Regarding revenue categories
- What is the composition of your sales?
- For face to face offline cashless payment services we provide, we classify revenue into four categories according to the nature of the service: "Initial," "Stock," "Fee," and "Spread. The stock, fee, and spread categories are collectively defined as "recurring-model".
In payment processing services, Initial revenue is generated from the sales of payment terminals, and an increase in the number of active terminals leads to an increase in Stock and Fee. In payment processing services, Initial is recorded through the sales of payment terminals, and the acquisition of merchants leads to an increase in Spread as well as an increase in Stock and Fee.
- What will be the main items recorded in each revenue category?
- While initial revenue is mainly transient revenues such as terminal sales, accessory sales, and software development, the structure is such that the accumulation of the number of active terminals leads to an increase in recurring-model revenue. Recurring-model revenue includes fixed monthly revenue from card companies and merchants and per-unit communication fees, which are tied to the number of contracted units rather than to the number of payment transactions. Fee is mainly related to the number of payment processed, such as processing center fee, paper roll sales, and electronic voucher storage fee. Spread is sales associated with the amount of transaction value (GMV) earned from merchants for payment processing services.
- What are the gross profit margins for each revenue category?
- The gross profit margin for Initial is currently around 10%, and the overall gross profit margin has been declining over the past several years due to the rising sales mix of the stera terminal, which is driving revenue. Gross profit margins for Stock, Fee, and Spread are not disclosed due to the difficulty in allocating expenses. The gross profit margin for the recurring-model business as a whole is approximately 60%.
Growth image and important indicators
- What is your view on med-term growth potential?
- We aim to grow revenue at a CAGR (compound annual growth rate) of at least 25%. The reason we do not target 25% growth for each fiscal year is that Initial revenue tends to fluctuate from period to period, and Initial revenue consists a high percentage of total revenue.
On the other hand, we target 25% growth in operating profit every fiscal year.
- What KPIs are considered as important?
- This will be the transaction value (GMV) and the growth rate of operating profit. Currently, the key is to expand market share, and building up the number of active terminals is important. Initial is a flow business, and quarterly fluctuations will be large depending on the timing of deliveries to merchants, but building up the number of active terminals contributes to the expansion of Recurring-model business.
- What are the current growth drivers for your business?
- While Initial sales growth is driven by sales of payment terminals, mainly stera, Recurring-model revenue is also expanding steadily as the number of active terminals increases.
- Please give us an overview of stera.
- GMO Payment Gateway and GMO Financial Gate have jointly developed this platform for payment providers. GMO Financial Gate provides services related to face to face offline payment center of this stera platform. stera has achieved lower network costs than conventional payment platforms, and is expanding its market share because it is a cost-effective platform for both acquirers (mainly card companies) and merchants. The main terminal connected to this stera platform is called "stera terminal" which is developed and provided by Panasonic.
Regarding Unattended (IoT) terminals
- How do you see the areas that are most likely to lead to the operation of unattended terminals?
- It has already led to operations at hotels, golf courses, and coin-operated parking lots, and will continue to contribute to the provision of self-checkout and other payment scenarios where there is a need for manpower saving. The unattended terminal area is just born and it is still in its infancy era in Japan, and we believe that there is significant room for expansion in this market in the future.
Regarding the seasonality of business
- Is there seasonality in your business?
- Initial depends on the timing of project delivery and currently have no clear seasonality. On the other hand, Recurring-model revenue is seasonal, with GMV tending to grow from October to December (our first quarter) and then slowing down from January to March (our second quarter), when economic activity relatively slows down.
- What are your future plans for capital investment?
- In line with sales growth, the processing center function needs to be expanded. In addition, software assets are on the rise due to the increasing demand for individual company-specific system development associated with the development of large-lot merchants. The amortization burden here is reflected in cost of sales and is expected to increase in the future.
- What are some other areas of investment focus for the future?
- On the offensive side, we will invest to provide additional value-added services to merchants, and on the defensive side, we will invest to expand our processing center functions that can handle the rapidly increasing GMV.
Risk of dependence on specific industries or merchants
- Are you in a situation that you are dependent on a particular industry or merchant?
- The percentage of our GMV top merchants has been continuously declining, and our merchant base has been steadily expanding. We believe that the risk of being influenced by the movements of specific industries or merchants is low.
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