EPS Holdings, Inc.

Financial Results OverView
for Second Quarter
Ended March 31, 2020

May 21, 2020

EPS Holdings, Inc.
Director and Vice President
Kazuki Sekitani

Contents

1Business Areas and Management Structure2

FY2020/2Q Financial Results Overview

3

FY2020 Full-Year Earnings Forecast

４

Shareholder Returns

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2

1

Business Areasand Management Structure

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3

FY2020/2Q ： EPS Group Business Areas*as of May 2020

Domestic BusinessCROEPS EP Mediate

SMO

EP-SOGOCSO

EP-PharmaLine EP-Force

NRO

EP-CRSU, EP-TechnoEP Yamanashi

ES-Link

3 Chinese data service companies

OverseasBusiness

GlobalResearch

EPS International Holdings

EKISHINEPS EKISHIN, EPS (China)

OthersEPBiz (Shared Services) TTC

Chinese CRO operating companies

Other oversea operating companies

Shanghai Hua Xin ET MEDICAL TECHNOLOGY (SUZHOU)EP Trading
Other Chinese operating companies

Copyright © 2020 EPS All rights reserved.

Notes:
1. AC MEDICAL has been included in EPS (continuing CRO business) and EP-Force (continuing CSO business)
4
2. EP Mediate Co., Ltd. split off from EPS in April
3. TTC was made a subsidiary in JanuaryFY2020 Business Management Structure(Vertical Dimension)（From April 1）

EPS Holdings

Business Strategy Division (No. 1 CBO)
advances management, support, planning

CRO(Segment CEO) Sasa

SMOCSONRO

GlobalResearch

EKISHIN

Yamamoto

Nishizuka
GotoYamada
SongTanaka
Hayakawa

YanTashiro(Segment Vice CEO)・Rejuvenate management at the segment level by appointing young,next-generation personnel
・Divide segments into business units of appropriate size dedicated to daily
operations and control them・Business Strategy Division (No. 1 CBO) functions as headquarters and positioning
for five segments
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5FY2020 Business Management Structure(Horizontal Dimension)

Audit &Supervisory Board

Board of Directors
Chief Executive Officer (CEO)Yan Hao, Chairman

Internal Audit Office
President andCorporate Officer Tanaka

Vice Chairman andCorporate Officer Tashiro

Business
Strategy
Division １(No. 1 CBO)

Quality
Improvement
Promotion
Department（CQO）

Business
Strategy
Division 2(No. 2 CBO)

FacilityManagement
Department

Nagaoka

AbeOkoso

Orihashi Shimada

Corporate
ExternalAffairs
Department

Vice President andCorporate Officer Sekitani

HumanResources
Strategy
Department(CHO)

Corporate
Communications
Strategy
Department(CCO)

Administration
Department(CAO)

Accounting &Finance
Department(CFO)

Sekitani Hirosaki Sekitani Koyama

ManagementPlanning
Affairs
Department(CPO)

Jike・The holding company will function as the central command point for the OneEPS
structure, strengthening the planning, coordination, and promotion functions forthe entire group・Proactively appoint next-generation personnel from segments to concurrent
positions

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6

2

FY2020/2Q Financial Results Overview

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7

FY2020/2Q Consolidated Financial Results（￥ million）

FY2019/2Q
Results

FY2020/2Q
InitialForecast

FY2020/2Q
Results

Net Sales

33,501 33,830 33,663

Operating
Income

3,179

2,153

2,684（Ratio）(9.5%)(6.4%)(8.0%)

Recurring
Profit

3,275

2,074

2,823（Ratio）
ProfitAttributabletoOwners of
Parent

(9.8%)(6.1%)(8.4%)

2,065

1,254

1,917（Ratio）(6.2%)(3.7%)(5.7%)

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Percent
Change vsChange vs
PlanPlanPercent
Change
YoY

-167

-0.5％

0.5%

531

24.7％ -15.6%

749

36.1％ -13.8%

663

52.9％

-7.2%

8FY2020/2Q
Financial Results by Business Segment（￥million）

FY2020/2Q
Initial Forecast
CRO

Domestic

SMO

CSO
NRO

OverseasGR

EKISINNet Sales
Operating
Income (%)
Net Sales
Operating
Income (%)

13,877

13,9032,233 (16.1%)

2,312 (16.6%)

7,100

6,917

741 (10.5%)

Net Sales

5,359

Operating
Income (%)

306
2,95471

Net Sales
Operating
Income (%)
Net Sales
Operating
Income (%)

Percent
Change vs Change
Percentvs
InitialChangeInitialForecast
YoYForecast

FY2020/2Q
Results

5,663(5.7%)(2.4%)

2,250-35

Net Sales

4,785

Operating
Income (%)- 156

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911 (13.2%)
399
2,904
122(7.0%)(4.2%)

1,889(—)

99(5.2%)

4,084(—)

-257

(－)

26

0.2％

3.1%

79

3.5％

-6.8%

-183

-2.6％

-2.9%

170

22.9％

11.7%

304

5.7％

39.2%

93

30.4％

136.7%

-50

-1.7％

-4.1%

51

71.8％

-65.6%-361-16.0％-20.9%

134－

425.0%-701-14.6％-29.4%-101－－* 1. The CRO segment in the earnings report (kessan tanshin) includes the NRO segment.
2. The calculation of segment operating income:(1)Does not include management advisory fees for the holding company(2) Includes amortization of goodwill and outsourcing expenses for shared services
3. Figures for EPS associates follow adjustment of previous fiscal year’s results

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FY2020/2Q Financial Results Summary

Overview of Financial Results
Net sales•Net sales fell 0.5% short of the initial plan due to factors such as
the impact of COVID-19, the conclusion of a large-scale project in
GR and the temporary suspension of manufacturing lines in theEKISHIN (China) Business, despite the strong performance of CSO•GR and EKISHIN (China) had significant decreases in revenue yearon year, CSO grew and increased sales

Operating income•

Domestic segments performed as planned, increasing by 24.7%
even though overseas business struggled in terms of the initialplan•

Operating income fell as decreases in CRO and EKISHIN
outweighed significant year-on-year increases in SMO and CSO

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FY2020/2Q
Financial Results Summary (Segment)

CRONet Sales, operating income achieved plan・ Initially felt the impact of sluggish orders received from the previous fiscal year but inquiries
moved toward recovery in monitoring services
・ Departments other than monitoring services progressed as planned
・ Pharmacovigilance (PV) improved low-earning projects

SMO

Net sales were lower than planned,
but operating income exceeded targets

・ Orders received struggled following a rebound from a strong performance in the previous
fiscal year, but this was covered by sales focusing on existing clinical trials
・ Visits to medical facilities restricted and new orders halted or postponed due to COVID-19
・ Secured operating income through appropriate allocation of CRC and tightened controls ofcosts and SG&A expenses

CSO

Sales and operating income exceeded forecasts

・ Medical call center business growth due in part to responding to urgent productrecalls・ Slumping demand for MRs in the pharmaceutical industry ended, CMR maintained
results
・ Steady performance in support for producing academic materials through the full
application of the Drug Sales Promotion Guidelines
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FY2020/2Q
Financial Results Summary (Segment)

NROSales fell below target, operating income exceeded plan・ In clinical research services, impact on planned project contracts and delayed progress・ In pharmaceutical IT, orders received decreased for electronic data capture (EDC) systems
such as e-Catch・ In data science services, sales fell short of the target due to cancellations of existing projects
and delays in progress due to the impact of COVID-19

GR

Sales fell below target, operating income exceeded plan・ Decreased due to the end of a large-scale project in the previous fiscal year
・ Japan: Sluggish orders received due to intensified competition with global CRO,cancellation of large-scale projects
・ China: Inquiries strong, main operations ended before the impact of COVID-19
・ Asia (excluding China): Contribute to existing projects from Japan, control costs andSG&A expenses

EKISHIN Net sales and operating income fell short of forecasts
・ Pharmaceutical business undersupplied due to the impact of a temporary halt inmanufacturing lines
・ Sales activities, demand and logistics stopped inside China due to the impact of COVID-19
・ In research materials, sales of main products grew due to progress in developing themarket
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12FY2020 Business Performance Topics
・CRO (TCC) for functional foods made into a subsidiary
Entry into undeveloped study market for functional foods, etc.
Development of new customers (markets) and relationship building
through sales activities targeting food-related companies

・Participated in joint development of DNA vaccine for
COVID-19
Participated as an institution supporting pharmaceutical development injoint development of a DNA vaccine for COVID-19 carried out by Osaka
University and AnGes, Inc.

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3FY2020 Full-Year Earnings Forecast

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Assumptions for Full-Year Earnings Forecast

・Due to the spread of COVID-19, factors such as limited visits to medical
facilities and a decrease in the number of patients visiting hospitals willcause delays in clinical trials and postponements of new clinical trials
・ In China, due to pharmaceutical lines in the manufacturing business forpharmaceuticals being temporarily halted, and the impact of COVID-19【Upper limit range】

If the State of Emergency is lifted in by end of May 2020 and thereafter
restrictions eased on visits to medical facilities in large cities in particular,and implementation system put in place in hospitals.

【Lower limit range】

If the COVID-19 pandemic does not end and restrictions continue from
June onward on visits to medical facilities in large cities in particular, anddifficult to conduct clinical trials in hospitals.

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15

FY2020 Consolidated Financial Forecasts（¥ million）

FY2019Results

FY2020InitialForecast

Revised Plan(Range)

65,000Changevs PlanPercent
Change YoY-7,500-5.8％~62,000 ~-10,500~-10.2％

Net Sales

69,00972,500Operating
Income

6,279

6,170

2,000-4,170-68.2％（Ratio）(9.1%)(8.5%)~-5,170~-84.1％

Recurring
Profit~1,000

6,271

6,320

2,200-4,120-64.9％（Ratio）(9.1%)~1,200~-5,120~-80.9％ProfitAttributable toOwners ofParent(8.7%)

3,633

3,540

1,500-2,040-58.7％（Ratio）(5.3%)(4.9%)~900~-2,640~-75.2％

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16FY2020 Financial Forecasts by BusinessSegment（ ￥million ）FY2019Results

FY2020InitialForecast

Domestic
Overseas

CRONet Sales

27,71928,600SMO

Net Sales

14,33915,000

CSONet Sales

9,399

10,800

NRONet Sales

5,829

6,500

GRNet Sales

4,848

5,100

EKISHINNet Sales

11,543

12,000

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Revised Plan(Range)

Change vs Plan(Range)

26,000-2,600~25,000~-3,600

13,000-2,000~12,000~-3,000

10,8000~10,400

~-400

5,800

-700

~5,400~-1,100

3,500-1,600~3,400~-1,700

9,000-3,000~8,500~-3,500* 1. The CRO segment in the earnings report (kessan tanshin) includes the NRO segment.
2. Figures for EPS associates follow adjustment of previous fiscal year’s results
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FY2020 Overview of Full-Year Earnings Forecast

Overview of Consolidated Financial Forecasts
Net Sales

・ Net sales to decrease due to factors including limits on visits tomedical facilities, decrease in the number of clinical trial subjects
visiting hospitals and delays in development of new clinical trials
・ Net sales to decrease due to undersupply caused by temporary
halt of manufacturing lines in the Chinese manufacturing businessand a delay in the recovery of demand
・ Orders received from overseas customers to struggle due tointensified competition with global CRO・ Steady inquiries for four domestic businesses

Operating ・ Operating income to decrease due to inability to offset decreasein sales despite controlling fixed costs
IncomeCopyright © 2020 EPS All rights reserved.

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FY2020 Overview of Consolidated Financial Forecasts
by Segment

CRO・ Restricted visits, delays in progress on existing projects and postponed starts
on new projects in monitoring services
・ Impact of delayed data collection in existing projects and postponed starts onnew projects in operations other than monitoring services

SMO
・ Delays in existing clinical trials due to decrease in the number of patients
visiting hospitals
・ Postponed starts to new projects
・ Contribution to sales by expanding the scope of CRC operations in responseto restrictions on monitoring services visits

CSO・ Shrink due to restriction on CMR visits to medical facilities
・ Call center services expanded e-detailing in response to restrictions on CMRvisits
・ Reduction in study groups had an impact on academic materials production
supportCopyright © 2020 EPS All rights reserved.

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FY2020 Overview of Consolidated Financial Forecasts
by Segment

NRO
・ In clinical research, progress was delayed due to the impact of COVID-19
・ In pharmaceutical IT, electronic data capture (EDC) systems sales weresluggish
・ Actively contracted to research COVID-19

GR・ Japan: Net sales down due to impact of sluggish orders received
・ China: Focus on securing human resources as inquiries from Japan are strong
・ Asia (excluding China): Delayed starts to new projects from Japan due to theimpact of COVID-19
EKISHIN・ Chinese market affected by COVID-19
・ Sales of research materials may shrink as customers’ research stagnates

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Key Initiatives for the Group
Business Activation Project (1)～Product Innovation～
Domestic business innovation
・ Maintain and develop existing products
・ Promote collaboration with academia and digitalization
Build, implement and develop new business models

Business Activation Project (2)～Business Structure Innovation～
Innovate the business structure through internal reorganization andexternal collaboration, etc.
Conduct training for next-generation human resources

Organization Activation Project
Review the personnel system and its operations, various types of costs,etc. by linking to COVID-19 pandemic response and promoting
organizational activation and structural innovation

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Key Initiatives for BusinessMeasures to Minimize Reductions in Sales and Profits

・ While working closely with customers, actively acquire postponed clinical trials
・ Maintain and continue operational system through rigorous measures against
transmission
・ Control costs through cost restructuring
・ Support COVID-19 drug treatment, clinical trials for a vaccine
・ Mental healthcare business for “COVID-19 depression”

Post-COVID-19 Response
・ Online diagnoses, consider new service jointly with vendors for virtual
clinical trials
・ Start new services by promoting remote operations for clinical trials

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22

COVID-19 Measures
Three Viewpoints
・ Prevent transmission, spread・ Maintain and improve employees’ employment and lifestyles
・ Prioritize customer needs and maintain and develop businessResponse Measures
1. Strengthen employee/workplace response
2. Implement special work systems(1) Consider those physically in the workplace(2) Work from home/reduce workplace attendance frequency through leave(3) Introduce a complete flextime system
3. Reduce compensation for some management level personnel, etc.

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Contribution to Society

Initiatives for Society
・Joint development of a DNA vaccine for COVID-19 carried out by Osaka
University and AnGes, Inc.
・Contributed medical supplies to the government’s “mask team,”academia and regional medical facilities, etc.
・Social contribution activities using Group medical human assets with specialized
qualifications (nurses, clinical technologists, etc.)

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4Shareholder Returns

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25

Dividends
Basic Dividend Policy

Secure the necessary retained earnings to strengthen the business structure for futurebusiness development and improved earning capability
Continue to enhance shareholder returns

Revision to Dividend Forecast

The COVID-19 pandemic is expected to have a significant impact on results going
forward and uncertainties exist regarding the assumptions used for the business¥50
forecast, therefore the interim dividend will be ¥10 per share and the year-end
dividend remains undecided
Term End Dividend
Mid-term Dividend¥40（Consolidatedpayout ratio）

27.1％

¥20

Commemorative
Dividend ¥2

15.0

20.0

¥10¥0

10.0

10.0

2016/92017/9Copyright © 2020 EPS All rights reserved.

SpecialDividend ¥4

25.0

30.0
SpecialDividend ¥8

SpecialDividend ¥5

¥30

30.3％

29.7％

29.0

17.0

34.6％

―28.0
15.0
Year-end
undecided

12.0

13.0

10.0

2018/92019/92020/926

Thank you for your attention.
Please direct inquiries to Investor Relations, Corporate Communication
Department, EPS Holdings, Inc.
Phone: +81-3-5684-7873 ／ Email：ir@eps.co.jp

EPS Holdings, Inc.

Copyright © 2020 EPS All rights reserved.

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Disclaimer

The earnings forecasts and future predictions described in the document are made by ourcompany based on the available information at the time of the creation of the document,
and contain potential risks and uncertainties. Therefore, due to various factors such aschanges in the business environment, it is possible that actual earnings results may differ
greatly from the future outlook mentioned or described herein.
We have approached the creation of this document with caution, to ensure correctness.
However, it is not a guarantee of completeness. Our company cannot be held liable forany problems or damages arising as a result of the information in this document. We
appreciate your understanding.

■For inquiries about this document
Investor Relations, Corporate Communication
Department, EPS Holdings, Inc.
Phone: +81-3-5684-7873
e-mail: ir@eps.co.jp

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