Internet Initiative Japan Inc. · TSE:3774
Internet Initiative Japan — Q1 FY2023 Earnings Presentation
46 slides from Internet Initiative Japan's earnings presentation, Aug 8, 2023
Slide 1: Consolidated Financial Results for 1Q23
Consolidated Financial Results for 1Q23 (April 1, 2023 to June 30, 2023) Internet Initiative Japan Inc. (IIJ) The Prime Market of the Tokyo Stock Exchange (Ticker symbol: 3774) August 8, 2023 Disclaimer Statements made in this presentation regarding IIJ’s or managements’ intentions, beliefs, expecta
Slide 2: Outline
Outline Ⅰ. 1Q23 Summary P. 2 Ⅱ. 1Q23 Financial Results P. 3 – 16 Ⅲ. Service & Business Developments etc. P. 17 – 19 Appendix P. 20 – 27 【Reference】 Presentation material for company overview P. 28 – 44 • FY23 stands for the fiscal year ending March 31, 2024 • Abbreviation: NW stands for network, SI
Slide 3: 1Q23 Summary
+%, YoY = Year over year comparison Ⅰ. 1Q23 Summary Net Profit is “Profit for the period attributable to owners of the parent” QoQ = Quarter over quarter comparison Enterprises’ legacy internal NW are shifting to advanced & complexed ones by utilizing Internet technology Demand & proposal opportunit
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 1Q23 Results 1Q22 Results YoY 1H23 Targets YoY FY2023 Targets YoY (Announced in May 2023) (Announced in May 2023) Apr. 2023 - June 2023 Apr. 2022 - June 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 1Q21 +5.22 1Q22 +3.23 1Q23 52.97 58.19 61.42 • NW services (excl. Mobile) revenues are calculated by deducting the below mentioned Mobile services revenues from total NW services reven
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% 26.5% 26.4% 23.9% 24.1%
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 1Q23: ¥10.77 bn, +13.2% 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.) 1Q23 Circuit-related costs increased by 7.2%, +¥0.47 bn YoY, along with an increase in Outsourcing-related costs (mobile infrastruc
Slide 10: Systems Integration (SI) (1) Revenues
Ⅱ- 6. Systems Integration (SI) (1) Revenues Unit: ¥ (JPY) million [ ] , YoY = Year over year comparison QoQ = Quarter over quarter comparison Systems Construction revenues (including equipment sales) Systems operation & maintenance revenues for on-premise system Cloud revenues such as private 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 Jun. 2022 Sep. 2022 Dec. 2022 Mar. 2023 Jun. 2023 Consolidated perso
Slide 13: SG&A
Ⅱ- 8. SG&A Unit: ¥ (JPY) million [ ] , YoY = Year over year comparison Research & development expenses Commission expenses Others (including other income and other expenses) Personnel-related expenses ( ) % of total revenues FY22: 30,687 [+9.3%] 7,674 7,645 7,548 7,822 8,797 (13.2%) (12.0%) (11.9%)
Slide 14: Profit
Ⅱ- 9. Profit Unit: ¥ (JPY) million [ ] , YoY = Year over year comparison Operating margin Operating profit Net profit Operating profit 1Q23: ¥5.00 bn, -0.5% YoY 12.0% 12.5% Profit before tax 8.6% 9.6% 8.1% 1Q23: ¥5.48 bn, -17.2% YoY • Foreign exchange gain: +¥401 million (1Q22: +¥474 million
Slide 15: Consolidated Statements of Financial Position (Summary)
Ⅱ- 10. Consolidated Statements of Financial Position (Summary) Unit: ¥ (JPY) million Mar. 31, 2023 June 30, 2023 Changes Mar. 31, 2023 June 30, 2023 Changes Cash & cash equivalents 42,472 37,266 (5,206) Trade & other payables 22,313 19,580 (2,733) Trade receivables 41,340 34,639 (6,701) Borrowings (
Slide 16: Consolidated Cash Flows
Ⅱ- 11. Consolidated Cash Flows Unit: ¥ (JPY) million YoY = Year over year comparison Operating Activities 1Q23 Major FY22: 38,529 Breakdown YoY Change 1Q22 2Q22 3Q22 4Q22 1Q23 Profit before tax 5,481 (1,142) 13,857 11,215 Depreciation and amortization 7,285 +230 8,602 4,855 5,016 Changes in operatin
Slide 17: Other Financial Data
Ⅱ- 12. Other Financial Data Unit: ¥ (JPY) million CAPEX CAPEX-related depreciation and amortization Cash CAPEX Finance lease FY22: 20,825 FY22： 15,278 6,791 6,581 6,627 3,796 3,792 3,789 3,901 3,869 4,172 3,280 4,258 5,504 5,794 2,647 2,440 2,533 840 1,077 1,525 833 1Q22 2Q22 3Q22 4Q22 1Q23 1Q22 2Q2
Slide 18: Mobile & IoT
Ⅲ- 1. 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) 1Q23 revenue: ¥3.15 bn (+¥0.51 bn YoY) Subscriptions (Subs.) 1,951 1Q23-end subs.: 1,951 thousan
Slide 19: Security Cloud Business
Ⅲ- 2. Security Cloud Business Unit: ¥ (JPY) billion ( ) = Year over year comparison Security service (recurring revenue) largely grew along with continuous Mail Security Web GW strong demands Full outsource of mail system, Full outsource of web Security, URL filtering FY22: 26.74 (+20.3%) coun
Slide 20: Large scale NW system Renewal projects with Service Integration
Ⅲ- 3. Large scale NW system Renewal projects with Service Integration Ongoing mid-to-large projects Next generation NW system covering a Full-scale renewal of office NW Adoption of Zero trust architecture for next Construction of private cloud few thousand branches (LAN, wireless NW, NW equipment)
Slide 21: 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 22: 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 23: Change in Largest Shareholders
Appendix Change in Largest Shareholders As of Mar. 31, 2023 As of May 31, 2023 Sale 15% NTT Group NTT Group • Continue to hold as strategic holdings 25.9% 10.9% • Seek business synergy (After the cancellation of the treasury shares: 11.1%) Transfer from NTT to KDDI KDDI 10% • Continue to hold as str
Slide 24: 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 25: 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. 202
Slide 26: 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 27: Data center (DC)
Appendix Data center (DC) Operate 16 DCs in Japan, 2 of which are owned by IIJ (as of June 2023) Expanding own DC capacity along with growing demands for IIJ services Matsue DCP (opened in Apr. 2011) Shiroi DCC (Opened in May 2019) Expect higher efficiency by gradually migrating leased DC spac
Slide 28: 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 29: Presentation material for company overview
【Reference】 Presentation material for company overview P. 28 – 44 © Internet Initiative Japan Inc. 28
Slide 30: 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 4,747 (approx. 70% engineers) Large Shareholders NTT Group, KDDI,
Slide 31: 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 32: 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 33: Management Structure
Business https://www.iij.ad.jp/en/ir/integrated-report/directors/ About IIJ Management Structure Holdings of IIJ shares are as of Mar. 31, 2023 Suzuki’s share includes his wholly owned private company portion Strength Model Growth Strategy Satoshi Murabayashi Koichi Suzuki Executive Vice President
Slide 34: 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 Provide an arena for people with diverse Lead netwo
Slide 35: 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 36: 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 37: 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 38: 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 39: 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. 38
Slide 40: 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 41: 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 42: 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 43: 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 44: 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 45: 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 46: © Internet Initiative Japan Inc.
© Internet Initiative Japan Inc.
Internet Initiative Japan — Q1 FY2023 Earnings Presentation on 6ix