Financial results briefing for the 2Q of FY2014（ O c t o b e r

1 ,2 0 1 3 - M a r c h

3 1 ,2 0 1 4 ）Themes： Our activities that create new markets, anda c c e l e ra t i n g t h e i m p r ove m e n t o f Ja p a n’s E C ra ti o .

May

2,

2014

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

h t t p : / / c o r p . g m o - p g . c o m /A Cautionary Note About the Contents of this Document

The contents of this document are based on generally
recognized economic and social conditions, as well as
premises judged to be reasonable by GMO Payment
Gateway as of May 2nd, 2014.
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. Growth strategy
2. Financial highlights
3. Results forecast for the term ending September 2014

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

3

1. Growth strategy

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

4

1.1

Recent circumstances Recent businessenvironment

・Misunderstanding of concentration of major
electronic shopping malls
・Diversified fee structures for payment service

・Changes in competitive situation in both face-toface field and small business (long-tail) market

 Progress of growthstrategy・Acquisition of large-scale merchants・Contributions to earnings from new merchants andnew business・Exploitation of new growth areas

 Our way of thinking
about share price

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

5

1.2 Two major changes in our business environment
Improvement of Japan’s BtoC - EC ratio, and widespread useof credit card payments between businesses (BtoB)
Face-to-face field

Non face-to-face field
Narrow sense EC market①

9.5 Trillion yen

EC ratio 3％ → 30％

BtoC market（About 300trillion yen）②
Microcommerce

Service commerce③

Public funds/
Public utility charges
O2O

Credit card payments are not widely available
between businesses(BtoB)①Expansion of the narrow sense EC market(expansion of the present EC, direct marketing ofmajor manufacturers, opening of major
distributors）②Expansion of micro-commerce③EC for service commerce, public funds and O2O

BtoB market（About 1,000trillion yen）

Credit card payment ratio ?% → 30％①Sophistication of payment structure in
manufacturing industry②Visualization, shortening the period of payment③Systemization of small businesses※Reference：METI, [Market report in regard to EC 2013]

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

6

1.3

Product strategy of GMO-PG group

Provide a payment platform and various solutions for ourmerchants to increase merchants’ revenue
Problem resolution level

Small staff・Can easily automate

Advanced operation

High

Strengthen support toincrease merchants’revenues

GMO Payment Service

Simple credit
card
Diversified
payment
payment
structures withrecurring
payment, etc.

Latestcontroversial
issue,“Spike”“Fastpay”“webpay”
Low

PlayerDiversified
payment
structures withmulti-payment,
etc.

Strengthen support forlarge-scale businesses（countermeasuresagainst unauthorized
utilization・DR, etc.）

・GMO Global Payment
・Online advertising service, etc.
Complexity
High

Low
・PayPal・GoogleCheckout

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

7

1.4

Expansion of the narrow sense EC market

Cultivation of non-supported area for internet sales andcredit card payments is underway
Internet sales・Credit card payment：General
Internet sales・Credit card payment：PopularInternet sales・credit card payment：non-supported

Major manufacturer
Major distributors
Traditional business entity

Retail or small manufacturer of popular items like apparel or shoes, secondary distribution
Retail or small manufacturer of standardized products like books, ticket, secondary distribution
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

8

1.5

The rise of “Micro-commerce” (Small BtoC, CtoC)

Strategy to capture the EC market which has been expanding
to the individual field
Speed/Easinessthe service of selling
one’s knowledge/skills
at a lower priceFlea
markettype

Skillselling
type

Instant
ECinterpersonal transaction services on
a network like a flea market

the service to create
an online store
easilyServices

Goods
Crowd
Crowd
-funding-funding
type
type

the service to finance small businessfunds via the Internet

Crowd
Crowd
-sourcing-sourcing
type
type

Industry
Industry-specific-specific
type
type
industry-specific flea market

the service of getting work by matching
the needs via the Internet

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

9

1.6 O2O strategy：Scenario of changing
face-to-face market to E-commerce
Change face-to-face market to be able to pay by smartphone
Non face-to-face field

Face-to-face fieldO2O Market

Various approaches by various industries
and companies

Various approaches by various industries
and companies

GMO-PG

Other players

GMO Pallet
Change face-toface market toe-commerce by
GMO pallet
JPY25 trillion market of food service
industry is our first target - improve
EC ratio from 0％ to 30％※Reference：Fuji keizai, [Food service industry market report 2013, No.1,2] , estimated by GMO-PG

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

10

1.7

Strategic services “GMO Pallet”

Smartphone payment without credit card
1：Customer payment by smartphone①Customer：checks into
shop

②Shop：input s amount③Customer：confirms
amount, input s password(transaction completed)④Customer：receives
receipt

2：Customer payment by shop’s mobile terminal (smartphone, tablet)①Customer： checks into
shop

②Shop： input s amount③Customer： confirms
amount, inputs password(transaction completed)④Customer：receives thereceipt

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

11

1.8 Widespread use of credit card payments
between businesses (BtoB)

Support credit card payment processing of untappedmega market
Non face-to-face field (EC)

Face-to-face field

About 9.5 trillion
yen

About 290
trillion yen

About 170
trillion yen

About 830
trillion yen

BtoC market（about 300
trillion yen）

BtoB market（about 1,000
trillion yen）

Platform of 1,000trillion yen market※Reference：METI, [Market report in regard to EC 2013]

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

12

1.9

Movement of share price

Implement strategy to grow profits by more than 20%(Share price index）(1,000yen）

1.4※％, ordinary income growth2,500,000+20.1％

23.0%
1.2
20.9%

Index (Closing price of Aprlil 2005=1)

2,000,000

19.3%

17.1%
16.1%

16.9%

15.5%

1.0

+23.3％+24.7％

14.3%

1,500,000+16.1％

0.8+23.7％

0.6+22.6％

1,000,000+81.0％

500,000+20.7％+17.1％

0.4

0.2
2.3%
0

0
2005/9listed on
the TSE

2006/92007/92008/92009/92010/9Ordinary income

2011/9ROE

2012/92013/92014/9E

Share price (index)

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

13

1.10

Forecasts

Achieve growth for over 10 billion yen in ordinary incomeby creating new markets and improving Japan’s EC ratio

EC ratio2014

Around 2020

20XX

3%

10%

30％
（Growth potential）

EC market scale¥10 Trillion

Around ¥25 Trillion

2.5times×Market share(GMO-PG Group)

13％

20％

Amount ofprocessed
payments(GMO-PG Group)¥1.3 Trillion¥5 Trillion

Ordinary income of
GMO-PG¥2.5 billion（Forecast: FY2014）

1.5timesMore than+α＝ 4times
Approx.¥10 billion（Forecast: 2014）※References：METI, [Market report in regard to EC 2013] , NRI[IT market navigator 2014], estimated by GMO-PG.

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

14

2. Financial highlights

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

15

2.1

Summary of Consolidated Results

Despite increase in cost of sales, gross income achieved
24.0% growth
Compared to the accumulated
results for 2Q FY2013

FY2014 (ending September 2014)（Million yen）

1Q

2Q

Sales

1,645

1,842

Cost of sales

317

Gross income

2Q

Compared to the accumulated
forecast for 2Q FY2014

Results% Change

2Q Forecast

Progress

3,487

2,731

27.7％

3,286

+106.1%

384

701

484

44.7%

-

-

1,327

1,458

2,785

2,246

24.0％

-

-

SG&A

750

796

1,546

1,230

25.7%

-

-

Operating income

577

661

1,239

1,015

22.0％

1,201

+103.2％

Ordinary income

601

641

1,242

1,020

21.7％

1,190

+104.4％

Net income

355

363

719

611

17.5％

680

+105.8％Net income
per share
(Yen)

20.62

20.08

35.62

-

39.43

-

accumulated results

41.70

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

16

2.2

Summary of Consolidated Balance Sheets

No major changes
Results for
2Q, FY2013

Change（Million yen）

Results for
2Q, FY2014

21,464

15,700

5,763

Current liabilities

Cash and deposits

19,544

14,376

5,168

Deposits

Advance payments

680

222

457

Other current assets

1,273

1,126

146

Allowance for
doubtful accounts

△33

△25

△8

Fixed assets

1,891

1,244

646

264

244

20

（Million yen）

Results for
2Q, FY2014

Current assets

Tangible fixed assets

Other current liabilities

Change17,223

11,842

5,381

15,731

10,944

4,787

1,492

898

593

Deposits from merchants under the“Merchant acquiring service agreement”

Non-current liabilities

167

96

71

Shareholders’ equity

5,927

4,990

937

32

5

27

4

11

△7

5,965

5,007

957

23,355

16,945

6,409

Intangible fixed
assets

743

555

187

Software

537

385

151

Valuation andtranslation
adjustments

Investments andother assets

882

445

437

Subscription rights tosharesBonds of affiliates

11

11

0

23,355

16,945

6,409

Total assets

Results for
2Q, FY2013

Total net assets
Total of liabilities and net
assetsCopyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

17

2.3

Cost of sales ratio/SG&A ratio（Quarterly changes）

Cost of sales ratio deteriorated due to increase in the sales ofvalue-added services that exceeded initial plan
Sales of special
system development
40 million yen（1,000yen）
2,000,000

70.0%
1,842,793

1,800,000
1,563,063

1,600,000
53.2%
1,400,000

1,200,000

47.0%

45.5%

44.0%

1,307,506

1,420,034

1,469,820
51.6%

45.9%
1,176,79143.9%

45.8%

44.4%

45.6%

44.0%

43.2%
40.0%

1,061,787

969,793

1,000,000 952,847

806,331800,000

696,122613,394

418,782

200,000

13.9%

533,740

498,728

441,423
13.4%

13.0%

13.4%

142,583

517,179

14.3%

179,489

166,050132,247

130,075

135,922

11/3 (2Q)

11/6 (3Q)

11/9 (4Q) 11/12 (1Q) 12/3 (2Q)

15.3%

16.9%

220,44217.7%

231,64317.8%

253,353

796,546 30.0%

750,260

647,175

630,407

600,491

600,000

400,000

50.0%

1,311,166

1,162,012
1,047,704

60.0%

1,645,144

58.5%

17.8%

261,235

18.2%

284,580

19.3%

20.9%20.0%

384,293
317,675
10.0%

Cost of sales of special
system development

0

0.0%

Sales

Sales-cost

12/6 (3Q)

SG&A

12/9 (4Q) 12/12 (1Q) 13/3 (2Q)

Sales-cost ratio

13/6 (3Q)

13/9 (4Q) 13/12 (1Q) 14/3 (2Q)

Sales-SG&A ratio

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

18

2.4

Sales/Ordinary income (Quarterly changes)

Sales up +29.8％ YOY due to the special system development■SalesCompared to last 1Q+29.8％※Sales excluding extraordinary
income up 27.0% YOY(thousand yen)

1,842,793
1,800,000

Sales of special
system development
40 million yen（thousand yen）

Compared to last 1Q ※Ordinary income excluding special+18.6％
factor below-mentioned up 25.5% YOY
641,092
601,701

600,000

1,645,144
1,563,063

1,600,000

1,307,506

1,200,000

480,414500,000

1,311,166

465,565

396,884

400,000

1,061,787

560,812475,402

The main SG&A
difference between 2Q
FY2013 and 2Q FY2014
・Establishing newcompany (GMO-PS)
・Rent expenses increase
due to expansion of
headquarters
465,943

433,440

1,176,791

1,162,012

1,000,000

540,382

1,469,820

1,420,034
1,400,000■ Ordinary income

400,593389,917

1,047,704
952,847

969,793

333,673

895,971

300,240

300,000
800,000

600,000

200,000

400,000
100,000

200,000

00

1Q
FY 20112Q
FY 2012

3Q

4Q

FY 2013

FY 2014

1Q

2Q

FY 2011

FY 2012

3Q

4Q

FY 2013

FY 2014

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

19

2.5

Sales results for each segment（Quarterly changes）

Overall segment sales increased over 20%（1,000yen）

YOY

700,000

600,000

670,573

（1Q）

（2Q）

Initial revenue+37.0％

Monthly revenue+27.9％+55.8％+29.0％+25.9％+27.4％

Transaction processing revenue+20.6％

Merchant acquiring service revenue+25.3％

582,291

568,811526,214529,688505,369
483,241

470,792

500,000

473,999

464,540

441,038
431,131

408,062400,000

356,129
329,121298,848

300,000

313,562309,391
264,470

326,267
278,531

350,983
341,807347,313
303,811

291,439403,729357,956
320,293371,745401,280

390,290

464,560

425,963

396,019374,667

363,264

336,130

243,845

Sales of special system development
40 million yen

200,000
125,630
100,000 81,031

82,368102,823

86,77677,557

94,811

117,872

112,981

93,072

127,249

183,609

127,4990
11/3 (2Q)

11/6 (3Q)

Initial revenue

11/9 (4Q)

11/12 (1Q)

Monthly revenue

12/3 (2Q)

12/6 (3Q)

12/9 (4Q)

12/12 (1Q)

Transaction processing revenue

13/3 (2Q)

13/6 (3Q)

13/9 (4Q)

13/12 (1Q)

14/3 (2Q)

Merchant acquiring service revenue

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

20

2.7

Sales results for each segment

Balanced growth in all segments
YOY+55.8%New service+29.0%+25.9%+27.4%New service

New service

New service

Onlineadvertising
service“GMO Payment after
delivery” service &Delivery service
7％

Early payment
service

Payment
processing
service

Payment
processing
service

93％

98.6％

1％

25％

Payment systemdevelopment
&
SSL
46％

Payment
processing
service
54％

Payment
processing
service75％

InitialStockTransaction

Spread（Initial revenue）（Monthly revenue）（Transaction processing revenue）（Merchant acquiring service revenue）※Image of the revenue structure（％: Sales composition of 2Q, FY2014）
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

21

2.8

Transition of major factors (Quarterly changes)

Number of operating stores increased as planned, andnumber of processed payments grew immensely
Number of operating stores 47,056/Amount of processed payments ¥350 billion/ Number of processed payments 158million
Number ofoperatingstoresNumber of processed
payments (10,000 trx)

Amount of

4,000 processed payments

18,000（100 million yen）

50,0003,000

40,00016,0002,000

14,000Share of merchant acquiring
service revenue
in settlement amount: 20%(March 2011)

1,000
30,00012,000Share of the merchantacquiring service revenue
in the settlement amount:30%

0

10,0008,000

20,000

6,000

4,000

10,000

2,000

0

0
08/12

09/3

09/6

Recurring payment

09/9

09/12

10/3

10/6

Online payment

10/9

10/12

11/3

11/6

11/9

11/12

Number of operating stores

12/3

12/6

12/9

12/12

13/3

13/6

13/9

13/12

14/3

Amount of processed payments(Number of operating stores is calculated at end of quarter; amount/number of processed payments is result for each quarter)

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

22

2.8

Progress of concentrating new business

GMO-PG group’s new business and status of profits■Online advertising service（GMO-PG）
Sales

13/9

13/12

14/3

14/1

14/2

14/3

13/6

13/3

12/12

12/9

12/6

12/3

11/12

11/9

Expanding support■GMO-PS
Amount of processed payments

Cultivating several
major manufacturers

13/12

13/11

13/10

13/9

13/8

13/7

13/6

13/5

Started in May 2013

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

23

3. Results forecast for the term ending
September 2014

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

24

3.1

Summary of Consolidated Results (Forecast)Investment continues though ordinary profit growth rate
returns to 20%（1,000yen）

6,934,000

7,000,000

34.3%

6,000,000

36.4%

33.2%

32.8%

36.5%

35.5%

37.5%

37.0%

40%

35.5%
5,764,085¥28.505,000,000

30%

4,708,097¥24.5024.0%

4,000,000

3,866,316

22.7%¥19.5020%

3,145,901
3,000,000¥15.502,460,000

2,546,550
2,207,071

1,629,951

0¥6.25
645,909535,350

2005/9304,302

2006/91,764,325

10%
1,421,000

1,431,391¥7.50

192,400
295,828150,092
30,173
2004/9¥10.50¥8.75

1,305,157
801,778

2,047,552¥11.75

1,945,011

2,000,000

1,000,000

By continuing priorinvestment andsales mix
(Sale of valueadded services withhigh cost price rate), sales amount forthe ordinary profit
rate is expected tomove sideways.

1,147,552
756,506

377,212 440,080

927,535

524,259585,206

960,761

1,217,025

Sales+20.3％

763,774

Ordinary income+20.1％
0%

2007/92008/92009/92010/92011/92012/9※％ yoy2013/9Net income+16.8％

2014/9E

listed on the TSE

Sales

Ordinary income

Net income

Ordinary income ratio

Dividend

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

25

3.2

Sales for Each Segment (Forecast)

Planning for merchant acquiring service revenue to be +25%
and transaction processing revenue to be +23％
（1,000yen）

7,000,000※％ yoy6,000,000

listed on
the TSE+ 25％

Because of expansion of
the ECmarket, we forecast
that merchant acquiring
service revenue is goingstay in good shape.

5,000,000+ 27.6％4,000,000+ 28.4％+ 36.4％+ 23％

3,000,000+ 17.3％+ 40.3％+ 14.8％+25.9％
2,000,000+ 16.6％+46.9％+88.4％+95.0％+155.5％1,000,000+44.4％+9.9％+14.2％+41.4％+15.4％+6.4％+ 18.1％+ 13％+ 24.6％+4.1％+45.4％+1.9％+15.6％+ 19.4％+ 21.8％+ 22.4％The Online AdvertisingService’s sales estimatedconservatively. Focusing
on expanding steadyrevenues.

+ 15％

2004/9+ 20.0％ + 12.6％+24.6％ +10.6％ + 11.5％ + 7.1％
+166.1％ -22.2％+6.6％
2005/92006/92007/92008/92009/92010/92011/92012/92013/92014/9E

Merchant acquiring service revenue

38,364

98,011

191,126

360,138

529,138

666,209

Transaction processing revenue

327,409

476,041

687,235

784,799

816,868

897,658 1,060,123 1,235,737 1,418,822 1,663,741

Monthly revenue

344,083

486,490561,253

597,193608,236

702,946

839,522 1,022,263 1,251,675 1,559,914

Initial revenue

91,920244,613

190,336

202,880

252,828

279,735

311,8130

In accordance with theeconomic recovery, we
forecast an increase in thetransactions of large-scale
merchants and an
enlargement sale for
GMO-PS.

934,441 1,274,419 1,636,774 2,089,254

333,895

400,823

Devote to acquiring thelarge and medium-scale
merchants, cross sell andorder of largescale development items.

451,175

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

26

3.3

Cost of sales ratio and SG&A ratio (Forecast)

Find balance between cost of sales ratio and SG&A ratio(1,000yen）
6,934,000

7,000,000

6,000,000

52.0%

50.8%

50.6%

49.0%

47.7%

5,764,085
47.7%

49.0%

48.1%

44.7%

5,000,000

60%

46.6%
4,708,097

4,000,000

40%

SG&A
• Employment of highly
talented personnel• Continuing efforts to
reduce cost
• Establishing newcompany (GMO-PS)• Rent expenses increase
associated withexpansion of
headquarters.

3,866,316
30.5%
3,145,901

3,000,000
24.0%
17.1%
2,000,000

1,945,011

1,629,951

2,207,071
17.1%

2,245,771

16.4%

801,778
416,874

1,247,407
827,385

984,589

397,698

192,223

279,287

318,497

1,513,031

1,053,821

584,130
376,997372,853

1,894,257

14.7%

14.6%

1,305,157
1,000,000

2,684,406

2,546,550

463,175

17.9%

20%

15.0%

13.7%

1,030,813
708,566

530,843

0

Cost of sales• Continuation of priorinvestment• Strong sales of Online
Advertising Service• Increase agency fees
• Cost of data center
parallel operation willremain the same.

0%
2004/92005/9listed on
the TSE

2006/9Sales

2007/92008/9

Sales-cost

2009/9SG&A

2010/92011/92012/9

Sales-cost ratio

2013/92014/9E

Sales-SG&A ratio

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

27

Thank you very much!

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

For more information, please contact the Company Value Creation Planning Office
IR/PR Group TEL:03-3464-0182
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

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