JVCKENWOOD : Q&A session at the earnings results briefing for Q3 of the fiscal year ending March, 2026

Q&A session at the financial results briefing for

the Q3 of the fiscal year ending March 31, 2026 (FY2025)

Q: Regarding the Safety & Security (S&S) Sector, you mentioned that there were significant lost sales opportunities in the enterprise market during Q3. What is the current status of actual demand? Also, please share the outlook for the Communications Systems Business for fiscal 2026.

A: We have been working to secure alternative components and implement design changes to address the supply shortage, aiming to recover sales of products that could not be shipped until Q2 from Q3 onward. While some orders from the enterprise market became backlogs, others were lost to competitors, resulting in a slight struggle in Q3 revenue. In Q4, we have customers waiting for our products, and since the order status itself has not declined significantly. As design updates with alternative components will be completed by the next fiscal year, we have confirmed with our teams that revenue is expected to return to levels comparable to the initial plan for fiscal 2025.

Meanwhile, in the North American public safety market, order status remains strong. This is due to our prioritization of design changes for this market, as well as continued high demand for crisis management and the transition from analog to digital. From the next fiscal year onward, the North American public safety business will drive the Communications System Business, with a target of US$400 million in sales for fiscal 2030.

Q: Please tell us about your financial strategy. I recall that following the issuance of corporate bonds with share acquisition rights immediately after the Q2 results announcement, the stock price declined due to concerns over equity dilution. Under the cash allocation strategy of the current medium-term management plan, growth investments were supposed to be funded by operating cash flow and asset sales. Please explain the background and necessity of this additional fundraising at this stage.

A: In November 2025, we raised 30 billion yen through the issuance of corporate bonds with share acquisition rights. As you noted, our current medium-term management plan aims to fund investments from a total of 100 billion yen generated internally through operating cash flow and asset sales. We are currently formulating a new medium-term management plan starting next fiscal year, where we intend to aggressively pursue necessary investments, particularly M&A for growth, to further expand our business. We believe that necessary funds should be procured as needed in order to pursue growth initiatives. Accordingly, we arranged financing slightly ahead of schedule to support further growth in the next medium-term management plan period.

Q: You mentioned various initiatives to enhance corporate value with the Communications Systems Business at the core. Specifically, what has been achieved so far, and what challenges remain? This question may relate to the growth investment mentioned earlier, but I would like to know where you see capital allocation needed and what internal changes are necessary for the organization.

A: Regarding the growth of the Communications Systems Business, we are nearing the closing of the M&A for San Luis Aviation, Inc. From the next fiscal year, we will act aggressively in the PTToC* system business and the hybrid market. We believe this will increase our order acquisition in the public safety market. We also plan to introduce trunking repeater systems, developed in collaboration with Tait International Ltd., to the enterprise market. These initiatives are aimed at driving short-term revenue growth. In the long run, while I cannot provide specifics, we are considering M&A for covering technological areas and sales regions where we currently lack a presence. We are committed to business expansion from both short-term and long-term perspectives, which we believe will ultimately lead to enhanced corporate value for the entire company.

*: Push-to-Talk over Cellular

Q: From your perspective, Mr. Suzuki, what challenges do you think businesses other than the Communications Systems Business are currently facing?

A: I believe B2C businesses are facing significant challenges. Specifically, the Aftermarket Business in the Mobility & Telematics Services (M&T) Sector is seeing a significantly shrinking market. We will focus our efforts on the overseas OEM business. In the Entertainment Solutions (ES) Sector, the Entertainment Business has remained firm. My view is that, although we are a conglomerate, we should provide premium value in each sector. In other words, it is crucial to drive growth in all three sectors. The key is to invest solidly in growth businesses. While practicing selection and concentration, we aim to improve profitability across all three sectors.

Q: Please explain your thoughts on recent fundraising and the next medium-term management plan. I believe development and human investments in growth-driving businesses, centered on the Communications Systems Business, are listed as uses for the recent funds in the next medium-term management plan. In that case, should we consider that the first year of the new medium-term management plan starting next fiscal year may involve a burden of front-loaded investment, potentially suppressing profitability or profit levels? While you mentioned revenue for the Communications Systems Business will recover next year, how should we view the profit outlook in relation to growth investments?

A: Regarding the growth investment for the future of the Communications Systems Business, we intend to continue using funds for product development in addition to M&A. We do not expect this to cause a sudden drop in profitability. We aim to increase the absolute amount of profit by growing revenue through investment while maintaining current margin levels.

A: Development investment for the growth of the Communications Systems Business focuses on strengthening the product lineup. Although development investment will expand significantly in the short to medium term, we will determine annual investment levels while considering the balance of core operating income across the entire company. Regarding M&A, we have a long-term perspective. We are currently proceeding with Post Merger Integration (PMI) for San Luis Aviation, Inc., which was acquired in the PTToC system business, to launch its business rapidly after closing. Certain hardware-related development investment is necessary for entering the hybrid market. Furthermore, we have proceeded with human investment to further expand system orders in the North American public safety market. We have hired approximately 50 people between fiscal 2024 and 2025. Local support will be extremely important as systems delivered to various counties begin operation. We also believe investment in collaboration with dealers and system integrators is necessary. Addressing component supply is also vital. Since we currently use many legacy components, we intend to work with various vendors to ensure stable supply, as well as customization of IC chips and development of dedicated chips for the future.

Q: Please tell us about the impact of the current memory shortage and rising memory prices. Are DRAM and NAND used primarily in car navigation systems and dashcams in the M&T Sector, and is the impact on the Communications Systems Business negligible? Please share the current procurement status in the M&T Sector and what impact we should anticipate from the next fiscal year onward.

A: For the current fiscal year, we have already secured the necessary quantity of memory and prices are mostly fixed, so we expect no impact. The challenge is securing memory and managing costs for the next fiscal year. Approximately 90% of the memory used company-wide is for the M&T Sector. The Communications Systems Business uses only a few hundred million yen worth; therefore, we do not expect a major impact on the latter.

A: First, securing components is of the utmost importance. We have instructed memory-related component manufacturers to accept firm orders for about two years' worth. Since prices have risen significantly, we are looking to minimize this impact through price pass-through to our products.

Q: It is difficult to predict the decrease in sales volume due to price pass-through, but could you provide some quantitative information to supplement, such as how many gigabytes of DRAM/NAND are installed per unit in car navigation systems and dashcams, and what the gross cost-up impact would be if prices increased by, say, 1.5 times?

A: In the M&T Sector, memory types vary by product, but on average, memory prices account for 5% to 10% of the total cost. The question is how to pass that through to prices. In the B2B business, we believe price pass-through is possible. For B2C business, while price increases are likely feasible, the impact on sales volume is difficult to predict, so we are currently conducting estimations.