Q&A at the Briefing of the Financial Results of the 3rd Quarter Ended
December 31, 2023
Questioner 1:
You explained the reason for the downward revision to the full -year forecasts earlier
today. The reason was probably seen as an underlying condition at the time of theannouncement of the Q2 financial results (November), wasn't it? While the top line
was a little disappointing, you wanted to try hard to maintain profits through costcontrol. I remember this is what you communicated to us three months ago.
What is the factor that led you to revise down the forecasts this time, or threemonths later?
Is it because revenue decreased to a lower level than expected? Do you want toincur a certain amount of costs for the next fiscal year and onward? What points
changed from the judgment you made three months ago and led to thedownward revision this time?
CFO Tokunaga:
Our answer is both. With the presentation slides, I explained year-on-year growth
in revenue of Career SBU. While the value for Q3 was still as high as 18.9%, thegrowth rate was lower compared to Q1 and Q2. This top-line reason is one of thefactors. The other factors is as follows. While we should of course ensure
appropriate spending during the Jan-Mar quarter to achieve profit growth toward
the next fiscal year, management judged that costs should not be reduced so far
as to generate a negative impact in the next fiscal year and beyond. We therefore
limited cost cutting to a certain degree, which resulted in the downward revision.
CEO Wada:
To add to this, while the market was slightly weaker than we forecast, weunderstand that it has in a sense reached a lull, rather than that actual demandfor human resources as a whole is declining significantly.
We believe it important to anticipate the future circumstances reliably and build
a structure that will enable us to reliably supply human resources when themarket turns around.
Questioner 1:
You gave explanations with a focus on Career SBU, but you revised down adjusted
EBITDA of Staffing SBU by almost the same amount as Career SBU. What is thebackground to this?

CEO Wada:
At present, Staffing SBU is seeing a certain decline in orders received from majorclients but continues to enjoy brisk demand from small and medium enterprises. We
understand that it is very important to make a steady shift so as to remain readyto supply human resources and maintain competitiveness in acquiring humanresources.
Questioner 2:
I would like to ask you questions about the new forecasts by the company.
Forecasts by SBU show that adjusted EBITDA were revised down in almost all SBUs.
I think that the downward revision for Career SBU is somewhat unavoidable
considering the perceived market conditions. However, given that forecast profit
has also been lowered for Technology SBU, or that the value for Staffing SBU was
also revised down, it seems to me that your initial forecasts were a little stretched.
What do you think?
In addition, while I believe that you are drawing up a plan for the next fiscal year,
please also tell me, to the extent you can, your view of the next fiscal year, suchas whether you are not stretching in your forecasts about stable businesses,
including staffing and Technology, and whether you desire to create positive
forecasts by assuming an economic recovery.
CFO Tokunaga:
Regarding the first question, our answers about Staffing SBU and Career SBU are
as I explained earlier today. I will give additional answers about Technology SBU.
We understand that the top line of Technology SBU is firm. On the other hand, newgraduate and mid-career recruitment is making greater progress than we expected,
and in our case, it takes about two to three months before the start of operation. As
a result, the cost rate rose, and the profit of Technology SBU declined slightly.
However, as I explained with the presentation slides, operations have started
smoothly every quarter, and we believe that there will be no major problem from thenext fiscal year.
Regarding the profit forecast for the next fiscal year in your second question, we arepreparing the budget right now, or in February and March. While we understandthat the tightness of the human resources market of Japan itself will not change
greatly in the short term, as Mr. Wada explained, hiring demand at some companies
is fluctuating slightly. We would therefore like to analyze the current conditions
carefully in making the profit forecast for the next fiscal year.

Questioner 2:
While you changed the full-year financial forecasts this time, you did not change thefull-year dividend forecast.
Under the current Mid-term Management Plan, you show your shareholder return
policy in great detail. I imagine that you are forecasting a profit increase in thenext fiscal year. In so doing, do you plan shareholder returns with the intentionof avoiding a decline in the dividend payout ratio or a reduction in the dividend
from the figure for the current fiscal year as much as possible?
CFO Tokunaga:
As described in the part on forecast revisions, the top line and gross profit arefirm. This fiscal year, we decided to invest in people in particular, steadily increasing
the number of consultants at Career SBU and raising wages for current employees atStaffing SBU and others, which may apply to Japan as a whole. This resulted in an
increase in personnel expenses as shown on Page 9 of the presentation, which had
an impact in the short term. Let me reiterate that the top line and gross profit arevery firm, and we will keep our dividend policy unchanged at approx. 50% ofadjusted EPS.
Questioner 3:
My question is about the factor for the downward revision for Staffing SBU thatyou explained earlier; that is, while demand from small and medium enterprises isfirm, a decline is seen in orders from major clients. Please tell me your sense of why
you are seeing a decline, or if you have made any further analysis, such as thatdemand for temporary staffing has been declining due to their shift to direct
employment and that demand for human resources has been declining among major
companies due to efficiency improvements achieved with AI.
CEO Wada:We are conducting a detailed analysis. To give you our sense, we have the impressionthat major companies have suspended the use of human resources due to uncertainty
about the future. This may include the use of AI that you mentioned, but thecurrent decline is not a result of progress in the use of AI. We think that they are
reducing the use of temporary staff toward the end of the fiscal year, reflecting
various future uncertainties about the economy, such as exchange rates and theeconomies of the U.S. and China. Accordingly, we believe that there will be newpolicies on the use of human resources, among other areas, when the fiscal year haschanged. We want to monitor the trends carefully.
Questioner 3:
Do you mean that they are not making a great shift to hiring regular employees inparticular?
CEO Wada:
Yes. We are mostly not sensing any trend toward hiring regular employees.
Questioner 3:
Am I correct in understanding that the reason why the impact of uncertainty
about the future, including the future of the economy, has been seen amongmajor companies but not among small and medium enterprises is that while small
and medium enterprises also have similar concerns, the labor shortages they are
feeling is a greater problem and therefore the demand did not decline?
CEO Wada:
You are correct. Unsuccessful human resources recruitment activities of small andmedium enterprises may also be linked to the increase in their use of temporary staff.
Questioner 3:
I have a question about growth in revenue at Career SBU. If the Q3 result is
subtracted from the revised forecast, revenue for Q4 will increase 15% YoY. Under
the Mid-term Management Plan, a 26% increase of CAGR is targeted, whichmeans you expect fairly high growth. I think that since the beginning you have had
the intention to make aggressive investments at Career SBU with a focus on doda X
during the three-year period. Please tell me whether your approach to investment atCareer SBU may change if circumstances do not permit 26% growth, although weare not sure how market conditions will change again in the future.
CEO Wada:
We understand that we can continue to expect significant growth in Career SBU.
Regarding CAGR of slightly above 26% targeted under the current Mid-termManagement Plan, the current figure leads it to be questioned to a certain degree,
as you pointed out. However, the placement market will surely grow in the futurefrom the viewpoint of the overall direction as well, and the number of times aperson changes their job will increase. This is the major trend. In addition, it istrue that demand for human resources in Japan is tight, and we want to makesure we invest in this domain by positioning it as a growth market.
However, as you pointed out, we will work to ensure appropriate operation witha focus on appropriate growth in business performance and appropriate
investments. This is our policy.
Questioner 3:
Regarding Career SBU, the president told us earlier today that moves toward
stringent selection in recruitment are being seen among some companies, if I
remember correctly. In this case, if the hiring demand is divided by the annual income
level into the majority group and in the group with medium to high income levels, doyou judge the high-end domain to be relatively good concerning stringent selectionin recruitment? Please tell me how you view this.
CEO Wada:
We are very strong in the largest segment. We have overwhelming strength in thegroup with annual incomes of 4 million to 6 million yen. The domain which will growin the future is the group above that, or the group with 6 million to 10 million
yen. We understand that aggressive recruitment will continue at this level, andwe enjoy demand from the market as well. However, stringent selection in
recruitment is one of the current trends in both domains, and we guess that thistrend has led to the overall lull. In addition, we understand that because people
with annual income of 4 million yen to 6 million yen constitute the overwhelming
majority in the largest segment, their impact on both ourselves and theplacement market as a whole is definitely great.
CEO Wada:Thank you very much again for your time today.
This time, we have revised down our full-year financial forecasts, and we areagain strongly aware that we must be sure to adapt ourselves to market changes.
In this market, however, we have continued to achieve double-digit growth in ourbusinesses, including the placement business, and we aim to acquire a solid positionin the market. We want to truly expand the world of "Work and Smile" as our goalby pursuing robust initiatives. We greatly appreciate your continued support.
Thank you very much.