TechnoPro : Business Environment and Management Policies

Engineers

1. Alliance
2. M&A
3. Talent

Management

［Core Business Processes］

Human

Recruiting Resource Assignment

Development

1. Stable growth in core (engineer staffing) business

Diversification leveraging

knowledge of core businesses and contact points between customers and engineers

1. Shift toward higher added value

1. Globalization

(4) Move toward platforms utilizing IT and Data

Cyber

Security

Drone

Collaboration

X Engineers CASE

Development

Manufacturing DX Consulting

FY20.6 Results

1. Stable growth in core (engineer staffing) business
2. Shift toward higher added value
3. Globalization

Invested Capital

(JPY)

ROIC

Machinery,ITOther Elect/Electronics Infrastructure

1,660M5,214M2,826M

Invested

Capital ROIC

(JPY)

1,104M 15.3%

4,358M 7.3%

4,238M 6.8%

Invested Capital 9,700M

• For fully-owned subsidiaries, invested capital is considered share acquisition price plus assumed net debt. For other non-100% subsidiaries, invested capital is considered share acquisition price
• ROIC (Return on Invested Capital)= NOPAT (before PPA amortization, corresponding to ownership %) divided by Invested Capital

• Excluding entities merged with TechnoPro,Inc. (Techno Live, Misystem, Softworks)
  Total invested capital in three entities amounts to 1,503 million yen

SOW Strategy (Contract Services/ Solution)

Adding Misystem, with its strengths in ERP, Softworks, with its strengths in embedded software for automotive, and other tech-driven companies to our group has brought in talented project managers and accelerated SOW business growth

Further, organically, acquired solution projects through proposals to the clients for team assignment

Alliance Strategy (Ecosystem）

We are expanding alliances and partnerships for data scientists and cyber security experts to foster a challenging environment in leading-edge technologies

Targeting to deliver total solutions, in addition to resource delivery, to the customers by adding consulting function

Alliance Sales

2,000

1,500

Talent development/

Resource planning

• New college graduate training portal for Career Advisors (May 2019)

• Training suggestion (July 2020)
• Chat Bot – AI

Training

Platform incorporating

Analytical Engine

/Personal Portal

• Data Storage, Maintenance, Analysis, Automation (June 2019)

• Start personalized portal for engineers
• Promote self-awareness and proactiveness

of engineers (July 2020)

• Begin use with new graduate hires (Feb 2019), mid-career hires (July 2019)
• Horizontal rollout from model BU to other BUs (June 2020)

Assignment (Matching)

• Adopted LMS (learning management system) (May 2018)

• Centralized training program search engine including external training

■ Gathering new order info

– FY20.6 –

Revenue

• Negative impact by COVID-19 was realized in Q4 FY20.6 （Constraint on sales activities, Engineers on furlough, Hiring freeze etc.）
• Non-achievementof Guidance – delayed assignment led to lower # of billable engineers

Operating Profit

• Better performance up to Q3 and strict SG&A control (e.g. recruitment cost) in Q4
• Achieved Guidance, regardless of goodwill impairment loss of 915 million yen

– FY21.6 & FY22.6 –

Overlook and Strategy

• Engineering HR market condition will depend on depth and length of ensuing economic downturn
• Watch over contract renewal rate in 3-monthcycle
• Main scenario – Bottom-out in 2021 and gradual recovery through 2022
• FY21.6 – Minimize adverse impact based on strict KPI monitoring and continue to invest into education and training etc. for mid- to-long term growth
• FY22.6 – 1st year of new medium-termmanagement plan/ Revert to growth scenario, with business transformation

Others 1%

Construction

13%

Biochemical 2%

Chemical

4%

IT infrastructure

13%

SW Development/

Maintenance

28%

Machinery

19%

Electric/Electronic

10%

Embedded Control

10%

Decreased demand for design work on new product development

Tendency to be shifted overseas in every process level

Weak in overall demand, despite some semiconductor-related recovery

Demand related to IoT and sensors remains strong, with robotic control and high-end home appliances remaining particularly active

Demand remains strong, although mainly focused on upgrade and maintenance

Delays in start-up of new development projects

Consumer 4%

Electricity/

Gas/Public

5% Electronic Industrial

Component Machinery

6% 13%

Current medium-term management plan period

Results of 15% or morefor CAGR in first 3-year

COVID-19

New medium-term management plan period

Sustained CAGR of

10% or more

(including inorganic)

Adapting to a new business

environment while seizing business opportunities in the “New Normal”

In the medium to long term, transform from a “technology- focused staffing service” to a “technology solution service” company in the digital domain

Minimizing Adverse

Impact

Preparation for

Regrowth

Shift from Quantity to

Quality

• KPI management on daily basis
• Expansion of financing sources
• Temporary freeze on new hiring
• Thorough cost management
• Introduction of order information sharing system
• Sales support by engineers
• Maintaining employment (securing of resources)
• Strengthen training curriculum in the digital domain
• Promote collaboration with leading-edge technology ventures and influential IT vendors

• Manage daily utilization ratio, assignments and returns
• Predict and respond promptly to contract cancellation possibilities for each engineer by the analyses of processes, skills, client business conditions
• Enlarge line of credit facilities for working capital usage
• Obtain credit rating from the rating agency R&I for the purpose of diversifying funding (A-, Stable)
• Cut hiring costs by 70% YOY in the budget for FY21.6
• Classify all SG&A items by rank (A to C) according to necessity, and flexibly adjust these expenses according to business performance
• To make up for reduced sales visits, establish a system that enables our engineers to report clients’ technical needs and demand for engineers, leading to effective proposals and project acquisition
• Eliminate engineer anxiety and prevent retirement by communicating management’s strong will to protect employment status
• Expansion of training programs that utilize e-learning
• Utilize standby periods to support acquisition of digital skills expected to be in strong demand
• Training programs including data science and cybersecurity
• Increased numbers of engineers with IT vendor certifications

Digital Transformation (DX) needs accelerated by COVID-19

Technology

Company Initiatives

IT

Implementation support for cloud and RPA, data scientist training

Manufacturing

Training for manufacturing DX consulting, implementation support for robotics

Construction/Infrastructure

Drone surveying services, training

of engineers capable of BIM

Societal Needs

Creating a more convenient society through

digitalization

Encourage shift of human resources across

industries and companies

Solve supply-demand mismatch for new

technology and human resources

Societal and client needs are

evolving

Target M&A Sectors

Shift toward high added value

Acquire resources (human resources/ technology) for upstream processes, both domestically and internationally

• Consulting/ project management / delivery functions
• Digital/ new technology fields
• COE (Center of Excellence)

Globalization

Acquire offshore delivery capabilities

• Delivery hubs in India and elsewhere
• U.S and European client bases for offshoring services

Sourcing

• Proactive approach that follows a clear medium to long term strategy, based on our target list
• Leverage our Indian subsidiary as a sourcing hub for M&A
• Strengthen early-stage collaborations among our M&A team, business units, and PMI team

Selection Criteria

• ROIC > 10% (to be achieved within two-to- three years following acquisition)
• Quality of management team
• Feasibility of group collaboration synergies by leveraging Japanese client base