TSE 1st Section Code:3992

Needs Well Inc.

Financial Results for the First Quarter of Fiscal Year 2020
(October 2019 – December 2019)
February 7, 2020

１． FY 2020 the First Quarter Financial Highlights

２． FY 2020 Financial Forecasts

３． Growth Strategies

４． Action to support growth strategies

５． Reference Materials

Financial Results for the First Quarter of Fiscal Year 202021) Summary
Sales remained strong.
The profit decreased because of the temporary cost for investment inadvance.
Ordinary profit

Net sales
12014501400

1,4181350

1300

110
100

1,341120110901250

Temporarycost※１、２92801200

Net profit
11010090807070

1100

60601050

5050

1000

40401150

FY’19/9 1Q

FY’20/9 1Q

FY’19/9 1Q

FY’20/9 1Q76

Temporarycost※１、２59FY’19/9 1Q

FY’20/9 1Q
Millions of JPY※１※２

Our head office relocation and establishment of the Nagasaki Development Center took SG&A expenses, about 24
millions of JPY, as investment in advance temporary. It does not occur after next fiscal year.
The temporary cost is already considered to forecast of this fiscal year. We don’t change of the 2Q and FY forecasts.

Financial Results for the First Quarter of Fiscal Year 202032) Progression rate
progression rate, result of the the First quarter (Forecast FY’20/9) Millions of JPY
Net Sales

23.6% 1,418 (6,000)【Breakdown of Sales】

Business systems SI

Infrastructure services

Embedded systems

Solutions / Products etc.

25.6% 1,118 (4,364)
22.7% 138 (611)
20.0% 88 (443)
12.4% 72 (579)

Operating profit

16.9% 92 (549)

Ordinary profit

16.9% 92 (550)

Net profit

15.7% 59 (379)

Financial Results for the First Quarter of Fiscal Year 2020Improved retain engineers. As aresult of efforts to train engineers,
new financial projects wereacquired and expanded businesswith existing customers.
YonY105.0%
Aimed for total orders incooperation with “Businesssystems SI”.
Struggled to retain engineers.
YonY99.6%
Specialized in the fields of future
automobiles and medical devices.
Struggled to retain engineers.
YonY97.1%
Expand the product lineup of“Information security solutions”
and “Work efficiency solutions”.
Various linkage functions thattake advantage of our softwaredevelopment strength arepopular. YonY159.0%

43) Sales by service line
Increased “Business systems SI” & “Solutions / Products etc.”.
Sales trends

FY’20/9 1Q
Sales by service line

1600
[ Millions of JPY ]1400
Solutions /Products

1200

1000
Businesssystems SI

800

Financial
NonFinancial

600
400
Embeddedsystems

200
0

Infrastructureservices● Financial deal accounts for about
half of the Business systems SI
Business systems SI
Embedded systems

Financial Results for the First Quarter of Fiscal Year 2020

Infrastructure services
Solutions / Products●EspeciallyLife insurance, non-life insurance
54) Operating profit analysis■ Increase ■ Decrease

Millions of JPY+7110
Gross profit increase
due to sales
expansion andproductivity
improvement.

YoY ▲17092▲ 24
Other expenses areconsistent with thepreceding period.

The head office relocation andestablishment of the Nagasaki Development
Center took SG&A expenses, about 24
millions of JPY as investment in advancetemporary.
※It will not occur after next fiscal year.

FY’19/9 1Q Operating profit
Financial Results for the First Quarter of Fiscal Year 2020

FY’20/9 1Q Operating profit

65) Profit & Loss results
Investment in advance, head office relocation and establishment ofNagasaki Development Center, increased the temporary costs.
Millions of JPY

FY'19/9 1Q
Net sales
Resultratio

FY'20/9 1Q
Net sales

ResultYear on Yearratio

Net sales

1,341-

1,418-

105.7%

Business systems SI

1,065

79.4%

1,118

78.9%

105.0%

Infrastructure services

139

10.4%

138

9.8%

99.6%

Embedded systems

91

6.8%

88

6.3%

97.1%

Solutions / Products etc.

45

3.4%

72

5.1%

159.0%

Gross profit

295

22.0%

302

21.3%

102.5%

SG&A expenses

184

13.8%

209

14.8%

113.6%

Temporary cost00.0%

24

1.8%

184

13.8%

184

13.0%

ー100.1%

110

8.3%

92

6.6%

83.9%

Non-operating profit

00.0%

00.0%

312.8%

Non-operating expense

00.0%

00.0%

0.0%

Ordinary profit

110

8.3%

92

6.6%

83.9%

Net profit

76

5.7%

59

4.2%

78.4%

OthersOperating profit

Financial Results for the First Quarter of Fiscal Year 202076) Balance Sheet results
As ofSep30,2019Millions of JPY

ResultContinued stable financial position

As ofDec 31,2019Year onYearResultAssets
Cash and deposits

1,548

1,540-7

Accounts receivable

705

741

36

Work in process

25

19-6

Total current assets

2,326

2,341

14

102

73-28

361

351

-9

2,688

2,692

4

Accounts payable

146

270

123

Payable

128

165

37

Income taxes payable

100

7-92

Provision for bonuses

241

140

-101

714

774

59

Total non-current liabilities

000

Total liabilities

714

774

59

Common stock

414

414

0

Additional paid-in capital

270

270

0

Retained earnings

1,287

1,233-54

Total retained earnings

1,288

1,233

-54

Total shareholders’ equity

1,973

1,918

-54

Total net assets

1,9731,918-54

Total liabilities and net assets

2,688

2,692

4

Deferred tax assets
Total fixed assets
Total assets
Liabilities

Total current liabilities

Net assets

Financial Results for the First Quarter of Fiscal Year 2020

Capital adequacy ratio71.3％
YonY 2.2pts DOWN
AssetsCurrent
assets,2,326

Current
assets,2,341
Fixed
assets, 361

As of Sep 30, 2019

Millions of JPY

Fixedassets, 351
As of Dec 31, 2019

Liabilities & Net assets

Millions of JPY

Current
liabilities,
714

Current
liabilities,
774

Net assets,
1,973

Net assets,
1,918

As of Sep 30, 2019

As of Dec 31, 20198

１． FY 2020 the First Quarter Financial Highlights

２． FY 2020 Financial Forecasts

３． Growth Strategies

４． Action to support growth strategies

５． Reference Materials

Financial Results for the First Quarter of Fiscal Year 202091) Summary
Furthermore stable growth.
We aim to increase sales and profit
for 9 consecutive terms.
※ There is no change of the 2Q and FY forecasts.
Net sales

5,517

6,000 (8.7%UP)

Operating profit

549 (8.1%UP)
508

Operating profit ratio 9.2%

Ordinary profit

550 (8.9%UP)
505

Ordinary profit ratio 9.2%

379 (9.1%UP)
347

Net profit

Net profit ratio 6.3%
Millions of JPY

FY2020(Forecast)Financial Results for the First Quarter of Fiscal Year 2020

( ): Year on Year

FY2019102) Dividends and shareholder returns
Dividend per share +2.50 JPY(YoY) increase forecast
Dividend annual forecast

16.00 JPY/share, Dividend payout ratio forecast 35.8%※ There is no change of the dividend annual forecast.
Annual Dividend per share
18.00 JPY

16.00 JPY

16.00
14.00

12.50

12.50

13.50

12.00

35.8

10.00

3635％

34338.00

32.2

6.00
4.00

Dividend payout ratio
37 %

32

32.9

31

30.6302.00

290.0028
FY2017FY2018Annual Dividend per share

FY2019FY2020

Dividend payout ratio

We split 100 shares per share on May 12, 2017, split 2 shares per share on April 1, 2018, 2 shares per share on January 1, 2019 A stock split
is conducted at the share ratio.
The annual dividend per share in the past is calculated based on this stock split.
Financial Results for the First Quarter of Fiscal Year 202011１． FY 2020 the First Quarter Financial Highlights

２． FY 2020 Financial Forecasts

３． Growth Strategies

４． Action to support growth strategies

５． Reference Materials

Financial Results for the First Quarter of Fiscal Year 2020121) Management Philosophy

Contributing broadly andSustaining to society.

Night view from Mt. Inasayama. (Nagasaki Pref.)Financial Results for the First Quarter of Fiscal Year 2020132) Trails of growthJun-2019 TSE 1st Section
Net sales
Number of Employees

Oct-2017 Started Solution Business
Jun-2018 TSE 2nd Section

Sep-2017 JASDAQ IPO
Apr-2013 Started Embedded systems
Oct-2012 Started Infrastructure services,
Started business with major telecom carriersApr-2005 Started business with major hotels
Apr-1998
Started businesswith major life insurance company
Aug-1992
Started Business systems SI

Employee

538

FY2019est.
Oct-1986
Started business consulting
Financial Results for the First Quarter of Fiscal Year 2020▲
FY2020143) Basic policy

Breakthrough from the dispatch business,
Become a true System Integrator.

Financial Results for the First Quarter of Fiscal Year 2020154) Targets

Near future

2010: Growth
Sales growth rate
２０％
Ordinary profit margin １０％

Target2510: Management constitution
Gross profit margin
２５％
SG&A expenses rate １０％

Liquidity market capitalization

Market capitalization

25 billion JPY

Net sales

10 billion JPY
10 billion JPY

FY 2019

Dispatch business >>> Become a true System Integrator.
Financial Results for the First Quarter of Fiscal Year 2020165) Our strengths
Well of strength ~ 3 “High” and know-how, performance.
1. High Financial system development capabilities.
The financial sector accounts for 50% of sales in our main
business “System development”.
Especially, we have strengths in Life insurance, Accident
insurance systems, and we have many performance in Bank,Credit card systems.

2. High End-user direct sales ratio.

3. High Proposal and provision
capabilities of solution business.

Over 50% of sales composition.
For life insurance companies, major hotels,
and telecommunications carriers etc.,
end-user direct sales ratio Over 50%.

Related to 5G and AI, RPA so on,
We provide optimal solution services tailoredto customers' business objectives.

High quality system development
Knowledge + know-how
accumulated over 20 years of systemdevelopment.
Financial Results for the First Quarter of Fiscal Year 2020

Performance in a wide range of industries
and technologies.
Approx. 300 customers.

176) Growth strategies

6 Priority items.
Improve corporate value

1Establish business foundation

256

3

Expansion of solution business4

Expansion of end-user direct sales
Start up AI businessStart up nearshore development

Financial Results for the First Quarter of Fiscal Year 2020186) Growth strategies - 1. Improve corporate value -1-

Various approaches to improve corporate value.
- Institutional investor- Individual investors- Media- Promotes CI, VI

IR

Capital policy

CI: Corporate Identity
VI: Visual Identity

Performance

Improve
corporatevalue

Future Goals- Sales growth rate 20%
Ordinary profit margin10%- Gross profit margin 25% SG&A expenses rate 10%- Net sales 10 billion JPY
Financial Results for the First Quarter of Fiscal Year 2020

- Public offering- Issuing new share- Buyback- M&A

Sustainability- ESG, SDGs
- Corporate governance196) Growth strategies - 1. Improve corporate value -2-

In addition to organic growth,
actively pursue M&A GrowthPolicy

We actively pursue M&A and business alliance with thecompany which we can expect high synergy forincreasement corporate value
We aim to prosper together.

PurposeTechnology, Customers, Trade area, Bland, Engineers

SchemeBusiness alliance, Capital alliance, Acquisition, etc.

Financial Results for the First Quarter of Fiscal Year 2020206) Growth strategies - 2. Establish business foundation

Establishing a business foundation
for stable development to the future as a listed company.

Business systems SI- Accumulating financial business knowledge- Train high-skilled engineersfrom upstream processes

Infrastructure services- Cooperation with business systems SIEmbedded systems- Automobile,
specialized in the field of medical equipment.
Financial Results for the First Quarter of Fiscal Year 2020

Expansion
Financialsector

Order fromLarge project

Order from
specializedfield216) Growth strategies - 3. Expansion of solution business

Differentiate by providing linkage functions with various products.
Information security solutions

LinkDisarmer

UTM
Assetmanagement

Work efficiency solutions

Work-AISystem

IPA (AI & RPA) X
development

Financial Results for the First Quarter of Fiscal Year 2020

Information security measures become even more
important with the arrival of the 5G era

Web Isolation

Promote work style reform andsolve labor shortages by utilizing IPA (AI x RPA)

LinkEAIAI-OCRWorkflow

LinkAI-OCRRPA226) Growth strategies - 4. Expansion of end-user direct sales

Stabilize orders and improve profitability,maintain and expand end-user direct sales ratio Over 50%.
1. Maintain and expand exist-customer- Maintain ongoing projects

End-userdirect sales ratio- Train high-skilled engineers andexpand the scale of project.

2. New customer development- Introduce our development results andbusiness know-how to similar/existing companies,
horizontal expansion.

3. Expansion solution business

60%
55%

FY2019Future- Focus on solution business with high sales ratio to end users.
Financial Results for the First Quarter of Fiscal Year 2020236) Growth strategies - 5. Start up AI business

Established AI Group in July 2019.
Started AI business in earnest and provide of AI solutions by industry.

RPAWinActorX

AI-OCR

License agreement
Consulting andscenario introduction

Data generation withbusiness characteristics

Data analysis service forimproving AI accuracy

AI solutions by industry [For Distribution/ Services

Financial Results for the First Quarter of Fiscal Year 2020

AI engine by industry

Cleansing unnecessary data

Assist DX

For Financial

Development oforiginal AI engine

Data analysis

Assortment of AI engines
specialized for eachindustry

Work - AI Service ]For Social
Infrastructure

For TelecomCarrier

For
Manufacturingindustry246) Growth strategies - 6. Start up nearshore development

Opened Nagasaki Development Center in October 2019.
Aiming for 100 employees in FY2024.
Promote recruitment of new graduatesand U-turns in Nagasaki and retain
talented people who want to findemployment.

Promote lump sum contract andovercome opportunity loss due to solve
labor shortages by nearshoredevelopment.

Financial Results for the First Quarter of Fiscal Year 202025

１． FY 2020 the First Quarter Financial Highlights

２． FY 2020 Financial Forecasts

３． Growth Strategies

４． Action to support growth strategies

５． Reference Materials

Financial Results for the First Quarter of Fiscal Year 202026

1) Human resources development
Work style reform and efforts to improve skills and motivation.
We are working on human resource development using various programs and tools.

Work style reform
Incentivedate fortaking paid
leavePremium
FridayNew
Overtime
target20 hours

Utilize
RPA

BPR
programRemotework

e-learningGetcertifiedencourage
programBusiness
improvement
committee

NeedsWellconference

Appointedleader
programPresident's
award

Improving skills
Preemploym
ent trainingNew
graduates
training

Management
training

Improving motivation
Shufflemeeting

Financial Results for the First Quarter of Fiscal Year 2020

Mentorprogram272) ESG/SDGs -1To realize our management philosophy“Contribute broadly sustaining to the society.”
ESG / SDGs Committee has begun working on a sustainable society.
Sports promotion support
We are supporting Soccer team,‘ V-Varen Nagasaki ’.
©２００５ VVN

©２０１８ VVN

IT education using AI

AI experience seminar for students will be held during FY2020.
Our AI engineers and general affairs dept are planning a program that it canfeel attractive of AI.

Supporting regional revitalization projects
We have been supporting the local revitalization project in Nagasaki Prefecturesince 2018.
Financial Results for the First Quarter of Fiscal Year 2020282) ESG/SDGs -2Promoting diversity and gender equality
We aim to achieve a 30% ratio of female managers.
Board of Directors

New Graduate 2020 (Plan)

All of EmployeeManagersGoal30
1７%

50%

１７%

６%%

■Female■MaleReduce electricity and paper usage

ESG committee members appointed from each department
are carrying out reduction activities.
- Power saving- Digitalization of internal documents and workflows etc.

Financial Results for the First Quarter of Fiscal Year 2020292) ESG/SDGs -3Promote collaboration with partners
We are promoting cooperation with partner companies andaiming for it can develop together for a long time.
- Core partner program- Partner meeting etc.

Create a high transparent governance system

We are constantly reviewing our governance system to create a moretransparent and fair corporate structure.
- Board effectiveness evaluation- Think about advisory committees, etc.

Financial Results for the First Quarter of Fiscal Year 202030

１． FY 2020 the First Quarter Financial Highlights

２． FY 2020 Financial Forecasts

３． Growth Strategies

４． Action to support growth strategies

５． Reference Materials

Financial Results for the First Quarter of Fiscal Year 2020311) Company profile* As of September 30, 2019

Company Name

Needs Well Inc.

Head Office

13F, New Otani Garden Court, 4-1 Kioi-cho, Chiyoda-ku, Tokyo, 102-0094 Japan

Office- Shinjuku Office : 5F, South Tower, 13-15 Tomihisa-cho, Shinjuku-ku, Tokyo, 162-0067 Japan- Nagasaki Office: 5F, Meijiyasudaseimei Nagasakikozenmachi building, 2-21 Kozen-machi, Nagasaki-shi,Nagasaki, 850-0032 Japan

Contact

TEL: +81-3-6265-6763

Representative

President and CEO

Established

October 1, 1986

Stock Listing

Tokyo Stock Exchange, 1st Section (3992)

Paid-in Capital *414 million JPY

Net sales *5,517 million JPYNumber ofEmployees *538

Memberorganizations

Japan Information Technology
Service Industry Association (JISA)

Qualification

Worker dispatch businessPrivacymark

ISO27001 (ISMS) Certified
ISO9001 (QMS) Certified

Board of Directors *FAX: +81-3-6265-6764

Kozo Funatsu

President and CEO Kozo Funatsu
Executive Director Takeshi Tsukada
Executive Director Nobumasa Goto
Director Hiromi Kimura
Director Hiroki Yanagawa External Independent
Director Hideaki Sakaue External Independent

Financial Results for the First Quarter of Fiscal Year 2020

URL: https://www.needswell.com

Audit & Supervisory
Board Member Kazuhiko Kato
Audit & Supervisory
Board Member Toshio Yamamoto
Audit & Supervisory
Board Member Yuji Dai
Audit & Supervisory
Board Member Kotaro Niwa

External

Independent

External

External322) Business field
Needs Well focused on Business systems SI for finance
4 services provide total IT services.

Business
systems SI

Solutionbusiness

Finance
Distribution / Services

SolutionsSocial Infrastructure

Telecom Carrier
Web
Financial Results for the First Quarter of Fiscal Year 2020AI

IT Infrastructure
Automobiles andMedical devices

Infrastructureservices

Embeddedsystems333) Comparison with our company and other companies
ROIC

ROE25%25%20%

20%

15%

15%

10%

10%

5%

5%0%0%FY2017FY2018

Needs Well

AFY2019
BC

14%
12%

10%8%6%
4%2%0%FY2017FY2018

Needs Well

APERC
14.50

A
19.26

16 % Needs Well
17.13
14 %
12 %
10 %

FY2019
BC

PBR

20 %

18 %

ROA

32

B
10.03

8%

Financial Results for the First Quarter of Fiscal Year 2020

1Needs Well
3.0

FY2017FY2018

Needs Well

AFY2019
BC- We selected and compared companies
with near close our business domains andmarket capitalization from the Information& Communication.

A2.7

C1.9- PER and PBR are calculated using theclosing price on November 5, 2019.

B
1.00344) Performance trends -1Net sales

FY2016

Millions of JPY

FY2018FY2019FY2020

Q1

1,217

1,341

1,418

Q2

2,470
3,801

5,063

Q3
Annual

4,586

FY2017FY2019FY2020Q1121110

92

2,724

Q2255

266

3,739

4,097

Q3387

354

375

5,140

5,517

Annual

443

476

508

Q1

82

76

59

266

Q2

174

185

343

370

Q3

248

236

255

467

505

Annual

287

325

347

121110

92

Q2255
382
426

FY2016256

FY2017

Millions of JPY

FY2020Q1Financial Results for the First Quarter of Fiscal Year 2020

Net profit

FY2019FY2020405

FY2017FY2018FY2019Annual408

Millions of JPY

FY2018Q3FY2017FY2016

Millions of JPY

FY2018

Ordinary profit

FY2016

Operating profit

354) Performance trends -2Basic earnings per share

FY2016JPY

FY2018FY2019FY2020

Q1

9.88

9.04

7.04

Q2

20.85

22.02

Q235.51

28.18

30.22

Q3

40.81

38.78

41.15

AnnualQ3
Annual36.74

FY2017

Rate of return on equity- After adjustment of 100 splits as of May 12, 2017,2 splits as of April 1, 2018, and 2 splits as of January 1, 2019.

Total assets

FY2016FY2019FY2020

Q1

2,220

2,478

2,692

Q2

2,507
2,062
2,438

Annual

1,661

Financial Results for the First Quarter of Fiscal Year 2020

FY2017FY2018FY2019

36.7

24.8

20.2

18.8

FY2020

Q1- This indicator is updated by annual year.

Net assets

Millions of JPY

FY2018Q3FY2017FY2016%FY2016FY2018FY2019FY2020

Q1

1,480

1,697

1,918

2,764

Q2

1,573

1,809

2,772

2,629

Q3

1,042

1,635

1,878

2,697

2,688

Annual

1,496

1,725

1,973820

FY2017

Millions of JPY364) Performance trends -3Capital adequacy ratio

Net assets per share%

FY2016 FY2017 FY2018 FY2019 FY2020

FY2016FY2017FY2018FY2019179.63204.99232.63

Q166.768.5

Q262.865.4

Q250.559.0

71.4

Q361.464.0

73.4

Annual 117.21

Q3
Annual49.3- Q2 is cumulative total from Q1 to Q2.
- Q3 is cumulative total from Q1 to Q3.

Stock price : JPY

Stock chart

900
800
700
600
500
400
300
200

Financial Results for the First Quarter of Fiscal Year 2020

71.3

JPYFY2020

Q1- After adjustment of 100 splits as of May 12, 2017,2 splits as of April 1, 2018, and 2 splits as of January 1, 2019.

- This indicator is updated by annual year.
Trading volume

Closing price

Trading volume: Share

1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
037

- All statements described in these material are based on our judgment by currently available information.
- Actual results may differ from forecasts due to various factors in the future.
Corporate Communication Division

TEL: +81-3-6265-6763 e-mail: ir-contact@needswell.com