Rakuten : FY2020 Second Quarter Consolidated Financial Results

FY2020 Second Quarter Consolidated Financial Results

August 11, 2020

Rakuten, Inc.

Consolidated Results

1

Q2/20 Results Highlights

• Consolidated revenue: +13.4% YoY
• Global GTV: +12.6% YoY
• Domestic E-Commerce GMS growth: +15.2% YoY －Shopping E-commerce GMS* growth +48.1% YoY
• GAAP OI: JPY 3.3bn due to sale of OverDrive
• • Non-GAAPOI: JPY -32.6bn due to mobile business and logistics investment
• Rakuten diversified ecosystem enabled solid growth

－FinTech: Revenue growth +19.5% YoY, Non-GAAP OI +24.2% YoY

－Businesses such as travel were negatively impacted by COVID-19, but showing gradual recovery

• Mobile business: Achieved 1mn applications

* Shopping E-commerce = Ichiba + 1st party (Fashion, Books, Rakuten24 (Direct), Net super + Open EC(Rebates, Checkout) + Rakuma

2

Q2/20 Business Summary

1. Strong Business Growth Amidst the Pandemic
2. Investing to Capture EC Growth Opportunities

-Change of consumer behavior

-Logistics and quality improvement activity

1. Steady MNO customer acquisition
2. RCP (Rakuten Communications Platform) strategy

5. Strength of Rakuten Ecosystem

3

1. Strong Business Growth Amidst the Pandemic

4

Business Strategy for Future Growth

■Q2/20 Revenue / OI	Revenue	+9.4% YoY
OI	+1.2% YoY
Core
Businesses*1	(excl. Rakuten Travel)
	Revenue	+15.1% YoY
	OI	+19.8% YoY

Growth	Investment
Phase	Phase
Businesses*2	Businesses*3
Revenue	Revenue
+64.7% YoY
+27.2% YoY

*1 Includes Ichiba, Travel, Rakuten Rewards (Ebates), Card, Bank, Life Insurance, etc *2 Includes C2C and 1st party businesses, etc

*3 Includes investment in Rakuten mobile and logistics business, etc.

5

How Rakuten Captures Changing Consumer Behavior

Changing		Field
consumer behavior
		Online Shopping

Impact

Ichiba: GMS↑/ Number of new and returning purchasers, orders↑

Shopping EC Q2/20 GMS: +48.1% YoY

Life Style

Shift to online for social distancing

Work Style

Work From Home

Communication Style

Increase in data consumption Online group communication

Online Banking Cashless Pay

Digital

Entertainment

Online Education

Mobile / 5G

More data and

connectivity

Securities: Q2/20 Rev+29.3% YoY/ OI+62.1% YoY

Stock, FX transactions↑

Card: Credit Card Shopping GTV Share↑ GTV Share↑

Rakuten TV: Active Users +3.9mm QoQ

Rakuten VIKI: Registered Users +3.7mm QoQ

Rakuten Kobo: Revenue↑/ Registered Users +1.9mm QoQ

Rakuten Mobile: Strong growth in online applications. Achieved 1mm applications

Rakuten Viber: Unique IDs +16.5mm QoQ

6

Q2/20 COVID-19 Impact on Domestic EC

Shopping

E-commerce*GMS

+48.1%

YoY

• Shopping E-commerce = Ichiba + 1st party (Fashion, Books, Rakuten24 (Direct), Net super + Open EC(Rebates, Checkout) + Rakuma

7

Shopping E-commerce*1 Purchasers Expand Strongly

Q2/20	Q2/20
New Purchasers	Returning Purchasers*2

+63.1% +80.9%

YoYYoY

*1 Shopping E-commerce = Ichiba + 1st party (Fashion, Books, Rakuten24 (Direct), Net super + Open EC(Rebates, Checkout) + Rakuma
*2 Returning Purchasers: Purchasers who purchase after more than a year.	8

Rakuten Card Shopping GTV Share

Expanding Rapidly

20%

Rakuten Card

15%

10%

Company A

Company B

5%

Q1/14

Q3/14

Q1/15

Q3/15

Q1/17

Q1/18

Q1/19

Q3/19

Q1/13

Q2/13

Q3/13

Q4/13

Q2/14

Q4/14

Q2/15

Q4/15

Q1/16

Q2/16

Q3/16

Q4/16

Q2/17

Q3/17

Q4/17

Q2/18

Q3/18

Q4/18

Q2/19

Q4/19

Q1/20

Q2/20

No.1

in Credit Card Shopping GTV

* Source: METI, Statistical survey of specified service, Credit Card category. Company disclosure.

9

Recent Milestones in FinTech

Rakuten Card						Rakuten Bank		Rakuten Securities
holders						Accounts		Accounts
	20mm	9mm	4mm4.4mm

2005	Jun/2020 2009	Jun/2020 2003	Mar/ Jun/
												2020 2020
												10

Rakuten Group in a Strong Position to Capture Cashless

Shopping GTV Growth Outperform the Market

(YoY)

YoY

PositiveRakuten

Card

0％

Credit Card

Industry

YoY
Negative	Apr/20	May/20	Jun/20

*METI, Statistical survey of specified service, Credit Card category

Rakuten Group: Strong Position to Capture Cashless

Other Rakuten

Services

Total GTV*

8.5

trillion JPY

*METI, Point Reward Project for Consumers using Cashless Payment, GTV for Oct 1, 2019 ~Apr 13, 2020

11

2. Investing to Capture EC Growth Opportunities

12

Strategies for Capturing

E-commerce Consumer Demand

Issue

・Expand logistics and last mile delivery to capture E-commerce demand growth under the pandemic

・Provide safe and reliable service to users

・Logistics support for Ichiba merchants

Strategy

・Increase fulfilment center coverage and efficiency of own delivery

・Introduce uniform shipping for worry-free shopping experience

Goal

・Merchant Growth =Growth of Rakuten Ichiba

・Improve user convenience

・Enhance cost and operational efficiency for merchants

13

Expansion of Logistics Centers

Chiba:Narashino

Opened on June 15, 2020

Osaka:Hirakata

Amagasaki	Kanagawa:Chuorinkan
Hyogo:Kawanishi,

First half of 2021

Chiba: Ichikawa,

Nagareyama

Kanagawa: Sagamihara

Rakuten Super Logistics (RSL) contribution to

Merchant's GMS growth

Q2/20 Average Monthly

Merchants' GMS YoY

YoY difference

Reasons why RSL merchants can grow faster

+35.9 pt

Merchant average 70%+ of shipment from RSL

Merchants utilize

Rakuten Super Logistics realize higher growth rate

"Asuraku"

(Next day delivery)

High quality

packaging

Lower logistics cost

Free up labor

Estimated delivery

time

(Start end of 2020)

"Matomete Haiso"

(Send items in one box)

(Planned)

15

Introduction of Uniform Shipping boosted Ichiba Growth

Ichiba launched Uniform shipping for purchases over JPY 3,980 on March 18

Merchants including

shipping fee ("39 shops*") GMS YoY

grow strongly since

it's launch

Users prefer to

purchase at "39 Shops*" which drives Ichiba GMS

growth

* "39 shops" = merchants including shipping fee above the threshold of 3,980 yen. In Japanese, "39" is pronounced as "Thank you."

16

NPS*1 improvement vs Competition

NPS improvement since Q3/18

(NPS absolute value)

Heavy users*2 NPS

Light users NPS

Q3/18

*1 Net Promoter Score (NPS) Survey: Conducted by Rakuten through external panel

*2 Heavy users of Rakuten include Diamond/Platinum rank. Heavy users of company A are paid members

+9.9points

Company A

+0.03 points

+6.7points

Company A

Q2/20 -0.7 points

17

3. Successful MNO Customer Acquisition

18

Accelerating Mobile Customer Acquisition

Applications Exceeded

1 million

Within 3 months of Launch

Launch of Rakuten Mobile TV Commercial in July

• 83% of Japanese want mobile prices to be reduced*.
• Unlimited data and voice at half the industry price.
• No conditions.
• No cancellation fee.

• Calculate the opinions of smartphone users based on the data from the Consumer Affairs Agency "Results of a price monitor survey for January 2019 (preliminary report)",

20

Base Station Buildout Ahead of Plan

Target population coverage 70% by March 2021

8,652

5,739

4,738

3,432

Accelerate deployment

Mar/20	Jun/20	Mar/21
		Commitment to MIC		Number of base stations on air

Jun/20

7,487

5,739

21

Rakuten UN-LIMIT User Satisfaction High

Overall satisfaction	80.0%	20.0%

Pricing plan simplicity			91.8%	8.2%
Cost performance			89.2%	10.8%
Flat rate data plan			85.4%	14.6%
Communication speed	75.8%			24.2%
Communication quality and stability	70.8%				29.2%
		Satisfied/Slightly satisfied			Dissatisfied/Slightly dissatisfied

• Source: MMD labo, June 2020 User survey after starting of "Rakuten UN-LIMIT"

22

Rakuten Mobile 5G Launch in Fall 2020

Efficient 5G roll out by software upgrade and antenna installation

Development of 5G Core

Agreement on joint development of Stand Alone 5G core network with container technology

Designated two R&D projects in the "Research and Development Project for Enhancement of the bases for post-5G information and communication systems"

23

4. RCP (Rakuten Communications Platform) strategy

24

Next Generation Global 5G Leader

Developed and Deployed

World's First Fully Virtualized Network

• Redefined how mobile telco networks are designed, built, operated
• Significant reduction in CAPEX and OPEX due to virtualization, automation and open architecture

Traditional Site Deployment	Rakuten Virtualized Site Deployment
			Integrated RRH
Power		Power	+ Antenna
Rectifier & Battery
Board	GC
		Board
			DU
BBU

Targeting the $1tn+

Mobile industry via

Innovation

"Rakuten…launched the first full- scale virtualized network on April 8th… it may prove as momentous as Amazon's launch in 2006 of its trailblazing cloud-computing arm." Economist April 8, 2020

BBU	Rectifier &	Cabinet RRU	Cable &
Battery	Jumper Antenna	Rectifier & Battery AAU

～40% lower CAPEX ～30% lower OPEX

RCP (Rakuten Communications Platform)

Total Revenue of

Global Mobile Operators

Network Cost of Mobile Operator

（% of Revenue）

RAN	Hardware &	MEC	Operation	Core Network
	Software

OpenRAN	Open	COTS based	Automation &	Innovation w/
Architecture	HW & SW	MEC Design	Operation by AI	Open Core
Cloud native compatible with	Framework based on	Optimal integration of edge,		Innovative partnership with
vRAN, separation of software	Adoption of automation and
standardized open hardware
and hardware, OpenRAN	central DCs, and resources	zero operation control	NEC on OpenCore
and software
architecture
	Edge Data Center		Central Data Center

4G LTE

RCP AUTOMATOR

TransportIP

TransportIP

RCP AUTOMATOR

Front Haul

Mid Haul

vDU

vDU

CP-CU

RCP CLUSTERvEPC

vIMS

FiberFibre

vDU

vDU

Fiber

FIBER

FIBER

UPCU-

5G mmWave

Network

Network

Internet

RCP CLUSTER

SUB-6 RU

JPY 120Tn

2020 2024

~-30%	OPEX Reduction
with RCP

~32％

~23%

OPEX

CAPEX

Operator	Traditional	RCP
Revenue	NW Cost	NW Cost

Market Size

• Avoid lock-in by specific vendors
• Quick adoption of additional services for network operation with marketplace type app store
• Network optimization using AI as a basic function, contributing to operational improvement
• Economic solution for expensive 5G infrastructure investment

JPY 30Tn-40Tn

Redefining how mobile telco networks are designed, built, and operated

5. Strength of Rakuten Ecosystem

27

Rakuten Ecosystem: Digital and Diverse

With Strong and Stable Growth

Global

Taiwan U.S. Spain

Books	Rakuma	82.7% 60.2% 74.1%

IDs

1.4bn

Annual Points

Issued

320bn Points

• FY2019 results

Bank

Securities

Life insurance

General insurance

France Canada

79.7% 64.5%

• Aided Rakuten corporate logo awareness survey conducted by Rakuten (Jul 2020)

Businesses

70+

28

Rakuten Everywhere

Capturing the Consumer's JPY 352 Trillion* Wallet Share

(JPY tn)

(Airweave, Genesis Healthcare)

* Internal estimation based on public information

29

COVID-19 Initiatives: Supporting Stakeholders

Employees

• Continue to promote WFH* through the proactive use of IT : videoconferencing, digital signatures.
• WFH while maintaining a high level of security
• Newly formulated Return to office guidelines.

Customers

• Rakuten Express / Seiyu Net Super: Available for non-face-to-facereceipt.
• Vacation STAY: Telework support campaign.

Partners

• Rakuten Travel "Secure Travel"
  Rakuten GORA "Play Safe" Rakuten Beauty
  Added COVID-19 countermeasure
• Rakuten Realtime Takeout
  Free of charge until end of Oct.

*WFH represents Work from home, Furusato-Nozei is Hometown Tax Donation Program

Society

• Charity fund : Donation to support medical institutions etc.
• Furusato-Nozei* :Donation exceeds JPY 1 billion in support projects for businesses affected by COVID-19.

30

Commitment to Sustainability

Selected for all major Japan ESG indices

Global ESG indices adopted by GPIF for ESG investment

31

Consolidated Results

33

Q2/20 Consolidated Results Summary

			(JPY bn)
	Q2/19	Q2/20	YoY
Revenue	306.3	347.3	+13.4%
Non-GAAP Operating Income	3.2	-32.6	-35.7
Non-GAAP Operating Income	24.7	31.3	+26.8%
Excluding Mobile, Logistics and Investment Business
IFRS Operating Income	-1.8	3.3	+5.1

Includes gain of JPY 40.9 billion from the sale of

OverDrive Holdings, Inc.

34

Q2/20 Revenue and Operating Income

					(JPY bn)
		Q2/19		Q2/20	YoY
	Core Business*1			267.5
	Revenue		244.6	+9.4%
	Operating Income		34.0	34.4	+1.2%
	Non-recurring / Investments*2			33.2
	Revenue		29.7	+11.6%
	Operating Income		-1.9	-1.5	+0.3
	Future Growth Investments*3			86.9
	Revenue		61.5	+41.3%
	Operating Income		-29.1	-66.7	-37.6
	Adjustments			-40.2
	Revenue		-29.4	-10.8
	Operating Income		0.1	1.3	+1093.7%
	Consolidated			347.3
	Revenue		306.3	+13.4%
	Non-GAAP Operating Income		3.2	-32.6	-35.7
	IFRS Operating Income		-1.8	3.3	+5.1

*1 Includes Ichiba, Travel, Rakuten Rewards (Ebates), Card, Bank, Life Insurance, etc *2 Includes Securities, General Insurance and Investment Business

*3 Includes Logistics-related investments, Mobile, Payment, NBA broadcasting rights, Rakuten Rewards (Ebates) rebranding costs, etc

35

Q2/20 Non-GAAP Operating Income Breakdown

Domestic EC

(excl. logistics related investments,costs, etc.)

Upfront investments for future growth
・Logistics-related investments, costs: -2.8bn
・Rakuten Rewards (Ebates) rebranding costs: +2.8bn
・NBA broadcasting rights *1: +0.5bn	(JPY bn)
・Consolidation adjustment, etc.

	Q2/19
	Loss from
	Investment	+4.1
3.2	business	7.6
-4.4	FinTech
Q2/19		Q2/19
Operating		Operating Income
	(excl. loss from
Income
	investment business)

+8.1	-5.9
	-3.2		+0.7
Boosted by	Growth slowed
COVID-19	by COVID-19	Others*2
(Travel, Ticket,	(excl. investment	10.7
(Ichiba,
Golf, etc.)	business,	-32.6
Rakuten24,
	Rakuten Rewards
Books, etc.)
	rebranding costs,
		NBA broadcasting	Q2/20
		rights *1, etc.)
			Operating Income	-38.4
			(excl. upfront

investments for future

growth, Mobile, loss from

investment business)

Q2/20

Loss from Investment business

*1 NBA broadcasting rights are included in "Others" of Internet Service Segment

*2 "Others" segment mainly includes overseas EC businesses and Sports businesses

Mobile -5.6

Q2/20

Operating

Income

36

Massive Expansion of the Rakuten Ecosystem

• Consistent growth towards target Membership Value of JPY 10tn

	Cross
	Use
	x	x
Q2/20	Unique
Membership Value	Users	x LTV
User

JPY 7.3tn

+47.5% YoY

Membership Value

Target

JPY 10tn

37

Rakuten Ecosystem Membership Value

• Membership Value climbed +47.5% YoY from increased Ichiba, Securities, and Rakuten Card users and improved gross profit

(JPY tn)

4.9

Q2/19

+1.07 +0.01

+0.89 +0.36

				Revenue growth and retention
Active user growth in
	improvement in
•	Rakuten Securities		•	Rakuten Ichiba
•	Rakuten Ichiba		•	Rakuten Securities
•	Rakuten Books, etc		•	Rakuten Card, etc.

Active Users x

Cross-Use

x

(LTV

-

CAC)

7.3

Q2/20

*MVNO membership value is excluded both from Q2/19 and Q2/20

38

Appendix

40

Consolidated Results

41

Total Global GTV*1*2

(JPY tn)

*1 Global Gross Transaction Value = Domestic E-Commerce GMS + Credit Card GTV + Rakuten Edy GTV + Rakuten Pay GTV+ Rakuten Point Card GTV + Overseas E-Commerce GMS + Rakuten Rewards (Ebates) GMS + Digital Contents GTV + Rakuten Advertising GTV

*2 Includes intercompany transactions for settlement and affiliate services

42

Expansion of Cross-Use Ratio*

• Successful SPU program enhancing cross-use, resulting in an increased number of active users, contributing to growth in membership value

*Number of Rakuten members who have utilized two or more Rakuten services during the past 12 months of the listed month (As of June 30, 2020) (Applicable services limited to those which can earn Rakuten Super Points.)

43

Q2/20 Revenue and Operating Income

					(JPY bn)
		Q2/19		Q2/20	YoY
	Domestic E-Commerce
	Revenue		116.8	133.2	+14.0%
	Operating Income		12.1	11.0	-9.1%
	Others
	Revenue		73.3	69.0	-5.9%
	Operating Income		-13.9	-15.5	-1.6
Internet Services Segment
	Revenue		190.1	202.1	+6.4%
	Operating Income		-1.8	-4.5	-2.7
FinTech Segment
	Revenue		118.6	141.7	+19.5%
	Operating Income		17.1	21.3	+24.2%
Mobile Segment
	Revenue		27.1	43.6	+61.0%
	Operating Income		-12.2	-50.6	-38.4
Adjustments
	Revenue		-29.4	-40.2	-10.8
	Operating Income		0.1	1.3	+1093.7%
Consolidated
	Revenue		306.3	347.3	+13.4%
	Non-GAAP Operating Income		3.2	-32.6	-35.7
	IFRS Operating Income		-1.8	3.3	+5.1

44

Q2/20 Operating Income Reconciliation

				(JPY bn)
	Q2/19		Q2/20	YoY
Non-GAAP Operating Income		3.2	-32.6	-35.7
Amortization of Intangible Assets (PPA)		-2.3	-2.7	-0.4
Stock Based Compensation		-2.6	-2.3	+0.3
One-off items		0.0	40.9	+40.9
IFRS Operating Income		-1.8	3.3	+5.1

45

Rakuten Group: Balance Sheets As of Jun 30, 2020 (Subsidiaries include internal transactions)

(JPY bn)

Cash and	Bonds and
cash	borrowings
equivalents	2,069.9
2,296.4

Financial	Financial
liabilities
assets	for
for	securities
securities	biz
biz	2,245.0
2,286.2
Investment
securities				Cash and	Bonds and
and loans for
			cash	borrowings
banking biz	Deposits
		equivalents	348.6
1,399.4	for
		1,608.2
	banking
Loans for
biz
credit card					Cash and
3,769.0
biz
	Cash and	Bonds and			cash
1,772.6
	cash	borrowings			equivalents
		equivalents	719.0		Deposits	61.5
		194.7			for
			Subordinated	Investment	banking
			biz
	Other		bonds	securities	Loans for	Bonds and	Other
Other		and loans for	3,869.0
liabilities		182.0	credit card	borrowings	liabilities
assets	1,625.8	Other	Other	banking biz	Other	biz	1,769.6	400.7
2,678.8		assets	2,643.3	liabilities	1,764.3
	liabilities	71.4
		2,010.0	766.0		Other
		Other
	Total
		Total		assets		Total
	net assets		assets	Total
		net assets
		629.9		net assets
	723.6		186.9	net assets
		537.6
				285.4
				149.5
Total Assets	10,433.3	Total Assets	2,204.7	Total Assets	4,438.4	Total Assets	2,455.7

Cash and

cash equivalents Bonds and

150.4 borrowings

143.0

Financial

assets

for

Financial securities liabilities

biz for

2,283.1 securities

biz

Other 2,239.4 assets

69.8

Total Assets 2,503.3

				Cash and	Other
				liabilities
	Cash and			cash
			391.0
	cash	Other	equivalents
	equivalents	liabilities	85.0
Other	6.6	34.8		Other	Total
			net assets
liabilities				assets
Other	Total		45.0
16.0	351.0
assets	net assets
Total	66.2	38.0
net assets
104.9
	Total Assets	72. 8		Total Assets 436.0

Rakuten Group	Rakuten, Inc.	Rakuten Bank, Ltd.	Rakuten Card	Rakuten	Rakuten
(Consolidated)	Co., Ltd.	Securities, Inc.	Life Insurance Co., Ltd.

*1 Rakuten, Inc., Rakuten Bank, Ltd., Rakuten Card Co., Ltd., Rakuten Securities, Inc., Rakuten Life Insurance Co., Ltd., and Rakuten General Insurance Co., Ltd. are based on IFRS non-consolidated balance sheets.

*2 Bonds and borrowings = Corporate bonds + CP + Borrowings *3 Subsidiaries include internal transactions

Rakuten

General Insurance

Co., Ltd.

46

Cash Flow Breakdown: Jan-Jun, 2020

(JPY bn)

Balance of cash
Dec 31, 2019	Non-Financial Businesses
	Operating	Investing Financing

Increase in cash and

cash equivalents

-105.4

Operating CF

(Excl. Tax)

1,478.6	11.9	4.3	149.5
			60.3
		Tax

Financial Businesses

	Operating			Investing	Financing
										276.5
	Change in
	assets &
	liabilities
547.1		7.7	17.1	0.2
				Tax		Change in				Other
						investment				investing CF
						securities
Profit
(adjusted)

43.7	Increase in cash and
	cash equivalents

+842.3

M&A, Common Investments

7.9 73.0

Increase in cash and

cash equivalents

+80.9

Balance of cash

Jun 30, 2020

2,296.4

• "M&A and investments" includes "Increase and Decrease in restricted deposits", "Purchase of investment securities" "Acquisition of investments in associates and joint ventures" and "Proceeds from sales and redemption of investment securities" of Non-Financial activities in addition to "Acquisition of subsidiaries"

47

FinTech Segment

48

Cross-Use Example of FinTech Businesses

• Cross-useamong FinTech services is rapidly expanding

(Number of Unique Users)

Bank

+49.7%*

YoY

Securities

* As of June 2020

49

Q2/20 FinTech Results Summary

				(JPY bn)
	Revenue	YoY	Operating	YoY
	Income
Card	64.3	+14.9%	9.2	+12.0%
Bank	23.6	+7.0%	7.4	+6.4%
Insurance	28.1	+9.1%	1.9	+87.7%
Payment	7.0	+6.2%	-0.6	+0.71
Others	1.4	+ 6.56	-0.2	-0.27
FinTech Total excl. Securities	124.5	+18.2%	17.6	+18.5%
Securities	17.3	+29.3%	3.7	+62.1%
FinTech Total	141.7	+19.5%	21.3	+24.2%

* Insurance includes Life Insurance, General Insurance, Pet Insurance and Insurance Agency. Detailed data is shown in the Appendix.

50

Rakuten Card Results

• Revenue +14.9% YoY and Operating Income +12.0% YoY from growth in shopping transactions and revolving balances

(JPY mm)

51

Rakuten Card Number of Cardholders surpassed 20mm

• Number of cardholders surpassed 20mm in June 2020, and continues to grow rapidly

(Card holders)

20mm

			19mm
			18mm
			17mm
			16mm
		14mm	15mm
	13mm	5 Months
11mm	12mm		5 Months
		6 Months
10mm			7 Months

7 Months

9 Months

8 Months

9 Months

8 Months

8 Months

Jul/14

Mar/15

Nov/15

Aug/16

Apr/17

Jan/18

Aug/18

Mar/19

Aug/19

Jan/20

Jun/20

Rakuten Card As a Primary Credit Card

• Rakuten Card kept positive growth amidst COVID-19 and recovered quickly in June
• Rakuten Card is also being used as a primary card for daily necessity and utility charges etc.

Shopping GMS Growth Outperform the Market (YoY)

YoY

PositiveRakuten

Card

0％

Credit Card

Industry*

YoY
Negative	Apr/20	May/20	Jun/20

*METI, Statistical survey of specified service, Credit Card category

Rakuten Card Shopping GMS Category Breakdown

Others

Travel

Department Stores etc.

Home/ Medical /Insurance/

Water /Electricity/

Communication etc.

Daily necessities

e-Commerce

May/19May/20

(Before COVID-19) (During COVID-19)

53

Rakuten Card KPIs*(1)

Number of Cardholders	Card Shopping Transaction Value
(mm)	(JPY bn)

• Calculated on a managerial accounting basis, using different definitions from data in the Appendix. Detailed credit card data is shown in the Appendix

54

Rakuten Card KPIs*(2)

(JPY bn)

Shopping Revolving and Cash Advance Balances

• Calculated on a managerial accounting basis, using different definitions from data in the Appendix. Detailed credit card data is shown in the Appendix. Revolving balance is calculated on a principal basis

55

Rakuten Card Allowance for Doubtful Accounts

(JPY mm)

		Q2/19	Q3/19	Q4/19	Q1/20	Q2/20	YoY
Expenses related to doubtful accounts	9,855	10,326	11,528	9,842	11,809	+19.8%
Ratio of expenses related to doubtful accounts*1	2.05%	2.05%	2.13%	1.77%	2.15%	－
		Q2/19	Q3/19	Q4/19	Q1/20	Q2/20	YoY
Rakuten Card	1,565,721	1,683,025	1,874,061	1,802,438	1,831,263	+17.0%
	Stage 1 (Normal)	1,492,322	1,605,403	1,794,230	1,717,959	1,741,588	+16.7%
	Stage 2 (1-2 months delinquent)	10,276	11,207	11,408	13,451	11,745	+14.3%
	Stage 3 (3 months-and-over-delinquent/Restructured Loans)	63,123	66,415	68,423	71,027	77,930	+23.5%
Rakuten Bank Super Loans	389,062	388,316	384,469	385,680	371,907	-4.4%
	Stage 1 (Normal/Credit gurantees*2)	349,841	348,932	345,922	347,551	333,715	-4.6%
	Stage 2 (30 days-and-over-delinquent/Credit gurantees*2)	197	212	127	135	83	-57.7%
	Stage 3 (Foreclosed credit guarantees)	39,024	39,172	38,420	37,994	38,109	-2.3%
Others	1,232	1,144	1,065	1,010	963	-21.9%
Total balance of loan receivables	1,956,015	2,072,485	2,259,594	2,189,128	2,204,133	+12.7%
Allowancefor doubtful accounts*3	91,180	93,504	94,265	95,109	99,504	+9.1%
Write-off for bad debt*4	8,966	8,002	10,766	8,999	7,416	-17.3%

*1 Ratio of expenses related to doubtful accounts = (Expenses related to doubtful accounts) / (average of total balance of loan receivables at beginning and end of the period) × 4 *2 Balance of Rakuten Bank Super Loans guaranteed by Rakuten Card

*3 Including allowance for credit guarantees

*4 Write-off for bad debt includes loss on transfer of loan receivables

56

Rakuten Bank Results

• Revenue +7.0% YoY on increase in loan receivables and service transactions

(JPY mm)

* Joint venture in Taiwan (RAKUTEN INTERNATIONAL COMMERCIAL BANK CO., LTD.) became a consolidated subsidiary in Q2/20, which is not reflected in the figures above.

57

Rakuten Bank Number of Accounts surpassed 9mm

• Number of bank accounts surpassed 9mm in June 2020, and continues to grow rapidly

9mm

8mm

7mm

6mm

5mm

4mm

8 Months

10 Months

16 Months

27 Months

37 Months

Apr/12

May/15

Aug/17

Dec/18

Oct/19

Jun/20

58

Rakuten Bank Deposits*1

(JPY bn)

*2

*1 Based on IFRS which includes derivatives in structured term deposits. Rakuten Bank consolidated basis. *2 Other deposits include deposits in foreign currencies and others.

59

Rakuten Bank Loan Receivables Balance

(JPY bn)

60

Rakuten Securities Results

• Revenue +29.3% YoY and Operating Income +62.1% YoY from growth in trading volumes of Stock and FX

(JPY mm)

61

Rakuten Securities Number of New Accounts

• The number of new accounts opened this year (Jan/20-Jun/20) reached a record high
• Opening an account can be completed online with introduction of eKYC (5/10~)

# of New Accounts (Jan/20-Jun/20)

Opening an account can be completed

online with introduction of eKYC

651 thousand

Email address	Photograph of identity Take a face photo	Input customer
registration	verification documents	information
	(smartphone)

Next business day or later

Company A Company B Company C Company D	Send login ID

62

Rakuten Securities Accumulation-type Investment Trust Accounts

• Number of accumulation-type investment trust accounts increased due to the provision of points for accumulation-type investment trusts paid by Rakuten Card and point-investments

(thousands of accounts)

63

Rakuten Securities Point Investments

• Investments with Rakuten Points has been growing steadily

(Amount of points used)

Domestic Stocks

Accumulation Type

Investment Trusts

Investment Trusts

Aug/17

Nov/17

Feb/18

May/18

Aug/18

Nov/18

Feb/19

May/19

Aug/19

Nov/19

Feb/20

May/20

August 2017

September 2018

October 2019

Point Investments

Point Investments

Point Investments

(Investment Trusts)

(Accumulation Type

(Domestic Stocks)

64

Investment Trusts)

Rakuten Life Insurance Results

• Operating Income increased due to increase of new policies, cost reductions, and rebalancing of risk through reinsurance

(JPY mm)

(JPY mm)

65

Rakuten Insurance Group : Accelerating Web New Sales

• Comprehensive Insurance Desk offers one-stop service of Life, General and Pet insurance
• General Insurance web sales increased steadily +208% YoY

Comprehensive Insurance Desk

Annualized Insurance Premiums of

Life Insurance	Comprehensive
	Insurance Desk

		Consolidate
		Operations
General Insurance		Marketing
		Call Center
		System
		Other
		Operations
Pet Insurance

		Web New Policies (YoY)
One Stop		Life Insurance	General Insurance
Service	+50%	+208%
	Q2/19	Q2/20	Q2/19	Q2/20

66

Strategy in the Accelerating Cashless Era

ID

Rakuten Points

Merchants

One ID		No.1	Approx.5mm
Enabling multiple payment	×	in total satisfaction survey	Locations Online and Offline
Methods		×

 Credit Card	 Point I want the most
	Debit Card		Point I have/use the most
	E-money		Point I can earn most easily

• QRcode/Barcode
• Point Card

1mm*

Transit e-money locations

*My voice com, Survey on points, July 2020

*As of end of June 2020

67

New initiative : Rakuten Pay - Suica Linkage

Suica is the biggest public transportation based e-money in Japan

Released on May 25, 2020	To be released…
 Issuance of Suica within	 Earn Rakuten Point by Charging Suica in
Rakuten Pay App	Rakuten Pay App with Rakuten Card

Service start screen

Charge completion screen

68

Internet Services Segment

69

Domestic E-Commerce GMS*1*2

(JPY bn)

*1 GMS comprises Ichiba, Travel GTV on checkout basis, Books, Golf, Ticket, Fashion, Dream businesses, Beauty, Delivery, Rakuten24 (Direct), Auto business, Rakuma, Rebates Rakuten Seiyu Netsuper, etc.

*2 Eliminated internal transactions in some businesses from Q1/20. This has resulted in retroactive adjustments

70

Domestic E-Commerce Results*

• Even under the negative impacts on Travel business due to COVID-19, revenue improved strongly +14.0% YoY mainly because Ichiba growth and operating income -9.1% YoY despite heavy investments in logistics business

(JPY mm)

• Domestic E-Commerce = Ichiba, Travel, Books, Golf, Ticket, Rakuten Fashion, Dream businesses, Beauty, Delivery, Rakuten24 (Direct), Logistics, Auto business, Rakuma, Rebates, etc.

71

Q2/20 Domestic E-Commerce Operating Income Breakdown

(JPY bn)

12.1

	Investing phase businesses
	・Rakuten 24 (Direct)
	・Rakuma
	・Rakuten Books
	・Rakuten Fashion
		Logistics-related investments / costs,
	・Rakuten BIC
	・Rakuten Seiyu Netsuper etc.		others.
+1.2	+1.0	-3.3
		14.3
Growth of Marketplace
businesses			11.0
・Rakuten Ichiba
・Rakuten Travel
・Rakuten GORA etc.

Q2/19	Q2/20	Q2/20
Domestic E-Commerce	Domestic E-Commerce	Domestic E-Commerce
Operating Income	Operating Income	Operating Income
	(excl. logistics-related
	investments/costs )	72

Q2/20 Domestic E-Commerce Operating Income Breakdown

(JPY bn)

12.1

COVID-19 negative impact ・Rakuten Travel

・Rakuten GORA etc.

			Logistics-related investments / costs,
	-5.9		others.
+8.1
		-3.3
Boosted by COVID-19
・Rakuten Ichiba
・Rakuten 24 (Direct)		14.3
・Rakuma
・Rakuten Books		11.0
・Rakuten Fashion
・Rakuten BIC
・Rakuten Seiyu Netsuper
etc.

Q2/19	Q2/20	Q2/20
Domestic E-Commerce	Domestic E-Commerce	Domestic E-Commerce
Operating Income	Operating Income	Operating Income
	(excl. logistics-related
	investments/costs )	73

Domestic EC Marketplace businesses* Operating Income

• Even under the negative impacts to travel business due to COVID-19, Q2/20 continued positive with +5.3% YoY

（YoY）

• Marketplace businesses comprises Ichiba, Travel, Golf, Dream businesses, etc.

74

Q2/20 Rakuten Ichiba Mobile GMS Ratio*

76.4%

Up 2.3 Points YoY

• Mobile GMS Ratio = Ichiba mobile GMS / Total Ichiba GMS (includes smartphones and tablets)

75

Rakuten Card Share of Rakuten Ichiba GMS

76

Rakuten Rewards (Ebates) GMS

(USD mm)

77

Rakuten Rewards (Ebates) Operating Income*

(USD mm)

• Excludes rebranding cost of USD 36.3 million (Q1/19) ,USD 30.4 million (Q2/19) ,USD 20.4 million (Q3/19) ,USD 27.4 million (Q4/19) ,USD 5.2 million (Q1/20) and USD 5.1 million (Q2/20)
• Operating income has changed due to change in method of internal cost allocation. Past figures have been retroactively adjusted.

78

Performance of Investment Business*

1,102

(USD mm)

+223

879

ROI

+99%

IRR

+23%

Initial Investment	Return	Fair Value
（2012 to date）		(As of Jun 30,2020)

• Lyft and Rakuten Medical are excluded due to transfer from Investment Business and treated as exited investments for return calculation
• Returns excluded Lyft and Rakuten Medical: ROI +68%, IRR +14% (partial modification to data scope)

Investment Business Portfolio

Internet

Ride Sharing

*

（Affiliated Company)

FinTech

Healthcare

*

（Affiliated Company)

* Lyft and Rakuten Medial were transferred from Investment Business in Apr and Sep 2019, respectively and changed from pure investments to strategic investments

Historical Investment and Business Exit

		FY2017	FY2018		FY2019	FY2020
								Q1	Q2
(JPY bn)
					Mainly	52.1			Mainly
Exit	15.7		20.8	14.1
4.8
						1.5	0.2
New	18.1		22.3
Investment*

105.1

Business

Exit

* Including additional investments

Gain from	Gain from
the sales of	the sales of
O-net	OverDrive
JPY23.6bn	JPY40.9bn

81

Mobile Segment

82

Mobile Results*

• Depreciation cost, etc. increased as base station build-out accelerated

(JPY mm)

• Mobile segment includes Rakuten Communications, MNO business, MVNE & O businesses, Rakuten Viber, and Energy businesses.

83

Rakuten Mobile Balance Sheet

	(百万円, JPY mm)
IFRS貸借対照表, Balance Sheet (IFRS)		Q2/20
資産, Assets
有形固定資産, Fixed assets		268,954
無形資産, Intangible assets		44,096
その他の資産, Other assets		155,852
資産合計, Total Assets		468,902
負債及び資本, Liabilities and net assets
借入金, Borrowings *		99,330
リース債務, Lease liabilities**		79,875
その他の負債, Other liabilities		110,104
負債合計, Total liabilities		289,309
資本合計, Total net assets		179,594
負債及び資本合計, Total liabilities and net assets		468,902

* Borrowings include liabilities from lease financing, etc

** Lease liabilities are capitalized costs under IFRS16 such as rent expenses

*** Planned additional capital injection of 110B JPY to the current capital of 240B JPY. (Total 350B JPY)

84

Mobile Shop Network

570 shops

As of July 2020

85

Viber Unique IDs*

(million IDs)

* Unique IDs: Unique phone numbers excluding deactivations

86

Viber Revenue*

Total revenue

+9.1% YoY

* Telco: Viber Out, Viber In, SMS. Content: Service messages, ads, stickers, etc.

87

Ad Business

88

Ad Business: Q2/20 Growth Analysis

• Internal advertising revenue increased. External advertising revenue declined due to market situation and COVID-19 effects

Ad Revenue*1*2	[Advertiser]
	External（National Brand）

+17.9% -12.7%

(JPY bn)

YoYYoY

[Inventory]

Internal

External

（Rakuten site）

+15.0% +15.8%

YoYYoY

Internal（Ichiba Merchants, etc.）

*1 Revenue includes internal transactions.

*2 Eliminated internal transactions in certain businesses from Q4/19. This has resulted in retroactive adjustments.

89

Ad Business: Expansion of Internal Inventory × External Advertiser

• In recognition of strong Ichiba performance, strengthen sales to external advertisers such as national brands on internal advertising
• As initiatives of online sales promotion by consumer goods maker, demand to ad placement is increasing

[Advertiser]

External（National Brand）

		Provide Rakuten		Provide External ad
			distribution
		Group ad
			and performance
		inventories to
			tracking with Rakuten
		external advertisers
			data to external
[Inventory]				advertisers
Internal					External
（Rakuten site）			Provide External ad
		Provide Rakuten		distribution
			and performance
		Group ad inventories
			tracking with Rakuten
		to internal advertisers
			data to internal
				advertisers

Internal

(Ichiba Merchants, etc.)

Q2/20

Ichiba×External	+42.2%
Advertiser Revenue	YoY
(Main clients)

●Advertiser's advantage

Promote customers to buy their products directly from ads on Ichiba

●Rakuten's advantage

・Ichiba GMS expansion

・Expansion of internal ad revenue which is high margin

User

Place advertisers' pages on Ichiba

90

Sustainability

91

Q2/20 ESG reporting

• In June, Rakuten selected as constituent of major ESG indices provided by FTSE and MSCI, with significant rating improvements regarding corporate governance (Executive Officer remuneration, anti-corruption) and climate change.

Climate change - FY2019 achievements

• Rakuten, Inc. joined RE100 initiative, committing to 100% renewable electricity by 2025 for offices, fulfillment centers and data centers
• In 2019, 51.4% of Rakuten, Inc,'s CO2 emissions neutralized (=15% of Group's emissions)

Rakuten Group's electricity	Rakuten Group's renewable
consumption in 2019	electricity sourcing in 2019
Base	Offices	15%
stations
21%	25%

Sports
facilities		Fulfillment
10%
Data	centers
	14%
	centers
	30%

2019 emission offset equivalent to carbon footprint of over 10 services, including Rakuten Ichiba, Rakuten Travel, Rakuten Super Logistics, Rakuten Books, Rakuten TV, Rakuten Farm…

92

This presentation includes forward-looking statements that reflect management's current assumptions and expectations of future events, and accordingly, they are inherently susceptible to uncertainties and changes in circumstances and are not guarantees of future performance. Actual results may differ materially, for a wide range of possible reasons, including general industry and market conditions and general international economic conditions. In light of the many risks and uncertainties, you are advised not to put undue reliance on these statements. The management targets included in this presentation are not projections, and do not represent management's current estimates of future performance. Rather, they represent targets that management strive to achieve through the successful implementation of the Company's business strategies. The Company may be unsuccessful in implementing its business strategies, and management may fail to achieve its targets. The Company is under no obligation - and expressly disclaims any such obligation - to update or alter its forward-looking statements. Names and logos of companies, products, and services and such that appear in this material are trademarks or registered marks of their respective companies.

93