PERSOL HOLDINGS CO., LTD.
Q1 Financial Results Briefing for the Fiscal Year Ending March
2020 Telephone Conference
August 9, 2019

Event Summary[Company Name]PERSOL HOLDINGS CO., LTD.

[Event Type]Earnings Announcement[Event Name]

Q1 Financial Results Briefing for the Fiscal Year Ending March 2020
Telephone Conference[Fiscal Period]

FY2019 Q1[Date]

August 9, 2019

[Number of Pages]

17[Time]

17:30 – 18:00(Total: 30 minutes, Presentation: 16 minutes, Q&A: 14 minutes)[Venue]1-15-5 Minami-Aoyama
Minato-ku, Tokyo 107-0062[Venue Size][Participants][Number of Speakers]

1
Kiyoshi Seki

Director, Executive Officer(Chief Financial Officer）[Analyst Names]*

Hirofumi Oda
Narumi Nakahara
Katsumi Arai

SMBC Nikko Securities Inc.
Goldman Sachs Japan Co., Ltd.
Mitsubishi UFJ Morgan Stanley
Securities Co., Ltd.

*Analysts that SCRIPTS Asia was able to identify from the audio who spoke during Q&A.

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Presentation
Moderator: We will now hold a teleconference on the financial results for PERSOL HOLDINGS CO., LTD. forthe first quarter of the fiscal year ending March 31, 2020.
Speaker: Thank you for participating in our conference call today. First, the Chief Financial Officer will present
an outline of the financial results for the first quarter of the fiscal year ending March 31, 2020. After thepresentation, we will move on to a question-and-answer session.
Seki: Thank you.
First, I would like to present the consolidated results. Globally, uncertainty about the future has increased dueto the effects of trade conflicts and other factors. Demand in some manufacturing sectors is weaker than in
the previous year. However, due to a structural labor shortage, there are no significant risks to the Group asa whole in the labor market in Japan, and results are generally in line with our plans. We will continue toclosely monitor economic trends in Japan and overseas.
The termination of an, the part-time job information service, was announced on August 1. This has had ashort-term impact on business results. However, I believe that it was a positive decision to further develop
doda, the Permanent Employment Business. The response of the market corroborates this.

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In the first quarter, consolidated net sales increased 4.1% year on a year-on-year basis, and operating income
declined 12.8%. The main factors behind the decline in operating income were, as initially expected, a threeday decrease in operating days in the Temporary Staffing Business, and an increase in costs due to an increasein the number of personnel, including new graduates. Each Segment will be explained in detail in the Sales by
Segment section.

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I will present this section by Segment. In the Temporary Staffing and BPO Segment, net sales increased 5.2%
on a first-quarter year-on-year basis. Breaking this down into KPIs, we find that the number of workers
dispatched is plus 3.5%, the unit price is plus 2.7%, the effect of working days is minus 4.8%, and the effect of
M&A is plus 3.4%. Operating income was down 8.5% and the operating margin was down 0.7 percentage
points on a first-quarter year-on-year basis.
In the Temporary Staffing Business, operating income was 6.311 billion yen. This is a result of a lower numberof working days due to this year’s long May holiday. On the demand side, however, orders from companies
continue to grow at a double-digit pace. Although the number of orders for temporary staffing frommanufacturers has declined slightly, the strength of demand as a whole remains unchanged. The profit margin
improved because the billing unit price of indefinite-term staff increased once again, by about 10%.
On the other hand, profits declined as a result of the impact of reduced working days and cost increases dueto the increase in personnel. At the Kurume Matching Center, which we launched in April 2019, we beganmatching operations in the western Japan area in June. We believe that this will contribute to further
productivity improvements in the future. We are also actively promoting the introduction of indefinite-term
employment of temporary staff. In the April to June quarter, approximately 1,700 temporary staff wereconverted to indefinite-term employment. The cumulative total since last year is about 12,000 people. We
expect to have about 5,000 employees who will change over the course of the current term, and we aremaking progress as planned.

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In the Recruiting Segment, sales increased 13.6% year-on-year, driven by continued growth in the Permanent
Placement Business and the Job Advertising business for Permanent Employees. This is against a backdrop of
expansion of the recruitment market in Japan. doda Plus has continued to grow at a high rate, and we areable to respond firmly to robust demand. Looking at the orders received from companies and the registrationof job seekers, we believe that the market environment continues to be favorable. This is because there has
been no major change in the outlook for the recruitment market.
On the other hand, conditions within the Company have been characterized by a shortage of managers due
to continued rapid growth for the past few years. In addition, from October onward, we will be strengthening
our organizational structure in order to accept increased numbers of personnel from the “an” business. We
will concentrate on strengthening our organizational structure in the second half of the fiscal year, and will
manage it to achieve high growth in the next fiscal year. With regard to the termination of an, which weannounced on August 1, we have not experienced any major confusion after the announcement, and we are
steadily responding to our customers and agencies. We will continue to prepare for personnel transfers from
October onward.

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First of all, sales in the quarter were down 9.8% year-on-year, and operating income was down 0.16 billion.
There was a 9.8% decrease in year-on-year net sales, with the effect of foreign exchange rates being negative
7.8%, and negative 2.1% on a local-currency basis. On a local-currency basis, the Staffing Business recorded a
decrease in sales of 6.3% and the Maintenance Business recorded an increase of 2.4%.
In the Staffing Business, due to the current slowdown in the Australian economy, we experienced a slowdown
in both demand from customers and cultivation of new customers in growth areas. As a result, progress has
not been as planned, and revenues declined. On the other hand, despite a decline in sales in the MaintenanceBusiness, particularly in the Painting Business, due in part to the Australian economy, sales have increased.
This is thanks to the progress in acquiring projects in the Large-Scale Facility Maintenance Business, against a
backdrop of demand for infrastructure investment in Australia as a whole.
Operating income decreased mainly due to the impact of lower sales in the Staffing Business. Excluding a yearon-year positive 0.4 billion due to the adoption of IFRS 16, EBITDA declined, as did operating income.

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6Supported by continuing buoyant market conditions in APAC countries, sales in the PERSOLKELLY Segment
were favorable, rising 19.2% year-on-year. Sales grew significantly, driven by Singapore and Malaysia, which
account for a large percentage of net sales. On the other hand, in all regions except Australia, growth was thesame as in the previous year. Head count also steadily increased by 12.2% year-on-year.
Operating income declined to 0.23 billion yen. In Australia, the introduction of a Core Business System has
not proceeded as planned. We believe that operating income declined due to a temporary decline inproductivity. This was a result of issues related to client correspondence and other factors.
We are making a keen effort to recover from the impact of this system trouble and transition. However, at
this point, we believe that the hurdles to achieving the full-year budget target are somewhat high. Friction
between the US and China has had an effect in the Chinese market. While orders from Japanese companies
in China fell below the previous year's level, demand from non-Japanese companies has continued to increase.
We will continue to closely monitor future trends in this area. The impact of foreign exchange rates on net
sales was negligible, with an increase of 0.3 billion yen year-on-year.

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Sales in the ITO Segment have progressed as planned. On a first-quarter year-on-year basis, net sales were up
25.1% and operating income was down 0.28 billion yen.
Investment in system-related services by client companies continued to be extremely vigorous, and in
addition to high-value-added projects such as SI Business and outsourcing services, sales of our own products
also grew, resulting in an increase in revenue. Operating profit was down 0.28 billion yen, but this was
anticipated at the beginning of the fiscal year. The staff turnover rate has been on a downward trend as aresult of the improvement of employee conditions.

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8On a first-quarter year-on-year basis, net sales were negative 1.0% and operating income was negative 0.13
billion yen. In the electrical machinery field, sales declined mainly due to a weakening of the Chinese market.
However, due to the effects of higher unit prices and other factors, there was only a 1% decline in sales. Profits
declined due to an increase in personnel expenses associated with the hiring of engineers, as well as atemporary decline in occupancy rates associated with changes in market conditions.
Activities centered on the recruitment of new engineering graduates continued to be steady. In this Segment,
the impact of the trade conflict between the US and China remains uncertain, and some customers areaffected by a decline in orders. Going forward, we will continue to closely monitor market and customer
trends.

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As we announced at the beginning of the fiscal year under review, we are planning to invest in new businesses
such as Sharefull, MIIDAS, POS+, and others. Results in the Business Adjustments Segment have decreased,
but progress has been largely in line with the initial plan.

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10There was no significant change in the balance sheet from the end of the previous fiscal year. The negative 5billion in assets was mainly due to a decrease in cash and deposits. The negative 8.4 billion yen in liabilities
was mainly due to a decrease in income taxes payable and provision for bonuses. The 3.2-billion-yen increasein net assets was mainly due to a 1.9-billion-yen increase in retained earnings. The equity ratio, which indicatessoundness, improved from 42.0% at the end of the previous fiscal year to 43.4%.
Lastly, consolidated results for the first quarter of the current fiscal year saw an increase in sales and adecrease in profits. Again, we believe there were three main factors behind the decline in profits. First, thereduced number of working days had a negative impact of 1 billion yen in the Temporary Staffing Business.
Second, the slump in the Staffing Business in the PROGRAMMED Segment. Finally, the temporary issues
associated with the introduction of core systems in the PERSOLKELLY Segment.
In the Temporary Staffing Segment, there is no significant change on the business side, and we have been able
to increase the number of workers dispatched and billing unit prices. We expect results to continue to improvesteadily in the future. On the other hand, in the PROGRAMMED and PERSOLKELLY Segments, we are making
a keen effort to recover from the negative trend in the first quarter. It is expected that a certain amount oftime will be required for business performance to recover.

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11With regard to the full-year earnings forecast for the current fiscal year, the Company revised the earnings
forecast on August 1 in line with the termination of the “an” business. We will continue our efforts to achieve
our revised operating income of 43 billion yen. This concludes my presentation, so I would like to move on to
the question-and-answer session.

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12Question & Answer
Moderator: The first question is from Mr. Oda of SMBC Nikko Securities Inc.
Oda: First of all, a question about the short term. I understand that domestic ITO and engineering areprogressing as planned. It seems to me that for the first half of the fiscal year have been slightly shortcompared to the planned for the period. Looking ahead to results for the first half or the full year, I would likewhether this is part of the plan, and if you are worried about this in the short term?
Seki: Thank you for your question. ITO is in line with the plan, and we expect progress in the second half ofthe fiscal year to be in line with the plan. However, regarding the Engineering Segment, there are still
structural issues, and there may be some elements of uncertainty in the second half of the fiscal year. However,
we intend to manage the Segment toward achieving a certain amount of progress.
Oda: Thank you. My second question concerns Overseas Business. First of all, I would like to ask about theissues affecting PERSOLKELLY in Australia. It was mentioned that the hurdle might increase a little over thefull year, but are these issues still ongoing? Could you tell us about the current situation, and if these issues
are still ongoing, when you expect them to be resolved?
Seki: Thank you for your question. Regarding the system issues affecting PERSOLKELLY in Australia, we have
not yet completely resolved the situation. We are working to provide backup by allocating the necessary local
resources, but I think that it will be the end of the first half of the fiscal year before we achieve recovery andget back on course. We will continue to allocate resources to our backup and recovery activities, as thisrecovery is required for growth in the current fiscal year and beyond.
Oda: Understood. Last but not least, I think that while operating profit is positive at PROGRAMMED, there
may be some positive impact from the IFRS or other factors that have pushed up profits slightly. The current
situation has been discussed, but it’s only been a few months since the guidance was issued, and the outlook
is slightly different from the start. Please tell us about the factors surrounding this.
Seki: Yes, thanks. Although there are several factors, I believe that a major factor is Australia’s economy. The
economic growth rate in Australia is around 1.8%, which is slightly below the 2% forecast. This is a significant
macroeconomic factor. Then there’s the Staffing Business. In order to revitalize this area, this fiscal year wehave begun reallocating marketing and sales resources. However, we believe that to a certain extent, results
have not been achieved. This is due to a reduction in activity with respect to cultivating customers among
SMEs and new project discovery. We believe that these are two factors that have not proceeded according to
our initial plan.
Oda: Thank you.
Seki: Thank you.
Moderator: Ms. Nakahara of Goldman Sachs Japan Co., Ltd. Please go ahead.
Nakahara: First, for your Temporary Staffing Business, I understand that it will cost 1 billion yen a year tocover PMI costs and there will be further costs this year relating to working style reforms. What progress isthere in this project in the first quarter, and what are your plans for PMI costs from the second quarter
onwards?

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Seki: Thank you for your question. As you mentioned in your question, the cost of the PMI and work stylereform is expected to be about 1 billion yen a year, as planned. We have made progress roughly according toplan, with costs amounting to 0.23 billion yen per quarter.
Nakahara: Do you anticipate that this pace will continue?
Seki: Yes.
Nakahara: Thanks. Second, what was the growth rate for the Placement business under Recruiting segment
this quarter?
Seki: The growth rate for Placement business alone was 18.2%.
Nakahara: Is this progressing as predicted at the beginning of the term?
Seki: We think the progress is as planned.
Nakahara: Thank you. Finally, I understand that there is an anticipated cost of 2.5 billion yen for new business
investments this period. Will these costs be split evenly across each quarter, or is there likely to be an increaseat some point?
Seki: We are planning to invest 2.5 billion yen on a P&L basis for the year. The overall plan is to have a slightly
larger amount in the second half of the year than in the first half in terms of overall activity and costs. Looking
at the results for the first quarter, there are still some areas where spending has been less than planned.
However, this area is an extremely important element of our growth strategy for the current fiscal year, andwe will continue to invest in this area.
Nakahara: Understood. If results for other businesses are not as strong as expected, will new business
investments be curbed?
Seki: Naturally, the cost of new services and new businesses as well as promotional costs for other brands will
be determined by balancing overall projects, business performance, and results.
Nakahara: Understood. Thank you very much.
Seki: Thank you.
Moderator: Next, Ms. Arai from Mitsubishi UFJ Morgan Stanley Securities Co., Ltd.
Arai: I think the comments earlier suggested that first quarter progress as a whole was in line with the plan,but if we deduct this from the plan for the first half, the second quarter would be expected to have a 9%
increase in sales, and a 20% increase in operating profit. With this in mind, could you tell us about yourpredictions for the second quarter? Thank you very much.
Seki: Thank you for your question. Obviously, we were in line with the plan, but exchange rate fluctuations
had an unforeseen effect, particularly for the top line of the first quarter.
Arai: There was a mention about the current exchange rates affecting sales, but what is your view about
operating profit in the second quarter?
Seki: As planned, there was a 1-billion-yen impact in the first quarter, but I do not think there will be an impact
on the second quarter.

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Arai: Understood. Thank you very much.
Seki: Thank you.
Moderator: We will now conclude the teleconference on the first quarter of the fiscal year ending March 31,
2020 for PERSOL HOLDINGS CO., LTD. Thank you for your attendance today.
[END]______________
Document Notes
1.
2.

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This document has been translated by SCRIPTS Asia.

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