Internet Initiative Japan Inc. · TSE:3774

Internet Initiative Japan — Nomura Investment Conference 2011

34 slides from Internet Initiative Japan's conference presentation, Dec 2, 2011

  1. Slide 1: Internet Initiative Japan Inc. – Nomura Investment Conference

    Internet Initiative Japan Inc. Nomura Investment Conference December 2, 2011 http://www.iij.ad.jp/en/IR TSE1:3774 NASDAQ:IIJI

  2. Slide 2: Key Investment Highlights

    Key Investment Highlights １ Top IP Engineering Company in Japan Target Blue-chip and Governmental Organizations ２ in Japan with dominant position Best Positioned in the Growing Outsourcing & ３ Cloud Computing Market in Japan Stable revenue growth from the accumulating ４ recurring revenue ５ Solid Gro

  3. Slide 3: TOP IP Engineering Company in Japan

    TOP IP Engineering Company in Japan  The first established full-scale ISP in Japan  A group of highly motivated and skilled TOP Level IP Engineers  Pioneer of Network Technologies in Japan  In-housed development  Operate one of the largest Internet Backbone in Japan  Fully develop its service

  4. Slide 4: Entrepreneur of Network Technologies

    Entrepreneur of Network Technologies Business and Service Development to Initiate the Market FX  The first full-scale ISP in Japan Application Cloud  In-housed development Development IPTV Computing Platform “IIJ GIO”  At leading edge of IP R&D System Operation Large Volume Smart  IP Specialists

  5. Slide 5: Strategic Shift in Business Model From ISP to Total Network Solution Provider

    Strategic Shift in Business Model From “ISP” to “Total Network Solution Provider” Revenue Target JPY100 million (Revenue, JPY million) EMERGE Internet Connectivity Services Cloud Outsourcing Service Computing Recurring revenue WAN Service ENDURE Listed on Systems Operation Tough economic TSE Systems

  6. Slide 6: Recurring Business Model Cross Selling of Total Network Solutions

    Recurring Business Model Cross Selling of Total Network Solutions • Network-related Integration • Application-related Development •Dedicated Line Connectivity Site-to-Site Network Construction On-line Security System IP Service (64kbps to over Gbps) Content Delivery Platform Ticketing System et

  7. Slide 7: Excellent Blue-chip Client Base

    Excellent Blue-chip Client Base Enduring Relationship with Top Tiers leading companies 10/10 10/10 10/10 Electronic Information/ Precision appliances telecommunications Equipment 9/10 9/10 8/10 Banks Securities Insurance 9/10 9/10 8/10 The Yomiuri Machinery Wholesale Shimbun Construction Imperial Ho

  8. Slide 8: Broad Client Base

    Broad Client Base Revenue Distribution by Revenue Distribution by Industry Clients Retail5% 2%Construction 5% 2% 6% Top 21.3% 501- Government/ 21% Public sector 6% 32% Machinery/12% Manufacturing Top 401-500 Communication/IT 51% of revenue 4% 3.4% 12% 32% from Top 301-400 Top 1-100 Clients 4.8% Fina

  9. Slide 9: Business Developments

    Business Developments

  10. Slide 10: Customer Retention Strategy

    Customer Retention Strategy Revenues by Customer (JPY million) Cross Selling of Services Increase revenue per customer Provide high quality/reliable total network solution Introduce new services Increase recurring revenues for Stable revenues and profit growth Number of Customers (~6,500) • Rise in

  11. Slide 11: Increasing IIJ Business Opportunities in Cloud Computing (1)

    Increasing IIJ Business Opportunities in Cloud Computing(1) Systems Integrators monitor Operates customer systems on one outsourcing service platform monitor IIJ Outsourcing Each systems built exclusively for each individual customer FY2010: Cloud Computing Start-up Year Some of the systems built Cl

  12. Slide 12: Increasing IIJ Business Opportunities in Cloud Computing (2)

    Increasing IIJ Business Opportunities in Cloud Computing(2)  Cloud compiting service ”IIJ GIO” Monthly revenues and project numbers of IIJ GIO JYP million project  IIJ GIO monthly revenue for Sep 2011: over JPY250 300 900 million 250 750 - Components (customized cloud. Revenue recognized in SI ope

  13. Slide 13: Enhancing business scope by AT&T Japan M&A

    Enhancing business scope by AT&T Japan M&A <Outline of Acquisition> < Effects to FY10 Consolidated Financial Results> ・Acquired mainly the domestic network (B/S) *As of March 31, 2011 (P/L) *7 months from Sep 2010 to March 2011 outsourcing service business such as WAN Current Assets 11,021 Revenues

  14. Slide 14: ATM Operation Business Developments

    ATM Operation Business Developments < ATM Operation Business Results > < Number of ATMs > ・FY2010 Revenue: JPY0.5 billion, ・FY08： Completed field test in Kanto Area Operating loss: JPY0.6 billion (10 ATMs) ・Number of ATM places as of November 8, ・FY09： Begun placing ATMs in Kanto and Kansai 2011: 34

  15. Slide 15: Historical Revenue & Income and FY11 Target

    Historical Revenue & Income and FY11 Target Operating Income & Revenue & Gross Margin Operating Income Ratio & Net Income 20.5% 20.1% 6.3% JPY millions JPY millions 19.5% 5.0% 5.0% 100,000 7,000 4.2% 6,300 100,000 82,418 6,000 80,000 69,731 5,000 68,006 4,141 4,000 3,412 60,000 2,917 3,000 40,000 2,

  16. Slide 16: 2Q11 Consolidated Financial Results

    2Q11 Consolidated Financial Results (Announced on November 8, 2011)

  17. Slide 17: Summary of 1H FY2011 Financial Results

    I. Summary of 1H FY2011 Financial Results <1H FY2011 Financial Results> •Total revenues JPY47,207 million (up 37.7% YoY) •Gross margin JPY9,236 million (up 35.0% YoY) •Operating income JPY2,448 million (up 103.8% YoY) •Income before income tax expense JPY2,291 million (up 127.7% YoY) •Net income att

  18. Slide 18: Consolidated Results for 1H FY2011

    II-1. Consolidated Results for 1H FY2011 Unit: JPY billion % of Revenues % of Revenues % of Revenues % of Revenues 1H11 Revised 1H11 Initial 1H11 1H10 YoY Target Target （11/4～11/9） （10/4～10/9） （11/4～11/9） （11/4～11/9） Total Revenues 47.2 34.3 37.7% 47.2 47.5 80.4% 80.0% Total Costs 38.4% ― ― 38.0 27.

  19. Slide 19: Revenues

    II-2. Revenues Unit: JPY million Internet Connectivity Services One-time Systems Construction Recurring Outsourcing Services Revenues Equipment Sales Revenues WAN Services ATM Operation Business Systems Operation and Maintenance FY09: 68,006 FY10: 82,418 （down 2.5％ YoY） （up 21.2％ YoY） 25,622 23,362

  20. Slide 20: Cost of Revenues and Gross Margin Ratio

    II-3. Cost of Revenues and Gross Margin Ratio Unit: JPY million Cost of Revenues Network Services SI Equipment Sales ATM Operation Business Gross Margin Ratio Network Services SI Total Gross Margin Ratio 28.1% 27.8% IIJ--Global 2Q10* 3Q10 4Q10 1Q11 2Q11 26.7% 25.7% 26.2% 24.7% Cost 1,761 5,215 5,160

  21. Slide 21: Network Services

    II-4. Network Services Unit: JPY million Internet Connectivity Services for Home Use Internet Connectivity Services for Corporate Use WAN Services Outsourcing Services 820.7 791.0 702.5 702.0 733.4 647.2 650.4 660.9 584.7 619.8 FY10: 51,662 Total Contracted Bandwidth (Gbps) FY09: 36,973 6,391 6,405

  22. Slide 22: Network Services (2) Cost of Revenues

    II-4. Network Services (2) Cost of Revenues Unit: JPY million Purchasing Costs Personnel Related Costs Others Network Operation Related Costs Outsourcing Costs Circuit Related Costs FY10: 41,678 (Gross Margin: 19.3%) FY09: 30,534 12,402 0 12,474 0 12,440 0 0 12,606 (Gross Margin: 17.4%) 608 616 557

  23. Slide 23: Systems Integration (1) Revenues

    II-5. Systems Integration (1) Revenues Unit: JPY million (Systems construction) Systems Construction Revenues Systems Operation and Maintenance Revenues 5,928 5,297 5,344 Order Backlog System construction’s order 4,428 4,580 4,710 4,590 backlog and order received 3,844 Order Received Includes equipm

  24. Slide 24: Systems Integration (2) Cost of Revenues

    II-5. Systems Integration (2) Cost of Revenues Unit: JPY million Purchasing Costs Outsourcing Costs Others Network Operation Related Costs FY10: 22,466 Personnel Related Costs 7,152 7,590 FY09: 21,904 5,770 5,957 4,876 5,174 4,702 2,705 4,793 5,066 5,017 3,230 1,198 1,220 1,412 972 987 1,235 985 854

  25. Slide 25: Number of Employees

    II-6. Number of Employees Contract worker (Personnel) Full time worker 2,000 1,968 1,944 1,953 1,955 267 258 243 246 1,687 [Employee Distribution] 263 1,500 Administration 14% Sales 19% 1,000 Engineers 1,701 1,686 1,710 1,709 67% 1,424 500 0 2010/3 2010/9 2011/3 2011/6 2011/9 Personnel related costs

  26. Slide 26: SG&A Expenses/R&D

    II-7. SG&A Expenses/R&D Unit: JPY million Sales and Marketing Expenses Research and Development IIJ-Global 2Q10* 3Q10 4Q10 1Q11 2Q11 General and Administrative Expenses ( ) % of Revenues SG&A 224 777 767 856 663 Amortization of customer 20 109 125 106 106 FY09 : 10,544 FY10 : 12,449 relationships （1

  27. Slide 27: Operating Income and Net Income

    II-8. Operating Income and Net Income Unit: JPY million Operating Income YoY = 2Q11 compared to 2Q10 Operating income ： 3,412 Operating income ： 4,141 QoQ = 2Q11 compared to 1Q11 Net Income Attributable to IIJ Net income attributable Net income attributable Operating Margin Ratio to IIJ： 2,234 to II

  28. Slide 28: Consolidated Balance Sheets

    II-9. Consolidated Balance Sheets Unit: JPY million March 31, September 30, Changes 2011 2011 Cash and Cash Nonmarketable 13,314 10,974 (2,339) Equivalents equity securities: JPY1,899 million Available for sale Accounts Receivable 16,431 14,453 (1,979) equity securities: JPY819 million Others: JP

  29. Slide 29: Consolidated Cash Flows

    II-10. Consolidated Cash Flows Unit: JPY million <Operating Activities> <2Q11 Operating Activities> FY09 : 9,621 FY10 : 12,564 Increased operating income 4,177 Decrease in accounts payable: JPY1,345 million 3,360 3,279 2,628 2,835 2,966 etc 2,164 2,274 1,468 1,323 While operating income increased

  30. Slide 30: Other Financial Data (CAPEX etc.)

    II-11. Other Financial Data (CAPEX etc.) CAPEX (Include Capital Lease) 1H11 CAPEX Breakdown FY09 : 5,584 FY10 : 6,752 IIJ-Global JPY0.3 billion Cloud related JPY1.7 billion (of which, JPY0.5 billion not in original plan) Matsue DC JPY0.9 billion Customer project related JPY0.9 billion (not in or

  31. Slide 31: Reference: FY2011 Financial Target (Remain unchanged)

    III-1. Reference: FY2011 Financial Target (Remain unchanged) Unit: JPY billion (except for Net Income and Cash Dividend per Share) FY11 Target FY10 Actual YoY （11/4～12/3） （10/4～11/3） (Revised FY10 to FY09 Acutal) Total Revenues 100.0 82.4 +17.6 21.3% Operating Income 6.3 4.1 +2.2 52.1% Income before

  32. Slide 32: Reference: IIJ Group Companies

    III-2. Reference: IIJ Group Companies （As of Oct 31, 2011) Company Name Ownership Main Business Provides a full range of network operation and management services, Net Care, Inc. from customer support, end-user help desks, monitoring and troubleshooting to integrated management services. Provides ne

  33. Slide 33: Reference: IIJ Press Releases

    III-3. Reference: IIJ Press Releases Dat e Pr e ss Re le ase s 8/18 IIJ to Build Infrastructure for docomo market (i-mode) 9/6 IIJ Global to Develop the IIJ Global Smart WAN Service 2Q 9/14 IIJ Global to Launch SaaS-based Asset Management Service GLASS 9/16 IIJ Opens the Mitaka Data Center Net Chart

  34. Slide 34: Forward Looking Statement Contact Information

    Forward Looking Statement Statements made in this presentation regarding IIJ’s or management’s 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 i

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