November 8 2018

Summary of Consolidated Financial Results for the Second Quarter of the Year Ending March 31, 2019

Company name:

SRA Holdings, Inc.
(URL: http://www.sra-hd.co.jp/)
Stock listing:Tokyo Stock Exchange
Code number:
3817
President:
Toru Kashima
For inquiries, please contact:
Toshiaki Kobayashi, General Manager, Finance Department, Administrative HeadquartersTel:(03)-5979-2666
Scheduled date of submission of quarterly securities report:
November 9, 2018
November 29, 2018
Scheduled commencement of dividend payment:
Quarterly Results Supplemental Materials
Yes
Quarterly Results Presentation MeetingYes

1. Consolidated results for the Second quarter of the fiscal year ending March 2019(from April 1, 2018 to September 30, 2018)(1) Consolidated Operating Results (cumulative total)(All amounts rounded down, % change YoY)
Profit attributable

Net Sales

Ordinary Profit

Operating Income

to owners of the parent

Second quarter of fiscal
2019
Second quarter of fiscal
2018

Millions of yen%

Millions of yen%

Millions of yen%

Millions of yen%

19,959

(0.2)

1,727

(2.3)

2,139

23.2

851

(26.2)

20,002

6.1

1,768

(0.7)

1,736

17.7

1,154

23.6

Note：Comprehensive Income
Second quarter of fiscal 2019
Second quarter of fiscal 2018

Second quarter of fiscal
2019
Second quarter of fiscal
2018¥525million((71.2)%)¥1,822million(-%)

Net Income

Net Income

per Shareper Share after Dilution

Yen

Yen

69.09

-

94.33

93.87

(2) Consolidated Financial Position

Second quarter of fiscal
2019
Fiscal2018

Shareholders’ Equity Ratio

Total Assets

Net Assets

Millions of yen

Millions of yen%

36,21621,112

58.3

37,756

21,43856.6

Reference: Shareholders’ equity
Second quarter of fiscal 2019 : ¥21,106million
Fiscal 2018: ¥21,379million

2. Dividends
Dividend per Share
End of First QuarterEnd of Second QuarterEnd of Third Quarter

Year-end

Yen

Yen

Yen

Yen

Yen

―
―

40.00
40.00

―

70.00

110.00―65.00

105.00Fiscal 2018
Fiscal 2019
Fiscal 2019(forecast)

Note: Revision of dividend forecast in this quarter:

For the YearNo

70 yen of year-end dividend for FY 2018 includes 10 yen of memorial dividend for the 50th anniversary of business establishment.

3. Consolidated Earnings Forecast for Fiscal 2019(from April 1, 2018 to March 31, 2019)(% of change from FY 2018）

Net Sales

Operating Income

Profit attributable

Ordinary Profit

to owners of the parent

FY2019Net Income
per Share

Millions of yen%

Millions of yen%

Millions of yen%

Millions of yen%

Yen

40,000

1.5

4,400

5.4

4,400

(7.6)

2,800

35.9

227.22

Note: Revision of consolidated results forecast in this quarter:No

4. Others(1) Changes to significant subsidiaries during the current period :No(2) Application of simplified accounting and application of special accounting :(3) Changes in accounting principles and procedures, presentation, etc.
1. Changes caused by revision of accounting standards, etc. :2. Changes other than 1. above:
No

No

No

(4) Number of shares outstanding (common stock)
1. Number of shares outstanding (including treasury stock)
Second quarter of fiscal 2019:15,240,000 sharesFiscal 2018:15,240,000 shares
2. Number of treasury stock
Second quarter of fiscal 2019:
2,903,185 sharesFiscal 2018:
2,935,755 shares
3. Average number of shares over period (consolidated total for quarter)
Second quarter of fiscal 2019:12,322,872 shares
Second quarter of fiscal 2018:12,237,255 shares*Indication of quarterly review procedure implementation status
This earnings release is not subject to the quarterly review process as required by the Financial Instruments and Exchange Act of Japan.
As of the date when this earning release was issued, the review process on quarterly financial statements as required by the Financial
Instruments and Exchange Act had been finished.

*Explanation relating to the appropriate use of results forecasts, and other noteworthy items
Forward-looking statements in this earnings release, such as forecasts of results of operations, are based on the information currently
available and the certain assumptions that we regard as reasonable and therefore actual results may differ materially from those containedin or suggested by any forward-looking statements.

SRA Holdings, Inc. (3817) Summary of Second-Quarter Consolidated Financial Results for the Year Ending March 31, 20191) Qualitative Information Concerning Second-Quarter Consolidated Business Results(1) Explanation Concerning Business Results
During the second quarter of the fiscal year (April 1, 2018 to September 30, 2018), the Japanese economy continued
a moderate recovery amid a gradual increase in capital investment and an improvement in corporate earnings.
In the information services industry, despite an increase in IT investments, mainly by large and medium-sizedcompanies, the environment for securing orders remained severe due to intensifying competition.
Within this business environment, based on our Medium-Term Management Strategy, we will implement thefollowing key measures to enhance corporate and shareholder value, promote earnings structure reform andestablish a high-income model, while working to further enhance shareholder returns.

1) Improving profitability in existing operations• Further raise the gross profit margin
We are working to raise profitability by enhancing and strengthening project management, continuously reduce
production overhead costs, carry out SRA’s proprietary IP product business and promote the appropriate level ofproduction staff.
• Improve SG&A expenses-to-sales ratio
We will strive to raise operation efficiency by introducing an account manager system while working to reduce
operational costs of Head Office staff departments and SRA Professional Service, Co., Ltd., which handles ashared service.
• Expand orders and sales
Priority measures will be to increase customer share of wallet by deeply cultivating existing customers as well as
to focus on securing new customers in growth fields, and in doing so, we will work to expand orders and sales.

2) Transforming the SRA business model•We will work to promote a convergence between “SRA’s proprietary IP product business and higher added value inexisting operations.” At the same time, we will strive to provide SRA’s proprietary IP products and new services insuch growth sectors as the Internet of Things (IoT), mobile computing, security, cloud computing, Big Data andsocial technology fields.

3) Strengthening linkages between SRA’s proprietary IP product business and overseas operations•We intend to expand and upgrade the line of SRA’s proprietary IP products for growth fields as well as promotebusiness that targets overseas markets, which are growth markets.

1

SRA Holdings, Inc. (3817) Summary of Second-Quarter Consolidated Financial Results for the Year Ending March 31, 2019

Due to the above initiatives, our consolidated business results for the second quarter of the fiscal year were as
follows.

Sales of the Systems Development business and System Operations and Infrastructure Development businessincreased but sales of the Product Sales business decreased. Therefore, consolidated net sales amounted to ¥19,959
million, a 0.2% decrease from the same period of the previous fiscal year.
At the profit level, despite an increase in gross profit resulting from measures to improve the profit margin,
operating income decreased 2.3% from the same period of the previous fiscal year to ¥1,727 million due to anincrease in selling, general and administrative expenses. Ordinary profit increased 23.2% from the same period of
the previous fiscal year to ¥2,139 million due to the impact of foreign exchange rates and profit attributable toowners of the parent amounted to ¥851 million, a 26.2% decrease from the same period of the previous fiscal year,
due to the recording of extraordinary losses.

A summary of consolidated business results for the second quarter by business segment is shown below.

1) Systems Development
The Systems Development business recorded increases in sales to manufacturing industries and the financial
industry. As a result, net sales increased 5.3% from the previous fiscal year to ¥10,652 million.

2) System Operations and Infrastructure Development
Orders from companies and university-related orders increased. As a result, net sales of the System Operations andInfrastructure Development business increased 3.3% from the previous fiscal year to ¥2,356 million.

3) Product Sales
Advanced Integration Technology, Inc. and SRA recorded decreases in device sales. As a result, net sales of the
Product Sales business decreased 8.6% from the same period in the previous fiscal year to ¥6,950 million.

(2) Explanation Concerning Financial Condition
Total assets at the end of the second quarter amounted to ¥36,216 million, a decrease of 4.1% from the end of theprevious fiscal year. Total liabilities decreased 7.4% from the end of the previous fiscal year to ¥15,103 million andnet assets decreased 1.5% to ¥21,112 million from the end of the previous fiscal year. Details of the principal
increases and decreases from the end of the previous fiscal year are as follows.

2

SRA Holdings, Inc. (3817) Summary of Second-Quarter Consolidated Financial Results for the Year Ending March 31, 2019

(Total Assets)
Investment securities increased ¥2,141 million to ¥11,495 million due to such factors as the purchase of shares of anaffiliated company. Short-term loans receivable increased ¥2,133 million to ¥2,550 million. On the other hand,
long-term loans receivable decreased ¥1,689 million to ¥1,490 million.

(Total Liabilities)
Accounts payable—trade increased ¥726 million to ¥3,598 million due to an increase in trade payables. On theother hand, provision for loss on litigation decreased ¥1,198 million and short-term loans payable decreased ¥609
million to ¥570 million due to the repayment of bank loans.

(Total Net Assets)
Foreign currency translation adjustments decreased ¥255 million to ¥190 million due to fluctuations in exchange
rates. Valuation difference on available-for-sale securities decreased ¥70 million to ¥584 million due to changes in
the market prices of marketable and investment securities.

(3) Explanation Concerning Consolidated Results Forecast and Other Future Projections
Please refer to “Notice Concerning Differences between Forecast of Consolidated Financial Results and Actual
Results for the Second Quarter (Cumulative) of the Year Ending March 31, 2019” released on November 8, 2018
regarding the differences between forecasted amounts and actual results for the second quarter. No revision has
been made to the full-year consolidated financial results forecast released on May 10, 2018. In the future, we willquickly disclose relevant information if there is a need to revise the forecast of financial results.

3

SRA Holdings, Inc. (3817) Summary of Second-Quarter Consolidated Financial Results for the Year Ending March 31, 2019

2. Consolidated Financial Statements(1) Consolidated Balance Sheets(Millions of Yen)
As of March 31, 2018

As of September 30, 2018ASSETS
Current assets:
Cash and deposits

7,629

4,194

Notes and accounts receivable—trade

6,932

6,474

Securities

108

25

Merchandise and finished goods

647

1,008

1,566

1,407

Short-term loans receivable

416

2,550

Accounts receivable—other

2,874

2,824

Other

1,922

693

Allowance for doubtful accounts
Total current assets(37)
22,061(5)
19,172

Buildings

376

467

Accumulated depreciation

(268)

(276)

Buildings, net

107

191

Machinery, equipment and vehicles

530

548

Accumulated depreciation

(491)

(502)

39

46

136

147

(91)

(95)

Other, net

4551

Total property, plant and equipment

192

289

1,310

1,407

1,310

1,407

Investment securities

9,353

11,495Long-term loans receivable

3,179

1,490

Deferred tax assets

2,211

1,732

Guarantee deposits

384

391

Net defined benefit asset

46

47

Other

555

216

(1,519)(9)Work in process

Non-current assets:
Property, plant and equipment

Machinery, equipment and vehicles,
net Other
Accumulated depreciation

Intangible assets
Other
Total intangible assets
Investments and other assets

Allowance for doubtful accounts
4

SRA Holdings, Inc. (3817) Summary of Second-Quarter Consolidated Financial Results for the Year Ending March 31, 2019

Allowance for investment loss

(19)

(18)

Total investments and other assets

14,191

15,346

Total non-current assets

15,69517,043

Total assets

37,75636,216

5

SRA Holdings, Inc. (3817) Summary of Second-Quarter Consolidated Financial Results for the Year Ending March 31, 2019

(Millions of Yen)
As of March 31, 2018

As of September 30, 2018

LIABILITIESCurrent liabilities:
Accounts payable-trade

2,871

3,598

Short-term loans payable

1,179

570

Accrued expenses

859

604

Income taxes payable

735

409

Accrued consumption taxes

506

367

Advances received

2,908

3,550

Provision for bonuses

565

744

Provision for directors’ bonuses

49

89

Provision for loss on construction contracts

780

378

1,198

–

294

375

11,94910,687

68

69

4,134

4,161

165

167

–

16

4,368

4,415

16,317

15,103

Capital stock

1,000

1,000

Capital surplus

4,671

4,699

Retained earnings

17,364

17,354

Treasury stock(2,437)(2,402)

Total shareholders’ equity

20,59820,651654

584

Foreign currency translation adjustment

445

190

Remeasurements of defined benefit plans

(319)

(320)

Total accumulated other comprehensive income

780

454

Provision for loss on litigation
Other
Total current liabilities
Non-current liabilities:
Deferred tax liabilities
Net defined benefit liability
Provision for directors’ retirement benefits
Other
Total non-current liabilities
Total liabilities
NET ASSETS
Shareholders’ equity

Accumulated other comprehensive income
Valuation difference
securitiesonavailable-for-sale

6

SRA Holdings, Inc. (3817) Summary of Second-Quarter Consolidated Financial Results for the Year Ending March 31, 201959

6

Total net assets

21,438

21,112

Total liabilities and net assets

37,75636,216

Share acquisition rights

7

SRA Holdings, Inc. (3817) Summary of Second-Quarter Consolidated Financial Results for the Year Ending March 31, 2019(2) Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements of Comprehensive Income(Quarterly Consolidated Statements of Income)(Consolidated Cumulative Total for Second Quarter)(Millions of Yen)
Six months ended
September 30, 2017

Six months ended
September 30, 2018

Net sales

20,002

19,959

Cost of sales

15,94915,664Gross profit

4,053

4,294

Selling, general and administrative expenses

2,285

2,567

Operating profit

1,768

1,727

Interest income

36

58

Dividend income

4228

Foreign exchange gains

61

356

Other

27

25

Total non-operating income

168

468

Interest expenses

19

22

Stock transfer agency service fee

98Equity in losses of affiliates

129

20

Other

42

4

Total non-operating expenses

200

56

1,736

2,139

278

3

Gain on reversal of share acquisition rights

1

54

Other

–

1

279

58

Loss on retirement of non-current assets

00Loss on valuation of investment securities

66–

Provision of allowance for doubtful accounts–

260

Loss on litigation–17

Total extraordinary losses

66

278

Profit before income taxes

1,949

1,919

792

560

Non-operating income

Non-operating expenses

Ordinary profit
Extraordinary income
Gain on sales of investment securities

Total extraordinary income
Extraordinary losses

Income taxes-current
8

SRA Holdings, Inc. (3817) Summary of Second-Quarter Consolidated Financial Results for the Year Ending March 31, 2019

Income taxes-deferred

2

507

795

1,068

1,154

851

Loss attributable to non-controlling interests(0)–

Profit attributable to owners of parent

1,154

851

Total income taxes
Net Profit

9SRA Holdings, Inc. (3817) Summary of Second-Quarter Consolidated Financial Results for the Year Ending March 31, 2019

(Quarterly Consolidated Statements of Comprehensive Income)(Consolidated Cumulative Total for Second Quarter)(Millions of Yen)
Six months ended

Six months ended

September 30, 2017

September 30, 2018

1154

851

Valuation difference on available-for-sale securities

714

(70)

Foreign currency translation adjustments

(73)

(254)

Remeasurements of defined benefit plans, net of tax

4(0)

Share of other comprehensive income of entities
accounted for using equity method

22

(0)

Total other comprehensive income

668

(326)

1,822

525

1,822

525

(0)

－

ProfitOther comprehensive income

Comprehensive income(breakdown)Comprehensive income attributable to owners of
the parent
Comprehensive
incomenon-controlling interests

attributable

to10

SRA Holdings, Inc. (3817) Summary of Second-Quarter Consolidated Financial Results for the Year Ending March 31, 2019(3) Quarterly Consolidated Statements of Cash Flows(Millions of Yen)
Six months ended
September 30, 2017

Six months ended
September 30, 2018

1,949

1,919

Depreciation and amortization

229

233

Amortization of goodwill

13–

Increase (decrease) in net defined benefit liability

69

26

Increase (decrease) in provision for directors’ retirement
benefits

11

2

Increase (decrease) in provision for bonuses

56

177

Increase (decrease) in provision for directors’ bonuses

(7)

39

Increase (decrease) in allowance for doubtful accounts

33

(32)

Increase (decrease) in allowance for investment loss

1

(1)

101

(401)

–

(1,198)Interest and dividend income

(79)

(86)

Interest expenses

19

22

Commissions paid–0

Foreign exchange losses (gains)

(61)

(356)

Share of loss (profit) of entities accounted for using equity
method129

20

Loss (gain) on valuation of investment securities

66

–

(278)

(3)

0

0

Decrease (increase) in notes and accounts receivable—trade

630

525

Decrease (increase) in inventories

(510)

(111)

Increase (decrease) in notes and accounts payable—trade

394

591

2

1,316

Increase (decrease) in other liabilities

141

284

Increase (decrease) in accrued consumption taxes

(126)

(138)

Other, net

24

222

Subtotal

2,809

3,053

Interest and dividends income received

72

58

Interest expenses paid

(19)

(21)

(1,389)(829)

Net cash provided by (used in) operating activities:
Income before income taxes and minority interests

Increase (decrease) in provision for loss on construction
contracts
Increase (decrease) in provision for loss on litigation

Loss (gain) on sales of investment securities
Loss on retirement of noncurrent assets

Decrease (increase) in other current assets

Income taxes paid

11

SRA Holdings, Inc. (3817) Summary of Second-Quarter Consolidated Financial Results for the Year Ending March 31, 2019

Net cash provided by used in operating activities

1,472

2,260

Purchase of property, plant and equipment

(58)

(18)

Purchase of intangible assets

(209)

(148)

Purchase of investment securities(767)(2,228)Proceeds from sales of investment securities

1,054

14

Purchase of stocks of subsidiaries and affiliates

–

(92)

Payments for sales of shares of subsidiaries resulting inchange in scope of consolidation
Payments of loans receivable

–

(144)

(939)

(1,788)

Collection of loans receivable

517

46

Payments into time deposits

(150)

(200)

Payments for guarantee deposits–(0)Proceeds from collection of guarantee deposited00

Other, net

(0)

(0)

(554)

(4,561)–(609)

Proceeds from stock issuance to non-controlling shareholders

0–

Purchase of treasury stock

(0)

(0)

(732)

(861)

Proceeds from exercise of stock option

98

58

Commissions paid

–

(3)

(633)

(1,416)

Effect of exchange rate changes on cash and cash equivalents

(14)

(1)

Net increase (decrease) in cash and cash equivalents

270(3,718)Cash and cash equivalents at beginning of period

6,265

7,018

Cash and cash equivalents at the end of quarter

6,536

3,299

Net cash provided by (used in) investing activities:

Net cash used in investing activities
Net cash provided by (used in) financing activities:
Net increase (decrease) in short-term loans payable

Cash dividends paid

Net cash used in financing activities

12

SRA Holdings, Inc. (3817) Summary of Second-Quarter Consolidated Financial Results for the Year Ending March 31, 2019(4) Notes Concerning Consolidated Financial Statements for the Second Quarter(Notes Concerning Premise of Going Concern)
None(Notes on Significant Changes in Shareholders’ Equity)
None(Changes to significant subsidiaries during the current period)
None
There were no changes to specified subsidiaries. However, in the second quarter, Proxim Wireless Corporation,
which became a subsidiary due to the acquisition of an additional equity interest, is included in the scope of
consolidation.

(Additional information)
Adoption of the Partial Amendments to Accounting Standard for Tax Effect Accounting
The Company has adopted the Partial Amendments to Accounting Standard for Tax Effect Accounting (ASBJ
Statement No. 28, February 16, 2018) from the beginning of the first quarter of the current fiscal year. As a result,deferred tax assets are presented in investments and other assets and deferred tax liabilities are presented in
noncurrent liabilities.

13

SRA Holdings, Inc. (3817) Summary of Second-Quarter Consolidated Financial Results for the Year Ending March 31, 2019

(Segment Information and others)[Segment Information]
I. Consolidated cumulative total for second quarter of the previous fiscal year (April 1, 2017 to September 30,
2017)
1. Information concerning net sales and income or losses for each reporting segment(Millions of Yen)
AmountSystemOperations

Systems
Development

andInfrastructurerecorded on
Product
Sales

Total

Adjustment

the quarterly

amount*1

consolidated
statements ofDevelopment

income*2

Sales(1) Sales to
Customers

10,115

2,281

7,605

20,002－20,002

17

102

198

318

(318)

－

Total sales

10,133

2,383

7,804

20,321(318)

20,002

Segment income

1,585

569

475

2,630

(862)

1,768

(2) Intersegment
sales or transfers

Notes:
1. The segment income adjustment of minus ¥862 million is a company-wide expense not apportioned to any
reporting segment. Company-wide expenses are general and administrative expenses and R&D expenses not
attributed to any reporting segment.
2. Segment income is adjusted in operating income on the quarterly consolidated statements of income.

2. Information concerning impairment loss on fixed assets or goodwill for each reporting segment
None

14

SRA Holdings, Inc. (3817) Summary of Second-Quarter Consolidated Financial Results for the Year Ending March 31, 2019

II. Consolidated cumulative total for second quarter of the fiscal year under review (April 1, 2018 to September
30, 2018)
1. Information concerning net sales and income or losses for each reporting segment(Millions of Yen)
AmountSystemOperations

Systems
Development

andInfrastructurerecorded on
Product
Sales

Total

Adjustment

the quarterly

amount*1

consolidated
statements ofDevelopment

income*2

Sales(1) Sales to
Customers

10,652

2,356

6,950

19,959－19,959

7

106

135

249

(249)

－

Total sales

10,659

2,462

7,086

20,208(249)

19,959Segment income

1,780

581

150

2,513

(785)

1,727

(2) Intersegment
sales or transfers

Notes:
1. The segment income adjustment of minus ¥785 million is a company-wide expense not apportioned to any
reporting segment. Company-wide expenses are general and administrative expenses and R&D expenses not
attributed to any reporting segment.
2. Segment income is adjusted in operating income on the quarterly consolidated statements of income.

2. Information concerning impairment loss on fixed assets or goodwill for each reporting segment
None

15

SRA Holdings, Inc. (3817) Summary of Second-Quarter Consolidated Financial Results for the Year Ending March 31, 2019

(Significant subsequent events)
Not applicable

16

SRA Holdings, Inc. (3817) Summary of Second-Quarter Consolidated Financial Results for the Year Ending March 31, 2019

3. Other Information
1. Status of Production, Orders and Sales
 Production amounts
Production by segment in the second quarter of the fiscal year under review is as follows.
Segment information by type of businessSix months ended% change YoY

September 30, 2018

Systems Development (Millions of Yen)

10, 956

101.8

System Operations and Infrastructure
Development (Millions of Yen)

2,374

102.4

Total (Millions of Yen)

13,330101.9

Notes:
1. Amounts are based on sales price.
2. The amounts above do not include consumption tax.
3. Intersegment transactions are offset.

 Purchase amounts
Purchases by segment in the second quarter of the fiscal year under review are as follows.
Segment information by type of businessSix months ended% change YoY

September 30, 2018

Product Sales (Millions of Yen)

4,657

101.0

Total (Millions of Yen)

4,657

101.0

Notes:
1. Amounts are based on purchase price.
2. The amounts above do not include consumption tax.
3. Intersegment transactions are offset.

17

SRA Holdings, Inc. (3817) Summary of Second-Quarter Consolidated Financial Results for the Year Ending March 31, 2019

 Status of orders
Status of orders by segment in the second quarter of the fiscal year under review is as follows.
OrdersSegment information by type of businessreceived(Millions ofOrder backlog% change YoY(Millions of% change YoY

Yen)

Yen)
Systems Development

10,882

99.3

5,049

92.7

System Operations and Infrastructure
Development

2,126

119.5

1,959

129.7

Product Sales

6,671

91.1

3,310

113.6

Total

19,68098.1

10,319104.5

Notes:
1. Amounts are based on sales price.
2. The amounts above do not include consumption tax.
3. Intersegment transactions are offset.
4. The percentages comparing order backlog with the same quarter of the previous fiscal year are comparisons with
figures for which the impact of the conclusion of litigation has been excluded from the previous year’s figures.

 Sales amounts
Sales by segment in the Second quarter of the fiscal year under review are as follows.
Segment information by type of businessSix months ended% change YoY

September 30, 2018

Systems Development (Millions of Yen)

10,652

105.3

System Operations and Infrastructure
Development (Millions of Yen)

2,356

103.3

Product Sales (Millions of Yen)

6,950

91.4

Total (Millions of Yen)

19,95999.8

Notes:
1. Amounts are based on sales price.
2. The amounts above do not include consumption tax.
3. Intersegment transactions are offset.
18