Corporate Overview ofInternet Initiative Japan (IIJ)

Internet Initiative Japan Inc. (IIJ)The Prime Market of the Tokyo Stock Exchange (Ticker symbol: 3774)
May and June 2024
Disclaimer
Statements made in this presentation regarding IIJ’s or managements’ intentions, beliefs, expectations, or predictions for the future are forward-looking statements that are based on IIJ’s andmanagements’ current expectations, assumptions, estimates and projections about its business and the industry. These forward-looking statements, such as statements regarding revenues, operating
and net profitability 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.
© Internet Initiative Japan Inc.

Outline
1. Key Updates
2. About IIJ (From ISP to Total NW Solution Provider, etc.)

P. 2 – 10

3. Business Model (Monthly recurring revenue accumulation, etc.)
4. Strength (Service development capabilities, customer base, etc.)
5. Growth Strategy

P. 12 – 16
P. 17 – 21
P. 22 – 24
P. 25

6. Service/Business Function (Enterprise NW, Cloud, Security, Mobile IoT)
7. Financials

P. 26 – 42
P. 43 – 60

Financial Performance (FY19 ~ FY23 Results)

P. 44

FY23 Financial Results

P. 45 – 59

FY24 Financial Targets

P. 60

8. Appendix••

P. 61 – 73

FY23 (FY2023) stands for a fiscal year ended March 31, 2024. Others alike
Abbreviation: NW stands for network, SI stands for systems integration, DC stands for data center, ¥ (JPY) bn stands for JPY billion

We changed our accounting principles from the Generally Accepted Accounting Principles in the U.S. (“U.S. GAAP”) to the International Financial Reporting Standards (IFRS) from the filing of FY2018 annual report “Yukashoken-houkokusho” which was filed on June 28, 2019. Because reporting period of foreign consolidated subsidiaries under IFRS is different from that of under U.S. GAAP, some figures disclosed in the past are different.
© Internet Initiative Japan Inc.

1

Key Updates
Summary of Recent Announcements1

 Result of the previous Mid-term Plan (FY21-FY23), New Mid-term Plan (FY24-FY26), Mid-to-long Term Vision, andFY24 financial targets

Business domain expanding with Service Integration model2

 Enterprise private network and systems in Japan are finally becoming to change Increasing track record of large-scale projects covering an entire enterprise private NW & systems
 Service Integration (providing in-house developed network services as part of SI) is increasing, covering these demands

Network expertise becoming a very critical differentiator

3 Reliable and stable network operation is indispensable Large number of talented network engineers Wide range of in-house developed network services

Revenue growth to be stronger, which results in economics of scale4

 Leveraging the current royal Internet access services’ client base Accelerated growth of MRR (monthly recurring revenue) through Service Integration
 Margin to improve with an accumulation of MRR whose the cost are mainly network operation’s common ones
© Internet Initiative Japan Inc.

2

Consolidated base“times” are appropriate terms & were calculated by comparing
FY23/FY23-end to FY20/FY20-end
Subs. = subscription, m = million

Result of the Previous Mid-tern Plan (FY21~FY23)

BusinessModel
GrowthStrategy

About IIJ
Strength

ICT usage & its advancement by Japanese enterprises finally kicked off, triggered by the Pandemic
Realized economies of scale in NW service model due to continued increase in traffic & security demand, etc.
Established profit base along with continuing to expand NW infrastructure & service lineup
Total Revenue

1.3 times
FY20¥213.0 bn

Operating Profit

DoubledFY23¥276.1 bn

Enterprise MRR 1.4 times
Sum of SI M/O & NW Service (excl. consumer & MVNE)

FY20¥14.3 bn

Human Capital (unit: personnel)

Operating Margin: FY20 6.7% FY23 10.5%
ROE:
FY20 11.5% FY23 16.3%

Remarkable increase in large scale projects& Service Integration orders
Revenue: SI 1.5 times, NW services 1.2 times
 FY-end SI construction order-backlog: 2.9 times(FY23-end ¥23.8 bn)
 Visible increase in large-scale complex projects
by Service Integration model Public & finance sectors transaction expanded• Public: GIGA school, construction of large NW
system infrastructure, etc.
• Finance: Renewal of large NW, construction of FX
trading infrastructure, etc.

Overseas business: ASEAN expansion+1.3 times

FY23¥29.0 bn

2.3 times

FY23-end

4,803

FY20-end

FY20

3,805

FY23

¥34.36¥14.875

Market Capitalization

2.2 times
FY20-end

FY23-end¥520 bn¥240 bn

Stable turnover rate (IIJ) the level of 3% to 4%

Expanded service & solution development

Significant growth in Security Service

 DWP(*)-related services such as Flex
Mobility grew along with enterprises’ DXadvancement even after the pandemic
 Continued developing services to promote
cloud migration

Revenue 1.7 times ¥18.4 bn• “GIO P2 Gen. 2” to realize easy cloud migration• “Smart Hub” to connect on-premise & third party
cloud• “CDP” to integrate data, etc.
(*) Digital Work Place: Office IT environment for client company &its employees

 Contracted bandwidth(*): 1.6 times
 Mobile bandwidth(*): doubled(overwrapping with enterprise MRR) Expanded ASEAN local business through PTC  No. of operating racks at Shiroi DC: 3 times• Continued to expand our owned DCs of Shiroi & Matsue
M&As (Singapore & Malaysia)• Promoted carbon neutral initiatives through on-site solar
power generation & non-fossil certificate direct
 Completed large-scale overseas DC
procurement, etc.
construction, executing its subsequent• Developed & launched micro DC solution, the core
projects
infrastructure for edge computing(*) Calculated by multiplying number of contracts by contracted
 Operating several global SASE projects (Topbandwidths for IP & broadband services respectively(*) Sum of our purchase of mobile data bandwidth from NTT Docomo &KDDI¥30.9 bn

Within enterprise MRR (excl. security related SI)

Demonstrated competitive advantages offull-MVNO

Mobile subs. 1.5 times 3.24 m

4.81 m Cross-selling opportunity increased such as Enterprise IoT subs. 2.1 times (FY23-end 2.35 m)
SOC(Security Operation Center) along with anincrease in large scale NW renewal projects  Developed & launched “IIJ Public Safety
Mobile Services” to pubic agencies for secure Increased the overwhelming market sharereliable connectivity in case of disastersof long-standing mail & web securities
 Gained & maintained No.1 market share for Expanded value-added function throughthe consumer SIM (MVNO) with Giga Plans
continuous development of new service &and others (MM Research Institute)function
Continued enhancing Governance &Sustainability

Continued expanding NW service infra.

Revenue: 4.2 times, ¥8.3 bn¥35.3bn
Business Profit: 7.2 times, ¥0.4 bn¥2.7 bn

partner of Palo Alto & Zscaler in Japan)

Dividend Per Share (annual) Enhanced management structure by inviting
two VPs from outside, etc.
 Maintained A rating on MSCI ESG throughproactive communication & disclosure
enlargement••

Opened Integrated Report Portal (web)Disclosure on TCFD & human capital, etc.

 Contributed to NW society of Japan andeducation of NW engineers by opening “IIJ
Academy”© Internet Initiative Japan Inc.

Start-up Digital Currency Business(Equity method investee: DeCurret)

No. of participantsin Digital Currency Forum2.7 times 38

104 Issue & settle using DCJPY (digital currency) for
non-fossil certificate transaction as a firstservice (first in Japan, from Jul. 2024)
 PoCs through various study groups• Invoice chain, electricity trading, retail & distribution,
regional currency, wallet security, e-money, security token
payment practices & systems study, merchant settlement,
NFT(Non-fungible Token), and administrative affairs

3

Consolidated base
Net Profit is “Profit for the period attributable to owners of the parent”“times” are calculated by comparing FY26/FY26-end to FY23/FY23-end
The figures below are all assumed targets

New Mid-term Plan (FY24 ~ FY26)

BusinessModel
GrowthStrategy

About IIJ
Strength

Accelerate business scale expansion toward the Mid-to-long Term Vision by advancing the business structure transformation in FY23
Revenue growth led by integration and profit growth through economies of scale as a NW service operator
Total Revenue

1.4 times
FY23¥276.1 bn

Operating Profit

1.6 times

FY26¥380.0 bn

FY23¥29.0 bn

NW service as Profit driver• Accelerate revenue growth byrolling out NW
construction/renewal projects tovarious industry, enhancing
account sales & PM, expanding
human resource• Enhance SI project management

Promotion of largetransactions & clients• Comprehensive outsourcing ofclient’s NW and open systems• Add large volume
revenue to the multi-industry
recurring revenue base
• Stable additional profit source
for the future

Enhancement ofService Control• Higher efficiency for service

development & operation by
new technology such as AI• Implement appropriate
pricing in response to inflation& cost increase

ROE

1.5 times

FY26¥46.0 bn

Further enhancement of the existing core business area
SI as Revenue driver

Net Profit+2.7 pt.

FY26¥30.0 bn

over

FY23

¥19.8 bn

16.3%

Creation of new growth area
Initiatives for Data-driven society

accumulation through Service
Integration• Demonstrate the strength of stable
NW operation in the DX era

data, data distribution mechanisms & operations, etc.
Study & create business models in conjunction withthe existing infrastructure & services
Opportunities for new datautilization

Establishment and Maturity of Data-driven society

Further enhancement ofservice development &operation

Use of generated
Involvement of
New insights
datamany stakeholders
for various
purposes
Generation
Distribution
Utilization ofof data• Focus on strengthening

cyber-security service
development• Respond to DX progress with DWP
lineup• Develop services that would be PF
for AI, data lake, etc.

Continuous expansion of
NW infrastructure
Pursuit of differentiation• Construct the third site of

Shiroi DC for long-term growth• Deploy full-MVNO 5G SAof data

Advancement ofproblem solving

1.3 times

FY26

19%

FY23

• Operate data utilization business, generate meaningful• Accelerate NW service

Human Capital
FY26-endaroundFY23-end
4,803

6,100

Enhancement of business foundation
Thorough expansionof Human Capital

Enhancement ofcash control• Continuous expansion of• Appropriate management of

human resources• Develop next-generation

human resources for long term
growth• Maintain & enhance top-tierengineering capabilities & expandthat to multiple layer

increasing SI-related working
capital• Investment allocation

Shiroi DC & growth areas• Increase payout ratio when the

Mid-to-long Term Vision isrealized

Solve social

data

issuesAchieve the spread of Digital Currency in Japan(Equity method investee: DeCurret)• First in Japan to issue commercial digital currency as a practicalcase (scheduled in Jul. 2024)
 Digitalized token of environmental value transaction• Within FY26, anticipate loss to shrink & become profitable on amonthly basis• Executing STO(*) of digital currency, invoice chain(*), web3/NFT(*)& other practical projects(*) STO (Security Token Offering): securities issued using electronic means such as blockchain,replacing traditional mechanism of stocks and bonds(*) Invoice chain: concept of industry standard systems for corporate intercompany
reimbursement(*) NFT(Non-Fungible Token): Token issued on the blockchain that can prove uniqueness andcannot be replaced© Internet Initiative Japan Inc.

Maintain & improve
Sustainability /GovernanceComplement growththrough M&As

• Strengthen governance in linewith growth• Contribute to the productivityof future society throughcontinuous stable NW operation• Introduce a new executive

compensation scheme linked to
the new Mid-term Plan

• Pursuit M&A opportunities

as a supplemental means of
expanding domestic
resources & technology• Leverage residual borrowing

capability (up to ¥70.0 bn isenvisioned image)

4

Business
Model
GrowthStrategy

About IIJ

New Mid-term Plan’s Financial Outlook

Unit: ¥ (JPY) billion

Strength

Breakdown image of financial outlook
Total
Revenue

FY20

FY23

FY26 outlook(one before
previous
Mid-term plan’s
final FY)

(Previous Mid-termplans’ final FY)(New Mid-term’s
last FY)

CAGR
9.0%

CAGR
11.2%

276.1

213.0
83.3
SI
NW Services

126.8

1.5 times
1.2 times

121.8
151.3

Gross
Profit

380.0

FY20

FY23

FY26 outlook(one before
previous
Mid-term plan’s
final FY)

(Previous Mid-termplans’ final FY)(New Mid-term’s
last FY)

CAGR
CAGR
16.6%

Slightly less
than

63.9

40.3 1.6 times

1.5 times

12.1

SI
NW Services

1.3 times

27.2

110

slightly more than 13%

1.6 times

Operating
ProfitOperatingMarginFY20

FY23

FY26 outlook(one before
previous
Mid-term plan’s
final FY)

(Previous Mid-termplans’ final FY)(New Mid-term’s
last FY)

6.7%

19.0

1.5 times

43.5

Slightly
more than

10.5%

12%

46.0

Slightly
more than

29.0
14.3

1.4 times

Capital allocation (FY24-FY26, 3 years in total)
Cash inCash out

Overview
 Start the construction within the new Mid-term plan period,

Investment: approx. ¥90.0 bn
Ordinal NW infrastructure, etc.
approx. ¥51.0 bn
Cash generated
from businessStable with economies of scale

Shiroi DC 3rd Siteconstruction
approx. ¥30.0 bn
Mainly for own services

approx. ¥134.0 bn(*)

Along with an increase in large complex projectIncrease in working capital and lease obligation(*) post-tax, pre-depreciation

Debt

Payout ratio 30%

Dividend
Scheduled repayment of long term borrowing

Strategic
investment
for new
growth areas

Shiroi DC
3rd siteconstruction

Approx. ¥13.0 bn

Approx. ¥24.0 bn

Strategic
Investment

 Specific investment details have not fixed and will be discussed

Increase inworking
capital &lease
obligations

 Increase in work in process, prepayments, etc. due to an

Approx. ¥1.5 bn

Up to approx. ¥65.0 bn
up to ¥70.0 bn© Internet Initiative Japan Inc.

going forward

increase in large scale multi-year SI projects• The impact of increased working capital should gradually be reduced
due to the constant revenue recognition of large scale projects
 M&As to be conducted in sequence with borrowing capacity

M&As

M&As

but the schedule is undetermined• First site: CAPEX approx. ¥8.3 bn, No. of racks: approx. 700,
started operating from May 2019
• Second site: CAPEX approx. ¥12.8 bn (plan),
No. of racks: approx. 1,100, started operating from Jul. 2023•

Maintain debt/equity ratio & financial discipline,
Up to ¥70.0 bn of additional debt could be implemented for M&As

5

About IIJ

Mid-to-long Term Vision

Strength

The figures mentioned below are all assumed status and image

Previous Mid-term

New Mid-term(FY21-FY23)(FY24-FY26)

Established profit base byenterprise recurring revenue
growth• Enhancement of NW

infrastructure & service lineup• Demonstration of profit
expansion through economies ofscale by monthly recurring
revenue accumulation• Increase in large scale projects
through NW renewals, etc.
• Large increase in security and
DWP related services• Demonstration of full-MVNO
competitive advantages,
Accumulation of IoT projects• Significant expansion ofoverseas business, including
M&As• Expansion of human resources• Initiatives for digital currency
and other new business areas

Mid-to-long Term Vision

Accelerate businessexpansion by focusing on
the existing core areas
Pursue business scale forlong term growth• Further enhancement of

the existing corebusiness areas• Creation of new growthareas• Enhancement of businessfoundation

Total revenue around ¥500.0 bn
Operating Margin 12% ~ 15%• Strongest focus on the core areas as

NW operator & IT provider
Positioned as one of the leading IT
providers in Japan
Thoroughly continue to differentiate through
NW operation & service offering model
Enlarge SI business driven by Service
Integration
Realize business scale by expanding large
customer base
• Provide NW platforms that support the
NW society
Strive to develop technologies
Create optimal NW & security platforms forthe spread of AI & the advent of data-driven
society, etc.
• Succession & development of IIJ
corporate culture as a challenger
Unchanged since the inception, diverse
employees take on new challenges
autonomously*5,000 is derived from the Japanese unit of ¥5,000 oku(oku = one hundred million) which is ¥500 bn

Demonstrate competitive advantage
of fully-outsourcing infrastructure
operation to support realization of
NW society• Develop integrated PF to enable

processing various types of data,
together with security & highperformance. IIJ to become a fulloutsourced IT providers equipped withDC (including edge computing) & cloud
resources, including wired and wireless
NWs• Achieve high profit margins bymanaging large customers’ NW & IT
domains as fully outsource• Business domain expansion anddiversification• Demonstrate leadership including

M&As amidst a changing industry
landscape• Become Asia's leading IT service

provider by leveraging domestic
knowledge & SWOT in ASEAN region

Execute actions early to realize revenue volume of ¥500 bn

Targets

Beyond 5,000

BusinessModel
GrowthStrategy(consolidated)

FY23 result

FY26 target

Total Revenue¥276.1 bn¥380.0 bn

Operating Margin

10.5%

12%

12% ~ 15%

Payout ratio

30%

30% ~ 40%

Market Cap.

1 trillion¥500.0 bn© Internet Initiative Japan Inc.

Payout ratio to gradually increase
along with an increase inbusiness scale6

FY24 Financial Targets

Unit: ¥ (JPY) billion
YoY = Year over year comparison
Consolidated base% of total reveue

First Half Targets% of total revenue

Full Year Targets

YoY（Apr. 2024 to Sep. 2024)

Total
Revenue

Gross Profit

142.0 ~

29.2 ~

30.2

13.5%

13.4%

+10.8% ~+0.0% ~

19.2

10.0 ~

shares of profit(loss)of investments
accounted for using
equity method
investees

9.5 ~+11.5%

+3.5%

7.7%

11.0

(17.2%) ~(8.9%)(24.3%) ~(16.4%)

4.4%

4.9%

6.3 ~

7.0

(24.3%) ~(15.9%)¥17.18 ~ ¥18.58¥0.00 ~+¥1.40

315.0

22.0%

22.7%

68.5 ~

71.5

12.3%

12.2%

9.6%

10.5%

30.0 ~

33.0+14.1%+7.3% ~

+12.0%  NW Service:Revenue to grow by recurring revenue accumulation & Service Integration
Expect mobile to achieve revenue & profit growth without the onetime cost reduction of data connectivity
At the upper limit, expect gross margin to improve YoY (1H: decrease, 2H: increase) SI:+10.5%
Revenue to largely increase by realizing FY23-end order backlog & strong demandAt the upper limit, expect gross margin to slightly decrease YoY (1H: decrease, 2H: increase) VMware impact: We are taking actions of passing through of the cost increase which would require sometime to be adopted thoroughly. Thus, we have set some ranges.
 SG&A, etc.: Increase along with an increase in number of employees and others (No modification of the+13.7%
salary table for FY24 new graduates)
 Shares of profit (loss) of investments accounted for using equity method investees: Expect DeCurret’s
related loss to be around ¥0.8 bn as they approach near to the service launch the cost should increase-  No consideration on any valuation gain (loss) on funds & foreign exchange gain (loss) Others: Number of employees to increase slightly over 400 personnel (of which, 307 are new graduates),
CAPEX: ¥23.0 bn (of which, approx. ¥5.7 bn is for own DCs expansion)+3.3% ~

(0.7)
9.3%

10.2%

29.0 ~

32.0

6.4%+0.2% ~

7.0%

Net Profit(Profit for the period
attributable to owners of
the parent)

Dividend per
share

19.9 ~

Gross
Profit+13.0% ~

38.5

-

7.4%

10.5

312.0 ~

+12.2%(0.3)
6.7%

Profit before
tax

143.0
21.1%

7.0%

Operating
ProfitRevenue（Apr. 2024 to Mar. 2025)

20.6%

SG&A, etc.

Assumption

YoY

21.9

+0.3% ~

¥34.36 ~ ¥37.16¥0.00 ~

+10.6%The impact from VMware license for virtualization software Effective from Apr. 2024, there were major changes in VMware product lineup & IIJ was migrated toa new partner program Under the new product lineup, generally, individual products are no longer sold separately, which
was the case previously, and they are now bundled together. This leads to a substantial increase in+10.4%
price & cost
 IIJ is taking actions including the revision of our service price; however, because the product lineup &the terms & conditions were shared in such a last minute, the full year financial targets are disclosed
as ranges of ¥3.0 bn. The upper limit indicates that the impact of VMware license is mostly passed+¥2.80through in the second half. The lower limit indicates that the impact of VMware license is passed
through with delay, except to the extent that can be assumed© Internet Initiative Japan Inc.

7

Enterprise private NW and systems in Japan becoming to change
30 years ago

Nowadays
Growing demand for NW-based systems
incorporating various network functions

Carriers & SIers each covered private NW & systems

Labor shortage requires
more ITHigh Speed/Capacity
Network

Network• Dedicated/Closed NW• Narrow bandwidth

SystemCPU/Storage
Performance Improve• On-premise• Mainframe / WS
• Legacy language

robust andcomplexed systems

Network

Emergenceof Internet

Zero Trust Concept
Gradual Cloud Shift
Data Analysis and AI
Preliminary IoT
usagesBirth of IIJ

SIers

SystemInternet Usages
Progressed

Struggling
switch toopen systems

Still slow move inconservative JapanIT adoption at lastforced by Pandemic

Every CEO says DX(Digital Transformation)

Legacy NW and Systems
to be reformed

Security forvarious incidents

Telecom
Carriers

convergence• Shifting to network-based systems• Required technology to change• Data volume continues to increase

Japan needs morecompetitiveness by IT

Internet traffic continues
to increase

IIJ• Attractive work place for network engineers• Accumulate NW infrastructure & NW Services Asset• Does not own or target legacy NW/systems• Have royal clients with Internet access contracts• Business domains to expand from external network tototal network and Systems

Telecom
Carriers

SIers• Consumer business• Seeking monthly recurring

focused historically• Lack of network engineers• Infrastructure provider• Legacy systems to© Internet Initiative Japan Inc.

revenue businessdecrease• Not own network andnetwork services

Cyber security demands
Importance fordata governance
Cloud systems
penetration
5G SA adoption andadvanced IoT projects
Importance of stable
operation of large-scale
NW remains unchanged8

Large-scale Service Integration Transactions
Educational Information NW for Chiba city

Services provided by IIJ
SI provided by IIJ

Integrated information system for public safety org.
Internet

 SASE案件(多数)
Large-scale
SASE project for a global company
IIJ GIO Managed

1Gbps

Internet

Prisma AccessInternet access

IP

1Gbps

Managed FW

100Gbps × 3 lines (main)

Cloud exchange

GIO remote accessCloud center

Internet connecting SW

Web Security
Equipment

Virtualization
infrastructure

support systems

SASE

Private accessApprox.
20 thousand

School affairs

NW in center

GIO P2 Gen.2

IIJ Private backbone

100Gbps × 3 lines (backup)

Application
vendorLearning systems

WAN

UOM
Operation
vendor

1Gbps

External
environment B

Base RT

Base RT

NW in DC

Existing
DC
•

1Gbps

External
environment A

100Gbps×3 lines

Carrier A

WAN
Base L3SW

BaseL3SW

Base L3SW

Base NW

Base NW

Base NW

LAN

LAN

LAN

Cloud exchange

NGFW

BranchBranchWAN

IIJ DC

Domestic
officeMPLS

MPLS

Overseas
officeOverseas
officeDomestic
officeDomestic
officeOverseas
officeOverseas
officeDomestic
officeDomestic
officeOverseas
officeOverseas
officeInternet

Cloud

Managed VPN pro

Menlo

Prisma SaaS

Security

Security Inline

Flex

Private access

Mobility

WAN
Main

WAN

Overseas
officeDC

IIJ DCPrivate access
Carrier B

Overseas
officeWAN
Domestic
officeLarge-scale NW renewal for a financial institution

IIJ Private backbone

Carrier A

Overseas
officeIP
Other DCWAN

WAN

NW in DC

Existing
DC

NGFW

HQ

Overseas
officeApprox. 7,000

Carrier B Carrier A

Private access

NGFW

BranchOverseas
officeTotal NW project for a prominent company group

Cloud
service

NGFW

BranchOverseas
officeManaged VPN pro

Remote access users

NGFW

BranchManaged FW

1Gbps

Managed FW

Managed VPN pro

NGFW

Cloud Proxy

Various VDI
Other systems

UOM

Prisma AccessofficePrisma Access
Branches(approx. 2,000)

Mobile access(over
50 thousand users)

Public Schools in Chiba(168 as of March 31, 2023)

Managed VPN pro
Main officeGroup companies

Approx. 20

BranchGroup companies

Group companies

Approx. 700

Approx. 20

Approx. 200

UOM: Unified Operation Management, NGFW: Next Generation FireWall, MPLS: MultiProtocol Label Switching© Internet Initiative Japan Inc.

9

Track record of large-scale Service Integration projects (IIJ as a primary contractor)
 Strong revenue growth drivers for SI construction and NW services
 Competitors are often current vendors such as legacy SIers and Carriers
Project overview

Project size
(approx.)Main revenue recognition

Order
received

Timing of revenue
recognition

Foreign exchange trading platform for a prominent financial group¥3.0 bn, 5 years

SI O/M

Dec. 2022

To be recognized from 3Q24

Core information NW infrastructure for a broadcaster¥6.0 bn, from FY24

NW service, SI construction, SI O/M

Dec. 2022 &Jan. 2023

To be recognized from 4Q24

Overseas DC project¥2.8 bn in 3Q23

SI construction

Nov. 2022

Dec. 2023

Subsequent projects of the overseas DC project¥1.2 bn in FY24
¥2.0 bn in or after FY25

SI construction

2H22

To be recognized in 1Q24
In or after FY25

Next generation NW renewal for a major system integrator¥1.0 bn, 5 years

NW service

Apr. 2023

From Nov. 2023

Enhancement of security for a prominent carrier¥1.5 bn, 5 years

SI construction, SI O/M

Apr. 2023

From Aug. 2023

Integrated operation system for a public sector organization¥3.0 bn, 5 years

NW service, SI construction, SI O/M

Apr. 2023

From 4Q23

Next generation research platform for a private university¥1.0 bn, 5 years

SI construction, SI O/M

May. 2023

From 4Q23

NW service, SI construction, SI O/M

Sep. 2023

To be recognized from 4Q24
(approx. ¥5.0 bn in FY24)

Educational information network for Chiba City

¥12.3 bn, 5 years(¥5.0 bn in SI construction, ¥2.0 bn
in SI O/M, the rest in NY Service)

Construction & operation for service infrastructure for an enterprise¥4.0 bn, 5 years

NW service, SI construction, SI O/M

Dec. 2023

To be recognized from 2Q24

Large-scale server construction for AI infrastructure(Acquired by PTC, Singaporean SIer subsidiary)¥3.0 bn, 3 years

SI construction, SI O/M

Dec. 2023

From 4Q23

Large-scale NW renewal for a prominent financial institution¥4.0 bn, 8 years

NW service, SI construction, SI O/M

Mar. 2024

To be recognized from 1Q25

Large-scale NW renewal for a prominent manufacturer¥3.0 bn, 5 years

SI construction, SI O/M

Mar. 2024

To be recognized from 1Q24

Large-scale IT infrastructure installment project¥1.0 bn

SI construction

Mar. 2024

To be recognized mainly in 1Q25••

The timing of revenue recognition is based on the assumption as of May 2024. It could change due to the progress of project and other factors
SI O/M = systems operation and maintenance© Internet Initiative Japan Inc.

10

About IIJ (From ISP to Total NW Solution Provider, etc.)

P. 12 – 16

Business Model (Monthly recurring revenue accumulation, etc.) P. 17 – 21
Strength (Service development capabilities, customer base, etc.)

P. 22 – 24

Growth Strategy

P. 25© Internet Initiative Japan Inc.

11

Company Profile

About IIJ
Strength

BusinessModel
GrowthStrategy

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

4,803 (approx. 70% engineers)

Large Shareholders

NTT Group, KDDI, ITOCHU Techno-Solutions (CTC), Koichi Suzuki, Global Alpha Capital Management*Foreign ownership is 24.9% as of Mar. 31, 2024

 The first established full-scale ISP (Internet Service Provider) in Japan

Introduce many in-house developed Internet-related network services

Highly skilled IP (Internet Protocol) engineers from the inception

Operate one of the largest Internet backbone networks in Japan Well recognized “IIJ” brand among Japanese blue-chip companies’ IT division

Differentiate by reliability and quality of network and systems operation

Long-term (almost 30 years) client relationship since the establishment of IIJ

 Development of innovative Internet-related services

Differentiate by continuous network service developments and business investments



Focus on Cloud, mobile, security, solutions related to Big Data, IoT and data governance

Always ahead of telecom carriers and systems integrators (SIers) with regards to services development and operationand many more••

Number of employees is on the consolidated basis and as of Mar. 31, 2024
Large shareholders are as of Mar. 31, 2024, except for Global Alpha whose holding is based on their Large Volume Holding Report filing as of Oct. 2023
© Internet Initiative Japan Inc.

12

About IIJ

From ISP to Total Network Solution Provider

Strength

BusinessModel
GrowthStrategy

Systems Integration (SI) revenue:
One timerevenue

Systems construction(including equipment sales)

EMERGE

Systems operation and maintenance(including private Cloud)Network enhancement,
Cloud, consumer mobile,
IoT ….

Network (NW) services revenue:
WAN services

Monthly Recurring Revenue

BLOOM

Outsourcing services(including Security services)Harvesting the flower of
Total Network Solution
ProviderMobile services
Internet connectivity services

Transition
Change in business model

Birth
Earned enduring client base

FY1994

M&A (Sep. 2010)

FY2000

Increase in number of ISPs
in JapanNTT launched Internet
connectivity service in 1996

FY2005

Price war and market
consolidation for ISPs in Japan
IIJ shifted its focus to large
corporates, survived the toughcompetition, and establishedmarket position

FY2010Became MVNO in2008 andlaunched Cloud
services in 2009
© Internet Initiative Japan Inc.

FY2015

Launched
consumer
mobileservices in2012

FY2023

BecamefullMVNO
in 2018

DX
triggeredby thePandemic

Advancement ofDX in
postpandemicera

13About IIJ

IIJ as a Total Network Solution Provider

Strength

BusinessModel
GrowthStrategy

Offers various network services and systems integration together in many projects
Approx.

15,000 customers(as of Mar. 31, 2024)(Japanese companies, central government agencies, local governments, consumer ISPs universities and more)

Systems
Integration (SI)

Network (NW) Services
Outsourcing
services

Internet connectivity
services

WAN services
Private Cloud

Security

SASE

Internet AccessPrivate connectivity

Systems construction

Public cloud

VPN

MobileGlobal WAN

Systems Operation and
Maintenance

Email gateway

etc.

etc.

etc.

etc.

Major cost components of Network services (mostly non-revenue linked cost)• Fiber leasing cost for Internet backbone and WAN access line
• Depreciation cost and maintenance cost of network equipment• Personnel cost for network service development and operation and outsourcing cost
• Data center operation cost etc.
• Mobile data interconnectivity and voice service purchasing cost for mobile services
IIJ’s Backbone Network© Internet Initiative Japan Inc.

14

AboutAbout IIJIIJManagement Structure (planned from June 2024)

Strength

BusinessModel
GrowthStrategy Outside independent directors: 5 directors, 42% of the total directors
 Female officers: 3 officers, 19% of the entire Board (including Company Auditors)
Koichi Suzuki

Satoshi Murabayashi

 Founder of IIJ

 Executive Vice President and Director (since June 2021)

 Chairman, Representative Director and co-CEO Career: CIO at MUFG Financial Group, Inc.

 Holdings of IIJ share: 10,643,589 shares (6.0%)*

 President and Representative Director of DeCurret Holdings, IIJ’s affiliatedcompany, as a concurrent position*Suzuki’s share includes his indirectly wholly owned private company portion

 Date of birth: September 1946 Holdings of IIJ shares: 5,819 shares (0.0%)
 Date of birth: November 1958

Eijiro Katsu

Yasuhiko Taniwaki

 President, Representative Director and co-CEO & COO

 Executive Vice President and Director (since June 2022)

 Career: Vice Minister of Finance Career: Vice-Minister for Policy Coordination of Posts and Telecommunications at

 Holdings of IIJ shares: 210,795 shares (0.1%)

the Ministry of Internal Affairs and Communications (MIC) Date of birth: June 1950

 Holdings of IIJ shares: 2,617 shares (0.0%)
 Date of birth: September 1960

Full-time Directors
Senior Managing Directors
 K. Kitamura A. Watai (CFO) J. Shimagami (CTO)•

Outside Independent Directors

Company Auditors(of which, 2 outside, 2 female) T. Tsukamoto

Senior Advisor of Mizuho Financial Group, Inc.

 K. Tsukuda

Former Chairman and Representative Director of Mitsubishi Heavy Industries, Ltd.

 K. Aso (Ms.) (New, CPA) Y. Iwama

Outside Director and Chairman of the Board of Nikko Asset Management Co., Ltd.
Former Chairman of Japan Securities Investment Advisers Association

 M. Tanaka (Ms.)

 A. Okamoto

Former President and CEO of Iwanami Shoten, Publishers (one of the best publishing houses in Japan)

 K. Tonosu (Ms.)

Outside Director of JAPAN POST INSURANCE Co., Ltd.
Former Board member of Deloitte Touche Tohmatsu LLC

Holdings of IIJ shares are as of Mar. 31, 2024

© Internet Initiative Japan Inc.

 T. Michishita (attorney) M. Tobita (New)15

Initiatives to achieve sustainable corporate value expansion
Key KPIs

IR engagement

PER

PBR

ROE

FY20-end

24.1

2.6

11.5%

FY23-end

25.4

4.0

16.3%

Market Cap. (FY20 ~ FY23)
時価総額推移（FY20〜FY23）
2.2 times

6,000
4,000

FY21

358

267
FY23-end¥520 bn

FY20-end¥240 bn0

implement portfolio management

Have been inviting outside independent directors since Jun. 2004 as the
U.S. SOX compliance
3 female officers; 19% of the entire Board (including company auditors)

Evaluate based on business performance (revenue, operating profit,
performance of assigned business area), engagement (employee
satisfaction, etc.), ROE 19% & market capitalization of ¥1 trillion to berealized in FY26, & achievement/progress of sustainability and othertargets, provision of restricted stocks. Through these, enhance bothshareholder & corporate value Implementation of efficient & productive managementmonitoring system that encourages self-autonomous
activity based on business philosophy
BOD is annually leveled-up through continuous evaluation, theNomination & Remuneration Committee, monitoring of Board ofCompany Auditors and Internal audit, whistle blower system, etc.
Continuously assign employees who have been involved in setting
up each technology and/or business area as officers

Initiatives for Sustainability and ESG

Enhancement of Human Capital
FY20-end

FY21-end

FY22-end

FY23-end

3,805

4,147

4,451

4,803

210

190

178

246

FY20

FY21

FY22

Turn over (IIJ)

3.6%

4.2%

Engagement

3.9

3.9

No. of employees(consolidated)

Of which, new graduateswith the new Mid-term Plan (from Jun. 2024)•

 Continuously evaluate each business project using IRR && economies of scale, rather than making individual
judgments for each business or service because NW
Domestic/foreign institutional investors (FY23: 5 overseas
infrastructure has many common costroadshows, 4 large conference, and one-on-one meetings),
 B/S management to control increasing the work-in-process
analysts, individual investors
 In response to increase in market capitalization, focusing on
and prepayment due to an increase in acquisition of large
new access to long-term and large-cap investors such as
multi-year projects, etc.
pension funds (FY23: approx. 60 contacts)
For the time being, continue to increase working capital as Expanding non-financial disclosure such as Integrated Report
the scale of SI expands
Portal, human capital disclosure, TCFD disclosure, etc.

5 outside independent directors; 42% of the total directors

 Introduction of a new officer compensation scheme linking•

Directors, and apply to the entire company

622•

Continuous enhancement of Governance

•

FY23

 Practice IR at the management level New structure from Jun. 2024

FY22
2.3 times494

 Calculate WACC every FY and report it to the Board of A business model that flexibly pursues overall optimization

2,000

•

Strength

Business Evaluation by IRR

 Number of IR dialogues (Total number of IR meetings per year)

FY20

BusinessModel
GrowthStrategy

About IIJ

(employee satisfaction(*))

Major KPIs

Target

FY23 result

FY23

FY30
85%

Matsue 100%

3.8%

4.6%

PUE of own DCs

3.9

3.9

Throughout FY30
Continue to belower than 1.4

Matue: 1.33
Shiroi: 1.36

Continue to be higher
than 3.5①3.9 ②4.0 ③ 4.3

OJT (On the Job Training) as the foundation of humanresource development, supplemented by training by job
level for each employee’s year & role, training bydepartment to acquire specialized knowledge & skills(*) Based on annual employee survey’s satisfaction questionnaires© Internet Initiative Japan Inc.

development is to support Internet in Japan through stable
operation and contribute to IT society
Usage of renewableenergy Strengthen & promote human resources development•

 The core of our social contribution and sustainable(Power Usage Effectiveness at DCs,
industry max at 1.4 or lower))

Self evaluation of
employees on ①Challenge,②Growth, ③Support fromsupervisors
Female manager ratio

50%

5 levels: 1(disagree), 2(rather disagree) 3(neither), 4 (rather agree), 5 (agree)

FY26: over 8%

6.5%(Brought FY27 target
forward by 1 year)(Achieved FY24 target
early

16

About IIJ

Extensive Service Lineup
Revenue category

FY23
revenue

YoY
growthUnit: ¥ (JPY) billion (bn)

Cost
Structure

About

Business situation, growth drivers and outlook

 IIJ’s core service since the establishment

 Matured market (hard to entry)

 Highly reliable dedicated connectivity services

IP

Internetconnectivity
services forenterprise

16.0(multi-carrier, redundancy, etc.)

+7.8%

44.73

WAN

(Wide Area Network)

28.37

Outsourcing

52.97

+4.3%

13.6

+21.9%

MVNE

10.5

+4.7%

 Provide data connectivity
 Provide mobile services for(Others) Broadband Internet services, etc.

Mobile

22.0

+4.5%

 Provide SIM with monthly data limits(voice as option)(Others) Broadband Internet services and email services for households, etc.

+2.7%

+13.2%

SI(including equipment
sales)

Cost
plus
49.90

+16.2%

Currently procuring mobile infrastructure to meet thepeak traffic of consumer whose traffic is concentrated
at commuting and lunch time

 Largest market share in consumer MVNO market
 Expect advanced IoT usages to emerge
 Stable market

 Directly purchasing WAN line (direct cost) Cross-selling element to make up comprehensive lineup

Various in-house developed Internet-related service line-ups

 Have been developing services based on Zero Trust concept

Security

+5.8%

•

30.9

+15.7%

 Managed security services, Security

Operation Center services and so many more

On-premise
Systems

41.3

+7.6%

PrivateCloud, etc.

30.6

+3.4%

 Operation and maintenance of constructedsystems Promote cloud shift with abundant, highly

reliable, value-added functions

 Design of an entire NW (location of NW equipment, needed bandwidth, etc.)
 Mainly NW integration projects such as server construction© Internet Initiative Japan Inc.

 Acquire enterprise demand by cross-selling services
 Continuous service development is important Expect security demand to be strong continuously

82%

 Expect great business opportunity in the mid-to-long term asinternal IT systems migrate to cloud Expect revenue to increase continuously along withaccumulation of construction projects
 Acquiring large-scale projects as Japanese enterprises’

private NW/systems are becoming more NW-based andrequiring various NW function (service integration model)

One timerevenueConstruction

71.92

mobile from the same infrastructure. Expect suchinfrastructure utilization to improve by gatheringvarious traffic such as IoT/enterprise/ consumers

 Legacy way of connecting multiple sites, intranet, closed NW(Others) NW monitoring, VPN services, public cloud services, and many more

Operation
andMaintenance Provide enterprise mobile, MVNE and consumer

for mainly IoT usages
other MVNOs

 Expect Internet traffic volume to continuously increase

Monthly recurring revenue 81%

25.29

Mostlysharedcost

Enterprise
mobileMobileNetwork services

Internetconnectivity
services for
consumers

24.2

 Very low turn rate, royal clients for 30 years

along with cloud penetration, SaaS, DX, etc.

(Revenue to increase as volume per client
increases)+11.1%
MobileIP Contracts are based on data bandwidth(Internet
Protocol)Strength

BusinessModel
GrowthStrategy17About IIJ

Monthly Recurring Revenue Accumulation% to the total revenue

Unit: ¥ (JPY) billion (bn)
% = Year over year change

Strength

FY19

FY20

FY21

FY22

FY23

168.4

178.3

188.2

206.9

223.3

(+5.0%)(+5.9%)(+5.5%)(+10.0%)(+7.9%)

82.4%

83.7%

83.1%

81.9%

80.9%

BusinessModel
GrowthStrategy

Revenues

49.9

ATM operation business
Systems construction

42.9

Systems operation and maintenance (excluding cloud)

35.4

Cloud services
Outsourcing services (excluding security and cloud)

32.0

Security services

25.5

WAN services
Internet connectivity services for enterprises (excluding mobile)
MobileInternet connectivity services for consumers (excluding mobile)

Monthly Recurring Revenue

•
•
•
•

31.8
28.1

41.3
38.4

34.2

33.4
32.4

26.2

28.7

13.3
16.4

14.5

15.4

18.4

22.2

27.0

25.0

26.4

27.6

14.0

15.8

17.6

19.0

20.5

46.1

47.5

40.7

42.3

46.1

23.6

Mobile revenue decreased year over year in FY21 due to ARPU decrease for consumers and change in unit charge for MVNE clients
Systems construction and systems operation & maintenance revenue increase for FY21 includes PTC revenue which became IIJ’s consolidated subsidiary from Apr. 2021
During FY20, ATM operation business was impacted by the COVID-19 pandemic due for example to the store closure and smaller number of users coming to stores
WAN revenue decreased year over year in FY19 and FY20 mainly due to certain large customers’ migration to our mobile services (cheaper than WAN to connect multiple sites)© Internet Initiative Japan Inc.

19.3
17.2
26.7

30.9
28.4

18

Gross Profit and Margin Growth
FY18

NW
services

FY19

About IIJ

Unit: ¥ (JPY) billion (bn)

FY20

FY21

+8.4

Gross
profit17.4

Grossmargin

+2.5

14.6%
•
•

+7.3

19.9

16.3%

27.2

21.4%

35.6

FY22

+2.5

27.8%

FY19

FY20

FY21

+2.8

+1.3

+1.0

•
•
•

+5.4

27.5%

43.5

28.7%

FY22

+3.7
Gross
profitGrossmarginFY23

NW services include Internet connectivity services for enterprises, Internet connectivity for consumers, Outsourcing, and WAN services. These are all monthly recurring revenue
FY22 NW service gross margin slightly decreased due to the decrease in mobile business margin, which is part of NW services, mainly because of an increase in marketing cost such as low price hand-set offering

FY18

SI

38.1

Strength

BusinessModel
GrowthStrategy

9.8

10.8

12.1

14.0%

13.8%

14.5%

14.9

15.7%

FY23

+0.4

18.6

16.7%

19.0

15.6%

SI includes systems construction which is one-time revenue and systems construction and maintenance which is monthly recurring revenue
FY21 SI includes PTC revenue which became IIJ’s consolidated subsidiary from Apr. 2021
FY23 gross margin was weak mainly due to the small construction revenue, an allocation of resources such as engineers to prospective orders of large-scale projects, and a low systems operation andmaintenance revenue growth (a scheduled termination of a particular project)© Internet Initiative Japan Inc.

19

NW Services (monthly recurring revenue) as Profit Growth Driver - Economies of Scale -About IIJ
Strength

BusinessModel
GrowthStrategy

Profit Model of NW Services

Revenue

Connectivity services
IP (Internet Protocol) service•••

Details in P.28

Contracted based on bandwidth
Contract period: 1 year, generally auto-renew
Low churn rate, royal clients for 30 years

WAN (Wide Area NW) service
Mobile service

Security services

Various in-house developed services

DDoS protection, Firewall, SOC, etc.

Remote access, DNS, monitoring, etc.

•

Contracted based on number of accounts•

Contracted based on number of accounts•

Contract period: 1 year, generally auto-renew•

Contract period: 1 year, generally auto-renew•

Cross-selling to IP service clients•

Cross-selling to IP clients

Details in P.33 - 36

Details in P.29 - 32

Details in P.27

Cost

Mainly common and shared cost to operate NW
Leasing cost

Depreciation & Amortization

Personnel costfor Internet backbone, WAN lines andleased DCs, etc.

cost for NW equipment, etc.

for engineers(service development & operation, etc.)

Outsourcing cost(mobile-related, outsourcing personnel,
maintenance, etc.)

Historical track record of NW services gross margin
FY18

FY19

FY20

FY21

FY22

FY23

14.6%

16.3%

21.4%

27.8%

27.5% *

28.7%

Intend to enhance NW services revenue accumulation by Service Integration strategy••

FY22 gross margin slightly decreased due to the decrease in mobile business margin, which is part of NW services, mainly because of an increase in marketing cost such as low price hand-set offering
Among NW service revenues, WAN, mobile and part of security services have variable cost which fluctuates depending on revenue© Internet Initiative Japan Inc.

20

About IIJ

Capex and Business Developments
FY16

FY17
157.8

Revenues
OperatingmarginOperatingprofitFY18
176.2

Unit: ¥ (JPY) billion (bn)

FY19
192.4

FY20
204.5

FY21
213.0

Stronger demands forenterprise network services

FY22
226.3

FY23
252.7

276.1

3.3%

3.8%

3.1%

4.0%

6.7%

10.4%

10.8%

10.5%

5.1

6.8

6.0

8.2

14.2

23.5

27.2

29.0

Large CAPEX increase due toaggressive business investment

CAPEX
NW services, etc.
Cloud
Shiroi DC
SI, others

CAPEX & its depreciation
almost same volume

16.5

20.7

15.1

15.2

15.2

16.1

20.8

22.5

12.6
3.6
0.3

9.4
7.9
1.2
2.3

9.4
1.9
2.1
1.7

9.6
2.6
2.0
1.0

8.8
2.8
1.5
2.0

9.1
2.3
1.5
3.2

10.0
2.0
5.4
3.4

13.2

15.6

1.5
5.5
2.3

Cost stabilizing

CAPEX-related
depreciation andamortization

10.9

12.1

13.9

14.4

14.5

15.1

15.3

Number of
employees

3,104

3,203

3,353

3,583

3,805

4,147

4,451

4,803
nd

Various Network Services Asset••

Strength

BusinessModel
GrowthStrategy

Launched Omnibus

Enhanced SMX

Opened SOC

Launched Secure Endpoint(Sep. 2015)(Oct. 2016)(Mar. 2017)(Oct. 2018)

Shiroi DC 2 site
started operation

Enhanced SWG

Opened Security
training school Launched CDP (July 2023)(Dec. 2020)(Jan. 2022)(Dec. 2022)

Launched GIO P2

Launched UOM

Launched full-MVNO

Opened Shiroi DC

Launched GIO P2 Gen.2(Oct. 2015)(Apr. 2017)(Mar. 2018)(May 2019)(Oct. 2021)

Added SWG Sandbox

DDoS service global

Launched Flex Mobility(Feb. 2016)(Jan. 2017)(Dec. 2018)

Launched private connectivity with AWS

Enhanced Omnibus(Sep. 2016)(Oct. 2018)

Launched enterpriseeSIM (Apr. 2021)

Launched Smart HUB(June 2022)

Enhanced SOC

Launched ISA(May 2021)(Sep.2022)

FY16: US-GAAP, from FY17: IFRSCAPEX-related depreciation and amortization is calculated by excluding depreciation and amortization of assets that do not have the nature of capital investment, such as right-of-use assets related to operating leases, small-amount equipment and customer relationship© Internet Initiative Japan Inc.

21

Service & Solution Development Capability

About IIJ
Strength

BusinessModel
GrowthStrategy

Initiate the market by continuously developing innovative
various NW-related services & solution in-house© Internet Initiative Japan Inc.

22

Excellent Customer Base (Number of IIJ Group’s clients: approx. 15,000 as of March 31, 2024)

About IIJ
Strength

BusinessModel
GrowthStrategy Through reliable operation, continuous use of Internet connectivity services since the inception of IIJ
 Our reliable infrastructure operation and cross-sell strategy have led to low churn rate

Cover Most of Top Revenue Companies

Client Distribution by Industry
FY20

•
•

Client Distribution by Revenue Volume

FY23

FY20

Top ten firms in each industry taken from annual revenues are selected by IIJ based on the Yahoo! Japan Finance website (finance/sales/whole market/daily)
The service penetration and the revenue distributions are based on IIJ’s FY23
© Internet Initiative Japan Inc.

FY23

23

About IIJ

Competitive Advantages

Strength

BusinessModel
GrowthStrategy

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 organizations• Has NW services asset and development capability (SIers do not)• Focuses on blue-chip companies’ IT needs with SI• Focuses on Internet-related open type systems

Telecom
Carriers
Legacy NW Services
i.e. telephoneSIers
IP services
Security services
Mobile services

NW Integration
Systems Operation
Private Cloud

Legacy Systems
i.e. mainframe

IIJ deals with newer systems and growing IT market(Not involved in heavy and legacy systems)© Internet Initiative Japan Inc.

24

About IIJ

Enhancement of Human CapitalStrength Basic policy: continuously hire and train new graduates

Breakdown of Employees

Turnover rate

 New graduates who studied NW are attracted to IIJ who is the first full-scale

ISP in Japan
 Increasing the size and improving the quality of recruitment and

FY19

FY20

FY21

FY22

FY23

4.6%

3.6%

4.2%

3.8%

4.6%

(As of Mar. 31, 2024)

Admin.
12%

human capital development•

 Programs to promote autonomous career development by having working

experiences at other departments and/or working at overseas subsidiaries
 IIJ provides a wide range of experience which leads to high employee•

satisfaction. Corporate culture of adopting new technology, aggressively
engaging in new service development, etc.

Total revenue
Year over year

Total number of
employees

Number of outsourcing
personnel

Number of new graduates••

Engineers70%

The industry average turnover rate of approx.
10% is announced by the Ministry of Health,
Labor, and Welfare•

Employee Age Composition

FY19

FY20

FY21

FY22

FY23

¥204.5 bn¥213.0 bn¥226.3 bn¥252.7 bn¥276.1 bn

+6.3%

+4.2%

+6.3%

+11.7%+9.2%

FY19-end

FY20-end

FY21-end

FY22-end

FY23-end

Female Manager Ratio

0

50

100

150

3,805

4,147

4,451

+6.2%

+9.0% *

+7.3%

+7.9%

1,123

1,270

1,319

1,385

1,521

Apr. 2020

Apr. 2021

Apr. 2022

Apr. 2023

Apr. 2024

210

190

178

246

307

Number of outsourcing personnel is for SI
We added 62 personnel through PTC consolidation (Apr. 2021)

FY21

FY22

FY23

FY24

4.6%

5.5%

5.7%

6.3%

7.5%

55

4,803

+6.9%

FY20

59

•

The female manager ratio is IIJ (nonconsolidated basis)•

Brought FY27 target forward by 1 year as IIJ
achieved target of over 6% a year earlier•

IIJ targets over 8% or more in FY26

50

3,583

Breakdown of new graduates is almost
identical(As of Apr. 1, 2024, IIJ)

45

Year over year

Sales
18%

The turnover rate of IIJ (non-consolidated
basis) is calculated by dividing leavers for the
fiscal year by the number of full-time
employees at the beginning of that fiscal year.

 Expect further business expansion by seeking M&A opportunities

Revenue Growth and Human Capital Enhancement

BusinessModel
GrowthStrategy

40

35

30

25
22

© Internet Initiative Japan Inc.

For more information onhuman capital, please visit
https://www.iij.ad.jp/en/ir/integrated-report/human_capital/

25Service/Business Function
Comprehensive NW system solution with NW services and SI

P. 27

Enterprise NW Services

P. 28

Security Services

P. 29 – 32

Mobile Services

P. 33 – 36

IoT Services

P. 37 – 38

Systems Integration (SI)P. 39

Cloud Services

P. 40 – 41

Data Centers (DC)P. 42

© Internet Initiative Japan Inc.

26

Comprehensive NW system solution with NW services & SI

Service/Business
Function By combining various in-house developed NW services with SI to provide comprehensive NW system solution

SI to meet specific requirements cannot be covered by NW services
NW services (in-house developed)
Secure Web
Gateway

Secure MX

ManagedWAF

IIJ ID

File ServerManaged DB

C-SOC
PrivateAccess

UnifiedOperation
Management

Flex Mobility

VirtualDesktopCloud
Exchange

Smart HUB

Cloud
Proxy

Cloud Data
Platform

Cloud Connectivity

CLOUD

Internet

INTERNET

IIJ
Data Center

ManagedFirewallManaged IPS

MobilePrivate GW

SimpleBackupOCI

Private Backbone
Internet
AccessContent
Acceleration

DNS Platform

Internet

SASE

Directory

Cloud
Web Hosting

MobileNW

Existing
customer WAN

Endpoint
Security
Branch Branch Data
office office Center

Private WAN
WAN

ClosedNW

IIJ Mobile

Outside of office© Internet Initiative Japan Inc.

Data
CenterVPN

NTT
FLET’S
network

RAS

VPN
equipment

Branch Branch Branch Branch Outside of office
office office office office27

Service/Business
FunctionEnterprise NW Services
IIJ’s enterprise NW services’ business model:
Cost doesn’t have to increase at the same pace as the revenue: economies of scale
IP service (Internet Protocol)

Business model IP Service is a bandwidth guaranteed dedicated Internet connectivity service forenterprises
 Service contracts are based on bandwidth. Minimum contract period is 1 year The revenue is 100% recognized in Internet connectivity services (Enterprise) Very low churn rate. Contracts are renewed every year, generally speaking

 As one of the largest independent ISPs, IIJ has strong burgeoning power
 IIJ expands its Internet backbone continuously

facility Difficult to newly enter the market because one will need customer base and engineers

to operate Internet

 NW operation cost which is many depreciation amortization costs for NW equipment

is stable due to the technological innovation of servers and other NW equipment

IIJ’s IP services clients include general Japanese enterprise as well as NW operatorssuch as consumer ISPs and cable TV operators

IP Service Revenue (unit: ¥ billion) IIJ purchases fiber from carriers

 IIJ owns NW equipment that are needed for Internet backbone and NW service

 IIJ has very high and stable market share among Japanese blue-chip

•

Cost

•

In other words, ¥1 million server today is higher spec compared to the ¥1 million
server a year ago.

Revenue Enterprise NW service revenues such as IP services and Outsourcing services

are to continuously increase while their costs remain relatively stable By that, IIJ can enjoy an economy of scale with strong revenue accumulation

which leads to gross profit expansion
 In other words, the costs for enterprise NW services do not have to increase at

the same pace the revenue growth© Internet Initiative Japan Inc.

28

Service/Business
Function

Security Business (1) Provide a wide range of security services over network
 Information analysis platform utilizing information and expertise only available to ISPs

Security services for internal systems

Security services for external systems

Internet

Mail security
Spam mails, anti-virus, audit, archives,countermeasures against erroneoustransmission, Microsoft 365, etc.
Enterprises’ NW

Internet
boundaries

Internal NW

IIJ Backbone

Managed firewall
Per user policy (access, application),
detect anomaly, monitor 24/365

Targeted attacks security

DNS operation & management
Registration, maintenance, and management oforiginal domain, prevent fake DNS responses,
protect of DNS reflective attack, etc.
DMZManaged IPS/IDS
Detect & interrupt attacks against
NW/OS/middleware, monitor 24/365

Detect malware including “Zero-Day threat”,
Sandbox, communication interruption for C&C
server, etc.
SASE

endpoint•

DDoS Protection
Detect & prevent DDoS attacks, including
those take place IIJ backbone

Security Operation Center (SOC)
Security consulting/training

Cloud

Web access security
Web filtering, anti-virus, web isolation, log
analysis, access control on user basis, etc.

Managed WAF
Interrupt attacks against Web application suchas SQL injection and XSS

Endpoint security

Anti-virus, prevention of taking out data, dataencryption, management of IT assets, detectionof unauthorized PCs, etc.

Public servers

SASE (Secure Access Service Edge) is a concept to shift controls of NW and security on the route to Cloud services to enable secure access from any points, instead of the conventional centralized management throughheadquarters or data centers.
© Internet Initiative Japan Inc.

29

Service/Business
Function

Security Business (2) Many initiatives taken by IIJ for security

1994

Started providing firewall services (first in Japan)

Invited and trained police officers to our SOC
Apr. 2017 Hyogo prefecture (1 year)
Oct. 2018 Shimane prefecture (3 months)
July 2019 Hokkaido prefecture (3 months)

1999

Started providing fully-managed firewall services (first in Japan)

2004

Started providing spam mail filtering (first in Japan)

2005

Added sender domain authorization technology/spam mail protection (first in Japan), Started providing IIJ DDoS Protection Services

2006

Started providing IIJ Managed IPS Service and IIJ Secure MX Service (SMX)

2009

Started providing IIJ Secure Web Gateway Service (SWG)

2015

Added sandbox option (function to detect behaviors as a countermeasure against targeted attacks)

2016

Constructed information analysis platform (constructed platform to analyze log data within our backbone to realize early detection and countermeasures against increasingly sophisticated threats)

2017

Started providing DDoS Protection Service (terabit-compatible), Opened new Security Operation Center (SOC) and started providing
C-SOC Service

2018

IIJ Security engineers provided trainings at an international security conference “Black Hat USA 2018” (first as Japanese)

2018

Started providing IIJ Secure Endpoint Security Service

2019

Started providing IIJ Managed WAF Security Service (public web system vulnerability countermeasures)

2021

Started providing IIJ CSPM Solution (Cloud Security Posture Management which means cloud security management)

2021

Opened IIJ Security Training School (launched business for IT division personnel assigned for security to become specialists)

2022

Started providing IIJ Secure Access Service (in-house developed SASE service)2023

IIJ Security Business division director was appointed as Kanto Regional Police Bureau’s cyber security advisor

Certification of multiple international standards
Feb.2020 Mail, Web Security Services
Apr. 2020 IIJ Managed IPS/IDS Services
Mar. 2021 DDoS Protection Service, IIJ Managed WAF

Continued afterwards© Internet Initiative Japan Inc.

Training
programs by
experienced
lecturers andactive SOC
analysts30

Service/Business
Function

Security Business (3)IIJ Secure MX Service (SMX)IIJ DDoS (Distributed Denial of Service) Protection Service

 Cloud-based integrated mail security service (launched in Sep. 2006)
 Differentiating by in-house developed filtering, providing support in Japanese,

update, etc.
 Minimize mail threats with multi filtering, able to store unlimited mail data in DCs

located in Japan, prevent accidental transmission/information leak with the system
 Competitors withdrawing from the market
Share

Cloud based mail security

SMX contracted accounts

Cloud based mailsecurity market

Sep. 2023

2.84 million

Share No.1

Sep. 2022

2.83 million＜Source＞ITR “ITR Market View:
Cyber Security counter market
2023”

Sep. 2021

2.65 million

Over 9 million accounts if include OEM

 Comprehensive service to protect enterprise NW system from DDoS attacks(launched in Oct. 2005)
 Service model requires NW backbone to offer
 Realize reliable web services by avoiding overloaded NW and server triggered byhuge traffic 24/365 operation by security engineers who have expertise obtained through ISP

business
 Automatically detect and prevent DDoS attacks
 Internet access line are also within service coverage Global coverage to prevent terabit level large-scale attack (Jan. 2017)

 High penetration rate toward large financial institutions

IIJ Secure Web Gateway Service (SWG)

IIJ C-SOC (Security Operation Center) Service

 Cloud-based integrated web security service (launched in Mar. 2009) Differentiating by in-housed developed engines, etc. to block and isolate web

 Comprehensive security incident response service provided by IIJ security

functions, etc.
 SWG clients include Sumitomo Life Insurance,
Fuji TV, Mitsubishi Chemical, Meiji Gakuin
University, and Morinaga

 Operational SOC service unique to ISPs: visualize invisible threats by applying

10 consecutive years

SWG contracted accounts
Mar. 2023

1.24 million

Sep. 2022

1.23 million

Sep. 2021

1.19 million

Sep. 2020

1.12 million

engineers
IIJ’s unique intelligence, execute initial response, etc.
 Individual service operation and monitoring including other managed services
 Relatively expensive service
Information resource of IIJ

Coverage comparison＜Competitors＞＜IIJ＞
Trouble shooting
Hardware exchange
Configuration change

SaaS Web gateway security＜Source＞ITR “ITR Market View: Cyber Security counter market 2023”

Software version up
Log collection server
Router construction© Internet Initiative Japan Inc.

Log collection server
Router construction

Security equipmentlog

170 billion lines
per month

Mail access log

3.8 billion lines
per month

Web access log

90 billion lines per
month

Monitoring node

48 thousand

Number researchsites by web crawler

Over 400
thousand per day

31Security Business (4)Unit: ¥ (JPY) billion

Security Service (monthly recurring revenue) Revenue strongly increasing along with continuous strong demands

 Total security business volume also growing
 Security projects outside the scope of IIJ security services are handled through SI

Total security businessvolume (Service＋SI)

FY19
19.18

FY20
21.47

FY21
25.44

FY22
31.25

FY23
34.81

Mail Security

Web GW Full outsource of mail system,
countermeasures for spam mail, etc.
 IIJ Secure MX Service (SMX)• Cloud-based integrated mail security service(launched in Sep. 2006)• Differentiating by in-house developed multifiltering, providing support in Japanese andupgrades• Minimize mail threats with multi-filtering, able
to store unlimited mail date in DCs located inJapan, prevent accidental
transmission/information leak with the system Full outsource of web security, URL filtering, IIJ Secure Web GW Service (SWG)• Cloud-based integrated web security service(launched in Mar. 2009)• Differentiating by in-housed developed engines
etc. to block and isolate web functions, etc.

NW Security

 IIJ DDoS Protection Service• Comprehensive service to protect enterpriseGreater opportunity to integrate it as part of large NW renewal project IIJ’s competitive advantages:
network system from DDoS attacks (launched• Collaborate with various in-house devolved managed type gateway security services
in Oct. 2005)• Wide monitoring scope including EDR & SASE
• Service model unique to NW operators• Apply abundant traffic log data to develop IIJ’s unique intelligence as well as detect threat• Realize reliable web services by avoiding
 Continued to enhance service line-ups and functions
overloaded network and server triggered by First in the Asia-Pacific to be certified as Palo Alto Networks Partner for SP Interconnect,
huge traffic, global coverage to prevent terabit
providing Internet connection between Prisma Access and IIJ Backbone (Apr. 2024)
level large-scale attack (launched in Jan.
 Expanded functions of “IIJ Managed WAF Service” by adding DDoS protection function in2017)
Oct. 2023
 Launched “IIJ leaked account detection solution” in Nov. 2023
 IPS/IDS, WAF, etc.
 Launched “IIJ Attack Surface Assessment Solution” in Nov. 2023
 Strong demand for “IIJ C-SOC Service”• Security Service Revenue (recurring) is 100% recognized in Outsourcing• SASE (Secure Access Service Edge) is a concept to shift controls of NW and security on the route to Cloud

Service/Business
FunctionFW (Firewall) Outsource of firewall operation, detection
services to enable secure access from any points, instead of the conventional centralized management
through headquarters or data centers. This concept is gaining popularity along with Cloud migration ofsystem for anomaly, etc. (launched in Oct.
enterprise operation systems, prevalence of flexible workstyle including teleworking.
2006)• SOC (Security Operation Center): organization providing advices and actions regarding cyber attacks byconstantly monitoring log data such as NW and device to detect and analyze cyber attacks© Internet Initiative Japan Inc.

SASE

 Operation of Prisma Access, Zscaler etc.
• Highly regarded as a top-class SASE
implementation & operation vendor• From a vendor neutral position, provide all-inone support ranging from solution selection,
design, construction, implementation tooperation IIJ Secure Access Service “ISA”• In-house developed SASE service (launchedin Sep. 2022)• Differentiating by high compatibility with other
IIJ security services, small start & low-pricerange• Continue to enhance the service, in the middleof setting up
SOC and others

 IIJ C-SOC Service• Launched in Oct. 2018
• Operational SOC service unique to ISPs:
visualize invisible threats by applying IIJ’s
unique intelligence, execute initial response as
well as notification etc.
• Continuously expanding functions including
recently launched “Premium” in May 2021
which offers primary responses against attacks
 Endpoint Security, etc.

32

Unit: ¥ (JPY) billion (bn)%, YoY = Year over year comparison
QoQ = Quarter over quarter comparison

Mobile Business (1)Mobile Subscription (Subs.)
2,249 2,350

1,457

1,494

1,685 1,810

1,951

2,039

 Enterprise mobile

1,197 1,206

1,203 1,222 1,239 1,274

1,032 1,039 1,086 1,120

1,115 1,140 1,147 1,186

1,126 1,178

 FY23 revenue: ¥13.63 bn (+¥2.45 bn YoY) FY23-end subs.: 2,350 thousand (+101 thousand QoQ)

Mobile Revenue
FY22: 42.27 (+3.8%)

Accumulate enterprise IoT traffic by leveraging the blue-chip client base,various NW services & SI function – higher utilization of the mobile
infrastructure Consumer subscription contributing to expand the infrastructure

Subscriptions (Subs.)(unit: thousand)Enterprise mobile
IIJmioMVNE

Service/Business
Function•

Existing transaction such as connecting NW cameras, GPS devices, and on-board unit–related
devices are becoming larger and continuously acquiring new orders

 MVNE

FY23: 46.14 (+9.1%)

10.37 10.63 10.49 10.79 10.94 11.50 11.70 12.00

 FY23 revenue: ¥10.55 bn (+¥0.48 bn YoY) FY23-end subs.: 1,186 thousand (+38 thousand QoQ)
 3Q23-end MVNE clients: 192 clients (+11 clients YoY)

Revenues(unit: ¥ bn)

Enterprise mobile
MVNE
IIJmio

2.63

2.67

2.85

3.03

3.15

3.44

3.46

2.43

2.41

2.56

2.67

2.63

2.62

2.62

5.31

5.55

5.08

3.59

•

2.67

 FY23 revenue: ¥21.96 bn (+¥0.94 bn YoY)
•

5.08

5.17

5.44

Cable TV operators (94 operators), prominent retailer, etc.

 IIJmio

5.61

5.74

Started offering large data volume plans from Mar. 2024, maximum of 50GB

 FY23-end subs.: 1,274 thousand (+36 thousand QoQ)•

Of which, the old plan’s subs. were 218 thousand

GigaPlans
1Q22
•
•

2Q22

3Q22

4Q22

1Q23

2Q23

3Q23

4Q23

4Q22 enterprise mobile revenue includes approx. ¥0.1 bn of lump-up revenue related to a large mobile
project which consists of several phases
Enterprise mobile subs.: in 4Q22, the subs. consistently increased by 124 thousand QoQ mainly due toadditional line orders from the existing project for a taxi payment devices and increased demands fromforeigners visiting Japan. In 3Q22, the subs. increased by 192 thousand QoQ as the existing project for a
GPS tracker for children security largely increased by approx. 60 thousand(unit: thousand)Subs.

© Internet Initiative Japan Inc.

1Q22-end 2Q22-end 3Q22-end 4Q22-end 1Q23-end 2Q23-end 3Q23-end 4Q23-end
757

837

878

908

928

963

995

1,041

33

Service/Business
Function

Mobile Business (2)IIJ launched GigaPlans
from Apr. 2021.

Revenues (unit: ¥ billion)

IIJmio (consumer mobile)
MVNE (providing mobile services to other MVNOs)Enterprise mobile (direct sales)

IIJ started providing LTE services toboth enterprises and consumers fromFeb. 2012

IIJ started providing 3G mobile services
by becoming MVNO in Jan. 2008

FY09

FY10

FY23
¥10.55 bn

IIJ became full-MVNO in
2018. Expect to expand
enterprise IoT business

IIJ became MVNE by providing its
mobile services to other MVNOs

Providing mobile services to enterprises
for their laptops PC’ data communicationand Machine to Machine (M2M) usages

FY08

FY23
¥21.96 bn

Rapid expansion of
consumer
inexpensive SIM
market in Japan

FY11

FY12

FY13

FY14

FY15

FY16

FY17

Consumer inexpensive SIM market in Japan

Dec. 31, 2022

Dec. 31, 2013

Dec. 31, 2022

Dec. 31, 2023

SIM subscription

4%

•

1%

13.8%

Source: the Ministry of Internal Affairs and Communications (MIC)

9.4%

FY19

FY20

FY21

FY22

FY23

SIM type MVNO market share in Japan

Total mobile subscription
MVNO subscription

FY18

FY23
¥13.63 bn

15.2%

9.7%

1st

June 30, 2023

Dec. 31, 2023

19.7% IIJ

19.8% IIJ

20.0% IIJ

2nd NTT Resonant

11.1% NTT Resonant

11.9% NTT Resonant

12.2% NTT Docomo(*) 10.4%

3rd Optage

9.1% Optage

9.0% Optage

9.0% Optage

8.7%

4th

Fujitsu

5.6% Fujitsu

5.6% Fujitsu

5.6% Fujitsu

5.7%

5th

Biglobe4.9% Aeon Retail4.8% Aeon Retail4.7% Aeon Retail

4.7%

•

IIJ

Mar. 31, 2023

21.3%

Source: the Ministry of Internal Affairs and Communications(*) NTT Docomo’s figures as of Dec. 31, 2023 was formerly NTT Resonant’s one© Internet Initiative Japan Inc.

34

Service/Business
Function

Mobile Business (3) Most of current enterprise mobile solution are simple usage such as connecting NW and surveillancecameras, etc.
•

Seeing some advanced usage such as Factory IoT for Toyota Motor Hokkaido https://www.iij.ad.jp/en/news/pressrelease/2020/0803.html
Accumulating various enterprise mobile solutions© Internet Initiative Japan Inc.

35

Service/Business
Function

Mobile Business (4)IIJ’s mobile business model

Growth Strategy
 Aim to improve mobile infrastructure utilization by gathering IoT/M2M &various consumer traffic

 Revenue
 Consumer mobile revenue is calculated by multiplying subscription by ARPU

Headsets sales are also recognized as consumer revenue. IIJ is recognized as MVNO
with good lineups of smartphone Enterprise mobile revenue is to grow with IoT/M2M traffic. Because we charge by how

much data is needed and an IoT device does not require much data, generally
speaking, per device revenue tends to be quite small Cost All of IIJ’s mobile services are provided from the same mobile infrastructure Purchasing mobile infrastructure on bandwidth-base from mobile carriers (mainly from Currently buying mobile capacity to meet the peak hours which are concentrated oncommuting hours and lunch time Currently, IIJ is increasing mobile infrastructure to meet the peak ofconsumer traffic which is concentrated around commuting hours and lunch
time. The overall mobile infrastructure utilization of other hours is relatively
low By gathering various type of mobile traffics such as enterprise IoT traffic
which is not concentrated at certain hours, we could aim for higher mobile
infrastructure utilization

Docomo, some from KDDI). Such purchasing cost is recorded as “outsourcing” in NW
services’ costs
 In order to provide voice services, we purchase per usage base (no economy of scale

merit for voice services)

2. Sales partners such as BICCAMERA INC. one of the largest retailers in Japan IIJ pays sales commission expenses to sales partners

 Sales commission expenses (SG&As) to sales partners such as BicCamera

3. MVNE “IIJ Mobile Platform Service”

 Profit IIJ provides mobile services to other MVNOs

 Profitability to increase by improving infrastructure utilization through gathering As of Mar. 31, 2024, IIJ had 192 MVNE clientsvarious consumer & enterprise traffic•

Traffic patterns of consumers and enterprises are different
 Consumers’ peak time is commuting hours and lunch break. Other than these hours, ourAmong them, 94 MVNE clients are Japanese cable TV operators who already havedirect relationship with consumers• Largest MVNE client is one of the largest Japanese retailers

consumers tend to access Internet through their home and/or office Wi-Fi. On the other
hand, there is no clear peak time for enterprise. Traffic is generated through mobile
dongle and/or IoT type usages which run 24/7

Number of MVNE Clients

300
200

192

Partnership with cable TV
association (Oct. 2014)

as of FY23‐end

100© Internet Initiative Japan Inc.

3Q23

1Q23

3Q22

1Q22

3Q21

1Q21

3Q20

1Q20

3Q19

1Q19

3Q18

1Q18

3Q17

1Q17

3Q16

1Q16

3Q15

1Q15

3Q14

1Q14

1Q13

3Q12

0
1Q12

•

IIJ’s sales channel for consumers
1. Direct sales through IIJ’s website

3Q13

•

36

Service/Business
Function

IoT Business (1)Combining IIJ’s existing service lineups and SI to build IoT systems
IIJ IoT
Specific Fields andBusinesses

Cloud Services

Industry(Manufacturing)

Agriculture

WISE-PaaS IIJ Japan-East(PaaS for Industrial IoT)

Home / Care
Monitoring

IIJ Water Management
Platform

EnergyNecolico HomePlus

IIJ IoT Service (IoT Platform)(Device / NW Management and Data Utilization Shared IoT Infrastructure)

Gateway

Local 5G

LTE / LTE-M(Full-MVNO)(Full-MVNO)

LoRaWAN®

WAN/VPN

Security

Secure (Closed) Network

NW Services

Unique Device AgentIoT Gateway Equipment / Industrial PCs / LoRaWAN® Gateway Equipment

Edge Equipment /Facilities / Sensors© Internet Initiative Japan Inc.

37

Service/Business
Function

IoT Business (2)IIJ’s IoT projects

Advanced IoT usage: factory IoT
 IIJ provides IoT system for Toyota Motor Hokkaido

Industrial
machinery
manufacturers

Shift from reactive post-sales maintenance model toproactive field services(making predictions based on data)

Car accessory
manufacturers

Expansion of service businesses by acquiring data throughthe networking of products and establishing software
technology development organizations to develop services
that use that data

Measuring
instrument
manufacturers

Expansion of services to streamline & improve the accuracyof recording tasks by going beyond just "measuring" things& providing linking data customers measure with theirbusiness systems

Automotive
manufacturers

Improved efficiency of equipment management to coverpersonnel shortages, analyzing the expertise of skilledworkers in maintaining operating capacity and implementing
traceability to ensure quality

Trading companies(agriculture)

Shift from the sales of pesticides & chemical fertilizers to
the provision of pesticide spraying technologies that reduce
the amount used, & the development of cutting-edge
agricultural technologies

 Providing a one-stop solution by offering mobile and Cloud services from datacollection via closed mobile network to creation of a cloud platform for visualizing
and analyzing the collected data.

© Internet Initiative Japan Inc.

38

Service/Business
Function

Systems Integration (SI) Started offering SI to fully meet Japanese enterprises’ IT demands which are quite specific & difficult tomeet solely by NW services
 Seeing greater proposal opportunities to replace legacy private NW and systems which often require

customization and Service Integration
SI revenue growth
Unit: ¥ (JPY) billion

pure operation &maintenace(monthly recurring)
consturction(onetime)

FY19

FY20

+16.9%+16.3%

+4.1%

57.5

FY21

59.8

25.5

28.1

32.0

31.8

69.6
34.2

FY22
+12.1%

81.3
38.4

FY23

91.2

 A quotation of construction revenue, a onetime revenue, is prepared based on

cost; an increase in cost can be reflected Pure operation and maintenance which is calculated by deducting private cloudservice revenues from systems operation and maintenance revenue is monthly
recurring revenues, for constructed systems

41.3
•

35.4

42.9

49.9

FY20 construction revenue decreased slightly year over year mainly because of the Pandemic recession.
Because construction revenue is one time revenue, it is easily affected by the economic environment andhighly impacted by IT investment appetite of Japanese enterprises.

IIJ’s SI projects are becoming larger and more complex
Conventional contracts

Current trend

Revenue Size

Few million to tens of millions (JPY)Few hundreds of millions (JPY)Type

NW integration, server enhancement and other Internet related systems
construction projects

Complete replacement of current enterprise NW/system

Term

Construction revenue is usually booked after 3 to 6 months from order
received• Construction revenue is sometimes booked a year later from order
received• Greater time to book order received as projects becoming more complex
and larger

Cost structure

Mainly hardware

Larger number of system engineers and outsourcing personnel are needed© Internet Initiative Japan Inc.

39

Cloud Business (1)Unit: ¥ (JPY) billion

Service/Business
Function

Majority of enterprise systems are still operating on-premise

Cloud service revenue (monthly recurring) Revenue continued to accumulate along with the constant cloud shift

Location of servers working and/or deployedMore than 50% on on‐premise

2023

More than 50% on cloudMore than 50% on others

29%

70%

2022

18%

81%

2021

13%

85%

Source: Internet Initiative Japan “Nationwide survey on IT department”
2021 N=737, 2022 N＝598, 2023 N=214•

 Continued to accumulate cloud migration projects• Case 1: Upon DC contract renewal, a client started considering cloud migrationof the current systems

FY23 Cloud Service revenue recognition: 91.7% in systems operation, 8.3% in Outsourcing

Private cloud IIJ GIO Infrastructure P2 Gen.2• Next generation IaaS enabling easy
Cloud migration from on-premise(launched in Oct. 2021)• Highly transitional VMware base hosted
private Cloud IIJ Unified Operation Management
Service (UOM)• SaaS to improve efficiency of multicloud system operation work (launchedin Apr. 2017)• Management and operation cover wide
range from cloud to on-premise,
Improve efficiency with automatedincident management etc.
 Multi-cloud, etc.

Public cloud IIJ GIO Infrastructure P2.Gen2, Migration Solution, and UOM combined to achieveeasy migration to cloud with almost no changes to the current configuration. IIJ wasin charge of test and production migration work, continued use of existing IP
addresses, integrated cloud and NW maintenance, etc.

 Low-cost servers with pay-as-you-go
pricing, etc.
Raptor• In-house developed SaaS base FX(Foreign Exchange) platform services foronline brokers, launched in Nov. 2011
 Providing services to Hirose Tsusho, Line
Securities, au Kabucom Securities, Nomura
Securities, Sony Bank, SMBC Nikko
Securities, Matsui Securities etc.
 New service platform (from Sep. 2023)•

With cloud-native design, greater
scalability, performance, and security
features than the previous platform
OthersCase 2: Upon the end of service of virtual desktop systems, a client started
considering cloud migration
 On-premise environment often causes long waits for login and other usability

problems, but IIJ provides multiple IIJ services including IP and security to create
IIJ Virtual
DesktopService/an easy and secure
cloud
environment(system image below) Security operation

Web security
Web access

Microsoft typeclosed NW

Internet access

Operation access

Monitoring

Managed Firewall

IIJ GIO Infrastructure
Distribute access

IIJ Cloud Proxy Service

 Cloud services provided through overseas
subsidiaries, etc.
© Internet Initiative Japan Inc.

IIJ UOM

BackupIIJ Simple Backup Service

Client’sDC

40

Service/Business
Function

Cloud Business (2) Cloud services as one of the cross-selling elements
 Promoting cloud shift of the current blue-chip Japanese enterprises

IIJ’s competitive advantages

Cloud market in Japan Blue-chip client base
 Cloud as new business opportunity

 Slow cloud shift in Japan Japanese enterprises are slowly but surely using more cloud services, yet most of Because blue-chip companies’ internal systems have been covered by legacy systemsuch usages are primitive ones: using cloud services for web and/file servers, etc.

integrators (SIers), it is a new business opportunity for IIJ once such systems migrate
toward Cloud. IIJ has not dealt with legacy internal enterprise systems

 Japanese blue-chip’ internal systems are quite large and complicated - can’t migrate Various NW service line-ups, various ways to access cloud systems
 Competitors

all at once Japanese enterprises consider whether to re-invest their on-premise systems or AWS (Amazon) & Azure (Microsoft): Strong scale merit. Focus on public cloud. Not sostrong about meeting individual systems needs

migrate to Cloud services when their existing systems approach to the end of life
• Average cycle of IT system: 4-5 years Some advanced usages

Because start-ups and SMEs do not have to worry about existing systems, theytend to use cloud services much more and much faster compared to large blue-chipcompanies who have large and complex existing systems
 Legacy SIers• Nippon Express (one of the largest logistics companies): replaced on-premise criticalbusiness operation system to IIJ Cloud (3,500 servers, 2PB storage), etc.

IIJ’s cloud business modelMulti-cloud strategy

 Revenue Revenue is to increase along with an increase in the number of cloud service clientsand each system volume (system volume depends on a number of cloud servers,
volume of storage, etc.)

 Cost Depreciation and amortization cost for servers and other NW equipment, outsourcing

cost and personnel costs for service developments

 Profit Currently very low profitability, need more revenue to have economy of scale Japanese enterprises avoid relying on single cloud service vendor andprefer multi-cloud systems
 Multi-cloud demands are generating demands for “IIJ Cloud Exchange Services”(revenue recognized in NW Services) which provide private connectivity to third
vendor Cloud services such as AWS (Amazon), Microsoft, and Google IIJ provides operation and management services to effectively monitor an entire IT
systems through IIJ UOM Service which covers IIJ’s cloud services, other cloudvendors’ cloud services and on-premise systems
 “IIJ GIO Infrastructure P2 Gen.2,” which was launched in Oct. 2021 to promote full-scale cloud shift of enterprise systems, is accumulating orders© Internet Initiative Japan Inc.

41

Service/Business
Function

Data center
Matsue DCP (opened in Apr. 2011)

 Operate 16 DCs in Japan, 2 of which are owned by IIJ(as of Mar. 2024)
 Expanding own DC capacity along with growing demands for IIJ services
 Expect higher efficiency by gradually migrating leased DC spaces to own DCs• First in Japan to use outside-air
cooling container units• Able to increase capacity
responding to demand percontainer• Utilize on-site solar power panels• Adopt latest energy-saving method
including outside-air coolingmethod• More flexible and cheaper capacity
expansion through system module
method• Shifting peak of air conditioning
power by utilizing lithium-ion
storage batteries• Utilize on-site solar power panels• Direct procurement of non-fossil
fuel certificates toward the supplyof electricity with environmental
values (Apr. 2023)

Approx. 16 thousand square meters

Approx. 40 thousand square meters

Approx. 500 racks

Over 700 racks

Features

Land
Number of inplaced racks

Tesla’s power pack

Edge computing

•

1.33

1.36

• Construction of new systemmodule Construction from Feb. 2024,
Scheduled operation from May
2025
 Approx. 2 thousand square
meters Approx. 300 racks
 FY23 capex (plan): over ¥5.0 bn(to be partially covered withsubsidy)• 2nd site is to be fully occupied
around FY26 by own service facility
and collocation• 3rd site construction is underdiscussion (From FY25)

FY23 PUE

Plan

PUE(Power Usage Effectiveness) is a metric that shows how efficiently electricity is used at a data center. The closer to 1.0 is considered to be good.
© Internet Initiative Japan Inc.

Shiroi DCC (opened in May 2019)

Own service facility

Objective

42

Financials
Financial Performance (FY19 ~ FY23 results)

P. 44

FY23 Financial Results

P. 45 – 59

FY24 Financial Targets

P. 60© Internet Initiative Japan Inc.

43

Financial Performance (FY19 ~ FY23 results)
FY19
Total Revenue

FY20

Unit: ¥ (JPY) billion (bn)YoY = Year over Year

FY21

FY22

Financials

FY23

204.5

213.0

226.3

252.7

276.1

YoY

+6.3%

+4.2%

+6.3%

+11.7%

+9.2%

122.0

126.8

128.2

138.9

151.3

YoY

+2.8%

+4.0%

+1.1%

+8.4%

+8.9%

75.9

79.3

87.5

96.6

105.2

YoY

(-0.1%)+4.5%+10.3%+10.5%

+8.9%

46.1

47.5

40.7

42.3

46.1

YoY

+9.8%

+3.1%

(14.3%)

+3.8%

+9.1%

78.4

83.3

95.3

110.9

121.8

YoY

+12.5%+6.2%+14.5%+16.4%

+9.8%

8.2

14.2

23.5

27.2

29.0

YoY

+36.6%+73.2%+65.3%+15.6%

+6.6%

4.0%

6.7%

10.4%

10.8%

10.5%

NW services

Enterprise NW

Mobile services

SI

Operating Profit
Operating Margin

Net Profit

4.0

9.7

15.7

18.8

19.8

+13.8%+142.4%+61.4%+20.2%

+5.2%

ROE

5.2%

11.5%

16.2%

17.0%

16.3%

NW service gross margin

16.3%

21.4%

27.8%

27.5%

28.7%

SI gross margin

13.8%

14.5%

15.7%

16.7%

15.6%

YoY

•
•
•

NW services (excluding Mobile service) revenue decreased YoY in FY19 mainly due to WAN services’ certain large customers’ migration to our mobile services
Mobile service revenue decreased YoY in FY21 and expect to decrease in FY22 mainly due to subscriber migration to new cheaper plan
Net profit is “Profit for the period/year attributable to owners of the parent”© Internet Initiative Japan Inc.

44

FY23 Summary

Unit; JPY/¥ billion (bn), +%, YoY = Year over year comparison, QoQ = Quarter over quarter comparison
Net Profit is “Profit for the period attributable to owners of the parent”

Financials

Expanded business domain to Service Integration in response to the advancement & renewal of enterprise NW
Pivotal fiscal year for the further revenue growth in SI construction and NW service
Total Revenue: ¥276.1 bn, +9.2%

Operating Profit: ¥29.0 bn, +6.6%

Net Profit: ¥19.8 bn, +5.2%

ROE: 16.3%

Total Shareholders‘ Return: 82.4%(Executed share buyback and its cancellation of ¥11.4 bn in May 2023)

NW Services

SI

Revenue

FY22
138.92

NW
Service(exc. Mobile)+8.9%

Gross Profit

FY23
151.35FY22
38.15+14.0%

Revenue

FY23
43.49

FY22
110.94+9.8%

Gross Profit

FY22
18.55

FY23
121.82

+2.6%

FY23
19.04

 FY23 total revenue: ¥105.2 bn, +8.9% YoY• Each service revenue continued to grow. IP: +7.8% YoY, Outsourcing: +13.2% YoY (of which, security: +15.7% YoY), WAN: +2.7% YoY• IP & Outsourcing revenue growth continued to expand gross profit through economies of scale

 FY23 total revenue: ¥46.1 bn, +9.1% YoY (FY22: +3.8% YoY), FY23-end total subs.: 4,810 k, +674 k YoY (FY22-end: +639 k YoY)

MobileIoT• Business growth led by enterprise IoT with large increase in revenue sand subscription (subs.) by +21.9% and 540 thousand YoY respectively

Existing transaction such as connecting NW cameras, GPS devices, & on-board devices are becoming larger & continuously acquiring new orders• Revenues & subs. for MVNE & consumer were back to QoQ net addition. No.1 MVNO market share since Dec. 2020 (MIC, SIM type), No.1 customer satisfaction 3 years in a row (J.D. Power)

 FY23 order-received: Construction ¥59.86 bn, +35.2% YoY, Operation & maintenance ¥88.09 bn, +15.0% YoY

SI

FY23-end order backlog: Construction ¥23.76 bn, +72.2% YoY, Operation & maintenance ¥85.13 bn, +23.5% YoY• FY23 revenue recognition was weak because of a structural change of longer lead time which was due to projects becoming larger in sizes & more complex• In 4Q23, received orders of large-scale NW renewal project for a prominent manufacturer (¥3.0 bn, 5 years), large-scale IT infrastructure installment project (¥1.0 bn, SI construction), etc.
(*) Provide in-house developed NW services with SI, Greater opportunities

 Acquired large scale projects with multi-year contract consecutively through Service Integration(*) modeland proposal areas along with internal large-scale NW renewals, etc.
• Renewal of Chiba-city’s educational information NW (¥12.3 bn), NW renewal for a large financial institution (¥4.0 bn), service infrastructure construction & operation for an enterprise (¥4.0 bn),
Integrated operation system construction for a public sector organization (¥3.0 bn)
 Expansion of own DCs: Shiroi second site started operating from Jul. 2023, to be fully occupied by around FY26 due to own service facility expansion and collocation demand
FY23
Business  Significant revenue growth for overseas business, FY23 revenue ¥35.3 bn (+38.1% YoY)(*) Singaporean SIer, consolidated subsidiary since Apr. 2021
TopicsASEAN business growing as strong demands for global NW, large-scale DC construction project (¥2.8 bn) & increased momentum for PTC(*)
 Change in shareholders structure: NTT Group & KDDI both own 11.1% as leading shareholders (May 2023). As a part of the transaction, executed ¥11.4 bn of share buyback
 DeCurret progressing: Working toward Japan’s first digital currency platform service to be launched in Jul. 2024
© Internet Initiative Japan Inc.

45

Consolidated Financial Results% of revenue

Revenues
Cost of Revenues
Gross Profit

Unit: ¥ (JPY) billion
YoY = Year over year comparison% of revenue

FY23 Results

FY22 Results

Apr. 2023 - Mar. 2024

Apr. 2022 - Mar. 2023

76.9%

77.1%

212.21

194.80

23.1%

22.9%

Operating Profit
Profit before tax
Net Profit
•
•
•

34.84

FY2023 Targets(Annunced in May 2023)
Apr. 2023 - Mar. 2024

252.71+9.2% +23.37+8.9% +17.41
+5.96

29.03

27.22

10.5%

10.8%

28.93

27.31

7.2%

7.5%

19.83

18.85

SG&A etc. represents the sum of SG&A, which includes R&D expenses, and other income/expenses
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"© Internet Initiative Japan Inc.

65.5
11.9%

30.69 +13.5%
10.8%

220.5
22.9%

12.1%

10.5%

286.0
77.1%

57.91 +10.3%

12.6%

SG&A etc.

% of revenue

YoY

276.08

63.87

Financials

+4.15

34.0
11.0%

+6.6%

+1.81

31.5
10.6%

+6.0%

+1.63

30.4
7.2%

+5.2%

+0.98

20.7
46

Unit: ¥ (JPY) billion (bn)GP = Gross Profit
YoY = Year over year comparison

Year over Year Analysis

Financials

Revenues
FY21

226.34+26.37+23.37FY22252.71Each service
continued to
grow
•
•

Stronger than
expected due toenterprise IoT,
etc.

FY23

276.08SI (one-time revenue included) was
weaker than expected due to longer
project period as project sizes
becoming larger despite strong
demandNW services (excl. Mobile) revenues are calculated by deducting the below mentioned Mobile services revenues from total NW services revenues. The revenues include non-mobile consumer revenue which is a small amount
Mobile services revenues include IIJ Mobile Services (including MVNE) and IIJmio (consumer mobile)

Operating Profit
FY21

23.55

+3.67

FY22

27.22

Stronger than
expected••

Smaller than expected
revenue & lower grossmargin as there are many
projects whose revenue
recognition are in FY24

NW services gross profit consists of gross profit related to NW revenues (excl. Mobile) and Mobile revenues (The two have costs in common and cannot be broken down in accounting terms)
SG&A etc. in this slide represents the sum of SG&A, which includes R&D expenses, and other income/expenses© Internet Initiative Japan Inc.

FY23

+1.81

29.03

Exceeded the initial plan
mainly due to an allocationof personnel expenses &other expenses,
proportional to personnel
between costs & SG&As

47

Revenues
Network (NW) Services

Unit: ¥ (JPY) million[ ], YoY = Year over year comparison

Internet Connectivity Services (Enterprise)Internet Connectivity Services (Consumer)
Outsourcing Service
WAN Service

FY22: 252,708 [+11.7%]

Systems Integration (SI)Financials

Systems Construction (including equipment sales)
Systems Operation and Maintenance

ATM Operation Business

FY23: 276,080 [+9.2%]

58,190 63,772 63,377 67,369 61,420 66,778 72,900 74,982
708
724
721

710

28,57827,629•••742

30,467

24,341

28,40933,23434,47335,03836,17836,35437,627

1Q22

2Q22

3Q22

4Q22

1Q23

2Q23

One-time revenue
FY23: ¥49.90 bn, +16.2% YoY(18.1% of FY23 total revenue)

725

687

24,269739

33,87035,19938,322

39,044

Recurring revenue
FY23: ¥223.26 bn, +7.9% YoY(80.9% of FY23 total revenue)

NW Services revenue (excluding Mobile Services)
FY23: ¥105.21 bn (+8.9%, +¥8.56 bn YoY)
Mobile Services revenue
FY23: ¥46.14 bn (+9.1%, +¥3.86 bn YoY)

3Q23

4Q23

One-time revenue, systems construction revenues which include equipment sales, is mainly recognized when systems and/or equipment are delivered and accepted by customers
Recurring revenue represents the following monthly recurring revenues: Internet Connectivity Services (Enterprise), Internet Connectivity Services (Consumer), Outsourcing Services, WAN Services, and Systems Operation and Maintenance
Mobile services revenues include IIJ Mobile Services (including MVNE) and IIJmio (consumer mobile)© Internet Initiative Japan Inc.

48

Cost of Revenues & Gross Profit Ratio
Gross margin:

NW (Network) Services

SI (Systems Integration)

Cost of revenues:

NW (Network) Services

SI (Systems Integration)

26.5%

26.4%

21.8%

21.6%

14.9%

15.3%

29.1%

23.9%
16.8%

27.7%
24.1%
19.4%

FY22: 194,800 [+11.5%]

412
400

20,65924,197409

22,97824,557ATM Operation Business

28.1%

28.5%

29.4%

22.5%

23.0%

23.0%

13.4%

15.2%

15.3%

28.9%

23.9%
17.9%

FY23: 212,214 [+8.9%]
393

390

28,702

28,903

 Total gross profit
 FY23: ¥63.87 bn (+10.3% YoY) Gross profit for NW services
 FY23: ¥43.49 bn (+14.0%, +¥5.35 bn YoY)•

Gross margin improved by 1.3 points YoY along with revenue growth•

Among ¥5.35 bn of gross profit increase, which is based on managerial accounting,
NW service (excluding Mobile services) gross profit increased slightly more than
¥4.2 bn YoY•

Gross profit of mobile services also nicely increased along with an increase inenterprise IoT revenue, etc.

398
402

21,08524,087

Financials

Total45,490 49,980 48,212 51,117 47,620 51,389 56,136 57,069
412

Unit: ¥ (JPY) million[ ], YoY = Year over year comparison

 Gross profit for SI
 FY23: ¥19.04 bn (+2.6%, +¥0.49 bn YoY)••

24,431

25,371

24,825

26,14926,133

26,904

27,041

27,776

1Q22

2Q22

3Q22

4Q22

1Q23

2Q23

3Q23

4Q23

FY23 gross margin was weak mainly due to the small construction revenue, anallocation of resources such as engineers to prospective orders of large-scale
projects, and a low systems operation and maintenance revenue growth (ascheduled termination of a particular project)
FY23 gross margin decreased by 1.1 points YoY

NW service gross margin:•
3Q23 gross margin included a onetime profit contribution of over ¥0.1 bn which was the result of FY22 Docomo’s mobile data interconnectivity (unit charge) revision•
3Q22 gross margin included a onetime profit contribution of over ¥0.5 bn which was the result of FY21 Docomo’s mobile data interconnectivity (unit charge) revision© Internet Initiative Japan Inc.

49

Network (NW) Services (1) Revenues

Unit: ¥ (JPY) million[ ] , YoY = Year over year comparison
QoQ = Quarter over quarter comparison

Financials

Total Contracted Bandwidth (Gbps)

Internet Connectivity (enterprise) Services

WAN (Wide Area Network) Services
Outsourcing Services

 FY23: ¥44.73 bn, +11.1% YoYInternet Connectivity (consumer) Services
Internet Connectivity (enterprise) Services

7,601

7,729

8,727

8,814

9,376

9,429 10,339 10,442•

Internet traffic (please refer to P.45) and contracted bandwidth continued to expand•

Of which, IP: ¥15.99 bn, +7.8% YoY•

Of which, Enterprise mobile (IoT usages etc.): ¥13.63 bn, +21.9% YoY•

Of which, MVNE (service offer to other MVNOs): ¥10.55 bn, +4.7% YoY
 Revenue growth absorbed a decrease in revenue due to reflecting a decreased procurement

FY22: 138,922 [+8.4%]

costs in selling prices at the beginning of FY23

FY23: 151,347 [+8.9%]

33,234 34,473 35,038 36,178 36,354 37,627 38,322 39,044

 Internet Connectivity (consumer) Services (Mainly consumer mobile “IIJmio”)
 FY23: ¥25.29 bn, +4.3% YoY
•

7,065

7,092

Of which, consumer mobile (IIJmio): ¥21.96 bn, +4.5% YoY

7,153

6,841

7,030

7,082

7,055

6,675

12,534

13,092

13,52010,944

11,89012,44813,826

11,525

5,993

6,276

6,431

6,585

 Outsourcing Services (Various in-house developed network services) FY23: ¥52.97 bn, +13.2% YoY•

Of which, security: ¥30.93 bn, +15.7% YoY
 Strong demand for SASE mainly due to NW renewal projects

•
•
•
•
•

 Demand for SOC (Security Operation Center) is significantly increasing as it is often included

6,099

6,354

5,882

5,899

9,516

9,753

10,236

10,74910,772

11,194

11,27911,480

1Q22

2Q22

3Q22

4Q22

1Q23

2Q23

3Q23

4Q23

in NW renewal projects with its number increasing

WAN Services (Closed network services) FY23: ¥28.37 bn, +2.7% YoY

Total contracted bandwidth is calculated by multiplying number of contracts by contracted bandwidths for IP service and broadband services respectively which are both under Internet connectivity services for enterpriseIP (Internet Protocol) Service is bandwidth guaranteed dedicated Internet connectivity services for enterprises. Contracts are based on bandwidth and enterprises use the service for their core and main Internet connectivity
MVNE is IIJ Mobile MVNO Platform Service
3Q22 contracted bandwidth increased due to Tokyo public school project by approx. 500Gbps
4Q22 enterprise mobile revenue included slightly over ¥0.1 bn of lump-sum revenue related to a large mobile project which consists of several phases© Internet Initiative Japan Inc.

50

Network (NW) Services (2) Cost of Revenues

Unit: ¥ (JPY) million[ ], YoY = Year over year comparison

Financials

 FY23 Circuit-related costs increased stably

Circuit-related costs (Internet backbone, WAN lines etc.)
Outsourcing-related costs (mobile infrastructure related costs such as interconnectivity
charge and voice communication services, outsourcing personnel costs etc.)•

OthersInternet backbone circuit cost remains stable as we can leverage scale merit by having
one of the largest Internet backbone networks

Personnel-related costs (NW services related engineers’ personnel cost)

 FY23 Outsourcing-related costs increased stably

Network operation-related costs (depreciation cost for network equipment, DC leasing costs etc.)

 FY23 Others increased YoY mainly due to an increase in the purchasing license

fees such as SASE in line with increased revenues

FY22: 100,776 [+8.8%]

FY23: 107,854 [+7.0%]

24,431 25,371 24,825 26,149 26,133 26,904 27,041 27,776•

FY23 purchasing mobile devices increased by approx. ¥0.24 bn YoY(YoY breakdown: 1Q23 -¥0.41bn, 2Q23 -¥0.20 bn, 3Q23 +¥0.42 bn, 4Q23 +¥0.43 bn)•

4Q23 temporarily increased due to supplies expenses

 Network operation-related continued to increase along with facility expansions

6,585

6,849

6,989

7,234

7,058

7,137

7,305

7,275

NTT Docomo’s mobile data interconnectivity charge (unit charge)
Unit charge based on future cost method

Fixed unit charge¥12,862
7,166

7,106

6,992

6,780

6,923

7,022

7,113

6,670
3,228

3,399

3,596

4,253

4,825

3,762

4,394

3,372
2,050

2,033

2,151

2,176

2,332

2,342

2,333

2,347

5,402

5,614

5,787

6,174

6,041

6,180

6,229

6,406

1Q22

2Q22

3Q22

4Q22

1Q23

2Q23

3Q23

4Q23

• Announced in Mar. 2024

FY24 • Will use this unit charge from 1Q24

¥15,644• Announced in Mar. 2023
• Used this unit charge in FY23
FY23 • Decreased by 21.7% from the FY22 fixed unit
charge• Previously announced unit charge in Mar. 2022
was ¥15,697¥20,327• Announced in Mar. 2022

FY22 • Used this unit charge in FY22••

• To be fixed around at the end of Dec. 2025

• Slightly lower than the previously announced unit
charge in Mar. 2023 which was ¥13,084

3Q23 outsourcing-related costs included a onetime profit contribution of over ¥0.1 bn which was the result of FY22 Docomo’s
mobile data interconnectivity (unit charge) revision
3Q22 outsourcing-related costs included a onetime profit contribution of over ¥0.5 bn which was the result of FY21 Docomo’s
mobile data interconnectivity (unit charge) revision• Decreased by 24.8% from the FY21 fixed unit
charge© Internet Initiative Japan Inc.

• To be fixed around at the end of Dec. 2024

¥19,979• Fixed at the end of Dec. 2023
• Onetime profit contribution of over ¥0.1 bn in 3Q23
• Decreased by 26.1% from the FY21 fixed unit
charge51

Unit: ¥ (JPY) million[ ] , YoY = Year over year comparison
QoQ = Quarter over quarter comparison
MRR = Monthly Recurring Revenue

Systems Integration (SI) (1) Revenues

Financials

Systems Construction revenues (including equipment sales)
Systems operation & maintenance revenues for on-premise system
Cloud revenues such as private cloud which are recognized as systems operation & maintenance revenues

Systems Construction (one-time)
1Q22
Order
backlog

2Q22

15,57914,572

3Q22

16,705

4Q22

13,7991Q23

20,644

Systems Operation & Maintenance (MRR)

2Q23

3Q23

4Q23

26,252

23,64923,761

FY22: 42,945 [+21.4%]
7,628

11,922

10,756

10,914

10,385

12,52013,00910,103(incl. ¥2.8 bnof overseas
DC project)

Ordersreceived

FY22: 44,293 [+14.6%]

10,745

15,553

16,362••

16,641

68,95816,656

17,244

17,4581Q23

71,602

9,641
7,603

10,120
7,338

9,914
7,185

16,18918,45918,836

19,743

16,353

12,95016,474

23,133(incl. ¥5.0 bn
of Chiba city’s
project)(incl. ¥4.0 bn
of a certain
large project)(incl. ¥1.0 bn
of a certain
large project)(incl.¥3.0 bn ofcertain large
projects)

FY22: 76,617 [+22.0%]

FY23： 59,864 [+35.2%]

2Q2375,883

3Q23

80,3784Q23

85,132

FY23： 71,917 [+5.8%]
17,099

9,572
7,084

14,087

Large-scale NW renewal project for a prominent manufacturer (¥3.0 bn, 5 years)
Large-scale IT infrastructure installment project (¥1.0 bn, SI construction, included in 4Q23
SI constrution orders received)

67,580

4Q22

9,058
7,583

(incl.¥3.0 bn ofcertain large
projects)

 Favorable demand from all industries continued (below projects were acquired in 4Q23）

66,365

3Q22

FY22: 67,999 [+13.4%]

FY23： 49,902 [+16.2%]
7,242

2Q22

66,832

Of which, approx. ¥20.0
bn are to be recognized
as revenue in FY24

Of which, approx. ¥10.0 bn
were to be recognized asrevenue in FY23

Revenues

1Q22

17,664

18,317

18,837

9,994
7,670

10,485
7,832

10,923
7,914

21,945

22,812

23,591(incl. ¥2.0 bn
of Chiba-city’s
project)

FY23： 88,091 [+15.0%]•

1Q23 operation & maintenance revenue was negatively impacted by approx. ¥0.2 bn QoQ as a large system
operation project was ended at the end of 4Q22 as scheduled•

Operation & maintenance orders received fluctuate quarterly due to the impact of large-scale projects with multiyear contract. (Generally, orders received is 1 year contract and automatically renewed)

 FY23 construction revenue was weak mainly due to longer project period as project

becoming larger in sizes and more complex
Overseas business FY23 revenue: ¥35.29 bn (+38.1%YoY), business profit: ¥2.73 bn (+33.6%YoY)••

Completed the overseas DC construction project (¥2.8 bn), executing its subsequent projects (¥3.2 bn in total, multi-year)
Increased momentum for PTC (Singaporean SIer): NVIDIA’s “ASEAN Top Value Partners of the Year” (sole recipient in ASEAN). Received large-scale AI infrastructure construction project,
ASEAN business growing with M&A of PTC Malaysia, etc.

 Expect in FY24 to also achieve revenue & profit growth through global SASE and ASEAN business expansion, compared to FY23 results including the overseas DC construction project© Internet Initiative Japan Inc.

52

Systems Integration (SI) (2) Cost of Revenues

Unit: ¥ (JPY) million[ ], YoY = Year over year comparison

Financials

Purchasing costs (Equipment etc.)
Outsourcing-related costs (SI-related outsourcing personnel costs etc.)
OthersNetwork operation-related costs (Depreciation cost such as for cloud facility, DC leasing cost etc.)
Personnel-related costs (SI-related engineers’ personnel cost)

FY22: 92,391 [+14.9%]

FY23: 102,777 [+11.2%]

20,659 24,197 22,978 24,557 21,085 24,087 28,702 28,903

 Purchasing, outsourcing-related, and others are linked to the size of project andrevenue to a certain degree
 Others include license purchasing costs for multi-cloud which fluctuates along

10,015
7,507
4,419

6,124

with customers’ demand

8,834

 No significant change in network operation-related costs on a quarterly basis

5,704

7,475
3,959

8,778
6,983

7,641

7,817

8,099

7,791

3,561

3,182

3,479

3,388

3,545

2,781

2,624

2,579

2,635

2,914

3,243

2,979

2,960

1Q22

2Q22

3Q22

4Q22

8,904

Number of SI-related outsourcing personnel

10,206

3,925

4,140

4,327

2,586

2,489

2,423

2,277

3,204

3,191

3,220

3,259

1Q23

2Q23

3Q23

4Q23

(unit: personnel)

1Q22end

2Q22end

3Q22end

4Q22end

1Q23end

2Q23end

3Q23end

4Q23end

1,327

1,390

1,393

1,385

1,367

1,395

1,456

1,521

 The number of SI-related outsourcing personnel can be increased incomparison with the number of IIJ’s SI engineers Due to many ongoing projects before order-received, the number ofoutsourcing personnel has been high level•

3Q23 purchasing costs included most of the cost related to the overseas DC construction project (revenue approx. ¥2.8 bn)© Internet Initiative Japan Inc.

53

Human Capital Disclosure

Financials

Number of Employees (consolidated basis)

Personnel-related costs & expenses (consolidated basis)
Unit: ¥ (JPY) million

Contract worker (personnel)
Full-time worker (personnel)

Jun. 2022

Sep. 2022

Dec. 2022

Mar. 2023

Jun. 2023

Sep. 2023

Dec. 2023

Mar. 2024

4,331

4,355

4,392

4,451

4,747

4,750

4,791

4,803

+262 YoYof which, 178 were
new graduates+416 YoYof which, 246 were
new graduates

296

309

309

311

4,035

4,046

4,083

4,140

Number of new graduates

306

4,441

% of revenue

296

304

4,507

4,487

Breakdown of Employees

Unit: personnel(As of Mar. 31, 2024)

Joined in
Apr. 2023

Joined in
Apr. 2024

307
246
178

Admin.
12%(Mar. 31, 2023, 17%)

2Q22

3Q22

4Q22

1Q23

2Q23

3Q23

4Q23

8,655

8,341

8,506

9,358

9,252

9,410

9,622

(+9.7%)(+6.1%)(+6.5%) (+14.4%) (+6.9%) (+12.8%) (+13.1%)(+5.4%)

FY22: 33,678 (+6.9%)
14.1%

13.6%

13.2%

FY23: 37,642（+11.8%）
12.6%

Ratio of Female Managers

12.9%

12.8%

Turnover rates

 Achieved FY24 target (6% or more) Lower than the industry average

turnoveryear

Engineers
70%

13.9%

number of employees and the modification of monthly salary table• FY23 result: increased by 352 personnel• Revised the new graduates salary table in Apr. 2023 (previous revision in Apr. 2019).
New graduates with bachelor‘s degree: ¥256,667 per month, up 4.8%, Salary ranges forthe existing employees were revised along with it FY24 outlook• Number of employees (consolidated basis) to increase by over 400 personnel (including
307 of new graduates)• No change in salary table at the beginning of FY24

 Brought FY27 target forward by 1

Sales
18%

15.2%

 FY23 personnel-related costs & expenses increased as expected due to an increase ina year in advance(Mar. 31, 2023, 12%)

Joined in
Apr. 2022

1Q22
8,177

(YoY)

302

4,448

Consolidated
personnelrelated costs& expenses

(IIJ)

Apr.
2022

Apr.
2023

Apr.
2024

FY26
target

5.7%

6.3%

7.5%

8% or
more

(Mar. 31, 2023, 71%)
© Internet Initiative Japan Inc.

•

FY19

FY20

FY21

FY22

FY23

4.6%

3.6%

4.2%

3.8%

4.6%

The turnover rate of IIJ (non-consolidated basis)
is calculated by dividing leavers for the fiscal yearby the number of full-time employees at the
beginning of that fiscal year. The industry
average turnover rate of approx. 10% isannounced by the Ministry of Health, Labor, andWelfare54

Unit: ¥ (JPY) million[ ] , YoY = Year over year comparison
QoQ = Quarter over quarter comparison

SG&A, etc.

Financials

Research & development expenses
Commission expenses
Others (including other income and other expenses)
Personnel-related expenses() % of total revenues

FY22: 30,687 [+9.3%]

FY23： 34,837 [+13.5%]

7,674

7,645

7,548

7,822

8,797

8,312

8,564

9,164

(13.2%)(12.0%)(11.9%)(11.6%)(14.3%)(12.4%)(11.7%)(12.2%)
158

148
171
125

128

121

1,035

1,097

1,009

173

1,196

2,974

3,111

1,203

1,081

1,084

 FY23 SG&As exceeded the initial plan mainly due to an allocation of

personnel expenses & other expenses, proportional to personnel between
costs & SG&As Commission expenses are mainly consumer sales commissions and

3,654
3,229

1,090

160

3,125

3,402

3,522

3,770

recruitment expenses (Recruitment expenses tend to be concentrated in FYend) Others are increasing mainly because of an increase in activity-related

expenses such as advertisement and travel expenses
 Personnel-related expenses are increasing along with an increase in

•
•
•

3,285

3,446

3,307

3,440

3,799

1Q22

2Q22

3Q22

4Q22

1Q23

3,649

3,801

4,033

2Q23

3Q23

4Q23

number of employees, etc.

Above figures are SG&A expenses plus other income and other expenses
1Q22 others included ¥0.17 bn of gain on sales of tangible assets
1Q personnel-related and others expenses increase mainly due to an increase in training and human capital development expenses along with the entry of new graduates. Such expenses decrease in 2Q QoQ as expenses for new graduate engineers are recorded as cost ofrevenues from 2Q© Internet Initiative Japan Inc.

55

Profit

Unit: ¥ (JPY) million[ ] , YoY = Year over year comparison Operating profit

Operating margin FY23: ¥29.03 bn, +6.6% YoY

Operating profit

 Profit before tax

Net profit

12.0%

9.6%

8.6%

12.5%

FY22 Operating profit: 27,221[+15.6%]

10.6%

8.1%

11.7%

11.2%

•

Foreign exchange gain: +¥533 million (FY22: +¥365 million)•

Valuation gain(loss) on funds etc.: +¥149 million (FY22: +¥303 million)

FY23 Net Profit: 19,831 [+5.2%]

8,430
7,077

1Q22

2Q22

3Q22

4Q22

1Q23

2Q23

3Q23

4Q23

FY24 plan+1,200

(5)

(820)

(73)

+310

+13

(535)

+361

±0

 Foreign exchange impacts were also included as lots of assets are dominated in USD

•

8,749

8,200

7,617
6,147

 FY23: ¥28.93 bn, +6.0% YoY

FY23 Operating Profit: 29,029[+6.6%]

FY22 Net profit: 18,852 [+20.3%]

5,026
4,391

Financials

Share of loss of investments accounted for using equity method: ¥465 million(FY22: ¥204 million)
DeCurret-related loss (IIJ ownership: 38.2%)

6,852

5,999
5,003

4,248

4,739

4,215

4,657

1Q22

2Q22

3Q22

4Q22

1Q23

2Q23

3Q23

4Q23

FY24 plan

78

102

94

109

125

124

143

143

Approx. 800

 Plan to provide first in Japan commercial digital currency (DCJPY) in Jul. 2024

3,583(For detail, please refer to P.71)
 Expect cost and expenses such as personnel are to increase in FY24 toward theservice launch. After the launch, anticipate to become profitable on a monthly basis
within FY26 by the revenue accumulation
 Net profit
 FY23: ¥19.83 bn, +5.2% YoY

1Q22

2Q22

3Q22

4Q22

1Q23

2Q23

3Q23

4Q23

1Q22

2Q22

3Q22

4Q22

1Q23

2Q23

3Q23

4Q23

•
•
•

1,611

152

(1,374)

(97)

632

114

(957)

581 Finance income (expense), net

(14)

(64)

(83)

(42)

(154)

(119)

(150)

(42)

(2,136)(1,982)(1,931)(2,266)(1,824)(2,320)(2,365)

96

5

14

26

74

13

71

Share of profit (loss) of investments accounted for using
equity method(2,449) Income tax expense(13)

Profit (loss) for the period attributable to non-controllinginterests

Net profit shows “Profit for the period attributable to owners of the parent”
Under IFRS, equity securities are measured at fair value through OCI (Other Comprehensive Income) while funds are measured through profit or loss
Figures for the fiscal year ended March 31, 2023 are based on the retrospective application of IAS 12 "Income Taxes"© Internet Initiative Japan Inc.

56

Consolidated Statements of Financial Position (Summary)Mar. 31, 2023

Mar. 31, 2024

Changes

Unit: ¥ (JPY) million

Mar. 31, 2023

Financials

Mar. 31, 2024

ChangesCash & cash equivalents

42,47245,474+3,002

Trade & other payables

22,31325,435+3,122

Trade receivables

41,34045,683+4,343

Borrowings (current & non-current)

20,43030,180+9,750Inventories

3,188

3,227

+39

Contract liabilities & Deferred income (current & non-current)

17,97821,530+3,552

Prepaid expenses (current & non-current)

27,92039,496+11,576

Income taxes payable

4,034

5,328

+1,294

Tangible assets

23,321

29,072+5,751Retirement benefit liabilities

4,513

4,991

+478

Right-of-use assets

46,67541,242(5,433)

Other financial liabilities (current & non-current)

48,80049,138+338

31,233

26,428(4,805)

Of which, operating leases (rent of oﬃce, data center etc.)

31,61026,982(4,628)

Of which, ﬁnance leases (network equipment etc.)

16,44715,750

(697)

8,823

10,079+1,256

126,891

146,681+19,790

Of which, operating leases (rent of oﬃce, data center etc.)

15,442

14,814(628)

Goodwill & intangible assets

Of which, ﬁnance leases (network equipment etc.)

26,47528,685+2,210Investments accounted for using the equity method

5,785

5,169

(616)

Investment securities (Equity)

10,031

14,563+4,532

Share capital

25,562

25,562-Other investments

9,119

9,805

+686

Share premium

36,73835,737(1,001)Others

9,992

11,297+1,305Retained earnings

51,202

65,616+14,414

OthersTotal liabilities:

6,571

10,863+4,292

Treasury shares(1,831)(12,027)(10,196)

Total equity attributable to owners of the parent:

118,242

125,751+7,509Other components of equity

Total assets:

•
•
•
•

246,318

273,713

27,395

Non-controlling interests

1,185

1,281

+96

Total liabilities and equity:

246,318

273,713+27,395

Prepaid expenses increased mainly due to an increase in projects for clients and maintenance for license and facility
Tangible assets increased mainly due to investment in Shiroi DC
Borrowings increased mainly due to the share buyback
Ratio of total equity attributable to owners of the parent: 48.0% as of Mar. 31, 2023, 45.9% as of Mar. 31, 2024, decreased due to the share buyback with cancellation© Internet Initiative Japan Inc.

57

Consolidated Cash Flows

Unit: ¥ (JPY) million
YoY = Year over year comparison

Financials

Operating Activities
FY22: 38,529
1Q22

2Q22

3Q22

13,8578,602

FY23： 40,780
4Q22

1Q23

11,215

2Q23

11,035

3Q23

11,536YoY Change+1,625

4Q23

Profit before tax

28,934

13,193

Depreciation and amortization

29,296+495

Changes in operating assets & liabilities(9,880)(2,168)

Income taxes paid

(8,130)+1,828

FY23 Major
Breakdown

YoY Change

Purchase of tangible assets(11,744)+43

Purchase of intangible assets such as software(7,199)(1,728)

FY23 Major
Breakdown

YoY Change

5,016

4,855

FY23 Major
Breakdown

Investing Activities
FY22: (18,386)
1Q22

2Q22

3Q22

FY23: (17,927)
4Q22

1Q23

(2,366)2Q23(2,700)(4,853)(5,941)(5,226)3Q23(3,994)(6,366)

4Q23(4,867)

Financing Activities
FY22: (25,731)
1Q22

2Q22

3Q22

(4,726)(7,875)

FY23: (20,797)
4Q22(4,965)(8,165)

1Q23(4,535)

2Q23

3Q23

(3,309)4Q23(4,732)(8,221)

Payment of operating/finance leases and other financial liabilities(20,008)(664)

Dividends paid

(5,682)(781)

Repayment of long-term borrowings(2,060)(545)

Short-term borrowings (Borrowings for acquisition of treasury shares, etc.)

11,800+11,900

Purchase of treasury shares(11,405)(11,405)© Internet Initiative Japan Inc.

58

Other Financial Data

Unit: ¥ (JPY) million

CAPEX

Financials

CAPEX-related depreciation and amortization

Cash CAPEX
Finance lease

FY22: 20,825
6,791

FY23： 22,521
6,689

6,627

6,581

5,288
3,280
2,440
840
1Q22

4,258

4,172
5,504

3,917
5,794

2,647
2,533
2Q22

1,077

1,525

833

3Q22

4Q22

1Q23

2,007

 FY23 CAPEX plan: ¥22.5 bn

3,796

3,792

3,789

3,901

3,869

3,878

3,906

3,981

1Q22

2Q22

3Q22

4Q22

1Q23

2Q23

3Q23

4Q23

4,340
3,824

1,910

1,464

2Q23

3Q23

2,349
4Q23

 Major breakdown of CAPEX(Unit: ¥ bn)

FY23：15,634

FY22: 15,278

FY22 FY23
Ordinal NW CAPEX (NW equipment, etc.)

9.0

10.4

Cloud-related

2.0

1.5

Shiroi DC second site -related

5.4

5.5

Customer-related

2.9

2.3

Renewal of Raptor service facility

0.2

1.1

Renewal of Full-MVNO 5G infrastructure

0.8

1.7

Adjusted EBITDA

FY22: 42,499
8,822

9,939

11,406

FY23： 44,663
12,33010,955

12,106 12,730

8,872(including approx. ¥7.0 bn for Shiroi DC second site)• Almost as expected in the total amount• Part of Shiroi DC second site expansion investment was postponed to FY24
 FY24 CAPEX plan: ¥23.0 bn
•
•
•
•
•

Of which, approx. ¥3.7 bn is for Matsue DC’s construction of its additional modules
Of which, approx. ¥2.0 bn is for Shiroi DC’s expansion investment

1Q22

2Q22

3Q22

4Q22

1Q23

2Q23

3Q23

4Q23

Total amount of capital expenditure is the amounts of acquisition of tangible and intangible assets by cash and entering into finance leases for the fiscal year, excluding duplication due to sale and leaseback transactions and acquisition of assets that do not have the nature of investment, suchas purchase of small-amount equipment.
CAPEX-related depreciation and amortization is calculated by excluding depreciation and amortization of assets that do not have the nature of capital investment, such as right-of-use assets related to operating leases, small-amount equipment and customer relationship.
Adjusted EBITDA is calculated by adding operating profit and CAPEX-related depreciation and amortization.
© Internet Initiative Japan Inc.

59

FY24 Financial Targets

Unit: ¥ (JPY) billion
YoY = Year over year comparison
Consolidated base% of total reveue

First Half Targets% of total revenue

Full Year Targets

YoY（Apr. 2024 to Sep. 2024)

Total
Revenue

Gross Profit

142.0 ~
20.6%

21.1%

29.2 ~

30.2

13.5%

13.4%

SG&A, etc.

10.0 ~

shares of profit(loss)of investments
accounted for using
equity method
investees+0.0% ~

9.5 ~

+11.5%

+3.5%

7.7%

11.0

(17.2%) ~(8.9%)(24.3%) ~(16.4%)

4.4%

4.9%

6.3 ~

7.0

(24.3%) ~(15.9%)¥17.18 ~ ¥18.58¥0.00 ~+¥1.40

315.0

22.0%

22.7%

68.5 ~

71.5

12.3%

12.2%

9.6%

10.5%

30.0 ~

33.0+7.3% ~

+12.0%  NW Service:Revenue to grow by recurring revenue accumulation & Service Integration
Expect mobile to achieve revenue & profit growth without the onetime cost reduction of data connectivity
At the upper limit, expect gross margin to improve YoY (1H: decrease, 2H: increase) SI:+10.5%
Revenue to largely increase by realizing FY23-end order backlog & strong demandAt the upper limit, expect gross margin to slightly decrease YoY (1H: decrease, 2H: increase) VMware impact: We are taking actions of passing through of the cost increase which would require sometime to be adopted thoroughly. Thus, we have set some ranges.
 SG&A, etc.: Increase along with an increase in number of employees and others (No modification of the+13.7%
salary table for FY24 new graduates)
 Shares of profit (loss) of investments accounted for using equity method investees: Expect DeCurret’s
related loss to be around ¥0.8 bn as they approach near to the service launch the cost should increase-  No consideration on any valuation gain (loss) on funds & foreign exchange gain (loss) Others: Number of employees to increase slightly over 400 personnel (of which, 307 are new graduates),
CAPEX: ¥23.0 bn (of which, approx. ¥5.7 bn is for own DCs expansion)+3.3% ~

(0.7)
9.3%

10.2%

29.0 ~

32.0

6.4%

Dividend per
share

19.9 ~

Gross
Profit+14.1%+0.2% ~

7.0%

Net Profit(Profit for the period
attributable to owners of
the parent)

Revenue+13.0% ~

38.5

-

7.4%

10.5

312.0 ~

+12.2%(0.3)
6.7%

Profit before
tax+10.8% ~

19.2
7.0%

Operating
ProfitAssumption

YoY（Apr. 2024 to Mar. 2025)

143.0

Financials

21.9+0.3% ~

¥34.36 ~ ¥37.16¥0.00 ~

+10.6%The impact from VMware license for virtualization software Effective from Apr. 2024, there were major changes in VMware product lineup & IIJ was migrated toa new partner program Under the new product lineup, generally, individual products are no longer sold separately, which
was the case previously, and they are now bundled together. This leads to a substantial increase in+10.4%
price & cost
 IIJ is taking actions including the revision of our service price; however, because the product lineup &the terms & conditions were shared in such a last minute, the full year financial targets are disclosed
as ranges of ¥3.0 bn. The upper limit indicates that the impact of VMware license is mostly passed+¥2.80through in the second half. The lower limit indicates that the impact of VMware license is passed
through with delay, except to the extent that can be assumed© Internet Initiative Japan Inc.

60

Appendix
Shareholders’ Return

P. 62

Market Growth Forecast

P. 63

Sales activity for Public Sector

P. 64

NTT Docomo’s Mobile data interconnectivity charge

P. 65

Consumer Mobile Price list

P. 66

Overseas Business

P. 67

ATM Operation Business

P. 68

Fintech Business: DeCurret (1) - (4)P. 69 – 72

CDN Business: JOCDN

P. 73© Internet Initiative Japan Inc.

61

Shareholders’ ReturnAppendix

Basic shareholders’ return policy:
Continuous and stable dividend payment while considering the need to have retained earnings for the enhancement offinancial position, mid-to-long term business expansion and future investment



Dividend per share:
Continued to increase dividend in line with profit increase due to revenue growth, 5 times in 4 years

Unit: JPY

FY19

FY20

Payout ratio

•
•
•
•

FY22

+21.9%

Year‐end
dividend
Interimdividend

FY21+61.3%+120.4%14.875

6.75

9.75

3.375
3.375

5.125

30.4%

27.6%

FY23 total payout ratio: 82.4%
In May 2023, IIJ executed share buyback of¥11.4 bn
and cancellation of shares

24.00
12.50

FY23

+17.5%

29.255
14.63

34.36
17.18

11.50

14.625

17.18

27.7%

28.0%

30.7%

Stock split
Jan. 2021

Stock split
Oct. 2022

Dividend per share is written on the post-stock-split basis
FY21 payout ratio: adjusted payout ratio is around 30% which is calculated by deducting temporary and non-cash transaction such as valuation on funds and impairment loss
FY22 payout ratio takes the retrospective application of IAS 12 “Income Taxes” into consideration
FY23 payout ratio takes the share buyback with cancellation which took place in May 2023 into consideration© Internet Initiative Japan Inc.

62

Market Growth Forecast

Appendix

Historical traffic data of major domestic IX

Operation where IT department spends the most timeTop 7 items are shown below

Peak traffic

72

Study about replacing of the current systems

54

Responding to in‐house inquries

50

System operation and monitoring

Jun. Sep. Dec. Mar. Jun. Sep. Dec. Mar. Jun. Sep. Dec. Mar. Jun. Sep. Dec. Mar. Jun. Sep. Dec.
2019 2019 2019 2020 2020 2020 2020 2021 2021 2021 2021 2022 2022 2022 2022 2023 2023 2023 2023
Source: INTERNET MULTIFEED CO., IX = Internet Exchange

Digital Competitiveness Ranking 2023
1

U.S.A

2

The Netherlands

3

Singapore

Study about introducing new systems

33

Security measures

31

Project management of system implementation

24

Developing IT starategy

22

Source: Internet Initiative Japan “Nationwide survey on IT department 2023” Dec. 2023, N=359

Status of Cloud migration by clients’ annual revenue size
More than 50% on on‐premise4

Denmark

5

Switzerland

6

South Korea(omission)

31

Spain

32

Japan

33

Malaysia

Source: IMD WORLD DIGITAL COMPETITIVENESS RANKING 2023

Over ¥1 trillion

2023

56%

44%

¥300.1 billion ~¥500 billion

2023
2022
2023
2022

43%

57%

50%

50%

43%

57%
80%

Source: Internet Initiative Japan “Nationwide survey on IT department” Nov. 2022
2022 N = 598, 2023 N = 359© Internet Initiative Japan Inc.

28%

72%

2022

¥500.1 billion ~¥1 trillion

More than 50% on cloud

20%

63

Sales Activity for Public Sector

Appendix Long and enduring relationship

We have been providing reliable Internet connectivity services to central government agencies and local governmentsfrom the early 1990s



They are also using our security services such as firewall services, DDoS Protection services and other network
services such as WAN. We also receive network related integration projects from them as well.

 Not only private sector, but also public sector is changing their attitude toward IT and network Growing demands for network related projects
Enhance remote access for central government agencies



Promote telework environment for local governments

Support educational institution to become online-capable• Hybrid of face-to-face & online classes, remote access, environment for faculty and staff, etc.

Projects to replace “Security Cloud” for local governments

 Social Security and Tax Number System which is often called “my number” was first introduced in

October 2015. As of February 12, 2023, 68.8% to the total Japanese population has received their ID
according to the Ministry of Internal affairs and Communications
https://www.soumu.go.jp/kojinbango_card/© Internet Initiative Japan Inc.

64

NTT Docomo’s Mobile data interconnectivity charge (Mbps unit charge・monthly) Appendix
Fiscal Year

FY18

MethodActual cost method

FY19

FY20

FY21

FY22

FY23

FY24

FY25

FY26

Future cost method: MNOs are to disclose the charges for next three years based on their prediction about cost etc.
Announced in Mar. 2024
To be fixed around theend of Dec. 2025

New

Fixed in Dec. 2022

Fixed

¥49,311-6.0% YoY

¥42,702-13.4% YoY¥37,280-12.7% YoY¥12,862¥10,874¥10,708-17.8% YoY-15.5% YoY-1.5% YoY(*)(*) Impacted by the revision of allocation standards
for voice & data transmission services

Fixed in Dec. 2023

¥27,024-27.5% YoY¥19,979-26.1% YoY

Slight decrease in the unit priceAnnounced in Mar. 2023
To be fixed around theend of Dec. 2024

¥15,644-21.7% YoY¥13,084-16.4% YoY¥20,327-24.8% YoY¥15,697-22.8% YoY¥13,207-15.9% YoY¥28,385-23.9% YoY¥22,190-21.8% YoY¥18,014-18.8% YoY¥33,211-19.8% YoY¥27,924-15.9% YoY¥11,255-14.0% YoYAnnounced in Mar. 2022

Old
Announced in Apr. 2021

Announced in Mar. 2020

¥41,436-3.0% YoY
•
•
•
•
•

The same calculation method is applied to both the actual cost method and the future cost method: (Data communication cost + profit) /demand
The charge disclosed based on the future cost method is to be finalized based on MNOs actual cost results etc.
The YoY (Year over Year) decrease percentage written under each charge is compared with the previous year charge
The charge is public information disclosed in NTT Docomo’s service terms and conditions document uploaded on NTT Docomo’s website (only available in Japanese)
https://www.docomo.ne.jp/binary/pdf/corporate/disclosure/mvno/business/oroshi.pdf
The impact of the revision of allocation standards for voice & data transmission services refers to the fact that, from 2023, with regard to the calculation of data communication cost (MNO investment) as the numerator of the MIC
formula, a part of the costs that were previously recognized as voice related costs are to be recognized as data communication related costs© Internet Initiative Japan Inc.

65

Comparison between the old & new plans of consumer mobile
Old
Minimum Start Plan
(3GB)
Light Start Plan
(6GB)
Family Share Plan
(12GB)¥1,760Data-only¥990

With voice¥2,442

Data-only¥1,672

With voice
Data-only¥3,586

2Giga Plan
(2GB)
5Giga Plan
(5GB)
10Giga Plan
(10GB)¥2,81615Giga Plan
(15GB)
20Giga Plan
(20GB)
30Giga Plan
(30GB)

Launched large data volume plan(Mar. 1, 2024)

40Giga Plan
(40GB)
50Giga Plan
(50GB)•••GigaPlans: by data plans

New: GigaPlans (Apr. 2021~)

With voice

With voice¥850

Data-only¥740

With voice¥990

Data-only¥900

With voice¥1,500Data-only¥1,400With voice¥1,800Data-only¥1,730With voice¥2,000Data-only¥1,950With voice¥2,700Data-only¥2,640With voice¥3,300Data-only¥3,240With voice¥3,900Data-only¥3,840

The above table briefly indicates service prices for major functions to show the differences between the old and new plans
GigaPlans pricings are as of Mar. 2024. eSIM with voice function services are offered at the same price.
Voice call charge is only for domestic calls. Old plan: ¥22 for 30 seconds, new plan: ¥11 for 30 seconds© Internet Initiative Japan Inc.

Appendix

As of Mar. 31, 2024
50GB
30GB

less than 1%

less than 1%
15GB

40GB
less than 1%

20GB

4%
10GB

9%

2GB
38%

9%
5GB
40%

•

Current users’ migration as well as the start of the large data volume was from Apr. 1, 2024

GigaPlans: by plans
As of Mar. 31, 2024
Onl y SMS, 4%

Onl y da ta
16%

Wi th voi ce
80%66Overseas Business

Appendix

Revenue and Operating Profit (included in SI and NW)

Business Developments

Unit: JPY bn

 Started focusing on overseas businessaround FY11. It was when Japanese companies
started to expand their business overseas andrequested us to provide the same service quality
we offer in Japan

FY20
Revenue FY23: Significant revenue growth for overseas

FY21

FY22

FY23

35.29

Operating profit

25.55
17.84
8.32
1.24
•

2.04

2.04

2.73

PTC financial results (included in the above results) : FY21 revenue ¥6.89
bn, operating profit ¥0.31 bn, FY22 revenue ¥10.68 bn, operating profit:¥0.47 bnbusiness• Completed the overseas DC construction project(¥2.8 bn), executing its subsequent projects (¥3.2 bn
in total, multi-year)• Increased momentum for PTC (Singaporean SIer):
NVIDIA’s “ASEAN Top Value Partners of the Year”(sole recipient in ASEAN). Received large-scale AI
infrastructure construction project, ASEAN businessgrowing with M&A of PTC Malaysia, etc.
 Expect in FY24 to also achieve revenue & profit
growth through global SASE and ASEAN businessexpansion, compared to FY23 results including theoverseas DC construction projectOverseas offices While IT markets in the U.S. and Europe are
relatively matured, the markets in Asia are justbeginning to build up•

Increasing demand for network services and SI in
China and Thailand•

Vietnam: Cybersecurity Law (Jan. 2019), Opened
another facility in Hanoi in addition to Ho Chi Min•

In Apr. 2021, we bought a Singaporean system
integrator, PTC – expect to strengthen ASEAN
business•

From Dec. 1, 2023, a small business operator “PTC
Malaysia” became a new consolidated subsidiary (nosignificant financial impact), expect higher productivityof a support center in Malaysia

 Providing cloud services in Indonesia,
Thailand and Vietnam. Working with local
prominent IT companies• With Biznet Networks in Indonesia (from Mar. 2015)• With T.C.C. Technology Co., Ltd, in Thailand (Feb.
2016)© Internet Initiative Japan Inc.

• With FTP Telecom Partner in Vietnam (Nov. 2016)67

ATM Operation Business

AppendixBusiness Model Similar to “Seven Bank” model Placing ATMs in pachinko parlors in Japan•

After long discussion, started to place in Kanto, Kansai, Kyushu and Tokai areas•

7,665 pachinko parlors in Japan as of Dec. 31, 2022 (Source: National Police Agency) Receive commission for each withdrawal transaction

Trust Networks Inc.



In charge of ATM operation business
IIJ’s ownership: 80.6%
Established in 2007
Number of employees: about 10 personnel

Revenue and Operating Profit
Unit: JPY billion
Revenue
Operating Profit

FY19

FY20

FY21

FY22

FY23

• ATM (Automated Teller Machine)

4.1
2.9
1.6
0.8

2.9

2.8

2.1
0.6

0.9

1.0

• FY20 revenue significantly decreased from FY19 as the stores we had placed ATMs were closed temporally and fewer customers visited due to the COVID-19 pandemic and stay-at-home-order/request© Internet Initiative Japan Inc.

68

FinTech Business through DeCurret (1)About DeCurret Holdings (IIJ’s equity method investee) Management (from Apr. 2022)

DeCurret DCP Partnership with Securitize Aim to adopt digital currency for digital securities' settlement

 DeCurret Holdings (Shareholders: 35 companies including IIJ)

Representative Director and President: Murabayashi (Mr.)(IIJ Vice President, former CIO at MUFG Financial Group, Inc.)• Part-time directors: IIJ, MUFG bank, au Financial Holdings, NTT, JAPAN POST bank•

 Background In Jan. 2018, IIJ established DeCurret Inc. as an equity method investee

engaging in crypto asset business and digital currency business with prominent
Japanese companies•

Appendix

IIJ has been providing IIJ Raptor Service, an ASP based FX systems, which havebeen used by prominent Japanese security companies

 Securitize, Inc., a parent company of Securitize Japan K.K., was establishedin 2017 and proves platform to issue and manage digital securities
 The scope of partnership includes the followings:•

Explanation and discussion with prospective issuers and other related companies•

Specifics of the scheme and workflow•

Legal research and preparation of contract templates•

Development of system integration

 Image of transaction/flow (idea)
ST (Security Tokens) issuers

ST investors

 In Dec. 2021, DeCurret Inc. established DeCurret Holdings through a share

Future visiontransfer In Feb. 2022, DeCurret Holdings divested its crypto asset business to dedicate(as of now)••

its business resources to digital currency business Business

Offer and Issue digital securities
Allocate to ST investors

Step 0:
Begin offering

 Digital Current Platform Business (mainly BtoB) Have been executing various proof of concepts with various business partners(Used by ST
issuers)

 DeCurret-related loss (IIJ ownership: 38.2%)

Apply for offered digital securities
Make payment for purchaseReceive ST

Step 1:Create an accountSecuritize PF
Securitize(please refer to page 71)
 Plan to issue Japan’s first digital currency in July 2024•••

Step 3’:
Link debit data

Step 6:
Issue ST

Step 7:
Receive ST

Step 2:
Apply(or temporary apply)

Step 3:
Instruct a transfer

unit: JPY million

1Q22
78

2Q22
102

3Q22
94

4Q22
109

1Q23
125

2Q23
124

3Q23
143

4Q23
143

FY24
Approx.

800

Digital Currency
PF
DeCurret

Step 5:
Receive digital currency

Step 4:
Pay by digital currency(Used by banks)© Internet Initiative Japan Inc.

69

FinTech Business through DeCurret (2)Digital Currency Forum Subcommittees (over 100 participants as of Oct. 2023)
Retail andDistribution

Electric Power
Transaction PoC

PoC

Administrative
Affairs PoC

PoC*DCJPY: tentative name of digital currency issued by banks that is able to be issued, transfer, and repay
through the Two-tiered Digital Currency Platform

Settlement inIndustrial Distribution

Security Token
Settlement Practices
and Systems Study

WalletSecurity

NFT

PoC

Regional
Currency
PoC

Electronic
Money

Subcommittees

Participators

Industrial
distribution

Mitsubishi
Feasibility studies to use DCJPY for Mitsubishi’s trading transaction
Corporation, NTT, etc. settlement with smart contracts

Electricity powertransaction A

The participants include companies, local governments and others

Regional
currency

Two-tiered Digital Currency Platform

Administrative
process

1
4

57OutlineKansai Electric
Purchase of goods at convenience stores by using DCJPY which isPower Company, etc. obtained through electricity Peer to Peer (P2P) transactions
ENERES, etc.

•

Appendix

Promoting Proof of Concept (PoC) for DCJPY * (approx. 40 companies participating)

PoC

Credit Card
Company Member
Store Settlement

For more details
https://www.decurret-dcp.com/en/news.html

Feasibility studies to launch new services by utilizing DCJPY andelectric power transaction data

Mitsubishi UFJ
Digitalization of local governments’ benefits for selective usages
Research &through DCJPY so that local governments’ administrative process
Consulting, TIS, etc. . such as printing, mailing and others are improved

Retail andDistribution

Seven Bank, etc.

Feasibility studies to apply DCJPY transaction among retail,wholesale and banking through EDI (Electronic Data Interchange)

Security token

Nomura HD,
Future Architect, etc.

Feasibility studies to use security token and DCJPY for DVP(Delivery Versus Payment) settlement to learn about potential issues,etc.

Patented “Two-tiered Digital Currency Platform”
3
2

Outline of the patent（Electronic Currency Management System）

6

8

①

Two-tired system consisting of Common Area and Business Process Area②

Issuance of digital currency within Common Area③④ Issuance of Business Process Area’s token tied to Common Area’s digital currency⑤⑥

Transfer of token within Business Process Area, and transfer of digital currency, being tied to thosetransfer of token, within Common Area⑦

Synchronous processing of Common Area and Business Process Area⑧

Transfer of digital currency, not being tied to Business Process Area, within Common Area

© Internet Initiative Japan Inc.

70

FinTech Business through DeCurret (3)Appendix

DeCurret shall be the first in Japan to issue commercial digital currency (July 2024)
About the Case

About DeCurret

Issuer of digitalcurrency

GMO Aozora Net Bank, Ltd.

Usages of digitalcurrency• Digitalization of environmental value transaction (non-fossil
certificates, etc.)• Transactions and settlement in the digital currency DCJPY

DeCurret HLD

Shareholder: 35 companies including IIJ

DeCurret DCP

Shareholder: DeCurret HLD 100%
Business:
 Digital currency business Secretary for the “Digital Currency Forum”• As of Mar. 31, 2024, there are 104 companies, organization, experts, as
members and related regulatory agencies (FSA, MIC, MOF, METI, BOJ)

Flow on DCJPY on the Two-tiered Digital Currency Platform
IIJ
Mint and transfer
instructions

Business zone

DeCurret
DCP

Financial
Zones
GMO
AozoraNet Bank,Ltd.

DC rack users
Environmental value
allocation service offerings
environmental
value token
transfer

Environmental
Value Token
Management
Base

Businesszone
account

Businesszone
account
Coin transfer

DCJPY
account

Difference between “DCJPY” and Trust Bank’s Stablecoins

Environmental
value token inquiry

Simultaneous
DCJPY
account
Fund transfer

DeCurret’s digital currency“DCJPY”

Trust Bank’s stablecoins

Corresponding act

The Banking Act

The revised Payment Services Act(enforced in June 2023)

Form

Bank deposits

Stablecoins

Scheme ofissuance• Withdraw from user’s bank deposit• DCJPY will be issued after booking
the same amount of such withdrawal
to DCJPY account on the digitalcurrency platform• User needs to deposit money andset up a trust asset each time
• Then, stablecoins can be issued bya trust bankFeatures• Highly compatible with the current
settlement system• Issuers are reliable and trustworthybanks• Banks support DCJPY can use theDigital Currency services• User needs to open an account with
the Trust bank and deposit money
each time• User needs to arrange a trust asset
each time transferring funds otherthan the two companies, a trustbank and a beneficiary

Mint
Banking system© Internet Initiative Japan Inc.

71

FinTech Business through DeCurret (4)Source: DeCurret Web Page

Appendix

Shareholders of DeCurret (35 companies)(Ownership: 38.2% as of Mar. 31, 2024)© Internet Initiative Japan Inc.

72

CDN Business through JOCDNAppendixCompany Profile

Business Model

Name

JOCDN Inc. (IIJ’s equity method investee)

IIJ Ownership

16.8%

Capital

JPY845 million (including capital reserve)

Established

December 1, 2016

Shareholders

IIJ, Nippon TV, TV Asahi, TBS, TV Tokyo, Fuji TV, WOWOW(Prominent satellite broadcaster in Japan), NHK (Japan’s only
public broadcaster) and non-Tokyo local broadcasters

Directors

Chairman: Koichi Suzuki (IIJ CEO)President: Shunichi Shinozaki (Nippon TV)

IIJ
Ownership

Internet connectivity services

Ownership

CDN service

 All Japan CDN company JOCDN Akamai Technologies (global leader in CDN services, US company)

has been dominating CDN market in Japan.

(Contents Delivery Network) Growing needs to distribute contents over Internet
 Broadcasting companies distributing contents via Internet•

Nippon TV bought Hulu Japan in 2014•

Japanese broadcasting companies operate “TVer”

JOCDN’s shareholders & other Japanese broadcastersTVer IIJ has rich and well-renowned expertise in CDN business••

Olympics games, high school base ball games, university sport andmany other popular sports events

TVer is a web platform where viewers can watch certain TV programs for free. Its system was developed
jointly by major commercial television networks in Japan to broadcast TV programs over Internet© Internet Initiative Japan Inc.

TBS
TV
Tokyo

Fuji TVTV
Asahi

NipponTVand more73