HOYA CORPORATION
Q2 Financial Results Briefing for the Fiscal Year Ending March 2022
October 28, 2021

Event Summary[Company Name]HOYA CORPORATION[Company ID]

7741-QCODE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Q2 Financial Results Briefing for the Fiscal Year Ending March 2022

[Fiscal Period]

FY2021 Q2[Date]

October 28, 2021

[Number of Pages]

19[Time]

15:00 – 15:38(Total: 38 minutes, Presentation: 20 minutes, Q&A: 18 minutes)[Venue]Webcast Live

[Venue Size][Participants]

300[Number of Speakers]

3
Hiroshi Suzuki[Analyst Names]*

Ryo Hirooka
Eiichiro Ikeda

Representative Executive Officer, President& CEO
Representative Executive Officer & CFO
Executive Officer & CTO

Damian Thong
Masahiro Shibano
Takahiro Mori
Richard KayeYu Yoshida

Macquarie Capital Securities (Japan) Limited
Citigroup Global Markets Japan Inc.
Mizuho Securities Co., Ltd.
Comgest Asset Management Japan Ltd.
CLSA Securities Japan Co., Ltd.

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Presentation
Moderator: As the time has come, we will now begin the HOYA Corporation second quarter financial results
briefing for the fiscal year ending March 2022. The presentation will be held via web conference. Attending
from our side today are Hiroshi Suzuki, CEO; Ryo Hirooka, CFO; and Eiichiro Ikeda, CTO.
Today, Mr. Hirooka will give an overview of our business performance and major businesses for the second
quarter, and then I will briefly explain the topics of the quarter. This will be followed by a question and answer
session, which is scheduled to end at 15:45.

Hirooka: Revenue was JPY162.6 billion, representing an increase of 16% from the second quarter of theprevious year.
On a currency neutral basis, the growth was 12%.
Quarterly profit before tax was JPY54 billion, and quarterly profit was JPY43 billion, both of which are morethan 30% higher than last year. As a reference, the profit from normal operating activities was JPY49.2 billion,
an increase of 14% compared to last year.
I would like to briefly explain the difference between the profit from operating activities and the profit before
tax.
First, there was a foreign exchange gain in this quarter. The amount was JPY3 billion, compared to less than
JPY900 million last year, so the difference has turned into a positive in the second quarter.
Also, we recorded an impairment loss of JPY3.1 billion in the second quarter of last year. Since there are no
impairments this fiscal year, this portion has become positive in this second quarter, and these 2 main areas2

have turned into a large positive, resulting in a different rate of increase in profit from operating activities andprofit before tax.
As for this, we have also made a bridge chart as supplementary data in the Quarterly Report, so please referto that.

Continuing on to page 5, the Life Care Business.
Revenue was JPY99.1 billion, an increase of 10% over last year and an increase of 6% on a currency neutral
basis.
For reference, compared to FY2019 Q2, 2 years ago, revenue in Life Care decreased 5%. However, in FY2019
Q2, there was a rush of demand before the consumption tax hike, and in our case, this was the quarter inwhich sales rose significantly, especially at Eyecity contact lenses. So if we take into account the temporary
upside that existed at that time, we are reaching about the same level as 2 years ago. So, this was the same
situation as in Q1.
Profit before tax JPY23.4 billion, and profit from ordinary operating activities was JPY19.8 billion.
I would like to make 1 more comment. In Q2 of last year, operating profit margin was 23.5%, and this year it
was 19.9%.
First, last year's Q2 was a quarter with a much higher profit margin than expected. In Q1 last year, sales fell
sharply amidst the global lockdown, so we cut costs and controlled the situation. In Q2, we kept expenses
under control because we were cautious about how much sales would return, but sales recovered rapidly lastyear. Therefore, last year, the profit margin was 23.5% for the quarter, which is very high for the Life Caresegment.
Revenue is almost back on track this fiscal year, so our spending in sales activities has almost resumed.

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As I explained earlier in the financial overview, most of our production, especially eyeglasses, is done inSoutheast Asia, including Thailand, Vietnam, and the Philippines, but due to the impact of the Delta variant
infection, we are spending a lot of money to protect our supply chain, to secure slightly more staff, test system,
vaccination, etc.
In the second quarter, we focused on making sure that the supply chain was working properly, and theefficiency of factories was slightly lower than usual in that quarter.

I will continue with the explanation by product. The first is Medical.
For the current fiscal year, sales were JPY25.6 billion, an increase of JPY3.6 billion compared to last year.
Endoscopes are up 12% in real terms on a currency-neutral basis and down 7% compared to FY2019, 2 yearsago.
As I briefly mentioned for Q1, there has been shortage of semiconductors for use in processors. Because ofthis, it has not been possible to manufacture all of the processors, and of course, if processors do not sell, we
are not able to sell scopes, so production has not been able to keep up with the orders we have received.
The market has been recovering quite well, and we have been conducting solid sales activities, and we havebeen able to get a certain amount of orders, but the supply has not been able to keep up, for endoscopes.
I will continue on to the intraocular lenses. We saw a 7% growth compared to last year and a 6% decrease
compared to FY2019.
In the U.S., Europe, and Asia, we continue to do well, and we are recovering and exceeding the FY2019 level.
In Japan, the market condition is very bad in the first place.
In July and August, especially with the declaration of a state of emergency and the explosion of infections,both hospitals and clinics have been affected, postponing surgeries. Therefore, as the proportion of the4

Japanese market is high in our sales of intraocular lenses, we have not been able to recover to the level of
FY2019.
Next, Health Care related products. Sales were JPY73.6 billion.
This is an increase of JPY5.3 billion compared to last year. First, for eyeglass lenses, we saw an increase of 3%
on a currency neutral basis, which is also above the level of FY2019.
In a similar manner to intraocular lenses, the Japanese market is struggling very much, and the market as awhole is stagnant. Also, as I mentioned earlier with respect to the Delta variant, sales in Southeast Asia havebeen up and down.
In the meantime, sales in China and Europe have been growing steadily and have exceeded last year's and
FY2019 levels.
As I mentioned earlier, for eyeglasses, many of our major factories are especially in Southeast Asia, so we had
to pay a certain amount for pandemic countermeasures, and the factories themselves could not operate atfull capacity, so while there was no impact on sales, it did have a slight impact on profits.
Next, contact lenses. We saw an 8% growth compared to last year and a 4% decline compared to FY2019.
As I mentioned earlier, 2 years ago, there was a rush demand of about JPY4.6 billion for Eyecity before theconsumption tax hike, so the rates excluding that are shown here.
This is the same story as the first quarter, but again, the flow of people has stopped, and people are notconsuming contact lenses, which continued in the second quarter, so we have not been able to exceed the
FY2019 level.
In the midst of this situation, we have been making new efforts such as home delivery services, and sales haveincreased to a certain extent and are increasing compared to last year.

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Next, Information Technology Business. With revenue of JPY62 billion, profit before tax of JPY31 billion, andprofit from normal operating activities of JPY30.1 billion, we have achieved significant growth in both revenue
and profit YoY.
On a currency neutral basis, sales increased 23%.

I will continue with the explanation by product. First is Imaging.
Sales were JPY10.2 billion, which is an increase of JPY3.1 billion compared to last year. In the information
technology field, the imaging-related business was the only business that was greatly affected by COVID-19.
Struggles in camera sales continued from the first half of last year, but from the second half, sales of opticalmaterials and lenses for cameras have been increasing, and this has continued from the first quarter andsecond quarter, and the current demand is reasonably strong, so we have seen a high YoY growth rate.
Next, Electronics-related products. Sales were JPY51.7 billion.
This is an increase of JPY9.8 billion compared to last year. Masks & Blanks saw a 15% increase YoY.
Both LSI and FPD here have shown significant growth compared to the second quarter of last year. The EUV
market continues to grow by more than 40% compared to last year, and the competitive environment has notchanged, so sales are growing steadily.
As for large FPD panels, in the second quarter of last year, panel manufacturers saw a significant increase indemand for panels, and they focused on mass production activities, which reduced the number of applications
for development.
From the perspective of our mask business, a decrease in development applications meant a decrease indemand, so in the second quarter and third quarter, there was no more sales in the FPD business. So that hascome back to normal, and on a YoY quarterly basis, we have seen a significant increase in sales compared tolast year. Sales have increased by more than double digits.

6As you can see here, we will be further strengthen our supply of FPD masks to the Chinese market, and as weannounced last week, we have signed a joint venture agreement with BOE in China.
We still have to go through the necessary procedures such as permits and approvals, and it will be a long time
before we can build a factory. However, it is important to build a supply system in each market, so we areplanning to build a solid base in China, which is expected to grow in the future.
Then finally, HDD. The substrates saw a 26% YoY growth, which is a very large increase. Both 3.5 inch and 2.5
inch saw significant growth compared to last year.
The positive point is that we have been able to increase sales of 3.5 inch in line with our strategy or plan.
For 2.5 inch, we expect a decrease, and our view remains unchanged that, in the medium term, it is expected
to keep declining. However, if we look only at the current situation, we can see that as demand for HDD issustaining, both 3.5 and 2.5 are contributing to sales and profits for us. This was the result of the second
quarter.

Finally, the balance sheet and cash flow.
The figures are as shown on the screen, but I would like to make a few comments on the cash allocation andshareholder return policies. These are our policies and our ideas have not been changed at all.
In terms of cash allocation, we continue to believe that we should actively pursue M&A for growth, especiallyin the current environment, if we can generate synergies in existing businesses.
Also, in terms of shareholder returns, the policy itself has not changed at all here either, so we have notchanged our idea at all about firmly returning money to our shareholders within a certain period of time. We
will continue to monitor the market trends and determine the right timing to steadily implement it going
forward.
This concludes my explanation.

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Moderator: Next, I would like to give a brief introduction on the topic of hard disks and glass substrates fordata centers.
In today's society, data is being used in every field. With the development and penetration of technologies
such as 5G, AI, and automated driving technologies, the volume of data distribution continues to grow.

With the growth in data distribution volume, cloud service providers are increasing their capital expenditures,and GAFAM's capital expenditures reached a record high level in CQ2.

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Under these circumstances, HDDs will continue to play a central role, accounting for about 90% of the datacapacity shipped to data centers.

The glass substrate that we manufacture is used in a hard disk as a platter, which is a part that record data.
The material of the substrate can be aluminum or glass, both of which are not magnetic as they are, so amagnetic film is applied to make the recording media. Currently, we are the only manufacturer of glass
substrates for hard disk drives.

9The advantages of glass substrates over aluminum substrates can be briefly summarized in 2 points: they are
more rigid and stable even when made thinner, and their high heat resistance allows them to be used in
HAMR, the next-generation recording technology. I would like to explain it a bit more in detail.

For cloud service providers, the concept of Total Cost of Ownership, or TCO, is of great importance. This is thetotal cost including all costs related to the data storage and maintenance, and so on.
In a data center, there are of course physical constraints such as site area and the shape of the server rack, so
if the data capacity per recording device increases, the TCO will decrease.
Hard disks have been taking 2 main ways to increase data capacity and help customers lower their TCO.
The first is to improve areal density, which is a method to increase the amount that can be recorded per areaby shrinking the size of a bit cell. HAMR and MAMR, which use heat and microwaves, fall into this category.
The second is to increase the number of platters per HDD. Since the thickness of existing hard disks is generally
fixed at 2.6 cm, HDDs have been able to increase data capacity by making platters and spacers thinner andusing more platters.
The highest capacity drive currently available is 18TB with 9 platters.

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Among the next generation technologies, HAMR is expected to have the highest recording density, but themagnetic material will be different from the conventional one. As a result, during film deposition, thetemperature of the sputtering process becomes extremely high, over 650 degrees Celsius.
Our glass substrate has a heat resistance of 710 degrees Celsius, making it the only option that is compatible
with HAMR.

Though it will depend on the material composition, but glass is generally more rigid than aluminum.

11Just for your reference, here is an index called Young's Modulus to show the difference in stiffness. With themost rigid glass substrate of our products, it is possible to mount up to 12 platters per drive by reducing the
thickness to 0.4mm.
If the platter is forcibly made thinner while its rigidity is still low, the platter may deflect when impact is applied,and particles may be generated by contact with other components. There is a risk that those particles will getin between the head and the platter and affect the read/write process, so rigidity is important.

On the lower right is a reference photo of the mock-up, and there is a potential for us in the future to makethe platter thin as 0.38mm thick and to mount 14 platters per drive.
In the future, we will continue to improve our ability to supply glass substrates in response to customer needs
and contribute to the development of this data-driven world.
This concludes my very brief explanation of hard disk substrates for data centers.

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Question & Answer
Moderator: We will now move on to the question-and-answer session. Please note that time is limited, so wewould like to limit the number of questions to 2 per person. Now, Mr. Yoshida, please.
Yoshida: Thank you very much. This is Yoshida of CLSA Securities. First, EUV blanks have increased by morethan 40% compared to the previous year, but if you look at QoQ, I think there is not much growth or a slightdecrease. Has there been any change in the demand environment?
Ikeda: Rather than a change in the demand environment, it is more likely that our newly built manufacturing
line in Singapore is now operating close to full capacity. This does not mean that demand is decreasing or
anything like that.
Yoshida: In that sense, do you think it will be difficult to grow from this level?
Ikeda: As we have reported before, we have already placed orders for long-lead-time equipment, and we willcontinue to increase our capacity to meet customer demand.
Yoshida: Thank you. The second point is the impact of COVID-19. This time, Life Care is experiencing supply
shortages, worsening profitability, and declining demand. Are there any fields where you expect to see theimpact to remain? In particular, what should we think about the profitability of eyeglass lenses for the second
half of the year?
Suzuki: Before I go on, I would like to talk about the EUVs again. There are grades, such as grades A, B, and C,
and the customers are saying that they want the A grade the most, but we have not been able toaccommodate them. Although we are close to full in terms of capacity, I think we will enter a phase where wewill be able to increase sales by increasing the ratio of A-grade products. I think what we need to do for the
next 6 months or so is to increase sales by raising unit prices even before the capital investment comes in.
Also, in the second quarter, we were a little overzealous in our countermeasures against COVID-19, and in
anticipation of the many things that might happen, we prepared a large number of people than normal. The
vaccine was urgently administered, and the PCR was carried out rapidly.
Perhaps this was meant to create a “bubble”, we had people sleepover in the factory with 3 meals, andnaturally, we raised the salary as well, so I think the cost temporarily increased too much. As for that, I am
hoping that such things are unlikely to happen in the second half of the year.
It will be different if another variant of COVID-19 comes out and makes a big deal again, but for now we are
not too worried about that, but on the other hand, there is a logistic cost.
Logistics costs are a bit of a concern, as we have had to replace a lot of sea shipment with air shipment in 3Q,
and there have been cases where prices have simply gone up.
Also, surprisingly, the state of China, the supply of electricity. We have our own factory, so we have to worry
about the supply of electricity to our own factory, but we are also worried about the shortage of electricity
for those who manufacture parts and materials for our customers, which may affect their top line rather thantheir profitability. We are a little worried about that.

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There is nothing we can do about this, so we do not have any measure to deal with it. What worries us, or
why we cannot say with confidence that earnings will get better and better in the second half of the year, isbecause in the current situation, there are quite a few factors that we are concerned about, in various places.
Yoshida: I see. Thank you. That's all.
Moderator: Thank you very much. Then, Mr. Kaye, please.
Kaye: Thank you. This is Kaye from Comgest. Thank you very much.
For endoscopes, there was a shortage of semiconductors and you were unable to respond enough to demand.
Are there any other fields where you are having a similar problem related to the supply chain? What kind of
outlook do you have? Please tell us how serious the issue is regarding procurement, including endoscopes.
Suzuki: At this point, the only field where sales have been affected due to the lack of supply of parts andmaterials is endoscopes, and there is no other field. To be honest, though, regarding whether the problem inendoscopes will be solved in the short term, I think it's going to drag on a bit.
What worries us more is that since it has been impossible to manufacture products due to shrinking
semiconductor supply, there is actually a business selling demo machines and temporary product loans, which
we call loaner, but current sales of demo machines and loaner will affect future sales.
In the end, the business cycle revolves around having people use the products by means of demo machines
and loaners, and then convincing them to buy them. Since we have orders, we have already taken orders, andsince we have sold demos and loaners, we will continue to be in a situation where business itself will not beable to run smoothly until we can properly produce and accumulate loaners and demos. So even if the supplyof semiconductors improves in the short term, I think the business situation will continue to be a bit difficult
for a while.
Kaye: Thank you very much.
Moderator: Mr. Kaye, you have just 1 question?
Kaye: 1 question is fine for now. Thank you very much.
Moderator: Thank you very much. Then, Mr. Damian Thong, please.
Thong: Thank you very much. I am Damian from Macquarie Securities. Thank you.
Just 1 question regarding the market for eyeglass lenses in Japan. How is it? Overseas, there has been a
gradual recovery, and in Japan, there is talk of a recovery in the situation, so I would like you to explain this in
more detail. That's all.
Suzuki: The market for eyeglasses in Japan is not recovering, or it is fine in terms of the number of units, but
the eyeglasses for the elderly are not really recovering at all. In short, the unit price of glasses for presbyopia,
not for young people, is high, and glasses for the elderly are not selling well.
Recently, we released a lot of new products in 2Q, and even though the new products happened not to be
new products for the elderly, I think the overall volume is increasing and the market share is rising, partly
because of the new products. The market for the elderly itself has shrunk considerably and has not comeback at all, so I think this situation will probably continue for a while.

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To be honest, we are unlikely to see an environment for the return of high unit price glasses for the elderly inthe short term.
One of the interesting things about our new products is that one of them is an antibacterial lens; it was
surprisingly well received.
Also, if you wear glasses and a mask, they will fog up. So, we have made and sold anti-fog glasses that do not
fog up, which are also surprisingly well received.
In that sense, market share in Japan is probably increasing, but overall sales are not high, so it seems unlikelythat sales will return to the level of the previous year or FY2019, no matter how hard we try.
Thong: Thank you very much. Hard disk, may I follow up on one thing? I believe your customer have been able
to increase their market share by using your products, and they are quite prominent in the market. Please let
us know if you have any recent updates as to when their competitor will start using glass substrates in the
future. That's all.
Ikeda: Right now, as explained earlier, the latest models that are out there are 16TB to 18TB, with 9 platters
per drive. The competitor will continue to use aluminum for 9 platters, and then one more, until the modelwith 10 platters. We are working with the said company on development activities for more than 11 platters,
so there is a possibility for adoption when a product with more than 11 platters will become available. There
has not been any decision on adoption, but we are continuing development activities with the said company.
Thong: I see. So for 11 platters, 2023, is that correct?
Ikeda: I think the 10-platter model will be used for several generations, and as mentioned earlier, it relates tothe multiplication with the recording density. Therefor the timing may vary back and forth.
Thong: I see. Thank you. That's all.
Moderator: Thank you very much. Next, Mr. Mori, please.
Mori: This is Mori from Mizuho Securities. Just 1 question, please. Could you tell us about the status ofdisposable endoscopes after the launch and the future prospects? That's all.
Suzuki: We have distributed it to all the major hospitals for them to use it, and we are currently listening totheir feedback, or rather, we are distributing demo units. To be honest, production has been lagging behind,so although the demo units have been surprisingly well received, we have not yet reached the point where
we can start taking orders. We hope to establish the production system early and we would like to see thefigures from around the end of 3Q. It seems to be receiving good feedback.
Mori: In that case, since you are probably manufacturing it in Southeast Asia, for example, if the COVID-19
infections there subside, and the production system is strengthened and the volume increases, you will beable to see a certain scale?
Moderator: We are making this in Bulgaria.
Mori: I see. It is almost like local production for local consumption. Making it close to where the demand is.
Suzuki: To tell you the truth, we have never operated a factory in Bulgaria before, so we are working on
manufacturing while dealing with all sorts of surprises and problems. That is what we're doing now. We
wanted to achieve more quantities, but please note that we are a little behind schedule.

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Mori: Has this area been affected by the semiconductor shortage?
Suzuki: Not directly, but the unit price has gone up. It is more of a sensor. The unit price of sensors is goingup, and we are wondering what we should do about it, whether to pass it on or not. You may think that weshould not simply pass the cost on to the price since we are a latecomer in the market, but the current
situation is that sensor manufacturers and semiconductor manufacturers are raising their unit prices quite abit.
Mori: I see. That's all. Thank you.
Moderator: Thank you very much. As the end time is approaching, we will conclude with the next speaker.
Mr. Shibano, please.
Shibano: I am Shibano from Citigroup Japan. Thank you.
The first point is about how to look at cash. At the end of September, the figure was 386.5 billion yen, which
is probably the highest level in 5 years. You mentioned earlier that there are various elements of uncertainty
in the second half of the year, but when I think about preparations for such elements, I do not see the needto hold onto this much cash, but I would like to know if there is anything I am overlooking. Thank you.
Suzuki: We basically do not want to have this much cash. Due to a variety of reasons, it has been difficult tobuy back our own shares currently.
Shibano: Understand. Secondly, for eyeglass lenses, I might have asked last time, but I would like to hear
about the new leadership, if there are any updates to the strategy or if you are seeing any results. Thank you.
Moderator: He is doing well but since it is still a short period of time so I think we should wait a little longer
for the results to really come out.
Shibano: I see. Thank you.
Moderator: Thank you very much. It is still a little early, but this concludes today's briefing. Thank you verymuch for taking time out of your busy schedule to join us today.
Moderator: Thank you very much.
[END]______________

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