Rakuten Group, Inc. · TSE:4755
Rakuten — Q3 2024 Earnings Presentation
77 slides from Rakuten's earnings presentation, Nov 13, 2024
Slide 1: FY2024 Third Quarter Consolidated Financial Results
FY2024 Third Quarter Consolidated Financial Results November 13, 2024 Rakuten Group, Inc.
Slide 2: Agenda
Agenda 1 Group Strategy 2 Q3/24 Highlights 3 Segment Results ・Internet Services Segment ・FinTech Segment ・Mobile Segment 4 Finance 5 AI 2
Slide 3: 1. Group Strategy
1. Group Strategy 3
Slide 4: Rakuten Group's Current Status and Going Forward
Rakuten Group’s Current Status and Going Forward 4
Slide 5: Total Rakuten Mobile Subscribers: 8.12 Million Lines
Total Rakuten Mobile Subscribers: 8.12 Million Lines*1 Total no. of subscribers *1 8.12 mm ■ MNO ■ MVNE *2 ■ BCP *3 ■ MVNO *4 Apr-20 Apr-21 Apr-22 Apr-23 Apr-24 Nov-24 (Preliminary) *1: Preliminary figures as of November 10, 2024. Total of MNO, MVNE and MVNO. Number of MNO (excluding BCP) plus MVNE
Slide 6: Achieved First Quarterly Profit since Start of Full-Scale MNO Investment
Achieved First Quarterly Profit since Start of Full-Scale MNO Investment Q3/24 Q3/24 Q3/24 Non-GAAP IFRS Operating Income Operating Income Achieved JPY 12.3 bn JPY 538 mm Quarterly Self Funding In profit In profit (first profit since Q3/19) (first profit since Q2/20) (further efforts to achieve self
Slide 7: Rakuten Group Going Forward
Rakuten Group Going Forward ■ Rakuten’s core assets, which are the basis for long-term advantage, will allow for both strong growth and high return (ROIC) Rakuten Mobile's Rakuten Ecosystem irreversible Rich data one of the largest from cost structure both online and offline membership platform In J
Slide 8: Rakuten Mobile Entering Sustainable Growth Phase from Investment Phase
Rakuten Mobile Entering Sustainable Growth Phase from Investment Phase Over 30 mm T-Mobile Growth in subscribers since service launch (# of months) US No. 3 mobile carrier (by revenue). As of the end of Rakuten Mobile’s customer Sep-24, the number of lines acquisition speed exceeded 100 mm vs Raku
Slide 9: Rakuten Mobile's Contribution to Ecosystem Growth
Rakuten Mobile's Contribution to Ecosystem Growth 9
Slide 10: Rakuten Mobile Subscribers Drive Usage of Group Services
Rakuten Mobile Subscribers Drive Usage of Group Services ■ One of the reasons for starting the MNO business was to accelerate Ecosystem growth ■ Rakuten Mobile subscribers show higher total GTV per service compared to non-subscribers Comparison of total GTV for each service over the past year betwee
Slide 11: Rakuten Mobile Subscribers Use +2.45 More Services than Non-Subscribers
Rakuten Mobile Subscribers Use +2.45 More Services than Non-Subscribers Rakuten Mobile (MNO B2C): Changes in service usage by subscribers and non-subscribers over two years since signing a contract* 3.15 3.20 3.05 3.10 2.95 3.00 2.85 2.90 2.74 2.80 2.63 2.69 2.56 2.50 2.43 2.36 +2.45 2.27 2.18 2.08
Slide 12: Reflecting Rakuten Mobile's Contribution to Ecosystem Growth
Reflecting Rakuten Mobile’s Contribution to Ecosystem Growth ■ Rakuten Mobile's contribution to Group’s growth (“Mobile Ecosystem Contribution”) will be reflected in segment results to visualize impact ■ "Mobile Ecosystem Contribution" is reflected in Rakuten Mobile and each segment's Non-GAAP Opera
Slide 13: AI-Powered Triple 20
AI-Powered Triple 20 13
Slide 14: Groupwide Productivity Enhancement Project "Triple 20" Driven by AI
Groupwide Productivity Enhancement Project "Triple 20" Driven by AI ■ Project launched in 2024 to improve operational, marketing, and client productivity by 20% ■ Currently, AI is delivering significant impact, particularly in customer support, sales, and coding activities Trend of Customer Support
Slide 15: 2. Q3/24 Highlights
2. Q3/24 Highlights 15
Slide 16: Consolidated revenue: Record high for Q3 JPY 566.7 bn
Q3/24 Consolidated Revenue (JPY bn) + 9.3% YoY 566.7 Consolidated revenue: 518.4 88.7 +19.5% YoY 106.0 Record high for Q3 184.6 +12.8% YoY 208.2 JPY 566.7 bn FinTech segment: Strong contribution from expansion of +4.4% 301.2 YoY 314.6 customer base, improvement in card shopping GTV, and rising inter
Slide 17: Rakuten Mobile Boosting Consolidated Revenue Growth
Rakuten Mobile Boosting Consolidated Revenue Growth (JPY bn) Organic growth Rakuten Mobile excluding 40% of Q3 revenue growth Revenue Growth Rakuten Mobile + contribution Group Revenue Uplift 566.7 driven by Rakuten Mobile from Rakuten Mobile 28.8 Subscribers* 19.5 518.4 Rakuten Mobile boosting grow
Slide 18: First quarterly profit since Q3/19, when investment in MNO began in earnest
Q3/24 Consolidated Non-GAAP Operating Income* (JPY bn) + 53.4 bn YoY 12.3 First quarterly profit since -41.0 25.4 +57.2% YoY 40.0 Q3/19, when investment in 13.7 +54.2% YoY 21.2 MNO began in earnest +26.5 bn -48.7 Significant improvement in OI on higher Rakuten Mobile revenue, -75.2 YoY reduced losse
Slide 19: Consolidated EBITDA achieved profitability JPY 92.2 bn
Q3/24 Consolidated EBITDA*1*2 (JPY bn) +159.1% YoY 92.2 35.6 10.7 Consolidated EBITDA 7.6 40.2 +38.6% YoY 55.7 achieved profitability 23.3 +32.4% YoY 30.9 JPY 92.2 bn -5.2 Non-FinTech EBITDA profit JPY 25.7 bn -35.6 +30.5 bn YoY Q3/23 Q3/24 ■ Internet Services Segment ■ FinTech Segment ■ Mobile Segm
Slide 20: 3. Segment Results
3. Segment Results 20
Slide 21: Internet Services Segment
Internet Services Segment 21
Slide 22: Internet Services Segment: Q3/24 Financial Highlights
Internet Services Segment: Q3/24 Financial Highlights ■ Non-GAAP OI growth despite slower Domestic E-Commerce revenue growth due to a high YoY hurdle owing to last- minute demand for hometown tax donations in Q3/24 ■ Other Internet Services (excluding minority investment business) Non-GAAP OI showed
Slide 23: Internet Services Segment: Key KPIs
Internet Services Segment: Key KPIs Domestic EC Domestic EC GMS Investment Business Q3/24 GMS under same YoY conditions IRR - 6.9% Approx. + 5% + 17% YoY Calculation excluding impact from: YoY Hometown Tax, JPY 1.5 tn SPU 0/5 rule revision, national travel support and Payment online transfer Rakuten
Slide 24: Rakuten Mobile Subscribers Boosting Rakuten Ichiba Growth
Rakuten Mobile Subscribers Boosting Rakuten Ichiba Growth ■ Rakuten Mobile subscribers increasing Rakuten Ichiba’s user count, average GMS, and usage frequency ■ Retention efficiency has improved, and further subscriber growth is expected to enhance marginal profitability ー Purchasing Behavior Chang
Slide 25: International BU: Significant Profitability Improvement
International BU*: Significant Profitability Improvement ■ Ongoing strong recovery following OI deterioration due to global pandemic and situation in Ukraine ■ Management focus on maximizing operational efficiencies, cost reduction initiatives, and strengthening profitability have driven significant
Slide 26: FinTech Segment
FinTech Segment 26
Slide 27: FinTech Segment: Q3/24 Financial Highlights
FinTech Segment: Q3/24 Financial Highlights*1*2 Steady revenue growth on continuous expansion of customer base, especially at Rakuten Bank and Rakuten Securities Significant profit growth driven by Rakuten Card, Rakuten Bank, and Rakuten Payment Revenue Non-GAAP Operating Income**1 + 12.8% YoY +
Slide 28: FinTech Segment: Q3/24 Key KPIs
FinTech Segment: Q3/24 Key KPIs Rakuten Card Rakuten Securities Rakuten Securities Shopping GTV General Accounts Deposited Assets*1 + 12.7% YoY +20.3%YoY + 39.1% YoY JPY 6.0 tn 11.65 mm JPY 32.2 tn Rakuten Bank Rakuten Bank Accounts*1*2 Deposit Balance*1*2 + 12.6% YoY + 16.4% YoY 16.19 mm JPY 11.1 t
Slide 29: Rakuten Card: Revenue and OI Growth on GTV Expansion and Higher Margin
Rakuten Card: Revenue and OI Growth on GTV Expansion and Higher Margin ■ Expansion of customer base and increase in average spend per customer led to continuous growth in shopping GTV, surpassing JPY 6tn for the first time in a quarter ■ Revenue increased due to higher merchant commissions and inter
Slide 30: Rakuten Card: Announced Strategic Capital and Business Alliance with Mizuho FG
Rakuten Card: Announced Strategic Capital and Business Alliance with Mizuho FG ■ Rakuten Group, Inc. signs share transfer agreement to transfer 14.99% of Rakuten Card Co., Ltd. (Approx. JPY 165 bn) to Mizuho FG (Continue to be a consolidated subsidiary of Rakuten Group, Inc. after the transaction) ■
Slide 31: Rakuten Payment: Further Operating Income Expansion
Rakuten Payment: Further Operating Income Expansion No. 1 in Customer Satisfaction for Two Consecutive Years ■ OI increased for the second consecutive quarter due to revenue growth from increased GTV and ongoing cost control ■ “Rakuten Pay” ranked first in customer satisfaction index in the QR code
Slide 32: Rakuten Securities: Customer Base Expansion, Diversification of Revenue Mix
Rakuten Securities: Customer Base Expansion, Diversification of Revenue Mix ■ Broke the record-high revenue booked in Q2/24 due to strong performance in various transactions, in line with continued expansion of the customer base ■ Recorded the same level of OI as Q3/23, despite the impact of the maj
Slide 33: Rakuten Bank: Performance Highlights
Rakuten Bank: Performance Highlights (J-GAAP, Consolidated, Six months ended Sep. 2024) ■ Interest income grew significantly due to a steady increase in assets under management backed by growth in the number of accounts and deposit balances, as well as the policy interest rate hike. Both ordinary in
Slide 34: Mobile Segment
Mobile Segment 34
Slide 35: Mobile Segment: Q3 Highlights
Mobile Segment: Q3 Highlights ■ Rakuten Mobile: profitability improving as MNO service revenues expanded due to an increase in subscribers ■ Rakuten Symphony: contributed to increased revenue with delivery of existing projects ■ Rakuten Energy: revenue decreased due to price cuts and higher promotio
Slide 36: Rakuten Mobile
Rakuten Mobile
Slide 37: Rakuten Mobile: Q3/24 Financial Highlights
Rakuten Mobile: Q3/24 Financial Highlights ■ Aiming for monthly EBITDA*2*3 profitability by the end of 2024 Revenue (JPY bn) Non-GAAP Operating Income*2 (JPY bn) EBITDA*2*3（JPY bn) +30.3% Q1/23 Q3/23 Q1/24 Q3/24 Q1/23 Q3/23 Q1/24 Q3/24 YoY 73 -13 -10 68 -24 -20 62 15 -38 -34 58 59 13 -7 56 -53 -51 -
Slide 38: Rakuten Mobile: Q3/24 Main KPIs
Rakuten Mobile: Q3/24 Main KPIs Total Subscribers*2*3 MNO Service Revenue *1 (As of Nov 10, 2024) +42.2% 8.12mm (JPY mm) YoY 43,178 40,140 36,161 Adjusted MNO Churn*4 33,175 (as of Q3/24) 1.09% 30,470 28,229 26,526 ARPU *5 (as of Q3/24) Q1/23 Q2/23 Q3/23 Q4/23 Q1/24 Q2/24 Q3/24 JPY 2,801 *1: Include
Slide 39: Subscriber acquisition status
1 Subscriber acquisition status 2 Communication quality improvements 3 ARPU 39
Slide 40: Net Increase in MNO Subscribers (B2C+B2B)
Net Increase in MNO Subscribers (B2C+B2B)* ■ Strong acquisitions via the ecosystem and contributions from various programs, such as the Saikyo Senior Program, continue to drive B2C net growth. While cancellations increased due to temporary factors in B2B, the number of openings exceeded Q1/24 levels
Slide 41: MNO B2C Subscriber Opening Trend
MNO B2C Subscriber Opening Trend* ■ After a seasonally slow period following the spring sales season, new subscriber numbers have returned to an upward trend, with October +46.5% YoY, exceeding growth rate in March during peak season Accelerated End of off-season marketing with and reacceleration Se
Slide 42: Intra-Group Campaigns Helping to Attract Ecosystem Users
Intra-Group Campaigns Helping to Attract Ecosystem Users ■ "Rakuten Mobile x Rakuten Ichiba" and "Rakuten Mobile x Rakuten Card" campaigns continued to perform well ■ "Rakuten Mobile x Rakuten Bank" campaign held in Oct 2024, successfully attracting bank customers to Mobile ■ Similar measures to be
Slide 43: Multiple Programs Helping to Attract New Subscribers
Multiple Programs Helping to Attract New Subscribers ■ Multiple programs contributed to subscriber acquisitions for targeted age groups Number of Applications by Age Group for Youth/Kids/Senior Programs: Year-over-Year Comparison +225% +200% +175% +150% +125% (Age) +100% 0~12 +75% 13~22 65~ +50% +25
Slide 44: Market Share Continued to Expand on Strong MNP Acquisitions
Market Share Continued to Expand on Strong MNP Acquisitions ■ Despite a lull in mobile carrier switching activity post-spring to Golden Week sales seasons, MNP net additions rose compared to pre-spring sales season; in September, the "Rakuten Mobile x Rakuten Card" campaign helped achieve MNP acquis
Slide 45: Communication quality improvements
1 Subscriber acquisition status 2 Communication quality improvements 3 ARPU 45
Slide 46: Continuous Improvements Based on Customer Feedback to Improve Network Quality
Continuous Improvements Based on Customer Feedback to Improve Network Quality ■ Ongoing efforts to improve network quality have led to increased customer satisfaction and growth, though feedback indicates connectivity challenges remain in busy areas and indoor locations Examples of areas with many r
Slide 47: Improving Network Quality on Tokyo Metro
Improving Network Quality on Tokyo Metro ■ Strengthening subway network quality by expanding shared base station bandwidth* (Expansion Progress & Schedule) Expanding bandwidth of existing base 20MHz stations upgrade (5 MHz → 20 MHz) 100% 5MHz Complete Strengthening network quality (scheduled) during
Slide 48: Increase in Data Usage (4G+5G)
Increase in Data Usage (4G+5G) ■ Continuing to strengthen 5G output in the Kanto region by mitigating interference; as more users connect to 5G, traffic is distributed, improving experience in crowded areas and during peak times (GB per day) 1.00 0.78 *4 Strengthening 5G output *5 (Kanto ) 0.56 *1 S
Slide 49: Rakuten Mobile's 5G Network Speed Received High Marks in Third-Party Survey
Rakuten Mobile’s 5G Network Speed Received High Marks in Third-Party Survey ■ In Opensignal's October 2024 Mobile Network User Experience Report*1, Rakuten Mobile was once again ranked No. 1 in Japan for 5G download speed, following the April 2024 report ■ Amongst global carriers, Rakuten Mobile rec
Slide 50: Promoting Efforts to Ensure Network Safety and Reliability
Promoting Efforts to Ensure Network Safety and Reliability ■ Rakuten Mobile’s 4x4 MIMO can switched to 2x4 during power outages, maintaining stable connectivity while extending backup power supply life by approximately 30% Remotely control radio waves to Extending the life of base station “emergency
Slide 51: Initiatives to Improve Network Energy Efficiency
Initiatives to Improve Network Energy Efficiency ■ Fully-virtualized network allows for implementation of wide range of innovative solutions to reduce energy consumption, thus maximizing network efficiency Central Base Stations Far Edge Near Edge Internet Data Center Where energy consumption is conc
Slide 52: AST SpaceMobile Progress
AST SpaceMobile Progress ■ Satellite communications network for use during disasters (Band 3 planned for communication between satellite and devices) ■ Aiming to provide nationwide coverage in Japan starting in 2026 ■ Providing reliable, continuous communication on unmodified smartphones, targeting
Slide 53: AST Video
AST動画 53 VIDEO URL
Slide 54: ARPU
1 Subscriber acquisition status 2 Communication quality improvements 3 ARPU 54
Slide 55: Q3 ARPU: JPY 2,801. Both B2C and B2B ARPU Improved
Q3 ARPU : JPY 2,801. Both B2C and B2B ARPU Improved *1 ■ Growth mainly in data ARPU on increased 5G traffic and acquisition of main line users with higher data usage ■ From Q3/24, Ecosystem ARPU*2, which reflects additional revenue from group services driven by Rakuten Mobile subscribers, is include
Slide 56: Generative AI Added to Rakuten Link
Generative AI Added to Rakuten Link (Currently Available on AndroidTM, coming soon to iOS) ■ Access to Rakuten Link AI from Rakuten Link home screen ■ Available to all Rakuten Mobile users with no additional subscription required 56
Slide 57: Personal Concierge Features Planned for Future Addition
近日公開 Personal Concierge Features Planned for Future Addition (Books) Personal shopping assistance Customized travel Learn new things and Get real time answers across the entire recommendations and explore your interests about your Rakuten Mobile Rakuten Ecosystem, booking assistance on with recommen
Slide 58: Rakuten Symphony
Rakuten Symphony
Slide 59: Develop Leading Network Software
Symphony Strategy Going into 2025 ■ Repositioned the company through 2024, with greater focus on software Previously Deliver Next-Gen Networks Going forward Develop Leading Network Software 59
Slide 60: Expanding Beyond Telecom Industry
Expanding Beyond Telecom Industry ■ Provide a service portfolio to serve customers outside the telecom industry Productize our ecosystem assets and white- label products for operators worldwide Internet White Label Apps & Platforms Services Develop industry-agnostic OSS with AI-based Service agents
Slide 61: Opportunity
Opportunity ■ Ready to take advantage of growing private cloud demand Favorable Market Strong Cloud Offering High Potential Consolidation of various Businesses shifting from cloud functions into Public to Private Cloud Rakuten Cloud Massive Government appetite for sovereign cloud capacity demand for
Slide 62: Rakuten Symphony: Accelerating Growth and Expanding Global Reach
Rakuten Symphony: Accelerating Growth and Expanding Global Reach ■ Accelerate diversification and growth of the customer base through strengthened partnerships and expanded sales, driving further global expansion ■ Transition to a software-centric business model 2023 2024 2025 Aiming for Foundation
Slide 63: 4. Finance
4. Finance 63
Slide 64: Mobile Ecosystem Contribution Reflected in Segment P&L
Mobile Ecosystem Contribution Reflected in Segment P&L ■ To enable precise evaluation of performance, including the effect of inter-segment contributions and cross- referrals within Ecosystem, “Mobile Ecosystem Contribution” is now included in each segment‘s Non-GAAP OI/EBITDA and Rakuten Mobile’s N
Slide 65: Our Commitment: Disciplined Financial Policy
Our Commitment: Disciplined Financial Policy Aiming for financial soundness in the medium term 1 2 3 Profitability Improvement Efficiency Improvement Financial Soundness Continuous profit growth of core Company-wide cost reduction Reduce gross debt businesses SPU revision Proactive debt maturity ❏ A
Slide 66: Refinancing Risks in 2024 and 2025 Have Been Eliminated
Refinancing Risks in 2024 and 2025 Have Been Eliminated ■ Provisions have been made for senior bonds maturing in 2024 and 2025 ■ Currently considering replacement of hybrid bonds with first maturities in Nov and Dec 2025 which are planned to be called then Status 2024/ • Senior bonds • Already addre
Slide 67: Rakuten Mobile Raised Funds Through Sale and Leaseback
Rakuten Mobile Raised Funds Through Sale and Leaseback (Announced in August) ■ Rakuten Mobile raised JPY 170 bn through sale and leaseback of telecom equipment owned by the company ■ By securing the necessary short-term funds for Rakuten Mobile, Rakuten Group’s liquidity should also improve. Cash fl
Slide 68: Rakuten Group's Evaluation in the Debt Market
Rakuten Group's Evaluation in the Debt Market ■ Rakuten Group’s various initiatives are being positively recognized by the debt market ■ Rising prices and falling yields in the secondary market suggest that future financing costs may be lower ＜Business＞ Price trends of Rakuten Group bonds • Steady p
Slide 69: 5. AI
5. AI 69
Slide 70: Augment human creativity with the power of AI
Augment human creativity with the power of AI ABC Online English- Digital Mobile AI-nization shopping nization Payments 70
Slide 71: Our Approach to AI is Foundational and Cost-effective
Our Approach to AI is Foundational and Cost-effective Performance Cost FOCUS ON SCALING HUMAN INTELLIGENCE + RIDE THE WAVE OF THE FUNDAMENTALS ARTIFICIAL INTELLIGENCE TECHNOLOGY INNOVATION Invest in core technologies that Combine the domain expertise Capitalize on recent increases in enable us to sc
Slide 72: Rakuten AI: Execution Momentum
Rakuten AI: Execution Momentum Deep Learning Rakuten AI Rakuten AI at Scale for Business for Consumers Semantic Search Rakuten Analytics Rakuten Link AI Semantic Recommendation: Rakuten Insight Universal Concierge Preview Dynamic Ads 72
Slide 73: Deep Learning: Ecosystem Expansion
Deep Learning: Ecosystem Expansion SEMANTIC SEARCH SEMANTIC DYNAMIC AD DISPLAY Delivering great results by RECOMMENDATIONS Dramatically improved relevance to understanding what customers Suggesting new options that users help increase basket size, conversion mean, not just what they say may not be a
Slide 74: Rakuten AI for Business
Rakuten AI for Business Launched Launched 9/25 9/12 RAKUTEN ANALYTICS RAKURAKU PROFILE (BY RAKUTEN INSIGHT) Deepens customer Automatically generate target profiles by linking internet survey understanding and support results with Rakuten Ecosystem data data-driven decision making 74
Slide 75: Rakuten AI for Consumers
Rakuten AI for Consumers Launched Unveiled 10/31 8/2 RAKUTEN LINK AI UNIVERSAL CONCIERGE Makes GenAI accessible to 8M+ A multi-modal, deeply Rakuten Mobile customers for personalized connection to the free from the Rakuten Link app entire Rakuten Ecosystem 75
Slide 76: Rakuten
Rakuten
Slide 77: 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