3-D Matrix,Ltd. Q3 FY2025 earnings call

Financial Performance

• 9M cumulative gross profit grew 1.9x year-over-year, with operating deficit reduced by more than 1 billion yen year-over-year.
• A temporary 10 billion yen+ ordinary and net loss expansion came from yen appreciation-driven foreign exchange loss on foreign currency-denominated intercompany loans; this is an accounting-only impact with no effect on operating cash flow or business costs.
• The 39th new share subscription rights were fully exercised by December 2024, raising ~2.9 billion yen. The 7th convertible bond balance was fully reduced to zero via partial redemption and conversion, cutting fixed liabilities by more than 1 billion yen year-over-date. Net assets increased 2 billion yen year-over-year to 2.6 billion yen.

Regional Commercial Highlights

• US: The GI segment continues to add new accounts at a steady high pace, with sales team expansion focused on the West Coast and Midwest driving above-plan growth. Hiring for next fiscal year's growth is progressing on schedule.
• Europe: A new agreement was reached with the German distributor to add additional sales resources, positioning for a growth recovery in the coming fiscal year.
• Japan: Management continues to focus on expanding usage among existing customers in addition to acquiring new customers to further expand contribution margin.

R&D Pipeline Updates

Hemostasis projects:

• Pediatric cardiac surgery hemostasis: European clinical data collection is complete, approval application preparation is ongoing, with submission targeted within 2025.
• Head and neck hemostasis: A manuscript demonstrating the clinical benefit of PureStat (earlier extubation and discharge) is in preparation.
• Osler-Weber-Rendu disease (HHT) hemostasis: Clinical research preparation is complete for a European poster presentation, and case accumulation is ongoing in the US.
• Benign prostatic hyperplasia surgery hemostasis: Test marketing with a robotic surgery company is scheduled to start in Europe, with data to be used for US approval review.
• Next-generation peptide-based neurosurgery hemostat: European approval is delayed by several months due to a last-minute request for additional regulatory information.

Wound healing projects:

• Radiation proctitis: Clinical study for European insurance listing is ongoing, with additional patient enrollment started.
• Mucosal wound healing: A new project targeting formal regulatory approval for use in non-bleeding mucosal wounds (gastrointestinal tract, urethra, bladder, nasal cavity, etc.) has been added. Approval application preparation is ongoing in Europe and the US.
• Dysphagia prevention: A new project has been added to prevent dysphagia after pharyngeal cancer treatment via endoscopic application of PureStat. A specific clinical study is in preparation in Japan.
• Radiation cystitis: Case reports have been published, and data accumulation is ongoing for US regulatory review.
• Inflammatory bowel disease (IBD): Two academic clinical studies are ongoing at Japanese universities, with a case report manuscript in preparation.
• Absorbable spacers for radiation therapy: Joint research with a Japanese university is ongoing, currently in animal testing.

Drug delivery projects:

• Breast cancer siRNA delivery: Ongoing work to refine patient targeting via gene expression analysis, and testing for systemic administration.

By geographic segment (9 months cumulative period ending Q3):

1. United States: Revenue more than doubled year-over-year, led by the Gastroenterology (GI) endoscopy segment. The US subsidiary turned profitable in cumulative terms this fiscal year, remaining profitable in Q3 alone. Growth exceeded plan by more than 10%. Revenue contribution from the US is the primary growth driver for the whole company.
2. Europe: Total revenue grew 20% year-over-year. GI segment growth is on target in the UK, but underperforming in Germany to date. ENT (Otorhinolaryngology) segment growth is on track but slightly behind plan. The cardiovascular segment eliminated direct sales to reduce costs.
3. Japan: Revenue grew 34% year-over-year, with sales operations progressing in line with plan and contribution margin expanding.
4. Australia: Revenue grew 24% year-over-year. A sudden insurance category reclassification by the government cut product prices by more than 10%, leading to revenue slightly below plan, but unit volume hit an all-time high and total revenue still exceeded the prior year.

Overall cumulative (YTD) revenue is 5.05 billion yen, up 69% year-over-year, with an operating loss of 0.6 billion yen, an 81% reduction in losses compared to the prior year. Q3 alone had an operating loss of 70 million yen, a sharp reduction in the deficit. Excluding temporary foreign exchange loss impacts, operating, ordinary and net loss all improved 9 billion yen or more year-over-year to a deficit of ~0.7 billion yen for each metric.

• Full year 2025 April fiscal year guidance was upward revised from the original 6 billion yen revenue target to 7 billion yen, representing a 52% year-over-year revenue increase from the prior year's 4.5 billion yen revenue.
• Full year operating loss guidance was revised from the original 1 billion yen deficit to 0.77 billion yen deficit, a 23.8% improvement from the original plan and a 63.7% improvement from the prior year's 2.1 billion yen operating deficit.
• Q4 is projected to deliver a new all-time high quarterly revenue, with year-over-year operating improvement of more than 0.3 billion yen despite planned additional operating expense increases for US growth and the Australian revenue shortfall.
• The original mid-term plan target of 30%+ revenue growth to 6 billion yen and halving the operating deficit to 1 billion yen this fiscal year was beaten handily, putting the company on track for progressive profit improvement and eventual profitability.

• Yield curve appreciation of the yen creates temporary accounting foreign exchange losses on intercompany foreign currency loans, which distort reported ordinary and net income despite having no impact on underlying operating performance or cash flow.
• Q3 US revenue was held down by fewer operating days due to the holiday season, and full year results face pressure from yen appreciation that reduces yen-converted revenue from overseas operations.
• German GI segment growth has underperformed plan to date, requiring additional sales resources from the distributor to recover growth in the coming fiscal year.
• Australian revenue has been negatively impacted by unexpected government insurance category reclassification that cut product prices by more than 10%, leading to a minor revenue miss relative to plan.
• The neurosurgery hemostat European approval process is delayed by several months due to a last-minute regulatory request for additional information.

No question and answer section is included in the provided transcript text.