JTEC CORPORATION Q2 FY2026 earnings call

• Overall 2Q FY2026/6 Performance

  • Total revenue did not reach the initial budget set at the start of the fiscal year, but grew year-over-year. Gross margin improved driven by productivity gains in the Optical Business, leading to significant improvement in operating profit and all other profit lines, and a narrower net loss compared to the prior year period. The company has a long-standing business pattern where sales are heavily concentrated in the fourth quarter annually.
  • Cumulative R&D expenditure through Q2 increased year-over-year. Additional capital expenditure for productivity improvement is planned for the second half of the fiscal year. Free cash flow turned positive due to increased collections of trade receivables. Financial position showed no major change from the prior fiscal period.
  • Total order backlog as of Q2 FY2026/6 was 2.195 billion yen, near the level of the prior year period, supported by firm orders in the Optical Business.

• Long-Term Strategy: Innovation 2030

  • Launched in spring 2022, the strategy sets a target of 15 billion yen in total revenue and 25% recurring profit margin by the 2031 June fiscal period, with a projected 20% ROE and 400 yen EPS based on current outstanding shares. The strategy is divided into three 3-year phases: Phase 1 focused on building growth foundations via capital investment, headcount expansion and R&D; 2026 is the first year of Phase 2, focused on converting R&D outcomes into actual sales; Phase 3 will focus on securing stable revenue growth and further scaling.
  • M&A: The 2021 acquisition of Electronic Science Business is already delivering synergies in R&D, manufacturing and sales, with a target of 1 billion yen in revenue for the segment by 2030. Additional acquisitions of synergetic optical component manufacturers and automation equipment manufacturers are planned between 2027 and 2029.

• Optical Business Updates

  • The company's X-ray mirrors hold leading global surface shape accuracy, and maintain a competitive advantage over overseas competitors. The company has successfully developed and launched new products including 2D focusing mirrors, deformable mirrors, and channel-cut crystals. It is expanding from the BtoG synchrotron radiation facility market to the larger BtoB semiconductor-related industrial market, leveraging its proprietary nano-surface processing and measurement technology. It currently participates in multiple joint development projects with semiconductor equipment manufacturers and multiple national semiconductor projects, targeting meaningful revenue contribution from the semiconductor segment by around 2027.

• Device Development Business Updates

  • The business is commercializing four proprietary ultra-precision surface processing technologies to meet diverse processing needs from semiconductor manufacturers:
    • Plasma CVM processing technology: Successfully commercialized ultra-precision processing equipment that uniformly finishes quartz crystal device wafers to nanometer-level thickness, and is expanding to large mass production systems. Demand for crystal devices (used in AI data center communications) is surging, driving high demand for this equipment. The company is expanding its scope to target silicon-based semiconductor materials and already has multiple mass production systems delivered to domestic and overseas manufacturers.
    • PAP (Plasma Assisted Polishing): This technology is highly regarded for polishing diamond substrates, and already has delivery track records for heat sink and diamond wafer polishing equipment. Demand for precision polishing of diamond wafers (used as heat sinks for semiconductors and next-generation power semiconductors) is growing rapidly, with inquiries from over 20 domestic and overseas companies. The company is actively conducting processing tests and targets multiple orders within the current fiscal year.
    • ECMP (Electrochemical Mechanical Polishing using ion conductive materials): The company has established processes for polishing SiC wafers, which are difficult to process with conventional CMP equipment, and is progressing deliveries to pilot users. Processing speed is significantly improved compared to conventional CMP for SiC substrates, and the company has received strong inquiries from semiconductor device manufacturers.
    • CARE (Atomic-level surface processing using metal catalysis): The company is developing practical applications for atomic-level surface creation for device wafers, targeting early commercialization. It is currently conducting processing tests for LN/LT substrates for SAW filters used in smartphones, in addition to power semiconductor applications.

• Life Science Business Updates

  • The company is expanding sales of automatic cell culture equipment that supports work style reform in regenerative medicine and drug discovery, and actively developing the market for custom large automatic cell culture equipment, with ongoing product development for multiple research institutions.
  • A stem cell separation device for cell therapy, developed via joint collaboration, is being advanced for application in cerebral infarction and dementia treatment. A regenerative medicine project using the company's proprietary CELLFLOAT 3D rotating suspension culture technology for cultured cartilage, conducted in collaboration with the University of Tokyo and a regenerative medicine company, entered investigator-initiated clinical trials in the current fiscal year. In Phase 3, the company plans to expand into licensing business and eventually enter the cosmetic surgery sector.

1. Optical Business: Revenue grew year-over-year in both Q1 and Q2 of FY2026/6; strong order growth across Asia (led by China, Taiwan, and South Korea), with ongoing upgrades to multiple advanced synchrotron radiation facilities in Japan, Europe and North America. The segment already holds an order backlog exceeding the full-year FY2026/6 sales target, and demand for high-precision optical components for semiconductor and metrology equipment in the BtoB sector is also increasing. As of Q2 FY2026/6, the segment contributed the largest share of total company revenue.
2. Device Development Business: Revenue exceeded the prior year level. Large-scale projects are expected to be concentrated in the second half of the fiscal year, and no significant orders had been secured as of Q2. The company targets multiple orders and sales of next-generation semiconductor processing equipment centered on diamond processing equipment in the second half of FY2026/6.
3. Life Science Business: Revenue exceeded the prior year level. Large projects are expected to concentrate in the second half of the fiscal year. No full breakdown of absolute revenue or revenue contribution percentage was provided in the transcript.
4. Electronic Science Business (subsidiary): Service and contracted analysis business performed steadily, but sales of the core product ESCO-TDS1200Ⅱ are underperforming, and order progress for the product is slower than the prior year. No full breakdown of absolute revenue or revenue contribution percentage was provided in the transcript.

• Full-year FY2026/6 consolidated revenue is projected at 2.655 billion yen, representing 37% year-over-year growth, and gross profit is projected at 1.657 billion yen, representing 40% year-over-year growth, targeting both revenue and profit growth.
• Sales progression through Q2 is 24.3%, which aligns with the company's historical pattern of heavy sales concentration in the fourth quarter; this year, in addition to the Optical Business, Life Science and Device Development Business sales are also expected to concentrate in Q4.
• Selling, general and administrative expenses are expected to increase due to higher R&D investment, but all profit lines are projected to see significant year-over-year growth.
• No upward or downward revision to prior full-year guidance was announced in the call.

• Core product sales in the Electronic Science Business are currently underperforming, with order progress for the flagship ESCO-TDS1200Ⅱ slower than the prior year.
• The overall automated cell culture device market in the Life Science segment is still in an early development stage, despite growing demand from industry.
• Most new high-growth products in the Device Development Business are still in the testing and pilot commercialization stage, with full-scale revenue contribution not yet realized.

Q: What is the current status of R&D and capital expenditure plans?

A: The company is currently in Phase 2 of the Innovation 2030 strategy. Phase 1 focused on increasing R&D headcount and implementing capital investment. In Phase 2, the company is participating in new national optical-related projects, and plans to sequentially invest in required R&D equipment over the next three years. On a consolidated basis, R&D expenditure is budgeted at approximately 450 million yen, and capital expenditure is projected at approximately 260 million yen for the 33rd fiscal period.