Rakuten Group, Inc. ($4755)

Thank you for joining Rakuten Group's FY 2026 First Quarter Financial Results Briefing today despite your busy schedule. The earnings summary was disclosed at 3:30 p.m. just a moment ago. Please visit the Investor Relations section on Rakuten Group's corporate website to view it. [Operator Instructions] We will now begin the presentation from [indiscernible].

Everyone, thank you very much for joining our briefing today despite your busy schedule. And I would like to cover FY 2026 first quarter financial results, followed by CFO, Kaga, to explain financial situation, followed by AI by Tina, Chief AI Officer. So this is the agenda for today, as shown on the slide. And first of all, overall summary. And the next today, we would like you to know about the synergy ecosystem of Rakuten Group in detail. After that, segment results will be explained. Now let me walk you through the summary. As for the revenue, for the first quarter, we were able to achieve the record high, JPY 643.6 billion versus the previous year, it was 14.4% increase. So it was a very steady growth. As for EBITDA, again, it was JPY 108.8 billion. The MNO business, it was the very first time in the first quarter that we achieved over JPY 100 billion after we entered into MNO business. For the competitive term. And as for non-GAAP operating income, since the full-fledged entry into the MNO business, we achieved a profit in the first quarter, JPY 36.6 billion versus the previous year, it was up by JPY 36.3 billion. So from here and the after, so I would like to talk about the Rakuten ecosystem in a qualitative manner. I would like to investors who have deep understanding on our ecosystem. So in Japan, ecosystem, I think the ecosystem is created by Rakuten Group. So basically, on the conglomerate discount, like the 1 plus 1 due to various reasons is less than 2. However, in our case, it's not a simple conglomerate. We do have a huge synergy in our group services. That's why 1 plus 1 is greater than 2. So it will be expanding. In particular, recently, because of AI or agent AI advance, so what would happen with that? So in various stages, Rakuten ecosystem, so-called -- we do have growth and the defense and office and defense, we are able to achieve both sides. And the foundation for this is one single brand name. So the common ID we do have and common point program. With that, we do have 70 services connected. So we haven't emphasized this, but the monthly 4.88 million users are using some of our services. So we do not call them the viewer. Actually, they are transacting our services. Other than this, so from the corporate governance perspective, so we do have a thorough corporate culture and including Rakuten Mobile, they are making really hard efforts. So the corporate culture, we do have more than 70 services. And in all of the group companies, we do have a common culture among the group companies and also the users very loyal to our services. So how to increase the number of users and how can we increase the number of cross and then how to improve the LTV or the lifetime value, lifetime value of the customer, how can we improve this? And then among that, so looking at the overall CAC or customer acquisition cost, how can we lower the CAC? And then how can we bring that to the higher LTV and acquire new users to our ecosystem and how to upsell them to other services. That is a big point of this ecosystem. And then over the past 5 years from 2020 to 2025, so-called Internet services such as EC or the travel and from those services, new user joined, that is about 19.7 million and new customers from fintech, Rakuten Point Card credit card and the bank and securities and the customers moved from there, new users, that is 16.1 million and 3D Mobile, 2.9 million. 38.71 million people who came into the ecosystem are using 4.6x the number of services. So each of the services are organically connected. That's what is represented here. Now this is a very surprising shocking number. The user of 1 segment and users of 2 segments and users of 3 segments, when we compare them, users who are using 2 segments are using 5.4x revenue. They are generating 5.4x the revenue of Rakuten Group and users of 3 segments are generating 13.5x the revenue for us. So the customers or membership nurturing is now working. So 2, 3, 4 services when users use all these services, what happens is that, for example, the users who are using one service, the churn rate of the user of service is baselined as 100. And then users of 4 services only have churn rate. So the more services users use Rakuten services, the higher the loyalty of the users becomes. So as a result, looking at our strategy holistically, the relatively low CSC services are used to acquire customers. And then among these users, we upsell them to high LTV services, including mobile and financial services. That's our strategy. By the way, mobile and fintech, the users of these services, about 85% of new users of the segment came from the Rakuten channels, Rakuten ecosystem. So there are many functions that we can utilize, and that is currently working very well. Now AI is advancing and what will happen to all these services? That is the question. But we have rich data on our hand, not only online data, we have offline data as well. So globally speaking, we have rare really valuable and rich data. So through the use of the data, we can provide many services. So we can also have more customers come to our ecosystem through the use of AI. And we will talk about this later again, but the profitability is going up more and more, which means that we have been decreasing the operating costs through the use of AI. We are also promoting cross-use using AI, and we can accelerate the customer acquisition using AI. And that's what we have been doing. So on the offense and on the defense, AI can accelerate our strategy, and that's what's happening. Okay. Now I move on to the segment results by each segment. And first of all, shopping travel, the Internet Service segment. And the revenue was JPY 317.6 billion. So not only from Ichiba and Travel, COBOL and Bibur conhtent businesses are performing pretty well to grow. And non-GAAP OI, JPY 21.2 billion comparing to the year before, plus 65.6%. And then each KPI and first of all, domestic ACGMS, that is JPY 1.5 trillion, which is 4.8% Y-o-Y growth. And then travel, plus 16.4% increase Y-o-Y. And investment business IRR is quite performing well. And then international BU revenue and the USD 459 million, about 7% growth. this time. So what we have to mention is AI-led advertisement business has been performing pretty well. So this JPY 61.9 billion in Q1 and 13% growth Y-o-Y. And then let me look into each business in detail. First of all, domestic EC. As mentioned before, GMS 4.8% Y-o-Y growth and revenue plus 4.0% and OI plus 29.2% growth. So it's about the JPY 31 billion we achieved. And the next is travel business. It's really growing today. And travel business, the GPV on Y-o-Y basis, plus 16.4% and particularly inbound demand, which is the 69.7% growth. And even for the domestic travel, there is a growth of plus 8.1%. So we have added the Rakuten AI capability here, which will help the search in hotel much easier and also the real cons. So just like if you are talking to the travel agency to decide where you want to go and book your hotel, that is possible with this AI. So next is the growth investment business. So trying to lower the cost or increase the revenue, and that is what we are doing really hard. And then about the JPY 2.7 billion profitability improve what's made non-GAAP. So what we have to stop needs to be stopped. For example, NBA Rakuten, this is a basketball streaming service we have terminated. And for the Rakuten Mart in the Western area, we have stopped -- we have terminated the service there. So that will improve the remaining growth investment businesses. It's still in the middle way. And the next is international BU. We will -- Y-o-Y basis, there is a big jump from the Y-o-Y basis and also the streaming service, V and then revenue has been steadily increasing. unfortunately, it was not making a huge loss, but it was really difficult to turn into the profit, which is the Rakuten Funds Marketplace, and that will be sold or terminated by the end of 2026. We have decided. And with that non-GAAP OI for this Q1 FY 2026, USD 7.1 million. And this is a shopping. So we do have a higher season in Q4 for revenue. And the next is ad business revenue, which is growing largely. So the Q1 revenue was JPY 61.9 billion, so the 13% Y-o-Y growth. So it's been accelerated. And then using the AI for various advertisement services, for example, Rakuten Ichiba for advertisement, -- so once you decide the budget, then automatically, we will place the optimized advertisement. With that, GMS at Ichiba will be growing, not only that, but also for the merchants revenue has improved. So the taking power of AI and taking advantage of Rakuten data has a great potential or possibility. Then Rakuten advertisement and the common challenges in advertisement businesses, what are the difference between the 2? And our targeting or the AI is the actual data or actual purchase data. On the other hand, other companies, they use behavioral data, for example, search and view. And then we do have a common ID so we can have accurate analysis of the results. On the other hand, the common challenges, they are using it is difficult to use the cookie. There is a restriction. So the accurate tracking or measurement of the result is quite difficult. And the coverage, as mentioned before, well, we do have so many users using various services in our group. So data is one thing and also the advertisement placement, web page or applications. So we do have rich asset of that. So the AI would be growing our advertisement business in Rakuten. Next is the FinTech segment. Revenue was up 3.1% to JPY 375.3 billion. So all the services are growing steadily, especially Rakuten Bank and Rakuten Card. They have increased revenue steadily and also cost is controlled the revenue the non-GAAP operating income was JPY 58.5 billion, up 33.8% year-on-year. These are the major KPIs. Rakuten Card shopping GTV was up by 8.5% to JPY 6.8 trillion, and the number of Rakuten Bank accounts was up 7.3% to 18.07 million, almost JPY 20 million. And Rakuten Bank deposit balance is JPY 12.9 trillion, up by 12.9%. There is severe competition, but it was JPY 12.9 trillion. It's growing. And Rakuten Securities General accounts, it surpassed JPY 14 million in April. And NISA accounts, as a leading company, we are driving NISA, and there is 7.53 million accounts. So for all generations, young people are opening up NISA accounts at Rakuten Securities as well. And Rakuten Securities deposit assets, JPY 50.3 trillion, up by about 40% year-on-year. Now on Rakuten Card first, the so-called interest rate has been increasing. So how can we grow this business was the question. But the number of members and GTV and assets and cost control, all of them are working successfully and 8.5% increase in GTV and revenue was up by 18.4% and non-GAAP OI up by 15.7% to JPY 16.8 billion. Now on payment, it is also growing. The revenue was up 12% to JPY 27.3 billion and non-GAAP OI was JPY 2.1 trillion, up 14.4% year-on-year. Now on Rakuten Bank, the bank side, already made an announcement, but the ordinary income was up 38.4% to JPY 255.5 billion. Ordinary profit was up 44.1% to JPY 103 billion and capital adequacy ratio is above 10% and ROE 21.7%. All in all, the number of bank accounts and number of main accounts, total deposit balance, they are all growing across the board. But with the utilization of AI, the expense ratio has been going down. Rakuten Securities other securities are also facing the same situation, but the securities market is quite active. So the number of general accounts has also surpassed JPY 14 million and operating revenue, JPY 50.3 billion, up 43.7% year-on-year and operating income versus the previous year, up by 92.5%, almost doubled to JPY 14.6 billion. Now insurance, it's also trending favorably. The revenue itself, we have high-margin products that we are focusing on. So looking at the revenue, the revenue, the absolute number may have gone down, but the OI was JPY 1.7 billion. So it's been trending steadily. Especially Rakuten Auto Insurance, that's where we focus on and the sales has been expanding. As for life insurance, we have face-to-face and online and group insurance, all channels are doing well. Now on the FinTech business, I'd like to touch upon reorganization. As of now, as far as we can disclose, I'd like to talk about this topic. First of all, the financial synergy is quite significant. The Rakuten Card, Rakuten Securities. So in Rakuten Bank, some of them are undertaken at Rakuten Bank. But on top of that, we also have external interest-bearing debt. a rather high interest rate is there. So with the restructuring, in the fintech group, we can complete the cycle ourselves. So the interest burden can be controlled. And also the asset management can be done in the group by ourselves. And in terms of the press use, we can accelerate that. Especially, we can consolidate and integrate the applications, and we can do that more easily with this reorganization. to achieve super ARPU. And we can maximize corporate customer base. The customers may have the corporate account at the Rakuten Bank, but they may not have the personal account or vice versa. So corporate customer base can be commonized to expand the business scale. And more than anything, including Rakuten Group, we can utilize AI further. So even more than before, various financial services can be offered in a seamless manner. So the personal -- the identification of the person is the key, but eKYC can be used to automatically verify the interpretation. And then we can centralize the data by so doing. So synergy will be quite large. Last from myself, talking about the mobile segment, and it has been progressing smoothly and both revenue and OI, the revenue, 18.5% Y-o-Y increase, which is JPY 131.2 billion and non-GAAP OI, JPY 13.3 billion Y-o-Y improvement and minus JPY 38 billion. EBITDA, JPY 1 billion. And then the premarketing cash flow, the so-called the new customers or new stores, excluding costs related to that, it's already reached the JPY 28.7 billion. So throughout the year basis, it's beyond the JPY 100 billion. So the premium acting premium PMCF growing by 85.7% and major KPI, Rakuten Mobile, on Y-o-Y basis and 136 million subscribers, increasing 1.74 million. And then the adjusted churn rate has been improving and ARPU mainly around the store, it's getting increasing. On the other hand, so mainly for the communication software, which is Rakuten Symphony number of customers are increasing and number of partners are increasing. So this has been progressing smoothly. And for let me go into detail about the Rakuten Mobile and the revenue is growing by 23.9% Y-o-Y and then we recorded JPY 108 billion. And then non-GAAP OI and then the improvement of JPY 12.7 billion. And particularly, so we are still at the phase of increasing the customer base. So we are still in the growing phase. So excluding those growth investments, we already achieved JPY 28.7 billion. So EBITDA, excluding the property tax and it's JPY 6.6 billion. So the net increase in the first quarter of last year was 324,000 lines. So in this first quarter, it was 373,000. So it was up by 15%. As for churn rate, compared on a quarter-to-quarter basis, it was down from 1.99% to 1.76%. And in April, it was 1.45%. So it was the improvement of 34 basis points. The one thing I can say is that there are people who are going around different areas to earn points. And so they are leaving the carriers quickly. But those users with more than 5 lines are now charged with our fee, and we are also strengthening the role to verify the identification. So that succeeded, and we were able to curb the short-term users as a result. That is the key point. Having said that, the user survey showed that the 76.4% of the Rakuten users are saying that they intend to continue using our service. And also Rakuten Mobile is the most considered mobile service for switching with 23.7%. We are ranked at #1. And ARPU is also about to go up. On the other hand, the base station construction, it is also accelerated. So the network quality will be improved as a result even further. The shortage of labor has given us a difficulty, but other companies and the mobile industry may not have used this process, but we are going to take up the upstream process internally to accelerate the base station construction. Rakuten Symphony, the USD 131.4 billion, that was the number. And OSS, cloud, including that, everything is trending well. So that is all from my end. Now I would like to turn it over to Kaga for finance, and Ting Cai is going to talk about the AI section.

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

Thank you, Kaga. This is Tim. I'm the Chief AI and Data Officer of Rakuten Group. Today, I'm very excited to share with you our AI strategy, how we set Rakuten apart and highlight our progress in rolling out AI agent across Rakuten ecosystem. We continue to pursue Rakuten AI vision to augment human creativity with the power of AI. We are leveraging our differentiated advantage, our ubiquitous channel reaching 10 million online and off-line touch points and our connected ecosystem with 46 million monthly active users in Japan. That connected ecosystem make it much easier for users to discover new services, reducing customer acquisition costs. And with our diverse portfolio of businesses, we have built one of the most comprehensive ecosystem that can meet almost every user need in both daily and professional life. Every interaction in the ecosystem help us to accumulate unique data, combined with AI, now we have -- we can derive more insights and provide higher quality services to our users, further nurture our relationship with our merchants and build the growth flywheel through our ecosystem. Why do customers choose Rakuten ecosystem? Because the trust in our brand and the value and joy we provide to our users through Rakuten Points and the relationship with our merchants and partners. Now with AI, we can compound our ecosystem advantage. For every touch point we have, we can engage better with our users, whether it is a search, recommendation, advertising, customer service, AI can better understand the user intent, enhance user experience through personalization. This creates a sticky experience that increases customer satisfaction and entices them to come back to us more often. And second, expand. AI can expand our services in multiple ways. It can help us to capture user intent earlier, turning big ideas into concrete actions. It can help user to understand our points and campaigns more because AI can guide them throughout the process. For example, in a shopping marathon, user can earn 10x points if they shop from 10 different shops in each car, but which shop to choose from, now AI can make recommendations. With AI, we can also interact with users in new ways through voice, through images and through conversations. Now more users can interact with our services in the way they prefer. And lastly, differentiate. AI is increasingly better understanding what users want to achieve, break it down into tasks, planning, executing, iterating to achieve goals. And when it comes to complete transactions, this is where Rakuten presents a unique advantage. In a nutshell, AI enables us to engage users with more personalized services, expand usage scenario and differentiate our services through transaction through our memory and connected services. With that, we can continue to build a flywheel to grow our competitive advantage. The beauty of Rakuten ecosystem is that it's all centered around one Rakuten ID. With Rakuten ID, we have accumulated precious data assets about our members, including historical context, user preferences that enables us to provide tailored services to our users. Integrated identity, context and easy payment and delivery remains a unique advantage of Rakuten ecosystem that external AI agent have difficulty replicating. In addition, our AI agent can activate the depth of knowledge we have in each domain. By delivering specialized services, it will be difficult for other general purpose agents to match. In the AI era, data alone is not enough about itself. It is the value we create from the data that help us to build a more trusting relationship with our merchants and users. It is additional economic and emotional value we can deliver through the Rakuten ecosystem that keeps our user coming back. As consumers increasingly shift from a traditional search engine to AI-powered information discovery services, our Agentic AI strategy presents a significant opportunity for Rakuten to expand our services and capture user intent. We are focusing on 2 things. One is building specialized agent with deep expertise in each domain. This enables user to skip traditional web search and come directly to Rakuten for discovery, consideration and all the way to purchase decisions. And second, we are building a super agent. User can just share a vague idea and super agent can figure out the intent through its memory or having a dialogue with the users, it can plan and execute then and finally, helping users to complete tasks across multiple ecosystem services. Going forward, we will enable our agent to complete even more tasks and expand our funnel opportunity, establishing Rakuten AI as the go-to destination for general inquiries. From an architectural point of view, we are investing deeply in each layer from infrastructure, data center, GPU optimization, model system and all the way to application and agent. Specifically, our AI agent, we are focusing on a strategy where build the best, but also partner with the best. We have been collaborating with the best AI company in the world, both start-ups and large companies such as Anthropic and OpenAI. We started collaborating with them early on. For example, we worked with OpenAI when they only had 400 people, and we worked with Anthropic before Cloud code became a phenomenon. And at the same time, we want to understand the technology fundamentals so we can build from the ground up, creating our own embedding for commerce, tokenizer for Japanese. We also innovate on top of our open source model trained with our unique data set and optimized for domain-specific tasks. Today, we have a portfolio of models from mini models to super model with almost 700 billion parameters. And moving forward, we are focusing on building domain and task-specific models that are very cost efficient for our businesses and delivering better margin and more value for our customers. Since our brand launch of Rakuten AI, our agentic platform at Optimism last year, we have continued our execution momentum. Today, we have 11 AI agents available. Particularly in our last earnings presentation, we talked about Rakuten Ichiba. Today, I want to briefly touch on Rakuten Travel. And as Mickey mentioned earlier, Rakuten Travel increased the gross transaction volume 16.4%, and I have personally used it every day during the Golden Week, while I was biking from Aemii to Ymaali, every night, I booked on Rakuten Travel. It's a delightful experience for me to discover local gen easily and quickly on the go. We are moving quickly to build, test and deploy AI agent across the ecosystem. AI agents are already live across 11 services, and our plan doesn't stop here. We hope to enhance all of our services through AI agent. Our ultimate goal is to augment human creativity with the power of AI. That concludes today's presentation. Thank you.

So this concluded the financial results presentation. Thank you very much. Thank you for joining Rakuten Group's FY 2026 First Quarter Financial Results briefing today despite your busy schedule. We will now move to the Q&A session for the press. Our presenters today are the following 7 individuals. Next, I would like to explain the format for today's Q&A session. [Operator Instructions] .

So [indiscernible] on from Yi newspaper. So business performance on operating income since FY 2019, for the first time, you turned the profit into profit. So how do you think of this? And so you had a good start in Q1. So what will be your expectation for full year? I would like to know that as well. That's all.

So basically, as you know, Rakuten Mobile, this is -- we have challenged a huge project and -- so the actual user reaction to this business, which actually contributed to the Rakuten ecosystem businesses. So the lifetime value LTV has been increasing. We have understood it. But now it comes to the surface, it has become explicit. So this time, I explained ecosystem in my presentation, and I think I covered about these points. Therefore, so it is a great result, and we need to continue the momentum. So the further utilization will be promoted. -- in context of that the -- looking at the profitability, I think the profitability, I think we will be able to improve profitability more with further utilization of AI. And we are quite good at new acquisition. So as mentioned before, reorganization of FinTech Group is one of the factors. And then we do have a sound balance sheet. Given that not just for this quarter, onward, I think we can expect a big profitability improvement. We are confident. That's all from me.

Next, from [indiscernible] Newspaper, Mizhima-san, please.

I'm Mizushima from Nikkon Koyo Newspaper. Can you hear me okay?

Yes, we can hear you.

Rakuten Mobile, following unext, is there any new service and new associated plan that you are thinking of with the recent infrastructure, I think that other competitors are increasing the prices. But as of last year, you said that you were not planning to increase the price. But since then, is there any plan to increase the price?

Well, the security will be a big issue going forward. And also [ Ole Ole ] Insurance was also quite well accepted by the elderly customers. So the services for young children and senior citizens will be expanded in the future. And the content bundling, we need to discuss with the counterparts. But if possible, we'd like to pursue that actively. And what's going to be important from now on is not to connect them, but connection needs to be secure. And also, we need to prevent any fraudulent activities. So we need to strengthen these areas. As for the price, that is part of our strategy. So I'd like to refrain from mentioning anything about that, but we are late comer to the market. So compared to other competitors, our market share is still relatively small. So we need to think about the overall picture when we consider these aspects.

So there is a time constraint. The question from the media, we are going to take the last question from the media. Freel [indiscernible], please start asking the question.

So the consumer price has been increasing drastically, and we see several data evidence for that. And probably that would have some impact on to consumption. If the price hike continues at this level, consumers may start thinking of protecting themselves. I feel this kind of phenomena. So for example, you made the delivery fee charging, and I think you are taking several measures and also the labor cost has been increasing. So the transportation cost or delivery cost. So the logistics industry is struggling with that. So maybe you need to take some action for this kind of a thing. So in the EC space, the cost increases or the consumption momentum goes down, I think that will be anticipated. So how do you see and what kind of actions will we be taking?

And first of all, so when inflation comes, one thing we can say is the -- so how -- I think the people start buying more from the online, that will be happening. And then we are not just looking at the simple GMS. We are following the -- how much transaction is increasing. So we do have more transactions. And the second point here is the growth factor. AI is one of the factors for the growth and simply by the power of AI to reduce cost largely. So I think it can be applied to our each service. And also, we are going to provide the various progress, but about 50% of the program code is written by AI. So given this, I think we can make the operation more efficiently. I think AI can contribute in that end. And then for the customer transaction, so the -- in a conventional way, using the search box for the Puma to see what they really want, not like that, for example, the golf, and we have a good driver, but fairway wood is not good. So how should they do? So this kind of the question, I will may -- and I am not sure whether I can meet a really good club. So the various shopping occasions, shopping scenes, I think satisfying the need is something we will be seeing in the future. And the Rakuten Group, we can do this in a unified manner, and we do have more advertisement revenue. And in terms of the profitability, it would be going up, but not going down. That is what I think. So if -- the hyperinflation is a different topic. But well, if it is a manageable inflation, as long as within the manageable inflation, I think it will be working in a favorable manner to our company. So ahead others, for example, when the memory is in short and we need to change the server, so there might be some impact like this. But by utilizing the power of AI, that can be absorbed. -- thank you very much. And this concludes the Q&A session for media. Thank you very much for participating.

Thank you very much for joining Rakuten Group's FY '26 First Quarter Financial Results briefing today despite your busy schedules. We would now like to begin the Q&A session for institutional investors and analysts. Today's presenters are these 7 individuals. Next, I'd like to explain today's Q&A session procedures. [Operator Instructions]. We have Okumura-san from Okasan Securities.

I am Okumura from Okasan. Can you hear me okay? Yes, we can hear you. So Fintech reorganization is what I would like to ask you about. There are one major question, but 2 minor questions included. So this time reorganization for Rakuten Group and Rakuten Bank, the minor shareholders of both entities can be benefited from this scheme. Why did you decide that that's the case? That's different from the previous decision? And also, another point that you mentioned, what will be essentially changing through this reorganization? On top of that, what is -- out of the objectives for the reorganization, you said that you will be funding to lower the financial leverage. Is that one of the objectives? If you could comment on these questions, I appreciate that.

Yes. The large factor is that the interest rate is being increased. That I think is one of the important factors. As you can see here, the external funding is what we are relying on in Rakuten Card and Rakuten Securities, partially, that's several JPY 10 billion. So is it JPY 10 billion or JPY 90 billion? I cannot disclose that, but the external interest rate is one big factor. For Rakuten Bank, including the deposits, there are assets without interest. So that is where they can switch to interest-bearing ones. So that is the most easy to understand factor. And on top of that, recently, the new CFO was appointed. So in many senses, we believe that we can generate more synergies as an organization. We have the foundation to achieve that. And now AI is advancing, and we want to make it one app. That's one app is another factor that we are considering. So from the financial perspective, obviously, Rakuten Card, Rakuten Securities, the so-called out of group interest-bearing debt will go down significantly. So the financial impact will definitely be there. Kaga-san, do you have any additional comments?

Yes. Thank you for the question. You pointed out that the financing may be one of the objectives, but that is not the case. As Mikitani said, this time, what we announced is the reorganization, but the objectives of the reorganization is to stop the outflow of the fund externally. And as soon as we want to promote synergy to be generated. So the funding and fundraising is not the objective of reorganization. -- and on an additional note, with this reorganization for the entire group, with the significant interest rate hike will not be a big risk for the entire organization. So that will not be a risk for us anymore.

And the next question, due to time constraints, this will be the last question. Asset Management, Nomura-san from Nomura Asset Management One.

Can you hear me?

Yes.

So non-fintech, the EBITDA. So looking at the Page 54 and the target of 2026 is 6x and the '19, 5.6x, and it's been improving. But looking at the December end situation, so this the net interest-bearing debt is increasing and EBITDA is increasing so that finally, you will be landing at the 6x. So the -- what is the background of increasing the EBITDA here? So is it because of the CapEx increase or about the investment securities value? I would like to know the assumption. That is my first question. And the second question, the fintech organization, reorganization, how will it be impacting on to the leverage?

Maybe you are not able to speak in detail, but I would like to know the more information as much as possible. That is all for me. And first of all, non-fintech net debt-EBITDA ratio in the next term, we have a target of 5x. And then towards achieving this target, we are progressing smoothly. That is our understanding. And then for the target, so this is based on the refinancing. So the net interest-bearing debt is flat. So this is a quite conservative assumption. And then the market securities, and this is equivalent to the cash and then the net interest-bearing debt, we include them to the net interest-bearing debt for the calculation. And last year, our holding the stock value went up. And then this contributed to this ratio improvement for the EBITDA as announced today, so it is growing quite powerfully. So it is progressing quite steadily. And this high EBITDA will contribute to the improvement of profitability. This would become a big driver. And then the interest-bearing debt to be refinancing in the future. So our financial structure soundness is improving. So we are on track in line with our schedule. And the second one is about the fintech reorganization. As answered in the previous question, so financing, there is no objective that is targeting the financing within the group. I cannot make any other comment other than that. That's all from me. Thank you very much. Thank you very much.

Thank you very much. This concludes the Q&A session with institutional investors and analysts. And before we close, Mikitani is going to say a few words.

Yes, I will do my best. We will do our best. Thank you. This concludes the 2026 first quarter earnings presentation session of Rakuten Group. [Statements in English on this transcript were Spoken by an interpreter present on the live call.]