Internet Initiative Japan Inc. · TSE:3774

Internet Initiative Japan — 9M FY2018 Earnings Presentation

22 slides from Internet Initiative Japan's earnings presentation, Feb 7, 2019

  1. Slide 1: Consolidated Financial Results for 1Q-3Q FY2018

    Consolidated Financial Results for 1Q-3Q FY2018 (9 months ended December 31, 2018) Internet Initiative Japan Inc. TSE1(3774), NASDAQ(IIJI) February 7, 2019 © Internet Initiative Japan Inc.

  2. Slide 2: Agenda

    Agenda Ⅰ. Summary of 1Q-3Q18 Financial Results Ⅱ. Consolidated Financial Results for 1Q-3Q18 Ⅲ. Reference Materials © Internet Initiative Japan Inc. 1

  3. Slide 3: Summary of 1Q-3Q18 Financial Results

    (※) Adjusted incomes exclude effect of the revision of U.S Ⅰ. Summary of 1Q-3Q18 Financial Results GAAP related to gains/losses on equity securities & funds Unit: JPY billion (bn), % ＝YoY comparison Revenue growth & SI gross margin improvement absorbed cost increase Gross Margin expansion led operat

  4. Slide 4: Consolidated Financial Results for 1Q-3Q18

    Ⅱ - 1. Consolidated Financial Results for 1Q-3Q18 Unit: JPY billion % of Revenues % of Revenues % of Revenues 1Q-3Q18 1Q-3Q17 Year over Year Change FY18 Targets Results Results (Apr. 2018 - Dec. 2018) (Apr. 2017 - Dec. 2017) (Apr. 2018 - Mar. 2019) Total Revenues 139.4 127.6 +9.2% +11.8 190.0 84.2%

  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 (Total) (SI) (NW) Gross Margin  Total 1Q-3Q18: JPY22,014 million (up 11.4% YoY) 1Q-3Q

  7. Slide 7: Network Services (1) Revenues

    Unit: JPY million Ⅱ - 4. Network Services (1) Revenues [ ] , YoY =Year over year comparison QoQ = 3Q18 compared to 2Q18 WAN Services Outsourcing Services Internet Connectivity Services (consumer) NW Services Revenues Internet Connectivity Services (enterprise) Internet Connectivity (Enterprise) Tot

  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 = 3Q18 compared to 2Q18 Outsourcing-related costs* Others Personnel-related costs Cost of NW Services Network operation-related costs  3Q18: up 9.4% YoY, up 2.3% QoQ Circuit-related costs • Along

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

    Unit: JPY million Ⅱ - 5. Systems Integration (SI) (1) Revenues [ ] , YoY = Year over year comparison QoQ = 3Q18 compared to 2Q18 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 = 3Q18 compared to 2Q18 Outsourcing-related costs* Others Network operation-related costs Personnel-related costs Cost of SI 1Q-3Q17: 37,898 [+6.3%] 1Q-3Q18: 38,801 [+2.4

  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%  Hired 175 new graduates in Apr. 2018 (148 in Apr. 2017, 137 in Apr. 2016)  176 new graduates are planned to join in

  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 1Q-3Q17: 15,980 [+8.9%] 1Q-3Q18: 16,878 [+5.6%] SG&A FY17: 21,471 [+6.8%]  Sales & marketing expenses

  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 Operating margin ratio Income attributable to IIJ (*)  Adjusted income before income tax expense: (*)  1Q-3Q18: JPY5,102 million (up 35.7% YoY) • Miscellaneous income: JPY143

  14. Slide 14: Consolidated Balance Sheets (Summary)

    Ⅱ - 9. Consolidated Balance Sheets (Summary) Unit: JPY million Mar. 31, 2018 Dec. 2018 Changes Cash and Cash Equivalents 21,403 28,878 +7,475 Accounts Receivable 31,831 30,615 (1,215) Inventories 1,715 4,748 +3,034 Prepaid Expenses (Current and Noncurrent) 16,409 19,012 +2,604 Investments in Equity

  15. Slide 15: Consolidated Cash Flows

    Ⅱ - 10. Consolidated Cash Flows Unit: JPY million YoY = Year over year comparison Operating Activities 1Q-3Q17: 8,296 1Q-3Q18: 17,114 FY17: 13,262 Major Breakdown YoY Change 6,340 6,515 4,966 Net income 1,430 (1,385) 4,259 3,237 2,865 2,194 Depreciation and amortization 10,288 +1,132 Fluctuations of

  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 1Q-3Q17: 15,756 1Q-3Q18: 12,000 1Q-3Q17: 9,156 1Q-3Q18: 10,288 FY17: 20,828 FY17: 12,365 5,340 4,006 6,410 5,072 4,181 3,699 4,120 2,979 3,043 3,134 3,209 3,297

  17. Slide 17: Cloud & Mobile/IoT Business

    Unit: JPY billion (bn) Ⅲ - 1. Cloud & Mobile/IoT Business % = Year over year comparison Subs. = subscriptions, mill = million Cloud-related revenue Mobile revenue & subscription Major Breakdown of 3Q18 Revenue Subscription (thousand): Private 3.66, Public 0.70, IIJ Raptor* 0.64 IIJ Mobile *ASP FX sy

  18. Slide 18: Business Developments

    Unit: JPY billion (bn) Ⅲ - 2. Business Developments % = Year over year comparison apx = approximately Security Overseas Business  Strong revenue growth supported by strong  1Q-3Q18 revenue JPY5.46 billion, demands, 3Q revenue grew by 8.3% from 2Q operating income (excluding that of JV) apx. JPY0.1

  19. Slide 19: Recurring Revenue Growth

    Ⅲ - 3. Recurring Revenue Growth Unit: JPY billion (bn) % = Year over year comparison （+6.3%） （+16.0%） （+14.0%） （+14.0%） Mobile SI operation (including private Cloud） Security Other NW services* +32% +71% +103% +8% +6% +19% +26% +7% +11% Consumer mobile & MVNE Accumulation of Multi-carrier Launched f

  20. Slide 20: FY2018 Financial Targets (remain unchanged)

    Ⅲ - 4. FY2018 Financial Targets (remain unchanged) 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 FY17 Results FY18 Ta

  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 3Q18-end B/S Marketable equity Marketable equity Marketable equity securities securities*1at market value: securities*1at market value: at market value: JPY6.2 billion New Accounting Rule Applied JPY9.2 billion JPY9.

  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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