Financial results briefing for the Q3 of FY2018
To raise our corporate value through the cycle of capital raise,
investment and growthAugust 10, 2018
GMO Payment Gateway, Inc.
(3769: Tokyo Stock Exchange Section-1)

The 54 th 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 August 10, 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 Q3 of FY2018
2. Future actions to implement growth strategies
3. Financial highlights
4. Reference materials

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

3

1. Summary of financial resultsfor Q3 of FY2018

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

4

1.1

SummaryOP up 60.0％ (28.7％ under J-GAAP), 80.2% vs. full-year plan
■Earnings results
YoY change

FY18 fullyear plan

Q1-3 Actual
vs. Full yearplan

19,122＋24.5％

26,107

73.2%

5,190

＋60.0％

6,475

80.2%

FY17 Q1-3Actual

FY18 Q1-3
ActualRevenue

15,362

Operatingprofit

3,243(Million yen)

(J-GAAP)
Profit attributableto owners of parent

EBITDA*1(5,068)(＋28.7％)(6,269)

2,064

3,016

＋46.1％

3,933

76.7%

3,815

5,894

＋54.5％--(3,937)

Operating stores(End of Q3)

KPI*293,450 stores（＋5.7％）*3

Transaction value(Q3)

Transaction volume(Q3)860 billion yen

348 million（＋24.6％）（＋24.0％）EBITDA＝OP＋depreciation *2 Physical payments excluded. () shows year-on-year changes■Financial results *1
3 Growth rate slowed down after many merchants went idle with a partner’s service termination (16.5％+ w/o this factor)
・Raised 17.5 billion yen through the issuance of JPY-denominated convertible bonds
・Stock split (1:2) Baseline date: Sep. 30 2018 (practically Sep. 28)
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
20,000(Million yen)

+24.5％

18,00016,00014,000

Revenue(+) Online payments grew steadily
EC merchants acquired as planned and existing merchants grew
Non-merchandising EC expansion (service, digital goods, biz with banks)(+) GMO Payment After Delivery and Remittance value grew(+) MACRO KIOSK’s SMS service was solid(-) Revenue declined in online advertising service
Operating profit(+) Expanded the high-margin online payment fields(+) Margin improved for GMO Payment After Delivery and Remittance*(FY17 Q1-3) Expensed the fair value changes in BIP trust provision

12,00010,0008,000+60.0％

6,000+46.1％

4,000

Profit attributable to owners ofparent (net profit)(+) Decline in equity method
investment loss

2,0000Revenue
Q1-3 FY17

Operating Profit
Q1-3 FY18

Profit attributable toowners of parent
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

6

1.3

Revenue/OP by segment

Payment processing profit up 23.6%, MSB turned black■ OP by segment (beforeconsolidation adjustment)■Revenue by segment(Million yen)
20,00018,000* (): year-on-year changes(Million yen)

Total: Post-adjustment+24.5％

Total: Pre-adjustment+39.7％

6,900*Post-adjustment ＋60.0％

3,873 (+24.3％)

・MACRO KIOSK’s SMS service
was solid

16,00014,000

5,900

3,114

874 (Turned black)4,580 (+32.8％)

・Margin improved in GMO
Payment After Delivery andRemittance

3,900
・GMO Payment After Delivery
was solid・Remittance service grew steadily
・Early payment service grew

10,000

3,449
8,000

4,900

2,900

6,000

10,668 (+21.3％)

6,056 (+23.6％)

1,900

・Online payments grew steadily
・Business with banks took off

・Online payments grew steadily
・Business with banks expanded

8,798

4,000-93(25%+ growth stripping the large 900
system development and large
sales of offline payment terminals
in the previous fiscal year）

2,000

0(-53.5％)

228

4,900

12,000106・Reviewed portfolio of online adservice
・Exchange loss of MACRO KIOSK(100)

Q1-3 FY17

Q1-3 FY18

Payment processing

MSB

Q1-3 FY17

Payment enhancement

Payment processing

Q1-3 FY18MSB

Payment enhancement

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

7

1.4

Segment: Money Service Business (MSB)

Asset up 40％, enjoyed segment profit with improved margin%: vs. Q1-3 FY17

■Segment revenue (J-GAAP)*■MSB-related assets+40.4％-28.0％+24.7％■Segment profit

874 (Million yen)

-23.1％
Affected bya change inbad debt
provision
rate forparticulartransactions+42.2％+30.8％+39.3％+89.3％

Turned black＋31.7％+45.0％+74.5％End of Q3 FY17

End of Q3 FY18

Q1-3 FY2017

Q1-3 FY2018-93
Q1-3 FY2017

Q1-3 FY2018

Services under Money Service BusinessTransaction Lending

Early Payment

GMO Payment After Delivery

Finance Lease

RemittanceSegment profit*Segment revenue chart is under J-GAAP for yoy comparison
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

8

1.5.1

Revenue breakdown by business model

Fee & Spread grew steadily while stock increased as thebusinesswith bank expanded(Millionyen)

Spread18,00016,0008,159
14,000・Online payments grew steadily
・Revenue from a particular merchant dropped (aspecial and one-off factor)(Yoy ＋9.4％ in Q3 alone)

Fee6,71812,000

7,502

10,000

5,470

8,000

2,521

2,132
4,000

1,041

9380
Q1-3 FY17

InitialYoy ＋18.3％

・Business with banks grew・Online payments and foreign subsidiaries including
MACROKIOSK grew
(Yoy ＋23.1％ in Q3 alone)

Initial2,000

Yoy ＋37.2％

・GMO Payment After Delivery andRemittance grew
・MACROKIOSK business grew
(Yoy ＋40.1% in Q3 alone)

Stock

6,000

Yoy ＋21.5％

Yoy －9.9％・Disadvantaged comparison with big
system developments recorded in FY2017(Yoy ＋25.0％ in Q3 alone)

Q1-3 FY18StockFee

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

91.5.2

Revenue breakdown (Quarterly)
Revenue from a particular merchant dropped (a specialand one-off factor)

Quarterly trends of revenue items* IFRSJ-GAAP(Million yen)

2,773
2,653

2,801
2,691

2,471

2,500

2,360

2,436

2,666
2,705

2,101
2,004

2,000

1,895
1,809
1,527

1,500

1,383
1,259

1,227

1,000

584
496
468
483
464

127

182

713

501
501

733

512
499

1,026

959

931
680

500

1,441

724

804
601

532
528
516

612
565

630
594

667

728749748

794875906

929795786

147

105142457

127150

832

893

663

343
108980142161151

185388327237251

298014/1Q 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 18/3Q
InitialStock
FeeSpread*Online Ad Service (stock) and Finance Lease (spread) recorded in net under IFRS while gross under J-GAAP
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.
102.

Future actions to implement

growth strategies

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

11

2.1

Capital raise, investment and then growthTimely capital raise and business investments for thebigger corporate value

IPO

Thirdpartyallotment
CB

Capital raise

Investment

Listed on TSE Mothers
Apr. 4, 2005

・System reinforcement(transition from card payment
to multi-payment)

1.2 billion yen
Jun 25, 2015

8 billion yen

June 19, 201817.5 billion yen

Growth・Established business foundation
for high growth continuation
・Aimed to be a comprehensive PSP・Profit growth acceleration with・FinTech services
financial services and adding
Started remittance and lending
affiliates/subsidiaries
Expanded Early Payment Service
・Invested in 17 companies in 10
・Established JV
countries
・Invested in NA and ASEAN・Business expansion in 5 focal
areas (EC, FinTech, Cashless,
IoT and global)
・Bigger need for working/lending
capital with FinTech expansion(Global lending)・Investments into new financial
services・To be the Asia’s No.1 company
in comprehensive payment andfinancial services
・FinTech expansion(Target for 2020)
60 billion yen+ assets
20% Profit contribution

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

122.2

Operating profit target for 2020

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

Global・Expansion of services forforeign operators (includeslending)
・MACRO KIOSK expansion

Cashless
JPY 6.4 billion(plan)

Guaranteeing the continuationof 25％+ profit growth・Ginko Pay implementation
・Merchant acquiring, connection
and then become aninfrastructure

IoT・Terminal replacement
・expansion in the unattendedmarkets

Fintech・Accelerated the businessexpansion by managing theraised capital
・BtoB MSB
・Added global lendingEC

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20182018 2019 2020・Online payments expansion
Acquiring of big operators andgrowth assistance
Adding various payment options
Going into new growth markets

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

13

2.3.1

EC: Measures for the 2025 target

Aim for a faster growth than EC market with growth measures
Growth measures
BtoC①Acquiring of leading companies and innovations②Actions in response to new payment options③Innovation by the fusion of existing servicesBtoB①Payment among major corporate group companies②Diversification of BtoB services (Early Payment Service, AR guarantee)
Our target is 20%+ growthin Ecommerce field

Growth expectationin EC market+10％

Operating profit
FY2018FY20195.8％

EC rate*FY2020

FY2021

FY202222-24 trillion

TRX value (JPY) 3 trillion

6-7 trillion

FY2024FY202518％

7-8％

EC market (JPY) 16.5 trillion

FY202350 trillion
18-20 trillion*METI ”FY17 Ecommerce market survey”, Figures of and after FY2020 are our estimates
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

14

2.3.2

EC: Status of growth measures

Our online payment business grew 25% to go above our target■Online payment (excl. system development,Bank Business and offline payment)■Growth measures①Acquiring leading companies:

SpreadThe number of merchants withARPU of JPY 1 mil+/monthdoubled in 2 years

9,000

16/7 16/10 17/1

17/4

Stock

Initial(Million yen)＋25.0％

8,000

ARPU￥1M+/mth16/4

Fee

17/7 17/10 18/1

18/4

②Diversification of payment methods:
2018/2016
Credit cardx1.6
Non-credit cardx3.1
CVS (upfront)x1.9Carrier billingx3.2
Account transfer
x292.1
GMO Payment After Delivery

7,000
6,000
5,000
4,000
3,000x6.1(TRX value base)③Development of new growth markets:
BtoB: 4% of PG standalone GMV
O2O and Subscription
Inbound services
Industries not fully on Ecommerce yet
Health care, education, etc.

2,000
1,000
0
Q1-3 FY17

Q1-3 FY18

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

15

2.4

FinTech: Service expansion andmargin improvement

Use the raised capital to accelerate business growth basedon profitability and capital efficiency■Growth measures■Asset expansion and margin improvement①GMO Payment After Delivery expansion
Introduction to new merchants
Further improvement of default rate
②Expansion of lending business home/abroad
Start of global lending service(Indonesia, US)③Diversification and development ofnew/existing services
Launch of BtoB MSB services (2018/5/15)
・GMO BtoB Early Payment Service・GMO BtoB AR Guarantee
Margin improvement of Remittance service

Accelerate business expansion
with the capital raised through CB

2016/3Q

2017/3Q

Total assets

2018/3Q

2019/92020/9Segment margin/assets

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

16

2.5.1

Cashless: Ginko Pay to become
an infrastructure

Target is to turn Ginko Pay into an infrastructure by adding
more banks and connecting with existing services
Banks

Bank of Yokohama

Japan Post Bank

Existing services
PowerWater

TV subscription

Tax

TravelRent

Education

Railway

Bank of Fukuoka

Resona Group

Shinwa Banketc.

Connecting banks and services → infrastructure
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

17

2.5.2

Cashless: New development of Ginko Pay

Put more banks/companies onboard, connect them andbe an infrastructure■Expansion of business with banks■Japan’s 1st cash out service at train
stations with Ginko Pay system

NEWResona Group

Tokyu Corporation, Bank of Yokohama andGMO-PG to start the development of a cashout service through ticket vending
machines at train stations (2019 spring-）

Japan Post BankNEWBank of Fukuoka

Ginko Pay

Bank of Yokohama

Shinwa Bank

Service expansion outside
Tokyu line on discussion
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

18

2.5.3

Cashless: Processing

Payment solution delivered to GMO Aozora Net BankJuly 2018Debit card issuing service

BrandIssuer

AcquirerBusiness fields in theconventional
Payment businesses

Consumer

Merchant

GMO Processing Platform delivered since Oct. 2017 tofinancial institutions and financial service providers
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

19

2.6

IoT: Monetization in offline payment field

Aim for a high growth taking advantage of Installment Sales
Act revision, 2020 Tokyo Olympics and others■Business plan of FG/GCS■Growth measures①Terminal replacement demands withthe Installment Sales Act revision
Mag tape to IC chip
Data non-retention

Offline market
Size: JPY60T
CAGR: 8％②Unattended Markets (automated selling machines)

Drink/Food vendingmachines
JPY2TTicketvendingmachines
JPY2TAutopayment
machines

25％+ growth target

Office coffeemachine

JPY6.9B

JPY446.4B(Assumption)(Assumption)③Payment data × Biz data
Develop an ecosystem of offline payment market
2018/9E
Sales A
Sales COperating profit

2019/9E

2020/9E
Sales B
Unattended MKT

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

20

2.7.1

Global business and FinTech

Launch of global lending service in ASEAN and US(As of Aug 10, 2018)

Annual sales by country (excludes MACROKIOSK)Work with each country’ top
FinTech players using AINEWUSPayment enhancement businessHong TaiwanKong

MACROKIOSK Revenue＋26.0％
Thailand
3,332

Malaysia

2,646(Million yen)

Q1-3 FY17Q1-3 FY18

Singapore

Sales size

NEW

Payment processing
Indonesia

Money Service Business(Global, FinTech)(under J-GAAP)

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

21

2.7.2Global business and FinTech

Building assets targeting the foreign markets with high spread margin
Lending-related assets home and abroad and interest rates (as of Aug. 10, 2018)
Interest rate(％)

Assets(Million yen)

12

Lending-related assets
1,000Interest rate

9～15％

10800

Fill in the gap fromthe target interest ratewith the earnings from 600
payment business

8Target5％6400

4Indonesia

200

Actual3%2US00Japan

Foreign markets

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

22

3.

Financial highlights

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

23

3.1

Changes in our balance sheetIncrease in MSB-related deposits and assets(Unit: million yen)

Current assets
Other

Noncurrent assets(under representative merchant service)*2
Net
Others MSB-relatedassets

Investment
Other
MSB-related

45,54915,461

End of *1
Q4/16

9,222

Net assets

Liabilities Deposits

35,663

27,634

Bad debt provision-327

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

71,07939,13013,259End ofQ4/17

63,56937,406

12,55820,769Bad debt provision-2,39392,23646,429End of88,873
Q3/18

21,754

41,164

25,11816,360Bad debt provision-2,570*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.

24

3.2

Major KPIs (Quarterly)

Annual transaction value reaches ¥3.3 trillion
Operating stores: 93,450; Transaction: ¥860 billion (value), 348 million (volume)(Reference) Transaction value (past 12 months) ¥3.13 trillion(stores) 850 (billion yen)

Including GMO Financial Gate ¥3.38 trillion(millionTRX)

90,000 750

300
650
80,000550
70,000250
450

60,000 350

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

250

200

150

40,00030,000100

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

16/6

Operating stores

16/9

16/12

17/3

17/6

17/9

17/12

18/3

18/6

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.

25

4.

Reference materials

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

26

4.1

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

Cost of revenue ratio changed
due to sales mix change J-GAAP(Million yen)

*44.5％

6,459

45.6%

*39.8％

50.4%

5,716

5,645
*41.7％
46.8%50.0%

44.2%
43.6%

42.6%
*37.4％

41.7%*41.5％*40.3％

43.6%

40.9%

*39.9％

40.2%

4,347
4,000
32.1%

3,294
3,090

2,998
22.4%

2,733

2,603

25.5%
23.4%

22.8%

2,000
2,265

1,000

1,813

1,655
1,247

1,307

2,497

30.0%

1,823

2,595

2,494

2,491

2,036

21.3%

1,372

33.2%

31.9%
3,067

22.6%

22.5%

31.9%

40.0%
36.3%
35.3%

33.4%

3,000

6,563

6,098

6,086

50.3%

*42.6％

5,000

IFRS

*47.2％*50.2％
52.7%

6,000

*Figures with asterisk do not take into accountoutsourcing expense
Not included in SG&A under IFRS from Q1/18

1,940

2,035

2,143

2,382
2,320

20.0%

1,316
1,109944554683

700

508615772

15/6(3Q)

15/9(4Q)

15/12(1Q)

16/3(2Q)

16/6(3Q)

16/9(4Q)

10.0%

00.0%

Revenue

Cost of revenue

16/12(1Q)

SG&A

17/3(2Q)

17/6(3Q)

17/9(4Q)

Cost of revenue rate

17/12(1Q)

18/3(2Q)

18/6(3Q)

COGS rate

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