Consolidated financial result

SIOS Corporation

Consolidated Financial Result(For the 6-month period ended June 30, 2021)
July 29, 2021
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 13, 2021
(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, 2021 through June 30, 2021)(1) Consolidated business results
Net sales
Million yen(% of change from previous second quarter)

Operating income%

Ordinary income

Million yen%

Million yen

295
54

443.2
42.0

316
57

6-month period(2021/6)
8,079
11.0
6-month period(2020/6)
7,276
5.2
(Note)Comprehensive income
As of June.30, 2021: 271 million yen/ -%Million yen

446.0
-17.9

%

234
19

-

As of June. 30, 2020: 8 million yen/ -%Net income per share- Basic

Net income per share- Diluted

Yen

Yen

27.06
2.29

-

6-month period(2021/6)
6-month period(2020/6)

Net income%(2) Consolidated financial position
Total assets

Net assets

Equity ratio

Million yen

Million yen

%

1,739
1,548

26.1
21.9

6-month period(2021/6)
6,465
FY20206,851(Reference) Equity
As of June. 30, 2021: 1,686 million yen

As of Dec. 31, 2020: 1,500 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

FY2020-0.00

FY2021-0.00

FY2021 (expected)

-

10.00

10.00

-

10.00

10.00

(Note) Revisions to recent dividend forecast: None

3. Forecast of consolidated results for FY2021 (January 1, 2021 through December 31, 2021)
Net sales
Million yen

Operating income%

Million yen

FY2021
15,7005.8(Note) Revisions to recent business forecast: Yes

480

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

Million yen%

Million yen

%

103.2

510

98.9

390

25.8

- 1 -

Yen

44.99

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
FY2021
Second quarter of
FY2021
Second quarter of
FY20218,874,400 shares

FY20208,874,400 shares

205,838 shares

FY2020205,838 shares

8,668,562 shares

Second quarter of
FY20208,668,628 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 2nd Section.
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 ofComprehensive 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(Additional Information).......................................................................................................... 14(Significant subsequent events) ................................................................................................ 14- 3 -Consolidated financial result

SIOS Corporation

1. Qualitative Information on Quarterly Results(1) Results of Operations
Overview of Consolidated Business Performance for the Six Months Ended June 30, 2021
During the six months ended June 30, 2021, the global economy continued to struggle amid the increasingly serious COVID-19
pandemic. The uncertainty over the economic outlook remained high also in Japan, as it was difficult to predict when the public healthcrisis brought about by the coronavirus would subside.
In the IT solutions arena in which the SIOS Group operates, however, companies continued to invest at an accelerated pace in
implementing digital transformation (DX)1 solutions, including switching to teleworking and transitioning to cloud environments. In
this favorable business environment, the Group pursued every growth opportunity by offering value-added products and services tocorporate clients to assist them in moving forward with DX and by stepping up cross-selling efforts, following the realignment of Group
companies.
The Group achieved consolidated business results by segment for the six months ended June 30, 2021, as follows:(i) Open System Infrastructure Business Segment
As corporate clients continued to invest aggressively in implementing DX amid the COVID-19 crisis, the Group enjoyed strong salesof Red Hat Enterprise Linux2 and other software products sourced from Red Hat, Inc.3 The Group also achieved an increase in sales of
its core LifeKeeper4. As a result, net sales in this segment soared 20.8% year on year to 5,054 million yen with a segment income of 215
million yen, compared with a segment loss of 5 million yen for the same period the previous year.
(ii) Application Business Segment
Revenues from software applications for MFPs5 grew year on year, supported by their increased sales in units and helped by the factthat the revenue from subscriptions6 for these applications signed on for by corporate clients during the previous fiscal year began to berecognized during the period under review. The Gluegent series7 also achieved a year-on-year increase in sales. In contrast, revenues
from the provision of support for system development and implementation to financial institutions declined. In addition, as the webservice business for broadcasters as well as the social and public outsourcing service business had been sold to outside the Group in theprevious fiscal year, revenues from those two businesses were no longer counted toward segment sales for the period under review. As aresult, net sales in this segment were down 2.2% year on year to 3,024 million yen.
The segment income was up 32.7% to 79 million yen, thanks primarily to the strong sales of products developed in-house, such assoftware applications for MFPs and Gluegent series products mentioned earlier.
The Group's combined net sales of these two segments jumped 11.0% year on year to 8,079 million yen, which marked therecord-high first-half sales for the Group.

The Company's consolidated quarterly operating profit jumped 443.2% to 295 million yen.

The Company posted a consolidated quarterly ordinary profit of 316 million yen, up 446.0%, and a consolidated quarterly profit of 234
million yen attributable to owners of parent, compared with a profit of 19 million yen the previous fiscal 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) are as follows for thesix months ended June 30, 2021:
EBITDA: 334 million yen, up 231.6% year on year
ROIC (annualized): 16.9%, compared with 3.5% for the same period the previous fiscal year

1

Digital transformation(DX)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

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

3

Red Hat, Inc. Related Items- 4 -Consolidated financial result

SIOS Corporation

Linux OS product developed by Red Hat, Inc., a provider of open source solutions.
4

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

5

Software application 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 runningon an MFP.

6

Subscription business model

7

Gluegent series

A business model that charges customers a recurring monthly or annual fee to access a software product or service.
Service 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) Summary of Financial Position(i) Assets
Current assets amounted to 5,652 million yen as of June 30, 2021, down 6.7% from the end of the previous
fiscal year, reflecting a decrease of 485 million yen in merchandise.
Non-current assets amounted to 812 million yen, up 2.6% from the previous fiscal year-end, reflecting an
increase of 46 million yen in investment securities.
As a result, total assets amounted to 6,465 million yen, down 5.6% from the previous fiscal year-end.
(ii) Liabilities
Current liabilities amounted to 4,211 million yen, down 11.3% from the previous fiscal year-end, reflecting adecrease of 865 million yen in accounts payable trade.
Non-current liabilities amounted to 514 million yen, down 6.9% from the previous fiscal year-end, reflecting adecrease of 61 million yen in long-term loans payable.
As a result, total liabilities amounted to 4,725 million yen, down 10.9% from the previous fiscal year-end.
(iii) Net assets
Total net assets amounted to 1,739 million yen, up 12.4% from the previous fiscal year-end, reflecting theposting of a profit of 234 million yen attributable to owners of parent for the period under review.
(3) Forward-looking Statements Including Consolidated Business Forecasts
We have updated the consolidated business forecasts for the fiscal year ending December 31, 2021, whichwere originally announced on January 28, 2021.
For details, refer to "A Revision to Consolidated Business Forecasts," announced on July 29, 2021.

- 5 -Consolidated financial result

SIOS Corporation

2. Quarterly Consolidated Financial Statements(1) Quarterly Consolidated Balance Sheet(Unit: thousand yen)

FY 2020(as of December 31, 2020)

FY 2021 Q2(as of June 30, 2021)

2,858,289
2,311,150
491,228
26,741
245,565
127,097-200
6,059,872

3,240,834
1,898,308
5,598
31,137259,464
217,758-200
5,652,900

76,52755,086
131,61469,80773,956
143,764

110,467
1,781
112,249

98,946
1,781
100,728

233,775
47,093
193,996
77,319-4,221
547,963
791,826
6,851,698

280,424
52,049184,046
55,901-4,221
568,201
812,693
6,465,594

AssetsCurrent assets
Cash and deposits
Notes and accounts receivable-trade
MerchandiseWork in progress
Advance payment
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
Other
Total intangible fixed assets
Investment and other assets
Investment securities
Net defined retirement assets
Guarantee deposits
Other
Allowance for doubtful accounts
Total investment and other assets
Total fixed assets
Total assets- 6 -Consolidated financial result

SIOS Corporation(In thousands of yen)
December 31, 2020
Liabilities
Current liabilities
Accounts payable-trade
Short-term loans payable
Current portion of long-term loans payable
Lease obligations
Income taxes payable
Advances received
Provision for bonuses
Provision for loss on order received
Other
Total current liabilities
Non-current liabilities
Long-term loans payable
Net defined benefit liability
Lease obligations
Long-term deposits received
Total non-current liabilities
Total liabilities
Net assets
Shareholders’ equity
Capital stock
Retained earnings
Treasury shares
Total shareholders’ equity
Accumulated other comprehensive income
Valuation difference on available-for-salesecurities
Foreign currency translation adjustment
Total accumulated other comprehensive income
Subscription rights to shares
Total net assets
Total liabilities and net assets- 7 -June 30, 2021

1,845,041
50,000123,120
7,099
57,6732,070,735
35,328604
561,448
4,751,052

979,833
123,120
6,027
43,863
2,573,536
97
485,384
4,211,862

290,500
241,315
8,908
11,632552,357
5,303,409

228,940
254,034
19,444
11,632514,051
4,725,913

1,481,520
349,766-87,254
1,744,031

1,481,520
497,626-87,254
1,891,892-6,848-3,816-236,209-243,057
47,315
1,548,289
6,851,698-201,998-205,814
53,603
1,739,680
6,465,594

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 profit
Non-operating income
Interest income
Foreign exchange gains
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 partnership
Share of loss of entities accounted for using
equity method
Loss on valuation of derivatives
Foreign exchange losses
Other
Total non-operating expenses
Ordinary profit
Extraordinary income
Gain on sale of non-current assets
Total extraordinary income
Extraordinary losses
Loss on retirement of non-current assets
Loss on valuation of golf club membership
Total extraordinary losses
Profit before income taxes
Income taxes-current
Income taxes-deferred
Total income taxes
Profit (loss)
Profit (loss) attributable to owners of parent

Six months ended June 30,
2020
7,276,483
5,097,568
2,178,914
2,124,512
54,402(In thousands of yen)Six months ended June 30,
2021
8,079,445
5,592,718
2,486,726
2,191,237
295,489

3,956
9,053
-

2,242
35,479-19,756

7,887
20,8977,329
64,808

1,617
1,269

1,131
-

11,087

-

3,172
214
17,362
57,93842,581
255
43,968316,329

-

74
74

615
268
883
57,05537,24537,24519,80919,8092,856
2,856
313,546
46,75832,24279,000234,546
234,546- 8 -Consolidated financial result

SIOS Corporation

Quarterly Consolidated Statements of Comprehensive Income
Six months ended June 30

ProfitOther comprehensive income
Valuation difference on available-for-salesecurities
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, 2020
Six months ended June 30,(From January 1,
2021
2020
(From January 1, 2021
through June 30,
through June 30, 2021)
2020)
19,809234,546- 9 --3,687

3,032-8,20633,592103618-11,791
8,018

37,242271,789

8,018

271,789

Consolidated financial result

SIOS Corporation(3) Quarterly Consolidated Statements of Cash Flows(In thousands of yen)
Six Months Ended
June 30, 2020
Cash flows from operating activities
Profit (loss) before income taxes
Depreciation
Amortization of goodwill
Interest and dividend income
Interest expenses
Loss (gain) on investments in partnership
Share of (profit) loss of entities accounted forusing equity method
Decrease (increase) in notes and accounts
receivable-trade
Decrease (increase) in inventories
Increase (decrease) in notes and accounts
payable-trade
Increase (decrease) in net defined benefit
liabilities
Increase (decrease) in advance received
Decrease (increase) in advance payment
Increase (decrease) in consumption taxes
payableOther
Sub-totalInterest and dividend income received
Interest expenses paid
Income taxes refund
Income taxes paid
Net cash provided by (used in) operating
activities
Cash flows from investing activities
Payment into time deposits
Proceeds from withdrawal of time deposits
Purchase of property, plant and equipment
Purchase of intangible assets
Payments for guarantee deposits
Proceeds from collection of guarantee deposits
Payments for asset retirement obligations
Purchase of investment securities
Proceeds from distributions from investment
partnerships
Loan advances to subsidiaries and associates
Other
Net cash provided by (used in) investing
activities
Cash flows from financing activities
Dividends paid
Net increase (decrease) in short-termborrowings
Repayments of long-term loans payable
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, 2021

57,05546,192428-4,464
1,617
1,269

313,546
39,461- 2,508
1,131-

11,087-19,756

145,501

420,868-4,771

481,234-83,122- 865,208-4,20812,718367,997-72,610

467,414-13,898

91,035-29,776-14,223538,783
4,464-1,61730,033-31,657-65,140
740,084
2,508-1,131-97,059

540,005

644,402-130,000
130,000-2,134-44,975-17,741336-25,000

130,000-7,119-3,300-7,297-30,535-25,200

19,813--21,542271-8,559-90,971

47,989-42,707-86,938-- 50,000-67,391-4,120-61,560-9,529-114,219-208,027-5,751

28,179329,063512,544

2,136,069
2,465,132

2,728,289
3,240,834

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, 2020 (From January 1, 2020 through June 30, 2020)
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

4,183,428

3,092,935

7,276,363

120

7,276,483

694

1,498

2,192

-2,192－

4,184,122

3,094,433

7,278,555-2,072

7,276,483-5,51759,80054,282120

54,402Total

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

Note: The total amount of segment income (loss) is adjusted to be equal to operating profit presented in the quarterly consolidated
statements of income.
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, 2020 (From January 1, 2020 through June 30, 2020)(Unit: thousand yen)Japan
6,959,197

Americas217,520

Europe69,551Other regions
30,213

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
Not applicable- 12 -

Total
7,276,483

Consolidated financial result

SIOS Corporation

II. For the six months ended June 30, 2021 (From January 1, 2021 through June 30, 2021)
1. Information on the amount of sales and income by reportable segment(Unit: thousandyen)

Adjustments

Amount recordedin quarterly
consolidated
statements ofincome(Note)

8,079,145

300

8,079,445

9,828

10,757-10,757－

5,055,381

3,034,520

8,089,902-10,457

8,079,445

215,807

79,382

295,189300

295,489

Reportable segment
Open systeminfrastructurebusiness

Application
business

5,054,452

3,024,692

928

Total

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

Note: The total amount of segment income (loss) is adjusted to be equal to operating profit presented in the quarterly
consolidated statements of income.
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, 2021 (From January 1, 2021 through June 30, 2021)(Unit: thousand yen)Japan
7,742,208

Americas221,740

Europe78,596

Other regions
36,899Note: 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
Not applicable- 13 -

Total
8,079,445

Consolidated financial result

SIOS Corporation(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, 2020.
(Significant subsequent events)
Not applicable- 14 -