Financial Results and Forecasts FY2024 Script for Financial Results Briefing

MANI, INC.

Financial Results Briefing for the Fiscal Year Ended August 2024

October 8, 2024

Event Summary

*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.

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Presentation

Moderator: This briefing will be held in a hybrid format, with a live-streamed online session in addition to the on-site session.

First, I would like to introduce the three individuals we are welcoming from the Company.

Mr. Masahiko Saito, President and Representative Executive Officer.

Saito: Thank you for your participation today.

Moderator: Mr. Kazuo Takahashi, Executive Vice President. Mr. Naohisa Hashimoto, Managing Executive Officer.

Today, President Saito will give us a presentation. After the explanation, a question-and-answer session will be held. Please note that we will not be accepting questions from online participants at this time. After the presentation, please email our contact person for IR, and we will be happy to answer if you have any questions.

Now, President Saito, please proceed with the presentation.

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Saito: Good morning, everyone. I am Masahiko Saito, President and Representative Executive Officer of MANI, INC. I would like to begin explaining our financial results for fiscal year 2024.

First, let me briefly describe MANI's product segments.

MANI's operations are divided into 3 segments: the Surgical segment, the Eyeless Needle segment, and the Dental segment.

First is the Surgical segment, which is the leftmost segment shown on this slide. This segment includes our mainstay product category of ophthalmic instruments - such as ophthalmic knives - and surgical instruments, such as skin staplers.

Next is the Eyeless Needle segment, which is the middle segment shown on this slide. In this segment, the finalized products are needles with a thread attached. These needles are sterilized and ultimately used as suture needles in surgical procedures. The images are the needle portions. We primarily produce these needle portions on an OEM basis.

Last is the Dental segment, which consists of products used in dental treatment. This includes reamers/files used in root canal treatment, dia-burs, which are dental rotary and cutting instruments, used in the removal of dental cavities, and composite resins for dental restoration.

In terms of the breakdown, the Surgical segment accounts for 29% of total sales, the Eyeless Needle segment accounts for 36%, and the Dental segment accounts for 35%.

Most of our products are directly held and used by doctors, who prefer to use our products for its precision, ease of use, and good quality. In this sense, we place particular emphasis on quality in our manufacturing.

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I will now explain the financial results for fiscal year 2024.

I would like to start with the consolidated financial results.

As for the full-year results, we recorded a strong overall consolidated business performance.

Product demand continues to expand overseas, allowing us to record new highs for the third consecutive fiscal year, as net sales, operating income, ordinary income and net income all reached new highs.

Foreign exchange gains resulting from the weaker yen also contributed to higher sales and profits.

. Furthermore, we were able to exceed our full-year forecasts.

I would now like to go over each line item in order, starting with net sales.

Net sales grew mainly in Asia, North America, and Europe. All three segments of Surgical, Eyeless Needle, and Dental delivered growth. Net sales for fiscal year 2024 stood at 28.513 billion yen, which corresponds to a year-on-year increase of 4.025 billion yen, a 16.4% increase.

Next is cost of sales. The impact of the yen depreciation is in the direction of worsening in cost of sales. In addition, despite an increase in labor costs at overseas subsidiaries, the cost of sales ratio worsened only slightly to 37.2% from 37% in the previous fiscal year, as the effects of productivity improvement activities at the manufacturing department became evident. Next is the cost of sales. The weaker yen negatively impacted the cost of sales, and another headwind was higher personnel costs at our overseas subsidiaries. However, productivity improvements at our manufacturing department are now starting to materialize and these effects allowed us to contain a slight increase in the cost of sales ratio, which went from 37% to 37.2%.

Next, SG&A expenses increased by 1,327 million yen, due to an increase in personnel expenses resulting from active R&D and sales activities, and the strengthening of the organization. This is a year-on-year increase of 16.2%

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Operating income increased to 8.392 billion yen, growing by 1.148 billion yen on a year-on-year basis, or 15.8% The operating income margin was 29.4%, falling short of the fiscal year 2024 target of 30%.

Ordinary income was 8.464 billion yen, a year-on-year increase of 5.9%, and lastly, net income was 6.286 billion yen, a year-on-year increase of 5.6%.

Next is the sales status by segment.

First, there was a positive impact from foreign exchange. . As you can see, a weaker yen boosted sales by 1.484 billion yen.

Excluding the effect of foreign exchange rates, sales increased in all 3 segments.

In the Surgical segment, favorable demand towards ophthalmic knives used in cataract surgeries increased in Asia, mostly in China, in Europe, and in North America, allowing us to deliver good results in these markets and grow sales by 932 million yen.

Next, in the Eyeless Needle segment, we continued seeing an increase in orders coming from Asia, mostly in China, and North America, and this demand allowed us to grow sales by 1.147 billion yen.

Lastly, in the Dental segment, sales of MANI's lineup of dental products, such as dia-burs and reamers/files, increased in Asia, mostly in China and India. This resulted in a sales increase of 564 million yen. Additionally, while our German subsidiary MMG recovered from production delays due to the relocation of its Head Office Factory, weak sales in the fourth quarter led to a sales decrease of 103 million yen. Sales increased by 461 million yen in the Dental segment overall.

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Next is the sales status by region.

The largest growth by region was in Asia. In the Surgical segment, we delivered double-digit growth of ophthalmic knives, especially in China. The Eyeless Needle segment achieved double-digit growth in India, Indonesia, Thailand, and especially in China. In the Dental segment, our mainstay products, such as dia-burs, grew by double digits, especially in China and India.

In Europe, ophthalmic knives and trocars delivered a double-digit sales increase, while sales of eyeless needles grew by double digits in North America.

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Next is the operating income status.

First of all, the impact of foreign exchange rate fluctuations made a positive year-on-year contribution of 570 million yen.

As for gross profit impact, an increase in sales volume due to higher demands made a positive contribution of 1.6 billion yen. Additionally, improvements to the cost of sales ratio had a positive impact of 65 million yen.

As for SG&A expenses impact, an increase in promotion expenses due to marketing activities and administrative expenses, such as personnel expenses at our Head Office, led to an overall negative impact of 1.088 billion yen.

Ultimately, operating income stood at 8.392 billion yen, up 1.148 billion yen on a year-on-year basis, or 15.8%.

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Next, I would like to explain the financial results by segment.

All three segments recorded net sales growth.

In terms of operating income in the Surgical segment, the operating income margin deteriorated in the previous fiscal year due to limited production caused by difficulties in the procurement of packaging materials. This procurement issue was resolved in the second half of the previous fiscal year, after which we were able to significantly grow sales. The operating income margin also improved to 32.4%.

Sales were strong in the Eyeless Needle segment. In fiscal year 2023, we were unable to ramp up production in time, and this led to delays in deliveries. We have now successfully increased our production capacity and also saw improvements in operating income margin.

Lastly, in the Dental segment, sales grew but the operating income margin was negative compared to the previous year. This resulted from an increase in expenses due to the relocation of MMG's Head Office Factory, as well as from an increase in sales expenses deriving from active marketing activities.

Also, starting in fiscal year 2024, we adopted a new allocation method for SG&A expenses for each segment. For more details regarding this allocation method, please refer to page 32.

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Next is the results analysis for each segment, starting with the Surgical segment.

In terms of business overview, demand for ophthalmic knives, our mainstay product, continues to expand mainly in Europe and Asia.

In the future, the number of cataract patients for whom ophthalmic knives are used is expected to continue to increase worldwide.

In the ophthalmic surgical field, the number of glaucoma and vitreous surgeries has been increasing in addition to cataract surgeries. We are developing products for these ophthalmic surgeries. One of these products will be vitreous forceps.

In terms of Surgical products, we will work to further expand our market share in Europe and North America and deal with low-priced products in countries, such as India.

Our competitive advantage is the superior sharpness of our ophthalmic knives and our proprietary microfabrication technology that responds to the miniaturization and precision of surgery.

The quality of our ophthalmic knives is highly regarded by doctors around the world. MANI's share of the global market for ophthalmic knives is already approximately 30%, and we intend to further increase our share.

As for results analysis, this demand for ophthalmic knives expanded in Asia, especially in China, Europe, and North America. Thanks to this demand, we were able to grow both sales and operating income.

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