FYE March 2026 3Q Financial Results (with transcript)

Q3 Financial Results Briefing for the Fiscal Year Ending March 2026 January 30, 2026

(Total: 49 minutes, Presentation: 24 minutes, Q&A: 25 minutes)

Tatsuya Murase Representative Director and COO

Takeyoshi Egawa Director and CFO

Takashi Ito Senior Operating Officer, Head of Arrhythmia Business Operations Group, Board Director

Fumiya Shinohara Corporate Planning Department

Tomoko Yoshihara UBS Securities

Motoya Kohtani Mizuho Securities

Anna Kato Daiwa Securities

*Analysts that SCRIPTS Asia was able to identify from the audio who spoke during Q&A or whose questions were read by moderator/company representatives.

In attendance at today's briefing were Tatsuya Murase, Representative Director, Executive Vice President; Takeyoshi Egawa, Director and CFO; and Takashi Ito, Senior Operating Officer.

Mr. Egawa, Director of IR, and Mr. Murase, Vice President, will now provide a presentation on the financial results for Q3 financial results briefing for the fiscal year ending March 2026, which will last approximately 30 minutes in total, followed by a question-and-answer session. The entire meeting is expected to last 60 minutes.

The explanation will be given in accordance with the financial results presentation materials posted on our website today, which we hope you will download from our website and view.

Before we begin the conference call, I would like to make a cautionary statement. The following discussion may contain forward-looking statements based on current expectations, all of which are subject to risks and uncertainties. We would like to remind everyone that actual results may differ from these forecasts.

We will now begin our explanation.

As a result of Q3, forward-looking investments in areas such as sales and R&D have progressed generally according to plan. As for non-operating expenses and below, due to an increase in one-time costs, the results show an increase in net sales but a decline in profit.

Net sales reached JPY44,405 million, an increase of 3.7% YoY, marking a record high. Operating profit decreased by 0.8% YoY to JPY9,824 million. This represents a slight decrease. Net income decreased by 3.5% YoY to JPY6,821 million.

I will explain the factors for these results by dividing them into external and internal factors.

The reasons for the YoY increase in net sales and decrease in profit are, first of all, external factors, AF procedure volume. As for positive factors, the AF procedure volume has increased by 10% YoY. This has driven sales in the EP/ablation segment. On the other hand, as for negative external factors, the penetration of PFA in the EP/Ablation field led to a decline in sales of some of our products; therefore, there were both positive and negative impacts.

Then there are three internal factors. In terms of sales, both core products and new TAs performed well, boosting net sales and profits. On the other hand, as for negative factors, SG&A expenses increased as R&D expenses, which are forward-looking investments, grew by JPY562 million YoY, weighing down profit compared to the previous fiscal year. In addition, non-operating expenses and below, one-time costs such as the write-down of certain products due to the discontinuation, as well as extraordinary losses from the recording of provisions for head office relocation expenses, acted as factors for the decrease in profit.

Furthermore, as performance has been generally in line with our plan, there is no revision to our financial guidance. Regarding the full-year performance, we are progressing generally in line with our plan, and we expect the results to be consistent with the performance seen in Q3.

Page five shows the details of the P/L comparison with Q3 of the previous fiscal year. Details up to operating profit will be explained in the next slide.

As for items below operating profit, as I mentioned earlier, non-operating expenses were incurred due to our withdrawal from the cholangioscope system, HeartLight X3, and endoscopic laser catheters following the suspension of their supply. Non-operating expenses were incurred due to the write-down of inventory related to these items. Under extraordinary losses, we have decided to relocate our head office and have recorded a provision for a portion of the expenses related to this relocation.

Due to these factors, while operating profit decreased by JPY82 million YoY, net income saw a larger decline of JPY249 million compared to the previous fiscal year.

Below net income, the ratio of in-house products decreased from 57.6% to 55.5%, a decrease of 2.1 percentage points. This was due to changes in the product mix, driven by significant growth in purchased products such as neurovascular and hemostatic devices. On the other hand, regarding in-house products, sales of esophageal monitoring catheters decreased primarily due to the impact of PFA, which also contributed to the decline in the in-house product ratio.

As for earnings per share at the bottom line, it decreased by JPY2.12 YoY due to the decline in net income.

Page six, operating profit analysis.

This table shows a comparison of operating profit with the previous fiscal year.

Overall, although sales of some products decreased due to the impact of PFA, this was offset by growth in other product lines, resulting in a net increase in profit from the combination of sales and cost of sales.

On the other hand, regarding SG&A expenses, the burden of forward-looking investments, such as R&D, has increased, resulting in a slight decrease at the operating profit level.

Below that, I will explain the factors behind the increase in profit, broken down into sales and cost of sales factors and SG&A factors.

Regarding the sales and cost of sales factors, sales volume increased across all four of our core product groups, contributing a combined JPY1,256 million to the increase in profit. Regarding "New TAs" shown next to that which we define as the combination of neurovascular and gastrointestinal fields, these also saw an increase in sales volume, contributing a combined JPY496 million to the increase in profit.

On the other hand, let me explain the factors behind the decrease in profit. As for other products, the impact of PFA penetration led to a decrease in sales of esophageal monitoring catheters, resulting in a JPY962 million decrease in profit. Since export sales grew within the other products category, netting these out results in a total decrease in profit of JPY860 million.

Other factors include the impact of unit prices. Regarding this impact, product unit prices declined due to the reimbursement revision and changes in sales channels for certain products. As a result of these factors, there was a total decrease in profit of JPY290 million.

While there were both positive and negative factors as described, the combination of sales and cost of sales resulted in a net increase in profit of JPY602 million.

Next to that, regarding SG&A factors, excluding one-off factors, SG&A expenses resulted in a JPY1,072 million decrease in profit. This decrease in profit of JPY1,072 million was due to an increase in R&D expenses for PFA

and other areas, higher personnel costs from raising salary levels, and an increase in sales-related expenses as a result of more active sales operations.

On the other hand, there are certain one-time factors that contributed to the increase in profit. Regarding this, in the previous period, we recorded approximately JPY200 million in bad debt-related expenses due to a suspension of transactions with a business partner. On the other hand, we took collection procedures for these accounts and recovered approximately JPY200 million, which was recorded as a reduction in SG&A expenses. Since there is a reduction in SG&A expenses of approximately JPY400 million due to the difference between the positive and negative JPY200 million impacts, resulting in an increase of JPY388 million, including other factors.

While there were both positive and negative factors, the total impact of SG&A factors resulted in a decrease in profit of JPY684 million.

While we generated a JPY602 million increase in profit from sales, increased SG&A expenses due to investments for the future resulted in a JPY684 million decrease in profit. Combining these factors, operating profit resulted in a slight decrease of JPY82 million, or 0.8% YoY.

Next, page seven shows the 9M FY2026 progress on initial guidance.

Regarding sales and operating profit, both are generally on track with our plan. On the other hand, regarding net income, these impacts resulted in a lower-than-expected figure due to one-time costs incurred below the operating level.

Regarding our full-year forecast, sales and operating profit are generally in line with our initial guidance. As for net income, we expect it to slightly underperform our full-year forecast, similar to the Q3 results, due to the impact of one-time costs incurred during Q3.

In response to this, regarding dividends, although net income is tracking below the forecast, we have decided to maintain our dividend forecast at JPY54, considering that the factor behind the underperformance is one-time costs.

Next, I would like to explain our sales by product categories. From this point on, Mr. Murase will take over the explanation.

Page 10 shows a comparison of sales by business segment on a YoY basis. Sales increased by approximately JPY1,593 million, or 3.7% YoY.

All items except rhythm devices achieved revenue increases, with particularly large increases in the existing areas of EP/Ablation in the cardiac area and cerebrovascular.

Moving on to page 11, I will now provide a detailed explanation of each business segment.

Sales for rhythm devices totaled JPY 9,995 million for the nine-month period, a decrease of 1.2% YoY. While it is positive that our core product, S-ICD, is performing well, pacemaker-related products continue to remain flat.

Three highlights are shown. For our core S-ICD products, the number of new implants is trending upward in the high single digits according to our internal research, driven by an increase in prophylactic implants. Replacement cases also saw an increase that exceeded our expectations.

On the other hand, pacemaker-related products are facing a challenging environment, with sales decreasing by 17% YoY. The penetration of leadless pacemakers by competitors has become a headwind, and we estimate that leadless pacemakers have now penetrated approximately 40% of the new implant market.

Finally, moving on to lead management products, we launched these products in Q1. This was not available in the previous period, so it contributed as a net increase in sales.

Sales for EP/Ablation totaled JPY21,904 million, an increase of 2.6% YoY. Despite the increasing penetration of PFA, our core segments have achieved growth and continue to perform well.

As for topics, we estimate that the number of atrial fibrillation cases has increased by approximately 10% YoY, based on the current market environment. In this environment, sales for our core defibrillation catheters grew by 5.7% YoY. This progress was almost in line with our initial guidance.

Next, sales for another core product, our hemostasis devices, exceeded our expectations and achieved significant growth of 77.9% YoY. This has also progressed with the expansion of sales channels from high-volume facilities to small and medium-sized facilities, with ablation case penetration rates expanding to 40% to 45%. While PFA procedures require larger-diameter sheaths that conventional products cannot accommodate, we have added large-sized products to our lineup. By addressing these cases with these large-sized products, we believe we can aim for further sales expansion.

The fourth and final point is the negative impact of PFA. As of December, our research indicates that PFA has spread to about 60% or more of all AF cases. As a result, sales of esophageal temperature monitoring catheters declined 50.3% because they are no longer needed for PFA, and sales of EP catheters declined 6.4% due to a decrease in the number of units used.

For our future guidance, we believe that the impact of PFA on our business performance has run its course as of Q3. Since full-scale PFA penetration began in November 2024, almost a year has passed since then. Therefore, we expect the YoY impact to diminish from Q4 onward. In addition, since PFA reduces procedure time to two-thirds compared to conventional methods, we expect it to become a driver for increasing the number of cases in the future.