We will now start the briefing session on the FY 2024 Third Quarter Business Results of LY Corporation. Thank you very much for your participation. In this session, we will use the LY Corporation business results presentation posted on LY Corporation website. Let me first introduce the participants from LY Corporation, Mr. Takeshi Idezawa, President and Representative Director, CEO; Mr. Ryosuke Sakaue, Executive Corporate Officer, CFO; Mr. Yuki Ikehata, Executive Corporate Officer, Marketing Solution Company CEO, and Mr. Makoto Hide, Executive Corporate Officer, Commerce Company CEO. First, Mr. Sakaue [Technical Difficulty] the third quarter results for fiscal year 2024. After that, there will be a Q&A session. The entire session is scheduled to last for about one hour. Also, please note that this session is also broadcasted live. For those of you watching the live broadcast, if you experience any problems with the audio or video, please try to move to a different server from the bottom of the screen. Now, let's begin.

I'm Sakaue of LY Corporation. Thank you very much for taking time out of your busy schedule to participate in the financial results briefing for the third quarter of fiscal year 2024. I will cover the financial results of the third quarter. There are three topics. First, the third quarter results account advertising and PayPay consolidated grew resulting in increased revenue and profit. Entire group revenue grew 6% year-on-year and consolidated adjusted EBITDA grew by 17.5%. For the shareholder return, this year's dividend forecast has been revised upward from JPY5.56 to JPY7. We will continue to consider share buyback using the remaining buffer for additional investments and capital policy. On BEENOS acquisition, by acquiring BEENOS, the largest player of intermediary cross-border EC in Japan, we will aim for a four-year CAGR of 10% in cross-border EC transaction value, bringing the reuse business back to growth track. This part will be explained later by Mr. Hide, CEO of Commerce Company. These are the agenda items I will cover today. First, I will explain the consolidated business results for the entire group. This is third quarter results. Revenue and profit increased in the third quarter. The quarterly revenue exceeded JPY500 billion for the first time. The progress of the entire group and each segment's adjusted EBITDA and adjusted EPS against the guidance exceeded 75% and are progressing well. This is group wide performance trends. As was in the first half of the fiscal year, the increase in revenue and profit were driven by account advertising and PayPay Consolidated. Revenue growth was 6% year-on-year. Adjusted EBITDA grew by 17.5% year-on-year. Enhanced profitability, thanks to fixed cost optimization, has led to stable profit growth with adjusted EBITDA margin improving to 25.6%. This is entire group performance analysis. Sales growth in each segment and disciplined cost investments are the main reasons for the increase in profit. Revenue growth was driven mostly by the strategic businesses, while media and commerce also grew. As the third quarter is the year-end sales season, a certain level of investment in sales promotion was made. Although the sales promotion expenses increased year-on-year, investments continued to be disciplined. SG&A expenses improved due to foreign exchange gains and lower depreciation, resulting in higher year-on-year profit. To strengthen the shareholder return, we have made -- business performance and profit is progressing well. We have made an upward revision to JPY7. We will continue to pay stable dividend. On the share buyback, in addition to conducting share buyback for the purpose of shareholder return, we will also look at the capital efficiency and conduct buyback at the appropriate timing. The total shareholder return of 70% or higher for the five-year period from 2025 to 29 on cumulative basis will be targeted. This is on capital allocation. Taking into account dividend forecast revision, we updated the outlook for capital allocation. Cash inflows increased mainly due to the improved operating cash flow driven by higher adjusted EBITDA. For cash outflows, due to the company's revised dividend forecast and increased base shareholder returns as a result of share buybacks by subsidiaries. On the other hand, base investments decreased from the original plan due to higher receipts from share sales and others, although there are expenditure -- were expenditures for intragroup M&A. As a result, the remaining balance of the additional investment in capital policy buffer increased by JPY80 billion compared to the plan. We will continue to consider share buyback using the remaining buffer as the funding source. Remaining buffer will be rolled forward to FY ‘26 and beyond. Next, I will explain our performance by segment. This is our Media business performance. Account advertising continued to be the growth driver for the media business, resulting in increased revenue and profit. Margin for the account ad is very high, so margin grew to 39.8%. This is the breakdown of Media business revenue. Overall, Media business revenue grew by 3.4% year-on-year and advertising revenue grew by 3.5% year-on-year. Account advertising maintained high growth of 19.7% year-on-year. Search ads grew by 2% year-on-year, while revenue from the partners' websites has stabilized. Display ads weakened slightly due to lower demand in certain industries. This is similar to the previous period. As part of the growth initiative, we have been talking about LINE renewal. Initially, we explained that the release will be in FY 2024. However, we are currently reviewing the tab structure with generative AI profitability in mind. Therefore, the renewal will be implemented in phases starting in FY 2025. This is on Media business performance analysis, EBITDA analysis. Despite an increase in cost of sales due to higher sales promotion costs linked to sales, the profit growth was achieved, thanks to the revenue growth and improvement in SG&A expenses through continuous cost control. Account ads, the number of paid accounts grew steadily, and account ad plan sales expanded in the third quarter as well with an increase in the number of pay-as-you-go account and pay-as-you-go billing and the revenue from the account advertising continued to grow at high rate. This is on Commerce business. Revenue and profit increased mainly due to growth in shopping and travel despite the impact of deconsolidation of value commerce and IPX. Margin also remained in the high teens range. This is on Commerce business. Yahoo! JAPAN Shopping's sales promotion measures in November and December generated favorable results. Also in December, Yahoo! JAPAN Hometown Tax was launched, which increased the number of users and order unit price. As a result, Yahoo! JAPAN Shopping transaction value increased by 9.5% year-on-year. On travel, the number of reservations increased due in part to sales promotions by Yahoo! Travel and Ikyu, and achieved a significant growth of 25.1% year-on-year. This is on Commerce business performance analysis. Revenues grew in ZOZO, ASKUL, Yahoo! JAPAN Shopping, reuse and travel businesses. In terms of the costs, both the cost of sales and SG&A expenses improved due to the deconsolidation of value commerce and IPX. As a result, adjusted EBITDA increased by 19.9% year-on-year. This is on Strategic business. PayPay Consolidated continued to drive sales and profit growth with revenue up 19% year-on-year to JPY91.1 billion. Adjusted EBITDA was JPY18 billion due to the growth in the sales and the continued improvement in profitability through cost control. As a result, the margin expanded to 19.8%. This is Strategic business revenue breakdown. All businesses continued to grow steadily. For PayPay Consolidated, it grew by approximately 20% year-on-year due to growth in transaction value from campaigns and other initiatives as well as increase in interest income from the expansion of revolving payment balances. PayPay Bank saw steady growth in housing loans and increased revenues due to increase in loan balances. Other fintech grew by 27.7% year-on-year due to strong performances of LINE Pay Taiwan and LINE Credit. This is the EBITDA YoY change for the strategic business. Despite higher cost of sales for PayPay Bank due to the rate hike, profits increased as a result of revenue growth and the reduction of SG&A owing to decrease by outsourcing costs and etc. Next page please. This is the PayPay Consolidated business overview. PayPay's consolidated GMV grew 26.5% year-on-year, thanks to successful marketing campaigns such as the PayPay Festival and the point redemption campaign run by the Tokyo Metropolitan Government in December and consolidated revenue also grew by 20.7%. Consolidated EBITDA grew significantly to JPY15.7 billion due to factors such as more efficient marketing spending and lower outsourcing costs. In addition to the sustained high growth of the payment business, we will also strengthen the collaboration with PayPay Bank in the future and pursue growth as a comprehensive financial platform. Specifically, we will further expand our financial business by utilizing banking functions such as deposits, loans, payroll accounts, and remittances provided by PayPay Bank as well as by developing products led by PayPay. Next page, please. Last but not least, the third point is about the acquisition of BEENOS Incorporated announced on December 19th last year, and this will be explained by the CEO of Commerce Company, Mr. Hide.

Hi. This is Hide, the CEO of Commerce Company. Let me share our thoughts on the acquisition of BEENOS. Next page, please. This is the outline of this deal. The tender offer price is approximately JPY54 billion and the IRR is estimated to be over 10%, surpassing our internal investment criteria. The deal is expected to contribute to the consolidated P&L and is expected to make profit contribution early on from the top line and the cost synergies. Adjusted EPS contribution of JPY0.15 is anticipated in the first year. We concluded the tender offer agreement on December 19 last year and we plan to start the tender offer as soon as we get clearance from competition law and other regulations. Next page, please. Now I will explain the background to this transaction. First, the positioning and the current state of the reuse business in our Commerce segment. In terms of scale, the reuse business accounts for one-third of the domestic merchandise transaction value. In terms of profit, the Yahoo! JAPAN Auction, the main service in our reuse business, is a good reference. With over 50% adjusted EBITDA margin, it's a highly profitable business within the Commerce segment and a core stable revenue business for the company. On the other hand, due to changes in the external environment and intensifying competition, growth is slowing and urgent efforts to prioritize our resource deployment are required to expand growth. Next page, please. Next, the current state of the domestic reuse market where we operate our reuse business. Since its launch in 1999, Yahoo! JAPAN Auction has been a pioneer in online reuse services and has led the market growth. Since then, the domestic online reuse market has continued to expand steadily with a sustained high-single digit growth. In recent years, inflation, moderated reluctance toward reuse goods, ethical consumption and inbound demand have served as tailwinds in establishing the foundation for further growth. The competitive landscape is such that the domestic top two companies occupy the majority of the online reuse market in Japan. LINE Yahoo! exerts a lot of competitive advantage, but further growth drivers are needed. Next page, please. Next, the overview of the intermediary cross-border EC market, which is the intention behind this deal and also a focus area for our reuse business going forward. The intermediary cross-border EC market continues to grow steadily with over 30% CAGR over the past three years, which is higher than the growth rate of the domestic C2C market. In addition, continued trend of weak yen and the expansion of the global reuse market, high growth is likely to continue in the future. Currently, we have a competitive position in the intermediary cross-border EC domain and our transaction value continues to grow at double digit. Further expansion of the intermediary cross-border EC domain is an extremely important initiative in the growth strategy for our entire reuse business. Next page, please. Next, some more information on the target company, BEENOS. BEENOS's main business is cross border e-commerce, and through its main service, Buyee, the company purchases and delivers products on behalf of overseas users when they purchase goods on Yahoo! JAPAN Auction and other sites. According to the latest results for cross border e-commerce business, both sales and operating profit increased by approximately 20%, and they also enjoy a high take rate, and the most recent results show a take rate of 16%. BEENOS is the number one company by annual transaction value in the domestic intermediary cross-border EC market, and by further strengthening our partnership with this company with a proven track record, we aim to capture the growth of the intermediary cross-border EC market. Next page, please. Last but not least, I will explain the synergies we anticipate from this deal. Due to BEENOS unique strength and the growth of the intermediary cross-border EC market, we expect organic growth of 7% CAGR over the four years from FY ‘24 to FY ‘28. In addition to the organic growth, we expect post-merger synergies. On Yahoo! JAPAN Auction and Yahoo! JAPAN Flea Market, which are services for sellers, we can expect an increase in the number of items listed, but operating as one with BEENOS, the service provider for the buyers, we will aim for 18% CAGR in cross-border EC transaction value over the four years from FY ‘24 to '28. Specific measures to create synergy would involve the followings; carry out joint sales promotion for overseas buyers, offer preferential sales commission to sellers on our site, and strengthen our collaboration with LINE Taiwan and Thailand to attract more customers. In sum, the reuse market is a promising market with further room for growth, and by accelerating our efforts in the intermediary cross-border EC domain with high growth rate together with BEENOS, we hope to further grow our core stable revenue business, the reuse business. This concludes my explanation. Thank you very much for your attention.

Thank you very much.

There has been a problem in the audio for the first five minutes after the start of the session. I would like to apologize for that. Now we would like to start the Q&A session. [Operator Instructions] We will now begin the Q&A session. First, I will -- I would like to invite Ms. Munakata of Goldman Sachs Securities. Unmute and state your question.

I am Ms. Munakata. I have two questions. First is on display ad. Negative growth was the actual of the third quarter. If you break it down between Yahoo! and LINE, what would be the percentage? In your material, it mentions that Talk List is also weakening. Could you also explain the background? Is it due to the overall advertising market or unique to your company? Do you expect this to continue?

Munakata-san, thank you for your question. The product by product growth rate is not disclosed, but Ikehata-san will talk about the qualitative aspect.

This is Ikehata. Thank you for the question. As Sakaue-san mentioned, the details, I will not be able to disclose, but in the third quarter, the display ad, the factor coming from the slowness of the demand had an impact. On recurring basis, we receive revenue from cosmetics and health food. The revenue from such industry was rather slow. And last year, there were big titles in games and entertainment. We had a large revenue on the application service, but this was absent this period. Although this is one-time, it both impacted LINE and Yahoo!. The countermeasures and outlook for the future including last round or - and the round before, we communicated the measures and they remain the same. The LINE and Yahoo!, in both of these spaces, the user retention is taken by the video-based media. So we need to improve that, news smart channel, Talk List profitability is not the only area, but in response to the total change in user behavior, Yahoo! application renewal and both LINE and Yahoo! application renewal would be necessary so that we can create a service experience and media experience. On cosmetics and health food industry, another reason for the revenue decline is the impact of the advertising. We need to make it more competitive versus other media. So that is a continuous effort that we need to make. ID linkage, user ID linkage, and also integration of the advertising platform, those are measures we will continue into next fiscal year so that the data utilization platform will be strengthened and we will aim at raising the impact of advertising. In the medium term, these initiatives will continue. In the third quarter, the trend will be the same, continue -- this trend will continue. We need to raise this negative growth to flat growth towards the next fiscal year. Talk List and News being weak, on News, the sales revenue was large to begin with. So the slowdown was large. On Talk List, the product and distribution volume was increased to a certain extent. So there was weakness coming from the reaction effect.

Thank you very much. My second question on LINE renewal. I would like to raise a question on this topic. Sakaue-san mentioned that you will postpone to FY 2025. If you could talk in more detail about the content of the renewal. Given the external environment, are you reviewing the renewal or is there any delay in the development and impact to the business performance? Now you're going to do the renewal within FY 2025. So the impact will likely be felt in 2026. Is that the right understanding?

This is Idezawa. Let me reply to your question. I'm partially repeating Sakaue-san's explanation. There are two elements. One is initiative related to GenAI. LINE Yahoo! is working on developing AI agents. So that is one initiative. And on the topic of display ad, we need to maintain the profitability. So those are two points we are taking into consideration to postpone the schedule of the renewal. The impact to the business performance. Within FY 2025, we will do renewals in stages. So no major business performance impact is expected in 2025. So inclusive of upside, the contribution will start from second half of 2025 to 2026, this will have a significant impact to the users. So we are repeating tests and carefully moving forward.

Thank you very much.

Thank you for the question. Next question from SMBC Nikko, Mr. Maeda, please, unmute yourself and please ask your question.

Hi. This is Maeda from SMB Nikko. I have two questions. My first question is, are the stores matching the conclusion of the contract? Also going forward the alternative that you will be developing, what kind of aspiration do you have for the new product? And on that point, how is it going to impact the top line and how would that reduce the cost? And in the collaboration of the Commerce [indiscernible] LINE and Yahoo!, do you need a new product? So for the store match and [indiscernible], I think you are developing an alternative product. So can you give us the background to that?

So I think your question is why we are changing the store match. Mr. Hide will respond to that question.

Yes. So the store match and stores RA (ph), as an alternative, we are developing our internal platform. So for the launch, the function that was provided by ValueCommerce will be developed and that will be the phase 1. And going forward, in terms of scalability, as you pointed out, the most important thing is that the whole marketing solution platform and the ad platform used by commerce must be integrated. As Mr. Ikehata mentioned earlier, LINE ID and Yahoo! ID will be integrated so that we can offer a comprehensive marketing solution. So that's why we have the Connect One concept. And to realize this, we are going to internalize our ad platform, which will be linked to the ad platform by marketing. So that from recognition to marketing, we can offer a full panel marketing solution. So in terms of scalability going forward, it will have an impact on the profitability and the revenue of the Commerce, but from recognition to conversion, we will be able to offer a full solution for marketing and sales promotion. So we will be able to offer that as a comprehensive solution to each of our clients.

Also for the revenue, at this point, we don't expect a material change. And the cost has been disclosed by ValueCommerce. So they will be losing our business, And in terms of cost, there will be an impact from that perspective.

My second question is regarding the display ad. With Fuji TV ad revenue coming down significantly, I don't expect everything to shift to the online marketing, but for branding -- marketing, for high quality display ads, I think there will be a migration to a more reliable media. So have you seen any signs of that shift? I think the impact will be quite significant. So can you tell us any change in the trend?

Okay. So Mr. Ikehata will answer that question because that will be the demand from the sales perspective.

Yes. This is Ikehata speaking to address your question. Regarding your question, we as a company are talking to the ad agencies and also clients, and we are starting to see signs of new activities. Normally for January to March quarter, especially at the end of March, the brand companies would deploy big budget, but compared to those normal years, clearly already in February, things are moving. I cannot say for sure the incident you mentioned had triggered this, but we can see that customers and clients are moving earlier than normal to discuss about the ad opportunity and the negotiation has been completed in some cases. So compared to the normal years, I think for ad revenue, especially for the branding strategies and also the reservation type of ad, we may see a shift from the traditional media.

So with that, in Q4, the negative in the display ad may contract and this may be just a one-off, but is this impact big enough to reduce the decline in your display ad?

At this point, it's difficult to assess the magnitude of this shift, but at this point, we don't expect the impact to be big enough to offset the negative in the display ad for Q4.

Next, Sato-san from Jefferies, please unmute and state your question.

I'm Sato from Jefferies Securities. Can you hear?

Yes, we can hear.

I have one major question -- sorry, I have two questions. My first question, this time, the third quarter business results for each segment, I would like to ask you to make comment. Was it in line with your internal target or was it higher or lower than your internal target on media, e-commerce, PayPay related? My second question, towards next year and beyond, you are working on various plans. Third quarter is now over. On the medium-term plan or on your strategy, are there any comments that you can share at the moment? What you have in mind, if you can share with us some hints. So those were my two questions. Thank you.

Third quarter segment results, on Media, it was almost in line with our internal targets. For profit, we suppressed spending the cost, so several JPY100 million overshoot of the profit. That is the Media. Commerce, the situation is similar. Yahoo! shopping transaction value was quite good, but as a result on revenue and EBITDA, it were -- they were almost in line with the internal plan. For the Strategic segment, PayPay revenue and cost reduction progressed more than our anticipation. Strategic segment in terms of EBITDA, the landing was higher than our internal plan. Towards next fiscal year, currently, we are in the develop -- under development of the plans. So next time we would like to share Y-on-Y plus a single – mid-single digit and adjusted EBITDA 5% to 10% range, hopefully in the upper -- higher part of the range is our target that we are hoping to achieve. Did this answer your question?

I have one more additional question. In the fourth quarter, Media business, search or display or each segment, how much shall we anticipate? So this one; search, account, display, what would be the anticipated growth rate? If there's any change in the range in the fourth quarter compared to third quarter.

For Q4, our expectation will be the same growth as the third quarter. That is how it is progressing. The search ad, the impact of Microsoft will settle down. It has bottomed out in the third quarter already.

Understood. Thank you.

Thank you very much. Next, from Okasan Securities, Okumura-san, please unmute yourself and ask your question.

This is Okumura from Okasan Securities. Can you hear me?

Yes, we can.

Thank you. I have two questions. So not related to the results, but as a factor that could impact your future performance, the Crystal Intelligence of Open AI is the question that I want to ask you. SBG is paying the usage fee and there was a question that the group will be able to use that. What kind of impact I do expect through the group in utilizing this new tool? There's going to be some positive factors, but to SBG, would you be paying the usage fee? And if so, what is the magnitude of the usage fee? How would that impact your performance and also impact your shareholder return policy or the buffer for additional investment? That's my first question.

Yes, I will have Mr. Idezawa answer that question.

Thank you for your question. Basically for the Crystal project, this is using GenAI for the corporates. This will be a good thing for us. We would like to actually consider this. At this point, the data protection issue and the environment that is required are things that we need to work on. Also short-term, we do not expect any material impact. And also in terms of the format, as LY, there's no commitment, financial commitment. According to the usage volume, we will be paying the appropriate fee. So in that sense, the impact on the financial results for FY ‘25, we do not expect any material impact for FY ‘25. Having said that, with GenAI, the business process can become more efficient. I think the efficiency gain can be achieved. Also we will work on this project with a forward-looking attitude.

Thank you very much. As a follow-up question, may I ask that my concern is that there could be unfair conditions of this collaboration because you have the parent and the subsidiary relationship. And is this also related to the LINE app's renewal?

To SoftBank who is their parent company, we have been communicating that we will make the appropriate judgment as a listed company. So you do not need to be concerned about that. And regarding the LINE app renewal, the Crystal project is not impacting our renewal plan.

I see. Thank you very much. My second question is regarding share buyback and also M&A. This time, you updated your capital allocation policy, which is very clear. So in the remaining one year, I think you have JPY370 billion as a capital allocation buffer. Given what you are considering for M&A opportunity, what is the balance you're thinking between share buyback and M&A opportunity? That's my second question. Thank you very much.

So at this point, there are uncertainties over the progress of the M&A pipeline. So we will not be able to offer you a clear response, but as I mentioned in the presentation, we are not trying to force ourselves to fully utilize the budget by looking for M&A opportunity. This could be carried over to FY ‘26 and also consider shareholder return as a use of this capital. Thank you very much.

Thank you very much. Next from Citigroup, Tsuruo-san, please unmute and raise your question.

I'm Tsuruo from Citigroup. I have two questions. My first question is on EPS guidance and the dividend increase. How do the two relate to -- with each other? The adjusted EPS progress is good. It is above 80%, and on EPS, the upper limit, JPY19.4 or higher than that, so will you be able to aim that range? You have increased the dividend. So what is your outlook of the EPS in making that decision? In the future, are you planning to keep at JPY7 or are you going to include progressive dividend as well?

Thank you for the question. On EPS guidance, the progress of EBITDA is high. So the upper limit, well, we will likely land above the upper limit, and overall the business performance is strong. Those are the reasons to make -- for the decision of increase in dividend. In the future, are we going to increase every year? That we cannot make a promise, but JPY7 is the minimum line and we will take into account the business performance. We're not going to keep it at JPY7, but we would like to strengthen our shareholder return.

Thank you very much. The second question, this is more of a big picture question. As we -- OpenAI HAV (ph) will start, and on top of that, SoftBank Group itself is joining the AI camp by making massive investment to pump up the profit of OpenAI. And what kind of opportunity do you see, the Google search engine related opportunity or other businesses? SoftBank Group is supporting heavily OpenAI, and what is your company's view on that?

Idezawa-san will reply to that question.

There are two major points. One is for users, the service to see the GenAI utilization will be further strengthened under each service. We are promoting the introduction of AI agents for users as an entry point of -- to GenAI, the chat and search window and Yahoo! top page. This has a strong synergy. So we will further progress in introducing AI agents. That is the major policy. The second point is internal work, internal process. We talked about Crystal in various business processes. We will make updates and those updates will be a very strong one and we will be utilizing Crystal and other tools. The relationship with OpenAI for us is very beneficial. So we will continue to strengthen the relationship. There are various options for the end users. In -- until now, we have been saying we'll -- our stance is multi-vendor, but depending on the application, there are various possibilities. So that is the direction.

Another point I would like to reconfirm, OpenAI is likely to become a strong business partner. So your options will expand and risk is declining. Is that the correct perspective?

Yes, that is the correct understanding.

Thank you very much.

Thank you. The next question is from UBS Securities from Ms. Zhai, please. Please unmute yourself and ask your question.

Thank you very much. This is Zhai from UBS. I have two questions. First one is regarding the Commerce business. This fiscal year, the Hometown Tax impact was quite significant. What was the actual impact in absolute yen amount? How much did it account for the YoY GMV growth? And the reason why I ask this question is, last year, the GMV base, I think was low to start. Also Q3, initially, the YoY growth was expected to be high, and then with Yahoo! JAPAN Hometown Tax contribution, I thought that the growth could have been higher. Also I would like to ask for the company's view.

Yes. So Mr. Hide will take that question.

Yes. Regarding the impact of Yahoo! JAPAN Hometown Tax, the Q3 overall growth was 9.5% for Yahoo! JAPAN Shopping, and out of this 9.5% growth, the impact is not as big as 2%. So around 1% to 1.5% was the contribution coming from Yahoo! JAPAN Hometown Tax. And the release was conducted in mid-December. So the period was quite short. So it did have a contribution for a single month of December, but for the quarter, the impact is not that big.

Thank you very much for that answer. My second question is regarding the Strategic business. The adjusted EBITDA was much higher compared to the original guidance. Can you tell us how the revenue growth contributed and also how the cost management contributed? Which factor was greater than expected in terms of the impact to growth? And also going forward, regarding the monetization opportunities, if there are going to be new monetization opportunity, when would that be happening and what is the magnitude of the impact? So from the medium to longer-term view, can you share your thoughts on the monetization opportunities?

Yes. For the Strategic business, the impact of the revenue and cost control, both had a significant portion to the profit growth. The Tokyo municipality government had the sales campaign and also PayPay Festival was quite successful after a long time. So it contributed to the GMV growth. And for cost control from Q1, we have been revisiting the outsourcing framework and also reviewed the campaigns to make improvement. So both impacted to contribute to a better EBITDA. And going forward, regarding the new pillars of monetization that you ask, at this point, we don't have anything specific in the pipeline. So the payment and the settlement fee will be growing and also the revolving balance is building up as a recurring fee. So they will continue to generate a stable revenue.

Thank you very much. My follow-up question is regarding the outsourcing expenses, regarding the cost management on that. This is something that you started mainly from this fiscal year, and going forward, are there further room for reduction? For example, in Q1 of next fiscal year, you will have gone through one cycle. So there's not much further room for cost reduction on that point. How should I interpret this?

Well, relatively speaking, this fiscal year, we focused on reducing the outsourcing fee, and also the unit price of the outsourcing resources are higher. So we try to internalize this work and the difference of the spending impacted the profit level. So the impact is quite big for this fiscal year, but we will continue to internalize and use in-house engineers for those capabilities. So to a certain extent, we do expect a certain level of impact to be incurred next fiscal year as well.

Thank you very much. Next, Kumazawa-san from Daiwa Securities, please unmute and state your question.

Thank you very much. Can you hear me?

Yes. We can hear you.

On Page 22, the acquisition of BEENOS. BEENOS supported Mercari on the cross-border EC, and once BEENOS is part of the LY Corporation Group, will the company be able to continue to support Mercari or are they going to increase the business or decrease the business with Mercari?

Mr. Hide will reply to this question.

I'm Hide of Commerce. The TOB will be -- is yet to happen, so we have not had the concrete discussion. BEENOS is a platform and it's not just our company's product, but other merchants or other players involvement is the source of competitive advantage of BEENOS. BEENOS is a fair platform and BEENOS will continue to do business with other partners. And that's what we desire and that -- we also confirm that BEENOS's stance is also the same. And through our own effort, the products that are demanded with high demand from overseas consumers will be offered through our Auction and Yahoo! Free Market.

Thank you very much. That's it from myself.

Next question is from Nagao-san from BofA Securities. Please unmute yourself and state your question.

This is Nagao from BofA Securities. Yahoo! LINE website and Yahoo website, I think the renewal is now pushed back and postponed. And Mr. Idezawa mentioned about the GenAI as the moving piece of this concept. How about the usability and from user's perspective, how do you expect to see a big evolution by using GenAI? How AI will be equipped into different media? And how do you think about the future state of media for LINE and Yahoo! from a mid to long-term perspective? So can you give us some ideas about your product strategy?

Yes. Mr. Idezawa will take the question.

We are actually in the midst of discussing that topic to plan for the business opportunities. From users' perspective, we need to offer something that's going to be a game changer as an experience for the users. Also at the right timing, we hope to offer you more information, but we expect the user experience to change and we are planning many initiatives to achieve that.

Thank you. I have a lot of expectation for that. My second question is on Page 8 of the presentation, regarding the capital allocation. So earlier, Mr. Sakaue, the CFO, stated that you were not able to spend all of the cost. You don't need to force yourself to spend all the budget. It could be brought forward to FY ‘26. So if you are going to roll it over to FY ‘26, what would be the magnitude of that? I understand that there will be a lot of moving upwards, but what are your thoughts? Because investors, I think, were considering their investment allocation assuming that you will be fully utilizing this capital. So how should we think about the capital that will not be consumed and what will be the ratio of that?

Well, at this point, it's still difficult for us to give a clear answer. So maybe when we announce our full-year results, maybe we can offer you more updates on that question. I have to apologize for not being able to respond.

I see. So if I may, I have one follow-up question. I guess, share buyback, in order to use capital in an efficient way, is a very significant methodology. So in that sense, what are your thoughts around share buyback and also your thoughts on M&A? Is it going to change going forward? And are you going to actively consider all those options? Would you also be updating if there's going to be upside or downside vis-a-vis the business plan?

Well, we don't expect to make any changes. For M&A opportunities like the BEENOS transaction, we are looking for a category number one company, which will be able to generate synergy with our company, and I will make sure that they'll be clear the investment criteria. So that thought remains unchanged. And for share buyback, we need to consult the parent company, but basically, we understand that our ROE is low. So we would like to consider the share buyback quite strongly, and that remains unchanged too. Thank you.

Thank you very much.

Next question will be the last question, from Nomura Securities, Masuno-san. Please unmute and state your question.

I'm Masuno from Nomura Securities. I have two questions. The first is that from April 1st, PayPay bank will be under PayPay and the investment will be 75%. Within the industry, there are missing parts and fintech companies were not integrated in the past. So I think this is a good direction and PayPay Card was combined and that was a good thing. When PayPay Bank is also combined, what kind of concrete things can you do? And in the future, what kind of target are you setting? You talked about some individuals, individual aspect, but PayPay and Card and Bank, by combining these entities, what kind of things can you do? Is 75% the maximum? I'm hoping that you will raise to 100%. Can you talk about the outlook?

PayPay Bank synergy, the -- once we have concrete plan, once it is under PayPay consolidation, we can talk about more, but there are two things. PayPay Card, on the app, there is a Blue PayPay and Red PayPay, and depending on the campaign, the balance was able to be increased. On PayPay app, the opening of the bank account or loan, providing loans, if we can focus on them, we have huge potential. Another point we have already started as a deposit revolution. We have dollar deposits and yen deposits offering 2% interest rate, and in the short term, we were able to acquire accounts. And using PayPay app, the awareness is to be raised so that the PayPay bank business will grow. As a basis, it was the same for the card. The banking system, there's some legacy system, and using the insight and know-how of PayPay, the bank system itself will be modernized and the development will be faster. And those are the areas we would like to focus. The ownership percentage, we have counterparties. So for now, we are considering 75%.

My second question, share buyback. Your company, in five-year period, 70% or higher total shareholder return is being presented. So you do have a target. The amount -- rather than amount being important, whether this is attainable or not, that is questioned by the market. So when I interview SoftBank, there are different views being shared. So inside the group, including SoftBank, the share buyback is possible. That kind of explanation, I'm hoping to hear. In the future, I do note you have your policy. How are you going to execute this? When the share price is rising, then the window will be opened.

As you say, the share price level is a factor. And on shareholder return, holdings, there's an environment where they can consider in a positive manner. So we would like to communicate by monitoring the timing.

That's it. Thank you very much.

This will conclude the Q&A session. Mr. Sakaue will make a closing remark.

Yes. Apologies that we had some audio issue at the outset of this session. The business is growing, especially for top line. We know that there are expectations for top line growth. So next fiscal year onward, we will continue to focus on the revenue growth and we hope to enjoy your continuous support and also feedback from you. Thank you very much for joining us today.

This will conclude the earning call for Q3 of FY ‘24 for LY Corporation. Thank you very much for joining us today.