The financial results briefing for the third quarter of the fiscal year ending December 31, 2023 was held online on November 9, 2023.

Speaker: Kazuhiro Ogawa, Managing Executive Officer

Summary of Q&A session

Cautionary statement


This is a summary of the question-and-answer session at the financial results briefing.

This contains forward-looking statements concerning the financial forecasts, plans, strategies of the Company, which are not historical facts. They are based on management's assumptions made in accordance with information available at the time of the briefing (as of November 9, 2023) and are subject to risks and uncertainties. Actual results may differ materially from these forecasts.

Q1:I believe you had intended to make up for the slow start in the first half of the year with additional efforts in the second half. What is the gap when compared to the forecast?

A1:Although we were able to resolve the production and supply issues by beefing up the production system to handle larger production volumes, a close examination of the Q3 results and Q4 forecast tells us that we are unlikely to achieve the sales targets from our initial forecast. The main reason is that sales of the new UV printers and resin printers did not reach expectations, nor did sales in Dental. In addition, we believe that our inability to supply products in a timely fashion due to the issues with procuring parts in the first half of the year has also had an impact. On the other hand, sales of UV printers have been strong, capturing the No.1 market share* in some regions.

Furthermore, as a result of our current Mid-term Plan, our achievements in platform creation have enabled us to shorten development lead times, and this has in turn allowed us to launch many new products in January of this year. We aim to continue expanding sales by swiftly bringing products to market that meet the needs of each region. As for Dental, we intend to raise the sales volume baseline by launching new products and deploying sales promotion campaigns in developed countries.

*According to our own calculations based on research agency data

Q2. What were the reasons for Dental's poor performance in the three months of the third quarter, and what is your strategy for the fourth quarter?

A2:In Dental, sales of the high-production model DWX-53DC have been progressing favorably. The growth market model DWX-52 Di has also been doing well, especially in the Middle East, Latin America, and Asia. That being said, the main reasons that we have fallen short of our sales plans have been the caution surrounding capital investment in Europe and the U.S., as well as sluggish sales of the DWX-52D, our existing high-volume model. Five years have passed since the launch of this model, and it is no longer as competitive as it was before, so we aim to recover sales by running campaigns.

As in the past, we also see room for growth in Dental along the three axes of geography, applications, and customer segments. In terms of geography, there is still room for expansion in the growth markets, where we will run sales promotions. In terms of applications, peripheral applications such as dentures are still primarily analog, so we will promote their digitalization. And finally, while dental labs have been our main customers until now, we will cultivate new customer segments, such as clinics that have dental labs. From the next fiscal year, we aim to expand sales by accelerating our efforts aimed at the three axes of geography, application, and customer segment.

Q3. The SG&A-to-sales ratio has risen to over 40%. Do you expect to maintain this level in the next fiscal year and beyond?

A3:The SG&A-to-sales ratio is relatively high because although SG&A expenses have been in line with initial plans, net sales have not reached our initial forecast. While it would be quite common to reduce SG&A expenses in such a situation to ensure profits, we have brought several new products to market this fiscal year. In order to link these efforts to sales in the next fiscal year, we do not intend to cut down on SG&A expenses, but to execute them as planned. For the next fiscal year and beyond, we will develop an expense budget plan appropriate to our investments in business growth.

Q4. Please explain what exactly is included in the 1.5 billion yen increase in inventory in real terms.

A4:Inventories increased by 1.5 billion yen in real terms. Product inventories account for 1.2 billion yen, and raw materials account for the remaining 0.3 billion yen. We aim to maximize sales by closely monitoring the demand situation and supplying the right amounts of product to the right markets.