COMPANY RESEARCH AND ANALYSIS REPORT

System Support Inc.
4396
Tokyo Stock Exchange Prime Market

10-Apr.-2023
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 Prime Market

10-Apr.-2023
https://www.sts-inc.co.jp/index_e.html■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Outline of results for 1H FY6/23...................................................................................................................

01

2. Outlook for FY6/23.. .....................................................................................................................................

01

3. Medium-term management plan............ ......................................................................................................

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

03

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

05■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 09
1. Outline of results for 1H FY6/23...................................................................................................................

09

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

10

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

15■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 16
1. Outlook for FY6/23.. .....................................................................................................................................

16

2. Medium-term management plan............ ......................................................................................................

18■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 22
This is an English translation of a report issued on March 14, 2023.

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 Prime Market

10-Apr.-2023
https://www.sts-inc.co.jp/index_e.html■ Summary
Double-digit increases in sales and profit continue on high growth in
Cloud Integration Business
System Support Inc. <4396> (hereinafter, “the Company”) is an independent IT company that continues to grow,centered on supporting the introduction and use of various cloud infrastructure-related services, ERP, databases,
etc., using its strength of industry-leading technological capabilities. The Company is headquartered in Ishikawa
Prefecture, Japan. However, Tokyo, Nagoya, and Osaka are the primary hubs of the Company’s business activities.
Also, the Company has a subsidiary in Silicon Valley in the US. The Company is also focused on recurring-revenue
businesses, including data center services and the Product Business, which mainly consists of providing cloud(SaaS) services.
1. Outline of results for 1H FY6/23
In 1H FY6/23 (July 2022 to December 2022), the Company set record highs for consolidated results. Net sales
increased 18.2% YoY (year-on-year) to ¥9,211mn and operating profit rose 26.4% to ¥743mn, as both figures
exceeded the Company’s forecasts (net sales of ¥8,765mn, operating profit of ¥722mn). Net sales increased in all
the Company’s business segments, particularly in the Cloud Integration Business. On the profit front, personnel
investment costs increased but they were more than offset by the increase in sales. The operating margin continued
its upward trend, rising to 8.1% thanks primarily to growth in the highly profitable Cloud Integration Business.
Overall, the Company’s consolidated results were very positive. In the Cloud Integration Business, net sales ofServiceNow*-related services increased 27.5% to ¥922mn, continuing their high growth, and Google Cloud-related
services also grew rapidly, rising by 201.5% to ¥261mn. The Company’s focus on training engineers in data analysis,an area where Google Cloud excels, proved successful.
*	“ServiceNow” is a cloud platform that standardizes and automates business processes and supports improved productivity
by employees and organizations. It is provided by ServiceNow, Inc. of the US. 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. 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.

2. Outlook for FY6/23
For FY6/23 consolidated results, the Company’s initial forecasts are kept unchanged for net sales to increase 11.7%
YoY to ¥18,093mn and operating profit to increase 21.7% to ¥1,456mn. The economic outlook is increasingly
uncertain, but recent orders have been strong, and the Company is handling them by hiring and strengthening humanresources. At the same time, demand continues to outstrip supply capacity, so the Company is expected to continue
to operate at full capacity in the second half. Recurring-revenue businesses, the Outsourcing Business centered ondata services and the Product Business, continue their strong performance and are projected to steadily grow inthe second half as more customers are added. There is therefore a high likelihood that the Company will achieve its
full-year forecasts. The Company is currently strengthening its personnel systems. In January 2023, it introduced aremote work program for employees out of commuting distance as a way to increase the employee retention rate.

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

01 22

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

System Support Inc.
4396 Tokyo Stock Exchange Prime Market

10-Apr.-2023
https://www.sts-inc.co.jp/index_e.html

Summary

3. Medium-term management plan
The Company started a three-year medium-term management plan that began in FY6/23. Its main theme is statedas “Growth and creation of further innovation.” Under the plan, the Company will expand services that form thefoundation of DX promotion for customers and society, promote the growth and success of diverse human resources,
and strengthen ESG management. For FY6/25, it is targeting net sales of ¥21.89bn or higher, operating profit of¥2.18bn or higher, and an operating margin of 10% or higher. In terms of average annual growth over three years,
growth in net sales will exceed 10.6% and growth in operating profit will exceed 22.3%. Driving this will be the
Cloud Integration Business. With the domestic cloud market continuing to experience double-digit annual growth
rates going forward, along with its existing cloud integration services, the Company will take up promising solutions
where future growth is expected in order to secure an annual growth rate of 25% for the business, expanding it ata pace beyond the industry average. One solution drawing attention is the Celonis Execution Management System(Celonis EMS)*, a platform for managing business process execution the Company began handling in 2022. The
platform also links with ServiceNow, which the Company has ample experience implementing, so it is possible thatsales will be increased relatively smoothly. It is already beginning to be deployed for customers. The Company’s
strategy is the same as before: to increase orders by actively training engineers. The Company also plans to steadily
increase earnings from the System Integration Business, Outsourcing Business, Product Business and other areas.
The Company further intends to continue investing in human resources, a source of growth, and plans to increase
employees at a pace of almost 9% per year. It will also take a positive stance to possible M&A opportunities wheresynergies can be expected. Regarding its policy on shareholder returns, the Company plans to pay dividends with apayout ratio at the 30-35% level. The per-share dividend for FY6/23 is expected to be ¥30.0 (payout ratio of 31.6%),
an increase of ¥5.0 from the previous fiscal year.
*	A cloud platform developed and provided by Celonis SE of Germany, a global leader in process mining. Celonis EMS is atool that helps increase productivity by visualizing and analyzing event log data from all systems using a process mining
engine to identify inefficient business processes and suggest improvements. The Company entered into a sales partner
agreement with Celonis K.K., the company’s Japanese affiliate, in June 2022.

Key Points
Double-digit growth in sales and profits in 1H FY6/23, exceeding company forecasts
Recent orders remain buoyant; sales and profits expected to continue double-digit growth• Smooth start to first year of medium-term plan, with the Company targeting annual growth in profit of 22% orhigher, which will be driven by the Cloud Integration Business••We encourage readers to review our complete legal statement on “Disclaimer” page.

02 22

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

System Support Inc.

10-Apr.-2023

4396 Tokyo Stock Exchange Prime Market

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

Summary

Results trends
Net sales (left)

Operating profit (right)

(¥mn)

(¥mn)

20,00018,0932,000

16,19816,00013,3761,600

14,431

11,762

12,000

1,456

1,200

1,196
8,000

800

931
754

4,000

400

529

0

0
FY6/19FY6/20FY6/21

FY6/22

FY6/23 E

Source: Prepared by FISCO from the Company’s financial results■ Company profile
An independent IT company that continues to grow by undertaking
many projects involving mainstay cloud infrastructure-related
services, 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, momentarily putting the Company’s survival at risk. However, in 1994, the Company
worked to rationalize management under the strong leadership of the current Representative Director Ryoji Koshimizu
who took over management from the Company’s founder. As a result, four years later, its business results had
recovered to the point where profitability was restored. Subsequently, the Company developed its technologicalcapabilities, which are said to be at the highest level of the industry for an independent enterprise, into a corestrength, and has continuously increased its business performance by using the expansion of the domestic cloudmarket as a tailwind.

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

03 22

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

System Support Inc.
4396 Tokyo Stock Exchange Prime Market

10-Apr.-2023
https://www.sts-inc.co.jp/index_e.html

Company profile

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.
Additionally, in 2013, the Company established a subsidiary in the US for the purpose of gathering information andsupplying IT services in the country. In 2016, it set up a subsidiary in Canada to provide outsourcing services (suchas accounting services) to Japanese companies in North America. More recently, B-ROCK, Inc., which provides
online marketing services, was made a subsidiary of ACROSS Solutions in April 2022 and was then absorbed by
it in July 2022. The Company was listed on the Tokyo Stock Exchange Mothers Market in August 2018 and waselevated to the Tokyo Stock Exchange First Section one year later in August 2019. The Company has since beentransferred to the Prime Market in conjunction with the TSE’s reorganization of its market segments in April 2022.
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 contract with Amazon Japan K.K.

March 2015
September 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)
Entered into a PartnerNow Master Terms with ServiceNow Nederland B.V.

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

April 2020
January 2021

Entered into a Google Cloud & Google for Education Commercial Partner Program Agreement with Google Cloud Japan G.K.
Entered into a Subcontractor Agreement with Automation Anywhere, Inc.

June 2021

Commenced provision of ADDPLAT, a next-generation data analysis platform

March 2022

Entered into a Celonis Partner Program Agreement with CELONIS K.K.

April 2022

Listed market changed to the Tokyo Stock Exchange Prime Market
ACROSS Solutions, Inc. acquired all shares in B-ROCK, Inc. and made it a subsidiary (absorbed in July 2022)

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

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

04 22

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

System Support Inc.
4396 Tokyo Stock Exchange Prime Market

10-Apr.-2023
https://www.sts-inc.co.jp/index_e.html

Company profile

Five businesses centering on the Cloud Integration Business
2. Business description
The System Support Group comprises the Company and its six consolidated subsidiaries. The Group reorganized
its business segments to more clearly present the progress of cloud integration, an area it will focus on over the
medium term. The previous segments were the Solutions Business, Outsourcing Business, Product Business,
and Others. In the new classification scheme, the Solutions Business was split into the Cloud Integration Business(implementation and support for the use of cloud services, including ServiceNow, Microsoft Azure, AWS and Google
Cloud, and resale of their licenses, etc.) and the System Integration Business (implementation and support for the useof ERP packages, infrastructure construction for Oracle Database, etc. and IT system development). Non-nearshore
operation and maintenance services, which had been included in the Outsourcing Business, were transferred to the
System Integration Business. Accounting process outsourcing services provided by a Canadian subsidiary weremoved to the Overseas Business, a new segment, and sales from overseas subsidiaries (recruitment services andmarketing support services, etc. for local Japan-affiliated companies), which had been in the Others segment, are
now recorded as part of the Overseas Business. The Product Business remains unchanged.
Looking at the share of each business segment in 1H FY6/23, the System Integration Business accounted for overhalf of net sales, 60.2%, followed by the Cloud Integration Business, which accounted for 26.0%, the Outsourcing
Business, for 9.3%, and the Product Business, for 3.7%. With regard to operating profit, on the other hand, the shareof the Cloud Integration Business was highest, at 49.1%, followed by the System Integration Business at 21.1%,
the Outsourcing Business at 14.4%, and the Product Business at 12.0%. The Overseas Business was minimal.
The reason the System Integration Business accounts for a lower share of profit is that the shared portion of SG&A
expenses are allocated to each business segment are allocated to each segment in proportion to cost of sales, so
because the System Integration Business has a large amount of sales, the proportion of shared expenses allocatedto the segment is also high. Looking at gross profit levels, the Cloud Integration Business is 28.0% and the System
Integration Business is 24.0%, so the gap between the two is not large.

Composition by business segment (1H FY6/23)

100.0%

90.0%

Cloud Integration BusinessOutsourcing Business
Overseas Business
0.7%
3.7%
9.3%

System Integration Business
Product Business

80.0%

3.3%
12.0%
14.4%

70.0%
60.0%

21.1%

60.2%

50.0%
40.0%
30.0%

49.1%

20.0%
10.0%

26.0%

0.0%
Net sales

Operating profit

Note: Percentages are calculated using pre-adjusted figures
Source: Prepared by FISCO from the Company’s financial results

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

05 22

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

System Support Inc.
4396 Tokyo Stock Exchange Prime Market

10-Apr.-2023
https://www.sts-inc.co.jp/index_e.html

Company profile(1) Cloud Integration BusinessIn the Cloud Integration Business, the Company implements and supports the use of various types of cloudinfrastructure-related services including ServiceNow, AWS, Microsoft Azure, Google Cloud and Oracle Cloud
Infrastructure, and also resells the licenses for them. Looking at the sales composition in 1H FY6/23, ServiceNowrelated services were highest at 38.5%, followed by AWS at 34.5%, Microsoft Azure at 12.1% and Google Cloudat 10.9%. License resales accounted for 33.6% of sales in this segment.
Orders for cloud-related services are often via referrals from cloud providers, so an important element in increasingorders is training large numbers of engineers certified on each of the cloud infrastructure-related services andgaining a track record of development projects with high customer satisfaction. For this reason, the Company
is focused on hiring and training certified engineers, and as a result of its efforts, it has received many awards
related to Microsoft Azure, AWS, Google Cloud and Oracle. Profitability is relatively stable, and with regard toServiceNow services in particular, the Company has amassed a substantial development track record, being thefirst company in Japan to get involved in the platform. In part because of this, its ServiceNow business has thehighest profitability of all its cloud services.
Regarding resales, which are cloud service usage fees, invoices denominated in dollars are sent to the Company
from cloud service provider like AWS, and the Company converts them to yen and bills customers denominatedin yen. For this reason, if the yen depreciates on currency markets, the amount of services companies use could
be reduced because of the increased burden on customer payments, which increase the Company’s sales, but
the gross profit margin is fixed, so it does not change. There are also cases in which the rapid depreciation of theyen can create a foreign exchange loss related to dollar-denominated debt.
Track record of main certifications and awards
Microsoft Azure• Obtained Gold Cloud Platform Competency
Certification (March 2018)
Certified as a partner with an outstanding trackrecord in expanding Microsoft Azure• Obtained Advanced Specialization (November2020)*1
Obtained certification as a partner with sophisticatedexpertise in specific solution fields• Received five consecutive MVP awards
Received consecutive awards in the data platform
field since 2017*2

AWS• Obtained Oracle Competency in the AWS Competency Program*3 (November 2014)• Received the APN Partner Award “Rising Star of the Year” (FY2014)
Google Cloud• Acquired Data Analytics Specialization in the Partner Advantage Program (September
2022)
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 Awards received from 2007 to 2020.
Source: Prepared by FISCO from the Company’s supplemental results briefing materials(2) System Integration Business
The System Integration Business includes consulting, design, development, and operation and maintenance forcorporate IT systems and also technical support for the deployment and use of ERP packages, and infrastructure
construction for Oracle Database and other systems (Oracle Cloud Infrastructure services are included in the
Cloud Integration Business). Regarding the sales composition in 1H FY6/23, IT system development accounted
for 53.1%, followed by ERP-related services at 28.2% and database-related services at 18.7%.

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

06 22

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

System Support Inc.
4396 Tokyo Stock Exchange Prime Market

10-Apr.-2023
https://www.sts-inc.co.jp/index_e.html

Company profile

For major projects such as systems for financial institutions and ERP construction, the Company does not receive
orders directly; rather, they are undertaken on a subcontracted basis in order to prevent the risk of unprofitability
caused by delivery delays and other such trouble. Profitability is lower, but major projects contribute to sales overthe long term, so they play a role in maintaining the utilization rates of engineers at fixed levels.
(3) Outsourcing BusinessIn the Outsourcing Business, management services at data centers in three locations in Japan (Tokyo andKanazawa) managed by subsidiary eNet Solutions Co., Ltd. account for 82.5% of net sales. The remaining 17.5%
is taken up by data analysis and entry and system operation and maintenance on a nearshore basis.
The Company’s data centers are primarily used as infrastructure for companies’ private clouds or for business
continuity planning (BCP) and data backup management. The Company also provides added-value services
as a strategy for acquiring data center customers. Specifically, in 2006, it began providing Safetylink24, anemergency notification and safety confirmation service that automatically distributes safety confirmation messages
for employees linked to earthquake information. Additionally, in 2010, the Company began offering ActionPassport,
an electronic work flow system, and in 2017, the Company began providing Magic Insight, a service that allows
customers to easily use IBM Japan, Ltd.’s IBM Watson Explorer (an AI-driven search and analysis platform) with amonthly charge plan. The data center service is characterized by a recurring-revenue structure in which monthly
sales increase as contracted data increases, but when capacity is augmented, depreciation expense increases,
and this can temporarily affect profits. As of December 2022, the number of customers using the Company’s data
centers amounted to approximately 1,000 companies.
(4) Product BusinessIn the Product Business, the Group is engaged in the development and sales of products (software) and the provision of services. It also customizes products according to customer needs. It currently has four main products.
Tate Yakusha, a construction work information management system for the construction industry, and MOS, amobile order receipt and placement system primarily for the wholesale and retail industries, respectively accountfor over 30% of sales, while SHIFTEE, a cloud-based shift management system, and Shugyo Yakusha, an
attendance and work management system, respectively account for over 10% of sales. While the Company does
receive orders for custom development projects from time to time, the majority of sales in the Product Businessare generated through monthly fees from cloud (SaaS) services. Therefore, this business has a recurring-revenue
business model where revenue increases in line with growth in the number of subscribers. Most sales are direct
sales (Tate Yakusha is often sold through the OEM channel), but sales agencies are also used.
Outline of major products
Name

ProviderDescription
A construction work information management system. The monthly charge for the standard
version starts at ¥40,000 per 5 licenses (initial cost: ¥350,000).
The monthly charge for the premium version starts at ¥80,000 per 5 licenses (initial cost:¥580,000).

Number ofsubscribing
companies*

Tate
Yakusha

System Support Inc.

MOS

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

SHIFTEE

System Support Inc.

A cloud-based shift management system. The monthly charge for the light version is ¥200 peruser (separate charges apply for customization).

110

ShugyoYakusha

System Support Inc.

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

160* As of December 31, 2022, on a result basis
Source: Prepared by FISCO from the Company’s website and supplemental results briefing materials

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

07 22

696

677

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

System Support Inc.

10-Apr.-2023

4396 Tokyo Stock Exchange Prime Market

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

Company profile(5) Overseas Business
The Overseas Business consists of system integration services and recruitment services provided by a US
subsidiary to Japan-affiliated companies doing business in North America and payroll and accounting outsourcing
services provided by a Canadian subsidiary.
(6) 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. The numberof employees was 1,233 on a consolidated basis at the end of June 2022, an increase of 107 people from theend of the previous fiscal year. Engineers account for 84% of employees. By region, 52% of employees are in
the Tokyo metropolitan area, 20% in the Hokuriku region, 14% in Kansai, 12% in Tokai, and 0.8% overseas. The
Company carries out hiring with a good balance between regions.
Description of main businesses of Group companies
Name of company

System Support
Inc.

Cloud Integration
Business
Cloud infrastructurerelated services andimplementation, usage
support and license
resales

System Integration
Business

Outsourcing Business

Product Business

Overseas Business

System development,
operation andmaintenance, andinfrastructure construction
and support for
databases, etc.

Data entry services,
nearshore operation andmaintenance

Development andsales of Tate Yakusha,
a construction work
information management
system, and otherproducts-

eNet Solutions
Co., Ltd.

-

Deployment of various
solutions

Data centers and related
platform services--

T4C Co., Ltd.

-ERP product deployment
and usage support
services---

STS Medic Inc.

-

Sale and installation of
medical devices and other
items

-

Sales and deployment
support for T-File, a
medical image filingsystem-ACROSS
Solutions, Inc.

-Web marketing services-

Development and sale of
MOS mobile order receipt
and placement system-

STS Innovation,
Inc.

-

-

-

-

Solution services,
recruitment services, etc.

STS Innovation
Canada Inc.

-

-

-

-

Outsourcing service formanagement operations

Source: Prepared by FISCO from the Company’s website

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

08 22

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

System Support Inc.

10-Apr.-2023

4396 Tokyo Stock Exchange Prime Market

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

Company profile

Trend in the number of consolidated employees
Total(people)Engineers

Sales and administration, etc.

1,400

1,233
1,126

1,200

1,039

956

1,000

163

869

810

194
177

157

800
600
400

799

876

949

FY6/20FY6/21

1,039

200
0
FY6/17

FY6/18

FY6/19FY6/22

Source: Prepared by FISCO from the Company’s supplemental results briefing materials■ Results trends
Double-digit growth in sales and profits in 1H FY6/23, exceedingcompany forecasts
1. Outline of results for 1H FY6/23
In 1H FY6/23 consolidated results, net sales increased 18.2% YoY to ¥9,211mn, operating profit rose 26.4% to¥743mn, ordinary profit was up 27.8% to ¥757mn and profit attributable to owners of parent was up 29.4% to¥508mn. All these results surpassed the Company’s initial forecasts, and the Company set a consecutive newrecord high for the first half.
Results for 1H FY6/23(¥mn)
1H FY6/22
Results

1H FY6/23% of net sales

Company
forecast

Results% of net sales

YoY

Achievement
rate

Net sales

7,790

-

8,765

9,211

-

18.2%

5.1%

Cost of sales

5,740

73.7%

-

6,711

72.9%

16.9%

-

Gross profit

2,049

26.3%

-

2,499

27.1%

22.0%

-

SG&A expenses

1,461

18.8%

-

1,756

19.1%

20.2%

-

Operating profit

587

7.5%

722

743

8.1%

26.4%

2.9%

Ordinary profit

592

7.6%

721

757

8.2%

27.8%

5.0%

Profit attributable toowners of parent

393

5.0%

487

508

5.5%

29.4%

4.4%

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

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

09 22

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

System Support Inc.
4396 Tokyo Stock Exchange Prime Market

10-Apr.-2023
https://www.sts-inc.co.jp/index_e.html

Results trends

The domestic economic outlook is becoming increasingly uncertain due to rising prices triggered by the Ukraine
crisis and the ongoing depreciation of the yen, but companies remain highly engaged in DX initiatives, and demand
continued to be strong for migrating information systems to clouds. Under such market conditions, all five of theCompany’s business segments recorded higher net sales, led by the Cloud Integration Business, and overall, theCompany continued to perform well.
On the profit front, the cost-of-sales ratio declined from 73.7% in the same period of the previous fiscal year to72.9% due to changes in the sales mix (increased sales share of the highly profitable Cloud Integration Business)and the effects of increased sales, and gross profit increased 22.0% YoY to ¥2,499mn. SG&A expenses increased
20.2% due to increases in personnel, recruiting, training, and other personnel-related costs and operating costs,
but this increase was absorbed by the increase in gross profit, so the operating margin increased from 7.5% in thesame period of the previous fiscal year to 8.1%, setting an all-time high for the first half.

In the Cloud Integration Business, sharp growth in net sales of
Google Cloud-related services
2. Trends by business segment(1) Cloud Integration BusinessNet sales from the Cloud Integration Business increased 52.2% YoY to ¥2,394mn and operating profit increased
58.1% to ¥374mn, so there were large increases in both sales and profits. Despite the major increase in sales,
the gross profit margin only increased 0.2 percentage points YoY to 28.0%. This is partially attributable to theshare of sales of ServiceNow, which is highly profitable, declining from 46.0% in the same period of the previous
fiscal year to 38.5%.
Looking at a breakdown of sales, ServiceNow-related services continued to be strong, increasing by 27.5% YoY
to ¥922mn, while AWS-related services increased 63.4% to ¥825mn, Microsoft Azure-related services increased
22.2% to ¥288mn, Google Cloud-related services rose 201.5% to ¥261mn, and other services went up 340.9%
to ¥96mn. There was sales growth in all cloud infrastructure-related services.

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10 22

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

System Support Inc.
4396 Tokyo Stock Exchange Prime Market

10-Apr.-2023
https://www.sts-inc.co.jp/index_e.html

Results trends

Breakdown of Cloud Integration Business net sales(¥mn)

ServiceNow-related services
Microsoft Azure-related services
OthersAWS-related services
Google Cloud-related services

2,500
96
261

2,000

288
86
236

1,500
1,000

21
825

505

500

922

723

0
1H FY6/22

1H FY6/23

Source: Prepared by FISCO from the Company’s supplemental results briefing materials

Regarding ServiceNow-related services, training engineers and expanding outside partnerships in order to meetrobust demand is fueling high growth. According to documents released by ServiceNow Japan, the numberof ServiceNow development certifications obtained has risen approximately three times over two years, from60 in November 2020 to 109 in September 2021 to 187 most recently at the end of September 2022, as theCompany has maintained its No. 2 spot in the industry*. In response to growth in the market, ServiceNow
partner companies increased from 30 to 58 over the past three years, and the total number of certifications has
increased approximately three times to 1,840, but the Company has maintained a just over 10% share of thesecertifications, and it can be inferred that it continues to remain in the top class as an Elite Partner, the highest
rank. The customers for these services are major companies, and orders are increasing not only in Tokyo andOsaka but at other offices as well, including Nagoya and the Ishikawa area. It appears that even now demand
continues to exceed capacity.
*	Covers Certified Implementation Specialist / Certified Application Developer / Certified Application Specialist. Accenture
Japan Ltd. was ranked first place with 199 projects.

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11 22

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

System Support Inc.

10-Apr.-2023

4396 Tokyo Stock Exchange Prime Market

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

Results trends

Number of ServiceNow development certifications obtained
System support (left)(Cases)200

Japan overall (right)
1,840

150

(Cases)
2,000

1,500
1,210

100

187

1,000

512
109

50

500

60

0

0
November 2020

September 2021

September 2022

Source: Prepared by FISCO from documents released by ServiceNow Japan

Among cloud infrastructure-related migration and usage support services other than ServiceNow, the rapid growthof Google Cloud-related services was prominent. The Company has focused these past one to two years on
training engineers in data analytics, where Google Cloud excels, and this has been one reason it has acquiredlarge numbers of orders in this area (The Company has over 80 engineers involved in Google Cloud as of October
2022 and over 155 hold certifications). In September 2022, in recognition of these achievements, the Company
acquired Partner Specialization, the highest rank of technical certification in data analytics within the Google Cloud
Partner Advantage program*. In addition, in October 2022, the Company developed and began providing three
new solution packages using Google Cloud services (Windows File Server Migration, Data Analysis Platform,and Autoscaling Application Platform). Each package optimally combines Google Cloud functions based on its
objectives, so the companies that implement them are able to use them at low cost, with low risk, and in a shortperiod of time (around three to five weeks from the service application). In particular, companies utilizing big data
analysis services are expected to continue to increase, so this area will be watched as one where high growthis expected.
*	There are two Japanese companies other than the Company that have acquired Google Cloud Specialization in data
analytics, Deloitte Tohmatsu Consulting LLC and SCSK <9719> (as of February 2023).

In other cloud-related services, along with Oracle Cloud Infrastructure, the Company has handled Celonis EMS
since 2022, and it is beginning to gradually generate sales results. For Celonis EMS, the Company is currently at
the stage of training engineers, and like Google Cloud, it is expected to contribute to sales growth on a full-fledged
basis in one to two years going forward.
License resales is a recurring-revenue business in which cloud service usage fees are collected from customer
accounts, so net sales increase as more customers deploy the services, but in 1H FY6/23, the yen depreciatedfurther on foreign exchange markets compared to the same period of the previous fiscal year, and this also
provided a boost to sales. The profit margin is low, but sales can be expected on an ongoing basis, so it is astable revenue source.

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12 22

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

System Support Inc.
4396 Tokyo Stock Exchange Prime Market

10-Apr.-2023
https://www.sts-inc.co.jp/index_e.html

Results trends(2) System Integration BusinessNet sales from the System Integration Business increased 8.2% YoY to ¥5,543mn and operating profit decreased
16.8% to ¥160mn. The decrease in profit despite the increase in sales was mainly due to an increase in SG&A
expenses. As was discussed previously, the shared portion of SG&A expenses are allocated to each businesssegment in proportion to cost of sales, so when SG&A expenses increase, the burden falls heavily on the System
Integration Business because it has a large amount of sales. Looking on a gross profit basis, it increased, risingby 10.5% to ¥1,330mn, so the actual earnings situation can be seen as positive.
System Integration Business net sales breakdown and profit margin

Operating profit, gross profit margin,
and operating margin

N e t s a l es(¥mn)

IT system development
Database-related services
ERP-related services

(¥mn)

5,543

300

6,000

Operating profit (left)
Gross profit margin (right)
Operating margin (right)
30.0%

5,125

4,000

23.5%

250

5,000

2,719

2,944

200

15.0%
193

1,000

993

1,035

1,412

1,564

1H FY6/22

1H FY6/23

100
3.8%

50

160

10.0%

2.9%

5.0%

0

0

25.0%
20.0%

150

3,000
2,000

24.0%

0.0%
1H FY6/22

1H FY6/23

Source: Prepared by FISCO from the Company’s supplemental results materials

Looking at a breakdown of net sales, IT system development increased 8.3% YoY to ¥2,944mn, ERP-related
services increased 10.7% to ¥1,564mn, and database-related services increased 4.2% to ¥1,035mn, so results
were solid in each area. In ERP-related services in particular, companies continue to migrate to SAP S/4 HANAin anticipation of the end of maintenance support for SAP’s existing product (in 2027), and business continues tobe brisk. Also, database-related services performed well centering on mainstay Oracle products.
(3) Outsourcing BusinessNet sales from the Outsourcing Business increased 15.4% YoY to ¥861mn, and operating profit rose 18.9%
to ¥109mn, as both sales and profits continue double-digit growth. Looking at a breakdown of net sales, data
center services, which include AI-related services, increased 15.4% to ¥710mn, and data analysis and input andnear-shore operation and maintenance services rose 15.5% to ¥150mn, so results were strong in both areas. A
key factor is that companies are reinforcing BCP measures for their information systems and they are continuing
to make increasing use of the Company’s data center in Kanazawa, where earthquakes are rare. The gross profit
margin increased from 30.7% in the same period of the previous fiscal year to 31.8% as a result of the increasein sales. Investment to augment capacity at data centers made in the first half of the previous fiscal year ran its
course, and this also is thought to have contributed to the increase in the profit margin. Recurring monthly revenue
from data centers has steadily risen and has recently topped the ¥100mn level.

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13 22

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

System Support Inc.
4396 Tokyo Stock Exchange Prime Market

10-Apr.-2023
https://www.sts-inc.co.jp/index_e.html

Results trends

Outsourcing Business net sales breakdown and profit margin

Operating profit, gross profit margin,
and operating margin

N e t s a l es
Data analysis, input, near-shore, etc.
Data center-related services
(¥mn)

(¥mn)

861

900
746

120

150

750

Operating profit (left)
Gross profit margin (right)
Operating margin (right)
31.8%

30.7%

100

30.0%

130

600

80

450

60
710

615

300

109
92

12.0%
12.8%

12.4%
20

6.0%

0

0
1H FY6/22

0.0%
1H FY6/22

1H FY6/23

24.0%
18.0%

40

150

36.0%

1H FY6/23

Source: Prepared by FISCO from the Company’s supplemental results materials(4) Product BusinessNet sales from the Product Business increased 16.8% YoY to ¥345mn and operating profit increased 44.9% to¥91mn, setting consecutive record highs for a half fiscal year. Looking at a breakdown of net sales, Tate Yakusha
increased 25.1% to ¥109mn, SHIFTEE rose 35.3% to ¥40mn, so both products performed well. Also, MOS
increased 1.8% to ¥113mn and Shugyo Yakusha increased 9.4% to ¥35mn, as sales grew steadily. On the profit
front, the operating margin rose significantly, from 21.4% in the same period of the previous fiscal year to 26.6%,
thanks in part to an improved profit margin in recurring sales, including monthly usage fees, and reductions in
SG&A expenses.
Product Business net sales breakdown and profit margin

N e t s a l es
Tate Yakusha
SHIFTEE
Others(¥mn)
400Operating profit, gross profit margin,
and operating margin

MOS
Shugyo Yakusha

345

320

295

45
35

240

34
32
30

160

111

40

Operating profit (left)
Gross profit margin (right)
Operating margin (right)

(¥mn)
100
80

75.0%
57.6%

60.5%
60.0%
91

60

45.0%

63
113

40

30.0%
26.6%

80

20
87

109

1H FY6/22

1H FY6/23

0

15.0%

21.4%

0

0.0%
1H FY6/22

1H FY6/23

Source: Prepared by FISCO from the Company’s supplemental results materials

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14 22

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

System Support Inc.
4396 Tokyo Stock Exchange Prime Market

10-Apr.-2023
https://www.sts-inc.co.jp/index_e.html

Results trends

Regarding Tate Yakusha, the impact of the COVID-19 pandemic has nearly run its course, and it has become
possible to hold face-to-face sales talks, so the lead time from negotiations to contracting improved, and theCompany was able to acquire prospective customers by starting to participate again in trade shows. These
factors were behind the strong sales. Also, with respect to SHIFTEE, more companies are working to increase
the efficiency of shift management, especially in the service industry, which is leading to increased inquiries about
SHIFTEE, which enables shift creation and management to be conducted simply and at a low cost. The percent
increase in sales of MOS and Shugyo Yakusha appears low compared to the increase in the number of companies
implementing them, but this is attributable to many customers having a small number of users (equivalent tosales) per company.

Number of companies deploying each product
Tate Yakusha

MOS

SHIFTEE

Shugyo Yakusha(No. of companies)
1,800
1,600
1,400
1,200
1,000
800

13
52

26
64

52
73

75
81
457

96
94
531

122
98

160
110

597

677

696

311

348

409

583

595

607

636

657

688

19/12

20/6

20/12

21/6

21/12

22/6

600
400
200
0
22/12
(Year/Month)

Source: Prepared by FISCO from the Company’s supplemental results briefing materials(5) Overseas BusinessNet sales from the Overseas Business increased 35.8% YoY to ¥67mn and operating profit increased 22.6% to¥25mn. The continued depreciation of the yen provided a boost to results and payroll and accounting outsourcing
services performed well, which led to the increased sales and profits. The operating margin fell from 42.0% in thesame period of the previous fiscal year to 37.9%, but this was affected by the situation with system integration
projects.

The equity ratio continues to increase; financial condition is sound
3. Financial condition and business indicators
Looking at the Company’s financial condition as of the end of 1H FY6/23, total assets were ¥8,164mn, an increaseof ¥348mn from the end of FY6/22. In terms of the main factors behind this change, in current assets, cash anddeposits decreased by ¥89mn and notes and accounts receivable – trade and contract assets increased by ¥431mn.
In non-current assets, goodwill decreased by ¥14mn, and property, plant and equipment increased by ¥54mn.

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15 22

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

System Support Inc.

10-Apr.-2023

4396 Tokyo Stock Exchange Prime Market

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

Results trends

Total liabilities decreased ¥25mn YoY to ¥4,368mn. Interest-bearing debt increased by ¥482mn, income taxes
payable decreased by ¥47mn. Total net assets were ¥3,796mn, an increase of ¥374mn from the end of the previous
fiscal year. This was primarily caused by an increase of ¥373mn in retained earnings as a result of recording profit
attributable to owners of parent and the payment of dividends.
Looking at business indicators, the equity ratio increased from 43.8% at the end of FY6/22 to 46.5%, a new record
high, owing to an increase in shareholders’ equity. The interest-bearing debt ratio increased from 33.6% to 43.0%,
but in a normal year the ratio tends to increase at the end of the first half due to an increase in working capital andtends to decrease toward the end of the fiscal year, so there is no particular problem with the current level. Net cash
(cash and deposits less interest-bearing debt) continues to be positive, and the Company’s financial condition canbe judged to be sound.
Consolidated balance sheet(¥mn)
End of FY6/20

End of FY6/21

End of FY6/22

End of 1H
FY6/23vs. prior fiscal
year-end

4,631

5,319

6,303

6,625

321

2,387

2,697

3,254

3,164

-89

Non-current assets

1,316

1,342

1,511

1,538

27

Total assets

5,947

6,662

7,815

8,164

348

Total liabilities

3,540

3,669

4,393

4,368

-25

1,015

952

1,149

1,631

482

2,407

2,993

3,421

3,796

374

Equity ratio

40.5%

44.9%

43.8%

46.5%

2.7pt

Interest-bearing debt ratio

42.2%

31.8%

33.6%

43.0%

9.4pt

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

Source: Prepared by FISCO from the Company’s financial results■ Outlook
Recent orders remain buoyant; sales and profits expected tocontinue double-digit growth
1. Outlook for FY6/23
For its consolidated results in FY6/23, the Company’s initial forecasts are kept unchanged for net sales to increase
11.7% YoY to ¥18,093mn, operating profit to increase 21.7% to ¥1,456mn, ordinary profit to rise 22.0% to¥1,452mn, and profit attributable to owners of parent to go up 25.1% to ¥982mn. The rate of progress through thefirst half is 50.9% for net sales and 51.0% for operating profit, which is nearly equivalent to the average progress
rate for the three most recent years (48.4% for net sales, 52.1% for operating profit). While there is some concernthat corporate earnings will deteriorate due to rising prices and higher personnel costs, even recently the appetite
for investment in DX is rampant, and orders, especially in the Cloud Integration Business, show no signs of slowing.
FISCO therefore believes there is a strong likelihood that performance will be steady in the second half as welland that the Company will meet its forecasts. Data center operation costs are expected to increase due to higher
electricity rates going into effect in spring 2023, but FISCO thinks that this increase will be within a range that canbe absorbed by sales growth.

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16 22

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

System Support Inc.

10-Apr.-2023

4396 Tokyo Stock Exchange Prime Market

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

Outlook

Outlook for FY6/23 consolidated results(¥mn)
FY6/22
Results

FY6/23% of net
sales

Company
forecast% of net
sales

YoY

Achievement
rate through2Q

Averageachievement
rate for the past
three years*

Net sales

16,198-18,093

-

11.7%

50.9%

48.4%

Operating profit

1,196

7.4%

1,456

8.0%

21.7%

51.0%

52.1%

Ordinary profit

1,190

7.3%

1,452

8.0%

22.0%

52.2%

51.9%

Profit attributable toowners of parent

785

4.9%

982

5.4%

25.1%

51.8%

51.1%

Net profit per share (¥)

75.91

94.88

* 1H result divided by full-year result for the past three years
Source: Prepared by FISCO from the Company’s financial results

Some recent topics are as follows. In December 2022, the Company announced that it had been chosen by
Google Cloud as a launch partner for the new fully managed database service AlloyDB*. The Company’s extensive
track record in high-quality development related to databases was recognized, and going forward this should leadto increased orders related to support for deployment of the service. In addition, in January 2023, the Company
announced it had begun providing an implementation support service for Azure combined with Oracle Cloud
Infrastructure (OCI). The service uses the Oracle Database Service for Microsoft Azure, a multi-cloud service jointly
released by Microsoft and Oracle in July 2022. The Company will support the construction of multi-cloud environments that utilize the characteristics of both systems to deliver high performance and high cost efficiency.
*	AlloyDB is a fully managed, PostgreSQL-compatible database service that accommodates enterprise-grade database
workload. It offers exceptional performance on Google Cloud, high scalability and high availability. The preview version of
the service was announced in May 2022, and it was officially released in December 2022.

Looking at personnel hiring, new graduate hires in spring 2023 numbered 85, a little less than the 91 people thatwere initially planned, but this represents a 15-person increase from the previous year, so hiring was steady. At thesame time, for its mid-career hires, the Company is planning to hire 93 people in FY6/23, an increase of 10 from theprevious year. Progress through the first half is a little behind plans, but the Company will continue to focus on hiring
and training engineers, who are strongly felt to be in short supply. As a part of its measures for increasing engineers,
the Company introduced a remote work program for employees outside of commuting distance in January 2023.
A remote work program had already been instituted for employees within commuting distance and around 80% of
employees utilized it, but expanding its scope to outside of commuting distance prevents employees from quitting
because of having to move to an outlying region because of family circumstances, such as the need to providing
nursing care. It also helps create a pleasant work environment, and this is expected to be a plus when it comes tohiring.

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17 22

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

System Support Inc.
4396 Tokyo Stock Exchange Prime Market

10-Apr.-2023
https://www.sts-inc.co.jp/index_e.html

Outlook

Smooth start to first year of medium-term plan; driven by the Cloud
Integration Business, targeting profit growth of 22% or higher
annually
2. Medium-term management plan
(1) Outline of medium-term plan
The Company started a three-year medium-term management plan from FY6/23. The main theme is stated as“Growth and creation of further innovation,” and under the plan, the Company will expand services that form
the foundation of DX promotion for customers and society, promote the growth and success of diverse humanresources, and strengthen ESG management. For FY6/25, it has set targets of net sales of ¥21.89bn or higher,
operating profit of ¥2.18bn or higher, and an operating margin of 10% or higher. This amounts to three-year annual
growth in net sales of more than 10.6% and operating profit of more than 22.3%. As discussed previously, FY6/23,
the first year of the plan, has gotten off to a smooth start.
Looking at average annual growth rates in net sales by business segment, the Cloud Integration Business ishighest at 25.0%, and next is the Product Business at 15.0%. For the System Integration Business, Outsourcing
Business and Overseas Business, the Company is projecting solid growth for each of between 5.5% and 7.0%.
Over the next three years, the Company is expecting an increase in sales of over ¥5.7bn, but more than 50% of
this will be generated by the Cloud Integration Business.
Net sales targets in the Company’s medium-term management indicators (consolidated)

Source: The Company’s medium-term management plan materials

The trends are nearly the same for segment profit (operating profit). The Cloud Integration Business is highest at
26.2%, followed by the Product Business at 15.3% and the other three businesses at between 8.1% and 9.7%.
The Company is also projecting profit margins to go up in nearly all its business segments. Only the ProductBusiness is expected to have a generally flat profit margin, but this is because the Company is planning to continue
investing in enhancements to the functions of existing products and development of new products, etc.

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18 22

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

System Support Inc.
4396 Tokyo Stock Exchange Prime Market

10-Apr.-2023
https://www.sts-inc.co.jp/index_e.html

Outlook

Profit targets in the Company’s medium-term management indicators (consolidated)

Source: The Company’s medium-term management plan materials(2) Growth strategy by business segmenta) Cloud Integration Business
The key to the Company achieving the targets of its medium-term management plan is the growth of its Cloud
Integration Business. Against the backdrop of the ongoing migration of IT systems to clouds, the cloud services
market is projected to continue double-digit growth over the medium term, so the Company is planning sales
growth of 25%, which exceeds the market average. To meet the goals of its plan, the Company intends to focus
on the following three initiatives. It will 1) work to strengthen relationships with cloud vendors through engineer
training and thereby increase customer referrals, 2) work to optimize cloud migration and post-migration (“lift &shift”) and increase orders, centering on the three major cloud platforms (AWS, Microsoft Azure, Google Cloud)and ServiceNow, and 3) gather information on promising cloud services overseas, commercialize them in theJapanese market as soon as possible through engineer training and knowledge accumulation, and use them toacquire new customers.
Regarding initiatives for promising new services, the Company is currently making several arrangements. The firstis Celonis EMS, an execution management platform provided by Celonis, a firm with which the Company enteredinto a sales partnership agreement in June 2022. It is already beginning to be deployed for customers. This tool
collects and analyzes business process information and identifies portions that are inefficient in order to optimize
business operations. Since its release in October 2020, it has been increasingly adopted by global corporations,and it is drawing attention in Japan as well, with the expectation that it will be widely used going forward.
Celonis has around 40 sales partners in Japan, but given the Company’s extensive experience in deployment
of ServiceNow, it is possible that it will quickly build up a track record of implementing Celonis EMS as well.
This is because Celonis and ServiceNow entered into a strategic partnership in October 2021, have linked theirproducts, and have agreed in principle on collaborating going forward in development, marketing and sales. In
both cases, the products are tools for increasing productivity, and they are even more effective when used in
combination, so companies that have implemented ServiceNow are strong prospects as customers for Celonis
EMS. The Company continues to actively train and increase personnel with ServiceNow certification, and sales
growth is expected going forward.

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19 22

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

System Support Inc.
4396 Tokyo Stock Exchange Prime Market

10-Apr.-2023
https://www.sts-inc.co.jp/index_e.html

Outlookb) System Integration BusinessIn the System Integration Business, the Company will work to recruit and train engineers to expand its mainstay
ERP-related, database-related and RPA-related services, and will increase sales by building close relationships
with customer companies to expand existing customer projects and acquire recurring orders. In addition, theCompany intends to maintain and strengthen project management from the perspectives of quality, duration,
cost and risk control to increase service quality while preventing the occurrence of unprofitable orders, and in thisway, it will work for steady growth.
c) Outsourcing BusinessIn the Outsourcing Business, the Company will target a different customer segment than major public cloudvendors for its data center services, acquiring customers by attracting them with unique services, including
AI-related services, and building up data usage volume. Since 2022, with the rapid depreciation of the yen, theincreased burden of service usage charges for public clouds has entered the awareness of companies and somehave begun to move toward building private clouds. The Company intends to accommodate this demand. It alsoplans to increase quality and secure profitability by gradually adding capacity at data centers in line with theiroperating status. Moreover, with regard to maintenance for SAP’s ERP products, demand is expected to rise aheadof 2027, so the Company will train nearshore staff in the Kanazawa region and further strengthen its systems.
d) Product BusinessIn the Product Business, the Company will expand sales channels through distributors and others and strengthen
advertising to acquire new customers and will work to increase the number of users by expanding user divisions
within existing customers. The Company also intends to continue strengthening the functions of existing products.
It plans to increase the number of companies deploying the Company’s four main existing products from 1,505 at
the end of FY6/22 to 2,500 in FY6/25. There were 1,643 companies as of the end of December 2022, and they
have been increasing at a generally steady pace.
Regarding MOS, a mainstay product, the Company’s strategy is to utilize the online marketing business it has
acquired through M&A to further promote sales through online marketing and also work for competitive differentiation by providing MOS and online marketing services to customers on a one-stop basis and thereby acquire newcustomers. Since the absorption-type merger in July 2022, progress had been made in building an organizational
structure, and while the effects have yet to materialize, further development is expected going forward.
e) Overseas BusinessIn the Overseas Business, the Company, through its US subsidiary, will provide support services for IT infrastructure, HR recruitment, marketing and other areas for Japan-affiliated companies expanding into North America,
and through its Canadian subsidiary, will provide remote monitoring services for Japanese companies that takeadvantage of the time difference with Japan and also strengthen outsourcing services for accounting processes.

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

20 22

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

System Support Inc.
4396 Tokyo Stock Exchange Prime Market

10-Apr.-2023
https://www.sts-inc.co.jp/index_e.html

Outlook(3) Investment in human resources
The Company positions human resources as a source of business growth and aims to create new corporate valueby actively recruiting and promoting diverse human resources, providing training, and creating a pleasant work
environment. With regard to recruitment, the Company will recruit functionally through hiring managers assigned
to its various offices instead of solely hiring through the head office. It also plans to be active in conducting
recruiting activities to prevent mismatches between job and applicant. New graduate hires are increasing eachyear, and the Company plans to hire 85 such individuals in FY6/23, which, combined with the 93 mid-career
professionals it plans to hire, will bring the total number of hires to 178 for the year, which would be a record high.
Many companies in the IT industry struggle to recruit personnel, but in the Company’s case, its name recognition
was raised when it became a publicly listed company, and it is involved in cloud infrastructure-related services,which continue to grow, so it is able to recruit and hire relatively smoothly. Also, with regard to its attrition rate, therate has declined from 8.1% in FY6/19 to 4.9% in FY6/22, which is less than half the industry average. Employee
engagement is also thought to be increasing. The Company is planning to increase the number of consolidated
employees from 1,233 at the end of FY6/22 to 1,582 by the end of FY6/25.
Number of personnel hired (consolidated)
FY6/19FY6/20FY6/21

FY6/22

FY6/23 plan

New graduates recruitment

55

58

60

70

85

Mid-career recruitment

93

97

89

83

93

8.1%

7.7%

5.9%

4.9%

-

Retirement rate

Source: Prepared by FISCO from the Company’s supplemental results briefing materials

Regarding engineer training, the Company will continue to make investments to maintain or increase its competitiveness, including by acquiring vender certifications related to cloud services in particular. In addition, it will work
to increase pay levels and will set targets for the proportion of female employees, reductions in total working hours
and the proportion of employees taking childcare leave and will work to achieve them. Specifically, in FY6/24,
on a non-consolidated basis, the Company is aiming for a proportion of female employees of 28% or higher (itwas 28.3% in FY6/22), average total hours worked per employee of 2,000 hours or less per year (1,995 hours in
FY6/22), and a proportion of male employees taking childcare leave of 40% or more (36.4% in FY6/22).
(4) Strengthening ESG management
Through ESG management based on its corporate philosophy (Contributing to Society, Advanced Customer
Service, Sharing Value), the Company is engaged in solutions to social issues and will strengthen the following
initiatives going forward.
In the area of the environment, to realize a decarbonized society, the Company is contributing to environmental
preservation and increasing the efficiency of resource use through the provision of IT services and reducing theenvironmental impact of its business activities. Going forward, the Company aims to set CO 2 emissions targets
and implement further reduction and absorption measures, establish a disclosure system in line with the Task
Force on Climate-Related Financial Disclosures (TCFD), and respond to the Carbon Disclosure Project (CDP)
survey and work to improve its score.

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

21 22

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

System Support Inc.

10-Apr.-2023

4396 Tokyo Stock Exchange Prime Market

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

OutlookFor society, the Company will seek to expand local business and stimulate the economy through training DX
personnel. In terms of specific measures, it started Microsoft Base Kanazawa activities in August 2022 based on
the concept of local IT urbanization in Hokuriku starting in Kanazawa. The Company is providing free DX education for industry-academia-government-private sector DX and also providing opportunities for communication
pivoting on cloud systems that make possible the experience of the latest technology. These activities support the
expansion of local businesses, the stimulation of economic activity and the creation of new business opportunities.
Participants total 270 people from 48 organizations when including those scheduled to participate in the future.
The Company established a new sustainability page on its website in February 2023 that introduces its policies
on sustainability, EGS-related initiatives, and other such topics.

■ Shareholder return policy
Dividends to be paid with a target payout ratio of 30-35%
The Company regards the return of profits to shareholders as one of the important management issues. The
Company has indicated that its basic policy on distributing profits is to strive to improve dividends according
to business performance and profit levels, while providing stable dividends based on consideration of earnings
conditions. Concurrently, the Company will ensure adequate internal reserves needed for future business expansion
and strengthening the management structure. With respect to the dividend per share for FY6/23, the Company plans
to increase the amount by ¥5.0 YoY to ¥30.0, which would mark the fourth consecutive year of dividend increases
since its listing on the stock market. It targets a dividend payout ratio in the 30%-35% range, and intends to continue
dividend increases alongside earnings growth.

Trends in dividend per share and dividend payout ratio
Dividend per share (left)(¥)

Dividend payout ratio (right)

40.0
32.1

32.9

（%）
40.0

31.6

30.0

30.0
22.3

20.0

20.0
30.0
21.0

10.0

25.0
10.0

4.3
10.0
1.5
0.0

0.0
FY6/19FY6/20FY6/21

FY6/22

FY6/23 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.

22 22

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.
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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.
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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,
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◾ 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