Internet Initiative Japan Inc. ("IIJ")(NASDAQ:IIJI) (TSE:3774)
today announced its nine months consolidated financial results for
the fiscal year ending March 31, 2018 (“3Q17” from April 1, 2017 to
December 31, 2017).1
| Highlights of Financial Results for
3Q17 |
|
|
|
|
|
Revenues |
JPY127.6
billion (up 12.3% YoY) |
|
|
Operating Income |
JPY3.8
billion (up 19.7% YoY) |
|
|
Income before Income Tax Expense |
JPY4.3
billion (up 26.1% YoY) |
|
|
Net Income attributable to IIJ |
JPY2.7
billion (up 40.7% YoY) |
|
|
|
|
|
| Financial Targets for FY2017 |
|
|
|
|
|
Revenues |
JPY176.0
billion (up 11.5% YoY) |
|
|
Operating Income |
JPY6.5
billion (up 26.6% YoY) |
|
|
Income before Income Tax Expense JPY6.5 billion (up 19.8%
YoY) |
|
|
|
Net Income attributable to IIJ |
JPY4.0 billion (up 26.3% YoY) |
|
Overview of 3Q17 Financial Results and
Business Outlook
“To
launch cryptocurrency exchange and settlement business, we
established an equity method investee by partnering with prominent
Japanese companies from various industries: Bank of
Tokyo-Mitsubishi UFJ, Sumitomo Mitsui Banking Corporation, Daiwa
Securities Group, Nomura Holdings, Dai-ichi Life Insurance Company,
Nippon Life Insurance Company, Mitsui Sumitomo Insurance Company,
Sompo Holdings, Tokio Marine & Nichido Fire Insurance Company,
East Japan Railway Company, ITOCHU Corporation, ITOCHU
Techno-Solutions Corporation, K-Opticom Corporation, QTnet, Bic
Camera, DENTSU, Mitsui Fudosan, and Yamato Holdings. DeCurret,
IIJ’s 35% equity method investee with capital of JPY5.23 billion,2
will offer BtoC cryptocurrency exchange services from the latter
half of FY2018 and BtoBtoC and BtoC cryptocurrency settlement
services from FY2019. Based on our existing ASP FX trading system,
which has been used by thirteen major Japanese financial
institutions, DeCurret should be able to develop highly reliable
and scalable cryptocurrency exchange system and services,
incorporating Anti-Money Laundering (AML) and Know Your Customer
(KYC) and other necessary and critical security requirements.3 We
see a great growth opportunity in settlement business as
conventional financial infrastructure needs to be changed
dramatically, especially in Japan where cash is a predominantly
major payment method.4 We’re very excited about working together
with so many outstanding Japanese companies to create a new
standard for cryptocurrency settlements which is thought to be a
new social infrastructure,” said Koichi Suzuki, Founder, CEO and
Chairman of
IIJ.
“As for the three months financial results, revenue and operating
income increased year over year by 13.0% and 20.9% respectively.
Network services, especially security-related services, which was
supported by the strong demands, and mobile services, led the
revenue growth. Accordingly with our mobile business growth
strategy, our enterprise mobile revenue strongly grew by 45.2% year
over year as MVNE and IoT/M2M transactions continued to expand. SI
revenue increased by 8.6% YoY as we continued to accumulate
projects. Operating income grew as gross margin of both network
services and SI expanded by 13.6% and 13.0% year over year,” said
Eijiro Katsu, COO and President of IIJ.
“We decided to build our own data center and
we’ve acquired the land of approximately 40 thousand m2.5 The main
purpose is to integrate our racks that are currently spread out in
the metropolitan area’s data centers for more effective operation.
The new data center, which ultimately can accommodate up to 6,000
racks, allows gradual expansion of capacity as we’ll place system
module-based data centers developed from our container-based data
center technology accumulated from our Matsue Data Center Park
since 2011. We estimate the future data center facility cost should
be approximately 20% lower by having our own data center than
continuously expanding leasing space. We’ll also ensure business
expansion scalability for the future by having this new data
center,” concluded Katsu.
“We continuously enhance our existing business such as
cloud, mobile, security and SI, and we’re also making further
business developments like FinTech project this time. Our invisible
yet very essential business assets such as Internet technology,
network and system infrastructure, SI expertise, brand of
reliability, and long-term relationship with prominent Japanese
blue-chips let us develop and expand our business foundation. We
shall continue to pursue these strategies going forward,” concluded
Katsu.
__________________________
1 Unless otherwise stated, all financial figures
discussed in this announcement are prepared in accordance with U.S.
GAAP, unaudited and consolidated.2 The capital is JPY5.23 billion
as of the mid-February when all the capital partners make
payments.3 The service, IIJ Raptor Service, was launched in 2010
and its customers include Nomura Scurities and Sony Bank.4
According to the Ministry of Economy, Trade and Industry who
published a report in May 2017, as for 2015, 19% of settlement was
through non-cash in Japan compared to 41% in the U.S.A. and 55% in
China.5 The new data center will be located in Chiba prefecture,
just east of Tokyo. As of December 2017, there are 21 data centers
operated by IIJ in Japan. 20 of them are leased by data center
owners and 1 data center owned by IIJ in Shimane prefecture.
3Q17 Financial Results Summary
| |
| Operating Results Summary |
| |
|
|
3Q16 |
3Q17 |
YoY Change |
|
|
JPY millions |
JPY millions |
% |
|
Total revenues |
113,602 |
127,612 |
12.3 |
|
|
Network services |
68,481 |
80,000 |
16.8 |
|
|
Systems integration (SI) |
39,858 |
42,301 |
6.1 |
|
|
Equipment sales |
2,207 |
2,275 |
3.1 |
|
|
ATM operation business |
3,056 |
3,036 |
(0.6 |
) |
|
Total costs |
95,772 |
107,856 |
12.6 |
|
|
Network services |
56,274 |
66,109 |
17.5 |
|
|
Systems integration (SI) |
35,644 |
37,898 |
6.3 |
|
|
Equipment sales |
2,024 |
2,053 |
1.4 |
|
|
ATM operation business |
1,830 |
1,796 |
(1.9 |
) |
|
Total gross margin |
17,830 |
19,756 |
10.8 |
|
|
Network services |
12,207 |
13,891 |
13.8 |
|
|
Systems integration (SI) |
4,214 |
4,403 |
4.5 |
|
|
Equipment sales |
183 |
222 |
21.0 |
|
|
ATM operation business |
1,226 |
1,240 |
1.2 |
|
|
SG&A expenses and R&D |
14,675 |
15,980 |
8.9 |
|
|
Operating income |
3,155 |
3,776 |
19.7 |
|
|
Income before income tax expense |
3,433 |
4,329 |
26.1 |
|
|
Net income attributable to IIJ |
1,910 |
2,688 |
40.7 |
|
| |
|
|
|
|
| |
| Segment Results Summary |
| |
|
|
3Q16 |
3Q17 |
|
|
JPY millions |
JPY millions |
|
Total revenues |
113,602 |
|
127,612 |
|
|
Network services and SI business |
110,831 |
|
124,835 |
|
|
ATM operation business |
3,056 |
|
3,036 |
|
|
Elimination |
(285 |
) |
(259 |
) |
|
Operating income |
3,155 |
|
3,776 |
|
|
Network service and SI business |
2,178 |
|
2,782 |
|
|
ATM operation business |
1,088 |
|
1,123 |
|
|
Elimination |
(111 |
) |
(129 |
) |
We have omitted segment analysis because most of
our revenues are dominated by network services and systems
integration (SI) business.
3Q17 Revenues and Income
Revenues
Total revenues were JPY127,612 million, up 12.3%
YoY (JPY113,602 million for 3Q16).
Network services revenue was JPY80,000 million, up
16.8% YoY (JPY68,481 million for 3Q16).
Revenues for Internet connectivity services for
enterprise were JPY20,418 million, up 24.0% YoY from JPY16,461
million for 3Q16, mainly due to an increase in mobile-related
services revenues along with an expansion of MVNE business clients’
transactions.
Revenues for Internet connectivity services for
consumers were JPY18,707 million, up 17.6% YoY from JPY15,903
million for 3Q16, mainly due to the revenue growth of “IIJmio
Mobile Service,” consumer mobile services which offer inexpensive
data communication and voice services with SIM cards.
Revenues for WAN services were JPY21,676 million,
up 9.2% YoY compared to JPY19,848 million for 3Q16.
Revenues for Outsourcing services were JPY19,199
million, up 18.0% YoY from JPY16,269 million for 3Q16, mainly due
to an increase in security-related services revenues.
| |
| Network Services Revenues
Breakdown |
| |
|
|
3Q16 |
3Q17 |
YoYChange |
|
|
JPY millions |
JPY millions |
% |
|
Internet connectivity services (Enterprise) |
16,461 |
20,418 |
24.0 |
|
|
IP service* |
7,331 |
7,553 |
3.0 |
|
|
IIJ FiberAccess/F and IIJ DSL/F |
2,279 |
2,262 |
(0.8 |
) |
|
IIJ Mobile service (Enterprise) |
6,680 |
10,436 |
56.2 |
|
|
IIJ Mobile MVNO Platform Service |
4,358 |
7,742 |
77.7 |
|
|
Others |
171 |
167 |
(2.7 |
) |
|
Internet connectivity services (Consumer) |
15,903 |
18,707 |
17.6 |
|
|
IIJ |
14,290 |
17,394 |
21.7 |
|
|
IIJmio Mobile Service |
12,437 |
15,342 |
23.4 |
|
|
hi-ho |
1,613 |
1,313 |
(18.6 |
) |
|
WAN services |
19,848 |
21,676 |
9.2 |
|
|
Outsourcing services |
16,269 |
19,199 |
18.0 |
|
|
Total network services |
68,481 |
80,000 |
16.8 |
|
| * IP
service revenues include revenues from the data center connectivity
service. |
| |
| |
| Number of Contracts and Subscription for
Connectivity Services*1 |
| |
|
|
as ofDecember 31, 2016 |
as ofDecember 31, 2017 |
YoY Change |
|
Internet connectivity services (Enterprise) |
824,546 |
1,246,898 |
422,352 |
|
|
IP service (1Gbps-) |
413 |
461 |
48 |
|
|
IP service (100Mbps-999Mbps) |
577 |
643 |
66 |
|
|
IP service (-99Mbps) |
622 |
627 |
5 |
|
|
IIJ Data center connectivity service |
258 |
243 |
(15 |
) |
|
IIJ FiberAccess/F and IIJ DSL/F |
72,132 |
70,778 |
(1,354 |
) |
|
IIJ Mobile service (Enterprise) |
749,484 |
1,173,563 |
424,079 |
|
|
IIJ Mobile MVNO Platform Service*2 |
501,374 |
744,332 |
242,958 |
|
|
Others |
1,060 |
583 |
(477 |
) |
|
Internet connectivity services (Consumer) |
1,377,529 |
1,349,664 |
(27,865 |
) |
|
IIJ*2 |
1,241,399 |
1,349,664 |
108,265 |
|
|
IIJmio Mobile Service |
912,394 |
986,767 |
74,373 |
|
|
hi-ho*2 |
136,130 |
- |
(136,130 |
) |
|
Total contracted bandwidth*3 |
2,636.7Gbps |
3,085.3Gbps |
448.6Gbps |
| *1. Numbers
in the table above show number of contracts except for “IIJ Mobile
service (Enterprise),” “IIJ” and “hi-ho” which show number of
subscriptions. |
| *2. On
December 31, 2017, IIJ sold all the shares of common stock of hi-ho
which was IIJ’s wholly owned subsidiary. Accordingly, hi-ho’s
subscription for “Internet connectivity services (Consumer)”
decreased to zero, hi-ho’s mobile service subscription of 14,735
was reclassed to “IIJ Mobile MVNO Platform Service” and a part of
hi-ho’s subscription other than mobile service subscription of
47,683 is included in IIJ’s subscrfiption for “Internet
connectivity services (Consumer).” |
| *3.
Regarding IP service, data center connectivity service and IIJ
FiberAccess/F and IIJ DSL/F of Internet connectivity services
(Enterprise), total contracted bandwidths are calculated by
multiplying number of contracts by contracted bandwidths
respectively. |
| |
SI revenues were JPY42,301 million, up 6.1% YoY
(JPY39,858 million for 3Q16).
Systems construction revenue, a one-time revenue,
was JPY14,530 million, up 4.0% YoY (JPY13,973 million for 3Q16).
Systems operation and maintenance revenue, a recurring revenue, was
JPY27,771 million, up 7.3% YoY (JPY25,885 million for 3Q16), mainly
due to continued accumulation of the orders and an increase in
private cloud services’ revenues.
Orders received for SI and equipment sales totaled
JPY48,228 million, down 6.8% YoY (JPY51,730 million for 3Q16);
orders received for systems construction and equipment sales were
JPY19,201 million, down 8.7% YoY (JPY21,031 million for 3Q16) and
orders received for systems operation and maintenance were
JPY29,027 million, down 5.4% YoY (JPY30,699 million for 3Q16).
Order backlog for SI and equipment sales as of
December 31, 2017 amounted to JPY45,153 million, up 4.3% YoY
(JPY43,309 million as of December 31, 2016); order backlog for
systems construction and equipment sales was JPY9,574 million, down
12.4% YoY (JPY10,928 million as of December 31, 2016) and order
backlog for systems operation and maintenance was JPY35,579
million, up 9.9% YoY (JPY32,381 million as of December 31,
2016).
Equipment sales revenues were JPY2,275 million, up
3.1% YoY (JPY2,207 million for 3Q16).
ATM operation business revenues were JPY3,036
million, down 0.6% YoY (JPY3,056 million for 3Q16). As of December
31, 2017, 1,101 ATMs have been placed.
Cost and expense
Total cost of revenues was JPY107,856 million, up
12.6% YoY (JPY95,772 million for 3Q16).
Cost of network services revenue was JPY66,109
million, up 17.5% YoY (JPY56,274 million for 3Q16). There were an
increase in outsourcing-related costs due to our mobile services
and an increase in circuit-related costs. Gross margin was
JPY13,891 million, up 13.8% YoY (JPY12,207 million for 3Q16) and
gross margin ratio was 17.4% compared to 17.8% in 3Q16.
Cost of SI revenues was JPY37,898 million, up 6.3%
YoY (JPY35,644 million for 3Q16). There were an increase in
outsourcing-related costs along with our SI revenue increase. Gross
margin was JPY4,403 million, up 4.5% YoY (JPY4,214 million for
3Q16) and gross margin ratio was 10.4% compared to 10.6% in
3Q16.
Cost of equipment sales revenues was JPY2,053 million, up 1.4%
YoY (JPY2,024 million for 3Q16). Gross margin was JPY222 million
(JPY183 million for 3Q16) and gross margin ratio was 9.8% compared
to 8.3% in 3Q16.
Cost of ATM operation business revenues was JPY1,796 million,
down 1.9% YoY (JPY1,830 million for 3Q16). Gross margin was
JPY1,240 million (JPY1,226 million for 3Q16) and gross margin ratio
was 40.8% compared to 40.1% in 16.
SG&A and R&D expenses
SG&A and R&D expenses in total were
JPY15,980 million, up 8.9% YoY (JPY14,675 million for 3Q16).
Sales and marketing expenses were JPY9,551 million,
up 13.8% YoY (JPY8,392 million for 3Q16) mainly due to increases in
advertising expenses, sales commission expenses, and
personnel-related expenses.
General and administrative expenses were JPY6,070
million, up 2.4% YoY (JPY5,928 million for 3Q16) mainly due to
increases in personnel-related expenses.
Research and development expenses were JPY359
million, up 1.3% YoY (JPY355 million for 3Q16).
Operating income
Operating income was JPY3,776 million, up 19.7% YoY
(JPY3,155 million for 3Q16).
Other income (expenses)
Other income (expenses) was an income of JPY553
million (an income of JPY278 million for 3Q16), mainly because of
net gain on sales of other investments, including
available-for-sale securities, of JPY373 million (JPY214 million
for 3Q16), distribution from fund investment of JPY196 million
(included in other-net of JPY173 million, JPY208 million for 3Q16),
interest expense of JPY276 million (JPY218 million for 3Q16),
dividend income of JPY231 million (JP106 million for 3Q16), and
foreign exchange gains of JPY29 million (foreign exchange losses of
JPY23 million for 3Q16).
Income before income tax
expenses
Income before income tax expenses was JPY4,329
million, up 26.1% YoY (JPY3,433 million for 3Q16).
Net income
Income tax expense was JPY1,614 million (JPY1,466
million for 3Q16).
Equity in net income of equity method investees was
JPY101 million (JPY69 million for 3Q16) mainly due to net income of
Internet Multifeed Co.
As a result of the above, net income was JPY2,816
million, up 38.3% YoY (JPY2,036 million for 3Q16).
Net income attributable to IIJ
Net income attributable to non-controlling
interests was JPY128 million (JPY126 million for 3Q16) mainly
related to net income of Trust Networks Inc.
Net income attributable to IIJ was JPY2,688 million, up 40.7%
YoY (JPY1,910 million for 3Q16).
3Q17 Balance Sheets
Balance sheets
As of December 31, 2017, the balance of total
assets was JPY150,273 million, increased by JPY12,877 million from
the balance as of March 31, 2017 of JPY137,395 million.
As of December 31, 2017, the balance of current
assets was JPY68,061 million, increased by JPY4,340 million from
the balance as of March 31, 2017 of JPY63,722 million. The major
breakdown of current assets was an increase in inventories by
JPY1,531 million to JPY4,329 million, an increase in prepaid
expenses by JPY1,343 million to JPY8,954 million and an increase in
cash and cash equivalents by JPY1,086 million to JPY23,044 million.
As of December 31, 2017, the balance of noncurrent assets was
JPY82,211 million, increased by JPY8,538 million from the balance
as of March 31, 2017 of JPY73,673 million. The major breakdown of
noncurrent assets was property and equipment of JPY45,125 million,
increased by JPY5,349 million, including JPY1,205 million by
purchase of land, from the balance as of March 31, 2017, and other
investments of JPY10,933 million,increased by JPY3,008 million
mainly due to an increase in the fair value of available-for-sale
securities. Other investments as of December 31, 2017, consisted of
JPY8,786 million in available-for-sale securities, JPY1,124 million
in nonmarketable equity securities and JPY1,023 million in
investments in funds, including some through a trust. As of
December 31, 2017, the balance of non-amortized intangible assets
was JPY6,118 million, decreased by JPY102 million from the balance
as of March 31, 2017 of JPY6,220 million. The major breakdown of
non-amortized intangible assets was JPY6,082 million in goodwill.
The balance of amortized intangible assets, which was customer
relationships, was JPY2,762 million, decreased by JPY274 million
from the balance as of March 31, 2017 of JPY3,036 million.
As of December 31, 2017, the balance of current
liabilities was JPY41,555 million, increased by JPY1,572 million
from the balance as of March 31, 2017 of JPY39,983 million. The
major breakdown of current liabilities was an increase in capital
lease obligations-current portion by JPY672 million to JPY5,491
million and an increase in accounts payable (trade and other) by
JPY462 million to JPY17,424 million. As of December 31, 2017, the
balance of noncurrent liabilities was JPY37,672 million, increased
by JPY7,640 million from the balance as of March 31, 2017 of
JPY30,032 million. The major breakdown of noncurrent liabilities
was an increase in long-term borrowings by JPY7,000 million to
JPY15,500 million and an increase in capital lease
obligations-noncurrent by JPY710 million to JPY11,095 million.
As of December 31, 2017, the balance of total IIJ
shareholders’ equity was JPY70,381 million, increased by JPY3,639
million from the balance as of March 31, 2017 and IIJ shareholders’
equity ratio (total IIJ shareholders’ equity divided by total
assets) as of December 31, 2017 was 46.8%.
3Q17 Cash Flows
Cash flows
Cash and cash equivalents as of December 31, 2017
were JPY23,044 million (JPY21,266 million as of December 31,
2016).
Net cash provided by operating activities for 3Q17
was JPY8,296 million (net cash provided by operating activities of
JPY4,408 million for 3Q16.) There were net income of JPY2,816
million, depreciation and amortization of JPY9,156 million and net
cash out flow of JPY3,486 million from changes in operating assets
and liabilities. As for changes in operating assets and
liabilities, there were an increase in prepaid expenses (including
prepaid expense-noncurrent) in relation to up front payment for
software licenses and maintenance cost for service facilities, an
increase in inventories due to the increase in systems construction
projects and an increase in prepaid expenses for seasonal bonus
payments to our employees.
Net cash used in investing activities for 3Q17 was
JPY8,272 million (net cash used in investing activities of JPY5,389
million for 3Q16), mainly due to payments for purchase of property
and equipment of JPY11,785 million (JPY7,940 million for 3Q16),
including JPY1,205 million by purchase of land, proceeds from sales
of property and equipment, which include sales and leaseback
transactions, of JPY2,757 million (JPY2,219 million for 3Q16) and
proceeds from sale of stock of hi-ho (net of cash divested) of
JPY726 million.
Net cash provided by financing activities for 3Q17
was JPY1,049 million (net cash provided by financing activities of
JPY2,831 million for 3Q16), mainly due to procceds from long-term
borrowings of JPY7,000 million, principal payments under capital
leases of JPY4,230 million (JPY3,535 million for 3Q16) and FY2016
year-end and FY2017 interim dividends payments of JPY1,217 million
(JPY1,126 million for 3Q16).
FY2017 Financial Targets
Due to seasonal factors, our financial results tend
to be small in a first quarter and strong in strong in a fourth
quarter every fiscal year. 3Q17 financial results resulted almost
as planed. Our financial targets for the fiscal year ending March
31, 2018 (FY2017) announced on May 15, 2017 remain unchanged.
3Q17 Reconciliation of Non-GAAP Financial
Measures
The following table summarizes the reconciliation
of adjusted EBITDA to net income attributable to IIJ in our
consolidated statements of income that are prepared in accordance
with U.S. GAAP.
| |
| Adjusted EBITDA |
| |
|
|
3Q16 |
3Q17 |
|
|
JPY millions |
JPY millions |
|
Adjusted EBITDA |
11,161 |
|
12,932 |
|
|
Depreciation and Amortization |
(8,006 |
) |
(9,156 |
) |
|
Operating Income |
3,155 |
|
3,776 |
|
|
Other Income |
278 |
|
553 |
|
|
Income Tax Expense |
1,466 |
|
1,614 |
|
|
Equity in Net Income of Equity Method
Investees |
69 |
|
101 |
|
|
Net income |
2,036 |
|
2,816 |
|
|
Less: Net income attributable to noncontrolling
interests |
(126 |
) |
(128 |
) |
|
Net Income attributable to IIJ |
1,910 |
|
2,688 |
|
| |
| |
| CAPEX |
| |
|
|
3Q16 |
3Q17 |
|
|
JPY millions |
JPY millions |
|
CAPEX, including capital leases |
12,258 |
15,756 |
|
Acquisition of Assets by Entering into Capital
Leases |
5,843 |
5,625 |
|
Purchase of Property and Equipment |
6,415 |
10,131 |
|
|
Presentation
Presentation materials will be posted on our web
site (https://www.iij.ad.jp/en/ir/) on February 8, 2018.
About Internet Initiative Japan
Inc.
Founded in 1992, IIJ is one of Japan's leading
Internet-access and comprehensive network solutions providers. IIJ
and its group companies provide total network solutions that mainly
cater to high-end corporate customers. IIJ's services include
high-quality Internet connectivity services, mobile services,
security services, cloud computing services, and systems
integration. Moreover, IIJ operates one of the largest Internet
backbone networks in Japan that is connected to the United States,
the United Kingdom and Asia. IIJ listed on the U.S. NASDAQ Stock
Market in 1999 and on the First Section of the Tokyo Stock Exchange
in 2006.
For inquiries, contact:
IIJ Investor RelationsTel: +81-3-5205-6500 E-mail:
ir@iij.ad.jp URL: https://www.iij.ad.jp/en/ir
Statements made in this press release regarding
IIJ’s or management’s 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 about its business and the industry.
These forward-looking statements, such as statements regarding
FY2017 revenues and operating and net profitability, are subject to
various risks, uncertainties and other factors that could cause
IIJ’s actual results to differ materially from those contained in
any forward-looking statement. These risks, uncertainties and other
factors include: IIJ’s ability to maintain and increase revenues
from higher-margin services such as systems integration and
outsourcing services; the possibility that revenues from
connectivity services may decline substantially as a result of
competition and other factors; the ability to compete in a rapidly
evolving and competitive marketplace; the impact on IIJ's profits
of fluctuations in costs such as backbone costs and subcontractor
costs; the impact on IIJ's profits of fluctuations in the price of
available-for-sale securities; the impact of technological changes
in its industry; IIJ’s ability to raise additional capital to cover
its indebtedness; the possibility that NTT, IIJ’s largest
shareholder, may decide to exercise substantial influence over IIJ;
and other risks referred to from time to time in IIJ’s filings on
Form 20-F of its annual report and other filings with the United
States Securities and Exchange Commission.
| |
| Internet Initiative Japan Inc. |
| Consolidated Balance Sheets
(Unaudited) |
| (As of March 31, 2017 and December 31,
2017) |
| |
|
|
|
|
|
|
As of March 31, 2017 |
|
As of December 31, 2017 |
|
|
|
Thousands of JPY |
|
Thousands of JPY |
|
|
ASSETS |
|
|
|
|
|
CURRENT ASSETS: |
|
|
|
|
|
Cash and cash equivalents |
21,958,591 |
|
|
23,044,148 |
|
|
|
Accounts receivable, net of allowance for doubtful accounts
of JPY 107,684 thousand and JPY 118,034 thousand
at March 31, 2017 and December 31, 2017, respectively |
27,383,692 |
|
|
27,615,182 |
|
|
|
Inventories |
2,798,054 |
|
|
4,329,210 |
|
|
|
Prepaid expenses—current |
7,610,925 |
|
|
8,953,946 |
|
|
|
Deferred tax assets—current |
1,298,469 |
|
|
- |
|
|
|
Other current assets, net of allowance for doubtful accounts of
JPY 15,192 thousand and JPY 720 thousand at March 31,
2017 and December 31, 2017, respectively |
2,672,008 |
|
|
4,118,959 |
|
|
|
Total current assets |
63,721,739 |
|
|
68,061,445 |
|
|
|
INVESTMENTS IN EQUITY METHOD INVESTEES |
3,150,175 |
|
|
3,382,804 |
|
|
|
OTHER INVESTMENTS |
7,924,914 |
|
|
10,932,942 |
|
|
|
PROPERTY AND EQUIPMENT, net of accumulated depreciation and
amortization of JPY 50,566,983 thousand and JPY 53,092,388
thousand at March 31, 2017 and December 31, 2017,
respectively |
39,775,444 |
|
|
45,124,889 |
|
|
|
GOODWILL |
6,169,609 |
|
|
6,082,472 |
|
|
|
OTHER INTANGIBLE ASSETS—Net |
3,087,017 |
|
|
2,797,659 |
|
|
|
GUARANTEE DEPOSITS |
3,060,365 |
|
|
3,345,893 |
|
|
|
DEFERRED TAX ASSETS—Noncurrent |
80,566 |
|
|
145,141 |
|
|
|
NET INVESTMENT IN SALES-TYPE LEASES—Noncurrent |
2,047,682 |
|
|
1,676,234 |
|
|
|
Prepaid expenses—Noncurrent |
6,607,437 |
|
|
7,342,288 |
|
|
|
OTHER ASSETS, net of allowance for doubtful accounts of JPY
61,877 thousand and JPY 60,749 thousand at March 31, 2017
and December 31, 2017, respectively |
1,770,201 |
|
|
1,380,815 |
|
|
|
TOTAL |
137,395,149 |
|
|
150,272,582 |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
As of March 31, 2017 |
|
As of December 31, 2017 |
|
|
|
Thousands of JPY |
|
Thousands of JPY |
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
CURRENT LIABILITIES: |
|
|
|
|
|
Short-term borrowings |
9,250,000 |
|
|
9,400,000 |
|
|
|
Capital lease obligations—current portion |
4,818,723 |
|
|
5,490,906 |
|
|
|
Accounts payable—trade |
14,653,065 |
|
|
15,450,618 |
|
|
|
Accounts payable—other |
2,308,790 |
|
|
1,973,532 |
|
|
|
Income taxes payable |
1,075,745 |
|
|
530,746 |
|
|
|
Accrued expenses |
2,755,581 |
|
|
3,000,449 |
|
|
|
Deferred income—current |
3,750,542 |
|
|
4,169,086 |
|
|
|
Other current liabilities |
1,370,661 |
|
|
1,539,525 |
|
|
|
Total current liabilities |
39,983,107 |
|
|
41,554,862 |
|
|
|
LONG-TERM BORROWINGS |
8,500,000 |
|
|
15,500,000 |
|
|
|
CAPITAL LEASE OBLIGATIONS—Noncurrent |
10,384,643 |
|
|
11,094,802 |
|
|
|
ACCRUED RETIREMENT AND PENSION COSTS—Noncurrent |
3,532,965 |
|
|
3,724,948 |
|
|
|
DEFERRED TAX LIABILITIES—Noncurrent |
963,845 |
|
|
780,689 |
|
|
|
DEFERRED INCOME—Noncurrent |
3,656,612 |
|
|
3,865,199 |
|
|
|
OTHER NONCURRENT LIABILITIES |
2,993,777 |
|
|
2,706,064 |
|
|
|
Total Liabilities |
70,014,949 |
|
|
79,226,564 |
|
|
|
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY: |
|
|
|
|
|
Common-stock—authorized, 75,520,000 shares; issued and outstanding,
46,711,400 and 46,713,800 shares at March 31, 2017 and December 31,
2017, respectively |
25,509,499 |
|
|
25,511,804 |
|
|
|
Additional paid-in capital |
36,117,511 |
|
|
36,161,451 |
|
|
|
Retained earnings |
4,511,945 |
|
|
5,983,175 |
|
|
|
Accumulated other comprehensive income |
2,499,700 |
|
|
4,620,983 |
|
|
|
Treasury stock—1,650,909 shares held by the company at March 31,
2017 and December 31, 2017, respectively |
(1,896,784 |
) |
|
(1,896,784 |
) |
|
|
Total Internet Initiative Japan Inc. shareholders' equity |
66,741,871 |
|
|
70,380,629 |
|
|
|
NONCONTROLLING INTERESTS |
638,329 |
|
|
665,389 |
|
|
|
Total equity |
67,380,200 |
|
|
71,046,018 |
|
|
|
TOTAL |
137,395,149 |
|
|
150,272,582 |
|
|
|
|
|
|
|
|
|
|
| |
| Internet Initiative Japan Inc. |
| Consolidated Statements of Income and
Consolidated Statements of Comprehensive Income
(Unaudited) |
| (For the nine months ended December 31, 2016
and December 31, 2017) |
| |
|
|
|
|
| |
|
|
|
|
|
|
Nine Months Ended |
|
Nine Months Ended |
|
|
|
December 31, 2016 |
|
December 31, 2017 |
|
|
|
Thousands of JPY |
|
Thousands of JPY |
|
|
REVENUES: |
|
|
|
|
|
Network services: |
|
|
|
|
|
Internet connectivity services (enterprise) |
16,461,205 |
|
|
20,417,963 |
|
|
|
Internet connectivity services (consumer) |
15,902,952 |
|
|
18,707,332 |
|
|
|
WAN services |
19,847,736 |
|
|
21,675,903 |
|
|
|
Outsourcing services |
16,268,643 |
|
|
19,198,399 |
|
|
|
Total |
68,480,536 |
|
|
79,999,597 |
|
|
|
Systems integration: |
|
|
|
|
|
Systems construction |
13,972,807 |
|
|
14,530,478 |
|
|
|
Systems operation and maintenance |
25,885,221 |
|
|
27,770,579 |
|
|
|
Total |
39,858,028 |
|
|
42,301,057 |
|
|
|
Equipment sales |
2,207,649 |
|
|
2,275,363 |
|
|
|
ATM operation business |
3,055,739 |
|
|
3,035,957 |
|
|
|
Total revenues |
113,601,952 |
|
|
127,611,974 |
|
|
|
COSTS AND EXPENSES: |
|
|
|
|
|
Cost of network services |
56,273,528 |
|
|
66,109,118 |
|
|
|
Cost of systems integration |
35,644,158 |
|
|
37,897,888 |
|
|
|
Cost of equipment sales |
2,024,262 |
|
|
2,053,432 |
|
|
|
Cost of ATM operation business |
1,830,095 |
|
|
1,795,912 |
|
|
|
Total costs |
95,772,043 |
|
|
107,856,350 |
|
|
|
Sales and marketing |
8,392,014 |
|
|
9,550,884 |
|
|
|
General and administrative |
5,928,165 |
|
|
6,070,008 |
|
|
|
Research and development |
354,411 |
|
|
359,125 |
|
|
|
Total costs and expenses |
110,446,633 |
|
|
123,836,367 |
|
|
|
OPERATING INCOME |
3,155,319 |
|
|
3,775,607 |
|
|
|
OTHER INCOME (EXPENSES): |
|
|
|
|
|
Dividend income |
106,336 |
|
|
230,784 |
|
|
|
Interest income |
26,781 |
|
|
23,130 |
|
|
|
Interest expense |
(218,204 |
) |
|
(276,374 |
) |
|
|
Foreign exchange gain (loss), net |
(23,072 |
) |
|
28,531 |
|
|
|
Net gain on sales of other investments |
213,938 |
|
|
373,499 |
|
|
|
Impairment of other investments |
(30,554 |
) |
|
- |
|
|
|
Other —net |
202,486 |
|
|
173,396 |
|
|
|
Other income —net |
277,711 |
|
|
552,966 |
|
|
|
INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE AND EQUITY
IN NET INCOME OF EQUITY METHOD INVESTEES |
3,433,030 |
|
|
4,328,573 |
|
|
|
INCOME TAX EXPENSE |
1,465,852 |
|
|
1,613,955 |
|
|
|
EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES |
69,244 |
|
|
101,169 |
|
|
|
NET INCOME |
2,036,422 |
|
|
2,815,787 |
|
|
|
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING
INTERESTS |
(126,161 |
) |
|
(127,891 |
) |
|
|
NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN
INC. |
1,910,261 |
|
|
2,687,896 |
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
Nine Months Ended |
|
Nine Months Ended |
|
|
|
December 31, 2016 |
|
December 31, 2017 |
|
|
NET INCOME PER SHARE |
|
|
|
|
|
BASIC WEIGHTED-AVERAGE NUMBER OF SHARES (shares) |
45,846,887 |
|
|
45,062,874 |
|
|
|
DILUTED WEIGHTED-AVERAGE NUMBER OF SHARES (shares) |
45,962,442 |
|
|
45,211,765 |
|
|
|
BASIC WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs) |
91,693,774 |
|
|
90,125,748 |
|
|
|
DILUTED WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS
(ADSs) |
91,924,884 |
|
|
90,423,530 |
|
|
|
BASIC NET INCOME PER SHARE (JPY) |
41.67 |
|
|
59.65 |
|
|
|
DILUTED NET INCOME PER SHARE (JPY) |
41.56 |
|
|
59.45 |
|
|
|
BASIC NET INCOME PER ADS EQUIVALENT (JPY) |
20.83 |
|
|
29.82 |
|
|
|
DILUTED NET INCOME PER ADS EQUIVALENT (JPY) |
20.78 |
|
|
29.73 |
|
|
| |
|
|
|
|
| |
| Quarterly Consolidated Statements of Comprehensive
Income (Unaudited) |
|
|
|
|
|
Nine Months Ended |
|
Nine Months Ended |
|
|
|
December 31, 2016 |
|
December 31, 2017 |
|
|
|
Thousands of JPY |
|
Thousands of JPY |
|
|
NET INCOME |
2,036,422 |
|
|
2,815,787 |
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: |
|
|
|
|
|
Foreign currency translation adjustments |
(455,158 |
) |
|
(13,401 |
) |
|
|
Unrealized holding gain on securities |
920,735 |
|
|
2,132,187 |
|
|
|
Defined benefit pension plans |
10,878 |
|
|
2,497 |
|
|
|
TOTAL COMPREHENSIVE INCOME |
2,512,877 |
|
|
4,937,070 |
|
|
|
LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING
INTERESTS |
(126,161 |
) |
|
(127,891 |
) |
|
|
COMPREHENSIVE INCOME ATTRIBUTABLE TO INTERNET INITIATIVE
JAPAN INC. |
2,386,716 |
|
|
4,809,179 |
|
|
|
|
|
|
|
|
| |
|
|
|
|
| |
| Internet Initiative Japan Inc. |
| Consolidated Statements of Cash Flows
(Unaudited) |
| (For the nine months ended December 31, 2016
and December 31, 2017) |
| |
|
|
|
|
|
|
Nine Months Ended |
|
Nine Months Ended |
|
|
|
December 31, 2016 |
|
December 31, 2017 |
|
|
|
Thousands of JPY |
|
Thousands of JPY |
|
|
OPERATING ACTIVITIES: |
|
|
|
|
|
Net income |
2,036,422 |
|
|
2,815,787 |
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
Depreciation and amortization |
8,006,049 |
|
|
9,155,860 |
|
|
|
Provision for retirement and pension costs, less payments |
188,923 |
|
|
196,199 |
|
|
|
Provision for allowance for doubtful accounts |
19,989 |
|
|
67,931 |
|
|
|
Gain on sales of property and equipment |
(15,410 |
) |
|
(13,636 |
) |
|
|
Loss on disposal of property and equipment |
54,481 |
|
|
62,391 |
|
|
|
Net gain on sales of other investments |
(213,938 |
) |
|
(373,499 |
) |
|
|
Impairment of other investments |
30,554 |
|
|
- |
|
|
|
Foreign exchange gain, net |
(277 |
) |
|
(11,011 |
) |
|
|
Equity in net income of equity method investees, less dividends
received |
(18,162 |
) |
|
(49,978 |
) |
|
|
Deferred income tax expense (benefit) |
349,735 |
|
|
(23,009 |
) |
|
|
Others |
(51,716 |
) |
|
(45,309 |
) |
|
|
Changes in operating assets and liabilities net of effects from
divestitures of a company : |
|
|
|
|
|
Increase in accounts receivable |
(64,287 |
) |
|
(589,876 |
) |
|
|
Decrease in net investment in sales-type lease — noncurrent |
400,390 |
|
|
371,448 |
|
|
|
Increase in inventories |
(1,586,556 |
) |
|
(1,528,797 |
) |
|
|
Increase in prepaid expenses |
(2,454,437 |
) |
|
(1,355,406 |
) |
|
|
Increase in other current and noncurrent assets |
(4,534,405 |
) |
|
(1,992,382 |
) |
|
|
Increase in accounts payable |
160,327 |
|
|
898,983 |
|
|
|
Decrease in income taxes payable |
(767,172 |
) |
|
(535,204 |
) |
|
|
Increase in accrued expenses |
18,639 |
|
|
241,367 |
|
|
|
Increase in deferred income—current |
140,038 |
|
|
419,937 |
|
|
|
Increase in deferred income—noncurrent |
302,157 |
|
|
236,485 |
|
|
|
Increase in other current and noncurrent liabilities |
2,406,335 |
|
|
347,722 |
|
|
|
Net cash provided by operating activities |
4,407,679 |
|
|
8,296,003 |
|
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
Purchase of property and equipment |
(7,940,090 |
) |
|
(11,785,162 |
) |
|
|
Proceeds from sales of property and equipment |
2,219,179 |
|
|
2,756,719 |
|
|
|
Purchase of other investments |
(316,171 |
) |
|
(131,118 |
) |
|
|
Investment in an equity method investee |
(99,000 |
) |
|
(174,808 |
) |
|
|
Proceeds from sales of available-for-sale securities |
- |
|
|
460,017 |
|
|
|
Proceeds from sales of other investments |
534,249 |
|
|
156,266 |
|
|
|
Payments of guarantee deposits |
(17,102 |
) |
|
(298,145 |
) |
|
|
Refund of guarantee deposits |
87,704 |
|
|
20,833 |
|
|
|
Payments for refundable insurance policies |
(42,385 |
) |
|
(42,272 |
) |
|
|
Proceeds from sale of stock of a subsidiary, net of cash
divested |
- |
|
|
726,081 |
|
|
|
Proceeds from subsidies |
200,000 |
|
|
48,976 |
|
|
|
Other |
(15,000 |
) |
|
(9,710 |
) |
|
|
Net cash used in investing activities |
(5,388,616 |
) |
|
(8,272,323 |
) |
|
| |
|
|
|
|
|
|
Nine Months Ended |
|
Nine Months Ended |
|
|
|
December 31, 2016 |
|
December 31, 2017 |
|
|
|
Thousands of JPY |
|
Thousands of JPY |
|
|
FINANCING ACTIVITIES: |
|
|
|
|
|
Proceeds from short-term borrowings with initial maturities over
three months and long-term borrowings |
8,550,000 |
|
|
9,550,000 |
|
|
|
Repayments of short-term borrowings with initial maturities over
three months |
(50,000 |
) |
|
(2,550,000 |
) |
|
|
Principal payments under capital leases |
(3,534,887 |
) |
|
(4,229,975 |
) |
|
|
Repayments of long-term accounts payable |
- |
|
|
(406,251 |
) |
|
|
Payments for purchase of treasury stock |
(982,107 |
) |
|
- |
|
|
|
Dividends paid |
(1,125,841 |
) |
|
(1,216,666 |
) |
|
|
Other |
(26,000 |
) |
|
(97,660 |
) |
|
|
Net cash provided by financing activities |
2,831,165 |
|
|
1,049,448 |
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
(153,105 |
) |
|
12,429 |
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS. |
1,697,123 |
|
|
1,085,557 |
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD |
19,569,095 |
|
|
21,958,591 |
|
|
|
CASH AND CASH EQUIVALENTS, END OF THE PERIOD |
21,266,218 |
|
|
23,044,148 |
|
|
| |
|
|
|
|
|
ADDITIONAL CASH FLOW INFORMATION: |
|
|
|
|
|
Interest paid |
217,414 |
|
|
270,664 |
|
|
|
Income taxes paid |
1,961,521 |
|
|
1,914,600 |
|
|
|
|
|
|
|
|
|
NONCASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
Acquisition of assets by entering into capital leases |
5,842,869 |
|
|
5,625,021 |
|
|
|
Facilities purchase liabilities |
899,852 |
|
|
1,973,532 |
|
|
|
Asset retirement obligation |
- |
|
|
49,609 |
|
|
|
|
|
|
|
|
| |
|
|
|
|
| Going Concern Assumption (Unaudited) |
|
|
| |
|
Nothing to be reported. |
|
|
| |
|
|
|
|
|
|
| Material Changes In Shareholders' Equity
(Unaudited) |
|
| |
|
Nothing to be reported. |
| |
|
|
|
|
|
|
| Segment Information (Unaudited) |
|
|
| |
|
Business Segments: |
|
|
| |
|
|
Revenues: |
|
|
| |
|
|
|
Nine Months Ended |
Nine Months Ended |
| |
|
|
|
|
December 31, 2016 |
December 31, 2017 |
| |
|
|
|
|
Thousands of JPY |
Thousands of JPY |
| |
|
|
Network service and systems integration business |
110,830,849 |
|
124,834,793 |
|
| |
|
|
|
Customers |
110,546,213 |
|
124,576,017 |
|
| |
|
|
|
Intersegment |
284,636 |
|
258,776 |
|
| |
|
|
ATM operation business |
3,055,739 |
|
3,035,957 |
|
| |
|
|
|
Customers |
3,055,739 |
|
3,035,957 |
|
| |
|
|
|
Intersegment |
- |
|
- |
|
| |
|
|
Elimination |
(284,636 |
) |
(258,776 |
) |
| |
|
|
Consolidated total |
113,601,952 |
|
127,611,974 |
|
| |
|
|
Segment profit or loss: |
|
|
| |
|
|
|
Nine Months Ended |
Nine Months Ended |
| |
|
|
|
|
December 31, 2016 |
December 31, 2017 |
| |
|
|
|
|
Thousands of JPY |
Thousands of JPY |
| |
|
|
Network service and systems integration business |
2,177,784 |
|
2,781,424 |
|
| |
|
|
ATM operation business |
1,088,056 |
|
1,123,290 |
|
| |
|
|
Elimination |
(110,521 |
) |
(129,107 |
) |
| |
|
|
Consolidated operating income |
3,155,319 |
|
3,775,607 |
|
| |
|
|
|
|
|
|
| |
|
|
Geographic information is not presented due to immateriality of
revenue attributable to international operations. |
| |
|
|
|
|
|
|
| Subsequent Events (Unaudited) |
|
|
| |
|
Nothing to be reported. |
|
|
| |
|
|
|
|
Third Quarter FY2017 Consolidated
Financial Results (3 months)The following tables are
highlight data of 3rd Quarter FY2017 (3 months) consolidated
financial results (unaudited, for the three months ended December
31, 2017).
|
Operating Results Summary |
| |
|
|
3Q16 |
3Q17 |
YoY Change |
|
|
JPY millions |
JPY millions |
% |
|
Total Revenues: |
39,479 |
44,624 |
13.0 |
|
|
Network Services |
23,645 |
27,714 |
17.2 |
|
|
Systems Integration (SI) |
14,090 |
15,302 |
8.6 |
|
|
Equipment Sales |
741 |
616 |
(16.9 |
) |
|
ATM Operation Business |
1,003 |
992 |
(1.1 |
) |
|
Cost of Revenues: |
33,497 |
37,894 |
13.1 |
|
|
Network Services |
19,558 |
23,073 |
18.0 |
|
|
Systems Integration (SI) |
12,651 |
13,677 |
8.1 |
|
|
Equipment Sales |
681 |
548 |
(19.5 |
) |
|
ATM Operation Business |
607 |
596 |
(1.7 |
) |
|
SG&A Expenses and R&D |
4,774 |
5,270 |
10.4 |
|
|
Operating Income |
1,208 |
1,460 |
20.9 |
|
|
Income before Income Tax Expense |
1,328 |
1,860 |
40.1 |
|
|
Net Income attributable to IIJ |
802 |
1,200 |
49.6 |
|
| |
|
|
|
|
|
Network Service Revenue Breakdown |
|
|
|
|
3Q16 |
3Q17 |
YoY Change |
|
|
JPY millions |
JPY millions |
% |
|
Internet Connectivity Service (Enterprise) |
5,884 |
7,152 |
21.5 |
|
|
IP Service* |
2,457 |
2,557 |
4.0 |
|
|
IIJ FiberAccess/F and IIJ DSL/F |
762 |
752 |
(1.2 |
) |
|
IIJ Mobile Service |
2,608 |
3,787 |
45.2 |
|
|
IIJ Mobile MVNO Platform Service |
1,784 |
2,822 |
58.2 |
|
|
Others |
57 |
56 |
(2.1 |
) |
|
Internet Connectivity Service (Consumer) |
5,575 |
6,356 |
14.0 |
|
|
IIJ |
5,064 |
5,936 |
17.2 |
|
|
IIJmio Mobile Service |
4,402 |
5,255 |
19.4 |
|
|
hi-ho |
511 |
420 |
(17.9 |
) |
|
WAN Services |
6,559 |
7,593 |
15.8 |
|
|
Outsourcing Services |
5,627 |
6,613 |
17.5 |
|
|
Network Services Revenues |
23,645 |
27,714 |
17.2 |
|
| * IP service revenues
include revenues from the data center connectivity service. |
|
|
|
|
| |
|
|
|
|
Reconciliation of Non-GAAP Financial
Measures (3rd Quarter FY2017 (3
months))The following table summarizes the reconciliation
of adjusted EBITDA to net income in our consolidated statements of
income that are prepared in accordance with U.S. GAAP.
| |
| Adjusted EBITDA |
| |
|
|
3Q16 |
3Q17 |
|
|
JPY millions |
JPY millions |
|
Adjusted EBITDA |
3,930 |
|
4,594 |
|
|
Depreciation and Amortization |
(2,722 |
) |
(3,134 |
) |
|
Operating Income |
1,208 |
|
1,460 |
|
|
Other Income (Expense) |
120 |
|
400 |
|
|
Income Tax Expense (Benefit) |
512 |
|
645 |
|
|
Equity in Net Income of Equity Method
Investees |
27 |
|
24 |
|
|
Net income |
843 |
|
1,239 |
|
|
Less: Net income attributable to noncontrolling
interests |
(41 |
) |
(39 |
) |
|
Net Income attributable to IIJ |
802 |
|
1,200 |
|
The following table summarizes the
reconciliation of capital expenditures to the purchase of property
and equipment in our consolidated statements of cash flows that are
prepared and presented in accordance with U.S. GAAP.
| |
| CAPEX |
|
|
|
|
3Q16 |
3Q17 |
|
|
JPY millions |
JPY millions |
|
CAPEX, including capital leases |
3,886 |
6,410 |
|
Acquisition of Assets by Entering into Capital
Leases |
2,051 |
1,218 |
|
Purchase of Property and Equipment |
1,835 |
5,192 |
| |
|
|
| |
| Internet Initiative Japan Inc. |
| Quarterly Consolidated Statements of Income and
Quarterly Consolidated Statements of Comprehensive Income
(Unaudited) |
| (Three Months ended December 31, 2016 and
December 31, 2017) |
| |
|
|
|
|
|
|
Three Months Ended |
|
Three Months Ended |
|
|
|
December 31, 2016 |
|
December 31, 2017 |
|
|
|
Thousands of JPY |
|
Thousands of JPY |
|
|
REVENUES: |
|
|
|
|
|
Network services: |
|
|
|
|
|
Internet connectivity services (enterprise) |
5,884,331 |
|
|
7,152,000 |
|
|
|
Internet connectivity services (consumer) |
5,574,632 |
|
|
6,355,678 |
|
|
|
WAN services |
6,559,024 |
|
|
7,592,525 |
|
|
|
Outsourcing services |
5,626,783 |
|
|
6,613,953 |
|
|
|
Total |
23,644,770 |
|
|
27,714,156 |
|
|
|
Systems integration: |
|
|
|
|
|
Systems construction |
5,389,388 |
|
|
5,722,530 |
|
|
|
Systems operation and maintenance |
8,700,314 |
|
|
9,579,514 |
|
|
|
Total |
14,089,702 |
|
|
15,302,044 |
|
|
|
Equipment sales |
740,991 |
|
|
615,444 |
|
|
|
ATM operation business |
1,003,219 |
|
|
992,045 |
|
|
|
Total revenues |
39,478,682 |
|
|
44,623,689 |
|
|
|
COST AND EXPENSES: |
|
|
|
|
|
Cost of network services |
19,558,238 |
|
|
23,072,762 |
|
|
|
Cost of systems integration |
12,651,235 |
|
|
13,676,673 |
|
|
|
Cost of equipment sales |
681,145 |
|
|
548,271 |
|
|
|
Cost of ATM operation business |
606,601 |
|
|
596,164 |
|
|
|
Total costs |
33,497,219 |
|
|
37,893,870 |
|
|
|
Sales and marketing |
2,756,066 |
|
|
3,223,719 |
|
|
|
General and administrative |
1,907,809 |
|
|
1,938,024 |
|
|
|
Research and development |
109,971 |
|
|
107,998 |
|
|
|
Total costs and expenses |
38,271,065 |
|
|
43,163,611 |
|
|
|
OPERATING INCOME |
1,207,617 |
|
|
1,460,078 |
|
|
|
OTHER INCOME (EXPENSE): |
|
|
|
|
|
Dividend income |
14,929 |
|
|
33,721 |
|
|
|
Interest income |
8,263 |
|
|
7,354 |
|
|
|
Interest expense |
(75,859 |
) |
|
(92,009 |
) |
|
|
Foreign exchange gain, net |
82,844 |
|
|
9,823 |
|
|
|
Net gain on sales of other investments |
- |
|
|
373,499 |
|
|
|
Other—net |
89,881 |
|
|
67,308 |
|
|
|
Other income —net |
120,058 |
|
|
399,696 |
|
|
|
INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE AND EQUITY
IN NET INCOME OF EQUITY METHOD INVESTEES |
1,327,675 |
|
|
1,859,774 |
|
|
|
INCOME TAX EXPENSE |
512,174 |
|
|
644,428 |
|
|
|
EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES |
27,598 |
|
|
23,830 |
|
|
|
NET INCOME |
843,099 |
|
|
1,239,176 |
|
|
|
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING
INTERESTS |
(40,772 |
) |
|
(39,249 |
) |
|
|
NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN
INC. |
802,327 |
|
|
1,199,927 |
|
|
| |
|
|
|
|
|
|
Three Months Ended |
|
Three Months Ended |
|
|
|
December 31, 2016 |
|
December 31, 2017 |
|
|
NET INCOME PER SHARE |
|
|
|
|
BASIC WEIGHTED-AVERAGE NUMBER OF SHARES (shares) |
45,636,429 |
|
|
45,062,891 |
|
|
|
DILUTED WEIGHTED-AVERAGE NUMBER OF SHARES (shares) |
45,758,296 |
|
|
45,220,584 |
|
|
|
BASIC WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs) |
91,272,858 |
|
|
90,125,782 |
|
|
|
DILUTED WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS
(ADSs) |
91,516,592 |
|
|
90,441,168 |
|
|
|
BASIC NET INCOME PER SHARE (JPY) |
17.58 |
|
|
26.63 |
|
|
|
DILUTED NET INCOME PER SHARE (JPY) |
17.53 |
|
|
26.53 |
|
|
|
BASIC NET INCOME PER ADS EQUIVALENT (JPY) |
8.79 |
|
|
13.31 |
|
|
|
DILUTED NET INCOME PER ADS EQUIVALENT (JPY) |
8.77 |
|
|
13.27 |
|
|
| |
|
|
|
|
| |
|
|
|
|
| Quarterly Consolidated Statements of Comprehensive
Income (Unaudited) |
|
|
|
|
|
Three Months Ended |
|
Three Months Ended |
|
|
|
December 31, 2016 |
|
December 31, 2017 |
|
|
|
Thousands of JPY |
|
Thousands of JPY |
|
|
NET INCOME |
843,099 |
|
|
1,239,176 |
|
|
|
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: |
|
|
|
|
|
Foreign currency translation adjustments |
(45,068 |
) |
|
41,807 |
|
|
|
Unrealized holding gain on securities |
469,974 |
|
|
955,606 |
|
|
|
Defined benefit pension plans |
3,626 |
|
|
809 |
|
|
|
TOTAL COMPREHENSIVE INCOME |
1,271,631 |
|
|
2,237,398 |
|
|
|
LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING
INTERESTS |
(40,772 |
) |
|
(39,249 |
) |
|
|
COMPREHENSIVE INCOME ATTRIBUTABLE TO INTERNET INITIATIVE
JAPAN INC. |
1,230,859 |
|
|
2,198,149 |
|
|
| |
|
|
|
|
|
|
| |
| Internet Initiative Japan Inc. |
| Consolidated Statements of Cash Flows
(Unaudited) |
| (Three Months ended December 31, 2016 and
December 31, 2017) |
| |
|
|
|
|
|
|
Three Months Ended |
|
Three Months Ended |
|
|
|
December 31, 2016 |
|
December 31, 2017 |
|
|
|
Thousands of JPY |
|
Thousands of JPY |
|
|
OPERATING ACTIVITIES: |
|
|
|
|
|
Net income |
843,099 |
|
|
1,239,176 |
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
Depreciation and amortization |
2,722,545 |
|
|
3,133,980 |
|
|
|
Provision for retirement and pension costs, less payments |
66,477 |
|
|
69,420 |
|
|
|
Provision for allowance for doubtful accounts |
14,856 |
|
|
22,695 |
|
|
|
Loss (gain) on sales of property and equipment |
(7,706 |
) |
|
868 |
|
|
|
Loss on disposal of property and equipment |
18,825 |
|
|
25,237 |
|
|
|
Net gain on sales of other investments |
- |
|
|
(373,499 |
) |
|
|
Foreign exchange gain, net |
(83,375 |
) |
|
(2,553 |
) |
|
|
Equity in net income of equity method investees, less dividends
received |
(27,598 |
) |
|
(23,830 |
) |
|
|
Deferred income tax expense |
66,553 |
|
|
112,939 |
|
|
|
Other |
(46,536 |
) |
|
(37,280 |
) |
|
|
Changes in operating assets and liabilities net of effects from
divestitures of a company : |
|
|
|
|
|
Increase in accounts receivable |
(560,123 |
) |
|
(1,690,935 |
) |
|
|
Decrease (increase) in net investment in sales-type lease —
noncurrent |
101,218 |
|
|
(17,142 |
) |
|
|
Increase in inventories |
(874,042 |
) |
|
(165,796 |
) |
|
|
Increase in prepaid expenses |
(1,046,904 |
) |
|
(208,278 |
) |
|
|
Increase in other current and noncurrent assets |
(2,849,833 |
) |
|
(927,696 |
) |
|
|
Increase (decrease) in accounts payable |
(357,834 |
) |
|
686,591 |
|
|
|
Decrease in income taxes payable |
(174,286 |
) |
|
(473,059 |
) |
|
|
Increase in accrued expenses |
65,056 |
|
|
16,453 |
|
|
|
Increase (decrease) in deferred income—current |
92,031 |
|
|
(5,671 |
) |
|
|
Increase in deferred income—noncurrent |
178,857 |
|
|
447,996 |
|
|
|
Increase in other current and noncurrent liabilities |
2,193,546 |
|
|
364,106 |
|
|
|
Net cash provided by operating activities |
334,826 |
|
|
2,193,722 |
|
|
|
INVESTING ACTIVITIES: |
|
|
|
|
|
Purchase of property and equipment |
(2,581,985 |
) |
|
(5,361,874 |
) |
|
|
Proceeds from sales of property and equipment |
1,009,711 |
|
|
372,958 |
|
|
|
Purchase of other investments |
(29,113 |
) |
|
(73,629 |
) |
|
|
Investment in an equity method investee |
(99,000 |
) |
|
- |
|
|
|
Proceeds from sales of available-for-sale securities |
- |
|
|
460,017 |
|
|
|
Proceeds from sales of other investments |
229,707 |
|
|
122,810 |
|
|
|
Payments of guarantee deposits |
(2,699 |
) |
|
(4,112 |
) |
|
|
Refund of guarantee deposits |
10,228 |
|
|
5,557 |
|
|
|
Payments for refundable insurance policies |
(14,204 |
) |
|
(14,091 |
) |
|
|
Proceeds from sale of stock of a subsidiary, net of cash
divested |
- |
|
|
726,081 |
|
|
|
Other |
(15,000 |
) |
|
(6,710 |
) |
|
|
Net cash used in investing activities |
(1,492,355 |
) |
|
(3,772,993 |
) |
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Three Months Ended |
|
|
|
December 31, 2016 |
|
December 31, 2017 |
|
|
|
Thousands of JPY |
|
Thousands of JPY |
|
|
FINANCING ACTIVITIES: |
|
|
|
|
|
Proceeds from short-term borrowings with initial maturities over
three months and long-term borrowings |
5,550,000 |
|
|
7,050,000 |
|
|
|
Net increase in short-term borrowings with initial maturities less
than three months |
- |
|
|
2,500,000 |
|
|
|
Repayments of short-term borrowings with initial maturities over
three months |
(50,000 |
) |
|
(2,550,000 |
) |
|
|
Principal payments under capital leases |
(1,221,124 |
) |
|
(1,465,754 |
) |
|
|
Repayments of long-term accounts payable |
- |
|
|
(202,979 |
) |
|
|
Payments for purchase of treasury stock |
(982,107 |
) |
|
- |
|
|
|
Dividends paid |
(620,361 |
) |
|
(608,349 |
) |
|
|
Net cash provided by financing activities |
2,676,408 |
|
|
4,722,918 |
|
|
|
|
|
|
|
|
|
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH
EQUIVALENTS |
79,517 |
|
|
29,470 |
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS |
1,598,396 |
|
|
3,173,117 |
|
|
|
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD |
19,667,822 |
|
|
19,871,031 |
|
|
|
CASH AND CASH EQUIVALENTS, END OF THE PERIOD |
21,266,218 |
|
|
23,044,148 |
|
|
Note: The following information is provided to
disclose Internet Initiative Japan Inc. ("IIJ") financial results
(unaudited) for the nine months ended December 31, 2017 (“3Q17”) in
the form defined by the Tokyo Stock Exchange.
Consolidated Financial Results for the
Nine Months ended December 31, 2017 [Under accounting principles
generally accepted in the United States ("U.S. GAAP")]
February 8, 2018
Company name: Internet Initiative Japan
Inc.Exchange listed: Tokyo Stock Exchange First SectionStock code
number: 3774URL: https://www.iij.ad.jp/Representative: Eijiro
Katsu, President and Representative DirectorContact: Akihisa Watai,
Managing Director and CFOTEL: (03) 5205-6500Scheduled date for
filing of quarterly report (Shihanki-houkokusho) to Japan’s
regulatory organization: February 14, 2018Scheduled date for
dividend payment: -Supplemental material on quarterly results:
YesPresentation on quarterly report: Yes (for institutional
investors and analysts)
(Amounts of less than JPY one million are
rounded)
1. Consolidated Financial Results for the
Nine Months Ended December 31, 2017 (April 1, 2017 to December 31,
2017)
| (1) Consolidated
Results of Operations |
|
|
|
(% shown is YoY change) |
|
|
Total revenues |
Operating income |
Income before income tax expense |
Net income attributable to IIJ |
|
|
JPY
millions |
% |
JPY millions |
% |
JPY
millions |
% |
JPY
millions |
% |
|
Nine months ended December 31, 2017 |
127,612 |
12.3 |
3,776 |
19.7 |
|
4,329 |
26.1 |
|
2,688 |
40.7 |
|
|
Nine months ended December 31, 2016 |
113,602 |
14.3 |
3,155 |
(22.5 |
) |
3,433 |
(17.8 |
) |
1,910 |
(25.8 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
(Note1) |
Total
comprehensive income attributable to IIJ |
|
|
For the
nine months ended December 31, 2017: JPY4,809 million (up 101.5%
YoY) |
|
|
For the
nine months ended December 31, 2016: JPY2,387 million (down 0.9%
YoY) |
|
(Note2) |
Income
before income tax expense represents income from operations before
income tax expense and equity in net income in equity method
investees, respectively, in IIJ's consolidated financial
statements. |
| |
|
|
|
|
Basic net income attributable to IIJ per share |
Diluted net income attributable to IIJ per share |
|
|
JPY |
JPY |
|
Nine months ended December 31, 2017 |
59.65 |
59.45 |
|
Nine months ended December 31, 2016 |
41.67 |
41.56 |
| (2)
Consolidated Financial Position |
|
|
Total assets |
Total equity |
Total IIJ shareholders' equity |
Total IIJ shareholders' equity to total assets |
|
|
JPY millions |
JPY millions |
JPY millions |
% |
|
As of December 31, 2017 |
150,273 |
71,046 |
70,381 |
46.8 |
|
As of March 31, 2017 |
137,395 |
67,380 |
66,742 |
48.6 |
2. Dividends
| |
|
| |
Dividend per Shares |
|
1Q-end |
2Q-end |
3Q-end |
Year-end |
Total |
|
|
JPY |
JPY |
JPY |
JPY |
JPY |
|
Fiscal Year Ended March 31, 2017 |
- |
13.50 |
- |
13.50 |
27.00 |
|
Fiscal Year EndingMarch 31, 2018 |
- |
13.50 |
- |
|
|
|
Fiscal Year Ending March 31, 2018 (forecast) |
|
|
|
13.50 |
27.00 |
| (Note)
Change from the latest released dividend forecasts: No. |
3. Target of Consolidated Financial Results
for the Fiscal Year Ending March 31, 2018
|
(April 1, 2017 through March 31, 2018) |
(% shown is YoY change) |
|
|
Total Revenues |
Operating Income |
Income before Income Tax Expense (Benefit) |
Net Income attributable to IIJ |
Basic Net Income attributable to IIJ per Share |
|
|
JPY
millions |
% |
JPY
millions |
% |
JPY
millions |
% |
JPY
millions |
% |
JPY |
|
Fiscal Year Ending March 31, 2018 |
176,000 |
11.5 |
6,500 |
26.6 |
6,500 |
19.8 |
4,000 |
26.3 |
88.77 |
| (Note1)
Changes from the latest forecasts released: No |
* Notes
| (1) Changes
in significant subsidiaries for the nine months ended December 31,
2017 |
| |
(Changes in
significant subsidiaries for the nine months ended December 31,
2017 which resulted in changes in scope of consolidation):
None |
| |
|
| (2) Changes
in significant accounting and reporting policies for the
consolidated financial statements |
| |
1 |
) |
Changes due to the
revision of accounting standards: Yes |
| |
|
In November 2015, the
Financial Accounting Standards Board (“FASB”) issued Accounting
Standards Update (“ASU”) 2015-17 “Balance Sheet Classification of
Deferred Taxes.” This ASU requires that deferred tax assets and
liabilities be classified as noncurrent on the consolidated balance
sheet. IIJ adopted this ASU from the first quarter beginning April
1, 2017, on a prospective basis, and did not retrospectively adjust
the consolidated balance sheet as of March 31, 2017. As of March
31, 2017, the balance of current deferred tax assets and
liabilities amounted to JPY1,298,469 thousand and JPY108,994
thousand, respectively. |
| |
|
|
| |
2 |
) |
Others: No |
| |
|
|
| (3) Number
of shares outstanding (shares of common stock) |
| |
| |
1 |
) |
The number of shares
outstanding (inclusive of treasury stock): |
| |
|
As of December 31,
2017: 46,713,800 shares |
| |
|
As of March 31, 2017:
46,711,400 shares |
| |
|
|
| |
2 |
) |
The number of treasury
stock: |
| |
|
As of December 31,
2017: 1,650,909 shares |
| |
|
As of March 31, 2017:
1,650,909 shares |
| |
|
|
| |
3 |
) |
The weighted average
number of shares outstanding: |
| |
|
For the nine months
ended December 31, 2017: 45,062,874 shares |
| |
|
For the nine months
ended December 31, 2016: 45,846,887 shares |
Internet Initiative Japan
Inc.E-mail: ir@iij.ad.jp Tel:
+81-3-5205-6500URL:
https://www.iij.ad.jp/en/ir
Internet Initiative Japan (PK) (USOTC:IIJIY)
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