Olympus Corp. · TSE:7733
Olympus — Olympus Corp Ord — Q2 2024 Earnings Presentation
40 slides from Olympus's earnings presentation, Nov 9, 2023
Slide 1: Consolidated Financial Results for the 2nd Quarter and Full-year Forecasts for Fiscal 2024
Consolidated Financial Results for the 2nd Quarter and Full-year Forecasts for Fiscal 2024 Olympus Corporation | President and CEO, Stefan Kaufmann Executive Officer and CFO, Chikashi Takeda | November 9, 2023 (Slide 1) Hello everyone. I am Chikashi Takeda, CFO of Olympus Corporation. I would li
Slide 2: Disclaimer
Disclaimer This material contains forward-looking statements that reflect management’s current views, plans, and expectations based on information available at the time of preparation. These forward-looking statements are not guarantees of future performance and involve known and unknown risks, un
Slide 3: Highlights
Highlights – 2Q and 6M Consolidated Financial Results Sales increased due to strong growth in APAC, which grew in all areas. By segment, continued strength in Medical service. Profit decreased due to investments for sustainable growth and strengthening of operational infrastructure, and project- rel
Slide 4: Consolidated Financial Results and Business Review for the 2Q of Fiscal 2024
Consolidated Financial Results and 01 Business Review for the 2Q of Fiscal 2024 (FY Ending March 31, 2024) (Slide 4) I will now explain the consolidated financial results and provide a business review for the second quarter of fiscal 2024. Page 4
Slide 5: 2Q of Fiscal 2024 Consolidated Financial Results
2Q of Fiscal 2024 (1) Consolidated Financial Results 1 Revenue: 5% consolidated growth. Record high for Medical Business in 2Q and 6M 2 Adjusted operating profit: Decreased due mainly to an increase in project-related expenses for improving efficiency, as well as personnel expenses for future growth
Slide 6: 2Q of Fiscal 2024 Endoscopic Solutions Division (ESD)
2Q of Fiscal 2024 (2) Endoscopic Solutions Division (ESD) FY2023 FY2024 35%* 55%* (Billions of yen) 2Q 6M 2Q 6M Revenue 141.6 258.5 143.7 270.9 ¥270.9 Operating profit Other income and expenses 44.1 -0.2 68.9 -1.4 28.7 -4.4 50.9 -7.8 billion Adjusted operating profit 44.3 70.3 33.2 58.7 Revenue Oper
Slide 7: 2Q of Fiscal 2024 Therapeutic Solutions Division (TSD)
2Q of Fiscal 2024 (3) Therapeutic Solutions Division (TSD) FY2023 FY2024 20%* 30%* (Billions of yen) 2Q 6M 2Q 6M Revenue 80.6 152.9 82.5 159.7 ¥159.7 Operating profit(loss) Other income and expenses 16.4 0.1 29.8 -0.1 -38.2 -52.8 -28.5 -54.7 billion Adjusted operating profit 16.3 29.9 14.5 26.1 Reve
Slide 8: Statement of Financial Position
Statement of Financial Position Balance sheet increased by approx. ¥20.5 billion in real terms, excluding FX impact of approx. ¥89 billion, due mainly to an increase in cash and profit from transfer of Evident Assets held for sale and liabilities directly associated with assets held for sale changed
Slide 9: Consolidated Cash Flows
Consolidated Cash Flows FCF: Despite a decrease in operating CF due mainly to corporate tax payment related to gain on transfer of Evident, FCF increased significantly due to receipt of consideration for transfer of Evident. Adjusted FCF was ¥17.7 billion Financing CF: Minus ¥125.4 billion due mainl
Slide 10: Forecasts for Fiscal 2024
02 Forecasts for Fiscal 2024 (Slide 10) Next, I would like to explain our full-year forecasts for fiscal 2024. Page 10
Slide 11: Fiscal 2024 Consolidated Forecasts
Fiscal 2024 Consolidated Forecasts 1 Revenue: Expected to achieve ¥958 billion, up 9% YoY 2 Adjusted Operating profit: Expected to achieve ¥174.5 billion, down 1% YoY, with an adjusted operating margin of 18.2% 3 Profit*: Record high of ¥289 billion due to a gain on transfer of Evident. EPS: Expecte
Slide 12: Fiscal 2024 Forecasts by Business Segment
Fiscal 2024 Forecasts by Business Segment 1 ESD: EVIS X1 launched in the U.S. and China in Oct 2023. Revised downward in consideration of delay in tenders due to anti- corruption campaign in China and provision associated with voluntary recall. 2 TSD: Revised downward in consideration of sales decli
Slide 13: Factors that Affect Fiscal 2024 Forecasts (vs. Previous Forecast)
Factors that Affect Fiscal 2024 Forecasts (vs. Previous Forecast) FY2024 Latest Forecasts vs Aug. 9 Forecasts (Billions of yen) Change in Sales -14.9 Change in 182.0 Declined in ESD Approx. -¥7 billion cost of sales Change in Impact of foreign 174.5 Declined in TSD -6.4 SG&A Expenses Exchange, e
Slide 14: Transforming into a Leading Global MedTech Company
03 Transforming into a Leading Global MedTech Company (Slide 14) Hello, everyone. I am Stefan Kaufmann, thank you for joining this earnings call. Today as the President and CEO of Olympus I would like to share with you my view on our current situation and give you some insight on our actions to su
Slide 15: Key Message
Key Message 1 Our clear priority is the remediation of all issues outlined in the three warning letters and transforming Olympus into a best-in-class MedTech company with highest focus on patient safety and quality. We are making good progress in both fulfilling our commitments towards FDA and trans
Slide 16: Guiding Principles
OLYMPUS + Guiding Principles Page 16 OLYMPUS
Slide 17: Our Strategy for Sustainable Growth
Our Strategy for Sustainable Growth Guiding Principles Patient safety and sustainability 1 Resolve pending commitments to the FDA, prove confidence with regulators 2 Lead in organization health and ESG Making people’s Innovation for growth 3 Strengthen the Olympus brand, elevate the experience of ou
Slide 18: Launched a holistic remediation and transformation program
Patient safety and Launched a holistic remediation and sustainability transformation program Elevate our innovative capabilities; the standard of care and patient outcomes; and growth as an organization Fix the past & secure the present Build for the future Meet all of our warning letter commitments
Slide 19: Laying the foundation for sustainable growth
Laying the foundation for We are making investments for the future in… sustainable growth Guiding Principles Growth is temporarily more Patient safety and challenged for a variety of sustainability Steady progress is made in corrective actions for FDA findings reasons, but we are ELEVATE; Launched a
Slide 20: Regulatory approvals and geographic expansion for EVIS X1
Innovation for growth Regulatory approvals and geographic expansion for EVIS X1 Full global availability of our strategic core product that is the largest source of sales EVIS X1 will foster sustainable growth Expected growth opportunity for EVIS X1 endoscopy system Revenue ratio Changes in GI and P
Slide 21: EVIS X1 Endoscopy System - Elevating the Standard of Endoscopy
Innovation EVIS X1 Endoscopy System for growth - Elevating the Standard of Endoscopy TXI – Texture and Color Enhancement Imaging Optimizes mucosal surface image color, texture, and brightness during endoscopic screening, increasing the visibility of potentially suspicious lesions. RDI – Red Dichroma
Slide 22: TSD offers a compelling portfolio of differentiated solutions with a robust pipeline
Innovation for growth TSD offers a compelling portfolio of differentiated solutions with a robust pipeline Steady progress is made in line with the company strategy for sustainable growth. GI-Endotherapy Double-digit growth in our ESD/EMR, ENDOCUFF VISION, EndoClot portfolios Acquisition*1 of br
Slide 23: Accelerate market development of iTind minimally invasive BPH solution
Innovation for growth Continue efforts to accelerate market development of iTind minimally invasive BPH solution The American Medical Association (AMA) CPT Editorial Panel published its decision to establish two Category I CPT codes for the iTind procedure, which would go into effect in January of 2
Slide 24: Establishing a framework to improve efficiency
Productivity Establishing a framework to improve efficiency Global Operating Model Global Productivity Goal Statement Goal Statement Further fine-tune and operationalize our global operating model to Ensure simplicity and operational efficiency become a more high-performing organization as a leading
Slide 25: Capital Allocation
OLYMPUS - SL Capital Allocation Page 25 OLYMPUS
Slide 26: Capital Allocation
Capital Allocation Prioritize allocation to business investment Stable and gradual dividend increase Flexible buyback of company shares Business Investment for profitable, organic growth Prioritize Investment Strategic investment for growth opportunities Stable and gradual dividend increase in l
Slide 27: Shareholder Returns: Additional share buyback of ¥80 billion
Shareholder Returns: Additional share buyback of ¥80 billion We will proactivity continue to consider share buyback in FY2025 and FY2026 after securing sufficient liquidity on hand for working capital and investment, based on the capital allocation policy. Changes in Shareholder Returns ¥ 100 billio
Slide 28: FY24-26 Financials
FY24-26 Financials In FY2026 we aim at achieving mid-single digit sales growth target and operating margin of 20%. Revenue Growth* ~ 5% CAGR from FY2023 EPS Growth** ~ 8% CAGR from FY2023 OP margin** ~ 20 % * constant currency basis ** Adjusted for extraordinary Items - Exclude “Other income / expen
Slide 29: Page 29
OLYMPUS Page 29 OLYMPUS
Slide 30: Appendix
OLYMPUS +—— Appendix Page 30 OLYMPUS
Slide 31: Changes in Reporting Structure
Changes in Reporting Structure With completion of divestiture of Scientific Solutions Business (Evident) in FY2024 1Q, it is disclosed as a discontinued operation from FY2023 2Q to FY2024 (based on IFRS) FY2022 Apr. 2022 - Mar. 2024 ESD ESD TSD Continuing TSD Operations SSD Others Others Discontinue
Slide 32: 2Q of Fiscal 2024 Factors that Affected Consolidated Operating Profit
2Q of Fiscal 2024 Factors that Affected Consolidated Operating Profit 6 Months (Apr. to Sep.) (Billions of yen) Change in Other sales Change in -73.7 +1.1 cost of sales Sales increased, Change in ＜Negative factors＞ centered on ESD -5.5 SG&A Decrease in gain on Provision associated sales of fixed
Slide 33: 2Q of Fiscal 2024 Results by Segment
2Q of Fiscal 2024 Results by Segment 6 Months (Apr. - Sep.) 2Q (Jul. – Sep.) After FX After FX (Billions of yen) FY2023 FY2024 YoY FY2023 FY2024 YoY adjustment adjustment Revenue 258.5 270.9 +5% +1% 141.6 143.7 +1% -3% ESD Operating profit 68.9 50.9 -26% -33% 44.1 28.7 -35% -38% Revenue 152.9 159.7
Slide 34: Other income and expenses
Other income and expenses 6 Months (Apr. to Sep.) Full-year Forecasts (Billions of yen) FY2023 6M FY2024 6M Change (Billions of yen) FY2023 FY2024 Change Other Other income 19.4 2.5 -16.8 income 23.7 3.5 -20.2 Gain on sales of land 16.4 Gain on transfer of collagen Gain on transfer of collagen Major
Slide 35: Factors that Affected Consolidated Cash Flows
Factors that Affected Consolidated Cash Flows FCF +400.9（Adjusted FCF* +17.7） Operating CF -11.8 Investing CF +412.7 Corporate tax payments -90.6 Others in Payment of Investing CF corporate tax on Receipt of +24.8 income for FY2023 consideration Financing CF Impact of Scheduled for transfer of C
Slide 36: Factors that Affect Fiscal 2024 Forecasts (vs. Previous Forecast)
Factors that Affect Fiscal 2024 Forecasts (vs. Previous Forecast) FY2024 Latest Forecasts vs Aug. 9 Forecasts (Billions of yen) Other -50.4 Change in Impact of Sales Change in Change in foreign -14.9 cost of sales SG&A Exchange -6.4 Expenses Declined in ESD +11.9 Approx. -¥7 billion Provision as
Slide 37: Key Product Catalysts: Endoscopic Solutions Division
Key Product Catalysts: Endoscopic Solutions Division (As of Nov. 9, 2023) ESD Key priorities for FY2024 Accelerate EVIS X1 sales growth in Europe, Japan and Asia Pacific Aim to launch EVIS X1 in the US in middle of FY2024 and prepare for launch in China Launch next generation EUS system in Eur
Slide 38: Key Product Catalysts: Therapeutic Solutions Division
Key Product Catalysts: Therapeutic Solutions Division (As of Nov. 9, 2023) TSD Key priorities for FY2024 GI-Endotherapy Expand clinically differentiated product offerings in key areas of focus: ERCP, ESD, Luminal Patency and Hemostasis devices Urology Expand leadership in BPH through iTind marke
Slide 39: Expenditures, etc.
Expenditures, etc. 6 Months (Apr. to Sep.) and Full-year Forecasts (Billions of yen) FY2023 2Q FY2024 2Q FY2024 (Forecasts) (Billions of yen) FY2023 FY2024 83.0 78.0 R&D expenditures* (a) 36.1 35.0 Capitalization of R&D 66.0 expenditures (b) 5.6 6.2 R&D expenses in P/L (a-b) 30.5 28.8 36.1 35.0 (Bil
Slide 40: Foreign Exchange and Sensitivity
Foreign Exchange and Sensitivity As a general rule, we use average value for latest month as exchange rates for full-year forecasts Foreign exchange rate FY2024 Forecasts FY2024 Latest (Yen) FY2023 1Q FY2023 2Q FY2024 1Q FY2024 2Q as of August 9 Forecasts Yen/U.S. dollar 129.57 138.37 137.37 144.62