Explanation Materials for Consolidated Financial Results...

Explanation Materials for Consolidated Financial Results for the Six Months Ended September 30, 2018

Financial results presentation for institutional investors and analysts

November 15, 2018

Security code: 4326

1 Copyright© INTAGE HOLDINGS Inc. All Rights Reserved.

Contents

■ Results for the Six Months Ended September 30, 2018

■ Forecasts for the Fiscal Year Ending

March 31, 2019 (Consolidated/by Segment) ■ Numerical Management Targets and Strategic

Points of the 12th Medium-Term Management Plan (FY2018)

■ Topics


Results for the Six Months Ended September 30, 2018


Summary of Consolidated Statements of Income

Net sales increased slightly from the same period of the previous year. Operating income fell short of forecast hit by decreased healthcare sales. Ordinary income and net income attributable to owners of parent were more or less in line with forecasts. (¥ million)

Six months ended Sept.

30, 2017

Six months ended Sept.

30, 2018 Y/Y Forecasts Compared to

forecasts

Net sales 22,941 23,082 +0.6% 24,000 -3.8% Operating

income 1,270 1,211 -4.6% 1,300 -6.8%

Ordinary income 1,469 1,216 -17.2% 1,250 -2.7% Net income

attributable to owners of parent

1,008 809 -19.8% 830 -2.5%

EPS (Yen) 25.25 19.66 －－－

ROA (%) 2.6 2.0 －－－ (Note) A 2-for-1 stock split of the Company’s outstanding shares of common stock implemented on October 1, 2017 is factored into the EPS

figure for the six months ended Sept. 30, 2017.


Summary of Consolidated Balance Sheets and Consolidated Statements of Cash Flows

(¥ million)

Summary of Consolidated Balance Sheets Year ended Mar. 31, 2018

Six months ended

Sept. 30, 2018

Increase/ Decrease Remarks

Current assets 26,639 22,845 -3,794 Mainly due to decreased notes and accounts receivable-trade

Non-current assets 14,847 17,889 +3,041 Mainly due to increased investment securities and goodwill

Total assets 41,486 40,734 -752

Current liabilities 11,601 11,057 -544 Mainly due to decreased short-term loans payable

Non-current liabilities 2,456 2,296 -159

Total liabilities 14,057 13,353 -704

Total shareholders’ equity 26,024 26,022 -2

Total net assets 27,428 27,380 -48

Summary of Consolidated Statements of Cash Flows

Six months ended

Sept. 30, 2017

Six months ended

Sept. 30, 2018

Increase/ Decrease Remarks

Cash flows from operating activities 1,781 2,462 681 Mainly due to increased decrease in notes and accounts receivable-trade

Cash flows from investing activities -721 -3,610 -2,889 Due to increased purchase of shares of subsidiaries and investment securities

Cash flows from financing activities -980 -1,285 -305 Mainly due to decreased proceeds from short-term loans payable

Effect of exchange rate changes on cash and cash equivalents

1 -19 -21

Net increase (decrease) in cash and cash equivalents

81 -2,452 -2,534

Cash and cash equivalents at beginning of period

10,418 11,622 +1,203

Cash and cash equivalents at end of period 10,499 9,169 -1,330


6,433 6,628

2,465 2,221

1,741 2,132 1,316 1,223 1,652 1,628 1,198 1,085

Performance by Segment: Marketing Support (Consumer Goods & Services)

Net sales breakdown by product

(¥ million)

Six months ended Sept. 30, 2018


CR-Web: Internet surveys of custom research areas

Panel research: SRI, SCI, etc.

Other than CR-Web: Custom researches through methods other than Internet surveys (such as qualitative research, offline survey, outbound)

Co: Communications area (i-SSP, interactive promotion, di-PiNK, etc.)

Overseas: Sales from overseas subsidiaries (excluding healthcare)

Others: Public-sector projects, consulting, etc.

Six months ended Sept. 30,

2017

Six months ended Sept. 30,

2018 Y/Y

Net sales 14,806 14,918 +0.8%

Operating income 460 505 +9.8%

(¥ million)

Both sales and profit increased Consumer goods,

Consumer durables, Services, Civil service

Major Customer Industries Net sales increased, bolstered by the strong performance of panel surveys, CLT (*) centered on product evaluation of custom research areas, and public-sector projects. Operating income increased, despite being negatively affected by the design, development, etc. of an upgraded version of SRI, a core product of panel surveys, and the struggling overseas operations.

* CLT stands for “central location test.” It is a survey method where respondents are invited to attend a product test held at a specific testing location.


Performance by Segment: Marketing Support (Healthcare)

CR-Web: Internet surveys of custom research areas

Panel research: SDI, SRI, Impact Track, etc.

Other than CR-Web: Custom researches through methods other than Internet surveys (such as qualitative research)

Others: Healthcare sales from overseas subsidiaries, etc.


(¥ million)



CRO (Contract Research Organization): Post-marketing surveillance (including ADDIN Series), etc.

Six months ended

Sept. 30, 2017

Six months ended

Sept. 30, 2018 Y/Y

Net sales 5,388 5,157 -4.3%

Operating income 635 554 -12.6%

(¥ million)

Both sales and profit declined

Pharmaceutical

Major Customer Industry

1,378 1,461

890 952 375 343

2,264 1,804

478 594

Net sales decreased, dented by a fall in a backlog of orders at the end of the previous year at ASKLEP Inc. for its core business, post-marketing surveillance conducted as a CRO (Contract Research Organization), despite the favorable performance of custom research on ethical drugs and panel surveys on drugs sold without prescriptions at ANTERIO Inc. Operating income dropped as a result of the decrease in net sales and an increase in investment costs related to new businesses such as pharmaceutical safety information management and patients’ association support services at ASKLEP Inc.

6





2,264 1,804

CRO

↓20.3％ down

It was predicted from the beginning of the current fiscal year that a drop in a backlog of orders at the end of the previous year for post-marketing surveillance of the CRO business would weigh on the segment’s performance. We will make particular effort to ensure a profit from this point onwards.

Nowadays, more drugs aimed at rare diseases than those aimed at lifestyle diseases are put on the market.

This has significantly reduced the unit price/project.

Background

CRO (Contract Research Organization)

Performance by Segment: Marketing Support (Healthcare)

Measures

Cut costs through the use of RPA, etc. Quicken the establishment of an organizational

structure for the safety management business having growth potential

Make an effort to boost the number of orders received from the current fiscal year onwards

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(¥ million)


Six months ended

Sept. 30, 2017

Six months ended

Sept. 30, 2018 Y/Y

Net sales 2,746 3,006 +9.5%

Operating income 175 151 -13.7%

Performance by Segment: Business Intelligence

Net sales breakdown by area

(¥ million)



(¥ million)

Sales increased but profit declined

Domestic CG&S: Travel, education, distribution, life insurance, etc.

Healthcare: Pharmaceutical and health information services, data center, etc.

* CG&S stands for consumer goods and services.

Travel, Pharmaceutical, Health insurance, etc.

Major Customer Industries

INTAGE TECHNOSPHERE Inc.’s business lineup INTAGE TECHNOSPHERE provides IT solutions to INTAGE Group clients. It is engaged in the establishment and operation of systems and operation of data centers as well as the establishment of infrastructure capable of high-speed big data processing. Examples of solutions: Payment systems for travel agencies, health management support services, pharmaceutical companies’ sales information systems, publishing POS systems, trade area analyses, AI solutions, etc.

1,661 1,956

1,085 1,050

Net sales increased thanks to introduction of development projects and health information services in the life insurance industry, an increase in development and new projects related to the travel industry, and contribution from Buildsystem Co., Ltd., which became a subsidiary in March 2018. Operating income shrank owing to some unprofitable projects.

8


Forecasts for the Fiscal Year Ending March 31, 2019

(Consolidated/by Segment)

9


Forecasts for the Fiscal Year Ending March 31, 2019 (Consolidated/by Segment)

(¥ million)

Earnings forecasts are based on information currently available and entail a wide range of uncertainties. Accordingly, actual results may differ from these forecasts.

Year ended Mar. 31, 2018

Year ending Mar. 31, 2019

(Forecasts) Y/Y

Consolidated

Net sales 50,499 53,000 +5.0%

Operating income 4,023 4,200 +4.4%

Ordinary income 4,311 4,250 -1.4%

Net income attributable to owners of parent 3,050 2,900 -4.9%

Marketing Support (Consumer Goods &

Services)

Net sales 33,186 35,000 +5.5%


Marketing Support (Healthcare)

Net sales 11,070 11,500 +3.9%


Business Intelligence Net sales 6,243 6,500 +4.1%

Operating income 446 450 +0.9%

No changes have been made to the initial full-year forecasts. Investment in a range of areas will continue.

10


Profit Distribution We consider shareholder return as one of our priority management tasks, and our basic policy on profit distribution calls for an appropriate balance between dividend payments and internal reserves based on consolidated earnings. In addition, we aim for a consolidated payout ratio of 35%.

Dividends per share at end of year (Yen)

Consolidated payout ratio (%)

Consolidated dividends-to-net assets ratio (%)

Year ended March 31, 2018 20.00 26.3 3.2

Year ending March 31, 2019

(Forecast) 22.00 31.2 ―

* A 2-for-1 stock split of the Company’s outstanding shares of common stock implemented on October 1, 2017 is factored into dividends per share at end of year.

11


Numerical Management Targets and Strategic Points of the 12th Medium-Term Management Plan (FY2018)

12


Numerical Management Targets and Strategic Points of the 12th Medium-Term Management Plan (FY2018)

In FY2018, we will steadily carry out a range of measures in accordance with the 12th Medium-Term Management Plan formulated in FY2017. Numerical management targets (FY2018):

Continuation of consolidated operating margin of 8% level and R&D expense to net sales ratio of 2% level (*) *We are planning to continue investing mainly in R&D and the renewal

of SRI.

Strategic points (FY2018): 1. Put more efforts into, and steadily carry out, R&D toward creation of

a driver of growth 2. Ensure the advancement of business areas and improvement in the

value of data 3. Accelerate work style reform

13


Topics

Marketing Support (Healthcare) Marketing Support (Consumer Goods & Services) Group-wide

14



15


April 2019

The INTAGE Group’s healthcare business

will enter a new phase

16


Changing Needs of Pharmaceutical Companies

Understand

Produce

Convey

the market environment

desired products

accurate information to many people

In order to understand the pharmaceutical market environment, real-time visualization of the environment

through the use of data is necessary.

The ongoing shift from product sales via MRs and stores to digital sales reduces distances between pharmaceutical

companies and customers.

For the development of drugs and medical equipment and creation of values, it is necessary to secure efficiency

through the use of data.


17


Accelerate Transformation to Next-Generation Healthcare Company via Management Integration, M&A and Group Reorganization

KYOWA KIKAKU Ltd.

Junicon Japan *Already absorbed into ANTERIO Inc.

ASKLEP Inc. ANTERIO Inc.

INTAGE Healthcare Inc. (tentative name)

Management integration in April 2019

Companies that have become members of the INTAGE Group in the current fiscal year through M&A

New INTAGE healthcare group

Plamed Inc.

Japan Medical Information Research Institute, Inc.

Kyoto Constella Technologies Co., Ltd.

Plamed Korea Co., Ltd.

Set a sales target of ¥20 billion and an operating income target of ¥3 billion yen in the next medium-term plan (*)

*The 13th Medium-Term Management Plan (FY2020-2022).

18


Establishment of Integrated Business Structure Completed

Ass

ets Medical

database

Research Drugs sold without

prescriptions / Prescription drugs

Medical equipment Medical economy

Promotion Education

Drug development

Prescription drugs Drug discovery

Solu

tions

Customers (pharmaceutical/medical equipment

manufacturers, medical institutions, medical personnel, patients, etc.)

Network

New INTAGE healthcare group’s business form

External prescription data, Health insurance receipts, Self-designed survey data (*), Adverse event database, Retail store sales data, Consumers’ purchasing behavior data

Physicians, Medical Associations, Patients’ Associations

*Data obtained by promotion activity evaluation (Impact Track / SOC / Rep-i), survey on physician drug dispensing and prescribing (ADM), survey on medical consumers (APM), etc. 19


Care

Retaining rights

Strength and Aim of New INTAGE Healthcare Group

New INTAGE Healthcare group aims to become a group of companies that will help medical consumers, medical providers and medical society

to make better choices through the use of information.

Long-term listing

Post-marketing Launch Approval Development Search

Total support for pharmaceutical lifecycle management

Prognosis

Total support for medical consumers

For example…

Treatment Diagnosis Foreseeing Prevention Health

Assets added to solutions such as research and commissioned development, our strong points;

Healthcare group’s functions consolidated to set up a business structure

Business structure enabling provision of integrated healthcare services and solutions

20


Marketing Support (Consumer Goods & Services)

21


Renewal of SRI (Nationwide Retail Store Panel Survey)

Marketing Support (Consumer Goods & Services)

SRI Plus

One of the major investments targeted in the 12th Medium-Term Management Plan A new name given to the next-generation panel service

2020- Full operation 2019- Test data provision

Schedule

Aim to increase opportunities for use of SRI by existing customers and secure new customers

Customer data assessment/ Preparation for introduction

SRI value improvement achieved through increased representation of markets and data accuracy

New service development by combining SRI with various types of big data

Phase１ Phase２

22


Current Status and Future of Communications Area

Although it was impossible to measure YouTube video ad exposure, PC-based measurement thereof has become possible since September thanks to our unique technology. Technology for mobile device-based measurement is now under development.

We are shifting to a sales policy that takes advantage of i-SSP, i.e. an ability to identify the proper linkage between media exposure and individual attributes, including one that focuses on tool installation and effectiveness measurement to one that focuses on media planning.

We offset the disadvantage of small sample size by providing Media Gauge TV, etc.

i-SSP (INTAGE Single Source Panel)

Media Gauge TV

One of the largest-scale cross-media single source panels in Japan which captures the relationship between media exposure and consumer behavior (purchase/consciousness) in a cross-media environment

Although it is inferior to i-SSP in capturing detailed individual attributes, it is superior in sample size.

[Service launched in November 2017] A TV audience measurement service that covers about 900,000 smart TVs and 650,000 video recorders across Japan [Characteristics] Broad coverage (It covers terrestrial, BS and CS broadcasting as well as real-time and time-shifted viewing, collects data from multiple makers, etc.) and detailed measurement (It enables analysis of TV exposure rates by municipality, etc., understanding of detailed viewer responses every 15 seconds, etc.)

23


Group-wide CVC Status Report

24


Investments by Intage Open Innovation Fund

About ¥1.9 billion invested in 18 companies as of October 2018 Investment destinations

Outline of CVC Funds: Jointly established with SBI Investment Co., Ltd. on October 14, 2016. The fund management period is 5 years and the fund size is ¥5 billion. Investments are made in promising venture companies both in Japan and abroad for the purpose of forming alliances in the INTAGE Group’s existing and new business areas and conducting joint R&D in advanced technology areas.

Marketing

Group-wide

ＡＩ Imaging technology

Big data

Livelihood

Healthcare

25


CRO (Contract Research Organization)

CRO is an organization that provides various support and agency services related to clinical trial, post-marketing surveillance (PMS), safety information, etc. for pharmaceutical makers. Functioning as a CRO, ASKLEP Inc., an operating company of the INTAGE Group, mainly provides PMS and safety information services.

Pharmaceutical development process and lineup of services

(Reference) Glossary

Clinical trial

Basic research

2-3 years

Nonclinical testing

3-5 years

Phase 1

Phase 2

3-7 years

Phase 3

Application Approval After marketing

4-10 years

Drug-discovery screening

Data management Statistics analysis

Medical writing Audit

Data management Statistics analysis

Medical writing Audit

Pharmaceutical affairs/ application consulting

Safety information support

IT solution

28 28 Copyright© INTAGE HOLDINGS Inc. All Rights Reserved.

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