Fiscal 2018 year ended March 2018

Financial Results Presentation

June 12, 2018
Focus Systems Corporation(Ticker code: 4662)

Contents

Financial Results for Fiscal 2018

P.3

Projections for Fiscal 2019

P.20

2

Financial Results for Fiscal 2018
Ended March 31, 20183

Highlights

Financial Results◆ Increase in net sales (P.6), increase in profits (P.7) and increase in cash dividend per share (P.17)◆ Issuance of share acquisition rights with exercise price revision clause by way of third-party allotment◆ Reduced net interest-bearing debt further and virtually achieved zero debt (P.16)

Business◆ Expansion of partnership・Coordination with Microsoft Japan to achieve fast processing for cybercrime evidencing data analysis
・Joint research with Nagoya Institute of Technology on directional antenna
・Concluded alliance partnership contract with Drone Pilot Association
・Established VRaiB, a new company jointly invested in with JPPVR4

Overview of Financial Results◆ Highest net sales since founding in 1977
◆ Income recovered significantly in this fiscal year with thorough improvement measures reflecting on
decrease in profit in the previous fiscal year(¥ million)

Year-on-year change

Changes comparedwith planYear ended
March 2017
Results

Year ended
March 2018
Plans

Year ended
March 2018
Results

17,846

18,40019,327

1,480

8.3%

927

5.0%

Operating income

743

850

1,025

282

37.9%

175

20.7%

Ordinary income

731

820

1,019

288

39.4%

199

24.3%

Net income

551

520

719

167

30.4%

199

38.3%

Net sales

AmountRatio

AmountRatio

5Changes in Net Sales

Plan for the next fiscal year: ¥20.0 billion(¥ million) 21,000

19,000

Increase in net sales for seventh consecutive fiscal year

17,00015,00013,00011,000
9,000
7,000
5,000
FY2011FY2012FY2013FY2014

FY2015FY2016FY2017FY20186

Changes in Earnings◆ Income marked V-shaped recovery in all items◆ Profitability improved albeit gradually. Measures for each project are being enhanced toward furtherimprovement(¥ million)

2,600
2,400
2,200
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0-200
FY2011FY2012FY2013Gross profit

FY2014
Operating income

FY2015
Ordinary income

FY2016FY2017FY2018Net income

7Overview by Segment
Final users are public offices and local governments

Public SectorCovers steps from proposal to design, manufacturing, testing as well as maintenance and operation
following commencement of system operations
Supporting society in various settings such as financial systems, trading systems, air traffic controlsystems, welfare and nursing care systems, social insurance systems, etc.

Net sales(¥ million)

7,000

Segment income

6,000Year-on-yearchange0.7%(¥ million)

1,200
1,000

5,000

Year-on-yearchange

800

4,000

45.2%

600

3,000400◆ Constitutes 31.8% of net sales (34.7% in the previous fiscal year)◆ Although net sales decreased slightly, segment income recovered significantly from the previous fiscal yearwhich marked decrease in profits◆ Thoroughly conducted measures to prevent recurrence of delayed progress in projects leading to decrease inprofits in Fiscal 2017
Adopted stricter stance in decision meetings for received orders

8

Overview by Segment
Final users are mainly general private businesses

Private Sector

Conducting development, operation and maintenance of systems for various private businesses underpartnership with IBM Japan, Oki Electric Industry, SoftBank, TIS INTEC, etc.
Engaged in a wide variety of systems including business applications, communications control systems,
IoT and AI

Net sales(¥ million)

13000

Segment income

11000(¥ million)

1300
1100

Year-on-yearchange9000

Year-on-yearchange

900

14.8%

7000

4.7%

700

5000

500

◆ Constitutes 62.1% of net sales (58.6% in the previous fiscal year)◆ Infrastructure building and operation services for major clients achieved growth◆ Operational results in regional areas focusing on Osaka and Nagoya expanding through steady securementof projects
9Overview by Segment
Has a broad customer base and provides services to both the public sector and private sector

Security Equipment

Addresses various needs in handling protective measures, preventing security accidents (cryptographictechnologies and digital watermark) and postventions (digital forensics and cyber security)
Has several partners, including those overseas, and strives to acquire developing technologies and tonurture specialists(¥ million)

Net sales

1300

Segment income

1100

Year-on-yearchange900

Year-on-yearchange1.4%

700

23.8％500(¥ million)300
2001000◆ Constitutes 6.1% of net sales (6.7% in the previous fiscal year)◆ Although segment income slumped from FY 2014 to FY 2016, it has been on a recovery trend for 2 consecutiveyears, due largely to growth in forensics related products◆ Public office projects are also performing favorably (received large orders for cyber security products andexperienced increase in orders for training)
10Net Sales Composition Ratio by Major Client GroupOthers

NTT Data related

33.04%

33.76%FY2018
Sales (¥million)

NTT Data related

6,525

IBM Japan related

4,028

19,327

SoftBank related

860

million yen

TIS INTEC related

837

Oki Electric Industry related

690

Others

6,385

Total

19,327Total

Oki Electric Industry
related

3.58%
TIS INTEC related

4.33%

Name

IBM Japan related
SoftBank related

20.84%

4.45%◆ SoftBank-related orders grew, making it the third-largest customer in terms of net sales in the fiscal year
◆ Net sales from NTT Data and related companies decreased slightly
Net sales from related companies of top 4 companies is generally on an increasing trend11Nonconsolidated Balance Sheets(¥ million)

As of Mar. 31, 2016

As of Mar. 31, 2017

As of Mar. 31, 2018

Current Assets

7.597

7,881

9,969

Noncurrent Assets

7,339

6,685

7,061

Property, Plant and Equipment

3,473

3,525

3,506

Intangible Assets

234

208

151

Investments and Other Assets

3,631

2,951

3,403

Total Assets

14,936

14,567

17,030(ASSETS)(LIABILITIES)Current Liabilities

4,064

3,786

4,459

Noncurrent Liabilities

3,456

3,521

3,370

Total Liabilities

7,520

7,308

7,829

Capital stock

2,905

2,905

2,905

Capital surplus

1,468

1,468

2,138

Retained earnings

1,739

2,069

2,615

Treasury stock
Valuation difference on
available-for-sale securities

(706)

(706)

(359)

2,009

1,522

1,898−−

2

Total Net Assets

7,4157,258

9,201

Total Liabilities and Net
Assets14,936

14,567

17,030(NET ASSETS)

Share acquisition rights

Increased by ¥2,463 million compared with the end of
the previous fiscal year
(Major factors)
・¥1,248 million of increase in cash and deposits
・¥703 million of increase in accounts receivabletrade・¥542 million of increase in investment securities

Increased by ¥521 million compared with the end of
the previous fiscal year
(Major factors)
・¥201 million of increase in deferred tax liabilities
・¥170 million of increase in income taxes payable・¥167 million of increase in accounts payable - trade

Increased by ¥1,942 million compared with the end of
the previous fiscal year
(Major factors)
・¥670million of increase in other capital surplus
・¥546million of increase in retained earnings
brought forward・¥376million of increase in valuation difference on
available-for-sale securities
12Nonconsolidated Income Statements(¥ million)

FY2016(ended Mar. 31,2016)

FY2017(ended Mar. 31,2017)

FY2018(ended Mar. 31,2018)

Net Sales

16,482

17,846

19,327

Cost of Sales

14,285

15,774

16,836Gross Profit

2,197

2,072

2,490

SG & A Expenses

1,243

1,328

1,465

Operating Income

953

743

1,025

Non-operating Income

694750Non-operating Expenses

725956

Ordinary Income

950

731

1,019

Extraordinary Income

235

3758

Extraordinary Loss

1−8

Income before Income
Taxes

1,184

768

1,070

Income Taxes

445

216

350

Net Income

738

551

719

Increased ¥1,480 million from the previous fiscal year・¥45 million decrease of public sector business・¥1,542 million increase of private sector business・¥17 million decrease of security equipmentbusiness

Gross profit improved significantly by 20% from theprevious fiscal year
・Profits increased by ¥312 million due to adoptionof stricter stance in decision meetings for public
sector business(45.2% increase from the previous fiscal year)
・Profits increased by ¥51 million through theexpansion of highly profitable business models indigital forensics field under the information security
equipment business(23.8% increase from the previous fiscal year)

Increased ¥167 million from the previous fiscal year13

Statements of Changes in Shareholders’ equity◆ Shareholders’ equity increased by effective utilization of treasury stock through exercising share acquisition rights(\ thousand)Shareholders’ equity
Capital surplus
Capital stock

Balance as of March 31,
20172,905,422

Legal capitalsurplus

Other capitalsurplus

Total capitalsurplus749,999

718,471

1,468,471

Total
retainedearnings

Treasury
stock

Total
shareholders’equity2,069,354(706,490)

5,736,756

Total
Valuation
andtranslation
adjustments

ShareacquisitionrightsTotal
net assets

1,522,161-

7,258,918

Changes of items during theperiod
Dividends from surplus(173,082)(173,082)(173,082)

Net income

719,243

719,243

719,243

1,017,051

1,017,051

Disposal of treasurystock

670,497

670,497

346,554

Net changes of items otherthan shareholders' equity
Total changes of items
during the period
Balance as of March 31,
2018376,3972,700

379,097--

670,497

670,497546,160

346,554

1,563,212

376,3972,700

1,942,309

2,905,422

749,999

1,388,968

2,138,968

2,615,515(359,936)

7,299,969

1,898,558

2,700

9,201,22814

Nonconsolidated Statements of Cash Flows(¥ million)

FY2016(ended Mar.
31, 2016)

FY2017(ended Mar.
31, 2017)

FY2018(ended Mar.
31, 2018)

Cash Flows from Operating Activities

42490

641

Cash Flows from Investing Activities

293(62)

49

Cash Flows from Financing Activities

(512)

88544

Net Increase (Decrease) in Cash andCash Equivalents

(176)

516

1,236

Cash and Cash Equivalents at Beginningof Period

3,106

2,930

3,447

Cash and Cash Equivalents at End ofPeriod

2,930

3,447

4,683

Increased ¥151 million from the end of the previous
fiscal year due to the expansion in business size andimprovement in profit margins

Increased ¥456 million from the end of the previous
fiscal year as a result of proceeds from disposal oftreasury stock through exercising share acquisitionrights largely surpassing repayment of interestbearing debt which progressed

Increased ¥1,236 million from the end of the previous
fiscal year and virtually achieved zero debt

15

Improvement in Cash Flows: Reduced Net Interest-Bearing Debt
◆ Net interest-bearing debt, which was ¥4.2 billion 13 years ago, was reduced and zero debt was virtually achieved(¥ billion)
7654¥4.2 billion
32

1

0
Mar.
2005Mar.
2006

Mar.
2007

Mar.
Mar.
Mar.
2008
2009
2010
Interest-bearing debt

Mar.
2011

Mar.
Mar.
Mar.
2012
2013
2014
Balance of cash and deposit

Mar.
2015

Mar.
2016

Mar.
2017

Mar.
2018

16

Changes in Share Price and Dividend

(¥)

1,400
1,200

Implemented a two-for-one
share split on October 1, 2015

1,000
800
600
400
200
Apr. 2013

Apr. 2014

Apr. 2015

Apr. 2016

Apr. 2017

Apr. 2018

Mar. 2013

Mar. 2014

Mar. 2015

Mar. 2016

Mar. 2017

Mar. 2018

Net income per share (¥)

17.02

32.91

42.81

53.36

39.83

51.21

Cash dividend per share (¥)

7.5

10.0

12.5

16.0

12.5

16.0

Payout ratio (%)

44.1

30.4

29.3

30.0

31.4

31.2

※ The Company implemented a two-for-one split of its common shares with October 1, 2015 as the effective date. Accordingly, figures before the split havebeen converted in accordance with the number of shares after the split.

17

Shareholder Composition and Number of Shares Owned

Two-for-one
share split(Number of shares)

16,000,000

Assigned to TSE
1st Section(Number of persons)Introduced ashareholder benefit
program

8,000

14,000,000

7,000

Number of shareholders increased
to around double over 3 years

12,000,000
10,000,000

6,000
5,000

Changed stock
market listing toTSE 2nd Section

8,000,000
6,000,000

4,000

Sharp increase in
number of shareholders

3,000

4,000,000

2,000

2,000,000

1,00000
FY2009FY2010FY2011

Individuals, others
Foreign corporations and individuals
Number of shareholders

FY2012FY2013

FY2014

Financial institutions
Securities firms

FY2015FY2016FY2017FY2018Other domestic corporations
Government and local public organizations

18

Changes in the Number of Employees & Turnover Rate◆ Surpassed 1,000 employees in 2016. Increasing trend continues each year◆ In the IT industry which sees employees come and go in large numbers, has maintained a turnover rateof industry average or below(Number of persons)201,200(%)

18

1,100

161,000

14
12900

10800

86700

4600

250002009

2010

2011

Number of employees

2012

2013

2014

Turnover rate of the Company

2015

2016

2017

2018

Turnover rate of IT industry*Turnover rate of IT industry refers to summary report on “Survey on Employment Trends” announced by Ministry of Health, Labour and Welfare.
Turnover ratio in 2018 is not indicated as it is not yet announced.

19

Projections for Fiscal 2019Ending March 31, 201920Fiscal 2019 Projections◆ Make strategic moves for expansion of business content including human investment, development of new products
and services, M&A as well as capital and business partnerships and work on such(¥ million )Year ended March2018
Results

Year ending March2019
Projections

Net Sales

19,32720,000

3.5%

Operating Income

1,025

1,080

5.3%

Ordinary Income

1,019

1,060

4.0%

Net Income

719

700

-2.7%

Year-on-yearchangeExtraordinary income of ¥58 million arose due to surrender of insurance and such inaccordance with retirement of directorsNo extraordinary income projected for the next fiscal year(¥)

Year ended March2018
Results

Year ending March
2019
Projections

Cash Dividends per Share

16.00

15.00

Payout Ratio

31.2％

32.2％

Increase in cash dividend per share from the forecast of ¥12.00

Payout ratio to improve21