Consolidated Financial Results for the Three Months Ended March 31, 2017
(Under Japanese GAAP)
April 28, 2017
Company name: SIOS Technology, Inc.
Stock listed on: Tokyo Stock Exchange
Stock code: 3744
URL: http://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: May 12, 2017
Scheduled commencement date of dividend payment: Supplementary materials prepared for quarterly financial results: None
Presentation of quarterly financial results: None
(Fractions less than 1 million yen are rounded off)

1. Consolidated Financial Results for the Three Months Ended March 31, 2017
(1) Consolidated Results of Operations (cumulative) (Percentages represent changes from the same period of the previous year)
Net sales
Million yen

Operating income%

Million yen

Ordinary income%

Million yen

Three months ended
3,321
1.2
121
(45.7)
126
March 31, 2017
Three months ended
3,281
56.3
223
760.1
207
March 31, 2016
Note: Comprehensive income: Three months ended March 31, 2017: 32 million yen (62.4%)
Three months ended March 31, 2016: 86 million yen (-%)
Net income per share(Basic)

Net income per share(Diluted)

6.89 yen

6.86 yen

15.09 yen

15.08 yenThree months ended
March 31, 2017
Three months ended
March 31, 2016

Net income
attributable to ownersof the parent
company%

Million yen%(39.0)

59(54.3)

562.7

129

-

(2) Consolidated Financial Position
Total assets
As of March 31, 2017
As of December 31, 2016

Net assets

Equity ratio

Million yen

Million yen

%

5,580
5,256

1,680
1,647

29.6
30.8

Note: Equity: As of March 31, 2017: 1,652 million yen
As of December 31, 2016: 1,619 million yen

2. Dividends
Dividends per share
End of Q1

End of Q2

End of Q3

Year ended December 31,
0.00 yen
2016
Year ending December 31,
2017
Year ending December 31,
0.00 yen2017 (Forecasted)
Note: Revision to the previously announced forecasts of dividend: None―1―Year-end

Total-

0.00 yen

0.00 yen-

5.00 yen

5.00 yen3. Consolidated Business Forecasts for Fiscal Year Ending December 31, 2017

Net sales(In millions of yen, except per-share amount)(Percentages represent changes from the previous fiscal year)
Net income
attributable to
Net income per
Operating income Ordinary income
owners of theshareparent company

Year ending December 31,
12,600
4.3%
500
5.4%
2017
Note: Revision to the previously announced business forecasts: None

480

23.1%

320

25.7%

37.14 yen

Notes:(1) Material changes in subsidiaries during the three months ended: NoneMarch 31, 2017
(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
As of March 31,
As of December
8,874,400 sharesshares at the end of the period (including
201731, 2016
treasury stock)
As of March 31,
As of December(ii) Number of treasury stocks at end of the259,241 shares
201731, 2016
periodFor three months
For three months(iii) Average number of shares during theended March 31,
8,615,159 shares ended March 31,
period (cumulative from the beginning of the
2017
2016
fiscal year)*
This summary of quarterly consolidated financial results is not subject to a quarterly review.
*
Proper use of business forecasts and other important matters

8,874,400 shares

260,041 shares

8,600,159 shares

Forward-looking statements, such as business forecasts included in this document, are based on currently available information
or assumptions that the Company considers reasonable, and business results may differ significantly from forecasts due tovarious factors. For assumptions used as a basis for making business forecasts and notes on the use of business forecasts, referto "(3) Forward-looking Statements Including Consolidated Business Forecasts" on Page 7 of the attached document.

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Table of Contents of the Attached Document

1. Qualitative Information on Consolidated Results................................................................................................................ 4(1) Results of Operations....................................................................................................................................................... 4(2) Financial Position ............................................................................................................................................................ 6(3) Forward-looking Statements Including Consolidated Business Forecasts ........................................................................... 6
2. Matters Concerning Summary Information (Notes) ............................................................................................................ 7(1) Material changes in subsidiaries during the three months ended March 31, 2017................................................................ 7(2) Adoption of special accounting treatments for the preparation of quarterly consolidated financial statements...................... 7(3) Changes in accounting policies, changes in accounting estimates, and restatements ........................................................... 7(4) Additional information..................................................................................................................................................... 7
3. Consolidated Financial Statements..................................................................................................................................... 8(1) Consolidated Balance Sheet ............................................................................................................................................. 8(2) Consolidated Statements of Income and Comprehensive Income ..................................................................................... 10(3) Notes on Consolidated Financial Statements................................................................................................................... 12
Notes on Going Concern Assumption ............................................................................................................................ 12
Notes on Material Changes in Shareholders’ Equity ....................................................................................................... 12
Segment Information .................................................................................................................................................... 13
Significant Subsequent Events....................................................................................................................................... 14―3―

1. Qualitative Information on Consolidated Results(1) Results of Operations
Overview of the consolidated business performance for the three months ended March 31, 2017
The SIOS Group has long been at the forefront of the fast-evolving IT industry and been implementing its strategic initiatives,
which are outlined in the Group's medium-term business strategy, by focusing its efforts on continuing to invest in research anddevelopment, expanding into new business segments including Fintech1, and becoming more competitive in its core businesses.
In the three months ended March 31, 2017, the Group expanded services for open source software2 (OSS) for cloud andredoubled its sales efforts for LifeKeeper3 and software applications for multifunction printers (MFPs)4. In addition, we launched
SIOS Coati, which provides automatic disaster recovery in public cloud environments.
With the implementation of these initiatives and activities, the Group's consolidated business results by segment turned out asfollows:(i) Open System Infrastructure Business Segment
The Group increased sales of LifeKeeper in Japan and the Asia-Oceania region. Red Hat Enterprise Linux5 and other products
sourced from Red Hat, Inc. enjoyed robust sales, buoyed by stepped up sales and marketing efforts. OSS-related products
achieved solid sales growth as well.
As a result, net sales in this segment amounted to 1,890 million yen, up 9.8% from the same period of a year earlier, with asegment income of 70 million yen, up 38.6% from the previous year.
(ii) Application Business Segment
Contract-based development of software applications for financial institutions generated increased revenue, and sales ofsoftware applications for MFPs also achieved a year-on-year increase. However, sales of software applications to regional banks
declined sharply in this period from the previous year. This was primarily because their sales for this fiscal year are projected toshift toward the second half of the year, while the majority of their annual sales had been posted in the first half of the year
previously.
As a result, net sales in this segment were down 8.2% year on year to 1,431 million yen with a segment income of 50 million
yen, down 70.7% from a year earlier.
The Group's combined net sales of these two segments were up 1.2% year on year to 3,321 million yen, marking record
quarterly sales for the Group.
The Group posted an operating income of 121 million yen in this period, down 45.7% from the year before. The decline inoperation income was because a substantial year-on-year drop in segment income in the application business segment more thanoffset an increase in segment income in the open system infrastructure business segment. With smaller non-operating expenses
recorded in this period compared with the same period of the previous year, when an equity in losses of affiliates had beenrecorded, the Group posted an ordinary income of 126 million yen, down 39.0% year on year, and a net income of 59 million yen
attributable to owners of the parent company, down 54.3% from a year earlier. The Group’s key management metrics EBITDA,
which is the sum of operating income, depreciation and amortization, and amortization of goodwill, stood at 164 million yen,down 38.0% year on year.
1. FinTech
An emerging technology for facilitating innovations in the financial sector.
2. Open-source software
Software whose source code, which is the fundamental component of the program, is made available for free and can beused, modified, and redistributed.
3. LifeKeeper
A failover software product that automatically switches a failed primary server to a backup server.
4. Software applications for multifunction printers
A multifunction printer (MFP) is a piece of office equipment that incorporates print, scan, copy, and fax capabilities into―4―one unit. SIOS develops, markets, and updates Quick Scan and Speedoc, document management software applications
running on an MFP.
5. Red Hat Enterprise LinuxLinux OS developed by the open solution provider Red Hat, Inc.

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(2) Financial Position(i)

AssetsCurrent assets amounted to 3,986 million yen as of March 31, 2017, up 10.3% from the end of the previous fiscal year,

reflecting an increase of 408 million yen in notes and accounts receivable-trade and a decrease of 36 million yen in work inprogress.
Fixed assets were down 2.8% to 1,594million yen, reflecting a decrease of 21 million yen in goodwill and a decrease of 7
million yen in investment securities.
As a result, total assets were up 6.2% to 5,580 million yen as of March 31, 2017.
(ii)

Liabilities

Current liabilities amounted to 2,856 million yen as of March 31, 2017, up 12.4% from the end of the previous fiscal year,
reflecting an increase of 386 million yen in accounts payable.
Fixed liabilities were down 2.1% to 1,044 million yen, reflecting a decrease of 34 million yen in long-term loans payable.
As a result, total liabilities were up 8.1% to 3,900 million yen as of March 31, 2017.
(iii)

Net assets

Total net assets amounted to 1,680 million yen as of March 31, 2017, up 2.0% from the end of the previous fiscal year,
reflecting a net income of 59 million yen attributable to owners of the parent company posted for the three months ended March
31, 2017.

(3) Forward-looking Statements Including Consolidated Business Forecasts
The Group achieved business performance in the three months ended March 31, 2017 on track to meet the full-year consolidated
business forecasts for the fiscal year ending December 31, 2017, which were announced on February 2, 2017. Those forecasts for
FY 2017 stand for the remainder of the year.

―6―2. Matters Concerning Summary Information (Notes)(1) Material changes in subsidiaries during the three months ended March 31, 2017
Not applicable(2) Adoption of special accounting treatments for the preparation of quarterly consolidated financial statements
Not applicable(3) Changes in accounting policies, changes in accounting estimates, and restatements
Not applicable(4) Additional information
Three Months Ended March 31, 2017
(From January 1, 2017 through March 31, 2017)
Effective at the beginning of the first quarter of the current fiscal year, the Company adopted the “Revised
Implementation Guidance on Recoverability of Deferred Tax Assets” (ASBJ Implementation Guidance No. 26, issued on
March 28, 2016).

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3. Consolidated Financial Statements(1) Consolidated Balance Sheet(In thousands of yen)
As of December 31, 2016

As of March 31, 2017

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Work in progress

1,923,658
1,346,923
56,0081,920,099
1,755,651
19,734

Advance payment
Other
Allowance for doubtful accounts

128,189
160,818(200)

118,976
171,792(200)

Total current assets

3,615,398

3,986,054

Fixed assets
Tangible fixed assets
Buildings (net)109,119

105,372

Other (net)84,402

83,882

Total tangible fixed assets

193,521

189,254

Goodwill
Other

753,414217,932

732,071
211,686

Total intangible fixed assets

971,347

943,758

171,942
27,674
229,51356,738

164,71027,475
227,058
52,400Intangible fixed assets

Investment and other assets
Investment securities
Net defined benefit assets
Guarantee deposits
Other
Allowance for doubtful accounts(9,966)(9,966)

Total investment and other assets

475,901

461,678

1,640,770

1,594,691

5,256,168

5,580,746

Total fixed assets
Total assets―8―

(In thousands of yen)
As of December 31, 2016

As of March 31, 2017

Liabilities
Current liabilities
Accounts payable-trade
Short-term loans payable
Current portion of long-term loans payable

443,227
30,000132,283

829,322
133,116

Income taxes payable
Advance received
Reserve for bonuses
Other

65,0181,409,377
24,556437,191

87,6491,395,053
63,912
347,382

Total current liabilities

2,541,654

2,856,436

Fixed liabilities
Long-term loans payable

812,988778,043

178,589
75,342

193,815
72,225

1,066,920

1,044,083

Net defined benefit liabilities
Other
Total fixed liabilities
Total liabilities

3,608,575

3,900,520

Net assets
Shareholders’ equity
Capital stock

1,481,520

1,481,520

Capital surplus
Retained earnings
Treasury stock466,657(67,044)(110,178)

466,750(7,698)(109,839)

Total shareholders’ equity

1,770,954

1,830,732

14,008

7,371(165,485)(185,688)(151,477)(178,316)

Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Foreign currency translation adjustment
Total accumulated other comprehensive income
Stock acquisition rights
Total net assets
Total liabilities and net assets―9―28,11627,8091,647,593

1,680,225

5,256,168

5,580,746

(2) Consolidated Statements of Income and Comprehensive Income
Consolidated Statements of Income
for the three months ended March 31(In thousands of yen)Three months ended March 31,
2016

Three months ended March 31,
2017

Sales
Cost of sales

3,281,064
2,097,012

3,321,549
2,233,214

Gross margin

1,184,052

1,088,335

Selling, general and administrative expenses

960,492

966,841

Operating income

223,560

121,493

476
5,293
600

941
2,105
630

Other

1,057

3,018

Total non-operating income

7,427

6,694

2,373

1,645

17,682
676

-

2,563

-

227

51

Non-operating income
Interest income
Foreign exchange gain
Fiduciary obligation fee

Non-operating expenses
Interest expenses
Equity in losses of affiliates
Loss on investment of investment partnerships
Provision for surcharge resulting from repayment ofsubsidies
Other
Total non-operating expenses

23,524

1,696

207,464

126,491

1,166

1,443

1,166

1,443

Loss on retirement of fixed assets

116-

Total extraordinary loss

116-

Net income before income taxes

208,514

127,935

Income taxes-current
Income taxes-deferred

79,732(1,950)78,223(9,633)

Total income taxes

77,781

68,590Net income

130,733

59,345

Ordinary income
Extraordinary income
Gain on reversal of stock acquisition rights
Total extraordinary income
Extraordinary loss

Net income attributable to non-controlling interests
Net income attributable to owners of the parent company

―10―

918

-

129,81459,345

Consolidated Statements of Comprehensive Income
for the three months ended March 31(In thousands of yen)Three months ended March 31,
2016

Three months ended March 31,
2017

Net income

130,733

59,345

Other comprehensive income (loss)
Foreign currency translation adjustment
Valuation difference on available-for-sale securities(33,846)(10,485)(20,202)(6,637)(44,332)(26,839)

Comprehensive income loss

Total other comprehensive income (loss)

86,40032,505Comprehensive income loss attributable to:
Owners of the parent company

85,48232,505918-

Non-controlling interests―11―(3) Notes on Consolidated Financial Statements
Notes on Going Concern Assumption
Not applicable
Notes on Material Changes in Shareholders’ Equity
Not applicable―12―Segment Information【Segment Information】
I. Three months ended March 31, 2016
1. Information regarding the amount of sales and income by reportable segment(In thousands of yen)Amount recorded inquarterly
Adjustments
consolidated
statements ofincome*Reportable segment
Open systeminfrastructurebusiness

Application
business

Total

Sales
Sales to external customers

1,721,466

1,559,598

3,281,064-

3,281,064

16

-

16

(16)

-

1,721,482

1,559,598

3,281,080(16)

3,281,064

51,154

172,405

223,560-

223,560

Intersegment sales andtransfers
Total
Segment income

Note: The total amount of segment income is equal to operating income recorded in the quarterly consolidated statements ofincome.
Supplementary Information
Information by region
In addition to the disclosure required by the “Accounting Standard for Quarterly Financial Statements,” information (sales)by region is disclosed in accordance with the “Accounting Standard for the Disclosure of Segment Information” for the
purpose of providing users of financial statements with valuable information.
Sales
For three months ended March 31, 2016
(In thousands of yen)Japan
3,106,036

Americas114,113

EuropeOther regions

35,956

24,958

Total
3,281,064

Note: Sales are classified by country or region in which customers are located.
2. Information regarding loss on impairment of fixed assets or goodwill by reportable segment
Not applicable―13―II. Three months ended March 31, 2017
1. Information regarding the amount of sales and income by reportable segment(In thousands of yen)Amount recorded inquarterly
Adjustments
consolidated
statements ofincome*Reportable segment
Open systeminfrastructurebusiness

Application
business

Total

Sales
Sales to external customers

1,890,316

1,431,233

3,321,549-

3,321,549

16

-

16

(16)

-

1,890,332

1,431,233

3,321,565(16)

3,321,549

70,90050,593

121,493-

121,493

Intersegment sales andtransfers
Total
Segment income

Note: The total amount of segment income is equal to operating income recorded in the quarterly consolidated statements ofincome.
Supplementary Information
Information by region
In addition to the disclosure required by the “Accounting Standard for Quarterly Financial Statements,” information (sales)by region is disclosed in accordance with the “Accounting Standard for the Disclosure of Segment Information” for the
purpose of providing users of financial statements with valuable information.
Sales
For three months ended March 31, 2017
(In thousands of yen)Japan

Americas3,163,844

90,080EuropeOther regions

32,40835,216

Total
3,321,549

Note: Sales are classified by country or region in which customers are located.
2. Information regarding loss on impairment of fixed assets or goodwill by reportable segment
Not applicable
Significant Subsequent Events
Not applicable―14―