Q2 FYE3/2026 Financial Results (with transcript)

Q2 Financial Results Briefing for the Fiscal Year Ending March 2026 October 30, 2025

(Total: 34 minutes, Presentation: 20 minutes, Q&A: 14 minutes)

Keisuke Suzuki President and CEO

Tatsuya Murase Vice President and COO, Representative Director

Takeyoshi Egawa Chief Financial Officer, Head of Corporate Management Group, Board Director

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

Board Director

*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.

Today's briefing is attended by Keisuke Suzuki, President and CEO; Tatsuya Murase, Executive Vice President and Representative Vice President and COO, Representative Director; Takeyoshi Egawa, Chief Financial Officer, Board Director; and Takashi Ito, Senior Operating Officer, Board Director.

Mr. Egawa, Director of IR, and Mr. Murase, Vice President, will give a presentation on the financial results for Q2 of the fiscal year ending March 31, 2026, which will last approximately 30 minutes in total, followed by a Q&A session. We have set aside 90 minutes for the entire meeting, but today's meeting may end a little early in terms of minutes.

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

Before we begin the meeting, I would like to remind everyone. The following discussion may contain forward-looking statements based on current expectations, all of which are subject to risks and uncertainties. Actual results may differ from the projections.

Now, let us begin the explanation.

First, here are the financial highlights for H1. For the six months of Q2, the results were an increase in revenue and profit. From net sales to interim net profit, all results were record highs for H1 of a fiscal year.

Net sales increased 4.6% to JPY29,285 million, operating profit increased 5.7% to JPY6,620 million, and interim net profit increased 7.7% to JPY4,774 million.

The following is an explanation of the six main factors behind the increase in sales and profit. The following explanation is divided into external and internal factors.

There are three external factors. Positive factors included a 10% increase in the number of AF cases compared to the same period last year. This resulted in EP/ablation sales being driven upward.

On the other hand, there are two negative external factors. First, a new technique called PFA is gaining ground in the field of EP/ablation. This penetration into PFA has been a negative factor in some of our own products where sales have declined.

Another negative factor is that the official price was revised in June last year, which had a negative impact of two months compared to the previous period. This had a negative impact of JPY90 million on gross profit.

We will then explain three internal factors, including our initiatives. The first point. There are four core product groups. The situation here continues to be generally firm continuing from Q1

The new segments are neurovascular and gastrointestinal, with sales up 38.4% from the previous year, mainly due to the strengthening of the product lineup.

Finally, there is one transitory factor in SG&A expenses. In the previous fiscal year, the Company recorded an allowance for doubtful accounts due to the suspension of bill transactions by a client, but in the current fiscal year, a portion of the bad debts were recovered, resulting in an increase in profit.

We would like to provide additional explanation regarding this one. The chart shows the impact of the official price revision and the flow of the official price revision. For the current official price, we are progressing in the light blue area.

Although the official price was revised in June of the previous year and the new light blue price was determined for the current year, sales for the previous year were calculated based on the old price multiplied by a certain multiplying factor. This has had a negative impact on the current period for about two months.

Next is the P&L for Q2. The figure is a comparison with the previous period. I would like to explain the factors of increase or decrease up to operating profit on the next slide.

Other than that, it is the third from the bottom. The ratio of in-house products decreased 2.5 percentage points from 57.6% to 55.1%.

The reason for this is the significant growth in the neurovascular segment and hemostatic devices in purchased products. On the other hand, as for in-house products, sales of esophageal monitoring catheters decreased mainly due to the impact of PFA, resulting in a decrease in the ratio of in-house products.

Below that is the ratio of overseas sales, which increased 0.6 percentage points from 2% to 2.6%. One of the initiatives in the new medium-term plan is to expand global sales. The result is that the steady progress here is showing in the figures here.

Last. Regarding earnings per share, in addition to the increase in net profit for the interim period, the Company repurchased its own shares in May of the previous fiscal year. As a result, the average number of shares outstanding during the period decreased this fiscal year, resulting in an increase of approximately 10%.

Here is a table of changes in operating profit from last year's figures. Operating profit increased from JPY6.26 billion to JPY6.62 billion, an increase of JPY359 million.

Overall, sales volumes of some products declined due to the impact of PFA. In addition, there was an increase in SG&A expenses such as labor costs, which had a negative impact on operating profit. On the other hand, growth in sales volumes of core products and new segments, especially in focused products, offset these negative factors.

In addition to this, there was a recovery of bad debts, resulting in a total increase of JPY359 million.

Let me explain the sales and cost factors and SG&A factors, respectively, in detail. There were four sales and cost factors, with a total increase of JPY593 million.

First, the leftmost. There are four core product groups, which contributed to a profit increase of JPY913 million due to an increase in sales volume. Next to them were new segments, neurovascular and gastrointestinal, which also saw an profit increase of JPY295 million due to higher sales volume.

On the other hand, the red areas are a factor in lower profits. In other products, total profit decreased by JPY563 million due to a decrease in sales volume of esophageal monitoring catheters as a result of the penetration of PFA. Furthermore, as a factor of the unit price, the revision of the official price in June last year was a factor in the decrease of about JPY90 million.

Altogether, the sales and cost of sales factors resulted in a JPY593 million increase in profit.

Next to that is the SG&A factor. Here, the increase in SG&A expenses was a factor in the decrease in profit of about JPY639 million.

The breakdown of the increase in personnel costs is due to an increase in salary levels. Below that, for R&D expenses, PFA and other R&D activities have been active, and this has resulted in an increase in expenses of

about JPY192 million. The third, sales-related expenses, increased due to increased sales activities, contributing the decrease in profit of about JPY150 million.

There are also transitory factors next to it. This is a factor in the increase in profit. The main one was a provision of about JPY216 million for bad debts due to the suspension of bill transactions by a business partner last year. On the other hand, the recovery of some receivables in the current period resulted in a negative SG&A expense of about JPY200 million.

The difference between last year's provision of JPY200 million and the current year's reversal of JPY200 million is about JPY400 million, resulting in an increase of about JPY400 million.

All of these factors together resulted in a JPY234 million increase in expenses in SG&A, which was a factor in the decrease in profits. The result was an increase of JPY359 million, or 5.7%.

Here is the progress of the earnings forecast announced on May 7 at the beginning of the period. Sales, operating profit, and interim net profit are all generally progressing at a rate of 50%. The results for operating profit and interim net profit are the result of a slight improvement in progress due to the quarterly shift in R&D and other expenses.

The following is an item-by-item description. Mr. Murase, Vice President, will explain.

YoY comparison. Sales increased in all items except rhythm devices. In particular, EP/ablation, neurovascular, and these businesses have shown significant growth.

Let me explain the situation with rhythm devices. S-ICD, our core product, performed well and remained at the same level as the previous year. As for S-ICDs, sales increased by 9.3%.

There are two factors. One is the market environment in which the number of cases is on the rise due to an increase in prophylactic implantations, and the other is the impact of new products from other companies, but we were able to achieve a 9.3% increase in revenue due to stronger-than-expected replacement cases.

On the other hand, regarding the pacemakers, the penetration of leadless pacemakers has been a headwind for us. In addition, the impact of two months of official price revisions have been included, resulting in a 19% decrease in revenue.

In addition, from this fiscal year, we have been selling lead management products that we took over from Philips, which also contributed to the increase in sales.