Nec Corp Unsp/Adr New

Thank you very much for your participation today. I will now explain the financial results for FY2023 March along with the forecast for FY2024 March. This will be the agenda for today. First, the financial results for FY23 March. Page 5 shows the summary of the financial results. Revenue was 3,313,000,000 yen, an increase in all segments. Year on year, this was a growth of 10%. Adjusted operating profit was 205.5 billion yen. Details will be explained later, but aside from network services, all segments increased. Adjusted net profit was 138.6 billion yen. Impact from tax expenses was approximately 30 billion yen versus last year, and if we exclude this, it effectively increased. Page 6 shows the main indices, along with performance by segment. Revenue, adjusted operating profit, and adjusted net profit were all higher than the January 30th forecast. Details of each segment will be described later. Now to page 7. This shows the fluctuation of adjusted operating profit. I will use FY22 March as the baseline to explain. In FY22 March, one-time profit of 10 billion yen from asset sales was acknowledged. In FY23 March, a one-time profit of 11 billion yen was attained. Next, in Q4, 5.5 billion yen was acknowledged for structural reform, such as global 5G cost structure optimization. As for macroeconomic environmental change impacts, forks fluctuation was a positive 16.5 billion yen. Component shortages were resolved from the second half of the year and onwards and year on year a positive 4 billion yen. Intellectual property income was attained in Q4 of last fiscal year as well as Q3 of this year and on an annual basis contributed to a positive 7.5 billion yen. Operations improved by 11 billion yen. Domestic IT segment advanced fairly. Enterprise saw 14.9 billion yen, and public solutions business saw a 7.5 billion yen improvement. On the contrary, network service business was minus 13 billion yen. Based on these results, operating profit for FY23 March was 205.5 billion yen. From page 8, I will explain each segment, starting with public solutions business. For revenue, the market situation surrounding SMEs have bottomed out and we continue to see a growth trend. Public and healthcare are increasing steadfastly as well, and all in all, a growth of 3.2%. Adjusted operating profit due to an increase in revenue as well as cost optimization saw plus 6.7 billion yen. Page 9 is public infrastructure business. Revenue grew by 6.8% due to increases in business for satellites and defense. As for adjusted operating profit, on top of an increase in revenue, non-performing projects were contained and overall an increase of 8.1 billion yen. Page 10 shows our enterprise business. Revenue increased 6.9% due to strong trends in all domains, including financial, manufacturing, and retail services business. Adjusted operating profit due to revenue increase enriched offering menus, as well as enhanced profitability through strengthening of SI project risk management, improved 15.9 billion yen. Operating profit ratio has advanced to 11.9%. Page 11 is Network Service Business. Revenue increased despite investment restraints among domestic and overseas telecom carriers. Intellectual property income attained in Q3 also made a positive contribution. On the next page, I will describe the adjusted operating profit. Here, on page 12, I will use the results from FY22 March as the baseline to explain the changes in profits and losses. Change factors up to Q3 have been explained during previous financial announcements. For Q4, due to revenue expansion, business operational improvements were 12.8 billion yen. Further, to improve profitability, 3.3 billion yen for structural reform and 1.4 billion yen to streamline assets were acknowledged. There was also a negative 5 billion yen impact for IP income, and all in all that gave us a profit of 24.7 billion yen for Q4 and for the full year, 24.1 billion yen. Next, page 13 is global business. For revenue, Netcracker's OSSBSS, as well as acquired companies' software-related business for digital government and digital finance, along with a favorable trend for major domains such as submarine systems, uplifted revenue by 20.8%. Adjusted operating profit increased 16.6 billion yen due to progress of business portfolio transformation and improved profitability in major business domains. Page 14 illustrates free cash flows. Operating cash flows increased 34.5 billion yen due to an increase in adjusted operating profit. Inventory was increased by 60 billion yen because of component shortages in FY22 March, and as planned, in FY23 March this was resolved. But to prepare for longer procurement periods and mitigate component risks, another 34.5 billion yen has been added. Year on year, this is an increase of 85 billion yen. Because of a large increase in revenue, working capital balance has increased and accounted for a minus of approximately 115 billion yen. Operating cash flow total year-on-year is an increase of 4.6 billion yen. As for investment cash flows, expenditure decreased by 13.8 billion yen. This is due to a decline in spendings for M&A activities. All of this taking into account year-on-year free cash flows increased 18.4 billion yen, totaling 102.5 billion yen. Page 15 is the status of our CCC. FY23 March saw an increase in large projects where upfront expenditure was made, and on a normal business operation basis, a deterioration of six days year-on-year is the result. However, these projects lead to future intake, and when excluding such projects, CCC is on par with the previous fiscal year. Long-term launch projects will increase in the future as well, so we will continue to promote improvement activities such as securing advance payment fees. Page 16 shows the status of our investment securities. Back in April of 2020, we decided that the policy be zero holdings, and as explained to you previously, we have steadily decreased the volume. Among the investment securities for listed stocks as of end of 2021 March, 108 shares, and by 2023 March end, this became 33 company shares, a decline of 70%. For FY23 March, the same level as FY22 March, 19.6 billion yen was sold, and the total amount sold since 2021 March end is 135.4 billion yen. Non-listed stock excluding aligned shares have dropped to 137 from 207.

Page 17, Orders. I will focus on the order trends of FY23 March. By segment, public solutions orders were up 10% due to an increase in urban infrastructure projects and the bottoming out of SMEs' sluggish demand. Public infrastructure increased 8%, mainly due to strong demand in the national defense sector. Enterprise increased 12% on the back of robust IT demand. Network services rose 10%, mainly driven by 5G, even excluding IP revenues recorded in Q3. The increase was 8%. Global business, excluding the offshore business impact, was up a substantial 15% driven by Netcracker's large projects. Thus, all segments posted year-on-year gains. Even excluding the volatile submarine systems business, the total orders increased significantly. The IT services also registered an increase of 9% for the full year. Next, our forecast for FY24 March and the progress of the Mid-Term Management Plan 2025. Page 19, forecast for FY24 March. We are projecting sales of 3.38 trillion yen and adjusted operating profit of 220 billion yen with increases in all major segments. The annual dividend for FY24 March is planned at 120 yen per share, an increase of 10 yen from FY23 March. Page 20. Factors contributing to the changes in adjusted operating profit. The basis of my explanation is the FY23 March adjusted OB of 205.5 billion yen. One-time profit recorded in FY23 March will have a negative impact of 11 billion yen in FY24 March. Although there is a decrease of 5.5 billion yen in structural reform expenses, IP income is expected to decrease by 14.5 billion yen. Other than these items, we have factored in a ¥34.5 billion increase in profit from operations. We expect to post-adjusted OPL ¥220 billion in FY24 March. Page 21, the progress of Midterm Management Plan 2025. Page 22, Progress by Segment. Network services is behind our expectations due to restrained investment by domestic telecommunications carriers and delays in the ramp-up of overseas 5G market. Despite these drawbacks, enterprise public solutions, public infrastructure, and global segments are all in all making steady progress toward the achievement of the Mid-Term Management Plan 2025. Phase 23, Status of Growth Businesses. Profitability of digital government and digital finance will be improved by reaping the fruits of investments made in FY20-23 March. We will expand cross-selling in APAC and EMEA, including Japan, and augment synergies by promoting offshore operations. Global 5G will shift more from hardware to software and services. We will enhance profitability by expanding our market share in Japan and optimizing our sales and development structure in overseas markets. We will work on shifting to a high profitability business model by further expanding the ratio of common platform sales. In addition, we will reinforce our strategic customer business by strengthening cooperation with our beam, which is trending favorably. Page 24, Status of Underperforming Businesses. We are focusing on improving low-profit businesses, and in FY23 March, we achieved a 2.4% improvement in adjusted OP margin over the previous year. This improvement contributes to about half of business enhancement. In FY22 March, CFO-led monitoring began and 4 out of 16 businesses were removed from the monitoring list due to improved profitability. We will continue to make appropriate decisions to maximize the value of non-core businesses by divesting them or establishing joint ventures. Page 25, culture. First, the engagement score, one of the KPIs of Midterm Management Plan 2025. It rose from 25% in FY21 March to 36% in FY23 March. We are promoting job-based management as part of the people and culture reforms undertaken within our engagement program. Job-based management will be initially introduced to general managers and above in FY24 March and will be expanded to all employees in FY25 March. Without the right allocation of people based on business strategies, without the top caliber talent, and without the best team, we cannot compete globally. The aim of job-based management is to assign the right person to the right places at the right time. Employees want to work for a company where they can see their own growth and feel motivated to realize their goal. We want NEC to be such a workplace, and this is extremely important to improve engagement. Rise fast and initiative to accelerate transformation through issue resolution practices is being promoted as an activity to simplify on-site processes and strengthen the autonomy of employees. The program is well established and 1,300 employees participated in FY23 March. Through improving efficiency, we realized an impact of 1.7 billion yen and we want to continue this effort. In Smart Work 2.0, teens maximize their productivity by selecting optimal work style. In developing internal business infrastructure, we will build a globally top-level management infrastructure so that all information can be digitized, thus enabling data-driven management. This will enable our business operations to be flexible and adaptable to environmental changes and maximize our business output. Finally, topics. Page 28, Segment Revision. In accordance with the reorganization implemented in April 2023, we will revise our segment disclosure from Q1 FY24 March. The new segments are IT Services and Social Infrastructure. The organization included in each segment is shown here. The new segments are based on business domains rather than market customer segments as in the past. This revision does not only allow the tracking of the Midterm Management Plan 2025, but also enables the capital market players to understand our business, which was said to be difficult to grasp. Page 29, non-GAAP indicators. From Q1 FY24 March, we will disclose non-GAAP profit laws in addition to the Convention-adjusted operating profit laws. Adjustment items from GAAP OP are shown here. Through this change, we aim at disclosing underlying profitability, excluding one-time profits and losses, and enhancing the ease of comparability with global competitors. Non-GAAP indicators will be disclosed only for the total earnings, and segment-based earnings will be disclosed only on an adjusted OP basis as it stands now. this concludes my presentation thank you very much for your attention