Risk Factors

The Company is subject to a number of risks and uncertainties, including but not limited to those described below. Our business, results of operations, financial condition and cash flows could be materially and adversely affected by any such risks and uncertainties.

In particular, the global outbreak of respiratory disease caused by a novel strain of coronavirus first identified at the end of 2019 ("COVID-19") affects many of the individual risks described below. In light of the importance of the risks relating to COVID-19 as of the end of June, 2020 (the date of submission of the Annual Report, translated from Yukashouken Houkokusho for FY2019), we have presented an overview of these risks under the section titled "The Outbreak of COVID-19 May Adversely Impact Our Business, Results of Operations and Financial Condition" below.

The following contains forward-looking statements, which reflect the Company's assumptions, estimates and outlook for the future based on the Company's plans and expectations as of March 31, 2020 unless the context otherwise indicates.

Due to a significantly uncertain outlook caused by the global spread of COVID-19, economic activity, including consumer and business activity, has been negatively affected globally, including in Japan. As a result, the Company's revenue and profits have been negatively impacted and may be further negatively impacted in future periods.

The following summarizes the potential risks to the Company's businesses as a result of the the global spread of COVID-19:

HR Matching business, which is comprised of HR Technology, Staffing, and HR Solutions in Media & Solutions, have been negatively affected, as employers have turned cautious on hiring while assessing the current economic situation and adapting to social distancing and other restrictions in many countries around the world. Revenue in HR Technology and HR Solutions in Media & Solutions may continue to decline if employers decrease the number of job advertisements and cancel hiring events in response to the above conditions. For the same reasons, revenue in Staffing may decline if demand for temporary staff from enterprise clients continues to decline.

Marketing Solutions in Media & Solutions, has also been negatively affected by reduced demand for advertising services, especially in travel, dining and bridal, as a result of the state of emergency and shelter-in-place request in Japan since April 2020. Revenue may decline to the extent enterprise clients temporarily suspend spending on advertising or change to lower priced advertising packages as a result of the weak business environment.

SaaS solutions, mainly Air BusinessTools, in Media & Solutions currently focus on increasing the number of enterprise client accounts by providing free solutions and marketing promotions. The number of accounts for AirPAY, a SaaS solution for accepting cashless payments, has particularly increased in FY2019, supported by the initiatives by the Japanese government to encourage business owners to accept cashless payments. The growth in the number of accounts may slow if enterprise clients suspend their subscriptions of Air BusinessTools in response to a continued weak business environment.

In addition to the risks discussed above relating to economic and business conditions, the Company's business and financial results may be negatively impacted by the spread of COVID-19 due to any of the following:

  • If the Company is unable to promptly and effectively address changes in the needs and preferences of enterprise clients and individual users, our market share and revenue may be negatively affected.
  • In the case where financial results are forecasted to decline over the long term, the Company may be required to recognize impairments of goodwill or intangible assets recorded in connection with acquisitions that exceed impairment losses the Company has already recognized.
  • The Company's liquidity may be negatively impacted if its creditworthiness declines as a result of declining financial performance or weakening of the business environment, or if the Company experiences delays in collecting, or default of, receivables.
  • Exchange rate volatility may result from unstable currency exchange markets.
  • The Company may be unable to obtain financing on attractive terms or at all due to an economic recession, volatility in financial markets, increases in interest rates, decreases in our creditworthiness or credit ratings downgrades, declining financial performance or weakening of the business environment.
  • The Company may experience operational or business disruptions or be forced to suspend certain operations or businesses if a large portion of the workforce it depends on to operate its business, including the employees and third-party service providers, contracts COVID-19 or is otherwise unable to function.

The performance of our businesses is generally sensitive to economic, social and geopolitical conditions in our main operating markets, including Japan, the United States, Europe and Australia, as well as global economic conditions more generally.
In the Company's HR Matching business, which is comprised of the HR Technology and Staffing SBUs, and the HR Solutions subsegment of the Media & Solutions SBU, the results of our operations are sensitive to negative developments in the labor and employment market resulting from economic downturns or uncertainty.
In times of negative economic conditions, employers may reduce spending on job advertising and other job placement and search staffing services or reduce hiring employees or agency workers due to cost-cutting initiatives or increased access to qualified job seekers without the use of advertising or other third-party services. Any such reduction in spending or hiring by employers would in turn reduce demand for our HR Matching business.
In addition, in our Marketing Solutions operations in the Media & Solutions segment, adverse economic conditions may affect consumer spending activity that may negatively affect the Company's enterprise clients' businesses and adversely impact enterprise clients' demand for our services due to reductions in advertising expenditures and other cost reduction initiatives or changes in consumer spending activity that negatively affect their businesses.
The outlook for the economy in our main operating markets remains highly uncertain and could be adversely affected by a range of economic, social and geopolitical developments.In particular, recent global economic conditions have significantly weakened due to extensive disruptions in economic activity and volatility in financial markets caused by the outbreak and global spread of COVID-19 and the measures implemented in many countries to help contain the spread of the virus. See "The Outbreak of COVID-19 May Adversely Impact Our Business, Results of Operations and Financial Condition." above.
There are also longer-term challenges in Japan surrounding deflation and the impact of unfavorable demographic trends such as the declining birthrate and the decline and aging of the overall population. In the United States, there remains significant economic uncertainty surrounding trade tensions between the United States and China and other major trading partners as well as other trade policies being pursued in the United States. In Europe, the impact of the exit of the United Kingdom from the European Union as well as the volatile political environment in many major European countries remains highly uncertain.
Any of these regional factors as well as factors outside of the Company's main operating markets, including economic slowdowns in China or other regions as a result of COVID-19 as well as the potential escalation of geopolitical risks associated with the Middle East and North Korea, could impact regional economies and the global economy more generally.

The markets in which we operate are highly competitive, and competition has generally intensified in recent years across our businesses. In particular, certain markets in which the Company operates have relatively low barriers to entry, which enables new competitors, including those operating in different industries, to enter these markets relatively easily.

In addition, the Company's ability to keep pace with increasingly rapid advances in technology is also a key competitive factor in many of our businesses. We may be unable to maintain a competitive position in our operating markets by relying on the strength of our brands, laws and regulations, financial resources and individual users and enterprise client bases.

Our current and potential competitors include large global technology companies, and a variety of global and regional companies operating in one or more of our target markets. These companies may have more advanced technological resources, more compelling business models, greater financial resources, more competitive pricing or ability to provide such pricing, greater global or regional brand awareness, larger user bases, stronger relationships with enterprise clients, greater access to potential employees, agency workers and other personnel or superior service, sales, marketing and other resources than we do.

Market shares, particularly in Internet-based services in the HR Technology and Media & Solutions segments, have in the past been subject to significant shifts from time to time due to the relative ease for individual users to switch to other services. As a result, our ability to compete effectively depends on our ability to achieve continued innovation and to improve the functionality of existing services and introduce compelling new services in order to effectively respond to the evolving needs and preferences of individual users and enterprise clients.

If we fail to keep providing services that gain market acceptance among individual users and enterprise clients and our competitors successfully differentiate their services from ours, our competitive position and market share could be materially harmed.

The Media & Solutions segment has a strong market position and has achieved the top market share in terms of revenue for many of their core businesses in Japan, which may make future growth for these businesses more challenging relative to other businesses. Even if we are able to maintain and further increase our market share, our margins may decrease if we are forced to undertake additional advertising and marketing expenditures, lower our pricing for existing services or introduce new services with lower profitability to do so.

The Company's business model depends on our ability to offer individual users and enterprise clients services that meet their respective needs and preferences. Accordingly, maintaining our competitive position and market share requires that we adapt quickly to changes in such needs and preferences.

For example, increased use of the Internet, social media, mobile devices and other new technologies, has resulted in information being available more rapidly and in real time while new technologies have made it relatively easy for new entrants to build user bases quickly without significant investment. In particular, the ability to offer effective mobile applications that provide individual users with an appealing, easy-to-use mobile experience is an increasingly important factor in maintaining and growing our individual user base and direct user traffic for many of our online services. These and other changes in technology and user behavior have in turn resulted in changes in the needs of our enterprise clients.

In addition, the needs and preferences of individual users and enterprise clients may change in response to the COVID-19 outbreak due to changes in the lifestyles of individual users and the business operations of enterprise clients. See "The Outbreak of COVID-19 May Adversely Impact Our Business, Results of Operations and Financial Condition." above.

We must invest significant resources to continually enhance and improve our existing services and to introduce new and innovative features and services that are compelling to individual users and enterprise clients and respond effectively to rapidly evolving technology and the way it is used or implemented by individual users or enterprise clients. If we are unable to accurately and swiftly identify and understand the changes in the needs of our individual users and enterprise clients, including the appropriate balance between such changes in the needs and interests of our individual users and enterprise clients, or if we fail to improve or develop our products and services to meet the needs of our individual users or enterprise clients and predict or respond to technological changes in a timely and cost effective manner before our competitors, individual users and enterprise clients may stop using our products and services.

The Company's businesses are also affected by changes in enterprise client preferences and how and to what extent enterprise clients choose to use our services.

A substantial portion of our revenue is generated from enterprise clients advertising on our platforms in the HR Technology and Media & Solutions segments. For certain services, we provide more flexible arrangements to meet the needs of enterprise clients, and contracts with such enterprise clients are sometimes in the form of relatively short-term advertising arrangements. These short-term arrangements may expose us to the risk that our enterprise clients may switch their advertising to competitors' platforms or reduce the amount of their spending on our platforms, or may cease to do business with the Company entirely.

In addition, our enterprise clients could decide to reduce the budgets they are willing to commit to us if we do not provide effective advertising solutions, or if they do not believe that their investment in advertising with us will generate a competitive return relative to alternatives.

Individual user preferences may change in a manner that increases our costs, such as expenditures required for development of new features or services, or increased expectations for user perks or other programs that result in additional costs.

In addition, initiatives taken to respond to rapid changes in individual user needs or preferences can reduce the profitability of our existing services and business models, and there is no assurance that we will be able to adjust our business models, including maintaining the appropriate balance between the needs and interests of our individual users and enterprise clients, or develop new business models that allow us to maintain profitability.

The markets in which the Company competes is characterized by rapidly changing technologies, which in turn impact individual user and enterprise client demands and the competitive environment more generally. Accordingly, we believe it is critical to continuously invest in and improve our technological capabilities, the functionality of our system infrastructure and the reliability of our products and systems in response to technological innovation.
In addition, because many of our services are provided over the Internet, we need to continuously modify and enhance our platform to keep pace with changes in Internet-related hardware, software, communications and database technologies and standards. In addition, we may be required to make significant investments in order to advance our technological capabilities, which could in turn impact our profitability.
Developing new technology presents significant technical and business challenges and risks, including the following:

  • we may invest in technologies or uses of technology that ultimately fail to deliver the benefits we anticipate or become obsolete by the time they are launched or fully implemented;
  • we must attract, train and retain highly skilled engineers and managers in order to build, maintain and expand our information technology services and achieve innovation, and these engineers and managers may be difficult to recruit and expensive to retain;
  • the number of different types of mobile devices in use, or the applicable technical standards, could further diversify across our operating markets, substantially increasing our product development and modification costs, and we may be unsuccessful in developing appealing products for these devices;
  • we may fail to maintain or update our technological infrastructure, products and systems to rapidly changing industry or technical standards;
  • the cost of upgrading our technology or implementing and operating new technology may be substantial and such upgrades or implementations may not be cost effective;
  • any upgrades to our technology and infrastructure may not achieve the desired results or may otherwise prove ineffective;
  • we may face competition from businesses that have implemented new technology faster than us or make better use of such technology than we do;
  • products and services incorporating new technology may contain bugs, defects or other design flaws; and
  • the continuous development of new devices and technologies makes it difficult to predict future trends in the areas in which we operate.

To achieve sustainable growth of enterprise value and shareholder value, the Company has organized management units called Strategic Business Units (SBUs), aiming to ensure timely decision-making by each SBU to swiftly capture opportunities in a global market. Under this structure, the Company aims to become a global leader in the HR Matching market, in which all three of the SBUs operate, as set forth in its mid- to long-term strategies announced in May 2020.

However, it is difficult to formulate effective strategies for the businesses due to the inherent uncertainties surrounding our future performance and market environment, and our strategies may not be effective, or we may be forced to change our strategies in the future due to any number of factors.
We have established a number of strategies for each of the operating segments that we believe will allow us to achieve long-term revenue and profit growth. However, each of these strategies is subject to a number of risks and uncertainties, including the following:

HR Technology

We intend to pursue continued growth in our online job advertising business primarily through Indeed and Glassdoor while expanding our capabilities through continued growth investments including acquisitions. However, there is no assurance that we will be able to achieve growth to the extent we expect or at all, or that our investments will achieve the expected benefits.
The online job advertising market may not grow at the pace we currently anticipate due to a number of possible factors, including the transition of offline job advertisements to online job advertisements progressing at a slower pace than we expect, and we may fail to capitalize on anticipated market opportunities for a variety of reasons, such as our failure to adapt to new technologies, changes in the needs of individual users and enterprise clients in the employment market and the constantly evolving regulatory and competitive landscape.

Media & Solutions

We intend to focus on stable growth of our advertising business while expanding its software as a service ("SaaS") offerings targeting SMEs. We may be unable to grow our business in this segment if SMEs do not adopt our SaaS solutions to the extent we expect, whether due to our failure in effectively acquiring new individual users or SMEs as enterprise clients, or our products being less attractive or innovative compared to those of our competitors. In addition, if our enterprise clients experience difficulties in operating their businesses, we may not succeed in exploring opportunities to monetize our SaaS business.


We intend to focus on improving profitability across our global operations. However, we may be unable to achieve improvements in profitability, or even experience deteriorating profitability, due to the worsening of the employment environment resulting from adverse changes in global economic prospects, the tightening of regulations in any of our major operating environments, or other factors.

We also intend to invest in expanding our presence in the market for our HR Matching business. While our HR Matching business currently targets the online job advertising market through the HR Technology segment and Media & Solutions segment, we also intend to introduce technology-driven solutions, an employment placement service which uses a pay per hire model, from the HR Technology segment that create cost efficiencies through automation of manual processes in the job placement and search market and temporary staffing markets.

However, if we are unable to successfully develop and introduce such solutions or achieve market acceptance for our solutions, or if we are unable to respond to rapid changes in the employment market, we may be unable to achieve a return on our investments in these new solutions. In addition, even if we are successful, such development may also result in a reduction in the profitability of our existing traditional businesses.

As we expand our existing services or launch new ones, we may face intense competition, greater than expected costs in establishing or expanding services and hiring and training the necessary personnel, difficulties predicting market and individual user and enterprise client trends and the performance of our new businesses, returns from new initiatives that are smaller than expected or slower to materialize, unanticipated costs and difficulties, or other challenges that prevent us from successfully realizing our business goals.

On the other hand, it is also possible that we may need to exit from existing businesses or withdraw from planned investments or expansions if we determine that such businesses would not yield the desired impact or the growth potential of such businesses does not justify the required investment outlay. In these cases, such exit or withdrawal may cause us to incur substantial costs.

In addition, our existing businesses may, in turn, be negatively affected by the new innovative services that we develop and introduce to our individual users and enterprise clients.

As part of the Company's business strategy, we have actively engaged in acquisitions, minority investments, joint ventures and other strategic alliances with third parties primarily to expand our businesses globally, acquiring new users, to expand our product and service offerings and acquiring related technologies. We intend to continue to pursue acquisitions and other strategic investments or alliances in the future as attractive opportunities emerge.
Acquisitions, strategic investments and alliances entail a number of risks, including, among others:

  • expenses incurred and difficulties in integrating or assimilating the operations, technology, personnel and culture of acquired businesses;
  • the inability to realize the synergy effects, such as technological development, expansion of individual user traffic and enterprise client base or cost reductions, that were anticipated in connection with the transaction;
  • the difficulty in ensuring that acquisitions reach the required regulatory compliance standard of the company;
  • the potential disruption of, and the distraction of management from, our regular business operations;
  • difficulties and substantial costs in connection with retaining the individual users, enterprise clients, key management or employees of an acquired company;
  • the possibility that strategic alliance partners could later become competitors and utilize the know-how and business relationships they developed or acquired while in partnership with us;
  • the possible failure to ensure that the companies we acquire operate consistently with our regulatory compliance standards;
  • with respect to foreign acquisitions and global expansion, uncertainty regarding and changes in foreign laws and regulations, local restrictions on foreign investments and challenges with respect to different employee/employer relationships, labor conditions, existence of workers' councils and labor unions, cultural, linguistic or operational differences and additional risks arising from the local and regional social, political, regulatory and economic environment;
  • the possibility of overestimating the value of an acquired company, underestimating its legal or contingent liabilities or receiving insufficient indemnification of liabilities or insufficient escrowed amounts or insurance to secure such indemnities from the seller;
  • recording significant goodwill and intangible assets that could be subject to future impairment, as described elsewhere in this section; and
  • incurrence of additional debt in connection with financing acquisitions and investments.

As a result of such risks, we may not be able to realize the full extent of the benefits that we anticipate from any given transaction, including increased revenue and profits and other expected strategic benefits, within the expected timeframe or at all.
Furthermore, for strategic reasons, we have in the past acquired and may in the future acquire target companies that are unprofitable, and the consolidation of such target companies into our overall results may materially and adversely affect our consolidated financial condition and results of operations.

Although we conduct due diligence reviews of acquisition targets, there can be no assurance that our due diligence process will disclose all relevant risks, legal, compliance or regulatory issues, losses and other liabilities or that our assessment of disclosed risks and liabilities will be accurate. In particular, with respect to acquisitions and investments in the technology sector, we may have difficulty accurately assessing the future viability and growth trajectory of target companies or technologies, especially where the relevant technologies are in the early stages of development or are rapidly evolving.

We may also face uncertainties when we acquire companies with a limited operating history or a management system that requires improvement, which is often the case in the technology sector, including potential compliance issues or liabilities that were not identified in due diligence.

In addition, in cases where we acquire non-controlling interests in entities, we may not have the capability to effectively monitor or exercise control over the management of the entities in which we invest or the direction that the entity will take. As a result, we may not be able to cause any companies in which we hold non-controlling interests to implement what we view as optimal management policies or strategies that would achieve the benefits from strategic investments that we expected to achieve. In addition, joint ventures and other strategic alliances could limit our future flexibility to work with other potential partners.

While we intend to continue to explore future opportunities for acquisitions and other strategic investments, there is no assurance that we will be able to correctly identify attractive opportunities. Even if we do correctly identify potential acquisitions and investments that we believe would further our growth strategy, we may be unable to negotiate favorable terms with the target company or otherwise be unable to pursue the opportunity due to our inability to secure the necessary financing or obtain necessary regulatory approvals or other reasons.

The Company operates in a number of countries and regions including Japan, the United States, Europe and Australia, and is working to further expand the businesses globally. However, the performance of our operations in any particular country or region could suffer or might otherwise fail to meet our expectations due to the following factors, among others:

  • poor regional or national economic and political conditions that could adversely impact, among other things, the advertising spend of our enterprise clients;
  • difficulties complying with legal or regulatory requirements and oversight by local regulators;
  • changes in legal or regulatory requirements that could impact our operating strategies, access to global markets, hiring, and profitability;
  • differing individual user and enterprise client expectations and preferences;
  • lower availability of Internet access and adoption of mobile devices;
  • taxation issues;
  • difficulties adapting to local market practice or local culture and customs;
  • labor disputes or strikes;
  • adverse political developments or general political uncertainty;
  • linguistic and communication difficulties;
  • a worsening of international relations involving any of the countries in which we operate;
  • seasonal reductions in business activity;
  • a higher risk of litigation in certain regions;
  • restrictions on share ownership by foreign entities;
  • difficulties hiring and retaining highly skilled management personnel, engineers and other staff;
  • lower brand name recognition; and
  • difficulties in monitoring business we conduct across a diverse range of countries and regions.

In addition, our exposure to the risks discussed above will increase as our global operations continue to expand.

For the businesses to be successful, the Company needs to attract, develop and retain talented personnel in a number of areas including management, engineering, sales, and other fields and develop a diverse workforce that brings a wide range of unique backgrounds and perspectives to our businesses. We must also continually train our employees to respond to changes in the market for our products and services and evolving technology.
In addition, we must maintain a positive work environment that provides the necessary support and flexibility for our employees and agency workers in our temporary staffing business, including allowing for remote working arrangements where necessary. Any failure to maintain a positive work environment could result in the infringement of the civil rights of such employees or agency workers.

Any failure to hire, train, retain, motivate and manage the required workforce may limit our growth, damage our reputation, negatively affect our financial performance, impede our ability to achieve innovation and otherwise harm our business.
In particular, talented and experienced IT engineers have become increasingly important in our HR Technology and Media & Solutions segments. Due to our increasing dependence on and the scarcity of such engineers, our success going forward depends in part on our ability to continue to recruit, train, develop and retain such personnel.

If we lose key personnel, including key members of our management team and engineers, to competitors or at a rate greater than we anticipate, or if we have difficulty attracting new, highly talented employees,our business could be materially and adversely affected.

Due to the nature of our business operations, and the large number of individual users who utilize our services and transmit and store personal information through our systems, we possess a substantial amount of personal, confidential or otherwise sensitive information with respect to current, past or prospective individual users, enterprise clients and business partners.

The Company's management and use of data have become an increasingly important part of our business, and we rely on the integrity of our systems and security procedures to ensure adequate protection of our data.

However, there can be no assurance that our efforts to ensure the security and proper management of such information will be fully effective. In particular, the Company has in the past experienced cyberattacks of varying degrees targeting our services, and there can be no assurance that such attacks will not occur in the future or that we will be able to successfully protect our data from unauthorized access in the event of any future attacks. In such an event, due to the size of our user base, the numbers of those affected could be extremely large, and we could face correspondingly large liability.

In addition to cyberattacks, information could be leaked or improperly accessed or used as a result of a range of factors including third-party security breaches, system failures or errors, software bugs, employee error, malfeasance, hacking, theft, faulty password management or other irregularity. In such cases, we could suffer damage to our reputation and our brands, including loss of confidence in our platforms by individual users, enterprise clients or other third parties or in our ability to manage our businesses by current or potential individual users, enterprise clients and business partners, or be subject to liability or regulatory investigations or other actions relating to violations of regulations surrounding data protection and privacy or otherwise.

The requirements under the Act on Protection of Personal Information of Japan, that apply to us in our handling of the personal information of our individual users and enterprise clients in our Japanese operations are stringent, and we are also subject to laws regarding personal information in the other countries in which we operate, such as the EU General Data Protection Regulation ("GDPR") in the EU. Many individual US states, such as California through the recently adopted California Consumer Privacy Act, are also tightening regulatory compliance standards regarding the handling of personal information. The costs of compliance with these laws and regulations, whose requirements and interpretations may differ significantly from country to country, can be substantial.

In addition, such laws and regulations related to the handling of personal and confidential information may become stricter in the future, which would make it difficult for us to utilize certain information that is critical to our products and services, which in turn may reduce the number of our users or clients. In addition, as many consumer and data protection laws have been in force for a relatively short period, the interpretation and application of consumer and data protection laws are often uncertain and in flux, and it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our current data practices.

Any new restrictions or limitations relating to data protection and security may result in the deterioration of the quality of our services that rely on data and our overall competitive advantage, and possibly necessitate a revision or overhaul of our business models and strategies.

During FY2019, the Personal Information Protection Commission and the Tokyo Labor Bureau issued administrative admonishments and administrative directives to our subsidiaries Recruit Co., Ltd. and Recruit Career Co., Ltd. due to violations of the Act on Protection of Personal Information and the Employment Security Act in relation to the Rikunabi DMP Follow service (which was suspended on August 4, 2019) operated by Recruit Career Co., Ltd.

In response to these administrative admonishments and administrative directives, we have implemented various measures to prevent similar violations in the future. We also recognize the importance of strengthening governance group-wide in order to ensure the appropriate handling of personal and sensitive information and are engaged in internal efforts and monitoring to promote stronger governance.

However, there can be no assurance that these measures will be effective in appropriately protecting the personal and sensitive data we handle. If we fail to appropriately handle personal and sensitive data, the Company could be subject to administrative orders and legal claims and complaints from users, experience damage to our reputation and decreased demand for our services and be forced to implement additional measures to prevent future violations.

As a result, our business, financial condition and results of operations could be materially and adversely affected.

The analysis, storage, retrieval, management and security of large amounts of data are an important part of our business. Any impairment in the reliability or availability of, or any security breach in, our information systems due to cyberattacks, systems failures or other factors could:

  • have an adverse effect on our products and services and their continued availability;
  • result in negative publicity about us or our brands or harm our brand strength, reputation and relationships with individual users and enterprise clients;
  • harm the continued adoption of our services by individual users and enterprise clients or negatively impact accessibility, performance and load times of our services, which could cause a loss of individual user or enterprise client traffic on our services;
  • subject the Company to legal and regulatory risk including litigation, government investigations or other legal actions;
  • result in large monetary judgments or a duty to remediate against us, or result in us voluntarily offering monetary or other compensation to affected parties; and
  • materially and adversely affect our business, financial condition and results of operations.

Although we have implemented policies and procedures to address these risks, system interruptions and malfunctions can occur for a number of reasons, including cyberattacks, hacking, computer viruses, sabotage, human error, natural disasters, power failures, software errors, hardware problems, network failures, terrorism, geopolitical conflict, difficulties with our service providers, overwhelming online traffic and similar factors.
In particular, cybersecurity-related attacks, intrusions and disruptions, including through spyware, viruses, phishing, denial of service and similar attacks by criminal organizations, hackers, foreign governments and terrorists, have become increasingly prevalent in our industry. The Company has in the past experienced cyberattacks of varying degrees targeting our services, and there can be no assurance that such attacks will not occur in the future or that we will be able to successfully defend our systems from any future attacks.
Certain of the services have also experienced downtime due to system disruptions or other outages. As we expand information technology-based offerings to support enterprise clients' workflows, we may be more likely to experience malfunctions of this kind despite any preventative measures we may take, which may result in legal liability or other costs or in damage to our reputation.
For example, as part of our efforts to expand operational and management support services for our enterprise clients including SMEs, we launched the Air BusinessTools, which includes cloud-based services as accounting and payment systems. If we experience system failures in connection with such services, our individual users and enterprise clients may claim that we are liable for any related losses they suffer, and the perception of the reliability of our services and our overall reputation could be negatively impacted.
In addition, we depend on third parties to operate and maintain certain of our information systems, and accordingly some system problems and failures may be outside of our control. For example, we rely on third-party cloud infrastructure providers to host all of our cloud-based services. Potential security breaches to the systems of these third parties, whether resulting from internal or external sources, could significantly harm our business. Furthermore, the cost of developing, maintaining and expanding our information technology infrastructure could also increase substantially in the future.

The Company provides certain services to individual users and enterprise clients through software applications including mobile and online applications that are highly technical and complex and, in some cases, hardware devices.

The software applications may contain bugs and other defects that interfere with their intended operation and that we are unable to detect prior to introducing the relevant service. Any defects we do not detect and fix may prevent us from providing our services in a responsive and reliable manner and could cause degradations or interruptions of service, negative experiences for individual users and enterprise clients, repair or remediation costs, delays in the release of new products or versions, difficulties in adequately protecting the data of our individual users and enterprise clients or legal liability from various issues such as loss or leakage of confidential or personal information or under applicable regulatory regimes. In particular, as many of our online services have significant user bases, any defects in our software applications could potentially affect a significant user population.

In addition, in certain of our businesses, we provide our enterprise clients with platforms through which they operate key business functions, such as online reservations, point-of-sale ("POS") cash registers, payments and attracting and connecting with individual users on our online platforms.
If there is any defect in the software used to provide these platform services, our enterprise clients may experience disruptions in their business operations or losses or leakage of sensitive data relating to their business or their users, and we expect our exposure to these risks will increase as we expand our SaaS business through Air BusinessTools, which provides a comprehensive suite of tools aimed at enhancing the efficiency and productivity of enterprise clients, including SMEs, in our Media & Solutions segment.

The businesses that we currently operate, as well as those that we may operate in the future, span many fields and countries and consequently are subject to a variety of laws and government regulations such as personal information and data protection, electronic communications, consumer reporting, labor, civil rights and social welfare, anti-bribery, taxation and antitrust laws.
Furthermore, the Company is required to obtain government permission or approval or to register for licenses in order to conduct certain of our businesses, and certain of our businesses are subject to supervision and monitoring by regulatory authorities.

Being subject to these laws and regulations exposes our businesses to certain risks. As a general matter, the legal and regulatory structures that apply to our various businesses are complex and even an inadvertent failure to comply with them could result in fines, penalties, losing permission to operate some of our businesses, being ordered to suspend operations, litigation and other legal proceedings and have an adverse effect on our reputation.
Furthermore, future changes in such laws or regulations or entry into new regulated businesses could necessitate costly compliance expenditures and increase the risk that we could fail to comply with applicable requirements or miss business opportunities as a result of restrictions imposed or delays caused by responding to such changes in laws or regulations.

Any new or amended laws and regulations may require us to change our business models or practices, or may prevent us from conducting existing businesses or entering into new businesses, which could adversely impact our business and results of operations and impede our execution of our growth strategy as planned.
For example, there have recently been active discussions among companies regarding civil rights and social welfare issues, and if we are unable to appropriately respond to changes in the laws and regulations concerning such issues, our brand and reputation may be adversely affected. In addition, any actions by governments that may affect the accessibility of our products or users' technology usage patterns in their countries, may cause a decline in our individual users' engagement with our products.

HR Technology

The HR Technology segment is subject to various laws and regulations. For example, in the United States, our activities may be subject to the Communications Decency Act, the California Consumer Privacy Act, the Telephone Consumer Protection Act, the Wiretap Act, the Stored Communications Act and the Fair Credit Reporting Act as well as various state legislation covering the same or similar topics. In addition, our HR Technology segment is also subject to other regulations including the GDPR in the EU and the Act on Protection of Personal Information and the Employment Security Act.
If any new laws and regulations are introduced, or if existing laws and regulations are amended in a manner that is unfavorable to us, our HR Technology segment operations may become subject to additional restrictions and costs, and responding to any new or amended laws or regulations may require significant time and resources.

The applicable laws and regulations in the technology sector are still evolving, particularly in Europe and the United States, and more stringent laws and regulations concerning the technology sector may be implemented in the future. For example, if new requirements or restrictions are imposed on the collection, use and analysis of information regarding user behavior in connection with our services, we may be restricted from using such information as planned and be forced to change our strategy and business practices.
As a result of any of the foregoing, the business, financial condition and results of operations of our HR Technology segment may be adversely affected.

Media & Solutions

In the Media & Solutions segment, our various services are subject to a number of laws and regulations. For example, we are subject to personal information and data protection laws relating to individual user and enterprise client data stored on our systems. With respect to our SaaS solutions in our Marketing Solutions operations, namely Air Business Tools, we are also subject to regulations under the Installment Sales Act of Japan.

In addition, our placement service in our HR Solutions operations operates on a fee basis with the permission of the Minister of Health, Labour and Welfare in compliance with the Employment Security Act. Changes to the applicable regulations could affect the pricing of our fees. Noncompliance with applicable laws, rules and regulations could lead to us losing permission to operate or being directly ordered to suspend operations.


The Staffing segment is also subject to a number of laws and regulations relating to temporary staffing and employment.

The Staffing segment in Japan operates with a license from and under the supervision of the Minister of Health, Labour and Welfare and is also subject to the Act for Securing the Proper Operation of Worker Dispatching Undertakings and Protection of Dispatched Workers of Japan and related rules and regulations. Any business that provides staffing services in Japan but does not comply with applicable laws, rules and regulations, including the Staffing Labor Act, is subject to the risk of being issued a business improvement order, losing its permission to operate as a staffing business or being directly ordered to cease its operations.

The Overseas operations in the Staffing segment are concentrated in the United States, Europe and Australia. Laws and regulations regarding temporary staffing in these regions may be implemented on a state-by-state (or, in the case of the European Union, member state-by-member state) basis, as well on a federal, nationwide or region-wide basis. It is also possible that any failure to comply with local laws, rules or regulations in our Overseas operations, whether in the United States, Australia, Europe or elsewhere, could result in us losing permission to operate our businesses in the relevant jurisdiction.

In addition, regulations that amend the Staffing Labor Act to require less compensation disparity between permanent and temporary workers, which is often referred to as "Equal Pay For Equal Work," came into effect in April 2020 in Japan. We may incur additional costs as a result, which could negatively impact the financial results of our Staffing segment.

As a general matter, future changes in employment-related laws and regulations in Japan and overseas could necessitate costly compliance expenditures and increase the risk that we could fail to comply with the applicable requirements.

The Company is subject to litigation and other legal and arbitration proceedings in the ordinary course of our business.
The Company may in the future be subject to claims, allegations, lawsuits, minimum statutory penalties and regulatory investigations regarding antitrust or competition law violations, intellectual property, the protection of personal information, data privacy and security, consumer protection, labor and employment, commercial disputes, content generated by our individual users, goods and services offered by advertisers or publishers using our platforms, false or deceptive advertising, delivery of services and alleged actions or other issues relating to the monitoring of our agency workers, among other matters, from individual users, enterprise clients, competitors, regulators and others, including proceedings originally commenced against third parties such as our individual users and enterprise clients.

In addition, we cannot be certain that our services, products and features do not infringe on the intellectual property rights of others, and we may be subject to infringement claims from third parties. Certain of these proceedings could be protracted and costly, regardless of the merit of the claims involved, and the results may be difficult to predict.
A determination adverse to us in any of these legal proceedings could result in significant costs, penalties or fines or require us to pay royalty fees and modify our services and products in order to provide non-infringing substitutes or cease the use of certain services, products or features altogether.

We believe that the brand identity that we have developed has significantly contributed to the success of our business and will continue to be a significant competitive factor going forward. We depend on our brands and reputation to maintain and expand our user base, which in most businesses comprises mainly general consumers who tend to have a relatively high level of sensitivity and awareness towards brand and reputation.
The reputation and brands could be harmed due to a number of factors, including defects or errors in our services, cyberattacks and other cybersecurity breaches, failure to adequately protect individual user and enterprise client data, inadequate investments to maintain and enhance our brand and reputation, our competitors achieving greater brand recognition, adverse media coverage or rumors including on the Internet or social media about us or our business, regardless of whether such content is true or not, misconduct by our employees or our agency workers, claims against us by our agency workers or employees relating to our employment practices, unpermitted use of our brands by a third party, unfavorable litigation or other factors, regardless of whether such damage was caused by our fault or the fault of others.

Furthermore, as the use of technology and data in our business has become increasingly important, the use of algorithms such as artificial intelligence and our use and management of data on our platforms could lead to negative outcomes or be viewed negatively by some individual users and enterprise clients and adversely affect our reputation and brands.

In addition, in the event that we, or one of our individual users or enterprise clients in any of our businesses, engage in misconduct or inappropriate behavior or acts through our platforms or engage in illegal activity such as infringement of third-party intellectual property, violation of personal privacy rights, libel or any other illegal act or malfeasance, our reputation and that of our brands could be materially damaged directly or by association due to our relationship with such individual user or enterprise client.
The Company's reputation or brands may be negatively affected if individual users or enterprise clients engage in misconduct, illegal activity or other inappropriate behavior such as web spam, phishing, impersonating other people or organizations or posting false, misleading or inappropriate information.

We are also subject to the risk that third parties could imitate our products or services or use our brands, trademarks, logos or other intellectual property without permission.
Although we believe we have in place robust protections for our intellectual property, there can be no assurance that these measures will be successful in preventing others from infringing our intellectual property rights and damaging our and our brands' reputation.

The Company relies on third-party service providers in a number of critical areas of our business. The occurrence of any of the below, including the termination or deterioration of our relationships with such third-party sales agents, could materially and adversely affect our competitiveness, business, financial condition and results of operations.
Certain of our services in the HR Technology and Media & Solutions segments rely on Internet search engines provided by global technology companies primarily for the purpose of ensuring our individual users access to our online platforms. User traffic on our online platforms can be significantly impacted by changes in the search algorithm of the search engine operators or as a result of actions by our competitors that render online search results through our third-party search providers less favorable to us, which would in turn impact our business and presence among users.

The HR Technology segment also relies on third-party publisher networks to drive traffic to our platforms by adding our content to their websites. Any failure of such publisher networks to effectively promote our services could result in reduced user traffic.
We also offer mobile applications through the platforms of third-party global technology companies to enhance the accessibility of our services and expand our individual user traffic. If we become unable to provide applications through these platforms, either due to vendor policies, platform updates or otherwise, our ability to expand our mobile user base and increase user traffic on our services would be adversely affected.

Furthermore, we rely on third-party data center providers in our operations, and any disruption or interruption to the data center service or deterioration of the network performance of such service, as well as any increase in server usage fees or other additional costs, could materially and adversely affect our competitiveness, business, financial condition and results of operations.
We also rely on third parties to provide certain payment methods and payment processing services, including the processing of credit cards. As a general matter, any third party that has access to data on our systems is a potential entry point for unauthorized access, which exposes us to the risk of security breaches of such third-party systems. We also make use of third-party sales agents or media agencies to manage sales to and other relationships with our enterprise clients to enhance our sales ability.

However, the reliance on such sales agents involves certain risks. In particular, because we generally work closely with these sales agents over long periods of time, the loss of a sales agent reduces the strength of our sales network and could result in the loss of enterprise clients and transfer of know-how to a competitor.
Additionally, we exert less direct control over third-party sales agents compared to our own employees, and the agents' actions in the course of their work for us or otherwise may harm our reputation or expose us to litigation.

Our online services also more generally depend on the ability of our individual users and enterprise clients to access our services through the Internet. Internet access providers may take measures that could degrade, disrupt, or increase the cost of user access to certain of our products by restricting or prohibiting the use of their infrastructure to support or facilitate our offerings, or by charging increased fees to us or our users to provide our offerings.
Our services may also be subject to government-initiated restrictions or blockages in some jurisdictions. Any such interference or disruption of access to our online services through the Internet could result in a loss of existing individual users and enterprise clients and increased costs, and could impair our ability to attract, maintain or increase the number of users, customers and advertisers, thereby harming our revenues and growth.
Furthermore, any limitation from our third-party Internet access providers on the use of third-party cookies could reduce our ability to provide targeted information to our individual users and negatively impact various areas of our business.

As part of the Company's strategy to expand the business, we engage in advertising, sales and marketing activities in order to increase recognition of new or existing services and expand our individual user and enterprise client bases. We are substantially dependent on advertising, sales and marketing operations to maintain brand recognition and user traffic on our services, acquire new enterprise clients and enhance client satisfaction with our services.

In particular, as many Internet users rely on search engines to refer them to products and services, our HR Technology segment and Media & Solutions segment depend in part on various such search engines to generate user traffic on our websites. Thus, maintaining a strong search engine ranking is an important factor in our success in those businesses, and we may be required to incur expenses to enhance our search engine rankings as we seek to maintain and expand the market presence of certain businesses.

We may also engage in other advertising including online, television and radio advertising to increase awareness of our services on the Internet and more generally among potential individual users and enterprise clients. In our Staffing segment, we may also rely on marketing to increase registered agency workers, particularly in markets where there are labor shortages.

Although we may undertake significant additional advertising, marketing and sales costs in order to expand certain businesses, our efforts may not be effective to the extent we expect or at all.

The business operations are subject to the risk of earthquakes, typhoons, tsunamis and other natural disasters, fires, blackouts, pandemics, armed conflict, war, terrorism and other catastrophic events. Any of these events could impact our ability to provide our services or otherwise operate our business, including due to disruptions affecting the workforce we need to operate our business including our employees, employees of our service providers and our agency workers, business restrictions under stay-at-home orders and other government measures or damage to our properties.

In particular, any of these catastrophic events could result in failure of our information technology systems or data servers. In the event that we experience a system failure or systems delays, we may be unable to offer certain products and services, and even if they are available, our Internet-based products and services may experience increased load times or other disruptions. In such event, our individual users may become dissatisfied and reduce their usage of our products and services or switch to those of our competitors. In addition, our brand and reputation may be damaged, and we may be required to undertake significant time and cost in order to repair our systems.

In addition, large-scale natural disasters or other catastrophic events could have secondary adverse effects, such as the destruction or incapacitation of or other harm to our users or enterprise clients, deterioration in economic conditions and decline in stock prices generally or decreases in lifestyle activities or daily consumer activities.
Any of these outcomes could impair our business operations and materially and adversely affect our business, results of operations and financial condition.

The Company may be required to record a significant charge on our consolidated financial statements during the period in which any impairment of our non-current assets is determined. Impairment may result from, among other things, deterioration in performance, adverse market conditions, adverse changes in applicable laws or regulations, changes in the Company's strategies, disposals of group assets and a variety of other factors.
Any determination of impairment of goodwill or other intangible assets could have a material adverse effect on our results of operations.

Moreover, to the extent that we acquire early stage companies that have not achieved profitability, we may be subject to impairment risk relating to any goodwill and intangible assets recorded in connection with the acquisition.
In addition, our other non-current assets, including investments in associates and joint ventures, are also subject to the risk of impairment.

Furthermore, we also hold equity securities of certain companies we consider to be necessary business partners in order to maintain and strengthen business relationships with these companies to support our long-term growth. We generally recognize changes in the fair value of these securities as part of other comprehensive income, which has the effect of increasing or decreasing our retained earnings. Declines in the value of such securities could thus have an adverse effect on our financial condition.

The Company is subject to income taxes in Japan and many foreign jurisdictions. The amount of consolidated income taxes and the effective tax rate for the Company is affected by a number of factors including the applicable tax laws and regulations in the jurisdictions where the Company operates, the evaluation of deferred tax assets and liabilities and the distribution of taxable income in each relevant jurisdiction.

In addition, the Company's tax exposure could be adversely affected if, for example, tax related laws and regulations or the interpretation thereof change due to political or economic conditions in the jurisdictions in which we operate. Further, differences in tax laws and regulations in the jurisdictions in which we operate could increase the complexity and burden of compliance with such laws and regulations, which could result in increased costs. In addition, although the Company seeks to address international taxation risks such as transfer tax regulations that arise from its global operations, the Company may become subject to additional taxes if tax authorities disagree with the Company's proposed tax treatment. Our exposure to the above tax risks could materially and adversely affect our business, financial condition and results of operations.

We may also become subject to new taxes applicable to online businesses, such as taxes on digital services that have been proposed or implemented in some countries, based on changes in tax laws and regulations of the jurisdictions in which we operate our businesses. Any changes to international tax laws could impact the tax treatment of our foreign earnings and adversely impact our effective tax rate. Moreover, the Company is subject to tax audits by relevant tax authorities on a periodic and non-periodic basis, and the timing and impact of such tax audits are difficult to predict.

The Company has substantial operations outside Japan and has significantly expanded the global businesses in recent years. The Company principally conducts global business transactions in foreign currencies, in particular the US dollar, the Euro and the Australian dollar.
Foreign currency-denominated assets and liabilities are reported in the relevant local currencies and then translated to Japanese yen at the period-end applicable exchange rate, while foreign currency-denominated results of operations are reported in local currencies and then translated to Japanese yen using the spot exchange rate at the date of the transaction or a rate that approximates such rate.

As a result of these factors, fluctuations in foreign currencies against the Japanese yen may adversely affect the impact of favorable results or amplify the impact of unfavorable results at our overseas subsidiaries.
Although we may enter into derivatives transactions to hedge a portion of our foreign currency exchange rate risk, there is no assurance that our hedging efforts will be effective in protecting us against exchange rate fluctuations.

Furthermore, volatility in foreign exchange rates could negatively affect economic conditions in our operating markets, potentially leading to decreased spending by our enterprise clients, or harm our ability to execute acquisitions or other strategic transactions abroad, which is an important piece of our strategy for growth globally, at an acceptable price.

The Company finances operations in part through loans from banks and other financial institutions and issuing bonds in the capital markets and may incur additional indebtedness in the future depending on the overall funding environment. Increases in interest rates could substantially increase our financing costs and may impair our ability to borrow necessary funds on a timely basis.

In addition, our creditworthiness may decline in the future due to adverse changes in our financial condition or business, which would negatively affect our ability to obtain additional borrowings in the future on terms that are acceptable to us or at all.
Any additional borrowings in the future may subject us to covenants or other restrictions that impede our operations.

If the Company fails to comply with such covenants, the repayment of the principal of or accrued interest on our loans could be accelerated or we could be required to post collateral to secure our borrowings. We may also have difficulties in obtaining additional financing on acceptable terms to the extent that our credit ratings decline.

Operating results may fluctuate as a result of a number of factors, many of which are outside of our control.

Operating results in future periods may fall below market expectations as well as our internal business objectives or financial targets. Any of these events could cause our stock price to fall. Each of the risk factors listed in this section in addition to the following factors may affect our operating results:

  • the ability to continue to attract and retain individual users and enterprise clients to our services and respond to changes in individual user preferences and enterprise client needs;
  • the ability to keep pace with rapid changes in technology;
  • the amount of revenues and expenses generated and incurred in currencies other than Japanese yen, and our ability to manage the resulting foreign exchange risk;
  • the amount and timing of advertising expenses, other operating expenses and capital expenditures related to the maintenance and expansion of our businesses;
  • the focus on long-term goals over short-term results;
  • acquisitions and other strategic investments;
  • introduction of new businesses, products, services and technologies; and
  • changes in economic conditions or the business environment.

Because our businesses are changing and evolving, our historical operating results may not be useful in predicting our future operating results.

The trading price of common stock of the Company has been, and is likely to continue to be, volatile. In particular, our operating results may fluctuate significantly due to a number of factors, including the various risk factors discussed in this section, which could negatively affect our share price.
In addition, the trading price of our common stock may fluctuate significantly in response to numerous other factors, many of which are beyond our control, including:

  • the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;
  • actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;
  • additional shares of our common stock being sold into the market by us or our existing stockholders, or in connection with acquisitions, or the anticipation of such sales;
  • changes in our dividend policy or planned share repurchases;
  • investor sentiment with respect to our competitors, our business partners, and our industry in general;
  • announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments;
  • changes in operating performance and stock market valuations of technology companies in our industry, including our competitors;
  • price and volume fluctuations in the overall stock market, including as a result of trends in global political or economic conditions;
  • the inclusion, exclusion, or deletion of our stock from any trading indices;
  • media reports regarding our business and financial performance;
  • lawsuits threatened or filed against us, or developments in pending lawsuits;
  • developments in anticipated or new legislation or regulatory actions; and
  • other events or factors, including those resulting from natural disasters, pandemics, war, or incidents of terrorism or other adverse events, or responses to these events.

In addition, broad market and industry fluctuations and general economic, political and market conditions, such as recessions, interest rate changes or foreign currency exchange fluctuations, may negatively impact the market price of our common stock regardless of our actual operating performance.