Rakuten : Q1 FY2024 Financial Results Highlights

May 14, 2024

• Rakuten Group, Inc.

Rakuten Group Q1 FY2024 Financial Results Highlights

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Overall Performance

・The Rakuten Group recorded year-on-year (YoY) revenue growth in all three segments in Q1 FY2024:Internet Services, FinTech and Mobile. Consolidated revenue reached 513.6 billion yen, a record high for the first quarter, up 8.0% YoY.

・The Rakuten Group recorded Non-GAAP operating losses in Q1 FY2024 of 25.4 billion yen, a significant improvement of 43.5 billion yen YoY as a result of increased revenue, improved profitability in domestic EC growth investment businesses and overseas businesses, strong performance in various FinTech businesses, and improved losses at Rakuten Mobile. The Group is making steady progress towards its goal of achieving profitability for FY2024. Consolidated EBITDA^*1, an indicator the Rakuten Group uses to assess the ability to generate cash flow, for the quarter was profitable, recording 52.8 billion yen, an increase of 49.3 billion yen YoY.

・As announced during the previous earnings results, the refinancing risk for bonds due in 2024 has been addressed. The liquidity gapfor corporate bonds maturing in 2025 has also been largely addressed via the issuance of 2 billion US dollar-denominated senior notes and 50 billion yen-denominated private placement notes in April 2024. The Group aims to conduct early redemptions of domestic hybrid corporate bonds at their first call date in 2025. From 2024 onwards, the Group will continue to increase intra-group cash flow, including optimization of working capital, and reduce interest-bearing debt through various capital procurement activities, while continuing to maintain its financial stability through a disciplined financial policy.

Internet Services segment

・The Internet Services segment achieved growth in both revenue and profit in Q1 FY2024, with revenue of 285.7 billion yen, up 5.4% YoY, and Non-GAAP operating income of 13.6 billion yen, up 14.8% YoY.

・In this segment, domestic e-commerce gross merchandise sales (GMS)^*2 were 1.3 trillion yen, down 4.7% YoY, due to the effect of nationwide travel support which partially ended in July 2023, revisions to Rakuten's Super Point Up Program introduced in December 2023, and the reorganization of the online payment business.At the same time, the GMS growth rate improved quarter-on-quarter (QoQ), and operating income has grown by approximately 20% YoY when excluding temporary factors such as the transfer of various costs to domestic e-commerce. In addition, Rakuten Travel achieved extremely strong growth in gross transaction value (GTV) for inbound travel, up 243% YoY.

・The advertising business recorded an increase in revenue^*3, with sales of 51.8 billion yen, up 7.2% YoY in Q1 FY2024.

・Rakuten's overseas businesses continued to steadily expand their user base, especially the digital content businesses, with significant improvements in profitability. The total number of Rakuten TV users and registered Rakuten Viki users reached 103 million, up 43.8% YoY, and 86.79 million, up 23.0% YoY, respectively. Total operating income for the four overseas digital content and communication platform businesses^*4 has also improved significantly, as the companies look to achieve profitability in the near future.

FinTech segment

・The FinTech segment delivered high growth in both revenue and profit for Q1 FY2024, with revenue of 193.5 billion yen, up 15.1% YoY, and Non-GAAP operating income of 39.3 billion yen, up 47.4% YoY.

・Rakuten Card continued to expand its customer base and average spending per customer, driving the steady expansion of shopping gross transaction value to 5.6 trillion yen, up 12.5% YoY. In addition, the company significantly improved operating margins by maintaining a low level of bad debt-related expenses and optimizing marketing expenses. As a result, Non-GAAP operating income grew significantly to 15.3 billion yen, up 22.7% YoY.

・As of April 2024, Rakuten Securities had surpassed 11 million customer accounts^*5, and the number of Rakuten Bank customer accounts (non-consolidated) reached 15.24 million as of March 31, 2024, an increase of 10.9% YoY, as the customer base of these fintech services continues to steadily expand.

・Rakuten Payment's Non-GAAP operating income for Q1 FY2024 reached 810 million yen, achieving operating profitability for the first time on a quarterly basis, thanks to measures aimed at expanding the number of merchant partners and users. The Rakuten Pay app is set to integrate with the Rakuten Point Card app by December 2024, and the Rakuten Edy app in the near future. The company aims to accelerate synergies between the FinTech services and strengthen its role as a key touchpoint guiding users into the Group's services.

Mobile segment

・The Mobile segment recorded revenue of 99.8 billion yen, up 3.6% YoY in Q1 FY2024. Driven by continuous cost reductions and increased subscriber numbers at Rakuten Mobile, Non-GAAP operating losses were 71.9 billion yen, an improvement of 30.7 billion yen YoY.

・Rakuten Mobile as an individual business recordednon-consolidated revenue of 62.0 billion yen, up 7.1% YoY, while Non-GAAP operating losses were 73.0 billion yen, an improvement of 25.9 billion yen YoY. EBITDA was a loss of 33.5 billion yen, an improvement of 28.2 billion yen YoY. The company is implementing various initiatives to achieve monthly profitability for EBITDA within 2024.

・The total number of MNO subscriptions (both individual and business) grew significantly to 6.8 million^*6 as of May 13, 2024.Adjusted MNO churn rate for Q1 FY2024 was 1.27%^*7, with ARPU for MNO subscribers for March 2024 at 2,024 yen^*8.

Notes
^*1 EBITDA = Non-GAAP operating income + depreciation, etc. EBITDA also includes property tax payments.
^*2 Domestic 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 Seiyu Netsuper, Rakuten Ticket, cross border trading, etc. Excludes some tax-exempt businesses and includes consumption tax.
^*3 Total sum of advertising sales in Japan recorded in each segment (Internet Services, FinTech and Mobile). Includes internal Group transactions.
^*4 Total Non-GAAP operating income of Rakuten Viber, Rakuten Viki, Rakuten Kobo and Rakuten TV.
^*5 10.91 million customer accounts as of March 31, 2024.
^*6 Includes Rakuten Saikyo Plan, Rakuten Saikyo Plan Business and Rakuten Turbo subscriptions, excluding Business Continuity Plan (BCP is a corporate plan sold for business continuity purposes) subscriptions. Based on preliminary figures.
^*7 Churn rate excluding B2C customers who cancel within the same month as the activation. Churn rate for most recent quarter divided by average of number of subscriptions for the end of the most recent and immediately preceding quarter. Includes individual and business and excludes BCP and MVNE.
^*8 Calculated using average of MNO subscriptions excluding MVNE and BCP for end of Q1 FY2024 and end of Q4 FY2023.