Second Quarter of Fiscal 2020 Ending March 31, 2021
Briefing Document

November 11, 2020

TDC SOFT Inc.
© 2020 TDC SOFT Inc.

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1. Overview of Financial Results for the Second Quarter of
Fiscal 2020 Ending March 2021
2. Status of the Key Measures for the Second Quarter ofFiscal 2020 Ending March 2021
3. Outlook for the Fiscal Year Ending March 2021
Hiroyoshi Kobayashi, President and Representative Director

4. Details of Financial Results for the Second Quarter ofFiscal 2020 Ending March 2021
Tsuyoshi Ogaki, Director & General Manager-Administration© 2020 TDC SOFT Inc.

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Important Points in the Second Quarter of Fiscal 2020 Ending
March 2021

Performance during the Quarter• The field of IT solutions for public corporations made solid progress and ensured net sales that slightly surpassed the figure
for the same period last year.
• Our profitability increased through the expansion of the next-generation SI business, which is a high-value-added field.
Consequently, we ensured operating profit that surpassed the same period last year.

Topics● Medium-term Management Plan “Shift to the Smart SI” 04/2019 – 03/2022
Creating high-value-added SI services• The agile development business has been steadily growing since the year before last, the growth rate averaging 84%.
• The information system security business launched “Tegata,” a cloud-based secure access service. The businessreceives orders for PoC projects, with an eye to SI service development that uses local 5G.

Supporting SI model reforms• Open innovation activities promote alliances for business partnerships and M&A, among others.
© 2020 TDC SOFT Inc.

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Overview of Financial Results
for the Second Quarter ofFiscal 2020 Ending March 2021

© 2020 TDC SOFT Inc.

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Overview of Financial Results
for the Second Quarter of Fiscal 2020 Ending March 2021
(Millions of Yen)

Q2 FY EndingMarch 2021

Profit MarginYOY

Q2 FY EndedMarch 2020

Net sales

13,186-+0.4%

13,128Gross profit

2,687

20.4%

+4.2%

2,580

Operating profit

1,077

8.2%

+5.6%

1,019

Ordinary profit

1,107

8.4%

+6.6%

1,038

Net income

745

5.7%

+8.5%

687

【Highlights】● The COVID-19 pandemic caused some projects to be postponed or suspended. It also placed constraints on our in-person sales
operations that affected our activities to receive orders.
● Our business has been stably progressing as we made efforts to adapt to the “new normal,” such as adopting telecommuting.
● The field of IT solutions for public corporations made solid progress and ensured net sales that surpassed the figure for the same period
last year.
● The operating profit margin increased owing to the high-value-added business created based on the medium-term management plan.
© 2020 TDC SOFT Inc.

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Overview of Net Sales by Field
Second Quarter of Fiscal 2019
Ended March 2020

Second Quarter of Fiscal 2020
Ending March 2021

¥13,128 million¥13,186 million

1,640(12.5%)

3,324(25.3%)613(4.7%)

3,816(28.9%)
7,549(57.5%)

IT consulting & services
IT solutions for public corporations© 2020 TDC SOFT Inc.

1,698(12.9%)

1,115(8.5%)

6,555(49.7%)

IT solutions for financial services
Platform solutions*We updated how we segment our businesses during the first quarter of fiscal 2020 ending March 2021
based on the directions these businesses are taking.
The year-on-year figures have been calculated in line with the updated segments.

6Highlights of Each Field
IT Consulting & Services
Solid progress on projects related todata analytics infrastructure including
BI/DWH and ETL

1,2009006003000

IT Solutions for Financial Services
A steady stream of systemdevelopment projects related to loyalty
point cards;
Little activity in projects for insurance
businesses

7,600
5,950
4,300
2,650

03/2020
2Q

03/2021
2Q

Revenue rose 81.8%
year on year

1,000

03/2020
2Q

03/2021
2Q

Revenue dropped 13.2%
year on year

IT Solutions for Public Corporations

Platform Solutions

3,900

1,700

Solid progress on development
projects for the manufacturing sector

3,175

1,525

2,450

1,350

1,725

1,175

1,000

03/2020
2Q

03/2021
2Q© 2020 TDC SOFT Inc.

Revenue rose 14.8%
year on year

Solid progress on projects to build IT
infrastructure for thetelecommunication businesses andpublic agencies

1,000

03/2020
2Q

03/2021
2Q

Revenue rose 3.5%
year on year7

Status of the Key Measures
for the Second Quarter ofFiscal 2020 Ending March 2021

© 2020 TDC SOFT Inc.

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Medium-term Management Plan andManagement Plan for Fiscal Year Ending March 2021
VisionKey Strategies
Performance
Goal

Medium-term Management Plan

ManagementPolicy© 2020 TDC SOFT Inc.

Evolve into a next-generation system integration (“SI”) business geared to digital technology andnew trends based on the potential needs of the market

Aim to become a next-generation system integrator
Create high-value-added SI services
Promoting business expansion in the key strategic
fields to pursue high revenue
Agile development
business

Information systemsecurity businessSupport SI model reforms● M&A of YBC to enhance the solution business● Promoting alliances with Scaled Agile, Inc. in theUnited States and LTE-X Inc.

Achieve net sales of ¥30 billion during fiscal 2021 ending March 2022
Expand high-value-added SI services so they will make up 20% of the net sales
Promote the initiatives stated in the medium-term management plan,
flexibly adapting to external environments and dealing with and making
improvements on issues that would arise from the initiatives.
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Initiatives to Become a Next-generation System Integrator

Overview of the Next-generation SI Business
The next-generation SI business issteadily growing.
The business has grown to make up 11.2% of net sales (123%of the planned figure).
The gross profit margin of the business rose 0.5% year on year.

Sales Ratios and Net Sales of the Next-generation
SI Business over Recent Years

1,474

20%15%The growth stated above coupled withcost cutting increased profitability shownin our consolidated financial results.
Gross profit margin

20.4% (+0.7% YOY)

Operating profit margin

8.2% ( +0.4% YOY)

Ordinary profit margin

8.4% ( +0.5% YOY)

© 2020 TDC SOFT Inc.

5%

1,500
1,125846
10%(millions of yen)

661

11.2%
750

6.5%

375

2.5%0%

0Results for FY
Ended March 2019

Results for Q2 FY
Ended March 2020

Results for Q2 FYEnding March 2021

10Initiatives to Become a Next-generation System Integrator

TOPICS: Key Strategic Field Agile Development Business
The agile development business has been earning substantial revenue, its net sales
steadily increasing. The business’s gross profit margin rose 7.4% year on year.
Sales from the Agile Development Business

Number of Agile Development Engineers
Quadrupled in 3 years

Average growth rate: 84.2%
1,1201200812900
600
01208033030003/2019
Actual Figure© 2020 TDC SOFT Inc.

4003/2020
Actual Figure

15816003/2021
Projection

01025003/2019
Actual Figure

03/2020
Actual Figure

03/2021
Projection

Certified SAFe Program Consultants
Certified Scrum Developers
Engineers with experience in agile development projects

11Initiatives to Become a Next-generation System Integrator

TOPICS: Key Strategic Field Information System Security BusinessWe focus more on the initiatives to create high added value, such as adding new services
We have launched new services to meet the demand generated by the need to live with the coronavirus
To meet the growing social demand for remote work solutions, we launched Tegata, a cloud-based secure access service
that uses the technology called “LTE over IP.”Business server
User

Various access technologies(e.g., Wi-Fi, Ethernet, mobile)

Terminal for work
Business server

By using Soft SIM and LET over IP,
a virtual private LTE is built on an IP network.

LTE protocol for safe connection
Soft SIM

We receive orders for PoC projects, with an eye to SI service development that leverages local 5G.
We work with LTE-X and a transportation company with whom we have formed capital/business alliances to receive orders for
PoC projects that aim to acquire elemental technologies leading to local 5G. We continue and promote service development inthe runup to the wide use of local 5G.
© 2020 TDC SOFT Inc.

12Initiatives to Become a Next-generation System Integrator

TOPICS: Support SI Model Reforms
Our initiatives toward the high-value-added SI business and the creation of new services
through open innovation activities

Status of the promoted alliances✕Agile development businessInformation systemsecurity business
Solution business

YBC (not consolidated), which we merged and acquired at the end of the last fiscal year, joined the Group without ahitch, and their performance has steadily grown.
We are working on the initiatives to create group synergies leveraging the SAP-related know-how, which is theadvantage YBC offers.
© 2020 TDC SOFT Inc.

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Outlook for the Fiscal YearEnding March 2021

© 2020 TDC SOFT Inc.

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Outlook for the Fiscal Year Ending March 2021
Present State• We should watch customers’ stance on IT investments• Given the uncertainties of customers’ business environment, we expect that customers will maintain a cautious stance on new
IT investments.

• The growing tide of digitization will likely lead to the further expansion of thenext-generation SI business.
• There is a growing need for digitization as Japan’s society has become aware of how much it is lagging behind in digitization,
which will likely lead to the further expansion of the next-generation SI business.

Business Risks● Lowered operating rate e.g. Employees are prohibited from coming to work because someone in their project (an employee ofTDC SOFT, a partner, or BP) or office has become infected.
● Reduced capacity to provide services e.g. When any changes are made to a collaborative framework with a partner company

because of the pandemic.
● Decrease in orders received e.g., When the return of opportunities to negotiate with partners is delayed; new projects decrease

because companies hold off making IT investments.
© 2020 TDC SOFT Inc.

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Financial Results Forecasts for the Full Fiscal YearEnding March 2021
(Millions ofYen)

Financial Results &Dividend Forecast for
FY Ending March 2021

Profit MarginResults for
FY Ended March 2020

YOY

Net Sales

27,800-+0.0%

27,795

OperatingProfit

2,250

8.1%

+1.9%

2,206

Ordinary Profit

2,310
1,540

8.3%
5.5%

+2.0%
+2.6%

2,265
1,500

¥63.90-+2.6%¥62.29¥24--¥24Net Income
Net Income
per Share
Dividend
Forecast* These financial results forecasts do not consider events that have not occurred thus far, such as anationwide state of emergency declared due to the further spread of COVID-19.

© 2020 TDC SOFT Inc.

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Details of Financial Results
for the Second Quarter ofFiscal 2020 Ending March 2021

© 2020 TDC SOFT Inc.

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● Financial Statements● Net Sales Analysis● Orders Received; Backlog of Orders● Operating Profit Analysis© 2020 TDC SOFT Inc.

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Financial Statements
Statement of Income(Millions of Yen)

Net sales
Labor expenses
Outsourcing expenses
Other expenses
In-process increase/decrease

Cost of sales

Gross profit
Selling, general andadministrative expenses
Operating profit
Non-operating income/expenses
Ordinary profit
Profit before income
taxes
Net income
EPS© 2020 TDC SOFT Inc.

Q2 FY Ending
March 2021

13,1865,191
5,070
383(146)
10,498
2,687
1,610
1,077
29
1,107
1,107
745
30.94

Q2 FY Ended
March 2020

13,1284,902
5,589
418(361)
10,548
2,580
1,560
1,019
18
1,038
1,038
687
28.53

Balance Sheet
Change+0.4%+5.9%(9.3%)(8.3%)+59.5%(0.5%)
+4.2%
+3.2%
+5.6%
+58.3%
+6.6%
+6.6%
+8.5%
+8.4%

(Millions of Yen)

End of Q2 FY End of FY
Ending March
Ended
2021
March 2020

ChangeTotal net assets

17,13013,210
3,920
4,211
3,999
211
12,91916,652
13,463
3,188
4,544
4,347
197
12,107+2.9%(1.9%)+23.0%(7.3%)(8.0%)+7.1%+6.7%

Total liabilities andnet assets

17,13016,652+2.9%

Owners’ equity ratio

75.4%
536.1072.7%
502.43+6.7%

Total assets
Current assets
Non-current
assetsTotal liabilities
Current liabilities
Non-currentliabilities

Net assets per share

19Financial Statements
Statement of Cash Flows

Balance of cash etc. at the beginning of the period
Profit before income taxes
Depreciation and amortization

1,116 -110

Notes and accounts receivable-trade-466

Notes and accounts payable-trade

8,919

CF from
investing activities

8,379

Inventories
Accounts payable – otherAccrued expenses

CF fromfinancing activities

Other
Income taxes

CF from
operating activities

CF from operating activities
Purchase of property, plant and equipment
Purchase of investment securities
Proceeds of dividend distribution from partnerships
Interest and dividend income
Proceeds from transfer of business
Other
CF from investing activities
Increase (decrease) in short-term loans payable

Balance of cash etc.
at the beginning of the period

Balance of cash etc.
at the end of the period

Dividend payment
Other
CF from financing activities
Balance of cash etc. at the end of the period© 2020 TDC SOFT Inc.

8,379
1,107
41910
(146)
(146)
(74)
(228)
73(275)
1,116(24)(105)
719(110)124(587)
(3)
(466)
8,919
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Overview of Sales by Customer’s Business Category(millions of yen)

Q2 FY ended March 2019

Q2 FY ended March 2020

3,260

3,123
2,381

2,593
2,048
2,194
2,034

2,513

2,850

2,678

2,535

2,237

1,158

Banking

CreditInsurance

Q2 FY ending March 2021

1,640
1,223

Manufacturing

1,501
1,324 1,284

Nonmanufacturing

Public agencies
and organizations

Finance© 2020 TDC SOFT Inc.

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Orders Received; Backlog of Orders(millions of yen)

13,796

13,415

Orders received

12,937

Backlog of orders6,498

6,551

6,650

Net sales

12,247

13,12813,186Q2 FY Ended March 2019

Q2 FY Ended March 2020

Q2 FY Ending March 2021

© 2020 TDC SOFT Inc.

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Operating Profit Analysis(millions of yen)
Increasein gross profit

+107
1,019

Increase in selling,
general andadministrative expenses

-49

1,077

<Gross profit>
The profit increased owing to profitability
improved through higher net sales andthe high-value-added business.

<Selling, general andadministrative expenses>
Despite decrease in costs incurred as aresult of the COVID-19 pandemic, these
expenses increased as we hired more
new employees and invested more inhuman resource development.

Q2 FY Ended March 2020

© 2020 TDC SOFT Inc.

Q2 FY Ending March 2021

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ＴＤＣ SOFT Inc.
https://www.tdc.co.jp/*Note on this document:
The matters related to the forecasts of the TDC SOFT Group in thisdocument have been determined based on currently available informationand may change due to uncertain factors inherent in forecasts and/orchanges in the situation surrounding business operation going forward.

© 2020 TDC SOFT Inc.

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