FY2022/5 Financial Results for Q2

Gunosy Inc.
First Section of The Tokyo Stock Exchange(Stock Code: 6047)
January 14, 2022

INDEX

1.

About “slice”, Our Investment in India

P3

2.

Financial Results for FY2022/5 Q2

P 18

3.

Business Overview by Division

P 26

4.

Medium-Term Management Plan

P 35

5.

Reference Materials: Overview of Gunosy Inc.

P 41

C

Gunosy Inc. All Rights Reserved.

2

About “slice”
Our Investment in
India

C

Gunosy Inc. All Rights Reserved.

3

Investment Summary"slice" is performing extremely well currently. As a strategic investment, it is expected to drive
discontinuous growth for the Gunosy Group.

Valuation/Equity Ratio

Over about $ 1 billion
Stockholding ratio: 17

Investment Purpose

Strategic
Investment+(As of the end of the current Q2)

Expected to contribute as a pillarof the Gunosy Group's growth

Cumulative investment

Investment todatefollow-on
investment

$20mn

$10mn
(Maximum expectedamount)*1: Valuation in the Series B funding round executed in 2021/12

Total(expected)$30mn

At the moment, we plan to be
involved in the management of"slice" as its largest external
shareholder, including
dispatching directors.

The Most Recent Funding / Additional Investment
In December 2021, “slice” completed funding from Tiger Global, Insight Partners, and others andreached unicorn status with a valuation of over $1bn. Gunosy has already decided to make a followon investment of up to $10mn.

TIGER GLOBALINSIGHT PARTNERSA NYC-based global investment firm

A NYC-based venture capital/private equity firm

founded in 2001. Has invested in a total offounded in 1995. Has invested in a total of 83

176 unicorns.

unicorns.

AUM (Assets Under Management)

Capital commitments$ 65 billion$ 30 billion

Portfolio

Portfolio

Peloton

ByteDance

Shutterstock

Twitter

Clubhouse

Nubank

ShopifyTumbler*1 Source: How Tiger Global, SoftBank Vision Fund And Insight Partners Changed The Venture Landscape In 2021 (2021/12/23 crunchbase news)*2 Source: Tiger Global overtakes Sequoia as the top investor in Indian unicorns in 2021, cracks 15 deals this year so far(2021/1/28 BUSINESS INSIDER INDIA)*3 Source: The company's website

(Reference) Basic information on GaragePreneurs
A start-up established in India in 2015. It started with providing BNPL services for college students andnow offers "slice", Credit card challenger mainly for young people.

Basic information of the company.

Company nameGaragePreneurs Internet Pvt. Ltd.

Representative

Rajan Bajaj (founder)

Establishment

2015/6/12

Capital2,582,269 Indian rupees (as of September 30, 2021)

Number of
employees

548 (as of December 31, 2021)

Address

747, Pooja Building, 80ft Road, 4th Block, Koramangala, Bangalore – 560034, India

Business
Description

Credit card challenger

Highlights of "slice"

MarketBusiness

KPI

Growthpotential

Market environment surrounding"slice"Product, strengths, andmanagement team
KPIs that continue to grow
Growth potential to step out of theUnicorn

The status of Unicorns in the Global Market

MarketThere are more than 800 unicorns in the world, and most of them are in FinTech and Internet Software &Services sectors.

Number of
unicorns

Business domain

ExamplesFintech domain
There are around 830

accounts for theunicorns in the world

largest number with162 companies
Fintech

No.1

Paidy

17%

In September 2021, PayPal, a major U.S.
payment service provider, announced its
acquisition of the Paidy for 300 billion yen.

slice

No.3

88
Source: CB Insights (US)

Source: CB Insights (US)unicorn status

19%

No.2

139
Commerce

recently reached

Percentage

162
IT

Companies that have

11%

NEW

Valuation exceeded $1 billion in funding
round led by Tiger Global and InsightPartners

MarketCompanies Listed in the FinTech Domain

Some fintech companies, such as Nubank and Affirm, achieved huge market capitalization by going
public.

NubankAffirmNubank is a digital bank in Brazil that started offering
credit cards with no annual fee in 2014. It now offers
checking/savings accounts, as well as personal loans,investment services, and life insurance.

Affirm is a U.S. fintech company that primarily provides
post-payment services for online and mobile ecommerce.

Market capitalization at the time of listing

Market capitalization at the time of listing

Approx. $ 48 billion *Approx. $ 22 billion

Listed on NYSE

Listed on NASDAQ

Berkshire Hathaway, the U.S. investment andinsurance company led by Warren Buffett, andother companies invested in Nubank. It is thelargest financial institution in Latin America bymarket capitalization.

Affirm provides a service that allows customers
to pay in installments or post-payments whenpurchasing products. The use of post-payment
services is increasing, especially among young
people.

Source: *Based on press articles and other information publicly available.

*

MarketMany Unicorns Emerging in India

As of 10/13/2021, there are 68 unicorns in India, 30 of which reached unicorn status in 2021, making
India a market to watch.

Number of unicorns

Number of global

unicorn valuation during 2021 unicorns by country

in India

68 companies

Companies that reached*

30 companies*

3rd place *Companies thatreached unicorn

68 companies

valuation during 2021

30

30

companies

companies

Unicorns in India

Companies that reached unicorn
valuation during 2021

* Source: JETRO (October 13, 2021) "30 companies reaching unicorn valuations in 2021"

MarketThe market that "slice" is Participating in

In India, attractive growth opportunities exist because most people do not have access to credit
cards due to difficulties in obtaining credit and complicated acquisition procedures.

Credit card issuance rate in India

The number of credit cards issued is equivalent toonly about 4.9% of the population.

Total population of India

About

1.38 billion

Number of credit cards issued/total population

About

4.9%

Social background
Younger people are less likely
to pass the screening process
due to lower credit scores.
Complicated process ofregistering and obtaining acredit card

*1 Source: Data released by the Ministry of Foreign Affairs*2 Number of credit cards issued in India 67,582,583 / Total population of India 1.38 billion (The number of credit cards issued is based on Reserve Bank ofIndia's statistics of 2021/11)

Business

Provide an Easy Post-Payment ExperienceAs a Pay Later card for young people in India, it provides an easy post-payment experience
regardless of the usage situation.

As a pay-later card, provides aneasy post-payment experience
regardless of the usage scenario

Business

Product Image

Together with physical cards, we provide (1) value that is closely connected to users' lives and (2) a financial
experience that goes beyond mere payment through intuitive and simple digital credit card payments.

Intuitive UI/UX

Issue cards through aquick and easy process

Manage expenses in a
simple manner

Business

Strength in “slice”"slice" has gained a strong support from millennials and Gen Z, the volume zone of India's population.
It has also achieved a low default rate through its unique credit know-how.

Age distribution of the Indian population
60+
10%

40-59

22%

Background of rapid
growthUnique and exceptional products highly
supported by BNPL needs of young
people, the volume zone of the
population

Main user group

20-39

33%

0-19

35%

Their unique credit know-how succeededin extending credit to those who werepreviously unable to get credit cards
while maintaining a low default rate.

*Source: Prepared by us based on the data published by by United Nations, Department of Economic and Social Affairs,

Business

Management Team of "slice"

A highly talented management team, mostly millennials, has revolutionized the financial experiencefor young people as a Credit Card Challenger.

Founder& CEO

ex- Flipkart Product Manager

CFO

ex- Spandana Sphoorty Finance CFO

COO

ex- Independent commodity trader

Chief Data
Scientist

ex-FICO Principal Scientist

CTO

ex- Myntra Engineering DirectorCRO

ex- Capital one Senior Manager

Main KPIs

KPI

AUM achieved significant growth YonY. In particular, growth accelerated after the follow-on investment
by Gunosy in 2021/6. The number of cards issued per month is one of the highest in India.

Number of credit cards issued permonth
AUM (outstanding
loan balance)

Approx.

200,000 +AUM growth/month400%+(YonY)

Number of registered users

5 million +users
Sept Oct

Nov Dec

2020

Jan

Feb MarApr May Jun
2021

Jul

Aug Sept

GrowthPotential

Future Growth

It is expected to go beyond the realm of unicorns and grow significantly to become India's leading
fintech company.

Past

Provide BNPL
experience forcollege students
Innovation forSociety

Provide an easy BNPL
experience to the young
people in India who could
not get credit in the past.

Present

Mid- tolong-term

Credit card
Leader in the credit
challenger for young
card market in India
peopleProvide a digital, simple andgamified credit card
experience that Millennials
and Gen Z can relate to.

Become a market leader by
opening up the immature credit
card market in India with superior
products and brands.

Long term-

Redesigning thepersonal financeexperience beyond
credit cards
Achieve further growth beyond
the boundaries of credit cards.

Financial Results for FY2022/5 Q2

FY2022/5 Q2 Summary

Compared to the 1H forecast, both sales and profit exceeded theplan. Steady progress is being made in the preparations toachieve medium- to long-term growth.
•
Media
Business

Although MAU remains weak in the aftermath of the Olympics
and other factors, the profitability of Gunosy is improving as aresult of the acquisition of new quality users.
•

Despite factors causing a decline in revenue in the creatorbusiness domain, revenue increased YonY. Overseas

Game8 Groupbusiness performed well.

Investment
Business•

Our portfolio company "slice" reached unicorn status in its
Series B funding round (see pages 3-17 for details).

FY2022/5 Consolidated Results for Q2 (vs. forecast)Business results exceeded 1H forecast, which was due to improved profitability per user of Gunosy,
strong performance of ADNW, and solid sales growth even during the expansion phase of COVID-19.

(Million yen)

FY2022/5
1H results
Net sales
Operating profit
Operating margin
Ordinary profit
Profit attributableto owners ofparentFY2022/5
1H forecast

Progression rate

FY2022/5 Consolidated Results for Q2 (vs. results)
Although sales declined QonQ due to weak MAUs in some services, 1H sales increased YonY driven by
the contribution from au Service Today. The YonY decline in 1H profits is due to YonY increase inadvertising expenses by approximately 440 million yen.

(Million yen)QonQ
FY2022/5
Q2

FY2022/5 Q1YonY
FY2022/5
1H

QonQ

FY2021/5
1H

YonY

Net sales%%

Operating profit%%

Operating margin
Ordinary profit
Profit attributableto owners of parent%*

Total Number of Active Users (MAU)
MAU increased 26.2% YonY driven by the contribution of au Service Today, although it decreased QonQin the aftermath of the Olympics. Gunosy's users are being replaced by quality users while maintaining
the scale of MAU.

* Average for each quarter of MAU (monthly active users) of “Gunosy”, “NewsPass”, “au Service Today” and “LUCRA”

Breakdown of Net Sales
Net sales increased YonY with the contribution of au Service Today. The QonQ decline was largely
due to temporary factors such as the post-Olympics pullback, seasonal factors (Gunosy Ads), andchanges in business terms in the creator area (Game8), and we are aiming for a reversal from the next
quarter onward.

(Million yen)

*1. Sales of Gunosy Ads, ADNW and Game8 are presented on a non-consolidated basis. Internal trade adjustments are included in Others*2. Sales of Gunosy Ads are the total of “Gunosy”, “NewsPass”, “au Service Today” and “LUCRA”

Cost Structure
Advertising investment in Gunosy was at the same level as Q1. We resumed investment inrecruitment as part of our efforts to build an organization for medium- to long-term growth, butother costs remain strictly controlled.

(Million yen)*”Revenue sharing” included in “Others” in FY2021/5 and earlier, but separated from “Others” from FY2022/5 Q1.
“Live video production expenses” is included in “Others” from FY2022/5 Q1.

Game8In Q2, despite factors causing a decline in sales, such as a change in the contract terms with ouraffiliated partners in the creator domain, sales increased on a year-on-year basis. We will continue tofocus on acquiring medium- to long-term growth drivers such as overseas development.
(Million yen)

* Non-consolidated results (before consolidated adjustment). Results of Smarprise, our subsidiary is not included.
FY2022 Q2 results are for the period from July to September 2022 due to a gap with the parent company's
consolidated accounting period.

Media Business

Status of Investment for the Re-growth of
Gunosy (1/3)

Profitability per user showed steady growth following Q1 through the acquisition of new users upon
resumption of investment.

Financialdata

Net sales of Gunosy

Growing

Number of users(Index: DAU)

Profitability per user

DAU remains unchanged

Profitability shows remarkable
growth(Index: Sales/DAU)

Growth rate+17%

Media BusinessProfitability of New Users (2/3)

The profitability of new users acquired after the resumption of investment tends to be higher thanthat of existing users. As a result of our efforts in product relaunch throughout the previous fiscal year,
we succeeded in attracting users with a high retention rate through improved media quality and promotion
strategies adjusted accordingly.

Factors that led to high profitability

Profitability per user is higher for newly
acquired users
Increased
product
value
Profitability:
Lower

Profitability:
HigherExisting users

New users(Before February 2021)(March 2021 and beyond)

Revisedpromotion
strategy

Through messages and advertisements focusedon the improved quality and value as media, we
acquired quality users with a high retention rate
and a high number of sessions

Media Business

Acquisition of New Users after Resumption of
Investment (3/3)

The percentage of new users acquired since the resumption of investment in March 2021 has beensteady, reaching 24% of the total users as of November 2021. We expect further improvement in
profitability through user turnover.
Improvement of retention rate

New users as % of DAU(Retention rate for 2021/2 set at 100%)

The percentage of new users with higher
profitability increased to approx. 24% of
the total

Steady improvement in retention rate has beenachieved since the resumption of advertising
investment.
We continue to aim for further improvement.

FY2022 Q4

Improvement

40-50%

72%(Forecast)(2021/2 to 2021/11)

2021

2021

Media Business

Progress in au Service Today

We are continuing to update the app UI and UX, including the introduction of dark mode andcarousel ads, as well as enhance monetization. Profitability per user is steadily improving.

Update app UX and enhance monetization

Improved user interface to give users more straightforward

access to useful information for their daily lives

Status of profitability
Profitability per user (Sales/DAU)
is improving.

Growth24%

Dark mode

Carousel ads

2021

Media Business

Ad Network (ADNW)

Although sales declined in Q2, CPM is currently on a recovery trend.
From Q3 onward, further growth is expected through customer expansion by strengthening thesales network.
Number of Impressions
and CPMGame8 Group

Progress in Overseas Business

The number of PVs of game walkthrough content for North America increased due to successful
localization and is starting to contribute to sales. We will continue to focus on overseas business in Q3
and beyond.

Overseas Business

The number of PVs of the overseas business in gamewalkthrough wiki guides is growing steadily.

Growth2020

2021

Investment

Investment

We have invested over 4 billion yen*to date, both overseas and in Japan, and as a limited partner,
considering risk and return. “slice”, in which we are making strategic investments, surpassed a valuationof $1 billion in its most recent funding round and became a unicorn status company.
*Size of investment balance, including investment commitments as a Limited Partner

Main investee companies
Up to

Early

India

Fintech$10mn

Educationof follow-on
investment
plannedMid-to-lateCommerce

Early

Fintech

MaaS

Japan

Audio
deliveryReal estatee
tecFintechCommerce

Exit
executed

Mid-to-late
Organic EL

HR techInvestment as alimited partner
Shows investments made since October 2018, when we started our investment
business.

New Business

YOU INYOU IN was launched in June 2021 with the concept of "mood pairing tea". In order to expand the scaleof the business, we are focusing on developing personalized gifts, such as LINE gifts and theHometown Tax Donation Program (Furusato Nozei), and developing sales channels for corporateclients. As an offline base, a pop-up store was opened in Shibuya Scramble Square.

Pop-up store

＠ Shibuya Scramble Square

Monthly sale(Jan 6-12, 2022)

Solid sales growth through thedevelopment of various sales
channels such as LINE gifts

Jun

Jul

Aug Sept Oct Nov
2021

Disclosure of Figures in Medium-Term Management Plan

Assumptions in developing
the plan•In the Medium-Term Management Plan announced on July 13, 2021, we mainly
released a qualitative strategy. Although the situation is still unpredictable, we aredisclosing numerical information to the extent that we can estimate at present, giventhat the changes in the market environment due to COVID-19 are converging to acertain degree.

•

The impact of “slice” business on consolidated business results is not included in thisdisclosure, as it is currently under close examination.

Progress Since the Release of the Previous Medium-Term
Management PlanIn FY2022/5 1H, steady progress was made in each of the three business pillars that are expected todrive medium- to long-term growth. Among them, the investment business achieved significant
results earlier than expected.
Disclosure

Present (6 months passed)

Media

Progress•

Improved profitability by acquiring new quality users•

Increased retention rate through product improvement
and marketing optimization

Game8
Group
Progress•

Stable growth of domestic business and continuous growthof overseas business•3 years later

Aim for renewed growth in the number ofusers through improved return on
investment and increased investment inadvertising.

Promote external investment, including
investment in overseas businesses andthe challenge of new businesses thatleverage our existing strengths.

Continue to consider new businesses in the gameperipheral market
Investment

Progress•“slice”, our strategic investment, reached unicorn status•

Decided to make a follow-on investment of up to $10mn in“slice”

Capture high growth areas outside thecompany through pure investment andstrategic investment.

Target Values in the Medium-Term Management Plan
In existing businesses, we plan to achieve 10% growth YonY in both sales and gross profit on aconsolidated basis. In the investment business, we will continue to seek out strategic investments andaim for discontinuous growth.
Consolidated net sales andgross profit

Policy on P/L management
110%(Million yen)

(Million yen)

110%

From next fiscal year
onward, pursue
operations with a view toachieving a consolidated
profit on a full-year basis
Aiming for solid sales growth by
improving S/D through the increase of
new users and steadily increasing
users through appropriate control ofadvertising investment.
However, in the event of a significant
improvement in KPIs or the launch of
an attractive new business, we will
increase investment and be flexible inallowing temporary losses.

(Expected)(Planned)(Planned)

FY2022/5 Results Forecast (Consolidated)
We are planning for zero operating profit as we pursue further growth in the next fiscal year and beyond,focusing on investments in human resources to strengthen the organization. Compared to 1H, we added 110 million
yen in personnel expenses and 60 million yen in one-time recruitment expenses. We will not disclose ordinary profit andprofit as we are still examining the impact of slice on the performance of the current fiscal year.

(Million yen)

FY2022/5 1H results

Net sales

Operating profit

Operating margin

FY2022/5 full-year
forecast

1H progression rate

Impact of "slice" on the Income Statement (Under J-GAAP)

Points

1. Our voting interest in “slice” is in the range of 15%-20% as defined in "AccountingStandard for Equity Method of Accounting for Investments". We are currently discussing
with our auditing firm about our intention to start applying the equity method at the timingof certain events (such as the completion of the dispatch of executives) that are deemed
to have a material impact on the financial, operating or business policy decisions of slice.
2. The equity method of accounting is assumed to be applied during the fiscal year ending
May 31, 2022.

3. Significant items affecting the profit and loss to be incorporated in the income statement
for the current fiscal year that have not yet been determined are as follows:•

Deemed acquisition date, which is the start date of application of the equity method(Since the company's fiscal year ends at the end of March, the results of operations are expected to be incorporated with a time lag,as is the case with other subsidiaries.)•

Determination of the amount of goodwill, etc. through PPA (Purchase Price Allocation) procedure and its amortization period•

Performance of "slice" in the period in which the profit or loss is incorporated.

4. Since "slice" is growing rapidly, depending on future marketing measures etc., it isassumed that losses may be recorded in relation to the application of the equity methodin the short to medium term.

Reference Materials: Overview of Gunosy Inc.

Overview of Gunosy Inc.

Basic Information
Officers:

Representative Director and Chairman, Group
Chief Executive Officer (CEO), Shinji KimuraCompany name:Gunosy Inc.

Representative:

Shinji Kimura

Representative Director and President, Yuya
Taketani

Yuya Taketani

Director and CFO, Yuki Maniwa

Established:

November 14, 2012

Director, Kentaro Nishio

Fiscal year end:May

Director, Takuya Sawada

Capital:4,099 million yen (as of the end of
November 2021)
6047 (First Section of The Tokyo
Stock Exchange)
Ernst & Young ShinNihon LLC

Director (Outside), Suguru Tomizuka

229(as of the end of November 2021, on aconsolidated basis)2-24-12 Shibuya, Shibuya-ku, Tokyo

Director (Outside), Lei-Isabelle Nakao

Stock Code:

Audit corporation:
Number of
employees:
Head office:Business:

Development and operation of information
curation service and other media

Director (Outside), Junichi Shiroshita
Director (Outside), Hirokazu Mashita

Corporate Auditor, Masakazu Ishibashi

Corporate Auditor (Outside), Kenji Shimizu
Corporate Auditor (Outside), Noboru Kashiwagi

Disclaimer

Forward-looking statements contained in these materials are prepared from judgments andassumptions based on information available at the time of preparing the materials, and do notguarantee their accuracy. These materials contain financial data that have not been audited byan independent certified public accountant or an auditing firm.
Please note that actual results may differ materially from the forecasts due to various
uncertainties included in these judgments and assumptions and changes in risk factors and theeconomic environment.

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