FY 2019/H1
Results Briefing Material for six months
ended July 31, 2019 (February-July)

August 30, 2019

Ryoyo Electro Corporation[Tokyo Stock Exchange 1st Section, Ticker Code: 8068]
https://www.ryoyo.co.jp

Copyright © Ryoyo Electro Corporation. All Rights Reserved

1AgendaH1/FY 2019 Business Results

FY 2019 Business PlanThree-year Business Plan

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H1/FY 2019 Business Results

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3P/L: Revenues and profits both increased, and results are higher
than initially planned
 Net sales: Substantial growth in both semiconductor devices and
ICT solutions
 Gross profit:
Although profit margin was affected by changes to the sales
structure and exchange-rate fluctuations, profit is up substantiallyboth YOY and vs. initial plans
FY 2018
Results
Net sales

FY 2019
Initial plan

(Unit: 100 millions of yen)vs. initial plan

YOY

Results

Diff

%

Diff

%

451

485

542

＋ 91

＋ 20.2%＋ 57＋ 11.8%

44.8

47.5

50.3

＋ 5.5

＋ 12.2%＋ 2.8＋ 5.8%

9.9%

9.8%

9.3%

36.9

39.0

39.7

＋ 2.8

＋ 7.5%＋ 0.7＋ 1.7%

7.9

8.5

10.6

＋ 2.7

＋ 34.1%＋ 2.1＋ 24.8%

1.8%

1.8%

2.0%

8.9

9.0

11.4

＋ 2.5

＋ 27.8%＋ 2.4＋ 26.7%

2.0%

1.9%

2.1%

6.2

6.4

8.0

＋ 1.8

＋ 28.5%＋ 1.6＋ 24.4%

1.4%

1.3%

1.5%

Gross profit
Selling, general andadministrative expenses
Operating income

Ordinary income
Profit attributable toowners of parent

Copyright © Ryoyo Electro Corporation. All Rights Reserved4

H1 results are at their highest level in 12 years H1 results are at their highest level in 12 years (since FY 2007), with gross profit at 5 billion yen
and the operating margin at 2.0%.
 Finally returning to the level from prior to the Global Financial Crisis
Operatingprofit margin(Profit)

2.0%

2.1%

1.06 billionsof yen1.47 billionsof yenGross profit

5.03 billions ofyen

5.66 billions of yen

FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019
Copyright © Ryoyo Electro Corporation. All Rights Reserved

5Sales by product: Substantial growth in products for PC and TV use(Unit: 100 millions of yen)

Results

Results

Increase (decrease)%

Comment542＋ 91＋ 20.2%

243

276

＋ 33

＋ 13.5%

Communications

32

37

＋5

＋ 14.2%

Even as the smartphone business shrinks, theinfrastructure-related business is growing

Digital consumer
electronics

21

43

＋ 22

＋ 105.8%

Sales for TV use are growing more than expected

Vehicle installation

14

15

＋2

＋ 12.1%

Expansion of commercial rights contributed

PC and peripherals

91

96

＋5

＋ 5.0%

Strong performance of products for both PC and peripheraluse

Industrials and others

85

85

△0

△ 0.1%The level of performance remains high with no major change
from the previous period in which large-scale deals
contributed

209

267

＋ 58

＋ 27.9%

46

59

＋ 13

＋ 28.4%Growth in server-related businesses, thanks to thecontributions of large-scale deals

Semiconductors/Devices

By useFY 2019451

Total net sales

ICT/Solutions
PC/Server/Network

By product

FY 2018

I/O equipment

37

38

＋1

＋ 3.0%

Through revising the policies of some businesses andsecuring a level similar to that of last year, thanks toincreased sales of display-related products despite
decreasing printer-related sales

Software

75

106

＋ 30

＋ 40.3%

PC demand is much higher than initially anticipated in the runup to the Windows 7 EOS and the increase in consumption tax

Embedded devices andothers

51

64

＋ 14

＋ 27.0%

The growth trend in products related to AI and deep learningtechnologies continues

Copyright © Ryoyo Electro Corporation. All Rights Reserved

6Balance Sheet, Statements of Cash Flows: Comparison to end of
previous period (January 31, 2019)
 State of the Balance Sheet State of Cash Flows(Unit: 100 millions of yen)755
Cash anddeposits

Tradereceivables

Inventory
assetsOther
current
assetsNoncurrent
assets

134

101

749
92

98

Trade
payablesAs of the end of January 2019

Otherliabilities

Cash flows from operating
activities

286

256

622

20
224

134

33

32

121

(Unit: 100 millions of yen)

121

▲30.1

Cash flows from investing
activities

624

Net assets＋1.3

Cash flows from financing
activities▲7.4

Exchange gain/loss

▲0.7

18
226

Assets Liabilities
and netassetsAssets Liabilities
and netassets

As of the end ofJanuary 2019

As of the end of
July 2019

Merger of unconsolidated
subsidiaries

As of the end of July 2019

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＋0.9

98

7

FY 2019 Business Plan

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8

Aiming to increase revenues and profits for the second consecutive year,
despite uncertainty in the business environment
Although forecasts of gross profit margin and SG&A will be revised inlight of H1 results, since there is uncertainty in the businessenvironment in Q3 and later the outlook for sales, operating income,ordinary income, and net income will remain unchanged from initial plans.
FY 2018
Whole year

Net sales
Gross profit
Selling, general andadministrative expenses
Operating income
Ordinary income
Profit attributable toowners of parent(Unit: 100 millions of yen)vs. initial plan

FY 2019YOY
H2Whole year Whole year
Increase
Increase(Revised (Revised%(decrease)
Results
Results
Initial plan (decrease)
plan)
plan)
938
542
438
980
980
＋ 42
＋ 4.5%
―
89.3
50.3
43.5
93.8
96.0
＋ 4.5
＋ 5.1%
▲2.2
9.5%
9.3%
9.9%
9.6%
9.8%
H1

%
―
▲2.3%

76.7

39.7

39.1

78.8

81.0

＋ 2.1

＋ 2.8%

▲2.2

▲2.7%

12.6
1.3%
14.7
1.6%
10.2
1.1%

10.6
2.0%
11.4
2.1%
8.0
1.5%

4.4
1.0%
4.6
1.0%
3.4
0.8%

15.0
1.5%
16.0
1.6%
11.4
1.2%

15.0
1.5%
16.0
1.6%
11.4
1.2%

＋ 2.4

＋ 19.3%

―

―

＋ 1.3

＋ 8.5%

―

―

＋ 1.2

＋ 11.7%――

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9Revenue growth expected in both Semiconductors/Devices and ICT/Solutions

FY 2018
Results

By useTotal net sales
Semiconductors/Devices

Comment

Plans call for launching new products for
smartphone use in addition to our strong
infrastructure-related products
Sales of products for TV use, which we initially
expected to grow, are much higher than
anticipated

Communications

68

65

72

＋4

＋7

Digital consumer
electronics

47

65

83

＋ 36

＋ 18

Vehicle installation

29

30

30

＋1

―

Roughly unchanged YOY, with no change frominitial plans

PC and peripherals

195

195

165

▲30

▲30

H2 forecasts revised due to some PC-related
projects coming to an end

Industrials and others

160

170

175

＋ 15

＋5

Revenues up YOY in light of strong H1 trends insolar power-related products and products forrailway companies

439

455

455

＋ 16

―

PC/Server/Network

98

98

98

▲0

―

Roughly unchanged YOY, with no change frominitial plans

I/O equipment

78

79

68

▲10

▲11

H2 forecasts revised because of some printerrelated projects coming to an end

Software

150

155

180

＋ 30

＋ 25

H2 forecasts unchanged from initial plans(Reflecting only upward revision during H1)

Embedded devices andothers

113

123

109

▲4

▲14

Plans revised downward because of unclear
prospects for the launch of a project that had been
expected to contribute starting in H2

ICT/Solutions

By product

938
499

(Unit: 100 millions of yen)vs. initial
FY 2019
YOY
plan
Increase
Increase
Initial plan (Revised plan) (decrease)(decrease)
980
980
＋ 42
―
525
525
＋ 26
―

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10Returns to shareholders

 Basic dividend policy
We consider allocation of profit earned through our business activities to be one of
the most important subjects of management. While we seek to maintain the stable
management base and expand future business, we also seek to ensure returns forshareholders based on our financial condition and business environment.

Beginning in FY 2019, our basic policy is one of paying stable dividends aiming for adividends to owners' equity (DOE) ratio of 3%.

Dividend per share

FY
2019
FY
2018

Payoutratio

DOE

Interim(Q2)

Year-end

Whole
year

(Forecast)-

40 yen80 yen172.1％

3.2％

Results

40 yen----Results

30 yen30 yen60 yen144.2%

2.3%

Copyright © Ryoyo Electro Corporation. All Rights Reserved11Three-Year Business Plan
February 2019 to January 2022

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12Framework of Companywide strategies"Succeeding against the competition throughcustomer satisfaction"
Three strategic frameworks of the business plan

Restructuring Trading
Functions

Challenge to“Only RYOYO”

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Enhancing Business
Infrastructure

13Restructuring Trading Functions
 Taking maximum advantage of our existing customer base by thoroughly
uncovering customer needs (pursuing anew the trade fundamentals demanded
of a trading company) Pursuing business growth through development and expansion of new
customers, products, and areas
Basic strategic framework(i) Maximizing business for existing models
and existing customers


Increasing sales by thoroughly rediscovering the needsof our asset of existing customers(ii) Expanding sales of new products toexisting customers
ModelsCusto
mers

Existing

Existing

New

(1)

(2)

(3)

Growththrough an
Only
RYOYO
approach

Developing new products in China, Europe, andelsewhere, and growing their sales to our asset ofexisting customers(iii) Expanding new customers and areas forexisting models
Accelerating efforts to secure trading rights to existingmodelsExpanding areas served through setting up new overseas
facilities for the futureNew

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14

Restructuring Trading Functions(ii) Expanding sales of new products toexisting customers
 Sitronix Technology
Basic strategic framework

Beginning handling of display devices such as display driver ICs

Models Hakaru Plus
Beginning handling of private LoRa products with functions
optimized for specific uses

Custo
mers

Existing

New Quectel Wireless Solutions

Existing

New

(1)

(2)

(3)

Growththrough an
Only
RYOYO
approach

Concluding sales-agent agreements with the world's leading
communication module makers

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15

Restructuring Trading Functions(iii) Expanding new customers and areas forexisting models
 Opening a subsidiary in Germany
Basic strategic framework

Beginning operations as the Group's first facility in Europe (April)

ModelsCusto
mers

Existing

Existing

New

(1)

(2)

(3)

Growththrough an
Only
RYOYO
approach Opening a subsidiary in Malaysia
Converting the representative office that opened in 2011 to a
subsidiary
Enhancing its organization as a base for sales activities in not
only Malaysia but other ASEAN markets as well (sales began in
October)New Participation in the 5G Open Partner Program
Together with aiming to develop services suited to the 5G age,
aiming to realize business matching with other participants

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16

Restructuring Trading Functions
 Expanding the wireless communication portfolio

Wireless communication
Network High
Speed

LPWA Low Speed

Near distanceCommunication

LoRaWAN
SystemLoRaWAN
ModuleLoRaWANChip

PrivateLoRa

ZETA
System

ELTRES

NB-IoT
ModureCat M

4G / LTE

5G

Wi-Fi

BLE

○

○

○

○

○

○

QUECTELQUECTELQUECTELQUECTELQUECTEL○<Channel Partner>

5G Open Partner
Program

Until now . . .

In addition

In advance of service introduction
and infrastructure development
Accelerating initiatives in the 5G field

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17Restructuring Trading Functions
 Proactively promoting LPWA and 5G initiatives at trade shows, seminars, etc.
[Exhibiting at trade shows] 5G IoT Network Expo (July 17-19 @ Tokyo)
 Customer previews (held from time to time)
Held at seven companies (over nine days) in H1(Exhibitions planned for the future) CEATEC (October 15-18 @ Makuhari) ET & IoT Technology (November 20-22 @ Yokohama)[Holding seminars]
 LPWA Study Meeting Plus (March 15 @ Tokyo)
The venue was very lively for this sold-out seminar (attendees:
120)
Leading players from across various competitive fields took the
podium, fully demonstrating the value that only a trading company candeliver(Planned to be held in the future) LPWA/5G Study Meeting Plus (November 29 @ Tokyo)

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18Challenge to “Only RYOYO”

Business development in which our solid strengths, created fromfusing business strategies with IP strategies, are the pillars for
improving earnings

Market analysis
Customer needs

Design anddevelopment(PoC)

Designthinking

Business strategies

Solutionsdevelopment

DW/receipt
of orders

How to respond to users' topics
and needs (who, what, how)(Creating value to supply to users)

Turning intopillars of earnings&
IP strategy(Sublimation into value that only we can provide)

Horizontal
deployment ofsubsequent
proposals

Forming differentiation,individuality, and uniqueness

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 Only RYOYO →High gross profit
margin To the level ofseveral billion yen
after two years
19Voice-recognition initiatives advance to the stage where they canlead to results

Toward the next stage for our voice-recognition technology forwhich we have secured our first patent
 Expanding business discussions on use of voice-recognition technology inswitches and remote controls for various home electronics devices→ Toward a stage at which our initiatives will lead to results
Replacement of remote controls Currently requesting overseas patent examination of the patents we havesecured with an eye toward deploying them overseas
 We have developed demonstration units for sales-expansion purposes andDemo units for growing
currently are developing high-performance embedded solutions. Broadening of sales of embedded
devicesapplications in ship steering etc.
 Now developing a system to convert the details of operations to text through an
operator (subject to having both hands full) dialoguing with the device (chatbot).
DialogueOperator

Voice

Devices

Text

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Report20

Development of PoC modules for full-fledged adoption of IoT systems
IoT platform conceptual diagram
・Temperature / humidity / atmospheric pressure
・Acceleration / angular velocity
・Light (illuminance)
・Gas leaks

Recording・Human, intrusion, and open-and-close detection
・Positions
・Current and voltage / analog
・Images / audios etc.

Connecting

Collecting

Development of modules for verification of the
IoT system concept
 Providing an environment to enable smooth adoption ofedge IoT Applying to register the product's trademark Ex-Node(trademark registration applied for pending) Plans call for full-fledged introduction of thisproduct to the market next year

Viewing

IoT platform Now developing a platform withquality and durability that can be usedreliably under various conditions in
preparation for linkage with 5G
 Now requesting patent examination
regarding a system for information
sharing on the platform

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21

Enhancing Business Infrastructure: Toward a company culture inwhich employees can achieve self-realization

Enhancing the governance structure
VisionActionPolicy Outside Director (Independent Director)
appointed Chairperson of the Board→ Further improving transparency inmanagement through enhancing thefunctions of Outside Directors

Businessstrategies
Three-YearBusiness Plan

 Change in Representative Directors

System and IT-infrastructuredevelopment

Operational reforms

Business Infrastructure Full-fledged adoption of new HR
evaluation system and HR training
program Commencing operation of attendance
management system, internal HR
communication tool, customerinformation management tool, etc.

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22Goals to be realized in three years<Targets for final fiscal year (FY 2021)>
Sales: 110 billion yen; operating income: 3 billion yen
30.0

2.5

<Operating profit>

12.6

15.0

(1.3%)(1.5%)(2.7%)

1,100(0.3%)The Only RYOYO
Challenge

980⇓
Turning intopillars of earnings

922

938

FY 2017

FY 2018

Restructuring of
the core tradingcompany business<Net sales>

FY 2019(Plan)⇒

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FY 2021(Target)23

Summary<H1/FY 2019 Business results>
Both sales and each type of income were up considerably both YOY and vs. initial plans.
Both gross profit (5 billion yen) and operating profit marring (2.0%) are at their highest levels
in 12 years.

Viewed by product, revenues were up YOY for both Semiconductors/Devices and
ICT/Solutions<FY 2019 full-year plans>
Full-year forecasts will remain at their levels announced previously, due to an uncertain
business environment in Q3 and later

However, even while plans remain unchanged, we expect to be able to increase revenues andprofits for the second consecutive year
<About the Three-Year Business Plan>
Accelerating initiatives in the 5G field, through portfolio expansion and ecosystemadvancement
Toward a stage at which our initiatives related to voice-recognition technology, for which wehave secured our first patent, will be linked to results
Steady progress also is underway on efforts targeting areas such as strengthening ofgovernance and improvement of business productivity

Copyright © Ryoyo Electro Corporation. All Rights Reserved24About this report

Note
The business results and forward-looking statements contained in this report are
based on certain assumptions that we deemed reasonable at the time of release. Actual
results may vary because of economic conditions and various other factors.

Contact
Ryoyo Electro Corporation
Corporate Strategy Div., Corporate Planning Dept.
Tel: +81-3-3546-5088

E-mail: irmanager@ryoyo.co.jp

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