Consolidated Financial Result(For the 3-month period ended March 31, 2022)
April 27, 2022
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: May 13, 2022
(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, 2022 through March 31, 2022)(1) Consolidated business results
Net sales
Million yen(% of change from previous first quarter)

Operating income%

Ordinary income

Million yen%

Million yen

-18
223

57.5

1
237

3-month period(2022/3)
3,767
-14.4
3-month period(2021/3)
4,398
10.5
(Note)Comprehensive income
As of Mar.31, 2022: 31 million yen/ -83.7%

Million yen

-99.3
74.4

%

-4
159

116.8

As of Mar. 31, 2021: 196 million yen/ 192.9%

Net income per share- Basic

Net income per share- Diluted

Yen

Yen

-0.48
18.41

-

3-month period(2022/3)
3-month period(2021/3)

Net income%(2) Consolidated financial position
Total assets

Net assets

Equity ratio

Million yen

Million yen

%

1,813
1,897

27.0
27.7

3-month period(2022/3)
6,465
FY2021
6,649(Reference) Equity
As of Mar. 31, 2022: 1,748 million yen

As of Dec. 31, 2021: 1,838 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

FY2021-

FY2022-

FY2022 (expected)

0.00

-

15.00

15.00

0.00

-

10.00

10.00

(Note) Revisions to recent dividend forecast: None

3. Forecast of consolidated results for FY2022 (January 1, 2022 through December 31, 2022)
Net sales
Million yen

Operating income%

Million yen

FY2022
16,0001.7(Note) Revisions to recent business forecast: None100

Ordinary income(% of change from previous year)
Net income
Net income
per share%

Million yen%

Million yen

%

-72.1

120

-70.0

60

-83.7

-1-

Yen

6.92

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: YES(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(3-month period)First quarter of
FY2022First quarter of
FY2022First quarter of
FY2022

8,874,400 shares

FY20218,874,400 shares

205,838 shares

FY2021205,838 shares

8,668,562 sharesFirst quarter of
FY2021

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 have notbeen 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.

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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 ....................................................................................................................... 5(3) Forward-looking Statements Including Consolidated Business Forecasts ............................ 5
2. Consolidated Financial Statements ................................................................................................................... 6(1) Consolidated Balance Sheet ....................................................................................................... 6(2) Consolidated Statements of Income and Comprehensive Income .......................................... 8(3) Notes on Consolidated Financial Statements......................................................................... 10(Notes on Going Concern Assumption) ..................................................................................... 10(Notes on significant changes in the amount of shareholders’ equity) ................................... 10(Changes in accounting policies) ............................................................................................... 10(Segment Information) ............................................................................................................... 12(Additional Information) ............................................................................................................ 13(Significant Subsequent Events) ............................................................................................... 13-3-

1. Qualitative Information on Consolidated Results(1) Results of Operations
Overview of consolidated business performance for the three months ended March 31, 2022 (Q1 2022)
During the three months ended March 31, 2022, the global economy continued to face lingering uncertainty amid the alarming
resurgence of COVID-19 fueled by new virus variants, the Russian invasion of Ukraine, the sharp devaluation of the Japanese yen,and the prolonged chip shortages.
To better adapt to this fast-changing socioeconomic landscape, many businesses continued to invest aggressively in implementing
digital transformation1 solutions, including making greater use of cloud environments. In this business environment, the SIOS Groupleveraged its vast technical expertise and experience in open-source software development to offer corporate clients the rightsolutions to assist them in moving forward with DX, with a focus on products and services that work in the cloud, as well as the
SaaS2 business.
The Group achieved consolidated business results by segment for the three months ended March 31, 2022, as follows:
On a side note, effective at the beginning of the period under review, the Company has adopted the Accounting Standard for
Revenue Recognition (Accounting Standards Board of Japan Statement No. 29, issued on March 31, 2020) in its financial reporting.
i.

Open System Infrastructure Business Segment
Sales of LifeKeeper3, which is one of the Group's core software products, increased over the same period the previous year. Thiswas because high-volume sales to corporate clients in the United States and a favorable yen-dollar exchange rate more than offset a
decline in perpetual license sales of the software in Japan. In contrast, sales of Red Hat Enterprise Linux4 and other software
products sourced from Red Hat, Inc.5 plummeted. This was primarily because high-volume sales to corporate clients were sluggish.
As a result, net sales in this segment fell 21.7% year on year to 2,241 million yen.
Segment profit dropped 64.3% to 56 million yen, due to an increase in personnel expenses and a sharp decline in sales of products
sourced from Red Hat, Inc.
The application of the Accounting Standard for Revenue Recognition had no effect on the segment sales or profit during theperiod under review.
ii. Application Business Segment
Net sales in this segment declined 0.8% year on year to 1,523 million yen. This was because slow sales of the management
support system to financial institutions and the adverse effect of the application of the Accounting Standard for Revenue Recognition
more than offset increased revenue from the Gluegent series6 services.
The Group posted a loss of 77 million yen in this segment, compared with a profit of 64 million yen a year earlier. This was
because of an increase in personnel expenses, investments in developing and marketing new products and services, and declined
sales of the management support system to financial institutions.
The application of the Accounting Standard for Revenue Recognition decreased the segment sales by 123 million yen and thesegment profit/loss by 5 million yen.
The Group's combined net sales of these two segments in the period under review were down 14.4% year on year to 3,767 million
yen. The Company posted a consolidated operating loss of 18 million yen, compared with an operating profit of 223 million yen theyear before. The consolidated ordinary profit was down 99.3% to 1 million yen, reflecting the posting of a share of profit of entities
accounted for using the equity method. The consolidated loss attributable to owners of parent amounted to 4 million yen, comparedwith a profit of 159 million yen the previous year.
The application of the Accounting Standard for Revenue Recognition decreased consolidated net sales by 123 million yen,operating profit/loss and ordinary profit by 5 million yen each, and profit/loss attributable to owners of parent by 0 million yen.
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
fiscal year under review are as follows:
EBITDA: 15 million yen, down 93.8% year on year

-4-

ROIC (annualized): -2.2%, compared with 26.2% the year before
1.

Digital transformation
A process in which a company uses data and digital technology to transform its products, services, andbusiness models to more 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.

2.

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.

3.

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

4.

Red Hat Enterprise LinuxLinux OS developed by Red Hat, Inc., a provider of open-source solutions.

5.

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

6.

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.

(2) Financial Positioni.

AssetsCurrent assets amounted to 5,566 million yen as of March 31, 2022, down 3.6% from the end of the previous fiscal year, reflecting
primarily a decrease of 421 million yen in cash and deposits.
Non-current assets amounted to 899 million yen, up 2.8%, reflecting primarily an increase of 19 million yen in investment
securities.
As a result, total assets decreased 2.8% to 6,465 million yen.

ii.

Liabilities
Current liabilities amounted to 4,178 million yen, down 2.1% from the previous fiscal year-end, reflecting primarily a decrease of
22 million yen in income taxes payable.
Non-current liabilities amounted to 473 million yen, down 2.0%, reflecting primarily a decrease of 16 million yen in long-termborrowings.
As a result, total liabilities decreased 2.1% to 4,652 million yen.

iii.

Net assets

Total net assets amounted to 1,813 million yen, down 4.5% from the previous fiscal year-end, reflecting primarily
a decrease of 126 million yen in retained earnings.
(3) Forward-looking Statements Including Consolidated Business Forecasts
As discussed in the earnings presentation for the fiscal year ended December 31, 2021, published on February 3, 2022, theCompany has been stepping up investments in hiring and developing talents as part of its efforts to implement two of its key strategic
initiatives: enhancing the competitiveness of existing products and services; and developing and marketing new products andservices. In the SaaS business, the Gluegent series services have achieved consistent growth in revenue. The Group will continue its
efforts to make its revenue base robust enough to achieve sustainable growth of business.
The consolidated business forecasts for the fiscal year ending December 31, 2022, remain unchanged from as stated in
Consolidated Financial Results for the Fiscal Year Ended December 31, 2021, announced on February 3, 2022. The Company will
announce promptly an update on consolidated business forecasts if any material change should arise.

-5-

2. Consolidated Financial Statements(1) Consolidated Balance Sheet(In thousands of yen)
December 31, 2021

March 31, 2022

AssetsCurrent assets
Cash and deposits

3,148,805

2,727,301

2,101,204-

2,316,786

MerchandiseWork in process

6,842
81,243

7,809
5,192

Advance payments to suppliers
Other

223,317
213,671

216,700
292,631

Allowance for doubtful accounts

-200

-200

5,774,885

5,566,221

Buildings, net
Other, net

59,276
61,92968,70855,674

Total property, plant and equipment

121,206

124,383

Notes and accounts receivable-trade

Total current assets
Non-current assets
Property, plant and equipment

Intangible assets
Software

86,91379,312

Software in progress
Other

11,524
1,781

26,931
1,781

Total intangible assets

100,218

108,025

Investments and other assets
Investment securities

289,222308,948

Retirement benefit asset
Guarantee deposits

53,453
172,939

54,339
162,729

Other
Allowance for doubtful accounts

142,205-4,221

144,983-4,221

Total investments and other assets

653,599

666,779875,025

899,1886,649,910

6,465,409

Total non-current assets
Total assets-6-

(In thousands of yen)
December 31, 2021

March 31, 2022

Liabilities
Current liabilities
Accounts payable - trade

1,216,499

1,235,082

109,000
6,000

94,7205,887

Income taxes payable
Advances received

24,484
2,399,175

1,890-

Contract liabilities
Other

513,734

2,392,100
448,875

4,268,894

4,178,556

Long-term borrowings
Retirement benefit liability

181,500
271,844

165,000
280,329

Lease liabilities
Long-term deposits received

18,353
11,632

16,885
11,632

Total non-current liabilities

483,331473,847

4,752,225

4,652,403

Shareholders’ equity
Share capital

1,481,520

1,481,520

Retained earnings
Treasury shares

630,831-87,254504,622-87,254

2,025,096

1,898,887-3,592-1,834Foreign currency translation adjustment-182,701-148,351

Total accumulated other comprehensive income-186,294-150,186

Current portion of long-term borrowings
Lease liabilities

Total current liabilities
Non-current liabilities

Total liabilities
Net assets

Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-sale securities

Share acquisition rights
Total net assets
Total liabilities and net assets-7-

58,88264,304

1,897,685

1,813,005

6,649,910

6,465,409

(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,
2021

Three months ended March 31,
2022

Net sales

4,398,750

3,767,245

Cost of sales

3,138,799

2,586,554

Gross profit

1,259,951

1,180,690

Selling, general and administrative expenses

1,036,531

1,198,843

223,419-18,152

Interest income
Gain on valuation of derivatives
Share of profit of entities accounted for using equity
methodOther

1,098
35,5891,241
29,572

16,216

20,750

5,862

4,779

Total non-operating income

58,76656,344630

439

43,523-31,6594,450

Operating profit
Non-operating income

Non-operating expenses
Interest expenses
Foreign exchange losses
Loss on investments in investment partnerships
Other
Total non-operating expenses
Ordinary profit
Extraordinary losses
Loss on retirement of property, plant and equipment

232-

44,38636,550237,799

1,640

1,172

5

1,172

5

Profit before income taxes

236,627

1,635

Income taxes-current

72,006

11,106

Income taxes-deferred

5,046-5,276

Total extraordinary losses

Total income taxes

77,053

5,830

Profit159,573-4,195

Profit attributable to owners of parent

159,573-4,195-8-

Consolidated Statements of Comprehensive Income
For three months ended March 31(In thousands of yen)Three months ended March 31,
2021

Three months ended March 31,
2022

Profit159,573-4,195

Other comprehensive income
Foreign currency translation adjustment

34,30734,367

2,334

1,758

-147

-17

36,495

36,108196,068

31,912

196,068

31,912

Valuation difference on available-for-sale securities
Share of other comprehensive income of entities
accounted for using equity method
Total other comprehensive income
Comprehensive income
Comprehensive income attributable to:Comprehensive income attributable to owners ofparent-9-

(3) Notes on Consolidated Financial Statements(Notes on Going Concern Assumption)
Not applicable(Notes on significant changes in the amount of shareholders’ equity)
Not applicable(Changes in accounting policies)(Application of the Accounting Standard for Revenue Recognition)
Effective at the beginning of the period under review, the Company has adopted the Accounting Standard for Revenue Recognition(ASBJ Statement No. 29, issued on March 31, 2020) in its financial reporting. Under this standard, the Company recognizes revenue
when control of a promised good or service has been transferred to a customer, and the recognized amount of revenue is the amountof the consideration expected to be received from the customer in exchange for the good or service.
With the application of the Accounting Standard for Revenue Recognition, the Company has made the following changes to its
accounting policies:(1) Recognizing revenue from transactions in which the Group acts as an agent
When the Group acts as an agent in providing a good or service to a customer, the Company previously recognized as revenue thetotal amount of the consideration to be received from the customer in exchange for the good or service. Under the new accounting
policy, the Company recognizes as revenue the net amount after the amount to be paid to the supplier (principal) for the product orservice is deducted from the amount of the consideration to be received from the customer.
(2) Recognizing revenue from made-to-order software development projects
The Company previously recognized revenue from made-to-order software development projects, based on the percentage-ofcompletion method when the outcome of the completed portion of development was deemed certain, and based on the completedcontract method when it was not. Under the new accounting policy, the Company recognizes revenue from such a project over a
period of time, based on a reasonably estimated performance obligation satisfied to date as a percentage of the total obligation to be
performed under the contract. In cases where such a reasonable estimate cannot be made, the Company recognizes revenue basedon the cost-recovery method.
In a contract in which a performance obligation is expected to be fully satisfied shortly after the transaction begins, the Company
employs an alternative method of recognizing revenue only when the performance obligation is fully satisfied.
(3) Recognizing revenue from the transfer of control of a licensed intellectual property
The Company previously recognized revenue from the transfer of control of a licensed intellectual property when a right to accessthe property was granted to a customer.
Under the new accounting policy, the Company recognizes revenue when the customer has acquired the ability to direct the useof, and receive the benefit from, a licensed intellectual property.
In accordance with the transitional treatment as permitted in the proviso of Paragraph 84 of the Accounting Standard for Revenue
Recognition, the Company has treated the assumed cumulative amount of effect from retroactively applying the new accounting
policies up to the end of the previous fiscal year as an adjustment to retained earnings at the beginning of the period under review,and has begun to apply the new accounting policies to the beginning balance of retained earnings from the period under review.
The application of the new accounting policies resulted in decreases of 123.783 million yen in net sales for the period underreview; of 118.43 million yen in cost of sales; of 5.353 million yen each in operating profit, ordinary profit, and profit before income
taxes; and of 77,000 yen in profit attributable to owners of parent. Retained earnings increased by 8.014 million yen at the beginningof the period under review.
With the application of the Accounting Standard for Revenue Recognition, “Notes and accounts payable trade,” presented under
Current Assets on the Consolidated Balance Sheet for the previous fiscal year, is included in “Notes, accounts payable trade, andcontract assets,” beginning in the period under review. “Advances received,” presented under Current Liabilities on the Consolidated
Balance Sheet for the previous fiscal year, is included in “Contract liabilities,” beginning in the period under review.
In accordance with the transitional treatment as permitted in Paragraph 89-2 of the Accounting Standard for Revenue Recognition,
the Company has not restated the results for the previous fiscal year, using the new presentation methods described above.

-10-

(Application of the Accounting Standard for Fair Value Measurement)
Effective at the beginning of the period under review, the Company has adopted the Accounting Standard for Fair Value
Measurement (ASBJ Statement No. 30, issued on July 4, 2019) in its financial reporting. In accordance with the transitional
treatment as permitted in Paragraph 19 of the standard and Paragraph 44-2 of the Accounting Standard for Financial Instruments(ASBJ Statement No. 10, issued on July 4, 2019), the Company will prospectively apply a new accounting policy as prescribed by
the Accounting Standard for Fair Value Measurement. The application of the new accounting policy has no effect on the
Company's quarterly consolidated financial statements.

-11-

(Segment Information)
I Three months ended March 31, 2021
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

2,863,457

1,535,143

4,398,600

150

4,398,750

829

6,881

7,710

-7,710-2,864,286

1,542,024

4,406,310-7,5604,398,750

159,062

64,207223,269150

223,419

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, 2021
(In thousands of yen)Japan4,246,076

Americas84,609EuropeOther regions

51,01517,048

Total
4,398,750

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-

II

Three months ended March 31, 2022

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
transferssales

2,241,709

1,523,275

3,764,984

2,261

3,767,245

-

2,090

2,090

-2,090-2,241,709

1,525,365

3,767,074

170

3,767,245

56,841-77,255-20,414

2,261-18,152

and

Total
Segment profit

Note: The total amount of segment profits or losses is the same as the amount of operating loss shown on the Consolidated Statementsof Income for the period under review.
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, 2022
(In thousands of yen)Japan
3,568,459

Americas138,628

EuropeOther regions

39,932

20,224

Total
3,767,245

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
3. Changes in reportable segments
As described in “Changes in accounting policies,” effective at the beginning of the period under review, the Company has
adopted the Accounting Standard for Revenue Recognition and revised the accounting methods for revenue recognition.
Accordingly, the Company has changed the methods of accounting for net sales and profit/loss for each reportable segment.
As a result of this change, net sales in the Application Business Segment for the period under review decreased by 123.783
million yen, and the segment profit/loss decreased by 5.353 million yen, compared with using the previous methods. The change
had no effect on net sales or profit/loss in the Open System Infrastructure Business Segment.
(Additional Information)
There is no significant change to the assumptions we made earlier about the effect that the COVID-19 crisis might have on theGroup's business performance going forward, which were provided in the "Additional information" section of the Company's
securities filings for the fiscal year ended December 31, 2021.
(Significant Subsequent Events)
Not applicable-13-