OLBA HEALTHCARE HOLDINGS,Inc. Q2 FY2025 earnings call

• Core Business Operations • Despite ongoing price increases for imported medical equipment driven by global inflation and yen depreciation, the company maintained stable profit levels through expanded sales activities, improved sourcing, alternative product proposals, and successful price pass-through negotiations. • The Kobe sales office was upgraded to a Kansai Branch to support ongoing customer acquisition growth in the priority Kansai region, driving further regional expansion. The full-scale operation of a large new facility acquired in Kansai in the prior fiscal year is a core driver of projected full-year profit growth. • Gastrointestinal endoscopy consumables grew 9.1% YoY after the first full year of the cooperation agreement with Olympus Marketing in Fukushima Prefecture, and cardiovascular consumables grew 8.7% YoY driven by new facility acquisition in Kansai.

• Strategic Transformation & Mid-Term Plan • The 3-year mid-term plan (FY2025 June to FY2027 June) targets 135 billion yen in consolidated revenue and 2.7 billion yen in operating profit by FY2027 June. VISION 2030 sets long-term targets: become Japan's top medical equipment distributor, generate 20% of operating profit from overseas, and launch over 30 new products/services. • The three core focus areas of the mid-term plan are: (1) OLBA-DX: digitize operations to improve efficiency, enhance customer satisfaction via ICT sales tools, and upskill employee digital literacy; (2) Productivity improvement: strengthen core operations, innovate logistics including new distribution center construction, deliver stable supply aligned with BCP requirements, and maximize customer value; (3) Investment for the future: develop new businesses and advance sustainability initiatives including human capital and environmental efforts.

• Digital Transformation (OLBA-DX) • The DX Promotion Office established in 2021 has already launched a customer web ordering app, in-house tools including a custom electronic catalog, business card management, and expense reimbursement systems, and proactive implementation of RPA and no-code tools, with robust cybersecurity measures including EDR for ransomware protection. • Planned upcoming initiatives include CRM/SFA system construction, sales management system renewal, and expanded use of generative AI. The company runs regular training including no-code tool and generative AI workshops, plus company-wide e-learning DX literacy programs to build DX talent across the group.

• Logistics Innovation • The integrated logistics system Li-Flo, launched in 2022, is being rolled out group-wide, delivering improved inventory management, quality control, lending operation efficiency for orthopedic surgical equipment, faster picking and invoicing, and reduced inventory counting time. • Construction of the new Okayama Distribution Center is targeted for launch in July 2027, designed to improve operational efficiency, strengthen BCP, build a new logistics network, and act as a hub for medical equipment supply in the Chugoku-Shikoku region, aligned with the company's mission of

1. Medical Equipment Business: Revenue of 57.294 billion yen (93.2% of total revenue), up 5.5% year-over-year. Operating profit of 0.715 billion yen, up 6.9% year-over-year. Within this segment, consumables total revenue is 52 billion yen (up 7.6% YoY): (i) Surgery-related consumables up 5.7% YoY, led by 15.6% YoY growth in internal medicine products including diabetes-related goods, 9.1% YoY growth in gastrointestinal endoscopy products, and 6.6% YoY growth in surgical products; (ii) Orthopedic consumables up 10.3% YoY, with 12.1% YoY growth in artificial joint products and 9.7% YoY growth in trauma/sports/arthroscopy products offset by a 10.9% YoY drop in spinal products due to 2024 reimbursement price revisions; (iii) Cardiovascular consumables up 8.7% YoY, with 14.6% YoY growth in catheter ablation products for arrhythmia and 13.3% YoY growth in cardiac ischemia treatment products offset by a 0.7% YoY drop in cardiovascular surgery products. Medical equipment and supplies revenue is 6.5 billion yen, down 5.8% YoY due to a post-subsidy slowdown in large capital expenditure projects by medical institutions, though automatic checkout machines for clinics are selling strongly. 2. SPD Business: Revenue of 2.842 billion yen (4.6% of total revenue), up 9.8% YoY. Operating profit of 55 million yen, up 5.3% YoY. Revenue grew from service price revisions at existing contracted facilities, with profit supported by cost pass-through and sourcing improvements offset by higher SG&A from wage increases. 3. Nursing Care Products Business: Revenue of 1.369 billion yen (2.2% of total revenue), up 4.0% YoY. Operating profit of 105 million yen, up 3.4% YoY. Core nursing care product rental grew 4.4% YoY, and product sales/home renovation that underperformed in Q1 have recovered.

• Full-year FY2025 June consolidated guidance expects 123.726 billion yen in revenue, 2.27 billion yen in operating profit, 2.253 billion yen in ordinary profit, and 1.465 billion yen in net income attributable to parent shareholders, which would be all-time record highs for revenue, gross profit, operating profit, and ordinary profit, marking the 5th consecutive year of revenue and profit growth. • Operating profit is projected to increase by 44 million yen year-over-year, with growth from the full-scale operation of the Kansai large facility and profit gains in SPD and nursing care businesses offset by a large projected increase in SG&A from ongoing investments in human capital and systems to improve sales and back-office productivity. • The dividend policy targets maintaining or increasing dividends per share while retaining internal capital for growth investment. The full-year FY2025 June dividend is projected to stay at 80 yen per share, maintaining the prior year's level after 5 consecutive years of dividend increases. The company's 2024 June-end DOE of 4.4% and dividend yield of 4.0% are both at relatively high levels compared to market averages. • The company continues to target PBR improvement: as of 2024 June-end, PBR was 1.05x, above the 0.9x weighted average for wholesalers on the Tokyo Stock Exchange Standard market, with improvement efforts focused on raising net profit margin via DX-driven efficiency gains and high-value new business development, and raising expected growth via expanding overseas business, developing new businesses, and increasing investor recognition via active IR.

• Persistent global inflation and yen depreciation continue to push up sourcing costs for the company's large share of imported medical products, creating pressure on margins if price pass-through is delayed or insufficient. • The medical device wholesale industry has structurally low profit margins, which is a core weakness the company is addressing but remains an ongoing headwind to profitability. • The company has low market share in major Japanese metropolitan areas, a structural weakness due to the difficulty of entering new regions in the industry, which limits near-term growth in large high-volume markets. • Government medical cost containment policies and reimbursement price revisions (such as the 2024 revision that caused a 10.9% YoY drop in spinal orthopedic product sales) create downward pressure on revenue and margins for affected product categories. • Post-subsidy demand for large medical equipment has cooled, leading to a 5.8% YoY drop in equipment and supplies revenue in the half-year period, creating pressure on this segment's performance in the near term.

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