We are ready to start FY 2025 full year and Q4 financial results briefing of LY Corporation. Thank you very much for joining us today. We'll be using the presentation material which is shown on our website. In today's session from LY Corporation, we have Mr. Takeshi Idezawa, the President and CEO. Mr. Ryosuke Sakaue, a Senior Executive Officer and CFO. Mr. Hiroshi Kataoka, the Media Search Domain Lead. Mr. Makoto Hide, the Commerce Domain Lead, as well as Mr. Yuki Ikehata, the Corporate Business Domain Lead. First, Mr. Idezawa will explain the FY 2025 full year and Q4 business results, then we take questions. We plan to spend about 1 hour for this session. We are live streaming this session. Let's get started.
Thank you. This is Idezawa of LY Corporation. Thank you very much for taking the time out of your busy schedule to join us today, FY 2025 full year and Q4 financial results briefing. Let me give you the overview. First, this page is the highlights. The revenue and profit increased despite a temporary impact of the ASKUL system outage on the consolidated basis. Excluding ASKUL, both e-revenue and adjusted EBITDA grew in double-digit %. We accelerated the AI agent rollout to evolve LINE-based experiences and integrate AI into existing services. Centering around the AI agent rollout, we would grow each business to realize the continuous profit growth and enhance shareholder return. Next fiscal year, we plan to increase the dividend per share to JPY 11. We aim to achieve ROE of 8% or more in FY 2030. Next page. This is an agenda that I'd like to follow. First, consolidated financial results.
In FY 2025, consolidated revenue grew 6.2% year-on-year. Adjusted EBITDA was up 5.5% year-on-year. The results ended close to the lower range of the initial guidance. Adjusted EPS was JPY 28.7, achieving the guidance. Please turn to the next page. Next is consolidated performance trend. With the business growth and new consolidation of the subsidiaries, higher revenue and profit was realized, especially the growth rate of revenue exceeded that of previous year. These are the factors of change in adjusted EBITDA. New consolidation of subsidiaries led to higher COGS and SG&A. The revenue growth driven by the strategic business and the commerce business reached 5.5% year-on-year. Excluding ASKUL, double digit 12.6% year-on-year profit growth was realized. Please turn to the next page.
Next is the business performance by segment. Starting with the media business. Account ad growth offset the search ad decline. Revenue grew by 0.4% year on year. The adjusted EBITDA margin was 38.2%, continuously at the high level. Next page. This is analysis of media business performance. Account ad growth pushed up the ad revenue as a whole. COGS decreased, but gen AI costs and Official Account and LINE MINI App-related cost increased. Adjusted EBITDA, the profit declined 2.2% year on year. Next page is account ad. The OA usage by companies and stores is expanding. Paid account is increasing and pay-as-you-go account is also expanding. As a result, the revenue keeps growing at 15.3% at high level. Next page. This is about the LINE MINI App.
We newly added the LINE MINI App tab to LINE from February to strengthen the user traffic and the full-scale launch of the digital content billing feature was launched in April. The number of the LINE MINI App and MAU are expanding steadily year on year. We are working on the monetization measures. Next is the digital transformation solution to stores. We will launch the restaurant option in June, beauty option in the first half. As shown on the slide, it's not just to improve the efficiency of the store operation by using the official account. We would like to promote the customer's repeat usage. In those 2 domains, we aim to achieve 100,000 stores. Next is LINE revamp and LYP Premium. The new home tab, it has started in March.
In addition to the personalized content, by having the gateway to utilize AI, the user dwell time and engagement frequency increased. LYP Premium, we have been expanding that steadily, and LYP Premium with Netflix started in February, and the number of direct subscribers increased by 28% year-on-year, excluding the non-paying users. Next page is the commerce business trend. Due to the ASKUL incident, the profit declined, but there were consolidations of the BEENOS and LINE MAN, and the existing businesses grew and the revenue increased. This is the analysis of the commerce business performance. In addition to the new consolidation, the Yahoo! JAPAN Shopping travel also contributed to the higher revenue. The adjusted EBITDA declined by 12.8% year-on-year. Next page. It's e-commerce transaction value.
The reuse and travel grew significantly. Yahoo! JAPAN Shopping captured the hometown tax demand. Large-scale sales promotion event did well, and the transaction value increased. Next is the major initiatives in commerce. In Yahoo! JAPAN Shopping, we plan to revise the shopping plan. We will change from the advertising-based model to sales-based royalty and monthly system usage fee model to improve profitability. Also, there will be a connection to the LINE SHOPPING tab and a commission on the AI-based transaction to diversify monetization. As for reuse, with the product improvement and consolidation of BEENOS, there was an increase of 14% year-on-year. We are also enhancing the AI functions. We expect double-digit growth next fiscal year. Next is strategic business performance. Revenue increased by 30.6% year-on-year, which is higher than the year before.
Adjusted EBITDA margin grew to 21.1%. Adjusted EBITDA grew more than JPY 40 billion year-on-year. This is the analysis of the strategic business. Revenue expanded mainly with PayPay consolidation. LINE Bank Taiwan was newly consolidated, and the growth of LINE Pay Taiwan contributed. There was a cost increase. With the strong revenue growth, adjusted EBITDA grew by 85% year-on-year. Next is the overview of the business through the PayPay consolidation. PayPay made their first earnings results call for the first time yesterday. Please refer to the details to PayPay's resources. GMV and the registered users are increasing. In payments and financial services, we are seeing the growth. Adjusted consolidated EBITDA is above JPY 100 billion level.
Lastly, the initiatives for FY 2026. Next page, please. I will walk you through the topics in the order shown here, starting with adoption of AI agents in our services. First, let me touch on the current state of generative AI usage in Japan. The environment surrounding generative AI is changing rapidly, and a wide variety of AI services are growing now. However, usage today remains primarily business-oriented, with only around 16% of users utilizing gen AI on a daily basis. In other words, there remains substantial room for wider adoption in terms of regular usage by individuals. We believe that by leveraging everyday touchpoints such as LINE and Yahoo! JAPAN, together with a broad range of service assets, we can deliver gen AI to a much wider user base in a more natural and seamless way. Next page, please.
In response to these changes in the environment, we are evolving the user experience for the AI era while also transforming our existing services. For that, we are pursuing two major directions. The first is the evolution of experiences centered around LINE. LINE serves as a core platform for everyday communication in Japan, and we believe it will continue to play a vital role as a close and trusted touchpoint with users in the AI era as well. Accordingly, we will develop new service experiences tailored to the AI era built around LINE as a daily used platform. The second is introducing AI agents to existing services. Advances in gen AI have the potential to fundamentally reshape the way all services operate, and these services are no exception. We see these changes as an opportunity and will transform our existing services into forms suited for the AI era.
Under this strategy, on April 20th, we announced Agent i, a new service designed to serve as the gateway to AI usage in the AI era. Agent i is an AI agent for consumers that can be accessed with just one tap from LINE or Yahoo! JAPAN. We are also rolling out Agent i for Business for enterprises and stores. Through these initiatives, LINE Official Accounts will evolve into business AI agents that support corporate customer engagement. Users will be able to seamlessly access a wide range of services, while businesses and stores will be able to reach over 100 million users more efficiently and quickly. We intend to evolve Agent i into a new user touchpoint and business platform for the AI era. Next page, please. Let me first explain Agent i for consumers.
By simply tapping through the interface without the need to enter complex prompts, Agent i enables users to easily find the product information they're looking for. We already offer multiple domain specifications and will continue expanding into additional areas going forward. Looking ahead, we will also introduce capabilities that allow these various vertical agents to perform tasks on behalf of users according to their needs. In this way, Agent i will evolve beyond simply providing information into an an AI agent that supports users' everyday activities. Next page, please. Moving on to Agent i for Business for enterprises and stores. Agent i for Business incorporates AI capabilities into many apps and official accounts to accelerate digital transformation for businesses. In customer service, LINE OA AI Mode will handle customer interactions.
It will enable simultaneous responses to multiple customers as well as after-hours support, significantly improving convenience for both users and the stores. In operations and analytics, we will offer Agent i Biz. AI will support the full marketing process for each company, from planning and execution through to analysis. This will allow businesses and stores to improve operational efficiency while focusing more on higher value-added core activities. In addition, by providing end-to-end support from advanced analytics through execution, it will help sophisticate the marketing activities themselves. Next page, please. Now let me talk about monetization opportunities around AI. In addition to providing Agent i, we will also build multiple revenue opportunities. For user billing, we will leverage the LYP payment platform to expand consumer AI subscription offerings. In advertising, we plan to launch agent-based ads on Agent i during FY 2026.
In commerce, we will promote conversion-based monetization through AI-driven purchase support. Monetization opportunity on the official accounts will be through the AI Mode I mentioned earlier. We will build new AI-driven monetization models across user touchpoints, business touchpoints, advertising and commerce to expand our revenue opportunities. Next page. Our initiatives for shareholder returns and improved capital efficiency. This slide illustrates our medium-term targets for corporate value enhancement. For adjusted EBITDA and EPS, we are targeting high single-digit percentage growth or higher. We will also strengthen shareholder returns with a target of achieving ROE of 8% or higher by FY 2030. Next page, please. We have formulated a new 3-year capital allocation policy. By balancing growth investments with shareholder returns, we aim to achieve ROE of 8% or higher by FY 2030.
Using operating cash flow as our foundation, we will execute CapEx and shareholder returns while also utilizing financing that's needed and allocating capital in a balanced manner toward growth investments. Next page, please. For shareholder returns, re-reflecting the earnings growth trend since the business integration, we plan to increase our dividend to JPY 11 per share in the new year. As we have previously explained, we target a cumulative total payout ratio of 70% or more over a 5-year period and will continue to enhance shareholder returns in line with profit growth. Let me explain our earnings outlook. For FY 2026, we forecast revenue of JPY 2.24 trillion, adjusted EBITDA of JPY 585 billion, and adjusted EPS of JPY 30.
While continuing to drive growth in our strategic businesses, we expect double-digit growth in both revenue and profit on a company-wide basis, supported by growth across our commerce business and account advertising, among other factors. We will also reduce fixed costs and further strengthen our operational efficiency. Lastly, let me briefly summarize today's key points. First, in FY 2025, our business foundation expanded steadily, resulting in higher revenue and profit. In FY 2026, we will fully accelerate our AI agent transformation initiatives. We will pursue both improved profitability and enhanced shareholder returns, with the goal of achieving ROE of 8% or more by FY 2030. This concludes my presentation on our full year results for FY 2025 and fourth quarter.
Thank you very much. Now we would like to move on to the Q&A session. If you have a question, please use the Raise Hand function on Zoom. When your name is called by the MC, please ask your question. Let me repeat. If you have a question, please use the Raise Hand function on Zoom. When it is your turn and when your name is called by the MC, please ask your question. We would like to kindly ask you to limit your questions to 2 questions at a time and ask one after another. If you want to ask a question in English, it will be consecutively translated. We would like to ask for your patience. The response will be simultaneously translated. We'd like to start the Q&A session.
First, from Citigroup Securities, we have Yoneshima-san. Please unmute and ask your question.
Thank you. This is Yoneshima from Citigroup. I can ask two questions, I understand, so I would like to do so. The first question is that your plan for this fiscal year, EBITDA, JPY 565 billion. It's a very strong number. The previous briefing session said that 10%-15%, so JPY 550 billion-JPY 575 billion, I think was the number. Now it's JPY 10 billion plus. This shows a certain direction. In the past or 3 month ago or compared with a quarter ago, what are the changes? Cost reduction or strategic business part, is it growing or ASKUL recovery, is it better than expected? Could you explain the reasons the originally 10%-15% higher than the previous forecast. Could you explain the reason behind it? That's my first question.
Ryosuke Sakaue, would you like to respond to your first question. Compared with three months ago, it has been increased. Strategic segment, the other day, PayPay announced the guidance, the upper limit is reflected to our number. That's the biggest reason. The second point is that three months ago, ASKUL part and LINE MAN were not very certain, we mentioned. ASKUL and LINE MAN budgets were confirmed and some upside was added. Those are the two major changes compared with three months ago.
I see. Follow-up question. As for others, other than the other segments, I think that about JPY 22 billion, if my calculation is correct. So like JPY 15 billion for this fiscal, that last fiscal year, and there is a positive JPY 7 billion. I had an impression that maybe the fixed cost improvement. That is not the case?
Well, no change from 3 months ago. Some improvements year-on-year is that, for example, in fiscal 2025, Next Carrier Support program was what we did, and that was the corporate-wide cost. The Next Carrier Support was included in others. That is for fiscal 2026. This program is continuing, but the number and also the amount are changing. That led to the improvements. Those are the major reasons.
Okay. Thank you. My second question. The other day, Agent i was announced and now you can use it from LINE, and I am using that. About that, the reaction so far, initial reaction, and also during this fiscal year, how much impact of the AI Agent i is on the top line and also cost? With the Agent rollout, what would be the impact in terms of the revenue and cost? What do you think are reflected in the forecast for this fiscal year?
Well, thank you for your questions. Well, first of all, as for the number of users after the announcement, yes, we did receive some reaction, so I think that the more people are using it and but the denominator is big, so it's still not showing vividly or clearly. We would like to grow this steadily, we would like to improve and enrich the services. As for the revenue and cost, concerning cost first, in the SoftBank Group as a whole, especially about the AI, I think that we are able to control the cost. That is the current situation. About the cost increase, about the Agent i, we do not include the big cost increase.
As for revenue, today, we showed you some directions, this is just the beginning. We are currently working on the validation, I would like to grow each one of these. We cannot really talk about the specific numbers yet.
I see. Thank you. Just one point of clarification. AI or OpenAI license, for example. When the revenue increases, is the payment increases? Even the revenue doesn't increase when you use a lot of AI, could the cost increase first? If you can answer that question, I would appreciate it.
Saka, would you like to respond?
It has to do with the contract, it's difficult to say. As the usage increases, the cost doesn't increase at first. We will be making the payment from the different perspective. If by 2025 AI cost is about JPY 10 billion, for 2026, it's not going to change that much. That is the current view that we have.
Okay. Thank you very much.
Thank you. Next question is from Sato-san from Jefferies Securities. Jefferies, Sato.
Yes, this is Sato from Jefferies. Can you hear me?
Yes.
I have two questions. My first question is on your guidance. Each segment I thought was pretty much in line with my expectation, but the profit seems to be a little bit bullish. Overall for each of the segment. For example, for media segment, is that a realistic number for e-commerce? The adjusted EBITDA, is it a little bit aggressive? For the strategic business, I guess, the PayPay's contribution are baked in. When you put together these numbers, what were the assumption and the mentality of the management team when you put these guidance together? Looking at the overall guidance, I think it's in the median of your range.
Can you maybe point out if there are any conservative assumptions that you have baked in? For media, the search may be flat, but the search advertising still may be challenging. Can you give me a little more color to your guidance, please?
Yes. I, Sakabe, will respond to that question. First, on the media business, for revenue, for display ad and search ad, for FY 2026, the two businesses in aggregate is expected to be flat. For the first half, this flat expectation may be a little bit challenging. Also, for the full year, we're trying to strive to maintain flattish growth over last year, but first half may be a little bit challenging. For account ads, we're looking at 15% growth in line with the FY 2025 growth. With just the accounting ads, 15% growth will give us additional JPY 20 billion. This is a highly profitable business. In that sense, the media, JPY 10 billion, is we're trying to achieve that with the account ads as a driver.
For the display and the search ad, we want to maintain a flat revenue over last year. For commerce, ZOZOTOWN has disclosed their numbers. You get the OP and the EBITDA, so that's like a JPY 5 billion profit growth. For Yahoo! Shopping, for reuse, GMV is expected to grow by double-digit, and I think that will be sustainable.
To a certain extent, those are more of a realistic target. For commerce, the moving parts will be the ASKUL business. Because, compared to FY 2025, we are expecting some recovery for ASKUL business. But at this point, it's still uncertain how strong the recovery will be for Q4. The ASKUL impact will be what had been negative JPY 700 million. As compared to Q3, the negative impact has been mitigated substantially. We're hoping to go back to the pre-incident level during the course of this year, but there are still some moving parts. For strategic businesses, we use the upper range of the PayPay's guidance, and the LINE brands at Global Financial Services are growing steadily. For strategic businesses, I think, we have a good visibility. That's the overall nuance of the guidance.
In the previous question from Yoneshima-san, he talked about Agent i. I think this will be part of the Media segment. It's still hard to say what impact you can expect from the Agent i business. If there are to be upsides, is it going to be related to Agent i, or I guess it may be included into both Media and Commerce. Is the upside going to be from Agent i? I guess the amount will not be that big because it's a fee-based business, right?
Yes. As opportunity, we have a good expectation, but the Agent i advertisement is still on a pilot basis. This is something that we have to work on, but we cannot incorporate bullish outlook. For the LLM cost, for FY 2025 and FY 2026, we're expecting a flattish level. For media, the gen AI and the increase is going to be on the story DX strategies for reinforced promotions.
I see. My second question is, if you could give me some insights. On a company-wide basis, if you are going to roll out campaigns for media, for instance, or commerce, and maybe for strategic businesses, are there any big events or promotions that you already have a solid plan for? If you could give me a rough idea of how much you're going to spend on promotion, I would appreciate such insights. If I may add, the Ministry of Communications cybersecurity, I think our investment was like JPY 15 billion. Has this been completed? Those are my questions.
yes. I will take those question as well. For campaigns, for commerce, no change from FY 2025. Of course, the GMV is increasing, so the point expenses would grow in line with the GMV growth. It will not put pressure on our margin. On the media business, last year we did the TV commercials, so with search advertising business, but we're not doing that this year. We do not expect any major incremental cost. For the security measures, initially we set at JPY 10 billion. Now the FY 2025 was JPY 8 billion. We do have some continued costs, like license cost for JPY 2 billion-JPY 3 billion. The reduction from last year's 8 billion is going to be like JPY 5 billion in terms of the security measures required.
Is that cost included in the other adjusted expenses?
Yes. Basically, yes. The other cost is improving, and that's reflecting into a better adjusted EBITDA. Yes, like, I explained earlier, the cost on the next carrier support is 60%, 70%, and the rest is the reduction of cost related to security.
Thank you.
Thank you very much.
Next, from Mizuho Securities, we have Kishimoto. Please unmute and ask your question.
This is Kishimoto of Mizuho Securities. Thank you very much for this opportunity. I have two questions. First is about the media business. In Q4, adjusted EBITDA is increased improving. Maybe it has to do with the cost structure, but LYP Premium I think did very well. For the full year, the profit was down, but if you look at Q4 only, I'd like to know the details. If you look at the LYP Premium monthly, for example, page 13, there is a great growth. It could have a positive impact. This search ad and account, as for vision and other LYP Premium, the surrounding data premium. Could you give us some details?
Yes. I'd like to also respond. This is Sakaue speaking. Account ads is something that will continue. LYP Premium, with the higher numbers, the revenue about JPY 2.4 billion in Q4, the year-on-year growth was realized. The search ads, as you can see, was negative. That, in terms of the gross profit, that had a negative impact. If you look at the year-on-year change in Q4 this year and A, there have been some changes. A year ago, the personnel cost and a part of that is gone. For example, the bonus and so forth is not repeated. This fiscal year Official Account and we enhanced the sales promotion, so that was offsetting with each other. LYP Premium, yes, it's included. Yes, that is the case.
Thank you. My second question is about the Yahoo! JAPAN Shopping, the fee, change or the plan, change and the potential impact. What kind of, negative impact, do you expect?
Well, about this, double-digit or, more than JPY 1 billion, contribution to revenue is included in our guidance. I'm sorry, I cannot disclose the specific numbers.
Understood. As of now, from the merchants, what have been the reaction so far?
Hide-san will answer to this point.
Yes, I'm in charge of commerce. I'd like to respond. From the merchants or the stores, the reaction with the change of this fee level, the shopping service from LINE and detailed scheduling and also the purchase via the AI, we are including that in our explanation. Currently, major sellers that are selling a lot, I think have given us a positive reaction. As for Yahoo! Japan Shopping, currently we have a ad model and the fee, there could be some changes. For the sellers of the Yahoo! Japan Shopping, the commission is not going to grow so much. For the major sellers, I think the reaction has been very good.
We will be charging the monthly fee and if the small, medium-sized sellers who are not achieving the big sales in the Yahoo! Japan Shopping could churn, but the impact on the transaction volume is going to be limited.
Thank you. That's all the questions. Thank you very much.
Thank you.
Next question is from Harahata-san from Nomura Securities. Please unmute and ask your question.
Yes, this is Harahata from Nomura. I have two questions. My first question is on the media business. We are faced with the Middle East risk. What is the impact on the advertisement market? How would you assess the impact of the conflict in the Middle East on your ad business?
Yes, this is Ikehata speaking. I will answer your first question. As you pointed out, due to the conflict in the Middle East, LINE Ads will display ad or the search ads, and the demand from the client, and the client refraining from putting out the ads is not happening. Also, at this point, looking at the current quarter, we have not seen a material impact on our plan.
I see. My second question is on AI agent and the monetizing opportunity. You have some slides. How would you score the level of expectations for this offerings? What is the timeframe of monetizing on these opportunities?
Yes. This is Uesawa. I will respond to your question. We are really working on this initiative, and at this point, we are working on all of these simultaneously and try to allocate more investment into areas where we see growth opportunities. It is difficult to rank them. The users' touch points to internet will transform into AI agent, and we believe that this is an inevitable trend. As we have been communicating, Agent i is something that we would like to grow so that we can also build the relevant monetizing model. That's our focus for FY 2026.
Thank you very much.
Thank you. Next is Okasan Securities. Okumura-san, please unmute.
Thank you. Okumura from Okasan Securities. I hope you can hear me. Yes? Thank you. I have two questions. First is about the media business, mini app, the store DX, billing business, and also the search business. The number of stores and amount of billing, is this going to be increasing in phases? Or if the growth is going to be accelerated, what could be the triggers that you expect? Also achieving JPY 100 billion or close to that level, what are the challenges before achieving that?
Thank you for your question. Ikehata speaking. I'd like to answer your first question. Right now, for the restaurant and also the beauty, the restaurant option and the beauty option, those are the pre-introduction, and we have already started selling those. Based upon our expectations or compared to that, I think the reaction has been better. We are in line with our plan. In June and onwards, we will be launching this. As for now, we are just making proposals before doing so. About 100,000 stores this time. At the end of FY 2028, we have the major target. That's how we are proceeding with account related businesses.
The restaurant and beauty, this store DX business, against the JPY 380 billion at the end of FY 2028, this will be the major portion. We'd like to make the progress in terms of acquiring stores. As for the account and the mini app, it's not just the store DX, but also the LINE MINI App advertising business, and also the payment, the commission, or the billing bill business, which started from last fiscal year. As of now, it's about JPY 10 million GMV per month. Concerning that, the mini app, to what extent can we increase the number of the mini apps and also the number of the users? MAU is growing, but to what extent can we grow this? Those have become very important. As of now, I think, it's going very well. That's our understanding. Thank you very much.
Thank you for your explanation. Second question is a qualitative question. The execution capability of your initiatives. You talked about various initiatives in the past from the investors. The level of the execution and also the speed, there have been some concerns expressed. From April, mission value was updated, and you have focused more on speed. In terms of structure or decision-making process, are there any changes or differences from the past? Anything that you want to focus upon?
Thank you. Specific or example, for example, Agent i, internally, especially, we have solicited the different ideas and with a very small team or smaller than the past, we have started multiple teams so that we can work on the development quickly. That's one specific example. As you referred to, the mission and value were updated. The process, internal processes, we try to speed up and eliminate the waste. Execution as a whole, we as a management team is very much focused on improving that. That's my answer to your question.
Well, thank you very much for your answers.
Thank you.
Next question is, Maeda-san from SMBC Nikko. Please unmute and ask your question.
Yes, this is Maeda from SMBC Nikko. I would like to ask two questions. My first one is regarding AI Agent and LINE Yahoo, both of them from outside. How can we assess the success of these initiatives? Are there any specific KPIs that we should be following? Do you have any internal KPIs or target that you would like to share with the external stakeholders so that you can prove that it will lead to future monetization opportunities? I also want to understand how you're managing the business, including the KPIs.
Yes, this is Idezawa, and I will take that question. First, we are in the phase of having the users use these offering. The number of active users is the important internal KPIs. As for the future disclosures, we will consider what is best for the outside personnel to assess the success of our progress.
Yes. My second question is on the store DX. For restaurant option, you have JPY 36,000. Beauty option is JPY 17,500. For this pricing strategies, I think you are the front runner and you have some competitive advantage. What is the competitive edge? Are you trying to take shares away from the existing players or are you trying to target new customers who have not used similar offering? This may already be a red ocean market. Can you elaborate on the competitive landscape?
Yes, this is Ikehata. I will take that question. To start with, other players are also offering similar solutions, and there are multiple players in the market. However, what we are offering as solutions, for example, we are not just simply offering a mobile ordering function. It's not just the CRM solution. Of course. We are also not just offering the cloud or hub or host. Also, for the official account, we are trying to offer multiple solutions that will help to digitally transform other stores. They will be connected and seamlessly help the stores proceed with DX. In regards to our value proposition, that is how we try to differentiate. We can also leverage on the existing customers, the official account customers, to offer the solution.
In terms of the customer acquisition, the Official Account users in the stores and the businesses are the initial target for these solutions. In reality, for our Official Account business, the restaurant and the beauty domains are very active and high in demand. We the customers appreciate the effectiveness of these solutions. Also, for these existing Official Account customers, we also want to offer these peripheral solutions for restaurants and beauty. Going back to your question, the existing stores who are using a similar solution, if they are the Official Account, we will try to replace their existing vendors. For the official account users who are not using these solutions offered by the other players, we will try to acquire them as new customers for these solutions.
I see. Thank you.
Next, Kumazawa-san from Daiwa Securities, please unmute and ask your question.
Thank you. In the supplementary information on page 21, the media business and search ads, LINE Yahoo, year-over-year, I think that looks worse than Q3 and Q4. The major customers trend and so forth, if you can elaborate on that.
Yes. Sakaue would like to respond to that, if I may. FY 2025, Q3, Q4, the major clients churn was the major factor. At the same time, as of now, the AI response is showing more. In March timeframe, about 13% is showing the AI response. By doing so, the users don't need to issue the queries many times.
In the AI dialogue, you can get the answer in the chat format. The accuracy of the first response is becoming better. Number of the query is being reduced. As a result of it, the existing search ads, they're showing as such, as is, becoming less. Because of that, Q4, the growth rate was negative. At the same time, the major trend is that it's not something that we can stop. We need to make the self-disruption, one of the self-disruption examples. About the search, AI response will be increased and at the same time, the search ads, the display frequency will be less. Agentic ads, we would like to launch that as soon as possible so that we can offset the decline of the search ads. That's what we are thinking.
Thank you. Anything to add?
Kataoka would like to also respond. In Q3 and Q4, are those a major difference between the two? In Q4, as Sakaue-san explained, the major client, the placement, has come to an end. If you look at the unit price of the ad, which has gone up and the search number has come down. With the declining search number or number of searches, as a market as a whole, the AI usage is increasing. In addition to that, in our company, the number of the searches, even if it decreases, we want to increase the usage of AI. Internally, even if the search usage goes down, we want to increase the AI usage.
Eventually, the AI ads business will emerge. If we don't do this, the usage of the search will be decreased. We are taking the steps so that we can expect the growth in the future. Thank you. Just one more thing, related to your answer. You are seeing the cannibalization. Search and display might be difficult.
Thank you very much for your explanation. Second question is on page 32. Page 32, the capital allocation. FY 2025, the part that you are unable to use, it's not going to go for the return to the shareholders, but it's included here. We are hoping that should be used for the return for the shareholders. Of course, the payout ratio is not mentioned. If it's the 30% to 40%, the shareholder return of 40%, without the share buyback, I think that you can achieve the shareholder return. What about the potential for the future buyback? It is mentioned here at the bottom about the financing.
Yes. Sakaue would like to respond. In page 32 on the left-hand side, the 23 to 25, the financing and out about JPY 210 billion. The backup finance is about JPY 150 billion. If we want to, we can do the financing, but the commitment line and, yes, JPY 150 is something that we don't do the financing. Out of the JPY 25.2 billion, we did not procure JPY 150 billion. If you go to the right, the bottom, the capital procurement is at the bottom. JPY 100 billion is carried forward, and the remaining JPY 100 billion is rolled over to 2026-2028. Shareholder return, we are enhancing the dividend payment, and part of the carried over it will be used for that. Also the profit is almost doubling. Based on that, keeping the dividend at the same level is not good enough for the long-term shareholders.
That's why we decided to pay more dividend. As for the share buyback. The dividend payout ratio with the current level, the total return, 70% or higher is not possible. Certain level of the share buyback is something that we would like to continue to think about. We had JPY 150 billion per year in the past. It could change from that a little bit, but including the parent company, we would like to discuss with them, and we'd like to also work on the share buyback at certain timing so that we can achieve the total return ratio of 70% or higher. Otherwise, unless we reduce the denominator part, you cannot just use the growth part to increase the dividend payment.
Thank you very much.
I'm conscious of time, and I would like to get the last question. Ramji from CLSA, please.
Hello. Sorry, Oliver Matthew. I have two questions. One, could you just, on this 100,000 accounts for LINE Official Accounts, how do you get that number? Is it very conservative? That's the first question.
Regarding your question on conservatism, this is actually quite aggressive, a stretch target in a way. Right now for restaurant and beauty domain, this is a service pre-launch, and the digital services are being used by the stores as a pre-launch. Also in that sense, I think, we can target 100,000 official accounts. We would like to make sure that we get that 100,000, and that is how we set the target. For us, how challenging is the target? Right now, the restaurants that's already using the official account and also beauty salons are using the official accounts. There's a few tens of thousand or a few hundred thousand users.
For those users, we would like to appeal the solution and we would like to market and sell the solutions. We have set up this subsidiary to reinforce our marketing and sales capability to put more manpower. Through those initiatives, in the next three years, we would like to achieve this target. Would that suffice your question?
Okay. Maybe PayPay could help you 'cause you helped them expand very aggressively into these segments before. Second question. Could you talk about AI productivity gains within the company? Are you seeing major changes in terms of the speed you are delivering new services or any other things? Thank you.
Thank you for the question. With our Agent i, we are trying to incorporate AI agent into the various services. For that development, AI software has been used quite intensively. Our development capability is improving as well as the speed. For all the employees, we are promoting the usage of AI. The AI usage in the development phase is improving. Well, there are services and programs which have intensively used AI. On the other hand, we have a lot of services. We want to make sure there is a solid security and governance, we have to work on both. The development efficiency and speed will continue to improve in our view.
Great. Thank you.
It's time. We'd like to end the Q&A. Lastly, I'd like to invite Idezawa to say a few words.
Yes. Thank you very much for taking the time out of your busy schedule to join us. FY 2025 ended well. We expanded our revenue and profit. As for FY 2026, we would accelerate introduction of the Agent i and that is being done in the societies. We would like to transform ourselves and increase the speed and also work on the business structure. As a result, we would like to improve the profitability and also the shareholder return to respond to the expectation of the shareholders. I hope that you will continue to support us, and thank you very much for joining us today. With that, we'd like to end LY Corporation 2025 full year and Q4 financial results briefing. Thank you very much for staying until the end.