ODAWARA AUTO-MACHINE MFG.CO.,LTD. Q4 FY2024 earnings call

Overall 2024 Fiscal Year Performance

• Achieved revenue of 6.11 billion yen and operating profit of 0.39 billion yen, marking the highest revenue and profit since the launch of Mid-Term Management Plan 2025 in 2020, with double-digit year-over-year growth in all profit metrics, beating initial opening guidance for both revenue and profit.
• Increased dividend per share to 28 yen, a 2 yen increase from the prior year, maintaining this dividend level for the 2025 fiscal year per the updated dividend policy.
• Successfully met all Tokyo Stock Exchange listing maintenance requirements as of December 31, 2023, after previously failing to meet the tradable shares market capitalization criterion, with the number of shareholders (led by individual shareholders) continuing to grow.

Strategic Growth Initiatives

• Three-stage preparation for the next mid-term management plan:
  • 1. Transform inefficient business processes: Shift from the current order-based

1. Fares Receipt Equipment Business: Contributes the majority of total revenue, driven by surging demand for fare box updates triggered by the 2024 new Japanese banknote issuance, and steady adoption of multi-cashless payment terminals. No exact absolute segment revenue was disclosed, but the overall consolidated revenue for 2024 was 6.11 billion yen, with the system development segment exceeding 0.5 billion yen in revenue.
2. System Development Business: Handled by subsidiaries Sota System and Azuma, achieved revenue exceeding 0.5 billion yen, with growth driven by expanding sales to external clients outside the group, including ETC system social infrastructure construction and application/printed circuit board development contracts. This segment accounts for approximately 8.2% of total consolidated revenue.

1. 2025 December fiscal year guidance: Revenue projected at 7.604 billion yen (meeting the original Mid-Term Management Plan 2025 full-year revenue target of 7.5 billion yen), with operating profit projected at 0.212 billion yen, representing a year-over-year decrease in profit.

• Revenue growth is driven by large expected increases in cashless terminal demand from payment diversification and rising inbound tourism, offsetting the peaking out of new banknote conversion demand, with total revenue expected to grow approximately 1.5 billion yen year-over-year. The large-scale Tokyo metropolitan area fare box replacement project previously scheduled for 2025 has been delayed to 2026 or later, but the company has already secured approximately 4 billion yen in backlog.
• Profit is projected to decrease due to the disappearance of the high-margin new banknote special demand, a higher proportion of low-margin large-scale projects pulling down gross margin, and continued planned investment in human resources and DX for future growth.

1. Mid-Term Management Plan 2025 target revision: Maintains the original 7.5 billion yen revenue target, but revises down the original operating profit target of 0.8 billion yen (10% operating margin) to account for changed market conditions.
2. Capital expenditure and R&D guidance: 2025 fiscal year planned capex is 0.188 billion yen, focused on DX investment for business process transformation; planned R&D expense is 0.178 billion yen, focused on next-generation boarding/alighting system development, multi-cashless terminal feature enhancement, and data service platform development.
3. 2026 December fiscal year outlook: Management expects revenue and profit to be roughly flat compared to 2025, with gradual profit improvement expected as DX process improvements take effect.

• Large-scale infrastructure projects that were originally scheduled for 2025 have been delayed to 2026 or later, creating uncertainty around near-term profit performance.
• A higher proportion of low-margin large-scale projects is pulling down overall gross margin, pressuring profitability in the near term.
• Pre-production of products for large 2025 projects led to a large increase in inventory, a negative 1.14 billion yen operating cash flow, and an increase in short-term borrowings, which pushed the equity ratio down 9.4 percentage points to 42% at the end of 2024. While management expects the equity ratio to recover in the first half of 2025 after large projects are recognized and debt is repaid, near-term balance sheet risk has increased.
• New business development is still in early stages, with uncertain revenue and profit contribution timelines.

Q: What is the expected growth contribution from new businesses led by the New Business Promotion Office? / A: Currently only data service solutions that use bus boarding/alighting data to improve bus operator operational efficiency are in client negotiations. This business will generate recurring monthly fee revenue that will gradually grow over time. Management is also developing additional new mechanical product-based business opportunities that are not yet ready for public announcement.

Q: What is the outlook for 2026 December fiscal year revenue and profit? / A: While exact figures are not yet finalized, management expects 2026 top and bottom line results to be roughly flat compared to 2025. DX transformation initiatives will be further implemented by 2026, and are expected to gradually deliver profit improvements starting that year.

Q: How much demand do you expect for multi-cashless payment terminals going forward? / A: Management expects strong demand growth for 2025. In 2024, the company shipped nearly 3,000 units of its second-generation BOSS terminal, which supports credit card payments and upcoming electronic ticketing. Strong demand comes from regions not currently using 10 major interoperable transit IC cards, airports, and tourist areas seeking to serve inbound foreign tourists, with growing adoption of non-IC card payment methods in public transit expected going forward.

Q: Do you have sufficient human resources to drive new business development? / A: The company hired approximately 40 new employees across the group in the 2024 fiscal year. It is also shifting development to open, modern environments including moving BOSS development from an embedded software base to Linux, and building capabilities to leverage Amazon Web Services for new project development.