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, 2014 (1Q13, from
April 1, 2013 to June 30, 2013). 1
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Highlights of
1Q13 Financial Results |
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Revenues |
JPY26,441 million |
($266.5 million, up 6.4% YoY) |
Operating Income |
JPY1,305 million |
($13.2 million, down 5.0% YoY) |
Net Income attributable to IIJ |
JPY954 million |
($9.6 million, up 6.4% YoY) |
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▪ 1Q13 revenues increased by
6.4% YoY. Revenues for network services, systems integration and
ATM operation business each continued to grow YoY. |
▪1Q13 operating income
decreased by 5.0% YoY. The rate of increase in SG&A expenses
was larger than the rate of increase in the monthly recurring type
revenues. |
Overview of 1st Quarter FY2013 Financial Results and
Business Outlook
"The new fiscal year started with the 1st quarter resulted in
line with our initial expectation," said Koichi Suzuki, the founder
and CEO of IIJ.
"As for the business environment in the 1st quarter, we continue
to see the increasing demand for systems integration and are
accumulating large-scale projects continuously. Also, the demand
for outsourcing enterprises' IT systems, including cloud computing
services, continues to be strong. We're receiving orders of
large-scale cloud transactions from certain large enterprises who
are beginning to adopt cloud computing for their business process.
To take advantage of these business environments, we've hired a
large number of employees at the beginning of this fiscal year and
they should contribute to our continuous growth in the middle
term."
"The 1st quarter financial results reflect ordinary seasonal
factors. The fixed expenses such as personnel-related expense tend
to increase as a new fiscal year begins. On the other hand, we're
usually pressured to reduce monthly recurring revenues by our
certain clients whose budgets renew at the beginning of fiscal
year. Also, 1st quarter systems construction revenue tends to be
the smallest every year. As a result, 1Q13 operating income
decreased a little compared with 1Q12. Despite all these, we stay
pretty optimistic as the impact was within our expectations."
"To accelerate our business development and expand further in
this highly competitive market, we secured money for growth by
issuing new shares, which amounted to approx. JPY17.3 billion. With
this fund, we'll be able to aggressively advance our business
development including M&A opportunities. The addition of Mr.
Katsu as new President and COO strengthens our management abilities
and thus expands our business scale. The stable business growth
we've made every year has led us to where we're now and we
recognized that it is the appropriate timing to increase our
business investments. Through the enhancement of management
structure and the equity finance, we aim to take IIJ to the next
level of growth and scale," concluded Suzuki.
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. The translation
of Japanese yen into U.S. dollars is solely for the convenience of
readers outside of Japan. The rate used for the translation was
JPY99.21 per US$1.00, which was the noon buying rate on June 28,
2013.
1st Quarter
FY2013 Financial Results Summary |
Operating
Results Summary |
|
1Q12 |
1Q13 |
YoY % Change |
|
JPY millions |
JPY
millions |
|
Total
Revenues |
24,841 |
26,441 |
6.4 |
Network
Services |
16,091 |
16,785 |
4.3 |
Systems
Integration (SI) |
7,952 |
8,692 |
9.3 |
Equipment
Sales |
330 |
319 |
(3.6) |
ATM Operation
Business |
468 |
645 |
37.9 |
Total Costs |
20,022 |
21,411 |
6.9 |
Network
Services |
12,764 |
13,242 |
3.7 |
Systems
Integration (SI) |
6,564 |
7,350 |
12.0 |
Equipment
Sales |
273 |
284 |
4.3 |
ATM Operation
Business |
421 |
535 |
27.1 |
SG&A Expenses and
R&D |
3,445 |
3,725 |
8.1 |
Operating Income |
1,374 |
1,305 |
(5.0) |
Income before Income Tax
Expense |
1,373 |
1,431 |
4.2 |
Net Income attributable to
IIJ |
897 |
954 |
6.4 |
Segment Results
Summary |
|
1Q12 |
1Q13 |
|
JPY millions |
JPY millions |
Total Revenues |
24,841 |
26,441 |
Network Services
and SI Business |
24,510 |
25,939 |
ATM Operation
Business |
468 |
645 |
Elimination |
137 |
143 |
Operating Income |
1,374 |
1,305 |
Network Service
and SI Business |
1,393 |
1,255 |
ATM Operation
Business |
16 |
81 |
Elimination |
35 |
31 |
We have omitted segment analysis because most of our revenues
are dominated by Network services and Systems Integration (SI)
business.
1st Quarter FY2013 Results of Operation
Revenues
Total revenues were JPY26,441 million, up 6.4% YoY.
Network Services revenue was JPY16,785 million, up 4.3% YoY.
Revenues for Internet connectivity services for corporate use
were JPY4,191 million, up 8.4% YoY. The increase was mainly due to
the increasing demands for broader bandwidth.
Revenues for Internet connectivity services for home use were
JPY1,397 million, down 2.2% YoY. While our LTE mobile data
communication service, which was introduced in February 2012, has
been accumulating orders continuously, the cancellations of old
type connectivity services continued.
WAN services revenues were JPY6,310 million, stayed almost flat
compared to 1Q12.
Outsourcing services revenues were JPY4,887 million, up 9.0%
YoY. The revenue growth was mainly led by the continuous demands on
"IIJ GIO Hosting Package Services" and datacenter-related
services.
Network Services
Revenues Breakdown |
|
|
|
|
1Q12 |
1Q13 |
YoY % Change |
|
JPY millions |
JPY millions |
|
Internet Connectivity Service
(Corporate Use) |
3,865 |
4,191 |
8.4 |
IP Service
2 |
2,439 |
2,681 |
9.9 |
IIJ
FiberAccess/F and IIJ DSL/F |
802 |
783 |
(2.4) |
IIJ Mobile
Service 3 |
564 |
670 |
18.8 |
Others |
60 |
57 |
(4.4) |
Internet Connectivity Service
(Home Use) |
1,429 |
1,397 |
(2.2) |
Under IIJ
Brand |
318 |
455 |
43.1 |
hi-ho |
959 |
773 |
(19.4) |
OEM |
152 |
169 |
11.2 |
WAN Services |
6,312 |
6,310 |
(0.0) |
Outsourcing
Services |
4,485 |
4,887 |
9.0 |
Total Network
Services |
16,091 |
16,785 |
4.3 |
Number of
Contracts for Connectivity Services |
|
as of June 30, 2012 |
as of June 30,
2013 |
YoY Change |
Internet Connectivity Services
(Corporate Use) |
95,342 |
117,000 |
21,658 |
IP Service
(-99Mbps) |
930 |
879 |
(51) |
IP Service
(100Mbps-999Mbps) |
353 |
409 |
56 |
IP Service
(1Gbps--) |
142 |
235 |
93 |
IIJ Data
Center Connectivity Service |
318 |
299 |
(19) |
IIJ
FiberAccess/F and IIJ DSL/F |
44,847 |
50,099 |
5,252 |
IIJ Mobile
Service 4 |
47,442 |
63,779 |
16,337 |
Others |
1,310 |
1,300 |
(10) |
Internet Connectivity Services
(Home Use) |
415,360 |
509,261 |
93,901 |
Under IIJ
Brand |
55,424 |
101,896 |
46,472 |
hi-ho |
153,612 |
151,318 |
(2,294) |
OEM |
206,324 |
256,047 |
49,723 |
Total Contracted
Bandwidth |
918.8Gbps |
1,242.0Gbps |
323.2Gbps |
SI revenues were JPY8,692 million, up 9.3% YoY.
Systems construction revenue, a one-time revenue, was JPY2,964
million, up 7.4% YoY. The increase was led mainly by the increase
in the number and the scale of systems construction projects.
Systems operation and maintenance revenue, a recurring revenue, was
JPY5,728 million, up 10.3% YoY. The increase was mainly due to the
continuous demands on "IIJ GIO Component Services" and the
operation and maintenance revenue for the large scale SI
construction projects completed in the last fiscal year.
The orders received for SI and equipment sales were JPY13,090
million, up 28.9% YoY. In the breakdown, the orders received for
systems construction and equipment sales were JPY5,102 million, up
36.2% YoY, and the orders received for systems operation and
maintenance were JPY7,988 million, up 24.7% YoY.
The order backlog for SI and equipment sales as of June 30, 2013
amounted to JPY24,159 million, up 29.0% YoY. In the breakdown, the
order backlog for systems construction and equipment sales was
JPY5,523 million, up 22.9% YoY, and the order backlog for systems
operation and maintenance was JPY18,636 million, up 31.0% YoY.
Equipment sales revenues were JPY319 million, down
3.6% YoY.
2 IP Service revenues include revenues from the Data Center
Connectivity Service.
3 Revenue from mobile data communication service
for home use is included in Internet Connectivity Service (Home
Use).
4 Contracts of IIJ Mobile Service are of mobile data
communication service for corporate use.
ATM Operation Business revenues were JPY645 million, up 37.9%
YoY. The increase was in accordance with the increase in the
numbers of newly placed ATMs. 652 ATMs were placed as of August 6,
2013.
Cost and expense
Total cost of revenues was JPY21,411 million, up 6.9% YoY.
Cost of Network Services revenues was JPY13,242 million, up 3.7%
YoY. Gross margin was JPY3,544 million, up 6.5% YoY. Gross margin
ratio was 21.1%, up 0.4 points from 1Q12. The increase was mainly
due to the increase in outsourcing-related, personnel-related and
circuit-related costs.
Cost of SI revenues was JPY7,350 million, up 12.0% YoY. The
increase was mainly due to the increase in outsourcing-related and
personnel-related costs. Gross margin was JPY1,343 million, down
3.2% YoY and gross margin ratio was 15.4%.
Cost of Equipment Sales revenues was JPY284 million, up 4.3%
YoY. Gross margin was JPY34 million and gross margin ratio was
10.7%.
Cost of ATM Operation Business revenues was JPY535 million, up
27.1% YoY. The increase was in accordance with the number of newly
placed ATMs. Gross margin was JPY110 million and gross margin ratio
was 17.0%.
SG&A and R&D expenses
SG&A and R&D expenses were JPY3,725 million, up 8.1%
YoY.
Sales and marketing expenses were JPY2,115 million, up 9.6% YoY.
The increase was mainly due to the increase in personnel-related
expenses, rent expenses related to expanded office spaces, sales
commission expenses related to Internet connectivity services for
home use and advertising expenses.
General and administrative expenses were JPY1,501 million, up
6.3% YoY. The increase was mainly due to the increase in
personnel-related expenses and staff-training expenses related to
the increase in employees as well as the increase in rent expenses
related to the expanded office spaces.
Research and development expenses were JPY109 million, up 5.0%
YoY.
Operating income
Operating income was JPY1,305 million, down 5.0% YoY. While
gross margin of network services and systems integration revenues
for 1st quarter were small due to seasonal factors, fixed expenses
such as personnel-related expense increased at the beginning of
this fiscal year.
Other income (expenses)
Other income (expenses) was an income of JPY126 million (an
expense of JPY1 million for 1Q12), mainly due to foreign currency
gains of JPY93 million, compared to foreign currency losses of
JPY20 million in 1Q12.
Income before income tax expense
Income before income tax expense was JPY1,431 million, up 4.2%
YoY (JPY1,373 million for 1Q12) as a result that the increase in
nonoperating income exceeded the decrease in operating income.
Net income
Income tax expense was JPY537 million (JPY515 million for
1Q12).
Equity in net income of equity method investees was JPY65
million (JPY33 million for 1Q12) mainly due to net income of
Internet Revolution, Inc. and Internet Multifeed Co.
As a result of the above, net income was JPY959 million, up 7.6%
YoY (JPY891 million for 1Q12).
Net income attributable to IIJ
Net income attributable to non-controlling interests was JPY5
million mainly related to net income of Trust Networks Inc (Net
loss attributable to non-controlling interests of JPY6 million for
1Q12).
Net income attributable to IIJ was JPY954 million, up 6.4 % YoY
(JPY897 million for 1Q12).
1st Quarter FY2013 Financial Condition
Balance Sheets
As of June 30, 2013, the balance of total assets was JPY79,776
million, decreased by JPY2,335 million from the balance as of March
31, 2013 (JPY82,111 million as of March 31, 2013).
As for current assets as of June 30, 2013, as compared to the
respective balances as of March 31, 2013, cash and cash equivalents
decreased by JPY1,982 million mainly due to the payment of income
taxes, accounts receivable decreased by JPY2,894 million and
prepaid expenses increased by 1,424 million. As for noncurrent
assets, as compared to the respective balance as of March 31, 2013,
property and equipment increased by JPY458 million, resulting
mainly from investments in network and servers, and guarantee
deposits for office rent increased by JPY657 million. As for
current liabilities, as compared to the respective balance as of
March 31, 2013, accounts payable decreased by JPY2,610 million and
income taxes payable decreased by JPY1,489 million.
As for the balances of capital lease obligations, as compared to
the respective balances as of March 31, 2013, capital lease
obligations-current portion increased by JPY145 million to JPY3,651
million and capital lease obligations-noncurrent increased by JPY49
million to JPY5,420 million.
As of June 30, 2013, the balance of other investments was
JPY3,749 million. The breakdown of other investments were JPY2,146
million in nonmarketable equity securities, JPY1,265 million in
available-for-sale securities and JPY338 million in other.
As of June 30, 2013, the balance of non-amortized intangible
assets (excluding telephone rights) such as goodwill was JPY6,077
million, and the breakdown of 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 JPY4,547 million.
Total IIJ shareholders' equity as of June 30, 2013 was JPY38,458
million, increased by JPY851 million from the respective balance as
of March 31, 2013. IIJ shareholders' equity ratio (total IIJ
shareholders' equity/total assets) as of June 30, 2013 was
48.2%.
Cash Flows
Cash and cash equivalents as of June 30, 2013 were JPY10,276
million compared to JPY11,471 million as of June 30, 2012.
Net cash provided by operating activities for 1Q13 was JPY1,528
million compared to net cash provided by operating activities of
JPY1,424 million for 1Q12. The increase from 1Q12 was mainly due to
the increase in net income and the increase in depreciation and
amortization, which are non-cash expenses.
Net cash used in investing activities for 1Q13 was JPY2,340
million compared to net cash used in investing activities of
JPY2,131 million for 1Q12, mainly due to payments for purchase of
property and equipment of JPY1,719 million (JPY1,658 million for
1Q12) and payments for guarantee deposits of JPY661 million (JPY1
million for 1Q12).
Net cash used in financing activities for 1Q13 was JPY1,387
million compared to net cash used in financing activities of
JPY1,332 million for 1Q12, mainly due to principal payments under
capital leases of JPY981 million (JPY877 million for 1Q12), payment
of FY2012 year-end dividends of JPY405 million (JPY355 million for
1Q12).
Prospects for the Fiscal Year Ending March 31,
2014
Due to seasonal factors, our financial results tend to be weak
in first quarter and strong in fourth quarter of every fiscal year.
In this 1Q13, we were pressured by our certain large network
service clients to reduce the monthly recurring revenues. Systems
construction revenue was small as it is in every first quarter. On
the expenses side, the fixed expenses such as personnel-related
expenses increased as a new fiscal year begins. Thus 1Q13 operating
income decreased a little compared to 1Q12, yet this was within our
expectations and the business development is proceeding accordingly
with our original plan.
Our FY2013 financial targets announced on May 15, 2013 remain
unchanged as the orders for systems construction have been
accumulated at a good pace and the monthly recurring revenues of
network services and systems operation and maintenance should
continue to increase and contribute to the full year operating
income increase.
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 |
|
1Q12 |
1Q13 |
|
JPY millions |
JPY
millions |
Adjusted
EBITDA |
3,172 |
3,376 |
Depreciation and
Amortization 5 |
1,798 |
2,071 |
Operating Income |
1,374 |
1,305 |
Other Income
(Expense) |
(1) |
126 |
Income Tax
Expense |
515 |
537 |
Equity in Net Income of Equity
Method Investees |
33 |
65 |
Net Income |
891 |
959 |
Net Loss (Income) attributable
to Noncontrolling Interests |
6 |
(5) |
Net Income attributable to
IIJ |
897 |
954 |
CAPEX |
|
1Q12 |
1Q13 |
|
JPY millions |
JPY
millions |
CAPEX, including
Capital Leases |
3,298 |
2,893 |
Acquisition of Assets by Entering into Capital
Leases |
1,640 |
1,174 |
Purchase
of Property and Equipment |
1,658 |
1,719 |
5 Depreciation and amortization includes impairment loss on
other intangible assets. (See IIJ's consolidated financial
statements for details).
Presentation
Presentation materials will be posted on our web site
(http://www.iij.ad.jp/en/ir/) on August 6, 2013.
About Internet Initiative Japan Inc.
Founded in 1992, Internet Initiative Japan Inc. 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 systems integration, 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 and the United Kingdom. IIJ
listed on NASDAQ in 1999 and on the First Section of the Tokyo
Stock Exchange in 2006. For more information about IIJ, visit the
IIJ Web site at http://www.iij.ad.jp/en/.
For inquiries, contact:
IIJ Investor Relations Tel: +81-3-5259-6500 E-mail: ir@iij.ad.jp
URL: http://www.iij.ad.jp/en/ir
Statements made in this press release regarding IIJ's or
managements' 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 revenues,
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 but not limited to: a decrease of corporate
spending or capital expenditure due to depression in the Japanese
economy and/or corporate earnings decreased, an inability to
achieve anticipated results and cause negative impact on
profitability, a possibility that less of reliability for our
services and loss of business chances due to interrupt or suspend
of our services, an excess increase in network rerated cost and
outsourcing cost, personnel cost etc, a possibility to lose
business opportunity due to our inadequate resources in personnel
and others, an increase in competition and strong pricing pressure,
the recording of an impairment loss as a results of an impairment
test on the non-amortized intangible assets such as goodwill, a
decline in value and trending value of our holding securities.
Please refer to IIJ's filings on Form 20-F of its annual report and
other filings with the United States Securities and Exchange
Commission ("SEC") for other risks.
Internet Initiative
Japan Inc. |
Quarterly Consolidated
Balance Sheets (Unaudited) |
(As of March 31, 2013
and June 30, 2013) |
|
|
|
|
|
As of March 31, 2013 |
As of June 30, 2013 |
|
Thousands of JPY |
Thousands of U.S. Dollars |
Thousands of JPY |
ASSETS |
|
|
|
CURRENT ASSETS: |
|
|
|
Cash and cash equivalents |
12,258,872 |
103,583 |
10,276,460 |
Accounts receivable, net of allowance for
doubtful accounts of JPY 93,934 thousand and JPY 91,774
thousand at March 31, 2013 and June 30, 2013,
respectively |
18,764,703 |
159,976 |
15,871,192 |
Inventories |
1,301,684 |
15,201 |
1,508,097 |
Prepaid expenses |
2,492,164 |
39,476 |
3,916,476 |
Deferred tax assets —current |
1,046,828 |
8,761 |
869,178 |
Other current assets, net of allowance
for doubtful accounts of JPY 10,732 thousand and JPY
720 thousand at March 31, 2013 and June 30, 2013,
respectively |
1,576,718 |
14,982 |
1,486,341 |
Total current assets |
37,440,969 |
341,979 |
33,927,744 |
INVESTMENTS IN EQUITY METHOD INVESTEES |
1,681,723 |
17,616 |
1,747,677 |
OTHER INVESTMENTS |
3,771,262 |
37,792 |
3,749,332 |
PROPERTY AND EQUIPMENT, net of accumulated
depreciation and amortization of JPY 29,516,394
thousand and JPY 31,127,875 thousand at March 31, 2013
and June 30, 2013, respectively |
23,025,755 |
236,712 |
23,484,200 |
GOODWILL |
5,969,951 |
60,175 |
5,969,951 |
OTHER INTANGIBLE ASSETS —Net |
4,791,431 |
47,134 |
4,676,197 |
GUARANTEE DEPOSITS |
2,051,449 |
27,296 |
2,708,085 |
DEFERRED TAX ASSETS —Noncurrent |
163,773 |
1,601 |
158,790 |
NET INVESTMENT IN SALES-TYPE
LEASES —Noncurrent |
898,040 |
9,078 |
900,621 |
Prepaid expenses —Noncurrent |
2,201,108 |
23,348 |
2,316,353 |
OTHER ASSETS, net of allowance for doubtful
accounts of JPY 71,727 thousand and JPY 71,327 thousand
at March 31, 2013 and June 30, 2013, respectively |
115,805 |
1,383 |
137,215 |
TOTAL |
82,111,266 |
804,114 |
79,776,165 |
|
|
|
|
|
|
|
|
|
As of March 31, 2013 |
As of June 30, 2013 |
|
Thousands of JPY |
Thousands of U.S. Dollars |
Thousands of JPY |
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
CURRENT LIABILITIES: |
|
|
|
Short-term borrowings |
9,400,000 |
94,750 |
9,400,000 |
Long-term borrowings —current
portion |
1,010,000 |
10,180 |
1,010,000 |
Capital lease obligations —current
portion |
3,505,471 |
36,797 |
3,650,662 |
Accounts payable —trade |
10,973,120 |
91,230 |
9,050,932 |
Accounts payable —other |
949,264 |
2,636 |
261,534 |
Income taxes payable |
1,669,849 |
1,824 |
180,985 |
Accrued expenses |
2,266,427 |
22,481 |
2,230,343 |
Deferred income —current |
1,806,074 |
19,887 |
1,972,971 |
Other current liabilities |
803,902 |
16,327 |
1,619,806 |
Total current liabilities |
32,384,107 |
296,112 |
29,377,233 |
LONG-TERM BORROWINGS |
980,000 |
9,878 |
980,000 |
CAPITAL LEASE OBLIGATIONS —Noncurrent |
5,370,365 |
54,630 |
5,419,799 |
ACCRUED RETIREMENT AND PENSION COSTS
—Noncurrent |
2,112,085 |
21,866 |
2,169,363 |
DEFERRED TAX LIABILITIES —Noncurrent |
412,132 |
4,937 |
489,850 |
DEFERRED INCOME —Noncurrent |
2,562,208 |
21,618 |
2,144,757 |
OTHER NONCURRENT LIABILITIES |
656,191 |
7,103 |
704,680 |
Total Liabilities |
44,477,088 |
416,144 |
41,285,682 |
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
SHAREHOLDERS' EQUITY: |
|
|
|
Common-stock —authorized, 75,520,000
shares; issued and outstanding, 41,295,600 shares at
March 31, 2013 |
16,833,847 |
169,695 |
16,835,422 |
—authorized, 75,520,000 shares;
issued and outstanding, 41,297,800 shares at June 30,
2013 |
Additional paid-in capital |
27,300,325 |
275,265 |
27,309,106 |
Accumulated deficit |
(6,399,088) |
(58,972) |
(5,850,646) |
Accumulated other comprehensive
income |
263,770 |
5,607 |
556,270 |
Treasury stock —758,800 shares and
758,813 shares held by the company at March 31, 2013 and
June 30, 2013, respectively |
(392,079) |
(3,952) |
(392,122) |
Total Internet Initiative Japan Inc.
shareholders' equity |
37,606,775 |
387,643 |
38,458,030 |
NONCONTROLLING INTERESTS |
27,403 |
327 |
32,453 |
Total equity |
37,634,178 |
387,970 |
38,490,483 |
TOTAL |
82,111,266 |
804,114 |
79,776,165 |
|
|
|
|
(Note) The U.S. dollar amounts
have been translated from yen, for convenience only, at the rate of
JPY 99.21 per 1U.S. dollar which was the noon buying rate in
New York City for cable transfers in foreign currencies as of June
28, 2013. |
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, 2012 and June 30, 2013) |
|
|
|
|
Quarterly
Consolidated Statements of Income |
|
|
|
|
Three Months Ended June 30, 2012 |
Three Months Ended June
30, 2013 |
|
Thousands of JPY |
Thousands of U.S. Dollars |
Thousands of JPY |
REVENUES: |
|
|
|
Network services: |
|
|
|
Internet connectivity services (corporate
use) |
3,864,767 |
42,244 |
4,191,009 |
Internet connectivity services (home
use) |
1,429,150 |
14,084 |
1,397,259 |
WAN services |
6,312,421 |
63,600 |
6,309,799 |
Outsourcing services |
4,485,194 |
49,262 |
4,887,268 |
Total |
16,091,532 |
169,190 |
16,785,335 |
Systems integration: |
|
|
|
Systems construction |
2,759,896 |
29,876 |
2,964,008 |
Systems operation and maintenance |
5,191,690 |
57,740 |
5,728,372 |
Total |
7,951,586 |
87,616 |
8,692,380 |
Equipment sales |
330,635 |
3,212 |
318,693 |
ATM operation business |
467,510 |
6,498 |
644,693 |
Total revenues |
24,841,263 |
266,516 |
26,441,101 |
COST AND EXPENSES: |
|
|
|
Cost of network services |
12,764,006 |
133,471 |
13,241,680 |
Cost of systems integration |
6,563,825 |
74,082 |
7,349,648 |
Cost of equipment sales |
273,039 |
2,869 |
284,688 |
Cost of ATM operation business |
421,087 |
5,394 |
535,102 |
Total cost |
20,021,957 |
215,816 |
21,411,118 |
Sales and marketing |
1,930,291 |
21,318 |
2,115,025 |
General and administrative |
1,411,052 |
15,123 |
1,500,342 |
Research and development |
103,940 |
1,100 |
109,144 |
Total cost and expenses |
23,467,240 |
253,357 |
25,135,629 |
OPERATING INCOME |
1,374,023 |
13,159 |
1,305,472 |
OTHER INCOME (EXPENSE): |
|
|
|
Dividend income |
22,534 |
273 |
27,111 |
Interest income |
8,193 |
59 |
5,846 |
Interest expense |
(71,437) |
(689) |
(68,351) |
Foreign exchange gains (losses) |
(20,418) |
933 |
92,619 |
Net gains on sales of other
investments |
2 |
564 |
55,920 |
Losses on write-down of other
investments |
(1,963) |
-- |
-- |
Other —net |
62,346 |
120 |
11,905 |
Other income (expense) —net |
(743) |
1,260 |
125,050 |
INCOME FROM OPERATIONS BEFORE INCOME
TAX EXPENSE AND EQUITY IN NET INCOME OF EQUITY METHOD
INVESTEES |
1,373,280 |
14,419 |
1,430,522 |
INCOME TAX EXPENSE |
514,760 |
5,417 |
537,419 |
EQUITY IN NET INCOME OF EQUITY METHOD
INVESTEES |
32,887 |
665 |
65,954 |
NET INCOME |
891,407 |
9,667 |
959,057 |
LESS: NET (INCOME) LOSS ATTRIBUTABLE TO
NONCONTROLLING INTERESTS |
5,300 |
(53) |
(5,247) |
NET INCOME ATTRIBUTABLE TO INTERNET
INITIATIVE JAPAN INC. |
896,707 |
9,614 |
953,810 |
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2012 |
Three Months Ended June
30, 2013 |
NET INCOME PER SHARE |
|
|
|
BASIC WEIGHTED-AVERAGE NUMBER OF
SHARES (shares) |
40,536,800 |
|
40,538,973 |
DILUTED WEIGHTED-AVERAGE NUMBER OF
SHARES (shares) |
40,560,600 |
|
40,588,597 |
BASIC WEIGHTED-AVERAGE NUMBER OF
ADS EQUIVALENTS (ADSs) |
81,073,600 |
|
81,077,946 |
DILUTED WEIGHTED-AVERAGE NUMBER OF
ADS EQUIVALENTS (ADSs) |
81,121,200 |
|
81,177,194 |
BASIC NET INCOME PER SHARE (JPY /
U.S. Dollars / JPY) |
22.12 |
0.24 |
23.53 |
DILUTED NET INCOME PER SHARE (JPY /
U.S. Dollars / JPY) |
22.11 |
0.24 |
23.50 |
BASIC NET INCOME PER ADS
EQUIVALENT (JPY / U.S. Dollars / JPY) |
11.06 |
0.12 |
11.76 |
DILUTED NET INCOME PER ADS
EQUIVALENT (JPY / U.S. Dollars / JPY) |
11.05 |
0.12 |
11.75 |
|
(Note) The U.S. dollar amounts
have been translated from yen, for convenience only, at the rate of
JPY 99.21 per 1U.S. dollar which was the noon buying rate in
New York City for cable transfers in foreign currencies as of June
28, 2013. |
|
|
|
Quarterly Consolidated
Statements of Other Comprehensive Income |
|
|
|
Three
Months Ended June 30, 2012 |
Three Months Ended June
30, 2013 |
|
Thousands of JPY |
Thousands of U.S. Dollars |
Thousands of JPY |
NET INCOME |
891,407 |
9,667 |
959,057 |
Comprehensive income (loss): |
|
|
|
Foreign currency translation
adjustments |
36,959 |
2,635 |
261,462 |
Unrealized holding gain (loss) on
securities |
(29,432) |
310 |
30,782 |
Defined benefit pension plans |
59 |
1 |
59 |
Total comprehensive income |
898,993 |
12,613 |
1,251,360 |
Less: Comprehensive income (loss)
attributable to noncontrolling interests |
5,300 |
(51) |
(5,050) |
Comprehensive income attributable to Internet
Initiative Japan Inc. |
904,293 |
12,562 |
1,246,310 |
|
|
|
|
(Note) The U.S. dollar amounts
have been translated from yen, for convenience only, at the rate of
JPY 99.21 per 1U.S. dollar which was the noon buying rate in
New York City for cable transfers in foreign currencies as of June
28, 2013. |
|
Internet Initiative
Japan Inc. |
Quarterly Consolidated
Statements of Cash Flows (Unaudited) |
(For the three months
ended June 30, 2012 and June 30, 2013) |
|
|
|
|
|
Three Months Ended June 30, 2012 |
Three Months Ended June
30, 2013 |
|
Thousands of JPY |
Thousands of U.S. Dollars |
Thousands of JPY |
OPERATING ACTIVITIES: |
|
|
|
Net income |
891,407 |
9,667 |
959,057 |
Adjustments to reconcile net income to
net cash provided by operating activities: |
|
|
|
Depreciation and amortization |
1,798,295 |
20,872 |
2,070,760 |
Provision for retirement and pension
costs, less payments |
52,811 |
578 |
57,370 |
Reversal of allowance for doubtful
accounts |
(59) |
(115) |
(11,439) |
Loss on disposal of property and
equipment |
1,044 |
7 |
645 |
Net gain on sales of other
investments |
(2) |
(564) |
(55,920) |
Impairment of other investments |
1,963 |
-- |
-- |
Foreign exchange losses (gains), net |
33,845 |
(806) |
(79,952) |
Equity in net income of equity method
investees |
(32,887) |
(665) |
(65,954) |
Deferred income tax expense |
151,609 |
2,704 |
268,241 |
Others |
(21,851) |
115 |
11,405 |
Changes in operating assets and
liabilities net of effects from acquisition of a
company: |
|
|
|
Decrease in accounts receivable |
1,419,385 |
29,458 |
2,922,484 |
Decrease (increase) in net investment in
sales-type lease —noncurrent |
43,050 |
(26) |
(2,581) |
Increase in inventories |
(80,134) |
(2,072) |
(205,548) |
Increase in prepaid expenses |
(1,567,220) |
(14,292) |
(1,417,900) |
Decrease (increase) in other current and
noncurrent assets |
(295,298) |
1,181 |
117,214 |
Increase (decrease) in accounts
payable |
125,608 |
(19,774) |
(1,961,748) |
Decrease in income taxes payable |
(2,045,009) |
(15,007) |
(1,488,894) |
Increase (decrease) in deferred
income-noncurrent |
5,010 |
(4,538) |
(450,251) |
Increase in accrued
expenses and other current and noncurrent
liabilities |
942,756 |
8,681 |
861,255 |
Net cash provided by
operating activities |
1,424,323 |
15,404 |
1,528,244 |
INVESTING ACTIVITIES: |
|
|
|
Purchase of property and equipment |
(1,658,341) |
(17,322) |
(1,718,513) |
Proceeds from sales of property and
equipment |
164,206 |
702 |
69,604 |
Purchase of available-for-sale
securities |
(16,103) |
(120) |
(11,939) |
Purchase of other investments |
(314,310) |
(235) |
(23,277) |
Investment in an equity method
investee |
(100,000) |
-- |
-- |
Proceeds from sales of other
investments |
20,121 |
40 |
4,000 |
Payments of guarantee deposits |
(765) |
(6,662) |
(660,973) |
Refund of guarantee deposits |
9,751 |
50 |
4,920 |
Payments for refundable insurance
policies |
(181) |
-- |
-- |
Acquisition of a newly controlled
company, net of cash acquired |
(235,771) |
-- |
-- |
Other |
-- |
(35) |
(3,435) |
Net cash used in investing
activities |
(2,131,393) |
(23,582) |
(2,339,613) |
|
|
|
|
|
Three Months Ended June 30, 2012 |
Three Months Ended June
30, 2013 |
|
Thousands of JPY |
Thousands of U.S. Dollars |
Thousands of JPY |
FINANCING ACTIVITIES: |
|
|
|
Proceeds from issuance of short-term
borrowings with initial maturities over three months |
-- |
2,016 |
200,000 |
Principal payments under capital
leases |
(877,214) |
(9,890) |
(981,161) |
Net decrease in short-term borrowings
with initial maturities less than three months |
(100,000) |
(2,016) |
(200,000) |
Dividends paid |
(354,697) |
(4,086) |
(405,368) |
Other |
-- |
(0) |
(41) |
Net cash used in
financing activities |
(1,331,911) |
(13,976) |
(1,386,570) |
|
|
|
|
EFFECT OF EXCHANGE RATE CHANGES
ON CASH AND CASH EQUIVALENTS |
(27,751) |
2,172 |
215,527 |
|
|
|
|
NET DECREASE IN CASH AND CASH
EQUIVALENTS |
(2,066,732) |
(19,982) |
(1,982,412) |
CASH AND CASH
EQUIVALENTS, BEGINNING OF THE PERIOD |
13,536,824 |
123,565 |
12,258,872 |
CASH AND CASH
EQUIVALENTS, END OF THE PERIOD |
11,470,092 |
103,583 |
10,276,460 |
|
|
|
|
ADDITIONAL CASH FLOW INFORMATION: |
|
|
|
Interest paid |
71,524 |
676 |
67,024 |
Income taxes paid |
2,288,808 |
15,484 |
1,536,124 |
|
|
|
|
NONCASH INVESTING AND FINANCING
ACTIVITIES: |
|
|
|
Acquisition of assets by entering into
capital leases |
1,639,432 |
11,842 |
1,174,882 |
Facilities purchase liabilities |
286,352 |
2,636 |
261,534 |
Asset retirement obligation |
-- |
555 |
55,066 |
Acquisition of a company: |
|
|
|
Assets acquired |
398,468 |
-- |
-- |
Liabilities assumed |
98,369 |
-- |
-- |
Noncontrolling interests |
300 |
-- |
-- |
Cash paid |
(299,700) |
-- |
-- |
Cash acquired |
63,929 |
-- |
-- |
Acquisition of a newly controlled
company, net of cash acquired |
(235,771) |
-- |
-- |
|
|
|
|
|
|
|
|
(Note) The U.S. dollar amounts
have been translated from yen, for convenience only, at the rate of
JPY 99.21 per 1U.S. dollar which was the noon buying rate in
New York City for cable transfers in foreign currencies as of June
28, 2013. |
Going Concern Assumption
(Unaudited) |
|
Nothing to be reported. |
|
|
|
|
|
Segment Information
(Unaudited) |
|
Business Segments: |
|
|
|
|
|
Revenues: |
|
|
|
Three Months Ended June 30, 2012 |
Three Months Ended June 30, 2013 |
|
Thousands of JPY |
Thousands of JPY |
Network service and systems integration
business |
24,510,419 |
25,939,103 |
Customers |
24,373,753 |
25,796,408 |
Intersegment |
136,666 |
142,695 |
ATM operation business |
467,510 |
644,693 |
Customers |
467,510 |
644,693 |
Intersegment |
- |
- |
Elimination |
136,666 |
142,695 |
Consolidated total |
24,841,263 |
26,441,101 |
Segment profit or
loss: |
|
|
|
Three Months Ended June 30, 2012 |
Three Months Ended June 30, 2013 |
|
Thousands of JPY |
Thousands of JPY |
Network service and systems integration
business |
1,393,241 |
1,255,068 |
ATM operation business |
16,327 |
81,074 |
Elimination |
35,545 |
30,670 |
Consolidated operating income |
1,374,023 |
1,305,472 |
|
|
|
Substantially all revenues
are from customers operating in Japan. Geographic information is
not presented due to immateriality of revenue attributable to
international operations. |
|
|
|
Material Changes In
Shareholders' Equity (Unaudited) |
|
Nothing to be reported. |
|
|
|
|
|
Subsequent Events
(Unaudited) |
|
On July 2, 2013 , the
meeting of the Board of Directors of IIJ resolved issuance of new
shares by way of public offering and issuance by way of third-party
allotment in connection with secondary offering of shares by way of
over-allotment. IIJ had received the proceeds from the issuance of
new shares by way of public and private offering on July 18, 2013
and had received the proceeds from the issuance of new shares by
way of third-party allotment on August 5, 2013. |
|
|
|
1.Issuance of New Shares by way
of Primary Offering (Public Offering) |
|
(1)Class and number of shares issued |
4,700,000 new shares of common
stock |
(2)Issue price |
JPY3,346 per share |
|
(3)Amount paid |
JPY3,208 per share |
|
(4)Total amount paid |
JPY15,077,600,000 |
|
(5)Amount of Stated capital
increased |
JPY7,538,800,000 |
|
(6)Payment date |
July 18, 2013 |
|
(7)Use of proceeds |
Payment of purchase of property
and equipment, capital lease obligations and borrowings |
|
|
|
|
|
|
2. Issuance by way of third-party
allotment in connection with secondary offering of shares by way of
over-allotment |
(1)Class and number of shares issued |
700,000 new shares of common stock |
|
(2)Amount Paid |
JPY3,208 per share |
|
(3)Total amount paid |
JPY2,245,600,000 |
|
(4)Amount of Stated capital
increased |
JPY1,122,800,000 |
|
(5)Payment date |
August 5, 2013 |
|
(6)Use of proceeds |
Payment of purchase of property
and equipment, capital lease obligations and borrowings |
|
|
Note: The following information
is provided to disclose Internet Initiative Japan Inc. ("IIJ")
financial results (unaudited) for the three months ended June 30,
2013 ("1Q13") in the form defined by the Tokyo Stock Exchange. |
|
|
|
|
|
|
|
|
|
|
|
Consolidated Financial
Results for the Three Months Ended June 30, 2013 |
[Under accounting
principles generally accepted in the United States ("U.S.
GAAP")] |
|
August 6, 2013 |
|
|
|
|
|
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) 5259-6500 |
|
|
|
|
|
Filing of quarterly report
(Shihanki-houkokusho) to the regulatory organization in Japan:
Scheduled on August 14, 2013 |
Payment of dividend: -- |
Supplemental material on
quarterly results: Yes |
|
Presentation on
quarterly 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, 2013 (April
1, 2013 to June 30, 2013) |
|
|
|
|
|
(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, 2013 |
26,441 |
6.4 |
1,305 |
(5.0) |
1,431 |
4.2 |
954 |
6.4 |
|
Three Months Ended June 30, 2012 |
24,841 |
6.3 |
1,374 |
50.2 |
1,373 |
58.7 |
897 |
75.0 |
|
(Note1) Total comprehensive
income attributable to IIJ |
Three Months Ended June 30, 2013:
JPY1,246 million (up 37.8% YoY) |
|
Three Months Ended June 30, 2012:
JPY904 million (up 75.5% YoY) |
(Note2) Income before income tax
expense represents income from operations before income tax expense
and equity in net income of 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, 2013 |
23.53 |
23.50 |
|
|
|
|
|
|
|
Three Months Ended June 30, 2012 |
22.12 |
22.11 |
|
|
|
|
|
|
|
(Note) IIJ conducted a 1:200
stock split on common stock with an effective date of October 1,
2012. Accordingly, basic net income attributable to IIJ per share
and diluted net income attributable to IIJ per share have been
calculated as if the stock split was conducted at the beginning of
the fiscal year ended March 31, 2013. |
|
|
|
|
|
|
|
|
|
|
(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, 2013 |
79,776 |
38,490 |
38,458 |
48.2 |
|
|
|
|
|
As of March 31, 2013 |
82,111 |
37,634 |
37,607 |
45.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.
Dividends |
|
|
|
|
|
|
|
|
|
|
Dividends per Share |
|
|
|
|
|
1Q-end |
2Q-end |
3Q-end |
Year-end |
Total |
|
|
|
|
|
JPY |
JPY |
JPY |
JPY |
|
|
|
|
|
Fiscal Year Ended |
-- |
1,750.00 |
-- |
10.00 |
1,760.00 |
|
|
|
|
March 31, 2013 |
|
|
|
|
|
|
|
|
|
Fiscal Year Ending |
-- |
|
|
|
|
|
|
|
|
March 31, 2014 |
|
|
|
|
|
|
|
|
|
Fiscal Year Ending |
|
11.00 |
-- |
11.00 |
22.00 |
|
|
|
|
March 31, 2014
(forecast) |
|
|
|
|
|
|
|
|
|
(Note1) Changes in the latest
forecasts released: None |
(Note2) IIJ conducted a 1:200
stock split on common stock with an effective date of October 1,
2012. 2Q-end dividend for the fiscal year ended March 31, 2013 does
not take the stock split into consideration. The dividends for
2Q-end and the total dividend for the fiscal year ended March 31,
2013 would have been JPY8.75 and JPY18.75 respectively if the stock
split were conducted on April 1, 2012, at the beginning of the
fiscal year ended March 31, 2013. |
|
|
|
|
|
|
|
3. Target of
Consolidated Financial Results for the Fiscal Year Ending March 31,
2014 (April 1, 2013 through March 31, 2014) |
|
|
|
|
|
|
|
|
|
|
(% 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,
2013 |
54,500 |
6.6 |
3,400 |
4.2 |
3,200 |
0.8 |
2,000 |
(0.3) |
46.86 |
Fiscal Year Ending March 31, 2014 |
117,000 |
10.1 |
9,400 |
21.2 |
9,000 |
16.0 |
6,000 |
13.2 |
135.42 |
(Note1) Changes in the latest
forecasts released: None |
|
|
|
* Notes
(1) Changes in significant subsidiaries for the
three months ended June 30, 2013
(Changes in significant subsidiaries for the three
months ended June 30, 2013 which resulted in changes in scope of
consolidation): None
(2) Changes in significant accounting and reporting
policies for the quarterly consolidated financial statements
1) Changes due to the revision of accounting
standards: None
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, 2013: 41,297,800 shares
As of March 31, 2013: 41,295,600 shares
2) The number of treasury stock:
As of June 30, 2013: 758,813 shares
As of March 31, 2013: 758,800 shares
3) The weighted average number of shares
outstanding:
For the three months ended June 30, 2013:
40,538,973 shares
For the three months ended June 30, 2012:
40,536,800 shares
(Note1) IIJ conducted a 1:200 stock split on common stock with
an effective date of October 1, 2012. The number of shares
outstanding (shares of common stock) in the above have been
calculated as if the stock split were conducted on April 1, 2012,
the beginning of the fiscal year ended March 31, 2013.
(Note2) IIJ issued 4,700,000 shares of common stock by way of
public offering on July 18, 2013. IIJ also issued 700,000 shares of
common stock by way of third-party allotment in connection with
secondary offering of shares by way of over-allotment on August 5,
2013. Basic Net Income attributable to IIJ per Share in the above
"3. Target of Consolidated Financial Results for the Fiscal Year
Ending March 31, 2014" was recalculated to reflect the increases in
the number of shares outstanding.
CONTACT: Internet Initiative Japan Inc.
E-mail: ir@iij.ad.jp Tel: +81-3-5259-6500
URL: http://www.iij.ad.jp/en/ir
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