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

Consolidated Financial Results for the First Half of the FY ending March 2020

(Six months ended September 30, 2019)

November 11, 2019

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 1H of the
		FY ending March 2020		4-8
	- Financial Results of the 1H of the FY ending March 2020 and
		Strategies by the Business Segments
		- Mobile Telecommunications Business Segment		9-14
		- Enterprise Solution Business Segment		15-28
		- Payment Service Business and Other Business Segment*	29-34
-	CSR Activities		35-36
-	Appendixes	37-50

*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）	1H	1H	y/y
FY 19/3	FY 20/3	Change

Forecasts of

20/3 Full-year

Achievement

Ratio

Net Sales

Gross Profit

（to Net Sales）

SG&A Expenses

Operating Profit

（to Net Sales）

Non-Operating Income*１

（Income from hoarded cards,

etc.）

Ordinary Profit

Net Profit

239.79 244.54 102.0％

33.26 34.19 102.8％

（13.9％） （14.3％） （＋0.4ｐ）

26.38 27.22 103.2％

6.87 6.96 101.3％

（2.9％） （2.4％） （▲0.5ｐ）

3.33 3.42 102.7％

10.20 10.38 101.8％

6.88 6.99 101.6％

432.00

67.50

(15.6％）

54.40

13.10

（3.0％）

5.40

18.50

12.40

56.6％

50.7％

50.1％

53.2％

63.4%

56.2％

56.4%

Mobile-phone*２	1.949	1.896	97.3％
Unit Sales (million units)

Overall results as planned

for FY 20/3

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

*２ From this fiscal year, UQ WIMAX has been included to the unit sales, and the unit sales for the 1Q of FY 19/3 has been revised. (1Q +2000 units, full year +7000 units).

	Financial Results of the 1H by Business Segment	6
	Mobile Telecommunications		Enterprise Solution		PaymentService Business * [ ] = segment ratio
	Business		Business		& Other Business

Net Sales	(Billion Yen)	244.5
239.7
		26.2
	23.1	[9.6%]			[10.7%]
					14.0
13.0	[5.4%]		[5.7%]

203.6204.2

[85.0%][83.6％]

Net Profit	（Billion Yen）

6.886.99

2.12

2.46 [30.4%]

1H FY 19/3	1H FY 20/3
Operating Profit	(Billion Yen)

6.87 6.96

0.35[5.2%]1.23 [17.7%]

[35.8%]

0.71 [10.4%]

0.86[12.3%]

1.03[15.0%]

5.48	5.92
[85.1%]
[79.8%]

				[▲2.8%]
		▲0.19
1H FY 19/3	1H FY 20/3

3.70	4.00
[57.3%]
[53.8%]

1H FY 19/3

1H FY 20/3

All have increased compared to the same time last year

Unit Sales of the 1H on Company-wide Basis	7

Unit Sales of Mobile Phones & Tablets

Unit Sales

(Thousand Units)

1949 1896

1H FY 19/3

1H FY 20/3

* Including WiFi terminals and MVNO handsets

The drop in unit sales

compared to the same time last year

Market Trends

・October 2019: Revised Telecommunications Business Act are in put in force, resulting in each telecommunications carrier to announce new plans.

・Rakuten Mobile to enter into MNO business.

Consumer Trends

Wait-and-see attitude

During September: There was a last-minute demand before the launch of new plans and increase in consumption tax.

* 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

Enterprise Solution Business Segment

Payment Service Business and Other Business Segment

Mobile Telecommunications Business Segment

Financial Results of	10
Mobile Telecommunications Business Segment

	Financial Results Comparison	Unit Sales of Mobile Phones
Net			Operating		Net Profit (Billion Yen)	(Thousand Units)	* Including WiFi terminals and MVNO handsets
Sales			Profit

18571780

203.6204.2

5.485.92

3.704.00

1H FY 19/3

1H FY 20/3

1H FY 19/3

1H FY 20/3

Though the unit sales decreased, due to the improved profitability per unit the operating profit and the net sales increased slightly compared to the same time last year.

Total Number of Retail Outlets of Mobile Phone and Others

11

Change in Number of Retail Outlets

Number of Shops by Each Carrier

*( ) = Directly managed Carrier Shop

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

Docomo au SB YM UQ Rakuten

1,129（326）

1,107（333）

1,898	1,866
17	17
570	549
182	193

1,1291,107

17(17)

35(2)

347(40)

417(85)

281(173)

32(9)

24(22)

31(8)

45(3)

331(34)

391(93)

285(173)

End of September	End of September
2018	2019

End of September

2018

End of September

2019

The number of directly managed carrier shops has increased

due to the transfer of the management contracts.

Examples of Investments in Shops - Part 1	12
Example of the shop	Installed designated area for
re-location and refurbishment	smartphone instructional classes for customers

Docomo Shop Kobe Harbor-land Umie

Examples of Investments in Shops - Part 2	13
Delivery of smartphone classes	Tailored classes commencing
in local community facilities

By Docomo Shop Onojo

By au Shop Tobo

at Community Center for Elderly People

in City of Onojo

At Nagasakishi East Public Hall

Examples of Investments in Shops - Part 3	14
Newly Opened	Dual shop opened in September 14th

Rakuten Mobile Sakura-machi Kumamoto /Smart Labo Sakura-machi Kumamoto

Enterprise Solution Business Segment

Financial Results of Enterprise Solution Business Segment	16
Unit Sales of Mobile Phones		Financial Results Comparison
(thousand units）		Net Sales		Operating		Net Profit	(Billion Yen)
				Profit

	116	13.0			14.0
	92			1.03				1.23
								0.71			0.86

1H FY 19/3

1H FY 20/3

1H FY 19/3

1H FY 20/3

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

services and terminals for enterprise customers.

* Including WiFi terminals and MVNO handsets

The Strategies of Enterprise Solution Business Segment

17

LCM Business Focusing on Mobile Phones and etc.

*LCM・・・Life Cycle Management

Update	Sourcing and
	Proposal

		Supporting
Maintenance
	Adaption

Operation		Building an
	Environment

Before

Now

Sales of Hardware

Giving supports

through the Life-Cycle

Strategies of Enterprise Solution Business Segment	18
LCM Business Focusing on Mobile Phones and etc.

T-Gaia

・Terminal replacement ・Disposal of used handsets (Purchase)

Update

T-Gaia

・Smart devices

・Laptop PC with SIM ・TG Rental

Sourcing and （Terminal rental service）

Proposal

T-Gaia

Subsidiary
			IT System
		Maintenance
			Development
Help desk service

Supporting	・Kitting service
・Enhancing security
Adaption
Partner

T-Gaia

Operation		Building an
		Environment

Mobile Security

Including iOS

Subsidiary

Communication Line

Management Service for

Corporate ClientsBuilding of

Wi-fi environment

The wide range of services and products from the stages of sourcing to replacement

are provided and strengthened by the subsidiaries and the partners.

*LCM・・・Life Cycle Management

Strategies of Enterprise Solution Business Segment	19
Strengths in IT System Development

IT System

Development

Subsidized

Strengths in	Strengths in Sales
IT System Development

×

・holds in-house system engineers

・has been developing systems for sales ・has its own IoT framework

Allows rapid development and

alteration of products

Strategies of Enterprise Solution Business Segment	20
LCM Business Focusing on Mobile Phones and etc.
*LCM・・・Life Cycle Management

PC Technology, Inc.

Number of Subscription of Help Desk Services

（thousand IDs）

197

157

Maintenance

				End of September
	End of September
	2018			2019
		It is planning to increase the
		number of helpdesk clerk in
		order to expand the capacity
		to accept expected demands.

Strategies of Enterprise Solution Business Segment	21
LCM Business Focusing on Mobile Phones and etc.
*LCM・・・Life Cycle Management

The communication line management service

for corporate clients

Number of

movino star ID

（thousand ID）	536	584

Operation

End of Sept 2018

End of Sept 2019

Strategies of Enterprise Solution Business Segment	22
ICT/IoT Enterprise Solutions

Target Customers

Offices

LCM Business Focusing on Mobile Phones and etc.

Restaurants and

retail stores

By offering solutions to aid

the issue on human resource shortage.

Strategies of Enterprise Solution Business Segment	23
ICT/IoT Enterprise Solutions

IT System

Development

Developing new services

together with its

subsidiaries, investees and

outside partners.

Strategies of Enterprise Solution Business Segment	24
ICT/IoT Enterprise Solutions

Apps and services to aid on the issue of human resource

shortage in restaurants and retail stores

Subsidiaries

and

investees

Outside partners

Strategies of Enterprise Solution Business Segment	25
ICT/IoT Enterprise Solutions

POS/cashier system that	The real-time updates of	Reception system and smart
works on tablets and mobile	whether a table is available	tools for offices
phones

Providing the POS system	Providing the online service	Providing the smart
on mobile phones to	tool for announcing	reception system that works
retail stores and	availability to cafes and	on tablets.
restaurants.	restaurants.

Investing and building partnerships with the small cap IoT venders that focus on the issue on human resource shortage and improve efficiency of office and retail management.

Roundup of the Strategies of Enterprise Solution Business Segment	26

IT System

Development

LCM focusing on

Mobile Phones

ICT/IoT

Enterprise Solutions

Subscription Service	27

Cumulative Number of TG Hikari

Subscribers (incl. Resale)

The optic fiber access service

increasing

steadily

The number of contracts are

increasing steadily.

End of April 2015	End of Sept 2018	End of Sept
(Launch)		2019

Subsidiary: WAMNET Japan K.K.	28

The online system for file transfer/share for

enterprise customers, Giga CC ASP/OFFICE.

Payment Service Business and Other Business Segment

Financial Results of	30
Payment Service Business and Other Business Segment

Financial Results Comparison

	Net		Operating			Net Profit
	Sales		Profit						(Billion Yen)
			26.2
	23.1

2.462.12

0.35

(0.19)

1H FY 19/3
	1H FY 20/3

Payment Service Business and Other Business Segment

<> Only>

		Net					Operating
						Net Profit
		Sales					Profit
	(Billion Yen)										24.6
		20.8
													0.78
			0.45									0.53
			0.3

Gross Sales of PIN & Gift Card

Significant increase

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

1H FY 19/3

1H FY 20/3

Amount of Issued QUO Card

Issued amount continues to increase

1H FY 19/3

1H FY 20/3

1H FY 19/3		1H FY 20/3

Wholesale Sale of Apple Accessories	31

The wholesale business of Apple Accessories to

Seven-Eleven convenience stores.

9 accessories from Apple are on sale from May 2019.

Subsidiary: Model T Inc. - Solar Power System	32

Installing solar power systems to Docomo Shops

Recent Campaigns

33

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

enterprise customers to launch various types of promotional campaigns.

UQ Communication Inc.	Toyota Motor Corporation
From Sept. 28th to Dec. 27th 2019
Until Nov. 30th 2019	Until the stock lasts

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

34

Member Stores

Convenience

Stores

Book Stores

（一部店舗を除く）

（一部店舗を除く）	（一部店舗を除く）
	（一部店舗を除く）

（一部店舗を除く）

（一部店舗）

（一部店舗）

（一部店舗を除く）

（都城 妻ヶ丘本店のみ）

(As of Nov. 1st 2019)	* I ts m em ber store differ from that of QU O C ard .
* ●= QUO Card Pay only
	Cafes

（一部店舗を除く）

（一部店舗を除く）

Drugstores

	（一部店舗を除く）
（一部店舗）	（一部店舗を除く）	Restaurants	*There are some exceptions

（一部店舗）	Toy Shop
Shopping Center
（守口本店のみ）
	（銀座博品館TOYPARK）
（一部店舗を除く）
（プラスゲオ富久山店のみ）

More stores are joining.

CSR Activities

CSR

36

●e-NetCaravan The action to promote the safe and secure use of the internet and smartphones to students as well as guardians and teachers.

By offering seminars to children, the company is taking its social responsibility to rise the awareness to the safe and secure use of internet.

The number	456instructors (As of end of Sept 2019)
of certified
instructors
The number	128seminars (As of end of Sept 2019)
of seminars
done

Photo taken at an e-Net Caravan seminar

• Environmental initiatives: Installing the solar panels and power generating systems to directly managed shops by T-Gaia and its warehouses.

(The warehouse in Shiga)

Appendixes

【T-Gaia Corporate Philosophy】

38

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

38

39

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	40

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

41

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

The Strengths of the Corporate Group

Unit Sales of FY2019 and FY2020	42

Quarterly Sales Unit

(Thousand Unit)
	1,006	1,030	1,147			983
943		913

1Q	2Q	3Q	4Q	1Q	2Q
		FY19/3			FY20/3

• 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	43

1Q (April to June)

		Net Sales		Operating		Net Profit
（Billion Yen）	Profit

115.6117.9

		3.86		3.70
		3.11		2.88

FY 19/3	FY 20/3
1Q	1Q

2Q (July to September)

		Net Sales				Operating				Net Profit
				Profit
（Billion Yen）
		126.5
124.1

3.75			4.07
3.01		3.28

FY 19/3	FY 20/3
2Q	2Q

Consolidated Forecasts for FY Ending March 2020	44

（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	▲2.28	▲14.8％
	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 45

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

13.10

8.86

FY 19/3

351.0	Our Strategies
● Reinforcing our "values in proposals" in response to
11.56	the drop in sales volume due to the complete separation
of charges of mobile phone handset and communication
7.76	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
FY 20/3 (Forecasts)	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	46
The Business Environment

Forecasts for Enterprise Solution Business Segment

Net		Operating		Net Profit	(billion yen)
Sales		Profit	31.0
26.5

• Workstyle reform and shortage of labor are both tailwind.
• Installing smart devices are popular to enterprise customers.
• Information security issue are becoming more serious.
• Re-wholesaleof "Hikari" fiber-optic connection service has started.

Our Strategies

2.43

1.68

FY 19/3 Results

2.48	Mobile Enterprise Solution Business
● 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

47

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
						46.5
	43.6

1.24				1.30
			0.90
		0.76

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	48

• Transition of ROE & Operating Profit

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

12.7	13.1

33.3%

29.4% 29.3% 29.7% 30.9%

26.4%

24.5% *

FY 14/3 FY 15/3 FY 16/3 FY 17/3 FY 18/3 FY 19/3 FY 20/3

It has been selected to "JPX Nikkei Index 400" （Forecast） 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	49

• 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
Profit	26.4%	29.4%	29.3%	29.7％	30.9％	33.3％
（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	50

• 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)

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.