Financial results briefing for the 3Q of FY2017
Maintaining high growth despite the incident impact

August 1, 2017

The 50 th IR Meeting

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

https://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 August 1, 2017.
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. Summary
2. Summary of financial results for 3Q FY2017
3. Future actions to realize growth strategies
4. Financial highlights
5. Reference materials

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

3

1.

Summary

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

4

1.1

Industry topics

Our position regarding recent issues■A compilation of measures is being taken, to develop a world-level payment
environment; for implementation of the revised Installment Sales Act in May 2018
・The revised Act requires mandatory security measures, merchant inspections, and environment improvement
accompanying the increasing penetration of FinTech companies
・The revised Act requires merchants not to retain credit card information, strengthen security measures and introduce
IC(EMV)-compatible terminals■Online payments are steadily expanding in the B2B sector
・Mainly in sales of parts and office supplies to corporations, wholesale and procurement, and web service, etc.

■Alibaba Gr. partners with CIMB to enable electronic payments in Malaysia
・Significant growth in the use of electronic payments in Malaysia
・Growing use of SMS services based on increased online banking payments combined with expanded Ecommerce market■U.K.’s Worldpay agrees to an acquisition offer from U.S. Vantiv (¥1,130 billion)
・Consolidation through large acquisitions is a major trend in the payments industry
・France’s Ingenico buys Sweden’s Bambora (approx.¥200 billion), Visa invests in Sweden’s Klarna

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

5

1.2

Business performanceOP +33％ (cumulative), +30.4% (3Q alone)
3Q (cumulative)
FY2016（Million yen）

ActualActual3Q (Apr-Jun)
FY2017

Change(%)

FY2016Full-year
forecast

Progress

Actual(%)

ActualChange(%)

Revenue

15,708

8,820

78.1

20,370

77.1

5,716

3,089

85.0

Gross profit

10,961

6,822

60.7

-

-

3,892

2,389

62.9

Operating profit

3,937

2,953

33.3

5,013

78.5

1,400

1,074

30.4

Ordinary profit

3,753

2,941

27.6

4,673

80.3

1,383

1,022

35.3

Net profit

1,513

1,809

-16.3

2,762

54.8

429

657

-34.7

EBITDA

4,308

3,122

37.9

5,811

74.1

1,546

1,133

36.4

*EBITDA＝OP + Depreciation + Amortization of goodwill

KPI

Number of operating stores(end of the 3Q)

Transaction value（3Q estimate）

Transaction volume（3Q estimate）

88,425

Approx. 690 billion yen

Approx. 281 million

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

6

1.3

Factors that affected the cumulative results

Revenue +78.1% (YoY), net profit -16.3% with income tax impact
16,000 Million yen+78.1％

14,00012,00010,0008,000
6,000

Revenue・Expansion of app business for banks
・Acquisition of large merchants by GMO-PS
・Consolidation of FG and MACROKIOSK・Delays in some projects due to the information leak incident
Cost of revenue and SG&A
・Strong performance in high cost ratio services
・Recorded bad debt allowance for GMO payment after delivery
・System reinforcement to prevent incident recurrences
Operating profit
・Factors affected profit growth:
PG standalone in good shape
FG and MK’s contribution+33.3％

Non-operating income and expenses
・ Investment loss from the equity method+27.6％

4,000-16.3％

2,000
0
Revenue

Operating profit
FY2016/3Q (cumulative)

Ordinary profit

Net profit

FY2017/3Q (cumulative)

Extraordinary profit and loss
・Extraordinary loss* due to theinformation leak・Loss on change in equity
Income taxes
・Higher tax burden rate due tothe accounting treatment forincome taxes*No additional impact on financial results after the 2Q
PS：GMO Payment Service, FG：GMO Financial Gate/GCS

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

7

2. Summary of financial results for 3Q FY2017

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

8

2.1

Quarterly results

Maintaining strong growth: Revenue +85% (YOY), OP +30% (YOY)％: YoY change■ FY2017 Quarterly results（consolidated)+85.0％

Revenue(Million yen)
1,400(Million yen)

5,000

Operating profit+30.4％

1,200

1,000

4,000

800
3,000

600
2,000
400

1,000

*Temporary revenue boosters of the 17/2Q
・Revenue associated with large-scale
projects on system development
・Consolidation of MACROKIOSK from the 2Q

0

200

0

1Ｑ
FY20142Ｑ
FY20153Ｑ
FY20164Ｑ
FY20171Ｑ
FY20142Ｑ
FY20153Ｑ
FY20164Ｑ

FY2017

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

9

2.2

Revenue/OP by segment (Cumulative)

Significant growth in revenue across all segments;
OP of the payment processing business up 32%*（%）：YoY■Revenue by segment■ OP by segment (before consolidation adjustments)(Million yen)
16,000(Million yen)

2,805

14,000（+258.0％）4,900（+210.1％）

12,000

444

124

3,900

159

4,104
（+164.0％）

10,000

904
8,000

5,078

2,900

（+32.0％）1,554
8,798 1,900

6,000

3,845

（+38.3％）

4,000

6,361

900

-22

2,000

（-％）
(100)

0

FY2016/3Q (cumulative)
Payment processing business

FY2017/3Q (cumulative)
MSB

Payment enhancement business

FY2016/3Q (cumulative)
Payment processing business

FY2017/3Q (cumulative)

MSB

Payment enhancement business*MSB: Money Service Business

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

10

2.3

Payment processing business

Revenue +34% (YoY): 20% growth from online payments net of FG（Million yen）

3,000

Revenue

FG revenueOP（ before consolidation adjustments ）Revenue of large system development■Business environment

YoY

2,500

2,000

1,500

1,000

500

0

+34.1％*(+20.0％excl. FG)

OnlineExpansion of the Ecommerce market
Rise of the B2B market
Revised Installment Sales Act
Card-present market
Spread of IC-compatible terminals
Spread of the IoT■Measures to accelerate growth
20% growth from online payments alone*The annual growth rate of the EC market is 10-15%
Successful addition of various payment methods
Existing merchants’ growth
Success of “ecosystem model” enhancement(including online advertising and MSB)

Our highly profitable core business entereda sustainable growth trend*Recorded revenue of large system development for 1Q-2Q of FY2017
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

11

2.4

MSB

Returned to operating profitability in 3Q; measures in place to keep
the same for the full year
(Million yen)

1,400

RevenueOP （ before consolidation adjustments ）■Business environment
1,200
1,000
800

600
400
200

YoY

+161.8％

Needs for new services (remittance, early
payment, and deferred payment)
Expansion of services by FinTech companies■Measures to accelerate growth
Expanding payment and value-added services
that contribute to our merchants’ growth
GMO payment after delivery->Keeping “adjusting the credit check process”
Early payment service-> Synergies of payment processing businesses(ecosystem model)
GMO-PG Remittance Service

0
(200)
(400)

Adjusting the credit check processof our “payment after delivery” service

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

12

2.5

Payment enhancement businessStarted PL consolidation of MACROKIOSK from the 2Q(Million yen)

Revenue

MK revenue

1,200

1,000

OP（ before consolidation adjustments ）*YoY+291.0％■Business environment
Global market：
Asian consumption and EC market in the
expansion stage
Online advertising：
Expansion of the online advertising market

800■Measures to accelerate growth
600

400

Global market
MACROKIOSK is in good shape
Expanding online banking in Malaysia
Cultivating large-scale merchants across Asia
Online advertising
Synergies of payment processing
businesses (ecosystem model)

2000

Our payment-related services, including
global business, are contributing to
expansion of EC and payment market*Drop due to the seasonal factor
MK：MACROKIOSK

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

13

2.6 Revenue breakdown by business model（cumulative）
More than 25% revenue growth in all business models（Million yen）

Spread:YoY+76.9％
・Expansion of MSB（GMO payment after
delivery)*・Increase in the transaction value

16,00014,0007,226

12,000Fee:

YoY+120.9％
・Consolidation of MK
・Expansion of MSB（GMO payment after
delivery)*

10,000
8,000
4,084

4,000

Stock:

YoY+26.7％
・Expansion of business with large-scale
merchants (banks, etc.)

4,730

6,000

2,141
2,711

2,000

Initial:YoY+128.5％
・Orders and sales of system development
・Cultivation of major or high growth merchants
・Sales of terminals (GMO-FG)

2,140
1,038

454

0

16/6 (cumulative)

Initial17/6 (cumulative)

Stock

Fee

Spread“GMO payment after delivery” revenue, which had been recorded as a part of fee revenue, has been divided into fee revenue and spread revenue since the 2Q of FY2017
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.
14

2.7

Full-year forecast

Keeping our full-year forecast revised in 2Q■ FY2017（Million yen, ％ YoY）

Revenue

OperatingprofitOrdinary
profitNet profit

Full year 20,370(68.2％) 5,013 (31.2％) 4,673 (23.6％) 2,762 (-5.1％)
Dividends
forecast
Revenue

5,811 （38.7％）

37 yen (+10 yen)

■ Points


EBITDA* EBITDA＝OP + Depreciation + Amortization of goodwill

・Consolidated the income statement of MK from the 17/2Q (2016/10/1 - 2017/6/30)
・3-4Q revenue of the new deferred payment service launched on Nov.1, 2016 is notincluded in the full-year forecast

・Plan to amortize goodwill from the increase in group companies（total of ¥230 million/yr）



SG&A



Non-operating ・Plan to amortize goodwill of equity-method affiliates (approx. ¥160 million/yr)
expenses
・FY2016 recorded extraordinary profit (approx. ¥590 million*)
Net profit*Recorded gain on sales of investment securities of ¥194M and gain on step acquisitions of ¥395M

・Deferred tax assets of GMO-PS related to the temporary difference is assumed to berecorded at the end of FY2017

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

15

3. Future actions to realize growth strategies

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

16

3.1

Mid-term goals

OP goal for 2020 can be achieved by growth of our existing
services and products
GlobalBusiness
OnlineAdvertising

ASEAN EC market（¥T）¥10bil2.4 → 4.0

OP target
for 2020*Total forecast for countriesof our operations

Online advertising market(¥T)

1 → 1.5
Payment enhancement business
MSB-related assets (¥B)

¥5bil

Finance Service(MSB)
Offline20 → 40*Payment after delivery is
not included

MSB

Card-present cashlessmarket (¥T)

60 → 82*Credit cards, debit cards,
prepaid cards in total

OnlineRatio of the Japanese
EC market scale（％）

5.4 → 8-10
Payment processing business

FY2017Now

2020

FY2020*Expected figures are based on our internal research

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

17

3.2

FY2017 results and future actions

Gaining results through strategic investments;
Action plan for 2020
Results and tasks

Action plan for 2020

High Lights

・Expansion of app business for banks

・Expansion of app solutions and partner banks

・Rapid expansion of “GMO payment after delivery”

・Establishing the profit structure and acquiring・Approach to major mail-order businesses andEcommerce with in-house payment processing

new customers
・Promoting projects and strengthening sales
activities

・Proactive approach to the B2B market

・Merchant size-based approach to promotestrategies

・Acceleration of global business profitability

・Service expansion to neighboring countries

・Approach to the card-present market

・Spread of the IoT and smart payment
solutions

Low Lights
・Information leak incident

・Proactive implementation of recurrence
prevention measures

・Increase in allowance for doubtful accounts

・Adjusting the credit check process, etc.
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

18

3.3.1

Payment processing business：business for banks

Expanding mobile payment services among regional financial institutions
Focusing on “mobile banking”
to expand FinTech services
Expansion of app solutions
Increase of partner banks andmulti-bank payments
From April 2016

Expect to launchfrom March 2018
The BANK OF FUKUOKA

OEM expansion of oursmart payment service
From July 2017

APM* integration, Cash out
Started discussions with Almex (U-NEXT group) from July 2017

*APM: Automated Payment Machine

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

19

3.3.2

Payment processing business ：B2B

Towards becoming an industry-standard B2B payment platform
B2B ratio in payments processed by GMO-PG (non-consolidated)
Transaction value
Operating stores

Result:B2B payments have steadily increased in the past
three years

4.0%

Task:
Ratio of B2B stores>Ratio of B2B transaction value

3.0%

Large scale(manufacturing,
construction, etc.)

2.0%

 Promoting our merchant size-based
approach Achieved results in deployment
among large-scale merchants

1.0%
Payment Package for B2B Ecommerce

Medium scale(wholesale, etc.)0.0%
2014/3Q

2017/3Q* The transaction value is a 3Q figure (cumulative),the number of stores is a figure based on the end-of-quarter calculation.

Small(retail, etc.)* Reference: METI “The 2015 Ecommerce market survey ”

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

20

3.4.1

MSB：assets and segments performance

Revenue up by 2.7 times in line with increase in MSB assets
MSB-related assets（BS)MSB-related revenue・OP（PL)(Million yen)

Revenue related
to MSB assets
increasedby 3.0 times

30,00025,00020,000

2.7
times

2.3
times

15,00010,0005,000

02016/6(cumulative 3Q)
16/6 (end)17/6 (end)Transaction lending

Early payment service

GMO payment after delivery

Finance lease

Transaction lease
GMO payment after delivery
Remittance service

2017/6(cumulative 3Q)
Early payment service
Finance lease
Operating profit

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

21

3.4.2

MSB：GMO payment after delivery

New service significantly increased payments;
Original service also showed solid growth
Transaction value
Transaction volume

In the process of adjusting
the credit check process

Payment volume

Payment value

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

22

3.5.1Business in Asia

Steady growth of group companies, partners and portfolios
0.5
兆円■Global business:
progress and results
The first FinTech investment
fund in Japan dedicated to
payment ventures in Asia（¥2 billion）

GDP
Approx.¥500T
1% GrowthHong Kong
TaiwanVietnamPhilippines
GDP
Approx.¥250T
5-6% GrowthSingapore
Singapore

・Online banking keeps growing in
Malaysia
・Continuing proactively assisting
merchants with advancing into Taiwan

Thailand

Malaysia

・Progress in acquiring majormerchants and banks acrossPhilippines and Indonesia

Indonesia

・Deferred payments have rapidly risen
in Indonesia

・Growing penetration of smartphone
has significantly triggered payment
market in Myanmar

Capital: ¥3.9B

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

23

3.5.2Global investment strategies

Global synergy：Connecting investments in growing SEA
and North America
PG-Japan
PG-Singapore

North America• Purpose：increase profit on the main
battlefield• Source of investments： direct
investments（PG, EP, FG）

Innovation
centerJapan

ProfitCenter• Purpose：acquisition, reprocess andtransfer of cutting-edge technologies• Source of investments：direct
investments（PG）

SEA・India

Growth center

Conducted proactive
investments in FY2016• Purpose：approach to expanding markets• Source of investments：
GPF for Payment-related minority investments
PG directly for Payment-related majority investments
and minority investments in other areas
PG: GMO Payment Gateway, EP: GMO Epsilon, FG: GMO Financial Gate/GCS
GPF: Global Payment Fund

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

24

4.

Financial highlights

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

25

4.1

Consolidated Balance Sheet

Increase in assets followed by MSB and expansions(Million yen)

End of 3Q’17 End of 3Q’16

Change(Million yen)
Current liabilities

Current assets

65,73147,68018,050Cash and deposits

28,26030,493△2,232

Lease receivable

6,865

6,004

860

547

387

159

11,906

6,280

5,626

Short-term loan receivables
Advance payments

End of 3Q’17

Short-term borrowings

13,756

1,677

12,078

Allowance for
doubtful accounts△1,988△289△1,698Other current assets

6,382

3,126

3,256

Noncurrent assets

9,949

5,085

4,863

Tangible assets

389

206

182

Intangible assets

4,029

1,178

2,850

Goodwill

2,203

22

2,181

Software

1,288

930

358

Investments andother assets

5,530

3,699

1,830

Investment securities

2,300

2,668

△367

Shares of subsidiaries
and affiliates

2,279

284

1,994

75,68052,766

22,914

Total assets

Change52,20235,45916,742

28

0

28

800

0

800

34,36729,9404,427

Related to Finance Lease

Long-term borrowings due
within one year
Deposits received

Increase in the TL balance

Accounts receivable

End of 3Q’16

Increase in Early Payment Service(BS balance after consolidation (offset))

Accounts payable

Deposits by merchants through representative
merchant service*Discrepancy occurs with the pace of merchants’sales growth due to change in merchants’ cutoff
date and payment cycle

11,495

2,820

8,674

Other current
liabilities

5,510

2,698

2,812

Noncurrent liabilities

3,545

224

3,321

3,204

0

3,204

Other noncurrent liabilities

341

224

116

Increase in subsidiaries and affiliates

18,794

17,206

1,588

4,712

4,712

0

151

△124

276

Total net assets

19,932

17,082

2,850

Total liabilities andnet assets

75,68052,766

22,914

Increase in GMO payment after delivery

Long-term borrowings

Shareholders’ equity
Capital stock

Increase in investment securities of subsidiaries and affiliates

Total cumulative othercomprehensive income

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

26

4.2

Major KPIs (Quarterly change)

Annual transaction value amounted to 2.4 trillion yen
Number of operating stores: 88,425/Transaction value: ¥690 billion/Transaction volume: 281 million
Transaction value(number （billion yen）
of stores) 6,500
650
90,00080,00070,000（Reference） Transaction value(12 months cumulative)
Include GMO FG’s transaction value

Transaction volume(million trx)

2.39 trillion yen
2.60 trillion yen

5,500
550

25,000
250

4,500
450
200
20,00060,000 3,500
350

250
50,000 2,500

150
15,000Share of the spreadrevenue within theamount of processed
payments: 45%

40,000100
10,00030,00020,00050
5,000
10,000

0

0

12/9

12/12

13/3

13/6

13/9

Recurring payment

13/12

14/3

14/6

Online payment

14/9

14/12

15/3

15/6

15/9

Number of operating stores

15/12

16/3

16/6

16/9

16/12

17/3

17/6

Transaction value(The number of operating stores is calculated at the end of the quarter, transaction value/volume are the results for each quarter)

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

27

5.

Reference materials

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

28

5.2 Cost of revenue ratio/SG&A ratio（Quarterly change）
The cost of revenue ratio changed due to the sales composition*Excluding MSB-related outsourcing expenses(Million yen)

*44.5％

52.7%
50.9%

50.3%

*42.6％

5,000
43.5%

46.8%
43.6%

*40.3％*37.4％*41.5％

22.4%

19.5%

19.5%

2,000

2,204
1,892

22.5%

21.3%

962

368

22.8%

22.6%

1,655

382

966

25.5%
Excluding
FG:23.5％

2,491
2,497
20.0%

1,959

851

23.4%

Excluding
FG and MK:
24.6％
31.9%
30.0%

2,265

1,372
1,000

Excluding
FG and MK:
24.4％

2,733

2,603
21.5%

32.1%

3,090

2,998

43.6%
40.0%

3,294
3,000

*39.9％

44.2%

4,347

42.6%

*39.8％

41.7%

50.0%

*41.7％

45.6%

43.8%

4,000

5,716

5,645

*50.2％

1,247

2,036
1,813

1,316

1,307

1,823

944

10.0%
1,109

476

508

554

15/3(2Q)

15/6(3Q)

15/9(4Q)

615

700

772

16/6(3Q)

16/9(4Q)

683

0

0.0%
14/9 (4Q)

14/12 (1Q)

Revenue

Cost of revenue

15/12(1Q)

SG&A

16/3(2Q)

Cost-revenue ratio

16/12(1Q)

SG&A-Revenue ratio

17/3(2Q)

17/6(3Q)

FG：GMO Financial Gate/GCS
MK：MACROKIOSK

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

29

5.3

Revenue breakdown（Quarterly）

Significant revenue increase in all business models
2653(Million yean)

2,471Year-over-year

2,500

2,000

Initial+57.0%

Stock+24.3%

Fee+152.9%Spread+84.2%

2,101
1895
1,808

1,527
1,441

1,500

1,000

584
496
468
483
464

127

182

501

501

804

733

713

680

500

959

931

512
499

612

601
532
516

528

565

1,383

1,259

1,227

724
630
594

667

749

794

1,026
874

748
728

904

929

786

663
460
345

108

147

105

142

127

150

142

161

151

237

185

0
14/1Q

14/2Q

14/3Q

14/4Q

15/1Q 15/2Q 15/3Q
InitialStock

15/4Q 16/1Q
Fee

16/2Q 16/3Q
Spread

16/4Q

17/1Q

17/2Q

17/3Q

“GMO payment after delivery” revenue, which had been recorded as a part of fee revenue, has been divided into fee revenue and spread revenue since the 2Q of FY2017

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

30

5.4

Changes in segments and Revenue models“GMO payment after delivery” is divided into fee and spread,
Red：Changes from 2Q
consolidation of MK
4 business models

３ Segments

Payment processing
business

Payment processing（MK）

Payment processing

InitialSystem development
FG

System development
etc

etc

Stock

GMO payment after
deliveryMoney service
business(Monthly revenue)

Online Ad Service

etc

Payment processing（MK）

Transaction lending

GMO payment after
delivery（fee）

MSB

Fee
(Transaction
processing revenue)etc

SpreadSSL(Merchant acquiring
service revenue )Delivery service
MK
etc

etc

Payment processing（MK）

Online Ad Service

FG：GMO Financial Gate/GCS, MK：MACROKIOSKRemittance service
Delivery service

Finance lease

etc

Payment processing（MK）

Remittance service

Early payment service

Payment
enhancement business

SSL（Initial revenue）

GMO payment after
delivery（spread）
Transaction lending
Early payment
Finance lease

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

etc

31

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