Financial Results for the 1Q
for the FY ending March 2020
July 31, 2019
NEC Networks & System Integration
Corporation(TSE: 1973, NESIC)1Q FY2020/3 Summary▌Orders ＆ Sales: Progressed steadily toward the full-year target▌Operating income/loss: Remained flat due to an unprofitable project(*),
despite an improvement in profitability* Mega solar project▌Net income/loss: Turned to positive with DTA
Attributable to owners of the parent
despite extraordinary losses(¥ Bn.)

1Q FY19/3

1Q FY20/3

Orders Received

66.2

74.1

+12%

Net Sales

55.5

60.5

+4%

Operating Income(Loss)(0.33)(0.18)+0.15---(to Sales)
Net Income(Loss)
attributable to owners of the parent(to Sales)
Free Cash Flows

Change(0.21)

0.02+0.23-(0.0%)

-19.0

15.4

3.6

Including extraordinary losses (-2.2) and an impact of review of the recoverability of deferred tax assets (+1.6)
2© NEC Networks & System Integration Corporation 2019

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

74.1 +12%
64.3

66.2
25.9

DSL 21.4

NWI

18.9

+5%

24.8

 DSL (Digital Solutions) Mainly work-style innovation-relatedbusiness expanded.
 Orders for hotels remained at a high level.

 NWI (Network Infrastructures)
23.0

+8%

21.2

 Social infrastructure expanded (firefighting system, broadcast/CATV).
 Business for telecom carriers waspostponed.

 ESS (EngineeringESS

Others

3

22.8
1.2

FY18/3
1Q

17.7

23.0 +30%

2.6

2.2

FY19/3
1Q

FY20/3
1Q© NEC Networks & System Integration Corporation 2019& Support Services) In addition to a reactive increase in
the cancellation of order receipts fromthe previous fiscal year, regional
construction business expanded.

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

60.5
53.1

DSL

NWI

20.2

14.1+9%

55.5

20.8

14.8

23.5 +13%

15.4+４%

 DSL (Digital Solutions) Work-style innovation-related
business continued to expand.
 Network installation for hotels
expanded.

 NWI (Network Infrastructures)
Sales for both telecom carriers* andsocial infrastructure increased.
*Product sales increased.

 ESS (EngineeringESS

17.8

Others1.1

4

FY18/3
1Q

18.0
1.8

FY19/3
1Q

18.5 +２%
3.2

FY20/31Q© NEC Networks & System Integration Corporation 2019& Support Services)Despite a decrease in mega solar
business, the office facility engineeringand service business expanded.

1Q FY2020/3 Operating Profit & Loss by Segment(¥ Bn.)(YoY)

Total-0.33

（‐）

-0.69

▐ Despite an increase in theincome of DSL and NWI, ESS-0.18 +0.15
decreased due to an（‐）
unprofitable mega solar project

（‐）

DSL

1.02

(5.0%)

ESS

0.35

NWI

-0.10

(2.0%)

 DSL (Digital Solutions)DSL

1.14(5.5%)

NWI 0.06(0.4%)
ESS

0.52(2.9%)

Others/Elimi- -1.95
nation1.65
0.38+0.32(7.0%)(2.5%)-0.17( - )

( - )

-2.05

+0.51

(+1.5pt)-2.05

・ Income increased due to highersales and continuous cost reductions.

 NWI (Network Infrastructures)(+2.1pt)-0.68

・The cost of sales ratio improved andincome increased mainly due to theabsence of an unprofitable project.

 ESS (Engineering& Support Services)

・Income decreased due toFY18/3
1Q
5FY19/3
1Q

FY20/3
1Q© NEC Networks & System Integration Corporation 2019

an unprofitable mega solar project.

1Q FY2020/3 Operating Income & Loss Analysis(¥ Bn.)

Unprofitable
Projects
in 1Q FY19/3+0.7
Improved
efficiency +0.1

-0.33

Sales
increase+0.8

FY19/31Q6© NEC Networks & System Integration Corporation 2019

Growthexpenses-0.3

FY19/3 0.3
FY20/3 0.6

Unprofitablemega-solarproject
-1.1

-0.18
FY20/3
1Q

Regarding the Unprofitable Mega Solar Plant Construction Project▍ Date of order： 4Q of the FY.18/3▍ Reason for： Improvement cost and additional man-hours were
unprofitability
triggered by a unique mega solar issue (assessment ofthe ground).
▍ Next steps： Changed the policy to receive mega solar orders fromthe FY.19/3.
*Considering risk and profitability for selective order
receipt.

Introducing further stringent criteria to avoid risks*Unprofitable projects other than mega solar projects
Keeping the generation of unprofitable projects in check through thepreliminary examination reinforcement measure established in April 2017.
7© NEC Networks & System Integration Corporation 2019

FY2020/3 Full Year Forecasts（Forecasts as at July 31, 2019）▐ Aim for steady growth in sales and profits in the first fiscal yearof the new Mid-Term Management Plan.
 Expansion in work-style innovation-related business and businesswith telecom carriers despite macroeconomic uncertainty
 Further acceleration of investment for growth

FY19/3Forecasts

ChangeOrders received

284.7

295+4%Net sales

277.9295+6%

Operating income

12.8

13.0+0.2(to sales)(4.6%)(4.4%)-0.2pt

Net income

8.9

8.9+0.0(3.2%)(3.0%)-0.2ptattributable to owners of the parent(to sales)
8FY20/3（¥bn.）© NEC Networks & System Integration Corporation 2019

Topics: Initiatives for Focus Areas of the Medium-Term Plan ①

New service release (digital-related)
AprilAI/RoboticsMonitoring services using drones and AI

MayRPA/AI

Business process efficiency solution combining RPA and AI-OCR

CloudBusiness visualization solution ”Wrike”

IoT

Partner program for ELTRES™(LPWA) service
commences acceptance

June

AI/Cloud

Security monitoring/operation services using AI

JulyRobotics

Automatic guidance robot “YUNJI SAIL” utilization service

Cloud/

Preliminary implementation of dispersed work
for TELEWORK DAYS.

Work-styleinnovation-related

9© NEC Networks & System Integration Corporation 2019

Topics: Initiatives for Focus Areas of the Medium-Term Plan ②

Establish a system for discovering new technologies
April Invested in a venture fund of a VC in the US.
June Signed a partnership agreement with Plug and Play in
Silicon Valley in the US.
Established a favorable relationship with start-up companies.
One of a select group of companies invited to the NYSE listing ceremony of Slack Tech.

10© NEC Networks & System Integration Corporation 2019

Topics: Taking on the Challenge of New Work-style Innovation▐ Disperse offices and work in a multi-location environment.
Dispersed work was implemented earlier for TELEWORK DAYS.

[Aim of dispersed work]

Take on the challenge ofsolving the issues faced byJapan

Heavy concentration of workers in urban areas& securement of labor force
Lag behind the world in terms of innovation(international competitiveness)

 Disperse offices to 10 locations in theMetropolitan area
(Commuting time less than 30 min.)One office with the head
office via video connection

 Various issues such as communications orbusiness process are solved by digitaltechnology, including the cloud.

Drastically review and implement awork style leading to personal growthof employees, and innovation

Co-creation by one
team internally andexternally

Sharing workplace

Visualization ofbusiness bythe cloud

郊外サテライトオフィス
Suburban satellite office
Staff work space

Cloud asオフィスの共通設備は
commontools.
クラウドを活用
Box
Box連携
cloudクラウド
プリンタ
printerFace
顔認証
recognition
入退security
システム

Office IoT
Automatic visualization ofsituations of members

11© NEC Networks & System Integration Corporation 2019

Zoom
Zoom
全社共通
signage
サイネージ

APPENDIX

12© NEC Networks & System Integration Corporation 2019

1Q FY2020/3 (June 2019) Balance Seat(¥ Bn.)End of Mar.19 End of Jun.19
Cash and cash equivalents
Notes & accounts receivable
Inventories
Others

67.9
74.1
15.6
7.4

13.6
-33.1
2.41.1

Noncurrent Assets

181.0
35.1

165.0
36.4

Assets

216.2

201.4

-16.0
1.2
-14.8

41.1
6.4
61.1

31.2
6.8
57.7

-9.9
0.3
-3.4

Current Assets

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

108.6

109.0

95.6

107.1

-12.9

-4.1

-4.0

0.2

2.7

2.7

0.0

-2.0

Liabilities & Net Assets

107.6
216.2

105.8
201.4

-1.8
-14.8

Owner's Equity Ratio

48.5%

51.2%

+2.7ptNet Assets

1354.4
107.2
13.2
6.3Diff.

© NEC Networks & System Integration Corporation 2019

1Q FY2020/3 Cash Flows(¥ Bn.)
1Q
FY19.3141Q
FY20.3

ChangeOperating Cash Flow (A)

20.3

16.9

-3.5

Investment Cash Flow(B)

-1.3

-1.5

-0.1

Free Cash Flows (A)+(B)

19.0

15.4

-3.6

Financial Cash Flow

-2.5

-1.8

0.7

Cash & cash equivalent

73.7

67.9

-5.8

© NEC Networks & System Integration Corporation 2019

New Segment According to Reorganization
New segments

Old segments

Enterprise
NW

Construction,operationandmaintenance

Office ICTDigital Solutions(DSL)
OfficeICTCarrier
NW

Socialinfrastructures

15Carrierinfrastructures

Socialinfra

Public ICT(Non-carrier)

Regionalbiz

Global© NEC Networks & System Integration Corporation 2019

Construction,
operationandmaintenanceConstruction,
operationandmaintenanceExpertise

PublicICTHighreliability

Network
Infrastructures(NWI)
Carrier
Infra.

SocialInfra.

Engineering& Support
Services(ESS)
Construction,
operation andmaintenanceConstruction
power

Regionalbiz

Deployment
power

Global1H FY2020/3 Forecasts by Segment（¥ Bn.)

OrdersNet Sales

-3%
146.7
DSL

52.3

NWI

42.2

ESS

48.4

Others+2%-11%( ) to sales+6%
143+1％

Oper. Income5343130122.5
DSL

46.6

NWI

43ESS

3.84Others

FY19/3

FY20/334.4

38.3+7%+5%+4％5036403.1

4FY19/3

FY20/3(Forecast)

2.7

2.6 +0.1 (2.1%)(Forecast)(2.1%)DSL
NWI
ESS
Others/Elimination

3.3+0.7(4.4%)

1.5+0.5

2.0-0.4-4.2-0.7(7.1%)(5.1%)

FY19/34.0(8.0%)

2.0(5.6%)

1.6(4.0%)-4.9

FY20/3(Forecast)※Forecasts as at July 31, 201916

© NEC Networks & System Integration Corporation 2019

FY2020/3 Forecasts by Segment（¥ Bn.)

OrdersNet Sales+4%104.2 +8％DSL( ) to sales

+6%
295

284.7

Oper. Income

112

295

277.9
99.8

DSL12.8(4.6%)+5%105

DSL
NWI

NWI

81.0+5%85

NWI

80.4+6%85

ESS91

ESS

90.4 +11％ 100

9.0

7Others

7.45

FY19/3

FY20/3

FY19/3

FY20/3

ESS

90.5

Others+1%(Forecast)

13.0+0.2 (4.4%)(Forecast)Others/Elimination

8.4+1.0

5.9+1.2

7.2+0.8-8.8-2.7(8.5%)(7.4%)(7.9%)

FY19/39.4(9.0%)

7.1(8.4%)

8.0(8.0%)-11.5

FY20/3(Forecast)※Forecasts as at July 31, 201917

© NEC Networks & System Integration Corporation 2019

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 andsocial trends surrounding the business of this Company’s group, consumer
trends vis-a-vis systems and services provided by this Company’s group, aswell as pressure to lower prices and ability to cope with the market in
response to intensified competition.
Factors affecting results are not limited to the ones mentioned above.

18© NEC Networks & System Integration Corporation 2019

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

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© NEC Networks & System Integration Corporation 2019

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20© NEC Networks & System Integration Corporation 2019