TOKYO OHKA KOGYO CO.,LTD. Q3 FY2025 earnings call

• Company Overview and Core Technology: Tokyo Ohka Kogyo (TOK) was founded in 1940, holds the global number 1 market share (24.7%) for semiconductor photoresists, and has shifted focus to concentrate management resources on semiconductor materials. It has 8 domestic facilities and 10 overseas facilities, with over 80% of revenue generated from overseas customers. The company's two core competitive technologies are: (1) Microfabrication technology that enables nanometer-scale circuit patterning for advanced semiconductors; (2) High-purity purification technology that can detect impurities at the 1 part per trillion level, supporting improved production yield for semiconductor manufacturers. The company has received industry recognition including the 2024 TSMC Excellent Performance Award, and has been selected as a Global Niche Top Company by Japan's Ministry of Economy, Trade and Industry twice.
• Growth Strategy Pillars: 1. Leverage Generative AI Demand Growth: Generative AI is the primary driver of semiconductor market expansion, and TOK's photoresists and high-purity chemicals are used in the production of all key components of AI GPUs, including logic semiconductors, HBM memory, and high-density interconnect layers. 2. Full Product Lineup Strategy: TOK offers a full range of photoresists from legacy to cutting-edge, for both front-end and back-end semiconductor manufacturing, enabling it to serve all four key growth areas: information terminals, cloud, sensing & IoT, and green energy. 3. Customer-Centric Localization Strategy: TOK locates facilities close to major semiconductor customers across Taiwan, South Korea, China, the US, and completed an acquisition of a German optical component firm in early 2025 to expand into the European market. It is currently constructing a second plant in Pyeongtaek, South Korea to meet local demand for high-purity chemicals, and will complete capacity expansion at its existing Incheon plant in H1 2026. A new manufacturing site was also opened in Kumamoto, Japan in 2024 near TSMC's new Japanese fab. 4. Human Capital Investment: TOK identifies employee engagement as a material management priority, has added employee engagement as an executive compensation KPI, and extended its employee stock ownership plan and employee award program to global overseas employees to support its customer-centric strategy. 5. New Business Development: TOK is leveraging its core microfabrication and high-purity technologies to develop new businesses including biochip materials, optical materials, and functional materials, and is pursuing external partnerships to explore opportunities in life science, advanced electronic devices, and environmental sectors.
• Recent Operating Performance: For the first nine months of fiscal 2025, revenue grew significantly year-over-year driven by strong demand for AI-related semiconductors and solid PC replacement demand, which offset soft smartphone demand. Full year fiscal 2025 is on track to deliver new record high revenue and operating profit, beating 2024's results. TOK maintains a strong balance sheet with total assets of 299.5 billion yen as of September 2025, and a 71.1% equity ratio, enabling it to fund long-term R&D and strategic investments while delivering stable shareholder returns.
• Shareholder Return Policy: TOK changed its dividend policy to target a 4% net equity dividend ratio (DOE), up from the prior 3.5% target, following ROE rising above 10%. It expects a full year 2025 dividend of 70 yen per share, marking 8 consecutive years of dividend increases. It completed a 7 billion yen share repurchase program between November 2024 and January 2025, and will continue to repurchase shares elastically after funding growth and capital expenditure requirements.

Tokyo Ohka Kogyo operates two core product segments, with a roughly 1:1 revenue contribution split: 1. Electronics Functional Materials: This segment is centered on semiconductor photoresists, ranging from legacy g-line resists to cutting-edge EUV photoresists, and also includes back-end processing materials such as bump formation resists, redistribution resists, and WHS-related materials. For the full fiscal year 2024, this segment contributed approximately 50% of the company's total revenue of 200.9 billion yen. 2. High-Purity Chemicals: This segment includes process chemicals used across semiconductor manufacturing, such as thinner, developer, and surface modifiers. For the full fiscal year 2024, this segment also contributed approximately 50% of total revenue. For the third quarter of fiscal 2025 ended September 2025, segment revenue combined to 61.1 billion yen (up 3.8 billion yen quarter-over-quarter), and combined operating income reached 12 billion yen (up 2 billion yen quarter-over-quarter). The full fiscal 2025 combined revenue guidance is 227 billion yen, with combined operating income guidance of 40 billion yen.

• Long-term guidance under tok Vision 2030: Maintains target of 350 billion yen in total revenue, 77 billion yen in EBITDA, and 13% ROE by 2030, with sufficient growth potential to achieve or exceed these targets.
• Mid-term guidance under the 3-year tok Mid-Term Plan 2027, launched in 2025: Maintains quantitative targets of 270 billion yen in total revenue, 61 billion yen in EBITDA, and 13% ROE by 2027. Management will focus on first achieving the 13% ROE target by 2027, then sustain that target through 2030 via improved profitability and stronger balance sheet management.
• The current round of large-scale capital expenditure under the 2027 mid-term plan is sized to meet demand for the 2030 350 billion yen revenue target. Management stands ready to implement additional capacity investments in future mid-term plans if further demand growth makes additional capacity necessary.
• Full fiscal 2025 guidance: Maintains the forecast of 227 billion yen in total revenue and 40 billion yen in operating income, which would represent a new all-time high for both metrics, with solid growth expected in Q4 FY25 driven by ramping of advanced customer processes.

• TOK has identified two core supply chain and market risks to address: regulatory trends surrounding PFAS, and potential future semiconductor supply glut risk. It develops short, medium, and long-term response plans for both risks.
• Geopolitical risk, export control risk, disaster risk, and information security risk are also recognized as key material risks. In April 2024, TOK established a dedicated ERM (Enterprise Risk Management) department to coordinate with executive leadership and business units to develop and implement risk mitigation plans across all risk categories.
• The competitive environment for advanced cutting-edge photoresists (including EUV resists) is intense, with large diversified chemical companies as key competitors.

Q: Does TOK supply products directly to NVIDIA? / A: TOK does not supply products directly to NVIDIA. TOK's customers are semiconductor device manufacturers, which produce GPUs for NVIDIA. TOK is positioned upstream in the NVIDIA GPU supply chain, supplying photoresists and high-purity chemicals to the manufacturing partners that produce NVIDIA's products. This structure is standard across the industry for semiconductor material suppliers.

Q: What are the priority areas for R&D and investment under TOK's full lineup strategy? / A: TOK will continue to allocate resources to advance front-end microfabrication for cutting-edge process nodes, which is a core priority. The company also identifies back-end advanced packaging materials, especially packaging materials for 3D stacked semiconductors like HBM, as a high-growth area that will receive increased R&D resources. Both cutting-edge front-end processes and advanced back-end packaging are key focus areas going forward.

Q: What is TOK's progress on metal resist R&D, and will it displace EUV resists? / A: Metal resist is a type of EUV photoresist that uses metal components. TOK views it as an important candidate for next-generation fine patterning, and is actively conducting R&D on its own proprietary metal resist. Management believes metal resist has a high probability of being commercialized for next-generation semiconductor processes, and is working to develop a competitive product to capture market share in this emerging segment.

Q: How does TOK approach M&A, given its strong balance sheet? / A: TOK completed its first M&A in February 2025, acquiring a German electronic components manufacturer to expand in Europe. Going forward, TOK will only consider M&A opportunities in areas that align with its core microfabrication and high-purity technologies. Any future M&A will be evaluated carefully based on potential benefits and risks, with full consideration of post-acquisition integration outcomes before a final decision is made.