Internet Initiative Japan (3774) Q1 2025 earnings summary

Executive summary

• Achieved strong revenue growth in 1Q24, with total revenue up 17.3% year-over-year to ¥72.02 billion, driven by both network services and systems integration.

• Operating profit declined 10.4% year-over-year to ¥4.48 billion, mainly due to increased VMware license costs, with net profit down 7.3% YoY to ¥3.32 billion.

• High demand for network reconstruction and large-scale projects contributed to revenue growth, while cost increases pressured margins.

• Updated FY24 guidance reflects continued robust demand, especially for large-scale enterprise projects and service integration, with full-year revenue target raised to ¥312.0 billion (+13.0% YoY).

• Dividend per share forecast increased to ¥35.00 for FY24, with interim dividend at ¥17.50.

Financial highlights

• 1Q24 gross profit rose 2.4% YoY to ¥14.13 billion; gross margin at 19.6%.

• Network services revenue rose 7.4% YoY to ¥39.1 billion; systems integration revenue surged 32.5% YoY to ¥32.2 billion.

• Net profit for 1Q24 was ¥3.32 billion, down 7.3% YoY; basic EPS was ¥18.78, down from ¥20.01 YoY.

• Recurring revenue accounted for 81.5% of total revenue, with one-time revenue up 74.1% YoY due to large SI projects.

• Cash and cash equivalents at quarter-end were ¥29.8 billion, down from ¥37.3 billion YoY.

Outlook and guidance

• FY24 revenue target set at ¥312.0 billion (+13.0% YoY), operating profit at ¥32.0 billion (+10.2% YoY), and net profit at ¥20.6 billion (+3.9% YoY).

• Price increases for VMware-related services and certain network services to offset cost pressures.

• CAPEX plan for FY24 is approximately ¥23.0 billion, including major data center expansions.

• Management expects profit growth to resume as price increases are gradually absorbed.