Vega Corporation Co., Ltd. · TSE:3542

Vega — Q3 FY2019 Earnings Presentation

60 slides from Vega's earnings presentation, February 2019

1. Slide 1: Quarterly Financial Results for the Nine Months Ended December 31, 2018

   Quarterly Financial Results for the Nine Months Ended December 31, 2018 Vega corporation Co., Ltd.

2. Slide 2: Agenda

   Agenda 1. Overview of Quarterly Financial Results for the Nine Months Ended December 31, 2018 2. Report on LOWYA Business 3. Initiatives Starting from the Second Half of the Fiscal Year 4. Synergy of Company-wide Businesses 5. New Businesses (R&D) 6. Shareholder Benefits Program 7. Appendix 1 Copyri

3. Slide 3: 1. Overview of Quarterly Financial Results

   1. Overview of Quarterly Financial Results for the Nine Months Ended December 31, 2018 2 Copyright 2019 VEGA corporation. All Rights Reserved.

4. Slide 4: 1. Summary of Financial Results

   1. Summary of Financial Results (Million yen) Nine months Nine months ended ended Sales ratio Sales ratio Change YoY December 31, December 31, 2017 2018 Net sales 9,569 100.0％ 9,882 100.0％ ＋313 103.3％ Gross profit 4,966 51.9％ 5,323 53.9％ ＋356 107.2％ SG&A expenses 4,612 48.2％ 5,490 55.6％ ＋877 119.0％

5. Slide 5: Quarterly Sales

   1. Quarterly Sales Net sales in 3Q increased by 6.0％ YoY, posting a record high Net sales (Million yen) 4,000 3,541 3,500 3,341 3,407 3,371 3,198 3,053 2,995 3,029 2,969 3,000 2,481 2,429 2,500 2,000 1,500 1,000 500 0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q FY2017 FY2018 FY2019 (*) Delivery revenue of DOKO

6. Slide 6: Quarterly Operating Profit

   1. Quarterly Operating Profit Significant rise in delivery expenses, and investments in fixed costs Active investments in light of the growth rate of the flagship store (personnel expenses、offline Operating profit advertising expenses, storage expenses, etc.) (Million yen) 300 273 250 211 207 201 20

7. Slide 7: Quarterly SG&A Expenses Ratio

   1. Quarterly SG&A Expenses <Ratio> (R&D on a net basis) （％） 2.6 2.9 2.1 1.7 2.8 2.5 1.1 1.7 2.8 2.4 2.6 11.8 12.5 2.7 2.7 2.7 10.4 10.5 9.7 9.5 9.8 12.5 11.5 10.2 8.9 9.7 9.9 10.0 26.5 27.0 27.8 24.4 24.7 23.9 22.8 1Q 2Q 3Q 4Q 1Q 2Q 3Q FY2018 FY2019 (Note 1) Presented as the net amount of Advertisin

8. Slide 8: Balance Sheet

   1. Balance Sheet (Million yen) Nine months Nine months Previous fiscal year ended December Previous fiscal year ended December (as of March 31, 2018) (as of March 31, 2018) 31, 2018 31, 2018 Current Current assets 5,309 5,180 liabilities 2,107 2,573 Cash and deposits 1,656 1,084 Debt obligations 820

9. Slide 9: 2. Report on LOWYA Business

   2. Report on LOWYA Business 8 Copyright 2019 VEGA corporation. All Rights Reserved.

10. Slide 10: Quarterly Report: Overall LOWYA Business

    2. Quarterly Report <Overall LOWYA Business> Gross margin ratio has seen improvement as a result of sales price revision (Million yen) Nine months Nine months ended December Sales ratio ended December Sales ratio Change YoY 31, 2017 31, 2018 Net sales 9,506 100.0％ 9,795 100.0％ ＋288 103.0％ Gross prof

11. Slide 11: Management Indicators: Overall LOWYA Business

    2. Quarterly Report_Management Indicators <Overall LOWYA Business> Stock-out effects were resolved but YoY CVR fell short of the forecast As recognition of the brand has yet to be established, there is a strong tendency for marketplace stores customers to make a search by a specific product. Measure

12. Slide 12: Net Sales by Sales Channel at Marketplace

    2. Quarterly Report_Net Sales by Sales Channel at Marketplace Sales at marketplace stores are recovering due to the resolution of stock-out issue and improvements in measures YoY sales at the Rakuten marketplace store Net sales by sales channel at marketplace 1Q: 78.2％ ＋4.3pt Rakuten 2Q: 82.5％ Amazo

13. Slide 13: Delivery Expense Ratio

    2. Quarterly Report_Delivery Expense Ratio Delivery expense ratio surged this fiscal year, taking an immediate response. Ongoing efforts including cost pass-through to sales prices and packing improvements, aiming to prevent further rise in delivery expense ratio （％） Packing and shipping costs ratio

14. Slide 14: Management Indicators: Flagship Store

    2. Quarterly Report_Management Indicators <Flagship store> Number of visitors to the flagship store and CVR increased 47.2％ and 8.2％ YoY, respectively, growing smoothly Fiscal year ended March 31, 2018 Fiscal year ending March 31, 2019 Item 1Q 2Q 3Q 4Q 1Q 2Q 3Q (Apr. –Jun.) (Jul. –Sep.) (Oct. –Dec.)

15. Slide 15: Access to Flagship Store

    2. Quarterly Report_Access <Flagship store> With enhanced SEO measures, number of organic access to the flagship store increased, up 47％ YoY (Million unique users (UU)) 600 Online advertising expenses were LOWYA flagship store access cut by nearly half of 2Q. Number of access fell correspondingly. A

16. Slide 16: Net Sales: Flagship Store

    2. Quarterly Report_Net Sales<Flagship store> Sales at the flagship store were up 72％ YoY Net sales (Million yen) 800 Website improvement and CVR boosting measures resulted in strong sales ・Website revamping following the change in logo design ・Contents featuring Taylor Hill, Christmas events, etc.

17. Slide 17: Sales Ratio by Sales Channel

    2. Quarterly Report_Sales Ratio by Sales Channel Flagship store ratio increased from 13.2％ in the previous 3Q to 21.5％ Net sales (Million yen) 21.5% 25.0% Flagship store 24.0% Marketplace stores 3,000 Flagship store ratio 22.7% 20.0% 19.4% 13.2% 15.0% 2,000 12.2% Approx. 1.6 times 10.0% 7.5% 5.9% 6.

18. Slide 18: 3. Initiatives Starting from the Second Half of the Fiscal Year

    3. Initiatives Starting from the Second Half of the Fiscal Year 3-1. Status of Initiatives from 3Q Onward and Forecasts 3-2. Strengthen Fulfillment Service Structure 3-3. Expand Recognition 3-4. Future Development 17 Copyright 2019 VEGA corporation. All Rights Reserved.

19. Slide 19: 3-1. Status of Initiatives from 3Q Onward and Forecasts

    3-1. Status of Initiatives from 3Q onward and Forecasts 18 Copyright 2019 VEGA corporation. All Rights Reserved.

20. Slide 20: Status of Initiatives from 3Q Onward and Forecasts

    3-1. Status of initiatives from 3Q onward and forecasts Place priority on measures that contribute to higher CVR, with continuous evaluation. Remain focused on the flagship store in consideration of the steady growth in the number of access. Aim for year-on- year increase in sales at marketplace sto

21. Slide 21: 3-2. Strengthen Fulfillment Service Structure

    3-2. Strengthen Fulfillment Service Structure 20 Copyright 2019 VEGA corporation. All Rights Reserved.

22. Slide 22: Strengthen Fulfillment Service Structure

    3-2. Strengthen Fulfillment Ser vice Structure Strengthen service structure and review earnings structure to enhance cooperation and optimization across the entire process Product development review Reduce storage expense ratio ・Active development of products with ・Adjust amount and turnover of high

23. Slide 23: Strengthen Service Structure

    3-2. Strengthen Fulfillment Service Structure In shifting from a structure mainly composed of marketplace stores to the flagship store, it is necessary to be aware of the balance between the growth rate of the flagship store and internal infrastructure development while working for higher operationa

24. Slide 24: Reduction of Warehouse Storage Expense Ratio

    3-2. Strengthen Fulfillment Service Structure Phase 1 Storage expense ratio Phase 2 Focus on efficient management of logistics, reduction of delivery lead times and other efforts to reduce storage expenses over the long term in order to accommodate the growth of the flagship store. Reduction of ware

25. Slide 25: Reduction of Delivery Expenses

    3-2. Strengthen Fulfillment Service Structure Phase 1 Delivery expenses Tackle the industry-wide issue over the long-term by reducing Phase 2 the delivery expense ratio through optimizing inventory placement (establishing the shortest and cheapest delivery routes), developing systems for optimizatio

26. Slide 26: 3-3. Expand Recognition

    3-3. Expand Recognition 25 Copyright 2019 VEGA corporation. All Rights Reserved.

27. Slide 27: Media Exposure Increased Access After October 9 Event

    3-3. Expand Recognition Media exposure caused the number of access to increase, following the promotion event on October 9 Number of access increased after the event, owing to social media posting by a personal account of Taylor Hill, and spread through TV, magazines, newspapers and influencers Conv

28. Slide 28: Searches for LOWYA Grew 1.65 Times After Event

    3-3. Expand Recognition Monthly average number of searches for LOWYA showed a growth of 1.65 times after the event Videos were made available centering on web media (November and December) Held the event (October 9) 2017/9 2017/12 2018/3 2018/6 2018/9 2018/12 27 Copyright 2019 VEGA corporation. All

29. Slide 29: Test Marketing to Prove Recognition and Sales Correlation

    3-3. Expand Recognition Prove correlation between recognition and sales through test marketing Aim to enhance recognition in the Tokyo metropolitan area （％） 100 Brand building period Recognition in Tokyo metropolitan area National recognition 0 FY2018 FY2019 FY2020 FY2021 * According to an online su

30. Slide 30: 3-4. Future Development

    3-4. Future Development 29 Copyright 2019 VEGA corporation. All Rights Reserved.

31. Slide 31: Future Development: LOWYA Business 100 Billion Yen Target

    3-4. Future Development_LOWYA Business Target of 100.0 billion yen is left unchanged, and continue efforts for higher brand recognition Recognition in Tokyo 100.0 Low High metropolitan area Brand building Brand recognition Billion yen (Billion yen) ● Solidify a Fan base Period of marketing ● Creativ

32. Slide 32: Aiming for 100 Billion Yen Sales in 2.5 Trillion Yen Industry

    3-4. Future Development_LOWYA Business Aiming 100 billion yen sales in LOWYA business by leading the 2.5 trillion yen industry (Trillion yen) 1 Sundries, furniture, and interior 100％ product market scale 7.2 7.2 trillion yen 1 E-commerce ratio (*70% is sundries for housework and housework supplies)

33. Slide 33: 4. Synergy of Company-wide Businesses

    4. Synergy of Company-wide Businesses 32 Copyright 2019 VEGA corporation. All Rights Reserved.

34. Slide 34: Develop LOWYA Fulfillment Systems to New Businesses

    4. Synergy of Company-wide Businesses Develop each system in LOWYA fulfillment service to new business and aim for its maximization ＜Past performance＞ *Experience in global marketing BtoBtoC (57million DLs for game apps) Warehouse Marketing sharing EC (Attracting customers) Delivery CS Marketing kno

35. Slide 35: 5-1. DOKODEMO Business

    5-1. Business 34 Copyright 2019 VEGA corporation. All Rights Reserved.

36. Slide 36: DOKODEMO Business Indicators: Members, App Downloads, Spend

    5-1. DOKODEMO Business_Indicators 10.00 Membership million members 343,808 （up 129% YoY） *As of December 31, 2018 (the same applies hereinafter) up 129 % 1Q 2Q 3Q 4Q 1Q 2Q 3Q FY2018 FY2019 Number of APP DLs 10.00 million DL 776,425 （up 103% YoY） up 103 % Purchase price per person 1Q 2Q 3Q 4Q 1Q 2Q 3

37. Slide 37: DOKODEMO Business Indicators: Products and Brands

    5-1. DOKODEMO Business_Indicators The number of products increased by approx. 1.8 times 1.00 million Number of products products 123,652 （up 90% YoY） *As of December 31, 2018 (the same applies hereinafter) up 90 % 1Q 2Q 3Q 4Q 1Q 2Q 3Q FY2018 FY2019 10 Number of brands thousand brands 1,053 （up 55% Y

38. Slide 38: DOKODEMO Distribution: GMS Up 22% YoY

    5-1. DOKODEMO Business_Distribution Reduced advertising expenses to evaluate investment effect (Million yen) Gross Merchandise Sales (GMS) was up 22% YoY 250 Hold large events ・Singles’ day Approx. 1.22 times 200 ・Black Friday ・Christmas sale Promote purchase with push notifications 150 Improve lead

39. Slide 39: Enhancement of Measures: Fashion Category

    5-1. DOKODEMO Business_Enhancement of Measures Special section was launched as part of enhancement in fashion category Aim to expand customer base as we started handling fashion items of SANYO SHOKAI, a general fashion apparel company * Formed a business alliance with SANYO SHOKAI, a general fashion

40. Slide 40: Online to Offline Measures with Brick and Mortar Stores

    5-1. DOKODEMO Business_Enhancement of Measures Tying in with brick and mortar stores, attract users “after travel” and “before travel” to DOKODEMO as an Online to Offline (O2O) measure 1. Purchase products at 2. Distribute duty-free 3. Access to DOKODEMO offline stores when shopping bags with websit

41. Slide 41: Deliveries Increased to 93 Countries and Regions

    5-1. DOKODEMO Business_Deliveries Deliveries increased to 93 countries and regions (up 26% YoY） Canada China 5.2％ Proportion of deliveries by country 5.0％ South Korea Hong Kong 3.7％ US Middle East Latin America 1.1％ 0.8％ Europe 7.3％ 15.4％ 7.2％ Malaysia Taiwan 4.7％ Oceania 30.4％ 11.5％ North Asia Sing

42. Slide 42: DOKODEMO Future Development

    5-1. DOKODEMO Business_Future Development Enhancing strategies to make people aware of DOKODEMO when visiting Japan, and promoting contact and repeat purchase after their return Sending information Consumption in Japan Send information on shopping, leisure, trends and Promote good-value shopping thr

43. Slide 43: 5-2. Laig Business

    5-2. Business 42 Copyright 2019 VEGA corporation. All Rights Reserved.

44. Slide 44: Laig Opening Event Held October 31

    5-2. Laig Business Opening event held on October 31 centering on contents with the concept of “Lifestyle is good” Offer a place to exhibit the concept of Laig by delivering unique lifestyle-related contents presented by artists embodying “Lifestyle is good” 43 Copyright 2019 VEGA corporation. All Ri

45. Slide 45: System Renovation to Support Tenants' Services

    5-2. Laig Business Make system renovation to support tenants’ services, aiming to further increase transactions Systems that can Attracting customers accept orders Product lineup Centralized inventory management Ease of shopping 44 Copyright 2019 VEGA corporation. All Rights Reserved.

46. Slide 46: Laig Future Development: Maximize GMS

    5-2. Laig Business _Future Development Maximize Gross Merchandise Sales (GMS) by increasing the number of (GMS: Million yen) brands and products (Number of brands) Gross Merchandise Sales (GMS) Number of brands Number of products Service launched on October 31 500 Number of products: Approx. 2,500 N

47. Slide 47: 6. Shareholder Benefits Program

    6. Shareholder Benefits Program 46 Copyright 2019 VEGA corporation. All Rights Reserved.

48. Slide 48: Decided Benefits to Shareholders

    6. Shareholder Benefits Program Decided benefits to shareholders ＜Eligible shareholders＞ Shareholders recorded or registered on the shareholders list as of March 31, 2019, who hold one unit of shares (100 shares) or more ＜Details of benefits＞ Number of Details Timing of grant shares held (1) QUO CAR

49. Slide 49: Appendix

    Appendix 48 Copyright 2019 VEGA corporation. All Rights Reserved.

50. Slide 50: LOWYA Business: Positioning

    Appendix LOWYA Business: Positioning Establishing the fast interior category in the “trendy & low price” space of the furniture and interior products market High price High-class High-class overseas antique High-quality furniture furniture standard Traditional Select fashionable furniture furniture

51. Slide 51: LOWYA Business: Brand Promise

    Appendix LOWYA Business: Brand Promise As a provider of “fast interior,” Propose attractive lifestyles and products with attractive prices and quality Fulfill satisfaction and inspiration by creating design that reflects a variety of tastes and trends. 50 Copyright 2019 VEGA corporation. All Rights

52. Slide 52: D2C Business Model Characteristics

    Appendix Business Model Characteristics D2C business model conducting the entire procedure inhouse （Direct to Consumer） Product Online Marketing Import Warehouse Delivery CS Development sales (Attracting customers) Customers Views Designing, buying Manufacturing by Style coordination Page content pl

53. Slide 53: LOWYA Business Customer Data

    Appendix LOWYA Business, Customer Data (Male Vs. Female, Area Distribution, and Generation Distribution) Showing higher ratio of female in their 30’s, mainly in the Tokyo metropolitan area （October 1, 2018 to December 31, 2018） Ratio of male Area distribution Age distribution vs. female ■ Kanto 38.3

54. Slide 54: DOKODEMO Business: Market Scale (1)

    Appendix DOKODEMO Business: Market Scale (1) Approx. 28.70 million people visiting 40.00 million people expected in Expansion of Japan(*) 2020 (*) international Increasing foreign tourists Tokyo Olympics e-commerce market visiting Japan * Expected number of tourists visiting Global international e-c

55. Slide 55: DOKODEMO Business: Market Scale (2)

    Appendix DOKODEMO Business: Market Scale (2) The size of the international e-commerce market is growing yearly, and foreign tourists visiting Japan and their spending are also increasing ■ International EC market scale (2017) ■ Survey of spending by foreign visitors to Japan (Units: Billion yen) （ B

56. Slide 56: DOKODEMO Business Model

    Appendix DOKODEMO Business: Business Model Delivering products directly from registered stores to customer (Non-stock inventory) JAPAN Overseas Direct Shipping Available in 5 Languages, with delivery options Order Purchase Provides DOKODEMO’s Purchase Shipping management system Price Cost Registered

57. Slide 57: DOKODEMO Sales Ratio by User Data and Category

    Appendix: DOKODEMO (Sales Ratio by User Data and Category) Female users in their 30’s are increasing. DOKODEMO will strengthen the “hobby” and “fashion” categories going forward Calculation period: October 1, 2018 to December 31, 2018 <User data> <User data> Sales ratio by Gender Age category Food &

58. Slide 58: Laig Business Service Vision

    Appendix Laig Business: Ser vice Vision SERVICE VISION A world that offers various ways in which “Lifestyle is Good” (Lifestyle space) The concept of Laig is “Lifestyle is good” Create more “Lifestyle is good” by offering inspiration on lifestyle spaces to each user through the various products and

59. Slide 59: MAKE NEW STANDARDS

    MAKE NEW STANDARDS 58

60. Slide 60: Forward-looking statements notice

    Views and forecasts in this document were prepared based on the judgment of the Company at the time of preparation. These statements are based on current expectations, forecasts, and assumptions that are subject to risks, and contain uncertainties that could cause actual outcomes to differ materiall

Vega — Q3 FY2019 Earnings Presentation on 6ix