In the first half, NISSO increased revenue due to an increase in thenumber of enrolled staff and higher billing unit-costs, while profit
declined due to aggressive investment in human resources recruitment
NISSO CORPORATION FY 3/2023 2Q Financial Results

NISSO CORPORATION
6569 · Prime Market · Services

This is a transcript of NISSO CORPORATION's financial results for the first six months of the
fiscal year ending March 31, 2023, announced on November 10, 2022.

SpeakerMr. Ryuichi Shimizu, Representative Director, President & CEO, NISSO CORPORATION

SponsorNISSO CORPORATION

Websitehttps://www.nisso.co.jp/enExplanation of Financial Results for the First Six Months of
the Fiscal Year Ending March 31, 2023
Mr. Ryuichi Shimizu (hereinafter "Shimizu"): Thank you all very much for taking time out ofyour busy schedule today to listen to this presentation. Now I would like to explain NISSOCORPORATION's financial results for the first six months of the fiscal year ending March 31,
2023.

SummaryThis is today's summary.

CONTENTSI will follow these contents in my presentation.

FY 3/2023 2Q Consolidated Financial Results Highlights

These are the consolidated financial highlights compared to last year. Each item will beexplained in more detail later, so I will leave them out for now.

FY 3/2023 Quarterly Consolidated Financial Results

These are the trends of the consolidated net sales and operating profit. Today, I would like tofocus on the non-consolidated financial results of NISSO that account for 90% of total net
sales.

FY 3/2023 2Q Non-consolidated Financial Results
Highlights

As shown on this slide, net sales and the number of enrolled staﬀ are increasing steadily. Oneof the factors behind it is that the number of enrolled staﬀ increased by 1,505 compared to lastSeptember. The other factor is that the unit-costs of orders increased by 102 yen as a simple
average, compared to last year. These factors resulted in a 14.4% increase in net sales.
However, there are several issues. I would like to explain these issues separately in terms of
cost and SG&A (selling, general and administrative) expenses.
First, let me talk about cost. Amid the recent labor shortage, the current situation is that wehave very often oﬀered company-entrance benefits for new employees, especially for
automobiles manufacturers. From the perspective that we must compete with other companies,
we have greatly expanded the payments of company-entrance benefits compared to last year.
As a result, this expense has ballooned by approximately 190 million yen.
Next, although I will explain this in more detail later, the expenses related to human resources
development, particularly career advancement and career changes, increased by 90 million
yen, mainly due to personnel expenses for trainees. Combined with company-entrance
benefits, the cost has grown to roughly 280 million yen. I would like to mention that this impact
is a factor that pushes down gross profit by 0.7%.
Another major point is, as I have explained since last year, is that supply chain problems havebeen slow to recover due to the impact of COVID-19.

For example, when comparing overtime work, specifically limited to auto body manufacturers,
the first quarter shows an average monthly decrease of 6.1 hours compared to last year. In
contrast, in the second quarter, the number of hours worked increased by 0.9 hours.
Furthermore, since August, the overtime curve has begun to cross even for auto bodymanufacturers.
In addition, although it is a good thing, it is relatively easy for staﬀ to use their paid leave while
the operating conditions remain low. As a result, paid time oﬀ used averaged 0.91 days permonth this year, compared to 0.86 days per month last year.
Although we encourage our staﬀ to actively use their paid leave, the normal level is 0.77 days
per month. It may seem like a very small number, but I would like to tell you that the absoluteamount is a relatively large amount that pushes down the cost.
Next is about SG&A expenses. As some of you may know, we actively promoted our website in
the second half of last year. This year, on the contrary, we have invested 244 million yen in thefirst half to promote our website in anticipation of the recovery from early fall.
As you are aware, in a situation where it is very diﬃcult to attract human resources, we are
belatedly trying to focus on recruiting new graduates, and in the first half of the year, the costof recruiting new graduates as regular employees increased to 49 million yen. These two(website promotion and new graduate recruitment) together resulted in an increase of 293
million yen, and all added up to approximately 573 million yen in costs.
I am very positive about these expenses, and see it as growth investment for us to achieve our
Medium-term Management Plan going forward.
Due to the impact of COVID-19, we were forced to loosen our growth investments due to theextremely diﬃcult outlook, and there were times when we held back a little. As a result, as you
are all aware, in the revision of the Medium-term Management Plan in August, we were forced
to reluctantly postpone the achievement of 115 billion yen in net sales of and 6.7 billion yen in
operating profit by one fiscal year.
In light of this, and in this current situation where an exit from COVID-19 is in sight, I would liketo achieve these figures in FY 3/2025 while making solid investments for growth.

FY 3/2023 Quarterly Non-consolidated Financial Results

The chart shows the trends of NISSO’s non-consolidated net sales and operating profit.

FY 3/2023 2Q Financial Results Summary

This is the financial results summary. I will be explaining each item in detail.

FY 3/2023 2Q Net Sales by Industry (NISSO, Nonconsolidated)

Now, this is the net sales by industry. In particular, I would like to provide an explanation about
the future of electronic devices and the automobiles-related industries.
First, with regard to electronic devices, passive components for automobiles are doing
extremely well with the progress of EVs. On the other hand, unfortunately, sales of PCs andcommunication-related equipment were not very good, and production adjustments were madefor passive components centered on capacitors. Partly because of this, the decline has
generally stopped in the first half of the year.
As for semiconductors, I believe that although there has been talk of some production
adjustments in some areas, such as memory, in the future, we intend to aggressively expand
our business in the area of semiconductors, where we have particularly strong competitivenessin domestic factories. In addition, we are planning to expand the number of highly skilled
personnel for equipment maintenance in order to be able to conduct business with anadvantage over other companies.
Automobiles, the other major pillar, also grew by 15.9% compared to last year, but it shouldhave grown even more. As you know, this is the so-called supply chain problem, andoperations have not yet returned to normal.
However, looking at the trends in overtime work that I mentioned earlier, from around August
onwards, overtime work at auto body manufacturers has been increasing year-on-year.
Therefore, we are beginning to recover moderately, and I think there will be no problems.
In the future, in addition to aggressively increasing our market share of auto bodymanufacturers as we have done in the past, we intend to actively expand in the areas of key
components centered on batteries and electrical components, where growth is highly
anticipated.

FY 3/2023 Quarterly Net Sales by Industry (NISSO, Nonconsolidated)

This is the quarterly net sales by industry.

Account Companies (NISSO, Non-consolidated)

This is the net sales trend of the Account Company Groups. As you can see from the bar graph,
there is no doubt that it has been growing as an absolute amount.
However, as we focus our eﬀorts on new areas, which we have traditionally referred to as "nextAccount Company candidates", I would like to inform you that we are growing mainly in areas
other than Account Companies.
One example is in the field of semiconductors. You may wonder if it is safe, even though there
are some areas where semiconductors may not necessarily grow in the future. However, fromthe perspective of economic security, there is still room for growth for domestic
semiconductors despite the possibility of varied results depending on the application.
In addition, for manufacturing equipment, particularly semiconductor devices, I believe that it
would be diﬃcult for our competitors to assign the same kind of human resources as us. We
have an advantage there.
Furthermore, we would also like to promote expansion in the so-called EV-conscious battery
field, where there is still more than enough room for expansion in the future, especially in highskill areas.

Net Sales per Capita/Month (NISSO, Non-consolidated)

These are the trends in net sales per capita. As you can see in this graph, it has increased by
11,000 yen per month compared to the same period last year. Compared to the second
quarter of last year, this is an increase of 18,000 yen, which means that it is definitely
increasing even though the operation rate has not yet normalized.
As I mentioned earlier, there is still see room for recovery in the future as the supply chain,
particularly for automobiles manufacturers, is gradually recovering toward normalization. On
the other hand, we are not just waiting around for that to happen, so I would like to tell you
what we think.
We aim to increase unit costs while expanding the training of so-called maintenance personnel
or equipment engineers related to manufacturing equipment. In addition, in the manufacturing
processes of mass production, production fluctuations are inevitably very large, whereas
equipment maintenance jobs have the characteristic of very stable work as long as theequipment is running, so we are thinking of increasing such fields.
Furthermore, we intend to further increase our net sales per capita by expanding into fields
such as equipment that implement AI, which is an application of equipment, and robots.

Number of Enrolled Staff (NISSO, Non-consolidated)

This is the trend of the number of enrolled staﬀ. Looking back, despite the impact of COVID-19
last year, we were able to increase the number of enrolled staﬀ by 1,799 in one year. The
number of enrolled staﬀ was 785 at just past the halfway point of this fiscal year, which is anincrease of 1,505 compared to September just one year ago.
So far, the speed of growth appears to be a little slower than last year. However, as we recoverfrom the impact of COVID-19, we plan to raise it to the same level as last year because of theextremely strong demand for human resources from our clients, and if operations stabilize, theincome of workers will also become stable.
In addition, in the second half of last year, we conducted promotions centered on TV
commercials for our company's own recruitment website (Kojo Kyujin Navi). In the current fiscal
year, on the contrary, we implemented the promotion in the first half, the number of people
hired per month is gradually increasing. As a result, the number of recruits per month isincreasing gradually. Therefore, I believe that we will be able to catch up with the increase in
the number of enrolled staﬀ at the same level as last year.

Educational Achievements (NISSO, Non-consolidated)

Now I am going to provide an explanation regarding our educational achievements. Education
is a source of diﬀerentiation between our company and other companies, and a “weapon” thatenables us to break into new areas.
Regarding the equipment maintenance and engineering education I mentioned earlier,compared to the second quarter of 2022, the number of participants has increased by 85 and204, respectively. This will have a significant positive impact on our future sales and earnings.
Looking at the situation in the first half, we have incurred expenses of 90 million yen compared
to last year, so going forward, we will continue to invest firmly in this area while changing theskills and careers of the people working at our company.
By doing so, the treatment (compensation) of individuals will increase, and the retention rate
will also increase. This will lead to providing our clients with work that will satisfy them in the
new era of manufacturing and development operations.

Net Sales by Segment (Services)

The slide shows the graphs of our general human resources services business and otherbusinesses. The graphs are categorized into manufacturing ・ production, engineering,administrative, and other in the general human resources services segment, and nursing care・
welfare in the other segment.

Manufacturing・Production Human Resources Services

I am going to provide an explanation regarding our Manufacturing ・ Production Human
Resources Services. Net sales and the number of enrolled staﬀ have exceeded the single-yearplan and the Medium-term Management Plan presented in August. On the other hand, there
are several other issues that need to be resolved, such as the issue of the hours of operation.
As I mentioned earlier, in order to acquire new clients, we also need to further expand ourbusiness, such as career advancement to expand our high-skill areas and career changes toengineers. We also need to take steps to further reduce the turnover rate.
In addition, the issue of securing human resources is an urgent issue for the human resourcesindustry. Fortunately, we actively conduct promotions on our own website and devise ways toimprove the usability for applicants, so we are not in a situation where we cannot attract humanresources unless we spend the recruitment cost per capita like other companies, but we needto further strengthen this area.

Manufacturing・Production Human Resources Services

The graph at the bottom of the slide shows the trend of the turnover rate. We would like to takevarious measures to maintain the 4% line even as we expand in scale or the world situation
changes.
The graph at the top of the slide shows the trend of net sales per capita for manufacturing・
production. Increasing sales not only for engineers, but also for those working at our company
will lead to better treatment (compensation). Therefore, we believe that it is necessary toincrease our sales per capita to about 500,000 yen in the medium term, and I myself am awareof this issue.

Engineering Human Resources Services

I am going to provide an explanation regarding our Engineering Human Resources Services. Net
sales per capita and the number of enrolled staﬀ have also been very steady, as in
Manufacturing ・ Production Human Resources Services. However, in this era of extremely
drastic change, we are aware of the problem that we may not be able to achievecustomer/client satisfaction solely through the volume and quality of the human resources weare developing.
In the field of development, we recognize that we are in a more advantageous position thanother companies in the same industry by actively promoting human resources development that
goes one step further for our clients and local communities as a new development initiative.
However, we intend to implement measures to further separate the diﬀerences.
Although NISSO has been focusing on human resources services in manufacturing ・
production, when we think about engineers in the future, I believe that another important point
is to further enhance the career paths of our workers. We believe that it is an urgent issue toraise the skill level of individuals and improve their treatment by expanding the scope anddepth of the training curriculum.
Since April 2022, a project to revise our personnel system has been underway. We will reduce
the turnover rate by increasing the satisfaction level of our engineers. In addition, I believe wewill be able to suﬃciently respond to the need to raise the salaries of each worker and increase
sales per capita.

Engineering Human Resources Services

This slide shows the status of the engineer turnover rate and the status of monthly net sales.

Toward the Growth of Engineering (Semiconductor Field)
Human Resources Services

We would like to focus our eﬀorts on areas around semiconductor manufacturers andsemiconductor equipment. I would like to talk about some of our strategies as part of thehuman resources development in this field.
The first is the opening of the Kumamoto Training Center. As you may know, the Kyushu area isin a situation where semiconductors will be enhanced in the future. Under such circumstances,human resources development in the semiconductor field, especially in the Kyushu area, has
become an urgent issue.
Until now, we have been developing human resources by introducing semiconductor equipment
at many locations. Based on this expertise, we will open a training facility in Kumamoto that will
enable further advanced human resources development.
Although I cannot tell you the name of the company , we have held discussions with a major
semiconductor manufacturer, and have started developing human resources and curricula thatwill be useful in new semiconductor factories.
The lower part of the slide describes our participation in the “Tohoku Semiconductor andElectronics Design Study Group” of the Tohoku Bureau of Economy, Trade and Industry. To
give you some background on this, there is actually a training facility in Kurihara City, Miyagi
Prefecture, that is working on human resources development by introducing semiconductor
equipment.

This facility is called the "NISSO Technical Center," where many people from manufacturers
and the industrial world come to visit. Under these circumstances, we have earned an
extremely high level of trust from our clients. In this case, people from the Tohoku Bureau of
Economy, Trade and Industry came to inspect the facility.
Of course, it is also important to improve the facility’s ability to develop human resources andenhance the curriculum. However, I believe that our participation in the study group will be aconcrete measure toward achieving growth in the field of electronic components, which is apillar of ours other than automobiles.

Administrative・Other Human Resources Services

This slide shows net sales and the number of enrolled staﬀ for Administrative and Other
Human Resources Services.
As you all know, it is diﬃcult to expand general administrative human resources services when
considering the current situation of AI and automation.
Under such circumstances, we are developing a system that enables people with disabilities
and the elderly to flourish in the engineering area, especially in diversity management. In the
future, we thought that it would become one of the guideposts for diversity management basedon NISSO's social contributions, so we have made some modifications.

I will explain the details later, but as you can see on the slide, Nikon Nisso Prime has decided tochange the majority since we will be developing a new model that will enable older (senior)
employees to flourish.
One is the promotion of employment of people with disabilities, which I have been talking
about for some time. Nisso Pure Co., Ltd. has been building a model for the development ofskills and opportunities for people with disabilities to flourish, and we would like to enhance
this model in order to promote diversity management in the future.

Nursing Care・Welfare Services

I will provide an explanation regarding the Nursing Care ・ Welfare Services in our Other(Human Resources Services) segment. As shown on the slide, the number of previews has
decreased due to the impact of COVID-19, and the occupancy rate has also decreased.
However, the number of residents is gradually recovering thanks to eﬀorts such as previews
and interviews with residents and their families via Zoom. Net sales have been mostly flat, andprofits have remained out of the red.

TopicsOn July 1, 2022, Nikon Nisso Prime Corporation became a consolidated subsidiary through achange in majority.
Of course, we will also create opportunities for the elderly to flourish, but as another objective,
we will also work on the activities and utilization of Nikon's various external labor forces.
In order for Nikon to move more flexibly in the future, we would like to utilize external labor
forces in various situations and contribute to the vertical launch of mass production throughthis company.
The lower part of the slide is about the development of new businesses in the medical DX area
for the online medical care era. As indicated in our Medium-term Management Plan, we intend
to develop businesses using new technologies in the healthcare, medical care, and nursing careareas.
We have finally found a suitable partner to promote "HealthTech, Medical Tech, and Nursing
Care Tech", to enable the "medical field, nursing care field, and people" to make good use of
new technologies while working productively.
Hereafter, I have the impression that we have finally reached the starting line to firmly establish
a business model in a field that is new and unique to NISSO, while borrowing the knowledge ofDoctors, with whom we have concluded a capital and business alliance.

FY 3/2023 Full-year Consolidated Forecasts

Currently, the world is in a situation where the future is diﬃcult to predict. Although the supply
chain has not yet fully recovered and is in the process of making a gradual recovery, based on
the information we have now, I would like for you to understand that we have determined that
we are not in a situation where we have to revise our original plan, and will leave it unchanged.

Shareholder Return PolicyNow, let me provide an explanation regarding our Shareholder Return Policy. The dividend,
which was 18 yen for FY 3/2022 has dropped to 16 yen, which is my concern as well.
However, our basic policy is to pay out at least 30% of our profits as dividends, so we will leave
it as it is.

Consolidated Balance Sheet

The consolidated balance sheet is posted here as supplementary material. I hope that you willtake a look at it later.

Consolidated Statements of Cash FlowsPlease also refer to the consolidated statements of cash flows later at your own convenience.
This concludes my explanation. Thank you very much.