SMS CO., LTD.
(Securities Code: 2175 / TSE1 )Presentation Materials for Investor Relations
Financial Results Summary for the Third Quarter of
the Fiscal Year Ending March 31, 2017 (the 14th Fiscal Year)

January 30, 2017

Table of Contents

1

Q3 FY03/17 Consolidated Financial Results2

Reference© Copyright SMS CO., LTD.

P3-P9

P11-P49

1

1

Q3 FY03/17 Consolidated Financial Results2

Reference© Copyright SMS CO., LTD.

P3-P9

P11-P49

2

1

Historical Financial Results and FY03/17 Forecasts

 We expect to achieve growth in both net sales and ordinary income for the 13th consecutive
year*1 since our establishment.

Trends in Net Sales (LHS) and Ordinary Income (RHS)*2(Net Sales, ¥ million)
30,000(Ordinary Income, ¥ million)
8,000

27,000*3

24,051

24,00021,00019,06918,0005,600*315,056
10,181

4,000

3,509

12,046

12,000

3,200

2,693

2,340
8,692
1,990
7,172 7,618
1,734
1,530
5,177
1,238 1,266

9,000
6,000

0

6,400

4,450 4,800

15,000

3,000

7,200

835 1,545
58
383
269
108
49
(5)
FY03/04

FY03/05(3,000)© Copyright SMS CO., LTD.

FY03/06

FY03/07

2,400
1,600

2,715
415
FY03/08800
FY03/09

FY03/10:Net Sales (in black font)

FY03/11

FY03/12

FY03/13

FY03/14

FY03/15:Ordinary Income (in blue font)*1: Excludes the first fiscal year
*2: Figures up to FY03/10 are on a non-consolidated basis while figures from FY03/11 are on a consolidated basis*3: Revised forecasts announced on October 28, 2016.

FY03/16

FY03/17

0
(800)

3

1

Q1-3 FY03/17 Consolidated Financial Results Both net sales and incomes increased YoY significantly.
 Incomes are largely making smooth progress against the forecasts revised upward on October
28.

P/L statement [¥ million]© Copyright SMS CO., LTD.

FY03/17
Revised
Forecasts

Q1-3
FY03/16
ActualQ1-3
FY03/17
ActualYoY
Changes

Net sales

12,842

16,713+30％

24,051

Operating
Income

1,572

2,332

+48％

3,650

Ordinary
Income

2,170

3,045

+40％

4,450

Net income

1,371

1,805

+32％

2,800

(Announced on
Oct. 28, 2016)4

1

Career Segment (Q1-3)

 Net sales increased 9% YoY.
 Both Recruiting Agent and Media services in the Nursing Care achieved significant growth.
Year-on-Year Comparison of Net Sales [¥ million]
Q1-3
FY03/16

Q1-3
FY03/17

YoY changes

Nursing
Care

Recruiting Agent

1,068

1,326

+24％

Media

1,262

1,550

+23％

MedicalCare

Recruiting Agent

6,367

6,728

+6％

Media

632

585

-7％

9,330

10,191+9％

Total

Highlights• In the Nursing Care, both recruiting agent and media services (primarily recruiting ads) achieved significant
growth.
⁃ Recruiting Agent services for physical therapists and occupational therapists continued to grow steadily.
⁃ The number of sales orders for the Recruiting agent service for care workers, which was launched thisfiscal year, started to increase. The number of consultants have been increased looking ahead of thegrowth from the next fiscal year.
• Recruiting agent services in the Medical Care have also been growing steadily.
© Copyright SMS CO., LTD.

5

1

Nursing Care Segment (Q1-3)

 Net sales increased 21% YoY.
 Kaipoke continues to grow.

Year-on-Year Comparison of Net Sales [¥ million]_

Q1-3
FY03/16

Q1-3
FY03/17

YoY changes

Management Support
for Service Operators

1,851

2,239

+21%

New Businesses

287

355

+24%

Total

2,138

2,595

+21%

Highlights• Management support for nursing care operators “Kaipoke” increased substantially because of the rise inmembership locations• In New Businesses, the home-delivered meal search website for seniors increased significantly© Copyright SMS CO., LTD.

6

1

Situation of Kaipoke

 The acquisition of small-sized operators continued to make a good progress Because of a revision to the law, there is a possibility for some large-sized operators topostpone the introduction of Kaipoke

Membership

Actions and Results• The number of membership locations reached 13,200
as of Jan. 1.

• Increase of a membership

Trend and Target for the Number of Membership Locations
14,500(As of April 1, 2017)13,200(As of Jan. 1, 2017)12,800 For small-sized operators, the member acquisition
process has been improved, mainly for daycare
services/home-visit nursing.
 Across K.K., which operates daycare services
nationwide, introduced Kaipoke.
Other large-sized operators will assess a revision of
the law before introducing Kaipoke and theirintroduction may be postponed until the next fiscal
year.

12,40012,000• Expansion of the scope of nursing care services
 In addition to home-visit nursing, management
support service for outpatient rehabilitation andserviced residence for seniors, daycare services after
school for students with disabilities also began to beprovided.

11,20010,400

Oct.
2014

Apr.
2015

© Copyright SMS CO., LTD.

Apr.
2016

Jul.
2016

Oct.
2016

Jan.
2017

Apr.
2017

7

1

Medical Care, Healthcare and Overseas Segments (Q1-3)

 In the Overseas segment, MIMS group that was acquired in October 2015 contributed to anincrease in net sales.
The Medical Care and Healthcare segments engaged in new businesses developments.
Year-on-Year Comparison of Net Sales [¥ million]*1
_
Q1-3
Q1-3
FY03/16

FY03/17

YoY changes

Medical Care

489

436

-11％

Healthcare

82

129

+58％

Overseas *1

802

3,361

+319％

Highlights
MedicalCare• Net sales of “Mail order/online sales of nursing goods” decreased YoY, but the profitability improved by discontinuing
catalog sales and focusing on online sales• Developing the services based on specific segments/themes, such as a information portal for hospital office managers
and regional partnership support in the Medical Care segment

Healthcare• Developing the services based on the themes of dementia and the prevention of lifestyle-related diseases

Overseas• MIMS group contributed to an increase in net sales⁃ In existing businesses, activities toward the online systemization of Pharma Marketing were carried out.
⁃ In new businesses, test marketing for the career-related business commenced.

*1: The MIMS group was acquired in October 2015. MIMS Group’s P/L is consolidated following a 3-month lag. (For Q1-3, the P/L of the MIMS group for January to September was
included in the scope of consolidation. For details, refer to p.40.) In addition, the results of net sales for Q1-3 were ¥3,103 million. In this regard, the financial results of the MIMS
group tend to be slanted toward the second half. For details, refer to p.44.

© Copyright SMS CO., LTD.

8

1

Topic: Financing

 The financial base has improved, reflecting equity finance of 7.0 billion yen and the full
payment of short-term loans.

Background of the equity finance Oct. 2015
 July 2016
 Dec. 2016
 Dec. 2016

Borrowed 19 billion yen short-term loans to acquire the MIMS Group
Refinanced 12 billion yen long-term loans
Implemented 7 billion yen equity financeRepaid 7 billion short-term loans

Outline of the equity finance Shares sold
 Dilution
 Method Offering price© Copyright SMS CO., LTD.

2.8 million shares(1,469,800 new shares and 1,330,200 treasury shares)
6.7% (The dilution due to the issuance of new shares is 3.5%.)
Offered overseas, same-day pricing (ABB)
2,623 yen9

1

Q3 FY03/17 Consolidated Financial Results2

Reference© Copyright SMS CO., LTD.

P3-P9

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102-1

Our Mission

We create value and contribute to society by providing an“information infrastructure for an aging society.”

SMS stands for “Senior Marketing System.”© Copyright SMS CO., LTD.

11

2-1

Marketing Segments in the Aging Society We define our market segments as Nursing Care, Medical Care, Career, Healthcare andSenior Life.
In the overseas market, we are targeting Asia*1 and promoting businesses in each country
with a focus on Medical Care and Healthcare.

Senior Life*3
Healthcare*2

CareerNursing Care

*1: Includes Oceania

Medical Care

*2: Covers health-related matters that are not subject to long-term care insurance or medical care insurance© Copyright SMS CO., LTD. *3:Businesses related to daily life in the aging society

12

2-1

Information Infrastructure In order to establish an effective information infrastructure, it is important to lock instakeholders who present value to SMS (i.e. service operators, professionals and end users),
offer a feasible business models and solve fill in the gaps regarding asymmetric information.

Related-Business
Operators？
？
？

Travels

Service
Operators？
？

？

Healthclubs？

？

Professionals？
？

？

Housing

End
Grand Users？

？

Healthfoods

Warehouses？

Nutritionists？

childrenWelfarevehicles？

Meal
delivery？

Helpers？

Real
estates

PT/OT

Nursingcare

Caremanagers

Facilitycare

Factoring

Healthcare

DiseaseDoctors

Dispensaries

Commodities

Pharmaceuticalcompanies？

Clinics？

Hospitals
Home
care

？

NursesStudents

Home-visit
nursing

Communication
carriers

Medicaldevices

Educationagencies
Rehabilitation
Nursing care
goods
goods

© Copyright SMS CO., LTD.

Pharmacists

？

13

2-1

Market Size of Nursing Care, Medical Care and Healthcare Information Infrastructure In 2025, the market size of information infrastructure for Nursing Care, Medical Care and
Healthcare in Asia (including Japan) is estimated to exceed ¥3.7 trillion, making it anextremely attractive market.
Market Size*1 of Nursing Care, Medical Care and Healthcare Information Infrastructurein Asia*2 including Japan

2015
Market size of Nursing Care,
Medical Care and Healthcare
Information Infrastructure¥2.0 trillion

2025
Market size of Nursing Care, Medical Care and
Healthcare Information Infrastructure¥3.7 trillion

Japan¥0.6 trillion
Japan¥1.0 trillion© Copyright SMS CO., LTD. *1: Market size based on SMS estimates *2: Includes Oceania

14

2-1

Breakdown of Net Sales by Segment
Breakdown of Consolidated Net Sales by Segment
25,0002.8%
0.6％

20,00015,000

4.9％

21.7%

3.4%
13.6%

0.3%
5.2%

0.7%

15.8%

Nursing
Care

15.6%

12.5％

Overseas

10,0005,000

Career

58.9%

77.1％

66.7%

FY03/152015年3⽉期

FY03/162016年3⽉期

Medical
Care
Healthcare0[¥ million]

FY03/16(Forecasts)
2017年3⽉期（計画）[¥ million]

Segment

FY03/15

FY03/17
Forecasts

FY03/16

Career

11,603

12,720Nursing Care

1,884

Overseas

Note（FY03/16 Forecasts）

14,167

Of which recruiting agent service for nurses accounts for approx. 50%*1

2,972

3,806

Of which Kaipoke accounts for approx. 90%*1

740

2,601

5,223

Of which MIMS accounts for approx. 90%*1

Medical Care

784

657

674

-

Healthcare

42

117

179

-

15,056

19,06924,051

-

Total

*2

*1：Ratio to segment net sales© Copyright SMS CO., LTD. *2：SMS’s FY03/16 net sales results only include MIMS Group’s net sales for Oct-Dec 2015.

15

2-1

Growth Scenario Our growth thus far has been driven by career-related businesses*1.
 Going forward, we aim to sustain stable growth in career-related businesses, while also
driving growth in Kaipoke, overseas businesses and new domestic businesses.

④ Growth of newdomestic businesses③ Growth of overseas
businesses driven byMIMS② Growth of Kaipoke① Growth of career-related businessesNow© Copyright SMS CO., LTD. *1: Refer to p.15 for details on the breakdown of net sales.

Future16

2-1

List of Services Provided*1

Segment

Subsegment
Mngt Support
for Service
Operators

Nursing
Care

New
Businesses

Service Name

Com forcare
managers

Com fornursing care
professionals

Mail order/online
sales of nursing
goods

MedicalCare－

Nursing Care
RAG
Nursing Care
RAD

CareerMedical Care
RAG
Medical CareRAD

Healthcare

overseas

AssociatedCompanies－－－© Copyright SMS CO., LTD.

Information portal of housing for seniors

Management support service fornursing care operators

Publishing fornursesCom for families
with those requiring
nursing care

Magazines for hospital Com for
management
pharmacists

User review site regarding
nursing care operators

RAG for PT/OT/ST

RAG for medical
technologists

RAD for nurses

Scholarship information
portalCom for nutritionists

Q&A site on
healthCom for nurses(South Korea)

Drug information service forhealthcare professionals andinstitutions

RAG and RAD for
doctors andpharmacists

Magazines for regional
medical resources

Online academic media
for nurses

Certification
courseinformation

RAG for radiological RAG for medical engineers RAG for nutritionists
technologists

RAD for newlygraduated nurses

Livelihood support search site

RAG for Care Workers

RAD for newlygraduated nursing
care professionals

RAD for nursing
care professionals

Renovation support

Drug and medicine Home-visit nursing stations Regional partnership
DB for pharmacists
support system
DB

Information portal for
Purchase support for
Regional partnership support in
hospital Admin. managers hospital Admin. managers the nursing/medical segment

RAG for caremanagers

RAG for nurses

Com for managers of
nursing care operators

Home-delivered meal search site

Information portal ofdementia

Solution service forhospitals

Com for nurses andstudent nurses

Information portal of
diabetes

News column
regarding pregnancy,
childbirth and childraising

RAG
for pharmacists*1: As of the end of December 2016.

Note: RAG stands for Recruiting Agent; RAD stands for Recruiting Ads; Com stands for online community

17

2-2

Career Segment: Business Model of Recruiting Agent Service

 When a job seeker successfully changes jobs through SMS’s service, SMS receives apercentage of the job seeker’s estimated annual income from the service operator (e.g.
hospitals and nursing care operators) as a commission.

【Example: Recruiting agent service for nurses, Nurse Jinzai-bank 】

Register on
the website

SMS Group website
Introduce
job seekers

Postrecruiting
ads

Providesinfo. onregisteredmembers

Requestrecruiting

Hospital (Service operators)

SMS consultants

Provide job
opportunity
information

Seek
consultation

Nurses (Job seekers)

Pay commission for a job placement service(calculated as a percentage of the job seeker’s
estimated annual income)© Copyright SMS CO., LTD.

18

2-2

Career Segment: Business Model of Recruiting Ads

 SMS receives from service operators (e.g. hospitals, nursing care operators, temporary
staffing companies and recruiting agents) advertisement posting fees proportional to thenumber of job seekers’ applications.

Example: Recruiting ads service for nurses, Nurse-senka Kyujin-navi
Apply to job
opportunities
postedProvidesinformation of
applicants

SMS Group website
Post
recruiting ads
Request postingof recruiting ads

Hospital (Service operators)

SMS sales staff

Provides job
opportunity
information

Nurses (Job seekers)

Pay advertisement posting fee calculated
in pro-rata of the number of applicants© Copyright SMS CO., LTD.

19

2-2

Career Segment: External Environment

 Continuous labor shortage in both nursing care professionals and nursing professionals

Nursing Care Segment

Medical Care Segment

Transition of effective ratio of job offers to applicantsfor Nursing Care Professionals *1

Transition of effective ratio of job offers to applicantsfor Nursing Professionals *1
4.00

3.20
2.80
2.40

3.00

Nursing Care
Professionals

2.00
1.60

2.00

Nursing
Professionals

1.20

Industry Total

0.80

1.00

Industry Total

0.40
0.00

0.00

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q

FY03/12 '13年3月期
FY03/13 '14年3月期
FY03/14 '15年3月期
FY03/15 '16年3月期
FY03/16'12年3月期

FY03/12 '13年3月期
FY03/13 '14年3月期
FY03/14 '15年3月期
FY03/15 '16年3月期
FY03/16'12年3月期

FY03/17

FY03/17*1: MHLW, General employment placement situation
Figures represent the average of values for the 3 months in each quarter. The figure for Q3 FY03/17 is the average of values for October and November© Copyright SMS CO., LTD.

20

Career Segment: Market Trends and Competitive Landscape of Nurse Recruiting
Agent Service

2-2

 Room for further expansion of SMS’s nurse recruiting agent service.
• Despite the increasing number of nurses, the shortage of nurses is severe.
• SMS is a market leader in nurse recruiting agent service, but its share among all job
seekers is 7%. Accordingly, SMS is expected to grow further.

Number of Working Nurses and Effective Ratio of Job Offers
to Applicants*1(Effective ratio of job
offers to applicants, times)(Number of nurses, thousand)

1600
1,600

1200
1,200

Market Size of Nurse Recruiting Agent Service and
SMS’s Market Share*2

1,540

Total number of nurse job seekers:
150-160K nurses/year

4.00

3.13

1,160

3.00

SMS
7%

SMS
25-30%

800
800

400
400

(Main
player)2.00
Increase in effective
ratio of job offers toapplicants= escalation of labor
shortage

1.05

00

Furthergrowth

2003

2006

2009

2012

Furthergrowth

1.00

0.00
2000

Expanding

Total number of job
seekers via nurse
recruiting agent
services
40 K nurses/year

Number of nurse job
seekers via SMS’ nurse
recruiting agent service
10 K nurses/year*1: Effective ratio of job offers to applicants: MHLW Number of nurses: Japanese Nurse Association Latest number of nurses is 1,603 thousand (2014)© Copyright SMS CO., LTD. *2: SMS estimates as of the end of March 2012

21

2-2

Career Segment: Market Size

 The market size of career-related businesses will double in the next decade.
 Our current growth rate surpasses market size CAGR estimates.

Market Size of Career-related Businesses
in Nursing Care and Medical Care*1¥106 billion

Market Size×2

¥54 billion

Market size CAGR: 7%
SMS current growth rate: 10%+¥12.7 billion
SMS market share:approx. 20％

2015

2025
: Market Size

© Copyright SMS CO., LTD. *1: Market size based on SMS estimates: Net Sales of SMS Career-related Business

22

2-2

Career Segment: Long-term Strategy

 Aim to realize long-term and continuous growth in the career-related businesses bydeveloping an optimal organization and expanding scope of services.
Needs ofService Operators

Providing broad rangeof services to meetthe needs of service
operators

Expanding scopeof services

Developing organization, humanresource management, and culture
RAG*1 forPT/OT*3

RAG*1 fornursesRAD*2 fornursesRAD*2 fornursing care
professionals

Others© Copyright SMS CO., LTD.

Enhancing competitive
advantages throughcontinuous growth centeredon recruiting agent services

Expandingscope ofservices*1 : RAG stands for Recruiting Agent*2 : RAD strands for Recruiting Ads*3 : PT/OT stands for Physical Therapist and Occupational Therapist, respectively

Covering all medical andnursing care professionals

Needs ofProcessionals

23

2-2

Career Segment: Sales Formula for Recruiting Agent Services

 Accumulation of past Received Order Sales(ROS) constitutes net sales.
 ROS is the result of sales activities during a certain period, and regarded as the leading
indicator of net sales.

Sales Formula

ROS Formula

Sales = ROS × DF - Cancellation - Refund

ROS = NofC × Productivity × Unit priceAny cancellations
Agreement b/w
job seeker and company(ROS Booking)Job seeker
joins company(Sales Booking)

Any refunds

6 months or
12 months• Net sales：Booked when a job seeker joins a company• ROS：Recorded when a job seeker and a company reach an
agreement
Not booked in financial accounting• Distribution factor(DF) :% of ROS distributed to each future month• Cancellation:
Cancellation of the agreement between a job seeker anda company after recording ROS
Cancellation will be deducted from net sales• Refund:When a job seeker quits within a certain period of time,
SMS will refund a part of the commissions to the company© Copyright SMS CO., LTD.

• Number of Consultants (NofC):
Number of sales staff engaging in recruiting agent service• Productivity:
Number of completed agreements between a job
seeker and a company per sales staff per month• Unit price: The average of commissions for job placement
service24

2-2Topic in Career Segment: Potential for Expanding the Recruiting Agent
Service for Care Workers 1/2

 Our recruiting advertisement service “Kaigo Job” has approx. 600,000 members.
 In addition to online recruiting ads and job fairs, the potential for the large-scale developmentof a recruiting agent service that we have been exploring is beginning to emerge.

Online recruiting ads

Job fairs

Recruiting agent
Number of members
engaging in nursing careapprox. 600,000(share: 30%)
Job seekers(total number of nursing care
professionals: 1,920,000*1)© Copyright SMS CO., LTD.

Nursing carebusiness operators*1. Source: Calculated based on the Survey of Institutions and Establishments for Long-term Care of the Ministry of
Health, Labour and Welfare (MHLW), as of 2015

25

2-2

Topic in Career Segment: Potential for Expanding the Recruiting Agent Service
for Care Workers 2/2

 Approx. 2 million workers were engaged in nursing care as of 2015. Mobility is very high.
 We already have 600,000 members engaged in nursing care and will create a recruiting agent
service for care workers of a size equivalent to the nurse recruiting agent service.
Potential number of users of care worker recruiting services*1
The size of the market for the
recruiting agent service for care
workers may become equivalent tothat for nurses.

# of Workers
1,920,000# of applicants
recruited% of390,000 applicants

Recruitment
rate
20%

# of Workers
1,610,000

using
recruiting
agent service
10%(assumption)# of workers
changing jobs
using a recruiting
agent service
40,000(assumption)# of applicants
recruited
160,000 Recruitment
rate
10%

# of workers
changing jobs
using a recruiting% ofagent service applicants
40,000using arecruiting
agent service
25%

Care Workers

Nurses

*1. Sources; The numbers of care workers were calculated based on the Survey of Institutions and Establishments for Long-term Care of MHLW, and the number ofnurses was calculated based on the number and percentage of nurses recruited provided by the Japanese Nursing Association.
(The recruitment rate represents the percentage of the number of new recruits in the number of existing workers.) Recruitment rate; Care workers: Survey of Actual
Condition of Care Workers of Care Work Foundation; Nurses: SMS estimate; Number of workers changing jobs using a recruiting agent service: calculated based on thepercentage of those using a recruiting agent service; Percentage of applicants using a recruiting agent service: nurses: SMS estimate© Copyright SMS CO., LTD.

26

2-3

Kaipoke: Business Model Receive service fee from nursing care operators for providing not only insurance claim services
but also management support services, which include support in sales, recruiting, andoperational efficiency improvement.

Service
Improvement

Provide services(improving financials andoperation and others)

Pay service fee(fixed rate or measured rate)

Service fee

Nursing Care
Operators© Copyright SMS CO., LTD.

• Fixed monthly rate for
packaged service• Measured rate for optional
services such as factoringand purchasing

Human Resource• Recruitment• Attendance• Welfare• Payroll calculation/
depositetc.

• Tablet• Marketing• Bank transfer• Document
Sharingetc.

Accounting/
Financing• Insurance claim system• Accounting software• Factoring• Business management
etc.

General Affairs/
Purchasing

Establishment• Purchasing• Insurance• Document
storageetc.

• Market analysis• Task management• Funding consulting• Reform support
etc.

27

2-3

Kaipoke: Expansion of Service

 Renewed from insurance claim service to management support services in February 2014.
 Already started approximately 40 new services, supporting operational efficiency and financial
improvement.

Starting in February 2014*1
Service Improvement

Prior toFebruary 2014
Insurance
claim
systemInsurance
claim service

Human Resource• Recruitment• Attendance• Welfare• Payroll calculation/etc.

• Tablet• Marketing• Bank transfer• Document Sharing
etc.

Management
support service*1: Only representative services are shown.

•Insurance claim system•Accounting software•Factoring•Business management
etc.

(Improve operation efficiency
and reduce costs)

General Affairs/
Purchasing• Purchasing• Insurance• Document storageetc.

© Copyright SMS CO., LTD.

Accounting/Financing

Establishment• Market analysis• Task management• Funding consulting• Reform support
etc.

28

2-3

Kaipoke: Target Service Offices

 We have expanded the target of Kaipoke service to large operators. Our target now includes

152,000 operators, consisting of small, medium and large-sized operators.
SMS holds approximately 11% share and intends to increase its market share by gaining
memberships in line with the increase in number of service offices.

Total
238,000*1 Services at facility
13,00022,000Communitybased
services*2

no target 51,000

203,000

Large-sized:
20%

In-homeservices

Potential member
service offices:134,800

30,000(started to expand)

Target service
offices for
insurance
claim services

Total
service offices•Short stay*3•Specified facility*3•Management of inhome medical longterm care *3

152,000

122,000
Small andmediumsized : 80%

Target service offices for
insurance claim services(= Target of Kaipoke)

Breakdown ofsmall and medium-sized
operators vs.
large-sized operators

11%

Member service offices asof Jan. 2017: 17,200(SMS market share: 11％,
Locations: 13,200)

Member of Kaipoke andPotential members*1: SMS estimates based on MHLW, Monthly report of Survey of Long-term Care Benefit Expenditures (October 2016)*2: Among community-based services, nighttime home-visit nursing care services and daycare services for dementia patients are our targets*3: Kaipoke does not support short-stay services or specified facilities. Management of in-home cover medical long-term care is also not covered since the© Copyright SMS CO., LTD.
need for insurance claim services is significantly low

29

2-3

Kaipoke: Market Size

 Kaipoke has abundant leeway considering the current market penetration level, and themarket size is estimated to increase to ¥153 billion in 10 years from now.

Management Support Services for Nursing Care Operators:
Market Size*1

Market size (2025)¥153 billion

Kaipoke net sales¥2.5 billion*2(Share relative to 2025 market size: 1.6%)© Copyright SMS CO., LTD. *1: Market size based on SMS estimates*2: Annual net sales of Kaipoke for FY03/16

30

2-3

Kaipoke: Long-term Strategy

 We are the only company offering management support services to nursing care operators,and thus the number of Kaipoke members and users is growing.
We can enter into new markets through expanding the scope of our nursing care services
and developing peripheral services.
Service TypeNew peripheral services(finance, logistics andsales support, etc.)

Increase unit price by developing
and delivering new peripheralservices

Increase members
Insurance claims,
management support
and factoring, etc.
Current Kaipoke
net sales© Copyright SMS CO., LTD.

Already increased members
by including large operators,
e.g. franchisers

Operators Using
Management Support Services*1: All nursing care operators including nursing care facilities

Expand the scope of nursing
care services

Operators Not Yet Using
Management Support Services# of Nursing Care
Operators*1

31

2-4

MIMS: Group Profile

MIMS Group
Global Coverage

MIMS Group

Founded1963

Net Sales

US$47.4 million in FY12/2014

Employees*1

494 (as of March 2016)

Business
Description

Providing drug information

Singapore, China, Hong Kong,
South Korea, India, Indonesia,
Global Coverage Philippines, Thailand, Malaysia,
Vietnam, Myanmar, Australia and
New Zealand
Approx. 2.0 million memberships
Number ofincluding 0.45 million doctors
memberships(as of Sep. 2016)*1. The number indicated in the previous reports did not include the employees of one of MIMS subsidiaries. We apologize for the error.

© Copyright SMS CO., LTD.

32

2-4

MIMS: Overview of the Acquisition

Overview

Investment Structure

SMS
60%

MIMSGroup

MIMS Pte.
Ltd.
(Singapore)© Copyright SMS CO., LTD.

Mitsui & Co.,Ltd.

US$250 million

Investment
Ratio

SMS 60%, Mitsui & Co., Ltd. 40%

40%

Medica Asia (Holdco)
Limited(U.K)

MIMS(Hong Kong)
Limited(Hong Kong)

Acquisition
Price

MIMS
Medica Sdn
Bhd(Malaysia)

The Date of theOctober 7, 2015
Share Transfer
Company fromwhich Shareswere Acquired

AXIO Data Hedgeco Limited(subsidiary of Electra Private Equity PLC
headquartered in the U.K. )

etc.

33

2-4

MIMS: Strengths of MIMS Group Strengths of MIMS Group include its overwhelming brand value in the region, its strong
membership base of healthcare professionals, and its business relationships withpharmaceutical companies.

1. Overwhelming Brand Value

 50 years of history
 Utilized by healthcare institutions/professionals to get drug information
on a daily basis

Healthcare
Professionals
1.7million

Pharmaceutical
Companies

2. Strong Membership Baseof Healthcare Professionals

3. Business Relationships
with Pharmaceutical Companies

 Healthcare professional memberships approx. 2.0 million- Including approx. 0.45 million doctors
 More than 80% of all doctors are registered in Singaporeand Hong Kong, etc.
© Copyright SMS CO., LTD.

 Almost all patented drug makers in the region post
information of their drugs on MIMS’s database

34

2-4

MIMS: Business model of “Pharma Marketing”

 The Pharma Marketing Business provides healthcare professionals with a drug databasewhich sort and summarize drug information provided by pharmaceutical companies andwhich can be accessed through various media. The database is a de facto standard in
the industry.
 It also provides marketing support to pharmaceutical companies by delivering medical
news and educational contents to the professionals, and by running related events
Business ModelMedia for Accessing Database
Pharmaceutical
Companies

Pay postingfee

2.0 million• Post drug information on
database• Provides access to drug
database• Provides medical news andeducational contents
Healthcare Professionals(e.g. doctors, nurses,
pharmacists)

Service Provision Area
Singapore, China, Hong Kong, South Korea, India,
Indonesia, Malaysia, Philippines, Thailand, Myanmar
and Vietnam© Copyright SMS CO., LTD.

Healthcare Professionals(e.g. doctors, nurses,
pharmacists)

OnlinePrinted publications
Mobile applications
Mail magazines
Social media etc.
Pharmaceutical
Companies• Post drug information
on database

35

2-4

MIMS: Business model of “Healthcare Data”

 Healthcare Data Business runs a drug database for healthcare institutions and it covers
more than 50% of hospitals, clinics and pharmacies in Australia and New Zealand.
 While offered as a physical book, the database is also integrated into core systems on
hospital information, clinic prescription and pharmacy dispensing.
Business ModelMedia for Accessing Database<Drug Database>

Pay usagefee• Provides access to drug
database• Database can be
integrated into coresystems of healthcare
institutions
Healthcare Institutions(e.g. hospitals, clinics,
pharmacies)<Integrating into Core System>

Service Provision Area
Australia, New Zealand, South Korea and Singapore© Copyright SMS CO., LTD.

Core systems of hospitals and pharmacies 362-4

MIMS: Strengths of SMS and Mitsui Both SMS’s expertise in developing and operating various information services and
Mitsui’s network will serve to reinforce MIMS’s strength, enabling MIMS Group to
expand its existing businesses and develop new ones.
Management Support Services

Career-related Services

Overwhelming
Brand Value

Online Communities© Copyright SMS CO., LTD.

Business
Relationships
with Pharmaceutical
Companies

StrongMembership Baseof Healthcare
Professionals

Mitsui
Medical/Healthcare Network

37

2-4

MIMS: Market Segment

 MIMS aims to achieve further growth in existing businesses and develop new businesses byutilizing its membership base of 2 million healthcare professionals and partnerships withpharmaceutical companies.

Pharmaceutical Field

Clinic Field

Marketing Support for
Pharmaceutical Companies

Management Support for Clinics
Marketresearch

SFA
vendors

PharmaDB

Medicalprescription
MedicalSales
promotion
supportcompanies
Privatepractice
supportConsulting
firms

Pharmarecords
Healthcare
ceuticalMR
Professionals
digitization companies

Financing
Patient
management
Document
e-detailing management

Medicine
wholesalers

Pharmaresearchcompanies

Financial
institutions

CareersupportClinical trial
recruitment

Business of associated organization/partner© Copyright SMS CO., LTD.

Attracting
newpatientsCRO

SMO

MIMS business

Purchasing

Phase 4

CSO
MR
educationcompanies

Medicaldevicevendors

Multinational
clinical trial
Medication
managementcompanies

Education

Education
supportcompanies

Recruiting
agencies38

2-4

MIMS: Long-term Strategy

 In the short term, we plan to invest in future growth. For the first few years, we will focus onpromoting online systemization of existing businesses and launching new businesses in the key
countries where we operate.
In the medium to long term, we will enhance our businesses in other countries and accelerate growth.

Business
Classification

Existing
Businesses*1

New
Businesses

Phase

First and Second Year

Third Year and Beyond

・PM*1: Promote online systemization ofservices targeting key countries- Strengthen ties with members- Develop web-based products
・HD*2: Enhance system-based products

・PM: As online systemization of services proceeds in key
countries, expand to other countries- Roll out best practices developed during the first two
years to other countries- Drive growth in web-based products
・HD: Establish a solid presence by expanding to othercountries and integrating with other systems

・In several countries, conduct tests
and launch businesses related to
management support systems forclinics and career-related
businesses

・ Solidify businesses in the countries where we havealready expanded and start the businesses in othercountries

Investment

Growth acceleration© Copyright SMS CO., LTD. *1:PM＝Pharma Marketing (refer to p.36 for details.) HD＝Healthcare Data (refer to p.37 for details.)

39

2-4

MIMS: Consolidation of MIMS Financial Results

 MIMS P/L statement will be consolidated to SMS P/L statement following a time lag of threemonths.

Image of Consolidating MIMS P/L to SMS Consolidated P/L (excl. MIMS)*1
FY15

FY16

3Q

4Q

1Q

2Q

3Q

4Q

Oct.-Dec. P/L

Jan.-Mar. P/L

Apr.-June P/L

July-Sep. P/L

Oct.-Dec. P/L

Jan.-Mar. P/L(B/S only)

Oct.-Dec. P/L

Jan.-Mar. P/L

Apr.-June P/L

July-Sep. P/L

Oct.-Dec. P/L: SMS Consolidated P/L (excl. MIMS): MIMS P/L© Copyright SMS CO., LTD. *1: Q1-4 presented here are those of the fiscal year of SMS. SMS fiscal year ends in March, while MIMS fiscal year ends in December.

40

2-1

Platform Create an environment that enables immediate contact with potential clients by locking instakeholders who present value to SMS.
Rapidly develop various new services and offer such services to those stakeholders. This willallow for significantly faster and less costly implementation than starting from scratch.
56%

Nursing
Care

40％

60%

Care managers

Nurses(Com membership)
85K/150K(Com membership)
610K/1,600K(RAG registration)
100K/170K

30%
Nursing care
Professionals

MedicalCare

20%
Student nurses(RAD membership)
15K/75K(RAD site visitor)
580K/1,920K

5%

20%
PT/OT/ST

Pharmacists(RAG registration)
30K/160K(Com membership)
19K/280K

65%

50%

Hospitals

Large-sized
nursing care operators(Clients of RAD)

13%
Small and Medium-sized
home-visit nursing
care operators(Membership)
15K/121K© Copyright SMS CO., LTD.

60%
Registerednutritionists(Com members)
32K/60K

10%(Client hospitals of
RAG for nurses)
5.4K/8.5K

Clinics(Client clinics of
RAG for nurses)
9.5K/100K

Note: RAG stands for Recruiting Agent; RAD stands for Recruiting Ads; Com stands for online community

41

2-5

Historical Financial Results(¥ million)
FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

Net Sales

58

383

835

1,545

2,715

5,177

7,172

7,618

8,692

10,181

12,046

15,056

19,069

Cost of Sales

0

5

20

38

77

149

375

319

431

700

952

1,332

2,204

SG&A Expenses

63

326

705

1,237

2,211

3,796

5,534

5,818

6,740

7,910

9,363

11,644

14,108Operating Income

-5

52

109

269

426

1,230

1,261

1,480

1,519

1,570

1,730

2,079

2,756

Ordinary Income

-5

49

108

269

415

1,238

1,266

1,530

1,734

1,990

2,340

2,693

3,509

Net Income

-5

31

63

157

244

719

717

876

1,004

1,226

1,380

1,824

2,265

Total Assets

59

357

566

1,016

1,806

3,118

3,645

4,672

5,716

6,948

8,406

11,421

41,689Liabilities

55

166

196

489

822

1,410

1,266

1,430

1,579

1,794

2,331

4,497

28,532

Net Assets

4

190

369

527

983

1,708

2,379

3,242

4,136

5,153

6,074

6,923

13,157

7.5

53.3

65.3

51.9

54.4

54.8

65.2

69.2

72.3

74.1

71.5

59.7

20.5

ROE (%)-124.9

31.8

22.8

35.1

32.3

53.4

35.1

31.2

27.3

26.4

24.7

28.4

29.5

DPS (¥) *1

-

-

-

-

-

1.25

1.25

2.5

3

4

5

7

7

Dividend Payout Ratio(%)

-

-

-

-

-

6.8

6.8

11.6

12.3

13.6

14.8

15.6

12.5

Equity Ratio (%)© Copyright SMS CO., LTD.

*1：The stock splits we had in the past are taken into account for DPS calculation.

42

2-5

Historical Financial Results (Expenses Breakdown)(¥ million)

Amount(¥ million)

Net
Sales
Ratio
(%)

© Copyright SMS CO., LTD.

FY03/15
ActualFY03/16
ActualFY03/17
InitialForecasts

Cost of Sales

1,332

2,204

3,848

Personnel
Expenses

4,858

6,116

6,849

Advertising
Expenses

2,518

2,776

2,876

Other
Expenses

4,267

5,214

7,043

Cost of Sales

8.9

11.6

16.0

Personnel
Expenses

32.3

32.1

28.5

Advertising
Expenses

16.7

14.6

12.0

Other
Expenses

28.3

27.3

29.3
43

2-5

Seasonal Volatility Net sales and operating income tend to increase in Q1 and Q4.

Seasonal Volatility of Net Sales and Operating Income
Quarterly Net Sales and Operating Income (FY03/15)[¥ million]

Businesses whose net sales and operating
income increase in Q1

Net Sales

7,000☐ Recruiting Agent Service
Operating Income  Net sales are booked when a job seeker joins a company; therefore, net
sales and operating income increase in April (Q1) when personnel
changes often happen

6,000
5,000

Businesses whose net sales and operating
income increase in Q4

4,000☐ Recruiting Ads Service
 Net sales are booked when a job seeker applies for a recruiting ad;
therefore, net sales and operating income increase in Q4 whencompanies publish recruiting ads targeting the beginning of a fiscal year
when job seekers are likely to be motivated to change jobs

3,000
2,000
1,000
0
1,000

Businesses with Seasonal Volatility and Reasons

1Q
1Q

2Q
2Q

3Q

4Q

Both net sales and operating income increasesignificantly in Q1 and Q4☐ MIMS group Because the booklet of drug information is more often issued for 2H andthe client pharmaceutical companies tend to increase their expenditure
for advertising expenses toward December, the end of the fiscal year,
the net sales and operating income of the MIMS group tend to increase
toward 2H (July to December). In addition, because the MIMS group isincluded in the scope of consolidation three months later, 2H of the
MIMS group is included in the scope of consolidation for Q3 and Q4 of
SMS (the fiscal year end is March for SMS and December for the MIMS
group).

*1: For FY03/16, the net sales (¥1,581 million) of the MIMS group, which was acquired in October 2015, were included only for Q4. For FY03/17, the net
sales of the MIMS group will be included for Q1, and thus it is forecasted that there will be no such difference in net sales between Q1 and Q4 as shownin the graph above.

© Copyright SMS CO., LTD.

44

2-5

Launch of Services 1/4
03/04

03/05

03/06

03/07

03/08

03/09

03/10

03/11

03/12

03/13

03/14

03/15

03/16

03/17

Com for nursing care professionals: Care Tomo Oct. 2005
Information portal of housing for seniors: Kaigo DB July 2006）
Management support service for nursing care operators: Kaipoke July 2006

Nursing Care

Com for care managers: Care Mane.com Sep. 2006
Com for families with those requiring nursing care: Anshin Kaigo June 2009
Home-delivered meal search site: Lifood Nov. 2013
User review site regarding nursing care operators: Tonari no Kaigo Apr. 2014
Com for managers of nursing care operators: Kaigo Must Feb. 2015
Livelihood support search site: Help You Oct. 2015
Renovation support: Hapisumu Apr.2016© Copyright SMS CO., LTD.

45

2-5

Launch of Services 2/4
03/04

03/05

03/06

03/07

03/08

03/09

03/10

03/11

03/12

03/13

03/14

03/15

03/16

03/17

Com for pharmacists: Cocoyaku May 2009
Publishing for nurses: Nurse-senka Books Aug. 2009
Mail order/online sales of nursing goods: PURE NURSE Sep. 2011
Information portal for hospital management: GALENUS May 2013
Drug and medicine DB for pharmacists: Cocoyaku DI-pedia May 2014

Medical Care

Information portal for hospital Admin. managers: Jimcom Sep. 2014
Regional partnership support in the nursing/medical segment: Chiiki Renkei ONE Nov. 2014
Regional partnership support system: EIR Apr. 2015
Purchasing support for hospital Admin. managers and purchasing managers: Aikon Sep. 2015
Magazines for regional medical resources: Zaitaku Houmon Iryou Guide Feb.2016
Home-visit nursing stations DB: Houmon Kango Station-Navi Feb.2016
Online academic media for nurses: Nurse Press Apr.2016© Copyright SMS CO., LTD.

46

2-5

Launch of Services 3/4
03/04

03/05

03/06

03/07

03/08

03/09

03/10

03/11

03/12

03/13

03/14

03/15

03/16

03/17

RAG for care managers: Care Jinzai-bank May 2003
RAD for newly graduated nursing care professionals: Kaigo Job Gakusei-ban July 2003
Certification course information: Sikatoru Nov. 2003
RAD for nursing care professionals: Kaigo Job Mar. 2004
RAG for nurses: Nurse Jinzai-bank Sep. 2005
RAD for nurses: Nurse-senka Kyujin-navi July 2006
Com for nurses and student nurses: Nurse-senka Community Aug. 2006

CareerRAG and RAD for doctors and pharmacists: M3 Career Agent Aug. 2006
RAG for pharmacists: Yaku Kyari Agent Apr. 2007

Company split andsucceeded to M3 career atthe end of Dec. 2012

RAG for PT/OT/ST : PT/OT Jinzai-bank Sep. 2008
RAD for newly-graduated nurses: Nurse-senka Shusyoku-navi Aug. 2009
Solution service for hospitals Apr. 2011
RAG for nutritionists: Nutritionist Jinzai-bank May 2012
Scholarship information portal: Kango Shogakukin-navi Oct. 2012
RAG for medical technologists: MT Jinzai-bank Sep. 2013
RAG for radiological technologists: RT Jinzai-bank June 2014
RAG for medical engineers: ME Jinzai-bank July 2014
RAG for care workers Kaigo Job Agent Aug.2014© Copyright SMS CO., LTD.

47

2-5

Launch of Services 4/4
03/04

03/05

03/06

03/07

03/08

03/09

03/10

03/11

03/12

03/13

03/14

03/15

03/16

03/17

Healthcare

Com for nutritionists: Eichie June 2011
Information portal of dementia: Ninchisho Net Aug. 2011
Q&A site on health: Narukara Dec. 2013
News column regarding pregnancy, childbirth and child-raising: Ixil July 2014

overseas

Information portal of diabetes: Tonyobyo Net Jul. 2016

© Copyright SMS CO., LTD.

(Korea) Com for nurses: Nurscape Sep. 2011
(Singapore and 11 other countries)
Drug information service for healthcare professionals and institutions: MIMS Oct. 2015

48

2-5

Other
Number of Employees
 Number of employees and its breakdown as of December 31, 2016
Employees (consolidated)

1,714

SMS CO., LTD.

256

SMS Career CO., LTD.

575

Subsidiaries and Sub-subsidiaries

883

Japan

255

Overseas

628

Shareholder Composition*1[as of September 31, 2016]

9%
6%

Number of stock
holders
3,624

26%
2%
3%

37%
17%

Founder
Director, Employees and Shareholding association
Treasury Shares
Domestic Institutional Investors
Foreign Institutional Investors
Individual Investors
Other© Copyright SMS CO., LTD. *1: This graph shows the ratio of the number of stocks hold by each category.

49

Cautionary Statement with Respect to Forward-Looking Statements
These materials contain forward-looking statements, including estimates, projections, and statements related to the business operations of SMS CO.,LTD. (hereinafter, “the Company”) based on current expectations and assumptions in light of the information available to the Company as ofDecember 31, 2016. These forward-looking statements are not guarantees of future performance and involve known and unknown risks,
uncertainties and other factors that may cause the Company’s actual results, performance, achievements or financial position to be materiallydifferent from any future results, performance, achievements or financial position expressed or implied by these forward-looking statements. These
factors include, but are not limited to:・changes in economic conditions, market demand, and the competitive environment affecting Japan, Asia and other markets inwhich the Company operates;
・reliance on digital and information technology, including with respect to the handling of nursing care, medical care and otherclient information and operation of the Company’s online community services;・inability to effectively execute M&A/business alliance and overseas expansion strategies;
・changes in the laws, regulations and government policies in the markets in which the Company operates, particularly relating toemployment placement, nursing care and medical care;・any damage to the brand image;・risk of infringing intellectual property rights;
・fluctuations in currency exchange rates, particularly with respect to the value of the Japanese yen, the US dollar, the Singapore
dollar, the Hong Kong dollar and the Australian dollar; and・risk of impairment losses, particularly with respect to goodwill recognized in connection of the acquisition of a 60% interest in
Medica Asia (Holdco) Limited in October, 2015.
A discussion of these and other factors which may affect the Company’s actual results, performance, achievements or financial position is describedin “Business Risks” contained in the Company’s corporate website*1.
We do not intend, and disclaim any duty, to update or revise any forward-looking statements contained in these materials to reflect new information,
future events or otherwise. We caution you not to place undue reliance on any forward-looking statements contained in these materials.
*1: http://www.bm-sms.co.jp/eng/ir/policy/risk/

For any inquiries on the materials, please contact below:
Finance & Accounting Department
E-mail: irinfo@bm-sms.co.jp
Phone: +81-3-6721-2403© Copyright SMS CO., LTD.

50