Internet Initiative Japan Inc. · TSE:3774

Internet Initiative Japan — Q3 FY2017 Earnings Presentation

23 slides from Internet Initiative Japan's earnings presentation, Feb 8, 2018

  1. Slide 1: Consolidated Financial Results for 3Q FY2017

    Consolidated Financial Results for 3Q FY2017 (9 months ended December 31, 2017) Internet Initiative Japan Inc. TSE1(3774), NASDAQ(IIJI) February 8, 2018 © 2018 Internet Initiative Japan Inc.

  2. Slide 2: Agenda

    Agenda Ⅰ. Summary of 3Q FY2017 Financial Results Ⅱ. Consolidated Financial Results for 3Q FY2017 Ⅲ. Reference Materials © 2018 Internet Initiative Japan Inc. 1

  3. Slide 3: Summary of 3Q FY2017 Financial Results

    bn = billion %, YoY＝1Q-3Q17 compared to 1Q-3Q16 Ⅰ. Summary of 3Q FY2017 Financial Results *Income before income tax expense **Net income attributable to IIJ 3Q17(3 months) YoY 1Q-3Q17 Results YoY FY17 Targets YoY Revenue JPY44.6 bn +13.0% JPY127.6 bn +12.3% JPY176.0 bn +11.5% Gross Margin JPY6.7 bn

  4. Slide 4: Consolidated Financial Results for 3Q FY2017

    Ⅱ- 1. Consolidated Financial Results for 3Q FY2017 Unit: JPY billion % of Revenues % of Revenues % of Revenues 1Q-3Q17 1Q-3Q16 YoY Change FY17 Targets YoY Change Results Results (Apr. 2017 - Dec. 2017) (Apr. 2016 - Dec. 2016) (Apr. 2017 - Mar. 2018) Total Revenues 127.6 113.6 +12.3% 176.0 +11.5% 84.

  5. Slide 5: Revenues

    Ⅱ- 2. Revenues Unit: JPY million NW Services Systems Integration (SI) [ ] , YoY = compared to the same period in a previous year Internet Connectivity Services (Enterprise) Systems Construction Internet Connectivity Services (Consumer) Systems Operation and Maintenance Outsourcing Service Equipment

  6. Slide 6: Cost of Revenues and Gross Margin Ratio

    Ⅱ- 3. Cost of Revenues and Gross Margin Ratio Cost of revenues: NW Services SI Equipment Sales ATM Operation Business Unit: JPY million [ ] , YoY = compared to the same period in a previous year Gross margin ratio: NW Services SI Overall QoQ = 3Q17 compared to 2Q17 Gross Margin  Total 1Q-3Q17: JPY1

  7. Slide 7: Network Services: Revenues

    Ⅱ- 4. Network Services (1)Revenues WAN Services Unit: JPY million Outsourcing Services [ ] , YoY = compared to the same period in a previous year QoQ = 3Q17 compared to 2Q17 Internet Connectivity Services (Consumer) (*) Internet Connectivity Services (Enterprise) Total Contracted Bandwidth(**) (Gbps

  8. Slide 8: Network Services: Cost of Revenues

    Ⅱ- 4. Network Services (2)Cost of Revenues Unit: JPY million Outsourcing-related costs [ ] , YoY = compared to the same period in a previous year Others Personnel-related costs Network operation-related costs Circuit-related costs Cost of NW Services  1Q-3Q17: up 17.5% YoY • Along with increases in

  9. Slide 9: Systems Integration (SI): Revenues

    Ⅱ- 5. Systems Integration (SI) (1)Revenues Systems Systems operation Cloud revenues within Order backlog (sum of systems construction and equipment sales) Unit: JPY million construction and maintenance systems operation and Order received (sum of systems construction and equipment sales) revenues re

  10. Slide 10: Systems Integration (SI): Cost of Revenues

    Ⅱ- 5. Systems Integration (SI) (2)Cost of Revenues Unit: JPY million Purchasing costs [ ] , YoY = compared to the same period in a previous year Outsourcing-related costs QoQ = 3Q17 compared to 2Q17 Others Network operation-related costs Personnel-related costs 1Q-3Q16: 35,644 [+17.0%] 1Q-3Q17: 37,8

  11. Slide 11: Number of Employees

    Ⅱ- 6. Number of Employees Unit: JPY million Contract worker [ ] , YoY = compared to the same period in a previous year Full time worker Employee Distribution Administration 12% Sales 17% Engineers 71%  3Q17: up JPY343 million, up 6.3% YoY  Hired 148 new graduates in Apr. 2017 (137 in Apr. 2016, 15

  12. Slide 12: SG&A Expenses/R&D

    Ⅱ- 7. SG&A Expenses/R&D Unit: JPY million Research & development expenses [ ] , YoY = compared to the same period in a previous year General & administrative expenses Sales & marketing expenses ( ) % of total revenues 1Q-3Q16: 14,675 [+7.0%] 1Q-3Q17: 15,980 [+8.9%] Sales & marketing expenses FY16: 2

  13. Slide 13: Operating Income and Net Income

    Ⅱ- 8. Operating Income and Net Income Unit: JPY million Operating Income Net Income Attributable to IIJ Operating Margin Ratio [ ] , YoY = compared to the same period in a previous year Income 1Q-3Q16 Operating income: 3,155 1Q-3Q17 Operating income:  Income before income tax expense: 3,776  1Q-3Q

  14. Slide 14: Consolidated Balance Sheets (Summary)

    Ⅱ- 9. Consolidated Balance Sheets (Summary) Unit: JPY million  Total IIJ Shareholders’ Equity to Total Assets: 48.6% as of Mar. 31, 2017, 46.8% as of Dec. 31, 2017 © 2018 Internet Initiative Japan Inc. 13

  15. Slide 15: Consolidated Cash Flows

    Ⅱ- 10. Consolidated Cash Flows Unit: JPY million [ ] , YoY = compared to the same period in a previous year Operating Activities 1Q-3Q16: 4,408 1Q-3Q17: 8,296 FY16: 7,368 Major YoY Breakdown Change Net income 2,816 +779 Depreciation and amortization 9,156 +1,150 Fluctuations of operating assets and

  16. Slide 16: Other Financial Data (CAPEX etc.)

    Ⅱ- 11. Other Financial Data (CAPEX etc.) Unit: JPY million CAPEX Depreciation and Amortization Cash CAPEX Capital Lease 1Q-3Q16: 12,258 1Q-3Q17: 15,756 1Q-3Q16: 8,006 1Q-3Q17:9,156 FY16: 16,531 FY16: 10,894 Including payment of JPY1.2 billion for land Adjusted EBITDA Revenue and Adjusted EBITDA Annu

  17. Slide 17: Cloud Business Developments

    Ⅲ - 1. Cloud Business Developments Cloud-related revenue Unit: JPY billion 3Q17 revenue Unit: JPY billion Cloud-related revenue [ ]＝Year over Year change General purpose SaaS 0.08 Quarter-end month’s revenue Task-specific SaaS 0.53 1Q-3Q16: 11.59 [+11.6%] 1Q-3Q17: 13.18 [+13.7%] Public 0.62 FY16: 15

  18. Slide 18: Mobile and IoT Business Developments

    Ⅲ - 2. Mobile and IoT Business Developments YoY＝Year over Year change QoQ = 3Q17 compared to 2Q17 Total subscription & revenue IIJmio Mobile (consumer) & IIJ Mobile (enterprise) Total subscription (thousand) Subscription Total revenue (JPY billion) (thousand): IIJmio Mobile IIJ Mobile ＜ ＞ MVNE Reven

  19. Slide 19: Further Expansion of Existing Services

    Ⅲ - 3. Further Expansion of Existing Services Security-related service strongly growing Promoting NW services totality with Omnibus  Security-related services revenue strongly  “One Cloud” Strategy growing Unit: JPY billion YoY＝Year over Year change 8.63 9.57 Network Cloud (+7.5%YoY) (+10.9%YoY) (

  20. Slide 20: Further Business Developments (FinTech)

    Ⅲ - 4. Further Business Developments (FinTech) Company Profile Competitive Advantages  Trading system leveraging the existing IIJ Raptor system Name DeCurret Inc. (IIJ’s equity method investee) • Top share ASP FX system in Japan, proving to 13 major Japanese financial institutions Est. January 2018

  21. Slide 21: Shareholders of DeCurret

    Ⅲ - 4. Further Business Developments (FinTech) Shareholders of DeCurret © 2018 Internet Initiative Japan Inc. 20

  22. Slide 22: Further Business Developments (New Data Center Construction)

    Ⅲ - 4. Further Business Developments (New Data Center Construction) IIJ Data Centers Purposes  Operating 21 data centers in Japan (as of Dec. 2017)  Integrate racks, currently spread out in the • 20 data centers are leased from data center owners per space eastern Japan area’s data centers  Conti

  23. Slide 23: Forward-looking statements / Contact Information

    ※ Forward-looking statements 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 abou

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