Internet Initiative Japan Inc. · TSE:3774

Internet Initiative Japan — Q1 FY2013 Earnings Presentation

20 slides from Internet Initiative Japan's earnings presentation, Aug 6, 2013

1. Slide 1: Consolidated Financial Results for 1Q FY2013

   Consolidated Financial Results for 1Q Q FY2013 (First 3 months ended June 30, 2013) Internet Initiative Japan Inc. TSE1(3774), NASDAQ(IIJI) August 6, 2013

2. Slide 2: Agenda

   Agenda Ⅰ. Summary of 1Q FY2013 Financial Results Ⅱ. Consolidated Financial Results for 1Q FY2013 Ⅲ. Reference Materials 1

3. Slide 3: 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) ・Income I before b f income i tax t expense JPY1 431 million JPY1,431 illi ( 4 (up 4.2% 2% Y

4. Slide 4: Consolidated Financial Results for 1Q FY2013

   Ⅱ- 1. Consolidated Financial Results for 1Q FY2013 3

5. Slide 5: 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:

6. Slide 6: 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 co

7. Slide 7: 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

8. Slide 8: 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 Network Operation Related Costs Circuit Related Costs YoY = 1Q13 compared to 1Q12 QoQ = 1Q13 compared to

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

   Ⅱ- 5. Systems Integration (SI) (1)Revenues <Systems S t C Construction> t ti 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 1 FY12:

10. Slide 10: 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

11. Slide 11: 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

12. Slide 12: 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%)

13. Slide 13: 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

14. Slide 14: 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) 13

15. Slide 15: 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

16. Slide 16: 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: *( ) % of total revenues FY12: 15,308 (14.4%) Depreciation and Amortization: FY12: 7,556 15

17. Slide 17: 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

18. Slide 18: FY2013 Financial Target

    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

19. Slide 19: 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. Targett cash T h dividends di id d per share h remains

20. Slide 20: Forward-looking Statements / Contact Information

    ※ Forward-looking Statements Statements made in this presentation regarding IIJ’s or managements’ intentions, beliefs, e pectations or predictions for the future expectations, f t re are forward-looking for ard looking statements that are based on IIJ’s and managements’ current expectations, assumpt

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