IIJ Announces Nine Months Financial Results for the Fiscal Year Ending March 31, 2019

TOKYO, Feb. 07, 2019 (GLOBE NEWSWIRE) — Internet Initiative Japan Inc. (“IIJ” NASDAQ:IIJI, TSE:3774) today announced its nine months consolidated financial results for the fiscal year ending March 31, 2019 (“1Q-3Q18” from April 1, 2018 to December 31, 2018).¹

Overview of 1Q-3Q18 Financial Results and Business Outlook
“Our focus of this fiscal year has been enhancing invested assets and existing network services to bring more value and accumulate revenue stronger. We believe this strategy has been successful as seen in our financial results. Nine months total revenue and operating income for the fiscal year ending March 31, 2019 grew by 9.2% and by 36.0% year over year respectively; stronger than our initial expectation. Supported by favorable IT demands and our wide range of network service offerings, we were able to continuously accumulate revenues. Recurring revenues, which 1Q-3Q18 revenue was 85.2% of the total revenue, grew by 10.2% year over year. Security services, which 1Q-3Q18 revenue increased by 16.5% year over year, in particular led the growth. Operating income growth was achieved with strong revenue growth, which translated into gross margin expansion for both network services and systems integration, as well as with systems integration gross margin ratio improvement, which was mainly due to high utilization rate of system engineers and absence of large unprofitable projects with enhanced quality control, absorbed an increase in cost including full-MVNO related fixed type cost. While our 1Q-3Q18 results were stronger than planned, our full year financial targets remain unchanged mainly due to uncertainty about how much NTT Docomo’s interconnectivity charge for our MVNO network decrease, which is revised annually and usually fixed at the end of March by NTT Docomo under a certain calculation method,” said Eijiro Katsu, COO and President of IIJ.

“As for business developments, we’ve been upgrading existing network services’ function. For security, we’ve renewed our virtual desktop services, to which demands are increasing along with Work Style Reform trend in Japan, to handle large number of concurrent user-connections. As for full-MVNO, we’ve been accumulating revenues accordingly with our plan by leveraging SIM life cycle management function⁴ to attract IoT projects as well as foreign tourists visiting Japan with prepaid SIM cards.⁵ Despite the tough competition for domestic consumer mobile market, we increased our total mobile subscription to 2.6 million by keep focusing on MVNE⁶ and corporates’ targeted strategy. In January, we also launched chip SIM⁷ services which enables us to acquire more IoT projects and enterprise mobile projects. Lastly, DeCurret, our equity method investee for fintech business, completed systems developments and is ready to offer cryptocurrency exchange services soon after they are registered as a service vendor,”⁸ said Koichi Suzuki, founder, CEO and Chairman of IIJ.   

“Following the accounting method revision of U.S. GAAP, we recorded unrealized loss of JPY2.95 billion on holding marketable equity securities, to which we have balance of accumulated unrealized gain JPY4.6 billion on our balance sheet as of December 31, 2018, as their share price significantly dropped along with overall stock market volatility. Due to the revision, at the beginning of this fiscal year, we had to reclassify unrealized gains of JPY5.1 billion to retained earnings without recognizing unrealized gains as profit on a consolidated statement of income. From 1Q18, we record gains/losses due to fluctuations of fair value as “other income (expenses)” on our consolidated statements of income every quarter. Since this loss is not at all related to our business operation but simply a matter of accounting and is not affected our cash flows, our cash dividend target remain unchanged. As disclosed today, we’ll voluntarily adopt IFRS (International Financial Reporting Standards) from the filing of our FY2018 annual report “Yuka-Shoken-Houkokusho” and with IFRS, we expect to have no P/L impact of above mentioned unrealized loss as we recognize fluctuation of fair value of our holding marketable equity securities as “other comprehensive income” under IFRS. We also disclosed our plan to delist our American Depositary Shares (“ADSs”) from the U.S. NASDAQ Stock Market and terminate registration with the U.S. Security and Exchange Commission. We will continue to disclose financial statements and other important information in English on our website in a timely manner to ensure overseas shareholders and investors to have appropriate information about us. After the delisting, we intend to maintain our American Depositary Receipts Program in the U.S. and we anticipate that our ADSs will continue to be traded in the U.S. on over-the-counter market,” concluded Katsu.

1. Unless otherwise stated, all financial figures discussed in this announcement are prepared in accordance with U.S. GAAP, unaudited and consolidated.
2. YoY is an abbreviation for year over year change.
3. “Adjusted income before income tax expense” and “adjusted net income attributable to IIJ” exclude gains/losses on equity securities and funds to which accounting policies were changed due to revision of U.S. GAAP.
4. SIM life cycle management is a function allowing users to switch status of SIMs from/to activated and suspended remotely.
5. Tourists can purchase our SIM cards in their home countries and as soon as they arrive at Japanese airports, they can start using our mobile services.
6. MVNE is an abbreviation of Mobile Virtual Network Enabler. MVNE provides mobile infrastructure and necessary services to MVNOs.
7. Small-sized SIM card with the features of corresponding to a wide range of temperature environments, vibration resistance, corrosion resistance etc.
8. In Japan, in order to operate cryptocurrency related business such as exchange and settlement, registration by Japan’s Financial Service Agency is required.

1Q-3Q18 Financial Results Summary

We have omitted segment analysis because most of our revenues are dominated by network services and systems integration (SI) business.

1Q-3Q18 Revenues and Income

Revenues

Total revenues were JPY139,382 million, up 9.2% YoY (JPY127,612 million for 1Q-3Q17).

Network services revenue was JPY88,044 million, up 10.1% YoY (JPY80,000 million for 1Q-3Q17).

Revenues for Internet connectivity services for enterprise were JPY24,406 million, up 19.5% YoY from JPY20,418 million for 1Q-3Q17, mainly due to an increase in mobile-related services revenues along with an expansion of MVNE business clients’ transactions.

Revenues for Internet connectivity services for consumers were JPY18,904 million, up 1.1% YoY from JPY18,707 million for 1Q-3Q17. The revenue growth mainly due to “IIJmio Mobile Service,” consumer mobile services which offer inexpensive data communication and voice services with SIMs, offset revenue decrease due to divesture of a former subsidiary, hi-ho in December 2017.

Revenues for WAN services were JPY23,240 million, up 7.2% YoY compared to JPY21,676 million for 1Q-3Q17, mainly due to the revenue growth along with order accumulation.

Revenues for Outsourcing services were JPY21,494 million, up 12.0% YoY from JPY19,199 million for 1Q-3Q17, mainly due to an increase in security-related services revenues.

SI revenues were JPY44,761 million, up 5.8% YoY (JPY42,301 million for 1Q-3Q17).

Systems construction revenue, a one-time revenue, was JPY14,025 million, down 3.5% YoY (JPY14,530 million for 1Q-3Q17). Systems operation and maintenance revenue, a recurring revenue, was JPY30,736 million, up 10.7% YoY (JPY27,771 million for 1Q-3Q17), mainly due to continued accumulation of systems operation orders as well as an increase in private cloud services’ revenues.

Orders received for SI and equipment sales totaled JPY53,459 million, up 10.8% YoY (JPY48,228 million for 1Q-3Q17); orders received for systems construction and equipment sales were JPY 21,538 million, up 12.2% YoY (JPY19,201 million for 1Q-3Q17) and orders received for systems operation and maintenance were JPY31,921 million, up 10.0% YoY (JPY29,027 million for 1Q-3Q17).

Order backlog for SI and equipment sales as of December 31, 2018 amounted to JPY51,674 million, up 14.4% YoY (JPY45,153 million as of December 31, 2017); order backlog for systems construction and equipment sales was JPY10,892 million, up 13.8% YoY (JPY9,574 million as of December 31, 2017) and order backlog for systems operation and maintenance was JPY40,782 million, up 14.6% YoY (JPY35,579 million as of December 31, 2017).

Equipment sales revenues were JPY3,485 million, up 53.2% YoY (JPY2,275 million for 1Q-3Q17) mainly due to the increase in sales of mobile devices.

ATM operation business revenues were JPY3,092 million, up 1.8% YoY (JPY3,036 million for 1Q-3Q17). As of December 31, 2018, 1,146 ATMs have been placed.

Cost and expense

Total cost of revenues was JPY117,368 million, up 8.8% YoY (JPY107,856 million for 1Q-3Q17).

Cost of network services revenue was JPY73,772 million, up 11.6% YoY (JPY66,109 million for 1Q-3Q17). There were an increase in outsourcing-related costs along with our mobile-related revenue increase as well as full-MVNO related fixed-type costs along with the service launch, an increase in network operation-related costs, and an increase in circuit-related costs along with our WAN services revenue increase. Gross margin was JPY14,272 million, up 2.7% YoY (JPY13,891 million for 1Q-3Q17) and gross margin ratio was 16.2% (17.4% for 1Q-3Q17).

Cost of SI revenues was JPY38,801 million, up 2.4% YoY (JPY37,898 million for 1Q-3Q17). There were an increase in license fees along with increase in cloud-related revenues and network operation-related costs, and decreases in outsourcing-related costs along with decrease in our systems construction revenue. Gross margin was JPY5,960 million, up 35.4% YoY (JPY4,403 million for 1Q-3Q17) and gross margin ratio was 13.3% (10.4% for 1Q-3Q17).

Cost of equipment sales revenues was JPY3,057 million, up 48.8% YoY (JPY2,053 million for 1Q-3Q17). There was an increase in purchasing costs of mobile devices. Gross margin was JPY428 million (JPY222 million for 1Q-3Q17) and gross margin ratio was 12.3% (9.8% for 1Q-3Q17).

Cost of ATM operation business revenues was JPY1,738 million, down 3.2% YoY (JPY1,796 million for 1Q-3Q17). Gross margin was JPY1,354 million (JPY1,240 million for 1Q-3Q17) and gross margin ratio was 43.8% (40.8% for 1Q-3Q17).       

SG&A and R&D expenses

SG&A and R&D expenses in total were JPY16,878 million, up 5.6% YoY (JPY15,980 million for 1Q-3Q17).

Sales and marketing expenses were JPY9,808 million, up 2.7% YoY (JPY9,551 million for 1Q-3Q17) mainly due to increases in personnel-related expenses and sales commission expenses.

General and administrative expenses were JPY6,717 million, up 10.7% YoY (JPY6,070 million for 1Q-3Q17) mainly due to increases in personnel-related expenses.

Research and development expenses were JPY353 million, down 1.6% YoY (JPY359 million for 1Q-3Q17).

Operating income

Operating income was JPY5,136 million, up 36.0% YoY (JPY3,776 million for 1Q-3Q17).

Other income (expenses)

Other income (expenses) was an expense of JPY2,676 million (an income of JPY553 million for 1Q-3Q17). It includes realized and unrealized loss on other investments of JPY2,642 million, to which accounting policies were changed under the revised U.S. GAAP effective from April 1, 2018, compared to realized gain of JPY569 million for 1Q-3Q17, miscellaneous income of JPY143 million (miscellaneous expenses of JPY23 million for 1Q-3Q17), dividend income of JPY96 million (JPY231 million for 1Q-3Q17), and interest expense of JPY298 million (JPY276 million for 1Q-3Q17).

Income before income tax expense

Income before income tax expense was JPY2,460 million, down 43.2% YoY (JPY4,329 million for 1Q-3Q17). When excludes realized and unrealized loss on other investments of JPY2,642 million, to which accounting policies were changed under the revised U.S. GAAP effective from April 1, 2018, compared to realized gain of JPY569 million for 1Q-3Q17, adjusted income before income tax expense was JPY5,102 million, up 35.7% YoY (JPY3,760 million for 1Q-3Q17).

Net income

Income tax expense was JPY961 million (JPY1,614 million for 1Q-3Q17).

Equity in net loss of equity method investees was JPY69 million (an income of JPY101 million for 1Q-3Q17) mainly due to equity in net loss of JPY272 million in DeCurret Inc.

As a result of the above, net income was JPY1,430 million, down 49.2% YoY (JPY2,816 million for 1Q-3Q17). When excludes net of tax amount of realized and unrealized loss on other investments of JPY1,810 million, to which accounting policies were changed under the revised U.S. GAAP effective from April 1, 2018, compared to net of tax amount of realized gain of JPY389 million for 1Q-3Q17, adjusted net income was JPY3,240 million, up 33.5% YoY (JPY2,427 million for 1Q-3Q17).

Net income attributable to IIJ

Net income attributable to non-controlling interests was JPY131 million (JPY128 million for 1Q-3Q17) related to net income of Trust Networks Inc.

Net income attributable to IIJ was JPY1,299 million, down 51.7% YoY (JPY2,688 million for 1Q-3Q17). When excludes net of tax amount of realized and unrealized loss on other investments of JPY1,810 million, to which accounting policies were changed under the revised U.S. GAAP effective from April 1, 2018, compared to net of tax amount of realized gain of JPY389 million for 1Q-3Q17, adjusted net income attributable to IIJ was JPY3,109 million, up 35.2% YoY (JPY2,299 million for 1Q-3Q17).

Regarding the change in accounting methods on other investments

Following the revision of U.S. GAAP, from 1Q18, gains/losses on other investments due to fluctuations of fair value of holding marketable equity securities and funds are recorded as “realized and unrealized gain (loss) on other investments, net” in “other income (expenses)” on our consolidated statements of income (“P/L”).

For 1Q-3Q18, we recorded JPY2,642 million of “realized and unrealized loss on other investments, net,” of which unrealized loss on our holding marketable equity securities was JPY2,951 million.

Please see below for detailed explanation on revision of U.S. GAAP related to holding marketable equity securities.

• As of March 31, 2018, we had balance of accumulated unrealized gains on holding marketable equity securities of JPY7,525 million. The net of tax amount of the unrealized gains, JPY5,079 million, was recorded as “accumulated other comprehensive income” on our consolidated balance sheet (“B/S”) as of March 31, 2018. Until the previous fiscal year, unrealized gains/losses of holding marketable equity securities had been recorded as the fluctuation of “accumulated other comprehensive income” on B/S without being recognized as profit on P/L.
• On B/S at the beginning of this fiscal year, the net of tax amount of the unrealized gains of JPY5,079 million as of March 31, 2018 was reclassified to “retained earnings.” The gains were never recognized as profit on P/L.
• After the above mentioned reclassification, gains/losses due to fluctuations of stock prices are recognized as “realized and unrealized gain (loss) on other investments, net” in “other income (expenses)” in every quarter.

For 1Q-3Q18, we recorded JPY309 million of realized and unrealized gain on investments other than marketable equity securities, such as funds that were available to be measured at fair value.

Please see below for detailed explanation on revision of U.S. GAAP related to funds that are available to be measured at fair value.

• As of March 31, 2018, value of such funds was recorded as assets in “other investments” under cost method. Its unrealized gain of JPY963 million was not recognized.
• On B/S at the beginning of this fiscal year, “other investments” was increased by JPY963 million and “retained earnings” was increased by JPY660 million which is the net of tax amount of the above mentioned unrealized gain. The gain was never recognized as profit of P/L.
• From 1Q18, fluctuation of fair values of such funds are recognized as “realized and unrealized gain (loss) on other investments, net” in “other income (expenses)” in every quarter.

Balance Sheets as of December 31, 2018

Balance sheets

As of December 31, 2018, the balance of total assets was JPY163,621 million, increased by JPY10,172 million from the balance as of March 31, 2018 of JPY153,449 million.

As of December 31, 2018, the balance of current assets was JPY79,175 million, increased by JPY11,990 million from the balance as of March 31, 2018 of JPY67,185 million. The major breakdown of current assets was: an increase in cash and cash equivalents by JPY7,475 million to JPY28,878 million, an increase in inventories by JPY3,034 million to JPY4,748 million, an increase in prepaid expenses by JPY2,316 million to JPY10,759 million and a decrease in accounts receivables by JPY1,215 million to JPY30,615 million. As of December 31, 2018, the balance of noncurrent assets was JPY84,446 million, decreased by JPY1,818 million from the balance as of March 31, 2018 of JPY86,264 million. The major breakdown of noncurrent assets was: other investment of JPY9,307 million, decreased by JPY2,067 million and property and equipment of JPY47,184 million, increased by JPY770 million. The major breakdown of fluctuation in other investments was: an increase by JPY963 million, which was the amount of unrealized gains on funds as of March 31, 2018 that recognized due to revision of U.S. GAAP at the beginning of FY2018, an decrease in marketable equity securities and funds that are available to be measured at fair value by JPY2,710 million due to fluctuation of fair value for 1Q-3Q18 and a decrease by JPY469 million due to benefit distribution from funds. As of December 31, 2018, the major breakdown of non-amortized intangible assets was JPY6,082 million in goodwill. The balance of amortized intangible assets, which was customer relationships, was JPY2,404 million, decreased by JPY267 million from the balance as of March 31, 2018 of JPY2,671 million.

As of December 31, 2018, the balance of current liabilities was JPY51,926 million, increased by JPY9,781 million from the balance as of March 31, 2018 of JPY42,145 million. The major breakdown of current liabilities was: an increase in accounts payable (trade and other) by JPY4,946 million to JPY21,346 million, an increase in short-term borrowings by JPY2,000 million to JPY11,250 million, an increase in deferred income—current by JPY1,693 million to JPY5,930 million, an increase in long-term borrowings—current portion by JPY1,500 million, which was reclassified from noncurrent, to JPY1,500 million, an increase in capital lease obligations-current portion by JPY668 million to JPY6,324 million, , and a decrease of income taxes payable by JPY1,333 million to JPY595 million. As of December 31, 2018, the balance of noncurrent liabilities was JPY36,494 million, decreased by JPY822 million from the balance as of March 31, 2018 of JPY37,315 million. The major breakdown of noncurrent liabilities was: an increase in capital lease obligations-noncurrent by JPY652 million to JPY11,572 million, an increase in deferred income—noncurrent by JPY592 million to JPY4,544 million, and a decrease in long-term borrowings by JPY1,500 million, which was the amount reclassified to current liabilities, to JPY14,000 million.

As of December 31, 2018, the major breakdown of IIJ shareholders’ equity was as follows. Accumulated other comprehensive income (loss) was a loss of JPY41 million as it decreased by JPY5,116 million (an income of JPY5,075 million as of March 31, 2018) mainly because of reclassification at the beginning of FY2018 to retained earnings by JPY5,079 million by revision of U.S. GAAP related to marketable equity securities; retained earnings was JPY14,608 million, increased by JPY6,203 million from March 31, 2018, mainly due to an increase by net income attributable to IIJ of JPY1,299 million, a decrease by dividend paid of JPY1,217 million and an increase at the beginning of FY2018 by JPY6,121 million due to revision of U.S. GAAP related to revenue recognition and other investments. As a result, the balance of total IIJ shareholders’ equity as of December 31, 2018 was JPY74,400 million, increased by JPY1,130 million from the balance as of March 31, 2018 of JPY73,270 million and IIJ shareholders’ equity ratio (total IIJ shareholders’ equity divided by total assets) as of December 31, 2018 was 45.5%.

1Q-3Q18 Cash Flows

Cash flows

Cash and cash equivalents as of December 31, 2018 were JPY28,878 million (JPY23,044 million as of December 31, 2017).

Net cash provided by operating activities for 1Q-3Q18 was JPY17,114 million (net cash provided by operating activities of JPY8,296 million for 1Q-3Q17). There were net income of JPY1,430 million, depreciation and amortization of JPY10,288 million, and adjustment of realized and unrealized loss on other investments, net of JPY2,642 million, which was mainly due to fluctuations in holding marketable equity securities. Regarding changes in operating assets and liabilities, it was net cash in of JPY3,355 million (net cash out of JPY3,486 million for 1Q-3Q17), mainly due to an increase in accounts payable and proceeds from customers, which resulted in a decrease in accounts receivable and an increase in deferred revenue, while the cash out increased due to an increase in inventories due to the increase in systems construction projects, an increase in prepaid expenses (including prepaid expense-noncurrent) in relation to upfront payment for maintenance cost for service facilities and software licenses and an increase in prepaid expenses for seasonal bonus payments to our employees.

Net cash used in investing activities for 1Q-3Q18 was JPY5,295 million (net cash used in investing activities of JPY8,272 million for 1Q-3Q17), mainly due to payments for purchase of property and equipment of JPY8,355 million (JPY11,785 million for 1Q-3Q17), proceeds from sales of property and equipment, which include sales and leaseback transactions, of JPY2,588 million (JPY2,757 million for 1Q-3Q17) and proceeds from sales of other investments, such as funds and nonmarketable equity securities, of JPY514 million (JPY616 million for 1Q-3Q17),

Net cash used in financing activities for 1Q-3Q18 was JPY4,374 million (net cash provided by financing activities of JPY1,049 million for 1Q-3Q17), mainly due to principal payments under capital leases of JPY4,795 million (JPY4,230 million for 1Q-3Q17), FY2017 year-end and FY2018 interim dividends payments of JPY1,217 million (JPY1,217 million for 1Q-3Q17) and increase in short-term borrowings of JPY2,000 million.

Future Prospects including FY2018 Financial Targets

Due to seasonal factors, our financial results tend to be large in fourth quarter every fiscal year. While 1Q-3Q18 total revenue and operating income were stronger than our initial plan, our full year financial targets for FY2018, announced on May 15, 2018, remain unchanged mainly because there is uncertainty about how much NTT Docomo’s interconnectivity charge for our MVNO network decrease from the last year. The charge, flat-rate per Mbps, is revised annually and is usually fixed at the end of March.

We disclosed our middle term plan for the period from FY2016 to FY2020 in our earnings results for FY2016 on May 13, 2016. Regarding our total revenue target of approximately JPY250 billion for the fiscal year ending March 31, 2021, while our business strategy progress and developments are in accordance with our plan, we now estimate it would be around JPY220 billion by mainly taking the followings into consideration: financial results by FY2018 and market expansion pace for enterprise IoT and cloud which is surely expanding but slower than our initial expectation.

FY2018 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.

Presentation

Presentation materials will be posted on our web site (https://www.iij.ad.jp/en/ir/) on February 7, 2019.

Presentation materials are also available in these file archives:

http://resource.globenewswire.com/Resource/Download/a0c654e7-1a7a-4bb3-a273-a6e9cfb1cd43

About Internet Initiative Japan Inc.

Founded in 1992, IIJ is one of Japan’s leading Internet-access and comprehensive network solutions providers. IIJ and its group companies provide total network solutions that mainly cater to high-end corporate customers. IIJ’s services include high-quality Internet connectivity services, mobile services, security services, cloud computing services, and systems integration. Moreover, IIJ operates one of the largest Internet backbone networks in Japan that is connected to the United States, the United Kingdom and Asia. IIJ listed on the U.S. NASDAQ Stock Market in 1999 and on the First Section of the Tokyo Stock Exchange in 2006.

For inquiries, contact:

IIJ Investor Relations　Tel: +81-3-5205-6500  E-mail: ir@iij.ad.jp  URL: https://www.iij.ad.jp/en/ir

Statements made in this press release regarding IIJ’s or management’s intentions, beliefs, expectations, or predictions for the future are forward-looking statements that are based on IIJ’s and managements’ current expectations, assumptions, estimates and projections about its business and the industry. These forward-looking statements, such as statements regarding 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 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 equity securities; fluctuations of equity in net income (loss) of equity method investees; 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.

Third Quarter FY2018 Consolidated Financial Results (3 months)
The following tables are highlight data of 3rd Quarter FY2018 (3 months) consolidated financial results (unaudited, for the three months ended December 31, 2018).

Reconciliation of Non-GAAP Financial Measures (3rd Quarter FY2018 (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.

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

Note: The following information is provided to disclose Internet Initiative Japan Inc. (“IIJ”) financial results (unaudited) for the nine months ended December 31, 2018 (“1Q-3Q18”) in the form defined by the Tokyo Stock Exchange.

Consolidated Financial Results for the Nine Months ended December 31, 2018
[Under accounting principles generally accepted in the United States (“U.S. GAAP”)]

February 7, 2019

Company name: Internet Initiative Japan Inc.
Exchange listed: Tokyo Stock Exchange First Section
Stock code number: 3774
URL: https://www.iij.ad.jp/
Representative: Eijiro Katsu, President and Representative Director
Contact: Akihisa Watai, Managing Director and CFO
TEL: (03) 5205-6500
Scheduled date for filing of quarterly report (Shihanki-houkokusho) to Japan’s regulatory organization: February 14, 2019
Scheduled date for dividend payment: –
Supplemental material on annual results: Yes
Presentation on quarterly report: Yes (for institutional investors and analysts)

(Amounts of less than JPY one million are rounded)

1. Consolidated Financial Results for the Nine Months Ended December 31, 2018 (April 1, 2018 to December 31, 2018)                                                        

(Note) Change from the latest released dividend forecasts: No