Q3 FY2024 results: Rakuten returns to OI profitability, notches record high third quarter revenue
On November 13, from the company’s global headquarters in Tokyo, Rakuten Group disclosed its financial results for the third quarter of 2024. Chairman and CEO Mickey Mikitani, along with Rakuten Group leaders, shared Q3 highlights from the company’s diverse portfolio of 70+ services and offered insights into the company’s bold plans in AI, telecommunications, digital content and more.
Rakuten Group achieves profitability
Rakuten recorded year-on-year (YoY) revenue growth across all three segments in Q3 FY2024: Internet Services, Fintech and Mobile, while consolidated revenue reached a record high for Q3 of 566.7 billion yen, up 9.3% YoY.
Due to improved revenue and cost optimization at Rakuten Mobile and a substantial increase in profits at Rakuten Card, Rakuten recorded Non-GAAP operating income of 12.3 billion yen over the quarter.
Headlining the presentation was the news that Rakuten had achieved quarterly profitability in Non-GAAP operating income for the first time in five years, following a period of significant capital investment after the launch of the company’s mobile network operator business in Q3 2019.
“Customer support for Rakuten Mobile used to cost almost 200 yen per user. However, by shifting more support online and leveraging AI, we’ve cut costs by more than 30%.”
Mickey Mikitani, Chairman and CEO, Rakuten Group
Over the quarter, Rakuten Mobile secured its own necessary short-term funds by raising 170 billion yen through the sale and leaseback of its mobile network assets, leading to improved liquidity for the Group overall. This enables the Group to allocate cash flow from the Rakuten’s Internet Services and Fintech businesses to reduce interest-bearing debt.
EBITDA, an indicator the company uses to assess its ability to generate cash flow, was profitable for the quarter at 92.2 billion yen, an increase of 159.1％ YoY. With the return to profitability in consolidated operating income, Rakuten Group aims to increase cash flow while pursuing a balance between growth and returns.
Rakuten Group Chairman and CEO Mickey Mikitani highlighted the role of AI in driving efficiency gains for the company. “Customer support for Rakuten Mobile used to cost almost 200 yen per user. However, by shifting more support online and leveraging AI, we’ve cut costs by more than 30%. This is part of our ‘Triple 20’ project, which targets 20% gains in operational, marketing and client productivity,” he shared during the presentation.
Fintech segment soars
Rakuten’s Fintech segment saw substantial growth in both revenue and profit for Q3 2024, with revenue of 208.2 billion yen, up 12.8％ YoY, and Non-GAAP operating income of 40 billion yen, up 57.2％ YoY. The customer base and transaction value of each business also continued to expand.
Rakuten Card’s shopping gross transaction value (GTV) reached 6 trillion yen in Q3, an increase of 12.7% YoY, as a result of an expansion in Rakuten Card’s membership base and average customer spend, boosting overall segment revenue growth. Moving ahead Rakuten Group aims to leverage the new strategic capital and business alliance between Mizuho Financial Group and Rakuten Card to further expand both Rakuten Card’s business and enhance the entire Rakuten Fintech Ecosystem, with Rakuten Card firmly centered at its core.
Rakuten Bank leveraged Group synergies to drive account acquisition, reaching 16.19 million individual accounts as of the end of September 2024, a 12.6% increase compared to the same period last year. With further progress in becoming the primary and everyday bank for users, the total balance of deposits (non-consolidated) steadily increased to 11.1 trillion yen as of the end of September 2024.
Rakuten Securities posted record revenue for the third quarter, with the total number of general securities accounts climbing considerably to reach 11.65 million as of the end of September 2024, up 20.3% YoY.
Rounding out the Fintech segment, Rakuten Payment recorded an increase in revenue due to increased transaction value and continuous cost control, resulting in the expansion of operating profit for the second consecutive quarter. For the second straight year, Rakuten Pay also ranked first in the QR code payment industry customer satisfaction index – a testament to its popularity with users.
Mobile momentum continues
For the third quarter of 2024, Rakuten’s Mobile segment recorded revenue of 106 billion yen, a notable increase of 19.5% YoY. Non-GAAP operating losses of 48.7 billion yen marked an improvement of 26.5 billion yen YoY.
As an individual business, Rakuten Mobile, driven by increasing subscribers and improved data average revenue per user (ARPU), recorded non-consolidated revenue of 72.5 billion yen, an increase of 30.3% YoY. Coupled with the effects of ongoing cost reductions, Non-GAAP operating losses were 50.6 billion yen, an improvement of 20 billion yen YoY. EBITDA also saw a significant improvement of 24.1 billion yen compared to the same period last year, ending with a deficit of 9.7 billion yen.
Continuing impressive recent growth trends, the total number of Rakuten Mobile subscriptions (both individual and business) surpassed 8.12 million* as of November 10, 2024. Rakuten Mobile’s growing subscriptions comes as a result of strong subscriber acquisition through the Rakuten Ecosystem, especially from B2C customers and various initiatives such as the Saikyo Senior Program. Churn has also continuously improved for the operator, with adjusted MNO churn for the quarter hitting 1.09%. MNO ARPU for the quarter, including from the Rakuten Group ecosystem, was 2,801 yen.
Commenting on Rakuten Mobile’s latest efforts to bring the power of AI to every user, Rakuten Group Chief AI & Data Officer Ting Cai commented, “We launched Rakuten Link AI, allowing millions of Rakuten Mobile users to leverage the latest generative AI technology without downloading additional software, creating another account, or paying a subscription fee right on their mobile devices.”
For more business-by-business breakdowns of Rakuten’s Q3 2024 performance, see the materials for investors in full here.
*Based on preliminary figures. Total of MNO, MVNO and MVNE subscribers, including Business Continuity Plan subscriptions.
