Notice: This document has been translated from Japanese original for reference purpose only, without any warranty as toits accuracy or as to the completeness of the information. The Japanese original version is the sole official version.
August 9, 2017

Summary of Consolidated Financial Results for the First Quarterof Fiscal Year Ending March 31, 2018
(Three Months Ended June 30, 2017)[Japanese GAAP]
Company name: EM SYSTEMS CO., LTD.
Listing: Tokyo Stock Exchange, First Section
Stock code:
4820
URL: http://www.emsystems.co.jp
Representative: Kozo Kunimitsu, Chairman and CEO
Contact:
Megumi Seki, Corporate Officer, General Manager of Administration Department
Tel: +81-6-6397-1888
Scheduled date of filing of Quarterly Report:
August 10, 2017
Scheduled date of payment of dividend:
Preparation of supplementary materials for quarterly financial results: None
Holding of quarterly financial results meeting:None(All amounts are rounded down to the nearest million yen)

1. Consolidated Financial Results for the First Quarter Ended June 30, 2017
(April 1, 2017 – June 30, 2017)(1) Consolidated operating results
Net sales(Percentages represent year-on-year changes)
Profit attributable toOrdinary profit
owners of parent

Operating profit%

Million yen%

Three months ended Jun. 30, 2017
3,113
2.9
574
10.9
741
11.0
Three months ended Jun. 30, 2016
3,025
9.3
517
192.3
668
117.0
Note: Comprehensive income (million yen)Three months ended Jun. 30, 2017: 488 (up 12.2%)
Three months ended Jun. 30, 2016: 435 (up 20.8%)

Million yen

%

497
441

12.6
23.4

Net income per share
Three months ended Jun. 30, 2017
Three months ended Jun. 30, 2016

Million yen%

Million yen

Diluted net income per share

Yen

Yen

28.10
25.27

27.93
25.06

(2) Consolidated financial position
Total assets

Net assets

Million yen

As of Jun. 30, 2017
As of Mar. 31, 2017
Reference: Shareholders’ equity (million yen)

Million yen

19,843
21,348
As of Jun. 30, 2017:

Net assets per share

Equity ratio

14,235
14,063
14,124

Yen

%

71.2
65.4
As of Mar. 31, 2017:796.78790.96
13,964

2. Dividends
1Q-endDividend per share
3Q-end2Q-endYen

Year-end

Total

Yen

Yen

Yen

Yen

Fiscal year ended Mar. 31, 2017
8.00
Fiscal year ending Mar. 31, 2018
Fiscal year ending Mar. 31, 2018
11.00
(forecast)
Note: Revisions to the most recently announced dividend forecast: None

-

23.00

31.00

-

20.00

31.00

3. Consolidated Earnings Forecasts for the Fiscal Year Ending March 31, 2018 (April 1, 2017 – March 31, 2018)
Net sales
Million yen

Operating profit%

Million yen(Percentages represent year-on-year changes)
Profit attributable to
Net income perowners of parent
share

Ordinary profit%

Million yen%

Yen

First half
7,100
8.9
1,340
16.6
1,643
14.6
Full year
13,835
1.2
2,600
0.1
3,205
1.4
Note: Revisions to the most recently announced consolidated earnings forecasts: None%

Million yen

1,096
2,137

14.5
1.0

63.11
123.08

* Notes(1) Changes in significant subsidiaries during the period (changes in scope of consolidation): None
(2) Application of special accounting methods for presenting quarterly consolidated financial statements: Yes
Note: Please refer to “2. Quarterly Consolidated Financial Statements and Notes, (3) Notes to Quarterly Consolidated
Financial Statements, Application of Special Accounting Methods for Presenting Quarterly Consolidated Financial
Statements” on page 9 of the attachments for further information.

(3) Changes in accounting policies and accounting-based estimates, and restatements
1) Changes in accounting policies due to revisions in accounting standards, others: None
2) Changes in accounting policies other than 1) above: None
3) Changes in accounting-based estimates: None
4) Restatements: None

(4) Number of outstanding shares (common stock)1) Number of shares outstanding at the end of period (including treasury shares)
As of Jun. 30, 2017:18,128,500 shares

As of Mar. 31, 2017:18,055,900 shares

As of Mar. 31, 2017:

400,954 shares

2) Number of treasury shares at the end of period
As of Jun. 30, 2017:

400,977 shares

3) Average number of shares outstanding during the period
Three months ended Jun. 30, 2017:

17,700,590 shares

Three months ended Jun. 30, 2016: 17,468,813 shares* The current quarterly summary report is not subject to quarterly review procedures.
* Explanation of appropriate use of earnings forecasts, and other special items
Forecasts of future performance in this report are based on assumptions judged to be valid and information available to theCompany’s management at the time the materials were prepared. Actual results may differ significantly from these forecasts for anumber of reasons.

EM SYSTEMS CO., LTD. (4820) Financial Results for the First Quarter of FY3/18

Contents of Attachments
1. Qualitative Information on Quarterly Consolidated Financial Performance2(1) Explanation of Results of Operations

2(2) Explanation of Financial Position

4(3) Explanation of Consolidated Earnings Forecasts and Other Forward-looking Statements

4

2. Quarterly Consolidated Financial Statements and Notes

5(1) Quarterly Consolidated Balance Sheet

5(2) Quarterly Consolidated Statements of Income and Comprehensive Income

7

Quarterly Consolidated Statement of Income
For the Three-month Period

7

Quarterly Consolidated Statement of Comprehensive Income
For the Three-month Period

8(3) Notes to Quarterly Consolidated Financial Statements

9

Going Concern Assumption

9

Significant Changes in Shareholders’ Equity

9

Changes in Significant Subsidiaries during the Period

9Application of Special Accounting Methods for Presenting Quarterly Consolidated Financial Statements

9

Subsequent Events

91

EM SYSTEMS CO., LTD. (4820) Financial Results for the First Quarter of FY3/18

1. Qualitative Information on Quarterly Consolidated Financial Performance(1) Explanation of Results of Operations
The Japanese economy continued to recover at a moderate pace in the first quarter of the fiscal year ending on
March 31, 2018 and the performance of Japanese companies continued to improve. The main reason was
improvements in corporate earnings and the employment situation due to economic and monetary policy
initiatives of the Japanese government and the Bank of Japan. However, the outlook remains unclear due tonegative consumer sentiment caused by concerns about the future and other reasons. Major changes are taking
place in the operating environment for pharmacies in Japan, the primary market for the products of EM
SYSTEMS (the “Company”). Pharmacies are facing challenges due to the saturation of Japan’s pharmacy market
and the April 2016 revisions to drug dispensing fees and National Health Insurance (NHI) drug prices. Due tothese events, a realignment is occurring due to activities aimed at business expansion that include mergers andacquisitions involving large pharmacy chains. This environment is making the business climate even moredifficult for small and midsize pharmacy companies. Revisions to medical care payments planned for 2018 will
make the operating environment even more challenging.
One significant source of change is Japan’s aging population. This is symbolized by the so-called 2025 problem,
which is about when the cost of senior healthcare is expected to start to skyrocket. To provide a link between
healthcare (clinics and pharmacies) and nursing care data, the Company started the full-scale operation of the IT
systems business for nursing care providers in 2016 and launched Hirogaru Care Net for linking healthcare andnursing care data systems in March 2017. The goal is to use a unified three-way network linking the systems that
the Company provides to clinics, pharmacies and nursing care providers in order to create an environment for theseamless sharing of healthcare and nursing care information.
For the first quarter, the Company reported consolidated net sales of 3,113 million yen (up 2.9% year on year),
operating profit of 574 million yen (up 10.9%), ordinary profit of 741 million yen (up 11.0%) and profit
attributable to owners of parent of 497 million yen (up 12.6%).
Results by business segment were as follows.
IT Systems and Related Business for Pharmacies
In this segment, instructors and field service personnel were moved to sales positions, chiefly in the chain
pharmacy sales organization. Increasing points of contact with current customers allows identifying their needs
and strengthens the ability to supply services that meet customers’ expectations. In addition, this business sector
is using sales agents and OEM supply agreements to continue to expand sales channels and focusing on
increasing sales of the Recepty NEXT prescription system and the Bungyo-mate system for pharmacies.
Although the number of systems sold was below the fiscal year plan, there was steady growth in billing service
sales due to the increasing number of users. Continuing growth in sales of supplies also contributed to thissegment’s performance. Due to these activities, this segment continued to record consistent sales and earnings.
As a result, the segment recorded sales of 2,537 million yen (up 2.1% year on year) and operating profit of 568
million yen (up 1.9%).
IT Systems and Related Business for Clinics
There were activities to expand sales channels throughout Japan centered on the use of sales agents to increaseinterest in the Company’s products at clinics. This segment also conducted sales activities for the Ortia electronic
patient record system. Sales of Ortia software separately from the hardware started in 2016 to sales agents. In
addition, the Company continued to focus on increasing sales of the Medical Recepty NEXT (MRN) Clerk Styleand UNI-MEDICAL medical accounting systems and the Medical Recepty NEXT (MRN) Karte Style electronic
patient record system. On the Company’s website, measures to provide easier access are expected to increase2

EM SYSTEMS CO., LTD. (4820) Financial Results for the First Quarter of FY3/18

requests for product information. Easier access has also produced steady growth in the number of online productdemonstration reservations and demonstrations performed. These demonstrations allow prospective customers to
obtain information from almost anywhere and at any time.
These activities resulted in steady growth in sales channels. Furthermore, the realignment of sales resources tofocus on key categories produced consistent growth in the number of MRN systems sold. There was also an
increase in billing service sales along with the rising number of users.
As a result, the segment recorded sales of 372 million yen (up 14.0% year on year) and operating profit of 5
million yen (compared with operating loss of 51 million yen one year earlier).
Other Businesses
The medical and nursing care linkage business launched Hirogaru Care Net in March 2017, which is provided toclinics, pharmacies and nursing care providers. In October 2016, this business started shipments of Tsunagaru
Care NEXT, an ASP nursing care provider support system. Work is proceeding on the development of morefunctions for this system in order to continue to increase sales.
On December 13, 2016, the Hiroshima office of the Japan Health Insurance Association selected the Company toestablish an online insurance coverage qualification verification system used to help produce forms for healthinsurance claims at pharmacies. Work has also started on a system for use by clinics and this project is expected
to start yielding benefits.
To contribute to progress in the healthcare industry, the Company will be actively engaged in research anddevelopment activities as well as demonstration projects for electronic prescriptions, electronic health records(EHR) and personal health records (PHR). The Company has been participating in a joint research program with
the Japan Medical Association, Japan Pharmaceutical Association and Nihon University concerning an infectious
disease outbreak notification service. Currently, over 10,000 pharmacies in Japan are using this service. In
addition, consolidated subsidiary Brick Pharmacy Co., Ltd. operates a pharmacy, and consolidated subsidiary
LASANTE Co., Ltd. operates fitness clubs, a conference room rental business and a nursery school business.
The IT systems business for nursing care providers is not yet contributing to sales and earnings, in part because
the full-scale launch of this business is behind schedule. However, the pharmacy business is performing well withsales and operating profit higher than one year earlier. In addition, although sales and earnings at LASANTE were
down from one year earlier, operating profit was higher than planned. Sales in this segment were 241 million yen(down 1.5% year on year) and operating profit was 0 million yen (down 96.9%).
Segment sales and operating profit in this section are before the inter-segment eliminations.

3

EM SYSTEMS CO., LTD. (4820) Financial Results for the First Quarter of FY3/18(2) Explanation of Financial Position
AssetsAt the end of the first quarter of the current fiscal year, current assets were 9,700 million yen, a decrease of 1,521
million yen from the end of the previous fiscal year. This was mainly due to a 1,369 million yen decrease in cash
and deposits mainly due to the payments of income taxes and year-end dividend and the early repayment of loans.
Non-current assets increased 16 million yen to 10,140 million yen, mainly because of a 107 million yen increasein software in progress and a decrease due to depreciation.
As a result, total assets decreased 1,504 million yen to 19,843 million yen.
Liabilities
Current liabilities decreased 976 million yen to 3,273 million yen. The main factors were decreases of 308 million
yen in notes and accounts payable-trade, 300 million yen in short-term loans payable, 305 million yen in income
taxes payable and 199 million yen in provision for bonuses. Deposits payable increased mainly because of income
tax withheld from year-end dividend payments and summer employee bonuses. Non-current liabilities decreased
699 million yen to 2,334 million yen, mainly due to a 747 million yen decrease in long-term loans payable.
As a result, total liabilities decreased 1,676 million yen to 5,607 million yen.
Net assets
Net assets increased 171 million yen to 14,235 million yen mainly because of increases of 100 million yen inretained earnings and 31 million yen each in capital stock and capital surplus resulting from the exercise of stock
options.
Consequently, the equity ratio was 71.2% compared with 65.4% at the end of the previous fiscal year.
(3) Explanation of Consolidated Earnings Forecasts and Other Forward-looking Statements
The Company currently maintains the first-half and full-year consolidated earnings forecasts that we disclosed in
the “Summary of Consolidated Financial Results for the Fiscal Year Ended March 31, 2017 [Japanese GAAP]”
on May 9, 2017.

4

EM SYSTEMS CO., LTD. (4820) Financial Results for the First Quarter of FY3/18

2. Quarterly Consolidated Financial Statements and Notes(1) Quarterly Consolidated Balance Sheet(Millions of yen)First quarter of FY3/18(As of Jun. 30, 2017)

FY3/17(As of Mar. 31, 2017)
AssetsCurrent assets
Cash and deposits

7,901

6,532

Notes and accounts receivable-trade

2,582

2,065

159

190

Merchandise and finished goods
Raw materials and supplies

0

0

Other

581

923

Allowance for doubtful accounts

(3)

(10)

11,221

9,700

Buildings and structures, net

827

815

Land

632

632

Leased assets, net

57

101

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

Rental assets, net

21

18

Other, net

124

114

1,663

1,682

259

230

Software in progress

39

146

Goodwill

311

297

5

5

616

679

Total property, plant and equipment
Intangible assets
Software

Other
Total intangible assets
Investments and other assets
Investment securities
Real estate for investment, net

35

23

7,215

7,166

Net defined benefit asset

107

104

Other

486

485

Allowance for doubtful accounts

(0)

(0)

Total investments and other assets
Total non-current assets
Deferred assets
Total assets

5

7,844

7,778

10,124

10,1401

121,348

19,843

EM SYSTEMS CO., LTD. (4820) Financial Results for the First Quarter of FY3/18(Millions of yen)First quarter of FY3/18(As of Jun. 30, 2017)

FY3/17(As of Mar. 31, 2017)
Liabilities
Current liabilities
Notes and accounts payable-trade

1,030

722

Short-term loans payable

300-

Current portion of long-term loans payable

526

587

Accounts payable-other

434

367

Lease obligations

45

52

Income taxes payable

545

239

Provision for bonuses

394

194

2

3

Provision for point card certificates
Other
Total current liabilities

971

1,105

4,250

3,273

1,255

508

31

59

Non-current liabilities
Long-term loans payable
Lease obligations
Net defined benefit liability

875

889

Provision for product warranties

177

173

Long-term guarantee deposited

695

702

3,034

2,334

7,284

5,607

Capital stock

2,394

2,425

Capital surplus

2,702

2,734

Retained earnings

9,140

9,240

Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity

Treasury shares

(223)

(223)

Total shareholders’ equity

14,013

14,177

Foreign currency translation adjustment

36

33

Remeasurements of defined benefit plans

(85)

(86)

Total accumulated other comprehensive income

(48)

(52)

99

110

14,063

14,235

21,348

19,843

Accumulated other comprehensive income

Subscription rights to shares
Total net assets
Total liabilities and net assets

6

EM SYSTEMS CO., LTD. (4820) Financial Results for the First Quarter of FY3/18(2) Quarterly Consolidated Statements of Income and Comprehensive Income
Quarterly Consolidated Statement of Income(For the Three-month Period)First three months of FY3/17(Apr. 1, 2016 – Jun. 30, 2016)(Millions of yen)First three months of FY3/18(Apr. 1, 2017 – Jun. 30, 2017)

Net sales

3,025

3,113

Cost of sales

1,296

1,327

Gross profit

1,729

1,786

Selling, general and administrative expenses

1,211

1,212

517

574

Operating profit
Non-operating income
Interest income
Rent income of real estate

0

0

244

249

Reversal of provision for product warranties

5

-

Other

0

12

250

261

Interest expenses

42

Rent expenses on real estates

89

90

Other

5

1

100

93

668

741

Gain on sales of non-current assets

0-

Total extraordinary income

0-

Loss on retirement of non-current assets

00Loss on cancellation of leases-

8

Total non-operating income
Non-operating expenses

Total non-operating expenses
Ordinary profit
Extraordinary income

Extraordinary losses

08Profit before income taxes

Total extraordinary losses

668

733

Income taxes

226

236

Profit441

497

Profit attributable to owners of parent

441

497

7

EM SYSTEMS CO., LTD. (4820) Financial Results for the First Quarter of FY3/18

Quarterly Consolidated Statement of Comprehensive Income(For the Three-month Period)First three months of FY3/17(Apr. 1, 2016 – Jun. 30, 2016)(Millions of yen)First three months of FY3/18(Apr. 1, 2017 – Jun. 30, 2017)

441

497

(10)

(7)

ProfitOther comprehensive income
Foreign currency translation adjustment
Remeasurements of defined benefit plans, net of tax
Total other comprehensive income
Comprehensive income

4

(0)

(5)

(8)

435

488

435

488

-

-

Comprehensive income attributable toComprehensive income attributable to owners of parent
Comprehensive income attributable to non-controllinginterests8

EM SYSTEMS CO., LTD. (4820) Financial Results for the First Quarter of FY3/18(3) Notes to Quarterly Consolidated Financial Statements
Going Concern Assumption
Not applicable.
Significant Changes in Shareholders’ Equity
Not applicable.
Changes in Significant Subsidiaries during the Period
Not applicable.
While it is not subject to the disclosure requirement regarding changes in specified subsidiaries, the Company
newly included EM SOFTWARE SYSTEMS DEVELOPMENT (SHANGHAI) Co.,Ltd., which was a
non-consolidated subsidiary, in the scope of consolidation due to an increase in its monetary materiality in thefirst quarter of the current fiscal year.
Application of Special Accounting Methods for Presenting Quarterly Consolidated Financial Statements
The tax expense was calculated by first estimating the effective tax rate after the application of tax effectaccounting with respect to profit before income taxes during the fiscal year, and multiplying that rate by thequarterly profit before income taxes.
Subsequent Events
Not applicable.

This financial report is solely a translation of the Company’s Kessan Tanshin (including attachments) in Japanese, which has
been prepared in accordance with accounting principles and practices generally accepted in Japan, for the convenience ofreaders who prefer an English translation.

9