LY Corporation

I would like to start the LI Corporation earnings briefing for FY2024 four-year and Q4. Thank you very much indeed for your participation.

During today's briefing, we will be using the presentation material that you can find in our website.

From the Y Corporation, first we have Mr. Takeshi Idezawa, CEO, Mr. Ryosuke Sakaue, CFO, and Mr. Yuki Ikehata, the CEO of Marketing Solution Company.

and Mr. Makoto Hide, the CEO of Commerce Company.

First, Mr. Idezawa will present the FY2024 four-year and Q4 results, and then we take questions.

We plan to spend about 60 minutes for the whole briefing session.

We are live streaming this session.

If you have any technical difficulties, please use the link at the bottom of the screen and move to another server.

So let us get started.

Thank you.

This is Idezawa, the CEO of AY Corporation. Thank you for taking the time out of your business schedule to attend FI24 four-year and Q4 business results briefing. I'd like to present a summary of business results.

First, this shows the FY24 business results.

Adjusted EBITDA grew 13.5% year-on-year to 470.8 billion yen. In FY25, we will focus on three areas. First is to transform LINE official account and LINE mini app into the business platform. Second is to transform PayPay from the payment app into the digital financial platform. We try to expand the ecosystem so that we can realize the corporate value and prepare for the IPO. Number three is agile deploy AI agent in consumer-facing services in full scale. a high single-digit increase in revenue and profit planned for FY25, including investments. And today, we announced up to 150 billion yen shares repurchased to improve the capital efficiency. Please go to the next page. So here, this is the agenda that I'd like to go through. Next page. So starting with the entire group consolidated business results. In FY24, revenue and profit increased in media, commerce, and strategic segments. Entire group adjusted EBITDA increased 13.5% year-on-year. Adjusted EPS increased 11.7% year-on-year. From FY25, we changed or redefined adjusted EPS for the FY24 number based on both definitions I've shown. The new definition includes the non-recurring gains and losses below the operating profit and PBA amortization as new adjustment items with the aim of showing normal profitability without one-off gains and losses or the impact of the past M&A. So, after the merger, this shows the trend of the performance. In all segments, we saw the growth of the businesses, and after the merger, we focused on the lean operation of the organization. And as a result, we realized a double-digit adjusted EBITDA, and margin expanded to 24.6%. It shows the factors of change in adjusted EBITDA of the entire company. In FY24, each business higher revenue contributed to the higher profit. We realized the double-digit profit growth. This shows the entire group total advertising revenue. In media ads, mainly account ads increased and stable growth was realized. In commerce ads, the revenue declined, but since the second half of FY23, we executed disciplined sales promotion investment, which led to a major growth. This is the entire group e-commerce transaction volume. Domestic shopping transaction volume grew by 5.1% year-on-year. In Yahoo Japan Shopping, we had a campaign to improve the UI and UX. and as a result, the transaction volume grew by 6.7% year-on-year. In re-use transaction volume, the Yahoo Rima showed a double-digit growth year-on-year. Yahoo Auction, the number of the users did not grow so much and the year-on-year decline was booked. Domestic service transaction volume with the sales promotion of the Yahoo Japan Travel and the Ikkyu with the higher reservation travel grew by 24.5% year-on-year. Next is the share repurchase and cancellation of the treasury shares. In order to improve the capital efficiency, we will execute up to 150 billion yen share repurchases. And with this, the dividend per share in FY26 will increase in proportion to the number of the shares repurchased. This would be the tender offer. The price is that of the 2nd of May, the ending price of 533 yen per share. We plan to cancel the majority of the purchased shares. Next is capital allocation and the trend of digested ROE. Buffer for the additional investments and the capital policy is updated to reflect the new share we purchased and Zozo's acquisition of List. We will work on the improvement of the capital efficiency so that we can realize the positive spread between the stable adjusted ROE and cost of equity. Next, this is the business results by segment, starting with media business. In FY24, highly profitable account ads showed strong growth. Adjusted EBITDA grew 11.6% year-on-year. With the changes of the revenue mix and cost control, adjusted EBITDA margin increased to 38.8%. Next page, this shows the breakdown of the media business revenue. Account advertising grew significantly by 18.9% year-on-year and drove overall media business. As for search advertising, partners' website revenue declined. However, for LY Corporation's website, we continued to improve the functions and revenue increased. Display advertising that although the number of impressions increased, the demand decreased in some industries. Revenue declined by 1.4% year-on-year. In others, line stickers grew.

Next, we look at the performance attribution of the media business. Due to revenue growth and reduced SG&A through cost control, we achieved double-digit profit growth. Next, let me now explain account ads. For the third consecutive year, we maintained year-on-year growth exceeding positive 18% with revenue reaching 125.1 billion yen. Next, the performance trend of the commerce business. Despite the impact of deconsolidating value commerce and IPX, revenue and profit increased, primarily driven by growth in shopping and service VC. Profits grew despite the absence of a one-time gain of 9.4 billion recorded last year. Profitability improved with adjusted EBITDA margin reaching 17.5%. Next, here's the performance attribution for the commerce business. While SG&A expenses increased due to active sales promotion, Revenue growth outpaced the cost increase, resulting in a plus 3.6% EUR on-year rise in adjusted EBITDA. Next, this shows the trends in strategic business. Revenue exceeded ¥300 billion driven by growth in PayPal Consolidated. Adjusted EBITDA also grew significantly to ¥51.5 billion. supported by revenue growth. With this sharp increase in profit, the margin improved significantly to 15.1%. Next. Breakdown of revenue in the strategic business. Throughout the year, both PayPay Consolidated and FinTech businesses showed steady growth. PayPay Consolidated achieved 17.7% year-on-year growth, driven by increased GMV, as a result of marketing campaigns and higher interest income from growing revolving payment balance. Peipei Bank increased revenue due to steady growth in account numbers and deposit balances, as well as expansion in housing loans, which led to higher loan balances. Other financial businesses, including Line Pay Taiwan and Line Credit, performed well, achieving 22.6% year-on-year growth. Performance attribution of the strategic business. In addition to higher revenue of PK consolidated, reductions in SG&A expenses, especially outsourcing costs, led to a significant profit increase.

Next, Peipei continues its high growth trajectory.

Thanks to strong performance of events like the Peipei Festival and municipal point-back campaigns, total consolidated GMV rose by 23.4% year-over-year, and consolidated revenue also grew by 17.6%. Consolidated EBITDA surged to 45.5 billion, driven by more efficient marketing speed and reduced outsourcing costs, efficient marketing spend and reduced outsourcing costs. As a result, margin expanded to 18.3%. Next, let us present our earnings guidance for fiscal 25. Before we present our earnings guidance for fiscal 25, we'd like to first explain PayPay's IPO as it will impact the format in which our guidance is disclosed. PayPay has begun preparations for its initial public offering, IPO. We're exploring the US market as a potential listing destination. Even after the IPO, LY Corporation remains fully committed to PayPay's business and enterprise value growth. Next. Once again, this is our consolidated earnings guidance for fiscal 25. We expect entire group revenue to grow by approximately 9%, entire group adjusted EBITDA to grow by 6.2% to 8.3%, and adjusted EPS to increase by 4.0 to 7.9%. Thus, we anticipate high single-digit growth in both revenue and profit. As mentioned, since Peipei has started preparations for IPO, we will refrain from disclosing financial forecast numbers for Peipei Consolidated in fiscal 25. Given that PayPay consolidated accounts for the majority of both revenue and profit within the strategic business segment, disclosing its forecast could effectively imply a projection for PayPay's performance. To avoid this, we are presenting the outlook by combining the strategic business segment with the others and adjustments category. Now, let us explain our capital efficiency improvement policy. Our basic policy is to strike a balance between profit growth and growth investment while working to improve operational efficiency. As for shareholder returns, we aim for a cumulative total payout ratio of over 70% over the next five years through flexible share buybacks and stable dividends. In terms of maximizing profit and free cash flow, we aim to maintain high single-digit profit growth in adjusted EBITDA and adjusted EPS over the medium term. We're also working on balance sheet management to ensure the appropriate size and structure of capital and liabilities. Next. Finally, let me outline our management policy for fiscal 25. Next, first a look back of fiscal 24. We steadily executed the policies and goals set at the beginning of the fiscal year. We were able to achieve such goals. While strengthening our products, we also improved profitability, resulting in adjusted EBITDA exceeding the initial guidance by 30 to 40 billion. Security measures also progressing according to plan.

Next is future policies and position of businesses in FY25 and onwards. We will focus on the official account and mini-app, PayPay and AI. Those are the three areas of the focus. And we try to realize a sustainable growth even in the rapidly changing market environment. LINE official account and LINE mini app will try to enhance the features and try to improve the linkage between the two to introduce this to the companies and stores to realize the continuous high growth. And we are trying to transform the PayPay not as a payment app but to become the digital financial platform to build the ecosystem to improve the revenue and to introduce all the AI agents to all the services that we have. And we would like to introduce the AI products, which can be provided only by us, who have many users, physical contact, and content. And we will build a solid user base and revenue base in GenAI. And I'd like to talk about those three basic principles. First is about the LINE official account and mini-app. First of all, about the potential market, the official account and mini app, they can be divided into the sales promotion market and digital transformation market. Each is the size of the market is 15 trillion and 7.7 trillion yen each. So the total is exceeding 20 trillion yen as a potential market. And the latest account at sales or revenue is about 120 billion. So there is a big room for growth. So on the basis of the standalone official account, we will try to aim for the double digit growth of this official account to up to 20%. And with the monetization of the mini app starting From the next fiscal year, we expect that the stronger growth. By 2028, we aim to achieve 100 billion yen annual sales with the mini app. So this will be the major driver.

Next page.

As a foundation for the future revenue growth, I would like to talk about the business platform. From this fiscal year, we will introduce the cross-functional business platform to centrally manage our services to companies. Our corporate service IDs will be integrated into the LINE official account. so the companies and stores will be able to use the multiple services based on the official account. As a result, from the perspective of the users or the companies, the users' status of the services can be seen, and based on the deeper understanding of the users, they can distribute the ads and do the sales promotion across different services, so we expect the combined use of other services and others. So, in addition to the business platform, we will be also taking measures to boost service foundations. On the left-hand side, we are showing our plan to strengthen our sales of the DX solutions. And mainly in the dining and beauty services, we will be introducing the promotion of the mini-app. And for the measures to increase the user usage, we would enhance the function so that the mini-app can be searched and found easily. And the companies have been requesting for the in-app billing feature of the mini-app. And we would also make a progress in terms of introduction of the option functions for the LINE official account. Through those initiatives, we will further grow the official account as well as mini-apps. Next is the second pillar that is to build the digital financial platform centering around PayPay. First, let's look at the external environment surrounding PayPay. The cashless payment ratio in Japan is steadily growing. And in 2024, it exceeded 40%. But there is still growth potential in comparison to other countries. So in this quickly growing cashless payment market in Japan, PayPay has been increasing its share steadily. And in terms of the number of the payments, the PayPay share is now close to 20%. And in terms of the profitability, the revenue increased in FY24, and now we are ready to expand this. In April, the PayPay Bank was transferred under PayPay, and we have now completed the reorganization of the financial businesses within the group so that we are ready to realize the synergy of this. And we will try to utilize the tailwind of the increasing cashless payment market to realize the further growth.

So, about the concrete items on the left, PayPay card example. PayPay and PayPay card will be linked. It will make it more convenient. And in terms of the interface, compared to the red screen, you can just slide to the blue screen and you can switch to the payment. And this should... This has led to more transactions for GMB and the number of cards issued, and that has led to the growth of PayPay itself. This past April, PayPay Bank has become a subsidiary of PayPay. At PayPay Bank, various initiatives are starting from April 25. From the PayPay Bank app, PayPay payments have now become possible. Going forward, as we have done with the card, we will make PayPay Bank balance payments from the PayPay apps, and so we shall achieve the high growth that we've achieved in cards at the PayPay Bank as well. So these initiatives are not limited to cars and banking. We will execute across our securities and insurance businesses as well. Going forward, we will use PayPay's broad user base and strengthen integration with the PayPay app to further grow our financial services, including banking, securities, and insurance. Peipei is evolving from a simple payment app into a comprehensive digital financial platform, and we will build a robust ecosystem and drive further monetization. Next. Lastly, I will explain our initiative to implement AI agents. Next. LINE Yahoo or Ewa Corporation has grown by capturing past paradigm shifts in the IT industry. we believe that the paradigm shift brought about by generative AI is the most significant of them all. And so how we respond to that is going to be the key. Amidst such transformation or paradigm shift, we are already implementing various AI initiatives. To date, we have launched 44 AI-powered services for consumers and undertaken over 35 internal operational efficiency projects. So we've strengthened the user service and enhanced efficiency of our internal operations. For example, LINE AI, which was launched in April, you see the numbers. It's already being used by a large number of users. In our internal operational efficiency projects, we've made steady progress. About 90% of certain customer support tasks has been automated, and the time spent gathering information in response to ad sales increase has been reduced by 70%. This fiscal year, in addition to advancing these initiatives, we will fully accelerate the transformation of our consumer-facing services into AI agents. The key to our customer-facing AI agents is deep user understanding, extensive merchant touchpoints, and the richness of our content and data. We think those are quite important. With a user base of about 100 million, over 10 million merchant and payment touchpoints, and more than 100 types of content, Well, a lot of data is being accumulated, and so we will leverage the unique strengths of the LY Corporation to deliver AI agents in a way that only we can offer. There are three key points, we think. First is personalization. The AI will autonomously analyze all kinds of information, including reviews and feedback, to provide optimal suggestions for each user. Second, end-to-end coverage of daily life. Our wide-ranging services allows our AI agents to accompany our users in all aspects of their lives. Third, conversion completion. The AI agent will complete the cycle to conversion seamlessly, including booking, purchasing, and payment.

So these three, we think, are our strengths. So next page.

Going forward, we will evolve our various services into AI agents. Not only our core services like LINE and Yahoo, but also local shopping and messaging services will transform into AI agents. So these services will go beyond providing information and analysis to offer optimal suggestions and assist with actions like reservations and purchases. We will prioritize the implementation of services that implement generative AI, aiming to build a solid user base and a revenue foundation in the Gen AI era. An image video of our AI agent is available on the IR section of our website, so please take a look. To summarize our full-year business results, in fiscal 24, we've grown our businesses by strengthening our products and by a lean operating structure that we have since the merger and have seen improved profitability, realizing stronger-than-expected profit growth. In fiscal 25, we will continue operating under this structure while steadily executing our mid- to long-term growth strategies centered around three pillars, official accounts and mini-apps, pay-pay, and AI agents. We'd like to make this a start of the next growth phase, capitalizing on our strengths. We will also maintain a balance between stable profit growth and growth investments, actively pursue shareholder returns and BS management, and continue focusing on improving capital efficiency, one of our key management issues. We will aim to be a company appreciated not just for its financial performance but for a multitude of reasons by the stock market. We appreciate your continued support. And that concludes the fiscal 24 full year and the Q4 earnings presentation. Thank you very much for joining us today.

Thank you very much.

Now I would like to take questions. If you have any questions, please use the raised hand function of the Zoom. When it's your turn and when your name is called, please start to ask your question. Once again, if you have any questions, please use raise hand function of the Zoom. When your name is called, please start asking your question. We would like to limit the number of the questions to two questions per person at one time. And please ask one question at a time. If you are asking questions in English, that will be consecutively translated, so it would take some time. The answer from the management side will be simultaneously interpreted.

So now we are taking questions.

First, from SMBC Nikko Securities, we have Mr. Maeda. Please unmute and ask your question.

Thank you.

This is Maeda from SMBC Nikko. I have two questions. First is about the PayPay IPO and preparation. In the long term, your investment and about the structure of the investment, what do you think would be the ideal? As of now, I think that as a line of group, The profit of the PayPay pickup is limited. So through the IPO, is this going to be diluted? Or at the time of the IPO or listing, as a shareholder, what are the advantages that you will expect? So that's my first question. Yes, Sakaue would like to respond to your question. For us, PayPay's listing means that the PayPay's corporate value can be realized. So that's the biggest advantage. In addition, PayPay itself through the IPO, the market discipline and others will improve their management and will accelerate their growth. So those are the expectations that we have in preparation for IPO. Our equity toward the IPO, we will be studying the different structures. So as of now, nothing has been decided. So for us, We are not thinking about that right now. And we will be studying the offering structure from now on. Thank you.

My second question.

This time, the briefing session on page 24, I talked about the guidance. In each segment, the revenue, we should look at it, and also the cost. If you can give us the byproduct or by sub-segment, additional explanation. Yes, Sakaue, I'd like to respond to that. First of all, starting with media, this is the high single-digit revenue growth is expected. And account advertising, we think we can grow in double digit. As for the display, it's still difficult, but single digit, low single digit is what we like to realize in four year. For the search ads, it's going to be a little bit tougher than the display ads that's being factored in. The revenue is growing low single-digit, but it's flat in terms of the profit. This is related to the cost of generative AI. So, EBTA is flat as a result. More specifically, Line AI and AI Search and LLM will be using other companies' LLM, so that would incur some cost. So that is reflected. And also the AI search, the monetization has not been established. So only the expenses are emerging. So that's why the profit looks flat. As for commerce, the BNOS is going to be consolidated. And that would be 10 billion to 20 billion add-on expected in terms of revenue. And so the high single-digit growth of the revenue is expected. Yahoo! Japan Shopping, gradually and steadily, we are trying to expand our ecosystem. So again, the high single-digit growth is expected for that. And adjusted EBITDA, is lower in terms of the expected growth around the revenue. In the AI era, how do we do the monetization? One is through conversion. We need to generate the revenue. So within commerce, there are different conversion services. So, I thought at the gen AI era, we need to improve our capability to convert. So, promotion, sales promotion. So, a certain level of the growth investment is included. So, that's why the revenue growth and adjusted EBITDA growth are a bit different. And as for the strategic area, it's difficult for me to comment, but the pay-pay and line financial services, the revenue growth is lower 20% range and EBITDA in the strategic area, we would like to maintain the curve that we arise and to improve the profit from now on steadily. That's all. Thank you.

Thank you very much. Thank you.

Next, from Goldman Sachs Securities, Munakata-san. Please unmute and ask your question.

Munakata from Goldman Sachs.

Thank you for the presentation. I also have two questions. First, about AI agents. FY26 and onwards, you're looking to monetize. That's what you said. But the method of monetization, what are you thinking? What are your thinking? So there was a mention of enhancing conversion to the previous question. But with AI agents, in order to grow revenue, in a large way, what is going to be important? Is it going to be user traffic or GMV? Growth of those things, that will lead to profit. Is that the image we should have? Or you say you have a broad range of contents, more than 100. So by introducing AI agent and also in trying to monetize that, what are the contents that's going to be the key?

Also,

line up renewal timing so second half of this fiscal year unchanged or is what about the surprising experience are you progressing toward a very positive surprise for the users in terms of that update thank you so it is our explain about monetization of ai agents So globally, this is something that's been discussed. So we have to think as we walk, and that is our basic approach. But the basic direction, there are three major parts. So conversion model that is in line with the GMB. So with AI agents, GMB can increase in various services. And so from there, we would like to or create a model where we can enjoy fees from that. So at our company, we don't just do media, but we have very large numbers of users. So we're sort of a portal and we have many conversion points. For example, commerce is one, or travel is another, and restaurants as well. And payment is also within our same group. So we're very unique in that aspect. And so conversion, in those places is one pillar of our monetization. And there's LIP Premium that we have. And amongst the subscriptions, or within that subscription, we can perhaps integrate that. That is another possibility we're thinking about. So something very useful if that is created. And then... that could be one item in the lyp that's something we can think about then there could be some completely a new model so whether it be search or chat or paypal we have this history of creating something very new so i think that there will be something fundamentally new and also your other question about the line app We're on schedule. Cisco 25 is when we plan to announce that update. And as you mentioned, we want to provide the convenience to the users. And so element of AI or Gen AI probably incorporate this. So we'll make due preparation for that. That would be my response to you. Thank you very much. Second question. So looking at this fiscal year's guidance, I also have a question. So internal company EBITDA margin, so it seems that it's about the same as fiscal 24. That seems to be the assumption. But what will be the positioning of this fiscal year? Cost optimization has run its course, so now you're going to focus on top-line driven growth phase. Is that the right understanding of your approach? Also, maybe difficult for you to say, but the strategic business monetization, if that should progress further, EBITDA margin, can we see an upside for that as a result of that? Please. For this fiscal year, it's not about cost reduction. Fiscal 24, we have worked on cost reduction and we increased the profit by... increasing the profitability. And for AI agent, we will be doing mid to long-term strategic investment and also grow the top line as well. So top line growing, not really in this year, but next, sowing the seeds for the next fiscal year onwards when it will be the AI era. But still, we want to maintain a profit growth of higher single digit. So for the strategic segment, it's difficult to talk about projections. So please forgive me for that.

Understood.

Thank you very much.

Thank you. Next, from Okasan Securities, we have Mr. Okamura.

Please unmute and ask your question.

Thank you.

Okumura from Okasan Securities. I hope you can hear me. Yes, if you can speak up a little bit.

Yes. I have two questions.

First is about the media business, the business results and guidance. Now, search and display, you mentioned, were weak, so I'd like to check the reasons. And for this fiscal year, Yahoo and Line ad platform integration was planned. That is not something that I can find in the presentation material. So how did you include that into the guidance? And also, the media guidance cost, crystal-related cost, is not included, is that right? So I'd like to confirm those points. Sakaue would like to respond. And maybe there is an additional comment from Ikehata.

Q4. The search ads, part of the major clients,

Well, among the clients, they're going through kind of trials and errors. And because of that, Yahoo website, the search ad faced some difficulty. And that is continuing in Q1. So when I talked about the guidance of the media, the search is flat because of that same reason that we expected the continued impact. As for the display, Q4, Q3, Q2, the revenues were down and demand side, the tax side display is not yet coming back. So it's not really the tariff or the impact of the tariff, but it was the situation that existed before. And as for the platform, it was integrated in FY25, and Ikehata can make some additional comments. As for the crystal specific, no, we do not have any budget for that. So I'd like to invite Ikehata-san to comment. Yes, Ikehata speaking. As for the guidance and the latest results, those were already reported by Sakaue. And one additional comment from my side, the ad platform integration and others, there are various initiatives starting this fiscal year. And the ad platform itself, LINE and Yahoo ads, The integration will be in the second half of this fiscal year. Gradually, we are starting to provide that to the market. And of course, when the platform becomes one single platform, then the advertisers can more seamlessly use the LINE site and the Yahoo to have a more efficient ad distribution. So that would be the environment. But this is the major integration of the measure and the platform. So in our guidance, revenue upside is not included. Rather, we will start to see the effect of it in the medium term, so in FY26 and onwards. So the platform integration will start to show the effect in the advertising. So that was additional comment that I wanted to make. One follow-up question. So platform integration is not delayed. Is that correct? And you also mentioned search and you talked about some clients. Is it related to the budget of the client? And that's not... going to have any impact on the platform. Thank you. About the integration of the ad platform, no, we do not have any today. Looking at the situation of the customers, and we are working closely how we can do this. So that's how we are working on this. But search, as your understanding is correct. Thank you. Thank you very much. My second question is about PayPay IPO. The PayPay is a domestic business and listing, potential listing in US market. Why is that? Simply in the case of IPO in Japan, there could be some conglomerate discount. Is that the reason? Could you explain the background? And about the PayPay, by listing the capital that you can procure, will change. So where would you be spending that? Through the IPO, the business value of the pay pay, how would it expand? And as of now, if you can comment on that. Thank you. So, PeiPei, considering the listing in US market, it doesn't mean that we are making any specific preparation, but eventually we would like to do the global business. So, that's one of the ideas that we have. So, that's about ground. And the second is that the US market, For the fintech company listing, there are more companies being listed, and there is a depth in the market, so the variation or multiple, from those perspectives, there could be higher evaluation, and that's one of the reasons why we keep this as one of our options. U.S., the regulation, preparation for the IPO, Of course, there is more burden or load, so we are going to start preparation even in this burdensome market. And finally, where do we list? That's something that we'd like to decide as we prepare. And of course, there will be more options in funding after the IPO. So what do we do in the future? Not just procuring the fund from the capital market, but debt capacity or procuring the funding through the debts or fixed income. There is more reliability or the trust. This is a financial business. The money is something that we need to procure in the financial business. And when we consider that, with more reliability, for example, with the debt, securitization or bank loans and others, there will be wider options in funding or financing. Thank you very much for your detailed answer. That's all.

Thank you very much.

Next, Jeffrey's Securities. Sato-san, please unmute and ask a question, please.

Sato from Jeffrey's Securities.

Can you hear? Yes.

I also have two questions.

The guidance.

The last two years,

In terms of the profit, you have seen upside against the guidance. Recent guidance from your company, there's this image that it's quite conservative. This time, EBITDA is flat from the previous year. Is this because there is AI investment? And so should we consider this to be conservative as well? Or this time you're spending money, so you're actually thinking that this is where it will land. So are you conservative on the sales or on the profit side? So what's your sense internally, if you can give us some clues? The past two years, in terms of profit, we've seen some relatively large upsides. So what's the sense for this fiscal year? That's the first question. Saka will respond. For this fiscal year, Earlier, we talked about AI and that we're making business investments. That's being reflected here. And so, well, maybe they will not be right ROI. Or when you call LLM, the users have to actually use AI search or that cost will not be incurred. So we really can't say for sure what will happen. So this is the best effort plus alpha. That's what is in the guidance. So rather than revenue, the EBITDA or the cost side is where there is that reflection. And so there may be some additional communication in terms of how we progress in the growth investments. Also another thing, cybersecurity. So 15 billion budget you had for the term just ended, and you would use that full amount. related to the Ministry of Internal Affairs and Communication. This is completed relative to the MIC. And this fiscal year, you were saying, I think you would have 10 billion. Is that in the budget? Right here. Yes. So it's in the appendix. In our guidance, we have 10 billion that's included. FY24, So for LY Corporation, there was the security measures. Neighbor system we were using, we had to separate that. So that was the focus for fiscal 24. The unconsolidated LY Corporation, we're seeing that completed. So FY25, this will be for the group companies, domestically and overseas. Still, neighbor system is used by some of those entities. So there is what we will do the separation and we expect about 10 billion yen for fiscal 25. So each quarter, are you reporting the progress or are you mandated to deliver a report to the MIC by quarter? Well, as of end of March, we haven't been told to do so. But of course, we think it's better to maintain the communication. So no set frequency, but we will maintain communication with the MIC. And so you will voluntarily declare. Like last time, you had to answer questions. This time, you just make a voluntary statement, like a status check. So it is our respond. So we've disclosed this separation plan. So some of that will take until fiscal 26. So for that, we will, of course, make reports. And a large part of the separation has been completed, but overseas subsidiaries still some separation work remains. So we want to do that within fiscal 25 and something that we will submit to the MIC and will publicly disclose. So to the MIC or on our corporate site, we will disclose the progress. Thank you very much. Going forward, Well, it's 10 billion this year, but fiscal 26, same amount of budget you plan to secure for this effort, or is it going to be eliminated? Saka will respond. Fiscal 26 onwards, 10 billion. We will not continue 10 billion. Security measures, of course, we always have to do it, but it will not be as large as this 10 billion. It will be only up until fiscal 25 that we'll be spending this amount of money. Very clear. Thank you very much.

Next, from Nomura Securities, Matsuno-san, please unmute and ask your questions. Matsuno from Nomura. I have two questions as well. First is about the AI agent. Your definition of important functions, what are, for example, the search or operability or better efficiency in development? And is it for the consumers or for the businesses? Your definition of the AI agent. And of course, you have to invest in order to get the return. So if you depend on the other companies' LLM, not at the LLM expenses, but you really have to spend all the development on your own to get the return. So excluding LLM, what is the size of the investment that you plan to make?

It is our right to respond first.

Our AI agent, what we talked about was for consumers, for the users, AI agent. And as for LLM, as you pointed out, The one of the Google was updated and there are more options for us. So about the pricing would come down. So rather than LLM itself, I would like to use it well so that we can have a better interface for the consumers. That's more important. So for all the users, we would like to provide the AI agent functions. And to differentiate in terms of the contact of the users, we have so many users, and also the GenAI, the chat, LINE, and also the Yahoo search, we have both. So there could be easy access on the part of the users. And also, we have many conversion points that users can take actions, purchase, reserve, and so forth. So from now on, the official account, the mini app, or PayPay, we will have more of those. So we'd like to link those, and to do it seamlessly. That would be our strength. As for the cost or expenses, Sakaue-san will make some additional comments. Yes, the expenses for the LLM, about 10 billion yen or so, that is what we expect. And also in the wider sense, when we consider the monetization in the future, we need to enhance the conversion. So for that, another 10 billion, the various service enhancement on the part of the conversion. 10 billion is included and as for the development for the ai agents of course it's necessary to develop and the personnel cost and the consignment cost and so forth i think we can keep continue to use our talent so we are not thinking about increasing the recruitment for that purpose thank you i see so you are making quite a bit of investment and that's a good thing I have to really invest in order to get the return. So about the strategic business, you mentioned that it's difficult to talk about the future. So I'd like to ask about the actual credit card, the net ads or increase. You have made a big increase. I'd like to know the reason behind that. In the background and for the bank, the asset side, when you look at other companies' ecosystem, you can grow further. So there is a lot of buffer for growth. And what is the reason why you're not really growing that much based upon your analysis? Well, about the card, the blue PayPay on the PayPay app, you can use the card. and that is something that is recognized very well, and it's growing. And also, gold cards, and to have multiple cards for one person, so there are various new characteristics that we are launching with this new credit card so 20 to 30 percent growth is something that we can realize and as for the bank yes that's something that we need to work on from now on so pay pay bank from the PayPay bank account to make a direct payment from the PayPay outstanding amount, you needed to move money from the bank to the app. There was one process there. So if you seamlessly connect that, the pay-pay bank can be used as a kind of a debit card. So if you don't want to use it as a credit card, if you want to use the amount that you have in the account, We would like to enable that. And for example, the housing loan and the mortgage, we are coming up with different levels and so forth. So we plan to accelerate the banking services. Thank you.

Thank you very much.

BOV Securities, Nagao-san, unmute and ask your question, please.

Thank you.

Nagao from BOA Securities. Can you hear?

Yes, we can. First question about the AI agent.

So the movie is uploaded, you said, but from Idezawa-san, I want to ask, how to reduce the user pain of consumers with your AI agents. So what kind of a product is it going to be as a user? If we can make a restaurant booking from LINE or make hotel bookings from LINE, that would be great. That's what I would feel. But that kind of a use case is what you envision for the future. and then the monetization would be more realistic. So I think you're in the era of investment, but talk about the timing of monetization. So on the 2C side, what are the potential service deployments, please?

Thank you.

So please look at the page on the screen. So it's not just one single AI agent, but we have diverse services. So we have multiple AI agents that will be running. So each of the services will shift to AI agents. So that's the key. And to integrate all that, there will be an AI agent to bring them all together. In terms of user pain, so line is maybe the portal, and maybe if you use OpenAI operator, and when you do the booking, then you have to log in again. As of now, it's already very convenient, but in the future, we can have even more seamless service. I think that's what the consumers want. And in that regard, various conversion points can be envisioned. and various local contents, Japanese contents. We have a huge amount of that, so understand the users and we can guide the users to the final destination very smoothly. That will be our strength. In terms of the LLM, i think it will become commoditized to some extent so we will choose whatever matches our services and so we will compile combine those services and our strength is that we have a chat and the search which has good affinity in terms of user contact. So I think that will be the unique characteristics that we have. Also about the timing of monetize, you asked about that, so that will be my response to your questions, if possible. your initiatives. So when we will be harvesting?

So can you talk about the timing?

Yes, for this fiscal year, so various AI agents being introduced and next year, fiscal 20 is six and onwards, we'll be thinking about monetization. We'll be going through trial and error phase. Then after that, it will be harvest time. Thank you very much. Second question, maybe difficult question for you to respond, but for PayPay IPO, so LY, you have 30% economic interest, and so there will be outflow. And I'm sure that there are many things you can talk about, but in the future, there's not the possibility of a big capital gain. So as a shareholder, In order to enhance corporate value, how is the PayPay IPO going to contribute? So how is it going to contribute to corporate value enhancement of LY Corporation? Because you have PayPay, media or commerce will grow and you have this virtuous cycle. Do you have that kind of story other than just the capital strategy? So what is that synergy effect that you have in mind? Sorry for the long question.

Thank you.

About the AI agent concept, for that, finance and payment, very important fields. And the most important is to construct the ecosystem And so in preparing for the IPO, we're just trying to shift from just a simple payment platform. We're making PayPay grow into a digital platform and the strong ecosystem will grow out of that. And that will combine with the current ecosystem and we'll have a strong ecosystem that will be chosen by the user. I think that's what we'll be able to realize So pay-pay growth, that's going to be our strategic core. So around that, we're going to provide user benefits. That's what we are thinking. Thank you very much.

Thank you.

From UBS Securities, we have Ms. Jai. Please unmute.

Jai from UBS Securities.

Thank you very much for this opportunity. I also have two questions. First of all, about the mini apps. Specifically, what kind of monetization methods would you be taking? the timing of the monetization you mentioned in FY26 and onwards. So the monetization revenue increase or accumulation from now on, if you can comment on that. Also, the AI agent, would there be some linkage to the AI agent? If you can also talk about that, I'd be very happy. Thank you.

Thank you for your question.

Ikehata speaking. So I'd like to respond to your question. So first of all, about the mini-app itself, our business model, there are many things that we are considering right now. So for example, Mini app itself, the EC service, the purchase, reservation, making orders for games and the subscription services, the billing of the users. And also in the app, there could be some advertising. So advertising revenue is also one of the things. So application app monetization, it's very close to the monetization method of apps. In addition, the LINE mini app, one of the characteristics is that the official account, people can use and share together with the official account. If you look at some of the examples, the account ads itself, the frequency of the use can be activated. And so the unit price of the account ads will grow together. So we have confirmed that. So concerning mini-apps, In addition to the direct revenue, there will be a contribution to the account, so that's the indirect revenue. So in total, as Zawasan said, we can expect that kind of a size of the contribution that would be possible. And monetization and also the timing, in FY26 and onwards, is what we said, and about the AI agent, the linkage to the AI agent, if I may comment on that. With the current AI, there are various content in the digital space, and you can call them up, and based on that, you can make a recommendation or you can do the conversions, and AI can support that. That would be the kind of our world. But still, in the digital space, There are not so many local content in the business model of the local, the physical store and so forth. There are many companies who have that kind of situation. So using the LINE official account and mini app, to all the major stores and services, we'd like to bring them to the LINE app platform so that our AI agent will be able to introduce many things. And MiniApp itself can do the conversion on top of the platform. So AI agent will introduce the various content and the volume will be increasing. And so the various reservations and placing an order and a payment up to the conversion, you can do it in the app. So that's something that we would like to expand using the official account as well as mini app. Thank you. My second question. about the Peipei IPO. as much as you can answer. So, the timing of the IPO and the market cap that you aim for, and you mentioned that the US market is one of the options, and you mentioned that the multiple could be higher there. So, for example, in terms of multiple, what do you think would be the reasonable multiple? It might be difficult for you to make a comment, but if you can give some hints. I'm sure that you want to ask those questions, but those are the things that we are still making preparation for. So we cannot respond to all the questions that you asked. Sorry. OK, understood. Thank you.

Thank you.

This will be the final question. CLSA Securities, Mr. Oliver Matthew, please unmute and ask your question.

Hello, thank you for your question. I mean, the presentation, I have three questions, two maybe we can fit in. One, on the buyback, can you explain the background here and the specifics of the transaction. And for the future buybacks, would they be similar to this or they will just be simple buybacks in the market? That's the first question.

Sakaiway will respond.

So the background of the buyback is that we have presented the capital allocation policy since before, and the buffer part we have been allocating to shareholder returns. So that's the basic background. And fiscal 24 results were strong, and fiscal 25, we expect higher revenue and profits. So we thought this would be a good timing to announce a buyback. For the future, the structure that will be used, that's something we will consider for the future, but we will be discussing with holdings, and so the structure like we used this time, maybe this could be the format for future buybacks as well. Okay.

uh the the final question um open ai softbank is making a very big investment i don't think you've mentioned them uh but uh what kind of discussions have you had or how do you see open ai fitting into your ai structure uh in the future Thank you for the question.

OpenAI, we're already utilizing internally for internal operations. And also, as an AI agent facing consumers, we are utilizing for some of those applications. And SoftBank has announced

Crystal project.

And in the preparation phase, we had a lot of discussions working on that. So we're moving forward with holding a lot of deliberations with them. That will be my response.

Okay. So just to clarify, when you're talking about launching new AI agents, some of those could be powered by open AI technology?

Of course, the answer is yes.

On the other hand, we have multiple LLM. So we'll select what is appropriate for the users. So we will utilize various kinds of LLM. And of course, we plan to use OpenAI extensively as well.

Okay, great. Thank you very much and congratulations on your good results.

Thank you very much.

So that concludes the Q&A session. Finally, I'd like to invite Idezawa-san to say a few words.

a few words. Thank you very much for staying until the end. FI24 was a very good year, and FI25, as we mentioned, will be focused on the three areas, the official account, mini-app, shift the pay-pay to the platform, and also deploy AI agent in the services. And also the return to the shareholders is something that we'll be doing so that we can build a better financial structure. We want to grow in both areas. So I hope you will continue to support us. Thank you very much indeed. So with that, we'd like to end Lai Lai Corporation's earnings briefing for FY2024 four-year NQ4.

Thank you very much indeed for staying until the end.