Note: This document is a translation of the original Japanese version and provided for reference purposes only. In theevent of any discrepancy between the Japanese original and this English translation, the Japanese original shall prevail.

Consolidated Financial Results
for the Nine Months Ended December 31, 2021 (Japanese GAAP)
February 4, 2022

Company name:
Stock code:

Medical System Network Co., Ltd.
4350

Listing: Tokyo Stock Exchange
URL: https://www.msnw.co.jp/eng/

Representative:
Contact:
Tel:

Inao Tajiri, President and Representative Director
Eiji Hirashima, Executive Officer, Director of Finance and Director+81-11-613-7750

Scheduled date for quarterly report submission:
Scheduled date for dividend payment:
Preparation of supplemental explanatory materials:
Results briefing to be held:

February 8, 2022
－
Yes
None
(Amounts of less than one million yen are rounded down)

1. Consolidated Financial Results for the Nine Months Ended December 31, 2021
(April 1 to December 31, 2021)(1) Consolidated operating results
Net sales
Nine months ended
December 31, 2021
Nine months ended
December 31, 2020

EBITDA(Percentages indicate YoY change)
Profit attributable toOrdinary profit
owners of parent

Operating profit

Million yen%

Million yen% Million yen

79,868

2.2

5,173

5.1

78,167

(1.0)

4,922

41.6

%

Million yen%

Million yen

%

3,063

10.5

3,485

25.8

2,144

6.5

2,773

125.7

2,770

129.2

2,013

516.6

Note: Comprehensive income for the nine months ended December 31, 2021 was 2,155 million yen (+7.6% YoY), and comprehensive income forthe nine months ended December 31, 2020 was 2,003 million yen (+659.0% YoY).
Note: EBITDA = (operating profit + depreciation + goodwill amortization)

Earnings per share
Nine months ended
December 31, 2021
Nine months ended
December 31, 2020

Diluted earnings
per share

Yen

Yen

71.08

－

66.37

－

Note: Please refer to “Appropriate use of earnings forecast and other special notes 2” for details of earnings per share calculations.

(2) Consolidated financial position
Total assets
As ofDecember 31, 2021
As ofMarch 31, 2021

Net assets

Equity ratio

Net assets per share

Million yen

Million yen%

Yen

65,23913,05520.0

432.4264,448

11,18717.3

370.23

Reference: Shareholders’ equity amounted to 13,049 million yen as of December 31, 2021 and 11,163 million as of March 31, 2021.
Note: Please refer to “Appropriate use of earnings forecast and other special notes 2” for details of shareholders’ equity, equity ratio, and net
assets per share calculations.

2. Dividends
Dividends per share
End of Q1
Fiscal year ended
March 31, 2021
Fiscal year ending
March 31, 2022
Fiscal year ending
March 31, 2022 (forecast)End of Q2

End of Q3

Year-end

Total

Yen

Yen

Yen

Yen

Yen

－

5.00

－

5.00

10.00

－

5.00

－
7.00

12.00

Note: Revisions to the Company’s most recently announced dividend forecast: Yes
The year-end dividend for the fiscal year ending March 31, 2022 consists of an ordinary dividend of 6 yen and a commemorative dividend of 1
yen (commemorating the 20th anniversary of the Company’s listing)

3. Consolidated Earnings Forecast for the Fiscal Year Ending March 31, 2022
(April 1, 2021 to March 31, 2022)
Net sales

Full-year

EBITDA

Operating profit(Percentages indicate YoY change)
Profit attributable
Earnings
Ordinary profit
to owners ofper share
parentMillion yen%

Million yen%

Million yen%

Million yen%

Million yen%

Yen

106,500

2.2

6,800

5.8

3,800

10.8

4,200

20.7

2,300

4.6

76.23

Note: Revisions to the Company’s most recently announced consolidated earnings forecast: Yes
Note: EBITDA = (operating profit + depreciation + goodwill amortization)

*Notes(1) Changes in significant subsidiaries during the period under review: None
(Transfers of specified subsidiaries associated with changes in the Company’s scope of consolidation)
Newly added:
None
Excluded:None(2) Distinctive accounting methods applied when preparing quarterly consolidated financial statements: None
(3) Changes in accounting policies, accounting estimates and retrospective restatements
1. Accounting policy changes due to accounting standard revisions, etc.:Yes
2. Other accounting policy changes:
None
3. Changes in accounting estimates:
None
4. Retrospective restatements:
None
Note: Please refer to “(3) Notes to Quarterly Consolidated Financial Statements (Changes in accounting policies)” within “2. Quarterly
Consolidated Financial Statements and Primary Notes” on page 8 of the attached materials for details.

(4) Number of shares outstanding (common stock)
1. Shares outstanding(including treasury stock)

As of December 31, 2021

30,642,600

As of March 31, 2021

30,642,600

2. Treasury shares outstanding

As of December 31, 2021

464,055

As of March 31, 2021

489,055

3. Period-average shares
outstanding (cumulative
quarterly figures)

Nine months ended
December 31, 2021

30,168,454

Nine months ended
December 31, 2020

30,336,063

Note: Please refer to “Appropriate use of earnings forecast and other special notes 2” for details of calculation method regarding period-end
treasury stock numbers and period-average shares outstanding (cumulative quarterly figures).

*The financial information in this quarterly report is not subject to review by certified public accountants or auditing firms.
*Appropriate use of earnings forecast and other special notes
1. The earnings forecasts and other forward-looking statements contained in this document are based on information
currently available to the Company, and certain assumptions it considers reasonable, but are not intended to be a promisethat the Company will achieve. Actual results may vary materially from forecasts due to a variety of factors. For mattersconcerning earnings forecasts, please refer to page 3 of the attached materials “1. Qualitative Information on Quarterly
Financial Performance (3) Explanation of Consolidated Earnings Forecasts and Other Projections.”
2. In the quarterly consolidated balance sheets, the Company's shares held as trust assets of the Board Benefit Trust (BBT)
are recorded as treasury stock. They are included in treasury stock in calculations of earnings per share, equity ratio, net
assets per share, shareholders’ equity, period-end treasury stock numbers, and period-average shares outstanding(cumulative quarterly figures).

Medical System Network Co., Ltd.(4350) Consolidated Financial Results for the Nine Months Ended December 31, 2021

Accompanying Materials – Contents
1. Qualitative Information on Quarterly Financial Performance.......................................................................................... 2(1) Explanation of Operating Results ................................................................................................................................. 2(2) Explanation of Financial Position.................................................................................................................................. 3(3) Explanation of Consolidated Earnings Forecasts and Other Projections ..................................................................... 3
2. Quarterly Consolidated Financial Statements and Primary Notes ................................................................................. 4(1) Consolidated Balance Sheet ........................................................................................................................................ 4(2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income ...................................... 6(3) Notes to Quarterly Consolidated Financial Statements ................................................................................................ 8(Notes to going concern assumptions) ........................................................................................................................... 8(Notes in the event of significant changes in shareholders’ equity) ................................................................................ 8(Changes in accounting policies) ................................................................................................................................... 8(Segment information).................................................................................................................................................... 91

Medical System Network Co., Ltd.(4350) Consolidated Financial Results for the Nine Months Ended December 31, 2021

1. Qualitative Information on Quarterly Financial Performance(1) Explanation of Operating Results
During the nine months ended December 31, 2021, the Company recorded consolidated net sales of 79,868 million
yen (+2.2% YoY), operating profit of 3,063 million yen (+10.5%YoY), and ordinary profit of 3,485 million yen (+25.8%
YoY). There was solid growth in the number of new network affiliates in the Pharmaceutical Network Business, andwhile prescription unit price fell in the Dispensing Pharmacy Business, the number of prescriptions recovered to a certain
extent. Profit attributable to owners of parent was 2,144 million yen (+6.5% YoY), due to gains on the sale of investment
securities and a reduction in corporate tax burden as a result of the absorption-type merger with the Company’s
consolidated subsidiary, Home-Visit Nursing Care Station Himawari Co., Ltd., in July 2021.
Results by segment were as follows. Net sales for individual segments include intersegment sales.
1) Community Pharmacy Network Segment
In the Community Pharmacy Network Segment, we aim to provide value throughout the entire pharmaceuticalsupply chain. Our businesses include a pharmaceutical network to support pharmacy management, dispensing
pharmacy operations, pharmaceutical manufacture and marketing, and a digital shift business using thecommunication app LINE.
In the Pharmaceutical Network Business, the environment surrounding the pharmacy industry has become
increasingly severe as the NHI drug price list, which was previously revised every other year, is subject to the annual
revision from April 2021. The number of new network affiliates continued to post solid growth amid mounting needsfor operational stability in these circumstances. As of December 31, 2021, network affiliates totaled 7,003, comprising
424 Group dispensing pharmacies and 6,579 general network affiliates (an increase of 887 from March 31, 2021).
In the Dispensing Pharmacy Business, while the prescription unit price fell, the number of prescriptions recovered
to a certain extent. In December 2021, as a new store format, we opened two pharmacies inside train stations inFukuoka Prefecture that accept prescriptions from a wide range of medical institutions by utilizing the prescription
transmission function of our official LINE account "Tsunagaru Pharmacy". As of December 31, 2021, the Company
had 424 dispensing pharmacies, one care plan center, and eight drug/cosmetic stores.
In the Manufacture and Market Pharmaceuticals Business, we launched seven products (12 ingredients) in thenine months ended December 31, 2021, and had 80 products (41 ingredients) available as of December 31, 2021.
In the Digital Shift Business, as of the end of December 2021, the number of registered LINE users exceeded
250,000, with 745 pharmacies using the service (1,425 pharmacies have placed orders).
As a result, segment sales for the nine months ended December 31, 2021 were 75,986 million yen (+2.2% YoY)
and operating profit was 4,663 million yen (+7.7% YoY).
2) Leasing and Facility-related Segment
In the Leasing and Facility-related Segment, while real estate lease revenue was generally solid, and orders forconstruction projects increased, occupancy rates at serviced residences for the elderly were sluggish. As a result,segment sales were 2,461 million yen (+12.1% YoY) and operating profit was 53 million yen (+55.5% YoY).
As of December 31, 2021, occupancy rates were stable at three of our five serviced residences for the elderly. At
the remaining two, Wisteria Senri-Chuo had an occupancy rate of 78.1% (64 out of 82 units occupied), and Wisteria
Minami-Ichijo had an occupancy rate of 69.8% (81 out of 116 units occupied). We plan to carry out marketing activities
to reach our fiscal year-end target occupancy rate of 90%, while taking care to prevent COVID-19 infections.
3) Meal Catering Segment
In the Meal Catering Segment, the number of meals supplied fell during the COVID-19 pandemic, but gross profit
improved as we changed suppliers. Segment sales were 1,752 million yen (-6.5% YoY) and operating profit was 7
million yen (operating loss of 2 million yen in the same period of the previous fiscal year).

2Medical System Network Co., Ltd.(4350) Consolidated Financial Results for the Nine Months Ended December 31, 2021

4) Other Segment
The Other Segment provides home-visit nursing care. Segment sales were 232 million yen (+35.4% YoY) and theoperating loss was 10 million yen (operating loss of 17 million yen in the same period of the previous fiscal year).

(2) Explanation of Financial Position
As of December 31, 2021, total assets amounted to 65,239 million yen, up 791 million yen from their level on March
31, 2021. Current assets totaled 21,145 million yen, up 1,832 million yen from March 31, 2021, mainly due to a rise inmerchandise. Non-current assets were 44,093 million yen, down 1,040 million yen compared to March 31, 2021, mainly
due to a decline in goodwill.
Liabilities came to 52,183 million yen, down 1,076 million yen compared to March 31, 2021. Current liabilities were
27,039 million yen, a decline of 1,621 million yen from March 31, 2021, mainly due to an increase in accounts payable—
trade. Non-current liabilities came to 25,143 million yen, down 2,698 million yen from March 31, 2021, mainly due to adecrease in long-term borrowings.
Net assets totaled 13,055 million yen, up 1,867 million yen compared to March 31, 2021, mainly due to an increase
in retained earnings.

(3) Explanation of Consolidated Earnings Forecasts and Other Projections
The Company has made revisions to its full-year earnings forecast for the financial year ending March 31, 2022,
which was initially announced on May 7, 2021. For details, please refer to the "Notice of Revision of Full-year Earnings
Forecasts and Dividend Forecasts " released today (February 4, 2022).

3

Medical System Network Co., Ltd.(4350) Consolidated Financial Results for the Nine Months Ended December 31, 2021

2. Quarterly Consolidated Financial Statements and Primary Notes(1) Consolidated Balance Sheet(Millions of yen)
Nine months ended
December 31, 2021
(as of December 31, 2021)

Fiscal year ended
March 31, 2021
(as of March 31, 2021)
AssetsCurrent assets
Cash and deposits
Accounts receivable - trade
Unearned revenue from sale of accounts
receivable
Purchased receivables - dispensing fees

10,118
2,646

9,427
3,329

735

753

424

428

Merchandise
Raw materials

4,390
12

5,673
20

Work in process
Supplies

6
75

19
82

Other
Allowance for doubtful accounts

916
(12)

1,414
(2)

19,313

21,145

Buildings and structures, net
Land

13,608
9,091

13,521
9,075

Construction in progress
Other

64
1,870

123
2,141

Total property, plant and equipment

24,634

24,861

13,145304

12,445392

Total current assets
Non-current assets
Property, plant and equipment

Intangible assets
Goodwill
Software
Other

122

114

13,572

12,952

Investment securities
Guarantee deposits

397
2,748

151
2,856

Deferred tax assets
Other

2,958
843

2,453
839

Total intangible assets
Investments and other assets

Allowance for doubtful accounts

(20)

(20)

Total investments and other assets

6,926

6,279

45,13444,09364,44865,239Total non-current assets
Total assets

4Medical System Network Co., Ltd.(4350) Consolidated Financial Results for the Nine Months Ended December 31, 2021

(Millions of yen)
Nine months ended
December 31, 2021
(as of December 31, 2021)

Fiscal year ended
March 31, 2021
(as of March 31, 2021)
Liabilities
Current liabilities
Accounts payable - trade
Short-term borrowings

9,258
3,916

11,776
5,364

Current portion of long-term borrowings
Income taxes payable

6,045
1,556

5,516
97

Provision for bonuses
Provision for bonuses for directors (and otherofficers)
Provision for point card certificates
Other

1,495

778

83

27

2
3,060

－
3,479

Total current liabilities

25,41827,03921,556

18,967

798

590

196

202

3,347
1,942

3,637
1,745

27,841

25,14353,26052,183

Shareholders' equity
Share capital

2,128

2,128

Capital surplus
Retained earnings

1,182
8,305

1,182
10,143

Non-current liabilities
Long-term borrowings
Provision for retirement benefits for directors(and other officers)
Provision for share awards for directors (andother officers)
Retirement benefit liability
Other
Total non-current liabilities
Total liabilities
Net assets

Treasury shares

(344)

(326)

Total shareholders' equity

11,27013,127

(24)

(9)

(3)

(0)

(78)

(67)

(106)

(77)

23

5

11,187

13,05564,44865,239

Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges
Remeasurements of defined benefit plans
Total accumulated other comprehensive
incomeNon-controlling interests
Total net assets
Total liabilities and net assets

5Medical System Network Co., Ltd.(4350) Consolidated Financial Results for the Nine Months Ended December 31, 2021

(2) Consolidated Statement of Income and Consolidated Statement of Comprehensive Income
Consolidated Statement of Income

Net sales
Cost of sales

Nine months ended
December 31, 2020
(from April 1, 2020
to December 31, 2020)
78,16746,501(Millions of yen)
Nine months ended
December 31, 2021
(from April 1, 2021
to December 31, 2021)
79,86846,425Gross profit

31,66533,443

Selling, general and administrative expenses

28,89230,379Operating profit

2,773

3,063

Non-operating income
Interest and dividend income

86Outsourcing service income
Rental income from facilities

55
72

58
80

Subsidy income
Miscellaneous income

0
100

398
102

Total non-operating income

237

647

Non-operating expenses
Loss on sale of receivables

39

41

Interest expenses
Miscellaneous losses

164
36

140
44

Total non-operating expenses

240

225

2,770

3,485

2
－

3
112

907

－

Ordinary profit
Extraordinary income
Gain on sale of non-current assets
Gain on sale of investment securities
Gain on sale of shares of subsidiaries andassociates
Gain on sale of businesses
Total extraordinary income
Extraordinary losses
Loss on sale of non-current assets

4

16

914

131

19

12

Loss on retirement of non-current assets
Impairment losses

7
143

14
90

Loss on store closings
Other

20
5

16
2

196

136

Profit before income taxes

Total extraordinary losses

3,489

3,480

Income taxes - current

1,233

821

Income taxes - deferred

245

532

Total income taxes

1,478

1,353

Profit

2,010

2,126

Profit (loss) attributable to non-controlling interests
Profit (loss) attributable to owners of parent

6

(2)

(18)

2,013

2,144

Medical System Network Co., Ltd.(4350) Consolidated Financial Results for the Nine Months Ended December 31, 2021

Consolidated Statement of Comprehensive Income
Nine months ended
December 31, 2020
(from April 1, 2020
to December 31, 2020)
2,010(Millions of yen)
Nine months ended
December 31, 2021
(from April 1, 2021
to December 31, 2021)
2,126

(14)

14

(1)

2

8

11

(7)

29

Comprehensive income

2,003

2,155

(Breakdown)Comprehensive income attributable to owners ofparentComprehensive income attributable to noncontrolling interests

2,005

2,173

(2)

(18)

ProfitOther comprehensive income
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges
Remeasurements of defined benefit plans, net oftax
Total other comprehensive income7Medical System Network Co., Ltd.(4350) Consolidated Financial Results for the Nine Months Ended December 31, 2021

(3) Notes to Quarterly Consolidated Financial Statements(Notes to going concern assumptions)None to be reported.
(Notes in the event of significant changes in shareholders’ equity)
None to be reported.
(Changes in accounting policies)(Application of Accounting Standard for Revenue Recognition, etc.)
The Company began applying the Accounting Standard for Revenue Recognition (ASBJ Statement No. 29, March 31,
2020, hereinafter, “revenue recognition standard”) and related implementation guidance at the beginning of the current
fiscal year. The Company recognizes revenue when control of promised goods or services is transferred to the customer,in the amount expected to be received in exchange for the goods or services.
The Company previously recognized the gross amount received from the customer as revenue for certain transactions.
Following the change, when the Company acts as an agent in providing goods or services to the customer, it will recognize
revenue based on the net amount received from the customer less the amount paid to the supplier.
Regarding points awarded under the customer loyalty program at the time of sale, the Company previously recognizedrevenue at the time of sale and booked the amount expected to be needed to redeem the points in the future as a provision
for point card certificates, and recorded this under selling, general and administrative expenses. However, since the points
are insignificant from a monetary perspective, the Company now applies a method that does not identify separate
performance obligations.
The Company participates in point programs operated by third parties and awards those parties’ points at the time of
product sales. Previously the Company recognized revenue at the time of sale and booked the amount equivalent topoints awarded under selling, general and administrative expenses. However, this amount does not constitute a separate
performance obligation, and the Company now excludes the amount paid to other companies at the time of sale fromrevenue as an amount collected on behalf of third parties.
Regarding construction contracts, the Company previously applied the percentage of completion method when theoutcome of the construction activity was deemed certain. However, we have changed our revenue recognition method.
When control over goods or services is transferred to the customer over a certain period, we now recognize revenue forthat period as our performance obligation to transfer the goods or services to the customer is satisfied. To measure theprogress toward fulfilling performance obligations for each reporting period, costs incurred until the last day of the period
as a percentage of total expected costs are calculated. When it is not possible to reasonably estimate progress in theinitial phase of a contract, but the Company expects to recover costs incurred, the Company recognizes revenue under
the cost recovery method. For contracts with a very short period from the start of the transaction until the performanceobligation is expected to be fully satisfied, we apply an alternative treatment under which revenue is not recognized for aset period but only when the performance obligation is fully satisfied.
The Company has applied the revenue recognition standard in accordance with transitional treatment prescribed in theproviso to paragraph 84 of the revenue recognition standard. The cumulative effect of retroactively applying the new
accounting policy prior to the beginning of the fiscal year was added to or deducted from retained earnings at the beginningof the fiscal year, and the new accounting policy was applied from the opening balance at the start of the fiscal year, butthere was no impact on the opening balance.
As a result, in the nine months ended December 31, 2021, net sales declined by 559 million yen, cost of sales declined
by 509 million yen, selling, general and administrative expenses declined by 50 million yen, and ordinary profit and profit
before income taxes each increased by 2 million yen. There was no impact on operating profit.
In accordance with the transitional treatment prescribed in paragraph 28-15 of the Accounting Standard for Quarterly
Financial Reporting (ASBJ Statement No. 12, March 31, 2020), the Company has not presented information on revenue
from contracts with customers broken down for the nine months ended December 31, 2020.

8

Medical System Network Co., Ltd.(4350) Consolidated Financial Results for the Nine Months Ended December 31, 2021

(Application of Accounting Standard for Fair Value Measurement)
The company applied the Accounting Standard for Fair Value Measurement (ASBJ Statement No. 30, July 4, 2019,
hereinafter, “fair value measurement standard”) and related implementation guidance from the beginning of the current
fiscal year. In accordance with the transitional treatment prescribed in paragraph 19 of the fair value measurement
standard and paragraph 44-2 of the Accounting Standard for Financial Instruments (ASBJ Statement No. 10, July 4, 2019),
the new accounting policy prescribed in the fair value measurement standard will be applied prospectively. There was no
impact on the quarterly consolidated financial statements.
(Segment information)
I. Nine months ended December 31, 2020 (from April 1, 2020 to December 31, 2020)
Information on sales and profit (loss) by reporting segment
Reporting segment
Community Leasing andPharmacy
FacilityNetwork
relatedMeal
Catering

Other

Total

(Millions of yen)Amounts on
consolidated
Adjustments
statement of(Note 1)income(Note 2)

Net sales
Sales to externalcustomers
Intersegment sales ortransfers

74,365

1,755

1,874

171

78,167－

78,167

2

439

－

－

442

(442)

－

Total

74,368

2,194

1,874

171

78,609(442)

78,167

Segment profit (loss)

4,329

34

(2)

(17)

4,343

(1,569)2,773

Notes: 1. The negative 1,569 million yen adjustment to segment profit (loss) includes 216 million yen in elimination ofintersegment transactions and 1,786 million yen in companywide expenses not allocated to reporting segments.
Companywide expenses mainly refer to general expenses that do not belong to reporting segments.
2. Segment profit (loss) is adjusted with operating profit (loss) in the quarterly consolidated statement of income.
II. Nine months ended December 31, 2021 (from April 1, 2021 to December 31, 2021)
Information on sales and profit (loss) by reporting segment
Reporting segment
Community Leasing andPharmacy
FacilityNetwork
relatedMeal
Catering

Other

Total

(Millions of yen)Amounts on
consolidated
Adjustments
statement of(Note 1)income(Note 2)

Net sales
Sales to externalcustomers
Intersegment sales ortransfers

75,985

1,897

1,752

232

79,868－79,868

0

563

－

－

563

(563)

－

Total

75,986

2,461

1,752

232

80,432(563)

79,868Segment profit (loss)

4,663

53

7

(10)

4,713

(1,650)

3,063

Notes: 1. The negative 1,650 million yen adjustment to segment profit (loss) includes 182 million yen in elimination ofintersegment transactions and 1,832 million yen in companywide expenses not allocated to reporting segments.
Companywide expenses mainly refer to general expenses that do not belong to reporting segments.
2. Segment profit (loss) is adjusted with operating profit (loss) in the quarterly consolidated statement of income.
2. Changes in reporting segments, etc.
As noted in the section on accounting policy changes, the Company changed its accounting policy and applied the
Accounting Standard for Revenue Recognition from the start of the current fiscal year, and segment profit and loss
calculation methods have changed similarly.
The effect of this change was to reduce sales in the Community Pharmacy Network Segment by 529 million yen and9Medical System Network Co., Ltd.(4350) Consolidated Financial Results for the Nine Months Ended December 31, 2021

sales in the Leasing and Facility-related Segment by 30 million yen for the nine months ended December 31, 2021. The
new accounting treatment had no effect on segment profit or loss during the period under review.

10