Financial Resultsfor Fiscal Year
Ended December 31, 2023
February 8,2024
SIOS ,Corp.

（Stock Code: 3744 on the Second Section of Tokyo Stock Exchange）© SIOS
Corporation.
All rights
Reserved.
© SIOS
Corporation.
All rights
Reserved.

Table of Contents
1. Review of Business Results for the Fiscal Year
Ended December 31, 2023 (FY 2023)
2. Business Forecasts for the Fiscal YearEnding December 31, 2024 (FY 2024)
3. Growth Strategies for FY 2024
4. Medium-Term Business Plan for FY 2024-2026
5. Appendix© SIOS Corporation. All rights Reserved.

1. Review of Business Results for the
Fiscal Year Ended December 31, 2023
(FY 2023)© SIOS Corporation. All rights Reserved.

Consolidated Financial Results for FY 2023
(In millions of yen)

FY2022
Results

FY2023Results

Change%Change＋1,469＋10.2%＋549＋11.8％

＋364

－

＋483

－

Operatingincome△572

Ordinary income△499

15,889
5,216
△208
△15

△639

△18

＋620

－

EBITDA

△469

＋322

－

ROIC

△25.1%△147△10.1%－－Net Sales

14,420Gross profit

4,666

Profit (loss)
attributable toowners of parent*EBITDA: Operating profit + Depreciation + Amortization of goodwill*ROIC: Operating profit after tax / (Shareholders’ equity + Interest-bearing debts)© SIOS Corporation. All rights Reserved.

4

Consolidated Net Sales（In millions of yen）

15,88914,420

FY2022Up 10.2%
year on year

FY2023© SIOS Corporation. All rights Reserved.

5

Consolidated Operating Profit, EBITDA, and R&D Spending（In millions of yen）

838

839
 Operating loss decreasedby ¥364M from theprevious year.

(208) (147)
(572)

(469)

FY2022

Operating Profit

FY2023
EBITDA Negative EBITDA
decreased by ¥322M YoY.
 R&D expenses increasedby ¥1M YoY.

R&D Spending© SIOS Corporation. All rights Reserved.

6

Consolidated Balance Sheets
As of December 31, 2022

Current
assets 5,195(including
cash anddeposits of
2,505)

Investment and otherassets 634

Total assets
6,022

Total
liabilities
4,778(includinginterestbearing
debts of
222)

Total net
assets 1,243
Total liabilities
and net assets
6,022 Property, plant and equipment 112
 Intangible assets 79As of December 31, 2023 （In millions of yen）

Current
assets 5,741(including
cash anddeposits of
2,604)

Investment and otherassets 760

Total assets
6,706

負債合計
5,518
(内有利子
負債181)

Total net
assets 1,187
Total liabilities
and net assets
6,706 Property, plant and equipment 132
 Intangible assets 72

Current assets: Reflected an increase of ¥404M in notes and accounts
receivable trade, as well as contract assets.
Current liabilities: Reflected an increase of ¥451M in contract liabilities.
© SIOS Corporation. All rights Reserved.

7

Analysis of Consolidated Cash Flows（In millions of yen）

188

39

28
-157

2,505

Cash and cash
equivalents as ofDecember 31,2022

Cash flows fromoperatingactivities

Cash flows frominvesting activities

Effect of exchange
Cash flows fromrate change on cash
financing activities
and cash equivalents© SIOS Corporation. All rights Reserved.

2,604

Cash and cash
equivalents as ofDecember 31, 2023

8

Cash Flow Analysis
Cash flows fromoperating activities

Net cash provided or used

¥28M net cash provided

Amount of cash
used

Cash flows fromfinancing activities¥188M net cash provided¥157M net cash used•

Increase in trade
payables: ¥150M••

Increase in contract
liabilities: ¥399M••

Increase in accrued
consumption taxes:
¥117M

•

Increase in tradereceivables andcontract assets: ¥393M•

Dividends paid:¥86M•

Increase in advancepayments to suppliers:
¥260M

•

Repayments oflong-term
borrowings: ¥66M

Amount of cash
provided
Breakdown

Cash flows frominvesting activities•

Proceeds from refundof guarantee deposits:¥49M
Proceeds fromderivativetransactions: ¥103M
Proceeds from
distributions frominvestment
partnerships: ¥97M

© SIOS Corporation. All rights Reserved.

9

Open System Infrastructure BusinessNet sales

9,909 million yen, Up 13.7％ YoY（In millions of yen）

9,909

 Sales of software products sourced
from Red Hat Inc.* increased YoY.

8,716

 Sales of LifeKeeper* were strong
for both on-premise* and cloud*FY2022

FY2023application.

Note: See the Glossary on page 38 for descriptionsof terms with an asterisk.
© SIOS Corporation. All rights Reserved.

10

Open System Infrastructure Business
Segment income

90 million yen, compared with a loss of
13 million yen the year before（In millions of yen）

90

Segment income was up YoY,
driven by robust sales in thissegment.

-13
FY2022

FY2023© SIOS Corporation. All rights Reserved.

11

Application BusinessNet sales

5,967 million yen, Up 4.8％ YoY（In millions of yen）

5,691

5,967

 Revenues from the provision of support
for system development andimplementation were up YoY, especiallyfrom the support provided for API*
projects and business management
systems of stock brokerage firms.
 Revenues from the Gluegent series*

FY2022

FY2023

achieved steady growth.
 Sales of the management support system
to financial institutions were slow.

© SIOS Corporation. All rights Reserved.

12

Application Business
Segment income-311 million yen, compared with a lossof 570 million yen the year before（In millions of yen）

Segment loss decreased YoY
with increases in personnel
expenses and investments in-311

partially offset by increased
sales in this segment.

-570
FY2022new products and services

FY2023© SIOS Corporation. All rights Reserved.

13

2. Business Forecasts for the Fiscal YearEnding December 31, 2024 (FY 2024)© SIOS Corporation. All rights Reserved.

Consolidated Business Forecast for FY2024
The Company projects an increase in consolidated net sales for two
consecutive years and a return to operating profit for FY 2024.
FY2023Results

FY2024
Results

Change%Change

+710

+4.5%

+458

ー

+345

ー

△18

16,600
250
330
220

+238

ー

△147

310

+457

ー

△10.1%

11.6%

ー

ー

Net Sales

15,889Gross profit△208

OperatingincomeOrdinary income
Profit (loss)
attributable toowners of parent
EBITDA（In millions of yen）

△15

© SIOS Corporation. All rights Reserved.

15

Analysis of Projected Operating Profit for FY 2024

We expect to return to operating profit for FY 2024, due to an increasein gross profit resulting from robust sales and a cutback in R&D andother SG&A expenses.
（In millions of yen）

710
74

０

250

△326
△208
Operating profit
for FY 2023
(result)

Increase in grossprofit resulting
from robust sales

Increase in costof sales© SIOS Corporation. All rights Reserved.

Cutback in
SG&A

Projected
operating profit for
FY 2024

16

3. Growth Strategies for FY 2024

© SIOS Corporation. All rights Reserved.

Growth Strategies for FY 2024
We will continue to focus on our SaaS* and subscription-based*businesses while developing new businesses into growth drivers.

1

Continue to invest in our SaaS andsubscription-based businesses

2

Expand our API solutions business3

Maximize the benefits of generative AI*
solutions in our business development andoperations© SIOS Corporation. All rights Reserved.

18

Revenue from the Gluegent Series

Our enhanced product development anduser support have been keeping the ARR¹ of
the series on a solid growth path.

Combined ARR of Gluegent Flow and Gluegent Gate
（In millions of yen）
577

Combined ARR for FY 2023
was up 18.2% YoY

488
375

414

270

2019.122020.122021.122022.12Gluegent Flow

Gluegent Gate

Up 22.2%

Up 16.7%

2023.12

1. ARR: Annual Recurring Revenue, obtained by multiplying MRR (monthly recurring revenue, which is a predictable revenue that a business counts onreceiving every month from subscriptions) by 12© SIOS Corporation. All rights Reserved.

19

Actions to Drive ARR
To drive ARR, we must increase A while stemming B.
Formula for ARR
ARR = MRR × 12 months

A

B

MRR = MRR for the previous month + New + Upgrade - (Downgrade + Churn)

New: Revenue increase from new clients
Upgrade: Revenue increase from clients who upgraded to a highertiered subscription plan
Downgrade: Revenue decline from clients who downgraded to a lowertiered subscription plan
Churn: Revenue decline from cancellation of subscription© SIOS Corporation. All rights Reserved.

20

Actions Taken to Drive the Revenue Growth of
the Gluegent Series

We made it work more closely with Microsoft 365
to help corporate users achieve greater
operational efficiency.

A. Increase revenue from new and upgrading clients
We have made it work more closely with Microsoft 365.
Gluegent Flow has been upgraded to work seamlessly with corporate clients'
enterprise systems via Excel and help their end users achieve greater efficiency
at work.

B. Stem a revenue decline from downgrading and churning clients
We have set up a customer-facing support team.


Assist corporate clients in making Gluegent Flow work with their enterprisesystemsProvide a training program to assist end users in familiarizing with Gluegent Flow
© SIOS Corporation. All rights Reserved.

21

Awards and Recognition Accorded to the Gluegent Series
Received many awards for its highly rated
performance.
Gluegent Flow received a High Performer award in the workflow system category in ITreview
Grid Award 2024 Winter, announced by the IT reviewing platform ITreview in January 2024. It
was the third consecutive year of award winning for Gluegent Flow, which made it into theaward's Hall of Fame.



Gluegent Flow has been also rated highly by online word-of-mouth review sites for SaaS
solutions.
© SIOS Corporation. All rights Reserved.

22

Actions Taken to Drive the Revenue Growth of
the Gluegent Series

Enables efficient management of user IDs of employees
across a corporate group and its supply-chain partners
in a zero-trust* environment.

A. Increase revenue from new and upgrading clientsITinfrastructure

Implementation of integrated user ID management

SaaS andother cloudbased services

 Requesting workflows and updating humanresources data trigger automatic addition anddeletion of user IDs.

Workflow requests
CSV data

 Enables integrated management of user IDs acrossa corporate group and its supply-chain partners.

Master humanresource data
Suppliers

Regional offices

Head office

B. Stem a revenue decline from downgrading andchurning clients

We have set up a customer-success team to provide end-to-end support that starts
with pre-project consulting and continues well after the system becomes operational.
© SIOS Corporation. All rights Reserved.

23

Bolster the Subscription Businessof LifeKeeper
Subscription Revenue of LifeKeeper Outside Japan
Revenue for FY 2023:

 Subscription revenue ofUp 22.6% YoY
CAGR: Up 55.8%

LifeKeeper has been following asolid growth path outside Japan.
 We have also stepped up oursales and marketing efforts for its
subscription business in Japan.

 Launched "My Page" service toFY2019FY2020

FY2021

FY2022

FY2023make it easy for corporate clientsto review their subscription
terms and available options.

© SIOS Corporation. All rights Reserved.

24

A cloud-based e-medical records
system that assists psychiatrichospitals in making greater use of DX
solutions The Japanese government hasestablished the Office of Promoting
Medical DX to encourage hospitals to
make greater use of DX solutions ande-medical data.
 We have discontinued INDIGO NOTE
Version 1.0 and started developing
the next-generation INDIGO NOTE
Version 2.0, which will be a radical
departure from conventional emedical records systems.

A system that manages employees'
seating arrangement and attendance
records in a teleworking and hotdesking environment

Sales of YourDesk
Up 464.9%
YoY

Enhanced marketing
efforts have driven
the sales growth of
YourDesk.

FY2022© SIOS Corporation. All rights Reserved.

FY202325

API Solutions Business
API stands for application programming interface, which is a set of
protocols that enables different software programs and applications toshare functions.
Example of How APIs Work in BusinessAPI

Map app
API

CompanyAPI
Onlinepaymentapp

 A company can launch a newservice by sharing data withother companies via APIs.
 An API economy thatfacilitates shared use of APIs
among businesses has been
gaining momentum.

© SIOS Corporation. All rights Reserved.

26

Our Approaches to the API Solutions BusinessWe have been upgrading our API-related technologies
to be able to meet diverse business needs.


SIOS launched its API solutions business in 2017 in anticipation of theemergence of APIs that connect many systems to make them work witheach other.



We have since hired and developed engineers to upgrade our APIrelated technologies and have been designing, developing, and offering
cutting-edge applications.



As a next step, we intend to work more closely with system developers,
consultancies, and cloud service providers and hire additional talent sothat we can accommodate broader business needs.

© SIOS Corporation. All rights Reserved.

27

API Solutions Business Model
Our dedicated API infrastructure team uses their wealth ofprofessional business and API knowledge to assist corporate clients indesigning, developing, operating, and supporting API solutions.
One-Stop API Solutions
STEP 1

Assisting indeveloping abusiness
model

STEP 2

STEP 3

STEP 4

Assisting indeveloping
and testing asystemAssisting inencouraging
business
partners andusers to use
the system

Assisting inoperating thesystem© SIOS Corporation. All rights Reserved.

28

Performance of Our API Solutions Business
Revenue in Our API Solutions Business
Revenue for FY 2023:

Up 40.3% YoY
CAGR: Up 48.9%

Our revenue in this business has
been following a solid growth path,as our engineering strengths in thefield of API economy have met
surging business needs.

FY2019FY2020

FY2021

FY2022

FY2023© SIOS Corporation. All rights Reserved.

29

Maximize the Benefits of Generative AI Solutions
in Our Business Development and Operations
Make greater use of generative AI to achieve higher operational
productivity and efficiency internally and create greater value for clients1

Launch a consulting service focused on
generative AI solutions

2

Use generative AI to achieve greater
operational efficiency internally3

Maximize the benefits of generative AI
in our existing products and services© SIOS Corporation. All rights Reserved.

30

Consulting Service Focused on Generative AI Solutions
We have launched a consulting service
focused on Azure OpenAI Service.*
Assist in the designand development
phase

Assist in theplanning phase

Assist in the PoC
phase

Identify theclient's needs

Create a PoC
environment

Train the client's
staff

Develop operating
scenarios

Make a complete
list of requiredtasks

Conduct technology
researchCreate adevelopment
environment

Assist in ongoing
system adjustment

Assist in creatinga project schedule

Assist in evaluating
PoC results

Assist in setting up
Azure Security

Assist in theoperation phase

Conduct
operational quality
assurance

We provide corporate clients that intend to implement, but are not familiar with,
Azure OpenAI Service with end-to-end consulting that spans from the planning
through to operation phases.
© SIOS Corporation. All rights Reserved.

31

4. Medium-Term Business Plan for FY
2024-2026© SIOS Corporation. All rights Reserved.

Medium-Term Business Plan for FY 2024-2026
We intend to continually bolster our EBITDA and ROIC performanceby expanding our SaaS business and growing new businesses.
Our goal is to bring our ROIC ratio well above our WACC ratio by FY 2026.
（In millions of yen）

EBITDA
ROIC

2023

2024

2025

2026

-147

310

610

880

-10.1% 11.6%

21.3%

24.3%

Our WACC ratio is in the range between 7 and 9%.
© SIOS Corporation. All rights Reserved.

33

Increasing Our Enterprise Value
with a Keen Eye on Our Capital Cost
The SIOS Group has been using the ROIC as a key metric to keep track of its financial
performance since FY 2019. After experiencing a business downturn in FY 2022, we havetaken a variety of actions to bolster our financial strengths. As a result, our ROIC is
projected to go above our WACC¹ in FY 2024 and to continue to rise from FY 2025
onward.
We intend to keep a keen eye on our WACC and stock price performance so that we cancontinually increase our enterprise value and meet the expectations of investors andshareholders.
Our WACC ratio is in therange between 7 and 9%.
ROIC
WACC

FY 2018

FY 2019

FY 2020

FY 2021

FY 2022

FY 2023

FY 2024

FY 2025

FY 2026© SIOS Corporation. All rights Reserved.

1. Weighted average cost of capital, whichindicates the blended cost that a company payson all its debt and equity

34

Dividend Rates for FY 2023 and 2024

Annual cash
dividend per
share
Dividend rate

26th term

27th term

28th term

Fiscal Year Ended
December 31, 2023

Fiscal Year Ended
December 31, 2023

Fiscal Year Ended
December 31, 2023

¥10

¥５

¥10

for FY 2023

¥5

Projected
dividend rate

¥10 (up by ¥5 from the previous year)

for FY 2024

© SIOS Corporation. All rights Reserved.

35

5. Appendix© SIOS Corporation. All rights Reserved.

About SIOS Corporation
SIOS is Innovative Open Solutions
SIOS Corporation started as a system integrator that provided solutions based on Linux and other varieties of open
source software. Today, the company serves as a holding company of the SIOS Group, which includes technology
firms specializing in software products and SaaS solutions.
Under the mission of making the impossible possible for the people of the world, the SIOS Group is committed topursuing innovative solutions that resolve issues affecting people and contributing to a better society.
Visit https://www.sios.com/en to learn more about us.

Headquarters
CapitalEstablished
Stock listed on
No. of employees
Main consolidated subsidiaries

SIOS Building, 2-12-3 Minami Azabu Minato-ku, Tokyo, Japan
1,481 million yen
May 23, 1997
TSE Standard Market (stock code: 3744)
550 on a consolidated basis (as of December 31, 2023)
Japan:
SIOS Technology, Inc.
© SIOS Corporation. All rights Reserved.

U.S.A.:
SIOS Technology Corp.
37

page
10

Glossary

Term
Description
Software products sourced
Open-source software products developed by Red Hat, Inc., a provider of open-source solutions
from Red Hat, Inc.

10

LifeKeeper

A failover software product that automatically switches a failed primary server to a backup server

10

On-premises

A user enterprise owns and operates servers and software on its premises

10

Cloud

12

API

12

Gluegent series

A user enterprise uses services provided by networks without owning servers or software on its
premises
A set of protocols that enables different software programs and applications to share informationand functions
Service products designed to assist corporate clients in achieving greater operational efficiency
using cloud solutions. The series includes the Gluegent Gate cloud-based management of user IDs,
the Gluegent Flow cloud-based workflow system, and the Gluegent Apps Group Scheduler, which
incorporated a function to manage schedules of team members into Google Calendar

Software as a Service. A software licensing and distribution model that allows users to connect toand use cloud-based software applications over the internet
A business model that charges customers a recurring monthly or annual fee to access a software
18 Subscription business model product or service

18

SaaS

18

Generative AI

23

Zero-trust environment

A security framework that assumes there is no traditional network edge and requires all users,
whether inside or outside the organization’s network, to be authenticated, authorized, andcontinuously validated for security before being granted access to information assets

31

Azure OpenAI Service

A service that enables the use of an AI model developed by OpenAI in the Microsoft Azure cloudservice environment

An AI system capable of generating new data and content from learned data

© SIOS Corporation. All rights Reserved.

38

Cautionary Statement
Forward-looking statements about the Company’s business outlook contained in this document reflect
management’s assumptions and judgments made on the basis of available information, and may include
risks and uncertainties. We caution that significant risks and uncertainties could cause actual performance
to differ materially from what is discussed in the forward-looking statements. Significant risks anduncertainties that might affect our performance include, but are not limited to, the economic environment
and market conditions in which we operate.

For inquiries about this document
Call the IR Section of SIOS Corporation on 03-6401-5111(+81-3-6401-5111 from outside Japan)
or fill in and send an online inquiry form available at:https://mk.sios.com/SIOS_Inquiry_english.html© SIOS Corporation. All rights Reserved.

39