LY Corporation

This is Idezawa from LY Corporation. Thank you very much for taking the time out of your business schedules to join us in the business results briefing for Q2 of FY23, ending in March 2024. I will present the overview. This is the first results meeting as a company, and I would like to start with the Q2 business results. I would like to start with the FY2023 Q2 business results topics, revenue and adjusted EBITDA. both reached record highs for the second quarter. Media business increased both revenue and income through a gradual recovery of advertising business and the line of digital accounts growth of over 20% enabled partly by rate revision. Commerce business increased both revenue and income with shopping business continuing to show signs of improvement and travel business recording double digit growth. Strategic business achieved a positive quarterly adjusted EBITDA For the first time, thanks to the selective focus on key businesses, we have promoted since the beginning of the previous year. With the addition of Line and the Yahoo Japan account linkage already started in October and the LYP premium starting in November, we will continue to promote cross-use between services. We will aim for further growth through new initiatives such as the renewable lineup. From here, I will present the items on the agenda one by one. First is consolidated business results for the entire group. Both revenue and adjusted EBITDA grew by double digits year-on-year. Revenue growth was attributable mainly to consolidation by pay-pay and the increase of media business revenue. Adjusted EBITDA increased by more than 25% thanks to cost optimization and select focus on key business areas, especially strategic business. Adjusted EBITDA margin improved to 23.4%. The following slide shows variance analysis of adjusted EBITDA. Growth profit improved year-on-year, mainly driven by line media business as well as travel business. Adjusted EBITDA increased year-on-year as a result of selective focus on key business areas and a fixed cost reduction beyond what was expected. Business variance analysis in operating income. Operating income grew 14% year-on-year due to growth in adjusted EBITDA. In the previous year, We had aligned music conversion into a consolidated subsidiary. Therefore, others and adjustments is done year on year. This is variance analysis in adjusted net income. Equity in losses of associates and joint ventures continued to improve in Q2 due to business growth and cost optimization. As a one-time factor, the recognition of a tax benefit from the merger due to significant decrease in corporate income tax payment resulting in an increase in adjusted net income of approximately 6.1 times year-on-year. Here is the consolidated full-year guidance for FY23. The progress as of the end of Q2 is 55% vis-à-vis the adjusted EBITDA target for the entire group. The results remained around the guidance level due to the continued uncertainty in the market and the continued focus on measures to promote the cross-use including account linkage during the second half of the year. Due to the merger, LY Corporation is applying a revised cost allocation rules starting in Q3, allocating corporate admin and HR expenses and the system expenses previously booked in others and adjustments to respective business segment. Next page, please. Let me explain the results and topics by segment. First is media business. In Q2, recovery of advertising sales, mainly from growth in account advertising and the consolidation of live music, supported an year-on-year growth in revenue. As for adjusted EBITDA, an improvement in gross profit due to higher sales and a tight control over SG&A expenses through cost optimization measures, resulted in revenue growth of 11.3%. As a result, adjusted EBITDA margin was 40%. Next page is total advertising revenue for the group. Despite the slowdown of such advertising, the negative growth rate of display and advertising was reduced. In addition, due to cost of optimization of the commerce business, shopping related ads gradually improved after continuous decline. for some time. As a result, the overall growth rate, including shopping ads, also turned positive year on year. Next is breakdown of search advertising revenue. About 80% to 85% of our search and revenue Search ad revenue is from search ads of LOI Corporation services, which is shown as LOI Corporation's websites, while the revenue from search ads distributed to partner sites is shown as partners' websites. Revenue from partner websites is declining, while revenue from LOI Corporation's websites has grown year on year. Next page shows account advertising. The number of paid accounts has increased steadily. Functional enhancements are being implemented on an ongoing basis. To enhance monetization, we are offering a membership function that allows users to create a paid membership plan on their official LINE account. In addition, using generative AI to automatically generate a response to user inquiries, we are planning to launch a new function in FY2023 We have already completed the preparation. We will continue to enhance functionality and improve operational efficiency to steadily grow LINE official account. Next page shows commerce business performance. Revenue grew year-on-year due to improvements in e-commerce transaction value. Adjusted EBITDA grew 16.9% year-on-year as we continue to reduce sales promotion expenses in Yahoo! Japan Shopping and Line e-commerce. Next page shows e-commerce transaction value. Growth in domestic merchandise was down 0.7% year-on-year due to continued reduction of sales promotion expenses, but it is on an improving trend. The total growth rate has turned positive at 0.4%. Next page shows domestic e-commerce transaction value. Domestic shopping transaction value was down 5.5% year on year, while the QOQ growth rate continued to improve and remained in line with expectations. Domestic service transaction value was impacted by the fading effect of reopening while travel remained strong with double digit growth. We have been asked about the synergies between Dozo and ASCO. So let me explain it once again. L.Y. Corporation's user base and technical capabilities contributed to the growth of Dozo and ASCO. Dozo opened a store in Pepe Mall in December 2019 and accessed L.Y. Japan's broad customer base, which helped expanding its merchandise transaction value. ASCO's B2C business returned to profitability FY 2023, partly helped by the migration of Lohaco main store system to Yahoo Japan system infrastructure. Both companies also contributed to the LOI corporations ecosystem. For example, the average number of orders from Yahoo Japan is about three times higher for those who are the Zozotown Yahoo Japan store and about four times higher for those who use the Lohaco or Yahoo Japan store compared to general users. Next, performance of strategic business for Q2 adjusted EBITDA turned positive for the first time as a result of selectively focusing on key business areas. Revenue growth strategically at YOY mainly due to the growth of PayPal and PayPal cards. Adjusted EBITDA is improving steadily, partly due to improved profitability of PayPal. Going forward, in addition to PayPal growth, we will continue to optimize cost and reduce revenue, review loss-making businesses in order to improve profitability and revenue growth. Here is the overview of PayPay business. Consolidated GMV was flat on Q1Q and up more than 20% year-on-year. Consolidated EBITDA was positive again in the second quarter. In addition to the increase in the number of registered users, the number of payments is also increasing steadily, supporting continued growth. There are PayPay cards' major KPIs. Synergies with PayPay continued to drive double-digit growth in the number of active cardholders. Transaction volume was up 31.8% year on year. Revolving balance also continued to expand, growing strongly by 56.4% year on year. Next page shows PayPay Bank's major KPIs. PayPay Bank also had synergy with PayPay. Each KPI is steadily expanding. The number of accounts has maintained double-digit growth due to the acquisition of accounts through PayPay mini-apps. Loan balance grew 30.5% year-on-year thanks to the sales promotions of housing loans and business loans. Next page. I'd like to talk about initiatives in the future. In April, we presented our management policy for FY2023. We made steady progress since then in streamlining our business, which is reflected in income numbers. as we spoke earlier. So what I would like to present today is the future initiatives for the regrowth of business further in FY 2024 and beyond. The slide illustrates the overall strategy of LY Corporation Group. we will leverage the group assets, promote cross-use among services, and reinforce our businesses with a focus on highly profitable search and media businesses. Today, I would like to explain some of our key initiatives with a particular focus on cross-use, search, commerce, and finance. Next page. First is cross-use. Next page.

Now about cross-use, needless to say, we will further reinforce linkages among LINE, Yahoo, the Japan PayPay, and while promoting cross-use today as an important concrete measure, we will explain about account linkage, RIP premium, and LINE renewal. So these are the three that we are going to explain today. First, about the first point, account linkage. From October, we start linking LINE and Yahoo Japan accounts. As of yesterday, November 6th, the actual number of links was 19,480,000, which is progressing smoothly and exceeding expectations. By linking accounts, we can expect to expand cost use of services and increase ad revenue. Please note that line and PayPay account linkage is scheduled for fiscal 2024. We will promote the use of PayPay by inline users. Next is the second measure, LIP premium. LIP premium is The premium membership plan by the new integrated company is scheduled for release on November 29th. The monthly fee is 580 yen, the same as the current Yahoo premium. And in addition to the existing Yahoo premium benefits, new line benefits will be added. We aim to acquire new members by adding new benefits. and expand the use of LI Cooperation Group services. The next point is the third measure, line renewal. Today, these are some examples. We are still considering these, so there is a possibility of this to be changed. Now this is a major renewal and with this renewal we are preparing to further encourage users to visit various sites for them to use search and commerce more. There are three major changes. At the extreme left, you see the Home tab. This has been redesigned into a portal where news and content are gathered. In order to attract more line users to search, this is going to be a very convenient place. On the second from the right, this is a Shopping tab, and this is to be newly established for commerce and shopping. This will be an easy-to-use UI that anyone can use. We will provide a purchasing experience beginning with a messenger app. On the extreme right, we have the place tab. The local information and mapping information are to be gathered here. the up-to-date information about the information that customers are looking for will be provided. And so this will allow users to use maps and reservations seamlessly. So through this major renewal, we will aim at improving the convenience of line and strengthening, attracting users to important services within the group. Next is search. Next page, please. Search is the gateway to the internet, and the growth of search leads to growth in all domains. Now I'd like to explain two important points to strengthen in order to grow search in the period ahead. The first is to strengthen search traffic. Approximately 80% of Yahoo search users go through Yahoo's top page. So we are taking measures about the Yahoo top page through which the search comes in. Specifically, to make users want to use the Yahoo app on a daily basis, we enriched weather and sports information. And as a result, on the Yahoo app grew by 5.6% year-on-year in the second quarter. Next is the second enhancement point. The key query domains for search are commas, local, and knowledge. These three domains account for over 50% of search queries and over 70% of search revenue from these three domains. We will improve the satisfaction level of the search experience in these three domains. We believe this is very important. Next page, please. So specifically on the left-hand side, these are the measures that we took in the first half. Now, Yahoo Search is available from within lineup, contributing to an increase in the number of searches. In the middle, in the local domain, we have improved the UI UX of restaurant search to improve convenience. And in the knowledge domain, we are enriching celebrity profiles. We are working to improve the search experience for our users. In the second half, we will strengthen our commerce domain by providing shopping search ads. So on the right hand side, we're going to provide for the first time. When commerce search is made, the ability to display products at the top of the commerce search module has a high appeal effect. So in the second five, we are scheduled to start provision of this. And in the gray on the right, there is a product information site that started in April 2023. Again, the external advertisers product information, the we actually started in April 2003 by offering a cost per acquisition type product. So this way, We would like to increase the number of searches and also in key query domains, we would like to strengthen the, enhance the search. Next page. And now the search and AI, very important combination. First, to use a generative AI for search, we started testing the search experience using chat type UI in October. On the right hand side, on Yahoo Chebukuro, both humans and generative AI answer questions. This is a new place to share knowledge. This is to start to be provided in November 2023. Next page. Next is commerce. For commerce, in addition to the diverse services provided by the LOI Corporation Group, we are now, of course, providing diverse services. In addition to these diverse services, as I have been explaining, with newly launched LOIP Premiums Integrated Commerce Search, and with the renewal of Lion Shopping Tab, we will provide a convenient commerce experience at great value. Lastly, I'd like to talk about FinTech. Next page, please. In the financial business, in order to consolidate overlapping businesses, we have been reorganizing since last year. In the credit card business, by making PayPayCard a subsidiary of PayPay, we are accelerating generational synergy by integrating QR code payments and credit card payments. Banking, securities, insurance, and consumer loans businesses overlapped within the group, so we aim to achieve further growth by unifying in each business and increasing efficiency. As a result of this, a selective focus on key business areas adjusted EBITDA improved by 7.8 billion yen in the first half, significantly improving the profitability of the financial business. Next page, please. Next is a linkage between PayPay and other financial services and line. First, on the left-hand side, we have a PayPay card. It has changed its company name and started offering credit. So after the linkage transaction volume, it continues to grow by more than 20%. As for PayPay Bank, with its trade name change and by providing services from the PayPay Mini apps, the number of bank accounts opened via PayPay is steadily increasing. on the right-hand side with respect to linkages with LINE, which are planned to allow for seamless PayPay payments on the LINE app. And the PayPay transfer to LINE friends, which are more convenient features for users for further growth of PayPay. Next page, please. The Line and Yahoo! Japan prepare the growth cycle of financial services. With the influx of users from Line and Yahoo! Japan, PayPay's user base will expand, sending customers to PayPay's financial mini-apps, and furthermore, will promote cross-use between financial services. And in addition, by improving convenience of points, we will create a positive cycle of increasing user engagement, expanding the customer base for financial services as a whole. Finally, I will explain action to implement management that is conscious of cost of capital and stock price. Please take a look at the next page. An issue we need to address for our capital policy is due to the increase in the number of shares and net assets from the business integration in 2021, we need to recover from the deterioration in EPS. On the other hand, considering that interest bearing debt is at an appropriate level, we have adopted cost of equity. as the cost of capital we estimate the cost of equity for the last year to be around 6.5 to 7.5 percent toward achieving a positive equity spread first we will recover adjusted eps to 18.7 yen the pre-integration level next page please we will work to recover adjusted eps by improving profitability and optimizing equity with a clear capital allocation policy Capital allocation involves allocating operating cash flows, excluding those from the financial business to base investments and shareholder returns. Using this surplus and the increase in cash due to the merger defect, we will flexibly allocate it to additional investments that contribute to medium and long-term business growth and additional shareholder returns such as share buybacks. In addition, adjusted EPS has been adopted as evaluation criteria for executive remuneration. As a result, executives are now in the same boat with our shareholders. we will work on profit improvement, which is the numerator of the adjusted EPS, and that optimizing capital, which is the denominator. In the first half, we were able to make a significant recovery in adjusted EPS, mainly through defensive initiatives, such as selective focus on key business areas and cost reductions. We aim to recover adjusted EPS to pre-integration level within adjusted around three to four years. Next page, please. So thank you so much for listening.

We would like to start the Q&A session. First, UBS Securities, Fukuyama-san. Please unmute yourself. Yes. Thank you very much for the opportunity to ask a question. My name is Fukuyama from UBS. I have two questions about advertising. The first is about the second half, domestic ad market outlook. When you look at your performance, display art in Q2 has stopped going down. But for the second half, can you accelerate your growth? if you can, what are the drivers for the growth in the second half? This is my first question. Could you ask the first and second questions together? Yes, thank you. For the second question, this is about Yahoo News. What is the procurement price for news? You have already announced the new pricing. But what is the size of the adversarial revenue related to news? If you raise the price, and then what will be the positive impact on the profits of medium business? Do you have any simulated calculation results? Yes, thank you very much for the question. For the first question about the second half ad outlook, Ikehata, who's in charge of advertising, is going to respond. And for the Yahoo news, CFO Sakaue would like to respond to your question. Yes, this is Ikehata speaking. Thank you very much for your question. For the first question about the ad market outlook for the second half, I would like to respond. In this presentation, we have already indicated that L.Y. Corporation ad business negative profit has been reduced. Therefore, we think that the market conditions have already bottomed out. And for the second half, gradually, we will see a recovery of the market conditions. It may be a moderate recovery, but we are expecting a recovery anyways. And this trend is something that we like to take advantage of as a group for the display art and other arts. We would like to expand our distribution, other distribution mechanisms so that we can capture the opportunity. So that's my answer for the first question. The second question was about Yahoo News. This is Sakawa speaking. I'd like to respond. Regarding news, sales, revenue, or other information, we are not disclosing any details. We are afraid that we can't make any comments on Yahoo News. In terms of the impact on earnings, well, the review of the rates have not been decided yet. With the information providers, we already have discussions, and we would like to explain about our logic for the information distribution and some of the simulation with the numbers. And so that means that we have just started the conversation with them. So we have to proceed with the conversation. Otherwise, the impact on the earnings cannot be determined yet. So at this moment, we are not sure how much impact we will have. So when we have progress on this front, we would like to communicate more information with the investors. Thank you very much.

Next, from SNBC Nikko, Mr. Maeda, please de-mute and ask questions. Thank you. I would like to ask two questions, if I may, about the now black ink of the strategic business as well. there might be red ink if there's additional necessary investment. So EPS 18.7 yen. Now in this process, to maintain the black ink for strategic business or expansion, what would be the pace at which to achieve that or what are your thoughts? My second question again about to achieving 18.7 yen, the traditional KPI, the adjusted EBITDA, what do you think the size would be, including in the improvement of the equity method revenue? What are your thoughts on EBITDA? So these are my two questions. Now, Sakowa speaking, I would like to answer the two questions about strategic business. For Q2, well, it's black ink. Pepe has achieved the black ink. So it was profitable. But in the second half, well, over short term, in the second half, Pepe, we've already begun Pepe Matsuri. And also in March, it's going to be a buoyant business period. So we're going to increase promotion. So in the second half, Again, there is a possibility that it will be a loss in the strategic segment. After fiscal 2024, Pepe and other businesses, we will increase profitability in the strategic segment. After fiscal 2024, we would like to achieve profitability. That's my answer to your first question. And about EPS, your second question, well, Well, there is an equity method, the investment profit and loss. I can't really give you an indication about the size, but on the left-hand side, you see capital allocation, the ballpark number for three years. As you see from there, Well, the messaging is we would like to continue revenue increase. That's, well, it's not a declaration, but that is something that we'd like to steadily achieve. But of course, well, 18.7 cannot be achieved without increased profitability. So that's something we would like to achieve. So when it comes to the size of EBITDA, Right now, at this moment, I would like to refrain from giving comments. Every year, we would like to show you guidance for EBITDA as we try to communicate with you. Thank you.

Thank you very much. Thank you. Next is from Goldman Sachs, Munakata-san. Please unmute yourself before asking questions.

Goldman Sachs.

My name is . Thank you very much for the opportunity. I have two questions as well. The first question is about ID linkage. Already 200 million members are gained. So this is beyond expectation, you said. But from our perspective, ID linkage, you may not be pushing so much to the users. That's my impression. What kind of measures have you taken What was the reason for the overshooting of the initial expectation? And in the second half of the word, shouldn't we expect this same pace to continue? Given what is happening, if the linkage ratio is going back up to 70 or 80%, when do you think that is going to be achieved? That's the first question. And the second question is about Q2 progress. as well as the guidance. As of the end of Q1, you were overshooting the guidance, but in July to September quarter, you're overshooting again vis-a-vis the internal targets. Can I say that? Is that correct? You said you are maintaining the guidance, but if you have more progress going forward, Simply, you would have an upside. Can we expect that? Or in the second half, there are important events such as the premium membership renewal. Therefore, you would like to increase the sales promotion in the second quarter, so we shouldn't expect overshooting of the guidance. Thank you very much for the question. Regarding ID linkage, you are right. We don't have a special promotion. organically, we were able to increase the members and nearly 20 million members 2019.58 million members were achieved. We don't think this pace will continue going forward in parallel with consent from the line members. Depending on that number, these line linkage number will be determined. Therefore, the organic addition, maybe another several million members we can add to what we already have. And sales promotion will be starting from now, when the LYP premium will start at the end of November. After that, we will be accelerating the full-fledged promotion expenses. Therefore, how much users will consent and decide to join us, that is something we want to see. We are not disclosing any specific numbers yet. So regarding guidance, Sakawa-san, could you respond? Yes, I would like to respond on guidance. In the first half, compared with the company's guidance or plan, the profits or earnings was greater, higher. As was mentioned in the presentation, in the second half, at the end of this month, we are starting LYP premium. Therefore, we are ingesting some sales promotions, and we will later determine how much we are doing so. And for the ad markets, there are still uncertainties. So because of those two factors, at this point in time, we have decided not to revise the guidance. And another factor is LYP premium acquisition. Rather than expanding the number by using inefficient investment, we want to focus on the efficiency. Therefore, one possibility is that highly efficient promotion plans, if we can't find any, and then we may have upside on earnings. But our priority is LYP premium because this is a stock type of earnings source for the future. Therefore, we would like to secure at a reasonable level of business there. And maybe in Q3, we will see more visibility into the initial dynamics. Therefore, in the next earnings announcements, we would like to make a decision probably. Thank you.

Thank you. Thank you. Next, from Citi Group Securities, ,, please de-mute and ask a question. I have de-muted. I have two questions. Thank you for this opportunity. Question one. This is a follow-up question from the previous question. EBITDA, a 55% progress rate. Now, the plan at the beginning of the year was 50%. If that's the case, then in the second half or the second quarter, cost, top line growth or segment, please give us a breakdown of the number. And the second question. Search-related question. Now, the linkage of the two accounts have generated various measures, and how can the long-term decline be arrested? For example, if this is mountain climbing, how high have you achieved in terms of the level? What's your analysis of the background of the share drop? The reason why I ask this question is, as the Trade Commission says, the competition while obstructing actions or short-lived or mobile issue. There are a variety of issues, I think. So how is the management looking at these issues and have started taking I would like to explain, well, understand that in a dynamic fashion. Thank you. To your first question, Sakauya speaking, I would like to answer the question first. To break it down by segment, now media segment, from the perspective of IBITDA, the progress rate is 48%, about 48%. In the second half, well, this play, well, it's been coming back to a good result when it comes to search. As shown on the slide, partner websites, on a continuous basis, it will be 30% decline. I think this kind of a situation will continue. And as for the search ad, last year, around the same time this year, well, UIEIX major, well, change will come to, well, the effect will come to an end. So as for medium, it's on trend. The ad revenue result, as shown on the guidance, the first half of the two digit is something we'd like to arrive at. As for commerce, EBITDA progress rate, it's about 52%. It's on the plus side. For this, it's been coming as expected. So in the second half, the Yahoo Shopping, there's going to be a shopping period and also LOIP Premium will start. And because of this, the GMB of Yahoo Shopping is something we would like to bring to a positive. in Q3 and Q4. We would like to see a recovery to positive. So for commerce, the EBITDA in the breakdown, this will arrive at what we expect. as planned. So in the internal plan, we are on the upside where strategy and the other adjustments have been contemplated and more than expected, the profit is being generated from the plan of the company. It's a positive point. And so that's about the first half. So the progress has been good in the first half. As for the second half, now, pay-pay promotion, how aggressively we're going to do this, it will depend on it, but throughout the year, well, Compared with our expectation at the beginning of the year, the possibility of arriving at a positive might be a better possibility. But the LAP premium, the membership acquisition will be the foundation for our future. So we'll do allocation and consider this issue. That's my answer to your first question. About the search, will answer that question. To answer your second question, what is the structure and how far we have come. Now, as you pointed out, structural issues are there, and we are where we are because of that. For example, the engine, well, we have been provided with that, and also the things are changing drastically, and so always, and also the hardware, impact is getting greater and also the situation is changing and also generative AI is coming along. So there's a complex or pretty big change is happening right now. And from that perspective, how far have we come? Well, at long last, we are now taking, we can take positive measures. at this moment. So as I explained before, the areas where we can differentiate on our own, we would like to differentiate ourselves, certainly, and also we would like to establish a partnership. And also generative AI is something, of course, there are a lot of choices, so how to work on it is another factor for further growth. Thank you. A follow-up question to the first question. In the first half, the cost reduction has been accelerating, but in the second half, what is the progress of cost reduction? Thank you. Right, in the second half, just like the first half, we are proceeding at around the same pace. To add, in the first half, as shown on the slide, the promotion, better efficiency, it was positive, both in Q1 and Q2. Well, after Q3, again, there's going to be a shopping period, buoyant shopping period, and so for the sales promotion, the efficiency for the fixed cost might be weakened. But of course, the outsourcing will continue, 2 billion, 3 billion per quarter. That kind of a reduction will continue on a YOY basis. Thank you. Thank you.

Thank you. Next, from Okasan Securities, Okumura-san, could you unmute yourself?

Thank you.

From Okasan, my name is Okumura.

I have two points.

First, ID linkage impact from this. Already linked users compared with the conventional users. the targeting accuracy is higher or is CTR better? Any positive impact on KPIs? You were talking about 5% to 10% efficiency. A 5% to 15% efficiency increase in advertising, has it changed? And when do you think you can hit that target or benchmark in terms of the effectiveness of advertisement? Second question. is about capital allocation. You explained it in the presentation. According to your explanation, buyback is one of the choices or options. So what is your ideas about buyback? EPS, if you are putting it back to FY19 level, maybe with the earnings growth, is it difficult? Is that why you include it as an option? Or is there any option to do buyback every year, little by little? How about the floating shares? Maybe because of your situation, it's difficult to buy from the market. How about the air holdings? Are you thinking about them in the buyback program? That's my second question. Yes, for the first question, Ikehata and Sakai is going to ask and respond to the second question. This is Ikehata. Thank you for the question regarding ID linkage. expected impact from that was the question. And in the presentation, we mentioned that when there isn't a progress in ID linkage for Yahoo Media and Line Media, user activation will increase over to media. And with the ID linkage, the user resolution will increase and distribution accuracy of ads will increase. So that means increasing advertising revenues we should have in the end. And that's what we said in the presentation. And what is the timeline for realizing such an impact? If that's the question, for the short term, for FY23, are we expecting any impact in accuracy of advertising from ID linkage? No, we are not. So through the cross use of users, where we cultivate more and more, and then we will start the data utilization and the improvement of the advertising targeting accuracy at the same time. So that means in the medium term, we would like to realize those effects and the expansion of the business. You said that at the beginning, we were thinking about 10% effect or impact. And that was your comment or question. And this benchmark or level is unchanged, and we think that this is the kind of initiative that can achieve the level at that high. Thank you very much. The second question regarding capital allocation, Sakaue would like to respond. Well, in terms of the EPS recovery, Basically, we are going to achieve it through the earnings growth. That's the basic stance. And secondly, our stance about capital allocation is something that we would like to respect for the three-year term or so. For the cash inflow and cash outflow, we would like to keep it even. And our priority is M&A and other investments into the future. And so that the IRI, or as we have more and more profitability, that will be the priority. When there is an excess cash, and then we would like to reinvest the cash into our own business or conduct a share buyback. In terms of the floating share ratio, you are right in mentioning that. We don't have to buy necessarily from the parent company, but from the parent company, more than prorated ratio, we have to buy. Otherwise, the floating share ratio will deteriorate if you think about the numerator and the denominator. Regarding that, with A Holdings, We would like to continue to have discussions, including the timing of the share buyback, and conduct the program. That's all. Thank you. Thank you very much for the explanation. That's all.

Thank you. Next, from Mizuho Securities, Kishimoto-san, please demute and ask a question. Kishimoto from Mizuho Securities. Thank you for the presentation. I have one major question about media business. What is your outlook? Well, page 12 of the material, well, mix will change. The partners' website proportion is coming down, and that may... be contributing to the reduction of the profitability. If this trend continues, then margin for the second half will increase. Is this an expectation? And also about the ID linkage, the targeting precision will improve, and that will push up the profitability. Is this a correct understanding? In introducing these new systems, the advance investment will be necessary. So the targeting, the precision will improve. So what is the outlook of the margin going forward? This is my first question. Thank you. Well, as you say, right, the search, the low-margin partner websites will reduce, and the L.Y. Corporation's websites will increase, and also as the unit price will increase, and that pushes up the profitability, and so your understanding is correct. However, the margin, well, it's large, so to improve just 1% or 2% is enormously difficult, so we'd like to make steady efforts in trying to achieve that. And so far, well, 40% is something that we'd like to aim toward, but the allocation rule with integration, the overall cost, the allocation rule from the second half will be adopted. And so the immediate segment side, the other adjustment cost, well, that's negative for profitability. So the... way we show you the margin. We would like to study that and explain that in the second half. Thank you.

Thank you. From Goldman Sachs, Munakata-san, please unmute yourself. Thank you. This is the second time. My name is Munakata from Goldman Sachs. I have just one question. You disclosed today the renewal of lineup. I have a question about it. Specifically, when is it that you are changing the lineup? Maybe you are not changing all at once. What is the timeline for the changes upcoming? And you said that this is not going to be the first product. But at a glance, it seems that you have less news tabs. But for news ad revenue news, are there any negative impact anticipated from this? That's all. Thank you for your question. The timing for renewal is within FY 2024. That's what we can say. The reason is as follows. As you pointed out, the change is going to be a complex change. So from users, they will see a change in the displays that they are familiar with. Therefore, we would like to take necessary steps while doing various tests with the users. So FY2024, from the beginning of the fiscal year, we would like to start the testing and gradually change and complete the implementation of the changes around the end of FY24. So when we have more concrete plans, and then we would like to let you know. Another point is about the impact on revenue. Well, that is another reason why we are trying to take cautious steps, implementing various tests. At the moment, in total, the effectiveness on revenue should be unchanged or even improved. So that's how we would like to think about the balance with the user acceptance. Therefore, from different aspects, we would like to think about the changes and proceed with the change. Thank you very much.

Thank you. Next, MST Financial Services, BTYLTD. Mr. David Gibson, please demute and ask a question.

Thank you. Just one simple question. Do you expect in the next 12 months for PayPay to IPO? And similarly, do you expect Webtoon by NAVA to IPO, which would actually both would realize significant value in for LY Corp and shareholders? Thank you.

Thank you for the question. I would like to answer those questions. Now, with respect to Pepe, as before, well, IPO is one choice that we are thinking of. Specifically, have we decided on anything? No, that is the current situation. And about Web 10, well, Naver is the parent company, so I really cannot decide it. So we would like to have a good conversation with Naver going forward and study about this. So the intention of the Naver is something we would like to confirm. To the extent I know specifically is, well, any specific, well, no specific plan about IPO has been decided. Thank you.

Thank you. It seems that there are no further questions, so we would like to close the Q&A session. Lastly, Mr. Idezawa would like to say a few words in closing. Yes, thank you very much for participating in the earnings results meeting at this budget-based schedule. This is the first analyst meeting as LOI Corporation. In terms of progress, we think that we have made a good progress, but we don't want to relax yet. And we would like to continue to become a lean structure and continue to make efforts and pursue the further growth strategy because we have finally been integrated. Therefore, we would like to make this as a trigger in increasing the top line as well as the number of users. And we would appreciate your continued guidance. Thank you very much.