Earnings Call: Q2 2026

Aug 14, 2026

Summary

H1 revenue rose 48% YoY and losses narrowed, with production on plan and a JPY 101.9B backlog. FY27 guidance targets JPY 68B–JPY 72B revenue, supported by ~72% secured orders; international expansion and new products offer upside.

Hello, I'm Masahiro Ito. I'm the CEO and co-founder of PowerX. Thank you very much for tuning into our second quarter financial results briefing for 2026. Really appreciate your watching this video. Okay, as we get started, I'd like to summarize where we're at and what the state of the situation. Today, I'll be explaining a lot of this in quite a lot of detail, but I just want to give you really the executive summary. Number one, the second quarter was good. Revenue and profit growth, and production progress are all on track. We have very strong year-over-year growth in both revenue and profit. We're about 60% done with the products that we need to deliver this year, so it's all progressing as planned. We've been able to attain a lot more orders in the past three months, so our order backlog is now JPY 101.9 billion. We're up JPY 12.9 billion just in the past three months. We've been able to secure a lot of orders, and we're very happy about that. We're going to, for the first time, disclose 2027 business outlook. We're going to give you an outlook of where we think our revenue and profit will land next year. We're confident in doing so, in sharing this, because about 70% of what we're going to be disclosing today, we have as orders already. We're starting to see clarity for next year. We're going to share with you where we're going to land. We're still preparing, moving to the Prime Market and the TSE, and that is ongoing. I don't have any new really news to share with you yet, but it's ongoing. We're also working on our global business, so we're selling outside of Japan. I want to share the strategy, what we're doing, and what we're expecting. We did a new product announcement a few days ago, about a week ago, and I want to share some of those highlights with you today as well. All right. I'm going to start with the financials. Okay. Sorry. Okay. Our revenue model. First, I'd like to review our business model with you and just the nature of how revenue works at PowerX. After receiving an order, we manufacture our products and revenue is recognized at the product delivery and acceptance stages. Approximately 90% of revenue is recognized upon delivery in accordance with the contract. The delivery date is agreed upon with the customer when the purchase order is signed, and ownership is transferred on the day agreed upon in the contract, regardless of the customer's readiness. As a result, our revenue recognition is relatively unaffected by delays on the customer side or other external factors, such as delays in the commencement of operations. In addition, due to the timing of customers' subsidy programs and their annual budgets, our revenue tends to be concentrated in the second half of this year every year, particularly in Q4. I therefore ask that you keep this in mind as we go through more of our financial results. Turning to our results for the second quarter. Revenue was JPY 6.8 billion, up 48% year-on-year. Operating loss was JPY 1 billion, representing an improvement of approximately JPY 480 million year-on-year. While net loss was JPY 1.5 billion, an improvement of approximately JPY 670 million year-on-year. As I mentioned earlier, our revenue is heavily weighted towards the second half of this year. As a result, progress against our full-year revenue forecast is currently at 17.2%. However, we have already completed production representing roughly 60% of this fiscal year's product sales revenue, and production is progressing according to plan. I'd like to briefly recap our full-year forecast. As you already know, we have raised our full revenue forecast to JPY 40 billion on June 25th. On the other hand, our profit forecasts remain unchanged. This relates to new products we currently announced, and we plan to reinvest the additional earnings in R&D, to make us more competitive and stronger in the future. Next, I'd like to explain the relationship between our JPY 40 billion revenue forecast and the actual orders that we have secured in this fiscal year. As I mentioned earlier, for projects that have already been contracted, we recognize revenue based on the delivery and acceptance schedule stipulated in the contract. Based on the orders we have already secured, the amount scheduled for this fiscal year has already exceeded our full-year revenue forecast. Production is also progressing without any issues, so we believe our full-year forecast is fully achievable. Next, I'd like to discuss the orders we have secured to date, which will support our growth from next fiscal year and onwards. The total value of these orders have increased significantly by 111.8% compared with the end of last year, reaching JPY 78.4 billion. For next fiscal year, we have already secured orders exceeding this year's revenue, and we also have a large number of additional opportunities in the pipeline. I'll explain more of this later. It's somewhat unusual to show outlook for next year, only six months into this year. But we have decided to disclose an outlook for 2027, together with our financial targets for 2030. As the orders we have secured have continued to grow, we have received many requests from investors asking us to provide more visibility into our performance beyond the current fiscal year. At the same time, we determined that providing an outlook for next year only to a limited number of investors would not be appropriate from a fair disclosure perspective. As visibility into next year's revenue has now increased, we therefore decided to make this disclosure. For fiscal year 2027, based on the orders we have already secured and our current pipeline, we currently expect revenue of approximately JPY 68 billion-JPY 72 billion. On the profit side, assuming current foreign exchange rates, component prices, and other economic conditions remain, we currently expect operating profit of at least JPY 5.5 billion. Because we still have tax loss carry-forwards, we expect a net income of at least JPY 5 billion. These figures may be affected by the introduction of new products, development in our overseas business, and we also intend to invest proactively in businesses where we see potential for higher growth. Therefore, I would ask you to regard these figures as reference figures based on the assumption that current conditions can continue. Looking further ahead to 2030, our long-term management targets are revenue of approximately JPY 200 billion, an ROE of at least 35%, and sustained positive free cash flow. We'll continue working towards becoming one of Japan's leading manufacturing companies and, of course, super high growth companies. We are turning now to the details of our second quarter performance. Revenue in Q2 alone increased 71.2% year-on-year, while gross margin was 24.8%. As previously explained, in the second half, we expect some slight downward pressure due to the impact of foreign exchange rates and raw material prices. However, performance is progressing in line with our original forecast, and we do not currently see any particular issues. Next are our segment results. Revenue in BESS, our BESS, that is our main business selling the batteries, was JPY 5.3 billion, up 34.3% year-on-year and accounted for 78% of total revenue. The Power business also grew significantly with both recurring revenue and equipment sales increasing, resulting in revenue growth of 375.9% year-on-year. In terms of profitability, seasonality is even more pronounced this year than it was last. As a result, storage costs for BESS products have increased and BESS profit declined year-on-year. However, storage costs are expected to decline from the second half as product inventory decreases. We are also preparing our own container yard for next year for storage. As product inventory declines and revenue increases in the second half, we expect profitability to improve. Profitability in all of our other areas also improved year-on-year. This slide shows the quarterly trend in our profit levels. In Q2 alone, our EBITDA loss narrowed to JPY 226 million. We expect the loss to narrow further in Q3, followed by a significant return to profitability in Q4. On a full-year cumulative basis, we expect all profit lines to turn positive. Next, I would like to discuss SG&A expenses. SG&A expenses were JPY 1.6 billion, down 3% year-on-year. Sales and marketing expenses increased, primarily due to higher storage costs for our products that I mentioned earlier. On the other hand, though, both R&D and G&A expenses declined year-on-year. For R&D, we revised our revenue forecast upward. When we revised our revenue forecast upward, we also allocated additional R&D budget for the second half. Aside from this, overall SG&A expenses are currently progressing broadly in line with our budget. Next, I would like to share our headcount and revenue per employee. We expect revenue per employee to improve significantly. In other words, we are not hiring a whole bunch of people to continue growing. At a CAGR of approximately 120%. As a manufacturing company, we needed to build out our organizational structure early in the beginning of our business, but we now have reached the stage where we can increase production without significantly increasing headcount. As a result, we have also been able to contain the growth of SG&A expenses. Next is our consolidated balance sheet. As previously explained, on the asset side, inventories increase as production progressed ahead of deliveries in the second half. On the liability side, contract liabilities or advanced payments from customers increase as the numbers of orders grow. We have also refinanced our borrowings and increased the amount of borrowing. I will explain this in a later slide. Now for our consolidated cash flow. Operating cash flow is currently negative, but we expect it to improve significantly in the second half. The working capital required due to increase in inventories and other items have been funded through short-term borrowings under our commitment line. Which brings me to our capital allocation approach. Beginning this quarter, we have also added disclosure regarding our approach to capital allocation. As business growth drives profitability and further improves our earnings, we intend to strengthen our ability to generate operating cash flow. This operating cash flow will be used to fund growth investments as well as the working capital required for advanced production due to the seasonality of our revenue. Where additional funding is required, we are primarily addressing the shortfall through increased debt financing. At the same time, we are working to optimize CapEx and build the capacity for shareholder returns in the future. I would like to provide one additional point to this. The factory CapEx required to expand our production capacity during 2026 and 2027 is expected to decline to a level that can be recovered approximately with one year of 2027 EBITDA. Our business model is relatively asset light, and we will continue working actively to improve free cash flow from next fiscal year and onwards, which leads us to our borrowing status. I would like to provide some additional detail regarding our borrowing, our debt. As we have already disclosed, we are funding the working capital required for advanced production resulting from the seasonality of our revenue by increasing our short-term borrowing capacity. In addition, we have expanding long-term borrowings to fund factory-related capital expenditures. In this way, we are expanding our use of debt financing according to the purpose of the funding, while also reducing our interest burden. Given the strong visibility into future revenue from the orders we have already secured, we intend to continue making active use of bank borrowings. Next is the change of the use of IPO proceeds. We take a flexible approach to capital allocation. This time, we have decided to reallocate funds that have originally been intended for the construction of Power Base Plant Two. That is our second factory inside our main factory. Instead, those funds will be used for production line expansion at Power Base, the original one, the launch of Power Base Hokkaido, and additional working capital. We believe this will improve our capital efficiency significantly. With all those orders, and our new capital expenditure, I would like to explain the changes to our production structure in a little bit more detail. For our Mega Power production structure, we have determined that the two shift operations at our second Okayama factory are feasible. In other words, we make batteries from 6:00 A.M. to midnight, two shifts. As a result, we have decided to postpone the start of operations at Power Base Hokkaido until July 2028. This is absolutely the most efficient way to increase our revenue. This allows us to delay the timing of the associated CapEx. For fiscal year 2027, we have visibility that the production required to support revenue of approximately JPY 70 billion can be handled through the two shift operations that I was just mentioning at our Okayama factory. In addition, moving Power Base to two shift operations will provide us with additional production capacity. In other words, if we see an increase in demand in the near term, we will still have the capacity to respond. We believe this has further improved our capital efficiency. That is the financial bits, and let me get into our business highlights next. I have already mentioned this in our finance, but we have significantly increased our order book. We have received a total of JPY 101.9 billion in orders, and that is up JPY 12.9 billion from just three months ago. There's a lot of demand for energy storage in Japan. In combination of taking a step back, looking at what we just announced in our 2027 outlook, we're seeing very high growth. When we started the company just five and a half years ago, we had nothing there. But in 2024 we had JPY 6 billion, 2025, JPY 19 billion, and then 2026, this year we're looking at JPY 40 billion and above, and 2027, we're looking at JPY 68 billion to JPY 72 billion. We're quite proud of the progress that the company is making, and we are quite confident that we can continue this kind of growth until 2030, where we've set our target at over JPY 200 billion. 2027, it is a tall order. Compared to this year, we're looking at 60%-70% CAGR. But if you look closely, you see that about 72% of next year is already secured. We have the orders for next year, and the company's feeling confident to publish this information and sharing this with you. We're sharing some EBITDA net profit ranges as well, as Benji. What's beyond that? Our order book has increased quite a bit, all the signed orders and such. But before that pipeline in front of that has increased substantially as well. Right now, between 2026 and 2030, we're working on 9 GWh of projects that we're negotiating with customers. Of course, we're closing on as many of those as we can. Compared to May, that's up 4.27 GWh. That's a lot. It's actually 2x increase in the past three months. What happened? Why are we staring down so many more orders? Number one is Japan, the energy storage market here, and the deployment and the demand is very strong. But number two, and I'll get into some more detail, is really that we're expanding internationally and we have lots of other very good tenders and projects that we're replying to in Asia and also some parts of Europe. To give you a trend on what's happening in Japan. Most of our projects are now bigger. They're just bigger in size. In Japan, we have different voltage levels, and they're classified differently. EHV is extra high voltage and anything above There are multiple layers in EHV. But you can see that about 88.3% of our pipeline capacity is indeed extra high voltage. All these projects that we're seeing tend to be bigger. It's also true that we have visibility for bigger projects earlier. People tend to plan for these for a longer period of time, so we get to see them early, and we'll have to see where this goes. But we're seeing very strong growth in the bigger battery power plants. I just want to make sure, because we have flushed out some new products and we're working in the data center space as well. All of this pipeline is energy storage. We don't include our data center products or the Grid Connector, which is a brand-new product I'll get to later. All of those are upside, and everything that we're working on, everything I've mentioned thus far is about energy storage and really big grid scale batteries. Looking at that opportunity, and I will get to the overseas, but looking at that opportunity where Japan is seeing bigger batteries and we are seeing lots of demand from Asia, we have redone our product portfolio and introduced a few products that make us truly internationally competitive, and we are very proud of this. We started out with the Mega Power 2500. That is the one on the top left in this slide. This is a 10-foot battery that is really optimized for deployment in Japan. However, to be fully internationally competitive, we need that kilowatt hour storage price to come down. It is not just about the battery, it is about all the other things that go in building a battery power plant, which we have created the Grid Connector for. The battery then has to increase in density. If we are installing a gigawatt hours in one location, we really need dense batteries. The Mega Power 4000 is our new product there. It is all explained. Throughout the Mega Power series, I want to really iterate and explain that people tend to think that it is just a box with batteries, and this is not the case. Our customers are choosing batteries for their features, not just cost, because it is something that has to run for 15, 20 years and give them a true return on investment. Throughout those 15 and 20 years, if you are in Asia, Ring of Fire, you are worried about earthquakes, you worry about typhoons. If you are in Japan, you cannot install something where people not too far from a residential area, so you need it to be quiet. Of course, in the unfortunate case of a disaster, you need it to start back up and be resilient. PowerX builds all of these features. We do not just sell batteries for cost. It is like buying a car. You expect all sorts of safety features, airbags and so on. This is same now with batteries. It is a very sophisticated product now, and we think that there is a lot of value add that we are doing to this segment. All right. That said, we have these big, very efficient, high-density products now. The Mega Power 4000 series. Japan is the same, but depending on different markets, you need multiple supply chains because there is a geographic and also a national security aspect to battery procurement. Type A, Type B, they come from different countries. With Type A, we are at 4.6 MWh in this 20-foot container and 4.2 with Type B’s modules. PowerX is battery, module, and cell agnostic. We can really mix and match the best technologies and package them into these products. This is a standard 20 foot, not high cube. It is really easy to ship, and we have the newest standards for the most cost-effective shipping of this product. This thing has a little trick where you can stack them. In Japan, we are running out of space. We want to put lots of batteries, but we are really literally not having the space to do so. We have created one that can stack. To stack it and to be within the limits of a building, we needed it to be within 5 meters tall. That is what we have done. When stacked, compared to our, next page, please. Compared to our regular product, it is 3.4x the capacity, in the same footprint. Instead of 11 MWh you got in four containers, you are getting 37.4. Imagine this next to a plant, next to a power plant, next to industrial C&I, and of course, those massive gigawatt hour scale battery power plants that are upcoming, you are going to need this kind of density. Grid connections. Grid connections tend to be We need to innovate here, and I will explain. The next page, you will see what this does. When you have the batteries and you want to connect to the grid, you have to bring down the 22 kV, and then it is AC. You have to step that down, you have to isolate it, and then you have to go through the switch gears and the transformers and the power converters to ultimately get 1500 volt DC that goes into your battery. All of these equipments were procured separately. We do this now. We procure them for our customers, very low margin, and then we have to install them. To install them, though, you need a blueprint. Somebody has to draft an electrical diagram. Multiple months before commissioning, you have to go in, dig a hole, and install the cables underground, and then you have to pour concrete and create lots of platforms to install this equipment on. We have simplified this. We create this in our factory, and the Grid Connector for BESS is this one solution. Everything is in one 20-foot skid. One truck, we drive it in, install it, and we are done. All of the software works together seamlessly, so you have a grid connection literally, within a few days. We have also done this for our data center products. Mind you, the data center business is not in our forecast. This will be an upside, and I think there is a pretty good potential for this product. The Grid Connector for data centers, next page, please, is one where we take the same problem, so the 22 kV AC, and give it to the data center as 0.4 kV AC. We provide you with redundant one megawatt connections, so two megawatt, but one megawatt each, completely separate channels. Then we give you two and a half hours of energy storage for backup, and we give you cooling as well. All you really need is a building with server racks, and we can provide all of the infrastructure, like in the parking lot, so you can upgrade these really quickly. We think for Japan and also in Asia, installation for data centers, this will be a great opportunity. This Grid Connector series, obviously to do the AC to DC conversion, we need a power converter, and this is something that we have been relying on partners for, but we are finally going to internalize the PCS. The Grid Connector PCS runs silicon carbide modules. It is the state-of-the-art, made by us, the product. We will be shipping it not only in Japan, but in Asia and hopefully Europe. What does that mean? On the next page, you will see how this affects our business. After all, this is an IR call. Until now, about 20% of our total sales was basically selling through the required optional hardware to do the battery power plants for our customers. In the future, we will try to take this all the way to 100% so we can internalize everything that a customer needs, and that is really for the customer's benefit. Its unified software makes installation simple, construction is a lot cheaper, and ultimately you get a much lower price for energy storage kilowatt hour. We are very competitive when combining the Mega Power 4000 with the Grid Connector. We now have an internationally competitive product we can sell anywhere in the world, and we intend to do so. Just taking the PCS, it has a lot of TAM even in Japan. We can sell the PCS by itself. If there is enough demand, we are happy to do so. That additional TAM is not in any of our projections right now. If we sell a lot of these, that is great and that is upside. Okay, so updates on our business units. First, starting with the BESS unit. This is our main business now, selling the grid-scale batteries to customers. We are up to 3 gigawatt hours in installation over 172 locations, and we are adding locations all the time and we are monitoring them. They are working as power plants every day. Customers are happy and so are we. We are quite happy that we are building critical infrastructure for the country. As I mentioned, Q3, Q4, that is where the weight is because we have built all this product. I told you about the storage costs. We have a lot of products that we are storing, and then we are finally shipping them now. This is a week ago, I think. We took a few photos of some sites that we are installing in, and yeah, the installations are on track. Deliveries are on track and installations are on track. Everything is going very smoothly and we will have many of these very large battery power plants up and running very soon. Okay, so the power business. PowerX also does resource aggregation. We operate the batteries for our customers. Just very quickly today, operating the batteries for our customers bit, that is the first thing. That is the battery storage operation services. We have actually been able to double the megawatts that we operate for our customers in just the past 3 months. That is amazing. This vertical integration of selling the hardware and then selling recurring electricity and the management and the operations seems to be working out very well, and we have lots of happy customers, and this is a very high growth segment for the company. This being recurring revenue is also good news, and we hope to expand this. Selling energy by itself, that is the power supply services. Given the state of affairs in the Middle East and the Strait of Hormuz and so on, we really have not been pushing power sales on our accord. We do not know where the market is going. Just selling power, we do not want unnecessary risk at the moment, so we are not really expanding this as of now. We will see where this ends up. On the bottom right, we have actually doing separately from the BESS business, we are selling battery power plants. We sell the hardware through this division as well, and that's a separate pipeline, and that's grown significantly in the past 3 months. We're seeing lots of growth here as well. You might have heard a few things about the changing rules in Japan's energy storage, and how the market operates. I just want to talk to that for just a few seconds here. Number one, the balancing market, which was very frothy. I've said this before, as we were doing the IPO, my first IR, I think, on the day of IPO, I was asked and we said this. The primary reserve price gap was high, and it's now coming down to a more reasonable JPY 10 to JPY 7. You may get worried that with the price gap for the balancing market coming down, maybe battery energy storage won't make as much money. This is actually not the case even with this, where the IRR is above 10%. If anybody is doing energy seriously here, this is more than enough IRR for them to continue. This can be made better by combining what's happening in the other side of the market. That's the arbitrage. We've been seeing lots of slots in the JEPX, in the energy market where the imbalancing is happening. In other words, you run out of energy for a few hours. You build the plan, the energy is all planned out a day in advance, but come that day, come that hour, if you run out of power, you have an imbalance. People don't want to buy at an imbalance, and so they tend to bid higher the next day. We see prices creeping up, while staying very low during the day because there's too much energy. Just the arbitrage opportunity of energy storage is actually greatly increasing right now. Summer and winter times, I think batteries will make a lot of money doing arbitrage. Combining these two things, energy storage is, as the results show, it's still very, very lucrative and in demand. Just about the imbalance, right now, the imbalance is capped at JPY 200 kilowatt hour, but there's a plan to increase that to JPY 300. It'll hurt even more when there's an imbalance, and so you're going to need these batteries. I don't want to waste your time. We'll keep going. Global sales. What are we doing and where? To be honest, the past 3 months, I have spent a lot of my time traveling overseas, and meeting executives and top management at multiple oil, gas, coal, energy, mining companies and governments in Asia. You'll see little check marks to places that I've been very recently. I went to the Philippines, Malaysia, Singapore, Indonesia. We got a secure order from Vietnam. We'll be delivering that very soon. We see potential. There's a lot of business here and I'll try to explain why. On the next slide you'll see that, yeah, there are many countries in this area that have their own coal, that have their own oil. There's also an interdependence. If you look at, for example, the Philippines, their energy is quite dependent on Indonesia, for example. That one country dependence is a similar theme in energy storage. Although Chinese battery systems are prevalent in this area, they are all from the same country. I think as a Japanese supplier of such, and being at the same price point, same and better features, we really have a shot at some percentage of this market and we are working on. Our pipeline is huge. We are responding to many RFQs and we will see. In the next few years, to grow to that 2030 rate, I think we have to do international sales very seriously, and that is what we are doing. We have started and my initial reaction is that it is good. Hopefully, we will see more international projects come up in the next six, eight, 12 months. Just recapping the potential. It is basically more than Japan. 380 gigawatt hours by 2030. That is far more than Japan. So, yeah, let us look at this market. We have good products. We are situated well. National security also on our side in some areas of this part of the world, so hopefully we make a difference here. One more thing about Montenegro. We announced our EPCG, that is the state energy company. We announced our MOU with them back in May. We are continuing discussions. Nothing to announce just yet. But yeah, we are working on it and we will let you know as soon as we know more. The MOU called for a definitive agreement to be signed in six months. So November-ish is when that happens. Hopefully we try to get this done, but we will let you know. After doing all of this, after spending the past three months traveling all over and meeting different people from different countries, I realized we have to update our mission. The company's mission was to achieve Japan's energy independence. That is wonderful, but that is very, very, very domestic. As I travel, I realize that everybody right now is thinking the same thing. They want sovereign energy, and batteries are a catalyst for sovereign energy. We are going to update our mission to say, "Think sovereign energy." We provide equipment, we provide the opportunity, we are an enabler of taking more ownership of energy locally. We want to update our mission to say, "Think sovereign energy." That is what we have done. Okay, there are a few other updates that I want to give and then I will be done. Number one, yes, we are still planning to transfer to the Prime Market. Nothing to let you know yet, but preparations are underway. We just keep at it. Our Tokyo office, we will be consolidating in the future into one office. Right now they are all split up. This is what happens when you grow very quickly. Hopefully with everybody in the same room, we will even be more efficient. As I mentioned about headcount, we do not intend to increase headcount by a lot. We want a very small team, very fast communication, so we are going to move to one place. You will see our cost a little bit higher in this Q3, Q4 for office space because we have three at the same time. But of course, as we let go of the older office and consolidate, you will see that gradually decrease and even out at some point. This is where we are. In the past three months, I think we are quite happy with where we are. We have lots of new orders, lots of new customers, lots of things operating, happy customers. We have now outlook for next year that we were able to share. Great, exciting products. Very excited about the Mega Power 4000 series and the Grid Connector. They are all coming out next year, so R&D is doing really well. Energy storage demand is very high in Japan. Next year is very domestic, but hopefully we will add some international projects for 2027. Not included yet, but upside. Then 2028 and beyond. Think sovereign energy. That is the tagline we are going with, and we want to be a global player from Japan in energy storage, and I think we are finally ready. We are going to keep going. That is it. Thank you very much for, if you are still watching, thank you very much. I just want to leave a link to our new product launch on YouTube. We have that. Also, we started this last time, but everything you see here is all inside an MD file, a markdown file. You can just download that from our website and then feed it into the AI of your choice and ask any questions, and the AI will understand and not misinterpret any of our PowerPoint and lengthy disclosures. You can ask it any questions. Of course, we are here for you for IR, for investor relations and questions. The team is here. I am here, and so that we can address any of your questions. Thank you very much for watching. Really appreciate your time. I am sorry it is a little bit long. It is always a little bit long. But we had another exciting quarter, and hopefully we will have another great quarter in Q3. We will let you know. Thank you very much