Z Holdings Corporation Stock

We will now begin the LY Corporation FY 2026 First Quarter Financial Results Briefing. Thank you very much for joining us today. For this briefing, we will be using the presentation materials available on the LY Corporation website. Attending today's briefing is LY Corporation President and Representative Director, CEO, Takeshi Idezawa; Director and Chief Financial Officer, Ryosuke Sakaue; Executive Corporate Officer, Media Search Domain Lead, Hiroshi Kataoka; Executive Corporate Officer, Commerce Domain Lead, Makoto Hide; Executive Corporate Officer, Corporate Business Domain Lead, Yuki Ikehata are in attendance.

First, Sakaue will present the financial results for the first quarter of fiscal year 2026. This will be followed by a Q&A session. The briefing is expected to last approximately 1 hour. Please take note that this briefing is also being live streamed. We will now start the briefing.

This is Sakaue of LY Corporation. Thank you very much for taking the time out of your busy schedule to join us at FY 2026 Q1 financial results briefing. Let me explain the summary of the financial results. There are 3 topics. First of all, it is about consolidated business results. The LY Corporation's gross profit grew with performance exceeding the internal projections.

More specifically, the consolidated revenue was JPY 553.9 billion, up 13.1% year-on-year. Adjusted EBITDA, JPY 154.8 billion, up 23.1% year-on-year. Strong growth were achieved. The second point is that the Agent i domains, Agent i expanded to 25 domains. DAU expanded to 12 million. So we are seeing a good progress in terms of the shift to AI agent.

The third is tender offer for Kakaku.com Inc. We aim to create synergies by combining user touch points, products, data and payment platform of 2 companies. Please go to the next slide. This is the agenda that I will follow. First of all, about the Q1 consolidated results.

Both revenue and profit made steady progress towards achieving the full year guidance. In Media and Strategic revenue, the progress was below the 25% of the guidance. This is due to the seasonality basically, and we assume that the revenue will concentrate in the second half. So we believe that the final results are in line with our expectations. And once again, this is the trend of the overall results. Revenue grew 13.1% year-on-year. The speed of the growth has accelerated.

Adjusted EBITDA grew by 23.1% year-on-year, significant growth. Margin improved to 28%, the major improvement. So the level of profitability is increasing. PayPay consolidation expanded the profit. And this has been the case in the past. But in addition, the higher gross profit of LY Corporation contributed to overall profit growth. So this was the major characteristic of our Q1 results.

Looking at the individual businesses, the Media, Commerce and Strategic, gross profit grew in all segments. In addition, in Media segment, the cost management was successful, and that led to the EBITDA increase of JPY 14.8 billion. On the right-hand side, there were newly consolidated subsidiaries in the last fiscal year that offset the negative impact coming from ASKUL. So adjusted EBITDA grew as much as 23.1% year-on-year.

Next page. What we are focused upon is the shift to Agent i, user navigation enhancement between LINE and Yahoo! JAPAN and also additional feature of the long-term memory of the user preference. Those are driving greater everyday usage. And also the Agent i has expanded to 25, and we are improving the usability.

Through those initiatives, the Agent i user grew to 12 million DAU. Next page. This is about the collaboration with 7-Eleven.

Last week, we made announcement. And once again, LINE Yahoo! has over 100 million digital customers. 7-Eleven has about 20 million per day physical customer. And as you can see in the middle, we have LYP Premium and Official Account and Mini app, we would like to align them.

For the LYP Premium members, we provide a higher rewards rate and also the coupons that can be utilized in the 7-Eleven stores. We plan to enhance the membership value as well as referrals. As for the official account and Mini app, through the expansion of the digital touch points such as digital membership and mobile order, we would like to improve the convenient and rewarding shopping experience.

Next is by segment. Looking at the Media business, the shift in the revenue mix progressed and the revenue grew steadily by 2.6% year-on-year. Adjusted EBITDA was 14.2% year-on-year and achieving the double-digit growth. The margin increased to 4.2 points and expanded to 41.8%. Now we have a new level of the margin. This is the analysis of the Media Business.

The portfolio transformation of this segment is progressing and the search and display ads were down year-on-year. However, the account ads continued to show the high growth. Also LYP Premium, the user number increased. So user subscription, including the LYP Premium, this is a new perspective, has also grew and contributed to the revenue. Adjusted EBITDA with the higher revenue of the account ad and LYP Premium, the gross profit improved.

And by using AI, the productivity improved and SG&A expenses was reduced and the adjusted EBITDA grew by 14%. Next, the number of the paid accounts has been growing. Total is right now 500,000, and we exceeded that level.

As for the revenue, it's expanding in line with our plan. Next. As for the mini apps, in Q1, the number has reached 35,000 MAU, 22.18 million, higher than 50% growth continued. So it's growing very rapidly.

DX transformation solutions and stores -- both stores and CRM is another initiative. In June, we began offering restaurant options, a digital transformation service for restaurants and started to monetize. The service is off to a strong start. We also plan to launch the service for hair and beauty salons during the second quarter.

Additionally, the CRM options, which enables more advanced management of LINE Official Accounts was launched in June for a monthly fee of JPY 5,000. It supports centralized management of customer information and communication optimized for each user. Through these monetization enhancements, we aim to achieve sustainable revenue growth of account advertising.

Please turn to the next page. This is on LYP Premium. The number of direct members, excluding free users through mobile phone carrier benefits has steadily increased to 6.82 million, up 36.8% year-on-year. Going forward, we aim to reach 10 million subscribers, including new plan users.

As part of our new plan offerings, we launched the lower-priced LINE Plan Enjoy Pack in July and plan to introduce the LINE MUSIC new plan in the fall or later.

Going forward, we talked about the benefits with the 7-Eleven offline benefits, and we intend to further strengthen the benefits and establish the media business as a key driver of earnings.

Next page, please. This is Commerce business. Revenue increased by 12.5% year-on-year, achieving double-digit growth. Adjusted EBITDA also rose 10.2% year-on-year, achieving double-digit growth. After ASKUL's pressure, we now were able to come back to the profitable level. The adjusted EBITDA margin improved significantly to 17.3%, a level close to the previous fiscal year. Next page, this is on commerce business performance.

LINE Yahoo!'s revenue grew 11.2% year-over-year, excluding the consolidation effects of BEENOS and LINE MAN driven by strong performance in shopping and reuse. Adjusted EBITDA posted double-digit growth, driven by revenue growth at LINE Yahoo! and the contribution from the consolidation of subsidiaries despite the impact of ASKUL.

This is on transaction value. Starting this fiscal year, the disclosure classification for commerce transaction value has been revised to align with that of the P&L. As a result, transaction value no longer includes media or equity method affiliates, providing a clearer view of each services growth.

For details, please see Page 24 of the supplementary materials. Shopping transaction value, this is mostly Yahoo! Shopping grew 9.1% year-on-year, continuing its growth trend. Reuse transaction value also performed strongly, up 18.4% year-on-year.

Service transaction value also maintained double-digit growth. Please see next page.

This is on shopping and reuse business. Yahoo! Shopping posted strong performance with transaction value up 8.6% year-on-year, driven by the time limited PayPay points promotions, the strengthening of product categories such as Gourmet Food and the enhancement of AI-powered features.

In the reuse business, the entertainment market expanded and measures such as shipping fee, refunds and coupon distributions proved successful, driving double-digit percentage growth in transaction value. Please see next page.

This is on strategic businesses. Revenue grew 34.9% year-on-year, maintaining strong growth. Adjusted EBITDA also reached JPY 35 billion, an increase of nearly JPY 14 billion year-on-year. Along with the revenue increase, the margin expanded to 26.9%, continuing strong top line growth and improved profitability.

Please see next page. Revenue maintained strong with the revenue of PayPay consolidated, up 28.4% year-on-year. Other fintech saw significant growth of 81.7% year-on-year, driven by the impact of the new consolidation of LINE Bank Taiwan and the growth of LINE FinTech. Adjusted EBITDA rose significantly by 64.4% year-on-year as the substantial increase in revenue offset higher SG&A expenses and other costs. Please see next page.

This is on PayPay consolidated business overview. The number of registered users expanded to over 74 million and GMV maintained strong growth, up 23% year-on-year, driven by increases in online payment GMV and interest income. Revenue grew by 27.4% year-over-year, exceeding the growth rate of GMV, while EBITDA also saw strong growth of 59.1% year-over-year, thanks to high take rate.

Furthermore, the acquisition of T&D Financial Life Insurance announced in June will accelerate the offering of comprehensive financial services.

Lastly, we will explain the scheduled tender offer for Kakaku.com. Overview is shown here. The tender offer price will be determined based on whether Kakaku.com acquires treasury shares from KDDI or not. The total acquisition cost is expected to be approximately JPY 690 billion in either case. This is a joint proposal with Bain Capital, and we aim to enhance Kakaku.com's long-term corporate value by combining the strength of both companies. The economic ownership ratio is expected to be 50.1% for Bain Capital and 49.9% for LY Corporation.

Please see next page. When this transaction is completed, we will leverage LINE Yahoo!'s extensive user touch point, data and payment infrastructure to drive synergies. There are 4 specific points shown here. We will drive user traffic to Kakaku.com's media platform and integrate Kakaku.com with Agent i and payment experiences, and we aim to deepen and expand DX solutions for the restaurants and HR domain.

This deal is yet to be closed, so I will not go into the details. However, when this transaction is finalized, further details will be provided separately. Please see next page. This concludes the summary of our first quarter financial results. Thank you very much.

Now we'd like to take questions.

[Operator Instructions]

First, Okumura-san.

Okumura speaking. Can you hear me?

Yes.

I have 2 questions, please. First, about Kakaku.com, TOB, scheduled TOB. Based upon the current conditions, the -- basically, it's 4% to 5% yield.

So for you, the IRR 10%, I think, is the standard for you. So the difference or the gap, how do you plan to fill that? What is the strongest conviction for this offer?

You mentioned the synergy in Page 25. But I'm sure that there are things which are not yet final. So what are your expectations? And what would be the impact that you expect from this? If you can elaborate on that?

Thank you very much, Okumura-san, for your questions. Let me answer first, and then Idezawa-san is might make some additional comments. IRR, 10%, the criteria? Yes, that's correct.

And for us, the biggest synergy that we have in our expectation is Tabelog. Using Tabelog official account area, we want to develop such area. That is the area that we would like to work on the most. This is something that we must do. This is like most important domain. So we have the highest expectation from that.

In addition, the next priority is Kakaku.com's services. And they have various, for example, product data and word-of-mouth data, and those can be utilized for our Agent i so that the Agent i can provide a better navigation for the shoppers, the Agent i can become smarter. So that's how we plan to utilize this. Yes. That's the question -- sorry, the answer to your first question.

One follow-up question, if I may. So the impact on the dividend, and also, would there be a impact in terms of the buyback?

As of now, the dividend, we announced the increase of the dividend payment that we do not expect any impact on those. The capital allocation for 3 years, basically, will not be changed based on the current assumptions.

My second question is about the media business and the results and the forecast. So search ad, I think you mentioned that the downward trend might stop. And on Page 6, you mentioned the differences, the fluctuations, and the gross profit, JPY 5.4 billion up and the gross profit increase is higher than the profit increase.

So because -- this is because of the fact that the search is down, the profitability per product, would there be -- are there any positive impact from it? What is the current status as well as the outlook, if you can comment?

Yes. Sakaue would like to answer to that question. First of all, about the stopping of the decline of the search, yes, it is. That is starting to happen, and that's what we see internally.

So Search Ads, when we look at the efficiency and power of monetization, I think we are seeing the improvements. So through that, the decline of the revenue is something that we are seeing.

And as for the gross profit improvement, on Page 11, if you refer to that, as you pointed out correctly, the low profit margin is declined and high profit product increase. So due to the improvement of the mix that led to the higher number. So that is the biggest part was the search advertising, as you correctly mentioned.

Yes. So it's product mix and the productivity -- sorry, the profitability of each product hasn't changed.

Yes, we have 4 now. So for each product, the productivity of each product remains the same.

We would like to take questions from Sato-san of Jefferies Securities.

This is Sato of Jefferies. Can you hear my voice?

Yes, we can.

I have 2 questions as well. My question is similar to the previous question. I'm also asking about Kakaku.com. Why this is important to you? I think you explained on that topic. So I was listening and nodding to the explanation. But frankly speaking, Tabelog from LY Corporation's perspective is the most attractive asset. Kakaku.com business, I think that you can also do that through using AI. But why this is most important to you? If the deal with the Kakaku.com is unsuccessful, what are you going to do? That is my first question.

Thank you for the question. Why this is important to us? The strategic significance is that when we look at AI era, the broad touch point with users and AI, 3 services that Kakaku.com has highly specialized data and customer platforms. So combining them would be very important in the era of AI rather than click type conversion and reservation has to be made before we can receive payment from the users and monetize.

So I said Tabelog is high priority and also Kakaku.com.

The purchase action can be completed using AI. So from that perspective, it is a very important asset. And Kyujin Box, the job posting box. Once conversion is achieved, then the service can be monetized simple posting of the job ads that will no longer be a valuable service in the era of AI. So these 3 assets, although I talked about our priority, we believe all 3 are important. There were a raising of prices as I have said 10% of IRR is our financial discipline. And it's possible that there may be further development, but we will continue to look into that.

The second question, what happens if this deal fails, especially restaurant-related areas and purchase AI agent or procurement agent?

This is a must-have domain for us. The changes through AI happens and expands in a very speedy manner in the next several months. In order to expand our market share in this domain, we can change the partners or using the synergy of SB Group like we did for PayPay, but we shall make investment in large amount to start up in an organic manner. So that is the backup plan we have.

This is a domain where business environment rapidly changes. Several years later, do we try to acquire Kakaku.com? Again, at that time, it will be too late. We believe this is -- this time around will be the last opportunity. If we miss this opportunity, we will change our strategy, including organic development, back up plan concept of IRR 10% remains the same. So that is the must-achieve requirement.

Anything?

This is Idezawa speaking. First, in terms of the importance and priority Kakaku.com has 3 businesses, and it also does incubation. The characteristic is that they all have high-quality conversion points, and they will network in the era of AI. AI Agent will connect various services.

AI is highly capable, but across Japan, the reservation of restaurants or product information or human talent registration, that is a very difficult area for AI to achieve. But if there is a concentration of such data somewhere and network, that will become very important. And this company that we are targeting has a very attractive services. So that is why we are proposing. What happens if we cannot buy? The speed is very important at this juncture. So that is the reason why we are proposing that we collaborate and work together. If this fails, we need to consider the backup plan on a speedy manner.

We already have a backup plan, and we will look into that. My point is that their services, the monetization and charging and settlement services, how can you attach those so that end-to-end service can be provided. The -- whether that opportunity is remaining, strength in that area and convert the mini app and develop as LY Corporation service.

Right. If you cannot also acquire the backup plan, then you have other things in mind, right? My second point, overall, the first quarter financial results were fairly good. Margin improved more than I thought. And adjusted EBITDA is growing in each segment. This momentum, do you think it's going to continue in Q2 and beyond?

Or you'd have a tendency to be slow in spending costs the beginning of the year. So cost cutting, cost saving worked quite well in the first quarter. So is that the reason for the higher margin? What about the sustainability of -- what about maintaining this momentum from second quarter and onward?

As indicated in the topics, this performance surpassed internal plans. So it was better, the profit was better than our expectation. In terms of the gross margin, Q2 and onward, in terms of the growth rate, we don't see major risks. As you say, SG&A, we were slow starter in spending. And that is actually true. For Q1, in commerce business, we plan to do promotion, but we were able to achieve GMV without spending for promotion. So that happened in commerce.

In the second quarter, the hometown tax scheme due to that, the change in that and seasonality, there may be some change in the second quarter. Media, the mix of the revenue direction-wise will remain the same, and display ad will continue to be tough, but account ad, and we have a recurring business, so we expect to add on gradually.

And SG&A will start to normalize from the second quarter. So the profit growth will -- may not be as high as the first quarter. But full year total, the guidance, we have the confidence to surpass the full year guidance.

I do understand that the high hurdle was there, thanks to the hometown tax payment scheme. But as much as you can comment, was campaigns or major launch, festival or any major event that you are planning in the second quarter that you did not do last year?

So far, no, no plan of anything new in major.

Next, from Goldman Sachs, Munakata-san.

This is Munakata of Goldman Sachs. I hope you can hear me.

Yes.

On the search ads, I have 1 question on that. And also another question on commerce. About the search ads, in the supplementary information, I was looking at it, and the number of the search is down and the demand is slowing down and that was offset by the improvement of the part of the products I understand.

So right now, the slowing down of the ad business and the number of search are being reduced. I think that one of the points that in the stock market drawing a lot of question. So is this within your expectation? I want to check on that.

And about the product improvement, I think that the unit price is coming up, so what are the items who contributed or which are the initiatives which contributed specifically? That's my first question.

Yes. Let me answer. About the number of search. Yes. Since last year with AI, the quick response can be given. So requery is not likely to occur. So the total number of the search, I think naturally will continue to face some difficulties. And this is something that we expected. We ourselves, the response of the AI, the percentage is being increased. So the number of the search is not likely to increase and that's going to continue.

As for the unit price, higher unit price and offsetting the lower search number. Yes, we -- what we have as a data, we would use it to the search, and then, by doing so, that led to the higher unit price per click. So we are trying to offset the lower number of the searches like that.

I see. So as Q1, I think, basically, it's in line when you look at the search ads alone.

Yes, that's correct.

So my second question is on commerce. The shopping and reuse, the growth rate have been quite steady and strong, in my view, especially what were the effective ones? In your presentation, you mentioned that AI function, navigation, so improvement of the functions, are you getting a good reaction from it? And in September onwards, there will be some change to the opening of the store plan in Yahoo! JAPAN Shopping. So by minimizing the negative impact and to have a smooth operation, what are the initiatives that you plan to have?

Yahoo! JAPAN Shopping, there are many things, but PayPay points related time-limited provision of the points, I think it's been 1.5 years already. And for users, I don't know whether that's a good thing, but I think that was -- has been effective in building the ecosystem because the points that we provide can be utilized within the ecosystem.

So it's more than a year, and it's impacting the GMV in a healthy manner. And what I did mention is that the profit of the Yahoo! JAPAN shopping is improving.

The outsourcing the fees and so forth, we could improve the efficiency of the cost side, and that was effective in Q1. As for reuse, I think that the entertainment market, growing area, and that part, I think that we are providing the sales promotion and other features and so forth, especially a weaker yen in relation to FX, and also, the prices are increasing in general.

And maybe Yahoo! JAPAN shopping will be difficult and maybe DS is setting better. So with the rising prices, I think the reuse is doing better than the Yahoo! JAPAN Shopping in general.

As for the revision of the shopping plan, this is something that we already talked about, and there were some impact, but especially the small stores or the stores with the small revenue churn, but that did not have any major negative impact. And I think that had the positive impact, for example, having the cleaner search results, and we changed the monetization or billings, so that led to some benefits as well.

So Yahoo! JAPAN Shopping, you are doing well in containing users. So the frequency of use of the users is increasing, but rather users coming from others, but rather the frequency of the usage is increasing. Is that the better of expression?

We have heavy middle and other users, and the heavy users or free users, I think they make even more frequent purchases in the Yahoo! JAPAN Shopping.

We would like to ask Harahata-san of Nomura Securities to ask your questions.

I'm Harahata. I have 2 questions. First question, Seven & i Holdings partnership in the short term and medium term, what kind of impact do you expect to which KPI, LYP Premium or account ad, any expectations in those areas? That is my first question.

Idezawa will answer your question.

The partnership with Seven & i, 7-Eleven, there are 2 initiatives that we have announced. One is for LYP Premium members. Basically, digital rewards are provided. Seven & i Holdings, with 7-Eleven, we have collaborated in stores, in physical stores, coupons can be used, and such a coupon will be added.

From that perspective, we can expect the member -- number of members of LYP Premium were likely to increase. And also official app, mini app will be jointly developed in order to increase the digital touch point. 7-Eleven has 20 million daily customers, and we have 100 million. So we both have a maximum user count. And by joining forces, we can enhance the mini app. So that is the KPI that we expect to improve the LINE Official Account in LINE Mini app.

We are going to further discuss on other initiatives going forward. As soon as we have concrete plans, we are going to share with you.

My second question is on media. The search and display and a competitive environment of those areas and the war in Iran is continuing. What would be the environment in the advertising market? What are the challenges of your company's advertising media?

The market-related question will be answered by Ikehata. And on AI recommend, I will answer.

Thank you for the question. I am Ikehata. The advertisers' perception of the market and trend as much as we know, let me comment. AI and various changes are happening and advertisers more than before are looking for the return on investment, they are stricter. In part of the sector, they are becoming more selective in advertising investments. The global environment is impacting, but we do not believe that, that is the major impact for the first quarter of our performance. The advertisers are judging the advertising methods very strictly and judging based on that. That is the overall industry trend. We are to improve the advertising effectiveness and media space improvement so that we can collaborate with advertisers to improve their investment return.

Related to AI, compared to other companies, our company have media data, click data, and we are working on utilizing such data to advertising. The text we have many media that is just with a lot of text. So even when we use AI, the market itself is tough that is because there is a shift to video. The video media, the video inventory is insufficient. That is a structural issue that is remaining. And text type of advertising display ad is improving thanks to the use of AI.

Next is SMBC Nikko Securities, Maeda-san.

Maeda from Nikko Securities. I have 2 questions . Earlier, the Agent i , the DAU -- 12 million DAU, how to interpret this number? I think that this is a cumulative number with different things added. So is it strong or weak? And how do -- have you monetized based on this? So the AI-driven growth is what you talk about? And how should we understand this number of DAU?

This is a strategic question, so Idezawa-san will answer.

Yes. First of all, the definition of the number, what we are disclosing right now, 12 million DAU, the Agent i, Yahoo! Finance, Agent AI, the average DUV and LINE Talk Room overall average, those 2 are added together.

And so as a beginning, I think it's a pretty good number and our target is 100 million users using Agent i, so that's what we aim for. So in that sense, this is something that we need to grow further.

So at the beginning, I think it's a pretty good number.

As for monetization in the previous meeting, I think we talked about the direction, and we are currently validating, verifying that. And specific monetization, we have not yet specifically started. So I cannot really say much. We are making preparations for it. But as for the direction, the user subscription is one thing. And for the companies using the official account or Mini app, providing AI functions to those companies. And also AI advertising is another thing.

So you can buy their AI agent in e-commerce. So then, we can get the advertising fee from company. So we have multiple things that are being validated right now.

My second question is also about Kakaku.com. IRR 10%. Is it including synergy or without the synergy, use of that debt, is that something that you can try to achieve?

So depending on the different way of thinking, the view on capital allocation and also the market or the view on the price will change. So how to have the leverage with debt? Or is that something that you are not thinking about? So once again, IRR 10%, do you think that you can achieve it without synergy? Sorry to say many things, but if you can talk about that.

We are working on the details and debt leverage, yes, that is something that we have in our assumptions. As for synergies, there are different patterns, the more likely ones and not likely ones. The -- something that can be achieved easily. And including all that, the IRR of 10% is what we are thinking about. So use of Agent i, we are making plans for the Agent i, but rather looking at the cost side and more certain ones, including the synergy, we think that the 10% is our standard.

Next, we will take questions from of Hosoi-san SBI Securities.

I'm Hosoi from SBI Securities. My first question is on media. My second question is on reuse. The media revenue is my first question. In the initial guidance, search and display total was flat year-on-year. That is the annual forecast. What is the background and outlook of the decline of the revenue of display and user charging grew by 13% other than LYP? What is growing? And is it sustainable?

On display ad, as of now, in total, we want to keep it at flat. The guidance is not revised. We still have 8 months, so we will make effort to realize the guidance or display ad. We will integrate former LINE and former Yahoo! advertising platform, and we are preparing for the launch of LINE Home. In the first half, we expect continue to be tough. In the second half, we are hoping to implement measures to achieve recovery. And that strategy remains the same.

Media, the monetization, charging users and other growth. In addition to LYP Premium stamps, those were very good and a lot makes up the large portion, but the majority is LYP Premium.

The first quarter gross margin, the start of the year, you made a good start. And I hypothetically, even if your search revenue declines, you can still achieve the guidance and that is the understanding of the first quarter.

Well, it's to the second half, but the Media segment was able to accumulate good profit, and we have, in a way, a savings for that. So I think that is achievable.

My second question is on reuse. You talked about the growth of entertainment. Is it overseas through BEENOS or mostly domestic? What are the items that are selling well.

In terms of the unit price frequency of transaction and MAU, what kind of KPI is growing?

Hide will answer your question.

This is Hide. I will answer your question. The growth in reuse is coming from entertainment. Both domestic and international businesses are growing. Service-wise, we have Yahoo! Flea market and Yahoo! Auction, both are growing. So entertainment products are growing in both platforms and the market itself is growing in that area. KPI-wise overall, the number of sellers and buyers both are growing, and purchasers and conversion rates, those are also growing. So overall, we are seeing growth.

And among entertainment products, trading cards, that category is growing, and there are high ticket items. So the average prices are also growing. So that was my reply.

[Operator Instructions] It seems that there are no other questions, so we'd like to end Q&A session. Finally, I would like to invite Sakaue-san to say the last words.

Thank you very much for taking the time to join us. So at the beginning of the fiscal '26, I think we made a good start. The full year guidance. I think especially about the consolidated numbers, we are more confident that we can achieve them. So in the shorter term, maybe we can exceed the guidance. And more importantly, the Agent i user, 100 million users, we would like to make sure that everybody uses it, and we'll be launching the different products to realize that. So we would like to continue to work on that. So I hope that you will give us your support and your comments. Thank you very much for your participation.

With that, I'd like to end the Q1 2026 results briefing. I would like to end that.

So once again, thank you very much for staying until the end. Thank you.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

[Audio Gap] FY 2025 full year and Q4 financial results briefing of LY Corporation. Thank you very much for joining us today. We'll be using the presentation material, which is shown on our website. Today's session from LY Corporation. We have Mr. Takeshi Idezawa, the President and CEO; Mr. Ryosuke Sakaue, Senior Executive Officer and CFO; Mr. Hiroshi Kataoka, the Domain of Media and Search Domain and Mr. Makoto Hide, the Domain Lead of Commerce Domain as well as Mr. Yuki Ikehata, the Domain Lead of Corporate Business Domain.

First Mr. Idezawa will explain the FY '25 full year and Q4 business results. And then we take questions. The plan to spend about 1 hour for this session. We are livestreaming this session. let's get started.

Thank you. This is Idezawa of LY Corporation. Thank you very much for taking your time out of the busy schedule to join us today, FY 2025, full year and Q4 financial results briefing. Let me give you the overview. First, at this, highlights the revenue and profit increased despite a temporary impact of ASKUL system outage on a consolidated basis. Excluding ASKUL, both revenue and adjusted EBITDA grew in double-digit percentage. We are accelerating the AI agent rollout to evolve line-based experiences and integrate into existing services. Centering around the AI agent rollout, we would grow business to realize the continuous profit growth and enhanced shareholder return.

Next fiscal year, we plan to increase the dividend per share to JPY 11. We aim to achieve ROE of 8% or more in FY '30. Next page. This is an agenda that I'd like to follow consolidated financial results. In fiscal 2025, consolidated revenue grew 6.2% year-on-year, adjusted EBITDA was up 5.5% year-on-year. The results ended close to the lower range of the initial guidance. Adjusted EPS was JPY 28.7 achieving the guidance. Please turn to the next page. Next is consolidated performance trend. With the business growth and new consolidation of the subsidiaries, higher revenue and profit was realized, especially the growth rate of revenue exceeded that of previous year. These are the factors of change in adjusted EBITDA.

New consideration subsidiaries led to higher COGS and SG&A., but the revenue growth driven by the strategic business and the commerce business reached 5.5% year-on-year. Excluding ASKUL, double-digit, 12.6% year-on-year profit growth was realized. Please turn to the next page. Next is the business performance by segment. Starting with the Media business. Account as growth offset the search ad declining. Revenue grew by 0.4% year-on-year. The adjusted EBITDA margin was 38.2%, continuously at the high level. Next page. This is analysis of build business performance. Account as growth pushed up the ad revenue as a whole.

Now COGS decreased but generative AI costs and official accounts and mainly related cost increased. Adjusted EBITDA, the profit declined 2.2% year-on-year. Next page, account at the OA usage by companies and stores is expanding. Paid account is increasing and pay as you go account is also expanding. As a result, revenue keeps growing at 15.3% at high level. Next page. This is about the LINE MINI app. We newly added MINI app tab to line from February to strengthen the user traffic and with a full-scale launch of the digital content bidding feature was launched in April. The number of the MINI app and MAU are expanding steadily year-on-year. We are working on the monetization measures.

Next is the digital transformation solution to stores. We will launch the restaurant option in June, beauty opportunity in the first half. As shown on the slide, it's not just to improve the efficiency of the store operation by using the official account, we would like to promote the customers' repeat usage. In those 2 domains, we aim to achieve 100,000 stores. Next is the LINE Revamp and LYP Premium. The new Home tab has started in March. And in addition to the personalized content by having the gateway to utilize AI, the user dwell time and engagement frequency increase.

In LYP Premium, we have been expanded that steadily and LYP Premium with Netflix started in February. And the number of direct subscribers increased by 28% year-on-year excluding the nonpaying users. Next page is the commerce business trend. Due to the ASKUL incident, the profit declined, but there were consolidations of the BEENOS and LINE MAN and the existing businesses grew and the revenue increase. This is the analysis of the commerce business performance. In addition to the new consolidation, the Yahoo! Japan Shopping and Travel also contributed to the higher revenue. The adjusted EBITDA declined by 12.8% year-on-year.

Next page, it's e-commerce transaction value. The reuse and travel grew significantly in Yahoo! Japan Shopping captured the hometown tax demand and large-scale sales promotion event was did well and the transaction value increased. Next is the major initiatives in commerce. In Yahoo! Japan Shopping, we plan to change the -- revise the shopping plan. We will change from the advertising-based model to sales-based royalty and monthly system usage fee model to improve profitability. Also, there will be a connection to LINE Shopping tab and commission on the AI-based transaction to diversify monetization.

As for reuse with the product improvement and consolidation of BEENOS, there was an increase of 14% year-on-year. We are also enhancing the AI functions. We expect double-digit growth next fiscal year. The next is strategic business performance. Revenue increased by 30.6% year-on-year, which is higher than the year before. Adjusted EBITDA margin grew to 21.1% and adjusted EBITDA grew more than JPY 40 billion year-on-year. This is the analysis of the strategic business. Revenue expanded mainly with PayPay consolidation. And also LINE Bank Taiwan was newly consolidated, and the growth of LINE Bank Taiwan contributed. There was a cost increase, but with the strong revenue growth. Adjusted EBITDA grew by 85% year-on-year.

Next is the overview of the business through the PayPay consolidation. PayPay made the first earnings call for the first time yesterday. And please refer to the details to PayPay's results, GMB and registered users are increasing. In payments and financial services. We are seeing the growth and just consolidated EBITDA is above JPY 100 billion level. Lastly, the initiatives for 2026. Next page, please. I will walk you through the topics in the order shown here, starting with adoption of AI agents in our services.

First, let me touch on the current state of generative AI usage in Japan. The environment using generative AI is changing rapidly, and the wide variety of AI services are growing now. However, usage today remains primarily business-oriented with only around 16% of users utilizing GenAI on a daily basis. In other words, there remains substantial room for wider adoption in terms of regular usage by individuals. We believe that by leveraging everyday touch points such as LINE in Yahoo! Japan, together with the broad range of service assets, we can deliver on AI to a much wider user base in a more natural and seamless way.

Next page, please. In response to these changes in the environment, we are evolving the user experience for the AI era, while also transforming our existing services. For that, we are pursuing 2 major directions. The first is the evolution of experiences centered around LINE. LINE serves as a core platform for everyday communication in Japan, and we believe it will continue to play a vital role as a close and trusted touch point with users in the AI era as well.

Accordingly, we will develop new service experiences similar to the AI era, built around LINE as a daily use platform. The second is introducing AI agents to existing services. Advances GenAI have the potential to fundamentally reshape the way all services operate and the services are not exception. We see these changes as an opportunity and will transform our existing services into forms suited for the AI era.

Under this strategy, on April 20, we announced Agent i, a new service, designed to serve as a great way to usage in the AI era. Agent i is an agent for consumers that can be accessed, but with just 1 tab from LINE or Yahoo! Japan. We are also rolling out Agent i for business for enterprises and stores. Through these initiatives, LINE of regional accounts were evolve into business AI agents that support corporate customer engagement. Users will be able to seamlessly access a wide range of services, while businesses and stores will be able to reach over 100 million users more efficiently and quickly. We intend to evolve Agent i into a new user touch point and business platform for the AI era.

Next page, please. Let me first explain Agent i for consumers. By simply tapping through the interface without the need to enter complex prompts, Agent i enables users to easily find the product information they are looking for. We already offer multiple domain specifications, and we'll continue expanding into additional areas going forward. Looking ahead, we will also introduce capabilities that allow these various vertical agents to form tasks on behalf of users according to their needs. In this way, Agent i will evolve beyond simply providing information into an AI agent that supports users' everyday activities.

Next page, please. Moving on to Agent i business for enterprises and stores. Agent i for business incorporates AI capabilities into many apps and official accounts to accelerate digital transformation for businesses. In customer service, LINE AI mode will handle customer interactions. It will enable semifinished responses to multiple customers as well as after our support, significantly improving convenience for both users and the stores. In operations and analytics, we will offer Agent i to this. AI will support the -- process for each company from planning and execution through to analysis. This will allow businesses and stores to improve operational efficiency, while focusing more on higher value-added activities.

In addition, by providing support from advanced analytics to execution, it will help sophisticate the marketing activities themselves. Next page, please. Now let me talk about monetization opportunities around AI. In addition to providing Agent i, we will also build multiple revenue opportunities. For user billing, we will leverage the LY payment platform to expand consumer AI subscription offerings. In advertising, we plan to launch agent-based app on Agent i during FY 2026. In commerce, we will promote conversion-based monetization through AI-driven purchase support. Monetization opportunity on the official accounts will be through the AI mode I mentioned earlier.

We will build new AIGP monetization models across usual touch points, business touch points, advertising commerce to expand our revenue opportunities. Next page. Next, our initiatives for shareholder returns and improved capital efficiency. This slide illustrates for medium-term targets for corporate value enhancement. Adjusted EBITDA and EPS, we are targeting high single-digit percentage growth or higher. We will also strengthen shareholder returns with our target of achieving ROE of 8% or higher by FY 2030.

Next page, please. We have formulated a new 3-year capital allocation policy. And by balancing growth investments with shareholder returns, we aim to achieve ROE of 8% or higher by FY 2030. Using operating cash flow as a foundation, we will execute CapEx and shareholder returns while also realizing financing as needed and allocating capital in a balanced manner toward growth investments. Next page, please. For returns, reflecting the earnings growth trends since the business integration we plan to increase the dividend to 0 per share in the new year.

In addition, as we have previously explained, we target a cumulative total payout ratio of 70% or more over a 5-year period and we'll continue to enhance shareholder returns in line with profit growth. Let me explain our earnings outlook. For FY '26, we forecast revenue of JPY 2.24 trillion, adjusted EBITDA of JPY 585 billion and adjusted EPS of JPY 30. While continuing to drive growth in our strategic businesses, we expect double-digit growth in both revenue and profit on a company-wide basis, supported by growth across our commerce business and account advertising among other factors.

We will also reduce fixed costs and further strengthen our operational efficiency. Lastly, let me briefly summarize today's key points. First, in FY '25. Our business foundation expanded steadily, resulting in higher revenue and profit. In FY '26, we will fully accelerate our agent transformation initiatives. At the same time, we will pursue both improved profitability and enhanced shareholder returns with the goal of achieving ROE of 8% or more by FY '30. This concludes my presentation on our full year results for FY '25 and the fourth quarter. Thank you very much.

[Operator Instructions] First, from Citi Group Securities, we have Yoneshima san.

This is Yoneshima from Citi Group. I can ask 2 questions, I understand, so I would like to do so. The first question is that your plan for this fiscal year EBITDA JPY 565 billion. It's a very strong number. The previous briefing session said that 10% to 15%, so JPY 550 billion to JPY 575 billion, I think, was the number. And so now it's JPY 10 billion plus. So this shows a certain direction. In the past or 3 months ago compared with a quarter ago, all the changes cost reduction or strategic business part? Is it growing or ASKUL recovery? Is it better than expected? So could you explain the reason originally 10% to 15% -- or 10% to 15% higher than the previous forecast. Could you explain the reason behind this? So that's my first question.

So Sakaue, we would like to respond to your first question. So compared with 3 months ago, has been increased and strategic segment, PayPay announced the guidance. So the upper limit is reflected to our number. That's the biggest reason. The second point is that 3 months ago, ASKUL and LINE MAN were not very certain we mentioned. But the ASKUL and LINE MAN budgets were confirmed and some upside was added. So those are the 2 major changes compared with 3 months ago.

I see. So a follow-up question. As for others, other than the segment, I think that about JPY 22 billion, if my calculation is correct. So like JPY 15 billion for this -- the last fiscal year and there is a positive JPY 7 billion. So I had an impression that maybe the fixed cost improvement.

That's not the case. Well, no change from 3 months ago. Some improvements year-on-year is that, for example, in fiscal '25, NEXT carrier support program was what we did and that was the corporate-wide cost. And the NEXT support was included in others. But that's for fiscal '26. This program is continuing, but the number and also the amount are like changing. So that led to the improvements -- so those are the major reasons.

Okay. My second question, the other day, Agent i was announced and now you can use it from LINE, and I'm using that. So for that the reaction so far -- initial reaction and also during this fiscal year, how much impact of the Agent i is on the top line and also cost. So with the Asian rollout, what would be the impact in terms of the revenue and cost? What do you think are reflected in the forecast for this fiscal year?

Well, thank you for your questions. First of all, as for the number of users, after the announcement, yes, we did receive some reaction so I think that the more people are using it, but the denominator is big. So it's still not showing the yield clearly. So we would like to grow this steadily. And also we would like to improve and enrich the services. As for the revenue and cost concerning cost first, in the SoftBank Group as a whole especially about AI.

I think that we are able to control the cost. So that is the current situation. So about the cost increase about the agent, we do not include the big cost increase. As for revenue, today, I -- we showed you some directions. And so this is just beginning. So we are currently working on the validation and we like to grow each one of these. So we cannot really talk about the specific numbers yet.

Just one point of clarification. AI or open AI license, for example, when the revenue increases, is the payment increases or even the revenue doesn't increase, when you use a lot of AI, the cost -- could the cost increase first. If you can answer that question, I would appreciate it.

Sakaue, we would like to respond because it has to do with the contract. So it's difficult to say. But as the usage increases -- the cost doesn't increase first. And we will be making the payment from the different perspective. So FY '25, AI cost is about JPY 10 billion for '26. It's not going to change that much. That is the current view that we have.

Next question is from Musa from Jefferies Securities.

This is Sato from Jefferies. I have 2 questions. My first question is on your guidance each segment I thought was pretty much in line with my expectations, but the profit seems to be a little bit bullish. Overall, for each of the segments. For example, for Media segment, is that a realistic number for e-commerce? The adjusted EBITDA is a little bit aggressive for the strategic business because the PayPay contribution -- but when you put together these numbers what were the assumption and the mentality of the management team when you put these guidance together? So because looking at the overall guidance, I think it's in the median of your range, but can you maybe point out if there are any conservative assumptions that you have baked in for Media, the search may be flat.

But for the search advertising still may be challenging. So can you give me a little more color to your guidance, please?

So Sakaue will respond to that question. First, on the media business for revenue for display ad and search ad for FY '26, the 2 businesses in aggregate is expected to be flat. And for the first half, this is a flat expectation may be a little bit challenging. So there may be -- also for the full year, we're trying to strive to maintain flattish growth over last year, but first half may be a little bit challenging. For account ads, we're looking at 15% growth, in line with FY '25 growth. But it was just the accounting. 15% growth will give us additional JPY 20 billion. This is a highly profitable business. So in that sense, the major JPY 10 billion is -- we try to do that with the account ads as a driver.

So for the display and search ad, we want to maintain a flat revenue over last year. And for commerce, ZOZO has disclosed their numbers. So you get the OP and the EBITDA, so that's like a JPY 5 billion in profit growth for Yahoo! Shopping for Reuse. GMV is expected to grow by double digit. And I think that will be sustainable. So to a certain extent, those are more of a realistic target. For commerce, the moving parts will be the ASKUL business because compared to FY '25, we are expecting some recovery for ASKUL business, but at this point, it's still uncertain how strong the recovery will be for Q4.

The ASKUL impact will be -- had been negative JPY 700 million. As compared to Q3, the negative impact has been mitigated substantially. So we're looking to go back to the pre-incident level during the course of this year, but there are still some moving parts. For strategic businesses, we use the upper range of the -- guidance and the line brands, global financial services are growing steadily. So for strategic businesses, I think we have a good visibility. And so that's the overall nuance of the guidance.

And the previous question from Yoneshima san, he talked about Agent i. I think this will be part of the Media segment. And it's too hard to say what impact you can expect from the Agent i business. So if there are to be upside, is it going to be ready to Agent i or I guess may be included into both Media and Commerce so is the upside going to be from an Agent i.

But I guess the amount will not be the debt because it's a fee-based business, right? Yes, as an opportunity, we have a good expectation, but the Agent i ad business is still on a pilot basis. So this is something that we have to work on, but we cannot incorporate bullish outlook. Then for the LLM cost for FY '25, '26, we are expecting a flattish level. So for Media, the SG&A increase is going to be on the store challenges for reinforced promotions.

I see. So my second question is, if you could give me some insights. On a company-wide basis, if you are going to roll out the campaign for Media, for instance, or commerce and maybe for strategic businesses, there is any big events or promotions that you already have a solid plan for? And if you could give me a rough idea of how much you're going to spend on promotion, I would appreciate such insights.

And also, if I may add the Ministry of Communications Cybersecurity, I think, investment is like JPY 15 billion. But has this been completed? So those are my questions.

Yes. So I will take those questions as well, for campaigns for commerce. No change from FY '25. So of course, the GMV is increasing. So the point expenses would grow in line with the GMV growth, but it will not put pressure on our margin. And on the Media business, last year, we did the TV commercials with search advertising business, but we're not doing that this year. So we do not expect any major incremental cost. And for the security measures, initially, we said JPY 10 billion, but now the FY '25 was JPY 8 billion. We do have some continued costs like license cost for JPY 2 billion to JPY 3 billion. So the reduction from last year JPY 8 billion is going to be like JPY 5 billion in terms of the security measures required.

So is that cost included in the other adjusted expenses?

Yes. Basically yes.

The other cost is improving and that's reflecting into a better adjusted EBITDA.

So yes, like I explained earlier, the cost on the next carrier support is 60% and 70%, and the rest is the reduction of costs related to security.

Next from Mizuho Securities, we have Kishimoto san.

This is Kishimoto of Mizuho Securities. I have 2 questions. First is about the Media business. In Q4, adjusted EBITDA is increased -- improving so maybe it has to do with the cost structure, but LYP Premium, I think, did prepare well. So for the full year, the profit was down. But if you look at Q4 only, we would like to know the details. And if we look at the LYP Premium monthly, for example, Page 13, there is a great growth. So it could have a positive impact. So this search ad and account as for vision and other LY Premium surrounding LY Premium. Could you give us some details.

Yes, I like also respond. This is Sakaue speaking. An account adds is something that will continue and LYP Premium with the higher numbers, the revenue, about JPY 0.4 billion in Q4. The growth -- year-on-year growth was realized. And search ads, as you can see, was negative. So that in terms of the gross profit that had a negative impact. If you look at the year-on-year change in Q4, this G&A, there have been some changes. And a year ago, the personnel cost and a part of that is going or for example, the bonus and so forth is not repeated, but this fiscal year, official account and we enhanced the sales promotion. So that was offsetting with each other.

So LIP Premium, yes, it's included, yes. That is the case.

My second question is about the Yahoo! JAPAN Shopping that we change or the plan change and the potential impact. What kind of negative impact do you expect?

Well about this double digit or more than JPY 1 billion contribution to revenue is included in our guidance. I'm sorry, I cannot disclose the specific numbers.

Understood. So as of now from the merchants, what have been the reaction so far?

Ikehata san will answer to this point.

Yes, in charge of commerce, I'd like to respond from the merchants of the stores. The reaction with the change of this firm level, the shopping service from LINE and the detailed scheduling and also the purchase via the AI, we are including that explanation. So currently, major sellers that are selling a lot, I think, have given us a positive reaction. And as for Yahoo! JAPAN Shopping, currently, we have an ad model and there could be some changes and -- for the sellers of the Yahoo! JAPAN Shopping, the commission is not going to grow so much. So for the major sellers, I think that the reaction has been very good.

But we will be charging the monthly fee and if the small, medium-sized sellers, who are not achieving that big sales in the Yahoo! JAPAN Shopping could -- but the impact on the transaction volume is going to be limited.

Next question is from Harahata san from Nomura Securities.

This is Harahata from Nomura. I have 2 questions. My first question is on the Media business. So we are faced with the Middle East risk. What is the impact on the advertisement market. Also, how would you assess the impact of the conflict in the Middle East on your ad business?

This is Ikehata speaking. So I will answer your first question. So as you pointed out, due to the conflict in the Middle East, LINE display ad to the search ads and the demand from the client and the client refraining from putting out the app is not happening. So at this point looking at the current quarter, we have not seen a material impact on our plan.

I see -- my second question is on agent in the monetizing opportunity. So you had some slides, but how would you score the level of expectations for this offerings? And what is the time plan of monetizing on these opportunities.

Yes. So this is Idezawa. I will respond to your question. So we are really working on this initiative. And at this point, -- so we are working on all of these simultaneously and try to allocate more investment into areas where we see growth opportunities. So it is difficult to rank them, but the users touch points to Internet were transforming into AI agent. And we believe that this is an inevitable trend. Also as we have been communicating, Agent i is something that we would like to grow so that we can also build the relevant monetizing model. So that's our forecast for FY '26.

Next is Okasan Securities, Okumura san.

I have 2 questions. First is about the Media business, MINI app, the store DX bidding business and also the search business. The number of stores and the amount of billing is this going to be increasing in basis or if the growth is going to be accelerated? What could be the triggers that you expect? And also achieving JPY 100 billion close to that level, what are the challenges before achieving that.

Thank you for your question. Ikehata is speaking. I'd like to answer to your first question. So right now, for the restaurant and also the beauty, the restaurant option and the beauty option, those are the pre-introduction, and we have already started selling those. Based upon our expectations compared to that, I think the reaction has been better. So we are in line with our plan. But in June and onwards, we will be launching this. But so as far now we are just making proposals before doing so.

About 100,000 stores this time, at the end of fiscal '28, we have the major target. So that's how we are proceeding with account-related businesses. So the restaurant and beauty, this store DX business against the JPY 380 billion at the end of fiscal '28, this will be the major portion. So we'd like to make the progress in terms of acquiring stores. And as for the account and the MINI app, it's not just the store DX, but also the LINE MINI app advertising business and also the payment, the commission, the billing business, which started from last fiscal year.

As of now, it's about JPY 10 million GMV per month. so concerning that the MINI app to what extent can we increase the number of MINI apps and also the number of the users, MMU, MAU is growing to what extent can we grow this, those become very important. But as of now, I think it's going very well. That's our understanding.

Second question is a qualitative question. The execution capability of our initiatives. You talked about various initiatives. In the past, from the investors, the level of the execution and also the speed. There have been some concerns expressed from April, mission value was updated and you're focused more on speed. So in terms of structure or decision-making process, are there any changes or differences from the past? Anything that you want to focus upon.

Example -- for example, Agent i intently, especially we have solicited the different ideas and with a very small team or smaller than the past, we have started multiple teams so that we can work on the development quickly so that's one specific example. And as you referred to, the mission of value were updated and so the process -- internal processes, we try to speed up and eliminate the risk. So execution as a whole, we -- as a management team is very much focused on improving that.

Next question is Maeda from SMBC Nikko.

This is Maeda from SMBC Nikko. I would like to ask 2 questions. My first 1 is regarding AI agent and LINE, Yahoo! both of them from outside, how can we assess the success of these initiatives. Are there any specific KPIs that we should be following? Or do you have any internal KPIs or target that you would like to share with the external stakeholders so that you can prove that it will lead to future monetization opportunities. So I also want to understand how you're managing the business, including the KPIs?

Yes. This is Idezawa, and I will take that question. The first, we are in the phase of having the users use these offerings. So the number of active users is the important internal KPIs. And as for the future disclosures, we will consider what is best for the outside personals to assess the success of progress.

Yes. So my second question is on the store DX restaurant option, you have JPY 36,000, beauty option is JPY 7,500. For this pricing strategies, I think you are the front runner and you have some competitive advantage. So what is the competitive edge? So are you trying to take shares away from the existing players? Or are you trying to target new customers who have not used a similar offering? So this may be -- already be a regular share market. So can you elaborate on the competitive landscape.

Yes, this is Ikehata. I will take that question. So this is that way other players are also offering similar solutions, and there are multiple players in the market. However, what we are offering solutions. For example, we're not just simply offering mobile ordering function. And it's not just the CRM solution and we are also not just offering the cloud hub or host. Also for the official account, we are trying to offer multiple solutions that will help to digitally transform other stores. So they will be connected and seamlessly help the stores proceed with the ads. So in regards to our value proposition, that is how we try to differentiate. And we can also leverage on the existing customers, the official account customers to offer this solution.

And in terms of the customer acquisition, this official account users in the stores and the businesses are the initial target for these solutions. And in reality, for our official account business, the restaurant and the beauty domains are very active and high in demand. And the customers appreciate the effectiveness of these solutions. Also for these existing official count customers, we also want to offer these peripheral solutions for restaurants and beauty. So going back to your question, the existing stores are using a similar solution.

If they are the official account, we will try to replace their existing vendors. And for the official count users who are not using these solutions of hard by the other players, we will try to acquire them as new customers for these solutions.

Next Kumazawa from Daiwa Securities.

In the supplementary information on Page 21, the Media business and search ads, LINE Yahoo! year-on-year, I think that it looks worse than Q3 in Q4, the major customers' trend and so forth, if you can elaborate on that?

Sakaue would like to respond to that, if I may. So FY '25 Q3, Q4, the major clients churn was the major factor. But at the same time, as up now, now the AI response is shown more. So in March time frame, about 13% is showing the AI response. So by doing so, users don't need to issue the queries many times. So in the AI dialogue, you can get the answer in the chat format and the accuracy of the first response is becoming better. So number of the query is being reduced. As a result of it, the existing search ads that are showing search ads is becoming less. So because of that Q4, the growth rate was negative.

At the same time, the major trend is that it's not something that. We need to make the self-disruption -- one of the self-disruption examples. So about the search AI response will be increased and at the same time, the search ads, the display frequency will be less. So agentic ads, we would like to launch that as soon as possible so that we can offset the decline of the search ads. So that's what we are thinking.

Kataoka, would like to also respond. In Q3 and Q4, there is a major difference between the 2. In Q4, as Sakaue san explained, the major client, the placement has come to an end so the -- if you look at the unit price of the ad, which has gone up and the search number has come down. And with the declining search number or number of searches, the market as a whole, the AI usage is increasing. And in addition to that, in our company, a number of the searches -- decreases, we want to increase the usage of AI.

So internally, even if the search uses goes down, we want to increase the AI usage and eventually, the AI ad business will emerge and if we don't do this, the usage of the search will be decreased. So we are taking this steps so that we can expect the growth in the future.

Just 1 more thing. Related to your answer. So you are seeing the cannibalization, so search and display and a flat must be -- might be difficult. Thank you very much for your explanation. Second question is on the Page 32, the capital allocation. So FY '25, the part that you are unable to use, it's not going to go for the return to the shareholders, but include a year. So we are hoping that it should be used for the return for the shareholders. And of course, the payout ratio is not mentioned, if it's 30% to 40%, the shareholder return of 40%. Without the share buyback, I think that you can achieve the shareholder turn. So what about the potential for the future buyback and it is mentioned here at the bottom about the financing.

Sakaue would like to respond. In Page 32 on the left-hand side, the '23 to '25 the financing and out about JPY 210 billion, the financing is about JPY 150 billion. So if we want to, you can do the financing, but it's a commitment line and JPY 150 billion is something that we don't do the financing. So out of the JPY 25.2 billion, we did not procure JPY 150 billion. And if you go to the right, at the bottom -- the capital procurement is at the bottom. So JPY 100 billion is carried forward and the remaining JPY 100 billion is rolled over to '26 to '28.

So shareholder return, we are enhancing the dividend payment. And part of the carried over, it would be used for that. And also, the profit is almost doubling. So based on that, keeping the dividend at the same level is not good enough for the long-term shareholder. So that's why we decided to pay more dividend that's for the share buy back. The payout ratio with the current level, the total return 70% or higher is not possible. So a certain level of the share buyback is something that we would like to continue to think about. So we had JPY 150 billion per year in the past.

It could change on that a little bit, but including the parent company, we would like to discuss with them, and we would like to also work on the share buyback at certain timing so that we can achieve the total -- the return ratio of 70% or higher. Otherwise, unless we reduce the denominator part, you cannot just use the growth part to increase the dividend payment.

So I'm cautious of time, and I would like to get the last question, Ramse san, from CLSA, please.

Sorry, Oliver Matthew. I have 2 questions. One, could you just -- on this 100,000 accounts -- for LINE official accounts, how do you get that number? Is it very conservative? That's the first question.

In your question on conservatism, this is actually quite aggressive also a stretch target in a way. So right now, for restaurant and beauty domain, this is a service prelaunch and the digital services are being used by the stores as a prelaunch. So in that sense, I think we can target 100,000 accounts. So we would like to make sure that we get that 100,000 and that is how we set the target. And for us, how challenging is the target? Right now, the restaurants that's already using the offshore account and stability salons are using the official accounts.

There's a few tens of thousands or a few hundred thousand users. So for those users, we would like to appeal the solution, and we would like to market and sell the solutions. Also, we have set up this subsidiary to reinforce our marketing sales capability to put more manpower. So through those initiatives in the next 3 years, we would like to achieve this target. So that that is your question.

Okay. Maybe PayPay could help you because you helped them expand very aggressively into these segments before. Second question, could you talk about AI productivity gains within the company? Are you seeing major changes in terms of the speed you are delivering new services or any other things?

With Agent i, we are trying to incorporate AI agent into the various services. And for that development, AI software has been used quite intensively. So our development capability is improving as well as the speed. And also for all the employees, we are promoting the usage of AI and the usage in the development phase is improving. And there are services and programs, which have intensively used there. But on the other hand, we have a lot of services. So we want to make sure there is a solid security and governance. So we have to work on both. But the development efficiency and speed will continue to improve in our view.

We'd like to end the Q&. Lastly, I'd like to invite Idezawa san to say a few words.

Thank you very much for taking the time out of your busy schedule to join us. FY '25 ended well, we expanded revenue and profit as for FY '26. We would accelerate the introduction of the agentic AI and that is being done in the society, we would like to transform ourselves and increase the speed and also on the business structure. And as a result, we would like to improve the profitability and also the shareholder return to respond to the expectation of the shareholders.

So I hope that you continue to support us. And thank you very much for joining us today.

With that, we'd like to end LY Corporation 2025, full year and Q4 financial results briefing. Thank you very much for staying until the end.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

We'll now begin the LY Corporation Fiscal '25 Third Quarter Financial Results Briefing. Thank you very much for joining us today. In this briefing, we will use the financial results briefing presentation materials available on the LY Corporation website.

Today's briefing is attended by the following members of LY Corporation: Representative Director, President and CEO, Takeshi Idezawa; Senior Executive Officer and CFO, Ryosuke Sakaue; Senior Executive Officer, Media and Search Domain, Domain Lead, Hiroshi Kataoka; Senior Executive Officer, Commerce Domain, Domain Lead, Makoto Hide; Senior Executive Officer, Corporate Business Domain, Domain Lead, Yuki Ikehata.

First, Sakaue will provide an overview of the fiscal '25 third quarter financial results. After that, we will have a question-and-answer session. The entire briefing is scheduled to last about 1 hour. This briefing is being live streamed. If you experience any audio or video issues during viewing, please use the link displayed at the bottom of the screen and move to another server.

Now let us begin.

This is Sakaue from LY Corporation. Thank you very much for taking time to join our fiscal '25 third quarter financial results briefing today. I will give you the overview of our third quarter financial results.

So this is the overview. At our subsidiary, there was a system outage due to a ransomware attack. So to show the underlying business performance in an easy-to-understand manner, we will present figures, excluding ASKUL for both the previous and current fiscal years.

First, excluding ASKUL, third quarter performance showed steady business growth. And as you can see, we had double-digit year-on-year increases in both revenue and profit.

I will present following the agenda. First, the consolidated financial results. So third quarter results. Consolidated revenue declined 0.7% year-on-year. But as I said, excluding ASKUL, it was 15.7% year-on-year increase. Adjusted EBITDA was down 2.3% year-on-year, but excluding ASKUL, it was up 11.2% year-on-year. So this is the third quarter.

So for the fiscal '25, we show our outlook, and we show also the outlook for next fiscal year. For fiscal '25, reflecting the impact of ASKUL's system outage, revenue is projected at about JPY 2 trillion. Adjusted EBITDA is expected to be around JPY 500 billion even after factoring the system outage impact.

Revenue growth in Strategic segment and company-wide cost reductions are supporting the overall performance. The Media segment has been on an improving trend since bottoming out in the first quarter. Adjusted EPS is also expected to land within the initial guidance range.

For fiscal '26, we aim to achieve for adjusted EBITDA, 10% to 15% increase compared with the fiscal '25 outlook of approximately JPY 500 billion, driven by business growth and cost reductions. So on a consolidated LY basis, we're targeting JPY 550 billion to JPY 575 billion. So as I explained, the underlying business has remained solid.

Next. So, EBITDA year-on-year analysis in the middle, this shows excluding ASKUL last and this fiscal year. Revenue increased driven by expansion in the Commerce and Strategic businesses. Although SG&A increased due to PayPay consolidated and Commerce, they were absorbed by revenue growth. We had 11.2% increased profit.

So this is ad-related revenue. Commerce, advertising grew 20.1%, supported by the expansion of transaction value and company-wide ad revenue grew 3%.

Next, about the e-commerce transaction value. Reuse, due to growth of Yahoo! Flea Market and consolidation of BEENOS achieved double-digit growth.

For shopping. So in Q2, there was a spike in hometown tax payments. So there was a shift from Q3 to Q2. And last year, there was a high level of tax payment in Q3. So reflecting that, it was a 2% year-on-year growth. Even including ASKUL, consolidated e-commerce transaction value was up 2.5% year-on-year.

Next, performance by segment. For Media, revenue achieved a slight positive growth year-on-year. Adjusted EBITDA declined 2.8% year-on-year, but the growth rate bottomed out in the first quarter and has continued to improve. Margins increased due to changes in the revenue mix.

Next. So this is the Media revenue and EBITDA year-on-year comparison. Revenue saw search advertising declined 9.5% year-on-year. Account ads rose 13.8% and display ads also posted positive growth. Total advertising revenue grew 0.4%. Adjusted EBITDA was down 2.8% year-on-year as decreases in costs such as outsourcing expenses were offset by increases in sales promotion and Gen AI-related expenses.

As we have shared in the previous earnings results, this is a mid- to long-term business development plan leveraging on OA, OA: LINE Official Account. The first point is capitalizing on OA's expanding customer base. And then we will build up services and layer structure from MINI Apps to SaaS to be offered from the first half of FY '26.

So from #1 to #3, I will give you the progress to date. So regarding the account advertisement, both Pay-As-You-Go Billing Accounts and Plan Revenue accounts increased. On the back of that, on the right-hand side, you can see that the sales grew by 13.8%.

So this is regarding the second point, the MINI Apps. The number of MINI Apps grew by 57.8% year-on-year. And the MAUs, it continue to grow at a high rate of 63.8% Y-o-Y. The promotions, growth in development partners and improved convenience of MINI Apps led to increase in usage.

So this is the third point regarding SaaS. For SaaS, we are starting with the SMB sector and the beauty category. For solutions targeting restaurants, we are acquiring Toreta to build a reservation capability, which was a missing piece for us. And this was recently announced.

This acquisition, it covers the functionality required for store operations, i.e., the reservation functions. Toreta services, as you can see on the right-hand side, have a proven track record. And it's a reservation log or strong in table management, and it is used mainly by casual restaurants. In the future, together with official accounts and reservations log, they will be linked to provide a one-stop solution from customer attraction to customer management and CRM. Through these efforts, we aim to enhance the ARPU.

Next page, please. This is regarding the Commerce business. Consolidated revenue and profits were down. Excluding ASKUL, impact of new consolidation and strong reuse business contributed. And as presented on Slide 4, excluding ASKUL, revenue grew by 31% year-over-year and adjusted EBITDA grew by 15.5%.

So this is again the Commerce business. On the left-hand side and the right-hand side, both excludes the numbers from ASKUL. For revenue for LINE Yahoo! Commerce, it increased by 64.4% Y-o-Y due to the consolidation of LINE MAN and BEENOS. A higher promotion expenses for Yahoo! JAPAN Shopping and Yahoo! JAPAN Flea Market was absorbed by revenue growth, as you can see on the left-hand side.

So the impact of the consolidation is JPY 1.1 billion as shown on the right-hand side. But excluding that, the EBITDA grew by 11.9% Y-o-Y, and we were able to achieve organic growth.

This is a Strategic Business. Revenue rose sharply by 30% year-on-year. We are achieving high growth. Adjusted EBITDA also expanded significantly. Steady growth continues with more margin expansion to 22.2%.

Next, this is the year-on-year comparison for the Strategic Business. PayPay consolidated revenue growth by 24%, and it is driving the segment growth. In Other Fintech subsegment, LINE Bank Taiwan, which was consolidated in the current fiscal year contributed. Higher SG&A expenses was offset by revenue growth, and we achieved growth in adjusted EBITDA.

This is focusing on the PayPay consolidated business. In addition to continued growth in QR code payments, interest income increased at banks on the back of loan book growth, leading to growth in both Payments and Financial Services.

As a result, both consolidated GMV and revenue grew at a high rate of more than 20% year-on-year. Consolidated EBITDA grew 59.1% year-on-year to over JPY 30 billion for the quarter.

So, this will be my last slide. And that concludes my presentation on the Q3 earnings results.

To wrap up, in Q3, despite the impact on earnings stemming from ASKUL system outage, the fundamentals were solid with double-digit growth in both revenue and profit.

Our focus areas such as Official Accounts and MINI Apps are also growing steadily, and we aim to maintain this growth trend and increase profit by 10% to 15% next fiscal year for FY '26. Thank you very much for your attention.

Now we would like to move on to the Q&A session. [Operator Instructions] So now without further ado, we'd like to begin the Q&A session. The first question, please. From Goldman Sachs Securities, Munakata-san.

Munakata from Goldman Sachs Securities. So, I'd like to ask two questions. Should I state the two questions together?

Yes, please.

So, with the Media business, so it seems to be bottoming. But ad demand, how has it trended past 3 months? Was it in line with expectations? In what areas was it not? And also SG&A, what's the ratio of the AI in SG&A? So that's the first question.

Second question, maybe getting ahead to ourselves, but next fiscal year -- this fiscal year, ad business was in a tough situation, but you did renewable LINE apps and you introduced AI agents. So I think you are quite aggressive on those fronts. So next fiscal year, 10% to 15% adjusted EBITDA increase is what you're expecting. But -- so things -- measures you've taken this year, how is that going to contribute next year? What is going to drive the growth next fiscal year?

Let me respond to the first question, and Ikehata will follow up. So, for the search ads improved quite a bit compared with Q2. So search ad product has been improved. We have improved it. And so the negative number has shrunk somewhat. Display ads, Q2, there was a special demand from hometown tax. And so it was just the same as Q1, but display ads is strong. It's moving into the higher revenue direction.

For account ads, it seems that globally, account ads using points not so active, not so vibrant. So Y-o-Y, a little less than Q1, Q2. But account ads using points, not so profitable, not high margin. So in terms of profit impact to the segment, not so big impact.

And for SG&A, AI for Media segment, it's about JPY 1 billion plus alpha. Ikehata, please.

This is Ikehata. So throughout the fiscal year, ad business, so you asked, was it in line with expectations? So let me give you our impressions.

So Sakaue has explained, and so I may be repeating some parts, but the three major things about the account business. And well, there's account and display and the search ads.

So for account ads was in line with expectations. So for next fiscal year, as was mentioned in the presentation, we are taking various measures for next fiscal year. So we are prepared for expansion, and we're able to maintain growth rate.

For display ads, this fiscal year, it was negative, but now it's becoming flat. And then single-digit growth is what we would like to realize. We've been saying that for some time. And looking back in terms of numbers, so from flat to single-digit growth, we are able to show for display ads. And so the ad platform construction that we've been working on and data sharing to increase ad performance, we are starting to see results. And so, we've finally been able to come flat and entering the single-digit growth. So it's based on our plan, it's going.

So next fiscal year, is it going to dramatically increase the growth rate? Maybe not. So let's be conservative. We will aim for flat or higher. That's what we will aim for. And one thing that may be out of line with expectations and something that we have to take measures is search ads. So in terms of numbers, you can see and Sakaue also mentioned -- commented about this as well.

So for next fiscal year, certainly, the existing search ads and the new shopping search ads and AI initiatives, those new challenges going to be pursued to improve the search ad business itself. That's how we look at this. So that's my supplemental explanation.

So for the next question about our image for next fiscal year, for Media, so I think we have become leaner, and we are improving productivity and raising margin. And so next fiscal year, we would like to solidly make profit increases. That's one thing.

For Commerce, so this fiscal year, we have taken various measures for Flea Market and Others. So reuse part, I showed you the number, including BEENOS. And the reuse part is getting on a growth trajectory. So next fiscal year in terms of profit, we are expecting it to boom. So Media Commerce, JPY 10 billion each profit increases is what we'd like to achieve. For ASKUL, some uncertainties. So, we would like to get plus alpha with a rebound.

And for Strategic segment, it's still growing around PayPay. So about JPY 20 billion increase in profit we'd like to achieve, mainly around PayPay. And Others, well, JPY 15 billion reduction in fixed cost is what we explained last time. And so that's outside of the three segments and JPY 15 billion reduction in fixed costs.

So if you add that, that would be JPY 50 billion plus. And then ASKUL, we're going to provide strong support if sales recovers. Well, if it can contribute more to profit, I think we can create strong numbers.

For the first one about the Media business, if I may follow up a bit, SG&A increased, so the ratio of AI, not so big was the impression I got. But the AI search usage rate, any changes in such numbers in the third quarter?

Comparing Q2 and Q3 in search, the ratio of AI ads hasn't changed so much, 10-plus -- a little less than 20%, 10-plus percentage, we're controlling at that level.

Next question is from Maeda-san from SMBC Nikko.

I have two questions. The first question is regarding the AI search that you just explained. So you said that you're managing that in 10-plus percent range. But going forward, by using the AI search, would you try to improve the impact of the ad, so that it can eventually lead to revenue per ad.

Google has been quite successful in that space. So to grow your search ad business, would AI be a driver for that growth? And do you have any good feeling for that right now? So are you managing that at 10%? Or do you just manage to have it used at 10% or so? So if you could just give us some nuance to that.

And also for next fiscal year on Page 13, you talked about the rollout of OA and MINI Apps. So, you talked about the market outlook. But for your revenue and profit, what are going to be the impact on your numbers? And also the timeline and addressable market and the scale, can you elaborate on those points as well for those strategies?

Yes. So I will respond to both of the questions. So Kataoka-san and Ikehata-san will follow up. For AI search, as a major direction, the AI search proportion will be increasing in the search result. So we are now doing some tests and trying to incorporate the ad for the AI results as well. So, on top of the genuine search advertisement, we will have the AI portion, which will be an uplift on the revenue.

And Kataoka-san, please?

Yes, I will follow up. So, first on the search ad, we have the existing search ad, shopping search ad. And what we're testing right now is the AI ad. So, we have the mix of the three, so that we can improve the decline we're seeing with the search ad business. So right now, AI results account for roughly 10-plus percent, and we are now planning to add new initiatives. So within the ad search, the AI results -- AI usage will be increasing. And we are now testing the AI ads so that we can monetize on that opportunity. So we will be growing the AI ads.

And on top of that, with the existing search ad business, the shopping ad business, we are now rolling out measures to improve. So all-in-all, we aim for growth. So we are intentionally managing that to just 10%, I mean the AI ad. And this is because we're still pushing up the functions for AI ads to be as competitive as the other ads. So as we push up the functionalities, we will be able to raise the proportion from 10-plus percent.

And on your second question, as we have shared in the previous earnings results for FY '28, we are now trying to double the revenue from the current JPY 140 billion to JPY 280 billion. And in terms of the mix, in the first layer, which is the official account, we are expecting 10% to 15% stable growth. And then what's short to the doubling of the revenue, maybe JPY 100 billion, that would be covered by the second layer, the MINI App and also the third layer SaaS business.

And in terms of the margin, for the first layer for the official account, the margin will be the highest. And then SaaS and for the MINI App, we have to think about the mix between the ad and the payment. But if the payment is larger, then the margin may not be that high.

So, Ikehata-san, do you have any follow-up?

Yes, this is Ikehata. Thank you for the question. So maybe let me put this into the context of the timeline. For FY '28 that target remains unchanged. And for next fiscal year, for FY '26 and also beyond '27, '28, first, looking at FY '26. For the existing official account, the first layer on this diagram, we aim to achieve further growth. And that is going to drive the revenue growth.

And on top of that, simultaneously from this fiscal year to next fiscal year, we are going to be working on the monetization of the second layer MINI App and also doing the marketing for SaaS. So for monetizing FY '27, FY '28 will be the timing for incremental revenue for the MINI App and the SaaS business. At the same time, for Toreta coordination is something that we have in the plan. So then the SaaS product launch may be happening earlier than expected. So for the FY '27, '28 timeline and the impact on profit, as we get more clarity, we will be sharing our outlook. But at this point, this is the timeline that we are expecting for the monetization opportunities.

Next, from Okasan Securities, Okumura-san.

This is Okumura from Okasan. Two questions. First, clarification of the previous question. Next fiscal year, JPY 10 billion profit growth for Media is what you're aiming for. And MINI Apps and SaaS as of Q3, you don't have revenue yet. So in increasing JPY 10 billion profit, MINI Apps and SaaS, what's the contribution expectation for next fiscal year? Should we not expect much in the next fiscal year?

Second question, several years ago, there was a security incident and talking about the response to that. So end of next month, those measures are to be completed. Is that the understanding correct? And from April onwards, any restrictions to be removed? So PayPay implemented in LINE app or the kind of more collaboration within the group, is that going to be strengthened? Are you going to enter that phase? So what are the measures you have in mind with the ending of the measures against the incident?

So I'd like to respond to both questions. So Media numbers for next fiscal year. So as Ikehata mentioned, in Q3, we had no revenue. And for next fiscal year, MINI Apps and SaaS, so will be single-digit billion. So JPY 1 billion to JPY 1.5 billion. It's very small, and it should be tens of billions in '27, '28. So we're preparing to achieve those numbers in terms of sales for '27, '28. So it will be mainly around official account and we're going to increase margin to achieve profit growth.

As for the security incident, so end of March, we are planning to end the measures. So going forward after that, PayPay and LINE, Yahoo!, ID Link, some parts that have not been completed, those areas we would like to work on and prepare for those measures. That's all.

Nagao-san from BofA Securities.

This is Nagao from BofA. I have one question. At the outset, you talked about the next year's outlook and aiming for 10% to 15% growth. So thank you for sharing that. So that would mean the profit growth will be JPY 50 billion to JPY 75 billion profit growth. And I would like to confirm, as for Media plus JPY 10 billion, Commerce with the existing business, plus JPY 10 billion. And for the remaining, how do you aim to grow by 10% to 15%? You have the cost reduction and also recovery of ASKUL. Did you say that together will be JPY 30 billion? Can you clarify those numbers once again, please?

Yes. As I'll be repeating my answer. So Media, Commerce were JPY 10 billion plus each. Commerce does not include ASKUL. Strategic businesses, plus JPY 20 billion is my image. And Media, Commerce and Strategic segment, outside of that cost reduction, it will be roughly JPY 15 billion cost savings across the organization.

So, sorry for repeating my question. But -- and these numbers does not incorporate ASKUL's performance recovery?

That is correct.

I see. That's clear.

From Nomura Securities, Harahata-san.

Harahata from Nomura. Two questions. So Media business, the business environment change next fiscal year on ChatGPT. That's going to be a trial and Gemini also. So that may expand to Japan. So how do you see the change in the competitive environment?

And second, there was a reporting in Nikkei in January. So the system foundation integration between Yahoo! and LINE. So Nikkei said several tens of billions yens of savings with the integration. So when are you going to see the impact of the cost reductions based on that? Thank you.

To answer your first question, the Media competitive environment change may be including ads, so Kataoka will answer that one.

This is Kataoka. Let me respond. So GPT and Gemini, number of users are increasing in the market. So there is the user need. And so there's going to be further usage. In addition to that, we are also doing testing. So with the increased number of users, there will be ad space and the testing has started to add ads to those spaces. So ad market, we think will grow gradually. That's our expectation. So there will be more users and ads will grow for them.

But from existing search ads, is it going to simply switch from there to that? Well, the market itself is growing now. So the overall pie is growing. And so in terms of the weight, there's going to be this search ad. So in terms of how we understand the market, Well, there's going to be various solutions. So we consider that a positive thing. That's all.

The second question. Next fiscal year, I talked about the three segments. And outside of that, there will be JPY 15 billion cost reduction. And one part of that is the LINE and Yahoo! technology foundation integration, lowering the infrastructure cost. So that is included in that JPY 15 billion. So that's going to bring about the impact over several years. So next fiscal year, yes, we would like to achieve impact so that there will be several tens of billion as of yen total. So I don't have the numbers at hand about what's the specific number for next fiscal year, but that's my response.

[Operator Instructions] Next from Jefferies Securities, Sato-san, please.

This is Sato from Jefferies. Can you hear me?

Yes, we can.

I have one question. In Q3, vis-a-vis the internal plan, how did you do? For Media for the internal target, was your result in line with the internal target? How about e-commerce, excluding ASKUL?

And also for Strategic businesses, I think you outperformed the original plan or maybe in line with your internal projections. Also briefly, compared to the internal target, how did you do with the Q3 results?

Yes. For Commerce, it was pretty much on par with the plan. For Media, it's difficult to say which point. But about a year ago, from that base point, compared to the internal original target, we were slightly short, but that was offset by strategic segment and others.

So if that's the case for Q3, compared to the internal target, Media was slightly weaker than your projection. Is that correct?

Yes, just very slightly.

From Daiwa Securities, Kumazawa-san, please.

For the EC service, so foreigners, maybe Chinese people may not be able to come to Japan. And EQ and hotel reservation, what's the expectation for January, March quarter and onwards? What's your current outlook?

Hide will respond.

This is Hide. EQ and Yahoo! Travel, so the current users are mostly domestic users. So Chinese people not come to Japan, leading to lower reservation, that's not going to happen because it's our main user base is Japanese users. Where there will be impact is inventory of hotels. So until recently, there were many inbound customers and so there was competition, strong demand. And so unit price have gone up. But in some areas, the unit price is coming down. So there is some impact there. Overall, not such a big impact. But in some areas like Toreta in Okinawa, we see a slight decline in unit price of hotels.

[Operator Instructions] It seems that there are no further questions. So we will complete the Q&A session. So lastly, we would like to have Mr. Sakaue give a closing remark.

Yes. So I have explained the presentation. So I will hand over to Idezawa-san for the closing remarks.

Yes, this is Idezawa, and thank you very much for your time today. As we reported, we had the ASKUL impact. But setting that aside, the businesses fundamentally have been making steady progress. For next fiscal year, we are aiming for 10% to 15% growth, and we are now putting together the plan for next fiscal year.

And important thing is going to grow with the product. So we are now working on AI agent and also working on all the other services. So focusing on that and also with the ad business we will try to revive that for -- to achieve growth. So we would like to achieve multifaceted growth, and we hope to continue to enjoy your general support.

Thank you very much for participating today.

So with that, we would like to complete LY Corporation's Q3 earnings results for FY '25. Thank you very much for joining us today.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]

We'll now begin the LY Corporation financial results briefing for the second quarter of fiscal year 2025. Thank you very much for joining us today. We will be referring to the financial results presentation available on the LINE and Yahoo! LY Corporation website. During today's session, we kindly ask you to follow along with the material.

Joining us today from LY Corporation are Mr. Takeshi Idezawa, President and CEO; Mr. Ryosuke Sakaue, Executive Corporate Officer, CFO; Mr. Yuki Ikehata, Corporate -- Executive Corporate Officer, Corporate Business Domain Lead; Mr. Makoto Hide, Executive Corporate Officer, Commerce Domain lead; Mr. Hiroshi Kataoka, Executive Corporate Officer, Media and Search Domain lead.

First, Mr. Idezawa will provide an overview of our financial results for the second quarter of fiscal year 2025. Following his presentation, we will hold a Q&A session. The entire briefing is scheduled to take approximately 1 hour. We will be live and streaming this session. If there is any distortion or inconvenience in the video or audio, please try alternate server link.

This is Idezawa of LY Corporation. First, before explaining our financial results, I would like to comment on the system failure caused by a ransomware attack that occurred at our group company, ASKUL Corporation on October 19 and the partial leakage of information held by the company. We sincerely apologize for the significant concern and inconvenience caused to our customers who use our services as well as to our business partners. The details regarding the damage potential information leakage and recovery status have already been communicated by ASKUL. The company is continuing to work closely with external experts prioritizing a safe and prompt restoration of systems while investigating the cause and confirming the scope of impact including any personal data. LY Corporation is fully cooperating with all recovery and investigation efforts. As the parent company, we take this matter seriously, and are committed to restoring the situation and preventing recurrence and strengthen the information security framework across the entire group.

Now let me explain our second quarter financial results. Please turn to the next page. First, here is an overview of the second quarter results. Consolidated revenue was JPY 505.7 billion, up 9.4% Y-o-Y. Consolidated adjusted EBITDA grew 11.3% Y-o-Y to JPY 125.4 billion showing solid profit growth. Additionally, progress in AI agentization and the expansion of LINE Official Account and Mini apps are progressing smoothly, preparations for the LINE renew are also steadily progressing. Home tab refresh scheduled within the year.

We will now proceed with the explanations in the order of the agenda you see here. First, the consolidated company-wide results. Next page, please. These are the results for the second quarter. Although consolidated revenue was slightly behind the guidance due to the decline in search advertising revenue, adjusted EBITDA and EPS are on track with the guidance.

Next page, please. These are the consolidated performance trends, driven by the growth of PayPay consolidated and progress in efficiency improvements at LY Corporation, adjusted EBITDA grew 11.3% Y-o-Y, achieving double-digit profit growth. The margin also improved year-on-year.

Next page, please. These are factors of change in consolidated adjusted EBITDA. Although expenses increased, revenue growth in the Strategic Business and Commerce Business outpaced the expense increase, resulting in a year-on-year increase of JPY 11.7 billion in adjusted EBITDA. BEENOS and LINE Bank Taiwan have been fully consolidated since the second quarter with the 2 companies contributing JPY 900 million to adjusted EBITDA.

Next page, please. This is consolidated total advertising-related revenue. This quarter, commerce advertising achieved double-digit growth driven by increased transaction value and the total ad revenue grew by 2.4%.

Next page, please. This is consolidated e-commerce transaction value. Domestic shopping transaction value grew 13.1% year-over-year, supported by last-minute demand ahead of the discontinuation for awarding points for hometown tax donation program. Reuse saw year-on-year growth of 15.7%, driven by Yahoo!'s lead market growth and BEENOS contribution.

Next page, please. Regarding the upward revision of the dividend forecast, we conducted share repurchase during the first half of the current fiscal year and the cancellation of these shares was completed on September 3. Consequently, as the number of shares eligible for dividends has decreased, the annual dividend has been revised upward from JPY 7 to JPY 7.3.

Next page, please. This is on progress on the LINE app revamp. The renewals of the talk, shopping and wallet tabs have been rolled out in phases since September. Home tab renewal is scheduled to make a test release this year.

Next page, please. This is on optimization of management resources. Firstly, on human resources, we are reallocating to growth areas such as AI agents, which will be explained later, Official Accounts and MINI Apps. We will reallocate our human resources so that by FY 2028, 50% will be allocated to growth areas. We will reduce the fixed cost by JPY 15 billion by the end of fiscal year by 2026 and build a leaner financial structure.

Next page, please. From here, I will explain the financial results by segment. Next page, please. First, the Media Business. Although both revenue and adjusted EBITDA declined, continuous cost-saving efforts are yielding results, leading to improvement of adjusted EBITDA margin on Q-on-Q basis. This is performance analysis of the Media Business. While search advertising revenue contracted, growth in account advertising drove an increase in total advertising revenue.

Next page, please. Account advertising continues to perform strongly in both the number of paid LINE Official Accounts and pay-as-you-go revenue. As this is an area we are strengthening alongside MINI Apps, we will provide a more detailed explanation of future strategies and initiatives later.

Next page, please. Next, the performance trends for the Commerce Business. Second quarter revenue reached JPY 216.6 billion, a year-on-year increase of 7.2%. Adjusted EBITDA was JPY 33.3 billion, although profit declined due to increased promotional expenses related to the hometown tax donation program, the decline narrowed compared to the previous quarter.

Next page, please. Performance analysis of the Commerce Business. The business as a whole is expanding steadily. In addition to the full consolidation of BEENOS, Yahoo! Shopping and subsidiary growth contributed to increased revenue. Next page, please. performance trends for strategic businesses such as payment and financial services. Revenue continued to be driven by PayPay consolidated, reaching JPY 109.7 billion, a year-on-year increase of 35%. Adjusted EBITDA also continued to grow, reaching JPY 22.9 billion, an year-on-year increase of 52.1% with margin remaining at a high level.

Next page, please. Performance analysis of strategic businesses. Payments and financial services are both growing steadily. Furthermore, the full consolidation of LINE Bank Taiwan contributed to increased revenue.

PayPay consolidated business overview. Each service is growing smoothly. Our number of payment per user and unit price, those KPIs are progressing smoothly. As a result, consolidated sales has increased Y-o-Y, plus 30.4%. Consolidated EBITDA was more than doubled. So the second quarter showed a significant strong growth.

Next, from here, I will explain our key strategy going forward. Next page, please. As our company-wide key strategy, we will advance as 2 wheels that agentization of all services and the enhancement of Official Account and MINI Apps. In agentization for the 100 million users using our services, we will provide services like search, media, finance and commerce more conveniently via AI agents.

And for corporate clients such as businesses, companies, stores and brands, we will provide customer contact points and business support function through our function enhances Official Accounts and MINI Apps by improving the value provided to both users and clients and by seamlessly connecting both via AI agents, we will realize new service experiences and expansion of revenue opportunities.

Please turn to the next page. First, regarding our initiatives for AI agentization. First, our goal is daily AI agent used by our 100 million users in Japan, aiming for 100 million DAU. Currently, in October, DAU for AI services is 8.6 million, especially AI answers on Yahoo! JAPAN search and LINE AI Talk Suggestions are used frequently and user numbers have begun to expand. Also for AI Talk Suggest, user billing has started and monetization efforts has also begun. Going forward, we will promote AI agentization of each service and aim to expand users.

Next page, please. Next, regarding the enhancement of OA, Official Account and MINI Apps. But before talking about the specific initiatives, I'd like to explain the structural transformation of the Media Business. Earlier, I explained the revenue decline in search advertisement in the Media Business, while steadily bolstering the conventional search and display advertising businesses, we will achieve sales and profit growth by further growing OA and MINI Apps where we can provide our original value. Over the next 3 years, we will increase the share of high gross margin OA and MINI Apps to about 40% and aim for an adjusted EBITDA margin of 40% to 45%.

First, regarding the performance of OA, Official Accounts in Japan over the last 3 years, our track record, the number of paid OAs improved by a CAGR of 14% and ARPA also improved. And as a result, OA revenue also grew 16% annually on average and sales have grown to the scale of JPY 100 billion in Japan and JPY 140 billion, including global.

Please turn to the next page. On top of this OA growth foundation by further building a MINI App platform and adding a SaaS-like store support solutions, will create a multilayered revenue structure and aim to double sales in 3 years. This fiscal year, as I mentioned, doubling the JPY 140 billion to JPY 280 billion. In this fiscal year, we will first focus on expanding MINI Apps based on OA and launching the SaaS business.

Important KPIs for the revenue models of each areas are shown in the lower section of this page. MINI Apps are -- our scale expansion is very important for KPIs in the growth phase. In OA SaaS, we set ARPA improvement as KPIs. But we think these KPIs as leading indicators to monitor our business goals.

Next page. Let me explain structurally. First, there is an OA, Official Account as a base. Currently, there are 1.3 million active Official Accounts used in Japan, in which number of paid Official Accounts are 310,000. We see the target accounts for future expansion such as businesses, companies, stores and brands at about 5 million. So we can still grow the number of OA accounts, and we will also further increase the ratio of paid accounts.

The second layer, MINI Apps to OA using companies and stores, we will propose a customer contact point via MINI Apps, expanding MINI Apps numbers, growing users and creating businesses like payments and ads within them. The third layer is SaaS solutions, developing specialized support for high affinity industries like Store DX or reservations, aiming to raise ARPA. Service launch planned for 2026 first half. And we'll have more new solutions at the right timing when we can introduce them to you, we will. We will provide services more broadly and deeply and provide a deeper solution via SaaS by industry to expand our sales.

Finally, regarding the recent growth of MINI Apps, as you can see on the left-hand side graph, number of apps has increased by 1.5x and the number of users has increased by 1.6x, steady growth. And we are strengthening our sales structures. We are enhancing proposal to bigger companies and installation at large enterprises like these are beginning. As you can see, and as a measure to strengthen inflow, we are leveraging LINE touch, which allows users to instantly launch MINI Apps at stores and the LINE apps revamp focusing MINI Apps will also begin. So we will further expand both the number of apps and the users and build a situation where businesses like advertising payments that can be provided.

Let's turn to the next page. And finally, a summary of the Q2 financial results. Sales and profit expanded steadily. Our company performance was -- experienced a solid growth. Going forward, centered on AI agentization and Official Accounts and MINI Apps, we will accelerate the growth. We will promote AI agentization across all services, offer AI services to 100 million users and create new value. Also, we will enhance OA and MINI Apps. And while transforming the media portfolio, we will achieve growth and improved profitability. This concludes our Q2 financial results explanation. Thank you very much.

We would like to now begin the Q&A session. [Operator Instructions] First from Goldman Sachs Securities, Munakata-san.

I'm Munakata from Goldman Sachs. I have 2 questions. My first question is on search ads. In the first quarter and also in the second quarter, the impression I got is this business is quite tough. The degree of toughness, is it correct to understand that it's the extension of the first quarter? Or are there any additional reasons? And on search ad, what would be the realistic guidance towards the second half? That's my first question.

Thank you for the question. I am Sakaue. I'm the CFO. Let me reply to your question. Second quarter year-on-year is worse compared to Q1. One of the factor is one major client budget allocation was weak, and that continued into the second quarter. And in addition, in other clients, the budget reduction happened. This I'm referring to large EC companies in Japan and vertical companies declined, and that can be called additional from Q1. So that was the additional factor for Q-on-Q deterioration. And Q3, Q4, I think the degree of negative -- negativity is same as Q2. For Q3 and Q4 as well, that is our forecast.

I have a follow-up question. There are other clients with quite reduction. Is there any structural reason such as shifting in-house or revisiting ROI of advertising? Is it more of an economic trend? What is the nuance?

This is Ikehata. Let me reply to your question. This is Ikehata. I would like to add some more comments. In addition, there were some industry -- well, in addition to prior quarter's reduction trend in other industry, partially, that is -- there was a reduction in ad spend for search ad. The concept of ad placement, I don't think that is such a reason. But overall, LINE Yahoo! search ad performance is being monitored and the advertisers operate. So based on that, there is -- there was a decline in ad placement. We will continue to work on the performance improvement of search ad, and that would lead to getting these customers back. So rather than any unique circumstances, we are to continuously work on performance improvement of search ad.

I understood fully. Another question is on MINI App. This time, various figures were presented and outline was explained, and I was able to learn. Thank you very much for that. The portfolio shift -- this chart has been shown. Just to reconfirm display and search, basically, it's very difficult to grow these areas. Is that the assumption you are setting? And JPY 140 billion to be expanded to JPY 280 billion, that has been rather difficult. And what is the pathway you envision? For example, from the first half of 2026, you're going to start SaaS service. So from the second half of next year, do you expect the sales to accelerate?

This is Idezawa. Let me answer your question. Display, search, naturally, the measures to revamp or to boost them, we are taking measures. And also thanks to the organizational change that we have implemented, we are able to implement activities to work on recovery. But structurally speaking, I don't think this is an area where we can expect high growth rate. So from that perspective, we will support the baseline for the display, search. And then apps will drive the growth.

And we have the target of Official Account doubling and CAGR-wise, it has been 16%. And so we have this growth of OA, Official Account as a basis. And to add on top of that, we are going to provide MINI Apps and SaaS services. So we will be pursuing the target by having breakdowns or compositions in mind. On MINI App, it's not a linear growth, but when we have a certain number of clients, then we can expect a significant activation. So the MINI App platform will be stronger in the later half. And then that would be the overall picture.

Next question from SMBC Nikko, Mr. Maeda, please.

This is Maeda from SMBC Nikko. I have 2 questions as well, please. I'll be recapping the previous comments regarding search linked ad. Together with popularization of GenAI, the negative impact to queries. And when I look at the performance, some of the clients looks like ad placements are declining in numbers. So because of this GenAI, the performance is having a negative hit on the flip side. If you could please share more on the recent trend?

And also for the market, we -- there is still a concern that GenAI rise can be a negative for a search-linked ad. If you could please share your outlook, that would be great.

Thank you, Mr. Maeda. Sakaue, I will start, then possibly Kataoka will follow up. At the moment, Yahoo! Search, 10% of query comes from AI search. And at the same time, the answers from AI search are business query where there is no opportunity for search-linked ad, like questions and answers. Those are the search keywords that we get. So it doesn't have much impact to our revenue and profit making. But at the same time, mid- to long term, regarding those business query, I would think that the there will be more use on use of GenAI. So media and search, we expect the next 3 years to be flat plus extra.

This is Kataoka speaking. As Sakaue mentioned, number of queries for search have not resulted in significant decline in the number of queries. There is no major time shift in the search trend. And ad performance itself hasn't deteriorated. So within this big global trend, there's more use cases from GenAI are increasing. And I'm sure more of our clients companies are considering to further use GenAI. We believe that there will be opportunity, the monetization business opportunity when it comes to GenAI-led search as well. So we are considering various different means to monetize.

Second question, regarding Commerce Business. In second quarter, each services growth on the Page 8. Regarding Yahoo! Shopping, the hometown tax, I wonder how much of that impact is included. I wonder in the second half, there can be a significant decline in the growth as a reversal factor. And if you exclude the BEENOS impact, what is your true growth opportunity? So the growth in the cruising pace and growth from a one-off reason, if you could please share for the results in the first half and what you expect for the second half, please?

Okay. Sakaue would share some figurative indication then -- and I'll have my colleague, Hide to provide additional information. And regarding Yahoo! Search -- sorry, Yahoo! Shopping, for second quarter, the growth was about 19%, 1-9, so quite significant. And hometown tax, late high single digits, mid-single digit to high single-digit growth. And for Reuse, this includes Yahoo! Auction, Yahoo! Flea Market and BEENOS as to be about 15% growth. So excluding BEENOS, we do have mid-single-digit growth. Second quarter has this last-minute demands for hometown tax. So that led to this significant growth rate.

This is Hide to provide additional information. Regarding Yahoo! Shopping, a significant impact from hometown tax. This is something that was happening at the end of the year in December time. So it's a front-loading of that demand now. Compared to the last year, Q3 growth rate will be stagnant, will slow down. For Reuse, excluding BEENOS, I do see the trend continuing. In other words, Yahoo! Auction growth is quite steady and Flea Market is growing significantly. So when you take the weighted average, our growth is mid-single digit. I would think that for the second half, we can expect a similar growth, and we'll have a synergy, as you can see on the right-hand side, to have a more significant growth in the midterm.

Next, Okumura-san from Okasan Securities.

This is Okumura from Okasan Securities. Can you hear my voice?

Yes.

I have 2 questions. On Page 26, you have been explaining on the account ad and MINI App expansion and double the sales from this, I would like to reconfirm Official Account, the platform part based part, the assumption is the current growth rate. And through MINI App several dozen billion will be added on top. Is that the assumption? If this becomes a reality, it's wonderful. But what is the background for being so bullish at the time of launch, the assumption of the MINI App or MAU in order to achieve your assumption, what kind of measures and scale of investment you're going to make in order to achieve your strategy? That is my first question.

Firstly, the growth image of official apps, I would like to explain and the strategy to grow will be replied by Idezawa-san and Ikehata-san. The existing OA part, the current level of growth can be maintained. To be more specific, 10% to 15%. Currently, it is growing at nearly 15%. So maintaining the same growth level. The paid accounts can be expanded in this pace, but that will not bring us to double. So the gap will be compensated by MINI App and SaaS. The strategy will be explained by Ikehata.

Thank you for your question. Let me just add some more comments. In your question, you said that it's still the starting phase and this forecast may be bullish at the starting phase. But right now, we already have Official Accounts and MINI Apps, although partially we are not monetizing yet to many customers, similar solutions are offered and being used, and it's been -- the customers are satisfied. So for MINI Apps, we will increase the number. And at the same time, we will focus on monetization. That is for next year and beyond.

Official Account SaaS solution already, including third-party solutions, we are collaborating with various companies and various solutions are already being utilized. So our strategy is to monetize them from next year and onward. We haven't been able to try or something that does not fit the market to start from scratch. Well, that is not the case. We already have existing foundation of Official Accounts, and we are offering various services, and we will expand and further monetize. So that is the basis of our assumption to achieve these targets.

What about the scale of investment? JPY 10 billion was the media investment for this year. What about the investment going forward?

The details will be discussed, but we are working on the awareness strengthening through advertising for MINI Apps and we are going to focus on promotion and PR. And regarding manufacturing or production, as shown on the slide, we are to reassign human resources to these growth domains to speed up the launch of products.

My second question, on LINE, you are going to implement AI agents. I would like to ask about that. ChatGPT has instant checkout and strengthening the functionalities, and they are expanding partners, the user side rather than ChatGPT, why do they use LINE's chat or AI agents? What is the value that you offer in the future? The relationship is that parent company is -- has strong ties with OpenAI. And what kind of positive influence will that relationship with OpenAI has with your company?

This is Idezawa. Let me reply to your question. Our company does not have our own LLM. So we use OpenAI solutions or other solutions. We pick and choose. It's not just LINE, but within our company, we have a variety of services, news, commerce, finance, auto, so each service will be agentized. That is what we are working on right now. And like Yahoo! and LINE or integrated agent will be created. So that is the perspective of our user interface. We do not have LLM ourselves. But on the other hand, we have a lot of touch points with so many users and services. So within one ID, ours can be used in a seamless manner. That is the value we offer. So that is why we are working on agentization of various services.

Next from Mizuho Securities, Mr. Kishimoto, please.

My name is Kishimoto from Mizuho. I have 2 questions too. Both are about LINE Ads. The first is commerce functions of LINE SHOPPING functions. I would think that it will be launched quite soon as a new platform. I know you've done some testing. So I wonder what is lacking in order to have a full launch? That's my first question.

This is Hide speaking. We are providing bucket test. We have already launched the test launch for this within the LINE SHOPPING tab. We are not offering any service actively or making a big sales promotion. We are testing system stable operations. Then within this test bucket, we are trying to expand our product and services or to enhance sales promotion activities so that we'll be able to have 100% full launch. We have been working together with various internal stakeholders.

The situation is a bit different from the users of shopping -- Yahoo! Shopping, where they already know what they want to buy or they want to buy certain things. LINE, we need to propose what is appropriate and right that would resonate to the LINE users. Once we know that right business model solutions, then we will be able to launch under such use case and sell products as well. So there's a great opportunity, and we've been testing at the moment.

On Page 27, please, you mentioned about second tier, third tier. I'd like to ask you a question about the capability for the third tier. I understand that you have been reallocating your staff together with AI agents. I wonder whether you'll be able to run all these initiatives under the current manpower? Or are you going to strengthen your perhaps sales capabilities with more new recruits? Is this something you can do with the current resource?

I'm sure it's based on the selection criteria, but thank you for your question. Your point, recently, we do have a certain amount of resource that we had to allocate that we had to secure from other departments to this department. So as mentioned on this page, we are going to have 50% of this existing business to new domain or the focus domains. So we will be shifting our business focus as well as resource allocation as well. And we also are considering more partnership, leveraging outside resources as well. We have many different ideas.

Next, Nagao-san of BofA Securities.

Can you hear?

Yes.

This is Nagao speaking. My first question is on MINI App MAU is to be increased from 25 million to 75 million and from 35,000, the KPI direction is being presented, the price charging per app or how you consider retention. What are the methods you're going to take? 60% comes from OA and 40% comes from MINI Apps. So proactive monetization will be necessary. So can you explain concrete ways you have in mind for monetization of MINI Apps.

Thank you for the question. This is Ikehata speaking. Let me answer your question. Right now, well, MINI App numbers are to be increased, and we are to increase the number of users significantly. That is the plan. So on MINI Apps themselves from LINE application, there will be a lot of touch point from the users. So we are increasing touch points by linking with LINE app and LINE media to increase the opportunity for as many people as possible to touch MINI App.

On the monetization of MINI App, the payment function and also advertising within MINI App and receive ad placement fee. So those are 2 monetization sources. The application that can generate fruits in terms of profitability is what we are planning to build. The sales force, we are strengthening right now so that as many people as possible will utilize MINI App and open Official Accounts.

From next fiscal year and beyond, we expect monetization of revenue. We already are seeing the account openings by many on Official Account. So we have confidence.

My second question is related to Page 24 of the material, the target of EBITDA margin, 40% to 45%. Right now, 37% or 38% is the Media Business margin. Official Account and MINI App domain overlaps SaaS domain. So when you expand the scale, the sales staff or development cost will be heavier upfront. And I have a concern that the profitability may decline. The existing search and display ad by the sales of that part decline will affect the overall margin. So what is the overall ad margin? And in achieving 40% to 45%, what would be the contribution of OA and MINI Apps? If possible, could you disclose those information?

Rather than speaking on the concrete number, it's more of a guide, the search, the basis is that profitability is not that high, and we have been communicating that from before. There's a certain fee that we pay to Google. So the search margin originally is low. And adding with display, it's shown as flat, but the search will be down trend and display, we achieved certain growth in Q2. So the ratio of display will likely to expand. So the margin on the lower part will increase -- will improve.

And on display, as you know, there is a commission with the agents that is included in the COGS. So it's -- that is the margin structure. OA the margin will be similar to display. The SaaS part, it will be dependent on the pricing structure, but vertical MINI App or SaaS peers, when we look at them, the profitability is quite high. Compared to ad business, it's low, but still, it's high enough to be able to support.

On top of that, MINI Apps, the ad on MINI Apps and within MINI Apps, we will place ads in a network style. So that's the type of ad business that we would like to deploy within apps. So we expect that we can secure profitability on a certain extent.

One quick question on Page 11, the JPY 15 billion reduction plan is shown in the medium term, the Media Business ad expense, in some part will increase, in some part it can decline, but the fixed cost of the Media Business will it be unchanged?

This slide is the company-wide figure. This fiscal year, JPY 10 billion for LLM cost will be incurred. And next year and beyond, LLM expense will continue to rise. But through various programming, we can expect improvement of operational efficiency. So JPY 15 billion, even LLM commission rises next year, we intend to reduce the fixed cost, even including that JPY 15 billion, the promotion expense and advertising for commerce, it is linked with GMV. So that is not included in this figure. And on Media segment, there are subcontractors and some of the human resources cost through use of AI, we can create a leaner structure. So those are combined to set the target margin at 40%.

Next, from Nomura Securities. Mr. Masuno.

This is Masuno speaking from Nomura. Can you hear me?

Yes, we can.

I just have one question, please. Renewal of LINE apps, you are -- been talking about adding a commerce tab. And I know you have been trying various scenarios under beta. Fundamentally, are you trying to transition the info traffic to service like LINE GIFTS? Or are you going to provide a brand-new shopping experience to LINE users. So I wonder what kind of inflow -- what kind of user experience are you trying to create through this commerce tab?

What we are testing right now under the current version, all the products that's on LINE tabs are LINE GIFT products. Going forward, in addition to the LINE GIFT products, the stores that are present in Yahoo! Shopping, some of their merchandises we would like to post there. So not just for gift needs, LINE SHOPPING, Commerce products, we would like to offer through that tab. So comprehensive portal shopping corner is how we like this service to grow to be.

So what type of stores, what type of products from Yahoo! Shopping really has to do with the previous questions and answers that we had. What kind of products will be the right fit, best resonate to the LINE user. It really depends on that. That's what we are testing right now. So we have to have a right product mix on top of the GIFT products, we've been carefully studying what would be the type of product group that is worth promoting heavily behind it on this new effort.

Okay. So this is not a purchase intent visit. I can understand LINE GIFT. I wonder for those users who are not thinking of purchasing anything would ever be a real customer, whether they would convert by visiting the site?

Other than Yahoo! Shopping, our customers right now are searching for what they want out of tens of thousands of our products with a certain purpose, compare prices and make decision-making. We have a massive number of products on Yahoo! Shopping. It doesn't make sense to put all of that on LINE tab. I don't think it will drive sales. So out of what's available in Yahoo! Shopping, those stores, we need to focus on products with more uniqueness, originality and some product group with extremely high demand once they release, always sells out. So those will be the right products, we think to be on the LINE tab. Those will be the right products for this casual shopper.

Are you talking about hundreds or thousands? I don't think you're talking about dozens of thousands. So I just have no idea about the scale of the products that would be available through this LINE tab.

That is exactly what we are trying to get to. That's why we've been repeating the test. So it really depends on the -- we don't know. There's nothing that we can share with you regarding the size or scale of the stores or the type of products or the scale of the product.

Next, Kumazawa-san of Daiwa Securities.

On Page 11, fixed cost reduction of JPY 15 billion. This is the topic of my question. Currently, what is the fixed cost? And how much is this JPY 15 billion? And from last year, you have been spending on security-related costs. Is that included in this reduction of JPY 15 billion? I believe it's mostly outsourcing that you can reduce. Are there any major items that you expect to reduce significantly? And I believe AI agent is contributing to reduction. So from -- compared to last year, how much reduction is this?

This is Sakaue. I will answer your question. LY stand-alone fixed cost is roughly JPY 700 billion. As you stated in your question, security-related costs will come down. On the other hand, LLM commission will almost offset that increase. From April of next year, we will increase the office space to accommodate a 3-day commuting of our employees, and that means the cost increase. And by using AI, we intend to reduce JPY 15 billion in total. If we do not take any action, the fixed cost will likely to go up by JPY 2.5 billion to JPY 2.6 billion.

In the areas of reduction, outsourcing part and software license from outside, the system that employees use, we can make progress in the integration of the platform. So double payment can be eliminated. So that is included as the cost reduction on software license.

The areas you can reduce, I understand it's difficult to name the concrete name or ServiceNow or others or Salesforce. Is it possible to cut them entirely rather than specific ones?

It's an overall effort, frankly speaking. And for example, there are licenses that are given to all of the employees. But if we identify the staff that really uses, then we can reduce the number of license. And also, there may be redundant functions on the software and cut one of them.

Next from [ SBR. Mr. Jose ], please.

I have a question regarding capital structure and security governance. I understand in the past, administrative [ court ] instruction was given from Ministry of Internal Affairs and Communication, administrative guidance pointing out your capital structure. Now that under new administration, any risks that you foresee or any changes to the relationship with the government regarding capital structure, please?

Regarding the administrative guidance, we've been responding appropriately. And from -- for the 2026 March, we are making progress toward it. And regarding the capital movements, we've been continuing the discussions, reflecting our past track record. No major changes to or the [ FY 2026 ].

I understand. So for 2026 March, you will conclude all the measures to meet the administrative guidance?

Correct. Yes on track.

Now, we would like to close because the schedule ending time has arrived. I would like to now have Idezawa to offer a final reading. Before Idezawa's final remarks, I mentioned about the fixed cost of JPY 700 billion, that was a mistake. It's roughly JPY 400 billion to JPY 500 billion.

This is Idezawa speaking. Thank you very much for raising a lot of questions. The environment surrounding AI is rapidly changing. And our 2 core strategy is AI agents and OA, and we will continuously grow by changing our business structure. That is the message of today's presentation. I will ensure that these plans will be executed steadily, and we would like to ask for your continued support.

With this, we would like to close LY Corporation's FY 2025 second quarter earnings call. Thank you for staying with us until the end.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]