Consolidated Financial Results for the Nine Months Ended September 30, 2018
(Under Japanese GAAP)
October 31, 2018
Company name: SIOS Corporation
Stock listed on: Tokyo Stock Exchange
Stock code: 3744
URL: https://www.sios.com
Representative: Nobuo Kita, Representative Director and President
Contact person: Tokutaro Kobayashi, Managing Executive Officer
Telephone: +81-3-6401-5111 (from outside Japan)
Scheduled filing date of quarterly securities report: November 13, 2018
Scheduled commencement date of dividend payment: Supplementary materials prepared for quarterly financial results: None
Presentation of quarterly financial results: No(Fractions less than 1 million yen are rounded off)

1. Consolidated Financial Results for 9 Months Ended September 30, 2018
(1) Consolidated Results of Operations (cumulative)(Percentages represent changes from the same period of the previous year)

Net sales
9 months ended
September 30, 2018
9 months ended
September 30, 2017

Operating income

Profit attributable toowners of parent

Ordinary income

Million yen%

Million yen%

Million yen%

Million yen

%

9,462

1.9

107

-41.9

118

-39.1

47

-39.7

9,283

1.1

184

-56.9

194

-46.9

79

-50.7

Note: Comprehensive income : 9 months ended September 30, 2018
9 months ended September 30, 2017
Earnings per share (Basic)
9 months ended
September 30, 2018
9 months ended
September 30, 2017

41 million yen (-27.3%)
57 million yen (-5.4%)

Earnings per share(Diluted)

Yen

Yen

5.52

5.51

9.18

9.14

(2) Consolidated Financial Position
Total assets

Net assets

Million yen

Note:Million yen

4,792
4,849

As of September 30, 2018
As of December 31, 2017

Equity ratio
%

1,135
1,076

Equity: As of September 30, 2018: 1,096million yen

22.9
21.5

As of December 31, 2017: 1,043 million yen

2. Dividends
Dividends per share
End of Q1
Fiscal year ended
December 31, 2017
Fiscal year ending
December 31, 2018
Fiscal year ending December
31, 2018 (Forecast)End of Q2

End of Q3

Year-end

Total

Yen

Yen

Yen

Yen

Yen

-

0.00

-

0.00

0.00

-

0.00
-

0.00

0.00

Note: Revision to the previously announced forecasts of dividend: None-1-

3. Consolidated Business Forecasts for Fiscal Year Ending December 31, 2018
(Percentages represent changes from the previous fiscal year)
Net sales
Fiscal year ending
December 31, 2018

Million yen

Operating income%

Million yen%

12,400 -0.6

70

-78.2

Ordinary income
Million yen

Profit attributable toowners of parent

Earnings per share%

Million yen%

Yen

80 -75.5

0

-

0.0

Note: Revision to the previously announced business forecasts: Yes

Notes:(1) Material changes in subsidiaries during the 9 months ended
September 30, 2018

: None(2) Adoption of special accounting treatments for the preparation of: Nonequarterly consolidated financial statements(3) Changes in accounting policies, changes in accounting estimates, and restatements(i) Changes in accounting policies based on revisions of: Noneaccounting standards(ii)

Changes in accounting policies other than the above (i): None(iii) Changes in accounting estimates: None(iv) Restatements: None(4) Number of issued and outstanding shares (common stock)(i) Number of issued and outstanding shares at
As of September
8,874,400 shares30, 2018
the end of the period (including treasury stock)(ii) Number of treasury stocks at end of the
As of September
226,968 shares30, 2018
period(iii) Average number of shares during the period(cumulative from the beginning of the fiscal year)**

For 9 months
ended September 8,635,429 shares30, 2018

As of December
31, 2017

8,874,400 shares

As of December
31, 2017

246,541 shares

For 9 months
ended September 8,620,334 shares30, 2017

This summary of quarterly consolidated financial results is not subject to a quarterly review.
Proper use of business forecasts and other important matters

Forward-looking statements, such as business forecasts included in this document, are based on currently available information orassumptions that the Company considers reasonable, and business results may differ significantly from forecasts due to various
factors. For assumptions used as a basis for making business forecasts and notes on the use of business forecasts, refer to "(3)Forward-looking Statements Including Consolidated Business Forecasts" on Page 5 of the attached document.

-2-

○Table of Contents of the Attached Document

１．Qualitative Information on Quarterly Results（１）Results of Operations（２）Financial Position……………………………………………………………………………4…………………………………………………………………………………………………4……………………………………………………………………………………………………5（３）Forward-looking Statements Including Consolidated Business Forecasts
2．Quarterly Consolidated Financial Statements…………………………………………5…………………………………………………………………………6 （１）Quarterly Consolidated Balance Sheet ……………………………………………………………………………6 （２）Quarterly
Consolidated Statements of Income and Quarterly Consolidated Statements of Comprehensive Income（３）Notes to Quarterly Consolidated Financial Statements
Notes to Going Concern Assumption

Segment Information…………………………………………………………………10………………………………………………………………………………………10

Notes to Significant Changes in Shareholders’ Equity
Changes in Accounting Policies……8……………………………………………………………………10……………………………………………………………………………………10………………………………………………………………………………………………………11-3-

１．Qualitative Information on Quarterly Results（１）Results of Operations
Overview of the consolidated business performance for the Nine months ended September 30, 2018
The SIOS Group continued to implement its growth initiatives, which are outlined in the Group's medium-term business strategy andfocused on expanding into new business segments including FinTech1, investing in research and development, and becoming morecompetitive in its core businesses, so as to become a leading player in the fast-changing IT industry.
With the implementation of these initiatives and efforts, the Group’s consolidated business results by segment for the nine months
ended September 30, 2018, are as follows:
During the quarter ended September 30, 2018, we worked more closely with our distribution partners and stepped up our sales
efforts to win large contracts with corporate clients to make up for the weaker-than-expected sales of LifeKeeper2 and software
applications for MFPs3 in the previous quarter. Furthermore, as part of our efforts to become more competitive in our core businesses,
we released as a freemium model4 an upgraded version of SIOS Coati5 based on the latest serverless architecture6.
(i) Open System Infrastructure Business Segment
Aided by enhanced sales efforts in the reported quarter, LifeKeeper achieved a significant jump in sales in Japan from the previous
quarter, when sales declined due to a fall in high-volume deals. Sales and profit of LifeKeeper in overseas markets, however, continued
to slide compared with the same period the previous year. While the Group achieved steady growth of sales of Red Hat EnterpriseLinux7 and other software products sourced from Red Hat, Inc8., profit from the sales of software products fell as their gross profit
ratio declined, which was a trend continued from the previous fiscal year. OSS9 support services achieved a year-on-year increase insales and profit. Expenses associated with the release of an upgraded version of SIOS Coati also contributed to the year-on-year decline
in profit in this segment.
As a result, net sales in this segment amounted to 5,402 million yen, up 4.9% from the same period a year earlier, with a segment
profit of 52 million yen, down 60.7% year on year.
(ii) Application Business Segment
While sales of software applications for MFPs picked up from the previous quarter, buoyed by joint efforts with our distribution
partners, the recovery was not strong enough to make up for the lost sales in the previous quarter, when we won fewer large contracts,
resulting in a year-on-year decline in their sales and profit for the nine months. Revenue and profit from providing financial institutions
with support for system development and implementation declined due to a delay in completing some of the contracted systemdevelopment projects. Although sales of business support systems to financial institutions weakened in the reported quarter due todelays in investment decisions by regional banks, sales and profit for the nine months were up year on year. Gluegent series10 cloudservices enjoyed year-on-year growth of sales and profit.
As a result, net sales in this segment declined 1.7% year on year to 4,060 million yen. Segment profit increased 8.6% to 54 million
yen, due to an absence of 75 million yen in amortization of goodwill and assets related to customers that the Company recognized theprevious fiscal year for Profit Cube Inc., a consolidated subsidiary of the Company, which more than offset a reduced gross profit
resulting from a decline in sales of some products explained above as well as an increase in expenses related to new businesses.
The Group’s combined net sales for these two segments were up 1.9% year on year to 9,462 million yen in this period. Operating
income down by 41.9% year on year to 107 million yen. The Group posted an ordinary income of 118 million yen, down 39.1% year
on year. The Group’s profit attributable to owners of the parent company amounted to 47 million yen, down 39.7% year on year. The
Group’s key management metrics EBITDA, which is the sum of operating income, depreciation and amortization, and amortization of
goodwill, stood at 167 million yen, down 47.0% year on year.

(*1) Fintech
An emerging technology for facilitating innovations in the financial sector.
(*2) LifeKeeper
A failover software product that automatically switches a failed primary server to a backup server.
-4-

(*3)Software application for multifunction printers
A multifunction printer (MFP) is a piece of office equipment that incorporates print, scan, copy, and fax capabilities into one
unit. SIOS develops, markets, and updates Quick Scan and Speedoc, document management software applications running on an
MFP.
(*4) Freemium modelA pricing strategy whereby basic features are offered for free for users to try and premium features are available for a fee.
(*5)SIOS Coati
Cloud-based service for automatic system failure detection and recovery(*6)Serverless Architectures
Technology that enables the use of a system without the need to build a server environment.
(*7) Red Hat Enterprise LinuxLinux OS developed by the open solution provider Red Hat, Inc.
(*8)Software products sorced from Red Hat, Inc.
Open-source software products developed by Red Hat, Inc., a provider of open-source solutions.
(*9) Open-source software
Software whose source code, which is the fundamental component of the program, is made available for free and can be used,
modified, and redistributed.
(*10)

Gluegent series
Cloud-based business-efficiency services offered to corporate users by Gluegent, a consolidated subsidiary of the Group.
Services include Gluegent Gate, which manages user IDs in the cloud, and Gluegent Apps Group Scheduler, which adds toGoogle Calendar a schedule management function for members of a project team.

（２）Financial Position(i) Assets
Current assets amounted to 3,997 million yen, down 3.5% from the end of the previous consolidated fiscal year, mainly due to adecrease of 307 million yen in cash and deposits, and an increase of 68 million yen in work in progress.
Fixed assets amounted to 795 million yen, up 12.4% from the end of the previous consolidated fiscal year, mainly due to an increaseof 29 million yen in investment securities.
As a result, total assets amounted to 4,792 million yen (down 1.2% from the end of the previous fiscal year).
(ii)Liabilities
Current liabilities amounted to 2,808 million yen, down 0.9% from the end of the previous fiscal year, due to a decrease of 79
million yen in income taxes payable and a decrease of 36million yen in account payable-trade.
Fixed liabilities amounted to 849 million yen, down 9.6% from the end of the previous fiscal year, due to a decrease of 99 million
yen in long-term loans payable.
As a result, total liabilities amounted to 3,657 million yen, down 3.0% from the end of the previous fiscal year.
(iii)

Net assets

Total net assets amounted to 1,135 million yen, up 5.4% from the end of the previous fiscal year, mainly due to a quarterly net
income of 47 million yen attributable to owners of the parent company posted in the nine months ended September 30, 2018.

（３）Forward-looking Statements Including Consolidated Business Forecasts
We have updated the consolidated business forecasts for the fiscal year ending December 31, 2018, which were announced on
February 5, 2018-5-

2. Quarterly Consolidated Financial Statements（１）Quarterly Consolidated Balance Sheet
In thousands of yen
FY 2017(as of December 31, 2017)
AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade

FY 2018 Q3(as of September 30, 2018)

2,379,099
1,377,939

2,071,964
1,426,421

Work in progress
Advance payment

27,873
139,488

96,210158,465

Other
Allowance for doubtful accounts

217,477△200

244,537△200

4,141,679

3,997,399

95,944

120,549

Total current assets
Fixed Assets
Tangible fixed assets
Building（net）
Other（net）

73,55190,358

Total tangible fixed assets

169,496

210,908

Other

995
60,32576,968

Total intangible fixed assets

61,321

76,968Intangible fixed assets
Goodwill

Investment and other assets
Investment securities

192,970

222,064

Net defined retirement assets
Guarantee deposits

35,988220,663

39,768217,279

Other
Allowance for doubtful accounts

36,896△9,82033,627△5,071

Total investment and other assets

476,698

507,668

707,515

795,545

4,849,194

4,792,944

Total fixed assets
Total assets-6-

In thousands of yen
FY 2017(as of December 31, 2017)

Liabilities
Current liabilities
Accounts payable-trade
Short-term loans payable
Current portion of long-term loans payable
Lease obligations
Income taxes payable
Advances received
Provision for bonuses
Other
Total current liabilities

FY 2018 Q3(as of September 30, 2018)494,376

457,894

50,000133,116

50,000133,116

4,018
104,721

6,693
24,889

1,521,761
42,816

1,746,598
31,283481,967

357,641

2,832,779

2,808,116

679,039
212,520579,202
211,858

11,248
11,632

17,098
11,632

Non-current liabilities

Long-term loans payable
Net defined benefit liability
Lease obligations
Long-term deposits received
Other
Total non-current liabilities

Total liabilities

25,166

29,765

939,607849,556

3,772,386

3,657,673

1,481,520
468,241

1,481,520
471,941△654,232△104,458△607,478△96,182

1,191,070

1,249,800

34,14034,394△181,724△188,089△147,584△153,694

33,321

39,166

1,076,808

1,135,271

Net assets
Shareholders’ equity

Capital stock
Capital surplus
Retained earnings
Treasury shares
Total shareholders’ equity

Accumulated other comprehensive income

Valuation difference on available-for-salesecurities
Foreign currency translation adjustment
Total accumulated other comprehensive
incomeSubscription rights to shares
Total net assets
Total liabilities and net assets

4,792,944-7-

（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
Non-operating income

Nine months
ended September 30, 2017

In thousands of yen
Nine months
ended September 30, 2018

9,283,261
6,087,092

9,462,803
6,445,222

3,196,168

3,017,580

3,012,053

2,910,535

184,115

107,045

5,011

9,167

11,546
-

4,748

1,200
4,168

1,800
11,85821,926

27,574

3,537

3,223

2,407
-

4,733
2,731

5,130
50

5,204
2

11,125

15,896

194,916

118,723

1,471

8,350
-

-

896

1,471

9,246

Interest income

Gain on valuation of derivatives
Reversal of allowance for doubtful accounts

Fiduciary obligation fee

Other
Total non-operating income
Non-operating expenses

Interest expenses
Loss on investments in partnership
Loss on valuation of derivatives
Foreign exchange losses

Other
Total non-operating expenses
Ordinary profit
Extra ordinary income
Gain on liquidation of subsidiaries
Gain on reversal of subscription rights to shares
Other
Total extraordinary income
Extraordinary losses

Loss on retirement of non-current assets
Loss on valuation of investment securities
Total extraordinary losses
Profit before income taxes
Income taxes-current
Income taxes-deferred
Total income taxes
ProfitProfit attributable to owners of parent

-8-

-

22

-

13,718-13,740196,388

114,229

124,279△6,99539,08627,440117,283

66,527

79,10447,701

79,10447,701

Quarterly Consolidated Statements of Comprehensive Income
Nine months ended September 30
Nine months ended
September 30, 2017
(From January 1, 2017
through September 30, 2017)79,104In thousands of yen
Nine months ended
September 30, 2018
(From January 1, 2018
through September 30, 2018)
47,701

Valuation difference on available-for-sale securities
Foreign currency translation adjustment△4,815△17,076

254△6,365

Total other comprehensive income△21,891△6,11057,212

41,59057,212

41,590Quarterly net income (loss)
Other comprehensive income

Quarterly comprehensive income(Comprehensive income attributable to)
Quarterly comprehensive income attributable toowners of the parent-9-

（３）Notes to Quarterly Consolidated Financial Statements
Notes to Going Concern Assumption
Not applicable
Notes to Significant Changes in Shareholders’ Equity
Not applicable
Change in Accounting Policies
For the Nine months ended September 30, 2018 (From January 1, 2018 through September 30, 2018)（Change in Accounting Policies）
Effective April 1, 2018, the Company adopted the Practical Solution on Transactions Granting Employees and Others Stock
Acquisition Rights, Which Involve Considerations, with Vesting Conditions (PITF No. 36 issued by the ASBJ on January
12, 2018; hereinafter referred to as “PITF No. 36”), under which the Company applies the Accounting Standards for Sharebased Payment (ASBJ Statement No. 8 issued on December 27, 2005) to transactions that grant employees stock acquisitionrights, which involve considerations, with vesting conditions.
However, in accordance with the stipulation on a transitional treatment provided in Paragraph 10, Item 3 of PITF No. 36,
the Company continues to apply the previously adopted accounting treatment to the transactions that granted employees onor before March 31, 2018, stock acquisition rights, which involve considerations, with vesting conditions.

-10-【Segment Information】
I. For the Nine months ended September 30, 2017 (From January 1, 2017 through September 30, 2017)
１．Information on the amount of sales and income/loss by reportable segment
In thousands of yen
Reportable segment
Open systeminfrastructurebusiness

Application
business

Total

Adjustment

Amount recordedin quarterly
consolidated
statements ofincome(Note)Net sales
Sales to external customers
Inter-segment sales andtransfers
Total

5,151,817

4,131,354

9,283,171

90

9,283,261

327

―

327

△327

―

5,152,144

4,131,354

9,283,498△237

9,283,261

134,129

49,896

184,02590

184,115

Segment profit

Note: The total amount of segment profit (loss) is equal to operating income recorded in the quarterly consolidated statements ofincome.

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, 2018
(From January 1, 2017 through September 30, 2017)
In thousands of yenJapan8,745,980

Americas357,770

Europe87,568Other regions
91,942(注) 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
Not applicable

-11-

Total
9,283,261

Ⅱ For the nine months ended September 30, 2018 (From January 1, 2018 through September 30, 2018)
１．Information on the amount of sales and income/loss by reportable segment
In thousands of yen
Amount recordedin quarterly
consolidated
Adjustment
statements ofincome(Note)

Reportable segment
Open systeminfrastructurebusiness

Application
business

Total

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

5,402,043

4,060,609

9,462,653

150

9,462,803

10,663

3,290

13,954△13,954―

5,412,706

4,063,900

9,476,607△13,804

9,462,803

52,69554,199106,895

150

107,045

Note: The total amount of segment profit is equal to operating income recorded in the quarterly consolidated statements of income
Supplementary Information
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, 2018 (From January 1, 2018 through September 30, 2018)
In thousands of yenJapan
8,882,756

Americas439,000

Europe84,198Other regions
56,848

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
Not applicable

-12-

Total
9,462,803