【IR】GMO Internet Group Strategy 2018 Q3 Summary

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Results presentation materials (here)
(IR) Masatoshi Kumagai talks about GMO Internet Group Strategy 
(IR) GMO Internet Group Strategy 2018 Q1 Summary (here)
(IR) GMO Internet Group Strategy 2018 Q2 Summary (here)
Older business results (here)

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■Financial Overview
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Net sales, operating profit, and ordinary profit achieved a record high for the third quarter.

[Executive Summary: Q3 FY2018 (January-September)]

Operating profit increased by 53% YoY. Internet Infrastructure segment’s solid growth in the earnings and Internet Finance segment’s enhanced profitability that is not easily affected by the market environment are producing good results.

[Executive Summary: Q3 FY2018 (July-September)]

Operating profit increased by 1.04 billion yen to 5.53 billion yen compared to this time last year. In Infrastructure, operating profit increased by 900 million yen, reaching a record high. In Cryptocurrency, operating profit increased by 330 million yen. Cryptocurrency exchange business grew, so it was able to offset the negative figures in cryptocurrency mining business. In Finance, operating profit increased by 240 million yen. Finance grew steadily due to improvements in profitability despite low price volatility. In Online Advertising and Media, operating profit decreased by 220 million yen due to the impact of ad fraud issues. In Incubation, operating profit decreased by 260 million yen due to the absence of the stock sale.

[Net Sales by Segment]

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■Internet Infrastructure
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In addition to conventional recurring revenue, transaction revenue has accelerated our growth. In Q3, security (SSL) business performed favorably both nationally and internationally. As discussed in the second quarter results presentation, this was due to the increased demand for the SSL.

[Internet Infrastructure: Net Sales by Sub-Segment]

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■Online Advertising & Media segment.
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For Online Advertising, the ad agency recovered compared to the previous quarter, resulting in two-digit growth in their net sales. On the other hand, there was a drop in the sales of existing products in Online Media, which resulted in YoY losses. We are also working on the enhancement of competitiveness in the mid-to-long-term. For example, ad placement rules will be tightened in order to boost our ad network product’s reliability.

[Online Advertising & Media: Net Sales]

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■Internet Finance segment.
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In Internet Finance, we saw two-digit growth in the profits compared to last year despite the impact of decreased FX transaction volume. This is due to improvement in profitability through analysis of big-data and increased FX trading volume of the high-margin currency pair. We’re responding to the ever-changing market.

 

[Internet Finance: Historical Performance by Quarter]

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■Cryptocurrency segment.
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Our cryptocurrency business launched in May and quarterly net sales is growing rapidly, reaching 2.6 billion yen in just over a year.

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■Cryptocurrency segment: Cryptocurrency exchange business
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In cryptocurrency exchange, the profits grew through various strategies despite the impact of decreased cryptocurrency transaction volume compared to the previous quarter. GMO Coin offers a spot trading and a trading with a leverage. The business model of GMO Coin is the same as that of GMO CLICK Securities’ FX trading. The adjustment of proprietary positions and cover deals is producing good results. We have built a revenue base that is unlikely to be affected by volatility.

[Cryptocurrency exchange business: Historical performance by quarter]

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■Cryptocurrency segment: Cryptocurrency mining business
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From July to September, we had added mining facilities as planned, and net sales expanded due to the increased hash rate. However, profit decreased as the global hash rate exceeded 50,000 PH/s and the Bitcoin price since the end of 2017 had been low, and also due to the high depreciation cost of the mining machines bought when their prices were relatively high.

[Cryptocurrency mining business: Historical performance by quarter]

We launched GMO Aozora Net Bank on July 17, which has made a good start, and its services are integrating with other group services. Connected securities account, which links securities and bank accounts, enable immediate account transfer. In mid-November, GMO Coin will also enable immediate account transfer. GMO Internet and GMO Financial HD have obtained an approval of agency business of the bank and are asking existing customers using other group services to open bank accounts.

 

We appreciate your ongoing support of the GMO Internet Group.

Internet for Everyone

 

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