Full-Year Results Briefing for the Fiscal Year Ended December 31, 2017 (19th Term)

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Dwain Malone
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Briefing for the Fiscal Year Ended December

2 Note to this material Plans, forecasts and strategies, etc. of the Company contained in this material include potential risks and uncertainties, except for elements that have already been fixed, and do not guarantee their contents. Potential risks and uncertainties include, but are not limited to, economic conditions centered on consumer spending trends, trends in the golf market, which is the main business domain of the GDO Group, and the overall Internet market, competition in the market and the rapid innovation of technologies, etc. The unauthorized copying of this material and the data therein is not permitted. Copyright(c) Golf Digest Online Inc. All Rights Reserved page 2

4 Full-Year Highlights of FY2017 Net sales and gross profit showed double-digit growth from the previous year. Business performance recovered and improved sharply in the second half. Focused on the cultivation of loyal customers. Promoted the reciprocal use of services. Made investments for future growth, including the cloud IT infrastructure, the strengthening of existing services and the development of new services. Net sales and net income fell short of their forecasts. Copyright(c) Golf Digest Online Inc. All Rights Reserved page 4

5 Consolidated Financial Results for FY2017 Net sales and profits at all levels achieved double-digit growth from the previous year (operating profit showed double-digit growth for the fifth consecutive year). Advance investment for future growth was made as planned. Net sales Gross profit Selling, general and administrative expenses Operating profit Ordinary profit YoY 19,309 21,574 +2,265 (112%) 8,012 8, (110%) 6,939 7, (110%) 1,073 1, (113%) 1,089 1, (113%) Profit attributable to owners of parent (116%) EBITDA 1,577 1, (104%) * EBITDA=Ordinary profit + Depreciation + Amortization of goodwill + Interest expenses + Long-term prepaid expenses Copyright(c) Golf Digest Online Inc. All Rights Reserved (Million yen) page 5

Changes in Net Sales and Gross Profit in FY2017 The membership system was renewed in June, and marketing measures to encourage the use of multiple services were successful.

6 Changes in Net Sales and Gross Profit in FY2017 The membership system was renewed in June, and marketing measures to encourage the use of multiple services were successful. In 4Q, in particular, net sales increased 23% and gross profit increased 12% year on year. (Billion yen) YoY 123% Net sales 5.0 YoY 112% Gross profit Copyright(c) Golf Digest Online Inc. All Rights Reserved page 6

7 Focused on Activation of Customers and Cultivation of Loyal Customers New membership system: GDO Yard Program Promoted the reciprocal use and repeated use of services by integrating special benefit grant systems for the sales of golf equipment and the golf course booking service. Copyright(c) Golf Digest Online Inc. All Rights Reserved page 7

Initiatives to Promote Reciprocal Use of Services were Successful The number of users for the reciprocal use of services increased after the launch of the GDO Yard Program.

8 Initiatives to Promote Reciprocal Use of Services were Successful The number of users for the reciprocal use of services increased after the launch of the GDO Yard Program. YoY change in the number of users for the reciprocal use of services Number of active users Up 10% year on year 100% Use only the golf course booking service Start to use the sales of golf equipment Number of users Up 30% year on year 50% Launch of the new membership system Use only the sales of golf equipment Start to use the golf course booking service Number of users Up 20% year on year Copyright(c) Golf Digest Online Inc. All Rights Reserved page 8

FY2017 (Million yen) Gross profit +837 Operating profit 1,073 Labor cost +144 Enhancement of sales to golf course Increase in coaches at GOLFTEC Enhancement of business base +274 Cloud IT

9 Changes in SG&A Expenses First half: Cloud IT infrastructure and opening of new stores of GOLFTEC by GDO,etc. Second half: Measures to promote the reciprocal use of services and the enhancement of customer communication (Enhancement of customer support and promotion of application downloads) FY2016 FY2017 (Million yen) Gross profit +837 Operating profit 1,073 Labor cost +144 Enhancement of sales to golf course Increase in coaches at GOLFTEC Enhancement of business base +274 Cloud IT infrastructure Expansion of head office and stores Enhancement of business +278 Measures to promote the reciprocal use of services Enhancement of customer communication Enhancement of services for smartphones and social media Copyright(c) Golf Digest Online Inc. All Rights Reserved page 9

10 Sales of Golf Equipment Sales of new golf clubs, which had continued to fare poorly since the previous year, remained firm from the second half. Sales of apparel, accessories and used equipment of popular brands continued to be strong. Focused on the provision of high value-added products, including sales of customized golf clubs. YoY comparison of amount of orders received * The graphs do not include the amount of orders received for apparel. *Golf equipment market (golf clubs, balls, accessories): Year-on-year changes in the market size estimated based on actual sales of actual stores of major dealers dealing with major golf equipment nationwide calculated by GfK LifeStyle Tracking Japan. Copyright(c) Golf Digest Online Inc. All Rights Reserved page 10

11 KPI Analysis for the Full Year Inflow from the golf course booking service increased, and the number of users grew. Sales of new golf clubs performed well throughout the second half. In sales of apparel and accessories, brands we began handling from the fiscal year under review became major products and raised the level of business performance. Number of customers Unit purchase price * All arrows indicate year-on-year changes. New golf clubs Used golf clubs Balls Apparel Accessories *Sales by category. Accessories include gloves, shoes and small items such as markers. Copyright(c) Golf Digest Online Inc. All Rights Reserved page 11

12 Golf Course Booking Service Remained Firm Early bookings of golf rounds continued to be strong. The number of visitors increased due to stronger exposure through Internet advertising and the promotion of bookings via smartphone applications. Collaboration with Jalan Golf began in earnest in October. Changes in the number of golfers booked on GDO (YoY) * GDO indicates YoY changes in the number of golfers booked on GDO. * Market data: Ministry of Economy, Trade and Industry Survey of Selected Service Industries * Comparison of the total of eight prefectures (Hokkaido, Miyagi, Tokyo, Aichi, Osaka, Hiroshima, Kagawa and Fukuoka) Copyright(c) Golf Digest Online Inc. All Rights Reserved page 12

13 KPI Analysis The number of visitors increased thanks to the success of SEO measures by refurbishing the Web page, in addition to effective exposure to Internet advertising (listing, display, etc.). The preparation of abundant booking plans to cater to the needs of customers, in addition to measures for the reciprocal use of services, contributed to the increase in the number of users. The unit fee price remained flat from the previous year, and the cancellation rate rose slightly due to poor weather in early autumn. Number of customers Unit fee price Cancellation rate * All arrows indicate year-on-year changes. Copyright(c) Golf Digest Online Inc. All Rights Reserved page 13

15 Four Services of GDO Four services of GDO that are a hybrid of online & offline and specialize in the golf category. Enhancement of services based on the policy of Kyakushin = putting the customer first Comprehensive pursuit of golf x technology Copyright(c) Golf Digest Online Inc. All Rights Reserved page 15

Kyakushin Sales of Golf Equipment Wider selection of goods The number of new brands

handled Total number of brands handled:about 340 Enhancement of mobile-friendliness

Apparel Expansion of sales channels GDO GOLF SHOP was opened on LOHACO, an Internet

16 Kyakushin Sales of Golf Equipment Wider selection of goods The number of new brands handled, including popular brands that become the mainstay of sales 60 New brands handled Total number of brands handled:about 340 Enhancement of mobile-friendliness Sports apparel Golf + 60 The GDO GOLF SHOP smartphone application was released. Apparel Expansion of sales channels GDO GOLF SHOP was opened on LOHACO, an Internet shopping service operated by ASKUL. Copyright(c) Golf Digest Online Inc. All Rights Reserved page 16

Expansion of added value for golf courses Management man-hours of golf courses were reduced by managing the

17 Kyakushin Golf Course Booking Service Strengthening of collaboration with Jalan Golf Enhancement of booking quota Play information (time frame, plans) on partner golf courses of both companies (about 1,600 courses) was shared. Expansion of added value for golf courses Management man-hours of golf courses were reduced by managing the booking quota using a common platform provided by GDO. Copyright(c) Golf Digest Online Inc. All Rights Reserved page 17

Increase in the number of courses accepting HOT PRICE Total number of courses accepting it: about 790 Promotion of use of IT at golf

18 Kyakushin Golf Course Booking Service Provision of extensive plans Design of plans that appeal to golfers, such as early booking and last-minute booking. Increase in the number of courses accepting HOT PRICE Total number of courses accepting it: about 790 Promotion of use of IT at golf courses The number of golf courses introducing the IT system increased. Total number of courses introducing Yardage and WebPack: about 280 Courses accepting HOT PRICE +64 Courses introducing IT system +25 Copyright(c) Golf Digest Online Inc. All Rights Reserved page 18

Kyakushin Golf Media Service Strengthened the attraction for

19 Kyakushin Golf Media Service Strengthened the attraction for customers by increasing news distribution and enhancing its content. Dedicated channel opened on Smart News, a news browsing application. BRUDER, a golf style class magazine and a medium transmitting diverse golf-related information, was launched. Copyright(c) Golf Digest Online Inc. All Rights Reserved page 19

Kyakushin Golf Lessons and Custom Club Fitting Nationwide promotion of new store openings Shinjuku Store opened in March (8 th store in the Kanto area) Osaka Umeda Store opened in May

experience-based store beyond golf lesson services by strengthening services for Custom club fitting Increasing the convenience of golf lessons with IT technology.

20 Kyakushin Golf Lessons and Custom Club Fitting Nationwide promotion of new store openings Shinjuku Store opened in March (8 th store in the Kanto area) Osaka Umeda Store opened in May (first store in the Kansai area) Nagoya Store opened in February 2018 (first store in the Chubu area) Establishment of a new retail model Aiming to create a comprehensive experience-based store beyond golf lesson services by strengthening services for Custom club fitting Increasing the convenience of golf lessons with IT technology. Dedicated application for the golf lesson services released. Booking of lessons by smartphone and checking of one s swing by video anytime, anywhere. Copyright(c) Golf Digest Online Inc. All Rights Reserved page 20

Making Golf More Comfortable with Golf x Technology Golf bag

21 Making Golf More Comfortable with Golf x Technology Golf bag storage and delivery service launched in collaboration with DUFL Japan. Distribution of GDO news using chatbot(*)by Facebook Messenger launched. * Chatbot is derived from the combination of chat and robot, and it is an automatic conversation program using artificial intelligence. Copyright(c) Golf Digest Online Inc. All Rights Reserved page 21

tracking all shots and statistically analyzing round data with a smartphone application.

22 Making Golf More Comfortable with Golf x Technology Sales of ARCCOS, an IT product, commenced. ARCCOS Caddie, the first AI platform in the golf industry, offers strategies for capturing golf courses by tracking all shots and statistically analyzing round data with a smartphone application. Its application to golf lessons of GOLFTEC by GDO and club fitting is also to be developed. Copyright(c) Golf Digest Online Inc. All Rights Reserved page 22

Making Golf More Comfortable by Golf x Technology GDO s official account was established

Information on golf courses in Japan and videos on how to use them will be delivered.

The most popular cashless settlement service in China has been introduced for golf

23 Making Golf More Comfortable by Golf x Technology GDO s official account was established on WeChat, China s largest social media service. Information on golf courses in Japan and videos on how to use them will be delivered. It will be possible to book golf courses in Japan from China. The most popular cashless settlement service in China has been introduced for golf course bookings via WeChat. It will support the comfortable golf tourism of golfers visiting Japan. Copyright(c) Golf Digest Online Inc. All Rights Reserved page 23

Activation of Golf and Regional Revitalization through Golf

the competition were broadcast on BS Fuji and it was

*A competition to hole out from 18 holes or 9 holes with as

fewer. Winter golf achieved the Sports Culture Tourism Award.

Culture Tourism Award 2017, a collaboration project of the

24 Activation of Golf and Regional Revitalization through Golf GDO hosted the 4 th speed golf competition(*) in September, and a total of 86 people participated. Speed golf gained exposure in multiple media, as scenes from the competition were broadcast on BS Fuji and it was introduced on terrestrial TV programs. *A competition to hole out from 18 holes or 9 holes with as few shots and as quickly as possible using 7 golf clubs or fewer. Winter golf achieved the Sports Culture Tourism Award. It won the prize in the Challenge category of the Sports Culture Tourism Award 2017, a collaboration project of the Japan Sports Agency, the Agency for Cultural Affairs and the Japan Tourism Agency. Copyright(c) Golf Digest Online Inc. All Rights Reserved page 24

and operates golf schools for juniors, and

Many events to expand the ways of playing,

25 Activation of Golf and Regional Revitalization through Golf Enjoyable golf for three generations of the family. Golf lesson services collaboration between KIDS GOLF Inc., a company that was made a subsidiary last year and operates golf schools for juniors, and GOLFTECH. Many events to expand the ways of playing, activate golf and revitalize the regions were held, in addition to holding festivals on golf courses. Number of events held 6 Copyright(c) Golf Digest Online Inc. All Rights Reserved page 25

A local site was launched that enables bookings from overseas, in addition to bookings in Japan.

26 Initiatives for Inbound and Outbound Tourism Initiatives in Thailand Provided a golf course booking service via the Internet in Thailand in cooperation with local business partners. A local site was launched that enables bookings from overseas, in addition to bookings in Japan. The number of bookable courses is expanding. Thailand 13 courses Copyright(c) Golf Digest Online Inc. All Rights Reserved page 26

Golf Links the World GDO Golf Garden Project (ongoing since 2016) If you play golf using the GDO Score Management

golfdigest.co.jp/ir/policies/csr/ Total number of birdies: 1.94 million!! Cumulative total of donation money: 19.

27 Golf Links the World GDO Golf Garden Project (ongoing since 2016) If you play golf using the GDO Score Management application, you will donate 10 per birdie to agricultural support programs in developing countries. A project to donate 10 per purchase of 1 point at GDO ORIGINAL, a GDO original brand, is implemented for a limited time only. GDO Score Management Golf Garden Project Total number of birdies: 1.94 million!! Cumulative total of donation money: million Number of gardens to which a donation has been made: 129 (as of January 2018) Copyright(c) Golf Digest Online Inc. All Rights Reserved page 27

28 Implementation of Measures for Shareholder Returns Paid interim dividends ( 4.0 per share). Plan to pay year-end dividends of 5.0 per share. Interim dividends Year-end dividends Annual dividends (Planned) 9.0 (Planned) The shareholder benefit program continues to be implemented. Coupons that can be used for shopping at GDO GOLF SHOP and booking GDO golf courses are distributed to shareholders to enable them to use and get to know the services of GDO (twice a year). Copyright(c) Golf Digest Online Inc. All Rights Reserved page 28

30 Business Policy for FY2018 Challenge Take on the challenge of maximizing the value we provide seriously. Take on the challenge of increasing the level of customer satisfaction without compromise. Copyright(c) Golf Digest Online Inc. All Rights Reserved page 30

31 Business Policy for FY2018 Kyakushin = Policy of putting the customer first Pursuing the services truly demanded by customers. Maximizing the value we provide Aims to achieve the industry s No.1 position in terms of the value we provide and the level of customer satisfaction in all services, and to maximize sales as a result! Increasing the level of customer satisfaction Sales growth Also enhancing investments for medium- to long-term growth Copyright(c) Golf Digest Online Inc. All Rights Reserved page 31

32 Earnings Forecast for FY2018 Theme for FY2018: Challenge Take on the challenge of maximizing the value we provide seriously Take on the challenge of increasing the level of customer satisfaction without compromise Sales growth (Million yen) Results in FY2017 Forecast for FY2018 Net sales 21,574 25,000 Operating profit 1,214 1,350 Ordinary profit 1,225 1,350 Profit attributable to owners of parent Dividend per share YoY +3,425 (116%) +135 (111%) +124 (110%) +142 (120%) Copyright(c) Golf Digest Online Inc. All Rights Reserved page 32

Medium- to Long-Term Vision of GDO from 2020 Mission of GDO

Materials for Supplementary Explanation

Materials for Supplementary Explanation Golf Digest Online Inc. (Securities Code: 3319) www.golfdigest.co.jp 2017 Note to this material Plans, forecasts and strategies, etc. of the Company contained in