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IIJ Announces Full Year and Fourth Quarter Financial Results for the Fiscal Year Ended March 31, 2015

TOKYO, May 15, 2015 (GLOBE NEWSWIRE) -- Internet Initiative Japan Inc. ("IIJ") (Nasdaq:IIJI) (TSE:3774) today announced its full year ("FY2014") and 4th quarter ("4Q14") consolidated financial results for the fiscal year ended March 31, 2015 (from April 1, 2014 to March 31, 2015).1

Highlights of Financial Results for FY2014
Revenues JPY123,050 million (up 7.7% YoY)
Operating Income JPY5,075 million (down 11.3% YoY)
Income before Income Tax Expense JPY5,139 million (down 18.1% YoY)
Net Income attributable to IIJ JPY3,322 million (down 25.2% YoY)
Financial Targets for FY2015
Revenues JPY139,000 million (up 13.0% YoY)
Operating Income JPY6,500 million (up 28.1% YoY)
Income before Income Tax Expense JPY6,400 million (up 24.5% YoY)
Net Income attributable to IIJ JPY4,000 million (up 20.4% YoY)
Annual Cash Dividend JPY22.00 per share

Overview of FY2014 Financial Results and Business Outlook

"Business environment continues to be favorable along with the growing outsourcing demands and the return of Japanese corporate IT investment appetite. Under such positive momentum, we're continuously enhancing our business investment. We hired 155 new graduates this April, and allocate more resources in areas of MVNO (Mobile Virtual Network Operator), Cloud, and systems integration where we're focusing on services and solutions developments in particular. We also promote overseas businesses aggressively by establishing affiliated companies and through partnerships. These forward-looking investments require some time to be reflected in financial results and thus our overall costs have increased. In the meantime, we saw an accelerated revenues growth, especially in the latter half of FY2014 where the total revenues grew by 10.0% year over year. We shall continue to execute our business expansion strategies for middle-to-long term growth," said Koichi Suzuki, Founder and CEO of IIJ.

"MVNO and Cloud continue to be strong growth drivers, which we started in January 2008 and December 2009. MVNO revenues for FY2014 grew by 63.5% to JPY7.7 billion and its subscription as of March 31, 2015 increased by 289 thousand to 673 thousand from a year ago. Consumer MVNO services, which became popular in FY2014 for their cost-effectiveness, can be anticipated to achieve a significant market penetration within two to three years as only about 1.3%2 of total mobile phone users in Japan are using these services currently. We're different from competitors as we can improve the infrastructure efficiency by gathering consumer and enterprise traffic, leveraging our blue-chip corporate client base. As for Cloud services, its revenue has grown to JPY12.3 billion in five years, which represents 10.0% of our FY2014 total revenues. We see some large Japanese companies began to use Cloud for their mission-critical and core business operation systems, such as online banking security systems by a major commercial bank. We expect it might take time but this trend gradually becomes prominent in the middle term," followed Eijiro Katsu, COO and President of IIJ.

1 Unless otherwise stated, all financial figures discussed in this announcement are prepared in accordance with U.S. GAAP. All financial figures are unaudited and consolidated.

2 The figure is calculated by dividing the total mobile subscription (154.75 million) by MVNO's SIM card subscription (1.95 million) as of December 31, 2014. These figures are published by the Ministry of Internal Affairs and Communications in March and April of 2015. http://www.soumu.go.jp/menu_news/s-news/01kiban02_02000151.html

"As for FY2014 financial results, revenues continuously increased mainly with consumer MVNO services, Cloud services, and systems integration. On the other hand, operating income decreased year over year primarily because the operating costs such as personnel-related and outsourcing-related are on an increasing trend due to our enhanced business investment while the accumulation of recurring revenue services was not as strong as planned. In addition, mobile data communication charge from NTT DOCOMO, Inc. hadn't decreased largely against our initial expectation," continued Katsu.

"For FY2015 earnings, we target revenues and operating income to increase by 13.0% and 28.1% respectively from FY2014. Our business investment should start to make contribution by accelerating revenue growth. Operating income growth should be achieved mainly by accumulating recurring revenues, increasing Cloud services profit, decreasing overseas business deficit, and improving system integration gross margin. We remain committed to returning to an operating income growth and further scale up of our business," concluded Katsu.

FY2014 Financial Results Summary

Operating Results Summary
FY2013 FY2014 YoY %
Change
JPY millions JPY millions
Total Revenues 114,272 123,050 7.7
Network Services 67,286 69,006 2.6
Systems Integration (SI) 42,469 48,237 13.6
Equipment Sales 1,690 2,167 28.2
ATM Operation Business 2,827 3,640 28.8
Total Costs 93,206 100,978 8.3
Network Services 53,046 54,932 3.6
Systems Integration (SI) 36,510 41,562 13.8
Equipment Sales 1,527 1,932 26.6
ATM Operation Business 2,123 2,552 20.2
SG&A Expenses and R&D 15,343 16,997 10.8
Operating Income 5,723 5,075 (11.3)
Income before Income Tax Expense 6,275 5,139 (18.1)
Net Income attributable to IIJ 4,442 3,322 (25.2)
Segment Results Summary
FY2013 FY2014
JPY millions JPY millions
Total Revenues 114,272 123,050
Network services and SI business 111,901 119,819
ATM Operation Business 2,827 3,640
Elimination 456 409
Operating Income 5,723 5,075
Network service and SI business 5,275 4,335
ATM Operation Business 578 886
Elimination 130 146

We have omitted segment analysis because most of our revenues are dominated by Network services and Systems Integration (SI) business.

FY2014 Results of Operation

Revenues

Total revenues were JPY123,050 million, up 7.7% YoY.

Network Services revenue was JPY69,006 million, up 2.6% YoY.

Revenues for Internet connectivity services for enterprise were JPY16,350 million, down 1.4% YoY from JPY16,585 million for FY2013. There were increase in enterprise mobile service revenues and decrease in IP services revenues including data center connectivity services revenues.

Revenues for Internet connectivity services for consumer were JPY8,222 million, up 36.5% YoY from JPY6,025 million for FY2013, mainly due to the large revenue growth of consumer mobile services "IIJmio High-speed Mobile/D service," consumer mobile services which offers inexpensive data communication and voice services with SIM cards.

WAN services revenues were JPY24,326 million, down 2.7% YoY compared to JPY25,006 million for FY2013.

Outsourcing services revenues were JPY20,108 million, up 2.2% YoY from JPY19,670 million for FY2013, mainly by the increase in revenues of "IIJ GIO Hosting Package Services."

Network Services Revenues Breakdown
YoY %
FY2013 FY2014 Change
JPY millions JPY millions
Internet Connectivity Service (Enterprise)3 16,585 16,350 (1.4)
IP Service4 10,357 9,831 (5.1)
IIJ FiberAccess/F and IIJ DSL/F 3,147 3,143 (0.1)
IIJ Mobile Service(Enterprise) 2,850 3,143 10.3
Others 231 233 1.0
Internet Connectivity Service (Consumer)3 6,025 8,222 36.5
Under IIJ Brand 2,273 4,781 110.3
hi-ho 3,047 2,793 (8.3)
OEM 705 648 (8.1)
WAN Services 25,006 24,326 (2.7)
Outsourcing Services 19,670 20,108 2.2
Total Network Services 67,286 69,006 2.6
Number of Contracts for Connectivity Services
as of as of YoY
March 31, 2014 March 31, 2015 Change
Internet Connectivity Services (Enterprise) 142,655 172,613 29,958
IP Service (-99Mbps) 847 763 (84)
IP Service (100Mbps-999Mbps) 448 504 56
IP Service (1Gbps-) 271 340 69
IIJ Data Center Connectivity Service 288 278 (10)
IIJ FiberAccess/F and IIJ DSL/F 56,384 62,926 6,542
IIJ Mobile Service(Enterprise) 83,124 106,493 23,369
Others 1,293 1,309 16
Internet Connectivity Services (Consumer) 625,297 894,009 268,712
Under IIJ Brand 171,968 373,125 201,157
hi-ho 155,177 150,776 (4,401)
OEM 298,152 370,108 71,956
Total Contracted Bandwidth 1,539.3Gbps 1,730.8Gbps 191.5Gbps
3 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.
4 IP Service revenues include revenues from the Data Center Connectivity Service.

SI revenues were JPY48,237 million, up 13.6% YoY.

Systems construction revenue, a one-time revenue, was JPY20,437 million, up 9.4% YoY. Revenue increased mainly due to the increase in the scale of systems construction projects. Systems operation and maintenance revenue, a recurring revenue, was JPY27,800 million, up 16.8% YoY. "IIJ GIO Component Services" revenues increased and systems construction projects that were completed and shifted to operation and maintenance phase contributed to the revenue increase of systems operation and maintenance.

Orders received for SI and equipment sales totaled JPY55,149 million, up 14.0% YoY; orders received for systems construction and equipment sales were JPY22,236 million, up 2.2% YoY and orders received for systems operation and maintenance were JPY32,913 million, up 23.6% YoY.

Order backlog for SI and equipment sales as of March 31, 2015 amounted to JPY29,053 million, up 19.5% YoY; order backlog for systems construction and equipment sales was JPY4,734 million, down 7.2% YoY and order backlog for systems operation and maintenance was JPY24,319 million, up 26.6% YoY.

Equipment sales revenues were JPY2,167 million, up 28.2% YoY.

ATM Operation Business revenues were JPY3,640 million, up 28.8% YoY. The increase was in accordance with the increase in the number of placed ATMs. As of March 31, 2015, 1,059 ATMs are in operation.

Cost and expense

Total cost of revenues was JPY100,978 million, up 8.3% YoY.

Cost of Network Services revenue was JPY54,932 million, up 3.6% YoY. The increase was mainly due to the increase in outsourcing-related costs6 along with the increase in mobile-related services revenues, and the increase in depreciation and amortization cost along with the expansion and upgrade of network facilities. Gross margin was JPY14,073 million, down 1.2% YoY and gross margin ratio was 20.4%.

Cost of SI revenues was JPY41,562 million, up 13.8% YoY. The increase was mainly due to the increase in personnel-related costs and outsourcing-related costs along with the revenue growth and solution development, increase in purchasing costs along with the systems construction revenue growth, and the increase in depreciation and amortization costs was due to the expansion of service facility such as for Cloud services. Gross margin was JPY6,676 million, up 12.0% YoY and gross margin ratio was 13.8%.

Cost of Equipment Sales revenues was JPY1,932 million, up 26.6% YoY. Gross margin was JPY235 million, up 43.5% YoY and gross margin ratio was 10.8%.

Cost of ATM Operation Business revenues was JPY2,552 million, up 20.2% YoY in accordance with increase in the number of placed ATMs. Gross margin was JPY1,089 million and gross margin ratio was 29.9%.

SG&A and R&D Expenses

SG&A and R&D expenses in total were JPY16,997 million, up 10.8% YoY (JPY15,343 million in FY2013).

Sales and marketing expenses were JPY9,188 million, up 7.5% YoY. The increase was mainly due to the increase in personnel-related and sales commission expenses.

General and administrative expenses were JPY7,368 million, up 15.6% YoY. The increase was mainly due to the expenses related to the headquarter relocation and an increase in personnel-related expenses.

Research and development expenses were JPY441 million, up 4.7% YoY.

Operating income

Operating income was JPY5,075 million, down 11.3% YoY (JPY5,723 million for FY2013).

5 IIJ provides mobile communications service through an MVNO scheme by purchasing mobile infrastructure from NTT Docomo. IIJ pays wholesale telecommunications service charge which is recognized in outsourcing-related costs in our cost of network services revenue.

Other income (expenses)

Other income (expenses) was an income of JPY64 million (an income of JPY552 million for FY2013), mainly due to distribution from other investments of JPY171 million (included in other-net of JPY209 million), dividend income of JPY63 million, net gain on sales of other investments of JPY41 million,and interest expense of JPY238 million.

Income before income tax expenses

Income before income tax expense was JPY5,139 million, down 18.1% YoY(JPY6,275 million for FY2013) .

Net Income

Income tax expense was JPY1,897 million (JPY1,795 million for FY2013).

Equity in net income of equity method investees was JPY155 million (JPY204 million for FY2013) mainly due to net income of Internet Revolution, Inc. and Internet Multifeed Co.

As a result of the above, net income was JPY3,397 million, down 27.5% YoY (JPY4,684 million for FY2013).

Net income attributable to IIJ

Net income attributable to non-controlling interests was JPY75 million mainly related to net income of Trust Networks Inc. (JPY242 million for FY2013).

Net income attributable to IIJ was JPY3,322 million, down 25.2% YoY (JPY4,442 million for FY2013).

FY2014 Financial Condition

Balance Sheets

As of March 31, 2015, the balance of total assets was JPY108,705 million, increased by JPY4,839 million from the balance as of March 31, 2014 of JPY103,867 million.

As for current assets as of March 31, 2015, as compared to the respective balances as of March 31, 2014, accounts receivable increased by JPY3,038 million, current portion of guarantee deposits decreased by JPY1,462 million along with our headquarter relocation, and cash and cash equivalents decreased by JPY1,327 million mainly related to the repayment of bank borrowings. As for noncurrent assets as of March 31, 2015, as compared to the respective balances as of March 31, 2014, property and equipment increased by JPY2,399 million and guarantee deposits increased by JPY1,536 million. As for current liabilities as of March 31, 2015, as compared to the respective balances as of March 31, 2014, accounts payable increased by JPY1,084 million, accrued expenses increased by JPY915 million and current portion of long-term borrowings decreased by JPY980 million.

As for the balances of capital lease obligations as of March 31, 2015, as compared to the respective balances as of March 31, 2014, capital lease obligations-current portion decreased by JPY231 million to JPY3,522 million and capital lease obligations-noncurrent decreased by JPY263 million to JPY4,340 million.

As of March 31, 2015, the balance of other investments increased by JPY305 million to JPY6,661 million. The breakdown of other investments were JPY4,314 million in available-for-sale securities, JPY2,263 million in nonmarketable equity securities and JPY83 million in other.

As of March 31, 2015, the breakdown of major non-amortized intangible assets were JPY6,170 million in goodwill and JPY107 million in trademark. The balance of amortized intangible assets, which was customer relationships, was JPY3,805 million.

Total IIJ shareholders' equity as of March 31, 2015 compared to the balance as of March 31, 2014, increased by JPY2,592 million to JPY62,504 million. IIJ shareholders' equity ratio (total IIJ shareholders' equity/total assets) as of March 31, 2015 was 57.5%.

Cash Flows

Cash and cash equivalents as of March 31, 2015 were JPY21,094 million compared to JPY22,421 million as of March 31, 2014.

Net cash provided by operating activities for FY2014 was JPY12,912 million compared to net cash provided by operating activities of JPY8,787 million for FY2013. Net income for FY2014 decreased from FY2013, however, non-cash operating expense such as depreciation and amortization cost increased. Additionally, in relation to the changes in operating assets and liabilities, there were positive effects to operating cash flow from increase in advance receipts from long-term systems maintenance projects, decrease in other receivable, increase in accrued expenses and increase in accounts payables.

Net cash used in investing activities for FY2014 was JPY8,073 million compared to net cash used in investing activities of JPY10,203 million for FY2013, mainly due to payments for purchase of property and equipment of JPY8,157 million (JPY9,124 million for FY2013), payments of guarantee deposits of JPY1,636 million (JPY689 million for FY2013), payments for purchase of other investments of JPY282 million (JPY1,186 million for FY2013) and refund of guarantee deposits of JPY1,573 million (JPY20 million for FY2013).

Net cash used in financing activities for FY2014 was JPY6,283 million compared to net cash provided by financing activities of JPY11,382 million for FY2013, mainly due to principal payments under capital leases of JPY4,194 million (JPY3,969 million for FY2013), net repayments of borrowings of JPY1,130 million (JPY1,010 million for FY2013) and FY2013 year-end and FY2014 interim dividend payments of JPY1,011 million (JPY911 million for FY2013).

FY2015 Financial Targets

Our financial targets for FY2015 are as follows:
(JPY in millions)
Operating Income before Income Net Income
Revenues Income Tax Expense attributable to IIJ
1H FY2015 Target 64,000 2,450 2,400 1,500
Full FY2015 Target 139,000 6,500 6,400 4,000

With the steady recovery of the Japanese economy, IT investment in Japan should continue during FY2015. We see a great business opportunity for the middle-to-long term as we expect enterprises' adoption of Cloud-related services to penetrate further, mobile-related services to become more popular, and the demands for outsourcing corporate IT systems to continue. As for FY2015, we shall increase revenue as well as operating income mainly by largely expanding consumer mobile services revenues, accumulating enterprise network services, increasing systems integration revenue and improving its profitability, and decreasing overseas business deficit by half.

We target revenue of JPY139 billion, up 13.0% YoY. We expect mobile services-related revenue to reach JPY13 billion, Cloud-related revenue to reach over JPY15 billion, systems integration revenue to increase, its profitability to improve, and ATM operation business revenue to continuously increase.

We target operating income of JPY6.5 billion, up 28.1% YoY. We expect SG&A and R&D expenses to increase around the same amount as in FY2014 while gross margin to increase along with revenue growth.

We target income before income tax expense (benefit) of JPY6.4 billion, up 24.5% YoY, considering interest expenses and others.

We target net income attributable to IIJ of JPY4.0 billion, up 20.4% YoY, considering taxes calculated by a normal statutory rate and income of equity method investees and non-controlling interests.

FY2015 Dividend Forecast

Our FY2015 dividend forecast is as follows:
Interim Year-end Full Year
FY2015 Dividend (forecast) JPY11.00 (forecast) JPY11.00 (forecast) JPY22.00 (forecast)
FY2014 Dividend (scheduled) JPY11.00 (paid) JPY11.00 (scheduled) JPY22.00 (scheduled)

Based on our Company's Article of Incorporation, we plan to pay our dividend twice a year, at interim and at fiscal year-end. The dividends for interim and fiscal year-end are decided at the Company's board of directors and at the general meeting of shareholders, respectively.

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
FY2013 FY2014
JPY millions JPY millions
Adjusted EBITDA 14,546 14,752
Depreciation and Amortization 6 (8,823) (9,677)
Operating Income 5,723 5,075
Other Income 552 64
Income Tax Expense 1,795 1,897
Equity in Net Income of Equity Method Investees 204 155
Net income 4,684 3,397
Less: Net income attributable to noncontrolling interests (242) (75)
Net Income attributable to IIJ 4,442 3,322
CAPEX
FY2013 FY2014
JPY millions JPY millions
CAPEX, including capital leases 12,560 11,835
Acquisition of Assets by Entering into Capital Leases 3,436 3,678
Purchase of Property and Equipment 9,124 8,157

Presentation

Presentation materials will be posted on our web site (http://www.iij.ad.jp/en/ir/) on May 15, 2015.

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 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 FY2015 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, 2014 and March 31, 2015)
As of March 31, 2014 As of March 31, 2015
Thousands of
JPY
Thousands of
JPY
ASSETS
CURRENT ASSETS:
Cash and cash equivalents 22,421,100 21,093,633
Accounts receivable, net of allowance for doubtful accounts of JPY 53,871 thousand and JPY 54,590 thousand at March 31, 2014 and March 31, 2015, respectively 19,214,248 22,251,818
Inventories 1,670,258 1,229,463
Prepaid expenses 3,128,290 3,691,643
Deferred tax assets—current 1,392,971 1,547,474
Guarantee deposits—current 1,462,223 --
Other current assets, net of allowance for doubtful accounts of JPY 720 thousand at March 31, 2014 and March 31, 2015, respectively 2,411,376 2,272,605
Total current assets 51,700,466 52,086,636
INVESTMENTS IN EQUITY METHOD INVESTEES 2,085,689 2,560,557
OTHER INVESTMENTS 6,355,817 6,660,706
PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization of JPY 34,725,611 thousand and JPY 39,591,769 thousand at March 31, 2014 and March 31, 2015, respectively 26,971,485 29,370,054
GOODWILL 5,969,951 6,169,609
OTHER INTANGIBLE ASSETS—Net 4,338,944 3,941,279
GUARANTEE DEPOSITS 1,264,535 2,800,201
DEFERRED TAX ASSETS—Noncurrent 636,807 471,087
NET INVESTMENT IN SALES-TYPE LEASES—Noncurrent 752,774 762,159
Prepaid expenses—Noncurrent 2,633,154 2,914,375
OTHER ASSETS, net of allowance for doubtful accounts of JPY 62,800 thousand and JPY 92,935 thousand at March 31, 2014 and March 31, 2015, respectively 1,156,953 968,652
TOTAL 103,866,575 108,705,315
As of March 31, 2014 As of March 31, 2015
Thousands of
JPY
Thousands of
JPY
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings 9,400,000 9,250,000
Long-term borrowings—current portion 980,000 --
Capital lease obligations—current portion 3,753,026 3,522,113
Accounts payable—trade 11,491,666 12,182,908
Accounts payable—other 1,050,429 1,442,810
Income taxes payable 1,079,480 499,104
Accrued expenses 2,053,550 2,968,139
Deferred income—current 1,560,603 2,143,480
Other current liabilities 1,098,173 1,732,781
Total current liabilities 32,466,927 33,741,335
CAPITAL LEASE OBLIGATIONS—Noncurrent 4,603,322 4,340,421
ACCRUED RETIREMENT AND PENSION COSTS—Noncurrent 2,274,540 2,792,617
DEFERRED TAX LIABILITIES—Noncurrent 1,092,863 1,097,650
DEFERRED INCOME—Noncurrent 2,711,347 2,943,975
OTHER NONCURRENT LIABILITIES 536,950 945,537
Total Liabilities 43,685,949 45,861,535
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 March 31, 2015
Additional paid-in capital 35,961,995 36,014,128
Accumulated deficit (2,867,548) (556,162)
Accumulated other comprehensive income 1,712,786 1,938,649
Treasury stock —758,709 shares held by the company at March 31, 2014 and March 31, 2015, respectively (392,070) (392,070)
Total Internet Initiative Japan Inc. shareholders' equity 59,912,185 62,504,402
NONCONTROLLING INTERESTS 268,441 339,378
Total equity 60,180,626 62,843,780
TOTAL 103,866,575 108,705,315
Internet Initiative Japan Inc.
Consolidated Statements of Income (Unaudited)
(For the fiscal year ended March 31, 2014 and March 31, 2015)
Fiscal Year Ended
March 31, 2014
Fiscal Year Ended
March 31, 2015
Thousands of
JPY
Thousands of
JPY
REVENUES:
Network services:
Internet connectivity services (enterprise) 16,585,175 16,349,785
Internet connectivity services (consumer) 6,024,560 8,222,015
WAN services 25,005,867 24,325,951
Outsourcing services 19,670,127 20,107,850
Total 67,285,729 69,005,601
Systems integration:
Systems construction 18,673,638 20,437,326
Systems operation and maintenance 23,795,927 27,800,132
Total 42,469,565 48,237,458
Equipment sales 1,690,225 2,166,928
ATM operation business 2,826,832 3,640,128
Total revenues 114,272,351 123,050,115
COST AND EXPENSES:
Cost of network services 53,045,814 54,932,285
Cost of systems integration 36,510,328 41,561,621
Cost of equipment sales 1,526,618 1,932,180
Cost of ATM operation business 2,123,168 2,551,437
Total cost 93,205,928 100,977,523
Sales and marketing 8,547,693 9,188,425
General and administrative 6,374,057 7,367,600
Research and development 421,361 441,329
Total cost and expenses 108,549,039 117,974,877
OPERATING INCOME 5,723,312 5,075,238
OTHER INCOME (EXPENSE):
Dividend income 51,003 63,143
Interest income 26,719 23,111
Interest expense (256,371) (238,260)
Foreign exchange gains (losses) 219,381 (5,045)
Net gain on sales of other investments 107,655 41,251
Net gain on other investments 313,393 --
Impairment of other investments -- (29,117)
Other —net 89,799 208,671
Other income—net 551,579 63,754
INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE AND EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES 6,274,891 5,138,992
INCOME TAX EXPENSE 1,795,305 1,896,865
EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES 204,046 154,626
NET INCOME 4,683,632 3,396,753
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS (241,395) (74,672)
NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC. 4,442,237 3,322,081
Fiscal Year Ended
March 31, 2014
Fiscal Year Ended
March 31, 2015
NET INCOME PER SHARE
BASIC WEIGHTED-AVERAGE NUMBER OF SHARES (shares) 44,306,680 45,942,291
DILUTED WEIGHTED-AVERAGE NUMBER OF SHARES (shares) 44,361,083 46,014,737
BASIC WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs) 88,613,360 91,884,582
DILUTED WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs) 88,722,166 92,029,474
BASIC NET INCOME PER SHARE (JPY) 100.26 72.31
DILUTED NET INCOME PER SHARE (JPY) 100.14 72.20
BASIC NET INCOME PER ADS EQUIVALENT (JPY) 50.13 36.15
DILUTED NET INCOME PER ADS EQUIVALENT (JPY) 50.07 36.10
Consolidated Statements of Other Comprehensive Income (Unaudited)
Fiscal Year Ended
March 31, 2014
Fiscal Year Ended
March 31, 2015
Thousands of
JPY
Thousands of
JPY
NET INCOME 4,683,632 3,396,753
Comprehensive income (loss):
Foreign currency translation adjustments 419,557 243,538
Unrealized holding gain (loss) on securities 988,139 61,590
Defined benefit pension plans 41,115 (83,000)
Total comprehensive income 6,132,443 3,618,881
Less: Comprehensive income attributable to noncontrolling interests (241,251) (70,937)
Comprehensive income attributable to Internet Initiative Japan Inc. 5,891,192 3,547,944
Internet Initiative Japan Inc.
Consolidated Statements of Shareholders' Equity (Unaudited)
(For the fiscal year ended March 31, 2014 and March 31, 2015)
Internet Initiative Japan Inc. shareholders' equity
Total
equity
Accumulated
deficit
Accumulated
other
comprehensive
income
Shares of
common
stock
outstanding
Common
stock
Treasury
stock
Additional
paid-in
capital
NON
CONTROLLING
INTERESTS
Thousands
of JPY
Thousands
of JPY
Thousands
of JPY
Shares Thousands
of JPY
Thousands
of JPY
Thousands
of JPY
Thousands
of JPY
BALANCE, MARCH 31, 2013 37,634,178 (6,399,088) 263,770 41,295,600 16,833,847 (392,079) 27,300,325 27,403
Acquisition of noncontrolling interests in consolidated subsidiaries -- 61 53 99 (213)
Issuance of common stock, net of issuance cost 17,271,204 5,400,000 8,661,600 8,609,604
Issuance of common stock upon exercise of stock options 3,151 2,200 1,575 1,576
Stock-based compensation 50,391 50,391
Comprehensive income (loss):
Net Income 4,683,632 4,442,237 241,395
Other Comprehensive income (loss), net of tax 1,448,811 1,448,955 (144)
Total comprehensive income 6,132,443
Dividends paid (910,697) (910,697)
Purchase of treasury stock (44) (44)
BALANCE, MARCH 31, 2014 60,180,626 (2,867,548) 1,712,786 46,697,800 25,497,022 (392,070) 35,961,995 268,441
Issuance of common stock upon exercise of stock options 5,671 3,200 2,835 2,836
Stock-based compensation 49,297 49,297
Comprehensive income
(loss):
Net Income 3,396,753 3,322,081 74,672
Other Comprehensive income (loss), net of tax 222,128 225,863 (3,735)
Total comprehensive income: 3,618,881
Dividends paid (1,010,695) (1,010,695)
BALANCE, MARCH 31, 2015 62,843,780 (556,162) 1,938,649 46,701,000 25,499,857 (392,070) 36,014,128 339,378
Internet Initiative Japan Inc.
Consolidated Statements of Cash Flows (Unaudited)
(For the fiscal year ended March 31, 2014 and March 31, 2015)
Fiscal Year Ended
March 31, 2014
Fiscal Year Ended
March 31, 2015
Thousands of
JPY
Thousands of
JPY
OPERATING ACTIVITIES:
Net income 4,683,632 3,396,753
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 8,822,981 9,677,339
Provision for retirement and pension costs, less payments 226,599 256,661
Provision for (reversal of) allowance for doubtful accounts (46,935) 33,158
Gain on sales of property and equipment -- (29,733)
Loss on disposal of property and equipment 83,487 101,189
Net gain on sales of other investments (107,655) (41,251)
Net gain on other investments (313,393) --
Impairment of other investments -- 29,117
Foreign exchange gains, net (129,916) (18,259)
Equity in net income of equity method investees, less dividends received (204,046) (122,286)
Deferred income tax expense (benefit) (699,826) 211,230
Others 71,448 8,560
Changes in operating assets and liabilities net of effects from acquisition of a company:
Increase in accounts receivable (342,391) (2,819,564)
Decrease (increase) in net investment in sales-type lease — noncurrent 145,266 (9,385)
Decrease (increase) in inventories (365,533) 450,256
Increase in prepaid expenses (612,802) (542,770)
Decrease (increase) in other current and noncurrent assets (1,801,403) 715,132
Increase in accounts payable 476,860 648,562
Decrease in income taxes payable (594,782) (718,737)
Increase (decrease) in accrued expenses (219,277) 873,815
Increase (decrease) in deferred income-current (158,972) 465,469
Increase (decrease) in deferred income-noncurrent 91,462 (248,061)
Increase (decrease) in other current and noncurrent liabilities (217,925) 595,178
Net cash provided by operating activities 8,786,879 12,912,373
INVESTING ACTIVITIES:
Purchase of property and equipment (9,123,998) (8,157,115)
Proceeds from sales of property and equipment 456,330 772,226
Purchase of available-for-sale securities (167,545) (4,104)
Purchase of other investments (1,185,985) (282,478)
Investment in an equity method investee (199,920) (338,240)
Proceeds from sales of available-for-sale securities 391,814 --
Proceeds from sales of other investments 351,740 40,501
Payments of guarantee deposits (688,902) (1,635,910)
Refund of guarantee deposits 20,233 1,572,885
Payments for refundable insurance policies (18,787) (47,831)
Refund from insurance policies 16,026 --
Proceeds from subsidies -- 200,000
Acquisition of a newly controlled company, net of cash acquired -- (167,678)
Other (53,766) (25,000)
Net cash used in investing activities (10,202,760) (8,072,744)
Fiscal Year Ended
March 31, 2014
Fiscal Year Ended
March 31, 2015
Thousands of
JPY
Thousands of
JPY
FINANCING ACTIVITIES:
Proceeds from issuance of short-term borrowings with initial maturities over three months 250,000 50,000
Repayments of short-term borrowings with initial maturities over three months and long-term borrowings (1,260,000) (1,030,000)
Principal payments under capital leases (3,968,724) (4,193,654)
Proceeds from sale and lease back -- 50,847
Net decrease in short-term borrowings with initial maturities less than three months -- (150,000)
Dividends paid (910,697) (1,010,695)
Proceeds from issuance of common stock, net of issuance cost 17,271,204 --
Other 109 3
Net cash provided by (used in) financing activities 11,381,892 (6,283,499)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 196,217 116,403
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 10,162,228 (1,327,467)
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD 12,258,872 22,421,100
CASH AND CASH EQUIVALENTS, END OF THE PERIOD 22,421,100 21,093,633
ADDITIONAL CASH FLOW INFORMATION:
Interest paid 256,722 239,940
Income taxes paid 2,707,784 2,405,067
NONCASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of assets by entering into capital leases 3,436,245 3,678,012
Facilities purchase liabilities 1,050,429 1,442,810
Asset retirement obligation 170,814 287,036
Acquisition of a company:
Assets acquired -- 1,064,736
Liabilities assumed -- 464,736
Cash paid -- (600,000)
Cash acquired -- 432,322
Acquisition of a newly controlled company, net of cash acquired -- (167,678)

Fourth Quarter FY2014 Consolidated Financial Results (3 months)

The following tables are highlight data of 4th Quarter FY2014 (3 months) consolidated financial results (unaudited, for the 3 months ended March 31, 2015).

Operating Results Summary
YoY %
4Q13 4Q14 Change
JPY millions JPY millions
Total Revenues: 31,526 35,204 11.7
Network Services 16,984 17,844 5.1
Systems Integration (SI) 13,273 15,593 17.5
Equipment Sales 512 801 56.5
ATM Operation Business 757 966 27.7
Cost of Revenues: 25,977 29,579 13.9
Network Services 13,282 14,801 11.4
Systems Integration (SI) 11,684 13,382 14.5
Equipment Sales 465 736 58.4
ATM Operation Business 546 660 20.8
SG&A Expenses and R&D 4,036 4,336 7.4
Operating Income 1,513 1,289 (14.8)
Income before Income Tax Expense 1,649 1,250 (24.2)
Net Income attributable to IIJ 1,518 1,008 (33.6)
Network Service Revenue Breakdown
YoY %
4Q13 4Q14 Change
JPY millions JPY millions
Internet Connectivity Service (Enterprise) 4,085 4,062 (0.6)
IP Service 2,539 2,406 (5.3)
IIJ FiberAccess/F and IIJ DSL/F 779 777 (0.4)
IIJ Mobile Service 709 819 15.6
Others 58 60 3.2
Internet Connectivity Service (Consumer) 1,628 2,469 51.7
Under IIJ Brand 696 1,639 135.4
hi-ho 749 679 (9.4)
OEM 183 151 (17.1)
WAN Services 6,220 6,181 (0.6)
Outsourcing Services 5,051 5,132 1.6
Network Services Revenues 16,984 17,844 5.1

Reconciliation of Non-GAAP Financial Measures (4th Quarter FY2014 (3 months))

The following table summarizes the reconciliation of adjusted EBITDA to net income in our consolidated statements of income that are prepared in accordance with U.S. GAAP.

Adjusted EBITDA
4Q13 4Q14
JPY millions JPY millions
Adjusted EBITDA 3,832 3,749
Depreciation and Amortization (2,319) (2,460)
Operating Income 1,513 1,289
Other Income (Expense) 136 (39)
Income Tax Expense (Benefit) (47) 264
Equity in Net Income of Equity Method Investees 13 40
Net income 1,709 1,026
Less: Net income attributable to noncontrolling interests (191) (18)
Net Income attributable to IIJ 1,518 1,008

The following table summarizes the reconciliation of capital expenditures to the purchase of property and equipment in our consolidated statements of cash flows that are prepared and presented in accordance with U.S. GAAP.

CAPEX
4Q13 4Q14
JPY millions JPY millions
CAPEX, including capital leases 2,697 2,545
Acquisition of Assets by Entering into Capital Leases 801 957
Purchase of Property and Equipment 1,896 1,588
Internet Initiative Japan Inc.
Quarterly Consolidated Statements of Income (Unaudited)
(Three Months ended March 31, 2014 and March 31, 2015)
Three Months Ended
March 31, 2014
Three Months Ended
March 31, 2015
Thousands of
JPY
Thousands of
JPY
REVENUES:
Network services:
Internet connectivity services (enterprise) 4,085,649 4,061,514
Internet connectivity services (consumer) 1,627,764 2,469,183
WAN services 6,219,920 6,180,534
Outsourcing services 5,050,931 5,132,426
Total 16,984,264 17,843,657
Systems integration:
Systems Construction 7,038,521 7,943,514
Systems Operation and Maintenance 6,234,333 7,649,665
Total 13,272,854 15,593,179
Equipment sales 512,236 801,566
ATM operation business 756,554 965,915
Total revenues 31,525,908 35,204,317
COST AND EXPENSES:
Cost of network services 13,281,985 14,801,381
Cost of systems integration 11,684,188 13,382,379
Cost of equipment sales 464,561 735,718
Cost of ATM operation business 546,532 660,158
Total cost 25,977,266 29,579,636
Sales and marketing 2,201,980 2,359,361
General and administrative 1,728,538 1,899,867
Research and development 105,561 76,551
Total cost and expenses 30,013,345 33,915,415
OPERATING INCOME 1,512,563 1,288,902
OTHER INCOME (EXPENSE):
Dividend income 2,744 4,172
Interest income 8,049 8,121
Interest expense (62,263) (58,165)
Foreign exchange gains (losses) 16,783 (32,460)
Net gain on sales of other investments 140,970 35,934
Impairment of other investments -- (29,117)
Other—net 30,613 33,031
Other income (expense) — net 136,896 (38,484)
INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE AND EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES 1,649,459 1,250,418
INCOME TAX EXPENSE (BENEFIT) (46,385) 264,016
EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES 12,842 39,140
NET INCOME 1,708,686 1,025,542
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS (190,519) (17,372)
NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC. 1,518,167 1,008,170
Three Months Ended
March 31, 2014
Three Months Ended
March 31, 2015
NET INCOME PER SHARE
BASIC WEIGHTED-AVERAGE NUMBER OF SHARES (shares) 45,939,091 45,942,291
DILUTED WEIGHTED-AVERAGE NUMBER OF SHARES (shares) 45,998,489 46,024,884
BASIC WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs) 91,878,182 91,884,582
DILUTED WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs) 91,996,978 92,049,768
BASIC NET INCOME PER SHARE (JPY) 33.05 21.94
DILUTED NET INCOME PER SHARE (JPY) 33.00 21.90
BASIC NET INCOME PER ADS EQUIVALENT (JPY) 16.52 10.97
DILUTED NET INCOME PER ADS EQUIVALENT (JPY) 16.50 10.95
Quarterly Consolidated Statements of Other Comprehensive Income (Unaudited)
Three Months Ended
March 31, 2014
Three Months Ended
March 31, 2015
Thousands of
JPY
Thousands of
JPY
NET INCOME 1,708,686 1,025,542
Comprehensive income (loss):
Foreign currency translation adjustments 140,450 179,163
Unrealized holding gain (loss) on securities (640,291) 119,942
Defined benefit pension plans 40,937 (83,178)
Total comprehensive income 1,249,782 1,241,469
Less: Comprehensive income attributable to noncontrolling interests (190,214) (14,998)
Comprehensive income attributable to Internet Initiative Japan Inc. 1,059,568 1,226,471
Internet Initiative Japan Inc.
Quarterly Consolidated Statements of Cash Flows (Unaudited)
(Three Months ended March 31, 2014 and March 31, 2015)
Three Months Ended
March 31, 2014
Three Months Ended
March 31, 2015
Thousands of
JPY
Thousands of
JPY
OPERATING ACTIVITIES:
Net income 1,708,686 1,025,542
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 2,318,779 2,460,495
Provision for retirement and pension costs, less payments 53,784 80,147
Provision for (reversal of) allowance for doubtful accounts (1,127) 30,993
Loss on disposal of property and equipment 72,044 9,201
Net gain on sales of other investments -- (35,934)
Net gain on other investments (140,970) --
Impairment of other investments -- 29,117
Foreign exchange losses (gains), net 25,478 (2,869)
Equity in net income of equity method investees, less dividends received (12,842) (39,140)
Deferred income tax benefit (1,090,417) (55,310)
Others 17,881 23,820
Changes in operating assets and liabilities net of effects from acquisition of a company:
Increase in accounts receivable (2,419,892) (4,473,038)
Decrease in net investment in sales-type lease―noncurrent 37,794 103,036
Decrease in inventories 848,410 1,082,978
Decrease in prepaid expenses 849,097 998,990
Decrease (increase) in other current and noncurrent assets (1,039,069) 775,633
Increase in accounts payable 1,234,546 1,089,640
Increase in income taxes payable 898,628 162,205
Increase in deferred income― noncurrent 99,854 65,862
Decrease in accrued expenses, other current and noncurrent liabilities (405,831) (430,868)
Net cash provided by operating activities 3,054,833 2,900,500
INVESTING ACTIVITIES:
Purchase of property and equipment (1,896,347) (1,588,189)
Proceeds from sales of property and equipment 219,831 236,698
Purchase of available-for-sale securities (69,051) --
Purchase of other investments (58,154) (100,800)
Investment in an equity method investee (199,920) (288,240)
Proceeds from sales of other investments 331,740 10,000
Payments of guarantee deposits (7,524) (24,412)
Refund of guarantee deposits 12,415 13,486
Payments for refundable insurance policies (14,090) (13,452)
Other (41,557) --
Net cash used in investing activities (1,722,657) (1,754,909)
Three Months Ended
March 31, 2014
Three Months Ended
March 31, 2015
Thousands of
JPY
Thousands of
JPY
FINANCING ACTIVITIES:
Principal payments under capital leases (1,026,718) (1,053,366)
Proceeds from sale and lease back -- 50,847
Net decrease in short-term borrowings with initial maturities less than three months -- (150,000)
Other 150 --
Net cash used in financing activities (1,026,568) (1,152,519)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS 13,142 53,561
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 318,750 46,633
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD 22,102,350 21,047,000
CASH AND CASH EQUIVALENTS, END OF THE PERIOD 22,421,100 21,093,633

Note: The following information is provided to disclose Internet Initiative Japan Inc. ("IIJ") financial results (unaudited) for the fiscal year ended March 31, 2015 ("FY2014") in the form defined by the Tokyo Stock Exchange.

Consolidated Financial Results for the Fiscal Year Ended March 31, 2015

[Under accounting principles generally accepted in the United States ("U.S. GAAP")]

May 15, 2015
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 annual general shareholder's meeting: June 26, 2015
Scheduled date for dividend payment: June 29, 2015
Scheduled date for filing of annual report (Yuka-shoken-houkokusho) to Japan's regulatory organization: June 30, 2015
Supplemental material on annual results: Yes
Presentation on annual results: Yes (for institutional investors and analysts)

1. Consolidated Financial Results for the Fiscal Year Ended March 31, 2015

(April 1, 2014 to March 31, 2015)

(1) Consolidated Results of Operations (% shown is YoY change)
Total Operating Income before Income Net Income attributable to
Revenues Income Tax Expense IIJ
JPY millions % JPY millions % JPY millions % JPY millions %
Fiscal Year Ended March 31, 2015 123,050 7.7 5,075 (11.3) 5,139 (18.1) 3,322 (25.2)
Fiscal Year Ended March 31, 2014 114,272 7.6 5,723 (26.2) 6,275 (19.1) 4,442 (16.2)

(Note1) Total comprehensive income attributable to IIJ

Fiscal Year Ended March 31, 2015: JPY3,548 million (down 39.8% YoY)

Fiscal Year Ended March 31, 2014: JPY5,891 million (up 5.4% 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.

Diluted Net Net Income Income before
Basic Net Income Income attributable to IIJ to Income Tax Total Revenues
attributable to IIJ attributable to IIJ Total Shareholders' Expense to Total Operating Margin
per Share per Share Equity Assets Ratio
JPY JPY % % %
Fiscal Year Ended March 31, 2015 72.31 72.20 5.4 4.8 4.1
Fiscal Year Ended March 31, 2014 100.26 100.14 9.1 6.7 5.0

(Reference) Equity in net income of equity method investees

Fiscal Year Ended March 31, 2015: JPY155 million

Fiscal Year Ended March 31, 2014: JPY204 million

(2) Consolidated Financial Position
Total IIJ Total IIJ Total IIJ
Total Total Shareholders' Shareholders' Equity Shareholders' Equity
Assets Equity Equity to Total Assets per Share
JPY millions JPY millions JPY millions % JPY
As of March 31, 2015 108,705 62,844 62,504 57.5 1,360.50
As of March 31, 2014 103,867 60,181 59,912 57.7 1,304.17
(3) Consolidated Cash Flow
Cash and Cash Equivalents
Operating Activities Investing Activities Financing Activities (End of the Period)
JPY millions JPY millions JPY millions JPY millions
Fiscal year ended March 31, 2015 12,912 (8,073) (6,283) 21,094
Fiscal year ended March 31, 2014 8,787 (10,203) 11,382 22,421

2. Dividends

Dividend per Shares Ratio of
Total cash Dividends to
1Q-end 2Q-end 3Q-end Year-end Total dividends for Payout Ratio Shareholder's
the year (consolidated) Equity
(consolidated)
JPY JPY JPY JPY JPY JPY millions % %
Fiscal Year Ended March 31, 2014 -- 11.00 -- 11.00 22.00 1,011 21.9 2.0
Fiscal Year Ended March 31, 2015 -- 11.00 -- 11.00 22.00 1,011 30.4 1.7
Fiscal Year Ending March 31, 2016 (forecast) -- 11.00 -- 11.00 22.00 25.3
(Note) Change from the latest released dividend forecasts: No.

3. Target of Consolidated Financial Results for the Fiscal Year Ending March 31, 2016

April 1, 2015 through March 31, 2016) (% shown is YoY change)
Income before Basic Net Income
Total Operating Income Tax Net Income attributable to IIJ
Revenues Income Expense (Benefit) attributable to IIJ per Share
JPY millions % JPY millions % JPY millions % JPY millions % JPY
Interim Period Ending September 30, 2015 64,000 11.9 2,450 1.4 2,400 (3.7) 1,500 3.9 32.65
Fiscal Year Ending March 31, 2016 139,000 13.0 6,500 28.1 6,400 24.5 4,000 20.4 87.07
* Notes
(1) Changes in Significant Subsidiaries for the Fiscal Year Ended March 31, 2015
(Changes in significant subsidiaries for the Fiscal Year Ended March 31, 2015 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: No
2) Others: No
(3) Number of Shares Outstanding (Shares of Common Stock)
1) The number of shares outstanding (inclusive of treasury stock):
As of March 31, 2015: 46,701,000 shares
As of March 31, 2014: 46,697,800 shares
2) The number of treasury stock:
As of March 31, 2015: 758,709 shares
As of March 31, 2014: 758,709 shares
3) The weighted average number of shares outstanding:
For the Fiscal Year Ended March 31, 2015: 45,942,291 shares
For the Fiscal Year Ended March 31, 2014: 44,306,680 shares
May 15, 2015
Company name: Internet Initiative Japan Inc.
Company representative: Eijiro Katsu, President and Representative Director
(Stock Code Number: 3774 The First Section of the Tokyo Stock Exchange)
Contact: Akihisa Watai, Managing Director and CFO
TEL: 81-3-5205-6500

Information Pertaining to Our Largest Shareholder

1. About Our Largest Shareholder (As of March 31, 2015)

Its Ownership Percentage (%) Securities Exchanges where its
Name Relationship Direct Indirect Shares are Listed
ownership ownership Total
Nippon Telegraph and Telephone Corporation("NTT") IIJ is NTT's affiliate company 22.0 4.4 26.4 Tokyo Stock Exchange (First Section) New York Stock Exchange

2. Position of the Listed Company (IIJ) within NTT Group and other relationships

a) Position of the Listed Company (IIJ) within NTT Group

The ownership percentage by NTT, which is IIJ's largest shareholder, was 26.4% as of March 31, 2015, including its indirect ownership. However, IIJ's business activities are not affected by NTT's ownership in IIJ and IIJ is maintaining its management independence.

b) Personal Relationships with NTT Group

IIJ's board of directors consists of 12 members including 4 outside directors as of May 15, 2015. Takashi Hiroi, an outside director (part-time director) of IIJ, is an employee of NTT (Senior Vice President, Finance and Accounting of NTT). Mr. Hiroi is monitoring IIJ's business operations as an outside director and does not have any personal relationships, such as family relationships, with IIJ's other directors and auditors. He did not acquire any interest such as capital or business relationships upon becoming an outside director.

3. Business Relationship with NTT Group

IIJ uses services provided by Nippon Telegraph and Telephone East Corporation ("NTT East") and Nippon Telegraph and Telephone West Corporation ("NTT West") for a significant portion of IIJ's access circuits, services provided by NTT Communications Corporation ("NTT Communications") for a significant portion of IIJ's domestic and international backbone circuits, and wholesale telecommunications services provided by NTT DOCOMO, INC ("NTT Docomo") for a significant portion of IIJ's mobile infrastructure. The aggregate amount paid to NTT East, NTT West, NTT Communications and NTT Docomo for these services was JPY7,076 million for the fiscal year ended March 31, 2015.

IIJ leases a part of Internet data center facilities from NTT Group companies to provide Internet data center services to IIJ's customers. The amount paid to NTT Group related to the lease of Internet data center facilities was JPY1,564 million for the fiscal year ended March 31, 2015.

4. Policy Concerning Measures to Protect Minority Shareholders in Transactions with NTT Group

Business transactions with the NTT Group are within the scope of normal business practices and there is no special contract made in relation to the investment by NTT Group.

CONTACT: For inquiries, contact: IIJ Investor Relations Tel: +81-3-5205-6500 E-mail: ir@iij.ad.jp URL: http://www.iij.ad.jp/en/ir

Source:Internet Initiative Japan Inc.