Internet Initiative Japan Inc. · TSE:3774
Internet Initiative Japan — Investor Presentation (February 2014)
42 slides from Internet Initiative Japan's investor presentation, February 2014
Slide 1: Internet Initiative Japan Inc. Feb. and Mar. 2014
Internet Initiative Japan Inc. Feb. and Mar. 2014 TSE1:3774 NASDAQ:IIJI
Slide 2: Key Investment Highlights
Key Investment Highlights Pioneer and Top IP Engineering Company in Japan Shifted from ISP to Total Network Solution Provider Target Blue-chip & Governmental Organizations Approx. 8,500 Excellent Japanese Customers Growth Strategy with Recurring Revenues & Income Growth Best Positioned in the
Slide 3: TOP IP Engineering Company in Japan
TOP IP Engineering Company in Japan The first established full-scale ISP in Japan Introduced many prototype internet-related network services and led the market A group of highly motivated and skilled top level IP engineers Pioneer of network technologies in Japan Service initiative with in-h
Slide 4: Entrepreneur of Network Technologies
Entrepreneur of Network Technologies Business and Service Development to Initiate the Market Overseas SI Projects SDN The first full-scale ISP in Japan FX Container Cloud DC Service In In-housed development Application Development US, China, UK, IPTV Singapore At leading edge of IP R&D Systems
Slide 5: Strategic Shift in Business Model
Strategic Shift in Business Model From “ISP” to “Total Network Solution Provider” EMERGE Revenue Cloud Computing (JPY million) One-time revenue Systems Construction ENDURE Monthly recurring revenue Tough economic situation Systems Operation and Maintenance BLOOM Systems WAN Services Harvesting the f
Slide 6: Business Structure of Network Services
Business Structure of Network Services Revenues and Costs are not in linear relation • Costs do not increase along with revenue growth • If revenues are accumulated continuously, the gross margin should continuously improve • Multiple cross-selling revenue sources with Internet connectivity for co
Slide 7: Business Model: Cross-selling of Network Solutions
Business Model: Cross-selling of Network Solutions • Dedicated line connectivity IP service (cover over Gbps) IPv6 service Mainly network-related integration E-commerce/Web-shopping System • Broadband connectivity Optical Fiber/ADSL Disaster Recovery System • Mobile connectivity (IIJ Mobile) P
Slide 8: Excellent Blue-chip Client Base
Excellent Blue-chip Client Base High Market Penetration towards Top Tiers 10/10 10/10 10/10 Electronic Information/ Precision appliances Telecommunications equipment 8/10 10/10 10/10 Banks Securities Construction 9/10 9/10 8/10 Machinery Wholesale Insurance The number of clients among the top 10 com
Slide 9: Revenue Composition by Clients
Revenue Composition by Clients Revenue Distribution by Revenue Distribution by Industry Clients Construction 2% Retail 4% Government/ Public sector 5% Top 401-500 Top 501- Machinery/ 3% 17% Manufacturing 12% Top 301-400 5% 55% Communication/IT of the total Financial sector 35% revenue Top 201-300 fr
Slide 10: Competitive Advantages
Competitive Advantages Cloud Computing Services Carriers Systems Integrators Internet Connectivity Services Network Integration Outsourcing Services Systems Operation WAN Services Private Cloud Telephone Mainframe Legacy Network Services Legacy Systems Operation IIJ… IIJ… has many highly skilled net
Slide 11: Business Growth Strategy
Business Growth Strategy Cross-selling of Services Revenues by Customer Solid Growth Strategy Provide high quality and reliable services Develop and introduce new technologies and Increase revenues solution continuously per customer Leverage and strengthen client base Seizing business opportunities
Slide 12: Growth Strategy Hereafter
Growth Strategy Hereafter • Survived tough competition. Few high-end corporate ISPs remain • Rapid traffic increase Bandwidth migration Further revenue growth Connectivity • Enjoying greater network efficiency by having multiple revenue sources on the Internet backbone Services • Providing services
Slide 13: Best Positioned in Cloud Market
Best Positioned in Cloud Market • Launched in Dec. 2009, chosen for service reliability and exceptional network operation skills • Ranked as the top share in Japanese public cloud market for 2 consecutive years (Fuji Chimera Research Inst., July 2012 and Aug 2013) • Target blue-chip companies’ inter
Slide 14: ATM Operation Business Developments
ATM Operation Business Developments Business Model Receive commission for each withdrawal transaction Now in a start-up phase Strong revenue & income driver in mid-term Financial Results (JPY billion) Number of Placed ATMs May 13, 2011 280 May 15, 2012 440 May 15, 2013 625 Aug. 6, 2013 652
Slide 15: Developing SDN Platform – Focused R&D Theme
Developing SDN Platform – Focused R&D Theme SDN (Software Defined Network): future networking technology, network is virtualized and controlled by software, independent from physical boundaries $35.6 B Aim to be the leader in SDN market SDN Market Growth • Develop services internally • Apply the t
Slide 16: FY2013 Financial Target (Revised on February 7, 2014)
FY2013 Financial Target (Revised on February 7, 2014) 16
Slide 17: FY2013 Dividend Forecast
FY2013 Dividend Forecast (Remain unchanged from May 15, 2013) IIJ conducted a 1:200 stock split on common stock with an effective date of October 1, 2012. Dividend figures shown below are retroactively adjusted to reflect the stock split. Target cash dividends per share remains unchanged after the i
Slide 18: IIJ Group – The Way Forward
IIJ Group – The Way Forward Market Opportunity Increased usage of network based systems Widespread use of cloud computing services Explosion of data traffic due to the growing popularity of smart devises Return of IT investments supported by the recent Japanese economy recovery Stronger Mana
Slide 19: Slide 19
Slide 20: Consolidated Financial Results for 1Q-3Q FY2013
Consolidated Financial Results for 1Q-3Q FY2013 Announced on February 7, 2014
Slide 21: Summary of 1Q-3Q FY2013 Financial Results
Ⅰ. Summary of 1Q-3Q FY2013 Financial Results < 1Q-3Q FY2013 Financial Results > < Full Year Target> ・Revenues JPY82,746 million (up 7.9% YoY) JPY117-> 114 billion (up 7.3% YoY) ・Gross margin JPY15,518 million (down 0.0 % YoY) ・Operating income JPY4,211 million (down 16.5 % YoY) JPY9.4-> 6.0 billion
Slide 22: Consolidated Financial Results for 1Q-3Q FY2013
Ⅱ- 1. Consolidated Financial Results for 1Q-3Q FY2013 22
Slide 23: Revenues
Ⅱ- 2. Revenues Network Services Systems Integration (SI) 1Q-3Q FY13 Network services: JPY50,301 million Systems Construction (up 3.7% YoY) Internet Connectivity Services for Corporate Use 1Q-3Q FY13 Systems integration: JPY29,197 million Systems Operation and Maintenance Internet Connectivity Serv
Slide 24: Cost of Revenues and Gross Margin Ratio
Ⅱ- 3. Cost of Revenues and Gross Margin Ratio Cost of revenues : Network Services Systems Integration（SI） Equipment Sales ATM Operation Business Gross margin ratio : Network Services Systems Integration（SI) Total Revenues Unit: JPY million YoY = 1Q-3Q FY13 compared to 1Q-3Q FY12 pt. = points 1Q-3Q
Slide 25: 1Q-3Q Revenue YoY Change
Ⅱ- 4. 1Q-3Q Revenue YoY Change ATM Operation Business Revenues Systems Construction & Equipment Sales Revenues Unit: JPY billion Systems Construction & Equipment Sales Order Received Systems Operation and Maintenance Revenues Network Services Revenues YoY = 1Q-3Q FY13 compared to 1Q-3Q FY12 +2.1 16.
Slide 26: 1Q-3Q Operating Cost YoY Change
Ⅱ- 5. 1Q-3Q Operating Cost YoY Change SG&A Total Cost related to ATM Operation Business Unit: JPY billion Total Cost related to Systems Integration & Equipment Sales Total Cost related to Network Services <Breakdown of Major Difference> YoY = 1Q-3Q FY13 compared to 1Q-3Q FY12 Personnel-related costs
Slide 27: Revenue (Compared with the Initial Target)
Ⅱ- 6. Revenue (Compared with the Initial Target) ATM Operation Business Revenue Recurring Revenue (Network Services and Systems operation and Maintenance) Unit: JPY billion Systems Integration Revenue (including Equipment Sales Revenue) Network Services Revenue Initial Target YoY= Compared to the sa
Slide 28: Operating Income (Compared with the Initial Target)
Ⅱ- 7. Operating Income (Compared with the Initial Target) SG&A Systems Integration Gross Margin (including Equipment Sales Gross Margin) Unit: JPY billion Network Services Gross Margin ATM Operation Business Gross Margin Initial Plan YoY= Compared to the same time period in the previous year 3.4 Ope
Slide 29: Network Services: Revenues
Ⅱ- 8. Network Services (1)Revenues WAN Services Unit: JPY million Outsourcing Services Total Contracted Bandwidth (Gbps) YoY= 3Q13 compared to 3Q12 Internet Connectivity Services for Home Use QoQ=3Q13 compared to 2Q13 Internet Connectivity Services for Corporate Use 3Q13 Corporate Connectivity: up
Slide 30: Network Services: Cost of Revenues
Ⅱ- 8. Network Services (2)Cost of Revenues Unit: JPY million FY12: 50,692 1Q-3Q FY13: 39,764 (Gross margin ratio： 22.3%) (Gross margin ratio： 20.9%) 12,764 12,619 12,589 12,721 13,242 13,223 13,299 Others Outsourcing Costs Personnel Related Costs Network Operation Related Costs Circuit Related Costs
Slide 31: Systems Integration (SI): Revenues
Ⅱ- 9. Systems Integration (SI) (1)Revenues <Systems Construction> Unit: JPY million Systems Construction Revenues Systems Operation and Maintenance Revenues Order Backlog ※Systems construction’s order backlog and order received Order Received include equipment sales YoY = 3Q13 compared to 3Q12 1Q-3Q
Slide 32: Systems Integration (SI): Cost of Revenues
Ⅱ- 9. Systems Integration (SI) (2)Cost of Revenues 1Q-3Q FY12: 20,994 1Q-3Q FY13: 24,826 Unit: JPY million (Gross margin ratio： 18.0%) (Gross margin ratio： 15.0%) Purchasing Costs FY12: 30,425 (Gross margin ratio： 18.2%) Outsourcing Costs 6,564 7,526 6,904 9,431 7,350 8,416 9,061 Others Network Oper
Slide 33: Number of Employees
Ⅱ- 10. Number of Employees 2,078 2,081 2,086 2,116 2,269 2,311 2,322 Contract worker (+206 from 4Q12) Full time worker (No. of employees) [Employee Distribution] Administration 13% Sales 19% Engineers 68% 3,741 3,858 3,902 3,979 4,212 4,254 4,317 Personnel related costs and (15.1%) (14.7%) (15.3%) (
Slide 34: SG&A Expenses/R&D
Ⅱ- 11. SG&A Expenses/R&D 1Q-3Q FY12: 10,482 1Q-3Q FY13: 11,307 Unit: JPY million (13.7%) (13.7%) Research and Development Expenses FY12: 14,101(13.3%) General and Administrative Expenses 3,445 3,440 3,597 3,619 3,725 3,697 3,886 Sales and Marketing Expenses (13.9%) (13.1%) (14.1%) (12.2%) (14.1%) (1
Slide 35: Operating Income and Net Income
Ⅱ- 12. Operating Income and Net Income Operating Income Unit: JPY million Net Income Attributable to IIJ Operating Margin Ratio ATM operation segment operating income: Unit: JPY million 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 16 67 81 75 81 160 159 FY12: 239 1Q-3Q FY13: 400 785 ATMs were placed as of
Slide 36: Summary of Consolidated Balance Sheets
Ⅱ- 13. Summary of Consolidated Balance Sheets 36
Slide 37: Consolidated Cash Flows
Ⅱ- 14. Consolidated Cash Flows Operating Activities: Unit: JPY million FY12: 9,639 1Q-3Q FY13: 5,732 1Q-3Q FY13 Operating Activities: Depreciation and amortization: JPY6,504 million Decrease in accounts receivable: JPY2,078 million Decrease in income taxes payable: (JPY1,493 million) Increase
Slide 38: Other Financial Data (CAPEX etc.)
Ⅱ- 15. Other Financial Data (CAPEX etc.) Unit: JPY million CAPEX (Include Capital Leases): Cash Payment Capital Lease Major Breakdown of 3Q13 CAPEX 1Q-3Q FY12: 8,452 1Q-3Q FY13: 9,863 Cloud related JPY2.0 billion FY12: 10,405 (Matsue Container DC) (JPY1.2 billion) Service development-related JPY0.7
Slide 39: Developments of Cloud Business
Ⅲ- 1. Developments of Cloud Business Cloud Revenue FY12 full yr Slightly behind FY13 Business Development Unit: JPY billion Unit: JPY billion JPY6.2 billion full yr plan of over JPY10 billion Further adoption of cloud by business enterprises, 2.3 2.4 2.5 System volume increasing and seeing some mo
Slide 40: Main Stream Adoption of Cloud Services
Ⅲ- 2. Main Stream Adoption of Cloud Services Expansion of Client Base As of Dec. 2013 1,090 users As of Dec. 2012 900 users 210 As of Dec. 2011 600 users 180 MRC (Monthly Recurring Charge) 100 120 MRC over JPY0.5 million 90 50 MRC over JPY1 million Common Operation Platform Core Business System Sh
Slide 41: Overseas Business Development
Ⅲ- 3. Overseas Business Development Merged 2 subsidiaries to enhance the total IT solution combining network services & systems integration USA Opened NY facility for US Cloud and expanded its service line-ups, Game customers slowing down IIJ Europe increasing employees, strengthening the sale
Slide 42: Forward Looking Statements
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 about
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