Nihon Kohden : FY2023 First Quarter Consolidated Financial Results presentation with transcript

Consolidated Financial Highlights

for the First Quarter of FY2023

(From April 1, 2023 to June 30, 2023)

1) Financial Results	7） Topics
2） Highlights	8） Capital Investments and R&D Costs
3） Breakdown of Operating Income	9） Forecast for FY2023
4） Domestic Sales	[Ref] Sales Forecast by Product Category/Effect of Exchange Rate
5） Overseas Sales	[Ref] COVID-19-Related Demand (Estimated)
6） Sales by Product Category
[Ref] Breakdown
	(Ticker Code: 6849)
	August 3, 2023

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1) Consolidated Financial Results for the 1st Quarter of FY2023

		FY2022	FY2023	YoY (%)
		1Q	1Q
	Net Sales	44,363	48,728	9.8
	Domestic Sales	28,971	30,154	4.1
	Overseas Sales	15,391	18,574	20.7
	Gross Profit	21,811	24,352	11.7
	(Gross Profit Margin)	49.2%	50.0%
	Operating Income	1,817	2,205	21.3
	(Operating Income Margin)	4.1%	4.5%
	Ordinary Income	5,481	5,794	5.7
	Income Attributable to	3,679	3,787	2.9
	Owners of Parent

(Amounts of less than ¥1 million are rounded down)

+11% on a local currency basis

(±0% on a local currency basis excluding impact of change in fiscal term of Defibtech*)

In-house	FY2022 1Q	FY2023 1Q
sales ratio:	70.8%	→ 73.3%
SG&A Ratio:	45.1%	→ 45.5%
Foreign exchange gains:
	¥3.55 bil	→ ¥3.53 bil

Average Exchange Rate	(2022/6)	(2023/6)
1 US Dollar	124.6 yen	135.4 yen
1 EURO	136.8 yen	147.9 yen

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*Defibtech, LLC changed its fiscal term from end on December 31 to end

on March 31, according to the reorganization of U.S. subsidiaries. In FY2023 1Q ended June 30, 2023, Nihon Kohden consolidated the 6 months of Defibtech's operating results from January 1, 2023 to June 30, 2023.

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• Overall sales increased 9.8% to ¥48.7 billion.
• Domestic sales increased 4.1% to ¥30.1 billion. Nihon Kohden concentrated on enhancing sales activities which match each market. The Company also focused on its consumables and services business as well as strengthening its marketing and service capabilities, creating customer value. As a result of these initiatives, sales increased.
• Overseas sales increased 20.7% to ¥18.5 billion, an 11% growth on a local currency basis. Defibtech, LLC changed its fiscal term from end on December 31 to end on March 31, according to the reorganization of U.S. subsidiaries in April 2023. In the 1st quarter of FY2023 ended June 30, 2023, Nihon Kohden consolidated the 6 months of Defibtech's operating results. Overseas sales remained flat on a local currency basis excluding the impact of the change in the fiscal term of Defibtech, LLC.
• Operating income increased 21.3% to ¥2.2 billion due to the increase in sales and higher gross profit margin thanks to a favorable product mix, offsetting the increase of SG&A expenses such as personnel expenses. Gross profit margin was 50.0%.
• Ordinary income increased 5.7% to ¥5.7 billion and income attributable to owners of parent increased 2.9% to ¥3.7 billion, reflecting foreign exchange gains.
• The 1st quarter performance was better than the Company's forecast both in sales and income due to greater-than-expected depreciation of the yen in currency translation as well as the favorable performance of consumables and services business in Japan.

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2) Highlights of FY2023 1Q

Net Sales : +9.8%

• Japan：Sales increased because the Company focused on its consumables and services business. Sales in the private hospital and clinic markets increased favorably, while sales in the university and public hospital markets decreased.
• International：Sales showed double-digit growth, as there was an impact of change in the fiscal term of Defibtech, LLC according to the reorganization of subsidiaries in the U.S. Strong sales were also seen in China because patient monitors were installed due to the COVID-19 resurgence.

Operating Income : +21.3%

• Operating income increased due to the increase in sales and higher gross profit margin thanks to a favorable product mix, offsetting the increase of SG&A expenses such as personnel expenses.

Ordinary Income : +5.7%

• Foreign exchange gains were recorded.

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3) Breakdown of Operating Income

(Amounts of less than ¥1 million are rounded down)

FY2021

30,992

FY2022 1Q
1,817	Increase in

Currency	gross profit
from sales
effect
increase
+301
+556

Gross margin
improvement	Increase
+1,184
Increase in COGS due to	in SG&A*
higher prices of components	-1,653
	and utility costs
	¥0.4 bil
	Items of increase/decrease
	in SG&A expenses*
	・Salaries		+¥1.18 bil
	・Legal welfare expenses	+¥0.22 bil
	・Provision for bonuses	+¥0.17 bil

FY2023 1Q

2,205

*Increase in SG&A indicates the amount as a factor of increase/decrease of operating income excluding the currency effect.

Items of increase/decrease in SG&A expenses indicate major components of increased/decreased SG&A expenses on a yen basis.

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• In the 1st quarter of FY2023, operating income increased to ¥2.2 billion from ¥1.8 billion in the 1st quarter of FY2022.
• Currency effect had a positive impact of ¥0.3 billion.
• The increase in gross profit from sales increase was ¥0.5 billion.
• Gross margin improvement was a positive factor worth ¥1.1 billion. This was due to a favorable product mix as the Company focused on selling in-house products in Japan. The increase in cost of goods sold due to higher prices of components and utility costs was around ¥0.4 billion which was offset by price optimization both in Japan and internationally.
• SG&A expenses were a negative factor worth ¥1.6 billion due to strengthening of human resources.

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4) Domestic Sales

	Sales by Market			Sales by Product Category
(¥100 million)		289	301					(Sales, millions of yen)
300
40		Other		FY2022	FY2023	YoY (%)
		37
250		40				1Q	1Q
	38		Clinics	Physiological Measuring Equipment	7,897	8,262	4.6
200
	83
	73
		Private	Patient Monitors	9,203	9,818	6.7
150
				hospitals	Treatment Equipment	5,648	6,048	7.1
100		84	82		Public
				hospitals
					Other Medical Equipment	6,222	6,024	-3.2
50					Universities
	56	55
			Total Sales	28,971	30,154	4.1
0
	FY2022 1Q	FY2023 1Q

【Markets】 As the number of testing and surgical procedures in medical institutions continued to recover and the Company focused on its consumables and services business, sales in the private hospital and clinic markets increased favorably. Sales in the university market decreased compared to the strong performance in FY2022 1Q when capital expenditure by medical institutions resumed. In the public hospital market, sales of locally purchased products decreased.

【Products】 Physiological Measuring Equipment: Sales of diagnostic information systems achieved double-digit growth. Sales of ECGs increased favorably. Sales of EEGs and polygraphs for cath lab also increased.

Patient Monitors: Sales of clinical information systems and telemetry systems achieved double-digit growth. Sales of consumables such as sensors also increased favorably.

Treatment Equipment: Sales of AEDs and pacemakers / ICDs achieved double-digit growth due to a recovery in demand. Sales of defibrillators also increased.

Other Medical Equipment: Sales of locally purchased products decreased, as the Company focused on selling in-house products. Sales of hematology instruments increased favorably.

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• Domestic sales increased by ¥1.2 billion to ¥30.1 billion, as the number of testing and surgical procedures in medical institutions continued to recover and the Company focused on its consumables and services business.
• Sales in the private hospital and clinic markets increased favorably. Sales in the university market decreased compared to the strong performance in the 1st quarter of FY2022 when capital expenditure by medical institutions resumed. In the public hospital market, sales of locally purchased products decreased.
• Sales of Patient Monitors and Treatment Equipment increased favorably. Sales of Physiological Measuring Equipment also increased. In Other Medical Equipment, sales of locally purchased products decreased, as the Company focused on selling in-house products.
• In Physiological Measuring Equipment, sales of diagnostic information systems achieved double-digit growth due in part to a postponement in some installations from the previous fiscal year. Sales of ECGs increased favorably. Sales of EEGs and polygraphs for cath lab also increased due to the increase in the number of testing and surgical procedures in medical institutions.
• In Patient Monitors, sales of clinical information systems remained strong and sales of telemetry systems recovered, resulting in double-digit sales growth for both products. Sales of consumables such as sensors also increased favorably.
• In Treatment Equipment, sales of AEDs and pacemakers / ICDs achieved double-digit growth due to a recovery in demand. Sales of defibrillators also increased. As for AEDs, sales of consumables such as pads and batteries increased favorably.
• In Other Medical Equipment, sales of locally purchased products decreased, while sales of hematology instruments increased favorably.

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