COMPANY RESEARCH AND ANALYSIS REPORT

System Support Inc.
4396
Tokyo Stock Exchange First Section

21-Oct.-2021
FISCO Ltd. Analyst

Yuzuru SatoFISCO Ltd.
https://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange First Section

21-Oct.-2021
https://www.sts-inc.co.jp/index_e.html■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Outline of results for FY6/21........................................................................................................................

01

2. FY6/22 forecasts. . .................................. ......................................................................................................

01

3. Growth strategy...........................................................................................................................................

02■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. History................................................... ......................................................................................................

03

2. Business description. . ..................................................................................................................................

04■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 09
1. Outline of results for FY6/21........................................................................................................................

09

2. Trends by business segment. . ......................................................................................................................

10

3. Financial condition and business indicators.................................................................................................

13■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 14
1. Outlook for FY6/22.. .....................................................................................................................................

14

2. Outlook and growth strategy by business segment. ....................................................................................

15■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 19

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange First Section

21-Oct.-2021
https://www.sts-inc.co.jp/index_e.html█ Summary
Expecting continual double-digit profit growth driven by ServiceNow,a DX support solution
System Support Inc. <4396> (hereinafter “the Company”) is an independent IT company that is continuously
delivering growth centered on the Solutions Business, which includes support for the use of cloud systems, ERP and
databases, based on technological capabilities at the highest level of the industry. The Company is headquartered in
Ishikawa Prefecture, Japan. However, Tokyo, Nagoya, and Osaka are the primary hubs of the Company’s businessactivities. Also, the Company has a subsidiary in Silicon Valley in the US. Besides the Solutions Business, theCompany also conducts recurring-revenue businesses such as the Outsourcing Business, which revolves arounddata center management, and the Product Business, which is mainly focused on providing cloud (SaaS) services.
The Company has selected and requested to be included in the Prime Market, the new market segment of the Tokyo
Stock Exchange that will be launched in April 2022.
1. Outline of results for FY6/21
In FY6/21, the Company set a new record high for results, with net sales increasing 7.9% YoY to ¥14,431mn,
and operating profit rising 23.3% to ¥931mn. The impact of the COVID-19 pandemic remained mostly within the
anticipated range and was minor. Net sales in the Solutions Business and the Outsourcing Business grew steadily,
while net sales in the Product Business were flat YoY due to the completion of a large project that contributed to
FY6/20 earnings. On the profit front, in addition to the impact of higher sales, growth of high-profit-margin sales
related to ServiceNow*, improvement in the cost-of-sales ratio due to the spread of working from home, andreductions in various expenses such as sales expenses were factors behind the increase in profit.
*	A cloud platform that standardizes and automates business processes, and supports improved productivity by employees
and organizations. Over the past few years, it has started to rapidly become widely used as a DX solution not only in the
US and Europe, but also in Japan.

2. FY6/22 forecasts
For FY6/22, the Company is forecasting net sales of ¥15,962mn, up 10.6% YoY, while operating profit is forecast
at ¥1,080mn, up 16.0%, as the Company is forecasting double-digit growth in both sales and profit. The COVID-19
pandemic is ongoing, but companies’ DX investment is robust, and there has been hardly any impact on orders
received. In particular, the Company is expecting strong growth in sales related to ServiceNow, which continues togain traction as a tool for improving business productivity. ERP-related sales are also expected to continue to grow,centered on SAP cloud migration projects, while even sales in the Product Business, which saw sales slump in
FY6/21 due to one-time factors, are expected to increase as the Company accumulates more subscribers. In terms
of profits, the Company’s forecasts are predicated on sales expenses and other expenses returning to pre-COVID-19
levels, but with the COVID-19 pandemic still ongoing, it seems that these expenses are lower than the forecast.
If there are no major changes in the market environment going forward, we at FISCO think that there is a strong
possibility that FY6/22 results could exceed the Company’s forecasts.

We encourage readers to review our complete legal statement on “Disclaimer” page.

01 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.

21-Oct.-2021

4396 Tokyo Stock Exchange First Section

https://www.sts-inc.co.jp/index_e.html

Summary

3. Growth strategy
The Company’s medium- and long-term growth strategy is to drive stable growth in the mainstay Solutions Businessand accelerate growth in the Outsourcing Business and Product Business further, with the aim of expanding
business performance and improving earnings capabilities. In the Solutions Business, the Company will recruit andtrain human resources with sophisticated technological capabilities, in order to expand sales in businesses related
to the cloud, ERP and databases, for which demand is surging. Notably, the Company has earned certification as
an Elite Partner, the highest level of partnership, by ServiceNow, a platform that helps companies realize DX. The
Company has the second-highest number of certified developers, making it a top-tier company, and the Company
intends to continue to proactively expand sales while bolstering its development of human resources. With high profit
margins, ServiceNow-related business is expected to help improve overall earnings capabilities too. Meanwhile, in
the Outsourcing Business, the Company plans to capture demand for the use of data centers as backup capacity forcustomers’ BCP measures, with the main target being companies building private clouds. Additionally, in the ProductBusiness, the Company internally develops and supplies various cloud services that contribute to improved operating
efficiency. The Company plans to upgrade and expand its sales agencies and strengthen web marketing, with theaim of achieving sales growth. Moreover, M&As are also viewed as a growth strategy in the Product Business.
Key Points
An independent IT company that continues to grow by undertaking many projects involving Microsoft Azure,
AWS (Amazon Web Services), ServiceNow, SAP and Oracle• In FY6/21, the Company achieved increases in sales and profit exceeding its forecasts due to the expansion oforders received for cloud systems and ERP, as well as an improvement in the cost-of-sales ratio• Supported by the growth in DX investment, double-digit increase in profit is expected to continue in FY6/22,
and the profit forecast seems quite conservative• The outlook is for growth in all business segments, with particularly strong growth continuing in the business
related to ServiceNow•

Results trends

Net sales (left)

Operating profit (right)
(¥mn)

(¥mn)
20,0001,080
931

16,00013,376
11,762

12,000960

14,431
720

754

9,970

8,000

15,962

1,200

480

529
402

240

4,000
0

0

FY6/18

FY6/19FY6/20FY6/21

FY6/22 E

Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

02 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange First Section

21-Oct.-2021
https://www.sts-inc.co.jp/index_e.html█ Company profile
An independent IT company that continues to grow by undertaking
many projects involving Microsoft Azure, AWS, ServiceNow, SAP
and Oracle
1. History
The Company was founded in 1980 in Kanazawa, Ishikawa Prefecture to provide data entry services and systemdevelopment services. In the 1980s, business performance continued to grow steadily against the backdrop offavorable economic conditions. However, business results started to deteriorate following the collapse of Japan’s
bubble economy in the 1990s, putting the Company’s survival at risk. In 1994, management was transferred fromthe Company’s founder to the current Representative Director Ryoji Koshimizu. Under Mr. Koshimizu’s leadership,
the Company worked to rationalize management, and four years later, it had recovered enough to restore profitability.
Subsequently, the Company developed its technological capabilities, which are said to be at the highest level ofthe industry for an independent enterprise, into a core strength. In addition, the Company developed many certified
technology professionals specialized in the products and services of global IT companies, such as Microsoft Azure,
AWS, SAP and Oracle. By doing so, the Company has expanded sales in the usage support fields for those products
and services and has continuously increased its business performance.
Looking at business expansion initiatives since 2000, the Company founded eNet Solutions Co., Ltd., a subsidiarythat conducts data center services, in 2000. In 2004, the Company entered into an Oracle EBS Technical Partner
contract with Oracle Corporation Japan <4716>. With this contract, the Company would go on to proactively
undertake system integration and deployment projects for Oracle products. In addition, the Company launched theProduct Business to sell internally developed software products as a new income-generating business following
systems development and data center services. As its first such product, the Company commenced sales of Tate
Yakusha, a construction work information management system, in 2005.
Moreover, in 2009, the Company founded STS Medic Inc., a subsidiary engaged in the development and sales of
specialized software for the medical industry. Thereafter, the Company built a solid business foundation by making
use of M&As. For example, T4C Co., Ltd., a service partner of the major ERP provider SAP, and ACROSS Solutions,Inc., which had been providing system solutions to the distribution industry, were successively converted into
subsidiaries of the Company in 2010 and 2012, respectively. The Company has also entered overseas markets.
Notably, in 2013, the Company established a subsidiary in the US for the purpose of gathering information andsupplying IT services in the country. Additionally, in 2016, it set up a subsidiary in Canada to provide outsourcing
services (such as accounting services) to Japanese companies in North America. These initiatives have led to theGroup structure in place today. In August 2018, the Company was listed on the Tokyo Stock Exchange Mothers
Market. In August 2019, one year later, the Company achieved the listing of its shares on the Tokyo Stock ExchangeFirst Section. The Company has selected and requested to be included in the Prime Market, the new market segmentof the Tokyo Stock Exchange that will be launched in April 2022.

We encourage readers to review our complete legal statement on “Disclaimer” page.

03 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange First Section

21-Oct.-2021
https://www.sts-inc.co.jp/index_e.html

Company profile

History
Date
January 1980
November 2000

Major event
Founded in Kanazawa, Ishikawa Prefecture, providing data entry and system development services.
Financed and founded eNet Solutions Co., Ltd.

January 2004

Entered into an Oracle EBS Technical Partner contract with Oracle Corporation Japan <4716>

February 2005

Commenced sales of “Tate Yakusha,” a construction work information management system

March 2009

Financed and founded STS Medic Inc.

May 2010

Acquired shares of T4C Co., Ltd. and made it a subsidiary

June 2011

Entered into an SAP Service Partner contract with SAP Japan Co., Ltd.

March 2012

Acquired shares of ACROSS Solutions, Inc. and made it a subsidiary

April 2012

Began providing services for Cloud Koubou powered by Amazon Web Services, a cloud support service

July 2013

Financed and founded STS Innovation, Inc. in the United States

August 2013

Began providing services for PinMap, a customer data mapping service

October 2013

Entered into an APN Consulting Partner agreement with Amazon Japan K.K.

March 2015

Acquired additional shares of T4C Co., Ltd. and ACROSS Solutions, Inc. and made them wholly owned subsidiaries
STS Innovation financed and founded FrontLine International, Inc. in the United States (absorbed through a merger in April 2017)

September 2015

Entered into a basic partnership contract with ServiceNow, Inc.

January 2016

Financed and founded STS Innovation Canada, Inc. in Canada

February 2016

Commenced sales of the cloud-based shift management system “SHIFTEE”

August 2018

Listed on the Tokyo Stock Exchange Mothers Market

August 2018

Commenced sales of the attendance/work management system “Shugyo Yakusha”

August 2019

Listed market changed to the Tokyo Stock Exchange First Section

Source: Prepared by FISCO from the Company’s website and securities reports

Focusing on the Solutions Business as the mainstay business, while
expanding into the Outsourcing Business and Product Business,
which will be recurring-revenue businesses
2. Business description
The System Support Group comprises the Company and its six consolidated subsidiaries. The Group discloses
information based on three segments, specifically the Solutions Business, Outsourcing Business and ProductBusiness. Looking at the ratio of sales in each segment over the past five years, the composition has been generally
stable with the Solutions Business accounting for approximately 83% of sales, the Outsourcing Business 13%, and
the Product Business 4%. During this period, overall net sales have grown by roughly 1.6 times, and each of thethree business segments have been growing at the same pace.
Looking at the profit margin (gross profit margin) for each segment, the mainstay Solutions Business and theOutsourcing Business have steadily remained in the low 20% range and the low 30% range, respectively, while
the Product Business has had relatively high gross profit margins in the 50% range. Among these, the stability of
the Solutions Business is what is receiving attention. In the system development industry, many companies areexperiencing unstable profitability due to projects being drawn out or defects emerging, but the Company has beenable to maintain a certain level of profitability. This is proof that the Company possesses strong technological andproject management capabilities, and we at FISCO view these as the Company’s strengths.

We encourage readers to review our complete legal statement on “Disclaimer” page.

04 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.

21-Oct.-2021

4396 Tokyo Stock Exchange First Section

https://www.sts-inc.co.jp/index_e.html

Company profileComposition of net sales by business segment
Solutions BusinessOutsourcing Business

Product Business

Others

100%

0.5%
3.7%

0.4%
3.3%

0.4%
4.1%

0.2%
4.1%

90%

13.3%

13.5%

13.0%

12.5%

0.2%
3.8%
12.3%

82.5%

82.8%

82.5%

83.2%

83.6%

FY6/17

FY6/18

FY6/19FY6/20FY6/21

80%
70%
60%
50%
40%
30%
20%
10%
0%
Note: Percentages are calculated using pre-adjusted figures
Source: Prepared by FISCO from the Company’s financial results

Gross profit margin by business segment
Solutions BusinessOutsourcing Business

Product Business

70%
57.3%

60%
50%

44.8%

40%

55.0%

53.2%

30.0%

31.4%

43.7%
31.9%

32.3%

22.4%

23.1%

22.3%

23.5%

24.1%

FY6/17

FY6/18

FY6/19FY6/20FY6/21

29.7%
30%
20%
10%
0%

Source: Prepared by FISCO from the Company’s financial results(1) Business description for each business segmenta) Solutions BusinessIn the Solutions Business, as an independent IT company, the Company provides technological support related
to usage and deployment of cloud services and ERP packages and building databases and other infrastructure,
centered on consulting, design, development, and operation and maintenance of IT systems for client companies.
Its strengths lie in its wide range of customers across all manner of business sectors and operations, and its ability
to support a complete spectrum of development processes on a one-stop basis.

We encourage readers to review our complete legal statement on “Disclaimer” page.

05 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange First Section

21-Oct.-2021
https://www.sts-inc.co.jp/index_e.html

Company profile

In terms of the sales composition for FY6/21, contracted development of IT systems represented over 40%, ERPrelated services (such as deployment and maintenance and operation of SAP and ERP) accounted for just over
20%, and the remainder was from cloud-related services (deployment and migration support for cloud services
such as Microsoft Azure, AWS, and ServiceNow*) and database-related services (design, construction, andmaintenance and operation of Oracle databases). In addition, direct transactions with end customers represented
just over 60% of the orders received by the Company, with the remainder comprising subcontracted orders
received via major SI vendors and other partners. Projects undertaken through direct transactions with customers
have relatively high profit margins and tend to lead to recurring orders more easily as closer relationships aredeveloped with customers through such projects. Meanwhile, subcontracted projects have the feature of tending
to lead to stable orders more easily. This is because these projects often cover longer periods of time as they
primarily involve large-scale projects, such as systems for financial institutions and mission-critical systems.
*	ServiceNow is a cloud service for standardizing business processes. It is provided by ServiceNow, Inc. of the US. Looking
at examples of usage, the information system departments of companies use the service when they need to centrally
manage assets, work flows, incidents and so forth for the purpose of streamlining operations. The Company was one of
the first Japanese companies to enter into a partner agreement with ServiceNow in 2015, and has a top-tier track record
for deploying the service in Japan.

Main features of the order-receipt scheme in the Solutions Business

Source: The Company’s results briefing materials

Moreover, one of the features of the Company is that it is a group of technology professionals, with engineers
representing more than 80% of personnel in the Solutions Business. The Company needs only a relatively small
number of sales personnel because it receives many customer-referred projects from Microsoft, AWS and Oracle.
These projects are referred to the Company based on its abundance of personnel with sophisticated technologicalcapabilities and its extensive development track record for projects related to the cloud, databases, etc.

We encourage readers to review our complete legal statement on “Disclaimer” page.

06 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange First Section

21-Oct.-2021
https://www.sts-inc.co.jp/index_e.html

Company profile

Track record of main certifications and awards
Microsoft Azure

AWS• Obtained Gold Cloud Platform Competency Certification
Certified as a partner with an outstanding track record in expanding
Microsoft Azure• Obtained Advanced Specialization*1
Obtained certification as a partner with sophisticated expertise in
specific solution fields• Received three consecutive MVP awards
Received consecutive awards in the data platform field since 2017*2• Obtained Oracle Competency in the AWS Competency Program*3• Received the APN Partner Award “Rising Star of the Year” (FY2014)

Oracle• Received Oracle Database-related awards for 14 consecutive years*4
Received Oracle Certification Award 2020 and other awards from
Oracle Corporation Japan*1 Obtained in the field of migrating Windows Servers and SQL Servers to Microsoft Azure.
*2 Award received by the Company’s employees.
*3 A program to identify, validate, and promote Advanced and Premier tier partners in the AWS Partner Network (APN) that have demonstrated
technical expertise and proven customer success pertaining to AWS.
*4 As of June 30, 2021.
Source: Prepared by FISCO from the Company’s results briefing materialsb) Outsourcing BusinessIn the Outsourcing Business, data centers managed by subsidiary eNet Solutions Co., Ltd. at three locations inJapan (Tokyo and Kanazawa) account for around 70% of net sales from management services. These services areused as infrastructure for the private clouds of companies and for BCP measures and data backup management.
Also, in 2006, as a value-added service that acts as a hook for acquiring data center customers, the Company
began providing Safetylink24, an emergency notification and safety confirmation service that automatically
distributes safety confirmation messages for employees linked to earthquake information (currently around 800
companies are subscribed to this service). In 2010, the Company began offering ActionPassport, an electronic
work flow system (approximately 300 companies subscribed), and in 2017, the Company began providing aservice that allows customers to easily use IBM Japan, Ltd.’s IBM Watson Explorer (an AI-driven search andanalysis platform) with a monthly charge plan. These value-added services have a recurring-revenue businessmodel based on monthly fees, so revenue increases in line with growth in the number of subscribers. As of June
2021, the number of customers using the Company’s data centers amounted to approximately 1,000 companies.
The Company also has other sources of sales, including training for client companies pertaining to systems that
the Company was involved in developing in the Solutions Business and operation and maintenance of help desk
services, along with data analysis and entry services.
c) Product BusinessIn the Product Business, the Group is engaged in the development and sales of products (software). It also
customizes products according to customer needs. Products are sold via sales agencies, in addition to direct sales
to customers. The Product Business’s current main products are Tate Yakusha for the construction industry andthe MOS mobile order receipt and placement system for the wholesale and retail sectors, both of which accountfor around 30% of net sales. While the Company does receive orders for large custom development projects fromtime to time, the majority of sales in the Product Business are generated through monthly fees from cloud (SaaS)
services. Therefore, this business has a recurring-revenue business model where revenue increases in line withgrowth in the number of subscribers.

We encourage readers to review our complete legal statement on “Disclaimer” page.

07 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange First Section

21-Oct.-2021
https://www.sts-inc.co.jp/index_e.html

Company profile

Outline of major products
Name

ProviderDescription

Number ofsubscribing
companies*

Tate Yakusha

System Support Inc.

A construction work information management system. The monthly charge for thebasic version is ¥36,000 per 5 users (initial cost: ¥240,000). The professional version isoffered at a monthly charge of ¥39,800 per 5 users (initial cost: ¥480,000).

636

MOS

ACROSS Solutions, Inc. A mobile order receipt and placement system. For the full version, the initial cost starts
at ¥350,000, options at ¥100,000, and the monthly charge at ¥20,000 (with actual
figures depending on the number of accounts needed by the party placing the order).

457

SHIFTEE

System Support Inc.

A cloud-based shift management system. The monthly charge for the full version is¥400 per user (separate charges apply for customization).

81

An attendance/work management system. The monthly charge for the cloud version is¥200 per user (separate charges apply for the on-premise version).

75

Shugyo Yakusha System Support Inc.
T-FileSTS Medic Inc.

Medical image filing system

N.A.

* As of June 30, 2021.
Source: Prepared by FISCO from the Company’s website and results briefing materials(2) Group companies and the number of employees
The Company’s subsidiaries specialize in different functions and business sectors so that they can constantly
provide new solutions to customers with proactivity and speed in each company’s specialty area. In addition, thenumber of employees was 1,126 on a consolidated basis as of the end of June 2021 (an increase of 87 people
YoY). The Group’s workforce has increased every year in step with growth in the size of its business. Of the total,
the number of employees of the Company on a non-consolidated basis was representing more than 80% ofGroup-wide employees.
Description of main businesses and number of employees of Group companies
Name of company

Solutions BusinessOutsourcing Business

Product Business

Number of
employees

System Support Inc.

System development,
infrastructure construction
support, cloud service
deployment support

System operation andmaintenance, data entry services

Development and sales of Tate
Yakusha, a construction work
information management system,and other products

943

eNet Solutions Co., Ltd.

Deployment of various solutions

Data centers and related platform
services-64

T4C Co., Ltd.

ERP product deployment
consulting

-

-

76

STS Medic Inc.

Sale and installation of medical
devices and other items-

Sales and deployment support
for T-File, a medical image filingsystem11

ACROSS Solutions, Inc.

--

Development and sale of
MOS mobile order receipt andplacement system

23

STS Innovation, Inc.

-

Outsourcing service formanagement operations

-

6

-

Outsourcing services for
management operations-

3

STS Innovation CanadaInc.

* Other businesses (overseas information provision service, overseas media business, staff referral business, etc.) are conducted by STS Innovation,
Inc.
Source: Prepared by FISCO from the Company’s securities reports

We encourage readers to review our complete legal statement on “Disclaimer” page.

08 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.

21-Oct.-2021

4396 Tokyo Stock Exchange First Section

https://www.sts-inc.co.jp/index_e.html█ Results trends
In FY6/21, the Company achieved increases in sales and profit
exceeding its forecasts due to the expansion of orders received forcloud systems and ERP as well as an improvement in the cost-ofsales ratio
1. Outline of results for FY6/21
In FY6/21, the Company set a new record high for consolidated results for another consecutive year, with net sales
increasing 7.9% YoY to ¥14,431mn, operating profit rising 23.3% to ¥931mn, ordinary profit up 34.1% to ¥954mn,
and profit attributable to owners of parent up 49.9% to ¥674mn. In addition, results even exceeded the Company’s
forecasts which had been upwardly revised in May 2021.
Consolidated results for FY6/21(¥mn)
FY6/20Results

FY6/21% of net sales

Company
forecast*

Results% of net sales

Achievement
rate

YoY

Net sales

13,376-

14,342

14,431

-

7.9%

0.6%

Cost of sales

9,983

74.6%

-

10,688

74.1%

7.1%

-

SG&A expenses

2,637

19.7%

-

2,811

19.5%

6.6%

-

Operating profit

754

5.6%

848

931

6.5%

23.3%

9.8%

Ordinary profit

712

5.3%

866

954

6.6%

34.1%

10.2%

Extraordinary losses

54

-

-

24

-

-

-

Profit attributable toowners of parent

450

3.4%

592

674

4.7%

49.9%

13.9%

* Revised forecast results announced in May 2021
Source: Prepared by FISCO from the Company’s financial results

The negative impact on net sales from the COVID-19 pandemic was approximately the level that had been anticipated at the beginning of FY6/21. Overall, companies have had a strong appetite for investment in DX, and theCompany’s overall revenue was driven by growth in the Solutions Business due to deployments of cloud systems
for improving work efficiency and more orders for deployments of ERP. Revenue also increased in the Outsourcing
Business due to the increase in monthly billing revenue. Meanwhile, revenue in the Product Business was flat YoY
due to the absence of a large customization project that contributed to sales in FY6/20.
The cost-of-sales ratio decreased 0.5 percentage points from 74.6% in FY6/20 to 74.1% in FY6/21, owing to an
improved product mix and decreased fixed costs associated with the shift to working from home. SG&A expenses
increased 6.6% due to the rise in personnel costs, but the SG&A expenses ratio declined 0.2 percentage points YoY
due to the curbing of sales expenses as a result of cancellations of trade exhibitions and the introduction of online
sales activities. These factors helped push up the operating margin from 5.6% in FY6/20 to 6.5% in FY6/21, thehighest level in the past few years. Non-operating income/expenses improved by ¥66mn YoY, mainly due to a ¥34mn
increase in subsidy income and the non-recurrence of listing expenses of ¥17mn recorded in the previous fiscal year.

We encourage readers to review our complete legal statement on “Disclaimer” page.

09 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.

21-Oct.-2021

4396 Tokyo Stock Exchange First Section

https://www.sts-inc.co.jp/index_e.html

Results trends

In the Solutions Business, there was continued strong growth insales related to ServiceNow, which supports operational productivity
improvements
2. Trends by business segment(1) Solutions BusinessIn the Solutions Business, net sales rose 8.5% YoY to ¥12,066mn, and segment profit increased 11.2% to¥2,905mn. There were strong orders in the field of cloud service usage support, such as deployments of thecloud system ServiceNow aimed at making system maintenance and operation more efficient, as well as ERP
deployment projects. The segment’s profit margin increased from 23.5% to 24.1%, mainly due to an increase in
the ratio of high profit margin ServiceNow sales.

Performance trends in the Solutions BusinessNet sales (left)

Segment profit (left)

Profit margin (right)(¥mn)
15,000

30.0%
22.4%

23.1%

22.3%
9,705

10,000

23.5%

24.1%
12,066

11,124

20.0%

8,254

7,315
5,000

10.0%
1,638

1,905

2,162

2,613

2,905

0

0.0%

FY6/17

FY6/18

FY6/19FY6/20FY6/21

Source: Prepared by FISCO from the Company’s results briefing materials
Looking at net sales by field, sales related to database and cloud platforms grew 13.2% YoY to ¥3,116mn, as thetrend of increasing revenue continued. In addition to an increase in deployments of cloud systems such as AWS
and Microsoft Azure, Oracle Database cloud migration projects were also strong. Also, although the scale is still
small, there was steady growth in recurring revenue for account resale (monthly usage fees that arise based on
customers’ cloud usage) for each cloud platform.
ServiceNow-related net sales grew significantly by 64.4% YoY to ¥1,169mn. In FY6/19, net sales were ¥377mn,
so this represents a rapid tripling of growth in two years. As companies advance digital transformation of management, demand has grown rapidly over the past 1-2 years for ServiceNow as a cloud platform that allows
companies to efficiently realize standardization and automation of business processes. In 2015, the Company
became one of the first Japanese companies to enter into a partner agreement with ServiceNow, and building
up a track record of deployments while developing certified engineers has led to strong growth. The number ofcompetitors has been increasing recently, but partially due to the fact that there is still a lack of engineers in the
Kansai area, the Company is often able to win orders for large projects from large companies, and this has had
an impact.

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10 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange First Section

21-Oct.-2021
https://www.sts-inc.co.jp/index_e.html

Results trends

ERP-related net sales increased 8.3% to ¥2,604mn. Among companies deploying ERP, there continues to bea shift to migrate from existing products to SAP S/4 HANA based on the fact that maintenance support for the
existing SAP ERP product will terminate in 2027. In this environment, the Company is proactively developing
engineers and responding to the robust demand. Also, the Company is building a framework for providing
nearshore support for ERP maintenance in the Hokuriku area, and the Company’s ability to offer ERP-related
consulting, development, infrastructure building and maintenance services in a one-stop manner is a strengthand a factor behind the growth in sales.
Net sales in other contracted systems development declined 1.5% YoY to ¥5,177mn. This was mainly due tothe completion of a large contracted development project that contributed to earnings in FY6/20, and net sales
actually increased compared to two fiscal years ago (¥4,489mn).
(2) Outsourcing BusinessNet sales in the Outsourcing Business increased 6.5% YoY to ¥1,780mn, while segment profit rose 11.3% to¥558mn. Sales from data center services, including AI-related services, increased steadily. Monthly data center
usage fees also continued to increase during the period, and the segment profit margin also rose from 30.0% in
FY6/20 to 31.4% in FY6/21, owing to the positive impact of higher sales.

Performance trend in the Outsourcing Business
Performance trend in the Outsourcing BusinessNet sales (left)
Net sales (left)

(¥mn)
(¥mn)
2,000
2,000

1,500
1,500

29.7%
29.7%

31.9%
31.9%
1,344
1,344

1,176
1,176

Segment profit (left)
Segment profit (left)

32.3%
32.3%
1,529
1,529

Profit margin (right)
Profit margin (right)

40.0%
40.0%

1,780
1,780

1,671
1,671

30.0%
30.0%

31.4%
31.4%

1,000
1,000

20.0%
20.0%

500
500

0
0

30.0%
30.0%

348
348

FY6/17
FY6/17429
429

FY6/18
FY6/18

493
493

501
501

FY6/19FY6/19FY6/20FY6/20Source: Prepared by FISCO from the Company’s results briefing materials

558
558

FY6/21
FY6/21

10.0%
10.0%

0.0%
0.0%



(3) Product BusinessIn the Product Business, net sales increased 0.1% YoY to ¥555mn, and segment profit declined 3.1% to ¥295mn.
While net sales increased due to the buildup in the number of subscribers to MOS, Shugyo Yakusha, and SHIFTEE,
the minimal increase was mainly due to the non-recurrence of a large customization project for Tate Yakusha that
contributed to an increase in revenue in FY6/20. Excluding this factor, revenue otherwise increased steadily. The
segment profit margin decreased from 55.0% to 53.2%, due to the impact of the non-recurrence of the large
customization project.

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11 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.

21-Oct.-2021

4396 Tokyo Stock Exchange First Section

https://www.sts-inc.co.jp/index_e.html

Results trends

The number of subscribers by major product as of June 30, 2021 was 636 companies for Tate Yakusha (up 41
companies YoY), 457 companies for MOS (up 109 companies), 81 companies for SHIFTEE (up 17 companies)
and 75 companies for Shugyo Yakusha (up 49 companies). The main revenue drivers are Tate Yakusha and
MOS, while SHIFTEE, which was launched in 2016, turned profitable on a full fiscal year basis for the first time. It
appears Shugyo Yakusha, which the Company launched in 2018, will take some time to monetize given the factthat functional upgrades and other development are still ongoing, but sales based on referrals from partnering
regional banks are increasing, and it is starting to be used by large companies, so growth can be expected going
forward. In addition to attendance/work management, Shugyo Yakusha allows users to manage and analyze
man-hours for various operations and projects, and it is becoming more widely deployed as a tool supporting
productivity improvements and work style reforms in companies.

Performance trends in the Product BusinessNet sales (left)

Segment profit (left)

Profit margin (right)

(¥mn)

57.3%

600
500
400

44.8%

328

43.7%

50.0%

555

40.0%

326
274

147

60.0%

53.2%

555

478

300

200

55.0%

305

295
30.0%

20.0%

142

100

10.0%

0

0.0%
FY6/17

FY6/18

FY6/19FY6/20FY6/21

Source: Prepared by FISCO from the Company’s results briefing materials㻺㼡㼙㼎㼑㼞㻌㼛㼒㻌㼏㼛㼙㼜㼍㼚㼕㼑㼟㻌㼐㼑㼜㼘㼛㼥㼕㼚㼓㻌㼑㼍㼏㼔㻌㼜㼞㼛㼐㼡㼏㼠（㻺㼛㻚㼛㼒㻌㼏㼛㼙㼜㼍㼚㼕㼑㼟）㼀㼍㼠㼑㻌㼅㼍㼗㼡㼟㼔㼍㻹㻻㻿㻿㻴㻵㻲㼀㻱㻱

㻿㼔㼡㼓㼥㼛㻌㼅㼍㼗㼡㼟㼔㼍

㻝㻘㻠㻜㻜
㻝㻘㻞㻜㻜
㻝㻘㻜㻜㻜
㻤㻜㻜

㻢㻜㻜

㻝
㻟㻥

㻝㻟
㻡㻞

㻞㻢
㻢㻠

㻡㻞
㻣㻟

㻠㻜㻥

㻟㻝㻝

㻟㻠㻤

㻡㻡㻜

㻡㻤㻟

㻡㻥㻡

㻢㻜㻣

㻝㻥㻛㻢

㻝㻥㻛㻝㻞

㻞㻜㻛㻢

㻞㻜㻛㻝㻞

㻞㻞㻤

㻣㻡
㻤㻝
㻠㻡㻣

㻠㻜㻜
㻞㻜㻜

㻢㻟㻢

㻜
㻌㻞㻝㻛㻢
㻔㼅㼑㼍㼞㻛㻹㼛㼚㼠㼔㻕

Source: Prepared by FISCO from the Company’s results briefing materials
We encourage readers to review our complete legal statement on “Disclaimer” page.

12 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.

21-Oct.-2021

4396 Tokyo Stock Exchange First Section

https://www.sts-inc.co.jp/index_e.html

Results trends

The Company’s financial position is sound, and the operating margin
remains on an upward trend
3. Financial condition and business indicators
Looking at the Company’s financial condition at the end of FY6/21, total assets were ¥6,662mn, an increase of¥714mn from the end of FY6/20. In terms of the main factors behind this change, under current assets, cash anddeposits increased by ¥310mn, and notes and accounts receivable - trade increased by ¥371mn, accompanying
the expansion of business. Under non-current assets, property, plant and equipment increased by ¥27mn.
Total liabilities were ¥3,669mn, an increase of ¥129mn from the end of FY6/20. While interest-bearing debt
decreased by ¥62mn, accounts payable - trade increased by ¥178mn and income taxes payable and accounts
payable - other both increased by ¥27mn. Total net assets were ¥2,993mn, an increase of ¥585mn from the endof FY6/20. Retained earnings increased by ¥573mn, primarily due to the recording of profit attributable to ownersof parent, partially offset by the payment of dividends.
Looking at business indicators, the equity ratio rose from 40.5% at the end of FY6/20 to 44.9% in step withearnings growth. Meanwhile, the interest-bearing debt ratio declined from 42.1% to 31.8%, and it can be said that
the Company’s financial soundness has greatly improved over the past few years. Net cash (cash and deposits– interest-bearing debt) was ¥1,744mn, which is 2.4 times higher than the level in FY6/19, as the financial basecontinues to strengthen.
Regarding profitability, the operating margin has remained on an upward trend, rising from 4.0% in FY6/18 to 6.5% in
FY6/21. This is mainly because the Company has almost no unprofitable projects as it has carried out internal project
management and the number of high-profit-margin projects has been increasing. The Company has maintained
high profitability with ROA and ROE at or above 10%.
Consolidated balance sheet(¥mn)
vs. prior fiscal
year-end

FY6/18

FY6/19FY6/20FY6/21

3,103

4,223

4,631

5,319

687

1,436

1,881

2,387

2,697

310

Non-current assets

1,063

1,141

1,316

1,342

26

Total assets

4,166

5,365

5,947

6,662

714

Total liabilities

3,608

3,387

3,540

3,669

129

1,499

1,145

1,015

952

-62

558

1,977

2,407

2,993

585

Equity ratio

13.4%

36.9%

40.5%

44.9%

4.4pt

Interest-bearing debt ratio

246.1%

58.0%

42.1%

31.8%

-10.4pt

ROA

9.4%

10.6%

12.6%

15.1%

2.5pt

ROE

48.4%

27.2%

20.5%

25.0%

4.5pt

Operating margin

4.0%

4.5%

5.6%

6.5%

0.9pt

Current assets(Cash and deposits)(Interest-bearing debt)
Total net assets(Security)(Profitability)

Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

13 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.

21-Oct.-2021

4396 Tokyo Stock Exchange First Section

https://www.sts-inc.co.jp/index_e.html█ Outlook
Supported by the growth in DX investment, double-digit growth
in profit is expected to continue in FY6/22, and the profit forecast
seems quite conservative
1. Outlook for FY6/22
For the FY6/22 consolidated results, the Company is forecasting net sales of ¥15,962mn, (up 10.6% YoY), operating
profit of ¥1,080mn (up 16.0%), ordinary profit of ¥1,066mn (up 11.7%), and profit attributable to owners of parentof ¥745mn (up 10.5%), as the Company is forecasting double-digit growth in both sales and profits. Although theuncertain situation in the domestic economic outlook is ongoing as the COVID-19 pandemic becomes drawn out,
companies will continue to have a strong appetite for investment in DX aimed at strengthening their competitivenessand growth potential, and the Company will aim to increase sales and profits by capturing this demand with certainty.
Consolidated outlook for FY6/22(¥mn)
FY6/21Results

FY6/22% of net sales

Company
forecast% of net sales

YoY

Net sales

14,431-

15,962-

10.6%

Cost of sales

10,688

74.1%

-

-

-

SG&A expenses

2,811

19.5%

-

-

-

Operating profit

931

6.5%

1,080

6.8%

16.0%

Ordinary profit

954

6.6%

1,066

6.7%

11.7%

Extraordinary losses

24

-

-

-

-

Profit attributable toowners of parent

674

4.7%

745

4.7%

10.5%

Profit per share (¥)

65.45

71.97

Source: Prepared by FISCO from the Company’s financial results

The Company’s forecasts are based on the following assumptions about the impact of the COVID-19 pandemic
on business.
• Depending on the situation with customers’ business results, there is expected to be an impact on the Group’sbusiness results due to IT investment budget contractions and project postponements. However, despite this, theGroup has a low level of dependence on specific customers, and the Group’s customers belong to a wide range
of industries, so the impact should be minor.
• Even if a state of emergency is declared, it will be possible to continue business based on the fact that the workfrom-home system is in place and business meetings and internal meetings are being held online.
The Company is forecasting net sales to increase by approximately 10% in each business segment. Meanwhile,on the expense front, the Company is forecasting that sales activity costs, including advertising, travel, and entertainment expenses, which had been declining amid the COVID-19 pandemic, will return to pre-COVID-19 levels.
Still, it actually seems that as the COVID-19 pandemic continues on, these costs are falling short of its forecasts.
As a result, if there are no major changes to the market environment going forward and net sales are achieved as
forecast, at FISCO we think that there is a strong possibility that profits will exceed the Company’s forecast, similar
to the previous fiscal year.

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14 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange First Section

21-Oct.-2021
https://www.sts-inc.co.jp/index_e.html

Outlook

Regarding human resources, the Company will continue to bolster hiring, and will work on increasing the number ofcertified professionals in cloud services. Regarding hiring, the Company hired 60 new graduates in April 2021 and 89
mid-career employees over the course of the year. In FY6/22, expecting both to be at a slightly higher level than theprevious year, the Company will carry out local hiring at its business offices in Tokyo, Nagoya, Osaka and Kanazawa.
By working to create employee-friendly workplaces and enhance the education and training system, the Company’s
attrition rate improved from 7.7% in FY6/20 to 5.9% in FY6/21. The Company will strive for further growth going
forward by focusing its efforts on the hiring and development of personnel which will be the foundation for growth.

Outlook is for growth in all business segments, with particularly
strong growth in business related to ServiceNow
2. Outlook and growth strategy by business segment
The Company’s growth strategy for the future is to continue double-digit growth by working to expand existing
businesses related to the cloud, ERP, and databases in the Solutions Business, and to achieve balanced growthin the Outsourcing Business, which includes data center services, and the Product Business, both of which will
become recurring-revenue businesses. The outlook and key initiatives for each business in FY6/22 are as follows.
Business growth diagram

Source: The Company’s results briefing materials(1) Solutions BusinessIn the Solutions Business, the Company will continue aiming for double-digit growth by leveraging its strong
technological capabilities and winning orders in the three areas related to the cloud and databases, ServiceNow,
and ERP.
a) ServiceNow
Regarding ServiceNow-related business, demand is strong and there are more inquiries than the Company’s
human resources can handle, and it seems that the number of cases in which the Company is the prime contractor
and utilizes external partners is increasing. At FISCO, we think that if progress is made on personnel development
and expansion of external partners, there is a good chance that sales will increase further.

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15 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.

21-Oct.-2021

4396 Tokyo Stock Exchange First Section

https://www.sts-inc.co.jp/index_e.html

OutlookAs mentioned above, ServiceNow is a cloud platform service that has various functions that contribute to thestandardization and automation of business operations, and use of it has been rapidly spreading and expanding in
the last few years. In Japan, growth is accelerating as companies’ efforts to shift to DX are speeding up, triggeredby the COVID-19 pandemic. ServiceNow Japan (joint venture) has set further expansion and strengthening of thepartner ecosystem in order to handle robust demand as one of the business strategies for 2021. In response to
the increasing needs for products for industries, the Company’s policy is to strengthen cooperation with partners
possessing expertise in each industry. Also, the Company has set a goal of doubling the number of certified
engineers in Japan from the current level of roughly 600 engineers to 1,200 engineers. This is evidence that theCompany thinks that there is plenty of latent demand. Recently, the Company is strengthening initiatives on DX
promotion solutions for local governments, and it appears that the strategy is to cultivate the market not only
targeting companies but also the public sector. Based on the above, at FISCO we predict that there will continue
to be strong growth in demand for ServiceNow over the medium term.
Meanwhile, given the fact that it is a high growth area, it is also expected that there will be an increase incompanies entering the field and that competition will become fierce. In Japan, the Company entered into a
partner agreement with ServiceNow at an early stage, and it has been aggressively working to expand sales. In
recognition of this track record, the Company became the first Japanese company to be certified as a Bronze
Services Partner* in 2017 and later as an Elite Partner in 2019. As of June 2021, including the Company, there arenine Japanese companies certified as Elite Partners, and these Elite Partners and new partners are expected todevelop their human resources going forward. We, at FISCO believe that the key to future growth is how well the
Company is able to increase the number of certified engineers. In addition, as one strategy for differentiating itself
from the competition, the Company is developing applications (function to work with LINE, etc.) to complement
the standard functions of ServiceNow.
*	Criteria for certification under the ServiceNow partner program include factors such as customer satisfaction and trackrecord of sales and deployment. The Company ranked second in Japan as of June 30, 2021 in terms of the total numberof ServiceNow development certifications it has obtained, which is 84.

ServiceNow Japanese corporate partners
Category

Company name

Elite

System Support, Fujitsu <6702>, NTT Communications Corporation, NTT Data <9613>, NTT DATA INTELLILINK Corporation, NTT
DATA SMS CORPORATION, Hitachi <6501>, Hitachi Solutions, Ltd., COMTURE CORPORATION <3844>

Premier

NTT COMWARE CORPORATION, KYOWA EXEO CORPORATION <1951>, ITOCHU Techno-Solutions Corporation <4739>,
JSOL Corporation, Mitsubishi Research Institute DCS Co., Ltd., Mitsui Knowledge Industry Co., Ltd., Ricoh <7752>, Rococo
Co., Ltd.

Specialist

Alpha Communications Corporation, Blueship Co., Ltd., DTS <9682>, IT VALUE EXPERTS Inc., Japan Business Systems, Inc., NEC<6701>, Net One Systems Co., Ltd. <7518>, NS Solutions Corporation <2327>, SCSK <9719>, TDC SOFT <4687>, transcosmos<9715>, CNS <7076>

Source: Prepared by FISCO from ServiceNow materials (as of June 30, 2021)b) Database and cloud infrastructure
Concerning database and cloud infrastructure-related business, the Company is expected to continue to see
an increase in projects to help customers construct and migrate to cloud platforms, such as Microsoft Azure
and AWS. In addition, it will develop and provide account resale and option services for each cloud platform.
Through these measures, the Company’s strategy is to accumulate recurring revenue. Moreover, recently, basedon the increase in inquiries about the Google Cloud Platform (GCP), the Company has developed ADDPLAT, anext-generation data analytics platform using the Google Cloud service, and it began offering this platform in June
2021. The distinctive feature of this service is that users can perform big data analysis at a low cost and quickly,
and it can be utilized in management strategies and marketing initiatives. The Company has approximately 40
Google Cloud-certified engineers, and is able to respond to diverse needs, so similar to Microsoft Azure and AWS,
it is expected to contribute to sales growth.

We encourage readers to review our complete legal statement on “Disclaimer” page.

16 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange First Section

21-Oct.-2021
https://www.sts-inc.co.jp/index_e.html

OutlookElsewhere, as for business related to AWS, in 2014, the Company became first in Japan to be certified for Oracle
Competency*, an APN partner program of AWS, and orders are expected to stably increase going forward,
centered on Oracle Database cloud migration projects. As the majority of these deployment projects for major
cloud platform services are based on referrals from customers, the Company is able to continually secure orders
without incurring sales and marketing costs. Also, unlike customized development projects, project management
is relatively easy, so there is little risk of fluctuations in profitability, and therefore profit is forecast to grow stably
along with the increase in sales.
*	Oracle Competency is a program where AWS evaluates and certifies partners that have the technologies and track record
needed to provide total support for the design, deployment, management and operation of Oracle-based workloads
implemented on the AWS cloud. As of June 2021, five companies have earned this certification in Japan.

ADDPLAT overview

Source: The Company’s websitec) ERP
There is currently a rush on SAP ERP migration projects ahead of the termination of maintenance in 2027, andgrowth of approximately 10% is expected to continue at least through 2027. Currently, demand is divided between
companies migrating from the current system of SAP ERP to the next-generation solution SAP S/4 HANA,and companies who will continue using SAP ERP for the time being. Moreover, SAP S/4 HANA is provided in
on-premise and SaaS versions. The on-premise version can be used with AWS, Google’s public cloud, SAP’s
private cloud and other platforms, so there have been many cloud migration support projects.
With regard to SAP ERP, the Company and its subsidiary T4C have approximately 180 technology professionals
combined, providing support for development in main areas and all levels (infrastructure, middleware, and applications). Moreover, the Company and T4C possess technologies and expertise in ERP products other than SAP
ERP. One of their strengths is that they can provide a broad range of stable services according to customer needs.
To address increasing demand in the run-up to 2027, the Company plans to target steady growth by continuing
to work to increase and train technology professionals while building a framework for providing nearshore support
related to the maintenance of existing systems in the Hokuriku area. There is significant competition for ERP
usage support services, but for large-scale projects, the Company often does not directly receive orders for suchprojects in consideration of the risks involved. In many cases, Nomura Research Institute, Ltd. (NRI) <4307> andAccenture Japan Ltd. are the primary contractors with which the Company works on such large-scale projects.

We encourage readers to review our complete legal statement on “Disclaimer” page.

17 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange First Section

21-Oct.-2021
https://www.sts-inc.co.jp/index_e.html

Outlook(2) Outsourcing BusinessIn the Outsourcing Business, the Company will continue to focus on building up data center services, which will
form a recurring-revenue business. The Company has established data centers in two locations in Kanazawa, an
area with a low risk of earthquake activity. It can expect growth in demand for the use of these data centers as
backup capacity for BCP measures. The targeted customers are companies building private clouds. The Company
will aim to grow by acquiring new customers and increasing sales per customer, with its proprietary value-added
services as a hook. There is still more than enough processing capacity at its data centers and, by ramping up
servers as needed, the Company can achieve sales growth. As of June 2021, recurring revenue of data center
services, excluding initial costs, are around ¥92mn on a monthly basis, and monthly sales have been continuously
achieving growth in the 6-9% range in comparison to the same months of the previous year. Growth is expected
to continue at a similar pace going forward.
Priority measures: Data centers

Source: The Company’s results briefing materials(3) Product Business
For the Product Business, the Company’s strategy is to increase the number of subscribers to drive revenue
growth. To this end, the Company will improve the functionality of each product, strengthen sales via sales
agencies, and conduct online marketing, as well as work to customize products to match customer needs. Tate
Yakusha, MOS, and SHIFTEE have already become profitable, and from here on, any increase in sales of theseproducts will lead directly to increases in profit, excluding the development costs incurred to strengthen productfunctionality.
In addition, for MOS and Shugyo Yakusha, inquiries for large projects and customization needs have been
increasing via agencies in response to tailwinds from changes in the market environment such as wider adoptionof work style reforms and working from home. Compared to competing services, the high cost competitivenessand ability to customize seem to be seen positively. While there is robust demand, the shortage of development
personnel is an issue, and going forward, the Company will aim to grow the business while strengthening its
personnel system. In the Product Business, the Company also intends to consider M&A opportunities.

We encourage readers to review our complete legal statement on “Disclaimer” page.

18 19

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange First Section

21-Oct.-2021
https://www.sts-inc.co.jp/index_e.html█ Shareholder return policy
Policy calls for maintaining stable dividends based on considerationof factors such as earnings levels
The Company regards the return of profits to shareholders as an important management issue, and has indicatedits basic policy on distributing profits is to provide stable dividends based on consideration of factors such as
earnings levels, while ensuring adequate internal reserves needed for future business expansion and strengthening
the management structure. It will also strive to improve the level of dividends according to business results andprofit levels. With respect to the dividend per share for FY6/22, the Company plans to increase the dividend amount¥3.0 YoY to ¥24.0, which would mark the third consecutive year of dividend increases since its listing on the stock
market. The targeted dividend payout ratio is believed to be in the low 30% range, so if the dividend payout ratio
falls below 30%, we at FISCO believe that further dividend increases can be expected.

Dividend per share and dividend payout ratio
Dividend per share (left)

Dividend payout ratio (right)

(¥)
35.0

32.1

33.3

30.0

(%)
35.0
30.0

22.3

25.0

25.0

20.0

20.0

15.0

15.0
21.0

10.0

24.0
10.0

4.3
5.0

5.0

10.0
1.5

0.0

0.0
FY6/19FY6/20FY6/21

FY6/22 E

Note: The Company conducted a two-for-one stock split in June 2020. Figures for FY6/19 have been retrospectively adjusted
Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

19 19

Disclaimer
FISCO Ltd. (“FISCO”) offer stock price and index information for use under the approval of theTokyo Stock Exchange, the Osaka Stock Exchange and Nikkei Inc.
This report is provided solely for the purpose of offering information, and is not a solicitationof investment nor any other act or action.
FISCO prepared and published this report based on information which it considered reliable;
however, FISCO does not warrant the accuracy, completeness, fitness nor reliability of thecontents of this report or the said information.
The issuers’ securities, currencies, commodities, securities and other financial instruments
mentioned in this report may increase or decrease in value or lose their value due to influence
from corporate activities, economic policies, world affairs and other factors. This report does
not make any promises regarding any future outcomes. If you use this report or any information
mentioned herein, regardless of the purpose therefor, such use shall be made based on yourjudgment and responsibility, and FISCO shall not be liable for any damage incurred by you asa result of such use, irrespective of the reason.
This report has been prepared at the request of the company subject hereto based on theprovision of information by such company through telephone interviews and the like. However,
the hypotheses, conclusions and all other contents contained herein are based on analysis
by FISCO. The contents of this report are as of the time of the preparation hereof, and are
subject to change without notice. FISCO is not obligated to update this report.
The intellectual property rights, including the copyrights to the main text hereof, the data
and the like, belong to FISCO, and any revision, reprocessing, reproduction, transmission,
distribution or the like of this report and any duplicate hereof without the permission of FISCO
is strictly prohibited.
FISCO and its affiliated companies, as well as the directors, officers and employees thereof,
may currently or in the future trade or hold the financial instruments or the securities of issuersthat are mentioned in this report.
Please use the information in this report upon accepting the above points.

◾ For inquiry, please contact: ◾

FISCO Ltd.
5-13-3 Minami Aoyama, Minato-ku, Tokyo, Japan 107-0062
Phone: 03-5774-2443 (IR Consulting Business Division)
Email: support@fisco.co.jp