Consolidated Financial Statements for the First Half of Fiscal Year ending March 31, 2021
29/Oct/2020
These financial statements have been prepared in accordance with accounting principals generally accepted in Japan.
NEC Networks & System Integration Corporation

Stock exchange listing: Tokyo
Code number:
1973

https://www.nesic.co.jp/english/index.html
1. Consolidated Results for the First Quarter (April 1, 2020 to September 30, 2020)of Fiscal Year ending March 31, 2021

(Rounded down to the nearest million yen.)(1) Net Sales and Income

6 months ended
Sep 2020
6 months ended Sep
2019

Net sales(¥ million)

Year-on-yearchange (%)

OperatingincomeYear-on-yearchange (%)

Ordinary
incomeYear-on-yearchange (%)

151,205

11.0

6,732

54.1

6,778

56.3

136,270

11.2

4,369

66.0

4,335

49.5

Net income
Net income
attributableYear-on-year
per share
to owners ofchange (%)(¥)
the parent(¥ million)

Net income
per share(diluted) (¥)

6 months ended
3,967
36.7
26.64
—
Sep 2020
6 months ended Sep
2,902
51.8
19.49
—
2019
c.f. Comprehensive income: 1H/FY Mar 2021: ¥4,208 million (27.7 %); 1H/FY Mar 2020: ¥3,296 million (56.0 %)* The company conducted a three-for-one stock split for its common stock on June 1, 2020. The amount of "Net income per share" is calculatedon the assumption that the stock split had been carried out at the beginning of the previous consolidated fiscal year.
(2) Financial Position
Owner's
Net assets
equity ratio
per share (¥)(%)
30/Sep/2020
230,823
115,42948.7
754.4231/Mar/2019
230,244
113,51047.9
741.12c.f. Owner's equity: 30/Sep/2020: ¥112,356 million; 31/Mar/2020: ¥110,366 million* The company conducted a three-for-one stock split for its common stock on June 1, 2020. The amount of "Net assets per share" is calculatedon the assumption that the stock split had been carried out at the beginning of the previous consolidated fiscal year.
Total assets(¥ million)

Net assets(¥ million)

2. Dividends
1stquarter
FY ended Mar. 2020—

Dividends per share (¥)
3rd
InterimYear-endquarter
13.33

—

14.00

Full year
27.33

FY ending Mar.
※ ※ Forecast
※
—
14.00
—
14.00
28.00
2021
Note: Revisions to projected dividends for the quarter under review: No* The company conducted a three-for-one stock split for its common stock on June 1, 2020. The dividends per share in the FY ended March 2020 is
calculatedon the assumption that the stock split had been carried out.
3. Financial Forecasts for Fiscal Year ending March 31, 2021 (April 1, 2020 to March 31, 2021)(¥ million)(%)(Percentages represent change compared to the previous corresponding period.)
Net income attributable to Net income
Operating income
Ordinary income
owners of the parent
per share(¥ million)(%)(¥ million)(%)(¥ million)(%)(¥)

327,000

7.7

19,000Net sales
FY ending Mar. 2021

17.0

19,00019.2

11,300

19.9

75.88

Note: Revisions to projected results for the quarter under review: yes* The company conducted a three-for-one stock split for its common stock on June 1, 2020. The amount of "Net income attributable to owners of theparent" is calculated considering on this stock split.
Cautionary Statement
Forecasts 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 tointensified competition.
Factors affecting results are not limited to the ones mentioned above.

4. Business Results(1) Business Results for the 1H for the Fiscal Year Ending March 31, 2021
During the first half under review (the period from April 1, 2020, to September 30, 2020), theJapanese economy was faced with an inevitable, sharp decline due to the impact of the
COVID-19 pandemic, which led to the government’s declaration of a state of emergency inApril. Although a gradual recovery trend is recognized after the lifting of the state of emergency
at the end of May, the Japanese economy remains severe, and we need to monitor the
pandemic situation in Japan and overseas going forward.
Under these economic conditions, the COVID-19 pandemic affected some areas of theinformation and communication technology (ICT) market, the business domain where NEC
Networks & System Integration Corporation (hereinafter “NESIC”) operates, although a robust
trend continued from the previous year.
In the enterprise market, companies maintained a high level of investment in workstyleinnovation, such as the introduction of teleworking as part of the response to the COVID-19
pandemic. Interest in cutting-edge technologies also remained high, including digitaltransformation (DX) such as cloud computing, artificial intelligence (AI), Internet of Things (IoT)
and robotic process automation (RPA). Meanwhile, the trend of postponing investment due toa fall in financial performance and other concerns has become more apparent in someindustries such as commerce and services. Meanwhile, capital investment by telecom carriers
remained robust for migration to 5G and enhancements on the quality of telecommunications.
Central and local governments and public interest-related organizations continued their system
investment in sophisticated urban infrastructure such as firefighting and disaster prevention
and broadcasting, video transmission and CATV although there were some impact such as
project delay. The ICT investment needs for the educational market such as GIGA school
initiative and remote (online) classes also rapidly increased.

In this market environment, the NESIC Group actively engaged in projects that emergedin the workstyle innovation business, ICT investment for the educational market andinfrastructure development investment for telecom carriers.
Under the Medium-Term Management Plan, “Beyond Borders 2021,” announced in May
2019, we aim to be a “communication services orchestrator” that produces new social value
using our strengths and in collaboration with our partners. We consider solving social issues
and a wave of technological innovation as an opportunity for business expansion and arefocusing on a shift to a new business model and business creation based on digital and 5G
communication.

Based on this concept, we have been practicing distributed operation since October 2019in our workstyle innovation-related business, in which we have been engaged since 2007. The
head office space has been reduced and head office staff members are separately assigned
to satellite offices in the suburban areas of Tokyo that are within 30 minutes from their homes.
The purpose is for our staff to experience workstyles that help create innovation for the future
and provide our customers with a variety of solutions for workstyle innovation through theoutcomes of the initiatives by using DX technology.

During the first half under review, we

carried out business using telecommuting following the state of emergency by using thissystem and technology. As measures to prevent COVID-19, which has recently become asocial issue, we shared our workstyle expertise with our customers and promptly responded tothe introduction of distributed operations and building platforms for teleworking, remote andonline classes, and other settings. In addition, we used the DX technology to implement avariety of initiatives and accelerate solution development corresponding to new workstyle(workstyle in the New Normal era) created jointly with our partners such as increasing theefficiency of operation and communication, and digitizing approval procedures. Moreover, inthe local 5G area where NESIC’s strength from infrastructure such as base station and core
network to services for enterprises can be utilized and there is a market potential, we areproceeding with trial experiments and proposition activities in areas including CATV, disasterprevention and disaster mitigation.
As a result, the Group posted the following consolidated results for the first half for the fiscal
year under review:

Net sales¥151,205 million

11.0% increase year on year

Operating income¥6,732 million

54.1%

increase year on year

Ordinary income¥6,778 million

56.3%

increase year on year

Net income attributable¥3,967 million

36.7%

increase year on year

¥177,890 million

17.2%

increase year on year

to owners of the parent＜Reference＞
Orders received

Net sales increased 11.0% year on year, to ¥151,205 million. This result reflected
increased sales in all segments, with the expansion of ICT services related to workstyleinnovation, infrastructure development for telecom carriers, GIGA school projects' contribution
to sales and the domestic construction business particularly for the mega-solar projects.
Orders received increased 17.2% year on year, to ¥177,890 million. This result reflected GIGA
school projects' significant contribution to orders received, expansion of demand forteleworking in the businesses related to workstyle innovation, and services for telecom

carriers.
Profit increased thanks to a decrease in the provision for loss for unprofitable projects
in the Engineering & Support Services business in addition to an increase in net sales andprogress in profitability improvement through resource efficiency and project management.
This more than offset the investment in growth, such as new service development and humanresource development. Accordingly, operating income rose 54.1% year on year, to ¥6,732
million, and ordinary income improved by 56.3%, to ¥6,778 million. Net income attributable toowners of the parent increased by 36.7%, to ¥3,967 million.

Operating results by business segment were as follows:（Million yen）

Net sales by business segment
Engineering

Digital

Network

Solutions

Infrastructures& Support

Other

Total

Services

1H Fiscal 2021.3

56,71238,08351,551

4,858

151,205

1H Fiscal 2020.3

53,20935,50541,602

5,953

136,270

Increase or (decrease)

3,502

2,578

9,949

(1,095)

14,934

6.6

7.3

23.9

(18.4)

11.0

Ratio ofincrease/(decrease) (%)（Million yen）

Reference: Orders received by business segment
Engineering

Digital

Network

Solutions

Infrastructures& Support

Other

Total

Services

1H Fiscal 2021.3

71,26047,57754,331

4,721

177,890

1H Fiscal 2020.3

55,39845,303

46,573

4,448

151,724

Increase

15,861

2,274

7,757

273

26,166

28.6

5.0

16.7

6.1

17.2

Ratio of increase (%)

1. Digital Solutions businessNet sales increased 6.6% year on year, to ¥56,712 million, reflecting expansion of ICT
services related to workstyle innovation and GIGA school projects at a subsidiary.
2. Network Infrastructures businessNet sales rose 7.3% year on year, to ¥38,083 million, reflecting expansion of services fortelecom carriers.

3. Engineering & Support Services businessNet sales rose 23.9% year on year, to ¥51,551 million, reflecting expansion of local GIGA
school projects and mega-solar projects.

<Outline of Business Segments>
Business Segment

Descriptions of Main Businesses
System integration related to ICT platform and outsourcing/cloudservices for business of enterprises and other customers and provision

Digital Solutionsof solutions/services that are helpful for customers’ business
transformation by using cutting-edge/digital technologies , and contact
center services
Provision of system integration/services related to network

Network Infrastructures
business

infrastructures of a public nature with the required high reliability, andthe development/manufacture and sales of network equipment, andprovide system integration for telecom carriers, central and local
governments and social infrastructures service providers.
Construction business in Japan and abroad, provision of support

Engineering & Support
Services businessservices such as maintenance and operations/monitoring related to ICT
systems/services provided by the Company and operations ofcompany-wide service infrastructures, in addition to technical support
using these.

OthersSales of purchased equipment(2) Outlook for the Fiscal Year Ending March 31, 2021
As for COVID-19, the state of emergency was lifted and economic activities are gradually
recovering. Nevertheless, it is uncertain when the pandemic will be contained. Accordingly, it isunknown how the pandemic will affect the economy. We must continue to closely monitor the
economic situation. While it is expected that demand for teleworking in the businesses related toworkstyle innovation will expand in the enterprises’ area, the business domain where NESIC
operates, a decline in ICT investments by client companies are becoming obvious, lagging behind
economic trends. In the services for telecom carriers, migration to 5G communication systems
is starting and we expect that the volume of capital investment will remain steady. In addition,
bidding on platform-building for GIGA school projects was concentrated in the first half underreview, and we expect now to move to the stage of actual platform-building.
Under the conditions described thus far, we revised our forecasts upward for the full-year
consolidated results for the fiscal year ending March 31, 2021, in view of the progress up to the firsthalf under review, as mentioned below. Although there is a concern that ICT investments will be
increasingly limited by the prolonged COVID-19 pandemic in the second half of the fiscal year, weare determined to focus on the proposal of a new workstyle in the new normal era, businessexpansion for telecom carriers, and GIGA school projects won during the period under review.

Net sales¥327 billion

7.7% increase year on year

Operating income¥19.0 billion

17.0% increase year on year

Ordinary income¥19.0 billion

19.2% increase year on year

Net income attributable¥11.3 billion

19.9% increase year on year

to owners of the parent

5. Consolidated Financial Statements(1) Consolidated Balance Sheets
As ofMarch 31, 2020
AssetsCurrent assets
Cash and cash equivalents
Notes and accounts receivable
Electronically recorded monetary claims
Purchased goods,materials and supplies
Work in process
Exchange
Other gain
Allowance for doubtful accounts
Total current assets
Non-current assets
Property and equipment
Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets
Deferred tax assets
Other
Allowance for doubtful accounts
Total investments and other assets
Total non-current assets
Total assets
Liabilities
Current liabilities
Notes and accounts payable
Electronically recorded obligations
Short-term bank loans
Current installments of long-term debt
Accrued income taxes
Accrued bunuses to directors and corporate auditors
Accrued warranty on products
Accrued losses on sales contracts
Provision for compensation for damage
Accrued office transfer cost
Other current liabilities
Total current liabilities
Long-term liabilities
Long-term debt
Liabilities for retirement benefits
Other liabilities
Total long-term liabilities
Total liabilities
Net assets
Shareholders' equity
Capital stock
Capital surplus
Retained earnings
Treasury stock, at cost
Total shareholders' equity
Accumulated other comprehensive income
Net unrealized holding gain on other securities
Deferred gains or losses on hedges
Foreign currency translation adjustments
Accumulated adjustments for retirement benefits
Total accumulated other comprehensive income
Non-controlling interests
Total net assets
Total liabilities and net assets(Millions of yen)
As of
Sep 30, 2020

58,321
112,358
728
4,898
8,259
7,359
(77)
191,847

70,671
99,784
985
3,548
9,184
7,457
(74)
191,557

8,942

10,254

899
4,948
5,847

741
4,476
5,218

16,5207,142(56)
23,60638,397230,244

16,466
7,379(53)
23,79239,265
230,823

41,666
1,441
4,632
298
3,580
139
105
2,159
1,326
218
24,55880,12842,602
1,301
5,077
298
2,617
48
91
644
1,824
24
24,22278,753

3,764
31,215
1,625
36,605
116,734

3,615
31,261
1,762
36,639115,393

13,122
16,664
84,972(271)
114,488

13,122
16,68086,896(264)
116,434

30
25
(392)
(3,783)(4,121)
3,143
113,510230,244

(4)
12
(501)
(3,584)(4,078)
3,073
115,429
230,823

(2) Consolidated Statements of Income and Comprehensive Income(Consolidated Statements of Income)(Millions of yen)
1H, FY March 2020
(6 months ended Sep 2019)

1H, FY March 2021
(6 months ended Sep 2020)

Net sales

136,270

151,205

Cost of sales

113,758

126,033

Gross profit

22,512

25,171

Selling, general and administrative expenses

18,143

18,439Operating income (loss)

4,369

6,732

Interest income

19

15

Other

117

142

Total non-operating income

168

189

Non-operating expenses

305

348

Interest expenses

48

55

Other

290

246

Total non-operating expenses

339

301

4,335

6,778

－

455

Impairment loss

1,788

－

Office transfer cost

405

－

2,194

455

Income (loss) before income taxes

2,141

6,323

Income taxes

(827)

2,102

Net income (loss)
Net income (loss) attributable to noncontrolling interests
Net income (loss) attributable to owners of the parent

2,968

4,221

66

254

2,902

3,967

Non-operating income

Ordinary income (loss)
Extraordinary losses
Provision of allowance for compensation for damage

Total extraordinary losses(Millions of yen)

(Millions of yen)

1H, FY March 2020
(6 months ended Sep 2019)

1H, FY March 2021
(6 months ended Sep 2020)

2,968

4,221

Net unrealized holding loss on other securities

8

(34)

Deferred gains or losses on hedges

5

(12)

Foreign currency translation adjustments

39

(165)

Adjustments for retirement benefit
Share of other comprehensive income of associates
accounted for using equity method

275

199

(0)

0

Total other comprehensive income

327

(12)

3,296

4,208

3,200

4,010

96

198

Net income (loss)
Other comprehensive income

Comprehensive income (loss)
Comprehensive income (loss) attributable to:
Owners of the parent
Non-controlling interests

(3) Consolidated Statements of Cash Flows
1H, FY March 2020

(Millions of yen)
1H, FY March 2021

(6 months ended Sep 2019)(6 months ended Sep 2020)

2,141
1,815
123
1,788
(1)
75
204

6,323
1,563
120
－
(3)
(28)
384

(65)
0
(343)

(90)
(13)
(1,514)

damageInterest and dividend income
Interest expense(Increase) decrease in notes and accounts receivable(Increase) decrease in inventories
Increase (decrease) in notes and accounts payable
Increase (decrease) in accrued consumption taxes
Other, net
SubtotalInterest and dividend income received
Interest paid
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property and equipment
Proceeds from sale of property and equipment
Purchase of intangibles
Proceeds from sale of intangibles
Purchase of investment securities
Collection of loans receivable
Other, net
Net cash used in investing activities
Cash flows from financing activities
Net increase (decrease) in short-term bank loans
Repayments of long-term debt
Proceeds from long-term debt
Net (increase) decrease in treasury shares
Dividends paid to shareholders
Dividends paid to minority shareholders of subsidiaries
Proceeds from share issuance to non-controlling interest
Other, net
Net cash provided by used in financing activities
Effect of exchange rate changes on cash and cash

－
(39)
48
19,645(1,507)(4,791)(1,217)(1,000)16,87439(48)(2,763)
14,101498(36)
55
11,137
418
854
(784)
1,333
20,21936(55)(3,122)
17,077(1,105)
7
(455)
0
(620)
0
(1,152)(3,325)(1,869)
1
(224)
－
(238)
0
(347)
(2,677)

1,044
(115)
200
(1)
(1,982)
(23)
3
(256)
(1,132)

987
(149)
－
(1)
(2,081)
(23)
－
(204)
(1,471)equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period(Decrease) in cash and cash equivalents resulting from

(10)
9,633
54,354(44)
12,88358,321

exclusion of a subsidiary from consolidation
Cash and cash equivalents at end of period－
63,987(532)
70,671

Cash flows from operating activities
Net income (loss) before income taxes
Depreciation and amortization
Amortization of goodwill
Impairment loss
Increase (decrease) in allowance for doubtful receivables
Increase (decrease) in asset for retirement benefit
Increase (decrease) in liability for retirement benefits
Increase (decrease) in accrued bonuses to directors andcorporate auditors
Increase (decrease) in accurued warranty on products
accurued forlosseson sales contracts
Increase (decrease) in provisioncompensationfor(4) Segment Information
Business Segment Information
First half of fiscal March 2021 (6 months ended September 2020)(Millions of yen)
Digital Solutions
Sales(1) Sales to third parties(2) Intersegment sales
Total
Operating income and loss

NetworkEngineering &Infrastructures

Support Services

38,08338,083
2,213

51,551
51,551
3,464

56,712
56,712
5,271

Others

4,858
4,858
363

Adjustments

Total(4,579)151,205
151,205
6,732

First half of fiscal March 2020 (6 months ended September 2019)(Millions of yen)Sales(1) Sales to third parties(2) Intersegment sales
Total
Operating income and loss

Digital

NetworkEngineering &Solutions

Infrastructures

Support Services

35,50535,505
1,839

41,602
41,602
2,196

53,20953,2094,760

Others

5,953
5,953
250

Adjustments(4,676)

Total

136,270
136,270
4,369*Our business segments were reorganized in line with our corporate management due to the replacement of some businesses and arevision in the distribution of management resources implemented in April 2020 to optimize business efficiency. Segment information
related to the first six months of the previous fiscal year was reclassified for disclosure to reflect the changes in this event.