LY Corporation

Thank you very much for joining us. My name is Saka Ue of Z Holdings Corporation. Thank you very much for taking the time out of your busy schedule to join us. Let me now present the overview of Q1 business results. Next page, please. First of all, let me start with Q1 business results topics. Both revenue and adjusted EBITDA renewed the highest record for Q1. PayPay started services four and a half years ago and turned profitable in adjusted EBITDA for the first time. In media business, account ads revenue grew in double digit and the search ad revenue also grew by 5.2% year on year. Commerce business adjusted EBITDA margin It exceeded 20% with subsidiaries' growth as well as profitability improvement through cost optimization. And through the selective focus on key businesses, we'll be reorganizing domestic financial business. This is the agenda that I'd like to follow. Let me start with consolidated business results of the whole group. This shows the group-wide performance. Revenue and adjusted EBITDA both showed the double-digit growth. Revenue growth is mainly due to the pay-pay consolidation and media business revenue increase. Adjusted EBITDA increased with lower fixed cost. and also pay-pay consolidation and turning into the profitable business in strategy business and the selective focus on key businesses. Adjusted EBITDA margin improved to 23.2%. It shows the factors of change in adjusted EBITDA. We have been reducing business commissions and increasing efficiency in sales promotion cost. Last fiscal year, we started the selective focus on the key businesses and we are steadily decreasing the fixed cost. Excluding the listed subsidiaries and pay-pay consolidation, our Z-holdings adjusted EBDA greatly improved. In addition to the growth of Azozo and Asco, the profitability of the pay-pay consolidation improved and adjusted EBDA increased as a result. It shows the factors of change in operating income. Although depreciation and PPA amortization increased, with the growth of the adjusted EBITDA, the operating income grew 19.3% year-on-year. In April 2023, the AI company business of LINE was inherited to Works Mobile Japan through absorption type demerger or split. and we booked the transfer profit through the business separation which is included under the others. It shows the factors of change in adjusted net income. Equity in losses of associates and joint venture improved with business growth and cost optimization. As our equity ratio in Webtoon changed, we booked gain on change in equity interest, adjusted net income, grew by 34.8% year-on-year. Until now, we did not give you the details below the adjusted EBITDA, but now we are giving more details. As a background of that, the improvement of the capital efficiency we believe is one of the important management issues, and we understand that it is important to streamline the capital. Realizing the continuous profit growth is the most important thing in our mind, so we continue to expand the profit. Next is selective focus on key businesses. As we start LINE Yahoo!, we would promote selective focus on the key businesses, mainly overlapping businesses. Domestic financial businesses, we had Zee Financial and LINE Financial, two companies. And through this reorganization, we have consolidated the functions to Zee Financial. So below Zee Financial, there is Line Securities and Line Credit Corporation. As for generative AI, I would like to talk about the two perspectives, including applications in services and increasing work efficiency.

First of all,

the applications in services. As for free market using the chat GPT, we will start to provide a feature to assist composition of text to explain items. And we are also considering the introduction to Yahoo Auction. As for LINE, we started the service to auto-generate visual images using generative AI. In terms of work efficiency improvement, in order to improve the productivity of the engineers, we have introduced GitHub Copilot. We concluded an agreement to use all APIs provided by OpenAI. All the employees of the other divisions will be using generative AI to pursue operational productivity and service quality improvement as well as new service creation. Let me now talk about the new structure after the merger in October. As we announced the business results, we also disclosed the new structure. We will streamline the board of directors in order to speed up the decision-making. We will promote the delegation of the authorities, so the company CEO will have authority and responsibility for the management of business domains. And we also promote the product-based businesses. As for the organizational structure, we will have three categories, first the seven companies and cross-sectional technologies and corporate administration. As MC announced at the beginning, today I am joined by Mr. Hide, Mr. Kataoka, Mr. Ikehata. They will become the company CEOs of commerce company, media company, and marketing solution company from October. So under this new structure, we will pursue product innovation and profitability improvement. This shows the consolidated four-year guidance. In addition to adjusted EBITDA, we have disclosed the revenue guidance of media business and commerce business. We'll touch upon this later, but we are seeing the signs of ad market bottoming out in media business. So, excluding the commerce ad of FY23, we expect a low single-digit growth of the ad revenue. In commerce business, we plan to start the LYP premium from November this year and we expect that the user base to expand. As our subsidiaries are growing, the FY23 commerce revenue is expected to be in mid to high single digit.