QAs from earnings release meetings and others

August 7, 2025：1Q25 Financial Results Briefing (Online)

(*)This is a summary of questions and answers took place at the Briefing.
Abbreviations: FY25 stands for a fiscal year ending March 31, 2026, 1Q25 stands for the first quarter of FY25, 1Q24 stands for the first quarter of FY24, NW Services stands for Network Services and SI stands for Systems Integration.

Question: You mentioned that a CEO-led initiative was launched in June 2025 to strengthen security . Could you tell us more about the planned initiatives?

Answer: To enhance the company-wide security posture, we are strengthening our organizational framework and implementing technical measures, including the redesign of inter-system boundary defenses. These efforts are aimed at building a more robust and resilient security infrastructure.

Question: Regarding the substantial price increase of VMware licenses in the previous fiscal year, could you explain its impact on year-over-year performance?

Answer: In 1Q24, the negative profit impact related to VMware licenses was approximately ¥0.9 billion for SI and approximately ¥0.3 billion for NW services . These impacts have been largely resolved in 1Q25 through price pass-throughs and revisions.

Question: Among the newly secured large-scale projects, one involves building a global network for a major Japanese commercial bank . Have you undertaken similar projects in the past?

Answer: We have a proven track record of building and operating global networks for a wide range of industries, including financial institutions. We believe our past achievements and experience were key factors in securing this project.

Question: While revenue from IP services and outsourcing services remained strong in 1Q25, what factors caused NW services gross margin to remain at the same level as 1Q24 ?

Answer: Despite price revisions for certain NW services last October, higher fixed costs at the start of the fiscal year and additional expenses such as MVNO infrastructure replacement increased costs by approximately ¥0.3 billion year-over-year, keeping the gross margin flat. Over the medium to long term, we expect improvement driven by revenue growth from large-scale projects and a broader accumulation of NW services.

Question: In 1Q25, orders received for Systems construction and operations & maintenance strongly grew by 12.8% and 12.9% year-over-year, respectively . Do you have any concerns about securing resources?

Answer: Based on our track record, we have not experienced any significant issues in securing resources and expect to continue operating smoothly. We view the business environment as favorable and will further strengthen order accumulation, including large-scale projects.