Rakuten Group Inc S/Adr

Thank you for joining Rakuten Group's FY2026 first quarter financial result briefing today despite your busy schedule. The earnings summary was disclosed at 3.30 p.m. just a moment ago. Please visit the investor relations section on Rakuten Group's corporate website to view it. Should the audio or video cut out, you may switch to an alternative streaming server using the button displayed below the video player. We will now begin the presentation from Miki Tani. So everyone, thank you very much for joining our briefing today despite your busy schedule. And I would like to cover FY2026 first quarter financial results, followed by CFO Kaga to explain financial situation, followed by AI by Tinsa chief AI officer. So this is agenda for today, as shown on the slide. And first of all, overall summary. And then next today, we would like you to know about the synergy ecosystem of Rakuten group in detail. After that, segment results will be explained.

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

So, from here and after, I would like to talk about the Rakuten ecosystem in a qualitative manner. I would like to investors have deep understanding on our ecosystem. So, in Japan, ecosystem, I think the ecosystem is created by Rakuten group. So, basically, the conglomerate discount, like the one plus one due to various reasons is less than two. However, in our case, it's not a simple conglomerate. We do have a huge synergy in our group services. That's why one plus one is greater than two. So it will be expanding. In particular, recently, because of AI or agentic AI advance. So what would happen with that? So in various stages, Rakuten ecosystem, so-called, we do have growth and the defense and office and defense, we are able to achieve both sides. And the foundation for this is one single brand name. So the common ID we do have and common point program, With that, we do have 70 services connected. So we haven't emphasized this, but the monthly, 45.88 million users are using some of our services. So we do not call them the viewer. Actually, they are transacting our services. Other than this, so from the corporate governance perspective, so we do have a thorough corporate culture and including Rakuten Mobile, they are making really hard efforts. So the corporate culture, we do have more than 70 services and in all of the group companies, we do have a common culture among the group companies and also the users very loyal to our services. So how to increase the number of users and how can we increase the number of cross-use? And then how to improve the LTV or the lifetime value. Lifetime value of the customer. How can we improve this? And then among that, so looking at the overall CAC or customer acquisition cost. How can we lower this CAC? And then how can we bring that to the higher LTV and acquire new users to our ecosystem and how to upsell them to other services. That is a big point of this ecosystem. And then over the past five years, from 2020 to 2025, so-called internet services such as EC or the Travel, and from those services, new users joined. That is about 19.7 million. And new customers from FinTech, Rakuten, PointCard, Credit Card, and the bank and securities, and the customers moved from there, new users, that is 16.1 million. And through the mobile, 2.9 million.

38.71 million people who came into the ecosystem are using 4.6 times the number of services. So each of the services are organically connected. That's what is represented here. Now, this is a very surprising, shocking number. The user of one segment and users of two segments and users of three segments. When we compare them, users who are using two segments are using 5.4 times revenue. They are generating 5.4 times the revenue of Rakuten Group and users of three segments are generating 13.5 times the revenue for us. So the customers or membership nurturing is now working. So two, three, four services, when users use all these services, what happens is that, for example, the users who are using one service, the churn rate of the user of one service is baselined as 100. And then users of four services only have one churn rate. So the more services users use Rakuten services, the higher the loyalty of the users becomes. So as a result, looking at our strategy holistically, the relatively low CSE services are used to acquire customers. And then among these users, we upsell them to high LTV services, including mobile and financial services. That's our strategy. By the way, mobile and fintech, the users of these services, about 85% of new users of these segments came from the Rakuten channels, Rakuten ecosystem. So there are many functions that we can utilize and that is currently working very well. Now AI is advancing and what will happen to all these services? That is the question. But we have rich data. On our hand, not only online data, we have offline data as well. So globally speaking, we have rare, really valuable and rich data. So through the use of the data, we can provide many services. So we can also have more customers come to our ecosystem through the use of AI. And we will talk about this later again, but the profitability is going up rapidly. more and more which means that we have been decreasing the operating costs through the use of ai we are also promoting cross use using ai and we can accelerate the customer acquisition using ai and that's what we have been doing so on the offense and on the defense ai can accelerate our strategy and that's what's happening

Okay, now move on to the segment results by each segment. And first of all, shopping, travel, the internet service segment. And the revenue was 317.6 billion yen. So not only from Ichiba and travel, Kobo and Viber content businesses are performing pretty well to grow. And Non-Gap OI, 21.2 billion yen, comparing to the year before, plus 65.6%. And then each KPI. And first of all, domestic ECGMS, that is 1.5 trillion yen, which is 4.8% YOY growth. And then travel, plus 16.4% increase YOY. And investment business IRR, and it's quite performing well. And then international revenue, and the 459 million US dollar, about 7% growth this time. So what we have to mention is AI-led advertisement business has been performing pretty well. So the 61.9 million yen in Q1 and 13% growth YOY. And then let me look into each business in detail. First of all, domestic EC. As I mentioned before, JMS 4.8% YY growth and revenue plus 4.0% and OI plus 29.2% growth. So it's about the 31 billion yen we achieved. And the next is travel business. It's really growing today. And travel business, the GTV, on a YY basis, plus 16.4%, and particularly inbound demand, which is the 69.7% growth. And even for the domestic travel, there is a growth of plus 8.1%. We have added direct AI capability here, which will help the searching hotel much easier and also the real concierge. So just like if you are talking to the travel agency to decide where you want to go and book your hotel, that is possible with this AI. So next is the gross investment business. So trying to lower the cost or increase the revenue. And that is what we are doing really hard. And then about the 2.7 billion yen profitability improve was made non-GAAP. So what we have to stop needs to be stopped. For example, NBA Rakuten, this is a basketball streaming service we have terminated. And for the Rakuten Mart in the western area, we have terminated the service there. So that will improve the remaining gross investment businesses. It's still in the middle way. And the next is international VU reward. So YOY basis, there is a big jump from the YOY basis and also the streaming service, the Viki, and then revenue has been steadily increasing. Unfortunately, Well, it was not making a huge loss, but it was really difficult to turn into the profit, which is the Rakuten France marketplace. And that will be sold or terminated by the end of 2026. We have decided. And with that non-GAAP OI for this Q1 FY2026, 7.1 million USD. And this is a shopping. So we do have a higher season in Q4 for revenue. And the next is at business revenue, which is growing largely. So the Q1 revenue was 61.9 billion yen. And so the 13% YY growth, so it's been accelerated. And then using the AI for various advertisement services, for example, Rakuten Ichibas for advertisement. So once you decide the budget, then automatically we will replace the optimized advertisement with that. GMS at Ichiba will be growing, not only that, but also for the merchant revenue and improved. So taking the power of AI and taking advantage of Rakuten data has a great potential or possibility. Then Rakuten Advertisement and the common challenges in advertisement businesses, what are the differences between the two? And our targeting, or the AI, use the actual data or actual purchase data. On the other hand, other companies, they use behavioral data, for example, search and view. And then we do have a common ID, so we can have accurate analysis of the results. On the other hand, the common challenges, they are using the cookie. It is difficult to use the cookie. There is a restriction, so the accurate tracking or measurement of the result is quite difficult. And the coverage, as I mentioned before, Well, we do have so many users using various services in our group. So data is one thing and also the advertisement placement, web page or application. So we do have rich the asset of that. So the AI would be growing our advertisement business in Rakuten.

Next is the fintech segment. Revenue was up 23.1% to 275.3 billion yen. So all the services are growing steadily, especially Rakuten Bank and Rakuten Card. They have increased revenue steadily, and also Coast is controlled the revenue. The non-GAAP operating income was 58.5 billion yen, up 33.8% year-on-year. These are the major KPIs. Rakuten card shopping GTV was up by 18.5% to 6.8 trillion yen, and the number of Rakuten bank accounts was up 7.3% to 18.07 million, almost 20 million yen. And Rakuten Bank deposit balance is 12.9 trillion, up by 12.9%. There is severe competition, but it was 12.9 trillion. It's growing. And Rakuten Securities General Accounts, It surpassed 14 million in April. And NISA accounts, as a leading company, we are driving NISA, and there is 7.53 million accounts. So for all generations, young people are opening up NISA accounts at Rakuten Securities as well. And Rakuten Securities' deposited assets, 50.3 trillion, up by about 40% year-on-year. Now on Rakuten card first. The so-called interest rate has been increasing, so how can we grow this business was the question. But the number of members and GTV and assets and cultural control, all of them are working successfully. An 8.5% increase in GTV and revenue was up by 18.4% and non-gap OI up by 15.7% to 16.8 billion yen. Now on payment, it is also growing. The revenue was up 12% to 27.3 billion, and non-GAAP OI was 2.1 trillion yen, up 14.4% year on year. Now on Rakuten Bank, the bank side, Already made an announcement about the ordinary income was up 38.4% to 255.5 billion. Ordinary profit was up 44.1% to 103 billion. Capital adequacy ratio is above 10% and ROE 21.7%. All in all, the number of bank accounts and number of main accounts, total deposit balance, they are all growing across the board. But with the utilization of AI, the expense ratio has been going down. Rakuten Securities Other securities are also facing the same situation, but the securities market is quite active. So the number of general accounts has also surpassed 14 million, and operating revenue 50.3 billion, up 43.7% year-on-year, and operating income versus the previous year, up by 92.5%, almost doubled to 14.6 billion yen. Now insurance, it's also trending favorably. The revenue itself, we have high margin products that we are focusing on. So looking at the revenue, the revenue, the absolute number may have gone down, but the OI was 1.7 billion yen. So it's been trending steadily. Especially Rakuten Auto Insurance. That's where we focus on and the sales has been expanding. As for life insurance, we have face-to-face and online and group insurance. All channels are doing well. Now, on the fintech business, I'd like to touch upon reorganization. As of now, as far as we can disclose, I'd like to talk about this topic. First of all, the financial synergy is quite significant. Directing car, directing securities, So in Rakuten Bank, some of them are undertaken at Rakuten Bank, but on top of that, we also have external interest-bearing debt, rather high. interest rate is there. So with the restructuring in the fintech group, we can complete the cycle ourselves. So the interest burden can be controlled. And also the asset management can be done in the group by ourselves. And in terms of the cross use, we can accelerate that. especially we can consolidate and integrate the applications. And we can do that more easily with this reorganization. to achieve super approval. And we can maximize corporate customer base. The customers may have the corporate account at Rakuten Bank, but they may not have the personal account or vice versa. So corporate customer base can be commonized to expand the business scale. And more than anything, including Rakuten Group, we can utilize AI further. So even more than before, various financial services can be offered in a seamless manner. So the identification of the person is the key, but eKYC can be used to automatically verify the identification. And then we can centralize the data by so doing. So synergy will be quite large.

Last from myself, talking about the mobile segment, and it has been progressing smoothly in both the revenue and OI. The revenue, 18.5% YY increase, which is 131.2 billion yen, and non-GAAP OI. 13.3 billion YOY improvement and minus 38 billion yen. EBITDA, 1 billion yen. And then the pre-marketing cash flow, the new customers or new stores, excluding costs related to that, it's already reached the 28.7 billion yen. So throughout the year basis, it's beyond the 100 billion yen. So the premium acting cash, premium PMCF, growing 8 by 85.7% in major KPI, Rakuten Mobile, the YY basis and 10.36 million under subscribers, increasing 1.74 million. And then the adjusted churn rate has been improving and up, mainly around the store, it's getting increasing. On the other hand, So mainly for the communication software, which is Rakuten Symphony, number of customers are increasing and number of partners are increasing. So this has been progressing smoothly. And let me go into detail about Rakuten Mobile. And the revenue is growing by 23.9% YOY. And then the recorded 108 billion yen. And then non-GAAP OI. And then the improvement of 12.7 billion yen. And particularly, so we are still at the phase of increasing the customer basis, so we are still in the growing phase. So excluding those growth investments, so we already achieved this, the 28.7 billion yen, so excluding the property tax, and it's 6.6 billion yen.

So the net increase in the first quarter of last year was 324,000 lines. So in this first quarter, it was 373,000. So it was up by 15% as for turn rate. Compared on a quarter-to-quarter basis, it was down from 1.99 to 1.76. And in April, it was 1.45%. So it was the improvement of 34 basis points. The one thing I can say is that there are people who are going around different areas to earn points. And so they are leaving the carriers quickly. But those users with more than five lines are now charged with our fee, and we are also strengthening the rule to verify the identification. So that succeeded, and we were able to curb the short-term users as a result. That is a key point. Having said that, the user survey showed that the 76.4% of the Rakuten users are saying that they intend to continue using our service. And also, Rakuten Mobile is the most considered mobile service for switching, with 23.7%. We are ranked at number one. And Apu is also about to go up. On the other hand, the base station construction, it is also accelerated, so the network quality will be improved as a result even further. The shortage of labor. has given us a difficulty, but other companies and the mobile industry may not have used this process, but we are going to take up the upstream process internally to accelerate the base station construction. Rakuten Symphony The 131.4 billion US dollars, that was the number. And OSS, cloud, including that, everything is trending well. So that is all from my end. Now I would like to turn it over to Kaga for finance, and Tinsai is going to talk about the AI section.

So this is Kaga. Let me explain the financial matters. So this is the first quarter consolidated financial results summary. Non-GAAP operating income came in at a strong 36.3 billion yen. After deducting amortization of intangible asset share-based compensation and one-off items, so the IFRS operating income was 30.4 billion yen. We made a very strong start while the goal of significantly increasing profit in fiscal year 2026. And for this other first quarter and they are before tax and the profit before tax is making a profit. This is a big turning point and that is our understanding and for this year. So continuously, we will revisit our business portfolio, and there is a possibility of revisiting business portfolio, but we are lowering the risk on the balance sheet. That is how we are thinking of. So this is about the financial strategies. There is no change to our financial strategy as previously communicated. We remain committed to continuing strategic investment in the mobile business while maintaining financial discipline and pursuing further credit improvement. We will maintain this policy. And then the most important thing, which is one of the financial KPIs, for the net debt to EBITDA of our non-fintech businesses, we are targeting a reduction to below 5x by 2027. And then we are also maintaining our target for consolidated equity ratio of 10% over the long term and 5% over the medium term. So regarding the ratio of net interest bearing debt to EBITDA in non-fintech businesses, the ratio... Due to both improved EBITDA and an increase in the valuation of listed securities, the ratio has declined to 5.6 times as of the end of March. And then for the target at the end of fiscal year 2026, we have set a slightly conservative goal of around 6 times. But our commitment to improving profitability and reducing interest-bearing debt remains unchanged. And then we are also making steady progress on funding for bond redemptions. For this year, senior bond redemption are planned to be covered by cash on hand. In the last month, April, we had a The first, the core date in April, the U.S. dollar denominated perpetual subordinate policies and have been fully redeemed using proceeds from the domestic perpetual subordinate bonds issued in October of last year. For the perspective of proactive maturity management, we have already begun planning for redemption from 2027 onwards, in addition to maximize free cash flow of the group. Where debt financing is required, we will carefully monitor market condition, including foreign exchange and interest rate trends, and evaluate the optional funding options from the full range of available options. So we recognize that our series of proactive initiatives toward financial soundness have been continuously evaluated positively by the market. The trend in the spread of our corporate bonds issued in previous years and five-year CDS spreads show relative improvements even when compared to the market indices. Going forward, we will continue to work on further strengthening our financial structure and maintaining disciplined financial management to sustain and enhance this evaluation. This is all about the financial section. And now we would like to move on to the AI initiative and see if AI Officer Tintan would be explaining.

Thank you, Kaka-san. This is Ting. I'm the Chief AI and Data Officer of Rakuten Group. Today, I'm very excited to share with you our AI strategy, how we set Rakuten apart, and highlight our progress in rolling out AI agent across Rakuten ecosystem. We continue to pursue Rakuten AI vision to augment human creativity with the power of AI. We are leveraging our differentiated advantage, our ubiquitous channel, reaching 10 million online and offline touchpoints, and our connected ecosystem with 46 million monthly active user in Japan. That connected ecosystem make it much easier for user to discover new services, reducing customer acquisition cost. And with our diverse portfolio of businesses, we have built one of the most comprehensive ecosystem that can meet almost every user needs in both daily and professional life. Every interaction in the ecosystem helps us to accumulate unique data. Combined with AI, now we can derive more insights and provide higher quality services to our users, further nurture our relationship with our merchants, and build the growth flywheel through our ecosystem. Why do customers choose Rakuten Ecosystem? Because the trust in our brand and the value and joy we provide to our users through Rakuten Points and the relationship with our merchants and partners. Now with AI, we can compound our ecosystem advantage. For every touchpoint we have, we can engage better with our users, whether it is a search, recommendation, advertising, customer service. AI can better understand the user intent, enhance user experience through personalization. This creates a sticky experience that increases customer satisfaction and and entices them to come back to us more often. And second, expand. AI can expand our services in multiple ways. It can help us to capture user intent earlier, turning vague ideas into concrete actions. It can help users to understand our points and campaigns more because AI can guide them throughout the process. For example, in a shopping marathon, users can earn 10x points if they shop from 10 different shops in Ichiba. But which shop to choose from? Now AI can make recommendations. With AI, we can also interact with users in new ways through voice, Now, more users can interact with our services in the way they prefer. And lastly, differentiate. AI is increasingly better understanding what users want to achieve. Break it down into tasks, planning, executing, iterating to achieve goals. And when it comes to complete transactions, this is where Rakuten presents a unique advantage. In a nutshell, AI enables us to engage user with more personalized services, expand usage scenario, and differentiate our services through transaction, through our memory, and connected services. With that, we can continue to build it flywheel to grow our competitive advantage. The beauty of Rakuten ecosystem is that it's all centered around one Rakuten ID. With Rakuten ID, we have accumulated precious data assets about our members, including historical context, user preferences, that enables us to provide tailored services to our users. Integrated identity, context, and easy payment and delivery remains a unique advantage of Rakuten ecosystem that external AI agent have difficulty replicating. In addition, our AIG agent can activate the depths of knowledge we have in each domain. By delivering specialized services, it will be difficult for other general purpose agents to match. In the AI era, data alone is not enough a mode itself. It is the value we create from the data that help us to build a more trusting relationship with our merchant and users. It is the additional economic and emotional value we can deliver through the Rakuten ecosystem that keeps our user coming back. As consumer increasingly shift from a traditional search engine to AI-powered information discovery services, our agentic AI strategy presents a significant opportunity for Rakuten to expand our services and capture user intent. We are focusing on two things. One is building specialized agent with deep expertise in each domain. This enables user to skip traditional web search and come directly to Rakuten for discovery, consideration, and all the ways to purchase decisions. And second, we are building a super agent. User can just share a vague idea and super agent can figure out the intent through its memory or having a dialogue with the users. It can plan and execute then And finally, helping user to complete tasks across multiple ecosystem services. Going forward, we will enable our agent to complete even more tasks and expand our upper funnel opportunity, establishing Rakuten AI as the go-to destination for general inquiries. From architecture point of view, We are investing deeply in each layers, from infrastructure, data center, GPU optimization, model system, and all the way to application and agent. Specifically, our AI agent, we're focusing on a strategy where we do the best, but also partner with the best. We have been collaborating with the best AI company in the world, both startups and large company, such as Anthropic and OpenAI. We started collaborating with them early on, For example, we worked with OpenAI when they only had 400 people, and we worked with Anthropic before cloud code became a phenomenon. And at the same time, we want to understand the technology fundamentals so we can build from the ground up, creating our own embedding for commerce, tokenizer for Japanese. We also innovate on top of our open source model, train with our unique data set and optimize for domain specific task. Today, we have a portfolio of models from mini models to supermodel with almost 700 billion parameters. And moving forward, we are focusing on building domain and task specific models that are very cost efficient for our businesses and delivering better margin and more value for our customers. Since our grand launch of Rakuten AI, our agentic platform at Optimism last year, we have continued our execution momentum. Today, we have 11 AI agents available, particularly in our last learning presentation, we talked about Rakuten Ichiba. Today, I want to briefly touch on Rakuten Travel. And as Mickey mentioned earlier, Rakuten Travel increased the gross transaction volume 16.4%, and I have personally used it every day during the Golden Week. While I was biking from Onomichi to Imabali, every night I booked on Rakuten Travel. It's a delightful experience for me to discover Local Jam easily and quickly on the go. We are moving quickly to build, test, and deploy AI Agent across the ecosystem. AI Agent are already live across 11 services, and our plan doesn't stop here. We hope to enhance all of our services through AI Agent. Our ultimate goal is to augment human creativity with the power of AI. That concludes today's presentation. Thank you.

So this is this concluded the financial results presentation. Thank you very much. Thank you for joining Rakuten Group's FY2026 first quarter financial results briefing today, despite your busy schedule. We will now move to the Q&A session for the press. Our presenters today are the following seven individuals. Next, I would like to explain the format for today's Q&A session. The Q&A will be conducted with simultaneous Japanese-English interpretation. Please select your preferred language from the menu on the Zoom screen. And please do not select mute original audio. During interpretation, the speaker's volume will be lowered and the interpreter's voice will be the primary audio. The presentation materials are in Japanese. Please download them if necessary from the investor relation page. To those who are joining from PC, please click the raise hand button and the smartphone, please tap more, then tap raise hand. When your name is called, please make sure you are unmuted before asking your question. Please note that questions are limited to those related to the financial results. And we also kindly ask that each participant limit themselves to two questions submitted together in a single turn. So the Yomiuri newspaper, Onosa, who raised their hands, please start your question. So honor from your newspaper. So business performance and operating income since April 2019 for the first time you turn the profit into profit. So how do you think of this and So you had a good start as Q1. So what would be your expectation for the full year? I would like to know that as well. That's all. So basically, as you know, Rakuten Mobile, we have challenged a huge project. So the actual user's reaction to this business, which actually contributed to direct the ecosystem businesses. So the lifetime value LTV has been increasing. We have understood it, but now it comes to the surface. It has become explicit. So this time I explained ecosystem in my presentation, and I think I covered about these points. Therefore, So it is a great result, and we need to continue this momentum. So the further utilization will be promoted. In context of that, and looking at the profitability, I think we will be able to improve profitability more with further utilization of AI, and we are quite good at new acquisition. So as mentioned before, reorganization of fintech group is one of the factors. And then we do have a sound balance sheet. Given that not just for this quarter, the onward, I think we can expect a big profitability improvement. We are confident. That's all from me. Thank you. Thank you very much.

Thank you very much.

Next, from Nikkan Kogyo newspaper, Mizushima-san, please. Mizushima from Nikkan Kogyo newspaper. Can you hear me okay? Yes, we can hear you. Rakuten Mobile. You next. Following you next, is there any new service and new associated plan that you are thinking of? With the recent infrastructure, I think that other competitors are increasing the prices. But as of last year, you said that you were not planning to increase the price. But since then, is there any plan to increase the price? This is the first question. Yes. Well, the security will be a big issue going forward And also, Ore Ore Sagi Insurance was also quite well accepted by the elderly customers, so the services for young children and senior citizens will be expanded in the future. And content bundling, we need to discuss with the counterparts, but if possible, we'd like to pursue that actively. And what's going to be important from now on is not to connect them, but connection needs to be secure. And also we need to prevent any fraudulent activities, so we need to strengthen these areas. As for the price, That is a part of our strategy. So I'd like to refrain from mentioning anything about that. But we are latecomer to the market. So compared to other competitors, our market share is still relatively small. So we need to think about the overall picture when we consider these aspects.

Thank you very much. That's all from me. Thank you. So there is a time constraint The question from the other media We are going to take the last question from the media Freelance, Onishi-san, please start asking a question Onishi is speaking So the consumer price has been increasing drastically, and we see several data evidence for that. And probably, that would have some impact onto consumption. If the price hike continues at this level, consumers may start thinking of protecting themselves. I feel this kind of phenomena. So for example, you made the delivery fee charging and I think you are taking several measures and also the labor cost has been increasing so the transportation cost or delivery cost so the logistics industry is struggling with that so maybe you need to take some action for this kind of the thing so in the EC space the cost increases or the consumption momentum goes down I think that will be anticipated So how do you see and what kind of actions will you be taking? And first of all, so when inflation comes, one thing we can say is the... I think the people start buying more from the online. That will be happening. And then we are not just looking at the simple GMS. We are following how much transaction is increasing. So we do have more transactions. And the second point here is the growth factor. AI is one of the factors for the growth and simply by the power of AI to reduce cost largely. So I think it can be applied to our each service. And also we are going to write the various programs, but about 50% of the program code is written by AI. So given this, I think we can make the operation more efficiently. I think AI can contribute in that end. And then for the customer transaction, so the, in a conventional way, they're using the search box for the full match to see what they really want. Not like that, for example, the golf, and we have a good driver, but fairway wood is not good, so how should I do? So this kind of the question, I may enter. And I am not sure whether I can meet a really good club. So the various shopping occasions, the shopping scenes, I think the unsatisfying the needs is something we will be seeing in the future and the Rakuten group, we can do this in a unified manner and we do have more advertisement revenue and in terms of the profitability, it would be going up, but not going down. That is what I think. So the hyperinflation is a different topic, but if it is a manageable inflation, as long as within the manageable inflation, I think it would be working in a favorable manner to our company. So I had others, for example, when the memory is in short and we need to change the server, so there might be some impact like this. But by utilizing the power of AI, that can be absorbed. Thank you very much. Thank you very much. And this concludes the Q&A session for media. Thank you very much for participating.

Thank you very much for joining Rakuten Group's FY26 first quarter financial results briefing today despite your busy schedules. We would now like to begin the Q&A session for institutional investors and analysts. Today's presenters are these seven individuals. Next, I'd like to explain today's Q&A session procedures. The Q&A session will be conducted with simultaneous interpretation in Japanese and English. Please select your preferred language from the menu on your Zoom screen. Please also note that you should not select mute original audio. During interpretation, the speaker's original audio volume will be lowered and the interpretation audio will be heard more permanently. The presentation materials will be displayed in Japanese, so please download the English version from the Investor Relations page as necessary. Participants joining from a PC should click the raise hand button displayed at the bottom of the participant list. Participants joining from a smartphone should tap more where the raise hand option will appear. Please tap it to raise your hand. When your name is called, please ensure that your microphone is unmuted and then start your question. So institutional investors and analysts, the floor is yours to ask your questions. Please limit your questions to matters related to the financial results. And each participant may ask up to two questions, and we kindly ask that you ask both questions together at one time. If you have a question, please raise your hand. We have Okumura-san from Okasan Securities. Please start your question. Thank you very much. I'm Okumura from Okasan. Can you hear me okay? Yes, we can hear you. Thank you. So fintech reorganization is what I would like to ask you about. There are one major question, but two minor questions included. So this time's reorganization for Rakuten Group and Rakuten Bank, the minor shareholders of both entities can be benefited from this scheme. Why did you decide that that's the case? That's different from the previous decision. And also, another point that you mentioned, what will be essentially changing through this reorganization? On top of that, out of the objectives for the reorganization, you said that you will be funding to lower the financial leverage. Is that one of the objectives? If you could comment on these questions, I appreciate that. Yes. The large factor is that the interest rate is being increased. That, I think, is one of the important factors. As you can see here, the external funding is what we are relying on in Rakuten Card and Rakuten Securities. Partially, that's several 10 billion. So is it 10 billion or 90 billion? I cannot disclose that, but the external interest rate is one big factor. For Rakuten Bank, including the deposit, there are assets without interest. So that is where they can switch to interest bearing ones. So that is the most easy to understand factor. And on top of that, recently the new CFO was appointed. So in many senses, we believe that we can generate more synergies as an organization. We have the foundation to achieve that. And now AI is advancing, and we want to make it a one app. That one app is another factor that we are considering. So from the financial perspective, obviously, Rakuten Card, Rakuten Securities, the so-called out-of-group interest-bearing debt will go down significantly, so the financial impact will definitely be there. Kaka-san, do you have any additional comment? Yes, thank you for the question. You pointed out that the financing may be one of the objectives, but that is not the case. As Mikitani said, this time, what we announced is the reorganization, but the objectives of the reorganization is to stop the outflow of the fund externally. And we want to promote synergy to regenerate it. So the funding and fundraising is not the objective of reorganization. Thank you very much for the thorough explanation. That's all from me. Thank you very much. And on an additional note, with this reorganization for the entire group, with the significant interest rate hike will not be a big risk for the entire organization. So that will not be a risk for us anymore.

Thank you very much. And the next question, due to time constraint, this will be the last question. Asset Management One, Nomura-san, please start asking your question. Nomura from Asset Management One, thank you very much for giving this the question opportunity. Can you hear me okay? Yes. So, non-fintech, EBITDA. So looking at the page 54 and the target of 2026 is six times high and the 19 5.6 X and it's been improving but looking at the December end situation so this the net interest bearing debt is increasing and EBITDA is increasing so that final you will be landing at the 6x. So the what is the background of increasing the EBITDA here? So is it because of the capex increase or the about the investment securities value? I would like to know the assumption. That is my first question. And the second question, the fintech organization reorganization, how will it be impacting onto the leverage? Maybe you are not able to speak in detail, but I would like to know the more information as much as possible. That is all from me. Thank you very much. And first of all, non-fintech, net debt, EBITDA ratio, and the next term, we have a target of 5x, and then toward achieving this target, we are progressing smoothly. That is our understanding. And then for the target, So this is based on the refinancing. So the net interest bearing debt is flat. So this is a quite conservative assumption. And then the market securities, and this is equivalent to the cash. And then the net interest bearing debt, we include them to the net interest bearing debt for the calculation. And last year, our holding stock value went up. And then this contributed to this ratio improvement for the EBITDA. as announced today. So it is growing quite powerfully, so it is progressing quite steadily. And this high EBITDA will contribute to the improvement of profitability. This would become a big driver And then the interest bearing debt to be refinancing in the future. So our financial structures soundness is improving. So we are on track in line with our schedule. And the second one is about the FinTech reorganization. As answered in the previous question, so There is no objective that is targeting the financing within the group. I cannot make any other comment other than that. That's all from me. Thank you very much. Thank you very much.

Thank you very much. This concludes the Q&A session with institutional investors and analysts. And before we close, Mikitani is going to say a few words. I will do my best. We will do our best. Thank you. This concludes the 2026 first quarter earnings presentation session of Rakuten Group.