T Gaia : Presentation Materials on Consolidated Financial Results for the 3Q of the FY ending March 2020

Consolidated Financial Results for the 3Q of the FY ending March 2020

(Nine months ended December 31, 2019)

February 6, 2020

T-Gaia Corporation / TSE

If there is any discrepancy between the English version and the Japanese version, the Japanese version shall prevail.

Disclaimer

This material contains statements about the future performance of T-Gaia Corporation which are based on management's assumptions and beliefs taking information currently available into consideration.

Therefore, please be advised that T-Gaia's actual results could differ materially from those described in these forward looking statements as a result of numerous factors, including general economic conditions in T-Gaia's principal markets as well as other factors detailed from time to time.

Table of Contents

	- Outline of the Consolidated Financial Results for the 3Q of the
	FY ending March 2020	4-7
	- Financial Results of the 3Q of the FY ending March 2020 and
	Strategies by the Business Segments
	- Mobile Telecommunications Business Segment	8-11
	- Enterprise Solution Business Segment	12-16
	- Payment Service Business and Other Business Segment*	17-22
	- Appendixes	23-36

*The translation of the name of the business segment has been revised for more clarity as below. Former translation: Settlement Service Business & Other Business

Revised translation: Payment Service Business & Other Business

Outline of the Consolidated

Financial Results

Summary of the Consolidated Financial Results

5

（unit: billion yen）	3Q	3Q	y/y
FY 19/3	FY 20/3	Change

Net Sales	376.80	354.95	94.2％
Gross Profit	50.70	49.79	98.2％
（to Net Sales）	（13.5％）	（14.0％）	（＋0.5ｐ）
SG&A Expenses	39.86	40.41	101.4％
Operating Profit	10.83	9.38	86.7％
（to Net Sales）	（2.9％）	（2.6％）	（▲0.3ｐ）
Non-Operating	4.23	4.40	104.1％
Income ※１
（Income from hoarded cards,
etc.）	15.06	13.79	91.6％
Ordinary Profit
Net Profit	10.15	9.29	91.5％

Forecasts of

20/3 Full-year

432.00

67.50

(15.6％）

54.40

13.10

（3.0％）

5.40

18.50

12.40

Achievement

Ratio

82.2％

73.8％

74.3％

71.7％

81.6%

74.6％

74.9%

Mobile-phone※２ 2.980	2.747	92.2％
Unit Sales (million units)

*１ No change to full-year plan for the fiscal year ending March 31 2020, including non-operating profit

Overall results fall in line with

initial forecasts of FY 20/3

*２ From this fiscal year, UQ WIMAX has been included to the unit sales, and the unit sales for the 3Q of FY 19/3 has been revised.

（19/3 3Q +5000 units, full year +7000 units）

Financial Results of the 3Q by Business Segment

Mobile Telecommunications		Enterprise Solution		Payment Service Business &	* [ ] = segment ratio
Business		Business		Other Business

6

Net Sales (Billion Yen)

376.8	354.9
35.8	[9.5%]
39.7 [11.2%]

19.4 [5.2%]

Net Profit

（Billion Yen）

10.15

21.3 [6.0%]

321.5293.8

[85.3%][82.8％]

Net sales of mobile telecommunication business decreased affected by the lower unit sales of mobile phone handsets.

3.31

[32.6%]

9.29

2.72

[29.4%]

3Q FY19/3	3Q FY20/3
Operating Profit	(Billion Yen)
10.83	9.38
0.73[6.8%]	The increase in expenses due
1.61 [14.9%]	1.93 [20.6%]	to the planned cost of sales
	promotion for the new service,
		"QUO Card Pay" by QUO
8.47	7.68	CARD Co., Ltd. the subsidiary
company.
[78.3%]	[81.8%]
	▲0.22 [▲2.4%]
3Q FY19/3	3Q FY20/3

1.11	[11.0%]	1.34	[14.5%]

5.72 5.21

[56.4%][56.1%]

3Q FY19/3

3Q FY20/3

All have marked low compared to the same time last year however overall results fall in line with the initial forecasts.

Unit Sales of the 3Q on Company-wide Basis

7

Unit Sales of Mobile Phones & Tablets

Unit Sales

(Thousand Units)

2980

2747

From October 2019 onward

Market Trends

●October 2019

・Revised Telecommunications Business Act put in force ・Separation of communication fee from handset price. Regulation on reduction of handset sales price.

・Increase in consumption tax

・Rakuten Mobile postponed its start of MNO service

• Spring of 2020

The deployment of 5G network commercial service

Consumer Trends

3Q FY 19/3

3Q FY 20/3

・Strong feeling of handsets are overpriced and restrained buying

・Wait and see attitude for Rakuten Mobile MNO service, and the launch of 5G services.

• There was a last-minute demand before the launch of new plans and increase in consumption tax, therefore resulted in less sales for this term.

• Including WiFi terminals and MVNO handsets
• The unit sales of FY 19/3 has been modified as UQ WIMAX has been included into the calculation. (7000 units are added.)

Mobile Telecommunications Business Segment

Financial Results of	9
Mobile Telecommunications Business Segment

Unit Sales of Mobile Phones

Financial Results Comparison

(Thousand Units)	* Including WiFi terminals and MVNO handsets

Net		Operating		Net Profit	(Billion Yen)
Sales		Profit

2838

2576 321.5 293.8

8.47 7.68

5.72 5.21

3Q FY 19/3

3Q FY 20/3

3Q FY 19/3

3Q FY 20/3

The overall results has fall in line with the y/y forecasts though there has been decrease in sales and profit due to the big drop in unit sales of mobile handsets after October 2019.

Total Number of Retail Outlets of Mobile Phone and Others	10

Change in Number of Retail Outlets

Carrier Shop		Multi-Carrier		Shop-in-shop & GMS
Accessories Shop		Shop

1,906	1,855
18	18
572	550
189	188

1,1271,099

End of Dec 2018		End of Dec 2019

Number of Shops by Each Carrier

*( ) = Directly managed Carrier Shop

Docomo au SB YM UQ Rakuten

1,127（331） 1,099（340）

18(18)	32(9)	25(23)
	31(8)

34(2)44(3)

348(38)

327(38)

414(91)387(95)

281(173)285(173)

End of Dec 2018		End of Dec 2019

The number of directly managed carrier shops has increased

due to the transfer of the management contracts.

Examples of Investments in Shops	11
Location Transfer	Newly Opened
November 22nd	October 25th
Docomo Shop	Dual shop opened
Across-Plaza	Rakuten Mobile Terrace Mall Matsudo
Minami 22-Jyo
Smart Labo Terrace Mall Matsudo

Enterprise Solution Business Segment

Financial Results of Enterprise Solution Business Segment	13

Unit Sales of Mobile Phones

* Including WiFi terminals and MVNO handsets	(thousand units）
	171

Financial Results Comparison

Net Sales		Operating		Net Profit	(Billion Yen)
		Profit

141

19.4

21.3

1.93

3Q FY19/3

3Q FY20/3

1.61

1.34

1.11

3Q FY19/3

3Q FY20/3

Operating profit and net profit increased due to strong sales in solution

services and terminals for enterprise customers.

Subscription Services	14

Number of movino star ID

The communication line management （thousand IDs） service for corporate clients

598

544

End of Dec 2018

End of Dec 2019

Number of Subscription of Help Desk Services

（thousand IDs）

200

174

End of Dec 2018 End of Dec 2019

Numbers are growing steadily

Subscription Service	15

Cumulative Number of TG Hikari Subscribers (incl. Resale)

increasing

steadily

The optic fiber access service

Support center for sales team

End of April 2015

(Launch)

End of Dec	End of Dec
2018	2019

For improved efficiency for sales department to deal with end customers and resales partners

Registration system for

TG Hikari service

The system for simplified registration, efficient

management of each case, and improved

information sharing.

Improved support and efficiency

In November 2019	16
Investment in Relay2, Inc.

Cloud wifi X Edge Computing

Offers Connection and terminals/handsets,

Offers solutions to customersconstruction of wifi environment

app	Edge Computing
Cloud	Data processing done
インターネット	locally, edge, where it's
Edge	close to users.

app

Relay2

ネットワーク

Advantages

・reduces costs

・reduced security risks ・real-time data processing

app

The exclusive sale of Relay2 products in the Japanese market will add edge computing solution to the product range of T-Gaia.

Payment Service Business and Other Business Segment

Financial Results of	18
Payment Service Business and Other Business Segment

Financial Results Comparison

				Operating			Net Profit
	Net
				(Billion Yen)
		Profit
	Sales				39.7
	35.8

3.312.72

0.73

(0.22)

3Q FY 19/3		3Q FY 20/3

Payment Service Business and Other Business Segment

<> Only>

	Net			Operating			Net Profit
	Sales			Profit			37.2
	32.5

1.23

0.94

0.640.73

3Q FY 19/3 3Q FY 20/3

Gross Sales of PIN & Gift Card

Increase due to the start of gift card business with a major sales channel from 2Q of FY 2019

3Q FY 19/3 3Q FY 20/3

Amount of Issued QUO Card

Issued amount continues to increase

3Q FY 19/3 3Q FY 20/3

The promotion of QUO Card Pay launched this FY has been proceeding as planned. Although the increased cost has resulted in drop in profit, the overall results are inline with the initial plan.

In November 201919

Formed Capital Alliance with NETSTARS CO.,LTD.

NETSTARS CO.,LTD.

"StarPay"

Accepting more than 20 brands of

QR code payment services

（As of end of Dec 2019）

The service of multi QR code payment gateway StarPay

for retailers mainly in Japan and Asia

In November 2019

20

Formed Capital and Business Alliance with BlueStack Systems, Inc.

The first esports tournament platform for mobile games in the world

Organize and play made easy by AI and social media connection.

【Our Strengths】

・Nationwide retail outlets ・Sales skills of terminals

・Sales channels of gift cards and digital codes by Payment Service Business

・Organizing offline game tournaments at our retail stores and online tournaments sponsored by our collaborators

・Selling gift cards and digital codes on the game platform

And further planning ahead.

Stepping into the eSports business which 5G will be the key factor.

Recent Campaigns	21

The digital gift that can be used in physical retail stores, allowing

enterprise customers to launch various types of promotional campaigns.

Osaka Prefectural Gov.	UQ Communication Inc.	RIZAP
The campaign to encourage	50,000 yen rewarding
wellness of its citizens.	Until End of March 2020	campaign
		ended

For updates and news on QUO Card Pay campaigns, please check its official website:

https://www.quocard.com/pay/campaign/

Member Stores: where it can be used	22

Member Stores

Convenience

Stores

(As of Feb 1st 2020)	* Its member store differ from that of QUO Card .
* ●= QUO Card Pay only
	Cafes / Restaurants

（一部店舗を除く）

Book Stores				（一部店舗を除く）	（一部店舗を除く）
		（一部店舗を除く）
					※飲食店 一部店舗を除く
（一部店舗を除く）		（一部店舗を除く）
（一部店舗）		（一部店舗を除く）		Drugstores
（一部店舗を除く）	（一部店舗を除く）	（一部店舗）
（一部店舗を除く）
				Lifestyle Stores
		（一部店舗）
（一部店舗）
				（一部店舗を除く）	（銀座博品館TOYPARK）
（一部店舗）		（守口本店のみ）	（一部店舗を除く）	（一部店舗を除く）
	（プラスゲオ富久山店のみ）	（一部店舗）	（一部店舗）
（都城 妻ヶ丘本店のみ）

Appendixes

【T-Gaia Corporate Philosophy】

24

TG Vision - Our Vision -

• We will propose new ways of communication to provide our customers with excitement, delight, and safety

TG Mission - Our Mission -

• We value our employees, as well as their families, and strive to establish a pleasant work environment for everyone
• We will develop strong relationships with our business partners, regional communities and shareholders toward our future mutual growth
• As a leading company in the industry, we will go ahead of changes to develop new businesses

TG Action - Our Code of Conduct -

• We will provide the highest-quality service exceeding any of someone's expectations
• We will keep challenging something new aggressively with our passion and a sense of speed
• We will value communication and establish workplace with a culture of openness
• We will value our diversity and strive to achieve the best teamwork
• We will move ourselves higher as professionals
• We always act on high ethical standards and strengthen our compliance structure

24

25

The Midterm Goals

From November 2015, T-Gaia has set a medium-term goals to realize a sustainable growth and to respond to the expectations of all stakeholders including shareholders and employees by achieving the following objectives based on the corporate philosophy toward the FY 2020 (FY ending March 2021).

• Firmly maintain the position as the leading company in the core business of mobile phone distribution
• Grow solution business for corporate clients, settlement service and overseas business as a strong core business
• Create and explore new business opportunities in the mobile and internet industries
• Maintain the dividend payout ratio over 30%

In order to realize the objectives noted above, T-Gaia is taking concrete measures every day, setting the following points as the company-wide strategy.

• Cultivate, recruit, utilize and retain human resources to realize maximization and optimization of achievement of respective employees
• Conduct strategic and continuous cost managements to transform the cost structure into one that can response to the change of the market environment
• Maximize the corporate-wide achievements by optimizing the organization as well as the corporate system

Based on the above medium-term goals and company-wide strategies, T-Gaia will develop the business strategies for each business lines and make every effort to realize them through the concrete action plans in each business departments.

Business Environment and The Strategies	26

Evaluations on the Business Environment

The wide spread of smartphones allows people to connect to the world regardless of time. It has brought huge changes to the way people communicate, gather information and purchase.

New types of businesses and services that were unimaginable in the past are now available. The market became more competitive and so as the chance of forming a new partnership.

Strategies of T-Gaia

T-Gaia will accelerate the speed to become "a Comprehensive Provider of ICT- Related Domains".

The company will accelerate its investments in its digital services while making full use of its analog strengths, such as shops and sales bases across the nation, the diverse range of business models and well-established trades.

It will strive to develop new businesses and services while maintaining the existing partnership within the group.

Vision of Becoming "A Comprehensive Provider

27

of ICT-Related Domains"

Digitalization

		Mobile Phone
		Distribution
		Business for
			Solution
Payment
	Consumers
		Business
Business
	B to C
B to B to C			B to B

Corporate

Group

Cooperation

Cooperation

				Nationwide sales
Wide variety		Wide range of			High flexibility		Financial
		channels		and neutrality
of business		business				condition kept in
		(for mobile distribution		(low in in-house
models		relationship				good valance
		business)		products)

The Strengths of the Corporate Group

Unit Sales of FY2020 (Quarterly)	28

Quarterly Unit Sales	October 2019
Revised Telecommunications
(Thousand Unit)	Business Act are in put in force

		1,030	1,147
943	1,006	913	983
		850

1Q	2Q	3Q	4Q	1Q	2Q	3Q
	FY 19/3			FY 20/3

• Including WiFi terminals and MVNO handsets
• The unit sales of FY 19/3 has been modified as UQ WIMAX has been included into the calculation. (7000 units are added.)

Financial Results in Quarterly Comparison	29

3Q（October to December）

Net Sales		Operating		Net Profit (Billion Yen)
		Profit

137.0

110.4

3.96

3.27

2.42 2.29

FY 19/3	FY 20/3
3Q	3Q

Consolidated Forecasts for FY Ending March 2020

30

（Unit: billion yen）	Full Year Results	Full Year Forecast	Year-on-year
		for 2019/3	for 2020/3
	Net Sales	526.92	432.00	▲94.92 ▲18.0％
	Gross Profit	70.94	67.50	▲3.44	▲4.9％
	SG&A Expense	55.56	54.40	▲1.16	▲2.1％
	Operating Profit	15.38	13.10	▲	▲14.8％
	2.28
	Non-Operating Income	5.21	5.40	＋0.19	＋3.6％
	(Income from Hoarded Cards , etc..)
	Ordinary Profit	20.59	18.50	▲2.09	▲10.2％
	Attributable to Shareholders of	13.84	12.40	▲1.44	▲10.4％
	the Parent Company
	Net Profit

Forecasts for Mobile Telecommunications Business Segment 31

The Business Environment

Forecasts of Mobile Telecommunications Business Segment

Net		Operating		Net Profit	(Billion yen)
Sales		Profit

The large swells that drive the industry are the law amendments regarding the sales of terminals in force from October and the foreseen establishment of a new carrier.

The preparation for 5G has started.

452.6

351.0

13.10

11.56

8.867.76

FY 19/3

FY 20/3 (Forecasts)

Our Strategies

• Reinforcing our "values in proposals" in response to the drop in sales volume due to the complete separation of charges of mobile phone handset and communication charges (Smartphone instructional classes and IoT showrooms within shops, etc.)
• Improving the ratio of revenue generated by subscription services
• Active investments in staff education and recruitment of personnel for enhancement of sales ability and improvement of customer satisfaction
• Continue to make strategic investments such as store relocation and renovation

Forecasts for Enterprise Solution Business Segment	32
The Business Environment

• Workstyle reform and shortage of labor are both

Forecasts for Enterprise Solution	tailwind.
Business Segment		- Installing smart devices are popular to enterprise
						customers.
Net		Operating		Net Profit	(billion yen)	- Information security issue are becoming more serious.
Sales		Profit	31.0	- Re-wholesale of "Hikari" fiber-optic connection
				service has started.

26.5

2.43

1.68

FY 19/3 Results

	Our Strategies
	Mobile Enterprise Solution Business
2.48	● Mobile version of LCM business are promoted

1.71	●IoT business put forward through capital alliance
with venture companies
	● Building up of subscription business such as "movino
	star"
FY 20/3 (Forecasts)	Network Business
● Expansion of revenue base of "TG Hikari"
	● Productivity improvements by effective use of sales
	support system

Forecasts for Payment Service Business and Other Business Segment

33

Forecast for Payment Service Business and

Other Business Segment (Consolidated)

The Business Environment

Net

(billion yen)

Operating

Net Profit

Sales

Profit

Gift card business and PIN business are steady.

47.7

50.0

Cashless payment services using smartphone

3.28

2.93

are expanding.

	▲0.16
					▲0.94
FY 19/3 Results		FY 20/3 Forecasts

Reference: The Forecast for Payment Service Business

and Other Business Segment (T-Gaia Alone)

Net		Operating	Net Profit	(billion yen)
Sales		Profit

43.646.5

1.241.30

0.760.90

Our Strategies

Payment Service Business

• Increase in gross sales due to expansion of products and sales channels

●Implementing large-scale sales promotion of "QUO Card Pay" (the planned cost: approximately 1 billion yen)

Overseas Business

• Gross sales of gift card increased due to the expanded sales channels at the luxury supermarket chain in Singapore
• Preparing to launch a business in Vietnam

FY 19/3 Results		FY 20/3 Forecasts

Financial Information of T-Gaia: Part 1

• Transition of ROE & Operating Profit

34

	Operating Profit		ROE (Return on Equity)
(billion yen)	15.6			15.3
		14.3	14.2	14.4

12.7	13.1

26.4%

33.3%

29.4%	29.3%	29.7%	30.9%

24.5%

*

FY 14/3

FY 15/3

FY 16/3

FY 17/3

FY 18/3

FY 19/3

FY 20/3

（Forecast）

It has been selected to "JPX Nikkei Index 400"

for consecutive years by maintaining high level of ROE

*The ROE of the FY 20/3（Forecast） is calculated based on the forecast of the net profit for FY 20/3 attributable to shareholders of the parent company and the prediction of the net worth of the period.

Financial Information of T-Gaia: Part 2

35

• The Past Trends and the Forecasts of the Key Financial Index

Year End (in billion)	2014/3	2015/3	2016/3	2017/3	2018/3	2019/3
Net Profit	6.83	7.74	9.49	9.69	10.16	13.84
Net Worth	23.59	29.10	35.81	29.36	36.44	46.73
Equity Ratio of Net				29.7％	30.9％	33.3％
Profit	26.4%	29.4%	29.3%
（ROE)
Return on Investment	10.0%	13.5%	17.3%	17.6%	20.3%	22.0%
(ROIC)
Operating Profit on	1.8%	2.2%	2.5％	2.6％	2.6%	2.9%
sales
Dividend on Equity	10.0%	9.8%	9.1％	9.9％	9.3％	10.0％
ratio (DOE)

Financial Information of T-Gaia: Part 3

• Return to Shareholders: Dividend Policy

Return to Shareholders in FY ending March 2020

• Annual dividend: 75 yen/share (Interim: 37.5 yen/share, Yearend: 37.5 yen/share)

36

Basic Dividend Policy

Targeting & maintaining dividend payout ratio of more than 30%

• Net Profit per share （yen）

242.24

222.51

172.62182.34

138.11

112.68

86.74

• Dividend per share & Payout Ratio（yen）

Dividend per share		Payout ratio	75.00
	75.00

52.00 55.00

43.00

35.00 37.50

40.3%

33.3% 31.1% 30.1% 30.2% 30.1%

33.7%

FY14/3 FY15/3 FY16/3 FY17/3 FY 18/3 FY 19/3 FY 20/3	FY14/3 FY15/3 FY16/3 FY17/3 FY 18/3 FY 19/3 FY 20/3
（Forecast）	（Forecast）

* The net profit per share and dividend per share at the end of FY 20/3 are calculated based on the predicted average number of the share of the period at the end of FY 20/3.