Rakuten Stock

[Interpreted] Thank you very much for joining us at Rakuten Group's FY 2026 second quarter consolidated financial results. So already the flash report of the summary of the financial report has been disclosed half past 3 this afternoon. Please refer to the content from the Investors information page on the corporate website. [Operator Instructions]

So I'd like to invite Mr. Mikitani for the presentation.

[Interpreted] Hello, everyone. So first of all, the effect of the 2026, those families and individuals that has been affected, we would like to offer a heartfelt support. And 2 weeks before the earthquake, in fact, I was in Kumamoto, I visited AEON Mall as well, who had been severely struck by the earthquake. And those people who have difficulties and deceased, at Rakuten Group, we would like to do everything that we can. So we'd like to offer heartfelt support and also [indiscernible] to that.

So in terms of the topic today, this will be the summary. So number one, in summary and FinTech business reorganization and segment result. And in finance, CFO, Kaga-san, will be presenting. AI Chief AI Officer, Data Officer, Ting Cai, will be presenting this section. So without further ado, the summary, Rakuten Group this second quarter.

In terms of the net income, we were able to achieve positive by amount of JPY 27.3 billion. Mobile business is a big challenge that we have executed, and that is a growth driver for us. In between the meantime, since Q2 of 2020, we have been able to enjoy the positive result. So reflective of that, so in 8 years -- 6 years, it says, but this is not only a one-off, but this needs to be a perpetuating result that we would like to achieve on the coming years.

In the consolidated revenue, the record high of JPY 665.5 billion. With the size of our business year-on-year, 11.6% growth. So we have been able to grow our business quite steadily. Each segment, all of them are on a growth trajectory. And also in term of consolidated EBITDA is a record high for second quarter, JPY 115.3 billion. Year-on-year, it's a growth by 11.7% in terms of the growth rate. And non-GAAP operating income is, again, AML service, this is a record high, JPY 42 billion. So again, year-on-year, it's 109.6%, roughly 110% increase over this year.

And with that being said, this is regarding the FinTech business. So Rakuten's FinTech business, bank securities and card and although this was not included this time, insurance and Rakuten Point Card or Rakuten Payment, we do have these entities. And respectively, they are top leaders within each industry, we believe. So regarding card, shopping GTV, JPY 27.7 trillion, that's second quarter result, so amazing result. And for digital bank, Rakuten Bank, the number of accounts, 18.46 million accounts. So very soon, we will be achieving 20 million mark. And for Rakuten Securities, general accounts, 14.39 million accounts.

We're #1 in the industry. So this has industry-leading growth and overwhelming customer base. So these 3 companies basically will be under the umbrella of Rakuten Bank. So for the details, we would like to talk about this later, but we do believe there are 2 major synergies, straightforward financial synergies. That's one. And from a marketing perspective, maximizing individual customer base. So cross use of customers or acquire new customers. So we do believe that there will be significant synergies that could be generated. So the total impact 2029 -- 2028. So actually, in October, we will integrate, which means that full year will be fiscal year ending March '28.

So that's JPY 25 billion approximately in financial impact and JPY 8 billion in terms of the marketing impact. And furthermore, with this growth for March 2030, JPY 85 billion of synergy effect presumably can be gained. So going forward, Rakuten Bank, the synergy with Rakuten Securities, we will be able to leverage their capabilities. And like I said, the number of accounts, Rakuten Bank, 18.46 million. And for Rakuten Card, overwhelmingly, the number of cards is extremely high. So we will be able to refer customers and Rakuten Card and Rakuten Securities with NISA, it is leading the young customer base.

So there, once again, will be synergy. So what kind of synergies, Rakuten Card, non-transfer of bank and those people with bank transfer at Rakuten Bank, the direct debit, the deposit amount is 4.3x. And with and without Money Bridge, that's 4.4x difference. So as we move into the world with interest rate, how can we go about opening more accounts and have our customers deposit their balance in those accounts. So these will challenge us. So we believe that there will be a lot of benefits that we can gain from consolidating integration. So card bank securities will be integrated. We want to increase the deposit and also diversify the portfolio. And not just these 3 entities, but synergy with Rakuten Group can be generated. So through Rakuten Payment, this fintech ecosystem and Rakuten Group e-commerce. So we will be connecting the two ecosystems.

And moving on to by segment results. So the Internet Service segment, in terms of the business results for the second quarter, revenue is JPY 338.1 billion and year-on-year is plus by 4.2%. And with AI utilization and other levers, non-GAAP operating income year-on-year is 68.6% increase, so JPY 23.1 billion. So looking into the breakdown in content, the domestic EC GMS, it's year-on-year, it 5.3% increase there by JPY 1.5 trillion. Rakuten Travel, GTV is 17.2% increase. The investment, again, plus by 17.6% for realizing IRR. And International is also a very robust business growth. Especially, it could be highlighted to the sense that advertising revenue year-on-year is JPY 65.6 billion.

So data and AI, Rakuten Mobile, DPI Data inclusive, we are able to enjoy a great amount of momentum in growth. And if I may reiterate, GMS is, as you can see, is increasing. And at the same time, the revenue is plus by 5.3%. So non-GAAP operating profit is 30.8% positive. So the AI, how this could be well leveraged and utilized. Without AI, we will not be able to grow our business. So with that being said, AI, we are putting a lot of emphasis on AI.

But one of the examples I'd like to share with you is that we are promoting and developing AI shop manager, allow me to introduce the shop manager. So with Rakuten and Amazon, the biggest difference is that Rakuten is based on brick-and-mortar stores and the store is the basis. So in other words, the human touch shopping experience that we'll be able to offer. At the same time, in terms of hospitality, we like to offer the sense of Omotenashi and hospitality from Japan. The true real store managers, 24/7 or serving a few tens of thousands of customers at the same time is not feasible. So the shop manager, the personality or the store characteristics or the product characteristics, having deep understanding of that, AI shop manager will be able to provide service 24/7.

So I think you're running a video of this AI shop manager.

[Presentation]

[Interpreted] So within this year, we're going to launch the service, and we're now extending our effort for the further development.

Next, I would like to highlight about the Rakuten Travel business. So again, it's a robust growth that we are enjoying. In terms of year-on-year, it's 17.2% in terms of GTV. So the domestic is 10% growth year-on-year. So again, a very robust growth. And on top of that, global related, we have 78.5% year-on-year. Especially in terms of Rakuten Travel Exchange, we have been holding the wholesaler distribution in terms of the room accommodation inventory, the various countries. The effective, of course, travel services, we're going to connect them all.

So we have 1,295 companies, the service companies, connected to Rakuten Travel Exchange. And the sales of that is increasing and the transaction value is increasing. So that is the reason for the growth of the gross transaction value. And outside of that, the investments that are being made, we are working hard in order to improve the profitability of the business. Last year, the second quarter compared to that is a growth by JPY 3.3 billion, the improvement of the losses.

And the international department, well, Rakuten France marketplace, they have worked hard, but they have not been able to achieve the ambitious goal. So we are unfortunately closing down this operation, and that is something that we decided. So the growth is the 3.9% growth, non-GAAP operating increase, a slight decline, but it's showing a very robust foundation of growth.

Viber, Viki, Rakuten Kobo and also U.S. Rakuten [indiscernible]. These are increasing their profitability steadily. And already mentioned earlier, the ad business, this is in fact, very -- showing a very healthy strong growth. And this quarter, [indiscernible] is 15.6% positive year-on-year. So JPY 65.6 billion basis, we will now be able to seek JPY 300 billion, excuse me. And AI utilization, for instance, in terms of content creative, the creation of that. So in terms of banner static image and video ad, we are going to offer that.

At the same time, massive amount of, of course, transactions and inspection, performance and bidding, everything is going to be leveraging AI capability. At the same time, based on Rakuten's customer database, we are going to effectively use the targeting ad.

Moving on to the FinTech segment. Revenue and income, revenue, JPY 295.4 billion. So very robust, year-on-year 25% increase. Non-GAAP operating income, JPY 69.2 billion, year-on-year, 60.1% increase. So Rakuten Card GTV, plus 9.4%, so that's JPY 7.1 trillion. Rakuten Bank account, 18.46 million and bank deposits, JPY 13.3 trillion. So deposit, of course, it's very competitive to gain deposits, but it grew by 13.9% year-on-year and securities general account, 14.39 million, 14.5% growth. So especially young people are opening accounts, NISA accounts.

In July, we surpassed 8 million, growing by more than 20% year-on-year and assets under custody, a plus 48.3% year-on-year basis, so a total of JPY 58.7 trillion. So for Rakuten Card, the number of cards are growing nicely. So shopping GTV and financial expense is going up. But with a reorganization of our financial businesses, we will be able to minimize the downside expense. And operating income since we're controlling. So non-GAAP operating income is plus 16.2%. So 17.4% was the result for Q2.

For Rakuten Bank, we made financial result announcements already. Interest rate is going up. And given this backdrop, we are growing nicely. ordinary revenue, JPY 78.4 billion; ordinary profit, JPY 30.2 billion, 26.1% year-on-year and capital adequacy ratio, 11.4%; ROE, 22%; accounts, 18.4 million.

Main accounts, the ratio. Well, the main accounts increased by 7.7%. It's now JPY 6 million. So main account ratio is improving and deposits grew by 13.9% and expense ratio coming down. So our activities are materializing. And for Rakuten Securities, especially with new NISA, we are gaining new accounts. It is growing, the number of accounts, it is growing and surpassing 15 million. And operating revenue as well as operating income, very robust, especially operating income under Japanese GAAP, it grew by 2.4x or more.

And what's more is assets under custody. It has exceeded JPY 60 trillion. A very steady, very stable performance is being achieved. Stock flow revenue, you can see the ratio here. The stock ratio is going up over the past quarters. And now insurance business is not included in this reorg, but very steady. We are honestly saying, revamping this business.

So revenue and income, revenue is JPY 20.7 billion and operating income, JPY 1.5 billion. So we are generating profits. And going forward, we believe that we will be able to generate more profit. And for Rakuten Payment, JPY 29.1 billion of revenue, plus 12.2% year-on-year and non-GAAP operating income, JPY 3.2 billion and year-on-year, it is close to 80% plus. So we have been working with different partners. As you know, the other day, we announced with FamilyMart, we've started SPU eligible services. If you spend more than JPY 3,000 or more per month, then you can earn points, plus 0.5% times.

And now with mobile segment. In terms of revenue, is JPY 121.4 billion. So year-on-year is positive by 8.3%. Non-GAAP operating income is an improvement by JPY 4.1 billion. But EBITDA, well, year-on-year is minus 28.4%. But in segment, for one thing, is the [indiscernible], the energy crisis, the Rakuten Electricity, the energy price has gone up. That is the main reason for that. And also pre-marketing cash flow. In other words, the new acquisition, what would happen without the new acquisition is a scenario. Already JPY 28 billion profit is being generated. So yes, this is positive by 11.8%.

So mobile, of course, accounts, it is going to achieve 10.8 million. And of course, the churn rate is going down. ARPU is also gradually going up steadily. Rakuten Symphony, so the number of customers and the number of partners are also on the growth trajectory. And Mobile, in the business, specifically, if I can allude on that, so 11.9% revenue, non-GAAP operating income is an improvement by JPY 6.7 billion. So it's in [indiscernible] with JPY 32.3 billion. But as I said, the pre-marketing cash flow, it is JPY 27.1 billion.

So in terms of the number of outlets is increasing, the marketing is quite active. So with that, including all that, there is a major contribution in terms of the profitability of our business. And also in terms of March and April, the peak competitive season after that, gradually, we are still on a rise and on an increase. So -- and churn rate, again, the hopping, the targeting, the point accumulation, those customers, we have been able to contain that. So therefore, the churn rate compared -- it was 1.38% for the second quarter. So we have seen improvement in this area.

So data usage has been growing nicely as well, ARPU as well. So going forward, the options, is an area that we also want to grow. Data usage, like I said, is growing. So 20 gigabyte plus users ratio share expanded plus 3.6 points -- percentage points. So network needs to be put in place. So as we initially planned, we will make investment of JPY 200 billion. And 5G construction has been more or less completed in this area. And also for Tokyo Metro, we only had 5 megahertz, but we'll be growing to 20 megahertz bandwidth expansion.

And as you may know, with Ministry of Internal Affairs and Communications, creating Japan Low Earth Orbit Satellite Communication. So as indirect subsidy operator, we have been selected. So our investment is JPY 248 billion. We will be receiving -- we would like to contribute toward resilience that maintains domestic communications infrastructure.

Now regarding the e-finance, last week, there was a comment from KDDI. So I would like to comment regarding roaming. First and foremost, Rakuten Mobile business, we have had roaming contract with KDDI. And we started the whole business with that and the main goal was NTT's dominance. We wanted to shift from that situation so that we can democratize telecommunication. And KDDI had supported our goal, and we were very grateful for that. So based on the contract with KDDI, we have come thus far. And first of all, we have the coverage based on the contract, we will continue on from October and onwards. Where Rakuten does not have a coverage, the roaming will be reduced gradually. So that will be the approach we will be taking.

I will stop here. Thank you.

[Interpreted] Thank you for your kind participation. So I would like to report on the finance. So first of all, in terms of the summary of the second quarter non-GAAP operating income was JPY 42 billion. IFRS operating income was JPY 20 billion after recording one-off item, including impairment losses on fixed assets in the logistics business. This represents more than double the figure of the same period last year. Since the one-off items are noncash accounting item, we believe the group's underlying capacity to generate cash is steadily increasing.

In addition to that, income before tax was positive mentioned by Mr. Mikitani, the fourth consecutive quarter since the third quarter of last year, we have been able to achieve positive. And furthermore, I would like to explain later, but the reversal of tax expenses arose in connection with the sales of shares we held. And as a result, quarterly net income attributable to owners of the parent returned to profit for the first time in 6 years since the second quarter of 2020.

Regarding the one-off item I just mentioned, in the second quarter, we recorded JPY 17 billion of impairment losses on fixed assets and related items in the logistics business. The impairment resulted from the decision following discussion with the counterparty of our warehouse leasing service to terminate that service and convert the warehouse to our own use. Together with impairment recorded in fiscal 2025 on warehouse, in the online supermarket logistics business, we have now impaired the entire book value of our own warehouses, which means that from a financial perspective, the associated balance sheet risk has been eliminated going forward.

On the other hand, this is an accounting treatment, reflecting the past asset and shift to more efficient management structure. At the same time, we intend to improve supply chain management in order to maximize the potential of our logistics facility, reduce operating costs and create competitive advantage in e-commerce. And in terms of the second quarter, accounting treatment across -- in tax expense in connection with the sales of share we held, especially as a result of the sales of fair value OCI shares held by a group company, the gain on sales was not recognized through P&L, but transferred directly to retained earnings.

On the other hand, an unrecognized tax effect recorded on OCI in relation to this transaction were transferred, thereby recorded on the tax benefit. That is a negative tax expense on the P&L. The actual negative tax expense reflecting the fact that substantially no tax payment rises. So that is the cost. And in addition to that, this accounting treatment suggests that as a result of a strategic investment, to date, we have more than JPY 1 trillion of net operating loss. So this would offset a certain portion of a future tax expense. And as earnings improve further, that effect will materialize and contribute to maximizing our cash flow.

Next, I'd like to explain once again the significance of the reorganization of our FinTech business scheduled to take effect on October 1, including the financial perspective. The purpose of this reorganization is to operate one financial business in a more integrated manner, thereby accelerating growth and improving operational efficiencies. As Mikitani explained earlier, we expect to generate more than JPY 85 billion in synergies by the fiscal year ending March 2030. So this reorganization is not intended as a means of fundraising for the company.

Also May 20, we disclosed that while the transaction does require a certain capital contribution, in order to carry out the reorganization, I would like to reiterate that we currently have no intention of selling shares of the bank. We recognize that the market assessment of our financial position continues to improve. The chart on the left shows the spread calculated from the yields on our corporate bond and the yields on the JGB, government bond of corresponding maturity. The blue line shows the credit spread 1 year ago and the red line shows the most recent level.

So across the maturities, spreads are steadily tightening on the trend. On the chart on the right, CDS spread also show a relative improvement compared to the market index. To further enhance the market assessment of the company, we would continue working to strengthen our financial soundness. Lastly, our financial policy remain unchanged, self-funding, meeting the funding needs of the mobile business without relying on external financing. As I mentioned earlier, in the second quarter, we raised approximately JPY 200 billion through the sales of share that we have held.

Going forward, we would continue to use such asset finance while securing the funds we need through the cash flow of each business and improvement in the cash conversion cycle. And also, the bond redemptions are also proceeding smoothly in line with our policy. In addition to redeeming our perpetual subordinated bonds in full, the first call date on April and in June, we redeemed JPY 20 billion of senior bond entirely with cash on hand without issuing refinancing bond. And also in terms of the December, we will be able to redeem in full with the cash on hand as well.

So in 2027 onward, the bond redemption, we would like to take a proactive approach in this range and the business cash flow maximizing them and the gross debt will be contained, of course, but refinance if it's been required in terms of the closely monitoring the market trends such as foreign exchange and interest rate, we would like to select optimal means for our company. That's all for the finance section.

I'd like to invite about initiative of AI. Chief AI and Data Officer, Ting will be taking this part.

Thank you, Hello, everyone. I will share an update on the Rakuten AI vision and our execution momentum in Q2 2026. As we discussed last quarter, the strength of the Rakuten ecosystem lies in the synergy among its services. Now AI presents a unique opportunity to amplify that synergy by attracting new users at lower cost increasing cross-use and bring more value to our users and businesses.

We are doing that in 3 ways: engage, expand and differentiate. Engage means making every touch point more relevant and useful; expand means increasing the usage scenario and surface area where we can be helpful to our customers, guiding them from vague idea to concrete actions; and differentiate means guiding a customer all the way to task completion from online discovery to off-line delivery an end-to-end experience that general purpose agent cannot match.

Together, these 3 areas add up to a durable competitive advantage built not only just on data, but also accumulate intelligence within the Rakuten ecosystem. And today, we will share examples in each of the 3 areas.

First, engage. the application of large language models goes beyond chat and language models can understand the user intent, identify patterns, match and translate better than any previous technology. And this is why we use large language models to enrich our [indiscernible] data, improve our ranking signal and in this case, improve our understanding of user queries.

Through ALM, we can better understand whether users have made up their mind or not. Take 2 customers on Ichiba as an example. One customer search for specific model number. And in this case, he knows exactly what he wants, and we only return product that matches that exact model number. With a set of limited choices, we accelerate his decision to check out. Another customer search for gift for summer holidays, and she does not have any specific product in mind. And in this case, we guide users through explorations, present a broader set of suggestions, expanded option and increasing the bucket size.

The impact is evident as indicated by our recent A/B experiment. The test shows that attributed orders grew by 0.52% and attributed GMS grew by 0.87%. At Ichiba's scale, this is quite remarkable. On an annualized basis, this is equivalent to JPY 12.8 billion GMS uplift.

The second area is expand, how Rakuten AI can expand, where, when and how we serve our customer needs. This includes engage them earlier in the purchase funnel and also recommend relevant products and services across businesses to dramatically increase cross use. Specifically, we are embedding Rakuten AI into almost every business applications, not only increasing their capability, but also connect them with the rest of ecosystem.

In addition, we are expanding our touch point through Rakuten AI apps across the vast surface area, whether it's mobile apps on the web or on the desktop. As web traffic shifts from search to agent, we are very well positioned to take advantage of this agentic shift to attract new users and increase usage of existing users.

Finally, we are also expanding our distribution by bringing Rakuten AI to our partners. As announced in July, Rakuten AI for desktop is now pre-bundled on Rakuten on our HP PCs, and this will help millions of users easily access the Rakuten ecosystem, leverage the computing power on their AI PC to reduce token cost and also understand the local context to provide more relevant results.

As of today, 17 of all of our services are live with an AI agent and 7 more are in the near-term deployment and more than 50 are underway. Each agent strengthened its own business and connect with the Rakuten ecosystem, expanding the potential of cross-use across Rakuten.

And lastly, the last area is differentiate. As Rakuten AI deeply embeds into each business applications, it can accomplish what other external agent cannot from first chat to a complete transaction all the way to delivery in the real world, even providing customer service after purchase. For example, on Ichiba, AI can [ now ] help customers to make decisions faster and the time to purchase is reduced by 41% and average order amount up 17%. Customer can understand the decision they have to make faster and buy with greater confidence.

Similarly, on Rakuten Travel takes customers from discovery to booking in one flow, and this is growing rapidly. Rakuten AI for Travel launched at the end of April. Now average order is 13% higher for AI-assisted booking versus those are not going through AI. And family and group trip booking are also up 29%. Such family and group tracking is often very complex in nature, and this is exactly where AI can help ease the decision-making. Just last week, we announced Rakuten AI Super Agent at Rakuten AI Optimism Conference.

This means 3 things. First, we doubled down on cross-use. Rakuten AI Super Agent is about connecting the customer experience across all of our products and services, so agent in one part of the ecosystem can hand off to another agent and complete another transaction. Second, we are expanding what agent can do, handling complex tasks, achieving goals, guiding users on the full journey from discover to purchase across many services. And third, we are connecting Super Agent to third-party services like maps, calendar, e-mail, messengers, so it's easier for customers to communicate and plan using their favorite tools and improve the product.

And lastly, the Super Agent will interact with other external agents on the Internet, which is critical to attract more agent traffic for our merchants, hotel and business partners in the Rakuten ecosystem. And I'd like to show you what the Super Agent can do. Please play the video.

[Presentation]

To close -- is that the last slide? Okay. To close, together, a preview of the Super Agent, you can download Rakuten AI today. It is available on the web, iOS, Android and Windows. And very soon, it will come to Mac as well. And I'd like to close by saying this in Japanese, [Foreign Language].

[Interpreted] Let's create new values, expand possibilities with AI and together build a better future. Thank you very much. That concludes the report.

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]

Thank you for joining Rakuten Group's FY 2026 First Quarter Financial Results Briefing today despite your busy schedule. The earnings summary was disclosed at 3:30 p.m. just a moment ago. Please visit the Investor Relations section on Rakuten Group's corporate website to view it. [Operator Instructions] We will now begin the presentation from [indiscernible].

Everyone, thank you very much for joining our briefing today despite your busy schedule. And I would like to cover FY 2026 first quarter financial results, followed by CFO, Kaga, to explain financial situation, followed by AI by Tina, Chief AI Officer. So this is the agenda for today, as shown on the slide. And first of all, overall summary. And the next today, we would like you to know about the synergy ecosystem of Rakuten Group in detail. After that, segment results will be explained.

Now let me walk you through the summary. As for the revenue, for the first quarter, we were able to achieve the record high, JPY 643.6 billion versus the previous year, it was 14.4% increase. So it was a very steady growth. As for EBITDA, again, it was JPY 108.8 billion. The MNO business, it was the very first time in the first quarter that we achieved over JPY 100 billion after we entered into MNO business. For the competitive term. And as for non-GAAP operating income, since the full-fledged entry into the MNO business, we achieved a profit in the first quarter, JPY 36.6 billion versus the previous year, it was up by JPY 36.3 billion.

So from here and the after, so I would like to talk about the Rakuten ecosystem in a qualitative manner. I would like to investors who have deep understanding on our ecosystem. So in Japan, ecosystem, I think the ecosystem is created by Rakuten Group. So basically, on the conglomerate discount, like the 1 plus 1 due to various reasons is less than 2. However, in our case, it's not a simple conglomerate. We do have a huge synergy in our group services. That's why 1 plus 1 is greater than 2. So it will be expanding.

In particular, recently, because of AI or agent AI advance, so what would happen with that? So in various stages, Rakuten ecosystem, so-called -- we do have growth and the defense and office and defense, we are able to achieve both sides. And the foundation for this is one single brand name. So the common ID we do have and common point program. With that, we do have 70 services connected.

So we haven't emphasized this, but the monthly 4.88 million users are using some of our services. So we do not call them the viewer. Actually, they are transacting our services. Other than this, so from the corporate governance perspective, so we do have a thorough corporate culture and including Rakuten Mobile, they are making really hard efforts. So the corporate culture, we do have more than 70 services. And in all of the group companies, we do have a common culture among the group companies and also the users very loyal to our services.

So how to increase the number of users and how can we increase the number of cross and then how to improve the LTV or the lifetime value, lifetime value of the customer, how can we improve this? And then among that, so looking at the overall CAC or customer acquisition cost, how can we lower the CAC?

And then how can we bring that to the higher LTV and acquire new users to our ecosystem and how to upsell them to other services. That is a big point of this ecosystem. And then over the past 5 years from 2020 to 2025, so-called Internet services such as EC or the travel and from those services, new user joined, that is about 19.7 million and new customers from fintech, Rakuten Point Card credit card and the bank and securities and the customers moved from there, new users, that is 16.1 million and 3D Mobile, 2.9 million.

38.71 million people who came into the ecosystem are using 4.6x the number of services. So each of the services are organically connected. That's what is represented here. Now this is a very surprising shocking number. The user of 1 segment and users of 2 segments and users of 3 segments, when we compare them, users who are using 2 segments are using 5.4x revenue. They are generating 5.4x the revenue of Rakuten Group and users of 3 segments are generating 13.5x the revenue for us. So the customers or membership nurturing is now working.

So 2, 3, 4 services when users use all these services, what happens is that, for example, the users who are using one service, the churn rate of the user of service is baselined as 100. And then users of 4 services only have churn rate. So the more services users use Rakuten services, the higher the loyalty of the users becomes. So as a result, looking at our strategy holistically, the relatively low CSC services are used to acquire customers.

And then among these users, we upsell them to high LTV services, including mobile and financial services. That's our strategy. By the way, mobile and fintech, the users of these services, about 85% of new users of the segment came from the Rakuten channels, Rakuten ecosystem. So there are many functions that we can utilize, and that is currently working very well. Now AI is advancing and what will happen to all these services? That is the question. But we have rich data on our hand, not only online data, we have offline data as well.

So globally speaking, we have rare really valuable and rich data. So through the use of the data, we can provide many services. So we can also have more customers come to our ecosystem through the use of AI. And we will talk about this later again, but the profitability is going up more and more, which means that we have been decreasing the operating costs through the use of AI. We are also promoting cross-use using AI, and we can accelerate the customer acquisition using AI. And that's what we have been doing. So on the offense and on the defense, AI can accelerate our strategy, and that's what's happening.

Okay. Now I move on to the segment results by each segment. And first of all, shopping travel, the Internet Service segment. And the revenue was JPY 317.6 billion. So not only from Ichiba and Travel, COBOL and Bibur conhtent businesses are performing pretty well to grow. And non-GAAP OI, JPY 21.2 billion comparing to the year before, plus 65.6%. And then each KPI and first of all, domestic ACGMS, that is JPY 1.5 trillion, which is 4.8% Y-o-Y growth. And then travel, plus 16.4% increase Y-o-Y. And investment business IRR is quite performing well.

And then international BU revenue and the USD 459 million, about 7% growth. this time. So what we have to mention is AI-led advertisement business has been performing pretty well. So this JPY 61.9 billion in Q1 and 13% growth Y-o-Y. And then let me look into each business in detail. First of all, domestic EC.

As mentioned before, GMS 4.8% Y-o-Y growth and revenue plus 4.0% and OI plus 29.2% growth. So it's about the JPY 31 billion we achieved. And the next is travel business. It's really growing today. And travel business, the GPV on Y-o-Y basis, plus 16.4% and particularly inbound demand, which is the 69.7% growth. And even for the domestic travel, there is a growth of plus 8.1%.

So we have added the Rakuten AI capability here, which will help the search in hotel much easier and also the real cons. So just like if you are talking to the travel agency to decide where you want to go and book your hotel, that is possible with this AI. So next is the growth investment business. So trying to lower the cost or increase the revenue, and that is what we are doing really hard.

And then about the JPY 2.7 billion profitability improve what's made non-GAAP. So what we have to stop needs to be stopped. For example, NBA Rakuten, this is a basketball streaming service we have terminated. And for the Rakuten Mart in the Western area, we have stopped -- we have terminated the service there. So that will improve the remaining growth investment businesses. It's still in the middle way.

And the next is international BU. We will -- Y-o-Y basis, there is a big jump from the Y-o-Y basis and also the streaming service, V and then revenue has been steadily increasing. unfortunately, it was not making a huge loss, but it was really difficult to turn into the profit, which is the Rakuten Funds Marketplace, and that will be sold or terminated by the end of 2026. We have decided.

And with that non-GAAP OI for this Q1 FY 2026, USD 7.1 million. And this is a shopping. So we do have a higher season in Q4 for revenue. And the next is ad business revenue, which is growing largely. So the Q1 revenue was JPY 61.9 billion, so the 13% Y-o-Y growth. So it's been accelerated. And then using the AI for various advertisement services, for example, Rakuten Ichiba for advertisement, -- so once you decide the budget, then automatically, we will place the optimized advertisement.

With that, GMS at Ichiba will be growing, not only that, but also for the merchants revenue has improved. So the taking power of AI and taking advantage of Rakuten data has a great potential or possibility. Then Rakuten advertisement and the common challenges in advertisement businesses, what are the difference between the 2? And our targeting or the AI is the actual data or actual purchase data.

On the other hand, other companies, they use behavioral data, for example, search and view. And then we do have a common ID so we can have accurate analysis of the results. On the other hand, the common challenges, they are using it is difficult to use the cookie. There is a restriction. So the accurate tracking or measurement of the result is quite difficult.

And the coverage, as mentioned before, well, we do have so many users using various services in our group. So data is one thing and also the advertisement placement, web page or applications. So we do have rich asset of that. So the AI would be growing our advertisement business in Rakuten.

Next is the FinTech segment. Revenue was up 3.1% to JPY 375.3 billion. So all the services are growing steadily, especially Rakuten Bank and Rakuten Card. They have increased revenue steadily and also cost is controlled the revenue the non-GAAP operating income was JPY 58.5 billion, up 33.8% year-on-year.

These are the major KPIs. Rakuten Card shopping GTV was up by 8.5% to JPY 6.8 trillion, and the number of Rakuten Bank accounts was up 7.3% to 18.07 million, almost JPY 20 million. And Rakuten Bank deposit balance is JPY 12.9 trillion, up by 12.9%. There is severe competition, but it was JPY 12.9 trillion. It's growing. And Rakuten Securities General accounts, it surpassed JPY 14 million in April. And NISA accounts, as a leading company, we are driving NISA, and there is 7.53 million accounts.

So for all generations, young people are opening up NISA accounts at Rakuten Securities as well. And Rakuten Securities deposit assets, JPY 50.3 trillion, up by about 40% year-on-year. Now on Rakuten Card first, the so-called interest rate has been increasing. So how can we grow this business was the question.

But the number of members and GTV and assets and cost control, all of them are working successfully and 8.5% increase in GTV and revenue was up by 18.4% and non-GAAP OI up by 15.7% to JPY 16.8 billion. Now on payment, it is also growing. The revenue was up 12% to JPY 27.3 billion and non-GAAP OI was JPY 2.1 trillion, up 14.4% year-on-year.

Now on Rakuten Bank, the bank side, already made an announcement, but the ordinary income was up 38.4% to JPY 255.5 billion. Ordinary profit was up 44.1% to JPY 103 billion and capital adequacy ratio is above 10% and ROE 21.7%. All in all, the number of bank accounts and number of main accounts, total deposit balance, they are all growing across the board. But with the utilization of AI, the expense ratio has been going down.

Rakuten Securities other securities are also facing the same situation, but the securities market is quite active. So the number of general accounts has also surpassed JPY 14 million and operating revenue, JPY 50.3 billion, up 43.7% year-on-year and operating income versus the previous year, up by 92.5%, almost doubled to JPY 14.6 billion.

Now insurance, it's also trending favorably. The revenue itself, we have high-margin products that we are focusing on. So looking at the revenue, the revenue, the absolute number may have gone down, but the OI was JPY 1.7 billion. So it's been trending steadily. Especially Rakuten Auto Insurance, that's where we focus on and the sales has been expanding.

As for life insurance, we have face-to-face and online and group insurance, all channels are doing well. Now on the FinTech business, I'd like to touch upon reorganization. As of now, as far as we can disclose, I'd like to talk about this topic.

First of all, the financial synergy is quite significant. The Rakuten Card, Rakuten Securities. So in Rakuten Bank, some of them are undertaken at Rakuten Bank. But on top of that, we also have external interest-bearing debt. a rather high interest rate is there. So with the restructuring, in the fintech group, we can complete the cycle ourselves. So the interest burden can be controlled. And also the asset management can be done in the group by ourselves.

And in terms of the press use, we can accelerate that. Especially, we can consolidate and integrate the applications, and we can do that more easily with this reorganization. to achieve super ARPU. And we can maximize corporate customer base. The customers may have the corporate account at the Rakuten Bank, but they may not have the personal account or vice versa.

So corporate customer base can be commonized to expand the business scale. And more than anything, including Rakuten Group, we can utilize AI further. So even more than before, various financial services can be offered in a seamless manner. So the personal -- the identification of the person is the key, but eKYC can be used to automatically verify the interpretation. And then we can centralize the data by so doing. So synergy will be quite large.

Last from myself, talking about the mobile segment, and it has been progressing smoothly and both revenue and OI, the revenue, 18.5% Y-o-Y increase, which is JPY 131.2 billion and non-GAAP OI, JPY 13.3 billion Y-o-Y improvement and minus JPY 38 billion. EBITDA, JPY 1 billion.

And then the premarketing cash flow, the so-called the new customers or new stores, excluding costs related to that, it's already reached the JPY 28.7 billion. So throughout the year basis, it's beyond the JPY 100 billion. So the premium acting premium PMCF growing by 85.7% and major KPI, Rakuten Mobile, on Y-o-Y basis and 136 million subscribers, increasing 1.74 million.

And then the adjusted churn rate has been improving and ARPU mainly around the store, it's getting increasing. On the other hand, so mainly for the communication software, which is Rakuten Symphony number of customers are increasing and number of partners are increasing. So this has been progressing smoothly.

And for let me go into detail about the Rakuten Mobile and the revenue is growing by 23.9% Y-o-Y and then we recorded JPY 108 billion. And then non-GAAP OI and then the improvement of JPY 12.7 billion. And particularly, so we are still at the phase of increasing the customer base. So we are still in the growing phase. So excluding those growth investments, we already achieved JPY 28.7 billion. So EBITDA, excluding the property tax and it's JPY 6.6 billion.

So the net increase in the first quarter of last year was 324,000 lines. So in this first quarter, it was 373,000. So it was up by 15%. As for churn rate, compared on a quarter-to-quarter basis, it was down from 1.99% to 1.76%. And in April, it was 1.45%. So it was the improvement of 34 basis points.

The one thing I can say is that there are people who are going around different areas to earn points. And so they are leaving the carriers quickly. But those users with more than 5 lines are now charged with our fee, and we are also strengthening the role to verify the identification. So that succeeded, and we were able to curb the short-term users as a result. That is the key point.

Having said that, the user survey showed that the 76.4% of the Rakuten users are saying that they intend to continue using our service. And also Rakuten Mobile is the most considered mobile service for switching with 23.7%. We are ranked at #1. And ARPU is also about to go up. On the other hand, the base station construction, it is also accelerated. So the network quality will be improved as a result even further.

The shortage of labor has given us a difficulty, but other companies and the mobile industry may not have used this process, but we are going to take up the upstream process internally to accelerate the base station construction. Rakuten Symphony, the USD 131.4 billion, that was the number. And OSS, cloud, including that, everything is trending well. So that is all from my end.

Now I would like to turn it over to Kaga for finance, and Ting Cai is going to talk about the AI section.

So this is Kaga. Let me explain the financial matters. So this is the first quarter consolidated financial results summary. Non-GAAP operating income came in at a strong JPY 36.3 billion. After deducting amortization of intangible assets, share-based compensation and one-off items, so the IFRS operating income was JPY 30.4 billion.

We made a very strong start for the goal of significantly increasing profit in fiscal year 2026. And so this is the first quarter and before tax, the profit before tax is making a profit. This is a big turning point, and that is our understanding. And for this year, so continuously, we will revisit the business portfolio, and there is a possibility of revisiting the business portfolio, but we are lowering the risk on the balance sheet. That is how we are thinking of. So this is about the financial strategies.

There is no change to our financial strategy as previously communicated. We remain committed to continuing strategic investment in the mobile business while maintaining financial discipline and pursuing further credit improvement. We will maintain this policy. And then the most important thing, which is one of the financial KPI for the net debt-to-EBITDA of our non-fintech businesses, we are targeting a reduction to below 5x by 2027.

And then we are also maintaining our target for consolidated equity ratio of 10% over the long term and 5% over the medium term. Regarding the ratio of net interest-bearing debt to EBITDA in non-fintech businesses, the ratio due to both improved EBITDA and an increase in the valuation of listed securities, the ratio has declined to 5.6x as of the end of March.

And then for the target at the end of fiscal year 2026, we have set a slightly conservative goal of around 6x, but our commitment to improving profitability and reducing interest-bearing debt remains unchanged. And then we are also making steady progress on funding for bond redemptions. For this year, senior bond redemption are planned to be covered by cash on hand.

And the last month, April, we had a the first call date in April, the U.S. dollar-denominated perpetual subordinate pros and have been fully redeemed using proceeds from the domestic perpetual subordinated bonds issued in October of last year. For the perspective of proactive maturity management, we have already begun planning for redemption from 2027 onwards in addition to maximize free cash flow of the group, where debt financing is required, we will carefully monitor market condition, including foreign exchange and interest rate trends and evaluate the optional funding options from the full range of available options.

So we recognize that our series of proactive initiatives toward financial soundness have been continuously evaluated positively by the market. The trend in the spread of our corporate bonds issued in previous years and 5-year CDS spreads show relative improvements even when compared to the market indices.

Going forward, we will continue to work on further strengthening our financial structure and maintaining disciplined financial management to sustain and enhance this evaluation. This is all about the financial section. And now we would like to move on to the AI initiative and Chief AI Officer, Ting Cai, would be explaining.

Thank you, Kaga. This is Tim. I'm the Chief AI and Data Officer of Rakuten Group. Today, I'm very excited to share with you our AI strategy, how we set Rakuten apart and highlight our progress in rolling out AI agent across Rakuten ecosystem. We continue to pursue Rakuten AI vision to augment human creativity with the power of AI. We are leveraging our differentiated advantage, our ubiquitous channel reaching 10 million online and off-line touch points and our connected ecosystem with 46 million monthly active users in Japan. That connected ecosystem make it much easier for users to discover new services, reducing customer acquisition costs.

And with our diverse portfolio of businesses, we have built one of the most comprehensive ecosystem that can meet almost every user need in both daily and professional life. Every interaction in the ecosystem help us to accumulate unique data, combined with AI, now we have -- we can derive more insights and provide higher quality services to our users, further nurture our relationship with our merchants and build the growth flywheel through our ecosystem. Why do customers choose Rakuten ecosystem? Because the trust in our brand and the value and joy we provide to our users through Rakuten Points and the relationship with our merchants and partners.

Now with AI, we can compound our ecosystem advantage. For every touch point we have, we can engage better with our users, whether it is a search, recommendation, advertising, customer service, AI can better understand the user intent, enhance user experience through personalization. This creates a sticky experience that increases customer satisfaction and entices them to come back to us more often. And second, expand. AI can expand our services in multiple ways. It can help us to capture user intent earlier, turning big ideas into concrete actions. It can help user to understand our points and campaigns more because AI can guide them throughout the process.

For example, in a shopping marathon, user can earn 10x points if they shop from 10 different shops in each car, but which shop to choose from, now AI can make recommendations. With AI, we can also interact with users in new ways through voice, through images and through conversations. Now more users can interact with our services in the way they prefer. And lastly, differentiate. AI is increasingly better understanding what users want to achieve, break it down into tasks, planning, executing, iterating to achieve goals. And when it comes to complete transactions, this is where Rakuten presents a unique advantage.

In a nutshell, AI enables us to engage users with more personalized services, expand usage scenario and differentiate our services through transaction through our memory and connected services. With that, we can continue to build a flywheel to grow our competitive advantage. The beauty of Rakuten ecosystem is that it's all centered around one Rakuten ID. With Rakuten ID, we have accumulated precious data assets about our members, including historical context, user preferences that enables us to provide tailored services to our users.

Integrated identity, context and easy payment and delivery remains a unique advantage of Rakuten ecosystem that external AI agent have difficulty replicating. In addition, our AI agent can activate the depth of knowledge we have in each domain. By delivering specialized services, it will be difficult for other general purpose agents to match. In the AI era, data alone is not enough about itself. It is the value we create from the data that help us to build a more trusting relationship with our merchants and users.

It is additional economic and emotional value we can deliver through the Rakuten ecosystem that keeps our user coming back. As consumers increasingly shift from a traditional search engine to AI-powered information discovery services, our Agentic AI strategy presents a significant opportunity for Rakuten to expand our services and capture user intent.

We are focusing on 2 things. One is building specialized agent with deep expertise in each domain. This enables user to skip traditional web search and come directly to Rakuten for discovery, consideration and all the way to purchase decisions.

And second, we are building a super agent. User can just share a vague idea and super agent can figure out the intent through its memory or having a dialogue with the users, it can plan and execute then and finally, helping users to complete tasks across multiple ecosystem services. Going forward, we will enable our agent to complete even more tasks and expand our funnel opportunity, establishing Rakuten AI as the go-to destination for general inquiries.

From an architectural point of view, we are investing deeply in each layer from infrastructure, data center, GPU optimization, model system and all the way to application and agent. Specifically, our AI agent, we are focusing on a strategy where build the best, but also partner with the best. We have been collaborating with the best AI company in the world, both start-ups and large companies such as Anthropic and OpenAI. We started collaborating with them early on. For example, we worked with OpenAI when they only had 400 people, and we worked with Anthropic before Cloud code became a phenomenon.

And at the same time, we want to understand the technology fundamentals so we can build from the ground up, creating our own embedding for commerce, tokenizer for Japanese. We also innovate on top of our open source model trained with our unique data set and optimized for domain-specific tasks. Today, we have a portfolio of models from mini models to super model with almost 700 billion parameters. And moving forward, we are focusing on building domain and task-specific models that are very cost efficient for our businesses and delivering better margin and more value for our customers.

Since our brand launch of Rakuten AI, our agentic platform at Optimism last year, we have continued our execution momentum. Today, we have 11 AI agents available. Particularly in our last earnings presentation, we talked about Rakuten Ichiba.

Today, I want to briefly touch on Rakuten Travel. And as Mickey mentioned earlier, Rakuten Travel increased the gross transaction volume 16.4%, and I have personally used it every day during the Golden Week, while I was biking from Aemii to Ymaali, every night, I booked on Rakuten Travel. It's a delightful experience for me to discover local gen easily and quickly on the go.

We are moving quickly to build, test and deploy AI agent across the ecosystem. AI agents are already live across 11 services, and our plan doesn't stop here. We hope to enhance all of our services through AI agent. Our ultimate goal is to augment human creativity with the power of AI. That concludes today's presentation. Thank you.

So this concluded the financial results presentation. Thank you very much. Thank you for joining Rakuten Group's FY 2026 First Quarter Financial Results briefing today despite your busy schedule. We will now move to the Q&A session for the press.

Our presenters today are the following 7 individuals. Next, I would like to explain the format for today's Q&A session. [Operator Instructions] .

So [indiscernible] on from Yi newspaper. So business performance on operating income since FY 2019, for the first time, you turned the profit into profit. So how do you think of this? And so you had a good start in Q1. So what will be your expectation for full year? I would like to know that as well. That's all.

So basically, as you know, Rakuten Mobile, this is -- we have challenged a huge project and -- so the actual user reaction to this business, which actually contributed to the Rakuten ecosystem businesses. So the lifetime value LTV has been increasing. We have understood it. But now it comes to the surface, it has become explicit. So this time, I explained ecosystem in my presentation, and I think I covered about these points.

Therefore, so it is a great result, and we need to continue the momentum. So the further utilization will be promoted. -- in context of that the -- looking at the profitability, I think the profitability, I think we will be able to improve profitability more with further utilization of AI. And we are quite good at new acquisition. So as mentioned before, reorganization of FinTech Group is one of the factors. And then we do have a sound balance sheet. Given that not just for this quarter, onward, I think we can expect a big profitability improvement. We are confident. That's all from me.

Next, from [indiscernible] Newspaper, Mizhima-san, please.

I'm Mizushima from Nikkon Koyo Newspaper. Can you hear me okay?

Yes, we can hear you.

Rakuten Mobile, following unext, is there any new service and new associated plan that you are thinking of with the recent infrastructure, I think that other competitors are increasing the prices. But as of last year, you said that you were not planning to increase the price. But since then, is there any plan to increase the price?

Well, the security will be a big issue going forward. And also [ Ole Ole ] Insurance was also quite well accepted by the elderly customers. So the services for young children and senior citizens will be expanded in the future. And the content bundling, we need to discuss with the counterparts. But if possible, we'd like to pursue that actively. And what's going to be important from now on is not to connect them, but connection needs to be secure.

And also, we need to prevent any fraudulent activities. So we need to strengthen these areas. As for the price, that is part of our strategy. So I'd like to refrain from mentioning anything about that, but we are late comer to the market. So compared to other competitors, our market share is still relatively small. So we need to think about the overall picture when we consider these aspects.

So there is a time constraint. The question from the media, we are going to take the last question from the media. Freel [indiscernible], please start asking the question.

So the consumer price has been increasing drastically, and we see several data evidence for that. And probably that would have some impact on to consumption. If the price hike continues at this level, consumers may start thinking of protecting themselves. I feel this kind of phenomena. So for example, you made the delivery fee charging, and I think you are taking several measures and also the labor cost has been increasing. So the transportation cost or delivery cost.

So the logistics industry is struggling with that. So maybe you need to take some action for this kind of a thing. So in the EC space, the cost increases or the consumption momentum goes down, I think that will be anticipated. So how do you see and what kind of actions will we be taking?

And first of all, so when inflation comes, one thing we can say is the -- so how -- I think the people start buying more from the online, that will be happening. And then we are not just looking at the simple GMS. We are following the -- how much transaction is increasing. So we do have more transactions.

And the second point here is the growth factor. AI is one of the factors for the growth and simply by the power of AI to reduce cost largely. So I think it can be applied to our each service. And also, we are going to provide the various progress, but about 50% of the program code is written by AI.

So given this, I think we can make the operation more efficiently. I think AI can contribute in that end. And then for the customer transaction, so the -- in a conventional way, using the search box for the Puma to see what they really want, not like that, for example, the golf, and we have a good driver, but fairway wood is not good. So how should they do? So this kind of the question, I will may -- and I am not sure whether I can meet a really good club. So the various shopping occasions, shopping scenes, I think satisfying the need is something we will be seeing in the future.

And the Rakuten Group, we can do this in a unified manner, and we do have more advertisement revenue. And in terms of the profitability, it would be going up, but not going down. That is what I think. So if -- the hyperinflation is a different topic. But well, if it is a manageable inflation, as long as within the manageable inflation, I think it will be working in a favorable manner to our company. So ahead others, for example, when the memory is in short and we need to change the server, so there might be some impact like this. But by utilizing the power of AI, that can be absorbed. -- thank you very much. And this concludes the Q&A session for media. Thank you very much for participating.

Thank you very much for joining Rakuten Group's FY '26 First Quarter Financial Results briefing today despite your busy schedules. We would now like to begin the Q&A session for institutional investors and analysts. Today's presenters are these 7 individuals. Next, I'd like to explain today's Q&A session procedures. [Operator Instructions].

We have Okumura-san from Okasan Securities.

I am Okumura from Okasan. Can you hear me okay? Yes, we can hear you. So Fintech reorganization is what I would like to ask you about. There are one major question, but 2 minor questions included. So this time reorganization for Rakuten Group and Rakuten Bank, the minor shareholders of both entities can be benefited from this scheme. Why did you decide that that's the case? That's different from the previous decision? And also, another point that you mentioned, what will be essentially changing through this reorganization? On top of that, what is -- out of the objectives for the reorganization, you said that you will be funding to lower the financial leverage. Is that one of the objectives? If you could comment on these questions, I appreciate that.

Yes. The large factor is that the interest rate is being increased. That I think is one of the important factors. As you can see here, the external funding is what we are relying on in Rakuten Card and Rakuten Securities, partially, that's several JPY 10 billion. So is it JPY 10 billion or JPY 90 billion? I cannot disclose that, but the external interest rate is one big factor.

For Rakuten Bank, including the deposits, there are assets without interest. So that is where they can switch to interest-bearing ones. So that is the most easy to understand factor. And on top of that, recently, the new CFO was appointed. So in many senses, we believe that we can generate more synergies as an organization. We have the foundation to achieve that.

And now AI is advancing, and we want to make it one app. That's one app is another factor that we are considering. So from the financial perspective, obviously, Rakuten Card, Rakuten Securities, the so-called out of group interest-bearing debt will go down significantly. So the financial impact will definitely be there.

Kaga-san, do you have any additional comments?

Yes. Thank you for the question. You pointed out that the financing may be one of the objectives, but that is not the case. As Mikitani said, this time, what we announced is the reorganization, but the objectives of the reorganization is to stop the outflow of the fund externally. And as soon as we want to promote synergy to be generated. So the funding and fundraising is not the objective of reorganization. -- and on an additional note, with this reorganization for the entire group, with the significant interest rate hike will not be a big risk for the entire organization. So that will not be a risk for us anymore.

And the next question, due to time constraints, this will be the last question. Asset Management, Nomura-san from Nomura Asset Management One.

Can you hear me?

Yes.

So non-fintech, the EBITDA. So looking at the Page 54 and the target of 2026 is 6x and the '19, 5.6x, and it's been improving. But looking at the December end situation, so this the net interest-bearing debt is increasing and EBITDA is increasing so that finally, you will be landing at the 6x. So the -- what is the background of increasing the EBITDA here? So is it because of the CapEx increase or about the investment securities value? I would like to know the assumption. That is my first question.

And the second question, the fintech organization, reorganization, how will it be impacting on to the leverage?

Maybe you are not able to speak in detail, but I would like to know the more information as much as possible. That is all for me. And first of all, non-fintech net debt-EBITDA ratio in the next term, we have a target of 5x. And then towards achieving this target, we are progressing smoothly. That is our understanding. And then for the target, so this is based on the refinancing. So the net interest-bearing debt is flat. So this is a quite conservative assumption. And then the market securities, and this is equivalent to the cash and then the net interest-bearing debt, we include them to the net interest-bearing debt for the calculation.

And last year, our holding the stock value went up. And then this contributed to this ratio improvement for the EBITDA as announced today, so it is growing quite powerfully. So it is progressing quite steadily. And this high EBITDA will contribute to the improvement of profitability. This would become a big driver.

And then the interest-bearing debt to be refinancing in the future. So our financial structure soundness is improving. So we are on track in line with our schedule. And the second one is about the fintech reorganization. As answered in the previous question, so financing, there is no objective that is targeting the financing within the group. I cannot make any other comment other than that. That's all from me. Thank you very much. Thank you very much.

Thank you very much. This concludes the Q&A session with institutional investors and analysts. And before we close, Mikitani is going to say a few words.

Yes, I will do my best. We will do our best. Thank you. This concludes the 2026 first quarter earnings presentation session of Rakuten Group.

[Statements in English on this transcript were

Spoken by an interpreter present on the live call.]

Hello, everyone. Thank you very much for taking the time out of your busy schedules to join us today. I will be explaining the results of Rakuten Group for the fourth quarter and fiscal year of 2025.

Here is today's agenda. First, I will explain the business performance. Then our CFO, Hirose, will explain the financial results, followed by our Chief AI and Data Officer, Ting, who will provide an update regarding our AI initiatives.

First, I will provide a summary of the performance and KPIs of fiscal year 2025. First of all, as we announced at the end of last year, Rakuten Mobile's total number of subscribers surpassed our target of 10 million subscribers. I would like to once again express my gratitude to not only our users, but also our partner companies and everyone who has supported us. At the same time, Rakuten Mobile also achieved full year profitability at the EBITDA level of JPY 12.9 billion, a significant year-on-year improvement of JPY 66.7 billion.

Next, I would like to report on our consolidated financial results for fiscal year 2025. Consolidated revenue increased 9.5% year-on-year to JPY 2.5 trillion, marking the 29th consecutive year of revenue growth. In particular, the FinTech segment contributed significantly to this growth, which was up 19% year-on-year. Consolidated non-GAAP operating income increased significantly by JPY 99.2 billion year-on-year to JPY 106.3 billion, thanks to the significant contributions of the FinTech segment and improved losses in the Mobile segment.

Consolidated EBITDA grew 33.7% year-on-year to JPY 435.9 billion, a new record high. To reiterate, we achieved 2 earnings targets we set at the beginning of 2025, demonstrating strong growth and solid profit improvement. In fiscal year 2025, non-GAAP operating income and IFRS operating income were both positive. For fiscal year 2026, we aim to achieve significant growth in both profit metrics.

With this in mind, Rakuten Group will focus on 3 areas. The first is expanding synergies with Rakuten Mobile and the ecosystem. We have previously stated that customers who sign up with Rakuten Mobile contribute to increased usage of group services, and we will continue to improve and expand the benefits of cross usage to make them even more appealing. We will also promote group services and provide new value by leveraging Rakuten Mobile's unique assets such as data and shops.

The second is accelerating the use of AI. In fiscal 2025, we continue to introduce AI in various areas, both inside and outside the company. And from fiscal 2026, we are appointing Chief AI Officers to all businesses and divisions to quickly promote the wider and more specialized uses of AI. Finally, we will strengthen human resource development. We strongly recognize that people are the most important driving force behind the company's growth. In fiscal 2026, we will review our recruitment and training strategies, foster entrepreneurship and improve skills and focus on building an organization that will enable us to make sustainable strides towards becoming a company that will last for 100 years.

Next, I will explain the business performance by segment. First, a review of the Internet Services segment. In the Internet Services segment, fiscal 2025 revenue increased 6.8% year-on-year to JPY 1.4 trillion and non-GAAP operating income increased 4.5% year-on-year to JPY 88.9 billion. However, excluding the valuation gains and losses of minority investments, operating income increased 15.2% year-on-year to JPY 100.3 billion. Within the segment, Rakuten Ichiba and Travel drove revenue growth in the domestic EC business. In addition, progress was made in reducing losses in growth investment businesses such as the logistics business, contributing to the profit increase. In the International business unit, Rakuten Kobo and Rakuten Viber were the main drivers of the increased revenue and profit.

Next, let's look at our main KPIs. Domestic EC GMS was JPY 6.3 trillion, up 3.9% year-on-year. However, taking into account the impact of 2024 being a leap year, the increase was 4.2% year-on-year. Travel Business GTV increased 7.6% year-on-year, driven by inbound and other global GTV. In addition, advertising revenue for the entire group increased 8.3% year-on-year to JPY 239.2 billion, achieving solid growth.

I would like to explain the fiscal year 2025 results for domestic EC once again. On the back of GMS growth explained on the previous slide, revenue increased 5.8% year-on-year to surpass the JPY 1 trillion mark and non-GAAP operating income also increased 12.6% year-on-year to JPY 122.4 billion. Solid revenue growth in core businesses and improved losses in growth investment businesses contributed to the increase in profits. Going forward, we aim to achieve sustained revenue growth in core businesses by expanding synergies with mobile and utilizing AI and to quickly achieve profitability in each of growth investment businesses.

Rakuten Ichiba continues to reform its website and functions, logistics and other areas. It is also promoting growth through the use of mobile and AI, expanding its customer base and improving the loyalty of existing users by enhancing its services, including new services. Rakuten Mobile subscribers accounted for 16.4% of Rakuten Ichiba's monthly active users, up 1.4 points from the same period last year. Going forward, we will drive this rate up by increasing awareness of and enhancing the benefits for mobile subscribers.

Regarding the use of AI in fiscal 2025, we promoted the introduction of AI in various areas, including search, recommendations and ads. In fiscal 2026, we will aim to maximize the effects of these efforts.

In terms of enhancing services, in December 2025, we launched Rakuten Ichiba's first private brand, Rakuten Original and Rakuten 24 Express, which offers same-day delivery of daily necessities and small appliances. We plan to launch several additional new services this year.

In the travel business, global travel GTV achieved a high growth rate of 58% year-on-year on successful measures aimed at capturing inbound demand. Domestic travel GTV also increased 1.8% year-on-year. Furthermore, although the Chinese government's call for people to refrain from traveling to Japan in November last year resulted in a decrease in the number of visitors to Japan, domestic demand expanded, resulting in positive growth in GTV.

Next, I'd like to talk about growth investment businesses. Various initiatives aimed at reducing losses have been successful, resulting in continuous reductions in losses across multiple businesses. Specifically, in the Logistics business, we revised prices and promoted operational efficiency, resulting in a JPY 7 billion year-on-year improvement in fiscal 2025. In the online grocery business, we decided to withdraw from Kansai area in the third quarter and reviewed our asset size, resulting in a JPY 730 million quarter-on-quarter improvement in losses. The NBA streaming business also saw a JPY 1.46 billion year-on-year improvement in losses in fiscal 2025 due to the termination of the service in July last year.

Lastly, turning to the International business unit. Revenue increased 2.4% year-on-year to $2.1 billion, and non-GAAP operating income increased 35.3% year-on-year to $51.8 million. Within this, Open Commerce centered on Rakuten Rewards faced headwinds due to the impact of the U.S. macro environment. On the other hand, in other categories, strong device and content sales at Rakuten Kobo and solid growth in communications and marketing services at Rakuten Viber contributed significantly to the division's overall revenue and profit growth.

Next, I will explain the FinTech segment. Segment revenue increased by 19.0% year-on-year to JPY 975.9 billion, and non-GAAP operating income increased by 30.3% to JPY 199.9 billion as a result of the customer base expanding across all services throughout the year.

Next, regarding the key KPIs for each business. Rakuten Card's shopping GTV increased by 10.3% year-on-year to JPY 26.5 trillion. Rakuten Bank's accounts increased by 7% year-on-year to 17.63 million accounts and deposits increased by 10% to JPY 13.2 trillion. Furthermore, Rakuten Securities general accounts increased by 11.1% year-on-year to 13.26 million accounts, and NISA accounts surpassed 7 million in January, maintaining its industry-leading position. Deposit assets also significantly increased, reaching JPY 48.7 trillion.

Let me dive into each business performance. Rakuten Card saw an increase in GTV due to an expanding customer base and higher average spending per customer. Additionally, the revision of revolving payment fees in August led to a significant increase in revenue. And despite a substantial rise in interest expenses, the company achieved increased profits. Rakuten Payment achieved increased revenue and continued operating income for fiscal year 2025, driven by GTV expansion due to the continuous growth in Rakuten Pay app users as well as an increase in advertising revenue.

In December, we launched Rakuten ID integration with Uber, enabling users to earn Rakuten points based on their spending with Uber and Uber Eats regardless of payment method. Combined with points previously awarded for Rakuten Pay transactions. This offers a maximum points accrual rate of 2%.

Moving forward, we will strengthen our integration with Rakuten AI and Rakuten Gurunavi to realize a smarter, more convenient future. Rakuten Bank has already released its financial results, but the bank continued to see an increase in the number of accounts and the trend toward them becoming main accounts, resulting in an expansion in deposit balances and an increase in assets under management, coupled with the Bank of Japan's hike in policy interest rates. Interest income increased significantly, with ordinary income increasing 39.1% year-on-year to JPY 183.2 billion, operating profit increasing 51.7% year-on-year to JPY 75.1 billion and ROE of 21.5%.

Rakuten Securities achieved record high revenue, thanks to steady customer acquisition via new NISA as well as increased trading activities and a growing investment trust balance amid a favorable market environment and expansion in financial income. Going forward, Rakuten Securities will continue to work to acquire new accounts and promote various types of transaction.

Regarding the insurance business, both Life and General Insurance saw revenue growth with strong sales continuing, particularly in medical insurance for life insurance and Internet automobile insurance for general insurance. Moreover, profitability for both services is steadily improving. Going forward, we will continue to select and concentrate our product lineup and work towards further business efficiency.

Rakuten General Insurance has been working to improve its product portfolio through 2025. It is focused on selling profitable online automobile insurance and home content insurance for rental properties while gradually discontinuing sales of less profitable products. As a result, premium income from its focused products has grown to account for 77% of total income. Insurance income, particularly from online automobile insurance and home content insurance for rental properties grew by more than 50% year-on-year in 2025. It plans to expand further and to continue improving the profitability in 2026.

Finally, I will explain the mobile segment. Revenue increased 9.6% year-on-year to JPY 482.8 billion, and non-GAAP operating loss improved by JPY 47.1 billion year-on-year. In addition to revenue growth in the mobile business, improved profitability at Rakuten Symphony helped the Mobile segment achieve its first ever full year EBITDA profit.

Next, let's look at the main KPIs. As of the end of December, Rakuten Mobile had a total of 10.01 million subscribers and adjusted MNO churn rate that excludes contracts canceled in the same month of signing was 1.46% and an ARPU JPY 2,860. Rakuten Symphony as of the end of December had 74 customers and 17 sales partners for RAN as well as others.

I will now explain the business performance of Rakuten Mobile. Fourth quarter revenue increased 24.9% year-on-year to JPY 101.8 billion, driven by higher service revenue on the back of growth in subscribers, ARPU and increased device sales. While the non-GAAP operating loss improved by JPY 5.4 billion year-on-year, it widened quarter-on-quarter to JPY 40.8 billion due to upfront investments to strengthen revenue going forward. We expect the loss will resume its improving trend from the first quarter of 2026 onwards.

As I mentioned at the beginning, Rakuten Mobile achieved full year EBITDA profit in fiscal year 2025. Like operating income, fourth quarter EBITDA decreased quarter-on-quarter to JPY 5.9 billion due to the recording of upfront investments to strengthen our future revenue, but on a year-on-year basis, EBITDA improved from loss to profit. On the other hand, pre-marketing cash flow, excluding these customer acquisition-related expenses, amounted to JPY 26 billion, demonstrating solid growth.

The number of MNO subscribers in the fourth quarter increased by a net 594,000 due to strong B2C acquisitions resulting from growing awareness of various synergies with Rakuten Ecosystem as well as progress in turning the B2B pipeline into contracts by the end of 2025. As for B2C subscribers, when comparing population penetration in each demographic at the end of 2024 and 2025, we saw strong acquisition of users with high data usage, particularly among young people, thanks to strong acquisition from Rakuten Ecosystem, growth in device sales and promotion of content such as Rakuten SAIKYO U-NEXT plan.

Adjusted MNO churn rate for the fourth quarter was 1.46%, excluding cancellations in the same month the contract was made. This was an increase of 13 basis points quarter-on-quarter, partly due to seasonal factors. However, as a measure to curb short-term users with no intention of using from the start, we introduced a contract administration fee from November 2025, for contracts with a total of 5 or more lines. And as a result, the churn rate for the month of December 2025, improved compared to October and November. While closely monitoring market conditions, we will continue to strive to improve network quality and aim to reduce the churn rate.

ARPU increased JPY 3 year-on-year to JPY 2,860. During the fourth quarter, we made progress in acquiring B2B subscribers, raising its mix and lowering ARPU as its ARPU is lower than that of B2C. However, year-on-year, we saw higher ARPU, primarily in data ARPU and option ARPU, and we believe this upward trend will continue going forward. Regarding ARPU, we will continue to implement various measures to improve it in multiple areas, including data, options and advertising.

Starting from March, we will be running a campaign that will allow users to take advantage of Rakuten SAIKYO U-NEXT at a great price to coincide with the start of a new school year. Additionally, starting this month, Rakuten Mobile subscribers can get a bonus interest rate on top of their Rakuten Bank deposits. An even higher interest rate will be offered to Rakuten SAIKYO U-NEXT subscribers. This way, we will strive to increase ARPU by leveraging the synergies between content and group services.

Next, I would like to talk about network quality. As a mobile network operator, we naturally believe that providing a stable, high-quality network is essential. As I mentioned earlier, the number of young users who use a lot of data is increasing significantly. So we would like to once again focus on measures to strengthen our network in 2026. Improving network quality naturally leads directly to an increase in the number of subscribers. Until now, we have built our own network nationwide at an unprecedented speed and have also been operating it while using KDDI's network.

However, since we are experiencing a rapid increase in subscribers, particularly in urban areas, we would like to further strengthen our infrastructure so that our own network can fully handle the resulting increase in traffic. Therefore, we are planning CapEx of over JPY 200 billion in fiscal year 2026. Last year, we fell short of the initially planned investment of JPY 150 billion. But in 2026, we are not only building closer cooperation with construction companies, but also concentrating on our in-house human resources to accelerate base station construction.

Specifically, we will focus on measures for downtown areas and subways, where we have received many requests from customers to make improvements. In downtown areas, we are installing 5G base stations to distribute traffic and in subways, we are continuing to expand bandwidth. Regarding the development of 5G base stations, new base stations are being constructed in Tokyo, as shown in the image.

We are also working to strengthen our 5G network at stations on the Yamanote Line. As of December 2025, 5G was available at the 18 major stations listed on this slide, and we expect to complete the remaining stations in the first half of this year. For subways, we are continuing to work on expanding bandwidth from 5 megahertz to 20 megahertz and are prioritizing measures using 5G sub-6 in MIMO.

This slide shows the status of Tokyo Metro's network as of January 2026. As you can see here, we plan to complete significant network enhancements at most subway stations and transit sections by July 2026. We are also promoting similar initiatives on Toei Subway. We also plan to complete significant network enhancements at all stations and transit sections by July 2026, making it even easier to use Rakuten Mobile. In addition to these efforts, Rakuten Mobile has been continuously promoting initiatives to improve network quality based on reports received from customers.

Our surveys of Rakuten Mobile customers found that over 80% of users have experienced noticeable improvements in network quality. In 2026, we will undertake company-wide efforts to strengthen our network, enabling even more customers to experience improved network quality. Simultaneously, we plan to accelerate the pace of subscriber growth by rolling out various initiatives that allow mobile subscribers to enjoy greater value from our group services.

Lastly, on Rakuten Symphony, Rakuten Symphony achieved profitability at the non-GAAP operating income level for fiscal year 2025. In RAN, we have steadily shifted our revenue structure from delivery of low-margin hardware to a major customer to high-margin software and its customization and maintenance. In the Cloud segment, we are expanding our sales channels through Google Cloud Marketplace and we'll continue to expand our revenue base for various services. That's all for me.

Next, Hirose will explain our financial situation. Thank you very much.

This is Hirose, and I will explain our financial strategy. Non-GAAP operating income for fiscal year 2025 rose significantly by JPY 99.2 billion year-on-year to JPY 106.3 billion, thanks to improved profitability in each business. IFRS operating income also recorded a profit of JPY 14.4 billion, marking the second consecutive year of profitability despite the absence of the JPY 106.9 billion unrealized gain on AST shares recorded in fiscal year 2024.

For one-off items, we recorded impairment losses on fixed assets in the online grocery business in the third quarter and in Rakuten Symphony and Logistics businesses in the fourth quarter. Going forward, we will continue to optimize our business portfolio to mitigate the impact of these one-off items on our net profit and loss. Financial income and expenses increased by JPY 3.4 billion year-on-year to a loss of JPY 36.0 billion due in part to a year-on-year decrease in hedge valuation gains from currency swaps related to foreign currency-denominated perpetual subordinated bonds.

Having said that, this valuation gain or loss is due to impact of exchange rate fluctuations and other factors, and it does not have an impact on cash flow. Therefore, it has no effective impact on our financials. As a result, pretax profit or loss decreased by JPY 45.8 billion year-on-year to a loss of JPY 29.5 billion. However, excluding the one-off gain in fiscal year 2024 that I mentioned earlier, this represents a significant reduction in losses, and we believe we have been able to demonstrate a strong improvement in our business performance.

In the fourth quarter, we recorded impairment losses of JPY 20.5 billion for Rakuten Symphony and JPY 10 billion for the Logistics business. As a result of these impairment losses, along with the impairment loss for the online grocery business recorded in the third quarter, we believe that the risk of future impairment losses across the group has been reduced.

Allow me to explain the reasons why tax expense in fiscal year 2025 was significant, similar to fiscal year 2024. When we transferred a portion of our shares in Rakuten Card, the corresponding tax expense was eliminated because the gain on transfer was not recognized on a consolidated basis. This lowered the tax level in 2024. However, a one-off tax expense was incurred due to a reversal of deferred tax assets. In fiscal year 2025, while there was no such one-off impact, corporate income tax increased due to high growth of FinTech companies that are not subject to the group tax consolidation system.

We believe that the amount of tax expenses for fiscal year 2025 represents a somewhat normalized level. In 2025, we further diversified our fundraising methods. In July, we issued our first sustainability bonds. And in August, we accessed the domestic retail bond market for the first time since 2023. In October, we issued perpetual subordinated bond domestically. We believe that being the first nonfinancial company domestically to issue yen-denominated perpetual subordinated bond of size with capital recognition from rating agencies was not only significant for the diversification of our fundraising methods, but also important for the domestic bond issuance market.

In addition, we continue to make progress in our cash conversion cycle, achieving significant improvement year-on-year. We believe that these consistent proactive initiatives are continually being recognized by the market. The prices of our bonds issued in previous years and 5-year CDS spreads both reflect an improvement in our credit standing. We will continue to work consistently to improve our financial position.

From 2026 onwards, we will continue to aim for self-funding to meet capital needs of the mobile business. In addition, we have diverse funding options available for capital needs related to corporate bond redemptions, including domestic and overseas markets, wholesale and retail bonds. We will closely monitor trends in exchange rates, interest rates and other factors and consider the most appropriate option depending on timing.

Finally, I would like to explain our financial targets for fiscal year 2026. As Mikitani mentioned at the beginning, we are aiming for significant increases in both non-GAAP operating income and IFRS operating income. We have long set a goal of achieving the ratio of Non-FinTech net interest-bearing debt to EBITDA to less than 5x and by the end of fiscal year 2025, we had reached 6.5x, making a steady progress toward that goal. In fiscal year 2026, we aim to achieve a ratio of around 6x, and we'll work to reduce interest-bearing debt, increase profitability in each business and further improve our ability to generate cash flow. That concludes my presentation on finance.

Next, Ting Cai, Chief AI and Data Officer, will explain our AI initiatives.

Hello, everyone. I'm Ting Cai, the Chief AI and Data Officer for Rakuten Group. Today, I would like to use my AI voice to speak to you in your local language to better connect with you all. At Rakuten, we drive AI transformation through an initiative called AI-nization, where we systematically infuse AI into everything we do. Our vision is to augment human creativity with the power of AI. With our growth flywheel and real user feedback, we are building the durable power of differentiation by accumulating our unique data assets.

In 2025, we demonstrated continued strong momentum towards this vision, delivering tangible and measurable results across the organization. I'd like to share some highlights with you today. Our strategy and strong commitment to execution is paying off. In 2025, AI contributed an impressive JPY 25.5 billion in profit to the group, beating our fiscal year target of JPY 21 billion and more than doubling our 2024 impact. This strong result was driven by increased sales through better user experiences as well as cost reductions through increased operational efficiency. For example, Rakuten Ichiba increased the sales growth by running ads automatically selected by AI, while Rakuten General Insurance implemented AI analysis tools to quickly provide insurance quotes, improving customer satisfaction and boosting sales.

2026 is looking to be even stronger. We're aiming for 3x the impact we delivered in 2024. These results were made possible by our relentless focus on execution, shipping products and services that solve real user problems. Deep learning, large language and vision models are far better at capturing user intent and understanding the context than traditional machine learning methods. They provide more relevant results that users want to engage and spend more time with.

For example, in 2025, we launched the personalized search and popularity search. They remember user preferences such as brand affinity and capture trending products that are relevant to the individual. We estimate these new features will contribute to an additional JPY 25.5 billion GMS on an annual basis to Rakuten Ichiba. Beyond Ichiba, we are now expanding the features to even more businesses.

Another example is our discovery recommendations launched on Ichiba. By deeply understanding the customers' past transactions and current context, we can provide a nearly infinite scroll feed with attractive content that spans products, videos and helpful articles. As a result, users spend 41% more time than before on the recommendation experience, opening the door for new sales and advertising opportunities.

Speaking of ads, we launched Rakuten Promotion Platform that automatically optimizes where and when ads are delivered to maximize returns for advertisers. This resulted in significant return on sales for merchants and ad revenue uplift for Rakuten Group.

Another great example is our new category word ad functionality. It automatically matches search terms to brands and categories, eliminating manual work by advertisers and making ads more helpful for users to find the product they are looking for. Early results are strong. We launched the service on October 1 and saw ad sales spike to JPY 152 million in December, 6x growth versus September before the launch.

2025 was the year we launched the Rakuten Agentic ecosystem with the full-scale launch of Rakuten AI, our Agentic AI platform in July. Since then, we have sustained momentum by shipping more AI agents across the ecosystem, including experiences for Rakuten Link, Rakuten Ichiba, Rakuten Travel and Rakuten Beauty. In December 2025, Rakuten Ichiba launched Rakuten AI to 100% of the traffic on the Ichiba app. Customers love the new experiences. Early data shows that users who experienced Rakuten AI come back 7x more frequently than users who have not experienced Rakuten AI on Ichiba. Rakuten AI isn't just helping customers before and during their purchase. It's helping them get better customer service after sale, too.

Our new Gen AI-powered customer service agent, which we call Raptor, is being deployed across the ecosystem. Unlike previous generation chatbots that rely on rigid dialogue flows, our Gen AI-based solution is far more flexible and understands nearly every user question. It not only offers a chat experience, but also voice interaction, augmenting human operators to better serve our customers. It's already improving auto resolution rate and customer satisfaction, and we expect it to drive a significant contribution to Rakuten's bottom line as well with a projected profit uplift of JPY 4.3 billion in 2026.

On December 18, we announced Rakuten AI 3.0, which delivers a dramatic leap in performance and world-class Japanese language capabilities. And critically, from an efficiency perspective, it operates at 1/10 of the cost compared to popular frontier models such as GPT 4.0 when powering Rakuten ecosystem services. Rakuten AI 3.0 is the foundation on which we are building our language model strategy, build the best, partner with the best and create models that efficiently solve real user problems at scale. This point is key. We see a tremendous market opportunity in optimizing the models for domain-specific tasks with real-world data to improve the profit margin for businesses.

Looking forward, Rakuten AI is becoming an intelligent fabric that connects Rakuten services and grows ecosystem users and usage. Users are increasingly coming to AI agents for their needs from inspiration to actions. Agents can plan, execute and iterate, completing tasks on users' behalf. Agents are also becoming more intelligent by remembering context and getting to know you. We see the capability of AI models continuing to increase and the cost of intelligence continuing to decrease as we deploy better hardware, algorithms and data and shift more compute from the cloud to desktop and mobile devices.

Rakuten is uniquely positioned to execute this vision because of our unique ecosystem and growth flywheel powered by our applications, models and data. 2026 is a pivotal year for AI in Rakuten and for the entire technology industry. And we will continue to lead the way on high-impact, high-efficiency, high ROI AI. Thank you for your time.

Hello, everyone. Thank you very much for taking the time out of your busy schedules to join us today. I will be explaining the results of Rakuten Group for the third quarter of 2025. Here is today's agenda. First, I will explain the business performance. Then our CFO, Hirose, will explain the financial results, followed by our Chief AI and Data Officer, Ting, who will provide an update regarding our AI initiatives.

To begin, I will report on our consolidated results. Consolidated revenue for the third quarter of 2025 increased 10.9% year-on-year to JPY 628.6 billion. With solid performance in core businesses across segments, we achieved double-digit revenue growth in all segments.

The Internet Services segment rose 11.1% year-on-year, the FinTech segment 20.3% and the Mobile segment 12%. Consolidated non-GAAP operating income was JPY 38.6 billion, up 212.8% year-on-year. In Internet Services, there was a rush of demand before the rule changes for hometown tax donations were implemented in October. But even excluding the profit increase attributable to this surge, we achieved steady growth.

For this fiscal year, as with last year, we aim to achieve full year profitability for both non-GAAP operating income and IFRS operating income. Consolidated EBITDA was JPY 118.7 billion, up 28.8% year-on-year, a record high for a third quarter.

For the full year, we expect to generate over JPY 400 billion of EBITDA. Regarding the number of subscribers of Rakuten Mobile, we surpassed 9.5 million the other day. As I will explain later, we continue to build strong momentum in B2C acquisitions, and we will continue to accelerate this while converting our growing B2B pipeline, aiming to reach a total of 10 million subscribers by the end of 2025.

Next, I will explain the business performance by segment. First, a review of the Internet Services segment. In the third quarter, the Internet Services segment achieved solid growth, delivering revenue of JPY 349.6 billion, up 11.1% year-on-year and non-GAAP operating income of JPY 24.2 billion, up 14.5% year-on-year.

In the domestic EC business, in addition to strong performance in core businesses, loss improvement in the logistics business contributed to higher profits. In the International business unit, revenue grew primarily at Rakuten Kobo and Rakuten Viber, while an improvement in losses at the overseas advertising business also contributed, leading to an expansion in segment profits.

Here are the main KPIs for the Internet Services segment. Domestic ECGMS increased 14.5% year-on-year to JPY 1.7 trillion. The travel business grew 7.6% year-on-year, led by inbound and other global GDV. The IRR of our investment business was plus 17.8%. Revenue in the International business unit increased 5.4% year-on-year to $487 million, and revenue in the advertising business rose 13.5% year-on-year to JPY 60.4 billion, each achieving solid growth.

Regarding the domestic EC business, GMS grew 14.5%, as noted on the previous page. Due to the rush demand ahead of a change to hometown tax point allocation rule from October, we expect a reactionary year-on-year decline in the fourth quarter. Revenue increased 10.0% year-on-year to JPY 265.5 billion, and non-GAAP operating income rose 33.6% to JPY 33.9 billion.

Operating income also benefited from the pricing revisions implemented in the logistics business in June. Going forward, Rakuten Mobile and AI will continue to be the keys to our growth strategy.

First, let me talk about the synergy between Rakuten Ichiba and Rakuten Mobile. For Rakuten Mobile subscribers, we have been offering benefits that make Rakuten Ichiba more attractive, such as 5x SPU campaign points and early access sales for super sale campaigns.

We are also rolling out acquisition initiatives targeting those who do not currently use either Rakuten Mobile or Rakuten Ichiba and the results of these efforts are becoming to show in our numbers. Currently, Rakuten Mobile subscribers account for 16.2% of Rakuten Ichiba's monthly active users. Moreover, the GMS per Rakuten Mobile subscriber is 48.5% higher than that of nonsubscribers.

We will continue to raise mobile penetration on Rakuten Ichiba to further drive usage. The graph on the right shows the proportion of Rakuten Mobile subscribers among new Rakuten Ichiba users. This also continues to expand, demonstrating Rakuten Mobile's contribution to acquiring new users for Rakuten Ichiba.

Next, I would like to talk about the use of AI in Rakuten Ichiba. In September, we made an agent-type AI tool available to users within the Rakuten Ichiba app. While this is a soft launch and not yet available to all, we plan to roll it out to all users as we continue to make improvements to provide a better shopping experience.

We also provide AI tools to merchants on Rakuten Ichiba. Since launching in March last year, we have added and improved various functions and the number of merchants using the tools on a daily basis has been increasing. Currently, 23,000 merchants use them at least once a month.

We will continue to expand usage based on feedback, contributing to improved operational efficiency at our merchants. As I mentioned earlier, the travel business is also achieving continuous growth led by inbound and other Global Travel GTV. Rakuten Travel is also promoting the use of AI. In September, we introduced an AI hotel search function on the smartphone browser version of Rakuten Travel.

Up to now, users narrowed down conditions from preset options to search for hotels. But with this feature, users can tell the AI their preferences as of speaking to a travel agent at a counter, enabling us to propose accommodations that better match customer needs.

Turning to the International business unit. Revenue grew 5.4% year-on-year to $487 million, and non-GAAP operating income increased 78.8% year-on-year to $4.2 million, achieving a significant increase in profit. In the open commerce business centered on Rakuten Rewards, revenue was flat due to a cautious stance among U.S. retailers.

However, by optimizing the cost structure in our overseas advertising business, we improved losses, allowing overall profit to grow. In other businesses, we achieved revenue and profit growth backed by Rakuten Kobo and solid communications and advertising revenue at Rakuten Viber. Let me also touch on the drivers of Rakuten Kobo's strong performance.

Rakuten Kobo is an e-book company that we acquired in 2012. It not only provides content, but also develops and sells its own devices. As you can see, the e-book market is continuously expanding. Within this expanding market, Kobo's total registered users have been steadily increasing.

In particular, the color devices launched in April last year has been a long-running hit, driving growth in content sales and the number of subscribers. Going forward, Kobo will continue to differentiate through the development of attractive devices, aiming for further business expansion.

Next, I will explain the FinTech segment. Segment revenue increased 20.3% year-on-year to JPY 250.5 billion as the customer base continued to expand across services, and non-GAAP operating income rose 37.9% to JPY 55.2 billion.

Turning to key KPIs for each business. Rakuten Card shopping GTV increased 11.7% year-on-year to JPY 6.7 trillion. At Rakuten Bank, number of accounts rose 6.9% year-on-year to 17.32 million and deposit balances grew 10.1% to JPY 12.2 trillion. Rakuten Securities total accounts rose 10.4% year-on-year to JPY 12.86 million and NISA accounts increased 15.5% to JPY 6.72 million, maintaining our industry-leading position.

Let me dive into each business performance. Rakuten Card increased GTV driven by an expansion of its customer base and higher spend per customer, and it also benefited from last-minute demand ahead of the hometown tax rule revision.

Combined with the revision to the revolving payment fee rate from August, Rakuten Card achieved revenue and profit growth. Although interest expenses are increasing, we expect positive growth in operating income for the full fiscal year. Rakuten Payment increased revenue by 14.4% year-on-year, driven by GTV expansion, in line with the continued increase in the number of users of the Rakuten Pay app.

Operating income also increased 78.8% year-on-year, outpacing revenue growth as a low-cost base was maintained. As with last year, we expect to achieve operating income for the full fiscal year. Rakuten Bank has already released its financial results. Deposit balances continued to expand, driven by a steady increase in new accounts and steady progress in customers using their accounts as their main account.

For the April to September period, ordinary income increased by 41.4% to JPY 118.3 billion, while ordinary profit increased 55.3% to JPY 48.2 billion. ROE stood at a healthy 21.2%. A significant factor in these strong results was the substantial growth in interest income propelled by both an expansion in its middle-risk asset portfolio and Bank of Japan's policy interest rate hike.

Rakuten Securities achieved double-digit revenue and profit growth, supported by customer base expansion and an improving market environment. Both revenue and profit reached record quarterly highs. We will continue to acquire new accounts while expanding assets under management per customer and improving utilization rates.

In the insurance business, life insurance achieved strong sales of medical insurance and general insurance continued strong sales led by online automobile insurance, contributing to revenue expansion. Although General Insurance experienced a temporary loss due to a conservative adjustment to the projected income and expenses of existing contracts and increased insurance payments resulting from the Kyushu heavy rains.

We aim to accelerate recovery in profit through selection and concentration of product offerings by sequentially discontinuing low-profit products and optimizing the portfolio. Finally, I will explain the Mobile segment. Revenue increased 12% year-on-year to JPY 118.7 billion, with both Rakuten Mobile and Rakuten Symphony continuing to grow steadily.

Operating loss improved by JPY 10.1 billion year-on-year and EBITDA improved by JPY 16.4 billion year-on-year to a positive JPY 11.2 billion. I will now explain the business performance of Rakuten Mobile on a stand-alone basis. Revenue increased 31.2% year-on-year to JPY 95.2 billion, driven by higher service revenue from growth in subscribers and net ARPU.

Operating loss continued to improve, narrowing by JPY 13.4 billion year-on-year to a loss of JPY 37.2 billion. EBITDA improved by JPY 17.5 billion year-on-year to a positive JPY 7.8 billion. PMCF pre-marketing cash flow, which excludes customer acquisition-related costs that are upfront investments for future subscriber growth was JPY 24.3 billion, also expanding steadily.

We are steadily progressing toward our initial target of achieving full year positive EBITDA. Next, let's look at the main KPIs. At the end of September, total subscribers reached 9.33 million. The adjusted MNO churn rate, excluding cancellations within the same month of contract, was 1.33% and ARPU was JPY 2,873.

MNO service revenue generated from the MNO network increased 24.7% year-on-year to JPY 53.9 billion. The net increase in MNO subscribers during Q3 was 405,000. Although July to September is typically a soft season, acquisition initiatives in collaboration with Rakuten Card continued to perform well, boosting activations.

While churn increased slightly, the underlying trend continues to decline if we exclude the increase in same month cancellations. For same month cancellations, we have taken measures such as introducing a cancellation fee in April for contracts being canceled within 1 year. And starting this month, we introduced a contract administration fee for contracts with 5 or more lines.

In any event, we will accelerate the pace of B2C acquisitions heading into the fourth quarter while swiftly promoting early execution of our B2B contract pipeline, working toward achieving 10 million subscribers by the end of 2025.

Here is the trend in MNP net adds. While some carriers have been revising their plans, our M&P net adds continues to trend upwards with Q3 MNP net adds rising 71.4% quarter-on-quarter to 95,000 MNP subscribers. As MNP subscribers mainly use it as their main line, we expect them to contribute to further declines in churn going forward.

As I mentioned earlier, this quarter's MNO churn rate on an adjusted basis, excluding cancellations within the same month of contract was 1.33%. And as I explained on the previous page, in a macroeconomic environment of persistent inflation, we believe the relative attractiveness of our plan has improved.

Let me also touch on our corporate business. We now have over 23,000 corporate customers. Recently, by offering industry-specific DX solutions packaged together with our network, we have received strong feedback translating into new customer acquisitions. Of course, we will not limit ourselves to packaged offerings.

By accelerating the execution of our contract pipeline. Our corporate business will also work vigorously toward achieving 10 million subscribers within this year. We continue to push initiatives to improve network quality. As of September, installation of 4,611 base stations has been completed.

We will continue deploying new base stations to eliminate coverage holes and add capacity, implementing measures with an eye on next fiscal year's spring sales season. ARPU increased JPY 72 year-on-year to JPY 2,873. The third quarter typically sees seasonality with higher data usage starting with the summer break, and this year was no exception.

B2C data ARPU was the main driver of ARPU growth. Ecosystem ARPU at the top in pink, was flat due to dilution from an increase in new contracts by light users. However, if we calculate ecosystem ARPU solely for users who have been contracted for more than a year, it was JPY 865, indicating steady growth in loyalty over time.

Lastly, net ARPU has temporarily declined Q-on-Q due to higher SBU costs associated with front-loaded demand for the hometown tax rule change. This chart shows the trend in average data usage for B2C users. As I mentioned earlier, the third quarter has seasonality.

As you can see, average usage rose 3 gigabytes to 33.5 gigabytes. We also aim to raise ARPU by expanding new services. From October, we launched the Rakuten SAIKYO U-NEXT package. While it is offered at a promotional price through January 2026, we expect it to contribute to higher data ARPU.

We have also launched new security-related optional services, which have been very well received. Meanwhile, our original Rakuten SAIKYO plan will continue to be offered without any price change. As announced recently, Rakuten Mobile is advancing the introduction of a function called RIC that manages and controls ran with AI.

By automating everything from traffic pattern analysis and demand forecasting to base station utilization adjustment, AI optimizes the network, enabling low-cost operations, including reduced power consumption. We intend to pass these benefits back to customers through our monthly rate plans.

Lastly, for Rakuten Symphony, we successfully secured 6 new customers across North America, Africa and Asia. Also regarding our sales partners, we have announced a strategic alliance with POLYSTACK Technologies to provide locally developed advanced cloud solutions for the public and private sectors of India.

We will continue to expand our revenue base in various services. That concludes my presentation. Thank you very much.

This is Hirose, and I will explain our financial strategy. Revenue increased 10.9% year-on-year to JPY 628.6 billion, and non-GAAP operating income rose by JPY 26.3 billion year-on-year to JPY 38.6 billion, achieving positive growth in revenue and profit for the 12th consecutive quarter. Below non-GAAP operating income, we recorded non recurring items, including JPY 27.9 billion of impairment losses in the online supermarket business.

IFRS operating income turned more positive, increasing by JPY 7.4 billion year-on-year to JPY 8 billion. In financial income and expenses, derivative valuation gains and losses arising from currency swaps on foreign currency-denominated perpetual subordinated notes, which were a significant negative last fiscal year, swung to a large positive this fiscal year, contributing to a JPY 55.1 billion improvement.

Perpetual subordinated notes are accounted for in equity and hedge accounting cannot be applied. Therefore, gains and losses related to currency swaps are recognized in the income statement due to exchange rate fluctuations, et cetera, but there is no substantive impact on our financial position.

As a result, we recorded quarterly profit before tax of JPY 8.7 billion. Quarterly profit was negative JPY 11.5 billion. However, this represents a significant year-on-year improvement, and we believe we have continued to demonstrate a strong recovery in performance.

In September 2024, we changed the online grocery service name from Rakuten Seiyu Netsuper to Rakuten Mart. In the third quarter, we decided to exit the Ibaraki warehouse by year-end and suspend service in the Kansai area due to low awareness of the online grocery business under the Rakuten brand in that region and slower-than-expected customer acquisition as well as longer-than-expected time to build the product procurement process.

In light of these business conditions, an impairment test on fixed assets led us to record a non recurring loss of JPY 27.9 billion, including impairment of fixed assets. Going forward, we will improve profitability by strengthening and streamlining our procurement structure, enhancing collaboration with the Rakuten ecosystem and expanding our customer base and rebuilding and optimizing our logistics network.

Next, I will explain our financial strategy. Our financial policy is to enhance corporate value through building a stable financial base and appropriate capital allocation, and we are advancing various initiatives on both the business and financial fronts. As a specific financial target, we aim for a consolidated equity ratio of 10% in the long term. But given the solid asset growth in our FinTech businesses recently, we have set a medium-term target of achieving a level of 5%.

In addition, we position as our leverage discipline, keeping the ratio of net interest-bearing debt of non-FinTech businesses to non-GAAP EBITDA of non-FinTech businesses within 5x. We will promote this in tandem with proactive management of maturity schedule while driving company-wide efficiency, reducing working capital and reviewing our business portfolio.

Allow me to explain the background on setting the medium-term target for the consolidated equity ratio. Our consolidated total assets expanded significantly from JPY 7 trillion at the end of 2018 to JPY 26 trillion at the end of 2024. The main driver of the JPY 19 trillion increase in total assets was the expansion of total assets in our FinTech businesses against the backdrop of solid growth in their customer base.

In our FinTech businesses, while we maintain ample capital as a risk buffer, the accounting-based equity ratio is generally low. For example, as of the end of 2024, Rakuten Bank's equity ratio was around 2% on an accounting basis, whereas its capital adequacy ratio under the Banking Act stands at a sufficient 11%.

Considering this change in the composition of total assets due to asset expansion accompanying the high growth of FinTech businesses, we judged it reasonable to set a medium-term target of 5% while maintaining the long-term equity ratio target of 10%, taking into account the balance between capital efficiency and growth in both FinTech and non-FinTech segments.

We believe the market has recognized our consistent execution of financial strategies aimed at strengthening our financial structure. In October, we issued our first yen-denominated perpetual subordinated bond in Japan and received strong demand totaling over JPY 500 billion from domestic and overseas investors against the JPY 82 billion offering size.

The coupon was 4.691%, approximately 50 basis points lower than the post-currency swap rate on the U.S. dollar-denominated perpetual subordinated bond we issued in December last year. As this perpetual subordinated bond is treated as equity for accounting purposes, they also contribute to strengthening our balance sheet.

Our credit outlooks from domestic rating agencies were also revised upward to stable. Prices of corporate bonds issued in past years and our 5-year CDS spreads also reflect improvements in our credit profile. With steady improvements in business earning power, we recognize that the market's assessment is improving, thanks to our consistent execution of financial strategy.

We will continue to work diligently on financial improvement and deepen dialogue with the market to further enhance our evaluation. Finally, with respect to our financial target of keeping the ratio of net interest-bearing debt of non-FinTech businesses to non-GAAP EBITDA of non-FinTech businesses within 5x, this declined to 8.3x due to an expansion in EBITDA.

We are progressing as planned toward the year-end target of around 8.5x. We will continue to reduce interest-bearing debt and enhance cash flow generation across each business. Next, Ting, our Chief AI and Data Officer, will present our AI initiatives. Thank you.

Hello, everyone. I'm Ting Sai, Chief AI and Data Officer for Rakuten Group. Today, I will let my avatar share our latest updates with you as part of our initiative to leverage AI for better efficiency. I'm excited to share the progress we're making on AI-nization, our effort to infuse AI into everything we do for customers, partners and Rakuten team members around the world.

Our vision is to augment human creativity with the power of AI. We continue to build a sustainable competitive advantage through our unique data, ubiquitous channels and growth flywheel. Today, we'll be highlighting recent AI-powered product launches. Rakuten has a golden opportunity to become the world's AI empowerment company.

By infusing AI into existing apps and reinventing experiences, we are growing the Rakuten ecosystem with new uses and increased engagement. The rise of mobile technology gave users the ability to access information realtime on the go. It unleashed a new wave of applications and market leaders.

AI is now enabling users to access intelligence with its diverse portfolio of services, Rakuten is uniquely positioned to take advantage of this opportunity and empower more people with AI. Our deep learning investments, search, ads, recommendations and more have generated material impact across the Rakuten ecosystem.

Today, we are seizing the opportunity of AI agents that can better understand user intent, capture context, plan execution, iterate and improve on their own. Tomorrow, we're looking to deliver better economics by leveraging a variety of tools, including further development of large and small language models.

The goal above all else is to meet user needs with the most effective, cost-efficient solution. For example, while language models are powerful, they are way more expensive than traditional machine learning or deep learning tools for search. We know that not every user query needs a large language model.

By building the right suite of tools and leveraging our ability to better understand user intent and orchestrate the execution plan, we can intelligently match our customers' needs with the tool that will give them the best outcome and the best return on investment for Rakuten.

In July, we proudly announced the general availability of Rakuten AI, our Agent AI platform. Since then, we have been sustaining momentum by shipping more AI agents for Rakuten Mobile, Rakuten Ichiba and Rakuten Travel. Rakuten AI is now the everyday assistant for Rakuten Mobile users, accelerating decision-making in Ichiba and offering personalized experiences in travel.

Our momentum continues as we expand AI-powered services across the Rakuten ecosystem. For example, Rakuten AI and Rakuten Ichiba enables users to make faster shopping decisions by helping them advance quickly from vague ideas to concrete actions. Leveraging our vast amount of shopping data.

Rakuten AI can better understand user intent, provide relevant research, identify key factors to consider, help users to compare and encourage them to make faster decisions. This is a win-win. Customers get useful, personalized guidance that helps them make a decision. Merchants sell more and Rakuten drives more revenue.

Rakuten securities is leveraging AI analysis to create value for customers and contribute to Rakuten Group growth. It offers AI-powered services in high-impact investment-related areas such as overall rating, target stock price, industry financial assessment and performance analysis.

By leveraging AI to do research and resolve bottlenecks, investors are more confident to make investment decisions and complete more transactions. Following our announcement about the Rakuten promotion platform, RPP in the last earnings announcement, we are pleased to announce that RPP has been rolled out to all Ichiba stores.

RPP leverages AI to optimize the timing, channel and pricing of ads to deliver better ad content to customers, higher return for advertisers and more profitability for the Rakuten Group. As a testament to this pervasive integration and expanding impact and as a direct result of both diverse AI-powered service offerings and aggressive internal AI adoption.

Token usage on our AI platform has increased by 17x compared to 1 year ago, driven by concrete applications in coding, business productivity and the release of multiple agents to production services.

Finally, I'm excited to share a new development just announced on Tuesday. Rakuten and HP Japan are joining forces to bring the power of Rakuten AI to HP PCs. This partnership enables AI with on-device LLM capabilities for both offline and online use.

By integrating Rakuten AI and HP PCs, we empower users with better economics, performance and reliability on the go in the office and at home. This partnership is a first milestone towards making powerful agentic AI accessible to everyone.

Looking forward, we envision a future where agents are everywhere throughout the Rakuten ecosystem, not only helping users make their days more productive and make it easier to access Rakuten Group services, but also serving as proactive assistants that improve every aspect of their life. Thank you.