Consolidated financial result

SIOS Corporation

Consolidated Financial Result(For the 9-month period ended September 30, 2022)
October 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: November 14, 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 September 30, 2022)(1) Consolidated business results
Net sales
Million yen

Operating income%

Million yen

9-month period(2022/9)
10,686-8.7
9-month period(2021/9)
11,707
11.2(Note)Comprehensive income
As of September. 30, 2022: -435 million yen/ -%Ordinary income

%

-468
279

Million yen-

Net income

%

-419
312

Million yen

-

%

-566
224

99.6

As of September. 30, 2021: 266 million yen/ 184.0%

Net income per share- Basic

Net income per share- Diluted

Yen

Yen

-65.31
25.88-

9-month period(2022/9)
9-month period(2021/9)(% of change from previous third quarter)(2) Consolidated financial position
Total assets

Net assets

Equity ratio

Million yen

Million yen

%

1,361
1,897

22.1
27.7

9-month period(2022/9)
5,796
FY2021
6,649(Reference) Equity
As of September. 30, 2022: 1,280 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

FY2021-0.00-

FY2022-0.00-

FY2022 (expected)

15.00

15.00

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%

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

Million yen%

Million yen%

Million yen%

Yen

FY2022
15,000-4.6-550(Note) Revisions to recent business forecast: None

-

-500

-

-650

-

-74.98- 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: 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(9-month period)

Third quarter of
FY2022
Third quarter of
FY2022
Third quarter of
FY2022

8,874,400 shares

FY20218,874,400 shares

205,838 shares

FY2021205,838 shares

8,668,562 shares

Third 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 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) 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) Notes to Quarterly Consolidated Financial Statements ................................................................. 10(Notes to Going Concern Assumption) ...................................................................................... 10(Notes on significant changes in the amount of shareholders' equity)............................................. 10(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
During the nine months ended September 30, 2022, the global economy continued to face lingering uncertainty amid the pervasive
COVID-19 pandemic, the Russia-Ukraine conflict, 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 transformation (DX)¹ solutions, including making greater use of cloud environments. In this business environment, the SIOS
Group leveraged 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 period under review 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
While sales of LifeKeeper³, which is one of the Group's core software products, declined in Japan, its sales were strong in theAmericas, Asia, and Oceania. 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, due to delays in their system development
projects caused by longer delivery lead times for hardware products at the height of chip shortages. As a result, net sales in this segment
fell 11.6% year on year to 6,395 million yen.
The Group posted a segment loss of 20 million yen, compared with a profit of 271 million yen the year before, due to the decrease insales described above and an increase in personnel expenses.
The application of the Accounting Standard for Revenue Recognition had no effect on the segment sales or profit during the period
under review.
(ii) Application Business Segment
Revenue from the Gluegent series6 and software applications for MFP7 was up year on year. Sales of the management support systemwere slow to financial institutions. This was primarily because of delays in their system development projects, caused by longer delivery
lead times for hardware products at the height of chip shortages. Combined with the effect of the application of the Accounting Standard
for Revenue Recognition, net sales in this segment were down 4.3% year on year, to 4,282 million yen.
The Group posted a segment loss of 455 million yen, compared with a profit of 7 million yen the year before, due to the decrease insales described above, an increase in personnel expenses, and an increase in investments in new products and services, mainly in the
Med Tech8 category.
The application of the Accounting Standard for Revenue Recognition resulted in a decrease of 344 million yen in segment sales andan increase of 22 million yen in segment profit.
The Group's combined net sales in these two segments for the period under review were down 8.7% year on year, to 10,686 million
yen. The Company posted a consolidated operating loss of 468 million yen, compared with an operating profit of 279 million yen theyear before, and an ordinary loss of 419 million yen, which reflected 40 million yen of the share of profit of entities accounted for using
the equity method, compared with an ordinary profit of 312 million yen a year earlier. The Company posted a loss of 566 million yen,
attributable to owners of parent, compared with a profit of 224 million yen the year before. The loss included an impairment loss of 29
million yen on non-current assets associated with sales of the management support system to financial institutions, and deferred income
taxes of 77 million yen resulting from the reversal of deferred tax assets.
The application of the Accounting Standard for Revenue Recognition resulted in a decrease of 344 million yen in consolidated net
sales, an increase of 22 million yen each in operating profit and ordinary profit, and an increase of 27 million yen in profit attributable toowners of parent.
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: -383 million yen, compared with +338 million yen for the same period the previous year
ROIC (annualized): -26.1%, compared with +10.9% for the same period the previous year

- 4 -Consolidated financial result
1

SIOS Corporation

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

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 the open solution provider Red Hat, Inc.

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.

7

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.

8

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

(2) Financial Position(i) Assets
Current assets amounted to 4,983 million yen as of September 30, 2022, down 13.7% from the end of the previous fiscal year,
reflecting primarily a decrease of 674 million yen in cash and deposits.
Non-current assets amounted to 813 million yen, down 7.1%, reflecting a decrease of 34 million yen in guarantee deposits.
As a result, total assets decreased 12.8% to 5,796 million yen.

(ii) Liabilities
Current liabilities amounted to 3,974 million yen, down 6.9% from the previous fiscal year-end, reflecting primarily a decreaseof 307 million yen in accounts payable trade.
Non-current liabilities amounted to 460 million yen, down 4.7%, reflecting primarily a decrease of 49 million yen in long-termborrowings.
As a result, total liabilities decreased 6.7%, to 4,434 million yen.

(iii) Net assets
Total net assets amounted to 1,361 million yen, down 28.2% from the previous fiscal year-end, reflecting primarily a decrease of
688 million yen in retained earnings.

(3) Forward-looking Statements Including Consolidated Business Forecasts
The consolidated business forecasts for the fiscal year ending December 31, 2022, remain unchanged from those announced on
July 28, 2022. The Company will announce promptly an update on consolidated business forecasts if any material change shouldarise.

- 5 -Consolidated financial result

SIOS Corporation

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

FY 2021(as of December 31, 2021)

FY 2022 Q3(as of September 30,
2022)

3,148,805
2,101,204

2,474,280－－

1,868,258

6,842
81,243
223,317
213,671-200
5,774,885

10,005
3,732
245,799
381,722-200
4,983,600

59,276
61,929121,206

56,426
48,595
105,022

86,913
11,524
1,781
100,218

59,95529,8791,441
91,275289,22253,453
172,939
142,205-4,221
653,599875,025
6,649,910

366,947
51,877
138,851
63,338-4,221
616,793
813,091
5,796,691

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
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, 2021
Liabilities
Current liabilities
Accounts payable-trade
Current portion of long-term borrowings
Lease liabilities
Income taxes payable
Advances received
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
Legal retained earnings
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 -September 30, 2022

1,216,499
109,000
6,000
24,484
2,399,175－
513,734
4,268,894

909,196
66,0005,368－－
2,657,322
336,533
3,974,421

181,500
271,844
18,353
11,632－
483,3314,752,225

132,000
303,645
13,099
11,632
27
460,405
4,434,827

1,481,520
630,831-87,254
2,025,096

1,481,520-57,310-87,254
1,336,954-3,592972－-182,701-186,294
58,882
1,897,685
6,649,910

52-57,043-56,01780,927
1,361,864
5,796,691

Consolidated financial result

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

Net sales
Cost of sales
Gross profit
Selling, general and administrative expenses
Operating profit (loss)
Non-operating income
Interest income
Gain on valuation of derivatives
Share of profit of entities accounted forusing 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 profit (loss)
Extraordinary income
Gain on sale of non-current assets
Total extraordinary income
Extraordinary losses
Impairment losses
Loss on retirement of non-current assets
Total extraordinary losses
Profit (loss) before income taxes
Income taxes - current
Income taxes - deferred
Total income taxes
Profit (loss)
Profit (loss) attributable to owners of parent(In thousands of yen)
Nine months ended September Nine months ended September
30, 2021
30, 2022
11,707,510
10,686,284
8,079,864
7,285,377
3,627,646
3,400,907
3,348,367
3,869,156
279,278-468,249

- 8 -

3,412
42,3704,231
135,244

28,956

40,415

7,231
81,9709,550
189,441

1,689

1,235

－

4,450

46,451
255
48,396
312,853

135,444－
141,130-419,939

74
74

－
－

－
2,856
2,856
310,071
56,28929,43885,727224,343
224,343

29,9092,409
32,319-452,258
36,381
77,489113,870-566,128-566,128

Consolidated financial result

SIOS Corporation

Quarterly Consolidated Statements of Comprehensive Income
Nine months ended September 30

Profit (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

Nine months ended
September 30, 2021
(From January 1, 2021
through September 30,
2021)
224,343(Unit: thousand yen)
Nine months ended
September 30, 2022
(From January 1, 2022
through September 30,
2022)-566,128

3,367

4,564

－
39,18752
125,147-415

510

42,139266,483

130,276-435,852

266,483-435,852- 9 -Consolidated financial result

SIOS Corporation(3) 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(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 amountof revenue is the amount of 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 asrevenue the total 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 or service 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 thepercentage-of-completion method when the outcome of the completed portion of development was deemed certain, and basedon the completed-contract method when it was not. Under the new accounting policy, the Company recognizes revenue fromsuch a project over a period of time, based on a reasonably estimated performance obligation satisfied to date as a percentageof the total obligation to be performed under the contract. In cases where such a reasonable estimate cannot be made, theCompany recognizes revenue based on the cost-recovery method.
In a contract under which a performance obligation is expected to be fully satisfied shortly after the transaction begins, theCompany 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 the rightto access the property was granted to a customer.
Under the new accounting policy, the Company recognizes revenue when the customer has acquired the ability to direct theuse of, 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 theperiod under review, and has begun to apply the new accounting policies to the beginning balance of retained earnings fromthe period under review.
As a result of the application of these new accounting policies, consolidated net sales decreased by 344.179 million yen forthe period under review; cost of sales decreased by 367.006 million yen; operating profit, ordinary profit, and profit before
income taxes increased by 22.827 million yen each;deferred income taxes decreased by 4.238 million yen; and profit

attributable to owners of parent increased by 27.065 million yen. Retained earnings increased by 8.014 million yen at the
beginning of the period under review.
With the application of the Accounting Standard for Revenue Recognition, “Notes and accounts payable trade,” presented- 10 -

Consolidated financial result

SIOS Corporation

under "Current Assets" in the Consolidated Balance Sheet for the previous fiscal year, is included in “Notes, accounts payable
trade, and contract assets,” beginning in the period under review. “Advances received,” presented under "Current Liabilities"
in 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.
(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 this new accounting policy has noeffect on the Company's quarterly consolidated financial statements.

- 11 -

Consolidated financial result

SIOS Corporation(Segment Information)【Segment Information】
I. For the nine months ended September 30, 2021 (From January 1, 2021 through September 30, 2021)
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

7,232,576

4,474,484

11,707,060

450

11,707,510

920

15,45816,379-16,379－

7,233,496

4,489,943

11,723,439-15,929

11,707,510

271,157

7,671

278,828450

279,278

Total

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

Note: The total amount of segment profits is equal to the operating profit presented in the Consolidated Statements of Income for theperiod 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
Nine months ended September 30, 2021
(From January 1, 2021 through September 30, 2021)(Unit: thousand yen)Japan
11,231,753

Americas308,167

Europe113,038

Other regions
54,550Note: 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
11,707,510

Consolidated financial result

SIOS Corporation

II. For the nine months ended September 30, 2022 (From January 1, 2022 through September 30, 2022)
1. Information on the amount of sales and income/loss by reportable segment(Unit: thousandyen)

Adjustments

Amount recordedin quarterly
consolidated
statements ofincome(Note)

10,677,723

8,561

10,686,284

5,342

5,342

-5,342－

6,395,070

4,287,995

10,683,065

3,219

10,686,284-20,999-455,811-476,810

8,561-468,249

Reportable segment
Open systeminfrastructurebusiness

Application
business

6,395,070

4,282,653

－

Total

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

Note: The total amount of segment losses is equal to the operating loss presented in the Consolidated Statements of Income forthe 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 nine months ended September 30, 2022 (From January 1, 2022 through September 30, 2022)(Unit: thousand yen)Japan
10,112,955

Americas380,692

Europe125,305

Other regions

Total

67,331

10,686,284

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 29.909 million yen on non-current assets in the Application Business Segment.
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, theCompany 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 344.179 million
yen, and the segment profit increased by 22.827 million yen, compared with the numbers under the previous method. The change had
no effect on net sales or profit/loss in the Open System Infrastructure Business Segment.

- 13 -

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, 2021.

(Significant subsequent events)
Not applicable- 14 -