20200206 Information Meeting Materials for the First Three ... · Fiscal 2020 First Three Quarters: Financial Highlights ... over the corresponding period a year ago and moving at

© 2020 TIS Inc.

Information Meeting Materials

for the First Three Quarters of the Fiscal Year

Ending March 31, 2020

February 6, 2020

© 2020 TIS Inc. 2

Fiscal 2020 First Three Quarters Financial Highlights

Fiscal 2020 Performance Forecast

Reference Materials

© 2020 TIS Inc. 3

Fiscal 2020 First Three Quarters: Financial Highlights

• Against a favorable business backdrop, sales and income were up over the corresponding period a year ago, thanks to higher business volume and efforts to improve profitability.

In sectors where IT investment is showing

renewed growth, we emphasized accurate

identification of client needs and were

rewarded with higher sales, year-on-year.

Up year on year, paralleling increase in

operating income.

Increase in gross profit, reflecting higher net sales

starting point and enhanced profitability,

absorbed rising selling, general and administrative

expenses, primarily costs associated with stronger

response to restructuring. Operating income was

up year-on-year.

[Millions of yen]

8.3% 9.4%

First Three Quarters of Fiscal 2019




5.6% 6.4%



Operating margin

Net income to net sales ratio

YOY change: +¥16,048 million [+5.3%] YOY change: +¥5,080 million [+20.3%] YOY change: +¥3,456 million [+20.4%]

Operating Income Net Income Attributable to Owners of the Parent Company Net Sales

302,961 319,009

25,022

30,103

16,979

20,436

Extraordinary income: ¥7,232 million (YOY change - ¥7,128 million) Extraordinary loss: ¥7,196 million (YOY change - ¥6,051 million

© 2020 TIS Inc. 4

Fiscal 2020 First Three Quarters: Sales and Income for Key Segments-1

4.9%

7.2%







6.2% 5.7%



YOY change: -¥146 million [-2.8%] YOY change: +¥413 million [+30.5%]

Service IT Business BPO

Operating Income Operating Income

YOY change: +¥5,754 million [+6.8%] YOY change: -¥3,116 million [-11.2%]

Net Sales Net Sales

84,146

5,258 5,112

89,901 27,736 24,619

1,354

1,767

Sales increased year on year, mainly due to expanded payment settlement-related business. Operating income decreased year on year, primarily due to higher prior investment to reinforce business pursuits as well as revision in strategy to strengthen platform business.

Impact from sale of subsidiaries, undertaken in previous fiscal year as part of effort to concentrate resources into core operations, had big impact, leading to lower sales but higher income.

[Millions of yen]

Operating margin

Operating margin

*Segment sales include intersegment sales.

© 2020 TIS Inc. 5

Financial IT Business Industrial IT Business

Fiscal 2020 First Three Quarters: Sales and Income for Key Segments-2

6.9% 8.7%







11.5% 12.8%



YOY change: +¥1,520 million [+16.9%] YOY change: +¥3,374 million [+36.6%]


Operating Income Operating Income

Net Sales Net Sales

77,953

8,989 10,510

81,963 133,470

144,506

9,226

12,601

Despite impact from reactionary drop in demand for large system development projects, segment recorded higher sales and income, mainly due to wider IT investment activity by core clients.

Higher sales and income year on year, largely the result of greater IT investment activity among wide range of industries, including core clients in energy- and manufacturing-based industries.


Note: Paralleling a shift—from Industrial IT Business to Financial IT Business—in know-how used in services provided to specific clients, transactions with such clients

were booked under Industrial IT Business up to fiscal 2019 and Financial IT Business from fiscal 2020.

[Millions of yen]

Operating margin

Operating margin

© 2020 TIS Inc. 6

Fiscal 2020 First Three Quarters: Net Sales and Operating Income Analysis


302.96

319.00

25.02

30.10

Service IT ＋5.75

[84.1489.90]

Service IT -0.14

[5.25 5.11]

BPO ＋0.41

[1.35 1.76]

Financial IT ＋1.52

[8.98 10.51]

Other -0.04

[0.71 0.67]

Inter-segment -0.03

[-0.52 -0.55]

+16.04 [+5.3%]

+5.08 [+20.3%]

BPO -3.11

[27.73 24.61]

Financial IT ＋4.00

[77.95 81.96]

Other -0.30

[6.80 6.49]

Inter-segment -1.33

[-27.14 -28.47]

Net Sales

Operating Income

Industrial IT ＋3.37

[9.22 12.60]

Industrial IT +11.03

[133.47 144.50]

[Billions of yen]




© 2020 TIS Inc. 7

Prior investment costs incurred in promoting structural transformation: Up ¥1.39 billion (YOY)

Costs related to

Fiscal 2020 First Three Quarters: Operating Income Analysis, Increase/Decrease Reasons


25.02

30.10

Increased sales +3.80

+5.08 [+20.3%]

Improved Profitability

+4.40

Increased SGA expenses

-3.12

Increased gross profit +8.20

YOY Change

Gross profit margin

Actual 23.4%

[YOY change +1.5 points]

Brand-related costs incurred to ensure quick recognition in market: Up ¥80 million (YOY)

[Billions of yen]


Software investment to create new services

Investment in human resources to fuel structural transformation

Investment in R&D to acquire advanced technologies

© 2020 TIS Inc. 8

6.3% 7.0%

3rd Quarter of Fiscal 2019


Services IT Business



9.5% 10.7%





6.7% 8.8%



99,931 102,713 9,480

11,003 6,287

7,169

+2,782 [+2.8%]

+882 [+14.0%]

+1,523 [+16.1%]

Operating margin

27,990 30,033

1,861

2,654

Net Sales Operating Income Net Income Attributable to

Owners of the Parent Company

BPO



5.7% 9.2%



61,930 63,000

（計画）

5,179 4,800

営業利益率

（計画）

営業利益

Financial IT Business



13.0% 13.5%



25,230 26,506

3,273 3,584

Industrial IT Business



8.7% 9.1%



43,605 45,092

3,805 4,088

9,476 8,397

539

773

+2,042 [+7.3%]

+792 [+42.6%]

-1,079 [-11.4%]

+234 [+43.5%]

+1,276 [+5.1%]

+310 [+9.5%]

+1,487 [+3.4%]

+282 [+7.4%]

(Reference) Fiscal 2020 Third Quarter (October - December) : Sales and Income for Key Business Segments

[Millions of yen]

Net Sales Net Sales Net Sales Net Sales

Operating Income Operating Income Operating Income Operating Income

Net income to net sales ratio

Operating margin Operating

margin


margin


© 2020 TIS Inc. 9

(Reference) Fiscal 2019 Third Quarter (October-December): Operating Income Analysis, Increase/Decrease Reasons

9.48

11.00


＋1.52 [+16.1%] Improved

profitability +2.16


-1.35

[Billions of yen]

YOY Change

Prior investment costs incurred in promoting structural transformation: Up ¥0.39 billion (YOY)

Costs related to

Brand-related costs incurred to ensure quick recognition in market: Up ¥80 million (YOY)




Third Quarter of Fiscal 2019

Third Quarter of Fiscal 2020

Gross profit margin

Actual 25.3%


Increased gross profit +2.87

© 2020 TIS Inc. 10

Fiscal 2020 First Three Quarters: Sales by Client Sector

54,720

18,399 20,103 14,071

33,262 28,337 23,862

73,812

23,344

13,046

53,741

22,187 21,584 17,411

32,877 28,594 24,874

82,066

24,032

11,639

Credit card Banking Insurance Other finance Assembly-based manufacturing

Processing-based manufacturing

Distribution Service Public institutions Others

First Three Quarters of Fiscal 2019 First Three Quarters of Fiscal 2020

16.8%

7.0%

6.8%

5.5%

10.3% 9.0%

7.8%

25.7%

7.5%

3.6%

18.1%

6.1%

6.6%

4.6%

11.0% 9.3%

7.9%

24.4%

7.7%

4.3%

Credit card

Banking

Insurance

Other finance

Assembly-based

manufacturingProcessing-based

manufacturingDistribution

Service

Public institutions

Others

Net Sales Break-

down by Client Sector

Net Sales Break-

down by Client Sector

[-1.8%]

[+20.6%]

[-1.2%] [+0.9%]

[+4.2%] [+2.9%]

[+11.2%]

[+7.4%] [-10.8%] [+23.7%]

[Millions of yen]

First Three Quarters of Fiscal 2019 First Three Quarters of Fiscal 2020

Financial sector: 35.4 % Industrial sector: 52.6 %

Public sector: 7.7 % Other sectors: 4.3%

Financial sector: 36.1 % Industrial sector: 52.8 %

Public sector: 7.5 % Other sectors: 3.6 %

© 2020 TIS Inc. 11

• Orders received during the first three quarters and order backlog at the end of the third quarter were up over the corresponding period a year ago and moving at a brisk pace. Results driven by Service IT Business, particularly payment services.

Fiscal 2020 First Three Quarters: Order Status (Software Development)

45,762 47,797

34,883 41,419



19,538 23,011

15,109 17,669



167,241 175,008

72,428 77,328

YOY change +¥7,766 million [+4.6%] YOY change +¥4,899 million [+6.8%]

Order received during first three quarters

Order backlog at end of first three quarters

[+18.7%]

[+4.4%]

[-0.9%]

[+16.9%]

[+17.8%]

[-3.0%] 86,596 85,791 37,780 36,647

[Millions of yen]







* Percentage figures in columns indicate increase or decrease from the previous term.



© 2020 TIS Inc. 12

1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half

Fiscal 2017 Fiscal 2018 Fiscal 2019 Fiscal 2020

54,753 [+12.2%]

56,623 [+11.5%]

62,826 [+1.8%]

51,133 [+12.9%]

53,437 [+0.1%]

104,569 [+6.0%]

46,318 [-1.6%]

57,419 [-6.8%]

103,737 [-4.6%]

52,047 [+1.8%]

54,949 [+2.8%]

106,996 [+2.3%]

48,802 [+5.4%]

63,427 [+10.5%]

112,229 [+8.2%]

50,779 [-2.4%]

61,709 [+12.3%]

112,488 [+ 5.1%]

71,057 [+12.0%]

125,810 [+12.1%] 119,450

[+6.2%]

Changes in Orders Received (Software Development)

55,558 [+1.5%]

[Millions of yen]


Second quarter of first half

First quarter of first half

Fourth quarter of second half

Third quarter of second half

© 2020 TIS Inc. 13

Changes in Orders Received (Software Development, by Business Segment)

10,690

10,699

21,389

11,360 [+20.2%]

12,630 [+6.0%]

23,990 [+12.3%]

14,340 [+23.4%]

1st Half 2nd Half 1st Half 2nd Half 1st Half 2nd Half

Fiscal 2018 Fiscal 2019 Fiscal 2020

29,293 [+3.2%]

12,990 [+20.6%]

14,228

17,145

31,373

14,181 [-9.0%]

23,411 [-2.5%]

37,592 [-5.0%]

27,128

27,105

54,233

29,212 [+22.9%]

35,014 [+27.3%]

64,226 [+25.3%]

9,454

11,914

21,368

15,577

24,013

39,590

23,772

27,500

51,272

11,623 [+8.7%]

11,900 [+11.2%]

23,523 [+10.0%]

10,771 [-24.3%]

20,810 [+21.4%]

31,581 [+0.7%]

28,384 [+4.6%]

29,000 [+7.0%]

57,384 [+5.8%]

27,941 [+18.8%]

13,601 [+14.3%]

32,082 [+1.6%]

19,092 [-8.3%]

59,425 [+3.6%]

30,132 [+3.9%]

13,477 [+18.6%]

15,714 [+10.8%]

26,365 [-9.7%]

[Millions of yen]







Second quarter of first half

First quarter of first half

Fourth quarter of second half

Third quarter of second half

© 2020 TIS Inc. 14



Reference Materials

© 2020 TIS Inc. 15

Fiscal 2020: Performance Forecasts-1

Fiscal 2019 Fiscal 2020

9.0%


6.2%


Operating margin

420,769 436,000 38,043

42,000

26,034 28,800

[Estimate]

YOY Change : +¥15,231 million [+3.6%] YOY Change : +¥3,957 million [+10.4%] YOY Change : +¥2,766 million [+10.6%]

9.6% 6.6%

• Amid a brisk demand environment, vigorously invest in growth domains and forte fields to facilitate structural transformation described in medium-term management plan. Offset reactionary drop in large projects and absorb investment costs, in pursuit of higher sales and income.

No change to targets since announcement on November 1, 2019.

Focusing on service IT and industrial IT demand, strive to expand business through accurate responses to IT investment needs of clients. Will absorb impact from sale of subsidiaries and expect high sales year on year.

Continued efforts to utilize high sales effect and improved productivity. Will absorb higher cost burden on investments to fuel structural transformation including shift to prior investment approach. Should see year-on-year increase in operating income.

Increase in operating income and net extraordinary income should deliver year-on-year improvement in income attributable to owners of the parent company.

[Millions of yen]

Net Sales Operating Income

[Estimate]

[Estimate]

Net Income Attributable to Owners of the Parent Company

Net income to net sales

ratio

© 2020 TIS Inc. 16

Fiscal 2020: Performance Forecasts-2

YOY change: +¥35.24 [+11.4%]


11.5%


12.1% [Current calculations]

343.07

307.83

YOY change: +0.6P

Net Income per Share ROE

*Forecast for net income per share calculated by dividing anticipated

net income attributable to owners of parent by average number of

shares outstanding (excluding treasury stock) for the first three

quarters of fiscal 2020, as of December 31, 2019.

Upward revision to full-year performance targets is key factor in expectation to achieve medium-term management plan target of 12% a year ahead of schedule.

• ROE expected to reach 12.1%, exceeding medium-term management plan final-year target of 12% a year ahead of schedule.

Anticipating year-on-year improvement, paralleling higher net income attributable to owners of parent.

[Yen]

[Estimate]

© 2020 TIS Inc. 17

5.1% 6.5%



7.2% 6.4%


117,617

8,519

36,231 32,400

1,843 2,100

Sales should increase year on year, as TIS INTEC Group meets IT investment needs in growth fields, such as the cloud and networks, and steadily capitalizes on greater demand for payment settlement and ERP services. Despite this, income may decrease year on year, mainly due to the losses booked in the first half period.

YOY change: +¥257 million [+13.9%]

7,900

122,900

YOY change: -¥3,831 million [-10.6%]

Service IT Business BPO

Despite year-on-year drop in sales due to sale of subsidiaries, operating income should rise, reflecting efforts to improve profitability through restructuring based on thorough profit management and a shift toward high-level, combined BPO services.

Operating Income

Net Sales

Operating Income

Net Sales

YOY change: +¥5,283 million [+4.5%]

YOY change: -¥619 million [-7.3%]

[Estimate]

[Estimate]

[Estimate]

[Estimate]

Operating margin

Operating margin


[Millions of yen]

Fiscal 2020: Sales and Income for Key Business Segments -1 [Forecast]

© 2020 TIS Inc. 18

7.8% 9.1%



12.0% 12.7%


106,436

12,797

189,595 199,800

14,777

18,100 13,900

109,800

Financial IT Business Industrial IT Business

Despite reactionary drop in sales associated with large projects, operating income should increase year on year, reflecting efforts to strengthen ties to core clients, engage in value-added services and improve productivity.

Anticipating higher sales and income year on year through high-value-added services underpinned by consultations and enhanced upstream operations as well as higher productivity.

Operating Income

Net Sales

Operating Income

Net Sales



[Estimate]

[Estimate]

[Estimate]

[Estimate]

[Millions of yen]




Operating margin

Operating margin

Fiscal 2020: Sales and Income for Key Business Segments -2 [Forecast]

© 2020 TIS Inc. 19


38.04

42.00


＋3.95 [+10.4%]

Improved profitability

+4.07


-3.76

Increased gross profit ＋7.71

Fiscal 2020 : Net Sales and Operating Income Analysis [Forecast]

[Billions of yen]

Gross profit margin

Actual 23.5%


Anticipate prior investment costs for promoting structural transformation : Up ¥2.5 billion (YOY)

Costs related to

Anticipate brand-related costs to ensure quick recognition in market: Up ¥500 million (YOY)




YOY Change

© 2020 TIS Inc. 20

Stock Split and Partial Amendment to Articles of Incorporation

■Stock Split

• Management has decided to execute a 1-for-3 stock split with a record date of March 31, 2020, and to partially amend the Articles of Incorporation.

■Partial Amendment to Articles of Incorporation

Purpose: To increase the liquidity of the Company’s stock and expand the Company’s investor base by lowering stock price per investment unit

Summary

Reason: In conjunction with the stock split, TIS will adjust the total number of authorized shares described in Article 5 of the Company’s Articles of Incorporation, effective April 1, 2020, in accordance with the provisions of Article 184, Paragraph 2 of the Companies Act.

Content

Method Split into three shares for every one share of ordinary stock

Number of shares outstanding before split

87,789,098 shares

Number of shares outstanding after split

263,367,294 shares (Number of shares added through stock split: 175,578,196 shares)

Date of record March 31, 2020 (planned)

Effective date April 1, 2020 (planned)

Total number of authorized shares before amendment

280,000,000 shares

Total number of authorized shares after amendment

840,000,000 shares

© 2020 TIS Inc. 21



Reference Materials

© 2020 TIS Inc. 22

7.0% 7.1%

Second Half of Fiscal 2019


Service IT Business



10.3% 10.4%





8.3% 8.6%



217,739 219,704 22,501 22,900 15,342 15,534

+1,965 [+0.9%]

+192 [+1.3%]

+399 [+1.8%]

61,461 63,033

5,123 5,443

BPO



5.7% 6.8%



61,930 63,000 （計画）

5,179 4,800

営業利益率

（計画）

営業利益




13.2% 12.8%



53,713 54,344

7,082 6,975




9.4% 9.6%



99,731 100,387

9,357 9,588

17,972 16,179

1,028 1,107

+1,572 [+2.6%]

+320 [+6.2%]

-1,793 [-10.0%]

+79 [+7.7%]

+631 [+1.2%]

-107 [-1.5%]

+656 [+0.7%]

+231 [+2.5%]

Fiscal 2020 Second Half: Sales and Income for Key Business Segments [Forecast]

[Millions of yen]

Net Sales Net Sales Net Sales Net Sales

Operating Income Operating Income Operating Income Operating Income

*Estimated amounts for the second half of Fiscal 2020 are calculated by subtracting the first half results from the annual estimates of Fiscal 2020.


[Estimate]

[Estimate] [Estimate]

[Estimate] [Estimate] [Estimate]

[Estimate]



Net Sales Operating Income Net Income Attributable to

Owners of the Parent Company


margin

Operating margin

Operating margin

Operating margin

TIS INTEC Group Logo Underlying Concepts

The logo portrays the TIS INTEC Group as a tightly knit team, powered forward by the different sets of expertise that each member brings to the table. It

features our two main corporate colors: “ocean blue” for the new challenges that we are constantly tackling, and “intelligent gray” for the solid technological

foundations that underpin our business.

Brand Message “Go Beyond”

The brand tagline, “Go Beyond,” embodies our constant quest into the beyond in search of new challenges. It represents our firm commitment as a group to

delivering solutions that are always one step ahead, not only solving clients’ problems but anticipating and meeting their own customers’ needs too.

Cautionary Statements

• All statements described in these materials are based on information available to management regarding the TIS INTEC Group—that is, TIS and the

subsidiaries under its umbrella—as of the presentation date and certain assumptions deemed reasonable at this time. No intent is implied of promise by

the Company to achieve such forward-looking statements. Indeed, various factors may cause future results to be substantially different from the

assumptions presented in these materials.

• Amounts for each three-month quarter are calculated by subtracting data for the respective period from the cumulative total.

• From the fiscal year ending March 31, 2019, Business segments were reclassified at TIS, paralleling changes in the management structure designed to

promote the shift to a new business structure. For comparison purposes, figures for fiscal 2018 have been recalculated and are presented according to the

new segment breakdown

Documents

20200206 Information Meeting Materials for the First Three ... · Fiscal 2020 First Three Quarters: Financial Highlights ... over the corresponding period a year ago and moving at