Notice: This document has been translated from Japanese original for reference purpose only, without any warranty as toits accuracy or as to the completeness of the information. The Japanese original version is the sole official version.
February 9, 2018

Summary of Consolidated Financial Results for the Third Quarterof Fiscal Year Ending March 31, 2018
(Nine Months Ended December 31, 2017)[Japanese GAAP]
Company name: EM SYSTEMS CO., LTD.
Listing: Tokyo Stock Exchange, First Section
Stock code:
4820
URL: http://www.emsystems.co.jp
Representative: Kozo Kunimitsu, Chairman and CEO
Contact:
Megumi Seki, Corporate Officer, General Manager of Administration Department
Tel: +81-6-6397-1888
Scheduled date of filing of Quarterly Report:
February 13, 2018
Scheduled date of payment of dividend:
Preparation of supplementary materials for quarterly financial results: None
Holding of quarterly financial results meeting:None(All amounts are rounded down to the nearest million yen)

1. Consolidated Financial Results for the Third Quarter Ended December 31, 2017
(April 1, 2017 – December 31, 2017)(1) Consolidated operating results
Net sales
Million yen(Percentages represent year-on-year changes)
Profit attributable toOrdinary profit
owners of parent

Operating profit%

Million yen%

Nine months ended Dec. 31, 2017
10,448
6.2
2,315
30.6
2,785
27.2
Nine months ended Dec. 31, 2016
9,843
3.6
1,773
54.9
2,189
42.8
Note: Comprehensive income (million yen)
Nine months ended Dec. 31, 2017: 1,870 (up 31.5 %)Nine months ended Dec. 31, 2016: 1,422 (up 17.4%)

%

1,861
1,436

29.6
19.5

Net income per share
Nine months ended Dec. 31, 2017
Nine months ended Dec. 31, 2016

Million yen%

Million yen

Diluted net income per share

Yen

Yen

104.8982.01

104.4381.28(2) Consolidated financial position
Total assets

Net assets

Million yen

As of Dec. 31, 2017
As of Mar. 31, 2017
Reference: Shareholders’ equity (million yen)

21,014
21,348
As of Dec. 31, 2017:

Net assets per share

Equity ratio

Million yen

15,441
14,063
15,307

Yen

%

72.8
65.4
As of Mar. 31, 2017:861.28790.96
13,964

2. Dividends
1Q-endDividend per share
3Q-end2Q-endYen

Yen

Year-end

Yen

Total
Yen

Yen

Fiscal year ended Mar. 31, 2017
8.00
23.00
31.00
Fiscal year ending Mar. 31, 2018
13.00
Fiscal year ending Mar. 31, 2018
12.00
(forecast)
Note: Revisions to the most recently announced dividend forecast: Yes
Regarding revisions to the dividend forecast, please refer to the press release “Announcement for dividends from surplus(dividend increase)” (Japanese version only) that was announced today (February 9, 2018). Moreover, the company plans to
conduct a 2-for-1 stock split effective March 1, 2018 as announced in the release titled “Stock split and partial revision to
Articles of Incorporation”(Japanese version only) announced on the same day (February 9, 2018). The dividend forecast for
the fiscal year ending March 2018 is calculated based on the number of shares after the stock split. The dividend forecast
calculated based on the number of shares before the stock split is as follows: Year-end dividend: ¥24, Annual dividend: ¥37.

3. Consolidated Earnings Forecasts for the Fiscal Year Ending March 31, 2018 (April 1, 2017 – March 31, 2018)
Net sales
Million yen

Operating profit%

Million yen(Percentages represent year-on-year changes)
Profit attributable to
Net income perowners of parent
share

Ordinary profit%

Million yen%

Yen

Full year
13,835
1.2
2,600
0.1
3,205
1.4
Note: Revisions to the most recently announced consolidated earnings forecasts: None%

Million yen

2,137

1.0

123.08

* Notes(1) Changes in significant subsidiaries during the period (changes in scope of consolidation): None
(2) Application of special accounting methods for presenting quarterly consolidated financial statements: Yes
Note: Please refer to “2. Quarterly Consolidated Financial Statements and Notes, (3) Notes to Quarterly Consolidated
Financial Statements, Application of Special Accounting Methods for Presenting Quarterly Consolidated Financial
Statements” on page 9 of the attachments for further information.

(3) Changes in accounting policies and accounting-based estimates, and restatements
1) Changes in accounting policies due to revisions in accounting standards, others: None
2) Changes in accounting policies other than 1) above: None
3) Changes in accounting-based estimates: None
4) Restatements: None

(4) Number of outstanding shares (common stock)1) Number of shares outstanding at the end of period (including treasury shares)
As of Dec. 31, 2017:18,173,700 shares

As of Mar. 31, 2017:18,055,900 shares

As of Mar. 31, 2017:

400,954 shares

2) Number of treasury shares at the end of period
As of Dec. 31, 2017:

400,977 shares

3) Average number of shares outstanding during the period
Nine months ended Dec. 31, 2017:

17,748,568 shares

Nine months ended Dec. 31, 2016: 17,521,634 shares* The current quarterly summary report is not subject to quarterly review procedures.
* Explanation of appropriate use of earnings forecasts, and other special items
Forecasts of future performance in this report are based on assumptions judged to be valid and information available to theCompany’s management at the time the materials were prepared. Actual results may differ significantly from these forecasts for anumber of reasons.

EM SYSTEMS CO., LTD. (4820) Financial Results for the Third Quarter of FY3/18

Contents of Attachments
1. Qualitative Information on Quarterly Consolidated Financial Performance2(1) Explanation of Results of Operations

2(2) Explanation of Financial Position

4(3) Explanation of Consolidated Earnings Forecasts and Other Forward-looking Statements

4

2. Quarterly Consolidated Financial Statements and Notes

5(1) Quarterly Consolidated Balance Sheet

5(2) Quarterly Consolidated Statements of Income and Comprehensive Income

7

Quarterly Consolidated Statement of Income
For the Nine-month Period

7

Quarterly Consolidated Statement of Comprehensive Income
For the Nine-month Period

8(3) Notes to Quarterly Consolidated Financial Statements

9

Going Concern Assumption

9

Significant Changes in Shareholders’ Equity

9

Application of Special Accounting Methods for Presenting Quarterly Consolidated Financial Statements

9

Subsequent Events

101

EM SYSTEMS CO., LTD. (4820) Financial Results for the Third Quarter of FY3/18

1. Qualitative Information on Quarterly Consolidated Financial Performance(1) Explanation of Results of Operations
The Japanese economy continued to recover at a moderate pace in the first nine months of the fiscal year endingon March 31, 2018. The main reason was improvements in corporate earnings and jobs due to economic andmonetary policy initiatives by the Japanese government and the Bank of Japan. This recovery is now the second
longest in the postwar era. Furthermore, consumer sentiment is strong. All these factors point to a continuation of
the slow recovery of the Japanese economy.
Japan’s pharmacy sector, the primary market for the products of EM SYSTEMS (the “Company”), is undergoinga realignment as M&A activity at major chains and other activities create larger companies. At the same time, theenvironment for small and midsize pharmacy companies is becoming increasingly difficult. To succeed,
pharmacies must provide customers with added value. Revisions to medical care and nursing care payments thatare to be enacted in 2018 are likely to create more challenges for pharmacies. Realignments of the m edical careand nursing care sectors are expected to accelerate as a result. Furthermore, the Japanese government plans totake many actions to increase the use of ICT in the healthcare sector. Consequently, the need for information links
and sharing among nursing care and other categories of healthcare is expected to become even greater.
Japan’s population is aging rapidly. There is much talk about the so -called “2025 problem.” In 2025, all of theapproximately 8 million baby boom generation people in Japan will have reached advanced old age. This is
expected to create serious problems like skyrocketing public-sector insurance payments for medical and nursing
care and shortages of nursing care workers. To provide a link between healthcare (clinics and pharm acies) andnursing care data, the Company started the full-scale operation of an IT systems business for nursing careproviders in 2016. Next was the March 2017 launch of the Hirogaru Care Net, which links healthcare and nursing
care data systems. In August 2017, sales of Tsunagaru Care NEXT started to meet the needs of companies in theat-home nursing care sector. The goal is to use a unified three-way network linking the systems that the Company
provides to clinics, pharmacies and nursing care providers in order to create an environment for the seamlesssharing of healthcare and nursing care information. AI is one option that the Company is considering in order toenable the development and provision of products and services that contribute to people and the healthcare
industry. In December 2017, the Company invested in MICIN, Inc. to strengthen EM Systems ability tocommercialize its products. The acquisition of capital interest in MICIN will help maintain a lasting relationshipwith MICIN. The Company expects to further increase the added value of its products by integrating MICIN’svarious medical technologies with EM System’s technologies and know-how.
For the first nine months, the Company reported consolidated net sales of 10,448 million yen (up 6.2% year onyear), operating profit of 2,315 million yen (up 30.6%), ordinary profit of 2,785 million yen (up 27.2%) and profit
attributable to owners of parent of 1,861 million yen (up 29.6%).
Results by business segment were as follows.
1) IT Systems and Related Business for Pharmacies
In this segment, instructors and field service personnel were moved to sales positions, chiefly in the chain
pharmacy sales organization. Increasing points of contact with current customers allows identifying their needs
and strengthens the ability to supply services that meet customers’ expectations. In addition, this business sector
is using distributors and OEM supply agreements to continue to expand sales channels and focusing on increasing
sales of the Recepty NEXT prescription system and the Bungyo-mate system for pharmacies.
Although the number of systems sold was below the plan, there was steady growth in billing service sales due tothe increasing number of users. Continuing growth in sales of supplies and maintenance services also contributed
to this segment’s performance. In addition, the OEM business is growing steadily. Due to these activities, thissegment continued to record consistent sales and earnings.

2

EM SYSTEMS CO., LTD. (4820) Financial Results for the Third Quarter of FY3/18

As a result, the segment recorded sales of 8,534 million yen (up 6.2% year on year) and operating profit of 2,184
million yen (up 16.8%).
2) IT Systems and Related Business for Clinics
There were activities to expand sales channels throughout Japan centered on the use of distributors to increaseinterest in the Company’s products at clinics. In addition, the Company increased referrals from existing clientsand from websites specializing in medical services, and continued to focus on increasing sales of the Medical
Recepty NEXT (MRN) Clerk Style and UNI-MEDICAL medical accounting systems, and the Medical Recepty
NEXT (MRN) Karte Style electronic patient record system and Ortia. Also, increasing the number of visitors to
the Company website is producing growth in the number of requests for pro duct information and the number of
online product demonstration reservations and demonstrations performed. These demonstrations allow
prospective customers to obtain information from almost anywhere and at any time.
These activities resulted in steady growth in sales channels. Furthermore, the realignment of sales resources tofocus on key categories produced consistent growth in the number of MRN systems sold. There were also a
steady increase in billing service sales along with the rising number of users and growth in sales of supplies.
As a result, the segment recorded sales of 1,310 million yen (up 14.2% year on year) and operating profit of 129
million yen (compared with operating loss of 75 million yen one year earlier).
3) Other Businesses
The medical and nursing care linkage business launched Hirogaru Care Net in March 2017, which is provided toclinics, pharmacies and nursing care providers. In October 2016, this business started shipments of Tsunagaru
Care NEXT, an ASP nursing care provider support system. Work is proceeding on the development of morefunctions for this system in order to continue to increase sales.
On December 13, 2016, the Hiroshima office of the Japan Health Insurance Association selected the Company toestablish an online insurance coverage qualification verification system used to help produce forms for healthinsurance claims at pharmacies. Work has also started on a system for use by clinics. The initial contract for thisproject has been extended and the Company is continuing to provide these services.
To contribute to progress in the healthcare industry, the Company will be participating in research anddevelopment activities as well as demonstration projects for electronic prescriptions, electronic health records(EHR) and personal health records (PHR). The Company has been participating in a joint research program with
the Japan Medical Association, Japan Pharmaceutical Association and Nihon University concerning an infectious
disease outbreak notification service. Currently, over 10,000 pharmacies in Japan are using this service. In
addition, consolidated subsidiary Brick Pharmacy Co., Ltd. operates a pharmacy, and consolidated subsidiary
LASANTE Co., Ltd. operates fitness clubs, a conference room rental business and a nurs ery school business.
In August, the IT systems business for nursing care providers started selling Tsunagaru Care NEXT, which has
functions required by providers of services for at-home nursing care. Sales of this new product have been
increasing slowly.
The pharmacy business is performing well with sales and operating profit higher than planned. In addition,
operating profit was higher than one year earlier.
Sales in this segment were 724 million yen (down 1.7% year on year) and operating loss was 6 million yen(compared with operating loss of 8 million yen one year earlier).
Segment sales and operating profit in this section are before the inter-segment eliminations.

3

EM SYSTEMS CO., LTD. (4820) Financial Results for the Third Quarter of FY3/18(2) Explanation of Financial Position
AssetsAt the end of the first nine months of the current fiscal year, current assets were 10,831 million yen, a decrease of
390 million yen from the end of the previous fiscal year. This was mainly due to a 729 million yen decrease in
cash and deposits resulting primarily from payments of income taxes, the year-end dividend and the early
repayment of loans. Non-current assets increased 58 million yen to 10,182 million yen. The main factors wereincreases of 185 million yen in investment securities, 166 million yen in software in progress, 62 million yen inleased assets and a decrease of 405 million yen in depreciation.
As a result, total assets decreased 333 million yen to 21,014 million yen.
Liabilities
Current liabilities decreased 818 million yen to 3,431 million yen. The main factors were decreases of 247 million
yen in notes and accounts payable-trade, 300 million yen in short-term loans payable and 190 million yen inprovision for bonuses. Non-current liabilities decreased 892 million yen to 2,141 million yen, mainly due to a
1,023 million yen decrease in long-term loans payable and increases in lease obligations and net defined benefit
liability.
As a result, total liabilities decreased 1,711 million yen to 5,573 million yen.
Net assets
Net assets increased 1,378 million yen to 15,441 million yen mainly because of increases of 1,230 million yen inretained earnings and 51 million yen each in capital stock and capital surplus resulting from the exercise of stock
options.
Consequently, the equity ratio was 72.8% compared with 65.4% at the end of the previous fiscal year.

(3) Explanation of Consolidated Earnings Forecasts and Other Forward -looking Statements
There are no revisions at this time to the full-year consolidated earnings forecast that was announced on May 9,2017 in the “Summary of Consolidated Financial Results for the Fiscal Year Ended March 31, 2017 [Japanese
GAAP]” because of uncertainty about the performance after the first nine months of the current fiscal year of
dispensing pharmacies, which are the primary market for products of the Company. An announcement will bemade promptly if the Company decides that the forecast needs to be revised.

4

EM SYSTEMS CO., LTD. (4820) Financial Results for the Third Quarter of FY3/18

2. Quarterly Consolidated Financial Statements and Notes(1) Quarterly Consolidated Balance Sheet(Millions of yen)
Third quarter of FY3/18(As of Dec. 31, 2017)

FY3/17(As of Mar. 31, 2017)
AssetsCurrent assets
Cash and deposits

7,901

7,172

Notes and accounts receivable-trade

2,582

2,572

159

168

Merchandise and finished goods
Raw materials and supplies

0

0

Other

581

938

Allowance for doubtful accounts

(3)

(19)

11,221

10,831

Buildings and structures, net

827

792

Land

632

612

Leased assets, net

57

119

Rental assets, net

21

17

Other, net

124

90

1,663

1,631

259

194

Software in progress

39

205

Goodwill

311

268

5

5

616

674

Investment securities

35

221

Net defined benefit asset

107

112

Total current assets
Non-current assets
Property, plant and equipment

Total property, plant and equipment
Intangible assets
Software

Other
Total intangible assets
Investments and other assets

Real estate for investment, net

7,215

7,067

Other

486

475

Allowance for doubtful accounts

(0)

(0)

Total investments and other assets
Total non-current assets
Deferred assets
Total assets

5

7,844

7,876

10,124

10,1821

021,34821,014EM SYSTEMS CO., LTD. (4820) Financial Results for the Third Quarter of FY3/18(Millions of yen)
Third quarter of FY3/18(As of Dec. 31, 2017)

FY3/17(As of Mar. 31, 2017)
Liabilities
Current liabilities
Notes and accounts payable-trade

1,030

783

Short-term loans payable

300-

Current portion of long-term loans payable

526

570

Accounts payable-other

434

344

Lease obligations

45

53

Income taxes payable

545

416

Provision for bonuses

394

203

2

3

Provision for point card certificates
Other
Total current liabilities

971

1,056

4,250

3,431

Non-current liabilities
Long-term loans payable

1,255

232

Lease obligations

31

83

Net defined benefit liability

875

918

Provision for product warranties

177

195

Long-term guarantee deposited

695

713

3,034

2,141

7,284

5,573

Capital stock

2,394

2,445

Capital surplus

2,702

2,753

Retained earnings

9,140

10,370Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity

Treasury shares

(223)

(223)

Total shareholders’ equity

14,013

15,347

Foreign currency translation adjustment

36

39

Remeasurements of defined benefit plans

(85)

(79)

Total accumulated other comprehensive income

(48)

(39)

99

134

14,063

15,441

21,34821,014

Accumulated other comprehensive income

Subscription rights to shares
Total net assets
Total liabilities and net assets

6

EM SYSTEMS CO., LTD. (4820) Financial Results for the Third Quarter of FY3/18(2) Quarterly Consolidated Statements of Income and Comprehensive Income
Quarterly Consolidated Statement of Income(For the Nine-month Period)First nine months of FY3/17(Apr. 1, 2016 – Dec. 31, 2016)(Millions of yen)First nine months of FY3/18(Apr. 1, 2017 – Dec. 31, 2017)

Net sales

9,843

10,448

Cost of sales

4,310

4,561

Gross profit

5,532

5,887

Selling, general and administrative expenses

3,759

3,571

Operating profit

1,773

2,315

Non-operating income
Interest income
Rent income of real estate
Other
Total non-operating income

0

0

727

751

7

25

735

778

Non-operating expenses
Interest expenses

13

4

Rent expenses on real estates

282

294

Other

23

9

Total non-operating expenses

319

308

2,189

2,785

Gain on reversal of subscription rights to shares-

0Gain on sales of non-current assets

11-

Total extraordinary income

110Loss on retirement of non-current assets

30Loss on sales of non-current assets

11-

Loss on cancellation of leases

0-

Impairment loss-

20

Expenses for advanced repayment of loans-

8Ordinary profit
Extraordinary income

Extraordinary losses

Total extraordinary losses
Profit before income taxes
Income taxes

15

29

2,185

2,755

748

894

Profit

1,436

1,861

Profit attributable to owners of parent

1,436

1,861

7

EM SYSTEMS CO., LTD. (4820) Financial Results for the Third Quarter of FY3/18

Quarterly Consolidated Statement of Comprehensive Income(For the Nine-month Period)First nine months of FY3/17(Apr. 1, 2016 – Dec. 31, 2016)(Millions of yen)First nine months of FY3/18(Apr. 1, 2017 – Dec. 31, 2017)

1,436

1,861

(35)

2

Remeasurements of defined benefit plans, net of tax

21

5

Total other comprehensive income

(14)

8

1,422

1,870

1,422

1,870

-

-

ProfitOther comprehensive income
Foreign currency translation adjustment

Comprehensive income
Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controllinginterests8

EM SYSTEMS CO., LTD. (4820) Financial Results for the Third Quarter of FY3/18(3) Notes to Quarterly Consolidated Financial Statements
Going Concern Assumption
Not applicable.
Significant Changes in Shareholders’ Equity
Not applicable.
Application of Special Accounting Methods for Presenting Quarterly Consolidated Financial Statements
The tax expense was calculated by first estimating the effective tax rate after the application of tax effectaccounting with respect to profit before income taxes during the fiscal year, and multiplying that rate by thequarterly profit before income taxes.

9EM SYSTEMS CO., LTD. (4820) Financial Results for the Third Quarter of FY3/18

Subsequent Events
Stock split and partial revision to Articles of Incorporation following the split
The Board of Directors of the Company approved a resolution on February 9, 2018 concerning a stock split andan associated revision to the Articles of Incorporation.
(1) Purpose of the stock split
Using this split to lower the cost of an investment unit of the Company stock will make this stock accessible to abroader range of investors. This is expected to increase the stock’s liquidity and expand stock ownership to moreinvestor segments.
(2) Summary of the stock split
1) Method of the stock split
Shareholders listed or recorded in the final shareholder register on the record date of February 28, 2018 will receive
two shares of common stock for each share held on the same day.
2) Increase in the number of shares due to the stock split
Number of shares outstanding before the stock split:

18,173,700 shares

Increase in the number of shares due to the stock split:

18,173,700 shares

Number of shares outstanding after the stock split:

36,347,400 shares

Total number of authorized shares after the stock split:

66,000,000 shares

Note: Following the exercise of subscription rights to shares, there may be an increase in the above number ofshares outstanding until the record date of the stock split.

3) Schedule
Announcement of record date:February 9, 2018

Record date:February 28, 2018

Effective date:

March 1, 20184) Effect of these changes on per share information
Per-share information calculated as if this split had taken place at the beginning of previous fiscal year is presented
below.

Net income per share
Diluted net income per shareFirst nine months of FY3/17(Apr. 1, 2016 – Dec. 31, 2016)
41.00
40.64

10

(Yen)
First nine months of FY3/18(Apr. 1, 2017 – Dec. 31, 2017)
52.44
52.21

EM SYSTEMS CO., LTD. (4820) Financial Results for the Third Quarter of FY3/18(3) Partial revision to the Articles of Incorporation following the stock split
1) Reasons for the revision
In association with this stock split, Article 6 of the Company's Articles of Incorporation will be amended on March 1,
2018 to revise the total number of authorized shares in accordance with Article 184, Paragraph 2 of the Companies
Act.
2) Amendment details(Underlined parts are amended.)
Current

After revision(Total number of authorized shares)(Total number of authorized shares)

Article 6

Article 6

The total number of shares authorized to be

The total number of shares authorized to beissued by the Company shall be 33 million

issued by the Company shall be 66 million

shares.

shares.

3) Schedule
Effective date:

March 1, 2018(4) Other
1) Change in capital stock
The stock split will have no effect on the capital stock.
2) Adjustment to the exercise price for subscription rights to shares
As a result of the above stock split, the exercise price for subscription rights to shares issued by the Company shall be
adjusted as follows on or after March 1, 2018.
(Yen)
Stock option No. 7

Board of Directors’ resolution
July 5, 2016

Previous exercise price
1,304

Adjusted exercise price652

This financial report is solely a translation of the Company’s Kessan Tanshin (including attachments) in Japanese, which has
been prepared in accordance with accounting principles and practices generally accepted in Japan, for the convenience ofreaders who prefer an English translation.

11