Internet Initiative Japan Inc. Corporate Overview IR Roadshow in London, Frankfurt, Paris, and Zurich July 2019 Internet Initiative Japan Inc.
Outline Strengths and competitive advantages Business accumulation P. 3 – 5 Business model P. 6 Blue-chip customer base P. 7 Comprehensive service line-up P. 8 Total Solution Provider P. 9 Positioning P. 10 Recent growth P. 11 Growth strategy Cloud P. 12 – 14 Mobile P. 15 – 17 Security P. 18 IoT P. 19 FinTech P. 20 – 21 CDN P. 22 Middle-to-long term business growth P. 23 – 24 Financials FY18 results summary P. 25 Comparison between U.S. GAAP and IFRS figures P. 26 FY19 business goals P. 27 FY18 results in details P. 35 – 53 Dividend P. 28 Appendix P. 29 – 33 * Unless other than stated, financial results up-till FY18 are based on U.S GAAP. 2 Internet Initiative Japan Inc.
Internet Technology Initiatives in Japan About IIJ Established December 1992 3,353 (approx. 70% engineers) Number of Employees Consolidated, As of Mar. 31 2019 Tokyo Stock Exchange 1 st Section (code: 3774) Listed Markets We voluntary delisted from the U.S. NASDAQ Market in Apr. 2019. Our ticker symbol at OTC is IIJIY NTT group (26.0%) , Dalton (6.3%) , Large Shareholders Global Alpha (6.1%), CEO Suzuki (5.6%*) *Jointly owned by CEO. Suzuki’s wholly owned private company The first established full-scale ISP (Internet Service Provider) in Japan Introduced many prototype Internet-related network services Highly skilled IP (Internet Protocol) engineers In-house service development and related back office facilities “IIJ” brand towards blue-chips Mainly large enterprises and governmental organizations Differentiate by reliability and quality of network and systems operation Long-term client relationship with no serious systems troubles At the leading edge of IP R&D Differentiate by continuous service developments and business investments Enhancing cloud, mobile, security, CDN (Contents Distribution Network) and solutions related to bigdata and IoT Participate in world-wide research and organizations …and many more 3 Internet Initiative Japan Inc.
Technology and Service Developments About IIJ Healthcare Initiate the market by developing platform AI network-related services IoT BigData Solution Solution Overseas SI Projects SDN/NFV FX Application Cloud Service Container Development In overseas DC Systems SACM IPTV Operation Large Volume Platform SOC Data Systems Distribution Integration Smart- P to P Cloud metering Computing Smart DC “IIJ GIO” Mobile Internet LTE iBPS LaIT Internet VPN M2M Wide Managed LAN Consumer LAN Service DDoS Mobile Global Web Hosting Web CDN Full-MVNO backbone Service Global Home Page SEIL Gateway Anti-spam WAN Service Solution MVNE SMF IIJ ISP Consumer Mobile in U.S. IPv6 Firewall IP Multicast ISP IIJmio Service Asia IX Backbone Mail Hosting SLA Dial-up Services service IIJ4U 1992 1996 1997 1998 2006 2007 2008 2010 2013 2014 2016 2018 IIJ Group 4 Internet Initiative Japan Inc.
ISP to Total Network Solution Provider About IIJ Revenues: Systems construction (one-time) SI Systems operation and maintenance (include private cloud revenue) One-time EMERGE Revenue WAN services Cloud, consumer mobile, IoT …. Outsourcing services NW (include security services revenue) Internet connectivity services (enterprise & consumer) (include mobile services) BLOOM Harvesting the flower of Total Network Solution Provider Recurring Revenue Transition Change in business model WAN Business (M&A Sep. 2010) Birth Earned enduring client base Increase in number of Heavy price Merger of Cloud service penetration ISPs competition corporate ISPs Mobile services demands 5 Internet Initiative Japan Inc.
Business Model About IIJ Leveraging Internet-related technology Total network solution provider with services and SI Approx. 12,000 customers Consumers (enterprises, central government agencies, universities, ISP more) Network Services SI Outsourcing services WAN services Private Cloud Public Cloud Security Data center Private Global Systems connectivity WAN VPN Email gateway construction etc. Internet connectivity services Systems Operation Mobile Multi site connectivity and etc. Maintenance IP DC Connectivity etc. Cost • Service development (mainly engineers’ personnel cost recognized as cost of revenue in NW and SI) • Network equipment depreciation (recognized as depreciation cost) • Purchasing mobile bandwidth from MNOs (recognized as outsourcing cost in NW cost) • Leasing data center space from data center owners (recognized Osaka Tokyo as outsourcing cost) *own 2 data centers • Leasing fiber from carries (recognized as circuit related cost) etc. 6 Internet Initiative Japan Inc.
Competitive Excellent Customer Base with Many Blue-Chips Advantages Cover Most of Top Revenue Companies Increase Revenue per Customer The number of clients among the top 10 companies in each industry. Revenues per Customer 10 10 10 10 Banks Insurance Securities Information/Telco 10 10 9 9 Number of Customers Electronic Construction Precision Retail appliances equipment Revenue Distribution by Industry Revenue Distribution by Clients 7 Source: IIJ’s FY2018 Financials Internet Initiative Japan Inc.
Competitive Comprehensive Line-ups of IT services Advantages Revenues Services Business status • Dominate the matured market • Revenue gradually increase with • Primary connectivity for head offices Internet greater contracted bandwidth/traffic • High-performance dedicated connectivity Connectivity • Anticipate to grow with CDN traffic & • Redundant connectivity for multi-site further cloud service penetration (Enterprise) • Continuous network expansion • Mobile solutions, M2M/IoT, MVNE for • Accumulate subscription with MVNE Mobile NW Internet enterprises and IoT Services Connectivity • Inexpensive SIM card services for • Further capture IoT demand with full- consumers MVNO supporting data services (Consumer) WAN • Closed NW for multi-site connection • Legacy technology, shrinking market • Cross-sell and accumulate various • Security, data center, email outsource, outsourcing services NW/Server management service line-ups etc. Outsourcing • Growing demands for security • Many in-house developed services • Continuous service development • Full service line-ups for IaaS • Competitive advantage of SI with Cloud • SaaS/PaaS with partners multi/private cloud Operation & • Continuous service enhancement • Hybrid/Multi cloud solutions including GIO P2 Maintenance • BigData, IIJ Raptor (FX application) etc. SI • Internet-related SI, NW integration Construction • Value-added functions to promote • Cloud-related, mobile-related SI cloud, mobile systems etc. • Operation & maintenance after construction Equipment Sales 8 Internet Initiative Japan Inc.
Competitive Example of Total Solution Advantages IoT Online Service Internet Connectivity Platform Services Information Security WAN Services Security Services Cloud System Remote Working & Office IT Enterprise System Cloud Services Mobile Services Systems Construction & FinTech Operation 9 Internet Initiative Japan Inc.
Competitive Target Blue-chip’s IT Shift Advantages Cover Corporates’ New IT Services Demands with reliable operation Cloud Services IoT Solutions Carriers Systems Integrators Internet Connectivity Services Network Integration Outsourcing Services Systems Operation WAN Services Private Cloud Legacy Network Services Legacy Systems i.e. telephone i.e. mainframe IIJ’s differentiation points towards competitors • Many highly skilled network engineers • Operates network facilities by ourselves • Corresponds to the Internet market rapidly • Develops network services • Unbureaucratic organization structure • Moderate number of employees 10 Internet Initiative Japan Inc.
Growth Leveraging Blue-chip Customer Base Strategy Unit: JPY billion Cross-selling multiple service products % = year over year change U.S. GAAP base < Revenue Breakdown > ATM Operation Business Equipment Sales 192.3 Systems construction Systems operation & maintenance (+9.2%) 176.1 Outsourcing services WAN services (+11.6%) Consumer Internet services 157.8 Enterprise Internet services (+12.2%) 140.6 (+14.3%) 123.1 114.3 (+7.7%) (+7.6%) 20.1 17.9 15.7 14.1 Cloud services 12.3 9.8 14.1 12.1 Security services 9.6 8.6 42.0 8.1 35.3 26.7 Mobile services 15.6 7.7 4.7 11 Internet Initiative Japan Inc.
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