August 4 2016

Summary of Consolidated Financial Results for the First Quarter of the Year Ending March 31, 2017

Company name:

SRA Holdings, Inc.
(URL: http://www.sra-hd.co.jp/)
Stock listing:Tokyo Stock Exchange
Code number:
3817
President:
Toru Kashima
For inquiries, please contact:
Toshiaki Kobayashi, General Manager, Finance Department, Administrative HeadquartersTel:(03)-5979-2666
Scheduled date of submission of quarterly securities report:
August 5, 2016―
Scheduled commencement of dividend payment:
Quarterly Results Supplemental Materials
Yes
Quarterly Results Presentation MeetingNo

1. Consolidated results for the first quarter of the fiscal year ending March 2017 (from April 1, 2016 to June30, 2016)(1) Consolidated Operating Results (cumulative total)(All amounts rounded down, % change YoY)
Profit attributable

Net Sales

Ordinary Profit

Operating Income

to owners of the parent

First quarter of fiscal
2016
First quarter of fiscal
2015

Millions of yen%

Millions of yen%

Millions of yen%

Millions of yen

%

9,325

7.9

801

46.0

531

(23.1)

328(19.1)

8,641

9.3

549

25.8

691

39.1

406

―

Note：Comprehensive Income
First quarter of fiscal 2016
First quarter of fiscal 2015

First quarter of fiscal
2016
First quarter of fiscal
2015¥(488) million(-%)¥443 million(-%)

Net Income

Net Income

per Shareper Share after Dilution

Yen

Yen

27.09

26.96

33.74

33.68

(2) Consolidated Financial Position

First quarter of fiscal
2016
Fiscal 2015

Total Assets

Net Assets

Shareholders’ Equity Ratio

Millions of yen

Millions of yen%

30,492

17,79358.2

31,823

18,81959.0

Reference: Shareholders’ equity
First quarter of fiscal 2016: ¥17,759 million
Fiscal 2015: ¥18,789million

12. Dividends
Dividend per Share

Fiscal 2015
Fiscal 2016

End of First QuarterEnd of Second QuarterEnd of Third Quarter

Year-end

Yen

Yen

Yen

Yen

Yen

―
―

25.00

―

45.00

70.00

30.00

―

55.00

85.00

Fiscal 2016(forecast)
Note: Revision of dividend forecast in this quarter:

For the YearNo

3. Consolidated Earnings Forecast for Fiscal 2016 (from April 1, 2016 to March 31, 2017)(% of change from FY2016 First Half or FY2016）

Net Sales

Operating Income

Ordinary Profit

Profit attributable

Net Income

to owners of the parent

per Share

Millions of yen%

Millions of yen%

Millions of yen%

Millions of yen%

Yen

FY2016 First Half
(for the six months ending
September 30, 2016)

18,320

1.5

1,742

13.2

1,834

9.8

1,186

22.8

7.79

FY201640,000

2.2

3,940

5.4

4,125

7.1

2,667

475.2

219.91

Note: Revision of consolidated results forecast in this quarter:No

4. Others(1) Changes to significant subsidiaries during the current period :No(2) Application of simplified accounting and application of special accounting :(3) Changes in accounting principles and procedures, presentation, etc.
1. Changes caused by revision of accounting standards, etc. :2. Changes other than 1. above:
No

No

Yes

(4) Number of shares outstanding (common stock)
1. Number of shares outstanding (including treasury stock)
First quarter of fiscal 2016:15,240,000 sharesFiscal 2015:15,240,000 shares
2. Number of treasury stock
First quarter of fiscal 2016:
3,110,555sharesFiscal 2015:
3,113,555shares
3. Average number of shares over period (consolidated total for quarter)
First quarter of fiscal 2016:
12,127,654 sharesFirst quarter of fiscal 2015:
12,034,555 shares*Indication of quarterly review procedure implementation status
This earnings release is not subject to the quarterly review process as required by the Financial Instruments and Exchange Act of Japan.
As of the date when this earning release was issued, the review process on quarterly financial statements as required by the Financial
Instruments and Exchange Act had been finished.

*Explanation relating to the appropriate use of results forecasts, and other noteworthy items
Forward-looking statements in this earnings release, such as forecasts of results of operations, are based on the information currently
available and the certain assumptions that we regard as reasonable and therefore actual results may differ materially from those containedin or suggested by any forward-looking statements.

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SRA Holdings, Inc. (3817) Summary of First-Quarter Consolidated Financial Results for the Year Ending March 31, 2017

1. Qualitative Information Concerning First-Quarter Consolidated Business Results(1) Explanation Concerning Business Results
During the first quarter of the fiscal year (April 1, 2016 to June 30, 2016), the Japanese economy continued amoderate recovery, as personal consumption remained generally unchanged, corporate earnings trended at a highlevel although improvements stagnated, and capital investment picked up.
In the information services industry, despite an increase in IT investments, mainly in manufacturing industries
and the banking industry, the environment for securing orders remained severe due to intensifying competition.
Within this business environment, the SRA Holdings Group formulated a Medium-Term Management Strategy
that covers the three-year period from fiscal 2016 through fiscal 2018 (from the fiscal year ending March 2016 to thefiscal year ending March 2018). Under this plan, we will seek to enhance corporate and shareholder value, promoteearnings structure reform and establish a high-income model, while working to further enhance shareholder returns.
Accordingly, we will implement the following measures under the Medium-Term Management Strategy. (For asummary of the Medium-Term Management Strategy, please refer to Announcement of Medium-Term Management
Strategy released on June 24, 2015 http://www.sra-hd.co.jp/Portals/0/ir/index-en.html).

1) Improving profitability in existing operations• Further raise the gross profit margin
We are working to raise profitability by enhancing and strengthening project management, continuously reduce
production overhead costs, carry out SRA’s proprietary IP product business and promote the appropriate level ofproduction staff.
• Improve SG&A expenses-to-sales ratio
We will strive to raise operation efficiency by introducing an account manager system while working to reduce
operational costs of Head Office staff departments and SRA Professional Service, Co., Ltd., which handles a sharedservice.
• Expand orders and sales
A priority measure will be to increase customer share of wallet by deeply cultivating existing customers, and in doing
so, we will work to expand orders and sales.
2) Transforming the SRA business model• We aim to target higher added value in existing operations through the utilization of proprietary IP products thatoffer high gross profit margins (expansion of recurring revenue-based operations, etc.).
• Software Research Associates, Inc. (SRA) will leverage its high technological capabilities and solid track record in
manufacturing/embedding development, cloud computing and open source software and will combine these areas topromote new business in the Internet of Things (IoT) field beginning with in-vehicle software.
3) Strengthening linkages between SRA’s proprietary IP product business and overseas operations• We raised SRA’s gross profit margin sharply by promoting proprietary IP product business in the Product Sales
business, which has a low gross profit margin compared with the Systems Development business and the System
Operations and Infrastructure Development business. “Qt,” which boasts an extensive track record in embedded and3

SRA Holdings, Inc. (3817) Summary of First-Quarter Consolidated Financial Results for the Year Ending March 31, 2017

mobile application building, recorded growth in both sales and profits. In the future, plans call for developing the Qt
business leveraging its technological capabilities and track record in the field of IoT, which is gaining a high degreeof attention.

• In April 2016, SRA concluded a business alliance and capital alliance with Tagit Pte. Ltd. (headquartered in
Singapore) to develop the mobile business, a promising field, targeting overseas growth markets beginning with Asia.
These alliances were also formed as part of efforts for strengthening links between SRA’s proprietary IP productbusiness and overseas operations. For detailed information, please refer tohttp://www.sra-hd.co.jp/Portals/0/ir/others/20150624.pdf (Japanese only).

Due to the above initiatives, our consolidated business results for the first quarter of the fiscal year were as
follows.
Sales of the Systems Development business, the System Operations and Infrastructure Development business andthe Product Sales business all increased. As a result, consolidated net sales amounted to ¥9,325 million, a 7.9%
increase from the same period of the previous fiscal year.
At the profit level, due to an increase in gross profit accompanying growth in sales and an improvement in the
profit margin, operating income rose 46.0% from the same period of the previous fiscal year to ¥801 million. However,

due to foreign exchange losses of ¥306 million, ordinary profit decreased 23.1% from the same period of the previous
fiscal year to ¥531 million and profit attributable to owners of the parent amounted to ¥328 million, a 19.1% decrease
from the same period of the previous fiscal year.
Consolidated results for the first quarter moved virtually in line with our forecast.
Regarding consolidated results for the first quarter, net sales, operating income and the operating income margin
reached all-time highs.

A summary of consolidated business results for the first quarter by business segment is shown below.
1) Systems Development
The Systems Development business recorded increases in sales to manufacturing industries and banks. As a result,net sales increased 10.1% from the previous fiscal year to ¥4,645 million.
2) System Operations and Infrastructure Development
Although university-related orders declined, there was an increase in orders from companies. As a result, net sales of
the System Operations and Infrastructure Development business increased 2.0% from the previous fiscal year to ¥983
million.
3) Product Sales
Although sales by SRA declined, Advanced Integration Technology, Inc. posted a sharp increase in device sales. As aresult, net sales of the Product Sales business rose 6.9% from the previous fiscal year to ¥3,697 million.

(2) Explanation Concerning Financial Condition
Total assets at the end of the first quarter amounted to ¥30,492 million, a decrease of 4.2% from the end of theprevious fiscal year. Total liabilities decreased 2.3% from the end of the previous fiscal year to ¥12,698 million and
4

SRA Holdings, Inc. (3817) Summary of First-Quarter Consolidated Financial Results for the Year Ending March 31, 2017

net assets decreased 5.5% to ¥17,793 million from the end of the previous fiscal year. Details of the principal
increases and decreases from the end of the previous fiscal year are as follows.
(Total Assets)
Work in process increased ¥352 million to ¥1,740 million due to such factors as a rise in contracted development projects
and long-term loans receivable increased ¥329 million to ¥2,267 million. On the other hand, notes and accounts
receivable—trade decreased ¥1,428 million to ¥5,455 million due to the collection of trade receivables. Investment
securities decreased ¥1,166 million to ¥4,579 million due to such factors as changes in market value.

(Total Liabilities)
Provision for bonuses increased ¥342 million to ¥902 million. On the other hand, income taxes payable decreased¥515 million to ¥264 million due to the payment of income taxes and accrued consumption taxes decreased ¥232
million to ¥274 million due to the payment of consumption taxes.
(Total Net Assets)
Valuation difference on available-for-sale securities decreased ¥751 million to ¥240 million due to changes in themarket prices of marketable and investment securities. Retained earnings decreased ¥217 million to ¥14,573 million
due to such factors as the payment of dividends.

(3) Explanation Concerning Consolidated Results Forecast and Other Future Projections
No revision has been made to forecasts in Summary of Consolidated Financial Results for the Year Ending March 31,2017 released on May 16, 2016.

2. Summary Information (Notes)(1) Significant changes involving subsidiaries during the period: None
(2) Application of simplified accounting methods and accounting methods specific to the preparation of the quarterly
consolidated financial statements: None
(3) Changes in accounting principles, changes in accounting estimates and restatements
Change in accounting policy(Application of Practical Solution for a Change in Depreciation Method Due to Tax Reform 2016)
Effective beginning in the first quarter of the fiscal year ending March 31, 2017, SRA has adopted the “Practical Solution
for a Change in Depreciation Method Due to Tax Reform 2016 (PITF No. 32 of June 17, 2016)” accompanying the revisionof the Corporation Tax Act. Accordingly, the Company changed its depreciation method for structures and facilities
attached to buildings acquired on and after April 1, 2016 from the declining-balance method to the straight-line method.
The impact of this change on first quarter consolidated financial results is minimal.

(4) Additional information(Adoption of Guidance on Recoverability of Deferred Tax Assets)
Effective from the first quarter of the fiscal year ending March 31, 2017, the Company has adopted the “Implementation
Guidance on Recoverability of Deferred Tax Assets (ASBJ Guidance No. 26 of March 28, 2016).”
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SRA Holdings, Inc. (3817) Summary of First-Quarter Consolidated Financial Results for the Year Ending March 31, 2017

3. Consolidated Financial Statements(1) Consolidated Balance Sheets(Millions of Yen)FY2015(as of March 31, 2016)

FY2016(as of June 30, 2016)

ASSETS
Current assets:
Cash and deposits

8,813

9,717

Notes and accounts receivable—trade

6,884

5,455

Short-term investment securities

509

3

Merchandise and finished goods

751

457

1,387

1,740

Short-term loans receivable

139

116

Accounts receivable—other

2,641

2,573

Deferred tax assets

569

636

Other

528

541

Allowance for doubtful accounts

(19)

(16)

22,204

21,225

Buildings

334

330

Accumulated depreciation

(251)

(246)

Buildings, net

82

83

Machinery, equipment and vehicles

555

557

Accumulated depreciation

(509)

(510)

Machinery, equipment and vehicles, net

46

47

Other

114

115

Accumulated depreciation

(83)

(78)

Other, net

31

37

Total property, plant and equipment

160

167

55

44

1,061

1,149

1,117

1,194

Investment securities

5,746

4,579

Long-term loans receivable

1,937

2,267

Deferred tax assets

1,005

1,337

Guarantee deposits

338

327

Net defined benefit asset

46

46

Other

565

531

Allowance for doubtful accounts(1,282)(1,171)

Allowance for investment loss

(16)

(15)

Work in process

Total current assets
Noncurrent assets:
Property, plant and equipment

Intangible assets
Goodwill
Other
Total intangible assets
Investments and other assets

6

SRA Holdings, Inc. (3817) Summary of First-Quarter Consolidated Financial Results for the Year Ending March 31, 2017

Total investments and other assets

8,341

7,904

Total noncurrent assets

9,619

9,266

Total assets

31,82330,492

7

SRA Holdings, Inc. (3817) Summary of First-Quarter Consolidated Financial Results for the Year Ending March 31, 2017

(Millions of Yen)FY2015(as of March 31, 2016)

FY2016(as of June 30, 2016)

LIABILITIESCurrent liabilities:
Accounts payable—trade

3,288

3,303

Short-term loans payable

1,179

1,179

Accrued expenses

811

720

Income taxes payable

779

264

Accrued consumption taxes

507

274

Provision for bonuses

559

902

Provision for directors’ bonuses

60

41

Provision for loss on construction contracts

415

433

5

–

Other

1,300

1,417

Total current liabilities

8,906

8,537

3,953

4,024

144

137

4,097

4,161

13,004

12,698

Capital stock

1,000

1,000

Capital surplus

4,524

4,526

Retained earnings

14,79014,573

Treasury stock(2,628)(2,625)

Total shareholders’ equity

17,686

17,474

Valuation difference on available-for-sale securities

992

240

Foreign currency translation adjustments

457

389

Remeasurements of defined benefit plans

(347)

(345)

Total accumulated other comprehensive income

1,102

285

30

33

Total net assets

18,81917,793

Total liabilities and net assets

31,82330,492

Asset retirement obligations

Noncurrent liabilities:

Net defined benefit liability
Provision for directors’ retirement benefits
Total noncurrent liabilities
Total liabilities
NET ASSETS
Shareholders’ equity

Accumulated other comprehensive income

Subscription rights to shares

8

SRA Holdings, Inc. (3817) Summary of First-Quarter Consolidated Financial Results for the Year Ending March 31, 2017(2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements of Comprehensive Income(Quarterly Consolidated Statements of Income)(Consolidated Cumulative Total for First Quarter)
Consolidated
cumulative total forfirst quarter of fiscal
2015 (from April 1,2015 to June 30, 2015)(Millions of Yen)
Consolidated
cumulative total forfirst quarter of fiscal
2016 (from April 1,2016 to June 30, 2016)

Net sales

8,641

9,325

Cost of sales

7,185

7,484

Gross profit

1,455

1,841

Selling, general and administrative expenses

906

1,039

Operating income

549

801

Interest received

59

28

Dividends received

18

12

Foreign exchange gains

52–

Guarantee commission received

6

–

Other

14

18

Total non-operating income

152

59

Interest expenses

68Foreign exchange losses–

306

Stock transfer agency service fee

3

2

Other

0

12

Total non-operating expenses

10

330

691

531

Gain on sales of investment securities–

0Gain on reversal of subscription rights to shares–

0

Loss on retirement of noncurrent assets

–

0

Other

–

0

Total extraordinary loss–

0

Income before income taxes

691

530

Income taxes-current

443

268

Income taxes-deferred

(158)

(66)

Total income taxes

285

202

Net income

406

328

Profit attributable to owners of the parent

406

328

Non-operating income

Non-operating expenses

Ordinary profit
Extraordinary income

Total extraordinary income
Extraordinary loss

9

SRA Holdings, Inc. (3817) Summary of First-Quarter Consolidated Financial Results for the Year Ending March 31, 2017

(Quarterly Consolidated Statements of Comprehensive Income)(Consolidated Cumulative Total for First Quarter)(Millions of Yen)
Consolidated

Consolidated

cumulative total for

cumulative total forfirst quarter of fiscal

first quarter of fiscal

2015 (from April 1,2016 (from April 1,2015 to June 30, 2015)2016 to June 30, 2016)

Net income

406

328

Other comprehensive income
Valuation difference on available-for-salesecurities
Foreign currency translation adjustments

63

(751)

(29)

(67)

Remeasurements of defined benefit plans, net of tax

2

2

Total other comprehensive income

37

(817)

443

(488)

443

(488)

－

－

Comprehensive income(breakdown)Comprehensive income attributable to owners of theparentComprehensive income attributable to non-controllinginterests

10

SRA Holdings, Inc. (3817) Summary of First-Quarter Consolidated Financial Results for the Year Ending March 31, 2017(3) Notes Concerning Consolidated Financial Statements for the First Quarter(Notes Concerning Premise of Going Concern)
None(Notes on Significant Changes in Shareholders’ Equity)
None(Segment Information and others)[Segment Information]
I. Consolidated cumulative total for first quarter of fiscal 2015 (from April 1, 2015 to June 30, 2015)
1. Information Concerning Net Sales and Income or Losses for each Reporting Segment(Millions of Yen)
AmountSystemOperations

Systems
Development

andInfrastructurerecorded on
Product

Total

Sales

Adjustment

the quarterly

amount*1

consolidated
statements ofDevelopment

income*2

Sales(1) Sales to
Customers(2) Intersegment
sales ortransfers
Total sales
Segment income

4,219

963

3,458

8,641

－

8,641

2

65

83

151

(151)

－

4,222

1,028

3,541

8,792

(151)

8,641

331

213

303

848

(298)

549

Notes:
1. The segment income adjustment of minus ¥298 million is a company-wide expense not apportioned to any reporting segment.
Company-wide expenses are general and administrative expenses and R&D expenses not attributed to any reporting segment.
2. Segment income is adjusted in operating income on the quarterly consolidated statements of income.

2. Information concerning impairment loss on fixed assets or goodwill for each reporting segment
None

11

SRA Holdings, Inc. (3817) Summary of First-Quarter Consolidated Financial Results for the Year Ending March 31, 2017

II. Consolidated cumulative total for first quarter of fiscal 2016 (from April 1, 2016 to June 30, 2016)
1. Information Concerning Net Sales and Income or Losses for each Reporting Segment(Millions of Yen)
AmountSystemOperations

Systems
Development

andInfrastructurerecorded on
Product

Adjustment

Total

Sales

amount*1

the quarterly
consolidated
statements ofDevelopment

income*2

Sales(1) Sales to
Customers(2) Intersegment
sales ortransfers
Total sales
Segment income

4,645

983

3,697

9,325

－

9,325

1

56

81

139

(139)

－

4,646

1,039

3,778

9,465

(139)

9,325

656

217

315

1,189

(387)

801

Notes:
1. The segment income adjustment of minus ¥387 million is a company-wide expense not apportioned to any reporting segment.
Company-wide expenses are general and administrative expenses and R&D expenses not attributed to any reporting segment.
2. Segment income is adjusted in operating income on the quarterly consolidated statements of income.

2. Information concerning impairment loss on fixed assets or goodwill for each reporting segment
None

12

SRA Holdings, Inc. (3817) Summary of First-Quarter Consolidated Financial Results for the Year Ending March 31, 2017

(Significant subsequent events)
The Board of Directors of Company subsidiary Software Research Associates, Inc. (hereafter SRA) convened on July 28,
2016 and resolved to conclude contracts for business and capital alliances with Hackett Enterprises Limited (headquarters:
Hong Kong; CEO: Ting Pang Wan Raymond; hereafter Hackett).

1. Purpose and overview of business alliance
Through the business alliance, SRA will utilize the SRA Group’s strength, namely its specialized business knowledge
and know-how in financial fields, to support Hackett’s business promotion.
Meanwhile, Hackett will proactively introduce the SRA Group’s products and services at companies under its corporate
umbrella as well as provide support when expanding sales in Hong Kong, China (particularly in China’s inland markets),and Taiwan.

2. Purpose and details of capital alliance
The capital alliance has two purposes: 1) raise the effectiveness of the business alliance between both companies andbuild even closer cooperative relations and a relationship of trust and 2) support Hackett’s growth and make a net
investment (stock acquisition) to obtain capital gains depending on the circumstances following Hackett’s stock listing.
SRA has invested ¥3.5 billion to acquire shares equivalent to 25% of Hackett’s total outstanding shares from Insight

Financial Group Limited, which is a major Hackett shareholder.
3. Schedule for the business alliance and capital alliance
July 28, 2016: SRA Board of Directors resolution
July 28, 2016: “Stock transfer contract” and “business alliance contract” concluded

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SRA Holdings, Inc. (3817) Summary of First-Quarter Consolidated Financial Results for the Year Ending March 31, 2017

4. Other Information
1. Status of Production, Orders and Sales
 Production amounts
Production by segment in the first quarter of the fiscal year ending March 31, 2017 is as follows.
Consolidated cumulative total for
Segment information by type of businessfirst quarter of fiscal 2016 (from% change YoY

April 1, 2016 to June 30, 2016)
Systems Development (Millions of Yen)
System Operations and Infrastructure
Development (Millions of Yen)
Total (Millions of Yen)

4,930

103.5

1,010

104.4

5,940

103.6

Notes:
1. Amounts are based on sales price.
2. The amounts above do not include consumption tax.
3. Intersegment transactions are offset.

 Purchase amounts
Purchases by segment in the first quarter of the fiscal year ending March 31, 2017 are as follows.
Consolidated cumulative total for
Segment information by type of businessfirst quarter of fiscal 2016 (from% change YoY

April 1, 2016 to June 30, 2016)
Product Sales (Millions of Yen)

2,162

98.7

Total (Millions of Yen)

2,162

98.7

Notes:
1. Amounts are based on purchase price.
2. The amounts above do not include consumption tax.
3. Intersegment transactions are offset.

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SRA Holdings, Inc. (3817) Summary of First-Quarter Consolidated Financial Results for the Year Ending March 31, 2017

 Status of orders
Status of orders by segment in the first quarter of the fiscal year ending March 31, 2017 is as follows.
OrdersSegment information by type of business

Order backlog

received% change YoY(Millions of% change YoY

Yen)

Yen)
Systems Development(Millions of

4,951

98.1

4,881

93.1

671

106.0

1,310

102.5

Product Sales

3,831

113.1

3,282

76.1

Total

9,454

104.2

9,474

87.5

System Operations and Infrastructure
Development

Notes:
1. Amounts are based on sales price.
2. The amounts above do not include consumption tax.
3. Intersegment transactions are offset.

 Sales amounts
Sales by segment in the first quarter of the fiscal year ending March 31, 2017 are as follows.
Consolidated cumulative total for
Segment information by type of businessfirst quarter of fiscal 2016 (from% change YoY

April 1, 2016 to June 30, 2016)
Systems Development (Millions of Yen)

4,645

110.1

983

102.0

Product Sales (Millions of Yen)

3,697

116.9

Total (Millions of Yen)

9,325

107.9

System Operations and Infrastructure
Development (Millions of Yen)

Notes:
1. Amounts are based on sales price.
2. The amounts above do not include consumption tax.
3. Intersegment transactions are offset.

15