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TOKYO, May 12, 2021 (GLOBE NEWSWIRE) — Internet Initiative Japan Inc. (“IIJ”, TSE1: 3774) today announced its consolidated financial results for the fiscal year ended March 31, 2021 (“FY2020”, from April 1, 2020 to March 31, 2021) under International Financial Reporting Standards (IFRS).1

 
Highlights of Financial Results for FY2020
  Total revenues JPY213.0 billion up 4.2 % YoY2  
  Gross profit JPY40.3 billion up 23.6 % YoY  
  Operating profit JPY14.3 billion up 73.2 % YoY  
  Profit before tax JPY14.0 billion up 96.0 % YoY  
  Net profit3 JPY9.7 billion up 142.4 % YoY  
  Annual cash dividend JPY29.75 per share of common stock (post-stock-split basis4)
             
Highlights of Financial Targets for FY2021 (fiscal year ending March 31, 2022)
             
  Total revenues JPY226.0 billion up 6.1 % YoY  
  Operating profit JPY17.5 billion up 22.8 % YoY  
  Profit before tax JPY17.3 billion up 23.3 % YoY  
  Net profit3 JPY11.7 billion up 20.5 % YoY  
  Annual cash dividend JPY39.00 per share of common stock
 

Overview of FY2020 Financial Results and Business Outlook
“As for FY2020 financials, we are very pleased to announce strong operating profit growth, which increased by 73.2% year over year to JPY14.3 billion. We see this FY2020 as a turning point of profitability as we were able to largely and structurally increase operating margin. We’ve been consistently executing our business strategy, continuing to develop and provide reliable and value-added network-related platform services for business uses. It had been sometimes posed us in-front-cost burden formerly, but our network services assets created strong accumulation of enterprise monthly recurring revenues along with IT services utilization demands from Japanese enterprises this year, and it led significant expansion of profit,” said Koichi Suzuki, Founder and Chairman of IIJ.

“We suppose this trend would continue to FY2021 and our mid-term plan period. In FY2021, our core business strategy remains the same: offering wide-range of various Internet/private access/mobile connectivity services, security functions such as gateway solutions/SOC5/EDR6, private-cloud services and multi-cloud solution, with Systems Integration function by leveraging our Internet related expertise. As for FY2021, we expect to increase revenue and operating profit by 6.1% to JPY226.0 billion and by 22.8% to JPY17.5 billion, respectively. Along with net profit increase, we suppose to increase our cash dividend per share by JPY9.25 to JPY39.00 on an annual basis. Although we anticipate our mobile-related revenues will decrease due to ARPU down by our new mobile plan for consumer launched in April 2021, which service price reflected decreasing purchasing unit cost of connectivity and voice fee from MNOs, continuous strong accumulation of enterprise monthly recurring revenues and systems integration, which includes our new subsidiary PTC in Singapore, would cover those impacts and bring consistent revenue growth in total with continued large increase of profit,” said Eijiro Katsu, President of IIJ.

“We also announced our new mid-term plan (FY2021-FY2023) today. We target to have continuous revenue growth to JPY270 billion and operating margin over 9% in FY2023 by realizing scale-merit furthermore. We recognize critical uses of IT services from large Japanese entities shall be enhanced over the long term, and our services offering business would support those changes. We regard this mid-term plan as one step of the growth stage and once we achieve this target, with leveraging our increasing market value, we would like to continue to implement our longer-term growth strategy including M&A to obtain more technology and human resources. Lastly, we believe our efforts for growth will lead to the realization of our ultimate corporate purpose which are: i) to pursue evolving Internet technology as a front runner, ii) to realize and support future networked society in Japan by our expertise, iii) to provide meaningful opportunities for growth to our employees through business execution. This is basically how we view sustainability as a company and for society,” concluded Suzuki.

_________________________________________
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 IIJ conducted a stock split at a ratio of two-for-one with an effective date of January 1, 2021. Annual cash dividend per share is the amount after the stock split.
5 SOC is an abbreviation for Security Operation Center with which we monitor security and analyze security logs collected from our dedicated security platform 24 hours per day, 365 days per year to help and keep our clients’ network secure.
6 EDR is an abbreviation for Endpoint Detection and Response which is a software that monitors the operation and behavior of endpoints connected to the network, such as personal computers, servers, smartphones, and tablets, and takes action as soon as it detects a cyber attack.

FY2020 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
    FY2019 FY2020 YoY Change
    JPY millions JPY millions
 Total revenues 204,474   213,002   4.2  
   Network services 121,999   126,827   4.0  
   Systems integration (SI) 78,394   83,284   6.2  
   ATM operation business 4,081   2,891   (29.2 )
 Total costs (171,880 ) (172,720 ) 0.5  
   Network services (102,092 ) (99,656 ) (2.4 )
   Systems integration (SI) (67,584 ) (71,197 ) 5.3  
   ATM operation business (2,204 ) (1,867 ) (15.3 )
 Total gross profit 32,594   40,282   23.6  
   Network services 19,907   27,171   36.5  
   Systems integration (SI) 10,810   12,087   11.8  
   ATM operation business 1,877   1,024   (45.4 )
 SG&A, R&D, and other operating income (expenses) (24,369 ) (26,034 ) 6.8  
 Operating profit 8,225   14,248   73.2  
 Profit before tax 7,159   14,035   96.0  
 Profit for the year attributable to owners of the parent 4,007   9,712   142.4  
(Note) Systems integration includes equipment sales.      
         

 

Segment Results Summary
    FY2019 FY2020
    JPY millions JPY millions
 Total revenues 204,474   213,002  
   Network services and SI business 200,679   210,278  
   ATM operation business 4,081   2,891  
    Elimination (286 ) (167 )
 Operating profit 8,225   14,248  
   Network services and SI business 6,729   13,541  
   ATM operation business 1,645   826  
    Elimination (149 ) (119 )
       

 

FY2020 Revenues and Income
Revenues
Total revenues were JPY213,002 million, up 4.2% YoY (JPY204,474 million for FY2019).

Network services revenue was JPY126,827 million, up 4.0% YoY (JPY121,999 million for FY2019).

Revenues for Internet connectivity services for enterprise were JPY40,347 million, up 10.1% YoY from JPY36,635 million for FY2019, mainly due to an increase in IP services revenues and mobile-related services revenues along with an increase of telecommunication demands.

Revenues for Internet connectivity services for consumers were JPY25,722 million, down 1.3% YoY from JPY26,055 million for FY2019, mainly due to competition in consumer mobile services.

Revenues for WAN services were JPY25,048 million, down 7.1% YoY from JPY26,972 million for FY2019. The decrease was mainly because of the year over year impact by large enterprises clients’ migration to mobile which mostly ended in 3Q19.

Revenues for Outsourcing services were JPY35,710 million, up 10.4% YoY from JPY32,337 million for FY2019, mainly due to an increase in security-related services revenues.

Network Services Revenues Breakdown
        FY2019 FY2020
YoY Change
        JPY millions JPY millions
Total network services 121,999   126,827   4.0  
             
               
  Internet connectivity services (enterprise) 36,635   40,347   10.1  
                 
    IP services (including data center connectivity services) 10,701   12,171   13.7  
    IIJ Mobile Services 22,598   24,525   8.5  
                   
      Enterprise mobile service (IoT usages etc.) 6,024   7,807   29.6  
      IIJ Mobile MVNO Platform service (MVNE) 16,574   16,718   0.9  
    Others 3,336   3,651   9.4  
  Internet connectivity services (consumer) 26,055   25,722   (1.3 )
                 
    IIJmio Mobile Services 23,487   22,997   (2.1 )
    Others 2,568   2,725   6.1  
  WAN services 26,972   25,048   (7.1 )
  Outsourcing services 32,337   35,710   10.4  
                 

 

Number of Contracts and Subscription for Connectivity Services
               
      As of March 31, 2020 As of March 31, 2021
YoY Change
Internet connectivity services (enterprise) 2,038,687   2,303,717   265,030  
               
  IP service (greater than or equal to 1Gbps) 769   791   22  
  IP service (less than 1Gbps) 1,245   1,200   (45 )
  IIJ Mobile Services 1,949,927   2,209,836   259,909  
                 
    Enterprise mobile service (IoT usages etc.) 842,811   1,110,415   267,604  
    IIJ Mobile MVNO Platform service (MVNE) 1,107,116   1,099,421   (7,695 )
  Others 86,746   91,890   5,144  
Internet connectivity services (consumer) 1,410,006   1,379,277   (30,729 )
               
  IIJmio Mobile Service 1,075,083   1,034,148   (40,935 )
  Others 334,923   345,129   10,206  
Total contracted bandwidth (Gbps) 5,115.9   6,624.1   1,508.2  
               
(Notes)          
1. Numbers in the table above show number of contracts except for “IIJ Mobile Services (enterprise)” and “IIJmio Mobile Service” 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 JPY83,284 million, up 6.2% YoY (JPY78,394 million for FY2019).
Systems construction and equipment sales, a one-time revenue, was JPY31,767 million, down 0.7% YoY (JPY31,976 million for FY2019). Systems operation and maintenance revenue, a recurring revenue, was JPY51,517 million, up 11.0% YoY (JPY46,418 million for FY2019), mainly due to an increase in private cloud services’ revenues.

Orders received for SI, including equipment sales, totaled JPY90,314 million, up 8.6% YoY (JPY83,143 million for FY2019); orders received for systems construction and equipment sales were JPY32,590 million, up 3.0% YoY (JPY31,643 million for FY2019), and orders received for systems operation and maintenance were JPY57,724 million, up 12.1% YoY (JPY51,500 million for FY2019).

Order backlog for SI, including equipment sales, as of March 31, 2021 amounted to JPY62,894 million, up 12.6% YoY (JPY55,864 million as of March 31, 2020); order backlog for systems construction and equipment sales was JPY8,330 million, up 11.0% YoY (JPY7,507 million as of March 31, 2020) and order backlog for systems operation and maintenance was JPY54,564 million, up 12.8% YoY (JPY48,357 million as of March 31, 2020).

ATM operation business revenues were JPY2,891 million, down 29.2% YoY (JPY4,081 million for FY2019), mainly due to the decrease in the number of ATM usage and ATMs in operation along with store closure and stay-at-home by the COVID-19.

Cost of sales
Total cost of sales was JPY172,720 million, up 0.5% YoY (JPY171,880 million for FY2019).

Cost of network services revenue was JPY99,656 million, down 2.4% YoY (JPY102,092 million for FY2019). There was a decrease in cost due to mobile unit charge revised by Mobile Network Operators (MNOs) based on their actual results of FY2019 (JPY1.09 billion) and a decrease in circuit-related costs along with WAN services revenue decrease. Gross profit was JPY27,171 million, up 36.5% YoY (JPY19,907 million for FY2019), and gross profit ratio was 21.4% (16.3% for FY2019).

Cost of SI revenues, including equipment sales was JPY71,197 million, up 5.3% YoY (JPY67,584 million for FY2019). There was an increase in license fees along with an increase in cloud-related revenues. Gross profit was JPY12,087 million, up 11.8% YoY (JPY10,810 million for FY2019) and gross profit ratio was 14.5% (13.8% for FY2019).

Cost of ATM operation business revenues was JPY1,867 million, down 15.3% YoY (JPY2,204 million for FY2019). Gross profit was JPY1,024 million (JPY1,877 million for FY2019) and gross profit ratio was 35.4% (46.0% for FY2019).

Selling, general and administrative expenses and other operating income and expenses
Selling, general and administrative expenses, which include research and development expenses, totaled JPY25,491 million, up 5.9% YoY (JPY24,076 million for FY2019). There was an increase in personnel-related expenses and decreases in sales commission expenses and traveling expenses.

Other operating income was JPY149 million (JPY223 million for FY2019).
Other operating expenses was JPY692 million (JPY516 million for FY2019), mainly due to disposal loss on fixed assets.

Operating profit
Operating profit was JPY14,248 million (JPY8,225 million for FY2019), up 73.2% YoY.

Finance income and expenses, and share of profit (loss) of investments accounted for using equity method
Finance income was JPY776 million, compared to JPY350 million for FY2019. It included gains on financial instruments of JPY479 million (JPY128 million for FY2019), foreign exchange gain of JPY138 million and dividend income of JPY98 million (JPY95 million for FY2019).

Finance expense was JPY581 million, compared to JPY610 million for FY2019. It included interest expenses of JPY580 million (JPY583 million for FY2019).

Share of loss of investments accounted for using equity method was JPY408 million (compared to loss of JPY806 million for FY2019), mainly due to loss of DeCurret of JPY629 million, which included gain on changes in equity of JPY349 million.

Profit before tax
Profit before tax was JPY14,035 million (JPY7,159 million for FY2019), up 96.0% YoY.

Profit for the year
Income tax expense was JPY4,234 million (JPY2,965 million for FY2019), which included tax reduction of JPY306 million related to employment promotion taxation (JPY237 million for FY2019) and deferred tax benefit of JPY384 million (JPY70 million for FY2019). As a result, profit for the year was JPY9,801 million (JPY4,194 million for FY2019), up 133.7% YoY.

Profit for the year attributable to non-controlling interests was JPY89 million (JPY187 million for FY2019), mainly related to net income of Trust Networks Inc.

Profit for the year attributable to owners of parent was JPY9,712 million (JPY4,007 million for FY2019), up 142.4% YoY.

Financial Position as of March 31, 2021
As of March 31, 2021, the balance of total assets was JPY220,777 million, increased by JPY14,253 million from the balance as of March 31, 2020 of JPY206,524 million.

As of March 31, 2021, the balance of current assets was JPY93,405 million, increased by JPY6,814 million from the balance as of March 31, 2020 of JPY86,590 million. The major breakdown of balance and fluctuation of current assets was: an increase in cash and cash equivalents by JPY3,795 million to JPY42,467 million, an increase in trade receivables by JPY2,214 million to JPY34,799 million and an increase in prepaid expenses by JPY902 million to JPY10,598 million.

As of March 31, 2021, the balance of non-current assets was JPY127,373 million, increased by JPY7,439 million from the balance as of March 31, 2020 of JPY119,934 million. As for the major breakdown of balance and fluctuation of non-current assets, tangible assets decreased by JPY315 million to JPY17,084 million, mainly due to depreciation. 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, increased by JPY147 million to JPY50,708 million, mainly due to new lease contracts. Intangible assets decreased by JPY1,326 million to JPY16,954 million, mainly due to amortization. The balance of investments accounted for using the equity method was JPY9,027 million, increased by JPY4,200 million, mainly due to an additional investment in DeCurret. Prepaid expenses increased by JPY1,759 million to JPY9,537 million, mainly due to prepayment of maintenance costs. The amount of other investments was JPY12,912 million, increased by JPY3,726 million mainly due to fluctuation of fair value of our holding marketable equity securities.

As of March 31, 2021, the balance of current liabilities was JPY73,259 million, increased by JPY7,572 million from the balance as of March 31, 2020 of JPY65,687 million. As for the major breakdown of balance and fluctuation of current liabilities, trade and other payables increased by JPY956 million to JPY19,244 million. Borrowings increased by JPY2,980 million to JPY18,560 million, due to an increase by JPY5,170 million from a transfer from non-current liabilities and a decrease by JPY2,190 million from repayment. Contract liabilities increased by JPY1,204 million to JPY7,102 million. Other financial liabilities increased by JPY34 million to JPY17,879 million. Other current liabilities increased by JPY1,678 million to JPY7,382 million.

As of March 31, 2021, the balance of non-current liabilities was JPY56,547 million, decreased by JPY4,234 million from the balance as of March 31, 2020 of JPY60,780 million. As for the major breakdown of balance and fluctuation of current liabilities, long-term borrowings decreased by JPY5,170 million to JPY7,000 million due to a transfer to current portion. Contract liabilities increased by JPY1,253 million to JPY7,244 million. Other financial liabilities decreased by JPY658 million to JPY35,648 million, mainly due to a transfer to current portion.

As of March 31, 2021, the balance of total equity attributable to owners of the parent was JPY89,956 million, increased by JPY10,881 million from the balance as of March 31, 2020 of JPY79,076 million. Ratio of owners’ equity to total assets was 40.7% as of March 31, 2021.

FY2020 Cash Flows
Cash and cash equivalents as of March 31, 2021 were JPY42,467 million (JPY38,672 million as of March 31, 2020).

Net cash provided by operating activities for FY2020 was JPY40,544 million (net cash provided by operating activities of JPY33,394 million for FY2019). There was profit before tax of JPY14,035 million, depreciation and amortization of JPY27,974 million, including JPY11,668 million of depreciation of right-of-use operating lease assets under IFRS 16, and income taxes paid of JPY3,912 million. Regarding changes in working capital, there was net cash in of JPY1,513 million compared to net cash out of JPY909 million for FY2019. As for the major factors for the increase in net cash-inflow in comparison with FY2019, there were decreases in payment of current liabilities, such as trade payable. Cash-inflow also increased due to decrease in trade and other receivable and increase in contract liabilities. The increase in net cash-inflow related to these factors exceeded the net increased amount of payment of prepaid expenses and contract assets.

Net cash used in investing activities for FY2020 was JPY13,216 million (net cash used in investing activities of JPY7,265 million for FY2019), mainly due to payments for purchases of tangible assets of JPY6,391 million (JPY7,197 million for FY2019), investments in an equity method investee of JPY4,754 million (JPY868 million for FY2019), payments for purchases of intangible assets, such as software, of JPY4,617 million (JPY4,642 million for FY2019) and proceeds from sales of tangible assets, which include sale and leaseback, of JPY2,499 million (JPY2,771 million for FY2019).

Net cash used in financing activities for FY2020 was JPY23,618 million (net cash used in financing activities of JPY19,354 million for FY2019), mainly due to payments of other financial liabilities of JPY20,168 million (JPY20,556 million for FY2019), which includes paymants under operating lease contracts such as office rent and finance lease contracts such as network equipment, repayments of long-term bank borrowings of JPY1,830 million, dividends paid of JPY1,533 million (JPY1,217 million for FY2019) and repayments of short-term borrowings of JPY360 million.

Considered Factors for FY2021 Financial Targets
As for the market environment in FY2021, the economy in general is expected to continue to recover, yet we need to pay attention to concerns such as the re-emergence of the COVID-19 pandemic. In the ICT related market, we assume that demand for network services and systems integration will continue to increase.

With regard to our business outlook for FY2021, we expect continued growth in revenues and gross profit for recurring transactions, such as network services, under the aforementioned assumptions of the market environment. In mobile services, we expect a decrease in revenue due to a reduction of average revenue per user caused by our new consumer plan, which reflects unit price reduction of mobile interconnectivity charge. In systems integration, in addition to continued growth, we expect an increase in revenues and profits due to the acquisition of PTC SYSTEM (S) PTE LTD., which became our wholly owned subsidiary in April 2021.

Based on the above, our consolidated financial targets for FY2021 are as follows: total revenues of JPY226.0 billion (up 6.1% from FY2020) and operating profit of JPY17.5 billion (up 22.8% from FY2020). As for profit before tax, we target JPY17.3 billion, by considering share of profit or loss of investments accounted for using equity method and others. As for profit for the year attributable to owners of the parent, we target JPY11.7 billion, by considering income tax expenses at the normal effective tax rate.

Dividend Policy and FY2020 Dividend and FY2021 Dividend Forecast
The basic dividend policy of IIJ is that IIJ pays dividends to its shareholders continuously and in a stable manner while considering the need to have retained earnings for the enhancement of financial position, medium-to long-term business expansion, future business investment and other goals.

Based on the Articles of Incorporation of IIJ, the frequency of dividend payments is twice each fiscal year, an interim dividend and a year-end dividend. The interim dividend is decided by the meeting of the board directors of IIJ and the year-end dividend is approved at IIJ’s general meeting of shareholders.

Based on the policy above, for FY2020, IIJ had paid the interim cash dividend of JPY10.25 per share of common stock (post-stock-split basis), and plans the year-end dividend to be JPY19.50 per share. Total dividend per share for FY2020 will be JPY29.75 per share of common stock.

As for FY2021, our interim dividend forecast is JPY19.50 and our year-end dividend forecast is JPY19.50, which in total is JPY39.00 per share of common stock, an increase of JPY9.25 from FY2020 annual dividend.

Presentation
Presentation materials will be posted on our web site (https://www.iij.ad.jp/en/ir/) on May 12, 2021.
Presentation material is also available in the following URL: http://ml.globenewswire.com/Resource/Download/e89f1d1c-d769-47ce-bd01-71d6dcbce1c3 

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: [email protected] 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.

     
Consolidated Statements of Financial Position (Unaudited)
         
    March 31, 2020   March 31, 2021
    Thousands of yen   Thousands of yen
Assets        
Current Assets        
Cash and cash equivalents   38,671,734     42,466,933  
Trade receivables   32,585,326     34,799,075  
Inventories   2,476,477     2,171,046  
Prepaid expenses   9,696,856     10,598,441  
Contract assets   438,675     1,281,918  
Other financial assets   2,629,332     1,975,910  
Other current assets   92,027     111,334  
Total Current Assets   86,590,427     93,404,657  
Non-current Assets        
Tangible assets   17,399,863     17,084,401  
Right-of-use Assets   50,560,361     50,707,726  
Goodwill   6,082,472     6,082,472  
Intangible assets   18,280,247     16,954,274  
Investments accounted for using the equity method   4,827,287     9,026,980  
Prepaid expenses   7,777,997     9,537,160  
Contract assets   60,362     46,638  
Other investments   9,186,646     12,912,483  
Deferred tax assets   742,857     143,337  
Other financial assets   4,645,959     4,442,704  
Other non-current assets   369,782     434,437  
Total non-current assets   119,933,833     127,372,612  
Total assets   206,524,260     220,777,269  
         
    March 31, 2020   March 31, 2021  
    Thousands of yen   Thousands of yen
Liabilities and Equity        
Liabilities        
Current liabilities        
Trade and other payables   18,287,546     19,243,800  
Borrowings   15,580,000     18,560,000  
Income taxes payable   2,283,707     3,012,415  
Contract liabilities   5,897,674     7,101,821  
Deferred income   88,901     79,914  
Other financial liabilities   17,845,194     17,879,331  
Other current liabilities   5,703,623     7,381,746  
Total current liabilities   65,686,645     73,259,027  
Non-current liabilities        
Borrowings   12,170,000     7,000,000  
Retirement benefit liabilities   3,984,880     4,168,575  
Provisions   753,518     756,405  
Contract liabilities   5,991,807     7,244,411  
Deferred income   479,097     405,579  
Deferred tax liabilities   136,536     225,469  
Other financial liabilities   36,305,781     35,647,899  
Other non-current liabilities   958,879     1,098,253  
Total non-current liabilities   60,780,498     56,546,591  
Total liabilities   126,467,143     129,805,618  
Equity        
Share capital   25,530,621     25,530,621  
Share premium   36,271,395     36,388,811  
Retained earnings   16,500,993     25,046,813  
Other components of equity   2,669,501     4,865,110  
Treasury shares   (1,896,921 )   (1,874,976 )
Total equity attributable to owners of the parent   79,075,589     89,956,379  
Non-controlling interests   981,528     1,015,272  
Total equity   80,057,117     90,971,651  
Total liabilities and equity   206,524,260     220,777,269  
             

 

Consolidated Statements of Profit or Loss (Unaudited)
         
    For the year ended   For the year ended
    March 31, 2020   March 31, 2021
    Thousands of yen   Thousands of yen
Revenues        
Network services   121,998,722     126,826,927  
System integration   78,393,435     83,283,912  
ATM operation business   4,081,358     2,891,041  
Total revenues   204,473,515     213,001,880  
         
Cost of sales        
Cost of network services   (102,092,065 )   (99,656,232 )
Cost of systems integration   (67,584,141 )   (71,196,904 )
Cost of ATM operation business   (2,203,884 )   (1,866,789 )
Total cost of sales   (171,880,090 )   (172,719,925 )
Gross Profit   32,593,425     40,281,955  
             
Selling, general and administrative expense   (24,075,759 )   (25,490,666 )
Other operating income   223,215     148,500  
Other operating expenses   (515,709 )   (692,066 )
Operating Profit   8,225,172     14,247,723  
             
Finance income   349,965     776,298  
Finance expenses   (610,370 )   (581,486 )
Share of profit (loss) of investments accounted for using equity method   (805,780 )   (407,816 )
Profit (loss) before tax   7,158,987     14,034,719  
Income tax expense   (2,965,453 )   (4,233,584 )
Profit (loss) for the year   4,193,534     9,801,135  
         
Profit (loss) for the year attributable to:        
Owners of the parent   4,006,773     9,711,559  
Non-controlling interests   186,761     89,576  
Total   4,193,534     9,801,135  
         
Earnings per share        
Basic earnings per share (yen)   44.44     107.67  
Diluted earnings per share (yen)   44.24     107.14  
         
※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 have been calculated as if the stock split was conducted at the beginning of the previous fiscal year.
 

 

Consolidated Statements of Comprehensive Income (Unaudited)    
         
    For the year ended   For the year ended
    March 31, 2020   March 31, 2021
    Thousands of yen   Thousands of yen
Profit (loss) for the year   4,193,534     9,801,135  
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   234,772     2,371,133  
Remeasurement of defined benefit plans   (157,541 )   115,649  
Total items that will not be reclassified to profit or loss   77,231     2,486,782  
Items that may be reclassified to profit or loss        
Exchange differences on translation of foreign operations   (92,375 )   98,938  
Financial assets measured at fair value through other comprehensive income   (1,735 )   (692 )
Share of other comprehensive income of investments accounted for using equity method   7,671     (21,921 )
Total of items that may be reclassified to profit or loss   (86,439 )   76,325  
Total other comprehensive income, net of tax   (9,208 )   2,563,107  
Other comprehensive income for the year   4,184,326     12,364,242  
Other comprehensive income for the year attributable to:        
Owners of the parent   3,997,565     12,274,666  
Non-controlling interest   186,761     89,576  
Other comprehensive income for the year   4,184,326     12,364,242  
         

 

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
For the year ended March 31, 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, 2019   25,518,712     36,225,775     12,335,035     4,088,704     (1,896,788 )   76,271,438     848,172     77,119,610  
Cumulative impact of adopting IFRS 16           (33,728 )           (33,728 )       (33,728 )
Comprehensive income                                  
Profit for the year           4,006,773             4,006,773     186,761     4,193,534  
Other comprehensive income               (9,208 )       (9,208 )       (9,208 )
Total comprehensive income           4,006,773     (9,208 )       3,997,565     186,761     4,184,326  
Transactions with owners                                  
Issuance of common stock   11,909     (11,895 )               14         14  
Purchase of treasury stock                   (133 )   (133 )       (133 )
Dividends paid           (1,217,082 )           (1,217,082 )   (53,405 )   (1,270,487 )
Stock-based compensation       57,515                 57,515         57,515  
Transfer from other components of equity to retained earnings           1,409,995     (1,409,995 )                
Total transactions with owners   11,909     45,620     192,913     (1,409,995 )   (133 )   (1,159,686 )   (53,405 )   (1,213,091 )
Balance, March 31, 2020   25,530,621     36,271,395     16,500,993     2,669,501     (1,896,921 )   79,075,589     981,528     80,057,117  
                                   
                                   
For the year ended March 31, 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, 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 for the year           9,711,559             9,711,559     89,576     9,801,135  
Other comprehensive income               2,563,107         2,563,107         2,563,107  
Total comprehensive income           9,711,559     2,563,107         12,274,666     89,576     12,364,242  
Transactions with owners                                  
Purchase of treasury stock                   (140 )   (140 )       (140 )
Disposal of treasury shares       52,781             22,085     74,866         74,866  
Dividends paid           (1,533,237 )           (1,533,237 )   (55,832 )   (1,589,069 )
Stock-based compensation       64,635                 64,635         64,635  
Transfer from other components of equity to retained earnings           367,498     (367,498 )                
Total transactions with owners       117,416     (1,165,739 )   (367,498 )   21,945     (1,393,876 )   (55,832 )   (1,449,708 )
Balance, March 31, 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  
                                   

 

Consolidated Statements of Cash Flows (Unaudited)
         
    For the year ended   For the year ended
    March 31, 2020   March 31, 2021
    Thousands of yen   Thousands of yen
Cash flows from operating activities:        
Profit (loss) before tax   7,158,987     14,034,719  
Adjustments        
Depreciation and amortization   28,520,131     27,973,729  
Loss (gain) on sales/disposals of property and equipment   470,789     634,271  
Shares of loss (profit) of investments accounted for using the equity method   805,780     407,816  
Finance income   (259,463 )   (639,262 )
Finance expenses   592,186     579,741  
Other   (8,075 )   338,666  
Changes in working capital        
Decrease (increase) in trade receivables   344,940     (2,151,565 )
Decrease (increase) in inventories   919,349     312,484  
Decrease (increase) in prepaid expenses   (538,864 )   (2,671,608 )
Decrease (increase) in contract assets   (390,673 )   (829,519 )
Decrease (increase) in other assets   245,625     15,818  
Decrease (increase) in other financial assets   (322,857 )   1,504,966  
Increase (decrease) in trade and other payables   (4,052,514 )   1,071,330  
Increase (decrease) in contract liabilities   1,590,073     2,505,263  
Increase (decrease) in deferred income   (42,085 )   (82,505 )
Increase (decrease) in other liabilities   1,150,317     1,677,036  
Increase (decrease) in other financial liabilities   (83,898 )   (185,457 )
Increase (decrease) in retirement benefit liabilities   271,746     347,171  
Subtotal   36,371,494     44,843,094  
Interest and dividends received   211,312     192,760  
Interest paid   (578,252 )   (580,053 )
Income taxes paid   (2,610,803 )   (3,911,634 )
Cash flows from operating activities   33,393,751     40,544,167  
         
Cash flows from investing activities        
Purchases of tangible assets   (7,196,952 )   (6,390,700 )
Proceeds from sales of tangible assets   2,771,031     2,499,494  
Purchases of intangible assets   (4,641,964 )   (4,616,636 )
Proceeds from sales of intangible assets   273,773     44,085  
Purchase of investments accounted for using equity method   (867,842 )   (4,754,000 )
Proceeds from sale of investments accounted for using equity method       60,637  
Purchases of other investments   (136,429 )   (241,307 )
Proceeds from sales of other investments   2,750,245     462,547  
Payments for leasehold deposits and guarantee deposits   (196,716 )   (280,742 )
Proceeds from collection of leasehold deposits and guarantee deposits   21,527     64,852  
Payments for refundable insurance policies   (56,340 )   (68,767 )
Other   14,833     4,695  
Cash flows from investing activities   (7,264,834 )   (13,215,842 )
Cash flows from financing activities        
Repayment of long-term borrowings   (1,500,000 )   (1,830,000 )
Net increase (decrease) in short-term borrowings   2,500,000     (360,000 )
Proceeds from other financial liabilities   1,473,000     329,566  
Payments of other financial liabilities   (20,556,388 )   (20,168,227 )
Dividends paid   (1,217,082 )   (1,533,237 )
Other   (53,551 )   (55,832 )
Cash flows from financing activities   (19,354,021 )   (23,617,730 )
Effect of exchange rate changes on cash and cash equivalents   (60,951 )   84,604  
Net increase (decrease) in cash and cash equivalents   6,713,945     3,795,199  
Cash and cash equivalents, beginning of the year   31,957,789     38,671,734  
Cash and cash equivalents, end of year   38,671,734     42,466,933  
             

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

Changes in Accounting Policies (Unaudited)
Nothing to be reported.

Segment Information (Unaudited)
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:

Fiscal year ended March 31, 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 200,392,157     4,081,358       204,473,515  
Intersegment transactions 287,262         (287,262 )  
Total revenue 200,679,419     4,081,358     (287,262 )   204,473,515  
Segment operating profit 6,728,906     1,644,629     (148,363 )   8,225,172  
Finance income                 349,965  
Finance expense                 (610,370 )
Share of profit (loss) of investments accounted for using the equity method                 (805,780 )
Profit before tax                 7,158,987  
                   

Fiscal year ended March 31, 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 210,110,839     2,891,041       213,001,880  
Intersegment transactions 167,160         (167,160 )  
Total revenue 210,277,999     2,891,041     (167,160 )   213,001,880  
Segment operating profit 13,541,072     826,004     (119,353 )   14,247,723  
Finance income                 776,298  
Finance expense                 (581,486 )
Share of profit (loss) of investments accounted for using the equity method                 (407,816 )
Profit before tax                 14,034,719  
                     

Intersegment transactions are based on market price. Substantially all revenues are from customers operating in Japan. Geographic information for revenues is not presented due to immateriality of revenue attributable to international operations. In addition, non-current assets (excluding financial instruments, deferred tax assets and assets related to retirement benefits) are not presented because substantially all non-current assets are located in Japan and non-current assets located overseas are not material.

Major customers information is not provided because there is no single external customer that accounts for 10% or more of the Company’s revenue.

Earnings per share (Unaudited)        
Basic earnings per share attributable to owners of the parent and diluted earnings per share attributable to owners of the parent for the years ended March 31, 2020 and 2021 were as follows:

    For the year ended
March 31, 2020
  For the year ended
March 31, 2021
Numerator:            
Basic earnings attributable to owners of the parent ( thousands of yen )   4,006,773     9,711,559  
             
Denominator:            
Weighted average number of shares ― basic(shares)   90,160,805     90,195,162  
Dilution arising from stock options (shares)   401,332     451,642  
Weighted average number of shares ― diluted(shares)   90,562,137     90,646,804  
             
Earnings per share attributable to owners of the parent            
Basic (yen)   44.44     107.67  
Diluted (yen)   44.24     107.14  
             

Stock split
Based on a resolution of the Board of Directors on November 9, 2020, the Company conducted a two-for-one stock split of common shares held by shareholders as of December 31, 2020, with an effective date of January 1, 2021. As a result of the stock split, per share information for the previous and current consolidated fiscal years presented in the condensed quarterly consolidated financial statements is presented after adjustment for the stock split.

Subsequent Events (Unaudited)
On April 1, 2021, the Company acquired all shares of PTC SYSTEM (S) PTE LTD, which is mainly engaged in the system integration business in Singapore, for SGD$44 million (JPY3,632 million) and made it a subsidiary.

Note: The following information is provided to disclose Internet Initiative Japan Inc. (“IIJ”) financial results (unaudited) for the fiscal year ended March 31, 2021 (“FY2020”) in the form defined by the Tokyo Stock Exchange.

Consolidated Financial Results for the Fiscal Year ended March 31, 2021 [Under IFRS]

May 12, 2021

Company name: Internet Initiative Japan Inc.
Exchange listed: Tokyo Stock Exchange First Section
Stock code number: 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 annual general shareholders’ meeting: June 29, 2021
Scheduled date for dividend payment: June 30, 2021
Scheduled date for filing of annual securities report (Yuka-shoken -houkokusho) to Japan’s regulatory organization: June 30, 2021
Supplemental material on annual results: Yes
Presentation on annual results: Yes (for institutional investors and analysts)

(Amounts of less than JPY one million are rounded)

1. Consolidated Financial Results for the Fiscal Year ended March 31, 2021 (April 1, 2020 to March 31, 2021)

(1) Consolidated Results of Operations (% shown is YoY change)
  Revenues Operating profit Profit (loss) before
tax
Profit (loss)
for the year
Profit (loss)
attributable to
owners
of the parent
Other
comprehensive
income
  JPY millions % JPY millions % JPY millions % JPY millions % JPY millions % JPY millions %
Fiscal Year ended March 31, 2021 213,002 4.2 14,248 73.2 14,035 96.0 9,801 133.7 9,712 142.4 12,364 195.5
Fiscal Year ended March 31, 2020 204,474 6.3 8,225 36.6 7,159 22.5 4,194 13.4 4,007 13.8 4,184 35.8

 

 

  Basic earnings per
share
Diluted earnings per
share
Rate of return
on equity
Ratio of profit before
taxes to total assets
Ratio of operating
profit to revenues
  JPY JPY % % %
Fiscal Year ended March 31, 2021 107.67 107.14 11.5 6.6 6.7
Fiscal Year ended March 31, 2020 44.44 44.24 5.2 3.8 4.0

(Reference) Equity in net income (loss) of equity method investees
Fiscal year ended March 31, 2021: JPY(408) million, Fiscal year ended March 31, 2020: JPY(806) million
(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 have been calculated as if the stock split was conducted at the beginning of the previous consolidated fiscal year.

 
(2) Consolidated Financial Position
  Total assets Total equity Total equity
attributable to owners
of the parent
Ratio of owners’
equity
to total assets
Owners’ equity
per share
  JPY millions JPY millions JPY millions % JPY
As of March 31, 2021 220,777 90,972 89,956 40.7 997.24
As of March 31, 2020 206,524 80,057 79,076 38.3 876.99

(Note) IIJ conducted a stock split at a ratio of two-for-one with an effective date of January 1, 2021. Accordingly, owners’ equity per share have been calculated as if the stock split was conducted at the beginning of the previous consolidated fiscal year.

 
(3) Consolidated Cash Flow
  Operating activities Investing activities Financing activities Cash and cash equivalents
(end of the year)
  JPY millions JPY millions JPY millions JPY millions
Fiscal year ended March 31, 2021 40,544 (13,216 ) (23,618 ) 42,467
Fiscal year ended March 31, 2020 33,394 (7,265 ) (19,354 ) 38,672
             

2.Dividends

  Dividend per Shares Total cash
dividends
for the year
Payout
Ratio
(consolidated)
Ratio of Dividends to
Shareholder’s Equity
(consolidated)
  1Q-end 2Q-end 3Q-end Year-end Total
  JPY JPY JPY JPY JPY JPY millions % %
Fiscal Year Ended
March 31, 2020
13.50 13.50 27.00 1,217 30.4 1.6
Fiscal Year Ended
March 31, 2021
20.50 19.50 2,684 27.6 3.2
Fiscal Year Ending
March 31, 2021
(forecast)
19.50 19.50 39.00   30.1  

(Note) IIJ conducted a stock split at a ratio of two-for-one with an effective date of January 1, 2021. The forecast of year-end dividend per share is the amount after the stock split. Regarding the pre-split basis amount, revised forecast of year-end and annual dividend per share are JPY39.00 and JPY59.50, respectively.

3.Targets of Consolidated Financial Results for the Fiscal Year ending March 31, 2022
     (April 1, 2021 through March 31, 2022)

(% shown is YoY change)
  Revenues Operating profit Profit (loss) before tax Profit (loss) for the year attributable to owners of the parent Basic earnings per share
  JPY millions % JPY millions % JPY millions % JPY millions % JPY
Interim Period Ending September 30, 2021 108,000 6.2 6,500 24.1 6,300 41.1 4,200 51.6 46.56
Fiscal Year Ending March 31, 2022 226,000 6.1 17,500 22.8 17,300 23.3 11,700 20.5 129.70

* 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 March 31, 2021: 93,469,200 shares
    As of March 31, 2020: 93,469,200 shares
  2. Number of treasury stock:
    As of March 31, 2021: 3,263,532 shares
    As of March 31, 2020: 3,301,900 shares
  3. Number of weighted average common shares outstanding:
    For the fiscal year ended March 31, 2021: 90,195,162 shares
    For the fiscal year ended March 31, 2020: 90,160,805 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 have been calculated as if the stock split was 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

  1. 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 May 12, 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, please refer to “Considered Factors for FY2021 Financial Targets” written on page 8 of this document.
  2. Adoption of IFRS
    We have adopted IFRS from the Annual Securities Report (Yuka-shoken houkokusho) for the fiscal year ended March 31, 2019.

[English Translation]

May 12, 2021

Company name: Internet Initiative Japan Inc.

Company representative: Eijiro Katsu, President and Representative Director
(Stock Code Number: 3774, The First Section of the Tokyo Stock Exchange)

Contact: Akihisa Watai, Senior Managing Director and CFO
TEL: 81-3-5205-6500

Information Pertaining to Our Largest Shareholder

1. About Our Largest Shareholder (As of March 31, 2021)

Name Relationship Its Ownership Percentage (%) Securities Exchanges
where its Shares are Listed
Direct
ownership
Indirect
ownership
Total
Nippon Telegraph and Telephone Corporation (“NTT”) IIJ is NTT’s affiliate company 22.4 4.5 26.9 Tokyo Stock Exchange
(First Section)

2. Position of the Listed Company (IIJ) within NTT Group and other relationships

The ownership percentage by NTT, which is IIJ’s largest shareholder, was 26.9% as of March 31, 2021, including its indirect ownership. However, IIJ’s business activities are not affected by NTT’s ownership in IIJ and IIJ is maintaining its management independence.

3. Business Relationship with NTT Group

IIJ uses services provided by Nippon Telegraph and Telephone East Corporation and Nippon Telegraph and Telephone West Corporation for a significant portion of IIJ’s access circuits, services provided by NTT Communications Corporation for a significant portion of IIJ’s domestic and international backbone circuits, and services provided by NTT DOCOMO, INC for a significant portion of IIJ’s mobile infrastructure, to provide Internet connectivity and other services to IIJ’s customers. IIJ also leases a part of Internet data center facilities from NTT Group companies to provide Internet data center services. The aggregate amount paid to for these services was JPY33,827 million for the fiscal year ended March 31, 2021.

4. Policy Concerning Measures to Protect Minority Shareholders in Transactions with NTT Group

Business transactions with the NTT Group are within the scope of normal business practices and there is no special contract made in relation to the investment by NTT Group.

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