COMPANY RESEARCH AND ANALYSIS REPORT

System Support Inc.
4396
Tokyo Stock Exchange Prime Market Index

14-Oct.-2022
FISCO Ltd. Analyst

Yuzuru SatoFISCO Ltd.
https://www.fisco.co.jp

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange Prime Market Index

14-Oct.-2022
https://www.sts-inc.co.jp/index_e.html■ Index■Summary---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 01
1. Outline of results for FY6/22........................................................................................................................

01

2. Growth strategy...........................................................................................................................................

02

3. FY6/23 forecasts. . .................................. ......................................................................................................

02■Company profile---------------------------------------------------------------------------------------------------------------------------------------------------------- 03
1. History................................................... ......................................................................................................

03

2. Business description. . ..................................................................................................................................

05■Results trends--------------------------------------------------------------------------------------------------------------------------------------------------------------- 10
1. Outline of results for FY6/22........................................................................................................................

10

2. Trends by business segment. . ......................................................................................................................

11

3. Financial condition and business indicators.................................................................................................

15■Outlook-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- 16
1. Medium-term management plan............ ......................................................................................................

16

2. Outlook for FY6/23.. .....................................................................................................................................

20■Shareholder return policy---------------------------------------------------------------------------------------------------------------------------------- 21

We encourage readers to review our complete legal statement on “Disclaimer” page.

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange Prime Market Index

14-Oct.-2022
https://www.sts-inc.co.jp/index_e.html■ Summary
Aiming for double-digit profit growth led by cloud integration
System Support Inc. <4396> (hereinafter, “the Company”) is an independent IT company that is continuously
delivering growth centered on the Solutions Business, which includes deployment and support for the use of cloudsystems, ERP and databases, etc., based on technological capabilities at the highest level of the industry. The
Company is headquartered in Ishikawa Prefecture, Japan. However, Tokyo, Nagoya, and Osaka are the primaryhubs of the Company’s business activities. Also, the Company has a subsidiary in Silicon Valley in the US. Beyond
the Solutions Business, the Company conducts recurring-revenue businesses such as the Outsourcing Business,
which revolves around data center management, and the Product Business, which is mainly focused on providing
cloud (SaaS) services.
1. Outline of results for FY6/22
In FY6/22, the Company set consecutive record highs for consolidated results, with net sales rising 12.2% YoY(year-on-year) to ¥16,198mn and operating profit increasing 28.5% YoY to ¥1,196mn. All businesses performed
well, the Solutions Business in particular, against the backdrop of robust investment by companies in DX. Profit
was driven by sales of high-profit-margin ServiceNow*-related services, which increased by 30.6% YoY, and salesof cloud infrastructure migration and usage support, which increased by 26.7% YoY, as high growth continued.
*	“ServiceNow” is a cloud platform that standardizes and automates business processes and supports improved productivity
by employees and organizations. It is provided by ServiceNow, Inc. of the US. Over the past few years, it has started to
rapidly become widely used as a DX solution not only in the US and Europe, but also in Japan. The Company was one of
the first Japanese companies to enter into a partner agreement with ServiceNow in 2015, and has a top-tier track record
for deploying the service in Japan.

We encourage readers to review our complete legal statement on “Disclaimer” page.

01 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange Prime Market Index

14-Oct.-2022
https://www.sts-inc.co.jp/index_e.html

Summary

2. Growth strategy
The Company announced a three-year medium-term management plan that will begin in FY6/23. Its main theme isstated as “growth and creating further innovation.” Under the plan, the Company will enhance foundational services
for DX promotion by customers and society, promote the growth and active participation of diverse human resources,
and strengthen ESG management. For FY6/25, it is targeting net sales of ¥21.89bn or higher, operating profit of¥2.18bn or higher, and an operating margin of ¥10% or higher. In terms of average annual growth over three years,
the Company is projecting growth in net sales to exceed 10.6% and growth in operating profit to exceed 22.3%.
Driving this will be the Cloud Integration Business. With the domestic cloud market to continue growing by double
digits going forward, along with its existing cloud integration services, the Company will take up promising solutions
where future growth is expected in order to secure an annual growth rate of 25% for the business, expanding it
at a pace beyond the industry average. One solution the Company has recently become involved in is the Celonis
Execution Management System (“Celonis EMS”), an execution management platform provided by Celonis SE ofGermany, the global leader in process mining. The Company began handling the platform in March 2022 and isalready receiving orders. The platform also links with ServiceNow, which the Company has ample experience
implementing, so it is possible that sales will be increased relatively smoothly. Trends going forward will be watched.
The Company also plans to steadily increase earnings from the System Integration Business, Outsourcing Business,
Product Business and other areas. The Company further intends to continue investing in human resources, a sourceof growth, and plans to increase employees at a pace of almost 9% per year. In the IT industry, there are somecompanies for which human resources become a bottleneck preventing sales growth, but the Company has beenable to steadily hire both new graduates and mid-career professionals, and its attrition rate is low at around 5%, sothis risk is thought to be extremely small. Regarding its policy on shareholder returns, the Company plans to pay
dividends with a payout ratio at the 30-35% level.
3. FY6/23 forecasts
For FY6/23, the Company is forecasting net sales to increase 11.7% YoY to ¥18,093mn and operating profit toincrease 21.7% to ¥1,456mn. Though the economic outlook is growing increasingly unclear, DX investment in thecorporate sector remains rampant, and the Company’s orders received continue to be strong, centering on the Cloud
Integration Business. The Product Business and Outsourcing Business, which are recurring-revenue businesses, arealso projected to grow steadily, and we at FISCO believe that there is a strong likelihood the Company will achieve
its forecasts for FY6/23 results as well.
Key Points
FY6/22 results set consecutive record highs on the strong performance of mainly the Solutions Business
Under its medium-term management plan starting in FY6/23, the Company is targeting annual growth inoperating profit of 22.3% or higher, which will be driven by the Cloud Integration Business• Cloud-related demand remains rampant, and both sales and profit are forecast to continue double-digit growth••

We encourage readers to review our complete legal statement on “Disclaimer” page.

02 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.

14-Oct.-2022

4396 Tokyo Stock Exchange Prime Market Index

https://www.sts-inc.co.jp/index_e.html

Summary

Results trends
Net sales (left)

Operating profit (right)

(¥mn)

(¥mn)

20,00018,0932,000

16,19816,00013,376
12,0001,600

14,431

11,762

1,456

1,200

1,196
8,000

800

931
754

4,000

400

529

0

0
FY6/19FY6/20FY6/21

FY6/22

FY6/23 Ｅ

Source: Prepared by FISCO from the Company’s financial results■ Company profile
An independent IT company that continues to grow by undertaking
many projects involving Microsoft Azure, AWS, ServiceNow, SAP
and Oracle
1. History
The Company was founded in 1980 in Kanazawa, Ishikawa Prefecture to provide data entry services and systemdevelopment services. In the 1980s, business performance continued to grow steadily against the backdrop offavorable economic conditions. However, business results started to deteriorate following the collapse of Japan’s
bubble economy in the 1990s, putting the Company’s survival at risk. In 1994, management was transferred fromthe Company’s founder to the current Representative Director Ryoji Koshimizu. Under Mr. Koshimizu’s leadership,
the Company worked to rationalize management. As a result, four years later, its business results had recovered
to the point where profitability was restored. Subsequently, the Company developed its technological capabilities,
which are said to be at the highest level of the industry for an independent enterprise, into a core strength, and has
continuously increased its business performance by using the expansion of the domestic cloud market as a tailwind.
Looking at business expansion initiatives since 2000, the Company founded eNet Solutions Co., Ltd., a subsidiarythat conducts data center services, in 2000. In 2004, the Company entered into an Oracle EBS Technical Partner
contract with Oracle Corporation Japan <4716>. With this contract, the Company would go on to proactively
undertake system integration and deployment projects for Oracle products. In addition, the Company launched theProduct Business to sell internally developed software products as a new income-generating business following
systems development and data center services. As its first such product, the Company commenced sales of Tate
Yakusha, a construction work information management system, in 2005.

We encourage readers to review our complete legal statement on “Disclaimer” page.

03 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange Prime Market Index

14-Oct.-2022
https://www.sts-inc.co.jp/index_e.html

Company profile

Moreover, in 2009, the Company founded STS Medic Inc., a subsidiary engaged in the development and sales of
specialized software for the medical industry. Thereafter, the Company built a solid business foundation by making
use of M&As. For example, T4C Co., Ltd., a service partner of the major ERP provider SAP, and ACROSS Solutions,Inc., which had been providing system solutions to the distribution industry, were successively converted into subsidiaries of the Company in 2010 and 2012, respectively. The Company has also entered overseas markets. Notably,in 2013, the Company established a subsidiary in the US for the purpose of gathering information and supplying IT
services in the country. Additionally, in 2016, it set up a subsidiary in Canada to provide outsourcing services (suchas accounting services) to Japanese companies in North America. More recently, B-ROCK, Inc., which provides
online marketing services, was made a subsidiary of ACROSS Solutions in April 2022 and was then absorbed by
it in July 2022. The Company was listed on the Tokyo Stock Exchange Mothers Market in August 2018 and waselevated to the Tokyo Stock Exchange First Section one year later in August 2019. The Company has since beentransferred to the Prime Market in conjunction with the TSE’s reorganization of its market segments in April 2022.
History
Date
January 1980
November 2000

Major event
Founded in Kanazawa, Ishikawa Prefecture, providing data entry and system development services.
Financed and founded eNet Solutions Co., Ltd.

January 2004

Entered into an Oracle EBS Technical Partner contract with Oracle Corporation Japan <4716>

February 2005

Commenced sales of “Tate Yakusha,” a construction work information management system

March 2009

Financed and founded STS Medic Inc.

May 2010

Acquired shares of T4C Co., Ltd. and made it a subsidiary

June 2011

Entered into an SAP Service Partner contract with SAP Japan Co., Ltd.

March 2012

Acquired shares of ACROSS Solutions, Inc. and made it a subsidiary

April 2012

Began providing services for Cloud Koubou powered by Amazon Web Services, a cloud support service

July 2013

Financed and founded STS Innovation, Inc. in the United States

August 2013

Began providing services for PinMap, a customer data mapping service

October 2013

Entered into an APN Consulting Partner contract with Amazon Japan K.K.

March 2015
September 2015

Acquired additional shares of T4C Co., Ltd. and ACROSS Solutions, Inc. and made them wholly owned subsidiaries
STS Innovation financed and founded FrontLine International, Inc. in the United States (absorbed through a merger in April 2017)
Entered into a PartnerNow Master Terms with ServiceNow Nederland B.V.

January 2016

Financed and founded STS Innovation Canada, Inc. in Canada

February 2016

Commenced sales of the cloud-based shift management system “SHIFTEE”

August 2018

Listed on the Tokyo Stock Exchange Mothers Market

August 2018

Commenced sales of the attendance/work management system “Shugyo Yakusha”

August 2019

Listed market changed to the Tokyo Stock Exchange First Section

April 2020
January 2021

Entered into a Google Cloud & Google for Education Commercial Partner Program Agreement with Google Cloud Japan G.K.
Entered into a Subcontractor Agreement with Automation Anywhere, Inc.

June 2021

Commenced provision of ADDPLAT, a next-generation data analysis platform

March 2022

Entered into a Celonis Partner Program Agreement with CELONIS K.K.

April 2022

Listed market changed to the Tokyo Stock Exchange Prime Market
ACROSS Solutions, Inc. acquired all shares in B-ROCK, Inc. and made it a subsidiary (absorbed in July 2022)

Source: Prepared by FISCO from the Company’s website and securities reports

We encourage readers to review our complete legal statement on “Disclaimer” page.

04 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.

14-Oct.-2022

4396 Tokyo Stock Exchange Prime Market Index

https://www.sts-inc.co.jp/index_e.html

Company profile

Focusing on the Solutions Business as the mainstay business, while
expanding into the Outsourcing Business and Product Business,
which will be recurring-revenue businesses
2. Business description
The System Support Group comprises the Company and its six consolidated subsidiaries. The Group discloses
information based on three segments, specifically the Solutions Business, Outsourcing Business and ProductBusiness (Segment names have been changed from FY6/23 onward; details to follow). Looking at the ratio of sales
in each segment over the past five years, the composition has been generally stable with the Solutions Businessaccounting for between 80%-89% of sales, the Outsourcing business 10%-19%, and the Product Business around
4%. During this period, overall net sales have grown by roughly 1.6 times, indicating well-balanced growth among
the three business segments.
Looking at the profit margin (gross profit margin) for each segment, the mainstay Solutions Business and theOutsourcing Business have steadily remained in the low 20% range and the low 30% range, respectively, while theProduct Business has had relatively high gross profit margins roughly between 55%-59%. Among these, the stabilityof the Solutions Business is what is receiving attention. In the system development industry, many companies areexperiencing unstable profitability due to projects being drawn out or defects emerging, but the Company has beenable to maintain a certain level of profitability. This is proof that the Company possesses strong technological andproject management capabilities, and we at FISCO view these as the Company’s strengths.

Composition of net sales by business segment
Solutions BusinessOutsourcing Business

Product Business

Others
0.2%
4.1%
11.7%

100%

0.4%
3.3%

0.4%
4.1%

0.2%
4.1%

90%

13.5%

13.0%

12.5%

0.2%
3.8%
12.3%

82.8%

82.5%

83.2%

83.6%

84.0%

FY6/18

FY6/19FY6/20FY6/21

FY6/22

80%
70%

60%
50%
40%
30%
20%
10%
0%
Note: Percentages are calculated using pre-adjusted figures
Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

05 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.

14-Oct.-2022

4396 Tokyo Stock Exchange Prime Market Index

https://www.sts-inc.co.jp/index_e.html

Company profile

Gross profit margin by business segment
Solutions BusinessOutsourcing Business

Product Business

70%
57.3%

60%

59.6%

55.0%
53.2%

50%

43.7%

40%

31.9%

32.3%

30.0%

31.4%

30.7%

23.1%

22.3%

23.5%

24.1%

24.8%

FY6/18

FY6/19FY6/20FY6/21

FY6/22

30%
20%
10%
0%
Source: Prepared by FISCO from the Company’s financial results(1) Business description for each business segmenta) Solutions BusinessIn the Solutions Business, as an independent IT company, the Company provides technological support related
to usage and deployment of cloud services and ERP packages and building databases and other infrastructure,
centered on consulting, design, development, and operation and maintenance of IT systems for client companies.
Its strengths lie in its wide range of customers across all manner of business sectors and operations, and its ability
to support a complete spectrum of development processes on a one-stop basis.
In terms of the sales composition for FY6/22, ERP-related services (mainly SAP construction, introduction andusage support) represented 21.3%, database-related services (design, construction, and maintenance andoperation of Oracle databases) were 14.2%, cloud infrastructure -related services (deployment and usage support
for cloud services such as Microsoft Azure, AWS, and Google Cloud) were 12.9%, ServiceNow-related services
11.2%, and other IT system-related services (contract development) 40.4%. Against the backdrop of growth in
the cloud services market, cloud infrastructure-related and ServiceNow-related services have continued to growrapidly over the past few years. The sales composition of both fields combined increased from 10.4% in FY6/18
to 24.1% in FY6/22.

We encourage readers to review our complete legal statement on “Disclaimer” page.

06 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.

14-Oct.-2022

4396 Tokyo Stock Exchange Prime Market Index

https://www.sts-inc.co.jp/index_e.html

Company profile

Sales composition of the Solutions BusinessIT system development
Database-related services
ServiceNow-related services
100.0%
90.0%
80.0%

ERP-related services
Cloud infrastructure-related services

2.3%
8.1%
16.7%

3.9%
10.2%

6.4%
10.8%

17.0%

13.9%

28.1%

21.6%

22.7%

11.2%

11.5%

12.9%

14.3%

70.0%
60.0%

9.7%

50.0%

14.2%

21.6%

21.3%

40.0%
30.0%
20.0%

44.7%

46.2%

47.2%

42.9%

40.4%

FY6/18

FY6/19FY6/20FY6/21

FY6/2210.0%
0.0%
Source: Prepared by FISCO from the Company’s supplemental results briefing materials

Direct transactions with end customers represented 67.4% of net sales in FY6/21, with the remainder comprising
net sales from subcontracted projects received via major SI vendors and other partners. Projects undertaken
through direct transactions with end customers have relatively high profit margins and tend to create closer
relationships with customers. Meanwhile, subcontracted projects primarily involve large-scale projects, such assystems for financial institutions and ERP development. Profitability is lower than direct transactions with end
customers, but these large projects contribute to sales over a long period of time, so they are positioned as astable business for maintaining engineer utilization rates at fixed levels. The Company’s repeat rate is high at
74.4%.

Ratio of direct transactions and repeat rate
Ratio of direct transactions

Customer repeat rate

100.0%
77.9%

76.6%

71.5%

75.0%

50.0%

62.9%

60.9%

64.6%

FY6/18

FY6/19FY6/20

74.4%

67.4%

25.0%

0.0%
FY6/21

Note: Repeat rate (among the customers from whom net sales were recognized in the previous period, the ratio of thenumber of customers from whom net sales were also recognized in the current period)
Source: Prepared by FISCO from the Company’s securities reports

We encourage readers to review our complete legal statement on “Disclaimer” page.

07 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange Prime Market Index

14-Oct.-2022
https://www.sts-inc.co.jp/index_e.html

Company profile

Moreover, one of the features of the Company is that it is a group of technology professionals, with engineers
representing more than 80% of personnel in the Solutions Business. This personnel mix is in place because a large
number of customer-referred projects for those related to cloud, databases, etc. come from Microsoft Azure, AWS,
ServiceNow, Oracle and other platforms, and it is becoming critical to have an abundance of certified engineers on
staff and a development track record of projects with high customer satisfaction in each area in order to receive
these projects. For this reason, the Company is focused on developing certified engineers and, as a result of these
initiatives, has received many awards from Microsoft Azure, AWS, Oracle and other platforms.
Track record of main certifications and awards
Microsoft Azure

AWS• Obtained Gold Cloud Platform Competency Certification
Certified as a partner with an outstanding track record in expanding Microsoft
Azure• Obtained Advanced Specialization*1
Obtained certification as a partner with sophisticated expertise in specificsolution fields• Received five consecutive MVP awards
Received consecutive awards in the data platform field since 2017*2• Obtained Oracle Competency in the AWS Competency Program*3• Received the APN Partner Award “Rising Star of the Year” (FY2014)
Oracle• Received Oracle Database-related awards for 14 consecutive years*4
Received Oracle Certification Award 2020 and other awards from Oracle
Corporation Japan*1 Obtained in the field of migrating Windows Servers and SQL Servers to Microsoft Azure.
*2 Award received by the Company’s employees.
*3 A program to identify, validate, and promote Advanced and Premier tier partners in the AWS Partner Network (APN) that have demonstrated technical expertiseand proven customer success pertaining to AWS.
*4 Awards received from 2007 to 2020.
Source: Prepared by FISCO from the Company’s supplemental results briefing materialsb) Outsourcing BusinessIn the Outsourcing Business, data centers managed by subsidiary eNet Solutions Co., Ltd. at three locations inJapan (Tokyo and Kanazawa) account for around 70% of net sales from management services. These services areused as infrastructure for the private clouds of companies and for BCP measures and data backup management.
Also, in 2006, as a value-added service that acts as a hook for acquiring data center customers, the Company
began providing Safetylink24, an emergency notification and safety confirmation service that automatically
distributes safety confirmation messages for employees linked to earthquake information. In 2010, the Company
began offering ActionPassport, an electronic work flow system, and in 2017, the Company began providing Magic
Insight, a service that allows customers to easily use IBM Japan, Ltd.’s IBM Watson Explorer (an AI-driven search
and analysis platform) with a monthly charge plan. The data center management business is characterized by arevenue structure in which monthly sales increase as contracted data increases, but when capacity is augmented,
depreciation expense increases, and this can temporarily affect profits. As of June 2022, the number of customers
using the Company’s data centers amounted to approximately 1,000 companies.
The Company also has other sources of sales, including training for client companies pertaining to systems that
the Company was involved in developing in the Solutions Business and operation and maintenance of help desk
services, along with data analysis and entry services.
c) Product BusinessIn the Product Business, the Group is engaged in the development and sales of products (software) and the supplyof services. It also customizes products according to customer needs. Many products are sold through direct
sales to customers (Tate Yakusha is often sold through the OEM channel), but sales agencies are also used. The
Product Business’s current main products are Tate Yakusha for the construction industry and the MOS mobile
order receipt and placement system for the wholesale and retail sectors, both of which account for around 30%of net sales. While the Company does receive orders for large custom development projects from time to time,the majority of sales in the Product Business are generated through monthly fees from cloud (SaaS) services.
Therefore, this business has a recurring-revenue business model where revenue increases in line with growth in
the number of subscribers.
We encourage readers to review our complete legal statement on “Disclaimer” page.

08 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.

14-Oct.-2022

4396 Tokyo Stock Exchange Prime Market Index

https://www.sts-inc.co.jp/index_e.html

Company profile

Outline of major products
Name

ProviderDescription

Number ofsubscribing
companies*

Tate Yakusha

System Support Inc.

A construction work information management system. The monthly charge for the
standard version is ¥40,000 per 5 licenses (initial cost: ¥350,000). The premium version
is offered at a monthly charge of ¥80,000 per 5 licenses (initial cost: ¥580,000).

688

MOS

ACROSS Solutions, Inc.

A mobile order receipt and placement system. For the full version, the initial cost starts
at ¥350,000, options at ¥100,000, and the monthly charge at ¥20,000 (with actual
figures depending on the number of accounts needed by the party placing the order).

597

SHIFTEE

System Support Inc.

A cloud-based shift management system. The monthly charge for the light version is¥200 per user (separate charges apply for customization).

98

ShugyoYakusha

System Support Inc.

An attendance/work management system. The monthly charge for the cloud version is¥200 per user (separate charges apply for the on-premise version).

122* As of June 30, 2022, on a cumulative basis
Source: Prepared by FISCO from the Company’s website and supplemental results briefing materials(2) Group companies and the number of employees
The Company’s subsidiaries specialize in different functions and business sectors so that they can constantly
provide new solutions to customers with proactivity and speed in each company’s specialty area. The online
marketing services business of B-ROCK, which was made a subsidiary of ACROSS Solutions in April 2022 (andsubsequently absorbed by it) has been incorporated into the Solutions Business.
*	In FY9/21, B-ROCK recorded net sales of ¥230mn and operating profit of ¥50mn.

The number of employees was 1,233 on a consolidated basis at the end of June 2022, an increase of 107 people
YoY. Engineers account for 84% of employees. By region, 52% of employees are in the Tokyo metropolitan area,
20% in the Hokuriku region, 14% in Kansai, 12% in Tokai, and 0.8% overseas.
Description of main businesses and number of employees of Group companies
Name of company

System Support Inc.

eNet Solutions Co., Ltd.
T4C Co., Ltd.
STS Medic Inc.

Solutions Business

Product Business

System development,
infrastructure construction
support, cloud service
deployment support

System operation andmaintenance, data entry services

Development and sales of Tate
Yakusha, a construction work
information management system,and other products

Deployment of various solutions

Data centers and related platform services

ERP product deployment
consulting--

Sale and installation of medical
devices and other items-

Sales and deployment support
for T-File, a medical image filingsystem

11

Web marketing services-

Development and sale of
MOS mobile order receipt andplacement system

23

ACROSS Solutions, Inc.
STS Innovation, Inc.
STS Innovation Canada Inc.

Number of
employees

Outsourcing Business-Outsourcing service formanagement operations--

Outsourcing service formanagement operations

-

943

64
76

6
3

* The number of employees is as of June 30, 2021. Other businesses (overseas information provision service, overseas media business, staff referralbusiness, etc.) are conducted by STS Innovation, Inc.
Source: Prepared by FISCO from the Company’s securities reports

We encourage readers to review our complete legal statement on “Disclaimer” page.

09 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.

14-Oct.-2022

4396 Tokyo Stock Exchange Prime Market Index

https://www.sts-inc.co.jp/index_e.html

Company profile

Trend in the number of consolidated employees(people)Total

Engineers

Sales and administration, etc.

1,400

1,233
1,126

1,200

1,039

956

1,000
810

194
177

163

869

157

800
600
400

799

1,039

876

949

FY6/20FY6/21

200
0
FY6/17

FY6/18

FY6/19FY6/22

Source: Prepared by FISCO from the Company’s supplemental results briefing materials■ Results trends
In FY6/22, the Company performed well, mainly in Solutions
Business, and set a new record high for results
1. Outline of results for FY6/22
In FY6/22 consolidated results, net sales increased 12.2% YoY to ¥16,198mn, operating profit rose 28.5% to¥1,196mn, ordinary profit was up 24.7% to ¥1,190mn and profit attributable to owners of parent was up 16.5%
to ¥785mn. All these results surpassed the Company’s initial forecasts, and the Company set a consecutive newrecord high.
Consolidated results for FY6/22(¥mn)
FY6/21Results

FY6/22% of net
sales

Company
forecast

Results% of net
sales

Achievement
rate

YoY

Net sales

14,431-

15,962

16,198

-

12.2%

1.5%

Cost of sales

10,68874.1%-

11,861

73.2%

11.0%

-

SG&A expenses

2,811

19.5%

-

3,140

19.4%

11.7%

-

Operating profit

931

6.5%

1,080

1,196

7.4%

28.5%

10.8%

Ordinary profit

954

6.6%

1,066

1,190

7.3%

24.7%

11.7%

Extraordinary gains (losses)

-24

-

-

-14

-

-

-

Profit attributable to owners of parent

674

4.7%

745

785

4.9%

16.5%

5.5%

Source: Prepared by FISCO from the Company’s financial results

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10 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange Prime Market Index

14-Oct.-2022
https://www.sts-inc.co.jp/index_e.html

Results trends

This was mainly attributable to the continued high growth of the Solutions Business centering on cloud-related
services. With the continued spread of COVID-19, corporate DX investment was rampant, and there were increases
in IT system cloud migration projects and ServiceNow installations, which have a high profit margin. Sales andprofits increased in the Outsourcing Business and Product Business as well. The cost-of-sales ratio declined by
0.9 percentage points YoY to 73.2% as a result of the continued high growth of ServiceNow, whose profit margin
is high even within the Solutions Business, and the increase in sales in the Products Business. SG&A expenses
increased by 11.7% YoY primarily due to increases in personnel, recruiting, education and other costs, but the
SG&A expenses ratio declined by 0.1 percentage points to 19.4%, and, as a result, the operating margin rose 0.9
percentage points to 7.4%, a record high level.

ServiceNow and cloud infrastructure-related services continue
double-digit sales growth
2. Trends by business segment(1) Solutions BusinessNet sales from the Solutions Business increased 12.8% YoY to ¥13,609mn, and segment profit rose 16.2% YoY to¥3,376mn. The profit margin increased 0.7 percentage points YoY to 24.8%. There were strong performances from
ServiceNow-related services, for which demand is increasing as a DX support solution that raises the efficiency
of system maintenance and operations, and in the area of information system cloud infrastructure migration andusage support. The higher profit margin was largely from the increased proportion of ServiceNow-related services
within the sales mix, along with the increase in sales.

Performance trends in the Solutions BusinessNet sales (left)

Segment profit (left)

Profit margin (right)（¥mn）

13,60914,00011,12412,00035.0%

12,06630.0%

9,705
10,000
8,000

25.0%
22.3%

23.5%

24.1%

24.8%
20.0%

6,000

15.0%

3,376

4,000

2,162

2,613

2,905

2,000

10.0%
5.0%

0

0.0%

FY6/19FY6/20FY6/21

FY6/22

Source: Prepared by FISCO from the Company’s supplemental results briefing materials

Looking at net sales by sector, ServiceNow-related services increased 30.6% YoY to ¥1,527mn, cloud infrastructure-related services increased ¥26.7% to ¥1,758mn, ERP-related services rose 11.2% to ¥2,895mn,
database-related services climbed 11.6% to ¥1,929mn, and IT system development increased 6.2% to ¥5,498mn,
as there was sales growth in all areas.

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11 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.

14-Oct.-2022

4396 Tokyo Stock Exchange Prime Market Index

https://www.sts-inc.co.jp/index_e.html

Results trends

Sales by Sector in the Solutions Business（¥mn）

IT system development
Database-related services
ServiceNow-related services

ERP-related services
Cloud infrastructure-related services
13,60914,00012,066

9,705
10,000

8,000
6,000

1,527

11,12412,000
8,254
669
1,380

193

988

377

711
1,206

1,169

1,758

1,387

1,547

1,728

2,404

2,604

1,929

1,652

2,895

2,199

2,322

4,000
2,000

4,487

5,255

5,175

5,498

3,688
FY6/18

FY6/19FY6/20FY6/21

FY6/220
Source: Prepared by FISCO from the Company’s supplemental results briefing materials

Regarding ServiceNow-related services, training engineers and expanding outside partnerships in order to meet
rampant demand is fueling high growth. According to documents released by ServiceNow Japan, the numberof ServiceNow development certifications obtained has risen approximately three times over two years, from 60
in November 2020 to 109 in September 2021 to 176 most recently at the end of June 2022, as the Company
has maintained its No. 2 spot in the industry*. More companies are entering the market as it expands, but theCompany can be expected to maintain a top market share as an Elite Partner of the highest rank. Previously, amajority of the Company’s customers were in Tokyo and Osaka, but, recently, orders have been increasing in the
Nagoya and Ishikawa areas as well, and demand continues to outstrip capacity.
*	Covers Certified Implementation Specialist / Certified Application Developer / Certified Application Specialist. Accenture
Japan Ltd. was ranked first place with 186 projects.

Number of ServiceNow development certifications obtained
System support (left)

Japan overall (right)(Cases)(Cases)

200

176
1,685

150

109
1,210

100

2,000

1,500

1,000

60
50

500
512

0

0
November 2020

September 2021

End of June 2022

Source: Prepared by FISCO from the Company’s materials

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12 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange Prime Market Index

14-Oct.-2022
https://www.sts-inc.co.jp/index_e.html

Results trends

In cloud infrastructure-related services, along with migration projects involving Microsoft Azure, AWS and Oracle
Cloud, Google Cloud related services, which the Company began in April 2020, also steadily generated results andcontributed to the sales increase. With technical database capabilities cultivated over many years as its strength,
the Company received numerous orders for projects related to use of cloud-based databases and data analysis
platforms. In addition, resale sales in particular increased by 30.7% to ¥1,010mn. “Resale” refers to cloud service
usage fees from customer accounts. The resale business has a low profit margin, but it provides a stable sourceof revenue as long as contracts are not cancelled.
In addition, in ERP-related services, in anticipation of SAP terminating maintenance support for existing products(in 2027), companies with these products are continuing to migrate from them to SAP S/4 HANA, and sales
are steadily increasing. Regarding the ERP field, the Company has built a maintenance system in the Hokuriku
region capable of nearshore support, and the fact that the Company is able to accommodate, on its own, theentire process from ERP consulting to development, infrastructure building and maintenance services has beena factor behind the sales growth.
(2) Outsourcing BusinessNet sales from the Outsourcing Business increased 6.1% YoY to ¥1,889mn, and segment profit rose 3.7% to¥579mn, as both sales and profits continued to increase. Sales from data center services, including AI-related
services, steadily increased. A key factor is companies increasingly using the Company’s data center located in
Kanazawa, which has few earthquakes, as a part of their BCP measures. The profit margin dropped slightly from
31.4% the previous term to 30.7%, but this is attributable to the Company having invested to augment servers inorder to expand capacity at data centers against a backdrop of strong orders. Recurring monthly revenue fromdata centers has steadily risen and has recently topped the ¥100mn level.

Performance trend in the Outsourcing BusinessNet sales (left)

Segment profit (left)

Profit margin (right)

（¥mn）
2,500

50.0%
1,889

2,000

1,529
1,500

32.3%

40.0%

1,780

1,671

31.4%

30.0%

30.0%
30.7%

1,000

20.0%
493

501

558

579

500

10.0%

0

0.0%
FY6/19FY6/20FY6/21

FY6/22

Source: Prepared by FISCO from the Company’s supplemental results briefing materials

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13 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange Prime Market Index

14-Oct.-2022
https://www.sts-inc.co.jp/index_e.html

Results trends(3) Product BusinessIn the Product Business, net sales increased 20.8% YoY to ¥670mn, and segment profit rose 35.2% to ¥399mn,
so both sales and profits increased substantially, setting new record highs for the first time in two terms. Strong
sales were recorded for MOS (a mobile order receipt and placement system), Shugyo Yakusha (an attendance/
work management system), and SHIFTEE (a cloud-based shift management system). The profit margin also
increased greatly, from 53.2% the previous year to 59.6%, owing to growth in products with good profitability.

Performance trends in the Product BusinessNet sales (left)

Segment profit (left)

Profit margin (right)

（¥mn）
1,000

800

75.0%
57.3%

55.0%

53.2%

59.6%
60.0%
670

600

555

555

45.0%

478
399

400
274

305

30.0%

295

200

15.0%

0

0.0%
FY6/19FY6/20FY6/21

FY6/22

Source: Prepared by FISCO from the Company’s supplemental results briefing materials

MOS has been highly rated for having an easy-to-use user interface, being customizable, and providing good cost
performance, and there is a substantial distributor network for it. As a result, the number of companies deploying
the product increased by 66 from the previous year-end to 597 companies. In addition, companies using Shugyo
Yakusha, which the Company launched in 2018, increased by 26 to 122. With more companies introducing diverse
work styles, including remote work, Shugyo Yakusha has been rated highly for having parameters that can be set
flexibly in line with company rules. The Company continues to strengthen its functions, so it is still not a profitableproduct, but given the steady growth in the number of companies deploying it, it is expected to move into theblack in due time. Companies using SHIFTEE increased by 4 to 98, and companies with Tate Yakusha increasedby 31 to 688 companies. As a proportion of segment sales, MOS is largest at over 30%, next is Tate Yakusha atjust under 30%, and SHIFTEE and Shugyo Yakusha are around 10% each, the rest accounting for just under 20%.

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14 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange Prime Market Index

14-Oct.-2022
https://www.sts-inc.co.jp/index_e.html

Results trends

Number of companies deploying each product
Tate Yakusha(No. ofcompanies)

MOS

SHIFTEE

Shugyo Yakusha

1,600
1,400
75
81

91
89

457

489

531

607

636

648

657

20/12

21/6

21/9

21/12

1,200
1,000
800

52

26
64

73

311

348

409

583

595

19/12

20/6

13
52

96
94

122
98

597

600
400
200

688

0
22/6

(Year/Month)
Source: Prepared by FISCO from the Company’s supplemental results briefing materials

Financial base continues to gain strength, and profitability risingsteadily
3. Financial condition and business indicators
Looking at the Company’s financial condition as of the end of FY6/22, total assets were ¥7,815mn, an increaseof ¥1,153mn from the end of FY6/21. In terms of the main factors behind this change, under current assets, cash
and deposits increased by ¥556mn and notes and accounts receivable – trade and contract assets increasedby ¥494mn, accompanying the expansion of earnings. Under non-current assets, although property, plant andequipment decreased by ¥16mn, goodwill and deferred tax assets increased by ¥196mn and ¥62mn, respectively.
Total liabilities increased ¥724mn YoY to ¥4,393mn. Interest-bearing debt increased by ¥196mn, income taxes
payable, by ¥123mn, accrued expenses, by ¥186mn, and accounts payable – other, by ¥92mn. In addition, total
net assets were ¥3,421mn, an increase of ¥428mn from the end of the previous year. This was primarily caused byan increase of ¥457mn in retained earnings as a result of recording profit attributable to owners of parent and thepayment of dividends.
Looking at business indicators, the equity ratio edged down from 44.9% at the end of FY6/21 to 43.8%, but thiswas the result of liabilities increasing more than equity in conjunction with business expansion. Because equity, cash
and deposits, and net cash (cash and deposits less interest-bearing debt) continue to increase, it can be judgedthat the Company’s financial base is continuing to gain strength. Regarding profitability, ROA was 16.4% and theoperating margin was 7.4%, as both continue to rise. With ROE being maintained in the 20-29% range as well, itsuggests profitability is increasing alongside earnings growth.

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15 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.

14-Oct.-2022

4396 Tokyo Stock Exchange Prime Market Index

https://www.sts-inc.co.jp/index_e.html

Results trends

Consolidated balance sheet(¥mn)
vs. prior fiscal
year-end

FY6/19FY6/20FY6/21

FY6/22

4,223

4,631

5,319

6,303

984

1,881

2,387

2,697

3,254

556

Non-current assets

1,141

1,316

1,342

1,511

168

Total assets

5,365

5,947

6,662

7,815

1,153

Total liabilities

3,387

3,540

3,669

4,393

724

1,145

1,015

952

1,149

196

1,977

2,407

2,993

3,421

428

Equity ratio

36.9%

40.5%

44.9%

43.8%

-1.1ptInterest-bearing debt ratio

57.9%

42.2%

31.8%

33.6%

1.8pt

Current assets(Cash and deposits)(Interest-bearing debt)
Total net assets(Security)

Source: Prepared by FISCO from the Company’s financial results■ Outlook
Driven by the Cloud Integration Business, targeting operating profit
growth of 22% or higher annually
1. Medium-term management plan
(1) Outline of medium-term plan
The Company has announced a three-year medium-term management plan that starts in FY6/23. The main themeis stated as “growth and creating further innovation,” and under the plan, the Company will enhance foundational
services for DX promotion by customers and in society, promote the growth and active participation of diverse
human resources, and strengthen ESG management. For FY6/25, it has set targets of net sales of ¥21.89bn
or higher, operating profit of ¥2.18bn or higher, and an operating margin of ¥10% or higher. This amounts tothree-year annual growth in net sales of more than 10.6% and operating profit of more than 22.3%.
The Company has revised its business segments as of FY6/23 primarily to carve out the area of cloud integration,
which it will focus on over the medium term, as a single segment. Specifically, the Solutions Business was divided
into the Cloud Integration Business (cloud service deployment and usage support covering ServiceNow, Microsoft
Azure, AWS and others) and the System Integration Business (ERP package deployment and usage support,
infrastructure building, including Oracle databases, and IT system development). In addition, non-nearshore
maintenance and operations services that had been recorded in the Outsourcing Business were transferred to
the System Integration Business, outsourcing services for accounting processes, which had been conducted bya Canadian subsidiary, were transferred to the newly established Overseas Business, and sales from overseas
subsidiaries (staff referral services for local Japan-affiliated companies, marketing support services, etc.), which
had been recorded in other sales, were also moved to the Overseas Business.

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16 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange Prime Market Index

14-Oct.-2022
https://www.sts-inc.co.jp/index_e.html

Outlook

Changes in the Company’s business segments

Source: The Company’s medium-term management plan materials

Looking at average annual growth rates in net sales by business segment, the Cloud Integration Business ishighest at 25.0%, and next is the Product Business at 15.0%. For the System Integration Business, Outsourcing
Business and Overseas Business, the Company is projecting solid growth for each of between 5.5% and 7.0%.
Over the next three years, the Company is expecting an increase in sales of over ¥5.7bn, but more than 50% of
this will be generated by the Cloud Integration Business.
Net sales targets in the Company’s medium-term management indicators (consolidated)

Source: The Company’s medium-term management plan materials

The trends are nearly the same for segment profit. The Cloud Integration Business is highest at 26.2%, followedby the Product Business at 15.3% and the other three businesses at between 8.1% and 9.7%. The Company isalso projecting profit margins to go up in nearly all its business segments. Only the Product Business is expected
to have a generally flat profit margin, but this is because the Company is planning to continue investing indevelopment in order to strengthen functions and for other purposes.

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17 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange Prime Market Index

14-Oct.-2022
https://www.sts-inc.co.jp/index_e.html

Outlook

Profit targets in the Company’s medium-term management indicators (consolidated)

Source: The Company’s medium-term management plan materials(2) Growth strategy by business segmenta) Cloud Integration Business
The key to the Company achieving the targets of its medium-term management plan is the growth of its Cloud
Integration Business. The migration of IT systems to clouds will continue going forward, and the cloud services
market is projected to continue double-digit growth over the medium term, so the Company is planning sales
growth of 25%, which exceeds the market average. To meet the goals of its plan, the Company intends to focus
on the following three initiatives. It will 1) work to strengthen relationships with cloud vendors through engineer
training and thereby increase customer referrals, 2) work to optimize cloud migration and post-migration (“lift &shift”) and increase orders, centering on the three major cloud platforms (AWS, Microsoft Azure, Google Cloud)and ServiceNow, and 3) gather information on promising cloud services overseas, commercialize them in theJapanese market as soon as possible through engineer training and knowledge accumulation, and use them toacquire new customers.
Regarding initiatives for promising new services in particular, the Company is currently preparing three. The firstis Celonis EMS, an execution management platform provided by Celonis, a firm with which the Company enteredinto a sales partnership agreement in March 2022. This tool collects and analyzes business process informationand identifies portions that are inefficient in order to optimize business operations. Since its release in October
2020, it has been increasingly adopted by global corporations, and it is drawing attention in Japan as well, withthe expectation that it will be widely used going forward.
Celonis has around 40 sales partners in Japan, but given the Company’s extensive experience in deployment ofServiceNow, it is possible that it will quickly build up a track record of implementing Celonis EMS as well. This isbecause Celonis and ServiceNow entered into a strategic partnership in October 2021, have linked their products,
and have agreed in principle on collaborating going forward in development, marketing and sales. In light of this,it can be said that it was inevitable that the Company, with its extensive track record in ServiceNow deployment,
would become a sales partner of Celonis. In both cases, the products are tools for increasing productivity, andthey are even more effective when used in combination, so companies that have implemented ServiceNow arestrong prospects as customers for Celonis EMS. The Company is already starting to build a track record, withcustomer referrals from Celonis leading to orders. This has the potential to be another seed of growth after
ServiceNow, which has contributed to the Company’s earnings growth over these past few years, so trends
going forward will be watched.

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18 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange Prime Market Index

14-Oct.-2022
https://www.sts-inc.co.jp/index_e.html

Outlookb) System Integration BusinessIn the System Integration Business, the Company will work to recruit and train engineers to expand its mainstay
ERP-related, database-related and RPA-related services, and will increase sales by building close relationships
with customer companies to expand existing customer projects and acquire recurring orders. In addition, theCompany intends to maintain and strengthen project management from the perspectives of quality, duration,
cost and risk control to increase service quality while preventing the occurrence of unprofitable orders, and in thisway it will work for steady growth.
c) Outsourcing BusinessIn the Outsourcing Business, the Company will target a different customer segment than major cloud vendors
for its data center management services, acquiring customers by attracting them with unique services, including
AI-related services, and building up data usage volume. In addition, data centers will gradually augment facilities inline with operating conditions, both raising quality and ensuring profitability. In addition, with regard to maintenancefor SAP’s ERP products, demand is expected to rise ahead of 2027, so the Company will train nearshore staff inthe Kanazawa region and further strengthen its systems.
d) Product BusinessIn the Product Business, the Company will expand sales channels through distributors and others and strengthen
advertising to acquire new customers and will work to increase the number of users by expanding user divisions
within existing customers. The Company also intends to continue strengthening the functions of existing products.
It plans to increase the number of companies deploying the Company’s four main existing products from 1,505
at the end of June 2022 to 2,500 in FY6/25.
Regarding MOS, a mainstay product, the Company’s strategy will be to utilize the online marketing businessit has acquired through M&A to further promote sales through online marketing and also work for competitive
differentiation by providing MOS and online marketing services to customers on a one-stop basis and thereby
acquire new customers.
e) Overseas BusinessIn the Overseas Business, the Company, through its US subsidiary, will provide support services for IT infrastructure, HR recruitment, marketing and other areas for Japan-affiliated companies expanding into North America,
and though its Canadian subsidiary, will provide remote monitoring services for Japanese companies that takeadvantage of the time difference with Japan and also strengthen outsourcing services for accounting processes.
(3) Investment in Human Resources
The Company positions human resources as a source of business growth and aims to create new corporate valueby actively recruiting and promoting diverse human resources, providing training, and creating a pleasant work
environment. With regard to recruitment, the Company will recruit functionally through hiring managers assigned
to its various offices instead of solely hiring through the head office. It also plans to be active in conducting
recruiting activities to prevent mismatches between job and applicant. New graduate hires are increasing eachyear, and the Company plans to hire 91 such individuals in FY6/23, which, combined with the 93 mid-career
professionals it plans to hire, will bring the total number of hires to 184 for the year, which would be a record high.
Many companies in the IT industry struggle to recruit personnel, but in the Company’s case, its name recognition
was raised when it became a publicly listed company, and it is involved in cloud infrastructure-related services,which continue to grow, so it is able to recruit and hire relatively smoothly. Also, with regard to its attrition rate, therate has declined from 8.1% in FY6/19 to 4.9% in FY6/22, which is less than half the industry average. Employee
engagement is also thought to be increasing. The Company is planning to increase the number of consolidated
employees from 1,233 at the end of FY6/22 to 1,582 by the end of FY6/25.

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19 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.
4396 Tokyo Stock Exchange Prime Market Index

14-Oct.-2022
https://www.sts-inc.co.jp/index_e.html

Outlook

Number of personnel hired (consolidated)
FY6/19FY6/20FY6/21

FY6/22

FY6/23 plan

New graduates hired

55

58

60

70

91

Mid-career professionals hired

93

97

89

83

93

8.1%

7.7%

5.9%

4.9%

-

Attrition rate

Source: Prepared by FISCO from the Company’s supplemental results briefing materials

Regarding training for engineers, the Company plans to continue investing to maintain and further raise competitiveness, which will include obtaining cloud-related vendor certifications. It will also work to raise salary levels andhas set targets for the percentage of women employees, reducing total work hours, the percentage of employees
who use childcare leave, and other areas.
(4) Strengthening ESG management
Through ESG management based on its corporate philosophy (Contributing to Society, Advanced Customer
Service, Sharing Value), the Company is engaged in solutions to social issues and will strengthen the following
initiatives going forward.
In the area of the environment, the Company will set a emissions target and implement further reduction andabsorption measures, establish a disclosure system in line with the Task Force on Climate-Related Financial
Disclosures (TCFD), and respond to the Carbon Disclosure Project (CDP) survey and work to improve its score.
For society, the Company will seek to expand local business and stimulate the economy through training DX
personnel. In terms of specific measures, it started Microsoft Base Kanazawa activities on a full-fledged basis
in August 2022 based on the concept of local IT urbanization in Hokuriku starting in Kanazawa. The programprovides free DX training and support for promoting DX at the industry, academia, government and community
levels. The activities also include providing business space, including co-working space, to support local businessexpansion, economic vitalization, and the creation of new business opportunities.

Cloud-related demand will remain rampant; sales and profits
expected to continue double-digit growth
2. Outlook for FY6/23
For its consolidated results in FY6/23, the Company is forecasting net sales to increase 11.7% YoY to ¥18,093mn,
operating profit to rise 21.7% to ¥1,456mn, ordinary profit to go up 22.0% to ¥1,452mn, and profit attributableto owners of parent to increase 25.1% to ¥982mn for double-digit growth in both sales and profits. While theeconomy’s outlook is increasingly uncertain given rising energy prices and the lack of any foreseeable resolution to
the Ukraine crisis, among other factors, the appetite of companies to invest in DX remains rampant, and there will
be no change in the fact that inquiries continue to outstrip capacity. Personnel costs, education and training costs,
and other expenses are expected to increase with active hiring of personnel, but owing to the effects of increased
sales and an improved sales mix, the profit margin is also projected to increase. By segment, as discussed above,
double-digit sales and profit growth is projected for the Cloud Integration Business and Product Business, and solid
performances are forecast for the System Integration Business, Outsourcing Business and Overseas Business.

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20 21

COMPANY RESEARCH AND ANALYSIS REPORTFISCO Ltd.
https://www.fisco.co.jp

System Support Inc.

14-Oct.-2022

4396 Tokyo Stock Exchange Prime Market Index

https://www.sts-inc.co.jp/index_e.html

OutlookConsolidated outlook for FY6/23(¥mn)
FY6/22
Results

FY6/23% of net sales

Company
forecast% of net sales

YoY

Net sales

16,198-18,093-

11.7%

Operating profit

1,196

7.4%

1,456

8.0%

21.7%

Ordinary profit

1,190

7.3%

1,452

8.0%

22.0%

Profit attributable toowners of parent

785

4.9%

982

5.4%

25.1%

Profit per share (¥)

75.91

94.87

Source: Prepared by FISCO from the Company’s financial results■ Shareholder return policy
Dividends to be paid with a target payout ratio of 30-35%
The Company regards the return of profits to shareholders as an important management issue. The Company
has indicated that its basic policy on distributing profits is to strive to improve dividends according to businessperformance and profit levels, while providing stable dividends based on consideration of earnings conditions.
Concurrently, the Company will ensure adequate internal reserves needed for future business expansion andstrengthening the management structure. With respect to the dividend per share for FY6/23, the Company plans
to increase the dividend amount ¥5.0 YoY to ¥30.0, which would mark the fourth consecutive year of dividend
increases since its listing on the stock market. It targets a dividend payout ratio in the 30%-35% range, and intends
to continue dividend increases alongside earnings growth.

Trends in dividend per share and dividend payout ratio
Dividend per share (left)

(¥)
40

32.1

Dividend payout ratio (right)

32.9

(%)
40.0

31.6

30

30.0
22.3

20

20.0
30.0
21.0

10

25.0
10.0

4.3
10.0
1.5

0

0.0
FY6/19FY6/20FY6/21

FY6/22

FY6/23 E

Note: The Company conducted a two-for-one stock split in June 2020. Figures for FY6/19 have been retrospectively
adjusted.
Source: Prepared by FISCO from the Company’s financial results

We encourage readers to review our complete legal statement on “Disclaimer” page.

21 21

Disclaimer
FISCO Ltd. (“FISCO”) offer stock price and index information for use under the approval of theTokyo Stock Exchange, the Osaka Stock Exchange and Nikkei Inc.
This report is provided solely for the purpose of offering information, and is not a solicitationof investment nor any other act or action.
FISCO prepared and published this report based on information which it considered reliable;
however, FISCO does not warrant the accuracy, completeness, fitness nor reliability of thecontents of this report or the said information.
The issuers’ securities, currencies, commodities, securities and other financial instruments
mentioned in this report may increase or decrease in value or lose their value due to influence
from corporate activities, economic policies, world affairs and other factors. This report does
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This report has been prepared at the request of the company subject hereto based on theprovision of information by such company through telephone interviews and the like. However,
the hypotheses, conclusions and all other contents contained herein are based on analysis
by FISCO. The contents of this report are as of the time of the preparation hereof, and are
subject to change without notice. FISCO is not obligated to update this report.
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may currently or in the future trade or hold the financial instruments or the securities of issuersthat are mentioned in this report.
Please use the information in this report upon accepting the above points.

◾ For inquiry, please contact: ◾

FISCO Ltd.
5-13-3 Minami Aoyama, Minato-ku, Tokyo, Japan 107-0062
Phone: 03-5774-2443 (IR Consulting Business Division)
Email: support@fisco.co.jp