Internet Initiative Japan Inc. · TSE:3774
Internet Initiative Japan — Investor Presentation (October 2013)
40 slides from Internet Initiative Japan's investor presentation, Oct 30, 2013
Slide 1: Internet Initiative Japan Inc.
Internet Initiative Japan Inc. p and Oct. 2013 Sep. TSE1:3774 NASDAQ:IIJI
Slide 2: Key Investment Highlights
Key Investment Highlights Top T IP Engineering E i i Company C iin Japan J Shifted from ISP to Total Network Solution Provider Target g Blue-chip & Governmental Organizations g Approx. 8,500 Excellent Japanese Customers Solid Growth Strategy with Proved Revenues & Income Growth Best Positioned
Slide 3: TOP IP Engineering Company in Japan
TOP IP Engineering Company in Japan The first established full-scale ISP in Japan Introduced many prototype internet-related network services and led the market A group of highly motivated and skilled top level IP engineers Pioneer of network technologies in Japan Service initiative with in-h
Slide 4: Entrepreneur of Network Technologies
Entrepreneur of Network Technologies Business and Service Development to Initiate the Market Overseas SI Projects SDN The first full-scale ISP in Japan FX Container Cloud DC I h In-housed dddevelopment l Application Development Service S i InI US & China & UK IPTV At leading edge of IP R&D Sys
Slide 5: Strategic Shift in Business Model
Strategic Shift in Business Model From “ISP” to “Total Network Solution Provider” EMERGE Revenue Cloud Computing (JPY million) One-time revenue Systems Construction ENDURE Monthly recurring revenue Tough economic situation Systems Operation BLOOM Systems y WAN Services Harvesting H ti ththe flflower
Slide 6: Business Structure of Network Services
Business Structure of Network Services Revenues Costs • Multiple cross-selling revenue sources with Internet • Constant expansion of Internet backbone connectivity for corporate/home and outsourcing services • Strong bargaining power as one of the largest on the Internet backbone independent ISPs •
Slide 7: Business Model: Cross-selling of Network Solutions
Business Model: Cross-selling of Network Solutions • Dedicated line connectivity IP service (cover over Gbps) IPv6 service Mainly network-related integration E-commerce/Web-shopping System • Broadband connectivity Optical Fiber/ADSL Disaster Recovery • Mobile connectivity (IIJ Mobile) Private
Slide 8: Excellent Blue-chip Client Base
Excellent Blue-chip Client Base Top Tiers 10/10 10/10 10/10 Electronic Information/ Precision appliances Telecommunications equipment 8/10 10/10 10/10 Banks Securities Construction 9/10 9/10 8/10 Machinery Wholesale Insurance • The number of clients among the top 10 companies in each industry. 8
Slide 9: Revenue Composition by Clients
Revenue Composition by Clients Revenue Distribution by Revenue Distribution by Industry Clients Not dependent on specific industry Not dependent on specific company * largest client revenue is less than 5% of the total Retail Government/ 4% Construction Public sector5% 4% 2% 2% Top 501- 5% 17% Machi
Slide 10: Competitive Advantages
Competitive Advantages Cloud Cl dCComputing ti Services Carriers System Integrators Internet Connectivity Services Network Integration Outsourcing Services Systems Operation WAN Services Private Cloud Telephone Mainframe Legacy Network Services Legacy Systems Operation IIJ… IIJ… has many highly skil
Slide 11: Customer Retention Strategy
Customer Retention Strategy Cross-selling of Services Revenues by Customer Solid Growth Strategy Provide high quality and reliable services Develop and introduce new technologies and Increase revenues solution continuously per customer Leverage and strengthen client base Seizing business opportuniti
Slide 12: Proven Solid Business Strategy and FY13 Target
Proven Solid Business Strategy and FY13 Target (JPY million) Revenue Growth 117,000 Income Growth 7. 3% 8. 0% 120,000 6. 5% 106, 248 (JPY million) 97, 315 5. 0% 5. 0% 100,000 10, 000 9, 400 82 418 82, 7, 753 80, 000 8, 000 68, 006 6, 353 6, 000 60, 000 6, 000 5, 301 Over 80% 4, 141 3, 412 3 641 3, 4
Slide 13: Growth Strategy Hereafter
Growth Strategy Hereafter • Survived tough competition. Few high-end corporate ISPs remain • Rapid traffic increase Bandwidth migration Further revenue growth Connectivity • Enjoying greater network efficiency by having multiple revenue sources on the Internet backbone Services • Corporate connectiv
Slide 14: Best Positioned in Cloud Computing Market
Best Positioned in Cloud Computing Market • Launched services in Dec. 2012, chosen for service reliability and exceptional network operation skills • Ranked as the top provider in Japanese public cloud market for 2 consecutive years (Fuji Chimera Research Inst., July 2012 and Aug 2013) • Continuousl
Slide 15: Expanding Overseas Business
Expanding Overseas Business S Supporting i JJapanese clients li globally l b ll London Demands from SNS game providers to support their global expansion Düsseldorf Los Angeles Japanese clients seeking network services abroad, especially in Asia San Jose Offering network services seamlessly O
Slide 16: ATM Operation Business Developments
ATM Operation Business Developments Business Model Receive commission for each withdrawal transaction Now in a start-up phase Strong revenue & income driver in mid-term Financial Results (JPY billion) Number of Placed ATMs May 13, 2011 280 M 15, May 15 2012 440 May 15, 2013 625 Aug. 6, 201
Slide 17: Developing SDN Platform – Focused R&D Theme
Developing SDN Platform – Focused R&D Theme SDN(Software Defined Network): future networking technology, network is virtualized and controlled by software, independent from physical boundaries Aim to be the leader in SDN market $35.6 B SDN Market Growth • Develop services internally • Apply the te
Slide 18: 1Q Results Summary and Full FY2013 Financial Target
1Q Results Summary and Full FY2013 Financial Target 18
Slide 19: FY2013 Financial Target (Remain unchanged from May 15, 2013)
FY2013 Financial Target (Remain unchanged from May 15, 2013) Seasonal factors of 1Q: price reduction pressure for network services, smallest systems construction scale, increased fixed expenses due for example the increased number of personnel 1Q financial results in line with our initial plan
Slide 20: FY2013 Dividend Forecast
FY2013 Dividend Forecast (Remain unchanged from May 15, 2013) IIJ conducted a 1:200 stock split on common stock with an effective date of October 1, 2012. Dividend figures shown below are retroactively adjusted to reflect the stock split. Target cash dividends per share remains unchanged after the i
Slide 21: Market Opportunity, Sustainable Growth & Scaling-up
IIJ Group – The Way Forward Market Opportunity Increased usage of network based systems Widespread use of cloud computing services Explosion of data traffic due to the growing popularity of smart devises Return of IT investments supported by the recent Japanese economy recovery Stronger Mana
Slide 22: Consolidated Financial Results for 1Q FY2013
Consolidated Financial Results for 1Q FY2013 Announced on August 6, 2013
Slide 23: Summary of 1Q FY2013 Financial Results
Ⅰ. Summary of 1Q FY2013 Financial Results < 1Q13 Financial Results > ・Revenues JPY26,441 million (up 6.4% YoY) ・Gross margin JPY5,030 million (up 4.4% YoY) ・Operating income JPY1,305 million (down 5.0% YoY) I ・Income before b f income i tax t expense JPY1 431 million JPY1,431 illi ( 4 (up 4.2% 2% Y
Slide 24: Consolidated Financial Results for 1Q FY2013
Ⅱ- 1. Consolidated Financial Results for 1Q FY2013 24
Slide 25: Revenues
Ⅱ- 2. Revenues Network Services Systems Integration (SI) Equipment Sales Unit: JPY million Internet Connectivity Services for Corporate Use Systems Construction ATM Operation Business Internet Connectivity Services for Home Use Systems Operation and Maintenance Outsourcing Service WAN Service FY12:
Slide 26: Cost of Revenues and Gross Margin Ratio
Ⅱ-3. Cost of Revenues and Gross Margin Ratio Cost of revenues : Network Services Systems Integration（SI） Equipment Sales ATM Operation Business Gross margin ratio : Network Services Systems Integration（SI) Total Revenues Unit: JPY million FY12: 84,395 , 20,022 20,939 20,204 23,230 21,411 YoY = 1Q13
Slide 27: Network Services Revenues
Ⅱ- 4. Network Services (1)Revenues Unit: JPY million Total Contracted Bandwidth (Gbps) FY12: 65,232 65 232 16,092 16,167 16,256 16,717 16,785 WAN Services Outsourcing Services Internet Connectivity Services for Home Use Internet Connectivity Services for Corporate Use YoY = 1Q13 compared to 1Q12 QoQ
Slide 28: Network Services Cost of Revenues
Ⅱ- 4. Network Services (2)Cost of Revenues Unit: JPY million FY12: 50,692 (Gross margin ratio： 22.3%) 12,764 , 12,619 , 12,589 , 12,721 , 13,242 , Others Outsourcing Costs Personnel Related Costs p Network Operation Related Costs Circuit Related Costs YoY = 1Q13 compared to 1Q12 QoQ = 1Q13 compared
Slide 29: Systems Integration (SI) Revenues
Ⅱ- 5. Systems Integration (SI) (1)Revenues <Systems Construction> U it JPY million Unit: illi Systems Construction Revenues Systems Operation and Maintenance Revenues Order Backlog ※Systems construction’s order backlog and order received Order Received include equipment sales FY12: 15,825 YoY = 1Q13
Slide 30: Systems Integration (SI) Cost of Revenues
Ⅱ- 5. Systems Integration (SI) (2)Cost of Revenues FY12: 30,425 Unit: JPY million (Gross margin ratio： 18.2%) 6,564 7,526 6,904 9,431 7,350 Purchasing Costs Outsourcing Costs Others Network Operation Related Costs Personnel Related Costs YoY = 1Q13 compared to 1Q12 QoQ = 1Q13 compared to 4Q12 1Q13
Slide 31: Number of Employees
Ⅱ- 6. Number of Employees (No. of employees) 2,078 2,081 2,086 2,116 2,269 Contract worker Full time worker [Employee Distribution] Administration 13% Sales 20% Engineers 67% 3,741 3,858 3,902 3,979 4,212 Personnel related costs and (15.1%) (14.7%) (15.3%) (13.5%) (15.9%) expenses (% of revenue) Uni
Slide 32: SG&A Expenses/R&D
Ⅱ- 7. SG&A Expenses/R&D Unit: JPY million FY12: 14,101 Research and Development Expenses (13.3%) General and Administrative Expenses Sales and Marketing g Expenses p 3,445 3,440 3,597 3,619 3,725 ( ) % of Total Revenues (13.9%) (13.1%) (14.1%) (12.2%) (14.1%) 1Q12 1Q13 4,819 5,030 +211 (5.5%) (5.7%)
Slide 33: Operating Income and Net Income
Ⅱ- 8. Operating Income and Net Income U i JPY million Unit: illi Operating Income Net Income Attributable to IIJ 1Q13 Operating income: JPY1,305 million Operating Margin Ratio (down JPY69 million YoY, down 5.0% YoY) ATM operation segment operating income: Unit: JPY million 1Q12 2Q12 3Q12 4Q12 FY12
Slide 34: Summary of Consolidated Balance Sheets
Ⅱ- 9. Summary of Consolidated Balance Sheets Unit: JPY million IIJ shareholders’ equity ratio: 45.8% (as of March 31, 2013), 48.2% (as of June 30, 2013) 34
Slide 35: Consolidated Cash Flows
Ⅱ- 10. Consolidated Cash Flows Operating Activities: Unit: JPY million YoY = 1Q13 compared to 1Q12 FY12: 9,639 1Q13 Operating Activities: Decrease in accounts receivable: JPY2,922 million Depreciation and amortization: JPY2,071 million Decrease in accounts payable: (JPY1,962 million) Payments fo
Slide 36: Other Financial Data (CAPEX etc.)
Ⅱ- 11. Other Financial Data (CAPEX etc.) Unit: JPY million CAPEX (Include Capital Leases): Cash Payment Capital Lease FY12: 10,405 Adjusted EBITDA: *( ) % off ttotal t l revenues FY12: 15,308 (14.4%) Depreciation and Amortization: FY12: 7,556 36
Slide 37: Developments of Cloud Business
Ⅲ-1. Developments of Cloud Business Cl d Revenue Cloud R Unit: JPY billion Unit: JPY billion FY11 FY12 FY13 General-purpose SaaS 0.1 1Q (June revenue) 0.5 (0.18) 1.2 (0.42) 2.3 (0.76) Task-specific SaaS 4Q (March revenue) 1 1 (0.37) 1.1 (0 37) 2 0 (0 2.0 (0.66) 66) 01 0.1 Full Year 3.1 6.2 Target ov
Slide 38: FY2013 Financial Target (Remain unchanged from May 15, 2013)
Ⅲ- 2. FY2013 Financial Target (Remain unchanged from May 15, 2013) Seasonal factors of 1Q: price reduction pressure for network services, smallest systems construction scale, increased fixed expenses due for example the increased number of personnel 1Q financial results in line with our initial
Slide 39: FY2013 Dividend Forecast
Ⅲ- 3. FY2013 Dividend Forecast (Remain unchanged from May 15, 2013) IIJ conducted a 1:200 stock split on common stock with an effective date of October 1, 2012. Dividend figures shown below are retroactively adjusted to reflect the stock split. Target cash dividends per share remains unchanged after
Slide 40: 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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