Financial Results for the First Half of the Fiscal Year Ending
March 31, 2024 and Update on the Medium-Term
Management Plan

November 8, 2023

Tsuzuki Denki Co., Ltd.
Copyright © 2023 Tsuzuki Denki Co., Ltd.

1 Financial Results for 1H FY03/24

Table ofContentsーーーー

Overview of Consolidated Results
Sale of Electronic Devices Business
Consolidated Earnings Forecast
Shareholder Return

2 Update on Medium-term Management Planー Targets of Long-Term Vision and Medium-Term
Management Plan
ー 1H Progress

1

Copyright © 2023 Tsuzuki Denki Co., Ltd.

1 Financial Results for 1H FY03/24

Table ofContentsーーーー

Overview of Consolidated Results
Sale of Electronic Devices Business
Consolidated Earnings Forecast
Shareholder Return

2 Update on Medium-term Management Planー Targets of Long-Term Vision and Medium-Term
Management Plan
ー 1H Progress

2

Copyright © 2023 Tsuzuki Denki Co., Ltd.

Consolidated Results
Achieved record 1H profits
・ Recorded steady sales mainly from order backlog. In addition to higher sales, improvement in cost ratio and reduction in SG&A expenses
contributed to profit, and operating margin rose substantially
・ Profit attributable to owners of parent increased significantly thanks to extraordinary gains from the sale of noncurrent assets, which
helped improve management resource utilization and asset efficiency
・ Orders fell owing to the absence of large projects in the Information Network Solutions business and a reactionary drop from advanced
orders in the Electronic Devices business(Millions of yen)

1H FY03/23

1H FY03/24

Change (amount)

Change (YoY)

Net sales

55,04660,887

5,841+10.6%

Gross profit

10,478

11,782

1,303+12.4%(Cost ratio)（81.0%）（80.6%）（-0.4pp）－

SG&A expenses

9,457

9,441

-16

-0.2%

Operating income

1,021

2,341

1,320

+129.3%(Operating margin)（1.9%）（3.8%）（1.9pp）

－

700

2,906

2,205

+314.8%Orders69,21362,816-6,397-9.2%

Order backlog

47,87846,429-1,449-3.0%

Profit attributable toowners of parent

3

Copyright © 2023 Tsuzuki Denki Co., Ltd.

Factors Affecting Operating Income■Positive: Effects of sales increase (+JPY1,111mn) : Higher sales in all businesses
Improvement in cost ratio (+JPY202mn) : Improved substantially in Information Network Solutions business
Lower SG&A expenses (+JPY16mn): Decrease in personnel expenses due to headcount reduction resulting
from mandatory retirement (Information Network Solutions)■Negative: Unprofitable projects (-JPY10mn): 1 project *None in FY03/23

+202

-10

16

(Millions of yen)

2,341

+1,111
YoY+1,320(+129.3%)

1,021
Increase in gross profit ＋1,303

1H FY03/23
OperatingincomeEffects of sales
increase

Improvement
in cost ratio(+0.4pp YoY)

Unprofitableprojects*
4

Lower SG&A
expenses

1H FY03/24
OperatingincomeCopyright © 2023 Tsuzuki Denki Co., Ltd.

Results by Segment■Information Network Solutions
Sales: Steady sales, especially in the equipment business (1H FY03/23 performance was affected by delivery delays due to semiconductor
shortages)
Operating income: In addition to higher sales, gross margin improved owing to pricing management and standardization of development
and construction processes■Electronic Devices

Sales: Recorded sales mainly from order backlog, because of production by automotive and other customers stabilized thanks to recovery
in semiconductor supply
Operating income: Operating income fell owing to an increase in personnel expenses as a result of recruiting personnel through mid-career
hiring(Millions of yen)

Net sales

Operating income

Change1H FY03/23

1H FY03/24

Information
Network
Solutions40,51945,653

5,134

Electronic
Devices

14,526

15,233

Consolidated
Total

55,04660,887

Change(YoY)

ChangeChange(YoY)

1H FY03/23

1H FY03/24+12.7%

521

1,930

1,408

+270.0%

706

+4.9%

483

392

-90

-18.7%

5,841+10.6%

1,021

2,341

1,320

+129.3%(amount)(amount)*Operating income adjustments are excluded
5

Copyright © 2023 Tsuzuki Denki Co., Ltd.

Results by Business Model (Information Network Solutions■Equipment
In addition to PC and application licenses, sales of equipment for network construction contributed to sales
However, orders fell owing to the absence of large projects compared to Q1 FY03/23■Development & Construction

System development and IT infrastructure/network construction projects grew, while on-premise PBX projects fell due to the shift
to cloud services■Service

Cloud services performed well, and ancillary maintenance services increased in line with growth in equipment business
However, orders and order backlog fell owing to a drop-off in large operation service projects from Q1 FY03/23(Millions of yen)

Net Sales

Orders45,653(YoY)+12.7％

52,05917,951+22.2％

22,763

Order Backlog
48,233

(YoY)
-7.3％

18,876-17.1％

28,81528,438

(YoY)
-1.3％

18,38718,368

-0.1％

5,362

5,734

+6.9％

5,065

4,335

-14.4％

23/3期2Q
1H
FY03/23

24/3期2Q
1H
FY03/24

40,519Equipment

14,694Development &Construction

6,004

6,500

+8.3％

6,894

7,564

+9.7％

19,82021,201+7.0％

22,401

21,792-2.7％

Service

23/3期2Q
1H
FY03/23

24/3期2Q
1H
FY03/24

23/3期2Q
1H
FY03/23

24/3期2Q
1H
FY03/24
6

Copyright © 2023 Tsuzuki Denki Co., Ltd.

Results by Business Model (Electronic Devices)■Orders, Net Sales
Strong sales of power semiconductors and LCD panels for in-vehicle equipment following the recovery of production in theautomobile market
Special demand (advanced orders) came to an end as the semiconductor shortage subsided■Order Backlog
Customer production stabilized thanks to restored semiconductor supply, and the build-up of long-lead items from FY03/23
and earlier steadily contributed to sales

Net Sales
15,233(Millions of yen)Orders(YoY)+4.9％

Order Backlog
19,063

17,153

17,99014,526
14,582

1H
FY03/23
23/3期2Q

1H FY03/24
24/3期2Q

1H
FY03/23
23/3期2Q

1H
FY03/24
24/3期2Q
7

(YoY)
-5.6％

(YoY)
-15.0％

1H23/3期2Q
FY03/231H
FY03/24
24/3期2Q
Copyright © 2023 Tsuzuki Denki Co., Ltd.

Transfer of Shares in Tsuzuki Embedded Solutions and Three Other Companies
Achieved flexible reorganization of the Group under the Medium-Term Management Plan policy
Going forward, we will concentrate management resources on the Information Network Solutions business toachieve further growth and boost corporate value
Background leading up to the transfer
Made restructuring of the business portfolio and Group companies a key strategy inthe medium-term management plan

1

July 2021: Established TSUZUKI EMBEDDED SOLUTIONS (spin-off of theElectronic Devices business)
October 2023: Established TSUZUKI XROSS SUPPORT (merger of Tsuzuki InfoTechno East Japan and West Japan)

Business Scale (FY03/23 Actual)

2

Recognized difficulties in creating synergies with
Information Network and challenges in terms ofcapital efficiency

Acquirer

Group companies to be sold: TSUZUKI EMBEDDED SOLUTIONS
Co., Ltd., TSUZUKI DENSAN TRADING (SHANGHAI) CO., LTD.,TSUZUKI DENSAN HONG KONG CO., LTD.,TSUZUKI DENSAN SINGAPORE PTE.
Sales: JPY29,993mn Operating income: JPY954mn
Employees: Appx. 160

Restar Holdings Corporation
Paid-in capital:
JPY4,383mn
Consolidated sales: JPY487,129mn
Employees (consolidated): 2,601*As of FY03/23

Transformation
Tsuzuki Group will become a pure Information Network Solution service business8

Copyright © 2023 Tsuzuki Denki Co., Ltd.

FY03/24 Consolidated Earnings Forecast [No Changes]
Offset the drop in the Electronic Devices business by capturing the expanding market and enhancing
earnings power
・ Four subsidiaries will be removed from the scope of consolidation from Q4 following the sale of the Electronic Devices
business・ Market environment for Information Network is good, and we will secure earnings by executing our medium-termbusiness strategy (shifting to growth areas and streamlining existing areas)(Millions of yen)

FY03/23
results

FY03/24
Forecast

Change (amount)

Change (YoY)

Net sales

123,899

126,500

2,601

+2.1%

Operating income

5,118

5,300

182

+3.6%

(Operating margin)（4.1%）（4.2%）（0.1pp）

Profit attributable toowners of parent

3,521

4,450

929

9

－
+26.4%

Copyright © 2023 Tsuzuki Denki Co., Ltd.

Shareholder Return
Dividend yield

Achieve stable dividends with a target payout
ratio of 40%*

Year-end price
JPY1,100(minimum dividend on equity (DOE) ratio of 3.5%)

Interim dividend: 38 yen; Year-end dividend: 38 yen(planned)Year-end price
JPY1,657

Year-end price
JPY1,563

5.0%

4.6%

3.9%

2.8%

3.2%

FY03/21
21/3期

FY03/22
22/3期*… Based on earnings per share excluding extraordinary income/loss, etc.
FY03/19
19/3期

FY03/20
20/3期

FY03/23
23/3期

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

120

45.0%

40.0%
40.0%

34.3%
35.0%

100

30.3%

30.2%

30.9%
JPY76

30.0%

80

Number ofshares held

JPY61

25.0%

JPY55

60

JPY46

20.0%

Shareholder benefits

JPY48

100 shares to less than
300 shares
300 shares to less than
1,000 shares

40

15.0%

Number of years
held

10.0%

20

Products (including QUO Cards,
13 types in different price ranges)

Less than 3 years

More than 3 years

JPY1,000 worth

JPY2,000 worth

JPY2,000 worth

JPY4,000 worth

JPY3,000 worth

JPY6,000 worth

5.0%

1,000 shares or more
00.0%

FY03/20

FY03/21

FY03/22

FY03/23*If 1,000 shares or more but less than 3 years (worth 3,000 yen) and 300 shares to less than 1,000
shares for more than 3 years (worth 4,000 yen) both apply, it will be treated as 300 shares to lessthan 1,000 shares for more than 3 years (worth 4,000 yen).

FY03/24(provisional)
10

Copyright © 2023 Tsuzuki Denki Co., Ltd.

1

Table ofContents
2

Financial Results for 1H FY03/24
ーーーー

Overview of Consolidated Results
Sale of Electronic Devices Business
Consolidated Earnings Forecast
Shareholder Return

Update on Medium-term Management Planー Targets of Long-Term Vision and Medium-Term
Management Plan
ー 1H Progress

11

Copyright © 2023 Tsuzuki Denki Co., Ltd.

1

Table ofContents
2

Financial Results for 1H FY03/24
ーーーー

Overview of Consolidated Results
Sale of Electronic Devices Business
Consolidated Earnings Forecast
Shareholder Return

Update on Medium-term Management Planー Targets of Long-Term Vision and Medium-Term
Management Plan
ー 1H Progress

12

Copyright © 2023 Tsuzuki Denki Co., Ltd.

Financial Targets of Long-Term Vision and Medium-Term Management Plan
[No Changes]
We will maintain our Long-Term Vision and Medium-Term Targets and take on the challenge offurther growing our Information Network Solutions business
Innovation 2023

Transformation 2026

Long-Term Vision

FY03/23 Results (INS)Management Targets for FY03/26(vs. FY03/23)

Stretch Targets for FY03/33(vs. FY03/23)

Net sales JPY93.9bn
Operating income JPY4.2bn

Net sales JPY130.0bn(+38.4%)

Net sales JPY150.0bn(+59.7%)

Operating income JPY6.5bn(+54.8%)Operating income JPY10.0bn(+138.1%)

ROE 10% or higher

ROE 15% or higher

ROE 10.4% *Consolidated
10-year Vision
Scope1+2 CO2 emissions
613t-CO2

Scope1+2 CO2 emissions
532t-CO2 (-13.2%)

Growth Navigator
An organization that navigates growthand grows together with stakeholders

13

Copyright © 2023 Tsuzuki Denki Co., Ltd.

Key Factor 1: Favorable Market Environment
Changes in the external environment also serve as a tailwind and accelerate the growth of the ICT
marketEasing of COVID-19 restrictions,recovery in investments

Increasing severity of social issues(e.g., labor shortages, etc.)

Advances in AI Everywhere

TREND

Digital First Era (sophistication, automation, labor saving, renewal of legacy systems)▼ Customer investment recovery and expansion trend as
seen based on Q2 performance of Information Network
Solutions business(Millions of yen)

▼ Domestic IT Infrastructure Market Forecast by IDC is up
significantly from the previous year
CAGR 8.4%

1,930
Operatingincome

1,063
185

532

521

CAGR 3.2%
45,65345,483
Net sales

43,162

FY03/20
20/3期

FY03/2121/3期

40,02240,519FY03/22
22/3期

FY03/23
23/3期

FY03/24
24/3期

FY03/23
FY03/24
23/3期 24/3期
14

27/3期 FY03/28
28/3期
FY03/27
Copyright © 2023 Tsuzuki Denki Co., Ltd.

Key Factor 2: Steady Improvement in Existing Areas and Opportunity Expansion
Existing areas, which account for more than 90% of sales, have a major presence and we are already seeing results fromexecuting our strategies
We will continue to thoroughly streamline and optimize our operations to capture business opportunities as they emerge▼ Cost ratio (Q2/Consolidated)
Achieved record the lowest cost ratio in the past 10 years in this 1H thanks to the success of pricing
management in existing areas
83.5%

15/3期
FY03/15

83.0%

16/3期
FY03/16

82.6%

17/3期
FY03/17

83.0%
82.0%

18/3期
FY03/18

81.9%

19/3期
FY03/19

20/3期
FY03/20

82.8%
81.6%

21/3期
FY03/21

22/3期
FY03/22

81.0%

23/3期
FY03/23

80.6%
24/3期
FY03/24▼ PC sales likely to expand beyond initial expectations
Aiming to maximize earnings by thoroughly implementing pricing management, such as by bundling with high-value-added
services
Sales during EOS special demand

PCs introduced at the time ofWin7 EOS (January 2020)
special demand are due forreplacement

Appx. 130,000
Appx. 70,000

unitsAppx. 85,000
units

units

19/3期
FY03/19

20/3期
FY03/20

Expanding needfor high-spec
PCs

Adding AI functionality
to Win11
Win10 EOS
(October 2025)

21/3期
FY03/21
15

Copyright © 2023 Tsuzuki Denki Co., Ltd.

Key Factor 3: Taking on the Challenge of M&A
Explore opportunities for growth by focusing on both growth and existing areas
Fully leverage funds gained from the sale of the Electronic Devices business to speed up the pace of reform
Growth areas and new areas are the initial main targets

Business Strategy Planning Office takes the lead inlaunching activities in preparation for M&A deals

GrowthMedium-term: Acquire lacking capabilities and channels in growthareas
Long-term: Enter new areas and markets, expand services

New areas

Social issues
Industry (Customers)- Partnerships with several M&A advisory firms- Strengthen contact with startup companies

Technology

Enhance connoisseurship through proactive interaction withexternal parties, and search for companies that can truly generatesynergies

Enter into collaborations that will strengthen
competitiveness in existing areas- Reaffirm the importance and potential of existing areas- Strengthen the overall business base and stabilize earnings

Growth areas
Cloud-based
Services
Security Products
DX Products, etc.

Existing areas
Individual Equipment Sales
Infrastructure construction
Conventional SI, etc.

Profitability
16

Copyright © 2023 Tsuzuki Denki Co., Ltd.

Shareholder Return [No Changes]
Achieve stable dividends and large dividend increases by raising the dividend payout ratio to 40%
and introducing a dividend on equity (DOE) metric
Dividend per share
Until FY03/23

From FY03/24
Raise dividend payout ratio to 40%*
(Minimum dividend payout ratio of
3.5% DOE)

Payout ratio of about 30%
IPO commemorative
dividend of JPY5 per share
45.0%

40.0%

40.0%

40.0%

130

40.0%

(Reference)
Dividend
payout ratio
35.0%

34.3%
30.2%

30.3%

30.3%

30.2%

150

30.9%

110

30.0%

90

JPY 76

25.0%

JPY55

20.0%

15.0%

JPY29

JPY39

JPY61
JPY46

70

JPY48

50

30

10.0%

10

5.0%

-10

0.0%

18/3期
FY03/18

19/3期
FY03/19

20/3期
FY03/20

21/3期
FY03/21

22/3期
FY03/22

23/3期
FY03/23

24/3期
FY03/24

25/3期
FY03/25

26/3期
FY03/26*Based on earnings per share excluding
extraordinary gains/losses, etc.
17

Copyright © 2023 Tsuzuki Denki Co., Ltd.

Financial
Resultsfor
1H
FY03/24
1ーーーー

Table ofContents2

Overview of Consolidated Results
Sale of Electronic Devices Business
Consolidated Earnings Forecast
Shareholder Return

Update on Medium-term Management Planー Targets of Long-Term Vision and Medium-Term
Management Plan
ー 1H Progress

18

Copyright © 2023 Tsuzuki Denki Co., Ltd.

Business Progress
Made progress in developing service infrastructure and reforming mindset in the field. Planning to accelerate growththrough further business investment going forward
Policies

1H initiatives by key priority
1. Promote collaboration with other companies by leveraging core technologies

Strengthen
six growth areas

Co-created services for a new era with partner companies in the communication domain- CT-e1/SaaS: System integration with LINE AiCall

2. Strengthen technical, marketing, and product development capabilities throughhuman resource development
Carried out structural reform of the engineering department to improve the quality of services and products- Organized and established the Tsuzuki Style, an in-house guideline for technical standardization

3. Expand service lineup- Launched TCloud for Smart: Fruits and Vegetables," a sales management system for the fruit and vegetablewholesale industry (Market-specific DX)- Released Azure OpenAI Service Utilization Support, a service proping methods to utilize generative AI tools
such as ChatGPT- Began offering free trial of AI Discharge Date Prediction Service (tentative name)Evaluation
Performance in the Six
Growth Areas
Total sales:

Appx. JPY5.0bn
Investment

Improve profitability
in existing areas

1. Strengthen product portfolio management under the concept of TSF /2. Ensure thorough pricing management
Made progress in mindset reform in the field through rapid execution of policies- Introduced and managed sales ROI indicators- Established and operated pricing management flow (review of pricing)- Changed project review operation

Overall

3. Reorganize business formation
Further strengthened Information Network business base through dynamic reorganization of the Group- Merger of Tsuzuki Info-Techno East Japan and West Japan (established Tsuzuki Xross Support)- Sale of Electronic Devices business (transfer of shares of 4 related subsidiaries)
19

Copyright © 2023 Tsuzuki Denki Co., Ltd.

Initiatives to Enhance Human Capital
Carried out system expansion and culture reform aimed at strengthening the personnel supporting our business strategy
Key
priorities

1H initiatives

Evaluation

Three pillars

Results

1. Develop leadership talent / 2. Develop diverse professional talent
3. Build teams that work autonomously and engage both internally and externally

Personnel
development

1. Recruitment for growing business- Launched referral recruitment system and introduced the My Refer app (currently in the process of selecting
candidates for 40% of the planned hiring for FY03/24)

2. Develop diverse talent- Reorganized personnel development program system into Leader Personnel Development, Professional
Personnel Development, and Autonomous Personnel Development- Company-wide development of DX personnel (encourage all employees to take the DX certification test;
number of employees that acquired certification increased 80% from FY03/23)- Develop personnel who can create social issue-driven businesses through cross-border programs andinterning at other companies

DX Associate Certified
197 (progress rate 82%)
External Evaluation
Eruboshi certification(acquired for the first time)
Investment

Prepareinternal environment

Two pillars
1. Create a foundation that enables employees to take on challenges on their own
2. Establish an environment that supports the success of diverse talentOverall

1. Performance-driven system- Launched project for migrating to the new HR system
2. Open corporate culture reform- Stimulated internal and external exchanges and enhanced autonomy through the use of external exchange
programs (37 employees participated)- Launched D&I promotion "Colorful Value" project (35 employees participated)
20

Copyright © 2023 Tsuzuki Denki Co., Ltd.

Topic: Our Approach to Solving Social Issues
We solve customer and social issues by using our expertise and technology and aim to engage in corporate activities that
contribute to the sustainability of society .
Logistics crisis
Cyber attack
Labor shortage

Aging

Increasing sophistication and scale of cyber attacks(increasing risk to businesses)

Tighter management of working hours

CO2 reduction

Diversification of working environments→ Increased complexity of security measures

The looming "2024 Problem"

Proper security measures are an urgent need forcompanies

Comprehensive cloudservices for thelogistics industry

Cyber Security Management Support
Services

Optimize and streamline delivery operations
Improving operations throughdata analysis

Comprehensive andobjective evaluation using
assessment
tools

Paperless (transition tosmartphones)

We have been working with over 500 logistics customers for morethan 20 years and have condensed our know-how to realize safe,
stable, and secure logistics.

Visualize customer status
and provide support for effectiveplanning

Specialists provide total security optimization andprotect customers fromever-evolving cyber-attacks

End-FY03/27 target: 12,000 licenses (JPY1,250 per month per license)
21

End-FY03/26 Target: Contracts with 200 companies
Copyright © 2023 Tsuzuki Denki Co., Ltd.

Reference: Share Price Trends(Volume: Number of shares)(Shares: Yen)
3,000

250,000

2,500
200,000

2,000

150,000

1,500

100,000
1,000

50,000500

02023/4/6

4/6/2023

2023/5/6

5/6/2023

2023/6/6

6/6/2023

2023/7/6

2023/8/6

8/6/2023

7/6/202322

2023/9/6

9/6/2023

2023/10/6

10/6/2023

02023/11/6

11/6/2023
Copyright © 2023 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.
23

Copyright © 2023 Tsuzuki Denki Co., Ltd.