FY2018 (59th)
Results Briefing

August 31, 2018

(Tokyo Stock Exchange‐8068)

http://www.ryoyo.co.jp

1Overview

Date ofestablishment: February 27, 1961

Capital: 13.672 million yen

Represented by : Kenhachiro Ogawa– Chairman & CEO
Moritaka Nakamura– President & COO

Domestic
network: Sendai, Koriyama, Matsumoto,
Omiya, Tokyo (head office), Hachioji,
Yokohama, Nagoya, Kyoto, Osaka,
Fukuoka (11 offices)

Overseas
network: Dalian, Shanghai, Shenzhen, Hong
Kong, Taipei, Bangkok, Sriracha,
Kuala Lumpur, Singapore,
Bangalore, Silicon Valley (11 offices)

Number of
employees: (As at July 31, 2018)
Consolidated: 524
Non-consolidated: 472*Whole group: 614

Business areas: ◇Sales of semiconductors/devices◇Sales of ICT products (HW/SW)◇Sales of embedded devices◇Various design, development
and engineering support◇Various services

Certifications: ISO9001 / 14001 / 27001

Domestic: Ryoyo Semicon, Ryoyo Security
subsidiaries
Service (2 companies)

Sales by product (H1/FY2018)

46.2%

53.8%
Semiconductors/Devices
ICT/Solution2

H1/FY2018 Business results3External business environments and our business External business environments (Electronics industry):‒ The electronics market continues to be growing mainly for the automobile,industrial equipment and data center industries.
‒ However, possible impacts of the US-China trade war (e.g. shrinking ofproduction activities in China due to higher duty and subsequent higher
production cost, and relocation of production from China to other countriesfor ‘local production for local consumption’)‒ is increasingly being concerned.
 Our business performance:‒ Partly affected by the transfer of distributorship, sales were lower than theprevious year.
‒ Significantly improved gross margin has compensated higher SG&A, which
led to the return to profitability in terms of operating income, ordinary income
and net profit.
‒ We have started to work on restructuring the business base toward the next
three years, ‘D-period’.

4P/L: Higher profits than the previous year with a significant increasein the gross profit margin

 Sales:
Due to the impact of the transfer of distributorship the overall sales werelower than the previous year Gross profit:
A significant increase in the gross profit margin due to some factors, such as
expansion of high-profitable businesses and an increase in rebates,
compensated an increase in SG&A and contributed to the higher profit thanthe previous year
FY2017
ActualSales

FY2018Plan(Unit: 100 million yen)
VS. Plan

YoY

Actual

Diff

%

Diff

%

460

470

451

(9)

(2.0%)(19)(4.0%)

41.8

42.5

44.8

+3.0

+7.1%

+2.3

+5.4%

9.1%

9.0%

9.9%

34.9

37.5

36.9

+1.9

+5.6%

(0.6)

(1.6%)

6.9

5.0

7.9

+1.0

+14.7%+2.9+58.2%

1.5%

1.1%

1.8%

8.2

6.0

8.9

+0.7

+8.2%

+2.9

+48.8%

1.8%

1.3%

2.0%

5.8

4.0

6.2

+0.4

+7.8%

+2.2

+54.9%

1.2%

0.9%

1.4%

Gross profit
SG&A
Operating income

Ordinary income
Profit attributable to owners ofparent5

Sales by segment: Higher growth than expected in industrials
100 million yen)
(Unit:（単位：億円）
FY2017FY2018ActualActual%Diff

Comments

460

451

(9)

(2.0%)

Semiconductors/Devices

244

243

(2)

(0.7%)

Communications

38

32

(6)

(15.9%) Decrease in products for communication devices

Digital consumer electronics

28

21

(7)

(25.1%)

Significantly affected by sluggish sales of large-lot orders
such as products for TVs or game machines

Vehicle installation

12

14

+2

+15.2%

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

PC and peripherals

91

91

(0)

Industrials and others

75

85

+10

+12.8%

216

209

(7)

(3.5%)

PC/Server/Network

50

46

(4)

(7.5%)

Decreased in the number of orders for IT systemprojects, mainly servers

I/O equipment

36

37

+1

+2.3%

Higher sales than the previous year, supported by growthof sales from products for LCD monitors which hascompensated a slight drop in those for printers

Software

75

75

+1

+0.8%

No significant change from the previous year

Embedded devices and others

56

51

(5)

Impacts of the end of spot projects that contributed to(9.3%) sales in the previous year has not been compensatedincreasing sales in graphic products

By application

Sales

By product

ICT/Solution

No change from the previous year, contributed by(0.0%) expanding distributorship which has compensated a
sharp drop in sales of products for printers
Higher sales from products for railway companies than
expected6

<Ref>
If excluding the specific factors, sales would be higher than the previous year

H1 sales have decreased for three periods in a row↓<Specific
factors>(1)

Transfer of distributorship (2 projects)(2)

End of large-scale lower-margin
projects (withdrawal)

587
540

(2)
493

(1)

460

451
+1,600M yen

476

H1/FY2014

484

H1/FY2015

445

433

449

H1/FY2016

H1/FY2017

H1/FY2018

Decreased even without
the specific factors

Without transfer of
distributorship,
increased7

<Ref> Despite sluggish sales, gross margin keeps increasing Despite a continued decrease in sales, due to higher profitability, grossmargin has increase for two periods in a row
 Gross margin has increased by 2.2 points over H1/FY2014
Sales: - 8,900M yen
However, gross margin: +0.3M yen

587
540
493
460

Sales

46.2
41.8

(7.9% )

(7.7% )

41.1

41.8

(8.3% )

(9.1% )

H1/FY2016

H1/FY2017451
44.8(9.9% )

Gross margin(%)

H1/FY2014

H1/FY2015

H1/FY2018

8

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

 B/S

 C/S

(Unit: 100 million yen)

(Unit: 100 million yen)

(Unit: 100 million yen)

781
Cash and
bank

140

753

97
41

259

135

85

Accounts

37

Other

139

OperatingCF+2.1

Investing
CF

+0.4

245

Accounts
receivable
Net assets

109

Other current
assets25

23

Fixed assets

248

234

of JanAs As
of Jan,31, 31
2018

117

AssetsLiabilities andnet assets

644

631

Liabilities andnet assets

Inventory

Assets

As of Jan.
31, 2018

Financing
CF

(7.3)

Exchange
loss

(1.3)

As of Jul.
31, 2018

133

July
AsAs
of of
July
31,31
2018
(*) The discrepancy in cash and deposits between B/S and C/F is due to different criteria on fixed deposits.

9

FY2018 Business plan

10

Targeting an increase in both sales and profit for the first time in four years
on a whole year basis

 Sales:
No change from the original plan, expecting a start of large-scale projects in H2
 Gross profit to Net profit:
Revised the original plan upward based on better results in H1 than plan
FY2017Whole year
(Actual)H1(Actual)

FU2018Whole year
H2
Original plan
(Revised plan)(Plan)(Unit: 100 million yen)
VS. Original plan

YoY
%

Diff

%

Diff

922

451

479

930

930

+8

+0.8%

―

―

Semiconductors/Devices

509

243

257

500

500

(9)

(1.8%)――ICT/Solution

413

209

221

430

430

+17

+4.1%

―

―

75.9

44.8

42.7

87.5

85.5

+11.6

+15.3%

+2.0

+2.3%

8.2%

9.9%

8.9%

9.4%

9.2%

73.4

36.9

38.6

75.5

75.5

+2.1

+2.9%

―

―

2.5

7.9

4.1

12.0

10.0

+9.5

+377.2%+2.0+20.0%

0.3%

1.8%

0.9%

1.3%

1.1%

4.3

8.9

5.1

14.0

12.0

+9.7

+223.8%+2.0+16.7%

0.5%

2.0%

1.1%

1.5%

1.3%
+7.5

+351.1%+1.6+20.0%

Sales

Gross profit
SG&A
Operating income

Ordinary income
Profit attributable to ownerof parent

2.1

6.2

3.4

9.6

8.0

0.2%

1.4%

0.7%

1.0%

0.9%

ROE

0.3%

1.5%

1.2%

11

Semiconductors/Devices (sales by application)
 Communications:
Revised the H2 plan based on the current weak sales in products for bothcommunication devices and infrastructure Digital consumer electronics and other home electronics:
While expecting a start of new projects in H2, significantly downward revision
based on the H1 performance
 Industrials and others:
Expecting an increase in sales, contributed sharp growth of projects for railway
companies which would compensate impacts of the end of distributorship(Unit: 100 million yen)

187 175 180

Communications

Digital consumer
electronics

PC and peripherals

FY2018(Revised)

FY2018(Original)

FY2018(Revised)

FY2017FY2018(Original)

Vehicle installation

FY2018(Revised)25
FY2018(Original)

25

FY201725
FY201755

FY2018(Revised)

70

FY2018(Original)

58

FY201775

FY2018(Revised)

80

FY2018(Original)

FY201781

158 150 165

Industrials and others

12

ICT/Solution (sales by product) PC/Server/Network:
Conservatively revision for the H2 plan based on the H1 performance I/O equipment and Software:
Stable without significant change from the previous year

 Embedded devices and others:
For graphic products, expecting release of new products as well as contributionof large-scale projects(Unit: 100 million yen)I/O equipment

Software

115

117

FY2018(Revised)

FY2018(Revised)

FY2018(Original)

FY201775

FY2018(Revised)

FY2017FY2018(Revised)

PC/Server/Network

75

FY2018(Original)

97

FY2017103
78

FY2018(Original)

FY2017

94

105

135

141

FY2018(Original)

139

Embedded devices andothers13

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.
As our policy on return to shareholders, we will target 100% of the payout ratio
through dividend payment and payback

Dividend per share
Interim(Q2)

Year-end

Total

Payoutratio

Payback

FY2018(Forecast)

30 yen30 yen60 yen153.2%

Unknown

FY2017(Actual)30 yen30 yen60 yen691.0%-FY2016(Actual)20 yen20 yen40 yen119.2%

150,000
shares14

Toward the next 3-years plan

15

Our current situation
Factors giving significant impacts on our recent
business performance
Transfer of distributorship

Lower competitiveness ofthe trading function which
is our core business

Delay in approaching the IoT area
Considerable stock-related loss
Slump of the semiconductorbusiness

Most of these are caused by our internal issues, not external factors

If we are able to solve these issues, our businesscould be recovered
16

FY2018 Action: The year “Trial and Error”
Feb-18Mar-18Trial and Error・ Organizational reform (Introduction of BU
structure, including overseas operation)<Define our target corporate image and slogan>Apr-18May-18Jun-18=Penetrate the new system (organization,business process) and develop thecompetitive business base for the coming
years

For each business segment,

For business infrastructure,

Recognize the current
situation

Recognize the current
situation(e.g. technology, IT, HR, businessJul-18
Aug18

Identify root challenges

Define challenges

Develop business strategies

Develop functional
strategies

Sep-18Oct-18
Nov-18Dec-18Develop/ Announce the next (3-year) business plan
(Plan)

Jan-1917

Earlier business cycle by a shift to the business unit (BU) structure Establish the integrated support structure for all of the head officeand domestic and overseas offices and allocate necessary functions
for business (sales, sales promotion, technology and operation) to each BU
 Along with a shift to the business unit structure, develop new businessprocesses and expedite the operational and decision-making flows
Sales and Business Development

Strategic Sales & Marketing Div.

Business Operations Div.

Strategic Overseas Sales Div.

Strategic Technology Development Div.

Semiconductor & Device Div.
Bus iness Unit 1

BU2

BU…

ICT Div.1 / ICT Div.2
Bus iness Unit 1

BU2

IoT Div.
BU…

Bus iness Unit 1

BU2

BU…

Bra nchEa s tern Region
Wes tern Region

Bra nchBra nch

Sa l es

Sa l es

Sa l es

Sa l es
Promoti on

Sa l es
Promoti on

Sa l es
Promoti on

Technology

Technology

Sa l es Office

Bus iness Operation
Overs eas Subsidiaries

Overs eas

Bus iness Operation

Technology

Bus iness Operation

Overs eas18

Target corporate image / slogan

VisionWe aim to be a Solution Partner
delivering a lasting impression
for our interconnected smart-society.
[VALUE]New value that leaves an impression
on the “smart society” beyond thescope of trading companies[PRIDE]
Action Policy

VALUE and PRIDE

Partner who is proud of solution
providing beyond the scope of trading
companies

SloganConnect Everything.
With Technology. With Ideas.

The Underlying RYOYO SPIRIT

Change, Challenge, Speed19

To develop / announce the next-period business plan within this year

Framework of the next 3-year plan (Draft) Restructure the trading functions
 Take action for “Only RYOYO”
 Upgrade the business infrastructure(Specific business performance targets are being prepared and will
be included in the “next-period business plan”)
20

Take action for “Only Ryoyo” = Create our unique strengths
Explore new demands by introducing the new product (NVIDIA Jetson Xavier)[NVIDIA Jetson Xavier] High speed-processing and energy-efficient AI-based computer board (evaluation kit)

Compared to the conventional product (Jetson TX2)…
Operational capacity: 2,000%
Energy efficiency: 1,000%

Explore demands from various areas, including robots,
smart city, factory, agriculture and medical

21

Take action for “Only Ryoyo” = Create our unique strengths“Field & Mobile Innovation” which creates new values in an operational level
Reform operations of any type of industry (customer) with ICT / IoT resources

Integrated work order management
system between shops and HQ(Work Order Management System)

 WOMS: Interactive communication portal to achieve consistentand high-quality operation
Simplify and ensure various communications (e.g. ordering,
information sharing) between a HQ and shops
 In addition to the existing “on-premises’ version, release the“cloud” version which can be introduced more easily and ismore cost effective

It is gathering more and more interest from not only the drugstore industry where we have won order already,but also security service companies and mobile phone shops

Expecting it will become one of our core products within a few years
22Take action for “Only Ryoyo” = Create our unique strengths
Our own development work achieving high values:
Voice recognition, technology development and commercialization
We have developed the technology achieving highly precise voice recognition
on a real time basis and applied for the first patentFeatures of our proprietary voice recognition technology:• With our purpose-based AI technologies, demonstrate the highrecognition performance→ Development of new algorism by our own structure• With the stand-alone operation, maintain the high responsiveness→ Completion the recognition process in a local device, not depending on
network environments•With the strong noise killer chip, catch precise voice data
→ Collaboration with our existing partners



Current status:• Launched the technology in the market by offering to replace withremote controllers or touch panels

Next steps:• Develop upgrade versions which are compatible with shop operations

23

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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