9880.T

Company Transformation & Core Mission

• Founded in 1987 as an import trading company focused on semiconductor-related products, gradually shifted away from commoditized trading business and grew in-house product / service businesses, largely via M&A. Reclassified from wholesale to electrical equipment on the Tokyo Stock Exchange in 2022, now operating as a hybrid trading/manufacturing business.
• Core mission: Leverage cutting-edge external technology, capture customer-specific needs, and deliver Innotech-unique customized solutions rather than generic mass-produced products.

Mid-Term Management Plan (FY2024-FY2026) Common Strategy

• Improve operating margin: Innotech is transitioning to a manufacturing-focused business, sees meaningful room to expand profitability further.
• Optimize business portfolio via capital reallocation: Clarify priority growth areas to accelerate growth, no planned major exits at this stage.
• Improve earnings stability: Reduce extreme cyclicality from semiconductor capital equipment sales by expanding stable stock-type recurring revenue businesses.

Segment Strategic Progress

• Test Solution: Expand product lineup to reduce over-reliance on NAND flash memory testing; STAr Technologies focuses on high-margin foundry business following divestment of non-core assets; continue R&D investment for next-generation device testers covering memory and CIS segments.
• Semiconductor Design Related: Solidify as a stable earnings base; expand design service offerings via internal subsidiaries to add higher value on top of the core EDA distribution business.
• System & Service: Pursue "mass customization": develop customer-customized solutions that can be scaled to broader mass markets to drive both revenue and profit growth; for IT Access payment terminals, pursue vertical expansion to lower-sales vending machine locations via lower-cost offerings, and horizontal expansion beyond beverage vending to new use cases.

Financial & Sustainability Strategy

• Capital allocation prioritizes growth investment and shareholder returns; 4 billion yen allocated for new growth investment over the mid-term plan, a manageable size for Innotech's current financial position.
• Shareholder returns: Target approximately 50% payout ratio, avoid extreme dividend swings, supplement with regular share buybacks to balance cash return to shareholders.
• Prioritize human capital management as the core sustainability focus; installed full-rooftop solar panels at the Shin-Yokohama headquarter, and conducts ongoing local community contributions including programming classes for local elementary schools.

• FY2026 March Term full-year guidance maintained at 43.5 billion yen total revenue and 2.6 billion yen operating profit, targeting a return to high-200 million yen level profit and upward movement in ROE after three years of stagnant profit growth.
• No expected improvement in domestic tester demand, with growth driven by new overseas customer orders for testers; the EDA business is expected to deliver stable year-over-year sales and profit growth.
• System & Service businesses are generally expected to perform in line with plan, with a cautious outlook for Gaio Technology due to softness in the automotive sector.
• 2024 (mid-term plan first year) operating cash flow came in below plan, so the company will focus on growing profit in years 2 and 3 to increase capacity for new growth investment.

1. Test Solution Segment: Develops and sells in-house semiconductor testing equipment, including NAND flash memory and CMOS image sensor testers (Innotech core business) and reliability evaluation equipment / probe cards via Taiwanese subsidiary STAr Technologies. For FY2026 March, the core tester business is projected to roughly double its sales driven by overseas demand; STAr Technologies is projected to see lower sales due to a Q3 FY2025 business divestment, but is expected to deliver higher profit on a focus to high-margin foundry-focused business. 2. Semiconductor Design Related Segment: Led by the long-standing Cadence EDA software distribution business (multi-year term licensing, stable recurring revenue), plus subsidiary businesses: Sanei Hightex provides semiconductor design contracting / engineer dispatch, and Modecc produces specialized simulation models for semiconductor design development. It is positioned as the stable earnings base for the company. 3. System & Service Segment: A diverse set of end-product focused businesses: (1) Embedded systems: In-house custom application-specific embedded computers for transportation, medical, and industrial sectors, valued for high reliability against lower-cost overseas alternatives; (2) Gaio Technology: Automotive embedded software validation tools and services, ISO 26262 compliant, maintains high profitability; (3) IT Access: Cloud-based payment terminal systems, primarily for beverage vending machines, over half of IT Access revenue, fast-growing, with low-cost simple terminal architecture and remote maintenance capabilities; (4) Reglus: In-house AI camera systems for worker safety detection in construction / logistics sites, growing rapidly.

Reported Q1 FY2026 results: Total company revenue 9.457 billion yen, operating profit 234 million yen, below prior year Q1 due to typical seasonal patterns and a large one-time Q1 sales booking in prior year. In terms of overall company, 70% of total sales are now in-house products, with traditional trading business also still growing alongside the in-house product portfolio, with 30% of total consolidated sales coming from overseas business, 15% of total consolidated sales from China, with single-digit percentage contributions from Taiwan, South Korea, and Singapore.

• Domestic demand for semiconductor testers has remained weak for three years, creating ongoing pressure on overall company profit growth.
• 90%+ of Gaio Technology (System & Service segment) revenue comes from automotive-related business, which faces ongoing uncertainty from trade tariffs that has made Japanese automaker customers more cautious about spending, creating uncertainty for Gaio's results from Q2 FY2026 onward.
• China's economic slowdown and ongoing geopolitical tensions with the US create uncertainty for STAr Technologies' sales in the key Chinese market, though the company has recently seen continued demand from Chinese semiconductor manufacturers seeking stable supply chains to avoid tariff-related risks.
• Securing technical talent is challenging: Innotech still carries a legacy trading company perception that makes it harder to attract science/engineering graduates, though recent internship programs have improved new graduate hiring results.
• The semiconductor industry has inherent cyclicality that creates volatile quarterly sales and earnings results for the company's test equipment business.

Q: What is the current geographic split of overseas sales, and how do you prioritize regions for Test Solution business expansion? / A: Currently, 30% of consolidated sales come from overseas, 15% of total consolidated sales are to China, with single-digit percentages from Taiwan, South Korea, and Singapore, led by STAr Technologies' global sales. For Test Solution expansion, China is the highest priority market in the near term: STAr's China sales are already growing rapidly, and Innotech's core tester business has seen stronger early customer traction in China than in the US, so the company will focus heavily on China for growth.

Q: Domestic memory tester demand remains weak, will the market wait for your company to recover, and what is your strategy to offset this weakness? / A: The company does not plan to wait for domestic demand recovery. It expects ongoing softness in domestic demand this fiscal year, and is counting on overseas demand to drive overall segment revenue growth. It is also actively developing new products, including testers for CMOS image sensors and DRAM, to reduce reliance on NAND flash memory demand and insulate the business from single-market cyclicality.

Q: What is your long-term shareholder return policy for dividends and buybacks? / A: The company commits to not letting the consolidated payout ratio fall below 30%, with a target of approximately 50% over the medium term. It prioritizes gradual steady dividend increases and avoids dividend cuts wherever possible. When annual profit is unexpectedly high or cash flow is larger than needed for growth investment, it will use additional cash for share buybacks as a buffer to maintain stable dividends.

Q: How much exchange rate volatility impacts your operating results? / A: The impact of exchange rates on core sales and operating profit is very small. Most of the company's sales are yen-denominated, and the EDA business has USD-denominated costs matched with USD-denominated customer contracts, which hedges most currency risk. The only impacts come from: translation of STAr Technologies' TWD-denominated results into yen for consolidated reporting, and foreign exchange gains/losses on intercompany loans to STAr, which flow through non-operating items rather than core profit.