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Consolidated Financial Overview

• Consolidated revenue was 553.9 billion yen, up 13.1% year-on-year, with accelerating growth. Adjusted EBITDA was 154.8 billion yen, up 23.1% year-on-year, and the adjusted EBITDA margin improved to 28%, driven by PayPay consolidation and higher core gross profit.
• All three segments delivered gross profit growth, and overall Q1 performance exceeded internal projections.

AI Agent i Transformation

• Agent i has expanded to 25 service domains, reaching 12 million DAU. Improvements to user navigation between LINE and Yahoo! JAPAN and addition of long-term user preference memory are driving higher daily usage. Monetization models (subscriptions, AI tools for businesses, AI advertising, e-commerce agency fees) are currently under validation.

Key Partnerships

• A new collaboration with 7-Eleven was announced: enhanced rewards and coupons for LYP Premium members, and development of joint digital touch points including digital memberships and mobile ordering via LINE Official Accounts and mini apps, to improve in-store shopping experiences and grow membership.

M&A and Strategic Transactions

• LY Corporation is conducting a joint tender offer for Kakaku.com Inc. with Bain Capital, with total expected acquisition cost of 69 billion yen. Expected ownership is 49.9% for LY and 50.1% for Bain. Planned synergies include: driving user traffic to Kakaku.com's platforms, integrating Kakaku.com assets with Agent i and payment infrastructure, and expanding DX solutions for restaurants and HR domains.

Product Monetization Initiatives (Media)

• A paid DX service for restaurants launched in June with a strong start; a similar service for hair and beauty salons is planned for Q2 FY2026. A paid monthly CRM tool for LINE Official Account management launched at 5 thousand yen per month to support customer data management and targeted communication.

• Full-year consolidated guidance is maintained, and management now has increased confidence that full-year results will exceed the original guidance, even after accounting for expected SG&A normalization starting in Q2.
• Media segment full-year guidance for flat search and display ad revenue is maintained. Management noted Q1 Media revenue progress was below 25% of full-year guidance due to planned seasonality, with revenue expected to concentrate in the second half, and the segment's Q1 profit overperformance puts full-year results within reach.
• The 10 million LYP Premium subscriber target is reaffirmed, with new lower-priced plans launching to drive further growth.
• Three-year capital allocation plans (including the planned dividend increase) are unchanged, with no expected impact from the Kakaku.com tender offer.

1. Media Segment: Revenue grew 2.6% year-on-year. Adjusted EBITDA increased 14.2% year-on-year to 14.8 billion yen, with the adjusted EBITDA margin expanding 4.2 percentage points to 41.8%. The segment contributes ~ (not explicitly stated, core mature earnings driver) of overall gross profit, with growth driven by high-margin account ads and subscriptions, offsetting declines in legacy search and display ads. Paid accounts for business services exceeded 500,000; LYP Premium direct paid members reached 6.82 million, up 36.8% year-on-year. Mini apps hit 35,000 with 22.18 million MAU, up over 50% year-on-year.
2. Commerce Segment: Revenue grew 12.5% year-on-year, and adjusted EBITDA rose 10.2% year-on-year. The adjusted EBITDA margin improved significantly to 17.3%, recovering to near pre-ASKUL pressure levels. Excluding consolidation effects, LINE Yahoo! commerce revenue grew 11.2% year-on-year. Shopping transaction value grew 9.1% (Yahoo! Shopping up 8.6%) year-on-year, reuse transaction value grew 18.4% year-on-year, and service transaction value maintained double-digit growth.
3. Strategic Businesses Segment: Revenue grew 34.9% year-on-year. Adjusted EBITDA reached 35 billion yen, an increase of nearly 14 billion yen year-on-year, with the margin expanding to 26.9%. Consolidated PayPay revenue grew 27.4% year-on-year, other fintech revenue grew 81.7% year-on-year (driven by LINE Bank Taiwan consolidation and LINE FinTech growth). PayPay has over 74 million registered users, with GMV up 23% year-on-year and PayPay adjusted EBITDA up 59.1% year-on-year.

• Display advertising faces structural headwinds from industry shift to video content, as LY has insufficient video advertising inventory, even as AI improves performance of text-based display ads.
• Advertiser demand is becoming more ROI-focused and selective amid uncertain market conditions, increasing pressure to improve advertising effectiveness.
• Legacy search ad volume is declining as AI answers reduce the need for multiple repeated searches, a trend management expects to continue; improvement in ad unit pricing must offset volume declines to meet guidance.
• Q2 profitability may decline relative to Q1, as Q1 SG&A spending was slower than planned, and spending will normalize starting in Q2. Seasonality and changes to the hometown tax scheme may also impact Q2 commerce results.
• If the Kakaku.com tender offer fails, management will need to execute an alternative organic or alternative partnership growth strategy for restaurant and conversion domain, though a backup plan is already in place.

Q: What are the primary expected synergies for the Kakaku.com acquisition that will help meet LY's 10% IRR requirement, and will the transaction impact planned dividends or buybacks? / A: The highest priority synergy is Tabelog, Kakaku.com's restaurant platform, which fills a critical must-have domain for LY's AI agent strategy. Kakaku.com's product and word-of-mouth data will also improve Agent i's shopping navigation capabilities. Management stated the 10% IRR target includes expected synergies and planned debt leverage, and there will be no impact to the already announced dividend increase or existing 3-year capital allocation plans.

Q: Why is acquiring Kakaku.com strategically critical now, and what is the backup plan if the deal fails? / A: In the AI era, high-quality conversion assets for restaurants, product comparison, and hiring are extremely valuable, as end-to-end AI agent services require existing trusted data and transaction networks. This is seen as the last opportunity to acquire these assets, as delay would cede market share. If the deal fails, LY will speedily implement a backup plan, including organic development or alternative partnerships within the SB Group, while maintaining the 10% IRR discipline.

Q: Why is search ad volume declining, and is this trend within expectations? What is offsetting the volume decline? / A: The decline in total search volume is expected and driven by AI answers eliminating the need for repeated follow-up searches, a trend that will continue. Higher ad unit pricing, driven by improved AI targeting that leverages LY's proprietary user and search data, is offsetting lower search volume, and Q1 search ad performance was in line with internal expectations.

Q: What is the current status of Agent i's 12 million DAU, and when will monetization begin? / A: The 12 million DAU combines users across LINE and Yahoo! Agent i services, which management calls a strong early start on the long-term target of 100 million users. Monetization is still being validated; potential models include user subscriptions, AI tools for business partners, and AI-driven advertising fees, but no specific commercial monetization has launched yet.