Rakuten Q2/FY2024 Earnings
The biggest news for cash-strapped Rakuten Group arrived just before the earnings release, with Rakuten Mobile “self-funding” through a sale-and-leaseback transaction with Macquarie Asset Management.
At the same time, the issuance of foreign bonds in the first half of 2024 has addressed the liquidity gap until the end of 2025, as per Rakuten. The goal is now to use the cash flow of the Internet Services and FinTech Segments to reduce interest-bearing debt for the group.
A little cringe-worthy is the newly introduced metric of Pre-Marketing Cash Flow, as the argument becomes circular: if we did not do any marketing, we would be cash-flow positive; but we need new subscribers to achieve our operating leverage targets and achieve EBITDA and operating profitability. Given Rakuten’s large debt pile, even EBITDA is not a meaningful measure given the previously stated focus on reducing interest-bearing debt.
FinTech Segment
Segment revenue: JPY 202.7bn (+12.0% YoY), Non-GAAP OI: JPY 42.3bn (+28.1% YoY). The customer base and transaction value continued to expand in each business.
Rakuten Card
Shopping GTV increased due to the expansion of card members and average customer spending. Q2/24 Shopping GTV: JPY 5.9tn (+13.9% YoY), contributing to increased segment revenue. Combined with increased operating leverage through marketing optimization and the maintenance of low levels of bad debt-related expenses, Rakuten Card achieved double-digit profit growth.
Rakuten Bank
Ongoing success in acquiring new accounts by leveraging group synergies. Number of accounts: 15.87 million (as of end of June, +12.9% YoY). As more customers use these accounts as their main accounts or for daily living, the deposit balance also increased, reaching JPY 10.9tn* (as of end of June, +15.3% YoY). Steady accumulation of managed assets led to a large increase in interest income, resulting in significant increases in both revenue and profit.
Rakuten Securities
Record high revenue, thanks to the continued expansion of its customer base and strong performance in various transactions. Number of general securities accounts: exceeded 11.33 million accounts (+22.7% YoY) as of end of June. Profits also increased QoQ, exceeding the figure for the quarter immediately prior to the introduction of free commissions.
Rakuten Payment
Increased revenue due to an expansion in transaction value, mainly at Rakuten Pay and Rakuten Cash. By achieving revenue growth while maintaining a lean operating structure, achieved an operating profit for the second consecutive quarter.
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