Welcome to the Recruit Holdings Q1 FY 2023 earnings conference call. This call is a simultaneous translation of the original call in Japanese. Translation is provided for the convenience of investors only. I am Mizuho Shen, Group Manager of Investor Relations and Public Relations. Joining me today is Junichi Arai, Executive Officer of the Corporate Planning Division. The first quarter financial results presentation video and transcript will be uploaded to the IR website at 3:00 P.M. today. All 50 minutes of today's session will be used as Q&A session. Please use the Raise Hand button and unmute yourself when you are nominated. We will take two questions per person. Jefferies, Takeuchi, please. Just a moment, please. We are just adjusting. Thank you very much for your attendance. Some large listed companies are announcing their results today at the same time, but nevertheless, you are here with us. Thank you very much. Shen, thank you very much. Thank you. Thank you. First question: PPSA, this HR Technology, PPSA is my first question. What is the impact and the hint to ascertain the potential going forward? 50% down in the paid job ads. Sales per paid job ad may be increasing by 60%, I project. By shifting to PPSA, how much per application will it go up? PPSA, what is the penetration of this in the U.S. customers? The scale and your potential going forward, please. That's my first question. Could you also ask the second question first? Thank you. This is also PPSA. It started in the U.S., 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 PPSA. It has been tested and introduced in a few other countries, too, as Idekoba said last time. Increasing the per application spend, that is also important. The first priority is how to provide high added value services to our clients so that it can be used more. We are doing trial and error, and this Pay Per 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 PPSA is. It explains, if you have time, please take a look. Just briefly, it used to be pay per click. With certain budget, clients looked for people through pay per click, but not just click. When those who are really interested to apply will be charged, as opposed to just simple click. That is the structure. In some cases, there may be no one who apply, which means no payment. Last time we said, explained the difference with PPA. When the application is clicked, it is certain amount of payment. Based on budget, based on click. This is a flow, natural flow is this PPSA from PPC. We are asking the business clients to consider and introduce this scheme. As Takeuchi just rightly said, paid job ads decreased by 50%, but the revenue has not declined as much because of this reason. There are other, other things we are trying, other factors come into play, but that is one impact. 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. One more point, if I may, the budget. If one client, say $100 a day or $300 per month, if that is the budget, this $300 will remain unchanged? and shift from PPC to PPSA. I think that's the simple way to understand this. It's not that clients are paying more. Thank you very much. One follow-up question. In that sense, from C-CPC to C, PPC to PPSA, in the near future, there will be a complete shift in the U.S.? Well, we are initiating that movement, but it's not that the shift will change completely, because it's, it, it depends on the customer. Thank you very much. Citigroup Securities, Yoneshima, please go ahead. Thank you. I also have two questions. This is kind of a follow-up on the previous question and answer. Until Q4, implementation of PPSA model seemed rather challenging. In this first quarter, I saw that you explained that promotion of this PPSA model was promoted pretty significantly. What changed? Is it because of better penetration of your measures, 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 Q1 results and Q2 outlook. When I look at them, as long as there is no rapid change in the environment, EBITDA is expected to be flat or go up. From your flash reports, I could see that there are signs of better environment, and I understand there is some unclarity throughout this fiscal year. Is it possible for you to cancel the cost reduction measures and move on to a growth track once again during this year? With the leverage maintained, can I expect a further improvement in profit if that happens together with the improvement in the environment? Thank you for your questions. To your first question, it was related to Takeuchi question. As I responded to Takeuchi, PPSA is something clients shift from PPC. PPA is a completely different product. When someone applies, it is monetized, it is charged a certain amount. PPSA, just like PPC, is consumed within the same budget. That is this pricing model. If Yamamura-san is the HR person, I think you can imagine that you are paying the same budget under the PPC model, when you shift to the PPSA model, your budget stays the same. Even if someone clicks, you will never know if that person is seriously considering to apply. Under this PPSA model, you just have to look at serious job seekers. We believe this is a high value-add service for clients, also in terms of cost, it is client friendly. That is why we are promoting this pricing model. Yoneshima mentioned promotion seemed rather difficult, and I think you were looking at PPA, not PPSA. They are similar, just with an S, but they are a totally different product, actually. Shift from PPC to PPSA has been promoted among a number of clients. I believe that is a natural shift, and I hope you can understand that situation. To your second question, my simple answer will be we are not sure yet. If we have better visibility of the external environment, well, we are expecting decreasing revenue and profit at this moment, we have uncertainties with regards to the external environment, so we're not announcing the full year guidance. Up to the second quarter, we are giving you certain visibility. Regarding the third and the fourth quarter, we still have a lack of visibility, and we're not sure what can happen. That is a better way to describe how we are feeling as of today. As of today. Well, when you say growth track, if you're referring to hiring more people, I would say we do not have a plan to implement such measure soon. For the time being, we will have a rather sensitive phase for our revenue. Now is the time to take on different challenges, to wait for the next recovery phase. ...while we control the cost. That is the view we continue to have since six months ago. That was clear. Thank you for correcting my misunderstanding. Thank you. Next is from Goldman Sachs Securities, Munakata, please. Goldman Sachs, Munakata here. Thank you very much. I have two questions. First, as the earlier questioner asked, it's on PPSA. PPA and PPSA, the differences of the business clients who use PPA and PPSA. If I'm wrong, please correct. PPSA are the, were the job posting that are doing in their internal, internally, large companies mainly. Large budget, this is a service for large companies for large budgets, so PPSA will have a larger revenue than PPA? That's my first question. Second question: HR technology cost. When you did the full year financial results briefing, SG&A, the advertisement accounts for 13%. In first and second half, the movement, the trend is quite different. If you have the results from the first quarter, I'd like to know that, as well as your forecast on the second quarter. Thank you. Thank you. For your first question, if you could remember, PPC was used by large corporates and SMEs, and PPSA is the shift from PPC, as I just said. It's not weighted towards one or the other, I think. PPA is used more by the SMEs, but depending on the purpose, large companies do use it too. Within the, the company's budget, they use something. It's not that there's a clear line between large and small and medium-sized corporates. Within their budget, they use 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 were different. That's how we explained it. Of course, we did this in fourth quarter, and we did cost reduction in March, so it is showing the result in the first quarter. Personnel cost is close to the fist half last year, and promotion and the advertisement is close to second half last year. That, I think, will be the appropriate allocation. 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 cost going forward. Thank you. That's clear. Thank you. JP Morgan, Morrison, please go ahead. Thank you. I am also interested in this topic of PPSA. You mentioned shift to PPSA and PPA. When we think about the revenue of HR technology, how much is the impact from this shift? In the first quarter, the revenue was at the... was close to the higher range of the guidance or perhaps above. Macroeconomic environment, perhaps was simply better than your expectation, but how much was the impact from this change in the pricing model? Within the same amount of budget, you said that you shift from PPC to PPSA, and that's understandable, but because of the higher value add or better convenience, does it lead to better wallet share and increased budget of your clients? Do you see any signs of that happening? From the second half to next fiscal year, macroeconomic environment is still unclear. This shift of pricing model was, I imagine, that it was expected to bring about positive benefit later in your journey, but how has been the progress? Yes, your second question is? Oh, that's all I have to ask. Okay. ... There were many things, so it's difficult to analyze and quantify the impact in terms of percentage from different elements, but that is difficult. The macroeconomic environment is never flat. There is always a certain level of impact, but short-term macroeconomic environment is deteriorating, and unit price per job 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 short term. We will consider many times going forward what we should continue and what we should quit. Increase of wallet share, increase of budget is not the main focus. On the other hand, clients who were paying may change to a type of client that does not pay a large amount only temporarily. Small budget clients may experience difficulties. If you just focus on the unit price, it may seemingly increase, but we're not looking for our sales to prosper in short term, but rather we are focusing on longer term cycle. This comes from a longer perspective, long-term perspective, to hire people among the clients. That is our philosophy. Of course, we face difficulties from a short-term perspective, but in longer term perspective, for clients and job seekers and ourselves, we just hope that we can bring about more benefits. Well, rather, you need to downsize the budgets, and clients would want to allocate budgets to more effective products. That is how I see this. PPSA shift is something you told us that you will never know what would happen unless you implement it. I think you just found out that it has had a positive effect. Well, it is a shift from PPC to PPSA, so to simply put, it's just neutral. It is not charging significantly more, but clients will have more candidates with a serious intention to apply. That means we can offer more added value to our clients. As you said, of course, we would be grateful if clients decide to allocate budgets more to this product. Comparing against previous year, maybe clients would feel that they are spending their money in better way this year because of this effective product. With this lack of clarity, it's difficult 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. SMBC Nikko Securities, Maeda, please. Thank you. I have two questions. First is the same with others, PPSA. From clients' perspective, there's not much advantage of going back to PPC. In the next one year or so, shift from PPC to PPSA, including you 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 4.1% and adjusted EBITDA, 2.0%. The profit did went down, but I cannot see why profit went down. First quarter staffing business, why did it go down? Thank you. Thank you. Staffing business, may I start from that one? Japan and overseas, the revenue trend is opposite. As we see from the past, overseas side, revenue is down, but our internal personnel costs went up. That was a big factor that pushed down the profit. We are continuing to control our margin. Mid-6% level margin is maintained from comprehensive viewpoint. Personnel cost and the associated- social security cost, including Japan, that is the plus alpha increment cost, but that cannot, could not be offset by revenue, fully offset by revenue. Let me go back to the first question. PPSA, so charging was not being applied. If you click on PPSA, it doesn't-- money does not come to us, so we do not monetize that. If it's just PPC alone, what will it be like? Those clients who enjoy the advantage will not go back. They will enjoy the current service, I think. Once this takes root, we will not go back. As you can see, it, you cannot go back, because we ha- say that we will charge in this system. It is unlikely that those two will co- coexist going forward. We said pay per click, pay per click, and then said budget base. Maybe this part was not fully communicated. I'm sorry about that. This budget-based product, PPSA, is the alternative as the budget-based product. We think it will be mostly replaced by PPSA. Of course, there will be some customers, the exception that go through agencies, but I think majority will shift. When do you think this shift will pretty much complete? Within a year, or will it 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. Thank you. We have taken all the questions that we have so far. Are there any questions from other participants or any second round of questions? I would like to have questions about the M&S SBU. Arai, please. This is Arai from Mitsubishi UFJ Morgan Stanley Securities. Can you hear me? Yes. Regarding HR technology, non-U.S. business is something I would like to ask question about. In this first quarter, it was - 1.8% year-over-year, and excluding the impact of foreign exchange, it was - 0.9%. In the first quarter, I think this is a larger decline compared to other quarters. Can you give us some more color on that? In the second quarter, what is your outlook for the non-U.S. business? My second question is... This is not related to the financial results, but Indeed job posting in the U.S. was on your website, and it was disclosed until the 28th of July. Compared to the February of 2020, it is a 120, seven, 28. So it is coming to the lower range. How do you see the situation? Well, regarding job posting, it includes things that are aggregated, so there is no significant decline. Regarding paid job ads, there is a change, as we have explained. As I responded to the other questions, some clients choose to say, stay free, and there are clients paying more. When we look at the six or nine month, compared to the decline of the volume of jobs, larger number of clients are paying for the product, and that is going to 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 a full year guidance because of such difficulty. To your second question, U.S. and non-U.S. business. Regarding the performance forecast, we are disclosing based on U.S. dollars for the entirety of the business. As always, the situation in the U.S. is kind of traced by Europe. There is a time difference. Then much later, Japan comes through the same path. That is the typical pattern. Let me see. People are terminated, people are hired. There are drastic markets and less drastic markets. Compared to the U.S., the magnitude 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. Even if there is a significant decline in the U.S., other regions don't decline as much. The revenue from the U.S. accounts for 75%, and the rest of the world accounts for 25%. The ratio of non-U.S. is expected to increase eventually. That is what we've been saying from three years ago. In the most recent disclosure, it was 70%-30%. That means the U.S. is decreasing and the non-U.S. is increased to 30%. We're hoping recovery to happen in both parts of the world. Maybe this ratio to change to 60/40, 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. In the third and the fourth quarter, as we have discussed, 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. That was very clear. Thank you. Thank you. Thank you. Macquarie Securities, Tanioka, please. Thank you. In the script, Indeed and Glassdoor access number is up year- on- year, you said. How can I look at this? In relative competitive position is changing. If you could elaborate, please. Access, number of access? This, those who are seeking for job, the access of the job seekers. The trend is that more people are coming to the site to look for new jobs. That is the trend right now. Of course, those who lost jobs are increasing, and those who are not satisfied with the current job are looking for new jobs. Mixture of those two. Compared to the past, more are coming to look for new jobs. This is increasing, and on the other hand, with the slowdown of the economy, the number of jobs available, job opening is decreasing. The supply and demand is laxing, easing, which is something we've been saying for 10 years now. If you're looking for jobs, go to Indeed. Let's go to Indeed. Let's go to look at the data on Glassdoor. And we're happy to see that there are many people who do that, and that is our value. It is realized to this day, and this trend, we think, will continue. Citigroup Securities, Yoneshima, please. Thank you for your kind suggestion. This is my second round about Matching & Solutions business. My first question is about the revenue of Matching & Solutions business. It is increasing year-over-year, and in the end of the year, including ads and pure cost, you explained how you were going to reduce cost, and we actually see- saw a increase in profitability. Is it correct that there has been no negative impact? In the HR solutions business, you worked on centralizing a point of contact for clients. In the first quarter, has there been any impact already, or is it going to happen in longer timeline? That is my first question. is, in another company, they described how advertising and a restaurant sector is decreasing. But is there any difference? Well, I'm talking about marketing solutions. Is there any difference in colors as to how different sectors are behaving recently? Well, you mentioned restaurant business, so I would like to talk about that first. Compared to the first quarter last year, compared to housing and beauty, the size of this restaurant or dining business is small. So percentage tends to seem larger in growth. But in the first quarter, there was actually a large recovery in this restaurant sector. Compared to pre-COVID, in 2019, fiscal year 2019, when we look at the first quarter, it was still at a higher level than today. We haven't recovered to that level, but in these eight or nine quarters, or in these three years, I believe we are at a relatively high level in terms of quarterly revenue for this restaurant sector. As we've discussed previously in our marketing solutions business, housing and beauty are the two largest sectors. In marketing solutions, we will continue to have about slightly over 50% revenue coming from those two sectors. These two will be enjoying a stable revenue growth. Compared to that, the size of this restaurant sector is smaller, but revenue is actually significantly increasing year-over-year. Going back to your first question, increase in revenue and cost reduction measures. Well, when you look at the first quarter, overall, JPY 200 billion revenue was the result. We will not be cutting cost if it damages our revenue. We will make sure we can maintain the revenue, but still streamline our cost. That is our business strategy. Therefore, our revenue is growing by 8.3%, correction, 10.8% as a whole. That was the result of this first quarter. In both marketing solutions and HR solutions, they were in line with our expectation in terms of reducing cost and growing the business. Especially in HR solutions business, we spent a large promotion cost last year. This year, the amount has decreased, and that is leading to better profitability of the business. We will be revisiting our strategy on a regular basis to make decisions on how to spend money. Throughout this year, we are looking at 20% overall. We like to continue to work on strict cost management to achieve 20%. Next, CLSA Securities, Kato, please. Hello, this is CLSA, CLSA, Kato speaking. Thank you. One simple question, on the overseas staffing, international staffing. Quarter-on-quarter growth is slowing down. Europe and Americas and Australia, if you could give us more color to those three regions? Give us more color to those three regions? As I, the U.S. 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. Slowdown is not that different among regions? The U.S. slowdown is the biggest. That's the rough image. TAM, it's a mirror image from TAM. As the total market, the market by country, it's almost a mirror image. Thank you. Are there any other questions from the participants? Well, we can talk about the follow-up on numbers in the analyst call. If you have questions about the big picture, we can use the remaining five minutes to answer your questions. If there are no additional questions. Okay, we would like to close this session since we don't have any more questions. Thank you very much, everyone, for your attendance.