Financial results briefing for the Q2 of FY2018

Laying the groundwork for the next growth stage

May 11, 2018

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

The 53 rd 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 May 11, 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Agenda
1. Summary of financial results for Q2 of FY2018
2. Full-year target for FY2018
3. Management target and requirements
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. Summary of financial resultsfor Q2 of FY2018

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

4

1.1Business performance

OP +51.8％ (+31.4％ under J-GAAP), TRX value +32.3％(million yen)

Revenue
Operatingprofit

H1 FY17actual

H1 FY18
actualYoYchange＜full-year plan＞

10,02812,558＋25.2％

11,967

2,153

3,269

＋51.8％(J-GAAP)（2,536）（3,334）（＋31.4％）

Profit attributableto owners of parent

1,357

1,962

＋44.5％(net profit)

EBITDA

*1

2,516

3,727

Operating stores(End of Q2)

KPI*2

※
88,673 *3（＋4.2％）

H1 FY18 plan

H1 FY18
actual vs. plan＜vs. full-year plan＞

104.9％＜26,107＞＜48.1％＞

3,011

108.6％＜6,475＞

1,825＜3,933＞＋48.1％＜50.5％＞

107.5％＜49.9％＞--Transaction value(Q2)

Transaction volume(Q2)

820 billion yen

327 million（＋32.3％）（＋25.0％）*1 EBITDA＝OP＋depreciation expenses*2 Excludes offline payments. ( ) represents year-on-year changes.
*3 Growth rate slowed down after a batch of merchants went idle with a partner’s service termination (+15.4％ without this factor)
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

51.2Factors that affected the cumulative results

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

+25.2％

12,00011,00010,000Revenue
・Major Ecommerce merchants grew・Expanded business areas besides merchandising Ecommerce(service, digital goods, business with banks, etc.)
・GMO payment after delivery transactions grew
・MACRO KIOSK pushed up payment enhancement business

9,000
8,000

Operating profit
・Money Service Business margin improved
・Foreign exchange loss (payment enhancement business)・(H1 FY17) Expensed changes of fair value of BIP trust

7,000
6,000
5,000
4,000

+51.8％

3,000
2,000

Profit attributable to owners ofparent (net profit)
・Foreign exchange (profit)+44.5％ ・Equity method investment loss
dropped1,0000Revenue

Operating profit
H1 FY2017

H1 FY2018

Profit attributable toowners of parent(net profit)*GMO-PS: GMO Payment Service

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

6

1.3

Revenue/OP by segment

Payment processing profit up 20%+ (net), MSB turned black■ OP by segment (before
consolidation adjustment)■Revenue by segment
Total: +25.2% afteradjustment

Total: +33.5% beforeadjustment

12,0002,491（+20.3％）
・MK:
Mainstay business grew
mainly in emerging countries
・Online ad service:
Ad placement down due toexternal factor

10,0002,071
8,000

3,106（+50.0％）(＋51.8％ before adjustment)

4,400

3,400

6,960（+18.2％）

5,886

・Major system development in
H1 FY17+22.8% without this factor

2,000

・GMO payment after delivery
margin improved

2,900

3,242

3,855 （+18.9％）
・Smaller system dev sales dragged(could have grown by +20%)

1,400(“+20%” is our estimate since wecannot identify the expense for eachsystem development)

900-87

4000・MK’s foreign exchange loss
・Portfolio of online ad service
under review

583 （ - ％）186

1,9004,00022 （-88.2％）

3,900・Solid GMO payment after
2,400delivery
・TRX value of early payment up
・Remittance service grew steadily

2,070

6,000

* ( ): YoY change(100)

H1 FY17H1 FY18

Payment processing

MSB

H1 FY17

Payment enhancement

Payment processing

H1 FY18MSB

Payment enhancement*MK: MACROKIOSK

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

71.4

Segment: Money Service Business (MSB)

Asset +44.5%, MSB returned to profitability with better margin■ MSB-related assets*( ): H1 FY18/H1 FY17

■ MSB-related revenue
J-GAAP+44.5％－25.7％

IFRS※+50.0％－21.0％

Revenue
Segment profit+27.1％+35.5％+72.4％+115.4％＋23.0％+43.6％+15.2％
2017/3
Transaction lending

2018/3
Early payment

F1 FY17
GMO payment after delivery

Finance lease

H1 FY18
RemittanceSegment profit*H1 FY18 finance lease is for YoY comparison purpose only
(Revenue recorded in net under IFRS; this bar is gross-based)
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

81.5

Revenue breakdown by business model

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

Spread12,000

YoY ＋28.3％

・Solid payment processing business・GMO payment after delivery TRX value up
10,000

5,492

Fee

4,280
8,000

4,797

3,538

6,000

・Solid payment processing business・GMO payment after delivery TRX value up
・MK transaction +35%

Stock
4,000

1,406

1,628803639

YoY ＋15.8％

・Online ad service portfolio under review
・Ginko Pay contribution to stock to kick in from H2

Initial2,000

YoY ＋35.6％

YoY -20.3％

・One-off in H1 FY17 (major systemdevelopment)

0
H1 FY17

InitialH1 FY18StockFeeSpread※MK：MACROKIOSK

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

9

2.

Earnings target for FY2018

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

10

2.1

Full-year forecast

Released IFRS-based forecast; targeting OP growth of 64％■ FY2018 ending September 2018
(million yen)

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

FY2018(forecast)

Change*2

H1 FY2018(forecast)

Revenue

21,054

26,107+24％

11,967

Operatingprofit

3,948

6,475

+64％

3,011（5,015）（6,269）*1（+25％）

2,430

3,933

+62％

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 (pushed up SG&A and down profit in FY17)*2 YoY 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.

11

2.2

Consolidated earnings transitions

Expecting a JPY49 DPS for the current periodIFRS

J-GAAP(million yen)

¥49.0026,10725000

Forecast vs. Prev. year results¥40.00

Revenue +24％

21,054

Operating profit +64％

20000

Profit＋62％¥27.0015000¥18.0010000¥15.00¥12.25

6,475

¥9.75

5000
¥4.38

¥5.25

¥5.88

3,948

¥7.75

3,933

2,430

0

Revenue

Operating profitNet profit

DPS

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

12

3.

Management target andrequirements

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

13

3.1

Management target and requirements

Guarantee 25%+ growth continuation by covering the 5 areas
Manageme
nt target

Marketenvironment

Focal areas

As Is

Managementrequirements

Guarantee continuation of 25%+ consolidated OP growth

REV Installment
Sales ActEC

Advancement oftechnologies

Cashless visionTokyo Olympics

FinTech・Implementing・AI researchcollaborative businesses ・Margin improvement
・Acquiring major/growthbusinesses
・Growing digital goods

IoT

REV Banking Act

Cashless

・Applying IoT terminals to ・Acquiring partnerbanks
vending/ticket- account transfer
dispensing machines
app- new payment
methodTo Be・Acquire, connect and・Diversify B2B product ・Accelerate business・Terminal replacement
be the infrastructure
・Collaborate with offline
expansion
・Key account acquisition
market・Overseas lending- Beverage, public
・Connect merchants and (JPN interest rates = low)transportation, etc.
services・Accumulate and use
payment data
(payment data× biz data)

Domestic GDP
scaling down

Global・Expanding MACRO KIOSK
business areas
・Investing in top company
in each country

・Improve MACRO KIOSKmargin
・Overseas lending

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

14

4. Future actions to implement
growth strategies

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

15

4.1

Operating profit target for 2020

Expand in 5 areas to deliver JPY 10 billion OP in FY2020
JPY 10 billion(target)Operating profit target

JPY 6.4 billion

4.6

GlobalCashless
IoT

4.5

Fintech

4.3

EC

4.2

4.4

(plan)“guaranteeing 25％+ profit growth continuation”

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018
2018

2019

2020

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

164.2

EC: Deliver 20%+ profit growth continuation

Acquire and connect “winners”, and put non-B2C EC
payments online
Profit target

Market outlook

Target 20%+ growthPresent2020 *

5.8％

7～8％

EC market ¥16.5T¥22-24T

EC rateTRX value

EC market
expected to
grow by 10％¥3T*2020 figures are our estimates

Our initiative and strategies●B2B market to expand steadily
Diversify our products
Expand services to clients within same industry●Services dedicated to pre-EC industries
Healthcare, construction, education, etc.
●New growth markets
O2O, subscription
Services for inbound visitors

FY2017FY2018FY2019FY2020
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

17

4.3

FinTech: MSB profit expansion

MSB margin improvement and acceleration of businessexpansion while monitoring capital efficiency
Market outlook

Profit target

Present2020 *Credit
payment
market¥400B¥1-1.2TMSBbalance¥43.4B*2020 figure is our estimate

Our initiative and strategies¥583 million(1H actual)●Move on from investment to profit collection stage
Invest in high capital efficiency or margin services
Healthy expansion of relevant assets●Synergy with payments (ecosystem)
Early payment, transaction lending●Take in high-growth C2C marketRemittance●Foreign lending to take off

*MSB

FY17

H1 FY18

FY19

FY20
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

18

4.4

IoT: Seize chances for growth acceleration

IC terminal replacement on law revision and Tokyo Olympics
Market outlook

Profit target
OfflineCashlessmarketPresent2020 *

¥58T

¥87T

Total of credit, debit and prepaid cards*2020 figure is our estimate

Our initiative and strategies●Replacement demands of offline terminals
From magnetic tape to IC chip
●IoT terminal resales expansion and more data
accumulation/utilization
Target: beverage maker, public transport, etc.
Connect payment and business data for higher
business efficiency●Government target (40% in 2025)“Cashless vision” by METI

FY17

FY18

FY19

FY20
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

194.5

Cashless: Expanding business with banks

Acquire banks, connect services and be their infrastructure■Advantages of connecting banks
BankNo. of merchants under Ginko Pay

・Accelerates data accumulation
・Delivers peripheral services(Lending, remittance, etc.）(Registration base)・Optimizes credit card charge

Merchant ・Collects customer data
efficiently

・User incentive(reward redemption, etc.)
・Account consolidation

Processing
platform

July 2017
Hama Pay

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

18/5

18/4

18/1

17/12

17/11

17/10

Merchant/services

17/9

TAX

17/8starts

18/3

March 2018
YOKA!Paystarts
18/2

Ginko Pay

17/7

User20

4.6

Global: Focal businesses in Asia

Optimize approaches by country■Strategy portfolio by country (Asia)*(Trillion yen)

Dev
stage

Taiwan60

Late

Payment processing (Assist JPN companies with TWentry)

Malaysia

30

Late

Payment enhancement (Acquisition of banks/large
companies and R&D base)Singapore

30

Late

Control, research and investment (Invest, R&D into
promising companies)

Thailand50

MiddlePayment processing (Incorporate results of equity
method affiliate)

India

250

Early

Invest in local promising companies as a baseIndonesia

100

Early

Payment enhancement (transactions at banks andlarge companies)

Vietnam20

Early

Invest in local promising companies as a basePhilippines

30

Early

Payment enhancement (transactions at banks andlarge companies)

CountryGDP

ApproachMain
investment/business
Portfolio

Invested Mar.
2018
Detects fraudwith AI*Nominal GDP
Underlined are approaches by our consolidated
subsidiaries or entities that deliver our products
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

21

5.

Financial highlights

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

22

5.1

Changes in our balance sheet

Increase in MSB-related deposits and assets(Unit: million yen)

Current assets
Other

Noncurrent assets

Investment
Other
MSB-related
15,46145,549Allowance for doubtful accounts-327

71,07939,130Net assets

Deposits*2※1

End of
Q4/16

9,222

Liabilities(under representative merchant service)

Other
35,663

MSB-related

Net assets

27,634

19,1082,784Interest-bearing debts(short+long)

13,259 End of

Q4/17

63,56937,406

12,55820,76914,074

21,688

Allowance for doubtful accounts-2,39379,59343,478End of71,637
Q2/18

13,732

41,418

Allowance for doubtful accounts-3,051*MSB-related assets: lease receivable, short-term loans receivable,
advance payments-trade and accounts payable-other*1 J-GAAP was applied for FY2016*2 MSB-related liabilities: accounts payable-other
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

23

5.2

Major KPIs (Quarterly)

Annual transaction value reaches ¥3.2 trillion
Operating stores: 88,673; Transaction: ¥820 billion (value), 327 million (volume)(Reference) Transaction value (past 12 months) ¥2.96 trillion(stores) 700 (billion yen)

Including GMO Financial Gate ¥3.2 trillion

90,000(millionTRX)

600
80,000300
500

70,000 400

250

60,000≒50% of trx value is subject
to spread charge*This figure is an annualaverage(Updated every５％)

50,00040,000200

150

30,000100

20,00050
10,000

00
12/12

13/3

13/6

13/9

Recurring billing

13/12

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

17/9

17/1218/3

Transaction value*Number of operating stores represents end-of-quarter figure, transaction value/volume represents figure during quarter*17/9 operating store number dropped QoQ due to a batch of merchants that went idle after a partner’s service termination

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

24

6.

Reference materials

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

25

6.1

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

Cost of revenue ratio changed
due to sales mix change*Figures with asterisk do not take into account outsourcing expense
Not included in SG&A under IFRS from Q1/18

IFRS

J-GAAP*50.2％
52.7%*44.5％*40.3％
5,716
50.3% *41.7％
46.8% 5,645
44.2%
43.6%

6,000
*42.6％
45.6% *39.8％
43.6%

43.8%

5,000

42.6%

41.7%

50.0%

40.9%

*39.9％*37.4％

6,459*47.2％
6,098
6,086
50.4%

40.2%
40.0%

4,347

*41.5％
4,000

32.1%

3,294
3,090

2,998
3,000
21.5%

22.4%

22.5%

1,247

2,494

2,491

2,036
1,813

1,655
1,372

2,49723.4%

22.6%

22.8%

2,000

1,000

33.4%

33.2%

30.0%

3,067

25.5%

21.3%

966

31.9%

2,733

2,603

2,265

2,204

31.9%

1,823

1,940

2,035

2,595
2,143

20.0%

1,316

1,307

1,109

944
508

615

683

476

554

700

15/3(2Q)

15/6(3Q)

15/9(4Q)

15/12(1Q)

16/3(2Q)

16/6(3Q)

772

16/9(4Q)

10.0%

00.0%

Revenue

Cost of revenue

SG&A

16/12(1Q)

17/3(2Q)

Cost-revenue ratio

17/6(3Q)

17/9(4Q)

17/12(1Q)

18/3(2Q)

SG&A-revenue ratio

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

26

6.2

Revenue breakdown (Quarterly)

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

2,801*

2,773
2,691

2,653
2,471

2,500

2,360

2,436

2,101
2,004

2,000

1,895

1,809

1,527

1,500

1,383
1,227

584
468
464
127

496

483

501
501

182
108

512
499

724

804

733

713

680

601
532
516

528

1,259

959

931

1,000

500

1,441

612
565

630
594

667
663

728

749
748

794
786

1,026
875

906

929

795

457
343

147

105

142

127980150142161151185327237*832388251014/1Q 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 18/1Q 18/2Q
InitialStockFeeSpread*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.

27

6.3

Consolidated cash flows

Positive OCF with earnings and deposit growth
J-GAAP8,000IFRS■Cash flow changes in Q2
OCF: ＋3,816 million

6,000

Pre-tax profit+3,180 million
Changes in operating and otherreceivables-4,204 million
Changes in operating and otherpayables＋6,073 million

4,000

2,000

ICF:

0－788 million

Acquisition of intangible assets-538 million-2,000

FCF:

1,228 million

Net changes in short-termborrowings+3,200 million
Payment of long-term borrowings-415 million
Dividend payout -1,482 million-4,000-6,000FY2013

FY2014OCF

ICF

FY2015FCF

FY2016FY2017

Q2/18

Free cash flow: ＋3,028 million

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

28

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