NTT Data Group Corp

DUS:NT5

Earnings Call Transcript 2022-Q2

[Yo Honma, executive]

This is Honma from NTT DATA Corporation. Thank you very much for joining this briefing session on earnings results, despite your busy schedule. As before, this session is taking place in an online format.

Please go to Page 1. This shows today's agenda. Let's now move into the results for the second quarter. Please go to Page 3. This slide outlines the second quarter's results. As you can see here, following the first quarter, favorable performance was recorded. As for new orders received, in addition to steady contract wins in Japan, larger businesses abroad and FX impact led to an increase. As for net sales, across all segments, larger businesses and FX impact contributed to an increase.

Operating income was helped by sales growth and structural transformation abroad, and it posted surplus. We have just finished the first half. However, given the brisk performance, we are expecting to achieve the full year guidance.

Now against each measure, let me explain year-on-year changes by business segment. Please go to Page 4. I First, new orders received. For Public & Social Infrastructure segment, renewal and new contract wins from central government and ministries led to substantial increase. For the Financial segment, it faced drawback from previous year's large win, which led to a sharp drop. However, it had been factored in the initial forecast. Therefore, it is in line with our original expectation.

For the Enterprise & Solutions segment, it secured projects in manufacturing sector, leading to an increase. In North America, large project wins from corporate clients and FX impact contributed to growth. In EMEA and Latin America, especially in Spain and Europe, they won contracts and also FX impact led to significant growth.

Please go to Page 5. Next, let me get through the net sales. For Public & Social Infrastructure, businesses with telecom and government sectors increased, leading to an increase. For the Financial segment, the size of business for banks grew, and it led to increase. For Enterprise & Solutions, larger businesses in manufacturing and retail and services area led to an increase.

In North America, as we planned during this fiscal year, some businesses have been sold, which led to a decline. However, services for health care grew and FX impact contributed to sales increase. In EMEA and Latin America, in Europe and especially in Spain, larger businesses and FX impact.

Please go to Page 6. The next one is about operating income. For Public & Social Infrastructure and Financial segments, sales growth led to an increase. For Enterprise & Solutions segment, sales growth as well as reduced impact of COVID-19 led to improvement of profitability, and it resulted in an increase. In North America, in addition to sales growth, structural transformation impact and reduced expenses, led to an increase. In EMEA and Latin America, it gained from sales growth as well as structural transformation impacts such as better utilization, and it led to an increase.

As you can see, the first half was very strong. Therefore, we are expecting to achieve the full year guidance. However, as for the degree of upside, we are going to closely watch the economic trend and the control of unprofitable projects. And also, we are going to make a judgment on investments for key initiatives for future growth. And then we would like to make an assessment on that.

Next, let me talk about key initiatives during the first half. Please go to Page 12. First, let me explain key initiatives in Japan. Please turn to Page 14. This is digital disaster prevention platform to provide total support for disaster response operations. This platform has tapped into multiple solutions using digital technologies we have been working on. By leveraging our strength in the digital space, we will contribute to swifter disaster measures and prevention of secondary disaster.

Please turn to Page 15. This shows an open platform, connecting fintech companies, local governments and financial institutions. And we have launched open API marketplace. By connecting financial institutions and local governments, we will promote cross-sector digitization.

Please go to Page 16. This is about the digital management platform for Asahi Kasei Corporation. This enables centralization of sales data across different locations and visualize information for decision-making.

Now let me cover key initiatives approach. Please turn to Page 18. Improvement of profitability outside Japan is positioned as an important management issue and steady efforts are in progress. As you can see here, during the first half, in North America, some divestment has been complete. And in EMEA and Latin America, integration of operating companies are on track. Each region has been enjoying growth with digital businesses.

And I'm going into details from now and onwards. Please go to Page 19. This is a status of divestment in North America. Noncore or non-digital businesses such as staffing have been sold. Such divestment-related sales decline has been incorporated in our guideline.

Please turn to Page 20. This shows a situation with integration of brand and operating companies in EMEA and Latin America region. Brand unification has been made to NTT DATA brand in European region. And also in September, NTT DATA EMEAL was established under which everis and NTT DATA EMEA are going through integration. Going forward, under such unified brand and such an entity as one NTT DATA, we will provide optimal and high-value services.

Next, let me cover digital-related projects abroad. Please go to Page 21. This slide shows a digital and consulting project in North America. From a leading hospitality company as an ITO Digital partner, we were awarded a large deal. In the first quarter, we mentioned about the deferral of recording this deal, and we solidly secured this project in the second quarter.

Please go to Page 22. This is a project for smart solutions we provide for North American INDYCAR for one of popular sports. To improve better -- to improve the fan experience, we provide smart solutions, and we believe it will enhance our market presence.

Please go to Page 23. This is a digital project in EMEA and Latin America. From the Spanish public rail transport company, we won a 5-year contract to establish MaaS platform covering requirement definition and operation.

And finally, let me touch upon green initiatives that is a common topic, both for Japan and abroad. Please go to Page 24. In light of growing demand of carbon neutrality in society, we have newly created Green Innovation Office. This office is designed to visualize and reduce carbon dioxide emissions of our internal supply chain and also to provide global standard solutions so that we can help promote greener society. The rest of the slides explain topics by segment and numerical information. Therefore, let me skip those parts.

This concludes my presentation. Thank you very much for your attention.