EPS Holdings, Inc.

Financial Results Overview
for the Second Quarter
Ended March 31, 2021

May 19, 2021
EPS Holdings, Inc.
Board Member
President and Corporate Officer
Tatsuma Nagaoka

Contents

1

Business Areas and Management Structure2

FY2021/2Q Financial Results Overview

3

FY2021 Full-Year Performance Forecast

4

FY2021 Key Initiatives

5

Shareholder Returns

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2

1

Business Areas and Management Structure

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3

FY2021: EPS Group Business Areas

Domestic
Business

CRO

EPS

SMO

EP-SOGO

EP-CRSU (clinical IT has been brought in)
EP Mediate(medical devices + health-function food)EP Yamanashi

EP-Force

Overseas
Business

CSO

EP-PharmaLine

GlobalResearchEPS International
Holdings

EKISHINEPS EKISHIN,EPS (China)

OthersEPS Digital-Share (IT, promotion of shared services)
EPBiz (creation of peripheral business)

Copyright © 2021 EPS All rights reserved.

(provision of pharmaceutical information)

ES-Link

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

4

FY2021 Business Management Structure(Vertical Dimension)
EPS Holdings
Management, Support and Planningby Business Division (CBO)

SMO

CSO

Yamamoto
Washio *Ogasawara *Ikeda *
Goto

CRO
(Segment CEO) Sasa

(Segment Sakuma *Vice CEO)
Shimada *Jike

GlobalResearch
Hayakawa *EKISHIN
Yan
Tashiro* Appointed in October.

• Next-generation members (including women) have been promoted to senior management at
the segment level.
• The Business Division (CBO) is positioned as a headquarters function for four segments.

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5

FY2021 Business Management Structure(Horizontal Dimension)

Business Strategy Center(CBO 4)

Corporate Communication
Strategy Center(CCO)

Management Planning &Promotion Center
(CPO)

Ando
Yamamoto
YamadaKoyamaTashiroHayakawa
Ogasawara
Nagatsuma
Hayashi

Jike

Finance & Accounting
Center(CFO)
Administration Center(CAO)
Human Resources Strategy
Center(CHO)
Group Management
Promotion Center (GMP)EPS Reserch Center(CBO RC)Sales Planning & Promotion
Center (CBO SP)

Business Strategy Center(CBO 2)Business Strategy Center(CBO 1)
Group Business
Management Center(CBO GR)

6
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IT Management Center(CIO)

Business Strategy Center(CBO 3)Song
Okoso
Nagaoka
Jike

Administrative Headquarters(CMO)
Sekitani (Vice President
and Corporate Officer)
Business Headquarters(CBO)
Nagaoka(President and Corporate Officer)

Audit &
Supervisory Board

Board of Directors

Chief Executive Officer (CEO)Yan Hao (Chairman)

Internal Audit Office2

FY2021/2Q Financial Results Overview

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7

FY2021 Consolidated Financial Results
FY2020/2Q
Results

FY2021/2Q
InitialForecast

FY2021/2Q
Results

Net Sales

33,66333,50635,390Operating
Income

2,684

1,848

3,807

(Ratio)(8.0%)(5.5%)(10.8%)

Recurring
Profit

2,823

1,960

4,326

(Ratio)(8.4%)(5.8%)(12.2%)

1,917

1,029

2,617

(5.7%)(3.1%)(7.4%)(¥million)

ProfitAttributableto Owners of
Parent(Ratio)Copyright © 2021 EPS All rights reserved.

Change vs Percent
Percent
Initial Change vs Change
Forecast Forecast
YoY
1,884

5.6%

5.1%

1,959

106.0%

41.9%

2,366

120.7%

53.2%

1,588

154.3%

36.5%

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FY2021 Financial Results by Business Segment(¥million)

Net Sales

CRO Operating

FY2020/2Q
Results

FY2021/2Q
InitialForecast

FY2021/2Q
Results

Percent
Change vsChange vsInitial
InitialForecast
Forecast

Percent
ChangeYoY

15,595

15,466

16,717

1,251

8.1%

7.2%

2,438

2,220

3,566

1,346

60.6%

46.3%

Domestic

Income(Ratio)(15.6%)(14.4%)(21.3%)Net Sales

6,917

6,800

6,700

-100

-1.5%

-3.1%

911

646

940

294

45.5%

3.2%

SMO Operating
Income(Ratio)(13.2%)(9.5%)(14.0%)Net Sales

5,663

5,780

6,336

556

9.6%

11.9%

399

361

807

446

123.5%

102.1%CSO Operating

Overseas

Income(Ratio)(7.0%)(6.3%)(12.7%)Net Sales

1,889

1,402

1,583

181

12.9%

-16.2%

Income(Ratio)(5.2%)

99

-109

(―)

(1.1%)

17126―-82.2%Net Sales

4,084

3,988

4,331

343

8.6%

6.1%

-257

-159

-181

-22

―

―

GR Operating
EKIS
Operating
HIN Income(Ratio)(―)

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(―)

(―)

Note: The calculation of segment operating income(1) Does not include management advisory fees for the holding company, and(2) Includes amortization of goodwill and outsourcing expenses for shared services.

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FY2021/2Q Overview of Consolidated Results
Vs. Initial Forecast

Regarding the impact of COVID-19, it was assumed that the situation in the fourth
quarter of the previous fiscal year would continue.
Net sales vs. initial forecast: 5.6%
• Net sales in Japan remained strong with an increase in orders received, which is attributed
mainly to an increase of new customers, offsetting the impact of COVID-19 on SMO.
• Net sales from clinical trials for overseas customers fell short of the forecast due to sluggish
contracts. Manufacturing and sales in China exceeded the forecast.
Operating income vs. initial forecast : 106.0%• Effect of net sales in Japan exceeding the forecast (CRO and CSO), control of administrative
cost enabled through cost restructuring

Year on YearNet sales year on year: 5.1%
• Regarding net sales in Japan, the impact of COVID-19 on SMO was offset by the highoperating rate of monitoring services in CRO and steady growth of operations in CSO.
• Sales from clinical trials for overseas customers decreased due to a decrease in ongoingprojects.
• Net sales in EKISHIN Business increased following a rebound from the impact of thesuspension of production lines in the previous fiscal year.
Operating income year on year: 41.9%• Effect of sales increase, control of administrative costs enabled through cost restructuring

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10

FY2021/2Q Summary of Segment Operating Results
CRO• In monitoring services, orders received continued to increase, and operating rate
remained high, due to the effect of new alliances.
• In data science services, operations made good progress, and less profitable projects
improved.
• Businesses other than monitoring services also mostly exceeded the forecast.

SMO• Trial patients decreased due to COVID-19. Above all, medical institutions outside major
metropolitan areas struggled.
• Operating income increased due to appropriate allocation of CRC and tightened control
of costs and SG&A expenses.
• Backlog was a record high, reflecting brisk inquiries.

CSO• Growth of the medical call center business, which is attributed in part to the developmentof new customers and contracts for operations related to COVID-19• Higher operating rate of CMR, attributed to progress in the allocation of human resourcesto new projects• Increase in sales, mainly reflecting the increase in web seminars
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11

FY2021/2Q Summary of Segment Operating Results
GR• Japan: New orders were weak due to intensifying competition with
global CROs.
Sales exceeding the forecast were moved up to the second half.
• China: Inquiries were strong due to the expansion of the market,
but some trials were delayed.
• Asia (excluding China): Costs and SG&A expenses were controlled.
EKISHIN• In manufacturing and sales of pharmaceuticals, sales increased fromthe previous fiscal year due to the resumption of supply.
• In import and sales of products (for China), sales increased steadily.
• In research materials (for Japan), sales decreased because sales tomajor customers, which existed in the previous fiscal year, wereabsent in the current fiscal year.
Copyright © 2021 EPS All rights reserved.

12

FY2021 Business Performance Topics
1. Acquisition of CAC Croit*

Acquired CAC Croit Corporation, which has strengths in pharmacovigilance(PV) operations, with the plan to apply the company’s excellent information
technologies and expertise in operations based on its extensive track record.

* The acquisition is planned to be completed in June 2021.

2. Acquisition of Speed Apparel*, which is listed on the Main Board ofHong Kong Exchanges and Clearing
Multilateral operations including drug development will be promoted, with
Speed Apparel Holding Limited (EPS Creative) being the core of productbusiness between Japan and China.

* The acquisition was completed in April 2021, and it is planned to rename the company EPS Creative
Health Technology Group Ltd.

3. A comprehensive partnership agreement concluded with thecity government of Tsuchiura

A framework for cooperating with the city government to respond to disasters(dispatching human resources), promote good health (advice to increasing
cancer screening rate, establishment of a vaccination system), and accomplish
other goals was built.

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13

3

FY2021 Full-Year Performance Forecast

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14

FY2021 Consolidated Annual Forecast

FY2020Results

FY2021 Initial
Forecast

FY2021
Revised
Forecast

Net Sales

66,68969,80075,000Operating
Income

4,553

4,800

5,500

Recurring
Profit

(6.8%)(6.9%)(7.3%)

4,978

5,000

5,900

ProfitAttributableto Owners of
Parent

(7.5%)(7.2%)(7.9%)

1,995

2,600

3,300

(3.0%)(3.7%)(4.4%)(¥million)(Ratio)(Ratio)(Ratio)Copyright © 2021 EPS All rights reserved.

Percent
Change vsChange vs Percent
Previous
InitialChange vs
Fiscal Year
Forecast Forecast(Revised
Forecast)
5,200

7.4%

12.5%

700

14.6%

20.8%

900

18.0%

18.5%

700

26.9%

65.4%

15

FY2021 Annual Forecast by Segment

FY2020Results

FY2021 Initial
Forecast

FY2021
Revised
Forecast

Change vsInitialForecast

Percent
Change vsPrevious
Fiscal Year
(Revised
Forecast)(¥million)

Net Sales

CRO Operating

31,40033,100

1,700

8.5%

4,360

4,760

5,500

740

26.1%

Domestic

Income(Ratio)(14.3%)(15.2%)(16.6%)Net Sales

13,22013,90013,500

-400

2.1%

1,600

300

3.8%

SMO Operating
Income(Ratio)1,541(11.7%)

1,300(9.4%)(11.9%)Net Sales

11,424

11,60012,300700

7.7%Income(Ratio)(7.4%)(6.4%)(11.1%)

1,370

630

61.4%

Net Sales

3,540

2,900

2,930

30

-17.2%

Operating
Income(Ratio)(1.2%)(0.7%)

20

-60

-80

―

Net Sales

8,613

8,800

8,600

-200

-0.2%

-210

-200

-370

-170

―

CSO Operating

OverseasGR

30,504

EKIS
Operating
HIN Income

849

41

(Ratio)Copyright © 2021 EPS All rights reserved.

(―)

740

(―)

(―)

(―)

Note: The calculation of segment operating income(1) Does not include management advisory fees for the holding company, and(2) Includes amortization of goodwill and outsourcing expenses for shared services.

16

FY2021 Full-Year Performance Forecast Overview
Net Sales• The operating rate will remain high in CRO, and net sales in CSO will also grow.
However, SMO will be affected by a decrease in clinical trial patients visiting
hospitals, attributed to the COVID-19 pandemic.
• It will be difficult for GR to receive new orders due to intensifying competition
with global CROs.
• In China, manufacturing lines will resume operations, but recovery of demand
will be delayed.
・ Net sales will increase due to the effects of acquiring the two companies.
Operating Income• Operating income will increase due to administrative costs being controlled.
• Expenses for securing human resources will be generated due to thenumber of orders received being larger than assumed.
• Up-front investments will be made to build IT infrastructure including
systems.

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17

FY2021 Overview of Performance Forecast
by Segment
CRO• In monitoring services, expenses for securing human resources will be
generated to respond to a larger number of orders than assumed.
• Data science services and clinical research are expected to exceed the initial
forecast.
• In clinical IT, sales and income are expected to fall a little short of the forecast.

SMO• The initial forecast will not be achieved due to COVID-19, but it is expectedthat both sales and income will increase.
• CRC productivity will improve using SDM and others.
• Expenses for activities will be revised significantly assuming the promotionof remote operations.

CSO• Medical call center business will grow due to contracts for operations related
to COVID-19, among others.
• CMR will be between projects due to the end of a major project.
• More web seminars will be held.
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18

FY2021 Overview of Performance Forecast
by Segment
GR• Japan: Net sales will be moved up to the first half. Marketing and proposal
capability will be strengthened to receive more orders.
• China: Some trials were delayed in the first half but will make progress. Orders
for local projects will increase.
• Asia (excluding China): Costs and SG&A expenses will be controlled bydownsizing or eliminating loss-generating bases and other measures.

EKISHIN• In the pharmaceutical business, the approval of manufacturing lines based on
new standards will be delayed, and the production volume of products for salewill decrease because samples will be supplied for examination by authorities.
• In international trade, sales of research materials and the number of items forsale will increase.
• Investments in drug development and reorganization will be promoted.

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19

FY2021 Orders by Segment
FY2020First Half

FY2021

FY2021First Half
Percent
Change vsBeginning of
the Fiscal
Year

Orders Received

Initial Backlog

Orders Received

Percent
Change YoY

CRO

11,30744,36524,307+115.0%52,196+17.7%

SMO

6,844

21,8318,204+19.9%

23,346

+6.9%

CSO

6,085

10,538

6,013

-1.2%

10,226

-3.0%

GR

-834

5,811

978

―

5,366

-7.6%

EKISHIN

3,703

158

4,385

+18.4%

224+41.8%

Others

295

30

147

-50.2%

23-23.3%

Total

27,40182,73744,037+60.7%

91,384+10.5%

Backlog(¥million)

Domestic
Overseas

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Notes: 1.The negative value for orders received in the GR segment in the previous fiscal year reflects the cancellation of orders that resulted.
2. Values for initial backlog are after the segment adjustment.

20Number of Clinical Trial Patients Visiting Hospitals
People giving consent to trials and registered subjects
Down 52% from March

Declined again due
to the third wave of
COVID-19

Number recovered

Note: Number of people giving consent to trials: The number of people who gave consent to participating to clinical trials
Number of registered trial patients: The number of people who participated in clinical trials
Actual numbers at EP-SOGO
Changes in the number of people who tested positive for COVID-19: Monthly numbers based on data from the Ministryof Health, Labour and Welfare
2020
Jan.

2021
Feb.

Mar.

Apr.

May

Number of people who tested positive

Copyright © 2021 EPS All rights reserved.

Jun.

Jul.

Aug.

Sep.

Oct.

Number of people giving consent to trials

Nov.

Dec.

Jan.

Feb.

Mar.

Number of registered trial subjects

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４ FY2021 Key Initiatives

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22

Key Initiatives for the Group (1)Business Activation ~Product Innovation~
1. Combining existing products flexibly to develop new products (e.g. hybrid CRC/CRA)
2. Strengthening development strategy planning capabilities
3. Promoting virtual clinical trials and using AI and big data
4. Promoting one stop service (service ranging from development to sales at a high level of expertise)
5. Expanding into new fields, including devices and health-function food

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23

Key Initiatives for the Group (2)Business Activation ~Business Structure Innovation~
1. Restructuring operations for which needs are falling and operations where
profitability is low
2. Strengthening relationships with partners in markets in Europe and the UnitedStates3. Reorganizing the CRO business in China and Asia
4. Searching for new business models for academia and drug development ventures(e.g. incentive fee model)

5. Moving the EKISHIN business to the next stage

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24

Key Initiatives for the Group (3)Organization Activation
1. Changing the personnel system, including trials for new ways of working• Building work systems for a variety of ways of working• Increasing the mobility of human resources and creating personnel systems for
assigning the right person in the right place• Changing the personnel system to accelerate changes in businesses andorganizations
2. Promoting digitization and shared service• Improving operational efficiency using IT• Promoting concentration of Group management operations (improving efficiency inshared service)
3. Promoting efficient and effective use of offices
4. Creating Group management patterns• Establishing matrix management• Creating management patterns by repeatedly thinking and practicing• Making management patterns permeate the Group and establishing them, using
training systems
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25

Key Initiatives for the Group (4)30th anniversary project
1. 30th anniversary ceremonies and symposiums (communication with customers
and employees)
2. CI, company history (rebuilding identity)
3. Enlargement and revision of EPSWAY (penetration and establishment ofmanagement)

Formulating a new business plan

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Tsukudo project26

Initiatives for Virtualization
Monitors do not need to visit facilities.

Virtualization

Improving efficiency in monitoring
and reducing workload

Subjects do not need to visit hospitals.

Virtualization

Improving the convenience andsatisfaction of patients

EHR

Collectionof samples(Electronic Health
Records)

Visiting nursing

DDC

Electronic worksheets, etc.
(Direct Data Capture)

Delivery of study drugs

eCOA(eClinRO, ePRO)
Procurement of devices
Copyright management

Wearable devices
eConsent(electric consent)

Online medical treatment
Medical institutions
Copyright © 2021 EPS All rights reserved.

patients
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5

Shareholder Returns

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28

Dividends
Basic Dividend Policy• Secure the necessary retained earnings to strengthen the business structure for
future business development and improved earning capability• Continue to enhance shareholder returns• 30th Anniversary Commemorative Dividend of ¥2.5 was added to the mid-term¥50dividend.
• The amount of term end dividend will be determined based on performance trends.
¥40(Consolidated
payout ratio)

30.0

20.0

30.3%

34.6%

29.0

28.0

17.0

15.0

¥0

22.5 (Plan)

20.0

10.0

12.0

13.0

10.0

2017/92018/92019/92020/9Copyright © 2021 EPS All rights reserved.

21.1%

45.1%

10.0
¥10

Mid-term Dividend

Commemorative
Dividend ¥2.5

¥20

29.7%
SpecialDividend ¥4

SpecialDividend ¥8¥30

Term End Dividend

10.0
12.5
2021/929

Thank you for your attention.
Please direct inquiries toInvestor Relations, Finance & Accounting Center, EPS Holdings, Inc.
Phone: +81-3-5684-7873 / Email: ir@eps.co.jp

EPS Holdings, Inc.

Copyright © 2021 EPS All rights reserved.

30

Disclaimer
The earnings forecasts and future predictions described in the document are made by our company
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 as changes in the businessenvironment, 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 for any problems or
damages arising as a result of the information in this document. We appreciate your understanding.
 For inquiries about this document
Investor Relations, Finance & Accounting Center,
EPS Holdings, Inc.
Phone: +81-3-5684-7873
e-mail: ir@eps.co.jp

Copyright © 2021 EPS All rights reserved.

31