Earnings Call: Q4 2026

May 14, 2026

Summary

FY 2025 operating profit and continuing-operations net profit exceeded targets, with contribution profit rising on reforms and industry growth. FY 2026 guidance factors in tariffs and cost pressures, while targeting growth in Professional Print, industry and healthcare.

Hello, everyone. Thank you very much for attending our financial results briefing session today. I would like to explain our full-year financial results for FY 2025 and forecast for FY 2026, which we disclosed today. First, I will explain the company-wide summary. As an overview of the FY 2025 results, revenue totaled JPY 1,087.7 billion, a decrease of approximately JPY 40 billion from the previous fiscal year. Although there was an effect of the yen depreciation in exchange rates and contribution in the industry and Professional Print businesses, the decrease in revenue was the result of business selection and concentration with the intention of improving profitability and narrowing down the scope of areas in some businesses. Business contribution profit was JPY 53.2 billion, a significant increase of JPY 21.3 billion from the previous year. Excluding the absence of a decrease by the correction of elimination of unrealized gains in consolidated adjustments in the previous fiscal year, it was JPY 11.4 billion, and the increase was about JPY 10 billion. In addition to increased profit in the industry business and improved profit and loss in the Imaging Solutions business, the increase was due to the business selection and concentration implemented in the previous fiscal year, management reforms involving global structural reforms, and cost efficiencies centered on the Digital Workplace business. As a result, the gross profit ratio was +1.5 points. The SG&A ratio was also reduced by 0.6 point, and the business contribution profit ratio improved by 2.1 points. In addition to these factors, operating profit increased significantly to JPY 49.9 billion due to one-time expenses recorded in the previous fiscal year and the absence of losses. In addition to the strong operating profit, net profit from continuing operations was much higher than expected at JPY 33.8 billion due to improvements in the financial income and costs and effective tax rates. The improvement in the tax rate includes one-time factors, but even excluding this factor, it was still higher than expected. In addition, a loss of JPY 1.9 billion was recorded from discontinued operations as a valuation loss and partial sale impact related to Tempus AI shares, which had been acquired as consideration for the transfer of the Ambry Genetics business. Operating cash flow amounted to JPY 86.3 billion, reflecting higher profit before tax, and free cash flow amounted to JPY 52.3 billion. Free cash flow decreased by approximately JPY 23 billion from the previous year, mainly due to the absence of gains from business transfers in the previous year. We have positioned FY 2025, the final year of the previous medium-term business plan, as Turn Around 2025, a year for establishing a growth foundation for sustainable growth in FY 2026 and beyond. As a result, we exceeded our targets of JPY 48 billion in operating profit and JPY 27 billion in net profit, and our ROE was 6.1%, well above our minimum target of 5%. We believe that the management reforms we have implemented over the past three years have left their mark as a result. Please see this page for a detailed analysis of the increase and decrease from revenue to contribution profit from the previous year, as explained earlier. Capital expenditures were on par with the previous year, except for the acquisition of trust beneficiary interest at the Tokyo Site Hino, which is a one-time event. We are promoting overall efficiency in R&D expenses while concentrating on growth areas. This page details the analysis of changes from other income and expenses to net profit. In addition to a significant increase in income due to the absence of one-time expenses recorded in FY 2024, profit before tax increased significantly due to a decrease in interest expense resulting from a reduction in interest-bearing debt and foreign exchange gains and losses in the financial income and costs. In addition, the recoverability of deferred tax assets to tax losses incurred as a result of business selection and concentration, including one-time factors, has improved, and tax expense has been reduced relative to the growth in profit before tax. Please refer to the appendix for a summary of one-time factors. On this page, we show the change in business contribution profit from the previous year by factor and by business. Excluding special factors, sales increased due to business growth in Professional Print and Imaging Solutions. Although there was an absence of last year's decrease due to the correction of elimination of unrealized gains, the decrease of approximately JPY 16.9 billion was due to the sales decrease in the office business, including the sales decrease resulting from business selection and concentration, and the impact of U.S. tariffs and other factors. On the other hand, the business structure improvement effect, business selection and concentration, cost reduction in production and SCM, and a reduction of approximately JPY 23.8 billion in other SG&A expenses, including reductions related to tariffs, also contributed to a significant increase in profit. This page provides a breakdown of the increase and decrease factors for sales. In sales and others, excluding special factors, the Digital Workplace business posted a negative JPY 12.2 billion due to lower sales of hardware and non-hardware products, including office OEM products, while WDX sales increased. Here we show revenue, business contribution profit, and operating profit by business segment. The industry business led the company-wide profit growth, and the Imaging Solutions business reduced its deficit. The Business Technologies business is also improving its earning power. In particular, in the area of business contribution profit, industry increased from 12%, the previous year's figure, to 18%. Our goal is to exceed 20%, and we are making steady progress in that direction. This is the status of the balance sheet. Excluding foreign exchange effects, the real reduction is approximately JPY 50 billion. Assets held for sale and financial assets decreased due to the completion of business selection and concentration. In addition, the company is also reducing interest-bearing debt by, among other things, reducing lease liabilities through the acquisition of a real estate trust beneficiary interests in the Tokyo site, Hino. Reducing inventories and trade receivables will continue to be a challenge as we work to improve working capital. Operating cash flow was JPY 86.3 billion, a significant increase from the previous year due to the increase in profit before tax. Regarding investment cash flow, tangible fixed assets increased, partly due to the Tokyo site, Hino. The decrease was due to the impact of proceeds from the sale of shares in Ambry Genetics and other companies in the previous fiscal year. But there were also cash inflows from the partial sale of Tempus AI shares. As a result, free cash flow was JPY 52.3 billion. I will now explain our full year forecast for FY 2026. First of all, in terms of the macroeconomic environment, FY 2026 is the first year of the new medium-term business plan and is positioned as the year in which we will accelerate our efforts to achieve sustainable growth while further strengthening our earning power. On the other hand, we expect the external environment to remain uncertain due to U.S. tariffs, geopolitical risks, and soaring material prices. While flexibly responding to this business environment, we will continue to improve profitability and capital efficiency. The exchange rate assumptions are JPY 150 to the US dollar and JPY 180 to the euro. We have factored in the possible impact of the U.S. tariffs at this time. We also expect a certain level of impact from geopolitical risks surrounding the Middle East region and the sharp rise in prices of materials such as memory and silver. In response to the memory procurement risk, we have learned from our response to the semiconductor shortage after the COVID-19 pandemic and have changed the way we hold inventories of key electronic components while anticipating the situation, and we have been able to secure the volume for this fiscal year, partly because of our early strategic efforts to secure inventories. In addition, although it is difficult to accurately estimate the total amount of supply in response to rising energy costs and fluctuations in raw material prices, we will absorb the impact by closely monitoring the situation and implementing necessary measures. This is a summary of the forecast for FY 2026. We have taken a hard look at the macroeconomic environment I explained earlier and factored it in. In contrast, revenue is projected to increase in the Professional Print, industry, and healthcare businesses. While business contribution profit is projected to increase after factoring in the impact of the macroeconomic environment, company-wide AI utilization, and investments for future growth. Operating profit also incorporates one-time expenses for reforms. For net profit, the company expects the absence of one-time factors in tax rates in FY 2025. Dividends will be explained later. With regard to the U.S. tariffs, we have applied for a tariff refund, and the amount of tariff refund claims that have been accepted and are currently under review totals approximately JPY 7 billion so far. However, since there is a high degree of uncertainty regarding the possibility of a refund, the amount of refund, and the timing of the refund, these factors have not been incorporated into the earnings forecast at this time. Page 14 shows our forecast by segment. We hope you will refer to this page as it reflects the actual and projected results for each segment. Next, I will explain each business segment. The first will be the industry business. In FY 2025, both revenue and profit increased. By unit, sensing revenue was up about 16%. In light source color measurement instruments, capital investments in displays by major customers continued to recover, and sales of object color measurement instruments and automobile visual inspections also increased. Hyperspectral imaging saw a decline in revenue due to customers' postponement of investment in the European recycling market. In the performance materials unit, demand for both films for LCD TVs and small and medium-sized films, such as smartphones, remained strong, and sales increased mainly for large IPS-type displays. Inkjet components unit revenue declined due to sluggish market conditions in China and other countries in the sign graphics market. Optical components unit revenue increased due to strong sales of units for semiconductor inspection equipment application, on which we are focusing, and lens units for projectors. In Q4 of the fiscal year, a new lens polishing process for semiconductor inspection equipment began operation at the Tokyo site, Hachioji. Industry business contribution profit increased by JPY 8.4 billion. The increase in gross profit was due to higher sales in sensing, performance materials, and optical components. Looking ahead to FY 2026, demand for smartphone display measurement instruments for sensing is expected to continue as customers continue to develop new display technologies and capital investment increases. In performance materials, customer certification of new film materials for displays is also progressing. During the previous medium-term business plan, we have also prepared for production, stabilization, and capacity expansion in a pre-investment manner, centering on the expansion of the retardation film SANUQI in SAZMA in the surface protection film area. This will promote steady earnings growth. In inkjet components, sign graphics applications are currently struggling, but we aim to expand new applications and further increase our market share for industrial uses with new products that take advantage of our strengths in long throw distance and material compatibility. In optical components, which are expected to continue experiencing high growth, we will increase our market share in existing areas by increasing production capacity for semiconductor inspection equipment, and we will ship prototypes in the new DUV area in FY 2026, which will lead to mass production in FY 2027. The next segment I will be explaining is Professional Print. Excluding the impact of the transfer of a portion of the overseas marketing services business due to business selection and concentration in the previous fiscal year, Professional Print revenue increased by approximately JPY 3.9 billion. Hardware revenue declined 2%, excluding foreign exchange effects. Although sales in North America declined due to the impact of the postponement of investment by customers due to the U.S. tariffs, we were able to recover from this decline in sales in India and other regions, mainly in HPP and MPP, to secure sales at almost the same level as the previous fiscal year. On a volume basis, sales of HPP continued to maintain the top share, while sales of MPP increased approximately 24% year-over-year. Worldwide, we have regained the top market share. Non-hardware sales also increased in real terms, excluding the effects of exchange rates, backed by an increase in the number of HPP and MPP. Industrial print saw an increase in revenue, although the shift to digital printing continues due to rising material costs for analog printing and a shortage of skilled operators. Hardware sales were down, mainly due to the impact of the postponed purchase decisions by U.S. customers. On the other hand, in Europe, we are restructuring our sales structure, and the sales volume of the KM-1 series inkjet machines and labels is growing year-over-year. Non-hardware sales are steadily expanding, centered on the KM-1 series inkjet machines and labels. Business contribution profit decreased, mainly due to lower gross profit in industrial print due to deteriorating U.S. market conditions and the higher development costs. In FY 2026, we will focus on sales of heavy production print, which have the top share in the market, and mid-production print, which continue to show signs of recovery to increase earnings. In industrial print, we recognize that improving profitability as soon as possible is an important issue, and we will improve our closeness to customers by strengthening our product portfolio, increasing the ratio of non-hardware sales, and reinforcing proposals such as workflow solutions to customers. Next is Digital Workplace. Excluding foreign exchange effects, office hardware revenue declined 4%. Excluding the decrease in revenue for other companies' brands, revenue decreased 1%. By region, sales fell below the previous year's level due to the postponement of purchase decisions by some customers in the U.S. due to tariffs and deteriorating business conditions in China, but sales in Europe exceeded the previous year's level. In Q4, revenue increased 5% due to a change in lease accounting treatment in France and a recovery in sales for other companies' brands. Non-hardware revenue is down 3% in real terms, excluding foreign exchange. The decline was temporarily larger in Q3, but returned to a 2% decline in Q4, bringing sales in line with expectations for the full year. WDX, which focuses on the provision of IT services and other services, reported a decline in revenue, but this was mainly due to the impact of measures to improve profitability from the sale of some business areas and weak performance in the U.S. Operation optimizing services and AI SaaS services are growing, especially in Europe and Japan. Business contribution profit increased due to a significant contribution from the profitable WDX. The office unit reported a decrease in gross profit due to lower sales and the impact of U.S. tariffs. In FY 2026, WDX will continue to target growth by expanding cross-selling to MFP customers and improving the unit price per customer. In the office unit, although we expect a decline in both hardware and non-hardware sales, we will strive to secure profit by operational efficiency improvement and fixed cost optimization through AI utilization. Moving on to Imaging Solutions. Healthcare had a JPY 6.8 billion decrease in revenue. Demand for X-ray film in China and third-party products in Japan declined. Unit sales of digital radiography systems increased in the U.S. and Asia, but declined in Europe, resulting in lower revenue. Healthcare IT sales grew in the U.S., and revenue increased. Excluding business selection and concentration, Imaging-IoT Solutions revenue increased by JPY 2.1 billion. Revenue in the Visual Solutions unit increased by JPY 1.2 billion. This was due to strong performance from directly managed planetariums and equipment sales. Business contribution loss of Imaging Solutions was JPY 1.8 billion. Healthcare was in the red last year, partly due to one-time factors, but it returned to the black, thanks to the effects of global structural reforms, in addition to a reallocation of resources to growth areas within the business. The effect of business selection and concentration in Imaging-IoT Solutions and the contribution to profit from Visual Solutions significantly reduced the amount of loss. In FY 2026, Healthcare will strive to expand the global adoption of dynamic digital radiography and overseas Healthcare IT. In Visual Solutions, we will expand LED solution sales. The Imaging-IoT Solutions unit remains in the red in FY 2025 and is recognized as a challenge. We will explain this point later. Last month, in April, we announced a new medium-term business plan. In order to further improve our ROE target, we have launched a project to improve the profitability of our Business Technologies business, particularly our office business. In addition to the measures to improve profitability and efficiency that were initially incorporated into the medium-term business plan, we will continue to pursue reforms without exception. The idea here is to take it a step further and implement additional measures properly, such as reducing assets in regions and areas that are causing challenges. We plan to explain our progress as needed. This page summarizes the status of businesses that have been in the red. As I explained earlier, WDX is now profitable, and we first recognize that the foundation is in place for future growth. In addition, we will replace personnel and implement measures to rebuild our managed IT services in the U.S. We will also expand scanning services and other services and aim to increase gross profit through increased added-value services. We expect Industrial Print to continue to be affected by customers' postponement of investment decisions due to deteriorating market conditions, particularly in the U.S. However, the amount of equipment in operation in the market, a leading indicator for non-hardware, has been steadily increasing, and non-hardware sales have continued to expand in the recent past. The loss and deficit in the Imaging-IoT Solutions unit have also narrowed, and we have begun to make further improvements. Specifically, we will shift some of our products and services to areas that can create synergies with other businesses, and we will also reallocate AI engineers to the company-wide Technology Development Division for future business. This is Shareholder Returns. For FY 2025, we increased the dividend by JPY 2 per share because net profit and free cash flow exceeded our forecast. The dividend forecast for FY 2026 is JPY 18 per share, an increase of JPY 6 per share for the year, which will include cash flow from operating activities and a portion of the JPY 6 billion cash inflow from the sale of a portion of Tempus AI shares as of May 2026. We will continue our efforts to increase cash flow so that we can execute shareholder returns that exceed our medium-term business plan. This slide summarizes the IR events for FY 2026. We are planning to hold briefing sessions on our businesses, and we will inform you once the details are finalized. This is the last page. Today, we have posted information on our website in an article titled "Notice Regarding Partial Amendment to Articles of Incorporation and Shelf Registration with Respect to New Financing Method." Please refer to the disclosure section for further details. That is all the explanation from me. Thank you very much for your attention.