balanced method or (ii) dispatch agency labor-management agreement method. The purpose of this is to eliminate unreasonable differences in working conditions between regular workers employed by client companies (permanent full-time employees) and dispatched workers.

We have responded to this revision based on the policy of equal pay for equal work of dispatched workers as sought by the Japanese government. In addition to responding to this revision, we are looking to secure and accumulate profits by negotiating appropriate charge increases (an increase in the sale price per dispatched engineer) with our business partners. However, if costs increase faster than we can respond, that may affect our Group’s business results and financial position.

Our Group policy is to establish a structure for risks caused by external factors (e.g., changes in legal regulations). We grasp the risk of this manifesting at an early stage by monitoring trends in the revision of relevant laws and ordinances. Nevertheless, our Group cannot control the content and timing at which such risks caused by external factors manifest. Therefore, we recognize that it is difficult to predict their level of impact in advance.