NISSO’s third quarter ended with an increase in revenue and adecrease in profits
Operating profit recovered to the previous year's level as a result of anincrease in the number of enrolled staff and an increase in billing unitcosts
Explanation of NISSO CORPORATION’s Financial Results for the First Nine Months of the Fiscal YearEnding March 31, 2023

NISSO CORPORATION
6569 · Prime Market · Services

This is a transcript of NISSO CORPORATION's financial results for the first nine months of the
fiscal year ending March 31, 2023, announced on February 9, 2023.

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

SponsorNISSO CORPORATION

Websitehttps://www.nisso.co.jp/enExplanation of NISSO CORPORATION’s Financial Results
for the First Nine Months of the Fiscal Year Ending March
31, 2023
Mr. Ryuichi Shimizu (hereinafter "Shimizu"): Hello, everyone. Thank you very much for taking
time out of your busy schedule today to listen to our third quarter financial results briefing
presentation. I would like to proceed based on the materials.

Summary

As shown on the slide, although revenue increased and profits decreased year-on-year,
operating profit has generally recovered to the same level as the previous year. As you are allaware, the operational status in the automobiles-related industry continued to be aﬀected byparts shortages, particularly in semiconductors. On the other hand, human resources needs
has remained very strong.
In the electronic devices industry, demand for components related to PCs and communications
equipment has declined, and sales of smartphones have also declined. Against this backdrop,
semiconductors have entered a slight adjustment phase as inventories in the memory field have

accumulated slightly.
In-vehicle products were doing well, but in fact, there was even a shortage. Although I will
explain in more detail later, the demand for engineers was steady.

Contents

I will proceed according to these contents today.

FY 3/2023 3Q Consolidated Financial Results Highlights

I will explain our consolidated financial results. As I mentioned earlier, although net sales
increased by 17.9% year-on-year, operating profit was almost the same level as last year anddecreased slightly.

FY 3/2023 3Q Quarterly Consolidated Financial Results

These are the trends of quarterly net sales and operating profit. In particular, today I would liketo talk about the non-consolidated financial results of NISSO, which account for 90% of the(Nisso) Group’s total net sales.

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

These are NISSO’s non-consolidated highlights. Net sales grew 14% year-on-year. The increasein the number of enrolled staﬀ and the increase in billing unit-costs were major factors, andoperations have not returned significantly.
The number of enrolled staﬀ increased by 1,396 compared to the end of December 2022. In
addition, billing unit-costs increased by 93 yen on a simple average in December. Although
operating profit resulted in increased revenue and decreased profits, it recovered to a situation
where it decreased by 29 million yen year-on-year in the third quarter.
As I will explain in more detail later, the impact of the spread of COVID-19 during the year-end
and New Year holidays has caused the attendance rate to drop by nearly 2 percentage points.
At its peak, approximately 300 on-site workers were infected with COVID-19 and unable to go
to work.

FY 3/2023 Quarterly Non-consolidated Financial ResultsPlease take a look at the operating profit graph. I think you can see how we have recovered in
the third quarter after struggling in the first half.
In our business, profits in normal times are said to be 1 in the first half of the fiscal year and 2 inthe second half. However, this fiscal year is expected to be a slightly irregular situation with aratio of 1 to 3. Looking back on the past, due to the impact of COVID-19 and other factors, theratio was slightly diﬀerent from the usual 1 to 2.45 in the fiscal year before last and 1 to 1.45 in
the previous fiscal year.

FY 3/2023 3Q Financial Results Summary

This is our third quarter financial results summary. I will explain the items listed on the slide in
more detail later.

FY 3/2023 3Q Net Sales by Industry (NISSO, Nonconsolidated)Now, let me provide an explanation about our net sales by industry. Although the automobiles
field is by no means in a favorable operating condition, the number of enrolled staﬀ continued
to increase. In the second quarter, net sales were up 15.9% year-on-year, and in the third
quarter, it was up 16% year-on-year, showing continued steady growth.
As I will explain later, growth in the electronic devices field has slowed down compared to thegrowth it has experienced to date.
Regarding the automobiles industry, as I mentioned earlier, although it has been recoveringmoderately, it has not yet returned to normal operating conditions due to parts shortages,
mainly semiconductors.
Furthermore, in addition to a decline in sales of electronic components related to PCs andcommunications equipment, sales of smartphones in particular have been sluggish due to theentering of an adjustment phase in memory production in the semiconductor field. On the other
hand, there is a sense of shortage of semiconductors for automobiles. Therefore, we believethat semiconductors for automobiles applications will achieve further growth in the future as
the automobiles field recovers.

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

These are the trends of quarterly net sales by industry. I believe that you can see from thisgraph that net sales in both the automobiles and electronic components industries continued toreach record highs.

Account Companies (NISSO, Non-consolidated)

Next, let me provide an explanation about our Account Companies. Although quarterly net
sales have hit a record high, the overall market share has declined to 42.7%. This is partly due
to the growth of companies other than Account Companies, and I think we are in a situation
where we are preparing next Account candidates for the next fiscal year.
Our Account Companies consist of four groups of major manufacturers: an automobiles
manufacturer

group,

apassivecomponents

manufacturer

group,

asemiconductor

manufacturer group, and a precision equipment manufacturer group.
The major automobiles manufacturer group was as I mentioned earlier. Unfortunately, I thinkthat the major passive components manufacturer group was aﬀected the most by poor
smartphone sales. Under normal conditions, if sales of automobiles increased, we would be
able to make a recovery with auto parts, but it has not happened yet.
The major semiconductor manufacturer group was at a standstill because they focus on
manufacturing memory. Meanwhile, the major precision equipment manufacturer group has

finally bottomed out. I do not expect their quick reversal, but they should rise gradually.
Next, I would like to explain our approach to our potential new Accounts that I mentioned
earlier. As you are all aware, the government plans to increase the mass production ofsemiconductors in Japan in the future. In conjunction with this, various semiconductor andequipment manufacturers are expected to grow. In this context, we would like to actively create
accounts with companies in the semiconductor field, which has particularly high growthpotential, and promote their growth.
We are also in the process of setting up the next account in the field of parts related to the new
era of automobiles, which are expected to grow, especially key components centered onbatteries. In the next fiscal year, we would like to introduce you to the members who have
newly joined our Account Groups.

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

Now, let me provide an explanation about our net sales per capita. Please take a look at thegraphs on the slide. Net sales per capita increased by 17,000 yen year-on-year on a quarterly
basis, and by 13,000 yen year-on-year on a monthly average basis.
Our analysis shows that the increase in simple average billing unit-costs in December and thegradual recovery in the operations of the automobiles-related industry have contributed

significantly.

Number of Enrolled Staff (NISSO, Non-consolidated)

Next, let me provide an explanation about the trend in the number of enrolled staﬀ. The
number of enrolled staﬀ increased by 1,166 from the end of the previous fiscal year. The
number of staﬀ increased by 1,396 compared to the corresponding period of the previous
fiscal year, and we believe that the number is steadily increasing. Although the recruitment of
human resources is extremely diﬃcult, even in such circumstances, we believe that we are able
to utilize our own website and conduct recruitment activities eﬃciently.

Educational Achievements (NISSO, Non-consolidated)

These are our educational achievements. Compared to the third quarter of 2022, basic
equipment maintenance education has decreased. This was due to the slowing down of needsof equipment maintenance personnel and engineers as new launches in the semiconductor
memory field have been delayed.
Currently, since we are structurally reallocating such human resources to semiconductors inother fields, the impact should be temporary. As I will explain in detail later, since this is anarea where client needs are extremely high, we would like to further strengthen our training.

Net Sales by Segment (Services)

The details of net sales by segment (services) will be explained later.

Manufacturing・Production Human Resources Services

Now, let me provide an explanation about our Manufacturing ・ Production Human ResourcesServices. Net sales increased by 9.5% year-on-year, and the number of enrolled
Manufacturing ・ Production staﬀ increased by 857 year-on-year. The number of staﬀ
continued to expand steadily, with an increase of 282 from the first to the second quarter, andan increase of 277 from the second to the third quarter.

Manufacturing・Production Human Resources Services

Net sales per capita in Manufacturing ・ Production Human Resources Services increased by
3.1% year-on-year.
Although there were some concerns that the "turnover rate was slightly rising", it has finallysettled down, and has improved by 0.1 percentage points from the corresponding period of theprevious year. Furthermore, since the line graph on the slide is a moving average, the turnoverrate is actually even lower than this.

Engineering Human Resources Services

Our Engineering Human Resources Services are also growing very steadily. Net sales in thethird quarter increased by 59.5% year-on-year.
The number of enrolled engineers also increased by 560 year-on-year. It increased steadily by
187 from the first quarter to the second quarter, and although it slowed down slightly, it
increased by 116 from the second to the third quarter.
At NISSO, approximately 20% of new graduates and mid-career hires are trained as engineers.
The remaining 80% are veterans already working at manufacturing sites, and by developing andpromoting such personnel, I believe we can achieve extremely stable growth.

Engineering Human Resources Services

Net sales per capita in Engineering Human Resources Services increased by 2.2% year-onyear. Unfortunately, due to the large number of entry-level engineers, net sales remained at thelevels shown on the slide. However, we believe we can increase our net sales per capita byreviewing the curriculum and further improving our training capabilities in the future.
On the other hand, since the turnover rate has decreased by 0.2 percentage points year-onyear, and has been declining gradually overall, I believe we will be able to get it below 2% verysoon.

Toward the Growth of Engineering Human Resources
Services

Next, let me provide an explanation about the growth of our Engineering Human Resources
Services, which is closely related to our next Account. First, we have introduced semiconductor
equipment and trained human resources at the Technical Center Higashi-Nihon and TechnicalCenter Naka-Nihon, and we will finally open the Kumamoto Training Center in April 2023.
From our conversations with semiconductor manufacturers, I feel that there is an extremely
high need for high value-added human resources necessary to establish mass-production
technology. The Kumamoto Training Center is a facility for developing such human resources.
NISSO has a training structure unlike any other company.
Although we are still in the process of experiencing the pains of creation, we believe that byassigning properly trained human resources to our clients, our credibility will be further
enhanced as a result. I believe that by increasing our recruitment and training capabilities, wewill also be able to increase our market share.
Second, following our aﬃliation with the Tohoku Bureau of Economy, Trade and Industry and
the Tohoku Semiconductor and Electronics Design Study Group, we will also participate in the
Chugoku Regional Semiconductor Industry Promotion Council.
In the Kyushu area, centered on Kumamoto, which is currently the most thriving area, and the
Tohoku area, where there is large number of semiconductor shipments, as well as the Chugoku
area, we will create a foundation for mass-production technology while providing each region

and our clients with a structure to develop semiconductor-related personnel.
Third, we concluded a partnership agreement with Interstellar Technologies Inc. Interstellar
Technologies is a company that is taking on the challenge of the space business of launchingrockets. You may be wondering, “Why is NISSO in the space business?”
Until now, we have been actively engaged in “How to provide the necessary human resource
services in the manufacturing field in the future”. Under such circumstances, we would like tochange the careers of human resources in the existing manufacturing industry to the spaceindustry, which is expected to grow in the future.
We decided to actively take on the challenge of "reskilling", which is often said these days, andconcluded a partnership agreement with Interstellar Technologies for the utilization of humanresources.
After discussions with the people of this company, I was very impressed with the fact that thisis a field in which we can utilize the foundation of various MONOZUKURI (manufacturing) thathave already existed in Japan. In addition, we have high expectations for the space industry,
which is expected to become a 100 trillion yen industry by 2040, so we intend to actively takeon challenges in this field as well.

Administrative・Other Human Resources Services

Next, I would like to talk about our Administrative・Other Human Resources Services. As callcenters and data centers, which have the greatest needs, are being replaced by newtechnologies, unfortunately, I believe the field of general oﬃce work will continue to taper oﬀ in
the future.
Even in such a situation, we would like to take a firm look at the human resources needed in the
new administrative areas of the new era, such as the utilization of foreigners for areas thatcannot be handled by the Japanese people alone.
Please refer to "Other Human Resources Services" at the bottom of the slide. We would like totake on this challenge in particular. For example, Nikon Nisso Prime is building a model thatallows older employees to flourish, and Nisso Pure is building a model that allows employeeswith disabilities to flourish.
There is also the expression “diversity”, but we would like to create a model that is a little morepractical and in-depth. I think the important point is to integrate the "model that nurtures
people" and the "model that allows people to flourish" when building such a model.
As technology continues to evolve, the qualities and skills required of human resources arechanging. We believe that it is necessary to create a human resources development model thatcan respond to these needs, and provide the people we have developed to each of our clients.

Nursing Care・Welfare Services

Now, I would like to talk about our Nursing Care ・ Welfare Services. The overall occupancy
rate of nursing care facilities remained unchanged at 93.3%, and has been generally steady.
Net sales increased by 1.4% year-on-year, and we are completely out of deficit.
In the future, we will use these facilities to conduct various trials for our new healthcare andmedical business fields, which I believe will lead to the meaning of sustaining this business.

Topics

These are our topics. First, as we have already announced, we will start the consideration of atransition to a holding company structure.
Amid the rapidly changing business environment surrounding the Nisso Group, we believe it isnecessary to restructure the Group structure with the aim of further improving management
eﬃciency in order to flexibly respond to changes in the business environment and achievesustainable growth. To this end, we intend to raise the gear and go on the oﬀensive.
Second, we have formulated a tagline for the Nisso Group. Our brand message is "Making
hardworking people, happy”. We conduct group management with the mission of "Creating
opportunities and hopes for people to work”. My personal theory is that “a human resources
company that is not supported by its future workers cannot grow”.
"Making hardworking people, happy." is, of course, rewarding them with treatment(compensation), and also creating various things such as dreams and hopes for the future. I
hope you will understand that this is a group tagline for becoming a company that is supportedby the labor market.

FY 3/2023 Revision of Full-year Consolidated Forecast

These are our future prospects. Although it is very regrettable, we have made downward
revisions to our full-year consolidated earnings forecast. I will explain the factors behind this.
As I have mentioned earlier, the first is the impact of production adjustments due to parts
shortages, mainly in semiconductors. In our scenario, we expected normalization from the
beginning of the year, but this lingering impact remains as a major factor.
The second factor is the lackluster sales of communication equipment-related devices, such as
PCs and smartphones, and as a result, the demand for related parts has declined. Since there
are a considerable number of semiconductors and passive components installed in
automobiles, under normal circumstances, we would have liked to supplement them with
automobiles.
However, the recovery was not significant enough to compensate for this, and as a result, we
also slowed down in the field electronic devices to some extent.
Third, the we were greatly aﬀected by the eighth wave of COVID-19 around the year-end and
New Year holidays. This resulted in very low occupancy rates, especially in December, when
the operation rate fell below 90%. This eﬀect continued in January, resulting in lost
opportunities.
Originally, we wanted to start taking recovery measures from the beginning of the year.

However, shipments were prevented by heavy snow that made it impossible to keep vehicles instockyards, mainly in the automobiles-related industry.
Despite these three negative factors as mentioned above, there were also positive factors.
As I mentioned earlier, firstly, we have been able to hire people at a much lower cost perperson compared to other companies by recruiting mainly through our corporate website,
despite the diﬃculty of recruitment. As a result of this investment, we were able achieve the top
line, exceeding the previous and initial plans.
The second is about the engineering area. We have successfully increased the number ofengineers in our engineering business faster than initially planned.
Although we call it a development model, since the characteristic of developing engineers isthat upfront investment inevitably increases, the investment phase will still continue. So, pleasewait a little longer since we believe those engineers who are starting to flourish will be able toearn and absorb our investment in them.
Third, which is closely related to the next fiscal year, is that we were able to firmly lay thegroundwork for the semiconductor area and new fields, which has had a very positive impact.
Due to our relationship with our partner, unfortunately, I cannot go into the details here, but I
would like to carefully explain how we are laying the groundwork for the new areas we aregoing to attack in the fourth quarter or next fiscal year.
I would like to talk now about our approach to the full-year consolidated earnings forecast.
Although we have gathered the information available to us, mainly from our major clients,
unfortunately, I think the truth is that our business partners are not sure about how things maychange after mid-February.
In light of this situation, we would like to proactively disclose information to you in the eventthat any changes that are significantly diﬀerent from what we currently anticipate occur.
We have no intention of lowering our targets for net sales of 100 billion yen and operating profitof 4 billion yen for the next fiscal year. In fact, we believe that net sales will actually be evenhigher than that. I think it will be up to management to decide how to secure an operating profitof 4 billion yen toward that goal and how we create a structure to generate an operating profitof 6.7 billion yen moving forward. In addition, we will explain the plan for the next fiscal year inMay.

Since it is a very delicate time, we will carefully explain any changes as they occur, so I would
like to kindly ask for your understanding.

Shareholder Return Policy

This is about our shareholder return policy. Please refer to the graph on the slide. Although it
pains me to see a slight decline, we intend to keep it at 16 yen as we initially promised. As aresult of simulating the current situation, we would like to pay dividends with a payout ratio of
36.3%.
Going forward, all of our employees will strive together to stably increase dividends while
increasing the profit margin. We would appreciate your acknowledgment of our belief that net
sales and profits for the next fiscal year will be at the highest level since our listing.

Consolidated Balance Sheet

The consolidated balance sheet is included as supplementary material, so please refer to it atyour own convenience.
This concludes my explanation of the third quarter. Thank you very much for your undivided
attention.