Financial Resultsfor Fiscal Year
Ended December 31, 2016
February 2, 2017
SIOS Technology, Inc.
(Stock Code: 3744 on the Second Section of Tokyo Stock Exchange)© SIOS Technology, Inc. All rights Reserved.

Table of Contents
Ⅰ Major accomplishments in fiscal year ended
December 31, 2016

Ⅱ Summary of business results for FY 2016
Ⅲ Key medium-term strategic initiatives andprogress achieved in FY 2016

Ⅳ Medium-term sales and profit plan and business
forecasts for fiscal year ending December 31,2017© SIOS Technology, Inc. All rights Reserved.

2ⅠMajor Accomplishmentsin Fiscal Year Ended December 31, 2016

© SIOS Technology, Inc. All rights Reserved.

3

Major Accomplishments

1

Leveraged resources and expertise of Keyport
Solutions (KPS) and Profit Cube (PCI), both acquiredin 2015, to enter the emerging Fintech* sector.

2

Released an upgraded version of the SIOS iQ*
software, born out of a stepped-up investment in
artificial intelligence technology.

3

Strengthened the Group’s revenue base by growing
existing businesses, including OSS*, LifeKeeper*, andsoftware applications for multifunction printers*.

Note: See the Glossary on Page 32 for descriptions of terms with an asterisk.
© SIOS Technology, Inc. All rights Reserved.

4

A New SIOS

Accelerating growth to the nextlevel, passing the 10 billion yen
mark in net sales

SIOS isentering a
new era ofgrowth andinnovation.

Maintaining a robust financial
foundation with OSS, LifeKeeper,and software applications for MFPs

Leveraging proprietary
FinTech and AI technologies
to become a leading player
in the IT solutions industry

Enforcing vigorous compliancepolicies and practices to retain
the trust of stakeholders© SIOS Technology, Inc. All rights Reserved.

5ⅡSummary of Business Resultsfor FY 2016© SIOS Technology, Inc. All rights Reserved.

6

Consolidated Financial Results for FY 2016
（In millions of yen）

FY 2015

FY 2016

Change% ChangeNet sales

9,362+2,718+29.0%

Gross margin

3,351+1,016+30.3%

Operatingincome (loss)
Ordinary
income (loss)(111)+585－(137)+526－

Net income (loss)
attributable toowners of theparent company

12,0804,367474389(186)

254+440－

EBITDA*(45)

653+698－*EBITDA: Operating income + Depreciation + Amortization of goodwill© SIOS Technology, Inc. All rights Reserved.

7

Consolidated Net Sales over the Past 5 Fiscal Years（In millions of yen）
14,00012,000Net sales for FY 2016 surged 29%
from the previous fiscal year

9,362

10,0008,000
6,000

12,080

5,931

6,565

7,349

4,000
2,0000FY20122012

FY20132013

FY20142014© SIOS Technology, Inc. All rights Reserved.

FY20152015

FY20162016
8

Consolidated Operating Income and R&D Spending
over the Past 5 Fiscal Years（In millions of yen）
800700 Operating income for FY 2016 up by 585 million yen from FY 2015
 R&D spending on an upward trend

671

503

600
500
400300200
100

R&D spending

314Operating income55474311
227553550-100-2002012
FY2012FY20132013

FY20142014© SIOS Technology, Inc. All rights Reserved.

(111)
FY20152015

FY20162016
9Consolidated EBITDA over the Past 5 Fiscal Years（In millions of yen）

700
600

Consolidated EBITDA for FY 2016 up by
698 million yen from FY 2015

500
400
300

237

297
115

200
1000-100653

FY20122012

FY20132013

FY20142014© SIOS Technology, Inc. All rights Reserved.

(45)
FY20152015

FY20162016
10

Analysis of Consolidated Operating Income for FY 2016
An increased gross margin resulting from the acquisitions of KPS and PCI
and from robust sales in existing businesses more than offset increased
SG&A expenses and substantially boosted operating income for FY
2016.
(330)
+372

（In millions of yen）

+643

(100)

474
(111)
Operatingincome for FY
2015

Increased
Increased gross Increased gross
Increased
margin resulting margin resulting personnel and amortizationof goodwill
fromfrom robust sales in other SG&A
acquisitions of existing businesses
expenses© SIOS Technology, Inc. All rights Reserved.
KPS and PCI

Operatingincome for FY
201611Consolidated Balance Sheets（In millions of yen）

Current assets3,901

Total liabilities
4,228

assets 193

assets 164

1,087

Investment andother assets 489

Total liabilities
3,608

Tangible fixed

Tangible fixed
Intangible fixed
assetsCurrent assets
3,615

Intangible fixed
assetsTotal net assets
1,414

As of December 31, 2015

971

Total net assets
1,647

Investment andother assets 475

As of December 31, 2016

© SIOS Technology, Inc. All rights Reserved.

12

Analysis of Consolidated Cash Flows for FY 2016
（In millions of yen）

311

2,045(123)
1,793
(414)

Cash and cash
equivalents asof December
31, 2015

Cash flows fromoperatingactivities

Cash flows frominvestingactivities

Cash flows fromfinancing
activities(25)

Effect ofexchange-ratechanges oncash and cash
equivalents

Cash and cash
equivalents asof December
31, 2016

 The balance of cash and cash equivalents as of December 31, 2016 was down by 251
million yen from the year before, reflecting repayment of short-term loans payable (213
million yen) and long-term loans payable (181 million yen).
© SIOS Technology, Inc. All rights Reserved.

13

Open System Infrastructure BusinessNet sales

6,300 million yen, up 13.7% year on year

Segment income

180 million yen, compared with a loss of 165
million yen the year before(In millions of yen)

6,300

Net sales

Net sales

5,541

Japan
 Increased sales of LifeKeeper

Up 13.7%

 Increased sales of products sourced from Red Hat, Inc.
 Increased sales of OSS support services and related
products

Overseas

Increase of345 millionyen

 Increased sales in Asia/Oceania, Europe, and the180(165)

Segment income (loss)
FY 2015

FY 2016

Americas

Segment income
 Continued to invest in R&D for SIOS iQ, machinelearning*- based IT analytics software Returned to profitability, buoyed by strong sales inexisting businesses© SIOS Technology, Inc. All rights Reserved.

14

Application BusinessNet sales

5,779 million yen, up 51.3% year on year

Segment income

293 million yen, up 451.8% year on year

(In millions of yen)

Up 51.3%

5,779

Net sales Achieved a substantial increase in net
sales as a result of acquisitions of KPS
and PCI Increased sales of software
applications for MFPs

Net sales

3,820

Segment income

Segment
income29353

FY 2015

Up 451.8％

FY 2016

 Higher personnel costs resulting fromthe acquisitions of KPS and PCI weremore than offset by an increase ingross margin resulting from a surge innet sales.

© SIOS Technology, Inc. All rights Reserved.

15

ⅢKey Medium-Term Strategic Initiatives
and Progress Achieved in FY 2016

© SIOS Technology, Inc. All rights Reserved.

16

3 Key Medium-Term Strategic Initiatives

1

Expand into new businesssegments including Fintech

2

Continue to invest in researchand development3

Become more competitive incore businesses© SIOS Technology, Inc. All rights Reserved.

17

① Expand into new business segments including Fintech

Launched the SIOS AI Consulting Serviceand the SIOS AI Academy to assist
corporate clients in adopting
machine-learning and AI solutions© SIOS Technology, Inc. All rights Reserved.

18

① Expand into new business segments including Fintech
Launched the SIOS AI Consulting Service in August 2016
and the SIOS AI Academy in October 2016

SIOS AI Consulting Service
LaunchedAugust2016

 Assist corporate clients in adopting
machine-learning and AI solutions
efficiently and effectively for theirbusinesses with minimum risk andinvestment

SIOS AI Academy
LaunchedOctober2016

 Train corporate IT engineers andanalysts on the basics ofmachine-learning and AI
solutions and applications
 All five classes held to date werefull.
 Surveys show that 90% ofparticipants were happy with thecourses.

© SIOS Technology, Inc. All rights Reserved.

19

② Continue to invest in research and development

Released an upgraded version of SIOS iQ,
machine learning-based IT analytics
software© SIOS Technology, Inc. All rights Reserved.

20

② Continue to invest in research and development
Released SIOS iQ v3.8, an upgraded version of machinelearning-based IT analytics software, in August 2016
Performance-ForecastingDashboard added
Predicts a performance issue likely tooccur within the next 7 days andindicates correlations, dates, and hours ofrelevant objects

Predicts a performanceissue

Indicates correlations, dates,and hours

Prevents a performance issue frombecoming serious so as to ensure
more stable operation of a virtualenvironment© SIOS Technology, Inc. All rights Reserved.

21

③ Become more competitive in core businesses

Upgraded LifeKeeper to work in diversecloud* environments and ensure highersystem availability© SIOS Technology, Inc. All rights Reserved.

22

③ Become more competitive in core businesses
Upgraded LifeKeeper to work in diverse cloud environments
and ensure higher system availability
Primary system

FailoverBackup system

Works in diverse cloud environments➡Provides solutions that work in
Microsoft Azure, Amazon EC2, and avariety of other cloud environments

Data replication

LifeKeeperとは？
LifeKeeper
HA cluster software that switchesa failed system to a backup
system to ensure continuous
uptimeAssists migration of a system to a cloudenvironment without any loss ofavailability of existing applications➡Maintains the availability of applications
and middleware in a cloud environmentat the on-premise level© SIOS Technology, Inc. All rights Reserved.

23

Ⅳ

Medium-Term Sales and Profit Planand Business Forecasts for Fiscal YearEnding December 31, 2017

© SIOS Technology, Inc. All rights Reserved.

24

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

Netsales(In billions of yen)

5.9230FY 2012Results

6.5
290

FY 2013
Results

7.3

9.3

12.0

12.6

1,000670

650120(40)FY 2014
Results

FY 2015Results

14.0

16.0

770
(In millions of yen)

EBITDAFY 2016
Results

FY 2017Plan© SIOS Technology, Inc. All rights Reserved.

FY 2018Plan

FY 2019
Plan25

SIOS Group to Reorganize into a Holding-CompanyStructure
The SIOS Group is scheduled to reorganize into a holding-company structure in July
2017 so as to make each Group company more adaptive in an ever-changing
business environment and maximize the Group’s value—all with the goal ofaccelerating the growth of the Group
Current Group Structure

New Group Structure effective July 2017

SIOS Technology, Inc.

Holding company

Administrative divisions

Administrative divisions

Business divisions

PCI and others

KPS

Gluegent

SIOS USA

Business divisions

Operating company

PCI and others

KPS

Gluegent

SIOS USA© SIOS Technology, Inc. All rights Reserved.

26

Why a Holding-Company Structure?
➊ Enhance the effectiveness of the Group’s strategic planning as well as that ofcorporate governance and compliance• Consolidate the Group’s back-office functions into a holding company toachieve greater effectiveness of the Group’s strategic planning as well asthat of corporate governance and compliance• Standardize and consolidate business processes and IT systems across theGroup to reduce operating costs and maximize the Group’s value➋ Ensure that each Group company achieves sustained growth• Ensure that each Group company will operate more effectively and efficiently
by enabling it to make business decisions more timely in an ever-changing
business environment➌ Redouble merger and acquisition efforts• Aggressively pursue merger and acquisition opportunities to diversify
revenue models using innovative technology solutions and to expand into
new business segments© SIOS Technology, Inc. All rights Reserved.

27

3 Key Medium-Term Strategic Initiatives for FY 2017 - 20191

Expand into newbusiness segments
including Fintech

2

Continue to invest inresearch anddevelopment3

Become morecompetitive in corebusinesses© SIOS Technology, Inc. All rights Reserved.

Accelerate theimplementation ofthese initiatives
under a holdingcompany structure28

Consolidated Business Forecasts
for Fiscal Year Ending December 31, 2017
The Group projects net sales of 12.6 billion yen, operating income of 500 million
yen, and EBITDA of 670 million yen for FY 2017 by continuing to implement
medium-term key strategic initiatives and conducting more efficient and costeffective operations under a new holding-company structure.
（In millions of yen）

FY 2016
Results

FY 2017
Forecasts

Net sales

12,080Operatingincome
Ordinary
income474

Change% Change+520+4.3%+26+5.4%

389+91+23.1%

Net income
attributable toowners of theparent company

12,600
500
480

254

320+66+25.7%

EBITDA

653

670+17+2.5%© SIOS Technology, Inc. All rights Reserved.

29

Payment of Dividends for FY 2016 and 2017
Annual dividends
for FY 2016
(Declared)

As announced on February 2, 2016, we have chosen, instead ofpaying dividends, to invest in research and development in FY 2016 toincrease our efforts to achieve the medium-term business plan.

Annual dividends
for FY 2017
(Forecasted)

Based on the business forecasts for FY 2017 outlined in the previous
page, we project payment of a dividend of ¥5.00 per share for FY 2017.

Annualdividends

18th term

19th term

20th term

21st term

FY2014

FY 2015

FY 2016(Declared)

FY 2017(Forecasted)

5.00 yen

0.00 yen

0.00 yen

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

30

About SIOS Technology

SIOS is Innovative Open Solutions
SIOS Technology, Inc. has been focused on commercializing open-source software
based primarily on Linux, and marketing and providing support for software products
developed in-house. To broaden our offerings into new segments, we recently
launched products and services that leverage such emerging technologies as artificial
intelligence, Fintech, and cloud computing.
We are committed to pursuing innovative software solutions to remain in the global IT
arena as an influential player that continues to create greater value and contribute toa better society.
Headquarters
CapitalEstablished

SIOS Building, 2-12-3 Minami Azabu Minato-ku, Tokyo, Japan1,481 million yen
May 23, 1997

No. of employees

460 on a consolidated basis (as of December 31, 2016)

Main consolidated
subsidiaries

Japan:
Gluegent, Inc.
Keyport Solutions, Inc.
Profit Cube Inc.

U.S.A.:
SIOS Technology Corp.
Glabio, Inc.

© SIOS Technology, Inc. All rights Reserved.

31

GlossaryPage

Term4Fintech

An emerging technology for facilitating innovations in the financial
sector.

SIOS iQ

A software platform that comprehensively monitors, analyzes, andoptimizes operations of applications in virtual and cloud environments
to improve performance and efficiency and to ensure reliability inresolving complex issues.

4Open source software (OSS)

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

4LifeKeeper

4Description

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

Software applications for MFPs

A multifunction printer (MFP) is a piece of office equipment thatincorporates 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.

14Machine-learning technology

A technology for giving the computer the same learning ability as ahuman being and for extracting useful information from a variety ofdata.

22

Cloud

4A new form of computing that provides computing resources asservices over the Internet.
© SIOS Technology, Inc. All rights Reserved.

32

Cautionary Statement
Forward-looking statements about the Company’s business outlook contained in thisdocument reflect its 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.

33