Mercari Inc

So we would like to begin Mayor Kari's FY24, ending in June, full-year earnings briefing. Thank you for joining this session and taking time out of your busy schedule.

I am the emcee today.

My name is Kyoko Kane. Thank you for having me. So I would like to go over the... the topics that we will cover today. First, CEO Shintaro Yamada will be talking about the midterm policy. And then afterwards, SVP of corporate and CFO Sayaka Eda will talk about the FY24 performance as well as the FY25 ending in June financial forecasts and business objectives. Please refrain from streaming the entire video presentation. Without further ado, Yamada will begin his explanation.

Apologies.

Apologies. Thank you for taking part in Mercari's full-year earnings briefing for FY 2024 ending in June. I'm Mercari CEO Shintaro Yamada. These are the topics we will be covering today. First, I will provide a summary of the last fiscal year and then Eda will describe it more in detail. This fiscal year, we focus on balancing growth and profitability while creating new businesses and accelerating the growth of existing businesses while looking 10 years ahead. As a result, as a group, we marked record high consolidated revenue as well as core operating profit. So we made steady progress this year. In particular, we were able to strengthen the profitability of our existing businesses. With respect to marketplace, the adjusted core operating margin reached the upper limit of the full-year target of 40%, and FinTech realized high revenue growth and core operating profit. Moreover, the core operating loss of the U.S. business significantly decreased. Secondly, we did well with respect to new services and areas we wanted to enhance. We launched MerCard at the end of 2022, and we've issued more than 3.4 million cards now. And MerCard Hello, which we launched in March this year, welcomed 5 million registered users in nearly three months after launch. GMV from cross-border transaction has grown 3.5 times year-on-year, and the GMV from B2C has grown 2.7 times. So these enhancement areas grew dramatically during this past fiscal year. On the other hand, what I believe we could have done better was accelerating the growth of our existing businesses. We wanted to achieve significant top-line growth with our marketplace business, but we did not get satisfactory results, landing at 9% year-on-year GMV growth, even though we were aiming for over 10% growth. Furthermore, with respect to the U.S. market, there are still challenges we need to address as we were unable to get back on the growth trajectory partially due to impact from extraordinary factors. We will make sure to learn from this and apply our learning to our future growth. This fiscal year, we made great strides with respect to our organization by building a global organization foundation and strengthening our governance. With the transition to a company with a nominating committee, we further improved effectiveness as a monitoring board, and with the nominating committee, we are currently developing a succession plan. Next, I would like to take you through Mercari Group's midterm policy. Our group mission is is to circulate all forms of value to unleash the potential in all people. We would like to realize a world where people around the world will be able to do things they weren't able to do before, contribute to society, or lead unique and rich lifestyles. To do so, technology will play an important part in connecting people around the world, and by using technology, Cutting-edge technologies such as AIOM and blockchain, we hope to build an ecosystem where all types of tangible and intangible values can circulate. To achieve our mission, we have continued to grow while creating group synergy by using our business platform such as Mercari C2C MAU to expand our services to MerPay, B2C, and on-demand work. This thinking has not changed, will not change. We will continue to expand into areas where we can utilize our existing businesses and thereby realize this continuous growth. Here are the midterm objectives and focus areas for each of the key businesses. First, starting with group-wide. To build an ecosystem, we will work with various external partners and promote global expansion by growing our U.S. business, and strengthening cross-border transactions. Moreover, to create a business foundation to support our growth, we will create a borderless organization where talent from all over the world can thrive and continue to strengthen our IND efforts. With Marketplace, we want to achieve stable growth of our C2C business and lead the market with rapid growth of cross-border transactions and B2C businesses. To do so, we will utilize AI LLM to redesign the UI UX of our services and strengthen our high price point categories. Regarding on-demand work, we will increase the number of workers and partners to become number one in the industry. For FinTech, we will continue to realize group synergy with respect to payment and expand our credit balance so that it will become Mercari Group's second revenue stream, achieving more than 10 billion yen in revenue. In the U.S., we will, in principle, continue to achieve break-even, focus on acquiring users from our main target group, Gen Z, and expand cross-border transactions from Japan. We will continue to hone our services to realize sustainable growth. This graph describes the next three years of Mercari Group's growth. Marketplace has grown rapidly, surpassing 1 trillion yen in GMV. Each year, rapid growth, is becoming increasingly more difficult, but we still believe there is ample potential. Thus, we will continue to realize steady growth and high profitability. In addition to stably growing CTC, we will add high growth potential BTC cross-border transactions, on-demand work, fintech, and the U.S. businesses. and the U.S. business so that our group will be able to achieve double-digit revenue growth over the next three years. Since our founding, we have continued to prioritize rapid top-line growth. From FY22, second half of FY22, we have incorporated the concept of profit into our management policy Thus, we started focusing on balancing top-line growth with profitability and on improving the group's earning potential. In FY25, we will take this a step further and achieve significant top-line growth that is accompanied by increase in profits. To grow in the future, it's essential to invest in rapidly growing businesses. We will invest in rapidly growing businesses capable of creating group synergy to realize our core OPK group of 25% as a group by FY27. This concludes my explanation and I will take it from here. FBPO corporate and CFO Sayaka Eda We'll talk about the FY24 financial overview as well as the financial forecast and business objectives for FY25. Good afternoon. My name is Eda, AmeriCorps CFO. I will take you through the financial overview of FY24 and our business objectives for FY25. This is the consolidated results. As Yamada mentioned earlier, from here forward, in principle, we will grow the top line as well as increasing the core OP. As you can see, the marketplace has been growing stably, and the fintech business has grown rapidly as well. So we have achieved revenue growth of 9% year-on-year, landing at 187.4 billion yen. The core OP marketplace has become highly profitable, and the fintech business has become profitable as well. And the reduction of operating losses in the U.S., these factors have contributed to our core OP, which was plus 13% year-on-year finishing at 18.8 billion yen. Thus, we have marked record high revenue and core OP. This is the consolidated results by quarter. the marketplace growth rate was slightly slower than expected in the fourth quarter. And as a result, as a group, we tightened our investment in response to the top-line situation, so the operating core profit was 5.4 billion. And I would like to start with a marketplace summary. Okay. So this is a policy that we introduced at the beginning of this fiscal year. We have continued to make disciplined investments and focus on top-line growth. And we also undertook marketing activities and focused on enhancing certain areas. And we wanted to grow the operating margin by 34% and grow the GNV by 10% through these efforts. And as a result, BTC and cross-border growth Significantly over the past year, we were able to see that, and the loyalty program has contributed. But the full-year GMV grew by 9% year-on-year, so it fell short of the 10% threshold that we were aiming for. The GMV for cross-border transaction grew 3.5 times and BTC 2.7 times year-on-year, And in March, we released the service, Mercari Hello. And under three months, we have welcomed more than 5 million users. So it's doing quite well. And these will be supporting the growth in the future. And they have steadily grown over the past year. And Mercari Hello is part of the marketplace. And Mercari Hello This includes the investment to mark our hello, but 30% to 40% was the OP margin guidance, and we were able to book 40%, a very high profitability for this fiscal year. This is the full year results for the marketplace. GMV and revenue increased. There's a slight difference in the growth rate, but... We changed the way the sales were booked. And just the points were actually deducted from a portion of the point expenses have been deducted from revenue and advertising expenses. That's why you see those figures are slightly different. This is the marketplace profit and cost composition. And if you look by quarter, On quarter-on-quarter, it does fluctuate, but from our point of view, we want to make sure that we hit our guidance throughout the full year. So we're not really too concerned about the Q&Q percentages. This is the marketplace results by quarter. Next. Next. Moving on to the FinTech summary. The business objective we introduced at the beginning of the fiscal year, we were going to focus on acquiring MerCard holders and aim to enhance group synergy. FY24, we focused on MerCard user acquisition, and we have done well. So MerCard has been leading the FinTech business. And we achieved high full-year revenue growth of 40% year-on-year. And the credit business has grown significantly. So our profit base has expanded significantly. And as I mentioned before, as a group, we wanted to focus on top-line growth as well as disciplined investment. So we have been able to book full-year core operating profit for students the second year in a row. And in terms of the group synergy with people who have MerCard, we've seen that the ARP of MerCard card holders on MerCard has improved by 50%. And also, we have been able to reduce payment fees that we would otherwise have to pay to external partners. And We started the crypto account service, and in a little over a year, 2.2 million accounts have been created. This is number one in the industry. So we have been able to acquire many casual users. This is the fintech results for the full year. As I mentioned before, the full year revenue growth was 40% year-on-year, landing at 43.7 billion yen. And OP, core OP, was also 700 million. And this is, these are the results by quarter. This is the breakdown of revenue as well as credit balance and collection rates. So from two years ago, we talked about the fintech business, the credit, Credit business will be the profit center of the fintech business. And as you can see here, the largest portion contributing to the revenue is the credit business out of all of the other fintech businesses that we are offering. And year-on-year, it has grown by 60%, so it's growing significantly over the recent period. Okay. fixed amount payment is in particular contributing significantly and you can see that the credit balance has gone by 52% to 130.1 billion yen but we're not simply just increasing the credit balance we want to make sure that it is of high quality so the collection rate is already high but we have been able to further improve that so we have been able to maintain and improve our high collection rate. This is a U.S. summary. The business objective that we introduced at the beginning of the fiscal year was focus on refining the product to strengthen retention of existing users and aim to get back on track for growth, and also focus on engaging Generation Z for future growth. Unfortunately, External factors, including long-lasting inflation, has impacted our business, and we haven't been able to get back on our growth trajectory within this fiscal year. In March, we have actually offered a flexible fee in March to make sure that we have more listings and more opportunities And actually, purchasers were able to list their products for free, and purchasers' buyers would pay for the service. And so we changed the business model significantly, and as a result, we've seen some positive results, but we have not seen significant contribution to the GMV yet. Over the last fiscal year, We re-examined our fixed costs, including marketing and payroll expenses. Hence, the losses shrunk drastically year over year. And in the fourth quarter, we've already restructured our organization. So in FY25, we want to break even. So we have, at the beginning of June, restructured our organization. These are the results for U.S. GMV and OP have grown negatively, but the adjusted operating profit, as I mentioned earlier, we re-examine the costs, continue to re-examine the costs, so we have significantly decreased the operation losses. These are the results by quarter. Next, I would like to tell you about the business objective for FY25. Until now, at the beginning of the fiscal year, we did not provide a financial forecast. But starting FY25 ending in June, we have started to provide a consolidated financial forecast. In terms of revenue... We talked about 184 billion, but this will grow to 200 to 210 billion. The core operating profit last year, or FY24, was 18.8%, and we believe that this will grow 1733% to 22 to 25 billion yen. The core OP will continue to stock up and so the business will continue to grow and we expect increased revenues from continued business growth and we believe that the core operating profit will also grow mainly in the second half of the fiscal year. This is the business objectives. So we will expand the business focusing on Group synergy. And we'll make sure that the top-line growth will be accompanied by profit increase. The guidance is, as I announced earlier, marketplace. CTC is our mothership. And we will utilize AI LLM and redesign our UI UX. And we will also focus on strengthening high price point categories to grow the CTC business. In addition... FY24, we saw that cross-border transaction and B2C grew rapidly. So these are enhancement areas, and we hope that these will drive the marketplace growth overall. And as a guidance, GMV growth will be around 10%. We expect that just the core operating profit to be around 37% to 42%. As we invested in Mercari Hello and FY24, likewise, we will invest in this business to increase the number of workers, recruit partners. There are many areas to invest. But the operating profit margin that we introduced does include investments into Mercari Hello. Moving on to FinTech, in FY25, we would like to transition into the continuous profit increase phase. And Merit Card user acquisition is an area that we focus on, but in FY25, we will continue to focus on user acquisition and also promote usage to new and existing users. And In addition, we want to add features to crypto assets. So we believe we want to aspire to a core operating profit of over 3 billion yen with a fintech business. Next, moving on to U.S., we would like to get back on the growth trajectory, which we were not able to achieve in FY24. We already started in July, but... We have started cross-border transactions with Mercari Japan, where U.S. buyers can buy goods from Mercari Japan. So a good quality inventory is our competitive edge. And so we are offering cross-border transactions. And in March, we talked about we've changed the fee model. So Through these efforts, we want to reinvigorate demand and get the business back on the growth trajectory and break even this coming fiscal year. This is the Japan Vision Group Synergy Overview. Until now, Marketplace, Fintech, they Of course, we utilized the assets that they both had effectively. And in FY24, we added on-demand work to Marketplace. So this is the Japan region's synergy utilizing the assets that each of these businesses have. And we will more efficiently improve the product UX and execute marketing initiatives thereby create great synergy. among these businesses, and I would like to go back. And I talked about this when I talked about Merit Card, but by getting people to use Merit Card, this will help increase the ARPU within Merit Card and reduce payment settlement fees as well. So I mentioned that earlier, but in addition to that, Merit Card Marketplace has an MAU of $23 million. over 23 million, and also we have 16 million confirmed users in fintech, ID confirmed users. So these are very important assets which we would like to utilize to help expand the user base for the other services. So, of course, we want to connect one business with the other and create synergy. And this is the business objectives for marketplace for FY25. So C2C stable growth. In addition to that, we want to focus on cross-border transactions and B2C high growth. And through these efforts, we want to challenge GMV growth of 10% year-on-year and adjusted core operating profit margin of 37% to 42%, as I mentioned earlier. B2C. I mentioned that it grew significantly last fiscal year. As you can see on the graph on the right, by 2030, there's great expectations for this market to grow. So as the market expands, we hope that we will be able to grow rapidly as well. Of course, C2C is going to be the mothership, the largest portion of marketplace. But cross-border transaction B2C, this is a role that the B2C and cross-border transactions will play within the overall picture. So we talked about cross-border transaction. GMV grew 3.5 times year-on-year, but it is actually promoting purchases. Yes. So overseas customers are able to buy unique and high-quality inventory, or there are many products that have been listed for a long time but have not been sold, so it gives these products opportunities to be purchased. And we will also strengthen high price point categories to improve AOV of the marketplace overall. And with respect to B2C, this is strengthening listing, contributing to strengthening listing. So, of course, the merchant can provide different types of products, and there are also products that, not individual users can list. They don't have access to. So by increasing the number of merchants, we can actually increase the number of products and strengthen our categories. So cross-border transactions, B2C, we want to grow these businesses to make our marketplace even more appealing. So that's what we would like to focus on doing. For marketplace... And on-demand work business objectives are, as you see here, as you can see, the market size, potential market size of on-demand work is significantly large. And we just started the service, but we want to make sure that our service can be utilized across the country, and we want to become the number one service in Japan in the midterm. These are the business objectives for the fintech business. The credit balance is growing. And, of course, as I mentioned before, we will enter the continuous profit increasing phase. So credit will continue to grow. And this is relying on acquiring even more AmeriCorp users and encouraging usage. And we also added a savings function to the crypto asset business. And we will also improve the U.S. as well to make sure that we can invigorate activities. These are the business objectives for the U.S. market. So we want to commit to break even and aim to get back on the growth trajectory. That's the policy for FI25. I mentioned this earlier, but we want to offer Mercari Japan inventory to U.S. users, so we started cross-border transactions already. So we would like to give these opportunities to U.S. users, differentiate ourselves, and we also updated the fee structure in March, and we plan to utilize machine learning to implement a system that changes the fee rate depending on demand or category or pricing, and hopefully thereby stimulate demand and purchases. So FI25, we want to break even in the U.S., and these are some of the discussions that we had internally to arrive at this point. At the beginning of FY23, we were creating a three-year plan, and the third year is FY2025. And internally, we wanted to break even in the third year, FY25. And at that point in time, we wanted to achieve high GMV growth to achieve break-even. So in order to do so, we wanted to add features, adjust marketing, but due to external factors as well, we fell short of our goal. And in March, we drastically updated the product and also fundamentally changed the fee structure as well. And we wanted to re-bolster the GMV through these efforts. So we updated the product to re-bolster GMV. As I mentioned before, we've seen some positive impact on certain KPIs. However, we need to make more adjustments to the fee structure. So at this point in time, we are not seeing sufficient impact on the GMV. So FI25, just through the GMV growth, we won't be able to break even in FI25. So in June, we already restructured the organization, including large-scale layoffs and Because of that, to take responsibility, we cut the executive composition over a certain period of time. In FY25, we want to achieve break-even in terms of FIRS, core operating profit. Lastly, these are the financial policies. On a consolidated basis and principle, we will strengthen our capital through top-line growth that will lead to increased profits. We will diversify debt financing methods, lengthening financing periods, and spread out payment periods to strengthen our financial foundation. So we've done this, but we'll continue to do this. to make sure that we have a stable financial foundation. And also, FinTech and the credit business, in principle, we will focus on non-recourse loans, and we will promote non-recourse receivable liquidation, and this is something that we've already promoted in the past, but FinTech we will procure funds in this way for fintech and the credit business. So we want to stabilize procurement and also reduce the cost of procurement as well. This is going to be a high priority for the fintech business. And our credit balance has become quite sizable, so we want to strengthen our control and interests risk through LLM. And with respect to shareholder returns, for the foreseeable future, we will prioritize strengthening our financial foundation through investment and growth opportunities and our internal reserves. So at this point in time, we do not have plans to pay out dividends. This concludes our earnings briefing for FY24 ending June. Thank you. This concludes Mayor Carr's FY2024 ending June earnings briefing. Thank you very much for joining us today.