Consolidated Financial Statements for the First Quarter of Fiscal Year ending March 31, 2021
30/Jul/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 June 30, 2020)of Fiscal Year ending March 31, 2021

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

3 months ended
June 2020
3 months ended
June 2019

Net sales(¥ million)

Year-on-yearchange (%)

OperatingincomeYear-on-yearchange (%)

Ordinary
incomeYear-on-yearchange (%)

67,369

11.3

1,008

—

941

—

60,537

9.2

-178

—

-251

—

Net income
per share(¥)

Net income
per share(diluted) (¥)

Net income
attributable toYear-on-year
owners of thechange (%)
parent(¥ million)

3 months ended
326
—
2.20
—
June 2020
3 months ended
21
—
0.14
—
June 2019c.f. Comprehensive income: 1Q/FY Mar 2021: ¥259 million ( 37.9 %); 1Q/FY Mar 2020: ¥188 million (-%)* 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/Jun/2020
213,327
111,45550.9
728.5431/Mar/2020
230,244
113,51047.9
741.12c.f. Owner's equity: 30/Jun/2020: ¥108,494 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.
—
14.00
—
14.00
28.00
2021(Forecast)
Note: Revisions to projected dividends for the quarter under review: yes* 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)

Net sales(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)(%)(¥)(¥ million)(%)

6 months ending
Sep. 2020

142,000

4.2

4,500

3.0

4,500

3.8

3,000

3.4

20.15

FY ending Mar. 2021

312,000

2.8

18,00010.8

18,00012.9

10,500

11.4

70.51

Note: Revisions to projected results for the quarter under review: yes
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 andservices provided by this Company’s group, as well 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.

4. Business Results(1) Business Results for the 1Q for the Fiscal Year Ending March 31, 2021
During the first quarter under review (the period from April 1, 2020, to June 30, 2020), theJapanese economy was faced with an inevitable, sharp decline due to the impact of the novel
coronavirus (COVID-19), which led to the government’s declaration of a state of emergency inApril. Although hopes for the start of recovery have been high since the end of May in response to
the lifting of the state of emergency, the trend of infection in Japan and overseas continues to beless than promising, seeing that the number of the newly infected cases is increasing again.
Under these economic conditions, COVID-19 affected some areas of the information andcommunication technology (ICT) market, the business domain where NEC Networks & System
Integration Corporation (hereinafter “the Company”) operates, although a robust trend continued
from the previous year.
In the enterprises market, companies maintained a high level of investment in workstyleinnovation, such as the introduction of teleworking as part of their response to COVID-19. Interestin cutting-edge technologies also remained high, including DX (digital transformation) such as
cloud computing, artificial intelligence (AI), the Internet of Things (IoT) and robotic process
automation (RPA). Meanwhile, the trend of postponing investment due to a fall in financial
performance and other concerns has become more apparent in some industries such ascommerce, services and manufacturing.
The central and local governments and public interest-related organizations continued their system
investment in sophisticated urban infrastructure such as firefighting and disaster prevention andbroadcasting, video transmission and CATV. The need for ICT investment such as remote (online)
classes for schools also rapidly increased.
In addition, telecom carriers continued their capital investment in enhancing telecommunication
quality.
In this market environment the NESIC Group actively engaged in projects that emerged in theworkstyle innovation business, school ICT investment and infrastructure development for telecom
carriers.
Under the Medium-Term Management Plan, “Beyond Borders 2021,” established 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 that solving social issues
and a wave of technological innovation as an opportunity for business expansion and are focusing
on a shift to a new business model and new business creation based on digital and 5G
communication.
Based on this concept, we have been practicing distributed operation since October 2019 in ourworkstyle 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 isfor our staff to experience workstyles that help create innovation for the future and provide ourcustomers with a variety of solutions for workstyle innovation through the outcomes of theinitiatives. During the first quarter under review, we carried out business using telecommuting as
an extension of this practice while the state of emergency was in effect. As measures to prevent
COVID-19, which has recently been a social issue, we shared our workstyle expertise with ourcustomers and promptly built platforms for teleworking, remote and online classes, and othersettings. In addition, we used the DX technology to implement a variety of initiatives and accelerate
solution development corresponding to new workstyles created jointly with our partners such asincreasing the efficiency of operation and communication, and digitizing approval procedures.
As a result, the Group marked a record high in all items and posted the following consolidated
results for the fiscal year under review:－

1 －Net sales¥67,369 million¥6,831 million increase year on year

Operating income¥1,008 million¥1,187 million increase year on year

Ordinary income¥941 million¥1,192 million increase year on year

Net income attributable to¥326 million¥ 305 million increase year on year

¥84,359 million¥10,243million increase year on year

owners of the parent＜Reference＞
Orders received

Net sales increased 11.3% year on year, to ¥67,369 million. This result reflected increased sales
in all segments, with the expansion of ICT services related to workstyle innovation, infrastructuredevelopment for telecom carriers and the domestic construction business particularly for the megasolar projects. Orders received increased 13.8% year on year, to ¥84,359 million. This result
reflected expansion of the Digital Solutions and Network Infrastructures businesses backed bydemand for teleworking in the businesses related to workstyle innovation, schools, including
remote classes and education IT, and services for telecom carriers.
Profit increased thanks to a decrease in provision for loss for unprofitable projects in theEngineering & Support Services business in addition to progress in profitability improvement
through an increase in net sales and resource efficiency, and thorough project management. This
more than offset the investment in growth, such as new service development and human resource
development. Accordingly, operating income rose by ¥1,187 million year on year, to ¥1,008 million,
and ordinary income improved by ¥1,192 million, to ¥941 million. Net income attributable to ownersof the parent increased by ¥305 million, to ¥326 million.
.
Operating results by business segment were as follows:（Million yen）

Net sales by business segment
Engineering &Digital

Network

Solutions

Infrastructures

Support Services

Other

Total

business

1Q Fiscal 2021.3

26,81916,61020,841

3,098

67,3691Q Fiscal 2020.3

24,107

15,362

17,824

3,243

60,537

Increase or (decrease)

2,711

1,248

3,016

(144)

6,831

Ratio of

11.2

8.1

16.9

(4.5)

11.3

increase/(decrease) (%)－

2 －（Million yen）

Reference: Orders received by business segment
Engineering &Digital

Network

Solutions

Infrastructures

Support Services

Other

Total

business

1Q Fiscal 2021.3

34,03625,39822,152

2,771

84,3591Q Fiscal 2020.3

26,501

23,101

22,324

2,188

74,115

Increase or (decrease)

7,535

2,297

(172)

582

10,243

28.4

9.9

(0.8)

26.6

13.8

Ratio ofincrease/(decrease) (%)

1. Digital Solutions Business：
Net sales increased 11.2% year on year, to ¥26,819 million, mainly reflecting the expansion of
ICT services related to workstyle innovation.
2. Network Infrastructures Business：
Net sales rose 8.1% year on year, to ¥16,610 million, reflecting expansion of services fortelecom carriers.
3. Engineering Support Services Business：
Net sales climbed 16.9% year on year, to ¥20,841 million, reflecting expansion of the domestic
construction business largely comprising the mega-solar projects.

<Outline of Business Segments>
Business Segment

Descriptions of Main Businesses
Mainly system integration related to ICT platform andoutsourcing/cloud services for business of enterprises and other

Digital Solutions

customers and provision of solutions/services that are helpful forcustomers’ business transformation by using cutting-edge/digitaltechnologies , and contact center services
Mainly centered on telecom carriers, central and local governments
and social infrastructures service providers, provide system

Network

integration/services related to network infrastructures of a public

Infrastructuresnature with the required high reliability, and thedevelopment/manufacture and sales of network equipment, andprovide system integration.
Construction business in Japan and abroad, provision of support

Engineering &services such as maintenance and operations/monitoring related to

Support Services

ICT systems/services provided by the Company and operations ofbusinesscompany-wide service infrastructures, in addition to technicalsupport using these.

OthersSales of purchased equipment－

3 －We have reorganized our business segments in line with our corporate management due to thereplacement of some businesses and a revision in the distribution of management resources
implemented in April 2020 to optimize business efficiency.
Information on reportable segments related to the first quarter of the previous fiscal year wasreclassified for disclosure to reflect the changes in this event.
(2) Outlook for the Fiscal Year Ending March 31, 2021
The impact of COVID-19 has spread globally, and although we hope that the economy will gradually
start to recover as the level of economic activity increases in stages, while measures to prevent the
spread of infection remain in effect, Japan is experiencing a second wave of infection, which is
clouding the outlook for the ending and requires the continued monitoring of the situation. In thebusiness domains in which we operate, a fall in ICT investment caused by aggravated businessesof our corporate customers is becoming apparent, despite expected growth in demand particularly
for teleworking in the workstyle innovation market. Meanwhile 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 the business of government and public interest-related services,
the volume of investment in disaster prevention and mitigation is likely to remain stable and the needfor educational institutions for remote classes is expected to rise.
Under the conditions described thus far, we plan to steadily acquire market opportunities in areas
such as teleworking and remote education and will improve project management and cost control.
As we position this year as a year of consolidating our footholds for further growth, we also plan toaccelerate investments, such as the strengthening of base technologies and the development of
new services while cautiously watching out for the risk of a downturn in investment due to COVID19. Considering these elements, we aim for year-on-year growth in income and profit by expanding
our businesses with a focus on services related to workstyle innovation and telecom carriers despite
expecting a decrease in operating income of ¥1.5 billion due to COVID-19, based on risks such as
project postponement and a decline in business confidence in our forecasts for the full-year
consolidated results for the fiscal year ending March 31, 2021.

Net sales¥312 billion

2.8% increase year on year

Operating income¥18.0 billion

10.8% increase year on year

Ordinary income¥18.0 billion

12.9% increase year on year

Net income attributable¥10.5 billion

11.4% increase year on year

to owners of the parent－

4 －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
Accruedncome taxes
Accrued bunuses to directors and corporate auditors
Accrued warranty on products
Accrued losses on sales contracts
Accrued 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 ofJune 30, 2020

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

72,35881,480
1,230
3,258
8,594
7,841
(71)
174,693

8,942

9,243

899
4,948
5,847

800
4,708
5,509

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

16,5537,383(55)
23,881
38,633
213,327

41,666
1,441
4,632
298
3,580
139
105
2,159
1,326
218
24,55880,12832,361
2,055
4,478
298
605
34
98
970
1,590
32
22,801
65,327

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

3,690
31,113
1,739
36,543
101,871

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

13,122
16,661
83,164(272)
112,675

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

21
23
(542)
(3,684)(4,181)
2,961
111,455
213,327

(2) Consolidated Statements of Income and Comprehensive Income(Consolidated Statements of Income)(Millions of yen)
1Q, FY March 2020
1Q, FY March 2021
(3 months ended June 2019) (3 months ended June 2020)

Net sales

60,53767,369

Cost of sales

51,801

57,026Gross profit

8,736

10,343

Selling, general and administrative expenses

8,915

9,334

Operating income (loss)

(178)

1,008

Interest income

11

7

Other

85

102

Total non-operating income

97

110

Interest expenses

23

30

Infectious disease related expenses

－

42

Other

146

104

Total non-operating expenses

169

177

(251)

941

－

262

Impairment loss

1,788

－

Office transfer cost

405

－

2,194

262

Income (loss) before income taxes(2,445)

678

Income taxes(2,448)

251

2

426

(18)

100

21

326

Non-operating income

Non-operating expenses

Ordinary income (loss)
Extraordinary losses
Compensation for damage

Total extraordinary losses

Net income (loss)
Net income (loss) attributable to noncontrolling interests
Net income (loss) attributable to owners of theparent(Millions of yen)

(Millions of yen)

1Q, FY March 2020
1Q, FY March 2021
(3 months ended June 2019) (3 months ended June 2020)
Net income (loss)

2426

Net unrealized holding loss on other securities

(0)

(8)

Deferred gains or losses on hedges－(1)

Foreign currency translation adjustments

48

(256)

Adjustments for retirement benefit
Share of other comprehensive income ofassociates

137

99

(0)

(0)

185

(167)

188

259

180

266

8

(6)

Other comprehensive income

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

(3) Consolidated Statements of Cash Flows

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
Increase (decrease) in asset for retirement benefit
Increase (decrease) in liability for retirement benefits
Increase (decrease) in accrued bonuses to directors
andIncrease (decrease) in accurued warranty on products
Increase (decrease) in accurued losses on sales
contracts
Increase (decrease) in accurued compensation forInterest 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
Net (increase) decrease in treasury shares
Dividends paid to shareholders
Dividends paid to minority shareholders of subsidiaries
Other, net
Net cash provided by used in financing activities
Effect of exchange rate changes on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of period(Decrease) in cash and cash equivalents resulting fromexclusion of a subsidiary from consolidation
Cash and cash equivalents at end of period(Millions of yen)
1Q, FY March 2020
1Q, FY March 2021
(3 months ended June 2019) (3 months ended June 2020)(2,445)
899
61
1,788
(2)
39
109

678
782
98
－
(3)
(15)
103

(88)
6

(105)
(6)

710
－
(29)
23
33,164(2,427)(9,881)(773)(1,565)
19,59129(20)(2,718)16,881(1,189)263(27)
30
29,0781,297(8,630)(602)(1,148)20,60527(27)(3,127)
17,478

(395)
4
(203)
0
(397)
0
(486)
(1,477)

(445)
1
(146)
－
(189)
0
(213)
(992)

369
(57)
(0)
(1,973)(19)(128)(1,810)

435
(74)
(0)
(2,071)(19)(123)(1,854)0
13,59454,354(60)
14,57058,321－
67,948(532)
72,358

(4) Segment Information
Business Segment Information
First quarter of fiscal March 2021 (3 months ended June 2020)(Millions of yen)
Digital Solutions
Sales(1) Sales to third parties(2) Intersegment sales
Total
Operating income and loss

NetworkEngineering &Infrastructures

Support Services

16,61016,610208

20,841
20,841726

26,81926,8192,101

Others

3,098
3,098
145

Adjustments

Total(2,173)67,36967,3691,008

First quarter of fiscal March 2020 (3 months ended June 2019)(Millions of yen)Sales(1) Sales to third parties(2) Intersegment sales
Total
Operating income and loss

Digital

NetworkEngineering &Solutions

Infrastructures

Support Services

15,362
15,362160

17,824
17,824(124)

24,107
24,107
1,832

Others

3,243
3,243
120

Adjustments(2,166)

Total

60,53760,537(178)*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 quarter of the previous fiscal year was reclassified for disclosure to reflect the changes in this event.