Japan Lifeline : FYE March 2024 1Q Financial Results (with transcript)

Japan Lifeline Co., Ltd.

Q1 Financial Results Briefing for the Fiscal Year Ending March 2024

August 3, 2023

Event Summary

[Company Name]	Japan Lifeline Co., Ltd.
[Company ID]	7575-QCODE
[Event Language]	JPN
[Event Type]	Earnings Announcement
[Event Name]	Q1 Financial Results Briefing for the Fiscal Year Ending March 2024
[Fiscal Period]	FY2024 Q1
[Date]	August 3, 2023
[Number of Pages]	18
[Time]	10:00 - 10:32
	(Total: 32 minutes, Presentation: 22 minutes, Q&A: 10 minutes)
[Venue]	Dial-in
[Venue Size]
[Participants]
[Number of Speakers]	3
	Atsuhiro Suzuki	Senior Executive Vice President and COO
	Kenji Yamada	Senior Vice President, Executive Manager of
		Corporate Administration Headquarters
	Takeyoshi Egawa	Vice President, Senior Manager of Business
		Administration Department
[Analyst Names]*	Yuki Yamazaki	Daiwa Securities
	Tomoko Yoshihara	UBS Securities Japan

*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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Japan	050.5212.7790	North America	1.800.674.8375
Tollfree	0120.966.744	Email Support	[e-mail]

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Presentation

Moderator: Thank you very much for your patience. It is time to begin the conference. Thank you for joining us today at the financial results briefing of JAPAN LIFELINE CO., LTD for Q1 of the fiscal year ending March 31st, 2024.

Present at the briefing today are Mr. Atsuhiro Suzuki, Senior Executive Vice President and COO; Mr. Kenji Yamada, Senior Vice President, Executive Manager of Corporate Administration Headquarters; and Mr. Takeyoshi Egawa, Vice President, Senior Manager of Business Administration Department.

Director Egawa will now give a 20-minute presentation on the financial results for Q1 of the fiscal year ending March 2024, followed by a question-and-answer session. The entire meeting is expected to last no longer than 60 minutes. Please refer to the Company's website for the financial results presentation materials.

Before we begin the teleconference, we have an announcement to make. This presentation may contain forward-looking statements based on current expectations, all of which are subject to risks and uncertainties. Please be aware that the actual results may differ from the forecast.

We will now start the presentation.

Egawa: My name is Egawa. I would like to report and discuss our Q1 financial results using the presentation handouts.

First, I would like you to look at page two. There are two highlights regarding profit and loss for Q1.

The first point is about sales. During this quarter, sales were expected to decrease by about JPY1.2 billion compared to the same period last year. On the contrary, the market bounced back and cerebrovascular sales were strong, as a result, the sales decreased by JPY14 million or almost on par with the previous year's results.

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The second point relates to profit. The increase in sales of in-house products and the decrease in loss on disposal and write-down of inventories have worked to boost profits. This resulted in a significant increase in quarterly operating profit and net profit.

This is followed by highlights of sales by line item.

Let's start with cardiac rhythm management devices. As for rhythm devices, sales increased by 11.4% compared to the same period last year, due to strong sales of S-ICDs as a result of sales activities and steady sales of pacemakers.

Next, I would like to move on to EP/ablation. For EP/ablation, we had expected a double-digit or worse negative result due to the change in the commercial distribution of Baylis products. The increase in AF cases was expected to be about 6% as planned, but the result was an increase of about 9%, which exceeded the forecast. EP/ablation ended the period with a decrease of negative 5.9% compared to the same period last year.

The third topic is cardiovascular-related. The profit increased by 9.2% compared to the same period last year. Cardiovascular-related sales increased 9.2% compared to the same period last year, mainly due to the strong performance of abdominal stent grafts, which increased its market share, and a significant increase in cerebrovascular-related sales, a new area of business.

The fourth topic is gastrointestinal. In the gastrointestinal business, the coronary intervention business, including Orsiro, was downsizing. Although we had expected a decrease in sales of about JPY300 million, the contribution of new products in the biliopancreatic field increased our market share, resulting in a 36.4% decrease in sales compared to the same period last year.

The third guidance in the summary shows that there are no changes to the forecast at this time and the forecast will remain unchanged, although operating profit and quarterly net profit were strong and significantly exceeded the forecast.

The reason for this is the increase in the number of cases, but we are still in the process of analyzing data to determine whether this is temporary or ongoing, and it is difficult to predict at this time.

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I would like to move on to page three. Here are the details.

As for the breakdown of the sales transition, as I mentioned earlier, sales decreased by JPY914 million due to the change in the commercial distribution of Baylis products and by JPY302 million due to the downsizing of the coronary intervention business, but there were three main positive factors.

With the increase in the number of AF cases, the sales of in-house products for EP/ablation reached a record high for quarterly performance. Sales increased by JPY633 million over the previous year.

Rhythm devices also performed well. Rhythm devices recorded strong sales, an increase of JPY352 million over the previous year. We also made promising progress in the new areas of neurovascular and gastrointestinal. The total sales of the two fields increased by JPY195 million.

Although some factors contributed to the decrease in sales, these large increases resulted in a 0.1% decrease in sales to JPY12.954 billion.

Second, operating profit increased by 17.3%. The main factor was a 5.2 percentage point increase in the ratio of in-house products. It was 54.6% in the previous year, now it reached 59.8%. This improved the gross profit margin by 3.4 percentage points due to the sale of in-house products with high gross profit margins.

The second section. Regarding the second item, there will be a decrease in loss on disposal and write-down of inventory. This is the reason for the JPY118 million increase in profit.

The third is a decrease in SG&A expenses. Although SG&A expenses increased due to an increase in sales activities, there were special factors that boosted profits. In total, SG&A decreased by JPY39 million.

As a result, operating profit increased by 17.3% to JPY3.176 billion.

Net profit for the quarter increased by 19.7% to JPY2.330 billion, landing at JPY2.330 billion, influenced by the increase in operating profit.

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