Seiko Group Corporation

FY23 Q3 Consolidated Results Presentation - Q&A◆

Date: Wednesday, February 15, 15:00 - 15:45, Tokyo, Japan◆

Respondent : Taku Yoneyama, Director, Executive Vice President

Summary of Q&A
Q1. Compared with the first half, you seem to have been better able to control advertisingexpenses in Q3. It looks as if adjustments will increase in Q4. Will company-wide
expenses increase?
A1. Our advertising expenses in Q3 in the Watches Business were right on target, and theincrease in those expenses was more than offset by increased sales. We believe ourefforts have been successful.
Expenses in Q4 appear to be higher than in Q3 chiefly due to two reasons: First,compared to the previous fiscal year, we have allocated a larger portion of branding
investment (which is included in adjustments) to Q4 compared to Q3; and second, other
SG&A expenses in Q4 are slightly higher than in Q3.
Q2. I have a question about your dividend policy. You recently announced a dividend increase.
Could you clarify whether this increase is a part of your plan to return more than 15.0
billion yen to shareholders over the five-year period of the SMILE145 Mid-termManagement Plan, or if it is based on the payout ratio?
A2. We have stated that our dividend policy is to maintain a consistent payout. Going forward,
we may consider increasing dividends in line with strong performance. We are also looking
at a management approach that takes into consideration the payout ratio. In fact, we arereviewing our dividend policy now, and will discuss it when we present our yearend resultsin May. At that time, we will also explain our capital policy, which includes the payout ratio,
and other initiatives for the last three years of the SMILE145 period.
Q3. In the Watches Business, what percentage of so-called domestic demand was actually
inbound-tourism demand?
A3. Inbound-tourism demand comprised between 10% and 15% of total domestic demand. It
appears that this percentage increased slightly in Q3, and if the number of Chinese
tourists increases, this percentage should continue to rise. Pure domestic demand is alsostrong. We expect that both inbound-tourism demand and pure domestic demand willcontinue to increase in the foreseeable future.

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Q4. Overall, domestic demand is strong in the Watches Business. How do you see thisdeveloping in the future?
A4. I’m happy to say that sales in our domestic retail business are quite strong. Barring
unforeseen negative factors in Japan, we are confident that the current trend will continue.
Our watches are selling well in all the usual sales channels — department stores, watchretailers, watch chain stores. In particular, domestic sales of Grand Seiko (GS) and other
Global Brands (GB) are rising. In addition, unit sale prices are rising. We believe we canfurther strengthen this trend by enhancing CRM and customer service, two areas that weare now emphasizing.
Q5. How has Shohei Ohtani’s transfer to the Dodgers impacted your sales? Have there been
any temporary effects?
A5. Of course, we cannot quantify the impact precisely, but we believe that Ohtani’s transfer tothe Dodgers has given a significant temporary boost to sales of the Shoei Ohtani model,
which was already selling well before the transfer. We expect to magnify this effect though
our marketing, which has capitalized on the fact that this transfer is big news throughout
Japan and overseas as well.
Our business is based on manufacturing, and is sustained by support from our customers.
While continuing to focus on high-quality manufacturing, we will emphasize increasing thesales of Seiko Prospex and Seiko Astron.

Q6. After a long period of struggle in the Devices Solutions (DS) Domain, there seems to begood news, and you expect that business will continue to improve in Q4. What are themajor factors contributing to this improvement?
A6. Sales of silver oxide batteries for medical purposes are very strong. We have been
manufacturing high-quality silver oxide batteries that provide a stable voltage for a longtime. This has earned us a good reputation, and there are indications of further growth
based on our proven track record in this field. In addition, the market for quartz crystals
has bottomed out and is now recovering. Although inkjet print heads have been affected by
the sluggish Chinese economy, we are developing new sales channels and new uses forthese products outside China. We expect that a recovery of inkjet print heads will raise
profits in Q4.

2Q7. You acquired Computer Science Corporation (CSC) in January 2024 in the SystemsSolutions (SS) Domain, which was a rather large acquisition. I assume that the upwardrevision of the sales forecast for the SS domain is attributable to the acquisition of CSC.
How will the acquisition impact finances, including profit and goodwill?
A7. Yes, the acquisition was relatively large compared to our previous M&A activities. CSC,
which has about 450 employees, is performing well, and its projected sales results havebeen added to the SS domain’s sales forecast for Q4. However, CSC’s real contribution toprofit will only emerge from the next fiscal year due to various related expenses and theamortization of goodwill. CSC has considerable expertise in systems operation andsecurity. It is generating synergies with IIM, which operates in the security sector, wheredemand is firm. We anticipate those synergies will continue to grow in the next fiscal year.

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