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PRESENTATIONMATERIALJAN.2020–MAR.2020
Table of Contents
Financial Highlights
Status of Businesses
- Mercari JP
- Merpay
- Mercari US
Summary
Initiatives as a Public Platform for Society
Appendix
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3
Summary
FY2020.6 Business Objectives Disclosed at Earnings Results Meeting for FY2019.6 Q4 Consolidated: Establish the 3 pillars of Mercari JP, Merpay, and Mercari US in this crucial year to set the foundation to achieve the mission with continuous investment for further growth
Mercari JP: Grow further by expanding listing Merpay: Obtain an unchallenged position in the cashless market Mercari US: Achieve monthly GMV of 100 million USD
FY2020.6 Business Objectives and Q3 Summary
Progress and Highlights in Q3 Consolidated: Operating loss peaked out for now and decreased due to growth acceleration in Mercari JP and positive impact of business alliances Mercari JP: Accelerated GMV growth rate and improved balance between listers and buyers Merpay: Achieved steady progress one year after launch and prepared to enhance monetization with the cost optimization effects of business alliances Mercari US: Achieved growth with increased marketing investment starting at the end of December and further expedited growth
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Net Sales
20.3(YoY +49.8%)
1. Aggregated transaction value after cancellation 2. CARTUNE included 3. Aggregated number of unique users registered for Merpay Electronic Money, or used either QR Code Payments, Online Payments, or Merpay Smart Payments (formerly Merpay Deferred Payments) as of January 2020 4. Merchants scheduled to implement Merpay included 5. MAU as of March 2020 excluding Web
GMV1, 2
YoY +23%Adjusted Operating Margin
30% (YoY +6ppts)
Number of Users3
6+ millionNumber of Merchants4
GMV1
YoY +55%MAU5
3.4+ million (YoY +77%)
Mercari JP Merpay
1.7 million
Mercari US
Consolidated
FY2020.6 Q3 (January–March) KPI Summary
Operating Income
-6.3(YoY -4.0 billion JPY)
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Impact of COVID-19—Summary
調整後営業利益率
Consolidated Mercari JP
Merpay Mercari US
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April 2020Week 3
Impact of COVID-19—Category ShiftObserved shift in category breakdown in GMV terms from outdoor to indoor categories due to lifestyle changes with the global spread of COVID-19
Mercari JP Mercari US
March2020
Saw increase in buying demands in Books and Games (Entertainment and Hobbies), Handmade, and Electronics for people to enjoy staying home after the state of emergency declaration in early April, and large increase in listings in Ladies, Books, and Games
Saw gradual growth in Electronics and Toys after lockdown began in mid-March, further diversifying categories and users
April 2020Week 3
March 2020Week 1
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Financial Highlights
Net Sales(Billion JPY)
1. Under the former user policy, costs related to discount coupons were included as part of promotion costs. Since we changed the user policy, costs related to discount coupons are deducted from net sales after January 2018.2. Numbers are rounded down to the billion, and coupon amount for FY2020.6 Q1–Q3 is indicated as zero.
Operating IncomeYoY +49.8%
(Billion JPY)
Change in accounting method1
2
Financial Highlights—(Consolidated) Q3 Net Sales and Operating Income
-7.0 -6.8-6.1
18.4
20.3
-6.3
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● Achieved record-high quarterly GMV again in Q3 with continued high growth rate● Grew GMV YoY growth rate by optimizing balance between listing and buying● See good signs of achieving full-year GMV YoY growth rate target of +mid-20% range, yet will closely
monitor external factors going forward
YoY+27.5%
YoY+23.4%
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(Billion JPY)
(Million users)
Mercari JP
YoY+26.7%
YoY+6ppts
11
YoY+57.6%
Adjusted Operating Income/Margin3Net Sales
1. Under the former user policy, costs related to discount coupons were included as part of promotion costs. Since we changed the user policy, costs related to discount coupons are deducted from net sales after January 2018.2. Numbers are rounded down to the billion, and coupon amount for FY2020.6 Q1–Q3 is indicated as zero.3. Graph reflects retroactive adjustment made from FY2019.6 Q3 to the amount before recording internal transactions between Mercari and Merpay as a result of transferring settlement to Merpay (outsourced payment processing fees)
(Billion JPY) (Billion JPY)
Change in accounting method1
Mercari JP—Q3 Net Sales and Adjusted Operating Income● Achieved record-high net sales and adjusted operating income again in Q3● Expect full year adjusted operating margin to be approximately 26-28% and will closely monitor
external factors going forward
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YoY+27.5%
YoY+22.5%
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YoY+53.9%
Mercari JP—Q3 Aggregated Key Financial Indicators
YoY+23.4%
(Billion JPY) (Billion JPY)
Net Sales/Adjusted Operating Income1GMV/MAU
1. Graph reflects retroactive adjustment made from FY2019.6 Q3 to the amount before recording internal transactions between Mercari and Merpay as a result of transferring settlement to Merpay (outsourced payment processing fees)
131. Outsourcing expenses, rent, and taxes and dues
Mercari JP—Cost Structure against Net Sales
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● Achieved adjusted operating margin of 30% with cost-effective promotions and restricted hiring
FY2020.6 Full-Year Earnings Forecast● Consolidated—Net sales: 73–75 billion JPY, Operating loss: ▲25–▲23 billion JPY● Mercari JP —Net sales: 57–58 billion JPY (+23–25% YoY)
Adjusted operating margin: 26–28%Q4 Earnings Forecast Consolidated: Upwards trend, potentially instantaneously, for JP and US due to the increased demand for e-commerce, possible headwind for Merpay (centered around offline payments), initiatives to cut promotion costs and SG&A expenses, and decrease in consolidated OP loss after peaking outMercari JP: GMV growth rate to steadily recover (+25–30%) and external factors. Adjusted OPM to be approximately 30% with further cost reduction.Merpay: Decreased loss in the near term with cost reduction while gradually shifting from user acquisition to credit business in order to enhance monetizationMercari US: GMV growth rate acceleration due to investments made in Q3. With rise in stay-at-home spending demand, changes seen for other e-commerce players, and government stimulus package, progressing toward the monthly GMV target of 100 million USD. Decreased loss vs. Q3 with uncertainty of COVID-19 impact.
FY2020.6 Full-Year and Q4 Earnings Forecast
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Status of Businesses
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Mercari JP— Optimizing Balance between Listing and Buying
● Saw favorable results from initiatives to enhance listing continuing from Q2 and further optimized the balance between listing and buying
● Further accelerated growth of number of new listers
Lister/Buyer Ratio New Lister IndexBenchmark against FY2018 Q4
Rolled out initiatives for
buyers
Strengthened initiatives for
listers
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Mercari JP—Business Alliance with DOCOMO
● Launched d POINT point-back campaign for users using d Barai on Mercari● Plan to continue well-received point-back campaign in Q4 also to further boost GMV
● Increased GMV by increasing the number of new users
● Optimized promotion costs
● Doubled the number of users using d Barai for the first time
● Allowed users to utilize unused d POINTs
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Aim to become a payment service used in people’s everyday life by expanding users and merchants
Upfront InvestmentPhase
1
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Phase
2Synergy with Mercari
● Build more trust with accumulated transaction data and provide added value to individuals and organizations
● Launch fixed-amount payment (installment payment) service
Profitable MerpayPhase
3
Phases to focus in FY2020.6
● Expand listing on Mercari byusing Merpay
● Enhance Merpay SmartPayments
Merpay—Business Objectives
Shift gears to enhance monetization in FY2021.6 and beyond
Merpay—One Year After Launch Becoming a Payment Service Used in People’s Everyday Life
1. Verified users: Merpay users who have completed identity verification through eKYC or by connecting their bank account
● Launched service in February 2019, achieved more than 20 million payments per month made outside of Mercari as of March 2020, and exceeded 5 million users (aggregated) who have undergone identity verification1
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Number of payments per
month
20 million
Aggregated number of
verified users
5 million
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Jan–Mar 2020
New user acquisition initiatives
Initiatives to make using Merpay a habit
Oct–Dec 2019Jul–Sep 2019Apr–May 2019
50% Off Golden Week
Campaign
Recommend Merpay
Merpay Smart Payments
● Merpay Fever● Merpay Sunday
Merpay—Main Campaign Initiatives in the Past Year● Launched campaigns strategically; launched user promotion campaign after new user
acquisition campaign
● 50% Off Golden Week Campaign: Point-back campaign to acquire new Merpay users● Recommend Merpay: Referral promotion to acquire new Merpay users● Merpay Smart Payments: Point-back campaign to promote Merpay Smart Payments (deferred payment) and buying on Mercari● Merpay Fever: Point-back campaign to promote buying using Merpay● Merpay Sunday: Point-back campaign to promote buying using Merpay
● Achieved accelerated growth in GMV and MAU by strengthening marketing efforts ● Recorded the highest GMV and MAU ever
Mercari US
MAU (in Mar 2020)
3.4M (YoY +74%)
YoY+55%160
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● Focused especially on enhancing brand awareness ● Aided awareness1 of Mercari, which increased approximately 1.8 times from Jan 2019
to Feb 2020, catching up to some competitors● Achieved high growth in new registered users and new listers, contributing to GMV
growth
Mercari US—Marketing Initiatives
Awareness (%)1 New Registered Users/New Listers
1. Based on a survey conducted by Mercari to approximately 1,000 smartphone users between ages 18 and 54 in January 2019 and February 2020. Survey assessed awareness of 11 companies providing online marketplaces for users to buy and sell used items, including The RealReal, Mercari, Poshmark, and LetGo. Respondents were allowed to select multiple choices.
Approx. 2X
Approx.1.8X
Approx. 1.5X
Right: Feb 2020Left: Jan 2019
YoY growth rate● New Registered Users● New Listers
+97%
+49%
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Authenticity
Price Suggestion
Media/User Acquisition Boost
SEO
User Acquisition/CRM RevampInstant Pay
Shipping InovationInventory Recognition and Management
Shipping Innovation
$100M GMV/month
Holistic Marketing
Product/ Service
Awareness
Making Selling Easy
Price Confidence
End of Q3
Mercari US—Roadmap
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Mercari US—Product Update
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Authenticity
- Attained higher AOV (approx. over 500 USD) - Saw that authenticated designer items are
typically twice as likely to sell1- Expanded to designer shoes category
Digital Goods
- Enabled users to buy and sell digital gaming assets
- Established a trustworthy marketplace to buy and sell digital items
1. Selling performance based on sell-through rate of authenticated items compared to non-authenticated items since November 18, 2019 as of March 4, 2020.
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Initiatives as a Public Platform
for Society
Recent Initiatives as a Public Platform for Society
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Stay Home & Share Smiles:Mercari to donate 10 JPY for every single listing1, 2, 3, 4
1. For one month from April 27 to May 27, 2020.2. A committee with external expert(s) will be established to decide recipient(s) of donations.3. Recipient(s) and total donation amount will be announced on our corporate website.4. Maximum donation amount is 50 million JPY.
Online ESG educational programs: provide learning opportunities to children who cannot go to school
Mercari JP Mercari US
Donate 50% of proceeds from selling fees on all handmade masks1, 2
1. Until May 31, 20202. The donation will be made to First Responders Children’s Foundation, which provides support to first responders and their families enduring hardships during the coronavirus pandemic.
Initiatives to Improve Governance—Establishing Nomination and Remuneration Committee
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● Established Nomination and Remuneration Committee as a non-mandatory advisory committee of Mercari’s Board of Directors on April 30, 2020
● Independent board directors make up a majority of committee members● Strengthen fairness, transparency, and objectiveness of decisions related to
nomination and remuneration of executives, and others
Board of Directors
Nomination and
Remuneration Committee(independent
outside directors as a majority)
Appointment and dismissalof executives
Remuneration system, etc.
Advice
Proposals
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1. Operating income + Depreciation and Goodwill amortization
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Consolidated P&L—Quarterly
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1. A part of liabilities to users, which has been recorded as Other payables, is recorded as Deposits received retroactively for FY2019.6 Q1 in order to better reflect the actual business activities.2. Includes long-term borrowings planned to be repaid within 1 year.
1
1
2
Consolidated BS
1
31
1. Excludes internal transactions with Merpay (outsourced payment processing fees)
Mercari JP P&L
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Number of Employees
● Continuing to hire highly specialized engineers in FY2020.6● Slight increase in Q3 due to the merger with Origami
Talent Supporting Mercari’s High Growth
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Men’s
Electronics
Cosmetics and Beauty
Sports and Leisure
● Entertainment and Hobbies category contributes most to GMV
FY2020.6Q3
GMV Category Breakdown
FY2019.6Q3
Women’s
Entertainment and Hobbies
Men’s
Electronics
Cosmetics and Beauty
Sports and Leisure
Babies and Children
Others Others
Babies and Children
Entertainment and Hobbies
Women’s
Mercari JP—Category Breakdown
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1. Only a breakdown of cost of sales and sales, general, and administrative expenses, and does not include non-operating and extraordinary profit and loss2. Outsourcing expenses, rent, taxes and dues3. Includes engineers’ personnel expenses
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Cost Structure Breakdown1
(Billion JPY)
Mercari JP—Cost Structure
3
Promotion Costs/Net Sales
35% 23% 22%
Merpay—Generating Synergy between Mercari and Merpay● Monthly GMV of deferred payment users on Merpay higher than that of non-users by slightly
over 10%● New Mercari users coming from Merpay contribute to increase in GMV
Increased number of
listers
Increased willingness to buy & sell on Mercari
IncreasedGMVIncreased
number of buyers
Increased usage of deferred
payments and credit line
Increased transaction volume on Merpay
Increased balance on Merpay
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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 by an independent certified public accountant or audit corporation, and includes financial information based on past financial statements or accounting documents as well as management figures not based on financial statements or accounting documents.This document is an English translation of the original Japanese language document and has been prepared solely for reference purposes. No warranties or assurances are given regarding the accuracy or completeness of this English translation. In the event of any discrepancy between this English translation and the original Japanese language document, the original Japanese language document shall prevail in all respects.
The FY2020.6 Q4 financial results are scheduled to be released at 15:00 or later on August 6, 2020.