DIP Corp

TSE:2379

Earnings Call Analysis

Earnings Call Transcript 2025-Q1

[Hideki Tomita, executive]

Despite your busy schedule, thank you very much for giving us your time today. This is the first quarter for the fiscal year ending February 2025, then I would like to start with the briefings.

AI-Agent. This is the first new business that we're launching, and this is the largest innovation that we're bringing. And mainly around the AI-Agent, various services will be introduced, and this will be the core of our business going forward, and I believe that is how we look at this new business.

And the Generative AI is being used. And the conventional search type recording service will move into a more interactive type of service using Generative AI. And by doing this, there will be many different effects. For example, by having the interaction, we are able to lock in the users. And until now, we will like referring the businesses, and that was it.

But by having this continuous interaction, dissatisfaction of the clients or other pain points can be understood. And beyond that, the part-times can move into a new graduates and moving to different careers. And depending on the various events, we will be providing many different services.

And so we can expect many different developments. And in that context, this is a very important service. And this is still in a trial phase, but still, we are feeling very strong potential, and this is very well received. And if you have not tried it out, I hope you would touch this and try this out. And that way, I think you could feel our potential of our company.

Well, this is under trial now, and we're making adjustments on AI-Agent. And in October, we are planning to conduct a large promotion so that we can raise the awareness and have you use this service, and that is the schedule. And towards that schedule, we are continuously evolving the service.

And as the second new business that we have Baitoru Free, and this is a service for spot work. But this is a very hot market. Our clients are showing very strong needs. I mean they're asking Baitoru to do the same. And if it's Baitoru, they're saying that there it could be more reassured and so we're very thankful to get such feedback.

But actually, since more than 5 years ago, we have decided to deliver this service, and we had undergone development internally. And finally, starting from this year, in the fall, we are planning to start the service. And starting from this quarter, we have started the hearings with our clients in full scale. So I hope the investors would keep an eye on this.

Our strength or the point that is very well received for the promotion is at the end of last year, everyone in Japan were surprised. Ever since the WBC was held, who would sign a contract with Shohei Ohtani was a big attention and we were the first to be chosen to sign a contract. And we gained a lot of attention. And the data was announced in the previous financial results announcement and the publicity effect was much higher than the contract amount that we paid to sign up with Shohei Ohtani.

And using Shohei Ohtani's movie, for example at the Shibuya Scramble Square, Vision, which is called the dip Vision, was used to show his promotion and the billboards will increase, for example, in places like Aoyama or [ Tambekar ] these are already decided, but we will increase the number of billboards.

And in the ads -- outside of Mr. Ohtani, we're seeing very strong demand in some industries and the ads focused on those industries for Baitoru NEXT, mainly like industries like logistics or restaurants or construction and civil work. We are showing the commercials focus on those areas, and we're seeing very good results.

And in sports events. Well, we have been involved since before, but we are actively showing commercials. And also, we have promotions targeting the high school kids. And Bocchi Za Rokku! is an anime that is very popular. And the story is about students who are doing a part-time job for the first time, and we're using this character that has very strong affinity and through various social media, we're showing the commercial, and we're seeing more than 100 million cumulative views. And the application by the high school students have grown by 1.3x. So we're seeing very strong results.

And in terms of the activities to drive the productivity, by using AI we're trying to improve the productivity. And this activity has been explained over time. But while using AI, the latest technology will also be utilized. But our strength is being very down to earth too.

So the other thing for the company internally for this fiscal year is to listen and see and talk and we don't want to focus on the real physical world. So basically, the employees are asked to come into the office physically. So basically, we're not allowing them to work remotely, we're asking them to come into the office. And if they want to work remotely, they need to apply beforehand. And if the senior allows them to work remotely, they will be allowed to work remotely based on the approval, and that was the direction.

And the employees because they're coming into the office, they want them to feel that it was better working in the office. So in order to develop that environment, YOTSUYA TOWER in Yotsuya. This is the largest building in Yotsuya, but we have secured one floor in that tower, and this is for the engineers and for Dx. And there is the table where the height changes so they can work sitting down or standing up. And when they turn around, they can talk to their boss directly and they can consult with their boss. And after work, they can go out for drinks. And so by developing the teamwork, we want to improve the productivity and efficiency.

And well, the biggest thing that we value is the philosophy. And in order to develop the philosophy, we are improving the office, and this is very well received, and we are expanding the headquarter floor too, so that they have more room as well as be able to work more efficiently.

And when we announced this direction, remote would be more efficient and some people said that they want to continue working remotely. Some people objected. But a lot of our employees are now coming into the office and they're saying that they have better efficiency and they have better teamwork and some people even say there was a waste that they were not working in the office.

This fiscal year in delivering the innovation, our management also need to evolve. And so we're expanding the HR resources, and we have invited a new executive on board. Mr. Keiichiro Nagashima, is now appointed as CTO as well as the Head of Development Division, DX Business Group. And now he is demonstrating his capability already. And by inviting him on board, a lot of the schedules are expedited. And so he is already demonstrating wonderful capabilities.

And apart from that, as Head of Personnel and General Affairs Group, we have invited Mr. Toshiki Kanadani; and also as General Manager of Marketing Division, we have invited Mr. Daisuke Nakamura. And these three people are already demonstrating their capabilities.

Well, internally and externally, including overseas market, we are enhancing our communications, including IR communication. And last month, I went on an overseas IR trip. And for overseas, we were introduced to very famous publications like Entrepreneur.

Well, we have many service publicities, but they have covered other content as well. That is all from me. Thank you very much.

[Masatsugu Shidachi, executive]

I'm Shidachi. From my side, I'm going to talk about the consolidated financial results of Q1 of FY '25. In Q1, sales grew by 9% year-on-year. Growth accelerated Q-on-Q from 7% to 9%. Growth rate has risen.

Operating income grew by 20% to JPY 4 billion, achieving the record high quarterly operating income. By segment, DX Business continues high growth with 21% growth in sales and 19% in segment profit. Personnel Recruitment Services Business grew 7.6% in sales. Growth is getting stronger Q-on-Q from 4.5% in Q3 last fiscal year and 5% in Q4 of last fiscal year. Segment profit increased by JPY 1.27 billion or 29%, backed by increase of efficiency in advertising sales promotion expenses and by the fact that promotion with Shohei Ohtani has been recorded as entire company adjustment cost, because it's a corporate commercial.

As a part-time job advertising market index from this time, we use actual figures of new active job opening-to-applicants ratio, not seasonally adjusted figures.

In seasonal adjusted figures, the difference of monthly business days of this year and the previous year is adjusted. But the sales of each medias, including us, would fluctuate with more business days or less business days, so we decided it is appropriate to use unadjusted actual figure of job operating-to-applicants (sic) [ job opening-to-applicants ] ratio, not seasonally adjusted figure to observe the market situation.

In Q1, market growth rate based on new active job opening-to-applicants ratio without seasoning or seasonal adjustment was minus 5.3% year-on-year. April market slowed down and it was weaker than what we expected at the beginning of the fiscal year. So we are paying close attention to identify whether the market has really bottomed out.

The background factor of this April worsening, it is supposed to be the increase in job seekers or labor supply in logistics and office work domain, which pushed down the new job opening-to-applicants ratio. Having said that, on the ground feeling of a business operator of this market, we didn't feel that job offering in logistics was bad, and we were able to increase our sales.

As a matter of fact, our Media Service business, including logistics sales grew by 7.2%, which outperformed the market growth by more than 12 percentage points, accelerating our market share gain.

Next, SG&A. Personnel costs increased, resulting from hiring 315 new graduates in April. So the cost itself was up, but the personnel cost ratio declined 0.3%. This is because we hired less new graduates than last year when we hired 600-plus, and also because we restrained mid-career hiring.

As for advertising and sales promotion expenses, we have a continued efficient operation and ratio to sales went down by 2.3%. The other costs increased due to the increase in the rent as a result of the opening of new offices such as Yotsuya office and increase of headquarters floor space as Tomita explained earlier.

Next full year forecast. There is no change from the forecast we announced in April. And the idea behind that is the same. So I will skip the explanation.

Next, I'm going to talk about the business overview and the progress in DX business. Let's see the sales trajectory. The trends in net sales continues a high growth of 21% year-on-year. Sales of customer traction KOBOT is strong. Our full year forecast for sales growth is 20.4%. So we have made a progress as expected. The number of companies subject to monthly billing grew significantly year-on-year with 16% growth.

KPI of DX business. The number of companies subject to billing increased by 500 quarter-on-quarter. And ARPU was up from JPY 39,000 to JPY 40,000. We have made progress as expected.

Next, strategy and progress of DX business. You can see the full year strategy, progress and topics for Q2. In the area of recruitment and human resources, we made steady progress in reducing churn rate through renewal of Corporate Recruiting Page KOBOT. And development of functions for major companies is in good progress. In Q2, the new feature of Interview Scheduling KOBOT was released in June with Google Calendar integration.

In the sales promotion support area, customer attraction KOBOT MEO is growing. Number of companies using MEO KOBOT steadily expands, surpassing 1,000. In April, we announced capital and business alliance with iRidge, an app planning and development company. We will improve quality of existing products and accelerate development of new products. In Q2, I hope you will look forward to this.

Next, full year plan. As I said earlier, we are in line with other plan, no change.

Next, progress in the Personnel Recruiting Service Business. First, Media Services. The sales grew by 7.2% year-on-year. As I said earlier, growth of Q4 in the last fiscal year was 4.9%. We can say that growth speed is up, and we outperformed the market growth, which is assumed to be minus 5.3%.

Number of contracted companies is growing nicely. Next is unit price. Contract price per -- contract price unit per company decreased year-on-year. But in quarter 4 of the last fiscal year, we recorded 3.3% decrease, so we are on a recovery trend. This was due to the gradual recovery of unit price of temp staff agencies and BPOs.

And next is the referral slide, we are #1 in terms of the average hourly wages. User-related KPI. And as for MAU, we are soon to catch up with it and surpass it. We would like to realize that.

Next, Media Services application. It's going up, increasing nicely. Next, strategy and progress of Media Service. First, improving productivity of sales staff. We have started training to improve sales productivity for some employees who joined in 2023. We expect the results is coming out from Q2 and onward. Utilizing AI tools made progress in improving the productivity of existing employees.

The second point is to strengthen sales in logistics, manufacturing, and medical and nursing care areas. In Q1, we are able to expand sales in this area. In Q2, we will increase the sales in the logistics sector advertising investment to expand sales. Third point is to increase market share in suburban and rural areas. We have allocated new graduates of this year in suburban area more than usual. In Q2, we will focus on expanding distribution network.

Next, we move on to a Permanent Placement Service. The sales were up by 12.3% Y-o-Y. Care de Hatarako, is a strong launch, a, propelled the strong growth. Now the strategy and progress of Permanent Placement Service business. The first point to improve productivity of career adviser. We established training organization for new graduates. As a result, existing employees don't lose productivity while new graduates are well trained. In Q2, we will improve job search tools for career adviser, which will improve their productivity. We will release this tool in the second half.

Secondly, we will enhance the customer flow from existing media. In Q2, we will develop app to be released in the second half. And the third point is, in order to offer better job opportunities, we have been striving to enhance relationship with large customers in urban areas. In Q2, we will expand these initiatives beyond the urban areas into suburban areas to increase the number of job offerings.

And the full year -- excuse me, the next is the sales trend. Q1 sales of Personnel recruitment Service in total grew by 7.6%. So the progress made is in line with the plan. So there's no change in the full year plan.

[Hideki Tomita, executive]

Well, in terms of the shareholder return and the dividend. For both interim and year-end, there is no change to the guidance. We are conducting share buybacks. And along with that, when you combine both the total return ratio is expected to be 110%. So it's JPY 40 and JPY 48, so the full year dividend is expected to be JPY 88.

As I explained at the beginning, AI-Agent using Generative AI, we are going to do a press conference for the media. So I would like to show you a video that was created for the press briefing.

[Presentation]

[Hideki Tomita, executive]

Well, I hope you like the video. AI-Agent service. This, I think, is a service that has very strong potential. So I hope you felt that potential, too. This is kind of the trap, but my daughter who's in fourth grade, I asked her to try out the AI-Agent service because we just started the service. And the question was that I'm only in elementary school, but she asked, if there's a job I can do. And this is the result that came back.

How should I say? Even as a human being, I'm not sure if someone can give this kind of a response. So I think, we were able to build an AI-Agent that sits alongside with the user. And so I am very grateful if you would try it out, too. Thank you.