Rakuten : Earnings Release for Q4 of FY2021 Financial Results

The following information was originally prepared and published by the Company in Japanese as it contains timely disclosure materials to be submitted to the Tokyo Stock Exchange. This English summary translation is for your convenience only. To the extent there is any discrepancy between this English translation and the original Japanese version, please refer to the Japanese version. The following financial information was prepared in accordance with International Financial Reporting Standards ("IFRS").

Consolidated Financial Reports (IFRS)

for the fiscal year ended December 31, 2021

					Rakuten Group, Inc.
					February 14, 2022
Company name	Rakuten Group, Inc.		Listed	Tokyo Stock Exchange
Code No	4755			URL	https://global.rakuten.com/corp/
Representative	(Title)	Chairman and CEO	(Name)	Hiroshi Mikitani
Contact person	(Title)	CFO	(Name)	Kenji Hirose

Scheduled date of Annual General Shareholders Meeting: March 30, 2022

Scheduled date of submission of Securities Report: March 30, 2022

Scheduled start date of dividend payment: March 14, 2022

Supplementary materials for financial results: Yes

Financial results information meeting held: Yes (For institutional investors and analysts)

1. Consolidated Results for the fiscal year ended December 31, 2021 （January 1 - December 31, 2021）

(1) Consolidated Operating Results					(Yen amounts are rounded to the nearest million)
							(%, YoY)
	Revenue		Operating income	Income before	Net income
		income tax
Fiscal Year ended	Millions of Yen	%	Millions of Yen	%		Millions of Yen	%		Millions of Yen	%
1,681,757	15.5	(194,726)	－	(212,630)	－	(135,826)	－
December 31, 2021
Fiscal Year ended	1,455,538	15.2	(93,849)	－	(151,016)	－	(115,838)	－
December 31, 2020
	Net income	Comprehensive	Basic			Diluted
	earnings per			earnings per share
	attributable to
	income			share attributable	attributable to
	owners of the
				to owners of the	owners of the
	Company
					Company			Company
Fiscal Year ended	Millions of Yen	%	Millions of Yen	%		Yen	Yen
(133,828)	－	(73,041)	－	(87.62)	(87.62)
December 31, 2021
Fiscal Year ended	(114,199)	－	(132,401)	－	(84.00)	(84.00)
December 31, 2020
	ROE		ROA			OI margin
	(Return on equity	(Ratio of income before		(Ratio of operating
	attributable to owners	income tax			income
	of the Company)	to total assets)		to revenue)
Fiscal Year ended		%		%			%
(15.7)		(1.4)		(11.6)
December 31, 2021
Fiscal Year ended	(17.0)		(1.4)		(6.4)
December 31, 2020

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(2) Consolidated Financial Position

								Ratio of total	Total equity
					Total equity	equity
					attributable to
	Total assets		Total equity	attributable to	attributable to
		owners of the
		owners of the	owners of the
					Company per
						Company	Company to
						share
								total assets
As of	Millions of Yen		Millions of Yen		Millions of Yen	%	Yen
16,831,221			1,117,290		1,093,719	6.5	691.47
December 31, 2021
As of	12,524,438			629,014		608,738	4.9	446.78
December 31, 2020
(3) Consolidated Cash Flows
	Net cash flows		Net cash flows	Net cash flows		Cash and cash
	from		from			from
					equivalents,
	Operating		investing		financing
				end of year
	activities		activities		activities
Fiscal Year ended	Millions of Yen	Millions of Yen		Millions of Yen		Millions of Yen
582,707		(611,830)		1,402,265		4,410,301
December 31, 2021
Fiscal Year ended	1,041,391		(303,347)		808,108		3,021,306
December 31, 2020

2. Dividends

		Dividend per Share				Ratio of
								Dividend	dividend
							Total	to total
							ratio	equity
							dividend
	1Q	2Q	3Q		4Q	Year	(Consolidate	attributable
		(Year)	to owners of
								d)	the
									Company
									(Consolidated)
	Yen	Yen		Yen	Yen	Yen	Millions of Yen	%	%
FY2020	－	0.00	－		4.50	4.50	6,131	－	0.9
FY2021	－	0.00	－		4.50	4.50	7,118	－	0.8
FY2022	－	－	－		－	－		－
(Forecast)
Note: Dividend per share for the fiscal year ending December 31, 2022 has not been decided yet
.

3. Estimate of Consolidated Operating Results for fiscal year 2022 (January 1 to December 31, 2022)

For the estimate of consolidated operating results for fiscal year 2022, double-digit growth on consolidated operating results for fiscal year 2021 is estimated for fiscal year 2022 consolidated revenue, excluding the securities business whose results are heavily impacted by stock market conditions.

For details, see page 9, 1. Overview of Business Results, etc. (4) Future Outlook.

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Notes

(1) Changes in Significant Subsidiaries during the Current Period

(Changes in Specified Subsidiaries resulting in Change in Scope of Consolidation): No

New:

－ (Company name: －)

Excluded: － (Company name: －)

1. Changes in Accounting Policies and Changes in Accounting Estimates
2. 1. Changes in accounting policies as required under IFRS: No
   2. Changes in accounting policies due to other reasons: No
   3. Changes in accounting estimates: Yes

Note: For details, see page 22, 3. Consolidated Financial Statements and Notes (6) Notes to the Consolidated Financial Statements (Changes in Accounting Estimates).

1. Number of Shares Issued (Common Stock)
2. 1. Total number of shares issued at the end of the period (including treasury stocks) 1,581,735,100 shares (As of December 31, 2021)
      1,434,573,900 shares (As of December 31, 2020)
   2. Number of treasury stocks at the end of the period

234 shares (As of December 31, 2021)

72,073,137 shares (As of December 31, 2020)

3. Average number of shares during the period (cumulative from the beginning of the year) 1,527,424,886 shares (January 1 - December 31, 2021)

1,359,477,579 shares (January 1 - December 31, 2020)

This financial report is not subject to audit.

Explanation about the Appropriate Use of Earnings Forecasts, and Other Special Matters Consolidated earnings forecasts for the fiscal year ending December 31, 2022 are based on information that is available at the time of writing, but a number of known and unknown factors could cause actual results to differ from projections.

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1. Overview of Business Results, etc.

(1) Overview of Business Results for the Fiscal Year ended December 31, 2021

The Rakuten Group discloses consolidated business results in terms of both its internal measures which management relies upon in making decisions (hereinafter the "Non-GAAP financial measures") and those under IFRS.

Non-GAAP operating income is operating income under IFRS (hereinafter "IFRS operating income") after deducting unusual items and other adjustments as prescribed by the Rakuten Group. Management believes that the disclosure of Non-GAAP financial measures facilitates comparison between the Rakuten Group and peer companies in the same industry or comparison of its business results with those of prior fiscal years by stakeholders, and can provide useful information in understanding the underlying business results of the Rakuten Group and its future outlook. Unusual items refer to one-off items that the Rakuten Group believes shall be excluded for the purposes of preparing a future outlook based on certain rules. Other adjustment items are those that tend to differ depending on the standards applied, and are therefore less comparable between companies, such as share based compensation expenses and amortization of acquisition-related intangible assets.

Note: For disclosure of Non-GAAP financial measures, the Rakuten Group refers to the rules specified by the U.S. Securities and Exchange Commission but does not fully comply with such rules.

i) Business Results for the fiscal year ended December 31, 2021 (Non-GAAP basis)

The world economy during the fiscal year ended December 31, 2021 showed signs of recovery as the severe situation of the COVID-19 pandemic gradually eases. The Japanese economy is also expected to recover mainly due to the effects of various policy measures such as COVID-19 vaccine promotion, but going forward, it will be necessary to pay attention to the risk of economic downturn due to trends in infections, supply-side restrictions, and other factors. Under the situation in which people are forced to change their lifestyles due to the COVID-19 pandemic, IT companies provide Internet services, online financial services, and information and communication services that enable people to purchase products and enjoy services while reducing contact with others, and the social role expected of IT companies is further increasing.

Under such an environment, the Rakuten Group worked to expand the Rakuten Ecosystem, which consists of more than 70 diverse services in Japan and overseas, while working to diversify business risks from the impact of infectious diseases by continuing to develop and operate businesses that bring together membership, data, and branding, along with services that proactively leverage AI.

In the Internet Services segment, factors including measures to improve customer convenience, such as the introduction of a common free shipping threshold for participating merchants on internet shopping mall "Rakuten Ichiba", successfully led to the retention of customers against the backdrop of stay-at-home consumption amid the COVID-19 pandemic. This contributed to growth in transaction volume in domestic e-commerce services, and gross merchandise sales in domestic e-commerce services surpassed ¥5 trillion in the fiscal year ended December 31, 2021. In the FinTech segment, services including credit card related, banking, and securities saw increases in revenue and profit with the continuous growth in the customer base in each service, and the shopping transaction value of Rakuten Card surpassed ¥14 trillion in the fiscal year ended December 31, 2021. In the Mobile segment, in addition to efforts to improve network quality by focusing on the development of the Rakuten Group's own base stations ahead of schedule, steady progress was made in acquiring customers even after the expiration of campaigns offering one year of free telecommunication charges.

As a result, the Rakuten Group recorded revenue of ¥1,681,757 million, up 15.5% year-on-year for the fiscal year ended December 31, 2021, but due to ongoing prior investments in the Mobile segment, such as the installment of its own base stations, it recorded a Non-GAAP operating loss of ¥224,999 million, compared to a Non-GAAP operating loss of ¥102,667 million in the previous fiscal year.

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(Non-GAAP)

				(Millions of Yen)
	Fiscal Year ended	Fiscal Year ended	Amount	% Change
	Change
	December 31, 2020	December 31, 2021	YoY
	YoY
Revenue	1,455,538	1,681,757	226,219	15.5%
Non-GAAP operating loss	(102,667)	(224,999)	(122,332)	－%

1. Reconciliation of Non-GAAP Operating Income to IFRS Operating Income
   For the fiscal year ended December 31, 2021, amortization of intangible assets of ¥9,321 million and

share based compensation expenses of ¥10,059 million were excluded from Non-GAAP operating income. One-off items listed for the fiscal year ended December 31, 2020 include a gain on sale of all shares in OverDrive Holdings, Inc. of ¥40,926 million, losses on investments in the filmmaking business of ¥3,277 million, and impairment of property, plant and equipment etc. due to the closure of certain U.S. based business. One-off items listed for the fiscal year ended December 31, 2021 include a gain on step acquisitions of ¥59,496 million as a result of making Altiostar Networks, Inc. a wholly-owned subsidiary of the Company and expenses of ¥8,789 million associated with an increase in provision for customer points as a result of revisions in the Rakuten Point Terms of Use.

			(Millions of Yen)
	Fiscal Year ended	Fiscal Year ended	Amount Change
	December 31, 2020	December 31, 2021	YoY
Non-GAAP operating loss	(102,667)	(224,999)	(122,332)
Amortization of intangible assets (PPA)	(9,502)	(9,321)	181
Share based compensation expenses	(10,612)	(10,059)	553
One-off items	28,932	49,653	20,721
IFRS operating loss	(93,849)	(194,726)	(100,877)

iii) Business Results for the fiscal year ended December 31, 2021 (IFRS basis)

For the fiscal year ended December 31, 2021, the Rakuten Group recorded revenue of ¥1,681,757 million, up 15.5% year-on-year, IFRS operating loss of ¥194,726 million, compared with an IFRS operating loss of ¥93,849 million in the fiscal year ended December 31, 2020, and net loss attributable to owners of the Company of ¥133,828 million, compared with a net loss of ¥114,199 million in the fiscal year ended December 31, 2020.

(IFRS)

				(Millions of Yen)
	Fiscal Year ended	Fiscal Year ended	Amount		% Change
	Change
	December 31, 2020	December 31, 2021		YoY
	YoY
Revenue	1,455,538	1,681,757	226,219		15.5%
IFRS operating loss	(93,849)	(194,726)	(100,877)		－%
Net loss attributable	(114,199)	(133,828)	(19,629)		－%
to owners of the Company

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