Financial Results Presentation for the Third Quarter …...2020 Valuence Holdings Inc. Financial...

Financial Results Presentation for the Third Quarter Ended May 31, 2020

July 15, 2020

Valuence Holdings Inc.

(Securities Code: TSE Mothers 9270)

Contents

1. Corporate Profile

2. Financial Results

3. Our Response to COVID-19

4. Topics

Appendix

Corporate Profile


Ⓒ 2020 Valuence Holdings Inc.

Valuence Group

Leverage our expertise gained to offer experiences

of life-changing value through our business activities

to those with whom we interact

4

Value ×Intelligence

Experience


Corporate Philosophy

5

Mission

Vision

Encouraging people to live in a way

that is true to themselves.

Providing life-changing value to the world.


Corporate Profile

6

Company Name Valuence Holdings Inc.

Representative Shinsuke Sakimoto

Head Office 1 Konan, Minato-ku, Tokyo

Founded December 2011

Capital ¥1,109 million (as of May 2020)

Employees 542(as of May 2020) *Consolidated, full-time only

Segments Luxury brand items, antiques, art,

and other reuse businesses

Subsidiaries

(as of May 2020)

Valuence Japan Inc.

Valuence Art & Antiques Inc.

Valuence Technologies Inc.

Valuence Real Estate Inc.

Valuence International Limited

Valuence International USA Limited

Valuence International Europe S.A.S.

Group Businesses and Brands

Purchasing Auctions (toB)

Retail (toC) Apps


Business Model

7

Buy Sell

Online

Customer

Development

90% *1B2B

Sales

90%+

Auction

Sales

Wholesale

In-Store Sales

PurchaseIn-Store/Off-Site

Purchase

Se

ller

Aff

iliate

s

Reta

ilers

Outs

ide

Vendors

Consum

ers

Luxury Brands

Antiques

Auction

Retail

Third-PartyChannels

*1 Based on questionnaire results *2 Valuence Brain: Valuence in-house system/database

Inspection

Shipment

Buying

Appraisal

Sales

Financial Results



Highlights for the Third Quarter Ended May 31, 2020

｜Financial results: impact of COVID-19

• In response to the state of emergency and other factors, some buying offices closed temporarily, while offline auctions were suspended.

• We recorded the first loss since our IPO. Both purchases and sales decreased markedly.

｜DX promotion and growth investment in preparation for the post-COVID world and the potential second wave of the pandemic

• Originally slated for September 2020, the transition of STAR BUYERS AUCTION (SBA) to an online platform was completed early, in April.

• A Quick Sell buying service based on videoconferencing technologies was launched May 15.

• We adopted a system of working from home. (Some personnel were asked to remain on standby at home after the state of emergency was declared.)

• We expanded our line of credit by 5.7 billion yen (including an increase in June).

• New buying offices continued to open. Four new offices opened during Q3.

9

With an eye on a post-COVID world, accelerating the pace of digital transformation (DX) and moving forward to invest in growth amid the

challenges posed by COVID-19


Financial Results for the Third Quarter Ended May 31, 2020

Nine months

ended May 31, 2019

Nine months

ended May 31, 2020Change

Net sales 27,538 25,242 -8.3%

Gross profit 7,074 6,044 -14.6%

Gross profit margin 25.7% 23.9% -1.8pts

SG&A 5,537 6,359 +14.9%

Operating profit 1,537 -315 -

Ordinary profit 1,537 -368 -

Ordinary profit ratio 5.6% - -

Profit attributable to

owners of parent1,015 -585 -

10

(Millions of yen)

✓ Due to the impact of COVID-19, net sales were down 8.3% YoY to 25,242 million yen.✓ Operating losses totaled 315 million yen, as investment in growth continued. The gross profit margin fell significantly,

reaching a point at which gross profit proved insufficient to cover SG&A.


1,537

-589

-440

-822

-315

-400

0

400

800

1,200

1,600

Operating Profit Change

11

(Millions of yen)

Decrease

in sales

Increase in

SG&A

✓ Gross profit margin: 25.7% → 23.9% (−1.8 pts)

Mainly due to a significant increase in the share

of scrap gold and bullion

✓ Increase in stock-based compensation

due to FY8/19 RS grants: +0.21B

✓ Increase in advertising expenses: +0.09B

✓ Increase in costs related to

IT investment: +0.10B

✓ Expansion in business scope:

• Personnel expenses: +0.15B

• Rent expenses: +0.07B

FY8/19 Q3

FY8/20 Q3

✓ Domestic SBA sales declined.→ The shift to an online platform began with small-scale auctions during

the April-May migration period.DX moved ahead of schedule, with restrictions imposed on the numbers of items listed.

✓ Sales from THE EIGHT AUCTION declined.→ Three auctions were suspended from March and sales totaled zero for

this period. Plans call for a shift to the online platform beginning in July.

Decrease in

gross profit

margin


Balance Sheet

FY8/19 FY8/20 Q3 Change

Current assets 9,874 12,809 +2,935

Cash and deposits 4,103 5,847 +1,744

Merchandise 4,863 6,037 +1,174

Other 907 924 +16

PPE 4,237 4,031 -205

Total assets 14,111 16,841 +2,729

Liabilities 7,416 11,008 +3,592

Interest-bearing debt 5,435 9,570 +4,135

Other 1,981 1,437 -543

Net assets 6,695 5,832 -862

Total liabilities and net

assets14,111 16,841 +2,729

12

Increase in cash on hand in

preparation for state of emergency

Increase in inventory due to the

small scale of independent auctions

and postponements and

cancellations of certain auctions

While buildings and structures (net)

increased with the opening of new

buying offices, other factors

included a decrease in goodwill.

Increase in short-term loans

payable to stabilize Group

management and purchasing in

light of the impact of COVID-19 on

financial results

(Millions of yen)

Decrease in retained earnings due

to the recording of net losses

attributable to owners of parent


6,889

8,1347,504

8,110

4,747

8,581

10,260

11,613

8,695

4,933

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

3Q 4Q 1Q 2Q 3Q

2019/8期 2020/8期

仕入高

売上高

Quarterly Purchases and Net Sales

13

(Millions of yen)

• A 41.5% decline quarter on

quarter due to the temporary

closure of as many as 59 buying

offices in April and May

• While the actual numbers were

low, stay-at-home orders

expanded the share of in-home

purchases.

Purchases

• Net sales fell 43.3% quarter on

quarter. Fewer items were listed

in domestic SBA sales due to the

shift to the online platform. THE

EIGHT AUCTION was suspended.

• No auctions were held in Hong

Kong in Q2 or Q3.

Net Sales

Purchases

Net Sales

Q3 Q4 Q1 Q2 Q3

FY8/19 FY8/20


37.3% 33.0% 37.7% 32.1% 29.7%

20.1% 24.3%22.9% 29.5% 33.8%

11.1%17.5% 15.7% 12.5% 11.3%

15.2%11.8% 10.8% 10.0% 13.1%

7.2% 5.4% 5.8% 6.4% 3.4%

0%

20%

40%

60%

80%

100%

3Q 4Q 1Q 2Q 3Q

2019/8期 2020/8期

時計地金ジュエリーバッグ骨董品アパレル・小物その他

Quarterly Net Sales by Category

14

Sales in the major categories

were slow for various

reasons, including a rise in

the share of purchases

accounted for by scrap gold

and bullion in April and May

and the difficulty of

organizing standard auctions.

The share of scrap gold and

bullion rose higher still from

the previous quarter.

Net Sales by Category

… Jewelry

… Bags

… Antiques

… Scrap gold

… Watches

Q3 Q4 Q1 Q2 Q3

FY8/19 FY8/20

Watches Scrap gold Jewelry Bags Antiques Apparel items Other


5,1886,206 6,407

4,693

2,407

2,897

3,617 4,843

3,598

2,320

495

436

362

403

205

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

3Q 4Q 1Q 2Q 3Q

2019/8期 2020/8期

自社オークション

卸売

小売

Quarterly Net Sales by Channel (to B, to C)

15

(Millions of yen)

Down 48.7% quarter on quarter due to restrictions imposed on numbers of items listed in domestic SBA auctions as a result of the shift to the online platform and suspension of THE EIGHT AUCTION

Independent Auctions

• Down 35.5% quarter on quarter due to decreased purchasing

• Lower domestic SBA volume led to lower overseas sales.*

Wholesale

• Down 49.0% quarter on quarter due to the impact of temporary store closures

• Growth in e-commerce

Retail

* The portion of domestic SBA sales to overseas partners is included under Wholesale.


Wholesale

Q3 Q4 Q1 Q2 Q3

FY8/19 FY8/20

Retail


8,161 9,398

10,551

8,266

4,819

420

862

1,062

429

114

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

3Q 4Q 1Q 2Q 3Q

2019/8期 2020/8期

国内

海外

Quarterly Net Sales by Channel (Japan, Overseas)

16

• Independent auction sales were

down due to restrictions

imposed on the numbers of

items listed in domestic SBA

auctions and the suspension of

THE EIGHT AUCTION.

• Sales fell for all wholesale and

retail channels, resulting in a

quarter-on-quarter decline of

41.7%

Japan

Down 73.4% quarter on quarter

attributed to the smaller share

accounted for by overseas limit-

bid sales due to restrictions

imposed on numbers of items

listed in domestic SBA auctions

Overseas(Millions of yen)

Japan

Overseas

Q3 Q4 Q1 Q2 Q3

FY8/19 FY8/20


13,792

17,732

21,489

12,697

710

1,824

2,077

810

95.6% 94.7%90.6% 93.2%

0.0%

20.0%

40.0%

60.0%

80.0%

100.0%

0

5,000

10,000

15,000

20,000

25,000

30,000

2017/8期 2018/8期 2019/8期 2020/8期 3Q

国内オークション海外オークション落札率

Auctions

17

15,785

1,574

Down 48.5% year on year as a result of auctions postponed due to the effects of demonstrations in Hong Kong and COVID-19 and to the effects of differences in category on the scale. (Auction category last year was watches; auction category this year was jewelry.)[Auctions held]Diamond auctions: two events (September, November 2019)Jewelry auctions: two events (September, November 2019)

Overseas Auctions

• Down 19.6% year on year due to auction postponements, auction cancellations, and other factors

[Auctions held]SBA: Online auctions began in March. The transition

to the online platform was completed in April. Volumes fell for several reasons, including restrictions imposed on numbers of items listed.

THE EIGHT AUCTION: Suspended from March• SBA bid rates remain high, even after moving SBA

entirely online.

Japan Auctions

(Millions of yen)

Japan Auctions Overseas Auctions Bid Rates

FY8/17 FY8/19FY8/18 FY8/20

Q3 cumulative

Our Response to COVID-19



Our Response to COVID-19

19

Purchases

In-office buying

Nanboya/BRAND CONCIER• Of 71 total offices, 57 closed temporarily. At one time (April 18-May 6), only 14 offices

were open and operating.• We launched the Quick Sell online buying service on May 15.

Hakkoudo: Operated by appointment only during the state of emergency (Daimaru Umeda and Sendai offices were closed temporarily)

In-home/offsite buying

In-home buying: Operating as usual Offsite buying: Adapting to circumstances

Sales

Auctions

Japan SBA• Online auctions began in March (conducted simultaneously with offline auctions).• Auctions on an experimental basis went completely online in April and May (with

restrictions on the numbers of items listed).

SBA Hong Kong: Planned February auctions were delayed to July (due in part to the effects of demonstrations)

THE EIGHT AUCTION: Suspended March–June

RetailALLU• Both Ginza and Shinsaibashi stores closed temporarily.• The frequency of order shipments from the e-commerce site was reduced to twice weekly.

Other

Employees• In general, employees worked from home, including standby at home, in regions subject

to the state of emergency.

Finances• Overdraft limit increased by 5.7 billion yen*. *Including June increase

Line of credit of more than 10 billion yen secured, counting existing commitment lines


COVID-19’s impact

20

(Offices) (Millions of yen)

✓ Due to the state of emergency, at one time (April 18–May 6), only 14 Nanboya and BRAND CONCIER offices were open and operational.

✓ Japan SBA moved entirely online in April. Sales fell, due in part to restrictions imposed on numbers of items listed during the migration period.

✓ Both purchases and auction sales in June showed signs of recovery. * Monthly figures are for reference only.

* Figures for Nanboya and BRAND CONCIER * Japan SBA sales (excluding overseas vendor sales from limit bids)

0

500

1,000

1,500

2,000

2,500

1月 2月 3月 4月 5月 6月

国内SBA売上高

0

500

1,000

1,500

2,000

2,500

3,000

0

10

20

30

40

50

60

70

80

1月 2月 3月 4月 5月 6月

仕入高平均稼働店舗数

Results Results

(Millions of yen)

January February March April May June

Japan SBA salesPurchasesAverage number of

offices in operation

January February March April May June

Topics



36 3848

6169

6 6

6

4

4

7 8

9

9

10

0

10

20

30

40

50

60

70

80

90

2016/8期 2017/8期 2018/8期 2019/8期 2020/8期

3Q

2020/8期

計画

なんぼや

BRAND CONCIER

古美術八光堂

New Buying Office Openings

Purchasing

22

49 offices52 offices

63 offices

74 offices

83 offices

85 offices

(planned)

New office openings through Q3

FY8/2020

Nanboya: 11

BRAND CONCIER: 1

Hakkoudo: 1* Three Nanboya offices and one BRAND

CONCIER office closed for various reasons,

including expired term of contract.

* Excludes Hong Kong offices.

Q4 planned store openings

• Nanboya Okayama Ekimae (opened in

June)

• Nanboya Melsa Sakae (relocation of

Nagoya Sakae Office), etc.

Proceeding according to plan, despite

minor delays in openings due to the

temporary closure of commercial

facilities

Nanboya

BRAND CONCIER

Hakkoudo

FY8/16 FY8/17 FY8/18 FY8/19 FY8/20

Q3

FY8/20

planned


Overseas subsidiaries (sub-subsidiaries)

Valuence International USA Limited

Location: United States

Established October 2019; investment completed

January 2020

Valuence International Europe S.A.S

Location: France

Established March 2020; investment completed March

2020

Valuence International Singapore Pte. Limited

Location: Singapore

Established December 2019; investment completed

June 2020

Growth in Buying Facilities: Overseas

Purchasing

23

Key roles: Development of business partners taking

part in auctions including consignments

+

Development of local buying offices

Status of Nanboya Hong Kong

• Buying began in July 2019.

• Steady increase in customers through marketing,

primarily on social media

• Number of customers and amount of purchases

increased rapidly due to a strong demand for cash

driven by COVID-19.

• Operating income projected to move into positive

territory about one year after opening

In response to the success of the first office,

plans call for opening a second office to

capture new customers.


Expansion and enhancement of buying services

Purchasing

24

✓ Growing need for cash flow to cover living

expenses, company operating expenses

✓ Reluctance to venture out, etc.

Changing consumer needs and behaviors

due to COVID-19

▶✓ Supporting individuals and businesses through

buying services

An opportunity to secure high-quality inventory

Responding through existing services and the

launch of new services

• Enables customer appraisal and sales from home

• Peace of mind secured through videoconferencing with concierges

Launching Quick Sell

• Enhancing structures for buying corporate inventory and office assets, such as works of art

• Enables payments as fast as same-day.

Corporate buying Continued in-office buying

In-home buying: normal operationsOffsite buying: case by case decisionsIn-office buying: certain offices

continuing to operate in accordance with national and local government policies

Operating under a structure that

balances employee health and

customer cash flow needs

▼


To mitigate the effects of COVID-19,

plans call for eliminating all offline

activity except viewing (in Japan and

Hong Kong) and holding auctions

based on the advance limit bid method.Full migration online, starting at a small

scale/restrictions on numbers of items listed

Online platform launched

Offline and online auctions held simultaneouslyAuctions

Selling

25

Auctions held/planned

Q1 Q2 Q3 Q4

September-

November

December-

FebruaryMarch April May June July August

SBAHeld once monthly

(offline)

1(Offline +

online)

1(Online)

SBA

Hong

Kong

DiamondsSeptember,

NovemberPostponed

Postponed

again1 1

JewelrySeptember,

NovemberPostponed

Postponed

again1 －

THE EIGHT

AUCTION

Held monthly (offline)

Even months: antiques, tea

utensils

Odd months: paintings,

calligraphy

Suspended1

(Online)

* Current plans shown for July and August

Melee

diamonds

Diamonds of

1 ct and above


Auctions

Selling

26

Full migration to online starting April 2020

• Conducted simultaneously with offline auctions in

March and moved completely online from April

Allowed auctions even during the COVID-19

pandemic

• The migration proved smooth, due in part to the

rapid shift toward online services throughout society.

• Acceptance of consignment sales from domestic

and overseas partners has begun.

• Domestic and overseas partners have been able to

participate in auctions under the same conditions

since June. (Schedule moved up from September)

Web viewing,

bidding

Web viewing,

bidding

Web viewing,

bidding

Web viewing,

bidding

Date of month

6 10 11 12 13 14

Accessories

Winning bidder determined




Watches

Jewelry

Bags

Japan SBA

Moving online makes it possible to expand the

volume of items listed.

Goal of holding auctions multiple times

a month in the future


Auctions

Selling

27

Japan SBA

Numbers of partner members

• Steady growth in numbers of partners despite

restrictions on sales activities due to COVID-19

• More members means more auction participants.

395408 412

422

7077 89

103

3月 4月 5月 6月

国内海外

March April May June

Trends in numbers of partner members

Japan Overseas


Auctions

Selling

28

SBA Hong Kong

✓ Postponed due to Hong Kong demonstrations and

COVID-19

Planned for July and August

* Jewelry auction

Finished in July; handled since then through SBA

online auctions in Japan

* Diamond auctions

Implemented in light of immigration restrictions

imposed due to COVID-19

• July: Melee diamonds listed for Chinese

partners

• August: Diamonds of 1 ct and above listed for

Indian partners residing in Japan and

Hong Kong

THE EIGHT AUCTION

✓ Suspended in March–June due to COVID-19

Fully resumed online in July

✓ Acceptance and sale of consignment articles have also

begun.

Targeting global sales channel expansion through

merger with STAR BUYERS AUCTION


Watches 10,165

Bags 1,939

Users74,329

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

2019/8期4Q

2020/8期1Q

2020/8期2Q

2020/8期3Q

時計バッグアクセサリー小物ブランドジュエリー絵画、骨董・美術品ユーザー数

29

(Millions of yen)

…

32,000 不動産

Trends related to Miney, the Asset Management App

Efforts to improve LTV

Downloads and Total AppraisalsTotal appraisals

43,106 million yen

(Users)Real Estate

3,009

Watches

Bags

Accessories

Designer Jewelry

Paintings, Antiques, Art Objects

Users

Real Estate

FY8/19

Q4

FY8/20

Q1

FY8/20

Q2

FY8/20

Q3

Watches31.9%

Bags31.1%

27.4%

Designer Jewelry7.8%

Paintings, Antiques, Art Objects 1.2%

Real Estate 0.7%

Total number of appraised items reaches approx. 75,000.

Accessories

Appendix

Financial Results for FY8/2020 Q3 (Cumulative)


Purchases and Net Sales

31

(Millions of yen)

‘

• Grew 0.5% year on year due to various factors, including increased purchases of scrap gold and bullion accompanying rising gold prices

• Slow growth due to the appreciable impact of temporary closure of some buying offices in April and May

Purchases

• Declined 8.3% year on year for various reasons, including decreased purchases in major categories and postponement, suspension, or reduced scale of independent auctions

• However, sales of scrap gold and bullion increased (wholesale).

Sales

18,106

20,270 20,363

23,084

27,538

25,242

0

5,000

10,000

15,000

20,000

25,000

30,000

2018/8期 3Q 2019/8期 3Q 2020/8期 3Q

仕入高

売上高

FY8/2018 Q3 FY8/2019 Q3 FY8/2020 Q3

Purchases

Sales



32

• The share of scrap gold grew

9.7 pts. due to expanded sales

of scrap gold and bullion

accompanying rising gold

prices and decreased auction

sales in other major categories.

• Due to various factors,

including postponed auctions in

Hong Kong, jewelry accounted

for a lower share of sales.


37.3% 36.9% 34.2%

20.0% 17.6% 27.3%

18.3%17.2%

13.8%

10.1% 13.5% 11.0%

7.5% 6.5% 5.5%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2018/8期 3Q 2019/8期 3Q 2020/8期 3Q

時計地金ジュエリーバッグ骨董品アパレル・小物その他

… Jewelry

… Bags

… Scrap gold

… Watches

… Antiques

Scrap gold Jewelry Bags Antiques Apparel, accessories OtherWatches

FY8/2018 Q3 FY8/2019 Q3 FY8/2020 Q3


13,703

17,360

13,507

8,347

8,914

10,762

1,034

1,264

971

0

5,000

10,000

15,000

20,000

25,000

30,000

2018/8期 3Q 2019/8期 3Q 2020/8期 3Q

自社オークション

卸売

小売

FY8/2018 Q3 FY8/2019 Q3 FY8/2020 Q3

Net Sales by Channel (to B, to C)

33

(Millions of yen)

Declined 22.2% year on year due to

the effects of various factors, including

decreased purchases in major

categories, suspension of THE EIGHT

AUCTION, and restrictions imposed

on numbers of items listed

accompanying the migration of SBA

online in Japan.


Grew 20.7% year on year due to a

dramatic increase in sales of scrap

gold and bullion.

Wholesale

• Declined 23.1% year on year due to

the appreciable impact of

temporary office closures in April

and May.

Retail


Wholesale

Retail

* The portion of domestic SBA sales to overseas partners is included under Wholesale.


20,780

24,639 23,636

2,304

2,899 1,606

0

5,000

10,000

15,000

20,000

25,000

30,000

2018/8期 3Q 2019/8期 3Q 2020/8期 3Q

国内

海外

FY8/2018 Q3 FY8/2019 Q3 FY8/2020 Q3

Net Sales by Channel (Japan, Overseas)

34

(Millions of yen)

• Fell 4.1% year on year due to

the appreciable impact of

decreased auction sales,

despite growth in sales of scrap

gold and bullion.

Japan

• Declined 44.6% year on year

due to various factors, including

fewer auctions held in Hong

Kong and the smaller sales

scale of jewelry auctions held

this year compared to watch

auctions held last year.

• Lower exhibition sales due to

COVID-19 also had an impact.

Overseas

Japan

Overseas

• Financial information, sales composition by category, sales by channel,

and auction results presented for FY8/2017 are for reference purposes.

This information has not been audited by an independent financial

statement auditor.

• Earnings forecasts and other statements are based on information

available at the time and certain assumptions deemed rational by

company management. Actual earnings and plan implementation may

differ from forecasts due to developments in global conditions, various

risks, uncertainties, and other factors that may arise in the future.

• This document has been prepared in conformance with information

presented in Consolidated Financial Results Presentation for the Six

Months Ended February 29, 2020.

Investor Relations Inquiries:

IR Office

Valuence Holdings Inc.

TEL：+81-3-4580-9983 / Mail：[email protected]

Financial Results Presentation for the Third Quarter …...2020 Valuence Holdings Inc. Financial...

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Transcript of Financial Results Presentation for the Third Quarter …...2020 Valuence Holdings Inc. Financial...