Olympus Corp Ord

Hello everyone, I'm Stefan Kaufmann, CEO, and welcome to today's earnings call. I'm pleased to see you all today. I'm glad to be able to start the earnings call of the first quarter on a positive note. In the first three months of fiscal year 25, we have recovered as planned and have achieved solid growth in both ESD and TSD. We have controlled SG&A well and therefore our consolidated results are well on track and in line with our expectations. The EVUS X1 GI endoscopy system remains a strong growth driver, but we also see good momentum in GI endotherapy, urology and respiratory, especially in North America. I'm confident that we will keep the good momentum throughout fiscal year 25. The ongoing remediation and quality transformation program Elevate is continuing to progress well, and we continue to meet our commitments to the FDA. Revenue increased by 15% on a consolidated basis year on year, accelerated by the tailwind of the depreciation of the yen. In medical service, we saw steady growth in all regions, I'm particularly happy about our performance in North America, where we achieved 32% growth year on year with strong sales in all our strategic focus therapeutic areas, GI, urology, and respiratory. We have also continued to see strong growth in emerging markets, especially in ESD, achieving over 20% growth year on year. On the other hand, The market situation in China, which continues to be affected by the anti-corruption campaign, volume-based procurement and increasing global competition, seems to be more challenging and persistent than expected. There is uncertainty in some areas, and we are actually aware of the recent sharp exchange rate fluctuations. Although we continue to carefully monitor the situation, looking at the results achieved in the first quarter, we have not changed our guidance for fiscal year 25 from our previous announcement. With a solid pipeline of growth drivers in our defined clinical focus areas and our proven business model, we anticipate a continued sound recovery and stable operations overall in fiscal year 25. We continue to maintain appropriate cost controls while continuing to invest strategically in strengthening our operational infrastructure, including QRA, R&D and initiatives to further improve productivity. After this short high level introduction, let me hand it over to our CFO, Tatsuya, who will lead you through our detailed financials for the first quarter. Thank you.

Hello, everyone. I am Tatsuya Izumi, CFO. I would like to provide a consolidated financial results and business review for the first quarter of fiscal year 2025. As we disclosed on July 12, we completed the transfer of the orthopedic business in July. As a result, we have classified the orthopedic business as a discontinued operation, so today, my explanations will focus on continuing operations. Consolidated revenue increased by 15% year-over-year, with yen depreciation serving as a tailwind. As Stefan explained, the medical business reached the record high for the first quarter, led by strong sales in North America, where Avis X1 GI endoscopy system, et cetera, performed well. All three focus areas, GI, urology, and respiratory grew double digits. Operating profit increased by 21% year-over-year to 27.5 billion yen, due mainly to revenue growth and improvement of gross profit, despite increased expenses in R&D for the next-generation endoscopy system, etc., and higher costs associated with the holistic remediation and transformation program elevated. Adjusted operating profit increased by 32% year-over-year to 37.2 billion yen, with an adjusted operating margin improving 2.1 points to 15.9%. As you can see, these financial results were largely supported by Forex. However, even after adjusting for Forex, revenue increased by 3% and adjusted operating profit increased by 14%. Our initial full-year forecasts remain unchanged despite some adjustments due to the orthopedic business being classified as a discontinued operation. Both revenue and adjusted operating profit are progressing smoothly against the initial forecasts.

Next, let us look at the business situation in each segment. First is the ESD. Revenue grew 16% year-on-year. Adjusted operating profit, excluding other income and expenses, significantly increased to 32.6 billion yen year-on-year, with an adjusted operating margin of 22.1%, an improvement from the same period from the last fiscal year. I would like to now give a review of the first quarter performances for each sub-segment. In GI endoscopy, cells in North America grew 62% led by strong cells of EVSX1 GI endoscopy system. On the other hand, cells declined in China due to the impact of the anti-corruption campaign, among others. In surgical endoscopy, cells declined in North America while increasing in Europe. Sales of the surgical endoscopy system, Visra Elite 3, remained solid. In medical service, we saw steady growth in all regions, especially in North America and Europe, due to stable revenue streams based on service contracts, including maintenance services and an increase in new accounts. Next, in the TSD, revenue grew 13% year-on-year. Adjusted operating profit, excluding other income and expenses, increased to 13.9 billion yen year-on-year, with an adjusted operating margin of 16%, an improvement similar to ESD. Performance for each sub-segment shows that all three focus areas, GI endotherapy, urology, and respiratory, grew, primarily in North America and Europe. In GI endotherapy, cells increased in hepatopancreatobiliary and hemostasis-related products. In urology, the cell's increase was led by saltive superpulse laser system for urinary tract stone management and resection electrodes for benign prostatic hyperplasia BPH treatments. In respiratory, we saw strong performance in the EBUS scopes and the therapeutic devices mainly used in EBUS TBNA. This is the financial position and balance sheet at the end of June 2024. Total assets decreased by 18.8 billion yen compared to the end of the previous fiscal year. Major factor for this is decrease in cash and cash equivalents due to the repayment of long-term debts and the dividend payments. Additionally, both assets held for sale and liability directly related with assets for sale increased due to the transfer of orthopedic business. fiscal year. Status of cash flows. Cash flow may appear to have decreased significantly because the impact of the transfer evident was included in the same period for the previous fiscal year, but adjusted free cash flow excluding external factors improved year-on-year. Looking at each item, Cash flow from opening activities was positive, 23.3 billion yen. It increased year-on-year due to mainly to an increase in profit before tax and depreciation and amortization. Cash flow from investing activities was negative, 15.2 billion yen due to mainly to expenditures associated with acquisition of intangible fixed assets, intangible assets. Tangible fixed assets, intangible assets, and investment securities. Free cash flow was positive 8.1 billion yen. Adjusted free cash flow was positive 14.8 billion yen, excluding external factors such as acquisitions, transfers, and reorganizations. Cash flow from finance activities was negative 77.5 billion yen, due mainly to the repayment of long-term debts and dividend payments. Resulting cash and cash equivalents stood at 276 billion yen at the end of June 2024. That concludes my explanation. Thank you for your attention.