Earnings call transcript: LY Corp Q2 2025 reveals strong revenue growth

LY Corporation’s Q2 2025 earnings call highlighted a robust financial performance, with consolidated revenue reaching 505.7 billion yen, a 9.4% increase year-over-year. The company also reported a significant rise in adjusted EBITDA, reflecting solid profit growth and strategic business performance driven by PayPay consolidation. The market reacted positively, with LY Corp’s stock price surging by 48.08% to 663.4 yen, nearing its 52-week high of 688.3 yen.

Key Takeaways

• LY Corp reported a 9.4% increase in consolidated revenue year-over-year.
• Adjusted EBITDA grew by 11.3%, indicating strong profit growth.
• The company’s stock price surged by 48.08% following the earnings announcement.
• AI initiatives and LINE app revamp are central to future growth strategies.
• The company aims to double Official Accounts revenue and achieve a 40% adjusted EBITDA margin.

Company Performance

LY Corporation demonstrated robust performance in Q2 2025, with a focus on efficiency improvements and strategic business initiatives. The integration of PayPay significantly contributed to the company’s profit growth. Despite challenges in search advertising, the company’s commerce segment showed resilience, highlighted by a 13.1% increase in domestic shopping transaction value and a 15.7% growth in the reuse segment.

Financial Highlights

• Revenue: 505.7 billion yen, up 9.4% year-over-year
• Adjusted EBITDA: 125.4 billion yen, up 11.3% year-over-year
• Domestic shopping transaction value: +13.1% year-over-year
• Reuse segment growth: +15.7% year-over-year

Outlook & Guidance

LY Corp is focused on expanding its AI and platform strategy, aiming for seamless service integration and enhanced user experience. The company plans to double its Official Accounts revenue from 140 billion yen to 280 billion yen and targets a 40% adjusted EBITDA margin. Future growth will be driven by AI agent development and the expansion of its Mini Apps platform.

Executive Commentary

"We will continuously grow by changing our business structure," stated Takeshi Idezawa, President and CEO. He emphasized the rapidly changing environment surrounding AI and the company’s strategic focus on leveraging its numerous user touchpoints, despite not having its own large language model (LLM).

Risks and Challenges

• Decline in search advertising due to client budget reductions.
• Weak performance in e-commerce and vertical companies.
• Minimal impact of generative AI, currently affecting only 10% of queries.
• Potential challenges in achieving resource reallocation and cost reduction targets.

Q&A

During the Q&A session, analysts focused on the challenges in search advertising and the monetization strategy for Mini Apps. The development of the LINE Shopping Tab and differentiation strategies for AI agents were also discussed, highlighting the company’s commitment to innovation and strategic growth.

Full transcript - LY Corp (4689) Q2 2026:

Unidentified Moderator, Conference Moderator, LY Corporation: Now. Begin the LY Corporation Financial Results Briefing for the second quarter of fiscal year 2025. Thank you very much for joining us today. We will be referring to the financial results presentation available on the LY Corporation website during today’s session. We kindly ask you to follow along with the material. Joining us today from LY Corporation are Mr. Takeshi Idezawa, President and CEO. Mr. Ryosuke Sakaue, Executive Corporate Officer, CFO. Mr. Yuki Ikehata, Executive Corporate Officer, Corporate Business Domain Lead. Mr. Makoto Hide, Executive Corporate Officer, Commerce Domain Lead. Mr. Hiroshi Kataoka, Executive Corporate Officer, Media and Search Domain Lead. First, Mr. Idezawa will provide an overview of our financial results for the second quarter of fiscal year 2025. Following his presentation, we will hold a Q&A session. The entire briefing is scheduled to take approximately one hour. We will be live streaming this session.

If there is any distortion or inconvenience in the video or audio, please try an alternate server link. This is Idezawa of LY Corporation. First, before explaining our financial results, I would like to comment on the system failure caused by a ransomware attack that occurred at our group company, ASCO Corporation, on October 19, and the partial leakage of information held by the company. We sincerely apologize for the significant concern and inconvenience caused to our customers who use our services, as well as to our business partners. The details regarding the damage, potential information leakage, and recovery status have already been communicated by ASCO. The company is continuing to work closely with external experts, prioritizing a safe and prompt restoration of systems while investigating the cause and confirming the scope of impact, including any personal data. LY Corporation is fully cooperating with all recovery and investigation efforts.

As the parent company, we take this matter seriously and are committed to restoring the situation and preventing recurrence, and strengthen the information security framework across the entire group. Now, let me explain our second quarter financial results. Please turn to the next page. First, here is an overview of the second quarter results. Consolidated revenue was JPY 505.7 billion, up 9.4% YoY. Consolidated adjusted EBITDA grew 11.3% YoY to JPY 125.4 billion, showing solid profit growth. Additionally, progress in AI agentization and the expansion of LINE Official Accounts and mini apps are progressing smoothly. Preparations for the LINE renewal are also steadily progressing. Home tab refresh scheduled within the year. We will now proceed with the explanations in the order of the agenda you see here. First, the consolidated company-wide results. Next page, please. These are the results for the second quarter.

Although consolidated revenue was slightly behind the guidance due to the decline in search advertising revenue, adjusted EBITDA and EPS are on track with the guidance. Next page, please. These are the consolidated performance trends. Driven by the growth of PayPay consolidated and progress in efficiency improvements at LY Corporation, adjusted EBITDA grew 11.3% YoY, achieving double-digit profit growth. The margin also improved year-on-year. Next page, please. These are factors of change in consolidated adjusted EBITDA. Although expenses increased, revenue growth in the strategic business and commerce business outpaced the expense increase, resulting in a year-on-year increase of JPY 11.7 billion in adjusted EBITDA. Binos and Line Bank Taiwan have been fully consolidated since the second quarter, with the two companies contributing JPY 900 million to adjusted EBITDA. Next page, please. This is consolidated total advertising-related revenue.

This quarter, commerce advertising achieved double-digit growth driven by increased transaction value, and the total ad revenue grew by 2.4%. Next page, please. This is consolidated e-commerce transaction value. Domestic shopping transaction value grew 13.1% year-over-year, supported by last-minute demand ahead of the discontinuation for awarding points for Hometown Tax Donation Program. Reuse saw year-on-year growth of 15.7%, driven by Yahoo Flea Market growth and Binos’ contribution. Next page, please. Regarding the upward revision of the dividend forecast, we conducted share repurchase during the first half of the current fiscal year, and the cancellation of these shares was completed on September 3. Consequently, as the number of shares eligible for dividends has decreased, the annual dividend has been revised upward from JPY 7 to JPY 7.3. Next page, please. This is on progress on the LINE App revamp.

The renewals of the talk, shopping, and wallet tabs have been rolled out in phases since September. Home tab renewal is scheduled to make a test release this year. Next page, please. This is on optimization of management resources. Firstly, on human resources. We are reallocating to growth areas such as AI agents, which will be explained later, official accounts, and mini apps. We will reallocate our human resources so that by FY 2028, 50% will be allocated to growth areas. We will reduce the fixed cost by JPY 15 billion by the end of fiscal year by 2026 and build a leaner financial structure. Next page, please. From here, I will explain the financial results by segment. Next page, please. First, the media business. Although both revenue and adjusted EBITDA declined, continuous cost-saving efforts are yielding results leading to improvement of adjusted EBITDA margin on a quarter-on-quarter basis.

This is performance analysis of the media business. While search advertising revenue contracted, growth in account advertising drove an increase in total advertising revenue. Next page, please. Account advertising continues to perform strongly in both the number of paid LINE Official Accounts and pay-as-you-go revenue. As this is an area we are strengthening alongside mini apps, we will provide a more detailed explanation of future strategies and initiatives later. Next page, please. Next, the performance trends for the commerce business. Second quarter revenue reached JPY 216.6 billion, a year-on-year increase of 7.2%. Adjusted EBITDA was JPY 33.3 billion, although profit declined due to increased promotional expenses. Related to the Hometown Tax Donation Program, the decline narrowed compared to the previous quarter. Next page, please. Performance analysis of the commerce business. The business as a whole is expanding steadily.

In addition to the full consolidation of Binos, Yahoo Shopping and subsidiary growth contributed to increased revenue. Next page, please. Performance trends for strategic businesses such as payment and financial services. Revenue continued to be driven by PayPay consolidated, reaching JPY 109.7 billion, a year-on-year increase of 35%. Adjusted EBITDA also continued to grow, reaching JPY 22.9 billion, a year-on-year increase of 52.1%, with margin remaining at a high level. Next page, please. Performance analysis of strategic businesses. Payments and financial services are both growing steadily. Furthermore, the full consolidation of Line Bank Taiwan contributed to increased revenue.

overview. As you can see, each service is growing smoothly. Number of payments per user and unit price, those KPIs are progressing smoothly. As a result, consolidated sales has increased YoY plus 30.4%. Consolidated EBITDA was more than doubled, so the second quarter showed significant strong growth. Next, from here, I will explain our key strategy going forward. Next page, please. As our company-wide key strategy, we will advance as two wheels: the agentization of all services and the enhancement of official accounts and mini apps. In agentization for the 100 million users using our services, we will provide services like search, media, finance, and commerce more conveniently via AI agents. For corporate clients, such as businesses, companies, stores, and brands, we will provide customer contact points and business support functions through our functional enhancements of official accounts and mini apps.

By improving the value provided to both users and clients, and by seamlessly connecting both via AI agents, we will realize new service experiences and expansion of revenue opportunities. Please turn to the next page. First, regarding our initiatives for AI agentization. Our goal is daily AI agent use by our 100 million users in Japan, aiming for 100 million DAU. Currently, in October, DAU for AI services is 8.6 million. Especially AI Answers on Yahoo Japan Search and LINE AI Talk Suggestions are used frequently. User numbers have begun to expand. Also, for AI Talk Suggestions, user billing has started, and monetization efforts have also begun. Going forward, we will promote AI agentization of each service and aim to expand users. Next page, please. Next, regarding the enhancement of OA, official account, and mini apps.

Before talking about the specific initiatives, I’d like to explain the structural transformation of the media business. Earlier, I explained the revenue decline in search advertisement in the media business. While steadily bolstering the conventional search and display advertising businesses, we will achieve sales and profit growth by further growing OA and mini apps, where we can provide our original value. Over the next three years, we will increase the share of high gross margin OA and mini apps to about 40% and aim for an adjusted EBITDA margin of 40%-45%. First, regarding the performance of OA, official accounts. In Japan over the last three years, our track record, the number of paid OAs improved by a CAGR of 14%.

ARPA also improved, and as a result, OA revenue also grew 16% annually on average, and sales have grown to the scale of JPY 100 billion in Japan and JPY 140 billion, including global. Please turn to the next page. On top of this OA growth foundation, by further building a mini app platform and adding SaaS-like store support solutions, we will create a multi-layered revenue structure and aim to double sales in three years. This fiscal year, as I mentioned, doubling the JPY 140 billion to JPY 280 billion. This fiscal year, we will first focus on expanding mini apps based on OA and launching the SaaS business. Important KPIs for the revenue models of each area are shown in the lower section of this page.

Mini apps are a scale expansion, which is very important for KPIs in the growth phase, and OA and SaaS, we set ARPA improvement as KPIs. I will link these KPIs as leading indicators to monitor our business growth. Next page. Let me explain structurally. First, there is an OA official account as a base. Currently, there are 1.3 million active official accounts used in Japan, of which the number of paid official accounts is 310,000. We see the target accounts for future expansion, such as businesses, companies, stores, and brands, at about 5 million, so we can still grow the number of OA accounts, and we will also further increase the ratio of paid accounts. The second layer, mini apps.

To OA-using companies and stores, we will propose a customer contact point via mini apps, expanding mini apps numbers, growing users, and creating businesses like payment and ads within them. The third layer is SaaS solutions, developing specialized support for high-affinity industries like store DX or reservations, aiming to raise ARPA. Service launch planned for the 2026 first half. We will have more new solutions. At the right timing, when we can introduce them to you, we will provide services more broadly and deeply, and provide a deeper solution via SaaS by industry to expand our sales as well. Finally, regarding the recent growth of mini apps, as you can see on the left-hand side graph, the number of apps has increased by 1.5 times, and the number of users has increased by 1.6 times. Steady growth. We are strengthening our sales structures.

We are enhancing proposals to bigger companies, and installation at large enterprises like these are beginning, as you can see. As a measure to strengthen inflow, we are leveraging LINE touch, which allows users to instantly launch mini apps at stores, and the LINE App’s revamp focusing on mini apps will also begin. We will further expand both the number of apps and the users and build a situation where businesses like advertising payments can be provided. Please turn to the next page. Finally, a summary of the Q2 financial results. Sales and profit expanded steadily. Our company performance was experiencing solid growth. Going forward, centered on AI agentization and official accounts and mini apps, we will accelerate the growth. We will promote AI agentization across all services, offer AI services to 100 million users, and create new value.

Also, we will enhance OA and mini apps, and while transforming the media portfolio, we will achieve growth and improved profitability. This concludes the Q2 financial results explanation. Thank you very much. それではこれより質疑応答。 I would like to now begin the Q&A session. For those of you who have questions, please use the raise hand button on your Zoom window. When it’s turned for you, the MC will call your name. Please ask your question. Repeat, those who have questions, please use the raise hand function on Zoom. When it’s turned for you to speak, the MC will call your name, and then please ask questions. Also, regarding questions, please allow us to limit the question to two questions per person per session. Please ask your questions one by one. For questions asked in English, we will provide consecutive interpretations. Please allow us some time to provide you that.

We broadcast it in English via simultaneous interpretation. Now, let us begin the Q&A session. ではまず最初に、ゴールドマンサックス証券の宗方さん。 Hello, Goldman Sachs Securities. 宗方さん, please unmute and ask your question. ゴールドマンサックス証券の宗方です。 I’m Munakata from Goldman Sachs. Thanks for the opportunity to ask questions. I’m allowed to ask two questions, so I have two questions. My first question is on search ads. In the first quarter and also in the second quarter, the impression I got is this business is quite tough. The degree of toughness, is it correct to understand that it’s the extension of the first quarter, or are there any additional reasons? On search ads, what would be the realistic guidance towards the second half? That is my first question. Thank you for the question. I am Sakaue. I’m the CFO. Let me reply to your question. The second quarter year on year is the worst compared to Q1.

One of the factors is one major client budget allocation was weak, and that continued into the second quarter. In addition, in other clients, the budget reduction happened. This is, I’m referring to large EC companies in Japan, and vertical companies declined. That can be called additional from Q1. That was the additional factor for Q1, Q2 deterioration. Q3, Q4, I think the degree of negativity is the same as Q2 for Q3 and Q4 as well. That is our forecast. Thank you very much. I have a follow-up question. 他にも少し予算縮小されたクライアントさんがいらしたということなんですけれども。 I am. 何か構造的に内政関係性。 Is there any structural reason such as shifting in-house or revisiting ROI advertising? Is it more of an economic trend? What is the nuance? 池端の方からちょっと。 This is Ikehata. Let me reply to your question. はい、池端でございます。 This is Ikehata. I would like to add some more comments.

In addition, there were some industry, in addition to prior quarter’s reduction trend in other industry, partially, that is, there was a reduction in ad spend for search ad. The concept of ad placement, I don’t think that is such a reason, but overall, Line Yahoo search ad performance is being monitored, and the advertisers operate. Based on that, there was a decline in ad placement. We will continue to work on the performance improvement of search ad, and that would lead to getting these customers back. So rather than any unique circumstances, we are to continuously work on performance improvement for search ad. I understood fully. Thank you very much. Another question is on mini apps. This time, various figures were presented, and outline was explained, and I was able to learn. Thank you very much for that.

The portfolio shift chart is being shown just to reconfirm display and search. Basically, it’s very difficult to grow in these areas. Is that the assumption you are setting? One, 140 billion to be expanded to 280 billion. That has been rather difficult. And what is the pathway you envision? For example, from the first half of 2026, you’re going to start SaaS service. From the second half of next year, do you expect the sales to accelerate? This is Idezawa. Let me answer your question. Display, search, naturally, the measures to revamp or to boost them, we are taking measures. Also, thanks to the organizational change that we have implemented, we are able to implement activities to work on recovery. Structurally speaking, I don’t think this is an area where we can expect high growth rate.

From that perspective, we will support the baseline for the display, search, and then apps will drive the growth. We have the target of official account doubling, and CAGR-wise, it has been 16%. We have this growth of OA official account as basis, and to add on top of that, we are going to provide mini apps and SaaS services. We will be pursuing the target by having breakdowns or compositions in mind of mini apps. It’s not a linear growth, but when we have a certain number of clients, then we can expect a significant activation. The mini app platform will be stronger in the later half, and that would be the overall picture. よくわかりました。ありがとうございます。 Understood quite well. Thank you. Thank you very much. Next question from SMBC Nikko. Mr. Maeda, please. はい、SMBC日光証券前田です。 Oh, this is Maeda from SMBC Nikko. I have two questions as well, please.

えっと。 ま、ちょっと繰り返しになりますけれども、検索。 I’ll be recapping the previous comments regarding a search linked ad. Together with the population of GenAI. 先ほど。 The negative impact to queries. When I look at the performance of some of the clients, it looks like ad placements are declining in numbers. Because of GenAI, the performance is having a negative hit. On the flip side, if you could please share more recent trends. Also, for the market, there is still a concern that GenAI rise can be a negative for a search linked ad. If you could please share outlook, that’d be great. Thank you. Mr. Maeda. Sakaue, I will start, then possibly Kataoka will follow up. At the moment, Yahoo Japan Search, 10% of query comes from AI search. At the same time, the answers from AI search are business query where there’s no opportunity for search linked ad, like questions and answers.

Those are the search keywords that we get. That does not have much impact to our revenue and profit making. At the same time, mid to long term regarding those business query, I would think that it would be more use of GenAI. Media and search, we expect the next three years to be flat plus extra. はい、カタコでございます。 Hello, this is Kataoka speaking. As Sakaue mentioned, the number of queries for search have not resulted in significant decline in the number of queries. There is no major tide shift in the search trend, and the performance itself has not deteriorated. Within this big global trend, there are more use cases from GenAI increasing, and I am sure more of our client companies are considering to further use GenAI. We believe that there will be opportunity, the monetization business opportunity when it comes to GenAI-led search as well.

We are considering various different means to monetize. Thank you very much. Second question regarding commerce business. In the second quarter, each service’s growth on page eight. Regarding Yahoo Shopping, the hometown. 影響がどのぐらい出てらっしゃるか。 I wonder how much impact is included. I wonder in the second half, there can be a significant decline in the growth as a reversal factor. If you exclude the Binos impact, what is your true growth opportunity? 人口で伸びてるところと。 So the growth in the cruising pace and growth from one-off reason. If you could please share for the results in the first half and what you expect for the second half, please. Okay, Sakaue would share some figurative indication. I will have my colleague Hide provide additional information. Regarding Yahoo Shopping, for second quarter, the growth was about 19%, one nine, so quite significant. Hometown tax, high single digits, mid single digits, high single digit growth.

For reuse, Yahoo Auction to Yahoo Flea Market to Binos. This includes Yahoo Auction, Yahoo Flea Market, and Binos, as to be about 15% growth. Excluding Binos, we do have mid single digit growth. Second quarter has this last minute demand for hometown tax, so that led to this significant growth rate. Hello, this is Hide to provide additional information. Regarding Yahoo Shopping, significant impact from hometown tax. This is something that was happening at the end of the year in December time, so it is a front loading of that demand now. Compared to last year, Q3 growth rate will be stagnant, will slow down. For reuse, excluding Binos, I do see the trend continuing. In other words, Yahoo Auction growth is quite steady and Flea Market is growing significantly. When you take the weighted average, our growth is a mid single digit.

I would think that for the second half, we can expect similar growth and we will have a synergy, as you can see on the right-hand side, to have more significant growth in the midterm. Thank you. ありがとうございました。 Thank you. それでは次に、岡三証券の奥村さん。 Next, Okumura-san from Okasan Securities. Please unmute and ask your question. ありがとうございます、岡三証券さんです。 Thank you. This is Okumura from Okasan Securities. Can you hear my voice? Yes. ありがとうございます。2点。 Thank you. I have two questions. 私もちょっと26ページ目ですけれども、ご説明いただいていると。 You have been explaining on the account and the mini app. をどういう場合にするっていうところですか。 And double the sales from this. I would like to reconfirm. その。 Official account, the platform part, base part. The assumption is the current growth rate and through mini app. 後半とかの増収をするっていう理解でいいのかな。 Several dozen of billion. それが。 Will be added on top is that the assumption, if this becomes a reality, it’s wonderful.

But what is the background for being so bullish at the time of launch? The assumption of the mini app or MAU. In order to achieve your assumption, what kind of measures and scale of investment you’re going to make in order to achieve your strategy? That is my first question. まず、数字の。 Firstly. The growth image of official apps, I would like to explain, and the strategy to grow. Will be replied by Idezawa-san and Ikehata-san. The existing OA part, the current level of growth can be maintained. To be more specific, 10%-15%. 今も15%近く伸びて。 Currently, it is growing at nearly 15%, so maintaining the same growth level. The paid accounts. Can be. Expanded in this pace, but that will not bring us to double. So the gap will be compensated by mini app and SaaS. The strategy will be explained. By Ikehata. Thank you for your question.

Let me just add some more comments. 今、ご質問の中で。 In your question. まだまだ立ち上がっていないのに。 You said that it’s still the starting phase and. This forecast may be bullish at the starting phase. Right now, we already have official accounts and mini apps. Although partially, we are not monetizing yet to many customers. Similar solutions are offered and being used, and it’s been. The customers are satisfied. For mini apps, we will increase the number, and at the same time, we will focus on monetization. That is for next year and beyond. Official account SaaS solution. Already, including third-party solutions. We are collaborating with various companies, and various solutions are already being utilized. Our strategy is to monetize them from next year and onward. ないしはマーケットに対して。 We haven’t been able to try or. Something that does not fit the market to start from scratch. That is not the case.

We already have existing foundation of official accounts, and we are offering various services, and we will expand and further monetize. That is the basis of our assumption to achieve these targets. Thank you very much. What about the scale of investment? 10 billion was the media investment for this year. What about the. Investment going forward? The details will be discussed, but. We are working on the awareness. Strengthening through advertising for mini apps, and. We are going to focus on promotion and PR. And. Regarding manufacturing or production. As shown on the slide, we are to reassign human resources to these growth domains to speed up the launch of products. Thank you. ですね。 My second question. ですね、あのLINEに実装していく。 On LINE, you are going to implement AI agents. 改めて伺いたいんですけど。 I would like to ask about that. ChatGPTとかが結構。 ChatGPT. インスタントチェックアウトとか。 Has instant checkout.

拡充をして。 And strengthening the functionalities, and they are expanding partners. サイドがチャットGPTの。 The user side. Rather than ChatGPT, why do they use LINE’s chat or AI agents? What is the value that you offer in the future? The relationship is that. Current company. Has strong ties with OpenAI, and. What kind of positive influence. Will that relationship with OpenAI have with your company? This is, it is our, let me reply to your question. Our company does not have our own LLM, so we use. OpenAI solutions or other solutions. We pick and choose. It’s not just LINE, but within our company, we have. A variety of services: news, commerce, finance, auto. Each service will. Be agentized. That is what we’re working on right now. Yahoo and LINE or. Integrated. Agent will be created. That is the perspective of our user interface.

We do not have LLM ourselves, but on the other hand, we have a lot of touchpoints with. So many users and services. Within one ID. Hours can be used in a seamless manner. That is the value we offer. That is why we are working on agentization of various services. Thank you. ご説明いただきましてありがとうございました。 Thank you for your. Comprehensive reply to my question. 水郷証券の岸本様。 Next from Mizuho Securities, Mr. Kishimoto. はい、水郷証券の岸本です。ご質問のお控えいただきありがとうございます。 Thank you for taking my questions. My name is Kishimoto from Mizuho. I have two questions too. Both are about. LINE as. The first is commerce functions of LINE, shopping functions. I would think that it will be launched quite soon. As a new platform. I know you’ve done some testing. I wonder. What is lacking in order to have a full launch? That’s my first question. Hello, this is Hide speaking. We.

バケットテストと社内では呼んでますが、 are providing テスト。 We have already launched. The test launch for this. サービスを活発に提供。 Within the LINE shopping tab. システムの安定化。 We are not offering any service actively or making a big sales promotion. We are testing system stable operations. Within this test bucket. We are trying to expand our product services or to enhance sales promotion activities. We will be able to have a 100% full launch. We are working together with various internal stakeholders. あの、situation is a bit different from the users of shopping, Yahoo Shopping, where they already know what they want to buy or they want to buy certain things. LINE. We need to propose what is appropriate and right that would resonate to the LINE users. Once we know that right business model. Solutions, then we will be able to. Launch under such use case and sell products as well.

So there’s a great opportunity, and we’ve been testing at the moment. Thank you very much. On page 27, please, you mentioned about the second tier, third tier. I’d like to ask you a question about the capability for the third tier. I understand that you have been reallocating your staff together with AI agents. I wonder whether you’ll be able to run all these initiatives under the current manpower, or are you going to strengthen your perhaps sales capabilities with more new recruits? Is there something you can do with a current resource? I’m sure it’s based on the selection criteria, but thank you for your question. Your point. Recently, we do have a certain amount of resources that we had to allocate, that we had to secure from other departments to this department.

As mentioned on this page, we are going to have 50% of this existing business to new domain or the focus domains. We will be shifting our business focus as well as resource allocation as well. We also are considering more partnership, leveraging outside resources as well. We have many different ideas. Thank you very much. Thank you. Next, Nagao-san of B of A Securities, please unmute and ask your question. B of A証券長尾様、ご質問の。 Nagao-san of B of A Securities, please unmute. あ、聞こえます。 Can you hear? Yes. 申請いたしました。はい、B of A証券長尾でございます。 This is Nagao speaking. まず1点目ですけれども。 My first question. ミニアップ入りについてですが、MAU。 を。 100万から。 7500万と、数そのものも。 Is to be increased from 25 million to 75 million. And from 35,000. The KPI direction is being presented, the price charging per app, or how you consider retention. What are the methods you are going to take?

60% comes from OA and 40% comes from mini apps, so proactive monetization will be necessary. Can you explain concrete ways you have in mind for monetization of mini apps? はい、ご質問ありがとうございます。 Thank you for the question. This is Ikehata speaking. Let me answer your question. Right now, mini app numbers are to be increased, and we are to increase the number of users significantly. That is the plan. On mini apps themselves from LINE application, there will be a lot of touchpoint from the users. We are increasing touchpoints by linking with LINE App and LINE media to increase the opportunity for as many people as possible to touch mini app. On the monetization of mini app, the payment function and also advertising within mini app and receive ad placement fee. Those are two monetization sources.

効果を収益性として効果を発揮できるようなアプリケーションということで。 The application that can generate fruits in terms of profitability is what we are planning to build. The sales force we are strengthening right now so that as many people as possible will utilize mini app and open official accounts. From next fiscal year and beyond, we expect our monetization revenue. We already are seeing the account openings by many on official ads, so we have confidence. Thank you for that. My second question is related to page 24 of the material. The target of EBITDA margin 42-45%. Right now, 37 or 38% is the media business margin. Official account and mini app domain overlaps SaaS domain. When you expand the scale, the sales staff or development cost will be heavier upfront, and I have a concern that the profitability may decline.

The existing search and display ad, by the sales of that part, decline will affect the overall margin. What is the overall ad margin? In achieving 42-45%, what would be the contribution of OA and mini apps? If possible, could you disclose those information? Rather than speaking on the concrete number, it is more of a guide. The search, the basis is that profitability is not that high, and we have been communicating that from before. There is a certain fee that we pay to Google, so the search margin originally is low, and adding with display, it is shown as flat. The search will be downtrend, and display, we achieved certain growth in Q2, so the ratio of display will likely expand. The margin on the lower part will increase, will improve.

On display, as you know, there is a commission with agents that is included in the COGS, so that is the margin structure. OA, the margin will be similar to display. The SaaS part, it will be dependent on the pricing structure. Vertical mini app or SaaS compared to peers, when we look at them, the profitability is quite high. Compared to ad business, it is low, but still, it is high enough to be able to support. On top of that, mini apps, the ad on mini apps, and within mini apps, we will place ads in a network style. That is the type of ad business that we would like to deploy within apps. We expect that we can secure profitability on a certain next level. Thank you very much. One quick question on page 11. The JPY 15 billion reduction plan is shown in the medium term.

The media business ad expense, some part will increase, and some part it can decline, but the fixed cost of the media business will be unchanged. This slide is the company-wide figure. This fiscal year, JPY 10 billion for LLM cost will be incurred, and next year and beyond, LLM expense will continue to rise. Through various programming, we can expect improvement of operational efficiencies. JPY 15 billion, even LLM commission rises next year, we intend to reduce the fixed cost, even including that JPY 15 billion. The promotion expense and advertising for commerce, it is linked with GMV, so that is not included in this figure. On the media segment, there are subcontractors, and some of the human resources cost through use of AI, we can create a leaner structure. Those are combined to set the target margin at 40%. Thank you. ありがとうございました。それでは次に。 Thank you for the question.

Next, from Nomura Securities, Mr. Masuno, please. Please unmute yourself and ask us a question. すいません、野村正樹です。 Yes, Masuno speaking from Nomura. Can you hear me? はい、1点だけあります。 Yes, we can. I just have one question, please. リニューアルオブラインアップ、 you are talking about adding a commerce tab. I know you have been trying various scenarios under beta. ファンダメンタルは、 are you trying to transition the info traffic to service like LINE gifts, or are you going to provide a brand new shopping experience to the LINE users? I wonder what kind of info, what kind of user experience you are trying to create through this commerce tab. What we are testing right now under the current version, all the products that are on LINE tabs are LINE gift products.

Going forward, in addition to the LINE gift products, the stores that are present in Yahoo Shopping are some of their merchandises we would like to post there. Not just for gift needs, LINE shopping commerce products we would like to offer through that tab. Comprehensive portal shopping corner is how we would like this service to grow to be. What type of stores, what type of products from Yahoo Shopping really has to do with the previous questions and answers that we had. What kind of products will be the right fit, best resonate to the LINE user? It really depends on that. That’s what we are testing right now. We have to have a right product mix on top of the gift products. We’ve been carefully studying what would be the type of product group that is worth promoting heavily behind it in this new effort.

Okay, this is not a purchase intent visit. I can understand LINE gift. I wonder for those users who were not thinking of purchasing anything, would it ever be a real customer, whether they would convert by visiting that site? Out of Yahoo Shopping, our customers right now are searching for what they want out of tens and thousands of products with a certain purpose, compare prices, and make decision-making. We have a massive number of products on Yahoo Shopping. It doesn’t make sense to put all of that on the LINE tab. I don’t think it will drive sales. Out of what’s available on Yahoo Shopping, those stores, we need to focus on products with more uniqueness, originality, and some product group with extremely high demands once they release, always sells out. Those will be the right products we think to be on the LINE tab.

Those will be the right products for this casual shopper. これは数百っていう単位、数千とかっていう単位。 Are you talking about hundreds or thousands? I don’t think you’re talking about dozens of thousands. I just have no idea about the scale of the products that would be available through this LINE tab. That is exactly what we are trying to get to. That’s why we’ve been repeating the test. So it really depends on the—we don’t know. There’s nothing that we can share with you regarding the size or scale of the stores, the type of products, or the scale of the products. Thank you very much. ありがとうございます。 On page 11. そして。 Reduction of this JPY 15 billion. And from last year, you have been spending on security-related costs. Is that included in this reduction of JPY 15 billion? I believe it’s mostly outsourcing that you can reduce.

Are there any major items that you expect to reduce significantly? I believe AI agents is contributing to reduction. Compared to last year, how much reduction is this? はい。こちらは坂上の方からお伺い。 This is Sakaue. I will answer your question. LY standalone fixed cost is roughly JPY 700 billion. ご質問の中にもありましたとおり。 As you stated in your question, security-related costs will come down. On the other hand, LLM commission will almost offset that and increase. From April of next year, we will increase the office space to accommodate a three-day commuting of our employees. That means a cost increase. By using AI, we intend to reduce JPY 15 billion in total. If we do not take any action, the fixed costs will likely go up by JPY 2.5-JPY 2.6 billion in the areas of reduction, outsourcing part, and software license from outside.

The system that employees use, we can make progress in the integration of the platform. Double payment can be eliminated. That is included as the cost reduction. On software license, the areas you can reduce, I understand it’s difficult to name the concrete name or service now or others or Salesforce. Is it possible to cut them entirely rather than specific ones? It’s an overall effort, frankly speaking. For example, there are licenses that are given to all of the employees, but if we identify the staff that really uses, then we can reduce the number of licenses. Also, there may be redundant functions on the software, and cut one of them. Thank you very much. それでは次にSBI証券のホースイです。 Next, from SBI. ご質問をお願いいたします。 Mr. Hosui, please. SBI証券のホースイでございます。ご参加の機会ありがとうございます。 Thank you for allowing me to. ご質問があるかと思います。 Governance. あなたに資本構成に関して政府との関係性を確認した上で、 from the Ministry of Internal Affairs and Communication. あなたに資本構成に関する情報や。 Pointing out your capital structure.

Now that under new administration, any risks that you foresee or any changes to the relationship with the government regarding capital structure, please. Regarding that, administrative guidance, we’ve been responding appropriately. From 2026 March, we are making progress toward it. Regarding the capital movements, we’ve been conducting the discussions reflecting our past track records. No major changes to all the efforts. ありがとうございます。 I understand. For 2026 March, you will conclude all the measures to meet the administrative guidance. Correct. ありがとうございます。以上になります。 That’s on track. Thank you very much. Thank you very much. 終了予定時刻となりましたので、以上で質疑応答を終了します。 Now, we would like to close because the schedule ending time has arrived. I would like to now have Idezawa to offer final briefing. Before Idezawa’s final remarks, I mentioned about the fixed cost of JPY 700 billion. That was a mistake. It’s roughly JPY 400 billion-JPY 500 billion. Thank you very much. This is Idezawa speaking.

Thank you very much for raising a lot of questions. The environment surrounding AI is rapidly changing, and our two core strategies are AI agents and OA. We will continuously grow by changing our business structure. That is the message of today’s presentation. I will ensure that these plans will be executed steadily, and would like to ask for your continued support with this. We would like to close LY Corporation’s FY 2025 second quarter earnings call. Thank you for staying with us until the end.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.