For Immediate Release

Internet Initiative Japan Inc. E-mail: ir@iij.ad.jp Tel: +81-3-5205-6500 URL: http://www.iij.ad.jp/en/ir

IIJ Announces Full Year and Fourth Quarter Financial Results for the Fiscal Year Ended March 31, 2017‌ Tokyo, May 15, 2017 - Internet Initiative Japan Inc. ("IIJ" NASDAQ:IIJI, TSE:3774) today announced its full year ("FY2016") and fourth quarter ("4Q16") consolidated financial results for the fiscal year ended March 31, 2017 (from April 1, 2016 to March 31, 2017).1

Highlights of Financial Results for FY2016

Revenues

JPY157,789 million

(up 12.2% YoY)

Operating Income

JPY5,134 million

(down 16.4% YoY)

Net Income attributable to IIJ

JPY3,167 million

(down 21.6% YoY)

Financial Targets for FY2017

Revenues

JPY176.0 billion

(up 11.5% YoY)

Operating Income

JPY6.5 billion

(up 26.6% YoY)

Net Income attributable to IIJ

JPY4.0 billion

(up 26.3% YoY)

Annual Cash Dividend JPY27.00 per common share

Overview of FY2016 Financial Results and Business Outlook

"In FY2016, a number of business developments, ranging from cloud, mobile, security and CDN2carried out in recent years, led to make our business growth fundamentals stronger. Our total revenue hit strong annual growth rate of 12.2%," said Eijiro Katsu, President and COO of IIJ.

"For cloud, more and more large-scale core enterprise systems of Japanese blue-chips are starting to make visible accumulation. Such projects include service platform for an online-ticketing company, unified business operation platform for a global manufacturing company's group and local governments' "Information Security Cloud." We've been also continuously expanding service functions for "IIJ GIO

Infrastructure P2 ("GIO P2")"3to meet complex cloud demands of Japanese blue-chips. Our FY2016 cloud revenue was JPY15.7 billion and we expect it to increase to JPY18.0 billion in FY2017 with these undergoing transactions and further order accumulation."

"For mobile, while the competition has been severe, we continue to accumulate subscription mainly through sales partners and MVNE.4As of March 31, 2017, our total mobile subscription grew to 1.86 million, annual increase of 628 thousand subscriptions. Our mobile revenue also grew by 71.3% year over year to JPY26.7 billion. Our market share among MVNOs on net addition-base in Japan was approx. 24%.5We're

very excited about becoming Japan's first full-MVNO service provider6as it will enable us to develop our own embedded SIMs which is a critical element for IoT7and preparing service cut-over in 4Q17."

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 CDN (Contents Distribution Network) is an optimized network to distribute contents such as pictures and videos over Internet.

3 "IIJ GIO Infrastructure P2" was launched in November 2015 as a renewed service platform to further meet Japanese enterprises IT needs are certainly contributing to promote cloud shift. The services offer public and private cloud resources seamlessly and provide closed connectivity between our cloud services to Amazon's AWS and Microsoft Azure services to meet hybrid and multi cloud systems needs.

4 MVNE (Mobile Virtual Network Enabler) provides business and service infrastructure to MVNOs.

5 Out of 5.9 hundred thousand total net addition for all MVNOs subscription from October to December 2016 in Japan, our net addition was 1.4 hundred thousand, making approx. 24% shares. These figures are according to the report published by the Ministry of Internal Affairs and Communications in March 2017.

6 For details, please refer to our press release titled "IIJ Begins to Engage in a Full MVNO for Enhanced MVNO Business" announced in August 2016.

7 IoT (Internet of Things) enables not only physical objects but also any "things" connected to network to exchange information automatically.

"As for security, we continue to see strong demands especially for Sandbox and DDoS protection services which led our FY2016 security services revenues to grow by 10.9% year over year. In addition to the existing security services, we launched Security Operation Center services by leveraging our massive network log data and an ability to analyze them. For CDN, we established a joint venture8with 15 major Japanese broadcasting companies to provide reliable CDN platform. As we expect to be their primary IT

provider, we should benefit from their requirement for significantly wide bandwidth."

"In terms of financial results, FY2016 operating income decreased year over year due to the overall cost increase along with the continuous business investments and a deterioration of SI gross margin.9However in the latter half, the revenue and income accumulated accordingly with our revised plan announced in November 2016 and SI profitability recovered in 4Q16 by mainly improving the productivity of

outsourcing personnel and with the absence of large-scale unprofitable projects."

"For FY2017, we target the total revenue of JPY176.0 billion, 11.5% annual increase, with continuous expansion of monthly recurring revenue services including mobile, many flagship GIO P2 projects, security and more. With the accumulation of recurring network services revenues and improvement of SI profitability should absorb increasing costs; thus FY2017 operating income should turn to increase to JPY6.5 billion, up by 26.6% year over year," continued Katsu.

"IT systems requiring IoT and BigData should significantly increase in the middle-to-long term. We believe that the value IIJ can offer as a total platform provider covering, network, cloud, mobile, security, and SI should become significant," concluded Koichi Suzuki, Founder, Chairman and CEO of IIJ.

FY2016 Financial Results Summary Operating Results Summary

FY2015

FY2016

YoY Change

Total revenues

JPY millions

JPY millions

%

140,648

157,789

12.2

Network services

79,296

92,996

17.3

Systems integration (SI)

54,188

57,749

6.6

Equipment sales

3,275

2,994

(8.6)

ATM operation business

3,889

4,050

4.1

Total costs

115,993

132,542

14.3

Network services

64,239

76,387

18.9

Systems integration (SI)

46,226

50,992

10.3

Equipment sales

2,969

2,735

(7.9)

ATM operation business

2,559

2,428

(5.1)

Total gross margin

24,655

25,247

2.4

Network services

15,056

16,609

10.3

Systems integration (SI)

7,963

6,756

(15.2)

Equipment sales

306

260

(15.4)

ATM operation business

1,330

1,622

22.0

SG&A expenses and R&D

18,515

20,113

8.6

Operating income

6,140

5,134

(16.4)

Income before income tax expense

6,193

5,427

(12.4)

Net income attributable to IIJ

4,038

3,167

(21.6)

8 JOCDN Inc. which is our equity method investee with a 20% ownership.

9 As we disclosed in our financial target revision for FY2016 (announced in November 2016), low productivity of systems engineers in 1H16 and some unprofitable large-scale projects led to a sharp decline in systems integration profitability.

Segment Results Summary

FY2015

FY2016

Total revenues

JPY millions

140,648

JPY millions

157,789

Network services and SI business

137,142

154,126

ATM operation business

3,889

4,050

Elimination

(383)

(387)

Operating income

6,140

5,134

Network service and SI business

5,128

3,854

ATM operation business

1,149

1,438

Elimination

(137)

(157)

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

FY2016 Revenues and Income

Revenues

Total revenues were JPY157,789 million, up 12.2% YoY (JPY140,648 million for FY2015).

Network services revenue was JPY92,996 million, up 17.3% YoY (JPY79,296 million for FY2015).

Revenues for Internet connectivity services for enterprise were JPY22,634 million, up 28.6% YoY from JPY17,597 million for FY2015, mainly due to an increase in mobile-related services revenues along with an expansion of MVNE business clients' business transaction.

Revenues for Internet connectivity services for consumers were JPY21,735 million, up 42.5% YoY from JPY15,256 million for FY2015, mainly due to the revenue growth of "IIJmio Mobile Services," consumer mobile services which offer inexpensive data communication and voice services with SIM cards.

Revenues for WAN services were JPY26,460 million, up 5.1% YoY compared to JPY25,177 million for FY2015.

Revenues for Outsourcing services were JPY22,167 million, up 4.2% YoY from JPY21,266 million for FY2015, mainly due to an increase in security-related services revenues.

Network Services Revenues Breakdown

FY2015

FY2016

YoY Change

Internet connectivity services (Enterprise)

JPY millions

17,597

JPY millions

22,634

%

28.6

IP service*1

9,671

9,768

1.0

IIJ FiberAccess/F and IIJ DSL/F

3,077

3,043

(1.1)

IIJ Mobile service (Enterprise)

4,580

9,595

109.5

IIJ Mobile MVNO Platform Service*2

2,063

6,441

212.2

Others

269

228

(15.4)

Internet connectivity services (Consumer)

15,256

21,735

42.5

IIJ

12,719

19,634

54.4

IIJmio Mobile Service*3

11,001

17,109

55.5

hi-ho

2,537

2,101

(17.2)

WAN services

25,177

26,460

5.1

Outsourcing services

21,266

22,167

4.2

Total network services

79,296

92,996

17.3

*1. IP service revenues include revenues from the data center connectivity service.

*2. From 1Q16, the revenue from "IIJ Mobile MVNO Platform Service", which is included in "IIJ Mobile service (Enterprise)," is disclosed. "IIJ Mobile MVNO Platform Service" provides MVNO platform to our MVNE clients.

*3. From 1Q16, the revenue from "IIJmio Mobile Service" (formerly known as "IIJmio High Speed Mobile Service" until September 30, 2016), which is included in "Internet connectivity services (Consumer)" provided by IIJ, is disclosed.

Number of Contracts and Subscription for Connectivity Services*1

as of Mar. 31, 2016

as of Mar. 31, 2017

YoY Change

Internet connectivity services (Enterprise)

510,067

933,496

423,429

IP service (1Gbps-)

367

437

70

IP service (100Mbps-999Mbps)

532

591

59

IP service (-99Mbps)

690

658

(32)

IIJ Data center connectivity service

270

253

(17)

IIJ FiberAccess/F and IIJ DSL/F

75,932

72,605

(3327)

IIJ Mobile service (Enterprise)

431,030

857,903

426,873

IIJ Mobile MVNO Platform Service*2

250,757

582,250

331,493

Others

1,246

1,049

(197)

Internet connectivity services (Consumer)

1,230,600

1,409,259

178,659

IIJ

1,084,295

1,275,875

191,580

IIJmio Mobile Service*3

747,395

951,249

203,854

hi-ho

146,305

133,384

(12,921)

Total contracted bandwidth*4

2,315.9Gbps

2,773.3Gbps

457.4Gbps

*1. Numbers in the table above show number of contracts except for "IIJ Mobile service (Enterprise)," "IIJ" and "hi-ho" which show number of subscriptions.

*2. From 1Q16, the number of subscription for "IIJ Mobile MVNO Platform Service", which is included in "IIJ Mobile service (Enterprise)", is disclosed.

*3. From 1Q16, the number of subscription for "IIJmio Mobile Service" (formerly known as "IIJmio High Speed Mobile Service" until September 30, 2016), which is included in "Internet connectivity services (Consumer)" provided by IIJ, is disclosed.

*4. Regarding IP service, data center connectivity service and IIJ FiberAccess/F and IIJ DSL/F of Internet connectivity services (Enterprise), total contracted bandwidths are calculated by multiplying number of contracts by contracted bandwidths respectively.

SI revenues were JPY57,749 million, up 6.6% YoY (JPY54,188 million for FY2015).

Systems construction revenue, a one-time revenue, was JPY22,626 million, up 7.0% YoY, mainly due to an increase and an expansion of the business transactions. Systems operation and maintenance revenue, a recurring revenue, was JPY35,123 million, up 6.3% YoY, mainly due to an increase in private cloud services' revenues and an increase of operation and maintenance which was shifted from systems construction projects.

Orders received for SI and equipment sales totaled JPY68,599 million, up 10.5% YoY; orders received for systems construction and equipment sales were JPY26,721 million, up 3.7% YoY and orders received for systems operation and maintenance were JPY41,877 million, up 15.4% YoY.

Order backlog for SI and equipment sales as of March 31, 2017 amounted to JPY41,501 million, up 23.3% YoY; order backlog for systems construction and equipment sales was JPY7,179 million, up 18.1% YoY and order backlog for systems operation and maintenance was JPY34,322 million, up 24.5% YoY.

Equipment sales revenues were JPY2,994 million, down 8.6% YoY (JPY3,275 million for FY2015) mainly due to the fluctuation in sales of devises such as mobile devices.

AT M operation business revenues were JPY4,050 million, up 4.1% YoY (JPY3,889 million for FY2015). As of March 31, 2017, 1,066 ATMs have been placed.

Cost and expense

Total cost of revenues was JPY132,542 million, up 14.3% YoY (JPY115,993 million for FY2015).

Cost of network services revenue was JPY76,387 million, up 18.9% YoY (JPY64,239 million for FY2015). There were an increase in outsourcing-related costs with our mobile infrastructure enhancement along with our mobile-related revenue increase, an increase in circuit-related costs along with our WAN services revenue increase, and an increase in network operation-related costs. Regarding NTT Docomo's interconnectivity charge for MVNO-related services, the charge based on their FY2015 actual cost was revised in March 2017 and it decreased by 14% (excluding the cost for borrowing SIM cards which arrangement took place during FY2016) year over year. Our estimate of 12% decrease, which rate had been applied to our mobile interconnectivity cost calculation from 1Q16, ended up in line with our initial estimate together with the cost for borrowing SIM. Gross margin was JPY16,609 million, up 10.3% YoY and gross margin ratio was 17.9% compared to 19.0% in FY2015.

Cost of SI revenues was JPY50,992 million, up 10.3% YoY (JPY46,226 million for FY2015). There were an increase in outsourcing-related and personnel-related costs along with an increase of large-scale SI transactions and an increase in network operation-related costs mainly along with the launch of "IIJ GIO Infrastructure P2." Gross margin was JPY6,756 million, down 15.2% YoY and gross margin ratio was 11.7% compared to 14.7% in FY2015. It was mainly due to profit deterioration resulted from low productivity of systems engineers and the delay in offering some functions of our ASP-type foreign exchange system, especially in 1H16.

Cost of equipment sales revenues was JPY2,735 million, down 7.9% YoY (JPY2,969 million for FY2015) along with the revenue decrease. Gross margin was JPY260 million (JPY306 million for FY2015) and gross margin ratio was 8.7% compared to 9.4% in FY2015.

Cost of ATM operation business revenues was JPY2,428 million, down 5.1% YoY (JPY2,559 million for FY2015). Gross margin was JPY1,622 million (JPY1,330 million for FY2015) and gross margin ratio was 40.1% compared to 34.2% in FY2015.

SG&A and R&D expenses

SG&A and R&D expenses in total were JPY20,113 million, up 8.6% YoY (JPY18,515 million for FY2015).

Sales and marketing expenses were JPY11,432 million, up 8.0% YoY (JPY10,589 million for FY2015) mainly due to increases in sales commission expenses of mobile-related services and advertising expenses.

General and administrative expenses were JPY8,215 million, up 10.0% YoY (JPY7,471 million for FY2015) mainly due to increases in office rent expenses.

Research and development expenses were JPY466 million, up 2.4% YoY (JPY455 million for FY2015).

Operating income

Operating income was JPY5,134 million, down 16.4% YoY (JPY6,140 million for FY2015).

Other income (expenses)

Other income (expenses) was an income of JPY293 million (an income of JPY53 million for FY2015), mainly because of net gain on sales of other investments of JPY217 million (JPY24 million for FY2015), distribution from fund investment of JPY321 million (included in other-net of JPY315 million, JPY209 million for FY2015), dividend income of JPY118 million from other investments (JPY93 million for FY2015), interest expense of JPY304 million (JPY241 million for FY2015) and foreign exchange losses of JPY45 million (JPY71 million for FY2015).

Income before income tax expenses

Income before income tax expenses was JPY5,427 million, down 12.4% YoY (JPY6,193 million for FY2015) .

Net income

Income tax expense was JPY2,225 million (JPY2,183 million for FY2015).

Equity in net income of equity method investees was JPY130 million (JPY180 million for FY2015) mainly due to net income of Internet Multifeed Co.

As a result of the above, net income was JPY3,332 million, down 20.5% YoY (JPY4,190 million for FY2015).

Net income attributable to IIJ

Net income attributable to non-controlling interests was JPY165 million mainly related to net income of Trust Networks Inc. (JPY152 million for FY2015).

Net income attributable to IIJ was JPY3,167 million, down 21.6% YoY (JPY4,038 million for FY2015).

FY2016 Balance Sheets and Cash Flows

Balance sheets

As of March 31, 2017, the balance of total assets was JPY137,395 million, increased by JPY19,560 million from the balance as of March 31, 2016 of JPY117,835 million.

As of March 31, 2017, the balance of current assets was JPY63,722 million, increased by JPY10,316 million from the balance as of March 31, 2016 of JPY53,406 million. The major breakdown of current assets was an increase in accounts receivable by JPY3,637 million to JPY27,384 million, an increase in cash and cash equivalents by JPY2,389 million to JPY21,959 million, an increase in prepaid expenses by JPY2,841 million to JPY7,611 million and an increase in inventories by JPY794 million to JPY2,798 million. As of March 31, 2017, the balance of noncurrent assets was JPY73,673 million, increased by JPY9,244 million from the balance as of March 31, 2016 of JPY64,429 million. The major breakdown of noncurrent assets was an increase in property and equipment by JPY5,451 million to JPY39,775 million, an increase in other investments by JPY1,976 million to JPY7,925 million mainly due to an increase in the fair value of available-for-sale securities and increase in prepaid expenses-noncurrent by JPY1,620 million to JPY6,607 million. Other investments as of March 31, 2017, consisted of JPY5,780 million in available-for-sale securities (including JPY5,464 million of strategic shareholdings), JPY1,124 million in nonmarketable equity securities and JPY1,021 million in investments in funds, including some through a trust. As of March 31, 2017, the balance of non-amortized intangible assets was JPY6,220 million, decreased by JPY82 million from the balance as of March 31, 2016 of JPY6,302 million. The major breakdown of non-amortized intangible assets was JPY6,170 million in goodwill and a decrease by JPY81 million to JPY15 million in trademark. The balance of amortized intangible assets, which was customer relationships, was JPY3,036 million, decreased by JPY380 million from the balance as of March 31, 2016 of JPY3,417 million.

As of March 31, 2017, the balance of current liabilities was JPY39,983 million, increased by JPY3,917 million from the balance as of March 31, 2016 of JPY36,066 million. The major breakdown of current liabilities was an increase in accounts payable (trade and other) by JPY1,557 million to JPY16,962 million and an increase in capital lease obligations-current portion by JPY864 million to JPY4,819 million. As of March 31, 2017, the balance of noncurrent liabilities was JPY30,032 million, increased by JPY13,607 million from the balance as of March 31, 2016 of JPY16,425 million. The major breakdown of noncurrent liabilities was an increase in long-term borrowings by JPY8,500 million to JPY8,500 million and an increase in capital lease obligations-noncurrent by JPY2,605 million to JPY10,385 million.

As of March 31, 2017, the balance of total IIJ shareholders' equity was JPY66,742 million, increased by JPY1,897 million from the balance as of March 31, 2016 of JPY64,845 million. There were an increase in retained earnings by JPY2,041 million to JPY4,512 million, an increase in accumulated other comprehensive income by JPY1,303 million to JPY2,500 million mainly due to an increase the fair value of available-for-sale securities and an increase in treasury stock by JPY1,505 million to JPY1,897 million due to the repurchase of own shares, authorized at the meeting of IIJ's Board of Directors held on November 4, 2016. IIJ shareholders' equity ratio (total IIJ shareholders' equity divided by total assets) as of March 31, 2017 was 48.6%.

Cash flows

Cash and cash equivalents as of March 31, 2017 were JPY21,959 million (JPY19,569 million as of March 31, 2016).

Net cash provided by operating activities for FY2016 was JPY7,368 million (net cash provided by operating activities of JPY12,052 million for FY2015.) There were net income of JPY3,332 million, depreciation and amortization of JPY10,894 million and net cash out flow of JPY7,026 million from changes in operating assets and liabilities. As for changes in operating assets and liabilities, there were an increase in accounts receivable mainly due to revenue growth, an increase in prepaid expenses (including prepaid expenses-noncurrent) and payments in relation to up front payment for software licenses and maintenance cost for service facilities.

Net cash used in investing activities for FY2016 was JPY7,376 million (net cash used in investing activities of JPY8,377 million for FY2015), mainly due to payments for purchase of property and equipment of JPY10,624 million (JPY10,899 million for FY2015) and proceeds from sales of property and equipment, which include sales and leaseback, of JPY3,046 million (JPY2,574 million for FY2015).

Net cash provided by financing activities for FY2016 was JPY2,492 million (net cash used in financing activities of JPY5,201 million for FY2015), mainly due to proceeds from long-term borrowings of JPY8,500 million, proceeds from financing in relation to procurement of software license of JPY1,498 million, principal payments under capital leases of JPY4,820 million (JPY4,194 million for FY2015), payments for purchase of treasury stock of JPY1,505 million and FY2015 year-end and FY2016 interim dividend payments of JPY1,126 million (JPY1,011 million for FY2015).

FY2017 Financial Targets

Our financial targets for the fiscal year ending March 31, 2018 (FY2017) are as follows:

(JPY in billions)

Revenues

Operating Income

Income before Income Tax Expense

Net Income attributable to IIJ

1H FY2017 Target

82.4

2.0

2.0

1.1

Full FY2017 Target

176.0

6.5

6.5

4.0

With the continuous expansion of Japanese economy, Japanese enterprises' ICT-related investment and spending should continuously grow during FY2017. Regarding consumer market in Japan, we expect the inexpensive SIM card services market to further penetrate. Based on these, we expect our operating income to improve with continuous expansion of revenue and gross margin.

We target total revenue of JPY176.0 billion, up 11.5% year over year. We expect both enterprise and consumer mobile services to further increase, cloud-related revenue to reach to JPY18.0 billion, revenue contribution from a large-scale local government's information security cloud project and other monthly recurring revenue services such as Internet connectivity, outsourcing, WAN and systems operation and maintenance revenue to continuously accumulate.

We target operating income of JPY6.5 billion, up 26.6% year over year. While SG&A expenses such as sales commission, advertisement, and personnel related fees are to increase continuously, we expect network services gross margin continuous expansion and systems integration gross margin improvement, approximately 1 point increase from FY2016, should absorb such increase in SG&A and lead to an operating income increase.

We target income before income tax expense of JPY6.5 billion, up 19.8% year over year.

We target net income attributable to IIJ of JPY4.0 billion, up 26.3% year over year, considering taxes calculated by a normal statutory rate and income of equity method investees and non-controlling interests.

FY2017 Dividend Forecast

Our FY2017 dividend forecast is as follows:

Interim

Year-end

Full Year

FY2017 Dividend (forecast)

JPY13.50 (forecast)

JPY13.50 (forecast)

JPY27.00 (forecast)

FY2016 Dividend (scheduled)

JPY13.50 (paid)

JPY13.50 (scheduled)

JPY27.00 (scheduled)

FY2016 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

FY2015

FY2016

Adjusted EBITDA

JPY millions

JPY millions

16,073

16,109

Depreciation and Amortization

(9,922)

(10,894)

Impairment loss on other intangible assets

(11)

(81)

Operating Income

6,140

5,134

Other Income

53

293

Income Tax Expense

2,183

2,225

Equity in Net Income of Equity Method Investees

180

130

Net income

4,190

3,332

Less: Net income attributable to noncontrolling interests

(152)

(165)

Net Income attributable to IIJ

4,038

3,167

CAPEX

FY2015

FY2016

CAPEX, including capital leases

JPY millions

JPY millions

14,812

16,531

Acquisition of Assets by Entering into Capital Leases

6,118

8,302

Purchase of Property and Equipment

8,694

8,229

Presentation

Presentation materials will be posted on our web site (http://www.iij.ad.jp/en/ir/) on May 15, 2017.

About Internet Initiative Japan Inc.

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

For inquiries, contact:

IIJ Investor Relations

Tel: +81-3-5205-6500 E-mail: ir@iij.ad.jp URL: http://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 FY2016 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.

Consolidated Balance Sheets (Unaudited)‌

(As of March 31, 2016 and March 31, 2017)

As of March 31, 2016

As of March 31, 2017

Thousands of JPY

Thousands of JPY

ASSETS

19,569,095

21,958,591

CURRENT ASSETS:

Cash and cash equivalents

Accounts receivable, net of allowance for doubtful accounts of JPY 74,229 thousand and JPY 107,684 thousand

at March 31, 2016 and March 31, 2017, respectively

23,746,683

27,383,692

Inventories

2,003,573

2,798,054

Prepaid expenses-current

4,769,988

7,610,925

Deferred tax assets-current

1,481,651

1,298,469

Other current assets, net of allowance for doubtful accounts of

JPY 15,693 thousand and JPY 15,192 thousand at March 31, 2016

and March 31, 2017, respectively

1,834,951

2,672,008

Total current assets

53,405,941

63,721,739

INVESTMENTS IN EQUITY METHOD INVESTEES

2,979,652

3,150,175

OTHER INVESTMENTS

5,948,741

7,924,914

PROPERTY AND EQUIPMENT, net of accumulated depreciation and amortization of JPY 45,345,543 thousand and JPY 50,566,983 thousand at March 31, 2016 and March 31, 2017, respectively

34,324,150

39,775,444

GOODWILL

6,169,609

6,169,609

OTHER INTANGIBLE ASSETS-Net

3,549,459

3,087,017

GUARANTEE DEPOSITS

3,084,681

3,060,365

DEFERRED TAX ASSETS-Noncurrent

224,316

80,566

NET INVESTMENT IN SALES-TYPE LEASES-Noncurrent

2,444,848

2,047,682

Prepaid expenses-Noncurrent

4,987,193

6,607,437

OTHER ASSETS, net of allowance for doubtful accounts of JPY 61,593 thousand and JPY 61,877 thousand

at March 31, 2016 and March 31, 2017, respectively

716,314

1,770,201

TOTAL

117,834,904

137,395,149

As of March 31, 2016

As of March 31, 2017

Thousands of JPY

Thousands of JPY

LIABILITIES AND SHAREHOLDERS' EQUITY

9,250,000

9,250,000

CURRENT LIABILITIES:

Short-term borrowings

Capital lease obligations-current portion

3,954,386

4,818,723

Accounts payable-trade

13,906,703

14,653,065

Accounts payable-other

1,497,767

2,308,790

Income taxes payable

1,078,412

1,075,745

Accrued expenses

2,932,653

2,755,581

Deferred income-current

2,528,885

3,750,542

Other current liabilities

917,300

1,370,661

Total current liabilities

36,066,106

39,983,107

LONG-TERM BORROWINGS

-

8,500,000

CAPITAL LEASE OBLIGATIONS-Noncurrent

7,779,367

10,384,643

ACCRUED RETIREMENT AND PENSION COSTS-Noncurrent

3,581,426

3,532,965

DEFERRED TAX LIABILITIES-Noncurrent

710,055

963,845

DEFERRED INCOME-Noncurrent

3,092,562

3,656,612

OTHER NONCURRENT LIABILITIES

1,261,413

2,993,777

Total Liabilities

52,490,929

70,014,949

COMMITMENTS AND CONTINGENCIES

25,509,499

25,509,499

SHAREHOLDERS' EQUITY:

Common-stock

-authorized, 75,520,000 shares; issued and outstanding, 46,711,400 shares at March 31, 2016 and March 31, 2017, respectively

Additional paid-in capital

36,059,833

36,117,511

Retained earnings

2,471,276

4,511,945

Accumulated other comprehensive income

1,196,669

2,499,700

Treasury stock -758,709 shares and 1,650,909 shares held by the company at March 31, 2016 and March 31, 2017, respectively

(392,070)

(1,896,784)

Total Internet Initiative Japan Inc. shareholders' equity

64,845,207

66,741,871

NONCONTROLLING INTERESTS

498,768

638,329

Total equity

65,343,975

67,380,200

TOTAL

117,834,904

137,395,149

Consolidated Statements of Income and Consolidated Statements of Comprehensive Income (Unaudited)

(For the fiscal year ended March 31, 2016 and March 31, 2017)

Fiscal Year Ended

Fiscal Year Ended

March 31, 2016

March 31, 2017

Thousands of JPY

Thousands of JPY

REVENUES:

17,597,343

22,633,739

Network services:

Internet connectivity services (enterprise)

Internet connectivity services (consumer)

15,255,596

21,734,968

WAN services

25,176,730

26,459,697

Outsourcing services

21,265,895

22,167,432

Total

79,295,564

92,995,836

Systems integration:

21,144,677

22,625,753

Systems construction

Systems operation and maintenance

33,043,669

35,122,940

Total

54,188,346

57,748,693

Equipment sales

3,275,220

2,994,449

ATM operation business

3,888,878

4,050,081

Total revenues

140,648,008

157,789,059

COSTS AND EXPENSES:

64,239,600

76,386,849

Cost of network services

Cost of systems integration

46,225,629

50,992,480

Cost of equipment sales

2,968,711

2,735,169

Cost of ATM operation business

2,558,883

2,427,870

Total costs

115,992,823

132,542,368

Sales and marketing

10,588,887

11,431,467

General and administrative

7,470,746

8,214,598

Research and development

455,198

466,319

Total costs and expenses

134,507,654

152,654,752

OPERATING INCOME

6,140,354

5,134,307

OTHER INCOME (EXPENSES):

93,054

117,567

Dividend income

Interest income

27,587

35,259

Interest expense

(241,057)

(303,685)

Foreign exchange gain (loss), net

(71,270)

(45,116)

Net gain on sales of other investments

23,765

216,646

Loss on sales of stocks of an affiliate

-

(12,070)

Impairment of other investments

(14,729)

(30,554)

Other -net

235,630

314,806

Other income -net

52,980

292,853

INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE AND EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES

6,193,334

5,427,160

INCOME TAX EXPENSE

2,183,531

2,224,880

EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES

180,219

129,791

NET INCOME

4,190,022

3,332,071

LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

(151,740)

(165,561)

NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC.

4,038,282

3,166,510

Fiscal Year Ended

Fiscal Year Ended

March 31, 2016

March 31, 2017

NET INCOME PER SHARE

45,950,098

45,652,981

BASIC WEIGHTED-AVERAGE NUMBER OF SHARES (shares)

DILUTED WEIGHTED-AVERAGE NUMBER OF SHARES (shares)

46,043,383

45,772,470

BASIC WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs)

91,900,196

91,305,962

DILUTED WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs)

92,086,766

91,544,940

BASIC NET INCOME PER SHARE (JPY)

87.88

69.36

DILUTED NET INCOME PER SHARE (JPY)

87.71

69.18

BASIC NET INCOME PER ADS EQUIVALENT (JPY)

43.94

34.68

DILUTED NET INCOME PER ADS EQUIVALENT (JPY)

43.85

34.59

Consolidated Statements of Comprehensive Income (Unaudited)

Fiscal Year Ended

Fiscal Year Ended

March 31, 2016

March 31, 2017

Thousands of JPY

Thousands of JPY

NET INCOME

4,190,022

3,332,071

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:

(67,652)

(181,110)

Foreign currency translation adjustments

Unrealized holding gain (loss) on securities

(275,952)

1,280,095

Defined benefit pension plans

(394,418)

204,046

TOTAL COMPREHENSIVE INCOME

3,452,000

4,635,102

LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

(155,698)

(165,561)

COMPREHENSIVE INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC.

3,296,302

4,469,541

Internet Initiative Japan Inc.

Consolidated Statements of Shareholders' Equity (Unaudited)

(For the fiscal year ended March 31, 2016 and March 31, 2017)

Total equity

Internet Initiative Japan Inc. shareholders' equity

NON CONTROLLIN G INTERESTS

Retained earnings (Accumulated deficit)

Accumulated other comprehensive income (loss)

Shares of common stock outstanding

Common stock

Treasury stock

Additional paid-in capital

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, 2015

62,843,780

(556,162)

1,938,649

46,701,000

25,499,857

(392,070)

36,014,128

339,378

Subsidiary stock issuance

3,692

4,038,282

(741,980)

10,400

9,642

(9,632)

3,692

Issuance of common stock upon exercise of stock options

10

151,740

Stock-based compensation

55,337

55,337

Net Income

4,190,022

Other Comprehensive income (loss), net of tax

(738,022)

(1,010,844)

3,958

Dividends paid

(1,010,844)

BALANCE, MARCH 31, 2016

65,343,975

2,471,276

1,196,669

46,711,400

25,509,499

(392,070)

36,059,833

498,768

Dividends paid to noncontrolling interests

(26,000)

3,166,510

1,303,031

(1,504,714)

57,678

(26,000)

Stock-based compensation

57,678

165,561

Net Income

3,332,071

Other Comprehensive income (loss), net of tax

1,303,031

(1,125,841)

Dividends paid

(1,125,841)

Payments for purchase of treasury stock

(1,504,714)

BALANCE, MARCH 31, 2017

67,380,200

4,511,945

2,499,700

46,711,400

25,509,499

(1,896,784)

36,117,511

638,329

IIJ 4Q and Full FY2016

- 17 -

Internet Initiative Japan Inc.

Consolidated Statements of Cash Flows (Unaudited)

(For the fiscal year ended March 31, 2016 and March 31, 2017)

Fiscal Year Ended

Fiscal Year Ended

March 31, 2016

March 31, 2017

Thousands of JPY

Thousands of JPY

OPERATING ACTIVITIES:

4,190,022

3,332,071

Net income

Adjustments to reconcile net income to net cash provided by operating activities:

9,921,555

10,893,657

Depreciation and amortization

Impairment loss on other intangible assets

11,000

81,000

Provision for retirement and pension costs, less payments

200,871

252,825

Provision for allowance for doubtful accounts

48,407

68,300

Gain on sales of property and equipment

(38,219)

(31,809)

Loss on disposal of property and equipment

66,169

170,971

Net gain on sales of other investments

(23,765)

(216,646)

Impairment of other investments

14,729

30,554

Loss on sales of stocks of an affiliate

-

12,070

Foreign exchange loss (gain), net

(51,727)

18,152

Equity in net income of equity method investees, less dividends received

(124,141)

(78,709)

Deferred income tax expense (benefit)

249,115

(94,343)

Others

(12,341)

(44,667)

Changes in operating assets and liabilities:

(1,565,857)

(3,751,392)

Increase in accounts receivable

Decrease in net investment in sales-type lease - noncurrent

98,511

492,530

Increase in inventories

(777,192)

(800,296)

Increase in prepaid expenses

(1,083,665)

(2,859,763)

Increase in other current and noncurrent assets

(1,485,629)

(3,317,968)

Increase in accounts payable

1,760,207

827,792

Increase (decrease) in income taxes payable

579,414

(2,621)

Decrease in accrued expenses

(32,288)

(167,597)

Increase in deferred income-current

418,162

1,257,870

Increase in deferred income-noncurrent

201,897

604,269

Increase (decrease) in other current and noncurrent liabilities

(513,647)

691,442

Net cash provided by operating activities

12,051,588

7,367,692

INVESTING ACTIVITIES:

(10,898,533)

(10,623,993)

Purchase of property and equipment

Proceeds from sales of property and equipment

2,574,449

3,046,189

Purchase of available-for-sale securities

(59,490)

-

Purchase of other investments

(376,067)

(410,587)

Investment in an equity method investee

(338,166)

(99,000)

Proceeds from sales of available-for-sale securities

141,235

-

Proceeds from sales of other investments

808,465

539,389

Payments of guarantee deposits

(348,005)

(50,345)

Refund of guarantee deposits

21,567

92,002

Payments for refundable insurance policies

(56,362)

(56,476)

Refund from insurance policies

10,108

-

Proceeds from subsidies

200,000

200,000

Other

(56,029)

(13,000)

Net cash used in investing activities

(8,376,828)

(7,375,821)

Fiscal Year Ended

Fiscal Year Ended

March 31, 2016

March 31, 2017

Thousands of JPY

Thousands of JPY

FINANCING ACTIVITIES:

1,550,000

8,550,000

Proceeds from issuance of short-term borrowings with initial maturities over three months and long-term borrowings

Repayments of short-term borrowings with initial maturities over three months

(1,550,000)

(50,000)

Principal payments under capital leases

(4,194,215)

(4,819,530)

Proceeds from other noncurrent liabilities

-

1,498,306

Repayments of other noncurrent liabilities

-

(30,122)

Proceeds from issuance of subsidiaries stock to noncontrolling interests

3,692

-

Payments for purchase of treasury stock

-

(1,504,714)

Dividends paid

(1,010,844)

(1,125,841)

Other

10

(26,000)

Net cash provided by (used in) financing activities

(5,201,357)

2,492,099

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

2,059

(94,474)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(1,524,538)

2,389,496

CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD

21,093,633

19,569,095

CASH AND CASH EQUIVALENTS, END OF THE PERIOD

19,569,095

21,958,591

ADDITIONAL CASH FLOW INFORMATION:

241,260

302,035

Interest paid

Income taxes paid

1,377,753

2,462,106

NONCASH INVESTING AND FINANCING ACTIVITIES:

8,065,674

8,301,695

Acquisition of assets by entering into capital leases

Facilities purchase liabilities

1,497,767

2,308,790

Asset retirement obligation

45,169

31,980

Fourth Quarter FY2016 Consolidated Financial Results (3 months)

The following tables are highlight data of fourth quarter FY2016 (3 months) consolidated financial results (unaudited, for the three months ended March 31, 2017).

Operating Results Summary

4Q15

4Q16

YoY %

Change

Total Revenues:

JPY millions

JPY millions

7.1

41,266

44,187

Network Services

21,080

24,515

16.3

Systems Integration (SI)

18,267

17,891

(2.1)

Equipment Sales

910

787

(13.6)

ATM Operation Business

1,009

994

(1.4)

Cost of Revenues:

34,405

36,770

6.9

Network Services

17,161

20,113

17.2

Systems Integration (SI)

15,771

15,348

(2.7)

Equipment Sales

844

711

(15.7)

ATM Operation Business

629

598

(4.9)

SG&A Expenses and R&D

4,794

5,438

(13.4)

Operating Income

2,067

1,979

(4.3)

Income before Income Tax Expense

2,016

1,994

(1.1)

Net Income attributable to IIJ

1,465

1,256

(14.3)

Network Service Revenue Breakdown

4Q15

4Q16

YoY %

Change

Internet Connectivity Service (Enterprise)

JPY millions

JPY millions

30.6

4,727

6,173

IP Service*1

2,453

2,438

(0.6)

IIJ FiberAccess/F and IIJ DSL/F

768

763

(0.6)

IIJ Mobile Service

1,440

2,915

(102.4)

IIJ Mobile MVNO Platform Service*2

780

2,083

167.2

Others

66

57

(14.3)

Internet Connectivity Service (Consumer)

4,548

5,832

28.2

IIJ

3,952

5,344

35.2

IIJmio Mobile Service*3

3,406

4,672

37.2

hi-ho

596

488

(18.2)

WAN Services

6,350

6,612

4.1

Outsourcing Services

5,455

5,899

8.1

Network Services Revenues

21,080

24,515

16.3

*1 IP service revenues include revenues from the data center connectivity service.

*2 From 1Q16, the revenue from "IIJ Mobile MVNO Platform Service", which is included in "IIJ Mobile service (Enterprise), " is disclosed. "IIJ Mobile MVNO Platform Service" provides MVNO platform to our MVNE clients.

*3 From 1Q16, the revenue from "IIJmio Mobile Service" (formerly known as "IIJmio High Speed Mobile Service" until September 30, 2016), which is included in "Internet connectivity services (Consumer)" provided by IIJ, is disclosed.

- 20 -

IIJ 4Q and Full FY2016

Reconciliation of Non-GAAP Financial Measures (4th Quarter FY2016 (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

4Q15

4Q16

Adjusted EBITDA

JPY millions

JPY millions

4,706

4,948

Depreciation and Amortization

(2,628)

(2,888)

Impairment loss on other intangible assets

(11)

(81)

Operating Income

2,067

1,979

Other Income

(51)

15

Income Tax Expense

487

759

Equity in Net Income of Equity Method Investees

(27)

61

Net income

1,502

1,296

Less: Net income attributable to noncontrolling interests

(37)

(39)

Net Income attributable to IIJ

1,465

1,257

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

4Q15

4Q16

CAPEX, including capital leases

JPY millions

JPY millions

2,601

4,273

Acquisition of Assets by Entering into Capital Leases

2,361

2,459

Purchase of Property and Equipment

240

1,814

- 21 -

IIJ 4Q and Full FY2016

Internet Initiative Japan Inc.

Quarterly Consolidated Statements of Income and

Quarterly Consolidated Statements of Comprehensive Income (Unaudited)

(Three Months ended March 31, 2016 and March 31, 2017)

Three Months Ended

Three Months Ended

March 31, 2016

March 31, 2017

Thousands of JPY

Thousands of JPY

REVENUES:

4,726,723

6,172,534

Network services:

Internet connectivity services (enterprise)

Internet connectivity services (consumer)

4,547,691

5,832,016

WAN services

6,350,368

6,611,961

Outsourcing services

5,455,425

5,898,789

Total

21,080,207

24,515,300

Systems integration:

9,597,461

8,652,946

Systems construction

Systems operation and maintenance

8,669,512

9,237,719

Total

18,266,973

17,890,665

Equipment sales

910,525

786,800

ATM operation business

1,008,732

994,342

Total revenues

41,266,437

44,187,107

COST AND EXPENSES:

17,161,110

20,113,321

Cost of network services

Cost of systems integration

15,771,218

15,348,322

Cost of equipment sales

843,626

710,907

Cost of ATM operation business

628,697

597,775

Total costs

34,404,651

36,770,325

Sales and marketing

2,746,697

3,039,453

General and administrative

1,938,658

2,286,433

Research and development

109,320

111,908

Total costs and expenses

39,199,326

42,208,119

OPERATING INCOME

2,067,111

1,978,988

OTHER INCOME (EXPENSE):

4,806

11,231

Dividend income

Interest income

12,216

8,478

Interest expense

(70,295)

(85,481)

Foreign exchange gain (loss), net

(59,997)

(22,044)

Net gain on sales of other investments

-

2,708

Loss on sales of stocks of an affiliate

-

(12,070)

Impairment of other investments

(14,729)

-

Other-net

76,582

112,320

Other income -net

(51,417)

15,142

INCOME FROM OPERATIONS BEFORE INCOME TAX EXPENSE AND EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES

2,015,694

1,994,130

INCOME TAX EXPENSE

486,595

759,028

EQUITY IN NET INCOME OF EQUITY METHOD INVESTEES

(26,604)

60,547

NET INCOME

1,502,495

1,295,649

LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

(37,036)

(39,400)

NET INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC.

1,465,459

1,256,249

Three Months Ended

Three Months Ended

March 31, 2016

March 31, 2017

NET INCOME PER SHARE

45,952,691

45,060,491

BASIC WEIGHTED-AVERAGE NUMBER OF

SHARES (shares)

DILUTED WEIGHTED-AVERAGE NUMBER

OF SHARES (shares)

46,053,964

45,192,000

BASIC WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs)

91,905,382

90,120,982

DILUTED WEIGHTED-AVERAGE NUMBER OF ADS EQUIVALENTS (ADSs)

92,107,928

90,384,000

BASIC NET INCOME PER SHARE (JPY)

31.89

27.88

DILUTED NET INCOME PER SHARE (JPY)

31.82

27.80

BASIC NET INCOME PER ADS EQUIVALENT (JPY)

15.95

13.94

DILUTED NET INCOME PER ADS EQUIVALENT (JPY)

15.91

13.90

Quarterly Consolidated Statements of Comprehensive Income (Unaudited)

Three Months Ended

Three Months Ended

March 31, 2016

March 31, 2017

Thousands of JPY

Thousands of JPY

NET INCOME

1,502,495

1,295,649

OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:

6,892

274,048

Foreign currency translation adjustments

Unrealized holding gain (loss) on securities

(190,829)

359,360

Defined benefit pension plans

(393,172)

193,168

TOTAL COMPREHENSIVE INCOME

925,386

2,122,225

LESS: COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS

(37,036)

(39,400)

COMPREHENSIVE INCOME ATTRIBUTABLE TO INTERNET INITIATIVE JAPAN INC.

888,350

2,082,825

Internet Initiative Japan Inc.

Consolidated Statements of Cash Flows (Unaudited)

(Three Months ended March 31, 2016 and March 31, 2017)

Three Months Ended

Three Months Ended

March 31, 2016

March 31, 2017

Thousands of JPY

Thousands of JPY

OPERATING ACTIVITIES:

1,502,495

1,295,649

Net income

Adjustments to reconcile net income to net cash provided by operating activities:

2,627,787

2,887,608

Depreciation and amortization

Impairment loss on other intangible assets

11,000

81,000

Provision for retirement and pension costs, less payments

59,257

63,902

Provision for allowance for doubtful accounts

21,715

48,311

Gain on sales of property and equipment

(247)

(16,399)

Loss on disposal of property and equipment

28,824

116,490

Net gain on sales of other investments

-

(2,708)

Impairment of other investments

14,729

-

Loss on sales of stocks of an affiliate

-

12,070

Foreign exchange loss (gain), net

(27,609)

18,429

Equity in net income of equity method investees, less dividends received

34,172

(60,547)

Deferred income tax expense

(59,126)

(444,078)

Other

368

7,049

Changes in operating assets and liabilities:

(3,551,160)

(3,687,105)

Increase in accounts receivable

Decrease in net investment in sales-type lease - noncurrent

115,610

92,140

Decrease in inventories

728,773

786,260

Decrease (increase) in prepaid expenses

607,225

(405,326)

Decrease (increase) in other current and noncurrent assets

(188,304)

1,216,437

Increase in accounts payable

1,925,649

667,465

Increase in income taxes payable

568,914

764,551

Decrease in accrued expenses

(261,171)

(186,236)

Increase in deferred income-current

12,951

1,117,832

Increase in deferred income-noncurrent

377,286

302,112

Decrease in other current and noncurrent liabilities

(308,707)

(1,714,893)

Net cash provided by operating activities

4,240,431

2,960,013

INVESTING ACTIVITIES:

(2,444,362)

(2,683,903)

Purchase of property and equipment

Proceeds from sales of property and equipment

1,481,371

827,010

Purchase of other investments

(102,381)

(94,416)

Investment in an equity method investee

(298,192)

-

Proceeds from sales of other investments

4,229

5,140

Payments of guarantee deposits

(326,873)

(33,243)

Refund of guarantee deposits

12,527

4,298

Payments for refundable insurance policies

(14,090)

(14,091)

Other

(55,351)

2,000

Net cash used in investing activities

(1,743,122)

(1,987,205)

Three Months Ended

Three Months Ended

March 31, 2016

March 31, 2017

Thousands of JPY

Thousands of JPY

FINANCING ACTIVITIES:

(1,154,338)

(1,284,643)

Principal payments under capital leases

Proceeds from other noncurrent liabilities

-

1,498,306

Repayments of other noncurrent liabilities

-

(30,122)

Payments for purchase of treasury stock

-

(522,607)

Net cash used in financing activities

(1,154,338)

(339,066)

EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS

(7,614)

58,631

NET INCREASE IN CASH AND CASH EQUIVALENTS

1,335,357

692,373

CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD

18,233,738

21,266,218

CASH AND CASH EQUIVALENTS, END OF THE PERIOD

19,569,095

21,958,591

Note: The following information is provided to disclose Internet Initiative Japan Inc. ("IIJ") financial results (unaudited) for the fiscal year ended March 31, 2017 ("FY2016") in the form defined by the Tokyo Stock Exchange.

Consolidated Financial Results for the Fiscal Year Ended March 31, 2017 [Under accounting principles generally accepted in the United States ("U.S. GAAP")]

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 28, 2017 Scheduled date for dividend payment: June 29, 2017

May 15, 2017

Scheduled date for filing of annual report (Yuka-shoken-houkokusho) to Japan's regulatory organization: June 30, 2017 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 Fiscal Year Ended March 31, 2017 (April 1, 2016 to March 31, 2017)

  2. Consolidated Results of Operations (% shown is YoY change)

    Total revenues

    Operating income

    Income before income tax expense

    Net income attributable to IIJ

    Fiscal year ended March 31, 2017

    JPY millions

    %

    JPY millions

    %

    JPY millions

    %

    JPY millions

    %

    157,789

    12.2

    5,134

    (16.4)

    5,427

    (12.4)

    3,167

    (21.6)

    Fiscal year ended March 31, 2016

    140,648

    14.3

    6,140

    21.0

    6,193

    20.5

    4,038

    21.6

    (Note1) Total comprehensive income attributable to IIJ

    Fiscal year ended March 31, 2017: JPY4,470 million (up 35.6% YoY) Fiscal year ended March 31, 2016: JPY3,296 million (down 7.1% YoY)

    (Note2) Income before income tax expense represents income from operations before income tax expense and equity in net income in equity method investees, respectively, in IIJ's consolidated financial statements.

    Basic net income attributable to IIJ per share

    Diluted net income attributable to IIJ per share

    Net income attributable to IIJ to total shareholders' equity

    Income before income tax expense to total assets

    Total revenues operating margin ratio

    Fiscal year ended March 31, 2017

    JPY

    JPY

    %

    %

    %

    69.36

    69.18

    4.8

    4.3

    3.3

    Fiscal year ended March 31, 2016

    87.88

    87.71

    6.3

    5.5

    4.4

    (Reference) Equity in net income of equity method investees Fiscal year ended March 31, 2017: JPY130 million Fiscal year ended March 31, 2016: JPY180 million

  3. Consolidated Financial Position

    Total assets

    Total equity

    Total IIJ shareholders' equity

    Total IIJ shareholders' equity to total assets

    Total IIJ shareholders' equity per share

    As of March 31, 2017

    JPY millions

    JPY millions

    JPY millions

    %

    1,481.16

    137,395

    67,380

    66,742

    48.6

    As of March 31, 2016

    117,835

    65,344

    64,845

    55.0

    1,411.13

  4. Consolidated Cash Flow

  5. Operating activities

    Investing activities

    Financing activities

    Cash and cash equivalents (end of the period)

    Fiscal year ended March 31, 2017

    JPY millions

    JPY millions

    JPY millions

    JPY millions

    7,368

    (7,376)

    2,492

    21,959

    Fiscal year ended March 31, 2016

    12,052

    (8,377)

    (5,201)

    19,569

  6. Dividends

    Dividend per Shares

    Total cash dividends for the year

    Payout Ratio

    (consolidated)

    Ratio of Dividends to Shareholder's Equity (consolidated)

    1Q-end

    2Q-end

    3Q-end

    Year-end

    Total

    Fiscal Year Ended March 31, 2016

    JPY

    JPY

    JPY

    JPY

    JPY

    JPY millions

    %

    %

    -

    11.00

    -

    11.00

    22.00

    1,011

    25.0

    1.6

    Fiscal Year Ended March 31, 2017

    -

    13.50

    -

    13.50

    27.00

    1,229

    38.9

    1.9

    Fiscal Year Ending March 31, 2018 (forecast)

    -

    13.50

    -

    13.50

    27.00

    30.4

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

  7. Target of Consolidated Financial Results for the Fiscal Year Ending March 31, 2018

  8. (April 1, 2017 through March 31, 2018) (% shown is YoYchange)

    Total Revenues

    Operating Income

    Income before Income Tax Expense (Benefit)

    Net Income attributable to IIJ

    Basic Net Income attributable to IIJ per Share

    Interim Period Ending September 30, 2017

    JPY millions

    %

    JPY millions

    %

    JPY millions

    %

    JPY millions

    %

    JPY

    82,400

    11.2

    2,000

    2.7

    2,000

    (5.0)

    1,100

    (0.7)

    24.41

    Fiscal Year Ending March 31, 2018

    176,000

    11.5

    6,500

    26.6

    6,500

    19.8

    4,000

    26.3

    88.77

    (Note1) Changes from the latest forecasts released: No

    * Notes

    1. Changes in significant subsidiaries for the fiscal year ended March 31, 2017

      (Changes in significant subsidiaries for the fiscal year ended March 31, 2017 which resulted in changes in scope of consolidation): None

    2. Changes in significant accounting and reporting policies for the consolidated financial statements

    3. Changes due to the revision of accounting standards: No

    4. Others: No

    5. Number of shares outstanding (shares of common stock)

    6. The number of shares outstanding (inclusive of treasury stock): As of March 31, 2017: 46,711,400 shares

      As of March 31, 2016: 46,711,400 shares

    7. The number of treasury stock:

      As of March 31, 2017: 1,650,909 shares

      As of March 31, 2016: 758,709 shares

    8. The weighted average number of shares outstanding:

    9. For the fiscal year ended March 31, 2017: 45,652,981 shares For the fiscal year ended March 31, 2016: 45,950,098 shares

      [English Translation]

      May 15, 2017

      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, 2017)

        Name

        Relationship

        Its Ownership Percentage (%)

        Securities Exchanges where its Shares are Listed (*)

        Direct ownership

        Indirect ownership

        Total

        Nippon Telegraph and Telephone Corporation ("NTT")

        IIJ is NTT's affiliate company

        22.4

        4.5

        26.9

        Tokyo Stock Exchange (First Section) New York Stock Exchange

        * NTT delisted its American Depositary Receipts from the New York Stock Exchange as of April 3, 2017, as announced.

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

        The ownership percentage by NTT, which is IIJ's largest shareholder, was 26.9% as of March 31, 2017, 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.

      3. Business Relationship with NTT Group

        IIJ uses services provided by Nippon Telegraph and Telephone East Corporation and Nippon Telegraph and Telephone West Corporation for a significant portion of IIJ's access circuits, services provided by NTT Communications Corporation for a significant portion of IIJ's domestic and international backbone circuits, and services provided by NTT DOCOMO, INC for a significant portion of IIJ's mobile infrastructure, to provide Internet connectivity and other services to IIJ's customers. IIJ also leases a part of Internet data center facilities from NTT Group companies to provide Internet data center services. The aggregate amount paid to for these services was JPY23,005 million for the fiscal year ended March 31, 2017.

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

        5. 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.

        End

      IIJ - Internet Initiative Japan Inc. published this content on 15 May 2017 and is solely responsible for the information contained herein.
      Distributed by Public, unedited and unaltered, on 15 May 2017 03:09:13 UTC.

      Original documenthttp://www.iij.ad.jp/en/ir/library/financial/pdf/IIJI4Q16E.pdf

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