Introduce today's presenters. Senior Executive Vice President and Representative Director, Toshi Fujiwara. Executive Vice President, Head of Corporate Headquarters, Yutaka Sasaki. Senior Vice President, Head of Finance Department and Corporate Headquarters, Kazuo Takeya. I am your facilitator, Ito of Public Communication Department. Today's presentations consist of two materials: Financial Results summary and the company presentation, which are available for download on our official website under Investors section. Now, Mr. Fujiwara will present the financial results for the third quarters of the year ending March 2023. Over to you, Mr. Fujiwara. This is Fujiwara, Representative Director and SEVP. Thank you for joining this earnings results briefing session today despite your busy schedule. Let me explain the results of the third quarter of the fiscal year ending March 2023. Please turn to page one. Here is today's agenda. I firstly explain the Q3 results and the forecast, then the recent updates on overseas business combination. NTT Ltd.'s results have started to be consolidated since third quarter, which we will cover at the end using appendix. Please turn to page three. Let me outline the third quarter results. Since the overseas businesses were combined in October 2022, we have started to include results of NTT Ltd. since the third quarter, resulting in growth both in net sales and operating income. While incremental financial expenses and tax-related costs reduced profit, net sales enjoyed gain from limited consolidation. In addition, all segments continuously increased scales and benefited from the FX impact posting sales growth. As for operating income, the company-wide strategic investments increased, and we posted losses from unprofitable projects in the second quarter. The limited consolidation gain and greater sales grew profit. New orders received. Since NTT Ltd. uses a different method in calculating orders, numbers shown here are for reference. Orders without the limited consolidation impact remains unchanged from the first half. Year-over-year decline was recorded due to the absence of mega deals posted in the previous fiscal year. Overseas project wins and FX impact boosted the increase further. Let me go through by segment using slide four and onwards. Please turn to page four. New orders received. Public and social infrastructure. Due to the absence of large projects in the previous fiscal year, for the central government, orders went down. Likewise, the financial segment reduced orders due to the absence of large deals recorded last fiscal. The orders received of the overseas segment does not incorporate the impact of consolidation of NTT Ltd.. Please turn to page five. Net sales. All segments continued to increase solidly their scale and posted incremental sales. At public and the social infrastructure, services scale both for telecom and utility and central government grew, leading to an increase. It posted a surplus. Overseas segment posted a sharp increase of around JPY 500 billion, which consists of around JPY 300 billion from the limited consolidation, around JPY 120 billion from the FX gain. Even without those, sales in fact increased helped by its larger scale of services in Europe. Please turn to page six. Next, operating income. Public and Social infrastructure. Sales growth boosted operating income. However, red projects recorded in the second quarter reduced our profit. Other segment. Reduced. Following the first half reduced profit. As we continue to make company-wide strategic investments, which have been factored in our initial forecast. Segment includes the 3-month results of NTT Ltd. for period from October to December. Net sales was JPY 302.4 billion, with JPY 16.1 billion in EBITDA, and both amounts contributed to year-on-year uplift. The effect of NTT Ltd. consolidation shall be touched upon later in detail. Let's move on to page 12. Next, let me revisit the full year forecast. Please turn to page 13. This shows the forecast announced on May 12th, 2022, which includes NTT Ltd.. As for the forecast, compared to the one announced at the beginning of the fiscal year, there's no change. In terms of net sales, up to 3rd quarter, all segments increased their sales and enjoyed FX gain and are performing well. For operating income, we continue to spend on strategic investments. However, we will continue to increase profit by driving growth in order to deliver the full year forecast. Please turn to page 14. This shows the full year forecast by segment. Overseas segment sales, EBITDA, and operating income have been updated to include NTT Ltd.. As per the Japan segment. The are the updates on the overseas business combination. Page 16, please. This is the overall schedule to transition to a holding company structure. In October 2022, NTT Ltd.'s business was combined, and as an overseas business company, NTT DATA, Inc. was founded. In November, NTT DATA Japan preparation company was set up, and we are taking solid steps to be ready to shift to a holding company structure, which is scheduled to take effect in July 2023. Meanwhile, as we establish NTT DATA, Inc., we have been promoting initiatives to nurture business projects by combining strengths of NTT Ltd. and to design optimal operating models. Please take a look at page 17. Collaborated with NTT Ltd. and one, SAP transformation project from a major electronics provides Microsoft Azure infrastructures for SAP and network to connect the environment. In addition to the track record in the SAP application space, increased the unified understanding among clients and in the sector across the world by undertaking business projects. To build an even greater trusted brand so that we can enhance market competitiveness and corporate value. Please turn to page 18. This shows initiatives at NTT Ltd.. In order to shift to high-value-added services, mainly around managed IT services, NTT Ltd. is implementing initiatives to drive sales and reform its structure. For high-value-added services to grow a top line, it aims to enhance sales with advanced expertise by assigning right resources, reskilling, and hiring talent from the market. As an effort to promote focused proposals for targeted clients, it develops and executes account planning, which includes proposals of high-value-added products and services for each targeted client. As the data center investment, it continues to make aggressive investments to capture a vibrant demand from hyperscalers. It also works on structural reforms to establish more efficient business foundation. As initiative to exit from unprofitable services and shift to cloud, it is undertaking a shift away from underperforming services and reorganizing its security business. It also pushes forward deliveries through outsourcing and streamlining overhead operations to optimize resources. Let me finish my part and hand over to Takeya. I am Takeya, Head of Finance Department. Let me cover additional information of the impact of NTT Ltd. consolidation. Please turn to page 20. This shows the FX impact. The third quarter experienced a yen depreciation greater than our full-year guidance and 16 JPY forecast. In a case when the Japanese currency's yen will weaker again, U.S. dollar is a billion JPY gain in net sales. Please turn to page 21. This shows details of consolidated net sales. Up to the end of the first half, our presentation deck did not include impact of NTT Ltd. in our appendix. Out of the year-on-year net sales uplift of 30%, around half of it comes from NTT Ltd. consolidation. In the third quarter, NTT Ltd.'s net sales and operating income landed at JPY 302.4 billion and JPY 12.8 billion respectively. The profit decline in the quarter mainly stems from increased financial expenses and tax-associated costs. Financial income and cost/share of profit loss of entities for using equity method increased given the nature of NTT Ltd. data center business, where a large capital investment is required upfront, raising the interest-bearing liabilities, while the interest cost also rose in response to the recent interest rate hike. Income taxes and others also increased mainly due to a tax cost increase as a result of limited consolidation. A certain part of profit loss is recognized on the side of non-controlling shareholder. Please turn to page 22. This shows the breakdown of net sales to a client outside the company. Overseas segment reflected NTT Ltd. consolidation impact both in actuals and forecasts for the third quarter and onwards. The line at the bottom, called Net Sales by Product and Services, has newly incorporated two items in addition to the existing five items based on the business operated. Assets increased by around JPY 2.8 trillion, principally due to around JPY 860 billion uplift in current assets, plus non-current asset increase by around JPY 1.9 trillion, driven by property, plant, and equipment and PPA and intangible assets. Liabilities, on the other hand, was pushed up by an increase of interest-bearing liabilities amounting to JPY 1.1 trillion, resulting in around JPY 1.8 trillion increase year-on-year. That's all from my side. Thank you. Thank you very much, Mr. Takeya. Let us move on to Q&A session, and please remain seated during the session. First, we will invite questions from the participants in the venue, and then take questions from online participants in the second half. Be sure to speak through the microphone. First, those of you in the venue, raise your hand if you have any question. Go ahead, please. This is Yamagata from Nikkei CrossTech, and this question directed to Fujiwara-san. This might not be directly related, but recently the rising prices is really happening in Japan as well. The raising salary and wages. What's your view on that? Can you talk a little bit about your intention? That's all. Thank you very much for your question. We didn't touch upon in the presentation, but this is a question about the payroll. I just would like to talk briefly about it. As part of NTT Group, we, regardless of deflation or the market situation, we have been working on improving the work conditions. Especially, we introduced a specialty-based talent programs. Also, we have been hiring specific talent. As for the pay raise itself, and in the past nine years, we have been doing that. Recently, 2% improvement of payroll, or JPY 100,000, should be included as an uplift. During the spring labor negotiation, through the discussions. I'd like to pose a question to Fujiwara-san. Combination with the NTT Ltd., I like you to talk about the impact. Conventionally, basically, one of the metrics that you have been using is that basically you want to achieve a 2% share in any market that you operate in. With this combination, if there are any markets you are able to grow because of the combination? Thank you very much for your question. As you mentioned, the 2% market share is our target. To have more opportunities of that sort, NTT Ltd. originally covered certain countries, and this increased the number of countries that we operate. We can jointly approach clients in Europe as well as North America. Therefore, in each region, for example, North America, Asia, and Europe, there's an initiative called Joint Go-To-Market. Both teams jointly visit clients to win the orders. To be more specific, in each region, each entity has existing clients, and they cross-check the client list to promote cross-sales. For example, application layer, if it is application layer, then NTT DATA goes, and if it is infrastructure, NTT Ltd. goes. They have selected 10 companies each. For those targeted customers, they are discussing how they can approach those customers. By doing so, there are actual examples which is shown here. We approach a major electronics manufacturer. For the infrastructure layer, NTT Ltd. did, and the application and consulting was done by NTT DATA. SAP and Cloud, we are getting very good feedback from customers. This is only one example of many, and we started to see this collaboration started to yield results. NTT Ltd. used to provide only infrastructure. However, they actually have the framework contracts. Under such contracts, there are various RPs. In the past, they only covered infrastructure part. However, there are other layers, and they actually transfer those contracts to the others. However, NTT DATA can cover those areas and can come up with proposals. Those business opportunities are coming up, therefore, we are expecting more opportunities to come. Thank you very much. Next question, please. Anyone in the venue, do you have any questions? Go ahead. My name is Harya. About the overseas business, I'd like to ask a question. Especially, I know that you were seeing a brisk performance in terms of new orders received, but when you look at the other markets, you started to see recession. How do you see the outlook going forward? Harya-san, thank you very much for your question. As you said, there's energy crisis or supply chain issues or interest rate or exchange rate. Various issues are tangled together and it is creating uncertainty. What about the IT spend? We are carefully watching the trend, and including Japan, in North America or in Europe. We haven't seen the declining trend of IT spend. Of course, in the existing area, of course, there's a pressure to reduce costs, and that is actually quite strong in Japan and overseas. As for the so-called digital space that can lead to new businesses, IT spend is quite aggressive. They have to do it, otherwise they cannot survive in the market, and especially for the digital IT services are seeing such trend. We are seeing a very aggressive investment, even during the COVID-19 and even today, where the pandemic is becoming settled. Moving on to the next question. Any more question from the venue? Please go ahead. This is Nishioka from Nikkei Business. About the electronic manufacturer business that you talked about, which country that company operate in? NTT Ltd. excluding that, you are getting a lot of orders and in overseas, especially in Europe. Is there any connection? Can you talk about that? Thank you for your question. Regarding this electronics manufacturer, this is a multinational company, it operates in various countries. Therefore, over multiple countries, NTT Ltd. can provide services, and so does NTT DATA, and such capabilities were highly recognized. Except for NTT Ltd. in North America, new orders received is like a decent level, excluding FX impact because of the large projects in the previous fiscal year. As we mentioned last time, we are being selective in doing the projects. If it is loss making or low profit projects, then we do not prioritize those. As for the pipeline, for the new orders received, it is becoming thicker. We hit the bottom at the fourth quarter in 2021, and since then it started to rise. Also, the sales cycle is now speeding up from taking orders to the sales recognized, especially in the digital space. We are aiming to enhance our profitability. If you look at the gross, the margin rate, compared to two years ago, we are seeing the improvement by around 1.5%, this is one of the accomplishment that we have made in the digital space. As a result, EBITDA is 7.2%. It includes some specific things, it is little over 7%. As for the European market, new orders environment is very robust and it is growing. Therefore, both in orders and the sales, they are growing. Our European team has consulting capabilities in the upstream, so they go to that layer and then undertake digital projects, and then they diverse the projects to BPO and others. For the European market, structural transformation are still underway to adapt digitization. Even including that cost, profit is rising. Thank you very much. 1.5% gross profit improvement, you are being selective in choosing the products, right. The high value digital project that are highly profitable, we are focusing on capturing those. Thank you. Moving on to the next question. Please go ahead. This is Yaguchi from Nikkei. The net profit, and the financial expenses, and also taxation expenses that have an impact on the profit. Until when this will continue, into fourth quarter or next fiscal year? Can you talk about that? Thank you for your question. For the net profit, the financial expenses and tax associated costs, it is not only for the single year. Every time it's going to hit our performance. I think it's around JPY 10 billion or JPY 12 billion for the financial expenses and JPY 5 billion for the taxation-related costs. That hits our balance sheet, and that's going to continue. From our perspective, it will push down the profit for the year. However, we are growing sales so that we can push up the profit. The data center requires investment upfront, therefore, there's a longer cycle to generate profit. Over the longer term, we would like to achieve solid growth. With that, I'd like to ask you related questions. The operating income margin, your guidance says 7.2%. Compared to your previous year, I think that this represents a decline, and are you expecting a V-shaped recovery? Also 10% that you set the target at, are you close to achieving the target, or when you start to see the rebound? What's your prospect? Are you talking about operating income? Operating income. There's a drop, which is a temporary one because strategic investment increased by JPY 15 billion compared to the previous fiscal year. In the 2Q, the unprofitable projects for the central government had an impact. Those are the two key factors. It is not that the profitability is declining. Especially for the strategic investments, we will continue to do so to drive growth for the future. For the red projects, we are going to prevent those projects so that we can drive profitability. Thank you very much. Moving on to the next question. Please raise your hand if you have any question. This is Suzuki from Asahi Shimbun. On a consolidated performance, if you look at this SG&A, within that, well, the labor cost is growing 30%, and another cost are also showing a 50% increase. The depreciation of the yen, then also the rising labor costs in overseas, are these creating an adverse impact to your performance? Then also, there are a lot of competition for the IT resources, if the wage increase will continue overseas, how much impact something like this will have on your performance? Can you talk a little bit about that? Thank you very much. Yeah. There's a shortage of IT resources, and we call it talent war. That is happening not only in Japan but also in the wider global market, and we expect this trend to continue. In the Japanese market, labor cost sharp increase is not yet happening. Earlier, the question about the pay raise was asked, but that may come out in the future. However, in the other countries, we are seeing the labor cost increase, and it varies by country, but it is now up by 20%. As a countermeasure, firstly, we want to gain understanding from clients. This is what American members said. This is a great opportunity. This provides an opportunity to negotiate with clients because the market is fluid and the pay raise trend is happening. Even during the middle of the contract, it offers the opportunity to negotiate the prices. As for the labor cost, in the past, mid-career hiring, even though unit price is high, we did hire those people. We do campus hiring as well. It's like, we hire new graduates, and they call it innovation center. They train those new graduates to, for them to learn the digital skills and expertise. They are also nurturing those talent. By and large, we can control the labor cost increase. Does that answer your question? Thank you for that. Any other questions? Okay. Now I would like to invite questions from online participants. Those of you who would like to ask questions, please use the Raise Hand icon at the bottom, and then wait until you called. When you are called, please make sure that you unmute yourself before speak. Nikkei BP Owada-san. We will activate the audio, so please stand by. Owada-san, please go ahead. Hi, Owada this is speaking, and I hope you can hear me, Fujiwara-san. Thank you. This is a global related question. You have talked about the SAP project with the electronic manufacturer, and that's a great achievement. On the other hand, well, when you look at the strength of NTT DATA, which is all about addressing the societal issues and cutting across different verticals and that's industry, not just focusing on the individual clients. That's what you have been doing in Japan. Is that something that you would like to do in overseas market, for example, or you will be focusing on competing likes of Accenture? Owada-san, thank you very much for your question. Where we are right now is slightly different between Japan and other countries. In each country, the level of presence is not so high compared to our presence in the Japanese market. In terms of facing up to societal challenges, I do see some common perspectives. For example, the issue around carbon neutrality. For such societal issues, there's an expectation from the community, not only in Japan, we are going to work on that in a global market. For example, visualizing CO2 emissions by providing consultations, or as for the circular economy, it is not contained to Japan, but also in other countries, there are a lot of initiatives on the way. Between Japan and Western countries, teams we are collaborating with each other. Thank you very much. Moving on to the next question. Okamoto-san from Nikkei Shimbun. We will activate the audio, so please stand by. Now it's ready. Okamoto-san, go ahead. I hope you can hear me. Yes, we can hear you clearly. This is Okamoto from Nikkei Shimbun, and I have two questions. First, the financial result in December, the sales, also the operating profit, the financial services and also enterprise. Apart, except for the NTT Ltd., what are the drivers that you, that stand out? Okay, let me explain by segment. In the public sector, the driver was the projects for the central governments and ministries, and also the telecom and utilities from the sales perspective. As for the financial segment, banking related projects drove our sales. In the last fiscal year, we had multiple large deals, and those have been recognized into as revenues. In the enterprise segment, retail services and manufacturing sectors are the area we are stronger than those are driving our sales. As for the North America, financial services, healthcare, public sectors and manufacturing sectors, those are the drivers. In Europe, including Europe and Latin America, so in Spain, Germany, UK, and Brazil, in those countries, those countries are drivers as region. In terms of the industry, it is actually different by country, but the financial sector, public sector, manufacturing sector, telecom and media sector, these sectors are being the drivers so far. Did it answer to your question? Thank you very much. That brings me to the second question to Takeya-san. The financial expenses increase that you talked about, this is attributable to increase in interest-bearing liabilities. Is this liability is denominated in JPY or U.S. dollars? Are you thinking about making any changes to our financial policy in the future? Okay, let me answer to your question. In terms of the foreign currency or the breakdown of the borrowings. We have borrowings in foreign currency for higher%. Most of it are in foreign currency, and dollars and euro accounts for around 80%. For the future financial policy, we will continue. NTT DATA Limited is going to make investment in data centers in the global market. Therefore, a foreign-based borrowing is the one that we have in mind. Also, we are going to explore other options as well. That's all. Thank you very much. That's all. Thank you for the questions. Thank you very much for the online participants. I would like to open the floor to those of you in the venue, any additional questions from the venue, please go ahead. This is Hatano from Nikkei. The cost of the combination with NTT Ltd., and what's the total cost that you expected? Up till December, how much of that have you been posted? Thank you very much for your question. Post merger PMI cost, I think, this is the question is about. JPY 11 billion has been recorded and JPY 4 billion was already spent. Joint Go-To-Market is the one of the activities that we use that money for, or the corporate function consolidation is the one that we spent. We are planning to use that spend by the end of this fiscal year. As for the PMI, we are currently estimating the cost and know every year JPY 10 billion-JPY 20 billion, roughly estimated, to shape a better business. Thank you for that question. Any other questions? If you have any question, please raise your hand. Thank you very much for all the questions that you have asked. With that, we would like to conclude the Press Conference for The Financial Results for The Third Quarter for The Year Ending March 2023. Thank you for your attendance.