Rakuten Group, Inc. · TSE:4755
Rakuten — Q1 2024 Earnings Presentation
76 slides from Rakuten's earnings presentation, May 14, 2024
Slide 1: FY2024 First Quarter Consolidated Financial Results
FY2024 First Quarter Consolidated Financial Results May 14, 2024 Rakuten Group, Inc.
Slide 2: Steady progress toward Rakuten Mobile monthly EBITDA profitability by end of 2024
Steady progress toward Rakuten Mobile monthly EBITDA *1 profitability by end of 2024 Rakuten Mobile EBITDA *1 (excl. property tax), when: 1) excluding CAC *2 (investments for growth), and 2) including Ecosystem EBITDA uplift *3 is nearly profitable *1: EBITDA = Non-GAAP OI + depreciation and amortiz
Slide 3: Agenda
Agenda Q1/24 Highlights Segment Results Internet Services Segment FinTech Segment Mobile Segment Triple 20 Finance AI 3
Slide 4: 1. Q1/24 Highlights
1. Q1/24 Highlights
Slide 5: Q1/24 Consolidated Revenue
Q1/24 Consolidated Revenue + 8.0% YoY Steady revenue growth in each business (JPY bn) 513.6 475.6 Consolidated revenue: + 3.6% 99.8 96.3 YoY JPY 513.6bn 168.0 + 15.1% YoY 193.5 Record high for Q1 Internet Services: Rakuten Ichiba and Rakuten Travel 271.1 + 5.4% 285.7 plus overseas businesses perform
Slide 6: Q1/24 Consolidated Non-GAAP Operating Income
Q1/24 Consolidated Non-GAAP Operating Income Revenue expansion and successful cost optimization in each business (JPY bn) + 47.4% 26.6 YoY 39.3 Consolidated Non-GAAP OI + 14.8% 11.9 YoY 13.6 +JPY 43.5bn YoY + 30.7bn -71.9 -102.7 YoY On track to achieve annual profitability -6.4 Internet Services: si
Slide 7: Q1/24 Consolidated EBITDA
Q1/24 Consolidated EBITDA* + 49.3bn YoY (JPY bn) 3.5 52.8 Successful cost optimization at Rakuten 4.8 5.0 Mobile + 34.0% 54.6 40.7 Consolidated EBITDA YoY + 9.6% 21.1 23.1 JPY 52.8bn YoY + 33.7bn -29.7 -63.4 YoY Cash flow from business activities: Emphasis on EBITDA as a KPI to evaluate ability to g
Slide 8: Corporate Bond Redemptions
Corporate Bond Redemptions Successfully issued USD 2bn of USD-denominated senior notes and JPY 50bn of JPY-denominated senior notes Liquidity gap for 2025 maturities largely addressed 8
Slide 9: 2. Segment Results
2. Segment Results
Slide 10: Internet Services Segment
Internet Services Segment 10
Slide 11: Internet Services Segment: Q1/24 Financial Highlights
Internet Services Segment: Q1/24 Financial Highlights ◼ Strong OI growth, despite slower Domestic E-Commerce revenue growth due to high YoY hurdles following the discontinuation of the government’s nationwide travel support and revisions in SPU 0/5 programs ◼ Non-GAAP OI of Other Internet Services (
Slide 12: Internet Services Segment: Key KPIs
Internet Services Segment: Key KPIs Domestic EC • Impact from SPU 0/5 revisions Rakuten Travel Advertising Revenue Q1/24 GMS and government travel Q1/24 Inbound GTV Q1/24 support on travel was within 4.7% 7.2% expectations - + YoY • Rakuten Ichiba maintained competitiveness + 243% YoY YoY JPY 51.8 b
Slide 13: Improved Productivity while Maintaining Rakuten Ichiba's Competitiveness
Improved Productivity while Maintaining Rakuten Ichiba’s Competitiveness after 0/5, SPU Revisions Rakuten Ichiba number of unique visitors continued to increase, showing continued competitiveness even after 0/5, SPU revisions in Dec 2023 Proportion of SPU points awarded to profit-contributing users*
Slide 14: Domestic EC: Continued to Grow Profits as Expected Excluding Temporary Factors
Domestic EC: Continued to Grow Profits as Expected Excluding Temporary Factors Domestic EC Non-GAAP Operating Income approx. +20% * Temporary factors YoY 0/5 cost transfer Estimated (Dec 2023) Domestic EC Non-GAAP OI amount* Nationwide travel support under same YoY conditions +2.7% JPY 21.5bn (up to
Slide 15: Strengthening Logistics for Sustainable Rakuten Ichiba Development
Strengthening Logistics for Sustainable Rakuten Ichiba Development Merchants that use Rakuten Super Logistics (RSL) see higher growth rates in GMS than merchants that do not; logistics is an important driver of GMS growth for Domestic EC Aiming to continuously improve our services to respond to chan
Slide 16: Logistics Business: Accelerating Initiatives Towards Profitability
Logistics Business: Accelerating Initiatives Towards Profitability Rakuten Super Logistics (RSL): 4 of 6 facilities that began operations pre-2021 already at full use; remaining 2 expected to improve profitability as utilization rate increases Promoting efficiency in delivery through collaboration w
Slide 17: Overseas Business Performance Recovering Steadily
Overseas Business Performance Recovering Steadily, Aiming for Early Profitability No. of users of each service steadily increased, and combined OI of select overseas businesses significantly improved Viber saw double-digit growth in both communications and ad revenue thanks to successful diversifica
Slide 18: FinTech Segment
FinTech Segment 18
Slide 19: FinTech Segment: Q1/24 Financial Highlights
FinTech Segment: Q1/24 Financial Highlights* ◼ Achieved increased revenue in all businesses due to expansion of customer base and GTV in each business ◼ Rakuten Payment become profitable. OI growth YoY achieved in all businesses, including Rakuten Securities Revenue Non-GAAP Operating Income + 15.1%
Slide 20: FinTech Segment: Q1/24 Key KPIs
FinTech Segment: Q1/24 Key KPIs Rakuten Card Rakuten Securities Rakuten Securities Shopping GTV General Accounts Deposited Assets* + 12.5% YoY + 22.1%YoY Surpassed + 49.8% YoY 11mm JPY 5.6 tn 10.91mm JPY 29.4 tn in April 2024 * J-GAAP Rakuten Bank Rakuten Bank Accounts* Deposit Balance* + 10.9% YoY
Slide 21: Rakuten Card: Significant OI Increase due to Shopping GTV Growth
Rakuten Card: Significant OI Increase due to Shopping GTV Growth and Improved Profit Structure Shopping GTV continued to expand due to growth in member base and average GTV per customer Significant increase in OI and higher OI margin as bad debt-related expenses were kept at a low level whilst optim
Slide 22: Rakuten Securities: Successful Expansion of Customer Base
Rakuten Securities: Successful Expansion of Customer Base. Profits up YoY No. of general accounts and trading volume continued to expand on zero domestic stock commissions and new NISA OI exceeded pre-zero commission levels (Oct 2023) on customer base expansion and other revenue Operating Income Gen
Slide 23: Rakuten Bank (Consolidated): Performance Highlights
Rakuten Bank (Consolidated): Performance Highlights (J-GAAP, FY2023*1) Increase in number of accounts and deposit balances, alongside steady growth in AUM, led to significant increase in interest income and contributed to revenue growth Ordinary Income Ordinary Profit Non-Interest Income*2 Ratio *1
Slide 24: Rakuten Payment: Achieved Quarterly Profit for the First Time
Rakuten Payment: Achieved Quarterly Profit for the First Time Measures to expand offline merchants and users implemented since 2022 have been successful Achieved quarterly profit. Expecting continued growth going forward Non-GAAP *1 *2 Overall Satisfaction Rakuten Pay App Downloads Operating Income
Slide 25: 2024: A Year of Further Advancement for the Rakuten FinTech Ecosystem
2024: A Year of Further Advancement for the Rakuten FinTech Ecosystem Japan’s cashless payment ratio Rakuten is leading the industry in the Enhancing synergies and pursuing *1 reached approx. 40% growing need for cashless payments further growth (JPY tn) 1 140 39.3%45.0% 40.0% 120 35.0% 100 30.0% En
Slide 26: Improving Convenience of Payment Services
Improving Convenience of Payment Services Full integration of payment apps: Full integration of Rakuten Pay, Rakuten Point Card, and Rakuten Edy apps Accelerate collaboration with Rakuten Card app (see diagram below) Accelerate collaboration with other FinTech services. In the future, incorporate AI
Slide 27: Promote High LTV Services using Payment Services as an Entry Point
Promote High LTV* Services using Payment Services as an Entry Point * Improving profitability of FinTech ecosystem by promoting the use of high LTV services such as banking, securities, and insurance, using our payment service as an entry point with one of the largest member bases in Japan Supportin
Slide 28: FinTech Reorganization - Announced on April 1st, 2024
FinTech Reorganization - Announced on April 1st, 2024 Rakuten Group, Inc. and Rakuten Bank, Ltd. entered into an MoU*1 to initiate discussions on integration of the entire FinTech business*2 into one group, to further expand our FinTech Ecosystem with innovative services and deeper data collaboratio
Slide 29: Mobile Segment
Mobile Segment
Slide 30: Mobile Segment: Q1/24 Financial Highlights
Mobile Segment: Q1/24 Financial Highlights ◼ Non-GAAP loss improved again on higher revenue from growing Rakuten Mobile subscribers and cost optimization ◼ Rakuten Symphony increased revenues through improving revenue management (including deliveries) and cost control Revenue Non-GAAP EBITDA* Operat
Slide 31: Rakuten Mobile
Rakuten Mobile
Slide 32: Rakuten Mobile: Revenue and Non-GAAP Operating Income
Rakuten Mobile: Revenue and Non-GAAP Operating Income Revenue growth on increase in service revenue (+28.3% YoY) from growth in subscribers Achieved continuous improvement on loss excluding property tax which is booked in January each year Revenue (JPY bn) Non-GAAP Operating Income (JPY bn) +7.1% Q1
Slide 33: Rakuten Mobile EBITDA Continuing to Improve
Rakuten Mobile EBITDA Continuing to Improve Continue to implement various measures to achieve Rakuten Mobile monthly EBITDA profitability in 2024 Entered MNO business to grow Rakuten Mobile as well as maximize the profits of Rakuten Ecosystem (JPY bn) CAC are upfront investments, Rakuten Mobile and
Slide 34: Rakuten Mobile, Inc.: Main KPIs
Rakuten Mobile, Inc. : Main KPIs MNO Service Revenue*1 (JPM mm) MNO Subscribers*2 (Excluding BCP*3 , As of March 31, 2024) +36.3% 6.8m YoY 6.48m as of May 13 *6 Adjusted MNO Churn*4 (As of Q1/24) 1.27% MNO ARPU *5 (Month of March) 2,024 yen *1: Includes Rakuten Turbo service sales from Q1/24. Retroa
Slide 35: Phase 3: Become profitable, enhance synergy, and be a major mobile carrier
Phase 3 : Become profitable, enhance synergy, and be a major mobile carrier Phase 2: Establishment of lean management Phase 1: Establish foundation rapidly 35
Slide 36: Realize Monthly Profitability for Rakuten Mobile EBITDA by Dec 2024
Realize Monthly Profitability for Rakuten Mobile EBITDA*1 by Dec 2024 ◼ Toward reaching profitability through growth in MNO service revenue exceeding monthly operating cost excluding depreciation Revenue Cost MNO Service Revenue 1 2 3 Monthly > Subscriber*2 Target ARPU*2 Target MNO Other Revenue JPY
Slide 37: Phase 3: Most Important Tasks - Improve Awareness of Network Quality
Phase 3: Most Important Tasks – Improve Awareness of Network Quality and Secure Subscribers Recently, a virtuous cycle of increasing acquisitions due to improved network quality has begun Improving perception of Contract signing network quality Rakuten Mobile population Rakuten Ecosystem coverage 99
Slide 38: Roaming expansion completed, network quality improved further
Improving perception of Contract signing network quality Rakuten Mobile population Rakuten Ecosystem coverage 99.9%* MAUs: 41mm + Roaming expansion completed Network quality improved further *As of September 2023. Population coverage is calculated based on areas where communication is available in 5
Slide 39: Opensignal: Mobile Network User Experience Report (April 2024)
Opensignal: Mobile Network User Experience Report (April 2024)* Rakuten Mobile ranked No. 1 in 7 categories in Opensignal’s latest user experience analytics result on network quality in Japan Game experience WINNER Voice app experience WINNER Upload speed experience WINNER 5G upload speed WINNER 5G
Slide 40: Opensignal: Improvements from Last Year's Analytics Result in Each Category
Opensignal: Improvements from Last Year’s Analytics Result in Each Category*1 Ranked as Japan’s best Gaming experience provider Keeping the 5G Upload Speed in a firm grip, Rakuten also claims the 5G Download Speed award Significant improvement in consistent quality*2 taking rank to 2nd place from 4t
Slide 41: Opensignal: No Signal Availability Improved as Roaming Expansion Completed
Opensignal: No Signal Availability* Improved as Roaming Expansion is Now Completed (%) Jan 2023 - March 2024 1.4 (90 days aggregated data) 0.57 pt 1.2 improvement 1 0.8 MNO C 0.6 0.4 MNO B 0.2 MNO A 0 Jan 2023 Mar 2024 *Source: Created by Rakuten based on analysis of Opensignal’s mobile measurements
Slide 42: Rakuten Mobile Subscribers Also Recognizing Improved Network Quality
Rakuten Mobile Subscribers Also Recognizing Improved Network Quality Survey of Rakuten Mobile subscribers (Feb 2024) *1 Survey question: How have your feelings about Rakuten Mobile’s network quality changed since you signed up with Rakuten Mobile? Much worse Much better A little worse 6.8% 8.3% Bett
Slide 43: Toward the Best Connectivity
TOWARD THE BEST F> 2 CONNECTIVITY. — cA» y “a a, —— 1 j j —<
Slide 44: Toward the Best Connectivity
Toward the Best Connectivity In addition to continuous expansion of Rakuten Mobile’s 4G and 5G base stations, aiming to effectively and efficiently improve network quality through the best mix of various measures Coverage areas Network expansion based on roaming agreement Early implementation of Pla
Slide 45: Expand 5G (Sub 6) Coverage in the Kanto Area by up to 1.6x within 2024
Expand 5G (Sub 6) Coverage in the Kanto Area by up to 1.6x within 2024 Solving interference with satellite communications in shared bands. From May to the end of 2024, Rakuten Mobile's *1 5G (Sub 6) coverage in the Kanto area will be gradually expanded by up to 1.6x versus January 2024 *2 *3 *4 Simi
Slide 46: Platinum Band Implementation Schedule
Platinum Band Implementation Schedule Preparing to start commercial services in major urban areas from June 2024 Step 1 Step 2 Step 3 Step 4 700MHz band awarded Preparation for operation Radio wave testing Commercial service October 23, 2023 From October 2023 From April 30, 2024 From around June 202
Slide 47: Becoming Rakuten Mobile with Best Connectivity
Becoming “Rakuten Mobile with Best Connectivity” A project is underway for direct communication with commercially available smartphones, using mobile broadband communications via low-orbit satellites Current Rakuten Mobile coverage Expanded coverage with SpaceMobile (image) Rakuten Mobile SpaceMobil
Slide 48: Subscriber acquisitions increasing from Ecosystem users
Improving perception of network quality Contract signing Rakuten Mobile Rakuten Ecosystem population coverage MAUs: 41mm + 99.9%* Subscriber acquisitions increasing from Ecosystem users *As of September 2023. Population coverage is calculated based on areas where communication is available in 50% or
Slide 49: Net Increase in MNO Subscribers (B2C+B2B)
Net Increase in MNO Subscribers (B2C+B2B)* ◼ Churn rate gradually decreased on improvement in network quality ◼ B2C acquisitions progressed due to reinforced marketing during spring peak sales season Accelerated acquisition of corporate contracts at the end of the year (K lines) Accelerated acquisit
Slide 50: Net Increase Trend in MNO Subscribers (B2C)
Net Increase*2 trendin MNO subscribers (B2C*1) Since Dec 2023, the pace of B2C contract acquisitions, focusing on Rakuten Ecosystem users, has accelerated due to the success of multiple marketing measures in the spring sales season, in addition to the ongoing strong performance of the referral campa
Slide 51: Introducing Various Measures Targeting Rakuten Ecosystem Users
Introducing Various Measures Targeting Rakuten Ecosystem Users Acquisition measures Post-contract benefits that provide benefits to in the Rakuten Ecosystem Rakuten Ecosystem users Additional benefits being planned 51
Slide 52: Footnotes on MNO contracts and ecosystem uplift
*1: MNO contracts from Mar 2020 – Mar 2024. *2: MNO contracts from Mar 2020 – Apr 2023. *3: For 16 businesses (Rakuten Ichiba, Rakuten Books, Rakuten Direct, Rakuten Bic, Rakuten Kobo, Rakuten Fashion, Rakuten Travel, Rakuten Seiyu Netsuper, Rakuten Beauty, Rakuten Pay app payment, Rakuten Pay onlin
Slide 53: Responding to Various User Needs While Keeping 'One Plan'
Responding to Various User Needs While Keeping ‘One Plan’ “SAIKYO FAMILY” updated Apr 10, now available to diverse family types “SAIKYO KIDS” plan launched May 2, providing an even more affordable plan for under-12-year-olds Up to 3GB Over3G Up to 20GB Over 20GB UNLIMITED (Family discount applied) ¥
Slide 54: MNO ARPU rose QoQ for both B2C and B2B
ARPU for both B2C and B2B rose QoQ, but the concentration of contract acquisitions in the last month of Q1/24 was a temporary negative factor. Monthly ARPU in March was 2,024 yen MNO ARPU Ecosystem ARPU Uplift*5 + 3,054 3,081 3,022 3,068 Ecosystem Others*4 2,916 ARPU Uplift Option 2,809 (JPY) 998 1,
Slide 55: Increasing B2C ARPU
Increasing B2C ARPU Compared to pre-SAIKYO Plan launch (Jun 2023), the 20GB~ tier has increased the most. This trend is expected to continue Plan to increase ad placements and advertising ARPU by improving the media value of Rakuten Link As the number of main users increases, expecting data ARPU to
Slide 56: Increasing B2B ARPU
Increasing B2B ARPU Expanding solutions for each industry of Rakuten Ecosystem-related partners Launched a plan for lodging facilities to provide a corporate plan and Buddycom, an IP wireless app, at a special price in Apr Introduce in-house solution services that contribute to improving convenience
Slide 57: Rakuten Symphony
Rakuten Symphony
Slide 58: Rakuten to Become an Open Intelligence Company for Open RAN
Rakuten to Become an Open Intelligence Company for Open RAN In modern society, where everything is connected by communication, the importance of high-quality communication networks is increasing The advent of Open RAN makes it possible to build low-cost, high-quality wireless networks Everything Ope
Slide 59: Open RAN: Freely customizable, low-cost network configuration
4G/5G … … … RU Freely customizable network configuration vDU vDU vDU … … … Low-cost network construction and operation vCU vCU … High security through transparent source code Core NW 59
Slide 60: Promoting Deployment of Rakuten Cloud Services
Promoting Deployment of Rakuten Cloud Services Provide Rakuten Ecosystem’s core assets, including AI-related technologies, and cloud-related technologies to external businesses Robin.io One Current clients: 20+ Cloud Integrate two Rakuten Group cloud services Full-scale development of Powered by… do
Slide 61: Triple 20
Triple 20 61
Slide 62: Group-Wide Project to Improve Efficiency: Triple 20
Group-Wide Project to Improve Efficiency: “Triple 20” Implemented centralized management of common operations within the group and reviewed various processes, etc. Utilizing AI to promote productivity improvement and cost reduction Example of AI usage in Rakuten Mobile Rakuten Mobile’s Quarterly Cus
Slide 63: Broad Portfolio of Rakuten AI Products to contribute to Triple 20 Targets
Broad Portfolio of Rakuten AI Products to contribute to Triple 20 Targets Operations Marketing / Ads Experiences Ichiba merchants AI usage rate* 32% Coding Assistant Knowledge Business Operations Marketing Ads Optimization Search Discovery Optimization Optimization Translation & AI Customer Inventor
Slide 64: 3. Finance
3. Finance 64
Slide 65: Our Commitment: Disciplined Financial Policy
Our Commitment: Disciplined Financial Policy Aiming for financial soundness in the medium term Profitability Improvement Efficiency Improvement Financial Soundness Continuous profit growth of core Company-wide cost reduction Reduce gross debt businesses SPU revision Proactive debt maturity ❏ Achieve
Slide 66: Refinancing Risk in 2024 and 2025 Addressed
Refinancing Risk in 2024 and 2025 Addressed Refinancing risk in 2024 addressed, and liquidity gap for corporate bonds maturing in 2025 also largely addressed Continue efforts to boost intra-group cash flow and cut interest-bearing debt through various capital procurement Maturing corporate bonds Fun
Slide 67: Path to Self-Funding
Path to Self-Funding FY2024 Illustrative Cash Flow Mobile Operating CF + Capex Aiming to Internet Services FCF + CF from FinTech Establish Self-Funding through Interest Expenses* 1. Significant improvement in Mobile Segment FCF Seek to improve EBITDA materially Plan to significantly reduce Capex fro
Slide 68: Project to Reduce Cash Conversion Cycle
Project to Reduce Cash Conversion Cycle ◼ Continuing efforts to optimize working capital and reduce leverage Plenty of scope for cash generation across all group companies Non-FinTech 2024 target 1 Improving accounts receivable/accounts JPY 50bn payable ratio 2 Revise and analyze points program etc
Slide 69: 4. AI
. Al 69
Slide 70: Rakuten's AI-nization Plan
Rakuten’s AI-nization Plan Vision Augment human creativity with the power of AI Strategy Unique Data Online + Offline Growth Assets Channels “Flywheel” Wave 1 Wave 2 Wave 3 Roadmap Deep Learning Rakuten AI for Business Rakuten AI for Consumer 70
Slide 71: Rakuten AI: Strong Execution Momentum in Q1
Rakuten AI: Strong Execution Momentum in Q1 WAVE 1 WAVE 2 WAVE 3 - Scale - - Launch - - Incubate - Deep Learning Rakuten AI Rakuten AI at Scale for Business for Consumers 2023: Semantic search for Rakuten 2024/3: Rakuten AI for merchants 2024/3: Rakuten AI 7B open Fashion, recommendations for Rakute
Slide 72: Execution Momentum: Scaling Deep Learning Applications
Execution Momentum: Scaling Deep Learning Applications Launched in 2023 Launched in 2024 Q1 Planned for 2024 Rakuten Fashion Rakuten Ichiba (Rakuten Books) (Rewards) And more... 72
Slide 73: Evolution of E-Commerce with Generative AI
Evolution of E-Commerce with Generative AI Rakuten AI for Business Operations Rakuten AI University RMS AI Assistant (Beta) launched Mar 28, 2024 Launched Apr 30, 2024 • Generate product descriptions, process • A suite of video-based e-learning resources product images (scheduled for release around
Slide 74: Rakuten AI 7B: Leading Performance Among Open Japanese LLMs
Rakuten AI 7B: Leading Performance*1 Among Open Japanese LLMs Comparison of Japanese language Comparison of Japanese language performance of LLMs via LM Evaluation performance from Nejumi LLM Harness*1 (Instruct models) Leaderboard*2 0.4192 Nekomata-7B-Instruction 49.04 0.393 Elyza-Japanese-Llama 57
Slide 75: Rakuten
Rakuten
Slide 76: Forward-looking statements disclaimer
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 diffe