EN FY201407 Q2 Businessoverview JP - IR Pocketpdf.irpocket.com/C3811/nKx5/oMUA/MgYP.pdf9 IBM 70,000 System Integrator － ... Advertising/media General business Systems integrators

Copyright 2014 Bit-isle Inc. All Rights Reserved

Business Overview

Bit-isle Inc.(TSE: 3811)March, 2014

1


Company Profile

2

Corporate name Bit-isle Inc.Head office 2-5-5 Higashi Shinagawa, Shinagawa-ku, TokyoEstablished June 14, 2000Capital 3,492 million yen (as of January, 2014)

Directors

Kohei Terada, President CEONobuyuki Amano, Vice President COOTakuya Ando,CTOHideo Fukai, General Manager of AdministativeDivisionKunitake Ando(external)

Auditors

Norio Yoshihara (standing)Tetsu Takahashi(external)Soumitsu Takehara(external)Keiichiro Hashimoto(external)

Number of employees

415(consolidated), 140 (non-consolidated) (as of January,2014)

Number of shares issued 35,530,565 shares (as of January,2014)

Major shareholders

・Terrada Warehouse Company (14.7%)・Kohei Terada (11.6%)・Information Services International-Dentsu, Ltd. (9.4%)(note)As of January,2014.Figures in parentheses are shareholding ratios.

Corporate philosophy

To become a company that helps customers realize their dreams

With our peerless services and technical expertise, we support the IT service field with stability and

security. Our aim is to support customers realize their dreams with our Integrated IT Outsourcing enterprise.

Subsidiary（6companies）

Bit-surf Inc.SiteROCK K.K.TERRAS Co., Ltd.SETA International Co., Ltd.AXLBIT Inc.Terra Power Co.,Ltd.

Copyright 2014 Bit-isle Inc. All Rights Reserved 3

History

July 2013

June 2000

March 2001

February 2006

July 2006

August 2006

November 2006

September 2007

February 2009

December 2010

June 2011

August 2012

February 2013

Listed in TSE 1st section

Bit-isle Inc. established

Bit-surf Inc. established

Listed in Hercules of OSE(current JASDAQ)

Terras Co., Ltd. becomes a subsidiary

siteROCK K.K. becomes a subsidiary

Osaka Datacenter set up

4th Datacenter set up

3rd Datacenter A-building set up

2nd Datacenter set up

1st Datacenter set up

3rd Datacenter B-building set up

Hiroshima mega solar began operation

2006/8 第2データセンター開設2006/11 第3データセンターA棟開設2006/8 第2データセンター開設2006/11 第3データセンターA棟開設

Mar.,2001 1st DatacenterMar.,2001 1st Datacenter

Aug.,2006 2nd Datacenter Nov.,2006 3rd Datacenter -A buildingAug.,2006 2nd Datacenter Nov.,2006 3rd Datacenter -A building

Feb.,2009 4th DatacenterFeb.,2009 4th Datacenter

Jue.,2011 Osaka DatacenterJue.,2011 Osaka Datacenter

Aug.,2012 3rd Datacenter-B buildingAug.,2012 3rd Datacenter-B building（Net sales: million yen）

Net sales, Number of racks in operation

（racks）

※FY2001/7 to FY2003/7 and FY2006/7 is non-consolidated

Net sales Number of racks in operation


About the Data Center

4

Feature 1 Location & ScaleOur Bit-isle's data centers located in Tokyo (Shinagawa-ku, Bunkyo-ku) and Osaka (Chuo-ku, Osaka-shi) are not only accessible butalso scalable.

Feature 2 Facilities (Electricity, air conditioning etc.)At Data Center 4, many server units can provide 6kVA per rack,leading to TCO* reduction.* TCO (Total Cost of Ownership): total cost of computer & systemintroduction, maintenance, management etc.

Feature 3 NetworkThe backbone of Bit-isle is using the multi-homing method byconnecting multi ISP and BGP*. It makes offering a stable Internetenvironment possible by using every line of more than 10 Gbps,including JPIX, JPNAP etc..* BGP (Border Gateway Protocol): the protocol which is used for theconnection devices to exchange routing decisions between networks

Feature 4 SecuritySecurity is guaranteed by a 24 hours a day, 365 days a yearmonitoring system of reception staff and resident operators, and anentrance/exit management system of ITV monitoring cameras, ICcards, and vein authentication.※ITV monitoring camera...a television system used for security andmonitoring

Feature 5 A people-friendly Data CenterBit-isle prioritizes those who use the data centers, and thus providesvarious amenity services, such as massage chairs in the salon etc..

Internet Data Center Operating 24 hours

a day, 365 days a year

Reducing costsby sharing facilities

Saving energythrough efficient air-conditioning etc.

per rackfor 20~30 server units

Electrical Equipment

Earthquakeresistants Monitoring

Private electronic Generator Security Operation

Server Room

Rack

Server

A room forsetting up the

racks

Something to store servers in;

similar to a locker

Buyer

Product PaymentGroupwareCustomerManagementSalesManagementCloudetc.

Shopping site Online tradeBtoC BtoB


Location

Closer to IX and easier to recruit engineers

IX is concentrated in Otemachi, Tokyo. Internet-based customer response is quick and communication costs are low. In Tokyo, it is easier to recruit engineers with

sophisticated skills.

Around Tokyo

72%

Excellent location close to customers

In open systems, customers are able to receive support quickly from any customers and any vendors.

Source: Fuji Chimera Research Institute, Inc. 2014

Partner DCOwn DC

Tokyo

Osaka DatacenterSet up：Jun.,2011

ShinagawaSet up：（1stDC）Mar.,2001

（2ndDC）Aug.,2006（3rdDC-A）Nov.,2006（3rdDC-B）Aug.,2012

Capacity：3,628racksTotal area：19,300㎡

BunkyoSet up：（4thDC）Feb.,2009Capacity： 2,378racksTotal area： 16,500㎡

Set up：（5thDC）Nov.,2014

Hiroshima Mega SolarSet up: section 1：Feb.,2013

section2：Jul.,2013

Data center market in Japan by region

Capacity：1,400racks（Plan）

Total area： 7,680㎡

5

HanoiOffshore development center

65%

35%

AroundTokyo

Others


Market environment in Japan

6

•Advancement and diversification of devices•Increase in the number of servers per service due to the rapid dissemination of high-capacity digital content•Tighter information management of companies and social demand for environmental measures, etc.

The size of IT outsourcing market in Japan will be 3.29 trillion yen

in 2017.

The size of data center market in Japan will be 1.28 trillion yen

in 2017.

2.702.81

2.963.10 3.14 3.20 3.25 3.29

2010 2011 2012 2013 2014 2015 2016 2017

0.78 0.84

0.91 0.99

1.06 1.13

1.21 1.28

2010 2011 2012 2013 2014 2015 2016 2017

Source: Compiled from International Data Corporation Japan November,2013Source: Yano Research Institute October,2013

Unit: trillion yen Unit: trillion yen


Position in Japan Datacenter market

169compaies

Number of iDC service providers in Japan

NO. Player Total area(unit:㎡) Segment memo

1 NTT Group 1,030,000 Telecommunications carrier/Network NTTeast, NTTwest, NTTcom, NTTdata, NTTPC, etc.2 SECOM Group 227,000 Home security Secom trust systems, @Tokyo3 Fujitsu Group 156,000 System Integrator Fujitsu, FujitsuFIP4 NEC Group 116,000 System Integrator NEC, NEC, BIGLOBE, etc.5 NRI 114,000 System Integrator －6 IT Holdings 111,000 System Integrator TIS, INTEC7 CTC 85,000 System Integrator －8 Softbank Group 74,000 Telecommunications carrier/Network Softbank telecom, iDC Frontier9 IBM 70,000 System Integrator －10 Hitachi Group 60,000 System Integrator Hitachi, Hitachi systems11 SCSK 60,000 System Integrator －12 KDDI 43,000 Telecommunications carrier/Network －13 KVH 37,000 Telecommunications carrier/Network Fidelity Group14 Bit-isle 35,800 Speciality －15 NS solutions 24,000 System Integrator －16 EQUINIX JAPAN 21,000 Specialty EQUINIX’s Japanese subsidiary17 SAKURA Internet 18,000 Specialty Sojitz Group18 Canon 17,000 System Integrator －19 IIJ 16,600 Telecommunications carrier/Network －20 Mitsubishi Electric 16,000 System Integrator －

Datacenter total area in Japan

*source:

Source: Fuji Chimera Research Institute, Inc. 2013 and trade paper


iDC market environmentData Center market• Tokyo metropolitan area and its suburbs were built many new large scale

Data Centers between 2011 and 2013.• After 2014,to build new large scale data centers are slow down. Cloud Services market• Amazon AWS services are strong in Japan market.

In Japan data center market, supply and demand balance is going to turn good, We approach the market as specialized colocation provider.

Note: Currently ,new mid-large scale Data Centers in around Tokyo(more than 7,000㎡)

*own reserch

2011 2012 2013 After 2014

IT Holdings SECOM NTTcom SCSK

KVH NRI Mitsubishi Corporation NEC

NTT com Canon Dai Nippon Printing Bit-isle

EQUINIX NS solutions Toppan Printing -

- NTT east CTC -

- AGS SECOM -

4.Forecast

8


32 34 363329

23

55.8%71.0% 76.3% 80.3% 81.3% 83.4%

0.0

10.0

20.0

30.0

40.0

2011 2012(E) 2013(E) 2014(E) 2015(E) 2016(E)0%

20%

40%

60%

80%

100%

スマートフォン市場規模の推移・予測

携帯電話総出荷数に対するスマートフォンの割合

9

Datacenter needs

（million unit）

（Gbps）

IT service's Needs Monthly average Internet traffic in Japan

Smartphone shipments in Japan

1,102 1,235

1,516 1,730

2,275

2009 2010 2011 2012 2013

64%

36%

DC その他（オフィスビル等）

68%

56%

8%

12%

22%

31%

1%

1%

0% 20% 40% 60% 80% 100%利用中/検討中分からない利用/検討なしその他

Sorce: Impress Innovation Lab. 2012

Sorce:iDC Japan Feb.,2013

End of 2012

General Business’ Needs

Reducing operating cost

Business continuity need Earth quake risk

Black out risk

Place to keep servers in Japan

Data center needs for Business Continuity Plan

2012（n=489）

2011（n=508）

Year

Others(Office space etc.)

Use or Planning

Do not know

Not use or Planning

Others

Souce:MM Research Institute （March.2013)

Smartphone shipments Smartphone shipmements of all mobile devices(%)


Customer Base

25180

57

207

157

28

Total（654)

（Unit: companies）

General business（392companies）

IT service provider（262compnies）

IT service provider

iDC/ hosting

Content providers

Advertising/media

General business

Systems integrators

Enterprises

Telecommunications, etc.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

市場構成ビットアイル構成

ITサービス事業者一般企業その他

Strong IT service providers

Approach General business market

Customer Distribution（January,2014） Sale segment in japan Compared iDC market with Bitisle

IT service provider

General business Others

Market Bit-isle

*Source: （Market sales segment） Fuji Chimera Research Institute, Inc.


High performance

11

Japan

Pure Player in Japan / in Global , Net sales EBITDA margin Trend

（Billion yen）

Bit-isle Sakura internet Broadband TowerNet sale EBITDA Margin

Global

Equinix Telecity Interxion

7.9 9.7 11.9

14.7 16.7 26.4%

35.8%38.9% 40.4%

39.1%

0%

10%

20%

30%

40%

50%

0.0

4.0

8.0

12.0

16.0

20.0

'09/7 '10/7 '11/7 '12/7 '13/7

7.1 7.8

8.6 9.2 9.5

15.4%20.8%

26.5% 24.3% 25.5%

0%

10%

20%

30%

40%

50%

0.0

2.0

4.0

6.0

8.0

10.0

'09/3 '10/3 '11/3 '12/3 '13/3

10.3 12.8

14.5 15.8

23.5

6.8% 8.9% 8.2%5.0% 6.5%

0%

10%

20%

30%

40%

50%

0.0

5.0

10.0

15.0

20.0

25.0

'09/6 '10/6 '11/6 '12/6 '13/6

*Source ：discloser documents. Global player’s financial date rate is $1=¥100


Business Overview

Integrated IT outsourcing

Solutions service

Support business with hardware, software, and temporary staff dispatch Temporary staff

dispatchSystem

developmentSystem

integration

Managed service

Cloud

Timely response 24 hours a day, 365 days a yearOperation/ monitoring

Rental office

NetworkCollocation

iDC service

OEM

internet datacenter

Rental equipment

Copyright 2014 Bit-isle Inc. All Rights Reserved13

Group Companies

Provides business services with a focus on engineering

Offers business services including system monitoring and operational management (MSP) services

Provides various services including movie delivery, system solutions, hosting and ASP, server storage and more

Bit-surf Inc.

SiteROCK K.K.

TERRAS Co., Ltd.

As a part of the system solutions offered by TERRAS, SETA International utilizes an offshore development center in Hanoi, Vietnam and pursues a system development business in Japan.

SETA International Co., Ltd.

Providing SaaS foundation to application vendors.

AXLBIT Inc.

Terra Power Co.,Ltd.Promoting development and sales the renewable energy power plants which make effective land in Japan.


Fact Sheet


Equity ratio（Equity ÷Total assets）

15

Equity ratio（Equity ÷Total assets） ROE（Net income ÷ Equity）

D/E ratio （Total debt ÷Equity） ROA（Net income ÷Total assets）

(Equity, Total assets, million yen, rounddown）（Equity ratio）

（Total debt Equity, million yen, rounddown）（D/Eratio）

EquityTotal debt D/E ratio

Equity Total assets Equity ratio

FY2009/7 FY2010/7 FY2011/7 FY2012/7 FY2013/7FY2009/7 FY2010/7 FY2011/7 FY2012/7 FY2013/7

15


Fact Sheet

16

（Unit ： million yen ,round down）PL

FY2009/07 FY2010/07 FY2011/07 FY2012/07 FY2013/07

Net sales 7,866 9,731 11,949 14,747 16,663

Gross profit 1,887 2,469 3,402 4,514 4,985

ratio 24.0% 25.4% 28.5% 30.6% 29.9%

Selling, general and administrative expenses 1,007 1,092 1,370 1,768 1,916

Operating income 880 1,376 2,032 2,746 3,068

ratio 11.2% 14.1% 17.0% 18.6% 18.4%

Non-operating income 28 27 29 39 23

Non-operating expenses 271 333 329 312 346

Ordinary income 637 1,070 1,732 2,472 2,745

ratio 8.1% 11.0% 14.5% 16.8% 16.5%

Extraordinary income/loss -9 -42 -147 -98 13

Income before income taxes 627 1,028 1,584 2,373 2,759

Income taxes 291 399 679 1,035 1,048

Minority interests in income/loss 0 0 0 1 7

Net income 336 628 903 1,336 1,703

ratio 4.3% 6.5% 7.6% 9.1% 10.2%

16


Fact Sheet

17

BS

Assets FY2009/07 FY2010/07 FY2011/07 FY2012/07 FY2013/07

Cash and deposits 1,248 4,364 3,456 3,045 6,220

Accounts receivable 269 355 601 809 842

Current assets 4,377 5,070 5,097 4,278 8,041

Property, plant and equipment 18,377 19,284 20,031 21,284 23,060

Intangible assets 313 378 451 377 410

Investments and other assets 2,198 2,095 2,181 2,183 3,016

Noncurrent assets 20,889 21,757 22,664 23,846 26,487

Assets 25,267 26,828 27,761 28,124 34,528

Liabilities and net assets FY2009/07 FY2010/07 FY2011/07 FY2012/07 FY2013/07

Short-term loans payable 2,270 230 190 150 110

Current portion of long-term loans payable/Lease obigations 2,505 3,466 6,969 4,396 5,442

Current liabilities 5,915 5,708 9,713 8,119 8,663

LongTerm Loans Payable /Lease obigations 13,531 14,795 10,884 11,665 13,153

Liabilities 13,531 14,795 10,884 11,713 13,735

Total liabilities 19,447 20,504 20,597 19,832 22,399

Net assets 5,819 6,323 7,163 8,291 12,129

Shareholders' equity 5,743 6,224 7,026 8,079 11,823

Liabilities and net assets 25,267 26,828 27,761 28,124 34,528

Total Debt 18,306 18,492 18,043 16,211 18,705

（Unit ： million yen ,round down）

BS

17


Fact Sheet

18

（Unit ： million yen ,round down）

CF

FY2009/07 FY2010/07 FY2011/07 FY2012/07 FY2013/07

Income before income taxes 627 1,028 1,584 2,373 2,759

Depreciation and amortization 1,188 2,099 2,587 3,174 3,427

Amortization of goodwill 4 6 32 42 40

Decrease (increase) in notes and accounts receivable-trade -64 -113 -180 -207 -28

Increase (decrease) in accounts payable-other and accrued expenses -67 171 126 138 -184

Increase (decrease) in advances received ー 389 -161 718 -206

Interest expenses paid -222 -332 -341 -309 -290

Income taxes paid -810 -151 -439 -956 -1,156

Net cash provided by (used in) operating activities 474 3,988 3,830 5,418 4,873

Purchase of property, plant and equipment -8,269 -1,369 -3,745 -3,351 -4,936

Net cash provided by (used in) investing activities -5,137 -504 -3,499 -2,065 -4,697

Charge in short-term loans payable -2,230 -2,040 -40 -40 -40

Charge in long-term loans payable 9,282 403 -228 -2,087 2,579

Proceeds from issuance of common stock 12 12 12 41 1,376

Net cash provided by (used in) financing activities 6,896 -2,366 -1,240 -3,772 2,998

Net increase (decrease) in cash and cash equivalents 2,233 1,116 -908 -419 3,174

18


Return to Shareholders

Planned (year-end) dividend for FY2014/7

13 yen per shareInterim 6 yen per share

End term 7 yen per share

13円

Interim

15円Commemorative dividend

9円

Dividend per share

End Term

(note) One share was split into 200 shares with February1, 2012.Above graph, we made correction in the past figures.


Other


Tokyo

5th Datacenter(1)

Overview Location：Bunkyo-ku, Tokyo Building：New Building

Quake-absorbing structure Total floor area：7,680 ㎡

The number of racks available 1,400racks

Set up November, 2014

Capital investment

Approx.10 billion yen

Otemachi

1st ・2nd ・ 3rd DC (3,628racks)

4th DC(2,378racks）

Tokyo's 23 wards

21

Near the 4th DCAn improbemnet in

air conditioningNew building

Quake-absorbing structure

・Point of otimaization

This is likely to change significantly as the now DC is still under the design phase.

Copyright 2014 Bit-isle Inc. All Rights Reserved22

5th Datacenter(2)

The above contents are likely to change significantly asthe now DC is still under the design phase.

Location near 4th DC

New building , Quake-absorbing structure

Improve air conditioning efficiency

Compared 5th DC with 4th DC

Item Capex

Builoding 2 billion yen

DC equipment 8 billion yen

• PUE1.6 at 4th DC→Target PUE1.3 at 5thDC

• Sharing in 4th DC operation staff.

• Investment for structuring 5th DC 10 billion yen breakdown

(note)Planning to inbest DC equipment in stages.

4th DC 5th DC

DC equipment 16billion yen 8billion yen

No. of racks installed

2.378racks 1,400racks

DC capex per rack6.7million yen 5.7million yen

15% efficiency

①Investment for DC equipment

②Cost

4th DC 5th DC

Rent/DC equipmentdepriciation（annual）

２billion yen 0.9billion yen

（note） Due to the impact of the (start depreciation) investment staged, the costofeach fiscal year is different from the above amount.


Solar Power Generation Business Overview

Hiroshima

Hiroshima prefecture

Hiroshima

Takehara

Adoption of the system for purchasing the total amount of renewableenergy under the Act on Special Measures Concerning the Procurement of

Renewable Energy Sourced Electricity by Electric Utilities

Support of Hiroshima prefecture and Takehara city

Commercial mega solar is to be installed in Takehara city where insulation conditions are good and an early start to the business is possible.

A pilot project for an electric power business with renewal energy

CSR

Earnings will be secured even in the first year of operations

Section 1 Section 2

Location Takehara, Hiroshima prefecture

Area 24,400㎡ 26,600㎡

Start February, 2013 July ,2013

Electric power output(Maximum)

1.5MW 1.5MW

Estimated Amount of Electric Power to

be Sold71 -75 million yen 79 -83 million yen

Cost 43 -49 million yen 46 -53 million yen


Coverage analyst

24

Company Analyst

Ichiyoshi Research Institute Inc. Hiroshi Naya, Kaname Fujita

SMBC Friend Research Center Ltd. Naoki Yokota

IwaiCosmo Securities Co.,Ltd. Tomoaki Kawasaki

Daiwa Securities Co. Ltd. Yu Tokuda

Macquarie Capital Securities Limited Michael Newman

Please note that any opinions, estimates or forecasts regarding Bitisle’s performance made by these analysts are theirs alone and do not represent opinions, forecasts or predictions of Bitisle or its management. Bitisle does not by its reference above or distribution imply its endorsement of or concurrence with such information, conclusions or recommendations.

(As of December, 2013）


Glossary

Term Meaning

Server In a network in which computers are connected, a computer that offers its functions to other computers (called clients) that use it for certain processing tasks.

EC An abbreviation for electronic commerce, which is commercial trade using the Internet. It provides a broad array of services, including the sale of merchandize and payment systems.

B2B/ B2C In transactions, business-to-business transactions are called B2B. Business-to-consumer transactions are called B2C (“B” stands for “business” and “C” stands for “consumer”).

SNS A community service (called a “social networking service”) on the Internet that encourages association between individuals.

SaaS Software as a service. Of software functions, a form of service that provides only those functions necessary for users, so that they can use them.

IaaS Infrastructure as a service: The provision of computer infrastructure, such as a virtualized platform, as a service via the internet.

Application Software designed for specific purposes such as document creation or numerical calculation, and include software for word processing, table calculation, and presentations.

ASP A business operator (Application Service Provider) that leases business applications to customers via the Internet.

Host computer A large computer that plays a central role in a network. The word is used as a collective term for computers that provide a high-speed arithmetic processing function and a database function.

IX (Internet exchange)

An interconnection point on the Internet that connects a number of Internet service providers and academic networks.

Open system A computer system that is constructed by combining software and hardware of different manufacturers

Cloud computing (cloud)

To use services through the servers of business operators connected via the Internet, instead of users purchasing and owning systems and software. Users receive the services they want when they want to use them and pay for that use, just like electricity and water.

OEMOEM as we define it is a method of providing iDC services that give large customers a dedicated floor designed to their specifications. Although a one-year contract is a standard for providing general services, the provision of an OEM service is based on a multi-year contract.


Glossary

Term Meaning

VirtualizationA fundamental technology of cloud computing that enables the use of a number of hardware units as if they were a single unit or, in contrast, the use of a single unit of hardware in pieces as if it was divided into multiple units by absorbing differences in the kinds of operating systems and hardware in between and eliminating boundaries.

PUEPower usage effectiveness: An index of the energy efficiency of data center facilities. It is calculated by dividing the power consumption of the entire data center by that of the IT equipment it uses. The smaller the value, the less power is used for data center facilities. In other words, it is an index of how efficiently a data center uses its power.

BCPBusiness continuity planning: A business strategy aimed at ensuring the continuation of important businesses, or else their earliest possible resumption, when a company has been affected by a disaster, to protect the company from the negative consequences ofbusiness discontinuity such as a loss of customers to competitors, decline of market share, and damage to reputation.


Bit-isle Inc.5 floor, HarborOneBuilding, 2-5-5 Higashi Shinagawa, Shinagawa-ku, Tokyo

Corporate Planning Office

Tel: 81-(3) 5782-8723E-mail: [email protected]

Documents

EN FY201407 Q2 Businessoverview JP - IR Pocketpdf.irpocket.com/C3811/nKx5/oMUA/MgYP.pdf9 IBM 70,000 System Integrator － ... Advertising/media General business Systems integrators