Financial Results for the Fiscal Year Ended March 31, 2024
/ Transformation / Becoming a Pure-play Information Network Solutions Business

May 22, 2024

Tsuzuki Denki Co., Ltd.
Copyright © 2024 Tsuzuki Denki Co., Ltd.

01 Financial Results for FY03/24

Table ofContents

ー Overview of Consolidated Results
ー Consolidated Earnings Forecast
ー Shareholder Return

02 Progress of Transformation 2026
ー Executive Summary
ー Progress of Measures

1

Copyright © 2024 Tsuzuki Denki Co., Ltd.

01 Financial Results for FY03/24
ー Overview of Consolidated Results
ー Consolidated Earnings Forecast
ー Shareholder Return

02 Progress of Transformation 2026
ー Executive Summary
ー Progress of Measures

2

Copyright © 2024 Tsuzuki Denki Co., Ltd.

Highlights
Achieved a record profit driven by substantial growth in the Information Network Solutions business,
offsetting the drop in performance following the business divestiture• The medium-term management plan strategy for the Information Network Solutions business, including pricing management andthe expansion of six growth areas, proved successful. Profits grew substantially with an improvement in profit margin. This offset
the impact of the deconsolidation of the Electronic Devices business (Q4 earnings) and further boosted profits.
• Recorded extraordinary gains from the sale of noncurrent assets, which helped improve the utilization of management resources
and asset efficiency. Meanwhile, the impact from the sale of the Electronic Devices business was minimal, resulting in substantial
growth in profit attributable to owners of parent.
• Order backlog decreased due to the exclusion of orders for the Electronic Devices business(Millions of yen)

FY03/23

FY03/24

Change (amount)

Change (YoY)

Net sales

123,899

124,856

957

+0.8%

Gross profit

24,17825,308

1,129

+4.7%

(Cost ratio)(80.5%)(79.7%)(-0.8pp)－

SG&A expenses

19,06018,868

-192

-1.0%

Operating income

5,118

6,439

1,321

+25.8%(Operating margin)(4.1%)(5.2%)(+1.1pp)－

Profit attributable toowners of parent

3,521

5,477

1,956

+55.6%

Orders134,688

114,035-20,652-15.3%

Order backlog

44,49917,895-26,604-59.8%

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Factors Affecting Operating Income■Positive:

Effects of sales increase (+JPY186mn): Higher sales in all business models of the Information Network Solutions
business (impact of sales increase in the Information Network Solutions business:+JPY1,059mn)

Improvement in cost ratio (+JPY951mn)
Lower SG&A expenses (+JPY192mn)■Negative: Unprofitable projects (-JPY8mn)+1,059-873

Offset impact of excluding Q4 earnings for the Electronic Devices
business (-JPY873mn): Significant improvement in equipment and development & construction
businesses: Decrease in personnel and other expenses due to the deconsolidation of 4
companies following the business divestiture (for Q4): 1 project, but with minimal impact *None in FY03/23

-8

+951

+192

6,439

(Millions of yen)

YoY
+1,321

5,118(+25.8%)
Effects of sales
increase +186
Increase in gross profit +1,129
FY03/23
OperatingincomeEffect of sales
Effect of excluding
increase inearnings for
Information Network Electronic Devices
Solutions businessbusiness (for Q4)

Improvement
in cost ratio(+0.8pp YoY)
4

Unprofitableprojects*

Lower SG&A
expenses

FY03/24
OperatingincomeCopyright © 2024 Tsuzuki Denki Co., Ltd.

Results by Segment■SalesSales increased in all business models of the Information Network Solutions business. Equipment business inparticular contributed to sales growth■Operating income

Achieved a record profit in the Information Network Solutions business thanks to thorough pricing
management and the expansion of six growth areas with high added value(Millions of yen)

Net sales
FY03/23

FY03/24

Operating income

ChangeChange(amount)(YoY)

FY03/23

FY03/24

ChangeChange(amount)(YoY)

Information
Network
Solutions

93,905102,523

8,617

+9.2%

4,155

5,925

1,770

+42.6%

Electronic
Devices

29,993

22,333-7,660-25.5%

954

487

-467

-48.9%

Consolidated
Total

123,899

124,856

957

+0.8%

5,118

6,439

1,321

+25.8%

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Results by Business Model (Information Network Solutions)■Equipment
Installed PCs, network equipment, etc. for customers in a wide range of industries
Orders and order backlog fell as we received some large orders expected for FY03/24 ahead of schedule in Q4 FY03/23, but themarket environment is strong.
■Development & Construction
Growth in network and infrastructure construction and small and medium-sized system development■Service
Cloud-based services in the six growth areas were solid. Monthly subscription services such as ancillary maintenance services andcloud usage fees increased in line with growth in equipment and development & construction businesses. Orders fell slightly owing
to the expiration of a major operation service in Q1 FY03/23.

Net Sales

OrdersOrder Backlog(YoY)

Equipment
Development &Construction

92,31993,90537,12737,943

14,501

13,840102,523

(YoY)

+9.2%

14,786+18.4%

+6.8%

(YoY)

102,490
95,00844,92538,62015,34245,06814,03994,560-7.7%

38,051-15.6%

25,85817,895-30.8%

10,568-39.4%-25.4%

3,744

3,484
3,842

FY03/23
23/3期

FY03/24
24/3期

17,274
13,599-3.1%

17,442
10,318Service40,690FY03/22
22/3期

42,121

FY03/23
23/3期

42,811

FY03/24
24/3期

+1.6%

(Millions of yen)

41,046

FY03/22
22/3期

43,382

42,909

-1.1%
4,472
2,484

FY03/23
23/3期
6

FY03/24
24/3期

FY03/22
22/3期

4,670

+2.6%

Copyright © 2024 Tsuzuki Denki Co., Ltd.

01 Financial Results for FY03/24
ー Overview of Consolidated Results
ー Consolidated Earnings Forecast
ー Shareholder Return

02 Progress of Transformation 2026
ー Executive Summary
ー Progress of Measures

7

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FY03/25 Consolidated Earnings Forecast
Projecting a record profit in the Information Network Solutions business, primarily driven by expanding demandfor AI PC installations and peripheral infrastructure upgrades, in addition to improved profitability of the overallbusiness resulting from the execution of the medium-term management plan strategy(Millions of yen)

FY03/24 results
Net sales

102,523

Operating income

5,925

Operating margin

5.8%

Profit attributable toowners of parent

5,477

FY03/25 forecast+0.5%(-21,856)(-17.5%)

324

+5.5%

(-189)(-2.9%)

6.1%

ー+0.3pp4,100-1,377-25.1%

6,250(6,439)(5.2%)

Change (YoY)

476

103,000(124,856)

Change (amount)(+0.9pp)*The upper figures in each cell are for the Information Network Solutions business only,
and the lower figures in parentheses include the Electronic Devices business.

8

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01 Financial Results for FY03/24
ー Overview of Consolidated Results
ー Consolidated Earnings Forecast
ー Shareholder Return

02 Progress of Transformation 2026
ー Executive Summary
ー Progress of Measures

9

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Shareholder Return
Dividend yield

Achieved a major dividend increase

Year-end share price

Dividend policy: Target dividend payout ratio of 40%, with aminimum DOE of 3.5%
(Profit attributable to owners of parent used for dividend calculation
is based on profit from business activities, excluding extraordinary
gains/losses, etc.)

JPY1,100

41.3%*

45.0%

JPY1,480

2.8%

3.2%

FY03/21
21/3期

FY03/22
22/3期

5.0%

Interim dividend: 38 yen; Year-end dividend: 52 yen

Dividend per share

JPY1,657

FY03/20
20/3期

40.0%

JPY1,563

JPY2,336

3.9%

3.9%

FY03/23
23/3期

FY03/24
24/3期*Dividend yield = Dividend per share / Share price at the end of the period (final record date)

120
40.0%

34.3%
35.0%

30.3%

30.9%

JPY90

JPY91

100

Shareholder benefits

30.0%

80

25.0%

JPY61

Number ofshares held

60
20.0%

JPY46

JPY48

100 shares to less than
300 shares
300 shares to less than
1,000 shares

15.0%
40

10.0%

20

5.0%

0.0%

1,000 shares or more

0

FY03/21

FY03/22

FY03/23

FY03/24

Number of years
held

FY03/25(provisional)

Products (including QUO Cards,
13 types in different price ranges)
Less than 3 years

More than 3 years

JPY1,000 worth

JPY2,000 worth

JPY2,000 worth

JPY4,000 worth

JPY3,000 worth

JPY6,000 worth*If 1,000 shares or more but less than 3 years (worth 3,000 yen) and 300 shares to less than
1,000 shares for more than 3 years (worth 4,000 yen) both apply, it will be treated as 300
shares to less than 1,000 shares for more than 3 years (worth 4,000 yen).

*Based on profit from business activities. Dividend payout ratio is 29.5%

based on reported profit attributable to owners of parent
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Copyright © 2024 Tsuzuki Denki Co., Ltd.

01 Financial Results for FY03/24
ー Overview of Consolidated Results
ー Consolidated Earnings Forecast
ー Shareholder Return

02 Progress of Transformation 2026
ー Executive Summary
ー Progress of Measures

11

Copyright © 2024 Tsuzuki Denki Co., Ltd.

Positioning of the Medium-term Management PlanFirst stage: Shift resources and put growing businesses on track to achieve our long-term vision
1st Stage

2nd Stage

3rd Stage

Shift resources
to growth areas

Scale growth areas
Develop new business
areas

Make growth areas into
core businesses andexpand into new areas

Transformation 2026

100th Anniversary
Growth Navigator
Operating income: JPY10.0bn

New areas(including M&A)
Growthareas
Information
Network
Solutions
Existing
areas

FY03/23
23/3期

FY03/26
26/3期

FY03/29
29/3期
12

FY03/33
33/3期
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Overview of the Medium-term Management Plan
Transformation 2026 ～ Shift resources to growth areas
FY03/23
results

FY03/26 targets
1. Businessstrategies

Expand growth areas
Increase profitability of existing businesses
Restructure business portfolio and Group companies

Net sales
JPY130.0bn (+5.0%)

Net sales
JPY123.8bn
OperatingincomeJPY5.1bn

2. Financial
strategies

Manage finances while being mindful of the cost ofcapitalCreate growth funds through balance sheet
optimization
Optimize capital allocation

3. Managementbase
reinforcement

Proactively invest in human capital (organizationaland human resource development)
Further enhance governance
Strengthen sustainability efforts

ROE
10.4%
CO2 emissions
Scope1+2

1,681t-CO2(vs. FY03/23)

13

Operating income
JPY6.5bn (+27.5%)
ROEOver 10%

CO2 emissions
Scope1+2

1,468t-CO2(-12.7%)

Copyright © 2024 Tsuzuki Denki Co., Ltd.

[Executive Summary] Progress and Overall Review of the First Year of theMedium-term Management Plan
Steady progress in shifting resources to core businesses by reviewing business portfolio
Achieved record profits close to the final-year target of the medium-term management plan, partly due to successful
implementation of various strategies
Company-wide✓ Carried out business structure reforms• Sold the Electronic Devices business• Reorganized Group companies• Issues remain in terms of cost of capitalmanagement

Net sales

Operating income

JPY124.9bn(+1% YoY)✓ Transitioned to a profitable structure(DX consulting, market-specific DX services)• Existing areas: Thoroughly implemented pricing management➡ Lowered cost ratio by 0.8pp YoY overall

Governance /Sustainability

Human resources✓ Initiated human capital enhancement and system reforms• Invested in training DX talent (over JPY200mn)➡ 239 certified DX associates (+92 YoY)
• Improved working conditions through system changes andintroduced a referral recruitment system• Female ratio increased slightly, while work engagement scoreremained flat YoY
14

CO2 emissions

JPY6.4bn

14.5%

1,573t-CO2(+26% YoY)(+4.1pp YoY)(-6.4% YoY)

✓ Managed finances and generated cash with a focus oncost of capital
FinanceBusiness• Six growth areas : Enhanced branding, organization, and service
functions➡ Sales expanded 36% YoY
Some delays in planned R&D

ROE• Established and operated a budget committee• Reduced non-business assets (sold real estate and crossshareholdings)➡ Generated growth capital (approx. JPY5.0bn)• Cash and deposits and net assets increased due to theimpact of divestments, with room for improvement incapital and debt structure✓ Implemented measures to increase the effectivenessof the medium-term management plan
• Held study sessions and opinion exchanges, including
with outside directors and outside corporate auditors (7times)• Re-identified key issues (materiality)• Stepped up IR activities; number of dialogues withinstitutional investors remained flat
Copyright © 2024 Tsuzuki Denki Co., Ltd.

Recognition of Challenges from the Perspective of Management Focused on
Cost of Capital and Stock Prices
P/B ratio stayed above 1x after announcing the medium-term management plan, but some issues remain
Tsuzuki(Yen)Jul. 31, 2023

Expanded
2,600
shareholder
benefit
May 12, 2023
program
2,400 Announced longterm vision and2,200
medium-term
management plan

Sep. 29, 2023

Jan. 31, 2024

Businessdivestiture

Upward forecast revisionand dividend increase

2,000
1,800
1,600
1,400

System/network
IT trading
integrator average company average

Cost of capital（CAPM/%）

7.5

7.1

7.8

ROE (%)

14.5

16.3

11.8

P/E ratio (x)

7.7

21.4

13.6

P/B ratio (x)

1.0

3.4

1.5

Operating margin
（%）

5.2

11.3

5.3

*Above figures are as of March 31, 2024.
*Cost of capital is calculated under the same conditions (CAPM).
*System/network integrator average consists of 9 companies and IT trading company average
consists of 5 companies, with the figures representing simple averages.

• Our calculated cost of capital is at the same level assystem/network integrator average• The difference in P/E ratio is larger than the difference inprofitability (ROE and operating margin)• Share price rose and P/B ratio has remained over 1x after
announcing the medium-term management plan
• Market reaction to the sale of the Electronic Devices businesshas been neutral

Raise growth expectations by accumulating growth (actual results) with improved profit margins and returnon capital while driving transformation as an ICT company (growth scenario)
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Business Portfolio Review (Sale of the Electronic Devices Business)
Resolved many issues by transforming into a pure-play ICT business, and aiming for further growth throughconcentrated resource allocation
Recognition of challenges• Difficulty in creating business synergies due to differences inbusiness models• Low profitability and return on capital• High working capital requirements✓ Effects of divestments

OperatingmarginROA(business
profit/total
assets)

FY03/23
results

FY03/24
results

Toward continuous profit
growth in the Information
Network Solutions business

FY03/25
forecast

Electronic Devices
business performance(operating income)Information Network
Solutions

4.4%

5.8%

6.1%

Electronic Devices

3.2%

2.2%

ー

JPY5.1bn

Information Network Solutions+Electronic Devices

4.1%

5.2%

ー

0.95bnInformation Network
Solutions

6.4%

7.3%

7.7% *3

Electronic Devices

4.4%

3.0% *1ーInformation Network Solutions+Electronic Devices

6.4%

7.2% *2ーGrowth funds acquired throughdivestments

Operatingincome
JPY10.0bn

JPY6.4bn JPY6.25bn

JPY6.5bn

0.49bn・・・

Approx. JPY8.5bn*1 Business profit is the actual results for April–December 2024 multiplied by 4/3, and business assets are the actual figures for FY03/23.
*2 Business profit is calculated by adding *1 to Information Network Solutions business profit (actual), and business assets are calculated based on estimated total assets excluding theimpact of the sale of the Electronic Devices business (if the business had not been sold).
*3 Total assets are the actual figures for FY03/24.

16

FY03/23

FY03/24

FY03/25

FY03/26

FY03/33

Copyright © 2024 Tsuzuki Denki Co., Ltd.

Profitability Enhancement of the Information Network Solutions Business[FY03/24 Progress]
Lifted company-wide profitability by expanding the six growth areas with high added value and optimizing profits inexisting areas✓ Achieved solid results by implementing measures to strengthen each area

Six growth areas

FY03/24 results

YoY

FY03/26 targets

1 Contact center system

JPY5.2bn+16%

JPY6.1bn

2 Cloud communication

JPY2.0bn+82%

JPY3.0bn

3 Security

JPY1.0bn+233%

JPY1.5bn

4 DX consulting

JPY0.2bn+28%

JPY1.0bn

5 Managed services

JPY3.5bn+25%

JPY3.8bn

6 Market-specific DX services

JPY0.1bn(no sales in
FY03/23)

JPY0.6bn

Six growth areas total

JPY12.0bn+36%

JPY16.0bn

Existing areas✓ Reduced cost ratio through rigorous pricing management
81.6%

20/3期
FY03/20

82.1%

21/3期
FY03/21

81.1%

22/3期
FY03/22

80.5%

23/3期
FY03/23

79.7%
24/3期
FY03/24
17

Enhanced marketing

Branding

Expanded service
lineup and enhanced
functions

Alliances with partners

Established specializedorganizations andstrengthened sales
promotion system

Launched new cloudservices• Tightened business negotiations screening and fostered a
profit improvement mindset among frontline divisions
Sales of low-margin projects decreased by approx. 10%• Introduced new pricing system for engineers in development& construction businesses
2–3% profit improvement• Secured appropriate profits by passing on increases inprocurement prices
Copyright © 2024 Tsuzuki Denki Co., Ltd.

Profitability Enhancement of the Information Network Solutions Business[FY03/25 Measures]
Aiming to establish a new business and further improve business structure by expanding on one year's initiatives.
Special demand for EOS is in full swing. Planning to expand sales by proactively capturing business opportunities.
✓ Develop proposal-based services
Reinforce
proposal-based
business

Further improve
profitability andproductivity

Capitalize on
special demandfor EOS• Cover customer needs and customer industry perspectives• Create service packages that can be implemented with nocustomization, providing integrated offerings fromupstream consulting services to downstream maintenanceservices• Develop services for specific industries (contact center,logistics, etc.) and cross-industry services✓ Pricing management(expand scope tomaintenance business)✓ Establish internal
working group andthoroughly manage
projects✓ Expand market✓ Acquire new customers
Reach out to new customers + over 10,000
dormant customers✓ Explore opportunities forcollaboration with external partners✓ Update Tsuzuki Style✓ Update initiatives tovisualize sales activities

Business scale (PCs + servers)

Approx. 60,000
units(Our actual results)

FY03/2418

FY03/25

FY03/26

Copyright © 2024 Tsuzuki Denki Co., Ltd.

Growth Investments
Progress in FY03/24 outpaced the full-year plan, including for investments in business restructuring and personnel.
Aiming to further promote strategic investments, including M&A.
Category

FY03/24

Total amount(plan)

ActualProgress

Details (FY03/24)(vs. total planed amount)

Technology• Enhanced market-specific DX service functions• Researched ChatGPT and other AI tools• Tested low-code development tools, etc.

Personnel• Implemented DX personnel development and reskilling programs• Improved employee working conditions• Introduced a referral recruitment system

JPY8.0bn

JPY2.6bn

33%

Internal DX• Updated ERP system• Enhanced security

Business
restructuring• Reallocated human resources within the Group• Business restructuring costs

Strategic
investments

JPY10.0bn+αDeals examined: 33 deals

19• Narrowed down some target areas based on our business strategy
and examined many specific projects

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Financial Status (Current Cash Position)
Obtained cash as a result of divestments and financing activities
Plan to invest in growth while maintaining appropriate capital control with an eye toward shareholder returns[Initial projection] *Three-year projection[First year of the medium-term management plan](1)

Shareholder
returns

Disposal of nonoperating assets
CCC improvement(2) + (3)Other investing and financing CFs(4)
Ensuresoundness(2) Increase in operating CF(+JPY4.0bn*)(3) Disposal of non-operating assets(+JPY5.0bn)(4) Reduction in cash on handlevels due to businessdivestiture (+JPY3.7 bn)

Cash on hand
JPY20.8bn（FY03/23）*Operating CF is stated net of repaymentsof lease obligations (financing CF)

FY03/23

Potential uses ofadditional cash

(1)

Additional capacity:
Approx. JPY12.0bn(4)Operating CF*
JPY10.0bn(FY03/24–FY03/26)

Growthinvestment(1) Cash inflow from businessdivestiture (+JPY8.5bn)

Shareholder
returns

Completed

Growthinvestment• Dividend payment of
JPY1.3bn• Growth investment of
JPY2.6bnin thefirst year

Ensuresoundness
JPY17.1bn(two months’
sales)

FY03/24 (actual + plan)

Growth investment : Invest funds mainly in M&A with the aim of increasing
corporate value over the medium to long term
Shareholder returns : Further discuss dividend increases, share buybacks, etc.
20

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Approach to M&A and Collaboration
Approach all business areas with a view to compensating for shortfalls in our value chain

Growth areas
Growth potential

Cloud-based services, security products, DX products, etc.

Complement and acquire technology,
products, and solutions

New areas

Growth areas

Existing areas
Individual equipment sales, infrastructure construction,
conventional SI, etc.

Achieve economies of scale, complement
product lines and coverage areas

Existing areas

New areas
Social issues x Industry (customers) x Technology

Acquire cutting-edge technologies andseeds

Profitability

21

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Dialogue with Shareholders in FY03/24
The content of dialogue has changed in line with the new medium-term management plan, including topics such as costof capital and valuation. However, challenges remain in terms of investor outreach.
Overview

CategoryMaincorrespondents

President, Managing Executive Officer of Management Planning (IR), and IR Manager

Overview ofshareholders● Investment style: Domestic active investors, overseas active investors● Respondents: Fund managers, analysts

Key themes andshareholderinterests● Key themes
・ Business model (discussion designed to promote understanding of business) and growth drivers
・ EOS and other market trends, current performance trends, and full-year forecasts
・ Medium-term outlook and initiatives● Interests
・ Background, outlook, and use of proceeds from the sale of the Electronic Devices business・ Market evaluation (cost of capital and valuation), execution progress of measures
・ Capital policy, M&A and other growth investments, and shareholder returns

Feedback● Frequency: Report on overall IR activities to the Board of Directors three times a year, and on other topics asappropriate● Content: Trends in market capitalization, trading volume, and shareholder composition; opinions received
during one-on-one meetings with investors and measures taken in response; capital market trends
and specific activities, etc.

Incorporated
items● Business portfolio review (measures to improve profitability), dividend policy and other financial strategies

22

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In Conclusion

We will pursue growth by transforming our business model

We will strive to improve return on capital through strategic capital control

We will continue to invest in our people, the source of our growth, andenhance our human capital
We will strive to further enhance our corporate value through dialogue with
our stakeholders

23

Copyright © 2024 Tsuzuki Denki Co., Ltd.

Contact

Contact

Tsuzuki Denki Co., Ltd.
Management Planning Office

Address

6-19-15 Shinbashi, Minato-ku, Tokyo 105-8665, Japan (Tokyo Art Club Building)
Phone: 050-3684-7780
ir-tantou@tsuzuki.co.jp
https://www.tsuzuki.co.jp/

Disclaimer
The forward-looking statements, including earnings forecasts, contained in this document are based on information
available to the Company at the time of this document’s release and are subject to a number of uncertainties. Please notethat actual results may differ significantly due to various factors. Although every effort has been made to ensure theaccuracy of the information contained in this document, please note that the accuracy and certainty of its content is notguaranteed. The names of companies, products, and services mentioned in this document are registered trademarks ortrademarks of their respective owners.
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