Japan Lifeline : FYE March 2024 Full-Year Financial Results (with transcript)(4220KB)

Japan Lifeline Co., Ltd.

Financial Results Briefing for the Fiscal Year Ended March 2024

May 8, 2024

Event Summary

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*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

Thank you for taking time out of your busy schedule today to participate in the presentation of the financial results briefing of Japan Lifeline Co., Ltd. for the fiscal year ended March 31, 2024.

Today's meeting is attended by President and CEO Keisuke Suzuki, Senior Executive Vice President and COO Atsuhiro Suzuki, Senior Vice President Kenji Yamada, Senior Vice President Tatsuya Murase, and Vice President Takeyoshi Egawa.

Mr. Suzuki, Senior Vice Executive President, and Mr. Egawa, Vice President, will now give a 30-minute presentation on the full-year financial results for the fiscal year ended March 31, 2024, the forecast for the fiscal year ending March 31, 2025, and the progress of the medium-term business plan, followed by a Q&A session. The entire conference is scheduled to last approximately 60 minutes.

Presentation materials and conference proceedings will be available through C-Meeting. The presentation materials are available on our website. You may also listen to audio of the meeting by phone. In the unlikely event that the web communication situation is disrupted during the meeting, you can also listen in via conference call.

Before we begin the briefing, I'd like to say a few words. In the explanation that follows, we may state future forecasts based on current expectations, but all of these involve risks and uncertainties. We would like to remind everyone in advance that actual results may differ from our forecasts.

We will now begin the meeting.

Egawa: This is Vice President Egawa. I will explain the situation according to the materials.

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First, here is a summary. In the fiscal year ended March 31, 2024, sales decreased slightly, but profits increased compared to the previous fiscal year. Operating profit continued to reach a record high as in the previous year.

I would like to explain three points. Regarding sales, our forecast for the fiscal year ended March 31, 2024 was for a decrease of about JPY3 billion due to the termination of businesses and changes in product distribution. However, overall strong sales and the introduction of new products resulted in sales that were almost on par with the previous year.

Regarding operating profit, selling expenses increased due to an increase in selling activity expenses and IT- related expenses. This increase in SG&A expenses was offset by an improvement in the gross profit margin, resulting in a YoY increase in profit.

The third point is net profit. Regarding net profit, the previous year saw an extraordinary loss of about JPY1.2 billion, but nothing this large was recorded in the current year, resulting in a significant increase in net profit for the current year relative to operating profit.

As I will explain the detail by business later, the cardiac rhythm management and cardiovascular business showed growth. GI alone was positive, excluding the terminated projects. EP/ablation sales were down 7.8%, and although we initially expected sales to decline by about 11% due to changes in product distribution, we ended up with a 7.8% decline in sales.

The following are the results of the consolidated business results. Sales were on par with the previous year, while operating profit reached a record high as improved gross margins absorbed increased costs.

Sales, I repeat, are where we expected a large negative impact due to the changes in commercial distribution and the termination of the business, which resulted in a large negative impact. However, sales of products in existing areas were strong due to an increase in the number of cases, and the new areas, NV and GI, just got off to a good start. As a result, although sales decreased 0.7%, they remained at a similar level to the previous year.

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The next item is operating profit. Operating profit, which will be explained in detail on the next page, increased as an improvement in gross profit offset an increase in SG&A expenses.

Third, net profit. Regarding net profit, we recorded a large, extraordinary loss of about JPY1.2 billion in the previous period, and in the current period, we wrote down some of our investments in venture companies in the evaluation of investments at the end of the period. Although we wrote down investments, the extraordinary loss recorded last year was larger, so we ended up with a 9.1% increase in profit.

These are the factors behind the changes in operating profit. Overall, the increase in SG&A expenses was absorbed by the improvement in sales and gross profit.

The first five on the left were sales to gross profit factors. The two factors on the right are the causes of lower profits: the impact of changes in commercial distribution, which was approximately JPY1 billion, and the termination of the business, which resulted in the realization of unrealized profits in a lump sum last year at the time of business termination. In the absence of these special items, the current period shows a combined decrease in profit of JPY1.3 billion.

On the other hand, there were factors that increased profits, such as increased sales of existing products and increased sales in new fields. In addition, we recorded disposal losses and valuation losses in the previous fiscal year, but now these have decreased. Adding these together, the increase was JPY1.091 billion.

While there were these profit-increasing factors, there were four main factors that led to a decrease in operating profit due to the increase in SG&A.

First, sales-related expenses. SG&A expenses have increased due to an increase in activity due to COVID-19 becoming a Class 5. As for IT-related expenses, the Company is replacing its core system. Some costs have increased due to this.

Regarding personnel expenses, a system to increase bonuses to employees based on their performance has been introduced in the current period. As a result, personnel expenses increased as results exceeded the

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initial operating profit budget. The fourth is provision for doubtful accounts, and here we have posted an allowance for doubtful accounts of about JPY140 million due to the credit concerns of our business partners.

There were these main factors that increased SG&A expenses and decreased profits, which were the factors that decreased profits by JPY1.036 billion. This decreasing factor was exceeded by the factors that increased sales profits, resulting in a total of JPY55 million, or 0.5%, of increase in operating profit for the current period.

Mr. Suzuki, Senior Executive Vice President, will now explain the sales situation.

Atsuhiro Suzuki: I, Senior Executive Vice President Suzuki, will now give an explanation.

First, here are the sales by product for the full year. Overall, sales increased significantly from the figures announced at the beginning of the fiscal year and were close to those of the previous fiscal year.

This was due to steady growth in the number of cases, as well as significant growth in the new areas of focus, neuro and GI area.

As explained, the negative factors associated with the previous change in commercial distribution and business termination were offset, resulting in a 0.7% decrease YoY to JPY51.384 billion.

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We will look at this by item. First is cardiac rhythm management. We have succeeded in growing our one-of-a-kind product, S-ICD to a record high on a full-year basis. As for S-ICDs, we were able to record double-digit, over 20% growth.

As a result, sales increased by 8.9% YoY to JPY13.5 billion.

Next is EP/ablation. We estimate the growth rate of the number of cases, especially AF cases, to have increased by 8% to 9% in the last fiscal year. Overall, sales of our own products were very strong, and we believe that the entry of other companies into the market for atrial cardioversion catheters was very limited.

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As a result of the above, in addition to making up for the significant decrease in sales due to changes in commercial distribution in the previous fiscal year, the launch of new hemostasis devices was also very successful, resulting in a decrease of 7.8% YoY to JPY24.249 billion.

This is a cardiovascular-related business. Both vascular graft and neurovascular products performed very well, reaching record highs for the full year.

Sales of conventional stent grafts have also increased favorably due in part to the introduction of new open stent grafts, or OSGs, which are our mainstay products.

As for neurovascular-related products, sales quadrupled YoY. In addition to existing products, we introduced a new coil for embolization and a newly launched aspiration catheter, resulting in a very strong increase in numbers, resulting in a JPY682 million increase in sales YoY and a total of JPY912 million in results.

The above resulted in an 11.9% increase in total cardiovascular-related sales, for a total of JPY12.319 billion.

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In gastrointestinal products, the in-house product, bile duct tube stents, continued to perform well and grew significantly. In addition, the CI business ended this fiscal year, so there was an offset, but if we look only at the gastrointestinal business, sales increased by 41.5% YoY to JPY925 million.

The total for GI business, which includes the CI business, was down 35.8% YoY for a total of JPY1.314 billion. Since the CI business ended this fiscal year, one major point was the significant growth in the GI business.

That's all for my explanation. Vice President Egawa will continue.

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