Gmo Payment Gateway, Inc. · TSE:3769

Gmo Payment Gateway — 2Q FY2017 Earnings Presentation

36 slides from Gmo Payment Gateway's earnings presentation, May 1, 2017

1. Slide 1: Financial results briefing for the 2Q of FY2017

   Financial results briefing for the 2Q of FY2017 （January 1, 2017-March 31, 2017） Incident report and business results for the current fiscal period May 1, 2017 The 49 th IR Meeting GMO Payment Gateway, Inc. (3769: Tokyo Stock Exchange section-1) https://corp.gmo-pg.com/en/

2. Slide 2: A Cautionary Note About the Contents of this Document

   A Cautionary Note About the Contents of this Document The contents of this document are based on generally recognized economic and social conditions, as well as premises judged to be reasonable by GMO Payment Gateway as of May 1, 2017. However, please note that they are subject to change without pri

3. Slide 3: Agenda

   Agenda 1. Information leak incident due to unauthorized access 2. Summary of financial results for 2Q FY2017 3. Business environment and segments progress 4. Financial highlights 5. Reference materials Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved. 3

4. Slide 4: 1. Information leak incident due to unauthorized access

   1. Information leak incident due to unauthorized access Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved. 4

5. Slide 5: Incident facts

   1.1 Incident facts Information Leak Due to Unauthorized Access happened between March 8 and March 9, 2017 ■Facts We detected between March 8,2017 and March 9,2017 that an unauthorized access had exploited the vulnerability of application frame work, Apache Struts2. It became clear that Tokyo Metropo

6. Slide 6: Recurrence prevention measurements

   1.2 Recurrence prevention measurements Establishment of “Recurrence Prevention Committee” on March 14, announcement of Investigation Report on May 1, 2017 ■Objectives of Recurrence Prevention Committee Inspect the fact situation of the incident. Inspect the factors of the incident. Recommend of recu

7. Slide 7: Impact on financial results

   1.3 Impact on financial results 1H results based on reasonable estimation as of now ■Extraordinary expense： ▲270 Million Yen ・Information security countermeasure cost Information security measures cost, as payments required for sending letters of apology to our customers, handling of inquiries and i

8. Slide 8: 2. Summary of financial results for 1H and Performance Forecast for FY2017

   2. Summary of financial results for 1H and Performance Forecast for FY2017 Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved. 8

9. Slide 9: Summary

   2.1 Summary Sales up 19.1％ over forecast, net income down 23.1% over forecast because of the impact of income taxes 1H of 2Q of （Million yen） 1H of FY2017 2Q of FY2017 FY2016 FY2016 Actual Forecast Actual A/F% Change% Actual Actual Change% Sales 5,730 8,389 9,992 +19.1 +74.4 2,997 5,645 ＋88.3 Gross

10. Slide 10: Summary

    2.2 Summary Sales up 74.4% , net income down 5.9% because of the impact of income taxes +74.4％ ・Payment processing business：Proactive business expansion (increase in the 10,000 Million yen number of processed payments and in the amount of processed payments, cultivation of major merchants), and FG c

11. Slide 11: Summary: Sales

    2.3 Summary: Sales Consolidated sales increased by 1,603 million yen against the initial budget 10,000 (Million yen) +74.4％ 8,000 Breakdown of sales +46.4％ above forecast 6,000 4,000 1,603 million yen 2,000 0 FY2016/1H FY2017/1H Plan FY20171H Actual Payment processing business MSB Payment enhancemen

12. Slide 12: Summary: Net income

    2.4 Summary: Net income Higher tax burden ratio from income taxes Million yen 1,500 －325 million yen 1,000 We decided not to recognize deferred tax asset on these temporary differences, which resulted in higher tax burden ratio from income taxes 500 * With regards to deferred tax asset relating to t

13. Slide 13: Quarterly forecasts and actual results

    2.5 Quarterly forecasts and actual results Sales up over the forecast, OP as planned （％）:percentage change compared to the initial plan for H1 FY2017 ■ FY2017 Forecast（consolidated） Sales +88.3％ Operating 1,400 income +35.0％ (+30.3％) (+64.7％) (+28.9％) （million yen） （million yen） (+53.5％) (+60.3％) 5,

14. Slide 14: Sales/Operating Income by segment

    2.6 Sales/Operating Income by segment Significant increase in sales in all segments; OP of payment processing business up 34% *（%）：YoY ■Sales by segment ■ OP by segment（before consolidation adjustments ） （million yen） 10,000 （million yen） 289 3,400 （+278.3％） 1,590 9,000 （+167.7％） 2,900 8,000 76 96 2

15. Slide 15: Payment processing business

    2.7 Payment processing business Income growth accelerated by increasing the number/amount of processed payments, and by acquiring large-scale merchants Sales Operating income（ before consolidation adjustments ） 3,000（million yen） ■Business environment YoY +41.8％ Online： Expansion of e-commerce marke

16. Slide 16: MSB

    2.8 MSB Acceleration toward positive turnaround despite the operating loss in 2Q 1,400（million yen） Sales Operating income（ before consolidation adjustments ） 1,200 ■Business environment YoY 1,000 +155.5％ Expansion of FinTech services ■Measures to accelerate growth 800 Expanding value-added services

17. Slide 17: Payment enhancement business

    2.9 Payment enhancement business Consolidation of MACROKIOSK started Sales Operating income（ before consolidation adjustments ） 1,200（million yen） ■Business environment YoY Global market： +300.3％ Asian e-commerce market moves to the stage of 1,000 expansion Online advertising service： MK Expansion o

18. Slide 18: Revenue breakdown by business model

    2.10 Revenue breakdown by business model Initial revenue +165.6％、Fee revenue +103.6％、Spread revenue +73％ （million yen） Spread: YoY+73.0％ 10,000 ・MSB（GMO payment after delivery）has expanded* ・The amount of processed payments has 9,000 increased 8,000 4,572 Fee: YoY+103.6％ 7,000 ・Consolidation of MK 6

19. Slide 19: Revenue breakdown (Quarterly)

    2.11 Revenue breakdown（Quarterly） Significant sales increase in all business model 2,500 2,471 （million yen） Year-on-year 2,101 2,000 Initial +185.5％ Stock ＋ 24.2％ 1,808 Fee ＋149.8％ 1,527 1,500 Spread ＋ 78.6% 1,441 1,383 1,259 1,227 1,026 959 749 794 1,000 931 724 904 874 804 748 612 667 786 713 733

20. Slide 20: Full year forecast

    2.12 Full year forecast Revised the forecast based on 1H financial results ■ FY2017 （Million yen, ％ YoY） Operating Ordinary Sales income income Net income EBITDA Full year 20,370(68.2％) 5,013 (31.2％) 4,673 (23.6％) 2,762 (-5.1％) 5,811 （38.7％） （before revision） 18,767(54.9％) deferred deferred deferred

21. Slide 21: 3. Business environment and segments progress

    3. Business environment and segments progress Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved. 21

22. Slide 22: Industry topics

    3.1 Industry topics Our position regarding recent issues ■Domestic B2C e-commerce market in 2016 is 15.1trillion yen （+9.9％ compared to 2015） The EC ratio：5.43%（+0.68p compared to 2015） ・We are realizing the growth beyond the market by strengthening our ecosystem model. ■From the ownership to the re

23. Slide 23: Mid-term goals

    3.2 Mid-term goals The goal for 2020 can be achieved by the growth of our existing services and products Now 2020 Operating income 100 Scale of EC market（trillion yen） （100 million yen） Global 2.4 → 4.0 ※Total forecast by developing Solutions countries Online advertising market （ trillion yen ） Adve

24. Slide 24: Payment processing business: card-present payment

    3.3 Payment processing business：card-present payment Challenge to cultivate new payment market in collaboration with retails companies Penetration of 100 yen coffee from Fresh brewed coffee convenience stores vending machines Coffeehouse chains （under development) Ultimate point of Image photo conta

25. Slide 25: MSB: MSB assets and performance by segments

    3.4 MSB：MSB assets and performance by segments Sales tripled as MSB-related assets had increased MSB-related assets（BS) MSB-related sales・OP（PL) (million yen) 30,000 Sales related to MSB assets 25,000 increased by 3.0 times 3.1 2.7 20,000 times times 15,000 10,000 5,000 0 2016/3(1H) 2017/3(1H) 16/3(

26. Slide 26: Business in Asia (MK): Joining GMOPG group accelerated MK's growth

    3.5.1 Business in Asia (Payment enhancement business：MK) MK’s 1Q financial Joining GMOPG group accelerated MK’s growth results exceeding its initial plans. Annual growth rate rose from 10% to over 20% 3,500 (million yen) Actual results and plan 3,000 +25% 2,500 +10% +10% +12% 2,000 1,500 1,000 500 0

27. Slide 27: Business in Asia (MK): Favorable factors for exceeding the budget

    3.5.2 Business in Asia (Payment enhancement business：MK) Favorable factors for exceeding the budget after joining GMOPG group ■Market environment：Rapid growth has been ■By region continuing “In 2016, the number of transactions carried out via mobile devices grew by 72%, while transactions via Acquir

28. Slide 28: Business in Asia (Payment processing business)

    3.5.3 Business in Asia (Payment processing business) Introduction by major merchants in progress; the amount of processed payments is positively increasing ■Examples of local subsidiaries of Japanese ■Deployment in Greater China / ASEAN firms Z.com Payment has been introduced by GMO-PG’s Overseas ba

29. Slide 29: 4. Financial highlights

    4. Financial highlights Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved. 29

30. Slide 30: Consolidated Balance Sheet

    4.1 Consolidated Balance Sheet Increase in assets followed by MSB and companies acquisition (Million yen) 2Q of FY2017 2Q of FY2016 Change (Million yen) 2Q of FY2017 2Q of FY2016 Change Current assets 64,067 43,788 20,279 Current liabilities 54,283 32,355 21,928 Cash and deposits 29,004 31,171 △2,16

31. Slide 31: Changes to major KPIs (Quarterly)

    4.2 Changes to major KPIs（Quarterly） Annual amount of processed payments exceeded 2 trillion yen Number of operating stores 85,123/Amount of processed payments ¥620 billion、Number of processed payments 261 million Amount of processed payments （Reference） Amount of processed payments (12 months) 2.20

32. Slide 32: 5. Reference materials

    5. Reference materials Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved. 32

33. Slide 33: Summary of the consolidated results

    5.1 Summary of the consolidated results OP up 35%, EBITDA up 41.7％ 1H of FY2017 YoY 1H of FY2016 （Million yen） Sales Sales Actual Growth Growth rate (%) Actual composition (%) composition(%) Sales 9,992 100.0% 4,261 +74.4% 5,730 100% Cost of sales 2,922 29.2% 1,624 +125.2% 1,297 22.6% Gross income 7

34. Slide 34: Cost of sales ratio/SG&A ratio (Quarterly change)

    5.2 Cost of sales ratio/SG&A ratio（Quarterly change） The sales of cost ratio has changed due to the sales composition (Million yen) *Excluding MSB-related outsourcing expenses 6,000 60.0% 5,645 *50.2％ 52.7% *44.5％ *37.4％ 50.3% *41.7％ 5,000 50.9% *42.6％ 50.0% 42.6% 46.8% 45.6% *39.8％ 43.5% *40.3％ 43.

35. Slide 35: Changes in Segments and Revenue models

    5.3 Changes in Segments and Revenue models GMO payment after delivery is divided into fee and spread, consolidation of MK Red：Changes from 2Q ３ Segments Payment processing（MK） Payment processing 4 Revenue models Payment processing Initial SSL business System development （Initial revenue） System deve

36. Slide 36: Thank you very much!

    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

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