Internet Initiative Japan Inc. · TSE:3774

Internet Initiative Japan — H1 2018 Earnings Presentation

22 slides from Internet Initiative Japan's earnings presentation, Nov 6, 2018

  1. Slide 1: Consolidated Financial Results for 1H FY2018

    Consolidated Financial Results for 1H FY2018 (First 6 months ended September 30, 2018) Internet Initiative Japan Inc. TSE1(3774), NASDAQ(IIJI) November 6, 2018 © Internet Initiative Japan Inc.

  2. Slide 2: Agenda

    Agenda Ⅰ. Summary of 1H18 Financial Results Ⅱ. Consolidated Financial Results for 1H18 Ⅲ. Reference Materials © Internet Initiative Japan Inc. 1

  3. Slide 3: Summary of 1H18 Financial Results

    Ⅰ. Summary of 1H18 Financial Results (※) Adjusted incomes exclude effect of the revision of U.S GAAP related to gains/losses on equity securities and funds bn = billion Enterprise recurring revenue growth & SI gross margin improvement led to income growth by absorbing cost increase, % ＝Year over yea

  4. Slide 4: Consolidated Financial Results for 1H FY2018

    Ⅱ - 1. Consolidated Financial Results for 1H FY2018 Unit: JPY billion % of Revenues % of Revenues % of Revenues % of Revenues 1H18 Results 1H17 Results Year over Year Change 1H18 Targets FY18 Targets (Apr. 2018 - Sep. 2018) (Apr. 2017 - Sep. 2017) (Apr. 2018 - Sep. 2018) (Apr. 2018 - Mar. 2019) Tota

  5. Slide 5: Revenues

    Ⅱ - 2. Revenues Unit: JPY million [ ] , YoY = Year over year comparison NW Services Systems Integration (SI) Internet Connectivity Services (Enterprise) Systems Construction Internet Connectivity Services (Consumer) Systems Operation and Maintenance Outsourcing Service Equipment Sales WAN Service AT

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

    Ⅱ - 3. Cost of Revenues & Gross Margin Ratio Unit: JPY million Cost of revenues: NW Services SI Equipment Sales ATM Operation Business [ ] , YoY = Year over year comparison Gross margin ratio: NW Services SI Total Gross Margin  Total 1H18: JPY14,089 million (up 8.2% YoY) 1H17: 69,962 [+12.3%] 1H18:

  7. Slide 7: Network Services (1) Revenues

    Unit: JPY million Ⅱ - 4. Network Services (1) Revenues [ ] , YoY =Year over year comparison QoQ = 2Q18 compared to 1Q18 WAN Services Outsourcing Services NW Services Revenues Internet Connectivity Services (consumer) Internet Connectivity (Enterprise) Internet Connectivity Services (enterprise)  1

  8. Slide 8: Network Services (2) Cost of Revenues

    Unit: JPY million Ⅱ - 4. Network Services (2) Cost of Revenues [ ] , YoY =Year over year comparison QoQ = 2Q18 compared to 1Q18 Outsourcing-related costs* Cost of NW Services Others Personnel-related costs  1H18: up 12.7% YoY Network operation-related costs  2Q18: up 12.3% YoY, up 3.5% QoQ Circuit

  9. Slide 9: Systems Integration (SI) (1) Revenues

    Unit: JPY million Ⅱ - 5. Systems Integration (SI) (1) Revenues [ ] , YoY = Year over year comparison QoQ = 2Q18 compared to 1Q18 Systems construction Systems operation & maintenance revenues Order backlog (sum of systems construction & equipment sales) revenues Cloud revenues within systems operatio

  10. Slide 10: Systems Integration (SI) (2) Cost of Revenues

    Ⅱ - 5. Systems Integration (SI) (2) Cost of Revenues Unit: JPY million Purchasing costs [ ] , YoY = Year over year comparison QoQ = 2Q18 compared to 1Q18 Outsourcing-related costs* Others Network operation-related costs Personnel-related costs 1H17: 24,221 [+5.3%] 1H18: 25,261 Cost of SI FY17: 53,61

  11. Slide 11: Number of Employees

    Ⅱ - 6. Number of Employees YoY = Year over year comparison Contract worker (personnel) Full time worker (personnel) Employee Distribution Administration 12% Sales 17% Engineers 71%  1H18: up JPY381 million, up 3.3% YoY  Hired 175 new graduates in Apr. 2018 (148 in Apr. 2017, 137 in Apr. 2016) Unit

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

    Ⅱ - 7. SG&A Expenses/R&D Unit: JPY million [ ] , YoY = Year over year comparison Research & development expenses General & administrative expenses Sales & marketing expenses ( ) % of total revenues 1H17: 10,710 [+8.2%] 1H18: 11,177 SG&A FY17: 21,471 [+6.8%] [+4.4%]  Sales & marketing expenses  1H1

  13. Slide 13: Operating Income & Net Income

    Ⅱ - 8. Operating Income & Net Income Unit: JPY million YoY = Year over year comparison Operating income Adjusted net income attributable to IIJ (*) Operating margin ratio 6.2% Income 3.3% 3.7% 2.7% 2.8% 2.6%  Adjusted income before income tax expense:(*)  1H18: JPY2,939 million (up 25.2% YoY) FY17

  14. Slide 14: Consolidated Balance Sheets (Summary)

    Ⅱ - 9. Consolidated Balance Sheets (Summary) Unit: JPY million Mar. 31, 2018 Sep. 30, 2018 Changes Cash and Cash Equivalents 21,403 28,051 +6,648 Accounts Receivable 31,831 29,745 (2,086) Inventories 1,715 3,560 +1,846 Prepaid Expenses (Current and Noncurrent) 16,409 18,971 +2,562 Investments in Equ

  15. Slide 15: Consolidated Cash Flows

    Ⅱ - 10. Consolidated Cash Flows Unit: JPY million YoY = Year over year comparison Operating Activities 1H17: 6,102 1H18: 12,855 FY17: 13,262 Major Breakdown YoY Change Net income 2,068 +492 Depreciation and amortization 6,751 +729 Fluctuations of operating assets and liabilities 4,220 +5,732 Realize

  16. Slide 16: Other Financial Data

    Ⅱ - 11. Other Financial Data Unit: JPY million [ ] = Year over year comparison CAPEX Depreciation and Amortization Cash CAPEX Capital Lease 1H17: 9,346 1H18: 7,880 1H17: 6,022 1H18: 6,751 FY17: 20,828 FY17: 12,365 Adjusted EBITDA Revenue & Adjusted EBITDA Annual Growth Revenue Unit: JPY billion 1H17

  17. Slide 17: Cloud & Mobile/IoT Business

    Unit: JPY billion (bn) Ⅲ - 1. Cloud & Mobile/IoT Business % = Year over year comparison Subs. = subscriptions Cloud-related revenue Mobile revenue & subscription Major Breakdown of 2Q18 Revenue Private 3.57, Public 0.67, IIJ Raptor 0.58 Subscription (thousand): IIJmio Mobile (consumer) IIJ Mobile (e

  18. Slide 18: Business Developments

    Unit: JPY billion Ⅲ - 2. Business Developments % = Year over year comparison METI = Ministry of Economy, Trade and Industry Security  Security-related services revenue growth Comprehensive Total Security Solution Provider  Recognized in Outsourcing Services  In addition to services, provide SI f

  19. Slide 19: Recent Press Releases of Services' Function Expansion

    Ⅲ - 3. Recent Press Releases of Services’ Function Expansion October Provide even more optimized and flexible enterprise IIJ Omnibus Services network with Cloud routing and SD-LAN Provide secure and fast VPN connection to access IIJ Flex Mobility Services “Office365” of Microsoft and others with UDP

  20. Slide 20: FY2018 Business Plan (announced in May 2018)

    Ⅲ - 4. FY2018 Business Plan (announced in May 2018) Unit: JPY billion Aim to increase income with continuous recurring revenue growth while full-MVNO-related costs increase, Seek significant income growth in FY19 by strengthening revenue accumulation % of Revenues % of Revenues Target & Assumption F

  21. Slide 21: Gains/Losses on Marketable Equity Securities

    Ⅲ - 5. Gains/Losses on Marketable Equity Securities 4Q17-end B/S 1Q18-beginning B/S 1Q18-end B/S 2Q18-end B/S Marketable equity Marketable equity Marketable equity Marketable equity securities*1at market value: securities*1at market value: securities at market value: securities at market value: (JPY

  22. Slide 22: 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 abou

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