financial results briefing for the q1 of fy2018 · financial results briefing for the q1 of fy2018...

Financial results briefing for the Q1 of FY2018

GMO Payment Gateway, Inc.

February 13, 2018

(3769: Tokyo Stock Exchange Section-1) h t t p s : / / c o r p . g m o - p g . c o m / e n /

The 52nd IR Meeting

Sustainable growth through online payment expansion and a push for a cashless society

https://corp.gmo-pg.com/en/

2Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.

The contents of this document are based on generally recognized economic and social conditions, as well as assumptions judged to be reasonable by GMO Payment Gateway as of February 13, 2018. However, please note that they are subject to change without prior notice in the event of changes in the business environment or other unforeseen occurrences.

A cautionary note about the contents of the document


1. Management goal and requirements for FY2018

and industry topics

2. Summary of financial results for Q1 of FY2018

3. Earnings forecast for FY2018

4. Future actions to implement growth strategies

5. Financial highlights

6. Reference materials

Agenda


1. Management goal and requirements for FY2018 and industry topics


1.1 Management goal and requirements for FY2018

■Management goal

Ensuring a sequential growth (OP growth by 25%+)

■Management requirements

１．Promotion for a cashless society

Promotion of business with banks

- Expansion of account transfer app

- Provision of new payment methods such as QR code payment

Taking advantage of REV Installment Sales Act to acquire large

merchants/businesses

２．Profit expansion in Money Service Business

GMO payment after delivery and early payment

Lending to overseas entities in our sights

３．Reinforcement of global strategies

Implementing strategies to lift profit after 2020 (core: MACRO KIOSK)

Leading a promotion and expansion of cashless payment for the development of the whole industry


REV Installment Sales Act to be in place from June 1, 2018・GMO-PG addressing security measures and merchant examinations mandated under the Act

・GMO-FG promoting IC-compatible terminals in card-present payment

Worldpay partners with Klarna for credit payment in 6 European countries

Credit payment also from India’s mobile payment “Paytm”・Working to scale up and improve margin of GMO payment after delivery to potentially take it

overseas

Mobile carriers enter QR code payments through mobile phones・Supporting its penetration in JPN for a cashless society with our know-how

Various worldwide events surrounding cryptocurrencies・Our payment transaction volume climbs with bigger cryptocurrency volatility

1.2 Industry topics

Our position regarding recent industry news

Our actions / what these mean to us


2. Summary of financial resultsfor Q1 of FY2018


（million yen）Q1 FY2017

(actual)

Q1 FY2018

(actual)YoY change

Revenue 4,826 6,098 ＋26.4％

Operating profit 1,238 1,594 ＋28.7％

Profit attributable to owners of parent 609 860 ＋41.1％

EBITDA 1,389 1,818 ＋30.9%

2.1 Business performance

Promising start with OP +28.7% and transaction value +36.1％

※

Card-present payment not included. Figures in brackets represent year-on-year change.*2 Growth rate slowed down after an end of a service by our partner sent a batch of merchants idled (+19.5% net of this factor)

(Net profit)

Operating stores

(end of Q1)

Transaction value

(Q1)

Transaction volume (Q1)

KPI86,136

（＋5.1％）

770 billion yen

（＋36.1％）

313 million

（＋25.9％）

*1

*2

*1 EBITDA=OP + Depreciation


0

1,000

2,000

3,000

4,000

5,000

6,000

Revenue Operating profit

(million yen)

Q1 FY2017 Q1 FY2018

2.2 Factors that affected the cumulative results

+28.7％

+41.1％

+26.4％

Financial statements disclosed under IFRS from Q1 FY2018

Profit attributable to owners of parent

Revenue・Grew above the market growth of major Ecommerce merchants・Business area expansion outside merchandising Ecommerce kicked in

(service/digital contents, business with banks, etc.)・Transaction volume of GMO payment after delivery soared

Operating profit・Money Service Business margin improved・Cost ratio of payment enhancement business rose・(Q1 FY2018) Recorded difference (gain) between an actual and estimate of

insurance reimbursement from information leakage in FY2017・(Q1 FY2017) Recorded an expense attributed to a fair value change in BIP

Trust provision

Profit attributable to owners of parent(net profit)

・Affected by exchange rate (gain)・Equity method investment loss

dropped・Tax effect accounting applied on

GMO-PS

*GMO-PS: GMO Payment Service, Inc.


2,8123,311

964

1,525

1,049

1,261

0

1,000

2,000

3,000

4,000

5,000

6,000

(million yen)

Payment processing MSB Payment enhancement

2.3 Revenue/OP by segment

1,425

1,677

164

387

110

47

0

500

1,000

1,500

2,000

(million yen)

Payment processing MSB Payment enhancement

Payment processing business OP +20% (real-term)Money Service Business OP +135％

*() represents year-on-year change

■ OP by segment (before consolidation adjustment)■Revenue by segment

（+17.7％）

（+58.2％）

（+20.2％）

（+135.5％）

（－56.9％）

（+17.7％）

Q1 FY2017 Q1 FY2017Q1 FY2018 Q1 FY2018

・Revenue from a major system development recorded in Q1 FY17.21.9%+ net of this factor

・GMO payment after deliveryis solid

・MK: Sales order grew mainly in emerging countries

・Margin of GMO payment after delivery improved

・MK’s sales mixchanged

・Temporary drop dueto a tweak on onlinead service portfolio

Total: +26.4％ after adjustment Total: +24.2％ (before adjustment)*＋28.7％ (after adjustment)

・Declined development revenuereined in OP growth rate.+20% net of this factor(This OP growth rate is our estimate since expense on development projects cannot be computed.）

*MK: MACRO KIOSK


2.4 Revenue breakdown by business model

Fee and spread solid with higher transaction value and volume

350 251

690795

1,715

2,360

2,070

2,691

0

1,000

2,000

3,000

4,000

5,000

6,000

Q1 FY2017 Q1 FY2018

(million yen)

Initial Stock Fee Spread

Spread

Fee

Stock

Initial

・Payment processing business solid (incl. bitcoin related businesses)

・GMO payment after delivery value rose

・Payment processing service rose 20%・Tweaked online ad service portfolio (one-off

factor)

・One-off factor in Q1 FY2017 (major systemdevelopment) slowed down initial revenue

YoY ＋30.0％

YoY ＋37.6％

YoY ＋15.3％

YoY －28.3％

・Payment processing business solid・GMO payment after delivery volume rose・MK’s transaction rose 40%

*MK: Macro Kiosk


3. Earnings forecast for FY2018


3.1 Full-year forecast

(million yen)FY2017

(actual)

FY2018

(forecast)Change

Cumulative

Q2 FY2018

(forecast)

Revenue 21,054 26,107 +24％ 11,967

Operating profit(JGAAP)

4,205（5,015）

6,475（6,269）

+54％（+25％）

3,011

Profit attributable to owners of

parent

2,599 3,933 +51％ 1,825

Full-year dividend 40.0 yen 49.0 yen ＋9.0 yen -

(Unit: million yen; ％ represents change vs. previous year)■ FY2018 ending September 2018

Released IFRS-based forecast; targeting OP growth of 54％

*1 Gap between JGAAP and IFRS: largely due to a fair value change in BIP Trust provision (SG&A upped in FY2017)*2 Changes are pre-audit figures

YoY changes are omitted on summary of consolidated financial statements, etc. since IFRS adoption started in FY2018.

*2

*1


4. Future actions to implement

growth strategies


(estimate)

Transaction value

¥2.5 trillion

¥6-8 trillion

¥12 trillion+

4.1 Business expansion around cashless payment

2027

Targets

Online payment Merchandising EC

Recurring billing

Actuals

Card-present payment

2005

ProcessingSmart payment

20182010 2015 2020 2025

18％ 40％

Coverednon-EC

Pension/tax/utilities

Service/digital contents

Acquire big merchants and big businesses

IoT penetration

NHK

Terminal replacement demand

B2BC2C

Account transfer app development

REV

In

sta

llmen

t S

ale

s A

ct

Tokyo

Oly

mp

ics

¥25 billion

¥10 billion

Lis

ted

on

the

TS

E 1

stsectio

n

Lis

ted

on

Moth

ers

Deregulation(e.g. electricity)

Operating profit

REV

Ban

kin

g

Law

Payment method diversified

Mag to IC chip

Cashless payment ratio

Subscription modelShared economy

Receive big businesses andthen connect them

REV

Local

Au

ton

om

y L

aw

Con

su

mp

tion

ta

x h

ike

(8%

)

B2C EC market

¥5 billion

→

¥15trillion

¥25trillion

→

2015

2016

2027

*Ministry of Economy, Trade and Industry “FinTech vision”*Ministry of Economy, Trade and Industry “FY2016 Building infrastructure for information- and service- oriented Japanese economy and society (Ecommerce market survey)

2020

Help to raise EC rate


2015 2017 2020E

Merchandising Service, digital contents Business with banks B2C Ecommerce market

Far outpacing market growth by taking in major/growing merchants and expanding businesses with banks

4.2 Payment processing business: customer base diversification

*Revenue mix from PG’s top 100 merchants (excl. finance lease, agent and others)Share of agent and others in PG’s top 100 merchants is approx. 30% 2020E: target

Merchandising EC(PG)

B2C Ecommercemarket10-15%

Service and digital contents

・NHK・Public due, utilities・Donation, rent・Travel, restaurant・Insurance, education

and others

Business with banks


4.3 Payment processing business: processing and smart payment

Drive cashless payments by “acquiring” and “connecting”

TAX

Acquire

Connect

Major EC operatorInnovative startupNon-EC operatorPublic office, municipalityBank

Service and operatorOperator and operatorService and service

Hokkoku Bank

Bank of Fukuoka

Bank of Yokohama


Parking lot companies

2,500Kunits960Kunits 200Kunits 1,570Kunits

without PINwith PIN

Beverage makers

Railway companies Gas stations

These illustrations do not necessarily imply plans of future implementations.

Com

patib

le

term

inals

Targ

et

EMV and cashless-payment compatible terminals

Embedded EMV terminalswith PIN with PIN Employee card payment

Resona debit payment

Ito-En

Employee card payment data

Debit payment data

Purchase data

Taking in cashless payment/inbound demandFull-fledged deployment of IoT services

4.4 Payment processing business:card-present payment

Spread of cashless payments in workplace commerce


Transaction lending Early payment Payment after delivery Finance lease Remittance Segment profit

■ MSB-related assets ■ MSB-related revenue

Expanded GMO payment after delivery and segment margin improved

4.5 Money Service Business (MSB)

IFRSJ-GAAP+48.8％

+68.8％

+99.5％

+56.9％

+43.1％

+90.2％

+13.7％

+34.2％

％: Changes vs. Q1/17

Revenue

Segment profit

－23.0％－16.2％*

*Q1 bar of finance lease is for YoY comparison purpose only(This revenue is recorded in net figure under IFRS; This data was computed against the conventional standard)


Singapore

Our topline-weighted approach on track toward profitexpansion after 2020

4.6 Overseas strategies: Payment enhancement business (MACRO KIOSK)

TaiwanHong Kong

Thailand

Malaysia

Vietnam

Philipines

Indonesia

Area of our dominance

Area of our focus

Area of our sales activities

Going after scale first, and then profit

2015/12 2016/12 2017/12

＋28.5％

＋21.3％

＋9.1％

MACRO KIOSK accelerated revenue growth after joining our Group in

August 2016

Progress in Q1 Expanded with a focus on high-GDP countries Mainstay authentication and notification

service upped 40% YoY with an advancement in acquisition of super-major customer in an area of our focus

Overseas basesof GMO-PG

*GDP by country 2016 (unit: USD billion)

on track to stretch profit after 2020

※

296

932

304


5. Financial highlights


MSB-relatedOther

Allowance for doubtfulaccounts -2,635

Net assets

60,822

63,312

Deposits received and MSB-related assets increased

5.1 Changes in our balance sheet

End of Q1/18

End of Q4/17

End of Q1/17

Current assets Noncurrent assets Liabilities Net assets

InvestmentDeposits

（from merchant representative contracts）

MSB-related

Interest-bearing debts（short+long）

68,299

71,079

82,704

11,673

13,180

13,541 75,731

19,150

20,947

20,515

*MSB-related assets: lease receivable, short-term loans receivable, advance payments-trade and accounts payable-other *MSB-related liabilities: accounts payable-other

Allowance for doubtful accounts

-605

Allowance for doubtful accounts

-2,393

Other Other

28,695

39,130

42,691

（million yen）

36,827

37,406

46,102

13,204

12,558

16,779


0

50

100

150

200

250

300

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

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 17/12

Recurring payment volume Online payment volume Operating stores

Operating stores: 86,136; Transaction: ¥770 billion (value), 313 million (volume)

5.2 Major KPIs (Quarterly)

Annual transaction value reaches ¥3 trillion

Transaction value

*Number of operating stores represents end-of-quarter figure, transaction value/volume represents figure during quarter

Application rate of spread revenue out of all transactions: 45% (value-based)

（Reference）Transaction value（cumulative 12 months） ¥2.76 trillion

Including GMO Financial Gate ¥2.99 trillion (million)(stores)

(billion yen)

600

500

400

300

*17/9 operating store number dropped QoQ due to a batch of merchants going idled in response to the end of a service of a partner

700


6. Reference materials


1,959

2,204 2,265

2,6032,733

2,9983,090

3,294

4,347

5,645 5,716

6,086 6,098

382476 508 554 615 683 700 772

1,109

1,813 1,8231,940

2,035

851966 944

1,3721,247 1,307 1,316

1,655

2,036

2,497 2,491

3,0672,494

19.5%

21.5%22.4%

21.3%22.5% 22.8% 22.6%

23.4%

25.5%

32.1% 31.9% 31.9%33.4%

43.5% 43.8%

41.7%

52.7%

45.6%

43.6%42.6%

50.3%

46.8%

44.2% 43.6%

50.4%

40.9%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

0

1,000

2,000

3,000

4,000

5,000

6,000

14/12 (1Q) 15/3(2Q) 15/6(3Q) 15/9(4Q) 15/12(1Q) 16/3(2Q) 16/6(3Q) 16/9(4Q) 16/12(1Q) 17/3(2Q) 17/6(3Q) 17/9(4Q) 17/12(1Q)

(million yen)

Revenue Cost of revenue SG&A Cost-revenue ratio SG&A-revenue ratio

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

Cost of revenue ratio changed due to sales mix change

*Figures with asterisk do not take into account outsourcing expenseNot included in SG&A under IFRS from Q1/18

*50.2％

*42.6％

*41.5％*39.8％

*37.4％

*44.5％

*41.7％

*40.3％

*39.9％

*47.2％

IFRSJ-GAAP


127 182

108 147

105 142 127 150 142 161 151 185

343

457

237

327251

464 483 501 499 516 528

565 594

663 728

748 786

875 906 929980

795

468 496 501

512 532

601 612 630 667 724

749 794

1,026

1,809

1,895

2,004

2,360

584

680 713 733 804

931 959

1,227 1,259

1,383 1,441

1,527

2,101

2,471

2,653

2,7732,691

0

500

1,000

1,500

2,000

2,500

14/1Q 14/2Q 14/3Q 14/4Q 15/1Q 15/2Q 15/3Q 15/4Q 16/1Q 16/2Q 16/3Q 16/4Q 17/1Q 17/2Q 17/3Q 17/4Q 18/1QInitial Stock Fee Spread

6.2 Revenue breakdown (Quarterly)

Revenue of some services recorded in net figure under IFRS(million yen) IFRSJ-GAAP

*Revenue of online ad service (stock) and finance lease (spread) are now recorded on a net basis on transition to IFRS

*

※


-6,000

-4,000

-2,000

0

2,000

4,000

6,000

8,000

10,000

12,000

FY2013 FY2014 FY2015 FY2016 FY2017 Q1/18

OCF ICF FCF Free cash flow

Positive OCF with earnings and deposit growth

6.3 Consolidated cash flows

OCF: ＋¥9,537 million

ICF: －¥381 million

FCF: －¥1,705 million

Pre-tax profit +¥1,585 millionChanges in trade and other receivables

－¥4,054 millionChanges in operating and other payables ＋¥13,670 million

Acquisition of intangible assets－¥258 million

Repayment of long-term borrowings－¥207 million

Dividend payout－¥1,472 million

Free cash flow: ＋9,155 million

IFRSJ-GAAP■Cash flow changes in Q1

Thank you very much!

GMO Payment Gateway Inc.

URL https://corp.gmo-pg.com/en

( T S E : 3 7 6 9 )

For more information, please contact the Corporate Value Creation Strategy Division

Investor relations office TEL:+81-3-3464-0182

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