Micware Co., Ltd. American Depositary Shares Emerging Growth Conference

Oh, nice to meet you.

Okay. Good morning, and thank you for joining us today. My name is Kenji Narushima, and yes, this is my English. Like our software, it's always in development, but I promise it works when it matters most. I am the founder and CEO of Micware. Today, I'm also joined by Takashi Harishima, President of Micware North America, based in Columbus, Ohio. Harishima-san will be your direct point of contact here in the U.S. going forward, working closely with our IR team in Japan to make sure your questions get answered quickly and clearly.

Thank you, Narushima-san. It's a pleasure to be here today. I look forward to serving as a direct line between our investors here and our team in Japan.

We appreciate your time and interest in Micware. Micware is a Japan-based automotive software developer offering in-vehicle infotainment navigation software and mobility solutions. Today, I'll provide an overview of our business, discuss our financial performance, and share our future strategic priorities. Let me begin with five key reasons to invest in Micware. First, Toyota and Honda, two of the world's largest automakers, are both our major customers and strategic shareholders. Second, we are a leading automotive software company in Japan with more than 20 years of industry experience. Third, we are well-positioned for the growth of software-defined vehicles as we work to expand into next-generation vehicle software. Fourth, DynaPlanet, our intelligent 3D platform designed for the AI era, is expected to create new recurring revenue opportunities. Finally, our strong profitability and cash generation provide a solid base for future growth.

Now I would like to hand it over to Takashi Harishima, President of Micware North America, who will walk you through our company overview and financial highlights.

Thank you, Narushima-san. It's a pleasure to speak with you today. Let me begin by introducing Micware and providing an overview of our business and financial performance. Since our founding in 2003, we've grown into a leading automotive software company. Today, we have about 600 employees and more than 300 patents. We develop IVI system navigation software and other mobility solutions for major automotive companies such as Toyota, Honda, Daihatsu, and Denso. We believe that our long-term relationships with these companies reflect both our deep industry experience and strong technical capabilities. Today, we operate through six operating entities and 13 branch offices in Japan with overseas subsidiaries in the U.S., Thailand, and Germany. From our North America office, we also work closely with OEMs and partners to support our global business development. We currently operate through three business segments.

The first is software-defined vehicles, or SDV, where we develop and provide next-generation mobility software centered on IVI system software. The second is Location-Based Services, or LBS, which includes navigation software and Location-Based Services. DynaPlanet, which Narushima-san introduced earlier, is part of this segment. The third is other, which includes software development services provided by our overseas subsidiaries and B2C mobile app services. Most of our revenue comes from developing custom automotive software based on our IVI platform. We also generate revenue through licensing our software modules to customers, typically on a per-unit basis. Other revenue comes from maintenance support and B2C mobile app services. Now, I'd like to touch on our financial highlights. Revenue increased by 19.9% from $116.9 million in fiscal year 2024 to $140.2 million in fiscal year 2025. In fiscal year 2026, revenue remained stable at $140.3 million.

Software development services represented the majority of our revenue, accounting for about 80% of total revenue in each of the past three years. Gross profit grew by over 38% from $35.5 million in fiscal year 2024 to $49.1 million in fiscal year 2025, and further to $51.6 million in fiscal year 2026. As a result, gross margin also increased by over six percentage points over the past two fiscal years. Adjusted operating profit increased from $13.5 million in fiscal year 2024 to $15.6 million in fiscal year 2026, while net income attributable to our ordinary shareholders increased from $9.1 million to $10.3 million over the same period. Beyond profitability, we further strengthened our financial position. Cash and cash equivalents nearly doubled since fiscal year 2024, showing strong cash generation from our core business.

At the same time, total debt decreased from $40.3 million as of February 2025 to $34.5 million as of February 2026. Overall, there are three key takeaways. First, our gross margin reached a record 36.8%, reflecting sustainable profitability rather than just one-off gains. Second, operating profit continued to increase even as R&D spending rose by 40%. This shows our ability to invest in innovation while maintaining profitability. Third, our long-term OEM relationships support repeat business and position us well as the SDV market expands. With that overview of our business and financial performance, I'd now like to hand it back to Narushima-san to discuss our long-term strategy and future growth initiatives.

Thank you, Harushima-san. With this strong financial foundation, I'd now like to share our strategic direction. Micware started as a developer of car audio systems and car navigation systems. Over the years, we improved our technology and built long-term relationships with major OEMs. These strengths helped us become a leading IVI software supplier in Japan. Today, we are entering the next stage of our growth. Our goal is to evolve from an automotive software company into a platform provider for next-generation mobility. To achieve this goal, our growth strategy is built around two main pillars. The first is micAuto, which we will further grow and expand our automotive software platform. The second is DynaPlanet, which will drive the growth of our spatial intelligence business.

To execute this strategy, we plan to introduce a new organizational structure in September 2026, including the establishment of a new company focused on next-generation spatial intelligence. Our investment priorities reflect these two pillar strategies. We plan to allocate 30% of our capital to the SDV business to support our existing business, micAuto Platform. The remaining 70% will be invested in the LBS business to support DynaPlanet Platform, create new growth opportunities, and generate recurring revenue. The next two slides will provide a closer look at each of these platforms. Let's begin with micAuto Platform. Its modular design allows us to reuse software across different vehicle projects while supporting different operating systems and devices, and cloud functions. As a result, we can reduce development work and make project timelines more predictable. Over the years, we have improved the platform through close collaboration with OEM customers.

While deepening long-term customer relationships, we expect micAuto Platform to begin contributing revenue in fiscal year 2027. Our second pillar, DynaPlanet Platform, formerly known as Dynamic Street Map & Market Place, opens a new area of growth for Micware. DynaPlanet is a next-generation 3D platform that uses AI to combine location data with different types of digital content. Its first product, Dynamic Share Map, combines location-based text, images, audio, video, and 3D content to create new value and support monetization. Another product is PreSpot, a DynaPlanet application that allows users to see the view from a selected stadium seat before making a reservation. We view DynaPlanet as a long-term growth platform. As adoption expands, we expect it to generate recurring revenue through broader commercial use and new monetization opportunities. We have clear strategies to grow both platforms.