Chapter 01

Our Company

Message from the CFO

more resilient as an organization.
* 3-year CAGR on a continuing business base from fiscal year 2020 after FX adjustment

Advancing to a New Phase of Growthwith a New Company Strategy

Chikashi Takeda
Executive Officer andChief Financial Officer

We aim to generate
sustainable value for all
stakeholders and maximize
our corporate value.”
Achieved Milestone Target ofCorporate Strategy by Enhancing
Corporate Resilience
As the final year of the corporate strategy that weannounced in November 2019, fiscal year 2023 was amilestone for Olympus. Reviewing the past three years, wehave encountered many challenges, starting with COVID-19
in the corporate strategy’s first year, followed by supply
shortages of semiconductors and parts. There were also
increasing geopolitical risks, such as the war in Ukraine,and rising raw material prices. Despite numerous macro
headwinds, we have achieved top-line growth with anannual revenue growth rate of 4.6%* by continuing to fulfill
our mission to deliver products and services to patients andhealthcare professionals. Our performance also benefited
from efforts to optimize costs and resource allocations byimplementing efficiency and effectiveness improvement
measures under our corporate transformation plan,
Transform Olympus. As a result, we were able to achieve an
adjusted operating margin of over 20%, which was amilestone in our corporate strategy. We also madesignificant progress on focusing our corporate portfolio,
which was a key component of our corporate strategy. We
transferred the Imaging Business and Scientific Solutions
Business, and we have transitioned into a long-termsustainable growth phase as a company focused onhealthcare. I believe that the mindset of Olympus
employees has been transformed, and that we are now28

Olympus Integrated Report 2023

We announced a new company strategy in May 2023. The
three Guiding Principles under this patient-centric strategy
are “Patient safety and sustainability,” “Innovation forgrowth,” and “Productivity.” We also narrowed our financial
targets down to three KPIs that emphasize growth andprofitability. We aim to achieve revenue CAGR of around 5%,
EPS CAGR of around 8%, and maintain the operating
margin at the previous year’s level of 20%. While maximizing
free cash flow is the starting point for achieving these KPIs,
they also correlate closely with our corporate value andstock price. We chose these indicators because they areeasy to calculate and understand, and I believe thissimplicity enabled us to achieve our previous milestone. I am
confident that over the next three years, our 30,000
employees will continue to work toward the common goal
and we will be able to achieve our desired results.
Patient safety is our top priority. While our quality
assurance and regulatory affairs (QARA) transformation efforts
will impact both costs and revenue growth, we anticipate
steady growth thanks to market growth as well as growth
drivers that include new product categories. In particular, weplan to launch the EVIS X1 advanced endoscopy system in
the United States, our largest market, in the middle of fiscal
year 2024, and in China in the near future. To achievesustainable growth in fiscal year 2024 and beyond, we willcontinue to invest in innovation while also focusing on cost
optimization. Some of our initiatives to improve productivityunder Transform Olympus, launched in 2019, have yet toyield results or are still in progress. Going forward, weanticipate that the effects of these measures will continue toyield benefits by improving our cost of sales ratio andoptimization of SG&A expenses. Since we have continued tooperate on a regional basis, we recognize that there is stillroom for further procurement cost optimization. We haveidentified specific initiatives and priority themes, and we are
gradually achieving results in these areas. We expect toimprove both the effectiveness and efficiency of our efforts
through further evolution of our global operating model. Inaddition, we are continuing to utilize platforms based on ourGlobal Business Services (GBS). Over the past three years,
we have strengthened our resilience and we will strive toachieve the goals in our new company strategy by furtherenhancing resilience while adapting quickly and flexibly to achanging environment.

Further Improvements tothe Finance Function
Our finance function activities are targeted toward therealization of the Guiding Principles and the achievement ofKPIs. We have transitioned our finance function, which has
primarily operated on a regional basis in the past, to aframework centered on business partners in business andfunctional categories. This has brought the finance function
closer to business activities so that it can respond quickly
and appropriately to everyday business needs, such as
resource allocation. Because we communicate more closelywith the business units, we are better able to monitor andmanage top-line growth and costs. As a result, we now
anticipate that we will be able to secure the funding needed
for investment in growth over the next three years such as
R&D and further enhancing our business foundation. The
finance function is also contributing to value creation throughactivities that are not directly reflected in our KPIs, such asefforts to optimize our balance sheet. We have reduced
cross-shareholdings by approximately 90% over the past
three years, and by the end of June 2023, Olympus held
shares in only one listed company. We are also taking steps
to dispose of assets that do not contribute to businessgrowth. A gain on the sale of land in fiscal year 2023
contributed significantly to our cash flows. We recognize that
there is room for improvement in our cash conversion cycle(CCC), especially in terms of inventory, and this topic has
become a major consideration for management. Although
we had to lower the priority over the past two years to ensure
reliable product supply to customers in the face of various
challenges, including parts supply shortages, we are now
promoting End-to-End supply chain transformation fromdevelopment to delivery for our patients and customers. We
are also strengthening our tax management and conducting
a comprehensive review to discover opportunities to improve
cash flow, while ensuring regulatory compliance. We continue
to support each business and function based on detailed
monitoring on a 360-degree perspective.

Capital Allocation toGenerate Sustainable Value
We aim to enhance our cash generation ability throughcontinual investment in business growth and productivity
enhancements. To achieve sustainable growth while also
increasing shareholder value, we will prioritize our capital
allocations toward businesses investment in areas in which
Olympus has unique capabilities and will add value. Over thepast four years, we have allocated approximately ¥140
billion to M&A and other investments. In accordance withour company strategy, we continue to strengthen ourproduct portfolio capabilities through tuck‐in M&A
opportunities in our priority businesses of GI, Urology andRespiratory in existing disease states and attractive
high‐growth adjacencies.
Our shareholder returns policy calls for steady, gradual
dividend growth, and in fiscal year 2023 we increased ourdividend by ¥2 from the previous fiscal year, to ¥16, our fifth
consecutive year of dividend growth. We expect increasing

dividends for the next three years. In addition, we are
currently repurchasing our shares with an approximately¥100 billion ceiling. This is our third share repurchasing since2022, and will run from May 15, 2023 to January 31, 2024.
We allocated approximately ¥80 billion to the two previous
repurchases. We will continue to increase dividends while
also considering additional share repurchasing based on theoutlook for the supply and demand of funds, as well as astrong focus on capital cost optimization, financial discipline,
and the EPS growth rate.

Becoming a Company Chosenby All Stakeholders
To increase corporate value sustainably, I believe the mostimportant thing is to earn the continuing support of all of ourstakeholders, including patients and their families, healthcare
professionals, investors, employees, business partners,regulators, and society. The results of our business activities,
as shown in our financial statements, begin with revenue andend with earnings per share after tax. Those figures reflect
the value that we provide in response to our various
stakeholders’ needs. For example, our revenue comes fromour products and services, but we also need to consider
whether we are providing sufficient value to patients in termsof healthcare safety and effectiveness, as well as whatinvestments we need to make in order to achieve thosegoals. There are other important things we need to consider
such as if we are paying our employees competitivecompensation and enabling them to experience pride andfulfillment through the creation and provision of our products
and services, whether we are investing enough in initiatives
to improve productivity and employee engagement, andwhether our trading condition is conducive to maintaining
win-win relationships with our partners and suppliers. We
need to deliver bottom-line growth to our shareholders while
meeting all of these requirements. To improve financial
performance sustainably, we must continuously verify that weare fully meeting stakeholder expectations.
We are actively introducing systems that will allow us toshare achievements with our stakeholders. In March 2023,
we expanded the scope of our stock-based compensation
system for directors and executive officers, which we
introduced with the aim of incentivizing contribution to theOlympus Group’s medium- to long-term growth. The system
has been expanded to include employees in senior
management positions. Our management team iscommitted to improving corporate value and shareholder
value from the same perspective as shareholders.
Despite a challenging business environment, weachieved the milestone set down in our corporate strategy.
We are taking a step forward to overcome the nextmanagement challenges. We will continue to strengthen ourresilience as we strive to deliver value and become acompany chosen by stakeholders, while also working tosustainably maximize our corporate value.

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