Expanding revenue fueled by Fintech growth: Rakuten presents Q3 FY2023 results
On November 9, Rakuten announced its financial results for the third quarter of 2023 from its headquarters in Tokyo. Chairman and CEO Mickey Mikitani, along with leaders from across the Rakuten Group, took to the stage for a live-streamed presentation highlighting financial results from the company’s global portfolio of more than 70 services.
Record revenue for Rakuten Group
Rakuten’s revenue reached 518.4 billion yen this quarter, up 10.1% year-on-year (YoY). Non-GAAP operating losses were 41 billion yen – a significant improvement of 42 billion yen YoY that comes as the result of reduced losses in the mobile business and revenue growth in core domestic e-commerce businesses such as Rakuten Travel, as well as Rakuten Bank and Rakuten Securities. The Rakuten Group’s consolidated Non-GAAP EBITDA was profitable, recording 35.6 billion yen – an improvement of 50.4 billion yen YoY.
The quarter saw the average number of monthly active users across the Rakuten Group in Japan hit 40.9 million*1, up 7.2% YoY. The Rakuten Ecosystem customer base also continued to expand, with the percentage of all users using two or more services over the past 12 months at an impressive 76.5%.
Another highlight: the company’s advertising business, which saw third-quarter revenue reach 51 billion yen, up 15.3% YoY*2. The business is now on track to surpass 200 billion yen in revenue for 2023.
“Acceleration of Rakuten Mobile subscriptions is going very well, and we are already in our growth phase. The keywords that are going to be necessary for this phase are quality and growth, and the network is going to be key.”
Mickey Mikitani, Chairman & CEO, Rakuten Group
Rakuten Fintech levels up
Rakuten’s Fintech segment recorded significant growth in both revenue and profit in the quarter, with revenue of 184.6 billion yen (+13.6% YoY) and Non-GAAP operating income of 28.6 billion yen (+35.8% YoY).
As of the end of September 2023, the total number of credit cards issued by Rakuten Card hit 29.54 million (+7.4% YoY). For the quarter, Rakuten Card’s shopping gross transaction value (GTV) hit 5.3 trillion yen, up 17.4% YoY, driving shopping GTV to exceed 20 trillion yen for the most recent 12-month period*3. Moving ahead, the company aims to continue expanding the Fintech segment within the Rakuten Ecosystem by boosting synergies within the Group through Rakuten Card.
Further in fintech, Rakuten Securities reached 9.68 million customer accounts as of the end of September 2023, up 15.8% YoY, and Rakuten Payment revenue rose to 20 billion yen in the third quarter of 2023, up a remarkable 37.4% YoY. Adding to the fintech momentum, Rakuten Pay ranked first in all six major indicators in the 2023 Japanese Customer Satisfaction Index Survey of QR code payments, according to the Service Industry Productivity Council.
Mobile momentum continues
Overall, Rakuten’s Mobile segment recorded revenuesof 88.7 billion yen, an increase of 5.0% YoY, while Non-GAAP operating losses improved by 36.4 billion yen YoY, continuing to contract from its peak in the first quarter of 2022.
“We are making ourselves more robust so we can run a marathon,” noted Rakuten Group Chairman & CEO Mickey Mikitani on Rakuten Mobile’s growth. “Acceleration of Rakuten Mobile subscriptions is going very well, and we are already in our growth phase. The keywords that are going to be necessary for this phase are quality and growth, and the network is going to be key.”
Rakuten Mobile, Inc. recorded revenue of 55.7 billion yen this quarter, up 21.6% YoY, recording Non-GAAP operating losses of 76.7 billion yen, up 35.1 billion yen YoY, thanks to steady subscriber growth and increased ARPU (average revenue per user).
Total mobile network operator (MNO) subscriptions, both individual and business, reached 5.22 million as of the end of September 2023, a significant increase of 410,000 subscriptions on the previous quarter. Notably, the net growth in MNO contracts is accelerating – the total number of subscriptions reached 5.42 million at the end of October 2023 (preliminary figures).
On October 23, 2023, Rakuten Mobile received approval from the Ministry of Internal Affairs and Communications for its special base station deployment plan in the 700 MHz “platinum band” frequency spectrum. Based on this approval, Rakuten Mobile will utilize the allocated 700 MHz band in order to provide even higher-quality mobile service to customers.
“We are on a mission to augment human creativity with the power of AI – combining human expertise across multiple industries with the latest cutting-edge technologies.”
Ting Cai, Chief Data Officer and Group Senior Managing Executive Officer, Rakuten Group
Internet Services segment boasts customer growth
Revenue in Rakuten’s Internet Services segment side reached 301.2 billion yen this quarter (+13.9% YoY). Domestic e-commerce revenue for the quarter was 224.9 billion yen, achieving double-digit growth of 14.9% YoY, while domestic e-commerce gross merchandise sales (GMS)*4 reached approximately 1.6 trillion yen, an increase of 15.7% YoY.
Rakuten’s overseas businesses saw steady expansion of their customer bases in Q3, with the total number of Rakuten TV users and registered Rakuten Viki users reaching 84.4 million (+42.1% YoY) and 78.4 million (+23.9% YoY) respectively.
The Power of “AI-nization”
During the Results webinar, Rakuten Group’s Chief Data Officer and Group Senior Managing Executive Officer Ting Cai took to the stage to provide an update on Rakuten’s AI strategy and roadmap, noting that “we are integrating AI into everything we do, through an initiative called ‘AI-nization.’”
“We are on a mission to augment human creativity with the power of AI – combining human expertise across multiple industries with the latest cutting-edge technologies.”
Rakuten is in a unique position to realize this vision for three reasons, explained Cai:
1. Rakuten’s unique data assets: Domain knowledge across multiple industries combined with customer contact over 25+ years, plus knowledge and technology through Rakuten’s collaboration with OpenAI.
2. Reach: Rakuten reaches more than 40 million active customers every month online and offline through Rakuten Card, Rakuten Pay, the Rakuten Points loyalty program and more.
3. World-class operations expertise: Rakuten has the discipline and determination to build a flywheel to reach customers and continuously improve the model to better serve customers.
For more business-by-business breakdowns of Rakuten’s third quarter 2023 performance, see the materials for investors in full here.
Notes
*1 Number of active users in September 2023. Figures are for Rakuten members who earned at least 1 Rakuten Point in the relevant month.
*2 Total sum of advertising sales in Japan recorded in each segment (Internet Services, Fintech and Mobile). Includes internal Group transactions.
*3 For the period from Q4 FY2022 to Q3 FY2023.
*4 Domestic e-commerce 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.
