Internet Initiative Japan Inc. IR Road Show September 2012 September 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 Pioneer of network technologies in Japan historically Pioneer of network technologies in Japan historically Service initiative with in-house development Operate one of the largest Internet backbone in Japan p g p Self-develop its service and back office facilities • Internet Connectivity & Security Services, IPv6 Services, Cloud IaaS Services, develop own routers etc. Established “IIJ” brand among the Japanese IT market Established IIJ brand among the Japanese IT market Known for its engineering & network support skills High customer satisfaction/long term relationship Approx 6 500 clients: mainly large enterprises & governmental organizations Approx. 6,500 clients: mainly large enterprises & governmental organizations At the leading edge of IP R&D Company Profile (as of March 2012) Participation in world-wide research Established December 1992 and organizations Number of Consolidated: 1,923 Employees (approx. 70% engineers) • Member of "FIRST," international organization handling security & incidents Listed NASDAQ (IIJI), TSE1 (3774) Markets • Board member of Telecom-ISAC Japan and many more Engaged in software development of SDN NTT (24.4%), Koichi Suzuki (6.3%), Large Itochu Corp. (5.1%), Shareholders NTTCom (4.9%) 3
Entrepreneur of Network Technologies Business and Service Development to Initiate the Market Overseas SI Projects SDN The first full-scale ISP in Japan p FX Cloud Container Container Service In DC In-housed development Application US & China Development Cloud IPTV Computing At leading edge of IP R&D Platform System “IIJ GIO” Operation Smart Large Volume IP specialists P to P Data Data Mobile Mobile Systems S 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 MVNE SMF IIJ 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 One time revenue One-time revenue EMERGE Systems Construction Cloud Computing Recurring revenue Listed on TSE 80,000 Systems Operation System ENDURE ENDURE I t Integration ti WAN Service Tough economic Outsourcing Service situation BLOOM Internet Connectivity Services 60,000 Harvesting the flower of flower of NASDAQ Total Network Solution Transition IPO Provider Change in 40,000 business model model WAN WAN Network Services 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
Business Structure of Network Services IIJ Internet Backbone IIJ I t t B kb * N t * Network services: Internet k i I t t Revenues connectivity, outsourcing, and WAN services Sappor o Multiple cross-selling revenue sources with Internet Senda i connectivity for corporate/home and outsourcing Toky services on the Internet backbone services on the Internet backbone Toky Toky o o #1 Saitam Internet connectivity contract is per bandwidth a Chib A monthly recurring-type revenue Shibuy Toky a Toya Blue-chip with mission-critical business & network Nerim Ikebukur a o operators clients (Carriers ISPs CATVs etc) operators clients (Carriers, ISPs, CATVs, etc) Kana Kana Tough competition ended, only few high-end ISPs left Yokoh Yokoh ama#1 ama Hama Revenues increase along with migration of bandwidth Osaka Nogoya and accumulation of outsourcing services orders Enjoying scale merit along with increasing traffic Enjoying scale merit along with increasing traffic Kyot Hiro Shinsai bashi Costs Oka 23.3% Fuku Gross Constant expansion of Internet backbone Constant expansion of Internet backbone Okin Margin Strong bargaining power as one of the Ratio largest independent ISPs 19.8% 16.7% 18.3% Mainly related to circuit-borrowing, network equipments, DC- borrowing, operations, equipments, DC borrowing, operations, Revenue personnel and outsourcing costs Not always directly related to the revenues Cost growth While constantly expanding the network While constantly expanding the network, costs barely increase 6
Recurring Business Model Cross-selling of Network Solutions Mainly network-related Integration Ecommerce/Web-shopping system •Dedicated Line Connectivity IP Service (cover over Gbps) Disaster Recovery IPv6 Service IPv6 Service Private Cloud Computing Platform Private Cloud Computing Platform •Broadband Connectivity and many more Optical Fiber/ADSL •Mobile Connectivity (IIJ Mobile) Systems LTE/3G •WAN Ethernet Connectivity Construction Internet Connectivity & WAN Over 6,500 Over 6 500 Client Base Outsourcing & Systems Syste s Operation O tso rcing ser ices incl de Outsourcing services include: 1. Security-related services (managed-firewall and IPS, DDoS protection, URL filtering, anti-spam etc..) 2. Data center-related services (housing, facility management and operation) 3. Server-related services (E-mail services, Web hosting, online storage, CDN etc..) 4. Network-related services (network management and monitoring, VPN, SEIL, SMF etc..) 5. IIJ GIO Hosting Package Services (public cloud/about 20% of IIJ GIO revenue) g g (p ) Systems Operation includes: 1.Operation and maintenance of a system constructed in Systems Construction 2. IIJ GIO Component Services (private cloud/about 80% of IIJ GIO revenue) 7
Excellent Blue-chip Client Base Top Tiers 10/10 10/10 10/10 Precision Precision Electronic Electronic Information/ Information/ Equipment appliances telecommunications 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 clients 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 Mi i t f Ministry of the Finance Environment and many more… 9
Revenue Composition by Clients Revenue Distribution by Revenue Distribution by Industry Clients Approx. 500 companies out of 6,500 Approx. 500 companies out of 6,500 Not dependent on specific industry Not dependent on specific industry client base makes up the ¾ of the Retail Construction Government/ total revenue 4% Public sector 2% 4% 2% 5% 18.2% Top 501- Top 501- 5% % 18% Machinery/ Manufacturing Top 401-500 Top 401 500 30% 14% 14% 3 5% 3.5% 14% 14% 4% Communication/IT 53% of revenue 31% Top 301-400 4.8% from from 5% 5% Top 1-100 Clients Top 201-300 7.4% 7% 25% M di /S Media/Service i 25% Financial 20% sector Top 101-200 19% 19% 13.2% 13 2% 13% 13% Source: IIJ’s consolidated data for FY2011 10
Competitive Advantages • Many highly skilled network engineers • Operate own backbone network • Rapidly correspond to the Internet market • In-house developed network services • Focus on enterprises • Target new IT market, not legacy SI • Established brand among blue-chips s ab s ed b a d a o g b ue c ps • Long and rich experience in server operation o g a d c e pe e ce se e ope a o • Flat organization structure • Not so huge number of employees Cloud Computing Services Carriers C i System Integrators S t I t t Mainframe Internet Connectivity Services Network Integration Telephone Large-sized Application WAN Services System Operation Legacy Network Services g y Development Development O t Outsourcing Services i S i Private Cloud P i t Cl d Legacy System Operation 11
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