I-NET CORP.
Q2 Financial Results Briefing for the Fiscal Year Ending March 2021
November 12, 2020

Event Summary[Company Name]

I-NET CORP.

[Company ID]

9600-QCODE[Event Language]

JPN[Event Type]Earnings Announcement[Event Name]

Q2 Financial Results Briefing for the Fiscal Year Ending March 2021

[Fiscal Period]

FY2020 Q2[Date]

November 12, 2020

[Number of Pages]

34[Time]

15:45 – 16:31(Total: 46 minutes, Presentation: 29 minutes, Q&A: 17 minutes)[Venue]2-1 Kabutocho Nihonbashi, TSE Bldg., 1F TSE Arrows, Chuo-ku, Tokyo 1038224[Venue Size][Participants]

22[Number of Speakers]

4
Mitsuru Sakai
Hiroshi Wanibuchi
Naokatsu Uchida
Masakazu Kinoshita

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Director and Managing Executive Officer
Director and Executive Officer

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Presentation
Moderator: Now, we will hold an investor relations meeting for I-NET Corporation. First, I would like tointroduce you to the four people we are welcoming from the Company.
First, Mitsuru Sakai, Representative Director, Executive President.
Sakai: I’m Sakai, thank you.
Moderator: Thank you very much. Next, Mr. Hiroshi Wanibuchi, Representative Director, Senior Managing
Executive Officer.
Wanibuchi: Wanibuchi. Thank you in advance.
Moderator: Thank you very much. Next, Mr. Naokatsu Uchida, Director and Managing Executive Officer.
Uchida: Uchida. Thank you in advance.
Moderator: Thank you very much. Next, Mr. Masakazu Kinoshita, Director and Executive Officer.
Kinoshita: Kinoshita. Thank you in advance.
Moderator: Thank you very much. Today, President Sakai is supposed to explain the matter to us, but oncethe explanation is finished, we have set aside time for a question and answer session.
Well then, Mr. Sakai, please start with your presentation, please.
Sakai: Thank you very much for your precious time today. This is Sakai, the president. Thank you very much.
I will start my explanation right away. This is the content of today's explanation. First, I will explain the
Company overview, the business overview of Q2 of the fiscal year ending March 2021, and our efforts towards
the medium-term management plans, and finally, I will explain about the dividends.

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First of all, by explaining the Company outline, I would like you to deepen your understanding of us. We were
established in 1971, and we are now in the 50th fiscal year. Shareholders' equity is JPY3.203 million, and thehead office is located in Minato Mirai, Yokohama. The number of employees is 1,663 on a consolidated basis
and 959 on a non-consolidated basis.

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3This is an overview of the composition of the I-NET Group. Software Control Co., Ltd. was newly added in
October 2018.

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4This is a graph showing the history and sales from the in-store listing to the present. I hope you will take alook when you have time.

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Next, we will explain the content of our business by service category. Our three service categories are
information processing services, system development services, and system equipment sales. This pie graph isbased on the annual results for the fiscal year ended March 31, 2020, and provides an overview of our business.
This section introduces information processing services and system development services, which account forthe majority of sales.

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First, let me explain the information processing services. We are focusing on strengthening our Stock Businessand expanding our stable foundation for growth. This includes data centers and cloud services and dataprocessing services, such as our Founding Business. Consignment calculation services for gas stations are StockBusinesses. Once you subscribe, this business allows you to continue earning monthly usage fees.
The graph below shows the trends in sales of our Stock Businesses over the past 10 years. You can see thatthe information processing services, which is a Stock Business, is the foundation for our growth.

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I would like to explain some of the main businesses of information processing services. First, data center
services and cloud services are our most focused businesses today. We were among the first in the industry
to focus on this business.
Please refer to the Japanese map on the left. We have four in-house data centers in Yokohama. The photoshows the center in Yokohama. In addition to this, in order to prepare for disasters, we hold comprehensive
backups in data centers located in Hokkaido, Nagano, and Osaka, which are all affiliated by different electric
power companies.
The right side is an example of a cloud service using our data center. You can understand that we are offeringa variety of services. Recently, we have received many inquiries, due in part to the growing demand for remote
works within the coronavirus crisis.

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I would like to introduce another information processing services. The consignment calculation for gas
stations is a business that we have been working on for 50 years since our foundation. Thanks to these efforts,
approximately 30% of the 30,000 gas stations nationwide have used our services in some form, and wecurrently hold the top share of the domestic market.
In gas stations, payments are mainly done in cash, credit cards, and accounts receivable. Of these, we provide
settlement services for credit cards and accounts receivable. For example, card payments are handled
centrally at our data centers. And for the accounts receivable, data is calculated on behalf of the gas stations
and an invoice is prepared and sent at the end of the month.
As a new initiative, we have begun the development of a public-sector card system, which is a mechanism
provided by oil unions around the country to support fuel supply for emergency vehicles. This is a mechanism
whereby emergency vehicles can refuel by accounts receivable if they display a specific card at the gas station.
This is a mechanism that allows us to refuel on credit even when emergency vehicles go to other prefecturesdue to disasters, et cetera.
As it is a Stock Business, of course, commissioned calculation for gas stations has been a business that
supported our long-standing growth. In addition to this, information-processing services include mailingservices for printing ledgers, invoices, and others, as well as enveloping, and BBO operations, such as callcenter operations, data entry, and card acceptance.

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9System development services are conducted in a wide range of fields, including financial customers,
customers in the oil and gas, retail and distribution industries, and customers in the space-related andmanufacturing industries. Through relationships of trust cultivated over many years, we design and build
systems for many of our customers.
In particular, growing demand is found in the FinTech field from the financial industry in recent years. To bedifferent from the rest, in the space development field, we have been involved with the weather satellite
Himawari's first build in 1977, and are engaged in the development of artificial satellites and operations ofinternational space stations.

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10This is a conceptual diagram of our business model. With cloud data centers at the center of the screen as theaxis, we are developing a Stock Business by linking various services to meet the business of a wide variety ofcustomers.
Customers will find it convenient not only by being provided with a single service, but also to be provided witha variety of services. From our perspective, of course, sales and profits will increase, and this will also serve asa barrier of entry from other companies. Our strength is providing a one-stop service for a wide range of ITrelated services in the businesses of our customers in a wide range of industries and business formats.
Not only system developments and specializing in data centers, enabling the Company to provide a wide rangeof services, from system construction to operation, and even a variety of cloud services. In addition, we print
various invoices and ledgers, and provide enveloping and shipping services. We differentiate ourselves fromcompetitors by providing high-level security services in all processes related to IT, from upstream todownstream.

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11This section provides an overview of the results for Q2 of the period ending March 2021. First one is theincome statement. The table compares H1 of the current fiscal year with Q2 of H1 of the previous year.
As you can see, net sales were JPY14.884 billion, down 3.1% on a YoY basis, operating income was JPY829
million, down 34% on a YoY basis, ordinary income was JPY854 million, down 31.7% on a YoY basis, and profit
attributable to owners of Parent was JPY372 million, down 55% on a YoY basis. Sales and profits declined
mainly in system development, which was affected more than expected by the coronavirus crisis. For details,
please refer to the next page.

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12This table shows sales and gross profit by service category. Information processing services sales were
JPY5.882 billion, an increase of 9% YoY, and gross profit was JPY1.326 billion, a decrease of 7.3% YoY.
Sales increased due to a steady increase in customers' use of data centers even in the coronavirus disaster,
including investments in corporate remote work and work style reforms. In terms of profits, both sales andprofits declined due to a decrease in the use of mailing services caused by the progress of digitization andother factors. The decrease in the profit margin was due to low-margin projects that were strategicallyacquired for the purpose of expanding the scope of operations.
Next, system development services recorded net sales of JPY8.367 billion, a decrease of 9.7% on a YoY basis,gross profit of JPY1.74 billion, a decrease of 14.2% on a YoY basis. System development services were mostsignificantly impacted by the spread of the new coronavirus. At the time when the State of Emergency was
declared during the coronavirus disaster, the progress of outsourced development projects declined due tocontrolled work attendance.
Regarding the status of development projects, although there were few business partners directly affectedby the coronavirus crisis, such as the restaurant industry, development projects were postponed or frozen
mainly in the industries, and had an indirect impact to them, which includes the petroleum development
industry, distribution industry, service industry, and the financial industry. This continued impacts also
affected our business in the beginning of Q2, which caused a decrease in the production rate of our engineers
and some others, resulting in a decrease in sales and profits.

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In system equipment sales as well, some of the equipment sales associated with each service were affectedby the coronavirus crisis, resulting in customers postponing investment.

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For your reference, I would like to introduce the factors behind the change in net sales for the services that
we are focusing on in particular as annual trends. First is the information processing services. The graph aboveshows a breakdown of the factors behind the increase in information processing services in the previous fiscal
year and the current fiscal year in the cumulative Q2.
Revenues increased due to an increase in the use of data centers by customers, including new customers, inour data center and cloud services, which we have been focusing on in recent years, despite the impact of adecrease in use in some businesses, such as mailing services.
The graph below shows the trends in sales of data center and cloud services, which we have been focusing on
most in the past few years among our information processing services. Over the past 10 years, we have growninto a business with sales that more than quadrupled in tandem with market growth. We plan to continue
focusing on this as a growth driver.

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15This graph compares the system development services for the previous fiscal year and the current fiscal year
in Q2 cumulative period. The main reason for the decline in sales is as stated before.
The graph below shows the overall sales trend of system development services up to March 2020. Prior to the
spread of the new coronavirus infectious disease, the trend of demand for software investment to strengthen
the competitiveness of companies, such as improving operational efficiency and responding to labor
shortages, was stable and high, and sales were steady.

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16This table shows the progress rate against the full-year forecast announced on July 31. See the right-mostcolumn of the table. As I mentioned earlier, we achieved 47.3% of our net sales, and although we have reachedabout half of our sales, our progress in terms of profits has been delayed.
The outlook for corporate capital investment remains uncertain, despite the gradual recovery of businesssentiment, which had been deteriorating due to the coronavirus crisis, in areas such as consumer spending
and corporate earnings.
Regarding the outlook for the full fiscal year, we expect this uncertainty to continue. However, we believethat high demand for data center and cloud services continues. In system development services, businessnegotiations are gradually becoming more active at present. We will aggressively acquire these businessnegotiations and work to recover them.

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17This table compares Q1 and Q2 of the year ended March 31, 2021. Please refer to the second column fromthe right. I think you can see that the amount and rate in Q2 have increased compared to Q1 and are gradually
improving.
In addition to system development, we have been involved in a variety of fields, including data center andcloud services, consignment calculation of gas stations, space development-related services, and mailingservices. So far, each business has been strong and weak in the past, but we have continued to grow steadily
by compensating for each other's respective fields.
This fiscal year was affected by the coronavirus crisis, which forced us to struggle in Q2 cumulative period.
However, we will aim to achieve our full-year forecast by leveraging our strengths of having a well-balanced
business portfolio.

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Next is the balance sheet. The balance of current assets was JPY8.82 billion, a decrease of JPY808 million fromthe end of the previous fiscal year. The balance of non-current assets was JPY20.327 billion, an increase of
JPY367 million from the end of the previous fiscal year. This was mainly due to an increase of JPY405 million
in investment securities.
The balance of current liabilities was JPY7.956 billion, a decrease of JPY450 million from the end of theprevious fiscal year. The balance of non-current liabilities was JPY5.845 billion, a decrease of JPY112 million
from the end of the previous fiscal year.

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Next is the cash flow statement. Net cash provided by operating activities amounted to JPY1.154 billion. Thiswas mainly due to increases of JPY902 million in retained earnings due to depreciation and amortization of
goodwill, JPY571 million in profit before income taxes for the quarter, JPY227 million in decrease in notes andaccounts-receivable trade, and a decrease of JPY404 million in income taxes paid.
Net cash used in investing activities was JPY1.167 billion. This was mainly attributable to expenditures of
JPY1.001 billion for the expansion of facilities at data centers in conjunction with the receipt of a large-scaleorder. Net cash used in financing activities was JPY633 million. This was mainly due to a decrease of JPY48
million in interest-bearing debt, purchase of treasury stock of JPY105 million, and cash dividends paid of
JPY341 million.
As a result of the above, cash and cash equivalents at the end of the fiscal year decreased by JPY472 million
from the end of the previous fiscal year to JPY2.436 billion.

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Next, I would like to explain the progress of the medium-term management plan launched in the previous
fiscal year. In the first year of the plan, we achieved our targets for both net sales and operating income, andstarted to make significant progress in achieving these targets. This was mainly due to the strong performanceof data center and cloud services and the strong performance of the system development field due to therising demand for IT capital investment.
Going forward, we will work on a wide range of initiatives, including proactively responding to customers'
digital transformation needs, improving our product and service capabilities for big data, AI, and FinTech,strengthening the promotion of cloud services, responding to remote work and other work style reform needs,
and collaborating with private ventures in the space development field.
Despite the impact of the spread of the coronavirus, we will recover the results in the cumulative Q2 as earlyas possible and aim to achieve the three-year performance plan outlined in the medium-term management
plan.

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From this point on, I would like to explain our focus businesses and topics as part of our medium-term
management plan. In April 2020, we reorganized and strengthened the former R&D Division and established
the R&D Office with the aim of strengthening R&D.
As one of our studies, we are developing services to solve the problems caused by coronavirus problems, andwe have begun providing a diagnostic service called Dream Data Sensing i-visible CO2 for populated spacesthat use CO2 temperature/humidity sensors.
I-visible CO2 is a small-scale IoT-device that measures CO2, temperature/humidity. By monitoring CO2
concentrations in heavily populated spaces, such as companies, commercial facilities, schools, and cramschools, it is possible to check the measurement values on smartphones and PCs.
Each data collected on an IoT device is sent over the Internet to the I-NET data center for environmental
analysis and immediate analysis by a cloud application. If it is determined that ventilation is required basedon forecasts of CO2 increases and decreases, we will provide customers with safety and peace of mind byalerting e-mail and signage.
This service is also an important part of our platform strategy as a developer in data center business, in which
by focusing to bring all kinds of data to data centers. In addition to CO2, we plan to increase our lineup ofDream Data Sensing series by measuring pollen, dusts, yellow sands, and other particulates, as well as
measuring tobacco and ammonia odor.

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On the other hand, in the press release, we disclosed that Shizuoka Bank, LTD., the leading local bank, hasgiven us an order for the construction of an ABC cost calculation system. In recent years, the proportion ofoverhead costs has been expanding as companies accelerate the shift to digital transformation for the purposeof improving operational efficiency, and the importance of ascertaining cost structures has become extremelyhigh.
We provide ABC Financial, which is a cost accounting system based on activity standards for financial
institutions. Including the Bank of Shizuoka, we have 23 customers, mainly local banks.
In the future, we will expand this ABC cost accounting system to other industries. In general, basic activity
cost calculations are often used not only by financial institutions, but also by the logistics industry and medicalrelated industries. Recently, there are many cases in which basic activity cost calculations are introduced to
the water supply bureau to make costs transparent. We intend to leverage our expertise in systemconstruction to introduce the system to a variety of customers.

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As another priority business, I would like to introduce the Company's initiatives in the Space Development
Business. The trend of the Space Business has been implemented with enormous budgets by governmental
and national space organizations, JAXA, et cetera. In recent years, however, private companies have been
taking on challenges one after another, and we are working as a space startup.
This is due to the progress of technology, such as the downsizing and cost reduction of the satellite field, andthe impact of the US, which has a lot of start-ups. We have been involved in space development since the first
Himawari aircraft in 1977, and we have knowledge based on more than 40 years of technology and experiencein this field.

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In recent years, we have received requests for cooperation in satellite development from many space startup companies. Among these, in the future we will strengthen our efforts in the Artificial Satellite Business,
which is promising in the future. I would like to introduce three steps to that end. The three pillars forstrengthening the Space Development Business are the Small Satellite Constellation Business, the Removal
Business of Space Debris, and the Business of Utilizing Satellite Data.
First of all, in the Small Satellite Constellation Business on the left side of the material, the supply of sufficienthuman resources is an important point, and we will take six measures described here. We are also actively
recruiting former employees of large corporations who have long been engaged in space development.
Next, in the Space Debris Removal Business stated at the center of the material, we are building a relationshipwith Astroscale Holdings, a pioneer in this field. In business, we support the assembly, knowledge, andoperation of satellites, as well as supporting the operation of ground station facilities, including parabolaantennas installed on our premises. In addition, in the current fiscal year, we invested ahead of the
procurement of the Company's E-Series and further strengthened our relationships.
Finally, the Satellite Data Usage Business on the right side of the document. The ultra-small marine
observation satellite project was adopted as a demonstration theme for JAXA's Innovative Satellite
Technology Demonstration Unit No. 3 at four prominent national universities, led by Tokyo Institute ofTechnology, and private companies, including us.

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Details of the demonstration include the identification of surface and sea-level substances, the state of plant
growth, and the installation of cameras capable of diagnosis on satellites, which can contribute to solving
problems mainly in agriculture and fisheries. This is a demonstration theme with this potential.
We are responsible for designing, testing, and operating satellite systems, as well as providing information
technology services. The essence of this initiative is that it handles a large amount of data obtained fromsatellites. Like CO2 sensor introduced earlier, it is one of the strategies that we are focusing on, bringing all
kinds of data to data centers. Although we have only just taken the first step, we will aim for the achievementof the project in the future.

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Please refer to page 28. This report summarizes management efforts for the expansion of the new coronavirus
in business and services. In March, we established a dedicated telework contact point using the services weprovide. In addition, projects to support companies in responding to new norms are becoming increasingly
active at present. Support for the construction of EC site businesses and cashless responses are in this way.
In responding to events, we also began holding online seminars to increase contact points with new customers
in the aftermath of the coronavirus disaster. Monthly seminars on various themes are offered online. In
addition, we are implementing initiatives as described above. Going forward, we will continue to take aproactive stance in response to social conditions.

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The final issue is the dividend policy. Please refer to page 30. There is no change in the dividend calculationfrom the plan announced on July 31. Our policy is to continue focusing on shareholder returns.
This year, we will increase the ordinary dividend by JPY1, and we will pay a commemorative dividend of JPY2
to commemorate the 50th anniversary of the Company's founding in April next year. In this way, we intend
to increase the total dividend by JPY3. The Board of Directors at the end of October has already resolved to
pay an interim dividend of JPY22. At the end of the fiscal year, we plan to pay JPY24, or JPY46 per year. This
will be the ninth consecutive year of dividend increases.
Finally, we will work together as a group to earn the greater trust of our stakeholders, including our
stakeholders. We look forward to your continued support in this endeavor.
This is my explanation, but I have a supplement. We have included a booklet named Best Partner publishedby Hamagin Research Institute, Ltd. in the materials distributed today. In the booklet, we are featured as acreative company that takes on challenges. This is written over six pages, so if you look at this booklet, thecontent explains very well and clear about us. Please take your time to look for it later.
This will be the end of our presentation. Thank you very much for your attention until the end.

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Question & Answer

Moderator: Mr. Sakai, thank you very much for your explanation. Now, we will enter a question and answer
session. If you have any questions, the attendant will bring the microphone if you raise your hand. This IR
meeting, including the question and answer portion, will be published in a full document. Accordingly, if you
wish to ask questions anonymously, we ask that you not state your name when you are asked. So, please go
on with your question.
Participant: I am Tanaka of J Capital Partners. There are three questions.
The first point is the comparison of the two quarters on page 15 of this document. Regarding systemdevelopment, the gross profit margin is almost unchanged despite the decline in sales, so I think this isinevitable. However, I would like for you to tell me why the gross profit margin, or in other words, cost of
sales, is increasing in information processing, despite the fact that sales are increasing compared to last year.
This is the first point.
The second is about the financial summary. It may have been written if it is better than the previous term andyou don't need to mention the names of the stocks, but I would like to ask about the breakdown of investment
stocks of your Company and what you think about your policy on investment stocks. For example, please tellus roughly whether it is a government bond, a listed stock, or an unlisted stock.
And the third question, I think that telework has been crucial to your Company's operations, including yourcustomers, but I would like to ask how much impact would your Company’s organizational structure or yourCompany's order backlog, which is the current stage of development suffer? This year, and perhaps the next
year as well, I think, the top line has weakened slightly in H1 of the year. I think that the weak balance will bealigned in a long run, so I personally recognize that it will not continue to change significantly. Please tell us
about the organizational structure based on that as well. Please answer the above three questions.
Wanibuchi: Let me answer the three questions I have just received from you.
First of all, the reason for the decline in the gross profit margin for information services. As Sakai has
mentioned earlier, one of the causes was the mailing service, or so-called encapsulating and enveloping
services, which was originally highly profitable.
Due to the impact of the coronavirus this time, much of the work of sending printed materials has beencancelled or postponed. This is one of the factors that has lowered the profit margins of information
processing plants and information processing services.
In addition to this, which we have already factored in to the initial budget, the data center I mentioned earlier
can be brought into consideration. This means that we are making capital investments in large-scale projects
in the future. This is, of course, an investment, so in that case, there is depreciation. To some extent, this will
be a burden of costs.
However, this was assumed in the original plan and our plan was to cover that liability with other services,such as system development. Unfortunately, however, because system development failed to increase sales
in line with our expectations, we were not able to cover the burden imposed.
And for the second question, regarding the policy of securities.

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Uchida: I will explain the breakdown of marketable securities. At the end of the fiscal year, the figures forlisted companies were large. However, for the breakdown of the increase of about JPY400 million from theend of the fiscal year under review was that JPY200 million was accounted for new investments, investments
in unlisted stocks, and an increase in market value.
In addition, to answer the question about the policy of investment securities, with regard to these matters,
the Board of Directors has adopted a policy of investing in line with the budget pool created in considerationof net assets, our net assets as a group, and taking into account as some percent of our profit.
Wanibuchi: Let me then answer about the third question, about the development system. We, in other words,
the name of the development team is called the DX Headquarters, and we have five development divisions
aiming for the so-called digital transformation.
We provide solutions tailored to our customers' industries and business formats. There are FinTech Solutions
Division and Distribution Services for the financial market, Distribution and Service Solutions Division, whichis in charge of markets centered on retailing and retail distribution services, and Enterprize Solutions Division,
which caters to manufacturers and other services, and travel, tourists, and other industries.
And this one is close to an embedded system or an IoT using sensor systems. IoT Solutions Division, which isin charge of the development and business of so-called control and embedded systems. Then, finally, theSpace Business, which previously has been mentioned by Sakai, Space and Satellite Solutions Division by
providing a variety of services for space. These are the five divisions we have. We are currently building adevelopment system tailored to each market.
Because of the spread of the coronavirus, we were basically asked by our client companies to provide services
from home. All business divisions basically adopt telework environments for jobs that are able to stay at home.
While at home, we always use our telework tools to ensure that we, our managers, and our developers areconnected online. In this way, while communicating, we can make progress in our Development Businesswithout losing productivity.
However, as we mentioned earlier, because we were unable to conduct various sales activities, the numberof projects we receive is slightly decreasing. Although this does not lead to direct sales at this point, we havea solid development system in place to enable businesses to take on projects and do the same as before,
whether they are at home or in the current work system. I think this answer makes everything clear to you.
Thank you very much.
Participant: Yes, thank you. Also, I'm sorry, but please allow me to ask you an additional question.
Based on what I have heard now, is the understanding that the catch-up in order backlogs and other factors
has not yet kept pace because of the impact of telework systems which makes sales activities to make slower
progress?
Uchida: Yes, for the backlog of orders, we only disclose such information at the end of the fiscal year in thefinancial report. However, for the backlogs in the interim period, it has remained at about 80% of the value
compared with the same period of last year.
Participant: Okay. Then, please let me ask only one more question.
Regarding the previous discussion of investment securities, should we basically have the image of CVC
regarding those that have not yet been listed? Assuming that you will form a business alliance with venturecompanies in the future, am I correct to understand that the provision of capital will be identical? [Inaudible]
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Net investment, not making a net investment in something of interest, but something related to yourbusiness?
Uchida: Yes, it is a policy-based investment.
Participant: Okay, thank you.
Sakai: The part I've talked about now is very true, and our investment policy is to first form a business allianceand make a decision after properly assessing our synergy as a company. In terms of the development structurethat I mentioned earlier, I do not mean to say that telework is better or that it is good to be in the office, notlike which one is better. The best way to do in the current situation is to stay at the customer’s for a day, thentake two days in the office, and then decide what to do with the customer for the remaining two days. Then,you decide what to do within the team in two days and work at home for two days after it is decided. We
found out that performance will improve in this way.
During the past six months, there have been a variety of cases, so there are some limitations on the part ofour customers, but we are pursuing our development system while pursuing what methods will best improve
our performance.
Participant: Yes.
Moderator: Thank you very much. Do you have any other questions? Yes, thank you. Please wait a moment.
Participant: Thank you very much for your explanation. There are some overlapping contents from thequestions from the first person, but what is the current ratio of teleworking workers? Also, could you tell me
up to what percentage of people were at home at the peak when the state of emergency was declared?
Wanibuchi: Yes, it was just after the state of urgency was declared, right then, developments, well, up to
about 70% of the Company-wide total was teleworking, but now it's just under 30%. As Sakai said, we’re notalways at home, and if there is a meeting and if necessary, or if it is better to go to the customer first, we willgo there, or if not, we let them stay at home for two days of the week. On average, I think it is in the range of
20% to 30%.
Participant: Based on that, I have another question. If 70% of workers stayed home at peak, and if you
currently average between 20% to 30%, I think that some costs, such as overtime and transportationcommuting costs, will generally be reduced. Looking at your Company's situation in H1, the cost of sales has
not fallen as much as expected. Regarding the decline in sales, there is no way to go about this time, but whatis the reason behind the cost of sales not being declined?
Is this cost of goods sold in a state of no further decline, or can it still fall depending on how it is done? The
same applies to SG&A expenses. I have heard that there are investments in data centers. What is your outlook
for how you will control SG&A expenses in H2 of the fiscal year, even where sales are increasing more thanthe decline in sales?
Wanibuchi: Cost is the cost of the engineer's labor in our case. Whether engineers work at home or in socalled offices, they don't change that much. Regarding transportation and other expenses, our system
basically pays a regular fee for commuter pass. This has not changed even during the telecommuting ofcoronavirus situation, so the situation is almost unchanged for the time being.
Selling, general and administrative expenses are obviously immobile in operating activities, which reduce thecost of that portion. However, fixed costs and rents other than sales activities have not basically changed, so

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31that part of them has not been affected. In addition, since the cost of salespeople's labor and other costs isbasically the same, the part remains the same.
Moderator: Thank you very much. Do you have any other questions? Yes, thank you.
Participant: Since this is my first time participating and because I came in late, the content may overlap insome parts, but please tell me the projection about your data center cloud from next term and onwards.
Regarding data centers, I feel that [Inaudible] even looking at NTT's data center strategy, it seems to have aslight tone-down due to concerns about the competitive landscape. I feel that the competitive environment
surrounding data centers are changing in a bad way going into the future. It would be a great help if I would
be able to know your projections about your data center cloud for the next fiscal year and beyond as much as
possible.
Sakai: We believe that the Data Center Business will grow even further. As we mentioned earlier, collecting
data at the data center will lead to a new business of how to use that data in the future. Those that we arefocusing on, such as drones, robots, and satellites in space, are all machines that produce enormous amountsof data. By linking them to a data center, data is collected there. I think that how to use this data will becomea business in the future. Therefore, demand is increasing in the event of a physical impact, such as a typhoon
or coronavirus disaster like it is now, and this is also true for data centers as well.
Then, more data gets collected. We have set the goal of growing the field of information services expending
the largest budget, so we will continue to invest aggressively focusing on this over the next few years. Do you
have any answers?
Participant: I would like to ask you one more question about what you expect on gross profit. Regarding theconcept of profitability you mentioned earlier, if you take into account the supply-demand environment,
should we think that gross profit will not deteriorate in the next few years, but rather improve gradually?
Sakai: Yes, as you say. Starting in April of this year, we strategically won large-scale business negotiations withlow gross profit in services. This is not only because we are aiming to expand the scope of our business, butalso because, from around February, we thought that the coronavirus could be menacing in the future. In
February and March, we were quite in danger of this. As business prospects were in fear for the new fiscal
year, we decided to actively take this project to secure gross profit. For this reason, I think our gross profit is
temporarily falling low, but I think this will be gradually improved.
Participant: Thank you very much.
Moderator: Thank you very much. Any other questions? Then, there seem to be no questions, so we would
like to close the Company briefing. Thank you very much, Mr. Sakai, ladies and gentlemen. Thank you for yourcooperation.
Sakai: Thank you very much.
[END]______________
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