NISSO CORPORATION: Although revenue increased and proﬁts decreased
in 3Q, with an increase in the number of enrolled sta , recovery production
was not possible due to parts supply shortages in the automobiles-related
business.
NISSO CORPORATION First Nine Months of FY 3/2022 Financial Results #0/2

NISSO CORPORATION

6569 · First Section of the Tokyo Stock Exchange · Servicess is a transcript of the ﬁnancial results brieﬁng for the third quarter of the ﬁscal year ending March
31, 2022 held on February 10, 2022, by NISSO CORPORATION.

Thiyuichi Shimizu, Representative Director, President & CEO, NISSO CORPORATION

peakerR

ponsorNISSO CORPORATION

S

S

st

Web i ettps://www.nisso.co.jp/en/hFirst Nine Months of FY 3/2022 Financial Results
yuichi Shimizu: Hello, everyone. Thank you very much for coming today despite the bad weather. I
would also like to thank those of you who are listening to the webcast for taking time out of your busy
schedules to join us.
Row, please let me take this opportunity to provide some explanation. Because of the complexity ofthe various factors involved, I would like to ﬁrst give an overall explanation before going into thedetails of the explanation of the ﬁnancial results, and then go into the individual explanations.

N

FY 3/2022 3Q (Non-consolidated) Factors behind the increase
in revenue and decrease in proﬁts (Supplement)s time around, revenues increased, and proﬁts decreased. One of the reasons for this is that wehave increased the number of enrolled sta , particularly at automobiles manufacturers, to recoverproduction. Despite the impact of COVID-19, the number of sta has increased by 2,023 over the
past year compared to the end of December the previous year. Considering the past, we can say thatthe increase of 2,023 enrolled sta in one year is quite fast.

Thithese, we added 870 enrolled sta in the automobiles-related area. Of these 870 enrolled sta ,more than 70%, or 623, have been added to the account group of major automobiles manufacturers of
NISSO, which demonstrates our commitment to recovering production in the automobiles-related
area.
Of

s increase in enrollment led to increased revenue, and another factor was an increase in unit-costs.
The growth in so-called order unit-costs have been achieved through negotiations, and these two
factors have contributed signiﬁcantly to the increase in revenue.
This of the end of the third quarter, the current number of enrolled sta was 14,715, and this year's
budget for existing businesses was based on the premise that 14,000 sta
would amount to net salesof 4.9 million yen per capita per year. As the number of sta continues to exceed this ﬁgure by a large
margin, although we have not been able to generate revenue for various reasons, please understandthat there is an increase in revenue.
A

Ne

xt, I'd like to explain some points about the decline in proﬁts. One factor contributing to ther s

proﬁts was the automobiles-related industry. Although the number of enrolled sta has
been increasing, there was a shortage of semiconductor supplies, and when the Delta variant, which
was said to have been the ﬁfth wave last summer, expanded, there were shortages of parts, mainly
wire harnesses, due to lockdowns in Southeast Asia, and the e ects were substantial in September
and October.
dec ea e int on, regarding trends in overtime and holiday work hours, since other days that should havebeen in operation in September and October were given as days o , there was a signiﬁcant drop in net
sales per capita. The graph on the bottom left shows what this would have been like under normal
operation. On the left are the net sales results, and on the right is estimated net sales assuming
normal operation. Simulation data shows that net sales in September and October were 1 billion yen
and proﬁts were 400 million to 450 million yen.
In addi i

ptember and October, the number of sta was increased mainly by automobiles manufacturers.
However, since it would be meaningless for them to leave the company because of the lack of working
days or overtime right after joining the company, they were paid compensation for their absence fromwork. This let to a compression of proﬁts of about 150 million yen over the two months of September
and October.
In Se

s for the second factor, the increase in expenses was attributable to the increase of 871 million yen
in SG&A expenses related to recruitment compared to the previous year. Recruitment expenses forsta working on-site accounted for a considerable share. This was an increase of 637 million yen.
Moreover, the cost to strengthen the promotion of our website was about 180 million yen.
At on, the cost of recruiting sta , mainly engineers, was 56 million yen, and about 60 million yen
of expenses increased. Moreover, since we have increased the number of enrolled sta , the costs
associated with dormitories have increased signiﬁcantly compared to the previous ﬁscal year.
Furthermore, the compensation for absence from work that I stated earlier, and the various companyentrance beneﬁts to attract sta
were the main reasons for the increase in costs.
In addi isummary, as I explained earlier, the number of enrolled sta has increased more than initiallyplanned. On the other hand, operating capacity has been reduced in the automobiles-related industry
due to an insu
cient supply of semiconductors and parts, resulting in lower gross proﬁts. Even underthese circumstances, we are actively investing in recruitment, increasing SG&A expenses. As I will
explain in more detail later, the speed of the increase in sta
is so fast that dormitory-related andeducation-related expenses are ahead of schedule, and investment is growing.
In

owever, we recognize that the need for human resources will continue to be high in the future, andbased on this situation, we will actively invest for the next ﬁscal year and beyond.

Ht regards to the automobiles-related industry, we are aware that parts shortages, including that ofsemiconductors, will be eliminated, and recovery production will continue. Therefore, it can be said
that we are looking forward to the recovery of this upfront investment from the next ﬁscal year
onwards. In addition, demand for semiconductors, including semiconductor devices, is extremely
strong.
Wi hssumption for the next ﬁscal year is that we will be able to start at a very high level of enrollment
by investing actively in recruitment. In addition to normal operations of the automobiles-relatedindustry, recovery production is clear especially in the ﬁrst half of the year, so high operating rates
can be expected. As a result, we expect net sales per capita to recover, net sales to grow further, andgross proﬁts to recover. In addition, demand for automobiles is more robust in the second half of theﬁscal year than in the ﬁrst half, so we expect to see very high operating rates throughout the next ﬁscal
year.
The a

will now provide an explanation about our issues for the next ﬁscal year and beyond. First of all,although this is a distinctive characteristic and positive aspect of NISSO, the fact that we have a very
high market share among automobiles manufacturers, especially auto-body manufacturers, poses arisk in this situation. I would like to explain a few things in detail that we would actively invest in while
avoiding such a risk.
Iﬁrst is the problem of a supply shortage of lithium-ion batteries for the coming era of EVs. NISSO
is also doing business in Japan with a manufacturer of lithium-ion batteries for automobiles, and alarge-scale investment project will start in the next ﬁscal year.
The

v
t r
otiations with two new factories of considerable scale, and we would like to focus
on expanding these lithium-ion batteries in light of the fact that there will be a chronic shortage in the
future.
We ha e en e ed neg

ondly, although this may be in the medium term rather than the long term, demand forsemiconductors is not expected to decline over the next two years. In particular, there are signiﬁcantneeds for system engineers for semiconductor maintenance, one of our strengths, at semiconductor
equipment manufacturers and new semiconductor factories. Therefore, we intend to actively increase
this number. With regards to semiconductor manufacturers in particular, we will assign personnel tohigh-value-added areas where other companies have diculty responding to the needs of strong
domestic semiconductor manufacturers.

Sec

third is the Kumamoto Project, which you all are aware of. Although this will be about two years
from now, we will prepare for this thoroughly and actively invest in this in order to expand it tosemiconductor manufacturers in Kumamoto and the surrounding areas.
They, we also keenly felt that engineers are vital in the shortage in the procurement ofsemiconductors and parts. Therefore, as I will explain later in the engineering area, we will expand it
even more aggressively.
Finall's stance for the next ﬁscal year and beyond is to diversify risks using such methods. Althouh
we have been actively investing in these areas in the past, we intend to make further investments in thenext ﬁscal year to expand these areas.
NISSO

FY 3/2022 3Q Non-consolidated Financial Results Highlights

v ust explained the outline of the ﬁnancial results, so I will omit it at this time. As a supplement,
employment adjustment subsidies are decreasing, as shown on the bottom left of the slide. Also,
although we are experiencing suspension of operations due to parts shortages, it can be said that
there was more operation than in the previous year.
I ha e j

FY 3/2022 Quarterly Non-consolidated Financial Results

s you can see from these graphs, net sales are steadily increasing despite the low operating rate due
to an increase in the number of enrolled sta , which is considered to be our top line. Therefore,
although proﬁts were steady until the ﬁrst quarter, from the second quarter onwards, our accountcompanies also experienced production adjustments in August due to semiconductor shortages,
which a ected their proﬁts.
As I mentioned earlier, in September of the second quarter, when proﬁts are normally generated, theoperating rate dropped due to a shortage of parts and the problem of compensation for absence fromwork, which caused a signiﬁcant drop in proﬁts. In the third quarter, although this was the case until
October, it improved in December. Although December was also strong last year, if you look at
December alone, the operating rates were higher than in the previous year.

A

FY 3/2022 3Q Net Sales by Industry (NISSO, Nonconsolidated)s shown in the graph, the electronic devices and automobiles areas are steadily expanding. Our
multifunction machine account company is included in the "Precision / Electrical Machinery" category,
and although it has been recovering moderately, it has not reached the level of FY 3/2020.

A

FY 3/2022 Quarterly Net Sales by Industry (NISSO, Nonconsolidated)s you can see from the slide, net sales in the electronic components ﬁeld are at an all-time high andwill continue to grow hereafter. Unfortunately, although we have not been able to surpass the ﬁgures
for the fourth quarter of FY 3/2020, the number of enrolled sta , which is our top line, has been
exceeded, and we expect this automobiles area to continue to reach new highs once operations return
to normal.

A

Net Sales per Capita (NISSO, Non-consolidated)

s slide details our net sales per capita. The basic basis for net sales per capita is the unit-costs of
the order received and how many hours our sta work per month, that is, the formula of "unit-costs"
multiplied by "working hours."Thit ough the hourly unit-costs up to December show a slight ﬂuctuation since it is a simple average,
unit-costs have increased by about 60 to 70 yen compared to the previous year. On the other hand,
unfortunately, the impact of overtime and the number of working days was seen in August and
September of the second quarter, especially in September and October of the third quarter, as I
reported earlier. Therefore, even though unit-costs have increased compared to the the level of theyear prior to the previous ﬁscal year, it has not yet reached that level. However, since unit-costs will
naturally increase in the future, if operations return to its original state, it will exceed the past levels
signiﬁcantly.
Al ht present, particularly in business negotiations with automobiles and electronic components
manufacturers, there is talk of raising unit-costs signiﬁcantly from the beginning of this year or in the
new ﬁscal year. This is because we can encourage people to join our company by improving theirAtreatment (salary), and it is also a part of our retention measures to prevent sta who have enhanced
their skills from leaving our company. Therefore, it is thought that unit-costs will increase further
toward the next ﬁscal year.

Number of Enrolled Sta (NISSO, Non-consolidated)s page is about the top line I've been talking about, or the number of our enrolled sta . The
number of enrolled sta
increased by 1,569 from the end of the previous ﬁscal year, and increased byThi

710 in the ﬁrst quarter from the end of the previous ﬁscal year. In the second quarter, the number
increased slightly by 369, but in the third quarter, the number increased by 490, totaling 1,569.
r r y, if the operating rate of work was higher, it would be easier to increase the number of sta ,but even among them, we have already increased the number of sta
by nearly 500. As the current
situation continues in the fourth quarter, please understand that next year will continue to rise fromthe starting point.
P ima ilthe automobiles account group, in particular, the number of enrolled sta increased by 623 overthe previous year. In addition, the account company for multilayer capacitors for electronic
components have ﬁnally recovered to reach our highest net sales ever, reaching 251 sta
compared tothe previous year.
In

Number of Skilled Sta ・Engineers (NISSO, Non-consolidated)

xt is the trend of skilled sta and engineers. There were 982 engineers, up 81 from the second
quarter, and 5,244 skilled sta , up 121 from the second quarter.

Neswhat kind of rationale we are planning for net sales in the engineering area this ﬁscal
year, at present, NISSO is producing net sales of 500,000 yen or more per month per engineer, andsimply multiplying such a ﬁgure by 12 results in 6 million yen.

When a kedr ore, we planned net sales based on the rationale of "6 million yen x 680 engineers". However,since there were already 982 engineers in 3Q, we plan to record net sales based on the average
The efrollment of about 1,250 in the next ﬁscal year. We believe that this is also progressing verysmoothly.

enowever, one of the “ active investments” I mentioned earlier that we would like to conduct is theactive promotion of career changes from skilled sta
to engineers, as shown on the slide. In doing so,since we will be conducting training for more than one month instead of the conventional two weeks, itwould be appreciated if you could understand that the upfront investment for the training costs would
increase.

H

Account Companies (NISSO, Non-consolidated)

xt, regarding account companies, net sales increased 15.5% year-on-year, and cumulative net sales
increased 12.3% year-on-year. Although it would have been nice if it had been a little better, therecovery production originally planned from September did not proceed as planned due to theshortage of semiconductors and parts.

Ner, of course, production started to recover, but after January, a large (COVID-19) cluster
emerged at a factory that manufactures seatbelt parts in Japan, and production was not possible.
This was a major factor, and we have not been able to recover production.

In Decembes we continue to increase the number of sta , we expect the automobiles area to recover sharply,
considering that automobiles manufacturers were also actively engaged in recovery production in
February and March.

Ay the way, to explain a little about the situation of the group of the major automobiles manufacturer,
net sales in September and October were actually below the “100” of the previous year. However, net
sales were up 23% from the previous year in November, when things returned to normal. In
December, net sales were up 35% from the previous year, showing a rapid recovery.
Btthis account group, although net sales were comparable to the previous September andOctober, in terms of the area of proﬁts, it was 53.7% in September and 67.5% in October compared tolast year. Even under such low operating conditions, although net sales increased by increasing thenumber of enrolled sta , there was no proﬁt.

Wi hinowever, in December alone, although net sales were up 35%, proﬁts were up 54%, and I will tell youthat while production is recovering, proﬁts will also recover rapidly in a V-shape manner.
Ht on, the capacitor group’s net sales also increased by 27.8 percent in December from theprevious year, while proﬁts recovered to an increase of 43%, so proﬁts will recover in a V-shapemanner once the operating conditions are in place.

In addi iurnover Rates (NISSO, Non-consolidated)Txt, regarding our turnover rates, in order to increase the number of enrolled sta , it is essential to
add new sta
in addition to reducing our turnover rates. Originally, although our plan was to reduce
the overall turnover rate to less than 4% this ﬁscal year, we were able to keep it around 3.7%.

Neparticular, net sales decreased by 1% compared to 4.7% in the year prior to the previous ﬁscal year
when net sales grew the most. If it was 1% for 15,000 sta , it would not require 150 sta to resign permonth. We recognize that having more sta
with ample skills than hiring new sta is a critical factor in
expanding our manpower in the future and in gaining the trust of our clients to increase our market
share.

In

the other hand, there is concern that the turnover rate in the skilled sta area may be slightly
increasing. At present, although we are analyzing the causes, as expected, skilled sta
are more likely
than regular sta to take on more complicated processes which may lead to the improvement in theirtreatment. However, since their responsibilities become more demanding, the number of sta who
cannot withstand the pressure has been increasing.

Onthe future, it will be necessary to review the training curriculum and increase the retention rate in a
way that does not place too much burden on the individual, or to further strengthen the system of onsite care. We have also begun e orts to reduce the turnover rate of skilled sta to the 1% or so levelthat we originally targeted.
In

Educational Achievements (NISSO, Non-consolidated)s page reﬂects our educational achievements and our upfront investment in education. The numberof participants has signiﬁcantly increased in engineer education and equipment maintenanceeducation, which are high in need. In addition, the number of participants for manufacturing
education has increased by 753. Although training is an essential part of our business, since it iscarried out while paying the salaries of employees, it is currently a factor in an increase in costs.
Thiowever, considering that the unit-costs of orders are particularly high in this area, those who haveestablished themselves will gradually allow NISSO to recover our investment in them. In order toreduce the aforementioned turnover rates, we recognize that it is extremely important to thoroughly
carry out manufacturing education and take measures to ensure that sta
are ﬁrmly established.
H

Net Sales・Operating Proﬁt Ratio by Company

xt, I would like to provide an explanation of the ﬁnancial results by target segment. This slide shows
the net sales and proﬁts of the companies that comprise each group.

Ne

Existing Areasor the trends of our existing areas, please refer to the trend of enrollment in particular. As I havementioned earlier, this target segment has been doing very well. Although the number of existing
enrolled sta
has already exceeded 14,000, the average number of enrolled sta
in existing areas thatcan be used as a basis for sales plans for existing businesses in the next ﬁscal year is 15,600.

F

s I mentioned earlier, 16,400 enrolled sta in FY 3/2024, the third year, is the basis for the average
enrollment. By having a high launchpad for the start in April, we will make active investments in thenext ﬁscal year with the goal of increasing the number of existing enrolled sta
in this existing businessas much as possible ahead of schedule.

Aor reference, other than NISSO, white-collar companies such as Nisso Brain, and Vector Shinwa,
which has newly joined the Nisso Group, are increasing existing enrollment in this way.
F

Engineering Area (Financial Results)

xt, I would like to provide an explanation of the engineering area which is important for risk
diversiﬁcation and proﬁt expansion. As you can see on the slide, the second and third quarters of theyear were slightly a ected by the operating conditions discussed above, and net sales were as you can
see.

Ne

the future, it will be necessary to further increase the unit-costs of orders by reﬁning the skills of
individuals and further increasing net sales per capita. As seen on the slide, although the (net sales per
capita of ) 470,000 yen for skilled sta
and the 512,000 yen for engineers may seem a little low,engineers are in a situation where they can aim even higher depending on their individual skill
enhancements.
In

Engineering Area: Number of Enrolled Engineersxt, I will like to provide an explanation on the number of enrolled engineers in the engineering area
which we are particularly focusing on. As you can see in the colored graph, we are steadily expanding
the scope of our activities, especially for equipment technology engineers, and gradually expanding
into other IT-based areas and ﬁelds such as AI.
Ne

s business is progressing smoothly, exceeding the average enrollment of 680 engineers initiallyplanned. Since there will be 1,250 engineers in the next ﬁscal year, we would like to expand thisengineering area as early as possible.

Thi

to have 2,500 engineers by April 2024, the ﬁnal year of the current medium-term
management plan, and will continue to invest ﬁrmly in the next ﬁscal year and the following ﬁscal year.
We

aim

Turnover Rates (Existing・Engineering Areas)

t ough the overall and engineer turnover rates are increasing little and little, it is still at a level where
it is not a problem. However, since we are investing in and nurturing them over the long term, we aretaking measures to reduce the turnover rate of engineers to just over 1% by devising curriculums andfully examining the appropriateness of each individual.
Al hProgress of AI Solution Services

s page is about the progress of our AI Solution Services which I have talked about before, which isa new business area. Although I have stated to you before that, "We will create a prototype model
while negotiating with clients in various ways", the idea is to focus on the three points listed on theslide that our clients highly need.

Thiy are described as visual inspection, predictive maintenance, and process condition optimization.
While implementing AI in manufacturing equipment, visual inspection is the early detection of
defective products from the appearance, especially using cameras. Predictive maintenance is tomaintain the equipment in advance while anticipating the failure that may occur when defective
products are produced, for example, to prevent equipment malfunctions, or since there areconsumables in the manufacturing equipment, "by replacing consumables at a certain time, one canprevent defective products in advance".
Thet regards to process condition optimization, in the past, when artisans used paint to create a
product, there were steps where they had problems with the temperature and viscosity, that is, howhigh or low the viscosity was, which led to “defects” in their products. With process condition
Wi hoptimization, AI is used to optimize procesesses such as "not producing defective products by
inputting raw materials under such conditions" in terms of the season, outside air temperature, andhumidity. I would like to inform you that we are ﬁnally starting the prototype model of these three.

Capital and Business Alliance with TSUNAGU GROUPHOLDINGS Inc.

s for new business initiatives, as shown on the slide, we will be establshing a joint venture company
with TSUNAGU GROUP HOLDINGS Inc., which is scheduled to be launched on March 1.

As I have stated before, the purpose of this joint venture is to thoroughly pursue the most criticalaspects of human resource services in the future, how to recruit people eciently, and how to match
those who have been hired to the right place, by sharing our expertise with that of the TSUNAGUGROUP.
As r ption of the business is as shown on the slide, and we are now ﬁnally entering the third yearof our new businesses. In particular, as I with the so-called alliance companies that I have beentalking about for some time, and of course TSUNAGU, we will create a consortium of industries that
we are able to send personnel that we have hired to, even though the industry may be di erent thanours, and we will conduct a matching platform business for introducing human resources.
The de c iorder to promote better recruitment, it is described as the “Recruitment Consulting Business”. In
particular, in the media direction business, the key point is to actively provide information on "how toInv rtise the site and how to hire sta
NISSO's own website.
ad eet y" to other companies while making good use ofcien lt on, we will steadfastly create NISSO's long-standing human resource development business,
which will dispatch development-type qualiﬁed personnel, with TSUNAGU. Moreover, since it would
be a waste to leave the sta
who gathered at NISSO as they are, we will also coordinate the businessof allocating appropriate personnel to light work, distribution centers, and service industries of the
newly joint-ventured company. I hope you will understand that the business derived from this has
started as a new business in the third year of the medium-term management plan.
In addi iow that it's no longer considered as insider information, I am ﬁnally able to explain it in this way. We
would like to continue to actively conduct IR activities in the next ﬁscal year.
N

Other Businesses Business Revenue

s is our Other Businesses. This is the nursing care business that you may be aware of, but when you
look at it, it may actually cause some concerns. Buildings 5 and 6, which are facilities for medical
treatment, may be the cause of such concerns, since there are some people who pass away as wehead toward the winter season.

Thi

the other hand, there are cases where people are waiting to occupy the facilities since there arerisks due to the recent spread of Omicron variant, or there are situations where it may be di cult forprospective residents to to preview the facilities, which has led to slight decreases in the occupancy
rates. Although this business is not in a situation where it will reach a deﬁcit, I have provided an
explanation just in case.
On

Summary (Progress of Net Sales Targets by Target Segment)

would like to provide an explanation regarding the progress of each target segment. As you can see,despite the fact that there are situations where the operating rates are low, we have been able tosteadily increase the number of enrolled sta . Therefore, with 72% progress in existing businesses, we
expect to fully achieve our initial target for net sales in the fourth quarter.
I

the other hand, in the engineering area, we have achieved net sales for roughly one year by thethird quarter, and as shown in the graph, we have been performing very well.

Ont regards to new businesses, we intend to create businesses in the new businesses area that will
generate a gross proﬁt of 1.8 billion yen in the third year. Looking at net sales alone, although theprogress is not "0", by the third quarter, since it was at a level of several million yen, we have made it"0" for the time being. Rather than saying that the progress is behind schedule, I believe it can be said
that they are making steady progress.

Wi hv you can see from these graphs that the progress of Other Businesses is proceeding at a

I belie eormal level.

nIntroduction of Shareholder Beneﬁts Programtroduction of the Shareholder Beneﬁts Program, which is highly beneﬁcial to individual investors
rather than institutional investors, has been decided as described here, so please refer to this page formore details. Since this brieﬁng is for institutional investors, please allow me to omit any further
explanation.
The inFY 3/2022 Full-year Consolidated Forecasts

r

our forecasts for the future, we would like to basically keep the ﬁgures that were revised at
the end of the previous second quarter. However, the status of operating proﬁt is indeed complicatedto read at this stage.

Rega dingv this depends on how the Omicron variant will be resolved and how much the semiconductors
and parts shortages will be resolved by the end of this ﬁscal year. However, since it seems unlikelythat proﬁts will fall signiﬁcantly at this stage, I would like to leave this part unchanged.

I belie e

Shareholder Return Policys is our shareholder return policy. As I have previously explained, although our perception is thatnet sales will not be as expected due to various issues, we do not regard it as negative at all,considering the steady growth in the number of enrolled sta .
This that the 18 yen that we originally promised will remain unchanged, and as a result, theThe idea ivpayout ratio will be 30% or more. It will be 34.9%, which depends on how proﬁts will comeout in the future, so I would like to leave the 18 yen unchanged.
di idend

Consolidated Balance Sheetthis page is considered as supplementary material, please refer to it at your own convenience.
Please accept my apologies for this long explanation, but I would like to conclude my presentation.
Thank you very much for your undivided attention.

Since