Good evening everybody. This is Kobayashi from ZOZO. [Non-English content] Welcome to ZOZO's conference call for the full year financial results of FY 2025 ending March 2026. [Non-English content] There will be two presenters from ZOZO today. Director, Executive Vice President and CFO Koji Yanagisawa and me, Kobayashi. [Non-English content] First, CFO Yanagisawa will take you through the financial results. [Non-English content] Good evening everybody. I'd like to walk you through the full year financial results for FY 2025 ending March 2026, and also, share our forecast for FY 2026. [Non-English content] Our handout is pretty dense, so I'd like to just briefly walk you through some of the pages. For the first one, we don't have a specific page, but I'd like to give you the results of the earnings. [Non-English content] As for the full year, let's go to the second item. GMV excluding other GMV increased by 12.4% year-over-year to JPY 646.1 billion. If you go down to the third item, you have the total GMV for the ZOZOTOWN business, LINE Yahoo! Commerce, and BtoB business all combined. This one increased by 5.1% year-over-year to JPY 603.9 billion. [Non-English content] EBITDA increased by 10.2% year-over-year to JPY 76.9 billion, and EBITDA margin was 11.9%, down 0.2 points from the same period last year. [Non-English content] The progress against the company plan announced is as follows. GMV excluding other GMV 98.8% and total GMV for ZOZOTOWN, LINE Yahoo! Commerce, and BtoB business combined 100.1%. EBITDA 100.3%. [Non-English content] [Non-English content] Regarding GMV, strong performance during the winter sales, in the fourth quarter enabled us to achieve growth that offset the shortfall from the end of the third quarter. As a result, the combined total for ZOZOTOWN, LINE Yahoo! Commerce, and BtoB businesses met our target. [Non-English content] For EBITDA, this one met its target primarily due to the reductions in logistics related expenses and shipping costs. [Non-English content] As announced in today's press release, we have acquired all shares of High Link and made it our wholly owned subsidiary. [Non-English content] High Link operates Coloria, a comprehensive fragrance platform, and under the mission of enriching the world with fragrance. [Non-English content] We have acquired all outstanding shares of High Link for JPY 4.95 billion. It's funded entirely with our own capital. [Non-English content] Let's now go to page eight of the handout. We will analyze the changes in EBITDA compared to the previous year's results at the end of the fourth quarter after the full year was completed. [Non-English content] There were mainly four factors attributable to the increase in EBITDA. First, a gross profit increase due to higher GMV in ZOZOTOWN business and LINE Yahoo! Commerce, that's plus JPY 9.36 billion. [Non-English content] The second one was sales increase due to the growth in the advertising business. That's plus JPY 670 million. Thirdly, gross profit increase due to the consolidation of Lyst and other businesses. That's plus JPY 6.86 billion. Fourthly, reduction in variable costs, driven by containment of logistics related personal expenses resulting from the streamlining of logistics centers. That's plus JPY 290 million. [Non-English content] On the other hand, there were three factors that reduced EBITDA. First, increase in fixed costs due to a rise in consolidated headcount associated with the consolidation of Lyst, the occurrence of one-time expenses related to M&A in the first quarter, and others. That's minus JPY 3.15 billion. Second, increase in actual PR expenses to attract customers to promote sales and cover Lyst's standalone expenses. That's minus JPY 5.97 billion. Thirdly, increase in other expenses due to success fees paid to FA related to M&A and others in the first quarter. That's minus JPY 920 million. [Non-English content] Let's look at the cash flow trends. I'd like to highlight just the big ones. Cash flows from investing activities for the current period included expenditures associated with the acquisition of Lyst and the replacement of equipment at existing logistics centers. There was also cash flows from financing activities which included expenditures related to the acquisition with treasury stock. [Non-English content] Now let's go to page 21 of the handout. This is the breakdown of SG&A. [Non-English content] The SG&A ratio relative to GMV was 22.2%, a decrease of 1.0 percentage points compared to the same period last year. [Non-English content] There are mainly two factors that drove up the SG&A ratio. First, amortization of goodwill related to the acquisition of Lyst. That's +0.4 percentage points. Second, in addition to expenses recorded for Lyst alone, there was increase in the advertising expenses due to higher web advertising spending for ZOZOTOWN. That's +0.3 percentage points. [Non-English content] The main factors contributing to the decrease in the SG&A ratio are mainly logistics related. First, lower shipping costs resulting from the improved economic terms with the delivery contractors, driven by both expanded consolidation scope and delivery efficiency initiatives. That's minus 0.6 point. Second, a decrease in logistics related labor costs, driven by improved operational efficiency, including inventory optimization at logistics centers and labor savings, coming from automation, and also expanded scope of consolidation. That's - 0.5 point. [Non-English content] In addition, as we have achieved our full year targets for operating profit and EBITDA, we have decided to pay an year-end bonus. Consequently, we have recorded the relevant expenses in the fourth quarter under payroll costs for employees and logistics related expenses. [Non-English content] Let's now go to page 24 of the handout. Here we show our actual promotion related expenses. [Non-English content] In Q4 actual promotion expenses amounted to 5.5% of GMV. [Non-English content] The 0.7 point increase in the ratio of actual promotion expenses to GMV compared to the same period last year was due to the following factors. There are mainly three reasons for this. One, there was an increase in online advertising spending on ZOZOTOWN. Second, an increase in promotional expenses rose due to initiatives such as acquiring new members and reactivating dormant members. Thirdly, the recognition of expenses on a standalone basis for Lyst where advertising expenses account for a significant portion of SG&A expenses. [Non-English content] As a result, our actual promotion related expenses for the full year amounted to 4.8% of the GMV, which is slightly more than our initial plan, and we expect the budget for the current fiscal year FY 2026 to remain at the same level as FY 2025 at 4.8% of the GMV. [Non-English content] From here on, I'd like to share ZOZOTOWN's KPIs. Let's first go to page 25. This is the number of total buyers. [Non-English content] The number of total buyers increased by 360,000 from the previous quarter to 13.17 million. Here's the breakdown of it. The number of active members increased by 350,000 from the previous quarter to 12.47 million, and the number of guest buyers decreased by 4,000 from the previous quarter to 690,000. [Non-English content] In FY 2025, we continued to successfully acquire new members by increasing our web ad and friend referral campaigns year-over-year. During this fiscal year, new member acquisition remained strong in every quarter, resulting in a significant increase in the number of total buyers. [Non-English content] Now let's look at the number of shops on ZOZOTOWN. At the end of the fourth quarter, the number of shops stood at 1,710, a net decrease of two shops from the previous quarter. [Non-English content] The number of new stores opened in the fourth quarter was 46. We successfully achieved our full year target for new store openings for FY 2025. [Non-English content] Okay, now I'd like to share ARP and AOV. Let's start with average retail price, ARP. With respect to ARP, it came to JPY 3,974, 1.6% year-on-year decrease. [Non-English content] The price increases for new fall and winter merchandise have moderated, with prices now broadly in line with last year's levels. The average retail price fell due to a higher proportion of sales items compared with the same period last year. [Non-English content] Let's now look at our AOV. Our average order value stood at JPY 8,864, - 1.3% year-over-year. [Non-English content] I'll be better that we go to the next slide. Thank you. [Non-English content] The number of items purchased per order rose, supported by an improved cross-selling ratio, which was driven by a higher markdown ratio. However, the decline in average retail price outweighed these effects, leading to a lower AOV. [Non-English content] That was the earnings briefing of FY 2025 ending March 2026. From here on, I'd like to share our business plan for FY 2026. [Non-English content] I need to start off this part with an apology. There have been changes in our key disclosure indicators. [Non-English content] From the perspective of presenting our group's underlying earnings power, we have adopted EBITDA as our management indicator that excludes the impact of amortization related to goodwill and other items arising from M&A. In order to more appropriately reflect our group's underlying earnings power, we have decided to adopt adjusted EBITDA. Under this metric, only amortization of a goodwill and intangible assets arising from M&A, as well as acquisition related costs will be adjusted. While all other depreciation and amortization expenses will be reflected. [Non-English content] Based on that, I'd like to share our full year consolidated earnings forecast for the current fiscal year, which is FY 2026. GMV excluding other GMV are expected to increase by 5.0% year-on-year to JPY 678.6 billion. Our operating profit is expected to increase by 7.3% year-over-year to JPY 74.4 billion. Our adjusted EBITDA is expected to increase by 7.2% year-over-year to JPY 77.9 billion. [Non-English content] Regarding dividends, we continue to target a payout ratio of 70% or higher. [Non-English content] Here are the targets by business segment. For ZOZOTOWN, we aim to do the growth of 4.2%. [Non-English content] For LINE Yahoo! Commerce, we aim to do JPY 86.6 billion, which is +9.7% year-over-year. [Non-English content] Regarding ZOZO AD, which accounts for majority of our advertising business, our plan is based on conservative assumptions. You can see that our growth forecast is rather low. [Non-English content] Next, let's go to page 42. I'd like to share our logistics base expansion plan. [Non-English content] The first regarding DPL Tsukuba Chuo, which we began leasing in April 2024, has been operational, and the leased area will be expanded starting in May 2026. [Non-English content] We will begin leasing ZOZOBASE Narashino 3 starting in March 2027, and operations are scheduled to begin in August of that year, with full scale operations planned for October of the same year. [Non-English content] Consequently, let's go to page 11 of the handout. This is about the trend in capital expenditures. Capital expenditures for FY 2025 were largely in line with our plan. [Non-English content] For FY 2026, which is our current fiscal year due to the cash outflow related to ZOZOBASE Narashino 3, which I explained earlier, we're planning capital expenditures of JPY 11.5 billion. [Non-English content] That is our business plan for FY 2026. For this timing, we have also disclosed our medium term business plan. I'd like to briefly go through that as well. [Non-English content] Here's the overview of our medium term business plan. This is a four year plan which ends in FY 2029 ending March 2030. We plan to have adjusted the EBITDA of JPY 90 billion and that will be 123.8% of FY 2025. [Non-English content] Here's the background of this medium term business plan. Of course we're going to continue to grow our ZOZOTOWN, but at the same time we'd like to expand into new markets. [Non-English content] What are those new markets that we'd like to branch out to? If you can go to this slide. We have three domains. One is MORE FASHION. This is going to be the first revenue pillar that we'd like to strengthen. This is inclusive of the existing ZOZOTOWN. We'd like to further grow this and aim for EBITDA of JPY 80 billion from MORE FASHION pillar. We also like to establish two more pillars of revenue. One is what we call Near Fashion. These are peripheral areas to fashion and we'd like to do JPY 5 billion in EBITDA with this. We also would like to have another revenue pillar that we call Global domain. We also like to do JPY 5 billion EBITDA with this one as well. If you combine all of these three domains, it adds up to JPY 90 billion in EBITDA. [Non-English content] I'd like to talk about each domain first, starting with the MORE FASHION domain. For this one, we really want to focus on new user acquisition by expanding into offline touch points to reach new users that we have not yet engaged with. Last year we conducted ZOZOFES, which is actually a combination of fashion and music. We've done this already last year, and we also launched a pop-up store, ZOZOTOWN Nagoya last year. These are the types of things that we would like to do. Reaching out to new segments through physical stores and events. [Non-English content] Not only would we like to increase the number of users, we also want to increase the number of brands. Last year we were able to bring on board MUSINSA, and this has really enabled us to increase the number of K-FASHION brands significantly. We'd like to continue to engage in activities like this in order to increase the number of brands as well as categories. [Non-English content] Another thing that I would like to highlight that I have been mentioning previously is the launch of conversational AI. I think it was just two days ago that we were able to adopt or implement this feature that allows us to propose a wear styling or wear outfit through ChatGPT app. We implemented a conversational AI so that we're able to propose new outfits to our users through ChatGPT app. Finally, we've been able to launch our conversational AI agent. [Non-English content] Let's now talk about Near Fashion domain. [Non-English content] This is our approach to Near Fashion domain. What we would like to do is to offer spending experiences, new spending experiences to our ZOZOTOWN users outside of ZOZOTOWN so that we can offer pleasant consumption experiences to them. [Non-English content] Here are examples of some of the Near Fashion domains that might resonate with ZOZOTOWN users. We have been working in skincare and cosmetics area already. Aside from that, there's hair salons, there's fitness, there's esthetic. These are types of markets or areas that fashion lovers that we so have as our user base might resonate with. [Non-English content] We'd like to explore proactively our opportunities in these areas. Of course, the way to approach this is to, first of all, try to make our services and business from scratch in house. There's another way to approach this, which is through partnerships. [Non-English content] Which brings me back to the topic of High Link that I mentioned. We acquired High Link as our subsidiary, hoping that we will be able to branch out into the fragrance area through the platform of Coloria so that we'll be able to drive traffic from ZOZOTOWN user base to them and also have the ZOZOTOWN users use their service, but at the same time aim for positive impact to ZOZOTOWN cosmetics from them. [Non-English content] In terms of Global domain, we want to further expand what we already do. For ZOZOFIT, this is a business that we're already operating in the U.S., so we'd like to further grow this. Lyst is a company that we acquired in Europe. We'd like to achieve growth with Lyst. [Non-English content] That was a very quick explanation of the earnings and also the forecast and our midterm business plan. Thank you. [Non-English content] Okay, we'd like to start accepting questions now. If you have questions, please raise your hand with the button at the bottom. [Non-English content] When you're appointed, please unmute and state your company and your name, then ask your question. [Non-English content] If you have questions, please do raise your hand using the bottom button. [Non-English content] Nagao-san, go ahead with your question. [Non-English content] One is DPL Tsukuba Chuo expansion. Starting in May 2026, you are expanding the leased area at DPL Tsukuba Chuo. Could you explain the reason for this expansion and what the positive effect do you expect from it going forward? My second question is Narashino 3 expansion. Next year in March 2027, the Narashino 3 will also be expanded. What kind of positive impact do you expect from this? My last question is Lyst earnings outlook. Regarding Lyst, is it fair to assume that there will be almost no profit contribution in fiscal year March 2027? Or should we expect that profit contribution to come from next year, I mean March 2028 onwards? Could you share your view on the earnings outlook for Lyst? Thank you. [Non-English content] Thank you, Mr. Nagao from BofA for doing the questions in both English and Japanese. To answer the first part of your question, this is due to the sheer volume of the handling of the merchandise. In order to secure a certain level of operational efficiency, it's best that we have some extra space at the warehouse. We thought that this was an opportune timing for us to expand the space. [Non-English content] I also want to answer the second part of your question, which is about Tsukuba 3. First of all, we have what's called Narashino one, and we're basically it's an outdated facility. We're renewing it into something that is similar to Tsukuba 3. We'd like to automate it to drive efficiency. [Non-English content] [Non-English content] [Non-English content] [Non-English content] [Non-English content] This is going to be the biggest warehouse to date. Not only are we expanding our space, we're also aiming to reduce 50% of our labor there. We're also keeping that as one as a place to store our inventory. We're going to reuse repurpose one in that way. [Non-English content] [Non-English content] Correction. In Chiba area, Narashino 3 is going to be the biggest warehouse. If you expand it into Ibaraki as well, Tsukuba 3 will be slightly bigger than that. [Non-English content] To answer the third part of your question, which is about Lyst business performance, we position as our investment phase. We are going to continue to be in the loss and the amount of the loss is going to be slightly higher than the amount that we had in FY 2025, but not much. [Non-English content] So over the past one to two years, your cost efficiency has improved thanks to automation and labor savings in logistics. With the new warehouses coming, should we expect logistics efficiency to improve further? Could you share your view on this? Thank you. [Non-English content] Thank you very much for your question. Naturally, yes, we would like to aim for that and we are hoping to drive even more operational efficiency than ZOZOBASE Tsukuba 3 as we invest in this capital expenditures. [Non-English content] Thank you. [Non-English content] Thank you very much for your question. If you have other questions, please raise your hand using the button. [Non-English content] Maybe I can wait for 20 more seconds. [Non-English content] Please go ahead with your question. [Non-English content] This is Kazahaya from UBS. I have one question. You just made the announcement of another M&A and it seems like you're quite eager to branch out into new businesses. What is your investment policy? [Non-English content] It is quite difficult to have discipline investment, but in Near Fashion domain and the M&A in that domain would like to acquire companies that are already making profit so that we don't have to start absorbing their loss right after consolidation. [Non-English content] In terms of the acquisition sizes of the companies, we don't have a specific idea in mind for that one, but we're not really intending to do large scale acquisition. [Non-English content] What I mean by that is that we want to be able to engage in M&A that we can pay with the current cash that we have. [Non-English content] I did briefly touch upon this during the earnings briefing, but for the M&A in the Near Fashion domain, we are intending to tolerate up to JPY 2 billion loss on an annual basis. [Non-English content] That said, as I mentioned, when it comes to M&A in the Near Fashion domain, we're aiming to acquire companies that are already making profits. I don't think we will get to that level of loss. [Non-English content] Where do you have anything you'd like to add to what I said? Because you're the one leading this. [Non-English content] Mr. Yanagisawa basically said everything that we need to say, but just kind of building on that. If we can anticipate growth in the market, then we could consider buying companies that are currently posting loss. [Non-English content] Just to kind of add to what I said, not only is our approach going to be through M&A, we can have another approach which is to develop new services in house. When we develop a new service, of course we need to take time to bring up the awareness rate. During that phase, we will naturally be in the loss. [Non-English content] Thank you. Thank you. [Non-English content] Does anybody else have questions? If so, please raise your hand using the bottom button. [Non-English content] I will wait for ten more seconds. [Non-English content] Okay. We would like to end our conference call. Thank you very much to all of you for your participation. Thank you very much everybody. Thank you.