Business Results FY2015 - sp.otsuka-shokai.co.jpconsulting, and Consigned software development 423 7,203 Net World Corporation Sales and technology support for network-related equipment

Copyright©2016 OTSUKA CORPORATION All Rights Reserved.

Business Resultsfor the fiscal year ended December 31, 2015

Yuji Otsuka, President

February 1, 2016

OTSUKA CORPORATION

Copyright©2016 OTSUKA CORPORATION All Rights Reserved. 1

(Millions of yen)

Consolidated Non-Consolidated

Amount Ratio to Plan

Change toLast Year Amount Ratio to

PlanChange toLast Year

Net sales 609,045 98.6% +0.5% 559,576 98.2% +0.2%

Operating income 37,311 99.2% +0.6% 33,677 99.9% +1.4%

Ordinary income 38,240 99.8% +0.3% 34,790 100.6% +1.5%

Net income 23,705 100.4% +1.1% 21,640 100.6% +1.1%

Summary of Business Results,January – December, 2015


Segment Company name Business domain Number of

employeesFY 2015 Net sales

(Millions of yen)

S I

OSK Co., LTD. Development and sale of packaged software, IT consulting, and Consigned software development 423 7,203

Net World Corporation Sales and technology support for network-related equipment 385 66,874

S & S

Alpha Techno Co., Ltd Emergency repair of PC and peripheral equipment and data recovery service 315 4,304

Alpha Net Co., Ltd Comprehensive service and support for network systems 404 7,765

Others Otsuka Auto Service Co., Ltd Maintenance and body work for automobiles, and

commissioned sales of insurance 23 563

Consolidated subsidiaries


564,595605,766 609,045

33,90137,097 37,311

33,505

38,144 38,240

23,455 23,70520,271

0

200,000

400,000

600,000

FY 2013 FY 2014 FY 20150

15,000

30,000

45,000

Net sales Operating incomeOrdinary income Net income

Net sales and ProfitsConsolidated

(Millions of yen)

Net salesOperating incomeOrdinary incomeNet income


-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

Jan. Feb. Mar. Apr. May Jun. Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. Mar. Apr. MayJun. Jul. Aug.Sep. Oct. Nov. Dec.

L-segment (2014-15) M-segment (2014-15) S-segment (2014-15)

L-segment (2008-09) M-segment (2008-09) S-segment (2008-09)

4

Monthly percentage of net sales per account by customer’s total annual business scale

Monthly percentage of net sales per account by customer’s total annual business scale(%)


Expansion of customer baseExpansion of customer base

Number of companies newly registered2013 2014 201535,000 → 41,000 → 46,000

Number of accounts newly registered2013 2014 2015

128,000 → 126,000 → 139,000

New customers are steadily increasing


385381658

255,490243,316231,868

353,170362,068332,067

0

200,000

400,000

600,000

FY 2013 FY 2014 FY 2015

564,595609,045605,766

Net sales by segmentsConsolidated

(Millions of yen)SI business S&S business Other business


113,448 122,148118,207

130,137121,698115,463

37,42438,13435,379

257,332 280,410 269,865

0

200,000

400,000

600,000

FY 2013 FY 2014 FY 2015

521,623559,576558,450

Net sales by 4 segmentsNon-Consolidated

(Millions of yen)SI related products Custom-made software, etc.

Supplies

Maintenance, etc.


140.6

143.9

150.6129.2

176.8

155.5 130.7 142.5135.7158.5

159.4155.4

020406080

100120140160180200

1Q 2Q 3Q 4Q

FY 2013 FY 2014 FY 2015

8

Consolidated Quarterly change of Net sales

(Billions of yen)


5,221

9,627

12,225

6,431

8,818

4,529

12,32812,468

9,6429,502

14,194

4,900

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

1Q 2Q 3Q 4Q

FY 2013 FY 2014 FY 2015

9

Quarterly change of Ordinary income

Consolidated

(Millions of yen)


(Millions of yen)

Consolidated Non-Consolidated

Amount Change to Last year Amount Change to

Last year

Net sales 155,408 +9.0% 142,838 +9.5%

Operating income 9,411 +10.3% 8,707 +13.7%

Ordinary income 9,642 +9.3% 8,870 +12.5%

Net income 5,977 -0.4% 5,503 +0.3%

10

Summary of Business Results,October – December, 2015


155,408142,555

150,689

9,4118,5309,381

9,6428,8189,627

5,879 5,9776,001

0

50,000

100,000

150,000

200,000

2013 4Q 2014 4Q 2015 4Q0

5,000

10,000

15,000

20,000

Net sales Operating incomeOrdinary income Net income

11

Net sales and Profits,October – December

Consolidated

(Millions of yen)

Net salesOperating incomeOrdinary incomeNet income


6.9

12.8

3.0

-2.3

-20.2

-13.9

42.4

12.8

16.7

-4.7

28.4

17.112.3

8.6 10.4

-0.7

4.0

-16.4

-9.1

3.8

11.8

7.1

8.6

15.9

33.5

3.55.1 7.4

9.612.0

-0.3

4.85.7

-0.3

5.1

2.0

11.3

2.67.2

2.31.23.1 4.6

3.5

3.0

2.3

2.9

4.54.2

2.4

3.1

5.3

-25.0

-20.0

-15.0

-10.0

-5.0

0.0

5.0

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

SI related productsCustom-made software etc.SuppliesMaintenance, etc.

4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4QFY 2012 FY 2013 FY 2014 FY 2015

12

Non-Consolidated

Quarterly Net Sales by 4 segments( % change year-on-year )

( % )

SI related products 12.8Custom-made software etc. 10.4 Supplies 7.4Maintenance, etc. 4.6


24.52% 29.66% 45.82%

24.13% 30.27% 45.60%

23.69% 30.32% 45.99%

0% 20% 40% 60% 80% 100%

FY 2013

FY 2014

FY 2015

Less than 1 billion of yen 1 to less than 10 billions of yen 10 billions of yen and above

Net sales structure on customers’ total annual business scale

Non-Consolidated

* “Less than 1 billion yen” includes public offices.


Manufacturingindustries

24.43%

Wholesaleindustries

19.43%

Buildingindustries

8.73%

Retailingindustries

4.44%

Education,Public offices

4.60%Service

industries30.14%

Lease, Creditfirms, etc.

8.23%

FY 2015

Sales breakdown by customers’ type of industryNon-

Consolidated


173,229163,277144,150

9,070 9,584 9,344

53.353.451.6

2.93.13.20

40,000

80,000

120,000

160,000

As of Dec. 31, 2013 As of Dec. 31, 2014 As of Dec. 31, 20150

20

40

60

80

Equity Interest-bearing debtEquity ratio Interest-bearing debt ratio

Equity and Interest-bearing debtConsolidated

(Millions of yen) ( % )


27.6

18.7

34.1

-7.2-3.4

-5.4 -8.7-6.5 -7.5-10

-5

0

5

10

15

20

25

30

35C/F from operating C/F from investing C/F from financing

Cash flowsConsolidated

FY 2013 FY 2014 FY 2015

(Billions of yen)


14.115.314.9

10.18.8

11.3 13.3

0

4

8

12

16

2009 2010 2011 2012 2013 2014 20150

50,000

100,000

150,000

200,000Net income Equity ROE

Consolidated

(Millions of yen)( % )

ROE


2,716

3,497

1,997

177

8,387

（32.4%）

（41.7%）

（23.8%）

（2.1%）

Personnel organization(regular employees)

Consolidated

As of Dec. 31, 2015

Technical personnel

Sales personnel

Corporate staff

Others


45,000

50,000

55,000

60,000

65,000

70,000

75,000

80,000

85,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500Net sales per employeeOperating income per employee

Number of employees 6,621 6,316 6,272 6,251 6,236 6,222 6,294 6,297 6,379 6,585 6,736 6,778 6,760 6,684 6,638 6,634 6,758 6,837

Non-Consolidated

Change of Net sales per employee and Operating income per employee

Operating income per employee (Thousands of yen)

Net sales per employee (Thousands of yen)

Net sales per employee increased 73.8%Operating income per employee grew 15.4 times

Relative to 1998

Operationof “SPR”Full operation of

“DAISENRYAKU”

Full-fledgedoperation of

“SPR”

(Difference to last year, +79)


<Amount of Sales> (Millions of yen)

2013 Jan. – Dec. 2014 Jan. – Dec. 2015 Jan. – Dec. 2015 Oct. – Dec.

Amount AmountChange to Last year Amount Difference to

Last yearChange to Last year Amount Difference to

Last yearChange to Last year

“tanomail” 122,367 128,733 +5.2% 139,106 +10,373 +8.1% 36,668 +3,045 +9.1%

SMILE 11,061 11,673 +5.5% 10,479 -1,194 -10.2% 2,783 -149 -5.1%

ODS21 43,525 43,575 +0.1% 46,196 +2,620 +6.0% 11,652 +1,178 +11.3%

OSM 50,453 50,836 +0.8% 59,831 +8,995 +17.7% 15,767 +3,666 +30.3%

<As reference: Number of Sales> (Units)

Copier 34,432 37,392 +8.6% 41,384 +3,992 +10.7% 11,749 +1,996 +20.5%(of whichColor copier) 30,449 33,793 +11.0% 38,391 +4,598 +13.6% 10,986 +2,023 +22.6%

Server 37,989 39,467 +3.9% 37,718 -1,749 -4.4% 7,965 -1,573 -16.5%

PC 932,607 966,600 +3.6% 795,646 -170,954 -17.7% 209,683 +24,808 +13.4%

Client Total 847,320 -149,511 -15.0% 225,330 +32,520 +16.9%

(ODS: Otsuka Document Solutions OSM: Otsuka Security Management)

20

Key strategic businessNon-Consolidated


0

100,000

200,000

300,000

400,000

500,000

1Q 2Q 3Q 4Q

2009 2010 2011 2012 2013 2014 2015

21

Quarterly Number of PCs SoldQuarterly Number of PCs Sold

(Units)


0

5,000

10,000

15,000

1Q 2Q 3Q 4Q

2009 2010 2011 2012 2013 2014 2015

22

Quarterly Number of Servers SoldQuarterly Number of Servers Sold

(Units)


0

5,000

10,000

15,000

1Q 2Q 3Q 4Q

2009 2010 2011 2012 2013 2014 2015

23

Quarterly Number of Copiers SoldQuarterly Number of Copiers Sold

(Units)


100,980107,934

117,381122,367

128,733

22,234

7,152

6,004

4,555

4,218

3,776

139,106

545 3,302 9,619

19,885

33,036

46,369

59,06271,088

82,49389,192

92,990

1,560

2,465

2,313

2,207

1,1281,408

25,21216,766

11,335

3,245

2,552

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015506 133,105 153,609 169,148 322,720 385,895 448,812 506,263 564,489 626,932 698,999 773,882 849,567 932,547 1,018,939 1,111,330 1,212,623

Annual sales transition of “tanomail”Non-Consolidated

(Millions of yen)

Non-“tanomail” MRO“tanomail”

“tanomail” achievedsales of over

100 billion yen

Started “tanomail”

“MA tanomail”

“personal tanomail”

“tanomail plus”

TANOSEE

Alliance withLION OFFICE PRODUCTS CORP.

Procurement servicefor large company

Mail-order servicefor individual

Procurement ASP service

Private brand

Accounts of“tanomail”


<customer>

OTSUKA CORPORATION supports customers’ procurement duties across the board

Total support by OTSUKA CORPORATION

Information System Office

Server Room

Accounting Dept.

HR Dept.President's Office

General Affairs Dept.

Sales Dept.Office supply mail-order service

“tanomail”1,212,623 accounts

Procurement ASP service“tanomail plus”

172 companies

Office supply mail-order service for large company

“MA tanomail” 26,433 accounts

Mail-order service for individual“personal tanomail”

347,041 membersMerchandisefor individual

Indirectmaterial

Corporate employees, general individuals

OfficeDirect material

(As of Dec. 31, 2015)

25


81208 304 384

509 560 638 722822 903

1,039

1,4391,645

1,783

1,2601,162

40

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

1.78 million peopleused services in 2015

(Thousand people)

Number of Users of Main Web Services (ASP)Number of Users of Main Web Services (ASP)


240.0

195.5228.4

218.7

212.8

202.4187.9

184.0170.8

151.7134.0

116.6102.0

89.783.681.585.280.088.8

70.463.557.852.950.0

42.940.9

41.944.945.545.246.8

42.139.0

37.735.2

34.032.2

30.127.5

25.928.927.4

24.222.124.125.126.125.0

0

50

100

150

200

250

1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150

10

20

30

40

50Net sales of Supplies and Maintenance agreementAccumulated business sales share

Accumulated business sales share (%)

Non-Consolidated Growth of accumulated business

Net sales of Supplies and Maintenance agreementAccumulated business sales share Net sales of Supplies and Maintenance agreement

(Billions of yen)

As reference (1992-1999)


Future Plans


The Basic Principle and Mid-Term Plans

< Basic principle >• Grow with customers by realizing the Mission Statement< Mid-term plans >• Workforce basically remains flat or will increase slightly• Strive to expand business by increasing revenues and

profitsAim to achieve 7% in operating income to net sales ratioand ordinary income to net sales ratio

• Cultivate new demand by utilizing customer information• Effective use of people/materials/money to improve per

head productivity

29


Market Forecast in 2016Market Forecast in 2016

• Moderate growth in the Japanese economy despite uncertaintyin the global economy

• Growing labor shortages

• Demand for raising productivity through aggressive IT investment

• Market expansion of tablet devices

• Upgrade to Windows 10 will be accelerated toward the end offree upgrade period

• Full-scale operation of the Social Security and Tax Number(“My Number”) System

• Response to introduction of reduced consumption tax rates

• Electricity liberalization

• Strong demand by companies for IT utilization and energy-saving30


“Vitalize office with solutions and live up to customer trust”

• Proposal of solutions to enhance productivity and laborsaving

• Expansion of business items with customers andcross-selling

• Proposal of client utilization focusing on tablet devices• Strengthening of optical communication lines and

network solutions• Help customers respond to “My Number” or reduced

consumption tax rates• Measures to raise the level of performance such as

“Virtual Manager”31

Policies and Measures in 2016 Policies and Measures in 2016


Growth rate of sales in security business

Security ServicesInfrastructure Network OperationApplications

Current

“My Number” Related Business

0

10

20

30

1Q 2Q 3Q 4Q

（％）

“My Number” response

• Administration of withholdingon employment income

• New employees• Administration of registeringemployment insurance

• Administration of registeringhealth insurance

• Administration of registeringemployees pension insurance

, etc.

Full-scale operation going forward

High growth along with “My Number” related business

meetings

32


One-Stop Solution & Support

FAX

COPIER

PBX

LINEMRO

GATEWAY

(ASP / Web Services)

SERVER

SOFTWARE PCTABLET

LEDBEMS

KT

VC

Office equipment

Voice communication system

Computer system

Communication lines andInternet related products

Supplies Electric power


Initiatives for Companies withMultiple Stores or Multiple Locations

Initiatives for Companies withMultiple Stores or Multiple Locations

Set up, operate and support IT systems that support store and location management

・・・

• Insufficient IT management relative to expansion of company size• Shortage of network and device management personnel due to

focusing on frontline activities→ Response using IT solutions is required due to many locations

Procurementsupport

LineWireless LAN

Wi-Fi

UnifiedCommunications

(UC)

Monitoring and maintenance

Supply

Raku RakuMy Number

LED•BEMS

Multi-function (Input-output)

printer

34

Raku RakuNetwork


0

2,000

4,000

6,000

8,000

2008 2009 2010 2011 2012 2013 2014 20150

250,000

500,000

750,000

1,000,000

Amount of Sales Number of Sales

35

(Millions of yen)

Sales Results of LED Lights(Units)


605,766 609,045 639,000

37,097 37,31140,000

38,144 38,240 40,500

23,705 25,18023,455

0

200,000

400,000

600,000

FY 2014 FY 2015 FY 20160

15,000

30,000

45,000

Net sales Operating incomeOrdinary income Net income*

*Net income attributable to owners of parent

Plans of Net sales and profitConsolidated

(Plan)

(Millions of yen)

Net salesOperating incomeOrdinary incomeNet income*


380385381

267,740255,490243,316

370,880353,170362,068

0

200,000

400,000

600,000

FY 2014 FY 2015 FY 2016

639,000605,766 609,045

Plans of Net sales by segmentsConsolidated

SI Business S&S Business Other Business (Millions of yen)

(Plan)


Jissen (Practical) Solution Fair 2016

Connect it, and you will seebusiness expansion!

Dates : February 3 (Wed) – February 5 (Fri)Venue: The Prince Park Tower Tokyo


Community

Employees

Customers

ShareholdersBusiness Partners

We live up to ourStakeholders’ confidence


1. This material is intended to provide information about the business performance of fiscal year2015 and strategy of the OTSUKA CORPORATION and Group companies. It is not intended and should not be construed as an inducement to purchase or sell stocks ofOTSUKA CORPORATION.

2. Forward-looking statements in this material with respect to OTSUKA CORPORATION’s strategies,plans, beliefs, and other statements related to future trends and performance are not historicalfacts, and as such involve risks and uncertainties. Such statements are not guarantees of futureperformance. Actual results may differ considerably from projections due to unpredictable changes to the economic situation, and a number of factors. Key factors that could affect actual results aregeneral economic conditions, social trends, change of relative competitiveness in demand actionfor products and services provided by OTSUKA CORPORATION. Key factors that may affectbusiness performance are not limited to these items described here.

3. Statements in this document are based on the current beliefs, estimates and expectations ofmanagement. OTSUKA CORPORATION undertakes no obligation to update any forward-lookingstatements.

4. OTSUKA CORPORATION shall in no event be liable for any damages arising out of the use orinterpretation of this material.

Cautionary statement

40

Documents

Business Results FY2015 - sp.otsuka-shokai.co.jpconsulting, and Consigned software development 423 7,203 Net World Corporation Sales and technology support for network-related equipment