Earnings Transcript for 4689.T - Q3 Fiscal Year 2023

Operator: Thank you very much for participating in our Third Quarter Business Results Briefing today. Before we start, allow me to express our deepest sympathies to the victims of the Noto Peninsula earthquake that occurred on New Year’s Day. We at LY Corporation are committed to making contributions for the earliest possible recovery through various services we provide. We would also like to apologize for your concerns and inconveniences caused by the information leakage that we announced on November 27 last year, which was caused by an unauthorized access. We are currently making every effort to formulate and implement measures to prevent the recurrence. We will provide more details at a later date. We will continue to make strenuous effort to ensure that our users and business partners can use our services with greater sense of safety and security.

Ryosuke Sakaue: This is Sakaue from LY Corporation. I’d like to explain the third quarter financial results. First I’d like to explain the topics of the financial results for the third quarter of fiscal 2023. Adjusted EBITDA for the third quarter was JPY109.8 billion, which was plus 17.4% year-on-year and we revised upward our full year guidance for adjusted EBITDA. Revenue also reached JPY475 billion, a record high for the third quarter consolidated results. Total advertising revenue grew 3.7% Y-o-Y due to recovery in display advertising. Domestic merchandise transaction value turned to positive growth due to an improvement in shopping transaction volume. For strategic business, thanks to improved profitability from selective focus and business growth. Adjusted EBITDA remained positive and full year profitability is expected. Some additional topics. LYP premium got off to a good start from November 29 with daily new memberships more than doubling from the Yahoo! Premium days. New AI-driven services for ad creatives and delivery are planned to launch in April 2024. We will aim to utilize new technologies to grow and add revenue. Adjusted EPS is recovering at a faster-than-expected pace due to the effects of selective focus in key business areas, cost optimization and onetime factors. I will now explain according to this agenda. Next, please. First, the consolidated business results for the entire group. Revenue increased mainly driven by growth in account and PayPay, ZOZO and ASKUL. Adjusted EBITDA increased by double digits in the third quarter due to cost optimization and the effect of selective focus. As a result, adjusted EBITDA margin was 23.1%, maintaining the same level as the first half. Next. This shows factors behind the change in adjusted EBITDA. Gross profit improved mainly in the media business and SG&A expenses improved mainly in business commissions. Next. Factors behind change in operating income, excluding the remeasurement gain from the consolidation of PayPay that took place last year. depreciations, but adjusted EBITDA grew and operating income grew by 33% year-on-year. Next. This shows the factors behind the change in adjusted net income. Corporate income tax grew but increase in operating income and improvement in equity in earnings of affiliates as well as the absence of the impairment loss on the Demae-can from the previous year, resulted in a significant increase in adjusted net income. This slide shows the adjusted EPS trend due to growth in adjusted EBITDA and also onetime tax effect from the merger, adjusted EPS is recovering faster than expected. Taking into account the capital allocation policy explained in the second quarter, we will continue our efforts to bring adjusted EPS back to the pre-merger level as soon as possible. Next. Efforts to utilize AI. In order to improve the efficiency of our development work last October, we introduced GitHub copilot. Since its introduction, we have seen a reduction in closing time and improvements in development work indicators. In the area of search advertising, we plan to launch an automatic creative generation function in April of this year. This is expected to improve the efficiency and effectiveness of ad operations. In display advertising, we are enhancing the automatic targeting function, which was launched in April last year for LINE Ads and is scheduled to be launched in March this year for Yahoo!. This is our consolidated full year guidance for fiscal ‘23. As a result of steady progress in selective focus, we have revised adjusted EBITDA upward to JPY390 billion. Adjusted EBITDA for each segment has been accordingly revised. Revenue was revised downward to JPY1.82 trillion as a result of selective focus and cost optimization. In addition, after the merger, the allocation of company-wide cost has been revised from the third quarter. Personnel costs and data center and internal infrastructure costs that had been recorded as adjustments were allocated to each segment and retroactively adjusted to fiscal 2022. That’s shown in this table. Next, I’d like to explain our business results and topics by segment. First, the media business performance. Advertising saw continued gradual improvement from the second quarter, resulting in higher revenue and income. In particular, account advertising led the increase in income and improved margins with adjusted EBITDA margin reaching 39.1%. As explained in the guidance slide from the third quarter, we have reviewed the allocation of company-wide cost and made retroactive adjustments to the first quarter of fiscal ‘22. Other segments have also been retroactively adjusted in a similar manner. In the third quarter, several services were transferred from other segments to media. The main one is the member services business, which was transferred from commerce to the media segment. This is the entire group total advertising revenue. Search Ads growth turned negative, but display has turned positive in the third quarter as advertising market conditions gradually improved. Account has grew by more than 20% year-on-year for the second consecutive quarter. Shopping-related adds, which had been declining due to cost optimization in the commerce business started to pick up. As a result, the overall growth rate, including shopping-related ads continue to improve moderately. Next page, please. Next is the breakdown of search advertising revenue. As explained in the previous quarter, about 80% to 85% of our search advertising revenue are from LY Corporation’s website. Revenues from our search ads displayed in our partner sites are shown as the partner’s website. The highly profitable LY Corporation’s website saw an increase in revenue in the third quarter as well, thanks to the effects of UI/UX improvement. Next page, please. Let me explain account linkage and LYP premium. A number of linked accounts grew steadily, reaching 23.22 million at the end of January. A number of daily LIP premium new membership has more than doubled since the launch of the service on November 29, last year compared to Yahoo! Japan premium. We will continue to implement campaigns and mass marketing to attract and acquire new restaurants. Next page. This is account advertising. The number of paid accounts continue to increase as a result of pricing revisions last June. As a functional enhancement or improvement measures to link with the group services were implemented last December. We reinforced features to enable users to trend line official accounts from Yahoo! Japan Maps and Yahoo! Japan search to propel referrals. We also expanded a feature, which enables one-stop setting for managing multiple accounts last year in November. We believe that these functions will enable companies and stores to reduce operational costs and further promote the acquisition and use of accounts. We will continue to enhance functions and improve operational efficiency to steadily grow the line official accounts. Next page. This page shows the performance of the commerce business. Revenue and income grew by 2.7% year-on-year, mainly due to an improvement in domestic merchandise transaction value, including ZOZO and ASKUL. Adjusted EBITDA also grew by 6.1% year-on-year for the same reasons costs, e-commerce transaction value. The year-on-year growth rate of domestic merchandise transaction value, which has been negative since the fourth quarter of fiscal year ‘22 due to the reduction of sales promotion expenses returned to positive in the third quarter, up 1.7% year-on-year. The overall growth rate of domestic merchandise was 0.1% year-on-year, maintaining positive growth. Next page. Next is the overview of domestic e-commerce transaction value. Domestic shopping transaction value continued to recover, returning to a near flat level year-on-year. Domestic Services transaction values slowed down due to the absence of the previous year’s nationwide travel incentive program resulted in a year-on-year decline of 7.4%. This is a strategic business performance. Revenue achieved growth of 17.5% year-on-year, mainly due to growth in PayPay and PayPay card. Adjusted EBITDA increased steadily due to progress in reducing and reviewing loss-making businesses by consolidating this duplicate while selectively focusing on key business areas as well as growth and efficiency improvements in continuing businesses, including PayPay. This is a business overview of PayPay. In the third quarter, a number of registered users consolidated GMV and consolidated revenue grew by more than double digits year-on-year, and the business is steadily expanding. Consolidated EBITDA was also positive in the third quarter. In addition to an increase in the number of registered users, MTU and the number of settlements also grew by double digits year-on-year and the business continues to grow while improving profitability. This slide shows the key KPIs of baby card due to synergies with PayPay, the number of active card holders continued to grow by double digits and transaction volume grew strongly by 28.1% year-on-year. The revolving balance also grew steadily, expanding sharply to 45.5% year-on-year. Next page. This is major the KPIs of PayPay Bank, Prep Bank also enjoys synergies with tape, which results in the growth in major KPIs. The number of accounts has maintained double-digit growth due to acquisition via PayPay mini apps. Loan balance grew strongly by 32.1% year-on-year due to the promotion campaigns of housing loans and business loans. Next page. This concludes my presentation. Thank you very much.

Operator: We will now have questions and answer session. JPMorgan Securities. Mori-san, please un-mute and ask your question.

Haruka Mori: Mori from JPMorgan. Thank you for the explanation. Two questions. First about the LYP premium. So you have disclosed end of December membership, number of members, almost no change from the previous quarter is what it seems. And you said that double new sign-ups. So how – what’s your expectation about the number of members here? And for example, end of March, what’s the number you have in mind? And next term, after promoting for a full year and I expect you to do that kind of promotion, what’s the potential for you to acquire membership? Is it like a JPY30 million you are aiming for or even higher. And I think it’s a synergy that – it’s a service that leads to various synergies. So what is the current situation and what’s your expectation going forward? That’s my first question. May I continue with the second?

Takeshi Idezawa: Yes, ask both questions together, please.

Haruka Mori: Second question, next fiscal year, your investment policy what’s your current thinking as of now? This term from the second half of last time, you have subdued hiring and you had various cost-cutting measures. And this year’s guidance resulted in high profit growth. Now next term onwards, are you going to increase investment? And that’s my expectation. So LYP premium, and there is also PayPay, LINE linkage. And so what is the policy of investment you have in mind? If possible, like you want to maintain 10% profit growth with various investments that kind of target, if you have an increased share?

Takeshi Idezawa: Thank you. So first about the LYP premium. Second is next term’s investment policy. So Sakaue will answer both questions.

Ryosuke Sakaue: LYP premium. As of end of March, well, from 1 year, we want to get it back to the year ago level. So for 23 by the end of third quarter, it was declining from Q1 to Q3. But with this new membership system and its new perks by end of March, we want to bring it flat. And then next term onwards, we want to have actual increase. In terms of target numbers, we do have some internal numbers. They are not to be disclosed. And – but we think that we can increase further. So several million members, we think we can increase. So we do want to add that to the membership numbers. That’s the first question. About the investment for next fiscal year, we are putting together a budget now and there is a vigorous debate going on internally. So the – well, in May, we plan to announce the business results for the full year and the actual numbers we would like to disclose at that time. But the big framework is that in this fiscal year, we have reduced the fixed cost to various measures. So we have become more muscular and more profitable. So we want to maintain that posture for the fixed cost, and we will continue on next fiscal year. On the other hand though, measures that lead to top line growth sales promotions for top line growth. That is what we’re discussing. So for those where we can get good profitability, we would like to make solid investments. So second point, I’m not able to give you a concrete answer, but those are my answers.

Haruka Mori: So for the second question, if I may follow-up, just one point, as of now, next fiscal year, what will be the biggest profit driver? What item?

Ryosuke Sakaue: Yes. Well, one is the strategic segment, PayPay to be specific. So for profit growth I think that will be the major driver. In addition to that, account adds and the e-commerce overall in Q3 hit bottom and gradually, it’s coming back. So those are the areas combined together shall be the profit increase drivers. Thank you very much.

Operator: Thank you very much. Moving on. From SMBC, Mr. Maeda, please un-mute and ask your question.

Eiji Maeda: Thank you. I am Maeda. I am from SMBC Nikko Securities. I have two questions. First is about revenue. You reduced the projection for the revenue. Could you tell us a bit about the background here? And for each segment, if you take a look at it for the advertisement, it is about the same as the regional plan. But in the case of commerce, it is declining. And also for the strategic business for which the revenue is not disclosed, could you tell us a bit about how it is changing and also, you talked about the selective focus on the areas. So business has been a decline. And could you tell us a bit about the reason here is directly to the low promotion. So – and for each segment, could you tell us a bit about the fourth quarter and maybe focusing on the direction of each business? This is my first question. My second question is about PayPay business. Promotion costs will be utilized and the certain area, EBITDA will be reduced or maybe it goes down to the deficit. That’s something I have been in mind. But still the third quarter was good. And then starting the fourth quarter onwards. Could you tell us how this will there? And also in the next year, next term, do you think you will be able to maintain the positive growth or the profit?

Takeshi Idezawa: Thank you for your question. The first question is about the – about the background of the revision of the revenue and also the fourth quarter production? And then the second question is about PayPay. Thank you for your questions. Sakaue, will answer both your questions.

Ryosuke Sakaue: About the revision of the revenues. There are two major reasons for that, for the commerce segment and also for the strategic businesses. We reduced the projected revenue from the beginning of the term. There are different reasons for that. For the commerce segment, we – there about – we have more stringent the investment principles. So we make sure that we will be able to have good gains out of this investment. So we try to be stringent and they have a better – have higher discipline. That’s the reason why in the commerce area, we had negative impact. And also for the e-commerce initially, we saw that we were more proactive in the – looking into the future. So we were more bullish here. For the strategic business, we try to work on the selective selection – selective focus on this but from the – after a while, we saw some big reduction. So – and also for the PayPay for the promotion, we have been more selective in the discipline, and also we had some more discipline for the investment. That’s always why we have seen the decline. So for the commerce and also strategic business, there has been a decline. That’s the background. For the fourth quarter direction, I’d like to explain to you one by one. For Media business, ultimately, as can be seen in the guidelines, that will be the lower part of the lower of the single digit. That will be the final figure. And then for the account adds, perhaps that will be around 15% to 20% plus, so that we will continue to be like this in the fourth quarter. In the display ads, we are seeing the recovery of the market. So before the display market, we do believe that in Q4, we will have this kind of a trend of recovery as in the case of Q3.

[25: 03][indiscernible]

Operator: Thank you. Goldman Sachs, Munakata-san. Please un-mute.

Minami Munakata: Munakata from Goldman Sachs Securities. Thanks for this opportunity to ask the question. I want to also ask two questions. First question. Looking back third quarter about the momentum of the media business. What I want to ask about, quarter-on-quarter, the revenue is coming back it seems. So how do you look at the market condition in Q3? That’s what I’d like to ask about especially the display ad recovery trend. Is it market environment driven? Is that the main factor? Or do you see some good strong signs internally? That’s the first question. Second question, about shopping, the search-related ads you talked about that in the previous meeting. And I think that started in November. What’s the current situation? How are you seeing it, Naver and other browsers. It’s a product that these sales. So personally, I have a lot of expectation for that. So what’s your expectation for the next year as well, the shopping search ads?

Takeshi Idezawa: So first question. Q3 media ad momentum, Ikehata will answer. And then shopping growth – shopping search ads, like to answer later to say that is.

Yuki Ikehata: Ikehata here. The first point, let me answer the question. Third quarter, the ad market as a whole. Well, digital advertising market environment was that the market deterioration has hit the bottom. So very gradually, we’re starting to see the trend of recovery and that is continuing, it seems. Especially for third quarter, especially in December, the advertiser, it’s a time when they are able to spend their budget. Generally speaking, when – so recovery up to before the deterioration of market that hasn’t been seen. But compared to the worst times, the advertisers’ propensity to spend is higher, and we have been able to capture such spending. So gradual recovery is what we expect. So the impact of the ad market environment, is that only reason for the recovery in display ads in third quarter? The answer is no. In addition to the market environment recovery, two major points

Minami Munakata: Thank you very much.

Operator: Thank you. Moving on. From Citigroup Securities, Tsuruo-san. Tsuruo-san, please un-mute and raise your question.

Mitsunobu Tsuruo: Thank you, can you hear me alright? My name is Tsuruo.

Takeshi Idezawa: Yes. We can hear you.

Mitsunobu Tsuruo: I have two questions. One is on Page 8 on the right-hand side. In 3 years or 4 years, EPS is JPY18.7, we will realize. But looking at the progress at this point, on the third quarter, it is JPY17.4, if it is the adjusted EBITDA – EPS. So on the third quarter, the – do you foresee any negative factors? And also for the full year, you have revised upward fee production. So maybe the – you might be able to accelerate this process not in 3 years down the road, but maybe earlier. And then on Page 9, utilizing AI for the search ads, you have – you will have the automated generation of creative. So you have the – your dedicated AI ChatGPT could be used. The Google search engines could be used – could be continued to be used. So there have been some discussions here. So you can have the dedicated proprietary AI. Could you tell us about it. And also about the selection of the search engines that you are thinking of working on. So I’m sure – I’m sorry, I have to ask you many more questions here. Thank you.

Takeshi Idezawa: The first question was about EPS. And the second is the search AI and also search engines. So I’d like to answer these two questions from myself. About the EPS for this year, there has been the guidance revision for Q4. So the JPY18.7. The – may be realized here as on an accelerated basis. We’re not able to deny that, and I don’t deny that. And then also about the integration, there has been the tax effect in the several yen has been saved in terms of cash. So that has been the background with which we were able to report that figure. So we’d like to continue working on the realization of JPY18.7. So that’s the first and foremost we have to work on. Starting next year – next term, we will have further goals. Now we will work on the budgeting and also the revenue guidance. So we will announce that in March – or excuse me, May so we will decide and announce to you the final figures for that. And then about the search engines. About the AI. This AI part is related to technology. So this is – this cannot be disclosed. And also with regards to the contract with the google, this will be valid until the end of the fiscal year 2025, which is March 25. So at this point, we are still discussing within this company. Needless to say, when we use the term the search engines, we have chatGPT kind of AI. So maybe we – there is a major trend to combine the search engines with the AI. So we try to be cautious in making decision looking into all the possibilities. This is a major decision that we will make. So we would like to make sure that we will report to you when we draw some conclusion here. So at this point, we do have the contact with Google. So we’d like to continue doing what we have now. And also at the same time, we look into the utilization of generative AI so that we will be able to understand what we have to do in the – down the road. Thank you.

Mitsunobu Tsuruo: Thank you, very much. Just one more thing. The tax effect was there. We – and for the EBITDA, the revision – upward revision was there. And so that means that we have the accelerated pace of the realization of the goals. So in the next 3 to 4 years, we will attain JPY18.7. So the last term, we said that we will do that in 3 to 4 years. But now the things are changing. Maybe that will be 3 years, not 4 years. So JPY18.7, might be able to be attained at an earlier stage. Could you tell us a bit about it. Thank you, very much.

Takeshi Idezawa: So when we say 3 years or 4 years about this, yes, thank you for your comment. So we would like to put that into the next year’s – next term’s projection. So when we are able to attain the goal of JPY18.7 on a stable basis, we would like to make a comment at that time. Thank you, very much.

Mitsunobu Tsuruo: Thank you, very much, that’s all for me.

Operator: Thank you. Next, [indiscernible] Asset Management, [indiscernible], please.

Unidentified Analyst: [indiscernible] here. Thank you for this opportunity. Let me ask the question. In Q2, you talked about the capital allocation policy. What’s your latest on that about the buying your own shares, you have this capital buffer. So this is after you earn operating income. And so what is your idea about the equity? And as was asked, I think you are seeing strong response and I would hope to see there is acceleration in this. The background to this is what – do you have the plan to maintain listing and you’re going to extend the time limit? And so I think you have some time in SBKK, your covers exploration talked about this and enables interview article on the website. The need for sales, is that being recognized? I really want to know about that, please.

Takeshi Idezawa: So that’s one question about capital allocation. So Sakaue will respond.

Ryosuke Sakaue: So no change from what we announced. So that was for 3-year cumulative. So for the capital buffer, JPY500 billion. So it’s not that operating capital has accumulated, but compared with others, if there is this thing that seems attractive, then flexibly, we want to use that capital. And in terms of shareholders’ comments, it’s difficult for me to comment. But in terms of response from my holdings, we have a communication. And in terms of achieving listing requirements, we will seek cooperation. And at a certain timing, we will discuss how to do this, and we will make decisions accordingly. And if there is anything that we should disclose, we will make sure to do that quickly.

Unidentified Analyst: Thank you.

Operator: Thank you, very much. Next, Masuno-san from Nomura Securities. Please un-mute and raise your question.

Daisaku Masuno: Masuno from Nomura. I have two questions. First is about strategy and the second strategic business and next e-commerce. And the cost business is doing well. What worked well? My first question. And then in the case of banks, there has not been a sharp rise of the number of accounts, number of members. Could you tell us about the kind of measures that you are planning to make, if any? So do you think you will do something? Or maybe you could work on the structural reforms starting Q4. Or are there any structural reforms that you are planning to do for the strategic business for the commerce business for 4Q, food shopping, EMB, you see close to the double digit, which is stronger than I expected. And LYP is not growing rapidly. Could you tell us how you are able to do this for LYP premium will have further growth for the next term. So could you tell us a bit more about the Commerce business.

Takeshi Idezawa: Thank you. First is about the strategic segment, Sakaue will answer. And the second is about the shopping related business. So I’d like to explain. For the strategic segment, the cardholder, the acquisition has been doing well. And therefore, we have the PayPay credit, we had Paypay Atobarai, which was the previous term. So, it’s the PayPay app, we have been strongly pushing this sale. And also Gold Card has been introduced. So, these are the driving factors for that. And with that, we are able to see the growth in the value and also in terms of the number of the cardholders for the PayPay card. And for the banks, and certainly, we try to think of the overall picture, incorporating both PayPay and PayPay Card, the bank. And then there is no further strong efforts made for that. So, we have not done anything drastic. PayPay Bank should be good in terms of usability. We have to enhance the service quality. And then after that, we have to work on some new measures to increase the acquisition of the number of users. So, as in the case of card and the banks, we have to say that banks are lagging behind. That means that we have room for improvement. That’s how we are looking at PayPay Bank. And then about the strategic segment about the structural reforms, from now on, we don’t have anything in mind at this moment. So, we have been working on the strategic segments. We try to make sure that we will see the growth in the certain businesses that are classified as a strategic segment. Hide-san will answer the second question.

Makoto Hide: Well, the Shopping GMV, allow me to make some additional comments, fourth quarter. Fourth quarter, GMV will be the higher – high-single digit to double digit. The most important is the cost optimization. 2 years ago in November and December, we started out this kind of initiative, and this has fed through. And so that means that the cost, the standard has been lowered. And then in the last 1 year, the YoY had been doing well. So, that’s the reason why we have seen the increase of this. So, we have organic growth for that. And then in the case of premium, as you just mentioned, we will see the increase of the number of members in the years to come. So, this is not only – not necessarily for quarter four, but rather that will be something we will have on the ‘24 year – fiscal year ‘24. And about next year, we are in the process of discussion, so we would like to report to you on the next briefing. Thank you. That was the supplemental remark. About next year, you said that the impact had fed through. So, this is for several quarters. And then if you see the increase of the premium then compared with Q4, we are not able to see the – I am not able to see – foresee any situation where the – it is lower than the Q4. Certainly, there could be some effect for Q4 and then that means that this will be effective for quarter three next year. And then on top of that, we have strategic initiatives. So, we will have further discussions to come up with the direction for next year. Thank you very much.

Operator: Matthew, CLSA. Mr. Oliver Matthew, please un-mute and ask your question.

Oliver Matthew: Hello. Thank you for the presentation. I have two questions. The first question on commerce, could you comment what you think is the overall e-commerce growth in Japan for the market? And how you see your own strategy compared to that? It still seems to me you have too many platforms. So, I wanted to understand how you think about your e-commerce business on the high-level strategic. My second question, I think you are planning to revamp the LINE app. I expect you have been working on this in the few months since the last analyst meeting. Could you tell us what is the most exciting, say, one or two points for that LINE revamp that’s going to come along? Thank you.

Takeshi Idezawa: Thank you for the first question. Hide will answer.

Makoto Hide: So, commerce market, Japanese e-commerce market, what sort of view about that and what would be our positioning in that market. That was a question, I believe. And so the e-commerce market in Japan as a whole, fiscal ‘23 there was – well, the impact of COVID disappeared. And so it was supposed to COVID in fiscal ‘23. So e-commerce, well, it grew substantially during COVID as a market. So, the market growth as a whole in fiscal ‘23 has decelerated a bit. That’s our understanding for the market growth. The official growth numbers, we need to wait, but our sense is single digit – middle-single digit of around 5% growth. Market growth total is what we think happened. And we have been working on more efficient cost. So, compared with the market growth, I think for fiscal ‘23, we are a little bit lower, but as we responded earlier, that’s run its course. So, next fiscal year, we are aiming for growth that exceeds the market growth. That’s my answer.

Takeshi Idezawa: So, the second question, Sakaue will comment. And then Kataoka, in charge of Media will also make a comment.

Ryosuke Sakaue: About the renewal of the LINE application, we think two major things. First, shopping tab is going to be created. So, many users of LINE will be provided shopping experience. It’s sort of like a portal to shopping. And so we talked about e-commerce earlier. So, we hope to invite the users to experience shopping. So, that’s a big challenge, but we want to do that. So, messenger app and the gift, there is good affinity, we see that in LINE GIFT. And the Kakao Gift also successful in Korea. So, we want to further introduce this. So, we want to try to let the users to shopping more broadly. So – and then there is the portable. So, Kataoka Meida will explain about the second new function.

Hiroshi Kataoka: Kataoka here. So, as was mentioned, LINE app, well, it has one of the largest user base in Japan and so it’s been used by a huge number of people for communication. We want to expand the usage further. And as Sakaue said, commerce is one thing, then the portal is the other. So, usage of news and also create other reasons for people to come or use like search. There is a lot of potential for usage and the monetization from search. And so we will do portal as well. And so we will try to expand usage. So, that’s what we are considering internally.

Oliver Matthew: Thank you. Could I just ask you a follow-up on LINE Shopping. I think you had – you tried e-commerce before, and it didn’t work very well. So, what’s different? What have you learned? And why do you think this time will succeed?

Takeshi Idezawa: I like to respond to that. So, fundamentally LY is promoting commerce and the direction is different from when we were just Yahoo!, now we have a bigger reach by coming together with LINE. I think that is the difference from before. And one of the initiatives is LINE Shopping tab, and also, we want high-quality members, LYP Premium member initiative is what we are doing. So, the reach is bigger. And we have people who will become members who come through LINE and we can drive that movement further. So, with that, as our pillar, we would like to further vitalize the customer base. In addition to that, the next fiscal year onwards, LINE and PayPay collaboration will start. And so within LINE, we will have more PayPay users. And so if you become a PayPay user, you have PayPay points from Yahoo! Shopping and LINE service. So, reach of LINE and PayPay point and more users those three. So, we will like to use our assets more effectively. And so we think that we can make this initiative more bigger, broader one than before. That’s my answer.

Oliver Matthew: Got it. Thank you.

Operator: [Operator Instructions] Mr. Okamura of [indiscernible], please un-mute.

Unidentified Analyst: Thank you very much. I am from [indiscernible] Okamura. You have been talking about ABS for mid-term, the goals of ABS. And the progress is very high. So, we intend to believe that you are able to accelerate the achievement of that. So, the answer is that you try to achieve on a continuous basis or on a sustainable basis. Could you tell us a bit about how – what do you mean by the sustainable basis? I am sorry, this is a very basic question.

Ryosuke Sakaue: Thank you. I am Sakaue. I am sorry, I use the complicated term. When I say on the sustainable work, sustainable term, I am talking about something that could continue. So, this is not about one-off things, but rather, we would like to realize something that can continue. So, that’s something I – we have in mind. And also when I say JPY18.7, we could achieve JPY18.7 per 1 year and then we could drop to the lower figure. So, we don’t want that. So, we would like to continue attaining JPY18.7 after we reach it for a long time.

Unidentified Analyst: I understand that. Thank you. So, in thinking about this goal, the EPS, as you know, is done by the earnings and the per share figures. So, in what way, you are able to have good growth for the PO? And then also, you have to pay attention to the number of shares. In the case of your company, LY Corporation, I am sure you have the limitation of the holding of the shares. So, in terms of PO, in terms of businesses, in what – the most important will be how you are able to raise the level on your actual operation rather than the number of stocks.

Ryosuke Sakaue: Yes, the PO growth is important. That’s the most important factor. And in terms of the increase of the shares, we cannot deny that we do not do that. However, the most important is to increase the level of revenue, so in the profit. So, we have parent company, and so we ourselves would not be able to have the entire control. So, the PO, the improvement of the PO is the most important factor.

Unidentified Analyst: Thank you very much.

Operator: Thank you. It is the scheduled time to close. So, this will be the last question. On [indiscernible] please un-mute and ask your question.

Unidentified Analyst: Can you hear?

Takeshi Idezawa: We hear you.

Unidentified Analyst: Page 10 of the presentation material, so this time, adjusted EBITDA, so this adjustment at the bottom, that was the biggest factor. So, adjustments allocation, I want to know for each segment, how did you allocate those costs?

Takeshi Idezawa: So, our allocation for the adjustments, let me respond to that question. So, Media segment, about JPY52 billion has been allocated based on the allocation rule change. So, that will be minus JPY52 billion impact to profit. For Commerce segment, minus JPY12 billion, so that – so the cost was moved to the commerce side. And then for Strategic segment, that was plus JPY12 billion. So, the Strategic segment because it has many subsidiaries in this segment, so allocation was actually reduced. So all-in-all, JPY52 billion was allocated to each of the segments based on the change in the allocation rules.

Unidentified Analyst: I see. Thank you. Second question, adjusted EBITDA, looking at this from the outside, it’s become more difficult to understand. It’s adjusted or modified each term, so next term onwards I want to see you use an indicator that’s closer to the real EBITDA, is that possible?

Takeshi Idezawa: We hear you and we take that opinion and we would like to consider it. Thank you for your suggestion.

Unidentified Analyst: Thank you.

Ryosuke Sakaue: Thank you very much for your time to be busy schedules for this past one hour. And we try to be secure as was mentioned by the President. And then for the next year, we would like to create something new, something that can make you say, wow. So, this is a very important day next year. So, we would like to make sure that all of us will do our best effort. And in this regard, we would like to ask for your continued support. Thank you.