Summary
The key question for 2Q results is how much of the 1Q gross loss of JPY -4,627M stems from one-off charges. The company attributed it to an impairment of advance payments following the rescheduling of its US mission. Whether costs normalize on a standalone 2Q basis will show the underlying earnings trend. Full-year guidance calls for Project Revenue of JPY 9,000M against Revenue of JPY 3,300M. The timing and size of the Space Strategy Fund subsidy, approved for disbursement in August 2026 and booked as non-operating income, will determine where the recurring loss lands. Investors should also track net assets, which fell to JPY 8,663M at 1Q-end, and cash and deposits of JPY 25,703M, given the financial covenants.
Key Points for Next Quarter
| Key Points & Focus | Implications |
|---|---|
Cost StructureStandalone 2Q Cost of Goods Sold, and the amount and P&L classification of the advance payment impairment | 1Q Cost of Goods Sold rose to JPY 4,795M from JPY 933M a year earlier. A return to normal cost levels in 2Q would support the view that the 1Q loss was a one-off |
Project RevenueStart of subsidy income recognition in non-operating income, led by the Space Strategy Fund | 1Q Project Revenue of JPY 168M matched Revenue, with no subsidy recognized. Full-year guidance implies a JPY 5,700M gap between Project Revenue (JPY 9,000M) and Revenue (JPY 3,300M) (our estimate). The key is when this begins to build |
Financial Position2Q-end net assets and cash balance, and headroom against financial covenants | At 1Q-end, net assets stood at JPY 8,663M and cash and deposits at JPY 25,703M. The covenants require positive net assets and cash and deposits of at least JPY 3B at each quarter-end. Watch the headroom and how the borrowing announced in September is reflected. (Only the loan under the November 10, 2023 agreement, with a JPY 1,189M balance, is tested at each quarter-end) |
RevenueMission 3 development progress and revenue from new contracts such as MAGPIE | 1Q Revenue of JPY 168M represents only 5.1% of the JPY 3,300M full-year guidance (our estimate). We will gauge the pace of recognition against standalone 2Q Revenue of JPY 1,028M a year earlier (our estimate) |
Development ProgressMission 3 PDR/CDR progress and movements in advance payments and long-term advance payments | Lander development spending on long-lead components such as engines is capitalized as advance payments. The company attributes the increase in advance payments and long-term advance payments mainly to development of relay (lunar orbit) satellites for Mission 2.5 and other missions. We also want to track advance payments tied to launch and transportation contracts |
Key Issues from Previous Results (FY3/2027 1Q Results)
1Q Revenue fell to JPY 168M (-85.5%) as the year-earlier contributions from Missions 2 and 5 dropped out. Combined with the advance payment impairment, the operating loss widened to JPY -6,397M. On the positive side, Mission 3 completed vibration and acoustic testing on its structural model, and the company says development is broadly on schedule. Mission 4's business foundation is also firming, backed by the MAGPIE Phase 2 contract (approx. JPY 12B) and the Space Strategy Fund disbursement approval (up to JPY 20B). Full-year guidance was maintained. From 2Q onward, the focus will be on three areas: the underlying loss trend, subsidy recognition, and financial headroom.
1. One-Off Nature of the 1Q Gross Loss and Standalone 2Q Cost Levels
- Previous Quarter: 1Q Cost of Goods Sold was JPY 4,795M (JPY 933M a year earlier), resulting in a gross loss of JPY -4,627M. On May 15, 2026, the company disclosed that it expected to book a JPY 3,688M loss on advance payments in 1Q (translated at the March-end 2026 exchange rate). The charge stems from the US mission rescheduling announced in March 2026, including the integration of the Japanese and US landers.
- This Quarter's Checkpoints: We want to see whether standalone 2Q Cost of Goods Sold shrinks from the 1Q level. At 1Q-end, advance payments were down JPY 2,209M and long-term advance payments down JPY 927M from the prior fiscal year-end. If the impairment amount is disclosed, we will reconcile it against these movements. R&D expenses fell to JPY 434M (JPY 1,236M a year earlier), so we will also check for any reclassification into Cost of Goods Sold.
- Key Metrics: Standalone 2Q Cost of Goods Sold (vs. JPY 4,795M in 1Q); standalone 2Q SG&A (vs. JPY 1,770M in 1Q); comparison with the year-earlier standalone 2Q operating loss of JPY -1,919M (our estimate).
2. Space Strategy Fund Subsidy Recognition and Pace of Recurring Loss Consumption
- Previous Quarter: 1Q non-operating income was JPY 548M, mostly a JPY 530M FX gain. No subsidy income was recognized, so Project Revenue equaled Revenue at JPY 168M.
- This Quarter's Checkpoints: Disbursement under the Space Strategy Fund (Phase 2) was approved on August 7, 2026, for JPY 11,643M. The initial subsidized project period began on April 13, 2026. The company says this fiscal year's receipts of SBIR subsidy income (Mission 3) and Space Strategy Fund subsidies (Mission 4) will be booked as non-operating income in a lump sum in 4Q. Full-year guidance calls for an operating loss of JPY -17,700M and a recurring loss of JPY -13,000M. This implies a net non-operating gain of JPY +4,700M (our estimate).
- Key Metrics: Cumulative 2Q subsidy income and Project Revenue (vs. full-year guidance of JPY 9,000M); recurring loss consumption rate against full-year guidance (48.7% as of 1Q, our estimate); FX gains/losses and interest expense (JPY 484M in 1Q).
3. Net Assets, Cash Balance, and Financial Covenants
- Previous Quarter: At 1Q-end, net assets were JPY 8,663M (JPY 15,173M at the prior fiscal year-end), the Equity Ratio was 20.9%, and cash and deposits stood at JPY 25,703M. Total borrowings, short- and long-term combined, were JPY 29,758M.
- This Quarter's Checkpoints: The loan under the November 10, 2023 agreement (balance JPY 1,189M) requires positive net assets and cash and deposits of at least JPY 3B at each quarter-end. The 2Q-end balances are therefore a key focus. Applying the full-year net loss guidance of JPY -13,000M mechanically implies year-end net assets of JPY 2,173M (our estimate, excluding new share issuance, foreign currency translation adjustments, and other changes). We also want to see whether the company outlines its capital policy.
- Key Metrics: 2Q-end net assets, Equity Ratio, and cash and deposits (1Q-end: JPY 8,663M/20.9%/JPY 25,703M); changes in borrowings.
4. Revenue Build and Contribution from New Contracts
- Previous Quarter: 1Q revenue was limited to JPY 168M, consisting solely of payload revenue from Mission 3 development progress. According to the company, the revenue impact of the CP-12 contract termination is already reflected in full-year guidance.
- This Quarter's Checkpoints: Following the payload transportation services contract with JALUX in 1Q and the MAGPIE Phase 2 contract in July, we want to see whether revenue recognition begins from 2Q. Contract liabilities stood at JPY 760M at 1Q-end and serve as a proxy for order accumulation.
- Key Metrics: Cumulative 2Q Revenue progress against full-year guidance of JPY 3,300M (5.1% as of 1Q, our estimate); comparison with year-earlier cumulative 2Q Revenue of JPY 2,193M; contract liabilities balance.
5. Mission 3 and 4 Development Milestones and Investment Progress
- Previous Quarter: Mission 3 completed vibration and acoustic testing on its structural model. After PDR and CDR, flight model manufacturing is scheduled to begin around winter. On July 29, the company signed an H3 launch contract with Mitsubishi Heavy Industries. Advance payments and long-term advance payments totaled JPY 6,370M at 1Q-end (down JPY 3,137M from the prior fiscal year-end).
- This Quarter's Checkpoints: We want to confirm the status and timing of PDR and CDR. We will also look for more concrete plans for Mission 2.5 (as early as 2027) and Starship-based transportation services. The start of flight model manufacturing is a checkpoint for 3Q results onward.
- Key Metrics: Progress on development milestones in the earnings presentation; balances of advance payments and long-term advance payments (1Q-end: JPY 1,782M/JPY 4,587M).
Key Timely Disclosures During the Period
- 2026/09/17Launch Contract with Argo Space for Mission 2.5 - This firms up the plan to place one of the company's lunar orbit satellites into lunar orbit as early as 2027. It positions the company to capture communications and SSA demand in cislunar space. We want to see whether launch-related payments show up in advance payments from 2Q onward.
- 2026/07/24Notice Regarding Additional Contract with the European Space Agency (ESA) - MAGPIE Phase 2, totaling EUR 65M (approx. JPY 12B), signed on July 23, 2026.
Previous Quarter Results (FY3/2027 1Q Actual)
Under its vision "Expand our planet. Expand our future.", the company develops landers and rovers and provides payload transportation services, all within a single lunar development segment. It is developing the ULTRA lander for Mission 3 (2028) and Mission 4 (2029). Tailwinds include NASA's plans to expand lunar landing missions and Japan's growth strategy, which targets JPY 5.6T in public-private investment in lunar exploration and low Earth orbit technology by FY2040. In 1Q, losses widened as revenue was limited to Mission 3 progress and the advance payment impairment was booked. Full-year guidance was maintained.
| Item | Amount | YoY | vs. Company Plan | Notes |
|---|---|---|---|---|
| Revenue | JPY 168M | -85.5% | - | Year-earlier revenue from Missions 2 and 5 dropped out. Progress against full-year guidance of JPY 3,300M was 5.1% (our estimate) |
| Operating Income | JPY -6,397M | - | - | Cost of Goods Sold rose to JPY 4,795M, resulting in a gross loss. Advance payment impairment booked during the quarter |
| Recurring Profit | JPY -6,335M | - | - | Includes FX gain of JPY 530M and interest expense of JPY 484M |
| Net Income | JPY -6,336M | - | - | No extraordinary items. Quarterly net loss attributable to owners of parent company |
| EPS | JPY -43.32 | - | - | Average shares outstanding during the period: 146,266,953 (105,796,042 a year earlier) |
Guidance Achievement Rate (Recurring Profit Basis): The recurring loss consumed 48.7% of the full-year guidance of JPY -13,000M (our estimate). The year-earlier figure is not calculated (-) as the prior fiscal year's initial guidance is not included in this report.
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