Performance Analysis

Highlights of Consolidated Financial Results for the Six Months Ended June 30, 2017

Sales
6,226 million yen
(down 0.2% yoy)
operating income
173 million yen
(down 47.5% yoy)
EBITDA
260 million yen
(down 37.5% yoy)
* EBITDA (operating income + depreciation + amortization of goodwill)

In the six months ended June 30, 2017, while the SIOS Group achieved robust sales of its core products led by LifeKeeper and software applications for multifunction printers (MFPs) as well as of open-source software-related products, the revenue and profit from the sales of software applications to regional banks declined sharply from a year earlier.
As a result, the Group's net sales in the reported period were down slightly by 0.2% year on year to 6,226 million yen, with an operating income of 173 million yen, down 47.5% from the year before.
With smaller non-operating expenses recorded in the reported period compared with the same period the previous year, when a share of loss of entities accounted for using equity method had been recorded, the Group posted an ordinary income of 184 million yen, down 37.0% year on year.
The Group's profit attributable to owners of parent amounted to 89 million yen, up 1.1% from the same period the previous year, when expenses related to a retrospective adjustment of 139 million yen had been reported as extraordinary losses.

Sales

Open system infra segment

Open system infra segment

The Group achieved a substantial increase in sales of LifeKeeper in the Americas and a steady increase in their sales in Japan and the Asia-Oceania region. Buoyed by stepped-up sales and marketing efforts, Red Hat Enterprise Linux and other software products sourced from Red Hat, Inc. enjoyed robust sales, and OSS-related products achieved steady sales growth as well. As a result, net sales in this segment were up 6.9% year on year to 3,424 million yen, which was a record for the first half of the Group's fiscal year.

Application segment

Application segment

The Group achieved a steady increase in sales of software applications for MFPs as well as in revenues from providing system development and implementation support. However, sales of software applications to regional banks declined sharply. This was primarily because their sales for this fiscal year are projected to shift toward the second half of the year, while the majority of their annual sales had been posted in the first half of the year previously. As a result, net sales in this segment were down 7.7% year on year to 2,801 million yen.

Operating Income

Open system infra segment

Open system infra segment

The operating income in this segment jumped 32.7% year on year to 107 million yen, primarily due to increased sales of the profitable LifeKeeper.

Application segment

Web application segment

The operating income in this segment fell 73.6% year on year to 65 million yen, as increased sales of application software for MFPs were more than offset by a substantial decline in the sales of applications for financial institutions.

Analysis of Balance Sheets

Analysis of Balance Sheets

(1)Assets

Current assets as of June 30, 2017 were up 10.0% from the end of the previous fiscal year, primarily due to an increase of 320 million yen in cash and deposits.
Non-current assets were down 4.9%, primarily due to 42 million yen in amortization of goodwill.
As a result, total assets increased 5.3% to 5,537 million yen.

(2)Liabilities

While the amount of long- and short-term loans payable was down by 97 million yen from the end of the previous fiscal year, advances received increased by 244 million yen.As a result, total liabilities were up 5.8% to 3,817 million yen.

(3)Net assets

As an increase of 21 million yen in negative foreign currency translation adjustment was more than offset by a profit of 89 million yen, total net assets were up 4.4% to 1,719 million yen.

Analysis of Cash Flow

Analysis of Cash Flow

The balance of cash and cash equivalents amounted to 2,114 million yen as of June 30, 2017, an increase of 320 million yen from the end of the previous fiscal year, reflecting substantial net cash provided by operating activities during the reported period.

Cash flows from operating activities

Net cash provided by operating activities amounted to 469 million yen in the reported period, reflecting a profit of 185 million yen before income taxes and an increase of 260 million yen in advances received.

Cash flows from investing activities

Net cash used for investing activities amounted to 11 million yen, reflecting payment for purchasing of intangible assets.

Cash flows from financing activities

Net cash used for financing activities amounted to 93 million yen, reflecting repayment of loans payable.

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