Internet Initiative Japan Inc. · TSE:3774

Internet Initiative Japan — H1 FY2008 Earnings Presentation

24 slides from Internet Initiative Japan's earnings presentation, Nov 13, 2008

  1. Slide 1: 1H FY2008 Consolidated Financial Results

    1H FY2008 Consolidated Financial Results 2008.11.13 http://www.iij.ad.jp/en/IR/

  2. Slide 2: Agenda

    Agenda . Summary of 1st Half Financial Results and Target for Full FY2008 . 1st Half Financial Results . Reference Materials © 1

  3. Slide 3: Summary of 1H08 Financial Results

    . Summary of 1H08 Financial Results 1H08 (1Q+2Q) Financial Results ¾Revenue JPY33,254 million (up 10.9% YoY) ¾Operating Income JPY1,005 million (down 44.6% YoY) (*Loss from 4 new subsidiaries JPY453 million) z Operating income increased by 10.9% YoY supported by the continuous increase in recurring

  4. Slide 4: Consolidated Financial Results for 1H08

    -1. Consolidated Financial Results for 1H08 Unit: JPY billion % of Revenues % of Revenues 1H08 1H07 YoY Total Revenues 33.3 30.0 10.9% 33.2 34.5 81.4% 79.4% Total Costs 27.1 23.8 13.7% ― ― 18.6% 20.6% Gross Margin 6.2 6.2 (0.2%) ― ― 15.5% 14.5% SG&A/R&D 5.2 4.4 18.4% ― ― 3.0% 6.1% Operating Income 1

  5. Slide 5: Revenues

    -2. Revenues Unit: JPY million Internet Connectivity Services Systems Construction Recurring One-time Revenues Outsourcing Services Equipment Sale Revenues Systems Operation and Maintenance ATM Operation Business 18,359 18,486 17,023 399 234 16,926 16,294 16,328 6 609 286 391 238 5 5,384 One-time 14

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

    -3. Cost of Revenues and Gross Margin Ratio Cost of Revenues Connectivity and Outsourcing Services SI Equipment Sales ATM Operation Gross Margin Ratio Total Gross Margin Ratio Business Connectivity and Outsourcing Services SI 28.8% Unit: JPY million 25.0% 25.5% 24.0% 23.5% 23.3% 22.3% 21.6% 21.6% 21

  7. Slide 7: Connectivity and Outsourcing Services

    -4. Connectivity and Outsourcing Services Revenues and Total Contracted Bandwidth Total Revenues from Connectivity and Outsourcing Services Connectivity Service ‹Connectivity services for corporate use: Connectivity Services for Home Use Revenues: JPY3,218 million (up 7.0% YoY, Connectivity Services

  8. Slide 8: Connectivity and Outsourcing Services: Cost of Revenues

    -4. Connectivity and Outsourcing Services Cost of Revenues 7,276 Unit: JPY million 7,065 6,598 5,670 ‹ Cost of Connectivity and Outsourcing Service revenue were: up JPY678 million YoY (up 10.3%), up JPY211 million QoQ (up 3.0%) ‹ Circuit related, network operation related, personnel related costs in

  9. Slide 9: SI Revenues

    -5. SI Revenues 9,234 (Systems Construction) Unit: JPY million Systems Construction Revenues were short of our budget 7,717 7,409 Down JPY914 million YoY (down 21.9%) 5,870 Up JPY218 million QoQ (up 7.2%) ¾ New investment for application 5,500 5,081 development projects were especially 4,762 affecte

  10. Slide 10: SI Cost of Revenues

    -5. SI Cost of Revenues Unit: JPY million 6,024 6,154 5,938 4,849 ‹ Cost of SI revenue were: up JPY216 million YoY (up 3.6%), up JPY130 million QoQ (up 2.2%) ¾ Personnel related cost increased due to business expansion YoY of 13.7% but slightly decreased by 1.1% QoQ. ¾ Outsourcing related costs incr

  11. Slide 11: SG&A Expenses/R&D

    -6. SG&A Expenses/R&D Unit: JPY million Sales and Marketing Expenses General and Administrative Expenses Research and Development 2,614 2,550 2,372 2,458 16.0% 15.1% ( ) % of Revenues 2,221 2,30 2,301 1 12.9% 13.3% 59 85 2,062 2,062 14.1% 61 13.0% 60 63 1,874 55 15.1% 1,744 1,747 13.8% 56 14.0% 12.5

  12. Slide 12: Number of Employees

    -7. Number of Employees Number of Employees (total of full time and contract worker) Employee distribution Administration 15% Sales 19% Engineers 66% Personnel related costs and expenses 2,599 2,605 Unit: JPY million ‹ Number of employees increased by 46 QoQ ¾ Employing temporary staff in our subsid

  13. Slide 13: Operating and Net Income

    -8. Operating and Net Income Operating Income Net Income Operating Margin Ratio Unit: JPY million ‹Operating Income was 9.8% Down 47.2% YoY 7.3% 6.7% 6.9% Down 44.5% QoQ 5.8% 6.2% 5.0% ¾ Loss from 4 new subsidiaries were 4.5% 2,907 2.5% 3.5% JPY287 million. ‹Net Income was: 2,120 Down 93.2% YoY Up 1

  14. Slide 14: Revised Target for 1H FY2008 Financial Results

    -9. Revised Target for 1H FY2008 Financial Results Factors for Revision (Previous Target) (New Target) ¾Systems construction revenue fell short of our budget: Approx. JPY0.9 billion ¾Connectivity Service Revenues: Approx. JPY33.3 billion Revenues JPY34.5 billion down JPY0.3 billion change from previ

  15. Slide 15: Revised Target for Full FY2008 Financial Results

    -9. Revised Target for Full FY2008 Financial Results Reasons for Revision (Previous Target) ¾Revision to Systems Construction and (New Target) Equipment sales revenue: Approx. down JPY3.6 billion (to the level as FY2006) ¾Revision to 4 new subsidiaries revenue: JPY73.0 billion Revenues JPY78.5 billi

  16. Slide 16: Topics and New Business Development

    -10. Topics and New Business Development “SMFv2” Compatible Routers On-Demand Solutions Inc. ¾Aggressively deploying SMF technology to ¾Established April 2008 (100% Consolidated subsidiary) other router makers to establish and ¾They have began providing network system for print-on realize a safe and

  17. Slide 17: Consolidated Balance Sheets

    -11. Consolidated Balance Sheets Unit: JPY million September 30, March 31, Changes 2008 2008 Cash and Cash 9,319 11,471 (2,152) Equivalents Accounts Receivable 9,981 12,255 (2,275) Inventories 1,537 1,184 353 Prepaid Expenses 2,148 2,005 143 Available-for-sale 753 844 (92) Securities Property and Eq

  18. Slide 18: Consolidated Cash Flows

    -12. Consolidated Cash Flows Unit: JPY million Net cash provided by (used in) operating activities Net Cash provided by operating activities: JPY1,987 million 4,083 2,826 ¾ Increase in accounts receivable of JPY1,185 1,608 2,063 2,018 1,987 million 1,444 905 ¾ Decrease in inventories and prepaid 338

  19. Slide 19: Other Financial Data (CAPEX etc.)

    -13. Other Financial Data (CAPEX etc.) Unit: JPY million CAPEX (Include Capital Lease) 3,953 6,078 2,685 Breakdown of CAPEX 2,232 ¾ Regulatory Investment JPY1,071 million (Investments for IIJ services, etc) 1,831 1,546 ¾ New subsidiaries related: JPY585 million 1,250 1,224 1,242 ¾ Renewal of IIJ bac

  20. Slide 20: Reference Consolidated Financial Results for 2Q08

    -1. Reference Consolidated Financial Results for 2Q08 Unit: JPY billion % of Revenues % of Revenues 2Q08 2Q07 YoY Total Revenues 16.9 16.3 3.9% 81.4% 79.0% Total Costs 13.8 12.9 7.1% 18.6% 21.0% Gross Margin 3.1 3.4 (8.2%) 15.1% 14.1% SG&A/R&D 2.6 2.3 10.8% 3.5% 6.9% Operating Income 0.6 1.1 (47.2%)

  21. Slide 21: Reference Forecast for FY2008

    -2. Reference Forecast for FY2008 Unit: JPY billion (except for Net Income and Cash Dividend per Share) 73.0 66.8 6.2 9.2% 3.8 4.8 (1.0) (20.2%) 3.0 4.4 (1.4) (31.2%) 2.8 5.2 (2.4) (45.9%) JPY13,561 JPY25,100 (JPY11,539) (46.0%) JPY2,000 JPY1,750 JPY250 14.3% (Annual) (Annual) © 20

  22. Slide 22: Reference: IIJ Group Companies

    -3. Reference: IIJ Group Companies Company Name Ownership Main Business Offers a comprehensive suite of systems integration services from design, IIJ Technology Inc. physical installation, operation, and maintenance to monitoring for our customers' diverse network systems. Provides full outsourcing

  23. Slide 23: Reference: Press Releases

    -4. Reference: Press Releases © 22

  24. Slide 24: Forward-looking Statements

    Forward-looking Statements 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

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