Persol Holdings Co Ltd

TSE:2181

Earnings Call Analysis

Strong Q1 Results with Stable Full-Year Forecast

In the first quarter of fiscal 2024, PERSOL HOLDINGS reported a robust 9.8% increase in revenue, reaching JPY 360.8 billion. Adjusted EBITDA surged by 20.7% to JPY 22.9 billion, and operating profit grew by 15.6% to JPY 16.9 billion. Despite market uncertainties, the company maintains its full-year forecast. The Career SBU was a significant contributor, with a 16% increase in revenue. Notably, the company achieved several awards for HR excellence, demonstrating its commitment to human capital management.

Strong Start to Fiscal 2024

PERSOL HOLDINGS has embarked on a promising journey in fiscal Q1 2024, showcasing robust financial performance. The company's revenue reached JPY 360.8 billion, marking a notable increase of 9.8% year-on-year. This growth is complemented by a significant rise in adjusted EBITDA to JPY 22.9 billion, up 20.7% from the previous year. The operating profit also saw a commendable uptick of 15.6%, totaling JPY 16.9 billion. This strong financial footing indicates resilience in the company's operational strategy despite global market uncertainties.

Positive Momentum in Key Segments

PERSOL's diverse business segments contributed positively to overall growth. The Career Service Business Unit (SBU) reported a remarkable revenue increase of approximately 16%, signaling enhanced demand for staffing and recruitment services. Operating profit in this sector improved significantly, reflecting strategic investments and a stronger workforce. Additionally, the Technology SBU demonstrated a 10% revenue growth and a 23% increase in adjusted EBITDA, fueled by a growing number of IT engineers and rising demand in technological staffing solutions.

BPO Segment Faces Challenges

While PERSOL has many strong performers, the Business Process Outsourcing (BPO) SBU struggled due to a reduction in COVID-related projects, leading to a 33% decrease in adjusted EBITDA. However, this sector's organic revenue grew around 14%, indicating opportunities for recovery and growth as the business environment stabilizes. The upcoming integration of companies in this SBU as 'Persol Business Process Design' may help streamline operations and drive future growth.

Future Outlook and Strategic Investments

Looking ahead, PERSOL aims to capitalize on its unutilized marketing and recruitment investments, which provided a boost in Q1 performance. The management expressed intention to maintain their full-year financial forecast amid market volatility, staying committed to strategic investments that can enhance growth. With adjusted EBITDA for Q1 achieving 30.2% progress towards the annual goal, the company demonstrates confidence in meeting its objectives in an unpredictable economic landscape.

Recognition and Human Capital Initiatives

PERSOL has not only achieved financial growth but has also garnered recognition for its commitment to human capital management. The company received several awards, including the Excellent Award at the Sixth Platinum Career Award and accolades at the Ninth HR Technology Awards. These recognitions underscore PERSOL's dedication to creating engaging workplaces and promoting diversity and inclusion in the workforce, which are essential factors for sustainable growth.

Guidance and Expectations

As part of their forward-looking approach, PERSOL acknowledged external factors such as foreign exchange fluctuations impacting performance, particularly in the Asia Pacific SBU, which reported a foreign exchange impact of around 12%. However, excluding this effect, local revenue growth was 5%, indicating underlying strength in operational performance. The company will continue monitoring these factors closely and adjusting its strategies, aiming for sustained growth and profitability in a dynamic landscape.

Concluding Thoughts

In summary, PERSOL HOLDINGS is on a solid trajectory, backed by impressive Q1 results and strategic initiatives. With ongoing investments in human capital and a keen eye on market dynamics, investors can be optimistic about the company's capacity to navigate challenges and harness growth opportunities. The commitment to achieving full-year forecasts amidst uncertainties demonstrates leadership confidence and a resilient operational foundation.

Earnings Call Transcript 2025-Q1

[和田 孝雄, executive]

Hello. I am Wada, CEO of PERSOL HOLDINGS. Thank you very much for joining us today. I have 3 points I would like to convey to you today. The first is the summary of the financial results for fiscal 2024 Q1. The second is fiscal 2024 full year forecast. And the third is the topics of our company.

Let me start with the Q1 financial results summary. Revenue was JPY 360.8 billion, an increase of 9.8% year-on-year, while adjusted EBITDA amounted to JPY 22.9 billion, an increase of 20.7% year-on-year. Operating profit totaled JPY 16.9 billion, an increase of 15.6% year-on-year. Adjusted EBITDA made 30.2% to 31.4% progress toward the full year financial forecast.

The second point is fiscal 2024 full year financial forecast. Although the market is becoming more uncertain due to fluctuations in recent stock prices and significant changes in foreign exchange rates, we would like to be fully aware of the situation and will respond to it. But in light of these factors, we intend to keep our full year forecast within the range of assumptions we announced at the beginning of the fiscal year.

As of the end of Q1, we have some unutilized marketing and recruitment investment. This contributed partially to an upside in Q1, but we will continue to monitor the market conditions and plan to execute these investments appropriately. The third is topics. There are great news we'd like to share as a company upholding human capital management. The first is that we won Excellent Award at the Sixth Platinum Career Award. We also won Excellence Award at the Ninth HR Technology Award. Furthermore, we won Award for Excellence in Human Resource Management at the 13th Japan HR Challenge Awards. The contents will be explained later.

Now first, we will have CFO, Tokunaga, explain the financial results.

[Junji Tokunaga, executive]

Hello. I'm Tokunaga, CFO. Allow me to explain the Q1 financial results of fiscal 2024. As was mentioned earlier, revenue increased circa 10% year-on-year to JPY 360.8 billion. Gross profit increased 12% to JPY 84.1 billion. Operating profit based on IFRS increased 15% year-on-year to JPY 16.9 billion. As for adjusted EBITDA, which the top management focuses on, increased 20% to JPY 22.9 billion. Q1 profit increased 38% year-on-year to JPY 12.9 billion due to tax refund of JPY 1.3 billion at programmed in Australia.

Next is the adjusted EBITDA and GAAP year-on-year. Adjusted EBITDA in Q1 of fiscal 2023 was JPY 19 billion, but in Q1 this fiscal year, gross profit increased JPY 9.8 billion. SG&A expenses increased JPY 5.9 billion. The impact of exchange rate on the gross profit was JPY 1.4 billion and on SG&A was JPY 1.2 billion.

Against the initial plan, gross profit increased by around JPY 2 billion and SG&A was around JPY 4 billion less. This is fiscal 2024 Q1 adjusted EBITDA and IFRS-based operating profit breakdown. Adjusted EBITDA was JPY 22.9 billion, but depreciation cost increased JPY 300 million year-on-year to JPY 3.2 billion.

Accrued paid leave increased JPY 400 million year-on-year to JPY 1.7 billion. As a result, IFRS-based operating profit was JPY 16.9 billion. Main reason for the increase in provision for paid leave is due to wage hike. This is revenue by SBU. As you can see, we achieved increase in revenue in all the segments. I will touch on this later, but we achieved 16% revenue increase in Career SBU, which is the pillar of growth this fiscal year.

This is adjusted EBITDA by SBU. BPO saw a decrease of 33% as projects related to COVID have almost been eliminated, but other SBUs achieved significant increase, as you can see. This is year-on-year operating profit by SBU. As this is similar to adjusted EBITDA, I will admit explaining about it. The following 3 pages show tables of revenue, adjusted EBITDA and operating profit by SBU. Please refer to them later.

Next is the financial results by SBU and the major KPIs. Let me start with Staffing SBU, the pillar of our business. Revenue increased 4% plus year-on-year. We also achieved adjusted EBITDA increase of circa 10% year-on-year. Main reasons for the increase are written around the middle of the slide, and it is mainly because of 30% year-on-year growth in the placement business.

KPIs for temporary staffing are written on the right-hand table. Number of active staffs increased by around 3% to 130,000 and average charge price increased by around 2%. I would like to omit the business topics because of time constraints today. The second SBU is BPO SBU. As explained earlier, because of the decline of COVID-related projects, profit decreased. However, other than COVID-related projects, what we call organic revenue increased by around 14%, and the number of customers increased more than 20%, and we are performing favorably.

At BPO SBU, we are planning to integrate the companies on October 1, and the company name is planned to be changed to Persol Business Process Design. We are going to restructure the Group organization. However, there will be no changes in the segments. The third is Technology SBU. Revenue increased circa 10%. Adjusted EBITDA increased circa 23%. Details are described in the below table. The number of IT engineers increased by around 20%. Mechanical and electric engineers increased by around 7% to circa 3,400 engineers. On the other hand, as is described at the very bottom, number of registered temporary staffs decreased slightly.

We have a number of active engineers and their operating rate in the graph. As we had 627 new graduates joined in April this year, exceeding last year, operating rate will temporarily decrease, but we are expecting to see improvement from Q2 onward, just like last year. Also, as described at the bottom, we were able to raise the average sales per unit by around 4% year-on-year from last fiscal year's JPY 936,000 to JPY 978,000.

I would like to skip the business topics because of time constraints. The fourth SBU is Career SBU. As explained at the beginning, there was a slight upside compared to the forecast at the beginning of the year, and revenue grew approximately 16% year-on-year. Adjusted EBITDA increased significantly by 37% to JPY 9.4 billion.

As for the KPIs for Career SBU, number of consultants increased 14% year-on-year, although we are controlling the hiring of consultants compared to Q4 of last fiscal year. In Q4, productivity of consultants decreased slightly, but compared to Q1 of last fiscal year, productivity has recovered to similar level at JPY 3.16 million. I would like to omit explaining the topics for Career SBU.

The last is Asia Pacific SBU. Again, as mentioned in the beginning, there was a foreign exchange impact of around 12%. But excluding that, we achieved 5% growth in revenue on a local currency basis. Adjusted EBITDA grew around 28%. Looking at each of the business, Placement business has not gotten back to pre-COVID level, but temporary staffing business continues to perform strongly.

Revenue of facility management business in Australia grew double digit on a local currency basis. Now R&D function unit included in others is making investments mainly in Shareful. And as a result, profit decreased slightly. Consolidated adjusted EBITDA improved year-on-year. For Shareful, we achieved 7 million downloads.

Last of all is Group's think tank, PERSOL Research and Consulting. Because of time constraints, I will admit explaining, but I would appreciate if you could take a look at it later. This is all for the Q1 results.

I will continue with the Group's topics. We won Excellent Award for the first time at the Sixth Platinum Career Awards. We were recognized for declaring to be a career well-being creation company and pursuing efforts proactively, including career ownership support and the promotion of DEI. As a result, we were able to receive Excellent Award at Platinum Career Award. At the same time, we received the Ninth HR Technology Awards and the 13th Japan HR Challenge Awards. We won the Excellent Award for Human Capital Management and also Excellent Award for Human Resource Management, respectively.

We prepared a platform for creating a system that helps foster career ownership and allows individuals to make their own choices about how they work. The HR Technology Award was given first and foremost in recognition of the efforts of the platform and the results achieved in improving engagement. We also set up a Career Scout System. When an individual registers for a career, somebody in the company in another division or group company can scout them.

This was highly recognized as achieving results in enhancing employee engagement and as a result, led to winning the award. We will continue to promote these initiatives as human resources platform to be able to showcase the human resources-related actions. Last of all, we transitioned to a new structure in APAC from August 1. So I would like to update you about it.

We promoted Mr. Francis Koh, who has been overseeing staffing business in APAC to CEO of APAC SBU and at the same time, welcome him as an Executive Officer of PERSOL HOLDINGS to build a structure to further promote APAC business and to drive growth. His predecessor, Mr. Yamazaki, will graduate from PERSOL Group on August 31. We will further globalize the executives and the Board members and proactively accommodate diversity to reinforce our business format.

This is all for me today. Thank you.