nri business outline · 2020-06-12 · accumulate nri expertise about the customer industry stage 1...

NRI Business Outline(FY March 2021)

(Update: August. 2020)

Nomura Research Institute, Ltd.

1Copyright（C） Nomura Research Institute, Ltd. All rights reserved.These materials were prepared for the sole purpose of providing information to use as reference in making investment decisions, and are not intended as a solicitation for investment.

About NRI 1

Medium-Term Management Plan (2019-2022)2

Recent Achievements3

Dividends and Shareholder Information4

Reference5


Corporate Information

Research Department, Nomura Securities

Computer Department,Nomura Securities

Nomura Research Institute Nomura Computer Systems

(Forerunner)

Established 1965 Established 1966

(Forerunner)

Merged 1988

Listed on the 1st Section of Tokyo Stock Exchange(TSE)(Securities Code: 4307)

(Corporate Data)

Nomura Research Institute, Ltd.

Capital JPY 21,175,164 K

Chairman and President & CEO, Member of the board

Shingo Konomoto

Number of employees(consolidated)

13,761(As of end-June, 2020)

(FY March 2020 Financial Results)Consolidated sales JPY 528.8 billion

Consolidated operating profit JPY 83.1 billionDec. 2001

Spun offSpun off


Business Performance

0

20

40

60

80

100

0

100

200

300

400

500

600

700 Sales Operating Profit

Global Financial Crisis

Listed on 1st

section of TSE

FY

Collapse of Japan’s bubble economy

Sales(JPY billion)

Operating Profit(JPY billion)

Burst of Japan’s Dot-com bubble

77.9 90.3 00.3 10.3 20.3 23.3(e)21.3

(e)


Financial HighlightsFY 10.3 11.3 12.3 13.3 ・・・ 17.3 18.3 19.3 20.3 21.3(e)

Sales 338,629 326,328 335,554 363,891 424,548 471,488 501,243 528,873 540,000EBITDA*1 70,992 69,094 74,027 86,567 88,933 101,223 108,846 117,419 -Operating Profit 40,077 38,426 43,152 43,967 58,514 65,138 71,442 83,178 83,000Profit attributable to owners of parent 21,856 23,188 32,920 28,612 45,064 55,145 50,931 69,276 84,000

EPS(JPY)*2 112 119 168 145 181 228 21672 109.35 98.96

DPS(JPY) *2 52 52 52 52 80 90 9030 32 34

Total Assets 363,368 380,032 402,784 432,222 628,944 643,117 612,192 533,151 -Shareholders’ Equity 220,237 231,074 258,276 290,818 447,297 432,674 425,032 287,153 -(％)

OPM 11.8 11.8 12.9 12.1 13.8 13.8 14.3 15.7 15.4ROE 10.3 10.3 13.5 10.5 10.7 12.9 12.3 20.3 -ROA 11.4 10.8 11.4 11.0 9.7 10.3 11.5 14.8 -EBITDA Margin 21.0 21.2 22.1 23.8 20.9 21.5 21.7 22.2 -Equity Ratio 60.3 60.5 63.8 66.9 69.1 65.2 67.1 50.9 -(Personnel)

Employee Group(Consolidated) 6,263 6,594 6,881 7,738 11,605 12,708 12,578 13,278 -(Year end) NRI(Non-consolidated) 5,314 5,560 5,739 5,823 6,003 6,130 6,297 6,353 -

(JPY million)

*1 EBITDA(FY10.3 – FY17.3) = operating profit + Depreciation and amortization + goodwill amortizationEBITDA(FY18.3 – FY20.3) = operating profit + Depreciation and amortization + goodwill amortization + loss on retirement of fixed assets

*2 NRI conducted 1-for-1.1 stock splits of common shares effective of October 1, 2015, and January 1, 2017. Also, NRI conducted a 1-for-3 stock split of common shares effective July 1, 2019. Earnings per share (EPS) and Dividends per share (DPS) has not been retroactively restated for the stock splits, except for the italicized figures in the second row under the FY19.3 column.


IT Services Competitive Landscape (Japan)

Financial Results for FY March 2020(JPY million)

System Integrator Hardware vendor

Source: NRI, based on each company’s financial results, as of July 2020

Code Company name Sales OP OPM Sales per employee

OP peremployee

4307 NRI 528,873 83,178 15.7% 39.83 6.26 9613 NTT DATA CORPORATION 2,266,808 130,937 5.8% 17.01 0.98

4739 CTC (ITOCHU Techno-Solutions Corporation) 487,018 41,667 8.6% 55.29 4.73

3626 TIS Inc. 443,717 44,839 10.1% 22.47 2.27

9719 SCSK Corporation 387,003 42,326 10.9% 27.68 3.02

8056 Nihon Unisys, Ltd. 311,554 26,139 8.4% 39.78 3.33

2327 NSSOL (NS Solutions Corporation) 274,843 28,387 10.3% 41.39 4.27

6702 FUJITSU LIMITED*1 3,163,200 248,500 7.9% 28.45 2.23

6501 Hitachi, Ltd.*2 2,099,426 249,412 11.9% 28.75 3.41

6701 NEC Corporation*3 1,411,256 109,613 7.8% 39.13 3.03

*1 Technology Solutions segment*2 IT segment*3 Public segment + Enterprise segment


IT Services Competitive Landscape (Japan)

Comparisons of Sales and Operating Profit Margin

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

100 200 300 400 500 600 700 800 900 1,000 1,100 1,200 1,300

● FY March 2019 (Result)

TIS

・・・ 1,800

NTT DATA

CTC(ITOCHU Techno Solutions)

SCSK

NSSOL(NS Solutions)

NRI

Nihon Unisys

1,900 2,000 2,100 2,200Sales (JPY billion)

Operating Profit Margin (%)


IT Services Competitive Landscape (Global)

EBITDA Margin Comparison

0.0

5.0

10.0

15.0

20.0

25.0

30.0

FY2015 FY2016 FY2017 FY2018 FY2019

NRIIBM

CognizantAccentureCapgemini

(％)

(Note) Based on earnings closed in the following months, respectively.Accenture: Aug.; IBM, Cognizant, Capgemini: Dec.; NRI: Mar. next year

(Source) Competitors’ data were obtained from Speeda


Sales by Segment

Financial IT Solutions51.7%

Other Financial8.2%

Banking9.6%

Insurance12.6%

Securities21.3%

Distribution12.6%

Manufacturing, Serviceand Other 21.1%

Industrial IT Solutions 33.7%

IT Platform Services 7.2% Consulting 7.3%

Asset management, etc.

Data center operation & management Creation of IT platforms and networks Information security services

Management consulting Systems consulting

FY Mar.2020Consolidated Sales

JPY528.8billion

Sales by Customer

FY20.3

Nomura Holdings12.3%Seven & i Holdings9.9%


Sales by Service

More than 60% of sales derived from low-risk, recurring revenue streams

0

100

200

300

400

500

FY10.3 FY11.3 FY12.3 FY13.3 ・・・ FY17.3 FY18.3 FY19.3 FY20.3 FY21.3(e)

Sales (JPY billion)

Consulting Product sales System development (new)

System development(enhancement)

System management• Outsourcing Services• Shared-online Services

Less than 40% of sales is tied to business cycles

More than 60% is recurring revenue with stable growth

Management consulting Systems consulting Consulting on upstream

system development

Consulting Services18.3%

Product Sales3.5%

3rd party hardwareand software

System Development & System Application Sales30.6%

Systems integration Software packages developed by NRI Customized add-ons to off-the-shelf packages

BPO and other outsourcing services Shared-online services

(About 20%)

System Management & Operation Services47.6%

Note: Ratios are for total sales on FY March 2020.

・・・


Solid Customer Base (Financial Sector)

Nom

ura Securities

THE STAR

I-STAR

T-STAR

BESTWAY

MS&AD

Holdings

Sony Life Insurance

Mitsubishi U

FJ Morgan

Stanley Securities

e-JIBAI

Seven Bank

Bank Asset Managementand OthersSecurities Insurance

FundWeb

Nom

ura AM

Nom

ura Trust & Banking

JIS&T

Tokyo Marine G

roup

Japan Post Insurance

ValueDirect

SBI Securities

e-AURORA

(Client names: Not disclosed)

Shared-Online

Services

System Operation

(outsourcing)

System Integration

Consulting

Note: ・The names below represent a portion of NRI’s client base. All names disclosed have been done so with client consent.・Numbers in blue as of end-Mar. 2020.

75 clients28 clients

20 clients

117 clients

81 clients

Market Share: 80%

NRI solutions manage around 50% of total transactions on

Tokyo Stock Exchange.

Market Share: 80%

Advisory Platform 14 clients


Solid Customer Base (Non-Financial Sector)

Fuji Xerox

ManufacturingDistribution

Onw

ard Kashiyama

Kumon

Institute of Education

KOKU

BU G

RO

UP

Eisai

Ageless 80

Seven-Eleven Japan

KDD

I

SAPPOR

O H

oldings

PermaDocument

Ajinomoto G

roup

7-Eleven, Inc.(U.S.)

Shiseido Com

pany

Global SCM Solution

Marubeni

BICC

AMER

A

(Client names: Not disclosed)

Recruit

Japan Airlines

TRU

SCO

NAKAYAM

A

MITSU

BISHI ESTATE

SUZU

KEN

Service

Shared-Online

Services

System Operation

(outsourcing)

System Integration

Consulting

804 clients

Note: ・The names below represent a portion of NRI’s client base. All names disclosed have been done so with client consent.・Numbers in blue as of end-Mar. 2020.


NRI’s Vertically Integrated Business Model

Consulting

System Development

System Management and Operation Outsourcing

Shared Online Services(roll out horizontally to multiple clients)

Navigation

Solutions

Client’s business pain pointsClient’s needs

Client’s needs

Client’s needs

Stage 1

Stimulate client’s needs

Stimulate client’s needs

Stimulate market needs

Stage 2

Stage 3

Stage 4

Accumulate NRI expertise about the customer industry

Stage 1 to Stage 3: NRI helps identify and resolve client pain points via services including consulting, system development, and system management and operation.

Stage 4: Leveraging industry expertise and know-how accumulated through system development for individual clients, NRI develops proprietary shared online services and rolls out the services horizontally to other clients in that industry. NRI is also entrusted with outsourcing for peripheral work processes (BPO services).

Utility services(Bundle in BPO services)


Shared-Online ServicesPackaged solutions developed by NRI for key customer industries

Shared-online services

Brokerage A

＜NRI’s data centers＞

Mutual Fund B Bank C

Clients

Trust Bank D

THE STAR BESTWAY

…

…

Hosted on NRI’s data centers as a SaaSservice (=ASP)

Complex regulatory reforms reflected speedily through system updates

Clients select the functions they need from a menu of service offerings

Comprehensive back-office systems for retail securities 75 clients

Comprehensive back-office systems for wholesale securities 28 clients

Trust asset management systems for mutual funds and asset management firms

81 clients

Account management system for mutual fund over-the-counter sales

117 clients

THE STAR

BESTWAY

T-STAR

I-STAR

Examples of Shared-online services * As of end-Mar. 2020

※ ASP : Application Service ProviderSaaS : Software as a Service


NRI Data CentersSupporting operation outsourcing, shared online services, etc.

Osaka Data CenterCompletion: 1992Total floor area: 18,695 m2

Reception capacity: 10,000 KVA

Yokohama Data Center ⅡCompletion: 2007Total floor area: 15,888 m2


Yokohama Data Center ⅠCompletion: 1990Total floor area: 20,480 m2


Tokyo Data Center ⅠCompletion: 2012Total floor area: 38,820 m2


Osaka Data Center ⅡCompletion: 2016Total floor area: 15,000 m2

Reception capacity: 7,500KVA

【Tokyo】【Osaka】


Depth in Human Resources: NRI + Partners (in Japan & China)

SubcontractorsN

RI G

roup employees

Head count:13,761*

Management Consultants Systems Consultants Application Engineers Technical Engineers, etc.

Head count: 7,500

Offshore DevelopmentPartners in China

Partners in Japan

20 partners in 20 regions Head count: 5,000

0

5,000

10,000

15,000

10.3 11.3 12.3 13.3 14.3 15.3 16.3 17.3 18.3 19.3 20.3 21.3(1Q)

Subcontractors(Head count)

Partnersin Japan

Partnersin China

* As of end-June. 2020

(FY)

320 301266 288 290 291

327

391 379

483

0

100

200

300

400

500

600

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

12.3 13.3 14.3 15.3 16.3 17.3 18.3 19.3 20.3 21.3(1Q)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

12.3 13.3 14.3 15.3 16.3 17.3 18.3 19.3 20.3 21.3(1Q)

New grad. hires in Apr.

NRI (non-consolidated)

Subsidiaries

NRI subsidiaries overseasNRI Group (global) New grad. hires(Head count)

Employees(Head count) (Head count)

(FY)(FY)


CAPEX and D&ACAPEX forecast to be JPY38.0 billion

14.8 11.2 8.320.2

13.6 16.15.6 6.6

13.0

16.1 22.6 22.7

28.0

25.0 22.0

20.6 21.8

25.0

42.4

34.1

25.8

32.5

28.4

31.930.4 30.4

31.0

0.0

10.0

20.0

30.0

40.0

0.0

20.0

40.0

60.0

80.0

13.3 14.3 15.3 16.3 17.3 18.3 19.3 20.3 21.3(e)

31.0 33.8

Tangible Asset Intangible Asset

31.026.2

48.3

Depreciation and Amortization

Investments in intangible assets

Enhance functionality of shared online services

Invest in developing digital IPetc.

Investments in tangible fixed assets

Enhancing cloud service infrastructure capabilities, etc.

38.6 38.2

CapitalExpenditures(JPY billion)

CAPEX and D&ADepreciation &

Amortization(JPY billion)

(FY)

28.4

38.0


R&D ExpensesBolster business development to achieve Vision 2022

Current R&D Themes

(FY)

Business development Companywide business development efforts

Strategic business exploration

Technology assessments and development, etc

.

Investigate research Working on social recommendations

Studies on advanced technologies, etc.

3.6 3.9

4.2

5.1 5.6

5.1

3.6

4.34.0

0

2

4

6

13.3 14.3 15.3 16.3 17.3 18.3 19.3 20.3 21.3(e)

R&D costs by year

(JPY billion)


About NRI 1




Reference5


There are significant needs for NRI consulting and IT services

Many companies are struggling with their own DX The “2025 Digital Cliff” impeding companies’ DX

There are companies in Japan that have yet to produce results with their DX, due to conflicts of interest with their existing business, and lack of IT personnel

Overall consulting and IT services capabilities are being tested

8.712.8 31.6 38.4 8.6

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Source) “Corporate IT Trends Survey 2018” by the Japan Users Association of Information Systems (JUAS)

Implemented(produced results)

Implemented(verifying effects)

Considering

Interested but not considering

Not interested(and not considering)

Status of digitalization initiatives (N=1061)

53.1%

Outdated, slow core systems in black box state shackle the DX of a company

IT structure reforms cannot wait

Source) Created based on “Overcoming of ‘2025 Digital Cliff’ Involving IT Systemsand Full-fledged Development of Efforts for DX” by METI

Current 2025 2030

• Competitive stagnation

• Depleted human resources

• Lost business opportunities

etc.

2025D

igital Cliff

• System maintenance takes up 90% of company IT budget

• IT personnel shortage of 430,000

• Old OS, ERP, etc., no longer supported


Vision2022 Expansion Strategy(1) Create & expand DX business by co-creating value with our customers(2) Accelerate globalization by obtaining new customers & IP(3) Enhance & enlarge our core business by expanding business platforms

& modernizing customer systems

Illustration of business developmentGlobal expansion

Asia Pacific

New OverseasBusiness

Domestic

Existing business models New business models

(1) Create & expandDX business

(2) Accelerate globalization

(3) Enhance & enlargecore businesses

Shift core businesses

to DX

Greater Customer Numbers & Business Growth


NRI strengths match recent trends in DXGrowth Strategy：DX

NRI strengths

New business model“As a Service”

New servicesin ecosystems

Integrate realand digital

sHigh quality business platforms

to support customers entering new businesstypes and offering new services

Con-Solution®(*) to be a value co-creation partner

for customers

f s

Data analytics mainly throughconsulting, and capability to build

from front office to e-commerce core systems

Main DX initiatives of customers

*Con-Solution: A business model in which consulting and solutions run side by side with customers from the planning and concept stages,creating business while repeating the process of hypothesis testing


Be our customers’ DX partner, and expand business continuouslyGrowth Strategy： DX

• Comprehensive support from building business models to building systems• Commit to the business of customers, and share the risks and rewards

Build cross-industry platforms that seek ecosystems

• Optimize customer business infrastructure through better modernization,• managed services, security, etc.

Enhance infrastructure such as cloud, security

DX2

.0D

X1.0

Business modeltransformation

Processtransformation

Infrastructuretransformation

• Deliver D2C (direct to customer) through the optimal mix of packages and individual development

• Achieve cost reductions and generate agility through shared online services

Digitalize business models, make IT resources more efficient

DX2.0: DX to transform business models themselves

DX1.0: DX that helps transform business processes(including business platforms and cloud)


The paradigm shift resulting from the pandemic could give rise to new business opportunities

Impact of COVID-19

Business continuity Make operations fully digital and bolstering clients’ intranet infrastructure in

preparation for full telecommuting Launch non-contact services such as unmanned registers on sales floors Fully rebuild global supply chains (drive further decentralization, or conversely,

bring supply chains back to Japan)

Digital transformation of business models (DX) Bolster e-commerce business (consolidating inventory, more sophisticated call

centers, optimal deliveries, etc.) Shift to the As a Service model (subscription-based, MaaS, etc.) Strengthen non-face-to-face channels at financial institutions (new services in the

front office domain, etc.)

Voice of the customer


Expand business base, centered on external growth in Australia and North America

Growth Strategy： Global

[Australia]

[Asia, Europe]

[North America]

[Functions of global headquarters]

• Seek to be a top-10 Australian IT services company by around FY2020

• Achieve additional external growth in fields where synergies can be anticipated

• Expand outsourcing business geared toward financial institutions, with NVANTAGE at the core

• Further expand consulting for Japanese and local companies in locations throughout Asia

• Formulate global strategies and support their execution

• Work together with regional controlling companies such as NRI Australia, and strengthen governance of overseas subsidiaries

• Acquire high added value IP of companies with advanced technologies and expertise

14.6 18.9

43.553.0

100.0

3.5% 4.5%

9.2%10.6%

2015 16 17 18 2022

Overseas sales(billion yen)

Overseas sales ratio

Level of M&A investment (4 years): At least 50 billion yen


Increase and enhance human resources to support growth strategyGrowth Strategy： Human Resources

Bolster hiring

Bolster new graduate hiring: Bolster promotions, etc. Bolster mid-career hiring: Further improve systems of

working conditions for the hiring of more specialists, etc.

Promote employee skills

transfer and development

Strategically develop business designers, data scientists, and other such personnel

Skills transfer and development for application/platform personnel to support DX strategy

Promote employee success

Promote diverse workstyles (diversity, participation and advancement of women and senior personnel, etc.)

More development partners

Get more development partners which have technologies and expertise in areas such as DX

2018 2022New graduate hires About 300 Stable expansionMid-career hires About 100 Double

Increase of 1,000 staff or more (at NRI alone) over four years


NRI Group Sustainability Management PolicyValue co-creation initiatives

NRI Group GrowthNRI Group Growth

NRI Group Sustainability Management

Building sustainable futuresBuilding sustainable futures

Solving social issues through value co-creation (CSV)

【Vision2022 Numerical Targets】

Consolidated Operating Profit (JPY billion)Consolidated Operating Profit Margin (%)Overseas Sales (JPY billions)ROE (%)

Co-create a thriving future societyby driving new value.

Co-create an ideal societyby effectively utilizing its resources.

Co-create a safe and secure society

by advancing its infrastructure.

Corporate Philosophy “Dream up the future”

100

14 or more

100

14*

Materiality for sustainable growth

Compliance with laws, regulations and risk management to increase

trust from society

Management of the informationsystems that form social

infrastructure

Reduction of environmentalimpact for preserving global

environment

Provision of opportunities for all kinds of professionals to take on

challenge

* Aiming for higher capital efficiency as continuing from the previous term


Important Indexes *Monitored on a quarterly basis

Value co-creation initiatives

“—” means undisclosed

Social value Medium to long-term measures Key indexes Results in FY March 2020

Co-create a thriving future society by driving new value.

Provide social recommendations and system proposals

Number of appearances in major media publications*1 122

Promote DXDX-related sales 308 billion yen

Overall scale of DX 2.0 business −

Create new business models Number of business partnerships (joint ventures, local government agencies supported, etc.) 4

Co-create an ideal societyby effectively utilizing its resources.

Contribute to reforms for the greater good Size of orders received for operational reform consulting −

Expand services in business platforms Business platform sales 103.6 billion yen

Generate environmental benefits for clients through business platforms

Client CO2 emission reductions through shared online services*2 83,299 tons

Help build IT infrastructure to create an ideal society Scale of cloud and data center services business −

Co-create a safe and secure society by advancing its infrastructure.

Help upgrade the social infrastructure Scale of business for the public sector −

Contribute to information security Amount invested in security, safety, and peace of mind 5.7 billion yen

Maintain the quality of systems in operation Number of systems failures −

(Overall) Facilitate long-term CSV activities Amount of contributions to the NRI Dream Up the Future Fund

(Launches in FY March 2021)*3

*1: Articles that contain photos of or at least two paragraphs about NRI*2: CO2 emissions reduction: Difference between the estimated amount of CO2 emissions if the client werenot to use the business platform and their actual emissions (assuming use of the platform)*3: Amount of contribution in the first year (FY March 2021) is predicted to be 830 million yen


14.6 18.9 43.5 53.0 61.0100.0

58.3 58.5 65.1 71.4 76.0

100.0

-30

-10

10

30

50

70

90

110

0.0

100.0

200.0

300.0

400.0

500.0

600.0

700.0

800.0

900.0

1,000.0

2015 2016 2017 2018 2019 2020 2021 2022

Numerical targets (consolidated)Medium-Term Management Plan (2019-2022)

421.4 424.5 471.5 501.2 530.0

670.0 or more

Vision2022Medium-Term Plan (2019-2022)Medium-Term Plan (2016-2018)

Operating profit

SalesOverseas sales

FY2018 actual FY2022 targetSales 501.2 670.0 or moreOperating profit 71.4 100.0Operating profit margin 14.3% 14% or moreDX-related sales ratio*1 About 60% About 75%Overseas sales 53.0 100.0EBITDA margin 21.7% 20% or moreROE 12.3% 14%

(Non-percentage numbers below are in units of billion yen)

*1 Ratio of consolidated sales

*2 Aiming for higher capital efficiency as continuing from the previous term*2


About NRI 1




Reference5


Zero Major Unplanned Project Losses(1) Production Innovations (Improve productivity in areas of strength in Japan)

Before launch: Proposal and Estimate Review MeetingDuring project: Supervision by Project Risk Management Department

Project supervision at NRI

in each division

Project Risk Management Department


Expanded Base of Business Operations through M&A in Australia and North America

(2) Dramatic Expansion of Global Business (From Asia to the World)

Name ProfileBrierley + Partners(U.S. Joined NRI Group in 2015)

• Brierley LoyaltyWare®, an integrated loyalty program solution.

• Emerged as 2020 SPARK Matrix Leader in the Customer Loyalty Solutions Market by Quadrant Knowledge Solutions

Cutter Associates(U.S. Joined NRI Group in 2016)

• Research and consulting services in the U.S. asset management industry.

• Solid customer base including over 200 firms such as asset managers, insurance companies and pension funds.

ASG(Australia. Joined NRI Group in 2016)

See next page for more details

NVANTAGE(India. Established in 2018)

• NVANTAGE, a joint venture with Nomura Holdings, provides ITO+BPO services for international financial players, starting in 2Q 2018.

AUSIEXAustralian Investment Exchange Limited(Australia. In the process of acquiring shares)

• Enter back-office operations services in Australia’s growing wealth management market and, in the future, aim to be part of Australia’s direct finance market infrastructure

• AUSIEX is part of the CBA* group, which provides IT and operations services in the back-office domain to major financial institutions in Australia * Commonwealth Bank of Australia Limited: One of the four largest banks in Australia, and listed on the Australian stock exchange


Built Foundations for Global Business (ASG)(2) Dramatic Expansion of Global Business (From Asia to the world)

Providing end-to-end services that enable customers’ digital transformation and innovation

Government

50%

Financial19%

Telecommunications

9%

Construction/Resource

s8%

Other15%

ITmanaged services

38%

Solution26%

Advisory22%

M&T(human resource

dispatching)14%

6 locations* in Australia, approx. 1,500 employees*,

Sales of Over AUD 400 mil*.

Business portfolio(as of June 2020)

Salesby service

Sales by customer

sector

*: as of end-Mar. 2020

ASG BRISBANE1ICT：Joined ASG

in November 2019

ASG SYDNEYSMS：Joined ASG

in September 2017

ASG ASG CANBERRAGroup10：Joined ASG

in March 2020ASG ADELAIDE

ASG MELBOURNE


Initiatives Aimed at DX2.0(3) Creating Business Value (Business IT and Con-Solutions)

Initiatives Outlines

KDDI Digital Design(Established Dec 15, 2017)Capital: JPY 7 billion (KDDI: 51%, NRI: 49%)

• Joint venture with KDDI to support DX of companies• Total support from the drafting of business strategies to

commercial verification, developing the systems and building the network infrastructure needed, to management

TECHNIUM(Established Jan 9, 2018)Capital: JPY 300 million (DMG Mori: 66.6%, NRI: 33.4%)

• Joint venture with DMG Mori.• Leverages digital technologies to enhance utilization of plant

production equipment.

NDIAS(Established Dec 3, 2018)Capital: JPY 100 million (Denso: 50%, NRI Secure: 50%)

• Cybersecurity joint venture between Denso and NRI Secure Technologies.

• Detect and diagnose security risks of in-vehicle electronic products.

JAL Digital Experience(Established Feb 4, 2019)Capital: JPY 475 million (JAL: 51%, NRI Group: 49%)

• Provide customers with a unique digital experience for tourism and everyday lifestyle purposes, by combining Japan Airline’s customer base and hospitality expertise with NRI’s capabilities in data analytics and artificial intelligence.

BOOSTRY(Established Sep 2, 2019)Capital: JPY 1,175 million (Nomura HD: 66%, NRI : 34%)

• Joint venture with Nomura Holdings.• Leverage blockchain technology to develop a new STO*

platform where securities and other rights can be exchanged as tokens.


About NRI 1




Reference5


Maintain Stable DPS while Aiming for Payout Ratio of 35%Shareholder Returns

Period of acquisition Number of shares acquired Cost of shares acquired

Nov. 2005 4.32 million (9.6% of shares issued) Approx. JPY47.5 billionFeb. 2008 4.93 million (2.2% of shares issued) Approx. JPY15.0 billionMay to June 2008 4.64 million (2.1% of shares issued) Approx. JPY11.9 billionApril to June 2016 2.47 million (1.0% of shares issued) Approx. JPY10.0 billionJul. to Dec. 2017 11.45 million (4.6% of shares issued) Approx. JPY50.0 billionMay to Nov. 2018 5.54 million (2.2% of shares issued) Approx. JPY30.0 billionJul. 2019 101.91 million (13.5% of shares issued) Approx. JPY160.0 billion

Share buyback

FY 13.3 14.3 15.3 16.3 17.3 18.3 19.3 20.3 21.3(e)

DPS*1¥52 ¥56 ¥70 ¥80 ¥80 ¥90 ¥90 ¥96

After Stock Split

¥32 ¥34Payout ratio 36.6% 35.9% 36.5% 41.1% 42.4% 39.1% 41.5% 27.9% 34.8%

Dividends

Policy on Treasury Stock Holdings*2

Generally, NRI seeks to cap any treasury stock holdings at 5% of total shares issued and cancel any surplus (above that 5%).*2 NRI announced on April 27, 2016.

*1 NRI conducted 1-for-1.1 stock splits of common shares effective October 1, 2015 and January 1, 2017, and a 1-for-3 stock split of common shares effective July 1, 2019. But dividends per share (DPS) have not been retroactively restated for these stock splits.


Shareholder CompositionOwnership by Nomura Holdings Group

Shareholders Ratio ofShareholding

Nomura Holdings, Inc. 16.63%Nomura Facilities, Inc. 10.55%JAFCO Co., Ltd. 6.17%NRI Group Employee Stock Ownership Association 4.54%The Master Trust Bank of Japan, Ltd.(Trust Account) 3.99%Nippon Life Insurance Company 3.86%State Street Bank and Trust Company 505223 3.10%Japan Trustee Services Bank, Ltd.(Trust Account) 3.00%National Mutual Insurance Federation of Agricultural Cooperatives 2.10%

JPMorgan Chase Bank 385632 1.87%Top 10 Total 55.81%Overseas Shareholders 29.2%

Major Shareholders (As of end-Mar. 2020)

55.1%*

23.1%

33.4%

August 2003secondary

offering

November 2005share buyback

(TOB)

*Includes Nomura Land and Building Co., Ltd.

Note: NRI treasury stock holdings excluded from the list above.NRI treasury stock included in calculations of ownership percentages.

August 2019share buyback

(TOB)

End-March 2020 27.2%


Strong Financial Structure Balance Sheet Management

Financial Indicators

Cash and cash equivalents• Required funds on hand equivalent to 2-3 months of sales

Investment securities and business andnon-business assets• Cross shareholdings will be held within the confines of

raising corporate value (and subject to validation of efficiency based on capital cost and other factors) and sold if the rationale to hold diminishes.

• For business assets, the decision to invest or exit will be based on hurdle rates based on capital costs, operating profit margin and other factors.

• We will generally not own office assets.• We treat non-continuous assets immediately.

Interest-bearing debt (bonds payable/loans)• Cap on net D/E ratio: 0.3 times• Maintain net interest-bearing debt below EBITDA (Priority on

credit rating)

Retirement benefit assets/liabilities• Manage retirement benefit trust assets and liabilities on the

balance sheet to advance stability in retirement system assets

Equity• Suitable capital level considering asset efficiency and capital

efficiency• Recognize capital efficiency for achieving both growth and

returns• Retain treasury stock at about 5% of total issued shares

Assets Liabilities

Net assets

AssetsLiabilities

Net assets

(JPY million)

FY 14.3 15.3 16.3 17.3 18.3 19.3 20.3Cash and cash equivalents 92,792 140,567 154,949 152,051 158,303 123,200 100,778Cash and cash equivalents ＋Investments for the purpose of fund management 133,350 169,023 206,031 192,028 185,882I 152,743 104,842

Interest-bearing debt 55,044 68,319 64,609 58,619 81,680 60,883 107,410Net interest-bearing debt ▲78,306 ▲100,703 ▲141,422 ▲133,408 ▲104,202 ▲91,860 2,568Debt-to-Equity ratio (times) 0.17 0.18 0.16 0.13 0.19 0.15 0.40Net Debt-to-Equity ratio (times) - - - - - - 0.02Capital adequacy ratio (%) 70.4 65.6 66.2 69.1 65.2 67.1 50.9


Strong Financial Structure

Acquisition of New Rating Acquired the rating from S&P Global Ratings in Sep 2018, strengthening NRI’s presence

and creditworthiness overseas

RatingRating JGB NRI Peer companies

Hitachi Fujitsu NEC

InvestmentGrade

AAAAA+AAAA-A+ ○A ○ ○A-

BBB+ ○BBBBBB- ○

Speculative Grade

BB+BBBB-

【Comparisons with JGB and Peers】As of Jul. 2020

Date of Rating AnnouncementSeptember 18, 2018

A（Forecast：Stable）


About NRI 1




Reference5


Numerical targets (sales by topic)Medium-Term Management Plan (2019-2022)

By growing DX business, expand the ratio of DX-related sales: About 40% (2015, rough estimate) → 60% (2018) → 75% (2022)

Domestic salesother than DX

Business platforms

501.2

670.0 or more

FY2018 FY2022

(billion yen)

DX-related sales

Overseas sales100.0

(Including external growth)

Roughly 75% ofconsolidated salesOverseas

Consolidated salesof roughly 60%

DX-related sales

・Consulting other than DX・On-premise software development・BPO services etc.

・Business platforms,STAR, BESTWAY, T-STAR, etc.

・DX consulting, Analytics, D2C, CRM, Digital marketing

・SCM reforms, Operational efficiency improvements using TRAINA, RPA, etc.

・Cloud, Security, Managed services, etc.


Leverage strength in finance BPFsto expand clientele and services across industry types

Medium-Term Management Plan (2019-2022) Growth strategy： Business platform

In addition to expanding core businesses, provide new business platforms for entering other industries

Structure changes in Financial industry

Number of usersFew Many

Per-person financial assets

Many

Few

Face-to-face-only and internet-only financial institutions• For wealthy people (excess funds) with

extensive financial knowledge• Finance service charges are main revenue source

New entrant companies from other industries

• For the general public with little financial knowledge (small funds)

• Various revenue sources such as points, advertising income, etc.

Expand core businesses

• High quality shared online services• Outsourcing, mainly BPO (business

process outsourcing)• New services for digital assets

Launch new services

• Lean services through APIs• Services for small funds products• Managed services for IT assets

NRI’s Strategy


Comprehensive support for the diversified system platforms that accompany the shift to cloud

Medium-Term Management Plan (2019-2022) Growth strategy： Cloud

Managed services: Optimize and comprehensively support overall systems on behalf of customer IT departments

Enhanced security: Deliver high levels of security catered to multiple system platforms

Multi-cloud services: Offer integrated services to customers which use multiple cloud platforms

Technology to support app development: Development and application of digital IP (common components of apps, digital development kits, etc.)

Managed services

Customer

Security

Public cloud

Private cloud

On-premises

Multi-cloud Service

Generate agility and optimize cost by modernizing legacy systems,developing cloud-native apps, etc.

Technology to supportapp development


Information Security Business

NRI SecureTechnologies, Ltd.・Started as NRI’s first internal venture・Established in 2000・532 employees (as of April 2020)

・Net sales have grown to about 20 billion yen

Three Business Domains Emerging technologies for new threats

IoT / ICS (Industrial Control System)

FinTech/Blockchain

Vehicle systems security assessment Acquisition support of Achilles certification

First company to provide “Blockchain Assessment” in Japan

Consulting Services

Cybersecurity Services

Solution Business

High-quality and convenient, self-developed software

Security Assessment and Penetration Testing(IT system vulnerability check using technology from the

perspective of cyber attackers) MSS and SOC as a Service

(24/7 monitoring and managing services for protecting IT systems from cyber attackers)

Security measure PDCA support from expert consultants Support program for cultivation and certification (GIAC, CISSP)

of security personnel

Secure SketCH as a GRC management platform

GRC (Governance, Risk and Compliance)

Unique log analysis using machine learning for the detection accuracy for unknown malware

AI/ ML (machine learning)

Multi-Cloud Security Cloud Access Security Broker (CASB), a solution which supports

security measures in multi-cloud environments


ESG Track Record

NRI is included in all four ESG indexes selected by the GPIF

S&P/JPX Carbon Efficient Index

「Dow Jones Sustainability World Index」 For two consecutive years

(Asia Pacific Index: for four consecutive years)

FTSE Blossom Japan Index

Evaluations Inclusion in ESG indexes

Corporate Governance of the Year for FY2017 - Tokyo Metropolitan Governor’s Award -(Japan Association of Corporate Directors)

Platinum Kurumin(Minister of Health, Labour and Welfare)

Note: THE INCLUSION OF Nomura Research Institute, Ltd IN ANY MSCI INDEX, AND THE USE OF MSCI LOGOS, TRADEMARKS, SERVICE MARKS OR INDEX NAMES HEREIN, DO NOT CONSTITUTE A SPONSORSHIP, ENDORSEMENT OR PROMOTION OF Nomura Research Institute, Ltd BY MSCI OR ANY OF ITS AFFILIATES. THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES AND LOGOS ARE TRADEMARKS OR SERVICE MARKS OF MSCI OR ITS AFFILIATES.

Good health business superior corporation (White 500) (Nippon Kenko Kaigi)

Nadeshiko Brand 2019For four consecutive years(METI and TSE)

A List(CDP)

Supplier Engagement Leaderboard

(CDP)


NRI Group Worldwide Locations

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