Olympus Corp Ord

Hello, everyone. I'm Yasuo Takeuchi, Representative Executive Officer. I would like to thank you for participating in this earnings briefing for the third quarter of fiscal year ending March 2025. First, our business. The business continued to grow steadily in the third quarter, driven by GI endoscopy in North America. Consolidated revenue increased by 9% year-on-year, accelerated by the tailwind of yen depreciation. North America posted strong growth of 22% year-on-year with double-digit growth in all three focus areas of GI, urology, and respiratory. Strong poor customer demand, particularly in the U.S., drove overall growth, mitigating headwinds in China, including the continued impact of the anti-corruption campaign, volume-based procurement, and increased local competition, as well as stagnation of budget execution and delays in business negotiations in Japan and budget cuts in the U.K., We have also continued to see strong growth in emerging markets, especially in ESD, achieving over 20% growth year-on-year. Quality and Regulatory Transformation Project Elevate is continuing to progress well to meet our commitments to the U.S. Food and Drug Administration, FDA. We have revised the forecast for the fiscal year 2025, considering the progress up to the third quarter and the external environment, particularly in China. We will continue to monitor the situation closely and respond appropriately and promptly, working towards achieving the forecasts. Today, I would like to announce changes to more efficient and patient and customer-centric structure. As we continue to advance our global target operating model to enhance our entire company architecture and business processes, we will realign our divisional structure from April 2025 to be more customer-centric. We will continue our journey to focus on therapeutic areas by improving focus on each business unit BU. This creates a direct connection between business unit global management and local sales teams, fostering collaboration, enhancing alignment between global and regional strategies, and ultimately improving effectiveness in execution. As part of this evolution, the endoscopic solutions division, ESD, and the therapeutic solutions division, TSD, will transition into the new divisions of the gastrointestinal solutions division, GIS, and the surgical and interventional solutions division, SIS. GIS includes GI endoscopy, GI endotherapy, medical services, and SIS includes urology, respiratory, and surgical. Through this reorganization, we aim to operate with greater speed, ensure consistency among the regions, break down silos, and reinforce our commitment to patient and customer-centric growth.

GIS will now have a full portfolio of solutions for GI procedures within one division. We aim to seamlessly integrate a broad portfolio of endotours, endoscopes, endotherapy devices, reprocessing, and service solutions with a cloud-based suite of applications. With our unique GI Solutions portfolio, we are well positioned to unlock the full power of endoscopy for the benefit of patients and customers. We are confident that fulfilling our unique customer promise will have positive impact on our market penetration, unlock additional recurring revenue streams, and foster strong customer loyalty. Let us take a closer look at our upcoming intelligent endoscopy ecosystem. We have established Olicense as our new sub-brand of a primarily cloud-based integrated suite of endoscopic applications and solutions. Our preparations to commercialize the first CAD AI products in selected countries in Europe and the US are in full swing. This will be an exciting and strategically important launch for the new GIS division. Through the Elevate initiative, we have been working on shortening the lead time to get the clearance, approval, and to launch products. As a result, we have been able to get several strategically important products cleared, approved more quickly, as shown on this slide. I have already mentioned the upcoming launch of the new Ollisense CAD AI products. Moreover, we are making progress on the FDA submission for the EDOF scopes and our plans for local manufacturing in China. We see growth potential for EDOF scopes in both the US and Chinese markets based on the success of the scopes in the markets where they are already available. In addition, the EU ME3 endoscopic ultrasound processor has received FDA clearance. We expect this to boost sales in GI and the respiratory in the US going forward. And we expect that the outpatient endoscopy system, OTV-S500, which has been approved in Europe and cleared in the United States, will also contribute to the SIS division in the subsegments of urology. We are confident that the initiatives through Project Elevate will continue to have positive effects for the future clearance and approvals and submissions and will lead to sustainable growth. Regarding our future disclosure plans for the Business Division reorganisation, we plan to disclose a forecast for the fiscal year ending March 2026 under new business segments on the fourth quarter next earning call And starting with the first quarter earnings score for fiscal year 2026, results for each new segment will be disclosed. We will also disclose the figures for ESD and TSD as reference information during fiscal year 2026. With that brief introduction, I'll hand over to CFO Izumi, who will lead you through the financials for the third quarter.

Hello, everyone. I am Tetsuya Izumi, CFO. I will provide consolidated financial results and the business review for the third quarter of FY 2025. Consolidated revenue increased by 9% year-on-year to 725.2 billion yen, with yen depreciation serving as a tailwind. Revenue growth was driven by North America, which achieved double-digit growth in all three focus areas, GI urology and respiratory, led by sales of the EVUS X1 GI endoscopy system. Revenue reached a record high for the third quarter and the first nine months. Operating profit increased down year to $108.8 billion due to a decrease in losses related to Barron Medical Technologies, which were recorded in the previous fiscal year, and the tailwind from foreign exchange. Note that the foreign exchange impact of $16.9 billion on operating profit included the impact of the elimination of the unrealized gains on inventories of $4.4 billion as a positive factor. Adjusted OP increased by 16% to $128.2 billion, with an adjusted operating margin improving 1.2 points to 17.7%. For full-year forecast, revenue and each profit level have been revised considering the progress up to the third quarter and the external environment, particularly in China. Further details will be provided starting on the slide 14. Next, the business situation by segment. First is ESD. Revenue grew 10% year-on-year. Adjusted OP, excluding other income and expenses, increased to $106.8 billion, with an adjusted operating margin of 23.2%, representing a year-on-year improvement. I will now give a review for each sub-segment. In GI endoscopy, sales in North America grew 39% on strong sales of the EVIX-XY GI endoscopy system. Sales declined in China due to the impact of the anti-corruption campaign and others. In surgical endoscopy, sales declined in China while they increased in North America, Europe, and APAC. Growth was driven by the solid performance of Viscera Elite 3 surgical endoscopy system in APAC, combined with favorable foreign exchange effect. Medical service saw steady growth across all regions, especially in Europe and North America, due to stable revenue streams based on service contracts, including maintenance services and an increase in new accounts. Next is TSD. Revenue grew 7%. Adjusted operating profit, excluding other income and expenses, increased to $49.9 billion, with an adjusted operating margin of 18.8%, which represents an improvement similar to ESD. For performance by subsegment, all three focus areas of GI endotherapy, urology, and respiration all grew primarily in North America and Europe. In GI endotherapy, sales increased in 2020. HPB-related products. In urology, the growth was led by a saltive superpulsed laser system for urinary tract stone management and resection electrodes for BPH treatments. In respiratory, we saw strong performance in the EBIS scopes and therapeutic devices mainly used for EBIS TBNA. This is financial position as of the end of last year. Total assets decreased $127.3 billion from the end of the previous fiscal year. The main reason was a decrease in cash-in-cash equivalents due to share buybacks and repayment of debts. Equity decreased due to share buybacks and dividend payouts, while an increase in profit was posted as a positive factor. The equity ratio rose to 52.2%, up 2.8 points from the end of the previous fiscal year.