3834.T

Overall Financial Performance

• Operating profit hit 1.017 billion yen, a 19.6% YoY decrease (-248 million yen), with an operating margin of 15.1%, reaching 43.3% of the full-year operating profit forecast of 2.35 billion yen. The lower than planned interim profit came from higher than expected spending on member acquisition in the first half.
• EBITDA was 1.55 billion yen, with an EBITDA margin of 23.1%. Ordinary profit was 1.029 billion yen (-19.3% YoY), and net profit was 725 million yen (-25.8% YoY).
• Balance sheet: Total assets 14.547 billion yen (-240 million yen from prior period end), total liabilities 1.673 billion yen (-23 million yen), net assets 12.873 billion yen (-217 million yen), equity ratio 88.5%.

Capital Management and Shareholder Return

• Targets ROE of 10%+ to exceed the estimated 5-6% shareholder cost of capital, and has met this target over the most recent 3 fiscal periods.
• Maintains a dividend policy targeting a 40-50% payout ratio, retaining internal reserves for future growth while delivering stable dividends. Interim dividend is confirmed at 12.5 yen per share, with full-year dividend planned at 25 yen per share (12.5 yen interim + 12.5 yen year-end).

ISP (ASAHI Net) Operational Progress

• FTTH connection contracts reached 503,000 IDs, up 17,000 YoY; mobile contracts hit 46,000 IDs, down 1,000 YoY; churn rate stayed at a stable low 0.61%.
• Expanded sales through NTT channels: grew Hikari Collaboration, Mansion All-unit Plan, and 10Gbps capable Flets Hikari Cross service, which has grown contracts as its service area expands.
• Increased member acquisition via Web channels by investing in sales promotion, growing website traffic and converting leads with attractive campaigns.
• Leverages its high proportion of corporate members (corporate contracts exceed consumer contracts, driven by demand for stable connectivity and fixed IP addresses), and continues focusing on growing new sign-ups and reducing churn.

• Full-year revenue guidance of 13.5 billion yen is maintained, with interim revenue reaching 49.8% of this target.
• Full-year operating profit guidance of 2.35 billion yen is maintained, with interim operating profit reaching 43.3% of this target, as accelerated member acquisition spending in the first half was planned and will deliver mid-term profit gains.
• Management maintains its long-term growth outlook for v6 Connect, forecasting continued growth in per-line traffic driven by increasing demand for streaming and online gaming content.
• For manaba, management guides that new feature releases from ongoing 2-year large-scale development (FY2025 March to FY2027 March) will help drive new orders and reduce churn starting in FY2026.

1. Internet Connection Services: Total segment revenue is 6.056 billion yen, up 3.9% year-over-year. ISP (ASAHI Net): 4.872 billion yen in revenue, 2.1% YoY increase (+102 million yen), contributing 72.4% of total company revenue. Within ISP: Hikari Collaboration increased 72 million yen, Mansion All-unit Plan increased 47 million yen, LTE increased 3 million yen; WiMAX decreased 8 million yen, other FTTH decreased 15 million yen, renewed fixed IP address service decreased 9 million yen, mobile overall decreased 5 million yen. VNE (v6 Connect): 1.184 billion yen in revenue, 12.4% YoY increase (+130 million yen), contributing 17.6% of total company revenue, with 10 partner carriers as of the interim period.
2. Internet-related Services: Total segment revenue is 0.667 billion yen, down 0.6% year-over-year. Education support service manaba: 290 million yen in revenue, 0.7% YoY decrease (-2 million yen), contributing 4.3% of total company revenue. Other internet-related services: 377 million yen in revenue, 0.5% YoY decrease, contributing 5.6% of total company revenue.

Total company revenue: 6.725 billion yen, 3.5% YoY increase (+228 million yen), 14 consecutive years of record interim revenue, reaching 49.8% progress against the full-year forecast of 13.5 billion yen.

• Declining contract volumes for manaba due to ongoing university consolidations and enrollment cuts driven by Japan's falling birth rate, which caused 3 university contract terminations in the interim period and a 9,000 ID decline in total contracts.
• Stagnant subscriber growth for WiMAX mobile service, leading to continued year-over-year revenue declines.
• Lower application volumes for the 2024 renewed fixed IP address service, leading to 900 million yen in year-over-year revenue decline.
• Broad cost inflation from general price increases, driving ongoing growth in rent, software, and other operating costs.
• Higher depreciation and labor/outsourcing costs from ongoing core system renewal investment, which reduced interim operating profit.

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