On January 29, 2021 NEC reported that Consolidated Financial Results for the Nine-month Period Ended December 31, 2020(Press release, NEC, JAN 29, 2021, View Source [SID1234574408])

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1. Consolidated Financial Results for the Nine-month Period Ended December 31, 2020 (April 1, 2020 – December 31, 2020)
2. Dividends
3. Consolidated Financial Results Forecast for the Year Ending March 31, 2021 (April 1, 2020 – March 31, 2021)

On January 29, 2021, the Company will hold a financial results briefing for the institutional investors and analysts.
Presentation materials will be posted on the company website after the release of financial results, and the presentation video and Q&A summary will be also posted on the company website promptly after the financial results briefing. In addition to the above, the Company periodically holds briefings on business and operating results for the individual investors.

Presentation materials and Q&A summary will be posted on the company website promptly after the briefing. For the schedule and details, please check the company website.1. Overview of Business Results As stated in the July 21, 2020 announcement, "NEC to Revise Operating Segments", starting from the first quarter of the consolidated financial results for the fiscal year ending March 31, 2021, the Company announced operating results using revised segments.

Figures for the corresponding period of the previous fiscal year have been restated to conform to the new segments. "Adjusted operating profit (loss)" is an indicator for measuring underlying profitability in order to clarify the contribution of acquired companies to the NEC Group’s overall earnings. It is measured by deducting amortization of intangible assets recognized as a result of M&A and expenses for acquisition of companies (financial advisory fees and other fees) from operating profit (loss). Also, "Adjusted net profit (loss) attributable to owners of the parent" is an indicator for measuring underlying profitability attributable to owners of the parent. It is measured by deducting adjustment items of operating profit (loss) and corresponding amounts of tax and non-controlling interests from net profit (loss) attributable to owners of the parent. (

1) Overview of Operating Results i) Overview of the nine-month period ended December 31, 2020 The world economy and the Japanese economy during the nine-month period ended December 31, 2020 both deteriorated significantly during the first quarter of the fiscal year ending March 31, 2021, due to the effects of restrictions on personal movement and suspension of sales and production activities due to the global pandemic of new coronavirus ("COVID-19").

Although the economy picked up slightly after the second quarter of fiscal year ending March 31, 2021, the economy remained slow. Under this business environment, the NEC Group recorded consolidated revenue of 2,044.4 billion JPY for the nine-month period ended December 31, 2020, a decrease of 131.2 billion JPY (-6.0%) year-on-year. This decrease was mainly due to decreased revenue in the Enterprise business, the Public Solutions business and the Global business, despite increased revenue in the Network Services business. Regarding profitability, operating profit improved by 4.5 billion JPY year-on-year, to an operating profit of 82.4 billion JPY, mainly due to improvement in selling, general and administrative expenses from expenditure efficiency, in addition to improvement in other operating income from gain on sales of land and gain on sales of subsidiaries, despite decreased revenue. Adjusted operating profit improved by 6.4 billion JPY year-on-year, to an adjusted operating profit of 97.0 billion JPY. Profit before income taxes was a profit of 85.8 billion JPY, a year-on-year improvement of 6.9 billion JPY, mainly due to improved operating profit. Net profit attributable to owners of the parent was a profit of 54.5 billion JPY, an improvement of 5.3 billion JPY year-on-year.

This was primarily due to improved profit before income taxes. Adjusted net profit attributable to owners of the parent improved by 6.8 billion JPY year-on-year, to an adjusted net profit attributable to owners of the parent of 63.7 billion JPY. In the Public Solutions business, revenue was 274.2 billion JPY, a decrease of 41.8 billion JPY (-13.2%) year-on-year, mainly due to decreased sales in sectors that include healthcare and regional industries, as well as reduced renewal demand for business PCs.

Adjusted operating profit (loss) worsened by 6.5 billion JPY year-on-year, to an adjusted operating profit of 11.4 billion JPY, mainly due to decreased sales. In the Public Infrastructure business, revenue was 460.5 billion JPY, a decrease of 4.7 billion JPY (-1.0%) year-on-year, mainly due to decreased sales at consolidated subsidiaries, despite increased sales in the government sector mainly from PCs for educational institutions on the back of the Japanese government’s GIGA school initiative. Adjusted operating profit (loss) worsened by 7.1 billion JPY year-on-year, to an adjusted operating profit of 35.3 billion JPY, due to decreased profit at consolidated subsidiaries despite increased profit in the government sector due to increased sales. In the Enterprise business, revenue was 354.4 billion JPY, a decrease of 54.7 billion JPY (-13.4%) year-on-year, mainly due to reduced IT investments in the manufacturing, retail and service sectors, in addition to decreased sales of large-scale projects as compared with the corresponding period of the previous year and reduced renewal demand for business PCs.

Adjusted operating profit (loss) worsened by 10.1 billion JPY year-on-year, to an adjusted operating profit of 26.2 billion JPY, mainly due to decreased sales.In the Network Services business, revenue was 365.8 billion JPY, an increase of 43.1 billion JPY (+13.4%) year-on-year, mainly due to an increase in sales in the mobile network domain and fixed network domain on the back of 5G adoption by telecom operators. Adjusted operating profit (loss) improved by 6.1 billion JPY year-on-year, to an adjusted operating profit of 19.9 billion JPY, mainly due to increased sales.In the Global business, revenue was 325.2 billion JPY, a decrease of 41.1 billion JPY (-11.2%) yearon-year, mainly due to decreased sales in the display area and the de-consolidation of subsidiaries in the display area and decreased sales in the wireless backhaul area, in addition to the termination of part of KMD’s business, which was expected from the time of its acquisition, despite increased sales of submarine systems. Adjusted operating profit (loss) improved by 6.5 billion JPY year-on-year, to an adjusted operating profit of 8.1 billion JPY, mainly due to gain on the sale of shares of subsidiaries, in addition to improved profitability in the business for service providers and increased sales of submarine systems.Adjusted operating profit (loss) worsened by 13.5 billion JPY year-on-year, to an adjusted operating profit of 9.6 billion JPY.

(2) Overview of Financial Position Analysis of the condition of assets, liabilities, equity, and cash flows Total assets were 3,343.9 billion JPY as of December 31, 2020, an increase of 220.6 billion JPY as compared with the end of the previous fiscal year. Current assets as of December 31, 2020 decreased by 67.1 billion JPY compared with the end of the previous fiscal year to 1,631.8 billion JPY, mainly due to the collection of trade and other receivables, despite increased inventories. Noncurrent assets as of December 31, 2020 increased by 287.7 billion JPY compared with the end of the previous fiscal year to 1,712.1 billion JPY.

This was mainly due to an increase in goodwill resulting from the acquisition of Avaloq Group and an increase in other financial assets resulting from the rising market value of equity securities. Total liabilities as of December 31, 2020 increased by 79.5 billion JPY compared with the end of the previous fiscal year to 2,088.2 billion JPY. This was mainly due to an increase in interest-bearing debt from issuance of commercial paper and long-term borrowings, despite a decrease in trade and other payables from the payment of materials cost. The balance of interest-bearing debt amounted to 833.6 billion JPY, an increase of 158.2 billion JPY as compared with the end of the previous fiscal year. The debt-equity ratio as of December 31, 2020 was 0.79 (a worsening of 0.05 points as compared with the end of the previous fiscal year).

The balance of net interest-bearing debt as of December 31, 2020, calculated by offsetting the balance of interest-bearing debt with the balance of cash and cash equivalents, amounted to 465.9 billion JPY, an increase of 149.7 billion JPY as compared with the end of the previous fiscal year. The net debt-equity ratio as of December 31, 2020 was 0.44 (a worsening of 0.09 points as compared with the end of the previous fiscal year). Total equity was 1,255.7 billion JPY as of December 31, 2020, an increase of 141.1 billion JPY as compared with the end of the previous fiscal year, mainly due to the execution of issuance of new shares by way of third-party allotment to Nippon Telegraph and Telephone Corporation ("NTT Corporation"), the increase in other components of equity resulting from the rising market value of equity securities, and the recognition of net profit for the nine-month period ended December 31, 2020, despite payment of dividends. As a result, total equity attributable to owners of the parent (total equity less non-controlling interests) as of December 31, 2020 was 1,049.4 billion JPY, and the ratio of equity attributable to owners of the parent was 31.4% (an improvement of 2.2 points as compared with the end of the previous fiscal year).

Net cash inflows from operating activities for the nine-month period ended December 31, 2020 were 86.6 billion JPY, a year-on-year worsening of 25.6 billion JPY, mainly due to an increase in the amount of reclassification to cash flows from investing activities such as gain on sales of land, despite improved profit before income taxes and working capital. Net cash outflows from investing activities for the nine-month period ended December 31, 2020 were 194.8 billion JPY, an increase of 131.8 billion JPY year-on-year, mainly due to the purchase of shares of newly consolidated subsidiaries resulting from the acquisition of Avaloq Group, despite an increase in proceeds from sales of property, plant and equipment. As a result, free cash flows (the sum of cash flows from operating activities and investing activities) for the nine-month period ended December 31, 2020 totaled cash outflows of 108.2 billion JPY, a year-on-year worsening of 157.4 billion JPY. Net cash flows from financing activities for the nine-month period ended December 31, 2020 totaled cash inflows of 112.7 billion JPY, mainly due to issuance of commercial paper, proceeds from issuance of common shares and proceeds from issuance of bonds, despite redemption of bonds, repayments of lease liabilities and dividends paid. As a result, cash and cash equivalents as of December 31, 2020 amounted to 367.7 billion JPY, an increase of 8.5 billion JPY as compared with the end of the previous fiscal year.

(3) Outlook for the Fiscal Year Ending March 31, 2021 There is no change to the outlook for the fiscal year ending March 31, 2021, as previously disclosed on October 29, 2020.3. Segment Information (1)General information about reportable segments The reportable segments of the NEC Group are determined from operating segments that are identified in terms of similarity of products, services and markets based on business, and are the businesses for which the NEC Group is able to obtain respective financial information separately, and the businesses are investigated periodically in order for the Board of Directors to conduct periodic investigation to determine distribution of management resources and evaluate their business results. The NEC Group has five reportable segments, which are Public Solutions, Public Infrastructure, Enterprise, Network Services, and Global businesses. Descriptions of each reportable segment are as follows: Public Solutions business mainly provides Systems Integration (Systems Implementation, Consulting), Maintenance and Support, Outsourcing / Cloud Services, and System Equipment, for Public, Healthcare, and Regional industries. Public Infrastructure business mainly provides Systems Integration (Systems Implementation, Consulting), Maintenance and Support, Outsourcing / Cloud Services, and System Equipment, for Government, and Media industry.

Enterprise business mainly provides Systems Integration (Systems Implementation, Consulting), Maintenance and Support, Outsourcing / Cloud Services, and System Equipment, for Manufacturing, Retail, Services and Finance industries. Network Services business mainly provides Network Infrastructure (Core Network, Mobile Phone Base Stations, Optical Transmission Systems, Routers / Switches) and Systems Integration (Systems Implementation, Consulting), and Services & Management (OSS/BSS, Service Solutions), for telecom market in Japan. Global business mainly provides Safer Cities (Public Safety, Digital Government), Software Services for Service Providers (OSS/BSS), Network Infrastructure (Submarine Systems, Wireless Backhaul), System Devices (Displays, Projectors), and Energy Storage System. Notes: OSS: Operation Support System, BSS: Business Support System

(2)Basis of measurement for reportable segment revenue and segment profit or loss Segment profit (loss) is measured by deducting amortization of intangible assets recognized as a result of M&A and expenses for acquisition of companies (financial advisory fees and other fees) from operating profit (loss). Intersegment revenues are made at amount that approximates arm’s-length pricesNotes: 1. "Others" mainly includes businesses such as business consulting and package solution services for the three-month period ended December 31, 2019 and 2020. 2. "Reconciling items" in segment profit (loss) includes amounts not allocated to each reportable segment that consist principally of corporate expenses of 13,913 million JPY and (5,744) million JPY for the three-month period ended December 31, 2019 and 2020, respectively.

Corporate expenses are mainly general and administrative expenses and research and development expenses incurred at the headquarters of NEC. Also these reconciling items include the gain on sales of the land of Sagamihara Plant recorded during this third-quarter. (4)Information about revising reportable segments From the first quarter of the fiscal year ending March 31, 2021, the NEC Group’s descriptions of the reportable segments have been revised based on a new performance management system and a new organization structure effective as of April 1, 2020.

Under the former organization structure, among the products and services provided by each business unit to customers, products and services managed by other business units were recorded as revenue in the segment to which the business unit managing the products and services belonged. However, sales revenue of products and services are now recorded in the business unit providing products and services to customers. Along with this, the "System Platform" segment is no longer an operating segment, and, excluding revenue recorded in other operating segments, revenue previously recorded in the "System Platform" segment, is now included in "Others". The NEC Group also made segment changes due to organizational reforms and changes in the management system of subsidiaries that have been implemented to accelerate business development related to digital transformation (DX) and strengthen business execution capabilities by integrating businesses with compatibility. In connection with this revision, segment information for the nine-month period ended December 31, 2019 and the three-month period ended December 31, 2019 has been reclassified to conform to the presentation of the revised segments for the fiscal year ending March 31, 2021.

4. Equity
(1)Increase in equity due to issuance of new shares and disposal of treasury shares by way of third-party allotment The board of directors of the Company passed a resolution as of June 25, 2020, to issue 12,376,600 new shares and dispose of 647,000 treasury shares (a total of 13,023,600 shares) at a price of 4,950 JPY per share, or 64,467 million JPY in total, to NTT Corporation by way of third-party allotment. The board of directors also passed a resolution as of the same date, to execute a capital and business alliance agreement with NTT Corporation, and executed the agreement on the same date. The payment for the shares has completed on July 10, 2020.

(2)Breakdown of other components of equity A breakdown of other components of equity as of March 31 and December 31, 2020, is as follows:5. Finance Income and Finance Costs6. Subsequent Events