Nippon Telegraph & Telephone (NTT)

Now, we would like to start the briefing on the financial results for the fiscal year ended March 31st, 2024, and financial forecast for the fiscal year ending March 31st, 2025. I am Hanaki from the IR office and will be serving as the facilitator today. First, I would like to introduce today's attendees. Mr. Shimada, member of the board, president, CEO. Mr. Hiroi, representative, member of the board, senior executive vice president. Mr. Nakamura, Executive Officer, Head of Finance and Accounting. Mr. Hattori, Executive Officer, Head of Corporate Strategy and Planning are present here today. Today's briefing session is streamed live. We are planning to stream it on our website at a later date, so we seek your understanding beforehand. As for today's explanation material, please refer to presentation materials I posted on our company IR website. On the first page, it shows the points to be noted, so please go through it as well. President and CEO Shimada will explain the outline of the financial results, followed by a Q&A from the floor. Mr. Shimada, please.

Thank you for joining us today. We appreciate your kind attendance. Allow me to present to you the financial results for fiscal year 2023 and also financial forecast for fiscal year 2024 at this time. Please turn to page four of the material. Operating revenue, operating profit, and profit all increased year over year. Operating revenue, operating profit, and profit all reached record high levels. As for operating revenue, well, revenue from electricity business at ENET dropped by 260 billion yen, driven by increasing revenue in integrated ICT business and global solution business operating revenue increased by 238.4 billion yen and reached 13,374.6 billion yen at the end of the day. Now, of the increase in revenue, impact from foreign currency accounted for roughly 200 billion yen. As for operating income, there was negative impact from costs related to disaster recovery and security, but cost reduction and streamlining of non-core assets helped to achieve increase of roughly 93.9 billion yen in operating profit, and the total was 1,922.9 billion yen. Profit increased 66.4 billion yen year-on-year due to increase in operating profit and reached 1,279.5 billion yen. As for EBITDA, increased by 127.9 billion yen year-on-year driven by increase in operating profit and reached 3,418.1 billion yen. as well as EPS. We achieved the target, which was the financial target of the previous military plan, which ended in fiscal 2023. So we achieved EPS of 14.8 at the end of the day. Please turn to the following page, page 5, please. This talks about connectivity factors by segment. Let's start from integrated asset protection, supported by increase in integrated solution in enterprise business, as well as asset impact driven by reorganization and growth in smart life business, focusing on finance and payment, both revenue and operating profit increased in this market segment. As for regional communication segment. There was negative impact from costs related to disaster recovery and security, but cost reduction and streamlining of non-core assets helped to achieve increase in both operating revenue and operating income. Turning to global solution business segment. Operating revenue and operating profit increased driven by increased revenue in public sector, finance, and enterprise business in Japan. Increased operating profit based on increased revenue Also, revenue dropped due to drop in revenue from electricity business at Anode Energy because they contained electricity procurement due to skyrocketing cost of power. But operating profit also declined because of the impact of increase of procurement cost compared to the previous year. So that is the situation presented to the other segment. Let me elaborate a little bit. In fiscal year 2022, profit from sales of electricity expanded due to jump in the market price. But in fiscal year 2023, the market price dropped, causing loss in sales, which led to operating loss on a year-on-year basis. Please turn to page seven. Page seven of the material, please. This shows you fiscal year 2024 results forecast. Fiscal year results forecast operating is anticipated. Increase year over year while operating profit to profit will decrease year over year. While there is 130 billion in negative impact from currency, we are aiming for record operating revenue based on increased revenue in global solution business. The guidance of operating profit and EBITDA is negative year on year, but if we exclude the one-time factor from the previous year, such as the streamlining of non-core assets, then we are actually in the positive territory as far as operating profit is concerned. We believe that fiscal year 2024 will be a year to evolve various measures toward the medium-term plan goals in fiscal year 2027. We will expand the base profit and actively implement various measures to increase operating profit over the medium term. Please turn to the following page. This shows you the project sectors by segment. Starting with integrated ICT segment. Because of the increase in both operating revenue and operating profit through increase in enterprise business based on expansion of integrated solutions business. As for regional communications segment, we expect both operating revenue and operating profit will decline because of the reaction toward the non-core asset streamlining in the previous year, as well as increased disaster recovery costs, and the continued drop in voice service and IP receiver revenue and packet communication revenue. But through selection of business and cost reduction based on improved efficiency, we are aiming to achieve inflection points so that we can indeed achieve growth in revenue and operating profit in the fiscal year 2027. So that is what we are aiming to achieve. As for global solution business segment, there's going to be an increase in both revenue and operating profit through growth in revenue driven by robust digitalization demand. As for the other segment, urban solutions revenue increased driven by expanded sales of residential homes, but as a result of the reaction to the strong sales in the previous year, operating revenue will increase, but operating profit will decline in this segment. Let's turn to page 9. Page 9, please. Here we talk about current profit levels and initiatives to reach medium-term targets. We actively streamline non-core assets to achieve the previous medium-term targets for which fiscal year 2033 was the final year, and we achieved significant profit increase. And so that being the case, in fiscal year 2033, we were able to achieve the EPS target as well. Although profits are expected to temporarily decline in fiscal year 2024, we will actively work on expanding growth areas and implement cost-structural reforms in order to achieve the new medium-term targets for fiscal year 2027. To be more specific, we will actively maximize return from investment in growth areas, also work to strengthen domestic and international enterprise business, leveraging synergy from integration of entity docomo and entity data. We also expect drastic cost of structural reforms to take place, and we're aiming to increase EBITDA by 20% in fiscal year 2027 compared to fiscal year 2022. So that is the growth in EBITDA that we're aiming to achieve. Please turn to the following page. I'd like to add one comment on the financial results. As you can see, our balance sheet is expanding, but most of the expansion is in line with the expansion of our finance and data center business, which are characterized as growth areas in our medium-term management strategy. As these businesses have distinct business and financial features compared to the telecommunication business, which is the main pillar of our existing business, we decided to disclose separately so that this may help our stakeholders in assessing the enterprise value as well as the creditworthiness of our company. As for the data center business, assets, liabilities, as well as EBITDA, operating revenue, and operating profit will be disclosed in the supplementary data for the annual results starting from fiscal year 2023. As for the finance business, we're reflecting the balance sheet for Monax and Oryx Credit, which are newly consolidated companies, starting from fiscal year 2023. But as full year results will be incorporated in the consolidated results starting from fiscal year 2024, what we're doing is we're planning to expand disclosure by the end of fiscal year 2024 as far as this segment is concerned. Please turn to page 11. Here we talk about shareholder return. At the board today, we resolved to increase year-end dividend per share to 2.6 yen, which represents an increase of 0.1 yen over the forecast at the beginning of fiscal year 2023. And end of dividends per share are forecasted to be 5.2 yen, which is an increase of 0.1 yen from fiscal year 2023. So these are resolved at the board. So dividends are expected to increase for the 14th consecutive year as a result of this effort. Let me now turn to topics.

From page 13, I will briefly go over them. First of all, I would like to explain about establishing NTT Docomo Global. In the Docomo Group, a new company will be established in July to manage and promote global business centrally and flexibly across various businesses. Within the group companies, NTT Digital, RXAI, and some overseas group companies will be transferred and start the expansion of application services such as Web3 and support open RAN implementation for telecoms globally. Through this, we aim to bring about richer lives and societies for customers around the world. Next page, please. Next, I will say about NTT precision medicine establishment. Precision medicine is a medical concept to provide optimal disease prevention and medical care that is personalized for each individual. Realizing precision medicine requires integrated collection, analysis, and utilization of medical healthcare data such as clinical trial data or medical examination data that is linked to an individual. Towards this realization, we will integrate assets and resources that are held by each of the companies within NTT Group, establish NTT Precision Medicine, which will conduct from data generation to utilization of data in a one-stop manner and make strenuous efforts in this business by partnering with all the stakeholders. Next, page 15, please. Next, I will explain about newly appointing CCXO and CAIO. In order to strengthen CX, we will newly appoint a chief customer experience officer at major entity group companies. In addition, customer engagement indicators will be reflected in executives' performance-based compensation. Furthermore, in order to promote AI first, We will newly appoint two chief AI officers, CAIOs. Next. It's regarding towards achieving net zero in 2040. Fiscal year 2023 actual results for Scope 1 and Scope 2 was 2.42 million tons and steadily progressing in the reduction faster than planned. In addition, as an interim target towards achieving net zero in fiscal year 2040, we are aiming for 17 million tons or 40% reduction of Scope 1, 2, and 3 in total to be achieved in fiscal year 2030. Next please. Next page please. I will explain about initiatives to roll out overseas business for ION. We hosted the Upgrade 2024 conference in San Francisco. Towards the implementation of ION and other technologies globally, we proposed R&D results and product developments, including distributed DC utilizing all photonics network in Tsutsumi, and this was reported. widely through domestic and international media and had many participations from overseas as well. Next, I will explain the status of the number of shareholders. Report the number of shareholders as of end of March. As you see on the right side of the chart, It shows the number of shareholders out of end of March. Historically, the number of shareholders was trending in a slight increase. However, after the announcement of a stock split, there is a continuous increase and has doubled. The proportion of shareholders in their 40s or younger has increased approximately four times. and the age composition has become more diverse. Next page, please. As for the medium-term management strategy, the progress since this February is as shown here. This concludes my explanation.