Internet Initiative Japan (3774) Q2 2025 earnings summary

Executive summary

• Total revenues for 1H24 rose 14.7% year-over-year to ¥147.02 billion, driven by strong demand in systems integration and network services.

• Operating profit declined 2.5% year-over-year to ¥11.78 billion, mainly due to increased VMware license costs, but returned to growth in 2Q24.

• Net profit attributable to owners was ¥7.47 billion, down 10.2% year-over-year, impacted by foreign exchange losses and higher costs.

• Interim dividend increased, reflecting confidence in ongoing business expansion.

• Significant new contracts include an eight-year, ¥6.0 billion joint banking system platform for regional banks.

Financial highlights

• Network services revenue rose 6.7% year-over-year to ¥78.95 billion; systems integration revenue surged 26.3% to ¥66.60 billion.

• Gross profit rose 17.5% year-over-year to ¥30.67 billion, with a gross margin of 20.9%.

• Net profit for 1H24 was ¥7.47 billion, down 10.2% year-over-year, impacted by foreign exchange losses and higher costs.

• Recurring revenue accounted for 80.7% of total revenue, up 9.1% year-over-year.

• One-time revenue (mainly SI construction) surged 49.5% year-over-year to ¥26.89 billion.

Outlook and guidance

• FY24 revenue target revised to ¥312.0 billion (+13.0% year-over-year), with operating profit targeted at ¥32.0 billion (+10.2%).

• VMware license cost increases expected to be offset by price revisions and pass-throughs in 2H24.

• Dividend per share forecast raised to ¥35.00, with a payout ratio of 30.1%.

• Full-year results will depend heavily on fourth quarter performance.