Mercari, Inc. · TSE:4385
Mercari — Q4 2023 Earnings Presentation
72 slides from Mercari's earnings presentation, Aug 10, 2023
Slide 1: FY2023.6 Q4 Presentation Material
FY2023.6 Q4 Presentation Material mercari
Slide 2: Table of Contents
Table of Contents 1 FY2023.6 Summary—Highlights 2 Mid- to Long-Term Policy 3 FY2023.6 Financial Overview/Results 4 FY2024.6 Business Objectives 5 ESG 6 Appendix 2
Slide 3: FY2023.6 Summary—Highlights
1 FY2023.6 Summary—Highlights Objectives set out at the beginning of FY2023.6 1. Build a lean business foundation and implement management that balances growth and profitability 2. Achieve further growth through synergy created by strengthening collaboration between C2C and B2C, as well as between Ma
Slide 4: Mid- to Long-Term Policy
_— Mid- to Long-Term Policy
Slide 5: Group Mission
2 Group Mission Circulate all forms of value to unleash the potential in all people 5
Slide 6: Positive Impact of Mercari's Business (Avoided Greenhouse Gas Emissions)
Positive Impact of Mercari’s Business (Avoided Greenhouse Gas 2 Emissions) ● In select categories1, approximately 530K tons of greenhouse gas emissions were avoided in one year by transactions on Mercari2 ● Mercari strives to be a planet-positive company that contributes to solving environmental iss
Slide 7: Transition to a Company with Three Committees, a Global Standard
2 Transition to a Company with Three Committees, a Global Standard1 ● Separated supervisory and executive functions of the company to clarify their roles, and built a structure that realizes the timely and resolute decision-making and business promotion of the executive function while strengthening
Slide 8: Medium-Term Milestones to Achieve Our Mission
2 Medium-Term Milestones to Achieve Our Mission Working with external partners to create a circular economy ecosystem Global expansion ● Create a world that uses technology to seamlessly ● Proceed with expansion into other countries, identifying circulate all forms of value, not just physical things
Slide 9: Mercari Plans Medium-Term Targets
2 Medium-Term Long Targets term Growth & Investment Image of Mercari Plans Group Business Medium-Term Objectives Future Major Area Investment Areas ● Strengthening AI, LLM, and data ■ Work with external partners to realize an ecosystem infrastructure Group- that leads the move to a circular economy
Slide 10: Mercari's Growth Trajectory and Further Leaps Forward
2 Mercari's Growth Trajectory and Further Leaps Forward ▶ 20XX Complete the mission Circulate all forms of value ● We will strengthen the Group’s revenue base by to unleash the potential in all people enhancing the profitability of Fintech and US in the New Businesses medium term as pillars of revenu
Slide 11: FY2023.6 Financial Overview/Results
FY2023.6 Financial Overview/ Results 11
Slide 12: FY2023.6 Summary—Highlights
3 FY2023.6 Summary—Highlights Consolidated ● Achieved new records for net sales and operating profit by implementing management that balances growth and profitability through disciplined investments with clear priorities and continued cost review for mid-to-long-term growth ● Had a solid start in crea
Slide 13: FY2023.6—Full-Year KPI Summary
3 FY2023.6—Full-Year KPI Summary Marketplace Fintech US Users3 GMV1 GMV1 15.71 million 984.6 billion JPY 1.01 billion USD YoY +10% Credit Balance4 YoY -11% Adjusted Operating 117.8 billion JPY Margin2 MAU6 Collection Rate5 44% 4.77 million (YoY +13 ppts) 98.7% (YoY -3%) 1. Aggregate transaction valu
Slide 14: FY2023.6 Q4—Consolidated Net Sales & Operating Income by Business
3 FY2023.6 Q4—Consolidated Net Sales & Operating Income by Business (Billion JPY) FY2022.6 Q4 FY2023.6 Q4 YoY Net Sales/ Operating Income/ Net Sales/ Operating Income/ Net Sales/ Operating Income/ Segment External Net Sales Adjusted Operating External Net Sales Adjusted Operating External Net Sales
Slide 15: FY2023.6 Full Year—Consolidated Net Sales & Operating Income by Business
3 FY2023.6 Full Year—Consolidated Net Sales & Operating Income by Business (Billion JPY) FY2022.6 FY2023.6 YoY Net Sales/ Operating Income/ Net Sales/ Operating Income/ Net Sales/ Operating Income/ Segment External Net Sales Adjusted Operating External Net Sales Adjusted Operating External Net Sales
Slide 16: Consolidated Net Sales & Operating Income (Quarterly)
3 Consolidated Net Sales & Operating Income (Quarterly) ● Generated stable income on a consolidated basis in spite of expanding investment centered on new services in the Fintech domain owing to a strengthened revenue base due to such things as the update to disciplined investment, the ongoing revie
Slide 17: Consolidated Net Sales & Operating Income (Full Year)
3 Consolidated Net Sales & Operating Income (Full Year) Net Sales Operating Income Billion YoY Billion JPY JPY (Billion JPY) +17% (Billion JPY) 17
Slide 18: The Talent Supporting Mercari's Growth
3 The Talent Supporting Mercari’s Growth ● Headcount decreased QoQ due to such things as continuing a selective hiring policy and reviewing fixed costs including personnel expenses in the US ● Will continue balanced hiring mainly of engineers to invest in growth for FY2024 Number of Employees 18
Slide 19: Marketplace—FY2023.6 Summary
3 Marketplace—FY2023.6 Summary ● Succeeded in achieving steady growth and high profitability by applying disciplined investment in initiatives that accumulate results; MAU exceeded 22 million, GMV for the full year grew by 10%, and adjusted operating margin landed at 44% ● Focused on updates to the p
Slide 20: Marketplace—GMV/MAU/Net Sales/Adjusted Operating Income (Full Year)
3 Marketplace—GMV/MAU/Net Sales/Adjusted Operating Income (Full Year) GMV/MAU Net Sales Adjusted Operating Income/Margin3 YoY YoY +11% YoY +13ppts (Billion JPY) Adjusted operating income Million (Billion JPY) +19% (Million users) users YoY Adjusted operating margin YoY +10% +69% Billion (Billion JPY
Slide 21: Marketplace—GMV/MAU (Quarterly)
3 Marketplace—GMV/MAU (Quarterly) ● MAU remained strong due to the success of new user acquisition measures such as joint promotions with Fintech ● GMV growth in Q4 was +15% YoY due to the ARPU boost from Mercard and strong performance of the Entertainment and Hobbies category YoY +11% Million users
Slide 22: Marketplace—Net Sales/Adjusted Operating Income (Quarterly)
3 Marketplace—Net Sales/Adjusted Operating Income (Quarterly) Adjusted Operating Net Sales Income/Margin1 YoY +12ppts YoY +22% YoY (Billion JPY) Billion +63% JPY (Billion JPY) Adjusted operating income Adjusted operating margin 1. Profit after deduction of internal transactions with Fintech (outsourc
Slide 23: Marketplace—FY2023.6 Cost Composition (Quarterly)
3 Marketplace—FY2023.6 Cost Composition (Quarterly) ● Continued to achieve high adjusted operating income, despite a slight QoQ increase in promotion cost ratio, due to efforts such as increased investment in joint promotions with Fintech 1 2 23 1. Profit after deduction of internal transactions with
Slide 24: Fintech—FY2023.6 Summary
3 Fintech—FY2023.6 Summary ● Launched Mercard and a bitcoin trading service to make progress on creating Group synergy ● Recorded an unadjusted operating profit for the full year due to favorable growth of credit services in spite of investing in the new services Credit/Payment ● Saw growth mainly of
Slide 25: Fintech—Net Sales and Adjusted/Unadjusted Operating Income (Full Year)
3 Fintech—Net Sales and Adjusted/Unadjusted Operating Income (Full Year) ● Saw growth mainly in the credit business where we broke records for total sales and sales outside of Mercari ● Achieved full-year unadjusted2 operating profit due to the growth of credit in spite of investing in new services N
Slide 26: Fintech—Net Sales and Adjusted/Unadjusted Operating Income (Quarterly)
Fintech—Net Sales and Adjusted/Unadjusted Operating Income 3 (Quarterly) Breakdown of ● Net sales grew due to a favorable trend in the usage of Mercard and fixed-amount payments unadjusted operating ● Although profitability improved, recorded an unadjusted2 operating loss of 600M JPY as a result of ag
Slide 27: Fintech—Credit Balance and Collection Rate of Credit Services (Quarterly)
3 Fintech—Credit Balance and Collection Rate of Credit Services (Quarterly) ● Expanded credit balance due to the favorable growth of existing services and Mercard ● Amid the growth of credit balance, the effects of the credit logic update implemented last year began to show in Q4, which improved col
Slide 28: Fintech—Number of Users/Verified Users (Quarterly)
3 Fintech—Number of Users/Verified Users (Quarterly) ● The numbers of both users1 and verified users continued to increase ● In addition to building an environment for safe and secure transactions, increasing the percentage of verified users also contributes to business growth since being verified allow
Slide 29: US—FY2023.6 Summary
3 US—FY2023.6 Summary ● The number of listings increased YoY as a result of product initiatives such as the simplification of listings and improvement of personalization features; we are beginning to see signs of a recovery in the falling number of purchases as well Marketing ● Conducted efficient and
Slide 30: US—Net Sales/Adjusted Operating Income (US GAAP/Yearly)
3 US—Net Sales/Adjusted Operating Income (US GAAP/Yearly) GMV/MAU Net Sales Adjusted Operating Income1 YoY (Million USD) (Million USD) (Million USD) -3% Million USD (Million users) Million USD YoY -9% YoY -11% Million USD 1. Adjusted operating profit after non-cash items (i.e., stock-based compensati
Slide 31: US—FY2023.6 Q4 GMV/MAU
3 US—FY2023.6 Q4 GMV/MAU ● Inflation and other external factors continued to slow purchases, with Q4 GMV growth landing at -14% ● On the other hand, the number of listings continued to increase and the number of purchases has recently begun to pick up Million users 1 2 YoY GMV /MAU -3% Million USD Yo
Slide 32: US—Net Sales/Adjusted Operating Income (US GAAP/Quarterly)
3 US—Net Sales/Adjusted Operating Income (US GAAP/Quarterly) ● Adjusted operating loss improved significantly YoY due to the realization of more robust management, which included a review of expenses throughout the year and the execution of disciplined investments Net Sales Adjusted Operating Income1
Slide 33: FY2024.6 Business Objectives
FY2024.6 Business Objectives 33
Slide 34: FY2024.6 Business Objectives
4 FY2024.6 Business Objectives Consolidated ● Continue implementing management that balances growth and profitability, and looking ahead to the next 10 years, take on the creation of new businesses while accelerating the growth of existing businesses ● Make progress on building a foundation for a glo
Slide 35: Japan Region—FY2024.6 Group Synergy Overview
4 Japan Region—FY2024.6 Group Synergy Overview ● Aiming to create synergy with Marketplace and Fintech working together to enhance UX and carry out marketing Japan Region Identity-verified users: approx. 14M MAU: over 22M Mercards issued: over 1.25M GMV: approx. 1T JPY Sales balance, points, data, MA
Slide 36: Marketplace—FY2024.6 Business Objectives
4 Marketplace—FY2024.6 Business Objectives Medium-Term Objective Lead the market as an essential service to the creation of a circular economy, and accelerate collaboration with external partners FY2024.6 Business Objectives Focus on top-line growth while continuing disciplined investments. Aim to a
Slide 37: Marketplace—Areas to Enhance in FY2024.6
4 Marketplace—Areas to Enhance in FY2024.6 ● Enhance areas such as crossborder transactions, category growth, and B2C and also continue product development and effective marketing investments Crossborder Transactions Category Growth B2C ● Select focus regions and expand ● Select focus categories and
Slide 38: Marketplace—Our Approach to FY2024.6 Targets
4 Marketplace—Our Approach to FY2024.6 Targets GMV growth rate of 10% or higher; adjusted operating margin of 30–40% ● Continue management that balances growth and profitability, but prioritize accelerating GMV growth ● Carefully examine effects of investments, but make aggressive investments if we d
Slide 39: Fintech—FY2024.6 Business Objectives
4 Fintech—FY2024.6 Business Objectives Medium-Term Objective Contribute to maximizing Mercari’s GMV and become the second pillar of revenue in Mercari Group FY2024.6 Business Objectives Focus on acquiring Mercard holders and aim to enhance Group synergy. While we expect to strengthen investments rel
Slide 40: Fintech—Approach to Financing for Credit Services in FY2024.6
Fintech—Approach to Financing for Credit Services in 4 FY2024.6 ● From FY2023.6, we have introduced non-recourse financing1, which allows us to finance based on confidence in the receivable credit itself rather than company credit, enabling us to expand our financing alongside the growth of our credit s
Slide 41: US—FY2024.6 Business Objectives
4 US—FY2024.6 Business Objectives Medium-Term Objective Engage Gen Z to establish recognition and reputation as "the easiest and safest selling app” FY2024.6 Business Objectives Focus on refining the product to strengthen retention of existing users and aim to get back on track for growth Focus on en
Slide 42: US—Strengthen Approach to Generation Z
4 US—Strengthen Approach to Generation Z ● 42% of Gen Z consumers prefer secondhand as their primary shopping method, which is far higher than any other generation1 ● The percentage of Gen Z users who use major reuse sites is lower compared to users of other generations, so we will aim to acquire mo
Slide 43: ESG
ESG 43
Slide 44: ESG—Materiality Update
5 ESG—Materiality Update ● Mercari defines our materiality as important topics that relate to creating value to contribute to resolving social and environmental issues through our business, and creating the management foundation necessary for continuous growth. In FY2023.6, we updated our materiality
Slide 45: ESG—FY2023.6 Summary
5 ESG—FY2023.6 Summary Environment Scope 1/2/3: 43K tons Governance 530 tons of greenhouse gas Good progress toward our emissions avoided as a result 2030 targets for scope 1, 2, Transition to a Company with of Mercari’s business1 and 3 emissions Three Committees2 (2030 Targets) ● Scope 1+2: Reduce
Slide 46: ESG—FY2024.6 Focus Areas and Objectives
5 ESG—FY2024.6 Focus Areas and Objectives ● We will carry out action plans for each material topic in our materiality, which we revised in FY2023.6 Material Topic Focus Areas FY2024.6 Objective Empowerment of Realize a world where all people’s potential 1 Individuals and is unleashed Society Creatin
Slide 47: Appendix
Appendix 47
Slide 48: Investment Policies
6 Investment Policies Through FY2022.6 H1 FY2022.6 H2–FY2023.6 FY2024.6 ■ Work with external partners to create an ecosystem that leads the move to a circular economy Mid-term ■ Establish a borderless organization where talent from all over the world can thrive objectives ■ Promote further global ex
Slide 49: FY2024.6—Investment Policy and Details by Business
6 FY2024.6—Investment Policy and Details by Business Investment policy and main investments Focus on top-line growth while continuing disciplined investments ■ Acquiring new users Marketplace ■ Strengthening the loyalty program ■ Accelerating GMV growth through UX evolution and areas to enhance such
Slide 50: New Board of Directors Structure
6 New Board of Directors Structure (Subject to approval at the General Meeting of Shareholders) ● Appointing Outside Directors with a wealth of knowledge and experience in a variety of areas to realize a transparent and highly diverse organization 10 Directors Directors (4) Independent Outside Direc
Slide 51: Strong Governance Structure (Independent Outside Directors)
6 Strong Governance Structure (Independent Outside Directors) (Subject to approval at the General Meeting of Shareholders) Makiko Shinoda Chair of the Masayuki Watanabe Takuya Kitagawa Compensation Committee Background • The Long-Term Credit Bank of Japan, Limited • McKinsey & Company, Inc. • Execut
Slide 52: Strong Governance Structure (Independent Outside Directors)
6 Strong Governance Structure (Independent Outside Directors) (Subject to approval at the General Meeting of Shareholders) Daiken Tsunoda Kazuhiko Toyama Fumiyuki Fukushima Chair of the Audit Chair of the Nominating Committee Committee Background • Admitted to the Tokyo Bar Association, Partner of M
Slide 53: Business Segments
6 Business Segments ● As of FY2023.6, we have changed the reporting segments to Japan Region and US ● Going forward, we will use the Marketplace and Fintech domains to explain and disclose business results for Japan Region Japan Region Marketplace Fintech US Others Adjustments1 Company-wide Mercari
Slide 54: Transitioning to IFRS
6 Transitioning to IFRS ● With the objective of enhancing international comparability, we will be transitioning to using IFRS from FY2024.6 Q1 ● Japan Region will use core operating profit (other income/expenses added to operating profit in IFRS; similar to operating profit in JGAAP) as a KPI JGAAP IFR
Slide 55: Consolidated BS
6 Consolidated BS 1 1. Includes long-term borrowings planned to be repaid within 1 year 55
Slide 56: Major Itemization of Consolidated BS
6 Major Itemization of Consolidated BS ● We will continue to leverage various methods of financing and appropriately control our balance sheet to maintain a sound financial foundation ● Our basic policy for financing our credit services is to primarily carry out financing by liquidating receivables ○ In
Slide 57: Consolidated PL (Full Year)
6 Consolidated PL (Full Year) 1 1. Operating income + Depreciation and Goodwill amortization 57
Slide 58: Consolidated CF (Full Year)
6 Consolidated CF (Full Year) 58
Slide 59: Marketplace PL (Quarterly)
6 Marketplace PL (Quarterly) 1 1. After deduction of internal transactions with Fintech (outsourced payment processing fees) 59
Slide 60: Fintech PL (Quarterly)
6 Fintech PL (Quarterly) 1 1 1. Adjusted: Figures after adjustment exclude internal transactions between Marketplace and Fintech (outsourced payment processing fees) 60 Unadjusted: Figures before adjustment include internal transactions between Marketplace and Fintech (outsourced payment processing
Slide 61: US PL (Quarterly)
6 US PL1 (Quarterly) 2 1. Based on US GAAP. Different in booking method from the figures of Mercari US included in Consolidated PL (J GAAP) 61 2. Adjusted operating profit after non-cash items (i.e., stock-based compensation and depreciation) are deducted
Slide 62: Marketplace—Q3 Cost Structure (Quarterly)
6 Marketplace—Q3 Cost Structure (Quarterly) (Billion JPY) 1 1 1. Outsourcing expenses, rent, taxes & dues, hiring fees 62
Slide 63: Q4 (Apr–Jun)—Category Shift
6 Q4 (Apr–Jun)—Category Shift ● In the Marketplace domain, Toys categories like trading cards and toys led to YoY growth ● In the US domain, the Men’s Fashion and Beauty categories grew slightly, but there were no major changes Marketplace US FY2022.6 FY2023.6 FY2022.6 FY2023.6 Q4 Q4 Q4 Q4 63
Slide 64: Marketplace—Crossborder Sales
6 Marketplace—Crossborder Sales ● Launched crossborder sales through collaboration with e-commerce businesses in 2019 ● Popular categories include anime, idol merchandise, and apparel Top 10 categories1 Partner companies No. Category Company name Start date Buyee: Nov 2019 1. Toys > Character Mercha
Slide 65: Marketplace App Market Data
6 Marketplace App Market Data ● Mercari holds an approximate 70% GMV share in the expanding marketplace app market in Japan Estimated value of unneeded items1 7.6 Online C2C market2 Approx. 2.2 trillion JPY Annually Marketplace app market2 Approx. Approx. 1.2 trillion JPY trillion JPY Mercari GMV3 A
Slide 66: Fintech—Services
6 Fintech—Services Asset Payment Credit Management Various payment methods available Various services that utilize unique credit based on Service that allows users behavior history such as usage history on Mercari to buy and sell bitcoin from within Mercari Smart Payments iD payment Credit Card Hold
Slide 67: Fintech—Credit Volume of Deferred Payment in the EC Market
6 Fintech—Credit Volume of Deferred Payment in the EC Market1 ● The amount of deferred payments in the EC market is growing ● A high rate of market growth is forecast for the future Approx. 2 trillion JPY 1,082 billion JPY 440 billion JPY Outlook Forecast Forecast Forecast Forecast 1. Source: E-comm
Slide 68: Fintech—Trends in the Cryptoasset Industry
6 Fintech—Trends in the Cryptoasset Industry ● The monthly amount of cryptoasset spot transactions in Japan is approximately 500 billion JPY ● However, the percentage of Japan’s population that owns cryptoassets is still low compared to other countries, showing large room for growth Amount of Crypto
Slide 69: US—US Reuse Market
6 US—US Reuse Market ● The US online reuse market is expected to grow at a pace approximately triple that of the offline market between 2022 and 2031 and overtake the offline market in size in 2026 2030 Forecast US Reuse Market $180 billion Offline market Online market (Billion USD) 2022 $74 billion 1.
Slide 70: Other Businesses—FY2024.6 Business Objectives
6 Other Businesses—FY2024.6 Business Objectives Soccer business: ● Strengthen admission fee and advertising revenue streams Kashima Antlers ● Expand merchandise sales using e-commerce, etc. Non-soccer business: ● Use the stadium effectively and strengthen soccer school operations ● Hire at the same
Slide 71: For Investors New to Mercari
6 For Investors New to Mercari ● Materials that cover basic information regarding Mercari Group Fact Book link Overview link https://speakerdeck.com/mercari_inc/mercari-fact-book-en https://speakerdeck.com/mercari_inc/merpay-overview-en 71
Slide 72: Disclaimer
Disclaimer This material has been prepared based on information gathered at the time of its preparation and is not in any way intended as a commitment to future implementation. Also note that information contained herein has not been audited or reviewed by an independent certified public accountant o