Summary of Financial Statements for theYear Ended December 31, 2017 (J-GAAP) (Consolidated)
February 13, 2018
Company Name: Segue Group Co., Ltd.
Code Number:
3968
URL: http://segue-g.jp/
Representative:
Yasuyuki Aisu, President and CEO
Contact:
Yasuhiro Fukuda, CFO
Scheduled date of annual general meeting of shareholders: March 28, 2018
Scheduled date of filing securities report: March 29, 2018
Scheduled date of dividend payment: Earnings supplementary explanatory documents: Yes
Earnings presentation: Yes (for institutional investors and analysts)

Stock Exchange: Tokyo Stock ExchangeTel.: +81-3-6228-3822(All amounts are rounded down to the nearest million yen)

1. Results for the Year Ended December 31, 2017 (from January 1, 2017, to December 31, 2017)(1) Consolidated Results of Operations(Percentages indicate year-over-year changes)
Profit attributable to
Net sales
Operating income
Ordinary income
owners of parent
million yen%

million yen%

million yen

FY 2017
7,792
13.2
382
75.2
FY 2016
6,881
11.5
218
69.6
Note: Comprehensive income (million yen) FY 2017: 744 (429.8%)

million yen

%

319
162

96.2
64.5

Ratio of ordinary
Ratio of operating
Return on equity income to total assets income to net sales

Net income per share Diluted net income
per share
Yen

%

437
53.0
286
99.9
FY 2016: 140 (423.2%)

Yen

%

%

%

FY 2017
16.5
9.9
4.9
57.10
54.43
FY 2016
34.31
34.11
12.4
8.2
3.2
Reference: Investment gains or losses using the equity method (million yen)
FY 2017: FY 2016: Notes: Basic earnings per share and diluted earnings per share have been calculated taking into account a common stock split
executed at the ratio of one hundred shares for one on September 21, 2016, a common stock split executed at the ratioof two shares for one on April 1, 2017, and a common stock split executed at the ratio of two shares for one on
October 1, 2017. For the purposes of the said calculations, all stock splits mentioned are assumed to have occurred at
the beginning of the fiscal year ended December 31, 2016.
(2) Consolidated Financial Position
Total assets

Net assets

million yen

Equity ratio

Net assets per share

million yen%

Yen

FY 2017
5,154
2,320
45.0
409.39FY 2016
3,708
1,546
41.7
280.45
Reference: Shareholders' equity (million yen)
FY 2017: 2,320 FY 2016: 1,546
Notes: The number of common shares issued and outstanding has been calculated taking into account a common stock split
executed at the ratio of one hundred shares for one on September 21, 2016, a common stock split executed at the ratio of
two shares for one on April 1, 2017, and a common stock split executed at the ratio of two shares for one on October 1,
2017. Net assets per share is calculated under the assumption that the stock split took effect at the beginning of the fiscal
year ended December 31, 2016.
(3) Consolidated Cash Flows
Cash flows fromoperating activities

Cash flows frominvesting activities

Cash flows from financing Cash and cash equivalents at
activities
end of fiscal year

million yen

million yen

million yen

million yen

670
158

- 127
- 44

- 95
162

1,569
1,121

FY 2017
FY 2016
2. Dividends

Annual dividends
End of Q1Yen

FY 2016
FY 2017
FY 2018 (forecast)-End of Q2
Yen

End of Q3
Yen

-

0.00
0.00
0.00

-

End of fiscal year

Total
Ratio of dividend
Payout ratio
dividends
paid to net assets(consolidated)
paid (total)(consolidated)

Total

Yen

Yen

million yen

0.00
0.00
0.00

0.00
0.00
0.00

-

%

-

%

-

3. Forecast for the Year Ending December 31, 2018 (from January 1, 2018, to December 31, 2018)(Percentages indicate year-over-year changes)
Net sales
Full year

Operating income

Ordinary income

Profit attributable to
Net income per shareowners of parent

million yen%

million yen%

million yen%

million yen

%

Yen

8,436

8.3

458

19.9

459

4.9

362

13.5

63.90

* Explanatory notes(1) Changes in major subsidiaries during the fiscal year
(changes in specified subsidiaries in conjunction with change in the scope of consolidation): None
(2) Change of accounting policies; change or restatement of accounting estimates(i) Change of accounting policies caused by revision of accounting standards : None(ii) Change of accounting policies other than stated in (i)(iii) Change of accounting estimates: None: None(iv) Restatement: None(3) Issued shares (common stock)(i) Number of issued shares at end of period (including treasury shares)(ii) Number of Treasury shares at end of period(iii) Average number of shares outstanding during the period

FY 2017

5,668,800 shares

FY 2016

FY 2017- shares

FY 2016

5,514,800 shares- shares

FY 2017

5,586,916 shares

FY 2016

4,738,564 shares* This Summary of Financial Statements is not subject to audit.
* Explanation and other explanatory notes pertaining to the appropriate use of financial forecasts- These materials contain forward-looking statements including forecasts of the Company’s business performance, which are based on certain
assumptions made in accordance with information currently available and judged to be reasonable and are not intended as a guarantee that theCompany will achieve these targets. In addition, actual results may differ materially from these forecasts as a result of various factors, including
actual business performance. For explanatory notes on the assumptions for these forecasts and the use of the financial forecasts, please refer to "1.
Summary of business results (4) Outlook" on page 3 of the attached materials.
- The Company plans to hold a results briefing for institutional investors and analysts on February 21, 2018. The materials distributed at the resultsmeeting are scheduled to be posted on the Company's website promptly after the meeting.

Segue Group Co., Ltd. (3968) Summary of Financial
Statements for the Year Ended December 31, 2017

1. Summary of business results(1) Summary of business results for the period under review
The Japanese economy in the period under review has proceeded on a moderate recovery track amid continuing improvements incorporate earnings and employment. The recovery trend has been holding up also in the global economy despite remaining risks
mainly in the geopolitical sphere. In the security and IT infrastructure industry of the Group, new technologies such as AI and IoT
are increasingly taking center stage and the investment inclination toward IT overall continues unabated. In security reinforcement
measures, there has been a rising trend in moves and investments addressing legislative amendments, external threats such asincreasingly diverse and complex cyber attacks, and internal threats relating to access control and vulnerability management.
In this environment, the Group engaged in proactive efforts surrounding security and IT infrastructure products and services aswell as sales of combinations of both as solutions geared at large companies. As a result, sales of solutions centered on security and
IT infrastructure products increased. Sales of own-developed products and new additions of third-party products performed alsofavorably.
As a result of the above, net sales in the Solutions Products Business during the current fiscal year increased by 712,642 thousandyen (21.0%) year-over-year to 4,104,571 thousand yen, and in the Solutions Services Business they increased by 198,732 thousandyen (5.7%) to 3,688,169 thousand yen. Consolidated sales thus grew by 911,374 thousand yen (13.2%) overall to 7,792,741
thousand yen.
Income increased, with operating income rising to 382,292 thousand yen (up 164,049 thousand yen, or 75.2%), buoyed not only inproportion to the sales expansion but also by sales of own-developed products and newly added third-party products, with ordinary
income of 437,805 thousand yen (up 151,616 thousand yen, or 53.0%) and with 319,024 thousand yen (up 156,450 thousand yen, or
96.2%) in net income attributable to shareholders of the parent company.

(2) Summary of financial status for the period under review
Total assets at the end of the fiscal year came to 5,154,021 thousand yen, an increase of 1,445,644 thousand yen from the previous
fiscal year. Current assets were 4,078,956 thousand yen, an increase of 785,118 thousand yen from the previous fiscal year. Noncurrent assets were 1,075,065 thousand yen, an increase of 660,525 thousand yen from the previous fiscal year.
The main factor behind the rise in current assets was an increase in cash, deposits, and inventories. The main factor behind the risein non-current assets was an increase in investment securities.
Total liabilities for the fiscal year came to 2,833,298 thousand yen, an increase of 671,565 thousand yen from the previous fiscal
year. Current liabilities were 2,520,277 thousand yen, an increase of 604,013 thousand yen from the previous fiscal year. Noncurrent liabilities were 313,020 thousand yen, an increase of 67,552 thousand yen from the previous fiscal year.
The main factor behind the rise in current liabilities was an increase in accounts payable - trade and advances received. The main
factor behind the rise in non-current liabilities was an increase in deferred tax liabilities.
Total assets at the end of the fiscal year came to 2,320,723 thousand yen, an increase of 774,078 thousand yen from the previous
fiscal year. The main factors behind this result were increases in retained earnings and valuation difference on available-for-salesecurities.

-1-

Segue Group Co., Ltd. (3968) Summary of Financial
Statements for the Year Ended December 31, 2017(3) Summary of cash flows for the period under review
For the current fiscal year, cash and cash equivalents came to 1,569,371 thousand yen an increase year-over-year of 447,920
thousand yen (39.9%).
For the respective cash flow categories, the primary factors were as follows.
[Cash flows from operating activities]
Cash flows from operating activities increased by a net inflow of 511,480 thousand yen to 670,090 thousand yen.
Main factors were 466,123 thousand yen in profit before income taxes, a 461,793 thousand yen increase in accounts payable-trade,
and a 157,649 thousand yen increase in advances received, as well as a 466,748 thousand yen increase in inventories.
[Cash flows from investing activities]
Cash flows from investing activities increased by 82,878 thousand yen to a net outflow of 127,025 thousand yen.
Main factors were purchase of property, plant and equipment of 99,635 thousand yen, and purchase of investment securities of
108,814 thousand yen.
[Cash flows from financing activities]
Net cash used in financing activities was 95,497 thousand yen (compared with 162,599 thousand yen in net cash provided byfinancing activities in the previous fiscal year). The main factor was 85,004 thousand yen in expenditure for the repayment of longterm loans.
Reference: Trends in cash flow indicators
Fiscal year ended Fiscal year ended Fiscal year ended Fiscal year ended
December 31,
December 31,
December 31,
December 31,
2014
2015
2016
2017
Equity ratio

30.5

32.5

41.7

45.0

Equity ratio based on market value

-

-

3.0

2.2

Ratio of interest-bearing debt to cash
flow liabilities
Interest coverage ratio

1.5

29.0

1.2

0.1

47.8

2.3

45.8

408.4

Equity ratio: Shareholders' equity / Total assets
Equity ratio based on market value: Market value of stocks / Total assets
Ratio of interest-bearing debt to cash flow: Interest-bearing debt / Cash flow
Interest coverage ratio: Cash flow / Interest paid
Note 1: All calculations use financial values that are stated on a consolidated basis.
Note 2: The FY 2014 and FY 2015 equity ratios based on market value are not stated because the Company's shares were not listed.
Note 3: The total market value of the Company's shares are calculated based on issued shares exclusive of treasury shares.
Note 4: Cash flow uses the value of operating cash flow.
Note 5: Interest bearing debt covers all liabilities, presented in the consolidated balance sheet for which interest is paid.

-2-

Segue Group Co., Ltd. (3968) Summary of Financial
Statements for the Year Ended December 31, 2017(4) Outlook
We expect the mild recovery to continue in Japan, despite the risk that the domestic economy will
underperform the world economy in 2018.
In the fields in which the Segue Group does business, we are projecting continued growth in the desire toinvest in IT in general.
In this environment, the Group has been working at business expansion through efforts such as
strengthening own-product development capabilities and stepping up sales promotion, sustained
expansion of the third-party products line-up of security products and services, and cross-selling of new
and existing merchandise. Based on these efforts, projections call for consolidated sales of 8,436,064
thousand yen (up 8.3% from the period under review), with operating income of 458,424 thousand yen(up 19.9%), ordinary income of 459,441 thousand yen (up 4.9%), and 362,239 thousand yen (up 13.5%)
in net income attributable to the shareholders of the parent company.
2. Basic approach regarding selection of an accounting standard
In order to ensure comparability with other Japanese companies in the same industry, the Group applies the Japanese accounting
standard.

-3-

Segue Group Co., Ltd. (3968) Summary of Financial
Statements for the Year Ended December 31, 2017

4. Consolidated financial statements and major explanatory notes(1) Consolidated balance sheets(units: 1,000 yen)
FY 2016(as of December 31, 2016)
AssetsCurrent assets
Cash
Cash andand deposits
deposits

FY 2017(as of December 31, 2017)

930,772
1,212,782

1,212,782
1,469,381

1,180,937

1,102,032

Securities

28,286-

14,41699,990Inventories
Advance payments - trade

302,085
303,092

768,834
317,612

Accounts receivable - other
Deferred tax assets

186,182
28,625225,939
22,605

Other
Allowance for doubtful accounts

52,083-237

58,286-143

3,293,838

4,078,956

Notes and accounts receivable - trade
Electronically recorded monetary claims - operating

Total current assets
Non-current assets
Property, plant and equipment
Buildings and structures
Accumulated depreciation

36,992

39,244-24,178-26,138

12,814

13,105Tools, furniture and fixtures
Accumulated depreciation

719,450-612,552

748,421-596,381

Tools, furniture and fixtures, net
Land
Leased assets
Accumulated depreciation

106,897
639
5,170-4,960152,040
639
5,170-5,117

Leased assets, net
Total property, plant and equipment

209
120,56152
165,838

Intangible assets
Goodwill

34,908

6,700

Other

23,12827,917

Total intangible assets

58,037

34,618Investments and other assets
Investment securities

Buildings and structures, net

24,389705,105

Long-term guarantee deposits
Deferred tax assets

72,012
54,253

77,118
10,429Insurance funds
Other76,541
8,743

64,924
17,031

235,940
414,539874,608
1,075,065

3,708,377

5,154,021

Total investments and other assets
Total non-current assets
Total assets-4-Segue Group Co., Ltd. (3968) Summary of Financial
Statements for the Year Ended December 31, 2017

(units: 1,000 yen)
FY 2017(as of December 31, 2017)

FY 2016(as of December 31, 2016)
Liabilities
Current liabilities
Accounts payable - trade
Current portion of bonds

394,574
40,000856,368
20,000Current portion of long-term loans payable
Lease obligations

85,004165

38,73255

Accounts payable - otherAccrued expenses

65,206
116,783

103,942
128,417

Income taxes payable
Accrued consumption taxes

95,71279,607

105,958
64,249Advances received
Other

952,601
86,6101,110,251
92,302

Total current liabilities
Non-current liabilities
Bonds payable
Long-term loans payable

1,916,263

2,520,277

20,00038,732-

55-

114,549

119,903
66,778131,873
66,598245,468
2,161,732

313,020
2,833,298

Capital stock
Capital surplus

483,470
255,970

498,306
270,806

Retained earnings

823,957

1,142,981

1,563,398

1,912,094984

421,293

Lease obligations
Deferred tax liabilities
Net defined benefit liability
Long-term accounts payable - otherTotal non-current liabilities
Total liabilities
Net assets
Shareholders' equity

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

Deferred gains or losses on hedges
Accumulated other comprehensive income
Total net assets
Total liabilities and net assets-5--17,737-12,663-16,752

408,629

1,546,645
3,708,377

2,320,723
5,154,021

Segue Group Co., Ltd. (3968) Summary of Financial
Statements for the Year Ended December 31, 2017(2) Consolidated statements of income and comprehensive income
Consolidated statement of income(units: 1,000 yen)
FY 2017 (from January 1, 2017,
to December 31, 2017)

FY 2016 (from January 1,
2016, to December 31, 2016)
Net sales
Cost of sales

6,881,366
5,310,690

7,792,741
5,921,449

Gross margin on sales
Selling, general and administrative expenses

1,570,675

1,871,291

1,352,432
218,243

1,488,998
382,292

211
17,170271-

Surrender value of insurance
Subsidy income

64,926
5,453

48,440
6,670

Other

3,724

2,748

Total non-operating income

91,486

58,131

3,275

1,617

99
-

381
125

3,201
16,858

365
-

105

128

Operating income
Non-operating income
Interest and dividend income
Foreign exchange gains

Non-operating expenses
Interest expenses
Guarantee commission
Foreign exchange losses
Share issuance cost
Expenses related to stock listing
Other
Total non-operating expenses
Ordinary income
Extraordinary income
Gain on sales of investment securities
Gain on transfer of business
Gain on sales of non-current assets

23,541

2,617

286,189

437,805

15,00028,317-59-

15,05928,317Extraordinary losses
Loss on valuation of investment securities

33,070-Total extraordinary losses
Profit before income taxes

33,070268,178

466,123

Income taxes - current
Income taxes - deferred

93,498
12,106138,245
8,853

Total income taxes
Profit105,604
162,574

147,098
319,024

Profit attributable to non-controlling interests
Profit attributable to owners of parent

162,574

319,024

Total extraordinary income-6-Segue Group Co., Ltd. (3968) Summary of Financial
Statements for the Year Ended December 31, 2017
Consolidated statement of comprehensive income

FY 2016 (from January 1,
2016, to December 31, 2016)
ProfitOther comprehensive income
Valuation difference on available-for-sale securities(units: 1,000 yen)
FY 2017 (from January 1,
2017, to December 31, 2017)

162,574

319,024-15

420,308

Deferred gains or losses on hedges-22,041

5,073

Accumulated other comprehensive income-22,057
140,516425,381744,406

140,516-

744,406-

Comprehensive income(Breakdown)Comprehensive income attributable to owners of parent
Comprehensive income related to non-controlling interests-7-

Segue Group Co., Ltd. (3968) Summary of Financial
Statements for the Year Ended December 31, 2017(3) Consolidated statement of changes in equity
FY 2016 (from January 1, 2016, to December 31, 2016)(units: 1,000 yen)
Shareholders' equity

Capital stock
Balance at beginning of current period

Capital surplus

318,000

90,500165,470

165,470

Retained earnings
661,382

Total shareholders' equity
1,069,882

Changes during period
Issuance of new shares

330,941

Profit attributable to owners of parent
Profit162,574

162,574

Net changes during period other thanshareholders' equity―

Total changes during period

165,470

165,470

162,574

493,515

Balance at end of current period

483,470

255,970

823,957

1,563,398

Accumulated other comprehensive income
Valuation difference on Deferred gains or losses onavailable-for-sale securities
hedgesBalance at beginning of current period

1,000

Total accumulated othercomprehensive income

4,304

5,304

Total net assets

1,075,187

Changes during period
Issuance of new shares

330,941

Profit attributable to owners of parent
ProfitNet changes during period other thanshareholders' equity

162,574-15-22,041-22,057-22,057

Total changes during period-15-22,041-22,057

471,457

Balance at end of current period984-17,737-16,752

1,546,645

FY 2017 (from January 1, 2017, to December 31, 2017)(units: 1,000 yen)
Shareholders' equity
Capital stock
Balance at beginning of current period

Capital surplus

483,470

255,970

14,835

14,835Retained earnings
823,957

Total shareholders' equity
1,563,398

Changes during period
Issuance of new shares

29,671

Profit attributable to owners of parent
ProfitNet changes during period other thanshareholders' equity

319,024

319,024―

Total changes during period

14,835

14,835

319,024

348,696

Balance at end of current period

498,306

270,806

1,142,981

1,912,094

Accumulated other comprehensive income

Balance at beginning of current period

Valuation difference on Deferred gains or losses onavailable-for-sale securities
hedgesTotal accumulated othercomprehensive income-17,737-16,752

984

Total net assets

1,546,645

Changes during period
Issuance of new shares
Profit attributable to owners of parent
ProfitNet changes during period other thanshareholders' equity

29,671
319,024
420,308

5,073

425,381425,381

Total changes during period

420,308

5,073

425,381774,078

Balance at end of current period

421,293-12,663408,629

2,320,723-8-

Segue Group Co., Ltd. (3968) Summary of Financial
Statements for the Year Ended December 31, 2017(4) Consolidated statement of cash flows(units: 1,000 yen)
FY 2016 from January 1,
2016 to December 31, 2016)
Cash flows from operating activities
Profit before income taxes

FY 2017 from January 1,
2017 to December 31, 2017)

268,178

466,123

Depreciation
Amortization of goodwill

53,69828,20884,85328,208

Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in net defined benefit liability

237
18,546-94
11,970Interest and dividend income
Interest expenses

-211
3,275

-271
1,617

Loss (gain) on sales of investment securities
Loss (gain) on valuation of investment securities

33,070-28,317-

Foreign exchange losses (gains)
Gain on transfer of business

1,069-15,000-352-

Gain on sales of non-current assets
Decrease (increase) in notes and accounts receivable - trade-59-197,945

92,773

Decrease (increase) in inventories
Decrease (increase) in advance payments

218,196-105,089-466,748-14,519

Increase (decrease) in notes and accounts payable - trade-261,947
149,976

461,793
157,649

Increase (decrease) in advances received
Other-23,713

22,209SubtotalInterest and dividend income received
Interest expenses paid

170,490
211-3,461

816,894271-1,640

Income taxes paid

-8,630-145,434

Cash flows from operating activities

158,610670,090

Cash flows from investing activities
Decrease (increase) in time deposits-6,01691,331

Purchase of investment securities
Proceeds from sales of investment securities

-455
2,000

-108,814
30,000

Proceeds from transfer of business
Purchase of property, plant and equipment

15,000-39,046-99,635

Proceeds from sales of property, plant and equipment

61-17,591892-27,758

845
-62

122
-7,5371,118-44,147674-6,300-127,025

Purchase of intangible assets
Collection of loans receivable
Payments for lease and guarantee deposits
Proceeds from collection of lease and guarantee deposits

Purchase of memberships
Cash flows from investing activities-9-Segue Group Co., Ltd. (3968) Summary of Financial
Statements for the Year Ended December 31, 2017

(units: 1,000 yen)
FY 2016 from January 1,
2016 to December 31, 2016)

FY 2017 from January 1,
2017 to December 31, 2017)

Cash flows from financing activities
Repayment of long-term loans payable-108,976-85,004

Redemption of bonds
Repayments of lease obligations-59,200-165-40,000-165

Proceeds from issuance of shares

330,941

29,671

Cash flows from financing activities

162,599-95,497

Net increase (decrease) in cash and cash equivalents-1,069275,993352
447,920

Cash and cash equivalents at the start of the period
Cash and cash equivalents at the end of the period

845,458
1,121,451

1,121,451
1,569,371

Effect of exchange rate change on cash and cash equivalents- 10 -