GMO internet : 1st Quarter Transcription

GMO Internet Group, Inc.

Q1 Financial Results Briefing for the Fiscal Year Ending December 2023

May 11, 2023

Event Summary

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Presentation

Moderator: Hello, everyone. Thank you very much for participating in GMO Internet Group, Inc.'s Q1 financial results presentation today. I will introduce to you the attendees of today's presentation.

Today's presenters are Masashi Yasuda, Group Vice President, CFO, and Noriko Inagaki, Group Executive Officer, General Manager of Finance Department.

Today, they will provide an overview of the financial results, followed by a question-and-answer session. The meeting is scheduled to end at 16:30. Presentation materials regarding financial results are available on the Company's website. After the event, a link to the survey will be displayed, and we would appreciate it if you could answer it. We thank you for your understanding.

Our CFO, Yasuda, will now explain the results.

Yasuda: My name is Yasuda, and I'm the CFO of GMO Internet Group. Thank you very much for participating in our presentation for Q1 financial results for the fiscal year ending December 31, 2023.

Since our fiscal year ends in December, I will explain our financial results for the period from January through March. I appreciate your attention.

First of all, here is today's agenda. Now I would like to get right into it.

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First, here is the summary of the financial results.

Sales were JPY65.5 billion, with operating profit of JPY10.9 billion, ordinary profit of JPY11.9 billion, and net profit of JPY3.9 billion. Compared to the same period of the previous year, sales increased but profit decreased.

Net sales grew significantly, with record highs in the infrastructure and finance segments. Profit, on the other hand, declined due to factors, such as additional provision for doubtful accounts in the securities business in Thailand.

The large decrease in net profit is a reactionary decline from the gains through the sale of investment securities in the previous year.

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Next, here is a summary for each segment. The far right shows the qualitative evaluation by our management.

First, infrastructure segment is rated as double circle, very good. Both sales and profit increased, with record- high quarterly performance. This business embodies the Group's strengths, which are a collection of overwhelmingly number one services and a solid recurring revenue business model. In particular, sales growth has been strong, exceeding 20%. This was because the cybersecurity business, which joined the Group in Q2 of the previous year, enjoyed a big demand season in this quarter. Another driver was the acquisition of large deals in face-to-face payment services.

Advertising and media is rated as circle, good. Sales increased but profit decreased. Capturing the expansion of the advertising business, in-house products and media performed well, which boosted top line. On the other hand, there were upfront costs, including onetime expenses that were not initially anticipated, in addition to higher sales-related expenses due to increased subcontracting costs associated with expanded transactions and an increase in personnel due to the investment in human resources in the previous year.

Next, finance is rated as circle, good. Both sales and profit increased.

Sales reached a quarterly high. Here is a breakdown. FX is rated as circle, good. Profitability has been an issue, but the effects of profitability improvement measures taken since Q4 of the previous year are becoming evident. CFD is also rated as circle, good. Sales reached a record high. It has grown to become our second mainstay product after FX. Overseas business is rated as x, bad. As I mentioned earlier, we have decided to record an additional JPY1.5 billion in allowance for doubtful accounts in our securities business in Thailand. We will strengthen our risk management system and will diligently pursue collection, including filing lawsuits, seizure of collateral, and seizure of property.

Crypto assets business is rated as triangle, neither good nor bad. It recorded a decrease in revenue and loss. The number of accounts and shares of transactions in the exchange business by GMO Coin has remained steady. On the other hand, the market environment is sluggish and transaction volume has declined across the industry as a whole. The utilization rate of the mining business also remained low.

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