IIJ Announces its Nine Months Results for the Fiscal Year

TOKYO, Feb. 08, 2022 (GLOBE NEWSWIRE) — Internet Initiative Japan Inc. (“IIJ”, TSE1: 3774) today announced its consolidated financial results for the nine months for the fiscal year ending March 31, 2022 (“1Q-3Q21”, from April 1, 2021 to December 31, 2021) under International Financial Reporting Standards (IFRS)1

Highlights of Financial Results for 1Q-3Q21
Total revenues JPY 165.6 billion up 6.1%   YoY2  
Gross profit JPY 36.8 billion up 27.7%   YoY  
Operating profit JPY 16.3 billion up 60.9%   YoY  
Profit before tax JPY 17.6 billion up 90.7%   YoY  
Net profit3 JPY 11.5 billion up 96.1%   YoY  
 
Financial Targets for FY2021 (Revised upward on November 5, 2021)
   
Total revenues JPY228.5 billion up 7.3%   YoY  
Operating profit JPY22.0 billion up 54.4%   YoY  
Profit before tax JPY21.5 billion up 53.2%   YoY  
Net profit JPY13.7 billion up 41.1%   YoY  
 

Overview of 1Q-3Q21 Financial Results and Business Outlook
“Along with a further shift toward IT utilization by Japanese enterprises, we believe our business status has entered into a profit margin expansion phase since the last fiscal year. This has been achieved mainly by steady growth of recurring revenues: our enterprise recurring revenues4 grew by 13.3% year over year, mostly due to 18.7% year over year growth from security services, 12.0% from IP services5, 36.3% from enterprise mobile and 15.1% from systems operation and maintenance. These led our operating profit to increase by 60.9% year over year and operating profit margin to reach 9.8% in this nine-month period for FY2021. As we continued to see strong demands from various industries for both network services and systems integration, we expect this trend to continue. Then, we decided to construct the second site of our Shiroi data center, which is to absorb growing demands for server racks by around FY2027,” said Eijiro Katsu, President of IIJ.

“For the past two consecutive fiscal years, we are seeing visible improvement in our financials, which has come from our long-term and consistent business strategy and investments in Internet-related technology for almost thirty years. Ever since our inception in 1992, the spread of Internet has been transforming business activities gradually and consistently, and that should continue to bring us further business opportunities. By leveraging our competitive assets such as reliable network infrastructure, various services developed in-house, blue-chip client base and skilled engineers, we believe our business scale and domain should largely expand to the next stage in the middle to long term,” concluded Koichi Suzuki, Founder and Chairman of IIJ.”

1Q-3Q21 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
  1Q-3Q20 1Q-3Q21 YoY Change
  JPY millions JPY millions
Total revenues 156,070   165,600   6.1  
Network services 93,983   95,097   1.2  
Systems integration (SI) 59,927   68,413   14.2  
ATM operation business 2,160   2,090   (3.2 )
Total costs (127,273 ) (128,816 ) 1.2  
Network services (74,201 ) (68,653 ) (7.5 )
Systems integration (SI) (51,672 ) (58,869 ) 13.9  
ATM operation business (1,400 ) (1,294 ) (7.6 )
Total gross profit 28,797   36,784   27.7  
Network services 19,782   26,444   33.7  
Systems integration (SI) 8,255   9,544   15.6  
ATM operation business 760   796   4.8  
SG&A, R&D, and other operating income (expenses) (18,670 ) (20,486 ) 9.7  
Operating profit 10,127   16,298   60.9  
Profit before tax 9,227   17,597   90.7  
Profit for the period attributable to owners of the parent 5,877   11,522   96.1  
(Note) Systems integration includes equipment sales.
Segment Results Summary
   1Q-3Q20 1Q-3Q21
   JPY millions JPY millions
Total revenues 156,070   165,600  
Network services and SI business 154,039   163,606  
ATM operation business 2,160   2,090  
Elimination (129 ) (96 )
Operating profit 10,127   16,298  
Network services and SI business 9,603   15,747  
ATM operation business 616   617  
Elimination (92 ) (66 )

1Q-3Q21 Revenues and Profit
Revenues
Total revenues were JPY165,600 million, up 6.1% YoY (JPY156,070 million for 1Q-3Q20).

Network services revenue was JPY95,097 million, up 1.2% YoY (JPY93,983 million for 1Q-3Q20).

Revenues for Internet connectivity services for enterprises were JPY28,082 million, down 5.4% YoY from JPY29,699 million for 1Q-3Q20. The decrease was due to the decrease in IIJ Mobile MVNO Platform service (MVNE) revenue, which was mainly in the response to the reduction in procurement cost, while revenues of IP services and enterprise mobile services increased.

Revenues for Internet connectivity services for consumers were JPY17,780 million, down 8.3% YoY from JPY19,390 million for 1Q-3Q20, mainly due to a decrease in average revenue per user of new plan for our consumer mobile services.

Revenues for Outsourcing services were JPY29,831 million, up 13.5% YoY from JPY26,289 million for 1Q-3Q20, mainly due to an increase in security-related services revenues.

Revenues for WAN services were JPY19,404 million, up 4.3% YoY from JPY18,605 million for 1Q-3Q20.

Network Services Revenues Breakdown
     1Q-3Q20 1Q-3Q21 YoY Change
     JPY millions JPY millions %
Total network services 93,983 95,097 1.2  
Internet connectivity services (enterprise) 29,699 28,082 (5.4 )
IP services (including data center connectivity services) 8,988 10,069 12.0  
IIJ Mobile Services 18,034 15,132 (16.1 )
Enterprise mobile service (IoT usages etc.) 5,513 7,516 36.3  
IIJ Mobile MVNO Platform service (MVNE) 12,521 7,616 (39.2 )
Others 2,677 2,881 7.6  
Internet connectivity services (consumer)  19,390 17,780 (8.3 )
IIJmio Mobile Services 17,363 15,555 (10.4 )
Others 2,027 2,225 9.8  
Outsourcing services 26,289 29,831 13.5  
WAN services 18,605 19,404 4.3  
       
Number of Contracts and Subscription for Connectivity Services (Note 1)
     As of Dec. 31, 2020 As of Dec. 31, 2021 YoY Change
Internet connectivity services (enterprise) 2,258,371 2,394,237 135,866  
IP service (greater than or equal to 1Gbps) (Note2) 782 751 (31 )
IP service (less than 1Gbps) (Note2) 1,225 1,206 (19 )
IIJ Mobile Services 2,165,723 2,302,538 136,815  
Enterprise mobile service (IoT usages etc.) 1,046,470 1,319,918 273,448  
IIJ Mobile MVNO Platform service (MVNE) 1,119,253 982,620 (136,633 )
Others 90,641 89,742 (899 )
Internet connectivity services (consumer) 1,380,594 1,419,277 38,683  
IIJmio Mobile Services 1,037,227 1,072,920 35,693  
Others 343,367 346,357 2,990  
Total contracted bandwidth (Gbps) (Note 3) 6,021.9 7,346.5 1,324.6  
(Notes)    
1. Numbers in the table above show number of contracts except for “IIJ Mobile Services (enterprise)” and “IIJmio Mobile Services” which show number of subscriptions.
2. The numbers of IP service contracts include the numbers of IIJ data center connectivity service contracts.  
3. Total contracted bandwidth is calculated by multiplying number of contracts under “Internet connectivity services (enterprise)” except for “IIJ Mobile Services” and the contracted bandwidths of the services respectively.

SI revenues, including equipment sales, were JPY68,413 million, up 14.2% YoY (JPY59,927 million for 1Q-3Q20). Systems construction and equipment sales, a one-time revenue, was JPY24,415 million, up 12.6% YoY (JPY21,687 million for 1Q-3Q20). Of this amount, revenue of PTC SYSTEM (S) PTE LTD6 (“PTC”) was JPY3,714 million. Systems operation and maintenance revenue, a recurring revenue, was JPY43,998 million, up 15.1% YoY (JPY38,240 million for 1Q-3Q20), mainly due to continued accumulation of systems operation orders as well as an increase in private cloud services’ revenues. Of this amount, revenue of PTC was JPY1,587 million.

Orders received for SI, including equipment sales, totaled JPY69,910 million, up 6.2% YoY (JPY65,821 million for 1Q-3Q20); orders received for systems construction and equipment sales were JPY26,501 million, up 10.7% YoY (JPY23,943 million for 1Q-3Q20), and orders received for systems operation and maintenance were JPY43,409 million, up 3.7% YoY (JPY41,878 million for 1Q-3Q20).

Order backlog for SI, including equipment sales, as of December 31, 2021 amounted to JPY68,151 million, up 10.4% YoY (JPY61,758 million as of December 31, 2020); order backlog for systems construction and equipment sales was JPY11,254 million, up 15.3% YoY (JPY9,763 million as of December 31, 2020) and order backlog for systems operation and maintenance was JPY56,897 million, up 9.4% YoY (JPY51,995 million as of December 31, 2020).

ATM operation business revenues were JPY2,090 million, down 3.2% YoY (JPY2,160 million for 1Q-3Q20).

Cost of sales
Total cost of sales was JPY128,816 million, up 1.2% YoY (JPY127,273 million for 1Q-3Q20).

Cost of network services revenue was JPY68,653 million, down 7.5% YoY (JPY74,201 million for 1Q-3Q20). Costs of mobile services were decreased due to reduction of purchase price in voice services from the beginning of FY2021 and one-time cost reimbursement of mobile unit charge by NTT DOCOMO, INC. in 3Q21 as FY2020 mobile unit charge was fixed based on its actual results for the corresponding period. Gross profit was JPY26,444 million, up 33.7% YoY (JPY19,782 million for 1Q-3Q20), and gross profit ratio was 27.8% (21.0% for 1Q-3Q20).

Cost of SI revenues, including equipment sales was JPY58,869 million, up 13.9% YoY (JPY51,672 million for 1Q-3Q20), mainly due to increases in outsourcing and purchasing costs. Of this amount, PTC’s cost was JPY4,713 million. Gross profit was JPY9,544 million, up 15.6% YoY (JPY8,255 million for 1Q-3Q20) and gross profit ratio was 13.9% (13.8% for 1Q-3Q20).

Cost of ATM operation business revenues was JPY1,294 million, down 7.6% YoY (JPY1,400 million for 1Q-3Q20). Gross profit was JPY796 million (JPY760 million for 1Q-3Q20) and gross profit ratio was 38.1% (35.2% for 1Q-3Q20).

Selling, general and administrative expenses and other operating income and expenses
Selling, general and administrative expenses, including research and development expenses, totaled JPY20,494 million, up 11.8% YoY (JPY18,328 million for 1Q-3Q20), mainly due to increases in personnel-related expenses, advertising expenses and sales commission expenses. Of this amount, PTC’s expenses was JPY329 million.

Other operating income was JPY125 million (JPY113 million for 1Q-3Q20).

Other operating expenses was JPY117 million (JPY455 million for 1Q-3Q20), mainly due to disposal loss on fixed assets.

Operating profit
Operating profit was JPY16,298 million (JPY10,127 million for 1Q-3Q20), up 60.9% YoY.

Finance income and expenses, and share of profit (loss) of investments accounted for using equity method
Finance income was JPY2,756 million, compared to JPY317 million for 1Q-3Q20. It included valuation gains on financial instruments of JPY2,560 million which mainly came from fund investments (gains of JPY192 million for 1Q-3Q20).

Finance expense was JPY401 million, compared to JPY490 million for 1Q-3Q20. It included interest expenses of JPY401 million (JPY440 million for 1Q-3Q20).

Share of loss of investments accounted for using equity method was JPY1,056 million (compared to loss of JPY727 million for 1Q-3Q20). There was an equity method loss of JPY1,332 million related to DeCurret Holdings, Inc., including temporary losses of JPY484 million related to a divestment of its crypto asset business on February 1, 2022.

Profit before tax
Profit before tax was JPY17,597 million (JPY9,227 million for 1Q-3Q20), up 90.7% YoY.

Profit for the period
Income tax expense was JPY5,974 million (JPY3,281 million for 1Q-3Q20). As a result, profit for the period was JPY11,623 million (JPY5,946 million for 1Q-3Q20), up 95.5% YoY.

Profit for the period attributable to non-controlling interests was JPY101 million (JPY69 million for 1Q-3Q20), mainly related to net income of Trust Networks Inc.

Profit for the period attributable to owners of parent was JPY11,522 million (JPY5,877 million for 1Q-3Q20), up 96.1% YoY.

Financial Position as of December 31, 2021
As of December 31, 2021, the balance of total assets was JPY224,599 million, increased by JPY3,821 million from the balance as of March 31, 2021 of JPY220,777 million.

As of December 31, 2021, the balance of current assets was JPY94,571 million, increased by JPY1,166 million from the balance as of March 31, 2021 of JPY93,405 million. The major breakdown of balance and fluctuation of current assets was: a decrease in cash and cash equivalents by JPY1,507 million, including payment of the acquisition of PTC, to JPY40,960 million, a decrease in trade receivables by JPY3,049 million to JPY31,750 million and an increase in prepaid expenses by JPY3,157 million, of which JPY1,369 million is related to the acquisition of PTC, to JPY13,755 million.

As of December 31, 2021, the balance of non-current assets was JPY130,028 million, increased by JPY2,655 million from the balance as of March 31, 2021 of JPY127,373 million. As for the major breakdown of balance and fluctuation of non-current assets, tangible assets increased by JPY525 million to JPY17,609 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 JPY6,298 million to JPY44,410 million, mainly due to depreciation. Goodwill increased by JPY3,153 million to JPY9,236 million, due to the acquisition of PTC. Investments accounted for using the equity method decreased by JPY1,127 million, mainly due to loss of DeCurret Holdings, Inc., to JPY7,900 million, which included JPY1,181 million of corresponding amount of goodwill related to DeCurret Holdings, Inc. Prepaid expenses increased by JPY1,270 million to JPY10,807 million, including an increase of JPY1,075 million related to the acquisition of PTC. The amount of other investments was JPY18,608 million, increased by JPY5,695 million mainly due to fluctuation of fair value of our holding marketable equity securities and funds.

As of December 31, 2021, the balance of current liabilities was JPY72,021 million, decreased by JPY1,238 million from the balance as of March 31, 2021 of JPY73,259 million. As for the major breakdown of balance and fluctuation of current liabilities, trade and other payables increased by JPY223 million to JPY19,467 million. Borrowings decreased by JPY2,190 million to JPY16,370 million, due to an increase of JPY1,480 million in short-term borrowings, a decrease by JPY5,170 million from repayment of long-term borrowings and an increase of JPY1,500 million due to a transfer from non-current liabilities. Contract liabilities increased by JPY1,904 million to JPY9,006 million, including an increase of JPY1,571 million related to the acquisition of PTC. Other financial liabilities decreased by JPY1,057 million to JPY16,822 million.

As of December 31, 2021, the balance of non-current liabilities was JPY51,586 million, decreased by JPY4,961 million from the balance as of March 31, 2021 of JPY56,547 million. As for the major breakdown of balance and fluctuation of non-current liabilities, long-term borrowings decreased by JPY1,500 million to JPY5,500 million due to a transfer to current portion. Contract liabilities increased by JPY209 million to JPY7,453 million, of which JPY1,215 million was an increase related to the acquisition of PTC. Other financial liabilities decreased by JPY4,934 million to JPY30,714 million, mainly due to a transfer to current portion.

As of December 31, 2021, the balance of total equity attributable to owners of the parent was JPY99,926 million, increased by JPY9,970 million from the balance as of March 31, 2021 of JPY89,956 million. Ratio of owners’ equity to total assets was 44.5% as of December 31, 2021.

1Q-3Q21 Cash Flows
Cash and cash equivalents as of December 31, 2021 were JPY40,960 million (JPY41,970 million as of December 31, 2020).

Net cash provided by operating activities for 1Q-3Q21 was JPY30,370 million (net cash provided by operating activities of JPY31,399 million for 1Q-3Q20). There were profit before tax of JPY17,597 million, depreciation and amortization of JPY21,088 million, including JPY8,643 million of depreciation of right-of-use operating lease assets under IFRS 16, and income taxes paid of JPY5,680 million, compared to JPY3,928 million for 1Q-3Q20. Regarding changes in working capital, there was net cash-out of JPY1,298 million compared to net cash-in of JPY3,526 million for 1Q-3Q20. As for the major factors in comparison with 1Q-3Q20, there were increases in payment of current liabilities, such as trade payable and other liabilities. The increase in net cash-outflow related to these factors exceeded the increase in cash-inflow due to a decrease in trade receivable.

Net cash used in investing activities for 1Q-3Q21 was JPY9,832 million (net cash used in investing activities of JPY8,918 million for 1Q-3Q20), mainly due to payments for purchases of tangible assets of JPY4,893 million (JPY4,555 million for 1Q-3Q20), payments for purchases of intangible assets, such as software, of JPY3,627 million (JPY3,722 million for 1Q-3Q 20), payments for the acquisition of PTC (net of its cash) of JPY2,612 million and proceeds from sales of tangible assets, which include sale and leaseback, of JPY1,776 million (JPY1,859 million for 1Q-3Q20).

Net cash used in financing activities for 1Q-3Q21 was JPY22,240 million (net cash used in financing activities of JPY19,031 million for 1Q-3Q20), mainly due to payments of other financial liabilities of JPY14,665 million (JPY15,252 million for 1Q-3Q20), 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 JPY5,170 million (JPY1,830 million for 1Q-3Q20), dividends paid of JPY3,836 million (JPY1,533 million for 1Q-3Q20) and net increase in short-term borrowings of JPY1,480 million (net decrease of 360 million for 1Q-3Q20).

FY2021 Financial Targets
Although our profits for 1Q-3Q21 exceeded our expectation, our FY2021 financial targets which were revised upward on November 5, 2021, remain unchanged because our 4Q financial results, which tend to be strong due to seasonal factors, affect the full year financial results considerably.

Presentation
Presentation materials will be posted on our web site (https://www.iij.ad.jp/en/ir/) on February 8, 2022.

Presentation material can be also found in the following URL: http://ml.globenewswire.com/Resource/Download/2c5b59c6-80b2-4638-8754-5adb492298e1

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

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

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

_________________________________

1 Unless otherwise stated, all financial figures discussed in this announcement are prepared in accordance with IFRS, unaudited and consolidated.
2 YoY is an abbreviation for year over year change.
3 Net profit is “profit for the year/period attributable to owners of the parent.”
4 Enterprise recurring revenues represent Internet connectivity services for enterprise excluding MVNE, Outsourcing services, WAN Services, and Systems operation and maintenance revenues.
5 IP services are IIJ’s dedicated-type Internet connectivity services, mainly used by corporate users.
6 For details, please refer to our press release titled “Notice Regarding Acquisition of Shares in PTC SYSTEM (S) PTE LTD (as a New Subsidiary)”
https://www.iij.ad.jp/en/news/pressrelease/2021/pdf/PTC%20SYSTEM_E.pdf

 

Condensed Consolidated Statements of Financial Position (Unaudited)  
         
    March 31, 2021   December 31, 2021
    Thousands of yen   Thousands of yen
Assets        
 Current assets        
  Cash and cash equivalents   42,466,933     40,960,126  
  Trade receivables   34,799,075     31,749,868  
  Inventories   2,171,046     2,381,308  
  Prepaid expenses   10,598,441     13,755,260  
  Contract assets   1,281,918     2,696,819  
  Other financial assets   1,975,910     2,714,757  
  Other current assets   111,334     312,834  
 Total current assets   93,404,657     94,570,972  
 Non-current assets        
  Tangible assets   17,084,401     17,609,118  
  Right-of-use assets   50,707,726     44,410,026  
  Goodwill   6,082,472     9,235,576  
  Intangible assets   16,954,274     16,523,124  
  Investments accounted for using the equity method   9,026,980     7,900,167  
  Prepaid expenses   9,537,160     10,806,811  
  Contract assets   46,638     73,609  
  Other investments   12,912,483     18,607,957  
  Deferred tax assets   143,337     201,472  
  Other financial assets   4,442,704     4,170,129  
  Other non-current assets   434,437     489,696  
 Total non-current assets   127,372,612     130,027,685  
Total assets   220,777,269     224,598,657  
         
    March 31, 2021   December 31, 2021
    Thousands of yen   Thousands of yen
Liabilities and Equity         
 Liabilities        
  Current liabilities        
   Trade and other payables   19,243,800     19,466,839  
   Borrowings   18,560,000     16,370,000  
   Income taxes payable   3,012,415     3,473,642  
   Contract liabilities   7,101,821     9,005,816  
   Deferred income   79,914     66,587  
   Other financial liabilities   17,879,331     16,822,261  
   Other current liabilities   7,381,746     6,816,151  
  Total current liabilities   73,259,027     72,021,296  
  Non-current liabilities        
   Borrowings   7,000,000     5,500,000  
   Retirement benefit liabilities   4,168,575     4,500,468  
   Provisions   756,405     785,521  
   Contract liabilities   7,244,411     7,453,367  
   Deferred income   405,579     355,843  
   Deferred tax liabilities   225,469     1,091,934  
   Other financial liabilities   35,647,899     30,713,989  
   Other non-current liabilities   1,098,253     1,184,482  
  Total non-current liabilities   56,546,591     51,585,604  
 Total liabilities   129,805,618     123,606,900  
 Equity        
  Share capital   25,530,621     25,561,838  
  Share premium   36,388,811     36,467,018  
  Retained earnings   25,046,813     32,732,212  
  Other components of equity   4,865,110     7,016,020  
  Treasury shares   (1,874,976 )   (1,850,924 )
  Total equity attributable to owners of the parent   89,956,379     99,926,164  
  Non-controlling interests   1,015,272     1,065,593  
 Total equity   90,971,651     100,991,757  
Total liabilities and equity   220,777,269     224,598,657  
Condensed Consolidated Statements of Profit or Loss (Unaudited)  
         
    Nine Months Ended   Nine Months Ended
    December 31, 2020   December 31, 2021
    Thousands of yen   Thousands of yen
Revenues        
  Network services   93,983,677     95,097,043  
  System integration   59,926,698     68,412,716  
  ATM operation business   2,159,738     2,089,962  
    Total revenues   156,070,113     165,599,721  
         
Cost of sales        
  Cost of network services   (74,201,460 )   (68,652,357 )
  Cost of systems integration   (51,671,863 )   (58,869,195 )
  Cost of ATM operation business   (1,400,165 )   (1,294,143 )
    Total cost of sales   (127,273,488 )   (128,815,695 )
Gross Profit   28,796,625     36,784,026  
             
Selling, general and administrative expense   (18,327,863 )   (20,493,325 )
Other operating income   113,091     124,732  
Other operating expenses   (454,357 )   (117,025 )
Operating Profit   10,127,496     16,298,408  
             
Finance income   317,146     2,755,446  
Finance expenses   (490,797 )   (400,686 )
Share of profit (loss) of investments accounted for using equity method   (726,857 )   (1,056,499 )
Profit (loss) before tax   9,226,988     17,596,669  
Income tax expense   (3,281,332 )   (5,973,854 )
Profit (loss) for the period   5,945,656     11,622,815  
         
Profit (loss) for the period attributable to:        
  Owners of the parent   5,876,784     11,521,612  
  Non-controlling interests   68,872     101,203  
  Total   5,945,656     11,622,815  
         
Earnings per share        
  Basic earnings per share (yen)   65.16     127.61  
  Diluted earnings per share (yen)   64.84     127.00  
         
※IIJ conducted stock a split at a ratio of two-for-one with an effective date of January 1, 2021. 
 Basic earnings per share and diluted earnings per share are calculated as if the stock split had been conducted at the beginning of the previous fiscal year.
Condensed Consolidated Statements of Profit or Loss (Unaudited)  
         
    Three Months Ended   Three Months Ended
    December 31, 2020   December 31, 2021
    Thousands of yen   Thousands of yen
Revenues        
  Network services   31,879,433     31,660,876  
  System integration   21,760,024     24,203,456  
  ATM operation business   765,666     681,502  
    Total revenues   54,405,123     56,545,834  
         
Cost of sales        
  Cost of network services   (24,305,137 )   (21,898,824 )
  Cost of systems integration   (18,281,933 )   (20,529,193 )
  Cost of ATM operation business   (476,046 )   (419,132 )
    Total cost of sales   (43,063,116 )   (42,847,149 )
Gross Profit   11,342,007     13,698,685  
             
Selling, general and administrative expense   (6,203,679 )   (6,703,629 )
Other operating income   32,677     32,254  
Other operating expenses   (282,558 )   (33,194 )
Operating Profit   4,888,447     6,994,116  
             
Finance income   349,379     983,034  
Finance expenses   (163,377 )   (128,374 )
Share of profit (loss) of investments accounted for using equity method   (313,322 )   (683,954 )
Profit (loss) before tax   4,761,127     7,164,822  
Income tax expense   (1,625,064 )   (2,499,657 )
Profit (loss) for the period   3,136,063     4,665,165  
         
Profit (loss) for the period attributable to:        
  Owners of the parent   3,106,856     4,629,856  
  Non-controlling interests   29,207     35,309  
  Total   3,136,063     4,665,165  
         
Earnings per share        
  Basic earnings per share (yen)   34.44     51.26  
  Diluted earnings per share (yen)   34.27     51.02  
         
※IIJ conducted stock a split at a ratio of two-for-one with an effective date of January 1, 2021. 
 Basic earnings per share and diluted earnings per share are calculated as if the stock split had been conducted at the beginning of the previous fiscal year.
Condensed Consolidated Statements of Comprehensive Income (Unaudited)  
         
    Nine Months Ended   Nine Months Ended
    December 31, 2020   December 31, 2021
    Thousands of yen   Thousands of yen
Profit (loss)    5,945,656     11,622,815  
Other comprehensive income, net of tax        
 Items that will not be reclassified to profit or loss        
  Net change in fair value of equity instruments designated as measured at fair value through other comprehensive income   1,737,941     1,886,924  
  Total items that will not be reclassified to profit or loss   1,737,941     1,886,924  
 Items that may be reclassified to profit or loss        
  Exchange differences on translation of foreign operations   (80,184 )   245,087  
  Financial assets measured at fair value through other comprehensive income   236     (212 )
  Share of other comprehensive income of investments accounted for using equity method   (22,038 )   19,111  
  Total of items that may be reclassified to profit or loss   (101,986 )   263,986  
 Total other comprehensive income, net of tax   1,635,955     2,150,910  
Other comprehensive income   7,581,611     13,773,725  
Other comprehensive income attributable to:        
 Owners of the parent    7,512,739     13,672,522  
 Non-controlling interest   68,872     101,203  
 Other comprehensive income   7,581,611     13,773,725  
Condensed Consolidated Statements of Comprehensive Income (Unaudited)  
         
    Three Months Ended   Three Months Ended
    December 31, 2020   December 31, 2021
    Thousands of yen   Thousands of yen
Profit (loss)    3,136,063     4,665,165  
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   177,294     (121,254 )
  Total items that will not be reclassified to profit or loss   177,294     (121,254 )
 Items that may be reclassified to profit or loss        
  Exchange differences on translation of foreign operations   (37,415 )   227,177  
  Financial assets measured at fair value through other comprehensive income   17     (335 )
  Share of other comprehensive income of investments accounted for using equity method   (10,939 )   5,969  
  Total of items that may be reclassified to profit or loss   (48,337 )   232,811  
 Total other comprehensive income, net of tax   128,957     111,557  
Other comprehensive income   3,265,020     4,776,722  
Other comprehensive income attributable to:        
 Owners of the parent    3,235,813     4,741,413  
 Non-controlling interest   29,207     35,309  
 Other comprehensive income   3,265,020     4,776,722  
Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)         
Nine months ended December 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, 2020 25,530,621   36,271,395     16,500,993     2,669,501     (1,896,921 )   79,075,589     981,528     80,057,117  
Comprehensive income                              
 Profit (loss)        5,876,784             5,876,784     68,872     5,945,656  
 Other comprehensive income           1,635,955         1,635,955         1,635,955  
 Total comprehensive income       5,876,784     1,635,955         7,512,739     68,872     7,581,611  
Transactions with owners                              
 Purchase of treasury stock               (140 )   (140 )       (140 )
 Disposal of treasury shares   52,917             21,949     74,866         74,866  
 Dividends paid       (1,533,237 )           (1,533,237 )   (55,832 )   (1,589,069 )
 Stock-based compensation   47,907                 47,907         47,907  
 Transfer from other components of equity to retained earnings       251,849     (251,849 )                
 Total transactions with owners   100,824     (1,281,388 )   (251,849 )   21,809     (1,410,604 )   (55,832 )   (1,466,436 )
Balance, December 31, 2020 25,530,621   36,372,219     21,096,389     4,053,607     (1,875,112 )   85,177,724     994,568     86,172,292  
                               
                               
Nine months ended December 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, 2021 25,530,621   36,388,811     25,046,813     4,865,110     (1,874,976 )   89,956,379     1,015,272     90,971,651  
Comprehensive income                              
 Profit (loss)        11,521,612             11,521,612     101,203     11,622,815  
 Other comprehensive income           2,150,910         2,150,910         2,150,910  
 Total comprehensive income       11,521,612     2,150,910         13,672,522     101,203     13,773,725  
Transactions with owners                              
 Issuance of common stock 31,217   (31,152 )               65         65  
 Disposal of treasury shares   53,252             24,052     77,304         77,304  
 Dividends paid       (3,836,213 )           (3,836,213 )   (48,550 )   (3,884,763 )
 Stock-based compensation   60,772                 60,772         60,772  
 Other   (4,665 )               (4,665 )   (2,332 )   (6,997 )
 Total transactions with owners 31,217   78,207     (3,836,213 )       24,052     (3,702,737 )   (50,882 )   (3,753,619 )
Balance, December 31, 2021 25,561,838   36,467,018     32,732,212     7,016,020     (1,850,924 )   99,926,164     1,065,593     100,991,757  
Condensed Consolidated Statements of Cash Flows (Unaudited)  
         
    Nine Months Ended   Nine Months Ended
    December 31, 2020   December 31, 2021
    Thousands of yen   Thousands of yen
Cash flows from operating activities:        
 Profit (loss) before tax   9,226,988     17,596,669  
 Adjustments        
  Depreciation and amortization   21,093,793     21,088,271  
  Loss (gain) on sales/disposals of property and equipment   432,101     98,131  
  Shares of loss (profit) of investments accounted for using the equity method   726,857     1,056,499  
  Finance income   (283,369 )   (2,775,941 )
  Finance expenses   538,117     400,558  
  Other   332,913     112,260  
  Changes in working capital        
   Decrease (increase) in trade receivables   2,753,953     4,276,673  
   Decrease (increase) in inventories   132,323     (207,824 )
   Decrease (increase) in prepaid expenses   (1,977,177 )   (2,114,135 )
   Decrease (increase) in contract assets   (2,795,705 )   (1,441,872 )
   Decrease (increase) in other assets   (151,013 )   (102,481 )
   Decrease (increase) in other financial assets   (100,592 )   (563,027 )
   Increase (decrease) in trade and other payables   2,820,693     (606,165 )
   Increase (decrease) in contract liabilities   1,501,364     (562,142 )
   Increase (decrease) in deferred income   (62,159 )   (7,976 )
   Increase (decrease) in other liabilities   666,159     (1,152,042 )
   Increase (decrease) in other financial liabilities   472,422     851,200  
   Increase (decrease) in retirement benefit liabilities   266,119     331,893  
 Subtotal   35,593,787     36,278,549  
 Interest and dividends received   172,300     170,291  
 Interest paid   (438,861 )   (398,439 )
 Income taxes paid   (3,928,124 )   (5,680,270 )
 Cash flows from operating activities   31,399,102     30,370,131  
         
    Nine Months Ended   Nine Months Ended
    December 31, 2020   December 31, 2021
    Thousands of yen   Thousands of yen
Cash flows from investing activities        
 Purchases of tangible assets   (4,555,236 )   (4,893,366 )
 Proceeds from sales of tangible assets   1,859,157     1,776,241  
 Purchases of intangible assets   (3,722,346 )   (3,626,997 )
 Proceeds from sales of intangible assets   44,085     189  
 Purchase of a subsidiary       (2,612,008 )
 Purchase of investments accounted for using equity method   (2,754,000 )    
 Proceeds from sale of investments accounted for using equity method   60,637      
 Purchases of other investments   (113,076 )   (573,680 )
 Proceeds from sales of other investments   462,547     103,618  
 Payments for leasehold deposits and guarantee deposits   (180,311 )   (91,284 )
 Proceeds from collection of leasehold deposits and guarantee deposits   25,986     140,825  
 Payments for refundable insurance policies   (50,043 )   (56,172 )
 Other   4,695     273  
 Cash flows from investing activities   (8,917,905 )   (9,832,361 )
Cash flows from financing activities        
 Repayment of  long-term borrowings   (1,830,000 )   (5,170,000 )
 Net increase (decrease) in short-term borrowings   (360,000 )   1,480,000  
 Payments of other financial liabilities    (15,252,049 )   (14,664,925 )
 Dividends paid   (1,533,237 )   (3,836,213 )
 Other   (55,832 )   (48,486 )
 Cash flows from financing activities   (19,031,118 )   (22,239,624 )
Effect of exchange rate changes on cash and cash equivalents   (151,393 )   195,047  
Net increase (decrease) in cash and cash equivalents   3,298,686     (1,506,807 )
Cash and cash equivalents, beginning of the period   38,671,734     42,466,933  
Cash and cash equivalents, end of the period   41,970,420     40,960,126  

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

Material Changes In Shareholders’ Equity
Nothing to be reported.

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

Segment information for the Company is as follows:

Nine months ended December 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 153,910,375   2,159,738       156,070,113  
Intersegment transactions 128,904     (128,904 )    
Total revenue 154,039,279   2,159,738   (128,904 )   156,070,113  
Segment operating profit 9,603,150   615,697   (91,351 )   10,127,496  
Finance income             317,146  
Finance expense             (490,797 )
Share of profit (loss) of investments accounted for using the equity method             (726,857 )
Profit before tax             9,226,988  

        
Nine months ended December 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 163,509,759   2,089,962       165,599,721  
Intersegment transactions 96,200     (96,200 )    
Total revenue 163,605,959   2,089,962   (96,200 )   165,599,721  
Segment operating profit 15,746,675   617,266   (65,533 )   16,298,408  
Finance income             2,755,446  
Finance expense             (400,686 )
Share of profit (loss) of investments accounted for using the equity method             (1,056,499 )
Profit before tax             17,596,669  

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, 2021 (“1Q-3Q21”) in the form defined by the Tokyo Stock Exchange.

Consolidated Financial Results for the Nine Months ended December 31, 2021 [Under IFRS]

February 8, 2022

Company name: Internet Initiative Japan Inc.
Exchange listed: Tokyo Stock Exchange First Section
Stock code number: 3774
URL: https://www.iij.ad.jp/en/ 
Representative: Eijiro Katsu, President and Representative Director
Contact: Akihisa Watai, Senior Managing Director and CFO
TEL: +81-3-5205-6500
Scheduled date for filing of quarterly report (Shihanki-houkokusho) to Japan’s regulatory organization: February 14, 2022
Scheduled date for dividend payment: –
Supplemental material on financial results: Yes
Presentation on quarterly report: Yes (for institutional investors and analysts)

(Amounts of less than JPY one million are rounded)

1. Consolidated Financial Results for the Nine Months ended December 31, 2021

(April 1, 2021 to December 31, 2021)                                                                                            

(1) Consolidated Results of Operations     (% shown is YoY change)
  Revenues Operating profit Profit (loss)
before tax
Profit (loss)
for the period
Profit (loss)
attributable to
owners
of the parent
Other
comprehensive
income
  JPY millions % JPY millions % JPY millions % JPY millions % JPY millions % JPY millions %
Nine Months ended December 31, 2021 165,600 6.1 16,298 60.9 17,597 90.7 11,623 95.5 11,522 96.1 13,774 81.7
Nine Months ended December 31, 2020 156,070 3.6 10,127 67.1 9,227 64.5 5,946 69.8 5,877 75.2 7,582 36.1
  Basic earnings per share Diluted earnings per share
  JPY JPY
Nine Months ended December 31, 2021 127.61 127.00
Nine Months ended December 31, 2020 65.16 64.84

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

(2) Consolidated Financial Position
  Total assets Total equity Total equity attributable to
owners of the parent
Ratio of owners’ equity
to total assets
  JPY millions JPY millions JPY millions %
As of December 31, 2021 224,599 100,992 99,926 44.5
As of March 31, 2021 220,777 90,972 89,956 40.7

2. Dividends

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

(Notes)
1. Changes from the latest forecasts disclosed: None
2. IIJ conducted a stock split at a ratio of two-for-one with an effective date of January 1, 2021. The 2Q-end dividend per share for the fiscal year ended March 31, 2021 is the amount before the stock split. Regarding the post-split basis amount for the fiscal year ended March 31, 2021, 2Q-end and annual dividend per share are JPY10. 25 and JPY29.75, respectively.

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

 (% shown is YoY change)
  Revenues Operating profit Profit (loss)
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
Fiscal Year Ending March 31, 2022 228,500 7.3 22,000 54.4 21,500 53.2 13,700 41.1 151.72

(Notes)
1. Changes from the latest forecasts disclosed: None
2. As for the details about our financial targets for the fiscal year ending March 31, 2022, please refer to “FY2021 Financial Targets” which is disclosed on page 7 of this earnings release.

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

(2) Changes in accounting policies and estimate
      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 December 31, 2021: 93,534,800 shares
        As of March 31, 2021: 93,469,200 shares

   ii. Number of treasury stock:
       As of December 31, 2021: 3,221,667 shares
       As of March 31, 2021: 3,263,532 shares

 iii. Number of weighted average common shares outstanding:
      For the Nine months ended December 31, 2021: 90,290,511 shares
      For the Nine months ended December 31, 2020: 90,191,724 shares

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

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

* Explanation on the Appropriate Use of Future Outlook and other special instructions
i) Forward-looking statements
   Forward-looking statements disclosed in this document are based on IIJ Group’s expectation, estimates, and projections based on information available to IIJ Group as of February 8, 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 for the fiscal year ending March 31, 2022, please refer to the page 7 of this document.

ii) Others
    Presentation material will be disclosed on TDnet as well as posted on our website on February 8, 2022. 

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