Gmo Payment Gateway, Inc. · TSE:3769
Gmo Payment Gateway — Q2 2024 Earnings Presentation
56 slides from Gmo Payment Gateway's earnings presentation, May 13, 2024
Slide 1: IR Introduction - Business Overview & Business Model
IR Introduction - Business Overview & Business Model - Q2 FY2024 May 13, 2024 77th Investor Meeting Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved.
Slide 2: 0. At a glance
0. At a glance Key features of GMO-PG group’s business model and the mechanism of sustainable growth ・Broad-based & high growth payment market ・Leading player ✓ Repeating and indispensable part of any ✓ GMV ¥14.9 trn (FY2023) commercial transaction ✓ Revenue ¥63.1 bil（FY2023) Market ✓ EC penetration
Slide 3: Contents and abbreviations
1. Business p.4 Overview 2. Focus Areas p.21 3. Sustainability p.41 4. Reference p.48 Materials Abbreviations used in the material are as follows: GMO-PG : GMO Payment Gateway GMO-EP : GMO Epsilon GMO-MR : GMO Medical Reservations Technology GMO-PS : GMO Payment Service GMO-FG : GMO Financial Gate G
Slide 4: 1.1 Our track record of growth
1.1 Our track record of growth The results of management policy focused on sustainable growth （¥ mil） Revenue*1 73,286 （¥ mil） Operating Profit*1 25,000 （¥ mil） EBITDA*1.2 28,373 25,000 70,000 +16.1％ +23.1% 25,000 +24.8% 60,000 20,000 63,133 20,312 22,731 20,000 50,000 15,000 40,000 15,000 30,000 10
Slide 5: 1.2 Consolidated management
1.2 Consolidated management Realize Group-wide stable growth through sound business operation that agilely responds to the business environment of each of the major Group companies Omni-channel Strategy Expand payment Diverse customer method offerings coverage Share customer base Sharing of manageme
Slide 6: 1.3 Three business segments
1.3 Three business segments Sustain an over 25% OP growth from the expansion of mainstay payment processing business and its peripheral businesses Payment Processing Business （Actual data for Q2 FY2024） ・Online Payment* 2% ・CP Payment 23％ Online payment ￥ ・Ginko Pay/Processing Payment After GMO-PG D
Slide 7: 1.4 Our value proposition
1.4 Our value proposition Businesses and services to comprehensively cater to customer’s needs Issues & Needs Value Proposition ・Cumbersome implementation work ・Package of diverse payment methods with ・Time consuming payment admin work, Processing centralized management Business Payment Merchant les
Slide 8: 1.5 Our business eco-system
1.5 Our business eco-system An expanding eco-system where the value-added services complements the main business to achieve mutual growth Increase in payment processing Payment processing （Gross margin 85％） Money Service Payment Business Processing Payment Business Enhancement Business Customer grow
Slide 9: 1.6 Revenue trend by segment
1.6 Revenue trend by segment Three segments of Payment Processing Business, Money Service Business and, Payment Enhancement Business （¥ mil） J-GAAP IFRS Payment 75,000 Enhancement 70,000 Business 65,000 Money Service 60,000 Business 55,000 50,000 45,000 40,000 35,000 30,000 Payment Processing 25,000
Slide 10: 1.7 Characteristic of payment business: cross-industry
1.7 Characteristic of payment business: cross-industry Payment is a required action for any purchase and is a highly repetitive application Manufacturing Digital Content Water Supply Publishing Education Utility Bill Logistics Finance Apparel Medical Energy Taxes Provide payment infrastructure to va
Slide 11: 1.8 Positioning of GMO-PG group
1.8 Positioning of GMO-PG group Connecting merchants and payment companies through ‘contracts,’ ‘payment information,’ and ‘money flow’. Consumer Merchant GMO-PG consolidated Payment subsidiaries Companies 153,336 stores*1 40+ Credit card (As of end-Mar 2024) companies EC Convenience store B2B・B2C・C
Slide 12: 1.9 Revenue model of credit card payment processing
1.9 Payment Processing Business: revenue model of credit card payment processing Revenue model determined by merchant size and type ■Four revenue types (i.e., business models) ■Revenue type determined by merchant type/size ① Initial (Initial revenue) Municipalities Payment Terminal Sales Coefficient
Slide 13: 1.10 Two types of merchant contracts
1.10 Payment Processing: two types of merchant contracts Direct Contract Payment Payment Revenue type ③ Processing Processing No. of contracts ② Stock Contracts with multiple payment companies ③ Fee MDR 2.8% Merchant Discount Rate (MDR) Direct negotiations with （Large GMV = Lower MDR） payment compan
Slide 14: 1.11 Revenue breakdown by business model
1.11 Revenue breakdown by business model Aiming for a balanced revenue growth by pursuing various initiatives （¥ mil） J-GAAP IFRS 70,000 60,000 Spread 50,000 40,000 Fee 30,000 20,000 Stock 10,000 Initial 0 04/9 05/9 06/9 07/9 08/9 09/9 10/9 11/9 12/9 13/9 14/9 15/9 16/9 17/9 18/9 19/9 20/9 21/9 22/9
Slide 15: 1.12 Summary table of segments, business model and services
1.12 Summary table of segments, business model and services Reporting in 3 segments and 4 business models Business Model Segment Online Payment* Initial Online Payment* / fincode byGMO CP Payment （Initial revenue) SSL Service CP Payment Online Payment Payment Processing CP Payment Business Ginko Pay
Slide 16: 1.13 Competitive advantage and achievements
1.13 Competitive advantage and achievements Expand value provided to clients to contribute to client’s growth Past Present （As of end-Sep 2011） （As pf end-Sep 2023） １ Over 30 Product Nos. of payment Credit card pure-play（payment) Multi-payment methods Comprehensive Capability （*Before 2005） Implemen
Slide 17: 1.14 Re-bundling
1.14 Re-bundling*1 One-stop support of merchant’s growth through product scalability (resulting in enlarging project size) Value proposition to merchants/users: examples of products offered Examples of supporting merchant’s growth Strengthen online sales Reduce payment operation burden Online “Re-bu
Slide 18: 1.15 Continuous achievement of OP target
1.15 Continuous achievement of OP target Earnings targets achieved through a highly visible earnings structure and a disciplined business operation Operation Profit* （¥ mil） 25,000 Initial Forecast Actual 20,000 Continuing stable growth while overcoming external volatilities 15,000 2020 COVID-19 201
Slide 19: 1.16 Medium target and basic policy
1.16 Medium target and basic policy Target OP CAGR of 25% after strengthening business foundations Image of revenue trend and basic policy Strengthen business Medium term management target foundation Trend line of revenue growth at OP CAGR 25% ・Monetize large-scale projects cruising speed ・Advance s
Slide 20: 2. Focus Areas
1. Business p.4 Overview 2. Focus Areas p.21 3. Sustainability p.41 4. Reference p.48 Materials Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved. 20
Slide 21: 2.1 Focus markets
2.1 Focus markets Sustain high growth from expanding revenues in existing services and entering new domains The five focus areas (¥ bil） Global ・Overseas lending Loan balance 60 ・ Approx. ¥14.5bil Business 2017 ・Ginko Pay base system domain BaaS Support service BaaS launched（GMO-PG） ・GMO-PG Processi
Slide 22: 2.2 Narrowly-defined EC: B2C EC market
2.2 Narrowly-defined EC: B2C EC market Low cashless and EC penetration compared to US/European countries EC Penetration Rates in Developed Markets*1 Cashless Penetration (ratio of private final consumption)*2 *3 （％） （¥ trn） （％） UK 31.0 140 Cashless Penetration Gov’t target Future: 80% USA Credit Car
Slide 23: 2.3.1 Broader EC: expanding scope of cashless business
2.3.1 Broader EC: expanding scope of cashless business Japan’s migration towards cashless payment contributes to accelerating the growth of GMO-PG group BtoB BtoC CtoC Merchandise EC*1 Market size of ¥13.9 trn Flea Market App EC penetration 9.1% Enormous market Expansion phase ¥1,000 trillion ¥2.21
Slide 24: 2.3.2 Broader EC: target markets
2.3.2 Broader EC: target markets Address each vertical in the vast white space Broader EC: cashless penetration by industry (credit card usage) Proportion of household expenditure by industry*4 Narrowly-defined EC ¥22.7 trn*1 Merchandise EC ¥13.9 trn*1 Other Broader EC ¥60 trn*2 Transportation Marke
Slide 25: 2.3.3 Broader EC: taxes/public dues and utility bills
2.3.3 Broader EC: taxes/public dues and utility bills Entered into the public dues/taxes sector in 2006 when Local Autonomy Law was amendment; pioneered credit card payments in this sector Tax National tax credit card payment website National tax smartphone app payment service Hometown tax Water bil
Slide 26: 2.3.4 Broader EC: transaction volume
2.3.4 Broader EC: transaction volume* Stable growth by capturing pay-as-you-go and recurring payment （100 million transactions） 50 40 Digital content subscription Pay-as-you-go payment 30 Payment occurs at each purchase 20 Electricity bill 10 Recurring payment Water utility bill Fixed amount paid NH
Slide 27: 2.3.5 Broader EC: transaction value
2.3.5 Broader EC: transaction value TRX Value = Sustainably grow revenues at client/merchants that we support/service （ ¥ trn） 9 8 7 Direct Contract 57% 6 5 4 3 Representative 2 Contract 43% 1 0 03/9 04/9 05/9 06/9 07/9 08/9 09/9 10/9 11/9 12/9 13/9 14/9 15/9 16/9 17/9 18/9 19/9 20/9 21/9 22/9 23/9
Slide 28: 2.4 Broader EC: GMO-MR
2.4 Broader EC：GMO-MR Provides reservation management system to realize operational efficiency at medical hospitals and clinics Product/Value proposition Growth strategy A reservation system for medical institutions ・Expand target domains that provide seamless coverage from ・Expand “reservation+α” p
Slide 29: 2.5.1 FinTech: Money Service Business
2.5.1 FinTech: Money Service Business Money Service Business that contributes to expanding payments Service Related assets Business Model GMO Payment After Delivery Pay the sales proceed ahead of ③ Fee Accrued revenues GMO B2B Pay On Credit the deposit from the consumer ④ Spread atokara Improves cas
Slide 30: 2.5.2 FinTech: Japan's BNPL market
2.5.2 FinTech: Japan’s BNPL market Expand business by capturing the Japan’s unique BNPL needs BNPL needs in Japan Outlook of Japan’s BNPL market ・Receiving goods before payment A growing payment method driven by the (Unit：¥ bil） ・Cash payment expansion of EC, used in conjunction with Consumer ・Manag
Slide 31: 2.5.3 FinTech: BNPL service atokara
2.5.3 FinTech：BNPL service “atokara” Realize flexible and convenient payment to be used in a diverse purchasing scenes Expanding service domains of atokara (size of addressable markets)* Significance of new business ・Data storage over 10 years/Business creation with partner companies leveraging base
Slide 32: 2.5.4 FinTech: Instant Salary byGMO
2.5.4 FinTech： Instant Salary byGMO (salary prepayment Service) Be the de facto standard of digitalization and seamless operation in the ¥231 trn salary market Service Growth strategy Enables salary for the work completed to be ・Entering into short-term labor market paid instantly and whenever ・Pene
Slide 33: 2.6.1 BaaS (Embedded Finance)
2.6.1 BaaS（Embedded Finance） One-stop payment solution by leveraging our payment know-how and track record GMO-PG Processing Platform Revolutionary credit card issuing system “H-ALIS”* クレジット Issuing FEP ハウス Network カード Gateway ソリューション イシュイング House サポート サービス Acquiring デビット Solution カード プリペイド Prepaid
Slide 34: 2.6.2 BaaS / Card present IoT
2.6.2 BaaS/ Card present IoT Increase Ginko Pay adopters, interlink each service to create an infrastructure-like service Ginko Pay GMO Cashless Platform Smartphone-based payment app that allows Cashless solution for CP stores that offers a package of for immediate debit from user’s bank account, pa
Slide 35: 2.7.1 Card present payment market
2.7.1 Card present IoT: card present payment market Scale-up business through cashless migration and alliance strategy CP payment：GMO Financial Gate, one of our Group companies, offers payment terminals for payments made at CP stores. 【Growth factors of the CP market】 Cashless demand arising from di
Slide 36: 2.7.2 Card present: stera tap
2.7.2 Card present：stera tap Launch of “stera tap,” a terminal-less payment service Overview（Press released dated March 25, 2024) GMO-FG has made a capital alliance with Soft Space, a Malaysian FinTech company that provides payment solution Asia in Malaysia, to provide the latest credit card securit
Slide 37: 2.8.1 Global: overseas strategy
2.8.1 Global: overseas strategy Leverage overseas expertise to focus on growth markets of SE Asia and India Business Area Payment Processing Business India & SE Asia Money Service Japan Business North America Profit Center Innovation Innovation Growth Center Center Center Strategy Investments and Bo
Slide 38: 2.8.2 Global: 20-year track record of overseas investment
2.8.2 Global: The 20-year track record of overseas investment strategy Major functions shifted to India/Pacific region: Evolving into a credit provider from a payment service provider Major overseas investment and loan portfolio Market expansion of SE Asia & India 8% Penetration TAM*2 BtoC EC ¥40 tr
Slide 39: 2.8.3 Global: Investment strategy
2.8.3 Global：Investment strategy Drive investment strategy in payment domain of the huge U.S. Payment market Aim of a minority equity stake Our Mid-term Global Strategy ・Obtaining insights into FinTech ・Leverage FinTech expertise ・Creating synergy ・Establishment of overseas payment business ・Acceler
Slide 40: 3. Sustainability
1. Business p.4 Overview 2. Focus Areas p.21 3. Sustainability p.41 4. Reference p.48 Materials Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved. 40
Slide 41: 3.1 Business opportunities arising from social challenges
3.1 Business opportunities arising from social challenges and changes in environment Converting social changes to opportunities for payment-related businesses Social Challenges Social Trends Business Opportunities for GMO-PG Depopulation Biometric CRM Regional authentication Aging/ revitalization Lo
Slide 42: 3.2 Materiality
3.2 Materiality Identified materiality issues to be prioritized ❶ Innovation ～ Social advancement and customer’s growth through creation of payment innovations～ Provide a wide array of innovations centered on payment, a necessary step in many economic activities, Social that support operational effi
Slide 43: 3.3 Environment
3.3 Environment Achieved zero GHG emissions (Scope 1,2) in FY2023 GHG emissions（Scope1,2） GHG emissions (Scope3) （t-CO2） （t-CO2） Scope2（Scope 1 is zero） 2,000 25,000 FY2023 Established target to reduce 1,600 Achieved Scope 3 (category 1+11) 20,000 ZERO emissions from newly operating Scope 1,2 paymen
Slide 44: 3.4 Social
3.4 Social Enhance job satisfaction, education and recruitment of good talent, based on our belief that “company = people” Human capital External evaluation Number of partners (left axis) Selected for “Great Place to Work Certification” Turnover rate (right axis) Approx. ¥25 mil for the 9th consecut
Slide 45: 3.5 Strengthening governance structure
3.5 Strengthening governance structure Realize medium- to long-term improvement in enterprise value through strengthening of supervisory function of the Board Corporate Governance Organizational Structure ➀ Audit and Supervisory Committee ➁ Proportion of External Directors one third ①② ③ Special Com
Slide 46: 3.6 Sustainability
3.6 Sustainability Driving ESG management towards realizing a sustainable society and enhancement of corporate value Roadmap of sustainability initiatives and achievements FY2023 Integrated Report (Japanese language): Acquired SBT https://www.gmo-pg.com/en/corp/newsroom/pdf/20240213_gmo_pg_ir_integr
Slide 47: 4. Reference Materials
1. Business p.4 Overview 2. Focus Areas p.21 3. Sustainability p.41 4. Reference p.48 Materials Copyright (C) 1995 GMO Payment Gateway, Inc. All Rights Reserved. 47
Slide 48: 4.1 Company outline
4.1 Company outline (as of April 1, 2024) ■Name ■Management team GMO Payment Gateway, Inc. (3769; Tokyo Stock Exchange Prime) Chairman & Director Masatoshi Kumagai President & Chief Executive Officer Issei Ainoura ■ Date of establishment March 1995 Director, Executive Vice President Ryu Muramatsu ■
Slide 49: 4.2 Organizational chart
4.2 Organizational chart GMO Payment Gateway, Inc. GMO-PG internal organizations Annual General Shareholder’s Representative Internal Audit Meeting (AGM) Director Office Board of Directors Management Audit & Committee Supervisory Director Committee Corporate Value Creation Strategy Division Innovati
Slide 50: 4.3 Major subsidiaries and equity-method affiliates
4.3 Major subsidiaries and equity-method affiliates（IFRS standards） GMO Payment Gateway, Inc. Consolidated subsidiary Equity method affiliate Multi payment service（targets small-sized merchants） GMO Epsilon, Inc. FY2023 Revenue ¥4,967 mil, Ordinary income ¥3,035 mil. (J-GAAP) GMO Medical Reservation
Slide 51: 4.4 Key characteristics of payment business
4.4 Key characteristics of payment business Stable industry with high entry barriers and low churn rates High entry barriers Regulation ・Responding to tightening regulation through repeated amendments (Amended ISA* etc.） ・Merchant management, security enforcement Payment company ・Unique payment prac
Slide 52: 4.5 Product map
4.5 Product map GMO-PG’s definition of payment: that which enables the digitalization of money flow No Credit Risk Cashless Payment Service DX support Ginko Pay PG Multi-Payment Service platform Processing platform EP payment service GMO Dokodemo SMS Choice Cashpoint of Payment Services that complem
Slide 53: 4.6 DX support services to improve clients PL/BS
4.6 DX support services to improve clients PL/BS Service line-up that can respond to the diverse clients’ needs Customer needs & PL/BS changes Use cases Our DX support services EC shop, Utility bills PL Revenue Multiple payment methods PG Multi-Payment service Cost of Sales Paperless (lower postal c
Slide 54: 4.7 Revenue structure in the credit card foodchain
4.7 Revenue structure in the credit card foodchain by player ■ Image of revenue structure by player Payment International Merchant processing Acquirer Issuer brand company Sale Merchant proceeds discount rate Spread revenue 100% Around 3.0% 0.3~0.5% 0.5 ~0.7% 1.5 ~1.8% 0.1% *Compiled by GMO-PG by re
Slide 55: 4.8.1 Business outline of payment processing company (1)
4.8.1 Business outline of payment processing company (1) Problems with online credit card payment in the early days of E-Commerce Consumer Merchant Authorization Payment ①Order taking （approval number Company assigned） ク レ Credit Card Company Large volume of sales slips Network ジ ッ ト カ ②Enter each ③
Slide 56: 4.8.2 Business outline of payment processing company (2)
4.8.2 Business outline of payment processing company (2) Payment processing service realizes operational efficiency in credit card payment operations Consumer Merchants Payment Payment Processing company ①Order taking Company Credit・sales Update Credit Card Company card data Network Real-time credit