Hamamatsu Photonics K.K. (HPHTY) Q3 2026 Earnings Call Transcript

HAMAMATSU PHOTONICS K.K. Q3 Financial Results Briefing for the Fiscal Year Ending September 2026 August 7, 2026

Presentation Kodama: Thank you very much for taking time out of your busy schedules today to attend HAMAMATSU PHOTONICS K.K.’s financial results briefing for Q3 of the fiscal year ending September 2026. I would like to introduce the attendees. Executive Officer Takashi Ogasawara will be presenting, and I, Kodama of the Corporate Communication Department, will serve as moderator. Today, we will explain the results for Q3 of the fiscal year ending September 2026. After the explanation, we will move on to the question-and-answer session. The relevant materials are available on our website, so please refer to them. The briefing is scheduled to end at 12:00 PM, but it may be extended depending on the situation. Thank you for your understanding. Now, Executive Officer Ogasawara, please begin. Ogasawara: Hello, everyone. I am Ogasawara. I will now explain the results using the presentation materials.

I will begin with the key points. There are two main points. The first is the FY2026 Q3 YTD results. Sales and profit increased. Sales were JPY173 billion, up 11.3% YoY. Industrial was the main driver of the increase in sales. Against the backdrop of expanding AI data center investments, semiconductor-related demand drove growth. Operating profit was JPY16.3 billion, up 33.1% YoY. In addition to the impact of increased sales, favorable foreign exchange movements also provided a tailwind. The second is the full-year forecasts. We revised our full-year forecasts upward because industrial demand continues to remain strong, and we updated our exchange rate assumptions. We forecast sales of JPY239 billion and an operating profit of JPY22 billion. Compared with the previous forecasts announced at the time of the Q2 FY2026 results, the sales forecast has been increased by JPY7 billion, or 3%, and the operating profit

forecast by JPY2 billion, or 10%. Although the scale of this revision does not meet the criteria for timely disclosure, we revised the forecasts to reflect the current business environment. That concludes today’s key points.

I will explain our results for the first nine months of FY2026. Sales for the first nine months were JPY173 billion, an increase of JPY17.5 billion, or 11.3%, YoY. Gross profit was JPY83.6 billion, an increase of JPY8.5 billion, or 11.4%, YoY. Operating profit was JPY16.3 billion, an increase of JPY4 billion, or 33.1%, YoY. Net profit attributable to owners of the parent was JPY12.6 billion, an increase of JPY3 billion, or 31.3%, YoY. In addition to the increase in sales, foreign exchange effects also contributed, resulting in operating profit and net profit growing at higher rates than sales.

I will explain the quarterly changes in results. The blue areas show the results for the three months of Q3. Sales in Q3 were JPY60.5 billion, and operating profit was JPY6.3 billion. Compared with Q3 of the previous fiscal year, the same period a year earlier, both sales and operating profit increased. Compared with Q2, however, operating profit decreased due to factors including an increase in depreciation associated with the commencement of operations of the new opto-semiconductor plant. However, there was no significant change in the business environment itself, and demand remained strong, particularly for semiconductor manufacturing and testing equipment and failure analysis systems. We believe that the favorable business environment seen since Q2 continued in Q3.

I will explain sales by application. Industrial increased by JPY11 billion, or 20.6%, YoY. Medical-bio increased by JPY3.7 billion, or 8.5%, YoY. Analytical increased by JPY1.6 billion, or 8.4%, YoY. Measuring increased by JPY1.8 billion, or 25.2%, YoY. In contrast, academic research decreased by JPY1.7 billion, or 11.2%, YoY due to the completion of a largescale project. Transport also recorded a 1% decline, with sales down 5.4% YoY due to fluctuations in demand from certain customers. Although some markets experienced factors that led to lower sales, sales increased across many applications, and we believe that the overall business environment remains favorable. Industrial, in particular, accounted for 60% of the JPY17.5 billion increase in sales and drove our growth this fiscal year.

This slide provides details on industrial. First, sales for semiconductor manufacturing and testing equipment increased by JPY4.8 billion. Sales of light sources and sensors are expanding. Next, sales for semiconductor failure analysis systems increased by JPY2.3 billion. Amid growing demand for analysis during the prototype stage of advanced devices, expanding HBM-related demand also provided a tailwind, and sales remained strong. Sales for non-destructive testing increased by JPY2.4 billion. X-ray sources for electronic component inspection remained strong, supported by growing demand for AI data center server boards. Sales for factory automation also increased by JPY1.8 billion. Demand for products for servo motor encoders and servo amplifier control equipment increased, supported by expanding investments in AI-related semiconductors. As such, we supply products to the AI data center market across multiple areas, including semiconductor manufacturing and testing, semiconductor failure analysis, server board inspection, and factory automation.

This slide provides details on medical-bio. First, sales for radiographic testing increased by JPY2.4 billion. Customer inventory adjustments ran their course, particularly for X-ray CT equipment, and demand from major customers remained strong. Sales for laboratory testing increased by JPY1.3 billion. Sales of new NanoZoomer virtual slide scanner products for pathology applications remained strong. As such, in medical-bio, new products for pathology applications are contributing to growth alongside our mainstay products for radiographic testing, and demand is expanding across a wide range of applications.

I will explain sales by region. Sales increased in all regions. Growth in Asia and North America, in particular, drove the overall increase in sales. China also maintained sales at approximately the same level YoY, and we believe that demand and the business environment remain solid across all regions.

I will explain the factors behind the change in operating profit. Operating profit increased by JPY4 billion YoY, from JPY12.2 billion to JPY16.3 billion. Looking first at the factors behind this JPY4 billion increase, the increase in gross profit due to increased sales. In particular, the increase in industrial sales, primarily for semiconductor applications, was a major factor boosting profit. Next is the impact of foreign exchange. The yen remained weaker against both the US dollar and the euro YoY, resulting in a positive impact of JPY3 billion on operating profit. Negative factors included higher personnel expenses, primarily overseas, and higher R&D expenses. At present, these increases are being sufficiently absorbed by sales growth and profit expansion. Still, we recognize appropriate cost control as an important management issue, as we aim to achieve even higher profit levels going forward. In R&D in particular, we intend to prioritize medium- to long-term growth over short-term profit and continue investing in future business opportunities.

This slide shows the status of inventories and CCC. CCC was 264 days, an improvement of 26 days from 290 days at the end of FY2025. Inventories increased with higher orders, but as a result of our continued efforts to optimize inventory levels, CCC steadily improved. Compared with its historical peak, CCC improved by more than 60 days, and we believe this demonstrates the results of our efforts to improve capital efficiency. We have set a target of 240 days and believe we are making steady progress toward achieving it. Going forward, we will continue to optimize inventory levels and improve CCC while balancing these efforts with business growth.

This slide shows order trends. The graph on the left shows trends in orders and backlog, with the beginning of FY2024 set at 1. Orders remained strong and maintained a high level in Q3. Q3 includes a large quantum-related order, which I have explained as a topic at Q2 Financial Results Briefing. However, even excluding this JPY5 billion order, orders remained at a high level, particularly for industrial, and we have not seen any significant change in the business environment. We believe that the solid order environment continues, particularly for our AI data center-related businesses.

This slide shows our full-year forecasts. We revised our full-year forecasts upward to reflect the continued strength of industrial demand and foreign exchange effects. We forecast sales of JPY239 billion, an increase of JPY26.9 billion, or 12.7%, YoY. This represents an upward revision of JPY7 billion, or 3%, from the previous forecast. We forecast an operating profit of JPY22 billion, an increase of JPY5.8 billion, or 36.1%, YoY and an increase of JPY2 billion, or 10%, from the previous forecast. These forecasts reflect the continued solid demand environment, particularly for industrial, as well as foreign exchange effects. Operating profit, in particular, has been revised upward by 10% from the previous forecast, reflecting the favorable demand environment and expected improvement in profitability.

This slide shows our sales forecasts by application. In the revised forecasts, we forecast industrial sales of JPY91.9 billion. This represents an increase of JPY17.6 billion, or 23.7%, YoY, and industrial is expected to continue driving company-wide growth. We forecast medical-bio sales of JPY65.4 billion, analytical sales of JPY27.8 billion, and measuring sales of JPY13.1 billion, all of which are expected to increase YoY. While academic research sales are expected to decrease YoY due to the completion of a large-scale project, they are expected to increase from the previous forecast. Although some markets face factors contributing to lower sales, we expect sales to increase in many applications and the overall business environment to remain solid.

This slide provides detailed sales forecasts for industrial. We forecast sales for semiconductor manufacturing and testing equipment to be JPY45.9 billion. Light sources and sensors are expected to remain strong, supported by growing demand for AI semiconductors. We forecast sales for semiconductor failure analysis systems to be JPY12.6 billion. There has been no significant change in the demand environment itself, but we have factored in delays in the timing of some shipments and customer acceptances. We forecast sales for non-destructive testing to be JPY20.6 billion. X-ray sources used for electronic component and battery inspection are expected to remain strong, supported by growing demand from AI data centers. We forecast sales for factory automation to be JPY9.4 billion. Sales are similarly expected to grow, supported by capital investment in AI-related semiconductors. As such, industrial is benefiting from expanding demand associated with growth in the semiconductor market and the AI data center market.

This slide shows shareholder return. There has been no change to the dividend forecast, and we plan to pay annual dividends of JPY38. Following the upward revision to the earnings forecasts, the dividend payout ratio is expected to be 62.8%. We have adopted a policy of targeting a consolidated dividend payout ratio of 30% while setting a DOE of 3.5% as the minimum, and we will continue to pay stable dividends.

These are our topics. I will explain our AI data center-related businesses. Against the backdrop of expanding AI data center investments, demand for our related products remains strong. As shown on the slide, we supply products for a wide range of applications that support AI data centers, from advanced semiconductor manufacturing and inspection processes to AI server board inspection and highspeed optical communications within data centers. Over the past two years, sales related to semiconductor manufacturing and inspection have continued to grow at an annual rate of 18.5%, non-destructive testing-related sales at 12.6%, and optical sensors for highspeed optical communications at 43.2%. As such, we participate in the AI data center market across multiple areas rather than through a single product, and we will continue to capture demand as an important growth opportunity.

This slide introduces our initiatives in the quantum computing business. As shown here, there are four approaches to quantum computers. Of these, we supply products, such as laser light sources, modulators, and detectors, for the three platforms: neutral-atom, ion-trap, and photonic. We believe that another strength is our ability to capture market growth without depending on any particular approach because we support multiple approaches. Advanced photonic technologies are essential to realizing quantum computers, and we position this as one of our medium- to long-term growth areas because of its strong compatibility with our core technologies.

In June 2026, we signed a memorandum of understanding with Yaqumo regarding advanced optical systems for quantum computing, which I would now like to introduce. In addition to our conventional supply of components, we are also considering expanding into the systems field in the future. To reiterate, quantum computing is one of our medium- to long-term growth areas, and we will work to expand business opportunities going forward. That concludes my presentation. Thank you for your attention.

Question & Answer

Q1. Could you comment on order trends excluding the JPY 5 billion quantum computing order, as well as order conditions in July and August and the medical equipment business? A1. Third-quarter order intake totaled JPY 83.0 billion, including a large order of approximately JPY 5.0 billion related to quantum computing. Excluding this order, order intake was largely in line with the second quarter, indicating that demand remained solid. While we do not disclose monthly order figures, we have not observed any significant changes in recent months, and overall business conditions remain stable. Orders in industrial applications continue to be strong, while demand in medical and life science applications has remained generally flat over the past year, reflecting a stable order environment.

Q2. What was the impact of depreciation expenses associated with new Building No. 5 at optosemiconductor factory, and what increase in depreciation expenses should be expected next fiscal year? A2. Building No. 5 began operations in June, resulting in approximately JPY 0.5 billion of depreciation expenses during the third quarter. In addition to depreciation, various start-up and operating costs were incurred during the quarter. In the fourth quarter, the primary impact will be depreciation expenses, which are expected to total approximately JPY 1.5 billion. The commencement of operations has proceeded according to plan. Regarding the increase in depreciation expenses next fiscal year, we continue to expect a level close to the previously indicated increase of approximately JPY 5.0 billion from this fiscal year, although the final amount may be somewhat lower. We plan to provide further details together with our next fiscal year's guidance.

Q3. Have there been any changes in products or demand trends for wafer inspection, failure analysis systems, and X-ray non-destructive inspection equipment in the semiconductor market? A3. There have been no significant changes in the components we supply for wafer inspection applications. However, as advanced semiconductor manufacturing processes become increasingly complex, the number of inspection steps continues to rise, driving demand for our customers' inspection equipment. In failure analysis systems, large-scale deployment in mass production remains at an early stage, with current demand primarily related to the analysis of leading-edge devices such as HBM. For X-ray non-destructive inspection, orders have continued to increase, supported by growing demand for more detailed inspection of circuit boards, particularly for AI server applications.

Q4. Could you comment on the size of AI data center-related demand within the non-destructive inspection market? A4. As we mainly supply components, we do not have full visibility into end-use applications. However, we believe that investment related to AI data centers has been a major driver behind demand growth over the past two years. In particular, increased inspection demand for circuit boards used in AI server has contributed significantly to growth in non-destructive inspection-related applications.

Q5. Is demand related to electric vehicles (EVs) recovering? A5. Demand for battery inspection systems used in EV applications has been increasing. However, demand has not yet returned to the peak levels observed during the strongest period of EV market expansion, and we view the market as still being in a recovery phase.

Q6. What factors have driven the improvement in gross profit margin, and what is the outlook going forward? A6. Gross profit margin improved from 47.8% in the previous fiscal year to above 50% in the second quarter of the current fiscal year. Since the third quarter, however, depreciation expenses associated with newly commissioned facilities have become a factor weighing on margins. At the same time, higher sales volumes have improved operating efficiency and capacity utilization, contributing positively to both gross profit margin and operating margin. We will provide further details regarding the outlook in our medium-term management plan scheduled for release in November.

Q7. How is the profitability improvement of Hamamatsu Photonics A/S (formerly NKT Photonics A/S) progressing? A7. We have been pursuing a plan to improve operating profit before goodwill amortization to break-even within three years, and progress remains on track. Our target has been to improve profitability by approximately JPY 1.0 billion annually. This fiscal year, however, the increase in quantum computing-related R&D expenses is expected to reduce the amount of improvement somewhat. Nevertheless, the underlying business continues to improve steadily, and we aim to achieve an operating profit improvement of more than JPY 1.0 billion next fiscal year.

Q8. What caused the decline in profitability in the Imaging and Measurement Instrument segment business compared with the forecast announced in May and the losses in the Laser segment business? A8. In the Imaging and Measurement Instruments business, shipments of high-margin failure analysis systems were delayed, affecting both sales and profitability. In addition, higher material costs and changes in product mix negatively impacted margins. In the Laser business, increased R&D expenses related to quantum technologies, together with foreign exchange effects, contributed to the loss.

Q9. Why is profit growth expected to be limited in the fourth quarter despite higher sales? A9. Our forecast includes approximately JPY 1.0 billion in inventory disposal costs. Furthermore, we have adopted conservative assumptions for operating expenses. As a result, profit growth is expected to be more modest than sales growth in the fourth quarter.

Q10. Why was the gross profit margin forecast revised from 48.1% in the previous forecast to 47.9% in the current forecast ?

? A10. The revision primarily reflects inventory disposal costs and more conservative assumptions regarding expenses. On the other hand, the impact of price revisions has developed as planned, and shipments from April onward have been contributing positively to profitability.

Q11. Have customers placed advance orders in semiconductor-related markets? A11. Based on our ongoing discussions with customers, we have not observed the type of inventory-driven advance purchasing seen during the COVID-19 period. We believe current demand is primarily supported by underlying end-market demand.

Q12. Could you comment on the photodetector business for optical transceiver applications? A12. Annual sales related to optical communications are approximately JPY 2.0 billion and currently account for a relatively small portion of our total sales. We supply high-speed photodiodes to optical transceiver manufacturers. As AI data center investments continue to expand, the optical communications market is growing, and we are also developing products for next-generation, higher-speed communication systems.

Q13. What is the Company's strategy for the optical communications market? A13. We recognize the strong growth potential of the optical communications market. Leveraging our strengths in photodetection technologies, we aim to expand business opportunities in this field and further strengthen our presence in optical communications-related applications.

Q14. What factors contributed to the larger loss at Hamamatsu Photonics A/S? A14. The primary factor was increased R&D investment in quantum technology-related projects. In addition, the business includes a significant number of project-based orders, which can result in substantial fluctuations in quarterly sales and profitability.

Q15. What is the purpose of the name change to Hamamatsu Photonics A/S from NKT Photonics A/S? A15. The name change is intended to reinforce the sense of unity within the Hamamatsu Photonics Group. We are integrating sales activities and leveraging Hamamatsu Photonics' global sales network to expand market opportunities. In addition, we expect to generate technological synergies by combining the former NKT Photonics' expertise in light generation with Hamamatsu Photonics' strengths in photodetection technologies, while also promoting closer collaboration among engineers.

Q16. How do you view neutral-atom quantum computing within the broader quantum computing market?

A16. We believe interest in neutral-atom quantum computing is increasing across the industry. However, it remains unclear which technology platform will ultimately emerge as the dominant approach. Accordingly, we are supporting not only neutral-atom systems but also photonic and ion-trap quantum computing platforms.

Q17. Which quantum computing approach is most compatible with Hamamatsu Photonics' technologies? A17. While we have high expectations for the neutral-atom approach, our laser products are also widely used in ion-trap quantum computing systems. Therefore, rather than focusing on a single technology platform, we intend to support multiple quantum computing architectures and pursue a broad range of business opportunities.