Consolidated financial result

SIOS Corporation

Consolidated Financial Result(For the 6-month period ended June 30, 2023)
August 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: August 10, 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 June 30, 2023)(1) Consolidated business results
Net sales(% of change from previous second quarter)

Operating income

Million yen%

Million yen

6-month period(2023/6)
8,066
11.2
6-month period(2022/6)
7,256
-10.2
(Note)Comprehensive income
As of Jun. 30, 2023: -134 million yen/ -%Ordinary income

%

-106
-225

Million yen

-

-78
-207

Million yen

-

%

-176
-339

-

As of Jun. 30, 2022: -239 million yen/ -%Net income per share- Basic

Net income per share- Diluted

Yen

Yen

-20.34-39.21-6-month period(2023/6)
6-month period(2022/6)

Net income%(2) Consolidated financial position
Total assets

Net assets

Equity ratio

Million yen

Million yen

%

1,033
1,243

15.5
19.4

6-month period(2023/6)
6,114
FY2022
6,022(Reference) Equity
As of Jun. 30, 2023: 947 million yen

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

2. Cash dividends
Record Date

End of Q1

Interim

Dividend per share
End of Q3

Year-end

Annual

Yen

Yen

Yen

Yen

Yen

FY2022-0.00

FY2023-0.00

FY2023 (expected)

-

10.00

10.00

-

-

-

(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(6-month period)

Second quarter of
FY2023
Second quarter of
FY2023
Second quarter of
FY20238,874,400 shares

FY2022

8,874,400 shares

205,838 shares

FY2022205,838 shares

8,668,562 shares

Second 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) Summary of 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) Quarterly Consolidated Statements of Cash Flows .......................................................................... 10(4) Notes to Quarterly Consolidated Financial Statements ..................................................................... 11(Notes to Going Concern Assumption) ...................................................................................... 11(Notes on significant changes in the amount of shareholders' equity)............................................. 11(Segment Information) ............................................................................................................ 12(Significant subsequent events) ................................................................................................ 13- 3 -Consolidated financial result

SIOS Corporation

1. Qualitative Information on Quarterly Results(1) Results of Operations
During the six months ended June 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 aglobal 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 six months ended June 30, 2023, 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 of
our core products, for both on-premise and cloud application. Net sales in this segment for the period under review jumped 16.2% froma year earlier to 4,999 million yen, with a segment profit of 56 million yen, up 270.2% year on year.
(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 3.8% to 3,060 million yen.
The Company posted a segment loss of 169 million yen, compared with a loss of 246 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 Tech8
business.
The Group's combined net sales in these two segments for the period under review were up 11.2% year on year, to 8,066 million yen.
The Company posted a consolidated operating loss of 106 million yen, compared with a loss of 225 million yen the year before, and an
ordinary loss of 78 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 207 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 176 million yen, compared with a loss of 339 million yen the previous
year.
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: -60 million yen, compared with -157 million yen for the same period the previous year
ROIC (annualized): -11.8%, compared with -16.1% for the year before
1

SaaS
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.

2

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

3

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

4

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

- 4 -Consolidated financial result
5

SIOS Corporation

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

6

API
A mechanism for software and applications to exchange information with each other.

7

Gluegent seriesService 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.

8

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

(2) Summary of Financial Position(i) Assets
Current assets amounted to 5,331 million yen as of June 30, 2023, up 2.6% from the end of the previous fiscal
year, reflecting primarily an increase of 211 million yen in cash and deposits.
Non-current assets amounted to 778 million yen, down 5.4%, reflecting primarily a decrease of 29 million yen
in software in progress.
As a result, total assets increased 1.5% to 6,114 million yen.
(ii) Liabilities
Current liabilities amounted to 4,674 million yen, up 7.8% from the previous fiscal year-end, reflecting
primarily an increase of 304 million yen in contract liabilities.
Non-current liabilities amounted to 406 million yen, down 7.9%, reflecting primarily a decrease of 33 million
yen in long-term borrowings.
As a result, total liabilities amounted to 5,081 million yen, up 6.3% from the previous fiscal year-end.
(iii) Net assets
Total net assets amounted to 1,033 million yen, down 16.9% from the previous fiscal year-end, reflecting
primarily a decrease of 263 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, the Group 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 six months ended June 30, 2023, the Group reallocated internal human resources and chose tofocus on businesses that offered a greater chance of growth and success. As we are still in the middle ofrestructuring and are unable to make reasonable 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 Q2(as of June 30, 2023)

2,505,766
2,028,395

2,717,533
2,090,908

13,558

5,858

13,267
272,047
362,291-200
5,195,125
2,505,766

519
336,982
180,321-200
5,331,924
2,717,533

50,131
62,699112,830

40,95849,652
90,611

48,49629,8791,441
79,81744,996
1,441
46,437

380,634
50,635127,063
76,225634,558
827,206
6,022,332

387,647
58,156
123,555
76,225645,584
782,633
6,114,558

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
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
Other
Total 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
Capital surplus
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Deferred gains or losses on hedges
Foreign currency translation adjustment
Total accumulated other comprehensive income
Subscription rights to shares
Total net assets
Total liabilities and net assets- 7 -June 30, 2023

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

1,087,512
66,00012,73229,4983,064,894
413,859
4,674,498

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

82,500301,928
9,095
11,632
1,352
406,5085,081,006

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

1,481,520-393,989-87,254
1,000,276

5,147

8,964

-100,273-95,12575,3691,243,534
6,022,332

2,557-64,450-52,928
86,204
1,033,551
6,114,558

Consolidated financial result

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

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating loss
Non-operating income
Interest income
Gain on valuation of derivatives
Share of profit of entities accounted for using
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 loss
Extraordinary income
Gain on sale of non-current assets
Total extraordinary income
Extraordinary losses
Loss on valuation of shares of subsidiaries andassociates
Impairment losses
Loss on retirement of non-current assets
Loss on sale of businesses
Total extraordinary losses
Loss before income taxes
Income taxes-current
Income taxes-deferred
Total income taxes
Loss
Loss attributable to owners of parent

Six months ended June 30,
2022
7,256,374
4,958,021
2,298,353
2,523,635-225,282(In thousands of yen)Six months ended June 30,
2023
8,066,359
5,400,782
2,665,577
2,771,581-106,003

2,586
94,202

4,350
34,821

25,12026,424

6,236
128,145

4,983
70,579838
4,450
105,445－
110,735-207,872

816
5,601
36,264042,681-78,106

-

88
88

-

10,43529,074
767
29,842-237,714
24,68577,489102,174-339,888-339,888

30,201
123
27,933
68,693-146,711
29,616
29,616-176,327-176,327- 8 -Consolidated financial result

SIOS Corporation

Quarterly Consolidated Statements of Comprehensive Income
Six months ended June 30

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(Unit: thousand yen)Six months ended
June 30, 2022
Six months ended June 30,(From January 1,
2023
2022
(From January 1, 2023
through June 30,
through June 30, 2023)
2022)-339,888-176,327

- 9 -

5,657

3,816

94,181

2,557
35,24066

581

99,904-239,984

42,196-134,131-239,984-134,131

Consolidated financial result

SIOS Corporation(3) Quarterly Consolidated Statements of Cash Flows(In thousands of yen)
Six Months Ended
June 30, 2022
Cash flows from operating activities
Loss before income taxes
Depreciation
Impairment losses
Loss (gain) on sale of businesses
Interest and dividend income
Interest expenses
Loss (gain) on investments in investment
partnerships
Share of loss (profit) of entities accounted forusing equity method
Increase (decrease) in trade receivables andcontract assets
Decrease (increase) in inventories
Increase (decrease) in trade payables
Increase (decrease) in retirement benefit liability
Increase (decrease) in contract liabilities
Decrease (increase) in advance payments to
suppliers
Increase (decrease) in accrued consumption taxes
Other
Sub-totalInterest and dividends received
Interest paid
Income taxes refund
Income taxes paid
Net cash provided by (used in) operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Payments of guarantee deposits
Proceeds from refund of guarantee deposits
Purchase of investment securities
Proceeds from collection of loans receivable
Proceeds from derivatives trading
Payments for acquisition of businesses
Net cash provided by (used in) investing activities
Cash flows from financing activities
Dividends paid
Repayments of long-term borrowings
Other
Net cash provided by (used in) financing activities
Effect of exchange rate changes on cash and cash
equivalents
Net increase (decrease) in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of quarter- 10 -Six Months Ended
June 30, 2023

-237,714
67,311
29,074-3,492
838-146,711
45,57030,201
27,933-4,948
816

4,450

5,601

-25,120-26,424

110,911-44,30977,602-321,676
20,685220,933

19,012
3,401-784
229,276

8,687-64,935-143,976-2,980-194,464
9,067-838
40,802-73,194-218,628

67,906
77,972
219,580
12,720-816
45,078-17,343
259,220-22,476-18,354-418
95-45,000-86,155-7,056-7,358-506
47,648
6,748
103,840
26,150117,165-129,272-61,560-3,047-193,880-86,135-33,000-20,544-139,679

88,154-24,938-410,509
3,148,805
2,738,295

211,767
2,505,766
2,717,533

Consolidated financial result

SIOS Corporation(4) 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.

- 11 -

Consolidated financial result

SIOS Corporation(Segment Information)【Segment Information】
I. For the Six months ended June 30, 2022 (From January 1, 2022 through June 30, 2022)
1. Information on the amount of sales and income/loss by reportable segment(Unit: thousand yen)
Reportable segment
Adjustments

Amount recordedin quarterly
consolidated
statements ofincome(Note)

Open systeminfrastructurebusiness

Application
business

4,303,677

2,947,285

7,250,962

5,411

7,256,374

-

3,996

3,996

-3,996-

4,303,677

2,951,282

7,254,959

1,414

7,256,374

15,331-246,024-230,693

5,411-225,282

Total

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

Note: The total amount of segment profits or losses is the same as the amount of operating loss presented on the Consolidated
Statements of Income 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
Six months ended June 30, 2022 (From January 1, 2022 through June 30, 2022)(Unit: thousand yen)Japan
6,879,442

Americas248,178

Europe81,875

Other regions
46,877

Total
7,256,374

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 29.074 million yen on non-current assets in the Application Business Segment.

- 12 -

Consolidated financial result

SIOS Corporation

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

Adjustments

Amount recordedin quarterly
consolidated
statements ofincome(Note)

8,060,059

6,300

8,066,359

2,864

2,864

-2,864-

4,999,873

3,063,049

8,062,923

3,435

8,066,359

56,756-169,060-112,304

6,300-106,003

Reportable segment
Open systeminfrastructurebusiness

Application
business

4,999,873

3,060,185

-

Total

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

Note: The total amount of segment profits or losses is the same as the amount of operating loss presented on the Consolidated
Statements of Income 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.
For the six months ended June 30, 2023 (From January 1, 2023 through June 30, 2023)(Unit: thousand yen)Japan
7,649,805

Americas279,667

Europe87,349Other regions
49,536

Total
8,066,359

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 29.074 million yen on non-current assets in the Application Business Segment.
(Significant subsequent events)
Not applicable- 13 -