Q2 2024 Recruit Holdings Co Ltd Earnings Call - Pre Recorded
FY 2023 means the fiscal year ending March 31, 2024. Please note that all comparisons during this conference call are year over year, unless otherwise stated.
Speaker 1: 2023. In this presentation, FY 2023 means the fiscal year ending March 31, 2024. Please note that all comparisons during this conference call are year-rear on us otherwise stated.
I will begin with the consolidated results of operations.
Consolidated revenue in Q2 decreased two 7% to $855 1 billion yet excluding the positive impact of foreign exchange revenue decreased five 7% consolidated revenue was slightly above the upper end of the outlook range of 825 to 150 billion yen, which we provided at the earnings announcement in August the expected revenue decline in <unk>.
Speaker 1: Consolidated revenue in Q2 decreased 2.7% to $855.1 billion. Excluding the positive impact of foreign exchange, revenue decreased 5.7%.
Speaker 1: Consolidated revenue was slightly above the upper end of the outlook range of 825 to 850 billion yen, which we provided at the earnings announcement in August . The expected revenue decline in HR technology and in Europe , US and Australian staffing was partially mitigated by the positive impact of foreign exchange, and revenue increased in matching and solution.
Technology and in Europe U S and Australia in staffing was partially mitigated by the positive impact of foreign exchange and revenue increased in matching and solutions Consol.
Consolidated adjusted EBITDA increased 11, 7% to $162 2 billion, which was close to the upper end of the outlook range of 143 to 166 billion in adjusted.
Speaker 1: Consolidated adjusted EBITDA increased 11.7% to 162.2 billion yen, which was close to the upper end of the outlook range of 143 to 166 billion.
Adjusted EBITDA margin increased two four percentage points to 19% due to higher adjusted EBITDA margins in HR technology and measurement solutions.
Speaker 1: Adjusted EBITDA margin increased 2.4 percentage points to 19% due to higher adjusted EBITDA margins in HR technology and matching and solutions.
Operating income increased 7% to $116 1 billion net profit attributable to owners of the parent increased 34, 9% to 115 billion due to the impact of an internal legal entity restructuring and HR technology segment, which decreased the consolidated income tax rate. This decrease in the consolidated income tax rate and a one time <unk>.
Speaker 1: Operating income increased 7% to 116.1 billion yen. Profit attributable to owners of the parent increased 34.9% to 115 billion yen due to the impact of an internal legal entity restructuring and HR technology segment which decreased the consolidated income tax.
Speaker 1: This decrease in the consolidated income tax rate is a one-time impact only for FY 2020.
<unk> only for FY 2023.
Basic EPS was $73 $4 six yen, an increase of 38, 7% and adjusted EPS. After excluding one time gains and losses was 60 441 yet.
Speaker 1: Basic EPS was 73.46 yen, an increase of 38.7%, and adjusted EPS, after excluding one-time gain losses, was 64.41 yen.
For the first half of FY 2023, consolidated revenue decreased <unk>, 9% consolidated adjusted EBITDA increased 10, 3% and adjusted EBITDA margin was 19, 2% profit attributable to owners of the parent increased 25, 5%.
Speaker 1: For the first half of FY 2023, Pansali revenue decreased 0.9%. Pansali adjusted EBITDA increased 10.3% and adjusted EBITDA margin was 19.2%. Profits attributable to owners of the parent increased 25.5%.
Today, we disclosed our outlook for Q3, FY 2023, assuming that will not be a sudden deterioration in economic environment for.
Speaker 1: Today, we disclose our outlook for Q3 FY 2023, assuming that will not be a sudden deterioration in the economic environment.
For Q3, we expect consolidated revenue to be in the range of 840 860 billion yet a decrease of four 6% to two 3% adjust.
Speaker 1: For Q3, we expect consolidated revenue to be in the range of 840 to 860 billion yen, a decrease of 4.6% to 2.3%.
Adjusted EBITDA is expected to be in the range of 130 to 145 billion yen due to the uncertain outlook in the HR management market, particularly for Q4 FY 2023, we are again not providing full year FY 2023 guidance at this time, we expect to provide consolidated full year guidance when it becomes reasonably feasible to do so.
Speaker 1: Just as Ibasons expected to be in a range of 130 to 145 billion yen, due to the uncertain outlook in the ATR management market, particularly for Q4 FY 2023. We are again not providing fully or FY 2023 guidance at this.
Speaker 1: We expect to provide custodial and phlegal gains when it becomes reasonably feasible to do...
We previously announced that we expected decline in both revenue and adjusted EBITDA for the full year our.
Speaker 1: We previously announced that we expected to client both revenue and adjusted ebidop of flea.
Our expectation for a decline in revenue remains unchanged. However, based on our first half performance and assuming the current business environment does not deteriorate significantly we believe adjusted EBITDA for the full year will either decreased slightly or remain at the same level compared to last year. Additionally, no significant onetime losses are incurred in the second half of this fiscal year profit attributable to owners of the parent and basic.
Speaker 1: Perfection for a decline in revenue remains unchanged. However, based on the first half performance and assuming the current business environment does not deteriorate significantly, we believe that Justin even thought for the full year will either decrease slightly or remain at the same level as I've had to last.
Speaker 1: Additionally, no significant one-time losses are incurred in the second half of this fiscal year. Profit attributable to owners of the parent and basic EPS are expected to increase this fiscal year, as a result of the lower consolidated income tax rate mentioned earlier. Now, I will explain the second-footed results and the third-quarter outlook for each business.
EPS are expected to increase this fiscal year as a result of the lower consolidated income tax rate mentioned earlier.
I'll explain the second quarter results and third quarter outlook for each business segment.
First I will talk about HR technology U S. Dollar based revenue was $1 77 billion, representing a decrease of five 2% quarter over quarter. This result was close to the midpoint of the previously announced outlook range provided in August which wasn't expected decrease of 7% to two 5% from the first quarter of the fiscal year.
Speaker 1: First, I will talk about HR technology. US dollar-based revenue was $1.77 billion, representing a decrease of 5.2% quarter of a quarter. This result was close to the midpoint of the previously announced elephant rain provided in August , which was an expected decrease of 7% to 2.5% from the first quarter of the fiscal-
Year over year U S. Dollar based revenue decreased 18, 2% or 19, 1% on a constant currency basis.
Speaker 1: Year over year US dollar based revenue decreased 18.2% or 19.1% on a constant currency.
On a U S dollar basis revenue in the U S decreased six 5% while outside of the U S revenue decreased one 9% quarter over quarter.
Speaker 1: on a US dollar basis, revenue in the US decreased 6.5%. While outside of the US, revenue decreased 1.9% quarter of it.
Year over year basis revenue in the U S decreased 23, 5% and two 9% outside of the U S. On a Japanese yen basis revenue decreased <unk>, 2% quarter over quarter, and 14, 4% year over year.
Speaker 1: On a year-over-year basis, revenue in the US decreased 23.5% and 2.9% outside of the
Speaker 1: On a Japanese YAN basis, revenue decreases 0.2% quarter of a quarter and 14.4% of the Euro.
Although the labor market remains tight globally and total job openings were still about pre pandemic levels from February one 2020, the supply and demand mismatch between John seekers and employers continue to ease. This was also reflected on indeed and glassdoor, while total job postings, which include both free and sponsored listings continued to decrease job seeker activity as measured by traffic and applies on our hiring platforms continued to.
Speaker 1: Although the labor market remained tight globally, in total job openings were still about pre-pandemic levels from February 1, 2020, the supply and demand mismanagement between job seekers and employers continued to ease.
Speaker 1: This was also reflected on indeeding glass door. While total job posting, which include both free and sponsored listings, continued to decrease, job seeker activity is measured by traffic and applies on our hiring platforms, continued to increase.
In Q2, and this total job openings in the U S were down approximately 16% year over year, while paid job ads declined approximately 50% compared to the same period last year when hiring demand with near its peak.
Speaker 1: Q2, indeed the total job openings in the US were down approximately 16% year over year, while paid job ads declined approximately 50% compared to the same period last year, when hiring demand was near its peak.
The decline in paid job ads can be attributed to two primary factors easing of the tightness in the labor market and ongoing enhancements to indeed pricing model, which are designed to deliver a better job search and hiring experienced jobseekers and employers in particular pricing improvements, including the shift to paper started application in combination with minimum budgets were further implemented.
Speaker 1: Client and paid job ads can be attributed to two primary factors. The easing of the technical labor market and ongoing enhancements to indeed pricing model, which are designed to deliver a better job search and hiring experience for job seekers and employers. In particular, pricing improvements, including the shift to paper started application in combination with minimum budgets, were further implemented. These changes led to a continued decline in the overall volume of paid jobs on Indeed, especially for jobs with very low budgets. As a result, the average revenue for job ad increase.
These changes led to a continued decline in the overall volume of pay jobs on indeed, especially for jobs with very low budget as a result, the average revenue per job and increased <unk>.
Given that these pricing adjustments and improvements are expected to continue impacting paid job add volumes on indeed. This metric is no longer considered to be a reliable indicator of HR technology revenue trends. Consequently, we will no longer report the change in the number of paid jobs on a quarterly basis. Adjusted EBITDA was $92 1 billion yen, resulting in an adjusted EBITDA margin of 35.
8% slightly above the midpoint of the outlook range announced in August from 33% to 37%.
Adjusted EBITDA margin increased five five percentage points, primarily due to lower advertising expenses and personnel costs. However, adjusted EBITDA margin decreased two two percentage points quarter over quarter.
For the six months period revenue on a us dollar basis in the U S decreased 21% and revenue outside of the U S decreased two 4% year over year cost control measures have been implemented throughout the first half of FY 2023, as a result sales commission promotion expenses and advertising expenses amounted to approximately 11% of revenue while employee benefit expense.
Speaker 1: For the six months period, revenue on a US dollar basis in the US decreased 21%, and revenue outside of the US decreased 2.4% year over year.
And service outsourcing expenses totaled approximately 51% of revenue adjusted EBITDA increased one 9% to $190 2 billion yen and adjusted EBITDA margin was 36, 9%.
Speaker 1: adjusted EBITDA increase 1.9% to 190.2 billion yen and adjusted EBITDA margin was 36.9%.
Regarding our third quarter in FY 2023 outlook.
Speaker 1: Regarding our third quarter in FY 2023 outlook, we expect revenue in Q3 will decline approximately 9% quarter over quarter, which is equal to a decrease of approximately 18% year over year. Revenue on a US dollar basis in October decreased approximately 18%. Just at EVA DOM larger for Q3 is expected to be approximately 27%. As we expect operating expenses to remain approximately flat quarter over quarter, while revenue decline.
Revenue in Q3 will decline approximately 9% quarter over quarter, which is equal to a decrease of approximately 18% year over year.
Revenue on a us dollar basis in October decreased approximately 18% adjusted EBITDA margin for Q3 is expected to be approximately 27% as we expect operating expenses to remain approximately flat quarter over quarter, while revenue declines.
Going forward, we will respond to changes in the business environment and implement appropriate cost control measures as needed while balancing continued strategic investments for long term growth as we had mentioned previously in May we do not prioritize maintaining a specific adjusted EBITDA margin level such as the level. We expect for Q3 as for the FY 2023 outlook for HR technology since we expect the year over year decrease.
Speaker 1: Going forward, we will respond to changes in the business environment and implement appropriate cost control measures as needed, while balancing continued strategic investments for long-term growth. As we have mentioned previously in May, we do not prioritize maintaining a specific adjusted EBITDA margin level, such as a level we expect for Q3. As for the FY 2023 outlook for HR technology, since we expect a year-over-year decrease in revenue and adjusted EBITDA for the second half of the fiscal year, the full year outlook for a decrease in both revenue and adjusted EBITDA for HR technology remains unchanged.
<unk> and revenue and adjusted EBITDA for the second half of the fiscal year, our full year outlook for a decrease in both revenue and adjusted EBITDA for HR technology remains unchanged at the Fireside chat and May Tycho presented a hypothetical.
Speaker 1: The fireside chat in May, Deco presented a hypothetical scenario. If revenues declined 20% in HR technology for FY 2023, adjusted EBITDA margin would be around the mid 20s. Considering the progress on cost controls implemented during the first half of fiscal...
The vertical scenario if revenue declined 20% in HR technology for FY 2023, adjusted EBITA margin would be around the mid twenties, considering the progress on cost controls implemented during the first half of the fiscal year. We now anticipate the margin would be in the upper Twenty's range under this hypothetical scenario in which the business environment Q4 becomes more challenging than we currently expect.
Next I will talk about the results of matching and solutions revenue and measurement solutions was $200 1 billion, an increase of eight 1% with revenue growth both in marketing solutions and HR solutions. Adjusted EBITDA increased 65, 5% to $46 2 billion yen due to appropriate cost control measures related to advertising expenses will come.
To invest in marketing activities and other areas for future growth.
Adjusted EBITDA margin was 23, 1% an increase of eight percentage points revenue and marketing solutions was $123 4 billion, an increase of 10, 3% exceeding our outlook revenue increased across all verticals, including housing real estate beauty travel bridal and diamond at the bidding environment in Japan remained relatively stable compared to Q1.
Revenue in housing and real estate increased due to higher advertising demand from business clients revenue and beauty increased due to continued growth in new business clients revenue travel increased mainly due to higher unit prices driven by stronger demand from overseas travelers.
<unk> EBITDA margin for marketing solutions was approximately 32% due to appropriate cost controls mainly related to advertising expenses SaaS.
SaaS business represented by Air business tools is included and marketing solutions. During Q2, the number of SaaS accounts rose, 22% to $3 $46 million driven by growth in air <unk> and air shift accounts in HR solutions. The outlook provided in August with revenue growth of approximately 9%. However, the job advertising service did not grow as much as.
<unk> due to lower demand from some business clients at the same time demand for the placement service continued to increase as the recruiting market as a whole saw continued growth in hiring demand across a wide range of industries. As a result revenue in HR solutions increased approximately five 5% to $74 1 billion yen in Q2, FY 2023, adjusted EBITDA margin for HRS.
Solutions was approximately 21%.
For the six months period revenue and marketing solutions increased 10, 7% and revenue HR solutions increased eight 4% total revenue and matching and solutions increased nine 4% of total amount of sales Commission and promotion expenses and advertising expenses were approximately 21% of revenue and employee benefit expenses and service outsourcing expenses totaled approximately 40 <unk>.
Net of revenue.
Adjusted EBITDA increased 49, 7% to $88 7 billion and adjusted EBITDA margin was 22, 2% adjusted EBITDA margin for marketing solutions with approximately 30% and for HR solutions was approximately 23% regarding the Q3 outlook for matching and solutions revenue and marketing solutions for Q3 is expected to increase.
Proximately, 7% year over year and revenue in HR solutions for Q3 is expected to increase approximately 2% year over year. Adjusted EBITDA margin is expected to be approximately 23% in Q3 regarding the FY 2023 outlook on May 15th earnings call, We had announced that revenue and marketing solutions was expected to increase by approximately 4% and an interest.
Solutions by approximately 6% and adjusted EBIT margin was expected to be approximately 20%. However, we revised our outlook to an increase in revenue marketing solutions of approximately eight 5% and an increase in revenue in HR solutions of approximately four 5%. This is based on the results of the first half of the fiscal year and the most recent second half outlook for each area assuming that Japan.
Economic environment will not change significantly the outlook for adjusted EBITDA margin of approximately 20% for FY 2023 remains unchanged as we plan to put significant advertising expenses in Q4 as in previous years.
Next I will talk about the results of staffing revenue in Q2 was $406 3 billion, an increase of one 5% or a decrease of two 4% on a constant currency basis revenue in Japan was 184 billion yen an increase of 10, 9% driven by an increase in the number of temporary staff on assignment as a result of continued growth in demand for <unk>.
<unk> services revenue in Europe U S and Australia was $222 2 billion a decrease of five 1% a decrease of 11, 8% on a constant currency basis, the demand for temporary staffing services slow continuously against the backdrop of an uncertain economic outlook adjusted EBITDA for the segment was $25 3 billion yen to decrease.
Of nine 2% and adjusted EBITDA margin was six 2% in the first half of FY 2023 revenue in Japan increased 11, 8% while revenue in Europe U S and Australia decreased three 8% adjusted EBITDA for the first half of FY 2023 was 52 billion a decrease of five 6%.
Regarding the Q3 outlook for staffing quarter over quarter revenue is expected to increase approximately 4% year over year revenue in Japan is expected to increase approximately 11% and revenue in Europe U S and Australia is expected to decrease approximately 5% adjusted EBITDA margin is expected to be approximately 7% on may 15th we announced that revenue for staffing in Japan was expect.
It to increase by approximately 9% for FY 2023, but this has been revised upwards to approximately 10% based on the results of the first half and the outlook for the second half at the same time, we expect demand for temporary staffing services in Europe U S and Australia.
To slow due to the uncertain economic outlook the outlook for adjusted EBIT margin of 6% for FY 2023 remains unchanged at this point please refer to the IR website for more details.
Finally, I would like to provide an additional breakdown of revenue and the marketing solutions business in matching and solutions since the reorganization of core operating and functional subsidiaries into matching and solutions in April 2021, we've not disclosed revenue for each vertical marketing solutions. However, we've received a number of questions from global institutional investors about each vertical and about the <unk>.
<unk> and progress of our SaaS business to help you better understand our strategic pillar help businesses work smarter in Japan, we have decided to disclose the breakdown of revenue and marketing solutions for the first half of FY 2023.
The breakdown in line with the current business strategy as shown in this Pie chart. We believe it is appropriate to look at beauty traveling dining together with SaaS as those verticals have the highest need among our business clients for SAP solutions and the highest number of actions by individual users among our matching platforms in the first half of FY 2023 revenue in these three verticals, including from SAS solution.
<unk> increased approximately 17% to 120 billion yen year over year, which is approximately 50% of the total revenue marketing solutions revenue of beauty, which represents approximately 22% of total revenue and marketing solutions increased steadily or approximately 8% year over year to $52 7 billion in the first half of FY 2023. Additionally.
Revenue in travel dining and SaaS solutions, each increased significantly compared to the same period last year.
Air business tools has not only helped us strengthen relationships with existing business clients, but it also will help us acquire new clients across various industries are paying and SaaS solutions continues to perform well gross payment volume, which is a <unk> of our strategic pillar health businesses work smarter and a crucial element to expand Fintech services is growing steadily we're advancing it.
Our effort to establish a unique ecosystem in Japan housing and real estate is our largest business and marketing solutions with revenue of $70 1 billion yen or approximately 29% of overall revenue and marketing solutions in the first half of FY 2023, others, and marketing solutions, including par education, bridal and others account for approximately 21% of revenue.
We aim to grow revenue in housing and real estate and others in the future by continuously providing services, which offer greater convenience for both individual users and business clients. While further enhancing our services. This concludes my presentation. Thank you.
Yes.