March 2019 3rd Quarter Financial Statement [Japan Standard] (Consolidated)
February 12th, 2019
Listed on: Tokyo
Stock Exchange

Listed company name

EM Systems Co., Ltd.

Code No.

4820

URL: http://www.emsystems.co.jp

Representative:(Job title)

Executive director and CEO(Name)
Kozo Kunimitsu

Representative forinquiries(Job title)

Managing director and operative
officer, administrative planning
office head

(Name) Gen Aota

Planned date of
February 13th,
Planned starting date of payment
submission of
2019
of dividends
quarterly report
Supplementary explanatory materials created for quarterly financial
statement
Quarterly financial results briefing held
(For Use by Analysts)

TEL:+81(0)6-6397-1888－: None: None(Amounts of less than 1 million yen rounded down)
1. Consolidated results of March 2019 3rd Quarter Financial Statement (April 1st 2018 through December 31st, 2018)(1) Consolidated management performance (total)
Sales

March 2019 3rdquarterMarch 2018 3rdquarter(Note)
Comprehensive
incomeMillionsof yen9,617
10,448March2019 3rd
Quarter(% refers to rate of change over the same quarter in the previous year)
Operating profits

%
(8.0)

Millionsof yen
2,014

6.2

2,315

1,683

Millions ofyen

Quarterly net income
belonging to parent
company shareholders
Millions of%yen(10.0)
1,675

Ordinary profits%(13.0)

Millionsof yen2,495(10.4)

30.6

2,785

27.2

1,861

29.6

March
2018 3rd
Quarter

1,870

Millions of
yen

31.5%

( 10.0%)%Quarterly net income per share after
potential stock adjustment
Yen 100ths of a yen
Yen 100ths of a yen
March 2019 3rd quarter
47.27
46.56
March 2018 3rd quarter
52.44
52.21
(Note) This company implemented a stock split at a rate of 2 shares per 1 share of ordinary stock with an effective date ofMarch 1st, 2018. We have calculated "quarterly net income per share" and "quarterly net income after potential stock
adjustment "assuming that said stock split was conducted at the beginning of previous fiscal year.
Quarterly net income per share(2) Consolidated financial position
Total assets
March 2019 3rd quarter
March 2018
(Refer to) Net capitalMillions of yen
21,412
21,893
March 201916,582
3rd Quarter

Net assets

Capital adequacy
ratio

Millions of yen
16,717
16,052Millions of yen－1－March 2018 period

Net assets per share
%
77.4
72.7
15,906

Yen 100ths of a yen
468.01446.82Millions of yen

2. State of dividends

March 2018

End of 1st quarter
Yen 100ths of a yen–

End of 2nd quarter
Yen 100ths of a yen
13.00

Annual dividends
End of 3rd quarter
Yen 100ths of a yen–

March 2019–
8.00
March 2019–
(estimate)(Note) Revisions from the last published dividend estimates: None

End of term
Yen 100ths of a yen
12.00
10.00

Total
Yen 100ths of a yen–
18.00

This company implemented a stock split at a rate of 2 shares per 1 share of ordinary stock with an effective date of March 1 st,
2018. Regarding the dividends of the 2nd quarter of the March 2018 period, we have included the amounts of actual dividends
before said stock split. The annual dividend amount per share calculated under the post-stock split standard is 18.5 yen for
the March 2018 period
3. Estimated consolidated results of March 2019 period (April 1st, 2018 through March 31st, 2019)(% refers to rate of change over the previous term)
Sales

Operating profits

Ordinary profits

Quarterly net income
belonging to parent
company shareholders

Millions
Millions
Millions
Millions of%%%of yenof yenof yenyen(5.8)(22.9)(17.3)
13,146
2,362
2,993
2,020
(Note) Revisions from the last published forecast of financial results : None

Full
year

－2－

%
(14.7)

Quarterly net income
per share

Yen 100ths of a yen
55.96

* Addendums(1) Changes in major subsidiaries during cumulative quarterly consolidated period (changes in designated subsidiaries
accompanied by changes within the scope of consolidation): None
(2) Application of special accounts processing in the creation of the quarterly consolidated financial statement: Yes(Note) For details, please see the attached document P.8 "2. Quarterly consolidated financial statement and major explanatory
notes (3) Addendums relating to quarterly consolidated financial statement (application of special accounts processing in thecreation of the quarterly consolidated financial statement)".
(3) Changes to accounting policy, changes to estimates in accounting, revised restatements
1. Changes to accounting policies accompanying revision to accounting standards, etc. : None
2. Changes to accounting policies other than 1.

: None3. Changes to estimates in accounting: None4. Revised restatement: None(4) Number of shares outstanding (ordinary stock)
1. Number of shares outstanding at end ofterm (including own stock)
2. Number of own shares at end of term
3. Average number of shares outstanding
during term (quarterly total)

March 2019
3rd quarter
March 2019
3rd quarter
March 2019
3rd quarter

36,578,600 shares
1,147,606 shares
35,435,594 shares

March 2018
periodMarch 2018
periodMarch 2018
3rd quarter

36,347,400 shares
747,206 shares
35,497,136 shares(Note) This company implemented a stock split at a rate of 2 shares per 1 share of ordinary stock with an effective date ofMarch 1st, 2018. We have calculated the “Average number of shares outstanding during term” for March 2018 2nd quarterassuming that said stock split was conducted at in the previous consolidated fiscal year.
* The quarter financial statement is not subject to quarterly review by certified public accountants or auditors.
* Explanation regarding appropriate use of estimated results and other special notes
The descriptions of the future such as estimated results contained in this document are based on information possessed bythis company at the present time and certain assumptions this company deems reasonable, and they may differ greatly toactual results due to a variety of factors.

－3－

○Table of contents of attached materials
1. Qualitative information relating to this quarter's statement ………………………………………………………………………. 5(1) Explanation regarding management performance …………………………………………………………………………………. 5(2) Explanation regarding financial position ……………………………………………………………………………………………. 6(3) Explanation regarding information on future prospects such as estimated consolidated results ………………………….. 7
2. Quarterly consolidated financial statement and major explanatory notes ………………………………………………………. 8(1) Quarterly consolidated balance sheet ………………………………………………………………………………………………… 8(2) Quarterly consolidated statements of income and quarterly consolidated statements of comprehensive income ……….10
Quarterly consolidated statements of income
Consolidated cumulative 3rd quarter………………………………………………………………………………………….. 10
Quarterly consolidated statements of comprehensive income
Consolidated cumulative 3rd quarter …………………………………………………………………………………………. 11(3) Addendums relating to quarterly consolidated financial statement ……………………………………………………………. 12(Explanatory notes regarding prerequisites of going concern) ……………………………………………………………………… 12(Explanatory notes for cases of considerable changes in amounts of shareholder's equity) …………………………………… 12(Application of special accounts processing in the creation of the quarterly consolidated financial statement) …………… 12(Important events after the reporting period) ………………………………………………………………………………………… 12－4－

1. Qualitative information relating to this quarter's financial results(1) Explanation regarding operating results
In regard to our country's economic condition in this 3rd quarter consolidated cumulative period, while
economic recovery temporarily dulled due to the effects of typhoon No. 21 and heavy rains in Western Japan,
capital investments remained steady with a focus on investments in streamlining and economizing prompted by
the labor shortage.
In the healthcare (clinics and pharmacies) and nursing care industries, the 2018 simultaneous revision of
medical service and long-term care fees was conducted. As a result, difficulties continue to increase in the fieldof pharmacies, which are our company's major sales outlet, due to medicine dispensing fees and drug pricereforms. In recent years, the nation’s citizens have become more critical of the quality of healthcare and nursing
care services, and it is necessary to meet these needs. In addition, in regard to major pharmacy chains and drug
stores, we expanded business scale and profit through M&As, etc.
Our group develops systems utilizing AI in order to be able to develop and offer products and services capableof contributing to the citizens and healthcare industry. Focusing on the super-aging society which is symbolic ofthe "2025 problem" (*1), we provide an environment that enables seamless information coordination between
the healthcare and nursing care fields by constructing a three-pronged network between systems for clinics,
pharmacies, and nursing care operators in order to achieve information coordination with healthcare (clinics
and pharmacies) and nursing care.
Furthermore, we have been conducting business collaborations since November 2018 to create further social
value through improving safety for patients and optimizing operations at medical institutions and pharmacies
by jointly developing new systems together with CSI Co. that link hospitals and pharmacies.
We have also been conducting business collaboration with Nippon Electric Company (NEC) to promote theutilization of ITC in the health and medical care fields such as information coordination between hospitals,
clinics, insurance pharmacies, etc., and create new services.
In November 2018, our group announced the “MAPs Series,” a shared information system base applicable toall healthcare fields (medical departments, pharmacies and nursing care). It is a completely cloud-based systemthat unifies systems in health care fields. Through the system’s various functions, we will continue to support
the operations of clinicians, pharmacists and nursing care service providers.
Performance during this 3rd quarter consolidated cumulative period was in line with plans in terms of sales
owing to refurbishment of our business model from October as well as to demands to replace hardware. In
addition, operating profits exceeded expectations as manufacturing costs were less than planned due to focusing
on development of next generation systems.
One the other hand, we failed to achieve performance equal to the previous 3rd quarter consolidated
cumulative period. As a result, our performance for this 3rd quarter consolidated cumulative period were 9,617
million yen in sales (an 8.0% decrease compared to the same period in the previous year), 2,014 million yen in
operating profits (a 13.0% decrease), 2,495 million yen in ordinary profits (a 10.4% decrease), and 1,675 million
yen in quarterly net income attributable to owners of parent (a 10.0% decrease).
(*1) The baby boomer generation said to number approximately 8 million will reach advanced elderly age by2025, thereby worsening issues such as increased social welfare spending, including nursing care and medical
costs, and lack of workers in nursing care.
By-segment results are as follows.
(Business for Pharmacies and related businesses)
Regarding business for pharmacies and related businesses, we have continued to strengthen our approaches
to pharmacy chains and our sales channels through OEM provision, etc., and we have focused our efforts on
expanding sales in systems for pharmacies, namely "Recepty NEXT" and "Bungyo Mate."
Billing sales increased favorably and sales of consumables continued to be bullish. As a result, while we nearly
achieved our goals for sales and operating profits, we failed to achieve sales and operating profits equal to theprevious 3rd quarter consolidated cumulative period.
Consequently, business for pharmacies and related businesses in this 3rd quarter consolidated cumulative
period were 7,686 million yen in sales (a 9.9% decrease compared with the same period in the previous year)
and 1,850 million yen in operating profits (a 15.3% decrease).

－5－

(Business for medical systems and related businesses)
Regarding business for medical systems and related businesses, in order to expand our nation-wide sales
channels we have been cultivating markets in clinics through retail outlets. Furthermore, we have continued tofocus efforts on sales of the medical accounting systems "MRN (*2) Clerk Style" and "Uni-Medical," as well as
the electronic medical records systems "MRN Karte Style" and "Ortia."
In addition, in regard to “Maps for CLINIC,” a diagnostic support systems for clinics and one of the productsin the “MAPs Series,” a shared information system base, we plan to begin shipping from the 4th quarter.
As a result, we have achieved sound expansion of sales channels as well as sound increases in numbers of
new installations targeting newly-started customers and replacements for customers of MRN competitors.
While billing sales increased favorably and sales of consumables were bullish, we failed to achieve sales andoperating profits equal to the previous 3rd quarter consolidated cumulative period.
Consequently, business for medical systems and related businesses in this 3rd quarter consolidated
cumulative period were 1,246 million yen in sales (a 4.9% decrease from the same period in the previous year)
and 178 million yen in operating profits (a 37.6% increase).
(*2) MRN: Medical Recepty NEXT
(Other business)
Regarding our nursing care system business, while we are reviewing our business strategy, such as M&A,
etc., we were not able to contribute to sales or profits. In our healthcare and nursing care business, we focusedon increasing the number of subscribers to "Hirogaru Care Net" which we provide for clinics, pharmacies, andnursing care service operators.
Our pharmacy operation business was partially impacted by medicine dispensing fees and drug pricereforms, but sales and operating profits were above initial estimates. Furthermore, Lasante Co., Ltd. achieved
planned sales and operating profits.
Furthermore, in the "commissioned online qualification checking system for prescription receipt creation at
pharmacies," with which we were commissioned by the Hiroshima Branch of the Japan Health Insurance
Association (Kyokaikenpo), we extended the initial contract periods to continue providing the service.
At our company, we are proactively engaged in the realization of electronic prescriptions and research anddevelopment as well as verification projects relating to HER (*3), in order to contribute to future developmentsin the healthcare industry. In the "infectious disease outbreak detection services," which is a joint research
project between the Japan Medical Association, the Japan Pharmaceutical Association, and Nihon University,
the number of pharmacies using it has exceeded 10,000 nationwide.
Consequently, other business in this 3rd quarter consolidated cumulative period was 765 million yen in sales(a 5.6% increase over the same period in the previous year) and 8 million yen in operating losses (compared to 6
million yen in operating profits in the same period in the previous year).
(*3) HER: Electronic Health Record(The aforementioned by-segment sales and operating profits and losses are the amounts before elimination ofinternal transactions between segments.)(2) Explanation regarding financial position(Assets)
Current assets at the end of this 3rd quarter consolidated cumulative period were 10,495 million yen, a 1,097
million yen decrease compared to the end of the previous consolidated fiscal year. While payments of dividends
and corporation tax were made, this is due mainly to a 793 million yen decrease in cash on hand and in banks
as well as a 408 million yen decrease in accounts receivable due to bullish performance and smooth collection of
accounts receivable. Fixed assets were 10,917 million yen, a 616 million yen increase compared to the end of theprevious consolidated fiscal year. While both construction in progress and software in progress increased 210
million yen and 671 million respectively accompanying development of next generation systems, this is due
mainly to a decrease accompanying a 146 million yen depreciation in investment real estate and a 79 million
yen depreciation in software.
As a result, total assets were 21,412 million yen, a 480 million yen decrease compared to the end of theprevious consolidated fiscal year.

－6－

(Liabilities)
Current liabilities at the end of this 3rd quarter consolidated cumulative period were 2,672 million yen, a 1,110
million yen decrease compared to the end of the previous consolidated fiscal year. This is due mainly torespective decreases of 345 million yen in long-term debt planned for repayment within a year and 538 million
yen in unpaid corporate taxes, etc. Fixed liabilities were 2,022 million yen, a 35 million yen decrease comparedto the end of the previous consolidated fiscal year.
As a result, total liabilities were 4,695 million yen, a 1,145 million yen decrease compared to the end of theprevious consolidated fiscal year.
(Net assets)
Net assets at the end of this 3rd quarter consolidated cumulative period were 16,717 million yen, a 665
million yen increase compared to the end of the previous consolidated fiscal year. This is due mainly to anincrease of 964 million yen in earned surplus due to bullish performance, increase of 484 million yen in treasury
shares due to acquisition of our own shares, etc., and respective increase on 86 million yen in capital and 100
million yen in capital surplus due to disposal of treasury shares accompanying execution of stock options andissuance of stocks with limitation on transfer.
As a result, our capital adequacy ratio was 77.4% (compared to 72.7% at the end of the previous consolidated
fiscal year).
(3) Explanation regarding information on future prospects such as forecast of consolidated financial results
Forecast of consolidated financial results for the full year ending March 2019 are as explained in the"Notification regarding Revisions to the Forecast of Consolidated Financial Results for the Full Year Ending inMarch 2019," announced on November 9th, 2018.

－7－

2. Quarterly consolidated financial statements and major explanatory notes(1) Quarterly consolidated balance sheet(Units: millions of yen)Previous consolidated
fiscal year
(March 31st, 2018)
AssetsCurrent assets
Cash on hand and in banks
Notes and accounts receivable
Merchandise and products
Raw materials and supplies
OthersAllowance for bad debts
Total current assets
Fixed assets
Tangible fixed assets
Buildings and structures (net)Land
Lease assets (net)
Rental assets (net)
Construction in progress
Others (net)Total tangible fixed assets
Intangible fixed assets
Software
Software in progress
Reputation
OthersTotal intangible fixed assets
Investments and other assets
Investment securities
Investment real estate (net)
Net defined benefit asset
OthersAllowance for bad debts
Total investments and other assets
Total fixed assets
Total assets－8－This 3rd quarter
consolidated fiscal period(December 31st, 2018)

8,528
2,189
130
0
762
(19)
11,592

7,735
1,780
146
0
851
(17)
10,495

777
608
102
15
–
77
1,580

742
589
70
11
210
71
1,695

167
255
254
5
682

96
927
211
5
1,240

205
7,018
109
704
(0)
8,037
10,30021,893

205
6,871
125
778
(0)
7,980
10,917
21,412

(Units: millions of yen)Previous consolidated
fiscal year
(March 31st, 2018)
Liabilities
Current liabilities
Notes and accounts payable
Long-term debt planned for repayment within 1 year
Arrears
Lease obligations
Income taxes payable, etc.
Provision for bonuses
Provision for points card certificates
OthersTotal current liabilities
Fixed liabilities

Long-term loans payable
Lease obligations
Net defined benefit loabolity
Provision for product warranties
Long-term guarantee deposits
Total fixed liabilities
Total liabilities
Net assets
Shareholder's equity
Capital stock
Capital surplus balance

Retained earnings
Treasury stock
Total shareholder's equity
Cumulative amount of other comprehensive income
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total other cumulative comprehensive income
Subscription rights to shares
Total net assets
Total liabilities and net assets－9－This 3rd quarter
consolidated fiscal period(December 31st, 2018)

760
517
418
48
763
350
3
921
3,782

675
171
436
36
224
188
4
934
2,672

137
72
917
214
715
2,058
5,840

60
61
963
223
714
2,022
4,695

2,445
2,808
10,8782,531
2,908
11,843

(208)

(693)

15,924

16,590

48
(66)
(17)
145
16,052
21,893

41
(50)
(8)
135
16,717
21,412

(2) Quarterly consolidated statements of income and quarterly consolidated statements of comprehensive income(Quarterly consolidated statements of income)(3rd quarter consolidated cumulative period)(Units: millions of yen)

Sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profits
Non-operating profits
Interest income
Real estate rental income
OthersTotal non-operating profits
Non-operating expenses
Interest expense
Real estate rental expenses
OthersTotal non-operating expenses
Ordinary profits
Special profits
Gain on reversal of subscription rights to shares
Total special profits
Special losses
Losses on disposal of fixed assets
Loss on impairment
Debt prepayment expenses
Total special losses
Quarterly net income before adjustment for taxes, etc.
Corporation tax, etc.
Quarterly net income
Profit attributable to owners of parent

Previous 3rd quarter
consolidated cumulative period(From April 1st, 2017
To December 31st, 2017)
10,448
4,561
5,887
3,571
2,315

This 3rd quarter
consolidated cumulative period(From April 1st, 2018
To December 31st, 2018)
9,617
4,103
5,514
3,499
2,014

0
751
25
778

0
764
9
774

4
294
9
308
2,785

1
277
14
294
2,495

0
0

–
–

0
20
8
29
2,755
894
1,861
1,861

0
20
–
20
2,474
799
1,675
1,675

－ 10 －

(Quarterly consolidated statements of comprehensive income)(3rd quarter consolidated cumulative period)(Units: millions of yen)

Quarterly net income
Other comprehensive income
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total other comprehensive income
Quarterly comprehensive income(Breakdown)
Quarterly comprehensive income concerning parent
company shareholders
Quarterly comprehensive income concerning
non-controlling shareholders

Previous 3rd quarter
consolidated cumulative period(From April 1st, 2017
To December 31st, 2017)
1,861

This 3rd quarter
consolidated cumulative period(From April 1st, 2018
To December 31st, 2018)
1,675

2
5
8
1,870

(6)
15
8
1,683

1,870

1,683

–

–

－ 11 －

(3) Addendums relating to quarterly consolidated financial statement(Explanatory notes regarding prerequisites of going concern)
There is no applicable information.
(Explanatory notes for cases of considerable changes in amounts of shareholder's equity)
There is no applicable information.
(Application of special accounts processing in the creation of the quarterly consolidated financial statement)
We have calculated tax expenses by multiplying quarterly net income before taxes and effective tax ratethat were reasonably estimated, following application of tax effect accounting for the income before taxes of
the consolidated accounting period including this 3rd quarter consolidated cumulative period.
(Important events after the reporting period)
Acquisition of treasury shares
At a meeting of the board of directors held on April 1st, 2019, this company resolved matters relating toacquisition of treasury shares based on the stipulations of Article 156 of the Companies Act applied througha re-interpretation of the stipulations of Item 3, Article 165 of the aforementioned Act.
1. Reason for acquiring treasury shares
To improve flexible capital strategies and capital efficiency in line with changes in administrativeenvironment.
2. Details of matters relating to acquisition(1) Type of shares to be acquired:
Ordinary shares in the company(2) Total number of shares to be acquired:500,000 share (maximum)(Ratio of total number of issued shares (excluding treasury shares): 1.4%)(3) Total amount of acquisition price of shares:
500 million yen (maximum)(4) Acquisition period:
January 7th ~June 30th, 2019(5) Acquisition method:
Market buying on Tokyo Stock Exchange
Corporate consolidation through acquisition
This company entered into a Business Transfer Agreement on February 1st, 2019, wherein the company
transferred to Janis Co., Ltd. a portion of its business relating to development and sales of systems fornursing care service providers.
1. Overview of corporate consolidation(1) Name of acquired company and description of its business
Name of acquired company: Janis Co., Ltd.
Description of business: Development and sales of systems for nursing care service providers(2) Main reason for conducting corporate consolidation
Our group, focusing on the super-aging society which is symbolic of the "2025 problem,” has been
wholeheartedly participating in the business of providing systems to nursing care service providers eversince October 2016 in order to achieve information coordination with healthcare (clinics andpharmacies) and nursing care, and following the March 2017 release of “Hirogaru Care Net,” which
provides solutions through cooperation between the medical and nursing care fields, in August, wereleased our “Tsunagaru Care Next” function (for at-home nursing care support providers and caremanagers). We provide an environment that enables seamless information coordination between the
medical and nursing care fields by constructing a three-pronged network between systems for clinics,
pharmacies, and nursing care operator.
In addition, Janis Co., Ltd., which has accumulated extensive experience and skills since its founding
through its business of providing systems for nursing care service providers, possesses excellent systemdevelopment capabilities. In particular, the company possesses the industry’s highest class of know-how
and accomplishments in the field of disability welfare service, and concentrating management resources
through the business transfer concerned is expected to further strengthen the business of providing
systems for nursing care service providers in the future.
(3) Date of corporate consolidation
February 1st, 2019－ 12 －

(4) Legal format of corporate consolidation
Business transfer
2. Acquisition price
135 million yen (tax included)
3. Amount of goodwill, cause of occurrence, method of amortization and amortization period
To be determined later.
4. Amount of assets accepted on business transfer date and liabilities assumed and the breakdown
To be determined later.
Corporate consolidation through acquisition
At a meeting of the board of directors on February 12th, 2019, this company acquired all shares in M-Win
Soft Co., Ltd. and entered into a Basic Agreement regarding transformation of said company into a
subsidiary.
1. Overview of corporate consolidation(1) Name of acquired company and description of its business
Name of acquired company: M-Win Soft Co., Ltd.
Description of business: Development and sales of the nursing care support system “Sukoyaka-san”(2) Main reason for conducting corporate consolidation
M-Win Soft Co., Ltd., which has accumulated extensive experience and skills through its business ofproviding systems for nursing care service providers, possesses excellent system development capabilities.
In particular, the company possesses the industry’s highest class of know-how and accomplishments inthe field of services for regional comprehensive support centers, and in combination with the business
transfer with Janis Co., Ltd., this is expected to further strengthen the business of providing systems fornursing care service providers in the future by unifying the nursing care service business field, thedisability welfare business field and the comprehensive support business field.
(3) Date of corporate consolidation
February 28th, 2019(4) Legal format of corporate consolidation
Share acquisition
2. Acquisition price
To be determined later.
3. Amount of goodwill, cause of occurrence, method of amortization and amortization period
To be determined later.
4. Amount of assets accepted on business transfer date and liabilities assumed and the breakdown
To be determined later.

－ 13 －