Mercari : Consolidated Financial Results for the Nine Months Ended March 31, 2022

Consolidated Financial Results for the Nine Months Ended March 31, 2022

[Japanese GAAP]

April 28, 2022

Company name: Mercari, Inc.

Stock exchange listing: Tokyo Stock Exchange Code number: 4385

URL:https://about.mercari.com/en/

Representative: Shintaro Yamada, Chief Executive Officer Contact: Jun Yokota, Senior Vice President of Corporate Phone: +81-3-6804-6907

Scheduled date of filing quarterly securities report: May 12, 2022 Scheduled date of commencing dividend payments: -

Availability of supplementary briefing material on quarterly financial results: Available Schedule of quarterly financial results briefing session: None

(Amounts of less than one million yen are rounded down.)

1. Consolidated Financial Results for the Nine Months Ended March 31, 2022 (the "Period")

(July 1, 2021 to March 31, 2022)

(1) Consolidated Operating Results (cumulative) (% indicates changes from the previous corresponding period.)

(Note) Comprehensive income: Nine months ended March 31, 2022: ¥(7,096) million [ -%]

Nine months ended March 31, 2021: ¥(422) million [ -%]

(Notes) 1. The Company has applied the "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29,

March 31, 2020) from the beginning of the fiscal year (July 1, 2021). All figures for the nine months ended March 31, 2022, reflect the application of this accounting standard.

2. Information on diluted earnings per share for the nine months ended March 31, 2022, is omitted since, although potential shares did exist, the recorded figure was a basic loss per share.

(2) Consolidated Financial Position

(Reference) Equity: As of March 31, 2022 ¥35,247 million

As of June 30, 2021 ¥39,060 million

(Note)The Company has applied the "Accounting Standard for Revenue Recognition" (ASBJ Statement No. 29, March 31, 2020) from the beginning of the fiscal year (July 1, 2021). All figures as of March 31, 2022, reflect the application of this accounting standard.

2. Dividends

(Note) Revisions to the forecasts of cash dividends most recently announced: No

3. Consolidated Financial Results Forecast for the Fiscal Year Ending June 30, 2022 (July 1, 2021 to June 30, 2022)

(% indicates changes from the previous corresponding period.)

* Notes:

• (1) Changes in significant subsidiaries during the Period (changes in specified subsidiaries resulting in changes in scope of consolidation): No

• (2) Application of special accounting treatments for preparing the quarterly consolidated financial statements: Yes

• (3) Changes in accounting policies, changes in accounting estimates and retrospective restatements

  • 1) Changes in accounting policies due to revision of accounting standards: Yes

  • 2) Changes in accounting policies other than 1) above: No

  • 3) Changes in accounting estimates: No

  • 4) Retrospective restatements: No

• (4) Total number of issued shares (common stock)

  • 1) Total number of issued shares at the end of the Period (including treasury stock):

March 31, 2022:

June 30, 2021:

160,488,868 shares 157,807,344 shares

• 2) Total number of treasury stock at the end of the Period:

* Quarterly Consolidated Financial Results are exempt from quarterly review conducted by certified public accountants or audit firms.

* Explanation of the proper use of financial results forecast and other notes

The forward-looking statements, including the financial results forecast, contained in these materials are based on information currently available to the Company and certain assumptions deemed reasonable by the Company. As such, they do not constitute guarantees by the Company of future performance. Details concerning the forward-looking statements are stated in "1. Qualitative Information Regarding Results for the Period (3) Explanation of Consolidated Financial Results Forecasts and Other Forward-looking Statements" on page 4 of the Appendix.

Table of Contents

1. Qualitative Information Regarding Results for the Period 2

(1) Explanation of Operating Results 2

(2) Explanation of Financial Position 3

(3) Explanation of Consolidated Financial Results Forecasts and Other Forward-looking Statements 4

2. Quarterly Consolidated Financial Statements and Primary Notes 5

(1) Quarterly Consolidated Balance Sheets 5

(2) Quarterly Consolidated Statements of Income and Comprehensive Income 7

Quarterly Consolidated Statements of Income 7

Quarterly Consolidated Statements of Comprehensive Income 8

(3) Notes to the Quarterly Consolidated Financial Statements 9

Notes on going concern assumption 9

Notes on significant changes in the amount of shareholders' equity 9 Application of special accounting treatments for preparing the quarterly

consolidated financial statements 9

Change in accounting policy 9

Segment information, etc. 10

Significant subsequent events 10

1. Qualitative Information Regarding Results for the Period

(1) Explanation of Operating Results

The Company and its group companies (collectively, the "Group") have been working to realize the Group mission to create value in a global marketplace where anyone can buy & sell. In Q3, the Group continued to work toward this goal, focusing on creating further growth opportunities for the Group by promoting the development of new domains in Japan and overseas, such as Souzoh, Mercoin, Merlogi, and global expansion, while also continuing to grow and strengthen its three pillars of Mercari Japan, Merpay, and Mercari US. Effective January 1, 2022, the Group has transitioned to a new management execution structure to promote the creation of synergy between businesses that the Group operates in Japan and the global business development.

Furthermore, through business activities that have a positive impact on the environment and the world, the Group aims to use the planet's limited resources carefully and build a world where anyone can create value. This fiscal year, the Group is also working on climate change mitigation and D&I as particularly important areas of focus. The Company has been making steady progress toward achieving its materiality goals, including by holding its first ever ESG Committee meeting in February.

In the mainstay Mercari Japan business, the Group continues to achieve steady growth in gross merchandise value (GMV), reaching a new record high amid successes with respect to cross-use initiatives and item listing promotional campaigns, in addition to aggressive efforts to acquire new users. On the other hand, there has been a slowdown from the corresponding period of the previous fiscal year in the number of listings and frequency of purchases as a result of people spending less time at home largely amid changing circumstances with respect to COVID-19, coupled with an increase in fraudulent usage since the end of last year, a problem becoming more prevalent across the industry as a whole. These factors culminated in a scenario where the GMV growth rate has slowed down from the corresponding period of the previous fiscal year. As a result, Mercari Japan's GMV for the nine months ended March 31, 2022, was ¥662.9 billion, an increase of ¥86.6 billion from the corresponding period of the previous fiscal year, with monthly active users (MAU(Note 1)) numbering 20.69 million.

In the Souzoh business, the full rollout of Mercari Shops took place on October 7, 2021. Since then, even with limited features on offer, an increasing number of shops and product listings have found their way to the platform.

This increase is necessary to achieve growth over the medium to long term. The Group has been taking a disciplined approach to marketing with its sights set on gaining new shops, while focusing on product updates such as release of the Refrigerated Mercari Shipping service to improve user experience. As a result, Mercari Shops has been making strong progress, with its cumulative number of shops exceeding 200,000 (as of April 19, 2022) within six months of its full rollout.

With respect to the Merpay business and its mobile payment services, the Group has been working to strengthen earnings potential mainly in the credit area, which involves providing services based on a unique form of credit leveraging Mercari user data and AI technology. This has resulted in the establishment of an earnings base that enables consistent achievement of an operating surplus for unadjusted operating profit(Note 2), thereby culminating in recording an unadjusted operating profit in the third quarter of the fiscal year ending June 30, 2022.

With the number of Merpay users having reached 12.92 million(Note 3), and as a result of successful efforts for achieving further growth in the credit area, the percentage of users who have completed identity verification has steadily grown to 85.6%.

For the Mercari US business, MAU reached 5.90 million in the month of January, a new record high for a single month. The Group hit this milestone as the number of new users grew due to ongoing efforts to improve features in order to simplify listing. This had an effect in combination with marketing initiatives to make Mercari synonymous with the concept of a consumer-to-consumer (C2C) marketplace. Mercari brand awareness achieved a record high and for the first time exceeded some peers. Meanwhile, GMV growth rate has slowed down due to a lack of the cash payouts from the government in the current third quarter that had been provided in the previous third quarter, along with inflation and other unexpected changes in the external environment. The GMV of Mercari in the US for the nine months ended March 31, 2022, was $879 million (¥99.7 billion; the exchange rate conversion is calculated using the average rate during the Period, ¥113.34 against the US dollar), up $6 million

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