FY2020 3Q Supplementary Materials for Financial …...→ accelerated shift to digital Crowded...

FY2020 3QSupplementary Materials for Financial Results Ending June 30,2020

May 15, 2020(TSE Mothers: 3135)

1. Social Issues around us and Growth Strategy

2. FY2020 3Q Financial Results

3. Summary of Businesses by Segment・ Second-hand online business・ Media business・ Mobile & telecommunications business

4. Earnings Forecast for FY 2020

Contents

2





Contents

3

New Social Issues Facing the Company

MarketEnterprise has been preparing for a digital shift through investment in Oikura systems, strengthening our media business, M&A, and more.

“New Lifestyle” for curbing spread of COVID-19→ accelerated shift to digital

Crowded places: gathering in offices to workClosed spaces: avoiding closed-off places

Close contact: store-based sales and door-to-door sales Online marketing

Telecommuting

4

Social Issues Facing Company & Areas of Focus

Online marketing

・Oikura helps second-hand brick and mortal shops throughout Japan

・Actively entering areas with less online presence → strengthening agricultural equipment field

Telecommuting

Our company is prepared to incorporate customer demand for a digital shift

Second-hand online

business

Media business

・Using in-house media to support online marketing

Mobile &telecommunicationbusiness

Building communication environment for working athome→ supporting spread of WiMAX service

5

Supporting Digital Shift (1): Second-Hand Online Business “Oikura”

A platform helping second-hand shops around Japan attract customers

6

They can negotiate freely with the seller based on the information provided.

Sellers (General consumers)

Find the store they

want to sell

Purchase request through

Website

Purchase request by

phone

Visit the second-hand brick-and-mortar shop to see the map

Purchasers (nationwide member stores of Oikura)

Recycle shops

Brand goods stores

Antique shops

Stores specializingin purchases

Second-handonline shops

Pawn shops

Jewelry shops

Second-handclothing shops

Auctionrepresentation shops

Second-handbook/game stores

Negotiate with sellers

Digital shift leading to increase in number of customers transferred

0

10000

20000

30000

2019Jan

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2020Jan

Feb Mar Apr

(unit: no. of customers)Oikura - customers transferred per month

7


32

4144 42

51

0

20

40

60

3Q FY2019 4Q 1Q FY2020 2Q 3Q

Third quarter net sales increased due to investments in systems, such as improving customer-transfer logic. Preparations are complete for full-scale capture of demand.

(unit: millions of yen)Net sales - Oikura

8


Promoting a Digital Shift (2): Agricultural Equipment

Targeting a B to B market which has been slow to shift online

9

For C to C4.4 trillion yen

• Clothing and accessories• Books• Daily necessities and

sundries• Software and media• Baby & children’s goods• Other

• 4 major household appliances• Cameras and accessories• Computers and peripherals• Mobile phones/smartphones• Toys and models• Bicycles, bicycle components, and

parts• Brand-name goods• Furniture• Other

Our target3.2 trillion yen

*Source: Ministry of Economy, Trade and Industry, “FY2018 Infrastructure Development for a Data Driven Society in Japan (Market Survey on Electronic Commerce)”*Source: Monetary values obtained by multiplying 30% future used goods ratio by data from the following sources; agriculturalequipment: Ministry of Agriculture, Forestry and Fisheries, Construction machinery: Japan Construction Equipment Manufacturers Association, Medical devices: “Pharmaceutical Industry Production Trend Statistics” (annual report).

B to B market

1.3 trillion yen + α

• agricultural equipment• Construction

machinery• Medical devices• Other

Our market: 4.5 trillion yen + α

Conversion rate to EC is only 2.0% for agricultural equipment. Major room for market expansion.

Source: Japan Agricultural Machinery Manufacturers Association, “Shipments Made in 2019 (Final Numbers)”Ministry of Finance Customs Statistics, “Agricultural Machinery Exports” and “Agricultural Machinery Imports”EC sales amounts based on our company’s estimates

Scale of domestic market

for agriculturalequipment

536.3 billion yen

EC conv. rate2.0％

10


63

10288

109130

159 150

0

50

100

150

200

1Q FY2019 2Q 3Q 4Q 1Q FY2020 2Q 3Q

Agricultural equipment buying and selling business expanding steadily

(unit: millions of yen)

1.7xon a YoY basis

Change of our agricultural equipment sales

11


Newly-established subsidiary ME Trading acquired agricultural equipment business from OHO Trading, an overseas exporter of used agricultural equipment (announced April 28, 2020)

Overseas exports70％

Sales in 80 countries

Domestic sales30%

New Subsidiary ME Trading Co., Ltd.

Sales Office Locations Tottori City, Tottori; Oyama City, Tochigi

Business Description

Purchasing, sales, and overseas export of used agricultural equipment

Media Managed

Manages agricultural equipment purchasing mediaNokigu kaitori.com (“agricultural equipment purchasing” dot com), kautora.net,membership-based overseas sales site FARM MART

Track Record


6981.2 billion yen (CY2019 results)

Number of member farmers

New Subsidiary UMM Co., Ltd.

Location Tokyo


Planning and management of marketplace for used items, focusing on agricultural equipment

The name “UMM” is an acronym for “Used Machine Market,”based on our desire to create a marketplace for providing quality Japanese used agricultural equipment to both the domestic and foreign markets.

Newly-established subsidiary UMM acquired JUM, one of Japan’s largest online marketplaces specializing in used agricultural equipment(announced May 15, 2020)

Total registered agricultural equipment businesses

Gross merchandise volume (GMV)

13


4,574

Supporting Digital Shift (3): Media Business

Helping advertisers attract customers through in-house media

14

Users

Active searches Provide information

Transfer customers Advertising income Transfer customers

Our media group

Advertisers (corporations) Convert into customers through another our services

0

5

10

15

2018

Jan

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2019

Jan

Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2020

Jan

Feb Mar Apr

(unit: million PV)

Using our own management know-how leading to increased page views (PV)Also captured demand from “staying home” in response to call to refrain from going out

April total

14.48 million PVMonthly PV changes

2019 JanAcquired

OUTLET JAPAN

2019 AugAcquired

SIMCHANGE

2020 FebAcquired

Saiyasu-Syuuri.com

15


Telecommunications

Acquired businesses offering customer attraction support services for repair shops.Currently expanding business domains.

Second-hand Repair

Lifestyle

(Acquired in Feb 2020)16


26.0%

14.4%

28.2%

57.1%

19.5%

17.9%

24.6%

14.3%

54.4%

67.7%

47.2%

28.6%

All

Less than 50

50 -300

More than300

Implemented Under consideration No plan to implement

Around 1/4 of companies using telecommuting, even in Tokyo

Supporting Digital Shift (4): Mobile & Telecommunications Business

26.0%

30.1%

26.2%

25.2%

60.0%

31.3%

16.4%

16.6%

25.7%

53.8%

19.5%

16.4%

25.0%

17.5%

20.0%

25.0%

17.8%

17.6%

17.0%

26.4%

54.4%

53.4%

48.8%

57.4%

20.0%

43.8%

65.8%

65.9%

57.3%

19.8%

All

Commerce/retail

Wholesale

Industry/manuf.

Trade

Finance

Transport/dist./warehousing

Construction/real estate

Service

Information/comm.

Implemented Under consideration No plan to implement

Telecommuting implementation status - by no. employees Telecommuting implementation status - by industry

Source: Tokyo Chamber of Commerce and Industry, “Response to Novel Coronavirus”17

Issues in developing a network environment for telecommuting

9.8%6.7%

29.3%

17.7% 17.7% 13.8%

38.8%

56.3%

9.4%4.7% 4.0%

33.2%

27.1% 27.1%

13.0%

48.7% 48.4%

12.3%

0.0% 0.0%

41.0%

27.7% 27.7%

9.6%

42.2%47.0%

12.0%

Not sure how

to get started

No w

orkers with IT know

ledge

Insufficient devices (PCs, smartphones), netw

ork environment, etc.

Insufficient software developm

ent, e.g., cloud

Concerned about security

Difficulty covering overhead costs

In-house systems not ready

(work & labor m

anagement, evaluation, etc.)

Work not am

enable to telecomm

uting

Other

Less than 50

50 - 300

More than 300

Not sure how

to get started

No w

orkers with

IT knowledge

Insufficient devices (PCs,

smartphones)

, network environm

ent,etc.

Insufficient software

development, e.g.,

cloud

Concerned

about security

Difficulty covering

overhead costs

In-house systems not ready

(work & labor m

anagement,

evaluation, etc.)

Work not am

enableto telecom

muting

Other

Source: Tokyo Chamber of Commerce and Industry, “Response to Novel Coronavirus”

Issues when considering implementation of telecommuting - by no. of employees

18


Major jump in number of retained lines in April. Demand expected to hold steady for a while.

0.1 0.2 0.51.0

1.52.0

2.63.3

4.14.5 4.5 4.6 4.8

2017End Sep

End Dec 2018End Mar

End Jun End Sep End Dec 2019End Mar

End Jun End Sep End Dec 2020End Jan

End Feb End Mar End Apr

Change in no. of retained lines

No. of contracts (end of Apr)

55,000(unit: 10 thousands)

19






Contents

20

Changes in Consolidated Financial Results - 3Q Cumulative

4,088 4,455

5,999

7,885

0

2,000

4,000

6,000

8,000

3Q FY2017 3Q FY2018 3Q FY2019 3Q FY2020

Net sales

(57) 26

285 443

-1.4%0.6%

4.8%

5.6%

-2.0%

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

(200)

0

200

400

600

800

3Q FY2017 3Q FY2018 3Q FY2019 3Q FY2020

Operating profit/operating profit ratio(unit: millions of yen)


3Q of FY 2020（Cumulative）

Net sales

Operating profit

7,885 million yen (increased by 31.4% YoY)

443 million yen (increased by 55.2% YoY)Operating profit ratio: increased by 0.8 points YoY.

21

Had record high net sales and operating profit for three consecutive quarters

Changes in Consolidated Financial Results - Quarterly

3Q of FY 2020(Three months)

1,731 2,100 2,167

2,472 2,598 2,580 2,706

0

1,000

2,000

3,000

1QFY2019

2Q 3Q 4Q 1QFY2020

2Q 3Q

Net sales

21

128 134 166 171

137 134 1.3%

6.1% 6.2% 6.7% 6.6%5.3% 5.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

050

100150200250300350400450500

1QFY2019

2Q 3Q 4Q 1QFY2020

2Q 3Q

Operating profit / operating profit ratio

Second-hand online and media business contributed to increased revenue in 3Q.However, operating profit dropped due to the slump in acquisition of new broadbandlines in Jan-Feb.

Net sales

Operating profit

Increased by 24.9% YoY

Declined by 0.6% YoY

(unit: millions of yen) (unit: millions of yen)

22

Consolidated Income Statement

(unit: millions of yen) 3Q 2019Nine months

3Q 2020Nine months Pct. change

Net sales 5,999 7,885 +31.4%

Gross profit 2,433 3,019 +24.1%

Operating profit 285 443 +55.2%

(Operating profit ratio) 4.8% 5.6% -

Ordinary profit 283 443 +56.3%

Profit attributable to owners of parent 135 246 +81.9%

23

Changes in Results by Segment

*Net sales for 3Q of FY ending Jun 2019 are for reference purposes only, as the company began managing multiple segments in FY ending Jun 2020.

Disclosures for 3 segments starting this period2 new businesses moving forward smoothly

(unit: millions of yen)FY ending Jun 2019

3Q cumulative(reference)

FY ending Jun 20203Q cumulative Pct. change

Net sales 5,999 7,885 +31.4%

Second-hand online business 4,629 5,229 +13.0%

Media business 99 429 4.3xMobile & telecommunications business 1,346 2,430 1.8x

Adjustment (74) (203) -

24





Contents

25

Second-Hand Online Business - Performance

1,698 1,755 1,775

0

1,000

2,000

1Q FY2020 2Q 3Q

Net sales

166 172 193

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

050

100150200250300350400450500

1Q FY2020 2Q 3Q

Segment profit


Solid performance in third quarter. In April, the State of Emergency Declaration resulted in shorter business hours at purchase sites, which in turn led to a drop in in-store and door-to-door purchases, but an increase in home delivery purchases.

Net sales

Segment profit

Increased by 1.1% QoQ


Increased by 11.7% QoQSegment profit ratio: improved by 1.1 points from 9.8% to 10.9%.

26*Figures for net sales and segment profit before adjustment for amount recorded in quarterly consolidated statements of income.

Second-Hand Online Business - Net Sales Ratio by Product

Net sales trendsby product

In main categories, home appliances and cameras saw losses, while musical instruments, audio, and PCs made gains. agricultural equipment, which we are focusing on as a strategic field, is progressing steadily.

・For other fields, hobby items including model train grew.

3Q

2Q

1Q FY2020 1,698 million yen

1,755 million yen

1,775 million yen

18%

18%

19%

12%

14%

13%

12%

11%

10%

13%

13%

13%

11%

10%

10%

10%

11%

11%

22%

22%

23%

1%

1%

2%

Home appliances Audio Cameras Mus. Instr. PCs

agriculturalequipment,

etc. Other

Brand goods and Luxury watches

5 Main Categories 27

(-9.8% comp. prev. yr.) (+5.0%) (-9.5%) (16.4%) (+37.3%) (+61.5%)

(-10.5%)

(+15.5%)

Second-Hand Online Business - Product Inventory & Inventory Turnover

Inventory turnover

stayed high

Product inventory for the end of 3Q held at a healthy level despite a decline from the previous quarter.・Q3 inventory declined from previous quarter due to seasonality, but inventory balance still held high at 340 mil. yen・Inventory turnover stayed high at 16.3 days

We are reducing inventory risk through rigorous inventory evaluation and focusing on selling fresh products

291 312 291

367 398

373 340

0

500

1QFY2019

2Q 3Q 4Q 1QFY2020

2Q 3Q

Inventory

8.8

12.9

17.215.4 16.3

0.0

10.0

20.0

FY2017 FY2018 FY2019 1H FY2020 3Q FY2020

Inventory turnover(unit: millions of yen)

(unit: times)

28

Topic: Internet Survey on Purchasing Services

Ranked No. 1 Recommended Service in seven categories of purchasing service survey!(1) No. 1 recommended purchasing service selected by flea market app users

(2) No. 1 recommended purchasing service selected by auction site users

(3) No. 1 recommended purchasing service selected by purchasing service users

(4) No. 1 recommended purchasing service selected by audio enthusiasts

(5) No. 1 recommended purchasing service selected by camera enthusiasts

(6) No. 1 recommended purchasing service selected by model train enthusiasts

(7) No. 1 recommended purchasing service selected by musical instrument enthusiasts

*Survey by Shopper's Eye, a site comparison image survey of 10 appliance purchase service companies29

Media Business - Performance

54 69 101

86 52

64

0

100

200

1Q FY2020 2Q 3Q

101

75

108

0

100

200

1Q FY2020 2Q 3Q

Segment profit


PV increased mainly in telecommunications and entertainment areas due to stay-home consumption. Sales increased due to more advertising from outside customers resulting from increased media exposure. (See page 15 for PV trends)

Net sales

Segment profit


(unit: millions of yen)(unit: millions of yen)

Net sales from ME group

Net sales from outside customers

Net sales


30

141121

165

*Figures for net sales and segment profit before adjustment for amount recorded in quarterly consolidated statements of income.

Mobile & Telecommunications Business - Performance

844 755

829

0

1,000

1Q FY2020 2Q 3Q

Net sales

83

55 48

0

100

1Q FY2020 2Q 3Q

Segment profit


Sales increased on the back of higher line revenues due to an increase in the number of customers owned. Profit dropped due to slump in acquisition of new lines in Jan-Feb.However, profits rose in April (see page 19).Net sales

Segment profit



Declined by 13.5% QoQ

*Figures for net sales and segment profit before adjustment for amount recorded in quarterly consolidated statements of income.31


Establishment of MarketEnterprise Vietnam, Our Offshore Development Site

As the digital shift accelerates, we are actively recruiting IT engineers at overseas sites to strengthen our systems development organization.

New Subsidiary MARKETENTERPRISE VIETNAM CO., LTD.

RepresentativeKohei Maruo, General Director(Director & CTO at MarketEnterprise Co., Ltd.)

Location Vietnam


System development pertaining to the group businesses

Capital $500,000 (USD)

Shareholder Composition MarketEnterprise, 100%





Contents

33

Earnings Forecast for FY 2020

Earnings forecasts remain as-is considering the uncertain economic environment, such as the impact of COVID-19.


3Q of FY2020(Cumulative)

FY2020 full year(Forecast)

Amount Progress rateAmount YoY Change

Net sales 7,885 +31.4% 10,000 78.9％

Operating profit 443 +55.2% 600 73.9％

Ordinary profit 443 +56.3% 602 73.7％

Profit attributable to owners of parent 246 +81.9% 270 91.4％

34

For IR-Related Inquiries

The information contained in this document is for informational purposes only, and is not intended as a solicitation for investment. Statements of future predictions contained herein are based on judgments, assumptions, and beliefs in light of the information available to us at the time of the release of this document, and are subject to a number of risks and uncertainties, including, but not limited to, future domestic and international economic conditions, changes in the status of domestic and international business operations, or uncertain factors and potential risks inherent in such forecasts. Please note that actual performance may differ significantly from these forecasts due to a variety of factors, including economic conditions, market conditions, and more.

[email protected] address:

IR website:https://www.marketenterprise.co.jp/ir/index.html

Contact us at the following email address for IR-related questions, requests for meetings, etc.

35

mailto:[email protected]

https://www.marketenterprise.co.jp/ir/index.html

Reference: Impact of and Response to Spread of Novel Coronavirus

Second-Hand Online Business

Reduced business hours: 10:30 - 16:00(normally 10:00 - 19:00)

・Implemented shortened hours at 10 locations nationwide (Effective period: April 8 - TBD)*We plan to resume normal operations once the State of Emergency declaration has been lifted.

・Door-to-door purchases only available when items can be picked up at doorstep.

・Contact center is basically operating normally through telecommuting (9:19 - 21:00)

・Operations and business basically continuing as normal through telecommuting

Media BusinessMobile & Telecommunications Business

Operating as normal

Continuing operations while ensuring the safety of our customers and employees

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Reference: Positioning of Group Companies

MEmobile Co., Ltd.Shareholder Composition

65％Telecommunications service, such as WiMAX, discount SIM cards, etc.

ME Trading Co., Ltd.Shareholder Composition

100％

Operates FARM MART, membership-based overseas sales site for used agricultural equipment; agriculturalequipment trading company

UMM Co., Ltd.Shareholder Composition

100％

Operates one of Japan’s largest specialized marketplaces for agricultural equipment

MARKETENTERPRISE VIETNAM CO., LTD.

Shareholder Composition

100％

Offshore base for developing IT system infrastructure pertaining to all Group businesses

Second-hand online business

Mobile & telecommunications business

Second-hand online business/media business

37

FY2020 3Q Supplementary Materials for Financial …...→ accelerated shift to digital Crowded...

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