Financial Results for the
1H ending March 2020
October 30, 2019
Yushi USHIJIMA, President
NEC Networks & System Integration Corporation(TSE: 1973, NESIC)AgendaI. Results for 1H FY2020/3
II. Forecasts for FY2020/3
III. Progress of Measuresfor “Beyond Boarders 2021”(Medium-Term Management Plan)

I. Results for 1H FY2020/3
II. Forecasts for FY2020/3
III. Progress of Measuresfor “Beyond Boarders 2021”

1H FY2020/3 Summery▐ Achieved higher net sales and income
Off to a good start for the achievement of“Beyond Borders2021” plan; exceeding forecasts

 Orders: Increased, offsetting a reactionary fall due to large overseas
projects in the previous FY (-10).
* Over 10％ growth excluding impacts above Operating income: Increased due to profitability improvement despite
increased growth expenditure (-0.9)
1H
FY2019/3

4

1H
FY2020/3

Change1H Forecasts
as at Jul.31

Orders received

146.7

151.7

+3%

143

Sales

122.5

136.3

+11%

130

(Gross margin)

15.9%

16.5%

+0.6ptOperating income

2.6

4.4

+1.7

2.7

(to sales)(2.1%)(3.2%)+1.1pt

(2.1%)

attributable to owners of the parent

Net income

1.9

2.9

+1.0

1.6

(to sales)(1.6%)(2.1%)+0.5pt

(1.2%)

Free cash flows

11.5

10.8

-0.7

© NEC Networks & System Integration Corporation 2019-(¥ Bn.)

1H/FY2020/3 Orders Received by Segment(¥ Bn.)

146.7

151.7 +3%

128.7
52.3
DSL

NWI

ESS

Others553.9 +3%

38.6

43.9

Although orders from financial
companies decreased due to PJ
concentration in the previous FY,
workstyle innovation orders increased▐ Network Infra. (NWI)

43.3

42.2

▐ Digital Solutions (DSL)

46.1 +9%Social/public orders* increased
although orders from telecom carriers
were carried over into 2H*Networks for firefighting, disaster prevention and traffic▐ Engineering & Support
Services (ESS)
48.4

47.2 -2%

2.8

3.8

4.4

1H
18/3

1H
19/3

1H
20/3

© NEC Networks & System Integration Corporation 2019

Decreased slightly as a result ofoffsetting the reactionary drop inorders due to large overseas orders in
the previous FY(-10) by increased
domestic construction (firefighting), etc.

1H/FY2020/3 Net Sales by Segment(¥ Bn.)

136.3 +11%▐ Digital Solutions (DSL)
119.9

Workstyle innovation area andnetwork for hotels increased

122.5
51.7 +11%

DSL

43.7

46.6

35.6 +4%

NWI

32.9

34.4

ESS

41.0

38.3

Others

2.3

3.1

6.0

1H
18/3

1H
19/3

1H
20/3

6

43.0 +12%© NEC Networks & System Integration Corporation 2019

Both of SI and services areas increased▐ Network Infra. (NWI)

Sales for social/public* increased,
although sales for telecom carriers
were carried over into 2H*Firefighting and space (terrestrial system), etc.

▐ Engineering & Support
Services (ESS)Both of domestic construction* andmaintenance/operation businesses
increased *Office facilities, mega-solar,
firefighting, etc.

1H/FY2020/3 Operating Income by Segment(¥ Bn.)( ) : to sales

2.5

2.6

4.4

+1.7 ▐ Significant increase as a

（3.2％）(+1.1pt)（2.1%） （2.1％）

Total

4.4

DSL
NWI
ESS

3.1

(7.1%)

1.3

3.3
1.5

(4.4%)

2.1

2.0(5.1%)

Others/ -4.0
Ellimination

-4.2

1H
18/3

1H
19/3

7

(8.4%) (+1.3pt)(7.1%)(3.9%)(5.2%)

+1.0

2.3

+0.8

(6.5%) (+2.1pt)

2.1

+0.1

(4.9%) (-0.2pt)

-4.4

-0.3

1H
20/3

© NEC Networks & System Integration Corporation 2019

result of improvement inall segments
 Digital Solutions (DSL)

・Profit increased due to improved fixed cost
efficiency as a result of higher net sales

 Network Infra. (NWI)

・Profit increased due to dissolving
unprofitable projects in addition to higher
net sales and the reorganization effect**Resource efficiency enhancement,enhanced PJ management etc.

 Engineering & Support
Services (ESS)・ Profit increased due to higher net sales
despite an increased impact from
unprofitable projects.

 Others/Ellimination
・Growth expenses increased(Office realignment, etc.)

I. Results for 1H FY2020/3
II. Forecasts for FY2020/3
III. Progress of Measuresfor “Beyond Boarders 2021”

FY2020/3 Forecasts▌Upward revision of full-year forecasts
in view of strong 1H progress For 2H, the uncertain macroeconomic environment, front-loaded
net sales and the carryover of 1H growth expenditure werefactored in.
FY19.3
Actual

FY20.3
Forecast

ChangeForecast

as at July 31

Diff.

Orders Received

284.7

295

+4％

295

－

Net Sales

277.9

300

+8%

295

+5.0

Operating Income

12.8

14.0

+1.2

13.0

+1.0

(to Sales)(4.6%)(4.7%)+0.1pt

(4.4%) ＋0.3pt

Net income

8.9

9.0

+0.1

8.9

+0.1

(to Sales)(3.2%)(3.0%)-0.2pt

(3.0%)－

attributable to owners of the parent（¥ Bn.）(*Forecasts as at October 29, 2019)9© NEC Networks & System Integration Corporation 2019

FY2020/3 Forecasts by Segment
Net sales（¥ Bn.）

277.9
DSL

NWI

99.8

80.4

295

+5

105

YOY

300

( ) to sales

+8%

12.8

+2

107

85

85

+7%

+6%

(4.6%)
8.4

DSL(8.5%)

NWI
ESS

ESS

90.4

100

その他

7.4

5

FY19/3

FY20/3(forecast as
at July 31)

100

+3

+11%

+1.0

14.0 +1.2(4.4%)(4.7%)

9.4

9.7

+1.3
(9.0%) +0.3 (9.1%)

5.9

7.1

+0.4 (8.8%) ＋1.6
(8.4%)

7.5

7.2

8.0

8.0

+0.8

-11.5 +0.3 -11.2-2.4(7.4%)(7.9%)

その他/
全社消去

13.0

YOY

-8.8

(8.0%)(8.0%)

8
FY20/3(Revised)*No change in orders forecasts
10

Operating Income© NEC Networks & System Integration Corporation 2019

FY19/3

FY20/3(forecast as
at July 31)

FY20/3(Revised)*Forecasts as at October 29, 2019

（Forecasts as at October 29, 2019）

Dividend Plan

▌Pay an interim dividend of ¥40 per share,up ¥2 YoY

 Year-end dividend: According to the initial plan

Planning increase
for the 13th year
6460
in a row
45
Dividend
per share
(¥)

14
7

20
10

22
11

26

28

14

13

14
14
12/3

25

7

10

11

11

13

FY07/3

08/3

09/3

10/3

11/3

11

30

32

70

35

72

36

74

37

78

80

40

40

Yearend

40

Interim

26

19
13/3

© NEC Networks & System Integration Corporation 2019

30

32

35

36

37

38

14/3

15/3

16/3

17/3

18/3

19/3 20/3(Forecast)I. Results for 1H FY2020/3
II. Forecasts for FY2020/3
III. Progress of Measuresfor “Beyond Boarders 2021”

Positioning of Medium-Term Plan toward Vision for 2030
Socialvision torealizeOur
futurevisionChanges insociety/technology

A more welcoming and convenient society
through communication
Communication Services Orchestrator

2030

to produce a new value chain leveraging the strengths, throughco-creation with partners

5G, digital, cloud first, SDGs, etc.
2021

Strengthen growth power and earnings power by strengthening
the business structure and constitution in anticipation of2019 environmental changes in five and ten years’ time.

13© NEC Networks & System Integration Corporation 2019

Growth Strategies with “NESIC × Digital × 5G”

With a view toward the coming “digital × 5G” era
when digital technologies are used on 5G infra. andthe two technologies are amalgamated,
NESIC will concentrate on both of these business fields.
Core competences

Digitalsolutions

Business
Nationwide Technological creation
capabilities capabilities
business
capabilities & credibility Business innovation

services

DX platform

Cloud shift and cloud SI (Self practice and modeling)
5G migration & network virtualization

5G
infrastructure

Local 5G (5G of private networks* Centered on migration during
the term of this medium-term plan
14

Automization & BPO
of operation© NEC Networks & System Integration Corporation 2019

Digital x 5G
Exerting the synergy of NESIC
offering diverse services from
ICT services for companies tocommunication infra. Of
telecom carriers

Basic Strategies

 Strengthening of competitiveness and growth power
for the Digital & 5G age
 Acceleration of innovation through All-NESIC Strengthening of the base, schemes and structure foradvanced technologies and new businesses creation

Shifting to sustainable profit growth.
15© NEC Networks & System Integration Corporation 2019

Progress of Measures for BB2021: Digital/Innovation

From the “product SI” model to the “multi-cloud service” modelthat links and integrates the most advanced cloud services
Expanding compatible cloud services

Optimal useof cloud services

Accelerating work-styleinnovation-related
businesses
16© NEC Networks & System Integration Corporation 2019

Salesforce

Progress of Measures for BB2021: Digital/Innovation
Multi-cloud service
that extracts the true value of cloud networking
Using conventional cloud services, you will have to use data and implement
processes in different ways...
Using conventional cloud services...

Registrationof biznegotiations

Info.
sharing

Relatedmaterials

Schedule

Meetings

Salesforce

Shift to the true cloud service

Registration of biz
negotiations
Info. sharing

Schedule

Saving a great
deal of time
Speedy process

商談登録 情報共有Meetings
関連資料スケジュールミーティング
Relatedmaterials

Salesforce
PF

Linking andintegrating the cloudservices
Data coordination andprocessing are automatedEach of these services is excellent,
has low fees, and offers rapid
processing, but...
17© NEC Networks & System Integration Corporation 2019

The models are
implemented by
NESIC’s own practiceProgress of Measures for BB2021: Digital/Innovation

Readily, quickly, and securely realizing multi-cloud& connectivity services at low cost
Multi-cloudservice

Sales
reforms

Automatedbusiness operations

・・・

Integrating the results of
NESIC’s own practicein a package

Expanding the fields

expanding the… Furthercompatible services

Salesforce
DX platform
Coordination ofcloud services

Product SI
model

18

Work-styleinnovation

Automated
processes
Office ICT equipment(telephones/networks…)© NEC Networks & System Integration Corporation 2019

Security

Connectivity

Monitoring cameras/sensors

Service launch
Serially enhancing thefunctions・・・

Progress of Measures for BB2021: Digital/Innovation
Example of NESIC’S
own practice

Improving the efficiency of the operations for reportingand managing field work through coordination
with various cloud services and process automation,with Slack as the entrance to the integrated service

Business chat

The red bar
indicates
problems

Completion
notification

Completion
report○XXX

Cloud coordination
platform (PF)

CPaaS

Reports of problems will be
automatically notified to the superiorSuperior○XXX

送信

Sharing of information
with the sales division
Workers in the field

19

Compilation of theoperation results© NEC Networks & System Integration Corporation 2019

Salesforce
Sales support system

Quality control division

Progress of Measures for BB2021: Digital/Innovation
Customer’s case: Mercari, Inc.
Back office operation reforms
through coordination with cloud networks
and automated processes

Documentation
management

API

Business chat

Expensesettlement

○XXX

○XXX

API

Cloud coordination
platform (PF)

API

送信

In-house inquiry
management

API

Salesforce

Various cloud services are coordinated and integrated with Slackfor the automation and optimization of approval processes
and the integration of inquiry response operations
20© NEC Networks & System Integration Corporation 2019

Progress of Measures for BB2021: Digital/Innovation

Changing Japan through comprehensive use of cloud/advanced tech.
(Overconcentration in Tokyo, labor productivity, innovation, ...)The staff are dispersed to satellite offices
within about 30 minutes from their homes
Urawa

Sharedwork space

Kita
senju

Tachi
kawa

Head
officeMusashikosugi

Kashiwa

Iidabashi

Note: Satellite offices are scheduled to be established one by one inother areas.

21© NEC Networks & System Integration Corporation 2019

…

Yoko
hama

Funa
bashi

Operating spacefor staff

Slack
Zoom
Wrike
Office IoT
SmoothSpaceProgress of Measures for BB2021: New Business Creation

To realize the DX of the fish farming business and innovation in our business model,
aiming to implement the solution of social issues and the growth of our business/theestablishment of a highly profitable model at the same time
Bringing about innovationin the fisheries industry

Our strengths(ICT/digitaltechnologies)

×Our partner’s strength(Assets in the fisheries
industry)
The largest
operator in theonshore fish farming
industry in Japan＋

Hayashi Trout Farm

Expanding the value
chain
Expanding the subject domain from theprovision of ICT to the farming business itself

22

Departing from theconventional styles in
the primary industry
・Evolving into a white-collar industry
・Turning from experience-based
work to data-based operations(from analog to digital)

Resulting in outstanding
work-style innovation© NEC Networks & System Integration Corporation 2019

Bringing
sophistication toonshore fish
farming with digitaltechnology
・Controlling the flavor and quality
・Increasing efficiency in theplantsIncreasing the unit price by 50%
Reducing the operation cost by 50%

Targeted SDGs

Progress of Measures for BB2021: New Business Creation
Winning new values
Conventional
model

Digital tech + Business model innovations = High profitability
New
Providing services via co-creation
model

Supplying ICT to operators
Operator

OrdersServices
Products

End
users

Innovation with digitaltechnologies

ICT services

NESIC

Business expansion
through
the franchising model

End
users

NESIC = Operator
Cocreation

Partner

Services
Products

Practices + expertise in packages= Nationwide and overseas development

STEP １

STEP ２

STEP ３■ Launching the business corporation■ Developing the business nationwide
in multiple locations■ Becoming the No. 1 onshore
fish farming operator

Franchiser

NESIC
Municipalit
ies
Local
enterprises

Fish farms

Franchisees23© NEC Networks & System Integration Corporation 2019

Regional
banks
Investors

Expanding the businessscale to ¥30 Bn. including
franchisee sales

At the End

Beyond Borders
To go beyond every border and barrier such as market borders,technological barriers, competitive barriers, organizational borders,ability borders or performance borders.

Move up to a next stage with
“Creation,” “Change” and “Challenge.”24© NEC Networks & System Integration Corporation 2019

APPENDIX

25© NEC Networks & System Integration Corporation 2019

1H FY2020/3 (End of Sep. 2018) Balance Sheet

Cash and cash equivalents
Notes & accounts receivable
Inventories
OthersCurrent Assets
Noncurrent Assets

Assets
Notes and accounts payable
Loans
OthersLiabilities
Shareholders' equity
Accumulated othercomprehensive income
Non-controlling interests

End of 19/9
64.0
87.5
14.7
6.9

41.1
6.4
61.1

36.3
7.5
56.8

181.0
35.1
216.2

173.1
36.4
209.5

Diff.

9.6
-19.6
1.5
0.6

-7.9
1.2
-6.7

-4.8
1.1
-4.3

108.6

100.6

-8.0

-4.1

-3.8

0.3

2.7

2.8

0.1

109.0

110.0

0.9

Liabilities & Net Assets

107.6
216.2

108.9
209.5

1.3
-6.7

Owner's Equity Ratio

48.5%

50.7%

+2.2ptNet Assets

26

End of 19/3
54.4
107.2
13.2
6.3

(¥ Bn.)© NEC Networks & System Integration Corporation 2019

1H FY2020/3 Dash Flows
Operating CF

+15.5

-6.1

+19.1

+3.6

+13.3

-8.5

+14.2

-5.8

+14.1

Investing CF

-2.0

-0.8

-1.2

-1.5

-1.6

-1.2

-2.7

-2.9

-3.3

（¥ Bn.）

FCF

17.9

13.5

11.7

11.5

10.8

2.1
70

-6.9

-8.7

-9.7

60
50

Net
cash

40
30
20

44.3

10
0

1H

35.4
2H

FY16/3

51.7

51.4

1H

2H

FY17/3*Net cash = Cash & cash equivalent - Debt
27

© NEC Networks & System Integration Corporation 2019

61.0

1H

49.2

2H

FY18/3

58.8

1H

47.9

2H

FY19/356.4

1H
FY20/3

Cautionary Statement
Forecasts and targets of results mentioned in this document are future
estimates and are thus inclusive of risks and uncertain factors since they are
not based on definite facts. Please be aware that a variety of factors could
cause actual results to differ significantly from those projected. The major
factors affecting actual results include the economic climate and social trends
surrounding the business of this Company’s group, consumer trends vis-a-vis
systems and services provided by this Company’s group, as well as pressure
to lower prices and ability to cope with the market in response to intensifiedcompetition.
Factors affecting results are not limited to the ones mentioned above.
* From FY2020/3 business segments are changed due toreorganization on April 1, 2019. The new segment figures for
FY2019/3 & FY2018/3 are numbers by reclassification. (Newsegment figures for FY 2018/3 were not audited)28© NEC Networks & System Integration Corporation 2019

NEC Networks & System Integration Corporationis committed to increasing customer value byredesigning future communications from the user’s
perspective.

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29

© NEC Networks & System Integration Corporation 2019

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30© NEC Networks & System Integration Corporation 2019