Sato : Financial Results Briefing Materials for 1st Quarter of FY2025 (with summarized script)

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• Sales and OI exceeded the plan in the Japan but fell short of the plan overseas.

  • Overseas, our factories for the base business in Asia and Oceania performed well, pushing up results above the plan. However, overall sales and OI fell short of the plan, as the primary labels business in Russia was impacted by the appreciation of the ruble against the euro and by increased costs incurred for the expansion of production capacity.

  • In Japan, we delivered results that exceeded the plan driven by the recovery of mechatronics sales.

• Q1(Apr-Jun) Results

  • Consolidated sales increased (+0%), while OI decreased (-18%) year on year.

    % in parentheses indicate year-on-year changes.

    • Overseas base business: Sales (-5%) and OI decreased (-13%).

    • Overseas primary labels business: Sales increased (+2%) while OI decreased (-57%).

    • Japan business: : Sales (+4%) and OI increased (5x).

Summary

Auto-ID Solutions Business (Consolidated)

• Quarterly results for Q1:

  • Year-on-year, consolidated sales increased while OI decreased. The percentages in parentheses show year-on-year comparisons.

  • Sales declined in the overseas base business due to the negative impact of foreign exchange rates, but this was offset by strong investment appetite in Japan, especially in the manufacturing vertical, resulting in overall sales growth.

  • Although OI in the Japan business increased significantly, it was not enough to offset the impact of cost increases in the overseas primary labels business and the temporary increase in SG&A expenses in the U.S. base business caused by a reversal of allowance for doubtful accounts recorded in the same period last year. As a result, overall OI declined.

• Compared to the plan:

  • Consolidated sales fell short of the plan mainly due to underperformance in the overseas base business.

  • Operating income:

    • Japan business performed better than the plan, driven by mechatronics sales in manufacturing and logistics verticals. Results from factories in Asia and Oceania were also better than the plan, helping boost the OI above the targets.

    • However, sales in the primary labels business in Russia declined due to ruble appreciation against the euro and increased costs incurred for expanding production capacity. As the result, overall operating income fell short of the plan.

  • A details will be provided in later slides.

    				FY24	FY25	YoY
    							In local currencies
    Consolidated			Total Sales	37,674	37,829	+0.4%	+2.6%
    			Operating Income	2,864	2,359	-17.6%	-11.3%
    	Overseas	Base	Total Sales	13,355	12,628	-5.4%	+0.4%
    			Operating Income	1,277	1,118	-12.5%	-7.3%
    		Primary Labels	Total Sales	5,966	6,109	+2.4%	+2.9%
    			Operating Income	1,301	561	-56.9%	-54.7%
    		Eliminations	Operating Income	7	-50	-	-
    		Total	Total Sales	19,321	18,737	-3.0%	+1.2%
    			Operating Income	2,586	1,629	-37.0%	-33.3%
    	Japan		Total Sales	18,353	19,091	+4.0%	+4.0%
    			Operating Income	186	864	4.6x	5.1x
    	Eliminations		Operating Income	92	-134	-	-

    Sales and OI by Business Segment

    （Millions of JPY）

    *1 Sales and OI excluding Russian subsidiaries are shown on p. 39.

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    Apr-Jun *1

    Auto-ID Solutions Business (Consolidated)

• The analysis are primarily presented on a year-over-year basis.

• The actual performance figures referenced in the ”Summary" on the previous slide are shown in the table.

• For FY25 cumulative results excluding the Russian subsidiary, please refer to page 39.

• The results for the Russian subsidiary are reflected in the European primary label business figures shown on page 13.

  	FY24	FY25
  			Change	YoY
  Net Sales	37,674	37,829	+154	+0.4%
  Operating Income	2,864	2,359	-505	-17.6%
  Operating Income %	7.6%	6.2%	-1.4pt	-
  Ordinary Income	2,411	1,885	-526	-21.8%
  Profit attributable to owners of parent	1,197	1,211	+13	+1.1%
  Effective Tax Rate 41.0%		30.6%	-10.4pt -
  EBITDA*	4,174	3,768	-405	-9.7%

  Consolidated Results

  （Millions of JPY）

  FX sensitivity for FY25: Assuming a 1-yen depreciation of the Japanese yen against the US dollar and an equivalent depreciation against other

  currencies, the estimated impact for the full-year FY25 would be an increase in sales of JPY 561 million and an increase in OI of JPY 35 million.

  Average FX for Apr-Jun 2025: JPY 144.59/USD, JPY 163.80/EUR (Apr-Jun 2024: JPY 155.85/USD, JPY 167.84/EUR)

  * EBITDA = Operating Income + Depreciation + Amortization (Incl. Goodwill)

  ·Depreciation for Apr-Jun 2025: JPY 1,405 million (Apr-Jun 2024: JPY 1,270 million)

  ·Amortization for Apr-Jun 2025: JPY 3 million (Apr-Jun 2024: JPY 38 million)

  *1 Sales and OI excluding those of Russian subsidiaries are shown on p. 40.

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  Apr-Jun*1

  Auto-ID Solutions Business (Consolidated)

  Consolidated results

• In Q1 (Apr–Jun) FY24, the effective tax rate increased due to the lump-sum recognition of deferred tax assets recorded in FY23, following the change in the tax treaty with Russia in the same year. Additionally, the tax rate that has been temporarily increased by the application of hyperinflation accounting in FY23 has since come down to normal levels, resulting in an overall decrease in the tax rate.

  Major Gains/Losses in OI

  (Millions of JPY)

  Consolidated

  -264

  -426

  Consolidated

  (Figures exclude those of the Russian subsidiaries)

  +366

  +301

  -387

  -181 +420

  -201

  2,359

  1,922

  FY24

  Net Sales Gross Profit, etc.

  Excludes FX Impact

  SG&A

  FX Impact

  FY25

  FY24

  Net Sales Gross Profit, etc.

  Excludes FX Impact

  SG&A

  FX Impact

  FY25

  7

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  Auto-ID Solutions Business (Consolidated)

  1,789

Consolidated operating income as compared against the previous year

• Consolidated OI decreased as explained on page 4.

• With the results of the Russian subsidiaries removed, the consolidated OI increased over the previous year, driven by the strong sales of mechatronics products in Japan which pushed up the gross profit.

  	FY24	FY25	Change
  				YoY	In local currencies
  Base business Total Sales Primary Lablels business Total Sales	13,355 5,966	12,628 6,109	-726 +143	-5.4% +2.4%	+0.4% +2.9%
  Total Sales	19,321	18,737	-583	-3.0%	+1.2%
  Gross Profit Gross Profit %	7,964 41.2%	7,083 37.8%	-881 -3.4pt	-11.1% -	- -
  Base business Operating Income Primary Lablels business Operating Income Elimination Operating Income	1,277 1,301 7	1,118 561 -50	-159 -740 -57	-12.5% -56.9% -	-7.3% -54.7% -
  Operating Income	2,586	1,629	-956	-37.0%	-33.3%
  Operating Income %	13.4%	8.7%	-4.7pt	-	-

  Overview

  （Millions of JPY）

  Sales

  • The base business was brisk in Asia and Oceania, but overall sales decreased, impacted by unfavorable foreign exchange rates affecting operations mainly in Europe and the Americas.

  • Sales of the primary label business increased helped by favorable foreign exchange rates, despite drops in demand in Russia caused by changes in the tax regulations.

  * Includes the impact of IAS 29, Financial Reporting in Hyperinflationary Economies ("Hyperinflation Accounting") in Argentina.

  Major Gains/Losses in OI

  • Positive factors

  • Negative factors

  +294

  -841

  • Asia/Oceania base

    business

  • Factories

  -316

  -94

  • Europe primary labels

  • Europe base business • The Americas base

    business

    • Asia/Oceania base business

  • The Americas primary labels

  • Asia/Oceania base business

  1,629

  FY24

  Net Sales

  Gross Profit, etc.

  Excludes impact of FX

  SG&A

  FX Impact

  FY25

  Operating income

  • The base business was brisk in Asia and Oceania, but OI for overseas decreased due to a temporary increase in SG&A expenses in Americas caused by the reversal of allowance for doubtful accounts recorded in Q1(Apr-Jun) FY24.

  • OI of the primary label business declined due to increased costs in

  Europe.

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  Apr-Jun

  Auto-ID Solutions Business (Overseas)

  2,586

• Overall, overseas business recorded lower sales and OI against the previous year.

• Sales decreased, despite the brisk base business enjoyed by the sales subsidiaries in Asia and Oceania, impacted by unfavorable foreign exchange rates mainly in Europe and the US.

• Despite the drops in demand in Russia due to the Russian tax law changes, sales of the primary label business increased helped by favorable foreign exchange rates. However, the increase was not enough to offset the declines in the sales of base business, and the sales of overall overseas Auto-ID solutions business was down from the previous year.

• Despite the good performance in OI of the Asian and Oceanian factories for the base business, the overall OI was down, impacted by the temporary increase in SG&A expenses in the US caused by the reversal of allowance for doubtful accounts recorded in Q1 (Apr-Jun) FY24.

• In the primary label business, OI declined due to cost increases in Russia and South America.

• Further details by region will be provided in the following slides.

  Sales	16,452	17,104	17,648	16,725	19,321	19,223	19,104	17,937	18,737
  YoY	+0.4%	-7.5%	-5.3%	+10.4%	+17.4%	+12.4%	+8.2%	+7.2%	-3.0%
  OI	2,169	2,346	2,490	1,238	2,586	2,303	2,405	1,183	1,629
  YoY	2.4x	+11.2%	-5.6%	-14.3%	+19.2%	-1.8%	-3.4%	-4.4%	-37.0%

  Quarterly Sales and Operating Income

  Sales (LHS)

  OI (RHS)

  30,000

  25,000

  20,000

  15,000

  10,000

  5,000

  0

  Q1

  Q2

  Q3

  Q4

  Q1

  Q2

  Q3

  Q4

  FY23

  FY24

  （Millions of JPY）

  3,000

  2,500

  2,000

  1,500

  1,000

  500

  0

  Q1

  FY25

  9

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  Apr-Jun

  Auto-ID Solutions Business (Overseas)

  Quarterly trend (Overseas)

  	FY24	FY25	Change
  				YoY	In local currencies
  Total Sales	4,568	4,264	-303	-6.7%	+1.8%
  Operting Income	318	164	-153	-48.4%	-43.7%

  Sales	4,353	4,412	4,293	4,274	4,568	4,294	4,503	4,768	4,264
  YoY	+3.3%	-6.0%	-7.2%	+14.6%	+4.9%	-2.7%	+4.9%	+11.5%	-6.7%
  OI	197	80	352	-92	318	54	-24	28	164
  YoY	+17.0%	-75.5%	-13.1%	-	+61.3%	-32.9%	-	-	-48.4%

  Base Business — The Americas

  （Millions of JPY）

  * Includes impact of IAS 29, Financial Reporting in Hyperinflationary Economies ("Hyperinflation Accounting") in Argentina.

  Quarterly Sales and Operating Income

  6,000

  Sales (LHS)

  OI (RHS)

  600

  400

  Sales

  • In the US, sales decreased due to the negative impact of foreign exchange rates, despite high-value projects for print and apply systems and increased demand for consumables.

  • Sales decreased in South America due to the negative impact of foreign exchange rates, despite strong demand amid inflation.

  4,000

  200

  2,000

  0

  0

  -200

  Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

  FY23 FY24 FY25

  Operating Income

  • OI decreased, impacted by a temporary increase in SG&A expenses caused by reversal of allowance for doubtful accounts recorded in the US in Q1(Apr-Jun) FY24.

  • OI decreased in South America due to increased personnel and other costs amid inflation.

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  Apr-Jun

  Auto-ID Solutions Business (Overseas)

  Regional Performance of the Base Business ― The Americas

• In the Americas, both sales and OI decreased.

• Sales drivers included:

  • A large project for print-and-apply systems in the logistics vertical in the US.

  • Increase in consumables demand ahead of the imposition of ‘reciprocal’ tariffs by the

    US.

• However, overall sales in the Americas decreased due to:

  • A negative impact of exchange rates.

• In South America, business was brisk despite the high inflation, but sales were down, impacted by unfavorable foreign exchange rates.

• OI dropped overall, due to:

  • A temporary increase in SG&A expenses caused by the reversal of allowance for doubtful accounts recorded in the US in Q1 (Apr-Jun) FY24.

  • Increased costs due to rising labor and personnel costs caused by high inflation in South America.

    	FY24	FY25	Change
    				YoY	In local currencies
    Total Sales	3,221	3,129	-92	-2.9%	-0.7%
    Operting Income	105	109	+4	+4.3%	+6.0%

    Sales	2,991	2,714	3,008	2,999	3,221	3,028	3,106	3,121	3,129
    YoY	-6.4%	-16.9%	-4.5%	+7.5%	+7.7%	+11.6%	+3.3%	+4.1%	-2.9%
    OI	487	108	219	78	105	144	73	85	109
    YoY	2.9x	-47.1%	+11.2%	-60.9%	-78.3%	+33.8%	-66.2%	+9.0%	+4.3%

    Base Business — Europe

    （Millions of JPY）

    Sales

    • In Europe, sales decreased due to sluggish investments caused by economic downturns.

    • The overall health care vertical remained strong.

    Quarterly Sales and Operating Income

    Sales (LHS)

    OI (RHS)

    3,400

    600

    3,200

    400

    3,000

    2,800

    200

    2,600

    2,400

    0

    Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

    FY23 FY24

    FY25

    Operating Income

    • OI remained flat, as the decrease in sales mentioned above was offset by well-controlled SG&A expenses and improved sales mix.

    11

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    Apr-Jun

    Auto-ID Solutions Business (Overseas)

    Regional Performance of the Base Business － Europe

• Sales decreased while OI remained flat.

• Overall investment appetite in Europe was subdued due to the economic downturns, which unfavorably affected the sales in key verticals such as retail and food & beverage.

• The overall health care vertical was strong, with robust demand for PJM RFID labels.

• OI was flat, as the impact of decreased sales was offset by:

  • Well-controlled SG&A.

  • Favorable sales mix due to the strong performance in the health care vertical, where

    margins are high.

    	FY24	FY25	Change
    				YoY	In local currencies
    Total Sales	5,564	5,234	-330	-5.9%	-0.1%
    Operting Income	853	843	-9	-1.1%	+4.7%

    Sales	4,431	4,679	5,120	4,790	5,564	5,483	5,718	5,251	5,234
    YoY	+4.8%	-3.9%	+8.2%	+17.3%	+25.6%	+17.2%	+11.7%	+9.6%	-5.9%
    OI	318	490	769	537	853	854	1,151	671	843
    YoY	-10.0%	-19.3%	+4.9%	2.0x	2.7x	+74.2%	+49.7%	+25.0%	-1.1%

    Base Business — Asia/Oceania

    （Millions of JPY）

    Sales (LHS)

    Quarterly Sales and Operating Income

    OI (RHS)

    8,000 1,500

    6,000

    1,000

    Sales

    • Sales were lower as brisk business in the manufacturing vertical in Thailand and high-value retail projects in the Philippines were not enough to offset the drops in the demand for products of Argox, our Taiwanese subsidiary, caused by excess inventory in its indirect sales channels

    • In Australia, sales continued to be robust, driven by high-volume RFID project.

    4,000

    500

    2,000

    0

    0

    Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

    FY23 FY24 FY25

    Operating Income

    • Although printer exports to sales companies in the Americas remained strong, improving the OI of our factories, overall OI was flat due to decreased sales at Argox in Taiwan, as mentioned above.

    • OI expanded due to the high-volume project in Australia mentioned above.

    12

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    Apr-Jun

    Auto-ID Solutions Business (Overseas)

    Regional Performance in Base Business — Asia and Oceania

• Sales decreased while OI remained flat.

• Sales drivers included:

  • Strong performance in the manufacturing vertical in Thailand and a large retail RFID project in the Philippines.

  • Continued strong performance in large RFID projects at the Australian sales subsidiary.

• However, overall sales decreased due to:

  • Argox in Taiwan was affected by a decrease in demand due to overstocking in its

    indirect sales channels.

• OI remained flat overall. Strong exports of printers to the American sales subsidiaries improved OI at our Malaysian factories. And the large RFID projects at the Australian sales subsidiary also pushed up the OI. However, these increases were offset by a decline in Argox’s sales in Taiwan, which pushed OI down to the same level as the previous year.

  		FY24	FY25	Change
  					YoY	In local currencies
  The Americas Achernar (Argetina) Plakorar (Brazil)	Total Sales	960	922	-38	-4.0%	+21.5%
  	Operating Income	255	135	-120	-47.0%	-29.2%
  Europe Okil/ X-pack (Russian)	Total Sales	4,904	5,089	+184	+3.8%	-0.9%
  	Operating Income	1,028	413	-614	-59.8%	-61.6%
  Asia/Oceania Hirich (Vietnam)	Total Sales	101	97	-3	-3.5%	+6.7%
  	Operating Income	17	12	-5	-29.4%	-22.0%
  Total Sales	Total Sales	5,966	6,109	+143	+2.4%	+2.9%
  	Operating Income	1,301	561	-740	-56.9%	-54.7%

  Primary Labels Business

  （Millions of JPY）

  * Includes the impact of IAS 29, Financial Reporting in Hyperinflationary Economies ("Hyperinflation Accounting") in Argentina.

  Quarterly Sales and Operating Income

  Sales (LHS) OI (RHS)

  8,000

  2,000

  Sales

  • Sales in Europe increased due to favorable foreign exchange rates, despite weaker demand in Russia resulting from changes in tax regulations.

  • Sales in the Americas decreased due to the negative impact of foreign exchange rates, despite solid demand amid inflation.

  6,000

  1,500

  4,000

  1,000

  2,000

  500

  0

  0

  Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

  FY23 FY24 FY25

  Sales

  4,676

  5,297

  5,226

  4,661

  5,966

  6,416

  5,775

  4,796

  6,109

  YoY

  Operating Income

  • In Europe, OI decreased due to increased costs resulting from production capacity expansion and rising raw material prices.

  • OI in the Americas decreased due to higher personnel and other inflation-driven cost increases.

  -1.7%

  -6.2%

  -14.6%

  +2.5% +27.6% +21.1% +10.5%

  +2.9%

  +2.4%

  OI

  1,118

  1,509

  1,136

  775

  1,301

  1,290

  1,198

  409

  561

  YoY

  4.3x +55.2%

  -18.9%

  -29.5% +16.4%

  -14.5%

  +5.4%

  -47.2%

  -56.9%

  13

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  Apr-Jun

  Auto-ID Solutions Business (Overseas)

  Performance of the Primary Label Business (Overseas)

• Sales increased while OI declined.

• In Europe, sales in Russia increased due to favorable foreign exchange rates from the appreciation of the ruble and the depreciation of the yen, despite the impact of lower demand due to changes in the tax regulations in Russia.

• In South America, sales decreased due to the depreciation of local currencies against the yen, although demand was firm even in an inflationary environment.

• OI declined due to:

  • The increase in labor and other costs due to the expansion of production capacity in Russia, as well as the rise in raw material costs.

  • The increase in labor and other inflation-driven costs in South America.

    	FY24	FY25	Change
    				YoY
    Mechatronics Sales Consumables Sales	6,847 11,505	7,180 11,911	+332 +405	+4.9% +3.5%
    Total Sales	18,353	19,091	+738	+4.0%
    Gross Profit Gross Profit %	8,127 44.3%	8,935 46.8%	+808 +2.5pt	+9.9% -
    Operating Income	186	864	+678	4.6x
    Operating Income %	1.0%	4.5%	+3.5pt	-

    Overview

    （Millions of JPY）

    Sales

    • Mechatronics: Sales increased, driven by steady demand resulting from investment in efficiency improvement in the manufacturing vertical. Demand related to the revised logistics efficiency law also contributed.

    • Consumables: Sales increased due

    to firm overall demand.

    Mechatronics: Hardware (e.g., printers, automatic labelers, scanners, hand labelers), software and maintenance services. Consumables: Products such as variable information labels, RFID tags, primary labels (product labels) and ribbons.

    Major Gains/Losses in OI

    • Positive factors

    • Negative factors

    +588

    -129

    -87

    +306

    ・HR capital investments

    ・Operating expense

    ・R&D costs

    Operating Income

    • OI increased due to the abovementioned increase in sales, an improved product mix, increased printer exports and successful control of SG&A expenses.

    ・GP on exports

    ・Product mix

    FY24

    Net Sales

    Gross Profit, etc.

    Excludes impact of FX

    SG&A

    FX Impact

    FY25

    14

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    Apr-Jun

    Auto-ID Solutions Business (Japan)

    186

• Both sales and OI increased.

• In mechatronics business:

  • Sales grew, driven by the demand for efficiency improvements in the manufacturing vertical.

  • Sales were also boosted by ongoing needs related to compliance with the revised logistics efficiency law.

• In consumables business:

  • Sales increased due to solid demand overall.

• OI increased as a result of:

  • Sales growth mentioned above,

  • Improved product mix,

  • Increased printer exports, and

  • Well-controlled SG&A.

    Sales	17,536	18,692	19,980	19,305	18,353	19,191	21,016	20,658	19,091
    YoY	+1.4%	+2.2%	+3.8%	-0.2%	+4.7%	+2.7%	+5.2%	+7.0%	+4.0%
    OI	-210	106	927	901	186	773	1,824	1,123	864
    YoY	-	-88.7%	-16.4%	+51.5%	-	7.3x	+96.8%	+24.6%	4.6x

    Quarterly Sales and Operating Income

    Sales (LHS)

    OI (RHS)

    25,000

    20,000

    15,000

    10,000

    5,000

    0

    （Millions of JPY）

    2,000

    1,500

    1,000

    500

    0

    -500

    Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

    FY23

    FY24

    Q1

    FY25

    15

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    Apr-Jun

    Auto-ID Solutions Business (Japan)

    Quarterly trend (Japan)

    ,815

    2,

    033

    Sales by Vertical 1/2 *1

    • ：Mechatronics ■：Consumables (% indicates YoY change)

    (Millions of JPY)

    Manufacturing *2

    8,000

    +8.3%

    Logistics *3

    8,000

    Retail

    8,000

    6,000

    5,295

    -1.8%

    5,202

    5,632

    6,000

    +6.5%

    4,410

    6,000

    4,000

    4,000

    3,998

    +3.6%

    4,141

    4,000

    Net Sales

    3,559

    3,621

    3,721

    3,072

    2,000

    2,000

    2,884

    2,936

    2,000

    1,736

    0

    1,580

    1,911

    0

    1,113

    FY23

    1,205

    FY24

    1,338

    FY25

    0

    FY23

    FY24

    FY25

    2,366

    1

    689

    FY23

    +17.4%

    2,777

    1

    962

    FY24

    +5.8%

    2,938

    905

    FY25

    Production of advanced semiconductors remained strong due to elevated demand for applications such as generative AI. Investment in efficiency improvement continued as severe labor shortages drove demands for digital transformation.

    Consumables and mechatronics sales increased in almost all industries, with a high-value project for print and apply systems in the electronic component industry and another one for automotive industry driving the latter.

    Due to the increased flow of goods driven by brisk ecommerce and inbound tourism, overall demand was strong. In addition to labor shortages, the revised logistics efficiency law limiting truck drivers’ overtime continued to drive demand.

    Consumables sales increased across all industries as we captured the demand that continued to rise on higher freight volumes. As for mechatronics, sales increased driven by the effects of revised logistics efficiency law, continued demand from the inbound tourism, and a high-value project in the ecommerce industry.

    In-store investments at supermarkets for digital transformation and efficiency gains continued to be strong. Investments in ecommerce are robust as well.

    Consumables sales rose, as robust inbound tourism boosted the sales of merchandise. Mechatronics sales declined; the sale increase from the brisk merchandise sales was not enough to cover the lack of one-off high-value e-commerce project in the same period last year.

    * 1 Since Q1 FY24, service sales are partially included in the mechatronics business. Graphs have been adjusted retrospectively.

    * 2 Since Q1 FY25, sales from the manufacturing and public verticals have been combined. Graphs have been adjusted retrospectively.

    * 3 Since Q1 FY23, some industries have been reclassified from the public vertical to the logistics vertical. Graphs have been adjusted retrospectively.

    16

    Copyright © SATO Corporation. All rights reserved.

    Apr-Jun

    Auto-ID Solutions Business (Japan)

    SATO

• Manufacturing:

  • Continuing from FY24, sales increased due to strong production of advanced semiconductors, driven by the growing demand for generative AI.

  • This trend led to higher sales not only in the electronic components industry but also in related industries such as chemicals.

  • In addition, the automotive industry performed well, boosting consumables sales and resulting in higher consumables sales in almost all industries.

  • Mechatronics sales were up, driven by high-value projects ― one for print and apply

    systems in the electronic component industry and another one for automotive industry.

  • The number of sales opportunities in manufacturing logistics are also continuing to

    grow.

  • From this quarter, results for manufacturing and public verticals are combined.

• Logistics:

  • Sales in logistics remained strong, driven by increased freight volumes and the demand

    created by the revised logistics efficiency law (capping truck drivers’ overtime).

  • Sales of printers used in tourist luggage delivery services also continued to grow, driven by brisk inbound tourism.

• Retail:

  • Continuing from FY24, consumables sales remained strong, thanks to a recovery in the demand in the retail industry driven partially by the robust inbound tourism.

  • On the other hand, mechatronics sales declined as large projects related to strong merchandise sales were not enough to compensate for the absence of the last year’s large e-commerce-related project.

  • However, investment appetite remains strong, especially among supermarkets, where labor shortages and the needs for operational standardization continue to drive demand.

    +4.7% -1.6% 2,166 2,268 2,233
    1,	516	1,	624	1,	629
    	650		644		604

    Sales by Vertical 2/2 *1

    • ：Mechatronics ■：Consumables (% indicates YoY change)

    (Millions of JPY)

    Health Care

    3,000

    Food & Beverage

    3,000

    2,000

    2,000

    1,852

    +11.4%

    2,062

    -7.9%

    1,899

    1,484

    1,000

    1,000

    1

    1,427

    0

    0

    FY23 FY24 FY25

    378

    FY23

    FY24

    FY25

    Investments in RFID to improve administrative efficiency and

    combat labor shortages continued. Demand is strong overall.

    Robust demand for automation and RFID solutions continued, as higher raw material and logistics costs and severe labor shortages keep affecting company operations.

    Consumables sales remained flat despite the absence of one-off high-value projects in the same quarter previous year, as the higher demand for RFID compensated it. Mechatronics sales decreased, impacted by the lack of high-value automation projects in the medical equipment industry.

    Consumables sales decreased due to declines in sales of specific products in food manufacturing industry.

    In mechatronics, sales were boosted by high-value projects in the food service industry, but the increase wasn’t enough to offset the lack of a high-value project in the same period last year.

    * 1 Since Q1 FY24, service sales are partially included in the mechatronics business. Graphs have been adjusted retrospectively.

    17

    Copyright © SATO Corporation. All rights reserved.

    Apr-Jun

    Auto-ID Solutions Business (Japan)

    471

• Health care:

  • Consumable sales remained flat, as RFID solution projects compensated for the lack of

    the previous year’s high-value projects.

  • Mechatronics sales declined, as the increased sales of printers in the medical equipment and hospital industries driven by demand for greater efficiency, fell short of offsetting the impact of the previous year’s high-value projects for print and apply systems.

• Food & Beverage

  • Although price revisions had a favorable impact, consumables sales declined, affected by the lower sales of specific products in the food manufacturing industry.

  • Mechatronics sales declined, as the high-value projects for print and apply systems

    were not enough to offset the impact of the previous year’s large traceability project.

• Overall:

  • Though quarterly results are impacted by the timing of large projects, overall demand remained strong across all industries.

    RFID and Automation Sales

    RFID and automation sales continued to be strong on the back of the robust demand related to digital transformation and labor shortages.

    Despite the robust demand in manufacturing, RFID sales dropped, due to unfavorable comparison to a year ago period when we had one-off high-value projects in public and other verticals.

    Automation sales increased, driven by high-value e-commerce projects in logistics.

    (Millions of JPY)

    RFID

    Q1 FY25: -13.4% YoY

    Consumables

    Automation*

    Q1 FY25: +2.3% YoY

    1,500

    Mechatronics

    1,500

    1,000

    1,000

    500

    500

    0

    0

    Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

    Q1

    FY25

    Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

    FY23

    FY24

    FY23

    FY24

    Q1

    FY25

    * Automation includes hardware and software sales (but not consumables, service and maintenance sales).

    18

    Copyright © SATO Corporation. All rights reserved.

    Apr-Jun

    Auto-ID Solutions Business (Japan)

    Quarterly Sales Trends of RFID and Automation Solutions (Japan)

  • Demand remains robust.

  • RFID sales declined, as the strong demand for RFID solutions in manufacturing fell short of offsetting the lack of the previous year’s high-value consumables project in public and other verticals.

  • Automation solutions sales increased, driven by a high-value e-commerce project in logistics.

    RFID and Automation Sales

    RFID and automation solutions sales continued to be strong, driven by labor shortages and robust demand for digital transformation.

    RFID sales were up year on year, thanks to high-value projects in manufacturing.

    Automation sales rose despite economic downturns in Europe, helped by large logistics projects in the US.

    (Millions of JPY)

    1,500

    Mechatronics

    RFID

    Q1 FY25: +33.4% YoY

    Consumables

    Automation*

    Q1 FY25: +25.4% YoY

    1,000

    1,000

    500

    500

    0

    0

    Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

    Q1

    FY25

    Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

    FY23

    FY24

    FY23

    * Automation only includes hardware sales.

    FY24

    Q1

    FY25

    19

    Copyright © SATO Corporation. All rights reserved.

    Apr-Jun

    Auto-ID Solutions Business (Overseas)

    Quarterly Sales Trends of RFID and Automation Solutions (Overseas)

  • Demand remains strong, driven by labor shortages and digital transformation efforts.

  • RFID solutions sales increased, driven by the ongoing high-value projects in manufacturing.

  • Automation solutions sales grew, boosted by large logistics projects in the US, despite some impact from economic slowdowns in Europe.

    	Apr-Sep		Oct-Mar		Full Year
    	Targets	YoY	Targets	YoY	Targets	YoY
    Net Sales	78,600	+3.3%	82,400	+4.7%	161,000	+4.0%
    Operating Income	5,500	-4.8%	7,000	+6.7%	12,500	+1.3%
    Ordinary Income	5,300	+8.5%	6,800	+8.6%	12,100	+8.6%
    Profit attributable to owners of parent	3,300	+9.0%	4,400	+6.7%	7,400	+7.7%

    FY25 Forecasts

    (Millions of JPY)

    ←FY24

    * EBITDA = Operating Income + Depreciation + Amortization

    FX assumption for FY25: JPY 140/USD, JPY 160/EUR

    Average FX for Q1 FY25: JPY 144.59/USD, JPY 163.80/EUR Average FX for FY24: JPY 152.62/USD, JPY 163.87/EUR

    20

    Copyright © SATO Corporation. All rights reserved.

    Auto-ID Solutions Business (Consolidated)

    +1.8%

    18,200

• No change has been made to the plan.

• The Japan business has been performing well through Q1 (Apr-Jun); we aim to achieve the plan by executing measures we have devised while remaining focused on customer needs.

• While ‘reciprocal’ tariffs between the US and other countries may have a direct impact on our sales and OI in the form of printer price adjustments at our US sales subsidiary, we expect the overall impact on consolidated results to be limited, as indirect effects in other regions are likely to absorb the impact.

• We will disclose promptly should we determine any material impact of the tariffs on our business performance likely.

  21

  Copyright © SATO Corporation. All rights reserved.

  Actions toward realizing optimal cost of capital and enhancing shareholder valueESG FocusApr- Jun 2025 Results

  Reassessed social issues our business could help solve and identified areas of priority, clarifying the direction we create value toward.

  Background

  • Social issues, such as responsible production and consumption, resource depletion, population decline, labor shortages, and the growing importance of governance, are becoming increasingly complex and critical.

  • This calls for a reassessment from a global perspective.

    Purpose

  • To enable us to enhance corporate value sustainably through giving every ‘thing’ its own ID for seamless connection and being essential for solving social issues.

  • To provide basis for decision-making in corporate management and capital allocation.

  Over a period of more than six months, the management and external experts held more than 11 discussions. Material issues were identified based on input from internal and external stakeholders.

  22

  Copyright © SATO Corporation. All rights reserved.

  Optimization of Materiality (Key ESG Issues)

  Materiality Overview Defined in 2019

  Optimization of Materiality (Key ESG Issues)

• These are the social issues we consider important as a company and the initiatives we are taking to address them.

• We first defined our material issues in 2019.

• Over the past five years since then, both society and the business environment have undergone significant changes.

• For example, issues such as responsible production and consumption, resource depletion, population decline, labor shortages, and growing importance of corporate governance have become increasingly complex and critical.

• Meanwhile, we have also experienced major changes within SATO. In addition to the appointment of the new CEO, our frontline teams have enhanced their proposal capabilities while the company’s technical expertise has been also grown, which, combined, enable us to deliver more sophisticated solution proposals.

• In the light of these internal and external changes, we recognized the need to reassess our focus — both in terms of the social issues we address and the areas where we can deliver value.

• We held repeated discussions within management and listened carefully to feedback from both internal and external stakeholders to redefine our priorities.

  (1) Addressing social challenges through our business

  (Society)

  (3) Contributing

  to the circular economy (Environment)

  (8) Sustainable supplier management

  (2) Driving social and corporate value through innovation (6) Improving

  employee engagement

  Overview of Materiality Structure

  Materiality Map

  Realization of sustainability management

  Creating shared value (CSV) (1) (2) (3)      

  Addressing social issues through our core business

  High

  Very High

  ESG foundations for core business

  • Each material issue is overseen by an executive and tracked with a KPI, with progress reviewed regularly.

  • Progress has been made in existing and new businesses with CSV focus.

  Copyright © SATO Corporation. All rights reserved.

  23

  *CSV (Creating Shared Value): A management concept aimed at simultaneously addressing social issues and achieving corporate growth.

  Redefine priorities for value creation as the basis for medium- to long-term management/business decisions.

  New Materiality Optimized Based on CSV*

  Governance (8) (9) (10) (11)

  The supporting foundation

  (9) Corporate governance (10) Compliance (11) Risk management

Importance to stakeholders (Impact of SATO’s activities on environment and society)

Very High

• We believe that solving social issues through our core business is directly linked to enhancing

  the company’s corporate value.

• In other words, we aim to address social issues while driving business growth.

• With this at the heart of our management, we restructured our materiality framework by combining CSV (Creating Shared Value) and ESG.

• Each component has been assigned a distinct and clear role.

• While CSV is sometimes regarded as a component of ESG — and we have received similar feedback from investors — we have deliberately positioned CSV as a standalone concept at the top of our framework. This reflects its central role in our value creation strategy.

• CSV focuses on leveraging our unique strengths to tackle social issues through our core operations.

• ESG, on the other hand, serves as the “foundation” that supports our corporate credibility

  and long-term sustainability.

• We have carefully organized key topics, including the environment, human rights, and governance, to ensure comprehensive risk management and transparent communication with stakeholders.

• Furthermore, each material issue is assigned to a responsible executive, with KPIs and targets. We have also set up a system for regular progress monitoring.

• Our materiality framework is not just a static list. It serves as a basis for medium-to long-term management decisions and capital allocation and is actively integrated into our business operations.

  ESG FocusApr- Jun 2025 ResultsActions toward realizing optimal cost of capital and enhancing shareholder value

  24

  Copyright © SATO Corporation. All rights reserved.

  ROIC has consistently exceeded WACC.

  However, there is still room to enhance corporate value.

  WACC and ROIC

  WACC=7% (including premium)

  • Cost of equity is calculated using CAPM

  • Our hurdle rates vary by geography and currency to account for differences in risk. (e.g., JPY: 7%, USD: 8%, EUR: 7%)

  WACC

  ROIC

  15%

  10.0%

  10%

  8.5%

  9.3%

  8.8%

  7.7%

  5% 7.5%

  5.8% 5.8%

  0%

  FY19 FY20 FY21 FY22 FY23 FY24 FY25

  FY30

  25

  Copyright © SATO Corporation. All rights reserved.

  Current Status & Evaluation

  WACC Components

  • Cost of equity: 7.2%

  • Cost of debt: 1.5%

  • Premium: 1%

• First, let us explain the current status regarding capital cost and capital efficiency.

• Our ROIC has consistently remained above our WACC.

• We have set 7% as a benchmark for our WACC. Here, we also provide its breakdown.

• Despite maintaining this level, our P/B ratio remains at approximately 1.0, indicating a gap between our market value and book value.

• In the next slide, we will explain our perspective on the factors contributing to this valuation

  gap and the actions we are taking to address them.

  Although ROIC exceeds WACC, the P/B ratio remains at around 1.

  We believe this valuation gap reflects concerns over the company’s sustained growth.

  P/B ratio Change

  (x)

  2.5

  Operating income by business segment

  Japan Overseas (Base) Overseas (Primary)

  IDP Elimination

  Millions of yen

  15,000

  2.0

  12,341 12,500

  10,000

  8,841

  10,383

  4,199 4,300

  1.5

  540

  5,847

  6,404

  1,225

  4,279 4,000

  1.0

  5,000

  1,927

  2,752

  3,374

  3,702

  3,221

  2,637

  3,906 4,200

  0.5

  0

  Elimination,

  89

  IDP, -148

  2,372

  Elimination,

  53

  -907

  1,724

  415

  -43

  0.0

  FY20 FY21 FY22 FY23 FY24 FY25 FY26 Plan

  Plan （tentative）

  Previous MTMP

  26

  Copyright © SATO Corporation. All rights reserved.

  Current Status & Evaluation

  Current MTMP

4,

Current MTMP

-5,000

• As explained earlier, our ROIC exceeds our WACC, which theoretically places us in a position where a P/B ratio above 1.0 would be expected.

• However, in practice, our P/B ratio continues to hover around 1.0, which we interpret as a valuation gap between SATO and the capital markets.

• We believe this gap stems from concerns over our ability to achieve sustainable, long-term growth.

• For example, high volatility arising from certain regions and perceived unclearness surrounding our future growth narrative may be making it difficult for the market to form a clear assessment.

• With this understanding, we are steadily implementing structural reforms and initiatives to improve ROIC, aiming for sustainable growth.

• The next slide outlines the specific actions we are taking.

  Initiatives to Improve P/B Ratio

  P/E ratio

• Improve profit margin of the Japan business

• Make investment decisions based on risk-based hurdle rates

Fixed

assets

Sales/profit growth

P/B ratio = ROE × P/E ratio

ROIC is used in place of ROE and broken down into a tree structure, with targeted initiatives

developed for each of its component.

FY25 plan figures; FY24 results in parentheses

               MTMP initiatives（FY24-28）          

• Capture demand in key verticals

• Revise selling prices in timely fashion

• Launch new printers

• Shift to profit-based evaluation for sales

  * ROIC, which indicates overall capital efficiency, is set as a KPI as a substitute for ROE.

  • Use business assets effectively

  • Review profitability & risks of ongoing investments

  • Create M&A synergies

  • Build global information platform for corporate management

  • Raise utilization rate of patents owned by the company

  27

  Copyright © SATO Corporation. All rights reserved.

  Initiatives to Improve P/B Ratio

• To improve our P/B ratio, we identify and address challenges by breaking down the key components of ROIC.

• Starting with the numerator — profitability — in the P/B ratio formula, we have launched several initiatives, including a review of our revenue structure and targeted cost optimization.

• For the denominator — capital efficiency — in the formula, we focus on priorities such as optimizing working capital management and improving investment decision-making processes.

• In FY24, we accelerated efforts across these areas. In FY25, we aim to enhance the effectiveness of our initiatives while clarifying our priorities further.

• Overall, this approach breaks down challenges into individual components and addresses them in a systematic manner.

• From here, we will walk you through the progress made and the key initiatives we are prioritizing — starting with operating income, followed by capital efficiency.

  FY25 Strengthen solution sales and enhance capabilities for consumables production FY24 • Created new solutions through cross-functional collaboration to build stronger business relationships with global key accounts

  FY25 scale best practices evaluation system FY24 • Focused on selected key verticals and vertical-specific priority initiatives costs

  FY25 Streamline the value chain end to end and reduce redundant/inefficient indirect costs across business units FY24 improving visibility into product-level profitability and issues

  • Allocate resources to deepen business relationships with global key accounts

  • Built systems to replicate successful proposals across industries

  • Strengthen collaboration with key customers in each industry and region and

  • Increase the focus on profitability through a phased shift to OI-based

  • Secured gross margin through implementing planned price increases to reflect higher material

  • Launched a project to improve SG&A control accuracy

  • Shifted to product-segment-based business units with integrated value-chain management,

  • Product roadmap largely completed; prepared to optimize development resources

  Building a solid business foundation for stable profit growth.

  Japan

  Gross margin improvement

  ・Capture demand in key verticals

  ・Revise selling prices in timely fashion

  ・Launch new printers

  ・Shift to profit-based evaluation for sales

  SG&A expenses

  ・Comprehensively overhaul value chain to improve productivity

  ・Control costs appropriately

  28

  Copyright © SATO Corporation. All rights reserved.

  Progress on initiatives to Improve P/B Ratio

  ・Develop and scale solutions to drive sales efficiency for profitable growth

  ・Launch new printers

• First, we will explain our initiatives aimed at improving operating income, which is the numerator in ROIC formula.

• In our overseas business, we are at this critical phase where we need to focus not only on profitability but also on steady sales growth.

• As part of the efforts, we are working to deepen business relationships with our globally operating key customers and to enhance solution sales. When we say solutions, we refer not just to packaged solutions, but to the company structure that enables tailored proposals based on customer needs.

• We are also strengthening our production capabilities for consumables to drive recurring sales.

• In Japan, we focus on working with leading customers in key industries and regions. By building a track record of working successfully with companies that have strong influence within their industries, we aim to achieve high profitability while also developing the ability to scale our solutions across a broader customer base.

• In addition, CEO-led strategic projects are now transitioning into the commercialization phase. These projects are aimed at developing new businesses that will create future pillars of our revenue by focusing on areas with strong growth potential and market viability. With a focus on agility and strong execution, these projects are placed under the direct supervision of top management.

• As for the company setup, we adopted a divisional structure organized by product segment in FY24. This structure places planning, development, manufacturing, and sales promotion for each product segment under one division. By organizing the value chain by product segment, we have enabled greater visibility into our profit structure.

• Furthermore, in FY25, we established the role of Global Operating Officer who oversees all these [product and geographical] segments at the headquarters. This structure helps enable company-wide optimal decision-making that goes beyond optimization of any single segment to benefit the whole company, by avoiding redundant investments and optimizing resource allocation.

  Progress on P/B Ratio Improvement Initiatives

  Fixed assets

Improving invested capital turnover ratio across functions to enhance capital efficiency.

Property, plant & equipment

• Implement PSI* for printers to ensure stable supply and optimize inventory

• Review vendor-managed inventory agreements and replenishment operations in Japan

  • Built a PSI framework for the printer business to ensure stable supply and optimize inventory

  • Visualized consumable inventory in Japan that is slow-moving or held at third-party warehouses

• Strengthen financial governance at overseas subsidiaries

• Continue monitoring receivables and capital allocation

  • Started using factoring in some regions to speed up collections and lower risk

  • Started monitoring accounts receivable status across all overseas locations

  Intangible assets

  P/E ratio

  • Firmly implement and achieve MTMP targets

  • Improve IR communications and investor engagement

  *PSI (Production, Sales, Inventory): Planning and management of production, sales, and inventory 29

  Copyright © SATO Corporation. All rights reserved.

  Progress on P/B Ratio Improvement Initiatives

• In FY24, operating cash flow declined by around 900 million yen, mainly due to increased working capital. While some of its causes are temporary, we recognize the need for the improvement in a medium to long term.

• Inventory, totaling approx. 29 billion yen, is a key contributing factor. We have started taking actions to optimize inventory.

• In FY24, the printer manufacturing and the R&D divisions launched a PSI (Production, Sales, Inventory) improvement project to better the planning and management. In FY25, we aim to optimize PSI across the company, including system operations.

• In Japan, we’re increasing visibility into slow-moving and externally stored consumables inventory. Starting in FY25, we will review customer inventory management agreements and replenishment processes to reduce excess stock while maintaining service levels.

• Although it is difficult to estimate the size of inventory reduction we can achieve at this stage, we will start the efforts by making structural improvements.

• We have introduced invoice factoring in some regions to accelerate receivables collection and reduce credit risk, with possible plans to expand.

• We had been tracking receivables in each region from before, but since FY24, we started intensifying the efforts by improving visibility across all the regions to improve accuracy and control. We will continue with this efforts in FY25.

• For fixed assets, we are developing evaluation metrics and systems to support better investment and

  M&A decisions.

• We have launched an investment management project to implement post-investment reviews and monitoring process on a trial basis.

• To support these initiatives, we integrated our holding and core operating companies in April 2025. We are now working to establish a structure that centralize resources management and governance.

• We also reorganized ourselves into divisions by product category, which provides visibility into internal value chains by product to enable better-informed decision-making on company-wide inventory and fixed asset management or PSI management.

Operating income exceeded the initial plan, but operating cash flow remained flat. We are working to optimize inventory.

Millions of yen

30,000

Finance with agility

・Pursuit of optimal capital structure

Cash

IN

20,000

Financing

556

Approx. 25,000

Increase

10,000

12,563

Operating CF

0

Cash

OUT

-10,000

Shareholder return

Regular Investment

Growth

i nt

nvestme

・Stable and progressive dividends

・Timely share buybacks

・Expand capacity to provide consumables and RFIDs Approx. 20,000

・Conduct M&As and capital investments to advance tagging technology

Maintain

Invest

-20,000

with agility

-30,000

Restore profitability

Invest in growth

FY23

FY24

FY25

FY26

FY27

FY28

FY30

30

Copyright © SATO Corporation. All rights reserved.

Capital Allocation

-9,000

-9,022

Capital Allocation

• We are working to improve ROIC by strengthening both our profit structure and capital efficiency.

• In FY24, operating income exceeded our medium-term plan, but operating cash flow declined temporarily.

• This was caused by a combination of factors, including higher inventory levels, increased accounts receivable, and lower accounts payable.

• Inventory had the most significant impact. As mentioned earlier, we are currently reviewing

  our inventory planning and operations to drive improvement.

• Based on these results and our ongoing efforts, we are now preparing to update our medium-term management plan.

• The updated plan will also include a clearer capital allocation policy.

• While specific allocation ratios cannot be mentioned at this stage, we are reviewing our medium-term approach from three key perspectives: growth, returns and business foundation enhancement.

• Looking ahead, we will remain focused on enhancing our ability to generate cash flow to increase corporate value in the medium to long term.