Financial Results for the Fiscal Year ended March 2024

April 26, 2024

Yushi Ushijima, President & CEO

NEC Networks & System Integration Corporation

(TSE: 1973, NESIC)

© NEC Networks & System Integration Corporation 2024

Agenda

  1. Results for the FY2024/3
    II. Forecasts for the FY2025/3
  1. Results for the FY2024/3

FY2024/3 Summary

(¥ Bn.)

FY23.3

FY24.3

Change

Forecast

as at Jan. 2024

Orders received

356.0

377.2

+6%

370

Net sales

320.8

359.5

+12%

350

Gross margin

66.5

71.2

+4.7

ー

(to Sales)

(20.7%)

(19.8%)

-0.9pt

ー

SG&A

43.8

46.1

-2.3

ー

Operating income

22.8

25.1

+2.4

24.0

（to sales）

(7.1%)

(7.0%)

△0.1pt

(6.9%)

*

Net income

13.8

15.3

+1.5

14.0

attributable to owners of the parent

（to sales）

(4.3%)

(4.3%)

±0.0pt

(4.0%)

ＲＯＥ

10.0%

10.4%

+0.4pt

Free cash flows

-2.1

15.4

+17.5

Orders backlog

201.2

219.0

+9%

3 © NEC Networks & System Integration Corporation 2024

Both sales and profits substantially increased

despite of severe capex control

by telecom. Carriers

Updated record-high orders, sales and GP

Orders received:

  • Increased orders from enterprises and governments

Net sales：

  • Two digits growth with tail wind of sales from backlogs

（+ A large product PJ for a government agency received in 1Q: ¥7.5 Bn.)

Profits：

  • Incomes expanded with aggressive SG&A for growth*
  • Though worsened NWS biz and product PJs impacted GPM, DXS biz is on an improvement track

*Cost for a new ERP for the enforcement of Data management, human resource cost etc.

FY2024/3 Operating Income Analysis

Operating income increased by the growth of DXS and ESS

despite of severe NWS and increased SG&A

SG&A

+4.7* GP

-2.3

GP of ESS

GP of NWS

-1.4

+1.7

Dropped GPM

SG&A

Increased sales

-2.3

GP of DXS

+3.8

ERP, human costs

22.8

Increased sales

(7.1%)

+

～

Improved GPM

～

FY23/3

*including "others and elimination"

4 © NEC Networks & System Integration Corporation 2024

25.1

(7.0%)

～

～

FY24/3

FY2024/3 Orders Received by Segment

(¥ Bn.)

377.2

▐ DX Solutions (DXS)

+6%

356.0

⚫

Strategic areas such as workstyle DX and

336.8

securities expanded

132.8

+8%

• A subsidiary decreased due to absence of Covid-19

122.7

related demand (-2.5)

DXS

119.5

•

+18% high growth in 2H thanks to strong demand

▐ Network Solutions (NWS)

82.1

-11%

⚫ Telecom carrier related biz dropped

92.1

•

Social infra* dropped due to rebound of a large

NWS

84.3

order in 23/3 (-3.5)

(increased excluding the rebound impact)

*Space/national security, submarine and broadcast biz

ESS

128.7

132.7

142.6

+7%

▐ Environmental & Social Solutions (ESS)

⚫ Domestic construction biz such as road ICT

Others

4.3

8.6

19.7

and overseas biz increased

⚫ Acquired a large product order for a

22/3

23/3

24/3

government agency in 1Q (7.5)

5

© NEC Networks & System Integration Corporation 2024

*Segment information for FY22/3 has been reclassified numbers to reflect the segment change in April 2022.

FY2024/3 Net Sales by Segment

(¥ Bn.)

359.5

+12%

▐ DX Solutions (DXS)

310.3

320.8

⚫ Both of strategic areas and existing areas

increased

129.7

+14%

• A subsidiary decreased due to absence of Covid-19

DXS

114.2

related demand (-2.5)

108.0

▐ Network Solutions (NWS)

83.1

+5%

⚫ Telecom carrier related biz decreased

NWS

79.2

but social infra biz and new banknote related

81.9

biz of a manufacturing subsidiary increased

ESS

137.2

+15%

▐ Environmental & Social Solutions (ESS)

115.0

119.2

⚫ Domestic construction biz such as road ICT

increased

Others

5.5

8.1

9.5

⚫ A large product PJ for a government agency

22/3

23/3

24/3

was recorded as sales in 3Q (7.5)

6

© NEC Networks & System Integration Corporation 2024

*Segment information for FY22/3 has been reclassified numbers to reflect the segment change in April 2022.

FY2024/3 Operating Income by Segment

(¥ Bn.)

▐ DX Solutions (DXS)

%: to sales

25.1

+2.4

⚫ Operating income substantially increased thanks

23.2

22.8

(7.0％)

(-0.1pt)

to increased sales and improved GPM

(7.1％)

(7.5％)

+2.5

• Growth in strategic areas such as workstyle DX

15.7

drove the improvement

13.2

(+0.5pt)

DXS

13.0

(12.1％)

(11.6％)

▐ Network Solutions (NWS)

(12.1％)

-0.4

9.4

⚫

Despite of increased sales and efficient SG&A,

NWS

9.8

(-1.0pt)

(11.3％)

10.8

(12.3％)

operating income decreased due to dropped

(13.2％)

+1.9

GPM

12.6

ESS

8.2

10.7

(+0.2pt)

▐ Environmental & Social Solutions (ESS)

(9.2％)

(9.0％)

(7.1％)

⚫ Sales expansion lead the income increase

Others/

-8.9

-10.9

-12.5

-1.6

▐ Others/Elimination

Elimination

22/3

23/3

24/3

⚫ ERP renewal and personnel costs increased

7

© NEC Networks & System Integration Corporation 2024

*Segment information for FY22/3 has been reclassified numbers to reflect the segment change in April 2022.

FY2024/3 Gross Profit Margin by Segment

Company total

19.8%

YOY：-0.9pt

1H：+0.6pt

2H：-2.2pt

DXS

22.0%

YOY：+0.4pt

1H：+0.7pt

2H：+0.1pt

NWS

21.5%

YOY：-2.8pt

1H：-2.8pt

2H：-2.8pt

ESS

17.7%

YOY：-1.3pt

1H：+2.3pt

2H：-4.1pt

excluding one-shot factors

YOY：-0.4pt

1H：-0.6pt

2H：-0.2pt

  • Dropped NWS GPM

<> factors>

  • Overseas factors in FY23/3(ESS)
  • Product biz(DXS/ESS)

YOY：+0.8pt

1H：+0.7pt

2H：+0.9pt

  • Expanded high value-added biz. (Improved mix)

<> factors>

  • Strategic product biz (4Q)

YOY：-2.8pt

1H：-2.8pt

2H：-2.8pt

  • Decreased highly-profitable biz with telecom. carriers
  • Increased product area in social infra. preceding SI area.

YOY：-0.3pt

1H：-1.0pt

2H：+0.1pt

  • Impact of super profitable PJs in 1H FY23/3

<> factors>

  • Overseas factors in FY23/3 (Myanmar/Thailand)
  • Large product PJ for govt (3Q)

8 © NEC Networks & System Integration Corporation 2024

Progress of "Shift up 2024": Spiral-type Business Model

Topline growth + profitability improvement in DXS leading other areas

Topline

Record high

Consultation

Orders by this approach

5 times

-type

YOY

approach

*Approx. 20% of non-consolidated orders

  • Changed mindset of sales personnel for the approach
  • Horizontal expansion of the know-how

(Issues) Small contribution to profitability improvement

  • Enhancing data usage, consulting personnel

GP Margin

Large recurring accounts

Customer-

in private sector)

base

+8%

Enhance-

YOY

ment

*Orders received per an account +9%

  • Enforced co-creation & account strategy
  • Management using SFA

Slightly declined due to worsened

NWS

Improved DXS

High

Strategic area sales in DXS

value

+35％

business

added

YOY

  • Acquired demand for workstyle innovation, network security upgrade using DX

(Issues) Delay in DX-usage at other segments

⇒ESS (DX × Infra. business)

9 © NEC Networks & System Integration Corporation 2024

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NEC Networks & System Integration Corporation published this content on 26 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 26 April 2024 14:25:10 UTC.