March 2019 2nd Quarter Financial Statement [Japan Standard] (Consolidated)
November 9th, 2018
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 ofNovember 12th,
Planned starting date of payment
submission of
2018
of dividends
quarterly report
Supplementary explanatory materials created for quarterly financial
statement
2nd quarter financial statement briefing held
(For Use by Analysts)

TEL:+81(0)6-6397-1888

December 3rd, 2018
: Yes
: Yes

(Amounts of less than 1 million yen rounded down)
1. Consolidated results of March 2019 2nd Quarter Financial Statement (April 1st 2018 through September 30th, 2018)(1) Consolidated management performance (total)(% refers to rate of change over the same quarter in the previous year)

Sales

March 2019 2ndquarterMarch 2018 2ndquarter(Note)
Comprehensive
incomeMillionsof yen6,594

Operating profits%△4.1

Millionsof yen
1,468

6,873

5.4

March
2019 2nd
Quarter

1,202

Quarterly net income
belonging to parent
company shareholders
Millions of
%
yen
△1.4
1,197

Ordinary profits%△2.7

Millionsof yen
1,787

%
△2.1

1,509

31.4

1,825

27.3

1,214

26.8

Millions ofyen(△ 1.0%)March2018 2nd
Quarter

1,215

Millions ofyen(29.3%)

Quarterly net income per share after
potential stock adjustment
Yen 100ths of a yen
Yen 100ths of a yen
March 2019 2nd quarter
33.79
33.25
March 2018 2nd quarter
34.23
34.07
(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 2nd quarter
March 2018
(Refer to) Net capitalMillions of yen
21,754
21,893
March 201916,338
2nd Quarter

Net assets

Capital adequacy
ratio

Millions of yen
16,47916,052Millions of yen－1－March 2018 period

Net assets per share
%
75.1
72.7
15,906

Yen 100ths of a yen
461.93446.82Millions 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

Millions
Millions
Millions%%of yenof yenof yen△5.8△22.9
13,1462,362
2,993(Note) Revisions from the last published estimated results: Yes

Full
year

－2－

%
△17.3

Quarterly net
income belonging toparent company
shareholders
Millions%of yen△14.7
2,020

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
2nd quarter
March 2019
2nd quarter
March 2019
2nd quarter

36,516,600 shares
1,147,106 shares
35,449,044 shares

March 2018
periodMarch 2018
periodMarch 2018
2nd quarter

36,347,400 shares
747,206 shares
35,472,978 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 ………………………….. 6
2. Quarterly consolidated financial statement and major explanatory notes ………………………………………………………. 7(1) Quarterly consolidated balance sheet ………………………………………………………………………………………………… 7(2) Quarterly consolidated statements of income and quarterly consolidated statements of comprehensive income ……….. 9
Quarterly consolidated statements of income
Consolidated cumulative 2nd quarter………………………………………………………………………………………….. 9
Quarterly consolidated statements of comprehensive income
Consolidated cumulative 2nd quarter …………………………………………………………………………………………. 10(3) Addendums relating to quarterly consolidated financial statement ……………………………………………………………. 11(Explanatory notes regarding prerequisites of going concern) ……………………………………………………………………… 11(Explanatory notes for cases of considerable changes in amounts of shareholder's equity) …………………………………… 11(Application of special accounts processing in the creation of the quarterly consolidated financial statement) …………… 11－4－

1. Qualitative information relating to this quarter's statement(1) Explanation regarding management performance
In regard to our country's economic condition in this consolidated cumulative 2nd quarter, business conditions are expected
to continue steadily transitioning as the real GDP showed a high growth rate during the April to June periods. However, due
to the effects of typhoon No. 21 and heavy rains in western Japan, there exists the possibility that business recovery will
temporarily slow due to suspension of plant operations and slowed exports. However, employment and income environments
continue to improve and the consumption mentality of individuals is steadily transitioning, so the Japanese economy isexpected to be able to remain firm.
In pharmacies, which are our company's major sales outlet, difficulties continue to increase due to the 2018 simultaneous
revision of medical service and long-term care fees. In addition, in regard to major pharmacy chains, business restructuringcontinues due to expansions in scale caused by M&As, etc.
Our group, focusing on the super-aging society which is symbolic of the "2025 problem" (*1), offers an environment thatenables seamless information coordination by constructing a three-pronged network between systems for clinics, pharmacies,and nursing operators in order to achieve information coordination with healthcare (clinics and pharmacies) and nursing.
Additionally, in order to be able to develop and offer products and services which can contribute even more to the citizens andhealthcare industry in the future, we are developing systems utilizing AI.
Furthermore, in March 2018 we started collaborations with Nippon Electric Company (NEC). As Japan approaches
becoming a super-aging society, we are jointly developing next generation systems in electronic medical records for clinics andmedicine dispensing systems for insurance pharmacies as a first step toward solving the issues of longer healthier lives for
citizens and optimization of social welfare spending. In the future, we also plan to promote the utilization of ITC in the healthand medical care fields such as information coordination between hospitals, clinics, insurance pharmacies, etc., and create
new services.
Performance in this consolidated cumulative 2nd quarter exceeded plans in terms of sales and operating profits. In addition,
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 consolidated cumulative 2nd quarter. As aresult, our performance for this consolidated cumulative 2nd quarter were 6,594 million yen in sales (a 4.1% decrease
compared to the same period in the previous year), 1,468 million yen in operating profits (a 2.7% decrease), 1,787 million yen
in ordinary profits (a 2.1% decrease), and 1,197 million yen in quarterly net income belonging to parent company shareholders(a 1.4% decrease).
(*1) The baby boomer generation said to number approximately 8 million will reach advanced elderly age by 2025, thereby
worsening issues such as increased social welfare spending, including nursing and medical costs, and lack of workers innursing.
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 forpharmacies, namely "Recepty NEXT" and "Bungyo Mate".
Under such circumstances, the number of systems sales reached the planned amount and billing sales have also increased
favorably, and with hardware replacement also proceeding as planned, our supply sales have continued to be bullish. As aresult, we achieved our planned sales and operating profits, but we failed to achieve sales and operating profit equal to theprevious consolidated cumulative 2nd quarter.
Consequently, business for pharmacies and related businesses in this consolidated cumulative 2nd quarter were 5,263
million yen in sales (a 6.4% decrease compared with the same period in the previous year) and 1,365 million yen in operating
profits (a 3.9% decrease).
(Business for Clinics and related businesses)
Regarding business for clinics and related businesses, in order to expand our nation-wide sales channels we have beencultivating markets in clinics through retail outlets. Furthermore, we have continued to focus 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".
As a result, we have achieved sound expansion of sales channels as well as sound increases in numbers of new installationsof MRN and system sales through third-party replacements. Furthermore, our billing sales have increased favorably, with our
supply sales also promising. Consequently, business for clinics and related businesses in this consolidated cumulative 2nd
quarter were 871 million yen in sales (a 2.3% increase over the same period in the previous year) and 122 million yen in
operating profits (a 59.7% increase).
(*2) MRN: Medical Recepty NEXT

－5－

(Other business)
Regarding other business, our nursing system business did not contribute to sales or profits due to a review of our businessstrategy, etc. Our pharmacy operation business was partially impacted by medicine dispensing fees and drug price reforms,
but sales and operating profits were above initial estimates. Furthermore, Lasante Co., Ltd. exceeded planned sales andoperating profits.
In our healthcare and nursing business, we focused on increasing the number of subscribers to "Hirogaru Care Net" which
we provide for clinics, pharmacies, and nursing service operators.
Furthermore, in the "commissioned online qualification checking system for prescription receipt creation at pharmacies,"with which we were commissioned by 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 and development aswell as verification projects relating to HER (*3), in order to contribute to future developments in 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 consolidated cumulative 2nd quarter was 513 million yen in sales (a 6.5% increase overthe same period in the previous year) and 17 million yen in operating losses (compared to 3 million yen in operating profits inthe 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 of internaltransactions between segments.)(2) Explanation regarding financial position(Assets)
Current assets at the end of this consolidated cumulative 2nd quarter were 11,413 million yen, a 178 million yen decrease
compared to the end of the previous consolidated fiscal year. While payments of dividends and corporation tax were made, thisis due mainly to a 152 million yen decrease in cash on hand and in banks as well as a 105 million yen decrease in accounts
receivable due to steady performance transitions and smooth collection of accounts receivable. Fixed assets were 10,340
million yen, a 40 million yen increase compared to the end of the previous consolidated fiscal year. This is due mainly to adecrease accompanying a 290 million yen increase in software in progress, a 97 million yen depreciation in investment realestate and a 47 million yen depreciation in software.
As a result, total assets were 21,754 million yen, a 138 million yen decrease compared to the end of the previous
consolidated fiscal year.
(Liabilities)
Current liabilities at the end of this consolidated cumulative 2nd quarter were 3,261 million yen, a 521 million yen decrease
compared to the end of the previous consolidated fiscal year. This is due mainly to respective decreases of 240 million yen in
long-term debt planned for repayment within a year and 143 million yen in unpaid corporation tax, etc. Fixed liabilities were2,013 million yen, a 44 million yen decrease compared to the end of the previous consolidated fiscal year. This is due mainly to
a 53 million yen decrease in long-term debt.
As a result, total liabilities were 5,274 million yen, a 565 million yen decrease compared to the end of the previous
consolidated fiscal year.
(Net assets)
Net assets at the end of this consolidated cumulative 2nd quarter were 16,479 million yen, a 427 million yen increase
compared to the end of the previous consolidated fiscal year. This is due mainly to a steady transition of performance and a
770 million yen increase in accumulated earnings, as well as to a 63 million yen increase in capital stock and a 77 million yen
increase in capital surplus balance due to disposal of our own stock accompanying execution of stock options and issuance ofstocks with limitation on transfer. Another factor was a 484 million yen increase due to acquisition of our own stock.
As a result, our capital adequacy ratio was 75.1% (compared to 72.7% at the end of the previous consolidated fiscal year).
(3) Explanation regarding information on future prospects such as estimated consolidated results
Estimated consolidated results for the full year ending March 2019 are as explained in the "Notification regarding Revisions
to the Estimated Consolidated Results for the Full Year Ending in March 2019," announced on November 9th, 2018.

－6－

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－7－This 2nd quarter
consolidated fiscal period(September 30th, 2018)

8,528
2,189
130
0
762
△ 19
11,592

8,376
2,083
129
0
841
△ 18
11,413

777
608
102
15
–
77
1,580

753
589
70
13
4
74
1,505

167
255
254
5
682

119
545
225
5
896

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

205
6,920
124
689
△0
7,939
10,34021,754

(Units: millions of yen)Previous consolidated
fiscal year
(March 31st, 2018)
Liabilities
Current liabilities
Promissory notes and accounts payable
Long-term debt planned for repayment within 1 year
Arrears
Lease liabilities
Unpaid corporation tax, etc.
Provision for bonuses
Provision for points
OthersTotal current liabilities
Fixed liabilities
Long-term debt
Lease liabilities
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
Accumulated earnings
Own stockTotal shareholder's equity
Cumulative amount of other comprehensive income
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Total other cumulative comprehensive income
Stock acquisition rights
Total net assets
Total liabilities and net assets－8－This 2nd quarter
consolidated fiscal period(September 30th, 2018)

760
517
418
48
763
350
3
921
3,782

722
277
439
37
619
367
4
793
3,261

137
72
917
214
715
2,058
5,840

83
57
954
202
714
2,013
5,274

2,445
2,808
10,878△ 208
15,924

2,508
2,885
11,649△ 693
16,350

48
△ 66
△ 17
145
16,052
21,893

43
△ 55
△ 12
141
16,47921,754

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

Sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profits
Non-operating profits
Received interest
Real estate rental income
OthersTotal non-operating profits
Non-operating expenses
Paid interest
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
Impairment loss
Debt prepayment expenses
Total special losses
Quarterly net income before adjustment for taxes, etc.
Corporation tax, etc.
Quarterly net income
Quarterly net income belong to parent company
shareholders

Previous 2nd quarter
consolidated cumulative period(From April 1st, 2017
To September 30th, 2017)
6,873
2,956
3,917
2,408
1,509

This 2nd quarter
consolidated cumulative period(From April 1st, 2018
To September 30th, 2018)
6,594
2,781
3,812
2,343
1,468

0
498
13
512

0
509
6
516

3
188
4
196
1,825

1
183
13
198
1,787

0
0

–
–

0
20
8
29
1,796
581
1,214
1,214

0
20
–
20
1,767
569
1,197
1,197

－9－

(Quarterly consolidated statements of comprehensive income)(2nd 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 2nd quarter
consolidated cumulative period(From April 1st, 2017
To September 30th, 2017)
1,214

This 2nd quarter
consolidated cumulative period(From April 1st, 2018
To September 30th, 2018)
1,197

△3
3
0
1,215

△5
10
5
1,202

1,215

1,202

–

–

－ 10 －

(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)
Regarding tax expenses, we have reasonably estimated the effective tax rate after application of tax effect accounting forthe income before taxes of the consolidated fiscal year including this 2nd quarter consolidated fiscal period, and we havecalculated said estimated effective tax rate for our quarterly net income before taxes.

－ 11 －