LY Corp

XMUN:YOJ

Q1-2026 Earnings Call

[Operator]

It's LY Corporation's Fiscal '26 First quarter Earnings Briefing. Thank you very much for taking the time to join us today. In this session, we will use the earnings presentation materials available on the LY Corporation website.

Joining us today from LY Corporation are President, Representative Director and CEO, Takeshi Idezawa; Executive Corporate Officer and CFO, Ryosuke Sakaue; Executive Corporate Officer and Corporate Business Company CEO, Yuki Ikehata; Executive Corporate Officer and Commerce Company CEO, Makoto Hide. These are the officers attending today. First, Sakaue will explain the earnings results for the first quarter of fiscal '25. This will be followed by a Q&A session. Today's session is scheduled to last approximately 1 hour. This session is being live streamed. If you experience technical difficulties such as disrupted audio or video, please try switching to an alternate server from the link at the bottom of the screen.

Let us now begin the presentation.

[Ryosuke Sakaue, executive]

This is Sakaue from LY Corporation. Thank you so much for taking the time out of your busy schedules to join us for the fiscal '25 first quarter earnings presentation. I'll first provide an overview of our first quarter results.

Next page, please. This is the overview. First, our consolidated performance tracked the full year guidance with both revenue and profit increasing. Revenue and adjusted EBITDA both reached record highs for a first quarter. As for mid- to long-term growth initiatives, the phase LINE revamp began in July, starting with some tabs. So we are upgrading LINE mini app functionality and sales capabilities as well to encourage greater usage. AI features are being rolled out across our services, aiming to drive the GenAI's take-up in Japan.

Next page. I will explain in the order shown in the agenda here. First, the consolidated results. The progress against the full year guidance did not reach '25, but our revenue tends to be higher in the second half due to the year-end shopping season and fiscal year-end demand. And our Q1 results, therefore, are within internal expectations.

Consolidated performance trends. Revenue and profit growth were mainly driven by account adds and PayPay consolidated. While we continue to invest to implement AI into services and grow our Commerce Business, ongoing optimization of fixed costs resulted in an adjusted EBITDA margin of 25.7%.

So consolidated EBITDA comparison. Biggest contributor to revenue was the Strategic Business, but Media and Commerce also grew. Although SG&A increased, revenue growth absorbed these cost increases. Excluding the onetime gain from the deconsolidation of ValueCommerce in the previous fiscal year, adjusted EBITDA grew by 7.1% year-on-year. This talks about Commerce and Media together, consolidated total advertising revenue. So in addition to account ads, Commerce ad revenue continues double-digit growth, driven by increased transaction value due to promotional investments and product improvements.

Next, this is consolidated e-commerce transaction value. Domestic shopping transaction value was up 5.9% year-on-year. Yahoo! Shopping saw a 6.9% year-on-year increase with growth also seen from ZOZO and ASKUL. Domestic service-related transaction value grew by 7% year-on-year, supported by an increase in travel bookings. Reuse transaction value achieved positive growth, driven by the growth of Yahoo! Flea Market and consolidation of BEENOS. Now the transaction volume or value for BEENOS reflects only the month of June, it's not so large. So it's the Yahoo! Flea Market that drove the GMV growth.

Share repurchase and cancellation situation. In line with our capital allocation policy, we executed share repurchase and cancellation of treasury shares through a tender offer announced in May '25, we repurchased shares worth approximately JPY 116.2 billion, which were canceled effective July 1. In June '25, we announced a plan to repurchase up to JPY 38.5 billion of shares through market purchases. Period of purchase runs through the end of September with cancellation scheduled for the end of October. We remain committed to enhancing shareholder returns and improving capital efficiency.

As for capital allocation, reflecting the share repurchases conducted in the first half, we have updated our outlook. We will continue to focus on improving capital efficiency and further expanding positive spread.

LINE revamp situation. So left, you see the tab structure. The shopping tab has been added with the revamp. The shopping tab will be rolled out to some users in a phased manner from September 2025. The Wallet tab, this was released at the end of July '25 from Android OS and the new features are being added progressively. Other tabs are also scheduled to be renewed sequentially during the second half of the year.

So the Shopping and the Wallet tabs, which are to be revamped, the newly introduced Shopping tab serves as a portal for LINE Commerce services. Initially, the main offerings will include LINE GIFT and LINE Shopping service launched in May. We plan to enhance personalization through data utilization and introduce AI-based product recommendations. LINE Shopping is a recommendation-driven e-commerce mall tailored to each user. The concept is casual discovery shopping, like discovering items while browsing a magazine. Through the Shopping tab, we aim to grow transaction value and boost Japan's e-commerce penetration, which remains still very low.

The Wallet tab, well, its UI/UX has been revamped and this will function as an entry point for mini apps by combining merchant-focused sales efforts and user campaigns, we aim to expand mini app usage. Additional Wallet functionalities are planned to be added in the future.

So in this fiscal year, by the end of July, LY Corporation has launched 14 services, leveraging GenAI. On Yahoo! with services such as AI Assistant, AI Topic and Review Summary, we enhanced user experiences in information search, news comprehension and shopping support. Online, AI has been integrated into daily usage with services such as LINE AI, which enables users to ask questions conversationally and Talk Suggest, which generates context-aware replying suggestions. We will continue accelerating AI deployment across our services to promote usage and drive GenAI adoption in Japan.

PayPay's plant listing. So we received some questions since the announcement, so we'd like to respond to that. We intend to maintain our current capital structure with PayPay even after the company's IPO, ensuring that PayPay remains a consolidated subsidiary. We will continue to support PayPay's business development and corporate value growth as its parent company.

Next, I will explain segment results and topics. Next slide, please. This is on performance trend of the Media Business. Account advertising continued to drive the growth of the Media Business and the overall business. Although revenue increased, SG&A also rose, resulting in a year-on-year decrease of 7.4% in adjusted EBITDA.

Next slide, please. This is Media Business revenue. Search advertising revenue decreased, but advertising revenue increased by 1.4% Y-o-Y. Display advertising saw its first positive growth in 3 quarters, indicating a bottoming out.

Next page, please. This is Media Business performance analysis. Profit decreased due to increased SG&A expenses. There are 2 major factors for this increase of SG&A. One is sales promotion costs decreased due to increased point costs for LYP premium members. The premium members increased and linked to that, the sales promotion costs increased. The second factor is costs related to the integration of advertising platforms and the development of AI infrastructure, which have risen.

Next page, please. This is on Search Advertising. Let me add some more information. On Search Advertising, revenue decreased due to slowdown of ad placements from some advertisers. The slowness is not due to the penetration of AI search, but changes in ad demand. Additionally, revenue from partner sites have also decreased. Going forward, we will explore diverse monetization methods, including the growth of search-linked shopping ads.

Next page, please. This is on Account Advertising. In the first quarter, the number of paid accounts continue to increase steadily. Pay-as-you-go billing accounts also increased with revenue growing at a high rate of 18.3% year-on-year.

Next page, please. this is on LINE Mini apps. The number of LINE Mini apps and MAU have grown significantly with usage expanding. In terms of functionalities, we plan to implement features in stages such as payments using payment information from App Stores and the ability to register payment information within the Mini app for payments. We are also strengthening our sales force establishing a sale subsidiary, LINE Yahoo! business partners, which is focused on the food and beauty sector. We will increase the number of sales office in the future.

This is on Commerce Business performance trend. Revenue increased primarily due to growth in Yahoo! Shopping and Travel. But operating profit decreased due to higher SG&A expenses and the impact of onetime gains recognized in the previous fiscal year. The margin remained at the high teens range.

Next page, please. This is on Commerce Business revenue and the breakdown. For LINE Yahoo!, the increased year-on-year by 5%, Shopping saw a slight decrease in revenue due to the impact of the deconsolidation of IPX despite strong performance of Yahoo! Shopping. Reuse saw an increase in users of Yahoo! Flea Market. And BEENOS was consolidated, resulting in a year-on-year revenue increase of 14%. Service e-c saw a year-on-year increase of 10% due to continued strong performance in Travel. ZOZO and ASKUL also grew.

Next page, please. This is Commerce Business EBITDA. Revenue was as shown on the slide with cost of sales slightly increasing, mainly due to ASKUL. Within SG&A, the business commission that we increased. This is due to the costs related to ZOZO's acquisition of Lyst and the operation of ASKUL's new logistics centers. As a result, the adjusted EBITDA, excluding last year's onetime gains, remained largely flat year-on-year.

Next page, please. This is a Strategic Business performance trend. PayPay consolidated continue to grow with revenue increasing by 22.1% year-on-year to JPY 96.6 billion. Adjusted EBITDA driven by revenue growth and continued cost control surpassed JPY 20 billion for the first time in a quarter. As a result, the margin reached 21.7%.

Next page. This is on Strategic Business revenues. With PayPay consolidated, started consolidation with PayPay Bank and PayPay securities starting from the first quarter, resulting in a year-on-year increase of 23.2%. PayPay and PayPay Card continued to grow in GMV and interest income increased due to the expansion of revolving loan balances. PayPay Bank saw increased revenue due to growth in loan balances. Other financial services also remained strong, growing at 15.1% year-on-year.

Next page, please. This is on Strategic Business performance analysis. Cost of sales increased at PayPay Bank due to the increase of the procuring cost. For SG&A, it decreased due to a reduction in other SG&A expenses, primarily due to the absence of costs related to the withdrawal of LINE Pay domestic services in the first quarter of the previous fiscal year. Significant increase in profit was achieved due to substantial growth in revenue.

Next page, please. This is PayPay business overview. PayPay's consolidated GMV increased by 24% year-on-year, driven by growth in the number of transactions per user and the average payment amount. Consolidated revenue and EBITDA now include PayPay Bank and PayPay Securities, reflecting the new consolidation scope starting this quarter. Revenue increased by 24.6% due to growth in payment impacting and EBITDA expanded to JPY 218 billion.

Next page. In summary this first quarter results marked a solid part in line with the guidance. We are steadily advancing initiatives aimed at mid- to long-term growth, such as the LINE renewal, expansion of Mini apps and implementation of GenAI in services. We will strengthen this momentum in the second half and beyond to lay the groundwork for growth in the future. Additionally, we are working to enhance capital efficiency and strengthen shareholder returns through share buybacks and cancellation to sustainably enhance corporate value.

That concludes our presentation. Thank you for your attention.

[Operator]

[Operator Instructions] Are there any questions? From SMBC Securities, Maeda-san.

[Eiji Maeda, analyst]

SMBC Nikko Securities. My name is Maeda. I have 2 questions. First question, so search ads, I think the market itself is slowing, but your revenue has fallen even more than I expected. You say some clients, but to the extent possible, explain what is happening. And in the second half onwards, is the impact going to continue? And was that reflected in the plan to begin with? So this search ads, why is it sluggish can you explain? That's the first question.

[Ryosuke Sakaue, executive]

About the search ads, let me explain and maybe Ikehata may supplement from a sales perspective. So in terms of demand from advertisers, so HR, travel and temp service, these large clients, internally, they have made system updates to enhance productivity of ads. And so there has been lower demand placement of ads. So if the placement goes down for the top client, then that impact others and the bidding price tends to come down. And so that's why we have an overall negative figure.

And from the second half of last fiscal year, we have seen that kind of a trend. We've been focusing on this, watching carefully, but the slowing of demand for the Search ad was stronger than expected in this quarter. So for the second quarter, in the second half, we cannot be optimistic is what we are thinking. So the negative rate in Q1, I don't know if it will be the same, but we should expect this kind of a decline in demand for this business.

Ikehata, if there's anything to add?

[Yuki Ikehata, executive]

Thank you for the question. This is Ikehata. Sakaue has laid out the main points about this. And especially we have received large sums from this one particular company, and they have changed the standards for ad placement, and that has directly impacted our business. For this, on a continuous basis, we will continue to discuss with this particular client, and we need to maintain communications so that there will be a restart of their business. But the system update and the placement standard change is the reason. So we think it might take a little time.

So Q2 onwards, throughout this fiscal year, relatively speaking, this kind of situation may continue as Sakaue also mentioned. So at the beginning of this fiscal year, this kind of drop, to be honest, we did not expect this magnitude of a drop. So the -- in terms of the ad revenue projection, how much have we reflected this search ads, we have to be very cautious. But for official account ads, growing it more than we had anticipated at the outset. For display ads, as we explained in the presentation, we're catching up to Y-o-Y flat level. So in terms of the impact to the ad business as a whole, while we're trying to control it so that there is no impact by combining various different types of ads.

[Eiji Maeda, analyst]

Second question about LINE Mini apps. And what's the progress to date? And quantitatively, what's been acceptance at what timing and what way are you going to try to monetize this? Is -- I think it's now usable on the web and the application, I think, are spreading. And I think there's a lot of potential for monetization. So talk about what you see in terms of its potential and talk about the current situation of the LINE Mini apps.

[Ryosuke Sakaue, executive]

Ikehata will mainly respond. As we showed on the slide, the Mini apps third party are now developing them. And we refrain from disclosing, but MAU basis, it is growing steadily. That's the current situation about monetizing and the concept. Ikehata will explain.

[Yuki Ikehata, executive]

Thank you for the question. This is Ikehata. About the Mini apps penetration, as Sakaue just mentioned, and also, it's in the presentation material, Y-o-Y Mini app numbers grew by 55%. So this kind of growth, this kind of speed indicates a strong growth. I think you can interpret it that way. It's not just a number of the Mini apps. How much is it used? I think that is very important. Is it app or service that is used well? And in that aspect as well, it's growing close to 50% year-on-year.

In terms of MAU, in fact the Mini app services that we're providing, therefore, offline restaurants or beauty parlors, and for retail stores, so many are for brick-and-mortar stores. So in terms of the frequency, there is still room for improvement. So in addition to the number of apps, increase in MAU. Well, that increase in MAU part is a little bit delayed. And I think we need some tuning of the service, but it's growing and it's spreading.

And in terms of how to monetize it, maybe we talked about this last time, 3 major ways that we are currently preparing and starting to provide. One is the place as within the apps, that's the service. So with more ads, with more apps, the line Yahoo! ad inventory will increase more opportunities to show them. And so that will -- there's a direct impact with the number of apps.

And the other is the payments. So when you have an e-commerce application that is released, if a product is bought, then we will receive certain commissions. So that's another business model we have in mind.

And third is the charging to digital content. I think it's easy to imagine with games. In a game, if there is a subscription or some kind of charge that would provide us with some commission. That's another model that we have in mind.

In terms of the number of apps in this world and how widespread they are, I think you can see, well, it's 23,000 Mini apps and the number of application service in the broader society is much larger. So if we're able to increase the ad inventory will increase and the number of services that will lead to payments will increase. So we think that there's a big business potential. And as we explained in the presentation, there should be flow from the Wallet tab. And so there's that perspective of making apps and there will also be a secondary effect in terms of routing users. So there's a lot of room for growth is what we think. Thank you very much.

[Operator]

Next from Goldman Sachs Securities, Ms. Munakata.

[Minami Munakata, analyst]

I am Munakata from Goldman Sachs. I have 2 questions. First question is also related to Search Advertising. AI search was not the background of the slowdown. That's how you explained. In terms of AI search, how are they being used? And can you compare with the AI search? And SG&A has been increasing JPY 5.8 billion to be specific. How much impact is coming from AI? Can you describe that? And also, can you update on the future forecast? That is my first question.

[Ryosuke Sakaue, executive]

This is Sakaue. Let me reply. On Yahoo! Search, AI mode switching is also possible, and the utilization rate is mid-single digit. That is the portion out of the total AI search and related license fees. The Q1 booking was single billion. And that is the breakdown. How they are being used? Well, how do related demand usage is going into AI search? And our company do not plan to block use of AI search, but rather promote proactive use, and we have launched PC version, and we are thinking of further promoting the use of AI search.

Monetizing method, we are not certain yet. But generally speaking, once the Internet user number increases, then there will be room for monetization. And so we are not going to go against the shift to AI search.

[Minami Munakata, analyst]

My second question is LINE renewal. Shopping tab will be replaced in stages in the future. You talked about magazine like shopping behavior. So when you -- so you need to encourage users to push this tab and open this tab. what are the appealing points to users to promote this service? While the tabs will be replaced rather than major marketing campaign, shall we have the image of gradual change? Let me reconfirm that again, also, the VOOM tab will be removed. So video ad positioning, what is your concept in the future for video advertising?

[Ryosuke Sakaue, executive]

On Shopping tab, Hide will reply. So I will first answer to your question on VOOM. VOOM will be replaced with Shopping tab. The VOOM contents -- the time line is yet to be determined, but home tab will be converted into a new media and VOOM will be integrated or merged to the home tab, and we are making preparation right now. Hide will reply to the first part of your question.

[Makoto Hide, executive]

This is Hide of Commerce. From this fiscal year, in LINE, we're going to add this shopping service. As you have commented, Yahoo! Shopping, like conventional mall is different from this new service. The conventional Yahoo! Shopping, the number of products listed is tens of millions of products and customers will do the search and also proactively search on the product they want and compare the prices. That was the behavior. But in LINE, the service that is suitable in LINE Shopping is to focus on the most popular product and provide them at a reasonable price or combination with the social service.

So as functionality, we are thinking of social buying and also GIFT is already growing and successful. There's already 10 million or more users or purchasers who are using LINE GIFT. So we are going to differentiate this service from the conventional service and the launch timing will be from this fiscal year, and we will develop over the next 2 to 3 years. And merchants, the Yahoo! Shopping merchants can easily apply to align commerce, and we are to provide convertibility between the 2 services, so that service will be easily used. And that is the enhanced value we plan to provide. That is it.

[Operator]

From Okasan Securities, Okumura-san.

[Yusuke Okumura, analyst]

Okumura from Okasan Securities. Two questions, please. About the LINE app renewal or the revamp, I want to ask about that as well. On Page 12, you explained about this. And you talk about the Wallet tab. So the final outcome is that PayPay will be implemented here from the next fiscal year. If PayPay is included here, how would the users UX change? And on your media's top line, what would be any positive change? So instead of the short term, I want to ask what you intend to do next year and what kind of changes you expect from the next fiscal year onwards?

[Ryosuke Sakaue, executive]

So on the wallet, we will make it easier for users to use PayPay. Concrete dates have not been set yet. We are making preparations. So PayPay will make it possible to use them. For LINE, we have 90 million users who visit And Paper, we have expanded the number of users to 70 million, but there's still the gap of 20 million or a difference of 20 million. So PayPay consolidation with -- through this is one major pathway.

And then in the LINE app, there's shopping and existing digital contents, Mini apps. And the PayPay payment should be usable in a more seamless manner so that people can earn points, and I think that will enhance the LINE app user experience. And so that will be a positive for the LINE app as well. So within the Wallet, it will connect with PayPay, we are making preparations for that.

[Yusuke Okumura, analyst]

Second question about the listing of PayPay. From the previous session, no major updates in terms of timing or the size. But looking at the materials that you have provided, you will maintain consolidation after listing. So you have clearly indicated that in your explanation. So ownership, you're intending to negotiate so that your ownership ratio does not go down. Is that what this indicates? And for the minority shareholders, what kind of message do you want to send in adding this kind of explanation?

[Ryosuke Sakaue, executive]

So in terms of IPO timing and magnitude, it's undecided. We're making preparation. And since -- as soon as they are decided, we will communicate that to you. The point of this is, as we explained in the previous meeting, some investors asked about whether it's no longer going to be consolidated. And there's going to be a one-off impact to the profit & loss. So there were those questions. Therefore, we wanted to indicate that we're going to maintain consolidation. And so there will -- so it's not that we expect any profit & loss by change in ownership. So that is what we wanted to make clear with this message.

In terms of the percentage of our ownership, it will depend on how we will do the IPO of PayPay, how we're going to generate liquidity. That's still something understanding. We have no intention of reducing in a dramatic way, but there might -- some things that we will consider. And in any case, we will make sure that it will remain a consolidated subsidiary.

[Operator]

Next, Kishimoto-san of Mizuho Securities.

[Akitomo Kishimoto, analyst]

I'm Kishimoto of Mizuho Securities. I have one question. The Media segment margin, this time, there's a cost incurred for the integration of advertising platform. Is it only for the first quarter? Or will it be booked for the second quarter and beyond? In the explanation, you said that this integration will take place throughout this fiscal year. So please let me know the progress. And also top line, we expect that -- what is your expectation on top line contribution of this integration of the platform?

On the integration of the ad platform, the process will take for the full year. So for SG&A, some amount will be incurred from second quarter and beyond as well, that is factored in. The synergy or add-on effect of this integration is not factored into the plan. If there's any comments to add?

[Yuki Ikehata, executive]

This is Ikehata. Thank you for the question. Platform integration will be done throughout the year. This is something we need to proceed very carefully. As was explained, the top line of this fiscal year, rather than impact of the platform integration in each platform's function development and sales activities and other various success will be the driver for the Y-o-Y single-digit growth. So the top line contribution of the integration will start from next fiscal year.

In terms of the scale, as of today, it's rather difficult to say that particular amount will be the contribution from platform integration, but single digit or low single-digit Y-o-Y growth in order to achieve that this integration is one of the important initiative.

[Operator]

Masuno-san from Nomura.

[Daisaku Masuno, analyst]

About account adds, so a new sales company that you created and so on all the offline companies, you said you want to increase the number of such clients all around Japan. That was established in July. And this second half, I think you have not reflected that in the plan. But how much effect do you see for the mid-range or midterm?

[Ryosuke Sakaue, executive]

So Ikehata will supplement, but in July, LINE Yahoo! Business Partners was established and that will increase personnel costs. But in the guidance, that has already been incorporated, reflected. So it's not going to increase the personnel cost further.

Anything, Ikehata you would like to add?

[Yuki Ikehata, executive]

Ikehata here. Just a small supplement to that comment. In July, it was established as a company. We've just started. So for this fiscal year, in terms of headcount, we are going to gradually increase and expand activities.

In terms of the account adds, in terms of the business structure that we currently have, the SMB or the local, small and medium-sized companies, we're trying to increase the number of cases and increase sales. And we occasionally comment on this in the presentation. But for the account adds, we wanted to provide functions and -- or expand function solutions that are easy to use by those shops. And we're going to try to enhance our activities and sales. And we should have better local -- better communication with these local players as we conduct sales and the Yahoo! LINE Business Partners is going to play that role. So the product itself should be constructive and updated steadily and the sales personnel and organization should be developed until the second half of this fiscal year, there should be a gradual impact to revenue.

[Daisaku Masuno, analyst]

So on that point, so what revenue -- what sales -- what kind of sales going to increase with this?

[Yuki Ikehata, executive]

Account ad sales would first increase. In addition to that, Mini app sales will also be conducted. So if there's a monetization of Mini apps, Mini app sales should also increase. Those 2 areas is where we see increases.

[Daisaku Masuno, analyst]

So in June, a number of account adds were strong. July onwards may be even stronger or better?

[Yuki Ikehata, executive]

I think we will be prepared to improve it further, but it's just been established in July. So for the second half, our sales capability should be strengthened. But for the short term, August, September, October, in that kind of short term, we shouldn't expect too big a change.

[Daisaku Masuno, analyst]

Understood. Second question, about PayPay consolidated. So the PayPay's payment number compared to the credit card number and new bank opening -- well, the number was as expected, but the EBITDA pro forma basis increased substantially. And so in terms of cost efficiency and sales efficiency, there must have been some improvement because just the numbers would not have increased profit so much. So what's been the improvement in the efficiency that led to better margins?

[Ryosuke Sakaue, executive]

This is Sakaue. I'd like to respond. So the PayPay monthly or PayPay festival that we do regularly that was shorter in this quarter. And so that's why acquisition cost was a little low. And this is a onetime thing, but we sold a card credit, and there has been a reversal of the nonperforming reserve. And so EBITDA increased as a result of that.

[Daisaku Masuno, analyst]

So if that's the case, that will not happen or it would disappear from Q2. So the promotion time was shorter, but you still had sales. So you didn't have to use so much money to acquire business. Is that going to continue?

[Ryosuke Sakaue, executive]

Yes, you can understand that way. And sales of card credit, we do several times a year as a credit. So Q2 onwards will not happen so much. But this trend of increased profit, we think will continue without major change.

[Daisaku Masuno, analyst]

And finally, a request. So adjusted EBITDA was increasing 3%, but excluding JPY 4.2 billion onetime event last year was 7% increase. So it's adjusted EBITDA, you're adjusting that again. So I think that's confusing that you're doubly adjusting. So you should adjust all of that together and also operating profit, 11% decline. But there was 3.1% last time, JPY 70.1 billion onetime impact this year-end. So if you exclude all of that, it's 22% increase. That's very confusing. So please adjust all of those things together.

[Ryosuke Sakaue, executive]

Yes, understood. We take your opinion. So EBITDA, there is the adjustment and there's the cash basis, profit and ValueCommerce, there was a cash in. So this resulted in this, but I understand fully your point that this may be confusing. We cannot change during the term, but it's something we'd like to consider for next fiscal year onwards.

[Operator]

Next, Ms. Zhai of UBS Securities.

[Yijia Zhai, analyst]

I'm Zhai of UBS Securities. I have 2 questions. First question related to PayPay. This time, GMV Y-o-Y growth was larger than the number of payment. Last fiscal year, you also implemented PayPay Matsuri festival. So what are the factors of the increase? Can you explain in more details? And is it sustainable for the next several quarters? And slightly related to the previous question, the operating profit and adjusted EBITDA between them, what were the adjustments being made? Usually, adjusted EBITDA is higher than operating profit. But this time, it seems to be lower. Can you explain that point in more details?

[Ryosuke Sakaue, executive]

The reason for the increased profit is -- sorry, increase of the GMV, the average payment amount increased, and we are using points or coupons to try to increase the average payment amount. And also home pay later payment style, which is currently called credit, we are enhancing the linkage. So those were the factors that drove GMV higher than the growth of the number of payments. The EBITDA should be larger. If there is any additional explanation needed, IR will get back to you.

Basically depreciation and LY consolidation adjustment items are adjusted. And basically, that is how adjustments are made.

[Yijia Zhai, analyst]

My second question is on Commerce. Recently, the Commerce GMV and Shopping ad-related take credit, it seems like it is gradually rising. Is it just a quarterly fluctuation that we don't need to be concerned? Or are there any special initiatives that are bringing about this trend, which will likely to continue?

[Ryosuke Sakaue, executive]

Hide of Commerce will answer your question.

[Makoto Hide, executive]

On a quarterly basis, there are some volatility, but on a full year basis, gradually take rate is rising. The bottom was 2 years ago when GMV was also down year-on-year. But after that, the overall activities have risen and also there are competitive pressure and sellers' appetite to place ad have increased. So from 2 years ago, take rate has gradually come up and we do expect this to further increase in the future.

[Operator]

As close to closing time, so next will be the last question. CLSA Securities, Mr. Oliver Matthew.

[Oliver Matthew, analyst]

My first question, could you just clarify when people select AI search in Yahoo!, are you paying extra costs to Google for that? Is it separate from your existing contract with Google?

[Ryosuke Sakaue, executive]

Is there another separate contract for AI payment? And yes, there is. And so we are paying to Google for that AI search.

[Oliver Matthew, analyst]

Okay. Hopefully, you could renegotiate that in your next contract with them. It seems a bit unfair. Second question, could you tell us more about the LINE official accounts? How big do you think the total market is for that? And how much do you think you can grow LINE official accounts over the next 2 to 3 years?

[Ryosuke Sakaue, executive]

Ikehata will respond.

[Yuki Ikehata, executive]

Ikehata here. Thank you for the question. So account adds themselves. So what's the addressable market for that? In Japan, sales promotion market, a very big market is the addressable market. On the other hand, within that, there's digital and the part of CRM, if you break it down in that way, realistically, what we can address is JPY 300 billion to JPY 500 billion and how much presence we can establish there.

And the next 1 to 3 years for that kind of a market, what can we achieve? We'd like to refrain from giving you concrete numbers, but high growth rate, we have already shown to you. And we're going to work hard to realize that or maintain that.

[Operator]

It's time to close the session. So with this, we would like to close the Q&A session. Lastly, Mr. Sakaue will give a few words of closing.

[Ryosuke Sakaue, executive]

Thank you very much for participating in our session this term as well. There are some strengths and weaknesses in the segments, but we have broad services. And overall, we do expect that we can achieve the full year guidance. And we would like to ask for your continued support.

[Operator]

With this, we would like to close the FY 2025 Q1 financial results briefing for LY Corporation. Thank you very much.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]