Consolidated financial result

SIOS Corporation

Consolidated Financial Result(For the 9-month period ended September 30, 2023)
November 9, 2023
Company name:
Address:
Stock exchange listings:
Code number :URL:
Representative:
Contact:

SIOS Corporation
2-12-3 Minami Azabu, Minato-ku, Tokyo 106-0047 JapanTokyo Stock Exchange (TSE)3744
https://www.sios.com/Nobuo Kita, Representative Director
Tokutaro Kobayashi, S.V.P. of Finance & Accounting
Phone: +81-3-6401-5111
Scheduled date for filing of quarterly financial report: November 13, 2023
(Note) All figures in the financial statements are rounded down to the nearest millionth.
‘-‘ indicates a loss or negative figure.

1. Consolidated results (January 1, 2023 through September 30, 2023)(1) Consolidated business results
Net sales

Operating income

Million yen%

Million yen

9-month period(2023/9)
11,701
9.5
9-month period(2022/9)
10,686-8.7(Note)Comprehensive income
As of Sep. 30, 2023: -122 million yen/ -%Ordinary income%-194-468

Million yen-Net income%-139-419

Million yen-%-186-566-As of Sep. 30, 2022: -435 million yen/ -%Net income per share- Basic

Net income per share- Diluted

Yen

Yen

-21.49-65.31-9-month period(2023/9)
9-month period(2022/9)(% of change from previous third quarter)(2) Consolidated financial position
Total assets

Net assets

Equity ratio

Million yen

Million yen%

1,049
1,243

15.7
19.4

9-month period(2023/9)
6,118
FY2022
6,022(Reference) Equity
As of Sep. 30, 2023: 958 million yen

As of Dec. 31, 2022: 1,168 million yen

2. Cash dividends
Record Date

End of Q1

InterimDividend per share
End of Q3Year-end

AnnualYen

Yen

YenYenYen

FY2022-0.00-

FY2023-

0.00-

10.00

10.00

--

FY2023 (expected)(Note) 1. The dividend forecast for the fiscal year ending December 31, 2023 is undecided.
2. Revisions to recent dividend forecast: None

3. Forecast of consolidated results for FY2023 (January 1, 2023 through December 31, 2023)
Net sales
Million yen

Operating income%Million yen%

Ordinary income
Million yen%(% of change from previous year)
Net income
Net income
per share
Million yen%

Yen

FY2023(Note)1. Regarding the consolidated earnings forecast for the fiscal year ending December 31, 2023, it is extremely difficult toreasonably calculate at this time. Since then, it is undecided. In the future, we will promptly announce it when it becomes possible
to make a reasonable calculation.
2. Revisions to recent business forecast: None- 1 -Consolidated financial result

SIOS Corporation

4. Others(1) Reclassification of significant subsidiaries during the period (Reclassification due to change in scope of consolidation): None
(2) Application of special accounting methods for the preparation of the consolidated quarterly financial statements: None
(3) Change in accounting policies, accounting estimates and restatement(i) Change in accounting policies associated with revision of accounting standards: None(ii) Change arising from other factors: None(iii) Change in accounting estimates: None(iv) Restatement: None
(4) Number of outstanding shares (common shares)(i)

Number of outstanding shares(including treasury stock)(ii) Number of treasury stock(iii) Average number of outstanding shares(9-month period)

Third quarter ofFY2023
Third quarter ofFY2023
Third quarter ofFY2023

8,874,400 shares

FY2022

8,874,400 shares

205,838 shares

FY2022205,838 shares

8,668,562 shares

Third quarter of
FY2022

8,668,562 shares

Explanation about proper use of forecasts of consolidated financial results and other special notes
1.

Information Regarding the Audit Review Procedure: This report is outside the scope of the procedures for quarterly review offinancial statements as required under the financial instruments and Exchange Act of Japan. The aforementioned procedures havenot been completed as of the time of disclosure of this document.

2.

Net income per share was calculated by the number of outstanding shares (excluding treasury stocks) at the end of fiscal year.

3.

Forecasts announced by the company referred to above were prepared based on management’s assumption with information
available at this time and therefore involve known and unknown risks and uncertainties. Please note such risks and uncertainties
may cause the actual results to be materially different from the forecasts.

4.

This information to above is an UNOFFICIAL English-language translation of the original Japanese-language version. The format
and contents of this document are defined by the requirements of the Tokyo Stock Exchange’s Standard.
To the extent that there are discrepancies between this translation and the original version, the original version shall be definitive.

- 2 -Consolidated financial result

SIOS Corporation○Table of Contents of the Attached Document

1. Qualitative Information on Quarterly Results ........................................................................................... 4(1) Results of Operations............................................................................................................................ 4(2) Financial Position ................................................................................................................................. 5(3) Forward-looking Statements Including Consolidated Business Forecasts .................................................. 5
2. Quarterly Consolidated Financial Statements ........................................................................................... 6(1) Quarterly Consolidated Balance Sheet ................................................................................................... 6(2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements of Comprehensive
Income ......................................................................................................................................................... 8
Quarterly Consolidated Statements of Income ........................................................................................ 8
Quarterly Consolidated Statements of Comprehensive Income ................................................................ 9(3) Notes to Quarterly Consolidated Financial Statements........................................................................... 10(Notes to Going Concern Assumption) ................................................................................................ 10(Notes on significant changes in the amount of shareholders' equity) ..................................................... 10(Segment Information) ....................................................................................................................... 10(Significant subsequent events) ........................................................................................................... 11- 3 -Consolidated financial result

SIOS Corporation

1. Qualitative Information on Quarterly Results(1) Results of Operations
During the nine months ended September 30, 2023, while the COVID-19 pandemic was settling down, the global economy continued
to face lingering uncertainty due to soaring materials prices amid rising geopolitical risks, and volatile foreign-exchange markets caused
by a global monetary-tightening trend.
In this business environment, the SIOS Group ("the Group") continued to restructure its business operations to make its revenue andprofit base more robust, and expanded its offerings of cloud-based products and services, including SaaS¹, to better assist corporateclients in implementing DX² solutions.
The Group achieved consolidated business results by segment for the period under review as follows:(i) Open System Infrastructure Business Segment
Sales of our products and services for on-premise application picked up, as chip shortages were resolved and the supply of hardware
products started to clear a backlog of orders. As a result, sales of Red Hat Enterprise Linux³ and other software products sourced fromRed Hat Inc.4, increased compared to the same period the previous year. We also enjoyed strong sales of LifeKeeper5, which is one ofour core products, for both on-premise and cloud application. As a result, net sales in this segment increased 12.0% year on year to7,165 million yen. The segment income was 62 million yen, compared with a loss of 20 million yen the year before.
(ii) Application Business Segment
Sales of the management support system to financial institutions were slow. In contrast, revenues from the provision of support forsystem development and implementation were up year on year, especially from the support provided for API6 projects and business
management systems of stock brokerage firms. The Gluegent series7 also achieved a year-on-year increase in sales. As a result, net sales
in this segment increased 5.7% to 4,526 million yen.
The Company posted a segment loss of 266 million yen, compared with a loss of 455 million yen the year before, due to rising
personnel expenses and more aggressive investments in developing and marketing new products and services, mainly in the Med Tech8business.
The Group's combined net sales in these two segments for the period under review were up 9.5% year on year, to 11,701 million yen.
The Company posted a consolidated operating loss of 194 million yen, compared with a loss of 468 million yen the year before, and an
ordinary loss of 139 million yen, which reflected a favorable impact of the share of profit of entities accounted for using the equity
method, compared with an ordinary loss of 419 million yen a year earlier. As a result of posting an impairment loss and a loss on sales ofbusinesses, the loss attributable to owners of parent amounted to 186 million yen, compared with a loss of 566 million yen the previousyear.
The Group’s key management metrics EBITDA (the sum of operating profit, depreciation, and amortization of goodwill) and ROIC
(ratio obtained by dividing operating profit after tax by the sum of shareholders’ equity and interest-bearing debts) for the period underreview are as follows:
EBITDA: -147 million yen, compared with -383 million yen for the same period the previous year
ROIC (annualized): -14.0%, compared with -26.1% for the year before
1SaaS
Software as a Service. A software licensing and distribution model that allows users to connect to and use cloud-based
software applications over the internet.

2Digital transformation(DX)A process in which a company uses data and digital technology to transform its products, services, andbusiness models to more effectively respond to constantly changing business environments and delivergreater value to customers and society as well as to transform its business processes and organizational
structure and culture to gain greater competitive advantage.

3Red Hat Enterprise LinuxLinux OS developed by the open solution provider Red Hat, Inc.

4Red Hat, Inc. Related Items
Linux OS product developed by Red Hat, Inc., a provider of open source solutions.

- 4 -Consolidated financial result
5SIOS Corporation

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

6APIA mechanism for software and applications to exchange information with each other.

7Gluegent seriesService products designed to assist corporate clients in achieving greater operational efficiency using cloud solutions. Theseries 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 GoogleCalendar.

8Med Tech
Short for medical technology.
It refers to technology that delivers medical services through software applications.

(2) Financial Position(i) Assets
Current assets amounted to 5,215 million yen as of September 30, 2023, up 0.4% from the end of the previous fiscal year,
reflecting primarily an increase of 220 million yen in cash and deposits.
Non-current assets amounted to 902 million yen, up 9.2%, reflecting primarily an increase of 35 million yen in investment
securities.
As a result, total assets increased 1.6% to 6,118 million yen.

(ii) Liabilities
Current liabilities amounted to 4,672 million yen, up 7.7% from the previous fiscal year-end, reflecting primarily an increase of
223 million yen in contract liabilities.
Non-current liabilities amounted to 395 million yen, down 10.3%, reflecting primarily a decrease of 49 million yen in long-termborrowings.
As a result, total liabilities amounted to 5,068 million yen, up 6.1% from the previous fiscal year-end.

(iii) Net assets
Total net assets amounted to 1,049 million yen, down 15.6% from the previous fiscal year-end, reflecting primarily a decrease of
272 million yen in retained earnings.

(3) Forward-looking Statements Including Consolidated Business Forecasts
As stated in the Consolidated Financial Result for the fiscal year ended December 31, 2022, announced on February 2, 2023, theGroup has been restructuring its business operations and bolstering its cloud-based business in order to make its revenue and profit
base more robust.
During the nine months ended September 30, 2023, the Group reallocated internal human resources and chose to focus on
businesses that offered a greater chance of growth and success. As we are still in the middle of restructuring and are unable to makereasonable assumptions or estimates of forecasts, we are not disclosing at this time the Group's business forecasts for the fiscal year
ending December 31, 2023. As soon as we are able to make reasonable assumptions and estimates, we will announce updated
forecasts.

- 5 -Consolidated financial result

SIOS Corporation

2. Quarterly Consolidated Financial Statements(1) Quarterly Consolidated Balance Sheet(Unit: thousand yen)

FY 2022(as of December 31, 2022)

FY 2023 Q3(as of September 30,2023)

2,505,766

2,726,679

2,028,395

1,929,861

13,55813,267
272,047
362,291-200
5,195,125

2,830
3,512
362,429
190,601-200
5,215,715

50,131
62,699112,830

42,267102,347
144,615

48,49629,8791,441
79,81738,70010,107
1,441
50,249380,634
50,635127,063
76,225634,558
827,206
6,022,332

416,160
56,072
122,324
113,491
708,049
902,913
6,118,629

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable - trade, andcontract assets
MerchandiseWork in progress
Advance payments to suppliers
Other
Allowance for doubtful accounts
Total current assets
Fixed assets
Tangible fixed assets
Buildings (net)Other (net)Total tangible fixed assets
Intangible fixed assets
Software
Software in progress
OtherTotal intangible fixed assets
Investment and other assets
Investment securities
Retirement benefit asset
Guarantee deposits
Other
Total investment and other assets
Total fixed assets
Total assets- 6 -Consolidated financial result

SIOS Corporation(In thousands of yen)
December 31, 2022
Liabilities
Current liabilities
Accounts payable-trade
Current portion of long-term borrowings
Lease liabilities
Income taxes payable
Contract liabilities
Other
Total current liabilities
Non-current liabilities
Long-term borrowings
Retirement benefit liability
Lease liabilities
Long-term deposits received
Other
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Share capital
Legal retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges
Total accumulated other comprehensive income
Subscription rights to shares
Total net assets
Total liabilities and net assets- 7 -September 30, 2023

1,084,110
66,00029,7002,760,665
396,729
4,337,206

937,086
66,00067,526
11,742
2,983,981
606,594
4,672,930

115,500
302,712
11,746
11,632441,591
4,778,798

66,000309,229
7,888
11,632
1,159
395,910
5,068,840

1,481,520-130,975-87,254
1,263,289

1,481,520-403,909-87,254
990,356

5,147

18,575-100,273-95,12575,3691,243,534
6,022,332-50,052-31,476
90,9081,049,788
6,118,629

Consolidated financial result

SIOS Corporation(2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements of Comprehensive
IncomeQuarterly Consolidated Statements of Income
Nine months ended September 30

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit (loss)
Non-operating income
Interest income
Gain on valuation of derivatives
Share of profit of entities accounted forusing equity method
Other
Total non-operating income
Non-operating expenses
Interest expenses
Loss on investments in investment
partnerships
Foreign exchange losses
Other
Total non-operating expenses
Ordinary profit (loss)
Extraordinary income
Gain on sale of non-current assets
Total extraordinary income
Extraordinary losses
Loss on valuation of shares of subsidiaries
and associates
Impairment losses
Loss on retirement of non-current assets
Loss on transfer of businessTotal extraordinary losses
Profit (loss) before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
Profit (loss)
Profit (loss) attributable to owners of parent(In thousands of yen)
Nine months ended September Nine months ended September
30, 2022
30, 2023
10,686,284
11,701,456
7,285,377
7,788,206
3,400,907
3,913,250
3,869,156
4,107,411-468,249-194,161

- 8 -

4,231
135,244

10,301
56,89840,415

43,0259,550
189,441

5,915
116,141

1,235

747

4,450

5,601

135,444
141,130-419,939

53,161
1,639
61,149-139,170

-

90
90

-

10,43529,9092,409
32,319-452,258
36,381
77,489113,870-566,128-566,128

30,201
123
27,933
68,693-207,773
15,741-37,266-21,525-186,247-186,247

Consolidated financial result

SIOS Corporation

Quarterly Consolidated Statements of Comprehensive Income
Nine months ended September 30

Profit (loss)
Other comprehensive income
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Share of other comprehensive income ofentities accounted for using equity method
Total other comprehensive income
Quarterly comprehensive income(Comprehensive income attributable to)
Quarterly comprehensive income attributableto owners of the parent

Nine months ended
September 30, 2022
(From January 1, 2022
through September 30,2022)-566,128(Unit: thousand yen)
Nine months ended
September 30, 2023
(From January 1, 2023
through September 30,2023)-186,247

4,564

13,42852
125,147

48,498510

1,722

130,276-435,852

63,649-122,598-435,852-122,598- 9 -Consolidated financial result

SIOS Corporation(3) Notes to Quarterly Consolidated Financial Statements(Notes to Going Concern Assumption)
Not applicable(Notes on significant changes in the amount of shareholders' equity)
Not applicable(Segment Information)【Segment Information】
I. For the nine months ended September 30, 2022 (From January 1, 2022 through September 30, 2022)
1. Information on the amount of sales and income/loss by reportable segment(Unit: thousand yen)

Adjustments

Amount recordedin quarterly
consolidatedstatements ofincome(Note)

10,677,723

8,561

10,686,284

5,342

5,342-5,342-

6,395,070

4,287,995

10,683,065

3,219

10,686,284-20,999-455,811-476,810

8,561-468,249

Reportable segment
Open systeminfrastructurebusiness

Application
business

6,395,070

4,282,653

-

Total

Net sales
Sales to external customers
Inter-segment sales and transfers
Total
Segment profit (loss)

Note: The total amount of segment losses is the same as the amount of operating loss presented on the Consolidated Statements ofIncome for the period under review.
(Supplementary Information)
Information by region
In addition to the disclosure required by “Accounting Standard for Quarterly Financial Statements,” information (Sales) by region isdisclosed in accordance with “Accounting Standard for the Disclosure of Segment Information” for the purpose of providing users offinancial statement with valuable information.
Net sales
Nine months ended September 30, 2022
(From January 1, 2022 through September 30, 2022)(Unit: thousand yen)Japan
10,112,955

Americas380,692

Europe125,305

Other regions
67,331

Total
10,686,284

Note: Sales are classified by country or region in which customers are located.
2. Information on impairment loss of fixed assets or goodwill by reportable segment(Significant impairment loss on non-current assets)
The Company posted an impairment loss of 29.909 million yen on non-current assets in the Application Business Segment.

- 10 -

Consolidated financial result

SIOS Corporation

II. For the nine months ended September 30, 2023 (From January 1, 2023 through September 30, 2023)
1. Information on the amount of sales and income/loss by reportable segment(Unit: thousandyen)

Adjustments

Amount recordedin quarterly
consolidatedstatements ofincome(Note)

11,692,006

9,450

11,701,456

4,359

4,359

-4,359-7,165,126

4,531,239

11,696,365

5,090

11,701,456

62,471-266,082-203,611

9,450-194,161

Reportable segment
Open systeminfrastructurebusiness

Application
business

7,165,126

4,526,880

-

Total

Net sales
Sales to external customers
Inter-segment sales and transfers
Total
Segment profit

Note: The total amount of segment profit or losses is equal to the operating loss presented in the Consolidated Statements ofIncome for the period under review.
(Supplementary Information)
Information by region
In addition to the disclosure required by “Accounting Standard for Quarterly Financial Statements,” information (Sales) by region isdisclosed in accordance with “Accounting Standard for the Disclosure of Segment Information” for the purpose of providing users offinancial statement with valuable information.
Net sales
For the nine months ended September 30, 2023 (From January 1, 2023 through September 30, 2023)(Unit: thousand yen)Japan
11,079,313

Americas413,590

Europe133,142

Other regions
75,410Total
11,701,456

Note: Sales are classified by country or region in which customers are located.
2. Information on impairment loss of fixed assets or goodwill by reportable segment(Significant impairment loss on non-current assets)
The Company posted an impairment loss of 30,201 million yen on non-current assets in the Application Business Segment(Significant subsequent events)
Not applicable- 11 -