2005 年 2 月 9 日
株式会社インターネットイニシアティブ
Tel: 03-5259-6500
E-mail: ir@iij.ad.jp
本資料は日本の方々の便宜性のために作成した簡易版です。9 ページより正式決算発表資料（英文）が続きますので、そちらもあわせてご参照いただけますよう、お願い申し上げます。

2004 年度第 3 四半期（10-12 月）決算発表（抄訳）＜前期に引続き営業利益の大幅増益を達成＞

本決算発表に関するマネジメント・メッセージを 2005 年 2 月 10 日より弊社ホームページ上（URL: http://www.iij.ad.jp/IR/）にて公開予定です。

2004 年度第 3 四半期決算
・ 営業収益（売上高）は、前年同期比 6.5%増、前期比 2.4%減の 10,261 百万円となりました。付加価値サービス
及びシステム・インテグレーションの運用売上が好調に推移したことから、前年同期比増収となりました。前期比では、機器販売が減少し、微減収となりました。
・ 営業利益は、410 百万円と、前年同期比（73.9%増）、前期比（45.4%増）ともに大幅増益となりました。利益率の高い付加価値サービス、システム・インテグレーションの運用売上の増加に加え、インターネット接続サービスのバックボーンコストを主体とする売上原価、及び販売管理費の抑制から、前期のガイダンスとおり、増益を達成しました。
・ 当期利益は、920 百万円となりました。営業利益の拡大に加え、保有株式の売却益及び株価上昇による税効果
会計から、前期の損失計上（保有株式の株価下落を要因とする税効果会計から損失を計上した）から、黒字転換となりました。

2004 年度第 4 四半期の見通し
・ 第 4 四半期は、前年同期比、前期比ともに、売上高増収、営業利益増益を見込みます。

経営の概況
IIJ は、インターネット接続の技術をベースに、ネットワーク設計・構築、セキュリティ・コンサルティングといったインテグ
レーションサービスやネットワーク運用等のアウトソーシングサービスをトータルに提供する「ネットワーク・ソリューション
事業」を、今期、戦略的に推進しておりますが、今四半期においても、企業の信頼性ニーズの増大を背景に着実に実績を積み重ねております。IIJ の技術力・運用力が最も差別化要因となる付加価値サービスは、本年 4 月の個人情報保護法の施行を前に企業のセキュリティ強化の動きが増進されたことによるセキュリティ系サービスの好調な推移（契約数は約 1,400 件と前期比+7.8%の増加）、及びインターネット VPN を用いた多拠点接続ソリューション等のネット
ワークアウトソース系サービス需要の増大等から、引続き安定的な収益源として成長しております。また、減収傾向を続けていたインターネット接続サービスは、多拠点接続ソリューションの展開に伴う新規契約の獲得増加から減収に歯止めがかかり、ほぼ底打ちの状況となりました。今四半期においても、ネットワーク・ソリューション戦略の推進により収益改善が進み、前期に引続き営業利益で大幅増益となりました。
新技術への取組みとして、経済産業省が行う平成 16 年度「電子タグ実証実験事業」において、物流業界を対象とした国際コンテナ物流の実証実験に参画しております。本実証実験では、インターネット上で電子タグに係る属性、履歴等の情報を登録・参照・変更することを可能とする自社開発の「EPC システム」を提供し、その有効性を検証しております。「EPC システム」は、従来の自社または業界に閉じた電子タグの利用ではなく、インターネットを利用することでIIJ 3Q04

より汎用的で拡張性に優れた電子タグの利用を実現するもので、今後は、この実証実験で培った知見とノウハウをもとに、新しいサービスを市場に投入していく予定です。
第 3 四半期は、付加価値サービス、システム・インテグレーションといった利益率の高い営業収益の増加、及びインタ
ーネット接続サービスのバックボーンコストを主体とする固定的売上原価、販売管理費の抑制から、前期に引続き営業利益で大幅増益を果たしました。第 4 四半期は、インターネット接続サービスの売上減少傾向がほぼ底打ちしていることに加え、季節変動要因によりシステム・インテグレーションの構築案件売上が、年度の中で最も強含みの四半期となることから、前年同期比、前期比ともに売上高増収、営業利益増益を見込んでおります。

サービス別概況及び財務関連データ

インターネット接続サービスの契約数及び総帯域
専用線接続サービス合計
IPサービス（低帯域：64kbps-768kbps）*1
IP サービス（中帯域：1Mbps-100Mbps 未満）
IP サービス（高帯域：100Mbps 以上〜）
IIJ T1 スタンダードおよびIIJエコノミー*2
インターネットデータセンター接続サービス
IIJ FiberAccess/F および IIJ DSL/F（ブロードバンド対応型）
ダイアルアップ接続サービス合計
自社提供
OEM提供*3
契約総帯域

3Q04
9,427
67
609
103
313
228

3Q03
6,884
98
535
72
581
188

2Q04
8,880
71
597
93
358
225

8,107

5,410

7,536

708,517
69,260639,257
109.5Gbps

666,920711,637
77,62670,629589,294
641,00875.8Gbps 104.9Gbps*1 IPv6 サービスを含む*2 1Q04 では、「機能限定型」と表記していたもの（回線専有型、割当 IP アドレス数等に制限あり、64kbps、128kbps、1.5Mbps）*3 他サービス事業者向け OEM サービス

今期においても、引続き契約数、契約総帯域は順調に増加しました。IP サービスでは、顧客企業がより広帯域のサービスにシフトをしていることから、10Mbps、100Mbps のサービス契約数が増加しています。1Gbps 以上の IP サービスの契約数は合計で 22 社となりました。
ブロードバンド対応型の契約数は、インターネット VPN を用いた多拠点接続ソリューション需要の拡大から、引続き堅調に増加しています。

IIJ 3Q04

インターネット接続及び付加価値サービスの営業収益、売上原価及び粗利益率
インターネット接続サービス
専用線接続サービス
IPサービス*4
IIJ T1 スタンダードおよびIIJエコノミー*5
IIJ FiberAccess/F および IIJ DSL/F（ブロードバンド対応型）
ダイアルアップ接続サービス
自社提供*6
OEM提供*7
付加価値サービス
その他
インターネット接続及び付加価値サービス
売上高合計
インターネット接続及び付加価値サービス原価
うちバックボーンコスト
粗利益率

3Q04
3,508
2,781
2,186
195

3Q03
3,984
3,204
2,485
391

前年同期比

400

（百万円）

(11.9%)(13.2%)(12.0%)(50.2%)

2Q04
3,572
2,832
2,222
228

(1.8%)(1.8%)(1.7%)(14.5%)

328

22.0%

382

4.8%

727
478
249
1,276
882

780
552
228
1,125
525

(6.8%)(13.4%)
9.3%
13.5%
68.1%

740
501
239
1,220
716

(1.8%)(4.6%)
4.2%
4.6%
23.3%

5,666

5,633

0.6%

5,508

2.9%

4,874
858
14.0%

4,877
1,094
13.4%

(0.1%)(21.6%)

4,780
877
13.2%

2.0%
(2.2%)

前期比*4 インターネットデータセンター接続サービスを含む（回線専有型、64kbps-1.2Gbps）*5 1Q04 では、「機能限定型」と表記していたもの（回線専有型、割当 IP アドレス数等に制限あり、64kbps、128kbps、1.5Mbps）*6 各種法人向けおよび個人向けサービス（IIJ4U、IIJmio）。B フレッツ、ADSL 対応オプションも含む*7 他サービス事業者向け OEM サービス

インターネット接続サービスの売上は、安価なブロードバンド回線への移行の終息、多拠点接続ソリューションの展開に伴う新規契約の増加等から、ほぼ減収傾向に底打ちを見せました。
付加価値サービスの売上は、データセンター系サービス、セキュリティ系サービス等の好調な推移に加えて、多拠点接続ソリューション案件の増加に伴う SMF サービス、SEIL レンタルサービスの好調もあり、増収となりました。
その他の売上は、多拠点接続案件に付随した広域 LAN サービスや社内 LAN 関連サービスの売上増により増収となりました。
粗利益率は、利益率の高い付加価値サービスの売上増加、インターネット接続サービスにおけるバックボーンコ
スト等固定的な売上原価の低減により前期から改善し、14.0%となりました。固定的な売上原価については、大きなコスト増大要因はなく、今後も売上増加と共に安定的に推移するものと想定しております。

クロスセリング

3Q04
インターネット接続サービス・付加価値サービス
クロスセリング率*8システム・インテグレーション・インターネット接続サービス
クロスセリング率*9

2Q04

87.5%

86.9%

90.0%

80.0%

*8 インターネット接続サービス売上高上位１，０００社の内、付加価値サービスを併用している顧客の割合*9 システム・インテグレーション売上高上位１００社の内、インターネット接続サービスを併用している顧客の割合

IIJ 3Q04

システム・インテグレーションの営業収益、売上原価及び粗利益率システム・インテグレーション収入合計
システム・インテグレーション・サービス
システム運用アウトソースサービス
システム･インテグレーション原価
粗利益率

3Q04
3,970
1,672
2,298
3,031
23.7%

3Q03
2,889
1,509
1,380
2,198
23.9%

（百万円）
前年同期比

37.4%
10.8%
66.5%
37.8%

2Q04
3,838
2,101
1,737
2,983
22.3%

前期比

3.4%
(20.4%)
32.3%
1.6%

システム・インテグレーションの売上は、昨年 10 月に営業譲受し設立した㈱アイアイジェイフィナンシャルシステ
ムズの証券システム開発・運用事業が売上に寄与したことから、増収となりました。システム運用アウトソースサー
ビスでは、上記に加え、前期に獲得したシステム・インテグレーションの構築案件に係る運用が開始されたことか
ら、前年同期比、前期比ともに大幅増収となりました。
安定した収益基盤である運用アウトソースサービスが引続き好調で大幅増収となったことから、粗利益率は前期比改善いたしました。

機器販売の営業収益、売上原価及び粗利益率
機器販売売上高機器販売原価
粗利益率

3Q04
625
581
7.0%

（百万円）

3Q03
1,111
1,050
5.5%

前年同期比

(43.7%)(44.6%)

2Q04
1,166
1,091
6.5%

その他
Adjusted EBITDA（償却前営業利益）
設備投資 （キャピタルリースを含む）
減価償却費*10

前期比(46.4%)(46.7%)

（百万円）

3Q04
1,508
2,017
1,116

3Q03
1,218
508
1,004

前年同期比

23.9%
296.9%
11.2%

2Q04
1,275
1,345
1,012

前期比

18.3%
49.9%
10.4%

*10 転換社債発行費用の償却額を含む。

注意事項： この資料には、1995 年米国民事証券訴訟改革法（Private Securities Litigation Reform Act of 1995）の「セーフハーバー」
規定に定義する「将来性の見通しに関する記述（forward-looking statements）」に該当する情報が記載されています。このプレゼンテー
ション資料の記載のうち、過去または現在の事実に関するもの以外は、将来の見通しに関する記述に該当します。将来の見通しに関する記述は、現在入手可能な情報に基づく IIJ 経営陣の仮定および判断に基づくものであり、これには既知または未知のリスクおよび不確定性が内在しています。IIJ の実際の活動または業績は、今後、将来の見通しに関する記述に示されたところと大きく異なる可能性があります。投資家の皆様におかれましては、1934 年米国証券取引法（Securities Exchange Act of 1934）に基づく今後の報告書等において IIJ が行う開示をご参照ください。

IIJ 3Q04

株式会社 インターネットイニシアティブ
四半期連結損益計算書（米国会計基準未監査）

Appendix 1

2004年12月期、2003年12月期、2004年9月期
JPY/千円単位、 USD/千米ドル単位 (1)
前年同四半期比較
2004年12月期
2003年12月期
USD (1)
営業収益：
インターネット接続及び付加価値サービス収入：
専用線接続サービス
ダイヤルアップ接続サービス
付加価値サービス
その他
インターネット接続及び付加価値サービス収入合計

JPY

対営業収益
%

JPY

前四半期比較
2004年9月期

対営業収益%

対前年同四半期

%

JPY

対営業収益
%

対前四半期
%

27,084
7,078
12,427
8,594
55,1832,780,955
726,798
1,275,958
882,4665,666,177

27.1%
7.1
12.4
8.6
55.2

3,204,046
779,544
1,124,596
525,106
5,633,292

33.3%
8.1
11.7
5.4
58.5

(13.2%)
(6.8)
13.5
68.1
0.6

2,832,355
739,957
1,220,119
715,617
5,508,048

27.0%
7.0
11.6
6.8
52.4

(1.8%)
(1.8)
4.6
23.3
2.9

38,6606,089
99,932

3,969,610
625,196
10,260,983

38.7
6.1
100.0

2,888,936
1,110,927
9,633,155

30.0
11.5
100.0

37.4
(43.7)
6.5

3,837,711
1,166,569
10,512,328

36.5
11.1
100.0

3.4
(46.4)(2.4)

47,46529,516
5,662
82,643

4,873,759
3,030,666
581,368
8,485,793

47.5
29.5
5.7
82.7

4,876,741
2,198,668
1,049,663
8,125,072

50.6
22.8
10.9
84.3

(0.1)
37.8
(44.6)
4.4

4,780,268
2,982,577
1,090,870
8,853,715

45.5
28.3
10.4
84.2

2.0
1.6
(46.7)
(4.2)

6,659
6,164
471
95,937683,731
632,874
48,4069,850,804

6.6
6.2
0.5
96.0

698,948486,332
86,966
9,397,318

7.3
5.1
0.9
97.6

(2.2)
30.1
(44.3)
4.8

711,661
612,526
52,237
10,230,139

6.8
5.8
0.5
97.3

(3.9)
3.3
(7.3)
(3.7)

営業利益

3,995

410,179

4.0

235,837

2.4

73.9

282,189

2.7

45.4

その他の収益 (費用)3,239

332,623

3.2

1,569,957

16.3(78.8)(10,188)(0.1)(3,364.9)

税引前当期利益

7,234

742,802

7.2

1,805,794

18.7(58.9)

272,001

2.6

173.1

法人税等、住民税及び事業税
少数株主損益持分法による投資損益(2,152)(419)(8)(220,980)(43,040)
(795)

(2.2)
(0.4)
0.0

(280,406)(48,710)(58,354)

(2.9)
(0.5)
(0.6)

(21.2)(11.6)(98.6)

517,379(42,837)
15,548

4.9
(0.4)
0.1

(142.7)0.5(105.1)

当期利益 (損失）8,959

919,947

9.0%

1,979,136

20.5%(53.5)(272,667)(2.6%)(437.4)

システムインテグレーション
機器販売
営業収益合計営業費用：
インターネット接続及び付加価値サービス原価システムインテグレーション原価
機器販売原価
売上原価合計
販売費
一般管理費
研究開発費
営業費用合計

1株あたり当期利益 (損失）
米国預託証券１単位あたり当期利益 (損失）
期中平均発行済株式総数
期中平均発行済米国預託証券総数

24,01212.01
38,312
76,623,702

注記(1): 2004年12月期につきましては、米ドル換算レート102.68円=1米ドル(2004/12/31) にて参考表示しております。

51,65825.83
38,312
76,623,702(7,117)(3.56)
38,312
76,623,702

株式会社 インターネットイニシアティブ
連結損益計算書（米国会計基準未監査）
2004年12月期累計、 2003年12月期累計
JPY/千円単位、 USD/千米ドル単位 (1)
前年同四半期累計比較
Dec 31, 2004
% of
Total
JPY
Revenues
JPY
USD (1)
営業収益：
インターネット接続及び付加価値サービス収入：
専用線接続サービス
ダイヤルアップ接続サービス
付加価値サービス
その他
インターネット接続及び付加価値サービス収Appendix 2

Dec 31, 2003
% of
Total
Revenues

YOY
Chg %

83,091
21,60835,86821,333
161,900

8,531,798
2,218,688
3,682,914
2,190,473
16,623,873

29.0%
7.5
12.5
7.4
56.4

9,761,680
2,330,551
3,192,670
1,581,204
16,866,105

35.9%
8.6
11.8
5.8
62.1

(12.6%)
(4.8)
15.4
38.5
(1.4)

102,278
22,618286,796

10,501,959
2,322,386
29,448,218

35.7
7.9
100.0

7,846,238
2,450,117
27,162,460

28.9
9.0
100.0

33.8
(5.2)
8.4

140,878
79,566
20,917
241,361

14,465,368
8,169,863
2,147,704
24,782,935

49.1
27.8
7.3
84.2

15,237,607
6,797,764
2,295,320
24,330,691

56.1
25.0
8.5
89.6

(5.1)
20.2
(6.4)
1.9

20,046
18,174
1,451
281,032

2,058,342
1,866,051
149,01128,856,339

7.0
6.3
0.5
98.0

2,771,562
1,580,597
279,182
28,960,032

10.2
5.8
1.0
106.6

(25.7)
18.1(46.6)(0.4)

営業利益 (損失）5,764

591,879

2.0(1,799,572)(6.6)(132.9)

その他の収益1,673

171,735

0.6

1,208,265

4.4(85.8)

税引前当期利益 (損失）7,437

763,6142.6(591,307)(2.2)(229.1)

法人税等、住民税及び事業税
少数株主損益持分法による投資損益(13,254)(455)
37(1,360,936)(46,693)
3,758

(4.6)
(0.1)
0.0

(1,242,083)
393,107(1,817,721)

(4.6)
1.5
(6.7)

9.6
(111.9)(100.2)

当期利益 (損失）20,2732,081,615

7.1%(773,838)(2.8%)(369.0)

システムインテグレーション
機器販売
営業収益合計営業費用：
インターネット接続及び付加価値サービス原価システムインテグレーション原価
機器販売原価
売上原価合計
販売費
一般管理費
研究開発費
営業費用合計

1株あたり当期利益 (損失）
米国預託証券１単位あたり当期利益 (損失）
期中平均発行済株式総数
期中平均発行済米国預託証券総数

54,33327.17
38,312
76,623,702(26,198)(13.10)29,53859,076,611

注記(1): 2004年12月期につきましては、米ドル換算レート102.68円=1米ドル(2004/12/31)にて参考表示しております。

株式会社 インターネットイニシアティブ
四半期連結貸借対照表（米国会計基準未監査）

Appendix 3

2004年12月期、2003年12月期、2004年9月期
JPY/千円単位、 USD/千米ドル単位 (1)2004年12月期
2003年12月期

2004年9月期

USD (1)

JPY

%

JPY

%

JPY

%

資産の部
流動資産：
現金及び現金同等物
売掛金
棚卸資産
前払費用
その他流動資産118,41460,687
3,624
9,632
3,255

12,158,790
6,231,361
372,144
989,003
334,169

26.9%
13.8
0.8
2.2
0.7

12,140,595
6,640,226
196,252
875,338
391,766

31.5%
17.3
0.5
2.3
1.0

11,802,165
6,770,303
262,180
652,061
106,364

27.4%
15.7
0.6
1.5
0.3

流動資産合計

195,61220,085,467

44.4

20,244,177

52.6

19,593,073

45.5

関連会社投資等
その他投資
有形固定資産等
敷金保証金
その他資産

7,398
107,831
97,42819,96812,544

759,585
11,072,053
10,003,936
2,050,305
1,288,024

1.7
24.4
22.1
4.5
2.9

1,024,126
5,821,912
8,448,327
2,076,387
849,954

2.7
15.1
22.0
5.4
2.2

752,630
10,657,082
9,045,349
2,080,345
963,895

1.7
24.7
21.0
4.8
2.3

資産合計

440,781

45,259,370

100.0%

38,464,883

100.0%

43,092,374

100.0%

46,9997,039
34,731
6,484
7,599
21,281
107,986
27,1184,825,844
722,800
3,566,158
665,821780,267
2,185,094
11,088,000
2,784,469

10.7%
1.6
7.9
1.5
1.7
4.8
24.5
6.1

6,764,410

17.6%

4,611,586
513,996594,974
1,947,309

12.0
1.3
1.5
5.1

2,415,596

6.3

5,732,204
816,800
4,502,356
448,585
604,868
1,650,139
11,088,000
2,491,070

13.3%
1.9
10.5
1.0
1.4
3.8
25.7
5.8

259,237

26,618,453

58.8

16,847,871

43.8

27,334,022

63.4

長期借入金
転換社債
長期リース債務退職給付引当金
その他固定負債

23,2702,389,339

5.3

4.0

4,459,352
120,732
320,393

9.8
0.3
0.7

5.0
30.7
7.3
0.2
0.5

1,732,473

43,4291,176
3,120

1,945,434
11,832,000
2,801,993
67,557
180,3293,620,613
102,224
300,190

8.4
0.3
0.7

負債合計

330,232

33,908,269

74.9

33,675,184

87.5

33,089,52276.8

少数株主持分9,632

988,9642.2

486,3881.3

945,5722.2

134,061
230,207(318,551)
55,629(429)

13,765,372
23,637,628(32,708,815)
5,711,952(44,000)

30.4
52.2(72.2)
12.6(0.1)

13,765,372
23,637,628(35,459,129)
2,359,503
(63)

35.8
61.5
(92.2)
6.1
0.0

13,765,372
23,637,628(33,628,762)
5,327,042(44,000)

31.9
54.8(78.0)
12.4
(0.1)

資本合計

100,917

10,362,137

22.9

4,303,311

11.2

9,057,280

21.0

負債、少数株主持分及び資本合計

440,781

45,259,370

100.0%

38,464,883

100.0%

43,092,374

100.0%

負債及び資本の部
流動負債：
短期借入金
有価証券貸借取引に伴う債務買掛金及び未払金
未払費用
その他流動負債
1年以内に期限到来の長期借入金
転換社債
短期リース債務
流動負債合計

資本：
資本金
資本準備金
欠損金
その他有価証券評価差額金等
自己株式

注記(1): 2004年12月期につきましては、米ドル換算レート102.68円=1米ドル(2004/12/31)にて参考表示しております。

株式会社 インターネットイニシアティブ

Appendix 4

四半期連結キャッシュフロー計算書（米国会計基準未監査）
2004年12月期、2003年12月期、2004年9月期
JPY/千円単位、USD/千米ドル単位 (1)Dec 31, 2004
USD (1)JPY

Dec 31, 2003

Sept 30, 2004

JPY

JPY

営業活動によるキャッシュフロー：
当期利益（損失）

8,959

919,947

1,979,136(272,667)

減価償却費等

10,873

1,116,447

1,004,236

1,011,532(180)(18,455)(40,428)

19,968(15,548)

貸倒引当金繰入（戻入）額
持分法による投資損益

8795

58,354

少数株主損（益）419

43,04048,71042,837

為替差損（差益）145

14,912

12,279(14,152)-

転換社債償還差損--(88,975)

その他投資に係る損益(5,135)(527,300)(1,532,033)(98,103)

売掛金の減少（増加）額5,677

582,873

138,452(1,396,506)

買掛金及び未払金の増加（減少）額(9,597)(985,459)(70,261)

566,837

棚卸資産の減少（増加）額(1,071)(109,964)

72,267

149,969

法人税等調整額(2,530)(259,783)(286,208)

501,873

その他(1,427)(146,465)(209,740)

542,953

営業活動によるキャッシュフロー

6,141

630,588

1,085,789

1,038,993

有形固定資産等の取得による支出(1,032)(105,946)(339,621)(51,435)

その他投資の売却による収入

7,312

750,800

1,946,875

125,281

投資活動によるキャッシュフロー：その他投資の取得による支出(47)(4,854)(6,039)(3,083)

敷金保証金の返還（差入）303

31,162727(19,193)(3,613)(371,011)

-

-

(10)

(1,029)

(225)

904

2,913

299,122

1,601,717

52,474

12,174

1,250,000-

1,000,000(567)(58,179)(1,036,247)(1,436,943)(916)(94,000)-

816,800--(3,047,460)-

営業譲受による支出
その他
投資活動によるキャッシュフロー
財務活動によるキャッシュフロー：長期借入金による調達
チョウキ
カリイレ
キン ンサイ
長期借入金の返済
有価証券貸借取引による担保金預り収入
転換社債の償還
リース債務元本の返済(7,372)(756,982)(671,339)(688,418)

短期借入金の純増減額(8,827)(906,360)

2,459,505

369,203

財務活動によるキャッシュフロー(5,508)(565,521)(2,295,541)

60,642

現金及び現金同等物に係る換算差額(73)(7,564)(34,305)

22,853

現金及び現金同等物の増加額

3,473

356,625357,660

1,174,962

現金及び現金同等物の期首残高

114,941

11,802,165

11,782,935

10,627,203

現金及び現金同等物の期末残高

118,414

12,158,790

12,140,595

11,802,165

注記(1):2004年12月期につきましては、米ドル換算レート102.68円=1米ドル(2004/12/31)にて参考表示しております。

For Immediate Release
Internet Initiative Japan Inc.
E-mail: ir@iij.ad.jp Tel: +81-3-5259-6500
URL: http://www.iij.ad.jp/

IIJ Announces Increase in Operating and Net Income in the Third Quarter of
Fiscal Year 2004
Tokyo and New York, February 9, 2005 - Internet Initiative Japan Inc. (Nasdaq: IIJI) (“IIJ”), one ofJapan’s leading Internet-access and comprehensive network solutions providers, today announced its
financial results for the third quarter of the fiscal year ending March 31, 2005 (“FY2004”).1

Highlights of Third Quarter FY2004 Results
・ Revenue totaled JPY 10,261 million ($99.9 million), an increase of 6.5% from JPY 9,633
million in 3Q03 and a decrease of 2.4% from JPY 10,512 million in 2Q04.
・ Operating income was JPY 410 million ($4.0 million), an increase of 73.9% from JPY 236
million in 3Q03 and an increase of 45.4% from JPY 282 million in 2Q04, and inline withguidance provided in 2Q04.
・ Net income was JPY 920 million ($9.0 million), an increase from a loss of JPY 273 million in
2Q04.
2
Outlook for Fourth Quarter FY2004
・ We expect annual and sequential increases in revenue and operating income in 4Q04.
Overview of 3rd Quarter Financial Results and Business Outlook2"We are extremely pleased with our performance in the past quarter," said Koichi Suzuki, President andCEO of IIJ. "We achieved increase and improvement in operating and net income in 3Q04, and we met
the guidance that we provided in 2Q04. Our comprehensive suite of services, including Internet
connectivity, outsourcing and Systems Integration ("SI") are fundamentally based on our high-quality
Internet engineering skills. We believe that this expertise is what has allowed us to continue to meet theincreased corporate demand for reliable and high-quality network solutions, including network design
and implementation, security consulting and outsourced network operations. Value-added Services("VAS") is one area in particular in which we believe we will be able to capitalize on our skills in networkand service operations. In the past quarter, revenues from this business line continued to grow and thebusiness line became a solid source of ongoing revenue due to the increased number of contracts forsecurity-related services and multi-site connectivity using Internet VPN technology. We believe that theincreased awareness of security-related issues along with the expected enforcement of the law
protecting personal information in April 2005 has been a primary driver of security-related services.
Additionally, the steady decrease in connectivity service revenues that has been seen in the past few
years started to level out in the third quarter due to an increase in the number of new contracts,
especially for multi-site connectivity."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. For all 3Q04 results, translations of Japanese yen amounts into US dollars aresolely for the convenience of readers outside of Japan and have been made at the rate of JPY 102.68 = US$1.00, theapproximate exchange rate on December 31, 2004.
2
This Overview and Business Outlook contains forward-looking statements and projections such as statements regarding
4Q04 revenues and operating profitability that are subject to known and unknown risks and uncertainties that could cause
actual results to differ materially from those expressed or implied by these statements. These risks and uncertainties include,
but are not limited to, the factors noted at the end of this release and to the risk factors and other information contained in IIJ’s
filings on Form 20-F and Form 6-K, as well as other filings and documents furnished to the Securities and Exchange
Commission. IIJ plans to keep this press release publicly available on its Web site (www.iij.ad.jp), but may discontinue thispractice at any time. IIJ intends to publish its next Overview and Business Outlook in its 4Q04 earnings release, presently
scheduled for May 2005.

Page 1 of 7

IIJ 3Q04

"Operating income in 3Q04 increased compared to both 3Q03 and 2Q04," said Akihisa Watai, CFO of
IIJ. "The increase in operating income was achieved due to an increase in revenues from higher-margin
VAS and SI, a decrease in backbone costs and stringent management of our SG&A expenses. In 4Q04,
we expect that revenue and operating income will continue to increase, since the declining trend ofconnectivity services revenues started to stabilize in 3Q04 and the revenue from SI is usually thestrongest in the fourth quarter of our fiscal year."

3rd Quarter FY2004 Financial Results
Operating Result Summary

3Q04
Total Revenues
Total Costs
SG&A Expenses and R&D
Operating Income
Net Income (Loss)
Revenues
Revenues in 3Q04 totaled JPY
10,261 million, an increase of
6.5% from JPY 9,633 million in
3Q03 and a decrease of 2.4% from
JPY 10,512 million in 2Q04.

10,261
8,486
1,365
410
920

3Q03

(JPY in millions)YoY %change
6.5%
4.4%
7.3%
73.9%
(53.5%)

9,633
8,125
1,272
236
1,979

2Q04
10,512
8,854
1,376
282
(273)

QoQ %
change(2.4%)(4.2%)(0.8%)
45.4%(437.4%)

Revenues

Total Re ve nue s :Conne ctivity & V AS
SI
Equipm e nt Sale sConnectivity and VAS revenues
were JPY 5,666 million in 3Q04, an increase of
0.6% from JPY 5,633 million in 3Q03 and 2.9%
from JPY 5,508 million in 2Q04.

3Q04

3Q03

10,261
5,666
3,970
625

9,633
5,633
2,889
1,111

(JPY in millions)YoY %change
6.5%
0.6%
37.4%
(43.7%)

QoQ %change(2.4%)
2.9%
3.4%(46.4%)

2Q04
10,512
5,508
3,838
1,166

Quarterly Total Revenues
14,000(JPY in millions)

12,000

Dedicated access service revenues were JPY
2,781 million in 3Q04, a decrease of 13.2%
compared to 3Q03 and a decrease of 1.8%
compared to 2Q04. The increase in revenues frombroadband services did not offset the revenue
decrease from IIJ T1 Standard and IIJ Economy.
However, the level of decline in dedicated accessservice revenues shrank from what was significant
and steady decline in prior quarters.

10,000
8,000
6,000
4,000
2,000
0
1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04
SI
Connectivity and VAS

Dial-up access service revenues were JPY 727
Equipment Sales
million in 3Q04, a decrease of 6.8% compared to
3Q03 and a decrease of 1.8% compared to 2Q04 due to the decrease in revenues from IIJ4U.

VAS revenues were JPY 1,276 million in 3Q04, an increase of 13.5% compared to 3Q03 and anincrease of 4.6% compared to 2Q04. The increase compared to 3Q03 and 2Q04 is mainly due toconstruction of special facilities for large customers and an increase in revenues from every packaged
type of outsourcing services such as security-related services.
Other revenues were JPY 882 million in 3Q04, an increase of 68.1% compared to 3Q03 and an increaseof 23.3% compared to 2Q04, mainly due to an increase in revenues from Wide-area Ethernet Services.
SI revenues increased 37.4% to JPY 3,970 million in 3Q04 from JPY 2,889 million in 3Q03 andincreased 3.4% from JPY 3,838 million in 2Q04. The increase is mainly due to additional revenues fromthe purchase of the security system business operations of Yamatane Co. Ltd. in October 2004.
Equipment sales revenues were JPY 625 million in 3Q04, a decrease of 43.7% compared to 3Q03 andPage 2 of 7

IIJ 3Q04

46.4% compared to 2Q04.
Cost and expense
Cost of revenues was JPY 8,486
million in 3Q04, an increase of 4.4%
compared to 3Q03 and a decrease of
4.2% compared to 2Q04.

Cost of Revenues

Total Cos ts :Conne ctivity & V AS
SI
Equipm e nt Sale s

Cost of Connectivity and VAS
revenues was JPY 4,874 million, adecrease of 0.1% compared to 3Q03 and anincrease of 2.0% compared to 2Q04. The
gross-margin ratio for Connectivity and VAS in
3Q04 was 14.0%, compared to 13.4% in 3Q03
and 13.2% in 2Q04 due to a decrease inbackbone costs.

Cost of SI revenues was JPY 3,031 million in
3Q04, an increase of 37.8% compared to 3Q03
and an increase of 1.6% compared to 2Q04.
The gross margin ratio for SI in 3Q04 was 23.7%,
compared to 23.9% in 3Q03 and 22.3% in 2Q04.
The improvement in margin compared to 2Q04
was due to the increase in outsourced operation
services with relatively high-margin.

3Q04

3Q03

8,486
4,874
3,031
581

8,125
4,877
2,198
1,050

(JPY in millions)YoY %change4.4%(0.1%)
37.8%(44.6%)

2Q04
8,854
4,780
2,983
1,091

QoQ %
change(4.2%)
2.0%
1.6%(46.7%)

Quarterly Cost and Gross Margin Ratio
30.0%

12,000(JPY in millions)

10,000

25.0%

8,000

20.0%

6,000

15.0%

4,000

10.0%

2,000

5.0%
0.0%

0
1Q03

2Q03

3Q03

4Q03

1Q04

2Q04

Cost of Connectivity and VAS (Cost of SI Cost (

3Q04

4Q04

Gross Margin Ratio)

Gross Margin Ratio)

Cost of Equipment Sales

Sales and marketing expenses were JPY 684
million in 3Q04, a decrease of 2.2% compared to 3Q03 and a decrease of 3.9% compared to 2Q04. The
decrease from 2Q04 is mainly due to a decrease in allowance for doubtful accounts.
General and administrative expenses were JPY 633 million in 3Q04, an increase of 30.1% compared
to 3Q03 and an increase of 3.3% compared to 2Q04. The increase compared to 3Q03 is mainly due toan increase in personnel expenses and impairment losses on telephone rights.
Operating income
Operating income was JPY 410 million in 3Q04, compared to JPY 236 million in 3Q03 and JPY 282
million in 2Q04 mainly due to improved gross-margins in Connectivity, VAS and SI.
Other income (expenses) in 3Q04 was JPY 333
million, compared to JPY 1,570 million in 3Q03 andother expenses of JPY 10 million in 2Q04. The
increase from 2Q04 is mainly due to gain on the saleof available-for-sale securities which amounted to
JPY 531 million. The other income in 3Q03 included
the gain on sales of the shares of DLJdirect SFG
Securites.
Income tax expense (benefit) for 3Q04 was abenefit of JPY 221 million, compared to a benefit of
JPY 280 million in 3Q03 and an expense of JPY 517
million in 2Q04. The difference from 2Q04 was mainly
due to a decrease in valuation allowance for deferred
tax assets attributable primarily to the income tax
effect of increasing unrealized gain on certain
available-for-sale securities during the quarter.

Quarterly Operating Income (Loss)
1,500(JPY in millions)

1,000
500
0
(500)
(1,000)(1,500)
1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04

Equity in net income (loss) of equity method investees amounted to a net loss of JPY 1 million in
3Q04, compared to a net loss of JPY 58 million in 3Q03 and net income of JPY 16 million in 2Q04.

Page 3 of 7

IIJ 3Q04

Net income (loss) was net income of JPY 920
million in 3Q04, compared to net income of JPY
1,979 million in 3Q03 and net loss of JPY 273 million
in 2Q04. The increase compared to 2Q04 was
mainly due to the improvement in operating income,gain on the sale of available-for-sale securities andthe income tax benefit due to the effect of increases
in unrealized gains on certain available-for-salesecurities.

Quarterly Net Income (Loss)
3,000(JPY in millions)

2,000
1,000
0
(1,000)(2,000)(3,000)
1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04

3rd Quarter FY2004 Business Review
Analysis by Service
Connectivity and Value-added Services
Number of Contracts for Connectivity Services
Dedicated Access Service Contracts
IP Service (Low Bandwidth: 64kbps-768kbps)3
IP Service (Medium Bandwidth: 1Mbps-99Mbps)
IP Service (High Bandwidth: 100Mbps-)
IIJ T1 Standard and IIJ Economy4
IIJ Data Center Connectivity Service
IIJ FiberAccess/F and IIJ DSL/F(Broadband Services)
Dial-up Access Service Contracts
Dial-up Access Services, under IIJ Brand
Dial-up Access Services, OEM5
Total Contracted Bandwidth

3Q04
9,427
67
609
103
313
228
8,107
708,517
69,260639,257
109.5Gbps

3Q03
6,884
98
535
72
581
188
5,410

2Q04
8,880
71
597
93
358
225
7,536

666,920711,637
77,62670,629589,294
641,00875.8Gbps 104.9Gbps

The total number of contracts for dedicated access services continued to steadily increase in 3Q04. The
number of contracts for medium and high speeds of IP Services increased as corporate customers
continued to upgrade their bandwidth to higher-speed services (10 or 100Mbps), rather than shift tolower-cost broadband services. The number of contacts over 1Gbps also increased to 22. The numberof contracts for broadband services continued to increase steadily due to the new connectivity contracts
for multi-site connectivity with Internet VPN.
Connectivity and VAS Revenue Breakdown and Cost
3Q04
Connectivity Service Revenues
Dedicated Access Service Revenues
IP Service 6
IIJ T1 Standard and IIJ Economy
IIJ FiberAccess/F and IIJ DSL/F(Broadband Services)

3,508
2,781
2,186
195
400

3Q03
3,984
3,204
2,485
391
328

YoY %
Change(11.9%)(13.2%)(12.0%)(50.2%)
22.0%(JPY in millions)

2Q04
3,572
2,832
2,222
228
382

QoQ %
change(1.8%)(1.8%)(1.7%)(14.5%)
4.8%

3

Including IPv6 Services.
Referred to "Limited Functionality Services" in 1Q04 for the services with local access not shared, limited on several
functionality compared to IP service such as number of IP address allocated and fixed speed of 64kbps, 128kbps and 1.5Mbps.
5OEM stands for Original Equipment Manufacturer.
6
IP Service revenues includes revenues from Data Center Connectivity Service.
4

Page 4 of 7

IIJ 3Q04

Dial-up Access Service Revenues
Under IIJ Brand
OEM
VAS Revenues
Other Revenues
Total Connectivity and VAS Revenues
Cost of Connectivity and VAS
Backbone Cost (included in the costof Connectivity and VAS)
Connectivity and VAS Gross Margin Ratio

727
478
249
1,276
882
5,666
4,874
858

780
552
228
1,125
525
5,633
4,877
1,094

14.0%

13.4%

(6.8%)(13.4%)
9.3%
13.5%
68.1%
0.6%
(0.1%)(21.6%)

740
501
239
1,220
716
5,508
4,780
877

(1.8%)(4.6%)
4.2%
4.6%
23.3%
2.9%
2.0%
(2.2%)

13.2%

The trend of decreasing revenues from IP Services, and decreasing revenues from IIJ T1 Standard andIIJ Economy due to the shift to lower cost broadband services has slowed. Revenue from broadband
services increased due to new multi-site connectivity customers. As a result of the factors above, therate of decline in total connectivity service revenues in 3Q04 decreased from what was a significant andsteady decline in prior years.
VAS revenues increased by 13.5% compared to 3Q03 and 4.6% compared to 2Q04. The revenues
steadily increased for almost every packaged type of outsourcing services. We had approximately 1,400
security-related contracts in 3Q04, an increase of 7.8% compared to 2Q04. Increased awareness of
security issues, especially resulting from the expected implementation of the law protecting personal
information in April 2005 also had a positive effect. Revenue from network-related services rose due to theincrease of contracts for IIJ SMF Service to provide automatic router configuration and monitoring for IIJ SEIL
routers and SEIL Rental Service that is related to multi-site connectivity cases.
Other revenues also increased steadily mainly due to an increase in revenue from Wide-area Ethernet
services and corporate LAN related services.

Backbone costs decreased by 21.6% compared to 3Q03 and by 2.2% compared to 2Q04. We expectthat this will become more stable in the coming quarters.
The cross-selling ratio between Connectivity and VAS, as
the percentage of the largest 1,000 Connectivity service
customers that use VAS was 87.5%.
The cross-selling ratio between Connectivity and SI, as thepercentage of SI customers that use Connectivity services
among the largest 100 SI customers was 90.0%.

Cross-selling Ratios
V AS Cros s -s e lling Ratio
SI Cros s -s e lling Ratio

3Q04
87.5%
90.0%

2Q04
86.9%
80.0%

Systems Integration
Systems Integration
Revenue Breakdown and Cost

Systems Integration Revenues
Systems Integration
Outsourced Operation
Cost of Systems Integration
Systems Integration Gross Margin Ratio

3Q04

3Q03

3,970
1,672
2,298
3,031
23.7%

2,889
1,509
1,380
2,198
23.9%

(JPY in millions)

2Q04 QoQ %YoY %changechange37.4% 3,838
3.4%
10.8% 2,101 (20.4%)
66.5% 1,737
32.3%
37.8% 2,983
1.6%
22.3%

SI revenues increased by 37.4% compared to 3Q03 and 3.4% compared to 2Q04. The increase ismainly due to additional revenues from the purchase of the security system business operations of
Yamatane Co. Ltd. ("Yamatane"). The steady increase in revenues from outsourced operations was alsoachieved by new outsourcing contracts related to the one-time integration of systems that occurred in
2Q04. We expect that overall SI revenues will continue to increase in 4Q04, since the fourth quarter isthe strongest quarter in our fiscal year.
Equipment Sales

Page 5 of 7

IIJ 3Q04

Equipment Sales Revenue and Cost
3Q04
Equipment Sales Revenues
Cost of Equipment Sales
Equipment Sales Gross Margin Ratio

625
581
7.0%

(JPY in millions)

3Q03

YoY % 2Q04 QoQ %changechange1,111 (43.7%) 1,166 (46.4%)
1,050 (44.6%) 1,091 (46.7%)
5.5%
6.5%

Other Financial Statistics
Other Financial Statistics
3Q04
Adjusted EBITDA7
CAPEX, including capital leases8
Depreciation and amortization9

1,508
2,017
1,116

(JPY in millions)

3Q03

YoY % 2Q04 QoQ %Changechange1,218
23.9% 1,275
18.3%
508 296.9% 1,345
49.9%
1,004
11.2% 1,012
10.4%

Key Service Developments
Participation in RFID development:
In November 2004, IIJ announced that it will participate along with IIJ Technology Inc, in testing Radio
Frequency ID tags ("RFID") on international shipping containers in the physical distribution industry as
part of the FY2004 RFID Pilot Project that is being run by the Ministry of Economy, Trade, and Industry.
In this test, the IIJ Group will provide network infrastructure and the EPC System, a system that wasdeveloped by IIJ and enables the general recording, referencing, and updating over the Internet of
information tied to RFID tags, such as tag code, association, and history to verify its validity. The EPC
System provides more generalized and flexible use than the proprietary use in a certain company orindustry by using the Internet. IIJ is planning to introduce new services based on the knowledge andknow-how accumulated in the experiment.
Addition of a spam filter to our Internet service for consumer customers:
In December 2004, IIJ announced that it would add a spam filter to its Internet service for consumer
customers, IIJ4U. In Japan, spam is becoming a serious problem and the feature is provided free ofcharge to consumers who use the optional Virus Protection service, which detects and deletes viruses.
There are also plans to extend this spam filtering feature to IIJmio in early 2005.
Reconciliation of Non-GAAP Financial Measures
The following table summarizes the reconciliation of adjusted EBITDA to net income according to theconsolidated statements of operations that are prepared in accordance with accounting principles
generally accepted in the U.S. and presented in Appendix 1:
Adjusted EBITDA
Adjusted EBITDA
Depreciation and Amortization10
Operating Income
Other Income (Expenses)
Income Tax Expense (Benefit)
Minority Interests in Consolidated Subsidiaries
Equity in Net Income (Loss) of Equity Method
Investees
Net Income (Loss)(JPY in millions)

3Q03
2Q04
3Q04
1,218
1,275
1,508
(982)
(993)
(1,098)
236
282
410
1,570
(10)
333
(280)
518
(221)
(49)
(43)
(43)
(58)
16
(1)
920

1,979

(273)

7

Please refer to the Reconciliation of Non-GAAP Financial Measures below.
Please refer to the Reconciliation of Non-GAAP Financial Measures on the next page.
9
Depreciation and amortization includes amortization of issuance cost of convertible notes.
10
Depreciation and amortization excludes amortization of issuance cost of convertible notes that was included in otherexpenses.
8

Page 6 of 7

IIJ 3Q04

The following table summarizes the reconciliation of capital expenditures to the purchase of property
and equipment according to the consolidated statements of cash flows that are prepared and presented
in accordance with accounting principles generally accepted in the U.S. in Appendix 4:
CAPEX
Capital Expenditures
Acquisition of Assets by Entering into
Capital Leases
Purchase of Property and Equipment(JPY in millions)

3Q03
2Q04
3Q04
508
1,345
2,017
168
1,294
1,911
106

340

51

Management Message/Webcast
On February 10, IIJ will present its management message and the Company's results and outlook by
webcast. For details, please access the following URL: http://www.iij.ad.jp/en/IR/

About Internet Initiative Japan Inc.
Founded in 1992, Internet Initiative Japan Inc. (IIJ, NASDAQ: IIJI) is one of Japan's leading
Internet-access and comprehensive network solutions providers. The company has built one of thelargest Internet backbone networks in Japan, and between Japan and the United States. IIJ and its
group of companies provide total network solutions that mainly cater to high-end corporate customers.
Services range from the delivery of new generation network services over an optical-fiber infrastructurethat is optimized for data communications, to the construction of pan-Asian IP backbone networks. The
company also offers high-quality systems integration and security services, Internet access,hosting/housing, and content design.

For inquiries, contact:
Taisuke ONO, Naoshi YONEYAMAIIJ Media & Investor Relations Division
Tel: +81-3-5259-6500 E-mail: ir@iij.ad.jp URL: http://www.iij.ad.jp/
Statements made in this press release regarding IIJ’s or management’s intentions, beliefs, expectations, orpredictions 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 4Q04 revenues and operating profitability, aresubject to various risks, uncertainties and other factors that could cause IIJ’s actual results to differ materiallyfrom those contained in any forward-looking statement. These risks, uncertainties and other factors include:
IIJ’s expectation that net losses will continue or may increase; 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; the impact on IIJ's profits of fluctuations in the price of available-for-sale securities; the impact on IIJ's
profits of fluctuations in costs such as backbone costs and subcontractor costs; IIJ’s ability to generatesignificant revenues from its other services such as systems integration; the ability to compete in a rapidly
evolving and competitive marketplace; the impact of technological changes in its industry; 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 UnitedStates Securities and Exchange Commission.

Tables to follow

Page 7 of 7

IIJ 3Q04

INTERNET INITIATIVE JAPAN INC.
CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)Appendix 1

For the Three Months Ended Dec 31, 2004, Dec 31, 2003 and Sept 30, 2004
(Expressed in Thousands of Japanese Yen (JPY) and U.S. Dollars (USD) Except for Per Share and ADS Data)(1)Year-over-year Comparison
Sequential Comparison
Dec 31, 2004
Dec 31, 2003
Sept 30, 2004
% of
% of
% of
Total
Total
YOY
Total
QOQ
USD (1)
JPY
Revenues
JPY
Revenues
Chg %JPY
Revenues
Chg %Revenues:
Connectivity and value-added services:
Dedicated access services
Dial-up access services
Value-added services
Other
Total connectivity and value-added services

27,084
7,078
12,427
8,594
55,1832,780,955
726,798
1,275,958
882,4665,666,177

27.1%
7.1
12.4
8.6
55.2

3,204,046
779,544
1,124,596
525,106
5,633,292

33.3%
8.1
11.7
5.4
58.5

(13.2%)
(6.8)
13.5
68.1
0.6

2,832,355
739,957
1,220,119
715,617
5,508,048

27.0%
7.0
11.6
6.8
52.4

(1.8%)
(1.8)
4.6
23.3
2.9

38,6606,089
99,932

3,969,610
625,196
10,260,983

38.7
6.1
100.0

2,888,936
1,110,927
9,633,155

30.0
11.5
100.0

37.4
(43.7)
6.5

3,837,711
1,166,569
10,512,328

36.5
11.1
100.0

3.4
(46.4)(2.4)

Costs and expenses:
Cost of connectivity and value-added services
Cost of systems integration revenues
Cost of equipment sales
Total costs

47,46529,516
5,662
82,643

4,873,759
3,030,666
581,368
8,485,793

47.5
29.5
5.7
82.7

4,876,741
2,198,668
1,049,663
8,125,072

50.6
22.8
10.9
84.3

(0.1)
37.8
(44.6)
4.4

4,780,268
2,982,577
1,090,870
8,853,715

45.5
28.3
10.4
84.2

2.0
1.6
(46.7)(4.2)

Sales and marketing
General and administrative
Research and development
Total costs and expenses

6,659
6,164
471
95,937683,731
632,874
48,4069,850,804

6.6
6.2
0.5
96.0

698,948486,332
86,966
9,397,318

7.3
5.1
0.9
97.6

(2.2)
30.1
(44.3)
4.8

711,661
612,526
52,237
10,230,139

6.8
5.8
0.5
97.3

(3.9)
3.3
(7.3)
(3.7)

Operating income

3,995

410,179

4.0

235,837

2.4

73.9

282,189

2.7

45.4

Other income (expenses)

3,239

332,623

3.2

1,569,957

16.3(78.8)(10,188)(0.1)(3,364.9)

Income before income tax expense (benefit)

7,234

742,802

7.2

1,805,794

18.7(58.9)

272,001

2.6

173.1

Income tax expense (benefit)
Minority interests in consolidated subsidiaries
Equity in net income (loss) of equity method investees(2,152)(419)(8)(220,980)(43,040)
(795)

(2.2)
(0.4)
0.0

(280,406)(48,710)(58,354)

(2.9)
(0.5)
(0.6)

(21.2)(11.6)(98.6)

517,379(42,837)
15,548

4.9
(0.4)
0.1

(142.7)0.5(105.1)

Net income (loss)

8,959

919,947

9.0%

1,979,136

20.5%(53.5)(272,667)(2.6%)(437.4)

Systems integration revenues
Equipment sales
Total revenues

Basic Net Income (Loss) Per Share
Basic Net Income (Loss) Per ADS Equivalent
Weighted Average Number of Shares
Weighted Average Number of ADS Equivalents

24,01212.01
38,312
76,623,702

51,65825.83
38,312
76,623,702

Note (1): The translations of Japanese yen amounts into US dollar amounts with respect to the three months ended Dec 31, 2004 are included solely for the convenience of readers outside Japanand have been made at the rate of JPY 102.68 =$1, the approximate rate of exchange on Dec 31, 2004.

(7,117)(3.56)
38,312
76,623,702

INTERNET INITIATIVE JAPAN INC.
Appendix 2
CONSOLIDATED STATEMENTS OF OPERATIONS(UNAUDITED)For the Nine Months Ended Dec 31, 2004, Dec 31, 2003
(Expressed in Thousands of Japanese Yen (JPY) and U.S. Dollars (USD) Except for Per Share and ADS Data) (1)Year-over-year Comparison
Dec 31, 2004
Dec 31, 2003
% of
% of
Total
Total
YOY
JPY
Revenues
JPY
Revenues
Chg %USD (1)
Revenues:
Connectivity and value-added services:
Dedicated access services
Dial-up access services
Value-added services
Other
Total connectivity and value-added services

83,091
21,60835,86821,333
161,900

8,531,798
2,218,688
3,682,914
2,190,473
16,623,873

29.0%
7.5
12.5
7.4
56.4

9,761,680
2,330,551
3,192,670
1,581,204
16,866,105

35.9%
8.6
11.8
5.8
62.1

(12.6%)
(4.8)
15.4
38.5
(1.4)

102,278
22,618286,796

10,501,959
2,322,386
29,448,218

35.7
7.9
100.0

7,846,238
2,450,117
27,162,460

28.9
9.0
100.0

33.8
(5.2)
8.4

Costs and expenses:
Cost of connectivity and value-added services
Cost of systems integration revenues
Cost of equipment sales
Total costs

140,878
79,566
20,917
241,361

14,465,368
8,169,863
2,147,704
24,782,935

49.1
27.8
7.3
84.2

15,237,607
6,797,764
2,295,320
24,330,691

56.1
25.0
8.5
89.6

(5.1)
20.2
(6.4)
1.9

Sales and marketing
General and administrative
Research and development
Total costs and expenses

20,046
18,174
1,451
281,032

2,058,342
1,866,051
149,01128,856,339

7.0
6.3
0.5
98.0

2,771,562
1,580,597
279,182
28,960,032

10.2
5.8
1.0
106.6

(25.7)
18.1(46.6)(0.4)

Operating income (loss)

5,764

591,879

2.0(1,799,572)(6.6)(132.9)Other income

1,673

171,735

0.6

1,208,265

4.4(85.8)

Income before income tax expense (benefit)

7,437

763,6142.6(591,307)(2.2)(229.1)

Income tax expense (benefit)
Minority interests in consolidated subsidiaries
Equity in net income (loss) of equity method investees(13,254)(455)
37(1,360,936)(46,693)
3,758

(4.6)
(0.1)
0.0

(1,242,083)
393,107(1,817,721)

(4.6)
1.5
(6.7)

9.6
(111.9)(100.2)

Net income (loss)

20,2732,081,615

7.1%(773,838)(2.8%)(369.0)

Systems integration revenues
Equipment sales
Total revenues

Basic Net Income (Loss) Per Share
Basic Net Income (Loss) Per ADS Equivalent
Weighted Average Number of Shares
Weighted Average Number of ADS Equivalents

54,33327.17
38,312
76,623,702(26,198)(13.10)29,53859,076,611

Note (1): The translations of Japanese yen amounts into US dollar amounts with respect to the three months ended Dec 31, 2004 are included soley for the convenienceof readers outside Japan and have been made at the rate of JPY102.68 =$1, the approximate rate of exchange on Dec 31,2004.

INTERNET INITIATIVE JAPAN INC.
CONSOLIDATED BALANCE SHEETS(UNAUDITED)Appendix 3

As of Dec 31, 2004, Dec 31, 2003 and Sept 30, 2004
(Expressed in Thousands of Japanese Yen (JPY) and U.S. Dollars (USD)) (1)
Dec 31, 2004
Dec 31, 2003

Sept 30, 2004

USD (1)

JPY

%

JPY

%

JPY

%

118,41460,687
3,624
9,632
3,255

12,158,790
6,231,361
372,144
989,003
334,169

26.9%
13.8
0.8
2.2
0.7

12,140,595
6,640,226
196,252
875,338
391,766

31.5%
17.3
0.5
2.3
1.0

11,802,165
6,770,303
262,180
652,061
106,364

27.4%
15.7
0.6
1.5
0.3

195,61220,085,467

44.4

20,244,177

52.6

19,593,073

45.5

7,398
107,831
97,42819,96812,544

759,585
11,072,053
10,003,936
2,050,305
1,288,024

1.7
24.4
22.1
4.5
2.9

1,024,126
5,821,912
8,448,327
2,076,387
849,954

2.7
15.1
22.0
5.4
2.2

752,630
10,657,082
9,045,349
2,080,345
963,895

1.7
24.7
21.0
4.8
2.3

440,781

45,259,370

100.0%

38,464,883

100.0%

43,092,374

100.0%

Short-term borrowings
Payable under securities loan agreement
Accounts payable
Accrued expenses
Other current liabilities
Long-term borrowings-current portion
Convertible notes
Capital lease obligations-current portion

46,9997,039
34,731
6,484
7,599
21,281
107,986
27,1184,825,844
722,800
3,566,158
665,821780,267
2,185,094
11,088,000
2,784,469

10.7%
1.6
7.9
1.5
1.7
4.8
24.5
6.1

6,764,410

17.6%

4,611,586
513,996594,974
1,947,309

12.0
1.3
1.5
5.1

2,415,596

6.3

5,732,204
816,800
4,502,356
448,585
604,868
1,650,139
11,088,000
2,491,070

13.3%
1.9
10.5
1.0
1.4
3.8
25.7
5.8

Total current liabilities

259,237

26,618,453

58.8

16,847,871

43.8

27,334,022

63.4

Long-term Borrowings
Convertible Notes
Capital Lease Obligations-Noncurrent
Accrued Retirement and Pension Costs
Other Noncurrent Liabilities

23,2702,389,339

5.3

4.0

4,459,352
120,732
320,393

9.8
0.3
0.7

5.0
30.7
7.3
0.2
0.5

1,732,473

43,4291,176
3,120

1,945,434
11,832,000
2,801,993
67,557
180,3293,620,613
102,224
300,190

8.4
0.3
0.7

330,232

33,908,269

74.9

33,675,184

87.5

33,089,522

76.8

9,632

988,9642.2

486,3881.3

945,572

2.2

Shareholders' Equity:
Common stock
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive income
Treasury stock

134,061
230,207(318,551)
55,629(429)

13,765,372
23,637,628(32,708,815)
5,711,952(44,000)

30.4
52.2(72.2)
12.6(0.1)

13,765,372
23,637,628(35,459,129)
2,359,503
(63)

35.8
61.5
(92.2)
6.1
0.0

13,765,372
23,637,628(33,628,762)
5,327,042(44,000)

31.9
54.8(78.0)
12.4(0.1)

Total shareholders' equity

100,917

10,362,137

22.9

4,303,311

11.2

9,057,280

21.0

Total liabilities and shareholders' equity

440,781

45,259,370

100.0%

38,464,883

100.0%

43,092,374

100.0%ASSETS
Current Assets:
Cash and cash equivalents
Accounts receivable, net
Inventories
Prepaid expenses
Other current assets
Total current assets
Investments in and Advances to Equity Method Investees
Other Investments
Property and Equipment, net
Guarantee Deposits
Other Assets
Total assets
LIABILITIES ANDSHAREHOLDERS' EQUITYCurrent Liabilities:

Total liabilities
Minority Interest

Note (1): The translations of Japanese yen amounts into US dollar amounts with respect to the three months ended Dec 31, 2004 are included solely for the convenience of readers outside Japanand have been made at the rate of JPY 102.68 =$1, the approximate rate of exchange on Dec 31, 2004.

INTERNET INITIATIVE JAPAN INC.

Appendix 4

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS（UNAUDITED）
For the Three Months Ended Dec 31, 2004, Dec 31, 2003 and Sept 30, 2004
(Expressed in Thousands of Japanese Yen (JPY) and U.S. Dollars (USD)) (1)
Dec 31, 2004
USD (1)

Dec 31, 2003

Sept 30, 2004

JPY

JPY

JPY

Operating Activities:
Net income (loss)

8,959

919,947

1,979,136(272,667)

Depreciation and amortization

10,873

1,116,447

1,004,236

1,011,532(180)(18,455)(40,428)

19,968(15,548)

Provision for (reversal of) doubtful accounts
Equity in net income (loss) of equity method investees

8795

58,354

Minority interests in consolidated subsidiaries

419

43,04048,71042,837

Foreign exchange losses (gains)

145

14,912

12,279(14,152)-

Gain on retirement of convertible notes--(88,975)

Net gains on other investments(5,135)(527,300)(1,532,033)(98,103)

Decrease (increase) in accounts receivable

5,677

582,873

138,452(1,396,506)

Increase (decrease) in accounts payable(9,597)(985,459)(70,261)

566,837

Decrease (increase) in inventories(1,071)(109,964)

72,267

149,969

Deferred income taxes(2,530)(259,783)(286,208)

501,873

Other(1,427)(146,465)(209,740)

542,953

Net cash provided by operating activities

6,141

630,588

1,085,789

1,038,993

Purchase of property and equipment(1,032)(105,946)(339,621)(51,435)

Proceeds from sales of other investment

7,312

750,800

1,946,875

125,281

Investing Activities:

Purchase of other investments(47)(4,854)(6,039)(3,083)

Refund (payment) of guarantee deposits-net

303

31,162727(19,193)(3,613)(371,011)

-

-

(10)

(1,029)

(225)

904

2,913

299,122

1,601,717

52,474

Proceeds from long-term borrowings

12,174

1,250,000-

1,000,000

Repayments of long-term borrowings(567)(58,179)(1,036,247)(1,436,943)

Proceeds from (repayments of) securities loan agreement(916)(94,000)-

816,800--(3,047,460)-

Acquision of business
Other
Net cash provided by investing activities
Financing Activities:

Repurchase of convertible notes
Principal payments under capital leases(7,372)(756,982)(671,339)(688,418)

Net increase (decrease) in short-term borrowings(8,827)(906,360)

2,459,505

369,203

Net cash provided by (used in) financing activities(5,508)(565,521)(2,295,541)

60,642

Effect of Exchange Rate Changes on Cash(73)

(7,564)(34,305)

22,853Net Increase in Cash and Cash Equivalents

3,473

356,625357,660

1,174,962

Cash and Cash Equivalents, Beginning of Period

114,941

11,802,165

11,782,935

10,627,203

Cash and Cash Equivalents, End of Period

118,414

12,158,790

12,140,595

11,802,165

Note (1): The translations of Japanese yen amounts into US dollar amounts with respect to the three months ended Dec 31, 2004 are include
solely for the convenience of readers outside Japan and have been made at the rate of JPY102.68 =$1, the approximate rate ofexchange on Dec 31, 2004.