Rakuten Group Q3 FY2024 Financial Results Highlights

• Rakuten Group, Inc.

- Consolidated Non-GAAP operating income achieves quarterly profitability for the first time in five years, since Q3 FY2019; IFRS operating income achieves first quarterly profitability since Q2 FY2020.

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・The Rakuten Group recorded year-on-year (YoY) revenue growth in all three segments in Q3 FY2024: Internet Services, FinTech and Mobile. Consolidated revenue reached 566.7 billion yen, a record high for the third quarter, up 9.3% YoY.

・The Rakuten Group recorded Non-GAAP operating income in Q3 FY2024 of 12.3 billion yen, due largely to increased revenue and cost optimization at Rakuten Mobile and a substantial increase in profits at Rakuten Card. The Group achieved quarterly Non-GAAP operating income profitability for the first time in five years, following significant upfront capital investments to build out its Mobile Network Operator (MNO) business starting in Q3 FY2019. In addition, Rakuten Group recorded 538 million yen in IFRS operating income, achieving quarterly profitability for the first time since Q2 FY2020. EBITDA^*1 for the quarter was profitable, recording 92.2 billion yen in a significant increase of 159.1% YoY.

・As announced in August 2024, Rakuten Mobile has successfully raised 170 billion yen through the sale and leaseback of mobile network assets. Through this transaction, Rakuten Mobile has secured its own necessary short-term funds, thereby improving the Group's overall liquidity. This enables the Group to allocate cash flow from Internet Services and FinTech businesses to reduce interest-bearing debt.

・The Internet Services segment achieved growth in both revenue and profit in Q3 FY2024, with revenue of 314.6 billion yen, up 4.4% YoY, and Non-GAAP operating income^*2 of 21.2 billion yen, up 54.2％ YoY.

・Domestic e-commerce gross merchandise sales (GMS)^*3 were 1.5 trillion yen, down 6.9% YoY due to a high YoY hurdle from factors including a rush to make purchases on Rakuten Ichiba by the end of last September ahead of rule changes to the Furusato Nozei "Hometown Tax" program starting from October 2023, as well as the effects of changes in nationwide travel support, which partially ended in July 2023. Excluding the effects of these factors, domestic e-commerce GMS maintained approximately 5% growth YoY^*4.

・The Rakuten International business unit^*5 achieved a profit of USD 4.7 million, representing an improvement of USD 10.4 million YoY. The improved profits resulted from revenue growth from across its portfolio of services, as well as efficiencies realized through cost reduction and increased centralization of core business operations.

・The FinTech segment achieved high growth in both revenue and profit for Q3 FY2024, with revenue of 208.2 billion yen, up 12.8% YoY, and Non-GAAP operating income^*2 of 40 billion yen, up 57.2% YoY, as the customer bases and gross transaction value (GTV) of each business continue to expand.

・Rakuten Card's shopping GTV reached 6.0 trillion yen for the first time ever on a quarterly basis, up 12.7% YoY as a result of an expansion in Rakuten Card's membership base and average spending per customer, contributing to overall segment revenue growth. Rakuten Card achieved a significant increase in profits as operating margins improved due to factors including increases in affiliate store fees and installment payment fees, maintaining low bad debt-related expenses and the optimization of marketing expenses. In addition, Rakuten Group aims to leverage its strategic capital and business alliance with Mizuho Financial Group to expand Rakuten Card's business landscape and drive growth, as well as further drive the expansion of Rakuten's entire FinTech Ecosystem, with Rakuten Card firmly centered at its core.

・Rakuten Bank leveraged Group synergies to drive account acquisition, reaching 16.19 million customer accounts (non-consolidated)^*6 as of the end of September 2024, a 12.6% increase YoY.As further progress in becoming customers' primary and everyday bank account drives larger account balances, the total balance of deposits (non-consolidated) steadily increased to 11.1 trillion yen^*7 as of the end of September 2024. The increase in managed assets and the Bank of Japan's policy interest rate hike improved yields and boosted interest income, leading to substantial revenue and profit growth.

・Rakuten Securities reached a new record for highest-ever revenue following a record second quarter, with the total number of general securities accounts increasing considerably to reach 11.65 million as of the end of September 2024, a 20.3% increase YoY. During the market turbulence in early August, Rakuten Securities addressed concerns among retail investors via active communication through its owned media platform. As a result, investment trusts and margin trading balances recovered steadily and the company recorded operating income at the same level as the previous year.

・Rakuten Payment recorded an increase in revenue due to increased transaction value and continued cost control leading to the expansion of operating profit for a second consecutive quarter. For the second year in a row, Rakuten Pay received the top rank in the QR code payment industry customer satisfaction index^*8.

・In Q3 FY2024 the Mobile segment recorded revenue of 106 billion yen, up 19.5% YoY. Non-GAAP operating losses^*2 improved by 26.5 billion yen YoY, totaling 48.7 billion yen.

・Rakuten Mobile as an individual business recorded revenue of 72.5 billion yen, up 30.3% YoY, driven by increasing subscriber numbers and improved data ARPU. Coupled with the effects of ongoing cost reductions, Non-GAAP operating losses^*2 improved by 20 billion yen YoY, totaling 50.6 billion yen. EBITDA^*1,2 saw a significant improvement of 24.1 billion yen compared to the same period last year, ending with a deficit of 9.7 billion yen.

・The total number of Rakuten Mobile subscriptions surpassed 8.12 million^*9 as of November 10, 2024, driven by strong subscriber acquisition through the Rakuten Ecosystem, as well as B2C customer acquisition efforts and contributions from the Saikyo Senior Program and other discount programs on offer. The number of MNO subscribers reached 7.21 million as of the end of September 2024^*10. Churn has also continuously improved, with adjusted MNO churn for Q3 FY2024 hitting 1.09%^*11.

・MNO ARPU^*12, which includes Ecosystem ARPU, for the quarter was 2,801 yen. Growth centered on data ARPU, driven by increased 5G traffic and acquisition of main line users with higher data usage. From Q3 2024, increased revenue in Rakuten Group service revenues from Rakuten Mobile subscribers is expected to contribute to growth in both Ecosystem ARPU and MNO ARPU. While Ecosystem ARPU growth may slow with the increase of new light users, it is anticipated to grow in the future as the number of loyal Rakuten members increases.

Notes:
*1 EBITDA is an indicator the Rakuten Group uses to assess the ability for business activities to generate cash flow. It is calculated by adding Non-GAAP operating income to depreciation costs, etc.
*2 From Q3 FY2024, in light of expanding mutual synergies between segments within the Rakuten Ecosystem, the effect of these contributions are reflected in segment P&L, in order to refine and enable performance evaluation KPIs that include mutual contribution and customer referral (Mobile Ecosystem Contribution). Non-GAAP and EBITDA in each segment have been retroactively revised starting from Q1 FY2023. This has been reflected in the P&L for each segment as follows: "other internet services" for Internet Services, "other services" for FinTech, and "Rakuten Mobile" for Mobile. There is no impact on consolidated Non-GAAP operating income, IFRS operating income, or EBITDA. For more information on Mobile Ecosystem Contribution calculations, please see page 7 of the Consolidated Financial Reports for Q3 FY2024.
*3 Domestic e-commerce GMS = Rakuten Ichiba, Rakuten Travel (GTV on checkout basis), Rakuten Books, Rakuten Books Network, Rakuten Kobo (domestic), golf business, Rakuten Fashion, Rakuten Dream businesses, Rakuten Beauty, Rakuten 24 and other first-party daily necessities shops, Rakuten Car, Rakuten Rakuma, Rakuten Rebates, Rakuten Mart, Rakuten Ticket, cross border trading, etc. Excludes some tax-exempt businesses and includes consumption tax.
*4 Based on Rakuten internal calculations.
*5 Open Commerce: Total of Rewards (USA, Europe, Canada), Fillr, overseas Ads business. EU: Total of Rakuten TV and Rakuten France. Others: Total of Rakuten Kobo, Rakuten Viber and Rakuten Viki. Note: This does not include businesses from Rakuten Symphony, Taiwan e-commerce, or overseas financial subsidiaries.
*6 Figures are rounded down to the nearest unit.
*7 J-GAAP. Figures are rounded down to the nearest unit.
*8 Source: Service Productivity & Innovation for Growth (SPRING)'s 2024 Japanese Customer Satisfaction Index (JCSI) survey.
*9 Based on preliminary figures. Total of MNO, MVNO and MVNE subscribers, including Business Continuity Plan (BCP is a corporate plan sold for business continuity purposes) subscriptions. The total number of MNO and MVNE subscribers (bandwidth wholesale from Rakuten to Rakuten Communications) excluding BCP is 7.72 million (based on preliminary figures). The number of MNO subscriptions (excluding BCP and MVNE) is 7.41 million. The number of B2B MVNO subscriptions has been reflected in the number of MVNO subscriptions as of Q3 2024. Past figures have been retroactively revised.
*10 B2C and B2B. Excluding BCP and MVNE.
*11 Churn rate adjusted to exclude B2C subscribers who cancel within the same month as activation, and cancellations due to contract reviews and reevaluation of transactions with some agents for B2B.
*12 ARPU is calculated using the average of MNO subscribers at the end of the previous and most recent quarters, excluding MVNE and BCP subscriptions. Ecosystem ARPU is calculated using MNO subscribers' uplift effect on Group revenue.