Internet Initiative Japan Inc. · TSE:3774

Internet Initiative Japan — Investor Presentation (November 2010)

39 slides from Internet Initiative Japan's investor presentation, November 2010

  1. Slide 1: Internet Initiative Japan Inc.

    Internet Initiative Japan Inc. November 2010 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

    Strategic Shift in Business Model From “ISP” to “Total Network Solution Provider” (Revenue, JPY million) Internet Connectivity Services ENDURE Outsourcing Service Tough economic Listed on situation 70,000 Systems Operation TSE1 One-time revenue Systems Construction (Include Equipment Sales) (FY1997-

  6. Slide 6: Recurring Business Model

    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 9/10 Electronic Information/ Wholesale appliances telecommunications 9/10 10/10 9/10 Machinery Precision Banks Equipment The Yomiuri 9/10 7/10 8/10 Shimbun Securities Construction Insurance Imperial Ho

  8. Slide 8: Broad Client Base

    Broad Client Base Revenue Distribution by Revenue Distribution by Industry Clients Retail 3% Construction 6% 6% 2% To p 1 - 1 0 0 Government/ 8% Top 501- To p 5 0 1 - Public sector 19% 8% Top 401-500 Machinery/ 37% 4% To p 4 0 1 - 5 0 0 Manufacturing9% Communication/IT 51% of revenue 10% 37% Top 301

  9. Slide 9: Solid Growth Model

    Solid Growth Model Revenues by Customer (JPY million) Customer Retention Strategy Increase revenue per customer Cross Selling of Services Provide high quality/reliable total network solution Introduce new services Increase recurring revenues for Stable revenues and profit growth Number of Customers

  10. Slide 10: Current Business Situation

    Current Business Situation Threats Opportunities Enlarging Enlarging Recession Downward Outsourcing Emerging Emerging Cloud Cloud Outsourcing Market Market Price Pressure Computing Computing Market Market Withheld Withheld Demands Demands Further cut back for for System System Investment Investment

  11. Slide 11: Future Growth Opportunities And Recent Business Developments

    Future Growth Opportunities And Recent Business Developments

  12. Slide 12: Growth Opportunity Awaits Ahead

    Growth Opportunity Awaits Ahead Growth Opportunities Connectivity Service Best positioned • Increase in bandwidth (over Gbps) with growing IT • Contents Delivery Network demands • Mobile data service (emergence of M2M market) Solid • IPv6 Growth Model Outsourcing Service • Security Services (DDoS, S

  13. Slide 13: Providing new outsourcing service & solution

    Providing new outsourcing service & solution ＜Cloud computing service＞ ＜Enhancing the outsourcing service ＞  Introduced to all different industries.  Introduced 18 new services & solution in 1H10  Customers highly value our long experience of  Especially devoting into cloud computing services ov

  14. Slide 14: Completed acquisition of IIJ-GS

    Completed acquisition the of IIJ-GS（Sept.1 2010.） ＜Outline of acquisition＞  On Sept. 1 2010, IIJ completed the acquisition of IIJ-GS and made it its 100% owned subsidiary  Acquired mainly the domestic network outsourcing service business such as WAN services from AT&T Japan  Successfully competed

  15. Slide 15: Trust Networks Inc. in Business Start Up

    Trust Networks Inc. in Business Start Up  ATM Network Operation Business Established July 2007 Places ATMs in Amusement Parlors Receives commission from each withdrawal Operates 148 ATMs as of November 15, 2010 To introduce additional 250 ATMs in around 3 months Similar model to “Seven Bank”

  16. Slide 16: FY2010 Target

    FY2010 Target (announced on June 1, 2010) Unit: JPY billion (except for Net Income and Cash Dividend per Share) FY10 Initial Target Revised FY10 Target FY09 Actual YoY （10/4～11/3） （10/4～11/3） （09/4～10/3） (Revised FY10 to FY09 Acutal) Total Revenues 71.0 84.5 68.0 +16.5 24.3% Operating Income 4.3 4.8

  17. Slide 17: Dividends

    Dividends FY2009 Year-end and FY2010 dividends were revised upward along with the income growth FY2009 interim Year-end Full year Original Plan JPY1,000 JPY1,000 JPY2,000 (announced on May 14, 2010) Revised Plan JPY1,000 JPY1,250 JPY2,250 (announced on May 14, 2010) Per share cash dividend UP 25% FY

  18. Slide 18: 1H FY2010 Consolidated Financial Results

    1H FY2010 Consolidated Financial Results (Announced November 15 , 2010)

  19. Slide 19: Summary of 1H FY2010 Financial Results

    I. Summary of 1H FY2010 Financial Results ≪1H FY2010 Financial Results ≫ <Original Target>  Revenue JPY34,272 million (up 6.2 % YoY) JPY32,300 million  Gross margin JPY6,842 million (up 9.7 % YoY)  Operating Income JPY1,201 million (up 3.0 % YoY) JPY1,200 million  Income before Income Tax Expens

  20. Slide 20: Consolidated Results for 2Q FY2010

    II-1. Consolidated Results for 2Q FY2010 Unit: JPY billion % of Revenues % of Revenues % of Revenues 1H10 1H09 YoY 1H10 Target （10/4～10/9） （09/4～09/9） （10/4～10/9） Total Revenues 34.3 32.3 6.2% 32.3 80.0% 80.7% Total Costs 5.4% ― 27.4 26.0 20.0% 19.3% Gross Margin 9.7% ― 6.8 6.2 16.5% 15.7% SG&A/R&D

  21. Slide 21: Revenues

    YoY = 2Q10 compared to 2Q09 II-2. Revenues QoQ = 2Q10 compared to 1Q10 Internet Connectivity Services Systems Construction Unit: JPY million One-time Recurring Outsourcing Services Revenues Equipment Sales Revenues WAN Services ATM Operation Business Systems Operation and Maintenance FY08: 69,731 FY

  22. Slide 22: Cost of Revenues and Gross Margin Ratio

    II-3. Cost of Revenues and Gross Margin Ratio Cost of Revenues Network Services SI Equipment Sales ATM Operation Gross Margin Ratio Total Gross Margin Ratio Business Network Services SI 28.1% Unit: JPY million 26.7% 27.8% 26.2% 25.7% 24.6% 24.7% 23.3% 23.4% 21.6% 21.4% 21.1% 22.0% 20.7% 19.2% 19.7%

  23. Slide 23: Network Services (1) Revenues

    YoY = 2Q10 compared to 2Q09 II-4. Network Services (1) Revenues QoQ = 2Q10 compared to 1Q10 Internet Connectivity Services for Home Use Outsourcing Services Internet Connectivity Services for Corporate Use Total Contracted Bandwidth (Gbps) QoQ WAN Services +41.6Gpbs 702.5 Unit: JPY million 647.2 650

  24. Slide 24: Network Services (2) Cost of Revenues

    YoY = 2Q10 compared to 2Q09 II-4. Network Services (2) Cost of Revenues QoQ = 2Q10 compared to 1Q10 Purchasing Costs Unit: JPY million Others Outsourcing Costs Personnel Related Costs Network Operation Related Costs 9,156 Circuit Related Costs 0 587 7,650 7,661 9 7,567 7 7,655 7,647 8 1,485 3 0 526

  25. Slide 25: Systems Integration (1) Revenues

    YoY = 2Q10 compared to 2Q09 II-5. Systems Integration (1) Revenues Unit: JPY million QoQ = 2Q10 compared to 1Q10 (Systems construction) Systems Construction Revenues 5,081 5,500 5,297 5,344 Systems Operation and Maintenance Revenues 4,428 4,580 4,236 Order Backlog System construction’s order 3,844 b

  26. Slide 26: Systems Integration (2) Cost of Revenues

    YoY = 2Q10 compared to 2Q09 II-5. Systems Integration (2) Cost of Revenues QoQ = 2Q10 compared to 1Q10 Purchasing Costs Unit: JPY million Outsourcing Costs 7,152 Others Network Operation Related Costs Personnel Related Costs 5,174 2,705 5,066 4,876 4,702 4,793 1,412 972 1,235 985 854 1,762 1,535 1,5

  27. Slide 27: Number of Employees

    YoY = 2Q10 compared to 2Q09 II-6. Number of Employees QoQ = 2Q10 compared to 1Q10 Contract worker Full time worker （number of employees） Including IIJ-GS ＋245 employees 1,968 2,000 1,687 1,740 267 [Employee Distribution] 1,602 265 263 1,500 1,373 229 Administration 173 16% 1,000 Sales 1,701 20% Engi

  28. Slide 28: SG&A Expenses/R&D

    YoY = 2Q10 compared to 2Q09 II-7. SG&A Expenses/R&D QoQ = 2Q10 compared to 1Q10 Sales and Marketing Expenses Research and Development Unit: JPY million General and Administrative Expenses ( ) % of Revenues FY08 : 10,668 FY09 : 10,544 2,978 2,931 2,881 IIJ-GS （1month） （15.7%） （14.9%） 2,759 （15.6%） 2,

  29. Slide 29: SG&A Expenses/R&D

    YoY = 2Q10 compared to 2Q09 II-7. SG&A Expenses/R&D QoQ = 2Q10 compared to 1Q10 Sales and Marketing Expenses Research and Development Unit: JPY million General and Administrative Expenses ( ) % of Revenues 2Q10 Operating Income: 7.1% Operating income related to IIJ-GS (1 month): JPY261 million 5.7

  30. Slide 30: Consolidated Balance Sheets

    II-9. Consolidated Balance Sheets Unit: JPY million September 30, March 31, Changes 2010 2009 Increased mainly due to IIJ-GS Cash and Cash Equivalents 9,408 8,764 +644 Nonmarketable Accounts Receivable 17,624 11,397 +6,227 equity securities: JPY1,796 million Available for sale Inventories 521 808

  31. Slide 31: Consolidated Cash Flows

    II-10. Consolidated Cash Flows Unit: JPY million Net cash provided by operating activities <2Q10> FY08 : 8,631 FY09 : 9,621 Increase in operating income Increase in accounts receivable: JPY2,522 3,280 3,360 million 2,628 2,835 2,018 1,987 2,164 2,274 Decrease in inventories, prepaid expenses 1,34

  32. Slide 32: Other Financial Data (CAPEX etc.)

    II-11. Other Financial Data (CAPEX etc.) Unit: JPY million CAPEX (Include Capital Lease) FY08 : 7,006 FY09 : 5,584 2,685 1,831 1,832 1,752 1,804 1,489 Adjusted EBITDA 1,124 1,218 1,221 658 FY08 : 8,348 FY09 : 8,718 2,777 1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 2,550 2,403 2,193 2,099 2,132

  33. Slide 33: Appendix: New service and solution developments

    Appendix New service and solution developments

  34. Slide 34: Module Eco-Data Center

    Module Eco-Data Center – Perfect for Cloud Computing Era – The solution to the tasks we face today  The tasks Japanese companies faces when using a data center facility are (1) the high energy cost and (2) the responsibility for CSR, to be an eco-friendly company  The risks service providers faces

  35. Slide 35: IIJ Raptor Service an ASP FX system

    “IIJ Raptor Service” an ASP FX system  ASP-based foreign exchange (FX) system for financial service providers A flexible system, compatible with Click 365, Daisho FX, and OTC Conventional FX solutions require infrastructure and application development for each market IIJ Raptor enables the user

  36. Slide 36: Cloud Solution for iPad Business Applications

    Cloud Solution for iPad Business Applications  “Smart Mobile Solution” IIJ GIO Smart Mobile Solution enables a safe and secure use of the iPad and other advanced mobile terminals for enterprises customers to incorporate the iPad, smartphones, and other high- performance devices into their business

  37. Slide 37: Reference: IIJ Press Release

    Reference: IIJ Press Release Dat e Pr e ss Re le ase s 4/8 IIJ Obtains US and Japanese Patents for SMFv2 4/12 IIJ Introduces New Products to the IIJ SSL Certificate Management Service 5/12 IIJ and EC-One Form Alliance in Cloud Computing 5/31 IIJ Adds SSL Inspect Option on IIJ Secure Web Gateway Serv

  38. Slide 38: Reference: IIJ Group Companies

    Reference: IIJ Group Companies （As of Oct. 31, 2010) 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 network

  39. Slide 39: 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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