Nec Corp Unsp/Adr New

Thank you for joining us today. I would like to explain the full year financial results for the fiscal year ending March 31, 2026 and the financial forecast for fiscal year ending March 2027, which we announced today. The topics we will cover today are listed here. I will now explain the full year results for fiscal year ending March 2026. First, the key takeaways. Domestic IT and ANS aerospace and defense continue to perform strongly. Annual revenue year-on-year, excluding the impact of the transfer enterprise PC sales functions and the withdrawal from low-margin hardware businesses, grew 9% year-over-year to 3,582.7 billion yen. Non-GAAP operating profit increased by 85.9 billion yen year-on-year to 397.2 billion yen, with the profit margin reaching 11% the first time it has hit double digits. GAAP-based operating profit has set a new record high for the second consecutive fiscal year. Based on these results, we are increasing the year-end dividend by 6 yen to 22 yen per share, bringing the annual dividend to 38 yen. First, the key figures. Annual adjusted operating profit increased by 99.7 billion yen year-on-year to 386.8 billion yen, and the adjusted operating margin stood at 10.8%. Next, the factors contributing to the increase or decrease in adjusted and non-GAAP operating income. In FY25 March, adjusted operating profit was 287.2 billion yen, while non-GAAP OP was 311.3 billion yen. Building on this foundation, we achieved significant growth in IT services and ANS aerospace and defense segments, resulting in a total of 85.9 billion yen in operational improvements. As a result, non-GAAP operating profit for FY26 March reached 397.2 billion yen. Non-GAAP adjusted total to 10.4 billion yen, consisting of 3.9 billion recorded through the third quarter and 6.5 billion in restructuring-related expenses recorded in the fourth quarter. As a result, adjusted operating profit was 386.8 billion yen. Please refer to page 24 of the appendix for details on the adjustments from GAAP profit to non-GAAP profit. Next are the results by segment. I will provide further details for each segment later, but both IT services and social infrastructure segments reported increases in both revenue and profit. First, the IT services segment. In Japan, revenue increased by 1.9% year-on-year, driven by strong performance in the public sector. On an actual basis, revenue increased significantly by approximately 9%. For adjusted operating profit, not only an increase in profit in accordance with revenue increase, but also by improved profitability centered around Blue Stellar and the effects of structural reforms and subsidiaries, profit increased substantially year-on-year by 72.5 billion yen and profit margin improved by 3 points. International DGDS saw improved profitability of three European companies and offset unprofitable costs incurred in other regions during the fourth quarter, resulting in a substantial increase in profit. Next is our domestic IT services broken down into the Blue Stellar and base businesses. Blue Stellar's scenario-based business, which resolves customer challenges through end-to-end solutions, has expanded steadily, particularly in the data-driven modernization sector, resulting in a 30% year-on-year increase in revenue and a profit increase of 35.8 billion yen. Both revenue and profit significantly exceeded the initial target set at the start of the fiscal year. In the base business, revenue declined due to the withdrawal of low-profit operations. However, profitability improved significantly, resulting in a profit increase of 36.8 billion yen compared to the previous fiscal year. Next, we'll look at the trends in domestic IT service orders. For domestic IT services, overall orders increased by 2% in Q4 and 1% for the full year on a real basis, with demand centered on digital transformation remaining robust by sector in the public sector. While orders for municipal government standardization and foreign disaster prevention projects peaked out, we secured large-scale projects for central government agencies, enabling us to maintain the high order volume achieved in FY 2025. In the enterprise segment, we secured projects steadily in Q4, particularly in the finance sector, resulting in performance on par with the previous year. Regarding hysterias, etc., AB maintains strong performance, scoring 11% in Q4 and 12% for the full year, continuing the positive trend from the previous year. Next, the social infrastructure segment. As explained during the Q3 earnings announcement, profits in the telecom services segment declined as a result of a thorough asset cleanup carried out in conjunction with the restructuring of the base station business. ANIS saw a significant increase in both revenue and profit, driven by strong performance in the aerospace and defense sectors. Order intake in aerospace and defense expanded further, reaching just under 600 billion yen. Additionally, as submarine systems, although we record additional construction costs in FY2026, the loss is narrowed. Business reforms are progressing steadily and going forward. Several large-scale projects secured in FY2026 will contribute to our performance.

Next, free cash flows. Operating cash flow increased by 94.1 billion yen year-on-year to 438.5 billion yen. As for breakdown, we had an increase in adjusted operating profit plus 99.7 billion yen. return of retirement benefit trust assets plus 140 billion yen and increase in working capital due to higher sales negative 120 billion yen. Investing cash flow improved 164.9 billion yen year-on-year to 33.7 billion yen. Main factors were sales of shares including JAE, acquisition and disposal of real estate. As a result, free cash flow increased 258.9 billion yen a year to 472.1 billion yen. Regarding CCC, due to higher Q4 sales, the end of period results worsened. However, improvement activities continue and average days improved by 5 days to 49 days. Next, progress on low-profit businesses. During the mid-term management plan period, we aimed to decide the direction of all target businesses. We monitored them under the leadership of CFO. As planned, by the end of March 2026, we decided the direction of all businesses. Over the past five years, a total of 14 businesses graduated from the monitoring post. For the remaining six businesses, we also determined whether to improve them independently or carve them out. Going forward, our business portfolio management will move to the next stage. In addition to monitoring based on hurdle rates, we will introduce a new evaluation system based on relative assessment. Through this, we aim to further strengthen profitability. Next, we will explain the FY March 2027 financial forecast. First, the overall company forecast. Until now, we disclosed both adjusted operating profit and non-GAAP operating profit. From FY March 2027, profit indicators will be unified to non-GAAP basis. Revenue for FY March 2027 is ¥3,500,000,000. Non-GAAP operating profit is ¥420,000,000. We have incorporated an allowance. The allowance reflects component risks and macroeconomic uncertainty. Allowance is 100 billion yen for revenue and 30 billion yen for non-GAAP operating profit. We will revise the forecast as needed based on business progress. The forecast does not include the performance of CSG, although the acquisition is planned within this fiscal year. Next, segment forecasts. Details for IT services and social infrastructure will be explained on the following pages. Of the allowance mentioned earlier, 100 billion yen in revenue is included in domestic IT services, while 30 billion yen in non-GAAP operating profit is included in adjustments. First, IT services. In Japan, revenue is expected to decline. This reflects the peak out of public sector projects such as municipal standardization and fire disaster prevention. It also reflects the component risks and macroeconomic risk of 100 billion yen. However, we will continue to accumulate orders while we aim to minimize the impact of lower revenue, so profitability is expected to improve. Driven by further expansion of Blue Stellar, non-GAAP operating profit is planned to increase 9.8 billion to 312 billion yen. The margin is planned at 15.3%. Overseas DGDF is also expected to improve. We will continue profitability improvement and curb unprofitable projects we had last year. As a result, profit will increase 4.3 billion yen to 38 billion yen. Next, we will explain March 2027 forecast for domestic IT services. We show it divided into Blue Stellar and base business. For Blue Stellar, it was the FY March 2031 targets announced on April 24, 1 trillion 300 billion yen in revenue and 25% in operating margin. We will expand scenarios using AI and improve profit. Productivity. Revenue in March 2027 is planned to increase by 135 billion yen to 840 billion yen. Non-gap operating profit is planned to increase 41 billion to 143 billion yen. Next, social infrastructure. For telecom services, revenue is expected to decline due to risks in the network infrastructure. Infrastructure business revenue is planned at 355 billion yen down 35.5 billion yen. Non-GAAP operating profit is expected to increase. This is due to the effects of structural reforms implemented in the previous year. Profit is planned to increase 18.9 billion yen to 48 billion yen. For ANS, profit is also expected to increase. This is driven by further expansion of aerospace and defense. It will reflect the return of to profitability in submarine system business. Nongap is expected increase by 24.6 billion to 79 billion yen. Next change is the result segments. From FY March 26, businesses in the telecom services domain will be reorganized. We will reallocate it to IT services and social infrastructure. IT services for telecom carriers In Japan, we'll be moved to domestic IT services. Netcore Cloud will move to international IT services. Network infrastructure business will be moved to social infrastructure. Finally, informational upcoming events. First, a briefing on the new midterm management plan will be held on May the 12th. In addition, NEC IR Day will be held on June 1. This event is for capital market participants. We will have a Q&A session. We hope this will deepen your understanding of initiatives in each segment. These initiatives are aimed at achieving the mid-term management plan. We look forward to your participation. This concludes my presentation. Thank you for your attention.