クリーマ（4017） – Financial Results Briefing Report for 4Q, FY2022

Financial Results Briefing Report for 4Q, FY2022CREEMA LTD. (TSE Growth Market: 4017)May 11, 2022Copyright ©2022 CREEMA LTD.PAGE1Agenda1. FY22 4Q and full-year results 2. FY23 growth strategy 3. FY23 earnings forecasts 4. Appendix P 3P 31P 41P 50Copyright ©2022 CREEMA LTD.PAGE2FY22 4Q and full-year resultsCopyright ©2022 CREEMA LTD.PAGE3[Company-wide] 4Q resultsWhile 4Q sales grew significantly by 117% YoY at 628 million yen, SG&A expenses remained at a lower level than in the same period of the previous year, when TV commercials were aired and investment in new business development was made. As a result, all major profit items, including YoY plus 233 million yen in the ordinary profit, significantly exceeded those of the previous year.4QTopicsUnit: million yenResultsYoYSalesSales CostGross profitSG&AOperating profitOrdinary profitNet income628345945088513126117%(Excluding masks: 120%)1802%111%80%+183+233+97• In 4Q sales, marketplace and platform services continued to perform strongly, and event and store services showed some recovery trend despite the significant negative impact of COVID-19 continued, and maintained to grow at 117% YoY.‒ Except for sales excluding masks, which surged last year due to COVID-19, growing at 120% YoY.• SG&A expenses remained as planned, but were limited to 80% in YoY due to the large scale of TV commercials and investment in new business in the same period last year.• As a result, both major revenue and profit items were significantly higher than the previous year.Copyright ©2022 CREEMA LTD.PAGE4[Company-wide] Full-year resultsThe full-year sales were 111% YoY (122% excluding masks) at 2.2 billion yen, reaching record highs. As in 4Q, all major profit items were significantly higher than the previous year, including the 177% YoY expansion in the ordinary profit. All revenue and profit items reached record highs.Full-yearTopicsUnit: million yenResultsYoYSales2,294Record high111%(Excluding masks:122%)Sales Cost741425%Gross profit2,219Record highSG&A1,897Operating profit322Record highOrdinary Profit363Record highNet income230Record high108%104%143%177%129%• The full-year sales grew at 111% YoY, with stable growth in online services, despite continued weakness in event and store services due to COVID-19.‒ As in 4Q, it grew strongly at 122% YoY, with the exception of full-year sales excluding masks.• SG&A expenses were 104% YoY mainly due to TV commercials, large-scale development investments, and new business investments.• As planned, sales increased significantly in excess of expenses. As a result, all major profit items significantly exceeded the previous year, reaching record highs in all profit items.‒ Operating profit：143% YoY‒ Ordinary profit：177% YoY‒ Net income：129% YoYCopyright ©2022 CREEMA LTD.PAGE5[Company-wide] Trends in consolidated salesIn 4Q, in addition to the growth of online fields such as the marketplace service, large events resumed under pre-emergency measures, resulting in 117% YoY. For the full year, YoY continued to grow strongly at 111%. Excluding sales related to handmade masks, which saw a surge in demand in the previous fiscal year due to COVID-19, YoY sales were 120% in 4Q and 122% for the full year, showing continued strong growth in the core business.Unit: million yenYoY：117%* Excluding masks: 120%YoY：111%* Excluding masks: 122%QuarterFull-year5235145394854486065575031,517 6282,062 2,294 365386317 1QFY20 1QFY21 1QFY22 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4QFY20FY21FY22Copyright ©2022 CREEMA LTD.PAGE6[Company-wide] Changes in consolidated SG&A expensesAs a result of TV commercials and investment in new business development in the same period of last year, YoY was 80% in 4Q, which was lower than the previous year. However, as a result of investment aiming at medium- to long-term growth in the full year as planned, YoY increased slightly to 104%.Unit: million yen：Other：Promotion expenses：Personnel expensesQuarterTemporary surge in TV commercials + Investment in new business investmentYoY：80%Full-yearYoY：104%869 955 173 175 161 67 93 84 84 90 73 1QFY20168 201 202 79 96 81 201 96 103 101 103 110 122 1QFY21263 249 228117104 1QFY22222248255679 110130 2Q108118 3Q124128 4Q522 460 439481322 355 2Q 3Q 4Q 2Q 3Q 4QFY20FY21FY22Copyright ©2022 CREEMA LTD.PAGE7[Company-wide] Changes in consolidated operating incomeIn 4Q, it reached 85 million yen with +183 million yen YoY. For the full year, YoY hit a record high of 322 million yen, reaching 143% YoY due to strong growth in existing businesses while continuing upfront investment for the future.Unit: million yenYoY：+183 million yenYoY：143%QuarterFull-year1221255875853949486 1QFY20 1QFY21 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4QFY20FY21FY22322226148 1QFY22-98 Copyright ©2022 CREEMA LTD.PAGE8[Company-wide] Changes in consolidated ordinary profitIn addition to the strong growth of the business, as non-operating incomes including subsidies for the event business were recorded, the ordinary profit reached + 233 million yen YoY at 131 million yen in 4Q. For the full year, it hit a record high of 177% YoY at 363 million yen.QuarterFull-yearUnit: million yenYoY：+233 million yenYoY：177%1201216164Subsidies, etc. for the event business are included in the other income1311473632044836452 1QFY20 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4QFY20FY21FY22 1QFY21 1QFY22Copyright ©2022 CREEMA LTD.PAGE9-102 [Company-wide] Changes in consolidated net incomeNet income landed at 230 million yen, a 129% YoY growth for the full year, and also a record high.Unit: million yenYoY：+97 million yenYoY：129%QuarterFull-year1201161292301780.612571726 1QFY20 4Q-9 1QFY21 2Q 3Q 2Q 3Q 4Q 2Q 3Q 4Q 1QFY22FY20-28 FY21FY22-70 Copyright ©2022 CREEMA LTD.PAGE10[Company-wide] Balance sheet statusRetained earnings increased significantly due to higher sales and profits. Maintain a stable liquidity ratio and build a stable financial base.Subject (Unit: Million Yen)4Q FY2022(Ref.) 4Q FY2021Current assetsCash and cash equivalentsAccounts receivableFixed assetsDeferred tax assetsSecurity depositsGoodwillTotal assetsCurrent liabilitiesWithholdings / Funds payable and amounts due to creators Loans repayable within one yearFixed liabilitiesLong-term liabilitiesTotal liabilitiesCapital stockCapital surplusRetained earningsTotal net assetsCopyright ©2022 CREEMA LTD.3,5982,953623291-154373,8892,1771,6191763913812,5695361,957-1,1721,3203,5682,8856441266338-3,6942,3131,4602,612266298298532532171,081YoY101%102%97%231%–401%105%94%111%66%131%128%98%101%365%-122%PAGE11Business structure and “Creema economic zone”We are developing a creator empowerment business with Japan’s largest handmade marketplace, Creema, as the main axis. From the next slide onward, we will cover the latest trends in each service, starting with the marketplace service.Creator empowerment business(1) Marketplace service (Japan/Taiwan/Hong Kong) • KPIs of our business model− Registered creators 23,000 people− Registered works− App downloads− GMV13 million items12 million 16 billion/yearCreators(Sellers)(Work listing)TransactionRevenueTransaction fees(Purchase)PaymentUsers(Buyers)(2) Platform services(3) Event and store services(4) New service group• Internal advertising(Advertising for creators)• External advertising (Advertising for companies and local governments)• Membership services(Daily remittance service, etc.)• Events− HandMade In Japan Fes’(Tokyo Big Sight), etc. • Store− Creema Store• Crowdfunding service− Creema SPRINGS• Lesson video platform− FANTIST• Other new services in preparation, etc.Copyright ©2022 CREEMA LTD.PAGE12(1) Marketplace service: Creema GMV trendsAs a result of MD measures in accordance with the timing and continuous product improvement, GMV of 4Q reached 109% YoY at 4.3 billion yen. Despite a rebound from the surge in mask demand and stay-at-home consumption in the previous fiscal year, the figures for the full year exceeded a record high of 16 billion yen at 104% YoY.Main initiativesCreema GMV trendsQuarterFull-year• Featuring trends such as Christmas and Unit: million yenYoY：109%YoY：104%4,2563,7403,4664,1723,9563,9483,6434,3038,99815,41916,067structure to provide a safer and more secure purchasing experience.2,2242,075 2,1822,515Valentine’s Day, implemented merchandising and campaign measures.• Continuous enhancement of Creema products focusing on a better user interface and measures to improve convenience for creators.• Strengthening of systems and support • Broadcasting of Creema TV commercial from July to August to make the service known.• Completed Star Creator Finding Project, a collaboration project with fashion designer Keita Maruyama, and sold it exclusively.•“Area CC,” a new brand produced by Chiaki, head of Hello Circus, was put on exclusive sale. 1QFY20 2Q 3Q 4Q 1QFY21 2Q 3Q 4Q 1QFY22 2Q 3Q 4QFY20FY21FY22Copyright ©2022 CREEMA LTD.PAGE13(1) Marketplace service: Impact of handmade masks in Creema GMVDemand excluding mask-related products increased sharply in the previous year due to the impact of the COVID-19 pandemic. The core service portion continued to show strong growth, with 113% YoY growth for 4Q, and 118% for full-year growth.Creema GMV (Overall)Creema GMV (Excluding mask-related sales)Unit: million yenYoY：109%YoY：113%QuarterFull-yearYoY：118%3,1333,1363,1873,9853,7593,8673,5224,2312,5153,9853,7593,8673,52213,2163,1873,1363,1332,5158,9984,23115,6071,1224QFY201QFY216042Q2793Q1964Q1871QFY221202Q803Q714Q4QFY201QFY21Mask-related distributionOther distribution2Q3Q4Q2Q3Q4QFY20FY21FY221QFY22Copyright ©2022 CREEMA LTD.PAGE14[Ref.] Broadcasting of Creema TV commercial (2Q)Broadcasting of a Creema TV commercial also in the summer of FY22 that was continuing from those aired in the previous year-end to make the service known.Copyright ©2022 CREEMA LTD.PAGE15[Ref.] Area CC (3Q)“Area CC,” a new brand produced by Chiaki, head of Hello Circus, was put on sale on Creema.Copyright ©2022 CREEMA LTD.PAGE16[Ref.] Christmas project (4Q)During the Christmas season, a special website was set up to propose various values and to stimulate demand for creators’ works.Copyright ©2022 CREEMA LTD.PAGE17(1) Marketplace service: Trends in marketplace-related KPIsBoth the number of listings and app downloads have been steady. The transaction unit price fell temporarily due to a sudden increase in low unit-price mask-related sales in FY21, but FY22, with a significant decrease in mask-related sales, marked a new high of the transaction unit price for the full year.Number of listingsApp DLAverage transaction unit price (Japan)Unit: ten thousandYoY：119%Unit: ten thousandYoY：112%Unit：yenTransaction unit price hit a record high due to a decrease in the percentage of mask GMV1,3481,131 973 837 654 866 694 529 1,2531,120 5,086 5,110 4,948 5,2554,410 Unit price temporarily fell due to an increase in volume of low-priced mask salesFY18FY19FY20FY21FY22FY18FY19FY20FY21FY22FY18FY19FY20FY21FY22Copyright ©2022 CREEMA LTD.PAGE18(1) Marketplace: Sales trendsIn connection with GMV growth, 4Q sales were 108% YoY (excluding masks: 112%) at 414 million yen. For the full year, they were 103% YoY (excluding masks: 117%) at 1.5 billion yen, and continued to grow steadily, despite a rebound from mask demand and stay-at-home consumption in the previous fiscal year.QuarterFull-yearOverallExcluding masksOverallExcluding masksUnit: million yenYoY：108%YoY：112%YoY：103%YoY：117%4074071,531 1,577 1,531 1,313 364314402351 369312 323 314246402364351 369886 886 312323246104644QFY201QFY2128182Q 3Q 4Q 1Q2012872Q 3Q 4QFY224QFY201QFY21FY22Mask-related salesOther sales2Q 3Q 4Q 1Q2Q 3Q 4QFY20FY21FY22FY20FY21FY22Copyright ©2022 CREEMA LTD.PAGE19Reposted: Business structure and “Creema economic zone”Recent trends in platform services are covered from the next slide onward.Creator empowerment business(1) Marketplace service (Japan/Taiwan/Hong Kong) • KPIs of our business model− Registered creators 23 thousand people− Registered works− App downloads− GMV13 million items12 million DL16 billion/yearCreators(Sellers)(Work listing)TransactionRevenueTransaction fees(Purchase)PaymentUsers(Buyers)(2) Platform services(3) Event and store services(4) New service group• Internal advertising(Advertising for creators)• External advertising (Advertising for companies and local governments)• Membership services(Daily remittance service, etc.)• Events− HandMade In Japan Fes’(Tokyo Big Sight), etc. • Store− Creema Store• Crowdfunding service− Creema SPRINGS• Lesson video platform− FANTIST• Other new services in preparation, etc.Copyright ©2022 CREEMA LTD.PAGE20(2) Platform services: Main initiatives and sales trendsIn addition to the significant acceleration of orders and deliveries of items in external advertising (advertising for companiesand local governments), users of internal advertising (advertising for creators) continued to be steady. As a result, sales of the platform services for 4Q landed 146 million yen (YoY: 112%). The full-year sales landed at 561 million yen (130% YoY).Main initiativesSales trendsUnit: million yenYoY：112%YoY：130%QuarterFull-year• In external advertising(advertising for companies and local governments), collaboration projects with major manufacturers and various companies as well as support in a digital shift in the traditional craft industry continued, and orders/deliveries of local government PR projects accelerated.• In internal advertising (advertising for creators), initiatives continued to be taken in various campaigns, additions of functions, etc. to promote the use of advertising services.561 165146430 130113129118288 909095846052 1QFY20 2Q 3Q 4Q 1QFY21 2Q 3Q 4Q 1QFY22 2Q 3Q 4QFY20FY21FY22Copyright ©2022 CREEMA LTD.PAGE21[Ref.] Honda N Series, a commemorative collaboration project for the 10th anniversary of the launch of Honda N Series (4Q)A collaboration with Creema to commemorate the 10th anniversary of the launch of the Honda N Series. A space decorated with creators’ works featured four car models of the N series with special designs expressing the concept of “Life with N,” and visitors could purchase their favorite items on the spot to experience this concept for themselves.Copyright ©2022 CREEMA LTD.PAGE22[Ref.] Creema Craft Caravan Kuriyama (4Q)A variety of handmade works and sweets by creators with connections to Kuriyama Town in Hokkaido are introduced online. The appeal of Kuriyama was presented from various points of view, such as the charm of the town according to the Creema staff, interviews with creators from Kuriyama, and discussions with creators who have migrated there.Copyright ©2022 CREEMA LTD.PAGE23Reposted: Business structure and “Creema economic zone”Recent trends in the event and store services are covered from the next slide onward.Creator empowerment business(1) Marketplace service (Japan/Taiwan/Hong Kong) • KPIs of our business model− Registered creators 23 thousand people− Registered works− App downloads− GMV13 million items12 million DL16 billion/yearCreators(Sellers)(Work listing)TransactionRevenueTransaction fees(Purchase)PaymentUsers(Buyers)(2) Platform services(3) Event and store services(4) New service group• Internal advertising(Advertising for creators)• External advertising (Advertising for companies and local governments)• Membership services(Daily remittance service, etc.)• Events− HandMade In Japan Fes’(Tokyo Big Sight), etc. • Store− Creema Store• Crowdfunding service− Creema SPRINGS• Lesson video platform− FANTIST• Other new services in preparation, etc.Copyright ©2022 CREEMA LTD.PAGE24(3) Event and store services: Main initiatives and sales trendsDue to the impact of COVID-19, the number of stores was reduced to one, which is two fewer than last year. However, with the partial resumption of large events, 4Q sales were 322% YoY and full-year grew to 155%. However, the number of visitors to all large events was significantly lower than planned due to pre-emergency measures, and one scheduled large event was cancelled. As in the previous year, the negative impact from COVID-19 was significant.Main initiativesSales trends•In addition to the Creema YAMABIKO FES 2021 held in 3Q, the HandMade In Japan Fes’ was held at Tokyo Big Sight in 4Q.• However, both events overlapped with the period of pre-emergency measures.✓ Creema Craft Party, which was scheduled to take place in 3Q, was cancelled due to the state of emergency.• The number of stores was reduced from three last year to one by the end of the current fiscal year due to restricted operation from ongoing state of emergency and pre-emergency measures.Unit: million yen5941• Both events and stores showed performance improvements YoY, but plans were missed as a result of the continued negative impact of COVID-19. 1QFY20QuarterFull-year336 118116YoY：322%YoY：155%6243132 85 262419131314 1QFY21 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4QFY20FY21FY22 1QFY22Copyright ©2022 CREEMA LTD.PAGE25[Ref.] Creema YAMABIKO FES 2021 (3Q)We held Creema YAMABIKO FES 2021 last November, an outdoor music and craft festival that consisted of an outdoor concert stage to enable the audience to enjoy live music played by 12 bands with Mt. Fuji in the background; a craft town, a sauna village and outdoor areas. The festival attracted over 10,000 visitors.Copyright ©2022 CREEMA LTD.PAGE26[Ref.] HandMade In Japan Fes’ (4Q)HandMade in Japan Fes’, Japan’s largest creators’ festival, was held at Tokyo Big Sight in January 2022 amid restrictions imposed by pre-emergency measures. It had been about a year and a half since the previous event was heldCopyright ©2022 CREEMA LTD.PAGE27[Ref.] Closure of Creema Store Shinjuku (4Q)Creema Store Shinjuku had been operating in Lumine Shinjuku Lumine 2 since 2014, but was closed on January 31, 2022. Business in the store field is currently continuing with only the one store of Creema Store Sapporo situated in Sapporo Stellar Place.Closure of Creema Store ShinjukuFuture business expansion in the store field• Afterward, we will run the store business with only the one store of Creema Store Sapporo located in Sapporo Stellar Place.• Continued operation of the Sapporo store looks realistic since it is less exposed to the impact of COVID-19 than in Tokyo due to its location.• When COVID-19 comes to an end,we plan to develop operations flexibly including opening a new store in a new format by leveraging our know-how in running an offline business format.• Creema Store Shinjuku started business in 2014, but the store closed up on January 31, 2022.• We concluded that further continuation of business would be risky due to factors such as temporary closure of the tenant building, shorter business hours and a decrease in visiting customers as COVID-19 spreads.• Additionally, after we had run business in Lumine Shinjuku, which leads the trend of tenant buildings for fashion stores, for many years, we judged that the store had completed the role of being a showcase for our business.Copyright ©2022 CREEMA LTD.PAGE28Reposted: Business structure and “Creema economic zone”Recent trends in the new service group are covered from the next slide onward.Creator empowerment business(1) Marketplace service (Japan/Taiwan/Hong Kong) • KPIs of our business model− Registered creators 23 thousand people− Registered works− App downloads− GMV13 million items12 million DL16 billion/yearCreators(Sellers)(Work listing)TransactionRevenueTransaction fees(Purchase)PaymentUsers(Buyers)(2) Platform services(3) Event and store services(4) New service group• Internal advertising(Advertising for creators)• External advertising (Advertising for companies and local governments)• Membership services(Daily remittance service, etc.)• Events− HandMade In Japan Fes’(Tokyo Big Sight), etc. • Store− Creema Store• Crowdfunding service− Creema SPRINGS• Lesson video platform− FANTIST• Other new services in preparation, etc.Copyright ©2022 CREEMA LTD.PAGE29(4) New service group: “Creema SPRINGS” & “FANTIST”In our new service group, the website was relaunched in 2Q with the crowdfunding service Creema SPRINGS. In addition, the lesson video platform FANTIST, which was added through M&A, has grown steadily with more than 1,400 lesson videos.Crowdfunding：Creema SPRINGSLesson video platform: FANTISTThe Creema SPRINGS website was relaunched in August 2021, and customer base collaboration was started with the handmade marketplace Creema, while expanding the types and number of projects.We entered the EdTech field in FY22 1Q with the acquisition of FANTIST, a lesson video platform. Currently, we offer lesson videos mainly in the fields of art, handmade goods, and beauty, and the number of videos exceeds 1,400.Copyright ©2022 CREEMA LTD.PAGE30FY23 growth strategyCopyright ©2022 CREEMA LTD.PAGE31Creema’s challenges for further growthNow when both the GMV of Creema and the financial performance of the entire company have reached record highs, two strategic challenges for further growth will be increasing awareness of the handmade marketplace market and Creema and strengthening the Creema economic zone by creating new services.Current condition• Since the company’s foundation, we have led the market as a pioneer of the industry with our core service Creema, ••Japan’s first online handmade marketplace.In the FY22, the GMV of Creema exceeded 16 billion yen, a record high, further strengthening its position in the domestic market.In addition, a variety of other services that support creators’ activities have also grown, and both sales and profits have reached record highs.• We recognize that two strategic challenges for our future growth are increasing awareness of the handmade market/services and strengthening the Creema economic zone by creating new services.AIncreasing awareness of the handmade market/services✓ According to our recent survey, the market awareness of the handmade marketplace is far below that of fashion e-commerce websites, flea market apps, etc.Strategic challenges for further growth✓ Creema itself is only about 55% as well-known in Japan as its major handmade marketplace peers.✓ In this context, the GMV of Creema is one of the largest among handmade markets in Japan.✓ To put it another way, if market and service awareness improves, we can realize our huge growth potential.‒‒BStrengthening the Creema economic zone by creating new services✓ We offer a wide range of services, from an online marketplace to advertising, the event and store services, and the lesson video platform.✓ We have linked a variety of services organically to enhance the convenience of the Creema economic zone as a whole and to establish the value and superiority of the business.✓ In order to achieve non-continuous growth in the future, it is necessary to continue to create new services by utilizing our abundant strategic assets.Copyright ©2022 CREEMA LTD.PAGE32FY23 strategic policyIn order to respond to strategic challenges, we aim to further expand the Creema economic zone by simultaneously implementing the further refinement of existing businesses, while focusing on both large-scale promotional investments centered on TV commercials and the expansion and strengthening of the new service group.Strategic challengesFY23 strategic policyOverviewABIncreasing awareness of the handmade market and servicesLarge-scale promotional investments centered on TV commercialsStrengthening the Creema economic zone by creating new servicesExpansion and strengtheningof the new service group123+Further refinement of existing services•In order to raise market and service awareness, a total of 1,090 million yen, an increase of 630 million yen YoY, will be invested in a large-scale promotion centered on TV commercials.• By expanding recognition through these measures, we will expand the handmade marketplace market and gain market share in other e-commerce markets.• We will continue to invest in the already-released Creema SPRINGS and •FANTIST to expand the business in earnest.In addition to the above, we will accelerate investment in the development of the new service group using our resources, and launch new services sequentially in FY23 and beyond.• Major investments will be made in systems and the infrastructure base in FY23 to further improve the user experience for the medium- to long-term growth of our core service, Creema.Including the above, we will continue to refine the three services that are already the core of our business: marketplace, platform, and event and store services (as mentioned later).•• The combination of increased awareness and the expansion of new services will increase the value of customers in the Creema economic zone as a whole and further strengthen the value and superiority of the business.Copyright ©2022 CREEMA LTD.PAGE331Large-scale promotional investments centered on TV commercials – TAMThe current market size of the domestic handmade marketplace is 40 billion yen. The potential market size is estimated to be about 303 billion yen, so it still seems feasible to expand. It is also possible to capture a wide range of peripheral markets such as handmade materials, related media, and lesson fields.Domestic creator empowerment marketCreator empowerment market(including advertising, crowdfunding, etc.)Hobby market, including handmade(sales of materials for production of works, skills classes, media, events, etc.)Approx. 1.9 trillion yenHandmade marketplace (potential)Approx. 303 billion yenHandmade marketplace (current)Approx. 40 billion yenNote: The creator empowerment market consists of business groups that provide necessary functions and services to achieve a society in which talented people in all genres, not only handmade creators, can play an active role. The market size of the handmade marketplace (current) is calculated based on the GMV of Creema and minne from January to December 2021, assuming that the combined GMV share thereof is 80% of the total. As the value of the market size of the handmade marketplace reported in the Hobby White Paper 2018 published by the Hobby Association of Japan approximates the total GMV of Creema and minne, these two services are considered to account for the majority of the market. However, since there are similar types of multiple businesses, we conservatively assume that the total GMV of these two services is 80% of the market. The market size of the handmade marketplace (potential) is calculated by multiplying the GMV per person of Etsy, a global handmade marketplace founded in 2005 (calculated by the U.S. population of 332 million divided by the GMV of $6.95 billion in the U.S. in 2021) and the population of Japan. The figure was 303 billion yen (assuming $1 = 115 yen). The TAM is larger than that disclosed at the time of listing, but this is because the GMV scale of domestic businesses and Etsy has grown significantly in response to the spread of COVID-19, supported by mask-related demand and stay-at-home consumption, and the growth rate of the entire handmade marketplace market has increased as a result. The market size of the hobby market, including handmade products, was taken from the Hobby White Paper 2019.Source: GMO Pepabo financial materials, Etsy financial materials, Hobby White Paper 2018 and 2019Copyright ©2022 CREEMA LTD.PAGE341Large-scale promotional investments centered on TV commercials – TAM expansionThe superior design, rarity, and originality of the creators’ works give Creema a competitive advantage, and if Creema owns a category of work, it can access all categories and markets, including fashion e-commerce, interior, and e-commerce for sundries, etc., and may gain market share.Creema user type classificationConcept image of market expansibility of creators’ worksCategories offered by CreemaAccessible marketUser typeFeatures• Users who like to purchase creators’ Handmade lovers• Purchase various works from multiple workscreatorsFan bases of specific creators• Prefer the style of a specific creator, and continuously purchase works from several creatorsNeutral layer• Purchased a creator’s work because it was the best product after checking various shops• The deciding factors behind purchasing are qualities found in creators’ works but not mass-produced products, such as excellent design, rarity, and originality→ These features mean that Creema is not limited to the handmade market, but can access a wider range of markets and categoriesClothing and clothing accessories, etc.Food, beverages, and alcoholic beveragesCreemaCreemaCreemaHousehold goods, furniture, and interior……• By improving the value provided, aim to further increase participating creators and registered works from the current 230,000 and 13 million, respectively.• Also raise awareness by continuing PR planning and promotional measures.• Through these efforts, encourage customers to think of Creema when they consider purchasing products in all categories offered by Creema, and use the value provided by creators’ works to expand our market share.In order to maximize the market potential of creators’ works, it is necessary to expand the awareness of the handmade marketplace Creema, and we believe that large-scale promotional investments, including mass advertising centered on TV commercials, are essential.Copyright ©2022 CREEMA LTD.PAGE351Large-scale promotional investments centered on TV commercials – large investments to expand TAMBy making large-scale promotional investments centered on TV commercials, the company aims to expand the handmade marketplace market itself and increase the service awareness of Creema, thereby further capturing peripheral markets by leveraging the high customer value and expanded awareness of creators’ works.Large-scale promotions centered on TV commercialsIncrease in promotion expenses• High quality works that are produced by professional and semi-professional creators have an appeal beyond handmade lovers.• We intend to expand the handmade marketplace market and our market share in other peripheral markets by investing heavily in advertising centered on TV commercials.• The company plans to spend a total of 1,090 million yen, mainly on TV commercials, by increasing promotion expenses by 630 million YoY. This major investment will further accelerate the growth of the business. Unit: million yenCopyright ©2022 CREEMA LTD.PAGE362Expansion and strengthening of the new service group – Investment policy for new servicesIn parallel with the promotion strengthening, we will proceed from areas synergistic with the platform built through the creator empowerment business. After that, the competitive advantage will be further strengthened by the cooperation between old and new services, and the Creema economic zone will be expanded.“Creema economic zone” expansion processBusiness expansion through the high customer valueBuild a solid platform and a financial base through business expansionExpanding the Creema economic zone≈ Strengthening the competitive advantageCreema platform infrastructure and new services① Creator base centered on professionals and semi-professionals② A huge user base of over 20-30 million visits per month, mainly by women in their 20s to 40s③ A website / app as a medium with transmission power and community base that goes beyond “just an EC website”④ Business development ability that has created various services by utilizing the platformImproving customer value throughout the “Creema economic zone” by strengthening a collaboration between old and new servicesSequential launch of new services utilizing the platformUtilizing a highly original platform, we will actively develop new services in other areas while focusing on areas related to creator activity support.Copyright ©2022 CREEMA LTD.PAGE372Expansion and strengthening of the new service group – Strengthening policyWhile strengthening the already-released crowdfunding service Creema SPRINGS and the lesson video platform FANTIST, preparations will be made to utilize our assets in creating the new service group sequentially in FY23 and beyond.Strengthening already-released new servicesFurther creation of new servicesCrowdfunding：Creema SPRINGSLesson video platform：FANTIST• Strengthen the sales structure to ensure a • At the end of 2021, we began offering • Development and examination of various stable supply of high-quality projects on the platform.course lesson videos that systematically teach students the necessary skills.new services with high synergy with Creema is underway.• In addition, we will flexibly make use of Creema to expand the number of users in order to ensure funding for the project owners.• We will continue to expand the number of one-off lesson videos and course lesson videos, and aim to achieve a platform that attracts the most creative lesson videos in Japan.• We will continue to invest in launching new services sequentially in FY23 and beyond.Copyright ©2022 CREEMA LTD.PAGE382Expansion and strengthening of the new service group – Concept image of enhancementIn FY22, we made our much-awaited entry into the EdTech field. In FY23 and beyond, at least one new service will be released in each fiscal year, and the value of the Creema economic zone as a whole will be enhanced through the introduction of multi-layer services.Before FY20Starting with the C2C marketplace, formed the basis of the creator empowerment business.PastFY21FY22FY23After FY24FutureReleased the crowdfunding service Creema SPRINGS to help creators get funding.Entered the EdTech field with the acquisition of the lesson video platform FANTIST.Planning to release a new service utilizing our strategic assets.Planning to release a large-scale service to support creators.New Service (1)Lesson video platformCrowdfundingAd network (Internal advertising)Media (External advertising)New Service (2)New Service (1)Lesson video platformCrowdfundingAd network (Internal advertising)Media (External advertising)Offline Biz (Event and store services)Offline Biz (Event and store services)Lesson video platformCrowdfundingAd network (Internal advertising)Media (External advertising)Offline Biz (Event and store services)C to C MarketplaceC to C MarketplaceC to C MarketplaceC to C MarketplaceAd network (Internal advertising)Media (External advertising)Offline Biz (Event and store services)C to C MarketplaceCrowdfundingAd network (Internal advertising)Media (External advertising)Offline Biz (Event and store services)Copyright ©2022 CREEMA LTD.PAGE393Further refinement of existing servicesWhile focusing on the aforementioned large-scale promotional investments centered on TV commercials and the expansion and strengthening of the new service group, we will also invest in large-scale systems and infrastructure to further improve the user experience, and aim for further growth by refining services in the three existing fields.Marketplace servicePlatform servicesEvent and store services••Increase awareness and strengthen the user base through large promotions, including the aforementioned TV commercials.• Maximize user satisfaction through product refinement, including improved search functions and UI.Implement large-scale system and infrastructure investments to ensure stable service operations and improve user experience over the medium to long term.• For external advertising, we will strengthen receiving orders for projects to revitalize regional economies, which continue to grow year by year, and for collaboration projects that only we can implement.• For internal advertising, we will achieve further growth by expanding the number of users and improving the effectiveness through refining the UI and logic.• For the store service, we will rebuild Creema Store Sapporo in light of the easing of the COVID-19 pandemic.• For events, this year’s HandMade In Japan Fes’ and Creema YAMABIKO FES will be returned to their normal scale. At the same time, we will continue to stimulate excitement in the Japanese creative scene with a view to launching more new events.Copyright ©2022 CREEMA LTD.PAGE40FY23 earnings forecastsCopyright ©2022 CREEMA LTD.PAGE41For FY23, we aim to achieve a 119% YoY growth in Creema’s GMV, exceeding 19.1 billion yen.GMV Forecast in FY23Unit: ten million yenSurging demand for mask-related products and stay-at-home consumption led to significant growthSteady growth despite a rebound from the surge in mask demand in the previous fiscal year15,41916,0678,998YoY：119%Implement various measures, including large-scale promotions, to accelerate growth in FY23 and beyond19,169FY20(Results)FY21(Results)FY22(Results)FY23(Forecast)FY24(Forecast)FY25(Forecast)Copyright ©2022 CREEMA LTD.PAGE42Consolidated sales forecast in FY23In addition to strong growth in the sales of the online service group such as marketplace and platform services through large-scale promotions and various measures, based on the certain recovery of large events, sales for FY23 are projected at 2.8 billion yen, representing 125% YoY growth.Unit: million yen1,517 YoY：125%2,8722,062 2,294 FY20(Results)FY21(Results)FY23(Results)FY23(Forecast)FY24(Forecast)FY25(Forecast)Copyright ©2022 CREEMA LTD.PAGE43Forecast of consolidated SG&A expenses for FY23In addition to large-scale promotion investment, including mass advertising, and temporary expansion of system and infrastructure investment for medium- to long-term growth, personnel and outsourcing expenses for creating new businesses for the purpose of multi-layer services will increase.Unit: million yen：Others：Promotion expenses：Outsourcing expenses：Personnel expenses1,357611 322 67355 1,8311,897789 522 79439864 460 914812,6556491,090275638Large-scale promotional investments centered on TV commercials led to a significant YoY increase in promotion expenses.Partial temporary increases in outsourcing and personnel expenses due to the expansion and strengthening of the new service group and an increase in investment in existing systems and infrastructure for medium- to long-term growth.FY20(Results)FY21(Results)FY22(Results)FY23(Forecast)FY24(Forecast)FY25(Forecast)Copyright ©2022 CREEMA LTD.PAGE44Forecast of consolidated operating income for FY23For FY23, operating income will be 144% YoY, or 465 million yen, if investment is kept at the normal level. However, in order tomake major investments in the aforementioned large-scale promotion, development investment, new business development, etc., we plan to land at -447 million yen. We aim to maximize medium- to long-term growth and cash flow generation capacity by making major investment during this period.Unit: million yenYoY：144%YoY：143%226322465FY21 (Results)FY22 (Results)FY23 (Forecast)Before reflecting theinvestment amountIf the normal level of investment is maintained, operating income for the FY23 will grow 144% YoY at 465 million yen.Major investments to grow existing businesses, including Creema.• Temporary increase in advertising expenses, including TV commercials• Temporary increase in large-scale system and infrastructure investments to ensure stable service operations and improve user experience over the medium to long term602Large-scale investment to expand and strengthen the new service group.• Temporary increase in personnel and outsourcing expensesFY23 (Forecast)After reflecting theinvestment amount310-447In order to maximize medium- to long-term growth and cash flow generation capacity, operating income for FY23 will be set at a deficit of 447 million yen due to major investments.Copyright ©2022 CREEMA LTD.PAGE45Summary of FY23 earnings forecastWe aim to achieve FY23 sales of 2.8 billion yen, which is 125% YoY. In line with the implementation of large-scale strategic investments, all profit items below operating income for the next fiscal year will be temporarily in the red. Through this large-scale growth investment, we hope to gain a foothold in further growth in the future.Company-wide earnings forecastsSales forecasts by major servicesUnit: million yen(Ref.) FY22SalesSales costGross profitSG&AOperating profitOrdinary profitNet income2,294742,2191,897322363230FY232,872 663 2,208 2,655-447-454-376Unit: million yenMarketplaceContinued strong growth from the previous yearApplication of new revenue recognition standards (see below)140%Strengthening upfront investment for future growthPlatformEvent and storeYoY125%887%99%-769-818-6061,867YoY：118%676YoY：120%252YoY：190%New service group75YoY：329%Copyright ©2022 CREEMA LTD.PAGE46Effect of the application of new revenue recognition standardsBeginning in FY23, we will incorporate a portion of SG&A expenses into sales and sales cost due to the application of the new revenue recognition standards. As a result, the sales cost will explode, but it will only shift from SG&A expenses as follows, with no effect whatsoever on our business profitability.Major changes due to the application of new revenue recognition standardsEffect of application on financial figuresSG&A• Part of the transfer fee, which was previously treated as negative processing of the payment fee, is included in sales as a consideration for our provision of services.• Settlement and payment fees are included in the cost.• As a result, SG&A decreased by 492 million yen compared to before the application.Salessales.the application.• The negative processing of the payment fee for SG&A is included in • As a result, sales increased by 37 million yen compared to before Sales cost• Settlement and payment fees for SG&A are included in the cost.• As a result, cost increased by 529 million yen compared to before the application.Gross profit• Gross profit decreased by 492 million yen compared to before the application due to an increase of 37 million yen in sales and an increase of 529 million yen in costs.Copyright ©2022 CREEMA LTD.PAGE47Our policy on ESGWe will continue to work on various ESG issues in order to realize a fair society in which talents and abilities are duly evaluated and people can live and work in their own way.Bring about a fair society where talented peopleand hard workers are justly appreciated• The word “Creema” was created from the term “Creators’ New Market” in pursuit of the mission to build a fair world where genuinely good products will not go unnoticed.• Creema is making trailblazing efforts to bring about a fair society where the talents and abilities of people are justly evaluated and people can be living and working in their own way in a world of creation where talent and hard work do not directly lead to opportunities and appreciation.Regional revitalization and development through producing goods• Collaboration between quality materials and creators with unique creativity from across the country “Nationwide Discovery of Fantastic Goods” is ongoing with the aim of regional development by introducing the attractions of places via the craftworks of creators.• Additionally, we are working on regional revitalization and development pivoting on producing goods through measures such as Creema Craft Caravan, in which we visit towns with the theme of producing goods across the country and open a market with local citizens.Copyright ©2022 CREEMA LTD.PAGE48[Ref.] Case studies on ESG initiativesWe commercialized 25 upcycled items by inviting Creema creators to come up with craftworks using selvedge (cloth edges), which is industrial waste from the weaving process of Enshu textile, a local industry of the Enshu region, Shizuoka Prefecture. Going forward, we will remain determined to bring about a sustainable world where the power of producing goods creates new value from waste.Copyright ©2022 CREEMA LTD.PAGE49ESGに係る当社取り組み事例静岡県・遠州地方の地場産業である「遠州織物」の製織工程で生じる産業廃棄物 「布耳（繊維くず）」を用いた作品を「Creema」クリエイターから募集し、アップサイクル作品25点を商品化しました。今後も「ものづくりの力によって廃材に新たな価値を生み出す」といったサステナブルな世界の実現を目指します。AppendixCopyright ©2022 CREEMA LTD.PAGE50[Ref.] Take rate trendsIn FY21, GMV increased due to the spread of COVID-19, but the sales of the event and store services fell sharply, resulting in a significant decrease in the take rate. FY22 is on a recovery trend with continued stable platform growth and some recovery for the event and store services. In FY23 and beyond, the take rate will gradually improve as the new service group is added sequentially in addition to the stable growth of platform and the event and store services.16.9%14.6%12.4%13.4%14.3%As the effects of COVID-19 gradually ease, the take rate has been increasingly improving to the level it should be. The take rate temporarily declined due to a significant decline in sales of the event and store services and a significant growth in GMV.FY18(Results)FY19(Results)FY20(Results)FY21(Results)FY22(Results)FY23(Forecast)FY24(Forecast)Note: The take rate is calculated using the GMV of the marketplace service as the denominator and the sales of all services as the numerator.Copyright ©2022 CREEMA LTD.PAGE51Changes in the number of employees (including part-time employees)There has been no significant change in the number of employees in the past year.Unit: people757998101959394959610010296 1QFY20 1QFY21 2Q 3Q 4Q 2Q 3Q 4Q 2Q 3Q 4Q 1QFY22Note: Employees are the total of regular employees, contract employees, and part-time employees, excluding executives.Copyright ©2022 CREEMA LTD.PAGE52