Medical System Network : Consolidated Financial Results for the Nine Months Ended December 31, 2021 (Japanese GAAP)

Note: This document is a translation of the original Japanese version and provided for reference purposes only. In the

event of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail.

Consolidated Financial Results

for the Nine Months Ended December 31, 2021 (Japanese GAAP)

		February 4, 2022
Company name:	Medical System Network Co., Ltd.	Listing: Tokyo Stock Exchange
Stock code:	4350	URL: https://www.msnw.co.jp/eng/
Representative:	Inao Tajiri, President and Representative Director
Contact:	Eiji Hirashima, Executive Officer, Director of Finance and Director
Tel:	[phone]

Scheduled date for quarterly report submission:	February 8, 2022
Scheduled date for dividend payment:	－
Preparation of supplemental explanatory materials:	Yes
Results briefing to be held:	None

(Amounts of less than one million yen are rounded down)

1. Consolidated Financial Results for the Nine Months Ended December 31, 2021 (April 1 to December 31, 2021)

(1) Consolidated operating results

(Percentages indicate YoY change)

	Net sales		EBITDA		Operating profit	Ordinary profit	Profit attributable to
			owners of parent
Nine months ended	Million yen		%	Million yen		%	Million yen	%	Million yen	%	Million yen	%
79,868		2.2	5,173		5.1	3,063	10.5	3,485	25.8	2,144	6.5
December 31, 2021
Nine months ended	78,167		(1.0)	4,922		41.6	2,773	125.7	2,770	129.2	2,013	516.6
December 31, 2020

Note: Comprehensive income for the nine months ended December 31, 2021 was 2,155 million yen (+7.6% YoY), and comprehensive income for the nine months ended December 31, 2020 was 2,003 million yen (+659.0% YoY).

Note: EBITDA = (operating profit + depreciation + goodwill amortization)

	Earnings per share	Diluted earnings
	per share
Nine months ended	Yen	Yen
71.08	－
December 31, 2021
Nine months ended	66.37	－
December 31, 2020

Note: Please refer to "Appropriate use of earnings forecast and other special notes 2" for details of earnings per share calculations.

(2) Consolidated financial position

	Total assets	Net assets	Equity ratio	Net assets per share
As of	Million yen	Million yen	%	Yen
65,239	13,055	20.0	432.42
December 31, 2021
As of	64,448	11,187	17.3	370.23
March 31, 2021

Reference: Shareholders' equity amounted to 13,049 million yen as of December 31, 2021 and 11,163 million as of March 31, 2021.

Note: Please refer to "Appropriate use of earnings forecast and other special notes 2" for details of shareholders' equity, equity ratio, and net assets per share calculations.

2. Dividends

		Dividends per share
	End of Q1	End of Q2	End of Q3	Year-end	Total
Fiscal year ended	Yen	Yen	Yen	Yen	Yen
－	5.00	－	5.00	10.00
March 31, 2021
Fiscal year ending	－	5.00	－
March 31, 2022
Fiscal year ending				7.00	12.00
March 31, 2022 (forecast)

Note: Revisions to the Company's most recently announced dividend forecast: Yes

The year-end dividend for the fiscal year ending March 31, 2022 consists of an ordinary dividend of 6 yen and a commemorative dividend of 1 yen (commemorating the 20th anniversary of the Company's listing)

3. Consolidated Earnings Forecast for the Fiscal Year Ending March 31, 2022 (April 1, 2021 to March 31, 2022)

(Percentages indicate YoY change)

											Profit attributable	Earnings
	Net sales		EBITDA		Operating profit	Ordinary profit	to owners of
			per share
											parent
	Million yen		%	Million yen		%	Million yen	%	Million yen	%	Million yen		%	Yen
Full-year	106,500		2.2	6,800		5.8	3,800	10.8	4,200	20.7	2,300		4.6	76.23
Note: Revisions to the Company's most recently announced consolidated earnings forecast: Yes
Note: EBITDA = (operating profit + depreciation + goodwill amortization)

*Notes

(1) Changes in significant subsidiaries during the period under review: None

(Transfers of specified subsidiaries associated with changes in the Company's scope of consolidation) Newly added: None

Excluded: None

1. Distinctive accounting methods applied when preparing quarterly consolidated financial statements: None
2. Changes in accounting policies, accounting estimates and retrospective restatements

1.	Accounting policy changes due to accounting standard revisions, etc.:	Yes
2.	Other accounting policy changes:	None
3.	Changes in accounting estimates:	None
4.	Retrospective restatements:	None

Note: Please refer to "(3) Notes to Quarterly Consolidated Financial Statements (Changes in accounting policies)" within "2. Quarterly Consolidated Financial Statements and Primary Notes" on page 8 of the attached materials for details.

(4) Number of shares outstanding (common stock)
1.	Shares outstanding	As of December 31, 2021	30,642,600	As of March 31, 2021	30,642,600
	(including treasury stock)
2.	Treasury shares outstanding As of December 31, 2021	464,055	As of March 31, 2021	489,055
3.	Period-average shares
Nine months ended	30,168,454	Nine months ended	30,336,063
	outstanding (cumulative
	December 31, 2021	December 31, 2020
	quarterly figures)

Note: Please refer to "Appropriate use of earnings forecast and other special notes 2" for details of calculation method regarding period-end treasury stock numbers and period-average shares outstanding (cumulative quarterly figures).

*The financial information in this quarterly report is not subject to review by certified public accountants or auditing firms.

*Appropriate use of earnings forecast and other special notes

1. The earnings forecasts and other forward-looking statements contained in this document are based on information currently available to the Company, and certain assumptions it considers reasonable, but are not intended to be a promise that the Company will achieve. Actual results may vary materially from forecasts due to a variety of factors. For matters concerning earnings forecasts, please refer to page 3 of the attached materials "1. Qualitative Information on Quarterly Financial Performance (3) Explanation of Consolidated Earnings Forecasts and Other Projections."
2. In the quarterly consolidated balance sheets, the Company's shares held as trust assets of the Board Benefit Trust (BBT) are recorded as treasury stock. They are included in treasury stock in calculations of earnings per share, equity ratio, net assets per share, shareholders' equity, period-end treasury stock numbers, and period-average shares outstanding (cumulative quarterly figures).

Medical System Network Co., Ltd.(4350) Consolidated Financial Results for the Nine Months Ended December 31, 2021

Accompanying Materials - Contents
1. Qualitative Information on Quarterly Financial Performance..........................................................................................	2
(1)	Explanation of Operating Results .................................................................................................................................	2
(2)	Explanation of Financial Position..................................................................................................................................	3
(3)	Explanation of Consolidated Earnings Forecasts and Other Projections .....................................................................	3
2. Quarterly Consolidated Financial Statements and Primary Notes .................................................................................	4
(1)	Consolidated Balance Sheet ........................................................................................................................................	4
(2)	Consolidated Statement of Income and Consolidated Statement of Comprehensive Income......................................	6
(3)	Notes to Quarterly Consolidated Financial Statements ................................................................................................	8
(Notes to going concern assumptions)...........................................................................................................................	8
(Notes in the event of significant changes in shareholders' equity)................................................................................	8
(Changes in accounting policies) ...................................................................................................................................	8
(Segment information)....................................................................................................................................................	9

1

Medical System Network Co., Ltd.(4350) Consolidated Financial Results for the Nine Months Ended December 31, 2021

1. Qualitative Information on Quarterly Financial Performance

(1) Explanation of Operating Results

During the nine months ended December 31, 2021, the Company recorded consolidated net sales of 79,868 million yen (+2.2% YoY), operating profit of 3,063 million yen (+10.5%YoY), and ordinary profit of 3,485 million yen (+25.8% YoY). There was solid growth in the number of new network affiliates in the Pharmaceutical Network Business, and while prescription unit price fell in the Dispensing Pharmacy Business, the number of prescriptions recovered to a certain extent. Profit attributable to owners of parent was 2,144 million yen (+6.5% YoY), due to gains on the sale of investment securities and a reduction in corporate tax burden as a result of the absorption-type merger with the Company's consolidated subsidiary, Home-Visit Nursing Care Station Himawari Co., Ltd., in July 2021.

Results by segment were as follows. Net sales for individual segments include intersegment sales.

1) Community Pharmacy Network Segment

In the Community Pharmacy Network Segment, we aim to provide value throughout the entire pharmaceutical supply chain. Our businesses include a pharmaceutical network to support pharmacy management, dispensing pharmacy operations, pharmaceutical manufacture and marketing, and a digital shift business using the communication app LINE.

In the Pharmaceutical Network Business, the environment surrounding the pharmacy industry has become increasingly severe as the NHI drug price list, which was previously revised every other year, is subject to the annual revision from April 2021. The number of new network affiliates continued to post solid growth amid mounting needs for operational stability in these circumstances. As of December 31, 2021, network affiliates totaled 7,003, comprising 424 Group dispensing pharmacies and 6,579 general network affiliates (an increase of 887 from March 31, 2021).

In the Dispensing Pharmacy Business, while the prescription unit price fell, the number of prescriptions recovered to a certain extent. In December 2021, as a new store format, we opened two pharmacies inside train stations in Fukuoka Prefecture that accept prescriptions from a wide range of medical institutions by utilizing the prescription transmission function of our official LINE account "Tsunagaru Pharmacy". As of December 31, 2021, the Company had 424 dispensing pharmacies, one care plan center, and eight drug/cosmetic stores.

In the Manufacture and Market Pharmaceuticals Business, we launched seven products (12 ingredients) in the nine months ended December 31, 2021, and had 80 products (41 ingredients) available as of December 31, 2021.

In the Digital Shift Business, as of the end of December 2021, the number of registered LINE users exceeded 250,000, with 745 pharmacies using the service (1,425 pharmacies have placed orders).

As a result, segment sales for the nine months ended December 31, 2021 were 75,986 million yen (+2.2% YoY) and operating profit was 4,663 million yen (+7.7% YoY).

2) Leasing and Facility-related Segment

In the Leasing and Facility-related Segment, while real estate lease revenue was generally solid, and orders for construction projects increased, occupancy rates at serviced residences for the elderly were sluggish. As a result, segment sales were 2,461 million yen (+12.1% YoY) and operating profit was 53 million yen (+55.5% YoY).

As of December 31, 2021, occupancy rates were stable at three of our five serviced residences for the elderly. At the remaining two, Wisteria Senri-Chuo had an occupancy rate of 78.1% (64 out of 82 units occupied), and Wisteria Minami-Ichijo had an occupancy rate of 69.8% (81 out of 116 units occupied). We plan to carry out marketing activities to reach our fiscal year-end target occupancy rate of 90%, while taking care to prevent COVID-19 infections.

3) Meal Catering Segment

In the Meal Catering Segment, the number of meals supplied fell during the COVID-19 pandemic, but gross profit improved as we changed suppliers. Segment sales were 1,752 million yen (-6.5% YoY) and operating profit was 7 million yen (operating loss of 2 million yen in the same period of the previous fiscal year).

2