Welcome to the Recruit Holdings Company Limited Q1 FY 2024 earnings conference call. This call is the simultaneous translation of the original call in Japanese, and translation is provided for the convenience of investors only. I am Mizuho from IR and PR, and joining me today is Junichi Arai, Senior Vice President, Corporate Strategy and Investor Relations of Recruit Holdings. The Q1 financial results presentation video and transcript were uploaded to the IR website at 3:00 P.M. today. Today, we will start with Jun's opening remarks, then followed by a Q&A session. Now I pass the call to Jun. Please go ahead. Hello, everyone. Thank you very much for your attendance today. Before I take your questions, I would like to make a few additions to the presentation we disclosed at 3:00 P.M., just one hour ago. Three months ago, in the FY 2023 earnings announcement on May fifteenth, Deko said the following about the positioning of the current fiscal year and the background behind FY 2024 guidance, especially for the HR Technology business. Let me once again refer to that. When I was thinking about this message this morning, Hiraoka-san of Nikkei wrote an article on the eyes from the journalist about us, and I think this article is only in Japanese, so I hope this will be translated into English so that the overseas institutional investors can take a look. Regarding the content that we disclosed on May fifteenth, our thinking behind and my meetings in July were summarized well in the article. Exactly the message I wanted to talk about today, and so it will be redundant with that article, but let me once again mention this. What Deko said on May fifteenth is the following: "Of course, financial market stress is increasing under high interest rate conditions, and economic uncertainties remain high. As I mentioned earlier, against the background that the supply of workers to the job market in the U.S. is not increasing significantly as in the past, and even if a recession occurs, we believe that it is unlikely that the number of job openings will decline by another 3 million or so from the current level. We assume that the number of job, job openings in the U.S. will hit the bottom after decreasing for another 18 or 24 months. In FY 2024, we would like to operate in the year zero of the economic cycle, in the sense that the decline of job demand may bottom out and the trend may turn up in the future. By improving the efficiency of monetization, which has been our focus in recent years, we hope to return to a positive year-on-year revenue trend in the H2 of the fiscal year, even during a period of declining job openings." So that was the message by Deco. In other words, the FY 2024 forecast for HR Technology and the consolidated guidance range are based on the assumption and outlook that job demand in the U.S. will continue to decline until mid- to late FY 2024... Excuse me, FY 2025, then will bottom out. Looking at the Q1 revenue for HR technology on a U.S. basis, revenue in the U.S. decreased 5.0% quarter-over-quarter. However, it increased 7.7% quarter-over-quarter. HR technology segment revenue, including Japan and rest of world, decreased 2.5% quarter-over-quarter, however, increased 7.2% quarter-over-quarter. Which means that the Q1 results are in line with the assumption we communicated on May fifteenth, that the revenue for the H1 of fiscal year 2024 will continue the trend of quarter-over-quarter decline. Given the current situation, we believe that there is no need to revise the full year guidance range. However, if we determine that it is necessary to revise our guidance due to changes in the business environment, we will communicate to you at the appropriate time. After the announcement, we received a number of questions from many people, so I'd like to provide a response first. We will conduct a share repurchase of maximum JPY 600 billion. We've announced such a share repurchase program, and on the first day of that announcement, we've made share repurchases through the ToSTNeT-3. Some investors asked: Who actually bought the shares? I was not able to provide a response to that question, so I will continue to refrain from disclosing that. But the day before yesterday, the sellers' earnings releases made a mention of that. Since it has now become public information, I would like to share information with you at this time. There have been speculations that perhaps overseas investors made a sale, but that is not the case. The company, NTT DATA, was the company that made a sale on ToSTNeT-3. This has become public, so I can share this with you now. So now I will take your questions. I will hand over to you, Shen-san. 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 of all, Nomura Securities, Ooma-san, please. Thank you very much. We, of Nomura Securities. Can you hear me? Yes. Thank you, as always. I have a question on Indeed job posting. In July, various sectors, the index is now trending upward. So Arai-s an, if you could share with us your view on this, is this one-off temporary, or it has hit the bottom and is trending upward? So that's my first question. Second question is: in the material, it says Indeed monetization progress, compared to Q4, Q1 is starting to show results, it says. So if you could elaborate on that point, which part you see some actual outcome? Thank you. Thank you for the question. Thank you for looking at the data very closely. As I've mentioned in the past, we do not become overly happy or disappointed by monthly results. So this alone cannot help us making a big decision, but the data may look flat, but the volatility is still high. So in November, when we announced our Q2 results, I would like to touch on this. We do not want to be happy or disappointed on monthly results and just steadily work do what we have to do. So that is my question answer to your first question. I do not think it has hit the bottom yet. And progress, how we can offer higher added value products and services so that more users can use our service and pay money to us. We talked about this in the March event. We're taking various initiatives and also developing and launching smaller scale services and trying to identify what works and what doesn't. So we're trying to accumulate knowledge and experience. And as a result of that, the unit price is rising up. So what work, we will increase the scale, the area, the customers, number of customers. But we're trying to try many things and try to work what works and decide what doesn't work on a day-to-day basis. It's not that we are having higher hit rate, but on a quarter-on-quarter, U.S. and for the entire segment, we are trending upwards. So I can say that there are certain level of impact. So we will continue researching and studying our initiatives. Thank you very much. Next, SMBC Nikko, Maeda-san, please. Thank you. Thank you. It is perhaps similar to the previous questioner, but the 7.7% quarter-on-quarter increase in revenues that you mentioned earlier due to the progress in monetization and the market environment, perhaps we are seeing a recovery in matching. So I would like to understand the factors are contributing to the 7.7%. Could you elaborate, please? And also, looking at the latest employment statistics, we see that the market is on a growth trend. We have not seen any revisions to the guidance, however, but looking at the latest numbers, do you see that perhaps the numbers are trending down faster than your expectations, or is everything within your expectations? I would like to ask about your views on the latest trends. Thank you very much for the question. I would like to respond to the second part of the question first. So what I mentioned and also covered in the presentation, basically is from what we shared in May. What we are seeing is within expectations, that's contributing to the background to the numbers that we are seeing. So it's not that things are moving significantly over the past several weeks, and hence we have not made any revision to the forecast. And if it's just performance, it's one thing, but if the currency exchange is moving alongside, then perhaps the story may be different, but the exchange rate is also trending within our expectation at 145 yen to the dollar. Therefore, we've not made any revision. It's not that our views have changed significantly or our forecast will not be revised any significantly as a result of what we are seeing today. And looking at the Indeed Hiring Lab, among others, the number of job posts both paid and free continues to show a declining trend. So it's not that the market environment is improving, rather it's a result of our efforts bearing fruit in some part. I believe we can take this as good news. As Deco said, in year zero this is what we consider as a preparatory year towards year one and year two. So we will continue to build on our efforts, and we are making preparations for our efforts to bear a fruit, a big fruit in the future. Thank you very much. Thank you. Next, BofA Securities, Nagao-san, please. Thank you very much. Nagao from BofA Securities. My first question is on HR tech EBITDA margin. Revenue compared to the previous quarter or on a year-on-year basis has recovered to a certain extent, but margin is declining. Looking at the material, your marketing investment is increasing, and Indeed Plus is another positive increase factor. So the intent of the marketing investment at this point in time and the plus, the, increase in cost from Indeed Plus. So if you could elaborate on that point, please. That's my first question. Second question is, there's an impact from Indeed Plus, and so HR, marketing, Marketing Solutions, EBITDA margin is improving quite significantly. Recently, M&S TV commercial, I do not see much the Matching & Solutions, and so Indeed Plus, the transfer portion and the existing business advertisement promotion is probably being controlled, I think, very meticulously. So if you could talk about that. So two questions on margin. Thank you. So to your first question, FY 2023 Q1 HR technology margin was 38.1%, and this time it is 35.2%, and so you talked about that decline. First, in May, we had the second workforce reduction. They came off of the payroll reduction, but there was a time lag, and so the contribution to the Q1 was only June. From the Q2, we will have a full contribution, the quarter that we are currently going on. That's one factor. For the advertisement promotion, the amount is increasing, and due to weak yen, the amount is bigger on yen basis. The actual amount compared to the previous Q1, we are spending more. That is a fact. Because we are trying many things in many areas to prepare for the future. We had been controlling, suppressing the cost in previous years, so we are now using an Indeed Plus contribution. Japan business, as I mentioned on May fifteenth, is now catching up with HR technology. We think we said that the margin can improve to catch up with the HR technology level. I think you remember that, as Deco's words. So there's a margin difference. So low margin is coming to this side, and so this is somewhat of a drag. That's what it meant. It's not that we are spending more cost on Indeed Plus. I see. So that's my answer to your first question. And the other question was MS, Matching and Solutions. We continue our tight control, but as you know, Nagao-san, and in HR and in the marketing solutions page, I mentioned this on the material, the advertisement promotion is bigger in Q1 and Q3. So compared to that, Q1 spending may seem smaller, and the amount is smaller. So comparing Q4 and Q1, we do spend differently. ...But it's not that we're trying to control the entire amount. We are, we continue our stance on spending where we need to. So one quick follow-up question, if I may, please. So MS advertisement promotion a Q-on-Q basis is what you just mentioned, but on a year-on-year basis, compared to Q1 last year, the amount has gone down, or is it up? Just a moment. The advertisement promotion in marketing solutions is slightly higher, but when we say advertisement, there's real advertisement and sales promotion. There are a few items here. So comparing the entire amount, it is about the same for sales and promotion. And in the HR solutions, pretty much the same. Maybe slightly lower on both sides, and that is why margin is inching up. Yes, it's not substantial. Understood. Thank you very much. Thank you very much. We believe, we've received all the questions whose hands were up, but since we still have more time, we can start round two. SBI Securities, Hosui-san, please. Thank you. This is Hosui from SBI Securities. I have two questions. The first question regarding Indeed Japan business. On a yen basis, Q on Q, we've seen 15% increase, but continuing growth from the conventional Indeed and the new business, which is contributing more to this growth rate. And also, I would like to know more about the progress of this collaboration since the last announcement. That's my first question. The second question is regarding staffing service in U.S. and Europe. I believe... Should we expect a similar decrease for this business in both Europe and U.S., or should we expect a somewhat of a recovery starting from the H2 in the U.S.? Thank you. Looking at the existing Indeed Japan and Indeed Plus, which is contributing more to growth, that is a very difficult question. Even internally, this is something we extensively discuss. The reason why it is difficult to say is because of the switch from Indeed to Indeed Plus, customers who've been using Indeed will continue to use the same service. In addition, we will have new customers, new users spending more to enjoy these services. And then we have Indeed Plus, which is a new way of getting sales, according to what Hosui-san said. If we look at that from a completely new sales entry point, then we can determine the contribution by business. But actually, in reality, the two are intricate combined. Therefore, it is difficult to segment and say with certainty which is contributing more. But in relation to the second part of your question, the shift is progressing well. If you ask us whether everything is going well, there are certainly some areas that still need to be worked on, and some issues from the operations standpoint that still need to be addressed. But overall, we see that this shift is going in the direction that we envisaged from the beginning. So looking at contribution from the original Indeed and the new Indeed Plus, since this shift is going in the right direction, we see that combined it is contributing more. We are still in the transition period, so it is difficult to segment and say with certainty this is the conventional Indeed, this is the new Indeed, and this is the switch. But as from next year and onwards, within the HR technology business, we'll be able to see the U.S., the largest region, followed by Japan. So we will be able to present more clearly the difference and changes from what it is today. But as of today, this shift or the change is happening right now as we speak. So it is difficult to say contribution is coming from which part. But customers say that the service has become more convenient. Users find it easier to use our service, so we continue to receive good reviews. This will drive growth going forward. I apologize for not a straightforward answer. And for the staffing service, minus 1.1%, and this is smaller than the negative range on a full year basis that we presented, but there are still uncertainties. We will continue to hold on to a more ... a tough view, a severe view on this. We are not optimistic about this business much. Particularly the U.S. will be quite challenging. Thank you very much. I would like to ask a follow-up question in relation to my first question. After the announcement of Plus, the Indeed share in the HR market or the presence of Indeed, I believe, is increasing, combined with the conventional Indeed. Is that a true assessment? On a yen basis, we've seen a 45% increase in revenue quarter-over-quarter. This is including Indeed Plus. So if that is the case, then it is true that our presence is increasing, and we need to do more to further increase our presence. Thank you very much. That's all from me. Thank you. Thank you very much. Next, CLSA Securities, Kato-san, please. Yes, Kato from CLSA Securities. Yes, thank you. HR Tech Japan is my question. 29% increase, Q1 was good. Full year, you're aiming for 70%, and so, you off to a slower start, or the Indeed Plus impact will be on the H2? How do I-- How should I interpret this? First, FX is one factor. There are a few other factors too. So it's not that we can push this up in a linear fashion. I think we will gain momentum more, but this started from launched on January thirtieth. So we think we will gain momentum and gain speed as we go by, but we're not concerned. So my image is that it will increase more in the H2. That is our original projection, so we are not concerned about that. Thank you very much. On Japanese yen basis, it is 45% quarter-over-quarter. 45% up quarter-over-quarter, so we're not concerned. On the full year, 70%. Is it U.S. dollar basis? Yes. And that is based on 140 JPY to $1 - 145 JPY to $1. So the other question is staffing in Japan, 7.5%, and full year, 5%. And so is it going better than you thought, or do you expect a deceleration in the H2? What is your image? Well, it's too early to decide. It's only three months into the year, but with the current pace, we think it will be stronger than our projection. Of course, because we have high-quality candidates, we are introducing strong staffing temporary workers. But this is because many workers are active on assignment. In Japan, the update, the renewal is three months, and so this gives us a better visibility. But there's still high volatility, so it is hard to say what will happen at the end of the year. We cannot be too bullish, but if the current pace continues, it may be higher than our projection, but it's hard to say. Thank you. The 7.5%, if you break this down to volume and unit price, it's volume, as you mentioned. It's volume. More staffs are on assignment. Are you negotiating for the price increase, or is it difficult? We are modest, and we're humbled, so we don't do that. Thank you very much. Thank you. Thank you very much. Next, Mizuho Securities, Kishimoto-san, please. This is Kishimoto from Mizuho Securities. Thank you for the explanation. I have a question regarding matching and solutions. I have two questions, but the first one is on M&S. In the marketing solutions by verticals, I would like to get some color by verticals for the Q1 results, and what are your expectations for growth rates for each vertical from Q2 onward? Restaurants, dining, perhaps is doing better than others. So what was the driver for the growth for dining in particular? That's my first question. And the second question is, in the fall, you plan to launch a spot work business. How is this business going to be launched? I apologize for this rather vague question, but I would like to know more about this. Is it going to be like a blockbuster type of launch? So in the short term, margin may be low, but first you want to establish a substantial volume. Is it how you imagine this business will be launched, or is it going to be a soft launch, and then, depending on the customers' inquiries or leads from customers, you will see the revenues and the mix gradually increase. I would like to see how this business will be launched in the fall. Those are the two questions I have. Thank you very much. Regarding marketing solutions, in your first question, on May fifteenth, we said the rate of increase of sales, we provided a range from 1.5%-9%. So based on this assumption, we want to increase the margin excluding corporate overhead costs to 30% range. We will continue to work on the two pillars in the Marketing Solutions. We continue to see good progress with regards to these two pillars. Unless there is any negative change, then we believe growth within the range that I presented for this fiscal year is possible. That's the first thing. So in my presentation, I gave a comment on this, for example, travel. We have seen a certain period in which the unit price remains stable, so this is a factor contributing to the sales in this business. But looking at the different verticals, the housing, house and real estate, and beauty businesses account for a large portion, so they will continue to drive the sales of this business. If we continue to build sales from these two areas, then it is likely that we will be able to land within the range that I presented. I can go on for more. It's not that we are seeing any negatives in the verticals. All the areas are growing and contributing to a sales increase in the Q1. The summer season will, of course, further drive demand in travel and other verticals, and then it will subside. So we are not optimistic that this level will continue throughout the year, but at the moment we don't have any news, negative news. As for the spot work business, we are a latecomer in this area, so we need to do our homework, and we need to do more research so that we can provide a service that fits the expectations and needs of our users and customers. So we are still in the study phase. We are still working on this business. And legally as well, there are established rules and regulations that need to be observed. And since we are coming into this market late, we need to make sure that we don't inconvenience other people, other stakeholders. We want to make sure that we follow the rules, and as a team working on the designing of this business, we are paying attention to all these things, and going through due process. I apologize for also giving you a vague answer, but when the right time comes, we hope we'll be able to provide you with more information. Thank you very much. Thank you very much. Mito Securities, Watanabe-san, please. Watanabe from Mito Securities. Can you hear me? Yes. So indeed, Arai-san, you earlier said that you are making small, small efforts, and this is bearing fruit. So you talked about many things, but I want you to elaborate on that. And you talked about workforce reduction. Are you okay with the less headcount? And why are you efficiently doing this under the laws and regulations? No problems there. Could you elaborate? Can you hear me? Yes, so I understand you have two questions. First is elaborate on the small efforts, and the other is, are we okay with less headcount? So let me answer your second question first. We are making sure that we can operate with fewer headcount. You may remember when I said in May, for faster action, faster decision-making, we are trying to become a more lean structure to prepare for year one and year two. So that is the purpose of the headcount reduction. So we're not losing any function or losing speed. ...We're trying to become faster. So it's a headcount reduction to become speedier. So we hope this will be positive for us, and that is our structural design, and that's what we are executing, so we have no worries there. Please rest assured. And to your first question, the small efforts, what are they? It is in multiple industries, but we want to raise the quality of the applicants. If the clients want higher quality applicants, we will say, "Yes, we will do that. If you could pay a little more, we will make sure you can find and meet such candidates." So we're continuing such screening and tuning to introduce such candidates. So we're testing such service. And if the clients like it, then they will be happy to pay more. So those are some fruits that we're starting to see. So they may be small scale now, but if they work, they may become bigger. So yes, understood. So with fewer people, you are working, you're functioning well, and quality that you mentioned last time is now showing results in Q1? Yes. Well, it's not a big result in terms of numbers, but once we have more successful initiatives, it will also show in numbers later on. Thank you very much. Thank you very much. Omo-san from Nomura Securities, please. Thank you for picking me for the second time. I would like to ask about the collaboration. You mentioned that one of the management themes is to increase efficiency among others. Looking at the sales structure, organization, have you had any progress in the Q1? And also, to be more specific, if you have any milestones that you are currently working towards, I would like to know more about them. Thank you. On May fifteenth, Kitamura and Deco talked about this, and also, I believe it was during the fireside chat that they talked about this. Indeed Plus is currently running ahead. Going forward, the Japan HR business and HR technology business will increase in their affinity. We are currently considering the appropriate organizational structure to further drive that. I believe that was mentioned. Evolution of the Japanese business, this includes evolution of the products, the services, the operations, and also the margin eventually will also be evolved. We are working on this, and there are things that go well, that do not go so well, bad connectivities among other issues. We are starting to identify. But in any way, we are looking into this. We are studying more into this, and we are eliminating the negatives or issues one by one in order to realize this integrated management. So once we realize that, we will be able to enter the next step, evolve, and we believe we will be able to present figures that will be appreciated by the market participants. Thank you very much. I have one more question, if I may. Yes, please. Go ahead. Thank you. Regarding Indeed, for example, Indeed Apply, ATS connection, have you had any additional events that you can share with us? Well, there are some things that are reflected in numbers, some are not. Back in March, on the product and also product and service development, we talked about this back in March. We do not have plans to do something similar next year, but when we announce the results for the Q3s, if there are any new service announcement or if there's going to be any evolution that we can share with regards to the existing products and services, or with regards to any new business, so we will be able to share with you if we have any when we announce the Q3 results. JP Morgan Securities, Mori-san, please. Thank you. I have two questions. I may overlap with the earlier questions. I'm sorry. But first, HR technology U.S. trend. In May, so you said that you are moving in line with your projections in May. Any changes in the client's sentiments, customer sentiment of where, so is it in line with your cautious outlook or not? Macro data is starting to move, as we saw from last week. And ZipRecruiter, I know they are different from you, but they were cautious in Q3. ... in their projection. So indeed, there's no change, or it has changed, but within your expectation. So my first question is about your nuance. And what is your second question? Thank you. Second question is on Matching & Solutions. Another repetitive question, but your profit was quite big, but the Marketing Solutions revenue is growing steadily. So on a quarterly basis, the advertisement and promotion is one factor, but, any way... Are you finding better ways to maintain an increased revenue in a more efficient way? Should we just think, understand that the advertisement promotion was, was lower this quarter, or? So your second question is on a full year basis. The corporate overs- before corporate overhead cost, margin is aimed at 30%, for the Marketing Solutions. And so towards that target, we are reducing where we can. But in Q4, we will use what we need to use. So all inclusive, we will save, where we can to achieve the target number, and the result is the result of our efforts. It's not that we have given up on the revenue, and, started focusing on the cost. We have such intention, but, operating in a natural way and bearing this result. So I think we are in a positive position. And to your first question, yes, we understand Zips, ZipRecruiter, projection, but we are different from them. We are in line with our expectation. So sudden market improvement or, sudden customers, halt, is unlikely from what we saw in July, so we are in line with our outlook. Thank you. Shen-san, should we take more questions? Did we cover the second question? Yes, I answered the second question first. My apologies. Okay, so we still have more time, so Nagaoka-san from BofA, please. Nagaoka-san, I believe he's not online. I see. Nagaoka-san's, I see his hand up again. Nagaoka-san, please. Sorry. Thank you, thank you for picking me. I pressed the wrong button because I was nervous that you picked me. I would like to ask a rather difficult question. Looking at your company and how you generate profits, there is a cyclical element, but in times of a recession, so you're active, you're proactive in cutting costs, cutting costs to maintain profitability. That is my view of the company. Of course, it's difficult to tell the future, but if there's going to be a hard landing with regards to the U.S. economy, you talk about zero, year zero, and you are now making preparations for the next step. Is it possible to make that drastic change in one go? What is the sense of urgency shared among the management? Perhaps you're shifting your gear into neutral. I guess, the other way of asking this is, is there more room to cut costs? Are you ready to implement such action? What are your views and assessment of this right now? Since last week, I've been talking about this with Deco. Looking at the current labor environment, focusing on the labor market, it appears that things have not gone wrong or gone in strange directions, and based on that, we have not changed the range, the guidance range that we presented earlier. But at times, for example, the financial market is affecting the real economy in adverse ways, and then we enter into a negative cycle. So if that were the case, then we needed to be prepared to also change our forecast and guidance as well. But right now, we have not seen anything like that. And for HR technology, the SG&A expenses, the large items are people and advertising and promotion costs. So if things turn up, if we expect higher revenues, if we see more capabilities for us to do a lot of things, then we will start to use advertisement. We will start to make advertisement investments, and we will start hiring more. ... and, we can achieve higher revenues, then the margin will also, follow. So that's what we are aiming, and that's what we, expect to happen in year one and beyond. If we continue the current operations and if we further, make, cost cuts, we don't think, this is necessary, at this time. What Deco said is that, for the next 18-24 months, the job openings, will, continue to decline gradually. If we see a sudden, decline as we saw in the first months of, COVID pandemic, then, things will be different. But our current expectation is different. It will be a gradual decline. If that is the case, then we will, continue to, work on our planning. But of course, we need to be flexible, if things changes. And we believe we have the capabilities, to adapt to change. Deco has a great sense, in making such assessments, so I'm not worried. Thank you. It's clear. Thank you very much. Thank you. We may perhaps take one more question, but are we okay? It seems okay. So it's a bit before time, but Arai-san, could you give us the last remarks? Thank you very much again for today. So last but not least, we will have Indeed FutureWorks 2024 on September 26th in Dallas, Texas. So we would like you to come to the venue or online is also welcome. And after that, on October 1st morning, Japan time, we will invite the analysts to share with you Indeed's product strategy and the product update that we explain in the Indeed FutureWorks. So we'll do product demo and Q&A. So, like Watanabe-san said, what we are doing these days, I hope we could explain our initiatives, so you could listen firsthand what is going on. We will let you know the details in September by email, so I hope you could look forward to that. And the individual and group and large IR meetings will continue in September. First week, we have a few Tokyo conferences, which we will also take part in. And and Nagao-san with Nagao-san, we are planning a fireside chat, so I hope you could come. We welcome the institutional investors, so thank you very much. Thank you very much. We will close the financial results briefing today. Thank you for joining us today, and thank you. I ask you for your continuous support.