Optorun Co., Ltd.

Earnings Announcement
For the Fiscal Year EndedDecember 2018
February 14, 2019

IndexⅠ. Outline of the financial results

P2Ⅱ. Outlook

P 131

● Financial Highlights (consolidated)● Comment on Net Sales● Net Sales● Net Sales by Categories● Net Sales by Region● Orders Received and Order Backlog● Operating Profit● Research and Development Expenses● Balance Sheet● Cash Flows2

Financial Highlights (Consolidated)
Strong financial results -Sales and earnings up sharply
Effect of U.S. – China trade friction insignificant on FY2018 performance(Million yen)FY12/2017

FY12/2018

YoYNet sales

33,38544,763+34.1%

Operating profit

7,327

10,690+45.9%

Operating margin

21.9%

23.9%

―

Ordinary profit

7,095

10,992+54.9%

Profit attributable toowners of parent

4,815

7,745+60.9%
3Comment on Net Sales
 Sales increased due to precise response to progressive and dynamicchanges in demand sectors
 Customer base for thin-film sputtering coaters for smartphones and Vacuum
deposition equipment shifted significantly from manufacturers in North
America to those in China, Taiwan and S. Korea. Focused on evolving
camera functions and decorative coverings.
 Share of optical thin film coaters for smartphones declined to less than 50%
of total sales
 Sales in the IoT and AI sectors surged, led by biometric authentication
applications. Sales to the automotive components sector were also higher.
 Sales of coaters for camera lenses were also favorable led by surveillancecameras and vehicle-mounted cameras kept pace with advancing camera
functions.
 Sales to the LED sector were also favorable centering on strong sales toChina. Sales in our newly developed field of expertise were also strong.
 Commenced shipments of equipment to the semiconductor sector, booking
sales of device of semiconductor/optical integration for the first time.
4Net Sales(Million yen)
50,000+34.1％

44,76340,00033,38530,00020,00015,27814,903

2015/122016/12

10,0000
2017/122018/12

5

Net Sales by Categories

Diversity of users of optical thin film equipment in the smartphone industry demand diversified from North
America to China, Taiwan, S. Korea and other regions.
Demand for equipment for lenses for surveillance and vehicle-mounted camera lenses increased .
There was a marked increase in IoT applications (biometric authentication, vehicle mounted cameras andsemiconductors)
In the LED sector, captured the needs arising from advanced functions.

4.1

4.4

%
5.9

8.2
9.1

6.6

Smartphone
Camera lense

Full year FY2017

33,385
million yen

74.2

22.5

Full year FY2018

44,763

47.4

IoT

million yen

Biometric
authentication,
automobiles

LED

17.7

Other6

Net Sales by Region

China remains the largest market.
However, demand from manufacturers in North American declined, increasing the weight of
Taiwan in total sales.
Sales diversified over multiple demand sectors, showing a trend away from single-client
centered sales to an increasing diversity of users.
FY12/2017
S.Korea Other Japan
3.6% 2.7%
2.6%
Taiwan
1.0%

China
90.1%

FY12/2018
S.Korea
0.5%
Taiwan7.1%

Other Japan
2.9% 1.8%

N.America
Smartphone
maker
54％

N.America
Smartphone
maker
54％

China
87.7%

7

Orders Received and Order Backlog

Orders Received(Million yen)Order Backlog

52,52750,00044,16940,00039,820
39,22736,57430,00025,171

20,00010,672
10,000

 Have secured sufficient backlog of orders
to support FY2019 business forecasts.
 Surge in orders for thin-file sputtering
coaters from China, Taiwan, S. Korea andJapan.
Applications diversified to smartphones,
biometric authentication, vehicle-mounted
cameras,and semiconductors/opticalintegration
 Orders from smartphone manufacturers inNorth America declined sharply

3,50002015/12

 In FY2017, there were particularly large
orders related to new models ofsmartphones. In FY2018, orders werefavorable in all regions, except NorthAmerica.

2016/122017/122018/12

 Orders also increased for deposition
systems for smartphone, vehicle-mounted
cameras and LED sectors.
8

Operating Profit

Operating profit
Operating margin (rhs)(Million yen)
12,000

(%)

23.9

21.9

10,69010,000

8,000

25.0

20.0

16.0

15.9

7,327

6,000
10.0
4,000

2,380

5.0

2,00000.0
2015/122016/122017/12

 Higher sales drove down SG&A ratio(5.3%)• No more than 1% change in any
SG&A items.
 CGS ratio increased slightly (3.4%)

15.0

2,435Operating margin increased by 2%
from previous year

2018/12• Sales of thin-film sputtering coaters
to China increased but declined toNorth America. Consequently, theshare of thin-film sputtering coaters
in total sales plunged 10%, caused
an increase in CGS ratio.
• Nevertheless, consolidated CGS
ratio was steady at 61%, still at afavorable level
9Research and Development Expenses(Million yen)

R&D expenses

R&D to sales (rhs)

3,500

7.4
3,000

2,500

4.4

4.8

6.9
3,103

2,466

7.0



A cross-company R&D organization covering
Kawagoe, Shanghai and Taiwan bases
accelerates R&D. Head office concentrates on
fundamental research and overseas bases
application research.

Developing advanced devices by adopting
new technologies going beyond optical thinfilm technology to cope with needs resulting
from advances in smartphones, IoT (biometricauthentication, vehicle mounted cameras andsemiconductors) and thin films for AI andLED. OPTORON is also exploring investment
and tie-up options.

R&D is focused on new industry areas
including semiconductor/optical integration.

6.0
5.0

2,000

4.0

1,5001,000(%)

R&D is given the highest priority in theresources and pursuing the goal of R&Ddriven company with continuous growth3.0666716

2.05001.000.0
2015/122016/122017/122018/1210Balance Sheet(Million yen)Dec. 31 2017
AmountDec. 31 2018%

Amount%Change

92.6%
35.3%

49,567
15,740

88.7%
28.2%

(2,688)Cash and deposits

52,25519,893

Notes and accounts
receivable - trade

3,380

6.0%

6,837

12.2%

＋3,457

Inventories

25,10744.5%

24,487

43.8%

(620)

Allowance for
doubtful accounts(181)(0.3)%(420)(0.8)%

(239)

Other

4,055
4,169
56,42532,0387.2%
7.4%
100.0%
56.7%

2,922
6,329
55,89625,9355.2%
11.3%
100.0%
46.4%(1,133)

Notes and accounts
payable - trade
Short-term interestbearing debt

7,303

12.9%

1,652

3.0%

(5,651)

9,193

16.3%

756

1.4%

(8,437)

Other

15,541

27.5%

23,52642.1%+7,985

Non-current
liabilities
Long-term interestbearing debt

1,780

3.2%

1,898

3.4%

＋118

432

0.8%

233

0.4%

(199)

Other

2.4%
59.9%
40.1%

1,665
27,83428,062

3.0%
49.8%
50.2%

＋318

Total net assets

1,347
33,81822,606＋5,456

Total liabilities andnet assets

56,425100.0%

55,896100.0%(529)

Current assets

Non-current assets
Total assets
Current liabilities

Total liabilities•

Retirement of debt•

Settlement of notes payable andaccounts payable•

Increase in investments•

Rise in advances due to increase inaccounts receivable on equipment
shipped•Increase in retained earnings(4,153)＋2,160(529)(6,103)(5,984)

11Cash Flows(Million yen)

FY2017
AmountFY2018
AmountChangeCash flows from operating
activities

4,695

9,572

+4,877

Cash flows from investing
activities(2,768)(2,964)(196)

Cash flows from financing
activities

12,446(10,053)(22,499)

Effect of exchange ratechange on cash and cash
equivalents

161

(707)

(868)

Net increase (decrease) incash and cash equivalents

14,536(4,153)(18,689)

Cash and cash equivalents
at beginning of period

5,357

19,893+14,536

Cash and cash equivalents
at end of period

19,893

15,740(4,153)Major factors• Increase in profit• Increase in advances received• Payment for investment• Net decline in short-term debt
• Cash dividends paid

12

● Forecast for FY12/2019● Strategy● Shareholder Distributions

13

Forecast for FY12/2019
Aim for higher sales and profit(Million yen)

FY12/2018(Actual)FY12/2019(Forecast)

ChangeNet sales

44,76346,000+2.8%

Operating profit

10,69011,300+5.7%

Operating margin

23.9%

24.6%

Ordinary profit

10,992

11,300+2.8%

Profit attributable toowners of parent

7,745

8,400

+8.4%

R&D expenses

3,103

3,900+25.7%―14Strategy1. Aim at expanding application areas with optical thin film coaters
 In the smartphone sector, accelerate improving availability of optical thin-film technologies andaccelerate development of new models in response to transition to 5G networks and emerging theneeds of smartphone manufacturers
 In the semiconductor/optical integration, start full-scale sales of finished Optical Wafer Level
Sputtering Coater.
 In vehicle mounted devices market, more orders for products related to vehicle-mounted cameras,
sensors an in-panel devices are expected. The core markets are East Asia, including Japan.
 Accelerate the development and sales of devices for BPF filters for 5G applications.
 In the LED sector, increase luminous efficiency by adopting new model of DBR of optical thin film
coaters, thus reducing LED production cost and boosting orders.
 Along with advances in IoT and AI technologies acquire new technologies in areas other than
optical thin films in order to dramatically increase thin film coating efficiency and thus expanding
application range

2. Medium-term targets
 Increase synergy benefits by consolidating companies acquired through M&A and increasecorporate value.
 Step-up investments, tie-ups and acquisitions in order to obtain new technologies, markets and acustomer base and thus increase corporate earnings power.
15

Shareholder Distributions
 FY12/2018: Dividend paid: 55yen (Payout ratio 29.3%)
 FY12/2019: Estimated dividend: 60yen (Payout ratio 29.6%)
Dividend per share29.7(Yen)Dividend Policy
The policy is maintain sufficient funds
for R&D activities, strengthening
manufacturing operations, starting new
モルガン・スタンレー
businesses
and other requirements andto use remaining funds as much as
possible for shareholder distributions.
The goal is consistent dividend
payments with a consolidated payout
ratio of about 30%.

Payout ratio (rhs)

29.3

29.6(%)

30.0

60.0
25.0
50.0

22.7
20.0

40.0

30.0

55

60

10.0

40

20.0

15.0

5.0

10.0

9.3
0.0

0.0
2016/122017/122018/122019/12（E ）* There was a 1-to-1,000 share split on March 18, 2017 and a 1-to-3 share split on October 13, 2017.
Earnings per share before 2017 have been adjusted to reflect these stock splits.

16Disclaimer, Precautions and InquiriesThis presentation was prepared by using assumptions based on economic, socialand other conditions as of February 13, 2019 and the reasonable judgments ofmanagement. The information in this presentation may be revised without priornotice in the event of a change in the business climate or some other event.
This presentation contains forward-looking statements. These statements
incorporate assumptions that reflect current outlooks, forecasts and risk factors.
There are many uncertainties that may cause actual performance to differ fromthese statements.
These risk factors and uncertainties include, but are not limited to, industry andmarket conditions, changes in interest rates and exchange rates, and other items
associated with the Japanese economy and global economy.
Even if there is new information, a future event or some other item that affects theoutlook, Optorun has no obligation to update or revise the forward looking
statements in this presentation.
Inquiries
E-mail: ir-info@optorun.co.jp

TEL: 03-6635-9487
17