GMO internet : 2nd Quarter Transcription

GMO Internet Group, Inc.

Q2 Financial Results Briefing for the Fiscal Year Ending December 2023

August 9, 2023

Event Summary

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Presentation

Moderator: Hello, everyone. Thank you very much for participating in GMO Internet Group, Inc.'s Q2 financial results presentation today. We are delivering this earnings presentation from GMO GLOBAL STUDIO, located on the top floor of GMO Internet TOWER in Yoga, Setagaya-ku, Tokyo.

I will introduce to you the attendees of today's presentation. Today's presenters are Masashi Yasuda, Executive Vice President and Group CFO, and Noriko Inagaki, Group Executive Officer, General Manager of Group Financial Department. Today, they will provide an overview of the financial results, followed by a question-and-answer session. 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: This is Yasuda, CFO. Thank you very much for participating in our presentation for Q2 financial results for the fiscal year ending December 31, 2023. Today's briefing will be delivered from GMO GLOBAL STUDIO, newly established on the top floor of GMO Internet TOWER in Yoga, Setagaya-ku, Tokyo. This studio will be used for our business development.

Now, this GMO GLOBAL STUDIO is a cutting-edge studio in Japan that responds to the age of video, utilizing 3DCG and VFX technologies with LED panels. There are two points that differentiate our studio from others. The first is that this is a venue where the audience can gather in a live setting, allowing them to feel a sense of unity as well as an immediate reaction among them.

The second is that the studio has a high ceiling, 10 meters high, so it is possible to use 3DCG and VFX technologies to create powerful images, utilizing its high ceiling. As a hybrid event that crosses real and online, it can be distributed to the entire world, from corporate conferences and in-house events to video creation for YouTubers and TikTok creators. We are currently preparing to open the facility to the general public starting next April. We hope you will use this service.

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Now, I would like to move on to the financial results. Since our fiscal year ends in December, I will explain our financial results for the period from April through June. I appreciate your attention.

As you can see, here is today's agenda.

First, here is the summary of the financial results. As you can see, the figures show a decrease in both sales and profit compared to the same period of the previous year.

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There were two main factors. First, in the previous year, the incubation business made a significant contribution of more than JPY10 billion due to the sale of some investee stocks in the incubation business. The second factor is that extraordinary factors pushed down the profit for the current period. I will explain these extraordinary factors later. The larger decline in net profit was also due to the gain on the sale of shares in equity-method affiliate in the previous year.

I will now provide a summary of each segment. The far right shows the qualitative evaluation by our management, along with that of Q1.

First, the infrastructure segment is rated as circle, good, not double circle, but circle. Expansion continued with an overwhelming collection of number one services, and sales reached a quarterly high. Continuing from Q1, face-to-face payment services drove the sales figures.

As for profit, however, the increase was limited to a single-digit percentage due to the recording of approximately JPY1 billion provision for bad debts in the FREENANCE business developed by GMO Pepabo. Although the business momentum is extremely strong, we take this matter very seriously and have rated as circle instead of double circle for the segment as a whole.

Advertising and media is rated as triangle, neither good nor bad. Both sales and profits were down. In-house media performed well, but there was a reactionary decline in some industries in the advertising business. As for profits, there were upfront costs associated with an increase in personnel due to the investment in human resources in the previous year.

Next, finance is rated as circle, good. Both revenues and profits increased. In the financial services segment, sales were at the second highest level following Q1, which was the highest.

FX is rated as circle, good, showing the effect of profitability improvement measures taken since Q4 of the previous year. CFD is also rated as circle, good. Although it was negative compared to the previous year, when the commodity-related business was brisk, it has remained strong and has become the second mainstay product after FX. The overseas business is rated as x, bad. We have decided to record an additional allowance

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