Rakuten : Earnings Release for Q2 of FY2023 Financial Results

The following information was originally prepared and published by the Company in Japanese as it contains timely disclosure materials to be submitted to the Tokyo Stock Exchange. This English summary translation is for your convenience only. To the extent there is any discrepancy between this English translation and the original Japanese version, please refer to the Japanese version. The following financial information was prepared in accordance with International Financial Reporting Standards ("IFRS").

Consolidated Financial Reports (IFRS) for the six months ended June 30, 2023

					Rakuten Group, Inc.
					August 10, 2023
Company name	Rakuten Group, Inc.		Listed	Tokyo Stock Exchange
Code No	4755			URL	https://global.rakuten.com/corp/
Representative	(Title) Chairman and CEO	(Name)	Hiroshi Mikitani
Contact person	(Title)	Director and Group Executive	(Name)	Kenji Hirose
Vice President CFO

Supplementary materials for financial results: Yes

Financial results information meeting held: Yes (For institutional investors and analysts)

1. Consolidated Results for the six months ended June 30, 2023

（January 1 - June 30, 2023）

(Yen amounts are rounded to the nearest million)

1. Consolidated Operating Results

							(%, YoY)
	Revenue		Operating income	Income before		Net income
		income tax
	Millions of Yen	%	Millions of Yen	%	Millions of Yen	%	Millions of Yen	%
Six months ended	972,800	9.5	(125,087)	－	(122,625)	－	(136,971)	－
June 30, 2023
Six months ended	888,249	－	(198,730)	－	(216,141)	－	(179,438)	－
June 30, 2022
	Net income		Comprehensive	Basic		Diluted
		earnings per		earnings per share
	attributable to
	income		share attributable	attributable to
	owners of the
			to owners of the	owners of the
	Company
				Company		Company
	Millions of Yen	%	Millions of Yen	%	Yen	Yen
Six months ended	(139,985)	－	(45,468)	－	(83.04)	(83.05)
June 30, 2023
Six months ended	(177,892)	－	(65,095)	－	(112.28)	(112.28)
June 30, 2022

Note: The Rakuten Group has adopted IFRS 17 "Insurance Contracts" (hereinafter "IFRS 17") from the beginning of the three months ended March 31, 2023, and reflected the cumulative effect of this accounting standard change on the date of transition of January 1, 2022. As a result, figures for the six months ended June 30, 2022 reflect the retrospective application of IFRS 17. As such, the ratios of year-on-year change for the six months ended June 30, 2022 is not stated.

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1. Consolidated Financial Position

			Total equity	Ratio of total equity
			attributable to
			attributable to
	Total assets	Total equity	owners of the
	owners of the
			Company to total
			Company
			assets
	Millions of Yen	Millions of Yen	Millions of Yen	%
As of June 30,	21,648,023	1,172,294	1,018,134	4.7
2023
As of December 31,	20,402,281	848,711	791,351	3.9
2022

Note: The Rakuten Group has adopted IFRS 17 from the beginning of the three months ended March 31, 2023, and reflected the cumulative effect of this accounting standard change on the date of transition of January 1, 2022. As a result, figures for the fiscal year ended December 31, 2022 reflect the retrospective application of IFRS 17.

2. Dividends

		Dividend per Share
	1Q	2Q	3Q	4Q	Year
	Yen	Yen	Yen	Yen	Yen
FY2022	－	0.00	－	4.50	4.50
FY2023	－	0.00
FY2023 (Forecast)			－	－	－

Note: Dividend per share for the fiscal year ending December 31, 2023 has not been decided yet, and there are no changes to the previously disclosed dividend forecast.

.

3. Estimate of Consolidated Operating Results for fiscal year 2023 (January 1 to December 31,

2023)

For the estimate of consolidated operating results for fiscal year 2023, double-digit growth on consolidated operating results for the fiscal year 2022 is estimated for fiscal year 2023 consolidated revenue, excluding the securities business whose results are heavily impacted by stock market conditions. (For details, see page 9, "1. Qualitative Information, Financial Statements, etc. (3) Qualitative Information about Consolidated Business Forecasts".)

Note: There are no changes to the previously disclosed consolidated forecasts for the year ending December 31, 2023.

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Notes

(1) Changes in Significant Subsidiaries during the Current Period

(Changes in Specified Subsidiaries resulting in Change in Scope of Consolidation): No

New:

－ (Company name: －)

Excluded: － (Company name: －)

1. Changes in Accounting Policies and Changes in Accounting Estimates
2. 1. Changes in accounting policies required by IFRS: Yes
   2. Changes in accounting policies due to other reasons: No
   3. Changes in accounting estimates: No
      (Note) For details, see page 18, "2. Consolidated Financial Statements (Summary) and Notes, (7) Notes to the Consolidated Financial Statements (Summary)".
3. Number of Shares Issued (Common Stock)
4. 1. Total number of shares issued at the end of the period (including treasury stocks)

2,138,419,700 shares (As of June 30, 2023)

1,590,463,000 shares (As of December 31, 2022)

1. Number of treasury stocks at the end of the period 272 shares (As of June 30, 2023)
   244 shares (As of December 31, 2022)
2. Average number of shares during the period (cumulative from the beginning of the year) 1,685,801,517 shares (January 1 - June 30, 2023)
   1,584,396,767 shares (January 1 - June 30, 2022)

These financial reports are not subject to an audit firm's quarterly review.

Explanation about the Appropriate Use of Earnings Forecasts, and Other Special Matters Consolidated earnings forecasts for the year ending December 31, 2023 are based on information that

is available at the time of writing, but a number of known and unknown factors could cause actual results to differ from projections.

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1. Qualitative Information, Financial Statements, etc.

(1) Qualitative Information Concerning Consolidated Business Results

The Rakuten Group discloses consolidated business results in terms of both its internal measures which management relies upon in making decisions (hereinafter the "Non-GAAP financial measures") and those under IFRS.

Non-GAAP operating income is operating income under IFRS (hereinafter "IFRS operating income") after deducting unusual items and other adjustments as prescribed by the Rakuten Group. Management believes that the disclosure of Non-GAAP financial measures facilitates comparison between the Rakuten Group and peer companies in the same industry or comparison of its business results with those of prior fiscal years by stakeholders, and can provide useful information in understanding the underlying business results of the Rakuten Group and its future outlook. Unusual items refer to one-off items that the Rakuten Group believes shall be excluded for the purposes of preparing a future outlook based on certain rules. Other adjustment items are those that tend to differ depending on the standards applied, and are therefore less comparable between companies, such as share based compensation expenses and amortization of acquisition-related intangible assets.

The Rakuten Group has adopted IFRS 17 "Insurance Contracts" from the beginning of the three months ended March 31, 2023. As a result, figures for the FinTech segment for the six months ended June 30, 2023 have been restated reflecting the cumulative effect of this accounting standard change as of the beginning of the previous fiscal year, being the date of transition. For further details, please refer to "2. Consolidated Financial Statements (Summary) and Notes, (7) Notes to the Consolidated Financial Statements (Summary) (Material Accounting Policies)".

(Note) For disclosure of Non-GAAP financial measures, the Rakuten Group refers to the rules specified by the U.S. Securities and Exchange Commission but does not fully comply with such rules.

i) Business Results for the six months ended June 30, 2023 (Non-GAAP basis)

The world economy picked up during the six months ended June 30, 2023 despite weakness seen in some regions. Looking ahead, it will be necessary to pay attention to the impact from global monetary tightening as well as increasing risk of economic downturn due to rising prices and other factors. The Japanese economy is recovering moderately, and going forward, it is expected that the moderate recovery will continue.

According to the "White Paper on Information and Communications in Japan" (Note), the amount of data used over networks in Japan has increased dramatically along with the advancement of communications infrastructure and the spread and diversification of digital services. Since the spread of COVID-19, digitalization has progressed, making contactless life possible, and the amount of data traffic worldwide, especially the amount of data used via mobile terminals, has increased significantly, and is expected to grow further in the future.

Under such an environment, the Rakuten Group is proactively developing and promoting the use of services that leverage advanced technologies such as AI and data both online and offline based on membership and a common loyalty point program. Rakuten Mobile was the first company in the world to introduce Open RAN that enables multi-vendor wireless access networks, including cell phone base stations, as well as vRAN, a virtualization technology, across its entire commercial network. In addition, Rakuten Symphony is proposing the open and fully virtualized architecture implemented by Rakuten Mobile to telecommunications companies around the world, as telecommunications carriers continue to innovate their network equipment configurations. Going forward, the Rakuten Group will continue to enhance its competitiveness by further evolving the Rakuten Ecosystem.

In the Internet Services segment, factors including various measures and sales promotion activities which sought to improve customer convenience and satisfaction for internet shopping mall Rakuten Ichiba successfully led to further retention of customers, even after the stay-at-home consumption amid the COVID-19 pandemic had run its course. In addition, continued steady recovery in demand for domestic travel and other factors resulted in continued growth in transaction value in domestic e-commerce services. In the FinTech segment, the customer base for each service has continued to expand, and the Rakuten Group achieved increases in revenue and profit in credit card related services, banking services, securities services, among others. In the Mobile segment, revenue increased year-on-year due to an increase in

telecommunication fee revenues and other factors, and the segment loss steadily decreased accordingly.

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As a result, the Rakuten Group recorded revenue of ¥972,800 million, up 9.5% year-on-year for the six months ended June 30, 2023. In the Mobile segment, segment loss peaked in the three months ended March 31, 2022 and has contracted thereafter. It recorded a Non-GAAP operating loss of ¥108,410 million, compared to a Non-GAAP operating loss of ¥179,540 million in the six months ended June 30, 2022.

Note: Source: "2023 White Paper on Information and Communications in Japan" (Ministry of Internal Affairs and Communications)

(Non-GAAP)

				(Millions of Yen)
	Six months ended	Six months ended	Amount	% Change
	Change
	June 30, 2022	June 30, 2023	YoY
	YoY
Revenue	888,249	972,800	84,551	9.5%
Non-GAAP operating loss	(179,540)	(108,410)	71,130	－%

1. Reconciliation of Non-GAAP Operating Income to IFRS Operating Income
   For the six months ended June 30, 2023, amortization of intangible assets of ¥4,259 million and share

based compensation expenses of ¥7,997 million were excluded from Non-GAAP operating income. One- off items of ¥8,614 million listed for the six months ended June 30, 2022 were expenses associated with an increase in provision for customer points as a result of revisions in the Rakuten Point Terms of Use. One-off items listed for the six months ended June 30, 2023 include costs temporarily incurred due to the cancellation of base station construction etc. of ¥1,977 million, associated with changes to capital expenditure plans resulting from a review of roaming agreements in the mobile business, gains and losses resulting from the sale of all shares in Seiyu Holdings Co., Ltd., and fees paid to external experts and others such as legal fees related to fraudulent acts committed in collusion by former employees of a subsidiary and suppliers which came to light in the previous year.

			(Millions of Yen)
	Six months ended	Six months ended	Amount Change
	June 30, 2022	June 30, 2023	YoY
Non-GAAP operating loss	(179,540)	(108,410)	71,130
Amortization of intangible assets (PPA)	(4,171)	(4,259)	(88)
Share based compensation expenses	(6,405)	(7,997)	(1,592)
One-off items	(8,614)	(4,421)	4,193
IFRS operating loss	(198,730)	(125,087)	73,643

iii) Business Results for the six months ended June 30, 2023 (IFRS basis)

For the six months ended June 30, 2023, the Rakuten Group recorded revenue of ¥972,800 million, up 9.5% year-on-year, IFRS operating loss of ¥125,087 million, compared with IFRS operating loss of ¥198,730 million in the six months ended June 30, 2022, and net loss attributable to owners of the Company of ¥139,985 million, compared with net loss of ¥177,892 million in the six months ended June 30, 2022.

(IFRS)

					(Millions of Yen)
	Six months ended		Six months ended	Amount		% Change
		Change
	June 30, 2022		June 30, 2023		YoY
		YoY
Revenue	888,249		972,800	84,551		9.5%
IFRS operating loss	(198,730)		(125,087)	73,643		－%
Net loss attributable	(177,892)		(139,985)	37,907		－%
to owners of the Company
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