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. This is the overview.

At our subsidiary, there was a system outage due to a ransomware attack. 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. 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. This is the third quarter.

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 ¥2 trillion.

Adjusted EBITDA is expected to be around ¥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 ¥500 billion driven by business growth and cost reductions. On a consolidated LY basis, we're targeting ¥550 to ¥575 billion.

As I explained, the underlying business has remained solid. Next.

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.

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, in Q2, there was a spike in hometown tax payments, there was a shift from Q3 to Q2, and last year there was high level of tax payment in Q3, 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.

This is the Media revenue and EBITDA year-on-year comparison. Revenue saw search advertising decline 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 cost such as outsourcing expenses were offset by increases in sales promotion and GenAI-related expenses.

Next. As we have shared in the previous earnings results, this is a mid-to-long-term business development plan leveraging on OA, or 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 FY26. From number 1 to number 3, I will give you the progress to date.

As 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%.

This is regarding the second point, the mini apps. The number of mini apps grew by 57.8% year-on-year, and the MAUs continue to grow at a high rate of 63.8% YoY.

The promotions, growth in development partners, and improved convenience of mini apps led to increase in usage. Next page, please.

This is our third point regarding SaaS. For SaaS, we are starting with the F&B sector and beauty category.

For solutions targeting restaurants, we are acquiring Toreta to build a reservation capability, which was the missing piece for us. This was recently announced.

This acquisition covers the functionality required for store operations, i.e., the reservation functions. Toreta's services, as you can see on the right-hand side, have a proven track record, and it's a reservation ledger strong in table management, and it is used mainly by casual restaurants.

In the future, together with Official Accounts and reservation ledger, 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.

As presented on slide 4, excluding ASKUL, revenue grew by 31% year-over-year, and adjusted EBITDA grew by 15.5%. This is again the Commerce business.

On the left-hand side and right-hand side, both excludes the numbers from ASKUL. For revenue, for LINE Yahoo Commerce, it increased by 64.4% YoY due to the consolidation of LINE MAN and BEENOS.

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. The impact of new consolidation is ¥1.1 billion, as shown on the right-hand side, but excluding that, the EBITDA grew by 11.9% YoY, and we were able to achieve organic growth.

This is 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 YoY 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. Next, please.

This slide 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 payment 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 ¥30 billion for the quarter.

Next, please. 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's system outage, the fundamentals were solid with double-digit growth in both revenue and profit. Our focus areas such as Official Account 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 FY26.

Thank you very much for your attention.

Munakata from Goldman Sachs Securities. Thank you for this opportunity to ask a question.

I'd like to ask two questions. Should I state the two questions together?

Yes, please.

For the Media business, 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? Also SG&A, what's the ratio of the AI in SG&A?

That's the first question. Second question: maybe I'm getting ahead of ourselves, but next fiscal year, for this fiscal year, ad business was in a tough situation, but you did renewable LINE apps and you introduced AI agent, I think you are quite aggressive on those fronts.

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?

Thank you. Let me respond to the first question, and Ikehata will follow up.

Search ads improved quite a bit compared with Q2. Search ad product has been improved.

We have improved it. The negative number has shrunk somewhat.

Display ads, Q2, there was this special demand from hometown tax, and so it was just the same as Q1. Display ads is strong.

It's moving into the higher revenue direction. For Account Ads, seems that globally Account Ads using points not so active, not so vibrant, YoY a little less than Q1, Q2.

Account Ads using points not so profitable, not high margin, in terms of profit impact to the segment, not so big impact. For SG&A, AI for Media segment, it's about ¥1 billion plus alpha.

Ikehata, please.

This is Ikehata. Throughout the fiscal year, ad business, you asked, was it in line with expectations?

Let me give you our impressions. Sakaue has explained, and so I may be repeating some parts, but three major things about the account business.

There's account, and display, and search ads. For Account Ads, was in line with expectations.

For next fiscal year, so as was mentioned in the presentation, we are taking various measures for next fiscal year, 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. Looking back, in terms of numbers, from flat to single-digit growth, we are able to show for display ads.

The ad platform construction that we've been working on, and data sharing to increase ad performance, we are starting to see results. We've finally been able to come flat and entering the single-digit growth.

It's based on our plan, it's going. Next fiscal year, is it going to dramatically increase, the profit growth rate?

Maybe not. Let's be conservative.

We will aim for flat or higher. That's what we were aiming for.

One thing that may be out of line with expectations and something that we have to take measures is search ads. In terms of numbers, you can see, and Sakaue also mentioned, commented about this as well.

For next fiscal year, certainly the existing search ads, and the new Shopping search ads, and the AI initiatives, those new challenges are going to be pursued to improve the search ad business itself. That's how we look at this.

That's my supplementary explanation. For the next question about our image for next fiscal year: for Media, I think we have become leaner, and we are improving productivity and raising margin.

Next fiscal year, we would like to solidly make profit increases. That's one thing.

For Commerce, this fiscal year, we have taken various measures for Flea Market and others. Reuse part, I showed you the number including BEENOS, and the reuse part is getting on a growth trajectory.

Next fiscal year, in terms of profit, we are expecting it to bloom. Media, Commerce, ¥10 billion each profit increases is what we'd like to achieve.

For ASKUL, some uncertainties, we would like to get plus alpha with a rebound. For Strategic segment, it's still growing around PayPay.

About ¥20 billion increase in profit we'd like to achieve, mainly around PayPay. Others, well, ¥15 billion reduction in fixed cost is what we explained last time.

That's outside of the three segments, and ¥15 billion reduction in fixed costs. If you add that, that would be ¥50 billion plus.

Then ASKUL, we're going to provide strong support if sales recovers. If they can contribute more to profit, I think we can create strong numbers.

Thank you. Thank you for the detailed answer.

For the first one about the Media business, if I may follow up a bit: SG&A increases, the ratio of AI, not so big was the impression I got, but 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+ a little less than 20.

10+% we're controlling at that level.

Understood. Thank you very much.

Yes, thank you for this opportunity. I have two questions.

The first question is regarding the AI search that you just explained. You said that you are managing that in 10+% 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 growth for ad?

Google has been quite successful in that space. To grow your search ad business, would AI be a driver for that growth?

Do you have any good feeling for that right now? Are you managing that at 10%, or do you just manage to have it used at 10% or so?

If you could just give us some nuance to that. Also for next fiscal year, on page 13, you talked about the rollout of OA and mini apps.

You talked about the market outlook, but for your revenue and profit, what are going to be the impact on your numbers? Also the timeline and addressable market and the scale, can you elaborate on those points as well for those strategies?

Yes, I will respond to both of the questions. 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 results. We are now doing some tests and trying to incorporate the ad for the AI results as well.

Also on top of the genuine search advertisement, we will have the AI portion, which will be an uplift on the revenue. Kataoka-san, please?

Yes, I will follow up. 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.

We have the mix of the three so that we can improve the decline we're seeing with the search ad business. Right now, AI results account for roughly 10+%, and we are now planning to add new initiatives.

Within the 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. We will be growing the AI ads, and on top of that, with the existing search ad business, the shopping-type ad business, we are now rolling out measures to improve.

All in all, we aim for growth. Also, we are intentionally managing that to just 10%, I mean the AI ad.

This is because we're still brushing up the functions for AI ads to be as competitive as the other ads. As we brush up the functionalities, we will be able to raise the proportion from 10+%."

On your second question: as we have shared in the previous earnings results for FY28, we are now trying to double the revenue from the current ¥140 billion to ¥280 billion. In terms of the mix, in the first layer, which is Official Account, we are expecting 10 to 15% stable growth.

Then what's short to that doubling of the revenue, maybe ¥100 billion, would be covered by the second layer, the mini app, and also the third layer, SaaS business. In terms of the margin, for the first layer, for the Official Account, the margin will be the highest, and then SaaS.

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. Ikehata-san, can you follow up?

Yes, this is Ikehata. Thank you for the question.

Maybe let me put this into the context of that timeline. By FY28, that target remains unchanged.

For next fiscal year, for FY26 and also beyond that, '27, '28, first looking at FY26, 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. 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.

For monetizing, FY27, FY28 will be the timing for incremental revenue for the mini app and SaaS business. At the same time, Toreta coordination is something that we have in the plan, then the SaaS product launch may be happening earlier than expected.

For the FY27, '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're expecting for the monetization opportunities.

Thank you very much. Thank you very much.

Okumura from Okasan Securities. Can you hear?

Yes. Okumura from Okasan.

Two questions: first, clarification of the previous question, next fiscal year, ¥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. In increasing ¥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, end of next month, those measures are to be completed.

Is that understanding correct? From April onwards, any restrictions be removed?

PayPay implemented in LINE app, or that kind of more collaboration within the group, is that going to be strengthened? Are you going to enter that phase?

What are the measures you have in mind with the ending of the measures against the incident?

I'd like to respond to both questions. Media numbers for next fiscal year: as Ikehata mentioned, in Q3, we had no revenue.

For next fiscal year, mini apps and SaaS, it will be single-digit billion, 1 to 1.5 billion, ¥1 to ¥1.5 billion, it's very small. It should be tens of billions in 2027, 2028.

We're preparing to achieve those numbers in terms of sales for 2027, 2028. 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. 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.

Thank you for the detailed response.

This is Nagao from BofA. I have one question.

At the outset, you talked about the next year's outlook and aiming for a 10 to 15% growth. Thank you for sharing that.

That would mean the profit growth will be ¥50 to ¥75 billion profit growth. I'd like to confirm: so Media, +¥10 billion, Commerce, with existing business, +¥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 ¥30 billion?

Can you clarify those numbers once again, please?

Yes, I will be repeating my answer. Media, Commerce, ¥10 billion plus each.

Commerce does not include ASKUL. Strategic businesses, +¥20 billion is my image.

Media, Commerce, and Strategic segment, outside of that, as cost reduction, it will be roughly ¥15 billion cost savings across organization. Sorry for repeating my question, but in these numbers, does not incorporate ASKUL's performance recovery.

That is correct? I see.

That's clear. Thank you very much.

Thank you. Harahata from Nomura.

Thank you for the opportunity. Two questions: Media business, the business environment change next fiscal year onwards, on ChatGPT, there's going to be a trial ad, and Gemini also, so that may expand to Japan.

How do you see the change in the competitive environment? Second, there was a reporting in Nikkei in January, data system foundation integration between Yahoo and LINE, Nikkei said several tens of billions yen of savings with the integration.

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, maybe including ads, Kataoka will answer that one.

This is Kataoka. Let me respond.

GPT and Gemini, number of users are increasing in the market, there is the user need, and so there's going to be further usage. In addition to that, we are also doing testing, with the increased number of users, there will be ad space, and testing has started to add ads to those spaces.

Ad market, I think, will grow gradually. That's our expectation.

There will be more users, and ads will grow for them. From existing search ads, is it going to simply switch from there to that?

The market itself is growing now, the overall pie is growing. In terms of the weight, there's going to be this search ad.

In terms of how we understand the market, well, there's going to be various solutions, 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 ¥15 billion cost reduction. One part of that is the LINE and Yahoo technology foundation integration, lowering the infrastructure cost, so that is included in that ¥15 billion.

That's going to bring about impact over several years. Next fiscal year, yes, we would like to achieve impact so that there'll be several tens of billions of yen total.

I don't have the numbers at hand about what's the specific number for next fiscal year, but that's my response.

Thank you for the detailed responses.

Thank you.

This is Sato from Jefferies. Can you hear me?

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?

Also for Strategic businesses, I think you outperformed the original plan, or maybe in line with your internal projections. 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.

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.

Thank you very much.

foreigners, maybe Chinese people, may not be able to come to Japan, and Ikyu and hotel reservation, what's the expectation for January-March quarter and onwards? What's your current outlook?

Hide will respond. This is Hide.

First, Ikyu and Yahoo! Travel, the current users are mostly domestic users.

Chinese people not coming to Japan leading to lower reservation, that's not going to happen because our main user base is Japanese users. Where there will be impact is inventory of hotels.

Until recently, there were many inbound customers, and so there was competition, strong demand, and so unit price had gone up. In some areas, the unit price is coming down, there is some impact there.

Overall, not such a big impact, but in some areas like Kyoto and Okinawa, we see a slight decline in unit price of hotels.

Thank you. Thank you.

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

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 business is fundamentally 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. Important thing is going to grow with the product.

We are now working on AI agent and also working on all the other services. Focusing on that, and also with the ad business, we will try to revive that to achieve growth.

We would like to achieve multifaceted growth, and we hope to continue to enjoy your generous support. Thank you very much for participating today.

With that, we would like to complete LY Corporation's Q3 earnings results for FY25. Thank you very much for joining us today.