4425.T

• Updated Growth Strategy

  • Revised strategy this fiscal year focused on two core pillars: expanding core spatial perception software technology and leveraging synergistic hardware packages to improve near term profitability and accelerate technology adoption.
  • Prior periods saw slower than expected product adoption after customer productization; the new strategy addresses this shortfall by combining software and hardware to drive near term revenue while building toward long term license-based growth.
  • Kudan holds a rare market position as one of the few companies covering both digital twin and robot spatial perception, allowing cross-segment synergy advantages.

• Market Environment Favorable Tailwinds

  • Digital twin: Demand for photorealistic technology and AI-enabled digital twin solutions is surging as a once-in-a-decade innovation, driven by industry leaders like NVIDIA. Kudan is an early leader in this space, positioned to capture growing demand across infrastructure, construction, manufacturing and logistics.
  • Robot: Physical AI expansion and next generation legged/humanoid robot development are increasing demand for advanced algorithms for complex environments, which is Kudan's core strength.

• Digital Twin Segment Operational Updates

  • Launched Kudan PRISM, a world-first next generation digital twin solution combining photorealistic 3D rendering and semantic 3D recognition that enables major AI functionality improvements over traditional 3D point cloud-only solutions.
  • Kudan PRISM has validated efficacy in Europe and Japan for facility/equipment inspection and maintenance, and is pursuing full commercial expansion this fiscal year. A key ongoing project is PRISM e-Road co-development with Nexco East Japan Engineering for road inspection DX.
  • 3D scanner sales via strategic partnership with XGRIDS have grown rapidly, with strong synergy alongside Kudan PRISM, driven by the scanner's high performance and low cost competitiveness.

• Robot Segment Operational Updates

  • Expanded core autonomous driving technology into a full integrated autonomous navigation software package to serve a broader customer base and streamline development; also began development of legged robot inspection solutions to leverage synergy with digital twin facility management business.
  • Serving as core software development leader for a Japanese Ministry of Economy, Trade and Industry national policy project focused on autonomous robot navigation for the construction industry, which will create a cross-industry generalizable technology platform.
  • Officially launched Kudan VANTAGE, patented spatial perception software for XR broadcast robot cameras, after successful deployment at the 2024 Super Bowl and full 2025 NFL season with FOX Sports and SkyCam; targeting expansion to global major sports and live event venues.

• Full year 2026 (ending March 2026) sales guidance is upward revised from 0.7 billion yen to a range of 0.92 billion yen to 1.02 billion yen, representing a 31% to 46% increase from the prior guidance and an 80% to 100% year-over-year increase.
• Full year adjusted operating loss guidance is revised from minus 0.72 billion yen to minus 0.68 billion yen (a limited improvement, due to partially offsetting cost reduction delays), while end-of-fiscal-year adjusted operating loss is upward revised from minus 0.59 billion yen to minus 0.48 billion yen to minus 0.52 billion yen, a larger improvement reflecting the completion of cost reduction by year end.
• Next fiscal year (ending March 2027) adjusted operating loss is expected to reach minus 0.35 billion yen to minus 0.4 billion yen, with accelerated deficit reduction off the improved year-end cost structure.
• Management confirms the path to profitability is now clearly defined, with cost reduction completed by the end of this fiscal year enabling accelerating deficit reduction going forward.

1. Digital Twin Segment: Includes software solutions (Kudan PRISM) and complementary 3D scanner hardware packages. This segment contributed 150 million yen to 250 million yen of the full year upward sales revision, with 50 million yen to 100 million yen from Kudan PRISM sales growth and 100 million yen to 150 million yen from combined software/hardware scanner sales growth. Cumulative H1 (first half) sales for the segment are not separately broken out, but it is the primary driver of near term growth and profitability. 2. Robot Segment: Includes autonomous driving navigation packages, government policy projects, and XR robot camera solutions. This segment contributed 70 million yen of the full year upward sales revision from better-than-expected government project order intake. The segment is focused on medium to long term competitive positioning rather than near term profit. Cumulative H1 total company sales reached 400 million yen, representing a 170% year-over-year increase.

• Cost reduction initiatives are currently delayed relative to the initial start-of-fiscal-year plan, due to the need to adjust plans to match faster than expected business growth. Management expects to get back on track by the end of the fiscal year, but any further delays could slow profitability improvement.
• The large potential robot market requires advanced next generation technology to serve complex unstructured environments, which presents ongoing technical development risk, though Kudan has built early implementation experience in this area.

Q: Why is the projected end-of-fiscal-year deficit much smaller than the full-year projected deficit? / A: All cost reduction improvements will be completed by the end of this fiscal year, and the improved year-end profitability figure reflects the steady-state cost structure that will carry over to next fiscal year. This end-of-period figure excludes one-time costs incurred during the current fiscal year's transition, so it shows a larger deficit reduction than the full-year current fiscal year figure.

Q: Why did cost reduction experience delays, and what are you doing to prevent further delays? / A: Delays occurred because business grew faster than originally expected, requiring adjustments to the original cost reduction plan. The plan is now fully updated, most specific measures are already near completion, and management sees no remaining risk of further delays at this point.

Q: Is there room for additional fixed cost cuts after reaching the planned 0.95 billion yen level by year end, and what sales level is needed to reach operating profitability? / A: The current planned fixed cost reduction is expected to be fully completed by year end, and no additional cuts are planned at this time. Management is still refining the target sales level for profitability, and will disclose the outlook once it is finalized.

Q: Can the current cash balance support operations without additional funding until profitability, and is there a need for future capital raising? / A: Management believes the existing cash level is sufficient to reach profitability without any additional capital raising. There are no material growth investment plans requiring additional funding that can be disclosed at this time, and no current need for additional capital raising is recognized.