OREANDA-NEWS. Internet Initiative Japan Inc. ("IIJ") today announced its full year (“FY2015”) and 4th quarter (“4Q15”) consolidated financial results for the fiscal year ended March 31, 2016 (from April 1, 2015 to March 31, 2016).

“We're pleased to announce that we achieved strong revenue growth of 14.3% year over year (YoY) which amounted to JPY140.6 billion for FY2015. The strong growth absorbed the continuous costs increase and made operating income grew by 21.0% YoY to JPY6.1 billion. We recognize the strong revenue growth is the result of our business expansion strategies we’ve been engaged in for the past several years,” said Eijiro Katsu, COO and President of IIJ.

“Through FY2015, we saw strong MVNO market expansion, especially toward consumers. By accumulating subscription strongly, we’ve established a strong position in the market which is expected to expand furthermore. Regarding our cloud business, we launched new service platform called “IIJ GIO Infrastructure P2” in November 2015 to promote Japanese enterprises’ demands to migrate their core business platform to cloud. We’re seeing an increase in number of large-scale prospective transactions. Although they tend to require longer process, they should contribute to strong middle term growth. Demands for security-related services and solution such as protection for DDoS and targeted attacks have been on the rise and we continued to enhance our related service lineups. Other enterprise network services steadily grew as well. Systems integration continued to grow as we accumulated construction orders and many have shifted to the operation and maintenance. As for overseas business, we’ve started cloud business in Indonesia and Thailand by partnering with prominent local business operators. Additionally, we continue to see demands to construct container type data centers in Asia. For FY2015, we proceeded on exporting container type DC to the Lao People’s Democratic Republic. Regarding new business developments, we’re enhancing our contents distribution business. We launched the world’s first live streaming service in high-resolution audio,” continued Katsu.

“We expect these business developments to continue to FY2016. We target revenue to increase by 13.1% YoY to JPY159 billion as mobile and cloud revenue to increase to JPY25.5 billion and JPY16.2 billion respectively, other network services and systems integration revenues to accumulate continuously. We target operating income to increase by 18.9% YoY to JPY7.3 billion along with the expansion of gross margin amount. Along with income growth, we plan to increase our dividend for FY2016 by JPY5 to JPY27 per common share,” continued Katsu.

“We believe that FY2015’s strong revenue growth trend has contributed in creating the foundation for our middle term growth. Under such momentum, we established middle term business plan from FY2016 to FY2020. The plan, which aims to increase the revenue to approximately JPY250 billion at FY2020 and maintain double-digit annual operating income growth YoY, is challenging one for us, yet we firmly believe the market growth opportunity is tremendous. We seek to execute our business expansion strategies accordingly,” concluded Koichi Suzuki, Founder and CEO of IIJ.

FY2015 Revenues and Income

Revenues

Total revenues were JPY140,648 million, up 14.3% YoY (JPY123,050 million for FY2014).

Network services revenue was JPY79,296 million, up 14.9% YoY (JPY69,006 million for FY2014).

Revenues for Internet connectivity services for enterprise were JPY17,597 million, up 7.6% YoY compared to JPY16,350 million for FY2014 mainly due to an increase in mobile related services revenues. The number of our MVNE business clients continued to increase and their business volume also expanded.

Revenues for Internet connectivity services for consumers were JPY15,256 million, up 85.5% YoY compared to JPY8,222 million for FY2014, mainly due to the significant revenue growth of “IIJmio High-speed Mobile/D services,” consumer mobile services which offer inexpensive data communication and voice services with SIM cards.

Revenues for WAN services were JPY25,177 million, up 3.5% YoY compared to JPY24,326 million for FY2014 as we continued to accumulate orders from enterprise customers.

Revenues for outsourcing services were JPY21,266 million, up 5.8% YoY compared to JPY20,108 million for FY2014 mainly by the increase in security-related services revenues.

SI revenues were JPY54,188 million, up 12.3% YoY (JPY48,237 million for FY2014).

Systems construction revenue, a one-time revenue, was JPY21,145 million, up 3.5% YoY (JPY20,437 million for FY2014). The increase was mainly due to an increase in systems construction projects and execution of several large-scale projects. Systems operation and maintenance revenue, a recurring revenue, was JPY33,043 million, up 18.9% YoY (JPY27,800 million for FY2014). The increase was mainly because many of accumulated systems construction projects have been shifted to the operation and maintenance. Also, the increase in “IIJ GIO Component Services” revenues contributed to the revenue growth.

Orders received for SI and equipment sales totaled JPY62,056 million, up 12.5% YoY (JPY55,149 million for FY2014). Orders received for systems construction and equipment sales were JPY25,764 million, up 15.9% YoY (JPY22,236 million for FY2014). Orders received for systems operation and maintenance were JPY36,292 million, up 10.3% YoY (JPY32,913 million for FY2014).

Order backlog for SI and equipment sales as of March 31, 2016 amounted to JPY33,645 million, up 15.8% YoY (JPY29,053 million as of March 31, 2015). Order backlog for systems construction and equipment sales was JPY6,078 million, up 28.4% YoY (JPY4,734 million as of March 31, 2015). Order backlog for systems operation and maintenance was JPY27,567 million, up 13.4% YoY (JPY24,319 million as of March 31, 2015).

Equipment sales revenues were JPY3,275 million, up 51.1% YoY compared to JPY2,167 million for FY2014 mainly due to an increase in selling mobile devices.

ATM operation business revenues were JPY3,889 million, up 6.8% YoY (JPY3,640 million for FY2014). As of March 31, 2016, 1,087ATMs have been placed.

Cost and expense

Total cost of revenues was JPY115,993 million, up 14.9% YoY (JPY100,978 million for FY2014).

Cost of network services revenue was JPY64,239 million, up 16.9% YoY (JPY54,932 million for FY2014). The increase was mainly due to an increase in cost related to mobile-related services along with the revenue growth. Also, there was an increase in depreciation and amortization which was mainly related to expansion and renewal of network equipment. Regarding NTT Docomo’s interconnectivity charge, the charge based on its FY2014 actual cost was revised on March 2016 and it decreased by 16.9% year over year. Beginning 1Q15, we calculated mobile interconnectivity cost by applying our supposed decrease rate of 15.0%. Gross margin was JPY15,056 million, up 7.0% YoY (JPY14,073 million in FY2014) and gross margin ratio was 19.0%.

Cost of SI revenues was JPY46,226 million, up 11.2% YoY (JPY41,562 million for FY2014). There were increases in outsourcing-related and personnel-related costs along with the increase in revenues, in purchasing-related costs along with the systems construction revenue increase, and in depreciation and amortization costs mainly along with the expansion of cloud services related facilities. Gross margin was JPY7,963 million, up 19.3% YoY (JPY6,676 million for FY2014) and gross margin ratio was 14.7%.

Cost of equipment sales revenues was JPY2,969 million, up 53.6% YoY (JPY1,932 million for FY2014) along with revenue increase. Gross margin was JPY307 million, up 30.6% YoY (JPY235 million for FY2014) and gross margin ratio was 9.4%.

Cost of ATM operation business revenues was JPY2,559 million, up 0.3% YoY (JPY2,552 million for FY2014). Gross margin was JPY1,330 million, up 22.2% YoY (JPY1,089 million for FY2014) and gross margin ratio was 34.2%.

SG&A and R&D expenses

SG&A and R&D expenses in total were JPY18,515 million, up 8.9% YoY (JPY16,997 million for FY2014).

Sales and marketing expenses were JPY10,589 million, up 15.2% YoY(JPY9,188 million for FY2014). There were increase in sales commission expenses related to mobile services and personnel-related expenses.

General and administrative expenses were JPY7,471 million, up 1.4% YoY (JPY7,368 million for FY2014). There was an increase in personnel-related expenses.

Research and development expenses were JPY455 million, up 3.1% YoY (JPY441 million for FY2014).

Operating income

Operating income was JPY6,140 million, up 21.0% YoY (JPY5,075 million for FY2014).

Other income (expenses)

Other income (expenses) was an income of JPY53 million (an income of JPY64 million for FY2014). There were distribution from fund investment of JPY209 million (included in other-net of JPY236 million), dividend income of JPY93 million from other investments (JPY63 million for FY2014), interest expense of JPY241 million (JPY238 million for FY2014) and foreign exchange losses of JPY71 million (losses of JPY5 million for FY2014).

Income before income tax expenses

Income before income tax expenses was JPY6,193 million, up 20.5% YoY (JPY5,139 million for FY2014).

Net income

Income tax expense was JPY2,183 million (JPY1,897 million for FY2014).

Equity in net income of equity method investees was JPY180 million (JPY155 million for FY2014), mainly due to net income of Internet Multifeed Co.

As a result of the above, net income was JPY4,190 million, up 23.4% YoY (JPY3,397 million for FY2014).

Net income attributable to IIJ

Net income attributable to non-controlling interests was JPY152 million, mainly related to net income of Trust Networks Inc. (JPY75 million for FY2014).

Net income attributable to IIJ was JPY4,038 million, up 21.6% YoY (JPY3,322 million for FY2014).