Financial Results for the
1H ending March 2018
November 1, 2017
Yushi USHIJIMA, President
NEC Networks & System Integration Corporation(TSE: 1973, NESIC)Introduction

Yushi USHIJIMA
1984: Joined NESIC⇒Mainly involved in sales& marketing strategy
Part of the creation ofthe EmpoweredOffice business2014: Member of Board of Directors of NESICManaged Q&A Corporation,a newly acquired subsidiaryas EVP, then as President & CEO
2017: President of NESIC
2© NEC Networks & System Integration Corporation 2017

Introduction▐ My Mission
Group-Wide Reform for Further GrowthTowards Regrowth■Strong and attractive company■Attractive, new cutting-edge businesses■Communication

Strength will emerge as profit
3© NEC Networks & System Integration Corporation 2017

AgendaI. Results for 1H FY2018/3
II. Forecasts for FY2018/3

I. Results for 1H FY2018/3
II. Forecasts for FY2018/3

1H FY2018/3 Summary▐ Operating income increased yoy, offsetting the decrease in 1Q.
 Gross margin improved (+0.7 pt) thanks to continuous cost structure reforms,
making up for the impact of the unprofitable projects posted in 1Q.
 Orders decreased yoy in reaction to the large projects received in 2Q of theprevious fiscal year (about ¥13 bn.).

61HFY2017/31HFY2018/3

Orders received

144.4

128.7-11%

140Sales

118.8

119.9

+1%120(Gross margin)

15.2%

15.9%

+0.7ptOperating income

1.7

2.5

+0.8

2.0

(to sales)(1.5%)(2.1%)+0.6pt

(1.7%)Net income

attributable to owners of the parent

1.0

1.6

+0.6

1.1

(to sales)(0.9%)(1.3%)+0.4pt

(0.9%)© NEC Networks & System Integration Corporation 2017

Change1H Forecasts
as at Jul.31-(¥ Bn.)

1H FY2018/3 Sales/Operating Income by Segment▐ Sales: Grew yoy due to an increase in the Carrier Networks Business.
 Social Infrastructures Business remained flat thanks to the contribution ofthe solar power generation plant projects.

▐ Operating Income: Increased yoy thanks to the Enterprise Networks Businessand the Carrier Networks Business making up for the reductionin the Social Infrastructures Business.

Sales(¥ Bn.)

127.8
Others

1.9

SocialInfra.

39.4

CarrierNetworks

35.6

118.8

Operating Income

3.5

119.9 +1%

3.4

2.3

34.9

35.2 +1%

28.5

30.4 +7%Enterprise
Networks 51.0

52.1

52.0 -0%

1H
16/3

1H
17/3

1H
18/3

7（2.8%）© NEC Networks & System Integration Corporation 2017

(to sales)

1.7（1.5%）
SocialInfra.
Carrier
Networks(6.6%)

Enterprise
Networks
Others/Elimination

2.6

2.5（2.1%）

0.1(0.3%)
2.1

1.4(4.2%)(6.9%)(4.0%)

1.5
1.0(3.7%)

3.4(6.7%)

3.6(7.0%)(8.4%)

-3.9

-4.4

-4.1

1H
16/3

1H
17/3

1H
18/3

4.3

1H FY2018/3 Orders Received by Segment▐ Decreased yoy in reaction to the large-scale solar power generation plant
projects received in the previous fiscal year.
 The business condition for telecom carriers in the Carrier Networks Business
improved.
*The decrease in orders was attributable to the reaction to the solar power
projects and the large-scale (two-year) maintenance in the previous fiscal year.

Orders(¥ Bn.)

141.5

144.4

2.9

3.1

SocialInfra.

51.0

45.6

Carrier
Networks

34.7

Enterprise
Networks

52.8
1H
16/3

Others8© NEC Networks & System Integration Corporation 2017

128.7-11%

2.8

41.9-8%31.0-12%60.5

52.9-13%

1H
17/3

1H
18/3

35.2

1H FY2018/3 Enterprise Networks Business▌Sales: Remained unchanged yoy.
Work-style innovation-related sales expanded.
 Sales of EmpoweredOffice: +3%▌Operating income: Increased yoy,
driven by the improvement in the cost ratio
Sales(¥ Bn.)

Operating IncomeTo sales

51.0

52.1

52.0 -0%
3.4
6.7%

1H
16/3
91H
17/3

1H
18/3

© NEC Networks & System Integration Corporation 2017

1H
16/3

3.6
7.0%

1H
17/3

4.3
8.4%

1H
18/3

1H FY2018/3 Carrier Networks Business▌Sales: Increased yoy due to expansion of sales to telecom carriers▌Operating income: Increased due to the impact of cost structure reforms
and increased sales
Sales(¥ Bn.)

35.6
28.5

Operating Income
To sales

30.4 +7%

2.1
1.4
1.0

1H
16/3
101H
17/3

1H
18/3

© NEC Networks & System Integration Corporation 2017

4.0%

3.7%

1H
16/3

1H
17/3

6.9%

1H
18/3

1H FY2018/3 Social Infrastructures Business▌Sales: Remained flat thanks to the contribution of the large-scale solarpower generation plant projects, despite decrease of the overseas sales.
▌Operating income: Declined due to higher expenses incurred for growth(securing resources, SGA), deterioration in the sales mix, andunprofitable projects in 1Q (overseas railroad projects).
Sales(¥ Bn.)

Operating IncomeTo sales

39.4

34.9

35.2 +1%

2.6
1.5
6.6%

4.2%

0.1
0.3%

1H
16/3
111H
17/3

1H
18/3

© NEC Networks & System Integration Corporation 2017

1H
16/3

1H
17/3

1H
18/3

Progress of the Strategic Areas for Midterm Plan▐

Sales expanded in the strategy business fields with different
growth levels between them.

（¥bn.）

Total▐ Service Business

Sales※EmpoweredOffice, Cyber security, IoT/MVNO

119.9+1%

54.8+7%29.7+4%

Infrastructure 12.1

15.5+28%

Global 10.6

9.6-9%The basement
67.5business

65.1

-4%

118.8

Strategicareas total

51.3

Strategic areas

Service 28.5～～

1H
17/3上期
17/3

12～～

1H
18/3上期
18/3© NEC Networks & System Integration Corporation 2017

 All of EmpoweredOffice, cyber security
and IoT/MVNO expanded The seeds for future growth weresteadily planted, primarily by initiating
new services, including teleworking.

▐ Infrastructure Business※Broadcasting/CATV,DP(Disaster prevention),
Road/Railways, Mega solar The mega-solar business expanded.
 New mega-solar projects have beenrealized for 2H.

▐ Global Business※ Inbound, Outbound The Saudi business declined, whereas
the Myanmar business was strong.

1H FY2018/3 Achievement▌The seeds for the future were steadily plantedin the growth strategy businesses.
 Initiatives for work-style innovation areas werestrengthened.
 Teleworking, AI, etc.
 New mega-solar projects will become manifest
in the second half of the year.

▌The earning capability further strengthened.

 Gross margin improved in the Enterprise Networks
Business and the Carrier Networks Business,leading to higher income.

13© NEC Networks & System Integration Corporation 2017I. Results for 1H FY2018/3
II. Forecasts for FY2018/3

FY2018/3 Forecasts▌Target the initial forecasts as a whole.
FY17/3

FY18/3Forecasts（¥bn.）

ChangeOrders Receipts

279.2

2800%

Net Sales

257.9

270+5%

Operating Income

10.0

10.5+0.5(to Sales)(3.9%)(3.9%)

0.0pt

Net income

6.5

6.7+0.2(2.5%)(2.5%)

0.0pt

attributable to owners of the parent(to sales)(Forecasts as at October 31, 2017)15© NEC Networks & System Integration Corporation 2017

2H FY2018/3 Basic Policy▌Expansion of topline Re-accelerate the strategy businesses– Harvest the fruits
・Work-style innovation, new market cultivation,
new technology introduction▌Recovery of the Social Infrastructuresbusiness Respond to mega-solar projects
 Pursue further cost cutting
・ Reduction in material cost and outsourcing expenses
through in-house production, etc.
16

© NEC Networks & System Integration Corporation 2017

Priority Measures (Expansion of Topline)
Harvest the fruits in 2H from the seeds planted in 1H
Work-style innovation
Pursue further innovation in earnest
with all employees participating
Introduced new solutions
Collaboration work solution “Zoom” / RPA solution

Renewed EmpoweredOffice CenterNew market cultivation

Promoted initiatives in new market which will produce
results in 2H・Obtain new mega-solar projects
・Obtain large-scale projects for hotels and universities

Introduction of new technologies

Autonomous delivery robot “Relay”
Solutions using AI

Cyber security, automated help desk functions

Virtual network technology SD-WAN17© NEC Networks & System Integration Corporation 2017

Priority Measures (Expansion of Topline)▌Expand work-style innovation business All employees to participate in full-scale
implementation of further work-style innovation・Teleworking system for all employees
・Participation in Teleworking Day
including officers-> Extensive media exposure

An executive meeting
using a teleworking system

Enhanced the brand of the Company;
increases in office visitors and inquiries

 Renewal of EmpoweredOffice Center・Introduction of leading-edge technologies,
including AI and face authentication
・Broader introduction by connection with branches

Inviting 1.5 times as many visitors as now
and creating more business

EmpoweredOffice sales to over ¥50 bn.
18© NEC Networks & System Integration Corporation 2017

Priority Measures (Expansion of Topline)▌Introduce new technologies to expand SI and service～Integration of advanced technologies of ventures and our ability
to provide SI and services
Example Introduction of autonomous delivery robot “Relay”
of Savioke at Shinagawa Prince Hotel*Savioke, Inc: a manufacturer established in 2013, specializing in automaticdelivery robots
Chosen among Top 50 Companies to Watch in 2016 of “Robotics
Business Review” of the United States

・System to connect the robot to internal
telephones, elevators, and automatic doors…Providing SI and operation service

Expanding business opportunities to hotels,
offices, apartments, plants, hospitals,
nursing-care facilities

19Delivering beverage
at NESIC receptionarea, too.

Further discovery of new technologies and newproducts + NESIC service platform-> new solutions© NEC Networks & System Integration Corporation 2017

Priority Measures (Expansion of Topline)▌Mega-Solar Business The X-Elio project (¥15.5 bn.)
received in the previous fiscal
year is proceeding steadily.
The land preparation phase has
progressed and electric / panel
installation is now starting.
(as planned)(From a plane) New mega-solar projects have been realized for 2H.

Acquire new orders and improve profitability· Step up proposal activities by strengthening collaboration withdomestic financial institutions· Pursue cost efficiency by making full use of the know-how in theexecution of large-scale projects

20© NEC Networks & System Integration Corporation 2017

Dividend Plan

（Forecast as at October 31, 2017）▌Payment of interim dividend of ¥37 as plannedat the beginning of the fiscal yearNo change in year-end dividend planned
Planning increase
for the 11th year
in a rowDividendper share(¥)

147707/32145252628

13142022101114111113

1409/3

10/3

11/3

12/3

1008/3© NEC Networks & System Integration Corporation 2017

6030

64
32

7470

72

35

36

37

Yearend37

Interim26
1913/3

30

32

35

36

14/3

15/3

16/3

17/3

18/3(Forecast)At the End

Toward Strong & Attractive
NESIC
Dreams andHigh
Aspirations

22

Innovation© NEC Networks & System Integration Corporation 2017

Enhance
OurStrengths

(ref.) End of FY2017/9 (Sep. 2017) Balance Sheet(¥ Bn.)End of 17/3
59.6
91.2
8.5
9.7

Noncurrent Assets

169.0
28.5

End of 17/9
69.2
75.8
10.2
9.4

Assets

197.5

192.9

-4.6

36.58.3
56.1

32.4
8.2
55.5

-4.1
-0.1
-0.6

Cash and cash equivalents
Notes & accounts receivable
Inventories
OthersCurrent Assets

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

9.6
-15.3
1.7
-0.3

-4.3
-0.3

100.1

96.0

100.0

-4.8

-5.5

-5.3

0.3

2.1

2.2

0.1

-0.2

Liabilities & Net Assets

96.7
197.5

96.9
192.9

0.2
-4.6

Owner's Equity Ratio

47.9%

49.1%

+1.2ptNet Assets

23100.8

164.7
28.2

Diff.

© NEC Networks & System Integration Corporation 2017

(ref.) 1H FY2018/3 Cash Flows(¥ Bn.）

20.3

14.6

17.9

13.5
3.2 4.4

4.1
-4.3

11.7

FCF2.1
-5.9

-9.2

-6.9

706050※4030
20100

38.8 33.5 36.6

1H

2H

FY12/3

1H

26.2
2H

FY13/337.0 38.0

1H

2H

FY14/345.7

1H32.82H

FY15/3

44.3

1H

35.4

2H

FY16/3*Net cash means an amount obtained by deducting loans payable from cash and cash equivalents
24© NEC Networks & System Integration Corporation 201751.7 51.4

1H2H

FY17/361.0Net Cash1H
FY18/3

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

25© NEC Networks & System Integration Corporation 2017

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

nesic
26

© NEC Networks & System Integration Corporation 2017

Searchhttp://www.nesic.co.jp/english/index.html

27© NEC Networks & System Integration Corporation 2017