#1ILJ Internet Initiative Japan Consolidated Financial Results for FY21 (April 1, 2021 to March 31, 2022) Internet Initiative Japan Inc. (IIJ) The Prime Market of the Tokyo Stock Exchange (Ticker symbol: 3774) May 13, 2022 Disclaimer Statements made in this presentation regarding IIJ's or managements' intentions, beliefs, expectations, or predictions for the future are forward-looking statements that are based on IIJ's and managements' current expectations, assumptions, estimates and projections about its business and the industry. These forward-looking statements, such as statements regarding revenues, operating and net profitability are subject to various risks, uncertainties and other factors that could cause IIJ's actual results to differ materially from those contained in any forward-looking statement. Internet Initiative Japan Inc.#2Outline I. Summary of FY21 P. 2 II. FY22 Targets & Status of the Mid-term Plan (FY21-FY23) P. 3 II. Consolidated Financial Results for FY21 P. 4-17 IV. Service & Business Developments P. 18-20 P. 21 - 22 V. Financial Targets for FY22 VI. Dividend Forecast for FY22 Appendix FY21(FY2021) means a fiscal year ending March 31, 2022. Others alike P. 23 P. 24 - 30 Internet Initiative Japan Inc. 1#3I. Summary of FY21 Unit: (JPY) billion (bn) +/- %, YoY Year over year comparison Net Profit is "Profit for the period attributable to owners of the parent❞ Revenues ¥226.3 bn, +6.3% Operating Profit ¥23.5 bn, +65.3% Net Profit ¥15.7 bn, +61.4% Started the Mid-term Plan with the first year's profit largely exceeding the initial target Structural profit expansion continued with our scale-merited enterprise recurring revenue (1) growth Increased dividend along with the profit growth (FY21 adjusted payout ratio: around 30%(*) Operating Profit & OPM NW Services Revenue (excl. mobile) Net Profit & ROE Dividend per Share FY19 Results FY20 Results FY21 Results FY20 Results FY21 Initial target FY21 Revised target FY21 Results FY19 Results FY20 Results FY21 Results 16.2% FY20 Results FY21 Initial forecast FY21 Revised forecast 9.6% 10.4% ¥46.00 11.5% 6.7% 7.7% 87.5 +10.3% 15.7 +61.4% FY21 Results ¥48.00 (27.7%)*2) OPM 22.0 23.5 +65.3% 5.2% 75.9 -1.0% (3) 79.3 +4.5% 17.5 ROE 14.2 +73.2% 9.7 +142.4% ¥29.75 (27.6%) 10.25 ¥39.00 23.00 23.00 19.50 4.0 +13.8% Network Services (excl.Mobile) • Mobile SI Topics 19.50 19.50 23.00 25.00 Year-end Interim (%) Payout ratio In-house developed highly value-added enterprise network (NW) services continued to grow by increasing digitalization demands IP: ¥13.68 bn, +12.4%, Outsourcing: ¥40.52 bn, +13.5%, WAN: ¥26.40 bn, +5.4%, Security (part of Outsourcing) ¥22.22 bn, +20.6% Total Mobile subscription as of Mar. 31, 2022: 3,508 thousand (of which, GigaPlans: 667 thousand) Enterprise (excluding MVNE) largely grew by accumulating various NW camera projects etc. Revenue: ¥10.26 bn, +31.4%, Subscription: 1,374 thousand, +23.7% . Consumer & MVNE revenues decreased as planned due to ARPU decrease for consumers & change in unit charge for MVNE clients at the beginning of FY21 (Total mobile revenue decrease: Plan: ¥7.0 bn, Result: \6.81bn) Received orders of several large scale integrated NW replacement projects. Favorable demands for NW integration such as Office IT Financial impacts from PTC (consolidated from Apr. 1, 2021): Revenues ¥6.89 bn (Plan: ¥8.5 bn) Operating profit ¥0.31 bn (Plan: ¥0.4 bn) "IIJ GIO Infrastructure P2 Gen.2" was launched in Oct. 2021 to promote full-scale Cloud shift of enterprise systems "IIJ GIO Infrastructure P2" was registered on ISMAP, Japanese government's Cloud service list (Dec. 2021) Construct 2nd site of Shiroi DC to absorb growing facility demands through FY2027 by gradually operating from July 2023 DeCurret HLD, an equity method investee, divested its crypto asset exchange business to focus on digital currency business. (Feb. 2022), enhanced management (*1) Enterprise recurring revenue: Sum of Network services (excluding Mobile) and Systems operation and maintenance revenues (*2) FY21 adjusted payout ratio is around 30%, which is calculated by deducting temporary and non-cash transaction such as valuation gain on funds & impairment losses (*3) FY19 NW Services Revenue (excluding mobile) includes certain large clients' WAN revenue which decreased by ¥4.4 bn YoY Internet Initiative Japan Inc. 2#4II. FY22 Targets & Status of the Mid-term Plan FY22 Targets Unit: JPY (¥) billion (bn) %, YoY = Year over year comparison Net Profit is "Profit for the period attributable to owners of the parent" Revenue & profit to increase by executing & enhancing growth strategy Revenues ¥250.0 bn +10.5% Profit before tax ¥26.3 bn +8.8% Operating Profit ¥27.2 bn +15.5% Net Profit ¥17.5 bn +11.7% Mobile DPS to increase with profit growth FY21 results ¥48.00 (27.7%) +\10.50 (%) payout ratio FY22 forecast ¥58.50 (30.2%) FY21 adjusted payout ratio is around 30%, which is calculated by deducting temporary and non-cash transaction Network Services (excl. mobile) Accelerate growth with large-scale NW replacement projects in addition to ongoing & continuous revenue accumulation Further strengthen competitive advantage of integrating various services such as Internet connectivity, Security, & WAN Enhancement of Company Foundation Enhance senior management to accelerate long term growth Level-up volume & quality of recruitment & human capital development Expect further business expansion by seeking M&A opportunities etc. Status of the Mid-term Plan (FY21-23) Generate advanced loT flagship projects Develop technology for 5G SA Expand market share by timely upgrading consumer plans Amount of expected revenue decrease to be smaller than FY21 CAPEX Construct Shiroi data center's 2nd site all at once Others such as network expansion related CAPEX to be usual volume SI Differentiate with comprehensiveness by providing services & SI Promote enterprise Cloud migration with GIO P2 Gen.2 Construction revenue to largely increase with large-scale & development projects in addition to NW integration demands following FY21 trend DeCurret HLD, an equity method investee Execute service & business development for digital currency platform to be launched in the latter half of FY23 Stronger-than-expected profit growth led to FY23 operating margin upward revision FY23 Operating Margin Target FY21 initial target FY21 revised target FY21 results Operating profit (bn) Operating margin 9.6% 10.4% FY22 target 10.9% FY23 plan 11.5% 7.7% Over 9% Over 10% 11.5% Revenues (bn) 17.5 22.0 23.5 27.2 226.0 228.5 226.3 250.0 270.0 Initial target (announced in May 2021) Previous target (announced in Nov. 2021) 5G SA (Stand Alone) is a way of communications in which core network, data communication, control functions and others are all comprised by 5G technology O Internet Initiative Japan Inc. Current target (announced in May 2022) 3#5- 1. Consolidated Financial Results Revenues % of revenue % of revenue FY2021 Results FY2020 Results YOY Apr. 2021 Mar. 2022 Apr. 2020 Mar. 2021 226.34 213.00 +6.3% +13.33 Unit: (JPY) billion YoY Year over year comparison % of revenue FY2021 Targets YOY (Revised in Nov. 2021) Apr. 2021 Mar. 2022 228.5 +7.3% +15.50 77.2% 81.1% 78.2% Cost of Revenues 174.71 172.72 +1.2% +1.99 178.7 +3.5% +5.98 22.8% 18.9% 21.8% Gross Profit 51.63 40.28 +28.2% +11.35 49.8 +23.6% +9.52 12.4% 12.2% 12.2% SG&A etc. 28.08 26.03 +7.9% +2.05 10.4% 6.7% Operating Profit 23.55 14.25 +65.3% +9.30 27.8 +6.8% +1.77 9.6% 22.0 +54.4% +7.75 10.7% 6.6% Profit before tax 24.16 14.03 +72.2% +10.13 6.9% 4.6% Net Profit 15.67 9.71 +61.4% +5.96 SG&A etc. represents the sum of SG&A, which includes R&D expenses, and other income/expenses Net profit is "Profit for the period/year attributable to owners of the parent" O Internet Initiative Japan Inc. 9.4% 21.5 +53.2% +7.47 6.0% 13.7 +41.1% +3.99 4#6III-2. Year over Year Analysis Revenues FY20 +13.34 213.00 YoY change in NW services (excl. Mobile) revenues YoY change in Mobile revenues Unit: (JPY) billion (bn) GP Gross Profit YoY Year over year comparison YoY change in SI revenues YoY change in ATM operation business revenues FY21 226.34 (0.11) • +8.19 IP, Outsourcing services and others continued to grow (6.81) Revenue decreased as planned due to ARPU decrease for consumer & MVNE +12.05 Of which ¥6.89 bn from PTC (Plan: ¥8.5 bn) NW services (excl. Mobile) revenues are calculated by deducting the below mentioned Mobile services revenues from total NW services revenues. The revenues include non-mobile consumer revenue which is a small amount Mobile services revenues include IIJ Mobile Services (including MVNE) and IIJmio (consumer mobile) ARPU is an abbreviation for Average Revenue Per User Operating Profit FY20 +9.3 FY21 14.25 23.55 YoY change in NW services GP YoY change in SI GP YoY change in ATM operation business GP YoY change in SG&A etc. +2.86 +0.04 Of which ¥0.76 bn from PTC +2.05 Of which ¥0.45 bn from PTC +8.45 About 2/3 of this growth came from NW services (excluding Mobile) SG&A etc. in this slide represents the sum of SG&A, which includes R&D expenses, and other income/expenses O Internet Initiative Japan Inc. 5#7III - 3. Revenues Network (NW) Services Internet Connectivity Services (Enterprise) Internet Connectivity Services (Consumer) Outsourcing Service WAN Service Unit: (JPY) million [ ], YoY = Year over year comparison Systems Integration (SI) Systems Construction (including equipment sales) LSystems Operation and Maintenance ATM Operation Business FY20: 213,002 [+4.2%] FY21: 226,335 [+6.3%] 50,379 51,286 54,405 56,932 52,975 56,079 56,546 60,736 694 731 715 682 766 824 693 570 21,760 23,357 23,403 24,203 26,926 18,875 19,292 20,807 30,934 31,170 31,879 32,8431 31,475 31,961 31,661 33,116 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 One-time revenue FY21: ¥35.38 billion, +11.4% YoY of which ¥4.73 billion from PTC (15.6% of FY21 total revenues) Recurring revenue FY21: ¥188.17 billion, +5.5% YoY of which ¥2.16 billion from PTC (83.1% of FY21 total revenues) NW Services revenue (excluding Mobile) FY21: ¥87.50 billion (+10.3% YoY, +¥8.19 billion) (38.7% of FY21 total revenues) Mobile Services revenue FY21: ¥40.72 billion (-14.3% YoY, ¥6.81 billion) (18.0% of FY21 total revenues) One-time revenue, systems construction revenues which include equipment sales, is mainly recognized when systems and/or equipment are delivered and accepted by customers Recurring revenue represents the following monthly recurring revenues: Internet Connectivity Services (Enterprise), Internet Connectivity Services (Consumer), Outsourcing Services, WAN Services, and Systems Operation and Maintenance • Mobile services revenues include IIJ Mobile Services (including MVNE) and IIJmio (consumer mobile) ARPU is an abbreviation for Average Revenue Per User Internet Initiative Japan Inc. 6#8II - 4. Cost of Revenues & Gross Profit Ratio Unit: (JPY) million [ ], YoY Year over year comparison Cost of Revenues: NW (Network) Services Gross profit ratio: NW (Network) Services SI (Systems Integration) SI (Systems Integration) ATM Operation Business Total 30.8% 26.5% 26.1% 27.7% 23.8% 22.5% 19.9% 19.4% 24.2% 24.4% 20.8% 20.2% 21.6% 20.8% 20.1% 18.2% 16.1% 16.0% 16.4% 15.2% 14.4% 13.7% 12.9% 10.5% FY20: 172,720 [+0.5%] FY21: 174,707 [+1.2%] 42,265 41,945 43,063 45,446 41,548 44,420 42,847 45,891 467 422 431 438 476 486 419 444 19,525 16,884 16,506 18,282 20,380 21,527 17,960 20,529 24,943 24,953 24,305 25,455 23,145 23,609 23,942 21,899 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 Total gross profit ➤ FY21: ¥51.63 billion (+28.2%, +¥11.35 billion YoY) ➤ FY21 gross profit ratio: 22.8% (FY20: 18.9%) ◆ Gross profit for NW services . ➤ FY21: ¥35.62 billion (+31.1%, +¥8.45 billion YoY) ➤ FY21 gross profit ratio: 27.8% (FY20: 21.4%) Gross profit increased by the increase in enterprise network services revenues, such as IP and Security In 3Q21, we had onetime profit contribution of approximately ¥1.08 billion as FY20 Docomo's mobile interconnectivity (unit charge) was fixed • ✓ For FY20, we recorded the following temporary cost reimbursement: 3Q ¥0.70 billion, 4Q: ¥0.39 billion Gross profit for SI ➤ FY21: ¥14.94 billion (+23.6%, +¥2.86 billion YoY) ➤ FY21 gross profit ratio: 15.7% (FY20: 14.5%) • 4Q21 gross profit ratio increased mainly due to a large systems construction revenue, which is a seasonal factor, and a small purchasing cost portion Internet Initiative Japan Inc. 7#9Ⅲ II - 5. Network Services (1) Revenues WAN Services Outsourcing Services Internet Connectivity (consumer) Services Internet Connectivity (enterprise) Services Total Contracted Bandwidth (Gbps) 6,624 7,108 7,280 7,347 7,642 5,869 6,022 5,289 FY20: 126,827 [+4.0%] FY21: 128,213 [+1.1%] 30,934 31,170 31,879 32,843 31,475 31,961 31,661 33,116 6,443 6,175 6,161 6,270 6,999 6,447 6,434 6,523 8,497 8,737 9,056 9,510 9,420 10,036 10,692 10,285 6,454 6,432 6,504 6,332 9,410 6,108 6,088 5,584 5,597 9,403 9,270 9,828 Decrease due to MVNE 9,809 9,841 10,049 10,648 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 Total contracted bandwidth is calculated by multiplying number of contracts by contracted bandwidths for IP service and broadband services respectively which are both under Internet connectivity services for enterprise IP (Internet Protocol) Service is bandwidth guaranteed dedicated Internet connectivity services for enterprises. Contracts are based on bandwidth and enterprises use the service for their core and main Internet connectivity ARPU is an abbreviation for Average Revenue Per User Unit: (JPY) million [ ], YoY = Year over year comparison QoQ Quarter over quarter comparison Internet Connectivity (enterprise) Services ➤ FY21: ¥37.91 billion, -6.0% YoY . Of which, IP (Dedicated connectivity for enterprises) FY21 revenue: \13.68 billion 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 YOY +9.4% +10.8% +17.2% +17.5% +13.7% +12.8% +9.8% +13.5% QoQ +6.4% +3.0% +5.7% +1.4% +2.9% +2.2% +3.0% +4.8% Of which, IIJ Mobile (enterprise): ¥20.35 billion, -17.0% YoY Of which, enterprise mobile (IoT usages) FY21 revenue: \10.26 billion 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 YoY +18.2% +22.0% +39.9% +37.0% +40.1% +37.8% +31.9% +19.5% QoQ (0.1%) +8.2% +12.1% +13.0% +2.2% +6.5% +7.3% +2.3% ✓ Of which, MVNE revenue: FY21 ¥10.09 billion, -39.6% YoY Impacted by the year-beginning decrease of purchasing unit charge and a large MVNE client switching to another operator due to M&A Internet Connectivity (consumer) Services (Mainly consumer mobile) FY21: ¥23.38 billion, -9.1% YoY Impacted by ARPU decrease along with the launch of GigaPlans Outsourcing Services (Various network services developed in-house) FY21: ¥40.52 billion, +13.5% YoY Of which, security FY21 revenue: \22.22 billion 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 YoY +11.9% +13.1% +12.0% +13.5% +15.0% +18.2% +22.7% +25.9% QoQ +3.2% +4.2% +2.3% +3.3% +4.5% +7.0% +6.2% +6.0% WAN Services (Wide Area Network, Closed network) ➤ FY21: ¥26,40 billion, +5.4% YoY 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 YoY (16.8%) (11.0%) (2.8%) +4.3% +4.4% +4.4% +4.0% +8.6% QoQ (0.0%) (0.2%) +1.8% +2.8% +0.1% (0.2%) +1.4% +7.3% FY20 revenue decreased due to certain large clients migration to mobile FY22 Outlook There is no major change with enterprise monthly recurring transactions (excluding MVNE) from 1Q22 (no large impact from annual renewal pricing pressure) ➤ Large-scale NW replacement projects' revenues would be gradually added to the continuous revenue accumulation O Internet Initiative Japan Inc. 8#10III-5. Network Services (2) Cost of Revenues Circuit-related costs (Internet backbone, WAN lines etc.) Outsourcing-related costs (mobile infrastructure related costs such as interconnectivity charge and voice communication services, outsourcing personnel costs etc.) Others Personnel-related costs (NW services related engineers' personnel cost) Network operation-related costs (depreciation cost for network equipment, data center leasing costs etc.) | FY20: 99,656 [-2.4%] FY21: 92,594 [-7.1%] 24,943 24,953 24,305 25,455 23,145 23,609 21,899 23,942 6,152 6,189 6,396 6,636 I 6,432 6,823 6,402 6,497 9,974 9,927 9,181 9,737 i 7,309 7,089 7,132 5,752 Unit: (JPY) million [ ], YoY = Year over year comparison FY21 Circuit-related costs increased by 3.1%, +¥0.78 billion YoY, along with WAN revenue increase Internet backbone circuit cost remains stable as we can leverage scale merit by having one of the largest Internet backbone networks ➤ FY21 Outsourcing-related costs decreased by 29.7%, -\11.54 billion YoY mainly because costs related to voice purchasing and mobile data interconnectivity decreased • • Voice purchasing cost (unit charge) was revised lower at the beginning of FY21 and Sep. 2021 (switched to auto-prefix appending in Sep.) 3Q21 Outsourcing-related costs reflect onetime cost reduction impact of Docomo's FY20 mobile interconnectivity cost (unit charge) revision ➤ FY21 Others increased by 44.8%,+\3.20 billion YoY as it included an increase in mobile device purchase . . FY21 purchasing cost of mobile device increased by ¥1.91 billion YoY Breakdown: 1Q: up ¥0.52 billion, 2Q: up ¥0.72 billion, 3Q: up ¥0.48 billion, 4Q: up ¥0.19 billion Regarding mobile data interconnectivity cost recognition: (Mobile Network Operator's mobile infrastructure cost) • 1,691 1,697 1,765 1,803 1,861 1,752 2,529 1,987 1,853 1,868 1,930 2,734 2,455 2,620 1,943 1,994 . 5,324 5,278 5,211 5,242 5,214 5,204 5,252 5,417 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 As for our FY22 usage charge, from 1Q22, we plan to apply ¥20,327 per Mbps as a unit charge which was disclosed by Docomo in Mar. 2022. The charge is lower than ¥22, 190 which was disclosed by Docomo in Apr. 2021. Both charges were based on Docomo's future cost method. As for our FY21 usage charge, from 1Q21, we applied ¥28,385 per Mbps as a unit charge, decrease of 23.9% from the previous year's charge, which was disclosed by Docomo based on the future cost method in Apr. 2021. The charge is to be fixed in late Dec. 2022. No onetime cost reduction upon ¦ the charge finalization is taken into consideration for FY22 financial targets. As for our FY20 usage charge, from 1Q20, we applied ¥41,436 per Mbps as a unit charge which was disclosed by Docomo based on the future cost method. This unit charge was fixed in late Dec. 2021 to ¥37,280 which is a decrease of 12.7% from the previous year's charge. Onetime cost reduction of slightly more than ¥1.0 billion was recorded in 3Q21. As for our FY19 usage charge, we used ¥42,702 per Mbps (decrease of 13.4% from the previous year's charge) as a unit charge, which was fixed in Jan. 2021. We recorded onetime cost reduction due to the difference between the fixed unit charge and our estimated unit charge were as follows: 3Q20: ¥0.70 billion, 4Q20: ¥0.39 billion. Internet Initiative Japan Inc. 9#11III - 6. Systems Integration (SI) (1) Revenues Systems Construction revenues (including equipment sales) Systems operation & maintenance revenues for on-premise system revenues Unit: (JPY) million [ ], YoY = Year over year comparison Cloud revenues such as private cloud which are recognized as systems operation & maintenance revenues Systems Construction (one-time) 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 I Systems Operation & Maintenance (recurring) 12,561 12,451 Order 11,073 11,254 9,646 9,763 backlog 7,650 8,330 49,981 51,341 51,995 54,564 56,424 56,388 56,897 1Q20 2Q20 3Q20 4Q201 1Q21 2Q21 3Q21 4Q21 60,340 FY20: 31,767 [-0.7%] FY21: 35,377 [+11.4%] 6,550 6,470 8,667 10,080 6,832 8,639 8,943 10,962 Revenues I FY20: 51,517 [+11.0%] FY21: 59,962 [+16.4%] 12,325 12,822 13,093 13,277 13,974 14,763 15,261 15,964 Order received 6,786 7,139 7,055 7,084 8,010 8,467 8,768 8,936 6,693 8,466 8,784 8,647 8,737 10,128 7,636 12,159 FY20: 32,590 [+3.0%] FY21: 38,660 [+18.6%] 5,539 5,682 6,038 6,193 13,949 14,182 13,747 15,846 12,911 14,727 15,770 | 19,407 FY20: 57,724 [+12.1%] FY21: 62,816 [+8.8%] 5,964 6,296 6,493 7,028 ➤ Accumulated orders across all industries (Large-scale construction orders received in 4Q21) • . Several large-scale NW renewal projects for public sector Several groupware implementation projects such as Microsoft 365 Several campus network renewal projects FY22 Outlook ➤ In addition to NW integration demands, we expect SI construction revenues to largely increase with large-scale & development projects We acquired several large-scale integrated NW replacement projects, which require both NW services & SI Acquired 5 projects ranging from a little less than ¥1 bn to over ¥5 bn in revenue. In total, revenue volume of over 10 bn for the total contracted period Contract period: 3 to 4 years Construction & operation of NW replacement and/or shared platform infrastructure such as Internet connection environment for all Tokyo metropolitan high schools and WAN to connect all Tax Offices in Japan (The projects' revenues would be largely recognized as NW services) • 1Q21 order received decreased because contracts for renewals were concentrated in 4Q20 Systems operation & maintenance revenues stably increased mainly because we continued to accumulate system construction project orders PTC (Singaporean Sler, consolidated subsidiary from Apr. 2021) While FY21 revenue was weaker than expected which was mainly due to fluctuation in orders from large customers & the Pandemic, we expect to accumulate demands from both the current large clients & new clients for FY22 Impact on consolidated financial results (All of PTC revenues is recognized as SI) Unit: \bn FY21 plan FY21 results FY22 target Revenues Operating Profit Approx. 8.5 6.89 Approx. 10.2 Approx. 0.4 0.31 Approx. 0.4 Internet Initiative Japan Inc. 10#12III - 6. Systems Integration (SI) (2) Cost of Revenues Purchasing costs (Equipment etc.) Outsourcing-related costs (SI-related outsourcing personnel costs etc.) Others Network operation-related costs (Depreciation cost such as for cloud facility, data center leasing cost etc.) Personnel-related costs (SI-related engineers' personnel cost) FY20: 71,197 [+5.3%] FY21: 80,396 [+12.9%] 16,884 16,506 18,282 19,525 17,960 20,380 20,529 21,527 5,460 5,064 5,324 4,742 5,371 3,538 4,141 3,056 7,513 7,501 6,880 5,813 6,223 6,324 6,751 6,888 1,590 1,680 1,483 2,978 2,951 2,922 2,801 1,891 1,917 2,755 2,154 2,517 2,739 2,754 2,943 2,971 2,469 2,686 2,614 2,711 2,861 2,907 2,865 2,843 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 Number of SI-related outsourcing personnel 1Q20- 2Q20- 3Q20- 4Q20- 1Q21- 2Q21- end end end end end end 1,094 1,181 1,236 1,270 1,244 1,300 (unit: personnel) 3Q21- 4Q21- end end 1,302 1,319 Unit: (JPY) million [ ], YoY = Year over year comparison ➤ Cost of revenues related to PTC is mainly recognized in purchasing costs, outsourcing-related costs and personnel related costs • 1Q: ¥1.16 billion, 2Q: ¥2.16 billion, 3Q: ¥1.39 billion, 4Q: ¥1.41 billion (FY21: ¥6.12 billion) ➤ 4Q21 gross profit ratio increased mainly because the ratio of purchasing cost to the systems construction revenue was small ➤ Others increased mainly due to an increase in license costs along with expansion of multi-cloud demands ➤ No significant increase in network operation-related costs Internet Initiative Japan Inc. 11#13III-7. Human Capital Disclosure Number of Employees Contract worker (personnel) Full-time worker (personnel) FY22 Outlook FY22 net increase of employees is planned to be approx. 290 (including 178 new graduates joined in Apr. 2022) Distribution (as of Mar. 31, 2022) Admin. YoY Year over year comparison Turnover Rate FY19 FY20 FY21 4.6% 3.6% 4.2% 12% Dec. 2020 Mar. 2021 Jun. Sep. 2020 2020 3,795 3,780 3,804 3,805 4,069 4,079 4,095 Jun. Sep. Dec. 2021 2021 2021 Mar. 2022 Sales 17% (+222) 4,147 (+342, of which Engineers 71% +56 from PTC) 262 270 270 306 253 256 257 258 • Turnover rate is calculated by dividing the number of leavers who joined before that FY by the number of full- time employees at the beginning of that FY IIJ's turnover rate is lower than its industry average turnover rate for telecommunication of about 10%, which is announced by the Ministry of Health, Labor and Welfare every year Age composition of IIJ's full-time workers As of Mar. 31, 2018 Number of IIJ's full time workers: 1,868 Number of IIJ's full-time workers: 2,301 (female to total: 16%) • As of Mar. 31, 2022 (female to total: 19%) 3,542 3,524 3,547 3,547 3,807 3,809 3,825 3,841 0 50 100 0 50 100 58 Male 58 Male 55 ■Female 55 Female 52 52 49 49 June-end 2021 employees increased by 274 YoY mainly due to the followings: +190 of new graduates in Apr. 2021, +62 through PTC consolidation 46 46 43 43 Personnel-related costs & expenses 40 40 Unit: (JPY) million, ( ) = % of revenue 37 37 1Q20 2Q20 3Q20 4Q20 2Q21 6,835 7,281 7,032 7,405 (13.6%) (14.2%) (12.9%) (13.0%) FY20: 28,553 (13.4%) +8.4% YoY ➤ ¥0.55 bn was added through PTC consolidation (Apr. 2021) 1Q21 7,756 7,892 7,859 7,985 (14.6%) (14.1%) (13.9%) (13.1%) 3Q21 4Q21 34 Female ratio 34 Female ratio 31 among twenties 31 among twenties 18% 26% 28 28 FY21: 31,491 (13.9%) +10.3% YoY 25 25 22 22 Internet Initiative Japan Inc. 12#14II - 8. SG&A Research & development expenses Commission expenses Others Personnel expenses ( ) % of total revenues Unit: (JPY) million [ ], YoY Year over year comparison FY20: 25,491 [+5.9%] 6,049 6,075 6,204 7,163 (12.0%) (11.8%) (11.4%) (12.6%) FY21: 27,969 [+9.7%] 7,083 6,707 6,704 7,476 (13.4%) (12.0%) (11.9%) (12.3%) 127 139 125 124 130 111 110 112 1,164 1,012 1,491 979 846 880 850 833 2,902 2,519 2,668 2,683 2,474 2,388 2,596 2,993 2,584 2,727 2,663 2,867 3,043 3,086 3,060 3,175 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 Other than as provided to the left, we had ¥0.11 billion of expenses, as other income/expenses (net) in FY21 (FY20: ¥0.54 billion of expenses) Of which, FY21 disposal loss on fixed assets was ¥0.22 billion (FY20: ¥0.64 billion) ➤ Research & development expenses mainly consist of personnel expenses of IIJ Innovation Institute, a wholly owned subsidiary IIJ absorbed IIJ Innovation Institute on Apr. 1, 2022 Commission expenses are mainly consumer sales commission and recruitment expenses. In 4Q21, mobile marketing expenses increased due to a seasonal factor ➤ FY21 Others slightly increased mainly due to advertisements for consumer business ➤ PTC's SG&A etc. has been added from 1Q21 1Q: ¥0.09 billion, 2Q: ¥0.11 billion, 3Q: ¥0.12 billion, 4Q: 0.13 billion (FY21: ¥0.45 billion) FY22 Outlook Expect the YoY increase to become large mainly due to enhanced recruitment and promotion SG&A etc. in this slide shows the sum of SG&A which includes R&D expenses (not including other income/expenses) Internet Initiative Japan Inc. 13#15II - 9. Profit Operating profit Operating Margin Net Profit (Profit for the period attributable to owners of the parent) Operating profit ➤ FY21: ¥23.55 billion, +65.3% YoY Profit before tax 12.4% 11.9% 9.0% 7.2% 8.2% 8.8% ➤ FY21: ¥24.16 billion, +72.2% YoY Interest expense: ¥538 million 6.2% 4.1% FY20 Operating profit: 14,248 [+73.2%] FY21 Operating profit: 23,547 [+65.3%] FY20 Net profit: FY21 Net profit: 9,712 [+142.4%] 3,192 2,047 1,654 1,116 15,646 [+61.4%] 7,249 6,994 4,888 4,944 4,120 14,360 4,630 4,150 3,835 3,507 3,107 3,385 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 Unit: (JPY) million [ ], YoY Year over year comparison Foreign exchange gain: ¥327 million Gain on funds*: ¥3,055 million (of which, ¥585 million is fixed and realized amount) (1Q: ¥1,296 million, 2Q: ¥396 million, 3Q: ¥867 million, 4Q: ¥495 million) Dividend income: ¥82 million Interest income: ¥42 million Share of loss of investments accounted for using equity method: ¥2,335 million DeCurret-related income (loss): 1Q21 2Q21 3Q21 4Q21 1Q20 2Q20 3Q20 4Q20 (306) (273) (207) 156 (296) (256) (780) (1,456) ✓ IIJ ownership: 4Q19 30.0%, from 1Q20 41.6%, from 1Q21 38.2% is used to recognize gain and loss ✓ DeCurret divested its crypto asset business on Feb. 1, 2022 to dedicate its business resources to digital currency business ✓ 3Q21 loss increased as it included temporary loss of ¥484 million due to the divestiture in addition to ordinal loss. 4Q21 loss includes \1.18 billion of loss as impairment on corresponding amount of goodwill (No more loss related to the divestiture) ✓ 4Q20 income includes a gain on changes in equity of ¥349 million arisen from the issuance of common stock Net profit ➤ FY21: ¥15.67 billion, +61.4% YoY Income tax expense: ¥8,362 million, +97.5% YoY Tax benefit on loss related to DeCurret investments was not recognized 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 (74) (286) 186 368 1,208 (279) (135) (313) 319 (217) 292 (155) 855 (572) (1,084) (1,625) (952) (6) (34) (29) (21) (1,807) (36) (1,667) (30) (684) (2,500) 595 Finance income (expense), net (1,278) Share of profit (loss) of investments accounted for using equity method (2,388) Income tax expense (35) (27) Less: Profit for the period attributable to non-controlling interests *Under IFRS, equity securities are measured at fair value through OCI (Other Comprehensive Income) while funds are measured through profit or loss. Internet Initiative Japan Inc. 14#16• III-10. Consolidated Statements of Financial Position (Summary) Unit: \(JPY) million Ratio of total equity attributable to owners of the parent: 40.7% as of Mar. 31, 2021, 44.7% as of Mar. 31, 2022 Cash & cash equivalents Trade receivables Inventories Mar. 31, 2021 42,467 Mar. 31, 2022 Changes 47,391 +4,924 34,799 37,649 +2,850 2,171 2,608 +437 Prepaid expenses (current & non-current) 20,136 24,006 +3,870 Tangible assets 17,084 17,846 +761 Right-of-use assets 50,708 44,874 (5,834) Of which, operating leases (rent of office, data center etc.) 34,222 27,859 (6,363) Of which, finance leases (network equipment etc.) 16,486 17,015 +529 Goodwill & intangible assets 23,037 25,903 +2,866 Investments accounted for using the equity method Other investments Others 9,027 5,830 (3,197) 12,912 17,410 +4,497 8,436 8,289 (147) Total assets: 220,777 231,805 +11,028 Trade & other payables Borrowings (current & non-current) Contract liabilities & Deferred income (current & non-current) Income taxes payable Retirement benefit liabilities Other financial liabilities (current & non-current) Of which, operating leases (rent of office, data center etc.) Of which, finance leases (network equipment etc.) Others 19,244 20,742 +1,498 25,560 21,870 (3,690) 14,832 17,405 +2,574 3,012 5,795 +2,783 4,169 4,395 +226 53,527 47,181 (6,346) 34,432 28,157 (6,274) 18,229 18,069 (160) 9,462 9,796 +334 Total liabilities: 129,806 127,184 (2,621) Share capital 25,531 25,562 +31 Share premium Retained earnings 36,389 36,518 +129 25,047 37,024 +11,977 Other components of equity Treasury shares 4,865 (1,875) 6,275 (1,851) +1,410 +24 Total equity attributable to owners of the parent: 89,956 103,528 +13,572 Internet Initiative Japan Inc. 15#17- 11. Consolidated Cash Flows Operating Activities Unit: (JPY) million YoY Year over year comparison FY20: 40,544 FY21: 43,573 Major Breakdown YOY Change 1Q20 2Q20 11,635 9,863 3Q20 9,901 4Q20 1Q21 9,145 i 7,654 2Q21 3Q21 4Q21 11,212 11,505 13,203 Profit before tax 24,162 +10,127 I Depreciation and amortization 28,444 +471 Changes in operating assets & liabilities (2,892) (4,406) Income taxes paid (5,700) (1,788) Investing Activities FY20: (13,216) Major YOY Breakdown Change FY21: (11,838) Purchase of tangible assets (6,783) (393) 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 Purchase of investments accounted for using equity method +4,754 Purchases of a subsidiary (2,612) (2,612) (4,592) (1,954) (2,371) (4,298) (6,414) (1,771) (1,647) (2,006) Purchase of intangible assets such as software Proceeds from sales of tangible assets (leaseback) (4,734) (118) 2,150 (349) Financing Activities FY20: (23,618) FY21: (27,296) Major Breakdown YOY Change 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 Payment of operating/finance leases and other financial liabilities (19,983) +186 Repayment of borrowings Dividends paid (3,690) (1,500) (3,836) (2,303) (6,802) (5,167) (7,062) (4,587) (8,875) (4,526) (8,838) (5,056) Internet Initiative Japan Inc. 16#18-12. Other Financial Data CAPEX Cash CAPEX Finance lease FY20: 15,151 FY21: 16,130 3,234 4,060 3,643 4,213 4,698 3,745 3,094 4,593 Unit: (JPY) million CAPEX-related depreciation and amortization FY20: 14,457 FY21: 15,090 3,610 3,622 3,621 3,604 3,645 3,682 3,753 4,009 • • 1,608 1,906 3,251 1,414 2,285 2,030 1,859 1,113 1,375 2,453 1,612 2,308 2,331 1,447 1,981 2,308 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 Breakdown (Unit: JPY billion) FY20 FY21 NW Usual Capex 8.8 9.7 Cloud-related 2.8 2.3 Shiroi DC-related 1.5 1.5 Customer-related 1.7 2.6 ATM-related 0.3 0.0 FY22 Outlook: around ¥21.5 billion ➤ CAPEX for Shiroi data center's 2nd site construction to be approx. ¥5.0 billion for FY22 portion. Network (NW) usual CAPEX & others to be normal level IIII 1Q20 2Q20 3Q20 Adjusted EBITDA 4Q20 1Q21 2Q21 3Q21 4Q21 FY20: 28,705 FY21: 38,637 5,658 6,814 8,509 7,724 8,005 8,626 10,747 11,258 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 Total amount of capital expenditure is the amounts of acquisition of tangible and intangible assets by cash and entering into finance leases for the fiscal year, excluding duplication due to sale and leaseback transactions and acquisition of assets that do not have the nature of investment, such as purchase of small-amount equipment. CAPEX-related depreciation and amortization is calculated by excluding depreciation and amortization of assets that do not have the nature of capital investment, such as right-of-use assets related to operating leases, small-amount equipment and customer relationship. Adjusted EBITDA is calculated by adding operating profit and CAPEX-related depreciation and amortization. Internet Initiative Japan Inc. 17#19IV - 1. Service & Business Developments: Mobile & lot Subscriptions (unit: thousand) Subscription (Subs.) Unit: (JPY) billion (bn) Year over year comparison Quarter over quarter comparison %, YoY QoQ Enterprise mobile (deducting MVNE from IIJ Mobile) ➤ FY21 revenue: ¥10.26 bn (+¥2.45 bn YoY) 4Q21-end subs.: 1,374 thousand (+54 thousand QoQ) Growing by additional orders from the existing projects & continuously receiving new projects 1,374 1,320 1,218 Enterprise mobile 1,124 1,123 1,119 1,163 1,110 1,073 1,090 . MVNE 1,072 1,046 1,099 1,053 IlJmio 1,063 1,045 • 1,037 1,034 1,042 992 923 968 983 1,033 Revenue Revenues (unit: \billion) 11.84 11.74 11.81 12.13 10.58 10.44 9.66 10.03 Enterprise mobile 1.67 1.81 2.03 2.29 MVNE 2.34 2.50 2.74 2.68 4.37 IIJmio 4.18 3.97 4.20 2.85 2.60 2.17 2.48 5.80 5.75 5.81 5.63 5.39 5.35 4.81 4.81 Differentiate with Multi carriers, SoftSIM and other various forms of SIM Various usage: payment (vending machines etc.), marketing cameras, surveillance cameras (attached to helmets etc.), dashboard cameras, backup for WAN, GPS trackers (for kids safety etc.), remote control (close/open door keys etc.) remote work and many more MVNE (providing mobile services to other MVNOs) FY21 revenue: ¥10.09 bn (-¥6.62 bn YoY) Impacted by the decrease in purchasing unit charge and a large MVNE client switching to another operator due to M&A 4Q21-end subs.: 1,033 thousand (+50 thousand QoQ) 4Q21-end MVNE clients: 170 clients (+11 clients YoY) Cable TV operators (91 operators), prominent retailer etc. IlJmio(consumer) FY21 revenue: ¥20.37 bn (-¥2.63 bn YoY) 4Q21-end subs.: 1,090 thousand (+17 thousand QoQ) GigaPlans Subs. (unit: thousand) 462 Of which, new users 1Q-end 2Q-end 3Q-end 4Q-end 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21 556 607 667 17% 30% 34% 38% FY20 FY21 Enterprise 7.81 (+29.6%) 10.26 (+31.4%) MVNE 16.72 (+0.9%) 10.09 (-39.6%) IlJmio 23.00 (-2.1%) 20.37 (-11.4%) Total 47.52 (+3.1%) 40.72 (-14.3%) FY21 full-MVNO revenue: \3.81 bn FY22 Outlook: total mobile revenue to decrease by ¥0.5 bn Enterprise: revenue & subs. to continuously & largely increase along with continuous accumulation of loT projects MVNE: Revenue per unit to decrease along with decrease in purchasing costs. The certain client's migration impact to continue IlJmio: Aim for larger than FY21 net addition subs. (56 thousand) (revenue recognition: 90% Enterprise mobile, 10% IIJmio) 18 O Internet Initiative Japan Inc.#20IV-2. Service & Business Developments Security largely growing with ongoing strong demands Security Services (recurring) revenue In addition to conventional services such as Mail and Web security services which we have been providing since the 2000s, SOC (Security Operation Center) and SASE services are also contributing to the strong revenue growth 6.07 Unit: (JPY) billion % Year over year comparison Acquired several large projects requiring both NW &SI Meeting demands for enterprise NW systems that are becoming more complexed and diversified with in- house developed NW services and SI SecureMX Mail security Web security IIJ UOM Service System monitoring & operation Secure Web Gateway CASB main IIJ C-SOC SOC MVISIO INA Shadow IT visualization & control INA Remote VPN Connec for Test environment MFW DR HIJ GIO Production environment MFW IN GIO DLP DNS/Web/Log MFW HUGIO DLP DNS/Web/Lo PVA AWS Microsoft Azure DNS/Web/Log PVA Cloud hub laaS DR (Western Japan region) 9999) laaS production environment (Eastern Japan region) goog Carrier redundancy laaS test (Eastern Japan region) I 4.38 ! 5.04 (+18.2%) 4.82 4.56 4.66 (+15.0%) (+11.9%) (+13.1%) (+12.0%) (+13.5%), 5.72 (+25.9%) 5.39 (+22.7%) Microsoft 365 Internet INA I FY20: 18.42 (+12.7%) FY21: 22.22 (+20.6%) AD FW(FG MVP/SW Closed network MVP/SW FW(FG) • Total Security Business (Services + SI) 1Q20 2Q20 3Q20 4Q20 5.01 5.30 5.44 5.72 1Q21 2Q21 3Q21 4Q21 5.73 6.19 6.48 7.05 FY21: 25.44 (+18.5%) FW(PA) Internal system DC (Disaster Recovery Site) SW Branch offices FY20:21.47 (+12.0%) Security service revenue (recurring) is 100% recognized in Outsourcing services Security services is a general term for individual security service such as mail security, firewall, Web filtering, DDoS protection, SOC service, Endpoint (EDR) and SASE SASE (Secure Access Service Edge) is a concept to shift controls of network and security on the route to Cloud services to enable secure access from any points, instead of the conventional centralized management through headquarters or data centers FY21 Security Service Revenue Breakdown Mail Full-outsourcing of mail systems, protected delivery/anti-threat email, sandboxing, etc. DDoS protection, IPS/IDS, WAF etc. Full-outsource of web security, URL filtering etc Others 7% FW 12% Mail 31% Network Web Web GW Gateway 20% Network 29% FW Managed firewall services, Anomaly detection etc Others SOC etc. FW PA) Internal system DC Outside of office Internet IIJ Private Backbone Services CASB Secure Web Gateway SWG bypass Unified Operation and Maintenance FW Cloud proxy HIJ GIO IIJ Private Backbone Service IUJ GIO Citrix Cloud for Azure Virtual Desktop(CTX) Boarder FW Azure Citrix Cloud Closed Connectivity (carrier redundancy) FW VPN equipment DC HQ/ branch offices Internet Initiative Japan Inc. 19#21IV-3. Service & Business Developments Unit: (JPY) billion % Year over year comparison IP Service Cloud Services 13.68 12.17 (+12.4%) Revenue Private cloud Raptor Public cloud Overseas etc. 10.14 10.57 10.70 (+13.7%) (+3.8%) (+4.2%) (+1.2%) 3.61 FY20: 26.20 (+11.1%) ¦ FY21: 28.65 (+9.4%) 3.18 2.65 2.71 7.75 2.55 3.45 4Q 3.14 6.19 6.36 6.74 6.91 6.68 7.20 7.02 2.56 2.71 2.68 0.72 3Q 3.35 0.70 0.72 0.72 0.71 0.72 1.37 2Q 2.51 2.63 2.68 2.97 0.65 1.01 0.68 0.98 1.30 1.33 1.14 1.12 1.09 1Q 2.49 2.58 2.63 2.88 3.28 FY17 FY18 FY19 FY20 FY21 4.37 4.54 4.58 4.68 4.70 4.98 5.19 5.48 I ⚫ IP Service (monthly recurring) is 100% recognized in Internet connectivity services for enterprise. IP service is bandwidth guaranteed & dedicated Internet connectivity services. Charge based on contracted bandwidth Internet traffic & bandwidth are increasing along with advancement of enterprises' IT usage. In addition to Office IT demands such as Web meetings, expect Business IT demands such as online business to increase As Japan's first full-scale ISP, we have established close relationships with blue-chips companies & retained them through our stable operation. Enjoying an economy of scale by operating one of the largest Internet backbone in Japan Overseas Business While FY21 revenue was weaker than expected mainly due to PTC, newly consolidated Singaporean Sler, for FY22 we aim for revenue and operating profit increase with each country's advancement, PTC recovery, certain projects, change in foreign exchanges etc. FY21 results ➤ Revenue: ¥17.84 bn (Plan: approx. ¥18.0 bn) ➤ Operating profit: ¥1.24 bn (Plan: approx. ¥0.9 bn) 1Q20 2Q20 3Q20 4Q20 4Q21 revenue recognition 1Q21 2Q21 3Q21 4Q21 90% Systems operation and maintenance (mainly private cloud which includes multi-cloud) 10% Outsourcing service (mainly public cloud) Private Cloud grew as demands for Multi-Cloud continued "IIJ GIO Infrastructure P2 Gen.2" was launched in Oct. 2021 to promote full-scale cloud shift of enterprise systems "IIJ GIO Infrastructure P2" was registered on ISMAP, Japanese government's Cloud service list (Dec. 21) DeCurret HLD, an equity method investee Divested crypto asset business in Feb. 2022 to focus on digital currency business New Management from Apr. 2022 ➤ DeCurret Holdings (Shareholders: 35 companies including IIJ) Representative Director and President: Murabayashi (Mr.) (IIJ Vice President, former CIO for Mitsubishi Tokyo UFJ Bank) Part-time directors: IIJ, MUFG bank, KDDI, NTT, JAPAN POST bank Plan to launch digital currency platform services in the latter half of FY23. Executing PoCs with various companies ➤ Apply Smart Contract to calculate fees & execute payment for trade transaction (Mitsubishi Corporation, NTT), Test electricity trading through virtualized data (ENERES), Execute store settlement at LAWSON, convenience store chain (Kansai Electric Power), Issue digital coupon in anticipation of temporary special benefit for child- rearing households (Kesennuma & Aizuwakamatsu cities) etc. Internet Initiative Japan Inc. 20 20#22V. Financial Targets for FY22 (1) % of Revenues FY22 Targets (Apr. 2022 Mar. 2023) % of Revenues FY21 Results (Apr. 2021 Mar. 2022) Unit: (JPY) billion (bn) YoY Year over year comp % of Revenues YOY FY22 1H Target (Apr. 2022 Sep. 2022) YOY Revenues Gross Profit SG&A etc. 250.0 23.1% 57.8 12.2% 30.6 226.3 +10.5% +23.7 117.0 +7.3% +7.9 22.8% 22.3% 51.6 +12.0% +6.2 26.1 +13.1% +3.0 12.4% 13.2% 28.1 +9.0% +2.5 15.4 +11.7% +1.6 10.9% 10.4% 9.1% Operating Profit 27.2 23.5 +15.5% +3.7 10.7 +15.0% +1.4 Shares of profit (loss) of investments accounted for using equity method investees (0.4) (2.3) +19.3 (0.2) +2.0 10.7% 8.8% Profit before tax +8.8% +2.1 10.3 (1.3%) -0.1 6.9% 5.8% Net Profit 15.7 +11.7% +1.8 6.8 (1.3%) -0.1 NW services (excluding mobile) Mobile SI ATM 10.5% 26.3 7.0% 17.5 Assumption for Revenue Accelerate with large-scale NW replacement projects in addition to strong revenue accumulation trend following FY21 While enterprise mobile to largely grow, total mobile revenue to decrease by \0.5 bn or slightly more as migration to cheaper new plan (GigaPlans) continues etc. Increase with demands for NW integration & large-scale NW replacement projects requiring both NW services and SI etc. Same level as FY21 24.2 Assumption for Gross Profit Structurally and continuously expand with revenue growth Smaller than FY21 profit as no onetime impact upon the unit charge finalization is taken into consideration (in FY21, we had approx. ¥1.08 bn of profit contribution) & onetime profit related to voice-purchasing cost down impact would be smaller in FY22 Increase as Sl revenue volume to expand and gross margin to slightly improve • • • Other assumptions SG&As: increase due to enhanced recruitment & promotion Share of loss of investments accounted for using equity method investees to be smaller as DeCurret related loss would be smaller (Plan: DeCurret's loss to be around \0.7 bn) Net addition of employees: approx. 290 including 178 newly graduates CAPEX: approx. ¥21.5 bn including approx. ¥5.0 bn for Shiroi DC 2nd site • Same level as FY21 Internet Initiative Japan Inc. SG&A etc. shows the sum of SG&A, which includes R&D expenses, and other income/expenses Net profit is "Profit for the year attributable to owners of the parent❞ 21 24#23Unit: (JPY) billion (bn) GP=Gross Profit YoY Year over year comparison V. Financial Targets for FY22 (2) Revenues FY21 226.34 YoY change in NW services (excl. Mobile) revenues YoY change in Mobile revenues +23.66 YoY change in SI revenues YoY change in ATM operation business revenues FY22 target 250.0 . +12.1 Growth to accelerate with ongoing strong demands & large-scale network replacement projects (0.5) While enterprise mobile to largely increase, total mobile revenue to decrease due to migration to new and cheaper consumer plan (GigaPlans) etc. +12.2 (0.2) In addition to ongoing demands for network integration, expect large- scale integrated projects etc. to contribute to the revenue growth NW services (excl. Mobile) revenues are calculated by deducting the below mentioned Mobile services revenues from total NW services revenues. The revenues include non-mobile consumer revenue which is a small amount Mobile services revenues include IIJ Mobile Services (including MVNE) and IIJmio (consumer mobile) ARPU is an abbreviation for Average Revenue Per User Operating Profit FY21 23.55 +3.65 YoY change in YoY change NW services GP in SI GP YoY change in ATM operation business GP YoY change in FY22 target 27.2 SG&A etc. (0.1) +4.3 While mobile gross profit to be smaller than FY21, continuous accumulation of NW services (excluding Mobile) revenue is to structurally increase profit +2.1 Gross profit to increase as SI revenue volume to expand and gross margin to slightly improve SG&A etc. in this slide represents the sum of SG&A, which includes R&D expenses, and other income/expenses O Internet Initiative Japan Inc. +2.5 Increase due to enhanced recruitment & promotion 22#24VI. FY22 Dividend Forecast ◆ Basic dividend policy: Basic dividend policy of IIJ is that IIJ pays dividends to its shareholders continuously and stably while considering the need to have retained earnings for the enhancement of financial position, med-to-long term business expansion and future business investment etc. ◆ Historical dividend per share: Unit: JPY Interim dividend 1 Year-end dividend FY19 FY20 FY21 FY22 (Forecast) +21.9% 58.50 +61.3% 48.00 29.25 23.00 29.75 Initial forecast: 19.50 +120.4% 10.25 13.50 25.00 19.50 6.75 Initial forecast: 19.50 Revised forecast: 23.00 6.75 Payout ratio 30.4% 27.6% 27.7% 29.25 30.2% Adjusted payout ratio is around 30%, which is calculated by deducting temporary and non-cash transaction such as valuation gain on funds & impairment losses We conducted 1:2 stock split on January 1, 2021. Dividends paid before the split are retroactively adjusted to reflect the spit Internet Initiative Japan Inc. 23 23#25Appendix IIJ Group's Client base: approx. 13,000 enterprises High penetration toward top 10 companies of each industry Retail 5% 100% 100% 80% 100% 90% Electronic Information/ Telecommuni- cations Machinery Precision equipment Banking 100% 80% 90% 100% 100% Securities Retailing Wholesales Construction Insurance Client distribution per industry Client distribution per revenue volume Construction/ Real estate 6% Communication, Top 501- 22% IT 26% Top 401-500 4% Manufacturing 11% Public 15% Top 301-400 5% Finance 19% Service 18% Top 201- 300 8% Top 101-200 13% Top 1-100 48% Number of IIJ group's clients is as of March 31, 2021 Top ten firms in each industry taken from annual revenues are selected by IIJ based on the Yahoo! Japan Finance website (finance/sales/whole market/daily) and are based on IIJ's FY21 results and prepared by IIJ Client distribution is based on IIJ's FY21 results and prepared by IIJ Internet Initiative Japan Inc. 24#26Appendix Revenue Recognition Category Revenue category FY21 revenue About Unit: (JPY) billion Business Situation & Outlook Network services Internet connectivity services for enterprise Internet connectivity services for IP 13.68 37.91 23.38 consumers WAN 26.40 Mobile Mobile 20.35 20.37 Core service providing from the foundation Highly reliable dedicated connectivity services for enterprise (multi-carrier, redundancy etc.) Charge based on contracted bandwidth. Enterprises use the service for their main Internet line Enterprise mobile (loT usages etc.) MVNE (Proving to other MVNOs) 10.26 10.09 ➤ Inexpensive SIM services (mainly data), ➤ Direct sale (via IIJ web), Indirect sale (via sales partners such as retailers) Closed network used to connect multiple sites In-house developed Internet-related various service line- ups (Security, datacenter and remote access etc.) Outsourcing 40.52 Security 22.22 Public Cloud 2.87 Operation and Maintenance 59.96 SI Construction (including Equipment sales) 35.38 Operation and maintenance of constructed systems ➤ Promote cloud shift with our abundant, highly reliable, value-added private Cloud related service line-ups On-premise Systems 34.18 Private Cloud etc. 25.78 System construction related to office IT, security, Cloud, IoT. Internet-related construction such as Online banking & brokerage, backbone network for university, and E-commerce site Internet Initiative Japan Inc. Matured market (hard to entry) ➤ Blue-chip client base ➤ Expect the revenue to continuously increase along with traffic volume and contracted bandwidth increase from CDN ➤ Expect profitability and mobile infrastructure utilization to improve as we gather various traffic such as loT, enterprise, consumers Enterprise: Expect demand to increase in the mid-to-long term • Consumer: Net increase (subscription) with new consumer plan in competitive market Stable market for long-term ➤ Have been developing services based on Zero Trust concept ➤ Acquire enterprise demand by cross-selling services. Continuous service development is important Monthly Recurring Revenue ➤ Demands for security and remote access to 83.1% increase continuously Expect great business opportunity in the middle- to-long term as internal IT systems migrating to cloud Certain volume of systems to be converted to Cloud ➤ Revenue to increase continuously along with accumulation of construction projects Through providing SI, offer greater value as loT and cloud usage penetrate revenue One time 25#27Appendix Capex and Business Developments FY16 FY17 FY18 FY19 FY20 FY21 FY22 targets Revenues (bn) 157.8 176.2 192.4 204.5 213.0 226.3 250.0 Operating Profit (JPY billion) 3.3% 3.8% 3.1% Stronger demands for enterprise Network services 4.0% 10.4% 10.9% 6.7% 27.2 23.5 Operating Margin (%) 5.1 6.8 6.0 8.2 14.2 Large CAPEX increase due to aggressive business investment CAPEX & its depreciation almost same volume CAPEX (\bn) 16.5 20.7 15.1 15.2 15.2 16.1 21.5 NW services 12.6 9.4 9.4 9.6 8.8 9.7 Cloud 3.6 7.9 1.9 2.6 2.8 2.3 Shiroi DC 1.2 2.1 2.0 1.5 1.5 SI, others 0.3 2.3 1.7 1.0 2.0 2.6 CAPEX-related Cost stabilizing depreciation and amortization (\bn) 10.9 12.1 13.9 14.4 14.5 15.1 Number of employees 3,104 3,203 3,353 3,583 3,805 4,147 Various Network Services Asset Launched Omnibus (Sep. 2015) Enhanced SMX (Oct. 2016) Opened SOC (Mar. 2017) Launched Secure Endpoint Enhanced SWG (Oct. 2018) (Dec. 2020) Launched GIO P2 (Oct. 2015) Launched UOM (Apr. 2017) Launched full-MVNO (Mar. 2018) Opened Shiroi DC (May 2019) Opened Security training center (Jan. 2022) Launched GIO P2 Gen.2 (Oct. 2021) Added SWG Sandbox (Feb. 2016) DDoS service global Launched Flex Mobility Launched enterprise (Jan. 2017) (Dec. 2018) Launched private connectivity with AWS (Sep. 2016) FY16: US-GAAP, from FY17: IFRS Enhanced Omnibus (Oct. 2018) CAPEX-related depreciation and amortization is calculated by excluding depreciation and amortization of assets that do not have the nature of capital investment, such as right-of-use assets related to operating leases, small-amount equipment and customer relationship Internet Initiative Japan Inc. eSIM (Apr. 2021) Enhanced SOC (May 2021) 26 26#28Appendix Structural Profit Growth with Enterprise NW Services Revenue Accumulation Unit: (JPY) billion Revenues of Network Services FY19 FY20 FY21 FY22 outlook 40.2 40.72 Mobile 47.52 46.09 99.6 Network Services 87.50 (excluding mobile) 75.91 79.30 (*1) (*2) aka Enterprise NW Services +3.39 +8.19 +12.1 IP, Security, WAN etc. Gross Profit of Network Services About 2/3 of the increase FY19 FY20 is due to FY21 FY22 outlook strong enterprise NW 39.9 services 35.62 revenue accumulation 27.17 19.91 +7.26 +8.45 +4.3 The main cost for Network services (excluding Mobile), written below, are not directly linked to the revenues fluctuation • Circuit leasing fees for Internet backbone • Depreciation cost for network equipment Personnel cost for service development & operation Operation cost for data centers (*1) Year over year revenue increase of ¥3.39 bn includes year over year revenue decrease of ¥1.92 bn for WAN Services, which require circuit purchasing (*2) Planned year over year revenue increase of ¥12.1 bn largely includes a revenue increase of WAN Services, which require circuit purchasing O Internet Initiative Japan Inc. 27 27#29Appendix Docomo's Mobile data interconnectivity charge (Mbps unit charge-monthly) FY20 FY21 FY22 FY23 FY24 Fiscal Year FY18 FY19 Method Actual cost method New Future cost method MNOS are to disclose the charges for next three years based on their prediction about cost etc. Current ¥49,311 -6.0% YoY ¥42,702 -13.4% YoY ¥37,280 -12.7% YoY Old Announced in Mar. 2022 ¥20,327 -28.4% YoY ¥15,697 -22.8% YoY ¥13,207! -15.9% YoYi -8.4% compared to the previously announced Announced in Apr. 2021 To be fixed around late Dec. 2022 (scheduled): ¥28,385 -23.9% YoY -23.9% YoY -14.5% compared to the previously announced charge charge ¥22,190 -21.8% YoY -20.5% compared to the previously announced charge -12.9% compared to the previously announced charge ¥18.014 -18.8% YoY Announced in Mar. 2020 ¥49,311 -6.0% YoY ¥42,702 -13.4% YoY ¥41,436 -3.0% YoY ¥33,211 -19.8% YoY ¥27,924 -15.9% YoY! • • The same calculation method is applied to both the actual cost method and the future cost method: (Data communication cost + profit) /demand As for our FY20 usage charge(*), from 1Q20, we applied ¥41,436 per Mbps as a unit charge which was disclosed by Docomo based on the future cost method. This unit charge was revised and fixed at the end of Dec. 2021 as ¥37,280 which is a decrease of 12.7% from the previous year's charge. We recorded all impact generated from this revision in our 3Q21 financial results. The charge disclosed based on the future cost method is to be finalized based on MNOS actual cost results etc. FY21 charge of ¥28,385 is to be fixed around at the end of Dec. 2022. MNO is an abbreviation for Mobile Network Operator such as NTT Docomo. • Mobile interconnectivity charges, which are underlined above, had been fixed based on the results The YoY (Year over Year) decrease percentage written under each charge is compared with the previous year charge The charge is public information disclosed in NTT Docomo's service terms and conditions document uploaded on NTT Docomo's website (only available in Japanese) https://www.docomo.ne.jp/binary/pdf/corporate/disclosure/mvno/business/oroshi.pdf Internet Initiative Japan Inc. 28 28#30Appendix Basic Monthly Charge Pay as об пол Comparison between the old & new plans of consumer mobile Including tax Old New: GigaPlans (Apr. 2021~) New Price from April 1, 2022 With voice ¥858 ¥850 With voice \1,760 Minimum Start Plan (3 GB) 2Giga Plan (2 GB) Data-only ¥748 ¥740 Data-only ¥990 With voice ¥1,078 ¥990 4Giga Plan (4 GB) Data-only ¥968 ¥900 With voice ¥2,442 With voice ¥1,518 ¥1,500 Light Start Plan 8Giga Plan (6 GB) (8 GB) Data-only ¥1,408 ¥1,400 Data-only ¥1,672 With voice ¥1,848 ¥1,800 15Giga Plan (15 GB) With voice ¥3,586 Data-only ¥1,738 ¥1,730 Family Share Plan (12 GB) With voice Data-only ¥2,816 20Giga Plan (20 GB) ¥2,068 ¥2,000 Data-only ¥1,958 ¥1,950 Voice call charge ¥22 per 30 seconds as you go Voice call charge as you go ¥11 per 30 second (from Sep. 2021) The above table briefly indicates service prices for major functions to show the differences between the old and new plans Voice call charge is only for domestic calls. New voice call charge as you go was revised on September 11, 2021 and is applied to old plan's users O Internet Initiative Japan Inc. 29 29#31Appendix From ISP to Total Network Solution Provider Systems construction (including equipment sales) Systems operation and maintenance (including private Cloud) WAN services Outsourcing services (including Security services) Internet connectivity services (enterprise & consumer) (including Mobile services) Birth Earned enduring client base FY1994 Increase in number of ISPs in Japan FY2000 revenue Recurring Transition Change in business model BLOOM Harvesting the flower of Total Network Solution Provider EMERGE Cloud, consumer mobile, loT.... One-time Recurring Revenue Revenue Price War: IIJ shifted its focus to large corporates FY2005 ISP market consolidation: IIJ survived the tough competition FY2010 IIJ became MVNO in 2008 and launched Cloud services in 2009 O Internet Initiative Japan Inc. FY2015 IIJ launched consumer mobile services in 2012 FY2021 IIJ became full-MVNO in 2018 30 30#32II.J Internet Initiative Japan The internet started in Japan in 1992, along with IIJ. Since that time, the IIJ Group has been building the infrastructure for a networked society, and with our technical expertise, we have continued to support its development. We have also continued to evolve our vision for the future and innovate to make it a reality. As an internet pioneer, IIJ has blazed the trail so that others could realize the full potential of a networked society, and that will never change. The middle "I" in "IIJ" stands for "initiative," and IIJ alway starts with the future. Internet Initiative Japan Inc.