SKY Perfect JSAT Corporation Q3 FY2025 earnings call

Overall Financial Performance

• Cumulative 9M operating revenue reached 91.9 billion yen, with operating profit of 21.3 billion yen and net profit attributable to parent shareholders of 14.4 billion yen, all up year-on-year. Full-year guidance was upward revised to 124.0 billion yen operating revenue, 28.0 billion yen operating profit, and 19.0 billion yen net profit, which would be record high profit since listing.

Space Business Strategic Initiatives

• The company approved full-scale entry into the low-orbit earth observation business, with a total planned investment of approximately 40.0 billion yen to build and own an in-house low-orbit satellite constellation. The company will procure 10 next-generation optical observation satellites Pelican developed by Planet, with service launch scheduled for 2027. The constellation will offer world-leading 30cm resolution imagery, and the company targets growing Space Intelligence revenue from approximately 4.0 billion yen this fiscal year to 23.0 billion yen by FY2030, with net profit exceeding 7.0 billion yen.
• The company announced new partnerships with two space startups: Penetrator (a JAXA spinout developing an AI-powered real estate search engine combining satellite imagery with other data) and Arc Edge Space (a full-stack microsatellite constellation solutions provider).

Media Business Strategic Initiatives

• The company is continuing the successful U30 First-Time Discount campaign for the 2025 professional baseball season to acquire younger subscribers, and will refresh the Professional Baseball Package app to add in-stream player statistics and related content.
• The company is expanding non-broadcast revenue via live events: a sold-out urban legend-themed talk show at Ariake Arena drew 30,000 attendees, and off-season baseball events have also been held to deliver off-air fan experiences.
• The SKY Perfect! + Net Stick hybrid broadcast-broadband streaming dongle is in limited pilot service, with 60% of pilot users rating its operational performance highly, and 40% reporting increased streaming viewing time.
• The company is participating in a Japanese Ministry of Internal Affairs project to demonstrate satellite-based terrestrial broadcast replacement for remote/geographically disadvantaged areas using existing vacant satellite bandwidth, targeting closing information gaps in mountainous and island regions.
• The company launched a one-stop media solution service leveraging existing broadcast distribution assets and live production expertise, with 2025 fiscal year revenue forecast to reach 120% of prior year levels.
• 100% owned subsidiary SKY Perfect Customer Relations (SPCC) was converted into a joint venture with Bell System 24 Holdings in January 2025, to accelerate development of a generative AI-powered hybrid contact center and improve service quality and operational efficiency.

Shareholder Returns

• The company upward revised year-end dividend by 5 yen per share to 16 yen, bringing full-year dividend per share to 27 yen. Cumulative shareholder returns (dividends + buybacks) over the 2022-2026 five-year period are on track to reach 24.5 billion yen by fiscal year-end, against a 40.0 billion yen total target. Management will continue to consider opportunistic share repurchases going forward.

1. Space Business: For the first three quarters, the segment recorded a large revenue decrease due to the end of 4K broadcasting-related transponder revenue, but this was partially offset by increased revenue from earth observation image data sales in the Space Intelligence business and yen depreciation benefits in the global mobile segment. A one-off loss of 0.5 billion yen from an equity method investee was recorded, but full-year segment operating profit is still forecast to reach 15.1 billion yen as originally guided. Management upward revised full-year segment operating profit to 22.8 billion yen, driven by near-certain government agency project orders in Q4 and cost improvements. This segment accounts for approximately 46% of total cumulative 9Q revenue.

2. Media Business: For the first three quarters, the segment recorded cumulative operating revenue of 49.6 billion yen, a 9 billion yen decrease year-on-year, as continued gradual subscriber declines reduced viewing fee revenue. This revenue drop was offset by growth in non-broadcast content revenue including talk events and animation-related revenue. Despite higher costs for new service development (connected TV, Web3), cost reductions from the end of 4K broadcasting and operational efficiency improvements drove a 16 billion yen year-on-year increase in operating profit to 57 billion yen, and a 19 billion yen increase in net-based segment profit to 40 billion yen, beating initial guidance. All full-year revenue, operating profit, and segment profit targets were upward revised after accounting for Q4 promotional plans for the flagship SKY Perfect! Professional Baseball Package. This segment accounts for approximately 54% of total cumulative 9Q revenue.

• Full-year FY2025 operating profit was upward revised from the initial forecast to 28.0 billion yen, and net profit was upward revised to 19.0 billion yen, which is expected to be the highest profit in the company's history since listing.
• The Space Intelligence business targets growing revenue to 23.0 billion yen by FY2030 (from ~4.0 billion yen in FY2025), with net profit exceeding 7.0 billion yen.
• Management is currently finalizing the FY2026 (ending March 2026) business plan, and is building the plan around a forecast of increased full-year profit, with no material negative factors expected. For the Media business, the plan assumes continued gradual declines in viewing revenue, which will be offset by growth in non-broadcast revenue to maintain overall operating revenue. The Space business is targeted to deliver higher profit than FY2025 as the company's core growth driver.
• The 10-satellite low-orbit optical observation constellation is on track to begin full operations in mid-2027, with the first launch scheduled for H2 2026.
• Media solution service revenue is forecast to reach 120% of prior year levels in FY2025.

• The Space Compass joint development project is facing delays due to its high technical complexity, with the data relay satellite launch already pushed back, and management is currently revising the project plan in coordination with partner NTT. No updated timeline has been confirmed.
• Southeast Asian satellite market competition is intensifying, with ongoing downward pressure on service pricing, a trend that management already expects to continue.
• New non-broadcast media businesses (live events, animation) have variable performance that depends on the success of individual projects, unlike the stable recurring revenue of traditional broadcast subscription services, meaning revenue growth is not guaranteed to compound automatically.
• Fuji Media Holdings is part of the company's leading joint venture controlling shareholder, and management notes that while there is no material negative impact on current earnings from the ongoing Fuji Television governance controversy, the company will review its position after the third-party investigation report is released.
• Low-orbit satellite launch schedules depend on launch provider availability, though management currently confirms that the planned 2027 service entry is achievable with SpaceX's Falcon 9 launch cadence.

Q: What is the strategic rationale for SKY Perfect JSAT's full-scale entry into low-orbit earth observation, and will the company offer both optical and radar satellites? / A: Management explains that the company has historically focused on geostationary communication satellites, and a single-orbit, single-segment portfolio is not sustainable for long-term growth. The company is expanding its asset and business portfolio to medium-orbit, low-orbit, and non-communication applications. SKY Perfect JSAT will continue to partner with multiple providers, offering both optical satellites from Planet and SAR radar satellites from its investment QPS Institute, to meet diverse customer needs with a full product portfolio. This full-scale entry is the first step to building in-house low-orbit capability.

Q: With 40 billion yen in total investment for the constellation, 5-year satellite lifetimes creating 8 billion yen annual depreciation, and existing annual Japanese Ministry of Defense contracts over 8 billion yen, can the project reach break-even in its first full year of operation, and how will the company engage in the MoD PFI project? / A: Annual defense contracts are awarded via competitive bidding, so future awards cannot be guaranteed, but the company's new 30cm resolution imagery will offer a major improvement over its current 50cm product, making it well-positioned to win new business. Management confirms that it expects to generate sufficient revenue to cover the 8 billion yen annual depreciation cost, with demand expected from multiple government agencies as well as new private sector customers, to hit the 23 billion yen revenue target by 2030 with solid profit. The PFI project is still undergoing budget review in the Japanese Diet, so management declines further comment at this time.

Q: How does the 2025 return of the Trump administration in the U.S. and the growing dominance of SpaceX impact the company's space business plans? Is there any headwind from this? / A: Management notes that the U.S. Space Force was first established under the first Trump administration, and its budget has continued to grow under the Biden administration, with closer U.S.-Japan space cooperation that benefits the company. SKY Perfect JSAT is already one of the largest Asian customers of SpaceX launch services, including for its upcoming Superbird-9 satellite, and will continue to use SpaceX. The Pelican satellites will launch on Falcon 9, which maintains a high launch cadence that supports the company's 2027 timeline. If SpaceX becomes too dominant, the company has backup options including Arianespace and Japan's MHI H3 rocket, which is expected to become competitive within 4-5 years. Overall, management sees no headwind, and expects a closer relationship with SpaceX going forward.

Q: What impact has the SKY Perfect! + Net Stick pilot had on existing subscriber viewing behavior? Has it cannibalized traditional broadcast viewing? / A: The pilot is primarily offered to existing SKY Perfect JSAT subscribers, and early data shows that the device has driven increased viewing time for both the SKY Perfect streaming service and SPOOX, even for users who did not use these services previously. Contrary to concerns that streaming would replace broadcast, data shows that many users actually increased their traditional broadcast viewing time after adopting the device, with streaming adding to rather than cannibalizing broadcast consumption. Management is using this pilot data to refine the full commercial launch plan.

Q: Will SKY Perfect JSAT expand beyond low-orbit observation into other low-orbit business segments like communications? / A: Management confirms it keeps all options open across orbits and use cases. Different service requirements support different models: full low-orbit communication constellations require hundreds of satellites, while medium-orbit solutions can cover the Earth with around 30 satellites to lower unit costs, and there are also technical options like high-capacity optical communications. The company's strategy is to remain flexible, and offer the optimal solution for customer needs across geostationary, medium, and low orbits going forward.