Sincere Co.,LTD. Q2 FY2025 earnings call

Core Business Growth

• The flagship silicone hydrogel lens "Sincere S" series performed strongly, driving growth in the core contact lens business. Retail outlet count for the series has grown 1.2x over the past 2 years, and sales have also reached 1.2x of 2-year prior levels, with its colored lens variant "Cleshe" also seeing steady sales growth.
• The long-awaited "Sincere One Day S for Astigmatism" was launched in February 2025, expanding product coverage and improving overall product competitiveness. This product features industry-thinnest design among comparable astigmatism lenses, retaining the comfortable fit of existing Sincere One Day S myopia lenses.
• Total contact lens business revenue grew 15.3% year-over-year, supported by the new astigmatism product launch and expanded sales of colored contact lenses from the newly acquired business.

M&A and Business Diversification

• In March 2025, the company acquired the colored contact lens sales business (including the EC site "Mew Contact") from Flue Co., Ltd., which contributed to expanded revenue scale. The acquisition strengthens Sincere's competitiveness in the growing colored contact lens market.
• The company has previously acquired a clinic consulting business (December 2022) and a POS system business for the reuse industry (November 2023), and leverages core competencies in quality management, web marketing, and sales networks to deliver synergies across acquired businesses.
• The company also offers regulatory approval support services for medical devices, quasi-drugs, and cosmetics for overseas companies entering the Japanese market; demand for this service is growing and it is positioned as a future growth segment.

Operational Drivers

• Yen-denominated purchasing for core products and a yen-strong trend in H1 suppressed raw material and procurement costs, supporting profit growth. Reported results saw large double-digit growth across all profit lines: total revenue +14.9% YoY to 3.551 billion yen, gross profit +21.3% YoY to 1.178 billion yen, operating profit +52.3% YoY to 275 million yen, net profit attributable to parent shareholders +76.1% YoY to 169 million yen.
• 2025 full-year key priorities: 1) Expand product assortment to match customer demand; 2) Grow in-house brand sales by strengthening prescription channel distribution, improving drugstore brand awareness, and capturing growing inbound demand; 3) Advance new M&A while driving post-acquisition integration (PMI) to improve profitability and deliver group-level synergies.

• Contact Lens Business: Revenue of 3.303 billion yen, segment profit of 353 million yen, accounting for approximately 93% of total consolidated revenue.
• Consulting Business: Revenue of 19 million yen, segment profit of 10 million yen, accounting for approximately 0.5% of total consolidated revenue.
• System Business: Revenue of 228 million yen, segment profit of 54 million yen, accounting for approximately 6.4% of total consolidated revenue.
• A common expense adjustment of 142 million yen (for corporate overhead such as management department costs) is deducted from total segment profit.

• The company maintained the full-year earnings guidance after an upward revision announced in May 2025, targeting full-year revenue of 7.206 billion yen, representing 10.2% year-over-year growth.
• Full-year projected gross profit is 2.285 billion yen (+9.0% YoY), operating profit is 342 million yen (-29.3% YoY), net profit attributable to parent shareholders is 198 million yen (-34.2% YoY), with expected top-line growth but lower full-year profit due to projected year-end yen depreciation-driven cost increases.
• As of the first half, cumulative profit through Q2 reached over 80% of the full-year target, a solid on-track performance, while revenue is progressing in line with plan.
• The company revised up its full-year dividend forecast from an initial 10 yen per share to 13 yen per share (up 3 yen per share) following the earlier upward earnings revision, targeting a consolidated payout ratio of 40% as a long-term policy.
• The company expects to grow sales and share for Sincere brand clear lenses and colored lenses via stronger marketing, while third-party supplied products will face continued tough conditions due to intensified price competition.

• The newly acquired colored contact lens sales business has not yet generated profit as of H1, with expected profit contributions only materializing after post-acquisition integration is completed starting in the second half.
• Persistent uncertain exchange rate trends: continued yen depreciation for the remainder of the year is expected to push up the cost ratio, leading to projected full-year operating profit decline year-over-year, despite partial mitigation from yen-denominated procurement.
• Intensified price competition in third-party supplied contact lens products will keep operating conditions for that segment difficult through the full year.

Q: Based on the first half result, the implied second half full-year profit implies a large year-over-year decline, which seems larger than expected. Is there upside potential for full-year results? / A: In the current environment of high uncertainty, management will continue to closely assess business conditions. The company will promptly disclose any material updates if changes to the full-year forecast are required.

Q: What is the current profit contribution of the colored contact lens business acquired in March, and what is the outlook for future profitability? / A: Profit contribution to the overall business is currently limited. Management is executing post-acquisition integration of inventory, logistics, and sales promotion systems, and plans to drive profitability by improving gross margin via higher direct online sales, cutting costs through optimized shared logistics, and expanding sales via new product launches. These benefits are expected to materialize gradually starting in the second half.

Q: Can shareholders use the shareholder discount coupon to purchase Sincere One Day S? / A: Sincere S series products are sold exclusively through ophthalmic prescription facilities and are not available on the company's official direct-to-consumer website, so they are not eligible for the shareholder discount coupon. The official site offers other high-quality products eligible for 30% to 60% discount based on shareholding size and holding period.