It is time. We would like to begin Mercari's FY 2025 Full-Year Financial Results Presentation. Thank you for joining today's session, taking the time out of your business schedule to listen to our presentation. My name is (Kyoko Kame). I will be the emcee today. First, I would like to take you through the agenda for today. First of all, we will welcome Shintaro Yamada, CEO and Representative Executive Officer at Mercari, to take us through the full-year financial results presentation. He will also talk about the progress made towards the 3-year midterm plan. Afterwards, Senior Vice President and CFO, Sayaka Eda, will take you through the detailed results of FY 2025, as well as the FY 2026 forecast and business policy. We would like to start with a presentation from CEO Yamada.
Thank you for joining Mercari's FY 2025 Full-Year Financial Results Presentation today. I am Shintaro Yamada, CEO and Representative Executive Officer of Mercari. Our group mission is to circulate all forms of value to unleash the potential in all people. We aim to create a world where anyone, anywhere, can do things they couldn't do before, pursue what they love, contribute to others in society, and lead a rich, authentic life. In short, a world where possibilities of all people are magnified. To achieve this, we are working to connect people around the world through technology and by leveraging advanced technologies such as AI and blockchain. We are building an ecosystem where all forms of value, both tangible and intangible, can circulate. This is the agenda for today. I will kick things off with a summary of the recent fiscal year, and then Eda will add some color later on.
First, regarding the performance against our consolidated earnings forecast for FY 2025, core operating profit was JPY 27.5 billion, significantly exceeding our forecast. On the other hand, revenue came in at JPY 192.6 billion. While this falls short of our forecast due to a slowdown in the growth of the marketplace and U.S. businesses, it still marked a record high. Here is a summary of the recent fiscal year. With respect to progress, after announcing our basic policy of aiming for top-line growth accompanied by increased profits, all three of our core businesses, marketplace, fintech, and U.S., recorded profit growth, resulting in a record-high consolidated profit. We also made progress in creating group synergies. For example, leveraging our C2C MAU-based cross-border transactions, GMV exceeded JPY 90 billion, and the number of Mercard issuances surpassed 5 million.
In addition, we plan to seize for future synergies by launching new services such as Mercari Mobile and Mercari NFT. As for the challenges ahead, we recognize that the top-line growth rate has slowed. Furthermore, we are only halfway towards establishing a firm position as a safe and secure marketplace. In light of these challenges, we aim to drive top-line growth by becoming an AI-native organization and by strengthening the core product experience. We will explain the details of these initiatives shortly. Next, I will explain the progress of Mercari Group's medium-term strategy towards the fiscal year ending June 2025. We would like to start by stating that there have been no changes to the group's midterm strategy announced when we shared the FY 2024 full-year financial results.
In principle, we still aim to achieve top-line growth accompanied by profit growth with a double-digit CAGR in revenue and a CAGR of over 25% in core operating profit compared to FY 2024. This outlines the group and each core business's midterm aspirations and areas of focus. These were originally presented when we shared the FY 2024 full-year financial results and have been partially updated to reflect the current situation. The underlying sections have been updated. We have illustrated Mercari Group's envisioned growth trajectory through to FY ending June 2027 using a stacked bar chart. Our goal is to achieve double-digit revenue growth at the group level, driven primarily by strong growth in both marketplace and fintech. For marketplace, we will focus on three key initiatives. First, we will enhance the core C2C marketplace experience by leveraging AI to create a safe, secure, and user-friendly platform, thereby boosting transaction activity.
Second, we will increase the supply of attractive products through B2C. By diversifying product offerings, we aim to improve convenience for domestic users. Third, we will expand global TAM through cross-border transactions with a focus on strengthening supply in high-demand categories such as entertainment and hobby. Next is expanding fintech revenue with a strong focus on our credit business. By advancing credit scoring models and deepening service integration, we will maximize customer usage opportunities and build a solid revenue base. Finally, for the U.S. business, returning to a stable growth trajectory is our top priority. This will in turn strengthen its contribution to the group's overall top-line growth. At the foundation of all these growth strategies is the organizational transformation into an AI-native company.
At Mercari, we have actively promoted the adoption of AI technologies to enhance product quality and improve user experience, starting with the establishment of our dedicated AI team in 2017. In addition to hiring AI engineers in Japan, we have proactively recruited top-tier talent from overseas, including India, which is known for its high concentration of skilled engineers. We have incorporated AI into key product areas such as listening experiences and fraud prevention. In 2021, we launched Mercari's proprietary AI-based credit scoring system, the first of its kind in the fintech space, which has now become a major contributor to the group's overall revenue. Since then, we have continued to enhance our products using AI and large language models, with AI playing an increasingly significant role in driving business growth. This year, to accelerate AI utilization even further, we launched a 100-member AI task force.
By fully embedding AI at the core of both our organization and products, we aim to transform Mercari into an AI-native company, establishing an even stronger and more sustainable competitive advantage. Since the use of AI has already become commonplace within our company, 95% of employees across the group are actively using AI tools. Furthermore, 70% of the code related to our product development is now generated using AI, resulting in a 64% year-over-year increase in development output per engineer, significantly accelerating development speed and improving productivity. Regarding product transformation, as mentioned earlier, we have already leveraged AI to improve user convenience. However, moving forward, we are not merely aiming to replace existing functions with AI or implement partial AI enhancements.
Instead, we are putting AI at the core of the user experience, rebuilding a safe and secure platform, and evolving our services into something that anyone can naturally and intuitively use. On organizational reform, to rapidly build a work environment where employees and AI work together, we established the AI task force. We are conducting a thorough review of all business processes, such as business planning, requirement definition, analysis, and decision-making, and will redesign them by December 2025 to be AI-first. This initiative will enable us to restructure our organization from scratch, allowing people to focus on judgment and creativity and achieve a highly productive work model. In this way, we are driving a company-wide transformation towards becoming an AI-native company. That concludes my part. Now I'll hand it over to Eda for the next section. Thank you very much.
Next, we would like to have Senior Vice President and CFO, Sayaka Eda, to take us through the FY 2025 detailed results, as well as the consolidated forecast, or forecast for FY 2026, as well as the business policy. Thank you.
Good afternoon. My name is Eda. I'm the CFO. Today, I would like to start with giving you a financial overview of FY 2025. In terms of achievement of our consolidated earnings forecast, here is a recap of how the consolidated end-of-year business performance against guidance. Yamada mentioned this already, but the core operating profit reached JPY 27.5 billion, exceeding the upper end of the forecast range. This is a year-on-year growth of 46%, and this demonstrates that the group's earning power is steadily strengthening. On the other hand, we recognize that increasing top-line revenue growth remains a key challenge, and we increased this by 3%, landing at JPY 192.6 billion.
This is a challenge. We recognize that we need to further improve the top-line revenue growth. In terms of the performance by business segment, you can see this below. Marketplace, fintech, and U.S. all three business segments achieved full-year profitability for the first time. In terms of the operating profit guidance, we achieved all of these guidance figures. However, in terms of growth rate, top-line, marketplace GMV growth rate, year-on-year, we were trying to achieve 10% year-on-year growth, but we landed at around 4%. We need to continue to focus on top-line growth in FY 2026 and beyond. This is the trends in the consolidated results. In terms of revenue and core operating profit, they have grown steadily. Over the last three years, the core operating profit has grown significantly. Revenue and core operating profit, both, we have marked record highs in these two KPIs.
First, we would like to start by taking a look back at the marketplace results. We saw stable growth in C2C, and we aim to achieve overall marketplace GMV growth rate of around 10% and an adjusted core operating profit margin of 37%- 42%, driven by high growth in areas such as cross-border and B2C. In terms of actual results, cross-border and B2C maintained high growth throughout the fiscal year, contributing to top-line growth of the marketplace overall. On the other hand, the impact of fraudulent activity, which affected customer sentiment mid-year, was minimized through swift response, resulting in minimal GMV impact. The full-year GMV growth rate was year-on-year 4%. In terms of adjusted core profit, core operating profit margin, including Mercari Hallo, was 38%, and excluding Mercari Hallo, was 43%. We continued to achieve high profitability.
With respect to Mercari Hallo, we saw significant increases in crew registrations and partner sites. In April, the service began charging fees, so we're marking steady progress for Mercari Hallo. This is a revenue increase in revenue for trends in marketplace for the full year, as well as by quarter. These are the results or trends in adjusted core operating profit margin and profit cost composition marketplace. If we look at the adjusted core operating profit, it might look a little bit low, but as I mentioned before, we continue to invest in Mercari Hallo. It's still in its investment phase, and it's included in the marketplace. Mercari Hallo is impacting these results, and the operating profit margin, excluding Mercari Hallo, remains strong at 43%, and we will continue to maintain this high level of margin going forward. Moving on to the fintech business.
As we mentioned in the beginning of the fiscal year, we initially planned to transition into a phase of continuous profit growth. We mentioned that we will continue to add to our credit balance, and we wanted to transition into a phase of continuous profit growth, achieving core operating profit of over JPY3 billion. In terms of actual results, we achieved both strong top-line and profit growth in the fintech business. The core operating profit significantly exceeded the initial target of JPY 3 billion, ending at JPY 4.5 billion. A large contributor was the Mercard. As of July, we had issued more than 5 million Mercards, indicating a growing customer base in the credit domain. Year-on-year, the credit balance also grew by 32%. The credit balance, or sorry, the credit business has continued to grow quite steadily.
To grow even further, we want to increase revenues from both within and outside of the Mercari platform. We released the Mercard in March, and it's been doing well, but we want to support our growth of our credit businesses going forward. This is the full-year results. Revenue and core operating profit have grown steadily every year. We are continuing to stack up on the profits, and we're continuing to see great performance of this business. These are the quarterly results. As I mentioned before, in March, we released Mercard Gold, and the scope of transactions subject to deductions and point-related expenses from revenue has expanded. As a result, growth rate appeared low as 9% pre-adjustment and 17% post-adjustment. However, excluding the impact of this accounting treatment, growth would have been 19% pre-adjustment, 31% post-adjustment, maintaining a high level of growth.
This is the core operating profit and advertising cost quarterly trends. I mentioned that the Mercard Gold was launched, and in the fourth quarter, we invested quite heavily in acquisition of new Mercard customers. However, we were able to achieve stable profit generation. This is a credit balance of the fintech business. Due to changes in credit limits for certain customers implemented in the second half of 2024, we landed at JPY 248.1 billion. The collection rates in the fall, in the fall, we changed the credit limits of certain customers, and in the third quarter, the collection rate dropped temporarily in the third quarter, but it has recovered as expected in Q4. Moving on to the U.S. business. Initially, we had announced that we will commit to breaking even, and we aim to return to a growth trajectory. Actual results.
In 2025, January 1st, Mercari Group CEO Yamada also assumed the role of U.S. CEO, so we changed the organizational structure. With a renewed focus on strengthening the core product experience, we started focusing our resources as well on the core product experience. We also changed the fee model. We have started to see signs of improvement in GMV growth rate. In addition to improved unit economics through product enhancements and marketing cost optimization, which we have continued to do, we have also reviewed fixed costs, which has led to a core operating profit of JPY 900 million, achieving the first full-year profitability. Break-even has been achieved, and we have seen positive signs in GMV growth trends. Based on this progress, our goal is to continue the business and return to a growth trajectory as early as possible. GMV improvement trends that I mentioned before.
FY 2024 in March, we significantly changed the fee structure. It became variable a year and a half ago. We changed the fee structure, and there were a lot of positive and negative feedback. In FY 2025 first half, second and first and second quarter, GMV as a result, GMV growth rate in the first half of FY 2025 dropped significantly as a result, and we changed the leadership thereafter. We're focusing now on the core product and also changed to a new fee model as well. We also strengthened countermeasures against fraud use, fraudulent use. We're seeing improvements. The recovery trends became particularly apparent in the fourth quarter. This is the full-year U.S. results. GMV and revenue, unfortunately, we're seeing a downward trend over the last three years, but we were able to significantly improve core operating profit even under such situations, circumstances.
We achieved our first full-year profitability this fiscal year. These are the quarterly results. In the third quarter, we mentioned that we have booked profits, and we continue to do so in the fourth quarter. Moving on to the forecast and business objectives for FY 2026. Before presenting specific performance forecasts and business policies, we would like to explain the changes in our disclosure policy. First of all, until now, we have disclosed adjusted core operating profit, which is just for internal transaction fees between marketplace and fintech. Going forward, we will disclose core operating profit without these internal adjustments to make our reporting simpler and more understandable. The reasons behind this change include mainly two reasons. Even before this, payment methods other than Merpay have been used in marketplace, and we have been paying external fees. In comparison to those market standards, the internal fee rate has been reasonable.
With the introduction of Mercard over the last two years, the contribution of Merpay to the expansion of marketplace transactions has become more evident. Because of these two reasons, we decided not to account for these, not to apply these internal adjustments. In addition, to enable continued investment in development that supports mid to long-term growth and to enhance productivity, visibility, and cost standardization in development, we will start capitalizing development labor, development-related labor costs. Following this in mind, this is the consolidated financial forecast for FY 2026. For revenue, we estimate that it will be around JPY 200 billion-210 billion. Year-on-year growth will be around 4% to 9%. Although the revenue growth forecast for FY 2026 is expected to remain in the single digits, there is no change to our midterm policy of targeting double-digit CAGR through growth driven by fintech and cross-border transactions towards FY 2027.
The core operating profit we estimate will be JPY 28 billion- JPY 32 billion. The CAGR target of 25% for core operating profit remains essentially on track. The three-year CAGR target of 25% remains unchanged. If we look at just FY 2026, revenue and core operating profit are expected to accumulate with a second half weighting. Due to office relocation and increased investment in AI, an increase in cost for the year is expected. However, we will make sure to achieve our guidance. Moving on to the business objectives for FY 2026. FY 2026 is a foundational year to prepare for growth beyond FY 2027, the third year of a midterm plan. While keeping our guidance in mind, we will make essential investments for future growth alongside product-related initiatives. Of course, we're going to achieve top-line growth accompanied by profit. We want to achieve group synergies as well. That remains unchanged.
These are the goals or objectives per business. Marketplace core operating profit guidance. We have shared the absolute figures for fintech in the U.S. Likewise, for marketplace, we believe showing actual figures will be easier to understand. Therefore, we have changed to disclose actual figures, absolute numbers rather than a percentage. On the other hand, we continue to consider operating profit margin an important indicator of operational efficiency, and we will remain committed to improving margins over the midterm. The further details will be provided on the following pages. This is for marketplace. While giving top priority to strengthening the core product experience, we will focus on enhancing cross-border transactions to lay the foundation for accelerating GMV growth beyond FY 2027. For FY 2026, we forecast GMV growth of 3% to 5% and a core operating profit of JPY 32 billion - JPY 36 billion.
FY 2025 core operating profit was JPY 30.5 billion. We plan to further improve the operating profit. Key focal areas include strengthening the core product experience, and the second is cross-border transactions. With respect to enhancing the product's core experience, there's mainly two aspects: establish a safe and secure environment. Fraudulent use is an issue for the entire industry, but we will leverage AI technology to detect and score suspicious activity, identify fraudulent users, and strengthen strict measures, including account restrictions and legal actions. We would like to strengthen these measures. To eliminate counterfeit goods, we have established the Mercari Authentication Center and expanded the range of items covered by authentication so that we can provide an environment where users can purchase high-priced products safely.
In the event of a product problem, even with these measures, as long as users follow proper usage guidelines, we will offer full compensation under certain conditions, either for the purchase amount or sales proceeds, ensuring a safe and worry-free environment for our users. Regarding UX, this is a second point. We are going to utilize AI. Until now, our shopping experience is based on search, but we are promoting a cross-category discovery-based shopping experience that eliminates the need for keyword search. We will improve the customer experience by expanding anonymous delivery, which was an option that was already offered, but we would like to make sure that it can be used in many different scenes now and offer new delivery services as well. Another key driver of marketplace is cross-border transactions.
Mercari's cross-border transaction has grown from JPY 6 billion in FY 2022 to JPY 90 billion, 15-fold by FY 2025, now accounting for approximately 8% of the total marketplace GMV. 60% of the total cross-border GMV is contributed by toys, figures, and merchandise, with particularly high demand for Japan original items such as anime and manga-related merchandise. The global entertainment and hobby category market was worth approximately $17 trillion in 2023, with Japanese IP holding nearly 25% share. The market is expected to continue to expand towards 2030, so it is a market with great potential. In FY 2025, we launched our cross-border business in Hong Kong and Taiwan, and we aim to further increase the number of countries covered by Mercari's cross-border operations and improve the UI/UX.
At the same time, we will respond to strong international demand for Japanese entertainment and hobby products, not only through consumer transactions but also by increasing business listings. These are some of the initiatives we would like to implement. Moving on to Mercari Hallo. Since April, partner-side fee collection has begun, aiming to improve profitability while pursuing further growth within disciplined investment parameters. This has not changed. Moving on to fintech business objectives. We would like to establish a foundation for becoming the preferred product in everyday payment and credit scenes. We will continue in the profit growth phase, aiming for a core operating profit of $5 billion- $7.5 billion. In order to make this possible, there are three ways that we will make this possible. First, we would like to increase the number of Mercards.
We would like to increase the number of Merpay users, enable the use of Mercard in various different scenes, and promote making Mercard the user's main card and encourage per-user spending. In addition to in-house development, we would like to pursue future expansions through partnerships with external partners to enhance customer convenience. If I can go in more detail, as I mentioned, increasing the number of Mercard users. As of July, over 5 million Mercards have been issued, and we aim to continuously grow membership, focusing on our 18 million verified customers. Next, increasing per-user spending. We will increase usage of Merpay and Mercard in daily payment and credit scenarios by encouraging higher credit limits, providing higher credit limits, and stronger external payment incentives, and by expanding the scope of installment payment options. We will also utilize our partnerships to pursue agile feature expansion in collaboration with Coincheck.
We issued a press release today, and in collaboration with Coincheck, we aim to increase the number of tradable crypto assets to expand trading volume and diversify revenue sources. Currently, tradable crypto assets include Bitcoin, Ethereum, and XRP. Through this partnership with Coincheck, we expect to enable transactions with a broader range of cryptocurrencies in the near future. Moving on to the U.S. business objectives. In FY 2025, we broke even, and we aim to achieve positive year-on-year GMV growth by enhancing the core product experience and clearly differentiating ourselves from competitors in key focus categories. Strengthening core product experience. This is common to the Japanese marketplace, but we will leverage AI to enhance UI/UX and bolster fraud prevention measures, delivering an unmatched level of ease of use and security. Differentiation through category strategy. In Mercard's key category of fashion, we are implementing competitive differentiating services.
In the fashion categories, our biggest category, especially the lower price and fashion category, we want to make sure that we can differentiate ourselves. We want to implement competitive shipping plans, and we're currently implementing a POC, but we want to introduce fashion item exchange programs and other initiatives to expand the fashion category. Successful initiatives from the fashion category will be applied to other categories so that we can build a trusted marketplace where users can list items stress-free and discover great deals with ease. Next, moving on to the capital allocation policy or financial policy. Over the last three years, we have steadily accumulated profits, and as we transition into a profit growth phase, we expect retained earnings to return positive in FY 2026, assuming progress continues as planned. In this line, we would like to reiterate our current thinking on capital allocation.
In terms of the internal reserve levels, especially the credit business, as the fintech business continues to expand, we plan to gradually build up our equity base and ensure stable funding capabilities. We want to remain competitive in this business. We aim to improve financing efficiency. We aim to improve external credit ratings to enhance capital efficiency and prioritize debt financing for credit operations. Cash excluding these internal reserves, that's on the right. We are a growth company, so we will prioritize capital allocation that contributes to long-term profit growth. This includes investment in existing businesses, new growth opportunities such as M&A, and share repurchases. From the standpoint of flexibility and agile decision-making, we will prioritize share buybacks over dividends. We will prioritize share buybacks over dividends as our primary form of shareholder returns. Lastly, we have announced this as well. This is part of our announcement today.
Timing the disclosure on corporate income tax. Mercari, Inc, which operates a U.S. business, has distributed dividends to the parent company from its capital surplus. This decision was made as part of our capital policy following a reduction in the required capital under relevant U.S. regulations and achieving profitability and securing continued stable operations of the U.S. business. As such, Mercari, Inc has distributed dividends to the parent company from its capital surplus. As a result, part of the valuation loss on shares of affiliated companies, which have previously been added back for tax purposes, has now been recognized. Accordingly, we recorded a corporate income tax benefit of $8.3 billion in the consolidated financial results of FY 2025. The dividend amount was determined based on the reduced regulatory capital requirement and in consideration of financial soundness.
Additional dividends may be implemented in or after FY 2026, depending on future financial conditions. This concludes Mercari's FY 2025 financial results presentation. Thank you.
This concludes Mercari's FY 2025 full-year financial result presentation. Thank you very much for joining us today.