IR department and I will serve as the moderator. Today, we have Juni Tsiarai, Executive Officer of Capital Market Strategies and Yasushi Hashimoto, Executive Manager, Disclosure and Individual Investor Relations department. Arai san will briefly go through Q1 fiscal twenty twenty results we announced at 3PM and proceed to the Q and A session. This call simultaneous translation of the original call in Japanese and translation is provided for the convenience of investors only. Now I'll turn over the call to Arai san.
Thank you for your participation today. As Menekis san mentioned in the fiscal year twenty nineteen results announcement call in May, our main priority is ensuring the safety of our employees and their families as well as individual users, enterprise clients and business partners while preventing the spread of COVID-nineteen. In Japan, after the government's declaration of state of the emergency was lifted, we acted immediately by continuing to recommend all employees work from home. In our global locations, we are working to ensure the safety of employees by following government health and safety guidelines in each country and region. Today, I would like to discuss the consolidated results of operations, results of operation by segment and update on our recent business operations for Q1 fiscal year twenty twenty.
When we explain the changes in revenue in percentage, it means it is on a year on year basis. First, consolidated results of operations. The global spread of COVID-nineteen and measures to help prevent the spread had a broad impact on business performance in Q1. As a result, revenues declined in all three segments and consolidated revenue was 4 and 75,400,000,000.0, a decrease of 20% year on year. Consolidated adjusted EBITDA was 53,400,000,000.0, a decrease of 38.8 year on year, and adjusted EPS decreased by JPY 40 7 point 5 percent to JPY 17.49, which are our key management targets.
In the face of significant uncertainty, we took swift actions by enacting cost controls as we mentioned in the full year results call in May. As a result, SG and A expenses decreased by JPY 44,000,000,000 year on year, mainly due to strategic reduction in marketing expenses such as advertising and sales promotion expenses and a decrease in sales commission. Revenue in each segment was higher in July than in June, and monthly consolidated revenue in July exceeded that of June. However, July monthly year on year revenue decreased by 15%, slightly worse than June. The status of the spread of COVID-nineteen differs in each country and the global economic outlook remains uncertain.
And lockdowns and other restrictions may continue or may be implemented again in many countries. Therefore, we believe that the global spread of COVID-nineteen will continue to have a significant adverse impact on our financial performance in Q2 fiscal twenty twenty and beyond, and it is uncertain whether recent positive trends will continue after August. As a result, we are not providing consolidated financial guidance for fiscal year twenty twenty. Next, I will talk about the results of operations by segment and provide an update on our recent business operations. First is HR technology.
Revenue in HR technology declined 25.8% year on year on a US dollar basis. Restrictions and social distancing measures put in place to limit the spread of COVID nineteen forced many businesses around the world to pause operations and caused enterprises to turn cautious on hiring due to the economic uncertainty. At the same time, job seekers adjusted their search behavior in response to health concerns and broad economic uncertainty resulting in a significant decline in job seeker activity on Indeed and Glassdoor. However, during the latter half of Q1, HR technology saw a partial recovery of employer and job seeker activity, particularly in The U. S.
As restrictions were lifted and businesses resumed their activities. As a result, revenue thus far during the COVID nineteen pandemic hit a low point in April and gradually improved in May and June. In July, revenue in HR technology continued to improve to a year on year decline of approximately 7% on a US dollar basis. Revenue has recovered more quickly than we anticipated, particularly in The US. In addition, Indeed's monthly unique visitor traffic in July rebounded to pre COVID nineteen levels.
However, we are treating these recent positive trends very cautiously due to the risk of additional forced closures by changes in future status and the resulting impact on hiring and job seeking activity. Adjusted EBITDA in HR Technology declined by JPY 50 9 point 4 percent year on year to JPY 7,800,000,000.0 and adjusted EBITDA margin was 10.6%. In reaction to the significant decline in revenue and the mid to long term economic uncertainty, HR Technology continued to control costs by reducing investments in sales and marketing while maintaining its hiring pause. However, despite the challenging business environment, HR technology continued to invest in innovative and differentiated product enhancements, including services tailored to support job seekers and employers as they adjust their mindset about what processes and activities can and will be done virtually.
Next, I will talk about the results of Media and Solutions. Revenue was JPY132.9 billion, a decrease of 29.1% year on year. Revenue in both Marketing Solutions and HR Solutions declined. Adjusted EBITDA was 27,300,000,000.0, a decrease of 45.4% year on year and adjusted EBITDA margin was 20.6%. Based on our experiences and learnings from responding to rapid changes in business environment since our founding, Media and Solutions implemented cost controls at an appropriate level, mainly by reducing marketing expenses.
Monthly revenue declined year on year in April, May, and June 2020. However, the year on year decline of monthly revenue in June improved from May. Revenue in July continued to improve from June, decreasing 26% year on year, which exceeded the year on year growth rates for June. As economic activity resumed after June, the number of enterprise clients advertising and hiring has been increasing. In marketing solutions, in particular revenue in bridal, travel and dining declined significantly year on year.
However, revenue in housing and real estate and beauty declined in the single digits. In Marketing Solutions, revenue was JPY 77,100,000,000.0, a decrease of 27.1% year on year. Adjusted EBITDA was JPY 17,200,000,000.0, a decrease of 44.1% year on year due to declined revenue and adjusted EBITDA margin of 22.3%. In July, housing and real estate and beauty began to show signs of revenue recovery, while bridal, travel and dining continue to be severely impacted and the outlook for these businesses remains cautious. However, despite the challenging business environment, we continue to see strong demand for air business tools as the number of AirPay accounts continued to grow steadily as individual users' preference for contactless payments increased.
In HR Solutions revenue was JPY55.1 billion, a decrease of 32.1% year on year. Adjusted EBITDA in HR Solutions was JPY14.9 billion, a decrease of 36.6% year on year due to declined revenue. And adjusted EBITDA margin was 27.1%. The overall demand for hiring in Japan sharply decreased resulting in a significant decline in revenue in the job advertising businesses. However, the negative impact on revenue in the placement business was minor because the placement business benefited from engagements that began prior to Q1 as the business operates on a performance basis where revenue is recognized when a candidate is hired by an enterprise client.
As a result, going forward, we expect the business performance of HR solutions will be impacted by this declining trend in q one hiring activity. The outlook for Media and Solutions overall continues to be uncertain. Next, I will talk about the results of Staffing. Revenue was JPY274.2 billion, a decrease of 12.3% year on year. Adjusted EBITDA was JPY19.8 billion, an increase of 0.2% year on year, and adjusted EBITDA margin improved to 7.2%.
Revenue in July declined approximately 10% year on year. Revenue in Japan operations was JPY145.8 billion, an increase of 5.9% year on year. Despite a decrease in the number of operating hours of the temporary staff due to the suspension of businesses and decreased overtime work, revenue increased mainly due to an additional two business days in the quarter compared to the previous year and increased the billing prices following the implementation of the EcoPay for EcoWork regulations beginning 04/01/2020. Adjusted EBITDA for Japan operations was JPY 17,000,000,000, an increase of 44.7% year on year. This improvement was mainly due to increased revenue and ongoing cost control measures, which included reductions in travel costs all while continuing to monitor costs in relation to labor market supply and demand.
Adjusted EBITDA margin was 11.7% in Q1 twenty twenty. Monthly revenue for July in Japan operations declined 3% year on year, mainly due to one less business day compared to July 2019 and less demand from enterprise clients for temporary staff. Revenue in overseas operations was JPY128.4 billion, a decrease of 26.6% year on year. This was primarily due to restrictions on enterprise clients' business operations related to government mandated lockdowns and uncertainty about the future, which led to a significant decline in demand from enterprise clients for temporary staff. Although the operating environment and results differed by country within overseas operations, year on year declines in monthly revenue were seen in all geographies with gradual improvement throughout the quarter.
Adjusted EBITDA was JPY 2,800,000,000.0, a decrease of 64.8% year on year and adjusted EBITDA margin decreased to 2.2%. Even in an uncertain global economic environment, overseas operations maintained a positive adjusted EBITDA margin by taking prompt and appropriate actions in response to labor market trends and government measures in each overseas market and by strengthening ongoing cost control initiatives. Monthly revenue for July decreased 16% year on year and the year on year revenue decline worsened compared to June. Enterprise clients remained cautious about their business outlook therefore revenue has not seen signs of a steady recovery. That concludes my explanation of our Q1 financial performance by segment.
At this moment, due to the significant uncertainty that remains, it is difficult to estimate how long it will take for revenue to recover to pre COVID-nineteen levels. We are focused on executing our business strategy with a mid to long term perspective, not short term, closely monitoring current business trends in Japan and overseas and how they will impact our business. We are grateful for the understanding and support of our shareholders, other capital market participants and all of our stakeholders. Please refer to the earnings release and the materials on our Web site as appropriate, which includes the content of today's presentation. Now we will take your questions.
Now we would like to proceed to the Q and A session. For participants on the English line, please email your questions to the IR address, recruithr. Recruit dot co. Jp provided in the invitation email.
Nomura Securities. Mister Nagao, please. Hello. This is Nagao from Nomura Securities. I have two questions.
First is a rather detailed question. So the non operating loss cost, 800,000,000.0 is being posted. So in your explanation, you said the sale sale of the subsidiaries and the COVID nineteen incurred cost. So this loss on sales of subsidiary and the COVID nineteen cost. What is the breakdown and what are the items?
So that's my first question. Could I continue on? Yes, please. My second question is, earlier you talked about July HR technology revenue on a year on year basis is now back to minus 7% in terms of category or the way it is recovering. So unit price is starting to rise or the job seekers traffic is recovering or coming back.
If the unit price is coming back, then which area, which industries are seeing a recovery? Could you elaborate on the details of this minus 7%? Thank you very much. So your first question is already posted on the website. Is a frequently asked question and we answered question number three.
Hope you could take a look at that as well. So 3,500,000,000.0 is COVID-nineteen related cost. In addition, 100,000,000.0 is the loss on sale of business. It's the unrealized foreign exchange loss. The asset that we sold is the Treadwell of the business in Europe.
Your second question, HR Tech year on year number is now back to negative 7%. Basically, the biggest driver is the volume recovery. Of course, it dropped significantly and now it's coming back. So it's not so much the unit price. It's the volume that's coming back.
So and with the support fading out, the job seekers are coming back too. So basically, the volume is coming back. Thank you very much. Thank you very much for your response.
Mister Kinoshita of Merrill Lynch, please. Hello. This is Kinoshita of Merrill Lynch. Hello. Regarding the revenue for July, overall, as I heard earlier, it was better compared to June on a year over year basis.
However, in your earlier explanation, if I recall, what was worsening was, I believe it's the staffing and there's also a possibility of worsening in Japan operations, if I understand you correctly. May I confirm whether my understanding is correct? That's the first question. First of all, as for Japan operations from second quarter and beyond, yes, I did mention that there would be such a possibility. I was not only referring to July alone, but the minus 15% broken down is as follows as was already mentioned.
In terms of revenue, the staffing operations account for a large portion. Therefore, a fluctuation in the staffing services revenue will have a huge impact on a consolidated basis. With that in mind, of course, the overseas operations, the if the revenue declines greatly, then it will impact the overall numbers. Understood. Thank you.
And next, regarding HR technology and staffing, I have a few questions regarding overseas business. If you are seeing any difference in terms of trends geographically, for example, for HR technology, The US, Europe, are there any differences in the trends? Please elaborate. Are you asking by segments whether there's any geographical difference or regional difference? Yes.
As I said before, for HR technology, The US market is recovering faster than we initially anticipated. Therefore, US is showing great signs of recovery. As for countries in Europe, there are some slight variations, but enterprise clients businesses have started operations in some markets and those are markets where we're seeing faster recovery speed. As for staffing services, in our disclosure we divide by Japan and international. Even pre COVID nineteen and during COVID nineteen pandemic, as we've mentioned, demand in the European market continues to be weak.
This is certain. Just to confirm, initially, the HR technology, rather than The US, you are seeing bigger growth outside of The US. The latest data is showing that The US is actually showing better year over year figures. US is relatively better compared to outside The US. I think it depends where you put your focus, so it's difficult to say.
In terms of recovery, first of all, we haven't shared with you the levels of decreases we are seeing in various places. So it's difficult to generalize, but one thing for certain is that everywhere we are seeing decrease, but speed of recovery is faster in The US. Thank you.
JPMorgan, Ms. Mori, please. Thank you. My first question is regarding Indeed. Hiring lab issues of data and in FAQ, you're referring to that.
In August, the trend where the recovery improvement had continued, it seemed to have slowed down in August for the past few weeks. So revenue and the number of posting cases are not directly correlated. I understand, but the vector, the direction or the trend, is it there a possibility of them diverging? So the industry where you can increase where the posting is increasing, are you capturing it effectively to minimize the decline in revenue? So if you could share with us your concrete measures, I'd appreciate it.
So that's my first question. As I have explained from the past, jobs posting, there are paid and unpaid. So it is not directly correlated with the revenue. That is the business model. So what we are saying now is the status up to July, We are still ongoing, in progress, so we hope to be able to explain again in the near future.
Before COVID,
looking at the chart pre COVID, it was a flat line, but revenue was still growing. So just because it's flat does not mean revenue does not grow. It's rather how many customers are paying seriously to post jobs. That's the key. So this chart alone does not show our revenue trend.
Thank you. And you disclosed the industries. So the number of jobs and the revenue is not a similar trend. Same story there. And the location is also involved.
So understood. Second question is cost control. First quarter, the marketing expenses, advertisement expenses was cut by half On a quarterly basis, in the fourth quarter, you spend much, you spend more. So from first to third quarter, you used evenly last year. So how much room do you have for reduction?
In the first quarter, the economic activity stopped. So you stopped And from there, are you gradually re resuming the marketing activity? How are you trending? Team is monitoring this every day and thinking about the right move. If the business environment is recovering and by spending more cost to stimulate it, if we think our business with the customers will increase, if we think that will be the case, then, yes, there's a good possibility we will resume the investment and invest because if we invest after things activate, it's it's pointless.
So we will start early on and trying to ascertain the right timing. So are we going to do it during this quarter or the next quarter? The business side is watching closely. We cannot just keep the tab closed, so we have to do it at the right timing, at the right range, and not only short term. And if we if this contributes to our mid to long term growth, we will do it.
So we will keep that direction and do our investment accordingly. Thank you very much.
Mister Tsuruo of Citigroup. Yes. Thank you. My first question is the same as others regarding HR technology. Just want to confirm, minus 7% for July, is this for The US alone?
If that is the case, then what is the situation globally? Recovery wise, how much recovery will come from increased share? I apologize for asking many questions. Second question is I wanted to ask about cost reduction but that was covered already by the previous person. I want to ask about M and A opportunities.
The market environment, mostly in the finance sector, is showing signs of stabilization. Funding has become more stabilized as well. How do you view M and A opportunities at this time? What about the pipeline at this time? In response to your first question regarding the minus 7%, that's for the entire HR technology business.
As for acquiring more share, that is a rather difficult question. How much the pie has shrunk since there is no concrete survey or data available? We are not quite sure how we should look at the share. As far as our business is concerned, enterprise clients are coming back who are willing to spend on advertisement. Other companies, as for the overall market, we have yet to ascertain the overall trend.
Hopefully, we will be able to capture a bigger share in customers' wallets and that will ensure a strong recovery later on. As we have been explaining, this is in alignment with the implementation of a medium to long term strategy. As for M and A opportunities, before the emergence of COVID-nineteen, we were of course on the lookout for good opportunities. Any good opportunities, add on software services, these are something that we are always interested in and continue to monitor. This has not changed even during this COVID-nineteen pandemic.
Of course, there is the pricing and the counterparties that need to be considered in pursuing and executing on such opportunities, but continue to look out for small to medium sized opportunities. We will will continue to monitor for such opportunities. However, there's nothing concrete that I can share with you today. Thank you. That's all for me.
So
we received all the questions we received so far. So if you have more questions, please register your questions. Star one. SMBC Nikko Securities, mister Maida, please. Yes.
Thank you very much. So I have just one question. You mentioned treat well sales. What was the background to the sales and the impact going forward, please? For example, in background, you will focus more investment on HR tech and therefore you were reviewing the overall portfolio or COVID impact
Those are the points I would like to know. Thank you. About three months ago, we talked about the Streetwell business. In media and solutions business strategy changes, more specifically, air business tools in Japan will be our focus. That's what we said.
And as a result, we revisited the business plan on treat well to go more on the solid trajectory rather than aggressive trajectory. And this changed the future projection and this resulted in impairment loss. So we already explained that. So we planned on maintaining this business and cultivate this business in our portfolio. But then, one company approached us And this was very sudden and we thought if that is the case, we judged that this is a company that can manage the company better.
So we sold the company at the June. It was media and solutions business, business portfolio realignment and changes in the focus of the medium to long term focus. So this is in others under the marketing solutions. So now this business is deconsolidated revenue or EBITDA impact. It was a relatively small business, and the impact was not so big, so we did not disclose the impact.
Thank you very much.
Mr. Tsutsu Saka of Morgan Stanley, please. Yes. Regarding the HR tech, my question is also regarding that segment. I just have one question.
The hiring lab numbers are something we are also closely following. The free postings are increasing. We're seeing signs of recovery. Even so, with free postings increasing, we initially thought that a unit price would be lower, but the revenue is showing smaller decline compared to the number of postings. So I would say the unit price is increasing.
Even if that's not the case, perhaps for specific industries, placement has been successful. And maybe from those specific industries or from specific clients, you are able to get more money. Unless, that is the explanation, it doesn't make sense. The decline in revenue and the number of postings are not correlated. There's no explanation for that.
So my hypothesis is this. You have a payment coming in from a good client that are reflected in this number. I just want to confirm whether my understanding is correct. Mr. Tsusaka, minus 7% is the level that we have recovered to.
Even if some customers or some clients paid more, this would not account for this level of recovery. Some clients are contributing far more than others, would not explain this level of recovery. For the number for July, it's the minus 20% year over year. I believe that's the figure for July. Perhaps The US is rebounding, but Europe and Japan, if we look at the numbers for these markets, the recovery is not as great as in The US.
Considering that, I'm not quite sure what is happening here. That is my question. Making a judgment based on the numbers for a single month alone would be difficult because there are some irregularities, different days in a month, so it's difficult to say. As you rightly said, The US recovery is bigger than other regions. That is a fact.
However, people seeking jobs are increasing and the clients are paying in order to capture and and hire people. So I think your point was that whether the unit price was higher for for some clients who are looking to hire people. But if they're not willing to pay as much, then if volume continues to recover, then we believe we will be able to recover to the level close to the previous year level. But again, it's difficult to say based on the numbers from July alone. We've seen recovery since April and this is continuing in July.
However, we will continue to recover to the level that is even, we still need to remain cautious. Thank you.
Mizuho Security, mister Kishimoto, please. Thank you. This is Kishimoto. I have two questions. First, so it's April, May, June.
HR technology in the full year results, you talked that minus 35% is the year on year for April. In first quarter, May and June, you said you saw an improvement. So the pace of improvement in May and June, how big was the improvement? Minus 7% is the level you've come to July. And I want to see how what the curve looks like.
So so that's my first question. Second question. Media and solutions. The HR solutions in Japan, so it's the placement. So what's the size of the revenue?
So placement may be difficult going forward. So what is the revenue decline impact? So I want you to explain the revenue breakdown. Thank you very much. April, May and June actual revenue decline percentage cannot be disclosed.
It's not linear. The recovery in June is bigger. So that's how I want you to understand. So April, May, and then up in June and July. And your second question?
In media and solutions, we have HR solutions, and the revenue breakdown is not disclosed either. So I hope you could understand. But in placement, I think placement accounts for a significant significant portion. Well, I would like you to guess. Yes.
I will do that. Thank you.
Mr. Fukuyama of UBS, please. Yes. Thank you. My first question is regarding the other in marketing solutions.
What is the breakdown? Where did you see increase in revenue? I want to have more granular understanding of this. The study SUPPORTY, I believe, increased by two times or more. I guess the biggest contributor to this increase in revenue came from study SUPPORTY.
On the other hand, AIR business tools, I imagine, had a slight decrease, so if I could have some qualitative understanding of this. Do you have a second question? Yes. My second question is regarding the Japan operations of staffing. I think the margin for Q1 was 11%.
This is a significant number. Equal pay for equal work regulations will be fully implemented, so what will be the impact on the margin? In other companies' case, they say that their operating margin may decrease by 0.5 points. Maybe companies are taking different approach and responding to the regulations, so could you give us the outlook of this? Regarding the marketing solutions, the other in that segment, we do not disclose the breakdown.
Therefore, am not able to give you breakdown but given the current COVID situation, studies happily and other services are gaining a lot of attention from customers and consumers and the demand is strong. We will continue to therefore provide services that captures that demand. As for Air business tools, as I said before, we are seeing strong inquiries and demand for these tools as well. We do not also disclose the breakdown of revenue of this, but the other segments in the marketing solutions continues to be strong. As for domestic operations, the margin outlook is this: As I said before, in July, it was -three percent or so.
In other words, they turned to the negative domain for that month. The revenue or top line is decreasing. We will therefore continue to control costs. On the other hand, for workers and customers, we must continue to provide excellent services, so where necessary there may be costs that we will spend. In that case, our margin may be negatively affected.
In any case, our revenue is going to slightly decrease and we have certain expenses that need to be paid and the remaining amount will be margin. It is not a significant change from our initial expectation but in any way the fluctuations in revenue is going to affect the future margin. Thank you.
Nomura Securities, mister Nagao, your second time, please. This is Nagao from Nomura Securities. So this COVID nineteen is an extraordinary situation. Once the infection, COVID subsides, then certain level of demand will surely come back. This will be a qualitative question, but under this COVID environment, because we're in this situation, are there areas that you can increase your resource like air business tools and study support, I think can are those examples.
So under this environment, in establishing new businesses outside of HR tech? What kind of efforts are you making in building new businesses? Bridle and travel is difficult. So in this establishing new businesses, how much resource are you injecting in Air Business Tools or StudySupree? Because we're in this environment, are there any businesses you're trying to set up anew?
I'm sorry. This is the qualitative question, but in media and solutions, what is an effort to create the next growth driver? First is something new. We can announce for the second quarter results. If we can do that, we would very much like to do that.
Today, we did not refer to that, which means there's nothing we could share with you at this moment. But new environment is an opportunity to build new businesses. So as you know very well, many Japanese customers of ours are small and medium sized. So the key is how much support we can offer to their troubles and inconveniences. This is not our foundational business, but your team support is based on our policy.
So going forward, Air Business Tool will be our foundation and think of how we can support our customers. As already been mentioning, data in Air business tool. Data is already accumulated in Air Regi, and we hear voices that is much more convenient now. The tool that was made for a different purpose under this environment is used for a different purpose or by different customers. So we want to use such movements as a feed for our new businesses.
So we are studying them and trying to take a move. I cannot share with you anything today, but in November, if we could share something with you, it'll be great. Thank you. I understand.
Hi, mister Kato of CLSA. Yes. This is Kato of CLSA. I have two questions. First is about HR technology.
To the extent possible, Glassdoor and Indeed situation is what I'm interested in. I believe Glassdoor receives consulting fees on an annual contract, so decline in revenue is not as big in the HR tech for Glassdoor. I want to confirm whether that's true and whether it continues to incur losses. That is my first question. The second question is about guidance.
There are still many uncertainties and you mentioned it's difficult to have guidance at this time, but what are some KPIs that you need in order to have this guidance available? As for Glassdoor, as we've been saying from before, it's part of the HR technology SBU. Taking that out of the SBU and give information on that business specifically. It's not something we do. But as I said before, from around May, We have implemented some changes in operation, especially as we are driving further integration of Indeed and Glassdoor providing support mutually.
Costs cannot be clearly separated between the two businesses, whether Glassdoor is incurring losses or not. That is not our focus because of the given situation. Going forward, how we can serve the existing customers and new customers, provide Indeed products to them, and at the same time introduce Glassdoor products. Those are mostly for large enterprises. Those are some action that will be implemented and to some extent that is already ongoing.
For example, January situation of Glassdoor and Glassdoor, how it is positioned today is quite different. These as for guidance, currently internally, we are looking at the situation in the second quarter and the second half of the year. Perhaps when we talk about this, we may have to rely on hypothesis and also which timing we will be able to share that guidance. That is something we are currently internally discussing. Whether we will be able to do so at the second quarter earnings call or whether it will shift to third quarters.
I cannot say for sure at this time, but at the earliest timing possible, we would like to provide you with the full year forecast. As you know, since last fiscal year, we've changed the method of disclosure. We provide a range of EBIT EBITDA and we provide a narrative for each SBU. So whether we will continue with this approach or adopt something else, that is also being considered internally. I ask for your patience.
Understood. Thank you very much.
It's still before time, but we answered all the questions. So we would like to close today's earnings conference call. Thank you very much again for your attendance. Thank you.