Oki Electric Industry : Presentation (with notes)

Financial Results for Q1 FY2023

August 10, 2023

Oki Electric Industry Co., Ltd.

© Copyright 2023 Oki Electric Industry Co., Ltd.

1

Summary of Financial Results

Net sales increased YOY. Operating income increased YOY on the reversal of allowance for doubtful accounts.

The increase in net sales owed to recovery from the impact of a production decline caused by component shortage.

Operating income increased due to the abovementioned one-time factor, although there was an increase in costs for components procured in the previous fiscal year and an increase in labor costs.

(Billion yen)	Q1	Q1
FY2023	FY2022	Variance
	(Actual)	(Actual)
Net sales	81.5	78.1	+3.4
Operating income (loss)	0.0	(3.0)	+3.0
Ordinary income (loss)	(0.3)	(3.1)	+2.8
Profit (loss) attributable to	(0.2)	(3.2)	+3.0
owners of parent
USD average exchange rate (Yen)	137.4	129.6	+7.8
EUR average exchange rate (Yen)	149.5	138.1	+11.4

© Copyright 2023 Oki Electric Industry Co., Ltd.	2/12

• In Q1, net sales were JPY81.5 billion, operating income was zero, and net loss was JPY0.2 billion.
• Net sales increased by JPY3.4 billion YoY as the impact of the production decline last year improved. Operating income also increased by JPY3 billion YoY, but this was largely due to a one-time factor of a JPY4.3 billion reversal of the allowance for doubtful accounts. Excluding provisions, income decreased from the previous year due to the high-cost components procured in the previous fiscal year and the increased costs from human resource investments which started in the current fiscal year.
• The details of the reversal of the allowance for doubtful accounts will be explained later.
• The exchange rates are JPY137.4 to the US dollar and JPY149.5 to the Euro.

2

Segment Information (Net Sales / Operating Income)

	Q1	Q1
(Billion yen)	FY2023	FY2022	Variance
	(Actual)	(Actual)

Public Solutions	Net sales	19.3	19.3	±0.0
Operating income	(0.1)	(0.3)	+0.2
Enterprise Solutions	Net sales	27.4	23.3	+4.1
Operating income	1.9	(1.6)	+3.5
Component Products	Net sales	17.0	19.2	(2.2)
Operating income	(0.8)	(0.1)	(0.7)
EMS	Net sales	17.7	16.2	+1.5
Operating income	0.6	0.1	+0.5
Others	Net sales	0.1	0.1	±0.0
Operating income	(0.1)	0.1	(0.2)
Corporate &	Operating income	(1.4)	(1.2)	(0.2)
Eliminations
Total	Net sales	81.5	78.1	+3.4
Operating income	0.0	(3.0)	+3.0

© Copyright 2023 Oki Electric Industry Co., Ltd.	3/12

• Page 3 shows net sales and operating income by segment.
• As you can see, the increase in income and profit is in EMS and Enterprise Solutions, but in real terms, excluding one-time factors, Enterprise Solutions is up in revenue but down in profit.
• Public Solutions remained flat YoY, while Component Products posted lower sales and profits.
• Details will be explained later in the segment results.

3

Reasons for Changes in Operating Income/Loss

Although Enterprise Solutions saw positive factors such as recovery from the impact of the production decline due to component shortages and an increase in volume in construction and maintenance services, it was in the minus overall owing to factors such as the impact of higher component costs for hardware products.

EMS was positive due to an increase in the volume of products, including recovery from the impact of reduced production due to a shortage of component.

There was a reversal of allowance for doubtful accounts for Chinese ATM receivables.

(Billion yen)

0.0

	(3.0)
					+0.4
	Q1		(1.0)
FY2022				Price
(Actual)	Changes in
			volume &		optimization
			product mix
Public Solutions	+0.3
Enterprise Solutions	(1.0)
Component Products	(0.7)
EMS		+0.4

			Q1
		+4.1	FY2023
(0.4)		(Actual)
(0.1)
Changes in	Impact of	One-time factor
fixed costs,
currency	(Reversal of allowance for
etc.
exchange	doubtful accounts）

Labor cost etc.

© Copyright 2023 Oki Electric Industry Co., Ltd.	4/12

• Page 4, we have the elevator chart of operating income in Q1.
• With respect to change in volume and product mix differences, positive contributions came from EMS and Public Solutions. In Enterprise Solutions, the volume of products increased as explained. However, as I mentioned earlier in the overview, the impact of highly priced components procured in the previous fiscal year resulted in a YoY decrease.
• Regarding changes in fixed costs etc., we have been investing in human resources. The net increase was JPY0.4 billion due to cost reductions and other factors, although personnel and other expenses increased by approximately JPY1 billion.
• I would like to explain the one-time factor on the far right, reversal of reserves. OKI filed a lawsuit against its former partner in China in 2015 regarding the collection of payment for trade receivables. On June 13 of this year, a final judgment was issued by the People's Court in Guangdong, and the Company's claims are almost fully acknowledged. For details, please refer to the material disclosed to the TSE on June 20.
• We have closely examined the impact of this ruling on the current fiscal year's financial results. This ruling is the final judgment, and we are also holding physical collateral and real estate that is valuable for preservation. In consideration of the fact that, in principle, recovery will now be made through enforcement procedures in China, among other things, we gathered opinions from local consultants and experts, carefully considered collection scenarios and their feasibility and appropriateness, and made estimates of collections. As a result, the JPY4.3 billion was reversed finally.
• OKI has already applied for foreclosure proceedings, and we will do our utmost to collect the full amount of the trade receivables as before.

4

Overview by Segment (Public Solutions / Enterprise Solutions)

Public Solutions

While the number of defense projects increased, the number of communication carrier projects declined, and overall net sales and operating income were at the same levels as in the previous year.

Enterprise Solutions

Net sales increased on reduction of the impact of the production decline caused by the component shortage.

Operating income was impacted by an increase in component costs for hardware products but this was partially offset by construction and maintenance services. Another factor behind the increase in operating income was the reversal of allowance for doubtful accounts.

Net sales（Billion yen）

19.319.3

Net sales（Billion yen）

23.3

27.4

(Reference)Breakdown

	FY22	FY23
Hardware/	13.1	16.4
Software
Construction&	10.2	11.0
Maintenance

Q1 FY2022	Q1 FY2023
22年度実績	23年度実績

Operating income （Billion yen）

(0.3)(0.1)

Q1 FY2022

Q1 FY2023

© Copyright 2023 Oki Electric Industry Co., Ltd.

Q1 FY2022

Q1 FY2023

Operating income （Billion yen）

				1.9		(Reference)Breakdown
								FY22	FY23
							Hardware/	(2.0)	(3.6)
							Software
(1.6)
					Construction&	0.4	1.4
							Maintenance
Q1 FY2022	Q1 FY2023		One-time factor	0.0	4.1

5/12

• On page 5 is overview by segment.
• First is Public Solutions.
• Looking at this quarter alone, there was an increase in defense projects but a decrease in projects for communications carriers. However, overall segment sales were at the previous year's level of JPY19.3 billion, and operating income improved slightly from the previous year.
• Next is Enterprise Solutions.
• As explained above, net sales recovered from the impact of the production decline and increased from the previous year. In terms of the fiscal year, we plan to increase the revenue of Enterprise Solutions by JPY65 billion YoY. Therefore, some may think that the increase in revenue of about JPY4 billion this time is a little small, but compared to the internal Q1 wrap, it is almost in line with the plan.
• Operating income decreased YoY in the hardware and software business, but was partially offset by an increase in profits in the construction and maintenance service businesses following the organizational and value chain revisions implemented in April. In addition to this, there were positive factors such as the reversion of allowance for doubtful accounts, which I explained earlier, resulting in an increase in operating income YoY.
• Going forward, we plan to increase the amount of sales compared to last year with each passing quarter. We intend to achieve the plan by ensuring that we reap the benefits of these large projects for which we have already received orders.

5