FY2015 Second Quarter Consolidated Financial Results August 6, 2015 Rakuten, Inc. This presentation includes forward-looking statements relating to our future plans, targets, objectives, expectations and intentions. The forward-looking statements 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 differ materially, for a wide range of possible reasons, including general industry and market conditions and general international economic conditions. In light of the many risks and uncertainties, you are advised not to put undue reliance on these statements. The management targets included in this presentation are not projections, and do not represent management s current estimates of future performance. Rather, they represent targets that management strive to achieve through the successful implementation of the Company s business strategies. The Company may be unsuccessful in implementing its business strategies, and management may fail to achieve its targets. The Company is under no obligation - and expressly disclaims any such obligation - to update or alter its forward-looking statements. Names of companies, products, and services and such that appear in this material are trademarks or registered marks of their respective companies.
Connecting The Dots 2
Crimson House (Futako-Tamagawa, Japan) Rakuten Crimson House Crimson House West (San Mateo, US) 3
Rakuten Innovation 4
Rakuten Smart Pay GMS 5
Rakuma GMS Rakuma, a C2C mobile-based marketplace, started from Nov 2014 GMS is growing rapidly: June 2015 +43.3% Month on Month +43.3% Month on Month 6
Super Point Screen We launched Super Point Screen on July 13. 7
1 Q2/15 Financial Results Rakuten Group started to disclose Non-GAAP financial measures, which is used for management s decision making, as well as IFRS measures, since FY2015. We define Non-GAAP operating income as IFRS operating income excluding non-recurring and other items. We believe Non-GAAP operating income is useful information to understand our recurring operating performance. Please see page 12 for the detailed information. In accordance with the change of financial measures used for management s decision making, the cost allocation to the business segments is also changed due to the management approach under IFRS. Therefore, segment profits and losses for the previous years are reported based upon Non-GAAP operating income. 8
Q2/15 Financial Highlights Non-GAAP Operating Income: +28.3% YoY IFRS Operating Income: +18.2% YoY Internet Finance OI: +73.5% YoY Domestic Gross Transaction Value: +24.2% YoY Global Offering successfully completed 9
Q2/15 Financial Results Summary (JPY bn, IFRS) Q2/14 Q2/15 YoY Revenue 138.3 173.2 +25.2% Non-GAAP Operating Income 24.1 30.9 +28.3% IFRS Operating Income 22.2 26.2 +18.2% 10
Q2/15 Financial Results by Segment (JPY bn, IFRS) Q2/14 Q2/15 YoY Rakuten Ichiba and Rakuten Travel Revenue 44.3 47.4 +7.1% Operating Income 21.3 23.2 +8.8% Other Internet Services Revenue 36.8 55.4 +50.6% Operating Income -7.3-6.3 +1.0bn Internet Finance Segment Revenue 56.8 69.6 +22.6% Operating Income 9.7 16.9 +73.5% Others Segment Revenue 11.7 13.8 +17.7% Operating Income 0.7-1.1-1.7bn Adjustments Revenue -11.2-13.0-1.8bn Operating Income -0.3-1.8-1.5bn Consolidated Revenue 138.3 173.2 +25.2% Non-GAAP Operating Income 24.1 30.9 +28.3% IFRS Operating Income 22.2 26.2 +18.2% 11
Q2/15 Operating Income Reconciliation (JPY bn, IFRS) Q2/14 Q2/15 YoY Non-GAAP Operating Income 24.1 30.9 +28.3% Amortization of Intangible Assets (PPA) -1.5-2.1-0.6bn Stock Based Compensation -0.4-1.4-1.1bn One-off items * - -1.2-1.2bn IFRS Operating Income 22.2 26.2 +18.2% * One-off items comprised JPY 1.2 bn of head office moving costs in Q2/15. 12
Shrinking Other Internet Services Loss (JPY bn, IFRS) Operating Income +1.0 bn YoY 13
Domestic Gross Transaction Value Domestic GTV +24.2% YoY *1: Edy Transaction Value = Amount settled by E-Money Rakuten Edy (including mobile and cards) *2: Point Partner Transaction Value = Amount settled with R-Point Card *3: Credit Card Shopping Transaction Value = Shopping Transaction Value of credit cards (including Rakuten group service use) *4: Travel gross booking transaction value is before cancellation and includes consumption tax *5: Domestic E-Commerce GMS includes consumption tax. Businesses not requiring consumption tax payment are GMS excluding consumption tax. Refer to the slide of Domestic E-Commerce GMS for details 14
2 Internet Finance 15
Operating Income +46.9% YoY Rakuten Card Results *1 *2, 3 *1: Q3/13 JPY 102 mm additional provision to reserve for retirement benefits due to the termination of the plan (increase in expense) *2: From Q1/15, general expenses decreased due to adoption of IFRS15, and part of customer acquisition costs included in general expenses have been capitalized. *3: Changed standards on allowance for doubtful accounts in Q1/15. Net increase in expenses related to doubtful accounts: JPY 218 mm 16
Rakuten Card OI & Margin Operating Income Margin staying over 20% OI Margin Operating Income *1 *2, 3 *1: Q3/13 JPY 102 mm additional provision to reserve for retirement benefits due to the termination of the plan (increase in expense) *2: From Q1/15, general expenses decreased due to adoption of IFRS15, and part of customer acquisition costs included in general expenses have been capitalized. *3: Changed standards on allowance for doubtful accounts in Q1/15. Net increase in expenses related to doubtful accounts: JPY218mm 17
Rakuten Card Shopping Transaction Value Rakuten Card Shopping GTV exceeded 1 trillion yen for the first time in Q2/15, even bigger than whole year of FY2010 18
Rakuten Card Shopping Transaction Value and Shopping Revolving Balance * * Managerial accounting basis and using different definition from Appendix. Total credit card data are shown in Appendix 19
Rakuten PINK Card Launched on May 19, created especially for women 20
Rakuten Bank Results Steady growth of Rakuten Bank Super Loans and successful cost control resulted in Operating Income +75.9% YoY 21
Rakuten Bank: Core Net Business Profit Core net business profit significantly increased by +63.5% YoY * Core net business profit = Net business profit - General and administrative expenses - Gains (losses) related to bonds Net business profit = Net interest income and expenses + Net fees and commissions + Net other ordinary income and expenses + Trust fees 22
Rakuten Bank Super Loans Steady growth of loan receivables: +22.3% YoY * Loan receivables and loan customers are total of Rakuten Bank and foreclosed credit guarantees of Rakuten Card Co., Ltd From Q2/15, loan receivables are retroactively changed to IFRS basis 23
Rakuten Bank Customer Accounts Customer accounts exceeded 5 million (+7.6% YoY), for the first time in Japanese internet bank industry 24
Rakuten Bank Deposits Deposits steadily increased by +26.6% YoY on an adjusted basis *1 *3 *1: Ordinary deposits as of end of June, 2015 is adjusted for 182 billion yen, temporally deposited due to the equity finance of Rakuten, Inc. *2: Other deposits include deposits in foreign currencies and others *3: Deposits as of end of June, 2015 are IFRS basis 25
Rakuten Securities Results Operating Income +63.7% YoY 26
Rakuten Securities Investment Trust Asset Balance Asset balance of Investment trusts exceeded JPY 524bn and maintained high growth: +32.1% YoY 27
Rakuten Securities Investment Trust Sales Sales of investment trusts continue healthy trend 28
Rakuten Securities FX Trading Value FX trading value continues to perform steadily :+273.6% YoY 29
Rakuten Securities Stock Brokerage Trading Value Stock brokerage trading value maintained high growth: +29.2% YoY (JPY bn) 19,408 +29.2% YoY 12,156 12,919 11,553 9,902 11,540 12,518 11,619 12,789 Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 30
Rakuten Life Insurance Results * * Q2/14 operating income included payment for a legal settlement (increase in expense) : JPY441 mm 31
Rakuten Life Insurance Contracts * Excluding policies of mutual aid association business transferred in 2008, and one-year cancer insurance for eligible Rakuten members started from Q4/14 32
3 Domestic Internet Services 33
Closed Domestic Open Strategy Open Super Deal Engage with Global Brands R Ichiba R Ichiba Super Points O2O Initiatives Expand Offline Check-out Enables Non- Rakuten Merchants Payment 34
Enhancing O2O Promotion Special point campaign: R-point Card utilization grew during Ichiba Super SALE Rakuten Super SALE Banner promoting both online and offline R-point Card Designed for offline usage 35
Connecting Edy App and R-Point Card Edy app now includes R-Point Card function Edy App (android) R-Point Card barcode 36
Rakuten Festival: O2O Event with Merchants Enhance New O2O events from August 1 st to 5 th at Tokyo Big site 37
Collaboration with Yamato Holdings Users can pick up products at over 20,000 convenience stores and 4,000 Yamato Transport sales offices Supporting merchants to improve operational efficiency 38
Enhancing Users Convenience Locker services for users pick-up are very popular at both Rakuten Box and Hako Post with Japan Post 39
Domestic E-Commerce GMS Q2/15 Domestic E-Commerce GMS : +17.2% YoY +17.2% YoY * Domestic E-Commerce GMS includes consumption tax. Businesses not requiring consumption tax payment are GMS excluding consumption tax GMS = Ichiba, Package Media, Auction, Golf, Business, Download, Tickets, Internet Supermarket, Check Out, Off-track betting, toto, Showtime, Media rental, Dining, Beauty, Mart, Kenko.com, Energy, Smart pay, Stylife, Coupon, Track cycling race and Rakuma 40
Rakuten Ichiba Results Revenue growth (adjusted) * : +8.4% YoY Operating Income growth: +5.1% YoY Revenue * +8.4% YoY Before Adjustment : +5.5% YoY Operating Income +5.1% YoY * Adjusted for change of revenue recognition at Stylife from gross basis to net basis from Q1/15 41
Rakuten Ichiba: Unique Buyers * +5.9% YoY * Unique Buyers: Number of buyers sorted by e-mail address with purchasing records during the listed 3 month period 42
Rakuten Ichiba Mobile Ratio * 48.5% * Mobile Ratio = Ichiba mobile GMS / Total Ichiba GMS Mobile GMS is preliminary data and includes feature phones, smartphones and tablets 43
Distribution of Merchant Plans * Rakuten Ichiba s main merchant plans are below Ganbare Plan (Monthly fee: JPY 19,500, Commission on PC GMS: 3.5-6.5%, Listable items: Up to 5,000 items) Standard Plan (Monthly fee: JPY 50,000, Commission on PC GMS: 2.0-4.0%, Listable items: Up to 20,000 items) Mega Shop Plan (Monthly fee: JPY 100,000, Commission on PC GMS: 2.0-4.0%, Listable items: No limit) Smaller-sized merchants typically choose Ganbare plan. Larger-sized merchants typically choose Standard or Mega plans. 44
Domestic E-Commerce GMS per Merchant Jun/14 Mar/15 Jun/15 Domestic E-Commerce GMS Per Ichiba Merchant *1 (JPY mm, LTM *2 ) 46.2 48.1 50.0 Domestic E-Commerce GMS (JPY bn, LTM *2 ) 1,925.9 2,006.6 2,085.1 Number of Merchants 41,827 41,568 41,659 *1: Number of Merchants is average of two most recent month ends *2: Jun/14 (July 2013 - Jun 2014), Mar/15 (Apr 2014 - Mar 2015), Jun/15 (July 2014 - Jun 2015) 45
Travel Gross Booking Transaction Value Gross Bookings: +24.8% YoY due to strong domestic accommodation bookings, Rent-a-car, inbound business, boosted by Coupon service Record-high GTV due to active bookings for summer holidays and Silver Week (JPY bn) +24.8% YoY * Travel gross booking transaction value is before cancellation and includes consumption tax. Travel GTV = Transaction of domestic / international accommodation booking, international air tickets, domestic / international dynamic package, Bus, rent-a-car and pet hotel services 46
Rakuten Travel Results Operating Income: +21.1% YoY (adjusted * ) due to effective marketing Revenue +13.9% YoY Operating Income +21.1% YoY * Before Adjustment : +36.2% YoY * * Operating Income in Q2/14 included the effect of accounting error mainly related to coupons about JPY 320mm. 47
Voyagin Joined Voyagin helps travelers discover and book unique travel experiences and activities from its C2C marketplace Acquisition cost: less than USD 10M 48
4 Overseas E-Commerce 49
Next Generation E-Commerce Initiatives 50
Further Expansion Overseas E-Commerce Ebates Cross Border Trading 51
Ebates GMS Growth (Q2/15) Ebates GMS is growing rapidly: +48.8% YoY +48.8% YoY 52
Cross Border Trading Q2 Results Total +55% China+66.8% US+80.5% HK+84.3% * Year on Year 53
Ichiba Cross-Border Trading GMS to China Cross-Border Trading GMS from Japan to China: +66.8% YoY 54
Strategic Alliance with S.F. Express Providing multiple delivery channels in China Realizing low delivery costs for customers 55
5 Digital Content 56
Kobo Registered Users 57
OverDrive Total Checkouts Number of Checkouts: +23.3% YoY *1: OverDrive was consolidated from Q2/15 *2: Total Checkouts includes e-book, audio book, video and so on. 58
Viki Monthly Active Users * Viki MAU comprises Viki and its partner sites including Roku, Google Chrome, Xbox, Youtube, and others. 59
Viki Watch Time * Viki Watch Time comprises primarily Viki.com domains. Excludes time watched on platform where Viki does not directly sell the ad inventory at this time, such as Youtube.com and third party platforms. 60
6 Others Segment 61
Viber Unique IDs * Unique IDs: Unique phone numbers excluding deactivations 62
Viber MAU Growth (June 2015) +40.5% YoY 63
Viber Ranks No. 1 in App User Ratings Source: App Annie, based on average of user ratings for ios: May1 to Jul 28, 2015 64
Rakuten Mobile The first TV advertising started on June 22nd, featuring Keisuke Honda(Famous soccer player) New model - honor6 Plus - released 65
Monthly Applications of Rakuten Card and Rakuten Mobile since Launch * Monthly applications (Month 10, Month 11 are Forecast) 66
7 Global Offering 67
Global Offering Proceeds: JPY 182bn Closing: June 30, 2015 To strengthen our financial base and flexibility for sustainable growth of shareholder value Currently focusing on Connecting the Dots 68
Appendix Financial Condition Other Information 69
Financial Condition 70
Rakuten Group: Balance Sheets (As of June 30, 2015, JPY bn) Rakuten Group (Consolidated) Rakuten, Inc. Rakuten Bank, Ltd. Rakuten Card Co., Ltd. Rakuten Securities, Inc. Rakuten Life Insurance Co.,Ltd *1: Rakuten, Inc., Rakuten Bank, Ltd. Rakuten Card Co., Ltd., Rakuten Securities, Inc. and Rakuten Life Insurance Co., Ltd are IFRS based non-consolidated balance sheet *2: Debt = Corporate bonds + CP + Borrowings 71
Debt from Outside Financial Institutions *1 *1: Debt from outside financial institutions = Corporate Bonds + CP + Borrowings *2: Debt subleased from Rakuten, Inc. to Rakuten Card Co., Ltd. is part of the debt of Rakuten Card. 72
Balance Sheet Change After Equity Offering *1: Reflected debt redemption in July financed with the equity proceeds, based on the balance sheet as of Jun/15 *2: Debt = Corporate Bonds + CP + Bank Borrowings (JPY bn, IFRS) Consolidated Mar/15 Jun/15 Adjusted* 1 Total Assets 3,824 4,398 4,272 Cash and cash equivalents 445 705 579 Total Liabilities 3,383 3,739 3,613 Total Debt* 2 642 732 606 Total Equity 441 658 658 Non-consolidated Mar/15 Jun/15 Adjusted* 1 Total Assets 938 1,212 1,080 Cash and cash equivalents 33 228 96 Total Liabilities 529 608 476 Total Debt* 2 376 440 308 Total Equity 408 605 605 73
Balance of cash Dec 31, 2014 Cash Flow Breakdown: Jan - Jun, 2015 (1) Non-Financial Businesses Operating Financial Businesses Investing Financing Operating Investing Financing Equity Common Offering, M&A, etc. investments * (JPY bn) Balance of cash Jun 30, 2015 Profit (adjusted) Tax Operating CF (Exc. Tax) Other investing CF Tax Change in assets & liabilities Change in investment securities Acquisition of OverDrive, Investment to Lyft, Fanli, etc. Increase of cash and cash equivalents JPY126.1bn Increase of cash and cash equivalents JPY71.7bn * M&A and investments includes Increase in restricted deposits, Purchase of investment securities and Proceeds from sales and redemption of investment securities of Non-Financial activities in addition to Acquisition of subsidiaries in the table of page 79. 74
Cash Flow Breakdown: Jan - Jun, 2015 (2) Overview of cash flows for six months ended June 30, 2015 Consolidated Financial Non-Financial Common (JPY bn) Income before income tax 54.1 30.5 23.6 - Depreciation and amortization 19.1 6.5 12.6 - Other loss (profit) 2.4 - - 2.4 Decrease (Increase) in operating receivables 8.8 (0.0) 8.8 - Decrease (Increase) in loans for credit card biz (25.5) (25.5) - - Increase (Decrease) in deposits for banking biz 140.1 140.1 - - Decrease (Increase) in call loans for banking biz 15.0 15.0 - - Decrease (Increase) in loans for banking biz (61.5) (61.5) - - Increase (Decrease) in operating payables (18.6) (16.4) (2.2) - Decrease (Increase) in financial assets for securities biz (161.1) (161.1) - - Increase (Decrease) in financial liabilities for securities biz 154.8 154.8 - - Others (17.2) (16.8) (0.4) - Income tax paid (29.9) (5.6) (24.3) - Net cash flows from operating activities 80.6 60.1 18.0 2.4 * Breakdown between financial and non-financial businesses are based on internal estimation and not reviewed by independent auditors. 75
Cash Flow Breakdown: Jan - Jun, 2015 (3) (JPY bn) Overview of cash flows for six months ended June 30, 2015 Consolidated Financial Non-Financial Common Increase in restricted deposits (6.0) - (6.0) - Increase in time deposits (10.4) (10.4) - - Decrease in time deposits 8.4 8.4 0.1 - Purchase of property, plant and equipment (7.3) (2.0) (5.3) - Purchase of intangible assets (16.5) (7.4) (9.1) - Acquisition of subsidiaries (54.8) (6.6) (48.2) - Purchase of investment securities for banking biz (158.1) (158.1) - - Proceeds from sales and redemption of investment securities for banking biz 172.8 172.8 - - Purchase of investment securities for insurance biz (4.1) (4.1) - - Proceeds from sales and redemption of investment securities for insurance biz 2.3 2.3 - - Purchase of investment securities (49.4) (4.6) (44.8) - Proceeds from sales and redemption of investment securities 5.3 5.3 0.0 - Other payments (2.8) (0.2) (2.6) - Other proceeds 2.8 2.1 0.7 - Net cash flows from investing activities (117.7) (2.5) (115.1) - Proceeds from issuance of common stock 182.3-182.3 - Net increase (decrease) in short-term borrowings 56.0 6.3 49.7 - Increase (Decrease) in commercial papers 47.5 (5.5) 53.0 - Proceeds from long-term debt 78.0 25.0 53.0 - Repayment of long-term debt (33.6) (18.0) (15.6) - Cash dividends paid (5.9) - (5.9) - Others (10.1) (0.3) (9.9) - Net cash flows from financing activities 314.0 7.5 306.5 - Effect of change in exchange rates on cash and cash equivalents (0.9) - - (0.9) Net increase (decrease) in cash and cash equivalents 276.0 65.1 209.4 1.5 Cash and cash equivalents at beginning of the year 428.6 - - - Cash and cash equivalents at end of June 2015 704.7 - - - * Breakdown between financial and non-financial businesses are based on internal estimation and not reviewed by independent auditors. 76
Balance of Goodwill (JPY mm, IFRS) December 31, 2014 June 30, 2015 Goodwill Non-Amortizable Non-Amortizable Goodwill intangible assets intangible assets Internet Services 214,111 7,493 254,188 7,017 PRICEMINISTER S.A.S 15,679 6,528 14,683 6,114 Rakuten Kobo Inc. 20,813 34 19,805 32 VIKI, Inc. 19,961-19,028 - Ebates Group 99,493-101,061 - OverDrive Group - - 38,239 - Slice Technologies, Inc. 13,478-13,691 - Others 44,687 931 47,682 871 Internet Finance 46,971-51,308 - Rakuten Bank, Ltd. 32,886-32,886 - Others 14,084-18,422 - Others 102,564-104,125 - Viber Group 99,349-100,915 - Others 3,215-3,210 - Total 363,645 7,493 409,621 7,017 77
* Acquisition Basis Rakuten Group s CAPEX * (JPY bn, IFRS) Q1 Q2 Q3 Q4 Total Property, plant and equipment 2.06 2.65 2.66 2.63 10.01 Intangible assets 7.11 5.74 8.31 7.05 28.21 Total 9.17 8.39 10.97 9.69 38.22 Q1 Q2 Q3 Q4 Total Property, plant and equipment 4.51 5.59 Intangible assets 7.90 7.99 Total 12.41 13.58 FY2014 FY2015 78
Rakuten, Inc. Balance Sheet (Non-consolidated) (JPY bn, IFRS) Total assets Jun/15 Cash and cash equivalents 227.8 Accounts receivable - trade 58.9 Property, plant and equipment 13.5 Intangible assets 29.6 Investment securities and financial assets 853.7 Other assets 28.7 Total assets 1,212.2 Liabilities and net assets Jun/15 Accounts payable - trade 4.1 Bonds and borrowings 439.8 Other liabilities 163.7 Total liabilities 607.6 Common stock 203.4 Capital surplus 216.2 Retained earnings 187.9 Treasury stock -3.6 Other components of equity 0.7 Total net assets 604.6 Total liabilities and net assets 1,212.2 79
Other Information 80
Rakuten Ichiba: Operating Income Margin Q2/13 Q3/13 Q4/13 Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 Revenue 33,593 33,768 39,587 38,560 35,979 35,734 41,001 36,632 37,970 *1 (JPY mm) Revenue *2 on a Net basis 32,742 32,813 38,361 37,354 35,017 34,755 39,429 36,632 37,970 Operating Income 17,662 17,442 21,252 20,979 18,735 18,136 21,951 19,761 19,687 OI Margin 52.6% 51.7% 53.7% 54.4% 52.1% 50.8% 53.5% 53.9% 51.8% OI Margin on a Net basis 53.9% 53.2% 55.4% 56.2% 53.5% 52.2% 55.7% 53.9% 51.8% *1: Adjusted for reversal of point allowance due to the change of consumption tax rate *2: Change of revenue recognition at Stylife from gross basis to net basis from Q1/15 81
Overseas E-Commerce GMS Overseas GMS *1 growth jumped up due to Ebates *2 Overseas Total +46.4% YoY (FX adjusted: +29.7% YoY) Ebates *1: Overseas GMS = Taiwan Rakuten Ichiba + Tarad Premium Mall + Rakuten.com + PriceMinister + Rakuten Belanja Online + Rakuten Deutschland + Rakuten.co.uk + Rakuten Brasil + Rakuten Malaysia + Rakuten Spain + Rakuten Austria + Rakuten Singapore + Ebates *2: Ebates was consolidated from Q4/14 82
Rakuten Card: Revenues and Expenses (JPY mm) IFRS Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 YoY Total revenues 23,833 24,823 27,033 27,015 28,652 +20.2% Shopping 14,857 15,456 16,378 16,832 17,959 +20.9% Revolving 8,719 9,184 9,747 10,264 10,720 +22.9% Others 6,137 6,271 6,631 6,568 7,240 +18.0% Credit guarantee 3,223 3,369 3,547 3,639 3,886 +20.6% Cash advances 2,017 2,142 2,412 2,454 2,724 +35.1% Others 3,737 3,856 4,696 4,090 4,083 +9.2% Total operating expenses 19,609 20,070 21,495 20,870 22,447 +14.5% Personnel costs 1,807 1,859 1,707 1,894 1,972 +9.1% General expenses 11,805 11,699 12,763 *1 11,662 12,823 +8.6% Interest expenses 1,949 1,947 2,060 2,093 2,288 +17.4% Expenses related to doubtful accounts 4,019 4,533 4,956 *2 5,203 5,357 +33.3% Others 29 33 8 18 7-75.8% Operating income 4,224 4,753 5,538 6,145 6,205 +46.9% *1: From Q1/15, general expenses decreased due to adoption of IFRS15, and part of customer acquisition costs included in general expenses have been capitalized. *2: Changed standards on allowance for doubtful accounts in Q1/15. Net increase in expenses related to doubtful accounts: JPY218mm 83
Rakuten Card: Transaction Volume General services Card shopping Others Financing Card cash advances Loan cards Others * Total transaction volume (JPY mm) Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 YoY 820,081 862,218 956,541 941,546 1,014,952 +23.8% 819,338 861,399 955,722 940,697 1,014,105 +23.8% 743 819 820 849 848 +14.0% 26,030 27,787 28,005 28,368 31,951 +22.7% 25,306 26,858 27,159 27,585 31,282 +23.6% 724 930 846 783 669-7.6% 18,098 21,087 8,643 5,748 5,869-67.6% 864,209 911,092 993,189 975,663 1,052,773 +21.8% * From Q4/14: Increase due to change of contract with a tie-up credit card company 84
Rakuten Card: Loan Receivables Balance (JPY mm) General services Card shopping Financing Foreclosed credit guarantees for Rakuten Bank Super Loans Installments Revolving balance (principal) Others Card cash advances Loan cards Others Total balance Differences between J-GAAP and IFRS Amount reported in IFRS B/S *1 Credit guarantees *2 for Rakuten Bank Super Loans (Off-balance) Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 YoY 515,201 538,892 616,292 607,906 630,084 +22.3% 514,960 538,621 616,003 607,595 629,802 +22.3% 242,461 256,879 271,687 283,211 295,232 +21.8% 241 271 289 310 283 +17.3% 75,504 79,668 81,694 86,603 91,867 +21.7% 41,566 46,117 49,001 53,886 58,491 +40.7% 4,931 4,694 4,494 4,312 4,095-16.9% 29,007 28,857 28,199 28,405 29,280 +0.9% 14,149 15,427 16,321 17,672 19,416 +37.2% 28 26 24 22 17-40.0% 604,882 634,014 714,330 712,202 741,384 +22.6% -869-952 -1,082-1,146-1,271-604,013 633,062 713,249 711,056 740,112 +22.5% 246,716 259,153 269,881 286,109 297,174 +20.5% *1: Before deducting allowance for doubtful accounts *2: Balance of Rakuten Bank Super Loans guarantees by Rakuten Card 85
Rakuten Card: Allowance for Doubtful Accounts (JPY mm) Rakuten Card Normal Doubtful (4 months-and-over-delinquent) Q1/14 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 YoY 598,144 589,694 617,425 698,240 694,694 722,355 +22.5% 585,679 577,801 605,786 686,601 682,878 710,575 +23.0% 12,465 11,894 11,638 11,640 11,816 11,780-1.0% Secured 3,767 3,658 3,565 2,484 2,421 2,349-35.8% Rakuten Bank Super Loans Normal (Credit guarantees *1 ) Doubtful (Foreclosed credit guarantees) Total balance of loan receivables 250,559 260,865 274,581 286,202 303,781 316,590 +21.4% 237,612 246,716 259,153 269,881 286,109 297,174 +20.5% 12,947 14,149 15,427 16,321 17,672 19,416 +37.2% 852,471 854,217 895,570 986,926 1,000,896 1,041,294 +21.9% Allowance for doubtful accounts 20,529 20,595 21,018 20,363 21,446 22,404 +8.8% Write-off for bad debt 3,475 3,902 3,941 4,576 4,037 4,349 +11.5% Expenses related to doubtful accounts Ratio of expenses related to doubtful accounts *2 3,739 4,019 4,533 4,956 *3 5,203 5,357 +33.3% 1.82% 1.88% 2.07% 2.11% 2.09% 2.10% - *1: Balance of Rakuten Bank Super Loans guaranteed by Rakuten Card *2: Ratio of expenses related to doubtful accounts = (Expenses related to doubtful accounts) / (average of total balance of loan receivables at beginning and end of the period) * 4 *3: Changed standards on allowance for doubtful accounts in Q1/15. Net increase in expenses related to doubtful accounts: JPY218mm 86
Rakuten Bank: Revenues and Expenses (JPY mm) Revenue (IFRS, non-consolidated) Differences between J-GAAP and IFRS, and etc. Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 YoY (2) 12,370 12,760 13,680 14,270 15,250 +23.3% (1-2) 195 274 297 318 320 Ordinary income (J-GAAP, consolidated*) (1) 12,565 13,035 13,977 14,588 15,570 +23.9% Interest income 8,036 8,459 9,016 9,096 9,844 +22.5% Fees and commissions 3,830 3,868 4,216 4,429 4,592 +19.9% Other ordinary income 634 656 686 817 909 +43.3% Other income 65 52 59 105 98 +50.0% Trust fees - - - 141 128 - Ordinary expenses (J-GAAP, consolidated * ) 10,201 10,740 10,749 11,188 11,734 +15.0% Interest expenses 614 621 648 675 677 +10.2% Fees and commissions payments 4,788 4,948 5,278 5,375 5,793 +21.0% Other ordinary expenses - 319 - - - - General and administrative expenses 4,773 4,817 4,785 5,090 5,207 +9.1% Other expenses 25 36 38 48 56 +120.3% Ordinary income (J-GAAP, consolidated * ) (3) 2,364 2,295 3,228 3,400 3,836 +62.3% Differences between J-GAAP and IFRS, and etc. (3-4) 220-238 210 290 63 Operating Income (IFRS non-gaap, non-consolidated) (4) 2,145 2,533 3,018 3,111 3,773 +75.9% * From Q1/15, consolidated figures of Rakuten Bank. Up to Q4/14, non-consolidated figures of Rakuten Bank. 87
Rakuten Bank: Balance Sheets (IFRS) (JPY bn) Assets Jun/15 Invested assets 1,621.6 Deposits (paid) 516.0 Deposits with the Bank of Japan 513.1 Other deposits 2.9 Call loans 13.0 Securitized loan receivables 502.6 Rakuten Card securitized assets *1 480.4 Others 22.2 Securities 205.5 JGBs, Local Government bonds, Authority bonds 102.0 Short-term bonds 25.0 Corporate bonds, Foreign bonds 65.4 Others 13.0 Loan Receivables 384.6 Rakuten Bank Super Loan 307.2 Others 77.4 Other assets 44.2 Total assets 1,665.7 (JPY bn) Liabilities and Net Assets Jun/15 Deposits (received) 1,532.6 Ordinary Deposits *2 871.6 Time Deposits 608.6 Other Deposits *3 52.4 Other liabilities 60.1 Total Liabilities 1,592.7 Total net assets 73.0 Total liabilities and net assets 1,665.7 *1: Intercompany elimination at IFRS consolidation *2: Ordinary deposits as of end of June, 2015 include 182 billion yen, temporally deposited due to the equity finance of Rakuten, Inc. *3: Other deposits include deposits in foreign currencies and others 88
Rakuten Life Insurance: Quarterly Results and Major Indices (No. of contracts, JPY mm) IFRS Q2/14 *4 Q3/14 Q4/14 Q1/15 Q2/15 Revenue 8,225 8,905 8,133 8,047 8,165 Operating Income 62 505 461 565 432 Q2/14 Q3/14 Q4/14 Q1/15 Q2/15 No. of New Policies 14,220 13,582 60,666 75,361 91,826 Annualized Insurance Premiums of New Policies 518 539 637 837 772 No. of Policies in Force *1 652,484 647,800 688,776 742,611 813,699 Annualized Insurance Premiums in Force *1 27,464 27,474 27,548 27,644 27,726 Solvency Margin Ratio *2 MCEV *3 1,183.2% 1,247.7% 1,340.1% 1,403.1% 1,461.7% 52,910 Adjusted Net Asset Value 6,220 The Present Value of Future Profits 46,690 *1: Including policies of mutual aid association business transferred in 2008, and one-year cancer insurance for eligible Rakuten members started from Q4/14 *2: Solvency margin ratio of Q2/15 is preliminary *3: MCEV uses simplified calculation methodology *4: Q2/14 operating income includes payment of legal settlement (increase in expense) : JPY441 mm 89
Advancing Cross-use Ratio * in Japan * Purchasing ratio of Rakuten Members who have utilized two or more Rakuten services during the past 12 months of the listed month. Applicable services are limited to those which can earn Rakuten Super Points. 90
Rakuten Membership (Millions of persons) Jun/14 Mar/15 Jun/15 YoY Rakuten members(cumulative) 93.9 99.8 101.1 +7.7% Rakuten members(logged-in*) 66.4 72.3 74.4 +12.1% * Rakuten Members who logged in at least once after membership registration (excluding members who withdrew their membership) 91
Q2/15 Non-GAAP EBITDA by Segment Q2/14 Q2/15 YoY Rakuten Ichiba and Rakuten Travel Revenue 44.3 47.4 +7.1% Non-GAAP EBITDA 22.2 24.1 +8.4% Other Internet Services Revenue 36.8 55.4 +50.6% Non-GAAP EBITDA -5.0-2.9 +2.1bn Internet Finance Segment Revenue 56.8 69.6 +22.6% Non-GAAP EBITDA 12.4 19.4 +57.4% Others Segment Revenue 11.7 13.8 +17.7% Non-GAAP EBITDA 1.2-0.5-1.7bn Adjustments Revenue -11.2-13.0-1.8bn Non-GAAP EBITDA -0.7-1.3-0.6bn Consolidated Revenue 138.3 173.2 +25.2% Non-GAAP EBITDA 30.1 38.8 +29.0% * EBITDA = Operating Income + Depreciation + Amortization of intangible assets (JPY bn, IFRS) 92