Internet Initiative Japan Inc. Corporate Overview IR Roadshow in Hong Kong November 2018 TSE1: 3774 NASDAQ: IIJI 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 Positioning P. 9 Leveraging Blue-chip Customer Base 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 1H18 results summary P. 25 FY18 plan summary P. 26 1H18 results in details P. 33 – 51 Dividend P. 27 Appendix P. 28 – 32 2 Internet Initiative Japan Inc.
Internet Technology Initiatives in Japan About IIJ Established December 1992 Number of Employees 3,344 (approx. 70% engineers) Consolidated Listed Markets NASDAQ (IIJI), TSE1 (3774) NTT group (26.0%) , Dalton (7.3%) , CEO Suzuki (5.6%*) Large Shareholders *Jointly owned by Mr. 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 Self-develop services and the 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 IoT network-related services 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 backbone Full-MVNO Service Global Home Page Gateway SEIL 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 Systems Integration: Systems construction revenue One-time Revenue Systems operation and maintenance revenue Network Services: WAN services revenue EMERGE Outsourcing services revenue Cloud Computing Internet connectivity services revenue (Enterprise & Consumer) BLOOM Harvesting the flower of Total Network Solution Provider Recurring Revenue Transition Change in business model WAN Business (M&A Sep. 2010) Birth Earned its enduring client base Increase in number of Heavy price Merger of corporate Cloud service penetration ISPs competition 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 Over 8,500 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 IP Mobile Multi site connectivity DC Connectivity and etc. Maintenance etc. Cost • Service development • Network equipment depreciation • Purchasing mobile bandwidth from MNOs • Leasing data center space from data center owners (own 1 data center, Osaka Tokyo container-type DC) • Leasing fiber from carries etc. 6 Internet Initiative Japan Inc.
Competitive Excellent Customer Base with Many Blue-Chips Advantages Cover Most of Top Revenue Companies Revenue Distribution by Industry The number of clients among the top 10 companies in each industry. 10 10 10 Electronic Construction Securities appliances 9 8 10 Information/Telco Retail Wholesale 8 9 9 Source: IIJ’s FY2017 Financials Banks Insurance Precision equipment 7 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 • Anticipate to grow with CDN traffic & Connectivity • Redundant connectivity for multi-site further cloud service penetration (Enterprise) • Continuous network expansion Mobile • Mobile solutions, M2M/IoT, MVNE for • Accumulate subscription with MVNE NW Internet enterprises and IoT Connectivity Services • Inexpensive SIM card services for • Further capture IoT demand with full- consumers MVNO supporting data services (Consumer) WAN • Closed NW for multi-site connection • Stable market for long term • Cross-sell and accumulate various • Security, data center, email outsource, outsourcing services NW/Server management service line-ups etc. Outsourcing • Growing demands for security • Over 60 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 Target Blue-chip’s IT Shift Advantages Cover Corporates’ New IT Services Demands with reliable operation Cloud Services IoT Solutions Carriers Systems Integrators Network Integration Internet Connectivity Services 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 9 Internet Initiative Japan Inc.
Growth Leveraging Blue-chip Customer Base Strategy Systems construction One Cloud Strategy Internet & Systems WAN services Network Cloud services operation + Over 8,500 Systems Cloud services Service Client Base Development Outsourcing services Increase revenues Room to increase revenue from per customer the existing customers Revenues per Customer Source: IIJ’s FY2017 Financials Number of Customers 10 Internet Initiative Japan Inc.
Growth Leveraging Blue-chip Customer Base Strategy Cross-selling multiple service products Unit: JPY billion % = year over year change < Revenue Breakdown > 176.1 ATM Operation Business Equipment Sales (+11.6%) Systems construction 157.8 Systems operation & maintenance (+12.2%) Outsourcing services 140.6 WAN services Consumer Internet services (+14.3%) Enterprise Internet services 123.1 114.3 (+7.7%) (+7.6%) 17.9 15.7 14.1 Cloud services 12.3 9.8 35.3 26.7 Mobile services 15.6 7.7 4.7 11 Internet Initiative Japan Inc.
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