Netstars - 2021 Q2

  • Netstars’s Q2 2021 transaction amount reached JPY104.5 billion, a 17% increase compared to Q1 2021, a 165% increase compared to Q2 2020. H1 2021 transaction amount reached JPY194.1 billion, a 112% increase compared to H1 2020
  • Netstars’s Q2 2021 revenue reached JPY396 million, a 2% decrease compared to Q1 2021 and a 3% increase compared to Q2 2020. H1 2021 revenue reached JPY799 million, a 3% increase compared to H1 2020
  • Netstars’s Q2 2021 gross profit reached JPY192 million, a 13% decrease compared to Q1 2021 and a 1% decrease compared to Q2 2020. H1 2021 gross profit reached JPY413 million, a 2% increase compared to H1 2020
  • Netstars’s Q2 2021 operating expenses reached JPY513 million, a 21% increase compared to Q1 2021 and a 28% increase compared to Q2 2020. H1 2021 expense reached JPY939 million, a 9% decrease compared to H1 2020
  • Net operating loss for the Q2 2021 amounted to JPY319 million. H1 2021 net operating loss was JPY530 million
  • Cash and equivalents at the end of Q2 2021 was JPY11.7 billion
  • Up to June 2021, Netstars has connected with more than 290K merchants in Japan

Company Overview

Founder 2009
Sector Integrated mobile payment
Address Tokyo, Japan

Management Team

Tsuyoshi Ri Founder and CEO
Koki Yamaguchi COO
Chuck Chen CTO
Kyoka Yoshida Founder and CMO

Board of Directors

Tsuyoshi Ri CEO
Koki Yamaguchi CPO
Chuck Chen CTO
Yoshimoto Bansho Chief Sales Officer
Kyoka Yoshida CMO
Kun Wang Software R&D Officer
Sen Lin Innovation Angel Funds
Mr. Sato Development Strategy Director of Itochu Corporation
Mr. Nagahashi Independent Officer
Mr. Kuwata Independent Officer
Kaede Kotsuki LUN Partners Capital Limited
Ting Huang Partner of JD.com
Eiji Yatagawa Partner of KKR

*  The Board consists of 13 members, with Kaede Kotsuki representing LUN Partners and its managed funds.

Current Operations

Corporate Structure (Subsidiaries)

Netstars has its holding company in Japan, and expands overseas business through the Singapore entity as its overseas holding company. The Singapore entity has a 100% subsidiary in Vietnam. This subsidiary handles sales and development of POS and multi QR payment devices in Vietnam.

Financing History

Time Round Amount(JPY¥ m) Price (JPY¥ k) Investors
As of 2016-10 Angel Rounds 440 400 Shenzhen Qianhai Innovation Angel Funds, Power Vision Technology Ltd, Shenzhen Weifutong Technology Ltd, Shinsei Bank
2018-04 A 890 700 NTT East, CTC, LINE and Gurunavi
2018-09 B 500 1,000 Japan Post Holdings
2019-10 C 2,146 300 Itochu, SCSK, T-Gaia
2020-05 D1 800 360 LUN Partners
2020-08 D2 2,100 360 LUN Partners, The Bank of Yokohama, SMBC Securities and JP Post.
2021-02 D3 1,476 360 JD.com
2021-03-06 E 5,400 390 KKR, LUN Partners, SIG

Financial Analysis

In 2021 Q2, the transaction amount was JPY104.5 billion, a 17% increase compared to last quarter (2021Q1) and 165% increase compared to the same time of 2020. The average monthly domestic transaction amount is above JPY 30 billion for Q2 2021.

In 2021 H1, the transaction amount was JPY194.1 billion, a 112% increase compared to the same time of last year.

2020-2021 monthly transaction amount
( in JPY million )

2020-2021 quarterly revenue
( in JPY million )

Revenue Breakdown 2021 Q2
( in JPY million )

In 2021 Q2, the revenue was JPY396 million, a 2% decrease compared to 2021 Q1 and a 3% increase compared to 2020 Q2. Due to the increase in transaction amount driven by Paypay promotion, the company’s main revenue in 2021 Q2 was trading commission revenue (JPY197 million), a 10% increase compared to 2021 Q1, accounting for 50% of the total revenue. Revenue of advertising and communications from Chinese customer reached JPY144 million, a 17% increase compared to 2021 Q1, accounting for 37% of the total revenue.

In 2021 H1, the revenue was JPY799 million, a 3% increase compared to 2020 H1.

In 2021 Q2, the gross profit was JPY192 million, a 13% decrease compared to last quarter (2021Q1) and 1% decrease compared to the same time of 2020. In 2021 H1, the gross profit rate was 52%.

The operating expenses was JPY513 million in 2021 Q2, a 21% increase compared to 2021 Q1 and a 28% increase compared to 2020 Q2. Marketing cost accounted for 33% of the total cost, which was JPY172 million. The company plans to launch Paypay’s cooperation activities and new franchise stores in July, which may driven transaction amount in the future. Staff cost accounted for 33% of the total cost, which is JPY170 million. Administrative expenses was JPY35 million, accounting for 7% of the total cost. Management fee amounted to JPY35 million, accounting for 7% of the total cost.

The operating expenses was JPY939 million in 2021 H1.

2021 Top 5 expense
( in JPY million )

The company’s operating loss for the quarter was JPY319 million. Accumulated operating loss for the H1 2021 was JPY530 million.

Cash and equivalents at the end of Q2 2021 was JPY11.7 billion (including funds to be settled by merchants and share buyback).

Recent Developments

Key Operational Development

As of June 2021, the Company has connected with about 290,000 merchants, compared with the end of March 2021, the number of merchants increased by nearly 10,000.

Number of merchants

Key Hires

With the continuous growth of the company’s business, the company is seeking to strength senior management team. The company is in communication with several candidates and plans to hire a CFO and a business development director in Q3 2021.

IPO Plan

The Company is proceeding with IPO investigation.

Market Overview

Japan’s Cash Consumption Habit

Merchants, especially small ones, have been reluctant to adopt other forms of payment due to above average transaction fees and high device installation costs. Processing charges range from 2% to 5% with the average close to 3%.

Japanese consumers have also held on to cash, in part due to slow merchant adoption of other forms of payment such as credit cards but also because they believe cash is a safeguard in all situations.

According to a research of MMD in January 2020, most of people in Japan preferred to pay by cash or credit card.

According to emarketer’s forecast, the number of mobile payment users in Japan is about 24.8 million in 2020, accounting for 22.5% of the national population, it is higher than that in 2019. The number of mobile payment users is estimated to exceed 30.3 million, or 27.7% of the population in 2025, still lagging behind other countries in Asia.

Mobile Payment Users

Source:eMarketer

QR Market Development in Japan

According to “Non-cash Vision Report” by the Japan government, Japan sets itself the ambitious goal to increase the ratio of cashless payment transactions to 40% by 2027.

The reward scheme running  by the government ended in June 30th 2020. This 9-month cashless incentive scheme helped to promote the non-cash payment popularizing rate in Japan from 27% to 36% in the context of Covid-19.

Non-Cash Payment Market Size

( in JPY trillion )

According to the “survey of household financial management” by Japan Central Financial Services Information Committee from Aug 2020 to Sep 2020, 29.6% of the respondents prefer making mobile payment for items less than 1,000 Yen, up from 18.5%; 6.4% of the respondents prefer making it for items of 10,000 Yen to 50,000 Yen, up from 3.4%. Overall, the number of people using mobile payment breaks record high, while that of cash payment breaks its lowest record, since the data had been recorded since 2007.

Mobile Payment Market Structure and Players

There were more than 28 non-cash payment companies in Japan in 2019, including Apple Pay, Amazon Pay, LINE Pay (more than 39 million LINE Pay users) and PayPay (more than 36 million PayPay users).

Competitors

InComm Japan

2008 – Atlanta

InComm Japan is the Japanese subsidiary of the world’s largest POSA card distribution company headquartered in Atlanta, USA, InComm. InComm Japan holds several patents on POSA card technology and is a major player in connecting POS systems for card activations at over 60,000 stores in Japan. Over the last few years, InComm Japan has announced partnerships with the leading payment issuers, including QR and barcode payment services such as WeChat Pay, LINE Pay, d Payment (R), AliPay, etc.

Financing History

  • undisclosed amount, Warburg Pincus

Recent News

  • N/A

Canal Payment Service

2017 – Tokyo

Japan payment service company. Three shareholders are Nihon Unisys Group, JCB, Japan Card Network. The main business includes the plan, development, design, sales, installment, operation of e-payment system, the business transactions based on internet, clearing and settlement related business, entrustment and agency, etc.

The company integrated payments: cooperate with 13 domestic payment brands like LINE Pay, PayPay and oversea payment brands like TenPay, AliPay, UnionPay, etc. Prepaid card point charge gateway services: cooperate with 13,000 domestic lawson stores to deal with the domestic or oversea brand prepaid card transactions like ANA, JCB, Visa etc.

Financing History

  • N/A

Recent News

  • N/A

Digital Garage

1995 – Tokyo

TerraPay links mobile wallet providers, banks, financial institutions, remittance operators, etc. to provide international remittance services.

In 2016, TerraPay acquired a 100% stake in Pay2Global, a regulated digital international remittance company with “right to travel” to the European Economic Area (EEA).

Digital Garage is a well established Japanese Internet combining three verticals in IT (Information Technology), MT (Marketing Technology) and FT (Financial Technology). In 2012 Digital Garage acquired SBI Holdings, Inc’s SBI VeriTrans Co., Ltd, a payment settlement business. In May 2019 Digital Garage established Cloud Pay, a multi-QR code payment solution encompassing a number of issuers.

Financing History

  • N/A

Recent News

  • May 2021, DG Financial Technology, a payment service provider, signed the cooperation agreement of providing contactless payment solution in hotel with Digital Garage.