TOKYO ELECTRON DEVICE LIMITED Q4 FY2025 earnings call

• Previous Mid-Term Plan VISION2025 Review • The previous plan hit all three-year financial targets (sales ±10% of 200 billion yen, operating margin 5%, ROE 15%) for three consecutive years, with 2024 March fiscal year recording all-time high revenue and profit. • CN expanded stock business by expanding security products and technical services; EC expanded customer base via new customer acquisition and built stable profit base through operational efficiency from IT infrastructure upgrades; PB made progress in launching the wafer inspection business. • The goal of becoming a "manufacturer with technical trading company functions" was not fully realized, requiring further focused effort to advance manufacturer transformation.

• New Mid-Term Plan VISION2030 • Mission: Contribute to sustainable social development by addressing social issues through cutting-edge semiconductor and IT technology, and providing solutions with value exceeding customer expectations. • Vision: Become a company that solves latent social issues by combining the strengths of a manufacturer and a technical trading company, updating the vision to reflect the need for both functions to address widespread market shifts driven by trends like AI advancement. • Core corporate priorities: Solve customer and social issues via combined manufacturer and technical trading company capabilities, and advance actions that drive sustainable profit growth.

• Segment Strategic Priorities • PB (primary driver of profit growth for VISION2030): Expand inspection product lines and customer base: target semiconductor and panel manufacturing markets, strengthen silicon wafer inspection after entering the market via business transfer, expand customers focused on silicon carbide for compound wafers, prioritize development of inspection equipment for the advanced packaging market, maintain existing liquid crystal panel inspection business while improving competitiveness and profitability. • CN: Expand solution portfolios and strengthen service business: focus on 5 core fields (security, network, storage, cloud, AI) in partnership with overseas locations to discover optimal DX solutions; combine product sales with phase-aligned services to improve customer satisfaction and enable upselling, cross-selling, and long-term recurring revenue. • EC: Focus on high-growth areas including industrial equipment, automotive-related equipment, cloud services, and OT security, prioritize competitive Japanese industry and automotive customers globally, and expand solution-oriented business that provides systematized products.

• Financial Policy and Capital Strategy • Core long-term financial targets for VISION2030: 300-350 billion yen in revenue, operating margin of 8% or higher, ROE of 20% or higher, maintain the strategy of sustainable profit growth where profit growth outpaces revenue growth. • Capital priorities: Allocate capital to growth investment (technology R&D, business expansion, internal/external DX, talent development), shareholder return aligned with performance, and balance sheet strengthening to maintain financial health, with a target dividend payout ratio of 40%. • 2025 March fiscal year dividend: raised full-year dividend to 119 yen per share (up 2 yen from prior forecast), 2026 March fiscal year planned full-year dividend is 96 yen per share, with a projected payout ratio of 40.4%.

1. CN Segment: Revenue was 37.327 billion yen, a 13.2% increase year-over-year, contributing 17.3% of total company revenue. Segment profit was 5.266 billion yen, a 52% increase year-over-year, with a segment profit margin of 14.1%. All product categories saw revenue growth, with strong demand for network, storage, and security products, and expanding demand for maintenance and monitoring services. 2. EC Segment: Revenue was 179.051 billion yen, a 14.7% decrease year-over-year, contributing 82.7% of total company revenue. Segment profit was 6.149 billion yen, a 41.2% decrease year-over-year. While automotive sales grew on expanded customer rights, demand for industrial, communication, and consumer electronics declined due to prolonged supply chain inventory adjustment and slowdown in the Chinese market. Overseas consolidated subsidiaries of EC had $339 million in dollar-based revenue (a $16 million decrease year-over-year), but yen-based revenue grew 392 million yen due to an 8 yen yen depreciation. 3. PB Segment: Revenue was 14.636 billion yen, a 2.7% increase year-over-year, accounting for 8.2% of EC segment revenue. Growth was driven by full-scale deliveries of wafer inspection equipment, while design and mass production contracting services for industrial equipment were weak, and TED Nagasaki saw slow performance from semiconductor manufacturing equipment-related business despite strong power equipment sales.

• Overall 2026 March fiscal year guidance calls for a year-over-year decrease in both revenue and profit, with recovery starting in the second half after prolonged inventory adjustment continues through the first half. Total revenue is projected at 200 billion yen (7.6% decrease YoY), ordinary profit at 10 billion yen (12.4% decrease YoY), and net income at 7 billion yen (21.1% decrease YoY). • CN segment: Projected revenue of 38 billion yen, a 1.8% increase YoY, with continued strong performance driven by digital transformation demand for security and related products. • EC segment: Projected revenue of 162 billion yen, a 9.5% decrease YoY, with order recovery expected after summer and profit contribution starting in the second half. • PB segment: Expected to return to growth in the second half of the fiscal year, with projected revenue decreasing 1.036 billion yen YoY.
• Assumptions for guidance: Exchange rate assumed to be in the 145-150 yen per USD range. Inventory adjustment in EC and PB is expected to gradually normalize starting in the second half, with uneven progress across customers. Automotive is expected to remain weak in the first half before recovering in the second half, despite favorable long-term growth from automotive electrification and software expansion. The Chinese market is expected to remain low despite stabilizing at the bottom, and the company still expects to gain new customer rights in the period.

• Prolonged inventory adjustment across the EC and PB supply chains has delayed normalization of inventory levels, extending the slowdown in revenue and profit into the first half of the 2026 March fiscal year, with uneven adjustment progress across individual customers leading to an uneven demand recovery.
• Persistent slowdown in the Chinese industrial equipment market continues to weigh on EC segment demand, with no near-term expectation of a meaningful recovery.
• Quantitative assessment of the impact of US tariff measures is extremely difficult, creating uncertainty for forward performance.
• Foreign exchange rate volatility and changes in interest rates continue to create uncertainty for financial performance, requiring ongoing monitoring.
• Demand is uneven across different market segments, creating a uneven operating environment that complicates performance forecasting.

The provided transcript does not include a transcribed question and answer section.