Recruit Holdings Co Ltd

TSE:6098

Earnings Call Transcript 2023-Q2

[Mizuho Shen, executive]

Welcome to the Recruit Holdings Second Quarter FY 2022 Earnings Conference Call. This call is a simultaneous translation of the original call in Japanese and translation is provided for the convenience of investors only. I'm Mizuho Shen, Group Manager of Investor Relations and Public Relations; and joining me today is Hisayuki Idekoba, President and CEO; and Junichi Arai, Executive Officer of THE Corporate Planning Division. Jun will briefly go through the second quarter results we announced at 3:00 p.m. today and proceed to the Q&A session.

The presentation we use today is available on our IR website. Please note all comparisons during this conference call are year-over-year unless otherwise stated. As a reminder we have applied a new definition for adjusted EBITDA, adjusted EBITDA margin and adjusted EPS for this fiscal year. And the new definition is applied retrospectively to the FY 2021 for the comparison purposes.

Now I'll turn the call over to Jun.

[Junichi Arai, executive]

Thank you for your participation today. I am Junichi Arai, Executive Officer of the Corporate Planning Division of Recruit Holdings. I will begin with the consolidated results of operations for Q2 of FY 2022. Consolidated revenue was JPY 878.4 billion, an increase of 25.3%. Consolidated revenue increased by 12.4% on a constant currency basis. Consolidated adjusted EBITDA decreased by 1.2% to JPY 145.3 billion. And consolidated adjusted EBITDA margin was 16.5%.

Adjusted EPS was JPY 54.70. Consolidated revenue increased as revenue in all segments increased led by HR Technology. Consolidated adjusted EBITDA margin was mainly affected by strategic investments for future growth in HR Technology and Matching and Solutions, which were executed as planned, in line with our May announcement.

There is no change in the guidance for the current fiscal year from the figures disclosed in May. For the 6-month period ended September 30, 2022, consolidated revenue was JPY 1.7216 trillion, an increase of 26%. Consolidated adjusted EBITDA was JPY 297.6 billion, an increase of 6.9% and consolidated adjusted EBITDA margin was 17.3%.

Now I will walk through each segment. First, I will talk about HR Technology. U.S. dollar-based revenue was $2.173 billion, an increase of 11.6% year-over-year and approximately flat compared to Q1. This is higher than 2 years ago in Q2 of FY 2020, but revenue was $973 million. On a Japanese yen basis, revenue increased by 40.1% year-over-year and 5.9% quarter-over-quarter. The increase was supported by strong demand for talent globally, which led to increased demand year-over-year for Indeed and Glassdoor's hiring products and services.

While still tight by historical standards, the labor market continued to normalize compared to Q1, especially in the U.S. and Europe. During Q2, the number of job openings posted on Indeed declined and the number of job seekers active on the Indeed and Glassdoor increased, reflecting the easing of the imbalance in the labor market seen in the U.S. and other countries in Q2.

An additional reason for the moderating revenue growth rate compared to Q1 was a significant growth experienced in FY 2021 from Q1 to Q2. On a U.S. dollar-basis, revenue in the U.S. increased by 9.2% and revenue outside of the U.S. increased by 18.9%, primarily led by Europe, Canada, and Japan. U.S. dollar-based revenue in the U.S. and outside of the U.S. remained at a similar level compared to Q1. Adjusted EBITDA was JPY 91.2 billion, and adjusted EBITDA margin decreased by 12.7 percentage points to 30.4%, 3.3 percentage points lower than Q1 due to a significant increase in operating and development expenses driven by investments in hiring for product and technology development, in line with our May announcement.

For the 6-month period, revenue was JPY 584.3 billion, an increase of 46.5%. Adjusted EBITDA was JPY 186.7 billion, an increase of 11.7% and adjusted EBITDA margin was 32%. We intend to continue to make necessary strategic investments for our long-term strategy simplify hiring while managing our operating expenses prudently.

Next, I will talk about the results of Matching and Solutions. Revenue in Matching and Solutions was JPY 185.2 billion, an increase of 17.3% with an increase in revenue for both Marketing Solutions and HR Solutions, which reflects the recovery of demand in the Japan economy. Revenue in Marketing Solutions was JPY 111.9 billion, an increase of 13.9%, exceeding pre-pandemic levels when revenue was JPY 110.6 billion in Q2 of FY 2019.

Revenue in HR Solutions was JPY 70.2 billion, an increase of 22.2%. However, it still did not recover to pre-pandemic levels of JPY 79.2 billion. Revenue increased in housing and real estate and beauty which together account for more than 50% of the revenue of Marketing Solutions and both are above pre-pandemic levels. Revenue in travel increased significantly from the same period in the prior year when travel in Japan was subject to COVID-19 related restrictions and revenue also increased in bridal and in dining. However, revenue has not yet recovered to pre-pandemic levels in any of these 3 verticals.

In HR Solutions, revenue in the placement service increased year-over-year, exceeding pre-pandemic levels due to an increase in hiring demand in many industries which utilize placement services. On the other hand, in the part-time job advertising business, revenue did not recover to pre-pandemic levels. However, hiring demand improved year-over-year, mainly from business clients in dining and retail, which have been impacted by the COVID-19 related restrictions in the prior year.

At this point, the cumulative number of SaaS accounts as of September 30, 2022, was $2.83 million. The number of AirPAY accounts as of September 30, 2022, was 329,000, an increase of 36.4% year-over-year. More detailed information in terms of the number of Air business tools SaaS accounts can be found in the FAQs.

In Q2 FY 2022, we continued to execute strategic marketing activities for future growth aligned with our business strategy. Adjusted EBITDA decreased to JPY 27.9 billion and adjusted EBITDA margin was 15.1%, a decrease of 5.4 percentage points. For the 6-month period, revenue was JPY 365.6 billion, an increase of 18.1%. Adjusted EBITDA was JPY 59.2 billion, a decrease of 7.4% and adjusted EBITDA margin was 16.2%.

Finally, I will talk about the results of staffing. Revenue was JPY 400.2 billion, an increase of 19.3% or an increase of 10.5% on a constant currency basis. Adjusted EBITDA was JPY 27.9 billion, and adjusted EBITDA margin was 7% at a similar level from the same period last year. Revenue in Japan was JPY 166 billion, an increase of 14% due to increased demand for staffing business year-over-year. Adjusted EBITDA was JPY 14.9 billion, an increase of 17.7% and adjusted EBITDA margin in Japan was 9%.

Revenue in Europe, U.S., and Australia was JPY 234.2 billion, an increase of 23.3%, an increase of 7.8% on a constant currency basis. Demand for staffing business continued despite a year-over-year slowdown in demand related to supporting COVID-19 mitigation efforts that had existed in the European region in FY 2021. Adjusted EBITDA was JPY 12.9 billion, an increase of 14.5%. Adjusted EBITDA margin was 5.5%, primarily due to the impact of inflationary effects and higher personnel costs resulting from increased head count. For the 6-month period, revenue was JPY 786 billion, an increase of 17.2%. Adjusted EBITDA was JPY 55.2 billion, an increase of 9.7% and adjusted EBITDA margin was 7%.

Consolidated guidance for the current fiscal year, as announced in May is revenue of JPY 3.3 trillion, adjusted EBITDA of JPY 520 billion and adjusted EPS of JPY 170.65. We have decided there will be no change in guidance at this time, when taking into account the actual results for the first half, the latest outlook for the second half and the impact from exchange rate fluctuations.

In May, FY 2022 guidance assumed an exchange rate of JPY 120 to the U.S. dollar for the fiscal year. But throughout the year, we updated our business outlook using actual figures and the latest market consensus exchange rates. The full year guidance for each SBU is disclosed as a range. And at this time, we expect results to be within those ranges while also taking into account the exchange rate fluctuations.

Last but not least, as for our capital allocation policy, there are no changes in our policy and order of priority. The interim dividend per share is JPY 11 as forecasted in May. On October 17, we announced a share repurchase program. The total number of shares to be repurchased is up to 42 million shares, and the maximum total purchase price is JPY 150 billion. The challenging macroeconomic environment continues to have a significant impact on the global equity markets. Under this situation and considering multiple factors, including the capacity to pursue strategic business investments, stock price level, the market environment and the outlook for our financial position, in line with our capital allocation policy, we decided to conduct the share repurchase.

This is our first time conducting a share repurchase, which does not accompany selling by shareholders. The total amount of dividends per share for FY 2022 is expected to be JPY 22 as we expect the dividend per share at the end of Q4 to be JPY 11. Assuming the share repurchase is completed at the maximum total purchase price, the total payout ratio for FY 2022 would be approximately 68%. Please visit our IR website for the details of the share repurchase.

In line with our capital allocation policy, we will continue to pursue the possibility of share repurchases, considering our business performance, strategic investment opportunities, stock price level in a comprehensive manner while monitoring stock market trends. This concludes my presentation. Thank you.

[Mizuho Shen, executive]

We would now like to proceed to the Q&A session as we did in the Q1 results call. First, I will ask a few questions about a topic. Sorry, this is the announcement for the earthquake that just occurred.

So I will ask a few questions about the topic that I believe you have an interest in. And then we will take your questions. Please wait for a moment until this announcement ends.

Thank you. Let me continue. So Idekoba-san, thank you again for today. So first of all, what are your thoughts on the global HR Matching Market? How has the labor market situation changed since last quarter in August?

[Hisayuki Idekoba, executive]

So we always mention this when we talk about the forecast of the labor market. Our outlook on the labor market has not changed. We are seeing a long-term and structural change in the labor market in almost all developed countries. The Asian workforce, shifts in immigration, and changing attitude towards work-life balance are progressing and resulting in a labor supply shortage. In the last 3 months we have seen an increase in news of layoffs, especially at tech companies. But in the labor market as a whole, layoffs have remained low.

Recent increases in layoffs are primarily seen in the industries that ramped up the hiring significantly during the pandemic. For example, the number of job postings for software development jobs in the U.S. peaked at 130% above pre-pandemic levels. And over the last 6 months, has decreased, only by approximately 30%. As another example, the number of workers in the leisure and hospitality industry in the U.S. is still about 1 million lower than pre-pandemic level. And people still say that they are suffering from a labor shortage when demand is as high as or even higher than pre-pandemic levels.

These examples demonstrate the labor market remaining tight, as I said in August, but it is gradually returning to more normal conditions closer to what it was before the pandemic. We believe that the current situation where the supply of workers is inadequate and interest rates are rising at an unprecedented rate will continue to make the outlook truly uncertain as there is no precedent for how quickly and to what extent the demand for hiring will decline.

[Mizuho Shen, executive]

I see. Based on this situation, how are you thinking about HR Technology's revenue performance for the remainder of this fiscal year?

[Hisayuki Idekoba, executive]

Yes. In terms of our performance, there has been no significant change in the trends we discussed in August. HR Technology year-over-year revenue growth continued to decelerate from its peak level seen during the recovery from the pandemic. HR Technology's U.S. dollar revenue growth in Q2 was 11.6% year-over-year and approximately 2.5% year-over-year in October, the most recent month, in line with our expectations.

However, one factor that has differed from our initial expectations is the headwind from ForEx on our non-U.S. revenue on a U.S. dollar basis, which has been greater than anticipated. In light of these factors and assuming no significant economic downturn occurs during the remainder of this fiscal year, we now believe that HR Technology revenue growth for this fiscal year will likely be closer to 10%, which is the bottom of the range rather than in the lower half of the 10% to 20% U.S. dollar guidance range, which I mentioned last quarter.

[Mizuho Shen, executive]

I see. So what measures is HR Technology taking in light of these downward trends and significant macroeconomic uncertainty looking towards next year?

[Hisayuki Idekoba, executive]

As I mentioned earlier, hiring demand in the U.S. has been decelerating towards a normalization and leveling off. And in other regions like Europe and Japan, we expect that hiring demand will also gradually peak and decline before leveling off. For the next fiscal year, we assume the size of the global HR Matching market will contract. And considering the current exchange rates, it is possible our HR Technology revenue will decline.

We don't know how long or deep the recession that is likely to come might be. But Recruit has grown through many economic cycles in its more than 60-year history. We've had success controlling costs during previous downturns while balancing this with investments for long-term growth, enabling us to expand our business through the recovery period.

In HR Technology, considering the current uncertain situation and the level of foreign exchange rates, we are already taking measures to control costs, including pausing hiring as we have already hired 2,500 people in the first half of the fiscal year. We will continue to evaluate the macroeconomic situation and the midterm outlook for HR Technology's financial performance while implementing appropriate cost controls and strategic investments.

[Mizuho Shen, executive]

I see. So up to this point, we talked about the global HR Matching market, focusing on HR Technology. But how do you see the latest trend and outlook for Matching Solutions, which operates businesses in Japan?

[Hisayuki Idekoba, executive]

I believe the Japan economy is now in the recovery phase from the pandemic about 6 to 9 months behind the U.S. and Europe. We see a significant rebound of demand, especially in travel and dining. However, I believe the potential for slowing of economic growth in Japan is increasing. So we are prepared to control costs balanced with continued strategic investments for long-term growth while closely monitoring the macroeconomic environment and the outlook for the next fiscal year.

[Unknown Executive]

Thank you very much, Idekoba. Now let's take questions from participants. Mizuho, please proceed.

[Mizuho Shen, executive]

Now we would like to proceed to Q&A session. [Operator Instructions] Jefferies Securities, Takeuchi-san, please.

[竹内 進之介, analyst]

This is Takeuchi from Jefferies. Can you hear me?

[Unknown Executive]

Yes.

[竹内 進之介, analyst]

I have 2 questions. First is on Indeed. So more specifically, what are the functional improvements are ongoing now, the personnel costs and Indeed employees increased significantly in the past 3 months, which is at a level we haven't seen in the past. So the exploration of the new countries or the functional improvements or I want to know some new developments. If you could share with us some information, please. That's my first question.

[Unknown Executive]

Thank you for the question. So this time, other tech companies are restraining, holding back or stopping the hiring early on. Indeed, on the other hand, continued hiring on engineering and machine learning specialists, people with such capabilities. So we were able to hire more. So engineer, engineering-type personnel are working on site improvements. For example, corporate clients and users to connect easier in the hiring process, so video and phone and SMS, text message, these are also being enhanced and more than 3.7 million people interviews, job interviews has been using this function.

And in addition, this may be a low key change or improvement on site, but a very detailed minor point. But on the website, so the job offer data -- so the salary can be viewed by the jobseekers when they are looking for jobs. So this is also an improvement, an evolution. So as a result, users can get jobs on our platform. We are seeing a steady increase of users finding jobs on our platform. Of course, there are ups and downs in business environment is the nature of our business, but the site improvement is ongoing.

[竹内 進之介, analyst]

My second question is this fiscal year and next fiscal year, company-wide profit balance. So now there is a tailwind of weak yen. So I don't think you have any problem achieving this year's target, but cost in the second quarter, you use cost rather than restraining costs. Now next year, HR Technology, you talked about the possible decline. So the cost will be reduced. And can you maintain profit by reducing costs? Or do you have to spend cost for the medium to long-term growth? What's your view?

[Unknown Executive]

Of course, for the short term, profit may increase or decrease on a year-on-year basis. So yes, there is a goal setting on that level, the short-term level. But in any case, even after the economy declines, the economy will always pick up in the future. So as you rightly mentioned, on a cumulative basis, we want to capture the sales and profit in a cumulative basis in the economic expansion period. So how can we do that? That is our baseline thinking.

So for example, are clients or users, both sides, we think of lifetime value. So once we capture the users, they can use our service for years, they stay for years, things like that. So we may see a declining forecast in the short term and try to avoid decline. But rather than taking these short measures, we want to make -- maintain a medium to long-term perspective and prioritize our investment. And as a result, see how the profit trends. So that is our line of thinking.

[Mizuho Shen, executive]

Next is Mori-san from JPMorgan.

[Haruka Mori, analyst]

I have 2 questions. One is related to HR Technology plan for the second half of the year. So you said that you will be closer to the lower end of the range on a full year basis. So in the second half on dollar basis, I believe you will have 2% increase. You said 2.5% for October. So in the second half, based on the assumption that there will be no major recession in the second half, growth rate is not expected to improve significantly.

And when we look at the number in the labor market in the U.S., I believe the negative year-over-year might expand in the second half. And how we can offset that decrease? What measures do you have in your mind? If possible, can you please explain development difference for major enterprises and small and medium companies?

[Unknown Executive]

Can you please ask the second question together?

[Haruka Mori, analyst]

Well, actually, this is a similar question, but next fiscal year, the total revenue could have a negative growth, as you suggested. But since previous fiscal year, although it is not disclosed on a quarterly basis, you have been working on increasing unit price. In the next fiscal year compared to this fiscal year, can we expect that to bear fruit? If possible, I would like you to give us some color on how that is going to bear fruit in the next year?

[Unknown Executive]

Yes. Thank you. So I hope I can answer both of your questions at the same time. So as we've been saying, as I said earlier, our hiring process is something we hope to improve so that we can offer more value to our clients. And as a result, we can receive higher unit price from clients. That is the process that we are hoping to achieve in our development activities. In the non-U.S. markets, when we look at the second quarter, the volume of job advertisement is still increasing, leading to increase in revenue. But in the U.S., for example, in the second quarter, increase in the unit price is making a larger contribution to revenue rather than increasing the number of job ads.

We have been repeating several tests. As I talked about recently, when we have applications from jobseekers, if their quality is favorable, the company pays us for receiving such application. And this is primarily for major enterprises. So clicking on an ad, so paper click is not what we are pursuing today. But you click on the advertisement, but there needs to be actual application after that in order to charge. For major famous companies, senior engineering is the type of job which has a high salary level. And students, junior engineers are interested, so they might click on the ad, but they don't apply for the job.

So conversion rate to application can be different for different types of jobs. That is what we have discovered. And we will like to make sure that customers' clients succeed and we like to contribute to the success of the clients in order to enhance our corporate value from a mid- to long-term perspective. So that is why we've been focusing on increasing the unit price. That is what we have been testing recently.

By continuing such activities, we have started to see results of these tests. However, the goal is not to increase the unit price per se. We are prudent in helping jobseekers and business clients in mid to long-term perspective and contribute to the satisfaction of those clients and jobseekers. We have been repeating very detailed test. So it is difficult to tell you by one, we are trying to achieve what.

But in the second quarter, I can tell you that we have started to see the results of these tests. And as for the second half, JOLTS, according to the data from JOLTS in the U.S., there was a 12 million open job split and now we have declined to 10 million jobs. But this can come down to 8 or 9 million in the future. So when it comes down further, how much value we can offer is what we would like to ensure going forward.

And you asked the difference in development between large companies and SMEs. And in the downturn economic cycle, it is always the case that the SMEs is the first one to decrease the number of job ads. For example, in the favorable economic conditions, strong economic conditions and Indeed and also other media are used by the SMEs. But the SMEs only use 1 or 2 media in more difficult economic condition. And when we look at our peers, we do see decline in the SMEs. But I believe that we see more concentration of SMEs in our service compared to the peers. We do see decline among the major enterprises as well, but not as much as the SMEs. I hope I answered your question.

[Haruka Mori, analyst]

I'd like to ask a follow-up question. Just one question. So in the second half, in terms of the volume, your -- the number of your paid job, so the decrease is going to become larger. But because of the measures, you will be able to increase unit price and you will barely be able to maintain positive number. Is my understanding correct?

[Unknown Executive]

Well, I believe we need to see the results and look back in order to answer that question. Increasing unit price to grow the revenue is not what we are trying to do. But rather, in mid- to long-term perspective, we want to make sure that our clients would be satisfied and convinced to pay higher unit price. For example, as I said earlier, ads are clicked, but not applied for. So for such clients, revenue may decline for some of the clients. So this is not what we do to grow the revenue. It's not that we have a specific target. But we are trying to improve the satisfaction level of clients who use our platform. That is our goal.

As a result, as I said earlier, in the second quarter, we've started to see results of the tests and we have seen increasing unit price as well as satisfaction level of clients being maintained. But it's not that we are targeting a specific revenue level. I hope you understand that point.

[Mizuho Shen, executive]

SMBC Nikko Securities, Maeda-san.

[Eiji Maeda, analyst]

I have one question. So the share repurchase, share buyback, you mentioned this earlier. So this time, market -- the labor market forecast is now a bit of concern in the market. So this is a good timing, a very good time for the announcement of the share buyback. Share price, how much of a focus was the share price in your -- so now cash is JPY 1 trillion, cash flow when the market environment declines, I don't think cash flow will impair significantly. So your management decision, including the balance with the flexible M&A option, the cash position that you can utilize is which level? So if you could give us the guidance, your view.

[Unknown Executive]

Thank you. I would like to answer that question. As we mentioned, for 2-3 years now we've been using -- having the capital allocation policy, the cash allocation and priorities have remained unchanged. And this time, we executed this buyback because we are doing the upper layer, more high priority measures. That is why we're doing this lower priority cash -- share buyback this time. And if there is a negative impact, we understand the need of the cash and we are well aware of that. So on that basis, we made this decision. And the timing, this is up to middle of March. So the economic indicator was announced last week from mid-October to mid-March, various events and announcements are taken into account. So on October 16, 17, share price, we think it's sufficiently reasonable. So that is why we decided to execute.

I think there is different view on the size, but vis-a-vis our market cap, we want you to see us as doing a sizable amount of share buyback. And given the timing, we decided on the upper limit of JPY 150 billion and this will end in March. So we will take the economic situation into account then. And our view on the financial results and forecast may change. So we may do another round. But first of all, we use the capital allocation policy and thought that this is the optimal way of using cash.

[Eiji Maeda, analyst]

So for M&A so they are the high priority in the allocation policy, but they are now lowered in policy. Well, strategic investment will be prioritized, right?

[Unknown Executive]

Yes. As you know, IPO window is at the current situation and it's difficult for it to reopen. So when I talk with companies, I feel that the M&A activity is increasing. It's M&A. And so it is always with a counterpart. If we find a good company that can identify with our vision, we want to be bold and go ahead with the M&A. So it still is a high priority for us.

[Mizuho Shen, executive]

Our next is Yamamura-san from Citi Group Securities.

[Junko Yamamura, analyst]

This is Yamamura from Citigroup Securities. Can you hear me?

[Unknown Executive]

Yes.

[Junko Yamamura, analyst]

Then I have 2 questions. One is from a short-term perspective. Second is midterm perspective-related. So first question is, so I apologize if I missed it, but the room left for cost control, so on the personnel cost, you said that you are taking proactive measures. But for advertising and promotional expenses, is that going to be controlled as well? Is it something that can function as a valve for operating expenses? So what is the threshold for controllable costs?

The second question is related to midterm perspective. As you have been explaining, the new business model shift is my focus. So regardless of revenue increase, you will be offering more value to increase unit price, but I was worried that it could be labor-intensive. So upfront investment, if that is controlled enough, EBITDA margin could be higher than the current level in short-term perspective. But compared to the conventional model, do you think profitability can be lower? Or would you be satisfied with the increase in absolute amount of [ OI ]? And in HR Technology, how many number of people do you need in order to make the business viable? When will be the end of the first stage? Those are my 2 questions.

[Unknown Executive]

So what was your question about HR Technology? Can you please repeat?

[Junko Yamamura, analyst]

Yes. So the way you are increasing the number of people in HR Tech, what is your goal? So when do you think the business will be viable? So I'm interested in when the first stage of the business will be viable? And how many number of talents are required?

[Unknown Executive]

Yes, thank you. So first of all, in terms of cost control room left for marketing expenses, so this was the case when pandemic started. But for job advertising market, it consists of supply and demand. Without advertisement, in economic downturn, jobseekers will always be there in the market, even if no advertisings are made.

So if we spend $100 and how many users would come? In the phase of labor shortage, that rate can be multiplied by many times. And in such situation, there is no need to post a lot of job advertisement. HR Tech used to enjoy a very high EBITDA margin. Without spending too much marketing cost, users still came to the service. That is the case we are expecting for the potential economic downturn. So regarding marketing cost, it's not that the marketplace will not function if we don't spend marketing expenses. It will still function. That is why we believe we have flexibility for job advertisement.

And the other question is on the new business model, monetizing model. If we shift to a new business model, you said you are worried about lower profitability. So as I said earlier, when we have application or when we have a job interview, when an applicant was satisfied, these are all done online, which means that we do not manually intervene. In that sense, we are not expecting increase in cost because of shift to new business model. So rather revenue growth, but costs will remain the same. So in terms of margin, we believe it will actually increase and improve.

So in sales, client support, client success and other than in these functions, we have backend system engineering, how many number of people do we need in order to make the business viable? I believe that was also your question.

To be honest, it depends on how much innovation this market would require. I believe we have said this a couple of times already, but innovation in the advertising market is not our goal. Job switching, the largest cost required in any businesses around the world is personnel expenses. So people in HR, hiring recruiters, their cost is large and selecting resume screening, resume -- moving on to arranging the job interview, such recruiting coordinators exist. We want to make their job easier. We want to use technology to reduce manual human intervention. That is our mid- to long-term goal. And when we think about that, I believe we still need more engineering power. That has been our view. I hope I answered your question.

[Mizuho Shen, executive]

So because of time, next will be the last. Fukuyama-san from UBS Securities, please. Fukuyama san, are you there? Your hand disappeared. So if you could press the re-attend button again.

[Kenji Fukuyama, analyst]

I have 2 questions. First is HR Tech. Second is Matching Solutions. So regarding HR Tech. So in the recessionary period may appear next year. So during recession, in general, the process up to hiring decision slows down or speed up in general? If you have -- could enlighten me on that, please? And regardless of the economic cycle, the hiring process can be shortened with our own efforts. So during recession even, top line can be maintained fairly easily. Is that the case? That's my first question.

Second question is about Air business tools, current monetization status update. So as we reopen the paying option is increasing or the SMEs not improving much and so as we have recession next year, the full scale monetization will still take a little while? So that's my question.

[Unknown Executive]

Thank you very much. So first, in the recessionary period, the hiring speed is your first question. So let me answer. Generally speaking, our HR business, if there's a particular candidate, we present the person and until the decision is made, the companies become more cautious. And the span, the period tends to become longer in the recessionary period. But as I mentioned earlier in the U.S., for example, and in Europe and Japan, structurally speaking, the supply side, labor supply is in shortage. So that's the baseline.

As I alluded to earlier, hotels and restaurants, hospitality, so they are 1 million short, lower than pre-pandemic. So labor shortage is still there. So K-shaped recovery happened after COVID and this is continuing. So engineers and tech domain and hospitality and health care, they're also facing labor shortage. And in the U.K. because of Brexit, truck transportation, truck drivers are in severe shortage. So this shortage was not evenly distributed, and now we are going into recession.

So we do not need to be that cautious, I think. In Japan too, restaurants, dining, they are suffering from labor shortage. We often hear that. So with such labor shortage and going into recession, we have never experienced this before. So I'm not sure how -- what this will turn out to be like. We need to watch closely.

And next point is Air business tools monetization. Thank you for the question on this point. As we've been mentioning before, Air business tools, charging with air business tools and raising profit, just with this is not our plan. We want to increase this comprehensively overall and increase the solution to our customers. And through that process, we want to little by little increase the amount that is billed. So we are still in the process. Air Invoice was launched in July, August. These initiatives are ongoing. We want to focus on the platform side and increase the size. We're still in that phase. Thank you. I hope this answers your question.

[Mizuho Shen, executive]

This is the end of the call and we apologize for the technical trouble on the Japanese line in the beginning. A clean audio file and the deck are going to be uploaded on our website for your convenience. Thank you very much for joining.

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