QAs from earnings release meetings and others

August 7, 2020: 1Q FY20 Results Briefing (Online)

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

Question: Please explain about remote access demand situation.

Answer: Demands for various network services needed for flexible workstyles, such as work-from-home, are quite strong. Especially, IIJ Flex Mobility Service, which offers reliable and secure VPN connectivity, are accumulating orders strongly.

Question: Please explain your consumer mobile services, IIJmio, situation.

Answer: We had sluggish growth in 1Q20 mainly because severe competition continued, our sales partners’ stores were temporarily closed due to the state of emergency, and fewer number of customers visited the stores along with the stay-at-home orders. As for eSIM services for consumers, its subscription exceeded 150 thousand.

Question: When do you expect your cloud profitability to improve?

Answer: We expect we should achieve profitability improvement along with revenue growth as cloud is the economy of scale business. However, because we are closing the old service facility and migrating to the new ones from around FY20 to FY21, we do not expect the revenue to grow strongly. We expect the visible profitability improvement to start roughly from FY22.

Question: Please explain year over year decrease for your 1Q20 SI construction order received.

Answer: Please note that 1Q19 SI construction order received included a certain large scale project amounted to JPY2 billion. During this April and May, our sales activity was restricted as we could not visit our clients’ offices. As demands for network integration, such as constructing remote access and virtual desktop environment, are strong, we are focusing on accumulating orders for the latter half of FY20.

Question: What are the outlooks for WAN services and ATM operation business, two areas which revenue largely decreased in 1Q20?

Answer: WAN services revenue decreased because of our certain large clients’ gradual migration to mobile, which ended in 3Q19. We expect the volume of revenue decrease beginning from 2Q20 should be smaller than that of 1Q20 results. ATM operation business revenue decreased mainly because the stores, to which we place our ATMs, were temporarily closed and the number of consumers visiting such stores was small due to the stay-at-home orders. We saw some signs of recovery in June once such stores resumed operating. 1Q20 ATM operation business revenue and operating profit decreased year over year; however, the negative impact was smaller than what we had initially expected in our disclosed target announced in May 14, 2020.