EXHIBIT 99.1
TOKYO, Aug. 8, 2014 (GLOBE NEWSWIRE) -- Internet Initiative Japan Inc. ("IIJ") (Nasdaq:IIJI) (TSE:3774) today announced its consolidated financial results for the first three months of the fiscal year ending March 31, 2015 (1Q14, from April 1, 2014 to June 30, 2014).1
| Highlights of Financial Results for 1Q14 | ||
| Revenues | JPY27,552 million | (up 4.2% YoY) |
| Operating Income | JPY768 million | (down 41.2% YoY) |
| Net Income attributable to IIJ | JPY491 million | (down 48.5% YoY) |
Overview of 1Q14 Financial Results and Business Outlook
"Under favorable business circumstances, we stay focused on actively investing our resources in services and solutions developments especially for cloud, mobile, BigData, M2M (Machine to Machine connection), SDN/NFV2 and overseas-related fields to significantly enhance our business scale in the middle to long term while bearing increasing costs at the moment. Among developments, we released several new products such as high-performance database services for BigData and cloud-based M2M platform in 1Q14. We've seen strong system investment demands supported by Japanese economic recovery and we believe the combination of our systems integration expertise and prominent services we develop should become an overwhelming differentiation against competitors in the long run," said Koichi Suzuki, Founder and CEO of IIJ.
"Our MVNO (Mobile Virtual Network Operator) services for consumers have been growing rapidly with our low-cost LTE SIM card offerings. We started offering voice call services, MNP (mobile number portability) option and unlocked SIM smartphones in 1Q14. LTE SIM services have been receiving much attention in the Japanese market and we anticipate a certain volume of price-sensitive mobile carriers' subscribers to switch within several years. Although our consumer service is growing, our main focus with MVNO business remains on enterprises. M2M and MVNE (Mobile Virtual Network Enabler) demands from blue-chips should continue to rise and become our important business growth drivers in near future by leveraging our large MVNO infrastructure and related services we develop on our own," followed Eijiro Katsu, COO and President of IIJ.
"We've continuously acquired advanced integrated transactions in 1Q14. Examples include one of the largest Japanese financial institutions' cloud adoptions for their online security controls and a major logistics provider's replacement of all of their internal systems to cloud. With regards to our overseas business, which is in start-up phase with deficit, we acquired container type datacenters construction transactions in Russia and Laos3 by leveraging our technology expertise. We also receive several requests to construct cloud infrastructure from some Asian countries. These kinds of business opportunities come from our continuous efforts to expand our overseas presence," continued Katsu.
"With regards to 1Q14 financial results, operating income decreased YoY while revenues increased. As we expected, fixed costs such as personnel-related costs increased with inviting 129 new graduates and the annual salary raise for existing employees and we had a one-time headquarter relocation-related cost, which will also incur in 2Q. On the other hand, our 1Q systems integration revenue tends to be the smallest due to seasonal factors in relation with Japanese corporates' budget system and recurring revenues should only increase gradually quarter by quarter. While we don't anticipate 1H14 financial results to be strong, we believe our business investment should enhance revenue accumulation in 2H14 and thereafter," concluded Katsu.
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 SDN/NFV: SDN is an abbreviation for Software Defined Network while NFV is an abbreviation for Network Functions Virtualization.
3 Laos's official name is Lao People's Democratic Republic.
1Q14 Financial Results Summary
| Operating Results Summary | |||
1Q13 | 1Q14 | YoY % Change | |
| JPY millions | JPY millions | ||
| Total Revenues | 26,441 | 27,552 | 4.2 |
| Network Services | 16,785 | 16,800 | 0.1 |
| Systems Integration (SI) | 8,692 | 9,457 | 8.8 |
| Equipment Sales | 319 | 466 | 46.3 |
| ATM Operation Business | 645 | 829 | 28.6 |
| Total Costs | 21,411 | 22,555 | 5.3 |
| Network Services | 13,242 | 13,214 | (0.2) |
| Systems Integration (SI) | 7,350 | 8,322 | 13.2 |
| Equipment Sales | 284 | 417 | 46.6 |
| ATM Operation Business | 535 | 602 | 12.5 |
| SG&A Expenses and R&D | 3,725 | 4,229 | 13.6 |
| Operating Income | 1,305 | 768 | (41.2) |
| Income before Income Tax Expense | 1,431 | 827 | (42.2) |
| Net income attributable to IIJ | 954 | 491 | (48.5) |
| Segment Results Summary | ||
| 1Q13 | 1Q14 | |
| JPY millions | JPY millions | |
| Total Revenues | 26,441 | 27,552 |
| Network services and SI business | 25,939 | 26,819 |
| ATM operation business | 645 | 829 |
| Elimination | 143 | 96 |
| Operating Income | 1,305 | 768 |
| Network service and SI business | 1,255 | 608 |
| ATM operation business | 81 | 189 |
| Elimination | 31 | 29 |
We have omitted segment analysis because most of our revenues are dominated by Network services and Systems Integration (SI) business.
1Q14 Results of Operation
Revenues
Total revenues were JPY27,552 million, up 4.2% YoY.
Network Services revenue was JPY16,800 million, up 0.1% YoY.
Revenues for Internet connectivity services for enterprise were JPY4,093 million, down 2.4% YoY. While mobile service revenues increased, revenue decrease in IP service in the previous fiscal year continued to affect IP service revenues for 1Q14.
Revenues for Internet connectivity services for consumer were JPY1,714 million, up 22.7% YoY. Revenue growth of low-priced LTE SIM card offerings covered revenue decrease from our legacy-type services.
WAN services revenues were JPY5,985 million, down 5.1% YoY due to revenue decrease in previous fiscal year and price reduction at the beginning of fiscal year.
Outsourcing services revenues were JPY5,008 million, up 2.5% YoY, mainly by the increase in revenues of "IIJ GIO Hosting Package Services."
| Network Services4 Revenues Breakdown | |||
1Q13 | 1Q14 | YoY % Change | |
| JPY millions | JPY millions | ||
| Internet Connectivity Service (Enterprise) | 4,191 | 4,093 | (2.4) |
| IP Service5 | 2,681 | 2,500 | (6.8) |
| IIJ FiberAccess/F and IIJ DSL/F | 783 | 784 | 0.1 |
| IIJ Mobile Service (Enterprise) | 670 | 752 | 12.2 |
| Others | 57 | 57 | 0.1 |
| Internet Connectivity Service (Consumer) | 1,397 | 1,714 | 22.7 |
| Under IIJ Brand | 455 | 808 | 77.5 |
| hi-ho | 773 | 719 | (7.0) |
| OEM | 169 | 187 | 10.3 |
| WAN Services | 6,310 | 5,985 | (5.1) |
| Outsourcing Services | 4,887 | 5,008 | 2.5 |
| Total Network Services | 16,785 | 16,800 | 0.1 |
4 We have renamed Internet Connectivity Service (for Corporate Use) and Internet Connectivity Service (for home use) to Internet Connectivity Service (Enterprise) and Internet Connectivity Service (Consumer), respectively in June 2014.
5 IP Service revenues include revenues from the Data Center Connectivity Service.
| Number of Contracts for Connectivity Services | |||
| as of June 30, 2013 | as of June 30, 2014 | YoY Change | |
| Internet Connectivity Services (Enterprise) | 117,000 | 145,280 | 28,280 |
| IP Service (-99Mbps) | 879 | 810 | (69) |
| IP Service (100Mbps-999Mbps) | 409 | 461 | 52 |
| IP Service (1Gbps--) | 235 | 284 | 49 |
| IIJ Data Center Connectivity Service | 299 | 288 | (11) |
| IIJ FiberAccess/F and IIJ DSL/F | 50,099 | 54,564 | 4,465 |
| IIJ Mobile Service (Enterprise) | 63,779 | 87,539 | 23,760 |
| Others | 1,300 | 1,334 | 34 |
| Internet Connectivity Services (Consumer) | 509,261 | 669,056 | 159,795 |
| Under IIJ Brand | 101,896 | 201,627 | 99,731 |
| hi-ho | 151,318 | 153,451 | 2,133 |
| OEM | 256,047 | 313,978 | 57,931 |
| Total Contracted Bandwidth | 1,242.0Gbps | 1581.4Gbps | 339.4 |
SI revenues were JPY9,457 million, up 8.8% YoY.
Systems construction revenue, a one-time revenue, was JPY3,084 million, up 4.1% YoY. Systems operation and maintenance revenue, a recurring revenue, was JPY6,373 million, up 11.3% YoY. "IIJ GIO Component Services" revenues increased and the systems construction project that completed in the previous quarter shifted to operation and maintenance phase, which contributed to systems operation and maintenance revenue increase.
Orders received for SI and equipment sales for the three months ended June 30, 2014 totaled JPY12,180 million, down 7.0% YoY; orders received for systems construction and equipment sales were JPY4,377 million, down 14.2% YoY and orders received for systems operation and maintenance were JPY7,803 million, down 2.3% YoY.
Order backlog for SI and equipment sales as of June 30, 2014 amounted to JPY26,564 million, up 10.0% YoY; order backlog for systems construction and equipment sales was JPY5,929 million, up 7.4% YoY and order backlog for systems operation and maintenance was JPY20,635 million, up 10.7% YoY.
Equipment sales revenues were JPY466 million, up 46.3% YoY.
ATM Operation Business revenues were JPY829 million, up 28.6% YoY. The increase was in accordance with the continuous increase in the numbers of operating ATMs. As of August 8, 2014, 915 ATMs are in operation (652 ATMs as of August 6, 2013).
Cost and expense
Total cost of revenues was JPY22,555 million, up 5.3% YoY.
Cost of Network Services revenue was JPY13,214 million, down 0.2% YoY. Gross margin was JPY3,586 million, up 1.2% YoY and gross margin ratio was 21.3% (21.1% in 1Q13).
Cost of SI revenues was JPY8,322 million, up 13.2% YoY. The increase was mainly due to the increase in outsourcing-related and personnel-related costs. Gross margin was JPY1,136 million, down 15.4% YoY and gross margin ratio was 12.0% (15.4% in 1Q13).
Cost of Equipment Sales revenues was JPY417 million, up 46.6% YoY. Gross margin was JPY49 million, up 44.0% YoY and gross margin ratio was 10.5% (10.7% in 1Q13).
Cost of ATM Operation Business revenues was JPY602 million, up 12.5% YoY in accordance with the number of newly placed ATMs. Gross margin was JPY227 million, up 107.1% YoY and gross margin ratio was 27.4% (17.0% in 1Q13).
SG&A and R&D Expenses
SG&A and R&D expenses in total were JPY4,229 million, up 13.6% YoY (JPY3,725 million in 1Q13).
Sales and marketing expenses were JPY2,276 million, up 7.6% YoY. The increase was mainly due to the increase in personnel-related expenses.
General and administrative expenses were JPY1,829 million, up 21.9% YoY. The increase was mainly due to the increase in personnel-related expenses and the additional expenses related to the relocation of headquarter in 1Q14.
Research and development expenses were JPY124 million, up 13.6% YoY.
Operating income
Operating income was JPY768 million, down 41.2% YoY (JPY1,305 million for 1Q13).
Other income (expenses)
Other income (expenses) was an income of JPY59 million (an income of JPY126 million for 1Q13). There were gains related to other investments of JPY82 million and interest expense of JPY61 million.
Income before income tax expenses
Income before income tax expenses was JPY827 million, down 42.2% YoY. (JPY1,431 million for 1Q13)
Net Income
Income tax expense was JPY352 million (JPY537 million for 1Q13).
Equity in net income of equity method investees was JPY34 million (JPY65 million for 1Q13) mainly due to net income of Internet Multifeed Co.and Internet Revolution, Inc.
As a result of the above, net income was JPY509 million, down 46.9% YoY (JPY959 million for 1Q13).
Net income attributable to IIJ
Net income attributable to non-controlling interests was JPY18 million mainly related to net income of Trust Networks Inc. (JPY5 million for 1Q13).
Net income attributable to IIJ was JPY491 million, down 48.5% YoY (JPY954 million for 1Q13).
1Q14 Financial Condition
Balance Sheets
As of June 30, 2014, the balance of total assets was JPY101,703 million, decreased by JPY2,164 million from the balance as of March 31, 2014 of JPY103,867 million.
As for current assets as of June 30, 2014, as compared to the respective balances as of March 31, 2014, cash and cash equivalents decreased by JPY2,000 million, accounts receivable decreased by JPY1,919 million and prepaid expense increased by JPY1,405 million. As for noncurrent assets, as compared to the respective balance as of March 31, 2014, guarantee deposits increased by JPY1,526 million along with our headquarter relocation. As for current liabilities, as compared to the respective balances as of March 31, 2014, accounts payable decreased by JPY1,823 million and income taxes payable decreased by JPY914 million.
As for the balances of capital lease obligations, as compared to the respective balances as of March 31, 2014, capital lease obligations-current portion decreased by JPY52 million to JPY3,701 million and capital lease obligations-noncurrent decreased by JPY262 million to JPY4,341 million.
As of June 30, 2014, the balance of other investments was JPY5,676 million. The breakdown of other investments were JPY2,977 million in available-for-sale securities, JPY2,620 million in nonmarketable equity securities and JPY78 million in other.
As of June 30, 2014, the breakdown of major non-amortized intangible assets were JPY5,970 million in goodwill and JPY107 million in trademark. The balance of amortized intangible assets, which was customer relationships, was JPY4,103 million.
Total IIJ shareholders' equity as of June 30, 2014 decreased by JPY537 million to JPY59,375 million, mainly due to FY2013 year-end dividends payments of JPY505 million and decrease in accumulated other comprehensive income by 537 million mainly as a result of decrease in unrealized gain in other investments. IIJ shareholders' equity ratio (total IIJ shareholders' equity/total assets) as of June 30, 2014 was 58.4%.
Cash Flows
Cash and cash equivalents as of June 30, 2014 were JPY20,421 million compared to JPY10,276 million as of June 30, 2013.
Net cash provided by operating activities for 1Q14 was JPY2,855 million compared to net cash provided by operating activities of JPY1,528 million for 1Q13 mainly due to the decrease in payments of operating liabilities, while net income decreased from 1Q13.
Net cash used in investing activities for 1Q14 was JPY3,339 million compared to net cash used in investing activities of JPY2,340 million for 1Q13 mainly due to payments for purchase of property and equipment of JPY1,936 million (JPY1,719 million for 1Q13) and payments of guarantee deposits of JPY1,537 million (JPY661 million for 1Q13).
Net cash used in financing activities for 1Q14 was JPY1,509 million compared to net cash used in financing activities of JPY1,387 million for 1Q13, mainly due to principal payments under capital leases of JPY1,004 million (JPY981 million for 1Q13) and FY2013 year-end dividends payments of JPY505 million (JPY405 million for 1Q13).
Prospects for the Fiscal Year Ending March 31, 2015
Due to seasonal factors, our financial results tend to be weak in first quarter and strong in fourth quarter every fiscal year. 1Q14 revenue was almost in line with our initial expectation while operating income was slightly weaker than expected. Gross margin of systems integration was affected by extra work related to certain systems construction projects we completed last fiscal year.
Our FY2014 financial targets announced on May 15, 2014 remain unchanged although operating income of 1H14 may be a little bit weak. We had an increase in fixed type cost such as personnel-related at the beginning of a fiscal year, and we expect network services and system operation and maintenance revenues should accumulate quarter by quarter and system construction revenues should become large in 2H14.
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 | ||
| 1Q13 | 1Q14 | |
| JPY millions | JPY millions | |
| Adjusted EBITDA | 3,376 | 3,080 |
| Depreciation and Amortization6 | (2,071) | (2,312) |
| Operating Income | 1,305 | 768 |
| Other Income (Expense) | 126 | 59 |
| Income Tax Expense | 537 | 352 |
| Equity in Net Income of Equity Method Investees | 65 | 34 |
| Net income | 959 | 509 |
| Net loss (income) attributable to noncontrolling interests | (5) | (18) |
| Net Income attributable to IIJ | 954 | 491 |
| CAPEX | ||
| 1Q13 | 1Q14 | |
| JPY millions | JPY millions | |
| CAPEX, including capital leases | 2,893 | 2,630 |
| Acquisition of Assets by Entering into Capital Leases | 1,174 | 694 |
| Purchase of Property and Equipment | 1,719 | 1,936 |
Presentation
Presentation materials will be posted on our web site (http://www.iij.ad.jp/en/ir/) on August 8, 2014.
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 of companies provide total network solutions that mainly cater to high-end corporate customers. IIJ's services include high-quality systems integration and security services, Internet access, and cloud computing. 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.
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 FY2014 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.
6 Depreciation and amortization includes impairment loss on other intangible assets. (See IIJ's consolidated financial statements for details).
| Internet Initiative Japan Inc. | ||
| Quarterly Consolidated Balance Sheets (Unaudited) | ||
| (As of March 31, 2014 and June 30, 2014) | ||
| As of March 31, 2014 | As of June 30, 2014 | |
| Thousands of JPY | Thousands of JPY | |
| ASSETS | ||
| CURRENT ASSETS: | ||
| Cash and cash equivalents | 22,421,100 | 20,421,047 |
| Accounts receivable, net of allowance for doubtful accounts of JPY 53,871 thousand and JPY 54,191 thousand at March 31, 2014 and June 30, 2014, respectively | 19,214,248 | 17,295,492 |
| Inventories | 1,670,258 | 1,937,702 |
| Prepaid expenses | 3,128,290 | 4,533,408 |
| Deferred tax assets—current | 1,392,971 | 1,319,496 |
| Guarantee deposits—current | 1,462,223 | 1,462,223 |
| Other current assets, net of allowance for doubtful accounts of JPY 720 thousand at March 31, 2014 and June 30, 2014, respectively | 2,411,376 | 1,981,918 |
| Total current assets | 51,700,466 | 48,951,286 |
| INVESTMENTS IN EQUITY METHOD INVESTEES | 2,085,689 | 2,169,593 |
| OTHER INVESTMENTS | 6,355,817 | 5,675,995 |
| PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization of JPY 34,725,611 thousand and JPY 35,986,344 thousand at March 31, 2014 and June 30, 2014, respectively | 26,971,485 | 26,940,399 |
| GOODWILL | 5,969,951 | 5,969,951 |
| OTHER INTANGIBLE ASSETS—Net | 4,338,944 | 4,239,681 |
| GUARANTEE DEPOSITS | 1,264,535 | 2,790,384 |
| DEFERRED TAX ASSETS—Noncurrent | 636,807 | 609,697 |
| NET INVESTMENT IN SALES-TYPE LEASES—Noncurrent | 752,774 | 603,879 |
| Prepaid expenses—Noncurrent | 2,633,154 | 2,630,253 |
| OTHER ASSETS, net of allowance for doubtful accounts of JPY 62,800 thousand and JPY 63,572 thousand at March 31, 2014 and June 30, 2014, respectively | 1,156,953 | 1,121,809 |
| TOTAL | 103,866,575 | 101,702,927 |
| As of March 31, 2014 | As of June 30, 2014 | |
| Thousands of JPY | Thousands of JPY | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| CURRENT LIABILITIES: | ||
| Short-term borrowings | 9,400,000 | 9,400,000 |
| Long-term borrowings—current portion | 980,000 | 980,000 |
| Capital lease obligations—current portion | 3,753,026 | 3,701,114 |
| Accounts payable—trade | 11,491,666 | 9,830,019 |
| Accounts payable—other | 1,050,429 | 889,368 |
| Income taxes payable | 1,079,480 | 165,974 |
| Accrued expenses | 2,053,550 | 2,155,966 |
| Deferred income—current | 1,560,603 | 2,074,077 |
| Other current liabilities | 1,098,173 | 2,121,607 |
| Total current liabilities | 32,466,927 | 31,318,125 |
| CAPITAL LEASE OBLIGATIONS—Noncurrent | 4,603,322 | 4,341,458 |
| ACCRUED RETIREMENT AND PENSION COSTS—Noncurrent | 2,274,540 | 2,335,678 |
| DEFERRED TAX LIABILITIES—Noncurrent | 1,092,863 | 841,349 |
| DEFERRED INCOME—Noncurrent | 2,711,347 | 2,629,966 |
| OTHER NONCURRENT LIABILITIES | 536,950 | 574,525 |
| Total Liabilities | 43,685,949 | 42,041,101 |
| COMMITMENTS AND CONTINGENCIES | ||
| SHAREHOLDERS' EQUITY: | ||
| Common-stock —authorized, 75,520,000 shares; issued and outstanding, 46,697,800 shares at March 31, 2014 | 25,497,022 | 25,499,857 |
| —authorized, 75,520,000 shares; issued and outstanding, 46,701,000 shares at June 30, 2014 | ||
| Additional paid-in capital | 35,961,995 | 35,973,558 |
| Accumulated deficit | (2,867,548) | (2,881,807) |
| Accumulated other comprehensive income | 1,712,786 | 1,175,791 |
| Treasury stock —758,709 shares held by the company at March 31, 2014 and June 30, 2014, respectively | (392,070) | (392,070) |
| Total Internet Initiative Japan Inc. shareholders' equity | 59,912,185 | 59,375,329 |
| NONCONTROLLING INTERESTS | 268,441 | 286,497 |
| Total equity | 60,180,626 | 59,661,826 |
| TOTAL | 103,866,575 | 101,702,927 |
| Internet Initiative Japan Inc. | ||
| Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements of Other Comprehensive Income (Unaudited) | ||
| (For the three months ended June 30, 2013 and June 30, 2014) | ||
| Quarterly Consolidated Statements of Income | ||
| Three Months Ended June 30, 2013 | Three Months Ended June 30, 2014 | |
| Thousands of JPY | Thousands of JPY | |
| REVENUES: | ||
| Network services: | ||
| Internet connectivity services (enterprise) | 4,191,009 | 4,092,430 |
| Internet connectivity services (consumer) | 1,397,259 | 1,713,742 |
| WAN services | 6,309,799 | 5,985,212 |
| Outsourcing services | 4,887,268 | 5,007,891 |
| Total | 16,785,335 | 16,799,275 |
| Systems integration: | ||
| Systems construction | 2,964,008 | 3,084,319 |
| Systems operation and maintenance | 5,728,372 | 6,373,163 |
| Total | 8,692,380 | 9,457,482 |
| Equipment sales | 318,693 | 466,221 |
| ATM operation business | 644,693 | 829,249 |
| Total revenues | 26,441,101 | 27,552,227 |
| COST AND EXPENSES: | ||
| Cost of network services | 13,241,680 | 13,213,441 |
| Cost of systems integration | 7,349,648 | 8,321,833 |
| Cost of equipment sales | 284,688 | 417,241 |
| Cost of ATM operation business | 535,102 | 602,245 |
| Total cost | 21,411,118 | 22,554,760 |
| Sales and marketing | 2,115,025 | 2,276,043 |
| General and administrative | 1,500,342 | 1,829,349 |
| Research and development | 109,144 | 124,015 |
| Total cost and expenses | 25,135,629 | 26,784,167 |
| OPERATING INCOME | 1,305,472 | 768,060 |
| OTHER INCOME (EXPENSE): | ||
| Dividend income | 27,111 | 25,350 |
| Interest income | 5,846 | 4,917 |
| Interest expense | (68,351) | (61,402) |
| Foreign exchange gains (losses) | 92,619 | (15,499) |
| Net gain on sales of other investments | 55,920 | -- |
| Other —net | 11,905 | 105,932 |
| Other income (expense) —net | 125,050 | 59,298 |
| INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE AND EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES | 1,430,522 | 827,358 |
| INCOME TAX EXPENSE | 537,419 | 352,253 |
| EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES | 65,954 | 33,904 |
| NET INCOME | 959,057 | 509,009 |
| LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | (5,247) | (17,938) |
| NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC. | 953,810 | 491,071 |
| Three Months Ended June 30, 2013 | Three Months Ended June 30, 2014 | |
| NET INCOME PER SHARE | ||
| BASIC WEIGHTED-AVERAGE NUMBER OF SHARES (shares) | 40,538,973 | 45,942,291 |
| DILUTED WEIGHTED-AVERAGE NUMBER OF SHARES (shares) | 40,588,597 | 46,004,747 |
| BASIC WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs) | 81,077,946 | 91,884,582 |
| DILUTED WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs) | 81,177,194 | 92,009,494 |
| BASIC NET INCOME PER SHARE (JPY / U.S. Dollars / JPY) | 23.53 | 10.69 |
| DILUTED NET INCOME PER SHARE (JPY / U.S. Dollars / JPY) | 23.50 | 10.67 |
| BASIC NET INCOME PER ADS EQUIVALENT (JPY / U.S. Dollars / JPY) | 11.76 | 5.34 |
| DILUTED NET INCOME PER ADS EQUIVALENT (JPY / U.S. Dollars / JPY) | 11.75 | 5.34 |
| Quarterly Consolidated Statements of Other Comprehensive Income | ||
| Three Months Ended June 30, 2013 | Three Months Ended June 30, 2014 | |
| Thousands of JPY | Thousands of JPY | |
| NET INCOME | 959,057 | 509,009 |
| Comprehensive income (loss): | ||
| Foreign currency translation adjustments | 261,462 | (40,988) |
| Unrealized holding gain (loss) on securities | 30,782 | (495,948) |
| Defined benefit pension plans | 59 | 59 |
| Total comprehensive income | 1,251,360 | (27,868) |
| Less: Comprehensive income attributable to noncontrolling interests | (5,050) | (18,056) |
| Comprehensive income attributable to Internet Initiative Japan Inc. | 1,246,310 | (45,924) |
| Internet Initiative Japan Inc. | ||
| Quarterly Consolidated Statements of Cash Flows (Unaudited) | ||
| (For the three months ended June 30, 2013 and June 30, 2014) | ||
| Three Months Ended June 30, 2013 | Three Months Ended June 30, 2014 | |
| Thousands of JPY | Thousands of JPY | |
| OPERATING ACTIVITIES: | ||
| Net income | 959,057 | 509,009 |
| Adjustments to reconcile net income to net cash provided by operating activities: | ||
| Depreciation and amortization | 2,070,760 | 2,312,086 |
| Provision for retirement and pension costs, less payments | 57,370 | 61,230 |
| Provision for (reversal of) allowance for doubtful accounts | (11,439) | 1,495 |
| Gain on sales of property and equipment | -- | (29,038) |
| Loss on disposal of property and equipment | 645 | 5,702 |
| Net gain on sales of other investments | (55,920) | -- |
| Foreign exchange losses (gains), net | (79,952) | 2,655 |
| Equity in net income of equity method investees | (65,954) | (33,904) |
| Deferred income tax expense | 268,241 | 132,402 |
| Others | 11,405 | 5,709 |
| Changes in operating assets and liabilities: | ||
| Decrease in accounts receivable | 2,922,484 | 1,911,247 |
| Decrease (increase) in net investment in sales-type lease — noncurrent | (2,581) | 148,895 |
| Increase in inventories | (205,548) | (267,798) |
| Increase in prepaid expenses | (1,417,900) | (1,408,944) |
| Increase in other current and noncurrent assets | 117,214 | 450,534 |
| Decrease in accounts payable | (1,961,748) | (1,634,123) |
| Decrease in income taxes payable | (1,488,894) | (912,999) |
| Decrease in deferred income-noncurrent | (450,251) | (79,509) |
| Increase in accrued expenses and other current and noncurrent liabilities | 861,255 | 1,680,353 |
| Net cash provided by operating activities | 1,528,244 | 2,855,002 |
| INVESTING ACTIVITIES: | ||
| Purchase of property and equipment | (1,718,513) | (1,935,917) |
| Proceeds from sales of property and equipment | 69,604 | 270,647 |
| Purchase of available-for-sale securities | (11,939) | -- |
| Purchase of other investments | (23,277) | (91,403) |
| Investment in an equity method investee | -- | (50,000) |
| Proceeds from sales of other investments | 4,000 | 7,887 |
| Payments of guarantee deposits | (660,973) | (1,536,768) |
| Refund of guarantee deposits | 4,920 | 7,358 |
| Payments for refundable insurance policies | -- | (11,176) |
| Other | (3,435) | -- |
| Net cash used in investing activities | (2,339,613) | (3,339,372) |
| Three Months Ended June 30, 2013 | Three Months Ended June 30, 2014 | |
| Thousands of JPY | Thousands of JPY | |
| FINANCING ACTIVITIES: | ||
| Proceeds from issuance of short-term borrowings with initial maturities over three months | 200,000 | -- |
| Principal payments under capital leases | (981,161) | (1,003,824) |
| Net increase in short-term borrowings with initial maturities less than three months | (200,000) | -- |
| Dividends paid | (405,368) | (505,330) |
| Other | (41) | 3 |
| Net cash used in financing activities | (1,386,570) | (1,509,151) |
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | 215,527 | (6,532) |
| NET DECREASE IN CASH AND CASH EQUIVALENTS | (1,982,412) | (2,000,053) |
| CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD | 12,258,872 | 22,421,100 |
| CASH AND CASH EQUIVALENTS, END OF THE PERIOD | 10,276,460 | 20,421,047 |
| ADDITIONAL CASH FLOW INFORMATION: | ||
| Interest paid | 67,024 | 61,400 |
| Income taxes paid | 1,536,124 | 1,450,035 |
| NONCASH INVESTING AND FINANCING ACTIVITIES: | ||
| Acquisition of assets by entering into capital leases | 1,174,882 | 694,211 |
| Facilities purchase liabilities | 261,534 | 889,368 |
| Asset retirement obligation | 55,066 | -- |
| Going Concern Assumption (Unaudited) | |||
| Nothing to be reported. | |||
| Material Changes In Shareholders' Equity (Unaudited) | |||
| Nothing to be reported. | |||
| Segment Information (Unaudited) | |||
| Business Segments: | |||
| Revenues: | |||
| Three Months Ended June 30, 2013 | Three Months Ended June 30, 2014 | ||
| Thousands of JPY | Thousands of JPY | ||
| Network service and systems integration business | 25,939,103 | 26,819,369 | |
| Customers | 25,796,408 | 26,722,978 | |
| Intersegment | 142,695 | 96,391 | |
| ATM operation business | 644,693 | 829,249 | |
| Customers | 644,693 | 829,249 | |
| Intersegment | -- | -- | |
| Elimination | 142,695 | 96,391 | |
| Consolidated total | 26,441,101 | 27,552,227 | |
| Segment profit or loss: | |||
| Three Months Ended June 30, 2013 | Three Months Ended June 30, 2014 | ||
| Thousands of JPY | Thousands of JPY | ||
| Network service and systems integration business | 1,255,068 | 607,629 | |
| ATM operation business | 81,074 | 189,437 | |
| Elimination | 30,670 | 29,006 | |
| Consolidated operating income | 1,305,472 | 768,060 | |
| Geographic information is not presented due to immateriality of revenue attributable to international operations. | |||
| Subsequent Events (Unaudited) | |||
| Nothing to be reported. | |||
| Note: The following information is provided to disclose Internet Initiative Japan Inc. ("IIJ") financial results (unaudited) for the three months ended June 30, 2014 ("1Q14") in the form defined by the Tokyo Stock Exchange. | ||
| Consolidated Financial Results for the Three Months Ended June 30, 2014 | ||
| [Under accounting principles generally accepted in the United States ("U.S. GAAP")] | ||
| August 8, 2014 | ||
| Company name: Internet Initiative Japan Inc. | Exchange listed: Tokyo Stock Exchange First Section | |
| Stock code number: 3774 | URL: http://www.iij.ad.jp/ | |
| Representative: Eijiro Katsu, President and Representative Director | ||
| Contact: Akihisa Watai, Managing Director and CFO | TEL: (03) 5205-6500 | |
| Scheduled date for filing of quarterly report (Shihanki-houkokusho) to Japan's regulatory organization: August 14, 2014 | ||
| Scheduled date for dividend payment: | ||
| Supplemental material on annual results: Yes | ||
| Presentation on annual results: Yes (for institutional investors and analysts) | ||
| (Amounts of less than JPY one million are rounded) | ||
| 1. Consolidated Financial Results for the Three Months Ended June 30, 2014 (April 1, 2014 to June 30, 2014) | ||||||||
| (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 | % | |
| Three months ended June 30, 2014 | 27,552 | 4.2 | 768 | (41.2) | 827 | (42.2) | 491 | (48.5) |
| Three months ended June 30, 2013 | 26,441 | 6.4 | 1,305 | (5.0) | 1,431 | 4.2 | 954 | 6.4 |
| (Note1) Total comprehensive income attributable to IIJ | ||||||||
| For the three months ended June 30, 2014: JPY(46) million (-) | ||||||||
| For the three months ended June 30, 2013: JPY1,246 million (up 37.8% 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 | |
| Three months ended June 30, 2014 | 10.69 | 10.67 |
| Three months ended June 30, 2013 | 23.53 | 23.50 |
| (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 June 30, 2014 | 101,703 | 59,662 | 59,375 | 58.4 |
| As of March 31, 2014 | 103,867 | 60,181 | 59,912 | 57.7 |
| 2. Dividends | |||||
| Dividend per Shares | |||||
| 1Q-end | 2Q-end | 3Q-end | Year-end | Total | |
| JPY | JPY | JPY | JPY | JPY | |
| Fiscal Year Ended March 31, 2014 | -- | 11.00 | -- | 11.00 | 22.00 |
| Fiscal Year Ending March 31, 2015 | -- | ||||
| Fiscal Year Ending March 31, 2015 (forecast) | 11.00 | -- | 11.00 | 22.00 | |
| (Note1) Changes to the latest forecasts released: No | |||||
| 3. Target of Consolidated Financial Results for the Fiscal Year Ending March 31, 2015 (April 1, 2014 through March 31, 2015) | (% 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 | |
| Interim Period Ending September 30, 2014 | 57,500 | 5.7 | 2,800 | (6.9) | 2,700 | (19.3) | 1,750 | (20.6) | 38.09 |
| Fiscal Year Ending March 31, 2015 | 123,000 | 7.6 | 7,200 | 25.8 | 7,000 | 11.6 | 4,500 | 1.3 | 97.96 |
| (Note1) Changes to the latest forecasts released: No | |||||||||
| * Notes | ||
| (1) Changes in Significant Subsidiaries for the three months ended June 30, 2014 | ||
| (Changes in significant subsidiaries for the three months ended June 30, 2014 which resulted in changes in scope of consolidation): No | ||
| (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 June 30, 2014: | 46,701,000 shares | |
| As of March 31, 2014: | 46,697,800 shares | |
| 2) The number of treasury stock: | ||
| As of June 30, 2014: | 758,709 shares | |
| As of March 31, 2014: | 758,709 shares | |
| 3) The weighted average number of shares outstanding: | ||
| For the three months ended June 30, 2014: | 45,942,291 shares | |
| For the three months ended June 30, 2013: | 40,538,973 shares | |
CONTACT: Internet Initiative Japan Inc.
E-mail: ir@iij.ad.jp
Tel: +81-3-5205-6500
URL: http://www.iij.ad.jp/en/ir