NISSO CORPORATION: Net sales increased 14.6% year-on-year
Despite the continued impact of the shortages of semiconductors and parts,
the forecast for the next ﬁscal year is expected for both revenue and proﬁts
to increase
NISSO CORPORATION FY 3/2022 Financial Results Brieﬁng

NISSO CORPORATION

6569 · Prime Market · Servicess is a transcript of the ﬁnancial results brieﬁng for the ﬁscal year ended March 31, 2022 held on
May 13, 2022, by NISSO CORPORATION.
Thiyuichi Shimizu, Representative Director, President & CEO, NISSO CORPORATION

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ponsorNISSO CORPORATION

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Web i ettps://www.nisso.co.jp/hSummaryo everyone, thank you very much for joining us today despite the poor weather and for taking timeout of your busy schedules. I would also like to thank those of you who are listening to the live
webcast. Now, I would like to start the brieﬁng.

Hellﬁrst page is the summary. It states that the increase in enrolled sta from the end of the previous
ﬁscal year was 1,799, but there were moments when the number increased by more than 2,000. Partly
because it was the end of the ﬁscal year, the number decreased by about 250 at the end of the period,
ending up with an increase of 1,799.
The

s I will be explaining later, although we should have seen a further increase in revenue and proﬁts,
this was not the case, as COVID-19 and other factors made it very di cult to procure parts andAsemiconductors. Therefore, although the increase in enrolled sta and higher unit-costs led to a yearon-year increase in revenues, the impact on the rate of operations was signiﬁcant, resulting in adecrease in proﬁts.
As for the engineering area, both net sales and proﬁts have been steadily increasing.

will be explaining the situation for the current ﬁscal year in detail later. We expect that the e ects ofthe semiconductor and parts shortages will remain, and have made a forecast for the end of the ﬁscal
year.

I

or human resources from clients has remained very strong. Although revenue and proﬁts will
increase compared to the previous ﬁscal year, we do not believe that the increase in proﬁts will bevery large under the current circumstances.

Demand f

FY 3/2022 Consolidated Financial Results Highlights

will be discussing the highlights of the consolidated results later on. First, I would like to explain byfocusing on the highlights of NISSO’s non-consolidated results.
I

FY 3/2022 Quarterly Consolidated Financial Results

r phs of quarterly net sales and operating proﬁt are shown on page 5.

The g aFY 3/2022 Non-consolidated Financial Results Highlights

s refer to page 6. As mentioned on the slide, net sales increased by 14.6 percent due to higher
unit-costs and increased enrollment.

Plea ethe other hand, there were signiﬁcant opportunity losses. For example, we receive an average of
60% compensation from the client when a process stops due to the shortage of parts or other factors,
which is basically compensation for the salary of the sta who couldn’t operate. In addition, theprocess stoppage allows operating sta to actively use paid leave, which is usually di cult to take,and reduces overtime and holiday work.
Ons resulted in an opportunity loss of approximately 2.7 billion yen in net sales, which I will be
explaining in detail later. Operating proﬁt was also a ected by COVID-19 in the 2 previous ﬁscal
years, resulting in an opportunity loss of approximately 1.3 billion yen compared to previous normal
operation levels.
Thi

s I mentioned earlier, demand from clients remained strong in the previous ﬁscal year, which led to alarge increase in expenses for recruitment and for advertising on our website, which had not beenpromoted for some time due to the impact of COVID-19. Recruitment and advertising expenses
together have increased by about 1 billion yen from the previous two ﬁscal years.
Ao not think it is a good idea, but there is such a thing as a company-entrance beneﬁt. In the midstof a situation where many upfront costs are incurred by automobile manufacturers and othercompanies in an e ort to pull in personnel to join their companies, we cannot a ord to be the only
company not taking any steps, and such expenses are getting higher. This is also a major factor
contributing to the deterioration of the cost ratio.
We dt on, the number of days where there was suspension of operations has decreased compared tothe start of the COVID-19 pandemic. As a result, subsidy income has decreased by 114 million yen
compared to last year.
In addi i

FY 3/2022 Quarterly Non-consolidated Financial Results

r graphs show non-consolidated quarterly net sales and proﬁts. Due to the nature of ourindustry, when enrollment increases steadily, the appropriate ratio of operating proﬁts in the ﬁrst halfof the year and in the second half of the year is about 1 to 2. However, as shown in the graph on theslide, operating proﬁt stalled signiﬁcantly at about 1 to 1.45 in FY 3/2022, a ected by parts shortages
in the second half.

The baFY 3/2022 Financial Results Summary

r s an overview of our activities. As you can see, with regard to net sales by industry, both theautomobiles and electronic devices industries are growing. As I mentioned earlier, the increase in thenumber of enrolled sta
in the automobiles industry and the rise in the unit-costs had a signiﬁcant
impact, but there were also some lost opportunities.
He e iysis of the previous year shows that semiconductor manufacturers performed extremely well,
but the area of what are called passive devices, highly related to semiconductors, was aggravated byinsu
cient semiconductor manufacturing. In our case, I would say that the rate of operations at eventhe leading group in capacitors was about 90% of the normal rate. As a result of our analysis, it turned
out that the operation status per capita has dropped despite the increase in the number of sta .
An analumber of enrolled sta was as I reported at the beginning of this brieﬁng. Net sales per capita
have increased by an average of 19,000 yen per month compared to the same period of the previous
year. Although the details of the impact were di erent, the previous two years were a ected by
COVID-19. FY 3/2021 was a ected by infection risks, and FY 3/2022 su ered from parts shortages.
Despite such situations, the increase in unit-costs led to an average monthly increase in sales of

The n

19,000 yen.
oticed one thing when analyzing various situations to ﬁnd the correlation between the number ofpaid leave days taken by the 14,000-plus sta who work for us to reduce operations.

I nr normal operating conditions, the paid leave acquisition status for each sta is slightly less than
0.8 days per month. However, when paid leave exceeds one day per sta per month, there is a
noticeable decline in operations, resulting in a signiﬁcant negative impact on earnings.
Unde（

FY 3/2022 Net Sales by Industry NISSO, Non-consolidated）

s refer to page 10. As I reported earlier, the electronic components and automobiles industries
are growing. If there had been no opportunity loss, the automobiles industry would have grown more.

Plea et I would like to communicate here is that amid the overall growth, the electronic components andautomobiles industries are growing signiﬁcantly. Although the automobiles industry has been a ectedby parts shortages, our share in major automobile manufacturers, which we would like to increase,has been steadily growing in the meantime. In addition, while the number of enrolled sta
under our
top line was increasing, the rate of operations did not grow so much. These situations are illustrated
on the slide.

Wha

FY 3/2022 Quarterly Net Sales by Industry (NISSO, Nonconsolidated)11 shows the trends in the electronic components, automobiles, precision and electricalmachinery industries, and others. As shown in the slide, although the rate of operations is notincreasing, the automobiles industry is steadily growing, and electronic components industry
continues to grow. We expect this situation to continue in the current ﬁscal year.
Page

Net Sales per Capita（NISSO, Non-consolidated）

12 shows the net sales per capita situation. As shown in the graph on the slide, there has indeed
been growth compared to the ﬁscal year before the previous one, but since FY 3/2021 was also
a ected by COVID-19, we will look at this compared to FY 3/2020, which is two years ago.

Page

spite the increase in the unit-costs for skilled sta , net sales have not increased so much, which you
can see is reﬂected in the poor operation status.
Det y, simply comparing the previous ﬁscal year to FY 3/2020, the average unit price per orderincreased by more than 70 yen. On the other hand, comparing FY 3/2020 to FY 3/2021, thedi erence in overtime levels in the fourth quarter is about 4 hours per month. The year before last wasin the midst of recovering from COVID-19, when parts shortages were not so pronounced, but
unfortunately the operation level was down.

Inciden all

Number of Enrolled Sta （NISSO, Non-consolidated）

13 is about the change in the number of enrolled sta . In addition to the very strong demand forhuman resources from clients, successful recruitment and lower turnovers contributed to the growth
as shown on the slide. I will be explaining the lower turnover rates later on.
Page

t is very disappointing that net sales and proﬁts have not accompanied the increase of the top line,
but we will continue to boost the top line while waiting for clients to recover from the parts shortage
situation. I will be explaining the circumstances of the current ﬁscal year again later.
I

Number of Skilled Sta ・Engineers（NISSO, Non-consolidated）

s refer to page 14. As shown on the slide, there were 102 more skilled sta and engineers in the
fourth quarter compared to the third quarter. In particular, we are actively promoting career changes
from skilled sta
to engineers.
Plea ety percent of our engineers come from skilled sta , with the remainder from mid-career hires. As
the demands of our clients are extremely high in the ﬁeld of equipment technology, I believe it isextremely important to expand the number of engineers in this area.
Eigh

Account Companies（NISSO, Non-consolidated）

15 is about the ratio of our Account Companies. When looking at the bar graph on the right sideof the slide, Account Company Groups appear to be growing steadily, but in reality, they have beena ected by parts shortages.

Pagev ong been aware that the automobiles industry, in particular, uses an unexpectedly large
number of passive components other than semiconductors. Of course, semiconductors are also usedin semiconductor equipment. Therefore, the situation where it was dicult to bring them to ﬁnishedproducts began to become noticeable from about the latter half of the previous ﬁscal year.
We ha e l（urnover Rates NISSO, Non-consolidatedT）t me explain our turnover rates, another factor that has contributed to the growth in the number ofenrolled sta
other than hiring.
Let y, we were in the situation where it would be OK if we could manage to get the turnover rate
below 4 percent for the current ﬁscal year. As a result, we were able to keep the overall turnover rate
down to 3.8 percent, which led to an increase in the number of enrolled sta .

Ini iallt s say the average number of enrolled sta in the ﬁrst half was about 14,500, and think about 0.2
percent of that number. From this calculation, you can see that we have saved that many people withskills from resigning, which I believe is a very good contribution to net sales and proﬁts.
Le `the other hand, although the turnover rate of skilled sta has increased slightly, we have managed
to keep it under 2 percent. In the future, we will be taking steps to not only maintain the turnover rate
below 2 percent, but also to revise our curriculum to further reduce the turnover rate of skilled sta .
On

Educational Achievements（NISSO, Non-consolidated）

s section is about our educational achievements. We place particular emphasis on basic equipment
maintenance education and engineer education.
Thit ough we are stepping up e orts to increase added value, raise the unit-cost per order, andincrease proﬁtability with improved treatment for employees by promoting skills development andcareer changes, we have not yet been able to fully augment these e orts. One major reason for this is
the impact of COVID-19.
Al h

or educational training at our technical centers, it is not possible for many people to enter the clean
room due to the risk of infection. Therefore, our current challenge is to further expand our capabilities
for training while incorporating new measures, such as e-learning, which we are currently addressing,VR, which is under development, and OJT (on-the-job training) at contracting sites of equipment
manufacturers.
F

Net Sales・Operating Proﬁt Ratio by Company

would like to explain the performance evaluation by target segment. First, let's take a look at nonconsolidated net sales by company.
Ireason for the focus on NISSO is because our non-consolidated sales account for 92 percent of
total consolidated net sales, and our non-consolidated operating proﬁt accounts for 95.4 percent of
total consolidated operating proﬁt.
The

tor Shinwa, shown in the table on the slide, is a company that joined our ranks in the previous
ﬁscal year. Therefore, the bar reﬂects the result for just the half-year. We asked them to join us since
they are in our existing areas.
Vec

we would like to establish a new pillar in the ﬁeld of semiconductor equipment in the future, we
believe that the expansion of Vector Shinwa will serve as a growth engine for NISSO in a new ﬁeld.
Since

Existing Areass page reﬂects the changes in our existing areas. The number of enrolled sta
increased by 112 compared to the third quarter.

Thi

in

the existing areasr , I have something I need to disclose to you. Despite the impact of COVID-19, the earthquake,and the sudden shutdown of operations due to cyber terrorism, our existing areas have grown. It is nota bad thing for us, since we currently have accounts with all the major auto-body manufacturers.
He e

owever, due to the increased weight of the existing areas, we have been directly a ected byeconomic ﬂuctuations. Looking ahead, although we will continue to focus on the existing areas, we will
also focus ﬁrmly on new areas through risk diversiﬁcation.
Hﬁrst is automotive parts and the factories related to lithium-ion batteries that will become very
important in the future. We will likely be competing for lithium-ion batteries in Japan as well, andmany large-scale projects are under development. We will aggressively expand and enhance this ﬁeld
by taking advantage of our unique position of having accounts will all lithium-ion battery factories
The

while developing human resources at the same time.
second is semiconductor and equipment manufacturers, which have traditionally been the focus
of our e orts. For semiconductor manufacturers, when acquiring new accounts, we expanded fromthe perspective of semiconductor equipment maintenance to an area closer to operators. In the
future, we will further speed up the training of equipment maintenance sta
to further increase ourmarket share among semiconductor manufacturers.

Thetor Shinwa, which I mentioned earlier, is one of the few human resources companies that can
provide contracting services for semiconductor equipment manufacturers. Although it is small in scaleat the moment, we will work together to increase the market share among semiconductor equipment
manufacturers while jointly utilizing our human resources and education system.
Vecor automation, we are also looking to expand our share of the market among equipment
manufacturers other than robots and semiconductors by training people with a background in
equipment maintenance. Therefore, we expect that the status of several companies will be changed to
Account Companies at some time during the current ﬁscal year.

Fthe area of semiconductors, we are having various discussions with Kumamoto Prefecture andrelated companies on how to develop human resources for expansion in the Kumamoto area. We are
currently in the process of preparing for full-scale operations 2 years from now.
In

Engineering Area（Financial Results）

t me explain the engineering area. Net sales for the fourth quarter were up 12.5 percent over thethird quarter. The cumulative achievement rate was 138.3 percent, which exceeded the achievementlevel by 38.3 percent.

Lev ronthly net sales per engineer were 514,000 yen compared to 473,000 yen per skilled
sta . You can see the high net sales per capita in the graph on the slide.
The a e age mEngineering Area: Number of Enrolled Engineersumber of enrolled engineers is steadily increasing. In this context, there is a reason why we focus
on equipment technology centered on semiconductor devices.

The n

r

r , one of our technical areas, is a newcomer. We are particularly focused on
equipment technology that has an extremely close anity with manufacturing sites. We also have astructure to train such people.

The enginee ing a ea

t is clear that the area of equipment maintenance will become increasingly in demand in the future.
Resources are in short supply at present and are expected to become even more scarce when
automation and other situations arise.

Is I mentioned earlier, a major reason for our emphasis on equipment technology is that when weforge into new areas by diversif ying the risks in existing areas, it will become easier to acquire newclients by introducing people with a background in equipment technology in advance.
As a future issue, let me explain a little about what we will be focusing on in the current ﬁscal year andbeyond. Although we have been training people in the area of equipment technology for the past few
years, they have just started their work and are mostly at beginner and pre-intermediate levels.
Aor this reason, we are now creating a structure for skills development for these people to upgrade
their skills in order for them to move up to intermediate and advanced levels. The ﬁrst challenge is tofurther expand net sales per capita by enhancing their skills.

Fsecond challenge is how we can expand into other areas of technology. Nowadays, manufacturers
are also utilizing IoT and AI. In this context, we started to work on AI education from about the second
half of the previous ﬁscal year. We are thinking of applying this to our equipment maintenance sta , orhiring people from overseas to work in Japan as engineers while applying IT and AI skills to them.
Thet ough the semiconductor area is expected to expand in the future, there are very few people
studying and graduating in the semiconductor area in Japan today. We are trying to create a structure
to train engineers in the semiconductor area through OJT as well as classroom learning.
Al hs is also the case with the Kumamoto project, and we are negotiating with other semiconductor
manufacturers or developing a curriculum. In this way, we will make full-ﬂedged e orts to expand thenumber of enrolled engineers and increase sales per capita in the current and next ﬁscal year.
Thi

Turnover Rates（Existing・Engineering Areas）

s page is about the turnover rate of engineers. The graph on the right shows a comparison of theturnover rate for engineers with that of non-engineers, ﬁxed-term and skilled sta combined. The
turnover rate remained below 2 percent, but since we are investing a considerable amount of training
in our engineers, it is not at a level where it is just enough to fall below 2 percent. We will continue to
strive to reduce our turnover rates.

Thi

Other Businesses Business Revenue

s is the segment for our Other Businesses such as nursing care and welfare. The red line graph at
the bottom of the slide shows the trends in the occupancy rate. Since the facilities are occupied byelderly people, we have to take strict measures against COVID-19. As a result, the occupancy rate is
now declining.
Thit ough not really considered as new technology, the facility utilizes web-based systems for facility
previewing and communication with residents, such as Zoom.
Al hurrently, the occupancy rate is just over 90%, but by utilizing these systems, we hope to raise it to the
95% that we are aiming for and raise proﬁts to a higher level.
C

Summary（Progress of Net Sales Targets by Target Segment）

s r phs show the progress of net sales targets by target segment. This is the progress of the fourareas that we started to address from the previous ﬁscal year
Existing Areas, Engineering Area,
New Businesses, and O ther Businesses centered on nursing care and welfare. In existing areas, thetargets have generally been achieved despite the low rates of operations. However, as I mentioned
earlier, the existing areas have a serious issue with revenues.
The e g a：

the four areas, only the engineering area has been performing well in terms of net sales and proﬁts.
O ther businesses, such as nursing care and welfare are as I explained earlier.
Ofrthe area of new businesses, let me explain in a little more detail what kind of business wedeﬁne as new businesses. To be honest, we had a fairly broad view of new businesses just about ayear and a half ago, at the time we were formulating the current Medium-term Management Plan.
Rega dingowever, as we were sowing various seeds in line with the one year plan, we gradually began to see
the considerable potential.

H

see such potential in the contracting of semiconductor equipment that Vector Shinwa is engaged
in, as I mentioned earlier, and in which we have almost no competitors. Although it is a derivative
business from our existing business areas, we intend to ﬁrmly establish this contracting business as a
new business and promote it as one of our pillars.
We

on Nisso Prime, which I have been talking about for some time, is not necessarily about diversity
management, but we are considering taking a more concrete approach to the utilization of the silver(older) generation, which is a volume zone.
Nikt on, we launched the recruitment platform business as a JV in March 2022, which is also
derived from our existing businesses. In the recruitment platform business, we have formed aconsortium with companies in our industry or with human resources companies that have an anitywith us, and have begun to work on a business that uses the platform to increase recruitmenteciency. We would also like to use a company called Leaf Nxt to improve retention and enhance
recruitment e ciency by utilizing the big data accumulated there.
In addi i

the future, we also plan to use Leaf Nxt go expand our expertise, education, and human resources
development structure. In addition, although there are many other businesses in those areas in which
we are still sowing seeds, in this ﬁscal year, we would like to actively engage in IR activities at a time
when we have we have some prospect of making them into businesses.
In

FY 3/2023 Full-year Consolidated ForecastsAs for the full-year consolidated forecasts, I would like to talk about our future prospects. Initially, forthe second year of our Medium-term Management Plan, we projected net sales of 90 billion yen andan operating proﬁt of 4 billion yen.
t, until the very last minute, I tried to create a business plan in line with these ﬁgures.
Unfortunately, however, we would not be able to avoid the impact of COVID-19 this ﬁscal year as
well. To explain the ﬁgures of the consolidated forecast at the end of the ﬁscal year, assuming that thelevel of opportunity loss I mentioned earlier was set at 100 for the previous ﬁscal year, I believe that
there is a risk of an opportunity loss of about 80 in the current ﬁscal year as well.

In

fac

r the premise of the Medium-term Management Plan, consolidated net sales of 115 billion yen
and operating proﬁt of 6.7 billion yen were projected for the next ﬁscal year. Although I am still
explaining it based on that premise, considering the current situation, it would probably be quitedicult to carry this out as it is in the next ﬁscal year.

Undet ough it will be delayed by about 1 year, we are in the process of rolling out the Medium-termManagement Plan once again, and re-creating a business plan that can achieve this plan.
Al hr steadily making preparations for its presentation so that we can explain it to everyone at thetiming of the ﬁrst quarter ﬁnancial results brieﬁng. Although the forecast is very disappointing andunfortunate, we plan to achieve net sales of 88.6 billion yen and an operating proﬁt of 2.7 billion yen.
We a eShareholder Return PolicyLet me explain our approach to the shareholder return policy. If you look at the graph, it would appear

that the dividend has been reduced every year. To explain this point a little, the dividend for FY
3/2021 includes an additional 5.00 yen as a commemorative dividend for our 50th Anniversary.
Therefore, the original dividend is the amount minus 5 yen.
v
or FY 3/2022, was 18 yen, which is the amount we initially promised, with a payout
ratio of 36 percent. For the next ﬁscal year, we expect to pay a dividend of 16 yen per share, for apayout ratio of 30.2 percent. This amount is in line with a payout ratio of 30 percent or more in ourshareholder return policy, which we always talk about.
The di idend fview of the recovery from the COVID-19 pandemic and various other factors in the future, we
consider the earnings forecast presented earlier as the minimum. However, I would like to take thisopportunity to express our intention to make e orts in the future to pay out dividends at a level of 18
yen or more.
In

Consolidated Balance Sheetrom here onward are the supplementary materials. The supplementary materials consist of theconsolidated balance sheet and the statement of cash ﬂows. Please review these at your own
convenience.

Fvplementing various growth strategies and taking various measures, making good
progress in recruitment, industries, new areas, and areas such as engineering, but I think the biggest
bottleneck is the shortage of parts due to the impact of COVID-19.

We ha e been imome believe that the recovery will start in the second half of this ﬁscal year. However, as I mentioned
earlier, the plan is based on the premise that the impact will be about 80% of that in FY 3/2022, sosome may argue that our forecast is somewhat conservative.

S

v provided quarterly explanations based on the information we gathered from our clients in theprevious ﬁscal year. However, we have come to the conclusion that since it is very di cult to predict
the future and because there are many uncertain factors, we have provided such a conservative
forecast.
I ha et the determination to make upward revisions rather than downward revisions this ﬁscal year, we
will all work together to forge ahead with our business operations. We would like to kindly ask you foryour continued support and guidance.

Wi ht will be all for now. Thank you very much for your undivided attention.

Tha