Internet Initiative Japan Inc. · TSE:3774
Internet Initiative Japan — H1 2023 Earnings Presentation
48 slides from Internet Initiative Japan's earnings presentation, Nov 6, 2023
Slide 1: Consolidated Financial Results for 1H23
Consolidated Financial Results for 1H23 (April 1, 2023 to September 30, 2023) Internet Initiative Japan Inc. (IIJ) The Prime Market of the Tokyo Stock Exchange (Ticker symbol: 3774) November 6, 2023 Disclaimer Statements made in this presentation regarding IIJ’s or managements’ intentions, beliefs,
Slide 2: Outline
Outline Ⅰ. 1H23 Summary P. 2 Ⅱ. 1H23 Financial Results P. 3 – 16 Ⅲ. Service & Business Developments etc. P. 17 – 20 Appendix P. 21 – 29 【Reference】 Presentation material for company overview P. 30 – 46 • FY23 stands for a fiscal year from Apr. 1, 2023 to Mar. 31, 2024 st • 1H23 stands for 1 half of
Slide 3: 1H23 Summary
Unit; JPY/¥ billion (bn), +%, YoY = Year over year comparison, QoQ = Quarter over quarter comparison Ⅰ. 1H23 Summary Net Profit is “Profit for the period attributable to owners of the parent” subs. = subscription, M = million, k = thousand (*) Increasing demands for large-scale “Service Integration”
Slide 4: Consolidated Financial Results
Ⅱ- 1. Consolidated Financial Results Unit: ¥ (JPY) billion YoY = Year over year comparison % of revenue % of revenue % of revenue % of revenue 1H23 Results 1H22 Results YoY 1H23 Targets YoY FY2023 Targets YoY (Announced in May 2023) (Announced in May 2023) Apr. 2023 - Sep. 2023 Apr. 2022 - Sep. 2022
Slide 5: Year over Year Analysis
Unit: ¥ (JPY) billion (bn) Ⅱ- 2. Year over Year Analysis GP = Gross Profit YoY = Year over year comparison Revenues 1H21 +12.91 1H22 +6.24 1H23 109.05 121.96 128.20 Stronger than 2H23 would be heavy concentrated Each service expected due to due to the postponement of the continued to enterprise IoT,
Slide 6: Revenues
Ⅱ- 3. Revenues Unit: ¥ (JPY) million [ ], YoY = Year over year comparison Internet Connectivity Services (Enterprise) Systems Integration (SI) Systems Construction (including equipment sales) Internet Connectivity Services (Consumer) Systems Operation and Maintenance Network (NW) Services Outsourcin
Slide 7: Cost of Revenues & Gross Profit Ratio
Ⅱ- 4. Cost of Revenues & Gross Profit Ratio Unit: ¥ (JPY) million [ ] , YoY = Year over year comparison Gross margin: NW (Network) Services SI (Systems Integration) Total Cost of revenues: NW (Network) Services SI (Systems Integration) ATM Operation Business 29.1% 27.7% 28.1% 28.5% 26.5% 26.4% 23.0%
Slide 8: Network (NW) Services (1) Revenues
Unit: ¥ (JPY) million Ⅱ- 5. Network (NW) Services (1) Revenues [ ] , YoY = Year over year comparison QoQ = Quarter over quarter comparison Total Contracted Bandwidth (Gbps) WAN (Wide Area Network) Services Internet Connectivity (enterprise) Services Outsourcing Services 1H23: ¥21.97 bn, +14.0% Yo
Slide 9: Network (NW) Services (2) Cost of Revenues
Unit: ¥ (JPY) million Ⅱ- 5. Network (NW) Services (2) Cost of Revenues [ ] , YoY = Year over year comparison Circuit-related costs (Internet backbone, WAN lines etc.) Outsourcing-related costs (mobile infrastructure related costs such as interconnectivity charge and voice communication services, out
Slide 10: Systems Integration (SI) (1) Revenues
Unit: ¥ (JPY) million Ⅱ- 6. Systems Integration (SI) (1) Revenues [ ] , YoY = Year over year comparison QoQ = Quarter over quarter comparison MRR = Monthly Recurring Revenue Systems Construction revenues (including equipment sales) Systems operation & maintenance revenues for on-premise system Cloud
Slide 11: Systems Integration (SI) (2) Cost of Revenues
Ⅱ- 6. Systems Integration (SI) (2) Cost of Revenues Unit: ¥ (JPY) million [ ] , YoY = Year over year comparison Purchasing costs (Equipment etc.) Outsourcing-related costs (SI-related outsourcing personnel costs etc.) Others Network operation-related costs (Depreciation cost such as for cloud facili
Slide 12: Human Capital Disclosure
Ⅱ- 7. Human Capital Disclosure Number of Employees (consolidated basis) Personnel-related costs & expenses (consolidated basis) Contract worker (personnel) Unit: ¥ (JPY) million Full-time worker (personnel) 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Jun. 2022 Sep. 2022 Dec. 2022 Mar. 2023 Jun. 2023 Sep. 2023 8,1
Slide 13: SG&A etc.
Ⅱ- 8. SG&A etc. Unit: ¥ (JPY) million [ ] , YoY = Year over year comparison QoQ = Quarter over quarter comparison Research & development expenses Commission expenses Others (including other income and other expenses) Personnel-related expenses ( ) % of total revenues 1H22: 15,318 [+11.2%] 1H23: 17,1
Slide 14: Profit
Ⅱ- 9. Profit Unit: ¥ (JPY) million [ ] , YoY = Year over year comparison Operating margin Operating profit Operating profit 1H23: ¥12.08 bn, +8.1% YoY Net profit Profit before tax 12.0% 12.5% 8.6% 9.6% 10.6% 1H23: ¥12.55 bn, -2.4% YoY 8.1% • Foreign exchange gain: +¥573 million (1H22: +¥761
Slide 15: Consolidated Statements of Financial Position (Summary)
Ⅱ- 10. Consolidated Statements of Financial Position (Summary) Unit: ¥ (JPY) million Mar. 31, 2023 Sep. 30, 2023 Changes Mar. 31, 2023 Sep. 30, 2023 Changes Cash & cash equivalents 42,472 42,587 +115 Trade & other payables 22,313 22,412 +99 Trade receivables 41,340 39,017 (2,323) Borrowings (current
Slide 16: Consolidated Cash Flows
Ⅱ- 11. Consolidated Cash Flows Unit: ¥ (JPY) million YoY = Year over year comparison Operating Activities 1H23: 13,457 1H23: 16,051 1H23 Major FY22: 38,529 Breakdown YoY Change 1Q22 2Q22 3Q22 4Q22 1Q23 2Q23 Profit before tax 12,552 (306) 13,857 11,215 11,035 Depreciation and amortization 14,598 +453
Slide 17: Other Financial Data
Ⅱ- 12. Other Financial Data Unit: ¥ (JPY) million CAPEX CAPEX-related depreciation and amortization Cash CAPEX Finance lease 1H22: 10,071 1H23: 10,544 1H22: 7,588 1H23: 7,747 FY22: 20,825 FY22: 15,278 6,791 6,581 6,627 3,796 3,792 3,789 3,901 3,869 3,878 4,172 3,917 3,280 4,258 5,504 5,794 2,647 2,0
Slide 18: Acquired large-scale Service Integration projects
Ⅲ- 1. Acquired large-scale Service Integration projects Services provided by IIJ SI provided by IIJ Educational Information NW for Chiba city Integrated information system for public safety org. SASE案件（多数） Large-scale SASE project for a global company Internet IIJ GIO Managed Prisma Access UOM 1Gb
Slide 19: Timing of revenue recognition for large-scale complex flagship projects
Ⅲ- 2. Timing of revenue recognition for large-scale complex flagship projects Order Timing of revenue Project overview Project size (approx. ) Main revenue recognition received recognition Nationwide NW replacement for a prominent financial institution ¥5.0 bn, 5 years NW service, SI O/M Jan. 2021 F
Slide 20: Mobile & IoT
Ⅲ- 3. Mobile & IoT Unit: ¥ (JPY) billion (bn) %, YoY = Year over year comparison QoQ = Quarter over quarter comparison Mobile Subscription (Subs.) Enterprise mobile (deducting MVNE from IIJ Mobile) 1H23 revenue: ¥6.59 bn (+¥1.28 bn YoY) Subscriptions (Subs.) 2,039 (unit: thousand) 1,951 2Q23-e
Slide 21: Security Business
Unit: ¥ (JPY) billion Ⅲ- 4. Security Business ( ) = Year over year comparison MRR ＝Monthly Recurring Revenue Security service (MRR) largely grew along with continuous strong demands Mail Security Web GW Full outsource of mail system, Full outsource of web Security, URL 1H22: 12.74 (+22.2%) 1H23:
Slide 22: FY23 Financial Targets (1)
Unit: ¥ (JPY) billion, YoY = Year over year comparison Appendix FY23 Financial Targets (1) Unchanged from May 2023 Net profit is “Profit for the period/year attributable to owners of the parent” YoY change of net profit is based on the retrospective application of IAS 12 "Income Taxes" % of Revenues
Slide 23: FY23 Financial Targets (2)
Unit: ¥ (JPY) billion (bn) Appendix FY23 Financial Targets (2) Unchanged from May 2023 GP = Gross Profit YoY = Year over year comparison Revenues FY22 FY23 Target +33.29 252.71 286.0 • NW services (excl. Mobile) revenues are calculated by deducting the below mentioned Mobile services revenues from t
Slide 24: Business zone Financial
Appendix First in Japan to issue commercial digital currency (July 2024) About the Case About DeCurret Issuer of digital DeCurret HLD Shareholder: 35 companies including IIJ GMO Aozora Net Bank, Ltd. currency Shareholder: DeCurret HLD 100% • Digitalization of environmental value transaction (non-fos
Slide 25: Change in Largest Shareholders
Appendix Change in Largest Shareholders As of Mar. 31, 2023 As of Sep. 30, 2023 Sale 15% NTT Group NTT Group • Continue to hold as strategic holdings 25.9% 11.1% • Seek business synergy (Before the cancellation of the treasury shares: 10.9%) Transfer from NTT to KDDI KDDI 10% • Continue to hold as s
Slide 26: FY23 Dividend Forecast
Appendix FY23 Dividend Forecast Basic shareholders’ return policy: Continuous and stable dividend payment while considering the need to have retained earnings for the enhancement of financial position, mid-to-long term business expansion and future investment In May 2023, IIJ executed share Divi
Slide 27: NTT Docomo's Mobile data interconnectivity charge
Appendix NTT Docomo’s Mobile data interconnectivity charge (Mbps unit charge, monthly) Fiscal FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 Year Future cost method Method Actual cost method MNOs are to disclose the charges for next three years based on their prediction about cost etc. Announced in Mar. 20
Slide 28: Basic Monthly Charge
Appendix Comparison between the old & new plans of consumer mobile Including tax Old New: GigaPlans (Apr. 2021~) Current Price list as of Apr. 1, 2023 With voice ¥858 2Giga Plan With voice ¥850 With voice ¥1,760 2Giga Plan (2GB) (2GB) Minimum Start Plan Data-only ¥748 Data-only ¥740 (3GB) Data-only
Slide 29: Data center (DC)
Appendix Data center (DC) Operate 16 DCs in Japan, 2 of which are owned by IIJ Matsue DCP (opened in Apr. 2011) Shiroi DCC (opened in May 2019) (as of Sep. 2023) Objective Own service facility Expanding own DC capacity along with growing demands for IIJ services Features • First in Japan to use
Slide 30: Creation of Guiding Principles for Employees "Backbone of IIJ"
Appendix Creation of Guiding Principles for Employees “Backbone of IIJ” “Backbone of IIJ” was created by volunteer members across departments as a guideline for realizing IIJ's business philosophy and accelerating future growth on the occasion of IIJ’s 30th anniversary. The name “Backbone of IIJ"
Slide 31: Presentation material for company overview
【Reference】 Presentation material for company overview P. 30 – 46 © Internet Initiative Japan Inc. 30
Slide 32: Company Profile
Business Company Profile About IIJ Model Growth Strength Strategy IIJ has been taking initiatives in Internet Infrastructure field in Japan Established December 1992 (The first established full-scale ISP in Japan) Number of Employees 4,750 (approx. 70% engineers) Large Shareholders NTT Group, KDDI,
Slide 33: From ISP to Total Network Solution Provider
Business About IIJ From ISP to Total Network Solution Provider Model Growth Strength Strategy Systems Integration (SI) revenue: Systems construction One time revenue (including equipment sales) EMERGE Systems operation and maintenance Network enhancement, (including private Cloud) Cloud, consumer mo
Slide 34: IIJ as a Total Network Solution Provider
Business About IIJ IIJ as a Total Network Solution Provider Model Growth Strength Strategy Offers various network services and systems integration together in many projects 14,000 customers Approx. (as of Mar. 31, 2023) (Japanese companies, central government agencies, local governments, consumer IS
Slide 35: Management Structure
Business https://www.iij.ad.jp/en/ir/integrated-report/directors/ About IIJ Management Structure Holdings of IIJ shares are as of Sep. 30, 2023 Suzuki’s share includes his wholly owned private company portion Strength Model Growth Strategy Satoshi Murabayashi Koichi Suzuki Executive Vice President
Slide 36: Initiatives for Sustainability
Business About IIJ Initiatives for Sustainability PDF download link for Integrated Report Portal can be here Model https://www.iij.ad.jp/en/ir/integrated-report/archives/pdf/integrated-repot2022_en.pdf Growth Strength Strategy IIJ’s Material Issues Lead NW infrastructure advancement with Provide an
Slide 37: SWOT of IIJ
Business About IIJ SWOT of IIJ Model Growth Strength Strategy Strength Weakness High technological capabilities Business domain mostly in Japan First full-scale ISP in Japan IIJ’s overseas business is mainly global network operation and is to increase Japanese clients’ loyalty Highly skilled
Slide 38: Extensive Service Lineup
Business About IIJ Extensive Service Lineup Model Growth Unit: ¥ (JPY) billion (bn) Strength Strategy FY22 Revenue category About Business Situation & Outlook revenue Core service providing from the foundation Matured market (hard to entry) Highly reliable dedicated connectivity services for
Slide 39: Monthly Recurring Revenue
Business About IIJ Model Unit: ¥ (JPY) billion (bn) Monthly Recurring Revenue Accumulation % = Year over year change Strength Growth Strategy FY23 Revenues FY18 FY19 FY20 FY21 FY22 outlook ATM operation business 192.4 204.5 213.0 226.3 252.7 286.0 Systems construction (+9.2%) (+6.3%) (+4.2%) (+6.3%)
Slide 40: Capex and Business Developments
Business About IIJ Capex and Business Developments Model Growth Unit: ¥ (JPY) billion (bn) Strength Strategy FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 targets Revenues (¥ bn) 157.8 176.2 192.4 204.5 213.0 226.3 252.7 286.0 Stronger demands for enterprise network services Operating 10.4% 10.8% 11.0% 4.
Slide 41: Service & Solution Development Capability
Business About IIJ Service & Solution Development Capability Model Growth Strength Strategy Initiate the market by continuously developing innovative various network-related services & solution in-house © Internet Initiative Japan Inc. 40
Slide 42: Excellent Customer Base
Business About IIJ Excellent Customer Base (Number of IIJ Group’s clients: approx. 14,000 as of March 31, 2023) Model Growth Strength Strategy Through reliable operation, continuous use of Internet connectivity services since the inception of IIJ Our reliable infrastructure operation and cross-s
Slide 43: Competitive Advantages
Business About IIJ Competitive Advantages Model Growth Strength Strategy Against telecom carriers, IIJ Against systems integrators (SIers), IIJ • Has highly skilled IP (Internet Protocol) engineers • Operates one of the largest Internet backbone (SIers do not) • Is faster to move than bureaucratic o
Slide 44: NW Services and SI provided together as a Total Solution
Business About IIJ NW Services and SI provided together as a Total Solution Strength Model Growth Strategy Systems Integration (SI) to meet specific requirements cannot be covered by NW services Network (NW) services (in-house developed) Secure Web Managed Cloud Content Simple Secure MX IIJ ID DNS P
Slide 45: Mid-term Plan (FY21-FY23)
Business About IIJ Mid-term Plan (FY21-FY23) Model Growth Unit: ¥ (JPY) bn Strength Strategy Previous Mid-term (FY15 - FY20) Current Mid-term (FY21 - FY23) Longer term growth (FY24 - ) Initial mid-term plan target (announced in May 2021) Revenue: ¥270 bn, Operating margin: over 9% Revenue (updated t
Slide 46: Drastically Changing Enterprises Circumstance
Business About IIJ Drastically Changing Enterprises Circumstance Model Growth Strength Strategy Labor shortage require 30yrs Ago Nowadays more IT Japan needs more High Speed/Capacity competitiveness by IT Network Network System CPU/Storage Performance Improve Network convergence System Every CEO say
Slide 47: Market Growth Forecast etc.
Business About IIJ Market Growth Forecast etc. Model Growth Strength Strategy Historical traffic data of major domestic IX Domestic shipments of mainframe and servers Number of units Unit: ten thousand Peak traffic Mainframe Servers (left axis) (right axis) Jun. Sep. Dec. Mar. Jun. Sep. Dec. Mar. Ju
Slide 48: © Internet Initiative Japan Inc.
© Internet Initiative Japan Inc.
Internet Initiative Japan — H1 2023 Earnings Presentation on 6ix