COMPANY RESEARCH AND ANALYSIS REPORT

FUJI SOFT INCORPORATED
9749
Tokyo Stock Exchange First Section

28-Apr.-2021
FISCO Ltd. Analyst

Yoshihiro Maeda

FISCO Ltd.
https://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Company outline and business description. ................................................................................................

01

2. Its core competencies are “superiority in technologies and deep customer insight”. ..................................

01

3. In the recovery period following the 2008 financial crisis,
strengthened both its financial structure and growth potential. ...................................................................

01

4. The FY12/21 consolidated results forecasts are for net sales to increase 3.3% YoY
and operating income to rise 2.1%.. ............................................................................................................

02■Company overview--------------------------------------------------------------------------------------------------------------------------------------------------- 04■Business overview---------------------------------------------------------------------------------------------------------------------------------------------------- 07
1. Mainstay embedded/control software. . .. ......................................................................................................

09

2. Further strengthening of initiatives in the online field in operations software................................................

10

3. Narrowly-defined products and services with increased presence. .............................................................

11

4. Outsourcing is searching for the bottom. .....................................................................................................

13

5. While it is a non-core domain, the Facility Business has high earnings........................................................

14

6. In Other Businesses, FUJI SOFT SERVICE BUREAU’s results have bottomed-out......................................

14

7. In the business strategy for initiatives in the “AIS-CRM” area,
is taking on the challenge of creating new products and businesses. .........................................................

15■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 16■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 20
1. FY12/21 consolidated results forecasts.......................................................................................................

20

2. Productivity is improving from the focus on upfront investment and work-style reforms. ............................

22

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html█ Summary
A major independent IT solutions vendor that celebrated the fiftyyear anniversary of its establishment in 1970
Realized YoY double-digit increases in operating income and profit
margin in FY12/20 even during the coronavirus pandemic
1. Company outline and business description
FUJI SOFT INCORPORATED <9749> (hereinafter, “the Company”) is a major, independent IT solutions vendor
established in May 1970. It has its roots in FUJI SOFTWARE LABORATORY, Ltd., which was established at the homeof Mr. Hiroshi Nozawa, the Company’s current Director and Executive Adviser, and two other employees. Today,
half a century after this establishment, the Company has grown into a group with 28 consolidated subsidiaries, 2equity-method non-consolidated subsidiaries, and 2 equity-method affiliates, with over 14,000 employees (as ofDecember 31, 2020).
The Company has three reporting segments: the SI (systems integration) Business (system construction and productservice), the Facility Business, and Other Businesses. In the mainstay SI Business, it provides a diverse solutions
menu, centered on the development of embedded / control software and operations software. The Facility Businessentails rentals of office buildings, while Other Businesses includes a BPO (business process outsourcing) services
business, a contact center business, and a regenerative medicine business.
2. Its core competencies are “superiority in technologies and deep customer insight”
The Company lists its “continually advancing superiority in technologies and deep customer insight” as the reasons
why it is chosen by customers. It is highly confident in its core competencies of advanced technological expertise
acquired through the development of embedded / control software that requires extremely high levels of precision,
such as for vehicles and semiconductor manufacturing equipment; systems construction capabilities cultivatedthrough the solutions it has provided to a wide range of industries; and “superiority in technologies and deep
customer insight” which it demonstrates in aspects such as its ability to provide flexible proposals as an independent
solutions provider.
3. In the recovery period following the 2008 financial crisis, strengthened both its financial structure andgrowth potential
Although the Company’s sales peaked before the economic downturn precipitated by the 2008 financial crisis(FY3/06), it set a new record high for sales in FY12/17. Therefore, while it actually took more than 10 years to renew
its peak sales, the Company can be highly evaluated for not only recovering non-recurring revenue, but both working
to strengthen its financial structure and growth potential in that time.

We encourage readers to review our complete legal statement on “Disclaimer” page.

01 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html

Summary

Specifically, the Company realized soundness of major financial indicators, with the equity ratio rising from 47.3% at
the end of FY3/06 to 59.9% at the end of FY12/17, the current ratio from 96.4% to 184.9%, and net interest-bearing
debt (interest-bearing debt – cash and deposits) of ¥21,295mn to excess cash of ¥6,204mn. Based on this, from
FY12/15 onwards it conducted major recruitment, mainly of new graduates, multiplying the number of consolidated
employees by 1.4 from 9,415 to 13,556. The percentage of certified technicians on a stand-alone basis (thepercentage of specialists and project managers certified according to the Company system out of the total numberof employees) also rose from 22.8% at the end of FY12/14 to 30.1% at the end of FY12/20. From this, we cansee that growth potential from a human resources angle has been enhanced both in terms of quantity and quality.
As a result of the above, subsequently through FY12/19, the Company continuously achieved year-on-year (YoY)
double-digit increases in sales and profits. Even in FY12/20 during the coronavirus pandemic, it secured a 4.3%
increase in net sales and realized a 20.4% increase in operating income. The financial indicators deteriorated in
FY12/20, with the equity ratio at 50.7% (down 3.4 percentage points (pp) compared to the end of the previous
fiscal year) and the current ratio at 153.3% (down 29.6%). However, this was due to the Company’s financial
strategy based on the impact of the coronavirus pandemic (accumulate cash and deposits through short-term
fund raising and repay long-term borrowings), and should not be considered a major cause for concern. In fact, net
interest-bearing debt decreased ¥1,157mn from the end of the previous fiscal year to ¥6,341mn and the Company
maintained its sound financial structure. Additionally, in terms of human resources, it has 14,422 consolidated
employees, while the percentage of certified technicians on a stand-alone basis is 32.0%.
4. The FY12/21 consolidated results forecasts are for net sales to increase 3.3% YoY and operating income
to rise 2.1%
For the FY12/21 consolidated results, the Company is forecasting net sales to increase 3.3% YoY to ¥249,000mn,
operating income to rise 2.1% to ¥16,300mn, ordinary income to grow 3.4% to ¥16,900mn, and profit attributableto owners of parent to increase 3.8% to ¥8,900mn. Therefore, it is actually forecasting the eighth consecutive
period of higher sales and operating income since 2013 when it transitioned to a fiscal period ending in December.
Although these results appear unsatisfactory compared to the FY12/20 results when profits increased by double
digits, the Company has continued with a pattern of setting initial forecasts assuming that sales will increase byaround 3% and an operating income margin on par with the results of the previous fiscal period since FY12/15.
Therefore, these Company forecasts are also considered to be positioned as the minimum amounts to be achieved
and do not need to be viewed negatively.
For FY12/20, the Company forecast an annual dividend of ¥50 per share (¥25 per share at the end of 2Q, ¥25 pershare at the end of the fiscal year) compared to the FY12/20 annual dividend of ¥51 per share (¥28 per share at theend of 2Q, including a commemorative dividend of ¥5 to mark the 50th anniversary of the foundation, and ¥23 pershare at the end of the fiscal year). Although this appears to be the first dividend decrease in six years, after excluding
the commemorative dividend it is actually an increase of ¥2 per share as the total of the interim and period-end
dividends. Additionally, the Company has upwardly revised the period-end dividend from the initial forecast for four
consecutive fiscal periods from FY12/16 to FY12/19 based on the fact that the full fiscal year results exceeded theforecasts, so we shall be paying attention to how it responds in FY12/21.

We encourage readers to review our complete legal statement on “Disclaimer” page.

02 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html

Summary

Key Points
A major, independent IT solutions vendor established in 1970. Its active investment in human resources and acomplementary M&A strategy are proving successful, and it has exceeded the ¥100bn barrier for net sales. At
the end of December 2020, it had over 14,000 consolidated employees.
• Its core competencies are “superiority in technologies and deep customer insight,” as seen in its abundant
track record and corporate philosophy. Although results stagnated for a period after the economic downturn
precipitated by the 2008 financial crisis, it has strengthened its financial structure and growth potential and iscontinuing “Challenges and Creation” while aiming to be an innovative corporate group.
• FY12/20 results exceeded the Company’s initial forecasts for the fifth consecutive year. For the FY12/21 fullyear results, is forecasting higher net sales and operating income for the eighth consecutive period in realterms.
•

Results trends
Net sales (left)(¥mn)

Operating income (right)

250,000(¥mn)
20,00015,972

16,300200,000

16,00013,266
11,400150,000
8,798

12,0009,708
231,074

100,000
164,218

180,773

240,953

249,000

204,329

8,000

50,0004,000

00FY12/16

FY12/17

FY12/18

FY12/19

FY12/20

FY12/21 E

Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

03 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html█ Company overview
Based on its corporate motto of “Challenges and Creation,” brokethrough the barrier of net sales of ¥200bn, while remaining independent.
Even during the coronavirus pandemic, is continuing a growth-oriented
management strategy while preparing for unforeseen situations
The Company is a major, independent IT solutions vendor established in May 1970. It has its roots in FUJI
SOFTWARE LABORATORY, Ltd., which was established at the home of Mr. Hiroshi Nozawa, the Company’s current
Director and Executive Adviser, who at that time was a teacher in a computer vocational school and started abusiness focusing on the prospects for the computer industry with two other employees who had previously been
his students. Today, half a century after this establishment, the Company has grown into a group of 30 consolidated
subsidiaries (of which, 4 are listed companies), 2 equity-method non-consolidated subsidiaries and 2 equity-method
affiliates, with over 15,000 employees.
Even while achieving rapid development in terms of size, the Company, in accordance with its basic philosophy of“Being a corporate group that is more useful for society, makes customers more happy, and that is more considerate
to the Earth, and that provides ‘relaxed and worthwhile’ work environments,” has consistently conducted theenlightened management that its founder aimed for to contribute to society through business, and aims to give
shape to the knowledge expressed by its corporate philosophy, such as through the Group’s corporate charter andstandards of conduct for executives and employees.
The Company has been moving ahead with a strategy of making both the parent company and subsidiaries listed,
and currently has four listed subsidiaries. Although the Group Company Charter states that “each company shallmutually respect the others as independent companies and shall prioritize independence and autonomy,” there
is a tendency to point to governance issues when listing both the parent and the subsidiaries in capital markets.
However, the fact that the business companies do not only have a presence in the capital markets and that they
face severe competition in the product and services markets and the labor market is extremely important. Whencomprehensively weighing the advantages and disadvantages for each market, the degree of satisfaction with theCompany’s strategy of listing the parent and subsidiaries is considered to be fairly high at the current time.
The Company has three reporting segments: the SI Business (systems construction and products and services),the Facility Business, and Other Businesses. In the mainstay SI Business, it provides a diverse solutions menu,
centered on the development of embedded / control software and operations software. The Facility Business entails
rentals of office buildings, and Other Businesses includes a BPO service business, a contact center business, anda regenerative medicine business.
In addition, as a business strategy to be implemented across the reporting segments, the Company is advancing
initiatives in the “AIS-CRM” area. AIS-CRM, which is the Company’s own unique acronym created by taking thefirst letters from AI, IoT, Security, Cloud computing, Robot, Mobile & AutoMotive, covers areas that are expected to
grow in the medium- to long-term. While it will not be easy to accumulate and refine technologies in these growthfields, if the Company can achieve this, it may be able to curb the rapid fluctuations in utilization rates caused by
the economic cycle. Among its past initiatives, the Company appears to feel confident about the results it has
accumulated in the cloud computing and mobile fields. We would like to keep an eye on future developments.

We encourage readers to review our complete legal statement on “Disclaimer” page.

04 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html

Company overview

At the time it was established, the Company’s business was founded on the dispatch of computer operators.
Subsequently, it entered into the software development and systems construction businesses and achieved rapid
development supported by the explosive expansion of the computer industry. But what should not be overlooked asa factor behind this growth is the strong belief of the executive management, including Hiroshi Nozawa, a Directorand Executive Adviser who founded the Company, that the time of the computer-dominated society had arrived.
While bearing a considerable risk, the Company actively invested in recruiting and training engineers and pursued
a complementary M&A strategy to incorporate the technologies and customer bases it did not have.
Even though the computer-dominated society has become a reality and the domestic IT services market has
expanded in scale to be worth over ¥6tn, the major IT services companies with sales of more than ¥100bn arecomprised almost entirely of manufacturers (such as Fujitsu Ltd. <6702>), user-related companies (such as NTT
DATA Corporation <9613>), trading companies (such as SCSK Corporation <9719>), and foreign-owned companies(such as IBM Japan, Ltd.) Including the Company, there are only three companies that could be called independent.
Although it has succeeded at becoming one of the groups with over ¥100bn in net sales in FY3/02, looking at the
number of employees to achieve this, which is 4,002 people on a stand-alone basis and 6,353 on a consolidated
basis, we can see that its business expansion has been supported by its active recruitment of human resources andtraining of engineers since its establishment. Additionally, in 1996, it merged with ABC Co., Ltd., which has strengths
in finance-related operations systems, and subsequently also made consolidated subsidiaries of Cybernet Systems
Co., Ltd. <4312>, which has its origins in an overseas company in 1999, and MYCAL Systems Corp. (currently
VINX Corp. <3784>), whose main business is distribution-related business systems, in 2002. In such ways, theCompany has advanced an M&A strategy to incorporate the technologies and customer bases to supplement its
strengths in embedded /control software development. It is thought that it would not have been able to exceed net
sales of ¥100bn solely from riding the favorable external wave, but that its bold decision making has also been vitalto achieving this. Then, in FY12/18, the Company surpassed the major milestone of net sales of ¥200bn, and isforecasting net sales of ¥240.9bn in FY12/20. Therefore, despite being in the middle of the coronavirus pandemic,
the Company is expecting to set a record high in net sales for the fourth consecutive fiscal year.
Since its establishment in May 1970, the Company’s size has expanded dramatically

Source: From the Company’s 2020 FACT BOOK

We encourage readers to review our complete legal statement on “Disclaimer” page.

05 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html

Company overview

With “superiority in technologies and deep customer insight” as
its core competencies, the Company is aiming to be a CSV-styleinnovative corporate group
The Company lists its “continuously advancing superiority in technologies and deep customer insight” as the reasons
why it is chosen by customers. It is highly confident in its core competencies of “continuously advancing superiority
in technologies and deep customer insight” which it demonstrates in aspects such as its advanced technologicalexpertise acquired through the development of embedded / control software that requires extremely high levels of
precision, including for vehicles and semiconductor manufacturing equipment; its systems construction capabilities
cultivated through the solutions it has provided to a wide range of industries; its ability to provide flexible proposals
as an independent solutions provider; and its construction of a network of bases close to customers (42 bases inJapan + a global network). In addition, the Company believes that its key mission is to further societal development
through various corporate activities, alongside sustainable growth and the creation of corporate value in the medium
to long term. As its medium-term policy, it aims to be “an innovative corporate group that links ICT development toimproving value for our customers.”
From the messages disseminated by the Company, what stands out are the strong belief in the effectivenessand potential of utilizing ICT and its sense of mission to advance this and a customer-oriented and CSV-type(a company that increases enterprise value through social contributions via its businesses) management policy.
Naturally, corporate activities will have CSV-type aspects to a greater or lesser extent, even if the company itself isunaware of this. But in the Company’s case, the fact that the founder’s strong intentions, based on the corporatemotto of “Challenge and Creation,” have been incorporated into its corporate culture is worthy of note.
One of the Company’s unique initiatives as a CSV-type company is the All Japan Robot-Sumo Tournament, which it
has held continuously since 1990. Although the tournament began with the aim of providing a place to experience
the enjoyment of building things and to improve technologies through building robots, it is currently recognized as an
excellent example of support for developing human resources through manufacturing. For example, since a division
for high school students was established in 1993, the National Association of Principals of Technical Senior HighSchools has joined the operation, and organizations including the Ministry of Education, Culture, Sports, Scienceand Technology (MEXT), and Ministry of Economy, Trade and Industry (METI) are also listed as sponsors. Although
the Robot Sumo Tournament and the Robot American Football Tournament, which were scheduled for 2020, werecalled off due to the coronavirus pandemic, the Company is currently putting its best efforts into resuming activities
with safety as the first priority.

We encourage readers to review our complete legal statement on “Disclaimer” page.

06 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html

Company overview

Business structural diagram
Consolidated subsidiaries (28 companies) /equity-method non-consolidated subsidiaries (2 companies) /equity-method affiliates (2 companies)(as of Dec. 31, 2019)
Customers

SI Business

Facility Business

Other Businesses

The Company< E m bed ded / c ont rol software>><Distribution- and services-related>

Consolidated subsidiaries: 2 companies
Cyber Com Co., Ltd.
FUJISOFT CHINA Corp.

Consolidated subsidiaries: 7 companies
VINX CORP., and 6 other companies

Equity-method non-consolidated
subsidiaries: 1 company
FUJISOFT America, Inc.

<Operations-related>
Consolidated subsidiaries: 1 company
iDEA Consulting Inc.
Equity-method affiliates: 1 company
Nihon Business Soft Inc.

<Products and services><Office services>
Consolidated subsidiaries: 1 company
FUJISOFT SERVICE BUREAU
INCORPORATED<Hardware development>

Consolidated subsidiaries: 14
companies
Cybernet Systems Co., Ltd.
WATERLOO MAPLE INC.,

Consolidated subsidiaries: 1 company
OA LABORATORY CO., LTD.

<Securities-related>

Consolidated subsidiaries: 1 company
FUJISOFT TISSUE ENGINEERING CO.,Ltd.

<Regenerative medicine business>

Equity-method affiliates: 1 company
ACE SECURITIES Co., LTD.

<Finance-related><Other>Consolidated subsidiaries: 1 company
TOSHO COMPUTER SYSTEMS CO., Ltd.

Equity-method non-consolidated
subsidiaries: 1 company
Fujisoft Kikaku Inc.(Special subsidiaries)

Source: From the Company’s securities report█ Business overview
Offering varied ICT services and products through “Challenge andCreation”
The Company has three reporting segments; the SI Business, the Facility Business, and the Other Businesses. The
mainstay SI Business is broadly divided into systems construction, and products and services. Further, systems
construction is subdivided into embedded / control software and operations software, while products and services
are subdivided into narrowly defined products and services, and outsourcing. In addition, the Facility Business entails
rentals of office buildings, while Other Businesses includes the BPO service business, a contact center business,
and a regenerative medicine business.

We encourage readers to review our complete legal statement on “Disclaimer” page.

07 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html

Business overview

Segment breakdown

Source: From the Company’s results briefing material

Trends in percentages of total net sales by segment
Embedded / control software
Products and services
Facility Business100.0%
90.0%

1.4%
7.4%

1.3%
6.5%

4.3%
1.1%
5.8%

28.1%

28.8%

30.0%

33.2%

26.3%

26.9%

27.3%

28.8%

28.6%

27.2%

28.8%

29.4%

29.2%

28.0%

27.0%

FY12/15

FY12/16

FY12/17

FY12/18

FY12/19

FY12/20

1.5%
13.0%

5.5%
1.6%
11.2%

1.6%
10.1%

5.9%
1.5%
8.3%

27.1%

26.6%

27.8%

27.4%

28.0%

25.5%
FY12/14

5.5%

Operations software
Outsourcing
Other Businesses
5.5%
5.9%

5.3%

80.0%
70.0%
60.0%
50.0%

40.0%
30.0%
20.0%
10.0%
0.0%

Source: Prepared by FISCO from the Company’s results briefing material

We encourage readers to review our complete legal statement on “Disclaimer” page.

08 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html

Business overview

1. Mainstay embedded/control software
Embedded / control software, which belongs to the systems construction category in the SI Business, accounted for
27.0% of Company-wide sales (FY12/20) and 30.8% of operating income, and the segment profit margin exceeded
the Company-wide level. FY12/20 performance was solid, as net sales increased 0.6% YoY, operating income rose
10.8%, and the segment profit margin was 7.6% (up 0.7pp). However, if we look exclusively at the 2H, we can see
the adverse impact of the coronavirus pandemic, with net sales declining 3.0% YoY and operating income falling
6.9%. Based on the acquisitions of orders per quarter, compared to the 1Q in which they increased 8.0% YoY, orders
trended downward from the 2Q, decreasing around 5%. As a result, at the end of the period, the order backlog had
declined 0.4% compared to the end of the previous fiscal year.
Embedded / control software is software that runs on a microcomputer or other piece of equipment embedded intoa device to provide specific functions. The Company’s technologies are used in a variety of products and devices,
including vehicles and mobile phones, home appliances such as TVs and air conditioners, office automation (OA)
equipment including printers, robots and semiconductor manufacturing device production equipment, infrastructure
equipment such as traffic lights, and medical equipment such as CT and MRI.
In this area, the Company has built up an excellent track record within Japan and boasts strengths in FA and othermachine control systems and automotive-related fields. Looking strictly at vehicles installations, in practical terms it
delivers products to all vehicle manufactures in Japan, and has the top share of the domestic market.
In FY12/20, although social infrastructure-related business performed strongly, there was a shift toward strengthening
adjustments in the 2H for FA and automotive companies, mainly due to the impact of the coronavirus pandemic.
However, there has been no change to the trend of CASE (Connected, Autonomous (driving) Shared/Service, Electric)
through AI and robots for productivity reforms and in the automotive industry, where it is thought that opportunities
to obtain medium- to long-term profits will increase for the Company.

Trends in embedded / control software net sales andoperating income margin（¥mn）

Net sales (left)

80,00070,000Operating income margin (right)

7.1
6.3

7.1

（%）
7.6

8.0

6.9
7.0

6.1

60,000

6.0

50,0005.0

40,0004.0

30,00020,00041,80647,32953,06559,62264,67065,0403.0

2.0

10,0001.0

00.0
FY12/15

FY12/16

FY12/17

FY12/18

FY12/19

FY12/20

Source: Prepared by FISCO from the Company’s results briefing material

We encourage readers to review our complete legal statement on “Disclaimer” page.

09 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html

Business overview

2. Further strengthening of initiatives in the online field in operations software
Operations software, part of the system construction category in the SI Business, is a major pillar of earnings,
contributing 28.6% of Company-wide net sales (FY12/20) and 24.3% of operating income. It achieved double-digit
increase in sales and profits for three consecutive fiscal years up to FY12/19. Even during the coronavirus pandemic,
while the sales-increase rate fell temporary in FY12/20, rising 3.6% YoY, the profit-increase rate was 21.6% andthe segment profit margin was 5.6%, improving 0.8pp. In addition, the quarterly order backlog fell to 18.9% in the
2Q compared to the same quarter in the previous fiscal year, but then recovered toward the end of the period (3Q:
up 7.7% compared to same quarter in previous fiscal year→4Q: up 12.9%), and at the end of the period, the orderbacklog had increased 4.5% on the end of the previous fiscal year.
In this area, in addition to organic business growth, the complementary M&A strategy is proving successful, andthe Company has established a system that is able to provide a one-stop service from consulting through todevelopment, systems construction, and support, for various solutions, such as for backbone systems like store
and ordering systems and production, sales, inventory, and accounting systems, and also information systems andonline services. It provides these solutions to a wide range of industries, including distribution, finance, service,
manufacturing, online businesses, social infrastructure, education, medicine, and public institutions.
In the operations software area, which is positioned as the main battlefield in the domestic IT services market,
there have been structural changes in the market that could prove to be disadvantageous to the existing players,
including 1) the shift from on-premises (operating IT systems, such as servers, through equipment installed within acompany) to the use of cloud services, and 2), the evolution from “defensive IT (mainly to improve work efficiency)”
to “offensive IT (mainly to create businesses).” Within these conditions, the Company, based on a spirit of seeing“change as an opportunity” has clearly set out and is implementing an approach of strengthening the developmentof outsourcing through actively investing in human resources. It truly makes management decisions in accordancewith the Company motto of “Challenge and Creation.”On this point, the strong performance of operations software in recent years can be said to be the result of theCompany accurately providing services in response to changing times and the market structure-- namely, the shift
to e-commerce in the distribution and services fields and the increase in demand in the digital content field, theacceleration of responses to the various digital transformations (DX) in fields centered on systems infrastructure,and the promotion of the utilization of ICT on the theme of work-style reforms.
Also, in January 2020, the Company established a new business department and is working to further strengthen
initiatives in the online business field. This is part of the Company’s business strategy that directly addresses anissue that is facing existing players, which is the “inconvenient truth” of the “Amazon Effect” (the phenomenon that
includes the disruption of and reforms to various markets alongside the rapid growth of Amazon.com <AMZN>. In theEC field, which is benefiting from the growth of nesting (staying-at-home) demand during the coronavirus pandemic
in addition to the prior achievements, projects for B-to-C, as well as for B-to-B, are strong, and the growth trend is
expected to continue in the medium- to long-term.

We encourage readers to review our complete legal statement on “Disclaimer” page.

10 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html

Business overview

Trends in operations software net sales and operating income margin（¥mn）

Net sales (left)（%）

Operating income margin (right)

80,0008.0

70,000

7.0
5.8

5.6

60,0004.9
50,000

4.1

4.5

5.0

40,0004.0
66,56730,00020,000

6.0

4.8

42,96943,237

68,9773.0

55,72948,5522.0

10,0001.0

00.0
FY12/15

FY12/16

FY12/17

FY12/18

FY12/19

FY12/20

Source: Prepared by FISCO from the Company’s results briefing material

3. Narrowly-defined products and services with increased presence
Products and services in the SI Business are divided into narrowly defined products and services and outsourcing. In
FY12/20, results grew significantly for narrowly defined products and services, with net sales increasing 15.4% YoY
and operating income rising 63.0%, and their percentages of the Company’s total results increased by 3.2pp YoY
to 33.2% for net sales and by 8.4pp to 32.1% for operating income, so their presence has further risen. Additionally,
on a quarterly, orders-acquisitions basis, orders were strong basically throughout the fiscal period (1Q: up 18.5%
compared to same quarter in previous fiscal year → 2Q: up 30.8% →3Q: down 19.4% → 4Q: up 24.1%), and at
the end of the period, the order backlog had accumulated significantly, increasing 30.8% on the end of the previous
fiscal year.
Narrowly defined products and services are comprised of 1) the Company’s own products (including moreNOTE, apaperless system; Mirai School Station, a comprehensive education solution for the information society; smartBYOD,
a tool for utilizing employees’ personal smartphones and other devices for a company’s operations; and PALRO,
a communication robot, and SIM-free mobile routers FS030W and FS040W); 2) the license business (Microsoft<MSFT> products, AWS, VMware <VMW>, etc.); 3) product sales, etc. (PCs, servers, etc.)
Looking at the YoY percentage increase in sales in FY12/20, sales of the Company’s own products increased 38%(versus 13% increase in FY12/19), while license business sales were up 46% (versus 28% increase) and productsales, etc. decreased 14% (versus 15% increase), so the own products business and the license business showed
particular strength. In the license business, AWS customers grew greatly by more than 80% YoY, while among theCompany’s own products, the SIM-free mobile router, which is a product in the AIS-CRM area, grew to be a hit with
a 54% market share. Regarding the “Mirai School Station,” the government’s GIGA School Program (a system inwhich the government subsidizes the cost of installing communication networks and PCs at elementary and juniorhigh schools nationwide) has been pushed forward amid the coronavirus pandemic, which is stimulating demand.

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11 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html

Business overview

With respect to the license business, sales have continued to increase even after peaking out of special demandin conjunction with the end of support for Windows 7 (on January 14, 2020). In addition, generally speaking, it ispossible that stability in the business has increased thanks to the growing shift to a subscription model for ICT
products—a business model in which fees are collected based on length of use, rather than via one-time softwaresales—including Office 365 and various cloud services. Note that sales of support for deployment of licensed
products is recorded in the Company’s own products, apparently enabling it to secure high profit margins.
In addition, the Company’s series of initiatives backed by long-term personnel development have been highly
evaluated by its business partners. Specifically, since 2019, its awards and achievements have included the following:1)Winner of the Modern Device Award in the Microsoft Japan Partner of the Year 2019; 2) In 2019, it became thefirst company in Japan to acquire certification for “Government Agency Competency,” “IoT Competency,” and“Management Service Provider” from Amazon Web Services (AWS), the largest provider of IT cloud services in
the world, and acquired certification as an APN Premier Consulting Partner, which is only granted to partners withparticularly excellent track records, in 2020. It also acquired certification for “Migration Competency” and for the“AWS well-Architected Partner Program,” which require comprehensive skills and a track record to migrate fromon-premises environments to AWS; 3) It attained the status of “Principal,” which is the highest level of certificationin the three categories (out of a total of five categories) of data center virtualization, network and security, and digital
workspace, in the new partners system from 2020 implemented by IT VMware, which has the largest market sharein the world of the IT virtualization market, and it won the VMware 2020 Partner of the Year Award (Cloud Platform
Transformation, in Asia-Pacific and Japan); 4) It was highly evaluated by Blue Prism, which is a global leader in thecorporate intelligent automation field, including for its RPA (Robot Process Automation) technological capabilities,
and acquired the Silver Delivery Provider certification.
One of the Company’s strengths is that, as an independent SIer, it is able to construct systems flexibly without beingtied to specific hardware. At the same time, launching proprietary products, including remote education-related
products and hardware such as the communication robot and mobile routers, seems to pose unique challenges.
The strategy of working to create new added value through the Company’s own products that are infused with its
core competencies, of “superiority in technologies and deep customer insight,” acts in accordance with its corporatemotto of “Challenge and Creation.” The Company has said that it is seeking high profitability after the investment
phase.
For this point, it is worth noting that the segment profit margin of narrowly defined products and services, which had
previously trended below the Company-wide level, has been significantly improving and reached 6.4% in FY12/20,
an increase of 3.5pp from 2.9% in FY12/18. In addition to the fact that subsidiary CYBERNET SYSTEMS’ profitability
continued to improve with upfront investment targeting a bolstering of quality, the sales mix in this category also
improved (the products with the thinnest profit margins fell from 50% of sales to 40% of sales, while sales in thelicense business rose from approximately 25% to just over 30%, and sales of proprietary products are rose 30%.
Because it depends on the spot sales of products with a wide range of profitability, there is no need to worry about
short-term fluctuations in the segment profit margins, but we would like to keep an eye on future trends, as we
expect improvements.

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12 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html

Business overview（¥mn）

Trends in narrowly defined products and services net sales andoperating income margin
Net sales (left)

80,000（%）

Operating income margin (right)

8.0
6.4

70,00060,000

7.0
6.0

4.5

50,0005.0

3.8

40,00030,00020,00079,971

3.0

2.7

2.9

4.0

69,2843.0

40,81545,69250,71658,8832.0

10,000

1.0

0

0.0

FY12/15

FY12/16

FY12/17

FY12/18

FY12/19

FY12/20

Source: Prepared by FISCO from the Company’s results briefing material

4. Outsourcing is searching for the bottom
Outsourcing provides services including data centers and systems operations and maintenance, and in FY12/20 it
contributed 5.8% of total net sales and 6.1% of operating income, and it had a segment profit margin of 7.0%. In
FY12/20, net sales declined 6.5% YoY, operating income increased 2.1%, while the segment profit margin increased
0.6%. The order backlog as of the end of FY12/20 was 22.3% lower than at the same time in the prior year.
Due to business structural reforms and other reasons, the profit margin has been maintained in the 6% range forthe past three years, which is above the Company-wide average. However, the decline in sales in recent years has
been brought on mainly by the decrease in ongoing projects for distribution and services. It is thought that the data
center business, in which competition with other companies’ cloud services is fierce, continues to be in a phase of
searching when sales from the data center business bottom out.

Trends in outsourcing net sales and operating income margin（¥mn）

Net sales (left)（%）

Operating income margin (right)

20,000

10.0

16,000
6.3

6.8
6.0

7.0

8.0

6.4

12,000

6.0
4.6

8,000

17,191

16,56515,043

15,041

14,98514,005

4,000

4.0

2.0

0

0.0
FY12/15

FY12/16

FY12/17

FY12/18

FY12/19

FY12/20

Source: Prepared by FISCO from the Company’s results briefing material

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13 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html

Business overview

5. While it is a non-core domain, the Facility Business has high earnings
The Facility Business, which obtains rental income from the office buildings owned by the Company, provides 1.1%of total net sales (FY12/20) and 5.1% of operating income, with a high segment profit margin of 30.6%. In FY12/20,
the declines in the occupancy rates of some event spaces and floors were added to fluctuation factors within theGroup, and net sales declined 8.5% YoY and profits fell 33.1%. However, the segment profit margin is significantly
higher than the Company-wide average, and this business continues to stably perform the role of supporting the
profit level, while being a non-core area.
According to the Company’s securities report, there are four properties; the Yokohama Head Office (land-acquisition
year: 2000, land and property book value: ¥11,135mn), the Akihabara Office (2005, ¥30,594mn), the Kinshicho
Office (2000, ¥5,441mn) and the Ryogoku Office and etc. (2003 Ryogoku, ¥31,892mn).

Trends in the Facility Business net sales and operating income margin（¥mn）

Net sales (left)（%）

Operating income margin (right)

4,000

50.0
41.8

41.2
3,200

36.6

38.9

37.9

40.0
30.6

2,400

30.0

1,600
2,478

2,708

2,909

2,696

20.0

2,899

2,653

800

10.0

0

0.0
FY12/15

FY12/16

FY12/17

FY12/18

FY12/19

FY12/20

Source: Prepared by FISCO from the Company’s results briefing material

6. In Other Businesses, FUJI SOFT SERVICE BUREAU’s results have bottomed-out
Other Businesses provided 4.3% of total net sales (FY12/20) and 1.6% of total operating income (same). In FY12/20,
net sales declined 18.7% YoY and profits fell 20.1%, but a segment profit margin of 2.5%, which was unchanged
YoY, was secured.
This category’s main businesses are the BPO service businesses and the contact center business operated bysubsidiary FUJI SOFT SERVICE BUREAU <6188>. The main reason for the decline in performance was that thetemporary suspension of FUJI SOFT SERVICE BUREAU’s eligibility to participate in competitive tenders for the
projects of the Japan Pension Service (from April 8, 2019 to January 7, 2020) applied the brakes to the business.
However, in the FY12/20 (April to December) results of SERVICE BUREAU, which has already passed its worst
period, operating income and ordinary income were both higher than the forecasts that were upwardly revised on
August 5, 2020.

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14 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html

Business overview

Trends in the Other Businesses net sales and operating income margin（¥mn）

Net sales (left)（%）

Operating income margin (right)

18,000

6.0
5.1
4.7

15,0005.0

12,000

4.0
2.7

9,000

2.9

2.5

6,000

12,142

10,6998,400

2.5

12,667
10,304

8,684

3,000

3.0
2.0

1.0

0

0.0
FY12/15

FY12/16

FY12/17

FY12/18

FY12/19

FY12/20

Source: Prepared by FISCO from the Company’s results briefing material

7. In the business strategy for initiatives in the “AIS-CRM” area, is taking on the challenge of creating new
products and businesses
As previously stated, the Company has positioned “AIS-CRM” as an important-technology field, and is focusing on
creating the seeds of new products and businesses and improving the added-value of existing businesses. Although,this might look like a mere series buzzwords at first glance, the superordinate concept of the “AIS-CRM” strategy
is included in the Company’s core competencies, and the results of these initiatives are steadily being realized.
Results are especially strong in the Cloud field, where SIM-free mobile routers have grown into hit products. Although
the details have not been disclosed, the overall “AIS-CRM” field appears to have already reached a level where it
accounts for a majority of the Company’s stand-alone net sales.
In November 2020, the Company announced a collaboration (concluded a vendor agreement) with Red TeamTechnologies Co., Ltd.. The two companies have already started to provide a new security service (vulnerability
diagnostics) that utilizes Synack, a cloud penetration testing platform, to corporations such as financial institutions
that offer Internet-based services. This service is attracting attention as a measure to enhance the field of security
in the AIS-CRM division.

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15 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html

Business overview

Summary of AIS-CRM
Utilizing AI for
customers’ businesses
FUJI SOFT will integrate
cutting-edge AI and provide
services optimized for customers
from the viewpoints ofmanagement, business, andtechnologies

IoT integration matching the
cutting-edge needs of the times
With a combination of the embedded technologies and big
data analysis among others, the world of IoT to be provided
through a one-stop service

For operations softwaredevelopment

For the development ofembedded/control software

Systems integration
capabilities

Advanced technicalcapacity

Responding to security threats
Contributing to customer
security and profits
By providing total security that responds toa variety of threats associated with thegrowth of new technology, FUJI SOFT willcontribute to customer security and profits.

For software/hardware products

Cloud services for every
industry and business type

Capability to provide products

FUJI SOFT will provide a wide variety
of cloud services, from private to
public, that are optimized to industry,business type, and customer needs

Building a smart
mobility society
FUJI SOFT will actively respondto the market for automotive
software, which continues togrow, working to integrate
embedded systems for vehicles
with information andcommunications platforms.

Development of a communication robot,
made possible through advanced AI androbotics technology

Realizing a world in which people can connect
anytime, anywhere from a variety of devices

FUJI SOFT will create new value through the use of PALRO,
a communication robot that brings together AI androbotics technology, and through software technology
supporting the field of industrial robots.

By connecting all types of devices—digital home appliances, mobile
devices, vehicles, factory automation (FA) and office automation(OA) equipment, etc.—to the cloud, FUJI SOFT will support therealization of a world in which people can connect anytime,
anywhere.

Source: From the 2020 CSR Report█ Results trends
In FY12/20, once again realized record highs for all results. Can
be highly evaluated for both strengthening the financial structure
backed by steady results from non-recurring business, and actively
conducting upfront investment
In the FY12/20 consolidated results, net sales increased 4.3% YoY to ¥240,953mn, operating income rose 20.4%
to ¥15,972mn, ordinary income grew 18.9% to ¥16,343mn, and profit attributable to owners of parent increased
9.4% to ¥8,573mn. Results continued to be steady, continuing on from FY12/19 in which operating income set a
new record high above the previous high before the 2008 financial crisis (¥12,078mn in FY3/06. Record high net
sales were already set in FY12/17).

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16 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html

Results trends

Looking at the rates of progress of these results compared to the initial Company forecasts announced in February2020 (net sales of ¥238,000mn, operating income of ¥13,600mn, ordinary income of ¥13,850mn, and profit attributable to owners of parent of ¥8,000mn), net sales were 101.2%, operating income was 117.4%, ordinary income
was 118.0%, and profit attributable to owners of parent was 107.2%. The Company succeeded at surpassing theforecast in all accounting items for the fifth consecutive period; in particular, the achievement rates of operating
income and ordinary income were the highest in the last five years.
In fact, more than 10 years passed since the Company set new record high net sales in FY12/17, higher thanthe peak net sales prior to the 2008 financial crisis (FY3/06). It can be highly evaluated for not only recovering
non-recurring revenue, but strengthening both the financial structure and growth potential.
Specifically, the Company realized soundness for the representative financial indicators, with the equity ratio risingfrom 47.3% at the end of FY3/06 to 60.3% at the end of FY12/15, and to 59.9% at the end of FY12/17; the current
ratio from 96.4%, to 199.7%, to 184.9%; and net interest-bearing debt (interest-bearing debt – cash and deposits)of ¥21,295mn, to ¥2,426mn, to excess cash of ¥6,204mn. Based on this, from FY12/15 onwards it conductedmajor recruitment, mainly of new graduates, so the number of consolidated employees increased by 1.4 times, from9,415 employees at the end of FY3/06 to 13,556 employees at the end of FY12/17. The percentage of certified
technicians on a stand-alone basis (the percentage of certified specialists and certified project managers, basedon the Company system out of the total number of employees) also had risen from 22.8% at the end of FY12/14
to 30.1% at the end of FY12/20. From this, it can be understood that growth potential as seen from the aspect ofhuman resources has been enhanced both in terms of quantity and quality.
As a result of the above, subsequently through FY12/19, the Company continuously achieved YoY double-digit
increases in sales and profits, and even in FY12/20 during the coronavirus pandemic, it secured a 4.3% increase in
net sales and realized a 20.4% increase in operating income. The financial indicators deteriorated in FY12/20, as theequity ratio was 50.7% (down 3.4pp from the end of the previous fiscal year) and the current ratio was 153.3% (down
29.6%). But this was due to the Company’s financial strategy based on the impact of the coronavirus pandemic(accumulate cash and deposits through short-term fund raising and repay long-term borrowing), and should not be
considered a major cause for concern. In fact, net interest-bearing debt decreased ¥1,157mn from the end of theprevious fiscal year to ¥6,341mn and the Company maintained its sound financial structure. For human resources
also, it has 14,422 consolidated employees, up 248 employees on the end of the previous fiscal year, and thepercentage of certified technicians on a stand-alone basis is 32.0%, an improvement of 2.5pp.
In addition, the capital investment amount increased from ¥3,028mn in FY12/14 to ¥22,608mn in FY12/18,¥8,952mn in FY12/19, and then was ¥10,203 in FY12/20 while R&D expenses also rose from ¥488mn in FY12/13
to ¥1,011mn in FY12/17, ¥831mn in FY12/19, and then were ¥984 in FY12/20. Therefore, the Company has been
expanding upfront investment, which together with its investment in human resources, indicates its intention tostrengthen growth potential toward “Challenge and Creation.”
Looking here at the relationship between the financial indicators and the management strategy, in FY12/15, which iswhen the Company launched large-scale recruitment and increased upfront investment, the equity ratio was aroundthe 60% level, the current ratio had improved to nearly 200%, and net interest-bearing debt had been reduced toa level of excess cash in FY12/16 and FY12/17. This indicates that FY12/15 was when the Company realized astrong financial structure.

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17 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html

Results trends

It can be said that the Company’s strengths include its ability to make and implement management decisions quickly
through strong leadership, including that of its founder. It did not hesitate to change to “offensive management(actively conducting upfront investment)” precisely because it had progressed “defensive management (strengthening
the financial structure)” during a phase of slumping results. Therefore, the Company can be highly evaluated formaking impartial management decisions that accurately reflect the changes to its business environment.

Trends in the financial indicators of stability（%）

Current ratio (left)（%）

Equity ratio (right)

220.0

65.0

200.0

60.0

180.0

50.7
47.3

160.0

55.0
50.0

153.3 45.0

140.0
120.0

40.0
96.4

100.0

35.0

80.0

30.0

60.0

25.0

Source: Prepared by FISCO from the Company’s securities report and financial results

Trends in net interest-bearing debt and the number of consolidated employees(¥mn)
50,000Net interest-bearing debt (left)
Number of consolidated employees (right)(people)18,00040,00015,00030,00012,00020,0009,000

10,000

6,000

0

3,000

-10,000

0

Source: Prepared by FISCO from the Company’s securities report and results briefing material

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18 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html

Results trends

Trends in R&D expenses and capital investment(¥mn)

Capital investment (left)

R&D expenses (right)(¥mn)

25,0002,500

20,0002,000

15,0001,500

10,000

1,000

5,000

500

0

0

Source: Prepared by FISCO from the Company’s securities report and results briefing material

Simplified income statements(¥mn)
FY12/16

FY12/17

FY12/18

FY12/19

FY12/20

FY12/21 (E)Net sales

164,218

180,773

204,329

231,074

240,953

249,000

YoY

6.9%

10.1%

13.0%

13.1%

4.3%

3.3%

126,024

138,708

156,808

178,337

186,105

-

YoY

7.2%

10.1%

13.0%

13.7%

0.0%

-

Gross profit

38,19342,06547,52052,73654,847

-

YoY

5.8%

10.1%

13.0%

11.0%

4.0%

-

Gross profit margin

23.3%

23.3%

23.3%

22.8%

22.8%

-

29,39432,357

36,11939,47038,875

-

YoY

6.2%

10.1%

11.6%

9.3%

-1.5%

-

SG&A expenses ratio

17.9%

17.9%

17.7%

17.1%

16.1%

-

8,798

9,708

11,40013,266

15,972

16,300

YoY

4.5%

10.3%

17.4%

16.4%

20.4%

2.1%

Operating income margin

5.4%

5.4%

5.6%

5.7%

6.6%

6.5%

9,166

10,26012,071

13,74916,343

16,900

Cost of sales

SG&A expenses

Operating income

Ordinary income
YoY
Profit attributable to owners of parent
YoY

0.8%

11.9%

17.7%

13.9%

18.9%

3.4%

5,042

5,797

6,516

7,836

8,573

8,900

2.4%

15.0%

12.4%

20.3%

9.4%

3.8%

Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

19 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED

28-Apr.-2021

9749 Tokyo Stock Exchange First Section

https://www.fsi.co.jp/e/index.html

Results trends

Simplified balance sheets(¥mn)
End-FY12/16

End-FY12/17

End-FY12/18

End-FY12/19

End-FY12/20

Change67,35072,45777,31588,009105,363

17,354

Cash and deposits

19,13418,851

22,554

22,27838,33016,051

Notes and accounts receivable - trade

36,72740,28844,45649,57052,7503,179

96,513102,110

115,310

119,609129,173

9,564

Property, plant and equipment

65,79665,22082,35686,33489,9283,594

Intangible assets

5,949

6,821

4,738

4,043

4,705

661

Investments and other assets

24,76630,06828,21429,231

34,5395,307

Total assets

163,863

174,568

192,625

207,618

234,537

26,919Current liabilities

37,46139,19749,428

48,10668,751

20,644

Notes and accounts payable - trade

9,444

9,977

9,526

13,361

12,519-842

Short-term loans payable and others

9,410

8,464

16,207

7,158

24,156

16,99817,40016,95923,52632,691

30,623-2,068

6,723

4,182

13,31922,61820,515-2,102

54,861

56,156

72,95580,797

99,374

18,576

Current assets

Non-current assets

Non-current liabilities
Long-term loans payable
Total liabilities(Interest-bearing debt)
Total net assets

16,134

12,64729,527

29,77644,671

14,895

109,001

118,411

119,670

126,820

135,163

8,342

Source: Prepared by FISCO from the Company’s financial results and results briefing material

Simplifies cash flow statements(¥mn)
FY12/16

FY12/17

FY12/18

FY12/19

FY12/20

Net cash from operating activities (a)

9,530

9,244

11,192

12,584

14,787

Net cash from investing activities (b)-4,337-4,524-23,424-9,442-16,109

Net cash from financing activities

1,076-4,462-14,766-1,451

12,703

Free cashflow (a) + (b)

5,192

4,720

-12,232

3,142-1,322

Cash and cash equivalents at end of period

21,79022,157

24,587

26,15837,450Source: Prepared by FISCO from the Company’s financial results█ Outlook
With the business environment moving in an overall positive
direction, we look forward to “the next move” targeting medium- tolong-term growth
1. FY12/21 consolidated results forecasts
For the FY12/21 consolidated results, the Company is forecasting net sales to increase 3.3% YoY to ¥249,000mn,
operating income to rise 2.1% to ¥16,300mn, ordinary income to grow 3.4% to ¥16,900mn, and profit attributableto owners of parent to increase 3.8% to ¥8,900mn. Therefore, it is actually forecasting the eighth consecutive periodof higher net sales and operating income since 2013 when it transitioned to a fiscal period ending in December.

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20 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html

Outlook

These results may appear unsatisfactory compared to the FY12/20 results when profits increased by double digits.
However, since FY12/15, the Company has continued with a pattern of setting initial forecasts assuming that net
sales will increase by around 3% and an operating income margin of the same level as the previous period’s result.
Therefore, these Company forecasts are also considered to be positioned as the minimum amounts to be achieved
and do not need to be viewed negatively.
The business environment is thought to be moving in a generally positive direction, based on factors such as thefact that the order backlog in FY12/20 had risen 10.1% on the end of the previous fiscal year on a Company-widebasis. In the embedded / control field, strong results are expected to continue for social infrastructure-related fields,
including 5G, while positive signs have also started to appear in terms of the economic sentiment and inquiry conditions for FA and for automotive business, for which adjustments are being strengthened. In the operations-related
field, in addition to the increase in demand in the EC field, there is a strong sense of increased demand for DX inother industries as well. For narrowly defined products and services, it appears that the favorable conditions arecontinuing for the license business and the Company’s own products.
For the dividend forecast, compared to the FY12/20 annual dividend of ¥51 per share (¥28 per share at the endof 2Q, including a commemorative dividend of ¥5 to mark the 50th anniversary of the foundation, ¥23 per share at
the end of the fiscal year), the forecast is for an annual dividend of ¥50 per share (¥25 per share at the end of 2Q,¥25 per share at the end of the fiscal year). Although this appears to be the first dividend decrease in six years,
after excluding the commemorative dividend it is actually a forecast dividend increase of ¥2 per share as the totalof the interim and period-end dividends. In addition, the Company upwardly revised the period-end dividend fromthe initial forecast for four consecutive fiscal periods from FY12/16 to FY12/19 based on the fact that the full fiscal
year results exceeded the forecasts, so we shall be paying attention to how it responds in FY12/21.
The impact of the coronavirus pandemic and the work-promotion structure

Source: From the Company’s results briefing material

We encourage readers to review our complete legal statement on “Disclaimer” page.

21 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html

Outlook

Results forecast(¥mn, %)Net sales
AmountOperating income
YoY

AmountYoYProfit attributable toowners of parent

Ordinary income
AmountYoY

AmountYoY

Net income
per share (¥)

FY12/19

231,074

13.1

13,266

16.4

13,749

13.9

7,836

20.3

250.40FY12/20

240,953

4.3

15,972

20.4

16,343

18.9

8,573

9.4

273.96

FY12/21 (E)249,000

3.3

16,3002.1

16,900

3.4

8,900

3.8

284.40Source: Prepared by FISCO from the Company’s financial results

2. Productivity is improving from the focus on upfront investment and work-style reforms
On the one hand, the Company is focusing on investing in human resources, centered on the large-scale recruitmentof new graduates, while on the other hand, it is assiduously implementing work-style reforms that are tailored toa variety of lifestyles, and providing support for these reforms, toward realizing “relaxed and worthwhile” working
environments.
Specifically, based on the upgraded version of the Super Flex System introduced in 1990 that had no core working
hours, the Company introduced the Ultra Flex system (the Super Flex system + a system enabling the acquisitionof paid leave on units of 30 minutes without fixing the time period and ‘refresh time’ of 10 minutes). Based on
this, it has been working on reducing overtime work, promoting acquisitions of qualifications, establishing anenvironment for remote work, and also working on the fully fledged operations of an at-home work system geared
toward all Company employees. In 2020, it adopted the system two months prior to the Japanese government’s
declaration of a state of emergency. Beginning in April 2020, it introduced a system for homeworking allowance(temporary allowance payments for initial expenses) and a support fund (monthly allowance payments for electricity
and communication expenses).
As a result of the above, the Company achieved excellent results in FY 2019 (statistics compiled from April to March)for 1) a paid-leave acquisition rate: 71.8% (private-sector average 56.3%, government target, 70% in 2020), 2) homework employees: 9,614 employees in total, 3) employees taking childcare leave: 177 employees, 4) annual average
overtime hours (other than predetermined): 23 hours 26 minutes. These excellent results are also being highly
evaluated and recognized by external organizations. For instance, the Company was awarded the Platinum Kurumin
Certification based on the Act on Advancement of Measures to Support Raising Next-Generation Children (Ministryof Health, Labour and Welfare) and the highest rank of the Eruboshi Certification based on the Act on Promotionof Women’s Participation and Advancement in the Workplace (Ministery of Health, Labour and Welfare). Moreover,it has been included in the Top Hundred Telework Pioneers (Ministry of Internal Affairs and Communications), theCertified Health & Productivity Management Outstanding Organizations Recognition Program (Ministry of Economy,
Trade and Industry), and certified as a Kanagawa business that promotes the support of children and child-raising(Kanagawa Prefecture).
Work-style reforms, which will cause a reduction in the working hours of existing employees, and the large-scale
recruitment of new graduates will lead directly to a dilution in the fighting strength of employees and an increase
in upfront costs. Therefore. in many cases, these are factors keeping down the productivity indicator of operating
income per employee (operating income / the average number of employees at the end of the period) in the shortterm. In the case of the Company, in the two years after FY12/15, when it began the large-scale recruitment of new
graduates while producing positive effects from work-style reforms, operating income per employee decreased.
However, since FY12/17, it changed direction and has been increasing. In FY12/20, it improved to just under ¥1.12
million (up 51.5% versus FY12/16).

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22 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED
9749 Tokyo Stock Exchange First Section

28-Apr.-2021
https://www.fsi.co.jp/e/index.html

Outlook

Taking a closer look, the new graduate inclusion rate found using a simple calculation (the number of recruited new
graduates in the Company along + in listed subsidiaries / the number of employees on a consolidated basis at theend of the previous year) rose each year from 1.5% in FY12/14 to 7.2% in FY12/18, and subsequently stayed at ahigh level in the 6% range. In addition, the FY2019 (April 2019–March 2020) average monthly overtime hours were
23 hours and 26 minutes, which was a significant decline from the 30 hours and 49 minutes in FY2014, while thepaid-leave acquisition rate has stayed at a high level above 70% for three straight years from FY2017. Amid this,the Company has achieved an increase in work productivity (operating income per employee increased from justunder ¥780,000 in FY12/14 to just under ¥1.12 million in FY12/20) in conjunction with the increase in expenses per
employee (from ¥5.98 million in FY12/14 to ¥6.17 million in 12/20) (consolidated personnel costs / the number of
employees on a consolidated basis at the beginning and end of the fiscal year). This is something that we should
evaluate highly, as it appears to be the result of the Company’s earnest efforts to improve the work framework andcreate relaxing and rewarding working environments for employees through the utilization of ICT and by continuously
reviewing employee statuses and work environments.
It is expected that, in the future, there will be a smaller amount of leeway to reduce overtime and increase thenumber of people taking paid leave, that the efficiency of remote work will improve, and that the inclusion rate of
new graduates will peak out. Therefore, the positive effects from improving hourly productivity will become more
likely to materialize. We have high expectations for the future of the Company, which is aiming to further improve
profitability in the long term.

Trends in the number of newly graduated recruits
and operating income per employee
Number of consolidated newly graduated recruits(in Company alone + in listed subsidiaries) (left)
Operating income per employee(right)(Numberof
new recruits)
1,200(thousand)
1,200.0

1,117.1

912.3

1,000
777.4
800

758.4

737.4

743.1

1,000.0800.70
800.0

600

600.0
973

400
470

200

520

1,034

861

835

400.0

643
200.0

155
0

0.0
FY12/14 FY12/15 FY12/16 FY12/17 FY12/18 FY12/19 FY12/20 FY12/21

Source: Prepared by FISCO from the Company’s securities report and results briefing material

We encourage readers to review our complete legal statement on “Disclaimer” page.

23 24

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

FUJI SOFT INCORPORATED

28-Apr.-2021

9749 Tokyo Stock Exchange First Section

https://www.fsi.co.jp/e/index.html

Outlook

Trends in average specified overtime hours
and the paid-leave acquisition rate
(time：minutes)(%)

Average specified overtime hours(left)
Paid-leave acquisition rate(right)

36:00

27:00
58.6

60.1

30:15

30:49

73.2

69.5

66.7

100.0

72.9

71.8

18:00

75.0

50.0
28:25

24:52

23:58

23:52

23:26

9:00

25.0

0:00

0.0

12/4-13/3 13/4-14/3 14/4-15/3 15/4-16/3 16/4-17/3 17/4-18/3 18/4-19/3
Source: Prepared by FISCO from the Company’s CSR Report

The work-style reforms advanced by the Company up until now have become a powerful weapon to continue
business without significant disruptions even during the coronavirus pandemic. Furthermore, the large-scale
implementation of teleworking and homeworking using IT solutions vendors can be said to be typical “dogfooding”(trialing products and services in-house before providing them to customers), and this is considered to be extremely
significant in terms of experiencing their advantages (reducing costs, improving work efficiency, etc.) and disadvantages (security issues, lack of communication, etc.)
Establishing and maintaining a teleworking environment
The strengths of FUJI SOFT in establishing andmaintaining a teleworking environment

Proposals from the company for use inside
the company. Advice on support provided inclose cooperation with customers.

As it is an independent company, proposes
products and services optimized to meetcustomer needs

Winner of the Chairperson’s Award in the
17th Telework Promotion Awards of theJapan Telework Association

Support for customers’ business continuity● Strengthening the customer-support structure and support for promoting homeworking and TV conferencing● Provision of in-company information environments that utilize the latest global technologies
VDI/Splashtop/Microsoft Teams/Google Hangouts/Zoom/Slack, etc.
● In-house development and provision of homeworking management tools that are being tested in-house● Free provision of Company’s own product moreNOTE, a paperless conferencing system

Homework strategy framework

Policies

Management
principles

ChangeSpeed!

DX
Direction

Behavior

Behavioral
style

Work anywhere

Team communication
Support

SystemWork-stylechoices

Cost burden /subsidiesLabor
regulations

Management ofworking hours

Evaluation andindicators

Infrastructure
Environment

Devices / tools /platforms

Communication
environment

Security

Source: From the 2020 CSR Report

We encourage readers to review our complete legal statement on “Disclaimer” page.

24 24

Disclaimer
FISCO Ltd. (“FISCO”) offer stock price and index information for use under the approval of theTokyo Stock Exchange, the Osaka Stock Exchange and Nikkei Inc.
This report is provided solely for the purpose of offering information, and is not a solicitationof investment nor any other act or action.
FISCO prepared and published this report based on information which it considered reliable;
however, FISCO does not warrant the accuracy, completeness, fitness nor reliability of thecontents of this report or the said information.
The issuers’ securities, currencies, commodities, securities and other financial instruments
mentioned in this report may increase or decrease in value or lose their value due to influence
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not make any promises regarding any future outcomes. If you use this report or any information
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This report has been prepared at the request of the company subject hereto based on theprovision of information by such company through telephone interviews and the like. However,
the hypotheses, conclusions and all other contents contained herein are based on analysis
by FISCO. The contents of this report are as of the time of the preparation hereof, and are
subject to change without notice. FISCO is not obligated to update this report.
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Please use the information in this report upon accepting the above points.

◾ For inquiry, please contact: ◾

FISCO Ltd.
5-13-3 Minami Aoyama, Minato-ku, Tokyo, Japan 107-0062
Phone: 03-5774-2443 (IR Consulting Business Division)
Email: support@fisco.co.jp