QD Laser,Inc. Q4 FY2025 earnings call

Leadership Transition

• QD Laser was spun out of Fujitsu Laboratories in 2006, with current COO Okubo as founding vice president. Long-time incumbent CEO Nagao will hand over the CEO role to Okubo, who will take office in June 2025 after the shareholder meeting.
• The early transition (after just 1 year of Nagao's tenure) is intentional: it allows a younger generation of leadership to steer the company over a 5-10 year long-term planning horizon, and the board confirmed the transition has gone smoothly following 5 months of delegated authority to Okubo as COO. Nagao will remain an executive officer to support Okubo's leadership after the transition.

Core Technology and Competitive Advantages

• QD Laser is a fab-light semiconductor laser company: it keeps core semiconductor crystal growth capabilities in-house, while outsourcing most downstream manufacturing. The company holds unique core technologies including quantum dot laser, proprietary diffraction grating for DFB lasers, VISIRIUM laser retinal projection, and integrated ready-to-use laser module design.
• Management believes QD Laser is one of only 2 companies globally capable of mass-producing commercial-grade quantum dot lasers, and its products offer superior high-temperature performance and low-cost mass production compared to peers.

2025 March Fiscal Year (Baseline Plan Year 1) Results

• Total company revenue grew 5% year-over-year, exceeding 1.3 billion yen (130 million USD equivalent) for the first time ever.
• Gross profit increased, cost of goods sold declined, SG&A decreased, and operating loss improved by 158 million yen (15.8 million USD equivalent) year-over-year. There were no special losses, so net income also saw meaningful improvement. Management calls the first year of the baseline plan a solid start. The end-of-period order backlog hit an all-time high, confirming solid LD segment momentum.

1. Laser Device (LD) Segment: Revenue grew 20% year-over-year, and profit improved 242% year-over-year. DFB lasers account for 47% of LD segment revenue, growing 34% year-over-year. Small visible lasers grew 28% year-over-year, driving segment revenue growth. High-power lasers were broadly flat at steady levels. Quantum dot laser revenue remained flat year-over-year. As of end-March 2025, the LD segment held an order backlog of 335 million yen (33.5 million USD equivalent), an all-time high. Approximately 90% of current LD segment revenue comes from non-quantum dot laser products.
2. Visual Information Device (VID) Segment: Revenue declined year-over-year, but operating losses narrowed. The segment continues to receive non-recurring engineering (NRE) development contracts from joint development partners that support current revenue, and has started pursuing a new B2B optical unit and component business with several initial inquiries received.

• The company maintains its medium-term target of achieving full company net profitability by the 2027 March fiscal year, the final year of the current mid-term plan (2025-2027 March fiscal years).
• For 2026 March fiscal year (Baseline Plan Year 2), overall progress is broadly in line with the original medium-term plan, with minor budget adjustments. VID segment revenue is expected to outperform the original medium-term plan target. LD operating profit is expected to decline significantly year-over-year, as management is intentionally budgeting for increased R&D spending to strengthen product competitiveness for 2027 and beyond. Adjustments to VID business activities are ongoing but the overall framework remains unchanged.
• Post-2027 profitability, the baseline LD business will continue to deliver steady incremental growth. Core long-term growth drivers are quantum dot lasers (primarily for silicon photonics applications) and VID business (including smart glass applications). Management expects visible growth opportunities to begin emerging by the 2027 March fiscal year, with major market expansion for quantum dot lasers expected around 2030.
• The company expects new wavelength small visible laser samples to ship by the end of 2025, with revenue contribution starting from the 2027 March fiscal year; 50mW high output small visible lasers are already commercialized.

• The company has never recorded an annual profit since founding, relying on repeated capital raises to fund development and operations. Management acknowledges that failure to achieve profitability by 2027 could make future debt or equity financing more difficult.
• Quantum dot laser commercialization depends entirely on product development and market adoption by QD Laser's partner and customer companies; the timeline for mass market adoption is uncertain and depends on external roadmap decisions that QD Laser cannot control.
• The stock price has declined multiple times following recent leadership changes, and management acknowledges that the company has low investor confidence in its 2027 profitability target amid continued consecutive annual losses.
• As a small company, QD Laser cannot independently pursue all potential growth opportunities for its core technologies, and relies on external partnerships to scale new products, creating execution and revenue sharing risks.

Q: The company has had frequent CEO changes recently. Is the mid-term plan still on track? / A: 2025 March fiscal year results exceeded the mid-term plan targets. For 2026, the expected lower profit reflects intentional increased R&D spending for future growth, not a miss. Overall, the business remains on track with the original plan. / Q: Why hasn't quantum dot laser achieved widespread adoption yet? Do you still expect growth from this technology? / A: Currently, the market is dominated by lower-cost quantum well lasers produced by many large incumbent manufacturers. Adoption is expected to grow over the medium term as demand increases for applications requiring high temperature resistance, where quantum dot lasers have unique advantages. Large-scale mass market adoption is expected around 2030. / Q: Why was earlier disclosure of Okubo's planned CEO succession not made when Nagao took office or Okubo became COO, given the stock price drops after each announcement? / A: While a long-term succession plan was considered, there was no formal finalized agreement or internal/board approval at the earlier stages, so early disclosure would have been premature and risked creating market confusion. The company prioritized finalizing plans before disclosure to avoid misinformation. / Q: Is the VID business still worth continuing given its long history of losses? / A: The VID business is not taking large new investments currently. Management is actively pursuing monetization of the existing retinal projection technology via partner collaborations, including launching a new B2B optical unit component business line.