Internet Initiative Japan Inc. ("IIJ") (NASDAQ:IIJI) (TSE:3774)
today announced its consolidated financial results for the nine
months of the fiscal year ending March 31, 2017 (“3Q16”, from April
1, 2016 to December 31, 2016).1
| Highlights of Financial Results for
3Q16 |
| |
|
Revenues |
JPY113,602 million |
(up 14.3% YoY) |
|
Operating Income |
JPY3,155 million |
(down 22.5% YoY) |
|
Net Income attributable to IIJ |
JPY1,910 million |
(down 25.8% YoY) |
Overview of 3Q16 Financial Results and Business
Outlook
“Our continuous business and service
developments are reflected in our strong revenue accumulation. 3Q16
three-month revenue growth year over year was 16.0%: 2Q16 12.0%,
1Q16 15.0%, 4Q15 17.2% and 3Q15 11.0%. We continue to focus on
investing in the fields of cloud, mobile, security, and next
generation network usage such as IoT and BigData. Mainly due to the
overall cost increase along with the recent aggressive business
investments and the deterioration of systems integration gross
margin from 1H162, 3Q16 nine-month operating income decreased year
over year,” said Eijiro Katsu, President and COO of IIJ.
“Mobile services continued to be a leading
revenue growth driver. 3Q16 nine-month revenue grew by 78.0% year
over year to JPY19.1 billion and the total subscription as of
3Q16-end reached to 1.7 million, an increase of 59.4% year over
year. Transactions by our 124 MVNE clients, including MVNOs,
prominent retailers, and many cable TV operators, continued to
expand. Other contributing factors for the strong 3Q16 revenue
growth were an export project of our container type data center to
the Republic of Laos3 and continuous revenue accumulation of
cloud services and non-mobile network services,” said Katsu.
“We’re making continuous progresses of our
business developments this fiscal year. We’ll be the first Japanese
full-MVNO service provider as we aim to capture enterprises’ mobile
needs such as IoT and BigData type of usages which are expected to
be implemented much more widely in the near future. We established
a joint venture4 with a major Japanese broadcasting company,
Nippon Television Netowrk Corporation, to become a main
CDN5 provider in the coming age of Internet-based broadcasting
including 4K. Regarding security services, we further enhanced “IIJ
DDoS Protection Services” by constructing worldwide network systems
to protect our clients from global DDoS attacks. We launched “IIJ
IoT Services,” packaged service offering necessary function to
build IoT systems. We believe our recent actions shall make our
role and value as a service platform provider of network, cloud,
mobile, security and network outstanding in the middle to long
term. We also expect that expansion of service revenues from these
continuous business developments should generate continuous gross
margin improvement which leads to operating income growth going
forward,” concluded Koichi Suzuki, Founder, Chairman and CEO of
IIJ.
1 Unless otherwise stated, all financial
figures discussed in this announcement are prepared in accordance
with U.S. GAAP. All financial figures are unaudited and
consolidated.
2 For details on our downward revision for
FY2016 financial target, please refer to our press release titled
”IIJ Revises its First Half and Full-Year Financial Targets for
FY2016” which can be found at
http://www.iij.ad.jp/en/ir/news/2016/pdf/FY16revision_E.pdf
3 For details on our involvement on Laos
project, please refer to our press release titled “’Lao PDR Energy
Efficient Datacenter Project’ Cloud Datacenter Using Joint
crediting Mechanism Starts Demonstration Operation” which can be
found at
http://www.iij.ad.jp/en/news/pressrelease/2016/1130.html
4 For details on the establishment of the
joint venture, please refer to our press release titled “IIJ and
Nippon TV to Establish a Joint Venture for Video Distribution
Platforms” which can be found at
http://www.iij.ad.jp/en/news/pressrelease/2016/1201.html
5 CDN (Contents Distribution Network) is an
optimized network to distribute contents such as pictures and
videos.
3Q16 Financial Results Summary
| Operating Results Summary |
|
|
3Q15 |
3Q16 |
YoY Change |
|
|
JPY millions |
JPY millions |
% |
|
Total revenues |
99,382 |
113,602 |
14.3 |
|
|
Network services |
58,216 |
68,481 |
17.6 |
|
|
Systems integration (SI) |
35,921 |
39,858 |
11.0 |
|
|
Equipment sales |
2,365 |
2,207 |
(6.6 |
) |
|
ATM operation business |
2,880 |
3,056 |
6.1 |
|
|
Total costs |
81,589 |
95,772 |
17.4 |
|
|
Network services |
47,079 |
56,274 |
19.5 |
|
|
Systems integration (SI) |
30,455 |
35,644 |
17.0 |
|
|
Equipment sales |
2,125 |
2,024 |
(4.7 |
) |
|
ATM operation business |
1,930 |
1,830 |
(5.2 |
) |
|
Total gross margin |
17,793 |
17,830 |
0.2 |
|
|
Network services |
11,137 |
12,207 |
9.6 |
|
|
Systems integration (SI) |
5,467 |
4,214 |
(22.9 |
) |
|
Equipment sales |
239 |
183 |
(23.5 |
) |
|
ATM operation business |
950 |
1,226 |
29.0 |
|
|
SG&A expenses and R&D |
13,720 |
14,675 |
7.0 |
|
|
Operating income |
4,073 |
3,155 |
(22.5 |
) |
|
Income before income tax expense |
4,178 |
3,433 |
(17.8 |
) |
|
Net income attributable to IIJ |
2,573 |
1,910 |
(25.8 |
) |
| Segment Results Summary |
|
|
3Q15 |
3Q16 |
|
|
JPY millions |
JPY millions |
|
Total revenues |
99,382 |
|
113,602 |
|
|
Network services and SI business |
96,789 |
|
110,831 |
|
|
ATM operation business |
2,880 |
|
3,056 |
|
|
Elimination |
(287 |
) |
(285 |
) |
|
Operating income |
4,073 |
|
3,155 |
|
|
Network service and SI business |
3,356 |
|
2,178 |
|
|
ATM operation business |
819 |
|
1,088 |
|
|
Elimination |
(102 |
) |
(111 |
) |
We have omitted segment analysis because most of
our revenues are dominated by network services and systems
integration (SI) business.
3Q16 Revenues and Income
Revenues
Total revenues were JPY113,602 million, up 14.3%
YoY (JPY99,382 million for 3Q15).
Network services revenue was JPY68,481 million,
up 17.6% YoY (JPY58,216 million for 3Q15).
Revenues for Internet connectivity services for
enterprise were JPY16,461 million, up 27.9% YoY from JPY12,871
million for 3Q15 mainly due to an increase in mobile-related
services revenues along with an expansion of MVNE business clients’
business transaction.
Revenues for Internet connectivity services for
consumers were JPY15,903 million, up 48.5% YoY from JPY10,708
million for 3Q15, mainly due to the revenue growth of “IIJmio
Mobile Services,” consumer mobile services which offer inexpensive
data communication and voice services with SIM cards.
Revenues for WAN services were JPY19,848
million, up 5.4% YoY compared to JPY18,826 million for 3Q15.
Revenues for Outsourcing services were JPY16,269
million, up 2.9% YoY from JPY15,811 million for 3Q15.
| Network Services Revenues Breakdown |
|
|
3Q15 |
3Q16 |
YoY %Change |
|
|
JPY millions |
JPY millions |
|
|
Internet connectivity services (Enterprise) |
12,871 |
16,461 |
27.9 |
|
|
IP service*1 |
7,219 |
7,331 |
1.5 |
|
|
IIJ FiberAccess/F and IIJ DSL/F |
2,309 |
2,279 |
(1.3 |
) |
|
IIJ Mobile service (Enterprise) |
3,140 |
6,680 |
112.8 |
|
|
IIJ Mobile MVNO Platform Service*2 |
1,283 |
4,358 |
239.5 |
|
|
Others |
203 |
171 |
(15.8 |
) |
|
Internet connectivity services (Consumer) |
10,708 |
15,903 |
48.5 |
|
|
IIJ |
8,767 |
14,290 |
63.0 |
|
|
IIJmio Mobile Service*3 |
7,595 |
12,437 |
63.7 |
|
|
hi-ho |
1,941 |
1,613 |
(16.9 |
) |
|
WAN services |
18,826 |
19,848 |
5.4 |
|
|
Outsourcing services |
15,811 |
16,269 |
2.9 |
|
|
Total network services |
58,216 |
68,481 |
17.6 |
|
*1. IP service revenues include revenues from
the data center connectivity service.*2. From 1Q16, the revenue
from “IIJ Mobile MVNO Platform Service”, which is included in “IIJ
Mobile service (Enterprise),” is disclosed. “IIJ Mobile MVNO
Platform Service” provides MVNO platform to our MVNE clients.*3.
From 1Q16, the revenue from “IIJmio Mobile Service” (formerly known
as ”IIJmio High Speed Mobile Service” until September 30, 2016),
which is included in “Internet connectivity services (Consumer)”
provided by IIJ, is disclosed.
| Number of Contracts and Subscription for Connectivity
Services*1 |
|
|
as ofDec. 31, 2015 |
as ofDec. 31, 2016 |
YoY Change |
|
Internet connectivity services (Enterprise) |
412,615 |
824,546 |
411,931 |
|
|
IP service (1Gbps-) |
342 |
413 |
71 |
|
|
IP service (100Mbps-999Mbps) |
518 |
577 |
59 |
|
|
IP service (-99Mbps) |
702 |
622 |
(80 |
) |
|
IIJ Data center connectivity service |
272 |
258 |
(14 |
) |
|
IIJ FiberAccess/F and IIJ DSL/F |
74,326 |
72,132 |
(2,194 |
) |
|
IIJ Mobile service (Enterprise) |
335,193 |
749,484 |
414,291 |
|
|
IIJ Mobile MVNO Platform Service*2 |
181,859 |
501,374 |
319,515 |
|
|
Others |
1,262 |
1,060 |
(202 |
) |
|
Internet connectivity services (Consumer) |
1,165,667 |
1,377,529 |
211,862 |
|
|
IIJ |
1,015,994 |
1,241,399 |
225,405 |
|
|
IIJmio Mobile Service*3 |
685,044 |
912,394 |
227,350 |
|
|
hi-ho |
149,673 |
136,130 |
(13,543 |
) |
|
Total contracted bandwidth*4 |
2,089.9Gbps |
2,636.7Gbps |
546.8Gbps |
*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. From 1Q16, the number of subscription for “IIJ
Mobile MVNO Platform Service”, which is included in “IIJ Mobile
service (Enterprise)”, is disclosed.
*3. From 1Q16, the number of subscription for
“IIJmio Mobile Service” (formerly known as ”IIJmio High Speed
Mobile Service” until September 30, 2016), which is included in
“Internet connectivity services (Consumer)” provided by IIJ, is
disclosed.
*4. 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 JPY39,858 million, up 11.0% YoY
(JPY35,921 million for 3Q15).
Systems construction revenue, a one-time
revenue, was JPY13,973 million, up 21.0% YoY, mainly due to the
revenue recognition of an export project of our container type data
center in 3Q16. Systems operation and maintenance revenue, a
recurring revenue, was JPY25,885 million, up 6.2% YoY, mainly due
to an increase in private cloud services’ revenues although certain
relatively large systems operation and maintenance projects were
cancelled in 1H16.
Orders received for SI and equipment sales
totaled JPY51,730 million, up 19.6% YoY; orders received for
systems construction and equipment sales were JPY21,031 million, up
4.3% YoY and orders received for systems operation and maintenance
were JPY30,699 million, up 33.0% YoY.
Order backlog for SI and equipment sales as of
December 31, 2016 amounted to JPY43,309 million, up 27.3% YoY;
order backlog for systems construction and equipment sales was
JPY10,928 million, down 0.5% YoY and order backlog for systems
operation and maintenance was JPY32,381 million, up 40.6% YoY.
Equipment sales revenues were JPY2,207 million,
down 6.6% YoY (JPY2,365 million for 3Q15).
ATM operation business revenues were JPY3,056
million, up 6.1% YoY (JPY2,880 million for 3Q15). As of December
31, 2016, 1,066 ATMs have been placed.
Cost and expense
Total cost of revenues was JPY95,772 million, up
17.4% YoY (JPY81,589 million for 3Q15).
Cost of network services revenue was JPY56,274
million, up 19.5% YoY (JPY47,079 million for 3Q15). There were an
increase in outsourcing-related costs with our mobile
infrastructure enhancement along with our mobile-related revenue
increase, an increase in circuit-related costs along with our WAN
services revenue increase, and an increase in network
operation-related costs with our network enhancement and the launch
of “IIJ Omnibus Service.” Gross margin was JPY12,207 million, up
9.6% YoY and gross margin ratio was 17.8% compared to 19.1% in
3Q15.
Cost of SI revenues was JPY35,644 million, up
17.0% YoY (JPY30,455 million for 3Q15). There were an increase in
outsourcing-related and purchasing costs along with our SI revenue
increase, an increase in personnel-related, and an increase in
network operation-related costs mainly along with the launch of
“IIJ GIO Infrastructure P2.” Gross margin was JPY4,214 million,
down 22.9% YoY and gross margin ratio was 10.6% compared to 15.2%
in 3Q15. It was mainly due to profit deterioration of our
cloud-related services and especially 1H16 profit deterioration
resulted from low productivity of systems engineers and the delay
in offering some functions of our ASP-type foreign exchange
system.
Cost of equipment sales revenues was JPY2,024
million, down 4.7% YoY (JPY2,125 million for 3Q15). Gross margin
was JPY183 million (JPY239 million for 3Q15) and gross margin ratio
was 8.3% compared to 10.1% in 3Q15.
Cost of ATM operation business revenues was
JPY1,830 million, down 5.2% YoY (JPY1,930 million for 3Q15). Gross
margin was JPY1,226 million (JPY950 million for 3Q15) and gross
margin ratio was 40.1% compared to 33.0% in 3Q15.
SG&A and R&D
expenses
SG&A and R&D expenses in total were
JPY14,675 million, up 7.0% YoY (JPY13,720 million for 3Q15).
Sales and marketing expenses were JPY8,392
million, up 7.0% YoY (JPY7,842 million for 3Q15) mainly due to
increases in sales commission expenses and advertising
expenses.
General and administrative expenses were
JPY5,928 million, up 7.2% YoY (JPY5,532 million for 3Q15) mainly
due to increases in office rent expenses, commission expenses and
taxes and public dues.
Research and development expenses were JPY355
million, up 2.5% YoY (JPY346 million for 3Q15).
Operating income
Operating income was JPY3,155 million, down
22.5% YoY (JPY4,073 million for 3Q15).
Other income (expenses)
Other income (expenses) was an income of JPY278
million (an income of JPY105 million for 3Q15), mainly because of
net gain on sales of other investments of JPY214 million (JPY24
million for 3Q15), distribution from fund investment of JPY208
million (included in other-net, JPY144 million for 3Q15), dividend
income of JPY106 million from other investments (JPY88 million for
3Q15), interest expense of JPY218 million (JPY171 million for 3Q15)
and foreign exchange losses of JPY23 million (JPY11 million for
3Q15).
Income before income tax
expenses
Income before income tax expenses was JPY3,433
million, down 17.8% YoY (JPY4,178 million for 3Q15).
Net income
Income tax expense was JPY1,466 million
(JPY1,697 million for 3Q15).
Equity in net income of equity method investees
was JPY69 million (JPY207 million for 3Q15) mainly due to net
income of Internet Multifeed Co.
As a result of the above, net income was
JPY2,036 million, down 24.2% YoY (JPY2,688 million for 3Q15).
Net income attributable to
IIJ
Net income attributable to non-controlling
interests was JPY126 million mainly related to net income of Trust
Networks Inc. (JPY115 million for 3Q15).
Net income attributable to IIJ was JPY1,910 million, down 25.8%
YoY (JPY2,573 million for 3Q15).
3Q16 Balance Sheets and Cash Flows
Balance sheets
As of December 31, 2016, the balance of total
assets was JPY130,915 million, increased by JPY13,081 million from
the balance as of March 31, 2016 of JPY117,835 million.
As of December 31, 2016, the balance of current assets was
JPY60,683 million, increased by JPY7,277 million from the balance
as of March 31, 2016 of JPY53,406 million. The major breakdown of
current assets was an increase in prepaid expenses by JPY2,410
million to JPY7,180 million, an increase in cash and cash
equivalents by JPY1,697 million to JPY21,266 million and an
increase in inventories by JPY1,572 million to JPY3,576 million. As
of December 31, 2016, the balance of noncurrent assets was
JPY70,233 million, increased by JPY5,804 million from the balance
as of March 31, 2016 of JPY64,429 million. The major breakdown of
noncurrent assets was an increase in property and equipment by
JPY2,757 million to JPY37,081 million, an increase in other
investments by JPY1,362 million to JPY7,310 million mainly due to
change an increase in the fair value of available-for-sale
securities, and increase in prepaid expenses-noncurrent by JPY1,291
million to JPY6,278 million. Other investments as of December 31,
2016, mainly consisted of JPY5,258 million in available-for-sale
securities (including JPY4,920 million of strategic shareholdings),
JPY1,124 million in nonmarketable equity securities and JPY929
million in investments in funds, including some through a trust. As
of December 31, 2016, the major breakdown of non-amortized
intangible assets was JPY6,170 million in goodwill and JPY96
million in trademark. The balance of amortized intangible assets,
which was customer relationships, was JPY3,132 million.
As of December 31, 2016, the balance of current liabilities was
JPY36,219 million, increased by JPY153 million from the balance as
of March 31, 2016 of JPY36,066 million mainly due to an increase in
capital lease obligations-current portion by JPY524 million to
JPY4,479 million. As of December 31, 2016, the balance of
noncurrent liabilities was JPY28,931 million, increased by
JPY12,506 million from the balance as of March 31, 2016 of
JPY16,425 million. The major breakdown of noncurrent liabilities
was an increase in long-term borrowings by JPY8,500 million to
JPY8,500 million and an increase in capital lease
obligations-noncurrent by JPY1,752 million to JPY9,532 million.
As of December 31, 2016, the balance of total
IIJ shareholders’ equity was JPY65,167 million, increased by JPY322
million from the balance as of March 31, 2016 of JPY64,845 million.
There was an increase in treasury stock by JPY982 million to
JPY1,374 million due to the repurchase of own shares, authorized at
the meeting of IIJ’s Board of Directors held on November 4, 2016.
IIJ shareholders’ equity ratio (total IIJ shareholders’ equity
divided by total assets) as of December 31, 2016 was 49.8%.
Cash flows
Cash and cash equivalents as of December 31,
2016 were JPY21,266 million (JPY18,234 million as of December 31,
2015).
Net cash provided by operating activities for
3Q16 was JPY4,408 million (net cash provided by operating
activities of JPY7,811 million for 3Q15.) There were net income of
JPY2,036 million, depreciation and amortization of JPY8,006 million
and net cash out flow of JPY5,979 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 expenses-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, an increase in prepaid expenses for seasonal bonus
payments to our employees and an increase mainly in accounts
receivable in relation to an export project of our container type
data center in 3Q16.
Net cash used in investing activities for 3Q16
was JPY5,389 million (net cash used in investing activities of
JPY6,634 million for 3Q15), mainly due to payments for purchase of
property and equipment of JPY7,940 million (JPY8,454 million for
3Q15) and proceeds from sales of property and equipment, which
include sales and leaseback, of JPY2,219 million (JPY1,093 million
for 3Q15).
Net cash provided by financing activities for
3Q16 was JPY2,831 million (net cash used in financing activities of
JPY4,047 million for 3Q15), mainly due to proceeds from long-term
borrowings of JPY8,500 million, principal payments under capital
leases of JPY3,535 million (JPY3,040 million for 3Q15), FY2015
year-end and FY2016 interim dividend payments of JPY1,126 million
(JPY1,011 million for 3Q15) and payments for purchase of treasury
stock of JPY982 million.
FY2016 Financial Targets
On November 4, 2016, we revised our financial
targets for FY2016 which was announced on May 13, 2016. Due to
seasonal factors, our fourth quarter revenue and income volume tend
to be the largest. Therefore, our financial target announced on
November 4, 2016 remain unchanged.
We conducted the repurchase of our own shares
which was authorized at the meeting of our Board of Directors held
on November 4, 2016. Final results of share repurchase is as
follows; period of repurchase: from November 7, 2016 to January 31,
2017, total number of shares repurchased: 892,200 shares, aggregate
repurchased amount: JPY1,499,933 thousand.
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 |
|
|
3Q15 |
3Q16 |
|
|
JPY millions |
JPY millions |
|
Adjusted EBITDA |
11,367 |
|
11,161 |
|
|
Depreciation and Amortization |
(7,294 |
) |
(8,006 |
) |
|
Operating Income |
4,073 |
|
3,155 |
|
|
Other Income |
105 |
|
278 |
|
|
Income Tax Expense |
1,697 |
|
1,466 |
|
|
Equity in Net Income of Equity Method
Investees |
207 |
|
69 |
|
|
Net income |
2,688 |
|
2,036 |
|
|
Less: Net income attributable to noncontrolling
interests |
(115 |
) |
(126 |
) |
|
Net Income attributable to IIJ |
2,573 |
|
1,910 |
|
| CAPEX |
|
|
3Q15 |
3Q16 |
|
|
JPY millions |
JPY millions |
|
CAPEX, including capital leases |
12,211 |
12,258 |
|
Acquisition of Assets by Entering into Capital
Leases |
3,757 |
5,843 |
|
Purchase of Property and Equipment |
8,454 |
6,415 |
Presentation
Presentation materials will be posted on our web
site (http://www.iij.ad.jp/en/ir/) on February 8, 2017.
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, systems integration,
cloud computing services, security services and mobile services.
Moreover, IIJ has built 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: http://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
FY2016 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, 2016 and December 31,
2016) |
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As of March 31, 2016 |
|
As of December 31, 2016 |
|
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| |
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Thousands of JPY |
|
Thousands of JPY |
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ASSETS |
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CURRENT ASSETS: |
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|
|
| |
Cash and cash equivalents |
19,569,095 |
|
|
21,266,218 |
|
|
|
| |
Accounts receivable, net of allowance for doubtful accounts of JPY
74,229 thousand and JPY 82,175 thousand at March 31, 2016 and
December 31, 2016, respectively |
23,746,683 |
|
|
23,701,119 |
|
|
|
| |
Inventories |
2,003,573 |
|
|
3,575,776 |
|
|
|
| |
Prepaid expenses—current |
4,769,988 |
|
|
7,180,146 |
|
|
|
| |
Deferred tax assets—current |
1,481,651 |
|
|
957,448 |
|
|
|
| |
Other current assets, net of allowance for doubtful accounts of JPY
15,693 thousand and JPY 15,193 thousand at March 31, 2016 and
December 31, 2016, respectively |
1,834,951 |
|
|
4,001,890 |
|
|
|
| |
Total current assets |
53,405,941 |
|
|
60,682,597 |
|
|
|
| |
INVESTMENTS IN EQUITY METHOD INVESTEES |
2,979,652 |
|
|
3,061,198 |
|
|
|
| |
OTHER INVESTMENTS |
5,948,741 |
|
|
7,310,426 |
|
|
|
| |
PROPERTY AND EQUIPMENT, net of accumulated depreciation and
amortization of JPY 45,345,543 thousand and JPY 49,000,397 thousand
at March 31, 2016 and December 31, 2016, respectively |
34,324,150 |
|
|
37,081,355 |
|
|
|
| |
GOODWILL |
6,169,609 |
|
|
6,169,609 |
|
|
|
| |
OTHER INTANGIBLE ASSETS—Net |
3,549,459 |
|
|
3,263,886 |
|
|
|
| |
GUARANTEE DEPOSITS |
3,084,681 |
|
|
3,029,012 |
|
|
|
| |
DEFERRED TAX ASSETS—Noncurrent |
224,316 |
|
|
171,150 |
|
|
|
| |
NET INVESTMENT IN SALES-TYPE LEASES—Noncurrent |
2,444,848 |
|
|
2,044,458 |
|
|
|
| |
Prepaid expenses—Noncurrent |
4,987,193 |
|
|
6,277,978 |
|
|
|
| |
OTHER ASSETS, net of allowance for doubtful accounts of JPY 61,593
thousand and JPY 61,610 thousand at March 31, 2016 and December 31,
2016, respectively |
716,314 |
|
|
1,823,824 |
|
|
|
| |
TOTAL |
117,834,904 |
|
|
130,915,493 |
|
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
As of March 31, 2016 |
|
As of December 31, 2016 |
|
|
| |
|
Thousands of JPY |
|
Thousands of JPY |
|
|
| |
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
| |
CURRENT LIABILITIES: |
|
|
|
|
|
| |
Short-term borrowings |
9,250,000 |
|
|
9,250,000 |
|
|
|
| |
Capital lease obligations—current portion |
3,954,386 |
|
|
4,478,624 |
|
|
|
| |
Accounts payable—trade |
13,906,703 |
|
|
14,045,710 |
|
|
|
| |
Accounts payable—other |
1,497,767 |
|
|
899,852 |
|
|
|
| |
Income taxes payable |
1,078,412 |
|
|
310,920 |
|
|
|
| |
Accrued expenses |
2,932,653 |
|
|
2,932,400 |
|
|
|
| |
Deferred income—current |
2,528,885 |
|
|
2,629,239 |
|
|
|
| |
Other current liabilities |
917,300 |
|
|
1,671,891 |
|
|
|
| |
Total current liabilities |
36,066,106 |
|
|
36,218,636 |
|
|
|
| |
LONG-TERM BORROWINGS |
- |
|
|
8,500,000 |
|
|
|
| |
CAPITAL LEASE OBLIGATIONS—Noncurrent |
7,779,367 |
|
|
9,531,762 |
|
|
|
| |
ACCRUED RETIREMENT AND PENSION COSTS—Noncurrent |
3,581,426 |
|
|
3,751,911 |
|
|
|
| |
DEFERRED TAX LIABILITIES—Noncurrent |
710,055 |
|
|
863,323 |
|
|
|
| |
DEFERRED INCOME—Noncurrent |
3,092,562 |
|
|
3,362,629 |
|
|
|
| |
OTHER NONCURRENT LIABILITIES |
1,261,413 |
|
|
2,921,230 |
|
|
|
| |
Total Liabilities |
52,490,929 |
|
|
65,149,491 |
|
|
|
| |
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
| |
|
|
|
|
|
|
| |
SHAREHOLDERS' EQUITY: |
|
|
|
|
|
| |
Common-stock—authorized, 75,520,000 shares; issued and outstanding,
46,711,400 shares at March 31, 2016 and December 31, 2016,
respectively |
25,509,499 |
|
|
25,509,499 |
|
|
|
| |
Additional paid-in capital |
36,059,833 |
|
|
36,102,931 |
|
|
|
| |
Retained earnings |
2,471,276 |
|
|
3,255,696 |
|
|
|
| |
Accumulated other comprehensive income |
1,196,669 |
|
|
1,673,124 |
|
|
|
| |
Treasury stock —758,709 shares and 1,360,809 shares held by the
company at March 31, 2016 and December 31, 2016, respectively |
(392,070 |
) |
|
(1,374,177 |
) |
|
|
| |
Total Internet Initiative Japan Inc. shareholders' equity |
64,845,207 |
|
|
65,167,073 |
|
|
|
| |
NONCONTROLLING INTERESTS |
498,768 |
|
|
598,929 |
|
|
|
| |
Total equity |
65,343,975 |
|
|
65,766,002 |
|
|
|
| |
TOTAL |
117,834,904 |
|
|
130,915,493 |
|
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| Internet Initiative Japan Inc. |
|
| Consolidated Statements of Income and
Consolidated Statements of Comprehensive Income
(Unaudited) |
|
| (For the nine months ended December 31, 2015
and December 31, 2016) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Nine Months Ended |
|
Nine Months Ended |
|
|
| |
|
December 31, 2015 |
|
December 31, 2016 |
|
|
| |
|
Thousands of JPY |
|
Thousands of JPY |
|
|
| |
REVENUES: |
|
|
|
|
|
| |
Network services: |
|
|
|
|
|
| |
Internet connectivity services (enterprise) |
12,870,620 |
|
|
16,461,205 |
|
|
|
| |
Internet connectivity services (consumer) |
10,707,905 |
|
|
15,902,952 |
|
|
|
| |
WAN services |
18,826,362 |
|
|
19,847,736 |
|
|
|
| |
Outsourcing services |
15,810,470 |
|
|
16,268,643 |
|
|
|
| |
Total |
58,215,357 |
|
|
68,480,536 |
|
|
|
| |
Systems integration: |
|
|
|
|
|
| |
Systems construction |
11,547,216 |
|
|
13,972,807 |
|
|
|
| |
Systems operation and maintenance |
24,374,157 |
|
|
25,885,221 |
|
|
|
| |
Total |
35,921,373 |
|
|
39,858,028 |
|
|
|
| |
Equipment sales |
2,364,695 |
|
|
2,207,649 |
|
|
|
| |
ATM operation business |
2,880,146 |
|
|
3,055,739 |
|
|
|
| |
Total revenues |
99,381,571 |
|
|
113,601,952 |
|
|
|
| |
COSTS AND EXPENSES: |
|
|
|
|
|
| |
Cost of network services |
47,078,490 |
|
|
56,273,528 |
|
|
|
| |
Cost of systems integration |
30,454,411 |
|
|
35,644,158 |
|
|
|
| |
Cost of equipment sales |
2,125,085 |
|
|
2,024,262 |
|
|
|
| |
Cost of ATM operation business |
1,930,186 |
|
|
1,830,095 |
|
|
|
| |
Total costs |
81,588,172 |
|
|
95,772,043 |
|
|
|
| |
Sales and marketing |
7,842,190 |
|
|
8,392,014 |
|
|
|
| |
General and administrative |
5,532,088 |
|
|
5,928,165 |
|
|
|
| |
Research and development |
345,878 |
|
|
354,411 |
|
|
|
| |
Total costs and expenses |
95,308,328 |
|
|
110,446,633 |
|
|
|
| |
OPERATING INCOME |
4,073,243 |
|
|
3,155,319 |
|
|
|
| |
OTHER INCOME (EXPENSES): |
|
|
|
|
|
| |
Dividend income |
88,248 |
|
|
106,336 |
|
|
|
| |
Interest income |
15,371 |
|
|
26,781 |
|
|
|
| |
Interest expense |
(170,762 |
) |
|
(218,204 |
) |
|
|
| |
Foreign exchange gain (loss), net |
(11,273 |
) |
|
(23,072 |
) |
|
|
| |
Net gain on sales of other investments |
23,765 |
|
|
213,938 |
|
|
|
| |
Impairment of other investments |
- |
|
|
(30,554 |
) |
|
|
| |
Other —net |
159,048 |
|
|
202,486 |
|
|
|
| |
Other income —net |
104,397 |
|
|
277,711 |
|
|
|
| |
INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE AND EQUITY IN NET
INCOME OF EQUITY METHOD INVESTEES |
4,177,640 |
|
|
3,433,030 |
|
|
|
| |
INCOME TAX EXPENSE |
1,696,936 |
|
|
1,465,852 |
|
|
|
| |
EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES |
206,823 |
|
|
69,244 |
|
|
|
| |
NET INCOME |
2,687,527 |
|
|
2,036,422 |
|
|
|
| |
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS |
(114,704 |
) |
|
(126,161 |
) |
|
|
| |
NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC. |
2,572,823 |
|
|
1,910,261 |
|
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| |
|
Nine Months Ended |
|
Nine Months Ended |
|
|
| |
|
December 31, 2015 |
|
December 31, 2016 |
|
|
| |
NET INCOME PER SHARE |
|
|
|
|
|
| |
BASIC WEIGHTED-AVERAGE NUMBER OF SHARES (shares) |
45,949,250 |
|
|
45,846,887 |
|
|
|
| |
DILUTED WEIGHTED-AVERAGE NUMBER OF SHARES (shares) |
46,039,920 |
|
|
45,962,442 |
|
|
|
| |
BASIC WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs) |
91,898,500 |
|
|
91,693,774 |
|
|
|
| |
DILUTED WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs) |
92,079,840 |
|
|
91,924,884 |
|
|
|
| |
BASIC NET INCOME PER SHARE (JPY) |
55.99 |
|
|
41.67 |
|
|
|
| |
DILUTED NET INCOME PER SHARE (JPY) |
55.88 |
|
|
41.56 |
|
|
|
| |
BASIC NET INCOME PER ADS EQUIVALENT (JPY) |
28.00 |
|
|
20.83 |
|
|
|
| |
DILUTED NET INCOME PER ADS EQUIVALENT (JPY) |
27.94 |
|
|
20.78 |
|
|
|
| |
|
|
|
|
|
|
| |
|
|
| |
Quarterly Consolidated Statements of Comprehensive
Income (Unaudited) |
|
|
|
|
| |
|
Nine Months Ended |
|
Nine Months Ended |
|
|
| |
|
December 31, 2015 |
|
December 31, 2016 |
|
|
| |
|
Thousands of JPY |
|
Thousands of JPY |
|
|
| |
NET INCOME |
2,687,527 |
|
|
2,036,422 |
|
|
|
| |
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: |
|
|
|
|
|
| |
Foreign currency translation adjustments |
(74,544 |
) |
|
(455,158 |
) |
|
|
| |
Unrealized holding gain (loss) on securities |
(85,123 |
) |
|
920,735 |
|
|
|
| |
Defined benefit pension plans |
(1,246 |
) |
|
10,878 |
|
|
|
| |
TOTAL COMPREHENSIVE INCOME |
2,526,614 |
|
|
2,512,877 |
|
|
|
| |
LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING
INTERESTS |
(118,662 |
) |
|
(126,161 |
) |
|
|
| |
COMPREHENSIVE INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN
INC. |
2,407,952 |
|
|
2,386,716 |
|
|
|
| |
|
|
|
|
|
|
| |
|
| Internet Initiative Japan Inc. |
|
| Consolidated Statements of Cash Flows
(Unaudited) |
|
| (For the nine months ended December 31, 2015
and December 31, 2016) |
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
Nine Months Ended |
|
|
| |
|
December 31, 2015 |
|
December 31, 2016 |
|
|
| |
|
Thousands of JPY |
|
Thousands of JPY |
|
|
| |
OPERATING ACTIVITIES: |
|
|
|
|
|
| |
Net income |
2,687,527 |
|
|
2,036,422 |
|
|
|
| |
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
| |
Depreciation and amortization |
7,293,768 |
|
|
8,006,049 |
|
|
|
| |
Provision for retirement and pension costs, less payments |
141,614 |
|
|
188,923 |
|
|
|
| |
Provision for allowance for doubtful accounts |
26,692 |
|
|
19,989 |
|
|
|
| |
Gain on sales of property and equipment |
(37,972 |
) |
|
(15,410 |
) |
|
|
| |
Loss on disposal of property and equipment |
37,345 |
|
|
54,481 |
|
|
|
| |
Net gain on sales of other investments |
(23,765 |
) |
|
(213,938 |
) |
|
|
| |
Impairment of other investments |
- |
|
|
30,554 |
|
|
|
| |
Foreign exchange gain, net |
(24,118 |
) |
|
(277 |
) |
|
|
| |
Equity in net income of equity method investees, less dividends
received |
(158,313 |
) |
|
(18,162 |
) |
|
|
| |
Deferred income tax expense |
308,241 |
|
|
349,735 |
|
|
|
| |
Others |
(12,709 |
) |
|
(51,716 |
) |
|
|
| |
Changes in operating assets and liabilities: |
|
|
|
|
|
| |
Decrease (increase) in accounts receivable |
1,985,303 |
|
|
(64,287 |
) |
|
|
| |
Decrease (increase) in net investment in sales-type lease —
noncurrent |
(17,099 |
) |
|
400,390 |
|
|
|
| |
Increase in inventories |
(1,505,965 |
) |
|
(1,586,556 |
) |
|
|
| |
Increase in prepaid expenses |
(1,690,890 |
) |
|
(2,454,437 |
) |
|
|
| |
Increase in other current and noncurrent assets |
(1,297,325 |
) |
|
(4,534,405 |
) |
|
|
| |
Increase (decrease) in accounts payable |
(165,442 |
) |
|
160,327 |
|
|
|
| |
Increase (decrease) in income taxes payable |
10,500 |
|
|
(767,172 |
) |
|
|
| |
Increase in accrued expenses |
228,883 |
|
|
18,639 |
|
|
|
| |
Increase in deferred income—current |
405,211 |
|
|
140,038 |
|
|
|
| |
Increase (decrease) in deferred income—noncurrent |
(175,389 |
) |
|
302,157 |
|
|
|
| |
Increase (decrease) in other current and noncurrent
liabilities |
(204,940 |
) |
|
2,406,335 |
|
|
|
| |
Net cash provided by operating activities |
7,811,157 |
|
|
4,407,679 |
|
|
|
| |
INVESTING ACTIVITIES: |
|
|
|
|
|
| |
Purchase of property and equipment |
(8,454,171 |
) |
|
(7,940,090 |
) |
|
|
| |
Proceeds from sales of property and equipment |
1,093,078 |
|
|
2,219,179 |
|
|
|
| |
Purchase of available-for-sale securities |
(59,490 |
) |
|
- |
|
|
|
| |
Purchase of other investments |
(273,686 |
) |
|
(316,171 |
) |
|
|
| |
Investment in an equity method investee |
(39,974 |
) |
|
(99,000 |
) |
|
|
| |
Proceeds from sales of available-for-sale securities |
141,235 |
|
|
- |
|
|
|
| |
Proceeds from sales of other investments |
804,236 |
|
|
534,249 |
|
|
|
| |
Payments of guarantee deposits |
(21,132 |
) |
|
(17,102 |
) |
|
|
| |
Refund of guarantee deposits |
9,040 |
|
|
87,704 |
|
|
|
| |
Payments for refundable insurance policies |
(42,272 |
) |
|
(42,385 |
) |
|
|
| |
Refund from insurance policies |
10,108 |
|
|
- |
|
|
|
| |
Proceeds from subsidies |
200,000 |
|
|
200,000 |
|
|
|
| |
Other |
(678 |
) |
|
(15,000 |
) |
|
|
| |
Net cash used in investing activities |
(6,633,706 |
) |
|
(5,388,616 |
) |
|
|
|
|
|
Nine Months Ended |
|
Nine Months Ended |
|
|
| |
|
December 31, 2015 |
|
December 31, 2016 |
|
|
| |
|
Thousands of JPY |
|
Thousands of JPY |
|
|
| |
FINANCING ACTIVITIES: |
|
|
|
|
|
| |
Proceeds from issuance of short-term borrowings with initial
maturities over three months and long-term borrowings |
1,550,000 |
|
|
8,550,000 |
|
|
|
| |
Repayments of short-term borrowings with initial maturities over
three months |
(1,550,000 |
) |
|
(50,000 |
) |
|
|
| |
Principal payments under capital leases |
(3,039,877 |
) |
|
(3,534,887 |
) |
|
|
| |
Proceeds from issuance of subsidiary stock to noncontrolling
interests |
3,692 |
|
|
- |
|
|
|
| |
Payments for purchase of treasury stock |
- |
|
|
(982,107 |
) |
|
|
| |
Dividends paid |
(1,010,844 |
) |
|
(1,125,841 |
) |
|
|
| |
Other |
10 |
|
|
(26,000 |
) |
|
|
| |
Net cash provided by (used in) financing activities |
(4,047,019 |
) |
|
2,831,165 |
|
|
|
| |
|
|
|
|
|
|
| |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
9,673 |
|
|
(153,105 |
) |
|
|
| |
|
|
|
|
|
|
| |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
(2,859,895 |
) |
|
1,697,123 |
|
|
|
| |
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD |
21,093,633 |
|
|
19,569,095 |
|
|
|
| |
CASH AND CASH EQUIVALENTS, END OF THE PERIOD |
18,233,738 |
|
|
21,266,218 |
|
|
|
| |
|
|
|
|
|
|
| |
ADDITIONAL CASH FLOW INFORMATION: |
|
|
|
|
|
| |
Interest paid |
170,903 |
|
|
217,414 |
|
|
|
| |
Income taxes paid |
1,392,230 |
|
|
1,961,521 |
|
|
|
| |
|
|
|
|
|
|
| |
NONCASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
| |
Acquisition of assets by entering into capital leases |
3,757,319 |
|
|
5,842,869 |
|
|
|
| |
Facilities purchase liabilities |
905,351 |
|
|
899,852 |
|
|
|
| |
Asset retirement obligation |
7,349 |
|
|
- |
|
|
|
| |
|
|
|
|
|
|
| |
|
|
|
|
|
|
| |
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, 2015 |
December 31, 2016 |
| |
|
|
|
|
|
|
Thousands of JPY |
Thousands of JPY |
| |
|
|
|
Network service and systems integration business |
96,789,223 |
|
110,830,849 |
|
| |
|
|
|
|
Customers |
96,501,425 |
|
110,546,213 |
|
| |
|
|
|
|
Intersegment |
287,798 |
|
284,636 |
|
| |
|
|
|
ATM operation business |
2,880,146 |
|
3,055,739 |
|
| |
|
|
|
|
Customers |
|
2,880,146 |
|
3,055,739 |
|
| |
|
|
|
|
Intersegment |
- |
|
- |
|
| |
|
|
|
Elimination |
(287,798 |
) |
(284,636 |
) |
| |
|
|
|
Consolidated total |
99,381,571 |
|
113,601,952 |
|
| |
|
|
|
Segment profit or loss: |
|
|
| |
|
|
|
|
Nine Months Ended |
Nine Months Ended |
| |
|
|
|
|
|
|
December 31, 2015 |
December 31, 2016 |
| |
|
|
|
|
|
|
Thousands of JPY |
Thousands of JPY |
| |
|
|
|
Network service and systems integration business |
3,356,483 |
|
2,177,784 |
|
| |
|
|
|
ATM operation business |
818,647 |
|
1,088,056 |
|
| |
|
|
|
Elimination |
(101,887 |
) |
(110,521 |
) |
| |
|
|
|
Consolidated operating income |
4,073,243 |
|
3,155,319 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
Geographic information is not presented due to immateriality of
revenue attributable to international operations. |
| |
|
|
|
|
|
|
|
|
| |
Subsequent Events (Unaudited) |
|
|
| |
|
|
Nothing to
be reported. |
|
|
| |
|
|
|
|
|
|
|
|
Third Quarter FY2016 Consolidated
Financial Results (3 months)
The following tables are highlight data of 3rd
Quarter FY2016 (3 months) consolidated financial results
(unaudited, for the three months ended December 31, 2016).
| Operating Results Summary |
|
|
3Q15 |
3Q16 |
YoY % Change |
|
|
JPY millions |
JPY millions |
|
|
Total Revenues: |
34,048 |
39,479 |
16.0 |
|
|
Network Services |
20,216 |
23,645 |
17.0 |
|
|
Systems Integration (SI) |
12,196 |
14,090 |
15.5 |
|
|
Equipment Sales |
726 |
741 |
2.0 |
|
|
ATM Operation Business |
910 |
1,003 |
10.3 |
|
|
Cost of Revenues: |
27,962 |
33,497 |
19.8 |
|
|
Network Services |
16,577 |
19,558 |
18.0 |
|
|
Systems Integration (SI) |
10,114 |
12,651 |
25.1 |
|
|
Equipment Sales |
645 |
681 |
5.6 |
|
|
ATM Operation Business |
626 |
607 |
(3.1 |
) |
|
SG&A Expenses and R&D |
4,576 |
4,774 |
4.3 |
|
|
Operating Income |
1,510 |
1,208 |
(20.0 |
) |
|
Income before Income Tax Expense |
1,531 |
1,328 |
(13.3 |
) |
|
Net Income attributable to IIJ |
920 |
802 |
(12.8 |
) |
| Network Service Revenue Breakdown |
|
|
3Q15 |
3Q16 |
YoY % Change |
|
|
JPY millions |
JPY millions |
|
|
Internet Connectivity Service (Enterprise) |
4,514 |
5,884 |
30.4 |
|
|
IP Service*1 |
2,446 |
2,457 |
0.5 |
|
|
IIJ FiberAccess/F and IIJ DSL/F |
771 |
762 |
(1.2 |
) |
|
IIJ Mobile Service |
1,228 |
2,608 |
112.4 |
|
|
IIJ Mobile MVNO Platform Service*2 |
584 |
1,784 |
205.7 |
|
|
Others |
69 |
57 |
(17.8 |
) |
|
Internet Connectivity Service (Consumer) |
4,111 |
5,575 |
35.6 |
|
|
IIJ |
3,491 |
5,064 |
45.0 |
|
|
IIJmio Mobile Service*3 |
3,031 |
4,402 |
45.2 |
|
|
hi-ho |
620 |
511 |
(17.6 |
) |
|
WAN Services |
6,269 |
6,559 |
4.6 |
|
|
Outsourcing Services |
5,322 |
5,627 |
5.7 |
|
|
Network Services Revenues |
20,216 |
23,645 |
17.0 |
|
*1 IP service revenues include revenues from the
data center connectivity service.*2 From 1Q16, the revenue from
“IIJ Mobile MVNO Platform Service”, which is included in “IIJ
Mobile service (Enterprise),” is disclosed. “IIJ Mobile MVNO
Platform Service” provides MVNO platform to our MVNE clients.*3
From 1Q16, the revenue from “IIJmio Mobile Service” (formerly known
as ”IIJmio High Speed Mobile Service” until September 30, 2016),
which is included in “Internet connectivity services (Consumer)”
provided by IIJ, is disclosed.
Reconciliation of Non-GAAP Financial
Measures (3rd Quarter FY2016 (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 |
|
|
3Q15 |
3Q16 |
|
|
JPY millions |
JPY millions |
|
Adjusted EBITDA |
4,004 |
|
3,930 |
|
|
Depreciation and Amortization |
(2,494 |
) |
(2,722 |
) |
|
Operating Income |
1,510 |
|
1,208 |
|
|
Other Income |
21 |
|
120 |
|
|
Income Tax Expense |
657 |
|
512 |
|
|
Equity in Net Income of Equity Method
Investees |
69 |
|
27 |
|
|
Net income |
943 |
|
843 |
|
|
Less: Net income attributable to noncontrolling
interests |
(23 |
) |
(41 |
) |
|
Net Income attributable to IIJ |
920 |
|
802 |
|
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 |
|
|
3Q15 |
3Q16 |
|
|
JPY millions |
JPY millions |
|
CAPEX, including capital leases |
4,268 |
3,886 |
|
Acquisition of Assets by Entering into Capital
Leases |
1,135 |
2,051 |
|
Purchase of Property and Equipment |
3,133 |
1,835 |
| |
|
| Internet Initiative Japan Inc. |
|
| Quarterly Consolidated Statements of Income
and Quarterly Consolidated Statements of
Comprehensive Income (Unaudited) |
|
| (Three Months ended December 31, 2015 and
December 31, 2016) |
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
Three Months Ended |
|
|
| |
|
December 31, 2015 |
|
December 31, 2016 |
|
|
| |
|
Thousands of JPY |
|
Thousands of JPY |
|
|
| |
REVENUES: |
|
|
|
|
|
|
| |
Network services: |
|
|
|
|
|
|
| |
Internet connectivity services (enterprise) |
4,513,952 |
|
|
|
5,884,331 |
|
|
|
| |
Internet connectivity services (consumer) |
4,111,346 |
|
|
|
5,574,632 |
|
|
|
| |
WAN services |
6,268,555 |
|
|
|
6,559,024 |
|
|
|
| |
Outsourcing services |
5,321,941 |
|
|
|
5,626,783 |
|
|
|
| |
Total |
20,215,794 |
|
|
|
23,644,770 |
|
|
|
| |
Systems integration: |
|
|
|
|
|
|
| |
Systems construction |
3,904,016 |
|
|
|
5,389,388 |
|
|
|
| |
Systems operation and maintenance |
8,291,772 |
|
|
|
8,700,314 |
|
|
|
| |
Total |
12,195,788 |
|
|
|
14,089,702 |
|
|
|
| |
Equipment sales |
726,672 |
|
|
|
740,991 |
|
|
|
| |
ATM operation business |
909,583 |
|
|
|
1,003,219 |
|
|
|
| |
Total revenues |
34,047,837 |
|
|
|
39,478,682 |
|
|
|
| |
COST AND EXPENSES: |
|
|
|
|
|
|
| |
Cost of network services |
16,577,185 |
|
|
|
19,558,238 |
|
|
|
| |
Cost of systems integration |
10,113,828 |
|
|
|
12,651,235 |
|
|
|
| |
Cost of equipment sales |
644,961 |
|
|
|
681,145 |
|
|
|
| |
Cost of ATM operation business |
626,050 |
|
|
|
606,601 |
|
|
|
| |
Total costs |
27,962,024 |
|
|
|
33,497,219 |
|
|
|
| |
Sales and marketing |
2,676,708 |
|
|
|
2,756,066 |
|
|
|
| |
General and administrative |
1,785,263 |
|
|
|
1,907,809 |
|
|
|
| |
Research and development |
113,684 |
|
|
|
109,971 |
|
|
|
| |
Total costs and expenses |
32,537,679 |
|
|
|
38,271,065 |
|
|
|
| |
OPERATING INCOME |
1,510,158 |
|
|
|
1,207,617 |
|
|
|
| |
OTHER INCOME (EXPENSE): |
|
|
|
|
|
|
| |
Dividend income |
14,040 |
|
|
|
14,929 |
|
|
|
| |
Interest income |
4,259 |
|
|
|
8,263 |
|
|
|
| |
Interest expense |
(59,202 |
) |
|
|
(75,859 |
) |
|
|
| |
Foreign exchange gain (loss), net |
2,793 |
|
|
|
82,844 |
|
|
|
| |
Net gain on sales of other investments |
23,765 |
|
|
|
- |
|
|
|
| |
Other—net |
34,870 |
|
|
|
89,881 |
|
|
|
| |
Other income —net |
20,525 |
|
|
|
120,058 |
|
|
|
| |
INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE AND EQUITY IN NET
INCOME OF EQUITY METHOD INVESTEES |
1,530,683 |
|
|
|
1,327,675 |
|
|
|
| |
INCOME TAX EXPENSE |
657,051 |
|
|
|
512,174 |
|
|
|
| |
EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES |
69,422 |
|
|
|
27,598 |
|
|
|
| |
NET INCOME |
943,054 |
|
|
|
843,099 |
|
|
|
| |
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS |
(22,730 |
) |
|
|
(40,772 |
) |
|
|
| |
NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC. |
920,324 |
|
|
|
802,327 |
|
|
|
| |
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
Three Months Ended |
|
|
| |
|
December 31, 2015 |
|
December 31, 2016 |
|
|
| |
NET INCOME PER SHARE |
|
|
|
|
| |
BASIC WEIGHTED-AVERAGE NUMBER OF SHARES (shares) |
45,952,691 |
|
|
45,636,429 |
|
|
|
| |
DILUTED WEIGHTED-AVERAGE NUMBER OF SHARES (shares) |
46,048,049 |
|
|
45,758,296 |
|
|
|
| |
BASIC WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs) |
91,905,382 |
|
|
91,272,858 |
|
|
|
| |
DILUTED WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs) |
92,096,098 |
|
|
91,516,592 |
|
|
|
| |
BASIC NET INCOME PER SHARE (JPY) |
20.03 |
|
|
17.58 |
|
|
|
| |
DILUTED NET INCOME PER SHARE (JPY) |
19.99 |
|
|
17.53 |
|
|
|
| |
BASIC NET INCOME PER ADS EQUIVALENT (JPY) |
10.01 |
|
|
8.79 |
|
|
|
| |
DILUTED NET INCOME PER ADS EQUIVALENT (JPY) |
9.99 |
|
|
8.77 |
|
|
|
| |
|
|
|
|
|
|
|
| |
|
|
|
|
|
|
|
| |
Quarterly Consolidated Statements of Comprehensive
Income (Unaudited) |
|
|
|
|
|
| |
|
Three Months Ended |
|
Three Months Ended |
|
|
| |
|
December 31, 2015 |
|
December 31, 2016 |
|
|
| |
|
Thousands of JPY |
|
Thousands of JPY |
|
|
| |
NET INCOME |
943,054 |
|
|
843,099 |
|
|
|
| |
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: |
|
|
|
|
|
| |
Foreign currency translation adjustments |
(95,236 |
) |
|
(45,068 |
) |
|
|
| |
Unrealized holding gain (loss) on securities |
90,452 |
|
|
469,974 |
|
|
|
| |
Defined benefit pension plans |
(415 |
) |
|
3,626 |
|
|
|
| |
TOTAL COMPREHENSIVE INCOME |
937,855 |
|
|
1,271,631 |
|
|
|
| |
LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING
INTERESTS |
(22,730 |
) |
|
(40,772 |
) |
|
|
| |
COMPREHENSIVE INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN
INC. |
915,125 |
|
|
1,230,859 |
|
|
|
| |
|
|
| Internet Initiative Japan Inc. |
|
| Quarterly Consolidated Statements of Cash Flows
(Unaudited) |
|
| (Three Months ended December 31, 2015 and
December 31, 2016) |
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
Three Months Ended |
|
|
| |
|
December 31, 2015 |
|
December 31, 2016 |
|
|
| |
|
Thousands of JPY |
|
Thousands of JPY |
|
|
| |
OPERATING ACTIVITIES: |
|
|
|
|
|
| |
Net income |
943,054 |
|
|
843,099 |
|
|
|
| |
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
| |
Depreciation and amortization |
2,493,478 |
|
|
2,722,545 |
|
|
|
| |
Provision for retirement and pension costs, less payments |
71,204 |
|
|
66,477 |
|
|
|
| |
Provision for allowance for doubtful accounts |
3,380 |
|
|
14,856 |
|
|
|
| |
Gain on sales of property and equipment |
(17,030 |
) |
|
(7,706 |
) |
|
|
| |
Loss on disposal of property and equipment |
5,493 |
|
|
18,825 |
|
|
|
| |
Net gain on sales of other investments |
(23,765 |
) |
|
- |
|
|
|
| |
Foreign exchange gain, net |
(25,102 |
) |
|
(83,375 |
) |
|
|
| |
Equity in net income of equity method investees, less dividends
received |
(69,422 |
) |
|
(27,598 |
) |
|
|
| |
Deferred income tax expense |
190,568 |
|
|
66,553 |
|
|
|
| |
Other |
2,337 |
|
|
(46,536 |
) |
|
|
| |
Changes in operating assets and liabilities: |
|
|
|
|
|
| |
Increase in accounts receivable |
(179,928 |
) |
|
(560,123 |
) |
|
|
| |
Decrease (increase) in net investment in sales-type lease —
noncurrent |
(13,836 |
) |
|
101,218 |
|
|
|
| |
Increase in inventories |
(676,714 |
) |
|
(874,042 |
) |
|
|
| |
Increase in prepaid expenses |
(523,982 |
) |
|
(1,046,904 |
) |
|
|
| |
Increase in other current and noncurrent assets |
(1,012,756 |
) |
|
(2,849,833 |
) |
|
|
| |
Increase (decrease) in accounts payable |
187,324 |
|
|
(357,834 |
) |
|
|
| |
Decrease in income taxes payable |
(289,427 |
) |
|
(174,286 |
) |
|
|
| |
Increase in accrued expenses |
68,502 |
|
|
65,056 |
|
|
|
| |
Increase in deferred income—current |
191,119 |
|
|
92,031 |
|
|
|
| |
Increase (decrease) in deferred income—noncurrent |
(111,647 |
) |
|
178,857 |
|
|
|
| |
Increase in other current and noncurrent liabilities |
518,229 |
|
|
2,193,546 |
|
|
|
| |
Net cash provided by operating activities |
1,731,079 |
|
|
334,826 |
|
|
|
| |
INVESTING ACTIVITIES: |
|
|
|
|
|
| |
Purchase of property and equipment |
(3,132,977 |
) |
|
(2,581,985 |
) |
|
|
| |
Proceeds from sales of property and equipment |
603,115 |
|
|
1,009,711 |
|
|
|
| |
Purchase of other investments |
(26,704 |
) |
|
(29,113 |
) |
|
|
| |
Investment in an equity method investee |
- |
|
|
(99,000 |
) |
|
|
| |
Proceeds from sales of other investments |
501,330 |
|
|
229,707 |
|
|
|
| |
Payments of guarantee deposits |
(4,070 |
) |
|
(2,699 |
) |
|
|
| |
Refund of guarantee deposits |
4,722 |
|
|
10,228 |
|
|
|
| |
Payments for refundable insurance policies |
(14,091 |
) |
|
(14,204 |
) |
|
|
| |
Other |
- |
|
|
(15,000 |
) |
|
|
| |
Net cash used in investing activities |
(2,068,675 |
) |
|
(1,492,355 |
) |
|
|
| |
|
Three Months Ended |
|
Three Months Ended |
|
|
| |
|
December 31, 2015 |
|
December 31, 2016 |
|
|
| |
|
Thousands of JPY |
|
Thousands of JPY |
|
|
| |
FINANCING ACTIVITIES: |
|
|
|
|
|
| |
Proceeds from issuance of short-term borrowings with initial
maturities over three months and long-term borrowings |
50,000 |
|
|
5,550,000 |
|
|
|
| |
Repayments of short-term borrowings with initial maturities over
three months |
(50,000 |
) |
|
(50,000 |
) |
|
|
| |
Principal payments under capital leases |
(1,020,122 |
) |
|
(1,221,124 |
) |
|
|
| |
Proceeds from issuance of subsidiary stock to noncontrolling
interests |
3,692 |
|
|
- |
|
|
|
| |
Payments for purchase of treasury stock |
- |
|
|
(982,107 |
) |
|
|
| |
Dividends paid |
(505,479 |
) |
|
(620,361 |
) |
|
|
| |
Net cash used in financing activities |
(1,521,909 |
) |
|
2,676,408 |
|
|
|
| |
|
|
|
|
|
|
| |
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS |
(5,226 |
) |
|
79,517 |
|
|
|
| |
|
|
|
|
|
|
| |
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS |
(1,864,731 |
) |
|
1,598,396 |
|
|
|
| |
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD |
20,098,469 |
|
|
19,667,822 |
|
|
|
| |
CASH AND CASH EQUIVALENTS, END OF THE PERIOD |
18,233,738 |
|
|
21,266,218 |
|
|
|
| |
|
|
|
|
|
|
Note: The following information is provided to
disclose Internet Initiative Japan Inc. ("IIJ") financial results
(unaudited) for the nine months ended December 31, 2016 (“3Q16”) in
the form defined by the Tokyo Stock Exchange.
Consolidated Financial Results for the
Nine Months ended December 31, 2016 [Under accounting principles
generally accepted in the United States ("U.S. GAAP")]
February 8, 2017Company name: Internet Initiative
Japan Inc.Exchange listed: Tokyo Stock Exchange First SectionStock
code number: 3774URL: http://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, 2017Scheduled date for
dividend payment: -Supplemental material on annual 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, 2016 (April 1, 2016 to December 31,
2016)
| (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 EndedDecember 31, 2016 |
113,602 |
14.3 |
3,155 |
(22.5 |
) |
3,433 |
(17.8 |
) |
1,910 |
(25.8 |
) |
|
Nine Months EndedDecember 31, 2015 |
99,382 |
13.1 |
4,073 |
7.6 |
|
4,178 |
7.4 |
|
2,573 |
11.2 |
|
|
|
Basic net incomeattributable to IIJ per share |
Diluted net incomeattributable to IIJ per share |
|
|
JPY |
JPY |
|
Nine Months EndedDecember 31, 2016 |
41.67 |
41.56 |
|
Nine Months EndedDecember 31, 2015 |
55.99 |
55.88 |
| (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, 2016 |
130,915 |
65,766 |
65,167 |
49.8 |
|
As of March 31, 2016 |
117,835 |
65,344 |
64,845 |
55.0 |
2. Dividends
| |
Dividend per Shares |
|
1Q-end |
2Q-end |
3Q-end |
Year-end |
Total |
|
|
JPY |
JPY |
JPY |
JPY |
JPY |
|
Fiscal Year Ended March 31, 2016 |
- |
11.00 |
- |
11.00 |
22.00 |
|
Fiscal Year Ended March 31, 2017 |
- |
13.50 |
- |
|
|
|
Fiscal Year Ending March 31, 2017(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, 2017
|
(April 1, 2016 through March 31, 2017) |
|
|
|
|
(%
shown is YoY change) |
|
|
Total Revenues |
Operating Income |
Income beforeIncome Tax Expense (Benefit) |
Net Incomeattributable to IIJ |
Basic Net Incomeattributable to IIJper Share |
|
|
JPY
millions |
% |
JPY millions |
% |
JPY millions |
% |
JPY
millions |
% |
JPY |
|
Fiscal Year EndingMarch 31, 2017 |
158,000 |
12.3 |
5,000 |
(18.6 |
) |
5,100 |
(17.7 |
) |
3,000 |
(25.7 |
) |
65.71 |
(Note1) Changes from the latest forecasts released:
No
* Notes
|
(1 |
) |
Changes
in significant subsidiaries for the nine months ended December 31,
2016 |
| |
(Changes
in significant subsidiaries for the nine months ended December 31,
2016 which resulted in changes in scope of consolidation):
None |
| |
|
|
(2 |
) |
Application of
simplified or exceptional accounting: No |
| |
|
(3 |
) |
Changes
in significant accounting and reporting policies for the
consolidated financial statements |
| |
1)
Changes due to the revision of accounting standards: No |
| |
2) Others: No |
| |
|
(4 |
) |
Number
of shares outstanding (shares of common stock) |
| |
1) The
number of shares outstanding (inclusive of treasury stock): |
| |
As of
December 31, 2016: 46,711,400 shares |
| |
As of
March 31, 2016: 46,711,400 shares |
| |
2) The
number of treasury stock: |
| |
As of
December 31, 2016: 1,360,809 shares |
| |
As of
March 31, 2016: 758,709 shares |
| |
3) The
weighted average number of shares outstanding: |
| |
For the nine months ended December 31, 2016: 45,846,887 shares |
| |
For the nine months ended December 31, 2015: 45,949,250 shares |
| |
|
(5 |
) |
Regarding the basic net income attributable to IIJ per share and
the repurchase of own shares: |
| |
The
basic net income attributable to IIJ per share for the fiscal year
ending March 31, 2017 disclosed in this document was calculated by
taking the repurchase of own shares into consideration. (Period of
repurchase: from November 7, 2016 to January 31, 2017, total number
of shares repurchased: 892,200 shares, total amount repurchased:
JPY1,499,933 thousand.) |
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