󰍉NISSO CORPORATION had higher revenue and proﬁts in the ﬁrst half of theyear, and expects sales per capita at an unprecedented high level due to the
future recovery production of automobiles manufacturers.
NISSO CORPORATION First Six Months of FY 3/2022 Financial Results Brieﬁng Materials

NISSO CORPORATION

6569 · First Section of the Tokyo Stock Exchange · Servicess is a transcript of the ﬁnancial results brieﬁng for the second quarter of the ﬁscal year ending
March 31, 2022, held on November 11, 2021, by NISSO CORPORATION.
Thiyuichi Shimizu, Representative Director, President & CEO, NISSO CORPORATION

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ponsorNISSO CORPORATION

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Web i ehttps://www.nisso.co.jp/en/Summaryyuichi Shimizu (Shimizu): Ladies and gentlemen, thank you very much for taking the time out of yourbusy schedule to come here today. And thank you also to those of you who are listening to the live
webcast.
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would like to talk about our summaries. I will explain each of the items listed on the slide in detaillater. First of all, I would like to explain a little bit about 'Starting business synergy activities withsubsidiary Vector Shinwa' which will not be discussed in the explanation later.

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shares were acquired as of August 31 and the deemed acquisition date was September 30,
there is almost no impact on P/L at this time, and only the balance sheet is combined.

Since allt me explain a little about the intention our acquisition of Vector Shinwa Co., Ltd. This company hasvery strong relationships with companies that make semiconductor manufacturing equipment andsemiconductor measurement equipment, with which we do not have a trading account.

Leompany is not very large, but it is recognized for its very high technology. In the future, we would
like to strengthen the area of electronic components, especially semiconductors, as our second pillar
after the automobiles area. That is why we have decided to make this acquisition.
The c

FY 3/2022 2Q Consolidated Financial Results Highlights

s is a summary of our condsolidated ﬁnancial results. Due to the increase in the number of sta , asa result, both sales and proﬁts have increased, despite some production adjustments in operating
hours. However, as you all know, not only did we face a shortage of semiconductors in the automotive
sector, which was our initial concern, but we also faced challenges in procuring wiring harnesses andother parts due to the lockdown.
Thithe latter half of the second quarter, we actually had people working on-site, but there were several
locations where the capacity utilization was 80% of the original capacity utilization and 50% at thefactories, which had a signiﬁcant impact on our proﬁts.
In

owever, since we are in close contact with the largest group of automobiles manufacturers in Japan,
we continue to hire people in order to win future proﬁts even if we lose current proﬁts. That is thesituation up until now.
H

FY 3/2022 Quarterly Consolidated Financial Results
Highlights

s shown in the bar graphs, proﬁt was relatively steady in the ﬁrst quarter, but unfortunately, looking
at it by quarter, we saw a large drop in proﬁts in the second quarter.

A

FY 3/2022 2Q Non-consolidated Financial Results Highlightssr our non-consolidated ﬁnancial results. In addition to what I mentioned earlier, you will
notice that SG&A expenses have increased signiﬁcantly when compared to the previous ﬁscal year. Of
The e a ethe 838 million yen increase in SG&A expenses compared to the same period of the previous ﬁscal
year, about 500 million yen was due to the increase in recruiting expenses. In the ﬁrst half of theprevious ﬁscal year, recruiting expenses were signiﬁcantly lower compared to this year because we
had not yet fully recovered from the COVID-19 pandemic.
ttle irregularity is the employment adjustment subsidy. Last year, the subsidy income was 231
million yen, but this year it is only a small part of the total, with 17 million yen coming in as nonoperating subsidy proﬁt, either as a subsidy for non-operation due to production adjustments or as a
subsidy for developing skills.

A li

s I mentioned earlier, net sales have increased compared to the previous ﬁscal year, despite the factthat operating hours and other factors were very short due to the increase in the number of sta .

A

FY 3/2022 Quarterly Non-consolidated Financial Results
Highlights

r graphs show net sales and operating proﬁt on a quarterly and non-consolidated basis. As I
stated earlier, you can see from the graph that proﬁts were very low in the second quarter.

The bas

rom the previous ﬁscal year, it would not be surprising if we were to exceed the record-high net
sales in the second quarter of the previous ﬁscal year. However, unfortunately, the production
adjustments by automobiles manufacturers that I mentioned earlier have had an impact on this result.
I will explain the details again later.
A ide f

FY 3/2022 2Q Financial Results Summary

will explain the overview of our activities. The ﬁnancial results summary for the second quarter will
be explained in detail item by item later.

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FY 3/2022 2Q Net Sales by Industry (NISSO, Nonconsolidated)

r graphs on the slide show the net sales composition ratio compared to the previous ﬁscal year,
which is composed of automobiles, electronic devices, precision & electrical machinery and other, allof which reﬂect an increase compared to the previous ﬁscal year.

The baFY 3/2022 Quarerly Net Sales by Industry (NISSO, Nonconsolidated)s take a look at the quarterly non-consolidated net sales by industry. As I mentioned earlier,from the ﬁrst quarter to the second quarter, net sales of electronic components reached a new record
high, partly due to the very strong per formance of semiconductors. However, unfortunately, the net
sales of automobiles have not yet reached the level of the record high in the past.
Plea eowever, if we compare the second quarter of the previous ﬁscal year with previous years in the
category of automobiles, net sales per capita was 84,000 yen less. Although unit costs are steadily
increasing every month and the simple average is also increasing, the net sales per capita in theautomobile category was 84,000 yen lower.

Humber of sta working in the category of automobiles was 5,811 for the second quarter of theﬁscal year ending March 2022 and 4,898 last year. This was an increase of 913 people from last year,
but the fact that our net sales per capita have dropped by 84,000 yen, has had a signiﬁcant impact on
our proﬁts.
The nt y, in our account with the largest automobile group, if you look at the second quarter of lastﬁscal year in September, it is very easy to understand the current ﬁgures, so I will tell you that lastSeptember, net sales per capita was 549,000 yen, but in September of this ﬁscal year, net sales per
employee were 428,000 yen, a drop of 121,000 yen.
Inciden alls does not mean that unit costs have dropped, but rather that we have been seriously a ected byproduction adjustments due to the lack of parts coming in. The total number of such employees was
3,249, resulting in an increase of 623 in enrollment compared to last year.
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Net Sales per Capita (NISSO, Non-consolidated)s is net sales per capita. Compared to the same second quarter, compared to last year, it doesn't
seem to have dropped that much, but it has actually had a signiﬁcant impact on net sales per capita.
Let me tell you a little bit about what's going on. As a matter of fact, production had been recovering
steadily until around July of this year, but in August we made production adjustments at some of thefactories in consideration of semiconductor procurement. In September, in addition to the shortage ofsemiconductors, lockdowns in Southeast Asia a ected various parts including wire harnesses. As aresult, the number of overtime hours per person per month has decreased by about 8 hours comparedto July.
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so here to tell you that in addition to these hours, we have also been a ected by other factors
such as stopping the process on so-called days when we should be operating. However, just as asimple average, even compared to last year, we are in a situation where the order hourly rate has
increased by approximately 30 yen, so I think we can say that the net sales per capita would havebeen much larger than it should have been.
I am alother thing I want to explain is the issue of paid holidays. As a matter of fact, 80% compensation isprovided as compensation for absence from work, but if sta take paid holidays, they will naturally
receive 100%, or 100% of their salaries.

Anrpaid leave, September has seen a very large increase. Normally, the monthly paid leave
utilization rate is at a level of a little less than one day per person. It may not seem like much, but thisSeptember it was 1.2 days.

Rega dingyou look at the total number of days taken, it is usually less than 10,000 days, but in September it
was about 17,000 days, so I think the fact that over 7,000 days of paid vacation were used up in
September has a big negative impact on proﬁt.
If

Number of Enrolled Sta (NISSO, Non-consolidated)

s is the number of enrolled sta . As you can see in the bar graph, we may see a slight slowdown inheadcount in the second quarter compared to the ﬁrst quarter, but there are two reasons for this.
Thirst, due to the spread of COVID-19 in August, the number of people who come for interviews has
stagnated a little. The second reason is that although the number of enrolled sta was increased
mainly by account companies in September, there were some people who wanted to wait and see alittle more due to the balance of parts procurement. Unfortunately, growth in headcount, or its
approximation, slowed slightly in the second quarter compared to the ﬁrst quarter.
Fi

owever, since the current state of emergency is over, and as the newspaper says, automobiles areshowing signs of recovery. People are coming in smoothly. Therefore, I think it can be said that we canreturn to the growth of the number of enrolled sta .
Hs is closely related to our growth strategy. So I want to explain it a little. One way to think about it
was that we could not avoid assigning people to production sites where production adjustments werebeing implemented.
Thiowever, what was originally supposed to be ﬁnished in September has been delayed until October or
November, but as a result, we have increased the number of sta
while compensating for newly hired
sta , and as a result, we have ﬁnally reached a situation where we can increase net sales greatly after
December.
Hwill respond to the increase in production in the next ﬁscal year and beyond, even if we assume
that this will have an impact on our current proﬁts. Also, considering that we are increasing our sharesin our account companies, we were prepared to invest rather than spend money, so we did that.

We

the spring of this year, we heard from autobiles manufacturers that production will gradually
increase from September, and that recovery production will start gaining in October. As a result, our
account company group will start to make up for it from December.
Insituation for other automobiles manufacturers have changed signiﬁcantly, with production
gradually increasing from December. Since December, we've heard that net sales per capita willprobably be at a level we've never seen before.
Theor example, in December, we have been told that they would like to have a four-day holiday from the
beginning of the month. Under these circumstances, December will see an unprecedented number ofworking days and hours.

Fr ore, we can make up for the delay from December at once. Unfortunately, however, since thecalendar is limited, we have decided that we have no choice but to revisit proﬁts. For this reason, we
have revised the proﬁt for this investment to the end of the ﬁscal year.
The eft me tell you a little bit about the transition of enrolled sta . In the ﬁrst quarter, we achieved anincrease in enrollment approximately three months ahead of the initial plan. As I mentioned earlier,the number of sta in the second quarter was 369, which was half the number in the ﬁrst quarter.
Le

rom the third quarter onward, although the automobiles market has recovered, we are now in theprocess of procuring semiconductors. By receiving orders for various semiconductor-related
components, we are steadily implementing our plans to reach the top line for the third year of ourexisting business, which we call our current business, at a very early date next year.
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originally planned to generate a proﬁt of 4 billion yen next year, but from the perspective of thenext ﬁscal year alone, we believe that proﬁts from this ﬁscal year will be transferred to the next ﬁscal
year. We are aware of the big jump in the third year of our current medium-term management plan.
We

portion exceeding \4 billion will be aggressively raised to further raise the probability of a thirdyear in our medium-term management plan. We will be able to invest more in new businesses in thenext ﬁscal year.
TheNumber of Skilled Sta & Engineers (NISSO, Nonconsolidated)

rom the ﬁrst quarter to the second quarter, we were able to increase the number of engineers by 40
and the number of skilled sta
by 128. Let me explain our thinking about engineers. We are anewcomer in this technology area.
For this reason, rather than hiring new graduates or mid-career workers who have this kind of
background, as is usually the case with human resources companies that specialize in technology, ourapproach is to train and increase the number of people who have the aptitude from among the 14,000
or so people we currently have as equipment engineers, engineers in the production technology area,
and AI engineers.

Fs I will explain a little later in the training session, the progress in this area may seem a little slower
than that of skilled sta . However, I would like to add that we are also increasing the number of
employees in this engineering area ahead of schedule, as I will explain later.
A

Account Companies (NISSO, Non-consolidated)s is the trend of account companies. Normally, as I mentioned earlier, we have been steadily
increasing the number of account companies, so this share ratio should grow more than the growth ofother businesses.

Thipact of operating conditions of automobiles manufacturers, which I mentioned earlier, hasbeen very signiﬁcant. However, each automobiles manufacturer is ﬁnally starting to recoverproduction. It is also clear that other companies that manufacture semiconductors and passive
components will be even busier from the beginning of next year.

The imr ore, while the overall scale of the business will increase, the net sales and composition ratio of
this account will also increase, and the growth will be greater than that of the overall net sales.
The efthese four account company groups, the ﬁrst and largest account company group is the group ofmajor automobiles manufacturers that I mentioned earlier.

Oft was 43 percent of the total in the second quarter, it is about 60 percent in terms of share of
the 7.436 million yen in net sales. Currently, even with after-hours or short operating hours, we are at
60%, so I believe that the percentage is already above 60% as it should be.
While isecond group of account companies is the world's largest group of passive components,
capacitors. This one is placed in the electronic devices, and its share is 39 percent of the area of thiselectronic devices, which is about 40 percent.
Thethird account company group is a growing group of general electronics manufacturers, especiallythose that make semiconductors. This group accounts for about 18% of the electronic components
market.
The

ourth account company group contains a company that makes multifunctional devices within
precision electrical machinery, which accounts for 30.1 percent of the total. Because of the nature ofmultifunction devices and the global promotion of teleworking and other activities, unfortunately, thebottom has been reached, but I don't think it is at the level of a reversal like other industries.
The f

s I have explained these four groups of account companies, there are about 700 companies we are inbusiness with, mainly major manufacturers. We are currently negotiating with our clients to makesome of these groups account companies in the future.
Aount companies are deﬁned by us as companies that are competitive and have growth potential.
We deﬁne it as a company where we can talk directly to the executives in charge of production,
generally senior managers and managing directors, and make proposals. We have the idea that wewould like to make sure that we are prepared in those areas for the coming year.

Accurnover Rates (NISSO, Non-consolidated)Ts r the trends of our turnover rates, which are very important indicators. Although the overallturnover rate has increased slightly compared to the ﬁrst quarter, our approach for this ﬁscal year was
to keep it below 4 percent. In the second and third quarters of the current ﬁscal year, we have beenable to control the turnover rate to below 4%.

The e a er ore, if we can continue to control the turnover rate below 4 percent in combination withrecruitment, I think it will have a great impact on raising the number of sta and the top line as I
mentioned earlier.
The efEducational Achievements (NISSO, Non-consolidated)

s is about our educational achievements. This is the education of engineers and the basic
maintenance education that I mentioned earlier. This is a very important point for us to increase ouradded value in the future.
This is a very important point for us to increase our added value in the future. In this area, we werea ected by the COVID-19 pandemic last ﬁscal year, but we have seen a large increase compared tothe second quarter and the ﬁrst half of the last ﬁscal year. Now that the COVID-19 pandemic has
ﬁnally settled down, we are able to aggressively implement basic manufacturing education, which willlead to the expansion of engineers and skilled sta .
Thit on to the conventional training facilities of TC Higashi-Nihon and TC Naka-Nihon, we are also
expanding our training system in Kyushu. In addition, the we have been able to increase the number ofparticipants in education, which has been one of our strengths, by about 1,000 from the previous
ﬁscal year, which is expected to lead to an increase in the number of enrolled sta and an
improvement in the retention rate.
In addi i

Net Sales and Operating Proﬁt Ratio by Company

s graphs show the classiﬁcation by company. In particular, it can be seen from the graphs that the
manufacturing human resources services of NISSO CORPORATION account for the majority of theoverall operating proﬁt and net sales.

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Existing Areasthe new medium-term management plan that we started this ﬁscal year, we categorized ourbusinesses into three categories: ‘existing businesses,’ ‘engineering area,’ and ‘new businesses’,
which you can see from the slide.
Ins r phs show the growth in enrolled sta and the progress of net sales compared to the ﬁrst
quarter. We hope to be able to see the progress every quarter in the future.
The e g a

Promotion of DX

or these times, please look at it as part of DX. the ﬁrst of which is "HR Cross". I'm sure othercompanies in the industry have mentioned this, but the "HR Cross" that we implement was originallydeveloped in order to conduct education by a company funded mainly by industry group board
members.
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order to reduce the burden on customers and dispatchers in this new era, we aimed to create asolid contract management and skills management system and make its infrastructure for our
manufacturing human resource services. We have been developing the system since the beginning of
this year, and have been trying it out since April. Finally, since this past October, we have moved tothe stage of actually using the system at several companies, mainly major manufacturers.
In

reason I am explaining this is not that we will make a large proﬁt here. The very reason forthis is that a law that stipulates "equal pay for equal work," which includes small and medium-sizedcompanies, came into e ect in April of this year. This is based on the government's idea that people
with the same abilities should be treated the same.
The mains we have been saying for some time, one of our key di erentiators and a major engine of growth isto provide our clients with human resources of a higher quality than other companies in our industry.
By introducing this system mainly to major manufacturers, we can, to put it bluntly, measure theabilities of 500 dispatched staof that manufacturer by the same yardstick. For us, this will be a pointthat will greatly boost our proﬁt in the future, and we are working on this kind of thing.
Asecond, the ‘apseeds portal,’ has been introduced and is now in operation as a tool for moreecient and successful communication between our sta
and the site supervisors who manage them.

The

Engineering Area (Financial Results)sr the trends in our engineering area. Although it is a little disappointing, net sales per capita
has dropped a little due to the increase in the number of beginners in the engineering area. However,they will receive unit costs according to their skills while working, and this will also increase in themedium term, so please look at this trend in the same way as the existing business I mentioned earlier.

The e a ewould like to talk a little bit about the average number of enrolled engineers for this ﬁscal year.
Initially, we placed a ﬁgure of just under 700 people in operation, and as I explained earlier, we havealready exceeded that ﬁgure. We are also planning to increase these numbers in the third year, so wewould like to aim to expand our scale and increase revenue as early as possible.
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Engineering Area: Number of Enrolled Engineers

would like to talk next about the enrollment of engineers and the kind of engineers they are. As I
mentioned earlier, we are a newcomer in the engineering area. Since we are particularly strong in
manufacturing, our ‘volume zone’ is with equipment engineers.

Ithe medium term, we will expand our business by focusing on equipment maintenance workers andproduction engineers who are close to manufacturing. At the same time, rather than hiring anddispatching new sta
with immediate ability, we will expand our business by developing IT andengineering sta .
In

AI Solution Services

s page is about our AI solution services. Last September, we concluded a capital and businessalliance with an AI company. Since the previous ﬁscal year, we have been working on the ‘Flow of AI
Solution Introduction’, and we are currently in the process of building a prototype model with three ofour major clients.
This you all know, since there is a chronic labor shortage at manufacturing sites, so we are currently
building this business on the premise that the implementation of AI in actual manufacturing equipment
to automate or derive optimal processing conditions will become a full-scale business in Japan in the
future.
A

Turnover Rates (Existing & Engineering Areas)s page shows the engineering area which has been cut out from the turnover rates that werementioned earlier. In the area where the turnover rate is increasing, we are following up by providing
additional training. However, there are a few people who ﬁnd it dicult to keep up with the process oflearning the new technology.
Thisy, we would like to continue to reduce the turnover rate while devising curriculums andimproving communication, and we would like to continue to reduce the turnover rate of engineers andexpand their numbers.

Ba icall

New Business Areass page is about the start of our new annotation business. In order to expand our business in the IT
ﬁeld, it may be described as a level prior to that of software engineers, but we are going to create anannotation business with a scheme as shown in the slide.

Thioventure Corp., a venture company of the Softbank Group, will be at the core of thisproject, we will also join the consortium to experience the work and improve our ability to develop
software. Some of the people who experience this will go on to the engineering area that I mentioned
earlier.
While SB Inn

the annotation work will be for IT and other infrastructure, I hope you can see that through thiskind of work we will also expand our new businesses and develop engineers.
Since

Other Business / Business Revenue

s refer to the business revenue of Other Businesses. ‘Other Businesses’ refer to the nursing carebusiness. The proﬁt for the second quarter was 2 million yen compared to 18 million yen for the ﬁrst
quarter. However, I think the biggest reason is that there are some issues with the occupancy rate of
Bldg. 6.
Plea eour case, we operate nursing care facilities in Bldgs. 1~ 6, and since Bldgs. 5 and 6 are medicalcare facilities, unfortunately, there was a large number of people who have passed away. Since thesummer was hot this year, if someone passed away immediately after moving in, we actually have toreturn the lump-sum move-in payment, so you can see the impact of this in the second quarter.

In

we have gotten rid of the deﬁcit structure that caused us concern, we would like to continue thisbusiness while increasing proﬁtability in the future.
Since

Summary (Progress of Net Sales Targets by Target Segment)s is the progress of the net sales targets by target segment. As I mentioned earlier, the area that ismaking the fastest progress against the plan made at the beginning of the ﬁscal year is the engineeringarea. Progress in the existing areas may look slow, but as explained earlier, since we have increased
the number of enrolled sta su ciently ahead of schedule, once the manufacturing sites return tonormal, we will be able to make progress in this area ahead of schedule.
This for new businesses, since we are preparing for it through JVs and other means, although theprogress rate is at zero percent at the moment, we have already created a prototype model, and will
be recording net sales and raising proﬁts from now on. Therefore we are aware that there are no major
problems.

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FY 3/2022 Revision of Full-year Consolidated Forecasts

s for the revision of the full-year consolidated forecasts for the ﬁscal year ending March 2022, wecaused a great concern to all of you by saying, " There may be an increase in revenue and a decreasein proﬁt for such a plan." It may have been very dicult to understand why this happened, but as I
mentioned earlier, we are aware that the operating hours per person is short, and we are promoting
the assignment of people mainly through the accounts of major automobiles manufacturers.

As will ﬁnally lead us to a situation where we can start to see results from December onwards.
Unfortunately, operating proﬁt will be down 600 million yen from the original plan. However, as
previously mentioned, we will have to wait until the end of the ﬁscal year, since it is very di cult for us
to predict how the COVID-19 pandemic will be resolved after February.
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we were to post these ﬁgures at the level of what we were told in December and January, the results
would be di erent, but considering the COVID-19 situation, which is very di cult to understand, we
have posted an adjustment to the operating proﬁt with a -600 million yen, a 20% decrease.

Ifsy, we will continue to make investments according to our clients needs, and even if we do notreach the 3 billion yen mark this ﬁscal year after making upward revisions, we will continue to raise the
top line based on the expectation that we will be able to fully recover the amount from the next ﬁscal
year.

Ba icallShareholder Return Policyr

our view of the return policy to our shareholders, we would like to maintain the dividend of
18 yen to reﬂect our initial proﬁts. As far as we are concerned, our recruitment and training activities
have been going better than planned.
Rega dingowever, although we have had some problems in the supply chain, some problems in logistics, andunfortunately, since operations have not gone as expected, we expect to make up for this in themedium term. However, since we expect to achieve more favorable results, we would like to keep thecurrent dividend unchanged.
Hs is a bit of a long explanation, but I would like to conclude my presentation. Thank you very muchfor your attention.

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