LY Corporation ($4689)

[Audio Gap] FY 2025 full year and Q4 financial results briefing of LY Corporation. Thank you very much for joining us today. We'll be using the presentation material, which is shown on our website. Today's session from LY Corporation. We have Mr. Takeshi Idezawa, the President and CEO; Mr. Ryosuke Sakaue, Senior Executive Officer and CFO; Mr. Hiroshi Kataoka, the Domain of Media and Search Domain and Mr. Makoto Hide, the Domain Lead of Commerce Domain as well as Mr. Yuki Ikehata, the Domain Lead of Corporate Business Domain. First Mr. Idezawa will explain the FY '25 full year and Q4 business results. And then we take questions. The plan to spend about 1 hour for this session. We are livestreaming this session. let's get started.

Thank you. This is Idezawa of LY Corporation. Thank you very much for taking your time out of the busy schedule to join us today, FY 2025, full year and Q4 financial results briefing. Let me give you the overview. First, at this, highlights the revenue and profit increased despite a temporary impact of ASKUL system outage on a consolidated basis. Excluding ASKUL, both revenue and adjusted EBITDA grew in double-digit percentage. We are accelerating the AI agent rollout to evolve line-based experiences and integrate into existing services. Centering around the AI agent rollout, we would grow business to realize the continuous profit growth and enhanced shareholder return. Next fiscal year, we plan to increase the dividend per share to JPY 11. We aim to achieve ROE of 8% or more in FY '30. Next page. This is an agenda that I'd like to follow consolidated financial results. In fiscal 2025, consolidated revenue grew 6.2% year-on-year, adjusted EBITDA was up 5.5% year-on-year. The results ended close to the lower range of the initial guidance. Adjusted EPS was JPY 28.7 achieving the guidance. Please turn to the next page. Next is consolidated performance trend. With the business growth and new consolidation of the subsidiaries, higher revenue and profit was realized, especially the growth rate of revenue exceeded that of previous year. These are the factors of change in adjusted EBITDA. New consideration subsidiaries led to higher COGS and SG&A., but the revenue growth driven by the strategic business and the commerce business reached 5.5% year-on-year. Excluding ASKUL, double-digit, 12.6% year-on-year profit growth was realized. Please turn to the next page. Next is the business performance by segment. Starting with the Media business. Account as growth offset the search ad declining. Revenue grew by 0.4% year-on-year. The adjusted EBITDA margin was 38.2%, continuously at the high level. Next page. This is analysis of build business performance. Account as growth pushed up the ad revenue as a whole. Now COGS decreased but generative AI costs and official accounts and mainly related cost increased. Adjusted EBITDA, the profit declined 2.2% year-on-year. Next page, account at the OA usage by companies and stores is expanding. Paid account is increasing and pay as you go account is also expanding. As a result, revenue keeps growing at 15.3% at high level. Next page. This is about the LINE MINI app. We newly added MINI app tab to line from February to strengthen the user traffic and with a full-scale launch of the digital content bidding feature was launched in April. The number of the MINI app and MAU are expanding steadily year-on-year. We are working on the monetization measures. Next is the digital transformation solution to stores. We will launch the restaurant option in June, beauty opportunity in the first half. As shown on the slide, it's not just to improve the efficiency of the store operation by using the official account, we would like to promote the customers' repeat usage. In those 2 domains, we aim to achieve 100,000 stores. Next is the LINE Revamp and LYP Premium. The new Home tab has started in March. And in addition to the personalized content by having the gateway to utilize AI, the user dwell time and engagement frequency increase. In LYP Premium, we have been expanded that steadily and LYP Premium with Netflix started in February. And the number of direct subscribers increased by 28% year-on-year excluding the nonpaying users. Next page is the commerce business trend. Due to the ASKUL incident, the profit declined, but there were consolidations of the BEENOS and LINE MAN and the existing businesses grew and the revenue increase. This is the analysis of the commerce business performance. In addition to the new consolidation, the Yahoo! Japan Shopping and Travel also contributed to the higher revenue. The adjusted EBITDA declined by 12.8% year-on-year. Next page, it's e-commerce transaction value. The reuse and travel grew significantly in Yahoo! Japan Shopping captured the hometown tax demand and large-scale sales promotion event was did well and the transaction value increased. Next is the major initiatives in commerce. In Yahoo! Japan Shopping, we plan to change the -- revise the shopping plan. We will change from the advertising-based model to sales-based royalty and monthly system usage fee model to improve profitability. Also, there will be a connection to LINE Shopping tab and commission on the AI-based transaction to diversify monetization. As for reuse with the product improvement and consolidation of BEENOS, there was an increase of 14% year-on-year. We are also enhancing the AI functions. We expect double-digit growth next fiscal year. The next is strategic business performance. Revenue increased by 30.6% year-on-year, which is higher than the year before. Adjusted EBITDA margin grew to 21.1% and adjusted EBITDA grew more than JPY 40 billion year-on-year. This is the analysis of the strategic business. Revenue expanded mainly with PayPay consolidation. And also LINE Bank Taiwan was newly consolidated, and the growth of LINE Bank Taiwan contributed. There was a cost increase, but with the strong revenue growth. Adjusted EBITDA grew by 85% year-on-year. Next is the overview of the business through the PayPay consolidation. PayPay made the first earnings call for the first time yesterday. And please refer to the details to PayPay's results, GMB and registered users are increasing. In payments and financial services. We are seeing the growth and just consolidated EBITDA is above JPY 100 billion level. Lastly, the initiatives for 2026. Next page, please. I will walk you through the topics in the order shown here, starting with adoption of AI agents in our services. First, let me touch on the current state of generative AI usage in Japan. The environment using generative AI is changing rapidly, and the wide variety of AI services are growing now. However, usage today remains primarily business-oriented with only around 16% of users utilizing GenAI on a daily basis. In other words, there remains substantial room for wider adoption in terms of regular usage by individuals. We believe that by leveraging everyday touch points such as LINE in Yahoo! Japan, together with the broad range of service assets, we can deliver on AI to a much wider user base in a more natural and seamless way. Next page, please. In response to these changes in the environment, we are evolving the user experience for the AI era, while also transforming our existing services. For that, we are pursuing 2 major directions. The first is the evolution of experiences centered around LINE. LINE serves as a core platform for everyday communication in Japan, and we believe it will continue to play a vital role as a close and trusted touch point with users in the AI era as well. Accordingly, we will develop new service experiences similar to the AI era, built around LINE as a daily use platform. The second is introducing AI agents to existing services. Advances GenAI have the potential to fundamentally reshape the way all services operate and the services are not exception. We see these changes as an opportunity and will transform our existing services into forms suited for the AI era. Under this strategy, on April 20, we announced Agent i, a new service, designed to serve as a great way to usage in the AI era. Agent i is an agent for consumers that can be accessed, but with just 1 tab from LINE or Yahoo! Japan. We are also rolling out Agent i for business for enterprises and stores. Through these initiatives, LINE of regional accounts were evolve into business AI agents that support corporate customer engagement. Users will be able to seamlessly access a wide range of services, while businesses and stores will be able to reach over 100 million users more efficiently and quickly. We intend to evolve Agent i into a new user touch point and business platform for the AI era. Next page, please. Let me first explain Agent i for consumers. By simply tapping through the interface without the need to enter complex prompts, Agent i enables users to easily find the product information they are looking for. We already offer multiple domain specifications, and we'll continue expanding into additional areas going forward. Looking ahead, we will also introduce capabilities that allow these various vertical agents to form tasks on behalf of users according to their needs. In this way, Agent i will evolve beyond simply providing information into an AI agent that supports users' everyday activities. Next page, please. Moving on to Agent i business for enterprises and stores. Agent i for business incorporates AI capabilities into many apps and official accounts to accelerate digital transformation for businesses. In customer service, LINE AI mode will handle customer interactions. It will enable semifinished responses to multiple customers as well as after our support, significantly improving convenience for both users and the stores. In operations and analytics, we will offer Agent i to this. AI will support the -- process for each company from planning and execution through to analysis. This will allow businesses and stores to improve operational efficiency, while focusing more on higher value-added activities. In addition, by providing support from advanced analytics to execution, it will help sophisticate the marketing activities themselves. Next page, please. Now let me talk about monetization opportunities around AI. In addition to providing Agent i, we will also build multiple revenue opportunities. For user billing, we will leverage the LY payment platform to expand consumer AI subscription offerings. In advertising, we plan to launch agent-based app on Agent i during FY 2026. In commerce, we will promote conversion-based monetization through AI-driven purchase support. Monetization opportunity on the official accounts will be through the AI mode I mentioned earlier. We will build new AIGP monetization models across usual touch points, business touch points, advertising commerce to expand our revenue opportunities. Next page. Next, our initiatives for shareholder returns and improved capital efficiency. This slide illustrates for medium-term targets for corporate value enhancement. Adjusted EBITDA and EPS, we are targeting high single-digit percentage growth or higher. We will also strengthen shareholder returns with our target of achieving ROE of 8% or higher by FY 2030. Next page, please. We have formulated a new 3-year capital allocation policy. And by balancing growth investments with shareholder returns, we aim to achieve ROE of 8% or higher by FY 2030. Using operating cash flow as a foundation, we will execute CapEx and shareholder returns while also realizing financing as needed and allocating capital in a balanced manner toward growth investments. Next page, please. For returns, reflecting the earnings growth trends since the business integration we plan to increase the dividend to 0 per share in the new year. In addition, as we have previously explained, we target a cumulative total payout ratio of 70% or more over a 5-year period and we'll continue to enhance shareholder returns in line with profit growth. Let me explain our earnings outlook. For FY '26, we forecast revenue of JPY 2.24 trillion, adjusted EBITDA of JPY 585 billion and adjusted EPS of JPY 30. While continuing to drive growth in our strategic businesses, we expect double-digit growth in both revenue and profit on a company-wide basis, supported by growth across our commerce business and account advertising among other factors. We will also reduce fixed costs and further strengthen our operational efficiency. Lastly, let me briefly summarize today's key points. First, in FY '25. Our business foundation expanded steadily, resulting in higher revenue and profit. In FY '26, we will fully accelerate our agent transformation initiatives. At the same time, we will pursue both improved profitability and enhanced shareholder returns with the goal of achieving ROE of 8% or more by FY '30. This concludes my presentation on our full year results for FY '25 and the fourth quarter. Thank you very much.

[Operator Instructions] First, from Citi Group Securities, we have Yoneshima san.

This is Yoneshima from Citi Group. I can ask 2 questions, I understand, so I would like to do so. The first question is that your plan for this fiscal year EBITDA JPY 565 billion. It's a very strong number. The previous briefing session said that 10% to 15%, so JPY 550 billion to JPY 575 billion, I think, was the number. And so now it's JPY 10 billion plus. So this shows a certain direction. In the past or 3 months ago compared with a quarter ago, all the changes cost reduction or strategic business part? Is it growing or ASKUL recovery? Is it better than expected? So could you explain the reason originally 10% to 15% -- or 10% to 15% higher than the previous forecast. Could you explain the reason behind this? So that's my first question.

So Sakaue, we would like to respond to your first question. So compared with 3 months ago, has been increased and strategic segment, PayPay announced the guidance. So the upper limit is reflected to our number. That's the biggest reason. The second point is that 3 months ago, ASKUL and LINE MAN were not very certain we mentioned. But the ASKUL and LINE MAN budgets were confirmed and some upside was added. So those are the 2 major changes compared with 3 months ago.

I see. So a follow-up question. As for others, other than the segment, I think that about JPY 22 billion, if my calculation is correct. So like JPY 15 billion for this -- the last fiscal year and there is a positive JPY 7 billion. So I had an impression that maybe the fixed cost improvement.

That's not the case. Well, no change from 3 months ago. Some improvements year-on-year is that, for example, in fiscal '25, NEXT carrier support program was what we did and that was the corporate-wide cost. And the NEXT support was included in others. But that's for fiscal '26. This program is continuing, but the number and also the amount are like changing. So that led to the improvements -- so those are the major reasons.

Okay. My second question, the other day, Agent i was announced and now you can use it from LINE, and I'm using that. So for that the reaction so far -- initial reaction and also during this fiscal year, how much impact of the Agent i is on the top line and also cost. So with the Asian rollout, what would be the impact in terms of the revenue and cost? What do you think are reflected in the forecast for this fiscal year?

Well, thank you for your questions. First of all, as for the number of users, after the announcement, yes, we did receive some reaction so I think that the more people are using it, but the denominator is big. So it's still not showing the yield clearly. So we would like to grow this steadily. And also we would like to improve and enrich the services. As for the revenue and cost concerning cost first, in the SoftBank Group as a whole especially about AI. I think that we are able to control the cost. So that is the current situation. So about the cost increase about the agent, we do not include the big cost increase. As for revenue, today, I -- we showed you some directions. And so this is just beginning. So we are currently working on the validation and we like to grow each one of these. So we cannot really talk about the specific numbers yet.

Just one point of clarification. AI or open AI license, for example, when the revenue increases, is the payment increases or even the revenue doesn't increase, when you use a lot of AI, the cost -- could the cost increase first. If you can answer that question, I would appreciate it.

Sakaue, we would like to respond because it has to do with the contract. So it's difficult to say. But as the usage increases -- the cost doesn't increase first. And we will be making the payment from the different perspective. So FY '25, AI cost is about JPY 10 billion for '26. It's not going to change that much. That is the current view that we have.

Next question is from Musa from Jefferies Securities.

This is Sato from Jefferies. I have 2 questions. My first question is on your guidance each segment I thought was pretty much in line with my expectations, but the profit seems to be a little bit bullish. Overall, for each of the segments. For example, for Media segment, is that a realistic number for e-commerce? The adjusted EBITDA is a little bit aggressive for the strategic business because the PayPay contribution -- but when you put together these numbers what were the assumption and the mentality of the management team when you put these guidance together? So because looking at the overall guidance, I think it's in the median of your range, but can you maybe point out if there are any conservative assumptions that you have baked in for Media, the search may be flat. But for the search advertising still may be challenging. So can you give me a little more color to your guidance, please?

So Sakaue will respond to that question. First, on the media business for revenue for display ad and search ad for FY '26, the 2 businesses in aggregate is expected to be flat. And for the first half, this is a flat expectation may be a little bit challenging. So there may be -- also for the full year, we're trying to strive to maintain flattish growth over last year, but first half may be a little bit challenging. For account ads, we're looking at 15% growth, in line with FY '25 growth. But it was just the accounting. 15% growth will give us additional JPY 20 billion. This is a highly profitable business. So in that sense, the major JPY 10 billion is -- we try to do that with the account ads as a driver. So for the display and search ad, we want to maintain a flat revenue over last year. And for commerce, ZOZO has disclosed their numbers. So you get the OP and the EBITDA, so that's like a JPY 5 billion in profit growth for Yahoo! Shopping for Reuse. GMV is expected to grow by double digit. And I think that will be sustainable. So to a certain extent, those are more of a realistic target. For commerce, the moving parts will be the ASKUL business because compared to FY '25, we are expecting some recovery for ASKUL business, but at this point, it's still uncertain how strong the recovery will be for Q4. The ASKUL impact will be -- had been negative JPY 700 million. As compared to Q3, the negative impact has been mitigated substantially. So we're looking to go back to the pre-incident level during the course of this year, but there are still some moving parts. For strategic businesses, we use the upper range of the -- guidance and the line brands, global financial services are growing steadily. So for strategic businesses, I think we have a good visibility. And so that's the overall nuance of the guidance.

And the previous question from Yoneshima san, he talked about Agent i. I think this will be part of the Media segment. And it's too hard to say what impact you can expect from the Agent i business. So if there are to be upside, is it going to be ready to Agent i or I guess may be included into both Media and Commerce so is the upside going to be from an Agent i.

But I guess the amount will not be the debt because it's a fee-based business, right? Yes, as an opportunity, we have a good expectation, but the Agent i ad business is still on a pilot basis. So this is something that we have to work on, but we cannot incorporate bullish outlook. Then for the LLM cost for FY '25, '26, we are expecting a flattish level. So for Media, the SG&A increase is going to be on the store challenges for reinforced promotions.

I see. So my second question is, if you could give me some insights. On a company-wide basis, if you are going to roll out the campaign for Media, for instance, or commerce and maybe for strategic businesses, there is any big events or promotions that you already have a solid plan for? And if you could give me a rough idea of how much you're going to spend on promotion, I would appreciate such insights. And also, if I may add the Ministry of Communications Cybersecurity, I think, investment is like JPY 15 billion. But has this been completed? So those are my questions.

Yes. So I will take those questions as well, for campaigns for commerce. No change from FY '25. So of course, the GMV is increasing. So the point expenses would grow in line with the GMV growth, but it will not put pressure on our margin. And on the Media business, last year, we did the TV commercials with search advertising business, but we're not doing that this year. So we do not expect any major incremental cost. And for the security measures, initially, we said JPY 10 billion, but now the FY '25 was JPY 8 billion. We do have some continued costs like license cost for JPY 2 billion to JPY 3 billion. So the reduction from last year JPY 8 billion is going to be like JPY 5 billion in terms of the security measures required.

So is that cost included in the other adjusted expenses?

Yes. Basically yes.

The other cost is improving and that's reflecting into a better adjusted EBITDA.

So yes, like I explained earlier, the cost on the next carrier support is 60% and 70%, and the rest is the reduction of costs related to security.

Next from Mizuho Securities, we have Kishimoto san.

This is Kishimoto of Mizuho Securities. I have 2 questions. First is about the Media business. In Q4, adjusted EBITDA is increased -- improving so maybe it has to do with the cost structure, but LYP Premium, I think, did prepare well. So for the full year, the profit was down. But if you look at Q4 only, we would like to know the details. And if we look at the LYP Premium monthly, for example, Page 13, there is a great growth. So it could have a positive impact. So this search ad and account as for vision and other LY Premium surrounding LY Premium. Could you give us some details.

Yes, I like also respond. This is Sakaue speaking. An account adds is something that will continue and LYP Premium with the higher numbers, the revenue, about JPY 0.4 billion in Q4. The growth -- year-on-year growth was realized. And search ads, as you can see, was negative. So that in terms of the gross profit that had a negative impact. If you look at the year-on-year change in Q4, this G&A, there have been some changes. And a year ago, the personnel cost and a part of that is going or for example, the bonus and so forth is not repeated, but this fiscal year, official account and we enhanced the sales promotion. So that was offsetting with each other. So LIP Premium, yes, it's included, yes. That is the case.

My second question is about the Yahoo! JAPAN Shopping that we change or the plan change and the potential impact. What kind of negative impact do you expect?

Well about this double digit or more than JPY 1 billion contribution to revenue is included in our guidance. I'm sorry, I cannot disclose the specific numbers.

Understood. So as of now from the merchants, what have been the reaction so far?

Ikehata san will answer to this point.

Yes, in charge of commerce, I'd like to respond from the merchants of the stores. The reaction with the change of this firm level, the shopping service from LINE and the detailed scheduling and also the purchase via the AI, we are including that explanation. So currently, major sellers that are selling a lot, I think, have given us a positive reaction. And as for Yahoo! JAPAN Shopping, currently, we have an ad model and there could be some changes and -- for the sellers of the Yahoo! JAPAN Shopping, the commission is not going to grow so much. So for the major sellers, I think that the reaction has been very good. But we will be charging the monthly fee and if the small, medium-sized sellers, who are not achieving that big sales in the Yahoo! JAPAN Shopping could -- but the impact on the transaction volume is going to be limited.

Next question is from Harahata san from Nomura Securities.

This is Harahata from Nomura. I have 2 questions. My first question is on the Media business. So we are faced with the Middle East risk. What is the impact on the advertisement market. Also, how would you assess the impact of the conflict in the Middle East on your ad business?

This is Ikehata speaking. So I will answer your first question. So as you pointed out, due to the conflict in the Middle East, LINE display ad to the search ads and the demand from the client and the client refraining from putting out the app is not happening. So at this point looking at the current quarter, we have not seen a material impact on our plan.

I see -- my second question is on agent in the monetizing opportunity. So you had some slides, but how would you score the level of expectations for this offerings? And what is the time plan of monetizing on these opportunities.

Yes. So this is Idezawa. I will respond to your question. So we are really working on this initiative. And at this point, -- so we are working on all of these simultaneously and try to allocate more investment into areas where we see growth opportunities. So it is difficult to rank them, but the users touch points to Internet were transforming into AI agent. And we believe that this is an inevitable trend. Also as we have been communicating, Agent i is something that we would like to grow so that we can also build the relevant monetizing model. So that's our forecast for FY '26.

Next is Okasan Securities, Okumura san.

I have 2 questions. First is about the Media business, MINI app, the store DX bidding business and also the search business. The number of stores and the amount of billing is this going to be increasing in basis or if the growth is going to be accelerated? What could be the triggers that you expect? And also achieving JPY 100 billion close to that level, what are the challenges before achieving that.

Thank you for your question. Ikehata is speaking. I'd like to answer to your first question. So right now, for the restaurant and also the beauty, the restaurant option and the beauty option, those are the pre-introduction, and we have already started selling those. Based upon our expectations compared to that, I think the reaction has been better. So we are in line with our plan. But in June and onwards, we will be launching this. But so as far now we are just making proposals before doing so. About 100,000 stores this time, at the end of fiscal '28, we have the major target. So that's how we are proceeding with account-related businesses. So the restaurant and beauty, this store DX business against the JPY 380 billion at the end of fiscal '28, this will be the major portion. So we'd like to make the progress in terms of acquiring stores. And as for the account and the MINI app, it's not just the store DX, but also the LINE MINI app advertising business and also the payment, the commission, the billing business, which started from last fiscal year. As of now, it's about JPY 10 million GMV per month. so concerning that the MINI app to what extent can we increase the number of MINI apps and also the number of the users, MMU, MAU is growing to what extent can we grow this, those become very important. But as of now, I think it's going very well. That's our understanding.

Second question is a qualitative question. The execution capability of our initiatives. You talked about various initiatives. In the past, from the investors, the level of the execution and also the speed. There have been some concerns expressed from April, mission value was updated and you're focused more on speed. So in terms of structure or decision-making process, are there any changes or differences from the past? Anything that you want to focus upon.

Example -- for example, Agent i intently, especially we have solicited the different ideas and with a very small team or smaller than the past, we have started multiple teams so that we can work on the development quickly so that's one specific example. And as you referred to, the mission of value were updated and so the process -- internal processes, we try to speed up and eliminate the risk. So execution as a whole, we -- as a management team is very much focused on improving that.

Next question is Maeda from SMBC Nikko.

This is Maeda from SMBC Nikko. I would like to ask 2 questions. My first 1 is regarding AI agent and LINE, Yahoo! both of them from outside, how can we assess the success of these initiatives. Are there any specific KPIs that we should be following? Or do you have any internal KPIs or target that you would like to share with the external stakeholders so that you can prove that it will lead to future monetization opportunities. So I also want to understand how you're managing the business, including the KPIs?

Yes. This is Idezawa, and I will take that question. The first, we are in the phase of having the users use these offerings. So the number of active users is the important internal KPIs. And as for the future disclosures, we will consider what is best for the outside personals to assess the success of progress.

Yes. So my second question is on the store DX restaurant option, you have JPY 36,000, beauty option is JPY 7,500. For this pricing strategies, I think you are the front runner and you have some competitive advantage. So what is the competitive edge? So are you trying to take shares away from the existing players? Or are you trying to target new customers who have not used a similar offering? So this may be -- already be a regular share market. So can you elaborate on the competitive landscape.

Yes, this is Ikehata. I will take that question. So this is that way other players are also offering similar solutions, and there are multiple players in the market. However, what we are offering solutions. For example, we're not just simply offering mobile ordering function. And it's not just the CRM solution and we are also not just offering the cloud hub or host. Also for the official account, we are trying to offer multiple solutions that will help to digitally transform other stores. So they will be connected and seamlessly help the stores proceed with the ads. So in regards to our value proposition, that is how we try to differentiate. And we can also leverage on the existing customers, the official account customers to offer this solution. And in terms of the customer acquisition, this official account users in the stores and the businesses are the initial target for these solutions. And in reality, for our official account business, the restaurant and the beauty domains are very active and high in demand. And the customers appreciate the effectiveness of these solutions. Also for these existing official count customers, we also want to offer these peripheral solutions for restaurants and beauty. So going back to your question, the existing stores are using a similar solution. If they are the official account, we will try to replace their existing vendors. And for the official count users who are not using these solutions of hard by the other players, we will try to acquire them as new customers for these solutions.

Next Kumazawa from Daiwa Securities.

In the supplementary information on Page 21, the Media business and search ads, LINE Yahoo! year-on-year, I think that it looks worse than Q3 in Q4, the major customers' trend and so forth, if you can elaborate on that?

Sakaue would like to respond to that, if I may. So FY '25 Q3, Q4, the major clients churn was the major factor. But at the same time, as up now, now the AI response is shown more. So in March time frame, about 13% is showing the AI response. So by doing so, users don't need to issue the queries many times. So in the AI dialogue, you can get the answer in the chat format and the accuracy of the first response is becoming better. So number of the query is being reduced. As a result of it, the existing search ads that are showing search ads is becoming less. So because of that Q4, the growth rate was negative. At the same time, the major trend is that it's not something that. We need to make the self-disruption -- one of the self-disruption examples. So about the search AI response will be increased and at the same time, the search ads, the display frequency will be less. So agentic ads, we would like to launch that as soon as possible so that we can offset the decline of the search ads. So that's what we are thinking.

Kataoka, would like to also respond. In Q3 and Q4, there is a major difference between the 2. In Q4, as Sakaue san explained, the major client, the placement has come to an end so the -- if you look at the unit price of the ad, which has gone up and the search number has come down. And with the declining search number or number of searches, the market as a whole, the AI usage is increasing. And in addition to that, in our company, a number of the searches -- decreases, we want to increase the usage of AI. So internally, even if the search uses goes down, we want to increase the AI usage and eventually, the AI ad business will emerge and if we don't do this, the usage of the search will be decreased. So we are taking this steps so that we can expect the growth in the future.

Just 1 more thing. Related to your answer. So you are seeing the cannibalization, so search and display and a flat must be -- might be difficult. Thank you very much for your explanation. Second question is on the Page 32, the capital allocation. So FY '25, the part that you are unable to use, it's not going to go for the return to the shareholders, but include a year. So we are hoping that it should be used for the return for the shareholders. And of course, the payout ratio is not mentioned, if it's 30% to 40%, the shareholder return of 40%. Without the share buyback, I think that you can achieve the shareholder turn. So what about the potential for the future buyback and it is mentioned here at the bottom about the financing.

Sakaue would like to respond. In Page 32 on the left-hand side, the '23 to '25 the financing and out about JPY 210 billion, the financing is about JPY 150 billion. So if we want to, you can do the financing, but it's a commitment line and JPY 150 billion is something that we don't do the financing. So out of the JPY 25.2 billion, we did not procure JPY 150 billion. And if you go to the right, at the bottom -- the capital procurement is at the bottom. So JPY 100 billion is carried forward and the remaining JPY 100 billion is rolled over to '26 to '28. So shareholder return, we are enhancing the dividend payment. And part of the carried over, it would be used for that. And also, the profit is almost doubling. So based on that, keeping the dividend at the same level is not good enough for the long-term shareholder. So that's why we decided to pay more dividend that's for the share buy back. The payout ratio with the current level, the total return 70% or higher is not possible. So a certain level of the share buyback is something that we would like to continue to think about. So we had JPY 150 billion per year in the past. It could change on that a little bit, but including the parent company, we would like to discuss with them, and we would like to also work on the share buyback at certain timing so that we can achieve the total -- the return ratio of 70% or higher. Otherwise, unless we reduce the denominator part, you cannot just use the growth part to increase the dividend payment.

So I'm cautious of time, and I would like to get the last question, Ramse san, from CLSA, please.

Sorry, Oliver Matthew. I have 2 questions. One, could you just -- on this 100,000 accounts -- for LINE official accounts, how do you get that number? Is it very conservative? That's the first question.

In your question on conservatism, this is actually quite aggressive also a stretch target in a way. So right now, for restaurant and beauty domain, this is a service prelaunch and the digital services are being used by the stores as a prelaunch. So in that sense, I think we can target 100,000 accounts. So we would like to make sure that we get that 100,000 and that is how we set the target. And for us, how challenging is the target? Right now, the restaurants that's already using the offshore account and stability salons are using the official accounts. There's a few tens of thousands or a few hundred thousand users. So for those users, we would like to appeal the solution, and we would like to market and sell the solutions. Also, we have set up this subsidiary to reinforce our marketing sales capability to put more manpower. So through those initiatives in the next 3 years, we would like to achieve this target. So that that is your question.

Okay. Maybe PayPay could help you because you helped them expand very aggressively into these segments before. Second question, could you talk about AI productivity gains within the company? Are you seeing major changes in terms of the speed you are delivering new services or any other things?

With Agent i, we are trying to incorporate AI agent into the various services. And for that development, AI software has been used quite intensively. So our development capability is improving as well as the speed. And also for all the employees, we are promoting the usage of AI and the usage in the development phase is improving. And there are services and programs, which have intensively used there. But on the other hand, we have a lot of services. So we want to make sure there is a solid security and governance. So we have to work on both. But the development efficiency and speed will continue to improve in our view.

We'd like to end the Q&. Lastly, I'd like to invite Idezawa san to say a few words.

Thank you very much for taking the time out of your busy schedule to join us. FY '25 ended well, we expanded revenue and profit as for FY '26. We would accelerate the introduction of the agentic AI and that is being done in the society, we would like to transform ourselves and increase the speed and also on the business structure. And as a result, we would like to improve the profitability and also the shareholder return to respond to the expectation of the shareholders. So I hope that you continue to support us. And thank you very much for joining us today.

With that, we'd like to end LY Corporation 2025, full year and Q4 financial results briefing. Thank you very much for staying until the end. [Statements in English on this transcript were spoken by an interpreter present on the live call.]