Fiscal Year 2010                      Third Quarter Financial Results                                                     ...
Agenda1 Results of FY2010 Third Quarter2 Operating Results of Key Businesses   1. Rakuten Ichiba Business   2. Global E-Co...
What is Rakuten?Well-balanced and diversified business portfolio tomaximize value per customerFocus on stickiness of servi...
1 Results of FY2010 Third Quarter                                    3
Key Highlights of 2010/Q3 (1)                            Proforma* OP : JPY17.7bn, +9.4% YoYRecord High Sales,            ...
Key Highlights of 2010/Q3 (2)                          China business started in good formGlobal Expansion          Comple...
Summary of Q3/10 Financial Results                                                                                        ...
Q3/10 Results by Business Category                                                                                        ...
Group Gross Transaction Volume                                               (Incl. Credit Card and E-Money)(JPY bn)      ...
GMS ( Rakuten Ichiba and Rakuten Books)                Growth of GMS : +16.3% YoY, despite late start of winter items and ...
Travel Business                                      Gross Booking Transaction Volume      Despite lacking string of conse...
Rakuten KC                           Shopping Transaction, Revolving Balance            Shopping Transaction Volume       ...
Transaction Volume of E-Money settlementGTV Growth :+25.3% YoY(JPY bn)          Gross Transaction Volume of Edy80         ...
Project V3Strategy for improving profitability1. Improve company-wide efficiency2. Reassess unprofitable businesses and pr...
2 Operating Results of Key Businesses   1.   Rakuten Ichiba Business   2.   Global E-Commerce Business   3.   Travel Busin...
2 -1 Rakuten Ichiba Business                               15
Rakuten Ichiba* Quarterly Results      Sales Growth: +14.9% YoY, Operating Profit Growth: +9.8% YoYSales and Operatin Prof...
Rakuten Ichiba Buyer Metrics*1      Unique Buyers Growth: +18.6% YoY                      Q3/08          Q4/08          Q1...
Analysis on GMS and Performance for Q3/10Unusual late start of winter items in August andSeptember  Items such as overcoat...
Initiatives for Improving ProfitabilityFocus on effective marketing  Control point campaign and listing ads  Diversify mar...
Mid-term Measures for Accelerating GMS1. Expansion of product line-up     “Rakuten Product”, price comparison and review f...
2 -2 Global E-commerce Business                                  21
Business Models to Fit Each Country     Deploy three different models according to               market characteristics   ...
PriceMinister / Buy.com JoinedIntroduced Rakuten Shugi helping growth and improvingprofitabilityBuy.com   “Shop Together” ...
High Growth in Overseas BusinessesContinued high growth of GMS  Growth of GMS of Taiwan Rakuten Ichiba, Buy.com and  Price...
LinkShare CorporationImproved efficiency significantly after implementationof Rakuten Shugi such as KPI management  Booste...
China: Lekutian at first lookMerchant-oriented marketplace                                    26
Launch of Lekutian (Chinese E-Commerce)Service started on October 19th with nearly 2,000merchantsOffering a wide range of ...
2 -3 Travel Business                       28
Travel Business Highlights of 2010/Q3                                                                   GTV: +15.6% YoY De...
Travel Business                                                    Quarterly Results    Sales Growth: +18.0% YoY    Operat...
Rakuten Travel                      Comparison of Gross Transaction Volume                                                ...
2 -4 Credit Card Business                            32
Rakuten KC Highlights of 2010/Q3                            Card shopping transactions: +55.5%                            ...
Rakuten KC Quarterly ResultsOperating Profit Growth: +20.8%YoY Despite the drop of revenue fromfinancing(JPY bn)20        ...
Rakuten KC              Change in the Composition of Quarterly Revenue   Revenue composition change continues at high pace...
2 -5 Banking Business                        36
Rakuten Bank Highlights of 2010/Q3Ongoing Ordinary                                                 Ordinary Profit achieve...
Profit and Loss at Rakuten Bank  Basic profit growth: +62.1% YoY Ordinary Profit achieved despite  impairment loss of CMBS...
Rakuten Bank                  Real Estate-backed Securities Reduced Real Estate-backed Securities such as Private Funds an...
Number of Happy Program Members                        (Loyalty Program Linked with Rakuten ID)     Loyalty Program Member...
“Rakuten Bank Super Loan” Trends of Loan ReceivablesLoan Assets                                                           ...
2 -6 E-Money Business                        42
E-Money Business Highlights of 2010/Q3                              Increased number of service points to                 ...
E-Money Business Quarterly Results  Sales expanded steadily. However promotion for expansion oftransaction volume affected...
2 -7 Securities Business                           45
Rakuten Securities Highlights of 2010/Q3Slowdown of Stock             Commission decreased due to dullMarket Affected     ...
Rakuten Securities Quarterly Results        Revenue: -11.6%YoY, Ordinary Profit: -39.8%YoY due to dull domestic        sto...
Rakuten Securities                                        Number of General Accounts(# of Accounts) 2,500,000            1...
Rakuten Securities                                       Number of Margin Accounts(# of Accounts)                         ...
Rakuten Securities                          Trading Value of Domestic Stocks (JPY tn)                                     ...
Appendix    - Financial Condition    - Other Information                            51
Financial Condition                      52
Financial Institution Borrowing Trend Increased borrowing at Rakuten KC due to expansion of card shopping business(JPY bn)...
Rakuten, Inc. ( Non-consolidated)                                      Debt and Cash                     Debt Balance and ...
Rakuten Group : Balance Sheets                                               (As of Sep 30, 2010)Rakuten Group (Consolidat...
Rakuten, Inc. (non-consolidated) : B/S,P/L                                                                                ...
Rakuten KC Balance sheet Balance sheet (As of Sep 30, 2010)                                                  (JPY bn)CURRE...
Rakuten Bank : B/S, P/L ( Consolidated )          Balance Sheets (As of Sep 30, 2010)                                     ...
Cash Flow Breakdown : Jan-Sep, 2010        Beginning                                                                      ...
Breakdown of Cash Flow by Financial Businesses                       and Non-financial Businesses : Jan-Sep, 2010 (1)Break...
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Q3PPT_EN1118

  1. 1. Fiscal Year 2010 Third Quarter Financial Results November 9, 2010 Rakuten, Inc.This presentation includes forward-looking statements relating to our future plans, targets, objectives, expectations and intentions. The forward-looking statements reflectmanagement’s current assumptions and expectations of future events, and accordingly, they are inherently susceptible to uncertainties and changes in circumstances and arenot guarantees of future performance. Actual results may differ materially, for a wide range of possible reasons, including general industry and market conditions and generalinternational economic conditions. In light of the many risks and uncertainties, you are advised not to put undue reliance on these statements. The management targetsincluded in this presentation are not projections, and do not represent management’s current estimates of future performance. Rather, they represent targets thatmanagement strive to achieve through the successful implementation of the Company’s business strategies. The Company may be unsuccessful in implementing its businessstrategies, 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.
  2. 2. Agenda1 Results of FY2010 Third Quarter2 Operating Results of Key Businesses 1. Rakuten Ichiba Business 2. Global E-Commerce Business 3. Travel Business 4. Credit Card Business 5. Banking Business 6. E-money Business 7. Securities Business Appendix - Financial Condition - Other Information 1
  3. 3. What is Rakuten?Well-balanced and diversified business portfolio tomaximize value per customerFocus on stickiness of services through synergiesStrong operational and innovative capabilitiesHigh potential R&D (Rakuten IT)Enhancing expertise in mobile and smart phonetechnologiesE-commerce focusing on “social shopping” ”verticals”“flash marketing” and “logistics” 2
  4. 4. 1 Results of FY2010 Third Quarter 3
  5. 5. Key Highlights of 2010/Q3 (1) Proforma* OP : JPY17.7bn, +9.4% YoYRecord High Sales, Proforma* EBITDA :Operating Profit, JPY24.0bn, +10.0% YoYOrdinary Profit and Group gross transaction volumeEBITDA for the reached JPY682.8bnThird Quarter *Adjusted CMBS loss GMS growth of Ichiba reached +16.3%Domestic YoY despite late start of winter itemsBusinesses and swine flu factorContinued Healthy Travel and Portal & Media segmentsGrowth achieved high OP growth, +20.0% YoY and +54.9% YoY, respectively 4
  6. 6. Key Highlights of 2010/Q3 (2) China business started in good formGlobal Expansion Completed acquisitions of Buy.com and PriceMinisterof E-Commerce At both companies GMS grew strongly and profitability improvedCredit Card Progressed in business modelBusiness Regained transformation to credit card shoppingProfit Growth oriented businessMomentum OP Growth : +20.8% YoY 5
  7. 7. Summary of Q3/10 Financial Results (JPY bn) Q3/09(Jul-Sep) Q3/10(Jul-Sep) Proforma*1 Proforma*1 YoYSales 77.2 88.4 14.5%Operating Profit 16.2 17.7 9.4%Operating Profit Margin 21.0% 20.1% -Ordinary Profit 15.9 17.3 8.7%EBITDA*2 21.9 24.0 10.0%*1 : Proforma figures are based on adjustment for CMBS loss Non-adjusted (JGAAP) figures in Q3/10 : Operating profit JPY 15.9bn, Ordinary profit JPY15.5bn, EBITDA JPY 22.3bn*2 : EBITDA = Ordinary Profit + Interest expense + Depreciation and Amortization of goodwill - Effect of securitizing loan receivables 6
  8. 8. Q3/10 Results by Business Category (JPY bn) Q3/09 (Jul-Sep) Q3/10 (Jul-Sep) *1 EBITDA *1 EBITDA Sales EBITDA Sales YoY EBITDA YoY Margin Margin E-CommerceInternet Travel Net *2 36.5 13.1 35.9% 45.6 24.8% 14.8 12.8% 32.5%Services Portal and Gross Media 41.6 13.1 31.5% 51.6 24.1% 14.8 12.8% 28.7% (accounting) Credit CardInternet Banking Securities 29.5 5.4 18.3% 32.5 10.2% 4.4 -18.4% 13.6%Finance E-Money*3 TelecommunicationOthers Professional sports 9.8 1.1 11.7% 8.8 -9.8% 1.1 3.8% 13.4%Corporate and Internal elimination -3.7 1.2 - -4.5 - 1.8 - - *1: EBITDA=Ordinary Profit +Interest expense + Depreciation and Amortization of goodwill-Effect of securitizing loan receivables *2 Reference: Calculated based on Gross Profit for Package Media (inventory-type business). 7 *3: Started consolidation with bitWallet, Inc. in 2010 Q1
  9. 9. Group Gross Transaction Volume (Incl. Credit Card and E-Money)(JPY bn) Growth of GMS of domestic E-Commerce and Travel: +15.7% YoY700.0 682.8 Edy 649.8 68.5 Transaction 588.3 64.1 Volume*1600.0 530.5 59.0 Credit Card500.0 473.6 Shopping 259.5 450.3 238.3 Transaction 418.6 194.9 Volume*2 404.6 207.8400.0 371.1 166.9 354.3 155.7 +55.5%YoY 332.5 329.7 139.2 139.8 286.8 123.7300.0 278.4 115.3 256.9 102.1 104.2 Domestic E- 84.9 89.3 Commerce*3 78.6 and Travel*4200.0 335.5 347.3 354.7 321.4 279.3 294.5 306.7 +15.7%YoY 264.7 230.3 239.0 247.4 225.5100.0 178.2 193.5 197.4 Q1/07 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10*1:Edy Transaction Volume= Amount settled by E-Money “Edy″ (including mobile and cards)*2:Credit Card Shopping Transaction Volume= Shopping Transaction Volume of credit cards issued by Rakuten KC (including Rakuten group service use)*3: Domestic E-Commerce =Mall (Fixed-price, Group purchase), Mobile, Business, Golf, Books, Auction (Flea market), download, tickets, Internet Supermarket, CheckOut, Off-track betting, toto(Q1/09-) *5, ShowTime (Q1/09-) *5, Media rental (Q1/08-) *5*4:Travel (before cancellation, excl. tax) = Domestic/international accommodation booking, International air tickets, Domestic/international dynamic packaging, Domestic 8bus service, Rental car service*5 Retroactively added to GMS since service start
  10. 10. GMS ( Rakuten Ichiba and Rakuten Books) Growth of GMS : +16.3% YoY, despite late start of winter items and “swine flu” factor Rate of growth became higher in October than Q3250 222.4 GMS 233.1 226.4 (JPY bn) 216.5200 191.3 GMS* 194.2 194.3 181.4 158.7 159.9 158.7 152.0150 127.4 130.5 129.4 1 yr Moving Average 120.1 101.5 99.8100 95.6 91.5 3% +16. 70.5 71.1 63.1 63.650 43.1 45.6 36.9 37.9 26.0 27.3 21.4 15.0 16.116.1 16.9 22.1 10.2 8.7 11.6 0 Q1/01 Q2/01 Q3/01 Q4/01 Q1/02 Q2/02 Q3/02 Q4/02 Q1/03 Q2/03 Q3/03 Q4/03 Q1/04 Q2/04 Q3/04 Q4/04 Q1/05 Q2/05 Q3/05 Q4/05 Q1/06 Q2/06 Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 *: GMS =Mall ( Fixed-price, Group purchase), Mobile (Fixed-price, Group purchase) and Rakuten Books 9
  11. 11. Travel Business Gross Booking Transaction Volume Despite lacking string of consecutive holidays, strong summer demand with successful campaigns led to higher Travel GTV* Growth: +15.6% YoY GTV Booked Rooms (JPY bn) (Million nights) GTV Booked Rooms 103.0 14 100 89.1 90.8 81.8 12 80 75.3 74.9 71.4 10 64.5 64.2 65.8 59.6 60.2 57.6 9.1 60 53.7 8 8.3 8.1 8.3 48.9 7.7 7.2 7.1 7.3 6.6 6.7 6.8 6 40 6.3 6.3 5.9 .6% +15 5.7 G TV 4 20 2 0 0 Q1/07 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10* Travel GTV = Booking base (before cancellation , excl. tax) 10 = Domestic / International accommodation booking, International air tickets, Domestic/ International DP, Domestic bus, Rental car service
  12. 12. Rakuten KC Shopping Transaction, Revolving Balance Shopping Transaction Volume Shopping Revolving Balance(JPY bn) (JPY bn)300 100 259.5 88.4 90250 238.3 79.9 80 207.8 71.3 194.9 70200 63.1 166.9 60 55.1150 50 40100 Y Y Yo 30 Yo % % 5.5 0.4 +5 20 +6 50 10 0 0 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 11
  13. 13. Transaction Volume of E-Money settlementGTV Growth :+25.3% YoY(JPY bn) Gross Transaction Volume of Edy80 Consolidation Started 68.570 64.1 59.3 59.060 54.6 51.5 53.15040 oY30 +25. 3% Y2010 0 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 12
  14. 14. Project V3Strategy for improving profitability1. Improve company-wide efficiency2. Reassess unprofitable businesses and projects3. Cut overhead costs4. Focus on effective marketing 13
  15. 15. 2 Operating Results of Key Businesses 1. Rakuten Ichiba Business 2. Global E-Commerce Business 3. Travel Business 4. Credit Card Business 5. Banking Business 6. E-money Business 7. Securities Business 14
  16. 16. 2 -1 Rakuten Ichiba Business 15
  17. 17. Rakuten Ichiba* Quarterly Results Sales Growth: +14.9% YoY, Operating Profit Growth: +9.8% YoYSales and Operatin Profit Operating Profit Margin (JPY bn) (%) 25.0 57% 60.0% 54% 55% 54% 51% 52%50% 50% 49% 50% 48% 47% 48% 49% 48% 48% 50.0% 46% 45% 22.0 20.0 43% 43% 41% 18.2 21.5 40% 39% 40% 41% 20.4 21.2 40% 40% 40% 18.5 38% 18.4 40.0% 15.1 17.2 les Y 15.0 Sa %Yo 15.0 33% 31% 34% .9 33% 15.4 +14 30% 12.3 12.4 13.8 11.5 11.9 30.0% 26% 10.8 10.5 9.7 9.8 11.7 10.0 10.2 10.0 9.5 9.3 9.0 8.8 8.3 7.6 20.0% 6.7 6.9 6.8 6.3 5.5 5.6 5.7 5.6 5.2 6.0 5.0 4.8 5.0 4.1 4.3 4.2 3.9 3.9 3.4 3.6 OP YoY 10.0% 2.9 2.7 2.4 2.6 2.7 2.1 2.3 2.6 +9 .8% 1.4 1.7 1.9 1.3 1.4 1.6 1.7 0.8 0.7 0.8 0.9 0.3 0.5 0.6 0.0 0.0% Q1/02 Q1/03 Q1/04 Q1/05 Q1/06 Q1/07 Q1/08 Q1/09 Q1/10 Sales Operating Profit Operating Profit Margin Operating Profit Margin (12 months MV) *: From Q1/02 to Q4/04, financial data of Rakuten, Inc. excluded Portal and Media businesses 16
  18. 18. Rakuten Ichiba Buyer Metrics*1 Unique Buyers Growth: +18.6% YoY Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Unique *2 Buyers 6.37 7.03 7.17 7.72 7.75 8.54 8.60 9.14 9.19 (million) # of Transactions 20.65 24.19 24.05 27.11 26.43 31.02 30.27 33.26 32.92 (million) Average # of Transactions 3.24 3.43 3.35 3.50 3.41 3.63 3.51 3.63 3.58 per Buyer Average Priceper Transaction 7,505 7,843 7,346 6,970 6,998 7,267 6,908 6,585 6,503 (JPY)Quarterly GMS *3 per Buyer 24,327 26,969 24,637 24,449 23,868 26,390 24,291 23,940 23,291 (JPY) *1: Based on e-mail address: Fixed-Price and Group Buy introduced in Rakuten Ichiba and mobile *2: Unique Buyers: Number of buyers sorted by e-mail address with purchasing records during the listed 3 month period. *3: Quarterly GMS Per Buyer = GMS ( Rakuten Ichiba) / Unique Buyers 17
  19. 19. Analysis on GMS and Performance for Q3/10Unusual late start of winter items in August andSeptember Items such as overcoats, boots, and heating devices were affectedSwine flu impact in previous year (JPY1.1 bn in Q3/09)Ongoing stable, high-paced growth in GMS In October, GMS growth became higher than Q3/10Reasons of change in OP margin Increase in point costs due to strategic marketing campaign Increase in costs such as administrative and development costs for domestic and global expansion 18
  20. 20. Initiatives for Improving ProfitabilityFocus on effective marketing Control point campaign and listing ads Diversify marketing methodsOverhead cost control under Project V3 Cost control against sales growth Reassess priority of development projects 19
  21. 21. Mid-term Measures for Accelerating GMS1. Expansion of product line-up “Rakuten Product”, price comparison and review function based on type of products for multiple merchants Increasing sign-ups from large-sized enterprises Strengthening support for fashion brands2. Diversify marketing methods Rakupon, a new coupon service launched successfully Flash marketing using twitter and e-mail Private sales for loyal customers Rakuten Fulfillment Center3. RFC (Rakuten Fulfillment Center) opened 20
  22. 22. 2 -2 Global E-commerce Business 21
  23. 23. Business Models to Fit Each Country Deploy three different models according to market characteristics BtoBtoC Model Merchants support, contribution to local marketsSafe/Secure CtoC Model 1st Party Sales Escrow, Counterfeit items guaranteed compensation product quality Effective for CtoC and/or Effective for emerging markets in growing markets 22
  24. 24. PriceMinister / Buy.com JoinedIntroduced Rakuten Shugi helping growth and improvingprofitabilityBuy.com “Shop Together” a social shopping function well accepted Alliances with large-scale companies progressingPriceMinister Expanding E-Commerce business into countries other than France Travel comparison site growingHeld “Rakuten Federation Technical Meeting” Multi-national collaboration on service and technology development 23
  25. 25. High Growth in Overseas BusinessesContinued high growth of GMS Growth of GMS of Taiwan Rakuten Ichiba, Buy.com and PriceMinister achieved +20% to +35% YoY in Sep 2010Improved profitability strongly Thanks to top-line growth and KPI management 24
  26. 26. LinkShare CorporationImproved efficiency significantly after implementationof Rakuten Shugi such as KPI management Boosted profitability over 1.5 times from Q3/09 to Q3/10Enhanced service delivery and client satisfactionFaster development of new features and technologyofferings Instituted agile technology development 25
  27. 27. China: Lekutian at first lookMerchant-oriented marketplace 26
  28. 28. Launch of Lekutian (Chinese E-Commerce)Service started on October 19th with nearly 2,000merchantsOffering a wide range of goods apparel, accessories, furniture, home electronics, digital equipment, baby goods, and cosmeticsVarious settlement methods are available“Genuine Only” mall with anti-counterfeit measuresbacked by expertise of PriceMinister in this areaLocalized functions such as messenger and escrowservices offered by Lekutian and Baidu 27
  29. 29. 2 -3 Travel Business 28
  30. 30. Travel Business Highlights of 2010/Q3 GTV: +15.6% YoY Despite lacking High growth of GTV consecutive holidays, summer demand and bookings grew steadily JAL RAKU PACK released (Sep 1) Combination of about 900 flights and about Expansion of Dynamic Packages 20,000 hotels is available Wide variety of JAL routes including remote destinations Accelerate enhancement of Smartphone usability Usability enhancement Travel Android Application (Aug 19) and promotions for iPhone Application “Tabimemo” (Sep 21) new users Large-scale campaigns with hotels* Dynamic Package: Package Reservations system which allows users to combine airline tickets and hotels of their choice. 29
  31. 31. Travel Business Quarterly Results Sales Growth: +18.0% YoY Operating Profit Growth: +20.0% YoY(JPY mm)8,000 7,0727,000 5,9896,000 5,322 5,157 5,1485,000 4,723 4,387 4,310 4,223 0% s +18.4,000 3,705 3,733 Sale 3,440 2,8683,000 2,439 2,378 2,273 2,070 2,040 1,812 1,7422,000 1,327 1,421 % +20.0 rofit1,000 ting p Opera 0 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Sales Operating Profit 30
  32. 32. Rakuten Travel Comparison of Gross Transaction Volume (JPY bn) Company Name GTV YoY GTV YoY (Domestic) (Incl. International)JTB Group 218.1 +3% 346.8 +9%Kinki Nippon Tourist 60.4 +4% 97.4 +12%Nippon Travel Agency 56.7 +1% 87.2 +11%Rakuten Travel 52.6 +21% 55.7 +22%ANA Sales 37.2 -2% 42 -1%HANKYU TRAVEL 35.5 +7% 101.8 +17%INTERNATIONALH.I.S 0.3 - 64.3 +18%*Source: 20th August 2010, Nikkei, Data: Apr-Jun 2010 31
  33. 33. 2 -4 Credit Card Business 32
  34. 34. Rakuten KC Highlights of 2010/Q3 Card shopping transactions: +55.5% YoYProgress in Business Shopping revolving balance: +60.4%Model Transformation YoY Operating profit growth: +20.8% YoY Added Edy function to Rakuten CardCustomer Service Introduced iPhone application for cardImproved expenditure management, first of its kind in the credit card industryCollection Early stage collection absorbed thePerformance instability caused by a new regulation 33
  35. 35. Rakuten KC Quarterly ResultsOperating Profit Growth: +20.8%YoY Despite the drop of revenue fromfinancing(JPY bn)20 Revenue Operating Profits 16.4 16.6 15.7 15.5 14.6 15.015 14.210 YoY fit +20.8% ting Pro Opera 5 1.1 0.8 1.0 1.2 1.2 0.3 0.4 0 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 34
  36. 36. Rakuten KC Change in the Composition of Quarterly Revenue Revenue composition change continues at high pace.(JPY bn)20.0 16.4 16.6 15.7 15.516.0 14.7 15.1 14.6 14.3 13.9 14.1 Card Shopping12.0 +36.2%YoY 5.0 5.6 6.5 8.1 9.0 10.4 11.0 6.7 7.5 9.4 8.0 3.5 3.5 3.3 3.0 2.8 2.6 2.5 Loan Card 2.3 2.2 2.0 -22.1%YoY 4.0 5.4 5.0 4.8 4.5 4.3 4.4 4.3 3.9 3.8 Cash Advance 3.5 Transaction 0.0 -19.7%YoY Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10*: Refer to appendix for the detail of revenue 35
  37. 37. 2 -5 Banking Business 36
  38. 38. Rakuten Bank Highlights of 2010/Q3Ongoing Ordinary Ordinary Profit achieved despiteProfit at Rakuten impairment loss of CMBS (approx. JPY 1.8bn)Bank Reduced Real Estate-backed Securities such as Private Funds and CMBS steadily Steady increase in Members of Happy Program (ID link with“Basic profit*1” Rakuten Member) exceeds 1.4mthanks to Groupsynergy Basic profit*1 growth: +62.1% YoY, thanks to settlement income Steady growth of loan assets for “Rakuten Healthy growth of Bank Super Loan” : +13.6% YoYloan business Decrease in allowance ratio*:Basic profit = Income or loss deducted from income (loss) due to changes in market price or sales of investment products. Income or loss from main business of Rakuten Bank excludes temporary evaluation gains (losses) such as investment. 37
  39. 39. Profit and Loss at Rakuten Bank Basic profit growth: +62.1% YoY Ordinary Profit achieved despite impairment loss of CMBS (JPY mm) 1,500 Basic Profit* 1,312 Rakuten Bank Ordinary Profit 1,000 809 % YoY +62.1 500 144 0 -500 -571 09/3Q 10/3Q*:Basic profit = Income or loss deducted from income (loss) due to changes in market price or sales of investment products. Income or loss from main business of Rakuten Bank excludes temporary evaluation gains (losses) such as investment. 38
  40. 40. Rakuten Bank Real Estate-backed Securities Reduced Real Estate-backed Securities such as Private Funds andCMBS steadily(JPY bn) 45.0 40.0 39.4 CMBS (with market 35.0 value) 30.0 19.3 Private funds (Real estate-backed 25.0 securities) 20.0 17.4 15.0 10.7 10.0 20.1 5.0 6.7 0.0 Dec 31 2008 Sep 30 2010 39
  41. 41. Number of Happy Program Members (Loyalty Program Linked with Rakuten ID) Loyalty Program Members surpassed 1.4 million, increased usage by Rakuten members# of person (million) 1.6 1.47 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 Ju 9 Ju 0 Au 9 Se 9 D 9 Au 0 Se 0 M 9 M 0 09 Fe 0 10 M 9 9 M 0 0 O 9 O 0 9 9 0 /0 /1 0 /0 1 r/ 0 r/ 1 l/0 l/1 0 /0 /1 1 0 1 1 /0 /0 /1 g/ g/ b/ b/ p/ p/ n/ n/ n/ ay ay ov ar ar 40 ec Ju Ju ct ct Ap Ap Ja Fe N
  42. 42. “Rakuten Bank Super Loan” Trends of Loan ReceivablesLoan Assets Total Members (JPY bn) (persons)120 113.5 180,000 107.7 97.7 99.9 96.6 100.6 160,000100 134,681 138,549 128,143 140,000 115,555 120,558 111,543 80 120,000 100,000 60 80,000 40 60,000 40,000 20 20,000 0 0 Jun/09 Sep/09 Dec/09 Mar/10 Jun/10 Sep/10 *1 *1 Loan receivables Total members Jun/09 Sep/09 Dec/09 Mar/10 Jun/10 Sep/10Allowance ratio*2 2.85% 2.91% 3.02% 2.88% 2.79% 2.65% *1: Loan Receivables, Total Members and Allowance are total of Rakuten Bank and Rakuten Credit *2: Allowance ratio (Allowance for doubtful account) ratio: balance of allowance/balance of loan assets 41
  43. 43. 2 -6 E-Money Business 42
  44. 44. E-Money Business Highlights of 2010/Q3 Increased number of service points to 240,000:+55.8% YoYIncreasing ServicePoints and Edy GTV GTV growth: +25.3%YoY Thanks to growing transactions at convenience store chains Issued Edy-embedded Rakuten Card (started Sep 10)Collaboration withinRakuten Group Improved usability of charge function of mobile Edy for Rakuten members 43
  45. 45. E-Money Business Quarterly Results Sales expanded steadily. However promotion for expansion oftransaction volume affected profitability temporarily Trends of Sales and Operating Profit * (JPY mm) 1,500 Consolidation Started 1,239 1,291 1,178 1,161 1,166 1,053 1,066 1,000 500 0 -191 -159 -262 -255 -288 -245 -500 -778 -1,000 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Net sales Operating Income and loss*: Figures until Q4/09 are non-consolidated results of bitWallet, Inc. Figures since Q1/10 are E-Money business segment of Rakuten group consolidatedresults (amortization of goodwill included) 44
  46. 46. 2 -7 Securities Business 45
  47. 47. Rakuten Securities Highlights of 2010/Q3Slowdown of Stock Commission decreased due to dullMarket Affected domestic stock marketsFinancial FX business shrank due to tighteningPerformance leverage regulation Started selling JGBs for individualIncrease in Product investorsLine-up Line-up of investment trust funds exceeded 1,000 CME and SGX connection to provideExpanded OverseasProducts global indices futures and commodities futures 46
  48. 48. Rakuten Securities Quarterly Results Revenue: -11.6%YoY, Ordinary Profit: -39.8%YoY due to dull domestic stock markets(JPY mm) (%)7,000 40% 6,390 6,043 5,694 5,900 35%6,000 5,379 5,217 5,048 30%5,000 31.4% 33.1% 29.2% 25%4,000 22.3% 20% 21.3%3,000 19.9% 17.0% 15% 2,000 2,0072,000 1,723 10% 1,199 1,211 1,038 8591,000 5% 0 0% Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Revenues Ordinary profit Ordinary profit margin 47
  49. 49. Rakuten Securities Number of General Accounts(# of Accounts) 2,500,000 1.5% 10/Q2 2,128,426 10/Q3 2,097,177 Q o Q(%) 2,000,000 General General Accounts No.3 Accounts No.2 -2.5% Growth No.1 1,500,000 1,283,440 2.7% 1,316,445 0.7% 0.9% 1,022,989 996,396 799,939 1,000,000 715,421 794,000 708,753 500,000 0 SBI Rakuten Matsui Kabu.com Monex 48
  50. 50. Rakuten Securities Number of Margin Accounts(# of Accounts) 1.3% 250,000 221,834 10/Q2 218,993 10/Q3 QoQ(%) 200,000 Growth No.1 2.1% 150,000 0.9% 124,553 122,027 116,078 115,039 -4.1% 1.5% 100,000 75,106 74,406 78,292 73,341 50,000 0 SBI Rakuten Matsui Kabu.com Monex 49
  51. 51. Rakuten Securities Trading Value of Domestic Stocks (JPY tn) 50% -32.4%14.0 10/Q2 12.9 10/Q3 40% Q o Q(%)12.0 Trading Value No.210.0 20% 8.7 10% 8.0 -29.9% 0% 6.0 5.3 -34.0% -29.8% 27.7% ▲ 10% 3.7 4.0 2.9 ▲ 20% 2.3 2.5 1.9 1.6 1.8 2.0 ▲ 30% 0.0 ▲ 40% SBI Rakuten Matsui Kabu.com Monex 50
  52. 52. Appendix - Financial Condition - Other Information 51
  53. 53. Financial Condition 52
  54. 54. Financial Institution Borrowing Trend Increased borrowing at Rakuten KC due to expansion of card shopping business(JPY bn) Debt from Outside Financial Institutions 500 425.2 432.0 400 384.1 329.9 300 200 100 0 Dec/09 Mar/10 Jun/10 Sep/10 *Debt from outside financial institutions = bond + CP + short-term debt + long-term debt 53
  55. 55. Rakuten, Inc. ( Non-consolidated) Debt and Cash Debt Balance and Cash and Deposits Balance of Rakuten, Inc. 146.2 145.3 Lending(JPY bn) to KC M&A126.0 125.8 Working 60.0 60.0 capital 60.0 60.0 NCD Cash and Deposits 49.7 61.8 56.4 40.3 41.4 38.1 50.3 16.0 32.5 33.0 24.3 24.4 24.4 28.9 8.7 4.2 15.7 17.2 5.1 4.5Borrowing Cash and Borrowing Cash and Borrowing Cash and Borrowing Cash and Deposits Deposits Deposits Deposits Dec/09 Mar/10 Jun/10 Sep/10 54
  56. 56. Rakuten Group : Balance Sheets (As of Sep 30, 2010)Rakuten Group (Consolidated) (JPY bn) Cash and Graph legend deposits Liabilities from 75.2 financial institution Liabilities from Cash and financial institution deposits (outside the group) Other 432.0 Other Liabilities Assets Deposit Total Net Assets At Banking Other Business Rakuten Bank Assets *JPY17bn of borrowing at *JPY95.5bn of borrowing (Consolidated) 1,838.3 699.3 Rakuten, Inc. Rakuten Securities, Inc. is at Rakuten KC is from 16.5 10.0 (Non-Consolidated) from Rakuten, Inc Rakuten, Inc Liabilities at Securities Business 4.5 Rakuten Securities Rakuten KC 256.7 16.1 60.1 31.2 Other 145.3 Liabilities 704.7 766.3 120.1 286.4 539.0 Total Net 324.5 371.0 387.1 61.8 40.9 Assets 294.5 278.2 238.9 32.4 32.0 27.2 Total Assets Total Assets Total Assets Total Assets Total Assets 1913.6 543.6 387.2 418.4 782.9 * Rakuten Securities, Rakuten KC, Rakuten, Inc. (non-consolidated) and Rakuten Bank also including internal elimination. * Liabilities from financial institution (outside the group) = Corporate bonds + CP + Short-term borrowings + Long-tem borrowings 55
  57. 57. Rakuten, Inc. (non-consolidated) : B/S,P/L Income Statements Balance Sheets (As of Sep 30, 2010) (Three months ended Sep 30, 2010 ) (JPY bn; Amounts Less Than 0.1 Billion Omitted) (JPY bn; Amounts Less Than 0.1 Billion Omitted)CURRENT ASSETS 87.5 CURRENT LIABILITIES 178.3 Sales 32.9  Cash and deposits 4.5 Account payable-trade 2.7 Cost of Sales 6.9  Accounts receivable-trade 26.2 Short-term debts 54.6 Gross Profit 25.9  Other current assets 57.2 Accounts payable 12.4 Operating Expense 15.7  Allowance for doubtful accounts - 0.5 Income taxes payable 7.6 Personnel costs 6.2   Advance receipt 4.9 Advertising and sales promotion 4.3   Reserve for point program 11.3 Depreciation 1.4 Other current liabilities 84.5 Communication and maintenance 1.0 LONG-TERM LIABILITIES 87.0 Outsourcing 3.4 TOTAL LIABILITIES 265.4 Others - 0.8NONCURRENT ASSETS 456.1 SHAREHOLDERS EQUITY 276.8 Operating Profit 10.2 Property, plant and equipmen 5.8   Capital stock 107.6 Non-Operating Profit 0.3 Intangible assets 12.6 Capital surplus 112.8 Non-Operating Expense 0.4 Investment and other assets 437.6 Retained earnings 56.3 Ordinary Profit 10.1 (Allowance for doubtful accounts) - 0.3 Treasury stock - 0.0 Extraordinary profit - 0.0 VALUATION AND (Loss on investment) - 1.4 0.4 Extraordinary loss 0.5 TRANSLATION ADJUSTMENTS Valuation difference on available- 0.4 Net income before tax 9.5 for-sale securities Subscription rights to shares 0.8 Income taxes-current 4.8 TOTAL NET ASSETS 278.2 Income taxes-deferred - 0.5TOTAL ASSETS 543.6 TOTAL LIABILITIES AND NET ASSETS 543.6 Net Income 5.3 56
  58. 58. Rakuten KC Balance sheet Balance sheet (As of Sep 30, 2010) (JPY bn)CURRENT ASSETS 374.7 CURRENT LIABILITIES 255.6 Account payable; guarantee Cash and cash equivalents 31.2 2.5 contracts Installment accounts receivable 270.8 Short-term borrowings 202.2 Installment accounts receivable; 2.5 Other current liabilities 50.9 guarantee contract Beneficial interest in securitized asse 40.3 Other current assets 55.3 LONG-TERM LIABILITIES 130.7 Allowance for doubtful accounts -25.7 Long-term borrowings 122.3 Allowance for loss on 7.3 investment repayment Other long-term liabilities 1.0FIXED ASSETS 43.7 TOTAL LIABILITIES 386.4 Property, plant and equipment 12.2 SHAREHOLDERS EQUITY 31.9 Land and buildings 11.6 Common stock 3.0 Other tangible fixed assets 0.6 Capital surplus 41.1 Intangible fixed assets 2.5 Retained earnings 3.5 Investment and other assets 30.7 Treasury stock -15.7 VALUATION, TRANSLATION Allowance for doubtful accounts -1.8 0.0 ADJUSTMENT AND OTHERS TOTAL NET ASSETS 32.0 TOTAL LIABILITIES AND NET TOTAL ASSETS 418.4 418.4 ASSETS 57
  59. 59. Rakuten Bank : B/S, P/L ( Consolidated ) Balance Sheets (As of Sep 30, 2010) Income Statements (Three months ended Sep 30, 2010 ) (JPY bn; Amounts Less Than 0.1bn Omitted)Cash and deposits 16.5 Deposits 704.7 (JPY bn; Amounts Less Than 0.1 bn Omitted)Call loans 77.0 Ordinary Deposits 303.2Monetary claims bought 179.6 Time Deposits 330.9 Ordinary income 8.8Money held in trust 11.7 Other Deposits 70.5 Interest income 4.5Securities 341.9 Borrowed money 14.5 (Interest on loans and discounts) 2.6Allowance for investment - Bond payable 10.0 (Interest and dividends on securities 1.0Loans and bills discounted 118.5 Other liabilities 19.2 Fees and commissions 3.2Foreign exchanges 0.5 Provision for bonuses 0.1 Other ordinary income 0.9Other assets 30.3 Reserves for points 0.2 Other income 0.1Tangible fixed assets 0.5 Contingency reserve 0.3 Ordinary expenses 8.7Intangible fixed assets 4.8 Reserves under the special laws 0.0 Interest expenses 0.9Deferred tax assets 0.0 Deferred tax liabilities 2.8Customers liabilities for 3.5 Acceptances and guarantees 3.5 (Interest on deposits) 0.7Allowance for loan losses -2.3 TOTAL LIABILITIES 755.6 Fees and commissions payments 2.3 Capital stock 23.4 Other ordinary expenses 1.8 Capital surplus - General and administrative expenses 3.6 Retained earnings 3.0 Other expenses -0.0 Treasury stock -4.1 Ordinary profit 0.1 Shareholders’ equity 22.3 Extraordinary Income - Valuation difference on available-for- Extraordinary losses 0.0 sale securities 4.6 Deferred gains or losses on hedges - Income before income taxes 0.1 Valuation and translation adjustments 4.6 Income taxes-current 0.0 Minority interests 0.2 Income taxes-deferred 0.0 TOTAL NET ASSET 27.2 TOTAL LIABILITIES AND Minority interests in income -0.0TOTAL ASSETS 782.9 NET ASSETS 782.9 Net income 0.1 58
  60. 60. Cash Flow Breakdown : Jan-Sep, 2010 Beginning Investments End Non-Financial Businesses Financial Businesses in Other (Dec 31, 2009) (Sep 30, 2010) Operating Financing Operating Financing subsidiaries(JPY bn) Investing*1 Investing 160 8.0 140 20.7 2.8 16.5 51.9 45.7 120 78.4 77.4 5.3 100 Tax , Other 80 1.2 9.1 Buy.com Operating CF 60 Tax , Other PriceMinister (Exc. Tax and Other) 112.7 103.6 Asset Increase & Rakuten Bank Liability Decrease Others 40 Profit (adjusted) Increase of Increase of 20 cash and cash equivalents cash and cash equivalents JPY38.6bn JPY17.0bn *1 : Excluding “Investments in subsidiaries”(JPY51.9bn) from investing activities in Non-Financial Businesses(JPY54.8bn). 59
  61. 61. Breakdown of Cash Flow by Financial Businesses and Non-financial Businesses : Jan-Sep, 2010 (1)Breakdown by financial businesses and non-financial businesses are based on internal estimation and non-audited. (JPY bn) Non- Overview of Cash flow statements for nine months ended September 30, 2010 Consolidated Financial Other FinancialⅠ Net cash provided by (used in) operating activities Income before income taxes and minority interests 43.0 6.6 36.3 - Amortization of goodwill 5.1 2.3 2.8 - Depreciation and amortization 12.1 5.3 6.7 - Loss (gain) on valuation of securities for banking business 2.4 2.4 - - Loss (gain) on sales of securities for banking business (0.0) (0.0) - - Increase (decrease) in allowance for doubtful accounts (6.1) (5.8) (0.3) - Increase (decrease) in provision for loss on interest repayment (2.9) (2.9) - - Other loss (gain) 5.0 - - 5.0 Decrease (increase) in notes and accounts receivable-trade 0.8 0.0 0.7 - Decrease (increase) in accounts receivable-installment (18.2) (18.2) - - Decrease (increase) in beneficial interests in securitized assets 1.3 1.3 - - Increase (decrease) in deposits for banking business 1.0 1.0 - - Decrease (increase) in call loans for banking business (27.0) (27.0) - - Decrease (increase) in cash loans and bills discounted for banking business (16.6) (16.6) - - Increase (decrease) in notes and accounts payable-trade (3.6) (1.4) (2.2) - Increase (decrease) in accounts payable-other and accrued expenses (4.2) (5.2) 0.9 - Increase (decrease) in accounts payable-other and accrued expenses (3.0) (3.0) - - Increase (decrease) in operating payable for securities business (33.9) (33.9) - - Increase (decrease) in loans payable secured by securities for securities business 23.3 23.3 - - Decrease (increase) in operating loans receivable 1.8 1.8 - - Other, net 1.0 0.3 0.7 -Subtotal (18.6) (69.4) 45.7 5.0 Payments for guarantee deposits for business operation (4.5) (4.5) 0.0 - Proceeds from guarantee deposits for business operation 3.2 3.2 0.0 - Income taxes paid (20.4) 0.2 (20.7) - Other, net (0.2) (0.2) - -Net cash provided by (used in) operating activities (40.5) (70.6) 25.0 5.0 60
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