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Management Message

To our shareholders

photo:Chairman & CEO:Koichi Suzuki ,President & COO:Eijiro Katsu

Koichi Suzuki (Left) , Eijiro Katsu (Right)

We would like to express our gratitude for your continued support.

We extend you our deepest and most heartfelt condolences to those who have been affected by the COVID-19.

IIJ Group has been contributing to society by establishing and developing Internet infrastructure in Japan ever since the inception. While the society and economy are still under severe situation due to the COVID-19 pandemic, IIJ Group shall strive to support everyone's everyday lives and socioeconomics by continuously providing the Internet and related systems and by engaging in technological innovation.

Enterprises and public sectors' network and systems are migrating from the conventional on-premises type systems to IT services, which are more efficient and cost effective. Our growth strategy is to continuously develop various and reliable network services that meet enterprises' needs, based on our one and only Internet-related network technology, and offer them with systems integration to create highly value-added solution.

For the first half of this fiscal year, triggered by the COVID-19 pandemic, Japanese enterprises adoption of IT became critical. We saw structural revenue and profit growth momentum as the demands for enterprise network services, which we have been continuously developing and accumulating expertise, accelerated.

As a result, our consolidated financial results for the first half of this fiscal year were as follows: total revenue was JPY 101,665 million, up 2.5% year over year, operating profit was JPY 5,239 million, up 56.3% year over year, which exceeded our initial expectation. As we expect this profit expansion trend shall continue to the latter half of this fiscal year, we revised our full-year financial targets upward. Along with the profit increase, we revised our cash dividend forecast, which initial forecast was already an increase year over year from the previous fiscal year.

As for network services, IP services revenue especially strongly grew by 10.1% year over year along with enterprises’ growing demands for Internet traffic. As for IoT projects, we saw increasing demands for factory IoT as seen in Toyota Motor Hokkaido's project. Outsourcing services revenue strongly grew by 9.1% year over year. The growth was mainly led by security-related services as well as VPN-related services, which are needed for remote access, along with the increase in demands for teleworking. As for systems integration, although 1Q20 systems construction order received was weak due to the COVID-19 pandemic, the demands recovered in 2Q: strong accumulation of projects for enterprises and public sector. Total systems integration revenue grew by 6.3% year over as systems operation and maintenance revenue grew mainly due to our cloud services revenue growth.

IT services penetration supported by the current socioeconomic situation as well as technological developments is certainly a tailwind for IIJ Group's further growth. We would like to continuously expand our corporate value by leveraging our reliable and strong technology capability to support both society and Japanese enterprises' systems.

We sincerely appreciate your continued support.

December 2020

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