FY2017 2Q Financial Results October 27, 2017 TOPCON CORPORATION President & CEO Satoshi Hirano
CONTENTS FY2017 2Q Financial Results Ⅰ Ⅱ Ⅲ FY2017 2Q Financial Results FY2017 Full Year Plan Appendix 2017 Topcon Corporation 1
Ⅰ. FY2017 2Q Financial Results Ⅰ-1. FY2017 2Q Financial Results Ⅰ-2. Overview of 2Q 2017 Topcon Corporation 2
FY2017 1H <On a recovery> 1H Sales Trend Net Sales (billion yen) 70 60 50 40 30 20 59.4 5.9 Net Sales 62.9 4.5 Operating Income 57.9 3.8 68.0 4.6 Operating Income (billion yen) 8 4 Growth in sales and profit Sales Operating Income Ordinary Income Net Income YoY 68.0B 117% 4.6B 122% 4.1B 183% 1.9B 294% Achieved announced target 10 Sales Operating Income 62.0B 4.0B 0 FY2014 1H FY2015 1H FY2016 1H FY2017 1H 0 2017 Topcon Corporation 3
FY2017 1H Financial Results <Growth in sales and profits> [Consolidated] FY2016/1H Actual Actual YoY FY2017/1H YoY % Announced on July 28th Net Sales 57,939 68,046 10,107 117% 62,000 Gross Profit (Gross Profit Ratio) 30,220 (52.2%) 34,545 (50.8%) 4,325 SGA 26,463 29,975 3,512 Operating Income (Operating Income Ratio) Non-Operating Income (Expenses) 3,757 (6.5%) 4,570 (6.7%) -1,523-481 1,042 813 122% 4,000 (6.5%) Ordinary Income 2,233 4,088 1,855 183% 3,000 Extraordinary Income (Loss) -210-263 -53 Income Before Income Taxes and Minority Interests 2,023 3,825 1,802 (unit: million yen) Net Income 634 1,867 1,233 294% 1,200 Interim Dividends 8 10 10 Exchange Rate (Average) USD 106.43 111.42 4.99 108.78 EUR 119.12 126.63 7.51 119.65 2017 Topcon Corporation 4
FY2017 1H Financial Results by Business <Significant Profit Growth in Positioning Business> Net Sales Operating Income (Operating Income Ratio) [Consolidated] FY2016/1H Actual Actual YoY FY2017/1H YoY % Announced on July 28th Positioning 27,166 35,884 8,718 132% 31,000 Smart Infrastructure 14,958 17,042 2,084 114% 16,000 Eye Care 19,611 21,397 1,786 109% 20,000 Others 1,736 1,030-706 59% 2,000 Elimination -5,533-7,307-1,774-7,000 Total 57,939 68,046 10,107 117% 62,000 Positioning Smart Infrastructure Eye Care Others Goodwill Amortization Total 2,472 (9.1%) 1,377 (9.2%) 1,269 (6.5%) -93 (-5.4%) 3,869 (10.8%) 1,630 (9.6%) 526 (2.5%) -22 (-2.1%) 1,397 157% 253 118% -743 41% 3,200 (10.3%) 1,600 (10.0%) 500 (2.5%) 71-0 (-) -1,268-1,433-165 -1,300 3,757 (6.5%) 4,570 (6.7%) (unit: million yen) 813 122% 4,000 (6.5%) 2017 Topcon Corporation 5
Domestic and Overseas Sales (YoY) Japan 117% (Billion yen) (Billion yen) (Billion yen) North America 123% Europe 115% 11.4 13.4 16.2 19.9 14.4 FY2016/1H FY2017/1H FY2016/1H FY2017/1H FY2016/1H 16.6 FY2017/1H SIB: Growing sales in i-construction Growing sales in IT Agriculture POC: Growing sales in IT Construction Recovery in IT Agriculture ECB: Growing sales of Maestro POC: Recovery in IT Agriculture ECB: Temporarily on sales downturn (Billion yen) 130% 101% (Billion yen) China Asia/Oceania Others 127% (Billion yen) 3.8 FY2016/1H 3.8 FY2017/1H 6.3 FY2016/1H 8.1 FY2017/1H POC: Growing sales in IT Construction SIB/ECB: Growing sales in India POC=Positioning Company/ SIB=Smart Infrastructure Business/ ECB=Eye Care Business 4.1 FY2016/1H 5.2 FY2017/1H POC/ECB: Growing sales in South America SIB: Growing sales in Middle East * i-construction is a registered trademark of National Institute for Land and Infrastructure Management, MLIT, Japan. 2017 Topcon Corporation 6
FY2017 1H Operating Income YoY Breakdown <Profit growth, Accelerate upfront investment> (unit: Billion yen) 8 6 4 3.4-3.0 mainly R&D Cost Increase Operating Income w/o FX Effects 0.4 2 3.8 4.2 4.6 YoY 111% YoY 122% 0 FY2016 1H Sales increase and decrease, Product mix Fixed cost, Lowering COGS FX Effects FY2017 1H 2017 Topcon Corporation 7
Ⅰ. FY2017 2Q Financial Results Ⅰ-1. FY2017 2Q Financial Results Ⅰ-2. Overview of 2Q 2017 Topcon Corporation 8
Overview of Each Business FY2016/1H Review of 1H Financial Results FY2017/1H Actual Actual YoY % Announced on July 28th Net Sales 27,166 35,884 8,718 132% 31,000 Operating Income (Operating Income Ratio) Exchange Rate 2,472 (9.1%) 3,869 (10.8%) (unit: million yen) 1,397 157% 3,200 (10.3%) USD 106.43 111.42 108.78 EUR 119.12 126.63 119.65 Positive factors Sales growth in IT Construction supported by strong global construction investment (YoY 130%) Sales recovery in IT Agriculture with OEM sales growth (YoY 130%) ー Negative factors Further acceleration of upfront investment (advanced technology development, enhancement of distribution network) 2017 Topcon Corporation 9
Overview of Each Business FY2016/1H Review of 1H Financial Results FY2017/1H Actual Actual YoY % Announced on July 28th Net Sales 14,958 17,042 2,084 114% 16,000 Operating Income (Operating Income Ratio) Exchange Rate 1,377 (9.2%) 1,630 (9.6%) (unit: million yen) 253 118% 1,600 (10.0%) USD 106.43 111.42 108.78 EUR 119.12 126.63 119.65 Positive factors Favorably prevailing the i-construction in Japan (YoY 160%) Sales growth in IT Agriculture in Japan (YoY 300%) ー Negative factors Temporary production delay with production line transfer to Topcon Yamagata * "i-construction" is a registered trademark of National Institute for Land and Infrastructure Management, MLIT, JAPAN. 2017 Topcon Corporation 10
Overview of Each Business FY2016/1H Review of 1H Financial Results FY2017/1H Actual Actual YoY % Announced on July 28th Net Sales 19,611 21,397 1,786 109% 20,000 Operating Income (Operating Income Ratio) Exchange Rate 1,269 (6.5%) 526 (2.5%) (unit: million yen) -743 41% 500 (2.5%) USD 106.43 111.42 108.78 EUR 119.12 126.63 119.65 Positive factors Turnover into surplus in 2Q "OP 1B" (Progress as planned) Sales growth of 3D OCT (YoY 120%) Sales growth of Fundus Camera (NW400) (YoY 130%) ー Negative factors Continued upfront investment (Building an IoT business, R&D cost, Enhancement of FDA acquisition) Temporarily on sales downturn in European market 2017 Topcon Corporation 11
FY2017 Full Year Plan Ⅱ. Ⅱ-1. FY2017 Full Year Plan Ⅱ-2. Strategic Plans after 2H Ⅱ-3. Summary 2017 Topcon Corporation 12
FY2016 Result and FY2017 Plan Net Sales (billion yen) FY2016 FY2017 Operating Income (billion yen) 150 100 128.4 126% 138.0 12.0 15 10 Full Year Plan Upward -Sales Correction 138B YoY107% 5B 50 57.9 9.6 68.0 5 -Operating Income 12B YoY126% 0 3.8 1H 122% Full Year 4.6 1H Full Year 0 1H Result -Sales YoY117% -Operating Income YoY122% Results Plan 2017 Topcon Corporation 13
FY2017 Full Year Plan (unit: million yen) FY2016 FY2017 [Consolidated] 1H Full Year 1H Full Year Actual Actual Actual YoY (%) New Plan Change YoY (%) Announced on July 28 th Net Sales 57,939 128,387 68,046 117% 138,000 5,000 107% 133,000 Operating Income (Operating Income Ratio) 3,757 (6.5%) 9,551 (7.4%) 4,570 (6.7%) 122% 12,000 (8.7%) 0 126% 12,000 (9.0%) Ordinary Income 2,233 7,622 4,088 183% 10,000 0 131% 10,000 Net Income 634 4,395 1,867 294% 5,700 0 130% 5,700 ROE 7.4% 10% - 10% ROIC 5.5% 7% - 7% Dividends 8 16 10 20 20 Exchange Rate (Average) * USD 106.43 109.03 111.42 108.46 107.03 EUR 119.12 119.37 126.63 121.26 117.50 * Assumed exchange rate after October 2017 is 105/US$, 115/EUR 2017 Topcon Corporation 14
FY2017 Full Year Plan by Business FY2016 FY2017 (unit: million yen) [Consolidated] 1H Full Year 1H Full Year Actual Actual Actual YoY (%) New Plan Change YoY (%) Announced on July 28 th Positioning 27,166 60,602 35,884 132% 68,000 5,000 112% 63,000 Net Sales Operating Income (Operating Income Ratio) Smart Infrastructure 14,958 33,091 17,042 114% 36,000 1,000 109% 35,000 Eye Care 19,611 43,148 21,397 109% 45,000 0 104% 45,000 Others 1,736 3,708 1,030 59% 4,000 0 108% 4,000 Elimination -5,533-12,163-7,307-15,000-1,000-14,000 Total 57,939 128,387 68,046 117% 138,000 5,000 107% 133,000 Positioning 2,472 (9.1%) Smart Infrastructure 1,377 (9.2%) Eye Care 1,269 (6.5%) Others -93 (-5.4%) Goodwill Amortization 5,596 (9.2%) 3,939 (11.9%) 2,598 (6.0%) 10 (0.3%) 3,869 (10.8%) 1,630 (9.6%) 526 (2.5%) -22 (-2.1%) 157% 7,000 (10.3%) 118% 4,700 (13.1%) 41% 2,800 (6.2%) 24% 0 (-) 0 125% 7,000 (11.1%) 0 119% 4,700 (13.4%) 0 108% 2,800 (6.2%) 0-0 (-) -1,268-2,593-1,433-2,500-2,500 Total 3,757 (6.5%) 9,551 (7.4%) 4,570 (6.7%) 122% 12,000 (8.7%) 0 126% 12,000 (9.0%) Exchange Rate (Average) USD 106.43 109.03 111.42 108.46 107.03 EUR 119.12 119.37 126.63 121.26 117.50 2017 Topcon Corporation 15
FY2017 Full Year Plan Ⅱ. Ⅱ-1. FY2017 Full Year Plan Ⅱ-2. Strategic Plans after 2H Ⅱ-3. Summary 2017 Topcon Corporation 16
Strategic Plans after the second half 1. Positioning Focused Strategy IT Construction: Further expansion of the aftermarket/oem sales with overwhelming superiority in technology IT Agriculture: OEM Sales growth with an increase in the cross selling Drones: Sales growth in Survey/Agriculture/Measurement fields Net Sales(billion yen) Net Sales 60 62.0 60.6 68.0 10 8 Operating Income(billion yen) Operating Income 40 7.0 6 5.6 4 20 2.4 2 0 FY2015 FY2016 FY2017 Plan 0 2017 Topcon Corporation 17
IT Construction: Further expansion of the aftermarket/oem sales with overwhelming superiority in technology Superiority of Mastless MC System -Improve work efficiency: Yield an accurate result even in the top gear, the third gear (conventionally, 2nd gear) -Easy installation / malfunction, prevent malfunction beforehand Mastless Weldingless Cableless Global sales plan of IT Construction (Amount) Antennas on the cabin Mastless Cableless Weldingless IMU sensors FY2015 FY2016 FY2017 Actual Actual Plan 2017 Topcon Corporation 18
IT Agriculture: OEM Sales growth with an increase in the cross selling Past Each company sells individually Agriculture group in POC Farm machine Industry Supplier Tractor Maker B D A C Kee Technologies E 2017 Topcon Corporation 19
IT Agriculture: OEM Sales growth with an increase in the cross selling Present The companies are unified to form one group Topcon Agriculture S.p.A (Headquarter) Farm machine Industry Topcon Electronics (Ex ) Topcon Agriculture America (Ex ) Significant growth in OEM sales Supplier Tractor Maker B A C Global sales plan of IT Agriculture (Amount) Topcon Agriculture Canada (Ex ) Maximization of synergy effect D E Topcon Precision Agriculture (Ex Kee Technologies) FY2015 Actual FY2016 Actual FY2017 Plan 2017 Topcon Corporation 20
Drones: Sales growth in Survey/Agriculture/Measurement fields Drones for professional equipped with high- accuracy GPS receivers Drone Sales: YoY 160% Professional duties Surveying - Current condition surveying and volume control Global sales plan of Drones (Amount) Agriculture - manage the growth status of crops Measurement - Maintenance of structures etc. FY2015 Actual FY2016 Actual FY2017 Plan Survey Agriculture Measurement World s First Drone surveying without orienting point 2017 Topcon Corporation 21
Strategic Plans after the second half 2. Smart Infrastructure Focused Strategy i-construction: Into authentic Diffusion phase IT agriculture: Sales growth at domestic after market Total Station: Further expansion of profitability Net Sales(billion yen) Net Sales 40 30 * "i-construction" is a registered trademark of National Institute for Land and Infrastructure Management, MLIT, JAPAN. 33.0 33.1 36.0 6 Operating Income(billion yen) Operating Income 20 3.9 3.9 4.7 4 10 2 0 FY2015 FY2016 FY2017 Plan 0 2017 Topcon Corporation 22
i-construction: Into authentic Diffusion phase Industry issues Lack of headcounts of i-construction technicians TOPCON s Mission Promotion activity to local governments City of Kitakyushu established i-construction Promotion Council Provide more satisfactory Education and Support Expand Training Centers Supply detailed training Kobe Jun 2016 Launched 4 th Center Shirakawa Sep 2014 Launched 4th Domestic sales plan of IT Construction (Amount) 3rd Kitakyushu Jul 2017 Opend Ibaraki FY2017 Planning Education (From the right, Mayor of Kitakyushu Mr.Kitahashi, President Hirano) Over 3,000 Trainees YoY150% FY2015 Actual FY2016 Actual FY2017 Plan FY2015 Actual FY2016 Actual FY2017 Plan * i-construction is a registered trademark of National Institute for Land and Infrastructure Management, MLIT, Japan. 2017 Topcon Corporation 23
IT Agriculture: Sales growth at domestic after market Diffusion of IT Agriculture by retrofit system Merit - Productivity improvement - Labor saving (skill unnecessary) - Reduction of fertilizer and pesticide Overview of retrofit system Automated by attaching to the existing tractors The Console GNSS Receiver Easy installation within 1hour Low Cost The wheel with electric motor Regular Wheel The wheel with electric motor Utilization of tractor maker's sales network Company A Company B Company C Domestic sales plan of IT Agriculture (Amount) FY2015 Actual FY2016 Actual FY2017 Plan 2017 Topcon Corporation 24
Total Station: Further expansion of profitability Total station production transfer to Topcon Yamagata (mother factory of eye care) Maximize production efficiency by consolidating production bases Expand profitability New factory appearance Opening Ceremony From the right, Mayor of Yamagata Mr. Sato, GM of Murayama General Branch Office in Yamagata Prefecture Mr. Komabayashi, President Hirano Topcon Yamagata Eye Care Product Moved Total Station New factory interior view Production transfer Topcon HQ Factory Smart Infrastructure Total Station Other measuring Prod. 2017 Topcon Corporation 25
Strategic Plans after the second half 3. Eye Care Focused Strategy 3D OCT: Good sales performance worldwide Screening: Market expansion in emerging countries Accelerate upfront investment: Release of new products / FDA acquisition / Building an IoT business Net Sales(billion yen) Net Sales 50 40 43.8 45.0 43.1 6 Operating Income(billion yen) Operating Income 30 4.9 4 20 10 2.6 2.8 2 0 FY2015 FY2016 FY2017 Plan 0 2017 Topcon Corporation 26
3D OCT: Good sales performance worldwide Maestro Strong sales in the world's largest, US market Sales expansion at world's largest eyeglasses exhibition (Vision Expo West held in September) (Las Vegas) Screening to Clinical Triton Widely spread to clinical area of ophthalmologic practitioner Sales plan of 3D OCT (Amount) Clinical to Research FY2015 Actual FY2016 Actual FY2017 Plan 2017 Topcon Corporation 27
Screening: Market expansion in emerging countries -Chinese market grows rapidly (The examination at the screening center rapidly advanced) Promoted diabetes screening project led by the Chinese government, adoption of fundus camera (NW 400) advanced -Also adoption expected in the Indian market (No. 2 in diabetes patients worldwide) Fundus Camera and OCT for screening market World diabetes population(2015) Rank 1st 2nd 3rd 9th Total Country China India USA Japan Patients 109.6 69.2 29.3 Source: International Diabetes Federation Sales plan of screening equipment (Amount) 7.2 415.0 (million) % 26% 17% 7% 2% 100% Full-auto function Easy-To-Operate Fundus Camera Screening devices TRC-NW400 & Maestro FY2015 Actual FY2016 Actual FY2017 Plan 2017 Topcon Corporation 28
Accelerate upfront investment: Release of new products / FDA acquisition / Building an IoT business FY2017 FY2018 Release of new products FDA acquisition Building an IoT business 2017/4 THS established Core organization of full-scale promotion of IoT THS=Topcon Healthcare Solutions 2017 Topcon Corporation 29
FY2017 Full Year Plan Ⅱ. Ⅱ-1. FY2017 Full Year Plan Ⅱ-2. Strategic Plans after 2H Ⅱ-3. Summary 2017 Topcon Corporation 30
Summary Trends of Financial Results Annually Net Sales (billion yen) Operating Income (billion yen) Net Sales 130.7 128.4 138.0 20 Operating Income 120 15 80 12.0 10 8.8 9.6 40 0 Exchange Rate 120.16 JPY/USD 132.36 JPY/EUR 109.03 JPY/USD 119.37 JPY/EUR 108.46 JPY/USD 121.26 JPY/EUR FY2015 FY2016 FY2017 Plan 5 0 2017 Topcon Corporation 31
Topcon for Human Life 医 食 住 2017 Topcon Corporation 32
Ⅲ. Appendix 2017 Topcon Corporation 33
Financial Results (Quarterly) 40.0 30.0 20.0 10.0 0.0 10.0 5.0 0.0 1. Consolidated Net Sales (billion yen) Net Sales Operating Income 26.2 0.7 Net Sales (billion yen) 6.6 0.3 31.7 3.0 Net Sales Operating Income 8.4 1.1 29.5 0.7 3. Smart Infrastructure 7.5 0.3 Operating Income (billion yen) 41.0 5.2 Operating Income (billion yen) 10.6 2.2 31.6 1.3 7.8 36.5 FY16/1Q 2Q 3Q 4Q FY17/1Q 2Q 9.2 0.8 0.8 FY16/1Q 2Q 3Q 4Q FY17/1Q 2Q 3.2 8.0 20.0 5.0 2.0-1.0 Net Sales (billion yen) 3.0 15.0 Net Sales Operating Income 2.0 10.0 1.0 0.0 15.0 10.0 5.0 0.0 5.0 0.0 2. Positioning Net Sales (billion yen) 12.8 0.7 8.8 0.5 Net Sales Operating Income 14.3 1.7 10.8 10.5 0.8 13.6 0.5 0.4 19.9 2.6 13.1 0.9 Operating Income (billion yen) 17.2 1.7 Operating Income (billion yen) 2.0 9.1-0.5 18.7 FY16/1Q 2Q 3Q 4Q FY17/1Q 2Q 4. Eye Care 12.3 FY16/1Q 2Q 3Q 4Q FY17/1Q 2Q 2.2 1.0 3.0 2.0 1.0 0.0-1.0 1.0 0.0-1.0 2017 Topcon Corporation 34
Financial Results and Forecast (Semiannually) 1. Consolidated 2. Positioning Net Sales (billion yen) 80.0 Net Sales Operating Income 60.0 40.0 20.0 62.9 4.5 67.8 4.3 57.9 3.8 Operating Income (billion yen) Net Sales (billion yen) 10.0 40.0 Net Sales 70.0 Operating Income 70.4 5.8 68.0 4.6 7.4 5.0 30.0 20.0 10.0 31.4 30.6 1.7 27.2 2.5 33.4 3.1 Operating Income (billion yen) 35.9 32.1 3.9 3.1 4.0 2.0 0.0 FY15/1H FY15/2H FY16/1H FY16/2H FY17/1H FY17/2H 0.0 0.0 0.7 FY15/1H FY15/2H FY16/1H FY16/2H FY17/1H FY17/2H 0.0 3. Smart Infrastructure 4. Eye Care 20.0 10.0 0.0 Net Sales (billion yen) 16.2 1.9 Net Sales Operating Income 16.8 15.0 2.0 1.4 Operating Income (billion yen) 18.1 2.5 17.0 1.6 19.0 3.1 FY15/1H FY15/2H FY16/1H FY16/2H FY17/1H FY17/2H 4.0 2.0 0.0 Net Sales (billion yen) 30.0 20.0 10.0 0.0 19.5 2.1 24.3 2.8 Net Sales Operating Income 19.6 1.3 23.5 1.3 Operating Income (billion yen) 21.4 0.5 23.6 2.3 FY15/1H FY15/2H FY16/1H FY16/2H FY17/1H FY17/2H 4.0 2.0 0.0 2017 Topcon Corporation 35
Cautionary Note regarding Forward-Looking Statements These materials contain forward-looking statements, including projections of future operating performance. Such statements are based on management s best judgment, given the materials available to them at the time these statements are made. However, please be aware that actual performance may differ from projected figures owing to unexpected changes in the economic environment in which we operate, as well as to market fluctuations. The original disclosure in Japanese was released on October 27, 2017 at 16:30(UTC+9) Inquiries: Corporate Communication Div. Investor Relations and Shareholder Relations Dept. TOPCON CORPORATION Tel: +81-3-3558-2532 E-mail: investor_info@topcon.co.jp URL: http://global.topcon.com/invest/ 2017 Topcon Corporation 36