Recruit Holdings Co Adr

Thank you very much. Welcome to Recruit Holdings Company Limited Q3 FY 2023 earnings conference call. This call is the simultaneous translation of the original call in Japanese, and translation is provided for the convenience of investor only. I am Mizuho from IRNPR, and joining me today is Jun Chiarai, Senior Vice President and Corporate Strategy Investor Relations of Recruit Holdings. Thank you all for joining today. Earlier at 3 p.m., we disclosed our FY 2023 Q3 financial results, Q4 outlooks, and full-year guidance. Many of you may have already watched the video presentation of the financial results, but I would like to give you a brief summary. Although we have assumed a decrease in consolidated revenue and adjusted EBITDA for the full year due to the deteriorating business environment and uncertainty in the future during the fiscal year, Today, we disclosed that consolidated revenue is expected to be approximately flat year-over-year at 3,400,000,000,000 yen, and consolidated adjusted EBITDA is expected to be 585,000,000,000 yen due to a significant increase in adjusted EBITDA margin in matching and solutions and a margin increase in HR technology resulting from cost controls throughout the fiscal year. Profit attributable to owners of the parent is expected to be approximately 354 billion yen, a record high. Basic EPS and adjusted EPS are expected to increase approximately 34.1% and 16.9% respectively. Consolidated revenue for Q3 decreased 1.5% due to continued lower revenue in HR technology, despite revenue increases in matching and solutions and staffing. Consolidated adjusted EBITDA margin increased 2.5 percentage points to 18.3% as a result of cost controls. For Q4, now the results for each SDU. For HR technology in Q3. U.S. dollar-based revenue decreased 17.2% and adjusted EBITDA margin was 33.2%, which was above the outlook announced. For Q4, revenue is expected to be approximately flat quarter over quarter, with a potential small increment benefit from Indeed Plus. Adjusted EBITDA margin for Q4 is expected to be approximately 27%, as we expect operating expenses to increase quarter over quarter, due primarily to seasonal increases in personnel costs and advertising expenses and incremental costs related to Indeed Plus. We expect U.S. dollar-based revenue for FY23 to decrease approximately 15.5% and adjusted EBITDA margin of approximately 34%. For matching and solutions, revenue in HR solutions for Q3 decreased 0.8% to 73.1 billion yen, and revenue in marketing solutions increased 7.1%. Adjusted EBITDA margin was 23.3%. Revenue in HR solutions is expected to decrease approximately 4.5% due to the continued downward revenue trend in the job advertising service and the impact from transition of revenue of HR technology due to Indeed Plus revenue in marketing solutions is expected to increase approximately 7%. Adjusted EBITDA is expected to improve. from the previous year to 12.5% with advertising expenses and anticipation of next fiscal year as in the past. For FY23, revenue in HR solutions in FY23 is expected to increase approximately 2.5%, and revenue in marketing solutions for Q4 is expected to increase approximately 9% for FY23. Adjusted EBITDA margin in matching and solutions for FY23 is expected to be approximately 20% in line with our initial estimate. For staffing, based on results through Q3 and outlook for Q4, we expect revenue in Japan for FY23 to increase approximately 10%, while revenue in Europe, U.S., and Australia is expected to decrease approximately 2%. Adjusted EBITDA margin is expected to be approximately 6% in line with our initial outlook.

Next, I would like to briefly introduce Indeed Plus, which is quite important to progress on business strategy before moving on to Q&A. I appreciate sell-side equity research analysts who have already published their research reports regarding Indeed Plus. Starting with Indeed Plus, we will quickly promote the conversion of HR solutions in matching and solutions into HR technology and promote simply hiring in Japan. Sorry, simplify hiring in Japan. IndyPlus has been developed and prepared in the Japanese market, which is the second largest HR matching market after the United States, as a cross-business project by HR Solutions of Matching Solutions and HR Technology since 2021. It supports the efficient hiring of the best match talent and simplifies the complicated hiring process. IndeedPlus is a job distribution platform that automatically distributes jobs to the most appropriate job boards based on the job content by linking multiple job boards. For the 12 months through December 2023, HR solutions revenue in the job advertising business for full-time and part-time job seekers was approximately 115 billion yen, an in-beat revenue in Japan. was approximately 68 billion yen. Each of the job boards operated by HR Solutions in Matching and Solutions will gradually become a job board linked to Indeed Plus, and revenue from job advertising services in HR Solutions will gradually be shifted to Indeed Japan. In addition, Indeed expects to further increase its revenue in Japan in the medium to long term, by acquiring new employers who use Indeed Plus, and by increasing the average revenue of existing employers. Now, I would like to take your questions. If you have a question, please click on the Zoom raise hand button. Please unmute before asking your question. We will accept up to two questions at a time. So first, JP Morgan, Mori-san, please.

Thank you very much for this opportunity. I have two questions. First is Indeed Plus that you just mentioned. If I could ask you to elaborate on that. I'm sorry if I don't have a full understanding. First of all, your job at 115 billion revenue, this will shift gradually to HR technology, I understand. So if it's just a simple shift, By moving to PPC, the revenue per customer may dip in the short term. But in the medium to long term, I understand it has a big potential. So what is the timeline you have in mind for customers, for the client, the users to shift? And how do you think the revenue will trend? Will it dip once and then recover and grow from there onward? And which part of the phase will next year be? It's only been 10 days since you started, but the current advertisers response or feedback, or how do you feel the acquisition of the acquiring new advertisers? Thank you. Please go ahead with your second question. HR Tech. So you stopped PPA this time. The revenue per job will, the effort to increase revenue per job will go back to zero once or are you taking various measures? Next measure will come very shortly. Is this a trial? So the revenue bird job, after you stop using PPA, what will it look like? Could you elaborate on your initiatives to raise your added value? I'm sorry for another question. Smart sourcing will be launched in spring. My understanding is correct. And I'm sorry I don't have the full picture yet, but with such service... You are trying to increase the revenue per job. Is that part of your effort? Thank you very much. First, starting with Indeed Plus. Our job ad business in Japan. This is the revenue that our sales is creating and generating and these sales through agency. And this has been the case historically. This has been the model all along. So our clients' preference and the agency's actions and job seekers' evaluation will all come into play. So it's not that we set the timeline. All these factors will need to be watched and monitored and shift smoothly and expeditiously. So we want to Have business clients understand this as soon as possible and shift smoothly. We have no intention of taking unnecessarily long time on this. In May, we will explain more on how we plan to progress. Will we decline once, dip once, or not? Even if that happens, as Mori-san just said, This will lead to a more efficient, simplified hiring process in the medium to long term. So there may be some ups and downs or decline as part of the transition, but this will be beneficial in the long run. And revenue, you mentioned, 115 billion yen. whether this shifts it to Indeed. The revenue recognition is different. Indeed side, Indeed side, HR technology side. For revenue via the agencies, the invoice comes from the agency. So revenue will be recognized on net. Now from recruit, the business from recruit, recruit issues the invoice. And so the revenue is recognized on gross basis. And the fee paid to the agency is included in the sales promotion expenses. And so the number is different. It's not just 100 for 100 shifts to the other side. So we hope to realize this shift. as quickly as possible. It depends on how our business clients manage their budget, but if it goes well, we should be able to avoid a big downside. From the 30th, we started this launch on 30th, and so it's too early to make any judgment, but our business clients say, that they are enjoying a simpler process. So talk with recruit and then make and then send and send back. All these back and forth communication can be avoided. And they said that this is very convenient and easy to use. So the feedback is positive. That's the feedback we get from our business department. On the business side, on the job seeker side, Rikunabi next, the number of jobs is increasing. Job seekers are increasing, is experiencing this positive change. And so if this trend continues, we can realize and complete the smooth transition. And to your second question, the abolition of PPA. In FAQ second questions, we referred to the content, expecting such question. Pay for performance will continue being validated. So it's not going to be a dramatic change like PPA, but it will be like PTSA to adjust the billing by understanding the response by our clients. And the launch of smart sourcing. So the new product evolution using AID. We are trying many things. We always do. And the strong response from the clients came from the smart sourcing that Morisan said. And as you rightly said, this is to improve the revenue unit price. So how we can improve our performance will be pursued further. We will take on various challenges to try to approach our goal. So we stopped using PPA, but we will continue our pursuit for further value. Thank you. Follow-up question on my second point. So next year, HR technology revenue will be volume linked, more volume linked. I think it was somewhere in the FAQ or in my script at hand. So even with the declining job, revenue decline may be smaller or flat. That means the revenue per job is increasing. And so, of course, it is a business that is heavily impacted by volume, but compared to the past, unit price is increasing significantly. So we will continue pursuing that and try to increase this further. So it's not that we are heavily dependent on volume. We are trying to improve our performance and improve the unit price per job and continue having our clients use our product and enjoy our value that we can offer.