Mercari Inc

So we would like to begin Mayor Kari's FY 2024 second quarter earnings briefing. The earnings briefing will be conducted by Executive Officer and CFO of Mayor Kari, Sayaka Eda. Eda will take it from here. Thank you. Good afternoon. Good afternoon. Thank you for taking part in Mercari's FY2024 second quarter earnings briefing. I'm Eda, Executive Officer and CFO of Mercari. So one year ago, we updated our group mission, circulate all forms of value to unleash the potential in all people. In order to achieve this new mission, group mission, we have worked towards this mission, and we have made great progress. This is the agenda that we will be covering today. First, starting with the financial summary. These are the progress and highlights for FY2024 second quarter. first starting with a consolidated basis. We achieved our highest ever revenue as a result of steady growth of each business and group synergy. We have continued to invest in the future growth, and we have also managed the company by consciously balancing profitability. And as a result, we recorded core operating profit as expected. Now, looking at marketplace, initiatives for the loyalty program and areas we wanted to enhance, including cross-border transactions, category growth, B2C, contributed to GMV growth. As a result, GMV grew 10% year-on-year, and adjusted core operating profit was roughly 37%, which were as expected. Next, fintech. We strengthened our investment in MerCard, and as a result, the number of cards issued reached 2.5 million and has been growing very rapidly. The credit balance has exceeded $150 billion, and the collection rate improved to 99.1%. So these have also grown steadily, more so than ever before. And now looking at U.S., MAU has increased QONU for a second consecutive quarter. On the other hand, external factors such as inflation has slowed down purchases, and this situation has continued. Thus, the GMV grew negatively at 12% year-on-year. As a result of efficient marketing, Adjusted operating losses have decreased year on year. These are the second quarter KPI summary. Marketplace, JNV, as we mentioned before, it grew 10% year on year, landing at 280.9 billion yen. Adjusted core operating margin was 37%. For fintech, the number of users grew steadily to 16.83 million, and the credit balance was 154.9 billion, and the collection rate was 99.1%. For U.S., GMV decreased by 12% year-on-year to $239 million, and MAU dropped 2% to $5.07 million. This is the revenue and core operating profit by segment. The revenue and core operating profit by segment are as you see here. Now moving on to the financial highlights for each business. First, on a consolidated basis, these are the Revenues and core operating profit, we achieved record high revenues, and core operating profit were as expected, and as was the case in the first quarter, it grew significantly year on year. On the other hand, especially in the second half of the year, we will increase investment in Merit Card and incrementally increase investments into... On-demand labor business, which we mentioned at the end of the first quarter announcement. So we will be investing in this new business, so we do not expect a year-on-year increase in profits for the full year. Moving on to marketplace for the second quarter. This is a progress. At the beginning of the fiscal year, we announced this business policy, so we will... Make sure that we will be continuing with disciplined investments and focus on top-line growth. So initiatives for the loyalty program and areas of enhancements contribute to the GMV growth rate of 10% year-on-year. So as I mentioned before, loyalty program and areas enhancements contributed to the GMV growth rate of 10% year-on-year, and the adjusted core operating margin landed at 37%. So thus, we continue to achieve stable growth and high profitability as we announced at the beginning of the fiscal year. AmeriCorps users contributed to increase in ARPU, and we continue to see synergies from our loyalty program. And our initiatives that focus on areas of enhancement contributed to GMV growth as well. For example, with cross-border, we have expanded our partnerships, and we our joint programs with our partners for fruit, and our efforts to strengthen categories such as smartphones that we started in end of September, and also strengthening fashion in time with demand fluctuations at the end of the year yielded favorable results as well. With regards to B2C, We are aiming to increase API partners and also expanding outlet and reuse affiliates. This is the JMV and MAU for the marketplace. As I already mentioned, JMV, the MAU campaigns and also offline initiatives marking the 10th anniversary of our service launch. resulted in greater exposure and higher MAU of 9% higher at $23.5 million. And this is the revenue and just the core operating profit. With the growth in GMV, we achieved steady growth of revenue and also continued high profitability. This is the cost composition of the marketplace. By increasing investments in areas of enhancements for this fiscal year and initiatives that will contribute to mid-term growth, the promotional cost ratio has increased quarter on quarter. For the second quarter, second quarter tends to be our high season, and we have focused on top-line growth and profitability as well. This is something that we are focusing on throughout the year. So... Q on Q fluctuates, and we expect this fluctuation. This is the product initiatives for GMV growth, and I touched upon this earlier, but I would like to go into more detail. During the first half, we focused on making marketing investments and product enhancement coinciding with a high demand period. So this is what we focused on. During the first half, especially with respect to enhancing categories or strengthening categories, we have improved UX because we expect midterm growth in this area, and this contributed to GMV as well. If you can go back one page again, for example, smartphone, iPhone, a new iPhone was released, so we offer smartphone data deletion service and listing fee refund campaign at the end of September to coincide with high demand. And so we saw... great activity in terms of smartphone, and this has continued in October. We are continuing to see positive impact. And fashion, we added a bundle purchase feature and implemented seasonal campaigns for the fashion categories as well. And we also saw GMV contribution for this category. This is the on-demand labor business, which falls under marketplace business. And we did mention this in the earnings briefing earlier. But we are going to be launching on-demand labor business. And this is going to be added to the AmeriCorps ecosystem. So time and skill will be added. ecosystem and we will accelerate the circulation of all forms of value. And we aim to launch this in spring 2024, so we are developing our product and signing up partners. And these are the three strands of our service as we enter the on-demand labor business market. So first, we have a multi-generation base of over 23.54 million users across Japan. So we will be able to acquire crew quite efficiently. And we offer pay, buy, and sell, but we will add time and skills in the form of work. And this can all be completed in one app. So people will be able to experience... the circulation of all forms of value. Number three is a safe and secure usage environment so people can be rest assured, trust the service, and enjoy the new service we will be introducing. After the service is launched, we want to make sure that this business will grow so we will gradually invest to support the growth. of this new business. Next, moving on to FinTech. This is a progress up to second quarter. At the beginning of the year, this is the business policy that we introduced, focused on acquiring Mercari holders and into an enhanced group synergy. As I mentioned earlier, we have strengthened our investment in Mercari user acquisition and our And we've surpassed 2.5 million cards issued. It's been about a little over a year since we launched AmeriCard, started issuing AmeriCard. And this is quite a fast speed for the industry. So we have been acquiring users at very rapid speed. And We are seeing card users are helping drive up the ARPU within Mercari, resulting in greater group synergies such as GMV growth. As a result, during the second half of the fiscal year, we will further strengthen our investment in user acquisition. So we will acquire Mercari users. and expand smart payments. And we have seen an increase in credit balance as well. It has reached over $150 billion. The collection rate has also both improved. So in the second quarter, we received non-recourse financing to improve liquidity. We have built a sound service with a solid financial foundation, so we have struck a balance between both. And also the number of Mercoin accounts, crypto accounts. After the service was launched seven months ago, we have topped one million crypto asset accounts. So New accounts during the eight months from the end of February to end of October in Japan was 1.77 million. So we are leading the growth in crypto asset accounts. We hope that crypto assets will become more accessible, and we will be adding a feature, developing a feature that will allow users to make payments on Mercari and Bitcoin. This is the revenue and core operating profit for FinTech. With the growth of fixed amount payments in Merit Card, the revenue has increased. So Merit Card has contributed to the group synergy, and so the second half of the year we want to make sure that we are acquiring more users. This is a reminder, but this is the AmeriCard growth we launched in November 2022. And this is a trajectory that we have traveled on. And we have already surpassed 2.5 million cards issued. And there are five key benefits that we offer, features that we offer. So we have five unique features. First, We provide unique credit based on behavior history and requiring merit pay. And based on activity, you will get more points back, so point back rate that increases through the actions of paying, buying, and selling. And we also offer flexible control of repayment date and timing. so we are offering more convenient features to our users. And our MerCard is a numberless card and a safe and secure design with all settings configured entirely using the MerCard Marketplace app. And users who have already verified their identity can apply for a card in as little as a minute using the MerCard Marketplace app. So with these features, we have acquired a lot of new users, but spring is when people start their new lifestyles, new chapters within their lives, so we want to continue to capitalize on this opportunity and also continue to launch campaigns targeting Zenji and acquire more users going forward. We've already talked about the credit balance. It's over 150 billion yen, and the collection rate is now 99.1%, and we are regularly updating the credit logic and strengthening activities to collect payment. So we have surpassed the past collection rates, and we have achieved even higher collection rates. Sorry, we went back a page. This is the financing for credit services. This is our thinking, summarized. FY2023, so we wanted to make sure that the confidence in MerPay Smart Payments credit itself, rather than company credit, will be improved. So our credit services are growing, and we wanted to make sure that we have sufficient financing So this is the procurement financing policy that we have implemented. And going forward, we will focus on non-recourse financing to promote liquidity, but we would also like to continue to diversify our fund procurement as well. This is the number of users and verified users. The number of users and verified users have increased steadily, and identity verification rate has surpassed 90%. As I mentioned in the past, we have a lot of verified users, which contributes to a safe and secure environment. And we have credit and crypto, and also on-demand labor business as well. So the verified users contribute to a seamless user experience. This is the U.S. business progress up to the second quarter of this fiscal year. This is the business policy that we have announced at the beginning of the fiscal year. We will focus on refining the product to strengthen retention on existing users and aim to get back on track for growth, focusing on engaging Generation Z for the future growth. As of December, first half of the year, the growth rate was negative. However, the second quarter, we did see recovery of the growth rate, and we also made disciplined investments despite the holiday season. As a result, adjusted operating losses continue to decrease year on year. Mainly, we also have developed products to attract Gen Z. As you can see below, in order to attract Gen Z, we have launched POC, a face-to-face transaction in certain areas, and we have also introduced the community feature, which I will go into more detail later. And in order to... We also have implemented new shipping fees as well, new plans, shipping costs to expand the scope and to promote purchases. We have implemented effective marketing initiatives as well. And so MAU has increased Q&Q for second consecutive quarters in a row. And long-lasting inflation has slowed down demand thus. GMV grew negatively at minus 12% year-on-year, as I mentioned earlier. This is the revenue and the adjusted operating profit. We significantly improved adjusted operating losses year-on-year due to robust management. This is the product development for targeting the Gen Z. So we have implemented community functions. In terms of the community function, if somebody is interested in a specific category, We, from December, we are providing a community for people who are interested in a specific category, and they can comment on each other, comment to each other. And not only coming to Merakari when you transact, but they can talk about their hobbies and gather information about their hobbies as well. So we want people to just come to the app and stay on our app longer. So this will help. We want to help activate the community, and hopefully this will lead to transactions as well. So we added this feature. And after the second half onwards, we want to make sure that we're nurturing this community as well, and thereby increasing the number of transactions and face-to-face transactions. Gen Z users. are sensitive to shipping fees as well as the transaction fees as well. And face-to-face transactions have become more commonplace in the U.S. as well. So we are conducting a POC of this face-to-face transaction feature. So we covered Marketplace, Fintech, and U.S. We went through the each business's performance. And I would like to summarize our approach to the second half of the fiscal year. First, starting with the consolidated basis, we want to acquire micro-users for mid-term growth and gradually increase investments for the on-demand labor business. And so because we will be entering the on-demand labor business, and we will gradually increase investment. For marketplace, we will continue with disciplined marketing and focus even more on product enhancement during the second half of the year. Once the on-demand labor business launches in spring 2024, we plan to gradually increase investment for fintech. We are seeing positive impact in the ARPU and group synergy. And as I mentioned before, in April, many people start new chapters of their lives. So in time with this, we want to increase our investment for AmeriCorps user acquisition. We plan to invest more in the second half than the first year in fintech, and we anticipate an unadjusted core operating loss for this fiscal year for fintech. For U.S., we are anticipating similar levels of adjusted operating profit as the first half in line with our policy to continue strict cost control. We will continue to develop product for Gen Z. We will continue to focus on developing product for Gen Z as well. This is a financial policy. So we will strengthen our... capital through management focused on balancing growth and profitability, and we want to diversify debt financing methods, lengthening financing periods, and spread out repayment periods to strengthen financial foundation. So this is the policy that has been in place, and we will continue to follow this policy. And with respect to FinTech, to... counterbalance the growing credit balance. As I mentioned before, in principle, we will focus on non-recourse financing to improve liquidity. And we will also maintain and improve our collection rate so that we can secure better terms for financing. And through asset and liability management, we will control liquidity and interest risk. And we get asked this question quite often, so we have highlighted the shareholder returns here. For the time being, we will prioritize strengthening our financial foundation through investment and growth opportunities and our internal reserves. And this is how we would like to give back to our shareholders. Thus, we do not have any plans to pay out dividends at the moment. That concludes our FY2034 second quarter earnings briefing. Thank you.