Thank you very much for joining us at Rakuten Group FY2026 Second Quarter Consolidated Financial Result. So already the summary of the financial report has been disclosed half past three this afternoon. Please refer the content from the investor's information page on the corporate website. If you have problem with the truncated image and video, please select the different distribution server where is the button at the bottom of the slide. So I'd like to invite Mr. Mikitani for the presentation. Hello everyone. So first of all, the effect of the 2026, those families and individuals that has been affected, we would like to offer a heartfelt support. And two weeks before the earthquake, in fact, I was in Kumamoto, I visited E.ON Mall as well, who had been severely struck by the earthquake. And those people who have difficulties and deceived, at Nakuten Group, we would like to do everything that we can. So we'd like to offer heartfelt support and also consolidation to that. So in terms of the topic today, this will be the summary. Summary and FinTech Business Reorganization and Segment Result and in Finance, CFO Kaga-san will be presenting, AI Chief AI Officer, Data Officer, Tin Tsai will be presenting this section. So without further ado, the summary. This second quarter, in terms of the net income, we were able to achieve positive by amount of 27.2 billion yen. Mobile business is a big challenge that we have executed, and that is a growth drive for us. In between the meantime, since Q2 of 2020, we have been able to enjoy the positive result. So reflective of that, so in eight or six years, since in eight years, six years it says, but this is not only a one-off, but this need to be a perpetuating result that we would like to achieve on the coming years. In the consolidated revenue, the record high of 665.5 billion yen. With the size of our business, 11.6% growth, so we have been able to grow our business quite steadily. Each segment, all of them are on a growth trajectory. and also Inter-Consolidated EBITDA is a record high for second quarter, 150.3 billion yen. It's a growth by 11.7% in terms of the growth rate. And non-GAAP, Non-GAAP operating income is again ML service this is a record high 42 billion yen so again year on year it's 109.6% roughly 110% increase over this year and with that being said this is regarding the fintech business

So Rakuten's fintech business, bank securities and card, and although this was not included this time, insurance and Rakuten point card or Rakuten payment, we do have these entities and respectively, they're top leaders within each industry, we believe. So regarding card, shopping, GTV, A 27.7 trillion yen, that's a second quarter result, so amazing result. And for a digital bank, Rakuten Bank, the number of accounts, 18.46 million accounts. So very soon we will be achieving 20 million. And for Rakuten Securities, general accounts, 14.39 million accounts were number one in the industry. So this has industry-leading growth and overwhelming customer base. So these three companies basically will be under the umbrella of Rakuten Bank. So for the details, We would like to talk about this later, but we do believe there are two major synergies. Straightforward financial synergies, that's one. And from marketing perspective, maximizing individual customer base. So cross-use of customers or acquire new customers. So we do believe that there will be significant synergies that could be generated. So the total impact, 2028. So actually, in October, we will integrate, which means that full year will be fiscal year ending March 28. So that's 25 billion yen approximately. In financial impact and 8 billion in terms of the marketing impact. And furthermore, with this growth for March 2030, 85 billion yen of synergy effect presumably can be gained. So going forward, Rakuten Bank The synergy with Rakuten Securities We will be able to leverage their capabilities and like I said the number of accounts Rakuten Bank 18.46 million and for Rakuten Card overwhelmingly The number of cards is extremely high, so we will be able to refer customers and Rakuten card and Rakuten securities. With Nisa, it is leading the young customer base, so there once again will be synergy. So what kind of synergies? Rakuten card? Non-transfer of bank and those people with a bank transfer at Rakuten Bank, the Direct Debit, the deposit amount is 4.3 times. And with and without money bridge, that's 4.4 times difference. So as we move into the world with interest rate, how can we go about opening more accounts and have our customers deposit their balance? Thank you very much. The deposit and also diversify the portfolio. And not just these three entities but synergy with Rakuten Group can be generated. So, through Rakuten Payment, this fintech ecosystem and Rakuten Group e-commerce. So, we will be connecting the two ecosystems. And moving on to buy segment results.

So, the internet service segment. In terms of the business result for the second quarter, revenue is 338.1 billion yen, and yen on yen is plus by 4.2%. And with AI utilization and other levers, non-GAAP operating income, yen on yen is 68.6% increase, so 23.1 billion yen. So looking into the breakdown and content, the domestic ECGMS, it's year-on-year, it's a 5.3% increase, thereby 1.2%. Raku Ten Travel, GTV is a 17.2% increase. The investment again plus by 17.6% for realizing IRR. And inter-international is also a very robust business growth. Especially it could be highlighted to the sense that advertising revenue year-on-year is 65.6 billion yen. So data and AI, data mobile, DPI data inclusive, Thank you very much. So the AI, how this could be well leveraged and utilized. Without AI, we would not be able to grow our business. So with that being said, AI, we are putting a lot of emphasis on AI. But one of the example that I'd like to share with you is that what we are promoting and developing AI Shop Manager allow me to introduce the shop manager. With Rakuten and Amazon, the biggest difference is that for Rakuten, it's based on brick-and-mortar stores and the store is the basis. So in other words, the human touch shopping experience that we'll be able to offer at the same time, In terms of hospitality, we like to offer the sense of omotenashi and hospitality from Japan. The true, real store managers, 24 by 7 or serving a few tens of thousands of customers at the same time is not feasible. So the shop manager The personality or the store characteristics or the product characteristics. Having deep understanding of that, AI Shop Manager will be able to provide service 24 by 7. So I think you're running a video of this AI Shop Manager.

Welcome.

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Is it okay to process your order with these details?

Yes, it's okay. Thank you.

Thank you very much for your purchase.

We'll be looking forward to seeing you again. So within this year, we're going to launch the service and we're now extending our effort for the further development. And the next I would like to highlight about the Rakuten travel business. So again, it's a robust growth that we are enjoying. In terms of year-on-year, it's 17.2% in terms of GTV. So the domestic is 10% growth year-on-year. So again, a very robust growth. And on top of that, the global related, We have 78.5% Yonyan. Especially in terms of Rakuten travel exchange, we have been holding the other wholesaler's distribution in terms of the room accommodation inventory. The various countries, the effective, of course, travel services, we're going to connect them all. So we have 1,295 companies. The service companies are connected to Rakuten Travel Exchange. And the sales of that is increasing, and the transaction value is increasing. So that is a reason for the growth of the gross transaction value. And outside of that, the investments that are being made We are working hard in order to improve the profitability of the business. Last year, the second quarter compared to that is a growth by 3.3 billion yen, the improvement of the losses. And the international department, well, Rakuten, France Marketing, they have worked hard, but they have not been able to achieve the ambitious goal, so we are unfortunately closing down. Akihito Kurozumi, Akihito Kurozumi, Akihito Kurozumi This is, in fact, showing a very healthy, strong growth. And this quarter, year-on-year, it's 15.6% positive, year-on-year. So, 65.6 billion yen basis. We're now being able to seek 300 billion, excuse me. And AI utilization, for instance, in terms of contents created, The creation of that. So in terms of a banner, static image, and the video ad, we are going to offer that. At the same time, massive amount of, of course, transactions, inspection, performance, and bidding, everything is going to be leveraging AI capability. At the same time, Based on our good and customer-based database, we are going to effectively use the targeting ad.

Moving on to the FinTech segment, revenue and income. Revenue, ¥295.4 billion, so very robust. Year-on-year, 27% increase. Non-GAAP operating income, ¥69.2 billion. Year-on-year, 60.1% increase. So Rakuten card, GTV, plus 9.4%, so that's 7.1 trillion yen. Rakuten bank account, 18.46 million. And bank deposits, 13.3 trillion yen. So deposit, of course, it's very competitive to gain deposits, but it grew by 13.9% year on year. And securities general account, 14.39 million, 14.5%. In July, we surpassed 8 million, growing by more than 20% year-on-year and assets under custody, a plus 48.3% year-on-year basis, so a total of 58.7 trillion yen. So for Rakuten card, the number of cards Akihito Kurozumi Nongap operating income is plus 16.2%, so 17.4 was the result for Q2. For Rakuten Bank, we made financial Result announcements already. Interest rate is going up. And given this backdrop, we are growing nicely. Ordinary revenue, 78.4 billion. Ordinary profit, 30.2 billion, 26.1% year on year. And capital adequacy ratio, 11.4%. ROE, 22%. Accounts, 18.4 million. Main accounts. The ratio. Well, the main account increased by 7.7%. It's now 6 million. So main account ratio is improving and deposits grew by 13.9% and expense ratio coming down. So our activities are materializing and for Rakuten Securities, especially with a new NISA, We are gaining new accounts. It is growing, the number of accounts. It is growing and surpassing 15 million. And operating revenue as well as operating income, very robust, especially operating income under Japanese GOP, it grew by 2.4 times or more. and what's more, its assets under custody. It has exceeded $60 trillion. A very steady, very stable performance is being achieved. The stock flow revenue, you can see the ratio here, the stock ratio is going up. Over the past quarters. And now, insurance business is not included in this reorg, but very steady. We are honestly saying revamping this business. So revenue and income. Revenue is 20.7 and operating income 1.5 billion. So we are generating profits. And going forward, We believe that we will be able to generate more profit and for Rakuten payment 29.1 billion yen of revenue plus 12.2% year-on-year and non-GAAP operating income 3.2 billion and year-on-year it is close to 80% plus so we have been working with different partners as you know the other day we announced with Family Mart we've started SPU eligible services If you spend more than 3000 yen or more per month, then you can earn points plus 0.5% times. And now with mobile segment.

In terms of revenue is 121.4 billion. So you know it's a positive by 8.3. Non-GAAP operating income is a improvement by 4.1 billion yen. But EBITDA, well, year-on-year it's a minus 28.4%. But in segment, for one thing, is the home straight, the energy crisis. The energy price has gone up. That is the main reason for that. And also, pre-marketing cash flow. You know, there was a new acquisition. What would happen without the new acquisition is a scenario. Already 28 billion profit is being generated. So, yeah, this is positive by 11.8%. So mobile of course account, it is going to achieve 10.8 million and of course the churn rate is going down, ARPU is also gradually going up steadily. Rakuten Symphony, so the number of customers and the number of partners are also on the growth trajectory. A mobile in the business, specifically, if I can allude on that. So 11.9% revenue, non-GAAP operating income is an improvement by 6.7 billion yen. So it's in red with 32.3 billion. But as I said, the pre-marketing cash flow, it is 27.1 billion. So in terms of the number of outlets increasing, the marketing is quite active. So with that, There is a major contribution in terms of the profitability of our business. And also, in terms of March and April, the peak competitive season, after that, gradually we are still on a rise and on an increase. And the turn rate, again, the hopping. The targeting, the point accumulation, those customers, we have been able to contain that. So therefore, the turn rate compared, it was 1.8% for the second quarter, so we have seen improvement in this area.

So data usage has been growing nicely as well, ARPU as well. So going forward, the options is an area that we also want to grow. Data usage, like I said, is growing. So 20 gigabyte plus users ratio share expanded plus 3.6 points, percentage points. So network needs to be put in place. So, as we initially planned, we will make Investment of 200 billion. And 5G construction has been more or less completed in this area. And also for Tokyo Metro, we only had 5 MHz, but we'll be growing to 20 MHz. Thank you very much. is 248 billion. We will be receiving, we would like to contribute toward resilience that maintains domestic communications infrastructure. Now, regarding the finance, last week there was a comment from KDDI, so I would like to comment regarding roaming first and foremost, Rakuten Mobile Business, we have had roaming contract with KDDI and we started the whole business with that and the main goal was NTT's dominance. We wanted to shift from that situation so that we can democratize telecommunication and Thank you very much. The contract we will continue on from October and onwards. Where Rakuten does not have a coverage, the roaming will be reduced gradually. So that will be the approach we will be taking. I will stop here. Thank you.

Thank you for your kind participation. So I would like to report on the finance. First of all, in terms of the summary of the second quarter non-GAAP operating income was 42 billion yen. IFAS operating income was 20 billion yen after recording one-off item including impairment losses on fixed asset in the logistic business. This represents more than double the figure of the same period last year. Since the one-off items are non-cash accounting item, We believe the Group's underlying capacity to generate cash is steadily increasing. In addition to that, income before tax was positive, mentioned by Mr. Mikitani, the fourth consecutive quarter. Since the third quarter of last year, we have been able to achieve positive. And furthermore, I would like to explain later, but the reversal of tax expenses arose in connection with the sales of shares we held. And as a result, quarterly net income attributable to owners of the parent Return to profit for the first time in six years since the second quarter of 2020. Regarding the one-off item I just mentioned, in this second quarter, we recorded 17 billion yen of impairment losses on fixed assets and related items in the logistics business. The impairment resulted from the decision following discussion with the counterparty of our warehouse leasing service to terminate that service and convert the warehouse to our own use. Together with impairment recorded in fiscal 2025 on warehouse held in the online supermarket logistic business, we have now impaired the entire book value of our own warehouses, which means that from a financial perspective, the associated balance sheet risk has been eliminated going forward. On the other hand, this is an accounting term treatment reflecting the past asset and shift to more efficient management structure. At the same time, we intend to improve supply chain management in order to maximize the potential of our logistic facility, reduce operating costs, and create competitive advantage in e-commerce. And in terms of the second quarter, accounting treatment across Thank you very much. On the other hand, an unrecognized tax effect recorded on CI in relation to this transaction was transferred, thereby recorded on the tax benefit, that is, a negative tax expense on the P&L. The actual negative tax expense reflecting the fact that substantially no tax payment arises, so that is the cause. And in addition to that, this accounting treatment suggests that as a result of a strategic investment We have more than ¥1 trillion of net operating loss. So this would offset a certain portion of a future tax expense. And as earnings improve further, that effect will materialize and contribute to maximizing our cash flow. Next, I would like to explain once again the significance of the reorganization of a fintech business scheduled to take effect on October 1, including the financial perspective. The purpose of this reorganization is to operate one financial business in a more integrated manner. Akihito Kurozumi, Akihito Kurozumi, Akihito Kurozumi, In order to carry out the reorganization, I would like to reiterate that we currently have no intention of selling shares of the bank. We recognize that the market assessment of our financial position continues to improve. The chart on the left shows the spread calculated from the yields on our corporate bond. and the yields on the JGB government bond of corresponding maturity. The blue line shows the credit spread one year ago and the red line shows the most recent level. So across the maturities spread are steadily tightening on the trend. On the chart on the right, CDS spread also show a relative improvement compared to the market index. To further enhance the market assessment of the company, we would continue working to strengthen our financial soundness. Lastly, our financial policy remains unchanged. Self-funding, meeting the funding needs of the mobile business without relying on external financing. As I mentioned earlier, in the second quarter, we raised approximately 200 billion yen through the sales of shares that we have held. Going forward, we will continue to use such asset finance while securing the funds we need through the cash flow of each business and improvement in the cash conversion cycle. and also the bond redemptions are also proceeding smoothly in line with our policy. In addition to redeeming our perpetual subordinated bonds in full, the first call date on April and in June, we redeemed ¥20 billion of senior bonds entirely with cash on hand without issuing refinancing bonds. and also in terms of the December, we will be able to redeem in full with the cash on hand as well. So in 2027 onward, the bond redemption, we would like to take a proactive approach and the business cash flow maximizing them and the growth that would be contained of course but we finance if it's being required in terms of the closely monitoring the market trends such as foreign exchange and interest rate we would like to select optimal means for a company. That's all for the finance section. I would like to invite about initiative of AI. Chief AI and Data Officer Ting will be taking this part.

Thank you, Kaga-san. Hello everyone. I will share an update on the Rakuten AI vision and our execution momentum in Q2 2026. As we discussed last quarter, the strength of the Rakuten ecosystem lies in the synergy among its services. Now AI presents a unique opportunity to amplify that synergy by attracting new users at lower cost, Thank you very much. And differentiate means guiding a customer all the way to task completion, from online discovery to offline delivery, an end-to-end experience that general purpose agent cannot match. Together, these three areas add up to a durable competitive advantage, build not only just on data, but also accumulate intelligence within the Rakuten ecosystem. And today we will share examples in each of the three areas. First, engage. The application of large language models goes beyond the chat. Language models can understand the user intent, identify patterns, match, and translate better than any previous technology. This is why we use large language models to enrich our ident data Improve our ranking signal, and in this case, improve our understanding of user queries. Through ALM, we can better understand whether users have made up their mind or not. Take two customers on Ichiba as an example.

One customer searched for a specific model number, and in this case,

knows exactly what he wants, and we only return product that matches that exact model number. With a set of limited choices, we accelerate his decision to check out. Another customer searched for gift for summer holidays, and she does not have any specific product in mind. And in this case, we guide users through explorations, present a broader set of suggestions, expanded option, and increasing the bucket size. The impact is evident as indicated by our recent A-B experiment. The test shows that attributed orders grew by 0.52% and attributed GMS grew by 0.87%. At Ichiba scale, this is quite remarkable. On an analyzed basis, this is equivalent to 12.8 billion yen GMS uplift. The second area is to expand. How Rakuten AI can expand where, when, and how we serve our customer needs. This includes engaging them earlier in the purchase funnel, and also recommend relevant products and services across businesses to dramatically increase cross-use. Specifically, we are embedding Rakuten AI into almost every business application, not only increasing their capability, but also connecting them with the rest of the ecosystem. In addition, we are expanding our touchpoint through Rakuten AI apps across the first surface area, whether it's mobile apps, on the web, or on the desktop. As web traffic shifts from search to agent, we are very well positioned to take advantage of this agentic shift to attract new users and increase usage of existing users. Finally, we are also expanding our distribution by bringing Rakuten AI to our partners. As announced in July, Rakuten AI for desktop is now pre-bundled on HP PCs, and this will help millions of users easily access the Rakuten ecosystem, leverage the computing power on their AI PC to reduce token costs, and also understand the local context to provide more relevant results. As of today, 17 of all of our services are live with an AI agent, and 7 more are in the near-term deployment, and more than 50 are on the way. Each agent strengthens its own business and connects with the Rakuten ecosystem, expanding the potential of cross-use across Rakuten. And lastly, the last area is differentiate. As Rakuten AI deeply embeds into each business applications, it can accomplish what other external agent cannot. From first chat to a complete transaction, all the way to deliver, Delivery in the real world. Even providing customer service after a purchase. For example, on Ichiba, AI cannot help customer to make decision faster. And the time to purchase is reduced by 41%, and average order amount up 17%. Customer can understand the decision they have to make faster and buy with greater confidence. Similarly, Rakuten Travel takes customers from discovery to booking in one flow, and this is growing rapidly. Rakuten Air for Travel launched at the end of April. Now the average order is 13% higher for AI-assisted booking versus those not going through AI. and family and group trip booking are also up 29%. Such family and group tracking is often very complex in nature and this is exactly where AI can help ease the decision making. Just last week, we announced Rakuten AI Super Agent at Rakuten AI Optimism Conference. This means three things. First, we double down on cross-use. Rakuten AI Super Agent is about connecting the customer experience across all of our products and services so agents in one part of the ecosystem can hand off to another agent and complete another transaction. Second, we are expanding what agents can do, handling complex tasks, achieving goals, guiding users on the full journey from discover to purchase across many services. And third, we are connecting super agents to third-party services like maps, calendar, email, and messengers, so it's easier for customers to track, communicate, and plan using their favorite tools and improve their productivity. And lastly, the Super Agent will interact with other external agents on the Internet, which is critical to attract more agent traffic for our merchants, hotels, and business partners in the Rakuten ecosystem. And I'd like to show you what the Super Agent can do. Please play the video.

This video is about the transformation of Rakuten AI from an AI agent to a super agent. Using travel as an example, the super agent will find the perfect travel plan and items based on your preferences, complete transactions, and connect with applications outside the Rakuten ecosystem to provide cross-service total solutions.

To close, to get a preview of the Super Agent, you can download Rakuten AI today. It is available on the web, on iOS, Android, and on Windows, and very soon, it will come to Mac as well. And I'd like to close by saying this in Japanese, AI de atarashi.

Let's create new values, expand possibilities with AI, and together, build AI. and Bitter Future. Thank you very much.