Explanatory Materials for
Financial Results
Fiscal Year Ended March 31, 2024
IWATSU ELECTRIC CO., LTD. | May 15, 2024

Table of Contents

1

Financial Highlights/Progress of Medium-term Management Plan

2

Results for the Fiscal Year Ended March 31, 2024

3

Forecast for the Fiscal Year Ending March 31, 2025

© 2024 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

2

1

Financial Highlights/
Progress of Mediumterm Management PlanFinancial Highlights for the Fiscal Year Ended March 31, 2024

Revenue

Operating profit¥21.29 billion¥(0.48) billion

YoY-6.9% [¥(1.58) billion]

External
Environment

YoY–% [+¥0.49 billion]

Profit attributable toROE

owners of parent¥0.52 billion
YoY–% [+¥1.72 billion]

2.0%
YoY

+6.8%

 With the easing of restrictions related to the COVID-19 pandemic, normalization of social and economic activities are advancing, andthe economy is on a gentle path toward recovery.
 However, the outlook remains uncertain due to concerns of a possible slowdown in consumption and capital investment caused byunstable international conditions, soaring fuel prices, currency fluctuations, and continuous price increases.

Major Impacts on
Business© 2024 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

Business
communication
systems

Although the impact on sales caused by components procurement difficulties is easing, demand for business phones is on a
gradual decline, resulting in distributor inventory adjustments as well as a decline in replacement demand.
Wide adoption of diverse work styles has led to the advancement of cloud-based services and diversification of network
equipment, resulting in prolonged business negotiations.

Printing systems

The overall market is on a declining trend due to advancement of paperless working practices as a result of increasing focus onenvironmental conservation and cost reduction.
We are utilizing the expertise we have cultivated through our printing business to transition to a business model focused on
products that apply chemical technology.

Test andmeasurement
equipment

We are seeing robust orders for power electronics-related products helped by rising environmental awareness.
Demand for electronic components, which temporarily surged in the previous fiscal year, has now stabilized due to improvementsin the supply chain.

Property leasing

Office vacancy rates are declining mainly in central Tokyo, resulting in steady operations of our office rental property.
The rental residential apartments we newly acquired through an anonymous association that is a consolidated subsidiary arenearly fully occupied.

4

Major Medium-term Measures Implemented in the Fiscal Year Ended March 31, 2024
Medium-term Tier 1: Improved efficiency of indirect operations
 Review of operations through the introduction of the new ERPThe new ERP system was implemented and went live from May 2023 as planned. We are promoting review and efficiency enhancement of operations throughimplementation of DX and utilization of business mainframe system and ancillary digital tools.

Medium-term Tier 2: Business selection and concentration
 Divestment of groxi.Inc. shares• As a result of the business selection and concentration study, we sold all shares in groxi.Inc. (a 100% consolidated subsidiary) to Elecom Co., Ltd. as of the end of June
2023.
• We shall strengthen collaboration with Elecom Co., Ltd. to enhance our business of promoting office DX by leveraging economies of scale to diversify products andservices, accelerate delivery, and enhance cost competitiveness.

Medium-term Tier 2: Acceleration of overseas expansion of test and measurement equipment business Capital and business alliance with Heimann Industries AG (hereinafter referred to as Heimann)
In February 2024, we subscribed to a third-party share allotment made by Heimann Industries AG, a German probe manufacturer, and entered into a capital and businessalliance agreement with Heimann. By strengthening the relationship with Heimann and expanding sales of our measurement products in Europe and the US, we will
speedily conduct a business rollout and secure stable procurement of Heimann’s high-performance probes to maintain and enhance the cost competitiveness of our
products.

Medium-term Tier 3: Promotion of growth strategies through M&A
 Capital and business alliance with Ai Holdings Corporation (hereinafter referred to as Ai HD) and a third-party share allotment of Company
shares to Ai HD
In December 2023, we entered into a capital and business alliance agreement with Ai HD, and implemented a third-party share allotment of Company shares to Ai HD witha view to expanding the business domain of our business communication systems business and accelerate overseas expansion of our test and measurement equipment
business. Our business operations are complementary, so by working together we aim to achieve more stable business operations while enhancing the enterprise valuesof both companies, with a focus on securing business synergies between the companies.
© 2024 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

5

Progress of Medium-term Management Plan

Tier 1

Thorough reduction of fixed costs

As explained above, the measures in the second year of the medium-term management plan are basically showing
progress as planned, but the impact on P/L is behind plan.
Major measures
Theme

Contents
Details of implementation (fiscal year ended March 31, 2024)

Cost reductionof Kugayama
Headquarters

 Reduction of property maintenance costs for Kugayama

Headquarters, etc.
 Improved efficiency of indirect operations(Review of operations through the introduction of ERP, etc.)

 Improved efficiency of production system with multiple

Improved
efficiency of
production

locations Improvement of product organization and purchasing

methods
 Improved production efficiency through factory DX, etc.

Improved
efficiency ofdevelopment
Review ofbusiness
profitability

 Reduction of obsolete parts support
 Commonization of multiple business phone architectures, etc.
 Reduction of outsourcing costs by increasing inhouseproduction

 Review of printing business operations© 2024 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

The new ERP system was implemented and went live
from May 2023 as planned. We are promoting review andefficiency enhancement of operations throughimplementation of DX and utilization of businessmainframe system and ancillary digital tools.
• Completed transfer of all shares of Iwatsu (Malaysia) (amanufacturing subsidiary) in September 2023. Although
we are promoting production efficiency improvementswith a view to consolidated production of business
communication equipment into domestic factories byAugust 2024, the impact on P/L is behind plan.
• Promoting production efficiency by advancing factory
DX through equipment automation and increased
deployment of cobots.

Effect amount(total)¥0 million¥0 million

Measures are mostly progressing according to plan.
Commonized architecture of business phones will be
adopted for development planned in next fiscal year. We
are also promoting commonization of the development
environment and in-house production of business phones.

¥0 million

Iwatsu Chemical Cross is exploring businesses utilizing
chemical technology. We will continue to review
operations side by side with commercialization studies.

¥0 million

6Progress of Medium-term Management Plan
Improvement in Operating Income

Tier 1

Thorough reduction of fixed costs

Fiscal year
endingMarch 31, 2025

Fiscal year ended March 31, 2024
Theme
Initial plan

Result (A)Rate ofachievement

Fiscal year ending
March 31, 2026
(Final year of themedium-term
management plan)

Forecast

Plan (B)

Rate ofprogress(A/B)

Cost reduction of
Kugayama
Headquarters¥0 million¥0 million-%¥0 million¥470 million-%

Improved efficiency
of production¥30 million¥0 million-%¥110 million¥410 million-%

Improved efficiency
of development¥0 million¥0 million-%¥190 million¥200 million-%

Review of businessprofitability¥0 million¥0 million-%¥0 million¥100 million-%

Total ¥1,180 million© 2024 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

7

Progress of Medium-term Management Plan

Tier 2

Promote growth strategies through businessselection and concentration and alliances

As explained above, the measures in the second year of the medium-term management plan are basically showing progress as planned,
but the impact on P/L is slightly behind plan.
Theme

Contents

Major measures
Details of implementation (fiscal year ended March 31, 2024)

Growth of test andmeasurement
equipment

Growth of business
communication
systems

 Accelerate overseas expansion (China, Europe,

America) with a focus on instrumentation in the powerelectronics-related field Expand lineup of power electronics-related products

 Strengthen subscription business••

Strengthen business of promoting office DX
Shift to cloud-based services for contact center systems

 Strengthen contract production business Initiatives in advanced technologies such as 5G-related

technologies, energy, healthcare, materials, etc.

New areadevelopment

 Expansion of IoT business through integration of

information and communication technology andelectronic measurement technology
 Create new markets by applying chemical technology

cultivated in the printing business© 2024 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

Effect amount(total)• We made a ¥800 million capital investment in Heimann Industries
AG, our German collaboration partner in the fields of sales,
maintenance and joint development in February 2024. We also
entered into a capital and business alliance with Heimann toaccelerate overseas sales expansion. The impact on P/L is slightly
behind plan.

¥180 million• We promote collaboration with other companies to strengthen ourbusiness of promoting office DX.
• The shift to cloud-based services through our in-house Cloud
Communication Platform Blue Commpaas is making good progress.
• The impact on P/L of contract production business was still negative
as of the fiscal year ended March 31, 2024, owing to difficulties inprocuring components and soaring raw materials prices.
As part of our efforts to strengthen the contract production business,
we are engaging in ODM production of interactive kiosks incollaboration with Ai Holdings Corporation. We intend to promote a
growth strategy as a Tier 3 project in future.

¥(220) million• For local 5G-related technologies, verification tests conducted within the Group are partly reaching theevaluation/validation phase. We are expanding the scope of the verification tests within the Group.
• A certain level of effectiveness has been identified through joint research with The University of ElectroCommunications on cutting-edge material technology (radio wave reflector using transparent conductive
materials). We will continue the joint research with the university into the next fiscal year.
• Application of chemical technologies in areas such as electric printing has reached the feasibility study
phase where we are conducting search for a collaboration partner as well as validation of technicalissues. The project is progressing steadily, although we expect it will take time to reach thecommercialization stage.
8

Progress of Medium-term Management Plan
Improvement in Operating Income

Tier 2

Promote growth strategies through businessselection and concentration and alliances

Fiscal year
endingMarch 31, 2025

Fiscal year ended March 31, 2024
Theme
Rate ofachievement

Forecast

Fiscal year ending
March 31, 2026
(Final year of themedium-term
management plan)

Rate ofprogress(A/B)

Plan (B)

Initial plan

Result (A)Growth of test andmeasurement
equipment¥190 million¥180 million

94.7%¥210 million¥310 million-%

Growth of business
communication
systems¥0 million¥(220) million-%¥0 million¥130 million-%

Total ¥440 million© 2024 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

9

2

Results for the
Fiscal Year Ended
March 31, 2024

Results for the Fiscal Year Ended March 31, 2024
Revenue declined year on year due to the impact of the exclusion of certain subsidiaries from consolidation, fluctuation of contract production demand, and delay of
new projects, but was ahead of the Company forecast.
 Operating profit and ordinary profit increased year on year helped by the reduction of the loss on valuation of inventories, but were behind the Company forecast due
to the delay of the reduction of the same loss.
 Profit increased year on year and was better than the Company forecast helped by gain on sale of shares of subsidiaries and associates and investment securities.


Results for the
fiscal year ended
March 31, 2023*1

Results for the
fiscal year ended
March 31, 2024

Revenue

228.7

212.9

(15.8)

Operating profit

(9.8)

(4.8)

+5.0

Ordinary profit

(9.1)

(5.1)

+4.0

Profit attributable toowners of parent(11.9)

5.2

+17.3

ROE

(4.8%)

2.0%

+6.8%

(¥100 million)

Change fromprevious term

*1 Includes impact of retrospective application due to changes in accounting policies© 2024 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

[(6.9%)]

[–]

[–]

[–]

Forecast for the
fiscal year ended
March 31, 2024*2

210.0

Compared toprevious forecast+2.9[+1.4%]

(4.0)

(0.8)

(4.0)

(1.1)

4.0

+1.2

1.6%

+0.4%

[–]

[–]

[–]

*2 Announced on February 9, 2024

11

Analysis of Change in Operating Profit from Previous Term(¥100 million)

Main causes of change
 Changes in segment gross profit(total):-¥180 million
Reference: “Segment Overview” section

 Decrease in selling, general andadministrative expenses:+¥320 million
Despite incurring one-off expenses related
to the measures in the medium-term
management plan, increases in expenses
were kept to ¥40 million due tostreamlining of other expenses. Coupledwith a ¥360 million reduction in personnel
costs due to the exclusion of certain
subsidiaries from consolidation, overall
SG&A expenses declined by ¥320 million.

 Decrease in loss from inventory
valuation:+¥360 million

Changes in segment gross profit© 2024 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

Loss on valuation of inventories, which
surged in the previous fiscal year owing toadvance procurement of materials under
the difficult procurement environment,
decreased in the current fiscal year in linewith the improvement of the environment.
12Analysis of Change in Operating Profit Compared to Company Plan(¥100 million)

Main causes of change Delayed reduction of loss frominventory valuation: -¥220 million
Reduction of loss on valuation of
inventories was delayed due to thecontinued high level of inventories, owing
to changes and extensions to somedelivery due dates coupled with receipt ofdelivery of advance procurement
components.

 Changes in segment gross profit(total):-¥80 million
Reference: “Segment Overview” section

 Decrease in selling, general andadministrative expenses:+¥210 million
Decrease of expenses from ongoingstreamlining efforts* Announced on February 9, 2024

© 2024 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

Changes in segment gross profit
13

Segment Overview: Business Communication Systems● Revenue, Segment Profit/Loss(¥100 million)

180

150

120

(¥100 million)

176.0
27.3

Reference

154.1

17.1

8.4
10.5

16.0

19.6

90

Main causes of change

12

152.0
11.7
10.0

10

19.3

8

7.2

9.7

6

Segment profit/loss (right axis)

115.6

111.0

4

Revenue (left axis)

7.5
60

115.5

Other

30

2

Contract production
Cloud solution

0

0

Fiscal year ended
March 31, 2023
(Actual)© 2024 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

Fiscal year ended
March 31, 2024
(Actual)Fiscal year ended
March 31, 2024
(Company Plan)

Business phone

 Revenue
The increase in cloud solution sales
from large project orders was offset bya decrease in contract production
sales caused by fulfillment of orders
from past projects and delay of new
projects, coupled with the impact of thedeconsolidation of certain subsidiaries.
As a result, revenue decreased 12.4%
year on year to ¥15,410 million.
 Segment profit/loss
Despite the surge of raw material costs
and increase in outsourced installation
work, a significant reduction of loss on
valuation of inventories compared withthe previous fiscal year led to asegment profit of ¥720 million, which isroughly at the same level as theprevious fiscal year.

14

Segment Overview: Printing Systems● Revenue, Segment Profit/Loss(¥100 million)(¥100 million)

20

Reference

16.9

Main causes of change
 Revenue
Revenue increased 10.1% year on
year to ¥1,690 million, mainly due toa rise in domestic consumables
demand before the price revisionfrom September 2023 and large
order awards of printing-related
products.

20

16.9

15.4
15

15

10

10

Segment profit/loss (right axis)

Revenue (left axis)

5

5

0

Fiscal year ended
March 31, 2023
(Actual)
(5)

(1.6)

© 2024 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

(0.6)

(0.7)

Fiscal year ended
March 31, 2024
(Actual)Fiscal year ended
March 31, 2024
(Company Plan)0 Segment profit/loss
The increase in revenue, coupledwith the reduced loss on valuation of
inventories in the current fiscal year
as a result of implementing theliquidation of products in the previous
fiscal year in line with the businessrestructuring helped segment
profit/loss improve by ¥100 million
year on year, resulting in a segment
loss of ¥60 million.

(5)
15

Segment Overview: Test and Measurement Equipment● Revenue, Segment Profit/Loss(¥100 million)

Reference

33.1(¥100 million)

34.1

5

11.1

12.3
4.7

4

22.0

21.8

3

31.9

Main causes of change
 Revenue
Revenue was ¥3,310 million, an
increase of 3.7% year on year, due togrowth in demand for powerelectronics-related products against a
backdrop of rising environmental
awareness, despite the decline(normalization) in electronic
components sales as a repercussionof the extraordinary surge of demandin the previous fiscal year.

4.9

30

14.8
20

17.1
10

2

Segment profit/loss (right axis)

1.2
1

Revenue (left axis)
Electronic components

00

Fiscal year ended
March 31, 2023
(Actual)© 2024 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

Fiscal year ended
March 31, 2024
(Actual)Test and measurement
equipment

 Segment profit/loss
Due to the improvement of the costof sales ratio owing to the change of
products composition, segment profit
increased 300.0% year on year to¥490 million.

Fiscal year ended
March 31, 2024
(Company Plan)
16

Segment Overview: Property Leasing● Revenue, Segment Profit/Loss(¥100 million)(¥100 million)

10

5

8.8

Reference
8.6

8

6

4

Main causes of change
 Revenue
Revenue was ¥880 million, an
increase of 60.1% year on year, due
to the start of operation of rental
apartments by an anonymous
association that is a consolidated
subsidiary, and the improved
occupancy ratio of rental offices.

4

5.5

2.9

3

3.3
2

1.6

2

1

0

0

Segment profit/loss (right axis)

Revenue (left axis)

Fiscal year ended
March 31, 2023
(Actual)© 2024 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

Fiscal year ended
March 31, 2024
(Actual) Segment profit/loss
Segment profit was ¥330 million, an
increase of 109.4% year on year,
due to the improved occupancy ratioof rental offices and the newly
acquired rental apartments nearly
fully occupied.

Fiscal year ended
March 31, 2024
(Company Plan)

17

Consolidated Balance Sheet

Fiscal year ended
March 31, 2023*

Fiscal year ended
March 31, 2024

Current assets

168.6

191.6

+23.0

Non-current assets

184.3

275.5

+91.2

(¥100 million)

Change fromprevious year

Main causes of change Current assets: +¥2,300 million
Cash and deposits: +2,450
Electronically recorded monetary claimsoperating: +230
Merchandise and finished goods: +220
Raw materials and supplies: -430 etc.

 Non-current assets: +¥9,120 million

353.0

467.2

+114.2Current liabilities

41.2

36.1

(5.1)

Non-current
liabilities

70.2

131.1

+60.9

Total liabilities

111.5

167.3

+55.8

Net assets

241.5

299.8

+58.3

Total liabilities andnet assets

353.0

467.2

+114.2

Total assets

Buildings and structures: +3,050
Land: +5,090
Investment securities: +1,120 etc.

 Current liabilities: -¥510 million
Notes and accounts payable-trade: -460
Contractual liabilities: -220 etc.

 Non-current liabilities: +¥6,090
millionLong-term borrowings: +5,980 etc.

 Net assets: +¥5,830 million
Share capital: +1,850
Capital surplus: +1,850
Retained earnings: +520
Valuation difference on available-for-salesecurities: +290
Non-controlling interests: +1,390 etc.

* Includes impact of retrospective application due to changes in accounting policies© 2024 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

18

Consolidated Statement of Cash Flows
Cash and cash equivalents were ¥7.12 billion, up ¥2.46 billion from the end of the previous fiscal year.
Fiscal year
ended March 31,
2023*

Fiscal year
ended March 31,
2024

Year-on-year

Cash flows fromoperating activities

(4.3)

+7.7

+12.0

Cash flows frominvesting activities(4.6)(93.9)(89.3)

Free cash flows(9.0)(86.1)(77.1)(¥100 million)

Cash flows fromfinancing activities(2.1)+110.5+112.6

Cash and cash
equivalents

46.6

71.2

+24.6

Major breakdown items
 Cash flows from operating activities:+¥770 million
Profit before income taxes: +580
Depreciation: +1,110
Loss (gain) on sale of shares of subsidiaries andassociates: -870
Decrease (increase) in trade receivables: -1,250
Decrease (increase) in inventories: -440
Other: +1,590 etc.
 Cash flows from investment activities:-¥9,390 million
Purchase of property, plant and equipment: -9,250
Proceeds from (payments for) sale of shares ofsubsidiaries resulting in change in scope of
consolidation: +440 etc.
 Cash flows from financing activities:+¥11,050 million
Proceeds from long-term borrowings: +6,000
Proceeds from issuance of shares: +3,690
Proceeds from share issuance to non-controllingshareholders: +1,370 etc.

* Includes impact of retrospective application due to changes in accounting policies© 2024 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

19

3

Forecast for the
Fiscal Year Ending
March 31, 2025

Forecast for the Fiscal Year Ending March 31, 2025

In order to accelerate business selection and concentration to achieve the goals of “Thoroughreduction of fixed costs” and “Promotion of growth strategies” outlined in the medium-term
management plan REBORN, the Company will implement the following structural reforms as per our
Notice Regarding the Implementation of Structural Reforms (announced on May 15, 2024).
Forecasts of earnings and dividends for the fiscal year ending March 31, 2025 are undetermined,
pending a thorough examination of future circumstances. An announcement will be made as soon as
the forecasts are determined.
[Optimization of Group staffing level and Group reorganization]
 In order to strengthen human capital and enhance labor productivity, we will shift resources to work related to DX
promotion and high added value activities, and optimize staffing levels by approximately 200 across the Groupby around September 2024.
 In order to pool our Group’s human resources in a unified effort, and further streamline Group management, we

will implement Group consolidation, including merging of our subsidiaries into the Company, aiming forcompletion by the end of the fiscal year ending March 31, 2026.
 We estimate the positive impact of the structural reforms to be an increase in operating profit of around ¥700

million in the fiscal year ending on March 31, 2025, and ¥1,200 million from the fiscal year ending on March 31,2026 onward. We expect the impact on our business results of one-off expenses related to these structuralreforms to be insignificant, as we are expecting one-off revenues that will offset the one-off expenses anticipatedin the fiscal year ending March 31, 2025.
© 2024 IWATSU ELECTRIC CO., LTD. All Rights Reserved.

21

Caution Regarding Forward-Looking Information
Statements in this document regarding future plans, forecasts, strategies and other future information of the Company and the Group are basedon certain assumptions that the Company determines to be reasonable based on information available at the time this document was prepared,
and actual results may differ significantly from these assumptions. These statements regarding forward-looking information involve a variety ofrisks and uncertainties, the principal ones are listed below, but this list is not exhaustive.
 Trends at major customers

 Litigation and other legal proceedings

 Bias towards second-half performance Natural disasters, etc.

 Intensifying market competition withcompetitors Information leaks
 Spread of infectious disease Deterioration in business performanceof business partners, etc.

The statements contained herein do not constitute a public offering of securities.

 Procurement risks (e.g., supply shortages due
to rapid changes in international conditions andincreasing procurement prices) Economic trends