Summary of Financial Statements for theYear Ended December 31, 2018 (J-GAAP) (Consolidated)
February 13, 2019
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, 2019
Scheduled date of dividend payment: March 29, 2019
Scheduled date of filing securities report: March 29, 2019
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, 2018 (from January 1, 2018, to December 31, 2018)(1) Consolidated Results of Operations(Percentages indicate year-over-year changes)
Net sales

Operating income

million yen%

million yen%

million yen

FY 2018
8,767
12.5
484
26.7
FY 2017
7,792
13.2
382
75.2
Note: Comprehensive income (million yen) FY 2018: 115 (-84.5%)
Net income per share Diluted net income
per share
Yen

Profit attributable toowners of parent

Ordinary income%

million yen

485
11.0
437
53.0
FY 2017: 744 (429.8%)

18.3
96.2

Ratio of ordinary
Ratio of operating
income to total assets income to net sales

Return on equity

Yen

%

377
319

%

%

%

FY 2018
66.30
64.42
15.8
9.3
5.5
FY 2017
57.10
54.43
16.5
9.9
4.9
Reference: Investment gains or losses using the equity method (million yen)
FY 2018: FY 2017: 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 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 tohave occurred at the beginning of the fiscal year ended December 31, 2017.
(2) Consolidated Financial Position
Total assets

Net assets

million yen

FY 2018
5,350
FY 2017
5,154
Reference: Shareholders' equity (million yen)
(3) Consolidated Cash Flows
Cash flows fromoperating activities

Equity ratio

Net assets per share

million yen

%

2,450
2,320
FY 2018: 2,450

Cash flows frominvesting activities

Yen

45.8
45.0
FY 2017: 2,320

427.77409.39Cash flows from financing Cash and cash equivalents at
activities
end of fiscal year

million yen

million yen

million yen

million yen

434
670

-297
-127

-43
-95

1,663
1,569

FY 2018
FY 2017
2. Dividends

Annual dividends
End of Q1Yen

FY 2017
FY 2018
FY 2019 (forecast)End of Q2
Yen-

End of Q3
Yen

End of fiscal year

-

0.00
0.00
0.00

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

Total

Yen

Yen

million yen

0.00
10.00
10.00

0.00
10.00
10.00

-

%

57

%

15.1
15.4

2.4

3. Forecast for the Year Ending December 31, 2019 (from January 1, 2019, to December 31, 2019)(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

9,476

8.1

566

17.0

574

18.1

371

-1.4

64.92

* Explanatory notes(1) Changes in major subsidiaries during the fiscal year
(changes in specified subsidiaries in conjunction with change in the scope of consolidation): Yes
One new company (company name) Falcon System Consulting Co., Ltd.

(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 2018

5,729,200 shares

FY 2017

FY 2018

41 shares

FY 2017

5,668,800 shares- shares

FY 2018

5,691,517 shares

FY 2017

5,586,916 shares* The summary of financial statements is outside the scope of the audit by certified public accountant or audit firm.
* 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 18, 2019. 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 Ending December 31, 2018

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 global economy too has remained on a recovery trend, although attended by a mounting
sense of uncertainty over issues such as US policy trends and geopolitical risks.
The IT industry, of which the Group is a part, is increasingly focused on new technologies, specifically AI and IoT, and their areasof practical application in digital transformation and in reforms of the way companies are organizing work execution. Thesedevelopments continue to fuel the investment inclination in IT overall. Efforts at strengthening security, amid the progressing
diversity and complexity of cyber attacks, have been seeing ongoing measures against external threats but also investment in
defenses addressing threats from within, such as access management for detecting unusual events and tools for the management ofvulnerabilities. Additionally, the importance of human investment has been on the rise in areas that include training and systemcreation.
Under this environment, the Group expanded sales of products, services and solutions that combine products and services as we
did the previous year through aggressive sales activities. We have also landed large-scale projects and continue to steadily increase
sales of maintenance services. On the other hand, personnel expenses are increasing due to aggressive recruitment and theintroduction of new training programs.
As a result of the above, net sales in the Solutions Products Business during the current fiscal year increased by 532,836 thousandyen (13.0%) year-over-year to 4,637,408 thousand yen, and in the Solutions Services Business they increased by 441,799 thousandyen (12.0%) to 4,129,968 thousand yen. Consolidated sales thus grew by 974,635 thousand yen (12.5%) overall to 8,767,376
thousand yen.
Income increased, with operating income rising to 484,465 thousand yen (up 102,172 thousand yen, or 26.7%), with ordinary
income of 485,942 thousand yen (up 48,136 thousand yen, or 11.0%), and with 377,375 thousand yen (up 58,350 thousand yen, or
18.3%) 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 5,350,087 thousand yen, an increase of 196,065 thousand yen from the previous
fiscal year. Current assets were 4,382,805 thousand yen, an increase of 303,848 thousand yen from the previous fiscal year. Noncurrent assets were 967,281 thousand yen, a decrease of 107,783 thousand yen from the previous fiscal year.
The main factor behind the rise in current assets was an increase in cash and deposits, and advance payments. The main factor
behind the fall in non-current assets was a decrease in investment securities.
Total liabilities for the fiscal year came to 2,899,346 thousand yen, an increase of 66,048 thousand yen from the previous fiscal
year. Current liabilities were 2,685,943 thousand yen, an increase of 165,666 thousand yen from the previous fiscal year. Noncurrent liabilities were 213,402 thousand yen, a decrease of 99,618 thousand yen from the previous fiscal year.
The main factor behind the rise in current liabilities was an increase in advances received. The main factor behind the fall in noncurrent liabilities was a decrease in deferred tax liabilities.
Total assets at the end of the fiscal year came to 2,450,741 thousand yen, an increase of 130,017 thousand yen from the previous
fiscal year. The main factors behind this result were increases in retained earnings.

3

Segue Group Co. Ltd. (3968) Summary of Financial
Statements for the Year Ending December 31, 2018(3) Summary of cash flows for the period under review
For the current fiscal year, cash and cash equivalents came to 1,663,362 thousand yen an increase year-over-year of 93,990
thousand yen (6.0%).
For the respective cash flow categories, the primary factors were as follows.
[Cash flows from operating activities]
Cash flows from operating activities decreased by 235,265 thousand yen to a net inflow of 434,824 thousand yen. Main factors
include 555,526 thousand yen in profit before income taxes, a 482,134 thousand yen increase in advances received, a 261,208
thousand yen decrease in notes and accounts payable-trade, and 172,577 thousand yen in payment of income taxes, etc.
[Cash flows from investing activities]
Cash used in investing activities totaled 297,448 thousand yen, which was 170,422 thousand yen more than in the year-earlier
period. Main factors included 128,983 thousand yen in expenditure for the acquisition of intangible assets and 107,083 thousand
yen in expenditure for the acquisition of property, plant, and equipment.
[Cash flows from financing activities]
Cash used in financing activities totaled 43,901 thousand yen, which was 51,595 thousand yen less than in the year-earlier
period. Main factors included 38,732 thousand yen in expenditure for the repayment of long-term loans and 20,000 thousand
yen in expenditure for the repayment of bonds.
Reference: Trends in cash flow indicators
FY 2015
Equity ratio
Equity ratio based on market value
Ratio of interest-bearing debt to cash
flow liabilities
Interest coverage ratio

FY 2016

FY 2017

FY 2018

32.5

41.7

45.0

45.8

-

3.0

2.2

1.9

29.0

1.2

0.1

-

2.3

45.8

408.4

2,145.2

Equity ratio: Shareholders' capital / 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 2015 equity ratio based on market value is not stated because the Company's shares were not listed.
Note 3: The total market value of the Company's shares is 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.

4

Segue Group Co. Ltd. (3968) Summary of Financial
Statements for the Year Ending December 31, 2018(4) Outlook
The Japanese economy in fiscal year 2019 is seen to continue on a moderate recovery path, albeit with the global economy
beset by downward risk and with the consumption tax rate increase scheduled for later this year. The further outlook is expected
to turn uncertain.
In the fields in which the Segue Group does business, we are projecting continued growth in the desire to invest in IT in
general.
In this environment, the Group will take a proactive stance in recruitment and personnel training, work on the continued
development and sales expansion of own products, widen the range of security-focused products and services, and promote crossselling of new and pre-existing goods. Additionally, the Group will promote the cooperation with companies that own proprietary
technologies and seek to accelerate their current business development.
Working at business expansion through these efforts, projections call for consolidated sales of 9,476,966 thousand yen (up8.1% from the period under review), with operating income of 566,641 thousand yen (up 17.0%), ordinary income of 574,021
thousand yen (up 18.1%), and 371,918 thousand yen (down 1.4%) 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.

5

Segue Group Co. Ltd. (3968) Summary of Financial
Statements for the Year Ending December 31, 2018

3. Consolidated financial statements and major explanatory notes(1) Consolidated balance sheets(units: 1,000 yen)
FY 2017(as of December 31, 2017)
AssetsCurrent assets
Cash and deposits

FY 2018(as of December 31, 2018)

1,469,381

1,663,362

1,102,032
14,416

1,166,419
23,445

Securities
Inventories

99,990768,834―
686,196

Advance payments - trade
Accounts receivable - other317,612
225,939

485,479
266,287

Deferred tax assets
Other

22,60558,286

23,66969,027-143-1,083

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

Allowance for doubtful accounts
Total current assets
Non-current assets

4,078,956

4,382,805

39,24442,974-26,138-28,114

Property, plant and equipment
Buildings and structures
Accumulated depreciation

13,105

Buildings and structures, net

14,860748,421-596,381

800,792-648,461

52
165,838―
167,8316,700

62,759―27,917

144,926
11,794

34,618219,481705,105
77,118355,633
93,813

10,42964,924

44,154
70,105

―

2,241

Other

17,031

16,097

Allowance for doubtful
Total investments and other assets―
874,608-2,075579,969

1,075,065
5,154,021

967,2815,350,087

Tools, furniture and fixtures
Accumulated depreciation

152,040
639
5,170-5,117

Tools, furniture and fixtures, net
Land
Leased assets
Accumulated depreciation
Leased assets, net
Total property, plant and equipment
Intangible assets
Goodwill
Software in progress
Other
Total intangible assets
Investments and other assets
Investment securities
Long-term guarantee deposits
Deferred tax assets
Insurance funds
Claims in bankruptcy

Total non-current assets
Total assets

6

152,331639――

Segue Group Co. Ltd. (3968) Summary of Financial
Statements for the Year Ending December 31, 2018

(units: 1,000 yen)
FY 2018(as of December 31, 2018)

FY 2017(as of December 31, 2017)
Liabilities
Current liabilities
Accounts payable - trade856,368

595,159

Current portion of bonds
Current portion of long-term loans payable

20,00038,732――

Lease obligations
Accounts payable - other55
103,942―
112,106

Accrued expenses
Income taxes payable

128,417
105,958

146,071
129,385

Accrued consumption taxes
Provision for bonuses

64,249―33,017821

Advances received
Other

1,110,251
92,302

1,620,429
48,951

Total current liabilities

2,520,277

2,685,943

Non-current liabilities
Deferred tax liabilities
Net defined benefit liability

114,549
131,873―
146,804

Long-term accounts payable - other

66,59866,598

Total non-current liabilities

313,020

213,402

Total liabilities
Net assets
Shareholders' equity
Capital stock

2,833,298

2,899,346

498,306

505,788

Capital surplus
Retained earnings

270,806
1,142,981

278,288
1,520,357―-79

1,912,094

2,304,355

Valuation difference on available-for-sale securities

421,293

147,002

Deferred gains or losses on hedges-12,663

Treasury shares
Total shareholders' equity
Accumulated other comprehensive income

Accumulated other comprehensive income
Total net assets
Total liabilities and net assets

7

-617

408,629

146,385

2,320,723
5,154,021

2,450,741
5,350,087

Segue Group Co. Ltd. (3968) Summary of Financial
Statements for the Year Ending December 31, 2018

(2) Consolidated statements of income and comprehensive income
Consolidated statement of income(units: 1,000 yen)
FY 2018 (from January 1,
2018, to December 31, 2018)

FY 2017 (from January 1,
2017, to December 31, 2017)
Net sales
Cost of sales

7,792,741
5,921,449

8,767,376
6,598,408

Gross margin on sales
Selling, general and administrative expenses

1,871,291
1,488,998

2,168,967
1,684,502

382,292

484,465271
48,440350
14,574

Subsidy income
Other

6,670
2,748

2,182
2,486

Total non-operating income

Operating income
Non-operating income
Interest and dividend income
Surrender value of insurance

58,131

19,593Non-operating expenses
Interest expenses
Guarantee commission

1,617
381

152
239

Foreign exchange losses
Share issuance cost

125
365

17,349
360

Other

128

14

Total non-operating expenses
Ordinary income

2,617
437,805

18,116
485,942

Extraordinary income
Gain on sales of investment securities

28,317

69,583

Total extraordinary income
Profit before income taxes

28,317466,123

69,583555,526

Income taxes - current
Income taxes - deferred

138,245
8,853

183,707-5,556

Total income taxes
Profit147,098
319,024

178,151
377,375

Profit attributable to non-controlling interests
Profit attributable to owners of parent―
319,024―
377,3758Segue Group Co. Ltd. (3968) Summary of Financial
Statements for the Year Ending December 31, 2018
Consolidated statement of comprehensive income

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

Deferred gains or losses on hedges
Accumulated other comprehensive income

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

9(units: 1,000 yen)
FY 2018 (from January 1,
2018, to December 31, 2018)

319,024

377,375

420,308-274,290

5,073

12,046425,381-262,243

744,406

115,131744,406―

115,131―

Segue Group Co. Ltd. (3968) Summary of Financial
Statements for the Year Ending December 31, 2018

(3) Consolidated statement of changes in equity
FY 2017 (from January 1, 2017, to December 31, 2017)(units: 1,000 yen)
Shareholders' equity

Capital stock
Balance at beginning of current
periodCapital surplus

483,470

255,970

14,835

14,835Retained earnings
823,957

Treasury shares―

Total shareholders'equity1,563,398

Changes during period
Issuance of new shares
Profit attributable to owners ofparentPurchase of treasury shares

29,671
319,024

319,024―

Net changes during period
other than shareholders' equity――

Total changes during period

14,835

14,835

319,024―

Balance at end of current period

498,306

270,806

1,142,981―

348,696
1,912,094

Accumulated other comprehensive income
Valuation difference on
available-for-salesecurities
Balance at beginning of current
periodChanges during period

Deferred gains orlosses on hedges

984

Total accumulated
other comprehensive
income-17,737-16,752

Issuance of new shares

Total net assets

1,546,645

29,671

Profit attributable to owners ofparentPurchase of treasury shares
Net changes during period
other than shareholders' equity

420,308

5,073

425,381425,381

Total changes during period
Balance at end of current period

420,308421,293

5,073-12,663425,381408,629774,078
2,320,723

319,024―

FY 2018 (from January 1, 2018, to December 31, 2018)(units: 1,000 yen)
Shareholders' equity
Capital stock
Balance at beginning of current
periodCapital surplus

498,306

270,806

7,482

7,482

Retained earnings

Total shareholders'equityTreasury shares―

1,142,981

1,912,094

Changes during period
Issuance of new shares

14,964

Profit attributable to owners ofparentPurchase of treasury shares

377,375

377,375-79

Net changes during period
other than shareholders' equity
Total changes during period
Balance at end of current period

―
7,482

7,482

377,375-79505,788278,288

1,520,357-79

Accumulated other comprehensive income
Valuation difference on
available-for-salesecurities
Balance at beginning of current
period421,293

Deferred gains orlosses on hedges-12,663

Total accumulated
other comprehensive
income408,629

Total net assets

2,320,723

Changes during period
Issuance of new shares

14,964

Profit attributable to owners ofparent377,375

Purchase of treasury shares
Net changes during period
other than shareholders' equity

-79

-79
-274,290

12,046-262,243-262,243

Total changes during period-274,290

12,046-262,243

130,017

Balance at end of current period

147,002-617

146,385

2,450,741

10392,2612,304,355 4

Segue Group Co. Ltd. (3968) Summary of Financial
Statements for the Year Ending December 31, 2018

(4) Consolidated statement of cash flows(units: 1,000 yen)
FY 2018 (from January 1,
2018 to December 31, 2018)

FY 2017 (from January 1,
2017 to December 31, 2017
Cash flows from operating activities
Profit before income taxes

466,123555,526

Depreciation
Amortization of goodwill

84,85328,20898,067
10,213

Increase (decrease) in allowance for doubtful accounts
Increase (decrease) in net defined benefit liability-94
11,970Interest and dividend income
Interest expenses

-271
1,617

3,015
14,931

Loss (gain) on sales of investment securities
Foreign exchange losses (gains)-28,317-352

Decrease (increase) in notes and accounts receivable - trade

92,773-466,748

Decrease (increase) in inventories
Decrease (increase) in advance payments
Increase (decrease) in notes and accounts payable - trade-14,519
461,793

Increase (decrease) in advances received
Other

157,649
22,209SubtotalInterest and dividend income received
Interest expenses paid
Income taxes paid

816,894271-1,640-145,434
670,090

Cash flows from operating activities
Cash flows from investing activities
Decrease (increase) in time deposits
Purchase of investment securities

91,331-108,814-350
152-69,583-515-73,414
82,637-167,665-261,208

482,134-66,687

607,254350-202-172,577
434,824―-50,517

Proceeds from sales of investment securities
Purchase of property, plant and equipment

30,000-99,635

Proceeds from sales of property, plant and equipment

Purchase of intangible assets

892-27,758

Payments of loans receivableCollection of loans receivable―
122

Purchase of subsidiary share capital associated witha change in the scope of consolidation―-72,000

Payments for lease and guarantee deposits-7,537

Proceeds from collection of lease and guarantee deposits

674-6,300-18,392

Purchase of memberships-127,025

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

Redemption of bonds-40,000

79,692-107,083―-28,983

-300
115

20
―

-297,448-38,732-20,000

Repayments of lease obligations

-165

-55

Proceeds from issuance of shares

29,671

14,964Purchase of treasury shares
Cash flows from financing activities―-79-95,497-43,901

352

515

Net increase (decrease) in cash and cash equivalents

447,920

93,990Cash and cash equivalents at the start of the period

1,121,451

1,569,371

Cash and cash equivalents at the end of the period

1,569,371

1,663,362

Effect of exchange rate change on cash and cash equivalents

11