Welcome to the Recruit Holdings Fiscal Year twenty twenty Earnings Conference Call. I am Shin from IR department, and I will serve as the moderator. This call is a simultaneous translation of the original call in Japanese, and translation is provided for the convenience of investors only. Today, we have Hisayuki Idakoba, President and CEO and Junji Arai, Executive Officer of Corporate Planning Division. Jeko will begin with the vision and the overall business strategies for Recruit Holdings.
Then Jun will discuss the fiscal year twenty twenty results and fiscal year in inn owners to purchase computers and sign up for Internet access and steadily increase the number of inn in Japan that can be booked online. Similarly, in the beauty business, we also created an online reservation system that allowed beauty salons across Japan to take reservations online. This April, there will be no major changes in our strategy. We will continue to work on our mission, opportunities for life, which means connecting individuals and businesses faster, simpler and closer than ever before. In pursuit of our mission, we are now outlining three specific pillars of our overall strategy, simplify hiring, help businesses work smarter and prosper together.
The first is simplify hiring. In other words, connecting people with jobs faster and easier. This is something we've been doing for more than sixty years since our founding, and I believe there is still so much more we can accomplish. The second pillar is help businesses work smarter. In other words, improving business performance and productivity through SaaS solutions.
In the Japanese market, where the working population is expected to continue declining, we believe that simply making it to a role in the lives of people all around the world. When the spread of COVID nineteen began, millions of people lost their jobs and needed to find a new one as soon as possible. But they were not able to have in person interviews. So since last year, we have accelerated the development of various online recruitment processes through SaaS solution. Let me introduce an example that made me wish that cashless payment was more commonplace in the world.
Long before, when my wife was working as a manager at a restaurant in Japan, I remember her saying that she had to go to the bank at least three times a week to make deposits and exchange money and that it was such a waste of time. I thought that if the world becomes more cashless, people would be able to spring from the cold to keep them warm. This experience highlighted for me that many people are really in a difficult situation. Of course, it's important to support people in need through charitable activities. But to solve the issue fundamentally, it is critical for people to have a job and earn a living.
And I believe there are so many things that we can do. We have been making efforts to provide new opportunities and new job opportunities in parallel with prudent short term decision making while achieving solid results in the medium to long term. Even now, Recruit has a relatively small presence in the competitive global technology landscape. However, when I started running Indeed about ten years ago, there were 30 to 40 engineers as a team at Indeed. For details of our Q4 financial performance, please refer to the earnings materials disclosed earlier today.
I will begin with the financial results for the last fiscal year ending March 2021. In the first half of FY twenty twenty, HR Technology and Media and Solutions segments implemented rapid cost cutting measures amid a sharp drop in revenue due to the rapid deterioration of global market caused by the spread of COVID-nineteen. In the second half of FY twenty twenty, while revenue from HR technology improved rapidly, in Media and Solutions, it was a six month period with intense ups and downs with the positive impact of the GoTo campaign in Japan and the negative impact of the subsequent state of emergency period. During this period, we continued to aggressively make investments that we believe are necessary for future growth in line with our management strategy. As a result, full year revenue excluding the rent assistance program decreased 8.7%, consolidated adjusted EBITDA decreased 25.7% and adjusted EPS decreased 31.8% year on year.
Adjusted EBITDA for FY 2020 was JPY 241,600,000,000.0, which was JPY 9,700,000,000.0 higher than the revised forecast of JPY 231,900,000,000.0 disclosed on February 15. The full year dividend will be JPY 20 per share, which is JPY 1 higher than our prior guidance. For the consolidated financial guidance for the fiscal year ending March 2022, the business environment continues to evolve rapidly as restrictions in some countries have variously been relaxed and reintroduced, making forecasting difficult. Assuming that new large scale lockdowns and state of emergency will not cause long term stagnation of economic activity, we disclosed FY twenty twenty one guidance in ranges today. Revenue and adjusted EBITDA are expected to increase in the HR Technology and Staffing segment, while revenue in the Media and Solutions segment is expected to increase compared to the previous year's revenue when excluding the rent assistance program.
Adjusted EBITDA is expected to be JPY $270,000,000,000 to JPY $335,000,000,000 compared to the previous year. Adjusted EPS is expected to be JPY 95.51 to JPY 126.1. The dividend forecast for the half year and full year for FY 2021 has not been determined at this time. Next, I will talk about full year financial results and outlook by segment. For HR Technology, in the first half of FY twenty twenty, revenue declined significantly in the first quarter due to the spread of COVID-nineteen, followed by a recovery driven by The U.
S, resulting in revenue reaching close to pre pandemic levels during the second quarter. During the second half of FY twenty twenty, hiring demand surged, particularly driven by small and medium sized employers in The U. S, which created an imbalance between dampened job seeker activity in The US and significant hiring demand, driving revenue growth higher. As a result, revenue for the full year decreased 0.4% year on year. On a U.
S. Dollar basis, reported revenue was $3,990,000,000 an increase of 2.2% year on year. HR technology pulled back marketing investments and paused hiring during the first half of FY twenty twenty while prioritizing investments to simplify hiring, which put us in a strong position to support employers' hiring activities during the second half of FY twenty Investments, combined with the continued strong revenue performance expected in Q1, is expected to result in the highest quarterly adjusted EBITDA margin to date in the first quarter. Regarding the definition and quantification of the HR matching market, please refer to our earnings release and question four in the FAQ. Next, for Media and Solutions.
Revenue for the first half of FY twenty twenty dropped significantly due to the first state of emergency in Japan. For the second half, revenue in the third quarter showed signs of recovery benefiting from the GoTo campaign during the first half. During the second half, Media and Solutions made a strategic and proactive marketing investment to seize future growth opportunities. In addition, an increase in costs related to the reorganization of the Media and Solutions SBU completed on 04/01/2021. An increased allowance for doubtful accounts due to the pandemic resulted in a decrease of 41.6% in adjusted EBITDA.
As a result, the adjusted EBITDA margin was 15.9%. For Media and Solutions, the guidance for Marketing Solutions for FY 2021, housing and real estate and beauty are expected to continue stable performance while the timing of recovery revenue recovery in travel and dining is uncertain due to the negative impact of approximately 3% to an increase of approximately 9% year on year compared to FY twenty twenty revenue, excluding the rent assistance program and is not expected to recover at the same level as FY twenty nineteen. For HR Solutions, although the uncertain business environment has continued mainly due to repeated states of emergency in Japan from mid to late FY twenty twenty one, hiring demand from business clients, especially in the dining industry, which has been negatively impacted by the state of emergency in Japan during the first quarter, is expected to recover. And the part time job advertisement business is expected to recover. The placement service is also expected to recover gradually.
As a result, revenue for HR solutions is expected to increase in the range of approximately 13% to 24% year on year. For fiscal year twenty twenty one, to realize our business strategy in the mid to long term that Deku explained, Media and Solutions is accelerating its investments for future growth in marketing and product development. As a result, we expect adjusted EBITDA margin to be approximately same level as FY 2020. And if the business environment deteriorates or if there's a prolonged delay in expected recovery, Media and Solutions expect to be able to control operating expenses as we did in first half of FY twenty twenty. As for one of our key strategies, health businesses work smarter, in other words, improving business performance and productivity through operations, adjusted EBITDA margin for staffing in total is expected to be at the same level as FY 2020.
Next, for capital allocation and shareholder returns. The capital allocation policy remains unchanged as shown on Page two of the summary with the following priorities in this order: one, various investments, including development and advertising expenses in line with business strategy two, dividends three, M and A and four, share buybacks. In order to realize the world that Deco is aiming for and to achieve our management strategies of simplifying hiring, help businesses work smarter and prosper together, Recruit Holdings will strive and return profits to our shareholders by maintaining a sound financial position and continuously paying stable dividends while aiming to achieve a continuous increase in enterprise value. The amounts of dividend for FY 2021 and beyond will be determined by comprehensively taking into account the trend of consolidated financial performance, including net income and financial condition. We will consider whether or not to repurchase our own shares, taking into account the market environment and the outlook for our financial condition.
We will continue to pay close attention to domestic and international trends and their impact and aim to grow our business and achieve our business strategy from mid- long term perspective. We are grateful for our understanding and support of our shareholders, other capital market participants and all of our stakeholders. Refer to the earnings release. Citi Group Securities, Mr. Tsudo, please.
Thank you very much for this opportunity. You have solid performance. I congratulate you. I have question to Idekoba san. HR tech will support your future competitors and decide to increase our market share?
No, that's not what we are doing. Whether we are acquiring market share is not watched that closely. As I mentioned earlier, we want the users to find jobs very easily and the employers can post jobs and hire someone very easily. So we want to improve the convenience there in this type of business. And when the business economy is bad, one once every eight or nine years, if we look back in the history, what happened was, as an example, in good times when the economy is strong, companies decide to hire people, but they sometimes find we will have a technology we have been shifting to technology centered business.
So given our current circumstances, in three years' time, our new innovation will progress this much or this kind of challenging endeavor will prove to be successful. You may have saw our past and saw how much resource we injected and how much increase we've seen. It's not like the past. It's difficult to forecast. And I think this is the same
For the HR matching market, you presented a data on the market. For HR technology business, drivers for the revenue, I would like to know your views on the drivers for the revenue. Currently, advertising revenue accounts for the largest portion, I understand. But will the situation continue to stagnate or the hiring platform that you launched in March, how are you going to localize it? What about Indeed hiring?
What is the direction? And more in the long term, for the staffing services, how you are going to make changes to that business. I would like to ask your views and more detailed explanation on these matters. Thank you. Yes.
Thank you. So this is the first question. I would like to first respond. Or should I get to your second question at this time? Sure.
So the second question is about the SaaS solution for monetizing. What is going to be your focus on monetizing this business? You have a 210,000 accounts, and it's less than 10%. So you're, for the time being, going to focus on accounts. But looking at the current circumstances, it's very I think it will take longer for the EBITDA to return to the pre pandemic level.
So for the SARS solution, looking at the growth drivers, what are they and what is going to be your focus for making this a viable business? Yes. Thank you for the wonderful, great questions. With respect to the first HR matching and future drivers, what they're going to be, I understand that it was your first question. As I briefly touched upon earlier, of course, the hiring process needs to be much more simplified.
So simply put, what I often say is this. A company that makes autonomous driving cars, of course, there are there is a number of companies that are in
that
business. But when we apply autonomous driving cars to the HR industry, what I'm trying to say is this. In autonomous driving, you have the taxi drivers, their jobs, truck drivers, and and, of course, there are people who drive their own cars. All those things happen even in autonomous driving. For job advertising market, it's exactly that advertising market.
Looking at business clients cost, let's say let's take Indeed for example, we have about 10,000 employees, 300 to 400 of them. They are from the talent acquisition team. Their sole job is to to work on hiring. Of course, advertising cost is something many companies pay, but 300 or 350 people, their contribution is actually great. So and, of course, the cost as well.
So if we outsource them, it will be the cost that we pay to a placement company. But what the the underlying story is that a cost basically are incurred year 2020. Many companies have downsized these hiring teams. And suddenly, with the the end of COVID nineteen pandemic in sight, companies may want to hire more people, but because they have already downsized their hiring teams, they need to hire people to be in the hiring team. That's what the situation many companies find right now.
And now we have the virtual hiring platform 10,000 as you mentioned. In The US and Europe, companies that provide payment platform comparing our revenue to theirs is that when we acquire one customer, how much increase in revenue it contributes? That is the biggest difference between them and us. One fourth and one fifth, why is it less? Simply situation right now.
How how many more accounts we'll be able to acquire will be key. So looking at one condition for for this to monetize, I would say, is this the rate of cashless payments percentage of cashless payments. If this reaches a significant level, then we will, of course, enter a phase where we need to consider how to monetize this. But having said that, first
is media and solutions, especially in the marketing solutions. Under COVID, the dining and travel are now still struggling. So, after COVID ends, do you think this part will recover linearly? Or do you think the value will change and the marketing media marketing solutions will have to change? And my second question is including HR tech.
So going forward, Idukobasan, your M and A strategy is what I would like to know. The budget size, so EUR 700,000,000,000 was the capacity you had and you used for the Australian strategy in EUR 200,000,000,000 and the remaining EUR 500,000,000,000 was for HR and for marketing media, marketing solutions. So what kind of capital allocations do you have compared to when you did a deal? Thank you very much for great questions. So first question, dining and travel post COVID, how they will recover post COVID?
Currently, we are running our business in many countries and what we see now is, especially in The U. S, there is a strong rebound. I can call it a rebound. It is a significant economic surge. So many restaurants and hospitality, hotels or airlines hiring recruitment is now increasing.
The hiring demand is increasing at a rapid speed hourly wage companies have to raise at least $2 or $3 an hour to hire someone. In the past two or three decades, this is the most difficult period to hire someone. And this is because, as you mentioned earlier, dining and travel our demand are recovering to pre COVID levels. That is why our business clients are trying to hire so rapidly. In The US restaurants, I drove around and looked at how the restaurants are doing.
There are many guests, many users in restaurants. But there are a few chefs and few waiters, so the people have to wait a long time to be served. So looking at the situation,
we had Brexit
and the COVID-nineteen damage was severe in UK, but even in The UK, the demand recovery is significant. Demand is rising at a great speed. And in Japan, Vaccination rollout, once it rises from thirty to forty, fifty percent like US and Europe, then we will start seeing the atmosphere we are now seeing in The US. Think fundamentally, human beings enjoy dining and travel and especially travel. Travel had been increasing all along until now.
So people value perceptions will not change with this one event fundamentally. Now answering your second question, you asked me about my strategy on M and A.
M and A,
as I mentioned earlier,
our
mission is to help people find jobs, to make it easy for people to find jobs. So this is our mission, which we have been committed to so far and we'll continue committing. We are looking for companies that are focusing on point solutions. I think there's a high possibility there. So it's not we are not thinking of the budget amount.
We are rather focusing on trying to find the companies with good solutions so that together we can contribute to the society.
So that is my strategy. Thank you very much. From Mizuho Securities, mister Kishimoto, please. This is Kishimoto from Mizuho Securities. Thank you for this opportunity.
I have one question. For HR technology. What are your views on the margin? Is your explanation and also FAQ number 13, it also mentioned it, but 20%, I think that's a rather high level. Is it going to be driven mainly by increase in revenue, or is it going to be improvement in the mix or new products and services?
And also, the assumptions for revenue for this fiscal year have been disclosed. What are some circumstances in which you are going to accelerate investments? And what are some circumstances in which you will hold investments? I would like to understand more have a larger revenues temporarily rather than the speed of cost input. When the revenue increase exceeds, then it's possible that we have a higher margin.
But from medium to long term, the biggest cost item is, as I've been mentioning since before, what we can provide to society, our biggest value is not sales and marketing but actual products and services. That's where we bring value to society. In fact, we need engineering people who will make those products and services. We need to make sure that we hire these resources and that should be our priority policy. On this matter, as you are aware, tech stocks are surging.
Over the past six months or so, there has been a very severe competition over resources. And also there's the effect of work from home. Engineers can now work from anywhere in the world so companies are fighting over these resources. But we will continue to make active investments in this area. So as you said, revenue and to CLSA Securities.
Kato san, this
will be the last question. This is Kato from CLSA Securities. Thank you. I have a question on Indeed. In 2020, ileko wasan, when you found this in 2010, what did you think was the most appealing point when you first found it?
It is now a well known company, but back then, barely no one knew it. And I'm sure there were positions of the M and A internally. So what was the innovation that they had? Do we make this decision even if this person is having difficulty? That was the basis of thought.
I remember them discussing from that perspective. And of course there were things that were better and worse than my expectation, but back then the engineering team, only 30 to 40 people in the engineering team, it was a pure startup. And the first countries that do not have much data privacy gather data and do machine learning without individual's consent. If companies do whatever they want in such countries, then it will be unfair. And so so depending on regions, the view on data will be different.
And so looking at ten to twenty years beyond, this may be a risk.