Results Briefing for Fiscal Year Ended
January 31, 2020

March 11, 2020

Ryoyo Electro Corporation
First Section, Tokyo Stock Exchange (Ticker Code: 8068)
https://www.ryoyo.co.jp/en/

Copyright 2020 © Ryoyo Electro Corporation

Overview of Fiscal Year
Ended January 31, 2020

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Copyright 2020 © Ryoyo Electro Corporation

Achieved V-shaped recovery, smooth start on
three-year business plan
 Revenue and income both up for two straight years• Net sales: Recovered to exceed ¥100 billion for the first time in four years• Operating income: Operating margin reached 2.0% for the first time in 15 years(Billion yen)

112.3

0.88
(0.8%)

3.0(2.7%)Net sales
Operating income (margin)

108.5

98.4

2.15
(2.0%)

1.37(1.4%)

92.2

110.0

93.8
1.26
(1.3%)

0.25(0.3%)FY2016/1

FY2017/1

FY2018/1

FY2019/1

2

FY2020/1

FY2022/1(Three-Year Plan
Target)Copyright 2020 © Ryoyo Electro Corporation

Profit/Loss: Full-year performance exceeded bothprevious year and forecast
 Net sales:

Semiconductors & devices and ICT & solutions both grew, and net sales
recovered to exceed ¥100 billion for the first time in four years

 Gross profit:

Profit margin is flat, but profit increased significantly year on year Operating
income:Operating income exceeded ¥2 billion for the first time in five years,
and operating margin reached 2% for the first time in 15 years(Billion yen)

FY2019/1

Net sales
Semiconductors &devices

FY2020/1
Q3
Q4

Q1

Q2

93.8

27.6

26.7

27.1

49.9

12.9

14.7

13.8

Full Year

YoY Change
%

27.2

108.5

+14.7 +15.7%

13.0

54.3

+4.4

Full-Year Forecasts
Initial Revised*

+8.9%

98.0

105.0

52.5

53.9

45.5

51.1

542

ICT & solutions
Gross profit
(%)

43.9

14.7

12.0

13.3

14.3

54.2

+10.3 +23.5%

8.93

2.55

2.48

2.57

2.76

10.36

+1.44 +16.1%

9.5%

9.3%

9.3%

9.5%

10.1%

9.5%

7.67

1.93

2.03

1.99

2.25

8.21

+0.54

Selling, general andadministrative expenses
Operating income
(%)

1.26

0.62

0.44

0.59

0.51

2.15

1.3%

2.2%

1.7%

2.2%

1.9%

2.0%

Ordinary income

1.47

0.63

0.51

0.52

0.52

2.19

1.6%

2.3%

1.9%

1.9%

1.9%

2.0%

1.02

0.43

0.36

0.29

0.22

1.3

1.1%

1.6%

1.4%

1.1%

0.8%

1.2%

(%)
Profit attributable toowners of parent

(%)

9.6

10.0

9.8%

9.5%

+7.0%

8.1

8.1

+0.9 +71.3%

1.5

1.9

1.5%

1.8%

+0.71 +48.3%+0.28 +27.7%

1.6

1.9

1.6%

1.8%

1.14

1.2

1.2%

1.1%

*Revised forecasts released in November 20193

Copyright 2020 © Ryoyo Electro Corporation

Semiconductors & devices:
Growth in logic semiconductors for TVs drove sales Analog & power
semiconductors:

Expansion of commercial rights contributed to analog
semiconductor sales, while power semiconductor sales grewin the infrastructure segment (solar power, railways, etc.)
 Logic semiconductors:
Some businesses for PCs ended during the year, but thisnegative factor was offset by sales for TVs, which grewsignificantly throughout the year Memory semiconductors: HDD, printer, and other PC peripheral sales declined
Net Sales by ProductAnalog & power
semiconductors

Logic semiconductors

12.2

21.9

FY2020/1+28.6%FY2019/1

5.5-27.3%+20.1%

9.5(Billion yen)
RF & optical
Memory semiconductors Other electronic
LCDs↓
semiconductors
devices

18.2

7.6

2.4 4.8

7.6

54.3+15.1% -10.2%+5.0%

2.1 5.3

49.9

7.3

Net Sales by Application
Communication
FY2020/1

7.1
+4.7%

FY2019/1

Digital consumer Vehicle
electronics
installation

6.8

10.2

3.1

+119.7% +6.3%
4.7

2.9

PCs & peripherals

Industrials & others

16.7-14.6%
19.5

17.2
+7.5%
16.0

4

54.3

49.9
Copyright 2020 © Ryoyo Electro Corporation

ICT & solutions:
PC software sales outpaced expectations
 PC/Server/Network: Embedded devices& others:

Large-scale deals on servers and other products contributed toincreased sales
Sales of displays, projectors and other video-related products grew,
but did not offset decline in printer-related product sales
Replacement demand for PCs due to the end of Windows 7
support exceeded initial estimates
AI & Deep Learning sales increased, even without large-scale
deals

Net Sales by Product(Billion yen)

 I/O equipment: Software:

PC/Server/Network I/O equipment
FY2020/1

FY2019/1

11.7

7.1

+19.5%

-8.4%

9.8

7.8

Software

Embedded devices& others

23.7

11.7

+57.7%

15.0

5

54.2

+3.4%

11.3

43.9

Copyright 2020 © Ryoyo Electro Corporation

Balance sheets & cash flows: Year-on-year comparison
Cash Flows

Balance Sheets(Billion yen)

75.5
Cash anddeposits

13.4

10.1

78.1
12.4

3.2
Trade
receivables

Inventory assets

4.0

Other
liabilities

As of January 31,
2019

13.4

Cash flows fromoperating activities+1.46

Cash flows frominvesting activities

62.2

12.6

Other current
assets2.0

1.3

Non-current
assets22.4

23.7

Assets12.0

Tradepayables

28.2

25.6

12.1

(Billion yen)

Liabilities
and net assets

As of January 31,
2019

62.1

Net
assetsCash flows fromfinancing activities

-0.77

-1.74

+0.05

Exchange gain/loss

As of January 31,
2020

Assets Liabilities
and net assets

12.4

As of January 31,
2020

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Copyright 2020 © Ryoyo Electro Corporation

Business Plan for Fiscal YearEnding January 31, 2021

7

Copyright 2020 © Ryoyo Electro Corporation

Outlook on the business environment
Although there are positive indications such as receding U.S.-China trade
friction concerns and the commercialization of 5G, the impact of the spreadof the novel coronavirus will be of great concern

 Potential impacts of the spread of novel coronavirus infections
Stagnation or slowdown of economy in Japan and around the world
Impact on supply chains
Direct impact
Suspension or significant reduction in manufacturing parts and/or
assembled products at factories in China, affecting procurement anddelivery of parts to Ryoyo
Indirect impact
Suspension in manufacturing finished products by Ryoyo’s
customers due to inability to procure parts from suppliers other than
Ryoyo, causing impact on Ryoyo's businesses
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Copyright 2020 © Ryoyo Electro Corporation

Profit/Loss: Accelerate shift to high value-added
businesses to increase profit for three consecutive years Net sales: Gross profit:

Net sales forecast to decrease year on year but stay above ¥100 billion
Improve profitability by changing composition of sales and growing highvalue-added businesses
Expected to absorb rise in selling, general and administrative expenses
and record an increase for the third consecutive year Operating
income:Note: Earnings forecasts do not take into account the impact of the spread of the novel coronavirus. No significant
negative impacts have appeared at this stage. The company intends to disclose updates as necessary when impacts
become clear.
FY2020/1
Result(Billion yen)

Net sales

YoY Change

FY2021/1
Target

%

108.5

105.0

-3.5

-3.3%

Semiconductors & devices

54.3

53.0

-1.3

-2.5%

ICT & solutions

54.2

52.0

-2.2

-4.1%

10.36

10.7

+0.34

+3.3%

(%)

9.5%

10.2%

Selling, general and administrative expenses

8.21

8.5

+0.29

+3.6%

Operating income

2.15

2.2

+0.05

+2.1%

+2.0%

2.1%

2.19

2.2

+0.01

+0.6%

2.0%

2.1%

1.3

1.53

1.2%

1.5%

Gross profit(%)
Ordinary income(%)
Profit attributable to owners of parent(%)
9+0.23 +17.4%

Copyright 2020 © Ryoyo Electro Corporation

Semiconductors & devices: Sales expected todecrease but several new products will be launched Analog & power Power semiconductor sales will remain unchanged in general, but
semiconductors: analog semiconductor sales are expected to decline due to loss ofcommercial rights
 Logic
While further growth of sales for TVs is expected, the impact ofsemiconductors: businesses that ended in the first half of the previous fiscal year willremain RF & optical
Sales are expected to grow in both RF and optical semiconductors,
semiconductors: boosted by new businesses using newly acquired agency rights
RF & optical(Billion yen)
Memory semiconductors Other electronic
Analog &Logic semiconductors↓ LCDssemiconductors
devices
power semiconductors

Net Sales by Product

FY2021/1
Target

10.9

19.3

5.8

-10.4%-11.9%+5.3% +60.5% -3.2% +12.5%

12.2

21.9

FY2020/1
ResultNet Sales by Application
Communication
FY2021/1
TargetFY2020/1
Result3.8

5.5

Digital consumer Vehicle
electronics
installation PCs & peripherals

4.6

2.4

8.6

4.8

54.3

Industrials & others

7.0

12.3

2.7

14.5

16.5

-1.4%

+20.1%-13.3%-13.2%

-4.0%

7.1

10.2

3.1

16.7

17.2

10

7.6

53.0

53.0

54.3

Copyright 2020 © Ryoyo Electro Corporation

ICT & solutions:
Relative decline expected in software for PCs
 PC/Server/Network: Capture continued strong demand for corporate IT investment
 I/O equipment:

Although video-related product sales growth is expected tocontinue, it will not offset the decline in printer sales

 Software:

Anticipate a relative decline from the strong demand of theprevious year

 Embedded devices& others:

Aim for further expansion of sales in core AI and Deep Learning
related businesses and by preparing for new solutions businesses

Net Sales by Product(Billion yen)

PC/Server/Network I/O equipment
FY2021/1
TargetFY2020/1
ResultSoftware

Embedded devices& others

12.1

6.7

20.8

12.4

+3.2%

-6.0%

-12.2%

+6.3%

11.7

7.1

23.7

11.7

11

52.0

54.2

Copyright 2020 © Ryoyo Electro Corporation

Three-Year Business Plan
February 2019 – January 2022

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Copyright 2020 © Ryoyo Electro Corporation

Reform Phase 2: Becoming a company that can deliver
self-sustained growthFiscalYear

ReformPhase

FY2018/1

FY2019/1

FY2020/1

FY2021/1

FY2022/1

Preparatory
Stage

Reform Phase 1

Reform Phase 2

Management
Reform Project

Net sales: Return to ¥100 billion
Operating margin: over 2%

Become a company that can deliver
self-sustained growth

Companywide:
Identify rootissuesEach division:
Identify rootissues• Face reality• Analyze &hypothesize• Expedite businesscycles• Changemanagement
structure• Reform company
organization(introduce
business unit
system)• Reform corporate
cultureFY2023/1

Three-Year Business Plan
• Shift to twobusiness divisions• Reform HR
systems• Productivity
improvement
project• First patentacquisition• Enhance
governancestructure13

Preparation of the next three-yearbusiness plan

Copyright 2020 © Ryoyo Electro Corporation

Shift to “solutions partner”
Strengthen structure and functions for expanding solutions business (fromedge devices to cloud services) for resolving customer and market issues,
instead of mere pursuit of scale

Edge devices

Network

Cloud

Solutions business

Semiconductors & devices business

Invest management resources in solutions
business that starts with ICT system and cloud
to provide value that exceeds customer
expectations

Shift to solutions business with devices as
starting point, and provide value unique to
Ryoyo with an awareness of end-user needs

Connect via technology and information
Strategic Technology Development Division andStrategic Sales & Marketing Division

Consider alliances that share vision, pride, and values(Cloud-based software development, R&D and manufacturing functions, etc.)
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Copyright 2020 © Ryoyo Electro Corporation

Making proposals with awareness of end-users
Ryoyo’s Added Value: Providing thorough problem resolution that considers
end-users (customers of Ryoyo’s clients)
Customers/competitors
of Ryoyo’s clients

Proposals with awareness of
end-users
 Proposals with awareness of
end-users

Clients’customers

 Proposals with awareness ofclients’ competitors
Clients’competitors

Clients

RYOYO

Suppliers

Competitors

End-user satisfaction↓
Client satisfaction↓
Supplier satisfaction↓
Employee satisfaction

Ryoyo’sclients/competitors
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Copyright 2020 © Ryoyo Electro Corporation

The three strategic markets
Support customer’s monozukuri (manufacturing) and kotozukuri (value/story
creation) in factory automation (FA), medical, and retail markets
Provide value with diverse
products, from edge
devices to cloud services

Become a trading company
that can show strength in theFA, medical, and retail markets

Develop and provide new,high-quality on-sitecommunication solutions

Expand functions
Cloud services
App development
Operation and maintenance
Kitting
Installation and construction
Modularization
Development support

Suppliers andpartners

Products
andservices

Total
coordinationof solutions

Edge devices～

Strategic
markets

End-users

FA equipment

Factories

Medicalequipment

Hospitals

Network～

Cloud

Retailequipment

StoresBusiness domains
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Outline of company-wide strategy“Overcome competition by exceeding
customer expectations”
Three strategic frameworks of the business plan

Restructure
trading functions

Embrace the“Only Ryoyo”
Challenge

17

Enhancemanagement
infrastructure

Copyright 2020 © Ryoyo Electro Corporation

Restructure trading functions
 Quectel (agency agreement entered in August 2019): Develop market needs towards local 5G
Quectel meets customer needs by working with Ryoyo to promptly release products
for the Japanese market

Examples of main sales
leads• Telematics control unit (TCU)• Programmable logic controller(PLC)• Smart meter• VPN router

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Copyright 2020 © Ryoyo Electro Corporation

Restructure trading functions
 Supporting HACCP* by using KiWi products — Leveraging IoT for foodtemperature control*Hazard Analysis and Critical Control Point (HACCP):
Due to the revision of Japan’s Food Sanitation Act, businesses that handle food are required toestablish methods for refrigerator and freezer temperature and time control, record keeping, andstorage by June 2020 in principle, and there is a pressing need for refrigerator and freezer IoT
implementation at all stores.
Temperature control ofrefrigerators at a supermarket

Visualization and record keeping
CloudInternet

Temperature
control of multiple
units in the kitchen

On-site issues foradministrative recordkeeping
 Steep rise in labor costs
 Shortage of personnel

Resolving on-site issues by
providing sensor-equipped
LPWA products and gateways

Internet

Sensor-equipped
LPWA productMeasuretaken

Gateway19

Copyright 2020 © Ryoyo Electro Corporation

Restructure trading functions
 Partnership with AI Medical Service (AIMS)* (September 2019): Further
strengthens Ryoyo Group activities in the field of medicine
Accelerate collaboration focused on providing products that are used in AI development⇩
Support the realization of AIMS's corporate philosophy, “Helping to save lives around theglobe: Endoscopy AI that supports doctors and protects patients by dramatically reducing
missed diagnoses”
Real-time detection and diagnostic support system for stomach cancer(usage example)
Note: This technology and system have not yet been approved under Japan’s Act on Securing Quality,
Efficacy and Safety of Products Including Pharmaceuticals and Medical Devices.

Carry out the following using AI image recognition:
 Detection of lesions

 Segmentation of lesion sites in pixels
 Classification of the detailed conditions* AI Medical Service Inc. (established in 2017)
The company develops endoscopy AI that supports the detection ofcancers and aims to obtain regulatory approval and bring it to market as asystem that supports doctor’s diagnosis.

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Copyright 2020 © Ryoyo Electro Corporation

Embrace the “Only Ryoyo” Challenge– Intellectual Property Strategy
Four patents obtained from R&D activities in 2019

Patent #1
High-Quality Voice Recognition System and Equipment
Patent #2
Friendly Information Sharing Method and System
Utilizing BOT
Patent #3 (Transportation industry)
Patent #4 (Work-site operations, regardless of industry)*Version of Patent #3 with expansion of application to other industries

Automatic Groups Management Method, Equipment and System
for Group Chat Communication.
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Copyright 2020 © Ryoyo Electro Corporation

Embrace the “Only Ryoyo” Challenge– Intellectual Property Strategy

Patent case: High-Quality Voice Recognition System and Equipment

Licensingcase

The technology developed in this project was adopted for a
Japanese manufacturer's home appliance (LED light)

The technology will be employed in other electrical appliances

Turn on thelight!

No Internet environment, smart speaker,
or special application necessary
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Copyright 2020 © Ryoyo Electro Corporation

Embrace the “Only Ryoyo” Challenge– Intellectual Property Strategy

Patent case: Friendly Information Sharing Method and System
Utilizing BOT
On-site (airport) issues

Common denominators for improvement• Information shared via transceiver• Preventing repeat inquiries, reducing task
interruptions• Transceiver use means history will
not be kept
• Communication takes too long

• Maintaining reliability of information exchanges

Designthinking• User: Airport ground staff

45 mins.

Ryoyo developed an original chatbot that can be used on site
Original chatbot service
Business
scope

Business chat (Direct)

Patentobtained

Operational service
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Copyright 2020 © Ryoyo Electro Corporation

Enhance management infrastructure Reform of HR evaluation system and enhancement of
employee benefits and terms
 Full-fledged adoption of HR training program

System and ITinfrastructuredevelopment

 Adoption and reform of internal systems
 Attendance management system Internal communication tool
 Customer information management tool, etc.

 Implementation of productivity improvement projects
 Standardization of sales activities
 Operational reforms
 Enhancement of IT tools, etc.

 Expansion of technology resources

Proactive
investment inbusinessresources Enhancement of R&D investment
 Expansion of training expenses (HR training) Expansion of floor space at head office (improve work
environment) Augmented participation in exhibitions, enhancement ofexhibition contents, etc.
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Copyright 2020 © Ryoyo Electro Corporation

Enhancing the governance structure Enhance governance system with the purpose of further improving
management effectiveness and transparency
Outside Director
chairs the Board of
Directors

Balance of inside/outside officers

2 female directors

Inside board members: 7
Outside board members: 7

Outside Director: 1
Audit & Supervisory Board Member: 1

Current structure

New structure

Board of Directors: 9

Board of Directors: 10

Inside Directors: 7

Inside Directors: 6

Outside Directors: 2

Outside Directors: 4

Audit & Supervisory Board: 4

Audit & Supervisory Board: 4

Audit & Supervisory Board
Member: 1

Audit & Supervisory Board
Member: 1

Outside Audit & Supervisory
Board Members: 3

Outside Audit & Supervisory
Board Members: 3* The new structure is to be officially determined via election at the General Meeting of Shareholders on April 28.

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Shareholder Returns

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Copyright 2020 © Ryoyo Electro Corporation

Shareholder returns
 Change in Shareholder Return Policy ROE in FY2022/1: 3.5%
 ROE level that exceeds capital cost recognized by Ryoyo
Aim to achieve the above two goals, and raise dividend on equity target to 5.0%
Fiscal Year

Annual Dividendper Share

Return Policy

Up to FY2019/1

Total return ratio

100% 

60 yenFY2020/1

Dividend on equity (DOE)

3.0% 

80 yenFY2020/1 andbeyondDividend on equity (DOE)

5.0% 

120 yen (+ commemorative
dividend: 60 yen)

Note: For FY2021/1, a 60th anniversary commemorative dividend will be added to raise ordinary
dividends, resulting in a dividend of 180 yen per share.

Dividend per Share (Yen)FY2021/1
FY2020/1
FY2019/1

InterimYear-End

Full Year

PayoutRatio

Forecast

60

120

180

289.1%

7.3%

Forecast

―

40

80

150.8%

3.2%

Result

40

―

―

―

―

Result30

30

60

144.2%

2.3%

27

DOE

Copyright 2020 © Ryoyo Electro Corporation

Summary
Overview of fiscal year ended January 31, 2020
Revenue and profit both up for two consecutive years• Net sales: Recovered to exceed ¥100 billion for the first time in four years• Operating income: Operating margin reached 2.0% for the first time in 15
years
Business plan for fiscal year ending January 31, 2021

Accelerate shift to high value-added businesses to increase profit for threeconsecutive years
Three-Year Business Plan
Transition to Ryoyo Group Management Reform Phase 2
Strengthen structure and functions for expanding solutions business (fromedge devices to cloud services), including alliances with other companies
Shareholder returns
FY2020/1: Annual dividends of ¥80 per share with a target of 3% DOE
FY2021/1: Raise DOE target to 5.0%
 Annual dividends: Ordinary dividend (¥120) +commemorative dividend (¥60) = ¥180 per share
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Copyright 2020 © Ryoyo Electro Corporation

Social contribution activities
New employees participated, as part of their follow-up training, in thepreservation activity “Michi Bushin Walk” for the World Heritage “Sacred Sites
and Pilgrimage Routes in the Kii Mountain Range.”

Ryoyo offers employee outreach programs topromote the sustainability of local communities

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About this report

Note
The business results and forecasts for the future contained in this presentation
are based on certain assumptions deemed reasonable at the time of release.
Actual results may differ from the original forecasts due to economic conditionsand various other factors.

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

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Copyright 2020 © Ryoyo Electro Corporation