IIJ Announces its Nine Months Results for the Fiscal Year Ending March 31, 2023

TOKYO, Feb. 08, 2023 (GLOBE NEWSWIRE) -- Internet Initiative Japan Inc. (“IIJ”, TSE Prime: 3774) today announced its consolidated financial results for the nine months for the fiscal year ending March 31, 2023 (“1Q-3Q22”, from April 1, 2022 to December 31, 2022) under International Financial Reporting Standards (IFRS).¹

Overview of 1Q-3Q22 Financial Results and Business Outlook

“In this nine-month period, we have seen strong revenue growth of 11.9% year over year with consistent penetration of IT utilization among Japanese enterprises and governmental organizations. Continuous accumulation of our network services’ monthly recurring revenues and system integration projects brought this favorable result, and also several large network-replacement transactions we acquired around the last fiscal year-end began to contribute to the revenue from this third quarter. At the same time, we have continuously developed new network services such as “IIJ Cloud Data Platform Service⁴,” “IIJ Private Backbone Service/Smart HUB⁵,” “IIJ Secure Access Service⁶” and “IIJ Mobile Service/TypeD for IIJmio Biz⁷” to further enhance our recurring revenue business model. In addition, we have recently acquired large scale projects such as several information systems replacement projects from a broadcasting company, a core system construction project for a financial group, a network replacement project with a multi-year contract and a data center construction project in overseas. Those would accelerate our revenue growth further in the next fiscal year and onward,” said Eijiro Katsu, President of IIJ.

“Our outstanding competitive advantage is to provide reliable network and services operation, realized by our robust Internet infrastructure and technology expertise that we have accumulated since our inception. Network would become faster and faster as well as CPU, storage capacity would be tremendously large, and AI would be widely adopted, which may change some current business players’ competitiveness in near future. Even in such a dynamic transition, we believe that our stable and secure network operation capabilities would continue to be required and also become more prominent advantage. Overlooking today’s overall market landscape in Japan, I am very excited that our roles towards future network-society in Japan would become significant more than ever,” concluded Koichi Suzuki, Founder and Chairman of IIJ.

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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 For details, please refer to our press release titled “IIJ Launches IIJ Cloud Data Platform Service to Facilitate On-Premise and Multi-Cloud Data Integration” .

⁵ For details, please refer to our press release titled “Launch IIJ Private Backbone Service/Smart HUB, A New Flexible Cloud Connection Service with High Performance Broadband Over 10Gbps” .

⁶ For details, please refer to our press release titled “IIJ to Start Providing New SASE Service, IIJ Secure Access Service” .

⁷ For details, please refer to our website  (Japanese text only).

1Q-3Q22 Financial Results Summary

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

1Q-3Q22 Revenues and Income

Revenues

Total revenues were JPY185,339 million, up 11.9% YoY (JPY165,600 million for 1Q-3Q21).

Network services revenues were JPY102,744 million, up 8.0% YoY (JPY95,097 million for 1Q-3Q21).

Revenues for Internet connectivity services for enterprise were JPY29,504 million, up 5.1% YoY from JPY28,082 million for 1Q-3Q21, mainly due to an increase in revenues of IP services and enterprise mobile services, which absorbed a decrease in IIJ Mobile MVNO Platform service (MVNE) revenue in the response to the reduction in procurement cost.

Revenues for Internet connectivity services for consumers were JPY18,335 million, up 3.1% YoY from JPY17,780 million for 1Q-3Q21, mainly due to an increase in revenue of IIJmio Mobile services led by an increase in subscription, which absorbed a decrease in revenue resulted from a decrease in average revenue per user along with continued migration of old plan’s customers to “GigaPlans”, which launched at the beginning of the previous fiscal year.

Revenues for Outsourcing services were JPY34,359 million, up 15.2% YoY from JPY29,831 million for 1Q-3Q21, mainly due to an increase in security-related services revenues.

Revenues for WAN services were JPY20,546 million, up 5.9% YoY from JPY19,404 million for 1Q-3Q21.

SI revenues, including equipment sales, were JPY80,477 million, up 17.6% YoY (JPY68,413 million for 1Q-3Q21).

Systems construction and equipment sales, a one-time revenue, was JPY29,936 million, up 22.6% YoY (JPY24,415 million for 1Q-3Q21). Systems operation and maintenance revenue, a recurring revenue, was JPY50,541 million, up 14.9% YoY (JPY43,998 million for 1Q-3Q21), 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 JPY91,971 million, up 31.6% YoY (JPY69,910 million for 1Q-3Q21); orders received for systems construction and equipment sales were JPY34,190 million, up 29.0% YoY (JPY26,501 million for 1Q-3Q21), and orders received for systems operation and maintenance were JPY57,781 million, up 33.1% YoY (JPY43,409 million for 1Q-3Q21).

Order backlog for SI, including equipment sales, as of December 31, 2022 amounted to JPY84,285 million, up 23.7% YoY (JPY68,151 million as of December 31, 2021); order backlog for systems construction and equipment sales was JPY16,705 million, up 48.4% YoY (JPY11,254 million as of December 31, 2021) and order backlog for systems operation and maintenance was JPY67,580 million, up 18.8% YoY (JPY56,897 million as of December 31, 2021).

ATM operation business revenues were JPY2,118 million, up 1.3% YoY (JPY2,090 million for 1Q-3Q21).

Cost of sales

Total cost of sales was JPY143,683 million, up 11.5% YoY (JPY128,816 million for 1Q-3Q21).

Cost of network services revenue was JPY74,627 million, up 8.7% YoY (JPY68,653 million for 1Q-3Q21). There were an increase in purchasing cost of mobile devices and one-time cost reimbursement, which was related to a mobile unit charge by NTT DOCOMO, INC., of over JPY0.5 billion in 3Q22 (a similar impact of approximately JPY1.08 billion in 3Q21) as FY2021 mobile unit charge was fixed based on its actual results for the corresponding period. Gross profit was JPY28,117 million, up 6.3% YoY (JPY26,444 million for 1Q-3Q21), and gross profit ratio was 27.4% (27.8% for 1Q-3Q21).

Cost of SI revenues, including equipment sales was JPY67,835 million, up 15.2% YoY (JPY58,869 million for 1Q-3Q21), mainly due to increases in purchasing costs and multi-cloud related services’ license fees along with an increase in revenues. Gross profit was JPY12,642 million, up 32.5% YoY (JPY9,544 million for 1Q-3Q21) and gross profit ratio was 15.7% (13.9% for 1Q-3Q21).

Cost of ATM operation business revenues was JPY1,221 million, down 5.6% YoY (JPY1,294 million for 1Q-3Q21). Gross profit was JPY897 million (JPY796 million for 1Q-3Q21) and gross profit ratio was 42.4% (38.1% for 1Q-3Q21).

Selling, general and administrative expenses and other operating income and expenses

Selling, general and administrative expenses, including research and development expenses, totaled JPY23,064 million, up 12.5% YoY (JPY20,494 million for 1Q-3Q21), mainly due to increases in personnel-related expenses, advertising expenses and outsourcing expenses.

Other operating income was JPY246 million (JPY125 million for 1Q-3Q21).

Other operating expenses was JPY48 million (JPY117 million for 1Q-3Q21).

Operating profit

Operating profit was JPY18,790 million (JPY16,298 million for 1Q-3Q21), up 15.3% YoY.

Finance income and expenses, and share of profit (loss) of investments accounted for using equity method

Finance income was JPY802 million (JPY2,756 million for 1Q-3Q21). It included gains on financial instruments, mainly related to funds, of JPY376 million (JPY2,560 million for 1Q-3Q21) and foreign exchange gain of JPY323 million (JPY98 million for 1Q-3Q21).

Finance expense was JPY413 million (JPY401 million for 1Q-3Q21). It included interest expenses of JPY400 million (JPY401 million for 1Q-3Q21).

Share of loss of investments accounted for using equity method was JPY161 million (loss of JPY1,056 million for 1Q-3Q21). There was a loss of DeCurret Holdings, Inc. of JPY274 million (JPY1,332 million for 1Q-3Q21).

Profit before tax

Profit before tax was JPY19,018 million (JPY17,597 million for 1Q-3Q21), up 8.1% YoY.

Profit for the period

Income tax expense was JPY6,049 million (JPY5,974 million for 1Q-3Q21). As a result, profit for the period was JPY12,969 million (JPY11,623 million for 1Q-3Q21), up 11.6% YoY.

Profit for the period attributable to non-controlling interests was JPY115 million (JPY101 million for 1Q-3Q21), mainly related to net income of Trust Networks Inc.

Profit for the period attributable to owners of the parent was JPY12,854 million (JPY11,522 million for 1Q-3Q21), up 11.6% YoY.

Financial Position as of December 31, 2022　

As of December 31, 2022, the balance of total assets was JPY234,858 million, increased by JPY3,053 million from the balance as of March 31, 2022 of JPY231,805 million.

As of December 31, 2022, the balance of current assets was JPY103,148 million, decreased by JPY1,337 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 JPY6,064 million to JPY41,327 million, trade receivables decreased by JPY1,570 million to JPY36,079 million, inventories increased by JPY1,682 million to JPY4,290 million, prepaid expenses increased by JPY2,354 million to JPY15,907 million, and contract assets increased by JPY1,448 million to JPY3,318 million.

As of December 31, 2022, the balance of non-current assets was JPY131,710 million, increased by JPY4,390 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 increased by JPY5,056 million to JPY22,902 million mainly due to purchases related to Shiroi Data Center Campus construction, 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 JPY2,376 million to JPY42,498 million mainly due to depreciation, intangible assets decreased by JPY224 million to JPY16,200 million mainly due to amortization of software, and prepaid expenses increased by JPY1,398 million to JPY11,850 million, mainly due to operation and maintenance costs.

As of December 31, 2022, the balance of current liabilities was JPY74,102 million, decreased by JPY2,675 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 increased by JPY3,077 million to JPY23,819 million, borrowings increased by JPY400 million to JPY16,770 million mainly due to a decrease of JPY1,500 million from repayment of long-term borrowings and an increase of JPY2,000 million owing to a transfer from non-current liabilities, income taxes payable decreased by JPY3,817 million to JPY1,978 million, contract liabilities increased by JPY187 million to JPY9,758 million and other financial liabilities decreased by JPY1,260 million to JPY15,775 million.

As of December 31, 2022, the balance of non-current liabilities was JPY47,591 million, decreased by JPY2,816 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 JPY1,829 million to JPY3,671 million mainly due to a transfer to current portion, contract liabilities decreased by JPY503 million to JPY6,926 million and other financial liabilities decreased by JPY472 million to JPY29,674 million.

As of December 31, 2022, the balance of total equity attributable to owners of the parent was JPY112,006 million, increased by JPY8,478 million from the balance as of March 31, 2022 of JPY103,528 million. Ratio of owners' equity to total assets was 47.7% as of December 31, 2022.

1Q-3Q22 Cash Flows

Cash and cash equivalents as of December 31, 2022 were JPY41,327 million (JPY40,960 million as of December 31, 2021).

Net cash provided by operating activities for 1Q-3Q22 was JPY27,314 million (net cash provided by operating activities of JPY30,370 million for 1Q-3Q21). There were profit before tax of JPY19,018 million (JPY17,597 million for 1Q-3Q21), depreciation and amortization of JPY21,254 million (JPY21,088 million for 1Q-3Q21), including JPY8,460 million (JPY8,643 million for 1Q-3Q21) of depreciation of right-of-use operating lease assets under IFRS 16, and income taxes paid of JPY9,871 million (JPY5,680 million for 1Q-3Q21). Regarding changes in working capital, there was net cash out of JPY2,991 million (net cash out of JPY1,298 million for 1Q-3Q21). As for the major factors for the increase in net cash out in comparison with 1Q-3Q21, there were a decrease in proceeds from trade receivables and increases in payments of prepaid expenses and inventories, which exceeded a decrease in payments of trade and other payables.

Net cash used in investing activities for 1Q-3Q22 was JPY13,160 million (net cash used in investing activities of JPY9,832 million for 1Q-3Q21), mainly due to payments for purchases of tangible assets, such as Shiroi Data Center Campus construction-related, of JPY9,760 million (JPY4,893 million for 1Q-3Q21), payments for purchases of intangible assets, such as software, of JPY4,150 million (JPY3,627 million for 1Q-3Q21), and proceeds from sales of tangible assets of JPY1,216 million (JPY1,776 million for 1Q-3Q21).

Net cash used in financing activities for 1Q-3Q22 was JPY20,766 million (net cash used in financing activities of JPY22,240 million for 1Q-3Q21), mainly due to payments of other financial liabilities of JPY14,396 million (JPY14,665 million for 1Q-3Q21), 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 JPY1,500 million (JPY5,170 million for 1Q-3Q21) and dividends paid of JPY4,901 million (JPY3,836 million for 1Q-3Q21).

Future Prospects including FY2022 Financial Targets

1Q-3Q22 financial results were in line with our plan with continued revenue growth. Therefore, FY2022 financial targets remain unchanged.

Presentation

Presentation materials will be posted on our web site (/en/ir/) on February 8, 2023.

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: 　E-mail: 　URL: /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.

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

Nothing to be reported.        

Note: The following information is provided to disclose Internet Initiative Japan Inc. (“IIJ”) financial results (unaudited) for the nine months ended December 31, 2022 (“1Q-3Q22”) in the form defined by the Tokyo Stock Exchange.

Consolidated Financial Results for the Nine Months ended December 31, 2022　[Under IFRS]

February 8, 2023

Company name: Internet Initiative Japan Inc.

Exchange listed: Tokyo Stock Exchange

Ticker symbol: 3774

URL: /

Representative: Eijiro Katsu, President and Representative Director

Contact: Akihisa Watai, Senior Managing Director and CFO

TEL:

Scheduled date for filing of quarterly report (Shihanki-houkokusho) to Japan’s regulatory organization: February 14, 2023

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 Nine Months ended December 31, 2022 (April 1, 2022 to December 31, 2022)

(Note) IIJ conducted a stock split at a ratio of two-for-one with an effective date of October 1, 2022. Accordingly, basic earnings per share and diluted earnings per share have been calculated as if the stock split had been conducted at the beginning of the previous consolidated fiscal year.

(2) Consolidated Financial Position

2．Dividends

(Notes)

1. Changes from the latest forecasts disclosed: None

2. IIJ conducted 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, the 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)

(Notes)

1. Changes from the latest forecasts disclosed: None
2. IIJ conducted a stock split at a ratio of two-for-one with an effective date of October 1, 2022. The target of basic earnings per share is the amount after the stock split.
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

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 December 31, 2022: 187,069,600 shares
   
   As of March 31, 2022: 187,069,600 shares
   
   
   
   
2. Number of treasury stock:
   
   As of December 31, 2022: 6,371,696 shares
   
   As of March 31, 2022: 6,443,334 shares
   
   
   
   
3. Number of weighted average common shares outstanding:
   
   For the nine months ended December 31, 2022: 180,678,380 shares
   
   For the nine months ended December 31, 2021: 180,581,022 shares
   
   
   
   * IIJ conducted a stock split at a ratio of two-for-one with an effective date of October 1, 2022. Accordingly, number of shares issued, number of treasury stock and number of weighted average common shares outstanding above have been 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 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 February 8, 2023. 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 are also presented in millions of yen.

iii) Others

Presentation material will be disclosed on TDnet as well as posted on our website on February 8, 2023.