Rakuten Group Q2 FY2024 Financial Results Highlights

Overall Performance

・The Rakuten Group recorded year-on-year (YoY) revenue growth in all three segments in Q2 FY2024: Internet Services, FinTech and Mobile. Consolidated revenue reached 537.3 billion yen, a record high for the second quarter, up 8.1% YoY. 

・The Rakuten Group recorded Non-GAAP operating losses in Q2 FY2024 of 11.8 billion yen, a significant improvement of 27.6 billion yen YoY due to increased revenue, improved profitability in domestic EC growth investment businesses and overseas businesses, strong performance across the FinTech businesses, and continued loss improvement driven by increased revenue and cost optimization 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 66.8 billion yen, an increase of 98.6% YoY.

・The liquidity gap for 2025^*2 has already been addressed through the issuance of foreign bonds in the first half of the year. Additionally, Rakuten Mobile will establish self-funding through its lease finance fundraising. The business has secured the necessary funds for the near future, thereby improving the Group's overall liquidity and enabling the Group to allocate cash flow from the Internet Services and FinTech businesses to reduce interest-bearing debt. Despite still being in the investment phase to acquire new subscribers, Rakuten Mobile’s pre-marketing cash flow (PMCF)^*3 turned positive in Q2 FY2024.

Internet Services Segment

・The Internet Services segment achieved growth in both revenue and profit in Q2 FY2024, with revenue of 303.9 billion yen, up 3.1% YoY, and Non-GAAP operating income of 18.9 billion yen, up 30.3% YoY.

・Domestic e-commerce gross merchandise sales (GMS)^*4 were 1.4 trillion yen, down 4.8% YoY due to the effect of nationwide travel support which partially ended in July 2023 and revisions to the Super Point Up Program in December 2023 and other conditions. At the same time, Rakuten Ichiba's GMS growth rate improved quarter on quarter (QoQ). Despite a rush in demand following rule changes to the Furusato Nozei hometown tax program in October last year, the Group aims to achieve YoY growth for FY2024 and expects a return to growth from Q4 FY2024 onwards.

・Profitability in domestic EC growth investment businesses has steadily improved. This was particularly driven by the enhanced profitability of Rakuten Seiyu Netsuper^*5, after it became a wholly-owned subsidiary of Rakuten Group, as well as successful operational improvements and pricing adjustments in the logistics business.

・In the second quarter, revenue from the advertising business increased to 54.0 billion yen, up 8.4% YoY^*6.

・Rakuten’s overseas businesses continued to steadily expand their user base, especially the digital content businesses, with significant improvements in profitability. Notably, Rakuten Viber's Q2 FY2024 revenue increased 51.3% compared to 2022, driven by increased sales of telecom services^*7, Business Messages and advertising. Moreover, Rakuten Kobo recorded robust sales of its first-ever color devices as well as significantly improved profitability. Total operating income for Rakuten’s four overseas digital content and communication platform businesses^*8 improved considerably by 2.7 billion yen, achieving quarterly profitability. 

FinTech Segment

・The FinTech segment achieved high growth in both revenue and profit for Q2 FY2024, with revenue of 202.7 billion yen, up 12.0% YoY, and Non-GAAP operating income of 42.3 billion yen, up 28.1% YoY. The customer base and transaction value of each business continued to expand.

・Rakuten Card's shopping gross transaction value (GTV) increased to 5.9 trillion yen, up 13.9% YoY for the quarter, as a result of an expansion in Rakuten Card’s membership base and average spending per customer, contributing to overall segment revenue growth. Optimizing marketing expenses and maintaining low bad debt-related expenses also contributed to the achievement of double-digit profit growth.

・Rakuten Bank leveraged Group synergies to acquire new customer accounts, achieving a total of 16 million accounts as of July 29, 2024^*9. With more customers using their Rakuten Bank account as their main account and for their everyday finances, the total balance of deposits (non-consolidated) steadily increased to 10.9 trillion yen as of the end of June 2024, up 15.3% YoY. This accumulation of managed assets boosted interest income, leading to substantial revenue and profit growth.

・Rakuten Securities recorded its highest-ever revenue due to increased earnings from transactions driven by the continuous expansion of its customer base. The total number of general securities accounts surpassed 11.33 million as of the end of June 2024, a 22.7% increase YoY. Profits exceeded those of the previous quarter when zero commission trading for Japanese stocks was introduced, and both revenue and profit increased QoQ.

・Rakuten Payment recorded an increase in transaction value, particularly through Rakuten Pay and Rakuten Cash, leading to revenue growth. By maintaining a lean operational structure while achieving sales growth, Non-GAAP operating income for Q2 FY2024 reached 1.2 billion yen, a 3.9 billion yen increase YoY, marking the second consecutive quarter of operating profitability.

Mobile Segment

・In Q2 FY2024 the Mobile segment recorded revenue of 95.0 billion yen, up 18.6% YoY. MNO service revenue expanded and profitability further improved in line with an increase in Rakuten Mobile subscribers, leading to Non-GAAP operating losses of 60.6 billion yen, an improvement of 21.8 billion yen YoY.  

・Rakuten Mobile as an individual business recorded non-consolidated revenue of 67.9 billion yen, up 29.9% YoY, driven by an increase in the number of subscribers and improved ARPU. Coupled with the effects of ongoing cost reductions, Non-GAAP operating losses were 59.5 billion yen, an improvement of 19.4 billion yen YoY. EBITDA was a loss of 20.2 billion yen, marking an improvement of 22.6 billion yen YoY.

・The total number of subscriptions (both individual and business) surpassed 7.7 million^*10 as of August 7, 2024, driven by strong subscriber acquisition through the Rakuten Ecosystem, especially for B2C customers. The number of subscribers, excluding BCP lines, for MNO and MVNE was 7.26 million^*11. This quarter saw the addition of 610,000 subscribers, and the largest-ever quarterly increase in B2C subscribers^*12. Churn has also continuously improved, with adjusted MNO churn for Q2 FY2024 hitting 1.04%^*13. MNO ARPU has been steadily rising in both B2C and B2B, primarily driven by data ARPU. MNO ARPU for the quarter was 2,021 yen, an increase of 55 yen QoQ. Additionally, monthly MNO ARPU for June was 2,031 yen.

・The average number of new Rakuten Group services used per Rakuten Mobile  subscriber (MNO B2C customers) over the two years after contracting increased by 2.45 services compared with non-subscribers, accelerating cross-usage within the Rakuten Ecosystem^*14. Moreover, compared to non-subscribers, Rakuten Mobile subscribers spent 49.7% more annually (GTV) on Rakuten Ichiba, 12.0% more on Rakuten Travel, and 25.9% more on Rakuten Card, contributing to the overall increase in the Group's gross transaction value^*15.

・Rakuten Mobile launched commercial services using the “platinum band” 700 MHz spectrum on June 27, 2024. In addition to the continuous expansion of 4G and 5G base stations, ongoing efforts are being made to improve network quality, such as expanding the 5G network area since measures preventing interference between mobile and satellite communications in shared bandwidth were eased, enhancing 5G base station traffic capacity per network cell and increasing the number of unique 5G users.

Notes
*1 EBITDA = Non-GAAP operating income + depreciation costs, etc.
*2 The gap between cash/deposits on hand and the balance of maturing corporate bonds.
*3 PMCF = Pre-Marketing Cash Flow. On a stand-alone basis. Calculated by adding back customer acquisition costs (including marketing expenses, shop expenses, etc.) to Rakuten Mobile, Inc.’s EBITDA, which includes the amount of profit boost from Group services attributable to Rakuten Mobile subscribers.
*4 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.
*5 Rakuten Seiyu Netsuper, Inc., was renamed Rakuten Mart, Inc. on August 8, 2024, and the online grocery delivery service will rebrand under the name “Rakuten Mart" on September 25, 2024.
https://global.rakuten.com/corp/news/press/2024/0807_02.html
*6 Total sum of advertising sales in Japan recorded in each segment (Internet Services, FinTech, and Mobile). Includes internal Group transactions.
*7 Telecom includes Viber Out, Viber In and SMS. 
*8 Total Non-GAAP operating income of Rakuten Viber, Rakuten Viki, Rakuten Kobo and Rakuten TV.
*9 15.87 million customer accounts as of the end of June 2024 (up 13.0% YoY)
*10 Preliminary figures as of August 7, 2024. Total of MNO, MVNO, and MVNE subscribers, including Business Continuity Plan (BCP is a corporate plan sold for business continuity purposes) subscriptions.
*11 Includes Rakuten Saikyo Plan, Rakuten Saikyo Plan Business and Rakuten Turbo subscriptions, excluding BCP subscriptions. Based on preliminary figures.
*12 Since essentially free mobile fees campaigns completely ended on July 1, 2022.
*13 Churn rate adjusted to exclude B2C customers who cancel within the same month as activation. Total subscription cancellations for the most recent quarter divided by the average number of subscriptions at the end of the most recent and immediately preceding quarter. Includes individual and business customers and excludes BCP and MVNE. 
*14 Rakuten Mobile subscribers (MNO B2C) who contracted between March 2020 and July 2022. Non-users are those who used any Rakuten service during the same period. Number of services used includes the MNO itself.
*15 The difference in average annual purchase amount (GTV for Rakuten Card) per person between Rakuten Mobile subscribers and non-subscribers over the past year. Subscribers are those who had a Rakuten Mobile (MNO B2C) contract in the relevant month and had similar purchasing trends to non-MNO subscribers over the past year. Non-subscribers are those who did not have a Rakuten Mobile (MNO B2C) contract in the relevant month but used other Rakuten services and had similar purchasing trends to MNO subscribers over the past year.