Earnings Call: Q4 2025

Feb 16, 2026

Summary

FY2025 revenue more than tripled and EBITDA neared break-even, led by BESS. FY2026 guidance targets ¥38B revenue and a return to operating profitability, while input costs and FX create near-term risks.

Hi. Thank you for tuning in to our annual earnings call. I'm Masa, the Co-founder and CEO of PowerX. I'll be presenting our financials and then proceed to discussing future business prospects. Please allow me to share our screen. I'd like to begin by walking you through our full year results for fiscal year 2025. We achieved revenue of ¥19.3 billion, and on the profitability side, EBITDA improved to a loss of close to ¥100 million, bringing us very close to breaking even. Strong revenue growth, higher gross margins driven by production improvements, and tighter control of SG&A expenses contributed to a significant reduction in losses at all levels compared with the previous fiscal year. Against our disclosed earning forecast, we achieved all our revenue and profit targets, excluding ordinary profit. To give you a bit more detail. On revenue, demand for battery storage systems for grid scale storage facilities remained very strong. In Q4 alone, we recorded approximately ¥12 billion in revenue. For operating profit and EBITDA, as mentioned earlier, gross margin improvements and SG&A control contributed significantly to the improvement in profitability. For ordinary profit, we recorded approximately ¥570 million in non-operating expenses related to financing activities, which was the primary factor behind the larger ordinary loss. As for profit attributable to owners of the parent, although we recorded special losses such as asset impairment, our recent performance and improved visibility towards future profitability allowed us to recognize deferred tax assets. As a result, we reported a net loss of approximately ¥1.6 billion. Let me now explain this in terms of our growth rate. Full year revenue earnings grew 213.4% year-over-year, increasing approximately threefold from ¥6.1 billion to ¥19.3 billion. In addition, improvements in gross margin and tighter control of SG&A expenses led to a significant improvement in operating profit and EBITDA. Next, I will explain performance by segment. The battery energy storage systems, our BESS business, led overall performance, recording revenue of ¥17 billion and operating profit of ¥3.8 billion. Although the Power business is relatively new, it achieved revenue of over ¥1 billion and achieved operating profitability. Unfortunately, the EVCS business experienced a decline in revenue due to slower EV adoption across the board. However, improvements in cost structure reduced the scale of losses. Looking at growth by segment, the BESS business, which accounts for 88.6% of total revenue, grew 212.8% year-over-year. The Power business also achieved strong growth of 170.6%. For the EVCS business, we expect difficult conditions to continue until EV adoption expands further. Next, I'd like to briefly comment on quarterly performance. Because customers' budget execution timing is heavily concentrated, primarily due to subsidies and similar factors, our revenue is concentrated in Q4. Revenue in Q4 last year increased 168.8% year-over-year, reaching approximately 2.5 times the level of the prior year's Q4. In addition, while the gross margin in Q4 declined slightly to 25.3%, this was due to the impact of certain large-scale projects that we accepted strategically. In Q4 alone, we recorded approximately ¥12 billion in revenue, a new quarterly record. In addition, we recorded operating profit of ¥1.5 billion and ¥1.3 billion on the bottom line. We have demonstrated our ability to handle production, shipment, and installation at this scale, providing a solid foundation to support further scaling of our operations. Next, I'd like to explain the breakdown of SG&A. Total SG&A decreased by 8.9% year-over-year, contributing to improved operating profit. Looking at the breakdown, sales and marketing expenses increased as these are directly linked to revenue. On the other hand, R&D expenses decreased by 26.5%, partly because the earlier upfront investment phase has begun to settle. G&A expenses also decreased by 15.8%, and we have been able to keep them under control. Next, I would like to explain the relationship between order backlog and revenue. First, please note that our order backlog includes only signed orders, amounts for which binding contracts have been executed, and does not include probable orders. At the beginning of FY 2025, the backlog was ¥6.1 billion. After that, while the backlog was drawn down as revenue was recognized, we accumulated new orders, ¥13 billion, ¥18 billion, ¥10 billion, and ¥7 billion, and as a result, at the end of last year, firm order backlog reached ¥37 billion. Going forward, as you look at our quarterly results, when revenue is recognized, backlog decreases by that amount, while new orders increase backlog. We would appreciate it if you could monitor this trend. Next, I will discuss the consolidated balance sheet. Following the public offering and in connection with our IPO, total net assets increased to ¥6.6 billion. As a result, our equity ratio improved and our financial position has strengthened. Current liabilities increased to ¥16.8 billion, of which ¥9.1 billion relates to contract liabilities. These represent advance payments received from customers at the time of contract signing. While classified as liabilities, they are recognized as revenue upon delivery to customers. Importantly, the increase in current liabilities is primarily attributable to these advance payments rather than to an increase in borrowings. Next, I will briefly explain the consolidated cash flow. First, operating cash flow was positive at ¥1.3 billion. Although we still have a loss on the profit line, the major factor was the increase in contract liabilities. In other words, the increase in advance payments. Next, cash flow from investing activities. Up to 2023, it had been approximately ¥4.1 billion of investment, but for last year and this year it is around 1.4. This is a business that inevitably requires upfront investment, but recently we have been able to keep the cash flow from investing activities under control. Finally, cash flow from financing activities. Due to the public offering, it was a significant inflow of approximately ¥6.3 billion. As a result, the year-end cash balance improved to ¥7.4 billion. Next, I will explain our financial forecast for the fiscal year ending December 2026. For FY 2026, we assume revenue of ¥38 billion, operating profit of ¥2 billion-¥2.5 billion, EBITDA of ¥2.5 billion-¥3 billion, and a net income of ¥1 billion-¥1.5 billion. This will be a major earnings inflection point as we expect operating profit and ordinary profit to turn positive, and we expect significant improvement at each profit level. Let me add some color. For the BESS business, demand for grid-scale storage batteries and storage batteries in solar-adjacent sites remains very strong, and we expect substantial increases in both revenue and profit. This fiscal year, we also expect revenue to be weighted toward the second half instead of Q4 as customers' budgets and executions are timed. Next, for the Power business, in addition to battery sales, we expect increased revenue and profit through electricity sales and proactive initiatives in aggregation. For EVCS, unfortunately, difficult conditions are expected to continue, and we assume a decline in revenue. However, on the profit side, we intend to pursue further cost reductions. Let me supplement this from the perspective of growth rates. For revenue, we expect a 98.8% increase year-over-year, or approximately 2X in growth. For operating profit and EBITDA, we expect to turn profitable in line with this significant revenue expansion. This time we are disclosing our forecast as a range, so I'd like to briefly explain why. Since January of 2026, the phased removal of Chinese export tax rebates, or basically VATs, and tighter lithium export controls and pre-deadline rush in demand have converged to drive up raw material prices, creating a risk of rising module costs from suppliers. While lithium prices are stabilizing and shifts to competitive new products are planned, short-term performance may be impacted. Conversely, as this situation affects the entire Chinese storage battery market, it is believed there are aspects that contribute positively to the competitiveness of our company, which procures components rather than finished systems. Going forward, lithium prices may also decline. In addition, we plan to implement price pass-through to customers and shift to new products with stronger cost competitiveness. For these reasons, we believe that gross margin improvement can be achieved over the medium to long term, but in the very short term, there remains a possibility of impacts on our performance. Also, many of these developments in China affect not only us, but all battery storage products exported from China and imported into Japan. Therefore, for companies like ours that procure only components, we believe that in relative terms, these changes may contribute positively to competitiveness. As for exchange rates, we assume JPY 155 to the US dollar in our business plan, but despite having entered into certain FX hedges, volatility has still been very high this year and difficult to forecast US dollar to Japan procurement costs. Depending on exchange rate movements, there may be cases where we pass costs through to sales prices, but this takes time, and in the short term there is a possibility of impacts on performance. Finally, today we announced the modular data center as a new business. I will talk about this in more detail momentarily, but we are not assuming any revenue from this new business during this fiscal year and on the cost side, we are only assuming a limited amount of R&D expense. Demand is still very difficult to predict, but in the short term this may also impact performance. Next, I would like to add some supplementary information on the other P&L assumptions and quarterly performance. As mentioned earlier, gross margin has downside risk in the short term compared with last year. For SG&A, we assume headcount increases in sales and marketing to support future revenue expansion. For R&D, while upfront investment related to existing products has decreased, we expect increases versus last year for development of new battery storage products, development related to power transmission transport, and modular data center-related R&D. We expect to keep this with a certain percentage of revenue, but is still expected to increase compared with last year. For G&A, we expect a minor increase. Regarding our view of quarterly performance in the BESS business, as projects become larger and deliveries are made in stages, we expect revenue to become more balanced compared with 2025. However, while Q4 concentration is expected to ease somewhat, we still expect revenue to be weighted towards the second half of this year. On current factory utilization, while production capacity itself has headroom, we are controlling staffing and other resources as appropriate, and current utilization is maintained at close to 100%. If orders exceed expectations by increasing staffing to some extent, we believe it would be possible to increase production by approximately 1.5 to 2 times, even in the short term. Finally, regarding our shareholder return policy, we are currently in a growth phase, and rather than allocating funds to dividends, we plan to reinvest them in R&D, CapEx, M&A, and other investments that generate further profits and accelerate the company's growth. This concludes the financial reporting part of my presentation, and I would like to now proceed to explaining the business environment to you. Please give me a second while I switch over my slides. Okay. Next page, please. I'd like to review our order backlog and forward outlook. The order backlog. Due to the adoption of subsidies, the number of orders expected for this year and next year have greatly increased. For 2026, our projection is to do JPY 38 billion in sales, of which we have JPY 36 billion on order. For next year, we suddenly have a lot of signed and probable orders due to the awarding of subsidies for our customers amounting to JPY 39.8 billion. We have a total of JPY 80.1 billion in signed and probable orders for the next four years. If you look at this in a chart, hopefully this is more easier to understand. 2026, the company's projecting JPY 38 billion in sales, of which, again, JPY 36 billion is on order, and we still have six months left to really close more deals. Hopefully we can bring this to the upside a little bit and accumulate as many orders as we can. 2027 is going to be very exciting for us. We already have JPY 39.8 billion booked, and we still have 18 months left of sales opportunities remaining. We don't expect SG&A to increase significantly for 2027, although we are not projecting certain numbers yet, so we should increase our profitability moving forward. Now, there may be a concern that with all these new orders, may be concern on fulfillment, and this is not the case. As I explained earlier, even for this year, we are able to increase production simply by increasing the hours that the factory is in operation. Right now we're running on one shift and on no overtime and of course, taking the weekends off. But if push comes to shove, we can increase production even this year. For next year, we are deploying capital to increase the factory capacity itself, and that will then translate into increased capacity in 2028 as well. Again, we still have plenty of time to prepare for 2027 and we will be disclosing how we plan to increase production in the coming months. Now, if we can get the orders and we can make the orders, the last bit is actually not trivial, but we have plans for this as well, is to execute, install and run the orders. I just wanted to show you this. Last year versus 2024, our revenue again was very weighted into Q4. In fiscal year 2024, November to December, we installed 47 megawatt hours of batteries with 12 project managers. Last year, 2025, between the same period in November and December, we installed 257 megawatt hours, with nine project managers. Each project manager has a 7x increase in efficiency. We have installed 93 of our Mega Power 2700s in November and December, and we know how to do this really well now. We are not very concerned about field engineering and installation, and also transportation. All of this has been done and proven that we can do this very well. I would like to update you on each of the business segments and also introduce the new business, which is the modular data centers. When we talked to our investors last, when we disclosed our order pipeline last time, the subsidies were not announced. They were submitted, but it was still in the pipeline and we did not see them as probable orders as they were not awarded. At the end of December, the subsidies were all awarded to our customers, and PowerX batteries have been awarded in 16 subsidies granted to the tune of JPY 33.4 billion for equivalent revenue for us. That is a 49.2% share. We were number one in both the number of subsidies granted and the financial amount granted for subsidies. We remain the number one energy storage supplier in this segment, as you can see from subsidies. Now that we have lots of installation and lots of projects are going live and being turned on and they are running every day as power plants, we want to provide an extra layer of security and service to our customers. We do have our field engineering team, which we are actually increasing headcount on. But we have been working with NTT Anode Energy to provide maintenance and operation for all of the sites that we are providing. NTT Group has nationwide coverage of engineers, and so a lot of the maintenance required on our batteries can be done jointly. This is something that we announced a couple of days ago. Trend-wise, most of our businesses are now in the extra high voltage range in Japan by classification, so they are bigger battery power plants. Each battery power plant, the size of them that we are receiving on order are increasing. This really helps us, because it helps the seasonality. Because each project now has 20 to 80 batteries, we need to get started earlier in the year. This reduces seasonality in revenue. Not everything is concentrated in December, for example. We start around the summertime, and then we can push through those orders. Q3, you will see delivery ramp-up starting for this year. Productivity and sales is better, obviously. The same amount of people can generate more revenue because each of these are bigger. Planning is a lot easier as well. This is a nice trend that we are welcoming. I would like to show a video of some of the battery power plants that we have installed and commissioned in the past couple of months. Let me show a video. Okay, so, this is a typical, very large-scale installation. There are still 20 or 30 batteries, I believe. Some of the bigger projects we have on order are up to 80 batteries in one installment. This is solar adjacent, and this is a new segment, I think, that is going to be very strong in Japan. This is a 10 or 15-megawatt, very large solar power plant in Kyushu with a lot of our batteries. This is going to be a new trend as well. Going back to the slides. Again, battery power plants are getting bigger. If you look at our latest press releases, we have a lot of, again, our tier 1, the most reputable companies are buying PowerX. I am very proud of that. We hope and are confident this trend will continue. All right, our power business. This is growing, and this is very interesting. Every time we sell our battery power plants, there is an opportunity for our power business to step in and leverage our customers' assets and do a revenue share with them for either aggregation or for us selling electricity to our customers. This is a type of business that is recurring, that sits on top of our flow business, which is battery energy sales. We do three things in this business. Number one, we simply sell electricity. This is everything from a PPA to retail sales. We do aggregation. We operate the assets of our customers if they would like. We can do battery power plants, photovoltaic co-location, and of course, we can manage them on-site for industrial plants as well. We also do asset services, which is in very high demand now, where we develop the site. We go find land, literally, procure and engineer the site, and give our customers a turnkey battery energy power plant. This has worked all very well in conjunction with one another. Right now, electricity-wise, we are selling, it is still very small now, but we are seeing very high growth in this sector. 19 megawatts of contracted energy sales capacity. Battery power plants, we are operating seven battery power plants right now to the tune of 14 megawatts. Of course, this will increase, and this is going to be recurring revenue for the company. Along with operation and maintenance, we have electricity as a recurring revenue now, and we hope to grow this in the next few years. Okay, moving over to the new business. This is our Mega Power DC. Now we have a press movie. A QR code is here. It would be great if you can take a look if you are interested. Basically, we have taken the Mega Power 2500 liquid cooled, battery energy storage system, and we have basically taken about 60% of the batteries out, and then we have installed racks for computers, and we are using all that cooling, all the technology, the DC technology, direct current DC technology, all that, in the same container. We can make this in our factory with no new CapEx, and this can be made alongside our regular batteries. I cannot go into the entire pitch for this here because of all of your time. I encourage you to visit our website and look at our video where I explain this in detail. I want our investors to understand what we may get out of this business. With very little risk, in other words, no new factories, the R&D is done. It's technology that we can leverage. We can sell data centers. If you put together 125 of these Mega Power DCs, we're at hyperscale equivalent in the amount of compute that these units can do. Each of these can be connected by NVLink or any other high-speed connection and act as one. 25 units amount to data centers, 10 units, small size, and of course, we have Edge data center use cases as well. We expect, especially because Japan has very different power plant, the power plants are in a different situation as the rest of the world, we think this might be the easiest way to add data centers in Japan. Construction is expensive, power is very hard to find. Batteries are going to unlock the power, and the containerized, the modular piece, will unlock the availability because buildings take a long time to produce. We expect use cases in power plant adjacent, containerized, these modular data centers popping up. We also expect co-location with our battery power plants that we make already, and we also expect very inner-city, high-density use in Edge as well. If we look at the addressable market, this is actually comparable to batteries, if not larger. We have all the math here, but basically, OCCTO, which is Japan's agency that manages the grid, is predicting about up to 70,000 gigawatt hours in electricity use from all data centers. If you do divide that by all the hours available throughout the year, we're looking at 5-8 gigawatts of data center power, of which 2 is deployed today. There's about 3-6, 5.9 gigawatts of new data centers that will be powered. If you translate that into trillions of JPY, it's anywhere between 5-10. That is equivalent to the battery energy storage business that we have here in Japan. We believe that our data centers may be the best and fastest way to deploy data centers here in this country. What's the business model like? Again, no new CapEx. R&D is done. We can do this right now as a new business, and we have. We have the prototype and all that, and you can look at it on the video. We're going to start with phase zero, which is the contract manufacturing model. Data center customers already have lots of the Nvidia servers and what have you on order. Instead of sending them to a building, they send it to our factory. We configure and install them into the Mega Power DC, and then we simply ship to site, install it, and operate, and we can help operate, turn them on. Phase one, hopefully, will be turnkey. Instead of doing an ODM style where we simply do contract manufacturing, we hope to have a few variations that we can sell to customers directly. Phase two, I don't want to get too much into detail, and again, we don't want to get too ahead of ourselves, but we think we can do something special. Instead of just making these for our customers and then having our own configuration where we're buying the computers, we think we can do a little bit more vertical integration. We're very excited about this prospect and we want our investors to also see value in this for this company. We have already signed an MOU with IIJ, absolute leading company for data centers here in Japan. We are jointly exploring how IIJ and PowerX can put this together and execute and install data centers quickly throughout the country. This project already has legs and we are going to push this through. Again, we do not expect any revenue for this year, but hopefully these are seeds that will grow out next year and beyond. I just want to spend maybe 2 minutes, especially for our international investors, why we are doing this thing, why we are doing modular data centers. We are a battery energy storage company, and we do power as well. The reason we do all this is because Japan needs energy independence, and we believe that we can help. If you look at the Japanese archipelago, we have got the Hokkaido, northern island, and Kyushu, and right up north, where it is actually some of the snowiest cities on Earth, there is a lot of potential to create power. These green circles show curtailment of power plants. In other words, too much power, cannot run the power plants, nobody is using the power. The batteries are the first thing that we need to install. Kyushu, when there is a lot of curtailment, you want to charge the batteries and have solar and nuclear available for 24 hours a day. However, when we have installed the batteries, Kyushu, Hokkaido, Tohoku, we are still going to have extra power, and Tokyo and Osaka and Nagoya, those three red bars, they are going to need more extra power. But power is very difficult to transmit for this very mountainous island. Next page, please. I do not want to get too technical here, but if you look at the top, power transmission lines cost anywhere between JPY 500 million to JPY 900 million per kilometer. These are HVDC or HVAC cables. They are roughly in this ballpark. Even if Kyushu had an abundance of power, sending extra power to a data center in Osaka, for example, is going to be really expensive to renew that grid. However, optical fiber cables are maybe JPY 1.2 million, JPY 2 million per kilometer. So it is JPY 200 million per kilometer, so it is practically much less than power. In other words, in Kyushu, Hokkaido, where there is a lot of extra energy, what we need to do is we need to build these data centers. Then the data centers will do the computing with that extra energy and send the bits back to the cities. We are leveraging all the extra energy that our batteries are helping the 24-hour availability of, and then we are going to turn that into bits and send them back to the cities. That is why we need to get involved. That is why PowerX feels that this is part of our mission, to build these computers. We really need data centers and the control of AI done here in Japan. Again, our mission is to achieve Japan's energy independence and our battery energy storage power plants are doing that right now and we are leading the field here. Very high growth, but we will remain grounded and make a really good product that our customers will enjoy. The data centers will then come on top of that. The data center business will take all that extra energy that we are storing and turn them into compute and really help this aging population. We need physical AI. We need lots of AI because of just population decline. The cheapest, best way to do that is through these containerized modular data centers that we've built. That was a long presentation. Thank you very much if you've got this far, I really appreciate it. We are quite focused and serious about doing proper disclosure and being very transparent with investors and our shareholders. We've released a bunch of new videos that explain what the company is doing, explain the situation that Japan is in, and we will continue to do this kind of disclosure as best we can. I'm here in our factory in Okayama, in our headquarters. It'd be great if investors can reach out to us if they're interested in learning more about us. We have a very strong IR team that we can go in details with you. I appreciate your watching. Thank you very much and we'll see you again in the next quarter. Thank you very much.