Internet Initiative Japan Inc. Internet Initiative Japan Inc. IR Road Show IR Road Show July 2012 http://www.iij.ad.jp/en/IR TSE1:3774 NASDAQ:IIJI
Key Investment Highlights y g g • Top IP Engineering Company in Japan • Shifted From ISP to Total Network Solution Provider • Target Blue-chip & Governmental Organizations • Over 6 500 Japanese Excellent Corporate Customers Over 6,500 Japanese Excellent Corporate Customers & Added 1,300 Customer Base through M&A • Solid Growth Strategy with Proved Revenues and Income Growth • Best Positioned in the Growing Outsourcing & Cloud Computing Market Co put g a et details to follow
TOP IP Engineering Company in Japan The first established full-scale ISP in Japan A group of highly motivated and skilled TOP Level IP Engineers Pi Pioneer of Network Technologies in Japan historically f N t k T h l i i J hi t i ll Service initiative with in-house development Operate one of the largest Internet Backbone in Japan Operate one of the largest Internet Backbone in Japan Self-develop its service and back office facilities • Internet Connectivity & Firewall Service, IP Multicast Delivery Service, IPv6 Service Established “IIJ” brand among the Japanese IT market Established IIJ brand among the Japanese IT market Known for its engineering skills & network support skills High customer satisfaction / long term relationship Approx 6,500 clients. Mainly governmental & large enterprise A 6 500 li t M i l t l & l t i At the leading edge of IP R&D Company Profile (as of March 2012) Participation in world wide research Participation in world-wide research Established December 1992 Number of Consolidated: 1,923 and organizations Employees (approx 70% engineers) Member of "FIRST", international Listed NASDAQ(IIJI), TSE1(3774) Markets organization handling security & incidents g g y Board member of Telecom-ISAC Japan NTT(24.4%), Koichi Suzuki(6.3%), Large Itochu Corp.(5.1%), Shareholders NTTCom(4.9%) and more 3
Entrepreneur of Network Technologies Business and Service Development to Initiate the Market Overseas SI Projects SDN FX Cloud The first full scale ISP in Japan The first full-scale ISP in Japan Container Container Service In DC Application US & China In-housed development Development Cloud IPTV Computing Platform System At leading edge of IP R&D “IIJ GIO” Operation Smart Large Volume P to P IP Specialists IP Specialists Data Data Mobile Mobile S Systems t Distribution Integration LaIT RFID Internet GDX iBPS LAN LTE Platform DC M to M Internet Managed Managed VPN VPN Web Service Gateway Anti-spam CDN Solution Global IP Multicast DDoS WAN SEIL SMF IIJ MVNE ISP Wide Mobile hi-ho hi-ho in U.S. in U S LAN Asia Consumer Firewall Backbone IPv6 Service ISP IIJmio Hope Page IX Service Dial-up SLA service service IIJ4U IIJ4U Web Hosting Service “IIJ Group” 2008 2010 2012 1992 1995 1996 1997 1998 2004 2006 2007 4
Strategic Shift in Business Model From “ISP” to “Total Network Solution Provider” (Revenue, JPY million) 100,000 Systems Construction One-time revenue EMERGE Systems Operation Cloud Computing WAN Service Listed on Recurring revenue TSE 80,000 Outsourcing Service System ENDURE ENDURE I t Integration ti Internet Connectivity Services Tough economic situation BLOOM 60,000 Harvesting the flower of flower of NASDAQ Total Network Solution Transition IPO Provider Change in 40,000 Network Business Services Model Model WAN WAN Business Birth （ M&A Sep10 ） Earned its 20,000 enduring Client Base Japanese Rapid Sudden down economy at Economic turn in bottom Recovery economy 0 FY94 FY95 FY96 FY97 FY98 FY99 FY00 FY01 FY02 FY03 FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11 Rise in needs for CWC filed for Merger of Increase in Heavy Price Cloud corporate corporate ISPs number of ISPs Competition /Outsourcing reorganization 5
Profit Structure of Network Services IIJ Internet Backbone Sappor About the Revenues o Senda i Multiple revenue sources with network services of Toky Toky o o #1 Saitam Internet connectivity services for corporate/home I t t ti it i f t /h a Chib and outsourcing services on the Internet backbone Shibuy Toky Monthly recurring revenue a Toya Nerim Ikebukur a o Big clients are enterprise businesses and network Kana operators such as CATVs and ISPs for consumer t h CATV d ISP f Yokoh Yokoh ama#1 ama Hama use Osaka Tough competition ended around FY2005 and only Nogoya a few high-end ISPs are left E j Enjoying scale merit along with an increase in traffic i l it l ith i i t ffi Kyot Kyot Hiro Shinsai bashi Oka Fuku About the Costs Okin 23.3 ％ Gross Constant expansion of Internet Margin 19.8% backbone Ratio 16.7% 18.3% Mainly related to circuit, network operation datacenter and operation, datacenter, and Revenue outsourcing Not always related to the revenues Cost increase While constantly expanding the While constantly expanding the backbone, the costs barely fluctuate 6
Recurring Business Model •Mainly Network-related Integration Cross Selling of Network Solutions Site-to-Site VPN Network Construction (Convenient stores, Banks, Gas Stations, etc) Email-system/Corporate Web Infrastructure Ecommerce/Web-shopping Ecommerce/Web-shopping •Dedicated Line Connectivity Dedicated Line Connectivity IP Service (64kbps to over Gbps) Desktop Virtualization Disaster Recover •Broadband Connectivity Optical Fiber/ADSL Private Cloud Computing Platform •Mobile Connectivity (IIJ Mobile) LTE/3G •WAN Ethernet Connectivity WAN Eth t C ti it Systems Internet Construction Connectivity & WAN Connectivity & WAN Over 6,500 , Outsourcing & Client Base Systems Operation Operation •Security Services Firewall/DDoS/URL Filtering/Anti-spam •Data Center Services Examples of Facility Management/Operation Services and S i d •Hosting/VPN/Email Services Solutions •Cloud Computing Services IIJ GIO Hosting Package & Component (SNS Game cleints, NTT Dodcomo, TSE, etc) 7
Excellent Blue-chip Client Base Top Tiers 10/10 10/10 10/10 Electronic Electronic Information/ Information/ Precision Precision appliances telecommunications Equipment 9/10 9/10 9/10 9/10 9/10 9/10 Machinery Securities Construction 9/10 9/10 9/10 Wholesale Banks Insurance • The number of companies that we do business with • The number of companies that we do business with among the TOP 10 companies in each industry. 8
Excellent Blue-chip Client Base Enduring Relationship with leading companies Imperial National Ministry of Household Police Justice Agency Agency Ministry of Ministry of the Finance Environment and many more… 9
Broad Client Base Revenue Distribution by Revenue Distribution by Industry Clients Not dependent on specific industry Not dependent on specific company Retail Construction Construction 5% 2% 5% 2% Top 501- 21.3% Government/ 21% 6% Public sector 6% 6% 32% Top 401-500 Machinery/ 3.4% 12% 4% Manufacturing Communication/IT 51% of revenue 12% 32% from 4.8% Top 301-400 Top 1-100 Clients 5% Financial 7.2% Top 201-300 Media/Service sector 7% 15% 28% 15% 12.2% Top 101-200 28% 12% Source: IIJ’s consolidated data for FY2010 Source: IIJ’s consolidated data for FY2010 10
Areas of Business And.. Cloud Computing Services Network Services System Integration Internet Connectivity System Integration Services System Operation and Maintenance S t O ti d M i t WAN services Outsourcing Services vs. carriers vs. system integrators 11
Customer Retention Strategy Revenues by Customer Cross Selling of Services (JPY million) Solid Growth Strategy Provide high quality and reliable services Increase revenue per customer Develop and introduce new technologies and solution solution Leverage and Strengthen Client Base Seizing business opportunities in the S i i b i t iti i th transitional phase of companies internal network system Maximize IIJ’s potential as a Network Service Maximize IIJ s potential as a Network Service Provider Focus on cloud computing services Number of Customers ( 6 500) (~6,500) ・ Increased demands of Outsourcing and Cloud Computing ・ Indispensable IT investment in the mid-to-long-term Greater Competitiveness and Creation of New Demands 12
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