FY2018 (59th)
Results Briefing

March 12, 2019

(Tokyo Stock Exchange‐8068)

https://www.ryoyo.co.jp

Copyright © Ryoyo Electro Corporation. All Rights Reserved

1

FY2018 Business results

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2

P/L:
Exceeded the previous year’s sales and profit for the first time in four years
Sales:
Managed to achieve higher sales than the previous year, with the negative impact of thetransfer of distributorship compensated

Profit: Gross margin (9.5%) reached the highest level since FY1997
 JPY 320 million recorded as expenses in Q4, including loss from inventory revaluation andstock option expenses
 Decreased loss from inventory revaluation uplifted the profit rates significantly
FY2017
ActualSales

FY2018Q1Q2

Q3(Unit: 100 million yen)
VS. Plan

YoY
Q4

Total

Plan

Diff

%

Diff

Plan

922

227

225

240

247

938

930

+16

+1.7%

+8

+0.9%

75.9

22.5

22.3

22.5

22.0

89.3

87.5

+13.3

+17.6%

+1.8

+2.0%

8.2%

9.9%

9.9%

9.4%

8.9%

9.5%

9.4%

73.4

18.1

18.8

18.9

20.9

76.7

75.5

+3.3

+4.5%

+1.2

+1.6%

2.5

4.4

3.5

3.6

1.1

12.6

12.0

+10.1 +400.1%

+0.6

+4.8%

0.3%

1.9%

1.6%

1.5%

0.4%

1.3%

1.3%

4.3

4.6

4.3

3.6

2.2

14.7

14.0

+10.4 +241.0%

+0.7

+5.3%

0.5%

2.0%

1.9%

1.5%

0.9%

1.6%

1.5%

2.1

3.1

3.1

2.4

1.6

10.2

9.6

+8.1 +379.5%

+0.6

+6.3%

0.2%

1.4%

1.4%

1.0%

0.6%

1.1%

1.0%

Gross profit
SG&A
Operating income

Ordinary income

Profit attributable toowners of parent

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Higher sales than the previous year,with the negative impact of the transfer of distributorship compensated Higher sales by 1,600 million yen (+1.7%), with the negative impact of the transfer of
distributorship compensated⇒ Excluding the negative impact of the transfer of distributorship (-4,700 million yen),sales increased by JPY 6,300 million over the previous year

(Unit: 100 million yen)

Closure of lowprofitability
business

1,123

First transfer of
distributorship

Second transfer of
distributorship

53





111

984
95

922

938

49
Termination ofcontracts withtwo partners

960

FY2015

+7.2%

889

873

FY2016FY2017

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936

FY20184

Sales by segment: Generally as planned in semiconductors/devices,while ICT contributed to an increase in sales(Unit: 100 million yen)
FY2017
Actual

FY2018Plan

ActualYoY

VS. PlanComments

930
500

938
499

+1.7%

+0.9%

Semiconductors/Devices

922
509

(2.0%)(0.2%)

Communications

81

75

68

(16.2%)(9.6%) Shrinking sales of LCD for smart phones

Digital consumer electronics

58

55

47

(19.4%)(15.3%)Overall, in a slump, despite the commencement of a
new business for TVs

Vehicle installation

25

25

29

+16.1%+17.1%

Increasing sales in products for vehicle installation,such as in-vehicle cameras and driving recorders

PC and peripherals

187

180

195

+4.5%

Industrials and others

158

165

160

+1.1%

413

430

439

+6.3%

Increasing sales in both PCs and peripherals,+8.6% despite the negative impact of transfer of
distributorship
Higher sales than the previous year, with
(3.1%) contributions of products for railway companies
which attained great demand in H1+2.1%

PC/Server/Network

94

97

98

+4.5%

+1.2%

Increased, mainly contributed by new security
products

I/P equipment

78

75

78

(0.1%)+3.7%

Higher sales in monitors compensated a decrease inprinters

139

141

150

+8.4%

+6.5%

Significantly increased in line with growing
production of PCs+9.9%

Increased, supported by growing sales of AI or(3.6%) DeepLeaning-related products that compensated thenegative impact of end of spot projects

By application

Sales

By product

ICT/Solution

Software

Embedded devices and others

103

117

113

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B/S & C/F: Changes since the end of the previous period (Jan. 31, 2018)

 B/S

 C/F

(Unit: 100 million yen)

(Unit: 100 million yen)

781
Cash and bankdeposits

140

97
41

Accounts
receivable259

As of Jan.
31, 2018

759
134

101

Accounts
payable

36

Other

139

Oprating
CF

+5.9

256
InvestingCF

Inventory

109

Other current
assets25

Fixed assets

248

Assets

644

121

622

24
224

Liabilities
and netassets

As of Jan. 31, 2018

AssetsLiabilities
and netassets

As of Jan. 31, 2019

+5.4

Net assets

FinancingCF(14.7)

Exchange
loss

(1.4)

As of Jan.
31, 2019

134

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6

Net 3-years plan

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Next 3-year plan (February 2019 – January 2022)“Overcome competition by moving customers”

Copyright © Ryoyo Electro Corporation. All Rights Reserved8Outline of company-wide strategy
Promote new challenges meeting changes in the world,
while restructuring the fundamental functions as an electronicsspecialized trading company
Restructure thetrading functions• Understand our customers and pursue the ‘basic expected to trading
companies’, i.e. delivering “what” is expected (including information andservices) with “quantity” expected and “quality” expected at “price” expected“when” expected  Make the best of the existing customer base by digging
into their needs• Explore/expand new customers, products and markets for businessexpansion

Challenge to“Only RYOYO”• Develop unique technologies/products by strengthening technologicalresources and investing in R&D (= “Only RYOYO”)• Create our values that no one else can provide by pursuing “differentiation”,“originality” and “uniqueness” through the combination of existing products
and “Only RYOYO”• Consider M&A and partnerships to ensure definite strengths

Enhance themanagement
infrastructure• Expedite the basic business cycle through a transition to the business unit
structure and a review of business processes, and maximize marketingproductivity through active investments on IT resources• Reinforce the governance system that ensures the healthy and transparent
management• Launch the new HR system that achieves the work-style meeting changes
in the society (in May)

Copyright © Ryoyo Electro Corporation. All Rights Reserved9Restructuring the trading functions(1) Maximize business opportunities
in existing products x existingcustomers


Deep into the needs of the existingcustomers, which is our assets(2) Explore business opportunities
of existing customers to new
productsProducts

Existing

New

Existing

(1)

(2)

New

(3)

Customers

Explore new products (e.g. China,
Europe) and offer to the existingcustomers, which is our assets(3) Explore new customers/markets
with existing products- Basic framework of strategy -Accelerate marketing activities with existingproducts
Open new overseas offices in prospective
markets
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10Our first office opened in Europe

Our first office in Europe opened in Munich, Germany(13th overseas office)Company
nameRyoyo Electro Europe GmbH

Location

Munich, Germany

Capital

25,000 euro

Shareholding

Ryoyo Electro Corporation: 100%

Establishment

March 2019

Operation

April 2019 (plan)

Business

Sales of semiconductors, devices, ICT
products, etc.

Break away from dependency on Asiaand enter into Europe

Explore business opportunities by focusing on
automobile and other manufacturing industries,
collect market information for future businessexpansion, and research new products

Following the new office in Munich, Germany,setting up a new sales office in North America is under consideration
Copyright © Ryoyo Electro Corporation. All Rights Reserved

11Challenge to “Only RYOYO”

Sell(Marketing)
Create(Development)

Customers

Make(Production)

Competitors

Market research

Customer needs

・

Purchase(Procurement)

Functions to be reinforced“Only RYOYO” + Existing products
Connectivity

Technology
Partners(External resources)

Sales

Cycle to create
valuesMarketing, Operation, IP management

Technologicalresource reinforcing

R&D investment

Better
profitability

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A voice recognition technology brought our first patent In-house development and sales for high values added: Voice recognition – Technology development
and commercialization(*) Developed the technology to achieve the high voice recognition capacity on a real-time basis,and obtained the first patent (no. 6462936). 8 related technologies are under application.

 Advantages of our voice recognition technology• High voice recognition rate with our unique AI technology that works flexibly depending upon theoperating environments.
 Developed new algorism by our unique dictionary engine (patented)• High-speed response with stand-alone features
 Completing recognition procedures within a local device without network connection• Super correct voice detection with strong noise reduction device
 Collaboration with a state-of-art partner

Noise

Uniquereduction

dictionary

deviceengineVoice recognition Current activities(1) Remote controllers or touch panels replacement(2) Voice-to-text technology with direct or chat bot(2) Connection with L is B’s business chat tool “direct” and our voice recognition technology

Voice access to bot

WorkerReport(1) Remote controller
replacement

To Excel format

Approach from bot

Voice

Text

 Next steps(3) Higher-functional embedded solutions through demonstrations in the market
Copyright © Ryoyo Electro Corporation. All Rights Reserved(3) Demo kit for embedded

13

Enhance the management infrastructure– Transition to the business unit structure
In March 2018, we transited to the business unit structure in preparation for the new
business plan
(Structural reform for “restructuring the trading functions” and “challenge to ‘Only RYOYO’”)
Basic operation cycle

Shorter distance
between suppliers andcustomers(Expedited operation cycle)

Expedited
operationcycle
through BU

Maximizing
business
opportunities

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Enhance the management infrastructure - Integration of ICT and IoT -With the integration of ICT business and IoT business,
Sharpen our strength covering devices, clouding and applications(In February
2019)

Enhance cross-selling and upselling through information
sharing

Expand synergies of targets, strategies and products

Promote joint business model development

Share and liquidate resources

Expand business opportunities / Accelerate business solution creation

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Enhance the management infrastructure – Investment in IT resources<Management components>

1,000 million yen investments for the
next three years in operation andmanagement infrastructure which form
the base of business strategy

Vision● Restructure the trading functions
Business strategy● Challenge to “Only RYOYO”● Sales operation

Operation● Business processes● Risk management (internal control)● Corporate governance● Organizational structureManagement infrastructure● HR / evaluation system● Management information system● IT infrastructure

Copyright © Ryoyo Electro Corporation. All Rights Reserved

16What should be in three years<Targets in the final year (FY2021)>

Sales: 110,000 million yen, Operating income: 3,000 million yen(Unit: 100 million yen)

30.0
(2.7% )
8.8
(0.8%)

13.7(1.4%)

12.6(1.3%)
2.5(0.3%)

Operatingincome(%)+17.4(+138.5% )+162( +17.3% )

Sales

1,123

FY2015

1,100

984

922

938

FY2016FY2017FY2018

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FY2021(Target)17

FY2019 Business plan

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18

Business environment forecast in FY2019

Our business is seeing some upward factors,
but may be affected by the current weak demand US-China trade conflict and increasing uncertainties of economies in US, Europe
and China

 With a scale-down trend in production of electronics parts and electric device
manufactures, which pushing down demand temporarily, the timing of recovery
would need to be monitored carefully
 Active investments in communication (e.g. Wi-Fi, LPWA) and security infrastructure
for the coming Tokyo Olympics⇒
 Demand for AI and IoT is expected to be growing, and business opportunities fordevices are also increasing in conjunction with infrastructure development

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19Targeting both higher sales and profit two periods in a row
 Sales:
Expecting an increase in both semiconductors/devices and ICT/solution Gross profit and Operating income:Targeting higher operating income by compensating increased ‘aggressive’
expenses (e.g. investment in the management infrastructure and R&D) with
the increasing gross margin rate

FY2018
Total(Actual)Sales
Gross profit
SG&A
Operating income

Ordinary income
Profit attributable toowners of parent

938
89.3
9.5%
76.7
12.6
1.3%
14.7
1.6%
10.2
1.1%

H1
(Plan)

485
47.5
9.8%
39.0
8.5
1.8%
9.0
1.9%
6.4
1.3%

FY2019H2(Plan)

495
48.5
9.8%
42.0
6.5
1.3%
7.0
1.4%
5.0
1.0%

(Unit: 100 million yen)
YoY
Total
(Plan)

980
96.0
9.8%
81.0
15.0
1.5%
16.0
1.6%
11.4
1.2%

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Diff

%

+42

+4.5%

+6.7

+7.6%

+4.3

+5.6%

+2.4

+19.3%

+1.3

+8.5%

+1.2

+11.7%

20

Expecting an increase in both semiconductors/devices and ICT/solution

FY2018FY2019(Unit: 100 million yen)
YoY

Actual

Plan

Diff

980
525

+42

+4.5%

Semiconductors/Devices

938
499

+26

+5.2%

Communications

68

65

(3)

Sales

Comments%

No significant change, with increasing demand(4.1%) from infrastructure to be compensated with a

By application

decrease in communications
Digital consumer electronics

47

65

+18

+39.5% Increasing orders for semiconductors for TVs

Vehicle installation

29

30

+1

+2.5% No significant change from the previous year

PC and peripherals

195

195

(0)

(0.2%) despite possible effects of shortage of products

No significant change on a whole year basis,
currently concerned
Industrials and others

ICT/Solution

160

170

+10

+6.3%

439

455

+16

+3.7%

98

98

(0)

Increasing order mainly from heavy electricindustries (e.g. railway and solar power)

Given shrinking investments in on-premises IT
PC/Server/Network(0.1%) infrastructure, shifting to cloud-based solution

By productbusiness

78

79

+1

+1.6%

Decreasing sales of printers to be compensatedby higher sales of monitors

Software

150

155

+5

+3.2%

Given customers are increasing the number ofPCs, stable orders expected

Embedded devices and others

113

123

+10

+9.1%

Continued high demand for AI and
DeepLearning products

I/P equipment

Copyright © Ryoyo Electro Corporation. All Rights Reserved21Return to shareholders
 Principle of return to shareholders
Allocation of profit earning through our business activity is one of our mostimportant matters. While we seek to maintain the stable management base andexpand business, we also seek a return for shareholders based on our financial
condition and business performance.
 Revised the dividend policy for enhanced return to shareholders
Until FY2018:

Stable dividend and 100% payout ratio

FY2019 onwards:

Stable dividend, targeting the 3% devedend-equity ratio (DOE)
Dividend per share

FY2019Interim(Q2)

Year-end

Total

Payoutratio(Plan)

40 yen40 yen80 yen172.1%

3.2%(Plan)―

30 yen60 yen144.2%

2.3%(Actual)30 yen――――(Actual)30 yen30 yen60 yen691.0%

2.3%

FY2018FY2017

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DOE

22

Summary<FY2018 Business results>
Exceeded the previous year’s sales and profit for the first time in four years, as well as theplan (announced in August)Higher sales than the previous year, with the negative impact of transfer of distributorshipcompensated
Gross margin (9.5%) reached the highest level in the past 21 period, despite increasing SG&A

<FY2019 Business plan>
Expecting higher sales than the previous year in both semiconductors/devices and
ICT/solution
Targeting higher operating income by compensating increased ‘aggressive’ expenses with theincreasing gross margin rate

The new dividend policy “DOE: 3%” set to better return to shareholders<Next 3-years plan>
Started the business plan consisting of “Restructure the trading functions”, “Challenge to‘Only RYOYO’” and “Enhance the management infrastructure”
Targets in the final year (FY2021): Sales – 110,000 million yen, Operating income – 3,000
million yen

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23

<Topics>

Official sponsor of
the Japan’s professional table tennis league (T.League)

 T.League:
Japan’s professional table tennis league thatstarted the first season in 2018. Word-classplayers registered from both Japan and foreigncountries. In the 2018/2019 season, four teams ofmale and female each have joined.

[Objectives of sponsorship]• Enhance the brand recognition toward the coming Tokyo Olympics in 2020
• Demonstrate our corporate mission and philosophy through fostering
players and supporting the league[Why table tennis?]• Both male and female world-class players have joined T.League. In linewith our policy to empower female employees

RYOYO Group seeks further social contributions throughthe sponsorship to T.League
Copyright © Ryoyo Electro Corporation. All Rights Reserved24About this report Notice
The business forecast and other forecasts contained in thisreport are based on certain assumptions, which we deemed
reasonable at the time of release, and the actual results may
differ due to the economic environment or various otherfactors.

- Contact Corporate Strategy Div.
Corporate Planning Dept.
Ryoyo Electro Corporation
Tel: +81-3-3546-5088
e-mail: irmanager@ryoyo.co.jp

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