Internet Initiative Japan Inc. · TSE:3774

Internet Initiative Japan — H1 FY2016 Earnings Presentation

22 slides from Internet Initiative Japan's earnings presentation, Nov 8, 2016

  1. Slide 1: Consolidated Financial Results for 1H FY2016

    Consolidated Financial Results for 1H FY2016 (First 6 months ended September 30, 2016) Internet Initiative Japan Inc. TSE1(3774), NASDAQ(IIJI) November 8, 2016 © 2016 Internet Initiative Japan Inc.

  2. Slide 2: Agenda

    Agenda Ⅰ. Summary of 1H FY2016 Financial Results Ⅱ. Consolidated Financial Results for 1H FY2016 Ⅲ. Reference Materials © 2016 Internet Initiative Japan Inc. 1

  3. Slide 3: Summary of 1H FY2016 Financial Results

    Ⅰ- 1. Summary of 1H FY2016 Financial Results < 1H16 Results > < FY2016 Targets > Revenues JPY74.12 billion (up 13.5% YoY) JPY159.0 billion JPY158.0 billion (up 12.3% YoY) Gross margin JPY11.85 billion (up 1.2% YoY) JPY27.6 billion JPY25.3 billion (up 2.6% YoY) Operating Income JPY1.95 billion (down

  4. Slide 4: Focusing Business Investing Areas

    Ⅰ- 2. Focusing Business Investing Areas クラウド Many enterprise systems continuously migrating to cloud  FY15 GIO P2-related CAPEX: approx. JPY2.2 billion Cloud Expect our cloud services to become the platform of full outsourcing in the future 1H16 revenue: up approx. JPY0.14 billion YoY, 1H16 cost: u

  5. Slide 5: Consolidated Financial Results for 1H FY2016

    Ⅱ- 1. Consolidated Financial Results for 1H FY2016 Unit: JPY billion % of Revenues % of Revenues % of Revenues % of Revenues % of Revenues % of Revenues YoY 1H16 Initial FY16 Initial FY16 Revised 1H16 Results 1H15 Results FY15 Results Change Target Target Target (Apr. 2016 - Sep. 2016) (Apr. 2015 -

  6. Slide 6: Revenues

    Ⅱ- 2. Revenues Unit: JPY million Network Services Systems Integration (SI) YoY = 1H16 compared to 1H15 Internet Connectivity Services (Enterprise) Systems Construction Internet Connectivity Services (Consumer) Systems Operation and Maintenance Outsourcing Service Equipment Sales WAN Service ATM Oper

  7. Slide 7: Cost of Revenues and Gross Margin Ratio

    Ⅱ- 3. Cost of Revenues and Gross Margin Ratio Cost of revenues: Network Services SI ATM Operation Business Unit: JPY million Equipment Sales Gross margin ratio: Network Services SI YoY = 1H16 compared to 1H15 Total Revenues 1H16 Gross Margin Total  JPY11,848 million (up JPY141 million, up 1.2% YoY

  8. Slide 8: Operating Income (1) comparison with initial full-year target

    Ⅱ- 4. Operating Income (1) comparison with initial full-year target Unit: JPY billion Gap between Initial and Revised Targets FY15 FY16 FY16 results initial target revised target (*)  Gap in SI gross margin: approx. JPY1.5 billion weaker  Low productivity of SEs, a low profitable construction proj

  9. Slide 9: Operating Income (2) comparison with FY15 results

    Ⅱ- 4. Operating Income (2) comparison with FY15 results Unit: JPY billion FY16 Business Outlook Future Prospects gm = gross margin FY14 results FY15 results FY16 forecast  SI(*) gross margin outlook:  Productivity of SEs is expected approx. down JPY0.8 billion to improve from 2H16. The Gross (up J

  10. Slide 10: Network Services (1) Revenues

    Ⅱ- 5. Network Services (1)Revenues WAN Services Unit: JPY million [ ] , YoY = compared to the same period in a previous year Outsourcing Services Total Contracted QoQ: 2Q16 compared to 1Q16 Internet Connectivity Services (Consumer) Bandwidth (Gbps) Internet Connectivity Services (Enterprise) 1H16 I

  11. Slide 11: Network Services (2) Cost of Revenues

    Ⅱ- 5. Network Services (2)Cost of Revenues Others Unit: JPY million [ ] , YoY = compared to the same period in a previous year Outsourcing-related costs Personnel-related costs Cost of network services Network operation-related costs  1H16: up JPY6,214 million, up 20.4% YoY Circuit-related costs 

  12. Slide 12: Systems Integration (SI) (1) Revenues

    Ⅱ- 6. Systems Integration (SI) (1)Revenues < Systems Construction > Unit: JPY million [ ] , YoY = compared to the same period in a previous year Systems Construction Revenues Systems Operation and Maintenance Revenues 1H15: 7,643 [-2.9%] 1H16: 8,583 [+12.3%] Order backlog *Systems construction’s ord

  13. Slide 13: Systems Integration (SI) (2) Cost of Revenues

    Ⅱ- 6. Systems Integration (SI) (2)Cost of Revenues Unit: JPY million Purchasing costs [ ] , YoY = compared to the same period in a previous year Outsourcing-related costs QoQ: 2Q16 compared to 1Q16 Others Network operation-related costs Personnel-related costs ( ) Gross margin ratio 1H15: 20,341 [+1

  14. Slide 14: Number of Employees

    Ⅱ- 7. Number of Employees Contract worker Unit: JPY million YoY = 1H16 compared to 1H15 Full time worker 2,835 2,975 2,981 2,977 2,980 3,110 3,124 Employee Distribution Administration 11% Sales 17% Engineers 72% 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 5,114 5,266 5,297 5,271 5,321 5,464 5,446 Personnel r

  15. Slide 15: SG&A Expenses/R&D

    Ⅱ- 8. SG&A Expenses/R&D Research & development expenses Unit: JPY million YoY = 1H16 compared to 1H15 General & administrative expenses Sales & marketing expenses ( ) % of total revenues 1H15: 9,145 (14.0%) 1H16: 9,901(13.4%) FY15: 18,515 (13.2%) 4,517 4,627 4,576 4,795 4,946 4,955 (14.4%) (13.7%) (

  16. Slide 16: Operating Income and Net Income

    Ⅱ- 9. Operating Income and Net Income Operating Income Net Income Attributable to IIJ Operating Margin Ratio Unit: JPY million YoY = 1H16 compared to 1H15 1H15 Operating income: 2,563 Income before income tax expense: 1H16 Operating income: 1,948 1H16: JPY2,105 million 1H15 Net income attributable

  17. Slide 17: Consolidated Balance Sheets (Summary)

    Ⅱ- 10. Consolidated Balance Sheets (Summary) Unit: JPY million Mar. 31, 2016 Sep. 30, 2016 Changes Cash and Cash Equivalents 19,569 19,668 +99 Accounts Receivable 23,747 23,161 (586) Inventories and Prepaid Expenses (Current and Noncurrent) 11,761 14,616 +2,855 Investments in Equity Method Investees

  18. Slide 18: Consolidated Cash Flows

    Ⅱ- 11. Consolidated Cash Flows Unit: JPY million < Operating Activities > YoY = 1H16 compared to 1H15 1H15: 6,080 1H16： 4,073 1H16 Operating Activities FY15: 12,052 Major YoY Breakdown Change Net income 1,193 (551) Depreciation and amortization 5,284 +483 Fluctuation of operating assets and liabili

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

    Ⅱ- 12. Other Financial Data (CAPEX etc.) Unit: JPY million < CAPEX > Cash CAPEX Capital Lease < Breakdown of CAPEX (unit: JPY billion) > 1H15 FY15 1H16 1H15: 7,943 1H16: 8,372 FY15: 14,812 Total CAPEX 7.9 14.8 8.4 Network update, back office 5.2 10.2 6.1 investment and others Cloud-related 2.6 4.4 2

  20. Slide 20: Cloud Business Developments

    Ⅲ- 1. Cloud Business Developments Cloud-related revenue (Unit: JPY billion) 2Q16 revenue (Unit: JPY billion) Large game customers 2Q16 cloud-related revenue recognition: General purpose SaaS 0.09 88.9% in systems operation and maintenance (groupware etc.) Business enterprise customers 11.1% in outso

  21. Slide 21: Mobile Business Developments

    Ⅲ- 2. Mobile Business Developments Total subscription & revenue IIJmio mobile (consumer) & IIJ Mobile (enterprise) Total subscription (thousand) 1,570 Subscription IIJmio mobile (thousand): Total revenue (JPY billion) IIJ Mobile 811 875 1,401 ( ) MVNE subscription* 747 685 Revenue IIJ Mobile 605 1,2

  22. Slide 22: Forward-looking statements / Contact Information

    ※ 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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