Financial Results Presentation for the
Fiscal Year Ended at March 31, 2020

May 22, 2020

TDC SOFT Inc.

© 2020 TDC SOFT Inc.

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Key Points in the Fiscal Year Ended
March 31, 2020

Consolidated Financial Results for this Period
・Increased earnings and profit, driven by strong sales in the financial field・Advanced progress with respect to the mid-term management plan (April,2019 - March, 2022) in the area of next-generation system integration
business

Topics⚫ “Shift to the Smart SI” as the medium-term management plan
・ Agile-related business: Concluded the gold partnership contract with Scaled Agile Inc.
(“SAI”) in the U.S.

・ Security-related business: Concluded the business and capital alliance contract with
LTE-X Inc., which has a competitive edge in the network
security field.
・ Solutions business: Acquired Yagi Business Consultant Inc. (“YBC Inc.”) ,which leads in the SAP area.
© 2020 TDC SOFT Inc.

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Contents● Overview of Consolidated Financial Results for the
Fiscal Year Ended March 31, 2020
● Status of Major Measures for the Fiscal Year
Ended March 31, 2020
● Business Outlook for the Fiscal YearEnding March 31, 2021.

© 2020 TDC SOFT Inc.

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Financial Results Overview for the
Fiscal Year Ended March 31, 2020

© 2020 TDC SOFT Inc.

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Financial Results Overview for the Fiscal Year Ended
March 31, 2020
(Unit: \ millions)

FY2019Profitratio

Rate ofchangeFY2018Net sales

27,795-+4.5%

26,590gross profit

5,277 19.0%

+4.0%

5,076

Operating profit

2,206

7.9%

+2.3%

2,157

Ordinary profit

2,265

8.1%

+0.8%

2,248

Profit attributable toowners of parent

1,500

5.4%

+2.1%

1,469

【Highlights】➢ Increased earnings and profit, driven by strong sales in the financial field➢ Achieved the full-year goals as a result of moving ahead on building aframework for sustained growth and actively investing in high-valueadded business➢ Insignificant impact by the COVID-19 health issue for this period© 2020 TDC SOFT Inc.

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Overview of Net Sales by Field
FY2018¥26,590 million
2,361（8.9％）
3,786（14.2％）
6,086（22.9％）© 2020 TDC SOFT Inc.

FY2019¥27,795 million
2,521（9.1％）

14,356（54.0％）

3,572（12.9％）
6,295（22.6％）

15,405（55.4％）

Financial IT solutions field

Infrastructure and network solutions field

Public corporation IT solutions field

Package solutions field
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Highlights by Field
Financial IT solutions field（Unit: ¥ millions）
16000
15000
14000
13000
12000
11000
10000

13,286 14,356 15,405

2018.32019.32020.3Large-scale systemdevelopment projects
for the insurance andcredit card industries
remained solid

Earnings increased
7.3% YoY

Public corporation IT solutions field（Unit: ¥ millions）
7000
6000
5000
4000
3000
2000
1000

4,955

2018.3

6,086

2019.3

6,295

2020.3Development projects
for the manufacturing
and logistics industries
remained solid

Earnings increased
3.4% YoY

Infrastructure and network solutions field

Package solutions field（Unit: ¥ millions）（Unit: ¥ millions）

4000

3,582

3,786 3,572

3000
2000
1000
2018.32019.3© 2020 TDC SOFT Inc.

2020.3IT infrastructure
construction projects for
manufacturers remainedsolid while projects for the
public sector and banking
industries decreased

Earnings decreased
5.6% YoY

3000

2,121

2,361

2,521

2000

Original cloud services andsolutions for CRM, etc.
remained solid

100002018.32019.32020.3

Earnings increased
6.8% YoY7

Status of Major Measures for the Fiscal Year
Ended March 31, 2020

© 2020 TDC SOFT Inc.

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Management Plan
VisionMain strategies
Performancetargets

Medium-Term Management Plan

Management
policy© 2020 TDC SOFT Inc.

Evolve into a next-generation system integration business that responds to digitaltechnologies and new trends by catching the potential needs of the market

Aim to become a Next-Generation System Integrator
Pursue high-value-added
system integration services⚫ Newly establish Digital Transformation driven
organization, strengthen propulsion power⚫ Expand the priority strategic fields
Agile-related
business

Security-related
business

Advance transformation of thesystem integration model⚫ Newly establish a dedicated organization
reporting directly to the president⚫ Advance ecosystem building through allianceswith other companies

Expand net sales to ¥30 billion by March 31, 2022 with expanding
high-value-added system integration services to about 20%

Focus on building a foundation forcontinued growth9Measures for Next-Generation System Integrator
Overview of Next-Generation SI Business⚫ High-value-added SI services increased to 6.8% of the net sales (126% of the plan)⚫ Target to expand the net sales of high-value-added SI services to about 20% in thefiscal year ending March 31, 2022
Plan for Net Sales Ratio of High-value-added SI Services（Unit: ¥ billions）

26.5
2.5%

FY2018© 2020 TDC SOFT Inc.

27.7
6.8%

FY2019

28.5

30.0

10.5%

20%

High-value-added SI services
Other SI services,
Packages and others

FY2020

FY2021※Red figures denote actual values
10Measures for Next-Generation System Integrator
Overview of Strategic Fields
Agile-related business
Achieved 41% progress of the sales target (¥2 billion), ahead of schedule, in the first yearof the mid-term plan from April, 2019 to March, 2022 as a result of the company-wide
promotion of every measure to expand the agile-related business.

Security-related businessStarted to offer with a security service menu targeting especially at consulting, system integration, operational
management and education, whose CAGR is expected to reach 4.3% amongst of the growing security service
market.

Started steadily as a high profit business with gross profit of about 6% higher than that of normal SI
projects.
In addition, concluded the business and capital alliance contract with LTE-X Inc., which has acompetitive edge in the network security field, and started secure network solutions by using patented
LTE over IP.
© 2020 TDC SOFT Inc.

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Measures for Next-Generation System Integrator
TOPICS: Establish Structures to Become a Next-Generation System Integrator
Newly establish an organization to build a foundation for sustained growth
Each organization functions effectively to drive the next generation of SI business

Digital Technology Headquarters

Business Innovation Headquarters

Drive high-value-added business such as DX
by collecting highly skilled human resources
and by collaborating with business divisions

Conduct M&A and open innovation activities withventure capital

Prom business in priority strategic fields
Agile-related
business

Security-related
business••

Concluded the gold partnership agreement with Scaled
Agile Inc. in the U.S., which provides SAFeⓇ having No.1
global share in the agile scaling methods.
Concluded the business and capital alliance contract with
LTE-X Inc., which has a competitive edge in the network
security field.

Smart SI Promotion Office
Build a TDC SOFT original SI model by promoting transformation beyond the conventionalframework, such as homogeneous and efficient project operation methods with automation,etc., and by sharing highly skilled human resources.
© 2020 TDC SOFT Inc.

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Measures for Next-Generation System Integrator
TOPICS: Focused Strategic Field - Agile-related Business
Strengthening our service capabilities to lead the domestic enterprise agile market
Consulting Capability Uplift
Concluded the gold partnership agreement, as thesecond partner company in Japan, with Scaled Agile Inc.
in the U.S., that provides SAFeⓇ having No.1 global
share in the agile scaling methods.
Consulting and training services are off to a good start.

Number of Experienced Engineer Uplift
Increase the number of engineers withagile expertise to around 100
Doubledin Number

SAFe Program Consultant
Certified Scrum Master

FY2018© 2020 TDC SOFT Inc.

FY2019Experienced in Agile Development Projects

Providing one-stop agile solutions covering fromupstream, such as organizational transformation, tosystem development
Organization
operation

Business
Systemdevelopment

Support realization of a highly agileorganization through consulting
and training services using SAFe®
Realize a flexible and speedy systemdevelopment by applying the agile
development framework withcertified Scrum Master engineers (*2)

*1 SAFe🄬：Having a dominant global market share in the large scale agile
frameworks (23%), well ahead of the second largest frameworks (4% of
spotify method) or Nexus*2 Scrum ：The de facto standard for small-scale agile development
methods. 71% of agile related certifications are Scrum related.
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Measures for Next-Generation System Integrator
TOPICS: Focused Strategic Field - Security-related BusinessStarted to offer with a security service menu targeting especially at
consulting, system integration, operational management and education
Total security solution considering system life cycles
Security assessment andaAnalysis

Support strengthening governance・Web/network security assessment
・Penetration test
・Security analysis of systems

・Support building CSIRT・Support security training

Monitoring and auditing support

Countermeasure solutions

・Support building SIEM

・Web application firewall
・Cloud security platform・Container security※SIEM：Integrated monitoringof security logs
© 2020 TDC SOFT Inc.

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Measures for Next-Generation System Integrator
TOPICS: Focused Strategic Field - Security-related Business
Concluded the business and capital alliance contract with LTE-X
Inc., which has a competitive edge in the network security field
Started a business and capital alliance with LTE-X Inc., which has strengths in the network security
field and started secure network solutions(*) by using patented LTE over IP to establish acompetitive edge in the local 5G market ahead of the arrival of the full-scale IoT/5G era.
And developing SI services that utilize local 5G by combining with our company’s strong
system development technology.
Aim to expand in the local 5G field along with the security-related business.

*：An inexpensive and secure network can be constructed by introducing a virtual LTE network within an existing IP network.

© 2020 TDC SOFT Inc.

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Measures for Next-Generation System Integrator
TOPICS: Proceeded with M&A to Strengthen the Solutions Business
Acquired YBC Inc., a company with a wealth of expertise including SAP S/4HANA
through M&A by considering the expected system migration demand increase due tocoming SAP Business Suite 7 maintenance deadline.
Aim to expand solutions business by combining with our company’s strong systemdevelopment technology.
Profile of “YBC Inc.”
Company Name

Yagi Business Consultant, Inc.
(Abbreviated as: “YBC Inc.”)

Location

2-17 Kanda, Chiyoda-ku, Tokyo

Date established

April, 1984

Business contents

SAP system introduction supportand system development with
open sources, web based, Javasystem and others

Net Sales(march, 2020)© 2020 TDC SOFT Inc.

¥528 million
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Measures for Next-Generation System Integrator
TOPICS: Update of the Company’s Management Process
Revamped the traditional bottom-up investment process to a top-down approach.
Developed the investment plan, "TDC Technology Beyond 2020" by top experts in technologies, markets
and customers. Foreseeing future changes and concentrating management resources in the fieldsof high expectations for quick ramp-up of revenue and for maximizing ROI.
Previous process

Current process
Top-down investment decision in light of futurechanges and business environment

Centered on bottom-up investment process
Regularmeeting

Dept A

Investment
review
committee

Dept B

Evaluation anddecision-making
of investment
polityTDC Technology
Beyond 2020

Annualmanagement plan

Dept C

Each department proposes its
investment policy© 2020 TDC SOFT Inc.

Mid-termmanagement plan

Business field
Technology

Dept A

Dept B

Dept C

Each department commits to a
top-down investment plan

Sales
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Business Outlook for the Fiscal Year Ending
March 31, 2021

© 2020 TDC SOFT Inc.

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Business Outlook for the Fiscal Year Ending
March 31, 2021
Trends in the Information Services Industry⚫ Domestic economic environment started to deteriorate rapidly
April 23: Monthly Economic Report by the Cabinet Office
Reported “getting worse” for the 1st time in 11 years by the statement that “the Japanese economy
is getting worse rapidly in an extremely severe situation, due to the Novel Coronavirus.”

April 30: JISA-DI Survey by Japan Information Services Industry Association (JISA)
46.2 points decreased in the forecasted DI of overall sales for the period of April – June, 2020
compared with the period of January – March, 2020.

May 11: Domestic ITC Market Forecast by IDC Japan
Forecasted the domestic ICT market (spending base) to be ¥27,835.7 billion, down 6.1% from theprevious year.

⚫ As reported above, ICT investment is expected to be curtailed atleast until the first half of 2020.
⚫ On the other hand, as people are shifting to new lifestyles, there are moredemand for high-value-added SI services based on new technologies, suchas cloud computing and cashless systems, than ever.
© 2020 TDC SOFT Inc.

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Business Outlook for the Fiscal Year Ending
March 31, 2021
Efforts to Prevent from COVID-19 Infection⚫ February 14: “A special task force” was formed at TDC Soft headquarters.
⚫ April 8: In response to the government's declaration of a state of emergency, the Group
shifted to working at home in principle.
⚫ The following measures have been implemented to ensure the health and safety of
employees and to ensure business continuity to the same degree as under normal
conditions.
About the work style⚫ In principle, employees including business partners work from home.
⚫ In case of any need to come to work, staggered commuting and/or rotational working styles
are required to reduce the risk of infection.

⚫ Domestic and international business travels are prohibited. Employees are requested to selfrestrain from going out for unnecessary and non-urgent purposes.
© 2020 TDC SOFT Inc.

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Business Outlook for the Fiscal Year Ending
March 31, 2021
Efforts to Prevent from COVID-19 Infection
Infection prevention measures⚫ Installed alcohol disinfectants and other hygiene products at offices and project sites.
Promoted the activities to inform employees on cough etiquette and other infection prevention
measures through in-house digital signage and/or portal sites.

⚫ Meetings are requested to hold online in principle. Even when meetings are held offline,
keeping social distance and wearing masks are requested. And distributed a box of masks toall employees with priority to those who need to come to work.
⚫ Non-online events are generally prohibited.
Early detection of infected people⚫ Using the emergency contact list that is available in normal operations, anyone suspected ofbeing infected is to be reported to the special task force immediately. Those with infection risk
and those who have been in close contact with infected people are suspended from coming towork for 14 days.
© 2020 TDC SOFT Inc.

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Business Outlook for the Fiscal Year Ending
March 31, 2021
Current Business Situations⚫ Insignificant impact on the current business
As the capacity utilization in April was about 1.4% higher than that of the previous year, impact
on the company's current performance is insignificant.

⚫ Difficult situations for new orders are expected to continue until thefirst half of 2020.
Although the order backlog at the end of April was 2.3% higher than the same period ofprevious year, due to the transition period to teleworks after the declaration of the state of
emergency and with business negotiation opportunities decreased, the April orders received
were lower than the same period of the previous year.

© 2020 TDC SOFT Inc.

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Business Outlook for the Fiscal Year Ending
March 31, 2021
Business Risks⚫ Risk of reduced utilization:
In case of measures to suspend attendance to work in case of any infected project members (ofsuppliers , the Company and business partners) or of customers⚫ Risk of reduced capacity to provide services:
In case of any changed cooperation with partner companies triggered by the infection⚫ Risk of order decline:
In case of delay in the recovery of business negotiation opportunities with customers or in case of
decrease in new projects due to restraint in IT investment© 2020 TDC SOFT Inc.

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Business Outlook for the Fiscal Year Ending
March 31, 2021
Financial forecast for the Fiscal Year Ending March 31, 2021
⚫ Since there are various uncertainties about the impact of COVID-19 and with its difficulty
to rationally calculate at this time, the financial forecast for the fiscal year ending
March 31, 2021 is yet to be determined.
⚫ With carefully observing the lifting of the emergency declaration and trends toward aftercorona world, the information will be disclosed as soon as it becomes available.

© 2020 TDC SOFT Inc.

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Business Outlook for the Fiscal Year Ending
March 31, 2021
Going Forward⚫ Continue to promote the next-generation SI business, for which
demand is expected to increase
Maintain the policies of the medium-term management plan and the technicalcapabilities to respond to market needs in a timely and accurate manner to expand our"next-generation SI business," and strengthen our efforts to create new business in an
anticipation of further growing needs for digitalization including teleworks and cloud computing.

⚫ Flexible response to the external environment
Flexibly respond with respect to the management plan for the fiscal year ending March 31, 2021 inlight of the current impact of COVID-19 health issue and in consideration of the after-corona
environment.

© 2020 TDC SOFT Inc.

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Focused Policies for the Fiscal Year Ending
March 31, 2021
Promote initiatives in each field based on the key strategies
set in the mid-term management plan

Pursuing High-value-added SI Services
Agile-related business

Security-related businessScaling the business with increase number ofengineers and enhanced services

Future trends and predicting security services

・Double the number of engineers with agile expertise toaround 100 compared with the previous year.

・Services to address the new security risks that arise due tothe increased architectural complexity of container
technology.

・Aiming to expand business scale with synergy of SAFe🄬,
Scrum, DevOps(*1), UX(*2) and other elements.

・Secure network solutions for teleworkers.

*1：A set of practices that combine software development (Dev) and operations (Ops) to shorten the system development lifecycle
and achieve continuous delivery of high quality software.
*2：An abbreviation for user experience. (experience which users receive by using products or services) The trend in recent years is
to increase the added value of products and services through UX-conscious design.
© 2020 TDC SOFT Inc.

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Focused Policies for the Fiscal Year Ending
March 31, 2021
Promote initiatives in each field based on the key strategies
set in the mid-term management plan

Promote Transformation of the System Integration Model
Improve profitability by securing service providing resources from efficiency improved quality
assurance process and by optimizing staffing for project characteristics
・Improve productivity and quality by automating the quality assurance process.
・Review methodologies and resource assigning methods for optimizing the project structure by
accurately understanding the characteristics of projects, such as next generation technologies.

© 2020 TDC SOFT Inc.

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Fiscal Ended March 31, 2020
Details of Financial Results© 2020 TDC SOFT Inc.

28

Contents● Financial Statements● Analysis of Net Sales● Orders Received/Unfilled Orders● Analysis of Operating Profit© 2020 TDC SOFT Inc.

29

Financial Statements
Statements of Income（Unit:\ millions）
Net Sales
Labor costs
Subcontract expenses
Other expenses
Work in progress change
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit
Non-operating income and expenses
Ordinary profit
Profit before income taxes
Profit attributable to owners of parent
EPS

FY201927,795
10,22811,458845△1422,518
5,277
3,070
2,206
58
2,265
2,265
1,500
62.29

changeFY2018+4.5%
26,590
+4.3%
9,806
+6.3%
10,784+11.4%
787
135 △110.4%+4.7%
21,513
+4.0%
5,076
+5.2%
2,918
+2.3%
2,157
△35.8%
91
+0.8%
2,248
+0.8%
2,248
+2.1%
1,469
+2.1%
61.02

Note: The Company conducted a two-for-one stock split of its common shares effective October 1,
2018. Accordingly, basic earnings per share is calculated under the assumption that the stock split was
conducted at the beginning of the fiscal year ended March 31, 2018.
© 2020 TDC SOFT Inc.

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Financial Statements
Balance Sheet（Unit:\ millions）

Total assets
Current assets
Non-current assets
Total liabilities
Current liabilities
Non-current liabilities

31-Mar-20
16,652
13,463
3,188
4,544
4,347
197

31-Mar-19
change16,353 +1.8%
12,930 +4.1%
3,422 -6.8%
4,887 -7.0%
4,717 -7.8%
169 +16.6%

Total net assets

12,107

11,466+5.6%

Total liabilities and net assets

16,652

16,353+1.8%

Equity ratio

72.7%

70.1%

-

Net assets per share502.43475.93+5.6%

Note: The Company conducted a two-for-one stock split of its common shares effective October 1,
2018. Accordingly, book value per share is calculated under the assumption that the stock split was
conducted at the beginning of the fiscal year ended March 31, 2018.

© 2020 TDC SOFT Inc.

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Financial Statements
Statements of Cash Flows
1,299

△218

△518

8,379

7,816
Cash flows
fromoperatingactivities

Cash and cash
equivalents at
beginning of year
© 2020 TDC SOFT Inc.

Cash flowsfrominvestment
activities

Cash flowsfromfinancialactivities

Cash and cash
equivalents at
end of period

Cash and cash equivalents at beginning of period
Profit before income taxes
Depreciation and amortization
Notes and accounts receivable
Notes and accounts payable
Inventories
Accounts payable
Accrued expenses
other
Income taxes payable
Cash flows from operating activities
Acquisition of tangible assets
Acquisition of investment securities
Acquisition of stocks of subsidiaries and affiliates
Proceeds from distribution of investment in
partnerships
Interest and dividend income
Proceeds from transfer of business
Other
Cash flows from investment activities
Increase (decrease) in short-term borrowings
Dividends paid
Other
Cash flows from financial activities
Cash and cash equivalents at end of period

7,816
2,265
88
138
39
△14
△119
△271
△32
△856
1,299
△63
△116
△300
31
51
142
8
△218
26
△538
△518
8,379
32

Overview of Net Sales by Customer Industry（Unit:¥ millions）
FY2017FY2019FY2018
6,123

5,127

5,494
4,794

4,446

4,760

6,362

6,234
5,372

5,161

4,805
3,991
2,659

2,907

2,683

2,553

1,977

Banking

CreditInsurance

Manufacturingnon-manufacturing

2,883

Government ministries,
agencies andorganizations

Financial services⚫ In the financial services business, the large projects decline at banks was covered by credit andinsurance projects. Sales increased in all customer industries, as in the previous year.
© 2020 TDC SOFT Inc.

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State of Orders Received/Unfilled Orders（Unit:¥ millions）

Orders received

12,365

12,28011,334

12,612

13,622

13,796

14,343

13,128

14,667

6,551

6,380

12,937

12,247

14,575Net sales

6,269

5,835

6,498

5,804

Unfilled orders© 2020 TDC SOFT Inc.

First Half Second HalfFirst Half Second HalfFirst Half Second Half

FY2017FY2018FY201934

Analysis of Operating Profit（Unit:¥ millions）

2,157

FY2018© 2020 TDC SOFT Inc.

Gross profitup
SG&A up

+201

-152

2,206

＜Gross profit＞
Increased in line with net sales growth.
＜SG&A＞
Increased in conjunction withinvestments to build a foundation forsustainable growth and to createhigh-value-added system integration
services for achieving the MediumTerm Management Plan.

FY201935

TDC SOFT Inc.
https://www.tdc.co.jp /*Cautionary note about these materials
This report contains forward-looking statements such as
forecasts for the TDC SOFT Group that are based on information
available to the Company at this point in time. Actual results
may differ significantly from these forecasts due to various
unforeseen factors or operations going forward.
© 2020 TDC SOFT Inc.

36