H1/FY2017 （58th）
Results Briefing

September 1, 2017

(Tokyo Stock Exchange‐8068)

http://www.ryoyo.co.jp

1Overview
Establishment: February 27, 1961

Capital: 13.672 million yen

Represented by : Kenhachiro Ogawa– Chairman & CEO
Takayoshi Oouchi– President & COO
Number ofemployees: (As at July 31, 2017)
Consolidated: 513
Non-consolidated: 454

Domestic
network: Sendai, Koriyama, Matsumoto,Omiya, Hachioji, Yokohama,Nagoya, Kyoto, Osaka, Fukuoka

Overseas
network: Dalian, Shanghai, Shenzhen,Hong Kong, Taipei, Bangkok,Kuala Lumpur, Singapore,
Bengaluru, Silicon Valley

Domestic: Ryoyo Semicon,
subsidiaries
Ryoyo Security Service,iStream
Sales by product (H1/FY2017)

Business areas:◇ Sales of semiconductors/devices◇ Sales of ICT products (HW/SW)◇ Sales of embedded devices◇ Various engineering support◇ Various services
Certification： ＩＳＯ ９００１ / １４００１ / ２７００１

47%

53%
Semiconductors/Devices
ICT/Solution2

H1/FY2017 Business results3Summary of H1 business trends
 Business results:
o Sales were lower than the same period last year, mainly due to transfer ofthe distribution rights, and in some segments, below the original plan forproduction adjustment and other reasons;o Gross profit, operating income, ordinary income and quarterly net profit
are in line with the original plan, thanks to the increasing ratio of higher
profitable ICT/Solution segment as well as the improvement of the profit
margin in the semiconductor/device segment; ando Ordinary income and quarterly net profit are higher than the same period
last year as well, supported by the upward swing of extraordinary income.
 Key actions:o We have continued to study and implement business collaborations(including capital tie-up) with partner companies for further acceleratingand expanding IoT-related businesses; ando We are seeing the fruits of previous efforts in IoT-related businesses,
including the introduction and transit to demonstration test of thetechnology.
4P/L : Ordinary income and net profit higher than the previous period(Unit: 100 million yen)
FY2016
H1Sales

FY2017
Original planYoY/ PlanComments

H1493

480

460

(6.6%)(4.1%)

41.1

41.0

41.8

+1.8%

+2.1% Higher than both the previous period and8.3%

8.5%

9.1%

33.2

34.5

34.9+5.2%+1.3% Increased in labor cost

7.9

6.5

6.9(12.5%)+6.1% Lower than the previous period due to

1.6%

1.4%

1.5%

0.1

0.5

1.4+876.5%

8.0

7.0

8.2

+2.9%

Gross profit

SG&A

the plan, due to the better profit margin
after improved product composition

Operating income

Non-operating income

increased SG&A, but exceeds the plan

+170.6% Increasing gain from investment securities+17.8% Higher than the previous period,Ordinary income

supported by extraordinary income
significantly exceeding the plan

1.6%

1.5%

1.8%

Extraordinary income

0.3

0.00.1(54.1%)―

Income before income taxes

8.3

7.0

8.4

+1.2%

+19.5%

Income taxes

2.6

2.5

2.6(0.3%)

+4.6%

5.6

4.5

5.8

+1.9%

+27.8%

1.1%

0.9%

1.2%

Profit attributable toowner of parent

5

Sales by segment : Higher ratio of ICT/Solution(Unit: 100 million yen)
FY2016FY2017

H1H1

Semiconductors/Devices

493
295

460
244

(17.0% )Communications

4338(9.8% )Demand for communication module-related products, which we
expected was growing, was dropping sharply

Digital consumer electronics

4228(33.4% )Significantly decreased in products for both TVs andamusement

Vehicle installation

1512(18.5% ) Decreased due to the end of some projects

PC and peripherals

9991(8.1% )Increased in products for peripherals, which is notcompensated by a decrease in products for PCs

Industrials and others9775(22.1% )Significantly decreased due to the transfer of the distribution
rights and production adjustment in solar power businesses

198216+9.0%

PC/Server/Network

5050(0.2% )No significant change from the previous period, except a higher
ratio of services and supports

I/O equipment4236(15.2% )Remains strong but lower than the previous period with thecontribution of large projects

Software

6375+17.9%

Continuous strong demand for corporate use PCs, the sales ofwhich were much higher than the previous period

Embedded devices and others

4356+30.4%

Driven by graphic products the sales of which are significantly
increasing

By application

Total

By product

ICT/Solution

YoYComments(6.6% )6Segment information (sales by region)(Unit: 100 million yen)

493

Decline in both Japan and Asia
460

399381Japan Japan:Lower than the previous period, due to adecrease in semiconductors forindustrial use or PCs

 Asia (Singapore, Hong Kong, Shanghai, Bengaluru):
Decreased in products for TVs and gamemachines

93

79

FY2016FY2017

H1

H1Asia7

B/S・C/F : Change from FY2016 (as at January 31, 2017)(Unit : 100 million yen)

(Unit: 100 million yen)

780

Notes andaccounts
receivable trade

195

96
35

293

227

160

163

As at Jan. 31,2017

Assets112
26

Liabilities andnet assets

Fixed assets

Other liabilities

As at Jan. 31, 2017193

Cash flows fromoperating activities+39.7

Cash flows frominvesting activities

648

10625

AssetsOther current
assets

Notes andaccounts
payable - trade

245
649

Inventories

90
34

Liabilities andnet assets

Cash in handand at banks

773

(5.4)

Net assets

Cash flows fromfinancing activities(4.9)

Effect of exchange ratechangeson cash andcash equivalents(1.4)

As at Jul. 31, 2017221

As at Jul. 31,
20178

FY2017 Business plan9

P/L (Plan) : No change except gross profit and SG&A Sales:
No change from the original plan, despite the weak sales in H1 mainly in
Semiconductors/Devices
 Gross profit:
Expected to be lower than H1, due to a higher ratio of large projects ofSemiconductor/Devices to total sales
FY2017FY2016
Total(Actual)H1(Actual)

H2(Balance)

Total(Revised plan)

Originalplan(Unit: 100 million yen, %)VS. Original plan
YoY
(AfterAmountRatio
revision)

984

460

540

1,000

1,000――

+1.6%

81.0

41.8

46.7

88.5

86.5

+2.0

+2.3%

+9.3%

(8.2%)(9.1%)(8.6%)(8.9%)(8.7%)

67.334.9

38.1

73.0

71.0

+2.0

+2.8%

+8.5%

13.7

6.9

8.6

15.5

15.5

―

― +12.9%(1.4%)(1.5%)(1.6%)(1.6%)(1.6%)

Ordinary income

15.5

8.2

8.3

16.5

16.5

―

―

Profit attributable toowners of parent

8.2

5.8

5.2

11.0

11.0

―

― +33.7%(0.8%)(1.2%)(1.0%)(1.1%)(1.1%)

ROE

1.3%

1.7%

1.7%

Sales
Gross profit
SG&A
Operating income

+6.8%

10

Semiconductors/Devices (sales by application)(Unit: 100 million yen)

-3,000 million yen:
Downward revision, mainly forcommunications

584
550
520

869580Communications

7060

Digital consumer

25258027

Vehicle installation

199
200215

PC and peripherals Communications:Sharply decreasing demand forcommunication modules which wasexpected to be increasing
 Digital consumer electronics:
More decrease in products for gamemachines PC and peripherals:
Downward revision in sales of products
for PCs
192

Actual
FY2016

145

155

Original
plan

Revisedplan

Industrials and others

 Industrials and others:
Lower than the previous period due tothe transfer of the distribution rights, etc.

FY2017

11

ICT/Solution (sales by product)(Unit: 100 million yen)

-3,000 million yen:
Considerable upward revision ofsoftware sales

480450400120

PC/Server/Network

125
10080

I/O equipment80

 I/O equipment:
No change from the original plan80
155

Software Software:
Given the demand for corporate use
PCs remains strong, expecting newcustomers

120

125

Embedded devices
and others

Originalplan

Revisedplan

 Embedded devices and others:
Increasing ales of graphic products
having the advantage for AI and deeplearning

125
125

95
ActualFY2016

 PC/Server/Network:
Reflected the actual results in H1 whichwere weaker than the original plan

FY201712

Return to shareholders
 Dividend policy:

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.
In FY2017 and the subsequent periods, we will target 100% of the total return
ratio to the profit attributable to owner of parent of each period through dividend
payments and share payback

Dividend per share
Interim(Q2)Yearend

Total

Payoutratio(Forecast)-

30 yen60 yen133.7%-(Actual)

30 yen----(Actual)

20 yen20 yen40 yen119.2%

150,000
sharesPayback

FY2017FY201613

RYOYO’s goal –High value added business14

Our strengths : Creation of value chain
IoT/AI
AirlineIntroduction of acommunication
tool among
ground staff

Amusement
park

Constructor
IoT project
consulting

Drugstore

Auto partmanufacturer

Introduction ofoperational ordermanagement
system for chain
storesAutomation ofappearance
inspection
process withgraphics and AI
technologies

New markets/
applications

Semiconductors/Devices

Development
fromentertainment
contents to wide
area W-Fi
infrastructure

New solution/
services

ICT/Solution
15

Creation of value chain – ４Ｄ value chain

ModuleSystemDevice

Smart factory・Remote monitoring
・Preventive maintenance・Technology succession)

Intelligent G/W

CPU
Board
Embedded DB
Security LoRa

Semiconductors / Embedded

AI learning/inferencepackage

Vertical collaboration

Solution

Servers, W/SGPU board
AI elements

ICT

Assortment (manufacturers) /Horizontal collaboration
16

<Case> ANA AS: Introduction of a communication tool
Introduced a chatbot-based communication tool for ANA AS
Customer’s need

Utilization of ICT to improve the efficiency of information
sharing among staff for safe and on-time operations

Design Thinking to understand the actual situation and issues at a workplace
Hearing wrong, Missing
hearing, Rehearing

Frequent operationsuspension

Inter-departmental
communication？

？

Business messenger connecting
people at a workplace？

Solution proposed
Use of text tovisualize and record
information

Asynchronous
communication

Linkage with othersystem by using bot(Efficient use of time)
TEXT
TEXT

17

<Case>Demonstration test of monitoring camera solution along the Tokyu Line

Explore new applications, customers and industries based on
knowledge acquired from demonstration test
New markets

New customers

Distribution, Disasterprevention, Construction…

JR, Private railway / bus
operators, Airports…

Wireless camera
demonstration test
infrastructure

Demonstration test

Crossing

Demonstration test

Wiring

Proposal

Train

ProposalStation

Real-time analysis
Accident alert
Streaming video transmission
STATION

DriverOperator

Stationstaff

Stuck in crossing

OthersMore and more in-housesharingWiringaccident

Assist Falling on
tracksneededQuarrel Dangerous
goods left

Pickpocket

Groping18AI / Deep learning initiatives focusing on NVIDIA
AI venders

Major customers

Collaboration withemerging companies
specialized in AI

Stronger relationships
with major customers,
mainly domestic
electric companies
Service clouded partners

NVIDIA

AI/DL platform

Evaluation kit

One-stop leaning andinference place

For automation ofappearance inspection
processLaboratories, R&D

AI consignment
development
Preventive maintenance,technology accession andautomation for themanufacturing sector

Medical devices
CT/MRI image
processing engine

Factories, Production control, Embedded

19Capital and business tie-up with Uhuru
With tie-up with Uhuru, establish a system to implement
and expand practical use of IoT swiftly Changes in IoT model
Integrate bulk data collected from edges into cloud storage

Self-sufficiency
Decentralization
Collaboration

Mount AI and analytics functions to edges and change these functions
flexibly by updating software

The Uhuru’s IoT orchestration “enebular”
helps to establish a new value chain
connecting from the linkage of edges withcloud storage to commercial use

Business model

In the “self-sufficiency, decentralization,and collaboration model” which requires
edges to have the high capacity, special
embedding technologies are essential forcommercial use

Development
Procedures

Centralization

Old ： without enebular

New ： with enebular

Need to redo device development for improving functions<Product A>
DeviceApplication
Distribution/
development development
Introduction<Product B>
DeviceApplication
Distribution/
development development
Introduction

Improving functions and services through upgradingIssue）
Shortage of embedded software development experts,
Partial optimization of process
Repeat sell-off of existing products andrelease of new products
Product A

Devicedevelopment

Application
development

Distribution/
Introduction

UpgradingSolution）
Consolidation of embedded software andcloud storage development, Total optimization
The continued charging by upgradable devices
UpdateChargefunction ASelloffProduct B

Management / Issue

UpdateChargefunction AEnhanced functional value
SelloffIssue）
Need to replace hardware for improving functions

Product ASolution）
Constant improvement of functional value toensure recurring revenues

20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 Office
Corporate Planning Department
Ryoyo Electro Corporation
Tel: +81-3-3546-5088
e-mail: irmanager@ryoyo.co.jp

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