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

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

Highlights of Financial Results for 1Q-3Q22						FY22 Targets
Total revenues	JPY 185.3 billion	up	11.9	%	YoY2	JPY 250.0 billion	up	10.5	%	YoY
Operating profit	JPY 18.8 billion	up	15.3	%	YoY	JPY 27.2 billion	up	15.5	%	YoY
Profit before tax	JPY 19.0 billion	up	8.1	%	YoY	JPY 26.3 billion	up	8.8	%	YoY
Net profit3	JPY 12.9 billion	up	11.6	%	YoY	JPY 17.5 billion	up	11.7	%	YoY

Overview of 1Q-3Q22 Financial Results and Business Outlook
“In this nine-month period, we have seen strong revenue growth of 11.9% year over year with consistent penetration of IT utilization among Japanese enterprises and governmental organizations. Continuous accumulation of our network services’ monthly recurring revenues and system integration projects brought this favorable result, and also several large network-replacement transactions we acquired around the last fiscal year-end began to contribute to the revenue from this third quarter. At the same time, we have continuously developed new network services such as “IIJ Cloud Data Platform Service⁴,” “IIJ Private Backbone Service/Smart HUB⁵,” “IIJ Secure Access Service⁶” and “IIJ Mobile Service/TypeD for IIJmio Biz⁷” to further enhance our recurring revenue business model. In addition, we have recently acquired large scale projects such as several information systems replacement projects from a broadcasting company, a core system construction project for a financial group, a network replacement project with a multi-year contract and a data center construction project in overseas. Those would accelerate our revenue growth further in the next fiscal year and onward,” said Eijiro Katsu, President of IIJ.

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

______________________

¹ Unless otherwise stated, all financial figures discussed in this announcement are prepared in accordance with IFRS, unaudited and consolidated.
² YoY is an abbreviation for year over year change.
³ Net profit is “profit for the year attributable to owners of the parent.”
⁴ For details, please refer to our press release titled “IIJ Launches IIJ Cloud Data Platform Service to Facilitate On-Premise and Multi-Cloud Data Integration” https://www.iij.ad.jp/en/news/pressrelease/2022/1212.html.
⁵ For details, please refer to our press release titled “Launch IIJ Private Backbone Service/Smart HUB, A New Flexible Cloud Connection Service with High Performance Broadband Over 10Gbps” https://www.iij.ad.jp/en/news/pressrelease/2022/0615-2.html.
⁶ For details, please refer to our press release titled “IIJ to Start Providing New SASE Service, IIJ Secure Access Service” https://www.iij.ad.jp/en/news/pressrelease/2022/0830.html.
⁷ For details, please refer to our website https://www.iij.ad.jp/news/pressrelease/2023/0117.html (Japanese text only).

1Q-3Q22 Financial Results Summary

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

Operating Results Summary
		1Q-3Q21		1Q-3Q22		YoY Change
		JPY millions		JPY millions		％
Total revenues		165,600		185,339		11.9
	Network services	95,097		102,744		8.0
	Systems integration (SI)	68,413		80,477		17.6
	ATM operation business	2,090		2,118		1.3
Total costs		(128,816	)	(143,683	)	11.5
	Network services	(68,653	)	(74,627	)	8.7
	Systems integration (SI)	(58,869	)	(67,835	)	15.2
	ATM operation business	(1,294	)	(1,221	)	(5.6	)
Total gross profit		36,784		41,656		13.2
	Network services	26,444		28,117		6.3
	Systems integration (SI)	9,544		12,642		32.5
	ATM operation business	796		897		12.7
SG&A, R&D, and other operating income (expenses)		(20,486	)	(22,866	)	11.6
Operating profit		16,298		18,790		15.3
Profit before tax		17,597		19,018		8.1
Profit for the period attributable to owners of the parent		11,522		12,854		11.6
(Note) Systems integration includes equipment sales.

Segment Results Summary
		1Q-3Q21		1Q-3Q22
		JPY millions		JPY millions
Total revenues		165,600		185,339
	Network services and SI business	163,606		183,300
	ATM operation business	2,090		2,118
	Elimination	(96	)	(79	)
Operating profit		16,298		18,790
	Network services and SI business	15,747		18,117
	ATM operation business	617		693
	Elimination	(66	)	(20	)

1Q-3Q22 Revenues and Income
Revenues
Total revenues were JPY185,339 million, up 11.9% YoY (JPY165,600 million for 1Q-3Q21).

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

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

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

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

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

Network Services Revenues Breakdown
				1Q-3Q21	1Q-3Q22	YoY Change
				JPY millions	JPY millions	％
Total network services				95,097	102,744	8.0
	Internet connectivity services (enterprise)			28,082	29,504	5.1
		IP services (including data center connectivity services)		10,069	10,862	7.9
		IIJ Mobile Services		15,132	15,548	2.7
			Enterprise mobile services (IoT usages etc.)	7,516	8,149	8.4
			IIJ Mobile MVNO Platform Service (MVNE)	7,616	7,399	(2.8	)
		Others		2,881	3,094	7.4
	Internet connectivity services (consumer)			17,780	18,335	3.1
		IIJmio Mobile Services		15,555	15,941	2.5
		Others		2,225	2,394	7.6
	Outsourcing services			29,831	34,359	15.2
	WAN services			19,404	20,546	5.9
Number of Contracts and Subscription for Connectivity Services (Note 1)
				As of Dec. 31, 2021	As of Dec. 31, 2022	YoY Change
Internet connectivity services (enterprise)				2,394,237	2,867,238	473,001
	IP service (greater than or equal to 1Gbps) (Note2)			751	1,341	590
	IP service (less than 1Gbps) (Note2)			1,206	1,334	128
	IIJ Mobile Services			2,302,538	2,771,263	468,725
		Enterprise mobile services (IoT usages etc.)		1,319,918	1,685,333	365,415
		IIJ Mobile MVNO Platform Service (MVNE)		982,620	1,085,930	103,310
	Others			89,742	93,300	3,558
Internet connectivity services (consumer)				1,419,277	1,538,622	119,345
	IIJmio Mobile Services			1,072,920	1,196,683	123,763
	Others			346,357	341,939	(4,418	)
Total contracted bandwidth (Gbps) (Note 3)				7,346.5	8,727.3	1,380.8
(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. The number of IP services (greater than or equal to 1Gbps) contracts as of December 31, 2022 increased mainly due to Tokyo public high school project in 3Q22.
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. Total contracted bandwidth as of December 31, 2022 increased mainly due to Tokyo public high school project in 3Q22.

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

Systems construction and equipment sales, a one-time revenue, was JPY29,936 million, up 22.6% YoY (JPY24,415 million for 1Q-3Q21). Systems operation and maintenance revenue, a recurring revenue, was JPY50,541 million, up 14.9% YoY (JPY43,998 million for 1Q-3Q21), mainly due to continued accumulation of systems operation orders as well as an increase in cloud-related services’ revenues.　

Orders received for SI, including equipment sales, totaled JPY91,971 million, up 31.6% YoY (JPY69,910 million for 1Q-3Q21); orders received for systems construction and equipment sales were JPY34,190 million, up 29.0% YoY (JPY26,501 million for 1Q-3Q21), and orders received for systems operation and maintenance were JPY57,781 million, up 33.1% YoY (JPY43,409 million for 1Q-3Q21).

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

As of December 31, 2022, the balance of current assets was JPY103,148 million, decreased by JPY1,337 million from the balance as of March 31, 2022 of JPY104,485 million. As for the major breakdown of balance and fluctuation of current assets, cash and cash equivalents decreased by JPY6,064 million to JPY41,327 million, trade receivables decreased by JPY1,570 million to JPY36,079 million, inventories increased by JPY1,682 million to JPY4,290 million, prepaid expenses increased by JPY2,354 million to JPY15,907 million, and contract assets increased by JPY1,448 million to JPY3,318 million.

As of December 31, 2022, the balance of non-current assets was JPY131,710 million, increased by JPY4,390 million from the balance as of March 31, 2022 of JPY127,320 million. As for the major breakdown of balance and fluctuation of non-current assets, tangible assets increased by JPY5,056 million to JPY22,902 million mainly due to purchases related to Shiroi Data Center Campus construction, right-of-use assets, which include right to use leased assets under operating lease contracts such as office and data centers and assets under finance lease contracts such as data communication equipment, decreased by JPY2,376 million to JPY42,498 million mainly due to depreciation, intangible assets decreased by JPY224 million to JPY16,200 million mainly due to amortization of software, and prepaid expenses increased by JPY1,398 million to JPY11,850 million, mainly due to operation and maintenance costs.

As of December 31, 2022, the balance of current liabilities was JPY74,102 million, decreased by JPY2,675 million from the balance as of March 31, 2022 of JPY76,777 million. As for the major breakdown of balance and fluctuation of current liabilities, trade and other payables increased by JPY3,077 million to JPY23,819 million, borrowings increased by JPY400 million to JPY16,770 million mainly due to a decrease of JPY1,500 million from repayment of long-term borrowings and an increase of JPY2,000 million owing to a transfer from non-current liabilities, income taxes payable decreased by JPY3,817 million to JPY1,978 million, contract liabilities increased by JPY187 million to JPY9,758 million and other financial liabilities decreased by JPY1,260 million to JPY15,775 million.

As of December 31, 2022, the balance of non-current liabilities was JPY47,591 million, decreased by JPY2,816 million from the balance as of March 31, 2022 of JPY50,407 million. As for the major breakdown of balance and fluctuation of non-current liabilities, long-term borrowings decreased by JPY1,829 million to JPY3,671 million mainly due to a transfer to current portion, contract liabilities decreased by JPY503 million to JPY6,926 million and other financial liabilities decreased by JPY472 million to JPY29,674 million.

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

1Q-3Q22 Cash Flows
Cash and cash equivalents as of December 31, 2022 were JPY41,327 million (JPY40,960 million as of December 31, 2021).

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

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

Net cash used in financing activities for 1Q-3Q22 was JPY20,766 million (net cash used in financing activities of JPY22,240 million for 1Q-3Q21), mainly due to payments of other financial liabilities of JPY14,396 million (JPY14,665 million for 1Q-3Q21), which included payments under operating lease contracts such as office rent and finance lease contracts such as network equipment, repayments of long-term bank borrowings of JPY1,500 million (JPY5,170 million for 1Q-3Q21) and dividends paid of JPY4,901 million (JPY3,836 million for 1Q-3Q21).

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

Presentation
Presentation materials will be posted on our web site (https://www.iij.ad.jp/en/ir/) on February 8, 2023.

http://ml.globenewswire.com/Resource/Download/9ef1ce5c-ec58-425d-ad22- ...

About Internet Initiative Japan Inc.
Founded in 1992, IIJ is one of Japan’s leading Internet-access and comprehensive network solutions providers. IIJ and its group companies provide total network solutions that mainly cater to high-end corporate customers. IIJ's services include high-quality Internet connectivity services, mobile services, security services, cloud computing services, and systems integration. Moreover, IIJ operates one of the largest Internet backbone networks in Japan that is connected to the United States, the United Kingdom and Asia. IIJ listed on the First Section of the Tokyo Stock Exchange (“TSE”) in 2006 and transitioned to the Prime Market of TSE from April 2022.

For inquiries, contact:
IIJ Investor Relations　Tel: [phone]　E-mail: [e-mail]　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.

Condensed Consolidated Statements of Financial Position (Unaudited)
		March 31, 2022			December 31, 2022
		Millions of yen			Millions of yen
Assets
Current assets
Cash and cash equivalents		47,391			41,327
Trade receivables		37,649			36,079
Inventories		2,608			4,290
Prepaid expenses		13,553			15,907
Contract assets		1,870			3,318
Other financial assets		1,295			1,926
Other current assets		119			301
Total current assets		104,485			103,148
Non-current assets
Tangible assets		17,846			22,902
Right-of-use assets		44,874			42,498
Goodwill		9,479			9,790
Intangible assets		16,424			16,200
Investments accounted for using equity method		5,830			5,598
Prepaid expenses		10,452			11,850
Contract assets		69			47
Other investments		17,410			17,689
Deferred tax assets		183			193
Other financial assets		4,245			4,375
Other non-current assets		508			568
Total non-current assets		127,320			131,710
Total assets		231,805			234,858
		Millions of yen			Millions of yen
Liabilities and Equity
Liabilities
Current liabilities
Trade and other payables		20,742			23,819
Borrowings		16,370			16,770
Income taxes payable		5,795			1,978
Contract liabilities		9,571			9,758
Deferred income		65			102
Other financial liabilities		17,035			15,775
Other current liabilities		7,199			5,900
Total current liabilities		76,777			74,102
Non-current liabilities
Borrowings		5,500			3,671
Retirement benefit liabilities		4,395			4,578
Provisions		786			789
Contract liabilities		7,429			6,926
Deferred income		340			297
Deferred tax liabilities		641			515
Other financial liabilities		30,146			29,674
Other non-current liabilities		1,170			1,141
Total non-current liabilities		50,407			47,591
Total liabilities		127,184			121,693
Equity
Share capital		25,562			25,562
Share premium		36,518			36,677
Retained earnings		37,024			44,977
Other components of equity		6,275			6,621
Treasury shares		(1,851	)		(1,831	)
Total equity attributable to owners of the parent		103,528			112,006
Non-controlling interests		1,093			1,159
Total equity		104,621			113,165
Total liabilities and equity		231,805			234,858

Condensed Consolidated Statements of Profit or Loss (Unaudited)
		Nine Months Ended		Nine Months Ended
		December 31, 2021		December 31, 2022
		Millions of yen		Millions of yen
Revenues
Network services		95,097		102,744
System integration		68,413		80,477
ATM operation business		2,090		2,118
Total revenues		165,600		185,339
Cost of sales
Cost of network services		(68,653)		(74,627)
Cost of systems integration		(58,869)		(67,835)
Cost of ATM operation business		(1,294)		(1,221)
Total cost of sales		(128,816)		(143,683)
Gross Profit		36,784		41,656
Selling, general and administrative expenses		(20,494)		(23,064)
Other operating income		125		246
Other operating expenses		(117)		(48)
Operating Profit		16,298		18,790
Finance income		2,756		802
Finance expenses		(401)		(413)
Share of profit (loss) of investments accounted for using equity method		(1,056)		(161)
Profit (loss) before tax		17,597		19,018
Income tax expense		(5,974)		(6,049)
Profit (loss) for the period		11,623		12,969
Profit (loss) for the period attributable to:
Owners of the parent		11,522		12,854
Non-controlling interests		101		115
Total		11,623		12,969
Earnings per share
Basic earnings per share (yen)		63.81		71.14
Diluted earnings per share (yen)		63.50		70.79
※IIJ conducted a stock split at a ratio of two-for-one with an effective date of October 1, 2022.
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, 2021			December 31, 2022
		Millions of yen			Millions of yen
Revenues
Network services		31,661			35,038
System integration		24,204			27,629
ATM operation business		681			710
Total revenues		56,546			63,377
Cost of sales
Cost of network services		(21,899	)		(24,825	)
Cost of systems integration		(20,529	)		(22,978	)
Cost of ATM operation business		(419	)		(409	)
Total cost of sales		(42,847	)		(48,212	)
Gross Profit		13,699			15,165
Selling, general and administrative expenses		(6,704	)		(7,556	)
Other operating income		32			25
Other operating expenses		(33	)		(17	)
Operating Profit		6,994			7,617
Finance income		983			19
Finance expenses		(128	)		(1,393	)
Share of profit (loss) of investments accounted for using equity method		(684	)		(83	)
Profit (loss) before tax		7,165			6,160
Income tax expense		(2,500	)		(1,931	)
Profit (loss) for the period		4,665			4,229
Profit (loss) for the period attributable to:
Owners of the parent		4,630			4,215
Non-controlling interests		35			14
Total		4,665			4,229
Earnings per share
Basic earnings per share (yen)		25.63			23.33
Diluted earnings per share (yen)		25.51			23.21
※IIJ conducted a stock split at a ratio of two-for-one with an effective date of October 1, 2022.
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, 2021			December 31, 2022
		Millions of yen			Millions of yen
Profit (loss)		11,623			12,969
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		1,887			(274	)
Total of items that will not be reclassified to profit or loss		1,887			(274	)
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations		245			579
Financial assets measured at fair value through other comprehensive income		(0	)		(3	)
Share of other comprehensive income of investments accounted for using equity method		19			44
Total of items that may be reclassified to profit or loss		264			620
Total other comprehensive income, net of tax		2,151			346
Other comprehensive income		13,774			13,315
Other comprehensive income attributable to:
Owners of the parent		13,673			13,200
Non-controlling interest		101			115
Other comprehensive income		13,774			13,315

 

Condensed Consolidated Statements of Comprehensive Income (Unaudited)
		Three Months Ended			Three Months Ended
		December 31, 2021			December 31, 2022
		Millions of yen			Millions of yen
Profit (loss)		4,665			4,229
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		(121	)		437
Total of items that will not be reclassified to profit or loss		(121	)		437
Items that may be reclassified to profit or loss
Exchange differences on translation of foreign operations		227			(433	)
Financial assets measured at fair value through other comprehensive income		(0	)		(2	)
Share of other comprehensive income of investments accounted for using equity method		6			10
Total of items that may be reclassified to profit or loss		233			(425	)
Total other comprehensive income, net of tax		112			12
Other comprehensive income		4,777			4,241
Other comprehensive income attributable to:
Owners of the parent		4,742			4,227
Non-controlling interest		35			14
Other comprehensive income		4,777			4,241

 

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
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
	Millions of yen		Millions of yen			Millions of yen			Millions of yen		Millions of yen			Millions of yen			Millions of yen			Millions of yen
Balance, April 1, 2021	25,531		36,389			25,047			4,865		(1,875	)		89,957			1,015			90,972
Comprehensive income
Profit (loss)	-		-			11,522			-		-			11,522			101			11,623
Other comprehensive income	-		-			-			2,151		-			2,151			-			2,151
Total comprehensive income	-		-			11,522			2,151		-			13,673			101			13,774
Transactions with owners
Issuance of common stock	31		(31	)		-			-		-			0			-			0
Disposal of treasury shares	-		53			-			-		24			77			-			77
Dividends paid	-		-			(3,836	)		-		-			(3,836	)		(49	)		(3,885	)
Stock-based compensation	-		61			-			-		-			61			-			61
Other	-		(5	)		-			-		-			(5	)		(2	)		(7	)
Total transactions with owners	31		78			(3,836	)		-		24			(3,703	)		(51	)		(3,754	)
Balance, December 31, 2021	25,562		36,467			32,733			7,016		(1,851	)		99,927			1,065			100,992
Nine months ended December 31, 2022
	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
	Millions of yen		Millions of yen			Millions of yen			Millions of yen		Millions of yen			Millions of yen			Millions of yen			Millions of yen
Balance, April 1, 2022	25,562		36,518			37,024			6,275		(1,851	)		103,528			1,093			104,621
Comprehensive income
Profit (loss)	-		-			12,854			-		-			12,854			115			12,969
Other comprehensive income	-		-			-			346		-			346			-			346
Total comprehensive income	-		-			12,854			346		-			13,200			115			13,315
Transactions with owners
Purchase of treasury stock	-		-			-			-		0			0			-			0
Disposal of treasury shares	-		99			-			-		20			119			-			119
Dividends paid	-		-			(4,901	)		-		-			(4,901	)		(49	)		(4,950	)
Stock-based compensation	-		60			-			-		-			60			-			60
Total transactions with owners	-		159			(4,901	)		-		20			(4,722	)		(49	)		(4,771	)
Balance, December 31, 2022	25,562		36,677			44,977			6,621		(1,831	)		112,006			1,159			113,165

Condensed Consolidated Statements of Cash Flows (Unaudited)
		Nine Months Ended			Nine Months Ended
		December 31, 2021			December 31, 2022
		Millions of yen			Millions of yen
Cash flows from operating activities
Profit (loss) before tax		17,597			19,018
Adjustments
Depreciation and amortization		21,088			21,254
Loss (gain) on sales/disposals of property and equipment		98			(143	)
Shares of loss (profit) of investments accounted for using equity method		1,056			161
Finance income		(2,776	)		(802	)
Finance expenses		401			413
Other		112			475
Changes in working capital
Decrease (increase) in trade receivables		4,277			1,784
Decrease (increase) in inventories		(208	)		(1,669	)
Decrease (increase) in prepaid expenses		(2,114	)		(3,440	)
Decrease (increase) in contract assets		(1,442	)		(1,426	)
Decrease (increase) in other assets		(102	)		(183	)
Decrease (increase) in other financial assets		(563	)		(745	)
Increase (decrease) in trade and other payables		(606	)		3,516
Increase (decrease) in contract liabilities		(562	)		(577	)
Increase (decrease) in deferred income		(8	)		(1	)
Increase (decrease) in other liabilities		(1,152	)		(1,402	)
Increase (decrease) in other financial liabilities		851			969
Increase (decrease) in retirement benefit liabilities		332			183
Subtotal		36,279			37,385
Interest and dividends received		170			201
Interest paid		(398	)		(401	)
Income taxes paid		(5,680	)		(9,871	)
Cash flows from operating activities		30,370			27,314
Cash flows from investing activities
Purchases of tangible assets		(4,893	)		(9,760	)
Proceeds from sales of tangible assets		1,776			1,216
Purchases of intangible assets		(3,627	)		(4,150	)
Proceeds from sales of intangible assets		0			-
Purchase of a subsidiary		(2,612	)		-
Purchases of other investments		(574	)		(397	)
Proceeds from sales of other investments		104			19
Payments for leasehold deposits and guarantee deposits		(91	)		(49	)
Proceeds from collection of leasehold deposits and guarantee deposits		141			16
Payments for refundable insurance policies		(56	)		(56	)
Other		0			1
Cash flows from investing activities		(9,832	)		(13,160	)
Cash flows from financing activities
Proceeds from long-term borrowings		-			179
Repayment of  long-term borrowings		(5,170	)		(1,500	)
Net increase (decrease) in short-term borrowings		1,480			(100	)
Payments of other financial liabilities		(14,665	)		(14,396	)
Dividends paid		(3,836	)		(4,901	)
Other		(48	)		(48	)
Cash flows from financing activities		(22,240	)		(20,766	)
Effect of exchange rate changes on cash and cash equivalents		195			548
Net increase (decrease) in cash and cash equivalents		(1,507	)		(6,064	)
Cash and cash equivalents, beginning of the period		42,467			47,391
Cash and cash equivalents, end of the period		40,960			41,327

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

Material Changes in Shareholders’ Equity
Nothing to be reported.

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

Segment information for the Company is as follows:

Nine months ended December 31, 2021
	Reportable segments
	Network service and systems integration  business		ATM operation business		Adjustments			Consolidated
	Millons of yen		Millons of yen		Millons of yen			Millons of yen
Revenue
Customers	163,510		2,090		-			165,600
Intersegment transactions	96		-		(96	)		-
Total revenue	163,606		2,090		(96	)		165,600
Segment operating profit	15,747		617		(66	)		16,298
Finance income								2,756
Finance expense								(401	)
Share of profit (loss) of  investments accounted for using the equity method								(1,056	)
Profit before tax								17,597
Nine months ended December 31, 2022
	Reportable segments
	Network service and systems integration  business		ATM operation business		Adjustments			Consolidated
	Millons of yen		Millons of yen		Millons of yen			Millons of yen
Revenue
Customers	183,221		2,118		-			185,339
Intersegment transactions	79		-		(79	)		-
Total revenue	183,300		2,118		(79	)		185,339
Segment operating profit	18,117		693		(20	)		18,790
Finance income								802
Finance expense								(413	)
Share of profit (loss) of  investments accounted for using the equity method								(161	)
Profit before tax								19,018

Intersegment transactions are based on market price.

Subsequent Events
Nothing to be reported.        

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

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

February 8, 2023

Company name: Internet Initiative Japan Inc.
Exchange listed: Tokyo Stock Exchange
Ticker symbol: 3774
URL: https://www.iij.ad.jp/
Representative: Eijiro Katsu, President and Representative Director
Contact: Akihisa Watai, Senior Managing Director and CFO
TEL: [phone]
Scheduled date for filing of quarterly report (Shihanki-houkokusho) to Japan’s regulatory organization: February 14, 2023
Scheduled date for dividend payment: -
Supplemental material on quarterly results: Yes
Presentation on quarterly results: Yes (for institutional investors and analysts)

(Amounts of less than JPY one million are rounded)

1. Consolidated Financial Results for the Nine Months ended December 31, 2022 (April 1, 2022 to December 31, 2022)

(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, 2022	185,339	11.9	18,790	15.3	19,018	8.1	12,969	11.6	12,854	11.6	13,315	(3.3	)
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

 

	Basic earnings per share	Diluted earnings per share
	JPY	JPY
Nine Months ended December 31, 2022	71.14	70.79
Nine Months ended December 31, 2021	63.81	63.50

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

(2) Consolidated Financial Position

	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, 2022	234,858	113,165	112,006	47.7
As of March 31, 2022	231,805	104,621	103,528	44.7

2．Dividends

	Annual Dividends
	1Q-end	2Q-end	3Q-end	Year-end	Total
	JPY	JPY	JPY	JPY	JPY
Fiscal Year Ended March 31, 2022	―	23.00	―	25.00	48.00
Fiscal Year Ending March 31, 2023	―	29.25	―
Fiscal Year Ending March 31, 2023 (forecast)				14.63	―

(Notes)
1. Changes from the latest forecasts disclosed: None
2. IIJ conducted a stock split at a ratio of two-for-one effective as of October 1, 2022. The forecast of year-end dividend per share is the amount after the stock split. Regarding the amount on a pre-split basis, the forecast of year-end and annual dividend per share are JPY29.26 and JPY58.51, respectively.

3．Targets of Consolidated Financial Results for the Fiscal Year ending March 31, 2023
(April 1, 2022 through March 31, 2023)

(% 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, 2023	250,000	10.5	27,200	15.5	26,300	8.8	17,500	11.7	96.89

(Notes)

1. Changes from the latest forecasts disclosed: None
2. IIJ conducted a stock split at a ratio of two-for-one with an effective date of October 1, 2022. The target of basic earnings per share is the amount after the stock split.
3. As for the details about our financial targets for the fiscal year ending March 31, 2023, please refer to “Future Prospects including FY2022 Financial Targets” which is disclosed on page 8 of this earnings release. 
    

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

(2) Changes in accounting policies and estimate

1. Changes in accounting policies required by IFRS: None
2. Other changes in accounting policies: None
3. Changes in accounting estimates: None

(3) Number of shares issued (common stock)

1. Number of shares issued (inclusive of treasury stock):
   As of December 31, 2022: 187,069,600 shares
   As of March 31, 2022: 187,069,600 shares
   
   
2. Number of treasury stock:
   As of December 31, 2022: 6,371,696 shares
   As of March 31, 2022: 6,443,334 shares
   
   
3. Number of weighted average common shares outstanding:
   For the nine months ended December 31, 2022: 180,678,380 shares
   For the nine months ended December 31, 2021: 180,581,022 shares
   
   * IIJ conducted a stock split at a ratio of two-for-one with an effective date of October 1, 2022. Accordingly, number of shares issued, number of treasury stock and number of weighted average common shares outstanding above have been calculated as if the stock split had been conducted at the beginning of the previous consolidated fiscal year, respectively.

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

* Explanation on the Appropriate Use of Future Outlook and other special instructions
i) Forward-looking statements
Forward-looking statements disclosed in this document are based on IIJ Group’s expectation, estimates, and projections based on information available to IIJ Group as of February 8, 2023. As these forward-looking statements are subject to known and unknown risks and uncertainties, actual results may differ from those disclosed due, for example, to but not limited to changes in business climate and/or market trends. As for our latest forecast of our financial targets, please refer to “Future Prospects including FY2022 Financial Targets” written on page 8 of this document. 

ii) Change in the unit of presentation for monetary amounts
Amounts of accounts and other items presented in our condensed quarterly consolidated financial statements were previously stated in thousands of yen, but effective from the first quarter ended June 30, 2022, IIJ has changed to present such amounts in millions of yen. In order to facilitate comparison, the amounts for the previous consolidated fiscal year are also presented in millions of yen.

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