Financial Results
for the 6 Months Ended
June 30, 2017
July 31, 2017
SIOS Technology, Inc.
(Stock Code: 3744 on the Second Section of Tokyo Stock Exchange)© SIOS Technology, Inc. All rights Reserved.

1

Table of Contents
Ⅰ Summary of Business Results for the 6Months Ended June 30, 2017
Ⅱ Initiatives to Achieve Sustained Growth

Ⅲ Medium-Term Sales and Profit Plan andBusiness Forecasts for Fiscal Year Ending
December 31, 2017
© SIOS Technology, Inc. All rights Reserved.

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Ⅰ

Summary of Business Results
for the 6 Months Ended
June 30, 2017

© SIOS Technology, Inc. All rights Reserved.

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Consolidated Financial Results
for the 6 Months Ended June 30, 2017
In millions of yen

Results for the6 months ended
June 30, 2016

Results for the6 months ended
June 30, 2017

Net sales

6,238

Gross profit

2,268

Operatingincome

330

Ordinary income

292

Profit attributableto ownersof parent

88

EBITDA

417

6,226
2,162
173
184
89
260

Change％ Change(11)(0.2％)(106)(4.7％)(156)(47.5％)(108)(37.0％)+0+1.1％(156)(37.5％)*EBITDA: Operating income + Depreciation + Amortization of goodwill© SIOS Technology, Inc. All rights Reserved.

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Consolidated Net Sales in First Halves of the Past 5 Fiscal Years
Net sales for the first 6 months of FY 2017 were slightly
down from the same period the year before, during
In millions of yen
which we achieved substantial year-on-year growth.
7,000

6,238

6,226

1H
FY 20162016/2Q

1H2017/2Q
FY 2017

6,000
5,000
4,000

3,225

3,626

4,392

3,000

2,000
1,000
0

1H2013/2Q
FY 2013

1H2014/2Q
FY 20141H
FY 2015
2015/2Q© SIOS Technology, Inc. All rights Reserved.

5Analysis of Consolidated Net Sales
Net sales for the 6 months ended June 30, 2017, were slightly down from thesame period the year before, with a sales increase in the open systeminfrastructure business offset by a comparable decrease in the application
business due to a projected shift of sales to the second half of the fiscal year.
In millions of yen

+221

(233)

6,238

Net sales for the
6 months ended
June 30, 2016

6,226

Increase in net sales
in open systeminfrastructure business

Decrease in net sales
in application
business© SIOS Technology, Inc. All rights Reserved.

Net sales for the
6 months ended
June 30, 2017
6Consolidated Operating Income and R&D Spendingin First Halves of the Past 5 Fiscal Years Operating income for the first half of FY 2017 down by
156 million yen from the same period the year before
 R&D spending on a general upward trend
400

In millions of yenOperatin
営業利益

g income

300

200

100

152
129

305

R&D
研究開発費
spending

221

330
282

264
173

430(55)-100
2013/2Q
1H
FY 20132014/2Q
1H
FY 2014

1H2015/2Q
FY 2015© SIOS Technology, Inc. All rights Reserved.

1H2016/2Q
FY 20162017/2Q
1H
FY 20177

Analysis of Consolidated Operating Income
Operating income for the 6 months ended June 30, 2017, was downfrom the same period the year before, with an increase in segment
income in the open system infrastructure business more than offset bya larger decrease in the application business.
In millions of yen+26

(183)

330
173

Operating income forthe 6 months ended
June 30, 2016

Increase in segment
income in opensystem infrastructurebusiness

Decrease in segment
income inapplication business© SIOS Technology, Inc. All rights Reserved.

Operating income forthe 6 months ended
June 30, 20178Consolidated EBITDA in First Halves of the Past 5 Fiscal Years
In millions of yen
450

EBITDA in the first half of FY 2017 down by 156
million yen from the same period the year before

400417350260300
250200161

15076

100500-50

1H2013/2Q
FY 2013

1H2014/2Q
FY 2014(21)

1H2015/2Q
FY 2015© SIOS Technology, Inc. All rights Reserved.

1H2016/2Q
FY 20162017/2Q
1H
FY 20179

Consolidated Balance Sheets
As of December 31, 2016

As of June 30, 2017

In millions of yen

Current assets
3,615

Total liabilities
3,608

Tangible fixed

Tangible fixed

assets 193
Intangible fixed
assets971

Investment andother assets

assets 182

Total net assets
1,647

475
Total assets: 5,256
Total liabilities
3,817

Current assets
3,977

Intangible fixedassets

916

Total net assets
1,719

Investment andother assets
461

Total assets: 5,537

An increase in current assets from December 31, 2016, to June 30, 2017,reflected an increase of 320 million yen in cash and deposits.
An increase in total liabilities reflected an increase of 244 million yen inadvance received. © SIOS Technology, Inc. All rights Reserved.

10Analysis of Consolidated Cash Flows
In millions of yen

2,114

(11)
469

(93)

1,793

Cash and cash
equivalents asof December
31, 2016

Cash flows fromoperatingactivities

Cash flows frominvestingactivities

Cash flows fromfinancing
activities(44)

Effect ofexchange ratechange oncash and cash
equivalents

Cash and cash
equivalents asof June 30,2017 The SIOS Group had sufficient cash and cash equivalents as ofJune 30, 2017, thanks to substantial cash flows collected fromoperating activities.
© SIOS Technology, Inc. All rights Reserved.

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Open System Infrastructure BusinessNet sales

3,424 million yen, up 6.9％ year on year

Segment income

107 million yen, up 32.7％ year on year

In millions of yenNet sales

Net sales

3,424
3,203

 Increased sales of LifeKeeper*, one of our coreproducts Increased sales of OSS* support services and relatedproducts Increased sales of software products sourced from Red
Hat, Inc.*

Up 6.9％

 Achieved record sales for the first half of a fiscalyear
Segment Up 32.7％
income 81
1H FY 2016

107
1H FY 2017

Segment income Achieved an increase in segment income
primarily due to increased sales of theprofitable LifeKeeper

Note: See the Glossary on Page 26 for descriptions of terms with an asterisk.
© SIOS Technology, Inc. All rights Reserved.

12Application BusinessNet sales

2,801 million yen, down 7.7％ year on year

Segment income

65 million yen, down 73.6％ year on year

In millions of yen

Net sales

3,034

Segment
incomeNet sales Increased sales of software applications forMFPs*
 Sales of software applications for financial
institutions declined substantially year on year,primarily because the majority of their sales wasprojected to shift to the second half of the fiscalyear.

Down 7.7％ 2,801

Down 73.6％

1H FY 2016

Segment income24965
1H FY 2017

 A substantial decline in sales of software
applications for financial institutions drove thesegment income in the application businessdown.

© SIOS Technology, Inc. All rights Reserved.

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ⅡInitiatives for Sustainable Growth- Beyond the 20th Anniversary of SIOS -© SIOS Technology, Inc. All rights Reserved.

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Beyond the 20th Anniversary of SIOS
2017 marks the 20th anniversary of SIOS Technology, Inc., which was originally founded under
the trade name Ten Art-ni Corporation in 1997. At the time, Microsoft Windows, UNIX, andmainframe OSs* were the mainstream OSs, and Linux was considered avariant for hobbyists.
Nevertheless, we saw the great potential of Linux to go beyond the hobbyist community andinto the mainstream business community and set out to promote Linux in a variety of businessapplications.
Today, Linux has become one of the most widely used OSs in the world, finding its way into
millions of smartphones running on Google’s Android.
Our business with open source software, which includes Linux, has grown to become one of thepillars that sustain the growth of the SIOS Group.
The drive to make the impossible possible is at the heart of our actions.
As we celebrate our 20th anniversary, we have a new corporate mission:

Making the impossible possible for the people of the world.
The SIOS Group pursues innovative solutions to resolve issues
affecting people and to contribute to a better society.
Notes: Linux is a trademark of Linus Torvalds.
All other company names and product names in this document are registered trademarks or trademarks of their respective companies.
© SIOS Technology, Inc. All rights Reserved.

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Mission Statement of the SIOS Group
Making the impossible possiblefor the people of the world

IMPOSSIBLE
The SIOS Group pursues innovative solutions
to resolve issues affecting people and to contributeto a better society.

© SIOS Technology, Inc. All rights Reserved.

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The Better Society That SIOS Helps Build
SIOS contributes to a better society through its business growth

Creative
Environment

FulfillingLife

Sustainable &Connected
Society© SIOS Technology, Inc. All rights Reserved.

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The Better Society That SIOS Pursues
Creative
Environment
Predict systemproblems

People focus on creative work while leaving
mundane and repetitive tasks to machines.

Identify causes of problems
and assist in solving them

SIOS iQ*
Enable people to leave mundane and repetitive tasks toAI and use information provided by AI to focus on higherlevel tasks that require human judgment and intelligence.

Data collection
Data
processing

SIOS
OSS

Data
store
Data
mart

Data analysis
Operation andmaintenanceIntegration of big-data infrastructure
Analyze a vast amount of information and present it in avisualized format that is easy to understand and in amanner that serves as a basis for creating new business
opportunities.

Lower cost

OSS

Latesttechnolog
yFlexibility

Provide business users with greater options and flexibility inselecting and implementing software applications,
reducing their dependence on a small number of
established software developers.
© SIOS Technology, Inc. All rights Reserved.

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The Better Society That SIOS Pursues
Everyone has the opportunity to develop their skills andreach their full potential in a comfortable and supportive
workplace that promotes their physical and mental health.

Fulfilling Life

Gluegent cloud services*
Provide secure, easy-to-use cloud-based services thatassist corporate clients in building a workplace in which
employees can achieve their full potential.

Single sign-on

Single sign-on solutions
Allow a user to use a single username and password tosafely access multiple applications in a corporate
environment, eliminating the need to remember multiple
usernames and passwords.

Employees selfassess their mental
stateManagers monitor theiremployees’ mental
state

Willysm*
Visualize and enhance each employee’s mental state so
as to achieve greater communication and productivity inthe workplace.

© SIOS Technology, Inc. All rights Reserved.

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The Better Society That SIOS Pursues
Enable people to live in a safe and secure environment.
Make efficient and responsible use of natural resources.
Create dynamic and thriving communities.

Sustainable &Connected Society
Quickly store
scanneddocuments indesignated folders

Scan
documents

Primary system

FailoverBackup system

Analysistools

Convert paper documents into digital files to achievesignificantly greater productivity in sharing, storing, andreusing information as well as to reduce paper use to savefinite natural resources and preserve the environment.

LifeKeeper, DataKeeper
Minimize downtime of enterprise information systems andkeep them running in the event of a disaster to ensure
continuity of mission-critical operations in society.

Data replication

Integratedmanagement
database

Speedoc*

Reports

Ensure safe and secure financialtransactions
Provide software applications that ensure safe and securetransactions at banks, securities companies, andinsurance companies, and contribute to community
development through regional financing.
© SIOS Technology, Inc. All rights Reserved.

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Driving Forces Behind Our Mission
3 driving forces behind SIOS’s mission to pursue a better society

Technology

Drivingforces

CultureSIOS continues to refine and upgrade itsproprietary technologies to venture into newterritories.

CreativeEnvironment

TechnologyOur Mission

SIOS attracts employees with diverse values
and professional backgrounds and helps
them reach their full potential.

Making theimpossible possible
for the peopleof the world

Fulfilling Life

CultureSustainable &Connected Society
PeoplePeopleSIOS fosters a culture that encourages
employees to be independent-minded anddemonstrate the pioneering spirit of anentrepreneur who creates trends, not simply
follows them.

© SIOS Technology, Inc. All rights Reserved.

21Ⅲ

Medium-Term Sales and ProfitPlan and Business Forecasts for
Fiscal Year Ending December 31,
2017© SIOS Technology, Inc. All rights Reserved.

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Medium-Term Sales and Profit Plan
Continue to invest in R&D and improve effectiveness inmarketing and sales so as to achieve net sales of 16
billion yen and EBITDA of 1 billion yen in FY 2019

Netsales5.9230FY 2012Results

12.0
In billions of yen

6.5

7.3

12.6

14.0

9.3

1,000
650

670

770
In millions of yen290

FY 2013
Results

120(40)FY 2014
Results

FY 2015
Results

16.0

EBITDAFY 2016
Results© SIOS Technology, Inc. All rights Reserved.

FY 2017Plan

FY 2018Plan

FY 2019
Plan23

Consolidated Business Forecasts for Fiscal YearEnding December 31, 2017
Results for the
6 months ended
June 30, 2017
(in millions of yen)

Forecasts for fiscalyear ending
December 31, 2017
(in millions of yen)

Percentage ofachievement

Net sales

6,226

12,60049.4％

Operatingincome

173

500

34.6％

Ordinary income

184

480

38.3％

Profit attributable toowners of parent

89

320

27.8％

EBITDA

260

670

38.8％

© SIOS Technology, Inc. All rights Reserved.

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Payment of Dividends for Fiscal Year Ending December 31, 2017
Annual dividends forfiscal year ended
December 31, 2016
(Declared)

We chose, instead of paying dividends, to invest in research anddevelopment in FY 2016 and increase our efforts to implement themedium-term business plan.

Annual dividends forfiscal year ending
December 31, 2017
(Forecast)

Based on the business forecasts for fiscal year ending December 31,
2017 outlined in the previous page, we project payment of a dividendof 5.00 yen per share for FY 2017.

Annualdividends
per share

18th term

19th term

20th term

21st term

Fiscal year ended
December 31,
2014

Fiscal year ended
December 31,
2015

Fiscal year ended
December 31,
2016(Declared)

Fiscal year ending
December 31,
2017(Forecast)

0.00 yen

5.00 yen

5.00 yen

0.00 yen© SIOS Technology, Inc. All rights Reserved.

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GlossaryPage

Term

12

LifeKeeper

12Open-source software (OSS)

Software whose source code, which is the fundamental component of theprogram, is made available for free and can be used, modified, andredistributed.

12

Software products sourced fromRed Hat, Inc.

Open-source software products developed by Red Hat, Inc., a provider of
open-source solutions.

13

Software applications for MFPs

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 other document management software
applications running on an MFP.

15

OS (operating system)

18

Description
A failover software product that automatically switches a failed primaryserver to a backup server.

A basic software program that manages a computer’s hardware andsoftware resources.
A software platform that comprehensively monitors, analyzes, and optimizes
operations of applications in virtual and cloud environments to improve
performance and efficiency and ensure reliability in resolving complex issues.

SIOS iQ

19

Gluegent cloud services

Services that assist corporate clients in using the cloud to achieve greater
operational efficiency, such as Gluegent Flow, a cloud-based workflow
management system.

19

WillysmA software application that monitors employees’ mental state to manage
stress in the workplace and enhance their motivation.

20

Quick Scan and Speedoc

Software applications that convert paper documents into digital files using an
MFP scanner.

© SIOS Technology, Inc. All rights Reserved.

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Cautionary Statement
Forward-looking statements about the Company’s business outlook contained in thisdocument reflect management’s assumptions and judgments made on the basis ofavailable 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 and uncertainties that might
affect our performance include, but are not limited to, the economic environment andmarket conditions in which we operate.

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

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