Financial Results for the
1H ending March 2019
October 31, 2018
Yushi USHIJIMA, President
NEC Networks & System Integration Corporation(TSE: 1973, NESIC)AgendaI. Results for 1H FY2019/3
II. Forecasts for FY2019/3

I. Results for 1H FY2019/3
II. Forecasts for FY2019/3

1H FY2019/3 Summary▐ Increased all of orders, sales & incomes yoy
 Orders: Significantly grew by orders from generalenterprises & overseas customers OP: Increased despite increase of growth cost andloss projects impact(¥Bn.)

41HFY2018/3

1HFY2019/3

ChangeOrders received

128.7

146.7

+14%

140Sales

119.9

122.5

+2%124(Gross margin)

15.9%

15.9%

+0.0ptOperating income

2.5

2.6

+0.1

2.0

(to sales)(2.1%)(2.1%)+0.0pt

(1.6%)

attributable to owners of the parent

Net income

1.6

1.9

+0.3

1.3

(to sales)(1.3%)(1.6%)+0.3pt

(1.0%)

Free cash flows

11.7

11.5-0.2© NEC Networks & System Integration Corporation 2018

1H Forecasts
as at Jul.31-1H FY2019/3 Orders Received by Segment▐ Enterprise Networks(¥Bn.)

Work-style innovation fields
was robust
146.7 +14%144.4※Others

3.1

SocialInfra. 45.6

Carrier
NW 35.2

Enterprise
NW

128.7
2.8

3.8

45.3 +8%

41.9

31.0

39.1 +26%～Office visitors increased by 79%

PJs for financial customers wereconcentrated in 1H▐ Carrier Networks

Non-carriers business expanded
due to large PJs for hotels
Orders from telecom carriers
increased▐ Social Infrastructures

Overseas business increased
52.9～Acquired 2 large PJs (¥10bn.)
Part of domestic PJs were shiftedto 2H
1H
1H
1H
Firefighting commander system
FY17/3
FY18/3
FY19/3※1H FY17/3 Orders includes mega-solar PJ(About ¥13Bn.)
was in the off-season
560.5

58.5 +11%© NEC Networks & System Integration Corporation 2018

1H FY2019/3 Sales by Segment(¥Bn.)

118.8Others

3.4

SocialInfra. 34.9

Carrier
NW 28.5

EnterpriseNW

6119.9
2.3

35.2

30.4

122.5 +2%
3.1

32.0 -9%

31.6 +4%▐ Enterprise Networks

Work-style innovation fields
increased
EmpoweredOffice sales +9%▐ Carrier Networks

Overall sales steadily increased
centered on non-carriers area

▐ Social Infrastructures

52.1

52.0

55.8 +7%

1HFY17/31HFY18/3

1H
FY19/3© NEC Networks & System Integration Corporation 2018

Sales of mega-solar plant
construction (for civil engineering)and overseas declined
Sales increased in thebroadcasting/cable TV area

1H FY2019/3 Operating Income by Segment(¥Bn.)

2.5

Total 1.7

2.6

+0.1(0.0pt)（2.1%） （2.1%）（1.5%）▐ Enterprise Networks

Income increased due to higher sales,
improved sales mix and cost reduction
Growth investment in the DX area

▐ Carrier Networks
Enterprise 3.6
NW (7.0%)
Carrier
1.0
NW (3.7%)
Social 1.5
Infra. (4.2%)
Others/Elimination-4.4

1H
FY17/374.3

5.1+0.8

Income declined due to lower COS
ratio and growth expenses (for J/Vwith KDDI)-0.3▐ Social Infrastructures(8.4%)(9.1%) (+0.7pt)

2.1

1.8

(5.8%)(-1.1pt)(0.3%)

-0.1

(－%)

-0.2
(-)

-4.1

-4.2

-0.1

(6.9%)

0.1

1H
FY18/3

1H
FY19/3© NEC Networks & System Integration Corporation 2018

Income decreased due to an increasein unprofitable projects impacts▐ Others/elimination

Income remained flat yoy due to thestream-lined administration cost, despitegrowth expenses (IT system)

Factors of Operating Income Change(¥Bn.)
Streamlined SG＆A+0.2
Improvement in
the cost ratio+0.5
sales growth+0.4
Loss Project Effect
Of 1Q FY18/3+0.5

2.5～～1H
FY18/38© NEC Networks & System Integration Corporation 2018

Increase ofgrowth cost-0.8

1Q FY19/3
Loss projects
-0.7

2.6
2.0～～～～
1H FY19/3
Actual July Forecast

1H FY2019/3 Summary▌Planted seeds began fruiting as orders up
 Enterprise NW ：Work-style innovation field Carrier NW：Non-carrier business (hotels etc.)
 Social Infra.
：Overseas business▌Executed growth investment as planned
 Utilize DX Technologies (Cloud, RPA, AI, etc.)
 Joint company with KDDI Investment into startup companies via CVC▌Strengthened profitability
 1H profit beyond forecast & previous 1H in spite ofincreased growth cost and loss projects impact
9© NEC Networks & System Integration Corporation 2018

I. Results for 1H FY2019/3
II. Forecasts for FY2019/3

FY2019/3 Forecasts▌Although good results in 1H, no change for the fullyear forecasts due to unclear macro environments
 Orders：Assumption changed as ¥290bn. without new orders
for mega-solar plant field (+10% yoy excl. mega-solar)（¥bn.）

FY18/3

FY19/3

Forecasts

ChangeOrders received

287.8

290+1%Net sales

267.9

280+5%

Operating income

11.1

11.5+0.4(to sales)(4.1%)(4.1%)

0.0pt

Net income

7.4

7.5

+0.1

(2.7%)(2.7%)

0.0pt

attributable to owners of the parent(to sales)(Forecasts as at October 30, 2018)11© NEC Networks & System Integration Corporation 2018

2H FY2019/3 Basic Policy

A year of solidifying the foundations forevolution into a strong and attractive company▌Creation of “No.1,” “Only 1” businesses Leading-edge technological fields

・Aggressive use of DX technologies (i.e. AI, IoT, RPA, etc.)

・Speedy creation of new businesses with the use of CVC

 Expansion of carrier networks business via
collaboration with partners(Mobile base station, LPWA)

 Respond to project managements.
12© NEC Networks & System Integration Corporation 2018

Priority Measures : Enterprise Networks BusinessWork-style to create innovations with leading edge technologies
Location-free, time-free comm.

Virtual contact

Real contact

Quick decision

Sharing knowhow & ideaActive communications

Practice of “collaborative work” beyond the boundaries of locations, timeand organisation/corporations[Creating new services]
Collaboration Platform

Info./knowledge sharing

Overtime management system

Automated helpdesk

13

IoT Mobility Cloud・・・

Collaboration with partners

DX technologies

AI

Automation of routines…

© NEC Networks & System Integration Corporation 2018…

Priority Measures : Enterprise Networks Business▌Capturing strong market needs
Orders from generalenterprises
1H
YoY

Visitors to NESIC office*Enterprise NW segment

+22%

1H
YoY

+79%

Video communicationsolution

150+ companies
have introduced▶ The ICT usage area is expected to be robust in 2H as well.
Investment
themesCommunication/collaboration, work-style/workplace innovation,
Shift from possession to utilization/BPO
Security, automation, digitalization▌Materialization/commercialization of DX business Accelerate in-house verification

・Verify effective technology/model for strengthening corporate power
and facilitate practical use

Verification
examples・Work-time/business management, visualization of the status of employees’

activities, elimination of communication losses in telework/free address environments
・Automation/labor saving of business process by utilizing advanced technology/tools Accelerate partner collaboration/alliance, investments
14© NEC Networks & System Integration Corporation 2018

Priority Measures : Carrier Networks Business▌Alliance with partners
KDDI

Established a joint company for mobile infrastructure
Base station construction & area design, fixed comm., etc.
K&N System Integration
Corporation

Enhancing business for KDDI providing total services
from area design to installation of base stations

Sony Network Communications + ORIX
Joined LPWA business that SONY starts as a business
Handling sales of communication services & provision ofpartner
support services to users and partners in individual area

ELTRES™

Expanding IoT related SI & service as well as line
sales as an operator of promising LPWA service

Sony’s LPWA15© NEC Networks & System Integration Corporation 2018

Participate in SONY LPWA Business
What is LPWA ?

LPWA: Low Power Wide Area

■Global LPWA market forecast(Source: 2017 edition of Information
and Communications White Paper)

Optimal wide area network technology for IoT
because of lower cost/lower power consumption, etc.
compared to conventional wireless network

10 times the sizeof 2016 by 2021

Application in potential fields for connection with network advances

Features of SONY LPWA

ELTRES™

Compared to other LPWA standards, has strengths in
Stable communication for long distance, high-speed mobilecommunications, low power consumption＝has strengths in movement/traceability such as
logistics/transportation, location information of vessels, etc.
NESIC’s role

161718192021■Applicable service
examplesInfra monitoring
Vehicle location
management
Monitoring for elders
and children, etc.

Contribute to LPWA business expansion with our solution planning ability or businessdevelopment ability (sales～SI/maintenance)

ELTRES

IoT Network Joint Businesses

Sony Network Communications
Build, operate/manage NW
Run a partner program

NESIC / ORIX
Sell and provide communication services
User support

Partner program (terminal, solution, application, and channel)
16© NEC Networks & System Integration Corporation 2018

Clients

Priority Measures : Social Infrastructures Business▌Steady execution of large projects
 Win large PJs by reinforcing our relationship with clients (¥10 bn. in 1H）・Plant monitoring control/communication
systems construction
・Communication systems construction ofSingapore MRT

Execute project
management steadily

Singapore MRT North East Line railroad communication systems constraction
ClientnameSingapore Land Transport Authority(LTA)

Projectoutline

On the North East Line of Singapore MRT,
(1)Expansion of communication systems
associated with an extension to one morestation(2)Supply in-vehicle communication systems tonew railroad cars
(3)Upgrade and replacement of the comm.
systems of the existing railroad cars

To becompleted
17

January 2023

© NEC Networks & System Integration Corporation 2018

NESIC has been in charge of thecommunication systems since theopening. Its high project management
ability and engineering ability are wellreceived by the client.

Priority Measures : New Business Using CVC▐ Established CVC fund for creation of newbusiness through open innovation with(January, 2018）startups
Open innovation“Game changing ideas
× NESIC assets ＝ New businesses”
of venture companies“No.1”“Only 1”
newbusinesses

CVC
Fund

<Seeds of new business>
Game changing ideasof startups

18<NESIC assets>
・ICT capabilities
・Construction capabilities
・Support service platform© NEC Networks & System Integration Corporation 2018

Investments through CVC
2018April: Boomtown Network, Inc.

USAA company to provide the next-generation support service business combining
the omni-channels contact center and the onsite support network with thesharing economy concept⇒Aiming innovation of our support service business

July: Savioke, Inc.

USAA company to provide self-controlled robots for transport tohotels and medical settings⇒Aiming acceleration of development of new markets
such as medical setting

September: InterMedia Laboratory Inc. Japan
A company to develop the technologies for capacitance codesthat can be read with the touch panel of a smartphone⇒Aiming new authentication service creation using high level
electrostatic capacity technology

October: ALE Co., Ltd.

JapanA company to develop satellites that realise artificial shootingstars for the first time in the world⇒Aiming private satellite operation service area

19

© NEC Networks & System Integration Corporation 2018

Return to Shareholders*Forecast as at 30th October, 2018

▌Increase in shareholder return with improvementof the profit level based on the basic policy forstable dividends
Consideration of DOE
Planning for dividend increase
for the 12th consecutive year
60

Dividend
per share(yen)1477

FY07/3
2045
25

26

28

20

22

10

1114

1314

1111131410

FY08/3

FY09/3 FY10/3

FY11/3 FY12/3© NEC Networks & System Integration Corporation 2018306432727476

35

3637

38

Yearenddividend35363738Interim
dividend

7026
1930

FY13/3 FY14/332

FY15/3 FY16/3 FY17/3

FY18/3 FY19/3e

At the End

Toward Strong & Attractive
NESICDreams andHigh
Aspirations

21Innovation© NEC Networks & System Integration Corporation 2018

Enhance
OurStrengths

(ref.) End of FY2018/9 (Sep. 2018) Balance Sheet
Cash and cash equivalents
Notes & accounts receivable
Inventories
OthersCurrent Assets
Noncurrent Assets

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

End of 18/966.4
82.912.65.4

40.3
8.1
57.5

32.5
7.6
58.0

175.2
32.4
207.6

105.9

167.4
33.0
200.4

9.1
-21.5
4.4
0.1

-7.8
0.6
-7.2

-7.8
-0.5
0.5

103.9

98.2

103.9

-7.7

-4.4

-4.2

0.2

2.3

2.5

0.2

0.1

Liabilities & Net Assets

101.7
207.6

102.2
200.4

0.5
-7.2

Owner's Equity Ratio

47.9%

49.8%

+1.9ptNet Assets

22

End of 18/3
57.3
104.4
8.2
5.3

(¥ Bn.)
Diff.

© NEC Networks & System Integration Corporation 2018

(ref.) 1H FY2019/3 Cash Flows(¥ Bn.)

14.6

17.9

13.5

11.74.4

4.1

FCF-5.9

3.2

11.5

2.1
-6.9

-9.2

-9.7

706050※4030
2036.6

100

1H

26.2
2H

FY13/337.0 38.0

1H

2H

FY14/3

45.7

1H

32.8

2H

FY15/344.3

1H35.42H

FY16/351.7 51.4

1H

2H

FY17/3*Net cash means an amount obtained by deducting loans payable from cash and cash equivalents
23© NEC Networks & System Integration Corporation 201861.0

1H49.22H

FY18/358.8

Net Cash

1H
FY19/3

Cautionary Statement
Forecasts and targets of results mentioned in this document are futureestimates and are thus inclusive of risks and uncertain factors since they
are not based on definite facts. Please be aware that a variety of factors
could cause actual results to differ significantly from those projected. The
major factors affecting actual results include the economic climate andsocial trends surrounding the business of this Company’s group, consumer
trends vis-a-vis systems and services provided by this Company’s group, 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.
.

24© NEC Networks & System Integration Corporation 2018

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

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25

© NEC Networks & System Integration Corporation 2018

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26© NEC Networks & System Integration Corporation 2018