GMO Payment Gateway, Inc.

Annual Report 24th Fiscal Year2016.10.1–2017.9.30

Message from the President

Reinforcing our ecosystem (recurringmodel) while maintaining a growth rate
in operating profit of at least 25%

Revenue and earnings grew for 12 straight years since we werelisted in April 2005 after resolving challenges that came with rapid
growth and reviewing and strengthening our business foundation
The period ended September 2017 was a year of challenges
for our company.
We sincerely apologize for the concerns we caused ourshareholders due to the unauthorized access to and data

More payment
processing

leakage from some websites under our service by a third
party, which was announced on March 10, 2017.
We have endeavored to regain trust by conducting a

Payment
processing

thorough root cause investigation and quick information
disclosure, creating recurrence prevention measures, andstrengthening our risk management system, as well as fully
ensuring safety measures from systematic and technologicalPayment
processing

Analysis/
Hypothesis
Ad service
Financeserviceperspectives.
We could not have achieved 12 consecutive years of growth
in revenue and earnings or 5 billion yen in consolidated operating profit without the efforts of all our employees regarding
this incident, as well as the heartfelt support from various
stakeholders, including our shareholders.
What we learned from the biggest crisis since our founding
has become a valuable asset. We pledge to strengthen ourmanagement and to deliver an even higher corporate value
through our concerted efforts.

To be an overwhelming industry leader
in comprehensive payment services

1

Issei Ainoura
President &Chief Executive Officer2Message from the President
25% growth line
Dividend per share¥40

Widening our business areas outside of payment
processing to deliver consecutive high growthCommitment to consecutively increase
consolidated operating profit by over 25%

Our consecutive high growth was achieved with our(82,349 stores), payment transaction volume (1.08 billion),“ecosystem” model in which our core payment processing

and value (2.5 trillion yen) per annum. In addition, we haveservice was enhanced through our new, value-added

reported an all-time high profit above our initial target withservices
generated as a result of our analyses and inferOP¥5 billion¥320 million

the launch of new businesses to financial institutions, the¥10 billion¥25 billion¥100 billion

ences. In FY2017, we added new businesses and services

rapid expansion of GMO payment after delivery, and grouparound online payments to beef up our “ecosystem” model.

synergies from the consolidation of GMO Financial Gate,

This has led to the accelerated growth of our merchant baseInc., Global Card System (GCS), and Macro Kiosk.

2005

2017

(approx.) 2020

(approx.) 2025

25% growth line
Dividend per share¥40(approx.) 2030

(FY)

*Consolidated operating profit figures are our management target for 2020 onward

New businesses
Processing/Smart payment¥300 billion market
CAGR 40%

Payment after delivery

Payment enhancements

Startedad service

Accumulatedtransaction dataMag
B2C ¥15 trillion
CAGR 10–15%

Online payments
2011

2012

2013

2014

2015

2016

Cashless promotion
ahead of Olympics

IC chips

REV Installment Sales Act¥1 trillion PRJ

2017

2018

2019

2020

¥6–7 trillion¥3.5–4
trillion¥2.5 trillion¥1.6 trillion¥0.8 trillion¥1.0 trillion¥25 billion¥100 billion

2005

2017

(approx.) 2020

(approx.) 2025

(approx.) 2030

Our core space (the B2C Ecommerce market in Japan) is

Continuing 25% growth in consolidated operating profit

on a rapid growth trend thanks to favorable changes in thewill allow us to achieve our mid-term goals of 10 billion yen

external environment including the spread of smartphonebusinesses
in FY2020, 25 billion yenNew
in FY2025,
and 100 billion yen inusage and logistics reforms. At the same time, our online

FY2030.
As for dividends,
we haveCashless
paid 40promotion
yen per share
Processing/Smartpayment

payment sphere has expanded with B2B and C2C payment

for the period ended September 2017; almost 13 times thetransactions going online. We are targeting to grow consoli-APIamount of what we paidOpen
in FY2006(3.13 yen after share split

dated operating profit by 25% in Payment
FY 2018 under
the following
after delivery¥300
billionadjustments).
After
11marketconsecutive years of increasing divi-

initiatives: acquisition of major and growth merchants as welldend amounts, we further plan to pay out 49 yen per share(FY)

GMO-PG
Transaction Value

Launch Fintech Biz

Biz for banks

REV Banking Act

CAGR 40%

Accumulated

Overseas

MSB taking
transactionfor
data
expansion we
as financial institutions, receiving major businesses,
FY2018. By putting into action the above strategies,
Started and cashless
in increasingof overseas visitors
Paymentnumber
enhancements
ad service

Actuals Outlook

3¥10 billion*Consolidated operating profit figures are our management target for 2020 onward

MACRO KIOSK
consolidation

PCE ¥300 trillion

2010¥5 billion

Overseas
expansion

Built
ecosystem

Card-present payments

OP¥320 million

REV Banking Act
Open APIBiz for banks

MSB

Cashless promotion
Launch Fintech Biz

Builtwill provide the largest
MACRO KIOSK
payment-related services in all our
ecosystem
consolidation

promotion ahead of the 2020 Olympics and Paralympics forpayment methods and expand financial services to turnpayment
after delivery, and growth of Macro Kiosk.
Online payments

B2C ¥15 trillion
REV your
Installment
Act
payment services.
Please keep
eyesSaleson us!

Cashless promotion
trillionMag
IC chips
Card-present
paymentspayment businesses, expansion of GMOPCE ¥300ourselvesof Olympics
our card-present
into the overwhelming leader aheadin comprehensive

2010

2011

2012

2013

CAGR 10–15%

2014

2015

2016

¥1 trillion PRJ

2017

2018

¥3.5–4
trillion

2019

2020

¥6–7 trillion
4

Highlights by segment*In order to reflect the most recent information, we are also including events from October 2017 onward.

Payments x IoT Monetization

TargetPayment Processing Business

Embedded EMV reader

Beverage makers

Railway firms
Tickets

In the online payment area, we have expanded the scope of ourmade a meaningful contribution to our group by taking in robust

businesses and received system development orders from major

consumption by inbound visitors and payment demands throughcompanies and other businesses from financial institutions. In thesmartphones against a backdrop of cashless acceleration leading

recurring payment area, we have launched credit card payment

up to the 2020 Olympics and Paralympics.
Parking lot firms

Gas stations

services to the National Tax Agency under its “National Tax Credit
Card Payment Site” from January 4, 2017. GMO Financial Gate,
Inc., our consolidated subsidiary since FY2016, and GCS have

“Smartphone Payment Services Linked to Bank Accounts”
platform system provided to the Bankof Fukuoka
Payments x IoT Monetization
We announced plans to provide a platformsystem for an immediate, direct debit service
through a smartphone app that links to bankaccounts by utilizing our technologies andknow-how which we have gained through“GMO Smart Shiharai.” Interconnected with
the Bank of Yokohama, this decision will leadto a smartphone payment service that is
linked to bank accounts across regions
and financial institutions.

TargetEmbedded EMV reader

Beverage makers

Bank of Fukuoka
Account holders

Smartphone Payment Service
Linked to Bank Accounts(Million yen)

Operating profit

Revenue mix of major businesses(Million yen)

Tickets

Parking lot firms

Gas stations

Systemprovided by

SHOP

Revenue

Railway firms

SHOP

Bank of
Yokohama’s
Merchants*

Bank of Fukuoka
Merchants*(Million yen)

*Merchants who have made an agreement on smartphone payment service usage

More implementations andat more public institutions

Present

Card-present payments
2011

National Tax Credit Card
Payment Site

In addition to payment services,
started production and operationof payment websites

Tokyo Automobile taxes,
Metropolitan: various taxes, water bills

FY2017
Revenue
Aichi Prefecture: Automobile taxes, various
taxes
Osaka Prefecture: Automobile taxes

2007

Fukuoka City: Various taxes, water bills

Began offering credit card payment
services for local governments andpublic institutions

Sapporo City: Water bills

Online payments
FY2016FY2017FY2016FY2017Growing Ecommerce in Japan’s consumption has led to our accelerated growth
While increasing our market share in the B2C
Ecommerce market, we have entered into
new online payment areas including B2B andC2C Ecommerce payments as well as NHK
subscription fees, utilities, taxes, and other
non-Ecommerce credit card payments. At thesame time, we have expanded our businessareas to offline markets and overseas markets
as we added more companies to our group,
thereby achieving a long-term high growth.
*GMO-PG calculations are based on “FY2016 Building
infrastructure for an information- and service-oriented
Japanese economy and society (Ecommerce market
survey)” by the Ministry of Economy, Trade andIndustry*MIC “Breakdown of national tax and local tax revenues(Budget and Local Government Finance Plan for
FY2017)”5

B2B
Enormous
market potential¥1,000 trillion

C2C

Narrowly-defined B2C EC market¥15.1 trillion
EC ratio: 5.4%
(growing 10–15% pa)

B2B
credit card
payments

Developing market¥1 trillion
Flea market
apps

Merchandising

OnlineOffline(cardpresent)

B2C

2016
EC rate 5.4%
Market size ¥15.1T

2020
8%
¥24T

2025
15%
¥45T

Service commerce
Digital contents

Public funds • utility fees
• Local taxes ¥39 trillion• National taxes ¥61 trillion

Consumer spending ¥300 trillion

Processing and otherservices for credit card
payments to the National
Tax Agency
Together with the Toyota Finance Corporation, we have produced, operated, andprovided payment processing services fora “National Tax Credit Card Payment Site”(URL https://kokuzei.noufu.jp/) for online
national tax payments using credit cards
which was launched on January 4, 2017,by the National Tax Agency.

Present

More implementations andat more public institutions

FY2016
Revenue

Online payments

Efforts in the card-present
market and moving toward
monetizing the IoT
We will ensure that we take in growth areas in
the in-store payment market in response to agreater need for a cashless society ahead of
the 2020 Tokyo Olympics and Paralympics,
as well as rapid consumption expansion
by inbound visitors and advances in IoT
devices and technologies.

National Tax Credit Card
Payment Site

In addition to payment services,
started production and operationof payment websites

Aichi Prefecture: Automobile taxes, various taxes
Osaka Prefecture: Automobile taxes

2007

Fukuoka City: Various taxes, water bills

Began offering credit card payment
services for local governments andpublic institutions

Sapporo City: Water bills

Payments x IoT Monetization

TargetEmbedded EMV reader

Beverage makers

B2B

B2C

Enormous
market potential¥1,000 trillion

Narrowly-defined B2C EC market

Railway firms

C2C

Tickets¥15.1 trillion
EC ratio: 5.4%
(growing 10–15% pa)

Gas stations

Offline(cardpresent)

Developing market¥1 trillion
Flea market
apps

Merchandising

OnlineB2B
credit card
payments
Flea market

2011Tokyo Automobile taxes,
Metropolitan: various taxes, water bills

2016
EC rate 5.4%
Market size ¥15.1T

2020
8%
¥24T

Service commerce
Digital contents

Public funds • utility fees
• Local taxes ¥39 trillion• National taxes ¥61 trillion

Parking lot firms

2025
15%
¥45T

Consumer spending ¥300 trillion

Flea market
6

Highlights by segment*In order to reflect the most recent information, we are also including events from October 2017 onward.

Processing/Smart Payment Business

Money Service Business (MSB)

GMO-PG Processing Platform: Assisting financial institutions with
implementing FinTech businesses and promoting cashless payments

An “early payment service” that helps set up payment cycles thatsite in Japan and operated by Start Today Co., Ltd., boosted ourcater to the needs of merchants and improves their cash flowgroup’s transaction size, top line, and bottom line.

and “GMO-PG Remittance Service” expanded. In addition, the“GMO-PG Processing Platform” is a comprehensive payment solution that was launchedon October 27, 2017. The platform helps
financial institutions and service providers
in implementing new payment businesses
including issuing debit cards, prepaid cards,
or house cards, as well as merchant-related
businesses that involve merchant contract
management, merchant settlement, andcard transaction processing by enabling apayment infrastructure building at low costs,
in a short timeframe, and with relative ease.
Published on May 8, 2017, by the Ministry of
Economy, Trade and Industry, “Summary of
FinTech Vision” gives the Japanese government’s target of a 40% cashless ratio in 2027,
which contrasts with the current 19%. With
the launch of the platform, we will endeavor
to promote a cashless society and help
FinTech businesses at financial institutions,
utilizing our experience and know-how gained
through providing payment services to Ecommerce merchants.

Card Brand
Card Brand

IssuerIssuerhighly-demanded “GMO payment after delivery,” an after-the-fact

Acquirer
Acquirerpayment service provided by GMO Payment Service, Inc., gained
more merchants. “GMO payment after delivery” has been offered

Payment solutions
House solution
support

Debit card
Credit card
House solution Acquiring
Prepaid card support
issuing support issuing support
supportissuing support
Debit card
Acquiring
Prepaid card
issuing support
supportissuing support

Improved convenience for card membersconnections
Improved Externalconveniencefor card members

Consumers
Consumers

since November 2016 on Zozotown, the largest online shopping

Payment solutions
Commoninfrastructure
Commoninfrastructure

Credit card
issuing support

Marketingandconnections
sales promotion
External
Operation
Marketingandmanagement
sales promotion
Operation management

Business areas for traditional
payment businesses
Business areas for traditional
payment businesses

Revenue(Million yen)

Operating profit(Million yen)

Revenue mix“GMO-PG Processing Platform”
launchedProcessingin OctoberPlatform”
2017“GMO-PG
launched in October 2017
LowcostLowcostOur clients
Our clients

Short
time
Short
time

Easy
Easy

Banks
Banks
Card companies
Card companies
Businesses
Businesses(Million yen)

Merchants
Merchants
FY2016
Revenue

End Users
End Users
Corporations
Corporations
Individuals
Individuals

FY2017
Revenue

Payment after
deliveryCashless payment ratio

Cashlesspayment
expansion
Cashlesspayment
expansion

60%

50%

South Korea/
China
South Korea/
China

Stable revenue growth
Stable revenue growthPayment solutions

50%

Payment solutions

US
40%
40%

Credit card
issuing support

Japan
US
(2027 target)Japan(2027 target)

House solution
support

Debit card
Credit card
House solution Acquiring
Prepaid card support
issuing support issuing support
supportissuing support
Debit card
Acquiring
Prepaid card
issuing support
supportissuing support

Improved convenience for card membersconnections
Improved Externalconveniencefor card members

30%

DoubleMarketingandconnections
sales promotion
External

30%(6trillion yen to go cashless per year)
DoubleOperation
Marketingandmanagement
sales promotion(6 trillion yen to go cashless per year)20%

Operation management
2017

20%

Yokohama Bank & Fukuoka Bank

Japan
(2016)
Japan(2016)

2016

Hokkoku BankSMBC GMO PAYMENT

2015

2017

Yokohama Bank & Fukuoka Bank

2016

2015

Hokkoku Bank

2015–2017
2015–2017

SMBC GMO PAYMENT7

FY2016

2018–
2018–

Common infrastructure
Common infrastructure

FY2017FY2016FY2017

Our Money Service Business (MSB) and FinTech
Consumers

Businesses (merchants)

Our group

Payments companies

3 “GMO-PG Remittance service”

Card-present
payment market Online market

60%

Changes in environment/market
Changes
environment/market
Cashlessinexpansion
Cashless
expansion
Realignment of financial institutions
Realignmentof financial institutions
Local
revitalization
Local
revitalization
FinTechFinTechExpansionof services
to banks
relatedrevenue
Expansionof services
to banks
andandrelatedrevenueCashless payment ratio

Payment after
delivery

1 Transaction lending

Repayments &remittances

Deposits
Daily transaction processing
2 “Early payment service”

Credit card companies,
convenience stores,
electronic moneycompanies, mobile
phone companies, etc.
GMO payment
4 after delivery

5 “GMO SmartPay”
1 Transaction lending
Service that uses payment data to make our own credit
decisions, and provides loans that give merchants theshort-term funding they need to boost sales
2 “Early payment service”
Service that helps set up payment cycles that cater tothe needs of merchants and improve their cash flow

What is FinTech?

3 “GMO-PG Remittance Service”
Service that makes automated systems for the repayments and remittancesthat take place when operating Ecommerce sites, and executes them efficiently
and affordably
4 “GMO payment after delivery”
An after-the-fact payment service for consumers to pay for items after receiving
them, using convenience stores or other such means to send the payments

5 “GMO SmartPay”
A smartphone-based payment service for which
you do not need a wallet. Completes credit card
payments at restaurants and other such places
through a smartphone app

It is a word created by combining finance (Fin) and technology (Tech), which refers to revolutionary IT-savvy finance services and companies

8Highlights by segment*In order to reflect the most recent information, we are also including events from October 2017 onward.

Advertising Business,
Payment Enhancement Business Online
Global Expansion, etc.

Leading all markets by the three strategies of regional expansion,business area expansion, and alliances with major global companies

A solid performance by Macro Kiosk, our consolidated
subsidiary since the previous fiscal year which provides mobile
payments, authentication, and notification services, made huge
contributions to our group’s revenue and earnings growth in overseas markets. Meanwhile, our “GMO-PG Online Advertisement
Service,” which our merchants can benefit from for their own
sales growth, experienced a steady expansion.

Revenue(Million yen)

Operating profit(Million yen)

Growth strategies for overseas businesses

Revenue mix(Million yen)

FY2016
Revenue

Domestic
business

We implemented multiple measures to capture
the huge growth potential of the regions (mainlySoutheast Asia) that have been growing by
5–6% with GDP worth 200 trillion yen, and built
a foundation by the end of the previous fiscal
year. All of the payment service providers that
we have invested in or forged partnerships
with and are taking on the regions’ payment
infrastructure have been growing by 50–150%
per annum in sales. Moreover, an increasing
number of them have turned to profitability.
We will realize further growth in overseas
markets which have hit the expansion phasethrough the three strategies of regional expansion, business area expansion, and allianceswith major global companies.

2017

ASEAN businesses and investments
A benign market which we continue to lead
Maintaining top position
Status of all investments and alliance partners (PSP)Sales: growing by 50–150% per annum
Profitability: an increasing number have turned to profitability

2018(Equity method affiliates) 2C2P to expand client base leveraging allianceswith major US and Chinese partners in Thailand(Consolidated subsidiaries) Macro Kiosk. Deciding on other future
growth countries and making preparations(Up to 20% stake investments) Form alliances with foreign payment-afterdelivery service providers

Our group’s overseas expansion
Domestic
business
FY2017
Revenue

Overseasbusiness(MACRO KIOSK)FY2016FY2017FY2016FY2017

Macro Kiosk expands businesses around ASEAN countries

Guangzhou

India

TaiwanMacau
From the previous fiscal year, we consolidated Macro Kiosk, which
captured social changes such as a bank account ownership ratio surge
from 20% to 80% in Malaysia over the past ten years as a business opportunity. Macro Kiosk is based in ASEAN countries; in many of which,bank accounts are not common despite being an important payment
infrastructure.
Macro Kiosk is the biggest Asian company which offers SMS mobile
solutions and carrier billing services to banks and companies as its corebusiness. It has provided comprehensive services for mobile payments,
authentication, and notification* to its over 4,000 clients that stretch over
18 industries and 37 countries across the globe.
Harnessing synergies with Macro Kiosk, our group of companies will
be expanding our businesses internationally with a focus on the ASEAN
region. This includes supporting Japanese Ecommerce companies in theirinternational expansions, and also providing payment services, among
other things, to banks and leading companies locally.

9

ThailandBusiness model

80%
Users

of the services arefor financial institutions$

Vietnam

SHOP

20%Singapore

Carrier billing
gateway*Notification: Service that informs users via their mobile devices when actions
occur such as deposits and withdrawals from their internet banking, or when they
accumulate transaction records on Ecommerce sites.

Philippines

Malaysia

Clients

Mobile carriers

Hong KongJapan’s first FinTech fund into
payment-related ventures in
Asia (Total ¥2 billion)

GDP ¥500 trillion
CAGR approx. 1%
GDP ¥200 trillion
CAGR 5–6%

Overseas bases
Investment countries

Indonesia

MACRO KIOSK bases
Equity capital: approx. ¥3.9 billion

10

24th fiscal year in review

Financial highlights (consolidated)

Books
Water
Books Books
Water Water
Books
Water
Books
Water
BooksBooks
WaterWater
Books
Water
Automobile
CDs
Automobile
Automobile
CDs CDs
ApparelAutomobile
CDs
Automobile
CDs
Taxes
ApparelApparel
Taxes
ApparelAutomobile
CDs
ApparelTaxes
Automobile
CDs CDs
Taxes
Taxes
Automobile
ApparelApparelTaxesTaxes
Apparel
Taxes

7,205
7,205
7,205
7,205

FY2013
FY2013
FY2014FY2014FY2015FY2015FY2016FY2016FY2017FY2017FY2013
FY2013
FY2014FY2014FY2015
FY2015FY2016FY2016FY2017
FY2017

5,015
5,015
5,015
5,015

(Million(Millionyen)yen)(Million(Millionyen)yen)

3,819
3,819
3,819
3,819

2,977
2,977
2,977
2,977

merchants
merchants

5,764
5,764
5,764
5,764

82,34982,34982,34982,34982,34982,34982,349

2,476
2,476
2,476
2,476

6,837
6,837
6,837
6,837
6,837
6,837
6,837

Fresh
Taxes
Fresh Fresh
Taxes Taxes
Fresh
Taxes
Fresh
Taxes
Food
Food
Fresh
Taxes
Food
FreshFood
Taxes
Food
Fresh
Taxes
merchants
merchants
Food Foodmerchants
merchants
Food merchantsmerchants(Million(Millionyen)yen)(Million(Millionyen)yen)OperatingOperatingprofitprofitOperatingOperatingprofit
profit31.3%
31.3%
increaseincrease
from
from
31.3%
31.3%
increaseincreasefromfromprevious
previous
periodperiodprevious
previousperiod
period

2,048
2,048
2,048
2,048

Number of Merchants

Net
Net
sales
sales
Net
Netsales
sales
79.9%
79.9%
increaseincrease
from
from
79.9%
79.9%
increaseincreasefromfromprevious
previous
periodperiodprevious
previousperiod
period21,794
21,794
21,794
21,794FY2017

Tickets
Tickets Tickets
Tickets
Tickets
Tickets
Electronic
Games
Electronic
Tickets
Electronic
Games GamesElectronic
Games
Electronic
Tickets Games
Books
and
Music
Books
and
Music
Electronic
Games
Books
and
Music
Electronic
Games
Books
and Music
Books
and
Music
Electronic
Games
BooksBooks
and Music
and Music
Books
and Music

12,113
12,113
12,113
12,113

FY2004

Revenue and earnings grew for 12 straight years since we were listed in 2005
Both growth rates reached highest since 2008 (under the TSE 1st section)

9,030
9,030
9,030
9,030

GMO Payment Gateway by the numbers

FY2013
FY2013
FY2014FY2014FY2015FY2015FY2016FY2016FY2017FY2017FY2013
FY2013
FY2014FY2014FY2015
FY2015FY2016FY2016FY2017
FY2017

Transaction
Volume & Value

trilliontrillion trillion
trilliontrilliontrilliontrilliontrillion

Number of Employees

40 40
40
40
404040
Number ofGroup Companies

000 0 000
11

Net profit
Net profit
per
share
per
share
NetNetprofitprofitper pershare
share
ROEROE(%) (%)
ROE
ROE(%)(%)

654
654
654
654
654
654
654
2323
23
23
23
23
23

(+3 Equity
MethodAffiliates)(+3
EquityMethodAffiliates)(+3
EquityMethodAffiliates)
EquityMethodAffiliates)(+3
EquityMethod Affiliates)(+3(+3EquityMethodAffiliates)(+3 Equity
MethodAffiliates)(+3 Equity
MethodAffiliates)

Dividend
Dividend
Dividend
Dividend(Yen)(Yen)
(Yen)
(Yen)

79.4
79.4
79.4
79.4

(Net
(Net
ProfitProfitperperShare)
Share)

35.4
35.4
35.4
35.4

billionbillion

78.4
78.4
78.4
78.4

¥2.5
¥2.5
¥2.5
¥2.5
¥2.5
¥2.5
¥2.5

¥120.0¥120.0¥120.0¥120.0¥120.0¥120.0billion¥120.0billionbillionbillionbillionbillion(Return(Return
on equity)
on equity)Net
profitpershare/ROENet
profitpershare/ROE(Returnonon
equity)equity)Net
Netprofit
profitper
pershare/ROE
share/ROE(Return
1.3%
1.3%
increaseincrease
from
from
1.3%
increasefrom
1.3%
increasefrom(Yen)(Yen)previous
previous
periodperiod(Yen)(Yen)
previous
periodprevious
period(Net(Net
ProfitProfitperperShare)
Share)

40.0
40.0
40.0
40.0

52.6
52.6
52.6
52.6

billionbillion billion
billionbillionbillionbillion
billion

43.9
43.9
43.9
43.9

1.08
1.08
1.08
1.08
1.08
1.08
1.08

37.037.0
millionmillion million
37.0
million37.0
million37.0
million37.0
37.0
million million

27.027.0
27.0
27.0
18.018.0
18.0
15.015.0 18.0
15.0
12.312.3 15.0
12.3
12.3

24.424.4
23.0
23.0 24.4
24.4
23.0
23.0
16.116.1 17.017.0
17.0
16.1
16.1 17.0

15.2
15.2
15.2
15.2

FY2013
FY2014FY2015FY2016FY2017FY2013
FY2014FY2015FY2016FY2017FY2013
FY2013
FY2014FY2014FY2015
FY2015FY2016FY2016FY2017
FY2017FY2013
FY2013
FY2014FY2014FY2015FY2015FY2016FY2016FY2017FY2017FY2013
FY2013
FY2014FY2014FY2015
FY2015FY2016FY2016FY2017
FY2017On July 1, 2012, the Company executed a 200-for-1 stock split of common stock. On

We have decided our dividend for FY2017 to be 40 yen, up by 13 yen from the year

October 1, 2014, the Company executed a 2-for-1 stock split of common stock.

before, in accordance with our basic principles for continuing a stable shareholder

To make it easier to compare “net income per share” for the period to other periods,

return while maintaining retained earnings necessary for future business expansion

we show the value resulting from adding the effect of the applicable stock splits, andand enhancement of our corporate structure.

adjusting retroactively. ROE was lower in the period ended September 2015, but thisOn July 1, 2012, the Company executed a 200-for-1 stock split of common stock,

was a result of increased equity due to the allocation of new shares to third parties

and later a 2-for-1 stock split of common stock on October 1, 2014. To make it easier

carried out in June 2015.

to compare to other periods, we show the value resulting from adding the effect of
the applicable stock splits, and adjusting retroactively.

12

Consolidated financial statements

83,125

Consolidated balance sheet: Points to consider

Consolidated balance sheet(Thousand yen)(Thousand yen)

23rd fiscal year

24th fiscal year

23rd fiscal year

24th fiscal year

As of Sept. 30, 2016

As of Sept. 30, 2017

As of Sept. 30, 2016

As of Sept. 30, 201735,330,748

57,820,557

Assets 1 Advance payments-trade, Accounts receivable-other

2,726,492

3,521,081

64,84674,918

Expansion of Money Service Business, especially “GMO payment after
delivery,” resulted in an increase in accounts receivable-other, and an
expansion of early payment service resulted in an increase in advancepayments-trade.

(Assets)(Liabilities)

45,549,162

72,347,531

Cash and deposits

25,231,522

27,623,466

Accounts payable-trade

Accounts receivable-trade

3,924,904

6,254,193

Lease obligations

Lease receivables

7,291,439

6,426,827

Accounts payable-other

2,784,175

12,558,354

38,377

93,720

Income taxes payable

901,767

1,693,502

972

757

Accrued consumption taxes

78,482

711,427

6,388,955

16,806,222

Prepaid expenses

118,723

173,200

Deposits received 2

Deferred tax assets

300,169

1,251,001

Unearned revenue

1,742,612

14,678,576

Other839,372

Allowance for doubtful accounts

Current assets

Merchandise
Supplies

Current liabilities

447,442

491,722

27,634,302

37,406,767

62

11,886

Provision for bonuses

478,808

410,197

1,433,354

Provision for directors’ bonuses

125,000

57,900(327,887)(2,393,788)

Other89,369882,799

Noncurrent assets

9,637,579

10,778,069

Noncurrent liabilities

586,876

3,618,851

Tangible assets

352,280

399,588

Long-term borrowings

30,1502,999,500

Buildings

83,14378,507

Lease obligations

115,984

158,075

Advance payments-trade 1

Accounts receivable-other 1

Advances received

Tools, furniture, and fixtures

122,782

125,698

Long-term lease and guarantee deposits

Leased assets

146,354

195,382

Investments andother assets

17,45025,719212

153

Software1,079,334

1,586,738

Other

1,360,069

1,273,310

Investments and other assets

5,141,549

5,872,850(Net assets)

Investment securities

2,251,124

2,704,216

Shareholders’ equity

Shares of subsidiaries and affiliates

2,203,234

2,318,656

Investments in other securities ofsubsidiaries and affiliates

309,174

420,998

962

467

Claims provable in bankruptcy, claims
provable in rehabilitation, and other

31,46849,359Long-term prepaid expenses

8,285

6,907

Long-term loans receivable from directors
and employees

Total liabilities

352

399

Intangible assets

35,917,624

61,439,408

Current
liabilities

Intangible assets
4,505

Investments andother assets

5,141

5,872

57,8202

Current
liabilities

35,330Noncurrent
liabilities

Noncurrent
liabilities

3,618

586

Net assets

Net assets

21,686

19,26923rd fiscal year 24th fiscal year

23rd fiscal year 24th fiscal year

(As of Sept. 30, 2016)(As of Sept. 30, 2017)(As of Sept. 30, 2017)83,125

Consolidated statement of cash flows
18,305,926

20,228,802

Capital stock

4,712,900

4,712,900

Capital surplus

4,964,712

4,933,388

Retained earnings

8,893,549

10,838,783

Treasury stock(265,236)(256,269)

Accumulated other comprehensive income(145,167)

364,344

Valuation difference on available-for-salesecurities(48,004)

185,078(97,162)

179,265

1,066

923

Non-controlling interests

1,107,292

1,092,121

Total net assets

19,269,118

21,686,192

Total liabilities and net assets

55,186,742

83,125,601

231,035

325,555

Deferred tax assets

57,294

16,848Subscription rights to shares

Other

80,437

79,200Allowance for doubtful accounts(31,468)(49,359)

55,186,742

83,125,601

13

Tangible assets(As of Sept. 30, 2016)

Lease and guarantee deposits

Total assets

Noncurrent assets
10,778

Tangible assets

250,780

55,1861

Noncurrent assets
9,637

263,343

1,619,708

Current assets

72,34745,549Other(As of Sept. 30, 2017)83,125Current assets

4,143

Tangible assets

Liabilities and net assets (Million yen)

55,186

210,495

1,686,682

Tangible assets

Deposits received
352 increased due to higher revenues
399 from contracts
relatedto representative
merchants. For deposits Intangible
received,assets
it should
Intangible
assetsbe noted that4,143
the sales amounts (amounts remitted4,505
to merchants from
Investments
andInvestments
creditcard companies
that pass through our company)
paidandto merother assets
other assets
chants with representative
merchant
contracts
arereportedat the end
5,141
5,872
of every month.
23rd fiscal year 24th fiscal year

83,125170,000

Goodwill

Trademark rights

Assets (Million yen)Noncurrent assets
10,778

Noncurrent assets
Liabilities 29,637
Deposits received(As of Sept. 30, 2016)

Provision for directors’ remuneration
Board Incentive Plan Trust

4,505,631

Leased assets

1—

4,143,749

72,347

assetsThe progress of our activities during this period has resulted in 83.125 Current
billion yen
in total assets at the end of the period;
45,549an increase of 27.938 billion yen from the end of the previous period.

7,397

Intangible assets

Current assets

55,186

Foreign currency translation adjustment

55,186

Current2017
Cash and cash equivalents at the end of September
stood at 27,575 million yen, up by 2,387 millionliabilities
yen from the57,820end of the previous period, with net cash provided
2 by (used in)
Current
operating activities which returned positive due to increased
liabilities
profit from35,330
solid business, increased deposits received fromexpanded payment processing business, and Noncurrent
increased bad
Noncurrent
liabilities
liabilities
3,618
586

Net assets

Net assets

Net cash provided
19,269by (used in) operating activities

21,686debt allowance that came from the increased transactions of“GMO payment after delivery” as well as with proceeds fromlong-term borrowings, despite the fund decrease due to anincrease in advance payments-trade and accounts receivableother related to Money Service Business (MSB).
(Thousand yen)

23rd fiscal year

24th fiscal year

from Oct. 1, 2015 to Sept. 30, 2016

from Oct. 1, 2016 to Sept. 30, 2017

(748,659)

1,749,955(3,415,138)(1,984,622)

Net cash provided by (used in) financing activities(654,646)

2,635,568

Translation differences of cash and cash equivalents(107,624)(13,263)

Increase (decrease) in cash and cash equivalents(4,926,069)

2,387,637

Balance of cash and cash equivalents at the beginning of the period

30,113,605

25,187,536

Balance of cash and cash equivalents at the end of the period

25,187,536

27,575,173

Net cash provided by (used in) investing activities

23rd fiscal year 24th fiscal year
(As of Sept. 30, 2016)(As of Sept. 30, 2017)14

Consolidated financial statements

Consolidated statement of income(Thousand yen)

23rd fiscal year

24th fiscal year

from Oct. 1, 2015 toSept. 30, 2016

from Oct. 1, 2016 to
Sept. 30, 2017

Revenue 3

12,113,864

21,794,783

Cost of revenue

2,769,578

6,687,176

Gross profit

9,344,285

15,107,607

Selling, general, and administrative expenses

5,524,779

10,092,156

Management system

Consolidated statement of income:Points to consider
3 Revenue

Growth of our payment processing service as a result of our efforts
to spearhead growth of the Ecommerce market, acquisition of amajor merchant by our consolidated subsidiary, GMO Payment Service, Inc., and consolidation effects of GMO Financial Gate, Inc.,and Macro Kiosk have put our revenue at 21,794 million yen (anincrease of 79.9% from the previous period).
4 Operating profit

Operating profit 4

3,819,506

5,015,450

Non-operating profit

75,056

110,555

Interest received

5,088

19,492

Dividends received

6,719

9,977

Gain on investment in partnership

12,425

—

933

1,159

Rent received

18,363

1,246

Commissions received

21,842

20,2215 Ordinary profit—

47,483

9,683

10,973

Our ordinary profit came in at 4,739 million yen (an increase of 25.4%
from the previous period) due to investment loss from equity methodof 352 million yen and others despite commissions received.

Non-operating loss

113,682

386,051

Interest paid

4,986

29,361Equity method investment loss

15,375352,599—

974

Rent paid

18,035

1,142

Foreign exchange loss

72,010

—

Other

3,274

1,972

Ordinary profit 5

3,780,880

4,739,954

Extraordinary profit

589,884

188,161

194,057

936

Insurance reimbursement—

160,000

Gain on liquidation of subsidiary—

27,225395,827—

33,121

457,561

Loss on change in equity

21,906

187,345

Loss on retirement of noncurrent assets

9,407

170

—

270,046

1,807—

Profit before income taxes

4,337,643

4,470,554

Corporate, inhabitant, and enterprise taxes

1,492,877

2,472,115(66,160)(984,104)

Gain on reversal of dividends payable

Foreign exchange gain
Other

Loss on investment in partnership

Income from securities soldGain on step acquisitions
Extraordinary loss

Information security countermeasure expenses
Loss on disaster

Income taxes-deferred
Profit before minority interests
Profit attributable to non-controlling interests
Profit attributable to owners of the parent 6

We have recorded operating profit of 5,015 million yen (an increase of
31.3% from the previous period) and an operating margin of 23.0%
due to a rise in cost ratio as a result of an increase in sales cost withthe expansion of part of our Money Service Business, an increase inpersonnel cost coming from added headcount and the expansion ofhigh-cost businesses such as our “GMO-PG Remittance Service,”“GMO payment after delivery,” and payment terminal sales businessby GMO Financial Gate, Inc., despite the scale of economy enjoyed inaccordance with our business expansion.

6 Profit attributable to owners of the parent

For extraordinary loss, we have recognized loss on changes in equityof 187 million yen, in accordance with changes of our stake in ourequity method affiliates. With regards to income taxes, we haverecognized income taxes-deferred of 984 million yen as a result ofrecording deferred tax assets that came in with the temporary differences increased by the business expansion of GMO Payment
Service, Inc. These factors were translated into profit attributable toowners of the parent of 2,948 million yen (an increase of 1.3% fromthe previous year).

Compliance

Information security

Our fundamental approachto corporate governanceIn our group of companies, we consider
the scope of compliance to include a)ordinances, b) ethics and social norms,c) rules, regulations, and procedures, andd) management vision. With an awareness of“adapting to the demands of society” (known
as full-set compliance), which includes
observance of ordinances, we are actively
boosting the compliance mentality of all
our employees. In its yearly audit plan, ourinternal audit office also reviews our stateof compliance with ordinances, Articles ofIncorporation, company rules, and othersuch regulations. When the circumstances
are found to require improvements, we takecorrective measures and follow up to ensure
the corrections are being made.
In addition to the normal reporting systems
based on chains of command, we arebuilding and operating an internal notification
system for incidents where compliance violations are thought to have occurred within ourcompany.

Certified IS027001 compliant

We consider this to be one of the mostimpor tant issues in management. It is
important to devise and implement governance systems necessary for healthy business development, while simultaneously
ensuring both the efficiency and legitimacy
of management. In order to achieve theseobjectives, our intention is to execute aneven more transparent style of management
through timely disclosures of management
information for shareholders and investors.

Overview of corporate
governance system
We have implemented a structure which
includes the appointment of two external
directors who offer advice and opinions froma neutral perspective, while overseeing thefull-time directors.
Our four-member board of auditors also
includes two ex ternal auditors, and is
working together with the internal audit office
and accounting auditors while building anaudit structure. Additionally, the board of
directors makes all decisions on importantmatters such as the execution of criticaloperations and the remuneration of directors, in addition to important decision items
for strengthening governance.

With a scope that encompasses all of ourbusiness locations, we have been certified
as compliant with the ISO/IEC 27001:2013
global information security standard (within
Japan, the JIS Q27001:2014 standard).

Fully PCI DSS compliant
The services we provide are in full compliance with version 3.2 of the PCI DSS global
security standard for the credit card industry,
which was jointly formulated by the fiveglobal credit card brands, JCB, American
Express, Discover, MasterCard, and Visa. As
such, we are delivering peace of mind to allof our customers, in addition to secure credit
card payments.

Privacy Mark certified
As recognition that we are taking the appropriate measures to safeguard personal
information, we have received Privacy Markcertification which signifies compliance with
the Japanese Industrial Standard “JIS Q
15001:2006 personal information protection
management systems requirements” for thehandling of personal information.

IFRS

About the information leakage

Our group plans to adopt International Financial Reporting Standards(IFRS) from the first quarter of the fiscal year ending September 30,
2018, considering our engagement in global business expansion.
Migration to IFRS should improve convenience on the part of ourvarious stakeholders including domestic/overseas shareholders andinvestors, making comparison of our financial data with overseas
peers easier and allowing for more expanded disclosure.

We found that there was unauthorized external access between March 8 and 9, 2017, to the payment sites of our consignment merchants,
the Tokyo Metropolitan Government credit card payment site for metropolitan taxes, and the credit card payment site for group life insurance
riders of the Japan Housing Finance Agency which led to information leakage. Vulnerabilities in the application frameworks of these sites
were exploited by a third party during this incident. We established a “recurrence prevention committee” on March 14, 2017, and published areport on May 1.
Furthermore, we implemented the following recurrence prevention measures and have endeavored to regain trust at a company level.

Consolidated earnings forecast (J-GAAP and IFRS)

Security management measures from organizational perspectives

Security measures from technological perspectives

1. Enhancement of our company-wide risk governance system

1. Performance of a re-audit of PCI DSS for the entire system of
GMO-PG

Outlook for FY2018
J-GAAPIFRS

vs. revenue
vs. revenue(billion yen)(billion yen)(%)(%)

IFRS figurescomparedwith J-GAAP

2,910,926

2,982,543—

34,312

Revenue

272

100

261

100

–11

–4%

2,948,230

Operatingprofit

62

23

64

25

+2

+3%

2,910,926

Corporate governance

2. Enhancement of our IT risk management system
3. Improvement of our internal audit and management review system
4. Improvement of our system development processes

2. Retiring from Apache Struts2
3. Splitting our database
4. Improvement of unauthorized access detection at the SQL-level

Revenue: Changes of sales recording standard (from gross to net)
Factors15

		

Macro Kiosk sales recognition timing gap

Operating profit: Goodwill not amortized under IFRS

16Company information

Company overview (As of September 30, 2017)
Name
Established
Head office
Capital stock
Capital reserve
Number of employees
Business outline
Memberships

Major subsidiaries

Members of the Board (As of December 17, 2017)

GMO Payment Gateway, Inc.
(3769; Tokyo Stock Exchange, First Section)
March 1995
Humax Shibuya Bldg. 7F
1-14-6 Dogenzaka, Shibuya-ku, Tokyo, Japan
4,712 million yen
4,933 million yen
654 (consolidated)
Integrated payment related services and financial services
Japan Consumer Credit Association (JICA)
Japan Multi-Payment Network Promotion Association (JAMPA)EC Payment Forum
Japan E-Commerce Consultant Association (JECCICA)
GMO Epsilon, Inc.
GMO Payment Service, Inc.
GMO Financial Gate, Inc.
GMO Payment Gateway Pte. Ltd.
Macro Kiosk Berhad

Chairman & Director
President & Chief Executive Officer
Director, Executive Vice President
Director, Executive Vice President
Senior Managing Director
Director
Director
Director
Director
Director
Director
External Director
External Director
Auditor (full-time)
AuditorExternal Auditor
External Auditor

Masatoshi Kumagai
Issei Ainoura
Ryu Muramatsu
Satoru Isozaki
Yuichi Hisada
Tomoyuki Murakami
Shinichi Sugiyama
Yusuke Arai
Masashi Yasuda
Masaru Yoshioka
Takehito Kaneko
Masaya Onagi
Akio Sato
Yasuhiro Kanda
Takashi Iinuma
Kazutaka Yoshida
Kazuhiko Okamoto

Stock information (As of September 30, 2017)

Major shareholders

Total number of authorized shares: 102,400,000
Total number of issued shares:

Shares owned

Stock ownership
ratio (%)

GMO Internet, Inc.

19,186,100

51.64

Japan Trustee Services Bank, Ltd. (Trust account)

2,224,700

5.98

Sumitomo Mitsui Banking Corporation

1,250,800

3.36

The Master Trust Bank of Japan, Ltd. (Trust account)

1,122,700

3.02

Issei Ainoura

1,000,100

2.69

State Street London Care of State Street Bank and Trust,
Boston SSBTC A/C UK London Branch Clients –United Kingdom

503,700

1.35

Northern Trust Co. (AVFC) RE IEDU UCITS CLIENTS NONLENDING 15 PCT Treaty Account465,100

1.25

J.P. Morgan Bank Luxembourg S.A. 385576

428,291

1.15

The Dai-Ichi Life Insurance Company, Ltd.

346,000

0.93

Treasury shares

Chase Manhattan Bank GTS Clients Account Escrow

343,803

0.92(2,500 shares)

Note: We calculate the stock ownership ratio after deducting treasury shares(2,500 shares) from the total number of issued shares

Name of shareholder

37,150,500

Number of shareholders:

3,698

Shareholders and numbers of shares
Financial institutions

Other institutions

Individuals, others(7,282,500 shares)(19,296,100 shares)(3,073,617 shares)

19.60%

51.94%

8.27%

Financial instruments Foreign institutions, etc.
business operators
19.61%
0.56% (209,271 shares) (7,286,512 shares)

0.01%

Stock price movement (By month, Sept. 2008 through Nov. 2017)(Yen)
10,0009,000

Company directors (excluding external directors)
and presidents of consolidated subsidiaries

8,000

7,000

6,000

5,000

4,000

3

3,000

2,000

Masatoshi Kumagai

Issei Ainoura

Ryu Muramatsu

Satoru Isozaki

Yuichi Hisada

Chairman & Director

President & Chief Executive Officer

Director, Executive Vice President
Head of Corporate Value Creation
Strategy Division, Director of GMO
Payment Gateway Pte. Ltd.

Director, Executive Vice President
Head of Corporate Support Division

Senior Managing Director
Head of Innovation Partners Division

1,000

2
1
9

12

2008

3

6

2009

9

12

3

6

2010

9

12

3

6

2011

9

12

3

6

2012

9

12

3

6

2013

9

12

3

6

2014

9

12

3

6

2015

9

12

3

6

2016

9

12

3

6

9

2017

1. Moved stock listing to the first section of the Tokyo Stock Exchange on September 17, 2008.
2. On July 1, 2012, the Company executed a 200-for-1 stock split of common stock. We have adjusted the stock price retroactively taking the stock split into account.
3. On October 1, 2014, the Company executed a 2-for-1 stock split of common stock. We have adjusted the stock price retroactively taking the stock split into account.

Notes for shareholders
Tomoyuki Murakami

Shinichi Sugiyama

Yusuke Arai

Masashi Yasuda

Masaru Yoshioka

Director
President, Representative Director &COO of SMBC GMO Payment, Inc.

Director
Head of System Division

Director
President & Chief Executive Officer
of GMO Epsilon, Inc.

Director

Director
General Manager of Management
Department of Strategic Business,
Innovation Partners Division

Business year

October 1 through September 30 of the following year

Base dates for dividends of surplus

December 31, March 31, June 30, September 30

Annual meeting of shareholders

Annually in December

Shareholder registry administrator

Mitsubishi UFJ Trust and Banking Corp.

Administrator contact information

Mitsubishi UFJ Trust and Banking Corp.
Stock Transfer Agency Department
10-11, 7-chome, Higashisuna, Koto-ku, Tokyo 137-8081
0120-232-711 (toll-free)

Stock listing

Tokyo Stock Exchange

Method of public notices

Through electronic public notices

Notices published at

http://corp.gmo-pg.com/ir/(However, when electronic public notices cannot be published due to an accident or any otherinevitable circumstances, we will publish them in the Nihon Keizai Shimbun newspaper).
Takehito Kaneko

Katsunari Mukai

Kentaro Sugiyama

Hideki Kurata

Kenny Goh

Director

President & Chief Executive Officer
of GMO Payment Service, Inc.

President & Chief Executive Officer
of GMO Financial Gate, Inc.

President & Chief Executive Officer
of Global Card System

Macro Kiosk Berhad
Chief Executive Officer

17[Announcements]
1. Points of note
(1) In principle, procedures such as change of shareholder address, bank remittance specifications for
dividends, and purchase requests, are handled by the account management institution (securities
company, etc.) where the account was opened. Please contact the securities company or other suchinstitution at which you opened your account. Please note that the shareholder registry administrator(Mitsubishi UFJ Trust and Banking Corp.) does not handle such matters.
(2) Unpaid dividends can be received at the main branch, or other branch offices of Mitsubishi UFJ Trustand Banking Corp.
2. Dividend calculation statements
The enclosed “Dividend Calculation Statement” also serves as the “Notice of Payment” created basedon regulations specified in the Act on Special Measures Concerning Taxation. After receiving paymentof the dividend, it can serve as confirmation of the dividend amount and as information used when filingincome taxes. Shareholders who receive dividends through their securities accounts (pro-rated method
for number of shares) should contact the securities company that performs the transactions for details.
3. For procedures pertaining to shares registered in special accounts, please contact the institution thatadministers special accounts, Tokyo Securities Transfer Agent Co., Ltd.
Mailing address and phone number
2-8-4 Izumi, Suginami-ku, Tokyo 168-8522 Tokyo Securities Transfer Agent Co., Ltd. Business Center
0120-49-7009 (toll-free)*At the annual meeting of shareholders held on December 20, 2015, it was decided that the board of directors would be the decision-making body for dividends of surplus, and that the record
dates for these dividends would be December 31, March 31, June 30, and September 30. As a result, we are able to distribute dividends of surplus on four occasions throughout the year.
However, in order to ensure the retained earnings that our business structure requires, our plan calls for the year-end dividend to be the single dividend of surplus distributed during the year.

18

GMO Payment Gateway, Inc.
URL https://www.gmo-pg.com/enTokyo Head Office: Humax Shibuya Building 7F, 1-14-6 Dogenzaka, Shibuya-ku, Tokyo 150-0043 Tel: +81-3-3464-2740
Osaka Branch:

Grand Front Osaka Tower B 23F, 3-1 Ofukacho, Kita-ku, Osaka 530-0011 Tel: +81-6-7634-3070

Fukuoka Branch:

Tenjin Miyuki Building 8F, 4-2-20 Tenjin, Chuo-ku, Fukuoka 810-0001 Tel: +81-92-688-9018