IMV CORPORATION Q2 FY2025 earnings call

Overall Financial Performance:

• 3 consecutive years of year-over-year revenue and profit growth for the first half period. Total interim revenue hit 9.525 billion yen, up 21.2% year-over-year.
• Operating profit reached 1.479 billion yen, up 21.7% year-over-year; EBITDA reached 1.765 billion yen, up 19.9% year-over-year; net interim profit reached 1.194 billion yen, up 10.0% year-over-year.
• Operating margin held steady at 15.5% year-over-year, while net profit margin fell 1.3 percentage points to 12.5% due to higher component costs and increased human capital investment, which offset gains from high-margin project wins.

Capital Investment and Expansion:

• Completed renovation of the Japan High Reliability Evaluation Test Center in Saitama, and opened a new dedicated EMC test building. Expanded EMC testing coverage beyond automotive clients to serve aerospace, space, and defense sectors that require higher reliability standards. The new facility will start operations in June 2025, and has already received strong customer inquiry volume.
• Increased capital expenditure to 1 billion yen from 0.248 billion yen in the prior year period, almost all allocated to the EMC facility expansion.
• Opened multiple new test facilities in 2025: a multi-purpose test lab at the Osaka headquarters in January, a second Vietnamese test facility in Ho Chi Minh City in May, plus the EMC expansion in Saitama. Management expects these investments to drive future revenue growth.

New Growth Areas:

• Inquiries and orders for vibration testing equipment for AI servers are growing rapidly. Management identifies significant growth potential in this segment: AI servers are larger than traditional servers, increasingly use water cooling which makes them more vulnerable to vibration stress during transport, so rigorous vibration reliability testing is a critical requirement. IMV has already received initial orders and is working closely with customers to develop tailored solutions.
• IMV's 3S (Strong, Small, Smart) SW-5033 seismograph, targeted at infrastructure operators to prevent secondary disasters and speed post-earthquake recovery, won the Japan Resilience Award 2025 Excellence Prize. The product is lower-cost and easier to install than traditional seismometers, and has strong market traction. It was also selected for a JICA business demonstration project to deploy earthquake monitoring systems in Indonesia, opening new international growth opportunities for the MES segment.

Balance Sheet and Cash Flow:

• Free cash flow remained positive, though it fell 0.538 billion yen year-over-year due to large capital expenditures. Cash and cash equivalents rose 0.217 billion yen to 2.983 billion yen.
• Equity capital increased 1.091 billion yen to 11.122 billion yen, and the equity ratio rose 0.2 percentage points to 51.2%, maintaining a stable, healthy financial position.

• DSS (Device and System Solutions): Revenue of 7.003 billion yen, 24.8% year-over-year increase. Contributes 74% of total company revenue, up 3 percentage points from the prior year period. Domestic growth was driven by large projects for automotive and defense industries; overseas growth came from large European automotive projects and aerospace projects in the U.S. and South Korea.
• TSS (Testing and Service Solutions): Revenue of 1.867 billion yen, 21.5% year-over-year increase. Contributes ~20% of total company revenue. Growth was driven by rising demand for vibration testing for EV batteries and motors, and steady demand for vibration/EMC testing for aerospace clients.
• MES (Measurement and Earthquake Solutions): Revenue of 0.655 billion yen, 8.1% year-over-year decrease. Contributes ~7% of total company revenue. The decline is due to the full-year plan being weighted toward the second half of the fiscal year, with no material permanent decline in demand.

Management maintained its original full-year 2025 September fiscal year guidance, projecting:

• Full-year revenue of 16.5 billion yen
• Full-year operating profit of 1.95 billion yen
• Full-year ordinary profit of 1.95 billion yen
• Full-year net profit of 1.5 billion yen All targets represent planned year-over-year revenue and profit growth. Management also noted that U.S. tariffs could reduce full-year operating profit by up to 0.05 billion yen, and will continue to monitor developments related to this risk.

• Rising prices of some raw materials and components push up cost of goods sold, putting moderate downward pressure on profit margins.
• U.S. tariffs carry potential downside risk to full-year operating profit of up to 0.05 billion yen.
• The DSS segment has seen growing order backlog driven by strong demand, partially due to larger project sizes and longer lead times for space and defense projects, which can create near-term production scheduling pressure.

The provided transcript does not include a question and answer section.