FY19Q4
F i n a n c i a l
R e s u l t s
May 8, 2020 Earnings Conference

7741.T[ADR:HOCPY
H O YAUS]C O R P O R AT I O N[With Memo]
Please be aware that this memo isposted for reference and is not averbatim record of all statements
made at the earnings call.
© 2020 HOYA CORPORATION All Rights Reserved

Presentation MC:
It is time to begin the HOYA financial results presentation for the fiscal year ending March
2020. Due to the spread of COVID-19, we have decided to conduct this presentation via
teleconference. We apologize if there are any circumstances make this teleconference difficult
to hear or for any interruptions due to technology issues.
Today’s presenters are Mr. Hiroshi Suzuki, CEO, Mr. Ryo Hirooka, CFO, and Mr. Eiichiro Ikeda,
CTO.

1

1. Financial Results [Ryo Hirooka, CFO]
2. IT Business Overview
3. Life Care Business Overview
4. Summary
5. Q&A© 2020 HOYA CORPORATION All Rights Reserved

2

Presentation MC:
As for today’s agenda, CFO Hirooka will cover earnings results for the fiscal year. Following
CFO Hirooka, CTO Ikeda will discuss the HOYA Information Technology segment. Finally, CEO
Suzuki will provide an overview of performance in our Life Care segment.
The remainder of our time until 4:00 PM will be open for questions and answers.
Those of you participating via PC, please refer to the materials shared on your screens.
Without further ado, CFO Hirooka will begin his portion of today’s presentation.

2

Financial Overview(¥bn)

Q4 FY18

Q4 FY19

YoY

YoY(%)

Revenue

141.5

135.1

-6.4

-5%

Pretax Profit

31.4

27.7

-3.7

-12%

Net Profit

29.2

19.7

-9.5

-32%

cf. Profit fromordinary operating
activities*

35.1

32.6

-2.5

-7%

Due to the impact of COVID-19 and a ¥4.7bn fine related toa settlement with the US DOJ (endoscope business), bothrevenue and profit declined YoY.
© 2020 HOYA CORPORATION All Rights Reserved

3

Ryo Hirooka, CFO:
I will conduct my portion based on the materials you see on your screens.
HOYA revenue amounted to ¥135.1 billion, down ¥6.4 billion (-5%) year on year.
Quarterly profit before tax was ¥27.7 billion, down ¥3.7 billion (-12%) year on year.
Quarterly profit was ¥19.7 billion yen, down ¥9.5 billion (-32%).

3

Constant Currency Basis (CCB)(¥bn)

Previous
Rate (A)Current
FX Impact
Rate (B)YoY

YoY(%)

Revenue

138.0

135.1

-2.9

-3.5

-3%

Pretax Profit

27.9

27.7

-0.3

-3.4

-11%

Net Profit

19.9

19.7

-0.2

-9.3

-32%

Average Rates(A)Q4 FY18

(B)Q4 FY19

Variance

US$
EURO
BAHT

¥110.27¥125.27¥3.50¥109.11¥120.06
¥3.44

+1.1%
+4.2%
+1.7%

© 2020 HOYA CORPORATION All Rights Reserved

4

Ryo Hirooka, CFO:
Next, I will address the impact of foreign currency translation.
The bottom section of this slide presents our main currencies, which consist of the U.S. dollar,
the euro, and the baht. Compared to last year, the yen was stronger in general related tothese currencies.
In real terms, the year-on-year change in revenues amounted to minus ¥3.5 billion (-3%)
after excluding the impact of foreign currency translation.
Profits were not impacted by foreign exchange significantly.
Further, quarterly profit before tax increased when excluding the ¥4.7 billion in settlementswith the U.S. Department of Justice.
The significant difference between profit before tax and quarterly profit is the non-deductible¥4.7 billion in settlements with the U.S. Department of Justice recorded in Q4, which resulted
in a significant change in effective tax rate in contrast to Q4 of last year in which we recorded
a significant decrease in taxes and effective tax rates related to the capital restructuring we
conducted for a company purchased in prior years.

4Notes RE: Special Items
Comprehensive Income Statement(¥bn)

Q4 FY18

Q4 FY19

YoY

Income

143.6

136.6

-7.0

Expenses

112.2

108.9

-3.3

Pretax Profit

31.4

27.7

-3.7

Expenses included a ¥4.7bn fine related to a settlementwith the US DOJ for our endoscope business.

© 2020 HOYA CORPORATION All Rights Reserved

55Life Care Earnings(¥bn)

Q4 FY18

Q4 FY19

YoY

YoY(%)

Revenue*

96.3

88.4

-7.9

-8%

Pretax Profit

15.8

9.0

-6.8

-43%

cf.Operating Profit

18.1

14.4

-3.7

-20%

18.8%

16.3%

-2.5ptcf.OP Margin*External revenue© 2020 HOYA CORPORATION All Rights Reserved

6

Ryo Hirooka, CFO:Life Care segment sales amounted to ¥88.4 billion, a decrease of ¥7.9 billion (-8%) year on
year.
Profit before tax amounted to ¥9.0 billion, ¥6.8 billion lower (-43%) year on year.
As I mentioned earlier, our recording of ¥4.7 billion in settlements with the U.S. Departmentof Justice in connection with our endoscope business had a major negative effect on quarterly
profit before tax.

6

Life Care Earnings (CCB)
Previous
Rate

Current
Rate

FX
ImpactYoY

YoY(%)

Revenue*

90.8

88.4

-2.4

-5.5

-6%

Pretax Profit

9.0

9.0

-0.0

-6.8

-43%

cf.Operating Profit

14.6

14.4

-0.2

-3.5

-19%

(¥bn)

*External revenue© 2020 HOYA CORPORATION All Rights Reserved

7

Ryo Hirooka, CFO:
Foreign currency translation had a negative ¥2.4 billion impact on the Life Care segment andsales decreased ¥5.5 billion in real terms (-6%).
Sales for January and February were higher year on year on a real basis. However, theimpact of COVID-19 on March Life Care segment sales resulted in a 6% decrease for Q4
performance.

7

IT Earnings(¥bn)

Q4 FY18

Q4 FY19

YoY

YoY(%)

Revenue*

43.7

45.7

+1.9

+4%

Pretax profit

18.4

19.9

+1.5

+8%

cf.Operating Profit

18.3

19.5

+1.2

+7%

41.8%

42.8%

+1.0ptcf.OP Margin*External revenue© 2020 HOYA CORPORATION All Rights Reserved

8

Ryo Hirooka, CFO:
Information Technology segment sales for the fiscal year amounted to ¥45.7 billion, an
increase of ¥1.9 billion (+4%) year on year.
Profit before tax amounted to ¥19.9 billion, ¥1.5 billion higher (+8%) year on year.
Performance in the Information Technology segment continued to be favorable throughout
Q4 as well.

8

IT Earnings (CCB)
Previous
Rate

Current
Rate

FX
ImpactYoY

YoY(%)

Revenue*

46.1

45.7

-0.4

+2.4

+5%

Pretax profit

20.1

19.9

-0.2

+1.7

+9%

cf.Operating Profit

19.7

19.5

-0.2

+1.4

+8%

(¥bn)

*External revenue© 2020 HOYA CORPORATION All Rights Reserved

9

Ryo Hirooka, CFO:
The Information Technology segment did not experience a significant impact due to foreign
currency translation. On a real basis, sales were up ¥2.4 billion, while profit before tax wasup ¥1.7 billion.

9

Earnings by Sub-Segment（¥bn）

Q4 FY18

Q4 FY19

YoY

YoY(%)

Health Care

72.0

64.5

-7.5
(-5.7)

-11%
(-8%)

24.2

23.9

-0.4
(+0.3)

-2%
(+1%)

34.8

38.7

+3.9
(+4.2)+11%(+12%)

8.9

6.9

-2.0
(-1.8)-22%(-21%)(Eye Glasses/Contact
Lenses)Medical(IOLs/Endoscopes/Ar
tificial Bone)Electronics(Blanks/HDD
Substrates)

Imaging*Inside the parentheses are growth rates on a constant currency basis© 2020 HOYA CORPORATION All Rights Reserved

10

Ryo Hirooka, CFO:
Health care-related product (eyeglass lenses, contact lenses) sales were ¥64.5 billion, down
¥7.5 billion (-11%) year on year.
The figures in parentheses represent results and change ratios excluding the impact offoreign currency translation. real basis a decrease of ¥5.7 billion year on year.
With the yen trending stronger against the dollar and euro, foreign exchange translation had
a negative impact on eyeglass lens performance. As a result, sales were 11% lower year on
year when considering foreign currency exchange, or 8% lower when excluding the impact offoreign currency exchange.
For Q4, eyeglass sales were 10% lower year on year. Due to the impact of COVID-19, sales
were lower year on year in China and Korea. We saw the same pattern in Europe, theAmericas, and Japan beginning in March. March sales were significantly lower year on year.
AS a result, quarterly sales were 10% lower.
Contact lens sales were 3% lower year on year. We did not forecast much growth, assumingthat the September rush in demand before the increase in consumption tax would have anegative rebound effect through Q3. Despite this forecast, we recorded higher sales for
January and February. However, the expanded stay-at-home orders in March led to a 3%
decline in sales year on year.
Medical-related product (intraocular lenses, endoscopes, etc.) sales amounted to ¥23.9 billion,a ¥400 million decrease (-2%).
In real terms, sales increased ¥300 million (+1%) after excluding the impact of foreign
currency translation, essentially level year on year.

Intraocular lens sales were 14% higher year on year, mainly due to the impact of our10acquisition in late January of last year. Excluding the impact of our acquisition, intraocularlens sales grew in excess of 5%. Japan showed a strong double-digit growth, while sales in
China and other markets in Asia were slow. In Europe, as well, we recorded double-digit
sales for January and February. In March, however, the impact of COVID-19 resulted in a
sharp drop in sales, leading to lower year-on-year performance for Q4.
Endoscope sales were 8% lower when excluding the impact of foreign currency exchange. In
addition to slow Q4 sales in China, Korea, and Asia, March sales could not make up for thedifference due to the timing of the COVID-19 outbreak. Generally, we experience strong sales
in March. Although we do have a backlog, we have not been able to ship product.
Electronics-related product (blanks, HDD substrates) sales rose in the double digits,
amounting to ¥38.7 billion up ¥3.9 billion (+11%) year on year.
EUV demand continued to be strong as semiconductor blank sales rose 15%. EUV growth
was more than 50% higher compared to the prior year.
FPD-related mask sales were unaffected by COVID-19, with OLED driving double-digit growth.
While sales of 2.5” HDD substrates were lower, sales of 3.5” products rose, resulting in 6%
overall growth for HDD substrates.
Imaging related product sales amounted to ¥6.9 billion, down ¥2.0 billion (-22%) year on
year.
The camera-related market continues to contract, resulting in steep sales declines. Imagingrelated products now only account for about 5% of group sales. Although we need to
streamline this business more, the impact on group earnings is small and decreasing.

10Balance Sheet(¥bn)

Q3 FY19

Q4 FY19

QoQ

Non-current Assets

291.2

289.8

-1.3

Current Assets

522.3

521.2

Capital

652.8

629.3

-1.1
-23.6 1

Non-current Liabilities

31.1

49.4

+18.2 2Current Liabilities

129.5

132.4

+2.9

Total Assets

813.4

811.0

-2.4

1

& 2 We plan to obtain 100% of the shares of a JV
established this quarter. Therefore, we haverecognized this future transaction as a liability,
posted to capital as minority interest.

© 2020 HOYA CORPORATION All Rights Reserved

11

Ryo Hirooka, CFO:
We did not experience significant changes on our balance sheet. Notes (1) and (2) here referto technical accounting issues.
The intraocular lens business established a JV to generate more sales in China. However, wehave decided to acquire the equity of our partner in the JV in the future. Therefore, we haverecorded a liability and reduced our capital account.

11

Cash Flow(¥bn)

Q4 FY18

Q4 FY19

YoY

Operating CF

46.6

43.2

-3.4

Investing CF

-26.3

-13.7

+12.6

1

Financing CF

0.2

-12.4

-12.5

2

293.4

318.0

+24.6

Cash & Cash Equivalents
at the end of the term

1

Cash outlay decreased compared to the year-ago
quarter, in which we acquired Mid Labs and Fritz Ruck.

2

Cash outlays increased due to share buybacks.

© 2020 HOYA CORPORATION All Rights Reserved

12

Ryo Hirooka, CFO:
Cash flows from investing activities increased ¥12.7 billion. In other words, cash outlays forinvestments decreased for the year. In Q4 of the prior fiscal year, we acquired two
companies (Mid Labs, Fritz Ruck), which involved significant cash outlays. Meanwhile, thebulk of ¥13.7 billion in Q4 of this year went to capital investment outlays for EUV
manufacturing lines in Singapore, an HDD substrate plant in Laos, and other investments.
Cash flows used in financing activities were related to outlays for share buybacks.

12

Results of Share Buyback
Share Buyback #1
Maximum Amount: ¥60 bn
Period: May 8, 2019 to October 28, 2019
Amount Repurchased: 3,085k shares (worth ¥24.1 bn)➡Canceled
Share Buyback #2
Maximum Amount: ¥50 bn
Period: October 30, 2019 to April 23, 2020
Amount Repurchased: 2,470k shares (worth ¥22.6 bn)➡To be canceled
HOYA repurchased shares worth ¥46.7 bn in total.
© 2020 HOYA CORPORATION All Rights Reserved

13

Ryo Hirooka, CFO:
Our second share buyback consisted of ¥22.6 billion in buybacks. We intend to cancel theshares purchased.
A portion of our buybacks extended into April; however, we conducted ¥46.7 billion inpurchases for the fiscal year.

13Cash Allocation Strategy
Prioritize investment for future growth. Our policy to return excess cash toshareholders remains unchanged. However, under the current situation,
HOYA will change the execution of cash allocation provisionally until theuncertainties related to COVID-19 have been mitigated.

Reduce to stabilize cash flow.

M&A

Regard as an opportunity.

Dividend

Distribute stable dividend.

Buy Back© 2020 HOYA CORPORATION All Rights Reserved

Reduce to stabilize cash flow.

×
No intent topile cash.

Cash in Hand

Cash Flow

CAPEX

14

Ryo Hirooka, CFO:
We have been asked how we intend to allocate cash in this environment; therefore, I will
explain our basic approach at this point.
Fundamentally, we do not intend to change our historic approach. We prioritize investments
for future growth, returning excess cash to our shareholders, rather than accumulating cash
internally.
On the other hand, the impact of COVID-19 is extremely uncertain. Accordingly, we will limit
capital investment until these uncertainties have been resolved to a certain extent. We will
expend cash for investments this year in our HDD substrate plant in Laos and EUV
manufacturing line. We will revisit all other investments in our annual plan from scratch. We
continue to investigate M&A investment opportunities, but we have not found any acceptablevaluations at this time. Any opportunities we find in this environment will be pursued actively.
Our forecast for dividends is unchanged at ¥45 per share. Accordingly, we plan to pay anannual dividend of ¥90 per share.

14

1. Financial Results
2. IT Business Overview [Eiichiro Ikeda, CTO]
3. Life Care Business Overview
4. Summary
5. Q&A© 2020 HOYA CORPORATION All Rights Reserved

15

Presentation MC:
Next, Mr. Eiichiro Ikeda, CTO, will give his presentation about the Information Technology
segment.

15

IT Snapshot
YoY Sales Growth (Like-for-Like)+6%

HDD Substrates

+18%

-21%

Masks & Blanks(LSI/FPD)

Imaging+5%© 2020 HOYA CORPORATION All Rights Reserved

16

Eiichiro Ikeda, CTO:
The Information Technology segment recorded improved sales and profits, with ¥45.7 billion
in sales (+4% year on year), ¥19.9 billion in quarterly profit before tax (+8%), and 42.8% in
operating profit ratio (+1.0 points).
As shown on this slide, sales growth was 5% when considering the impact of foreign currency
exchange.
By product, HDD Glass Substrate sales were up 6%, masks and blanks were up 18%, andimaging sales fell 21%.

16

Overview by Product
EUV blanks showed stable growth driven by customer
demand. HOYA opened new production lines in Singapore
to cater to the growing demand. We are ramping up in linewith our schedule. We expect leading-edge products tocontinue to grow, driven by smartphone SoCs and 5Grelated products.

LSI Blanks
HOYA grew the business by gaining market share in
China. We did not see an obvious impact from COVID-19.
OLED is driving demand as OLED requires more numbersof masks compared to LCD. We will continue to focus onvalue-added products including OLED and PSM.

FPD/LSI Masks© 2020 HOYA CORPORATION All Rights Reserved

17

Eiichiro Ikeda, CTO:
Blanks for Semiconductors
This year, both EUV and optical recorded higher sales. The end user markets for PCs andtablets was lower than the prior fiscal year; however, development activities among ourcustomers continued to be strong. Among others, our main client, TSMC’s applications formass production of 7nm was extremely strong, leading to this result. Sales of EUV mask
blanks were more than 50% higher compared to the prior fiscal year. Looking at the financial
results from exposure device manufacturers, we see that four devices were shipped during
Q4 and devices in operation in the field is proceeding favorably. The increase in the numberof exposure devices in operation and strong development activities among semiconductor
manufacturers lead us to expect significant growth in the future for EUV mask blanks. We
have installed an EUV production line in Singapore which is progressing as planned. We
shipped samples for customer certification in Q4 and we already received certification forcertain parts in April. We hope to expand production capacity in the future for these products.
Addressing the impact of COVID-19 on our internal operations, we have seen a decrease on
capacity in Malaysia due to the lockdown in that country. At the same time, we are operatingin Singapore and the impact of COVID-19 on our businesses as a whole has not been
excessive.
Hiroshi Suzuki, CEO:A notable trend for Q4 was the rising numbers of EUV mask blank samples for the next node.
Unit prices were low, as the specifications for the products were not provided. In general,development has shifted from the current node to the next node.
FPD/LSI Masks
FDP mask sales experienced double-digit growth compared to the prior year. The Chinese
market continued to be strong, growing 1.8 times, driving significantly higher sales for our17overall business.
In G8 masks and lower, our main battlefield, we saw the effects of stepped-up sales activities
for OLED targets over the last year or so. Three-fourths of Q4 sales were to China andTaiwan.
To grow our business, our area focus in the near future will be on China for OLED and otherhigh-value-added product applications. We did not see any particular impact of COVID-19 on
our production facilities in Korea and Taiwan.
Hiroshi Suzuki, CEO:We have made masks for OLED applications for quite some time, although products for
400ppi do not exist to the extent being discussed in the world markets. While high-end
mobile phones have not sold well, masks for 400ppi applications were released more than
expected during Q4.

17

Overview by Product

HDD
Substrates

Sales of 2.5” continued to decline, cannibalized by SSDs inareas including notebook PCs. 3.5” sales grew over 90%
YoY driven by the 16TB drive for data centers. Our new
factory in Laos started to ship sample products tocustomers for qualification.

HDD Substrates

Imaging

The structural decline of digital camera lenses
accelerated due to COVID-19. In contrast, we expect
surveillance camera lens sales to revive as they will beutilized to contain COVID-19. We will continue to develop
new market opportunities for our glass lenses.

Imaging© 2020 HOYA CORPORATION All Rights Reserved

18

Eiichiro Ikeda, CTO:
HDD Glass Substrates
To make one correction, the slide indicates that sales of 3.5” products grew over 90%;
however, Q4 growth was actually around 50%. The 90% figure is for the fiscal year.
HDD overall experienced 6% growth. 2.5” product sales fell more than 10%, while 3.5”
products increased 50%. 3.5” products not only covered the decrease in 2.5”, but also
provided growth as we anticipated.
2.5” products experienced further replacement by SSDs for use in PCs. SSDs have been
selected for use in new game console models, leading us to forecast another 20% decreasefor 2.5” products. 3.5” products are designed for data centers and sales currently rely on
customer 16TB products. Although currently affected by data center distribution, we
understand that the most important factor is not short-term demand fluctuations, but rather
having the three HDD manufacturers use our glass substrates. More recently, difficulties in
MAMR have led to the adoption of energy assist PMR in exchange. However, theimprovement in recording density is limited only to a few percentage points. Further
recording density improvements will require HAMR. HAMR drive (requiring glass substrates)
development activities are underway, including manufacturers in the MAMR camp. In addition,in terms of multiple layer products, models of 10 or more layers require glass substrates andall manufacturers are engaged in development activities. We believe it is important to
conduct development activities for HAMR and multi-layer devices with every manufacturer.
Our Laos factory is capable of manufacturing samples. In April, we began to ship samples tocustomers for certification. Certification will take several months and we expect to be able tostart mass production on schedule during the second half of the fiscal year. COVID-19 has
not had a significant impact on our Vietnam factory in terms of distribution. Our Laos factoryclosed temporarily, but did not experience significant impact as we have not entered mass
production.

18

Hiroshi Suzuki, CEO:
Although 2.5” sales decreased more than 10%, we do not perceive this as such a major
contraction. While sales contracted, HDD for notebook PCs were produced in numbers during
Q4. The impression is that the transition to SSDs has decelerated. We do not know exactly
what will happen in the future, however. These were the impressions looking at Q4 by itself.
From our perspective, we increased the price of our substrates, but were not able to makesales during the quarter.
Imaging-Related Products
We have already assumed that digital cameras will experience negative growth. However,
COVID-19 has further accelerated contraction of the market. Production adjustments havecombined to result in a significant decrease compared to the prior fiscal year. We recognizethat the digital camera market will shrink further in the future. HOYA will continue to focus on
camera applications such as surveillance cameras, but we believe we must reduce fixed costs
as these applications may take time to contribute to growth. There was no particular impact
of COVID-19 on production facilities.
Hiroshi Suzuki, CEO:
February performance was poor as all factories suspended operations. However, production
for CCTV lenses started up in significant numbers in March. We assume that these will be
used to track people infected with COVID-19.

18

1. Financial Results
2. IT Business Overview
3. Life Care Business Overview [Hiroshi Suzuki, CEO]4. Summary
5. Q&A© 2020 HOYA CORPORATION All Rights Reserved

19

Presentation MC:
Next, Hiroshi Sukuzi, CEO, will give his presentation about the Life Care segment.

19Life Care Snapshot
YoY Sales Growth (Like-for-Like)

-9%
-10%

Eyeglass Lenses-3%

Contact Lenses

Endoscopes

+11%

+14%

Other

IOLs

-6%
© 2020 HOYA CORPORATION All Rights Reserved

20

20

Overview by ProductEnd customer demand declined significantly, due to retailstore closures and movement limitations. Store closures
are a critical factor for the industry as online exposure is
only 5% to 7%. We will capture pent-up demand in China
and Korea, where new infection numbers are starting todecelerate.

Eyeglass Lenses
In line with our expectations, we saw a reverse impact
after front-loaded demand due to the consumption tax hike,totaling around ¥1.1bn. Our sales were also affected by apartial closure of our retail operations during the second
half of March. Including M&A, our stores totaled 336 storesas of end of March.

Contact Lenses© 2020 HOYA CORPORATION All Rights Reserved

21

Eyeglass Lenses
Sales in China fell 90% in February, but began rising during the second half of March. South
Korea fell between 40% and 50% during March. Performance in these two countries was thebiggest factor causing sales to drop in Q4. On the other hand, sales rose between 1% and
2% in Europe and the Americas in January and February. The spread of COVID-19 in March
was a significant drag on performance.
Contact Lenses
Many customers made new purchases of supreme comfort lenses (silicon hydrogel lenses).
Further, many customers continue repeat purchases of the first lenses they buy. We expect
average unit prices will continue to rise based on what we saw during the quarter.

21

Overview by Product
The COVID-19 outbreak resulted in fewer cataract
procedures in Asia and Europe. Sales in Japan
progressed stably and the two companies (Mid Labs/Fritz
Ruck) acquired in Jan. 2019 showed outstanding
performance. As a result, overall sales were positive.

IOLs
In addition to strong sales in Russia, our bronchoscopes
showed robust sales in Europe through ER and ICU
channels due to COVID-19. US sales were down due todelays in approval. COVID-19 negatively impacted sales
in Asia.
Endoscopes© 2020 HOYA CORPORATION All Rights Reserved

22

Hiroshi Suzuki, CEO:
Endoscopes
Our competitor released a new endoscope. While the functions were not significantly
surprising, we were impressed with the company and the capabilities provided that would be
difficult for even experts. The Japanese and Korean markets use endoscopes slightly
differently than other markets. In Japan and Korea, doctors mainly take pictures of theaffected area during an examination. In other countries, it is common to take video footage
since patients are anesthetized for examination. The root technologies for product that takestill pictures versus products that take video are different. Our competitor has been able toeffectively combine both in one, surprising experts with its capabilities. We are still not surewhat the market reception for this product will be. There may not be much change.
This competing product combines video and still photos, while providing compatibility witholder products, which is difficult to pull off. I imagine our competitor ran into many difficulties
in developing their product.

221. Financial Results
2. IT Business Overview
3. Life Care Business Overview
4. Summary [Hiroshi Suzuki, CEO]
5. Q&A© 2020 HOYA CORPORATION All Rights Reserved

23

23Status of Life Care Business RE COVID-19
Production/Supply Chain End Demand

Eyeglass
LensesContact Lenses

IOLs

Endoscopes

Outlook After Activity
Restrictions Eased

Reduce production toalign with end demand.

Significant decline indemand due to lockdowns and activity
restrictions resulting inretail closures.

Return to normal levels
after three months as
economic activity
resumes. (China andKorea starting to show
signs of recovery)

No remarks.

Lost sales opportunities
due to voluntary stayat-home request madeby the Japanese
government.

Expect pent-up demandsince majority ofcontact lenses are
consumables(disposables).

Reduce production toalign with end demand.

Demand decreasing,since cataract surgery
has been deemed anelective surgery.

Expect slow recovery.
Patients (generally
elderly) being
susceptible to COVID19
may hesitate to visit
hospitals.

No remarks.

Increased demand forbronchoscopes.
Majority of endoscopic
procedures deemed
elective.

Gradually return tonormal as elective
procedures are
performed.

© 2020 HOYA CORPORATION All Rights Reserved

24

Hiroshi Suzuki, CEO:
Next, I will address results for April of this year.
Eyeglass Lenses
As of last week, eyeglass lens sales were down 78% year on year. We rebounded from abottom in the prior week, seeing an increase of between four and five percentage points. The
week of April 20 was the lowest point for sale performance. Korea was the quickest to
rebound, recovering to more than 80% compared to the same period in the prior fiscal year.
China and Germany were the next-quickest regions to recover, up to almost 70% and 38%,
respectively, during the week of April 26. Germany came back quickly, doubling the priorweek to reach nearly 40% of last year’s results. The worst-preforming regions were India, at
almost zero sales, and the UK at only 5%. We expect this business to return slowly over time,likely in May, June, and July. Our competition has stated that their eyeglass stores will
experience a rush from consumers once the lockdown ends. I don’t expect this will happen
and that any business lost will not likely return. At the moment, we are looking to return toprevious year levels in about three months.
Contact Lenses
Our retail contact lens business in Japan is moving along at 20% lower performance year on
year. We operate about 350 stores, 140 of which are closed. These stores are closed because
they are located in shopping malls that are closed themselves. Even so, we have maintained
80% of previous-year sales figure thanks to home delivery sales. Since the COVID-19
commotion began, we started delivering the identical contacts at the same prescription tocustomer homes. Since home delivery sales account for about 40% of total sales, we haven’t
seen as great a drop in sales as one would expect when stores are closed. Some customers
have turned to online orders for their products, so our recovery will depend on how manycustomers return to shopping malls in the future. Most likely, the recovery will be slow.

24With many consumers not using contact lenses in the home, the demand disappearing during
this lockdown will likely remain unrecoverable. We don’t expect consumers to run to ourstores as soon as their stock of contacts is gone. We believe sales will recover in two months
or so.
Intraocular Lenses
Intraocular lens sales are moving forward at about 50% of the same period in the previous
fiscal year. Japan may be a little less than that. Since many people with cataracts are older
patients who are avoiding hospitals right now, cataract surgeries may decline for a while.
China and Europe, however, are rebounding. China has returned to about 60% of prior year,
while Europe has returned to between 10% and 20% recently, from essentially zero earlier.
Endoscopes
Japan and the United States are down between 30% and 40% compared to the year-ago
period. However, Europe and Asia are outperforming prior year. Digestive tract applications
have fallen across every region. However, demand in Asia and Europe for endoscopes usedin ICUs for work on lungs is rising dramatically. Medical workers use endoscopes to better see
when they insert tubes in patients. Although disposable endoscopes would be better,production of disposable devices by Ambu, the sole maker of these tools, has not kept pace.
Therefore, we have received a major rise in inquiries and sales have outperformed prior year.
We are moving forward in the development of disposable bronchoscopes, which we expect torelease this year to the market. Unfortunately, we are not likely meet demand for the current
pandemic.
Basically, the demand for endoscopes will not go away, and will recover in the short term.
Demand depends on national budgets, and national hospital budgets will have a long-term
impact on the future of this business. We will likely see a recovery over the short term,
however. We will need to take a closer look over the long run.

24

Status of IT Business RE COVID-19
Production/Supply Chain End Demand

Outlook After Activity
Restrictions Eased

BlanksTemporary closure of
Malaysia factory(polishing of standard
blanks). Restarted
operations, thoughutilization still fairly low.

End demand for
consumer products face
reduced demand.
Leading-edge R&D
maintains momentum.

FPD/LSI Masks

No remarks.

No obvious impact.

-

HDD
Substrates

Temporary closure of
new Laos factory.
Restarted operations.

2.5” end demand
related to consumer
products face reduced
demand. 3.5” is seeing
increased demand due
to WFH etc.

-

Digital camera demand
declining due to activity
restrictions.

Digital camera demand
may not recover for awhile. We may see
increased demand forsurveillance cameras
used to contain25
epidemic.

Imaging

No remarks.

© 2020 HOYA CORPORATION All Rights Reserved

Hiroshi Suzuki, CEO:
Next, I will address results for April of this year.
Blanks for Semiconductors
Sales of blanks for semiconductors are moving along at between 3% and 5% ahead of prioryear.
FPD Masks
Sales of FPD masks are moving along at between 10% and 15% ahead of prior year.
HDD Substrates
We have one customer who owns a manufacturing facility in the Philippines. This facility isexperiencing a decline in operating capacity, which has resulted in an issue for us supplying
certain components. Therefore, sales have declined slightly when looking at April
performance alone. We are not overly concerned, as we believe this situation will recover
during the second half of May.
Imaging-Related Products
Weak performance in imaging-related products continued through April. Speaking frankly,
April seemed to be a month signaling the end of the interchangeable lens camera market,
including the market for mirrorless cameras.

25Initiatives Related to COVID-19
Prioritize safety of employees and other stakeholders.

Cost reductions to secure profit as much as possible.
●Cancel overseas business trips●Freeze hiring●Execute different working style (no-pay leave, short working hours)●Restrain sales promotion expense●Restrain purchase activity●Close/integrate production sites●Adjust production lines●Restrain capital investment

Assuming the situation continues, we will consider
business structure reforms to adjust to a post-COVID-19
era.
© 2020 HOYA CORPORATION All Rights Reserved

26

26

1. Financial Results
2. IT Business Overview
3. Life Care Business Overview
4. Summary
5. Q&A© 2020 HOYA CORPORATION All Rights Reserved

27

Presentation MC:
Next, we will begin our Q&A session.
Anyone with questions, please click the “raise hand” icon. If you are participating by phone,push the star button and the number nine. Please state your company and your name before
asking your question.
Due to time limitations, we must limit questions to two per person. Thank you for yourunderstanding.

27

Q&A -1
Q

Nihon Keizai Shimbun Reporter (Masuda)
Response to COVID-19
In the slide titled, Initiatives Related to COVID-19, you state that you areconsidering business structure reforms with a view toward the long term.
What does this mean, exactly? HOYA maintains a wide supply chain
throughout Asia, so we believe we can take various measures, including
moving this chain to Japan.

A

Rather than changing the supply chain, we are considering structuralreforms to lower fixed costs in businesses where demand is shrinking.
While risks could increase on the one hand, we want to consolidate
production, integrating inefficient operations from one location toanother. Even in indirect departments that we cannot change normally,
we want to use the current situation as an opportunity to raise
efficiencies in areas that aren’t operating at peak.
We want to change how we approach production in certain areas of ourLife Care Business. As we disperse risk in certain areas, we may also
attract risk in some ways. This integration will represent a combination ofsuch risks.

© 2019 HOYA CORPORATION All Rights Reserved

28

28

Q&A -2
Q

Nihon Keizai Shimbun Reporter (Masuda)
Cash Allocation
Do you intend to maintain cash on hand of ¥300 billion as you have donein the past? You have also stated your intention to maintain stabledividends. Do you mean payout ratio or dividend amounts here?

A

We mean that we do not intend to cut dividends at present. We are nottied exactly to ¥300 billion in cash on hand, but we will be putting sharebuybacks on the shelf for a while. Rather than worrying about cash, we
believe there may be opportunities for M&A in the future. The mostdifficult challenge has been valuations, but they are beginning toapproach our standards. In this sense, there seems to be more
opportunities for M&A than before, so we want to have cash on hand as
funds for M&A. Although text discussing our future may be opaque, if
anything, we believe there will be positive opportunities to use our cash.
Therefore, we think maintaining cash reserves at this point is better thanconducting share buybacks.

© 2019 HOYA CORPORATION All Rights Reserved29

29

Appendix© 2020 HOYA CORPORATION All Rights Reserved30

30Annual Earnings
(¥bn)

FY18

FY19

YoY

YoY(%)

Revenue

565.8

576.5

+10.7

+2%

Pretax Profit

144.7

147.3

+2.6

+2%

Net Profit

122.1

114.6

-7.5

-6%

cf. Profit fromordinary operating
activities*

148.5

154.5

+6.0

+4%

Achieved record high revenue and pretax profit.

© 2020 HOYA CORPORATION All Rights Reserved3131Life Care Annual Earnings
(¥bn)

FY18

FY19

YoY

YoY(%)

Revenue*

373.4

375.0

+1.7

+0%

Pretax Profit

69.3

62.2

-7.1

-10%

cf.Operating Profit

74.2

70.0

-4.3

-6%

19.9%

18.7%

-1.2ptcf.OP Margin*External revenue© 2020 HOYA CORPORATION All Rights Reserved32

32

IT Annual Earnings
(¥bn)

FY18

FY19

YoY

YoY(%)

Revenue*

187.5

196.7

+9.2

+5%

Pretax Profit

80.6

88.1

+7.5

+9%

cf.Operating Profit

79.6

88.6

+9.0

+11%

42.4%

45.0%

+2.6ptcf.OP Margin*External revenue© 2020 HOYA CORPORATION All Rights Reserved33

33

Annual Cash Flow(¥bn)
Operating CF
Investing CF
Financing CF
Cash & Cash Equivalents
at the end of the term

© 2020 HOYA CORPORATION All Rights Reserved

FY18
146.6
-70.1
-32.8

FY19
163.4
-47.4
-85.5

YoY
+16.8
+22.8
-52.7

293.4

318.0

+24.6

34

34

Life Care QoQ Earnings
Revenuecf. Operating Profit / Margin
21.6%

96.3

Q4

93.8

Q1

FY18

100.4

92.5

Q2

Q3
FY19

88.4

Q4

19.4%

(¥bn)

(¥bn)

18.8%

18.1

Q4
FY18

18.2

Q1

16.9%

16.3%

15.7

14.4

Q3

Q4

21.7

Q2
FY19

*External revenue© 2020 HOYA CORPORATION All Rights Reserved3535IT QoQ Earnings
cf. Operating Profit / Margin

Revenue

46.0%

46.2%

44.9%

(bn)

(¥bn)

41.8%

43.7

46.0

Q4

Q1

FY18

52.4

52.7

Q2

Q3
FY19

45.7

18.3

Q4

Q4
FY18

21.2

Q1

24.3

42.8%

23.6
19.5

Q2

Q3

Q4

FY19

*External revenue© 2020 HOYA CORPORATION All Rights Reserved3636Notes✓ Accounting standard: IFRS✓ The fiscal year ending March 2020 is referred to as “FY19” throughout thisdocument.
✓ Figures less than ¥100 million are rounded down. Accordingly, some discrepancies
may occur among totals. Ratios are calculated using actual numbers.
✓ Like-for-Like figures exclude foreign exchange and M&A impact as well as otherextraordinary factors.
✓ Profit from ordinary operating activities is calculated as reference
information for investors; calculated by deducting finance income/costs,
share of profits(loss) of associates, foreign exchange gain/loss and othertemporary gain/loss from pretax profit.
✓ We have omitted a detailed breakdown of financial statements.
Please refer to the tanshin or the quarterly report for detailed numbers.
http://www.hoya.co.jp/english/investor/library.html
3737

Forward Looking Statement

HOYA may make comments and disclose information which include forward-looking statementswith respect to HOYA´s plans and future performance. All statements, other than statements ofhistorical fact, are statements that could be deemed forward-looking statements and are based on
management´s assumptions and beliefs in light of the information available when suchstatements were prepared, including exchange and interest rates, international situations, market
trends and economic conditions, competition, production capacity, estimates of revenues,
operating margins, capital expenditures, cash, other financial metrics, expected legal, arbitration,
political, regulatory, clinical or research and development capabilities, results or practices,
customer patterns or practices, reimbursement activities and outcomes, effects of pandemics orother widespread health problems such as the ongoing COVID-19 pandemic on our business, andother such estimates and results. HOYA does not guarantee the accuracy or completeness of suchinformation and HOYA does not undertake any obligation to update any forward-looking
statements as a result of new information, future events or otherwise.

38

38