Mercari Inc

It is time. So we would like to begin Mercari Inc's FI2026 four-year earnings briefing. I will be the MC today. My name is Takasu. Thank you. Today we have with us representative executive officer and CEO, Shintaro Yamada, as well as a guest executive officer, SVP of corporate, and CFO Sayaka Eda here with us today. They will take us through the full year briefing for FY2026. After the presentation, we will have a Q&A session for the media. And this session is estimated to finish at 4.45. Please refrain from recording and streaming the entire session.

Mr. Yamada, please go ahead.

Thank you for joining Merkari's FY2026 four-year earnings briefing. I'm Shintaro Yamada, Representative Executive Officer and CEO of Mercari. This is the agenda we will follow today. SVP of Corporate and CFO Eda will take you through the recent earnings. As for my part, I would like to start with a summary of FI2036 and the progress with respect to our midterm plan. This is our achievement in FY2026 of our consolidated business forecast. This fiscal year, mainly our marketplace business witnessed earlier than expected positive impact from improvements in our product's core experience, which led to two upward revisions in our forecast during the fiscal year. Ultimately, we booked 229.2 billion in revenue and 44.1 billion in core operating profit, exceeding our revised targets on both fronts, achieving record high results. Revenue grew 19% one-on-one, recovering to double-digit growth for the first time in three years. Next, moving on to the summary. We positioned this fiscal year as a year of preparation for FY2027, the final year of our midterm plan. We have endeavored to achieve top-line growth that leads to increased profits and to expand business centered around group synergy. So we have focus in these areas. While focusing on making enhancements to our product's core experience, we have seen faster-than-expected results this fiscal year. The results can be summarized into two categories. One is return to double-digit revenue growth. We announced at our FI 2024 full-year earnings briefing that we will achieve double-digit CAGR growth over the mid-term by FI 2027. Having said that, we were unable to realize the desired top line growth in the first year in FY 2025 of our midterm plan. Thus, we refocused our efforts to further accelerate our top line growth in FY 2026. As a result, as you see here, we were able to achieve high growth in each segment and recover to double digit consolidated revenue growth. Second is establishing the revenue base of the group. During the midterm plan period, we aspire to create a strong revenue foundation so that the marketplace fintech and US businesses can each contribute to profits. We invested and so the seeds for our future growth and we examined our portfolio including prioritization and divestment. Company-wide usage of AI has improved productivity contributing to strengthening of groups revenue base. The revenue and profitability of all of our three business segments improved and marked record high results. We saw solid results this fiscal year. However, we know that there are still some challenges, namely creation and expansion of group synergy, growth of the marketplace MAU, and US GMV growth rate. We will overcome these challenges to realize even faster results. We also scaled up our AI initiatives over the past fiscal year. We declared at the full year announcement last fiscal year that we will evolve into an AI-native company and adopt an AI-driven approach in everything that we do to fundamentally transform our organization and our product. We have now completed the foundation for our AI-native transformation. First, 100% of our employees now use AI tools, and collaborating with AI daily has become commonplace. The next stage involves engineers and non-engineers not only using AI agents, but creating AI agents to solve issues faced during daily work. To further improve our AI maturity, we will continue to run this AI Agent Day initiative regularly so that we can become even more AI native. During the first half of the fiscal year, through the AI Task Force, we conducted a comprehensive review of all business processes and identified approximately 1 million hours worth of productivity improvement. Then we transformed our business process using AI and managed to realize nearly half, or 495,000 hours of improvement. Moreover, we have identified 770,000 more hours of potential improvement. Compared to two years ago, output per engineer has increased 7.6 times, thereby dramatically improving the speed at which we enhance our CX and add or improve new functionalities. We are also seeing concrete results in AI implementation into our products and development process. For example, we have significantly improved the accuracy of our recommendations in our search and home screens and improved the listing completion rate through AI listing support feature, which uses AI to make suggestions, thereby increasing transaction activity. Furthermore, we enhanced fraud monitoring utilizing AI to establish a safer and more secure transaction environment. We believe these core product improvements are contributing to GenV growth. In addition, with AI-driven development, we are increasingly able to develop new services and features with fewer engineers and shorter lead times. And to support the speed of this AI-native transformation, we established a dedicated AI governance organization and formulated the Mercari Group AI usage policy to balance both speed and security. We will continue to strengthen our organization by establishing a permanent AI task force and continue our journey to become an AI native company. Next, I would like to share our future direction with respect to our AI native transformation. First, with the adoption of AI, our business and development are dramatically accelerating. To maximize this speed, we will update the way we work, organizational structure, and HR framework with AI in mind. Our former CTO will now serve as both CHRO and chief AI officer, enabling us to promote both AI and HR. We will redesign our workflows and organizational structure based on AI agents. We will also continue with our AI native transformation in both product innovation and organizational reform. With respect to product innovation, we will fully adopt AI to radically change our service. More specifically, to enhance our CX, we will accelerate the development of a proprietary AI model based on Mercari's data and use cases. This will be implemented to our search and recommendation features. Moreover, we will use AI to enhance CS capabilities to improve response speed and enable multilingual support. We will also create a safer and more secure environment by strengthening fraud detection and improving authenticity appraisal speed. To provide our customers value unique to AI, we will also develop shopping agents among others. With respect to organizational reform, we will promote the development of AI agents by engineers and non-engineers alike. We hope to completely establish an environment where AI agents collaborate across all business domains. We will standardize AI pods with small group of engineers who will be involved in development from end to end, from requirement definition quality assurance to release. By doing so, we want our teams to transcend organizational roles, enable more products, and accelerate new business creation and new AI-based user experiences. In addition, we want to strengthen AI-based decision support, delegate authority to frontline teams, and renew approval processes. By redesigning AI implementation and evaluation system as a single integrated effort, we will accelerate our business execution speed. Furthermore, we will utilize AI for business reviews conducted by the risk management division, thereby building AI-driven capabilities to support both offensive and defensive initiatives. Here is our midterm plan progress to date. We are making steady progress to achieve both double-digit CAGR revenue growth and core operating profit CAGR of more than 25%. We have achieved our core OP target one year ahead of schedule. We also plan to achieve our revenue CAGR target, and we will endeavor to continue to grow both revenue and core OP. We have also shared our 2B vision over the midterm for each of our core businesses. We updated a few things, but no major changes have been made. We will continue to do our best to achieve these goals. We are undertaking these initiatives to deliver on our group mission. Currently, we are working on our next midterm plan, which will start in FY2028 to be announced next fiscal year. We will continue to do our best to achieve our mission, circulate all forms of value to unleash the potential in all people. This concludes my presentation. Eda will now introduce the FI2026 financial results. Thank you very much. Thank you very much, Mr. Yamada. Ms. Eda, please go ahead. Good afternoon. I'm Eda, the CFO from here. I will take you through the financial results for FY2026. Here is the consolidated result forecast and guidance achievement for each business. Yamada talked about the consolidated results. But we have made upper revisions twice this fiscal year to both revenue and core OP. And we landed at 229.2 billion yen, growing by 19% one on one. And core operating profit was 44.1 billion, growing 60% one on one. So we have grown significantly over the past fiscal year. And this is by business, per business marketplace. We did update the guidance as well in the middle of the fiscal year. But year on year, we grew at 15%. So we have achieved double digit growth for the first time in a while. And core operating profit was $42.9 billion, significantly overachieving the guidance. And fintech and U.S. We did not make upward revisions to these businesses, but we have dramatically overachieved the guidance that we announced at the beginning of the fiscal year. Fintechs, the range was 5 to 7.5 billion, but core operating profit rounded out 9.1 billion. And with respect to U.S., we wanted to grow positively year-on-year while maintaining break-even. But GMV growth rate was 11% 1Y and core operating profit was 2 billion. So all of the core businesses we saw excellent performance. This is the consolidated results for the full year and this is the quarterly results. With respect to the quarterly results, as I explained during the earnings briefing for Q3, we have invested our core OP towards our future growth. First half, we saw great traction. So we started to invest, additionally invest towards FY2027 and beyond. So we executed on those plans as initially planned. Moving on to performance by business, first starting with the marketplace. As we mentioned at the beginning of the year, these are the business objectives. And we're going to focus on enhancing the product's core experience and strengthen cross-border transactions. And we wanted to lay the foundations for accelerating GMV growth in FY2026-7 and beyond. and MAU went beyond 24 million. And as I mentioned before, the full year of GMB growth rate was plus 15% year on year, recovering to double digit growth for the first time in three years. So we enabled, or we created a safer and more secure transaction environment and improved usability. So we improved our core experience. So we saw an improvement in a number of users, output and frequency. So these grew in a well-balanced way, and using this as a platform, we have conducted large-scale marketing initiatives such as Super American Market Days to maintain GMV growth momentum. For the focus area of cross-border transactions, we saw strong demand in entertainment and hobby category, with GMV growing steadily to 112.2 billion, approximately 9% of total GMV. So this grew quite steadily. and we also expanded our inventory through our partnership with Tsurugaya and we also released in the fall a global app and direct cross-border transactions. So we started with Hong Kong and Taiwan and in June we started in US as well. So we have been implementing and have made progress with our initiatives for future growth. These are the results for the marketplace. GMV and core operating profit, as I mentioned before, we grew double digits. And as such, core OP has significantly increased as well. This is by quarter. So the fourth quarter GMV was 346.2 billion. growing 26% one-on-one. This grew significantly. FY 2025, it was a very hard quarter for us, the fourth quarter in FY 2025, so the hurdle was low. and due to the Supermarket Mirakari Market Days, it usually tends to be in March and December, and we actually had these large-scale marketing initiatives at high seasons, but for various reasons, we conducted this in June, but we saw great results from Supermarket Mirakari Market Days and solid performance of the entertainment and hobby tech category resulted in high growth this quarter. Moving on. to the core operating profit and cost composition, as I mentioned when I introduced the consolidated results. And as I explained during our third quarter earnings brief, we made proactive investment and marketing initiatives this quarter, including Super Mercari Market Days and in growth for FY27. That's our core OPM, operating profit margin decrease quarter on quarter. However, we have been investing for the next fiscal year onwards, and despite that, we were able to achieve high core operating profit. In the marketplace, we have implemented many initiatives to make sure that we provide a safer and secure environment for a transaction. As a result, GMVs grew quite rapidly. These here are some key topics but for example we implemented a full coverage support program and anonymous return service as well so customer support and which we also provided more guarantees as well and compared to two years ago The rate of increase related to transactions dropped from 0.49% to 0.35%, and the percentage of transactions in which users were compensated within 48 hours improved from last year's figure of 40.9% to a dramatic 92.6%. So we have been able to improve the customer experience. We are also utilizing AI to create fraud detection scores and tighten account restriction, and we also established the Mercari Appraisal Center and waived appraisal costs for items over a certain price. By offering authentication services and defining rules, a number of items safe appraisal was used on nearly tripled one-on-one, demonstrating its contribution to anti-contrafeiting measures. So our measures to provide a safe and secure environment for transaction has borne fruit. Moving on to the fintech business summary. This is the business objective that we announced at the beginning of the fiscal year. We wanted to establish a foundation to become a product that is chosen by users for all payment and credit use cases and for core operating profit of 5 to 7.5 billion yen. With fintech, we managed to grow both the top line and profits rapidly. Thus, the core operating profit, as I mentioned before, was 9.1 billion, so we greatly surpassed the initial guidance. We have issued 6.32 million MerCards, and number of crypto asset trading accounts have grown steadily to 4 million, so we have been able to expand the user base quite steadily. In particular, MerCard acquisition and usage. We have been working on many campaigns together with merchants, and so these figures have grown rapidly. Thus, our external transaction value has grown. So we saw great results in terms of our external transaction value. We have added new features. We have made progress in building a foundation to become a product that is chosen by users. For example, we provided boss functions and crypto assets. We have added a variety of crypto assets as well through this partnership. So by adding new features by leveraging partnerships, We have built a foundation to become a product that is chosen by users for a wide range of payment and credit use cases. These are the business trends. So we both achieve both high revenue and profit growth for fintech. This is for the quarter. So we started with the payment business, but over the mid-term, we believe the credit business is going to be the mid-term growth driver. But we have built a foundation based on credit. Therefore, by leveraging the unique characteristics as a stock business, we have been able to realize steady revenue growth. As I mentioned, This is the quarterly core operating profit and advertising cost. In the fourth quarter, as I mentioned before, with Marketplace, we have been strengthening our investment for FY2027 and beyond. As planned, we have amplified our investment in Merit Card and Merit Pay acquisitions. The advertising spend increased significantly to $5.9 billion. as a result of our efforts. And this is the FinTech expansion of credit balance. It's been going stably. So we have been able to gradually expand credit limits due to our unique AI credit model, which has resulted in high credit balance growth and high collection rate. Moving on to the US business summary. The business objective for the U.S. business that we announced at the beginning of fiscal year is as follows. Continue to break even while aiming for positive full-year GMV growth one-on-one by enhancing the product's core experience and distinguishing ourselves from our competitors by using category-specific strategies. It's quite close to the marketplace business in Japan, but we wanted to focus on improving core We have implemented category-specific CRM measures as well in shipping discount promotions. Therefore, we successfully captured strong demand in entertainment and hobby categories. These efforts enabled us to achieve double-digit GMV growth for the full year. By maintaining disciplined investment, we have been able to achieve a core operating profit of ¥2 billion. So basically, our grassroots efforts to improve our core product has produced early results. Next fiscal year onwards, we have a great foundation in place for growth. And we have achieved the mid-term target ahead of plans. This is the four-year results for the US business. GMV has grown positively this fiscal year and GMV and Core OP reached the bottom. NFI 2025, it has recovered and Core OP has improved every year. These are the quarterly results. Moving on to the financial forecast for FY2027 and business objectives. This is the consolidated financial forecast for FY2027. We aim to achieve a revenue of $260 to $290 billion. Core operating profit will be $45 billion or more. so these are our forecasts from 268 to 290 billion this is the final year of our midterm plan and we have mesh we have Announce that we want to achieve more than 10% CAGR growth over the three years, and this will enable us to achieve 12% to 16% CAGR growth over the three years. And core operating profit, Yamada mentioned that we've already achieved this target ahead of schedule, and three-year CAGR will come up to be about 34% or more. We want to continue to balance high growth with investments for mid to long-term growth while maintaining top-line growth that drives profit growth. So the core operating profit is going to be more than 45 billion. However, taking into consideration the uncertainty of one year investment plans, we have decided to disclose a lower range of the core OP. We may revise our forecast as necessary depending on the progress we make in the first semester. Moving on to the business objectives for the next fiscal year. So I already talked about the guidance, but we want to become an AI native company utilizing AI agents. So we are making company-wide efforts. And the guidance and the objectives for each business, I will talk about these more in detail from the next page onwards. First starting with the marketplace business. These are our business objectives. We aim to... Maintain a high GMV growth rate by focusing on strengthening cross-border transactions while continuing to enhance the product's core experience. And we aim for GMV growth rate of 10% to 15% year-on-year and core operating profit of 45 billion yen or more. So this is our guidance. There are three key important objectives enhancing the product's core experience, enhancing entertainment value, and cross-border transactions. With respect to improving the product's core experience, we want to improve the core experience by leveraging AI. We now have the foundations in place that will enable us to develop more and more features with a smaller engineering team. So we want to continue to improve the core experience, especially customer support structure, as well as the authentication feature. These are very important, and we will continue to invest in these areas to build a stronger product foundation. With respect to I would like to talk about that more in detail on the next page. In addition to enhancing the product's core experience, we want to improve the entertainment value of the core experience to grow both MAU and the time spent on our app with respect to MAU. MAU is more than 24 million now as I mentioned earlier, but the cumulative number of Mercari users has exceeded 60 million. So they're not coming every month, but they're coming and of course there are dormant users as well so we want to reactivate existing infrequent users which will help us improve MAU so there's great potential here and also we want to focus on new acquisitions and acquisitions in the global market through We have seen noteworthy growth in time spent but there is room to improve our current app It's more purpose-specific. People come because they want to buy something specific or sell something. But we want to transform from a purpose-specific service to a place people visit for fun, just browse. And we want people to discover and search for things that they would like. So we want to become a service that people just use day to day. and Visit for Fun. We will add the option feature and enhance the discovery search experience to further increase the entertainment value of our service. Expanding cross-border transactions, if I may touch upon this as well. FY2026, we have aim to grow direct cross-border transactions in Taiwan, Hong Kong, and U.S., and we believe there's still room for growth. So we'll focus on growing the business and also expand the service to other countries and regions. So we will accelerate our global expansion efforts. We will also strengthen partnerships with B2C companies such as Surugaya to increase inventory in the entertainment and hobby category, which are in high demand. Despite changes in the business environment, including higher tariffs, So there was a lot of headwind for the cross-border business, even though we grew quite rapidly. But we were able to expand the GMV, grow the GMV to 112.2 billion. And our direct cross-border transactions in Taiwan surpassed transactions through the partner sites. And we would like to further accelerate our efforts in this area in FY2027 and beyond. These are the major investment areas for marketplace going forward. We talked about investing, improving the core product experience, the CS structure, as well as authentication. We also can develop with smaller pods, but we want to make sure that we will hire AI native We will leverage partnerships and enhance the user experience to seamlessly connect payment credit and other features to achieve sustainable transaction value and credit growth, promote daily use and create opportunities for credit. We will aim to achieve core OP of more than 10 billion yen in FI2027. There are two key focal areas, increasing total transaction value and build further trust. So first, starting with increasing transaction value. It's been more than three years since we started issuing merit cards. but the credit business or transactions have grown 2.2 fold over the last three years. We will aspire to achieve further transaction growth through, it's only been three years since we began, so we don't have all of the features yet. So we want to add more basic features, promote daily use, and we want to improve user experience and receiving points so that our customers will utilize the service day to day. We also want to build further trust So we will also issue a card for payments using the balance and points, thereby expanding the range of eligible users to create opportunities to build trust using MerCard. So we want to expand our user base. We want to create opportunities for people to become eligible for credit using MerCard. So we know that this is going to take time, but over the mid to long term, MerCard and MerPay customers, we want to focus on expanding our user base for MerCard and MerPay. Now moving on to the U.S. business objectives. We want to continue to break even while aiming for a four-year GMV growth rate of 10% or higher one-on-one by enhancing the product's core experience. And we also want to find a winning strategy to achieve strong growth in the mid to long term. There are two key areas that we will focus on enhancing the product's core experience. This is common to the marketplace here in Japan, but we want to utilize AI to develop new features with smaller teams. And we want to update the UI UX and continue to enhance CS and strengthen fraud prevention measures to activate transactions among mainly existing users. And also, we want to drive bigger baskets. In the US, shipping fees per transaction is quite high in comparison to Japan. So AOV tends to be low for our service at the moment, but we want to strengthen bundle purchases so that we can increase the average purchase amount per transaction. and lower the shipping fee composition of each transaction. And entertainment and hobby and fashion are two key categories but we want to drive the activation of transactions across categories and not just in fashion and entertainment and hobby. By the... Until the end of June 2026, Yamada was the CEO of the U.S. business, but as of July 1, 2026, former Mercari Inc. Vice President of Growth Jeff LeBeau was appointed as the new CEO of Mercari Inc. The new CEO will take charge of everyday business management and decision-making, while Yamada will focus on the mid- to long-term strategy that will realize U.S. business step-change growth. So we have changed the structure so that we can drive further growth in the US market. As I mentioned before, we will continue to enhance the UI UX and our core experience. And Jeff will take the lead in this area. And Yamada will continue to focus on strategies for high growth. That concludes our explanation of the business objectives for FY2027. Now I would like to talk about the capital policy. We have just announced at the same time as our earnings briefing, but we will be conducting our first share buyback. At last year's full year earnings briefing, we announced for the first time our philosophy behind capital allocation and our retained earnings for FY2026 will become positive. As I mentioned before, both our consolidated and Mercari standalone retained earnings are positive for this fiscal year. and based on the capital allocation philosophy, we have decided to conduct our first share buyback. With respect to our capital allocation, this is a review of what we announced last year, but we have the credit business, MerPay, and we, of course, we will continue to maintain, we want to prioritize lost cost debt financing and maintain stable access to capital. and cash excluding internal reserves will be used to invest in long-term growth because we are still a growth company and these investments include new businesses M&A but we will also use the funds to buy back shares if the investment in our own business offer attractive returns. So we want to think about share buyback as part of our capital allocation philosophy. And based on this thinking, we have decided to conduct a share buyback. So next fiscal year onwards as well, we want to make decisions flexibly based on our capital allocation policy. But first and foremost, investment in our business will be key. and total number of shares to be purchased will be up to 4 million shares and this will begin tomorrow. And one more announcement. This post is on July 29th, but to realize step change growth, we revised our executive compensation policy. We have upheld an ambitious goal of achieving a market cap of 2 trillion yen within five years to encourage bold challenges and risk-taking by executive officers to achieve step change growth. So the Compensation Committee has introduced this new compensation policy, especially the Group CEO, Yamada, Until now, restricted stock units and phantom stocks were granted. However, he will only be granted PSUs going forward so that he can firmly commit to the group's growth. Other executive officers will be granted PSUs as mid to long-term incentives so that the Representative directors, CEO and executive leadership can work in concert to achieve bold results. So this shows our commitment as well as expectations. This concludes my explanation apologies for the lengthy presentation, but we would like to conclude this fiscal year's earnings briefing for AmeriCorps Inc. Thank you very much. Ms. Eda, thank you very much. This concludes Mercari Inc's FI2026 Full Year Earnings Briefing. Thank you very much for joining us today.