LY Corporation (4689.T) Q2 2026 Earnings Call Transcript

Operator: We will now begin LY Corporation's FY 2026 Q2 Earnings Briefings. Thank you very much for joining us today. For this briefing, we will use the materials posted on LY Corporation's website, the earnings presentation. Joining us today from LY Corporation are the following executives: President and Representative Director, CEO, Takeshi Idezawa; Director and CFO, Ryosuke Sakaue; senior Executive Officer, COO and Commerce Domain Lead, Makoto Hide, Senior Executive Officer and Media and Search Domain Lead, Hiroshi Kataoka; Senior Executive Officer and Corporate Business Domain Lead, Yuki Ikehata. These five executives are joining us today. First, Idezawa will present our FY 2026, second quarter results. We will then take questions. The entire briefing is expected to last about 1 hour. And this briefing is also being live streamed. So let us begin.

Takeshi Idezawa: This is Idezawa. Thank you very much for taking the time out of your busy schedule to join us at this financial results briefing of Q2. I'd like to give you the overview. First of all, starting with the earnings highlights. LY Corporation's profitability continues to improve Q2 revenue increased by 11.5% year-on-year. Adjusted EBITDA by 20.9% strong growth in revenue and profit. Reflecting the strong progress we made upward revision to the full year guidance. In addition to the revenue, adjusted EBITDA, adjusted EPS and dividend forecast are raised. We also will establish a new shareholder benefit program to offer Yahoo! JAPAN Shopping gift certificates. As for Agent i, now we have over 40 domain agents available. We will be launching the stand-alone app and Agent i for business. In addition to the growth of OA account, MINI App, we are also making progress in store digital transformation for food service and beauty industries. This is today's agenda. Starting with the consolidated financial results. In Q2, we achieved a double-digit growth in consolidated revenue and adjusted EBITDA. Progress against the guidance is over 50% both for adjusted EBITDA and adjusted EPS. We are progressing better than our expectations at the beginning of the year. The adjusted EBITDA by segment also expanded in double digits. Next is quarterly trend of consolidated performance. Revenue growth is over 10%, 3 quarters in a row. Adjusted EBITDA has grown over 20% in 2 quarters in a row and strong growth continues. EBITDA margin growth was 26.9%, up year-on-year. High level is maintained. Next is consolidated performance analysis. LY Corporation business, the gross profit in all areas improved and mainly in media and commerce, we controlled SG&A and adjusted EBITDA grew by JPY 10.4 billion. PayPay consolidated adjusted EBITDA at JPY 14.2 billion driving overall profit growth. ZOZO and newly consolidated subsidiaries also contributed to higher profit. Next page. Based on the strong first half progress, upward revision was made to consolidate guidance. Revenue forecast is increased by 14.8% year-on-year from JPY 2.24 trillion to JPY 2.33 trillion. Adjusted EBITDA has been grown in forecast by 28.9% year-on-year from JPY 585 billion to JPY 640 billion. By segment, Commerce revenue forecast is JPY 1.06 trillion. Adjusted EBITDA of 33.6% year-on-year, major increase and in strategic business, adjusted EBITDA forecast is JPY 160 billion, 69.1% up year-on-year. Adjusted EPS is also raised from JPY 30 to JPY 35. Next, let me explain the background behind the guidance revision. As shown on the left, adjusted EBITDA exceeded the guidance in all segments is progressing well. As shown on the right-hand side, after the business integration, we promoted the business portfolio transformation in a continuous manner and try to improve the efficiency, using AI and reduce fixed costs. We realized both higher gross profit margin and lower SG&A ratio. So those are not temporary factors, but structural profitability improvement, which led to the upward revision of guidance. Reflecting the better or improved profitability, we will be enhancing the shareholder returns, reflecting the higher revenue and EPS we are planning to change the annual dividend from JPY 11 to JPY 12 per share. In order to diversify the investors and also to promote the use of the Yahoo! JAPAN Shopping, we will establish the new shareholder benefit program to offer gift certificate. So together with the dividend and shareholder benefit, overall return will be 3.4% based on the steady profit growth, we will implement an attractive return to the shareholders to respond to their expectations. In addition to steadily expanding the business performance, as a medium- to long-term growth pillar, we will be focused on growth, the Agent i, and let me explain the characteristics. The strength of Agent i is the daily touch point with over 100 million cumulative users and unique data as well as 1.45 million company store accounts and the fact that we can provide the one-stop services up to the payment. So it's not just a dialogue or provision of the information from decision, purchase, reservation payment. So this is the end-to-end support, which can differentiate us. So using the overwhelming customer base and execution capability, we will build the foundation for future monetization. Next is the B2C situation of the Agent i. We have over 40 domain agents. And in November, we launched the stand-alone app. And the scheduling agent, which can be accessed directly from LINE chats so that this can be utilized on the daily basis. Especially for the Yahoo! JAPAN Shopping, the conversion rate of the AI feature users and also the prepurchase page viewers are much higher than non users to about 1.7x. And also the percentage of the transaction value generated through AI has expanded to 22%. So now that the AI is widely utilized in purchasing. Next is about the Agent i for business for companies and stores. From customer engagement to business operation support, we would establish end-to-end AI support across all business activities. In customer engagement through the LINE Official Account AI mode, we will build a seamless AI support from inquiries, searches to reservation, purchase and customer support. And in the business support area, at the end of October, we launched Agent i business. And through this, market analysis and ad operation support will be provided using data. Through those services, we will improve the user usability and to contribute to the improvement of the productivity and the growth of the businesses. Next, let me update you on our progress in monetizing Agent i. Following advertising-based monetization, we will gradually introduce user subscription, commissions and other revenue models. In the advertising, we began charging for our shopping search ads at the end of August. We also began showing display ads to selected users and started charging for them in July. For user subscription, we plan to launch a premium plan for heavy token users within this fiscal year. And based on the results of ongoing test. We will also gradually introduce commissions for shopping assistance and client billing for LINE Official Account AI mode, which is scheduled to launch this year. Next, let's turn to performance by segment. First, the performance trends in Media business. Adjusted EBITDA achieved a double-digit growth for 2 consecutive quarters. The adjusted EBITDA margin reached 40.8%, staying above 40% for second consecutive quarter. Now an analysis of Media business performance, revenue increased overall as growth in account advertisement and user subscription, including LYP premium more than offset an 8% year-on-year decline in display ads. As for earnings, higher revenue and the better sales mix improved gross profit, SG&A also fell in Q1. Together, these factors lifted adjusted EBITDA by 10%. Next, account advertising. The number of paid accounts continued to grow steadily, although growth in LINE Official Account overseas is moderating a bit, domestic revenue continued to grow strongly, up 14.1% year-on-year. Next, our initiatives for LINE Official Account, LINE MINI App and the digital transformation of stores. For LINE Official Account, we revised our pricing plan in October to raise the revenue per message. We are also preparing new ad products, including click-to-chat ads. In the middle, the LINE MINI Apps, we reduced the payment fees and raised the business revenue shares to 80% aiming to bring more digital content businesses onto the platform. For Store DX, we've launched our LINE Restaurant Plus and LINE Beauty Plus to expand store touch points and strengthen monetization. Next, LYP premium. Through continued improvements to LINE benefits and integration of LINE MUSIC and sticker subscribers, direct subscribers reached 10.9 million. Even excluding music and sticker subscribers, membership continued to grow, reaching 7.27 million. On the same basis, revenue is also growing strongly, up 27.2% year-on-year. Next, performance trends in Commerce business. Both revenue and adjusted EBITDA grew at a double-digit rate for 2 consecutive quarters. In particular, adjusted EBITDA rose sharply by 23%. As a result, the margin improved from 15.5% a year ago to 17.2%, maintaining a high level. Now analysis of Commerce business performance. For LY Corporation, strong shopping and reuse business drove the revenue growth of 9.1% year-on-year, including LINE MAN, growth was 63.6%. Although ASKUL's earnings decline, revenue growth at LY Corporation and contribution from newly consolidated subsidiaries drove a sharp increase in adjusted EBITDA. This slide shows trends in Commerce business transaction value. Shopping transaction value stayed in positive territory, up 0.7% year-on-year despite the high comparison base from last year's rush to make hometown tax donation. Reuse transaction value grew 11.1% year-on-year and services transaction value rose 10.3%, both double-digit growth. ASKUL's decline also narrowed, showing a continuing improvement trend. Next, the performance trend in strategic business. Revenue maintained strong momentum at JPY 140.7 billion, up 28.4% year-on-year. Adjusted EBITDA rose sharply to JPY 39 billion from JPY 23 billion a year earlier. The margin climbed further from previous quarter to 27.7%, reflecting continuing strong growth and improving profitability. Now analysis on strategic business performance. Revenue grew on 2 fronts. PayPay consolidated maintained a strong growth of 28.4% year-on-year. Other Fintechs also grew mainly through LINE Pay Taiwan, LINE Bank Taiwan, giving us a balanced growth across PayPay and LINE Financial businesses. On the earnings front, although cost of revenue and SG&A increased, but the revenue growth more than offset those increases. As a result, adjusted EBITDA rose sharply by 69% year-on-year. That's all the explanation from me. And as I explained, we intend to deliver on our raised guidance by steadily advancing our mid- to long-term AI strategy, including AI -- Agent i. We will work to further enhance corporate value and strengthen shareholders' return. And this concludes our overview of the second quarter results. Thank you very much.

Operator: [Operator Instructions] So first, from UBS Securities, [ Jai-san].

Unknown Analyst: This is [ Jai ] from UBS Securities. My first question about the guidance upward revision. I'd like to know some details, especially about the Media.

Unknown Executive: Excuse me, we cannot hear you. So could you check your microphone?

Unknown Analyst: So this is Jai from UBS Securities. Can you hear me? Can you hear me?

Unknown Executive: Excuse me, there has been some technical issues, so please bear with us. [Technical Difficulty]

Unknown Analyst: This is Jai of UBS Securities. Can you hear me?

Unknown Executive: Yes, we can hear you. Yes, go ahead with your question.

Unknown Analyst: So I have 2 questions. First, about the guidance revisions. I'd like to know some details. First of all, about the Media by product, could you tell me the expected revenues by product and also the reduction of the cost in comparison to the initial guidance, what has been the progress? Also about the Commerce, the revenue, the revision and also the cost reduction, could you tell me how they contribute to the adjusted EBITDA? So that's my first question.

Ryosuke Sakaue: This is Sakaue, CFO. I'd like to respond to your first question. So the background of the guidance, first of all, about the media, the revenue is minus JPY 20 billion. We made that change. And as for this, the search ads at the beginning of the fiscal year, we expected minus 5%, but it was minus 6%. It was not a major change, but slightly lower revision, we expect the difficulty in the second half. The display ads, as you can see, the results of the Q2. At the beginning of the fiscal year, we expect 3% to 4% positive. But for the full year, it is now down 5%. So mainly, this is the Media ad part that is about 8% or 8 points down from our initial expectation. So that's the impact -- negative impact. As for the EBITDA, the positive JPY 5 billion for the media LYP Premium was better than our expectations. And LLM cost part, the synergy with the SoftBank Group, we could generate the synergy and that was not included or factored in at the beginning of the fiscal year. So the improvement of the gross profit mix and cost reduction that led to the positive JPY 5 billion. As for the commerce, at the beginning of the year, the ASKUL recovery was very difficult to forecast and also LINE MAN newly consolidated and there were some uncertainties. So we had a conservative forecast. So because of that, the revenue for the commerce, positive JPY 130 billion, that is a revision. This is due mainly to the ASKUL and LINE MAN because our expectations were conservative to start with. As for the Commerce profit, those 2 companies, we added that to the profit. And so the conservative expectations in comparison to that, I think we are doing better. So -- sorry, JPY 16 billion positive for Commerce. For the strategic, yesterday, today -- or was it yesterday, the PayPay, the results were announced. And as for the revenue, there is a negative number other than PayPay and LINE Finance, the new businesses are the ones that we are working on challenging and their start-ups for -- up to now is not really brisk. So that's the negative part on revenue. But as for the strategic EBITDA is positive, JPY 31.5 billion, and that is because of the PayPay results. And so the payment rather than offline, I think that when the online GMV increases, the take rate mix improves. And PayPay Bank, the lending is enhanced and the interest rate is coming up. So based on those, it is likely that the profit is going to go up. So those are the reasons behind our revisions.

Unknown Analyst: The follow-up question. As for the display ads, at the beginning, the major gap from the beginning of the fiscal year, could you tell us the differences?

Ryosuke Sakaue: There are 2 major factors. One is that the LINE app, there is a VOOM tab. And this time, we sunsetted that. So as for the VOOM, we used to have a video ads, but now it's a shopping tab. So no advertising being posted. That's the major part. At the beginning of the year, the VOOM sunset part, the negative revenue was offset by the LINE Home tab. And we are hoping to offset that, but to some extent, but that's not yet what we see. So Home tab is not completely offsetting the absence of the VOOM tab. So that led to the lower the revenue of the display, and that's about 1/3 of the reason. And the remaining 2/3 negative is that the LINE display ads and the Yahoo! Display Ads, it has to do with the back-end system. We have integrated the systems. And among the clients, LINE and Yahoo!, they have budgets for each. And now that through the platform integration, it was not 1 plus 1 equal 2, but 1 plus 1 is equal to 1.6 or 1.8. So they improved the efficiency on the part of some clients. So because of that display ads as a part of the platform integration had some negative impact. And there is a, of course, that we plan to enhance the sales to follow up on this. But up to the second half, maybe some of the difficulties will remain. So because of this, we are -- we have a conservative forecast or view on the display ads.

Unknown Analyst: My second question, Agent i monetization, could you tell me the further details on that? First, the size and the time frame and also the balance between the B2B and B2C. And from July, display ads and from August, the shopping search ads have started. So could you tell us the initial movement and what will be the major bottlenecks and expectations and so forth?

Takeshi Idezawa: Idezawa. I'd like to respond. Thank you for your question. Well, as of now, the Agent i itself, the users are using this. So right now, about the monetization, which part will be the core, we are still verifying that as we work on this. And now we are entering into the AI era or Agentic era. So as for B2C, we will have the contact with the users. And when the users have a conversion, what kind of experiences do we offer and how on top of our platform, how they can convert, that would be the point. And at the beginning, there is a way to monetize and also at the time of the conversion, we can monetize. So those are the 2 major areas of monetization. So right now, including the other companies, we are verifying this, validating this. So we'd like to continue doing so that we can bet on the growing areas.

Operator: Next question from Jefferies Securities, Sato.

Hiroko Sato: This is Sato from Jefferies. Can you hear me? Yes, we can.

Unknown Executive: Yes, we can hear you.

Hiroko Sato: Regarding the answers Jai-san. Agent i, my understanding, is still in the test phase. Monetization hasn't started yet, right?

Unknown Executive: As you can see on the Page 3 -- Page 13, we started our test, and we have started monetization. We have actually started monetization.

Hiroko Sato: Two questions, please. Regarding second quarter's net profit is a negative 60%. And when I look at supplementary material, is that a tax that dampened your profit -- current profit? Are there any other factors, please? And also, EPS has been upward revised for the full year guidance. I wonder what are the positive factors that made that change for the second half?

Ryosuke Sakaue: Let me explain. This is Sakaue speaking. Regarding the profit year-on-year comp, last year, there were 2 one-off positive factors. One is a part of operating profit. LINE MAN, we had a remeasurement of profit recorded. That was JPY 44.3 billion at the PayPay side, I think I made an explanation about the corporate tax decline, the tax saving benefit. That was one-off additional benefit at JPY 19 billion. So all that together has to be a JPY 63.3 billion positive factor. That was a one-off last year. So on the comp, actual performance will be subtracting those one-off reasons, then our actual performance would be the 32% increase in profit. And regarding the second point that you raised, EBITDA's Q3, Q4 guidance upward revisions timing, we had made the change to our profit of that period, including EPS. So there were no other additional factors that are working below the line of OP.

Hiroko Sato: Okay. I understand. Clear. If you cannot -- please, in the best way you can, please try to answer regarding pricing negotiations, I believe, is still continuing. Is there any update that you can share with us? I wonder to what extent, how long this would continue.

Ryosuke Sakaue: Yes, it's really a tug of war we are playing here. And for us, what [ EQT ] is proposing price at the moment, we are proposing pricing at double layers. And even at our lower limit, the pricing is higher. So I think that Kakaku.com, the special committee will be making a decision or [ EQT ] has probably different thinking too. It's quite difficult to comment. I wonder the valuation is really getting bloated now at beyond 30x multiples. So I think historical range at the maximum is about 30x. So I wonder to what extent it can go up. I know it's very difficult to comment, but it seems quite load. Do you agree to our assessment? But we do recognize a great synergy at the time of AI era, there are assets we can leverage quite well. And when we look at the earnings call just yesterday of Kakaku.com, they've been growing quite a bit in the [ Tabelog ] areas and recruitment Kyujin Box are growing quite strongly. So our IR is still meeting. So we do recognize them as an asset that has a value.

Operator: Next, from JPMorgan, Yamamura-san.

Junko Yamamura: I am Yamamura from JPMorgan Securities. I hope you can hear me.

Unknown Executive: Yes.

Junko Yamamura: I also have 2 questions. First is about the Media business guidance, the search at the revenue decline, you made some lower downward revision. So if you only look at the Q2, the search -- the shrinking of the search is bigger than what you expected. So AI mode search, I think it has been affected to some extent. But if not, that is not the case, maybe it was a temporary improvement. And in the second half, is it possible that there will be the expanding negative numbers. AI search, I think that was what you expected for the second half. So are there any changes that you see in our outlook in relation to this?

Ryosuke Sakaue: Sakaue. I'd like to respond to your question. Yes, as you asked correctly, in Q2, especially the ads, the unit price has been doing very well. At the same time, more recently, the trend that we see now, whether it will continue or not is not yet certain. So we are expecting the conservative status like Q1. So maybe Q2 was temporary. So for the second half, we expect a similar level as Q1. So that's how we changed.

Junko Yamamura: So AI mode, AI search, the results contribution is not something that you have confirmed. So in Q2, we shouldn't expect that to happen?

Ryosuke Sakaue: Well, fiscal '26, as we mentioned at the beginning, we are testing the ad display. And we are not still -- we are not yet seeing the good results. So in fiscal '27, we are hoping to expand the size or the scale of it.

Junko Yamamura: My second question is about the LYP Premium or LYP the revenue increase is accelerating. So could you explain the reason? The LINE members increasing and the Netflix related is increasing. So LYP is supporting the e-commerce business and also is maybe controlling the increase of the sales promotion. So it will be very interesting. So whether it is sustainable or not, could you explain that? And also the SoftBank Group as a whole, the synergy -- creating synergy, I'm seeing that result. So do you think that this type of effect can be something that we can expect in many different ways, if you can respond to that?

Ryosuke Sakaue: As for the first part, I'd like to respond and as the synergy, Hide-san will respond. As for the LYP, LINEs, for example, the erasing the transmission and so forth, that is encouraging the joining of the LYP. And so the future benefit and those people or the cancellation rate has been kept at low levels. So we are seeing the cumulative increase. Like in the past, YAHUOKU! in order to use the feature, people joined and then they canceled, that happened in the past. But LINE function and also the Netflix, they're distributing a very good content. So the sustainability is good. So we are seeing the cumulative growth from that. So we see some growth from that. So Hide-san will respond to your first -- the second part of your question.

Junko Yamamura: Right. So LYP is strong and leveraging that, what will be the group synergy?

Makoto Hide: This is Hide speaking. As Sakaue-san mentioned, this LYP strength is especially the feature, functional benefit of the LINE and that is encouraging people to join or become LYP members. So getting the customers increasing the LINE point or LINE award is not something that we are seeing. I think that the users are finding our function to be helpful. And LYP, for the LYP members, we provide -- sorry, for the SoftBank users, we provide this free of charge. So SoftBank users using LINE and also using the LY Commerce. So using the -- increasing the LYP members, and that would lead to the commerce and SoftBank users using this free of charge. So as for the Commerce users, they can use the PayPay points. So PayPay users payment transaction would also increase. So with the strong LYP, we are hoping that we can cross-sell and improve the group-wide business. So we are working on this together with the SoftBank. So I look forward to that. Thank you very much.

Operator: Next question is from SMBC Nikko. Mr. Maeda, please.

Eiji Maeda: I have 2 questions as well. My first question is the recent cyberattack-related questions. Regarding your security-related costs, are you planning to increase going forward? What are your plans, your directions of how you plan to strengthen your security measures, please?

Unknown Executive: Well, recent cyberattacks are advancing quite a bit. So our security-related cost, we do need to allocate more to a certain extent. And actually, we are using AI for our security diagnosis, and we are doing various tests for that, too. And including token cost, we are allocating more budget for that. But as I mentioned on today's presentation, our plan includes those additional costs. That's factored in, in our full year guidance, too, to realize our growth.

Eiji Maeda: And my second question is about your market overall, the trend and comparison of your trend versus market. Agentic AI uses, various AIUs are increasing. And the recent Meta's Muse or some of the new emerging advanced products are starting to become available, and I believe that competition is becoming more and more fierce. So I wonder whether that is becoming a headwind for your sales activities, especially in the Media business, please? Does that impact your position in the marketplace?

Unknown Executive: Let me answer this question, too. Regarding release of the Muse, it is -- what we have announced is from April, we released Agent i. And for our consumers, we make AI agent services available, and that is happening globally, too. So this is perfectly within our expectations. And for us, expanding the market by other global players is all welcome. And how we differentiate our offering versus others is leveraging our line, the strong chat service. At the moment, Muse is integrating Gmail or calendar softwares to bring convenience to the users, and that is perfectly doable in line and messengers too, we can realize that and to understand the consumers' shopping behaviors or when -- sorry, when our users want to make some shopping or make a reservation or book some hotels and transitions themselves to external servers, there is a certain hurdles, and that's our current situation, but we do have conversion points amongst our group. We are able to deliver a seamless user experience. And we are connecting various services of our [indiscernible] groups to Agent i. So that's what we are working on. That, I believe, is our strength and competitive advantage.

Operator: Next from Nomura Securities, Harahata-san.

Ryohei Harahata: This Harahata from Nomura Securities. I also have 2 questions. First, as Maeda-san asked about AI agent, for example, if a particular agent service market share increases in Japan, what would be the impact on your growth strategy? So do you think that you need to make some changes? Or still can you expect the increase of the revenue? So how this AI model is robust in terms of other competitors?

Unknown Executive: Well, this is something that we want to grow steadily. And if it doesn't work, we shouldn't really talk about that now. But what is most important right now, for example, in the local market or in Japan market, the network of the restaurants and the word-of-mouth have been accumulating and the Japanese inns. So data itself in each vertical and also the network with the companies, I think that will be the key in this type of business. So our strength is that we have Yahoo! and LINE, and that will be our strength. And also in each vertical, we have a network with the companies, and we also have data. So we are competitive, I think, in that sense. But the various agents, if the number increases and still the vertical network and using our data, we think that we can monetize. So first, with Agent i want to make sure that we can get the overwhelming market share. And that will be the target, and we want to grow or promote businesses that way.

Ryohei Harahata: Sorry to be asking a kind of a bit offensive question. So second question is about the room for further revenue improvement or profitability improvement. By using AI, do you think that you can still improve the profitability in the medium term? How do you plan to make further improvements?

Ryosuke Sakaue: Sakaue. I would like to respond to your question. First, engineering, sometimes it's outsourced or done in-house. So Claude code included, they are becoming smarter and more automated. So something like that, we want to continue to improve efficiency, and that is something that will be done. And as for the COGS or cost, the business model, I probably do not think that will be changed with AI, but rather the personnel cost and the outsourcing costs and so forth, we can probably expect some improvement of the efficiency.

Operator: Next question is from Mizuho Securities, Mr. Kishimoto.

Akitomo Kishimoto: This is Kishimoto from Mizuho Securities. I have one question about your media business. In your upward revision in your revision this time, account ad, the growth outlook, you have not made a change. Could you please give us a breakdown? What's working well? What is not working as well as you expected? And also, this is probably under account ad, MINI app or in-store DX. In the -- from the end of Q1, you've launched some services. If you could please share your current feeling about this launch date. I know the contribution is probably rather small, something qualitative -- sorry, if you could give as much quantitative as possible, that would be great.

Unknown Executive: Regarding paid account numbers has been increasing, especially from SMEs, those clients' numbers are increasing number, and that's contributing quite a bit, especially from Japan market. And growth in Japan market is bigger than others. And in overseas, especially in Thailand, because of regulatory frameworks related to Internet ads is strengthening led by government. And domestic economy is not all that robust at the moment. So amongst our overseas business, we are struggling quite a bit in Thailand. So that's driving the overall overseas down in Thailand, quite brisk like Japan. And in Taiwan, we made a price revision. We are going to make a price revision. That's in plan. So I believe that Taiwan can realize a similar growth rate as Japan, like 14% to 15%. Next, about in-store DX, it's not something that we really can share in terms of the contributions, but we are sharing many apps DAU about year ago, we have shared about the target user base in FY 2028. In the current growth rate, things are going on track. So as long as [ MAU ] will keep on growing, we should have a pretty good business from EMEA. And for store DX, we are strengthening our commercial activities, and we are doing various installation works. So we don't have much to share in terms of revenues or the number of stores who have utilized our DX service.

Akitomo Kishimoto: Sorry, I have a second question, too. Are there any bottlenecks to drive your store DX initiatives? And you talked about the synergy with the food service restaurants in terms of sales when you were talking about the TOB of Kakaku.com. I wonder whether there are any challenges that you're feeling when you were to rely on your internal resources for sales or maybe leveraging agents or distributors?

Unknown Executive: Well, we are coming on a laggard in this initiative. So there are already systems that are available in the marketplace. So we do know that some of the shortcoming in terms of functionality that we can fulfill so that, that would be a good reason for store owners to use our service coming as a laggard. But we know that it will come with a certain time. But as long as we keep at it, we do this properly, and we will be able to develop expertise and know-how, and we should be able to shorten our launch period, too. I see those limitations has to do with the functionality and features. So you don't have much issues at the moment in terms of sales resources -- sales capability, resources.

Yuki Ikehata: Ikehata speaking. Let me add to the comment related to our commercial capabilities. As Sakaue mentioned, regarding functionality, there are certain functionality that we need to build up so that we can catch up to our competitors. So we are not ready to add a massive amount of personnel in our sales so that we can just scale rapidly. So we did have certain target per person per head in terms of revenue contributions, we are meeting that target. But regarding expanding our sales resources, number of personnel, we are not there yet. But as long as we are ready to go full launch all out in terms. Because we have all the enriched functionalities, then we will allocate more resources. At the moment, we are not there yet.

Operator: Next, from Okasan Securities, Okumura-san.

Yusuke Okumura: Okumura from Okasan. Hope you can hear me. One question from my side. For the next fiscal year and onwards, the profit growth. So this fiscal year, more than 20% increase of the profit. It's a very strong plan. And the medium-term profitability improvement or growth rate is in the single digit or high single digit, I think that was the image. But as of now, the management team, based on your recognition in the medium to long term, what would be the basic profitability or growth rate of the profitability? Is it increasing? So based on the media initiatives for this fiscal year, do you think that you can aim for more than double digit in the next fiscal year?

Ryosuke Sakaue: Sakaue will respond. More specifically, I cannot give you the numbers, but high single digit is what we used to say that was conservative. And for the next fiscal year, at least double digit or higher than 10% or 10% or higher, that type of growth can be realized in a sustainable manner.

Yusuke Okumura: So earlier, you said that the profitability and the cost and the sales promotion, but rather the next fiscal year, the changes of the top line is also something that we can expect?

Unknown Executive: Well, it's a mixture of those. The fixed cost reduction. It's not just temporary or onetime, but using the AI that would be continuously made. And as for top line, the Commerce and Yahoo! JAPAN Shopping, we are seeing the increase of the profit level and the LYP Premium, I think it's official account is also cumulative business or stock business. So it's relatively easy to predict. So I think that we are seeing the cumulative increase of the sales or revenue.

Operator: Next is Nagao-sama from BofA Securities, please.

Yoshitaka Nagao: This is Nagao from BofA. One question, please. Regarding your growth of your core business. Now that your first half is closed and your growth in EBITDA is JPY 6 billion. Now out of that Media sales is a positive 1.9% shopping transaction value is a positive 0.7%. And the growth -- half of the growth is pretty much cost reduction. PayPay -- excluding PayPay, ZOZO, ASKUL. Your core business growth rate, what are you foreseeing for next fiscal year and the year after that? Your great interest of Agent i, when would it have a significant contribution in terms of numbers? Is that from next fiscal year? I actually have difficulties in seeing visibilities for the growth opportunities for your core business, LINE, Yahoo! core business, please.

Unknown Executive: Regarding commerce, we had a one-off reason last year, and we are growing our top line. And regarding our Media business, as mentioned on today's presentation, difficulties we do have in the search business, but as an opportunity to revisit that product mix within the Media business. So when looking at the Media segment stand-alone, we have converted our portfolio for growth, too. And the breakdown is some of the stock business, leveraging offshore [indiscernible] and LYP and for Commerce business, because of the structural reform, we've been able to grow our user base in a quite healthy fashion, which is leading to increase in GMV. And PayPay is also growing, too. And global and Asia financial services are growing significantly. So our perspective is not because of the cost reduction. We've been able to change our structure so that we are able to generate the revenue with a reduced cost. That's how we are saying.

Operator: From Daiwa Securities, Kumazawa-san.

Shingo Kumazawa: Two questions, please. On Page 7, other adjustment, EBITDA is up by JPY 10 billion. At the end of the first half, it was minus JPY 2 billion and the second half, JPY 12 billion positive. So next year, there was a next career program and so forth, the negative, I understand. But the JPY 12 billion positive in the second half, could you share with us what that means? Is it higher revenue? Could you tell us?

Ryosuke Sakaue: Yes. Second half, the company-wide cost reduction, that's something that we did in the first half and we are expecting the full year effect, and it was difficult to distribute that into each segment. So it's the cost reduction for company-wide. So that's the positive number that we have.

Shingo Kumazawa: I see. The second question, if I may. From September, Yahoo! JAPAN Shopping, the store opening, I think that it's the notification of the take rate to GMV. So looking at the external environment, Rakuten is increasing the fee by 40% from February next year. So are you trying to get more merchants? Or are you going for the higher profitability? So using Agent i the transaction fee -- with the transaction fee, I think it will be competing against the -- so in the competition in the shopping mall type business, could you tell us the direction? Are you going for the kind of volume or profitability?

Makoto Hide: Thank you for your question. Hide is going to respond. So September, we revised our plan -- as you asked, in the medium term, the agent commerce is what we expect. So 2023, we did the e-commerce revolution, and we focused on the ad model. So getting the compensation based on the results because we don't know where the purchases are made. So in view of the agent commerce, we believe that we need to make the change. So that's what we did in September. And we have a monthly fee that we charge and including the security cost, sellers and the product information incurs some cost. So we changed it to the monthly fee scheme. So for the competitive environment in the future, based on this change of the plan, I think that we have made a change to the -- where we can get the appropriate level of the fee. So rather than just increasing the profitability, we want to expand the volume or size or scale. And so agent commerce being expanded and Yahoo! JAPAN Shopping included. So expansion of the scale and also to get the appropriate level of the profit or revenue based on the expected profitability.

Operator: I would like to make the next question as a last question. From Bloomberg, Mr. [indiscernible].

Unknown Analyst: This is [ Kirk Bi ] from Bloomberg Intelligence. I have one question about the transaction value in the commerce business because that's been improving. But I want to understand what the drivers are, whether it's H&I has had some impact, whether you're seeing more value-conscious shoppers on the platform or whether there's inflation having an impact on the volume of sales.

Makoto Hide: Let me, Hide, answer this question. It's a mix reasons. You mentioned about the inflation impact. Yes, definitely there because prices are up by 2%. So our sourcing cost has increased as well. So that's additional few percentage because of inflation and a number of our users shoppers are increasing and have to do with Yahoo! Shopping too. And we are increasing our market share in marketplace and has to do with the increase of LYP members and increase of PayPay users. There are greater participants of economic zones and those are buying on our platform plus inflation. And I think AI contribution is yet to come. I'm sure that the frequency will increase with our current AI users and that would give us a reach to the customer group that we haven't been able to tap to. So that would come from next year onwards.

Unknown Analyst: Understood. As a follow-up, do you think that reuse transaction value can continue with growth above 10%?

Unknown Executive: Yes, double-digit growth, we are planning to continue. In terms of market-wise, with the depreciation of yen, there are quite a bit of cross-border transaction from overseas shoppers. That is increasing and Japanese users are seeking reasonable price item has to do with inflation, too. So this reuse market is quite active now. And I believe that we can expect this double-digit growth that we like to in the midterm onwards.

Operator: So it's time to end. So we'd like to end the Q&A. So I'd like to invite Idezawa-san to say a few words of closing.

Takeshi Idezawa: Thank you so much for so many questions. So including our answers, we'd like to make sure that we continue to grow our businesses. And also as for the Agent i, this is the biggest change of the user interface, and this is going to be the core for us. So we would hone this further. And through that, we want to improve the financial value that we offer. So a higher dividend and the shareholder return we announced today. So we would like to continue to respond to the expectation of the shareholders. We want to continue to take initiatives. So thank you very much, and please continue to support us. And thank you for your participation today.

Operator: With that, I'd like to end the financial results briefing of LY Corporation. 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.]