Recruit Holdings Co Adr

Welcome to the Recruit Holdings FY2025 earnings call. This call is a simultaneous translation of the original call in Japanese and translation is provided for the convenience of investors only. I'm Mizuho Shen, Manager of Investor Relations and Public Relations. Earlier at 3.30 p.m., we disclosed the earnings release, earnings summary, and the presentation slides of this results call on our IR page. The video and transcript of this results call and the transcript of follow-up meeting and sell-side a follow-up meeting with Southside analysts which will be conducted followed by this results call will be posted promptly on our IR website after the session. Today's presenters are Hisayuki Itekoba, representative director, president, and CEO, and Junichi Arai, executive vice president and chief financial officer. Hello, everyone. In the first 25 minutes, DECO in June will provide a presentation followed by a Q&A session. Now, I'll turn the call over to DECO.

I hope you can hear me. Hello, everyone. My name is of . I'd like to start at this page regarding revenues and EBITDA plus S. I spoke to you around this time last year. I mentioned that we are going to be engaged in various activities utilizing AI You did not seem convinced yet, but I think numbers are very important to validate this point. We have been utilizing AI in various areas, and we are now showing results in numbers. For the period that descended, we have achieved record high profits for the fiscal year 2026. In terms of revenues as well as profits, we are now poised to further accelerate growth. We are adopting AI across many parts of our businesses, and today I would like to address HR tech because this is an area we are receiving many questions. I would like to elaborate to you how we are utilizing AI to accelerate revenue growth. Now, recently, the other day, I recently bought a new tablet. Because I travel a lot for work, I often download movies onto my tablet. That means that the plenty of storage will be required. At the same time, screen size is very important. It has to be reasonably large and easy to watch, not too small. And I found that there was a big price gap between the expensive models and the cheap ones. And it took about one hour just going through the different offerings. And I found that it was very difficult to select a piece of electronics. And then it occurred to me, what if everything were offered for free? Now, if it were all free, deciding would be incredibly easy. It wouldn't take one hour. Just one click will surprise to find the best choice for oneself. And I put this in the context of looking to changing jobs as well. And I found that, in a way, it's akin to a completely free e-commerce site. There might be various factors taken into consideration, but you can also apply for jobs that pays two or three times your current salary, or maybe two times one day a week of working could be your condition. For Japanese people, we are very straightforward. Therefore, if it was conditions like this, there would be many applicants overseas. Now, please think about this. In the past, in a competitive site, when they started Jocet, people said that Indeed and Recruit will be overwhelmed because if you ask AI, they can make recommendations in terms of jobs, and people were concerned about the future of Indeed. How algorithm is developed must be taken into consideration. Whether it is AI or machine learning, there is not much difference. The best job for one person, what is a job that one likes, what is popular is data that is not so relevant because web company or the employers might actually want to hire the person regardless of your intention. HR matching may take significant data from the user side, but that is not significant. It depends on whether the employer will be impressed. So it is two sides of matching that is required. Company or the employer side is maybe a solution as well. showing the tendency of hiring, but appropriate matching cannot be made. So this is a very unique matching model that we have between job seekers and employers. And therefore, in the past several years, the employer side, the AI development has been areas where we have made investment. Of course, on the user side, the preference to jobs, is also very important, but the employer side has to identify the tendency of hiring for certain positions for certain companies is also data that is required in order to have the effective matching. That is the reason why we have been making investments on the employer side. This might be difficult to understand, so let me give you an example. To illustrate my point, let's imagine you're running a restaurant with two chefs and 10 servers. You are managers of this restaurant. At that time, if one of your servers quit, of course, there will be a concern on the part of the owner. It isn't as if the restaurant will remain closed for this purpose. There might be some instances where customers have to wait on certain weekdays. But what would happen if one chef of the two chefs quits? The situation changes dramatically. In some cases, the owner doesn't care as much about cost. Their priority is to hire someone with solid experience and skills as quickly as possible. Otherwise, the restaurants cannot be operated. A truck company in the United States has more trucks than the drivers, and the construction workers are hard to find because of construction of many AI centers. Hiring which is directly related to value increase is very important. And here, what we are proposing is sponsored jobs. If it's keyword, that is very important. French chef could be the keyword, and the result is where the job is posted. you might understand that matching may not be impacted, but in fact with AI, matching can become very effective. Key word, search is made, and the result will be searched too. However, the 30%, only 30% are responding to that. But if AI sourcing, AI screening is utilized for certain companies, the recommendation will be made sending emails that the company is looking for a person like you at the pop-up. And this is accounting for 70% recommendation and AI tools. This is reflection of the fact that AI is evolving Furthermore, from last year, we are promoting a premium product. This is a sponsored job and the better version of the product is offered as premium. Higher quality people can be hired, can apply with the utilization of this product. In the past, The chef might have to be hired expeditiously, then budgets can be increased for the service. And for one position, there could be 200 or 300 or 400 applicants. However, on the part of the restaurant, even if 500 people apply, it would be difficult to make the selection. It would be difficult to increase budget for the service. But now if the budget can be earmarked and payment can be made, AI matching can be enabled so that a quality, high quality applicants can be identified. This is how evolution has been made. And the hiring period as a result has been reduced by 50%. This is becoming more effective with AI matching. Now, what about the job seekers side? What are the issues facing them? They apply to many and receive no advice, so they have the concern that whether the employees are actually seeking for applicants. In order to resolve the problem, the premium as well as AI matching can be very effective. The share could be needed immediately, and the relevant person can be matched. That means that for the sponsored job, if utilized can receive a response, the response will be provided 40% earlier. So the motivation of the companies to hire is also very important and crawling can be utilized from other sites to obtain data. Motivation to hire is very important to be identified. This is important for the user and for the job seekers as well. As a result, the monthly active users was 18% higher than previous year. This is a record high for us. So by utilizing AI, user experience can be enhanced. In this way, if there is intention to hire, then employers will be willing to pay more. Matching is enabled. That means that the update, the U.S. for fourth quarter, they have seen growth significantly in the United States. Now in this way I would say that the 25% increase could be subject in price increase, could be subject to criticism. But we have to look at the content in more detail. We have to look at this market overall, the job market overall, globally. Online advertising as well as the job seeking is very small. It's only several percentage point even though we have 60 to 70%. the placement and the recruitment, offline matching is more significant in terms of market size. When we ask companies, they tell us that indeed free service is utilized and if a hiring cannot be made, even though the fee is excessive, the retained search could be utilized by two placement recruitment agencies. But indeed, low-cost hiring can be enabled. Offline is more expensive, but because they are pressed for the need to hire, they have to resort to placement and recruitment agency. But if we are able to provide AI matching in the appropriate way, and if we can provide applicants that companies would want to hire, then we will have to capture more of this market. When I became CEO, I have been emphasizing the simplified hiring. And when a button is pushed, the next job should be realized as quickly as possible. This has been enabled by the evolution of technology. This is our mission. Utilizing AI, various manual work can be automated, which is a wonderful opportunity for all of us. This is also shown in the performance as well as actual numbers. Now, in this way, utilizing AI, significant changes are being made and it is reflected in our numbers as well. And I feel more confident as management as well. And I believe that the growth rate can be achieved that is of 10%, 20% can be, 10% is achievable and when the hiring demand recovers I believe that 20% of revenue growth can also be achieved and we expect to exceed the margins above 50%. Over the global platform, we are seeing 31 hires a minute, meaning that we are helping someone get hired roughly every two seconds. We would like to expand this globally so that we can do more to support people around the world finding their next job. We will continue to make our efforts. Thank you.

Good afternoon, I'm Arai. How was Deco's presentation? Since he became CEO, about three pages before there was a big circle. And he's been sharing that with you. He's been promoting simply hiring. And I think that the times have caught up with the ideal that Deco has been sharing with you. On Indeed, we have seen accumulation of unique data. We are seeing enrichment of this unique data. And with the power of AI, I think we have taken another step closer to realizing the world that DECO has envisaged. And this is an exciting time for us. And since I-FI 2024, we have been talking about year zero, making preparations during year zero, gaining strength. So that's what we've been saying over the past two years. I am very pleased to be able to report a significant result as our efforts have been reflected in the numbers. And this makes me very happy as well. As you can see from the table of contents for my presentation like last year, I will present the executive summary at the very top from here on stage. that there will be a meeting with equity research analysts scheduled for later today. And in that meeting, I will cover the remaining items in more detail. First, for FY 2025, I will cover the consolidated results, revenue EBITDA plus S, and basic EPS. each exceeded the revised guidance announced with our Q3 results in February and reached a record high on a four-year basis. And for fiscal 2026, we will see further acceleration of this growth based on the assumption of the exchange rate of 154 yen per U.S. dollar. And although various changes are happening economy, but we assume no major changes to take place, and we expect revenue and profit growth across all three segments, particularly driven by progress in business evolution and enhanced efficiency in HR technology. Our assumption for consolidated revenue is to increase by 9.0% year-over-year to 4.03 trillion yen. EBITDA plus 3 is expected to increased by 19.5% year-over-year to 949 billion yen, with margin expanding to 23.5%. Basic EPS is expected to increase by 27.8% year-over-year to 447.0 yen. The number of employees decreased from approximately 50,000 at the end of fiscal year 2024 to approximately 45,000 at the end of FY2025, and we do not currently plan any large-scale hiring in FY2026, so the number of employees will stay almost flat. Next, I will talk about capital allocation. In FY2025, we returned a total of 713.1 billion yen to shareholders. and this resulted in a total payout ratio of 143.5%. We have maintained a high payout ratio. And net cash at the end of March 2026 was 765.9 billion yen. In May 2024, which is two years ago, I said that We would reduce the net cash from 1,135.4 billion yen at the end of March 2024 to 600 billion yen over the two-year period ending March 2026. Actually, we had already reached that level in the first half of FY2025. However, a second half results exceeded our assumptions. ended the year above the 600 billion yen level. ROE was 22.6% in FY2024 last year. It was 31.0%, which is a significant increase. As for our capital allocation policy for the next three fiscal years starting this fiscal year, we are making no changes to the current order of priorities. We intend to maintain year-end gross cash and cash equivalents at around 750 billion yen. And if we execute a strategic acquisition, we intend to fund most of the required amount with debt while taking our credit ratings into account. Based on our policy of stable and continuous dividends, Our dividend outlook for this fiscal year is 13 yen per share in the first half, 13 yen in the second half, totaling 26 yen for the full year. Regarding share repurchases, already a share repurchase program for a total of 350 billion yen has started from April 1st this year, and the current plan is to complete this program by the end of November. and we will make appropriate decisions and act accordingly while monitoring second half cash flow generation, capital market conditions, and our share price level for the second round of our share repurchases. Going forward, we believe that growth in net income and the continued shareholder returns will, of course, result in higher ROE than 31%. We believe that such higher levels of ROE will be possible. And as you are aware, we operate through three segments. Among them, HR technologies, revenue growth, profit growth, and also margin expansion are substantially higher than those of the other segments. In FY2026, HR technology revenue is expected to reach a new record high of over $10 billion or 1.5 trillion yen. And this represents about 40% of consolidated revenue. However, staffing, which, accounts for 45% records approximately 1.8 trillion yen in accounting revenue. The margin excluding wages paid to temporary staff, in other words, the margin substantially for our company is around 300 billion yen annually. Accordingly, HR technology, accounts for approximately 65% of consolidated gross profit, which we believe better reflects its substantive contribution to consolidated revenue. And profits are even higher. HR Technologies EBTA plus S accounts for about 70% of consolidated EBTA plus S. and it is expected to continue to grow as the core driver of our earnings and value creation. As mentioned before, as for staffing, we do not expect significant organic growth in staffing under the current business model. However, we will continue to focus on efficiency. in our operation and strive to generate stable EVTA plus S margins. Marketing Matching Technologies or MMT will continue refining and evolving its business model to further strengthen its competitive advantages and uniqueness in Japan. And by increasing revenue and improving operating efficiency, We expect EDTA process margin of 30% this fiscal year and aim to increase this to 35% by FY2028. Now, I will discuss each segment in more detail. First, the HR technology. Q4 results substantially exceeded the outlook disclosed in February in all regions, including the U.S., Europe, and others. which covers Canada and Japan. And as a result, four-year revenue in FY 2025 increased by 7.6% year-over-year to $9.67 billion. EVIT-GA process margin reflects a progress in efficiency improvements, including lower personnel expenses and significantly exceeding the FY2024 pro forma margin of 33%. The margin recorded was 37.7% despite FY2025 being the first year of integration of HR solutions of matching and solutions. For FY2026, while U.S. revenues showed strong year-over-year growth of 26% in March and 27% in April, our four-year outlook however, reflects the potential risk from the uncertain economic environment, including geopolitical tensions and commodity price volatility. In the U.S. and in Europe, Canada, and other markets, we anticipate continued monetization development, including further growth of premium-sponsored jobs. we expect steady performance of Indeed Plus and the recovery of the placement business to FY2024 levels. As a result, we expect revenues increased by 11% year-over-year on a dollar basis to more than $10 billion, while EBTA process margin is expected to increase to 41%. As Deco mentioned earlier, over the medium term, It is well within our reach to not only maintain double-digit annual revenue growth, but to achieve 20% or greater when hiring demand recovers. I also believe it is well within our reach, and at that time, we expect our EVTA plus S margin to exceed 50%. In the U.S., in fiscal year 2025, amid stagnant hiring demand, And while the total number of U.S. job postings on Indeed declined by approximately 7% year-over-year, monetization development resulted in revenue of $5.31 billion, an 8.8% year-over-year increase on a dollar basis with a U.S. ARPJ growth rate of 17%. And then fiscal year 2026, Based on our assumption for the job market, that hiring demand will remain flat after bottoming out in Q4 of FY2025. Assuming the total number of U.S. job postings on Indeed declined by approximately 4% year-over-year, our outlook is for revenue to increase by 13.6% year-over-year to $6.03 billion or 929.3 billion yen. and for U.S. OpJ to increase by 18%. We position this fiscal year as a year to steadily lay the groundwork and pave the way for further U.S. revenue growth from FY2027 onwards. Keeping in mind the Japanese proverb, haste makes waste, we intend to carefully consider the timing and pricing of new plans and product launches before executing them while maintaining close communication with our business clients. As for staffing, revenue in FY 2025 increased by 2.2% year-over-year to 1,703.4 billion yen. By region, revenue in Japan was 846.8 billion yen, and revenue in Europe, U.S., and Australia was 856.5 billion yen. EBITDA plus S margin was 5.9%, maintaining the FY2024 level. In FY2026, while we do not expect major revenue growth in Japan, our outlook for Europe, U.S., and Australia is for revenue to increase by 5.8% year-over-year in yen terms, supported by performance bottoming out in key markets and a gradual recovery trend. Our outlook is for EBTA plus S margin of 5.6%, broadly in line with FI 2025 and EBTA plus S of 100.5 billion yen. Finally, MMP. An FI 2025 lifestyle led by beauty drove revenue growth, which increased by 4.7% year-over-year to 564.6 billion yen, while EBTA plus S margin was 27.4%. In fiscal year 2026, our outlook assumes continued growth in lifestyle, and we expect revenues increase by 7.1% year-over-year to 605 billion yen. By smoothing out quarterly seasonality in sales, promotion, and advertising expenses, our outlook is for EVTA process margin of 31% in the first half, 29% in the second half, and 30% for the full year. Recruit Holdings will continue to pursue its growth strategy as a global technology company consistently amid major changes in the business environment while also working to continue to improve operational efficiency. We respectfully ask for the continued understanding and support of all stakeholders including shareholders and capital market participants. That concludes my remarks.