TOKYO, Aug. 08, 2017 (GLOBE NEWSWIRE) -- Internet Initiative Japan Inc. ("IIJ") (NASDAQ:IIJI) (TSE:3774) today announced its first three months consolidated financial results for the fiscal year ending March 31, 2018 (“1Q17” from April 1, 2017 to June 30, 2017).1
| Highlights of Financial Results for 1Q17 | ||||||||||
| Revenues | JPY41.0 billion | (up 13.2% YoY) | ||||||||
| Operating Income | JPY1.1 billion | (up 34.4% YoY) | ||||||||
| Net Income attributable to IIJ | JPY0.7 billion | (up 33.4% YoY) | ||||||||
| Financial Targets for FY2017 | ||||||||||
| Revenues | JPY176.0 billion | (up 11.5% YoY) | ||||||||
| Operating Income | JPY6.5 billion | (up 26.6% YoY) | ||||||||
| Net Income attributable to IIJ | JPY4.0 billion | (up 26.3% YoY) | ||||||||
| Financial Targets for 1H17 | ||||||||||
| Revenues | JPY82.4 billion | (up 11.2% YoY) | ||||||||
| Operating Income | JPY2.0 billion | (up 2.7% YoY) | ||||||||
| Net Income attributable to IIJ | JPY1.1 billion | (down 0.7% YoY) | ||||||||
Overview of 1Q17 Financial Results and Business Outlook
“We started 1Q17 with strong year over year revenue growth of 13.2%. The operating income also increased 34.4% year over year. This good start reflects continuous recurring revenue growth we’ve been accumulating from the last fiscal year,” said Eijiro Katsu, COO and President of IIJ.
“1Q17 monthly recurring revenues, which were 85.1% of 1Q17 total revenue, increased 3.2% quarter over quarter and 13.3% year over year. With an accumulation of many transactions, network, cloud, security, mobile, WAN and all these monthly recurring revenues accomplished a favorable start, overall. We also had local governments’ “Information Security Cloud” projects, in which we provide Internet connectivity, cloud, security, data center, and SI, which contributed to the quarter over quarter revenue growth. Gross margin amount increased for both network services and systems integration which absorbed the increase in operating costs and made the overall operating income increase,” continued Katsu.
“Japan is approaching towards a network-based society and IoT should be a key theme. As examples, the Ministry of Agriculture, Forestry and Fishers has chosen us for a feasibility study on paddy water control management system. We also co-work with a prominent Japanese housing corporation and an electric power company on low-carbon housing system by incorporating IoT-based air-conditioning systems combined with weather forecast data. We’ve been involved in these kinds of IoT-related discussions, received from Japanese companies. We expect to play an important role with our technology and wide range of services we’ve accumulated towards a forthcoming connected society in the middle to long term,” said Koichi Suzuki, Founder, CEO and Chairman 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.
1Q17 Financial Results Summary
| Operating Results Summary | ||||||
| 1Q16 | 1Q17 | YoY Change | ||||
| JPY millions | JPY millions | % | ||||
| Total revenues | 36,179 | 40,964 | 13.2 | |||
| Network services | 22,075 | 25,686 | 16.4 | |||
| Systems integration (SI) | 12,366 | 13,599 | 10.0 | |||
| Equipment sales | 730 | 676 | (7.4 | ) | ||
| ATM operation business | 1,008 | 1,003 | (0.5 | ) | ||
| Total costs | 30,397 | 34,434 | 13.3 | |||
| Network services | 18,030 | 21,066 | 16.8 | |||
| Systems integration (SI) | 11,094 | 12,163 | 9.6 | |||
| Equipment sales | 665 | 604 | (9.2 | ) | ||
| ATM operation business | 608 | 601 | (1.3 | ) | ||
| Total gross margin | 5,782 | 6,530 | 12.9 | |||
| Network services | 4,045 | 4,619 | 14.2 | |||
| Systems integration (SI) | 1,272 | 1,436 | 12.9 | |||
| Equipment sales | 65 | 72 | 11.2 | |||
| ATM operation business | 400 | 402 | 0.6 | |||
| SG&A expenses and R&D | 4,946 | 5,406 | 9.3 | |||
| Operating income | 836 | 1,124 | 34.4 | |||
| Income before income tax expense | 994 | 1,163 | 17.0 | |||
| Net income attributable to IIJ | 529 | 706 | 33.4 | |||
| Segment Results Summary | |||||
| 1Q16 | 1Q17 | ||||
| JPY millions | JPY millions | ||||
| Total revenues | 36,179 | 40,964 | |||
| Network services and SI business | 35,264 | 40,052 | |||
| ATM operation business | 1,008 | 1,003 | |||
| Elimination | (93 | ) | (91 | ) | |
| Operating income | 836 | 1,124 | |||
| Network service and SI business | 514 | 804 | |||
| ATM operation business | 356 | 367 | |||
| Elimination | (34 | ) | (47 | ) | |
We have omitted segment analysis because most of our revenues are dominated by network services and systems integration (SI) business.
1Q17 Revenues and Income
Revenues
Total revenues were JPY40,964 million, up 13.2% YoY (JPY36,179 million for 1Q16).
Network services revenue was JPY25,686 million, up 16.4% YoY (JPY22,075 million for 1Q16).
Revenues for Internet connectivity services for enterprise were JPY6,524 million, up 29.2% YoY from JPY5,048 million for 1Q16, mainly due to an increase in mobile-related services revenues along with an expansion of MVNE business clients’ transactions.
Revenues for Internet connectivity services for consumers were JPY6,155 million, up 23.2% YoY from JPY4,996 million for 1Q16, 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 JPY6,970 million, up 3.6% YoY compared to JPY6,729 million for 1Q16.
Revenues for Outsourcing services were JPY6,037 million, up 13.9% YoY from JPY5,302 million for 1Q16, mainly due to an increase in security-related services revenues.
| Network Services Revenues Breakdown | |||||||
| 1Q16 | 1Q17 | YoY Change | |||||
| JPY millions | JPY millions | % | |||||
| Internet connectivity services (Enterprise) | 5,048 | 6,524 | 29.2 | ||||
| IP service*1 | 2,401 | 2,490 | 3.7 | ||||
| IIJ FiberAccess/F and IIJ DSL/F | 761 | 753 | (1.0 | ) | |||
| IIJ Mobile service (Enterprise) | 1,829 | 3,225 | 76.4 | ||||
| IIJ Mobile MVNO Platform Service | 1,123 | 2,359 | 110.0 | ||||
| Others | 57 | 56 | (2.8 | ) | |||
| Internet connectivity services (Consumer) | 4,996 | 6,155 | 23.2 | ||||
| IIJ | 4,430 | 5,697 | 28.6 | ||||
| IIJmio Mobile Service | 3,864 | 5,013 | 29.8 | ||||
| hi-ho | 566 | 458 | (19.1 | ) | |||
| WAN services | 6,729 | 6,970 | 3.6 | ||||
| Outsourcing services | 5,302 | 6,037 | 13.9 | ||||
| Total network services | 22,075 | 25,686 | 16.4 | ||||
*1. IP service revenues include revenues from the data center connectivity service.
| Number of Contracts and Subscription for Connectivity Services*1 | |||||||
| as of June 30, 2016 | as of June 30, 2017 | YoY Change | |||||
| Internet connectivity services (Enterprise) | 616,356 | 1,005,410 | 389,054 | ||||
| IP service (1Gbps-) | 376 | 450 | 74 | ||||
| IP service (100Mbps-999Mbps) | 540 | 598 | 58 | ||||
| IP service (-99Mbps) | 659 | 642 | (17 | ) | |||
| IIJ Data center connectivity service | 264 | 240 | (24 | ) | |||
| IIJ FiberAccess/F and IIJ DSL/F | 73,111 | 71,390 | (1,721 | ) | |||
| IIJ Mobile service (Enterprise) | 540,326 | 931,049 | 390,723 | ||||
| IIJ Mobile MVNO Platform Service | 333,375 | 639,659 | 306,284 | ||||
| Others | 1,080 | 1,041 | (39 | ) | |||
| Internet connectivity services (Consumer) | 1,283,614 | 1,453,068 | 169,454 | ||||
| IIJ | 1,141,236 | 1,322,313 | 181,077 | ||||
| IIJmio Mobile Service | 810,753 | 965,692 | 154,939 | ||||
| hi-ho | 142,378 | 130,755 | (11,623 | ) | |||
| Total contracted bandwidth*2 | 2,239.0Gbps | 2,882.6Gbps | 643.6Gbps | ||||
*1. Numbers in the table above show number of contracts except for “IIJ Mobile service (Enterprise),” “IIJ” and “hi-ho” which show number of subscriptions.
*2. 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 JPY13,599 million, up 10.0% YoY (JPY12,366 million for 1Q16).
Systems construction revenue, a one-time revenue, was JPY4,440 million, up 20.7% YoY (JPY3,678 million for 1Q16). Systems operation and maintenance revenue, a recurring revenue, was JPY9,159 million, up 5.4% YoY (JPY8,688 million for 1Q16), mainly due to continued accumulation of the orders and an increase in private cloud services’ revenues.
Orders received for SI and equipment sales totaled JPY16,990 million, down 0.9% YoY (JPY17,150 million for 1Q16); orders received for systems construction and equipment sales were JPY6,664 million, up 1.5% YoY (JPY6,564 million for 1Q16) and orders received for systems operation and maintenance were JPY10,326 million, down 2.5% YoY (JPY10,586 million for 1Q16).
Order backlog for SI and equipment sales as of June 30, 2017 amounted to JPY44,216 million, up 17.3% YoY (JPY37,699 million as of June 30, 2016); order backlog for systems construction and equipment sales was JPY8,727 million, up 6.0% YoY (JPY8,233 million as of June 30, 2016) and order backlog for systems operation and maintenance was JPY35,489 million, up 20.4% YoY (JPY29,466 million as of June 30, 2016).
Equipment sales revenues were JPY676 million, down 7.4% YoY (JPY730 million for 1Q16) mainly due to the fluctuation in sales of equipment and mobile devices.
ATM operation business revenues were JPY1,003 million, down 0.5% YoY (JPY1,008 million for 1Q16). As of June 30, 2017, 1,083 ATMs have been placed.
Cost and expense
Total cost of revenues was JPY34,434 million, up 13.3% YoY (JPY30,397 million for 1Q16).
Cost of network services revenue was JPY21,066 million, up 16.8% YoY (JPY18,030 million for 1Q16). 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. Gross margin was JPY4,619 million, up 14.2% YoY (JPY4,045 million for 1Q16) and gross margin ratio was18.0% compared to 18.3% in 1Q16.
Cost of SI revenues was JPY12,163 million, up 9.6% YoY (JPY11,094 million for 1Q16). The increase was mainly due to the increase in outsourcing-related and personnel-related costs. Gross margin was JPY1,436 million, up 12.9% YoY (JPY1,272 million for 1Q16) and gross margin ratio was 10.6% compared to 10.3% in 1Q16.
Cost of equipment sales revenues was JPY604 million, down 9.2% YoY (JPY665 million for 1Q16). Gross margin was JPY72 million (JPY65 million for 1Q16) and gross margin ratio was 10.6% compared to 8.9% in 1Q16.
Cost of ATM operation business revenues was JPY601 million, down 1.3% YoY (JPY608 million for 1Q16). Gross margin was JPY402 million (JPY400 million for 1Q16) and gross margin ratio was 40.1% compared to 39.7% in 1Q16.
SG&A and R&D expenses
SG&A and R&D expenses in total were JPY5,406 million, up 9.3% YoY (JPY4,946 million for 1Q16).
Sales and marketing expenses were JPY3,149 million, up 13.8% YoY (JPY2,766 million for 1Q16) mainly due to increases in advertising expenses, sales commission expenses of mobile-related services, and personnel-related expenses.
General and administrative expenses were JPY2,130 million, up 3.6% YoY (JPY2,056 million for 1Q16) mainly due to increases in personnel-related expenses.
Research and development expenses were JPY127 million, up 2.9% YoY (JPY124 million for 1Q16).
Operating income
Operating income was JPY1,124 million, up 34.4% YoY (JPY836 million for 1Q16).
Other income (expenses)
Other income (expenses) was an income of JPY39 million (an income of JPY158 million for 1Q16), mainly because of dividend income of JPY72 million (JPY63 million for 1Q16), distribution from fund investment of JPY57 million (included in other-net of JPY42 million, JPY49 million for 1Q16), and interest expense of JPY89 million (JPY69 million for 1Q16).
Income before income tax expenses
Income before income tax expenses was JPY1,163 million, up 17.0% YoY (JPY994 million for 1Q16).
Net income
Income tax expense was JPY451 million (JPY440 million for 1Q16).
Equity in net income of equity method investees was JPY36 million (JPY17 million for 1Q16) mainly due to net income of Internet Multifeed Co.
As a result of the above, net income was JPY748 million, up 31.0% YoY (JPY571 million for 1Q16).
Net income attributable to IIJ
Net income attributable to non-controlling interests was JPY42 million (JPY42 million for 1Q16) mainly related to net income of Trust Networks Inc.
Net income attributable to IIJ was JPY706 million, up 33.4% YoY (JPY529 million for 1Q16)
1Q17 Balance Sheets
Balance sheets
As of June 30, 2017, the balance of total assets was JPY136,500 million, decreased by JPY895 million from the balance as of March 31, 2017 of JPY137,395 million.
As of June 30, 2017, the balance of current assets was JPY60,246 million, decreased by JPY3,476 million from the balance as of March 31, 2017 of JPY63,722 million. The major breakdown of current assets was a decrease in accounts receivable by JPY3,325 million to JPY24,059 million, a decrease in cash and cash equivalents by JPY1,450 million to JPY20,508 million, an increase in prepaid expenses by JPY2,108 million to JPY9,719 million. As of June 30, 2017, the balance of noncurrent assets was JPY76,254 million, increased by JPY2,581 million from the balance as of March 31, 2017 of JPY73,673 million. The major breakdown of noncurrent assets was an increase in deferred tax asset-noncurrent by JPY1,060 million to JPY1,141 million mainly due to a change of the accounting standard, an increase in other investments by JPY906 million to JPY8,831 million mainly due to an increase in the fair value of available-for-sale securities, and an increase in property and equipment by JPY640 million to JPY40,415 million. Other investments as of June 30, 2017, consisted of JPY6,670 million in available-for-sale securities, JPY1,124 million in nonmarketable equity securities and JPY1,038 million in investments in funds, including some through a trust. As of June 30, 2017, the balance of non-amortized intangible assets was JPY6,220 million and the major breakdown of non-amortized intangible assets was JPY6,170 million in goodwill. The balance of amortized intangible assets, which was customer relationships, was JPY2,944 million, decreased by JPY92 million from the balance as of March 31, 2017 of JPY3,036 million.
As of June 30, 2017, the balance of current liabilities was JPY37,738 million, decreased by JPY2,245 million from the balance as of March 31, 2017 of JPY39,983 million. The major breakdown of current liabilities was a decrease in accounts payable (trade and other) JPY2,980 million and an increase in capital lease obligations-current portion by JPY305 million to JPY5,124 million. As of June 30, 2017, the balance of noncurrent liabilities was JPY30,739 million, increased by JPY708 million from the balance as of March 31, 2017 of JPY30,032 million. The major breakdown of noncurrent liabilities was an increase in capital lease obligations-noncurrent by JPY624 million to JPY11,009 million.
As of June 30, 2017, the balance of total IIJ shareholders’ equity was JPY67,389 million, increased by JPY647 million and IIJ shareholders’ equity ratio (total IIJ shareholders’ equity divided by total assets) as of June 30, 2017 was 49.4%.
1Q17 Cash Flows
Cash flows
Cash and cash equivalents as of June 30, 2017 were JPY20,508 million (JPY18,504 million as of June 30, 2016).
Net cash provided by operating activities for 1Q17 was JPY3,237 million (net cash used in operating activities of JPY117 million for 1Q16.) There were net income of JPY748 million, depreciation and amortization of JPY2,979 million and net cash out flow of JPY690 million (JPY3,571 million for 1Q16) from changes in operating assets and liabilities. As for changes in operating assets and liabilities, there were a decrease in accounts receivable mainly due to receipts of accounts receivable, an increase in prepaid expenses mainly due to payments in relation to upfront payment for maintenance cost for service facilities and software licenses and seasonal bonus payments to our employees, and a decrease in accounts payable (trade and other) mainly due to payments of accounts payable.
Net cash used in investing activities for 1Q17 was JPY2,572 million (net cash used in investing activities of JPY2,188 million for 1Q16), mainly due to payments for purchase of property and equipment of JPY3,839 million (JPY3,085 million for 1Q16) and proceeds from sales of property and equipment, which include sales and leaseback transactions, of JPY1,276 million (JPY404 million for 1Q16).
Net cash used in financing activities for 1Q17 was JPY2,098 million (net cash provided by financing activities of JPY1,344 million for 1Q16), mainly due to principal payments under capital leases of JPY1,335 million (JPY1,125 million for 1Q16) and FY2016 year-end dividends payments of JPY608 million (JPY505 million for 1Q16).
FY2017 Financial Targets
Due to seasonal factors, our financial results tend to be small in first quarter and large in fourth quarter every fiscal year. 1Q17 income was slightly higher than we expected; however, contribution of first quarter to full year results are not very large. Therefore, our financial targets for the fiscal year ending March 31, 2018 (FY2017) announced on May 15, 2017 remain unchanged.
1Q17 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 | ||||||
| 1Q16 | 1Q17 | |||||
| JPY millions | JPY millions | |||||
| Adjusted EBITDA | 3,448 | 4,103 | ||||
| Depreciation and Amortization | (2,612 | ) | (2,979 | ) | ||
| Operating Income | 836 | 1,124 | ||||
| Other Income | 158 | 39 | ||||
| Income Tax Expense | 440 | 451 | ||||
| Equity in Net Income of Equity Method Investees | 17 | 36 | ||||
| Net income | 571 | 748 | ||||
| Less: Net income attributable to noncontrolling interests | (42 | ) | (42 | ) | ||
| Net Income attributable to IIJ | 529 | 706 | ||||
| CAPEX | |||||
| 1Q16 | 1Q17 | ||||
| JPY millions | JPY millions | ||||
| CAPEX, including capital leases | 4,688 | 5,340 | |||
| Acquisition of Assets by Entering into Capital Leases | 1,891 | 2,268 | |||
| Purchase of Property and Equipment | 2,797 | 3,072 | |||
Presentation
Presentation materials will be posted on our web site (https://www.iij.ad.jp/en/ir/) on August 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 Relations
Tel: +81-3-5205-6500 E-mail: ir@iij.ad.jp URL: https://www.iij.ad.jp/en/ir
Statements made in this press release regarding IIJ’s or management’s intentions, beliefs, expectations, or predictions for the future are forward-looking statements that are based on IIJ’s and managements’ current expectations, assumptions, estimates and projections about its business and the industry. These forward-looking statements, such as statements regarding FY2017 revenues and operating and net profitability, are subject to various risks, uncertainties and other factors that could cause IIJ’s actual results to differ materially from those contained in any forward-looking statement. These risks, uncertainties and other factors include: IIJ’s ability to maintain and increase revenues from higher-margin services such as systems integration and outsourcing services; the possibility that revenues from connectivity services may decline substantially as a result of competition and other factors; the ability to compete in a rapidly evolving and competitive marketplace; the impact on IIJ's profits of fluctuations in costs such as backbone costs and subcontractor costs; the impact on IIJ's profits of fluctuations in the price of available-for-sale securities; the impact of technological changes in its industry; IIJ’s ability to raise additional capital to cover its indebtedness; the possibility that NTT, IIJ’s largest shareholder, may decide to exercise substantial influence over IIJ; and other risks referred to from time to time in IIJ’s filings on Form 20-F of its annual report and other filings with the United States Securities and Exchange Commission.
| Internet Initiative Japan Inc. | ||||||||
| Consolidated Balance Sheets (Unaudited) | ||||||||
| (As of March 31, 2017 and June 30, 2017) | ||||||||
| As of March 31, 2017 | As of June 30, 2017 | |||||||
| Thousands of JPY | Thousands of JPY | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash and cash equivalents | 21,958,591 | 20,508,225 | ||||||
| Accounts receivable, net of allowance for doubtful accounts of JPY 107,684 thousand and JPY 112,385 thousand at March 31, 2017 and June 30, 2017, respectively | 27,383,692 | 24,059,068 | ||||||
| Inventories | 2,798,054 | 3,115,959 | ||||||
| Prepaid expenses—current | 7,610,925 | 9,718,714 | ||||||
| Deferred tax assets—current | 1,298,469 | - | ||||||
| Other current assets, net of allowance for doubtful accounts of JPY 15,192 thousand at March 31, 2017 and June 30, 2017, respectively | 2,672,008 | 2,843,592 | ||||||
| Total current assets | 63,721,739 | 60,245,558 | ||||||
| INVESTMENTS IN EQUITY METHOD INVESTEES | 3,150,175 | 3,173,008 | ||||||
| OTHER INVESTMENTS | 7,924,914 | 8,831,196 | ||||||
| PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization of JPY 50,566,983 thousand and JPY 51,987,126 thousand at March 31, 2017 and June 30, 2017, respectively | 39,775,444 | 40,415,418 | ||||||
| GOODWILL | 6,169,609 | 6,169,609 | ||||||
| OTHER INTANGIBLE ASSETS—Net | 3,087,017 | 2,995,042 | ||||||
| GUARANTEE DEPOSITS | 3,060,365 | 3,065,701 | ||||||
| DEFERRED TAX ASSETS—Noncurrent | 80,566 | 1,140,682 | ||||||
| NET INVESTMENT IN SALES-TYPE LEASES—Noncurrent | 2,047,682 | 1,845,894 | ||||||
| Prepaid expenses—Noncurrent | 6,607,437 | 6,968,043 | ||||||
| OTHER ASSETS, net of allowance for doubtful accounts of JPY 61,877 thousand and JPY 59,498 thousand at March 31, 2017 and June 30, 2017, respectively | 1,770,201 | 1,649,540 | ||||||
| TOTAL | 137,395,149 | 136,499,691 | ||||||
| As of March 31, 2017 | As of June 30, 2017 | |||||||
| 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 | 4,818,723 | 5,124,025 | ||||||
| Accounts payable—trade | 14,653,065 | 13,028,880 | ||||||
| Accounts payable—other | 2,308,790 | 952,611 | ||||||
| Income taxes payable | 1,075,745 | 318,179 | ||||||
| Accrued expenses | 2,755,581 | 2,714,107 | ||||||
| Deferred income—current | 3,750,542 | 4,462,206 | ||||||
| Other current liabilities | 1,370,661 | 1,888,255 | ||||||
| Total current liabilities | 39,983,107 | 37,738,263 | ||||||
| LONG-TERM BORROWINGS | 8,500,000 | 8,500,000 | ||||||
| CAPITAL LEASE OBLIGATIONS—Noncurrent | 10,384,643 | 11,008,657 | ||||||
| ACCRUED RETIREMENT AND PENSION COSTS—Noncurrent | 3,532,965 | 3,593,797 | ||||||
| DEFERRED TAX LIABILITIES—Noncurrent | 963,845 | 1,222,341 | ||||||
| DEFERRED INCOME—Noncurrent | 3,656,612 | 3,471,380 | ||||||
| OTHER NONCURRENT LIABILITIES | 2,993,777 | 2,943,221 | ||||||
| Total Liabilities | 70,014,949 | 68,477,659 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| SHAREHOLDERS' EQUITY: | ||||||||
| Common-stock—authorized, 75,520,000 shares; issued and outstanding, 46,711,400 and 46,713,800 shares at March 31, 2017 and June 30, 2017, respectively | 25,509,499 | 25,511,804 | ||||||
| Additional paid-in capital | 36,117,511 | 36,129,788 | ||||||
| Retained earnings | 4,511,945 | 4,609,672 | ||||||
| Accumulated other comprehensive income | 2,499,700 | 3,034,242 | ||||||
| Treasury stock —1,650,909 shares held by the company at March 31, 2017 and June 30, 2017, respectively | (1,896,784 | ) | (1,896,784 | ) | ||||
| Total Internet Initiative Japan Inc. shareholders' equity | 66,741,871 | 67,388,722 | ||||||
| NONCONTROLLING INTERESTS | 638,329 | 633,310 | ||||||
| Total equity | 67,380,200 | 68,022,032 | ||||||
| TOTAL | 137,395,149 | 136,499,691 | ||||||
| Internet Initiative Japan Inc. | ||||||||
| Quarterly Consolidated Statements of Income and Quarterly Consolidated Statements of Comprehensive Income (Unaudited) | ||||||||
| (For the three months ended June 30, 2016 and June 30, 2017) | ||||||||
| Three Months Ended | Three Months Ended | |||||||
| June 30, 2016 | June 30, 2017 | |||||||
| Thousands of JPY | Thousands of JPY | |||||||
| REVENUES: | ||||||||
| Network services: | ||||||||
| Internet connectivity services (enterprise) | 5,047,825 | 6,523,846 | ||||||
| Internet connectivity services (consumer) | 4,996,069 | 6,154,713 | ||||||
| WAN services | 6,729,601 | 6,969,904 | ||||||
| Outsourcing services | 5,301,656 | 6,037,221 | ||||||
| Total | 22,075,151 | 25,685,684 | ||||||
| Systems integration: | ||||||||
| Systems construction | 3,678,367 | 4,439,994 | ||||||
| Systems operation and maintenance | 8,687,939 | 9,159,313 | ||||||
| Total | 12,366,306 | 13,599,307 | ||||||
| Equipment sales | 729,699 | 675,922 | ||||||
| ATM operation business | 1,008,095 | 1,002,992 | ||||||
| Total revenues | 36,179,251 | 40,963,905 | ||||||
| COSTS AND EXPENSES: | ||||||||
| Cost of network services | 18,030,232 | 21,066,296 | ||||||
| Cost of systems integration | 11,093,569 | 12,162,837 | ||||||
| Cost of equipment sales | 664,985 | 603,976 | ||||||
| Cost of ATM operation business | 608,327 | 600,642 | ||||||
| Total costs | 30,397,113 | 34,433,751 | ||||||
| Sales and marketing | 2,766,497 | 3,148,710 | ||||||
| General and administrative | 2,055,679 | 2,129,782 | ||||||
| Research and development | 123,643 | 127,271 | ||||||
| Total costs and expenses | 35,342,932 | 39,839,514 | ||||||
| OPERATING INCOME | 836,319 | 1,124,391 | ||||||
| OTHER INCOME (EXPENSES): | ||||||||
| Dividend income | 63,379 | 72,272 | ||||||
| Interest income | 9,123 | 7,978 | ||||||
| Interest expense | (69,157 | ) | (88,932 | ) | ||||
| Foreign exchange gain (loss), net | (90,500 | ) | 5,087 | |||||
| Net gain on sales of other investments | 213,938 | - | ||||||
| Impairment of other investments | (17,829 | ) | - | |||||
| Other —net | 48,797 | 41,811 | ||||||
| Other income —net | 157,751 | 38,216 | ||||||
| INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE AND EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES | 994,070 | 1,162,607 | ||||||
| INCOME TAX EXPENSE | 440,089 | 450,641 | ||||||
| EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES | 16,735 | 35,859 | ||||||
| NET INCOME | 570,716 | 747,825 | ||||||
| LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | (41,457 | ) | (41,781 | ) | ||||
| NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC. | 529,259 | 706,044 | ||||||
| Three Months Ended | Three Months Ended | |||||||
| June 30, 2016 | June 30, 2017 | |||||||
| NET INCOME PER SHARE | ||||||||
| BASIC WEIGHTED-AVERAGE NUMBER OF SHARES (shares) | 45,952,691 | 45,062,838 | ||||||
| DILUTED WEIGHTED-AVERAGE NUMBER OF SHARES (shares) | 46,059,998 | 45,202,227 | ||||||
| BASIC WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs) | 91,905,382 | 90,125,677 | ||||||
| DILUTED WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs) | 92,119,996 | 90,404,454 | ||||||
| BASIC NET INCOME PER SHARE (JPY) | 11.52 | 15.67 | ||||||
| DILUTED NET INCOME PER SHARE (JPY) | 11.49 | 15.62 | ||||||
| BASIC NET INCOME PER ADS EQUIVALENT (JPY) | 5.76 | 7.83 | ||||||
| DILUTED NET INCOME PER ADS EQUIVALENT (JPY) | 5.75 | 7.81 | ||||||
| Quarterly Consolidated Statements of Comprehensive Income (Unaudited) | ||||||||
| Three Months Ended | Three Months Ended | |||||||
| June 30, 2016 | June 30, 2017 | |||||||
| Thousands of JPY | Thousands of JPY | |||||||
| NET INCOME | 570,716 | 747,825 | ||||||
| OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX: | ||||||||
| Foreign currency translation adjustments | (222,449 | ) | (75,709 | ) | ||||
| Unrealized holding gain (loss) on securities | 121,246 | 609,373 | ||||||
| Defined benefit pension plans | - | 878 | ||||||
| TOTAL COMPREHENSIVE INCOME | 469,513 | 1,282,367 | ||||||
| LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS | (41,457 | ) | (41,781 | ) | ||||
| COMPREHENSIVE INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC. | 428,056 | 1,240,586 | ||||||
| Internet Initiative Japan Inc. | ||||||||
| Quarterly Consolidated Statements of Cash Flows (Unaudited) | ||||||||
| (For the three months ended June 30, 2016 and June 30, 2017) | ||||||||
| Three Months Ended | Three Months Ended | |||||||
| June 30, 2016 | June 30, 2017 | |||||||
| Thousands of JPY | Thousands of JPY | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net income | 570,716 | 747,825 | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 2,612,239 | 2,979,342 | ||||||
| Provision for retirement and pension costs, less payments | 61,172 | 62,303 | ||||||
| Provision for allowance for doubtful accounts | 1,423 | 23,661 | ||||||
| Gain on sales of property and equipment | (5,425 | ) | (13,869 | ) | ||||
| Loss on disposal of property and equipment | 9,954 | 21,639 | ||||||
| Net gain on sales of other investments | (213,938 | ) | - | |||||
| Impairment of other investments | 17,829 | - | ||||||
| Foreign exchange loss (gain), net | 73,002 | (2,589 | ) | |||||
| Equity in net income of equity method investees, less dividends received | 34,347 | 15,332 | ||||||
| Deferred income tax expense | 300,934 | 108,916 | ||||||
| Others | (9,020 | ) | (15,109 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Decrease in accounts receivable | 1,673,982 | 3,288,086 | ||||||
| Decrease in net investment in sales-type lease — noncurrent | 183,809 | 201,788 | ||||||
| Increase in inventories | (6,587 | ) | (320,774 | ) | ||||
| Increase in prepaid expenses | (2,175,960 | ) | (2,113,231 | ) | ||||
| Increase in other current and noncurrent assets | (1,593,216 | ) | (447,177 | ) | ||||
| Decrease in accounts payable | (2,079,654 | ) | (1,718,921 | ) | ||||
| Decrease in income taxes payable | (836,023 | ) | (757,485 | ) | ||||
| Decrease in accrued expenses | (32,340 | ) | (39,674 | ) | ||||
| Increase in deferred income—current | 289,208 | 714,717 | ||||||
| Increase (decrease) in deferred income—noncurrent | 104,511 | (175,856 | ) | |||||
| Increase in other current and noncurrent liabilities | 901,588 | 678,461 | ||||||
| Net cash provided by (used in) operating activities | (117,449 | ) | 3,237,385 | |||||
| INVESTING ACTIVITIES: | ||||||||
| Purchase of property and equipment | (3,084,531 | ) | (3,839,315 | ) | ||||
| Proceeds from sales of property and equipment | 404,390 | 1,275,766 | ||||||
| Purchase of other investments | (37,796 | ) | (27,656 | ) | ||||
| Investment in an equity method investee | - | (43,000 | ) | |||||
| Proceeds from sales of other investments | 303,614 | 33,199 | ||||||
| Payments of guarantee deposits | (2,024 | ) | (12,559 | ) | ||||
| Refund of guarantee deposits | 42,387 | 10,077 | ||||||
| Payments for refundable insurance policies | (14,091 | ) | (14,091 | ) | ||||
| Proceeds from subsidies | 200,000 | 48,976 | ||||||
| Other | - | (3,000 | ) | |||||
| Net cash used in investing activities | (2,188,051 | ) | (2,571,603 | ) | ||||
| Three Months Ended | Three Months Ended | |||||||
| June 30, 2016 | June 30, 2017 | |||||||
| Thousands of JPY | Thousands of JPY | |||||||
| FINANCING ACTIVITIES: | ||||||||
| Proceeds from short-term borrowings with initial maturities over three months and long-term borrowings | 3,000,000 | 2,500,000 | ||||||
| Net decrease in short-term borrowings with initial maturities less than three months | - | (2,500,000 | ) | |||||
| Principal payments under capital leases | (1,124,910 | ) | (1,334,954 | ) | ||||
| Repayments of long-term accounts payable | - | (108,135 | ) | |||||
| Dividends paid | (505,480 | ) | (608,317 | ) | ||||
| Other | (26,000 | ) | (46,797 | ) | ||||
| Net cash provided by (used in) financing activities | 1,343,610 | (2,098,203 | ) | |||||
| EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS | (102,714 | ) | (17,945 | ) | ||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS | (1,064,604 | ) | (1,450,366 | ) | ||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD | 19,569,095 | 21,958,591 | ||||||
| CASH AND CASH EQUIVALENTS, END OF THE PERIOD | 18,504,491 | 20,508,225 | ||||||
| ADDITIONAL CASH FLOW INFORMATION: | ||||||||
| Interest paid | 68,699 | 87,211 | ||||||
| Income taxes paid | 941,083 | 1,027,984 | ||||||
| NONCASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Acquisition of assets by entering into capital leases | 1,891,072 | 2,268,329 | ||||||
| Facilities purchase liabilities | 796,407 | 952,611 | ||||||
| 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 | Three Months Ended | |||||||||
| June 30, 2016 | June 30, 2017 | |||||||||
| Thousands of JPY | Thousands of JPY | |||||||||
| Network service and systems integration business | 35,263,867 | 40,051,731 | ||||||||
| Customers | 35,171,156 | 39,960,913 | ||||||||
| Intersegment | 92,711 | 90,818 | ||||||||
| ATM operation business | 1,008,095 | 1,002,992 | ||||||||
| Customers | 1,008,095 | 1,002,992 | ||||||||
| Intersegment | - | - | ||||||||
| Elimination | (92,711 | ) | (90,818 | ) | ||||||
| Consolidated total | 36,179,251 | 40,963,905 | ||||||||
| Segment profit or loss: | ||||||||||
| Three Months Ended | Three Months Ended | |||||||||
| June 30, 2016 | June 30, 2017 | |||||||||
| Thousands of JPY | Thousands of JPY | |||||||||
| Network service and systems integration business | 513,553 | 804,025 | ||||||||
| ATM operation business | 356,232 | 366,832 | ||||||||
| Elimination | (33,466 | ) | (46,466 | ) | ||||||
| Consolidated operating income | 836,319 | 1,124,391 | ||||||||
| 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, 2017 (“1Q17”) in the form defined by the Tokyo Stock Exchange.
Consolidated Financial Results for the Three Months ended June 30, 2017
[Under accounting principles generally accepted in the United States ("U.S. GAAP")]
August 8, 2017
Company name: Internet Initiative Japan Inc.
Exchange listed: Tokyo Stock Exchange First Section
Stock code number: 3774
URL: https://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, 2017
Scheduled date for dividend payment: -
Supplemental material on annual results: Yes
Presentation on quarterly report: 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, 2017 (April 1, 2017 to June 30, 2017) | ||||||||||||||||||||||||
| (1) Consolidated Results of Operations | (% shown is YoY change) | |||||||||||||||||||||||
| Total revenues | Operating income | Income before income tax expense | Net income attributable to IIJ | |||||||||||||||||||||
| JPY millions | % | JPY millions | % | JPY millions | % | JPY millions | % | |||||||||||||||||
| Three months ended June 30, 2017 | 40,964 | 13.2 | 1,124 | 34.4 | 1,163 | 17.0 | 706 | 33.4 | ||||||||||||||||
| Three months ended June 30, 2016 | 36,179 | 15.0 | 836 | (26.7 | ) | 994 | (22.2 | ) | 529 | (26.6 | ) | |||||||||||||
| (Note1) | Total comprehensive income attributable to IIJ | |||
| For the three months ended June 30, 2017: JPY1,241 million (up 189.8% YoY) | ||||
| For the three months ended June 30, 2016: JPY428 million (down 45.6%) | ||||
| (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, 2017 | 15.67 | 15.62 | ||||
| Three months ended June 30, 2016 | 11.52 | 11.49 |
| (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, 2017 | 136,500 | 68,022 | 67,389 | 49.4 | |||||||||
| As of March 31, 2017 | 137,395 | 67,380 | 66,742 | 48.6 | |||||||||
| 2. Dividends | ||||||||||||||||
| Dividend per Shares | ||||||||||||||||
| 1Q-end | 2Q-end | 3Q-end | Year-end | Total | ||||||||||||
| JPY | JPY | JPY | JPY | JPY | ||||||||||||
| Fiscal Year Ended March 31, 2017 | - | 13.50 | - | 13.50 | 27.00 | |||||||||||
| Fiscal Year Ending March 31, 2018 | - | |||||||||||||||
| Fiscal Year Ending March 31, 2018 (forecast) | 13.50 | - | 13.50 | 27.00 | ||||||||||||
(Note) Change from the latest released dividend forecasts: No.
| 3. Target of Consolidated Financial Results for the Fiscal Year Ending March 31, 2018 | ||||||||||||||||||||||||||
| (April 1, 2017 through March 31, 2018) | (% shown is YoY change) | |||||||||||||||||||||||||
| Total Revenues | Operating Income | Income before Income Tax Expense (Benefit) | Net Income attributable to IIJ | Basic Net Income attributable to IIJ per Share | ||||||||||||||||||||||
| JPY millions | % | JPY millions | % | JPY millions | % | JPY millions | % | JPY | ||||||||||||||||||
| Interim Period Ending September 30, 2017 | 82,400 | 11.2 | 2,000 | 2.7 | 2,000 | (5.0 | ) | 1,100 | (0.7 | ) | 24.41 | |||||||||||||||
| Fiscal Year Ending March 31, 2018 | 176,000 | 11.5 | 6,500 | 26.6 | 6,500 | 19.8 | 4,000 | 26.3 | 88.77 | |||||||||||||||||
(Note1) Changes from the latest forecasts released: No
* Notes
| (1 | ) | Changes in significant subsidiaries for the three months ended June 30, 2017 | ||||||
| (Changes in significant subsidiaries for the three months ended June 30, 2017 which resulted in changes in scope of consolidation): None | ||||||||
| (2 | ) | Changes in significant accounting and reporting policies for the consolidated financial statements | ||||||
| 1 | ) | Changes due to the revision of accounting standards: Yes | ||||||
| In November 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2015-17 “Balance Sheet Classification of Deferred Taxes.” This ASU requires that deferred tax assets and liabilities be classified as noncurrent on the consolidated balance sheet. IIJ adopted this ASU from the first quarter beginning April 1, 2017, on a prospective basis, and did not retrospectively adjust the consolidated balance sheet as of March 31, 2017. As of March 31, 2017, the balance of current deferred tax assets and liabilities amounted to JPY1,298,469 thousand and JPY108,994 thousand, respectively. | ||||||||
| 2 | ) | Others: No | ||||||
| (3 | ) | Number of shares outstanding (shares of common stock) | ||||||
| 1 | ) | The number of shares outstanding (inclusive of treasury stock): | ||||||
| As of June 30, 2017: 46,713,800 shares | ||||||||
| As of March 31, 2017: 46,711,400 shares | ||||||||
| 2 | ) | The number of treasury stock: | ||||||
| As of June 30, 2017: 1,650,909 shares | ||||||||
| As of March 31, 2017: 1,650,909 shares | ||||||||
| 3 | ) | The weighted average number of shares outstanding: | ||||||
| For the three months ended June 30, 2017: 45,062,838 shares | ||||||||
| For the three months ended June 30, 2016: 45,952,691 shares | ||||||||