[Detailed Analysis] SIOS Corporation (3744) Q2 FY2026 Earnings: Evolution of Growth Model through Enhanced Recurring Revenue and AI-Driven Development

SIOS Corporation (Securities Code: 3744) announced its financial results for the second quarter (interim period) of the fiscal year ending December 2026, showing steady progress with both revenue and profit across all levels exceeding the same period last year. This report provides an objective summary and analysis of the company's performance, segment-specific details, key KPI trends, and future growth strategies based on the facts and figures presented in the earnings materials.

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1. H1 Consolidated Earnings Highlights: Revenue and Profit Growth Across All Key Metrics

Consolidated results for the second quarter (interim period) of FY2026 showed year-on-year growth in all profit and loss metrics, including net sales and operating profit.

The following slide provides an overview of the consolidated performance for the first half of FY2026.

[Slide Commentary: H1 Consolidated Performance]

This slide presents the fundamental data covering the overall performance for the first half of FY2026. Net sales reached 10.944 billion yen (+15.4% YoY) , marking an increase of 1.458 billion yen compared to the same period last year. Furthermore, operating profit reached 196 million yen (+9.0% YoY) , ordinary profit reached 239 million yen (+8.2% YoY) , and net profit attributable to owners of the parent reached 141 million yen (+18.2% YoY) .

EBITDA , a key indicator of cash-generating capability, expanded significantly to 237 million yen (+21.9% YoY) , demonstrating the health of cash flows generated from business activities. The annualized ROIC remains at a high level of 13.0% , indicating efficient profit generation relative to invested capital.

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2. Financial Position and Cash Flow Status

The company maintains a stable asset structure, with net assets increasing due to the accumulation of retained earnings.

• Balance Sheet (B/S) Trends : Total assets as of June 30, 2026, stood at 9.44 billion yen (an increase of 778 million yen from the end of December 2025). Current assets were 8.402 billion yen , of which cash and deposits accounted for 4.148 billion yen . Total net assets reached 2.01 billion yen (an increase of 154 million yen), reflecting steady accumulation of equity.
• Cash Flow (C/F) Trends : Cash flow from operating activities resulted in a net inflow of 429 million yen , driven by factors such as an increase in contract liabilities (+528 million yen). Cash flow from investing activities was +120 million yen (including income from derivative transactions), and cash flow from financing activities was -10 million yen (repayment of lease liabilities, etc.). Consequently, cash and cash equivalents at the end of the period increased by 561 million yen from the beginning of the period to reach 4.148 billion yen .

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3. Segment Performance: Business Structural Changes and Growth Drivers

The company operates through three business segments: "Product & Service," "Consulting & Integration," and "Software Sales & Solution."

(1) Product & Service

• Net Sales : 2.483 billion yen (+5.0% YoY)
• Segment Profit : 314 million yen (+10.3% YoY)

In this segment, which focuses on proprietary software, the company achieved overall revenue and profit growth. While the transition of document management applications to a subscription model acted as a temporary profit drag, recurring revenue from the high-availability software "LifeKeeper" and the cloud service "Gluegent Series" expanded steadily.

The following slide details the profit structure of this segment.

[Slide Commentary: Product & Service Profit Analysis]

This slide visualizes the year-on-year profit fluctuations for the Product & Service segment. Sales growth in flagship products "LifeKeeper" and the "Gluegent Series" contributed +156 million yen to profit , while the transition of certain document management applications to a subscription model resulted in a short-term profit impact of -126 million yen . Consequently, the segment secured a net profit increase of +30 million yen (+10.3% YoY) , totaling 314 million yen.

Transitioning document management apps to subscriptions shifts revenue from traditional one-time license sales to monthly recurring revenue. While this reduces apparent revenue and profit during the initial phase, it is positioned as a strategic move to strengthen the mid-to-long-term earnings base by converting to stable, recurring revenue.

(2) Consulting & Integration

• Net Sales : 1.693 billion yen (-3.5% YoY)
• Segment Profit : 210 million yen (-1.5% YoY)

While system development and construction support for the education sector remained solid, and new businesses such as Generative AI implementation support performed well, the segment saw a slight decline in revenue and profit due to the reactionary drop from other businesses that performed strongly in the previous year. However, the profit progress rate against the full-year plan remains high at 80.8% .

(3) Software Sales & Solution

• Net Sales : 6.774 billion yen (+26.1% YoY)
• Segment Profit : 92 million yen (+27.3% YoY)

This segment, which handles cutting-edge software, saw significant growth in both revenue and profit, driven by a surge in demand for Elastic N.V.-related products , which provide high-precision search solutions and security features suitable for enterprise AI implementation. This segment was the primary driver of overall company sales growth.

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4. Progress of Growth Strategy and Key KPIs

The company has identified "Continuous Investment in Recurring Business Models" and "Business Strengthening through AI and Open Source Software (OSS)" as the two pillars of its growth strategy to enhance corporate value.

(1) Recurring Revenue Ratio Trends

Recurring revenue in the Product & Service segment grew steadily to 1.988 billion yen (up from 1.813 billion yen in the same period last year). This brings the recurring revenue ratio in this segment to 80.1% , maintaining an extremely high level of recurring business. The company is making steady progress toward its annual recurring revenue target of over 4 billion yen.

(2) ARR Growth of the Gluegent Series

The following slide shows the trend of ARR (Annual Recurring Revenue) , a critical KPI for SaaS businesses.

[Slide Commentary: Gluegent Series Performance]

This slide shows the combined ARR trend for the workflow tool "Gluegent Flow" and the ID management/authentication tool "Gluegent Gate." As of June 2026, the total ARR reached 909 million yen , recording a high growth rate of 26.5% YoY .

By breakdown, "Gluegent Flow" grew by 54.6% YoY , acting as a powerful driver for overall company ARR growth. "Gluegent Gate" also performed steadily with an 11.2% increase . By capturing needs for cloud migration and operational efficiency, the series is scaling steadily as the core of the recurring revenue base.

(3) AI-Led Development Innovation (AI-Driven Development)

In terms of technology strategy, the company is not only integrating AI features into its products and supporting customer AI adoption but is also working on "significantly reducing company-wide development man-hours through AI utilization." By leveraging multiple AI tools across all processes—from requirements definition and design to code generation, automated testing, and deployment—the company has shifted to a system ( AI-Driven Development ) where engineers focus on critical quality judgments and decision-making. This has enhanced product competitiveness through shorter development cycles and optimized allocation of engineering resources.

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5. FY2026 Full-Year Earnings Forecast and Progress

The company has maintained its initial full-year consolidated earnings forecast for the fiscal year ending December 2026.

Item	FY2026 Full-Year Forecast	FY2026 H1 Actual	Progress Rate
Net Sales	20,000 million yen	10,944 million yen	54.7%
Operating Profit	450 million yen	196 million yen	43.6%
Ordinary Profit	510 million yen	239 million yen	47.0%
Net Profit	370 million yen	141 million yen	38.1%
EBITDA	540 million yen	237 million yen	44.0%
ROIC	13.4%	13.0%	—

The sales progress rate is 54.7% , exceeding 50% and proceeding smoothly. Profit items are also maintaining progress toward the plan, supported by various measures for the second half and the accumulation of recurring revenue.

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Summary of the Report

SIOS's Q2 FY2026 earnings can be summarized as follows:

1. Solid Performance : Achieved year-on-year revenue and profit growth across all metrics. Net sales increased by 15.4% and operating profit by 9.0% YoY.
2. Evolution of Recurring Business : The recurring revenue ratio in the Product & Service segment reached 80.1% , establishing a structure that grows profits while investing in the subscription transition of document management apps.
3. Breakthrough of the Gluegent Series : ARR expanded to 909 million yen (+26.5% YoY) , with Gluegent Flow showing significant growth of 54.6% YoY.
4. Expansion of Cutting-Edge Products : The Software Sales segment recorded significant revenue and profit growth due to increased demand for Elastic N.V.-related products.
5. Productivity Revolution via AI : Promoting development man-hour reduction and enhanced competitiveness simultaneously through the introduction of AI-driven development.

Backed by a solid cash position (approx. 4.14 billion yen) and a high recurring revenue ratio, the company is advancing business structural improvements and technological innovation for mid-to-long-term growth.