Thank you very much for joining us today. I would like to offer from Rakuten Group Inc, FY 2024 first quarter consolidated financial results. Already at 3:00 P.M., we have disclosed the earnings call summary. Rakuten Group Inc corporate website, please refer to them from the Investors Information page. You may not have received smooth feed, individual or audio. In the button that is at the bottom of your screen, you'll be able to be redirected to a different server. Also, we have generated a subtitle generated by AI. It has not been edited, but all confirmed and verified by human. There may be some incorrect information in the subtitle. I'd like to seek for your kind understanding. Without further ado, I'd like to invite Mr. Mikitani for his presentation.
[Foreign language]
Hi. Hello everyone, and most of you, I presume, are attending through video of the 2024, the first quarter consolidated financial results. I'd like to start this presentation. So first of all, the large theme that I would like to deliver to you today, in terms of, future, of course, strategic project, Rakuten Mobile, which you have engaged on. And this, in terms of EBITDA on a single month, turning us, black, we are now making a very smooth progress with the profitability. And in fact, Rakuten Mobile, the single, of course, unit in terms of EBITDA, for instance, in term of, the acquisition of new customers, the cost. It could be that ecosystem.
There is a major contribution made to our ecosystem, and based upon all these and embracing this, EBITDA already on an EBITDA basis, we are around the corner, in making the business profitable. On top of that, today, I would like to bring to you the overall highlight and segment by segment results, and at the same time, financial status quo and a future outlook and a strategy. And of course, in terms of AI, artificial intelligence, how we harness these new technologies, is what I'd like to bring to you.
[Foreign language]
So starting with the highlight of our performance, as for the revenue, on a year-on-year basis, about 8% increase was observed, JPY 513.6 billion. This is record high for first quarter. Rakuten Ichiba and Travel, the domestic market was quite steady in its growth, and in addition, the overseas business also made a progress in a steady fashion. We have expanded our customer base, and also transaction volume, or value rather, has increased. As for mobile, growth in Rakuten Mobile, subscribers boosted, and so, MNO service revenue by JPY 9.6 billion year-on-year was observed, achieved.
Non-GAAP operating income has seen a tremendous improvement, operating profit income JPY +43.5 billion year-on-year. So we have seen improvement. So domestic EC, as well as overseas business profitability has improved dramatically. And also, the Internet Services significant profit improvement in growth. Rakuten Card profitability improved, and Rakuten Payment turned profitable. So at one time there were some views expressed, but for commission, for example, the financial status is quite stable. And so even before, compared against the pre-zero commission level, the Rakuten Securities has the profit level back to those levels. And also, cost optimization was conducted in Rakuten Mobile, therefore, the situation has been improving.
As a result, before depreciation, that depreciation, that is EBITDA, is JPY 52.8 billion. That's consolidated EBITDA, and therefore, cash flow also has improved accordingly. And therefore, well, we have corporate bond issued. We successfully issued a $2 billion denominated senior notes and JPY 50 billion senior notes denominated in Japanese yen. And so liquidity gap for 2025 maturities are largely addressed, so please rest assured. So I would like to move on to the segment-based presentations. Internet first.
Yeah, let's see that.
So in terms of the revenue, it's +5.4%, by JPY 285.5 billion. Non-GAAP, the operating income is 14.8% positive , so thereby JPY 13.6 billion positive. So of course, to a certain extent, the minority investment, there are some, of course, elements that needs to be embraced. And if that is going to be excluded, 63.3%, a large, of course, growth has been exemplified by this business. And of course, this is the SBU optimization, is one of the bigger, of course, factor. At the same time, in terms of some of the subsidy of the government, by the support to have people travel, that has been already concluded.
So there are negative, factors, but still, we are seeing a large amount of growth in terms of the, profitability. So the east, domestic EC, on the surface, it looks as though it's -4.7%, and of course, JPY 1 trillion in terms of GMS. But we are now pursuing for quality rather than volume. So therefore-
... and there are some sort of the users that are turning deficit. We are going to have a very sound and healthy, of course, customers that are generate profit for our overall business. And Rakuten Ichiba, the competitiveness is consistently very strong, and at the same time, the domestic EC and GMS growth rate is the year-on-year 1.5 percentage point improved. So Rakuten Travel, inbound, of course, total GTV is now with a lot of inbounds, so +243%. And for advertisement, +7.2%. And Rakuten TV, overseas that is 43.8% year-on-year growth. The amount of users are increasing, so therefore have exceeded over 100 million people altogether.
Global, the second, of course, Rakuten Kobo is a digital book. We have now a total of 65.7 million people that have registered, so year-on-year +6.3%. So Kobo Inc, the readers digital reader, is also very, very smoothly growing and profitable. And also, Rakuten Viber, we have increase of +5.4%, so accounting for 1.5 billion people. And what's doing very smoothly, Rakuten Viki, again, we are seeing the number of users increasing by 23%, so totaling to the amount of 86.8 million people together. So I'd like to break this down in more detail. So SBU, the revision of the SBU. So first of all, a unique user number, unique users, is growing steadily.
On the right-hand side of the chart is the graph. Histogram, is the gray shaded area, is the negative and profit contributors in terms of the users. So there are certain, of course, a percentage of them that has not contributed to the business . But with SBU improvement, the of course, utilizing other service and being a subscriber of Rakuten Mobile, and inclusive of that, we are seeing a reduction on non-contributors. And also, at the same time, domestic EC non-GAAP, as I have mentioned, operating income, the one-time temporary factor, if you exclude that, then it's, like, increased by 20%. So on the baseline is a 20% growth. I think we'll be able to say that. And also, large competitors, strategy is needed, so we're putting a lot of emphasis in logistics as well.
Logistic services, by introducing them, some of the merchant in compared to non merchant utilizing, it's a growth by 12.5% compared to a non-user of a logistic service versus our users. In actual terms, is as you can see here, the six large warehouse, out of that, four of them already is now full capacity and is now turning into profitable growth. Other logistic business, there are various, of course, efficiency and optimization that has been implemented. Therefore, in the future, we are going to foresee improvement of the profitability, and also in term GMS, the growth could be quite a large contribution that we'll be able to expect out of.
The overseas business, as you can see, it is quite obvious, the large improvement being made and the so-called in terms of JPY 2.5 billion improvement in terms of operating profit.
[Foreign language]
Next is FinTech segment. Now, overall, in all business segments, we have realized an increase in revenue, and our profit has been improved, has been growing in a major fashion. Rakuten Securities also registered increase, and therefore, the revenue increased by 15.1% year-on-year, namely JPY 193.5 billion. Non-GAAP operating income increased by 47.4% year-on-year, reaching JPY 39.3 billion. Highlights include a 12.5% increase year-on-year of Rakuten Card shopping GTV to reach JPY 5.6 trillion. Rakuten Securities general accounts is over 10 million now. So last month, it actually went beyond 11 million. And also, Rakuten Securities deposited asset is increasing by about 50%.
I think it's in excess of JPY 30 trillion now. And Rakuten Bank accounts, the total number is 15.24 million as of last week, I think. Well, actually, JR East collaborating virtual bank, I think, is making steady progress. So... And Rakuten Bank deposit balance on a standalone basis has increased 15.4% year-on-year, JPY 10.5 trillion. And Rakuten Card shopping GTV, that is, JPY 5.6 trillion. And 19.2% is the operating income margin, which is showing a very strong growth. And non-GAAP operating income is JPY 15.3 billion, and therefore this is an increase of 22.7% against last year.
Rakuten Securities, the number of accounts is increasing, and NISA accounts, 5.2 million accounts already. We are among the top or the top in Japan now in this area. Operating income, JPY 6.9 billion, which is +18% year-on-year. Rakuten Bank, this is the highlight of the performance, as you can see here. Things that I haven't mentioned, ROE, 14.1%, and capital adequacy ratio, 10.9%. Therefore, the balance sheet is quite healthy. Rakuten Payment, competitors like PayPay, d Payment, au PAY, there are many payment platforms, but our pay has ranked the first according to MMD Institute. In terms of overall satisfaction, we ranked number one. Downloading of the apps is quite growing steadily.
Finally, in first quarter, we have this operating profit for the first time, and Rakuten Payment and Rakuten Point business, including these are the numbers that are inclusive of those businesses. Now the forecast or what we expect for the future. Now, 2010, that's 14 years ago, the cashless ratio in Japan was 13.2% or so, but now it has come or close to 40% penetration. At the end of the day, in the future, maybe we will be on par with the Western countries, 70% or 80% cashless payment ratio is expected.
If you look at other markets, Rakuten Credit Card, Cards, and Rakuten Bank debit card included, QR-based or barcode-based, Rakuten Pay is there as well, Rakuten Point, Rakuten Edy, and Rakuten Cash. These are the different payment methods that we offer. There's no other fintech company that offers so many options. And in addition, about JPY 30 trillion worth of transactions is realized through these services, quite strong, and that is due to the strong teamwork. And in addition to that, of course, that we're going to make further improvement of our payment services, but also provide higher value items such as insurance as well as banking services. So we will continue our efforts so that more people will leverage those services as well.
In the near future, what is likely to happen is regarding Rakuten Card, which has been issued for more than 30 million, and the Rakuten Card that these people have, they have the Rakuten Card and Rakuten Pay functions being integrated so that there will be more synergistic effects, and that will boost the total number of people using the functions. And Rakuten Pay, Rakuten Card, Rakuten Edy, these are to be integrated, and Suica will be also available on the same terminal. And Rakuten Card, Rakuten Pay are used quite frequently, but on the other hand, there are high-value services by Rakuten Bank, Insurance, and life insurance and so, and securities as well. Maybe not so frequently used, but higher lifetime value.
As we announced the other day, we're going to have this integration of the FinTech business. We will have a reorganization of the FinTech businesses of ours. In doing so, the financial services in agency as well as others will be involved, and there will be the wallet and others that will be brought outside of this framework.
So let me take you through the Mobile. I'm sorry, let me sip of water, take a break. So the mobile segment of our business. Well, in other words, the Mobile segment, well, Rakuten Symphony is included. So overall, the Symphony last year, because of the German company business transaction, it is a profit by JPY 100 billion.
So but in terms of non-GAAP, last year comparison, it is going to be JPY +30.7 billion in non-GAAP, so EBITDA, JPY 33.7 billion improvement. So we have been able to shrink the losses. So this is the revenue and non-GAAP operating income. So as a group overall, so this is, as you can see here, this is going to be the chart. So Rakuten Mobile, the—in terms of fixed assets, and including of that, including that EBITDA, last year, the first quarter, it was JPY -54 billion. And this is, again, Rakuten Ichiba doing their shopping and transaction, and Rakuten Bank being utilized, and Rakuten Card, the utilization volume goes up. And those are a large portion of the business.
In a quarter-by-quarter business, this effect is going to be JPY 12 billion. So therefore, if you include that altogether, the adjusted, adjusted EBITDA is on a quarterly basis, it is JPY 4 billion already that I've achieved. So by making this business profitable, Rakuten Group, the ecosystem, the, will they make-- It's starting to contribute to our profitability and our revenue. And, in terms of [revenue], in terms of service, it is going to be-
... 36.6 billion, so it is a total of the number of 6.8 million. So BCP, the visa, the second SIM, at a time of emergency. So there's, the profitability high, but, increasing of that, we are seeing that after the adjusted MNO churn rate is 1.27%. So the other, of course, carry, on par with other carriers, or it is, coming to a quite, good area. So ARPU is JPY 2,024. So let me proceed and show you the actual, scenario of what is happening.
Okay, what I would like to draw your attention to is the overall ARPU contribution, for the entire group. So [JPY 3,060.80] is what we have achieved so far. Not all are gross margin, however or profit, however, uplift all included, then we reach more than JPY 3,000 now. So I will go back.
We concluded the first and the second phase, and now in the third phase, and, it is going to make major contribution about business and also to the ecosystem. And three carriers, we're going to be, included, within this, sort of the game of, playing with the three carriers. So in terms of, in terms of, 680 to, continuing to 800 million, 800 to 810 million. And ARPU, of course, MBA, NBAO, NBCV, what we need to do. And on the monthly, cost, is going to be JPY 23 billion-JPY 25 billion. So, in introduction of AI, we'd like to further reduce, these numbers.
So why it is doing very extremely well is the roaming has expanded, so that inclusive in terms of quality of the communication has improved. So 99.9% will be able to cover the population. And in terms of the acquisition of the contract from ecosystem we are now seeing a great acquisition from our ecosystem overall. And in terms of on top of the roaming what we are pursuing as a strategy is Open RAN and also virtualization. So around the world it is highly evaluated, and not that alone the actual of course quality survey that has been conducted many of course the item and indices in many carriers, we are a single number one winner of these ranking.
Especially 5G upload speed, download speed, for these areas, we have been very highly evaluated on these segments. In terms of coverage, Opensignal have a no signal availability survey. Out of 100, how many of them with no signal availability? As you can see on the graph, 1.2%, somewhat percentage to in the 12-month and plus. So we have been able to make improvement by 0.57 percentage point. In terms of 77%+, have said that the quality have improved. Setting the price and fairness, democratization of mobile phone, and at the same time, we are going to establish the most strong connectivity.
[Foreign language]
So we're working towards the best connectivity. Now, the new roaming contract is the basis for the network expansion, which is underway. And platinum band to be realized at an earliest possible timing. In May, already the test run has started so that we can start commercial operation in June. And then for subways and indoor areas, using platinum band in some cases, so we're going to make improvements in connectivity, and 5G expansion will be promoted further, and network density will be enhanced further. And the 5G is plotted here. In Kanto region, for example, it will go to 1.6 x the coverage as of now, compared to now, and Tokai area, 1.7 x coverage. In Kinki or Kansai area, again, it's expanding.
Platinum band, as we have been explaining, you have this diagram in the second box there. We are currently using the mid-band 1.7 GHz band radio head, but 700 MHz compliant radio head will be attached, so that we can use it for platinum band as well. You know, investors might wonder, "Why can this be done at a lower cost?" Because we are manufacturing this at a new type of factory. That's the answer. And then in 2026, Space Mobile is going to be used, broadband will be used so that we have 100% population coverage. That is our target.
So whether you're in Tokyo or in Tsugaru Strait, or in Hokkaido, prairies, or if you're in the ocean, basically, you will be able to get connected in the case of emergencies as well. Number of users has been increasing steadily as well. At the end of the year, merchant oriented mobile allocations for the merchants were conducted. So there were many activities at the end of the fiscal year. But 426,000 cases in Q1 also was experienced. And since February, we have this Family Program, the Youth Program, as well as the most recent one, which is the kids program that was announced, which were all well received.
Rakuten Card being at the center, there are synergistic effects being felt as well. It's not just about Rakuten Card, but travel, Ichiba, and Rakuten Pay as well, and also baseball and soccer. There are synergistic effects everywhere that we're trying to expand to the maximum possible. So if you look at the ecosystem overall, ARPU contribution is worth about JPY 1,055, and JPY 9.8 billion push up or lift up in the group profit. So it will be 2.55+. And of course, there will be various services used as Rakuten Mobile as an entry point.
For example, +53%, Rakuten Ichiba annual GMS increase, and also Rakuten Travel annual GMS, actually, had 88% increase. And therefore, we have the Saikyo Family Program, Youth program, as well as Kids program that have been announced, so that JPY 3,068 ARPU is what we have now. And so two years ago, it used to be JPY 1,045 . However, it has gone up to over JPY 3,000, JPY 3,068. And, of course, we're trying to improve or increase the ARPU further, and data usage is increasing. That's one factor. We offer only a single plan, and so the more data usage, the higher our revenue. And by people using our services, the convenience on their part will increase. For example, Rakuten Link.
Threefold increase of the impressions in the past year for Rakuten Link is what we have seen. And also for corporate mobile, it's not just them using the service, but for Rakuten Group, as well as our partners who provide various services, we can actually promote and contribute to those other services as well.
[Foreign language]
Rakuten Symphony, the largest sort of mobile phone trade fair, global mobile conference. We have RAN software, which we have announced that is going to be open. And having discussion with many people, Rakuten Mobile success is going to change the status quo and the norm of the mobile phone. And I've been told you already changed the norm, and you had already disrupted the conventional world, and the Open RAN and software also is going to make further advancement. So Rakuten Open RAN software, what are we trying to do is, as you can see, the Open RAN software, there are a few hundreds of thousands of software that are being utilized, like Linux, Linux.
Source code to our affiliated companies, so we want to make open, and so via transparency in terms of strategy that we are going to engage ourselves on. So therefore, in other words, Linux, in the world of Linux, Red Hat, Red Hat has succeeded in the world of Linux. In terms of mobile phone network, we are going to pursue to become Red Hat of the mobile world. And the other is a cloud strategy. In fact, the Robin.io, which we have acquired, this company in the cloud for the mobile phone network. On top of that, the general enterprise cloud is doing very well in United States and Europe as well.
And having said that, on top of that, our own proprietary Rakuten One Cloud, which we have developed, we're going to multiply or integrate these two in order to converge them as a Rakuten Cloud, a domestic cloud. We are going to launch them. So to do so, not only cloud, but the Rakuten's own developed generative AI, Rakuten AI, and of course, a comprehensive strategy alliance being concluded by with OpenAI as well. So on cloud, we're going to empower AI capability as well. And last but not least, this is how AI is going to be utilized, but our Chief Digital Officer, Ting Cai, is going to describe the strategy later on. But from me, I'd like to just give you a high-level image.
We have an initiative called Triple 20 , and we made the announcement of the strategy. So what it means that in utilizing AI and leveraging them, specifically, marketing productivity is going to improve by 20% and operational productivity improve by 20%. And at the same time, client productivity is going to be made 20% efficient. So Rakuten Ichiba, in terms of editing and customer service, Copilot will be utilized, and AI is already empowered, and we're going to see that further rolled out. So one example of that is that Rakuten Mobile, where we are today, is, in other words, at the time of entry, it was a human sort of support-intensive support. So JPY 2.2 billion support fee was necessary.
Utilizing AI by launching services, first quarter, we have been able to achieve a 70% reduction by JPY 989 million. So therefore, Rakuten Mobile, not alone, but all businesses will be able to implement them. And at the same time, what we are really trying to do is, for us, the generative AI, the development of generative AI. On top of that, operation will also be made further productive. So engineering, code assistance, or various documentation, again, it's not manually intensive, by utilizing AI and customer support. At the same time, the logistics segment, and furthermore, in the center, it is quite ambitious, but utilizing AI, optimizing marketing efficiency and direct business, or to our merchant, price and optimization inventory will be recommended by AI, and optimization of advertisement.
In terms of AI search, you can find by means of recommendation. So that's already the area AIs are already have been extensively utilized. So in the future, UX is going to be centered on, on voice as well. So therefore, the concierge function also further is going to be enhanced going forward.
[Foreign language]
So this is all I have for you from me. Thank you.
[Foreign language]
Hi, Hirose is my name. I'm in charge of finance. I'd like to give an overview of the financial strategy. First, this might be a repetition, but mid- to long-term, financial soundness is what we are aiming for on three pillars. Profitability improvement, as Mr. Mikitani already explained, the core business will grow its growth profit growth will be increased. And so achieve profitability on annual consolidated non-GAAP OI basis in fiscal 2024. And also, for Rakuten Mobile, monthly EBITDA based annual increase, as well as annual basis as well. And efficiency improvement, yes, we have been improving our efficiency, and we will make further efforts. And SBU various revisions will be underway.
Our marketing-related improvements are being worked on, and also a working capital improvement and also cash conversion cycle being optimized, as that was already mentioned, and internal cash will be increased as a result of that. And by using AI, we are going to further improve our efficiency. And financial soundness being maintained, for interest-bearing debt, we will increase, rather, decrease, and we have been decreasing that, but we will continue that. And also proactive debt maturity management is next, which I will explain a little more later, but we will take more proactive actions to finance this. So, and we have already done that, and to a large extent, I think this issue or concern has been addressed.
The third one is a credit rating improvement, so that we will have a very financial sound financial basis. Let me talk about refinancing risk in 2024 and 2025. So the redemption was JPY 321 billion, but we have already addressed them. Redemption, of course, that we wanted to redeem 100%. However, there are still some remaining, that is JPY 145 billion that is still remaining, and the funding is on the right-hand side. So we have had additional sales of Rakuten Bank and Rakuten Securities shares. And also, we have issued this corporate bond, senior notes issued, and then that's for the 2024 maturity.
JPY 400 billion is the amount for 2025. $2 billion US-denominated senior notes, and we also have Japanese yen-denominated in private placement, and so that is JPY 350 billion. Now, domestic hybrid bonds maturity will come in November, December, and JPY 76 billion we will use the products that receive equivalent equity certification, and so we are addressing that as well. And, of course, depending on the market situation as well as other situations, corporate bond-type class shares might be issued or hybrid bonds being issued, but we will have this call on the first call date. Path to self-funding mobile segment, free cash flow improved dramatically.
EBITDA will be improved dramatically, but in addition, the capital expenditure will be, or CapEx will be reduced. And so that is our plan for free cash flow improvement. And Internet Service free cash flow, EBITDA will continue to increase, and cash conversion cycle will be shortened, so that internal cash will increase. So these are the measures that we plan on doing. And FinTech. We will, of course, have dividends as well as management fees coming in. Also, for 2024, self-funding will be established, and then beyond that point, we will have free cash flow being realized. And with regard to the project to reduce cash conversion cycle, the entire company has been trying to improve the cash conversion.
And so we're trying to have improvements or prolongance of the payment terms, for example. And so there have been various measures undertaken. And also, at the same time, in addition to the accounts receivable and accounts payable ratio improvement, we're revising and analyzing points program as well. Minimum JPY 50 billion, non-FinTech cash will be generated, and we still have upsides to that amount. So we're on a path to further soundness in financial basis. Thank you.
Please.
Good afternoon, everyone. My name is Ting. I'm speaking from the Silicon Valley today. After meeting with many companies here, I truly believe Rakuten is in a unique position to develop cutting-edge AI technology and to bring the benefit of AI across multiple industries. We'll continue to push our strategy to leverage our unique data, ubiquitous channel, to deliver our flywheel, so we can continue to accumulate our sustainable competitive advantage. While strategy is important, execution is even more crucial. Next slide, please. In Q1, we demonstrated strong momentum on all fronts. We continue to scale our deep learning application and shift our first generative AI application to merchant, and continue to develop and incubate our future technology for consumers. Next slide, please. Last year, we shipped semantic search for fashion, and in January, we shipped for Ichiba.
In 2024, we're gonna scale semantic search applications to 10 additional services across Rakuten Group. In addition, we're gonna leverage our deep learning foundation to extend from search to recommendation to advertising. Next slide, please. The beauty of Rakuten AI solution is that our solution is so easy that we can enable merchants to use it right away in their existing flow and tools. In Q1, we launched RMS AI Assistant for merchants, so they can quickly analyze merchant reviews and draft responses to their customers, and they can leverage Rakuten AI to understand the data and grow their sales. For advanced users, we also launched Rakuten AI University, so they can learn about Rakuten AI technology and broader industry knowledge as well, for the best of their advantage. Next slide, please. In Q1, we also launched Rakuten AI 7B.
As you know, 7 billion is the number of parameters for a large language model, and today, large language model is growing bigger and bigger. The largest model today is over 1 trillion parameters. As the number of parameter grows, the cost of operation is also growing. Here at Rakuten, we can leverage our data to develop cost-effective model. Rakuten AI 7 B is probably the best cost-effective open model for Japanese language and Japanese audience. And recently, Llama launched open 8 billion model, and our performance is comparable with that. And in the open, Rakuten AI 7 B performance, even, even better than the than the Google Gemma in 7 billion model. As Miki mentioned earlier, we have a broad portfolio of AI product..
We'll continue to help the entire Rakuten Group to improve its operation, whether it's customer support, software engineering, documentation, translation, search, advertising, and offering all, all experiences to operations. So we have a lot to come to share with you later. And today, I want to thank everyone at Rakuten to participate in the AI-nization effort, and I'm very excited about progress and look forward to share with more, with more with you later. Thank you.
[Foreign language]
This concludes the financial results announcement. Thank you very much.