Q1 2024 Recruit Holdings Co Ltd Earnings Call

<unk> will be used at the Q&A session. Please use the raise hand button and on mute yourself. When you are nominated we.

We will take two questions per person.

Okay.

Jefferies Securities bucket with something.

Yeah.

Just a moment please.

Yeah.

Oh, we're just adjusting.

Thank you very much for your attendance.

Okay.

Some large listed companies are announcing their results today at the same time, but nevertheless, you are here with us. Thank you very much.

Thank you Simon Thank you very much.

Thank you.

Thank you.

First question.

P B S a.

This HR technology P. P. S. A is my first question what is the impact and of the hint to ascertain the potential going forward.

So the.

50% down in the paid job ads.

So sales per paid job at maybe increasing by 60% I project.

So by shifting to P. P. S. Eight how much per application will it go up and P. P. S E. How.

What is the penetration of this in the U S customers. So the scale and your potential going forward. Please that's my first question.

Could you also ask the second question first thank.

Thank you.

This is also a P b S a.

It started in the U S. But what is the schedule of this development outside of the U S.

Thank you very much thank you for today.

In a few other countries. We are testing this P. P S age.

Yeah.

So it has been tested and introduced in a few other countries too.

As they called US and said last time.

Increasing the.

Per application I spend that is also.

Important but the first priority is how to provide high added value services to our clients and so that it can be used more.

So we are doing trial and error and.

This.

Paper's sports started application is part of that effort.

If you visit the site.

You can see especially the U S corporate clients.

Tutorial for the corporate clients on what P. P. S. A is it explains so if you have time, please take a look but just briefly.

The it used to be paper clip.

So with certain budget clients.

Looked for people through paper click.

But.

Not just quick.

When those who are really interested to apply will be charged.

As opposed to just simple quick.

So that is the structure.

So in some cases, there may be no, one who apply which means no payments.

But.

Last time, we said.

<unk> explained the difference with P. P a.

When the application is clicked it.

There is a certain amount of payments.

And.

Did so based on budget based on quick out.

So this is a slow natural flow is this P. D F. A from P. B C.

So we are asking the business clients to consider in introduced this scheme. So advocate Suntrust rightly said.

Yeah.

Pay job ads decreased by 50%, but the revenue has not declined as much because of this reason and there are there other things. We are trying other factors come into play but that is one impact.

And for your second question, we started in the U S and testing in other countries too in some other advanced nations developed nations.

Thank you very much and one more point, if I may about it.

So if.

One client.

There's a $100 a day or $300 per month, if that is the budget. This $300 will remain unchanged.

And shift from P. B C P B S. A.

I think that's the simple way to understand this so it's not that clients are paying more.

Thank you very much one follow up question.

So in that sense from C. C. D. C. D E. P. P feed the P. P S. A.

In the near future. This there will be a complete shift in the U S.

Well, we are initiating that movement, but its not that this shift will change completely because its a it depends on the customer.

Thank you very much.

Citigroup Securities Yamana Marathon. Please go ahead.

Thank you.

I also have two questions.

This is a kind of a follow up on the previous question and answer until Q4.

Implementation of P. P S. A model all seemed rather challenging.

But in the first quarter I saw that.

You explained that our promotion of this a P. P. S. A model a was a promoted a pretty significantly what changed is it because of a better penetration of your measures are better understanding in the market.

Can you give us some more color on that that is my first question.

Can you. Please also ask your second question as well.

Right. My second question is.

Our Q1 results and our Q2 outlook when I look at them.

As long as there is no rapid change in the environment. Our EBITDA is expected to be a flat.

Or go up but.

From your all Flash reports I could see that there are signs of better environment and I understand there is some unclear to you oh throughout this fiscal year.

But.

Is it possible for you to cancel the cost reduction measures and I'll move on to a growth track once again during this year.

And with these levers maintained Oh can I expect a further improvement in profit if that happens together with improvement in the environment.

Thank you for your questions for your first question. It was related to this our coaches zones question.

And as I responded to Taco to Sun.

P P F E.

Is it something clients shift from P. P C.

P. P. A is a completely different product when someone applies.

It is monetized it is charged.

A certain amount.

So P. P. S. A it just like P. P. C is consumed within the same budget.

That is this pricing model.

If you remember iPhone is the HR person.

I think you can imagine that the European the same budget under the P. P. C model and when you shift to the P. P. S. A model your budget stays the same.

And.

Even if someone clicks you will never know if that person is seriously considering to apply but under this P. B S. A model you'll just have to look at a furious job seekers.

We believe this is a high value up service for our clients.

And also in terms of calls diet is oh client friendly.

That is why we are promoting this pricing model.

I am a marathon.

Mentioned promotion seemed rather difficult and I think you were looking at P. P. A.

Not P. P. S. A they are similar drop with an S. But they are a totally different product actually.

So shift from PBC to P. P S. A.

Has been a promoted amongst a number of clients.

And I believe that is a natural shift and I hope you can understand that situation and to your second question on my simple answer will be we are not sure yet.

If we have better visibility of the external environment, where we are expected decrease in revenue and profit at this moment and we have uncertainties are with regards to the external environment. So we're not announcing our full year guidance.

So up to.

The second quarter, and we are giving you a certain visibility, but regarding the third and the fourth quarter, we still a have.

The lack of visibility and we're not sure what can happen on that.

Is a better way to describe how we are feeling as of today.

So as of today.

Well when you say growth truck, a if you're referring to hiring more people.

I would say, we do not have a plan to implement such measure.

Soon and for the time being a we will have a rather sensitive Ah phase Oh for our revenue.

So now is the time to take on different challenges to wait for the next recovery phase.

While we control the cost.

That is.

On the view, we continue to have this six months ago.

It was clear thank you for correcting my misunderstanding.

Thank you next is from Goldman Sachs Securities Monaco assemblies.

Goldman Sachs and when I got that here. Thank you very much.

I have two questions.

First.

As the earlier question there asked it's P. P. S. A P. P. A M P. P S. A.

The difference of the business clients, who use D. P. A M. P. B S. A if I'm wrong. Please correct P. B S. A R.

Well the job posting that are doing in their own internal up.

Internally large companies mainly.

Then large budget. This the service for a large company for large budgets, though P. B S. A will have a larger revenue than P. B E.

That's my first question.

Second question.

HR technology cost.

When you did the a full year.

Financial results briefing SG&A the advertisement.

Accounts for 13%.

And first and second half the movement to the trend is quite different.

Yeah.

If you have the results from the first quarter I'd like to know that as you ballsy our forecast on the second quarter. Thank you.

Thank you.

So for your first question.

If you could remember.

P D C was.

Used by large corporates and Smes and.

And P. P S a.

Is the shift from P. P C.

As I just said.

So it's not weighted towards one or the other.

Yeah.

I think.

P P a.

Is used more by the Smes.

But.

Depending on the purpose large companies, who do use it too.

So within need the company's budget are they use something it's not that there is a clear line between large and.

Small and medium size corporates, so within their budget, they use or certain portion for this or that.

SG&A breakdown.

Looking back on the past year.

First half and second half last year.

The cost and the content we're different.

That's how we explained it.

Of course.

We did this in the fourth quarter.

And we did cost reduction in March.

So it is showing the result in the first quarter.

Yeah.

Personnel.

Cost is close to the first half last year.

And promotion and the advertisement.

It is close to second half last year.

So that I think will be the appropriate allocation.

And Uh huh.

Not on a quarterly basis, but in a half year or full year basis.

We want to give you the image of the allocation the breakdown of the costs going forward. Thank you that's clear.

Thank you.

JP Morgan a worrisome. Please go ahead.

Yeah.

Thank you.

Yeah.

I am also interested in this topic.

P P S a.

So you mentioned shift to P. P. S. A M P P a.

When we think about the Virginia of HR technology, how much is the impact from this shift in the first quarter of the revenue was at the was close to the higher range of the guidance where are perhaps above.

Macro economic environment, Oh, perhaps was simply better than your expectation, but how much was the impact from this a change in the pricing model.

And within the same amount of budget.

You said that you shift from P. P feed to the P. S a and that's understandable but.

Because of the higher value add or a better convenience.

Does it lead to better wallet share and increased budgets of your clients.

Or do you see any signs of that happening.

From the second half to next fiscal year, our macroeconomic environment is still unclear.

And the shift of pricing model.

Oh, It was I imagine that it was expected to bring about positive benefit.

Benefit later in your journey, but how has been the progress.

Yes, and they were second question is.

Well, that's all I had to ask.

Okay.

There were many things so its difficult to analyze and quantify the impact in terms of percentage from different elements, but that is difficult.

The macroeconomic environment is never flopped.

There is always a.

A certain.

Level of impact.

But short term macroeconomic environment.

Is.

Deteriorating.

And our unit price per job Ah is increased in order to survive. This time that is not the operation we have.

We want to make sure that the measures we take today will lead to enhancing value in the future, even though we may lead to a deterioration of performance in the short term.

So we will consider many times so going forward, what we should continue and what we should quit.

Increase of wallet share increase of budget is not the main focus.

And on the other hand.

Clients are who were paying.

Me a change to a type of client that does not pay a large amount are only temporarily.

Yeah.

And small budget clients may experience difficulties. So if you just focus on the unit price I'm amazed seemingly increased.

But we're not looking for.

Our Ah self to prosper in the short term, but rather we are focusing on longer term cycle.

And this comes from a a longer perspective long term perspective to hire people among the clients about is our philosophy.

Of course, we face difficulties from a short term perspective, but in longer term perspective for our clients and on Jobseekers and ourselves are we just hope that we can bring about a more benefits.

Well, rather you need to downsize the budgets and clients would want to allocate budgets to more effective paradox thought is how I see this P. P. S. A shift is.

Something you told US that you will never know what would happen unless you are implemented and Oh I think.

As you found out that I have had a positive effect.

Well it is a shift from P. P C to P. P. S. A so to simply put it's just neutral on it if not charging significantly more.

But clients will have more candidates with a serious intention to apply.

So that means we can offer more out of value to our clients. So as you said hum.

Of course, we would be grateful if clients decide to allocate budgets more onto this product, but are comparing against a previous theory, maybe clients would feel that they are spending their money in better way. This year because of this effective product, but with this lack of clarity its.

Nickel to foresee a future where clients would increase the amount of the entire budget.

Well if we can continue this I think it is going to be a positive thing.

Thank you. Thank you.

F N B C Nikko Securities Might've Friendly's.

Yeah.

Okay.

Thank you.

I have two questions.

First is the same with others P. P S. A.

So from clients perspective.

Ah theres not much advantage of going back to P. B C. So in the next one year or so shift from P. P. C. P b S a including.

Including the U promoting them will will move forward or will they coexist in the near future. That's my first question second question is about the staffing results.

Overall revenue is four 1% and adjusted EBITDA need 2.0%. So the profit went down.

But I cannot see why profit went down first quarter staffing business why did it go down.

<unk>.

Thank you so staffing business may I start from that one.

Yeah.

So in Japan and overseas.

Yeah.

Yeah.

The revenue trend is opposite.

So as we see from the past oversee side.

Revenue is down.

But.

Our internal personnel costs went up.

So that was a big factor that pushed down the profit.

But we are continuing to control our margin.

Yeah.

So mid 6% level margin.

Is maintained.

From comprehensive viewpoint, so personnel cost and the associated.

Social security cost, including Japan that is D plus alpha increment cost, but that cannot could not be offset by revenue fully offset by revenue.

Yeah.

So.

Let me go back to the first question.

Yeah.

P P S a.

So.

Charging what's not being applied so if you click on P. P. S. A it doesn't have money does not come to us.

So we do not monetize that.

Okay.

Yeah.

So if it's just P. P C alone.

What will it be like.

Yeah.

Those clients, who enjoy the advantage will not go back they will enjoy the current service I think.

Yeah.

So once this takes root.

We will not go back and.

As you can see.

Yeah.

You cannot go back.

Because we have to say that we will charge in this system.

So it is unlikely that those two will go co exist going forward.

Yeah.

Yeah.

So we've said Ah.

Pay per click pay per click.

And then said budget base.

So maybe this part was not fully communicated I'm sorry about that.

But this budget based product.

P B S a as the alternative.

S deposit based product.

So we think it will be mostly were placed via E. P. S. A.

Of course, there will be some.

Customer.

Customers are the exception that go through agencies, but I think majority will shift.

So when do you think this shift will pretty much complete within a year or.

Well it might be more drastic or quick.

Within a quarter or so.

Within a year it will be pretty much replaced thank you.

In other words.

There's no option to go back.

Okay.

Thank you.

We have taken are all the questions that we have so far but are there any questions from other participants or any second round of questions.

I would like to have questions about.

The <unk> S P a.

And Oh iPhone all please.

This is a right from Mitsubishi <unk> Morgan Stanley Securities can you hear me yes.

Okay.

So regarding HR technology.

Non U S business is something I would like to ask a question about so in the first quarter.

It was minus one 8% year over year and excluding.

The impact of foreign exchange it was minus <unk>, 9%.

So in the first quarter I think this is a larger decline compared to other quarters.

So can you give us some more color on that and.

In the second quarter, what is your outlook for the non U S business and my second question is.

This is not related to the financial results, but Ah indeed job posting in the U S was on your website and.

It was disclosed until the 20th of July .

And compared to the February of 2020 are it is a 127 28, so it as we're coming to the a the lower range. So how do you see the situation well recording job posting.

It includes things that are aggregated.

So there is no significant decline.

And.

Regarding paid joke of.

There is a change as we have explained.

Yeah.

And as I responded to the other questions.

Oh, some clients choose to say stay free.

And there are clients paying more so when we look at the six or nine months.

The compared to the decline of the volume of our jobs larger number of clients are paying for the product.

And that is going to.

<unk> lead to future results.

The entire pie is seemingly coming down.

But there is also a possibility that this can decline further.

That is why we are not disclosing our full year guidance.

Because of such difficulty.

Okay.

And to your second question, our U S and non U S business.

Regarding the performance forecast.

We are just closing based on U S dollars are for the entirety of the business.

Yeah.

But as always.

The situation in the U S is kind of traced finally Europe . There is a time difference.

And then a much later, Japan crumbs.

Yeah.

Through the same path.

That is the typical pattern.

So let me see.

Our people are terminated people are hired him there are drastic markets and less drastic markets.

Compared to the U S.

The the mountains intuit or the liquidity of the HR market is not high in other countries, including Japan.

I believe that is the key difference between the U S and non U S markets as I have always explained so even if there is a.

A significant decline in the U S. Other regions Oh.

Don't decline as much.

Budd.

The revenue from the U S is account for 75% of the rest of the world accounts for 25%.

And the the ratio of non U S is expected to increase eventually that is what we've been saying from three years ago.

But in the most recent disclosure it was 70% to 30%.

That means the U S is a decreasing and the non U S is increased to 30%.

So we were hoping recovery to happen in both parts of the world.

And maybe this ratio to change to 60 to 40.

But that is not what we're seeing today.

The U S is weakening and the rest of the world is kind of a flattish or slightly declining.

That is the image we have for the second quarter.

But in the third and the fourth quarter.

As we have discussed them it is still not clear.

In November .

We hope to have a better visibility to share with you, but as of today the situation has not changed.

And that was very clear. Thank you. Thank you.

Thank you.

Macquarie Securities Paniagua from please.

Thank you.

So in the script indeed in glass door access number is up year on year you said.

How can I look at this as a whole and relative competitive position and changing.

So if you could elaborate please.

Excess number of access.

Those who are seeking a job the access of the job seekers. So.

The trend is that more people are.

Are coming to the site.

To look for new jobs.

Okay.

And that is the trend right now.

Of course, those who lost jobs are increasing.

And those are not satisfied with the current job won't or looking for new jobs. So a mixture of those two.

Compared to the past.

More are coming to look for new jobs.

So this is increasing and on the other hand with the slowdown of the economy.

Of the number of jobs available a job opening is.

Decreasing.

So the supply and demand is lexing easing.

Which is something we've been saying for 10 years now.

If youre looking for jobs go to indeed, let's go to indeed, let's go out and look at the data on Glassdoor and so we're happy to see that there are many people who do that and that is our value.

It is realized to the day and this trend we think will continue.

Hi.

Yes.

<unk> Citigroup securities humour marathon please.

Thank you for your kind of suggestion. So this is my second round about a matching of solutions business.

My first question is.

Yeah.

About the revenue of marching in solutions business, it is increasing year on year.

And in the end of the ear, including oven a pure cost.

You explained how you were going to reduce our cost and we actually see fall a increasing our profitability.

The is it correct that there has been no negative impact and in the HR solutions business are you worked on centralizing our corner of contract for our clients and in the first quarter have there been any impact already or is it a go into happening longer timeline.

<unk>.

That is my first question and my second question is.

Is.

In another company. They this crime not how advertising and Ah Ah Ah restaurant sector is a decreasing but is there any difference oh, well I'm talking about marketing solutions is there any.

France and colors are as to how different sectors are behaving recently.

Well, you mentioned restaurant business, so I would like to talk about that first.

Okay.

Compared to the first quarter last year.

Compared to housing and beauty.

The the size of this a restaurant where dining our business is small.

So percentage tends to seem larger.

And gross.

But in the first quarter.

There was actually a large recovery are in this are restaurant sector compared to pre COVID-19.

[noise] in 2019 fiscal year 'twenty 19, when we look at the first quarter.

It was still at a higher level than today.

So we havent recovered to that level, but.

In these eight or nine quarters.

Or in the three years I believe we're at a relatively high level in terms of quarterly revenue for this the restaurant sector.

And as we've discussed previously.

Previously in our marketing solutions business.

Housing in beauty are the two largest factors.

So.

In marketing solutions, So we walk in.

She needs to have.

About slightly over 50% of revenue coming from those two sectors.

These two will be.

Enjoying a stable revenue growth.

Compared to that.

The size of there's the restaurant sector is smaller but revenue.

Is actually significantly increasing year over year.

And going back to your first question.

Our increase in revenue.

And cost reduction measures well when you look at the first quarter overall two.

200 billion yen revenue was the result.

Yeah.

So.

Well, we are we're not be cutting cost is it damages or revenue. So we will make sure. We can maintain the revenue but are still streamline our cost in that as our business strategy.

Therefore.

Our revenue is growing by eight 3%.

Yeah.

Correction 10, 8%.

As a whole.

That was the result of this first quarter.

In both marketing and <unk> solutions.

They were in line with our expectation.

In terms of reducing cost and growing the business.

Especially in HR solutions business.

We are.

<unk> spent a large promotion cost.

Last year.

But this year the amount has decreased and that is leading to better profitability of the business.

So we will be revisiting our strategy on a regular basis to make decisions on how to spend money.

Throughout.

This ear.

We were looking at 20% overall.

Oh, we like to.

Continue to work on the strict cost management to achieve 20%.

Next CLSA Securities couple of assemblies.

Hello. This is CFO at CLSA cut all speaking.

Thank you.

One simple question on the overseas.

Staffing international staffing.

So quarter on quarter growth is slowing down.

So Europe , and Americas, and Australia, if you could give us more color or two of those three regions.

As I said earlier the U S.

Yes.

And the other regions are have a time lag from the U S.

So the biggest slowdown is U S. U S is the most difficult market.

Followed by the U K.

Europe .

They will come follow with a certain time lag Australia.

Has been difficult all along.

So that I think will be the color I hope this answers your question.

Okay. So.

Slow down is not that different among regions.

The U S slowdown is the biggest.

That's the rough image okay.

Tam.

Yeah.

If it's a mirror image from Tam.

The total market.

The.

Market by country, it's almost a mirror image. Thank you.

Okay.

Okay.

Are there any other questions from the participants.

Well, we can talk about are the follow up on numbers in the analyst call. So if you have questions about our the the big picture, but can use the remaining five minutes to answer your questions.

But if there are no additional questions.

Ah. Okay, then we would like to close this session office, we don't have any more questions. Thank you very much everyone for your attendance.

Okay.