Bridge Report:（7685）BuySell Technologies fiscal year ended December 2022
 President and CEO Kyohei Iwata | BuySell Technologies Co., Ltd (7685) |
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Company Information
Market | TSE Growth Market |
Industry | Wholesale (trade) |
President and CEO | Kyohei Iwata |
HQ address | PALT Building, 28-8, Yotsuya 4-Chome, Shinjuku-ku, Tokyo |
Year-end | End of December |
Homepage |
Stock Information
Share Price | Shares Outstanding | Total Market Cap | ROE (Act.) | Trading unit | |
¥6,440 | 14,546,728 shares | ¥93,680 million | 35.8% | 100 shares | |
DPS (Est.) | Dividend yield (Est.) | EPS (Est.) | PER (Est.) | BPS (Act.) | PBR (Act.) |
¥25.00 | 0.4% | ¥191.80 | 33.6x | ¥560.38 | 11.5x |
* The share price is the closing price as of February 14. Each number are taken from the brief financial report for the fourth quarter of FY ended December 2022.
Earnings Trend
Fiscal Year | Net Sales | Operating Income | Ordinary Income | Net Income | EPS | DPS |
December 2019 | 12,828 | 846 | 817 | 505 | 41.94 | 7.50 |
December 2020 | 14,764 | 968 | 922 | 565 | 41.12 | 7.50 |
December 2021 | 24,789 | 2,315 | 2,295 | 1,314 | 93.26 | 14.00 |
December 2022 | 33,724 | 3,694 | 3,672 | 2,268 | 160.91 | 20.00 |
December 2023 Est. | 44,600 | 4,550 | 4,500 | 2,800 | 191.80 | 25.00 |
* The estimated values are based on the forecasts made by the Company. On January 1, 2021, a 2-for-1 stock split was conducted. EPS and DPS were ad1ted retroactively.
This Bridge Report presents BuySell Technologies’ financial results for the fiscal year ended December 2022 and so on.
Table of Contents
Key Points
1. Corporate Overview
2. Fiscal Year Ended December 2022 Earnings Results
3. Fiscal Year Ending December 2023 Earnings Forecasts
4. Conclusions
<Reference1: Medium-term Management Plan for 2024（announced in Feb. 2022）>
<Reference2: Regarding Corporate Governance>
Key Points
- In the term ended Dec. 2022, sales increased 36.0% year on year to 33,724 million yen and operating income increased 59.6% year on year to 3,694 million yen. Both BuySell Technologies and TIMELESS Corporation achieved significant growth thanks to the solid growth of KPIs in the Purchase Business and the Sales Business throughout the fiscal year. Adjusted EBITDA, which excludes the impact of amortization from the acquisition of FOUR-NINE, Inc. and other factors, increased 56.9% year on year to 4,339 million yen, maintaining a healthy profit growth rate. Sales fell slightly short of the company’s forecast (34,000 million yen in sales and 3,350 million yen in operating income), which was revised upwardly at the time of disclosure of the results for the second quarter, however, gross profit margin improved and mid-career hiring did not progress as planned, resulting in operating income exceeding the company’s forecast significantly.
- The number of at-home visits in the At-Home Pick up Purchase Business, the company’s main KPI, increased 16.1% year on year to 243,321 (the company’s forecast: 243,000), and variable profit per at-home visit increased 13.2% year on year to 45,560 yen (the company’s forecast: 46,800 yen). The company’s aggressive hiring and training of new graduates were successful. Gross profit margin per at-home visit fell short of the company’s forecast due to the expansion of visits to regional areas, however, efficient promotional activities were successful, and advertising costs per at-home visit were kept low, resulting in a solid increase in variable profit per at-home visit.
- In the company’s forecast for the term ending Dec. 2023, sales are projected to increase 32.2% year on year to 44,600 million yen, gross profit to rise 29.6% year on year to 25,750 million yen, operating income to grow 23.2% year on year to 4,550 million yen, and adjusted EBITDA to increase 30.2% year on year to 5,650 million yen. The projected dividend per share is 25.00 yen (payout rati 13.0%). The company will continue to strengthen hiring and invest in technologies for future growth. Despite the increased amortization/depreciation of goodwill and customer-related assets associated with the acquisition of FOUR-NINE, an increase in the number of at-home visits and variable profit per at-home visit, as well as an increase in gross profit margin due to the store network expansion in the Storefront Business, will support solid profit growth. The quarterly progress is expected to be more significant in the second half of the fiscal year. This is because the company intends to have a longer inventory turnover period in the first half of the fiscal year compared to previous years, in accordance with the company’s policy to re-accelerate its toC sales strategy to improve profitability from the beginning of the term ending Dec. 2023, which is caused by the impact of the shortening of the inventory turnover period by strategic toB sales in the second half of the previous fiscal year in response to market fluctuation.
- At the financial results briefing, there were concerns raised about the probability of achieving the medium-term management plan (an ordinary income of 6,000 million yen in the term ending Dec. 2024) by analogy with the company’s forecast of 4,500 million yen in ordinary income for the term ending Dec. 2023. President Iwata responded, “We have been able to post a consolidated ordinary income of 3,727 million yen after forecasting 3,000 million yen at the beginning of 2022, and in order to increase it from 3,727 million yen to 6,000 million yen, we believe that we will be well on our way to reaching 6,000 million yen if we can achieve a consolidated ordinary income of 4,500 million yen as an intermediate point. Rather, we believe that the probability of achieving the medium-term management plan is much higher than it was when we announced it last year, one year after we announced our medium-term management plan.”
- From the term ending Dec. 2023 onward, growth in the Storefront Business, in addition to the At-Home Pick up Purchase Business, will drive overall performance. The company plans to increase the number of stores, the core of its Storefront Business, from 10 BuySell stores at the end of December 2022 to 20 by the end of December 2023, then to 35 by the end of December 2024, from 19 to 25 to 35 for Timeless, and from 207 to 266 to 330 for FOUR-NINE (directly managed stores + franchised stores). Data-driven management will support this growth, and the development and installation of the “Cosmos” Reuse Platform are progressing steadily as the organization is expanding in the technology area through active hiring of engineers. The company puts the focus not only on the improvement of productivity through in-house installation, but also on the future external sales. This will be a point of focus for the realization of dynamic growth.
1. Corporate Overview
BuySell Technologies operates reuse business that leverages the strengths of the "Internet" and "Real world". The Company attracts sellers through a marketing strategy that makes full use of the Internet and mass media, and also provides the at-home pick up service throughout Japan. Its characteristics or strengths include the maximization of synergy with a variety of purchase and sales channels, the robust customer base centered around seniors, and the high-quality management. The Company is aiming for further growth by developing a huge potential reuse market and creating new businesses utilizing its customer base.
[1-1 History]
President Iwata, who was in charge of marketing at a major advertising company, questioned the situation where large and famous companies with abundant advertising expenses are favored to the disadvantage of small and medium-sized companies and start-ups with a small budget. He retired from the major advertising company and established a consulting company for his desire to help companies, including ones with weak capital, develop true marketing. He met BuySell Technologies (formerly Ace Co., Ltd.) while supporting many start-ups and small businesses.The Company had long been providing the at-home pick up service, which is its current core business, but when President Iwata's consulting engagement started in May 2016, its marketing depended almost entirely on flyers. The homepage was not sophisticated, and the business performance was not good. The Company, which undertook a full-fledged reform under President Iwata, began to see the results when it registered a record number of applications in August of the same year, renewing the record in September.
In this process, President Iwata felt that while "the at-home pick up service" has a high added value and there are many customers who need it, the way in which the benefits of the service are communicated, the brand is constructed, marketing actions are taken, and others were extremely inadequate. He was convinced that with his marketing know-how, the Company could transform itself into a more attractive company.
In October of the same year, President Iwata assumed the role of Chief Sales and Marketing Officer (CSMO). In November, the Company name was changed to BuySell Technologies, and a new TV commercial was put on air and the reform sped up. He assumed the post of president in September 2017. The business expanded steadily thanks to the success of conducting the PDCA cycle of creative activities and the purchase of TV commercials utilizing his expertise. The Company also established a compliance system and was listed on the Tokyo Stock Exchange Mothers in December 2019. In April 2022, the company got listed on the Growth Market of TSE through the stock market restructuring.
[1-2 Corporate Philosophy and Management Philosophy]
The Company upholds the following missions and values.
Mission ：Our Mission | Beyond people, beyond time, we aim to become a bridge connecting important things. |
Value ：What We Aim to Be | 1. Hospitality We listen to others and provide them with joy and delight that exceeds their expectations. 2. Professional Maximize your performance by leveraging your professional knowledge and skills. 3. Creative Without being bound by existing concepts, we discover challenges ourselves and create new value. |
The Company believes that things have value that goes beyond their physical existence, and that properly connecting them is its mission and social existence value.
In addition, the company is strongly aware of the need to address environmental issues and co-create with all stakeholders, and considers its group mission to be "contributing to the creation of a recycling-oriented society through the revitalization of the secondary distribution market to realize a sustainable society" and "pursuing sustainable growth and maximizing corporate value as a company that co-creates value with various stakeholders including customers, shareholders, employees and society.
Furthermore, the company intends to reflect the value in its human resources evaluation system and link them to the development of next-generation human resources.
[1-3 Market Environment]
The scale of the reuse market is estimated to be about 3.0 trillion yen in 2022 and is expected to grow to 3.5 trillion yen by 2025.
However, this is only a figure for the actual reuse market, and the total potential size of the reuse market, including "hidden assets," which are unused items in houses that have not been used for more than one year, is estimated to be approximately 44 trillion yen. In addition, in Japan, where the population continues to shrink, disused articles are estimated to increase by 7.6 trillion yen each year, and the potential reuse market is expected to continue expanding. In terms of hidden asset holdings per capita in each age group, seniors in their 50s and older hold a significant portion.
(Source: the reference material of the Company)
BuySell Technologies intends to cultivate the reuse market, which has great potential for growth, by focusing on on-site purchase, which is one of the company's strengths, and by uncovering potential "hidden assets" in the home.
[1-4 Business Description]
(1) Business Model
The company and its 4 subsidiary, TIMELESS, BuySell Link Inc., and FOUR-NINE, Inc. operate the reuse business by utilizing respective strengths in the Internet and in real transactions. (BuySell Link Inc. is a special subsidiary for the purpose of promoting the employment of people with disabilities.)It attracts sellers through a marketing strategy that makes full use of the internet and mass media, and also provides a shipping purchase service and a store purchase service as well as the at-home pick up service delivered by its assessors who can travel throughout Japan. The Company sells purchased products to general customers (toC sales) though EC sales at EC malls such as the Company's own EC site "Reuse Select Shop BuySell" and Yahoo! Auctions, and at cross-border EC sites such as eBay, and special event sales at department stores. In addition, it sells to external vendors through the “Timeless Auction", which is held by TIMELESS Corporation, which was acquired as a subsidiary, and wholesale using other companies' markets.
(Source: the reference material of the Company)
The Company has built a system to consistently manage and execute the entire flow from marketing to attracting customers, purchase appraisal, inventory management, and sales on its own. At the same time as expanding its mainstay reuse business, the Company is also focusing on launching and developing new business adjacent to the reuse business and other services utilizing customer data.
(2) Overview of Each Service
The Company's reuse business consists of the following business flo "Attracting sellers" → "Conducting purchase" → "Selling purchased products". The outline and features of each step of "customer attraction", "purchase" and "sales" are described in detail below.
(Source: the reference material of the Company)
1) Attracting Customers: Developing cross-media marketing aimed at high-net-worth seniors
◎Marketing
Marketing activities for receiving appraisal requests from customers are the starting point of the business strategy and execution, and maximizing the number of customers is the first key to the success of the Company's business. The marketing skills and expertise of the management team, including President Iwata, play a major role.
The Company develops cross-media marketing that leverages "the Internet", such as SEO (Search Engine Optimization), listing ads, and SNS, as well as "the mass media" centered on TV commercials, foldouts, flyers, etc.. In addition to advertising operation from a macro perspective based on market conditions and seasonality, the company conducts detailed analysis for each kind of daily media, area, etc., to realize efficient CPA (cost per action) and maximize cost-effectiveness in its marketing activities.
Due to such detailed marketing activities, the number of inquiries and customers are increasing year by year.
(Source: the reference material of the Company)
◎Inside Sales: Providing services that meet customer needs and maximizing the efficiency of assessor operations
In response to incoming calls from potential buyers, the company approached through marketing, approximately 100 operators listen directly to customers’ requests and cooperate with assessors to provide services in line with customer needs.
In July 2020, the organization was changed from the previous "Call Center Business Division" to the "Inside Sales Division" for the purpose of organizing sales from the time of answering the first inquiry call. Moreover, the call center not only performs administrative tasks such as receiving inquiries about products to be sold and arranging the date and time of visits, but also provides the customer with an explanation that will be given when they are visited by an assessor, as well as an overview of the Company's services, information regarding the range of products that can be assessed, and a guidance for preventing uninvited solicitations so that customers can use the Company's services with greater confidence.
In addition, the Inside Sales Division, along with these customer-oriented services, generates highly profitable and effective appointments by classifying them into five ranks based on the expected gross profit per business visit (expected cost per visit) when the call is received.
This organizational change has resulted in a steady increase in the ratio of highly ranked appointments over the years, contributing to an increase in variable profit per at-home visit.
The company receives 410,000 calls(The Fiscal Year Ended December 2022 Results) for asking about purchase per year, and records all of them, to trace the subsequent appointments and home visits. With this, they extract common items and essential points from highly ranked appointments, and educate operators about them. By repeating this cycle, they increase gross profit from home visits.
(Source: the reference material of the Company)
2) Purchase: Developing the "at-home pick up service" meeting a wide range of customer needs
◎The At-home Pick up Service
"The at-home pick up service" which involves going to the homes of customers who made inquiries and conducting an appraisal and a purchase, is the main purchasing method. In addition, the Company also carries out a "shipping purchase service", in which customers send products to be sold to the Company, and a "store purchase service", in which customers bring products directly to the Company.
The Field Sales Division, which is in charge of "the at-home pick up service," has approximately 360 assessors as of the end of 2022, with based in the Kanto, Kansai, Nagoya, Fukuoka, and other areas, to cover all parts of Japan. "The at-home pick up service" can flexibly respond to purchase requests from customers who have difficulty using store purchases service or shipping purchase service and meet a wider range of customer needs, such as when there is a wide variety of products to be assessed, the quantity of appraisals is large, it is difficult to carry the products due to their weight, as well as when there are inquiries from distant customers and elderly customers.
For example, if a customer wants to sell a large number of kimonos which weighs approximately 1 kg per piece, and it is difficult to carry them, "the at-home pick up service" in which the Company's assessor visits a customer's home to conduct an appraisal and a purchase, is highly compatible with such customer needs.
◎Assessor
The number of field sales assessors is also increasing steadily in parallel with the expansion of business scale, based on the company's recruiting capability. Since 2017, the company has been strengthening its recruitment of new graduates. In the medium/long term, they plan to stop recruiting mid-career workers.
The company also focuses on the training of assessors to enhance customer satisfaction.
The Sales Enablement Department, a division specializing in education and training, has introduced a systematic education and training system for assessors and implements education and training programs tailored to each assessor in each center, based on the company's unique internal management index.
Considering the shortening of the training period as a KPI, they constantly review their educational programs. Several years ago, the training period was about 6 months, but currently, it is about 5 months.
The Company emphasizes the education of assessors and regularly conducts on-the-job training, including sales skills training and on-site training, to improve sales attitude, appraisal skills, and compliance awareness.
In addition, the Company is working to achieve thorough compliance because the Company must provide customers with safety and security when its employees visit customers’ houses.
The assessors alone cannot make a decision on the contract, and the compliance department calls the customer at the time of the contract and issues a decision call to confirm the contents of the sales contract (confirmation of the product, the price and the customer's satisfaction with the price), after which the contract is finalized.
Furthermore, the compliance department calls the customer again (follow-up call) after the assessor has left to receive the customer's candid opinions about the at-home pick up service, specifically about the assessor's attitude, compliance and customer satisfaction. The results of follow-up call, including customers’ voices, complaints and compliments are managed for each assessor, and the assessors are thoroughly informed of these to further improve their performance. The company is also working to ensure that it complies with the cooling-off policy in accordance with laws and regulations.
◎Authenticity Appraisal
To ensure accurate appraisal and prevention of counterfeit purchase and assessors' fraudulent appraisal, the Company's appraisal system requires not only an on-site appraisal by a visiting assessor but also a double check by another assessor who specialize in authenticity appraisal and appraisal, based on information from photos and videos sent from the visiting assessor using mobile terminals and such.
In addition, the company is using valuation data and technology to improve the efficiency and productivity of valuation and pricing decisions by automating operations using machine learning technology, etc., with the aim of maximizing the volume of purchases.
◎Products
It mainly deals with kimonos, stamps, old coins, precious metals, jewelry, brand-name items, watches, antiques, furs, alcoholic beverages and others, and focuses mainly on products with high selling prices.
(Source: the reference material of the Company)
◎Main Customers
There are many inquiries from senior wealthy people whose needs are aligned with the at-home pick up service, which is the Company's main service. In the FY ended December 2022, customers in their 50s and over accounted for approximately 82% of all customers. In addition, senior customers use the Company's purchase services for disposition of one’s home, sorting out mementos and pre departure decluttering cleaning which account for approximately 60% of the reasons for using the services.
(Source: the reference material of the Company)
3) Sales:
◎Inventory Management
After the cooling-off period, purchased products are managed centrally from inspection to exhibition by more than 300 staff including part-time job in the Company's own warehouse in Funabashi, Chiba Prefecture.
AXIS, an IT system developed by the Company, manages inventory for each product, and processes cooling-off requests. The product is sent to the most suitable sales route, taking into account various aspects such as the characteristics and condition of the product as well as the market environment.
◎Sales System
After planning sales strategies based on inventory status, the Company sells purchased products through sales channels such as antique markets, auctions for dealers, e-commerce sales, special events and others.
(Source: the reference material of the Company)
For corporate sales through antique markets and auctions, the Company uses face-to-face auction formats for each product, and repeats negotiations with business partners until they find a sales partner that can produce a higher Profit Margin. Approximately 76% of Sales comes from corporate customers.
In addition, the company holds an auction of kimonos regularly at Narashino Warehouse, and actualizes appropriate sales at each quality level and the distribution of more goods through TIMELESS Auction, which is held by TIMELESS Corporation, which was acquired as a subsidiary.
On the other hand, in sales to end-user general consumers, in order to provide high-quality products, the Company conducts EC sales (Rakuten Market, Yahoo! Auctions and others) and sales at department store events. It operates two e-commerce sites, "Reuse Select Shop BuySell" which was launched in July 2018 and focuses on the sales of reused kimonos, and " BUYSELL brandchée ", which was opened on February 2020 and focuses on selling luxury reuse products such as brand-name items, watches, jewelry and alcoholic beverages. The company is also running a live commerce business for the Chinese market.
The Company aims to maximize Profits by expanding sales to general consumers while shortening the inventory turnover period (reducing inventory risk) through sales to corporations. The ratio of toC sales(non-consolidated), which started in 2018, was initially about 9%, but grew to 24.2% in FY 12/22, driving profit growth. By formulating optimal sales strategies for each product according to demand trend and building various sales channels, the Company is steadily accumulating results in sales, which is the third key to the success of the reuse business.
[1-5 Strengths and Features]
1) Maximization of synergy with a broad range of purchase and sales channelsThe company is striving to maximize synergy by utilizing the strengths of the company and its subsidiary, TIMELESS, based on a wide array of purchase and sales channels of the two companies. Among many players in the reuse market, the Company has a unique business model of purchasing "luxury products" with a high unit price though a non-store-type "the at-home pick up service" which is unmatched by other competitors and constitutes a clear differentiator.
2) Strong Customer Base Centered on Senior Customers
As mentioned above, customers in their 50s and over make up approximately 82% of the Company's customer base. According to the Company's survey, 80% of the customers are satisfied with the responsiveness of the company's services, and the trust of senior high net worth individuals is strong.
This strong customer base will be a great advantage in future business development.
3) High Quality Management Team
One of the factors supporting the Company's growth is its excellent marketing strategy. According to President Iwata, no other start-up can run TV commercials as cost-effectively as the Company.
Running successful TV commercials requires familiarity with the industry structure including which players exist and what kind of setups are required, but at the Company, President Iwata who is from a major advertising company and have a great deal of knowledge, experience, and expertise, are strongly promoting a cross-marketing strategy.
In addition, in order to pursue sustainable growth by earning the trust of customers as well as to list the Company, it is essential to have a complete compliance system, and cash management in the purchase process is also an important point. Under the leadership of Mr. Koji Ono, who was appointed as Director and CFO in October 2016, the Company has been working to improve operations from an accounting perspective.
At the annual meeting of shareholders in Mar. 2021, a new director and CTO was appointed. The CTO Masayuki Imamura has the experience of engaging in a variety of digital transformation (DX) projects. The Company runs its business with six high-quality executives, including two outside board directors, covering both offense and defense.
4) Main KPIs: "the number of at-home visit" x "Variable profit per at-home pick up purchase"
The Company has set "the number of at-home visit" x "Variable profit per at-home pick up purchase" as the main KPIs for the reuse business.
It pursues an increase in the number of inquiries by raising awareness in order to increase "the number of at-home visit", and seeks to maximize Variable profit per at-home pick up purchase by increasing the purchase of high-priced products and optimizing advertising expenses.
(Source: the reference material of the Company)
(Source: the reference material of the Company)
2. Fiscal Year Ended December 2022 Earnings Results
(1) Business Results
| FY 12/21 | Ratio to Sales | FY 12/22 | Ratio to Sales | YoY |
Net Sales | 24,789 | 100.0% | 33,724 | 100.0% | +36.0% |
Gross Profit | 14,487 | 58.4% | 19,864 | 58.9% | +37.1% |
SG&A | 12,172 | 49.1% | 16,169 | 47.9% | +32.8% |
Operating Income | 2,315 | 9.3% | 3,694 | 11.0% | +59.6% |
Adjusted EBITDA | 2,766 | 11.2% | 4,339 | 12.9% | +56.9% |
Ordinary Income | 2,295 | 9.3% | 3,672 | 10.9% | +60.0% |
| Current Net Income | 1,314 | 5.3% | 2,268 | 6.7% | +72.6% |
* Unit: million yen.
(Source: the reference material of the Company)
Increased Sales and Profit for 8 Consecutive Terms
Sales increased 36.0% year on year to 33,724 million yen. In the At-home Pick up Purchase Business, the number of inquiries increased from 350,204 in the previous period to 413,385, and the ratio of high-rank appointments increased from 44.4% in the previous period to 51.6%, resulting in steady growth in the number of at-home visits and variable profit per at-home visit. The number of at-home visits increased as 135 actively-recruited new graduates became more competitive in the second half of the year.
Gross profit margin per at-home visit was 62,161 yen, up 8.4% from the previous term, due to the expansion of visits to regional areas. However, gross profit margin was generally maintained at the previous year’s level due to a change in the sales mix as the toC sales ratio (non-consolidated basis) increased from 20.3% in the previous year to 24.2%. In terms of SG&A expenses, efficient advertising and publicity spending was successful, and variable profit per at-home visit increased 13.2% from the previous year to 45,560 yen. As a result, the ratio of operating income to sales rose to 10.9%.
(Main SG&A expenses)
| FY 12/21 | FY 12/22 | YoY |
Advertising Expense | 3,904 | 4,970 | +27.3% |
Labor Costs | 4,677 | 6,014 | +28.9% |
Total SG&A | 12,172 | 16,169 | +32.8% |
* Unit: million yen.
Regarding advertisement, brand development has progressed somewhat so that “people recall BuySell when thinking of selling used goods at home.” Accordingly, they post ads while pursuing cost per action (CPA) through direct marketing. As a result, CPA declined 5.7% year on year to 9,642 yen.
(Source: the reference material of the Company)
The company recorded the highest quarterly sales and profit in the fourth quarter (October to December). Not only were purchase results healthy, but the company’s sales strategy was also successful while maintaining the year-end inventory level. The company started including the performance of FOUR-NINE in its consolidated profit-and-loss statement in 4Q. (Impact of acquisition: 1,216 million yen in sales, 125 million yen in operating income).
(2) Trends of major KPIs
| FY 12/21 | FY 12/22 | YoY |
The Number of At-home Visit | 209,526 | 243,321 | +16.1% |
Variable Profit per At-home pick up Purchase | 40,238 | 45,560 | +13.2% |
* Unit: case, yen
(Source: the reference material of the Company)
(3) Financial Condition and Cash Flows
◎ Main BS (Non-consolidated)
| End of 12/21 | End of 12/22 | Increase and Decrease |
| End of 12/21 | End of 12/22 | Increase and Decrease |
Current Assets | 7,346 | 10,448 | +3,101 | Current Liabilities | 3,649 | 5,690 | +2,040 |
Cash Equivalent | 4,772 | 6,999 | +2,226 | ST Interest Bearing Liabilities | 1,075 | 1,717 | +642 |
Inventories | 2,142 | 2,794 | +651 | Non-current Liabilities | 2,043 | 3,715 | +1,672 |
Noncurrent Assets | 2,938 | 7,196 | +4,257 | LT Interest Bearing Liabilities | 2,040 | 3,333 | +1,293 |
Tangible Assets | 362 | 717 | +354 | Liabilities | 5,692 | 9,406 | +3,713 |
Intangible Assets | 2,093 | 5,690 | +3,597 | Net Assets | 4,592 | 8,238 | +3,646 |
Investment, Others | 482 | 788 | +306 | Retained Earnings | 2,805 | 4,875 | +2,070 |
Assets | 10,285 | 17,644 | +7,359 | Total Liabilities and Net Assets | 10,285 | 17,644 | +7,359 |
* Unit: million yen
*This figure is created by Investment Bridge Co., Ltd. based on disclosed materials.
Inventory decreased temporarily due to accelerated toB sales in 3Q for the purpose of hedging the risk of fluctuations in the gold and watch markets. However, due to steady purchases in 4Q, the inventory level at the end of the term was 2,794 million yen, up 651 million yen from the previous term. With the inclusion of FOUR-NINE in the scope of consolidation, goodwill of 2,359 million yen (amortized over 13 years) and customer-related assets of 1,375 million yen (depreciated over 5 years) were recorded. Interest-bearing debt increased by 1,935 million yen due to partial borrowing for the acquisition of FOUR-NINE’s shares. Net assets increased 3,683 million yen year on year to 8,238 million yen due to an increase in retained earnings and an increase in capital surplus resulting from the execution of a partial share exchange scheme in the acquisition of FOUR-NINE’s shares. Equity ratio increased 3.2 points from the end of the previous period to 49.3%.
(4) Topics
◎ Steady Progress Toward Expansion of Technology Organization
In order to not only achieve the goals of its medium-term management plan, but also sustain high growth, the company is actively working to strengthen its data-driven management through the establishment of data bases and the utilization of technology. In the term ended Dec. 2022, the number of employees in the Technology Strategy Division increased 34 from the end of the previous fiscal year to 70. The recruitment of engineering managers and personnel who can become technical leaders from major IT companies has materialized, which is noteworthy from the perspective of human capital management.
In terms of product development, the company is focusing on the development of “Cosmos,” an in-house developed platform that provides comprehensive services for everything related to the Reuse Business, including purchasing, sales, customer management, inventory management, sales management and data analysis. In the term ended Dec. 2022, in light of the M&A of FOUR-NINE, the company prioritized the development and launch of “Store,” a dedicated storefront purchase system. This launch has already materialized the following benefits: a 40% reduction in response time from the start of customer services to the signing of a contract, a reduction in the system training period for new assessors from one month to one day, and an improvement in gross profit margin by stores through faster PDCA based on various types of data.
The company plans to launch major systems one by one in the term ending Dec. 2023 as well. The future core system for the main business of the At-Home Pick up Purchase Business, “Visit,” is scheduled to be launched in the 4Q of the current term and will support growth after the end of the medium-term management plan period.
(Source: the reference material of the Company)
(Source: the reference material of the Company)
◎ Acquisition of FOUR-NINE, Inc., which operates stores for purchasing used goods nationwide, as a 100% subsidiary
In August 2022, the company acquired FOUR-NINE, Inc., which operates stores for purchasing used goods nationwide, as a 100% subsidiary. Consolidated from 4Q FY12/2022.
(Outline of FOUR-NINE, Inc.)
Established in 2016. It operates “Reuse Shop WAKABA,” which buys a wide array of used goods, including high-end bags, wristwatches, jewelry, and precious metals. It excels at developing shops in secondary locations, such as shopping malls, which are easy to access by car, although they are located far from stations, and supporting franchisees who have no experience of buying used goods with meticulous and enriched training programs.
As of June 2022, it was operating a total of 207 shops, including franchised and directly managed ones, around Japan. For the term ended March 2022, it posted sales of 3.3 billion yen, an operating profit of 249 million yen, total assets of 885 million yen, and net assets of 393 million yen.
(Envisioned FOUR-NINE’s contribution to business performance)
(Source: the reference material of the Company)
Through the acquisition of FOUR-NINE as a subsidiary, the company aims to exert the following synergetic effects and make them contribute to business performance.
(1) Enhancement of purchase of used goods
The number of shops of the corporate group increased from 24 (8 BuySell stores and 16 Timeless stores) to over 200 in one go. They aim to enhance the purchase of used goods from customers in the in-store purchase business, by differentiating shops of each company and realizing the synergy among group companies while increasing shops.
In addition, the data that can be obtained around Japan, such as the client attributes in each region and the details of purchase conditions (what kinds of goods were brought, whether goods were purchased at home or after delivery, whether customers visited a store by train or by car, etc.), are significant assets. Such data are expected to enable the development of more meticulous sales and marketing strategies.
(2) Enhancement of the selling capability
In FOUR-NINE, Inc., franchised shops sold goods they have purchased to not only the headquarters (directly managed store), but also external auction organizers in many cases. From now on, both franchised and directly managed shops will sell goods to BuySell and Timeless, and by utilizing the sales channels of BuySell’s direct sale to customers, the auctions of Timeless, etc., they are expected to increase sales volume considerably. Then, they will improve profit margin by selling goods to customers and expand the number of auction transactions.
(Taken from the company's M&A documents)
(3) Acceleration of the shift to SaaS
The company will provide the franchisees of FOUR-NINE, Inc. with the services of BuySell Reuse Platform (Cosmos), with the aim of accelerating the scheme of transforming the reuse platform into SaaS in the mid-term management plan.
To date, a total of 24 stores (8 BuySell stores and 16 Timeless stores) have piloted cloud-based system management for customer management, assessment, merchandise management, individual ledger management, sales channel selection, accounting, etc., and improvements have been made based on feedback. Furthermore, the company will proceed with full-scale implementation and operation within its own group, since approximately 160 franchise owners were added at once through this M&A. In addition, the company will use this as an advantage in acquiring new franchisees and will also consider external sales in the future.
It was a significant step toward the completion of the SaaS system.
(Taken from the company's M&A documents)
(4) Development of a stable revenue base with a recurring-revenue business model
It is possible to expect that stable revenues will be posted with a recurring-revenue business model of collecting initial and monthly franchise fees, where the initial fee depends on the contract period.
(5) Contribution to medium/long-term business performance
The company plans to keep increasing franchised stores steadily. It is expected that revenues will be posted throughout the franchise period, offsetting goodwill amortization and contributing to medium/long-term business performance.
(Overview of the acquisition of FOUR-NINE as a subsidiary)
The company bought 600 out of 800 outstanding shares of FOUR-NINE, Inc. at a price of 2.26 billion yen in July 2022. For the remaining 200 shares, they carried out the simplified share transfer with BuySell Technologies being the wholly-owning parent company and FOUR-NINE, Inc. is being a wholly-owned subsidiary in August 2022. The company issued 1,020 common shares of BuySell Technologies per common share of FOUR-NINE, Inc. The company newly issued a total of 204,000 shares for it.
3. Fiscal Year Ending December 2023 Earnings Forecasts
(1) Business Results
◎Consolidated Financial Forecast
| FY 12/22 | Ratio to Sales | FY 12/23 Est. | Ratio to Sales | YoY |
Net Sales | 33,724 | 100.0% | 44,600 | 100.0% | +32.2% |
Gross Profit | 19,864 | 58.9% | 25,750 | 57.7% | +29.6% |
SG&A | 16,169 | 47.9% | 21,200 | 47.5% | +31.1% |
Operating Income | 3,694 | 11.0% | 4,550 | 10.2% | +23.2% |
Adjusted EBITDA | 4,339 | 12.9% | 5,650 | 12.7% | +30.2% |
Ordinary Income | 3,672 | 10.9% | 4,500 | 10.1% | +22.5% |
Net Income | 2,268 | 6.7% | 2,800 | 6.3% | +23.4% |
*Unit: million yen.
Focus on Sustainable Growth Beyond the Final Year of the Medium-Term Plan While Increasing the Probability of Achieving the Plan
Sales are expected to increase 32.2% year on year to 44,600 million yen, operating income to rise 23.2% year on year to 4,550 million yen, and adjusted EBITDA to grow to 5,650 million yen. A profit growth of over 20% from the previous year is expected through store expansion of BuySell, Timeless, and FOUR-NINE, in addition to continuing to aggressively hire human resources with a focus on new graduates, despite an increase in land rent due to warehouse expansion and an increase in the number of stores, and higher depreciation due to the acquisition of FOUR-NINE. The impact of the inclusion of FOUR-NINE in the scope of consolidation is expected to result in 6,350 million yen in sales and 530 million yen in operating income.
The dividend forecast is 25.00 yen per share, up 5.00 yen per share from the previous year. The dividend payout ratio is expected to be 13.0%.
(Main SG&A expenses)
| FY 12/18 | FY 12/19 | FY 12/20 | FY 12/21 | FY 12/22 | FY 12/23 Est. | YoY |
Advertising Expense | 1,927 | 2,613 | 2,990 | 3,905 | 4,970 | 6,000 | +20.7% |
Labor Costs | 1,745 | 2,084 | 2,349 | 3,087 | 6,014 | 8,100 | +34.7% |
* Unit: million yen. FY 12/20 numbers are non-consolidated.
(Transition of KPIs)
| FY 12/21 | FY 12/22 | FY 12/23 Est. | YoY |
The Number of At-home Visit | 209,526 | 243,321 | 282,000 | +15.9% |
Variable Profit per At-home pick up Purchase | 40,238 | 45,560 | 50,000 | +9.7% |
* Unit: case, yen
(Source: the reference material of the Company)
4. Conclusions
There may be some concerns about the probability of achieving the medium-term management plan if we see the plan for the term ending Dec. 2023 only. However, in light of the accurate management decision to control and subsequently increase inventory in the second half of the term ended Dec. 2022 and the progress of KPIs, it may be suggesting not only that the probability of achieving the medium-term management plan increased, but also that the expected long-term growth rate has been raised. In order to keep this expected growth rate, we believe that the key to success will be the enhancement of human capital, particularly engineers, and whether the development of the in-house developed platform and the launch of the platform with a view to external sales in the future can proceed without delay.
<Reference1: Medium-term Management Plan 2024（announced in Feb. 2022）>
The company announced a three-year medium-term management plan for 2024 as follows.
(1) Ideal state
The following four are the goals to be achieved by 2024.
☆ | To establish a position as a reuse tech company by promoting the integration of reality x technology (IT and DX) |
☆ | To maintain a solid leading position unrivaled by any other company in the reuse at-home pick up service |
☆ | An average annual growth rate of approximately 40% in consolidated ordinary profit during the three years of organic growth (FY 12/2024) |
☆ | To establish a corporate governance structure that balances sustainable growth and governance tightening to maximize shareholder value |
(2) Management Strategy
① Basic policyAs mentioned in the Company Overview section, the growth potential of the reuse market is extremely large. The company believes that in this explicit market, which is estimated to be worth 3 trillion yen in 2022, all purchase channels (stores, home delivery, etc.) will be available, although the customer base ranges from young people to senior citizens, competition is intense. On the other hand, in the dormant reuse market, which is estimated to have hidden assets of 37.1 trillion yen, the main need is to sell items for clearance and disposal, so at-home pick up services are advantageous because they allow direct access to unwanted items in customers’ houses; the customer base is mainly senior citizens who have many hidden assets, and competition is not expected to be as intense as in the explicit market.
Therefore, the company's basic policy is to "expand market share by strengthening purchase channels such as stores and M&A" in the explicit market and to "place the highest priority on investment for growth in the at-home pick up service and maintain a leading position" in the latent market.
② Competitive advantage in potential markets
The company's mainstay business is the at-home pick up service, which allows direct access to "hidden assets" lying in the home by visiting customers at their residences. The company's strength lies in its ability to purchase goods such as kimonos and stamps, which are in high demand for disposal, as well as the fact that approximately 60% of its customers use the service for estate liquidation and home clearance, and that 82% of its customers are seniors in their 50s or older. These points are the source of the company's competitive advantage in the "hidden assets" market, a reuse market with large growth potential.
③ Five Management Strategies
The company has set forth five management strategies to realize its vision.
A | To accelerate technology investments, particularly in IT and DX enhancement |
B | To continue to strengthen the at-home pick up service and toC sales |
C | To expand the purchase store business |
D | M&A |
E | New Business |
Based on "A," the company aims for organic growth in "B" and "C," and inorganic growth in "D" and "E."
[A: To accelerate technology investments, focusing on IT and DX enhancement]
They will accelerate business growth by improving productivity through the use of technology and deepening data-driven management through the development of data infrastructure. They aim to become a reuse tech company by promoting the fusion of reality (people and products) and technology (IT and DX).
(Source: the reference material of the Company)
[B: To continue to strengthen the at-home pick up service and toC sales"]
◎Area expansion strategy for the at-home pick up service
The company aims to achieve further growth by increasing the number of at-home visits and maximizing variable profit per visit in each area through the development of optimal marketing strategies and the allocation of offices and personnel to each regional area, in addition to the metropolitan areas centered on Tokyo, Nagoya, and Osaka.
In the Tokyo, Nagoya, and Osaka areas, where the volume of inquiries and purchases is high, and gross profit per visit is high, but competition is fierce and advertising expenses tend to be high, the company will further strengthen its foundation through ongoing investment.
On the other hand, in the priority regional areas, where gross profit per visit is lower than those in the Tokyo, Nagoya, and Osaka areas, but the competitive environment is not as fierce as in the Tokyo, Nagoya, and Osaka areas, investments will be strengthened because they enable efficient advertising with low advertising costs.
The company will develop a cross-media marketing strategy, which is one of the company's strengths, by dividing the areas into smaller segments. In addition, by increasing the number of offices, the company will strengthen its sales force with an optimized organization and staffing in each area.
Strengthening of toC sales through the use of technology in sales
The company aims to improve profitability by optimizing sales channels through centralized management of group data such as "inventory," "sales by channel," "auctions," etc., promoting Online-Merge-Offline (OMO) in toC sales, and expanding overseas sales channels.
(Source: the reference material of the Company)
[C: Expansion of the purchase store business.]
They will accelerate store development while leveraging group synergies to strengthen the toC purchase channel, which is differentiated from at-home pick up service.
As of December 2021, BuySell had five stores in major cities nationwide, and its main products are kimonos, stamps, and old coins. Due to its large-scale marketing, the company is highly recognized for its at-home pick up service, which is a major advantage in attracting customers.
On the other hand, TIMELESS, whose main products are brand-name products, watches, and jewelry, has 14 permanent stores in department stores nationwide, whose good location and a sense of security are significant characteristics.
By leveraging the advantages and features of both companies, the company will accelerate store development through group synergies by promoting mutual customer traffic, marketing, data sharing, hiring and personnel exchanges, and other measures. The company aims to have over 50 group stores by 2024.
(Main KPI targets for the at-home pick up service)
| Results in 2021 | Goal in 2024 |
Number of at-home visits | 209,526 | 320,000 |
Variable profit per at-home visit (yen) | 40,238 | 51,000 |
Gross profit per at-home visit (yen) | 57,324 | 72,000 |
Advertising expense per at-home visit (yen) | 17,086 | 21,000 |
Number of inquiries | 350,204 | 508,000 |
CPA (yen/case) | 10,223 | 13,000 |
Number of employees (people) in FS business (at-home visits) | 314 | 500 |
Highly Ranked Appointment Ratio (%) | 44.4 | 50 |
Ratio of toC sales (%) | 20.3 | 30 |
*CPA: Advertising cost per action (advertising cost related to at-home pick up service divided by the number of inquiries)
*High-Rank Appointment Rati Appointments are classified into five ranks, A-E, according to the estimated gross profit earned per at-home visit for internal management accounting purposes. Percentage of the number of at-home visits for appointments of high-rank A-C among the ranks concerned (the number of ABC rank appointments divided by the number of at-home visits).
[D: M&A Strategy]
The company will focus on M&A in the reuse domain, giving priority to executing investments that contribute to strengthening existing competitiveness and developing areas that have yet to be reused. In addition, the company aims to increase corporate value by enhancing return on investment through strategic M&A in areas where there is a high probability of creating synergies through PMI.
TIMELESS, which became a subsidiary in 2020, has contributed significantly to the enhancement of the Group's corporate value by generating group synergies through effective PMI after M&A, generating profits that significantly exceeded the burden of goodwill amortization, and improving EPS over the dilution impact of the stock swap. Based on this track record, the company will continue to pursue effective M&A activities.
(Source: the reference material of the Company)
[E: New Business]
Scheme of changing the reuse platform into SaaS
The platform that has been used within the company group up to now was launched as the BuySell reuse platform (Cosmos) and was converted to SaaS. By providing this platform to outside vendors, the company will create a new pillar of revenues. The platform will provide a full range of functions from purchasing to selling and will realize a world in which a variety of reuse vendors use the BuySell Reuse Platform.
In addition, the company will use the platform as an integrated group system through the promotion of DX in pursuit of greater efficiency and maximization of earnings.
(Source: the reference material of the Company)
Promoting commercialization in the areas of liquidation and disposal needs and seniors
The company has been promoting a model of sending customers through alliances, focusing on areas that have a high affinity with the company's main customers, such as seniors and their clearance and disposal needs (collection of unwanted items, real estate sales, insurance, inheritance and counseling for end-of-life preparation, etc.), and aims to launch a business within its own group in addition to this model.
(3) Investment and Financial Strategy
① Capital Allocation Policy
Based on the ability to generate operating cash flow based on high-profit growth and flexible debt financing based on a stable financial base, the company aims to secure funds to invest in businesses and M&A for growth and allocate capital for sustainable growth.
Investment resources will be allocated in the following order of priority: "operating CF from business," "interest-bearing debt," and "equity." Regarding capital allocation, in addition to business investments for organic growth, priority will be given to strategic investments for inorganic growth, mainly M&A.② Investment Policy
The company is actively pursuing strategic investments in M&A for non-continuous growth and business investments for sustainable growth based on a disciplined investment policy.
Regarding business investment, the company will invest in technologies for enhancing IT and DX, marketing, human resources (recruitment and organizational strengthening), relocation and expansion of warehouses, store expansion, and strengthening of the compliance system. The company will control the allocation of funds while considering the forecast profit.
In M&A, from the perspective of maximizing corporate value and synergies, priority will be given to majority investments that can be consolidated into a consolidated group. The company will implement disciplined investment practices such as setting a maximum EV/EBITDA multiple and targeting profitable companies or companies with a high probability of becoming profitable in the short term. For new businesses, the initial investment will be limited, and after carefully examining business profitability and growth potential, the investment limit will be gradually expanded in phases where the return on investment can be expected.
③ Financial Policy
To enable aggressive business investment and M&A activities while securing investment funds, the company maintains the stability of its financial base through disciplined financial management while emphasizing investment for growth. The company's financial discipline includes a net D/E ratio of 0.5 or lower, a Net Debt/EBITDA ratio of 1.0 or lower, and a capital adequacy ratio of 40% or higher.
④ Shareholder Return Policy
The company's basic policy is to return profits to shareholders through stable and continuous dividends, while aiming to increase TSR (Total Shareholder Return) through medium- and long-term share price appreciation by increasing EPS through prioritizing investments for growth. The target consolidated dividend payout ratio is 20%. They will maintain the current dividend policy.
(4) Governance Structure and ESG/SDGs
①Strengthen the corporate governance structure
With the aim of enhancing corporate value, further improving governance, and increasing management transparency and objectivity, the company will shift to a system in which independent outside directors constitute a majority of the Board of Directors, along with the transition to a company with an audit committee.
In addition, the company will continue to operate a voluntary Nomination and Compensation Advisory Committee, which is chaired and majority-owned by outside directors and will increase the ratio of female directors from the perspective of promoting diversity on the Board of Directors. The number of female directors increased by two to become three out of a total of eleven directors.
In addition, by nominating directors based on a skills matrix that defines key areas of expectation for directors, the composition of the Board of Directors will be changed to enable both medium- and long-term growth of the group and stronger governance.
② ESG/SDGs
From the perspective of the sustainability of business activities required by society, the company established a sustainability strategy policy focusing on compliance, risk management, and organizational and human resource management.
The two pillars of the strategy are "compliance and risk management" and "organization and human resource management."
Under "Compliance and Risk Management," the key measures are to strengthen corporate/service governance, enhance information security, and maintain/improve reliability in at-home pick up service. In the area of organizational and human resource management, the key measures are strengthening recruitment and training, improving employee engagement, and bridging the skills and gender gap.
(5) Business Performance Targets
The organic and inorganic targets for 2024 are as follows①Organic Targets
| Actual results for FY 12/21 | Target for FY 12/24 | CAGR |
Net sales | 247 | 465 | approx. 23% |
Ordinary Income | 22.9 | 60 | approx. 38% |
Ordinary Income Ratio | approx. 9% | approx. 13% | +4pt |
＊Unit: Hundred million yen. Organic growth of existing businesses of BuySell and TIMELESS. The impact of future M&A is excluded. CAGR: compound annual growth rate.
②Inorganic Targets
They aim for non-continuous growth through aggressive promotion of M&A. The recurring profit target for FY12/2024 is 6 billion-plus yen. To lay the foundation for long-term business sustainability and growth in FY12/2024 and beyond.
<Reference2: Regarding Corporate Governance>
Organization type, and the composition of directors and auditors
Organizational Type | Company with Audit & Supervisory Committee |
Directors | 11 directors, including 6 outside directors |
Auditors | 3 auditors, including 3 outside auditors |
Corporate Governance Report The latest revision date: March 30, 2022 <Fundamental Concept>
The Company recognize that establishing corporate governance is essential in order to increase corporate value, maximize shareholder returns, and build good relationships with stakeholders such as customers, business partners, employees, local communities, and government agencies.
To this end, the Company believe that it is important to establish a decision-making body that responds quickly and fairly to changes in the business environment, pursue Profits through its businesses, ensure that its financial soundness and improve its credibility, actively disclose information to fulfill accountability, build an effective internal control system, and ensure that audit and supervisory board members maintain their independence and fulfill their audit functions.
＜Reasons for not implementing each principle of the Corporate Governance Code＞
The Company has implemented all the basic principles of the Corporate Governance Code.
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