Synspective Inc.

In FY2024 (ended December 2024) and FY2025 (ending December 2025), sales to government agencies accounted for approximately 90% of consolidated net sales. If, for any reason, transactions with government agencies cannot continue, or if bidding conditions change, this could have a material impact on business operations and financial results. The company plans to gradually reduce its dependence on specific customers by further acquiring domestic private-sector customers and strengthening acquisition of overseas government and private customers.

While the number of satellite operators is rapidly increasing due to the global expansion of satellite constellation plans, launch opportunities remain tight due to delays in the development of emerging rockets and the loss of supply means resulting from the Russia-Ukraine situation. If commercialization by emerging rocket operators is delayed, launch delays or increased launch costs could occur, potentially affecting the business and results of operations. The company has currently secured launch opportunities for 26 satellites and is considering utilizing multiple rocket operators over the medium to long term.

The SAR satellite market is in its launch phase, requiring continuous upfront investment for early construction of multiple satellite systems and expansion of solutions. The company plans to prioritize revenue growth over profitability for a certain period going forward, and if upfront investment does not yield the expected results due to sudden changes in the business environment or other factors, there is a possibility that the company may not achieve profitability. The company aims to improve profitability by continuing to develop customers and reduce satellite manufacturing costs.

Although operating cash flow turned positive in FY2025 (ending December 2025), negative investing cash flow is expected to continue exceeding positive operating cash flow for a certain period going forward. If the company is unable to secure funds when needed, it may face difficulties in cash management. As of the end of the consolidated fiscal year, the company held cash and deposits of ¥24,542,232 thousand, and based on existing credit lines, contracts with the Ministry of Defense, and subsidy income, the company has determined that there are no material concerns regarding cash flow for at least one year.

The company plans to strengthen its manufacturing capacity to up to 12 satellites per year in the future, but the mass production system is currently still being established. If the construction of the manufacturing system does not progress as expected and the planned number of satellites cannot be launched, this could affect the business and results of operations. The company aims for stable manufacturing through a partnership system utilizing parallel manufacturing at multiple locations.

The 3rd generation commercial satellite is expected to provide a greater number of scenes compared to previous satellites, and the business plan is formulated on the assumption of an increase in the number of scenes provided. If improvements to satellite design capacity and other factors do not materialize as planned, this could directly affect the revenue plan. The company strives to secure the number of scenes through continuous improvement of satellite design and optimization of operations.

The operation of satellites is subject to regulation under the Space Activities Act, the Radio Act, and the Remote Sensing Act, and both international law and domestic laws of various countries are still in the process of being developed. If the company receives an administrative disposition due to changes in laws and regulations or violations of such laws, or if regulations that hinder business development are strengthened, this could have a material impact on business operations and financial results. The company has established a system to comply with relevant laws and regulations, including building an internal management structure, and is also addressing foreign investment regulations by obtaining a radio station license through its wholly owned subsidiary, Synspective Japan Inc.

Since the company's main customers are ministries responsible for national defense functions in various countries, it handles information important to national security, and the impact would be particularly significant if an information security breach were to occur. If an information security breach or violation of laws and regulations occurs, the company may be held liable for damages or subject to criminal penalties, and the loss of social credibility could affect its business and results of operations. The company has taken measures including obtaining ISO/IEC 27001 certification (May 2021) and joining the US Space ISAC (March 2021).

Loans from financial institutions are subject to covenants (financial restriction clauses), and if the company fails to comply with these, it could lose the benefit of term and be required to repay part or all of the loans. The company addresses this through monitoring of business plans by the Board of Directors and management meetings, and by establishing a system requiring prior approval by the Board of Directors for transactions that could potentially violate financial covenants.

The company holds tangible fixed assets such as satellites, manufacturing equipment, and head office facilities, and it is impossible to completely prevent impairment due to changes in the market and competitive environment. If signs of impairment are recognized and an impairment loss is recorded, this could affect results of operations and financial position. When making investments, the company examines business plans, rates of return, risks, and other factors based on internal regulations, and continuously manages the profitability of each asset thereafter.