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Financial Results
for Fiscal Year
Ended December 31, 2019
February 5, 2020
SIOS Corporation
(Stock Code: 3744 on the Second Section of Tokyo Stock Exchange)
© SIOS Corporation All rights Reserved.
Table of Contents
Summary of Business Results for the Fiscal
Year Ended December 31, 2019 (FY 2019)
Review of FY 2019
Medium-Term Business Plan for FY 2020-2022
and Business Forecasts for FY 2020
Ⅰ
Ⅱ
Ⅲ
© SIOS Corporation All rights Reserved. 2
© SIOS Corporation All rights Reserved.
Summary of Business Results
for the Fiscal Year Ended
December 31, 2019 (FY 2019)
Ⅰ
FY 2018
Results
FY 2019
Results
Change % Change
Net sales 12,799 13,686 +887 +6.9%
Gross profit 4,210 4,345 +135 +3.2%
Operating profit 290 54 △235 △81.1%
Ordinary profit 310 96 △214 △69.0%
Profit (loss)
attributable to owners
of parent
225 32 △193 △85.7%
EBITDA 375 145 △230 △61.4%
ROIC 8.7% 1.7% - -
© SIOS Corporation All rights Reserved.
Consolidated Financial Results for FY 2019
4
(In millions of yen)
*EBITDA: Operating profit + Depreciation + Amortization of goodwill
*ROIC: Operating profit after tax / (Shareholders’ equity + Interest-bearing debts)
© SIOS Corporation All rights Reserved. 5
Consolidated Net Sales
Record-high net
sales achieved in
FY 2019
(Up 6.9% YoY)
(In millions of yen)
12,799
13,686
FY2018 FY2019
© SIOS Corporation All rights Reserved.
Consolidated Operating Profit, EBITDA, and R&D Spending
 Operating profit declined
by ¥235 million from the
previous year.
 R&D spending remained
robust.
6
(In millions of yen)
290
54
375
145
551
652
0
150
300
450
600
FY2018 FY2019
Operating Profit EBITDA R&D
© SIOS Corporation All rights Reserved.
Consolidated Balance Sheets
 Property, plant and equipment 221
 Intangible assets: an increase of ¥134 million in software in progress
 Net assets: a decrease of ¥94 million in valuation difference on available-for-sale securities
7
 Intangible assets 89
Current assets
4,383
(including
cash and
deposits of
2,138)
Total liabilities
3,970
(including
interest-bearing
debts of 751)
Investment and
other assets 635
Total net
assets
1,359
Current assets
4,479
(including
cash and
deposits of
2,266)
Total liabilities
4,023
(including
interest-bearing
debts of 614)
投資その他 438
Total net
assets
1,308
 Property, plant and equipment 186
 Intangible assets 226
Total assets
5,330
Total liabilities
and net assets
5,330
Total assets
5,332
Total liabilities
and net assets
5,332
Investment and
other assets 438
As of December 31, 2018 As of December 31, 2019 (In millions of yen)
© SIOS Corporation All rights Reserved.
Analysis of Consolidated Cash Flows
Cash and cash
equivalents as
of December
31, 2018
Cash flows
from operating
activities
Cash flows
from investing
activities
Cash flows
from financing
activities
Effect of change
in exchange rate
on cash and
cash equivalents
363
2,136△130 △5
Cash and cash
equivalents as
of December
31, 2019
2,008
△101
8
(In millions of yen)
© SIOS Corporation All rights Reserved. 9
YoY Changes in Cash Flows
(Millions of yen)
Cash flows from
operating activities
Cash flows from
investing activities
Cash flows from
financing activities
Amount of YoY changes Increase of ¥363 Decrease of ¥101 Decrease of ¥130
Breakdown Increases •¥135 resulting from profit
before income taxes
•¥280 resulting from an
increase in notes and
accounts payable trade
•¥117 resulting from an
increase in advances
received
Decreases •¥142 resulting from an
increase in notes and
accounts receivable
trade
•¥109 resulting from a
decrease in accrued
consumption taxes
•¥159 resulting from
purchase of intangible
assets
•¥133 resulting from
repayments of long-
term loans payable
© SIOS Corporation All rights Reserved.
Cash Flows and Investments
10
R&D projects and
investments funded
by an increasing
level of cash flows
(In millions of yen)
△106
262
(800)
(400)
0
400
800
1200
FY2018 FY2019
CF from operations(excluding R&D expenses)
CF from investing activities
R&D spending
Free cash flows
© SIOS Corporation All rights Reserved.
Open System Infrastructure Business
 Sales of business-continuity solutions
showed a solid increase, fueled by
strong demand for our core
LifeKeeper* in Japan.
 Sales of software products sourced
from Red Hat, Inc.* increased from
the previous year.
11
Net sales 7,695 million yen, up 6.4% YoY
(In millions of yen)
7,231
7,695
FY2018 FY2019
© SIOS Corporation All rights Reserved.
Open System Infrastructure Business
Segment income 58 million yen, down 49.0% YoY
12
 Segment income declined YoY due
to increases in labor cost at a U.S.
subsidiary as well as in development
cost to upgrade LifeKeeper.
115
58
FY2018 FY2019
(In millions of yen)
© SIOS Corporation All rights Reserved.
Application Business
13
Net sales 5,991 million yen, up 7.6% YoY
 Revenues from the provision of support
for system development and
implementation to financial institutions
achieved steady growth.
 Revenues from the Gluegent series*
maintained momentum of growth.
 Sales of our core software applications
for MFPs* declined, affected by a new
subscription business* launched in the
fourth quarter.
(In millions of yen)
5,568
5,991
FY2018 FY2019
© SIOS Corporation All rights Reserved.
Application Business
Segment income
Loss of 4 million yen, compared with an
income of 174 million yen the year before
14
 Segment income declined YoY partly
because the loss from unprofitable projects
undertaken in the first half of the year to
provide support for system development and
implementation to financial institutions was
not fully offset in the second half,
 and partly because sales of the following
high-margin products developed in-house
were weak.
• Software applications for MFPs
• Management support system for financial
institutions
(In millions of yen)
174
-4
FY2018 FY2019
© SIOS Corporation All rights Reserved.
Review of FY 2019
Ⅱ
© SIOS Corporation All rights Reserved. 16
Business Challenge ①: Software Applications for MFPs
A larger-than-expected number of corporate customers
switched from a perpetual licensing model for our high-
margin software applications for MFPs to a subscription
model launched in the fourth quarter of FY 2019, and the
recognition of some of the subscription revenues was
deferred to FY 2020, bringing the FY 2019 revenues from
these applications down.
リプションで
Challenge
Action
It is inevitable that revenue or profit of a software product
declines temporarily while we make a transition from a
perpetual licensing model to a subscription model. We
intend to bolster sales to new and existing customers by
offering products and services that meet their needs and
releasing regular functional updates.
© SIOS Corporation All rights Reserved. 17
(1) Provision of support for system development and implementation
Profit in this business declined due to unprofitable projects undertaken
and delayed in the first half of FY 2019. We conducted more stringent
preliminary assessments to screen out unprofitable projects.
(2) Sale of management support system
The recognition of revenues from orders received in the fourth quarter of
FY 2019 was deferred to FY 2020, which made it impossible to make up
in the second half of the year for the shortfall in sales and profit posted
in the first half.
Challenge
Action Continue to perform a stringent assessment of a proposed project
before closing a deal
Offer clients subscription options as part of our efforts to change the
nature of this business fundamentally
Challenge
Action
Business Challenge ②: Business with Financial Institutions
© SIOS Corporation All rights Reserved.
Medium-Term Business Plan for FY
2020-2022 and Business Forecasts
for FY 2020
Ⅲ
© SIOS Corporation All rights Reserved. 19
Primary Objective and Management Metrics Established
in Medium-Term Business Plan for FY 2020-2022
The Group uses EBITDA and ROIC as its key management metrics to continue to
generate positive cash flow. Positive cash flow enables the Group to invest in
the three driving forces for our growth—people, research and development,
and a corporate culture that fosters innovation—and to return profit to our
shareholders and stakeholders. Through these efforts, the Group works toward
achieving its primary management objective.
Under the mission of making the impossible possible for the people of
the world, the SIOS Group works toward achieving its primary management
objective of pursuing innovative solutions to resolve issues affecting people
and to contribute to a better society.
Primary Management Objective
Management Metrics
© SIOS Corporation All rights Reserved. 20
Basis for Achieving the SIOS Group Mission
Improve performance
on key management
metrics
Achieve greater
EBITDA and
ROIC
Generate
positive cash
flows
Invest to achieve the mission
Return profit to shareholders and
other stakeholders
Invest in people, R&D, and a
corporate culture that fosters
innovation
Return profit to
shareholders and other
stakeholders
Make the business
foundation more solid
Make the business
foundation more solid
Increase sales and
gross profit
Reduce interest-bearing
debts
Maintain good
relationships
with
stakeholders
Carry out
M&A
Release new
products and
services
Enhance existing
products and
services
Raise the level of
customer
satisfaction
Optimizing SG&A expenses
© SIOS Corporation All rights Reserved.
Review of FY 2019 ①
21
Release new
products and
services
Enhance existing
products and
services
Released SIOS bilink, a platform that supports
companies operating under subscription
business models
Released an AI-enabled service solution for MFPs
that recognizes confidentiality designations on
documents for greater information security
Repaid ¥130 million of loans
payable
Reduce interest-
bearing debts
© SIOS Corporation All rights Reserved.
Review of FY 2019 ②
22
Invest in people, R&D,
and a corporate culture
that fosters innovation
• Rolled out a new container* platform
business to meet the growing needs
among corporate clients to pursue
digital transformation (DX)*
• Introduced new talent management
programs, such as OKR* and 1 on 1*
Return profit to
shareholders and other
stakeholders
• Resumed dividend payment of
¥5.0 per share for the first time
in five years
© SIOS Corporation All rights Reserved.
Medium-Term Business Plan for FY 2020-2022
We will use the transition to a subscription business model to lay the
groundwork for sustained growth under the three-year plan and will work
toward achieving EBITDA of ¥560 million and ROIC of 14.7% in FY 2022.
2019 2020 2021 2022
EBITDA 145 180 310 560
ROIC 1.7% 2.7% 7.1% 14.7%
23
(In millions of yen)
© SIOS Corporation All rights Reserved. 24
Key Initiative: Transition to a Subscription Business Model ①
As companies have been investing aggressively in
implementing DX, more and more of them have been
switching from perpetual licensing of software to subscription.
Background and Benefits of Making a Transition to a Subscription Model
Background
 User benefits of switching to a subscription model
① Lower initial cost
② Ease of cancellation
③ Ability to continue to use up-to-date products and services
 Software vendor’s benefits of switching to a subscription model
① Ability to create a steady and recurring stream of revenue and profit
② Ability to collect information about customers’ usage of products
and services to continually improve their quality
© SIOS Corporation All rights Reserved. 25
Offer corporate customers
subscription options for our products
and services developed in-house
Why We are Making a Transition to a Subscription Model
We can better assist our corporate customers in their
efforts to implement DX by offering them subscription
options for our products and services, which is a
critical business model for our long-term growth.
Key Initiative: Transition to a Subscription Business Model ②
1,790 1,940
2,160
2,500
3,100
2,340 2,530
2,860 2,910
3,160
2018年度 2019年度 2020年度 2021年度 2022年度
サブスクリプション売上 売り切りモデル売上
© SIOS Corporation All rights Reserved.
Projected Revenues from Subscription Business for Products and Services Developed In-House
26
 We intend to make a transition to subscription business not only for software
applications for MFPs but also for our other software products.
 Revenues from subscription are projected to reach the level of those from perpetual
licensing business in FY 2022.
(Millions of yen)
Key Initiative: Transition to a Subscription Business Model ③
Revenues from subscription Revenues from perpetual licensing
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
© SIOS Corporation All rights Reserved.
Consolidated Business Forecasts for FY 2020
FY 2019
Results
FY 2020
Forecasts
Change % Change
Net sales 13,686 14,300 +613 +4.5%
Operating profit 54 80 +25 +45.6%
Ordinary profit 96 100 +3 +3.9%
Profit (loss)
attributable to owners
of parent
32 40 +7 +23.6%
EBITDA 145 180 +34 +24.0%
ROIC 1.7% 2.8% - -
We intend to maintain our momentum of growth for 10 consecutive
fiscal years and achieve net sales of ¥14.3 billion in FY 2020.
27
(In millions of yen)
© SIOS Corporation All rights Reserved. 28
Key Strategies for FY 2020 ①
Conduct stakeholder surveys to better serve our
customers and improve the quality of our
products and services
Raise the level of
customer
satisfaction
Enhance existing
products and
services
Update existing products and add more value to
them to better serve customers in their greater
use of subscription and cloud
Optimize resource allocation within the Group to
achieve greater efficiency and better manage
subcontractors
Optimizing
SG&A expenses
© SIOS Corporation All rights Reserved.
Key Strategies for FY 2020 ②
29
Implement programs intended to assist every
employee in achieving their full professional
potential
• Ensure employees embrace new talent
management programs, such as OKR and
1 on 1
• Offer employees more flexible working
arrangements
• Expand the scope of CSR activities
Continue dividend payment of
¥5.0 per share
Invest in people, R&D,
and a corporate culture
that fosters innovation
Return profit to
shareholders and other
stakeholders
Cash Dividends for FY 2019 and 2020
Dividend payment of ¥5.0 per share resumed
Fiscal year ended
December 31, 2019
Dividend payment of ¥5.0 per share planned
Fiscal year ending
December 31, 2020
(Projected)
23rd term 24th term
Fiscal year ended
December 31, 2019
Fiscal year ending
December 31, 2020
(Projected)
Annual cash
dividend per
share
¥5.0 ¥5.0
30© SIOS Corporation All rights Reserved.
SIOS is Innovative Open Solutions
© SIOS Corporation All rights Reserved.
About SIOS Corporation
31
Headquarters SIOS Building, 2-12-3 Minami Azabu Minato-ku, Tokyo, Japan
Capital 1,481 million yen
Established May 23, 1997
No. of employees 432 on a consolidated basis (as of December 31, 2019)
Main consolidated
subsidiaries
Japan:
SIOS Technology, Inc.
Gluegent, Inc.
Keyport Solutions, Inc.
Profit Cube Inc.
Listed on the Second Section of the Tokyo Stock Exchange, SIOS Corporation is a holding company that manages
subsidiaries having a wealth of expertise and assets in open source software, including Linux, AI and cloud technologies, and
Fintech.
Under the mission of making the impossible possible for the people of the world, the SIOS Group pursues innovative
solutions to resolve issues affecting people and to contribute to a better society.
U.S.A.:
SIOS Technology Corp.
© SIOS Corporation All rights Reserved.
Glossary
32
Page Term Description
11 LifeKeeper A failover software product that automatically switches a failed primary server to a backup server.
11
Software products sourced
from Red Hat, Inc.
Open-source software products developed by Red Hat, Inc., a provider of open-source solutions.
13 Gluegent series
"Gluegent Gate" which manages ID in the cloud, "Gluegent Apps group scheduler" etc. which added team
calendar schedule management function etc to Google Calendar etc. We support business efficiency by
using enterprise cloud.
13
Software applications for
multifunction printers (MFPs)
A multifunction printer (MFP) is a piece of office equipment that incorporates print, scan, copy, and fax
capabilities into one unit. The Group develops, markets, and updates document management software
applications, such as Quick Scan and Speedoc, that run on an MFP.
13 Subscription model
A business model that charges customers a recurring monthly or annual fee to access a software product
or service.
22 Digital transformation (DX)
A process in which a company uses data and digital technology to transform its products, services, and
business 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.
22 Container
A standard unit of software into which the host OS is divided logically and that packages everything needed
to run an application, such as codes and system libraries, to make it work like an independent server.
22 OKR
Objectives and Key Results. A goal management framework for establishing ambitious objectives with
measurable results and tracking progress.
22 1 on 1
A one-on-one meeting that a manager conducts with an employee to assist her or him in achieving
professional growth and improving their job performance.
Forward-looking statements about the Company’s business outlook contained in this document
reflect management’s assumptions and judgments made on the basis of available information, and
may include risks and uncertainties. We caution that significant risks and uncertainties could cause
actual performance to differ materially from what is discussed in the forward-looking statements.
Significant risks and uncertainties that might affect our performance include, but are not limited to,
the economic environment and market conditions in which we operate.
Call the IR Section of SIOS Corporation on 03-6401-5125
(+81-3-6401-5125 from outside Japan)
For inquiries about this document
or fill in and send an online inquiry form available at:
https://mk.sios.com/SIOS_Inquiry.html
© SIOS Corporation All rights Reserved.
Cautionary Statement
33
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20200205financial results-presentation.pdf

  • 1. Financial Results for Fiscal Year Ended December 31, 2019 February 5, 2020 SIOS Corporation (Stock Code: 3744 on the Second Section of Tokyo Stock Exchange) © SIOS Corporation All rights Reserved.
  • 2. Table of Contents Summary of Business Results for the Fiscal Year Ended December 31, 2019 (FY 2019) Review of FY 2019 Medium-Term Business Plan for FY 2020-2022 and Business Forecasts for FY 2020 Ⅰ Ⅱ Ⅲ © SIOS Corporation All rights Reserved. 2
  • 3. © SIOS Corporation All rights Reserved. Summary of Business Results for the Fiscal Year Ended December 31, 2019 (FY 2019) Ⅰ
  • 4. FY 2018 Results FY 2019 Results Change % Change Net sales 12,799 13,686 +887 +6.9% Gross profit 4,210 4,345 +135 +3.2% Operating profit 290 54 △235 △81.1% Ordinary profit 310 96 △214 △69.0% Profit (loss) attributable to owners of parent 225 32 △193 △85.7% EBITDA 375 145 △230 △61.4% ROIC 8.7% 1.7% - - © SIOS Corporation All rights Reserved. Consolidated Financial Results for FY 2019 4 (In millions of yen) *EBITDA: Operating profit + Depreciation + Amortization of goodwill *ROIC: Operating profit after tax / (Shareholders’ equity + Interest-bearing debts)
  • 5. © SIOS Corporation All rights Reserved. 5 Consolidated Net Sales Record-high net sales achieved in FY 2019 (Up 6.9% YoY) (In millions of yen) 12,799 13,686 FY2018 FY2019
  • 6. © SIOS Corporation All rights Reserved. Consolidated Operating Profit, EBITDA, and R&D Spending  Operating profit declined by ¥235 million from the previous year.  R&D spending remained robust. 6 (In millions of yen) 290 54 375 145 551 652 0 150 300 450 600 FY2018 FY2019 Operating Profit EBITDA R&D
  • 7. © SIOS Corporation All rights Reserved. Consolidated Balance Sheets  Property, plant and equipment 221  Intangible assets: an increase of ¥134 million in software in progress  Net assets: a decrease of ¥94 million in valuation difference on available-for-sale securities 7  Intangible assets 89 Current assets 4,383 (including cash and deposits of 2,138) Total liabilities 3,970 (including interest-bearing debts of 751) Investment and other assets 635 Total net assets 1,359 Current assets 4,479 (including cash and deposits of 2,266) Total liabilities 4,023 (including interest-bearing debts of 614) 投資その他 438 Total net assets 1,308  Property, plant and equipment 186  Intangible assets 226 Total assets 5,330 Total liabilities and net assets 5,330 Total assets 5,332 Total liabilities and net assets 5,332 Investment and other assets 438 As of December 31, 2018 As of December 31, 2019 (In millions of yen)
  • 8. © SIOS Corporation All rights Reserved. Analysis of Consolidated Cash Flows Cash and cash equivalents as of December 31, 2018 Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Effect of change in exchange rate on cash and cash equivalents 363 2,136△130 △5 Cash and cash equivalents as of December 31, 2019 2,008 △101 8 (In millions of yen)
  • 9. © SIOS Corporation All rights Reserved. 9 YoY Changes in Cash Flows (Millions of yen) Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Amount of YoY changes Increase of ¥363 Decrease of ¥101 Decrease of ¥130 Breakdown Increases •¥135 resulting from profit before income taxes •¥280 resulting from an increase in notes and accounts payable trade •¥117 resulting from an increase in advances received Decreases •¥142 resulting from an increase in notes and accounts receivable trade •¥109 resulting from a decrease in accrued consumption taxes •¥159 resulting from purchase of intangible assets •¥133 resulting from repayments of long- term loans payable
  • 10. © SIOS Corporation All rights Reserved. Cash Flows and Investments 10 R&D projects and investments funded by an increasing level of cash flows (In millions of yen) △106 262 (800) (400) 0 400 800 1200 FY2018 FY2019 CF from operations(excluding R&D expenses) CF from investing activities R&D spending Free cash flows
  • 11. © SIOS Corporation All rights Reserved. Open System Infrastructure Business  Sales of business-continuity solutions showed a solid increase, fueled by strong demand for our core LifeKeeper* in Japan.  Sales of software products sourced from Red Hat, Inc.* increased from the previous year. 11 Net sales 7,695 million yen, up 6.4% YoY (In millions of yen) 7,231 7,695 FY2018 FY2019
  • 12. © SIOS Corporation All rights Reserved. Open System Infrastructure Business Segment income 58 million yen, down 49.0% YoY 12  Segment income declined YoY due to increases in labor cost at a U.S. subsidiary as well as in development cost to upgrade LifeKeeper. 115 58 FY2018 FY2019 (In millions of yen)
  • 13. © SIOS Corporation All rights Reserved. Application Business 13 Net sales 5,991 million yen, up 7.6% YoY  Revenues from the provision of support for system development and implementation to financial institutions achieved steady growth.  Revenues from the Gluegent series* maintained momentum of growth.  Sales of our core software applications for MFPs* declined, affected by a new subscription business* launched in the fourth quarter. (In millions of yen) 5,568 5,991 FY2018 FY2019
  • 14. © SIOS Corporation All rights Reserved. Application Business Segment income Loss of 4 million yen, compared with an income of 174 million yen the year before 14  Segment income declined YoY partly because the loss from unprofitable projects undertaken in the first half of the year to provide support for system development and implementation to financial institutions was not fully offset in the second half,  and partly because sales of the following high-margin products developed in-house were weak. • Software applications for MFPs • Management support system for financial institutions (In millions of yen) 174 -4 FY2018 FY2019
  • 15. © SIOS Corporation All rights Reserved. Review of FY 2019 Ⅱ
  • 16. © SIOS Corporation All rights Reserved. 16 Business Challenge ①: Software Applications for MFPs A larger-than-expected number of corporate customers switched from a perpetual licensing model for our high- margin software applications for MFPs to a subscription model launched in the fourth quarter of FY 2019, and the recognition of some of the subscription revenues was deferred to FY 2020, bringing the FY 2019 revenues from these applications down. リプションで Challenge Action It is inevitable that revenue or profit of a software product declines temporarily while we make a transition from a perpetual licensing model to a subscription model. We intend to bolster sales to new and existing customers by offering products and services that meet their needs and releasing regular functional updates.
  • 17. © SIOS Corporation All rights Reserved. 17 (1) Provision of support for system development and implementation Profit in this business declined due to unprofitable projects undertaken and delayed in the first half of FY 2019. We conducted more stringent preliminary assessments to screen out unprofitable projects. (2) Sale of management support system The recognition of revenues from orders received in the fourth quarter of FY 2019 was deferred to FY 2020, which made it impossible to make up in the second half of the year for the shortfall in sales and profit posted in the first half. Challenge Action Continue to perform a stringent assessment of a proposed project before closing a deal Offer clients subscription options as part of our efforts to change the nature of this business fundamentally Challenge Action Business Challenge ②: Business with Financial Institutions
  • 18. © SIOS Corporation All rights Reserved. Medium-Term Business Plan for FY 2020-2022 and Business Forecasts for FY 2020 Ⅲ
  • 19. © SIOS Corporation All rights Reserved. 19 Primary Objective and Management Metrics Established in Medium-Term Business Plan for FY 2020-2022 The Group uses EBITDA and ROIC as its key management metrics to continue to generate positive cash flow. Positive cash flow enables the Group to invest in the three driving forces for our growth—people, research and development, and a corporate culture that fosters innovation—and to return profit to our shareholders and stakeholders. Through these efforts, the Group works toward achieving its primary management objective. Under the mission of making the impossible possible for the people of the world, the SIOS Group works toward achieving its primary management objective of pursuing innovative solutions to resolve issues affecting people and to contribute to a better society. Primary Management Objective Management Metrics
  • 20. © SIOS Corporation All rights Reserved. 20 Basis for Achieving the SIOS Group Mission Improve performance on key management metrics Achieve greater EBITDA and ROIC Generate positive cash flows Invest to achieve the mission Return profit to shareholders and other stakeholders Invest in people, R&D, and a corporate culture that fosters innovation Return profit to shareholders and other stakeholders Make the business foundation more solid Make the business foundation more solid Increase sales and gross profit Reduce interest-bearing debts Maintain good relationships with stakeholders Carry out M&A Release new products and services Enhance existing products and services Raise the level of customer satisfaction Optimizing SG&A expenses
  • 21. © SIOS Corporation All rights Reserved. Review of FY 2019 ① 21 Release new products and services Enhance existing products and services Released SIOS bilink, a platform that supports companies operating under subscription business models Released an AI-enabled service solution for MFPs that recognizes confidentiality designations on documents for greater information security Repaid ¥130 million of loans payable Reduce interest- bearing debts
  • 22. © SIOS Corporation All rights Reserved. Review of FY 2019 ② 22 Invest in people, R&D, and a corporate culture that fosters innovation • Rolled out a new container* platform business to meet the growing needs among corporate clients to pursue digital transformation (DX)* • Introduced new talent management programs, such as OKR* and 1 on 1* Return profit to shareholders and other stakeholders • Resumed dividend payment of ¥5.0 per share for the first time in five years
  • 23. © SIOS Corporation All rights Reserved. Medium-Term Business Plan for FY 2020-2022 We will use the transition to a subscription business model to lay the groundwork for sustained growth under the three-year plan and will work toward achieving EBITDA of ¥560 million and ROIC of 14.7% in FY 2022. 2019 2020 2021 2022 EBITDA 145 180 310 560 ROIC 1.7% 2.7% 7.1% 14.7% 23 (In millions of yen)
  • 24. © SIOS Corporation All rights Reserved. 24 Key Initiative: Transition to a Subscription Business Model ① As companies have been investing aggressively in implementing DX, more and more of them have been switching from perpetual licensing of software to subscription. Background and Benefits of Making a Transition to a Subscription Model Background  User benefits of switching to a subscription model ① Lower initial cost ② Ease of cancellation ③ Ability to continue to use up-to-date products and services  Software vendor’s benefits of switching to a subscription model ① Ability to create a steady and recurring stream of revenue and profit ② Ability to collect information about customers’ usage of products and services to continually improve their quality
  • 25. © SIOS Corporation All rights Reserved. 25 Offer corporate customers subscription options for our products and services developed in-house Why We are Making a Transition to a Subscription Model We can better assist our corporate customers in their efforts to implement DX by offering them subscription options for our products and services, which is a critical business model for our long-term growth. Key Initiative: Transition to a Subscription Business Model ②
  • 26. 1,790 1,940 2,160 2,500 3,100 2,340 2,530 2,860 2,910 3,160 2018年度 2019年度 2020年度 2021年度 2022年度 サブスクリプション売上 売り切りモデル売上 © SIOS Corporation All rights Reserved. Projected Revenues from Subscription Business for Products and Services Developed In-House 26  We intend to make a transition to subscription business not only for software applications for MFPs but also for our other software products.  Revenues from subscription are projected to reach the level of those from perpetual licensing business in FY 2022. (Millions of yen) Key Initiative: Transition to a Subscription Business Model ③ Revenues from subscription Revenues from perpetual licensing FY 2018 FY 2019 FY 2020 FY 2021 FY 2022
  • 27. © SIOS Corporation All rights Reserved. Consolidated Business Forecasts for FY 2020 FY 2019 Results FY 2020 Forecasts Change % Change Net sales 13,686 14,300 +613 +4.5% Operating profit 54 80 +25 +45.6% Ordinary profit 96 100 +3 +3.9% Profit (loss) attributable to owners of parent 32 40 +7 +23.6% EBITDA 145 180 +34 +24.0% ROIC 1.7% 2.8% - - We intend to maintain our momentum of growth for 10 consecutive fiscal years and achieve net sales of ¥14.3 billion in FY 2020. 27 (In millions of yen)
  • 28. © SIOS Corporation All rights Reserved. 28 Key Strategies for FY 2020 ① Conduct stakeholder surveys to better serve our customers and improve the quality of our products and services Raise the level of customer satisfaction Enhance existing products and services Update existing products and add more value to them to better serve customers in their greater use of subscription and cloud Optimize resource allocation within the Group to achieve greater efficiency and better manage subcontractors Optimizing SG&A expenses
  • 29. © SIOS Corporation All rights Reserved. Key Strategies for FY 2020 ② 29 Implement programs intended to assist every employee in achieving their full professional potential • Ensure employees embrace new talent management programs, such as OKR and 1 on 1 • Offer employees more flexible working arrangements • Expand the scope of CSR activities Continue dividend payment of ¥5.0 per share Invest in people, R&D, and a corporate culture that fosters innovation Return profit to shareholders and other stakeholders
  • 30. Cash Dividends for FY 2019 and 2020 Dividend payment of ¥5.0 per share resumed Fiscal year ended December 31, 2019 Dividend payment of ¥5.0 per share planned Fiscal year ending December 31, 2020 (Projected) 23rd term 24th term Fiscal year ended December 31, 2019 Fiscal year ending December 31, 2020 (Projected) Annual cash dividend per share ¥5.0 ¥5.0 30© SIOS Corporation All rights Reserved.
  • 31. SIOS is Innovative Open Solutions © SIOS Corporation All rights Reserved. About SIOS Corporation 31 Headquarters SIOS Building, 2-12-3 Minami Azabu Minato-ku, Tokyo, Japan Capital 1,481 million yen Established May 23, 1997 No. of employees 432 on a consolidated basis (as of December 31, 2019) Main consolidated subsidiaries Japan: SIOS Technology, Inc. Gluegent, Inc. Keyport Solutions, Inc. Profit Cube Inc. Listed on the Second Section of the Tokyo Stock Exchange, SIOS Corporation is a holding company that manages subsidiaries having a wealth of expertise and assets in open source software, including Linux, AI and cloud technologies, and Fintech. Under the mission of making the impossible possible for the people of the world, the SIOS Group pursues innovative solutions to resolve issues affecting people and to contribute to a better society. U.S.A.: SIOS Technology Corp.
  • 32. © SIOS Corporation All rights Reserved. Glossary 32 Page Term Description 11 LifeKeeper A failover software product that automatically switches a failed primary server to a backup server. 11 Software products sourced from Red Hat, Inc. Open-source software products developed by Red Hat, Inc., a provider of open-source solutions. 13 Gluegent series "Gluegent Gate" which manages ID in the cloud, "Gluegent Apps group scheduler" etc. which added team calendar schedule management function etc to Google Calendar etc. We support business efficiency by using enterprise cloud. 13 Software applications for multifunction printers (MFPs) A multifunction printer (MFP) is a piece of office equipment that incorporates print, scan, copy, and fax capabilities into one unit. The Group develops, markets, and updates document management software applications, such as Quick Scan and Speedoc, that run on an MFP. 13 Subscription model A business model that charges customers a recurring monthly or annual fee to access a software product or service. 22 Digital transformation (DX) A process in which a company uses data and digital technology to transform its products, services, and business 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. 22 Container A standard unit of software into which the host OS is divided logically and that packages everything needed to run an application, such as codes and system libraries, to make it work like an independent server. 22 OKR Objectives and Key Results. A goal management framework for establishing ambitious objectives with measurable results and tracking progress. 22 1 on 1 A one-on-one meeting that a manager conducts with an employee to assist her or him in achieving professional growth and improving their job performance.
  • 33. Forward-looking statements about the Company’s business outlook contained in this document reflect management’s assumptions and judgments made on the basis of available information, and may include risks and uncertainties. We caution that significant risks and uncertainties could cause actual performance to differ materially from what is discussed in the forward-looking statements. Significant risks and uncertainties that might affect our performance include, but are not limited to, the economic environment and market conditions in which we operate. Call the IR Section of SIOS Corporation on 03-6401-5125 (+81-3-6401-5125 from outside Japan) For inquiries about this document or fill in and send an online inquiry form available at: https://mk.sios.com/SIOS_Inquiry.html © SIOS Corporation All rights Reserved. Cautionary Statement 33