JTEC CORPORATION Q4 FY2025 earnings call

• Long-term Strategy Progress: The 10-year long-term growth strategy "Innovation2030", launched in spring 2022, targets 15 billion yen in total revenue and a 25%+ recurring profit margin by the 2031 June fiscal year. The strategy is divided into three 3-year phases: Phase 01 (foundation building for growth) concluded in FY2025 (the final year of Phase 01), and the company moved to Phase 02 starting July 2025, which focuses on converting R&D成果 into realized sales revenue across all business segments. Phase 03 will focus on securing and scaling segment profits. Multiple acquisitions of optical component and automation equipment manufacturers with synergy potential are planned for FY2026, FY2027, and FY2029.

• Optical Business Updates: The company's X-ray mirrors hold world-leading surface shape accuracy, maintaining a competitive advantage over overseas rivals. New products including 2D focusing mirrors, variable shape mirrors, and channel-cut crystals (co-developed with a Osaka University startup) are seeing steady order growth. The segment is expanding from BtoG business for university research institutions to BtoB business for large semiconductor-related markets, and is currently participating in multiple national semiconductor-related projects targeting sales contribution from the semiconductor sector around FY2027. The company is collaborating with EX-Fusion on developing variable shape mirrors for laser fusion, which is viewed as a long-term initiative with no major revenue contribution expected before 2030.

• Device Development Business Updates: The segment is commercializing four proprietary ultra-precision surface processing technologies for semiconductor customers: 1) Plasma CVM: Commercialization is the most advanced; the company has successfully commercialized thickness equalization processing equipment for crystal device wafers, expanded to mass production automation systems, and already delivered multiple mass production systems to domestic and overseas manufacturers. It is now expanding application to silicon-based semiconductor wafers to open new markets. 2) PAP (plasma-assisted polishing): Demand for high-speed, high-precision processing systems for diamond substrates has been higher than expected, with multiple units already delivered. It is being advanced as the next profit pillar after plasma CVM, with ongoing test orders and sales activities with semiconductor device makers. 3) ECMP: The company is developing processes for SiC wafer polishing, which is difficult with conventional ECMP equipment, and targets receiving test processing orders from pilot users in FY2026. 4) CARE: Development is ongoing for commercialization of atomic-level surface creation technology for SAW device wafers, targeting full product launch in FY2027. The segment targets turning profitable at the segment level in FY2026, and all four processing technologies are eco-friendly, using no oil or chemical solutions.

• Life Science Business Updates: The segment is expanding its lineup of general-purpose automatic cell culture equipment (which sees growing demand from work style reform) and actively pursuing market expansion for custom large automated cell culture systems, with plans to enter overseas markets. The stem cell separation device for stem cell therapy, co-developed with research institutions, is being advanced for application in stroke and dementia treatment starting with free medical care. The CELLFLOAT cartilage regenerative medicine technology, co-developed with AIST, has added Japan Tissue Engineering to the partnership and will start physician-led clinical trials in FY2026, with planned expansion to cosmetic applications in later phases. The company's CellPet 3D-iPS culture device is well-regarded by researchers, and growing market share is expected as the biotech and regenerative medicine industry expands.

• Denshi Kagaku Updates: The subsidiary has delivered steady profit growth from synergy with the parent company, and targets 1 billion yen in revenue by 2030. It upgraded the core product ESCO-TDS1200Ⅱ IR to meet the needs of advanced semiconductor device development for AI, and has successfully developed and launched new hydrogen-specific analysis equipment, targeting business expansion in previously untapped markets including China, the US, and Europe.

• Financial and Cash Flow: Gross profit margin remained in line with historical levels. However, increased R&D spending and large personnel increases to advance Innovation2030 pushed up personnel costs, leading to a year-over-year decline in operating margin and ROE. Capital expenditure increased for productivity improvements, and free cash flow turned significantly positive year-over-year due to increased income from improved trade receivable collection. The overall financial position saw no major changes from the prior year.

For the 2025 June fiscal year, total company revenue was 1.925 billion yen, a 4.2% year-over-year decrease. 1. Optical Business: The current core profit pillar, focused on X-ray mirrors for synchrotron radiation facilities and expanding to optical components for semiconductors and laser fusion. Revenue remained flat year-over-year in FY2025, as shipment of high-difficulty high-precision X-ray mirrors for large Q4 overseas projects was delayed, resulting in missed revenue recognition for the period. This segment accounts for the largest share of total company revenue, with 71.1% of total consolidated revenue coming from the Asia (including Japan) market driven by Optical Business sales. In August 2025, the segment announced a large combined order of 0.3 billion yen from Chinese synchrotron radiation facilities. 2. Device Development Business: The company's current highest-priority segment, focused on next-generation processing and polishing equipment for power semiconductor substrates and diamond substrates. Large planned revenue from a plasma CVM-related introduction project and large culture device development was delayed in FY2025. The company attempted to offset this with multiple PAP processing equipment sales in Q4 but failed to meet the target revenue, resulting in a year-over-year revenue decline for the segment. 3. Life Science Business: Developing and selling automatic cell culture equipment and regenerative medicine products based on proprietary culture technology. A large planned culture device project was delayed in FY2025, leading to missed revenue targets and a year-over-year revenue decline. 4. Denshi Kagaku (Electronic Science): A subsidiary acquired in 2021, specialized in temperature-programmed desorption analysis equipment for liquid crystal color filters and semiconductor R&D/process management. Revenue increased 5.1% year-over-year in FY2025, driven by growing analysis service business that offset flat sales of its core analysis equipment.

• For the 2026 June fiscal year, management guides total revenue of 2.655 billion yen, representing a 37.9% year-over-year increase from FY2025. Revenue growth is expected to absorb the increase in R&D and personnel costs, leading to a significant improvement in all profit metrics.
• As of the end of June 2025, the total backlog of confirmed and high-probability orders has increased year-over-year, driven by strong orders for the Optical Business primarily in the Chinese-led Asian market, plus steady orders from upgrades in Japan, Europe, and the US. The Optical Business is expected to remain the largest contributor to profit in coming fiscal years.
• For the Optical Business: Management expects continued demand growth from upcoming upgrades of advanced synchrotron radiation facilities in Japan, Europe, and the US, plus growing orders from increased joint research for high-precision semiconductor optical components.
• For the Device Development Business: Management guides that the segment will absorb R&D costs and achieve segment-level profitability in FY2026.
• For the Life Science Business: Management confirms plans to enter overseas markets and advance clinical development of regenerative medicine products in FY2026.
• For Denshi Kagaku: Management targets increased orders from product upgrades and expansion into new geographic markets in FY2026.

• Large project delivery delays: High-complexity, high-value orders (particularly in the Optical Business and Device Development Business) may experience shipment delays that shift revenue recognition between fiscal periods, as seen in the FY2025 Q4 missed revenue targets.
• R&D commercialization risk: All new business lines (including the four semiconductor processing technologies in Device Development and regenerative medicine products in Life Science) are dependent on successful development and market adoption, which may not occur on the expected timeline.
• Market development risk: Expansion into new large markets (semiconductors, regenerative medicine, overseas markets for Denshi Kagaku and Life Science) may not generate the expected revenue growth or customer adoption.

The provided transcript does not include a transcribed Question and Answer section, so no content can be summarized for this portion.