FYE March 2026 Full-Year Financial Results (with transcript)

Financial Results Briefing for the Fiscal Year Ended March 2026 May 8, 2026

(Total: 60 minutes, Presentation: 44 minutes, Q&A: 16 minutes)

Tatsuya Murase Representative Director, Vice President and COO

Takeyoshi Egawa Director, Executive Officer and CFO

Takashi Ito Director, Executive Officer and Head of Arrythmia Business Operations Group

Fumiya Shinohara Investors Relations

Anna Kato Daiwa Securities

Tomoko Yoshihara UBS 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.

Attending today's briefing are Mr. Tatsuya Murase, Representative Director and Vice President; Mr. Takeyoshi Egawa, Director and Executive Officer; and Mr. Takashi Ito, Director and Executive Officer.

Mr. Egawa, Director in charge of IR, and Mr. Murase, Vice President, will now give a total of approximately 40 minutes of explanation on the financial results for the full year ended March 31, 2026, the forecast for the full year ending March 31, 2027, and the update on the medium-term strategy, followed by a Q&A session. We have allotted a total of 90 minutes for this briefing.

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

Before we begin the meeting, I would like to make a brief disclaimer. The explanations that will follow may include forward-looking statements based on current expectations. However, these are all subject to various risks and uncertainties. We ask that you kindly acknowledge in advance that actual results may differ from these projections.

We will now begin our briefing.

First, these are the results for the fiscal year ended March 2026.

The results for the fiscal year ended March 2026 show an increase in both sales and profit. All figures are record highs. The results show a 4.6% increase in net sales to JPY59,187 million, a 2.3% increase in operating profit to JPY12,606 million, and a 0.4% increase in net income to JPY9,350 million.

I would like to explain the factors behind the increase in both sales and profit by separating them into external and internal factors.

First, regarding external factors, such as the business environment, the first positive factor is that AF cases, or atrial fibrillation cases, increased slightly less than 10% YoY. This resulted in an increase in EP/Ablation sales.

Second, and this is a negative factor, a new technique called PFA is gaining popularity in the field of EP/Ablation. Although there were some positive aspects due to this penetration, a significant decrease in sales occurred for some products, which was a negative factor.

Next is internal factors, such as the Company's initiatives. We have about four topics here.

There are two positive factors. First, our four core products generally remained strong, and sales increased. Second, the new areas of neurovascular and gastroenterology also maintained double-digit growth compared to the previous year.

On the other hand, on the negative side, in the area of SG&A expenses, upfront investments, such as personnel expenses and R&D expenses, increased. SG&A expenses increased, especially where personnel expenses to secure talented personnel for strategy implementation and R&D expenses for the development of a new product, PFA, had increased. This resulted in an increase in SG&A expenses compared to the previous period.

Regarding the figures below the operating profit line, specifically non-operating income and expenses, the results were slightly negative due to the incurrence of temporary costs. These included valuation losses on discontinued products and provisions related to the relocation of our headquarters.

This is a comparison of the full-year P&L with the previous year.

As I explained earlier, non-operating expenses included JPY295 million in write-downs of cholangioscope systems and endoscopic laser catheters due to the withdrawal of these products from the market. In addition, we recorded a special loss of approximately JPY108 million to cover expenses related to the relocation of our headquarters. These items represent additional onetime costs that were recorded as expenses.

In addition, with respect to tax expenses, deferred tax assets related to loss on valuation of investment securities were recorded in the previous period. As these specific items were not recorded in the current fiscal year, our tax expenses increased slightly.

Although there were such negative factors in non-operating income and the items below it, the large positive increase up to operating profit resulted in a net income increase of JPY32 million for the period.

Proprietary sales mix decreased by 1.4 percentage points from 57.4% to 56%. Sales of purchased products in the neurovascular and hemostatic devices grew significantly, resulting in a 7.9% increase in sales of these products.

In contrast, due to the impact of PFA, sales of our in-house products, specifically items such as esophageal monitoring catheters, declined. As a result, the relative share of our proprietary products decreased. This resulted in a 1-percentage point decrease in gross profit from 60.4% to 59.4%.

Finally, regarding EPS, the magnitude of its increase was greater than that of net income for the current period. This is attributable to a reduction in the weighted average number of outstanding shares during the period, resulting from our acquisition of treasury stock in the previous fiscal year.

This is an analysis of the changes in operating profit from the previous year.

Operating profit was affected by the negative impact of PFA and an increase in SG&A expenses for upfront investment, such as personnel and R&D expenses.

Despite these negative factors, sales of core products and new areas grew significantly, and the increase in SG&A and other expenses was offset by the growth in sales, resulting in an increase in profit.

Next, I will explain the sales and COGS-related factors and SG&A-related factors, and the factors behind the increase and decrease in profit. The green-colored areas are the factors contributing to the increase in profit.

There are four sales and COGS-related factors.

Regarding the factors contributing to the increase in profit, first are our core products. Driven by an increase in sales volume for each, these contributed an increase of JPY1,708 million.

Second, as for new areas, increased sales volumes in both the neurovascular and gastrointestinal segments resulted in a profit increase of JPY646 million.

To the right, reflecting the impact of sales volume trends, sales of esophageal monitoring catheters declined due to the growing market penetration of PFA. This had the effect of reducing profit by about JPY941 million.

To the right is a factor in the unit sales price. There was a partial decrease in the unit sales price of cardiac defibrillation catheters and esophageal monitoring catheters. In addition to these factors, various other impacts, such as the two-month effect of the revisions to official pricing and the transfer of product sales operations, resulted in a total earnings reduction of approximately JPY430 million due to changes in unit prices.

Despite these positive and negative factors, in terms of sales and COGS-related factors, we recorded an increase in earnings of JPY983 million.

To the right, there are SG&A-related factors.

One of the reasons for the decrease in profit is the increase in SG&A expenses. There are three major factors. We have raised salary levels as a strategic investment in human resources aimed at securing talent. The resulting rise in personnel costs resulted in a decrease in profit. The second factor is R&D expenditure, specifically an increase in R&D expenses associated with projects such as the development of PFA. In addition to this, where sales-related expenses increased due to increased sales activities, profit decreased by about JPY1,080 million.

On the right, this is a factor for increased profit, but there are some transitory factors that contributed to the increased profit. In the previous fiscal year, we recorded a provision for doubtful accounts related to uncollectible receivables as an expense. However, as we had been able to recover a portion of these receivables during the current fiscal year, we recorded a corresponding reduction in expenses. The difference between the recorded expenses and reduction in expenses resulted in a one-off fluctuation in costs of approximately JPY387 million. Due to these factors, profit increased by JPY377 million, reflecting the impact of one-off expenses.

While profit increased due to the sales and COGS-related factors, they decreased due to factors related to SG&A. However, the net result is an increase in operating profit of JPY280 million, bringing the total to JPY12.606 billion.

This represents the progress toward the earnings forecast announced at the beginning of the fiscal year. Sales and operating profit fell slightly short of the forecast.

On the other hand, net income for the period was 100.4%, with the increase due to factors such as the large amount of reductions in tax expenses due to tax credits.

In all indicators, the results were generally in line with the plan.

From this point on, I will explain the situation by item. Please see page 10. This outlines the revenue trend for each item

Sales of cardiac rhythm management devices, shown in red, declined due to the severe environment. For other items, sales increased YoY.

Sales in existing businesses increased by about JPY1,500 million, and sales in new areas increased JPY1,135 million, resulting in a total sales increase of JPY2,577 million, or 4.6%.

I will provide a detailed explanation of each of these items starting on the following page.

First is the cardiac rhythm management device.

Sales of pacemakers declined due to the severe competitive environment. On the other hand, the introduction of our new lead management product helped offset the negative impact, resulting in a revenue decline limited to just 1.6%.

First, in the pacemaker-related business, sales declined 14.2% due to an increase in the number of newly implanted leadless pacemakers from other manufacturers.

Second, and this is a positive factor, regarding S-ICDs, the number of cases increased due to the penetration of primary prevention. However, toward the latter half of the period, sales growth was only 0.4% due in part to the impact of the introduction of new products by other companies.

Finally, sales of new products also contributed to overall revenue. These negative impacts were mitigated by the sales of our lead management products, which commenced in Q1.

As a result, overall sales for rhythm management devices declined by 1.6%.

Next is EP/Ablation.

As for EP/Ablation, strong sales of core products, such as defibrillation catheters and hemostatic devices, absorbed the negative impact of PFA penetration. This resulted in a 4.5% increase in revenue.

In terms of the market environment, the number of AF cases increased nearly 10% YoY. These were the factors for the overall increase in revenue.

Turning to sales highlights by product, starting with BeeAT, our intracardiac defibrillation catheter, revenue in monetary terms saw an increase of 7.6%. Regarding volume, we observed an increase of 8.6%. However, the discrepancy between this figure and the corresponding monetary value is attributable to a decline in unit prices, resulting from pricing adjustments implemented at certain facilities. However, the market share has remained unchanged at 95% since the end of the previous fiscal year.

Below that, hemostatic devices saw a large increase in sales at 61.7%. The increase in sales was due to two factors: the penetration of our products into small- and medium-size facilities and the increase in the number of cases of the newly launched slightly larger models.

On the other hand, there were also negative factors. The penetration of PFA had a negative impact on our in-house products. As for the penetration rate of PFA, it has spread to 65% of all AF cases. As a result of the impact of this PFA penetration, sales volumes for products such as esophageal monitoring catheters and EP catheters declined. However, given that the adoption of PFA began to accelerate rapidly starting in Q3 of the previous fiscal year, this impact was most pronounced in YoY comparisons through Q3 of the current fiscal year. From Q4 onward, the results show a slightly milder negative impact.

Finally, we launched new products this year. We have commenced sales of our proprietary radiofrequency transseptal wire. Although full-scale sales only began in March, covering a single month, we successfully secured a market share of approximately 8% during that period, and the product is currently receiving highly favorable reviews within the market.

The next item is cardiovascular-related products.

As for cardiovascular-related products, sales are expanding steadily in a steadily growing market. There are mainly three sales highlights.

First, with respect to Frozen Elephant Trunk, revenue increased by 3.9%. While market growth stood at 3.1%, revenue increased by 3.9%, driven by strong sales of high-priced products. The market share recovered slightly to 90%.

In the second category, vascular graft, sales increased by 4.6% as a result of the Company's increased market share due to the shrinkage of other companies' product lineups.

On the other hand, there were some negative factors. In abdominal stent grafts, sales decreased by 1.7% due to intensified competition from other companies.

Additionally, sales of TAVI guidewires and cell delivery catheters contributed to these results. Consequently, the cardiovascular segment achieved a revenue increase of 3.7%.

Next is neurovascular-related products.

In neurovascular, sales of thrombus aspiration catheters were stronger than expected, and sales of embolic coils also increased because of new products.

There are three sales highlights.

Regarding thrombus aspiration catheters, the performance of the product has been highly evaluated, and the number of facilities introducing the product has been expanding. As a result, the market share expanded to 20%. Consequently, this resulted in a substantial increase in revenue-1.7 times that of the previous period.

The next item is embolic coils. The 19.6% increase in revenue was due to a wider range of cases and also to expanding target clinical departments through the new model.

In addition, sales of stent retrievers, which were launched in the previous fiscal year, doubled YoY.

The last item is gastrointestinal-related products.

The growth of bile duct tube stents accelerated, resulting in overall gastrointestinal-related sales growth of 23.5%, maintaining double-digit growth from the previous year.

By product category, the new bile duct tube stent model, pictured bottom right, was well received, resulting in a 49.3% increase in sales.

In addition, sales of ERCP guidewires and gastrointestinal stents also increased.

The unit price of ablation needle for liver cancer decreased due to the transfer of sales. As a result, we have experienced a 34% decline in revenue.

This concludes our report for the fiscal year ended March 2026.

Vice President Murase will now explain the forecast for the fiscal year ending March 31, 2027.

For the fiscal year ending March 2027, sales are expected to be very strong, and we anticipate record-high sales, but we are forecasting lower profit because of solid growth investments, as well as the relocation of our headquarters. We are projecting net sales of JPY63.2 billion and an operating profit of JPY10.7 billion, a 15% decrease YoY.

As for external factors, we expect the trend of very high growth in AF cases to continue. We estimate an increase of approximately 9% compared to the previous period. Negative factors are expected to include a reimbursement price decline, an increase in manufacturing costs such as labor costs, and an increase in SG&A expenses.

As for internal factors, we have added transseptal wires to our core product lineup, as Mr. Egawa explained earlier, and we expect sales of these products to be very strong. As for negative factors, as I mentioned earlier, we will accelerate investment in growth, mainly global expansion, which I will explain in detail later. Additionally, we have recorded headquarters relocation expenses as a one-off factor.

This is the P&L guidance.

As we have already mentioned, sales will be boosted by new products and an increase in the number of cases. The reimbursement price decline is a negative factor, but as I will explain on a later slide, the decline was slightly less than we had initially expected.

We expect that the gross profit margin will be 57.9%, a decrease of 1.5 percentage points. The major factor behind this is that we expect costs, such as raw material and labor costs, to increase.

Additionally, we plan to increase SG&A expenses significantly YoY. As I will explain later on a separate slide, we have budgeted an increase of JPY3.3 billion over the previous year, mainly due to increases in R&D expenses, personnel expenses, and SG&A expenses resulting from inflation, as well as expenses related to the head office relocation.

Finally, regarding net income, due to factors such as the sale of investment securities and a decrease in the write-off of fixed assets, the magnitude of the decline is slightly smaller than that of operating profit.

Proprietary sales mix is expected to account for 57.9% of the total.

Here is the projected analysis of the changes in operating profit.

As I mentioned earlier, our core products, especially transseptal wires, will contribute significantly to the increase in operating profit, with an increase of JPY880 million. While we saw a positive contribution of JPY440 million from sales support for RF needles through the previous fiscal year, we view this factor as a driver of profit growth that significantly exceeds that figure.

Next is the unit price impact of approximately JPY1 billion, a decline in the unit sales price. This includes the reimbursement price cut. Additionally, there is a JPY600 million increase in raw materials and labor costs, which is a somewhat substantial figure.

Then, there will be an increase in SG&A expenses: JPY900 million in personnel expenses, JPY300 million in depreciation and amortization, and JPY180 million in IT-related expenses.

Up through SG&A expenses, we will maintain an upward trend in earnings. However, for the current fiscal year, with the aim of securing future growth, we will commit to robust growth investments, specifically increasing our R&D spending by JPY1 billion YoY. In addition, there is JPY260 million for the start-up of the Malaysia plant and the OEM line.

Furthermore, due to the inclusion of one-off factors, specifically expenses related to our headquarters relocation and provisions for doubtful accounts totaling JPY800 million, we forecast an operating profit of JPY10.7 billion, representing a decline of JPY1.9 billion YoY.

Here are the supplementary materials.

As I mentioned earlier, while the impact of the reimbursement price revision proved less severe than we had anticipated, it nonetheless resulted in a negative impact of approximately JPY400 million. Since the previous revision had an impact of JPY1 billion, this time it was positive for us.

We see the current fiscal year as the peak of R&D investment for PFA or global expansion. We expect a small impact in this fiscal year and next, but after that, we would like to maintain an R&D-to-proprietary-sales ratio of 8% to 10%.

This is a breakdown of our key R&D initiatives.

We would like to concentrate our investment in the EP/Ablation field, where the market is expected to expand significantly worldwide in the future. We are allocating JPY750 million to joint development projects with CardioFocus, as well as to the development of our own proprietary products.

Furthermore, regarding the overseas expansion of our existing domestic product portfolio, specifically in the EP and cardiovascular fields, we anticipate total costs of approximately JPY850 million across both domains for what we refer to as reengineering, aimed at achieving global optimization.

We expect to be able to recover these investments in the future, and we intend to continue to invest in this area beginning this fiscal year.

Full-year sales forecast.

Generally, all products are expected to increase. While the outlook for cardiac rhythm management devices is somewhat challenging, strong revenue growth is projected for our other product lines.

On the next two pages, I would like to explain the trend for each product.

I will start with CRM. For our core product, S-ICD, we expect a 6% increase in sales. This is partly due to the expansion of the market, but we also expect an increase in the number of replacement cases, so we are confident in achieving a solid increase in revenue here. On the other hand, we unfortunately expect negative growth for pacemaker-related products, as the competitive environment will continue to be severe.

EP/Ablation. This is a positive 9.5% growth for the business as a whole. For defibrillation catheters, we expect AF case volume to grow 9% next year. With PFA penetration having run its course and our ability to firmly maintain our market share, we are projecting a 9% increase in sales. Hemostatic devices are expected to grow another 15% with the sale of additional devices. As for esophageal monitoring catheters and EP catheters, we believe that the impact of the previous period's PFA has run its course. Although the negative trend is expected to persist, the decline is projected to narrow significantly compared to the previous fiscal year. Specifically, esophageal temperature monitoring catheters are forecast to see a 10% decline. We project that sales of EP catheters will be almost flat.

Finally, we expect mostly stable growth for all cardiovascular-related products, roughly 4% and 5% growth. One point is that FET has already started overseas, especially in Taiwan, but it is also spreading to Thailand, Hong Kong, and the Middle East, and we believe that this is one of the factors contributing to the forecast increase.