Canon : Results for 3Q 2021

CONSOLIDATED RESULTS FOR THE THIRD QUARTER AND

THE NINE MONTHS ENDED SEPTEMBER 30, 2021

October 26, 2021

CONSOLIDATED RESULTS FOR THE THIRD QUARTER

					(Millions of yen, thousands of U.S. dollars, except per share amounts)
					Actual
		Three months		Three months						Three months
		ended		ended		Change(%)		ended
	September 30, 2021			September 30, 2020					September 30, 2021
Net sales	¥	833,324		¥	758,881	+	9.8		$	7,440,393
Operating profit		58,728			19,192	+	206.0			524,357
Income before income taxes		79,326			22,808	+	247.8			708,268
Net income attributable
to Canon Inc.	¥	49,317		¥	16,658		+	196.1		$	440,330
Net income attributable to Canon Inc. shareholders per share:
- Basic	¥	47.16		¥	15.93	+	196.0		$	0.42
- Diluted		47.15			15.93	+	196.0			0.42

CONSOLIDATED RESULTS FOR THE NINE MONTHS

					(Millions of yen, thousands of U.S. dollars, except per share amounts)
					Actual									Projection
		Nine months		Nine months						Nine months		Year ending
		ended		ended		Change(%)		ended		December 31,		Change(%)
	September 30, 2021			September 30, 2020					September 30, 2021			2021
Net sales	¥	2,557,908		¥	2,214,508	+	15.5		$	22,838,464	¥	3,600,000		＋	13.9
Operating profit		206,561			34,314	+	502.0			1,844,295			272,000		＋	146.0
Income before income taxes		231,147			50,096	+	361.4			2,063,813			298,000		＋	128.7
Net income attributable
to Canon Inc.	¥	154,920		¥	29,729		+	421.1		$	1,383,214		¥	201,000		＋	141.2
Net income attributable to Canon Inc. shareholders per share:
- Basic	¥	148.16		¥	28.29	+	423.7		$	1.32	¥	192.23		＋	142.2
- Diluted		148.12			28.28	+	423.8			1.32			192.17		＋	142.2

					Actual
		As of			As of	Change(%)		As of
	September 30, 2021			December 31, 2020	September 30, 2021
Total assets	¥	4,752,215		¥	4,625,614		+	2.7		$	42,430,491
Canon Inc. shareholders' equity	¥	2,740,069	¥	2,575,031	+	6.4		$	24,464,902

Notes: 1. Canon's consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles.

2. U.S. dollar amounts are translated from yen at the rate of JPY112=U.S.$1, the approximate exchange rate on the Tokyo Foreign Exchange Market as of September 30, 2021, solely for the convenience of the reader.

Canon Inc.	30-2, Shimomaruko 3-chome,Ohta-ku,
Headquarter office	Tokyo 146-8501, Japan
	Phone: [phone]

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I. Operating Results and Financial Conditions

2021 Third Quarter in Review

Looking back at the third quarter of 2021, although the pace of economic recovery slowed in some regions due to the resurgence of coronavirus disease ("COVID-19") variants and the shortage of semiconductor chips, economic activities continued to recover as vaccines became widely available in each country. In the United States, although the pace of recovery in personal consumption slowed due to the renewed spread of infections, robust economic recovery continued in the wake of steady capital investment. In Europe, restrictions on economic activities were gradually eased in each country, and increasing personal consumption and expansion of capital investment led to the steady economic recovery. In China, personal consumption remained strong, but the economic recovery was moderate due to sluggish infrastructure investment and exports. In other emerging countries, economic activities continued to stagnate due to the spread of infections mainly in Southeast Asia. In Japan, capital investment stayed on a recovery track, but economic recovery remained moderate due to the ongoing State of Emergency.

Amid these conditions, in the markets in which Canon operates, although demand for office multifunction devices (MFDs) continued to recover, there was only a moderate recovery due to the shortage of semiconductor chips. For laser printers, demand remained at the same level as the previous year. For inkjet printers, demand in home use remained solid. For cameras, demand remained solid, mainly in mirrorless cameras. For medical equipment, despite delays in the installation of medical devices in some areas due to the resurgence of COVID- 19 infections, recovery continued thanks to sales activities with medical institutions. For lithography equipment, demand for both semiconductor lithography equipment and FPD (Flat Panel Display) lithography equipment remained solid.

The average values of the yen during the third quarter and the first nine months of the year were ¥110.10 and ¥108.59 against the U.S. dollar, respectively, a year-on-year depreciation of approximately ¥4 and year-on-year depreciation of approximately ¥1, and ¥129.86 and ¥129.89 against the euro, respectively, a year-on-year depreciation of approximately ¥6 and year-on-year depreciation of approximately ¥9.

As for the third quarter, unit sales of office MFDs were below those of the same period of the previous year due to the shortage of semiconductor chips. However, sales of services and consumables moderately recovered due to the gradual return toin-personoffice work. As for the Prosumer consisting of laser printers and inkjet printers, unit sales were below those of the same period of the previous year due tothe stagnation of production activity resulting from a resurgence of COVID-19 infections in Southeast Asia. However, sales of laser printer consumablesincreased significantly compared with the same period of the previous year, during which time demand had decreased. Forinterchangeable-lensdigital cameras, unit sales remained at around the same level as the previous year due to continued strong sales offull-framemirrorless cameras. As for network cameras, which are being used in a growing range of applications, sales increased due to the strengthening of sales activities. For medical equipment, sales increased mainly in Japan due to strong sales of computed tomography (CT) systems and diagnosticX-raysystems. While sales for semiconductor lithography equipment remained solid, sales for FPD lithography equipment were significantly above those of the same period of the previous year. Under these conditions,third-quarternet sales increased by 9.8%year-on-yearto ¥833.3 billion. Net sales for the first nine months of the year increased by 15.5%year-on-yearto ¥2,557.9 billion. Gross profit margin increased by 3.4 points to 46.6%.Third-quartergross profit increased by 18.4%year-on-yearto ¥388.0 billion. Operating expenses increased by 6.8%year-on-yearto ¥329.2 billion mainly due to the effects of exchange rate fluctuations, although the expense ratio improved significantly thanks to greater productivity and the results of structural reform. As a result,third-quarteroperating profit increased by 206.0% to ¥58.7 billion. Other income (deductions) increased by ¥17.0 billionyear-on-yearto ¥20.6 billion, due to such factors as valuation gain on securities, while income before income taxes increased by 247.8%year-on-yearto ¥79.3 billion and net income attributable to Canon Inc. increased by 196.1% to ¥49.3 billion. Operating profit for the first nine months of the year increased by 502.0% to ¥206.6 billion, while income before income taxes increased by 361.4% to ¥231.1

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billion and net income attributable to Canon Inc. for the first nine months increased by 421.1% to ¥154.9 billion.

Basic net income attributable to Canon Inc. shareholders per share was ¥47.16 for the third quarter, a year-on- year increase of ¥31.23, and ¥148.16 for the first nine months, a year-on-year increase of ¥119.87.

Results by Segment

Looking at Canon's third-quarter performance by business unit, in the Printing Business Unit, unit sales of office MFDs decreased compared with the same period of the previous year due to the shortage of semiconductor chips while demand for MFDs continued to recover. Although the imageRUNNER ADVANCE DX series enjoyed solid demand, it could not meet a demand due to a supply shortage. Sales of services and consumables increased due to a recovery of corporate activity. For equipment for the production printing market, the varioPRINT iX series, a high-speedsheet-fed color inkjet press, gained favorable reviews. Sales of services and consumables increased due to the recovery of corporate activity. As for laser printers, unit sales decreased compared with the same period of the previous year due to stagnation of production activity resulting from the resurgence of COVID-19 infections in Southeast Asia. Unit sales of consumables increased significantly compared with the same period of the previous year, during which time demand had decreased.For inkjet printers, unit sales were below those of the same period of the previous year, when demand from home use increased rapidly, due to stagnation of production activity. Although sales of consumables remained at the same level as the previous year, total sales ofinkjet printers decreased compared with the same period of the previous year. These factors resulted in total sales for the business unit of ¥459.2 billion, a year-on-year increase of 6.8%, while income before income taxes increased by 213.5%, a year-on-year to ¥62.1 billion. Sales for the combined first nine months of the year totaled ¥1,418.2 billion, a year-on-year increase of 9.0%, while income before income taxes totaled ¥182.7 billion, a year-on-year increase of 89.1%.

As for the Imaging Business Unit, unit sales of interchangeable-lens digital cameras were the same level as the previous yeardue to strong sales of the EOS R5 and EOS R6. In addition, sales of interchangeable lenses increased significantly due to the expansion of the lens product lineup. As for network cameras, despite the continued impact of COVID-19, sales increased mainly as a result of strengthening sales activities for such diversified applications as remote monitoring and monitoring of congested and confined spaces as well as conventional market needs including crime prevention and disaster monitoring tools. These factors resulted in total sales for the business unit of ¥153.8 billion, a year-on-year increase of 9.3%, while income before income taxes increased by 43.2% year-on-year to ¥17.7 billion. Sales for the combined first nine months of the year totaled ¥472.2 billion, a year-on-year increase of 32.6%, while income before income taxes totaled ¥56.6 billion, representing a shiftfrom a loss for the same period of the previous year to a profit.

As for the Medical Business Unit, although the shortage of semiconductor chips and the resurgence of COVID- 19 infections had an impact on business negotiations and installation in some regions, sales of CT systems and diagnostic X-ray systems increased mainly for strong sales in Japan. These factors resulted in total sales for the business unit of ¥115.7 billion, a year-on-year increase of 9.8%, while income before income taxes increased by 105.6% year-on-year to ¥10.2 billion. Sales for the combined first nine months of the year totaled ¥351.9 billion, a year-on-year increase of 12.3%, while income before income taxes totaled ¥25.7 billion, a year-on- year increase of 70.3%.

As for the Industrial & Others Business Unit, regarding semiconductor lithography equipment, demand remained solid in a wide range product. As a result, unit sales increased compared with the same period of the previous year. For FPD lithography equipment, there was growth in demand for panels. As a result, unit sales increased significantly compared with the previous year, when equipment installation stagnated due to circumstances related to COVID-19. These factors resulted in total sales for the business unit of ¥130.4 billion,

1. year-on-yearincrease of 25.6%. However, income before income taxes decreased by 69.6%year-on-yearto ¥1.5 billion asupfront investments for new businesses were carried out intensively in the third quarter. Sales for the combined first nine months of the year totaled ¥393.0 billion, ayear-on-yearincrease of 30.1%, while income before income taxes totaled ¥26.3 billion, ayear-on-yearincrease of 90.0%.
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Cash Flow

During the first nine months of 2021, cash flow from operating activities increased by ¥155.9 billion year-on- year to ¥350.0 billion due to a significant increase in profit and working capital improvement. Cash flow used in investing activities increased by ¥36.7 billion year-on-year to ¥148.4 billion mainly due to the acquisition of Redlen Technologies Inc. intended for key parts creation of CT systems. Accordingly, free cash flow increased by ¥119.3 billion compared with that of the previous year to ¥201.6 billion.

Cash flow from financing activities recorded an outlay of ¥140.0 billion mainly due to the repayment of long- term debt and dividend payout.

Owing to these factors, as well as the impact from foreign currency exchange adjustments, cash and cash equivalents increased by ¥74.6 billion to ¥482.2 billion from the end of the previous year.

Outlook

Looking at the global economy from the fourth quarter onwards, the progress of COVID-19 vaccinations is expected to support the resumption of economic activities. However, there are risks of delay in the supply of semiconductor chips and of tight supply due to high demand for international freight transport. Under these conditions, economic prospects continue to remain uncertain throughout the world. In this situation, the pace of the global economy is expected to recover moderately over the long term, supported by various economic measures and fiscal policies in each country and region.

In the markets in which Canon operates, for office MFDs, despite the impact of the delay in the supply of semiconductor chips, the office occupancy rate is expected to recover moderately. For laser printers, demand is expected to increase due to signs of recovery of demand from offices in addition in home use. For inkjet printers, demand is expected to remain solid due to print volumes resulting from remote work and education, which have become more commonplace due to the impact of the COVID-19 pandemic. As for interchangeable-lens digital cameras, the demand is expected to increase moderately compared with last year due to the need for high-quality image expression. Canon will strengthen the competitiveness of its full-frame mirrorless cameras and interchangeable lenses while reinforcing sales promotion efforts amid a shift to mirrorless cameras and improving the product mix. For network cameras, the market is expected to continue growing due to the stable expansion of sales markets and increasing demand for video analysis solutions. As for the medical equipment market, demand is expected to continue to recover due to progress in sales activities focusing on medical institutions, despite concerns about the impact of a resurgence in COVID-19 infections. For semiconductor lithography equipment, demand from a wide range of fields is expected to continue increasing.

With regard to currency exchange rates on which Canon bases its performance outlook for the fourth quarter, Canon anticipates exchange rates of ¥112 to the U.S. dollar and ¥130 to the euro, representing depreciation of approximately ¥3 against the U.S. dollar and depreciation of approximately ¥8 against the euro as the annual average rates of the previous year.

Taking into consideration solid demand, Canon's 2021 full-year projection on a consolidated basis is net sales of ¥3,600.0 billion, a year-on-year increase of 13.9%, which was maintained from its previous outlook. Full- year projection of operating profit is ¥272.0 billion, a year-on-year increase of 146.0%. Full-year projection of income before income taxes and net income attributable to Canon Inc. are ¥298.0 billion, a year-on-year increase of 128.7% and ¥201.0 billion, a year-on-year increase of 141.2%, which were maintained from its previous outlook due to valuation gain on securities.

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Consolidated Outlook

Fiscal year			Millions of yen
	Year ending	Change		Year ended		Change (%)
	December 31, 2021		December 31, 2020
	Previous Outlook (A)		Revised Outlook (B)	(B - A)		Results (C)		(B - C) / C
Net sales	3,600,000	3,600,000			-	3,160,243	+13.9%
Operating profit	283,000	272,000			(11,000)	110,547	+146.0%
Income before income taxes	298,000	298,000			-	130,280	+128.7%
Net income attributable to
Canon Inc.	201,000	201,000			-	83,318	+141.2%

This document contains forward-looking statements with respect to future results, performance and achievements that are subject to risk and uncertainties and reflect management's views and assumptions formed by available information. All statements other than statements of historical fact are statements that could be considered forward-looking statements. When used in this document, words such as "anticipate," "believe," "estimate," "expect," "intend," "may," "plan," "project" or "should" and similar expressions, as they relate to Canon, are intended to identify forward-looking statements. Many factors could cause the actual results, performance or achievements of Canon to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements, including, among others, changes in general economic and business conditions, changes in currency exchange rates and interest rates, introduction of competing products by other companies, lack of acceptance of new products or services by Canon's targeted customers, inability to meet efficiency and cost reduction objectives, changes in business strategy and various other factors, both referenced and not referenced in this document. A detailed description of these and other risk factors is included in Canon's annual report on Form 20-F, which is on file with the United States Securities and Exchange Commission. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. Canon does not intend or assume any obligation to update these forward-looking statements.

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