Outline & Update of NESIC
November 2018

NEC Networks & System Integration Corporation(TSE: NESIC, 1973)

At the Beginning▐ Yushi USHIJIMA
1984: Joined NESIC⇒Mainly involved in sales & marketing strategy
Joined the EmpoweredOffice business launch
2014: Member of Board of Directors of NESICManaged Q&A Corporation,a newly acquired subsidiaryas EVP, then as President & CEO
2017: President of NESIC▐ My Mission
Change the Groupfor Further Growth～ “Strength appears as profit”
2© NEC Networks & System Integration Corporation 2018Company Outline

NESIC History
Era ofTelecomconstruction

Era ofoverseas infra.
construction

Era of SIer

Toward the further
expansion of services
FY2018/3

Net sales¥267.9 bn
Installation of the first
TV broadcast
equipment

NetworkOperation Centre

Intra-office network

1996
The world's first
automated NHK
broadcasts

Satellite comm. invarious countries
around the world

Over ¥200 bn

1988
Over ¥100 bn

2011
TSE category change<Info.& Comm.
industry>

1973
Net sales
Over ¥10 bn

1953
Foundation4

1983
Listed on
2nd Section of TSE<Construction
Industry>© NEC Networks & System Integration Corporation 2018

Work-styleinnovationsolution

Business Model▌Coordinate equipment and network in accordance with customer needs
and provide total services to customers from construction to operation/
maintenance
Governments

Companies

Telecom. carriersSocial infra. operators

NESIC(Integration, installation/maintenance services)
Hardware

SoftwareMulti-vendors capability
5© NEC Networks & System Integration Corporation 2018

Communicationlines

Business Segments
Net sales: ¥267.9 bn.
(FY 2018/3)

85.2 110.9

64.9Enterprise Networks business
Provision of ICT solutions for offices,
centered on intra-company network- PBX, PC network, security, office tools such as
teleconference system, cloud computing…

Carrier Networks business Construction and maintenance of the system fortelecom. carriers (mobile/fixed)
 Service using the assets for carriers- Construction of Wi-Fi network, IoT/MVNO service

Social Infrastructures business Construction of ICT infra. for governments andpublic utility companies
 Overseas subsidiaries
6© NEC Networks & System Integration Corporation 2018

Strengths

21Unique technicalcapabilities

34×Nationwide
businessdevelopment
capability

Ability toprovide broad services＝Broad Business Fields
and Customer Base

Top company in the network fieldin Japan
7© NEC Networks & System Integration Corporation 2018

Unique Technical Capabilities▌SIer with Construction Capabilities
 To achieve the provision of new services that take advantage ofthe strengths of the ICT business and the telecom construction
business and total services

ICT

Telecom construction/facility management(Information andcommunicationstechnology)(Office furniture, electricity and air conditioners…)

SIers such as
SCSKCTCNet One Systems

NESIC
Started work-style innovation
over ten years ago8

© NEC Networks & System Integration Corporation 2018

Telecom
construction
companies such as
COMSYS Holdings
KYOWA EXEO

Nationwide Business Development Capability▌Nationwide sales network& diversified quality service bases
 Sales network throughout Japan and platform for 24/7 service=> Applying highly reliable system for the public infra.
to private companies
Nationwide
sales/maintenancesystemNationwide sales
and maintenancenetwork of 400
bases and 4,000
engineers for 24/7service
9Network total
operation centre

Service delivery
operation centre

Inquiry acceptance, Logistics function with
24/7 security
technical services
monitoringsuch as evaluations
and networkand repairs.
operation© NEC Networks & System Integration Corporation 2018

Data centre

Highly reliableurban-type datacentre to keep
important ICTassets ofcustomers

Ability to Provide Broad Services▌Offering a wide range of services through high-quality
technical capabilities and the string service platform
ICT Introduction Process
Consulting

Outsourcing

Arrangement ofequipment
Design/integration/
installation
Operation/
maintenance

ICT related all supply chains areavailable

Multi-vendor services
with NEC quality=High-level service for a wide
range of customer needs

Providing supply chains to vendors andstartups in Japan and overseas that do nothave service bases
Creating new services through collaboration

10© NEC Networks & System Integration Corporation 2018

Broad Business Fields and Customer Base▌With broad customer bases from governments to privatecompanies, NESIC supports safe, secure and fulfilling lives
in all realms of society, from the ocean floor to space

11© NEC Networks & System Integration Corporation 2018

Position in the ICT Service Industry▌Leading position in the network field in Japan
Differ from other companies centred on equipment sales
or software development.
(¥ bn.)Net sales relating
to network(*)

Net sales for
FY2017/3

1 NESIC

145.2

257.9

2 ITOCHU Techno-Solutions
3 Net One Systems
4 OTSUKA CORPORATION
5 Nihon Unisys6 NTT DATA7 SCSK
8 TIS Inc.
9 Canon Marketing Japan
10 NS Solutions Corporation

129.0
83.1
79.0
71.0
70.3
48.5
35.1
16.9
12.6

407.8
157.2
643.4
282.2
1732.5
329.3
393.4
629.3
232.5

*(Source) Edited by NESIC based on the results of the survey on new business strategies of SI/NIvendors in Japan for 2017, Fuji Chimera Research Institute, Inc.
12

© NEC Networks & System Integration Corporation 2018

Recent Financial Results▌The major factors in the sales decrease ceased,
and the re-growth trend started in FY18.3.
12.5
9.7

14.4

16.2
（5.5%）（5.3%）(¥ bn.)

14.1（5.0%）（5.3%）

10.0（4.8%）（3.9%）

Operatingincome

11.1（4.1%）

3,500

3,000(Margin)
2,500

204.7

235.7

270.3

292.2

280.0

257.9

267.9

Reactionary fall of special
demand for fire-fighting
radio digitalisation

2,000

1,500

NetsalesCapex reduction bytelecom carriers

1,000

5000

FY12.313

FY13.3

FY14.3© NEC Networks & System Integration Corporation 2018

FY15.3

FY16.3

FY17.3

FY18.3

Business Environment (FY19.3 & Medium Term)▐ Favourable as a whole with differences by field Enterprise Networks- Expanding work-style innovation demand in Japan- The point is shifting to productivity and creativity
by using DX technologies (AI/IoT/RPA, etc.)

 Carrier Networks- Recovering CAPEX of telecom carriers
mainly in base stations

 Social Infrastructures- Japan: Stable conditions with up & down
by investment theme- Favourable areas are broadcast/CATV, disaster prevention..

- Overseas: Active infra. investment in ASEAN*DX: digital transformation

14© NEC Networks & System Integration Corporation 2018

FY2019/3 Basic Policy

A year of solidifying the foundations forevolution into a strong and attractive company▌Creation of “No.1,” “Only 1” businesses Leading-edge technological fields
・Aggressive use of DX technologies (i.e. AI, IoT, RPA, etc.)

・Speedy creation of new businesses with the use of CVC

 Expansion of carrier networks business via
collaboration with partners(Mobile base station, LPWA)

 Growth investments to sprint from the startin the next medium-term management plan15© NEC Networks & System Integration Corporation 2018

（Forecasts as at 30th October, 2018）

FY2019/3 Financial Forecasts & 1H Progress▐ Forecast OP increase
offsetting a rise in growth cost (¥2bn).
 Forecast +10% orders expansion except for huge orders ofmega-solar plants construction in FY18/3 (¥24bn.)▐ Robust results in 1HOrders
287.8

2H1H

159.2

128.7

FY18/3
16Sales290 (+1%)

150140（¥ bn.）

267.9

148.0

146.6 (+14%)

Forecast Actual

FY19/3

OP119.9

FY18/3© NEC Networks & System Integration Corporation 2018

280 (+5%)
11.1

11.5 (+0.4)

8.5

9.5

2.5

2.0 2.6 (+0.1)

156

124 122.5 (+2%)
Forecast Actual

FY19/3

FY18/3

Forecast Actual

FY19/3

Return to Shareholders*Forecast as at 30th October, 2018

▌Increase in shareholder return with improvementof the profit level based on the basic policy forstable dividends

Consideration of DOE
Planning for dividend increase
for the 12th consecutive year
60
Dividend
per share(yen)1477
FY07/3
1745
26

28

20

2225

10

11

14131410111113

14

FY08/3

FY09/3

FY10/3

FY11/3

FY12/3© NEC Networks & System Integration Corporation 2018306432

72

74

76

35

36

37

38

Yearenddividend

35363738

Interimdividend

70

26

19
FY13/33032

FY14/3

FY15/3

FY16/3 FY17/3

FY18/3 FY19/3eUpdate ofFinancial Results

Recent Financial Results▌The major factors in the sales decrease ceased,
and the re-growth trend started in FY18.3.
12.5
9.7

14.4

16.2
（5.5%）（5.3%）(¥ Bn.)

14.1（5.0%）（5.3%）

10.0（4.8%）（3.9%）

Operatingincome11.1（4.1%）

3,500

3,000(Margin)
2,500

204.7

235.7

270.3

292.2

280.0

257.9

267.9

Rebound of special demand
for fire-fighting radio
digitalisation

2,000

1,500

NetsalesCapex reduction bytelecom carriers

1,000

5000

FY12.3
19FY13.3

FY14.3© NEC Networks & System Integration Corporation 2018

FY15.3

FY16.3

FY17.3

FY18.3

Business Environment (FY19.3 & Medium Term)▐ Favourable as a whole with differences by field Enterprise Networks- Expanding work-style innovation demand in Japan- The point is shifting to productivity and creativity
by using DX technologies (AI/IoT/RPA, etc.)

 Carrier Networks- Recovering CAPEX of telecom carriers
mainly in base stations

 Social Infrastructures- Japan: Stable conditions with up & down
by investment theme- Favourable areas are broadcast/CATV, disaster prevention..

- Overseas: Active infra. investment in ASEAN*DX: digital transformation

20© NEC Networks & System Integration Corporation 2018

FY2019/3 Basic Policy

A year of solidifying the foundations forevolution into a strong and attractive company▌Creation of “No.1,” “Only 1” businesses Leading-edge technological fields
・Aggressive use of DX technologies (i.e. AI, IoT, RPA, etc.)

・Speedy creation of new businesses with the use of CVC

 Expansion of carrier networks business via
collaboration with partners(Mobile base station, LPWA)

 Growth investments to sprint from the startin the next medium-term management plan21© NEC Networks & System Integration Corporation 2018

（Forecasts as at 30th October, 2018）

FY2019/3 Financial Forecasts & 1H Progress▐ Forecast OP increase
offsetting a rise in growth cost (¥2bn).
 Forecast +10% orders expansion except for huge orders ofmega-solar plants construction in FY18/3 (¥24bn.)▐ Robust results in 1HOrders
287.8

2H1H

159.2

128.7

FY18/322Sales290 (+1%)

150140（¥ bn.）

267.9

148.0

146.6 (+14%)

Forecast Actual

FY19/3OP

119.9

FY18/3© NEC Networks & System Integration Corporation 2018

280 (+5%)
11.1

11.5 (+0.4)

8.5

9.5

2.52.0 2.6 (+0.1)

156

124 122.5 (+2%)
Forecast Actual

FY19/3

FY18/3

Forecast Actual

FY19/3

1H FY2019/3 Orders Received by Segment▐ Enterprise Networks（¥ bn.）

146.7 +14%
128.7Others

2.8

SocialInfra.

Carrier
NW～Office visitors increased by 79%

3.8

45.3

+8%

41.9

31.0

Work-style innovation fields
was robust

39.1 +26%

PJs for financial customers wereconcentrated in 1H▐ Carrier Networks

Non-carriers business expanded
due to large PJs for hotels
Orders from telecom carriers
increased▐ Social Infrastructures
EnterpriseNW2352.9

58.5 +11%1H
FY18/3

1H
FY19/3© NEC Networks & System Integration Corporation 2018

Overseas business increased～Acquired 2 large PJs (¥10bn.)
Part of domestic PJs were shifted
to 2H
Firefighting commander system
was in the off-season

1H FY2019/3 Sales by Segment（¥ bn.）

119.9
Others2.3

SocialInfra.

35.2

CarrierNW

30.4

122.5 +2%
3.1

32.0 △9%31.6+4%▐ Enterprise Networks
Work-style innovation fields
increased
EmpoweredOffice sales +9%▐ Carrier Networks

Overall sales steadily increased
centered on non-carriers area▐ Social Infrastructures
EnterpriseNW2452.0

55.8

1H
FY18/3

1H
FY19/3+7%© NEC Networks & System Integration Corporation 2018

Sales of mega-solar plant
construction (for civil engineering)and overseas declined
Sales increased in thebroadcasting/cable TV area

1H FY2019/3 Operating Income by Segment（¥ bn.）

Total

2.5（2.1%）

2.6+0.1（2.1%）(0.0pt)▐ Enterprise Networks
Income increased due to higher sales,
improved sales mix and cost reduction
Growth investment in the DX area

▐ Carrier Networks
Enterprise 4.3NW(8.4%)

CarrierNW
SocialInfra.
Others/Elimination

2.1(6.9%)

0.1(0.3%)-4.1

1H
FY18/325

5.1(9.1%)+0.8(+0.7pt)-0.3

1.8(-1.1pt)-0.1-0.2(－%)

(-pt)

-4.2

-0.1

(5.8%)

1H
FY19/3© NEC Networks & System Integration Corporation 2018

Income declined due to lower COS
ratio and growth expenses (for J/Vwith KDDI)▐ Social Infrastructures
Income decreased due to an increasein unprofitable projects impacts▐ Others/elimination

Income remained flat yoy due to thestream-lined administration cost, despite
growth expenses (IT system)

Initiatives in Focused Areas: Work-style Innovation
Experience of work-style innovation since 2007
Through practice and verification at NESIC, improving solutions
to make proposals
About 50,000 customers cameto see our work-styles.

EmpoweredOffice is:

ICT
To thenext stage＋Space design＋

Rule＝ Productivityimprovementfrom the improvement of the work-place to theimprovement of the work-styles
2015

2007
Office reform

utilizing the latest technologies

Telework from home and satellite offices
Visualization ofmeeting

Paper & paper

Closed meetings
26

Paperless© NEC Networks & System Integration Corporation 2018

Meeting amongHQ/branches/home

Management meetingwith teleworkers

Initiatives in Focused Areas: Work-style Innovation (2)Work-style to create innovations with leading edge technologies
Location-free, time-free comm.

Virtual contact

Real contact

Quick decision

Sharing knowhow & idea

Active communications

Practice of “collaborative work” beyond the boundaries of locations, timeand organisation/corporations[Creating new services]
Collaboration Platform

Info./knowledge sharing

Overtime management system

Automated helpdesk

27

IoT Mobility Cloud・・・

Collaboration with partners

DX technologies

AIAutomation of routines…

© NEC Networks & System Integration Corporation 2018…

Initiatives in Focused Areas (2) New Business Using CVC▐ Established CVC fund for creation of newbusiness through open innovation with(January, 2018）
startups
Open innovation“Game changing ideas× NESIC assets ＝ New businesses”
of venture companies“No.1”“Only 1”
newbusinesses

CVC
Fund

<Seeds of new business>
Game changing ideasof startups

28<NESIC assets>
・ICT capabilities
・Construction capabilities
・Support service platform© NEC Networks & System Integration Corporation 2018

Investments through CVC
2018April: Boomtown Network, Inc.

USAA company to provide the next-generation support service business combining
the omni-channels contact center and the onsite support network with thesharing economy concept⇒Aiming innovation of our support service business

July: Savioke, Inc.

USAA company to provide self-controlled robots for transport tohotels and medical settings⇒Aiming acceleration of development of new markets
such as medical setting

September: InterMedia Laboratory Inc. Japan
A company to develop the technologies for capacitance codesthat can be read with the touch panel of a smartphone⇒Aiming new authentication service creation using high levelelectrostatic capacity technology

October: ALE Co., Ltd.

JapanA company to develop satellites that realise artificial shootingstars for the first time in the world⇒Aiming private satellite operation service area29© NEC Networks & System Integration Corporation 2018

Initiatives in Focused Areas (3) Carrier Networks Business▌Alliance with partners
KDDI
Established a joint company for mobile infrastructure
Base station construction & area design, fixed comm., etc.
K&N System Integration
Corporation

Enhancing business for KDDI providing total services
from area design to installation of base stations

Sony Network Communications + ORIX
Joined LPWA business that SONY starts as a business
Handling sales of communication services & provision ofpartner
support services to users and partners in individual area

ELTRES™

Expanding IoT related SI & service as well as line
sales as an operator of promising LPWA service

Sony’s LPWA30© NEC Networks & System Integration Corporation 2018

Initiatives in Focused Areas (4) Global Business▌Business with local subsidiaries &Proactive response to investment in ASEAN
 Acquired big projects growing ties with customers
・Monitoring control and communications systemfor petro plant・Singapore railway communication system▌Ocean business Expanding into new market:
marine resources development
・Using expertise of submarine cable/seismometer business
・POC of submarine hub device forelectricity/signal supply in the North Sea
Adopted for a subsidized project for the Japan-Scotland
collaborative technology development for the ocean
development project of the Nippon Foundation

31© NEC Networks & System Integration Corporation 2018

(Ref.) Mega Solar Plant Business Impact by Segment
OrdersEnterprise
CarrierSocial InfraTotal

1H
5.0
3.5
4.5
13.0

17.3
2H
1.0
1.5
2.5

Yr
6.0
3.5
6.0
15.5

1H-

18.3
2H
14.5
5.5
3.5
23.5

Yr
14.5
5.5
3.5
23.5

1H*
-0.5
-1.0
-1.0
-2.5

19.3
2H(e)
-Yr(e)
-0.5
-1.0
-1.0
-2.5

*Cancellation of orders for maintenance received in 2H/17.3 due to the change of the operator

Sales
Enterprise
CarrierSocial Infra
Total

1H-17.3
2H
1.0
1.0

Yr
1.0
1.0

1H
0.5
a bit
2.0
3.0

18.3
2H
3.5
1.5
1.0
6.0

Yr
4.0
1.5
3.5
9.0

1H
1.0
1.0
0.5
2.5

19.3
2H(e)
3.0
2.5
1.5
7.0

Yr(e)
4.0
3.52.09.5*Profit impact is negligibly small<Mega solar business>
Construction of plant and maintenanceAs large-scale projects, tasks are allocated to the sections of the entire company.
Accordingly, the results were posted in all segments by area in charge.
<Area in charge>(1) Enterprise Networks: Construction of electrical equipment and project management(2) Carrier Networks: Construction of panels/monitoring network(3) Social Infrastructures: Development of land on the site
32

© NEC Networks & System Integration Corporation 2018

Approx.
¥ bn.

NEC Networks & System Integration Corporationis committed to increasing customer value byredesigning future communications from the user’s
perspective.

nesic
33

© NEC Networks & System Integration Corporation 2018

Searchhttp://www.nesic.co.jp/english/index.html

34© NEC Networks & System Integration Corporation 2018