Slide 1: Quarterly Financial Results for the Six Months Ended September 30, 2018
al, aye VEGA corporation Quarterly Financial Results for the Six Months Ended September 30, 2018 Vega corporation Co., Ltd.
Slide 2: Agenda
Agenda . Overview of Quarterly Financial Results for the Six Months Ended September 30, 2018 . Revision of Full-year Financial Results Forecasts . Report on LOWYA Business . Initiatives Starting from the Second Half of the Fiscal Year . Synergy of Company-wide Businesses . New Businesses (R&D) . App
Slide 3: Summary of the First Half of the Fiscal Year Ending March 31, 2019
Summary of the First Half of the Fiscal Year Ending March 31, 2019 = Targets not achieved due to decrease in net sales compared to the previous year, mainly resulting from stock-out at the Rakuten marketplace store ™ Delivery expenses began to surge this fiscal year ™ Steady growth in both access an
Slide 4: 1. Overview of Quarterly Financial Results
1. Overview of Quarterly Financial Results for the Six Months Ended September 30, 2018 Copyright 2018 VEGA corporation. All Rights Reserved.
Slide 5: 1. Summary of Financial Results
1. Summary of Financial Results (Million yen) Six months ended Six months ended September 30, Sales ratio September 30, Sales ratio Change YoY 2017 2018 Net sales 6,250 | 100.0% 6,341 100.0% +90| 101.5% Gross profit 3,188 51.0% 3,432 54.1% +244| 107.7% SG&A 3,021| 48.3% 3,455| 545%| +434] 114.4% exp
Slide 6: Net sales in 1H FY2019 increased by 1.8% YoY
in 1H FY2019 increas ales Nets ed by 1.8% YoY 6 749 «66,341 | / 1H ) 1H . ‘Y¥20 FY2019 iveh S. a2 202 02 2 2 2 2 0 oO 8G 86 80 8 8B BSF So 80 6 86 86 G0 86 G6 Zo CX © Bw FF HO N
Slide 7: Semiannual Operating Profit
al Operating Profit Semiannu 1. (23) | ' 4) million yen as (9 fixed costs associated with business expansion Operating profit was (23) million yen due to increase in 353 a2 oO 2° 2° 2° 2° 2° ro) Ss ©<§S6 8 G6 S&S GS GB ~*~ 6
Slide 8: 1. Quarterly SG&A Expenses <Ratio>
1. Quarterly SG&A Expenses <Ratio> (R&D on a net basis) (%) 2.6 1.7 24.4 24.7 23.9 22.8 27.0 1Q 2Q FY2018 3Q 4Q 1Q FY2019 2Q B Advertising expenses H R&D expenses (Note1) Fixed costs (Note rgvenue and expenditures. of . (Note 2)Includes salaries and allowances. @ Personnel expenses _[ Selling expens
Slide 9: 1. Balance Sheet
]. Balance Sheet (Million yen) Previous fiscal year Six months ended Previous fiscal Six months ended (as of March 31, 2018) September 30, secot wet, sone September 30, Current assets 5,309 5,066 | Current liabilities 2,107 2,098 Cash and deposits 1,656 1,789 | Ssigations 820 820 Accounts Non-curren
Slide 10: 2. Revision of Full-year Financial Results Forecasts
2. Revision of Full-year Financial Results Forecasts Copyright 2018 VEGA corporation. All Rights Reserved.
Slide 11: 2. Revision of Financial Results Forecasts
2. Revision of Financial Results Forecasts Revision of net sales forecast to reflect effects of stock-out and shift from marketplace stores to the flagship store Revision of cost of sales in view of recent conditions, and additional recording of sales-related costs in response to opportunity loss du
Slide 12: 2. Analysis of Difference
2. Analysis of Difference Full-year operating profit 730 (Million yen) Copyright 2018 VEGA corporation. All Rights Reserved. (472) Impact of decreased net sales (162) Increase in cost of sales Full-year Previous ratio operating forecasts (144) profit Increase in (58) (152) salesrelated Increase in 6
Slide 13: 3. Report on LOWYA Business
3. Report on LOWYA Business Copyright 2018 VEGA corporation. All Rights Reserved. 12
Slide 14: 3. Quarterly Report <Overall LOWYA Business>
3. Quarterly Report <Overall LOWYA Business> Net sales of the flagship store increased, but targets were not achieved due to YoY decrease in net sales of the marketplace stores (Million yen) Six months ended| Six months ended September 30, Sales ratio September 30, Sales ratio Change YoY 2017 2018 N
Slide 15: 3. Quarterly Report_Management Indicators <Overall LOWYA Business>
3. Quarterly Report_Management Indicators <Overall LOWYA Business> Fiscal year ended March 31, 2018 Fecal veer re Item - 1Q 2Q 3Q 4Q 1Q 2Q (Apr. -Jun.) | (Jul.- Sep.) | (Oct.- Dec.) | (Jan.- Mar.) | (Apr.- Jun.) | (Jul. - Sep.) YoY number of visitors (%) 127.2 128.0 105.3 122.8 125.1 110.1 YoY avera
Slide 16: 3. Quarterly Report_Net Sales by Sales Channel at Marketplace
3. Quarterly Report_Net Sales by Sales Channel at Marketplace Sluggish sales due to multiple factors including stock-out and increased delivery expenses, in particular, net sales at the Rakuten marketplace store decreased compared to the previous year =o=Rakuten =—o=Amazon =o=Yahoo Sales were sluggi
Slide 17: 3. Quarterly Report_Delivery Expense Ratio
3. Quarterly Report_Delivery Expense Ratio (%) 15 10 Packing and shipping costs ratio gradually rose then jumped 3.Opt this fiscal year, putting pressure on profits Packing and shipping costs ratio 12.2 1Q 2Q 3Q 4Q 1Q FY2016 * The packing and shipping costs ratio shows the ratio against net sales. 2
Slide 18: 3. Quarterly Report_Management Indicators <Flagship store>
3. Quarterly Report_Management Indicators <Flagship store> Number of visitors to the flagship store increased 1 13.5% YoY, growing steadily despite stock-out effects Fiscal year ended March 31, 2018 Fiscal year oe It - em 1Q 2Q 3Q 4Q 1Q 2Q (Apr. - Jun.) (Jul. - Sep.) (Oct.- Dec.) | (Jan. - Mar.) (Ap
Slide 19: 3. Quarterly Report_Access <Flagship store>
3. Quarterly Report_Access <Flagship store> Ongoing efforts to build a fan base, aiming to increase access to the store (Million unique users (UU)) LOWYA flagship store access 8.00} 6.00 0° 3.95 million UU ,°° . Oo ” 4.00} ° 85 million UU 2.00 Approx. 2 times ie} 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
Slide 20: 3. Quarterly Report_Net Sales <Flagship store>
3. Quarterly Report_Net Sales <Flagship store> Strong sales at the flagship store, up 91% YoY Approx. 1.9 times =_\ ..._ i we 8 a & “ce 19 FY2019 FY2018 FY2017 05 OQ OF Oo OO Oo OO OQ OQ Oo 62 GO GF GB 8@ G G@ GF 8 a7 0 FC GO O6 FSF MOM N= on
Slide 21: 3. Quarterly Report_Sales Ratio by Sales Channel
3. Quarterly Report_Sales Ratio by Sales Channel Flagship store ratio increased from 12.2% in the previous 2Q to 24.0% Net sales oe te (Million yen) . . 2 24.0% s 25.0% wg, Flagship store 6 : Marketplace stores i fee 3,000 J =O=Flagship store ratio eal % 20.0% Approx. / : 1.9 times 19.4% 15.0% 2,000
Slide 22: 4. Initiatives Starting from the Second Half of the Fiscal Year
4. Initiatives Starting from the Second Half of the Fiscal Year 4-1. Strengthen Fulfillment Service Structure 4-2. Expand Recognition 4-3. Future Development Copyright 2018 VEGA corporation. All Rights Reserved. 21
Slide 23: 4-1. Strengthen Fulfillment Service Structure
4-1. Strengthen Fulfillment Service Structure Copyright 2018 VEGA corporation. All Rights Reserved. 22
Slide 24: 4-1. Strengthen Fulfillment Service Structure
4-1. Strengthen Fulfillment Service 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
Slide 25: 4-1. Strengthen Fulfillment Service Structure
4-1. 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
Slide 26: 4-1. Strengthen Fulfillment Service Structure: Storage expense ratio
4-1. Strengthen Fulfillment Service Structure Storage expense ratio 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 warehouse storage
Slide 27: 4-1. Strengthen Fulfillment Service Structure: Delivery expenses
4-1. Strengthen Fulfillment Service Structure Delivery expenses Phase 1) Tackle the industry-wide issue over the long-term by e 9 VLE a Phase 2 ) reducing the delivery expense ratio through optimizing i 4 inventory placement (establishing the shortest and : Vee cheapest delivery routes), developing
Slide 28: 4-2. Expand Recognition
4-2. Expand Recognition Copyright 2018 VEGA corporation. All Rights Reserved. 27
Slide 29: 4-2. Expand Recognition LOWYA
4-2. Expand Recognition LOWYA TRENDISHERE, Supermodel Taylor Hill was appointed as the LOWYA brand ambassador (’) Going forward, conduct test marketing by area to attract customers (*) For one year from October 2018 v Appointment of brand ambassador announced v Brand logo refined in October 2018 in
Slide 30: Brand recognition survey
(%) * According to an online survey of furniture, interior product, and sundries brands. 29
Slide 31: 4-3. Future Development
4-3. Future Development Copyright 2018 VEGA corporation. All Rights Reserved. 30
Slide 32: 4-3. Future Development_LOWYA Business
4-3. Future Development_LOWYA Business LOWYA A TRENDISHERE. Recognition in Low High E Tokyo metropolitan a Brand building Brand recognition y ao 1 00.0 area e Billion yen (Billion yen @ Solidify a Fan base @ Creative integration @ Social Media Branding Period of marketing transformation > Flagship s
Slide 33: 4-3. Future Development_LOWYA Business
4-3. Future Development_LOWYA Business LOWYA TRENDISHERE, Aiming 100 billion yen sales in LOWYA business by leading the 2.5 trillion yen industry Hi Sundries, furniture, and interior (Trillion yen) 100% product market scale 7.25 7 ane E-commerce ratio 7.2 trillion yen 11 “ (*70% is sundries for hous
Slide 34: 5. Synergy of Company-wide Businesses
5. Synergy of Company-wide Businesses Copyright 2018 VEGA corporation. All Rights Reserved. 33
Slide 35: Synergy of Company-wide Businesses
3. 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 DOKODEMO BtoBtoC (57 million DLs for game apps) sous cou Donn $ Warehouse : EC i Marketing sharing : $ (Attracting cu
Slide 36: 6-1. DOKODEMO Business
6-1. SOKODEMO Business Copyright 2018 VEGA corporation. All Rights Reserved. 35
Slide 37: 6-1. DOKODEMO Business_Indicators
6-1. DOKODEMO Business_Indicators DOKODEMO = Membership ee 308,787 (up 190% YoY) Y *As of September 30, 2018 (the same applies hereinafter) up 1 90% / 1a 20 3a 4Q | 1a 20 FY2018 FY2019 = Number of APP DLs 10.00 700,734 (up 113% YoY) min DL up 113% _—— = Purchase price per person 1a 2Q 3a 4a) 1a 2a 8
Slide 38: 6-1. DOKODEMO Business_Indicators
6-1. DOKODEMO Business_Indicators 37
Slide 39: 6-1. DOKODEMO Business_Distribution
6-1. DOKODEMO Business_Distribution DOKODEMO Reduced advertising expenses to evaluate investment effect (Milken yer} Gross Merchandise Sales (GMS) was up 73% YoY 250 200 150 Approx. 1.73 times 100 50 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q FY2017 FY2018 FY2019 38 Copyright 2018 VEGA corporation. All Rights Re
Slide 40: 6-1. DOKODEMO Business_Deliveries
6-1. DOKODEMO Business_ Deliveries DOKODEMO Deliveries increased to 87 countries and regions (up 24% YoY) sabre Proportion of China 6.1% deliveries by country 4.6% South Korea d idle E . A ; ; Hong Kong \ 3.5% US i 7 e Eas Latin America 9 \ “t WB.9% 89 asic 4 0.1% Malaysia Taiwan 6.7% a KY 29.6% Sin
Slide 41: 6-1. DOKODEMO Business_Future Development
6-1. DOKODEMO Business_Future Development : ° DOKODEMO Enhancing strategies to make people aware of DOKODEMO when visiting Japan, and promoting contact and repeat purchase after their return He de DOKQDEMO Sow if ~ 23355853 “ aie gY Sending information oy i & e—_ in Japan Send information on shoppin
Slide 42: 6-2. Laig Business
6-2. (aig Business Copyright 2018 VEGA corporation. All Rights Reserved. 41
Slide 43: 6-2. Laig Business
6-2. Laig Business (aig Officially opened on October 31, 2018 Brands that share a similar ethos with Laig participated. By expanding the range of options and value in furniture, interior, and sundries products, the brand will energize the industry and create a world where all people can enjoy their
Slide 44: 6-3. Laig Business: Business Model
6-3. Laig Business: Business Model EC media that realizes OMO" that enables seamless access between online (Laig) and offline (brick and mortar stores) (*) OMO (Online Merges Offline) : Environment or method that integrates online and offline in order to create better customer experiences and custom
Slide 45: 6-3. Laig Business: Business Model
e 6-3. Laig Business: Business Model (aig Create better customer experiences and customer contacts, and offer multiple options in order to realize “Lifestyle is good” for users ®@ Options for inspiration @ Options for shopping <Laigstyle coordination> <Laigstyle Magazine> ; ; . . Offer shopping opti
Slide 46: 6-2. Laig Business_Future Development
6-2. Laig Business _Future Development Maximize Gross Merchandise Sales (GMS) by increasing the number of brands and products ga 3 (Number of (GMS: Million yen) brands) Gross Merchandise Sales (GMS) === Number of brands === Number of products (oig =» Service launched on October 31 ; 500 Number of pr
Slide 47: Appendix
Appendix Copyright 2018 VEGA corporation. All Rights Reserved. 46
Slide 48: Appendix LOWYA Business: Positioning
Appendix LOWYA Business: Positioning LOWYA TRENDISHERE, Establishing the fast interior category in the “trendy & low price” space of the furniture and interior products market High price oecccccccccer ° : High-class * High-class ° overseas antique furniture furniture High-quality Py standard | ° Tra
Slide 49: Appendix LOWYA Business: Brand Promise
Appendix LOWYA Business: Brand Promise LOWYA As a provider of “fast interior,” Propose attractive lifestyles and products with attractive prices and quality MIDDLE TV BOARD ¥49,990 ¥14,990 LOWTABLE gee ¥29,990 =~ - fame rr —_ ss Fulfill satisfaction and inspiration by creating design that reflects a
Slide 50: Appendix Business Model Characteristics LOWYA
Appendix Business Model Characteristics LOWYA D2C business model conducting the entire procedure inhouse (Direct to Consumer) . Product fl Marketing - A : > Development > Import > Warehouse > Online sales Diatiracting £8 sea Delivery > cs » 5 : F : : 4 ; KL Customers : a a ae i : : Views bd Designin
Slide 51: Appendix LOWYA Business, Customer Data
Appendix LOWYA Business, Customer Data LOWYA (Male Vs. Female, Area Distribution, and Generation Distribution) monn Showing higher ratio of female in their 30’s, mainly in the Tokyo metropolitan area (July 1, 2018 to September 30, 2018) y <> Ratio of male vs. female a Age distribution # Male 32.9% m
Slide 52: Appendix DOKODEMO Business: Market Scale (1)
Appendix DOKODEMO Business: Market Scale (1) 2 Pee Approx. 28.70 million people visiting Japan” Increasing foreign tourists visiting Japan * Japan National Tourism Organization Number of foreign tourists visiting Japan from January to December 2017 Ne S 40.00 million people expected in 2020") Tokyo
Slide 53: Appendix DOKODEMO Business: Market Scale (2)
Appendix DOKODEMO Business: Market Scale (2) DOKODEMO 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) (Units: Billion yen) Japan 2327 | 243 | 257.0 (Yor) 7.2% 7.3% 7.3
Slide 54: Appendix DOKODEMO Business: Business Model
Appendix DOKODEMO Business: Business Model DOKODEMO Delivering products directly from registered stores to customer (Non-stock inventory) i 3 JAPAN Overseas peceesseeeeseeemeeenene Drect Shipping N Pee eee Available in 5 Languages, v with delivery options e Purchase _—_—— Purchase Shipping Price GP
Slide 55: Appendix: DOKODEMO (Sales Ratio by User Data and Category)
Appendix: DOKODEMO (Sales Ratio by User Data and Category) DOKODEMO Female users in their 30’s are increasing. DOKODEMO will strengthen the “hobby” and “fashion” categories going forward Calculation period: July 1, 2018 to September 30, 2018 <User data> <User data> Sales ratio by Gender Age category
Slide 56: Appendix Laig Business: Service Vision
Appendix Laig Business: Service 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 c
Slide 57: MAKE NEW
MAKE NEW
Slide 58: VEGA corporation
we ye VEGA corporation 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 outco