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Good morning.

 

We will soon begin the investor & media conference call on Naver’s acquisition of Poshmark.

Naver’s management team will present first before moving on to the Q and A.

 

For the benefit of participants, simultaneous interpretation will be provided for the presentation, while Q&A will be conducted through consecutive interpretation.

 

With that, I invite Naver.

 

Good morning, I’m Agnus Park from the Corporate Finance Department.

Thank you to investors for joining the conference call on Naver’s acquisition of Poshmark.

With me today are CEO Soo-Yeon Choi and CFO Namsun Kim from Naver, and Founder & CEO of Poshmark.

 

Before we begin, I'd like to remind everyone that statements made during this call, that are not historical facts, are considered forward-looking statements under U.S. Federal Securities laws. These forward-looking statements are based on the beliefs of the management teams, as well as assumptions made by and information currently available to us.

A full declaration regarding forward-looking statements, and additional important legal information, are available at the beginning of the accompanying presentation and should be read in conjunction with the call.

 

Following the presentation by the two Naver executives, there will be a brief remark by CEO of Poshmark, after which we will have the Q&A.

We have uploaded relevant documents on our website, so feel free to refer to them at your convenience, and please note that this conference call can also be replayed on our website.  

With that I invite CEO Soo-Yeon Choi.

 

 

Good morning. I am Soo-Yeon Choi, the CEO.

 

Based on our Board of Directors’ resolution dated October third, Naver has decided to acquire 100% stake in Poshmark, North America’s biggest C2C fashion community platform.

 

We’ve been thinking long and hard about Naver’s commerce strategy, closely following the development of the global commerce market. In light of the circular economy, and Naver’s steadfast efforts on expanding the asset light commerce strategy, we decided that C2C Commerce will be an attractive driver for Naver’s new growth.

 

In addition, within commerce, fashion specialized verticals are growing the fastest in Korea and abroad. In Korea, it already accounts for 15% of the commerce market.

 

This acquisition is not only going to power Naver, Korea’s biggest e-commerce platform, to gain a position at the forefront of fast-evolving vertical fashion and global C2C market in a short period of time, but will also be an important foothold in creating the ‘re-fashion’ community, connecting Commerce with “Social”.

 

Upon close of the strategic acquisition, Naver will closely collaborate with Poshmark across technology and business areas, so as to maximize synergy creation. We are painting a big picture around building a new retail format called “Community Commerce” which only Naver can bring to light on the global market. We will make the leap as world’s best fashion C2C platform, while showcasing fun, new and innovative services, to elevate “Team Naver’s” global standing and recognition. 

 

I will now turn it over to CFO Namsun Kim, for further elaboration. 

 

Good morning. This is CFO Namsun Kim. Let me first run through the deal structure.

 

Naver is planning to acquire 100% of Poshmark for 17.9 dollars per share or an enterprise value of 1.2 billion dollars. When taking into consideration Poshmark’s cash balance of around 500 million dollars, the acquisition represents around 1.6 billion dollars.

We expect closing to take place by Q1 next year, and foresee no particular issues in gaining the required approval from KFTC.

The deal is not a tender offer, but a merger between Naver’s newly established SPC and Poshmark, and we gained voting support from major Poshmark shareholders representing close of 80% of voting power, which is above the required quorum for the merger. 

This deal is 100% cash transaction, where Naver will use its cash balance and available debt and we also plan to do securitization of a portion of invested assets, that have not yet brought much of strategic value or supported rise in share price.

Also, pursuant to US commercial code, Poshmark’s 500 million dollars cash can also be used as part of the fund for acquisition.

 

Upon completion of the acquisition, Poshmark will become Naver’s US subsidiary, while the same management team, including the CEO, who have led the growth so far, and the same brand and business identity will be retained, as it expands its business reach.

 

Naver encourages Poshmark’s current structure, while both companies will closely communicate on major decision items, as we seek to find ways to maximize synergies. 

 

Underpinned by the world’s top-notch search technology, Naver is the only global company that successfully advanced into, and drove rapid growth from Commerce.

 

Poshmark on the other hand, is a strong social community-based platform, where we see continuous influx of users, who communicate and create mutual lock-ins; where repetitive buying and consumption takes place. And it enjoys the number 1 position in the world’s biggest market, which is North America.

 

This acquisition will bring to Poshmark, Naver’s technological prowess including AI, Machine Learning, Live Commerce and Smart Lens, powering the next phase of growth for Poshmark.  

 

Both companies have a shared set of values and vision, which are Content, Community and Empowerment.

 

In terms of Content, Naver created “Blogs” signaling the beginning of online communities in Korea, and over the past 2 decades we have gained strategic operational knowhow as a builder of “large communities.”

 

In digital content also, we created the world’s biggest webtoon platform, and in 2021 acquired the largest storytelling platform in North America, Wattpad, gaining the basis for global exposure.

 

Poshmark is where not only K-Fashion, but other unique style and fashion-related contents are continuously created; and with a trendy social feature enough to excite the Millennials and Gen-Z, was a true pioneer in creating a business model that powers organic expansion of the ecosystem between users and sellers.

 

Secondly, both companies have a lot in common as “Community Builders.” Naver is by far Korea’s biggest online community, with 36 million DAUs (daily active users).  Not just the Blogs, which I mentioned, but we successfully expanded into Naver Café, Band, and other large communities including Zepeto, second largest metaverse app globally; and K-Pop fandom community Weverse, which is jointly owned with BTS’ management company Hybe Entertainment. These are all community-based services born within the Naver entity. 

 

Poshmark is a platform where around 40 million users across North America spend more than 25 minutes of their day having fun, and like SNSs, through sharing, likes and postings of one’s own items, [user stickiness is very high user activity metrics in terms of interactions within micro communities and sharing taste/interest is rising.

 

Lastly on empowerment, in Korea, Naver provides smart store solutions that help small merchants start-up their e-commerce business. And Naver Webtoon was a pioneer in democratizing creation, allowing anyone to be a creator. 

 

To nurture the ecosystem of Smart Store entrepreneurs, we will maintain industry’s reasonable fee structure; and offer variety of technology solutions for Live Commerce, membership management and marketing tools, and solutions that enable fastest payment cycle globally.

Through the Canvas platform, Naver Webtoon fosters amateur creators, offering tools that creators can use most easily and efficiently, within the Naver ecosystem. 

 

Poshmark is also empowering users including any individual, influencers and brands enabling them to easily and safely list and sell what’s in their closet, thereby making a social impact,

This is well aligned with the company’s philosophy and vision of socially responsible and sustainable commerce.

 

Next I will introduce Poshmark and Naver in more detail.

 

Poshmark, based on its strong “social” function, is the largest C2C platform in North America

with the potential to grow into a differentiated and mega-size community.

 

As the No. 1 fashion C2C platform in the US, 80% of the approximately 40 million annual users are Gen Z and Millennials. Gen Z and Millennials who enjoy discovering influencers and individual posts; and engage through micro communities with others with similar taste and interests.
As a result, Poshmark enjoys high user stickiness and a significantly higher purchase conversion rate than other e-commerce platforms.

 

Around half of buyers become sellers, while half of the sellers become a buyer thus, creating an interactive virtuous cycle. Moreover, more and more individual sellers are growing into professional sellers. The ticket price per customer is growing, and categories continue to expand, which is also encouraging.

 

Now, let me briefly touch upon some of Poshmark’s key metrics.

 

Across North America, Poshmark has a roughly 40 million, dominant active user base, led by Gen Z and Millennials.

 

Poshmark’s active buyers and sellers stood at 8 million and 4.5 million respectively. 52% of buyers became a seller in 5 years, while 48% of sellers used earnings to buy, thus, creating an interactive virtuous cycle.

 

As of 2021, gross merchandise volume was 1.8 billion dollars, up 27% yoy, and revenue was 326 million, an increase of 24% yoy. In terms of both GMV and revenue, the Company has posted a high CAGR of 25% during the past 3 years.

 

Based on its asset-light business model, even during COVID, the Company was able to maintain a positive EBITDA margin.

 

Poshmark’s take rate is around 20%, with no additional listing, payment or authentication fees required, which is a simple and intuitive business model. Shipping is fast and provided at a flat rate regardless of weight, resulting in a competitive delivery system against its rivals.

 

Naver will be able to enjoy the No. 1 position in the fashion category for the North American re-commerce market, which is expected to grow at CAGR of 20%. In addition, the deal is also an important step on the path to achieving a sustainable economy and implementing Naver’s ESG management philosophy.

 

By following sellers with similar tastes or engaging in community activity, users accumulate social experiences, which creates a patch to discovering personal taste much stronger than any personalized algorithm. Based on these “social graphs,” we believe new retail formats can created.

 

Moreover, Naver’s leading AI search and live commerce technology will enable Poshmark buyers and sellers to enjoy a more simplified, yet rich shopping experience.

 

In particular, live commerce will not be just a simple sales tool, but a new format that can further enhance the social nature of Poshmark.

 

It can evolve into a wide variety of formats, so that not only will sellers be able to sell clothes in their own closet; but more experienced influencer sellers would be able to sell items on behalf of other users; or multiple sellers would be able to co-host live shows.

 

Through this deal, Naver’s commerce business will grow in dimension and scope from Naver’s search-based shopping driven by users with specific purchase intentions, to include discovery or browsing based activities led by Millennials and Gen Z, which motivates shopping.

 

In addition, by adding more segmented apparel/lifestyle categories, we hope the platform will grow into a micro community based social ecosystem supported by casual and immediate interaction on recent trends.

 

Lastly, let me go over the financial synergies and cost efficiencies that we expect from this deal.

 

Based on Poshmark’s asset-light business model that can enable it to generate high margins, for the next 3 years, the target is to achieve a revenue CAGR of 20% and record positive EBITDA, on an adjusted basis, margins in 2024.

 

Recently, changes in the iOS privacy policy, and normalization of the new buyer cohort that was exceptionally high during COVID, has led to a slowdown in top-line growth. But a business strategy focused on user retention and re-activation, live commerce synergies, and new profit sources, such as high-margin ads, are expected to not only improve the top-line, but also contribute the better profitability.

  

In terms of operational efficiencies, absence of US listing maintenance expenses, rationalization of overlapping R&D resources and headcount, and savings on IT, such as by using live commerce and search, are expected to result in a cost savings of around 30 million dollars per year.

 

Finally, the combination of Naver and Poshmark marks the creation of a re-commerce platform with the widest reach around the globe.

 

With Poshmark Naver will become the No.1 player in the fashion re-commerce market in the US, which is the largest market in the world.
 

We will fully support Poshmark’s endeavors into Europe, including the UK. With Naver, Poshmark will gain a foothold to make inroads into the advanced Asia market, including Korea and Japan.

 

This ends the presentation by Naver’s management on the acquisition of Poshmark.

 

We would like to invite Manish Chandra, the CEO and founder of Poshmark for his brief remarks.

 

Thank you. It’s an honor to be here today and to share this milestone with all of you. We started the company in 2011 with my co-founders Tracey, Chetan and Gautam, and our mission from day 1 was to put people at the heart of commerce.

 

We looked at a future where we really want to empower anybody with a closet to turn their closet into a shop to buy and sell, connecting and empowering everybody people and take the journey to entrepreneurship. Today we have over 80M registered users at Poshmark that span the US, Canada, Australia, and India. We really were able to engage in community and what is exciting for us in partnership with Naver, is that we can make this community become even more global, and grow it even further and faster, as we combine forces.

 

What we are really excited about the partnership, is the depth of Naver’s technology presence, particularly around live selling, search, machine learning/AI. But ultimately what solidified our decision to move forward, was our shared visions, shared values, and shared mission. We all prioritize people and focus on people, combined with empowering them with technology, and really focus on community. And its ultimately, who we serve is our community and our shared mission got us together, it is really exciting day for all of us, and we think it of it as a new phase of growth for Poshmark and Naver together.

 

This concludes the presentation on the Poshmark acquisition by Naver management. We will now ask the operator to start with Q&A session.

 

 

Web Casting Playback:

▪ Korean : https://irsvc.teletogether.com/naver/naver20221004_kor.php

▪ English : https://irsvc.teletogether.com/naver/naver20221004_eng.php