Recruit Holdings Co Ltd

TSE:6098

Earnings Call Transcript 2021-Q1

[Mizuho Shen, executive]

Welcome to Recruit Holdings Q1 Fiscal Year 2020 Earnings Conference Call. I am Shen from IR department, and I will serve as the moderator.

Today, we have Junichi Arai, 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 2020 results we announced at 3:00 p.m. and proceed to the Q&A.

This call is simultaneous translation. 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.

[Junichi Arai, executive]

Thank you for your participation today. As Minegishi-san mentioned in the fiscal year 2019 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-19.

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, an update on our recent business operations for Q1 fiscal year 2020.

We when explained the changes in revenue in percentage, it means it is on year-on-year basis.

First, consolidated results of operations. The global spread of COVID-19 and measures to help prevent the spread had a broad impact on business performance in Q1. As a result, revenues declined in all 3 segments and consolidated revenue was JPY 475.4 billion, a decrease of 20% year-on-year. Consolidated adjusted EBITDA was JPY 53.4 billion, a decrease of 38.8% year-on-year, and adjusted EPS decreased by 47.5% 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&A expenses decreased by JPY 44 billion year-on-year, mainly due to strategic reductions 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-19 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-19 will continue to have a significant adverse impact on our financial performance in Q2, fiscal 2020 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 2020.

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 U.S. dollar basis. Restrictions and social distancing measures put in place to limit the spread of COVID-19 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 figures 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-19 pandemic hit a low point in April and gradually improved in May and June. In July, revenue in HR Technology continues to improve to a year-on-year decline of approximately 7% on a U.S. dollar basis.

Revenue has recovered more quickly than we anticipated, particularly in the U.S. In addition, Indeed's monthly unique visitor traffic in July rebounded to pre-COVID-19 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 59.4% year-on-year, to JPY 7.8 billion, and adjusted EBITDA margin was 10.6%. In reaction to the significant decline in revenue in 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 & Solutions. Revenue was JPY 132.9 billion, a decrease of 29.1% year-on-year, and revenue in both Marketing Solutions and HR Solutions declined. Adjusted EBITDA was JPY 27.3 billion, 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 & 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 rate 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 77.1 billion, a decrease of 27.1% year-on-year. Adjusted EBITDA was JPY 17.2 billion, a decrease of 44.1% year-on-year due to declined revenue and adjusted EBITDA margin was 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 BusinessTools as the number of AirPay accounts continue to grow steadily as individual users preference for contactless payments increase.

In HR Solutions, revenue was JPY 55.1 billion, a decrease of 32.1% year-on-year. Adjusted EBITDA in HR Solutions was JPY 14.9 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 Q1 hiring activity.

The outlook for Media & Solutions overall continues to be uncertain.

Next, I will talk about the results of Staffing. Revenue was JPY 274.2 billion, a decrease of 12.3% year-on-year. Adjusted EBITDA was JPY 19.8 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 JPY 145.8 billion, an increase of 5.9% year-on-year.

Despite the decrease in the number of operating hours of the temporary staff due to the suspension of businesses and decreased over time work, revenue increased mainly due to an additional 2 business days in the quarter compared to the previous year and increased billing prices following the implementation of the equal pay for equal work regulations beginning April 1, 2020.

Adjusted EBITDA for Japan operations was JPY 17.0 billion, 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 2020.

Monthly revenue for July in Japan operations declined 3% year-on-year, mainly due to 1 less business day compared to July 2019 and less demand from enterprise clients for temporary staff.

Revenue in Overseas operations was JPY 128.4 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 differs by country within Overseas operations, year-on-year declines in monthly revenue was seen in all geographies with gradual improvement throughout the quarter.

Adjusted EBITDA was JPY 2.8 billion, a decrease of 64.8% year-on-year, and adjusted EBITDA margin decreased to 2.2%. Even 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-19 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 website as appropriate, which includes the content of today's presentation.

Now we will take your questions.

[Mizuho Shen, executive]

[Operator Instructions] Nomura Securities, Mr. Nagao, please.

[Yoshitaka Nagao, analyst]

This is Nagao from Nomura Securities. I have 2 questions.

First is a rather detailed question. So the nonoperating loss cost, JPY 9.8 billion is being posted. So in your explanation, you said the sales of subsidiary and the COVID-19 incurred cost. So this loss on sales of subsidiary and the COVID-19 cost, what is the breakdown? And what are the items? So that's my first question.

Could I continue on?

[Junichi Arai, executive]

Yes, please.

[Yoshitaka Nagao, analyst]

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%?

[Junichi Arai, executive]

So your first question is already posted on the website. It's a frequently asked question. And we answered. It's number -- question #3. So I hope you could take a look at that as well. So JPY 3.5 billion is COVID-19-related cost. In addition, JPY 3.1 billion is the sale of business -- loss on sale of business. It's the unrealized foreign exchange loss. The asset that we sold is the Treatwell, the business in Europe.

And 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 of fading out the job figures are coming back, too. So basically, the volume is coming back.

[Mizuho Shen, executive]

Mr. Kinoshita of Merrill Lynch.

[Yoshiyuki Kinoshita, analyst]

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.

[Junichi Arai, executive]

First of all, as for Japan operations from second quarter and beyond, yes, I did mention that there would be such a possibility. So 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.

[Yoshiyuki Kinoshita, analyst]

Understood. 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 U.S., Europe, are there any differences in the trends? Please elaborate.

[Junichi Arai, executive]

Are you asking by segments, whether there's any geographical difference or regional difference?

[Yoshiyuki Kinoshita, analyst]

Yes.

[Junichi Arai, executive]

As I said before, for HR Technology, the U.S. market is recovering faster than we initially anticipated. Therefore, U.S. is showing great signs of recovery.

As for countries in Europe, there are some slight variations, but enterprise client 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-19 and the drawing COVID-19 pandemic, as we've mentioned, demand in the European market continues to be weak. This is certain.

[Yoshiyuki Kinoshita, analyst]

Just to confirm, so initially, the HR Technology, rather than the U.S., you are seeing bigger growth in outside of the U.S. But the latest data is showing that the U.S. is actually showing better year-over-year figures. So U.S. is relatively better compared to outside the U.S.

[Junichi Arai, executive]

I think it depends where you put your focus. So it's difficult to say. But in terms of recovery, well, 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 a decrease, but the speed of recovery is faster in the U.S.

[Mizuho Shen, executive]

JPMorgan, Ms. Mori, please.

[Haruka Mori, analyst]

My first question is regarding Indeed Hiring Lab issues a 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. The revenue and the number of posting cases are not directly correlated, I understand, but the vector, the direction or the trend, is 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.

[Junichi Arai, executive]

As I have explained from the past, job 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, and so 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.

[Haruka Mori, analyst]

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 resuming the marketing activity? How are you trending?

[Junichi Arai, executive]

Kitamura-san's 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 pointless. So we will start early on and trying to ascertain the right timing.

[Haruka Mori, analyst]

So are we going to do it during this quarter or the next quarter? The business side is watching closely.

[Junichi Arai, executive]

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.

[Mizuho Shen, executive]

Mr. Tsuruo of Citigroup.

[Mitsunobu Tsuruo, analyst]

Yes. My first question is the same as others regarding HR Technology. Just want to confirm, minus 7% for July. Is this for the U.S. alone? If that is the case, then what is the situation globally? And recovery-wise, how much recovery will come from increased share? I apologize for asking many questions.

The second question is I wanted to ask about cost reduction, but that was covered already by the previous person. So I want to ask about M&A opportunities. The market environment, mostly in the finance sector, is showing signs of stabilization. So funding has become more stabilized as well. So how do you view M&A opportunities at this time? What about the pipeline at this time?

[Junichi Arai, executive]

In response to your first question, regarding the minus 7%, that's for the entire HR Technology business.

And 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, so we're 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. But other companies for the overall markets, 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&A opportunities, before the emergence of COVID-19, 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. And this has not changed even during this COVID-19 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 continue to monitor for such opportunities. However, there's nothing concrete that I can share with you today.

[Mizuho Shen, executive]

[Operator Instructions] SMBC Nikko Securities, Mr. Maeda, please.

[Eiji Maeda, analyst]

Yes. So I have just one question. You mentioned Treatwell sale. So 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 or EBITDA -- impact on EBITDA from the sales, those are the points I would like to know.

[Junichi Arai, executive]

About 3 months ago, we talked about the Treatwell business. In Media & Solutions, business strategy changes more specifically. Air BusinessTools in Japan will be our focus. That's what we said. And as a result, we revisited the business plan on Treatwell 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 end of June.

So it was Media & Solutions business' business portfolio realignment, 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.

[Mizuho Shen, executive]

Mr. Tsusaka of Morgan Stanley, please.

[Tetsuro Tsusaka, analyst]

Regarding the HR Tech. I apologize, 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 increasing, we're seeing signs of recovery. Even so with free postings increasing, we initially thought that 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 payments coming in from good clients that are reflected in this number. I just want to confirm whether my understanding is correct.

[Junichi Arai, executive]

Mr. Tsusaka, the minus 7% is the level that we have recovered, too. So even if some customers or some clients paid more, this would not account for this level of recovery.

[Tetsuro Tsusaka, analyst]

Some clients contributing far more than others would not explain this level of recovery. But as for the number for July, it's minus 20% year-over-year. I believe that's the figure for July. So perhaps the U.S. is rebounding. But Europe and Japan, if we look at the numbers for these markets, the recovery is not as great as in the U.S. So considering that, I'm not quite sure what is happening here? That is my question.

[Junichi Arai, executive]

Making judgments based on the numbers for single month alone will be difficult because there are some irregularities, different days in a month so it's difficult to say. But as you rightly said, the U.S. 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 hire people. So I think your point was that whether the unit price was higher for some clients who are looking to hire people. But they are 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 then this is continuing in July. Whether, we will continue to recover to the level that is even, we still need to remain cautious.

[Mizuho Shen, executive]

Mizuho Securities, Mr. Kishimoto, please.

[Akitomo Kishimoto, analyst]

This is Kishimoto. I have 2 questions.

First, so for April, May, June, HR Technology in the full year results, you talked that minus 35% is the year-on-year for April. In the 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 what the curve looks like. So that's my first question.

Second question, Media & Solutions in 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.

[Junichi Arai, executive]

April, May and June, actual revenue decline percentage cannot be disclosed. It's not linear. The recovery in June is bigger. So that's what we want you to understand. So April, May and then up in June and July.

And your second question. In Media & 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 portion. Well, I would like you to guess.

[Akitomo Kishimoto, analyst]

Yes, I will do that.

[Mizuho Shen, executive]

Mr. Fukuyama of UBS, please.

[Kenji Fukuyama, analyst]

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 Sapuri, I believe, increased by 2x or more. So I guess, the biggest contributor to this increase in revenue came from Study Sapuri. On the other hand, Air BusinessTools, I imagine, had a slight decrease. So if I could have some qualitative understanding of this?

[Junichi Arai, executive]

Do you have a second question?

[Kenji Fukuyama, analyst]

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. And maybe companies are taking different approach and responding to the regulations. So could you give us the outlook of this?

[Junichi Arai, executive]

Yes. So regarding the Marketing Solutions, the other in that segment, we do not disclose the breakdown. Therefore, I am not able to give you the breakdown. But given the current COVID situation, Study Sapuri and other services are gaining a lot of attention from customers and consumers and demand is strong. We will continue to, therefore, provide services that captures that demand.

As for Air BusinessTools, 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 minus 3% 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.

[Mizuho Shen, executive]

Nomura Securities, Mr. Nagao, your second time, please.

[Yoshitaka Nagao, analyst]

This is Nagao from Nomura Securities.

So this COVID-19 is an extraordinary situation. Once the infection COVID subsides, then certain level of demand will surely come back. So this will be a qualitative question. But under this COVID environment, because we're in the situation, are there areas that you can increase your resource like Air BusinessTools and Study Sapuri, I think 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? Bridal and travel is difficult. So in establishing new businesses, how much resource are you injecting in Air Business tools or Study Sapuri? Because we're in this environment, are there any businesses you're trying to set up a new? I'm sorry, this is the qualitative question, but in Media & Solutions, what is the effort to create the next growth driver?

[Junichi Arai, executive]

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 our team support is based on our policy.

So going forward, Air BusinessTools will be our foundation and think of how we can support our customers. As already been mentioning, data in Air BusinessTools -- data is already accumulated in AirREGI and we hear voices that it's much more convenient now. The tool that was made for a different purpose under this environment is used for different purpose or by different customers. So we want to use such movements as a seed 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 will be great.

[Yoshitaka Nagao, analyst]

I understand.

[Mizuho Shen, executive]

Mr. Kato of CLSA.

[Jun Kato, analyst]

Yes, this is Kato of CLSA. I have 2 questions.

First is about HR Technology. To the extent possible, Glassdoor and Indeed situation is what I'm interested in. So I believe Glassdoor received consulting fees on an annual contract. So decline in revenue is not as big in the HR Tech for Glassdoor. So 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?

[Junichi Arai, executive]

As for Glassdoor, as we've been saying from before, it's part of the HR Technology SBU. So 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 we are driving further integration of Indeed and Glassdoor, providing support mutually. So costs cannot be clearly separated between the 2 businesses, whether Glassdoor is incurring losses or not, that is not a 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. So 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.

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 quarter, 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 EBITDA and we provide a narrative for each SBU. So whether we will continue with this approach or adopt something else, so that is also being considered internally. So I ask for your patience.

[Mizuho Shen, executive]

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.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]