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IIJ Announces its First Six Months Results for the Fiscal


TOKYO, Nov. 05, 2021 (GLOBE NEWSWIRE) — Internet Initiative Japan Inc. (“IIJ”, TSE1: 3774) today announced its consolidated financial results for the first six months for the fiscal year ending March 31, 2022 (“1H21”, from April 1, 2021 to September 30, 2021) under International Financial Reporting Standards (IFRS)1.

Highlights of Financial Results for 1H21
Total revenues JPY109.1 billion up 7.3 % YoY2  
Gross profit JPY23.1 billion up 32.3 % YoY  
Operating profit JPY9.3 billion up 77.6 % YoY  
Profit before tax JPY10.4 billion up 133.6 % YoY  
Net profit3 JPY6.9 billion up 148.8 % YoY  
             
New Financial Targets for FY2021 (Revised on November 5, 2021)
  Original Target
Total revenues JPY228.5 billion up 7.3 % YoY JPY226.0 billion
Operating profit JPY22.0 billion up 54.4 % YoY JPY17.5 billion
Profit before tax JPY21.5 billion up 53.2 % YoY JPY17.3 billion
Net profit JPY13.7 billion up 41.1 % YoY JPY11.7 billion
Annual Cash Dividend JPY46.00                 per share of common stock JPY39.00
 

Overview of 1H21 Financial Results and Business Outlook
“Along with our profit growth, we revised our FY2021 full-year financial targets upward as well as increased both interim and year-end cash dividend forecast. Accordingly, we updated our FY2023 operating margin target in our mid-term plan, which was disclosed on May 12, 2021, upward from over 9% to over 10%. Under the ongoing expansion of IT utilization by Japanese enterprises, our operating profit has been structurally increasing. This has been achieved mainly by the accumulation of various enterprise network services line-ups that we have been continuously developing for almost 30 years. As a pioneer in building Internet in Japan in the early 1990s, we have maintained our innovative corporate culture which continuously encourages us to proactively take on new initiatives. We believe that this advantage allows us to have further business opportunities in our future,” said Koichi Suzuki, Founder and Chairman of IIJ.

“As for 1H21 financials, we achieved year over year operating profit growth of 77.6%, which exceeded our initial forecast under the continuous demands from various industries in Japan for both network services and systems integration. We continuously accumulated monthly recurring revenues, 84.5% of 1H21 total revenue, brought by the revenues growth in network services, such as IP services4 and outsourcing services. With regard to systems integration which includes our new subsidiary PTC5 in Singapore, we strongly accumulated order-received for systems construction which increased by 24.4% year over year,” said Eijiro Katsu, President of IIJ.

“We will be listed in the ‘Prime Market’ under the new market segments of the Tokyo Stock Exchange6 next April. We are going to advance our long-term business strategy, and also continue to have strong focus on corporate governance to achieve sustainable growth. Our mission is always to contribute to the development of a networked society in Japan by technology innovation. Through our business expansion, we would like to continue to respond sincerely to the trust and expectations of our stakeholders,” concluded Katsu.

1H21 Financial Results Summary

We have omitted segment analysis because most of our revenues are dominated by network services and systems integration (SI) business.

Operating Results Summary
    1H20 1H21 YoY Change
    JPY millions JPY millions
 Total revenues 101,665   109,054   7.3  
   Network services 62,104   63,436   2.1  
   Systems integration (SI) 38,167   44,209   15.8  
   ATM operation business 1,394   1,409   1.0  
 Total costs (84,210 ) (85,969 ) 2.1  
   Network services (49,896 ) (46,754 ) (6.3 )
   Systems integration (SI) (33,390 ) (38,340 ) 14.8  
   ATM operation business (924 ) (875 ) (5.3 )
 Total gross profit 17,455   23,085   32.3  
   Network services 12,208   16,682   36.7  
   Systems integration (SI) 4,777   5,869   22.9  
   ATM operation business 470   534   13.5  
 SG&A, R&D, and other operating income (expenses) (12,216 ) (13,781 ) 12.8  
 Operating profit 5,239   9,304   77.6  
 Profit before tax 4,466   10,432   133.6  
 Profit for the period attributable to owners of the parent 2,770   6,892   148.8  
(Note) Systems integration includes equipment sales.      
       
Segment Results Summary
    1H20 1H21
    JPY millions JPY millions
 Total revenues 101,665   109,054  
   Network services and SI business 100,360   107,712  
   ATM operation business 1,394   1,408  
    Elimination (89 ) (66 )
 Operating profit 5,239   9,304  
   Network services and SI business 4,923   8,933  
   ATM operation business 378   417  
    Elimination (62 ) (46 )
           

1H21 Revenues and Profit
Revenues
Total revenues were JPY109,054 million, up 7.3% YoY (JPY101,665 million for 1H20).

Network services revenue was JPY63,436 million, up 2.1% YoY (JPY62,104 million for 1H20).

Revenues for Internet connectivity services for enterprises were JPY18,813 million, down 4.3% YoY from JPY19,650 million for 1H20. The decrease was mainly due to the decrease in IIJ Mobile Platform service revenue, which was in the response to the reduction in procurement cost, while revenues of IP services and Enterprise mobile services increased.

Revenues for Internet connectivity services for consumers were JPY12,196 million, down 5.4% YoY from JPY12,885 million for 1H20, mainly due to reduction in unit price of our consumer mobile services.

Revenues for WAN services were JPY12,881 million, up 4.4% YoY from JPY12,336 million for 1H20.

Revenues for Outsourcing services were JPY19,546 million, up 13.4% YoY from JPY17,233 million for 1H20, mainly due to an increase in security-related services revenues.

Network Services Revenues Breakdown
        1H20   1H21   YoY Change
        JPY millions   JPY millions  
 Total network services 62,104   63,436   2.1  
   Internet connectivity services (enterprise) 19,650   18,813   (4.3 )
    IP services (including data center connectivity services) 5,849   6,622   13.2  
    IIJ Mobile Services 12,035   10,284   (14.5 )
      Enterprise mobile service (IoT usages etc.) 3,484   4,839   38.9  
      IIJ Mobile MVNO Platform service (MVNE) 8,551   5,445   (36.3 )
    Others 1,766   1,907   8.0  
   Internet connectivity services (consumer) 12,885   12,196   (5.4 )
    IIJmio Mobile Services 11,549   10,741   (7.0 )
    Others 1,336   1,455   8.9  
   WAN services 12,336   12,881   4.4  
   Outsourcing services 17,233   19,546   13.4  
                 
Number of Contracts and Subscription for Connectivity Services (Note 1)
        As of Sep. 30, 2020   As of Sep. 30, 2021   YoY Change
  Internet connectivity services (enterprise) 2,180,704   2,301,380   120,676  
  IP service (greater than or equal to 1Gbps) (Note2) 778   757   (21 )
  IP service (less than 1Gbps) (Note2) 1,239   1,211   (28 )
    IIJ Mobile Services 2,090,428   2,210,095   119,667  
      Enterprise mobile service (IoT usages etc.) 967,548   1,218,375   250,827  
     IIJ Mobile MVNO Platform service (MVNE) 1,122,880   991,720   (131,160 )
    Others 88,259   89,317   1,058  
  Internet connectivity services (consumer) 1,384,933   1,416,927   31,994  
    IIJmio Mobile Services 1,044,681   1,072,107   27,426  
    Others 340,252   344,820   4,568  
Total contracted bandwidth (Gbps) (Note 3) 5,869.0   7,279.7   1,410.7  
(Notes)              
1. Numbers in the table above show number of contracts except for “IIJ Mobile Services (enterprise)” and “IIJmio Mobile Services” which show number of subscriptions.
2. The numbers of IP service contracts include the numbers of IIJ data center connectivity service contracts.      
3. Total contracted bandwidth is calculated by multiplying number of contracts under “Internet connectivity services (enterprise)” except for “IIJ Mobile Services” and the contracted bandwidths of the services respectively.
   

SI revenues, including equipment sales, were JPY44,209 million, up 15.8% YoY (JPY38,167 million for 1H20).
Systems construction and equipment sales, a one-time revenue, was JPY15,472 million, up 18.8% YoY (JPY13,020 million for 1H20). Of this amount, revenue of PTC was JPY2,586 million.
Systems operation and maintenance revenue, a recurring revenue, was JPY28,737 million, up 14.3% YoY (JPY25,147 million for 1H20), mainly due to continued accumulation of systems operation orders as well as an increase in private cloud services’ revenues. Of this amount, revenue of PTC was JPY1,055 million.

Orders received for SI, including equipment sales, totaled JPY46,503 million, up 7.4% YoY (JPY43,291 million for 1H20); orders received for systems construction and equipment sales were JPY18,865 million, up 24.4% YoY (JPY15,159 million for 1H20), and orders received for systems operation and maintenance were JPY27,638 million, down 1.8% YoY (JPY28,131 million for 1H20).

Order backlog for SI, including equipment sales, as of September 30, 2021 amounted to JPY68,949 million, up 13.1% YoY (JPY60,988 million as of September 30, 2020); order backlog for systems construction and equipment sales was JPY12,561 million, up 30.2% YoY (JPY9,646 million as of September 30, 2020) and order backlog for systems operation and maintenance was JPY56,388 million, up 9.8% YoY (JPY51,341 million as of September 30, 2020).

ATM operation business revenues were JPY1,409 million, up 1.0% YoY (JPY1,394 million for 1H20).

Cost of sales
Total cost of sales was JPY85,969 million, up 2.1% YoY (JPY84,210 million for 1H20).

Cost of network services revenue was JPY46,754 million, down 6.3% YoY (JPY49,896 million for 1H20), mainly due to a decrease in outsourcing costs. Gross profit was JPY16,682 million, up 36.7% YoY (JPY12,208 million for 1H20), and gross profit ratio was 26.3% (19.7% for 1H20).

Cost of SI revenues, including equipment sales was JPY38,340 million, up 14.8% YoY (JPY33,390 million for 1H20), mainly due to increases in outsourcing and purchasing costs. The amount included PTC’s cost of JPY3,321 million. Gross profit was JPY5,869 million, up 22.9% YoY (JPY4,777 million for 1H20) and gross profit ratio was 13.3% (12.5% for 1H20).

Cost of ATM operation business revenues was JPY875 million, down 5.3% YoY (JPY924 million for 1H20). Gross profit was JPY534 million (JPY470 million for 1H20) and gross profit ratio was 37.9% (33.7% for 1H20).
        
Selling, general and administrative expenses and other operating income and expenses
Selling, general and administrative expenses, including research and development expenses, totaled JPY13,790 million, up 13.7% YoY (JPY12,124 million for 1H20), mainly due to increases in personnel-related expenses, advertising expenses and sales commission expenses. Of this amount, PTC’s expenses was JPY207 million.
Other operating income was JPY93 million (JPY80 million for 1H20).
Other operating expenses was JPY84 million (JPY172 million for 1H20), mainly due to disposal loss on fixed assets.

Operating profit
Operating profit was JPY9,304 million (JPY5,239 million for 1H20), up 77.6% YoY.

Finance income and expenses, and share of profit (loss) of investments accounted for using equity method
Finance income was JPY1,772 million, compared to JPY109 million for 1H20. It included valuation gains on financial instruments, mainly related to funds, of JPY1,692 million (loss of JPY141 million for 1H20).

Finance expense was JPY272 million, compared to JPY469 million for 1H20. It included interest expenses of JPY272 million (JPY296 million for 1H20).

Share of loss of investments accounted for using equity method was JPY372 million (compared to loss of JPY413 million for 1H20), mainly due to loss of DeCurret Inc. of JPY552 million.

Profit before tax
Profit before tax was JPY10,432 million (JPY4,466 million for 1H20), up 133.6% YoY.

Profit for the period
Income tax expense was JPY3,474 million (JPY1,656 million for 1H20). As a result, profit for the period was JPY6,958 million (JPY2,810 million for 1H20), up 147.6% YoY.

Profit for the period attributable to non-controlling interests was JPY66 million (JPY40 million for 1H20), mainly related to net income of Trust Networks Inc. 

Profit for the period attributable to owners of parent was JPY6,892 million (JPY2,770 million for 1H20), up 148.8% YoY.

Financial Position as of September 30, 2021
As of September 30, 2021, the balance of total assets was JPY222,729 million, increased by JPY1,952 million from the balance as of March 31, 2021 of JPY220,777 million.

As of September 30, 2021, the balance of current assets was JPY89,322 million, decreased by JPY4,082 million from the balance as of March 31, 2021 of JPY93,405 million. The major breakdown of balance and fluctuation of current assets was: a decrease in cash and cash equivalents by JPY2,672 million, including payment of the acquisition of PTC, to JPY39,795 million, a decrease in trade receivables by JPY3,978 million to JPY30,821 million and an increase in prepaid expenses by JPY2,566 million, of which JPY1,266 million is related to the acquisition of PTC, to JPY13,165 million.

As of September 30, 2021, the balance of non-current assets was JPY133,407 million, increased by JPY6,034 million from the balance as of March 31, 2021 of JPY127,373 million. As for the major breakdown of balance and fluctuation of non-current assets, tangible assets increased by JPY745 million to JPY17,829 million. Right-of-use assets, which include right to use leased assets under operating lease contracts such as office and data centers and assets under finance lease contracts such as data communication equipment, decreased by JPY2,974 million to JPY47,734 million, mainly due to depreciation. Goodwill increased by JPY3,182 million to JPY9,264 million, due to the acquisition of PTC. Prepaid expenses increased by JPY1,145 million to JPY10,682 million, including an increase of JPY1,055 million related to the acquisition of PTC. The amount of other investments was JPY17,731 million, increased by JPY4,819 million mainly due to fluctuation of fair value of our holding marketable equity securities and funds.

As of September 30, 2021, the balance of current liabilities was JPY70,031 million, decreased by JPY3,228 million from the balance as of March 31, 2021 of JPY73,259 million. As for the major breakdown of balance and fluctuation of current liabilities, trade and other payables decreased by JPY2,502 million to JPY16,742 million. Borrowings decreased by JPY1,855 million to JPY16,705 million, due to an increase of JPY1,480 million in short-term borrowings, a decrease by JPY4,085 million from repayment of long-term borrowings and an increase of JPY750 million due to a transfer from non-current liabilities. Contract liabilities increased by JPY2,055 million to JPY9,157 million, including an increase of JPY1,456 million related to the acquisition of PTC. Other financial liabilities decreased by JPY522 million to JPY17,357 million.

As of September 30, 2021, the balance of non-current liabilities was JPY54,451 million, decreased by JPY2,095 million from the balance as of March 31, 2021 of JPY56,547 million. As for the major breakdown of balance and fluctuation of non-current liabilities, long-term borrowings decreased by JPY750 million to JPY6,250 million due to a transfer to current portion. Contract liabilities increased by JPY293 million to JPY7,537 million, of which JPY1,192 million was an increase related to the acquisition of PTC. Other financial liabilities decreased by JPY2,830 million to JPY32,818 million, mainly due to a transfer to current portion.

As of September 30, 2021, the balance of total equity attributable to owners of the parent was JPY97,215 million, increased by JPY7,258 million from the balance as of March 31, 2021 of JPY89,956 million. Ratio of owners’ equity to total assets was 43.6% as of September 30, 2021.

1H21 Cash Flows
Cash and cash equivalents as of September 30, 2021 were JPY39,795 million (JPY41,602 million as of September 30, 2020).

Net cash provided by operating activities for 1H21 was JPY18,865 million (net cash provided by operating activities of JPY21,498 million for 1H20). There was profit before tax of JPY10,432 million, depreciation and amortization of JPY13,266 million, including JPY5,035 million of depreciation of right-of-use operating lease assets under IFRS 16, and income taxes paid of JPY3,352 million, compared to JPY2,045 million for 1H20. Regarding changes in working capital, there was net cash out of JPY399 million compared to net cash in of JPY4,022 million for 1H20. As for the major factors in comparison with 1H20, there were increases in payment of current liabilities, such as trade payable and other liabilities. The increase in net cash-outflow related to these factors exceeded the increase in cash-inflow due to a decrease in trade and other receivable and an increase in contract liabilities.

Net cash used in investing activities for 1H21 was JPY8,185 million (net cash used in investing activities of JPY6,547 million for 1H20), mainly due to payments for purchases of tangible assets of JPY4,164 million (JPY2,754 million for 1H20), payments for purchases of intangible assets, such as software, of JPY2,167 million (JPY2,772 million for 1H20), payments for the acquisition of PTC (net of its cash) of JPY2,612 million and proceeds from sales of tangible assets, which include sale and leaseback, of JPY1,011 million (JPY1,448 million for 1H20).

Net cash used in financing activities for 1H21 was JPY13,402 million (net cash used in financing activities of JPY11,969 million for 1H20), mainly due to payments of other financial liabilities of JPY8,989 million (JPY10,390 million for 1H20), which included payments under operating lease contracts such as office rent and finance lease contracts such as network equipment, repayments of long-term bank borrowings of JPY4,085 million (JPY915 million for 1H20), dividends paid of JPY1,759 million (JPY609 million for 1H20) and net increase in short-term borrowings of JPY1,480 million.

Upward revision of FY2021 Financial Targets
We have revised our FY2021 financial targets and dividend forecast announced on May 12, 2021. For details, please refer to our press release titled “Notice regarding Differences between Financial Targets and Results for the Six Months ended September 30, 2021, and Upward Revision of the Full-Year Financial Targets for the Fiscal Year ending March 31, 2022” and “Notice regarding the Distribution of Retained Earnings (Interim Dividend, Increase) and Revision of Dividend Forecast for the Fiscal Year ending March 31, 2022” both of which were announced today, November 5, 2021.

Updates on “IIJ Group Mid-term Plan (FY2021-FY2023)”
We updated our operating margin target for FY2023 from over 9% to over 10% by considering our current business progress and an increase in demand for IT services by both private and public sectors. The target was originally disclosed in “IIJ Group Mid-term Plan (FY2021 – FY2023) which we announced on May 12, 2021.

Presentation
Presentation materials will be posted on our web site (https://www.iij.ad.jp/en/ir/) on November 5, 2021.
They can also be found in the following URL: http://ml.globenewswire.com/Resource/Download/4c66142b-3000-4267-99a4-c6b794ce3a4a

About Internet Initiative Japan Inc.
Founded in 1992, IIJ is one of Japan’s leading Internet-access and comprehensive network solutions providers. IIJ and its group companies provide total network solutions that mainly cater to high-end corporate customers. IIJ’s services include high-quality Internet connectivity services, mobile services, security services, cloud computing services, and systems integration. Moreover, IIJ operates one of the largest Internet backbone networks in Japan that is connected to the United States, the United Kingdom and Asia. IIJ listed on the First Section of the Tokyo Stock Exchange in 2006.

For inquiries, contact:
IIJ Investor Relations Tel: +81-3-5205-6500 E-mail: ir@iij.ad.jp URL: https://www.iij.ad.jp/en/ir

Disclaimer:
Statements made in this press release regarding IIJ’s or management’s intentions, beliefs, expectations, or predictions for the future are forward-looking statements that are based on IIJ’s and managements’ current expectations, assumptions, estimates and projections about its business and the industry. These forward-looking statements, such as statements regarding revenues and profits, are subject to various risks, uncertainties and other factors that could cause IIJ’s actual results to differ materially from those contained in any forward-looking statement.

__________

1. Unless otherwise stated, all financial figures discussed in this announcement are prepared in accordance with IFRS, unaudited and consolidated.
2. YoY is an abbreviation for year over year change.
3. Net profit is “profit for the year/period attributable to owners of the parent.”
4. IP services are IIJ’s dedicated-type Internet connectivity services, mainly used by corporate users.
5. For details, please refer to our press release titled “Notice Regarding Acquisition of Shares in PTC SYSTEM (S) PTE LTD (as a New Subsidiary)”
https://www.iij.ad.jp/en/news/pressrelease/2021/pdf/PTC%20SYSTEM_E.pdf
6. Tokyo Stock Exchange will restructure the current four market divisions into three market segments, the “Prime Market”, “Standard Market”, and “Growth Market”, on April 4, 2022.

     
Condensed Consolidated Statements of Financial Position (Unaudited)    
         
    March 31, 2021   September 30, 2021
    Thousands of yen   Thousands of yen
Assets        
 Current assets        
  Cash and cash equivalents   42,466,933     39,795,023  
  Trade receivables   34,799,075     30,820,775  
  Inventories   2,171,046     2,090,996  
  Prepaid expenses   10,598,441     13,164,900  
  Contract assets   1,281,918     1,846,011  
  Other financial assets   1,975,910     1,364,724  
  Other current assets   111,334     240,027  
 Total current assets   93,404,657     89,322,456  
 Non-current assets        
  Tangible assets   17,084,401     17,829,112  
  Right-of-use assets   50,707,726     47,733,602  
  Goodwill   6,082,472     9,264,427  
  Intangible assets   16,954,274     16,706,806  
  Investments accounted for using the equity method   9,026,980     8,578,152  
  Prepaid expenses   9,537,160     10,682,395  
  Contract assets   46,638     67,895  
  Other investments   12,912,483     17,731,165  
  Deferred tax assets   143,337     202,288  
  Other financial assets   4,442,704     4,139,914  
  Other non-current assets   434,437     471,149  
 Total non-current assets   127,372,612     133,406,905  
Total assets   220,777,269     222,729,361  
         
Liabilities and Equity        
 Liabilities        
  Current liabilities        
   Trade and other payables   19,243,800     16,741,727  
   Borrowings   18,560,000     16,705,000  
   Income taxes payable   3,012,415     3,148,954  
   Contract liabilities   7,101,821     9,156,549  
   Deferred income   79,914     67,709  
   Other financial liabilities   17,879,331     17,357,189  
   Other current liabilities   7,381,746     6,853,457  
  Total current liabilities   73,259,027     70,030,585  
  Non-current liabilities        
   Borrowings   7,000,000     6,250,000  
   Retirement benefit liabilities   4,168,575     4,385,743  
   Provisions   756,405     784,872  
   Contract liabilities   7,244,411     7,537,104  
   Deferred income   405,579     372,308  
   Deferred tax liabilities   225,469     1,146,534  
   Other financial liabilities   35,647,899     32,818,398  
   Other non-current liabilities   1,098,253     1,156,449  
  Total non-current liabilities   56,546,591     54,451,408  
 Total liabilities   129,805,618     124,481,993  
 Equity        
  Share capital   25,530,621     25,561,838  
  Share premium   36,388,811     36,419,817  
  Retained earnings   25,046,813     30,179,558  
  Other components of equity   4,865,110     6,904,463  
  Treasury shares   (1,874,976 )   (1,850,924 )
  Total equity attributable to owners of the parent   89,956,379     97,214,752  
  Non-controlling interests   1,015,272     1,032,616  
 Total equity   90,971,651     98,247,368  
Total liabilities and equity   220,777,269     222,729,361  
         

 

     
Condensed Consolidated Statements of Profit or Loss (Unaudited)    
         
    Six Months Ended   Six Months Ended
    September 30, 2020   September 30, 2021
    Thousands of yen   Thousands of yen
Revenues        
  Network services   62,104,244     63,436,167  
  System integration   38,166,674     44,209,260  
  ATM operation business   1,394,072     1,408,460  
    Total revenues   101,664,990     109,053,887  
Cost of sales        
  Cost of network services   (49,896,323 )   (46,753,533 )
  Cost of systems integration   (33,389,930 )   (38,340,002 )
  Cost of ATM operation business   (924,119 )   (875,011 )
    Total cost of sales   (84,210,372 )   (85,968,546 )
Gross Profit   17,454,618     23,085,341  
Selling, general and administrative expense   (12,124,184 )   (13,789,696 )
Other operating income   80,433     92,478  
Other operating expenses   (171,818 )   (83,831 )
Operating Profit   5,239,049     9,304,292  
Finance income   109,178     1,772,412  
Finance expenses   (468,831 )   (272,312 )
Share of profit (loss) of investments accounted for using equity method   (413,535 )   (372,545 )
Profit (loss) before tax   4,465,861     10,431,847  
Income tax expense   (1,656,268 )   (3,474,197 )
Profit (loss) for the period   2,809,593     6,957,650  
Profit (loss) for the period attributable to:        
  Owners of the parent   2,769,928     6,891,756  
  Non-controlling interests   39,665     65,894  
  Total   2,809,593     6,957,650  
Earnings per share        
  Basic earnings per share (yen)   30.71     76.34  
  Diluted earnings per share (yen)   30.56     75.97  
         
•  IIJ conducted stock a split at a ratio of two-for-one with an effective date of January 1, 2021.
   Basic earnings per share and diluted earnings per share are calculated as if the stock split had been conducted at the beginning of the previous fiscal year.
 
     
Condensed Consolidated Statements of Profit or Loss (Unaudited)    
         
    Three Months Ended   Three Months Ended
    September 30, 2020   September 30, 2021
    Thousands of yen   Thousands of yen
Revenues        
  Network services   31,170,310     31,961,186  
  System integration   19,291,714     23,402,624  
  ATM operation business   824,461     715,128  
    Total revenues   51,286,485     56,078,938  
Cost of sales        
  Cost of network services   (24,952,979 )   (23,608,888 )
  Cost of systems integration   (16,506,123 )   (20,380,115 )
  Cost of ATM operation business   (485,822 )   (431,470 )
    Total cost of sales   (41,944,924 )   (44,420,473 )
Gross Profit   9,341,561     11,658,465  
Selling, general and administrative expense   (6,075,336 )   (6,706,707 )
Other operating income   32,282     40,391  
Other operating expenses   (106,687 )   (47,668 )
Operating Profit   3,191,820     4,944,481  
Finance income   40,502     427,418  
Finance expenses   (326,064 )   (135,019 )
Share of profit (loss) of investments accounted for using equity method   (134,628 )   (155,435 )
Profit (loss) before tax   2,771,630     5,081,445  
Income tax expense   (1,084,076 )   (1,666,940 )
Profit (loss) for the period   1,687,554     3,414,505  
Profit (loss) for the period attributable to:        
  Owners of the parent   1,653,615     3,384,883  
  Non-controlling interests   33,939     29,622  
  Total   1,687,554     3,414,505  
Earnings per share        
  Basic earnings per share (yen)   18.33     37.48  
  Diluted earnings per share (yen)   18.24     37.31  
         
•  IIJ conducted stock a split at a ratio of two-for-one with an effective date of January 1, 2021.
   Basic earnings per share and diluted earnings per share are calculated as if the stock split had been conducted at the beginning of the previous fiscal year.
 
 
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
           
    Six Months Ended   Six Months Ended  
    September 30, 2020   September 30, 2021  
    Thousands of yen   Thousands of yen  
Profit (loss)   2,809,593     6,957,650  
Other comprehensive income, net of tax          
 Items that will not be reclassified to profit or loss          
  Net change in fair value of equity instruments designated as measured at fair value through other comprehensive income   1,560,647     2,008,178  
  Total items that will not be reclassified to profit or loss   1,560,647     2,008,178  
 Items that may be reclassified to profit or loss          
  Exchange differences on translation of foreign operations   (42,769 )   17,910  
  Financial assets measured at fair value through other comprehensive income   219     123  
  Share of other comprehensive income of investments accounted for using equity method   (11,099 )   13,142  
  Total of items that may be reclassified to profit or loss   (53,649 )   31,175  
 Total other comprehensive income, net of tax   1,506,998     2,039,353  
Other comprehensive income   4,316,591     8,997,003  
Other comprehensive income attributable to:          
 Owners of the parent   4,276,926     8,931,109  
 Non-controlling interest   39,665     65,894  
 Other comprehensive income   4,316,591     8,997,003  
           
 
Condensed Consolidated Statements of Comprehensive Income (Unaudited)
         
    Three Months Ended   Three Months Ended
    September 30, 2020   September 30, 2021
    Thousands of yen   Thousands of yen
Profit (loss)   1,687,554     3,414,505  
Other comprehensive income, net of tax        
 Items that will not be reclassified to profit or loss        
  Net change in fair value of equity instruments designated as measured at fair value through other comprehensive income   364,811     1,173,980  
  Total items that will not be reclassified to profit or loss   364,811     1,173,980  
 Items that may be reclassified to profit or loss        
  Exchange differences on translation of foreign operations   (17,304 )   23,860  
  Financial assets measured at fair value through other comprehensive income   82     (158 )
  Share of other comprehensive income of investments accounted for using equity method   20,295     (95 )
  Total of items that may be reclassified to profit or loss   3,073     23,607  
 Total other comprehensive income, net of tax   367,884     1,197,587  
Other comprehensive income   2,055,438     4,612,092  
Other comprehensive income attributable to:        
 Owners of the parent   2,021,499     4,582,470  
 Non-controlling interest   33,939     29,622  
 Other comprehensive income   2,055,438     4,612,092  
         
                 
Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)        
Six months ended September 30, 2020               
                               
  Owners of the parent’s shareholders’ equity   Non-controlling interests   Total equity
  Share capital   Share premium   Retained earnings   Other components of equity   Treasury shares   Total    
  Thousands of yen   Thousands of yen   Thousands of yen   Thousands of yen   Thousands of yen   Thousands of yen   Thousands of yen   Thousands of yen
Balance, April 1, 2020 25,530,621   36,271,395     16,500,993     2,669,501     (1,896,921 )   79,075,589     981,528     80,057,117  
Comprehensive income                              
 Profit (loss)       2,769,928             2,769,928     39,665     2,809,593  
 Other comprehensive income           1,506,998         1,506,998         1,506,998  
 Total comprehensive income       2,769,928     1,506,998         4,276,926     39,665     4,316,591  
Transactions with owners                              
 Purchase of treasury stock               (140 )   (140 )       (140 )
 Disposal of treasury shares   52,917             21,949     74,866         74,866  
 Dividends paid       (608,629 )           (608,629 )   (55,832 )   (664,461 )
 Stock-based compensation   31,178                 31,178         31,178  
 Transfer from other components of equity to retained earnings       251,849     (251,849 )                
 Total transactions with owners   84,095     (356,780 )   (251,849 )   21,809     (502,725 )   (55,832 )   (558,557 )
Balance, September 30, 2020 25,530,621   36,355,490     18,914,141     3,924,650     (1,875,112 )   82,849,790     965,361     83,815,151  
                               
                               
Six months ended September 30, 2021               
                               
  Owners of the parent’s shareholders’ equity   Non-controlling interests   Total equity
  Share capital   Share premium   Retained earnings   Other components of equity   Treasury shares   Total    
  Thousands of yen   Thousands of yen   Thousands of yen   Thousands of yen   Thousands of yen   Thousands of yen   Thousands of yen   Thousands of yen
Balance, April 1, 2021 25,530,621   36,388,811     25,046,813     4,865,110     (1,874,976 )   89,956,379     1,015,272     90,971,651  
Comprehensive income                              
 Profit (loss)       6,891,756             6,891,756     65,894     6,957,650  
 Other comprehensive income           2,039,353         2,039,353         2,039,353  
 Total comprehensive income       6,891,756     2,039,353         8,931,109     65,894     8,997,003  
Transactions with owners                              
 Issuance of common stock 31,217   (31,152 )               65         65  
 Disposal of treasury shares   23,408             24,052     47,460         47,460  
 Dividends paid       (1,759,011 )           (1,759,011 )   (48,550 )   (1,807,561 )
 Stock-based compensation   38,750                 38,750         38,750  
 Total transactions with owners 31,217   31,006     (1,759,011 )       24,052     (1,672,736 )   (48,550 )   (1,721,286 )
Balance, September 30, 2021 25,561,838   36,419,817     30,179,558     6,904,463     (1,850,924 )   97,214,752     1,032,616     98,247,368  
                               
     
Condensed Consolidated Statements of Cash Flows (Unaudited)    
         
    Six Months Ended   Six Months Ended
    September 30, 2020   September 30, 2021
    Thousands of yen   Thousands of yen
Cash flows from operating activities:        
 Profit (loss) before tax   4,465,861     10,431,847  
 Adjustments        
  Depreciation and amortization   14,155,824     13,266,486  
  Loss (gain) on sales/disposals of property and equipment   146,543     69,026  
  Shares of loss (profit) of investments accounted for using the equity method   413,535     372,545  
  Finance income   (106,976 )   (1,741,881 )
  Finance expenses   485,895     272,251  
  Other   99,910     62,598  
  Changes in working capital        
   Decrease (increase) in trade receivables   4,394,275     5,132,848  
   Decrease (increase) in inventories   (70,127 )   79,318  
   Decrease (increase) in prepaid expenses   (1,648,603 )   (1,463,773 )
   Decrease (increase) in contract assets   (1,111,425 )   (585,350 )
   Decrease (increase) in other assets   (437,263 )   (29,674 )
   Decrease (increase) in other financial assets   1,421,035     685,380  
   Increase (decrease) in trade and other payables   (1,573,038 )   (2,877,333 )
   Increase (decrease) in contract liabilities   2,872,875     (258,874 )
   Increase (decrease) in deferred income   (41,663 )   (5,431 )
   Increase (decrease) in other liabilities   90,580     (1,293,234 )
   Increase (decrease) in other financial liabilities   (44,324 )   311  
   Increase (decrease) in retirement benefit liabilities   169,395     217,168  
 Subtotal   23,682,309     22,334,228  
 Interest and dividends received   159,256     154,178  
 Interest paid   (298,015 )   (271,275 )
 Income taxes paid   (2,045,413 )   (3,351,958 )
 Cash flows from operating activities   21,498,137     18,865,173  
Cash flows from investing activities        
 Purchases of tangible assets   (2,753,663 )   (4,164,485 )
 Proceeds from sales of tangible assets   1,447,635     1,010,704  
 Purchases of intangible assets   (2,772,180 )   (2,166,892 )
 Proceeds from sales of intangible assets   137     189  
 Purchase of a subsidiary       (2,612,008 )
 Purchase of investments accounted for using equity method   (2,754,000 )    
 Proceeds from sale of investments accounted for using equity method   60,637      
 Purchases of other investments   (57,500 )   (348,380 )
 Proceeds from sales of other investments   392,365     95,371  
 Payments for leasehold deposits and guarantee deposits   (90,868 )   (83,804 )
 Proceeds from collection of leasehold deposits and guarantee deposits   8,896     121,064  
 Payments for refundable insurance policies   (28,170 )   (37,448 )
 Other       253  
 Cash flows from investing activities   (6,546,711 )   (8,185,436 )
Cash flows from financing activities        
 Repayment of long-term borrowings   (915,000 )   (4,085,000 )
 Net increase (decrease) in short-term borrowings       1,480,000  
 Payments of other financial liabilities   (10,389,786 )   (8,989,166 )
 Dividends paid   (608,629 )   (1,759,011 )
 Other   (55,832 )   (48,486 )
 Cash flows from financing activities   (11,969,247 )   (13,401,663 )
Effect of exchange rate changes on cash and cash equivalents   (51,423 )   50,016  
Net increase (decrease) in cash and cash equivalents   2,930,756     (2,671,910 )
Cash and cash equivalents, beginning of the period   38,671,734     42,466,933  
Cash and cash equivalents, end of the period   41,602,490     39,795,023  
         

Notes to Condensed Consolidated Financial Statements (UNAUDITED)
Going Concern Assumption
Nothing to be reported.

Material Changes In Shareholders’ Equity
Nothing to be reported.

Segment Information
IIJ and its subsidiaries (collectively “the Company”) primarily operate their network service and system integration business, which provides a comprehensive range of network solutions to meet their customers’ needs by cross-selling a variety of services, including Internet connectivity services, WAN services, outsourcing services, systems integration and sales of network-related equipment, and the ATM operation business. Therefore, the Company defined two reportable segments: “Network service and systems integration business” and “ATM operation business.”

Segment information for the Company is as follows:

Six months ended September 30, 2020

  Reportable segments        
Network service and systems integration business   ATM operation
business
  Adjustments   Consolidated
Thousands of yen   Thousands of yen   Thousands of yen   Thousands of yen
Revenue              
Customers 100,270,918   1,394,072     101,664,990  
Intersegment transactions 89,384     (89,384 )  
Total revenue 100,360,302   1,394,072   (89,384 )   101,664,990  
Segment operating profit 4,922,707   378,434   (62,092 )   5,239,049  
Finance income             109,178  
Finance expense             (468,831 )
Share of profit (loss) of investments accounted for using the equity method             (413,535 )
Profit before tax             4,465,861  
                 

Six months ended September 30, 2021

  Reportable segments        
Network service and systems integration business   ATM operation
business
  Adjustments   Consolidated
Thousands of yen   Thousands of yen   Thousands of yen   Thousands of yen
Revenue              
Customers 107,645,427   1,408,460     109,053,887  
Intersegment transactions 66,457     (66,457 )  
Total revenue 107,711,884   1,408,460   (66,457 )   109,053,887  
Segment operating profit 8,932,994   417,301   (46,003 )   9,304,292  
Finance income             1,772,412  
Finance expense             (272,312 )
Share of profit (loss) of investments accounted for using the equity method             (372,545 )
Profit before tax             10,431,847  
                 

Intersegment transactions are based on market price.         

Subsequent Events
Nothing to be reported.

Note: The following information is provided to disclose Internet Initiative Japan Inc. (“IIJ”) financial results (unaudited) for the first six months ended September 30, 2021 (“1H21”) in the form defined by the Tokyo Stock Exchange.

Consolidated Financial Results for the Six Months ended September 30, 2021 [Under IFRS]

November 5, 2021

Company name: Internet Initiative Japan Inc.
Exchange listed: Tokyo Stock Exchange First Section
Stock code number: 3774
URL: https://www.iij.ad.jp/en/
Representative: Eijiro Katsu, President and Representative Director
Contact: Akihisa Watai, Senior Managing Director and CFO
TEL: +81-3-5205-6500
Scheduled date for filing of quarterly report (Shihanki-houkokusho) to Japan’s regulatory organization: November 15, 2021
Scheduled date for dividend payment: December 3, 2021
Supplemental material on financial results: Yes
Presentation on quarterly report: Yes (for institutional investors and analysts)

(Amounts of less than JPY one million are rounded)

1. Consolidated Financial Results for the Six Months ended September 30, 2021

(April 1, 2021 to September 30, 2021)

(1) Consolidated Results of Operations (% shown is YoY change)
  Revenues Operating profit Profit (loss) before tax Profit (loss) Profit (loss) Other comprehensive income
for the period attributable to owners
  of the parent
  JPY millions % JPY millions % JPY millions % JPY millions % JPY millions % JPY millions %
Six Months ended September 30, 2021 109,054 7.3 9,304 77.6 10,432 133.6 6,958 147.6 6,892 148.8 8,997 108.4
Six Months ended September 30, 2020 101,665 2.5 5,239 56.3 4,466 46.7 2,810 51.2 2,770 57.7 4,317 68.5

 

  

  Basic earnings per share Diluted earnings per share
  JPY JPY
Six Months ended September 30, 2021 76.34 75.97
Six Months ended September 30, 2020 30.71 30.56

(Note) IIJ conducted a stock split at a ratio of two-for-one with an effective date of January 1, 2021. Accordingly, basic earnings per share and diluted earnings per share are calculated as if the stock split had been conducted at the beginning of the previous consolidated fiscal year.

(2) Consolidated Financial Position
  Total assets Total equity Total equity attributable to Ratio of owners’ equity
owners of the parent to total assets
  JPY millions JPY millions JPY millions %
As of September 30, 2021 222,729 98,247 97,215 43.6
As of March 31, 2021 220,777 90,972 89,956 40.7

2.Dividends

  Dividend per Shares
1Q-end 2Q-end 3Q-end Year-end Total
  JPY JPY JPY JPY JPY
Fiscal Year Ended
March 31, 2021
20.50 19.50
Fiscal Year Ending
March 31, 2022
23.00      
Fiscal Year Ending
March 31, 2022
(forecast)
    23.00 46.00

(Notes)

  1. Changes from the latest forecasts disclosed: Yes
  2. IIJ conducted a stock split at a ratio of two-for-one with an effective date of January 1, 2021. The 2Q-end dividend per share for the fiscal year ended March 31, 2021 is the amount before the stock split. Regarding the post-split basis amount for the fiscal year ended March 31, 2021, 2Q-end and annual dividend per share are JPY10.25 and JPY29.75, respectively.

3.Targets of Consolidated Financial Results for the Fiscal Year Ending March 31, 2022

(% shown is YoY change)
  Revenues Operating profit Profit (loss) Profit (loss) for the year attributable to owners of the parent Basic earnings per share
before tax
  JPY millions % JPY millions % JPY millions % JPY millions % JPY
Fiscal Year Ending March 31, 2022 228,500 7.3 22,000 54.4 21,500 53.2 13,700 41.1 151.72

(Notes)
1. Changes from the latest forecasts disclosed: Yes
2. As for the details about our financial targets for the fiscal year ending March 31, 2022, please refer to “Considered Factors for FY2021 Financial Targets” which is disclosed on page 7 of this earnings release.

* Notes:
(1) Changes in significant subsidiaries: None

(2) Changes in accounting policies and estimate

  1. Changes in accounting policies required by IFRS: None
  2. Other changes in accounting policies: None
  3. Changes in accounting estimates: None  

(3) Number of shares issued (common stock)

  1. Number of shares issued (inclusive of treasury stock):
    As of September 30, 2021: 93,534,800 shares
    As of March 31, 2021: 93,469,200 shares
  2. Number of treasury stock:
    As of September 30, 2021: 3,221,667 shares
    As of March 31, 2021: 3,263,532 shares
  3. Number of weighted average common shares outstanding:
    For the Six months ended September 30, 2021: 90,279,138 shares
    For the Six months ended September 30, 2020: 90,184,713 shares

    * IIJ conducted a stock split at a ratio of two-for-one with an effective date of January 1, 2021. Accordingly, number of shares issued, number of treasury stock and number of weighted average common shares outstanding above are calculated as if the stock split had been conducted at the beginning of the previous consolidated fiscal year, respectively.

* Status of Audit Procedures
This document is not subject to the quarterly review by certified public accountant or independent auditor.

* Explanation on the Appropriate Use of Future Outlook and other special instructions
i) Forward-looking statements
Forward-looking statements disclosed in this document are based on IIJ Group’s expectation, estimates, and projections based on information available to IIJ Group as of November 5, 2021. As these forward-looking statements are subject to known and unknown risks and uncertainties, actual results may differ from those disclosed due, for example, to but not limited to changes in business climate and/or market trends. As for our latest forecast of our financial targets for the fiscal year ending March 31, 2022, please refer to the page 7 of this document.

ii) Others
Presentation material will be disclosed on TDnet as well as posted on our website on November 5, 2021.

Internet Initiative Japan Inc.
E-mail: ir@iij.ad.jp
Tel: +81-3-5205-6500
URL: https://www.iij.ad.jp/en/ir

Internet Initiative Japan Inc



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