IIJ Announces its First Three Months Results for the Fiscal

TOKYO, Aug. 05, 2022 (GLOBE NEWSWIRE) — Internet Initiative Japan Inc. (“IIJ”, TSE Prime: 3774) today announced its consolidated financial results for the first three months for the fiscal year ending March 31, 2023 (“1Q22”, from April 1, 2022 to June 30, 2022) under International Financial Reporting Standards (IFRS).¹

Overview of 1Q22 Financial Results and Business Outlook
“As the second fiscal year of our three-year mid-term plan, FY2022 started as planned with 1Q22 total revenues and operating profit increased by 9.8% and 15.3% year over year, respectively. Along with further advancement of IT utilization through business activities in Japan, enterprise systems are gradually and continuously transforming to be more network-based. This transition is a tailwind for us, as we have capabilities of offering various and highly reliable network services together with systems integration which are based on our robust Internet infrastructure and Internet technology expertise. In this first quarter, with our network related projects becoming more complex and larger, we continued to acquire these middle scale projects, which would bring us increases in our monthly recurring revenues hereafter. Having seen the continued upward trend in Japanese Internet traffic, we are confident that our enterprise network services revenues would be accumulated continuously, and this would contribute to our structural increase in operating profit,” said Eijiro Katsu, President of IIJ.

“In order to sustain our strong growth, we are strengthening the recruitment and development of human resources. For FY2022, we have set approximately 50% higher recruitment targets⁴ for both new graduates and mid-career hires than we had in previous years, and recruiting activities have made progress in accordance with those policy, while we maintain reasonable management over the number of outsourced personnel. Our continuous network infrastructure enhancement, services development, and stable network operation for about thirty years have been our distinguished competitive advantages. We believe that these technology-oriented business models have been attracting competent Internet-related engineers, which drive us to pursue further technology developments,” concluded Koichi Suzuki, Founder and Chairman of IIJ.

1Q22 Financial Results Summary

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

1Q22 Revenues and Income
Revenues
Total revenues were JPY58,190 million, up 9.8% YoY (JPY52,975 million for 1Q21).

Network services revenue was JPY33,234 million, up 5.6% YoY (JPY31,475 million for 1Q21).

Revenues for Internet connectivity services for enterprise were JPY9,516 million, up 1.1% YoY from JPY9,410 million for 1Q21. The increase was due to an increase in revenues of IP services and enterprise mobile services, which absorbed a decrease in MVNO Platform service (MVNE) revenue owing to reflecting the annual revision of mobile data interconnectivity charge⁵ in selling prices.

Revenues for Internet connectivity services for consumers were JPY6,099 million, down 0.1% YoY from JPY6,108 million for 1Q21, mainly due to a decrease in average revenue per user along with continued migration of former plan’s customers to “GigaPlans”, which launched at the beginning of the previous fiscal year.

Revenues for Outsourcing services were JPY10,944 million, up 15.1% YoY from JPY9,510 million for 1Q21, mainly due to an increase in security-related services revenues.

Revenues for WAN services were JPY6,675 million, up 3.5% YoY from JPY6,447 million for 1Q21.

SI revenues, including equipment sales, were JPY24,269 million, up 16.6% YoY (JPY20,807 million for 1Q21). Systems construction and equipment sales, a one-time revenue, was JPY7,628 million, up 11.7% YoY (JPY6,832 million for 1Q21). Systems operation and maintenance revenue, a recurring revenue, was JPY16,641 million, up 19.1% YoY (JPY13,975 million for 1Q21), mainly due to continued accumulation of systems operation orders as well as an increase in cloud-related services’ revenues.　

Orders received for SI, including equipment sales, totaled JPY33,889 million, up 56.5% YoY (JPY 21,649 million for 1Q21); orders received for systems construction and equipment sales were JPY10,756 million, up 23.1% YoY (JPY8,737 million for 1Q21), and orders received for systems operation and maintenance were JPY23,133 million, up 79.2% YoY (JPY12,911 million for 1Q21).

Order backlog for SI, including equipment sales, as of June 30, 2022 amounted to JPY82,411 million, up 22.1% YoY (JPY67,496 million as of June 30, 2021); order backlog for systems construction and equipment sales was JPY15,579 million, up 40.7% YoY (JPY11,073 million as of June 30, 2021) and order backlog for systems operation and maintenance was JPY66,832 million, up 18.4% YoY (JPY56,424 million as of June 30, 2021).

ATM operation business revenues were JPY687 million, down 0.9% YoY (JPY693 million for 1Q21).

Cost of sales
Total cost of sales was JPY45,490 million, up 9.5% YoY (JPY41,548 million for 1Q21).

Cost of network services revenue was JPY24,431 million, up 5.6% YoY (JPY23,145 million for 1Q21), mainly due to an increase in purchasing cost of mobile device. Gross profit was JPY8,803 million, up 5.7% YoY (JPY8,330 million for 1Q21), and gross profit ratio was 26.5% (26.5% for 1Q21).

Cost of SI revenues, including equipment sales was JPY20,659 million, up 15.0% YoY (JPY17,959 million for 1Q21), mainly due to increases in license fees along with an increase in multi-cloud related services’ revenues and purchasing costs. Gross profit was JPY3,610 million, up 26.8% YoY (JPY2,848 million for 1Q21) and gross profit ratio was 14.9% (13.7% for 1Q21).

Cost of ATM operation business revenues was JPY400 million, down 9.9% YoY (JPY444 million for 1Q21). Gross profit was JPY287 million (JPY249 million for 1Q21) and gross profit ratio was 41.8% (36.0% for 1Q21).
        
Selling, general and administrative expenses and other operating income and expenses
Selling, general and administrative expenses, including research and development expenses, totaled JPY7,858 million, up 10.9% YoY (JPY7,083 million for 1Q21), mainly due to increases in advertising expenses, personnel-related expenses and outsourcing expenses.

Other operating income was JPY194 million (JPY52 million for 1Q21).

Other operating expenses was JPY10 million (JPY36 million for 1Q21).

Operating profit
Operating profit was JPY5,026 million (JPY4,360 million for 1Q21), up 15.3% YoY.

Finance income and expenses, and share of profit (loss) of investments accounted for using equity method
Finance income was JPY1,747 million, compared to JPY1,361 million for 1Q21. It included gains on financial instruments, mainly related to funds, of JPY1,200 million (JPY1,296 million for 1Q21) and foreign exchange gain of JPY474 million (loss of JPY17 million for 1Q21).

Finance expense was JPY136 million, compared to JPY154 million for 1Q21. It included interest expenses of JPY133 million (JPY137 million for 1Q21).

Share of loss of investments accounted for using equity method was JPY14 million (compared to loss of JPY217 million for 1Q21), mainly due to loss of DeCurret Holdings, Inc. of JPY78 million

Profit before tax
Profit before tax was JPY6,623 million (JPY5,350 million for 1Q21), up 23.8% YoY.

Profit for the period
Income tax expense was JPY2,136 million (JPY1,807 million for 1Q21). As a result, profit for the period was JPY4,487 million (JPY3,543 million for 1Q21), up 26.6% YoY.

Profit for the period attributable to non-controlling interests was JPY96 million (JPY36 million for 1Q21), mainly related to net income of Trust Networks Inc.

Profit for the period attributable to owners of parent was JPY4,391 million (JPY3,507 million for 1Q21), up 25.2% YoY.

Financial Position as of June 30, 2022
As of June 30, 2022, the balance of total assets was JPY225,730 million, decreased by JPY6,075 million from the balance as of March 31, 2022 of JPY231,805 million.

As of June 30, 2022, the balance of current assets was JPY101,186 million, decreased by JPY3,299 million from the balance as of March 31, 2022 of JPY104,485 million. As for the major breakdown of balance and fluctuation of current assets, cash and cash equivalents decreased by JPY4,834 million to JPY42,557 million, trade receivables decreased by JPY3,214 million to JPY34,435 million and prepaid expenses increased by JPY3,340 million to JPY16,893 million.

As of June 30, 2022, the balance of non-current assets was JPY124,544 million, decreased by JPY2,776 million from the balance as of March 31, 2022 of JPY127,320 million. As for the major breakdown of balance and fluctuation of non-current assets, tangible assets decreased by JPY225 million to JPY17,621 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 JPY2,449 million to JPY42,425 million mainly due to depreciation, intangible assets decreased by JPY299 million to JPY16,125 million mainly due to amortization of software, and other investments decreased by JPY56 million to JPY17,354 million.

As of June 30, 2022, the balance of current liabilities was JPY72,110 million, decreased by JPY4,667 million from the balance as of March 31, 2022 of JPY76,777 million. As for the major breakdown of balance and fluctuation of current liabilities, trade and other payables decreased by JPY1,349 million to JPY19,393 million, borrowings increased by JPY250 million to JPY16,620 million due to a decrease of JPY750 million from repayment of long-term borrowings and an increase of JPY1,000 million owing to a transfer from non-current liabilities, income taxes payable decreased by JPY3,942 million to JPY1,853 million, contract liabilities increased by JPY1,128 million to JPY10,699 million and other financial liabilities increased by JPY132 million to JPY17,167 million.

As of June 30, 2022, the balance of non-current liabilities was JPY47,000 million, decreased by JPY3,407 million from the balance as of March 31, 2022 of JPY50,407 million. As for the major breakdown of balance and fluctuation of non-current liabilities, long-term borrowings decreased by JPY1,000 million to JPY4,500 million due to a transfer to current portion, contract liabilities decreased by JPY412 million to JPY7,017 million and other financial liabilities decreased by JPY1,467 million to JPY28,679 million mainly due to a transfer to current portion.

As of June 30, 2022, the balance of total equity attributable to owners of the parent was JPY105,480 million, increased by JPY1,952 million from the balance as of March 31, 2022 of JPY103,528 million. Ratio of owners’ equity to total assets was 46.7% as of June 30, 2022.

1Q22 Cash Flows
Cash and cash equivalents as of June 30, 2022 were JPY42,557 million (JPY34,831 million as of June 30, 2021).

Net cash provided by operating activities for 1Q22 was JPY4,855 million (net cash provided by operating activities of JPY7,654 million for 1Q21). There were profit before tax of JPY6,623 million (JPY5,350 million for 1Q21), depreciation and amortization of JPY7,055 million (JPY6,606 million for 1Q21), including JPY2,808 million (JPY2,500 million for 1Q21) of depreciation of right-of-use operating lease assets under IFRS 16, and income taxes paid of JPY6,091 million (JPY3,334 million for 1Q21). Regarding changes in working capital, there was net cash out of JPY1,063 million compared to net cash-out of JPY71 million for 1Q21. As for the major factors for the increase in net cash outflow in comparison with 1Q21, there was a decrease in proceeds from trade receivables, which exceeded decreases in payments of current liabilities, such as trade payable and other liabilities.

Net cash used in investing activities for FY1Q22 was JPY2,366 million (net cash used in investing activities of JPY6,414 million for 1Q21), mainly due to payments for purchases of tangible assets of JPY1,839 million (JPY2,839 million for 1Q21), payments for purchases of intangible assets, such as software, of JPY1,149 million (JPY1,325 million for 1Q21), and proceeds from sales of tangible assets of JPY791 million (JPY584 million for 1Q21).

Net cash used in financing activities for 1Q22 was JPY7,875 million (net cash used in financing activities of JPY8,875 million for 1Q21), mainly due to payments of other financial liabilities of JPY4,819 million (JPY4,463 million for 1Q21), which included payments under operating lease contracts such as office rent and finance lease contracts such as network equipment, dividends paid of JPY2,258 million (JPY1,759 million for 1Q21) and repayments of long-term bank borrowings of JPY750 million (JPY4,085 million for 1Q21).

Future Prospects including FY2022 Financial Targets
1Q22 financial results were in line with our expectation. Therefore, financial targets for the fiscal year ending March 31, 2023 (FY2022) announced on May 13, 2022 remain unchanged.

Presentation
Presentation materials will be posted on our web site (https://www.iij.ad.jp/en/ir/) on August 5, 2022.
The materials can also be found in the following URL. http://ml.globenewswire.com/Resource/Download/d8c087ab-4ca8-4088-899d-67dbd89d895b 

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 (“TSE”) in 2006 and transitioned to the Prime Market of TSE from April 2022.

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 attributable to owners of the parent.”
4 The recruitment targets are on a non-consolidated basis.
5 A unit charge for interconnectivity data communications charge between mobile carriers such as NTT DoCoMo and MVNO such as IIJ. The unit price is per Mbps.

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 operates its network service and system integration business, which provides a comprehensive range of network solutions to meet its 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:

Intersegment transactions are based on market price.

Subsequent Events

On August 5, 2022, IIJ’s board of directors resolved a stock split of its common stock, as follows.

1.  Purpose of stock split
     The purpose of the stock split is to increase the liquidity of IIJ’s common stock and expand its investor base by reducing the trading price per share of its common stock. As a result of the stock split, the investment unit amount of its common stock will be one half (1/2) of the previous amount.

2.  Overview of stock split

3. Effect on per share information
    Assuming the stock split had been conducted at the beginning of the fiscal year ended March 31, 2021, basic earnings per share attributable to IIJ would have been as follows:

Note: The following information is provided to disclose Internet Initiative Japan Inc. (“IIJ”) financial results (unaudited) for the first three months ended June 30, 2022 (“1Q22”) in the form defined by the Tokyo Stock Exchange.

Consolidated Financial Results for the Three Months ended June 30, 2022　[Under IFRS]

August 5, 2022

Company name: Internet Initiative Japan Inc.
Exchange listed: Tokyo Stock Exchange
Ticker symbol: 3774
URL: https://www.iij.ad.jp/
Representative: Eijiro Katsu, President and Representative Director
Contact: Akihisa Watai, Senior Managing Director and CFO
TEL: (03) 5205-6500
Scheduled date for filing of quarterly report (Shihanki-houkokusho) to Japan’s regulatory organization: August 15, 2022
Scheduled date for dividend payment: –
Supplemental material on quarterly results: Yes
Presentation on quarterly results: Yes (for institutional investors and analysts)

(Amounts of less than JPY one million are rounded)

1. Consolidated Financial Results for the Three Months ended June 30, 2022 (April 1, 2022 to June 30, 2022)

(1) Consolidated Results of Operations                                                                      　　(% shown is YoY change)

(2) Consolidated Financial Position

2．Dividends

(Notes)
1. Changes from the latest forecasts disclosed: Yes
2. IIJ plans a stock split at a ratio of two-for-one effective as of October 1, 2022. The forecast of year-end dividend per share is the amount after the stock split. Regarding the amount on a pre-split basis, revised forecast of year-end and annual dividend per share are JPY29.26 and JPY58.51, respectively.

3．Targets of Consolidated Financial Results for the Fiscal Year ending March 31, 2023
(April 1, 2022 through March 31, 2023)

(% shown is YoY change)

(Notes)

1. Changes from the latest forecasts disclosed: None
2. IIJ plans a stock split at a ratio of two-for-one effective as of October 1, 2022. The basic earnings per share are calculated on the post-split basis.
3. As for the details about our financial targets for the fiscal year ending March 31, 2023, please refer to “Future Prospects including FY2022 Financial Targets” which is disclosed on page 8 of this earnings release.

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

(2) Changes in accounting policies and estimate
i. Changes in accounting policies required by IFRS: None
ii. Other changes in accounting policies: None
iii. Changes in accounting estimates: None

(3) Number of shares issued (common stock)
i. Number of shares issued (inclusive of treasury stock):
As of June 30, 2022: 93,534,800 shares
As of March 31, 2022: 93,534,800 shares

ii. Number of treasury stock:
As of June 30, 2022: 3,185,828 shares
As of March 31, 2022: 3,221,667 shares

iii. Number of weighted average common shares outstanding:
For the three months ended June 30, 2022: 90,319,431 shares
For the three months ended June 30, 2021: 90,244,770 shares

* Status of Audit Procedures
This document is not subject to the audit procedures 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 August 5, 2022. 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, please refer to “Future Prospects including FY2022 Financial Targets” written on page 8 of this document.

ii) Change in the unit of presentation for monetary amounts
Amounts of accounts and other items presented in our condensed quarterly consolidated financial statements were previously stated in thousands of yen, but effective from the first quarter ended June 30, 2022, IIJ has changed to present such amounts in millions of yen. In order to facilitate comparison, the amounts for the previous consolidated fiscal year and the first quarter of the previous consolidated fiscal year are also presented in millions of yen.

iii) Others
Presentation material will be disclosed on TDnet as well as posted on our website on August 5, 2022.