Tsuzuki Denki Co., Ltd
Financial Results for the First Half of the Fiscal Year Ending
March 31, 2023

November 16, 2022
Stock code: 8157

URL https://www.tsuzuki.co.jp
Copyright © 2022 Tsuzuki Denki Co., Ltd.

Table of Contents

1

Overview of Q2 FY03/23 Consolidated Results2

FY03/23 Consolidated Earnings Forecast

3

Progress of Medium-term Management Plan

４ Shareholder Return1

Copyright © 2022 Tsuzuki Denki Co., Ltd.

Table of Contents

On June 24, 2022

We created a purpose statement and reorganized management principles(Tsuzuki Principles)
The purpose statement expresses our values and aspirations, while “values” defines the values we hold and theaction guidelines we follow
Managementprinciples
Purpose statement

Values/seven actions
Face

BuildConnect

Challenge

Enjoy

SupportPersevere

Based on the purpose statement, we are creating a long-term vision and a new medium-management plan as we prepare for our 100th anniversary
2Copyright © 2022 Tsuzuki Denki Co., Ltd.

Table of Contents

1

Overview of Q2 FY03/23 Consolidated Results2

FY03/23 consolidated earnings forecast

3

Progress of Medium-term Management Plan

４ Shareholder Return3Copyright © 2022 Tsuzuki Denki Co., Ltd.

1. Overview of Q2 FY03/23 Consolidated ResultsHighlights
Net sales: JPY55,046mn, an increase of JPY1,945mn (103.7% YoY)
Operating income: JPY1,021mn, an increase of 222mn (127.8% YoY)

Second-highest sales and profit in 10 years
Information Network Solutions
・Customers made steady IT investments (investments suspended amid the pandemic recovered in some industries)
・Delivery delays associated with semiconductor shortages were mitigated to a certain extent
・Progress was made in transition to service of cloud computing

Electronic Devices
・The supply-demand balance for semiconductors began to improve, but there was still special demand
4Copyright © 2022 Tsuzuki Denki Co., Ltd.

1. Overview of Q2 FY03/23 Consolidated Results

Statement of Income(Millions of yen)

1H FY03/22

Change (amount)

1H FY03/23

Change (YoY)

Net sales

53,10055,046

1,945

103.7%

Gross profit

9,789

10,478688

107.0%(Cost ratio)（81.6%）（81.0%）（-0.6pt）－SG&A expenses

8,990

9,457

466

105.2%

Operating income

798

1,021

222

127.8%(Operating margin)（1.5%）（1.9%）（0.4pt）－Profit attributable toowners of parent

492

700

208

142.3%

Orders

68,576

69,213637

100.9%

Order backlog

37,94247,8789,935

126.2%

5Copyright © 2022 Tsuzuki Denki Co., Ltd.

1. Overview of Q2 FY03/23 Consolidated Results

Factors Affecting Sales +1.4+(Billions of yen)++2.5-1.055
YoY+3.7%+1.9-1.053.1

1H FY03/22
SalesSpecial demand・Growth in Equipment
・Growth in cloud services for ElectronicDevices

Effects ofsemiconductor
shortages*1・Decrease in Service*2
1H FY03/23・Decrease in Development Sales& Construction(*1) Sales were postponed because of a delay in the delivery of information network equipment
amid semiconductor shortages(*2) Large-scale LCM services expired for some customers
6Copyright © 2022 Tsuzuki Denki Co., Ltd.

1. Overview of Q2 FY03/23 Consolidated Results

Factors Affecting Operating Income(Millions of yen)++YoY
+27.8%+222-

Increase in gross profit: ＋688

FY03/22
Operatingincome

Effects ofsales
increase

Improvement in costratio

Unprofitableprojects

Higher SG&Aexpenses*(+0.6pp YoY)

1H FY03/23
Operatingincome(*) Higher SG&A expenses: Expenses related to pre-order activity
and personnel expenses in Information Network Solutions
7

Copyright © 2022 Tsuzuki Denki Co., Ltd.

1. Overview of Q2 FY03/23 Consolidated Results

Results by Segment(Millions of yen)

Net sales
1H
FY03/221H
FY03/23

Operating income
Change(amount)

InformationNetworkSolutions

40,02240,519

ElectronicDevices

13,078

14,526

1,448

Consolidated Total

53,10055,046

Change(YoY)

496 101.2%

1H
FY03/221H
FY03/23

Change(amount)

Change(YoY)532521-1098.0%111.1%

266483217

181.5%

1,945 103.7%

798

1,021

222

127.8%

8

Copyright © 2022 Tsuzuki Denki Co., Ltd.

1. Overview of Q2 FY03/23 Consolidated Results

Results by Business Model (Information Network Solutions)(Millions of yen)

Net sales
40,02240,519（YoY）
101.2％

Orders52,05950,175（YoY）
103.8％

Order backlog（YoY）

28,815116.5％

18,387122.6％

5,852

5,362

91.6％

3,892

5,065

130.1％

1H
FY03/22
22/3期2Q

1H
FY03/23
23/3期2Q

24,73813,899Equipment

14,694105.7％

22,76320,067113.4％Development&Construction

6,214

6,004

96.6％

8,435

6,894

81.7％

Service19,908

19,82099.6％

21,672

22,401103.4％

1H
FY03/22
22/3期2Q
Equipment

1H
FY03/23
23/3期2Q

1H22/3期2Q
FY03/221H
FY03/23
23/3期2Q

14,993

Effects of delivery delays associated with semiconductor shortages were mitigated to a certain extent
We actively held talks with customers in the railroad, manufacturing, financial industries, etc.

Development &Construction

Despite a reactionary decline from the previous fiscal year and a shift in services, PBX, networkconstruction, etc., remained solid

Service

Orders and order backlog remained solid thanks to growth in cloud services and equipmentmaintenance services
9Copyright © 2022 Tsuzuki Denki Co., Ltd.

1. Overview of Q2 FY03/23 Consolidated Results

Results by Business Model (Electronic Devices)(Millions of yen)Orders

Net sales（YoY）
14,526111.1%

Order backlog
17,15319,063144.4%

93.2%

13,078

1H22/3期2Q
FY03/22

（YoY）

（YoY）

18,40013,20423/3期2Q
1H
FY03/23

1H22/3期2Q
FY03/221H
FY03/23
23/3期2Q

1H
FY03/2222/3期2Q

1H
FY03/23
23/3期2Q

Net sales/Orders

Semiconductor shortages continued, but sales significantly rose as we secured volume by leveraging ourprocurement capabilities and strengthened proposals for alternative products. However, some suppliers
normalized their production. Thus, the supply-demand balance improved and led to a decline in demand.

Order backlog

Buildup of inventory of long-lead items(We received, as we did in the previous fiscal year, advanced orders from customers concerned about
semiconductor shortages. The majority of the sales will be made in the next fiscal year or later.)
10Copyright © 2022 Tsuzuki Denki Co., Ltd.

1. Overview of Q2 FY03/23 Consolidated Results

Results by Business Model (Electronic Devices – by Product)
Sales composition ratio by product inElectronic Devices: Q2 FY03/23

Other
5%
Supplies8%
Hard disk/SSD
10%

Semiconductor
19%

Power
semiconductor
15%

Embeddedproducts
11%
LCD
15%

Electronicparts
17%

This fiscal year (+)
Semiconductors/electronic parts for FA and industrial
equipment
Power semiconductors for electric vehicles, power supply
equipment, and air conditioning equipment
Embedded products for servers, PCs, etc.
This fiscal year (-)
Hard disks for consumer equipment
LCD panels and SSD products for in-vehicle informationequipment

11

Copyright © 2022 Tsuzuki Denki Co., Ltd.

Table of Contents

1

Overview of Q2 FY03/23 consolidated results2

FY03/23 Consolidated Earnings Forecast

3

Progress of Medium-term Management Plan

４ Shareholder Return

12

Copyright © 2022 Tsuzuki Denki Co., Ltd.

2. FY03/23 Consolidated Earnings Forecast

We raised our FY03/23 consolidated earnings forecast(released on May 13, 2022)(Millions of yen)

Change(YoY)

Revised forecast(B)

Net sales

120,000

121,000

1,000

0.8%

119,316

1,683

1.4%

Operatingincome

4,000

4,500

500

12.5%

4,012

487

12.2%

Ordinary
profit

4,130

4,630

500

12.1%

4,227

402

9.5%

Profit attributableto owners ofparent

2,760

3,090

330

12.0%

2,798

291

10.4%

Net sales

ProfitChange（B-A）

FY03/22
results

Previous forecast(A）(Change)ChangeWe have a high order backlog, but sales will not be recorded until next fiscal year or later for the majority of the backlog
for electronic devices (long-lead inventory). Therefore, the sales contribution of the order backlog will be limited during
this fiscal year. (Sales are progressing as planned for Information Network Solutions.)
Profitability is expected to continue to improve in 2H (the cost ratio improved by 0.6pp YoY in 1H)
13Copyright © 2022 Tsuzuki Denki Co., Ltd.

2. FY03/23 Consolidated Earnings Forecast

Long-term Trends in the Cost Ratio and Operating Margin
Consolidated
4.0%

83.7%

83.4%

3.6%
2.7%

3.5%

3.0%

82.5% 82.6%

Cost ratio

2.5%

2.0%

Operating margin

1.5%

1.0%

0.5%

1.4%

2.3%

1.7% 2.0%

2.8%
81.9%

3.4%

1,119

0.0%

1,053

1,056

1,051

FY03/15

FY03/16

FY03/17

83.5%

83.0%

82.5%

82.1%

81.6%

82.0%

81.5%

81.1%

FY03/18

1,188

FY03/19

1,253

81.0%

Changes in business structure

FY03/20

Operating margin(Information Network Solutions)

2.0%
0.7%

2.6%
0.2%

2.7%
0.9%

3.3%
1.0%

1,193

1,210

FY03/21

FY03/22

FY03/23（Forecast）

4.2%
3.0%
0.7%

80.0%

1,200

By segment

1.1%

Cost ratio improved significantly over themedium to long term; operating margin roseaccordingly

84.0%

80.5%

Net sales (Billions of yen)

1.5%

3.7%

1.1%

3.7%
2.2%

Operating margin(Electronic Devices)
14

79.5%

✔ We are strengthening profitable services(Information Network Solutions)

Ensuring appropriate profit✔ We have practically no unprofitable projects
thanks to thorough profit management(Information Network Solutions)✔ We are addressing soaring procurement costs(Electronic Devices)
Copyright © 2022 Tsuzuki Denki Co., Ltd.

Table of Contents

1Overview of Q2 FY03/23 consolidate results2

FY03/23 consolidated earnings forecast

3

Progress of Medium-term Management Plan

４ Shareholder Return15

Copyright © 2022 Tsuzuki Denki Co., Ltd.

３．Progress of Medium-term Management Plan

Overview of Medium-term Management Plan (FY03/21 to FY03/23)
Medium-term Management Plan "Innovation 2023”＝VisionHelp customers achieve digital transformation
and boost competitiveness

Create a prosperous
societyInnovation Service Provider

Key priorities
1. Reforming our business structure byexpanding the service we offer
2. Promoting data-driven businesses
3. Strengthening our management base

FY03/23
Targets

SalesJPY120bn

Operating income
JPY4bn16

ESG Activities
SDGs

ROE8%
Copyright © 2022 Tsuzuki Denki Co., Ltd.

３．Progress of Medium-term Management Plan

Progress of Key Priorities in the Medium-term Management Plan(Overview)
1. Reforming our business structure by expanding the service we offer
Maintaining a high service-sales composition ratio by promoting human-resource training, etc. to release
new services and strengthen service sales
Service sales composition

31.7%
1H FY03/20

37.5%
33.6%
1H FY03/21

1H FY03/22

36.0% （-1.5pt YoY）

1H FY03/22*Declined because large-scale service contracts expired for some customers

2. Promoting data-driven businesses
Focusing on business design centered on co-creation with partners
・Alliance with Digital Platformer Corp. ・Progress in collaboration with JIG-SAW INC.
・Active demonstration experiments in the AI field

3. Strengthening our management baseCreating a purpose statement, reorganizing management philosophy
Formulating a long-term vision and next medium-term management plan based on the purpose statement
17

Copyright © 2022 Tsuzuki Denki Co., Ltd.

３．Progress of Medium-term Management Plan

Strengthening the Service Business
New service releases and enhancements of existing services are progressing under our TSF service framework

Total SolutionService Framework（TSF）
Implementation support
service
D-VUE
DX implementation
supportServices
Customersystems

Common services
Tsuzukiservices

D-VUE
Cloud Data Lake Platform

Integrated managed
service
Platforms

Cyber security
management support

Zero trust security service

Cloud

On-premises

18

IoT connectivity service

Copyright © 2022 Tsuzuki Denki Co., Ltd.

３．Progress of Medium-term Management Plan

Strengthening the Service Business(a sales-management system forfruit and vegetable wholesalers)Cyber security management support services

TCloud for Smart Fruits

Support for the visualization of cybersecurity
response and the creation of effective
cybersecurity planning

Industry-wide cloud platform covering the basic
operations of fruit and vegetable sales

Comprehensive and objective
evaluation using
assessment tools

Consulting by security
engineers

Expertise gained through the provision of ICT
support for fruit and vegetable wholesalers for 40years

Cloud format lowers entry hurdle

Offensive cybersecurity
Perfect for small- and medium-sized fruit andvegetable markets✔ New security challenges are on the rise as companies actively✔ Responding to changes in the environment, such as a revision

pursue DX✔ Specialists provide low-cost, short lead-time, and high-quality
servicesto the Whole Market Act, diversification of distribution channels, andhuman-resource shortages

Aiming for a 30% share of sales-management systems
for fruit and vegetable wholesale markets (small- andmedium-sized operators)

Aiming to sign contracts with 200 companies
by end-March 2026
19Copyright © 2022 Tsuzuki Denki Co., Ltd.

３．Progress of Medium-term Management Plan

Strengthening the Service BusinessD-VUE® Implementation Support Services

TManaged Service

One-stop support service for upstream processes
such as business design and data analysis for DX
implementation

Monitors up to 10 servers in cloud and on-premises environments;
The service package specifies surveillance targets and provides
primary response when a problem occurs

Advisory service
Design workshop
Marketing service
creation
DX talent reskilling

Creation of aspirational goals, aswell as qualitative research andtest-marketing, to help customers
achieve their targets(Server-surveillance starter service)【Server-surveillance starter service pack 10】
On-premises/cloud

Remote center✔ Provides surveillance 24 hours

Reskilling program for digitaltalents to help customers foster
DX personnel they needa day, 365 days a year

✔ Monitors for, and reports on, any
abnormalities✔ Provides primary response toproblems

These two are newly
added✔ Provides monthly reports

Solving problems faced bycustomers, providing
sustainability support

Systemadministrator

Upstream approach toexpanding business domains

Surveillanceengineer
Surveillance tool

We will expand service sales by capturing demandfor cloud computing and surveillance; Suchdemand grew during the pandemic
20Copyright © 2022 Tsuzuki Denki Co., Ltd.

３．Progress of Medium-term Management Plan

Co-creation with Partners
Digital Platformer Corp.

JIG-SAW INC.

Business alliance agreement signed (August 23, 2022)

Release of Tsuzuki IoT StarterKit

NEQTO Engine Linux version was released by the company(September 2022)
We will leverage the alliance todevelop services that incorporate this product ahead ofother companies

We will combine blockchain technology, which is essential
in the era of Web. 3.0, with our Group’s industry
knowledge and IoT technology to develop new markets✔ The acceleration of DX has increased the need for reliable information.
Thus, blockchain technology, which protects against data tampering andensures transparency, is gaining attention

Tsuzuki IoT StarterKit
Ultrasonicsensor

Infraredsensor

LITA, blockchain platform
We will add LITA to our service lineup and createbusinesses through a proof of concept within ourcompany and with our customers

Temperature
sensorSensingdevices
CameraInstalled withNEQTO EngineLinux21

Bringing IoT closer to customers

We will develop sensing devices
compatible with sensors of variousspecifications. This will lower thehurdle for introducing IoT. In this way,
we will uncover potential IoT needs
and expand sales.

Copyright © 2022 Tsuzuki Denki Co., Ltd.

３．Progress of Medium-term Management PlanCo-creation with Partners
Nextgen, Inc.
【Joint development】 Cloud PBX

No physical PBX needed

Reduction in operational
loads

Extensible

Works in any location

No maintenance needed

No physical assets
neededFlexibleHigh quality

Low costs✔ Customers in various industries such as financial, manufacturing, andreal estate are adopting the service, which provides unparalleledfunctionality and quality✔ Highly competitive in on-premises PBX construction

IP-PBX software
NX-C1000

Our Group’s voice
platform technology✔ We stand out for our reliability and scalability;
The business is highly profitable (we serve major
companies in the financial industry, etc.)

22Copyright © 2022 Tsuzuki Denki Co., Ltd.

Table of Contents

1

Overview of Q2 FY03/23 consolidated results2

FY03/23 consolidated earnings forecast

3

Progress of Medium-term Management Plan

４ Shareholder Return23

Copyright © 2022 Tsuzuki Denki Co., Ltd.

４．Shareholder Return

Shareholder ReturnInterim dividend: JPY25 (including JPY2 commemorative
dividend for the 90th anniversary)
Annual dividend: JPY50 (provisional)

Dividend yield
Year-end
price
JPY1,100

Aiming to maintain stable dividends with a payout ratioof around 30%

4.6%

5.0%

3.3%

Year-end
price
JPY1,657

Year-end
price
JPY1,480

2.8%

3.2%

FY03/21
21/3期

22/3期
FY03/22

Dividend per share
Record high profit
FY03/18
18/3期

JPY55
JPY46

JPY48

FY03/19
19/3期

FY03/20
20/3期*Dividend yield = Dividend per share / Share price at theend of the period (final record date)

JPY50

JPY39

Shareholder benefits

FY03/19

FY03/20

FY03/21

FY03/22

Number of shares heldProductsDonation

100 shares to less than 1,000shares

JPY1,000 worth of food items

JPY1,000

1,000 shares or more

JPY3,000 worth of food items

JPY3,000

FY03/23(provisional)
24

Copyright © 2022 Tsuzuki Denki Co., Ltd.

Reference

Press Releases
No.

Date

Link to press
releaseContent

1

2022/06/24

Established a purpose statement

22022/07/14

Released FINDISH, an AI-based tableware-search site, on a trial basis32022/08/23

TSUZUKI DENKI and Digital Platformer concluded a business alliance agreement42022/08/29

52022/09/21

Released information regarding TCloud for Smart Fruits, a sales management system forfruit and vegetable wholesalers
Won both corporate excellence award and individual excellence award in an industry DX
certification test

62022/09/27

Launched cybersecurity management support services

25

Copyright © 2022 Tsuzuki Denki Co., Ltd.

Reference

Stock Price History(Stock price: Yen)

(Volume: Shares)
160,000

1,600

140,000

1,400

120,000

1,200

100,000

1,000

80,000800

60,000600

40,000400

20,00020002022/4/1

02022/5/1

2022/6/1

2022/7/1

2022/8/1

26

2022/9/1

2022/10/1

2022/11/1

Copyright © 2022 Tsuzuki Denki Co., Ltd.

Contact

Contact

Tsuzuki Denki Co., Ltd.
Management Planning Office

Address

6-19-15 Shinbashi, Minato-ku, Tokyo 105-8665, Japan (Tokyo Art Club Building)
Phone: 050-3684-7780

ir-tantou@tsuzuki.co.jp
https://www.tsuzuki.co.jp/Disclaimer
The forward-looking statements, including earnings forecasts, contained in this document are based on information
available to the company at the time of this document's release and are subject to a number of uncertainties. Please notethat actual results may differ significantly due to various factors. Although every effort has been made to ensure theaccuracy of the information contained in this document, please note that the accuracy and certainty of its content is notguaranteed. The names of companies, products, and services mentioned in this document are registered trademarks ortrademarks of their respective owners.
27

Copyright © 2022 Tsuzuki Denki Co., Ltd.