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  6. 1Q FY21 Financial Results Briefing (Online)

QAs from earnings release meetings and others

August 10, 2021: 1Q FY21 Financial Results Briefing (Online)

(*) This is a summary of questions and answers took place at the Briefing.

Question: 1Q21 results for profits seem quite strong compared to your first half and full year financial targets for FY21. Are you not going to make an upward revision?
Answer: We just finished the first quarter of FY21. That’s the main reason we did not revise our targets this time. However, so far the profits are exceeding our expectation. We think that there would be a high probability that we may make upward revision to our financial targets when we announce our 2Q21 results if the profits continue to progress this way.
Question: Would you say that 1Q21 mobile profitability expansion tended to be particularly profitable due to the cost decreasing factors of mobile data interconnectivity and voice purchasing?
Answer: We would not disagree that there were such cost decreasing factors. Yet, please note that more than half of year over year gross profit increase of network services came from continuous accumulation of enterprise network services (monthly recurring revenue) such as IP services and Security-related services. Going forward, regarding mobile profitability outlook, we should continue to see ARPU and revenue decrease mainly due to our subscribers' migration from old to new plan. On the other hand, we should also see continuous revenue growth of enterprise mobile and net addition of consumer subscriptions due to new plan.
Question: Strong 1Q21 profit growth was mainly achieved through network services' gross profit expansion. Is it fair to say that such contribution was mainly led by mobile profitability? I see that mobile revenue decreased by JPY1.26 billion year over year while outsourcing-related cost (NW services costs) decreased by JPY2.85 billion year over year.
Answer: Please note that there was a cost increasing factor of mobile device purchasing in 1Q21 which increased by JPY0.52 billion year over year. Moreover, year over year revenue decrease of JPY1.26 billion for mobile includes strong revenue growth of enterprise mobile revenue. Therefore, the cost decreasing factors of mobile data interconnectivity and voice purchasing are not the only contributors to the profit growth.
Question: Regarding 1Q21 mobile related cost, mobile device purchasing cost increased JPY0.52 billion year over year. Should we expect this level to continue going forward?
Answer: 1Q21 mobile device purchasing cost increased mainly because we increased the purchasing 1) for sales promotion for spring sales session and 2) for procurement in advance in light of semiconductor shortage. While we plan to continue purchasing mobile devices for sales promotion, such volume seen in 1Q21 was rather large.
Question: Please explain what we should expect about the impact caused by a large MVNE (*) client switching to another operator due to M&A.
Answer: Above mentioned factor is one of the reasons impacted 1Q21 MVNE revenue which decreased by JPY1.53 billion year over year. 1Q21-end MVNE subscriptions which decreased by 57 thousand quarter over quarter is largely impacted by this client. In our FY21 outlook, we expect all of this client's subscriptions to be switched to another operator; therefore, 1Q21 results was in line with our expectation.

(*) MVNE: IIJ Mobile MVNO Platform Services (providing mobile services to other MVNOs)

Question: What is the business progress of DeCurret Inc. (DeCurret), an equity method investee of IIJ?
Answer: As for cryptocurrency trading services, due to a quiet market, 1Q21 trading volume was small. As a result, 1Q21 equity in net loss of DeCurret was JPY296 million, increased from JPY193 million for 4Q20. With order book trading services added from April 2021, which function is popular among large users, DeCurret continues to focus on promoting the services. As for digital currency business, DeCurret has been executing various experiments with its enterprise shareholders and others as well as engaging in developing platform for BtoB smart contract (*) platform and digital currency settlement platform.

(*) Smart contract: A system that automates remittance, settlement, and other various transactional processes

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