Financial results briefing for the 4Q of FY2017(October1,2016-September30,2017)

Status of our business expansion toward achieving mid-term goal

November 6, 2017
GMO Payment Gateway, Inc.
(3769: Tokyo Stock Exchange Section-1)

The 51st IR Meetinghttps: //c orp. gmo - pg. c om/e n/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 November 6, 2017.
However, please note that they are subject to change
without prior notice in the event of changes in thebusiness environment or other unforeseen occurrences.

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

2

Agenda1. Summary of financial results for FY2017
2. Earnings forecast for FY2018
3. Future actions to implement growth strategies
4. Financial highlights
5. Reference materials

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

3

1. Summary of financial results for FY2017

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

41.1

Business performanceOP +31.3％; transaction value at ¥2.5 trillion (+29.3％)（Million yen）

FY2016

Initialforecast

FY2017

YoY changevs. Initial
forecast

Revenue

12,11318,767

21,794+79.9％+16.1％

Operating profit

3,819

5,013

5,015

+31.3％+0.0％

Ordinary profit

3,780

4,673

4,739

+25.4％+1.4％

Net profit

2,910

2,762

2,948

+1.3％

+6.7％

EBITDA

4,191

5,811

5,919

+41.2%+1.8%

DPS (yen)

27.0

37.0

40.0+13.0+3.0*EBITDA＝OP + Depreciation + Amortization of goodwill

Operating stores(end of term)

KPI※82,349（＋6.6％）

Transaction value(full year)

Transaction volume(full year)¥2.5 trillion（＋29.3％）

1.08 billion（＋20.2％）() = year-on-year change※Slowdown of yoy growth due to the end of a service of our partner company resulting in churn by a bulk of stores (18.5％ up if net of this factor）
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

5

1.2

Factors that affected the cumulative results

Net profit over plans & FY16 level with PS tax effect accounting
22,000

million yen+79.9％

20,00018,000

Revenue・Expansion of services to financial institutions
・Acquisition of a major merchant by GMO-PS
・Consolidation of FG and Macro Kiosk
Cost of revenue and SG&A
・Sales growth of high cost-ratio services
・Recognition of bad-debt allowance for GMO payment after delivery
・System reinforcement/modifications upon incident

16,00014,000Operating profit
Growth drivers
・Solid GMO-PG (standalone)・Profit contribution from FG and Macro Kiosk

12,00010,0008,000+31.3％

6,000

Non-operating income and expenses
・Equity method investment loss
Resolved net profit shortfall vs.
plans during 4Q+25.4％

4,000

+1.3％

2,0000Revenue
FY2015

Operating profit

Ordinary profit

FY2016(all full-year)

FY2017

Net profit

Extraordinary profit and loss
・Extraordinary loss due to data leak・Loss on changes in equity

Income taxes
・Recognition of income tax
adjustment associated withsubsidiary’s tax effect accounting

Extraordinary profit
PS：GMO Payment Service

FG：GMO Financial Gate/GCS

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

6

1.3

Quarterly results

4Q Revenue up by 84.8% YoY, OP up by 24.5％ YoY■ FY2017 Quarterly results (consolidated)（million yen）
6,000％: YoY changesyen）Operating profit+84.8％ （million
1,400Revenue+88.3％+30.4％+32.4％+85.0％+37.9％

1,200+24.5％

5,000+59.1％

1,000

4,000
800

3,000
600

2,000400

1,000

200

001Ｑ
FY20142Ｑ
FY20153Ｑ
FY20164Ｑ
FY20171Ｑ
FY20142Ｑ
FY20153Ｑ
FY20164Ｑ

FY2017

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

7

1.4

Revenue/OP by segment

Strong revenue growth in all segments with profit of()：YoY changepayment processing business up by 30%■ OP by segment (before consolidation adjustment)■Revenue by segment（million yen）

（million yen）

508

7,000

20,000（+218.8％）

4,078（+229.2％）

15,000

5,801

6,000

4,000

10,00011,9142,242（＋4.2％）

216

6,579

5,000

（+158.7％）

1,239

226

159（+29.9％）

5,066

3,000（+38.0％）
2,000

5,000

8,632
1,00000

FY2016

Payment processing

FY2017

MSB

Payment enhancement

FY2016

Payment processing

FY2017

MSB

Payment enhancement

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

81.5

Revenue breakdown by business modelAll business models grew more than 25%(millionyen)

Spread20,00010,000・Expansion of MSB (GMO payment afterdelivery)*・Transaction value increaseFee

15,000

6,735
5,611

10,000

5,000

3,692

1,3666400

FY2016

Initial

FY2017

StockFee

YoY＋26.2％

・Business with large operates(banks, etc.)
Initial2,926

YoY＋129.5％

・MK consolidation effect・Expansion of MSB (GMO payment afterdelivery)*
Stock

2,935

YoY＋78.2％

YoY＋113.4％

・Recognition of system development
orders and sales
・Acquisition of large or growth merchants
・Sales of GMO-FG terminals

Spread*Sales from “GMO payment after delivery” split into fee and spread from FY2017 2Q
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

91.6

Overview of FY2017

Reinforced business base through challenges from high-growth
Challenges

Highlights
・ Services for financial institutions

・Incident of the March 9th
Implemented prevention measures (done)
Organization-wise reinforcements
・Company-wide risk governance structure
・IT risk management structure
Technology-wise reinforcements
・Retired from Struts2
・Data base split, etc.
Business
・Fraud detection at SQL level
results

・Worked to prevent unauthorized usage
Conducted website patrol, etc.

・Acquired major EC and mail ordermerchants“1 trillion yen project”
B2B, subscription business, connectedcars
・Rapid surge of payment after delivery
・Expanded business portfolio
B2B market, card-present payments,
overseas business・Bad debt reserves swelled
Profitability improved with credit
model adjustment, etc.

・¥110 million extraordinary loss fromthe incident

Prepared for “GMO-PG Processing Platform”(announced on Oct. 27)

Earnings
results

Sales and profit grew for 15 years in a row(or 12 consecutive years since listed)
Highest growth rate since listed on
TSE 1st section in both sales and profit

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

10

2.

Earnings forecast for FY2018

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

11

2.1

Full-year forecast（J-GAAP）

Remain committed to deliver OP CAGR of 25%■ FY2018（million yen）

（Unit：million yen）

FY2017FY2018YoY change

Revenue

21,79427,283+25.2％

Operatingprofit

5,015

6,269

+25.0％Net profit

2,948

3,635+23.3％EBITDA

5,919

7,594

＋28.2％DPS (yen)

40.0

49.0＋9.0※EBITDA＝Operating profit + depreciation + amortization of goodwill

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

122.2

Earnings forecast by segment (consolidated)

Measures to achieve our target■Revenue by segment（million yen）

5,627

25,000（+38.0％）

4,078

20,0006,558（+13.0％）15,0005,801
15,097（+26.7％）

10,00011,914

Payment enhancement business(+38.0％ YoY）
・Consolidated an entire year of MK・Strengthened overseas business・Margin of Online advertisingbusiness rose

3.6

Money service business (MSB)(+13.0％ YoY）
・MSB’s margin rose
・Finance-related services expanded
to beef up ecosystem model

3.5

Payment processing business(+26.7％ YoY）

3.4

・Continued high growth of payment
processing business・A series of new businesses expansion(processing business, etc.)

5,0000FY2017

Payment processing

FY2018(plan)

MSB

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

132.3Full-year forecast (IFRS)

Comparison of consolidated forecasts 【J-GAAP and IFRS】
Outlook for FY2018
J-GAAP(billion yen)

IFRS

vs.
revenue(billion yen)

(%)

vs.
revenue

IFRS figurescompared withJ-GAAP(%)

Revenue

27.2

100

26.1

100-1.1-4％

Operatingprofit

6.2

23

6.4

25+0.2+3％

Revenue

Changes of sales recording standard（from gross to net）

Factors

Online advertising service
Finance lease

Operating profit-¥1.5 billion-¥0.8 billion-¥0.7 billion

MK sales recognition timing gap+¥0.3 billion

Goodwill not amortized under IFRS+¥0.2 billion

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

14

3. Future actions to implement growth strategies

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

153.1Business area expansion

All businesses enjoyed market expansion & stay on high growth
XProcessing
Smart payment
Businesses forbanks

Cashless promotion
Fully start fintech businessRev. Banking Act
Open API

Payment
after delivery¥300 bil market
with CAGR 40%
Accumulatedtransaction dataMSB
Payment
enhancement
Card-present
payment
Onlinepayment

Start of Online
advertising service

Built ecosystem

Final consumer spending¥300 tril pa

Potentially expand overseas
Macro Kiosk
consolidation
Cashless promotion
Magnetic to IC chip ahead of Olympics

B2C payment ¥15tril Rev. installment Sales Act
10-15％ CAGR
¥1 trillion project2010¥0.8 tril

2012¥1.0 tril2015¥1.6 tril

2017¥2.5 tril

Actuals

2018

2020

¥3.5-4 tri¥6-7 tril

GMO-PG
Transaction value

Outlook

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

16

3.2

Short-term outlook：2017-2020

Outlook and measures to achieve ¥10 billion OP in 2020
Up until 2017
Establishment of ecosystem

2020 and beyond
Reinforcement of ecosystem

Operating profit¥5 billion¥10 billion

Transaction value¥2.5 trillion¥6-7 trillion Tapped into growing EC market
and merchants
 Consolidated FG

 Capture major merchants(Revised Installment Sales Act) Capture inbound needs and IOT trends

 Alliances with banks

 Expansion of businesses for financial
institutions
・Processing/smart payment business MSB asset expansion and margin
improvement
 Accumulation of credit data to utilize forpurchase lending Leads to ecosystem enhancement

Business strategies
PaymentprocessingMSB

 Started MSB
 Started Payment after delivery
and Deferred payment service

Paymentenhancement

 Online advertising service
 Consolidation of MK Overseas businesses to deliver
meaningful earnings

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

17

3.3

Three strategies to note for FY2018

Enhance ecosystem and new businesses(processing/smart payment)
Strategy 2）Processing and smart payment business expansion
Processing / Smart payment

Strong system development capabilities, high-volume processing capabilities and know-how accumulation

Solution business for financial institutions

Process more transactions

Payment processing
Paymentprocessing

PG ecosystem

Analyze / Buildhypotheses
Ad service

Finance service

Strategy 1）Expansion of payment businessby acquiring big merchants

Strategy 3）Expansion of MSB

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

183.4.1

Payment processing:Processing business /Smart payment

Client base to expand from merchants to financial institutions

Card brands
Issuers

Acquirers

Debit
CreditPrepaidHouse
Existing business area
(payment processing)

Consumers

Merchants
2017 Oct. Released GMO Processing Platform
to financial institutions, etc.

Plan to triple revenue from services to financial institutions yoy
Stock revenue to expand
Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

193.4.2

Payment processing:Processing business /Smart Payment

Support FinTech businesses by financial institutions, etc.
to ultimately bring payments towards cashless

60％

Going cashless

Expansion of services to financial institutions

Changes in markets or environments■Going cashless■Restructuring of financial institutions■Regional revitalization■FintechCashlesspayment ratios

South Korea/
China50％

Stock revenue expansion

US40％ Japan (2027 target)

30％・・・Planned to double（¥6 trillion pa to gocashless on average)

20％

2017

Bank F ・・・

Prepaid cards
Credit card issuingBank C Bank E ・・・

Debit card issuingBank A Bank B Bank D ・・・

GMO-PG Processing Platform

2016

Japan (2016)2015

2015 - 20172018Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

20

3.5.1

Money Service Business (MSB)

Solid assets and revenue; segment profit highest for a quarter

Transaction lending

Early payment service

Payment after delivery

Finance lease

RemittanceSegment profit

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

213.5.2

Money Service Business (MSB)

Work to improve MSB’s margin to enlarge segment profit
Asset increase not factored into forecast
2016/92017/92018/9¥15.9 bil → ¥39.1 bil (+145％） Plan to be on par
PS included in the above
with FY2017¥1.7 bil → ¥14.6 bil (+742％）

Margin improvement of each MSB service
Expansion of GMO payment after delivery
Continue to adjust credit check model, etc.
Acquisition of merchants leveraging PG’suniqueness, strength and group synergies
Analysis on growing volume of data, measures
to improve collection rate, fraud detection

RevenueSegment profit
Segment profitability

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

22

3.6

Overseas business strategies (expansion phase)Three strategies of regional expansion, business area
expansion and alliance with global giants
・ASEAN business and investment portfolio
Dominant in the competition-free market
Stayed in the top position

The first investment fund inJapan dedicated to payment
ventures in Asia（¥2 billion）

2017

GDP
¥500 trillion
1% growthHong KongTaiwan

・(Equity method affiliates) 2C2P to expand
client base leveraging alliances with major USand Chinese partners in Thailand
・(Consolidated subsidiaries) Choosing a new,2018
growth country and readying ourselves together
with Macro Kiosk
・(Up to 20% stake investments) Form alliancewith foreign payment-after-delivery service
providersViet Nam
ThailandPhilippinesGDP¥200 trillion
5-6% growthMalaysia
Singapore

・Revenues of all investments and alliancepartners (PSP) growing 50-150% per annum
An increasing number of companies turning
to profitability

Indonesia

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

23

4.

Financial highlights

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

24

4.1

Consolidated balance sheet

Assets related to Payment after delivery and early payment up by¥10 billion+ respectively（Million yen）

End of 4Q
2017

End of 4Q
2016

Change（Million yen）

End of 4Q
2017

End of 4Q
2016

ChangeCurrent asset

72,34745,54926,798Current liabilities

57,82035,33022,489Cash and deposits

27,62325,231

2,391

050

△50

Lease receivable

6,426

7,291

△864

827

17809

Short-term loan
receivables

1,218

515

702

37,406

27,6349,772

Advance payments

16,806

6,388

10,417

Accounts receivable

14,678

1,742

12,935

Early payment expanded(BS balance shows afterconsolidation (offset))

Short-term borrowings
Finance lease, etc.

Long-term borrowings
due within one year
Deposits received
TL balance increased

Deposits by merchants through representative
merchant service*Discrepancy occurs with the pace of merchant’s sales
growth due to change in merchants’ cutoff date andpayment cycles

Allowance for
doubtful accounts△2,393△327△2,065

Other current assets

7,987

4,706

3,280

Accounts payable

12,558

2,784

9,774

Noncurrent assets

10,778

9,637

1,140

Other current liabilities

7,091

4,843

2,247

Tangible assets

399

352

47

Noncurrent liabilities

3,618

586

3,031

Intangible assets

4,505

4,143

361

Long-term borrowings

2,999

30

2,969

Goodwill

1,619

1,686

△66

Other noncurrent
liabilities

645

302

342

Software

1,586

1,079

507

Shareholders’ equity

20,22818,305

1,922

Investments andother assets

5,872

5,141

731

4,712

4,712

0

Investment securities

2,704

2,251453Shares of subsidiaries
and affiliates

2,318

2,203

115

83,12555,18627,938

Total assets

GMO Payment after
delivery increased

Capital stock

Total cumulative other364△145509
comprehensive income
Increase in investment securities of subsidiaries and affiliates
Total net assets
21,686
19,2692,417
Total liabilities and net
assets83,12555,18627,938

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

25

4.2

Major KPIs（Quarterly)

Annual transaction value reaches ¥2.5 trillion
Operating stores: 82,349; Transaction value ¥670 billion; Transaction volume 288 million（Stores）（billion yen）
650
90,00080,00070,00060,00050,000（Reference）Transaction value（cumulative 12 months）¥2.55 trillion

Including GMO Financial Gate

¥2.78 trillion（Million）

550
250
450
200

350

250

Share of spreadrevenue withintransaction value:45%

40,000

150

100

30,00020,00050
10,000

00
12/12

13/3

13/6

13/9

13/12

14/3

14/6

14/9

14/12

15/3

15/6

15/9

15/12

16/3

16/6

16/9

16/12

17/3

17/6

17/9

Transaction value
Recurring payment
Online payment
Operating stores
Operating stores net of the below factor *(Operating store number dropped QoQ due to not a few merchants going idled in response to the end of a service of our partner)*The number of operating stores is calculated at the end of the quarter, transaction value/volume are the results for each quarter

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

26

5.

Reference materials

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

27

5.1

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

Cost of revenue ratio depends on sales composition*Figures with asterisk exclude MSB-related outsourcing expenses（million yen）

6,086

*50.2％
52.7%

6,000

*44.5％
50.3%*41.7％
46.8%

45.6%
43.6%

5,000

43.5%

41.7%

43.8%

*42.6％*39.8％*41.5％

42.6%

50.0%
*40.3％
44.2%

43.6%

4,347

*37.4％*47.2％
50.4%

5,716

5,645

40.0%

*39.9％

4,000
32.1%

31.9%

31.9%
30.0%
3,067

3,294
3,090

2,998
3,000

2,733

21.5%
1,959
2,000

19.5%

2,204

2,603

22.4%

22.5%

21.3%

851
382

22.8%

22.6%

23.4%
2,497
2,036

2,265

1,813

2,491

1,823

1,940

20.0%

1,655
1,372

1,000

25.5%

966

1,247

1,307

944

476

508

554

615

683

15/3(2Q)

15/6(3Q)

15/9(4Q)

15/12(1Q)

16/3(2Q)

1,316

700

16/6(3Q)

1,109
10.0%

772

00.0%
14/12 (1Q)

Revenue

Cost of revenue

SG&A

16/9(4Q)

16/12(1Q)

Cost-revenue ratio

17/3(2Q)

17/6(3Q)

17/9(4Q)

SG&A-revenue ratio

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

28

5.2

Revenue breakdown（Quarterly）

Revenue growth accelerated in all business models
2,773（Million yen）

Year-over-year

2,500

2,000

2,653

Initial+76.3％

Stock＋ 24.7％

Fee＋152.4％

Spread＋ 81.6%

2,471

2,101

2,004
1,809

1,895

1,527

1,500

1,383

1,227

1,026
794

804

516

105

630

612

601

532

1,259

959

931

1,000

500

1,441

667
663

724
728

749
748

875

142

929

457

565

343
127

150

980

786

594
528

906

142

161

151

327
237

185

0

15/1Q

15/2Q

15/3Q

15/4Q
16/1Q
16/2Q
Initial
Stock

16/3Q
Fee

16/4Q
Spread

17/1Q

17/2Q

17/3Q

17/4Q

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

29

5.3

Consolidated cash flows

Positive OCF with earnings growth and deposit growth¥4 billion borrowing to boost MSB
8,000（million yen）

OCF：＋¥1,749 million

Pretax profit+¥4,470 mil
Reserves increase +¥1,996 mil
Advance payments increase-¥10,417 mil
AR increase-¥12,775 mil
AP increase＋¥9,796 mil
Deposit increase＋¥9,772 mil

6,0004,000

2,000

ICF：

-¥1,984 million

Acquisition of intangible fixedassets-¥1,065 mil

0

FCF：

-2,000＋¥2,635 million

Long-term borrowing＋¥4,000 mil
Dividend payout-¥1,001 mil-4,000Free CF： -¥235 million-6,000FY2013OCF

FY2014ICF

FY2015FCF

FY2016FY2017

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

30

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