Consolidated Financial Results for the Three Months Ended March 31, 2018
(Under Japanese GAAP)
April 27, 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: May 14, 2018
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 Three Months Ended March 31, 2018
(1) Consolidated Results of Operations (cumulative)(Percentages represent changes from the same period of the previous year)

Net sales

Three months ended
March 31, 2018
Three months ended
March 31, 2017

Operating profit

Profit attributable toowners of parent

Ordinary profit

Million yen%

Million yen%

Million yen%

Million yen%

3,363

1.3

223

83.8

225

78.2

138

133.8

3,321

1.2

121-45.7

126-39.0

59-54.3

Note: Comprehensive income : Three months ended March 31, 2018
Three months ended March 31, 2017

100 million yen (208.3%)
32 million yen (-62.4%)

Basic earnings per share

Diluted earnings per share

YenYen

16.08

16.02

6.89

6.86

Three months ended
March 31, 2018
Three months ended
March 31, 2017(2) Consolidated Financial Position
Total assets

Equity ratio

Million yen

Million yen%

5,161
4,849

1,178
1,076

22.2
21.5

As of March 31, 2018
As of December 31, 2017

Note:Net assets

Equity: As of March 31, 2018: 1,145 million yen

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, 2017
(Percentages represent changes from the previous fiscal year)
Net sales
Fiscal year ending
December 31, 2018

Operating profit

Profit attributable toowners of parent

Ordinary profit

Earnings per share

Million yen%

Million yen%

Million yen%

Million yen%

Yen

13,0004.23302.83301.1260-30.13

Note: Revision to the previously announced business forecasts: None

Notes:(1) Material changes in subsidiaries during the three months ended
March 31, 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)(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 atAs of March 31,
2018
the end of the period (including treasury stock)(ii) Number of treasury stocks at end of theAs of March 31,
2018
period(iii) Average number of shares during the period(cumulative from the beginning of the fiscal year)**: None8,874,400 shares

As of December
31, 2017

8,874,400 shares

246,541 shares

As of December
31, 2017

246,541 shares

For three months
ended March 31, 8,627,859 shares
2018

For three months
ended March 31, 8,615,159 shares
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 variousfactors. 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 Consolidated Results ............................................................................................. 4(1) Results of Operations ................................................................................................................. 4(2) Financial Position ....................................................................................................................... 5(3) Forward-looking Statements Including Consolidated Business Forecasts ............................ 52. Matters Concerning Summary Information (Notes) ......................................................................................... 6(1) Material changes in subsidiaries during the three months ended March 31, 2018 .............. 6(2) Adoption of special accounting treatments for the preparation of quarterly consolidated
financial statements......................................................................................................................... 6(3) Changes in accounting policies, changes in accounting estimates, and restatements .......... 6
3. Consolidated Financial Statements ................................................................................................................... 7(1) Consolidated Balance Sheet ....................................................................................................... 7(2) Consolidated Statements of Income and Comprehensive Income .......................................... 9(3) Notes on Consolidated Financial Statements......................................................................... 11
Notes on Going Concern Assumption ........................................................................................ 11
Notes on Material Changes in Shareholders’ Equity ............................................................... 11Segment Information.................................................................................................................. 11-3-1. Qualitative Information on Consolidated Results(1) Results of Operations
Overview of the consolidated business performance for the three months ended March 31, 2018
The SIOS Group has long been at the forefront of the fast-evolving IT industry and has 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 Fintech 1, and becoming more competitive in its core businesses.
With the implementation of these initiatives and efforts, the Group’s consolidated business results by segment for the three months
ended March 31, 2018, are as follows:
Open System Infrastructure Business Segment
Global sales of LifeKeeper2 in the first quarter of FY 2018 were weaker than in the same period a year earlier. This was because
licensing sales of the software were sluggish in Japan and the rest of the Asia-Oceania region, while sales were up in the Americas.
While the gross profit ratio of products sold in this segment remained low, as in the previous fiscal year, Red Hat Enterprise Linux 3and other software products sourced from Red Hat, Inc. enjoyed strong sales.
As a result, net sales in this segment declined by 1.7% year on year to 1,858 million yen, and segment income fell 79.4% to 14
million yen.
Application Business SegmentSales of business intelligence systems intended for financial institutions surged, helped by increased sales efforts as well as by thereceipt of some of the orders delayed from the second half of the previous fiscal year. Revenues from providing support for systemdevelopment and implementation were down for financial institutions, but up for educational institutions. The Group enjoyed strong
sales of software applications for multifunction printers (MFPs)4.
As a result, net sales in this segment were up 5.1% year on year to 1,504 million yen. Segment income jumped 312.6% to 208
million yen, reflecting an increase in net sales and the absence of an impairment loss of 25 million yen, which had been recognizedin the same period of the previous fiscal year on goodwill and assets related to customers for Profit Cube Inc., a consolidated subsidiaryof the Company.
As a result, the Group’s consolidated net sales for the first quarter of FY 2018 were up 1.3% year on year to a record 3,363 million
yen.
The Group’s consolidated operating profit surged 83.8% year on year to 223 million yen for the quarter, with a decrease in segment
income in the Open System Infrastructure Business more than offset by a substantial increase in segment income in the Application
Business. The Group posted an ordinary profit of 225 million yen, up 78.2% year on year, and a profit of 138 million yen attributableto owners of parent for the quarter, up 133.8% year on year. The Group’s key management metrics EBITDA—which is the sum ofoperating profit, depreciation and amortization, and amortization of goodwill—stood at 241 million yen, up 46.6% from the year
before.
1. Fintech
Emerging financial services driven by innovative IT solutions.
2. LifeKeeper
A failover software product that automatically switches a failed primary server to a backup server.
3. Red Hat Enterprise LinuxLinux OS developed by Red Hat, Inc., a provider of open-source solutions.
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 one unit.
SIOS develops, markets, and updates Quick Scan and Speedoc, document management software applications running on an MFP.

-4-(2) Financial Position(i)Assets
Current assets were 4,459 million yen as of March 31, 2018, up 7.7% from the end of the previous fiscal year, reflecting an increaseof 243 million yen in notes and accounts receivable trade as well as an increase of 25 million yen in work in progress.
Non-current assets were down 0.7% to 702 million yen, reflecting a decrease of 4 million yen in investment securities.
As a result, total assets increased 6.5% to 5,161 million yen.
(ii)

Liabilities

Current liabilities amounted to 3,087 million yen, up 9.0% from the end of the previous fiscal year, reflecting an increase of 214
million yen in accounts payable trade as well as an increase of 77 million yen in advance received.
Non-current liabilities were down 4.6% to 896 million yen, reflecting a decrease of 33 million yen in long-term loans payable.
As a result, total liabilities increased 5.6% to 3,983 million yen.
(iii) Net assets
Total net assets were up 9.4% to 1,178 million yen, reflecting a profit of 138 million yen attributable to owners of parent for thequarter.

(3) Forward-looking Statements Including Consolidated Business Forecasts
The Group achieved business performance in the three months ended March 31, 2018 on track to meet the full-year consolidated
business forecasts for the fiscal year ending December 31, 2018, which were announced on February 5, 2018. Those forecasts for FY
2018 stand for the remainder of the year.

-5-2. Matters Concerning Summary Information (Notes)(1) Material changes in subsidiaries during the three months ended March 31, 2018
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-6-3. Consolidated Financial Statements(1) Consolidated Balance Sheet(In thousands of yen)
December 31, 2017

March 31, 2018

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
Work in process
Advance payments- tradeOther

2,379,099

2,434,480

1,377,939
27,873

1,621,399
53,001

139,488
217,477

137,594
212,733

(200)

(200)

4,141,679

4,459,008

Buildings, net
Other, net

95,94473,551

93,195

Total property, plant and equipment

169,496

167,788995

Allowance for doubtful accounts
Total current assets
Non-current assets
Property, plant and equipment

Intangible assets
Goodwill

74,592

Other

60,325497
67,684

Total intangible assets

61,321

68,181

Investment securities
Net defined benefit asset

192,970
35,988

188,527
34,892

Guarantee deposits
Other

220,663
36,896

213,486
35,045

Allowance for doubtful accounts(9,820)(5,071)

476,698

466,881

707,515

702,851

4,849,194

5,161,860

Investments and other assets

Total investments and other assets
Total non-current assets
Total assets-7-

(In thousands of yen)
December 31, 2017

March 31, 2018

Liabilities
Current liabilities
Accounts payable-trade494,376

708,501

Short-term loans payable
Current portion of long-term loans payable

50,000133,116

50,000133,116

Lease obligations
Income taxes payable

4,018
104,721

4,035
65,840

Advances received
Provision for bonuses

1,521,761
42,816

1,599,051
59,395-7,17330,439Provision for loss on order received
Derivatives liabilities

481,967

429,615

Total current liabilities

2,832,779

3,087,168

Non-current liabilities
Long-term loans payable

679,039645,760
202,568

Other

Net defined benefit liability
Lease obligations

212,520
11,248Long-term deposits received
Other

11,632
25,166

10,233
11,632
26,157

939,607896,351

3,772,386

3,983,519

Shareholders’ equity
Capital stock

1,481,520

Capital surplus
Retained earnings

468,241(654,232)

1,481,520
469,642

Total non-current liabilities
Total liabilities
Net assets

Treasury shares(104,458)(515,499)(104,458)

Total shareholders’ equity

1,191,070

1,331,204

Valuation difference on available-for-sale securities
Foreign currency translation adjustment

34,140(181,724)(216,367)

Total accumulated other comprehensive income(147,584)(186,106)

33,321

33,242

1,076,808

1,178,340

4,849,194

5,161,860

Accumulated other comprehensive income

Subscription rights to shares
Total net assets
Total liabilities and net assets-8-30,260

(2) Consolidated Statements of Income and Comprehensive Income
Consolidated Statements of Income
For three months ended March 31(In thousands of yen)Three months ended March 31,2017
3,321,579

Three months ended March 31,2018
3,363,584

Cost of sales

2,233,214

2,218,393

Gross profit

1,088,365

1,145,190

Selling, general and administrative expenses

966,841

921,786

Operating profit

121,523

223,403

Net sales

Non-operating income
Interest income
Foreign exchange gains

941

2,971

2,105

Reversal of allowance for doubtful accounts
Other

3,618

32,1304,748

Total non-operating income

6,664

43,555

1,645

1,101

Loss on valuation of derivatives
Other

51

36,726
3,751

Total non-operating expenses

1,696

41,580126,491

225,378

Gain on reversal of subscription rights to shares

1,443

-

Total extraordinary income

1,443--

12,954-

Profit before income taxes

127,935

12,954
212,424

Income taxes-current
Income taxes-deferred

78,223(9,633)

69,223
4,467

Total income taxes

68,59073,691

Profit59,345

138,733

Profit attributable to owners of parent

59,345

138,733

Non-operating expenses
Interest expenses

Ordinary profit

3,705

Extraordinary income

Extraordinary losses
Loss on valuation of investment securities
Total extraordinary losses-9-Consolidated Statements of Comprehensive Income
For three months ended March 31(In thousands of yen)Three months ended March 31,
2017

Three months ended March 31,
2018

Profit59,345

138,733

Other comprehensive income
Foreign currency translation adjustment(20,202)(34,642)

Valuation difference on available-for-sale securities(6,637)(3,879)Total other comprehensive income(26,839)(38,522)

32,505100,21032,505100,210Comprehensive income
Comprehensive income attributable to:Comprehensive income attributable to owners ofparent-10-(3) Notes on Consolidated Financial Statements
Notes on Going Concern Assumption
Not applicable
Notes on Material Changes in Shareholders’ Equity
Not applicable
Segment Information【Segment Information】
I Three months ended March 31, 2017
1. Information regarding the amount of net sales and profit by reportable segment(In thousands of yen)
Reportable segment
Open systeminfrastructurebusiness

Adjustments

Application
business

Total

Amount recordedin quarterly
consolidated
statements ofincome*Net sales
Sales to external customers
Intersegment
transfers

sales

1,890,316

1,431,233

3,321,549

30

3,321,579

16-16(16)-1,890,332

1,431,233

3,321,565

13

3,321,579

70,90050,593

121,49330

121,523

andTotal
Segment profit

Note: The total amount of segment profit is equal to operating profit recorded in the quarterly consolidated statements of income.
Supplementary Information
Information by region
In addition to the disclosure required by the “Accounting Standard for Quarterly Financial Statements,” information (net sales)by region is disclosed in accordance with the “Accounting Standard for the Disclosure of Segment Information” for the purpose ofproviding users of financial statements with valuable information.
Net sales
For three months ended March 31, 2017
(In thousands of yen)Japan
3,163,874

Americas90,080EuropeOther regions

32,40835,216

Total
3,321,579

Note: Sales are classified by country or region in which customers are located.
2. Information regarding loss on impairment of non-current assets or goodwill by reportable segment
Not applicable-11-

IIThree months ended March 31, 2018

1. Information regarding the amount of net sales and profit by reportable segment(In thousands of yen)Amount recordedin quarterly
consolidated
statements ofincome*

Reportable segment
Open systeminfrastructurebusinessAdjustments

Application
business

Total

Net sales
Sales to external customers
Intersegment
transfers

sales

5,151,817

4,131,354

9,283,171-

9,283,171

327

-

327

(327)

-

5,152,144

4,131,354

9,283,498(327)

9,283,171

134,129

49,896

184,025-

184,025

and

Total
Segment profit

Note: The total amount of segment profit is equal to operating profit recorded in the quarterly consolidated statements of income.
Supplementary Information
Information by region
In addition to the disclosure required by the “Accounting Standard for Quarterly Financial Statements,” information (net sales)by region is disclosed in accordance with the “Accounting Standard for the Disclosure of Segment Information” for the purpose ofproviding users of financial statements with valuable information.
Net sales
For three months ended March 31, 2018
(In thousands of yen)Japan
3,187,778

Americas133,715

EuropeOther regions

24,655

17,435

Total
3,363,584

Note: Sales are classified by country or region in which customers are located.
2. Information regarding loss on impairment of non-current assets or goodwill by reportable segment
Not applicable-12-