Financial results briefing for the Q1 of FY2018
Sustainable growth through online payment expansion and a push
for a cashless society

February 13, 2018

GMO Payment Gateway, Inc.
(3769: Tokyo Stock Exchange Section-1)

The 52 nd IR Meetinghttps://corp.gmo-pg.com/en/

A cautionary note about the contents of the document

The contents of this document are based on generally
recognized economic and social conditions, as well asassumptions judged to be reasonable by GMO Payment
Gateway as of February 13, 2018.
However, please note that they are subject to change
without prior notice in the event of changes in thebusiness environment or other unforeseen occurrences.

Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

2

Agenda1. Management goal and requirements for FY2018
and industry topics
2. Summary of financial results for Q1 of FY2018
3. Earnings forecast for FY2018
4. Future actions to implement growth strategies
5. Financial highlights
6. Reference materials

Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

3

1. Management goal and requirements
for FY2018 and industry topics

Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

4

1.1 Management goal and requirements
for FY2018
Leading a promotion and expansion of cashless payment
for the development of the whole industry■Management goal
Ensuring a sequential growth (OP growth by 25%+)■Management requirements
１．Promotion for a cashless society
Promotion of business with banks- Expansion of account transfer app- Provision of new payment methods such as QR code payment
Taking advantage of REV Installment Sales Act to acquire large
merchants/businesses

２．Profit expansion in Money Service Business
GMO payment after delivery and early paymentLending to overseas entities in our sights

３．Reinforcement of global strategies
Implementing strategies to lift profit after 2020 (core: MACRO KIOSK)
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

5

1.2

Industry topics

Our position regarding recent industry news
Our actions / what these mean to us

REV Installment Sales Act to be in place from June 1, 2018
・GMO-PG addressing security measures and merchant examinations mandated under the Act
・GMO-FG promoting IC-compatible terminals in card-present payment

Worldpay partners with Klarna for credit payment in 6 Europeancountries
Credit payment also from India’s mobile payment “Paytm”
・Working to scale up and improve margin of GMO payment after delivery to potentially take itoverseas

Mobile carriers enter QR code payments through mobile phones
・Supporting its penetration in JPN for a cashless society with our know-how

Various worldwide events surrounding cryptocurrencies
・Our payment transaction volume climbs with bigger cryptocurrency volatility

Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

6

2. Summary of financial resultsfor Q1 of FY2018

Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

7

2.1

Business performance

Promising start with OP +28.7% and transaction value +36.1％（million yen）

Q1 FY2017(actual)Q1 FY2018(actual)YoY changeRevenue

4,826

6,098

＋26.4％

Operating profit

1,238

1,594

＋28.7％

609

860＋41.1％

1,389

1,818

＋30.9%

Profit attributable toowners of parent(Net profit)

EBITDA*1*1 EBITDA=OP + Depreciation

Operating stores(end of Q1)

KPI※ *286,136（＋5.1％）

Transaction value(Q1)

Transaction volume(Q1)770 billion yen

313 million（＋36.1％）（＋25.9％）Card-present payment not included. Figures in brackets represent year-on-year change.
*2 Growth rate slowed down after an end of a service by our partner sent a batch of merchants idled (+19.5% net of this factor)
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

8

2.2Factors that affected the cumulative results

Financial statements disclosed under IFRS from Q1 FY2018(million yen)

+26.4％

6,000Revenue
・Grew above the market growth of major Ecommerce merchants
・Business area expansion outside merchandising Ecommerce kicked in(service/digital contents, business with banks, etc.)
・Transaction volume of GMO payment after delivery soared

5,000

Operating profit
・Money Service Business margin improved
・Cost ratio of payment enhancement business rose・(Q1 FY2018) Recorded difference (gain) between an actual and estimate of
insurance reimbursement from information leakage in FY2017
・(Q1 FY2017) Recorded an expense attributed to a fair value change in BIP
Trust provision

4,000

3,000

Profit attributable to owners of parent

2,000(net profit)+28.7％+41.1％1,000

・Affected by exchange rate (gain)
・Equity method investment loss
dropped・Tax effect accounting applied on
GMO-PS

0Revenue

Operating profit
Q1 FY2017

Profit attributable toowners of parent
Q1 FY2018*GMO-PS: GMO Payment Service, Inc.

Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

9

2.3

Revenue/OP by segment

Payment processing business OP +20% (real-term)
Money Service Business OP +135％■Revenue by segment*() represents yearon-year change■ OP by segment (before consolidation adjustment)
Total: +24.2％ (before adjustment)

Total: +26.4％ after adjustment(million yen)
6,000*＋28.7％ (after adjustment)(million yen)

47 （－56.9％）

2,000

1,261

・MK’s sales mixchanged
・Temporary drop due
to a tweak on online
ad service portfolio（+20.2％）5,000

・MK: Sales order grew
mainly in emerging countries

1,049

110
1,500

387 （+135.5％）

4,000

1,525（+58.2％）
3,000

・GMO payment after delivery
is solid964

・Margin of GMO payment
after delivery improved

164
1,000

1,677（+17.7％）
1,425

2,000

3,311

2,812（+17.7％）

・Declined development revenue
reined in OP growth rate.
+20% net of this factor

500(This OP growth rate is ourestimate since expense ondevelopment projects cannot becomputed.）・Revenue from a major
system development
recorded in Q1 FY17.
21.9%+ net of this factor

1,00000

Q1 FY2017

Q1 FY2018

Payment processing

MSB

Payment enhancement

Q1 FY2017

Payment processing

Q1 FY2018

MSB

Payment enhancement*MK: MACRO KIOSK

Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

102.4

Revenue breakdown by business model

Fee and spread solid with higher transaction value and volume(millionyen)
6,000

Spread5,000

・Payment processing business solid (incl.
bitcoin related businesses)
・GMO payment after delivery value rose

2,691

Fee2,070

4,000

2,360
3,000

2,000795690350251

YoY ＋15.3％

・Payment processing service rose 20%
・Tweaked online ad service portfolio (one-offfactor)

Initial1,000

YoY ＋37.6％

・Payment processing business solid・GMO payment after delivery volume rose
・MK’s transaction rose 40%

Stock

1,715

YoY ＋30.0％

YoY －28.3％

・One-off factor in Q1 FY2017 (major systemdevelopment) slowed down initial revenue

0Q1 FY2017
InitialQ1 FY2018

StockFeeSpread*MK: Macro Kiosk

Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

11

3. Earnings forecast for FY2018

Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

12

3.1

Full-year forecast

Released IFRS-based forecast; targeting OP growth of 54％■ FY2018 ending September 2018
(million yen)

FY2017(actual)(Unit: million yen; ％ represents change vs. previous year)

FY2018(forecast)

Change*2Cumulative
Q2 FY2018(forecast)

Revenue21,054

26,107+24％

11,967

Operatingprofit

4,205

*1

6,475

+54％

3,011（5,015）（6,269）（+25％）

2,599

3,933

+51％

1,825

40.0 yen

49.0 yen＋9.0 yen-(JGAAP)

Profitattributableto owners ofparent

Full-year
dividend*1 Gap between JGAAP and IFRS: largely due to a fair value change in BIP Trust provision (SG&A upped in FY2017)*2 Changes are pre-audit figures
YoY changes are omitted on summary of consolidated financial statements, etc. since IFRS adoption started in FY2018.
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

13

4. Future actions to implement
growth strategies

Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

14

4.1 Business expansion around cashless payment
2005

2018

2020

Accounttransfer app
development

NHK
Merchandising EC

Pension/tax/utilities

Coverednon-EC

2015

Cashlesspayment ratio

18％

B2C EC market¥15
trillion

Deregulation(e.g. electricity)

Service/digitalcontents→

2016

→

B2B
C2C

IoT penetration

Subscription model
Shared economy

Acquire big merchants
and big businesses

Help to raise EC rate202740％¥12 trillion+¥25 billion

2020¥25trillion(estimate)Transaction value
Operating profit

2027

Receive big businesses andthen connect themPayment method
Terminal
diversified
replacement
demandMag to IC chip

Recurring billing

2025

Tokyo
Olympics

REV
Installment
Sales ActREV Banking
Law

Consumption
tax hike (8%)

Card-presentpayment

Online payment

2015

Listed on theTSE 1st section

REV Local
Autonomy Law

Listed on Mothers

Processing
Smart payment2010¥2.5 trillion¥5 billion¥6-8 trillion¥10 billion*Ministry of Economy, Trade and Industry “FinTech vision”
Actuals Targets*Ministry of Economy, Trade and Industry “FY2016 Building infrastructure for information- and service- oriented Japanese economy and society (Ecommerce market survey)

Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

15

4.2

Payment processing business:customer base diversification

Far outpacing market growth by taking in major/growing
merchants and expanding businesses with banks Business with banks
Service and digitalcontents
・NHK・Public due, utilities
・Donation, rent
・Travel, restaurant
・Insurance, educationand others

Merchandising EC(PG)
B2C Ecommercemarket10-15%2015Merchandising2017
Service, digital contents

2020E
Business with banks

B2C Ecommerce market*Revenue mix from PG’s top 100 merchants (excl. finance lease, agent and others)
Share of agent and others in PG’s top 100 merchants is approx. 30%
2020E: target
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

16

4.3

Payment processing business:processing and smart payment

Drive cashless payments by “acquiring” and “connecting”

Acquire Major EC operator

Innovative startup
Non-EC operator
Public office, municipality
BankHokkoku BankTAXConnect Service and operator

Operator and operator
Service and service

Bank of Fukuoka

Bank of Yokohama

Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

17

4.4

Payment processing business:card-present payment

Taking in cashless payment/inbound demand
Full-fledged deployment of IoT services
Spread of cashless payments
in workplace commerce

EMV and cashless-payment compatible
terminals
Embedded EMV terminals
with PIN

with PIN

with PIN

Employee card payment

without PIN

Compatible
terminals

Ito-EnRailwaycompanies

Gas stations

Parking lotcompanies

Beveragemakers

Resona debit payment

TargetEmployee card
payment data
Debit payment data
Purchase data

960Kunits 200Kunits 1,570Kunits 2,500Kunits
These illustrations do not necessarily imply plans of future implementations.

Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

18

4.5

Money Service Business (MSB)

Expanded GMO payment after delivery andsegment margin improved■ MSB-related assets+48.8％％: Changes vs. Q1/17

J-GAAP■ MSB-related revenue－23.0％

IFRS*－16.2％

Revenue
Segment profit+56.9％+13.7％+90.2％+99.5％+68.8％

Transaction lending

Early paymentPayment after delivery+34.2％+43.1％

Finance lease

RemittanceSegment profit*Q1 bar of finance lease is for YoY comparison purpose only(This revenue is recorded in net figure under IFRS; This data was computed against the conventional standard)
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

19

4.6 Overseas strategies:
Payment enhancement business (MACRO KIOSK)Our topline-weighted approach on track toward profit
expansion after 2020

Going after scale first, and then profit
on track to stretch profit after 2020Hong Kong

Taiwan＋28.5％＋21.3％＋9.1％

Philipines

Thailand
Vietnam

304

296
Malaysia
Singapore
Area of our dominanceArea of our focus
Area of our sales activities

2015/122016/122017/12

MACRO KIOSK accelerated revenue
growth after joining our Group in
August 2016932 ※Progress in Q1

Indonesia

Overseas basesof GMO-PG*GDP by country 2016 (unit: USD billion)

 Expanded with a focus on high-GDP countries
 Mainstay authentication and notification
service upped 40% YoY with an advancementin acquisition of super-major customer in anarea of our focus

Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

20

5. Financial highlights

Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

21

5.1

Changes in our balance sheet

Deposits received and MSB-related assets increased（million yen）

Current assets

Investment
Other
68,299MSB-related
28,695

Liabilities

Noncurrent assets
OtherInterest-bearing debts（short+long）
Deposits
Other

MSB-related（from merchant representative contracts）

11,673End ofQ1/17

60,822

13,180End ofQ4/17

63,312

Net assets

Net assets

13,204

19,15037,406

12,55820,947

46,102

16,77920,51536,827

Allowance for
doubtful accounts-605

71,07939,130Allowance for
doubtful accounts-2,39382,70442,691

End of75,731
Q1/18

13,541

Allowance for doubtful
accounts -2,635*MSB-related assets: lease receivable, short-term loans receivable,advance payments-trade and accounts payable-other*MSB-related liabilities: accounts payable-other
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

22

5.2

Major KPIs (Quarterly)

Annual transaction value reaches ¥3 trillion
Operating stores: 86,136; Transaction: ¥770 billion (value), 313 million (volume)
700 (billion yen)(stores)
90,000 600（Reference）Transaction value（cumulative 12 months）¥2.76 trillion

Including GMO Financial Gate

¥2.99 trillion(million)
300

80,000 500

70,00060,000

250

400

300

Application rate of
spread revenue outof all transactions:
45% (value-based)

50,000200

150
40,00030,000100

20,00050
10,000

00
12/12

13/3

13/6

13/9

13/12

Recurring payment volume

14/3

14/6

14/9

14/12

15/3

Online payment volume

15/6

15/9

15/12

16/3

Operating stores

16/6

16/9

16/12

17/3

17/6

17/917/12

Transaction value*17/9 operating store number dropped QoQ due to a batch of merchants going idled in response to the end of a service of a partner*Number of operating stores represents end-of-quarter figure, transaction value/volume represents figure during quarter

Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

23

6.

Reference materials

Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

24

6.1

Cost of revenue ratio/SG&A ratio (Quarterly)

Cost of revenue ratio changed
due to sales mix change(million yen)

J-GAAP*50.2％

6,000*Figures with asterisk do not take into account outsourcing expense
Not included in SG&A under IFRS from Q1/18*44.5％

52.7%*39.8％*37.4％
45.6%
43.6%*41.5％
43.8%

43.5%

41.7%

50.0%

*40.3％
44.2%

42.6%

50.4%

*39.9％
46.8%

IFRS*47.2％

5,716

5,645

*41.7％
50.3%*42.6％

5,000

6,098

6,086

43.6%

4,347

40.9%
40.0%

4,000
32.1%

3,294

2,204
2,000

1,959

2,265
21.5%

22.4%

21.3%

3,067

25.5%
22.8%

22.5%

33.4%
30.0%

2,733

2,603

31.9%

3,090

2,998
3,000

31.9%

22.6%

23.4%
2,497

19.5%

1,813

2,491
1,823

1,940

2,494
2,035

20.0%

2,036
1,655
1,372

1,000

382851476966508944

15/3(2Q)

15/6(3Q)

554

1,247
615

1,307
683

1,316
700

1,109
10.0%

772

00.0%
14/12 (1Q)

Revenue15/9(4Q)

15/12(1Q)

Cost of revenue

16/3(2Q)

SG&A

16/6(3Q)

16/9(4Q)

16/12(1Q)

Cost-revenue ratio

17/3(2Q)

17/6(3Q)

17/9(4Q)

17/12(1Q)

SG&A-revenue ratio

Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

256.2

Revenue breakdown (Quarterly)

Revenue of some services recorded in net figure under IFRSJ-GAAP(million yen)

2,773

IFRS
2,691*

2,653
2,471

2,500

2,360

2,101
2,004

2,000

1,895
1,809

1,527

1,500

1,383
1,259

1,227

713

680
584
468
464
127

501

496

483

501

182
108

804

733
512

499

601

532
516

528

1,026

959

931

1,000

500

1,441

612
565

630
594

667
663

724
728

749
748

786
794

875

906

929

105

142

127

※795

457343147980150142161151185327237251014/1Q 14/2Q 14/3Q 14/4Q 15/1Q 15/2Q 15/3Q 15/4Q 16/1Q 16/2Q 16/3Q 16/4Q 17/1Q 17/2Q 17/3Q 17/4Q 18/1QInitialStockFeeSpread*Revenue of online ad service (stock) and finance lease (spread) are now recorded on a net basis on transition to IFRS
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

26

6.3

Consolidated cash flows

Positive OCF with earnings and deposit growth
J-GAAP

12,000IFRS■Cash flow changes in Q1
OCF:

10,000＋¥9,537 million

Pre-tax profit+¥1,585 million
Changes in trade and other receivables－¥4,054 million
Changes in operating and otherpayables＋¥13,670 million

8,000

6,000
4,000

ICF:

2,000

－¥381 million

Acquisition of intangible assets－¥258 million

0FCF:-2,000－¥1,705 million

Repayment of long-term borrowings－¥207 million
Dividend payout－¥1,472 million-4,000Free cash flow: ＋9,155 million-6,000FY2013

FY2014OCF

ICF

FY2015FCF

FY2016FY2017

Q1/18

Free cash flow
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

27

Thank you very much!

GMO Payment Gateway Inc.
(TSE:3769)
URL https://corp.gmo-pg.com/en

For more information, please contact the Corporate Value Creation Strategy Division
Investor relations office

TEL:+81-3-3464-0182