FY2019 Full-year Financial Results

1. FY2019 Consolidated Financial Highlights

• Consolidated revenue of 2,399.4 billion yen (+3.8%), adjusted EBITDA of 325.1 billion yen (+10.9%), adjusted EPS of 121.03 yen (+13.0%).

• Exceeded financial guidance, "adjusted EBITDA of 320 billion yen" and "high single-digit growth for adjusted EPS".

	FY2019
	Q4	YoY	Full Year	YoY
Revenue	589.7	+1.6%	2,399.4	+3.8%
Adjusted EBITDA*¹	55.2	+4.1%	325.1	+10.9%
Adjusted EBITDA margin*¹	9.4%	+0.2pt	13.6%	+0.9pt
Operating income	△6.2	-	206.0	△7.7%
Operating income excluding impairment loss*²	24.7	△19.9%	237.4	+6.4%
Profit attributable to owners of the parent	13.3	△52.7%	179.8	+3.2%
Adjusted EPS (yen)	17.38	+4.2%	121.03	+13.0%

2. Q4 FY2019 Segment Highlights

HR Technology:

• Quarterly revenue increased by 18.1% year on year (yoy) and by 19.4%*¹ yoy in US dollar terms. Revenue growth was primarily driven by increased sponsored job advertising which was supported by a generally favorable economic environment and tight labor market through February prior to the negative impact of the global spread of COVID-19. Recruiting solutions focused on sourcing and screening candidates as well as employer branding, through Indeed and Glassdoor, also contributed to revenue growth yoy.

• Quarterly adjusted EBITDA decreased by 20.7% yoy. Adjusted EBITDA margin was 7.9% for Q4 FY2019, a decrease from 11.8% in Q4 FY2018 as the growth rate of marketing expenses exceeded that of revenue.

Media & Solutions:

• Quarterly revenue decreased by 0.4% yoy as enterprise clients in most industries turned cautious on hiring and reduced job advertising spend in response to the challenging business environment created by the spread of COVID-19.

• Quarterly adjusted EBITDA increased by 6.1% yoy since HR Solutions reduced marketing investment as a cost control measure considering the influence of COVID-19.

Staffing:

• Quarterly revenue decreased by 2.1% (+0.1% ex FX impact) yoy. Quarterly revenue for Japan operations increased by 7.7% and for Overseas operations decreased by 9.8% (-5.7% ex FX impact) yoy.

• Quarterly adjusted EBITDA increased by 18.5% (Japan +53.7%, Overseas -15.0%) yoy. Adjusted EBITDA margin was 5.4%

• For Japan operations, both revenue and adjusted EBITDA increased. Adjusted EBITDA margin was 7.1%, an increase from 5.0% in Q4 FY2018.

• For Overseas operations, both revenue and adjusted EBITDA decreased yoy, due to the ongoing uncertain outlook of the global economy intensified by the global spread of COVID-19. Adjusted EBITDA margin was 3.9%, a decrease from 4.1% in Q4 FY2018. The segment continues to focus on utilizing the Unit Management System to optimize its adjusted EBITDA margin.

Revenue

	FY2018	FY2019
	Q4	Q4	YoY	Full Year	YoY
Consolidated results*³	580.3	589.7	+1.6%	2,399.4	+3.8%
HR Technology	90.0	106.3	+18.1%	424.9	+30.0%
Reference: (In million US dollars) Revenue in US dollars*²	816	974	+19.4%	3,907	+32.7%
Media & Solutions	193.7	192.8	△0.4%	755.9	+4.8%
Marketing Solutions	105.2	113.0	+7.5%	438.5	+9.5%
Housing and Real Estate	28.1	30.6	+9.0%	113.3	+8.9%
Bridal	13.0	12.2	△6.2%	52.0	△5.3%
Travel	14.9	16.8	+12.7%	73.4	+19.1%
Dining	10.0	9.8	△2.1%	39.2	+0.9%
Beauty	18.7	21.1	+13.3%	81.6	+13.3%
Others	20.3	22.3	+9.7%	78.9	+14.7%
HR Solutions	86.6	79.1	△8.6%	314.1	△0.9%
Recruiting in Japan	78.2	70.0	△10.5%	277.8	△2.2%
Others	8.3	9.1	+8.9%	36.2	+10.4%
Eliminations and Adjustments	1.9	0.6	△65.8%	3.1	△23.4
Staffing	304.1	297.7	△2.1%	1,248.1	△3.3%
Japan	133.4	143.6	+7.7%	567.8	+4.7%
Overseas	170.7	154.0	△9.8%	680.3	△9.0%
Eliminations and Adjustments	△7.6	△7.2	-	△29.5	-

	FY2018	FY2019
	Q4	Q4	YoY	Full Year	YoY
Consolidated results*¹ *³	53.1	55.2	+4.1%	325.1	+10.9%
HR Technology*¹	10.5	8.3	△20.7%	71.2	+50.2%
Media & Solutions*¹	32.2	34.2	+6.1%	182.9	+6.1%
Marketing Solutions*¹ *⁴	18.8	18.6	△1.4%	115.9	+5.6%
HR Solutions*¹ *⁴	17.9	18.8	+5.0%	83.4	+5.3%
Eliminations and Adjustments*¹ *⁴	△4.5	△3.1	-	△16.5	-
Staffing*¹	13.6	16.2	+18.5%	81.2	△2.0%
Japan*¹	6.6	10.2	+53.7%	47.1	+9.5%
Overseas*¹	7.0	5.9	△15.0%	34.1	△14.5%
Eliminations and Adjustments	△3.4	△3.6	-	△10.3	-
EBITDA margin*¹
Consolidated results*¹	9.2%	9.4%	+0.2pt	13.6%	+0.9pt
HR Technology	11.8%	7.9%	△3.9pt	16.8%	+2.3pt
Media & Solutions	16.7%	17.8%	+1.1pt	24.2%	+0.3pt
Marketing Solutions*¹ *⁴	18.0%	16.5%	△1.5pt	26.4%	△1.0pt
HR Solutions*¹ *⁴	20.7%	23.7%	+3.1pt	26.6%	+1.6pt
Staffing*¹	4.5%	5.4%	+0.9pt	6.5%	+0.1pt
Japan*¹	5.0%	7.1%	+2.1pt	8.3%	+0.4pt
Overseas*¹	4.1%	3.9%	△0.2pt	5.0%	△0.3pt

3. Consolidated Financial Guidance for FY2020

The Company currently expects that the global spread of COVID-19 will have a significant impact on financial performance in Q1 FY2020, and may continue to impact performance in Q2 FY2020 and beyond. The Company is not providing guidance for FY2020 at this time, but plans to provide consolidated financial guidance for FY2020 when the Company is able to reasonably estimate the magnitude of the impact of COVID-19 on its business.

4. Latest Business Operation Update

The Company's consolidated revenue*¹ in April decreased approximately 21% yoy.
HR Technology yoy revenue*² growth on a US dollar basis was approximately 26% in February, increasing approximately 4% in March and declining approximately 35% in April. Revenue began to stabilize in mid-April, although the future outlook contains significant uncertainty.
Media & Solutions revenue*² *³ in February 2020 increased approximately 5%, in March 2020 decreased approximately 10%, and in April decreased approximately 23% yoy.
Staffing revenue*² in February, March, and April 2020 was up by approximately 0.1%, up by approximately 0.2% and down by approximately 12% yoy, respectively.

5. Mid- to Long-Term Strategies

(1) Aim to become the global leader of the HR Matching market

The Company aims to become the global leader in the HR Matching market, which the Company estimates was roughly 159 billion US dollars*¹ in terms of annual revenue in 2019, by utilizing innovation and creativity driven by technology. The HR Matching market includes job advertising and talent sourcing tools, placement and search, and temporary staffing.

The Company believes the size of the global HR Matching market will decrease significantly in the near-term, including in 2020 due to the impact of the COVID-19 pandemic as revenue in the HR Matching market tends to be highly correlated with overall economic growth as well as conditions in the labor market.

However, the resulting uncertainty and rapidly evolving conditions around the world prevent the Company from reliably predicting the magnitude of the negative impact on the HR matching market in 2020 or subsequent years.

During these unprecedented times, the Company remains fully committed to supporting job seekers and employers through its resources and technology. The Company will continue to invest proactively and strategically to become a global leader in the HR Matching market in the mid- to long-term.

(2) Improve productivity of clients' businesses through SaaS solutions with a focus on Air BusinessTools

The Company believes there is a sizable long-term growth opportunity to provide operational support services empowered by technology, that is delivered through SaaS solutions to help improve productivity for SMEs in Japan, and aims to solve various challenges SMEs face every day in their business operations by providing Air BusinessTools across a variety of industries in Japan. SaaS solutions enable SMEs to spend less time on back-office related work and spend more time on their main businesses, which improves operational efficiency, enhances productivity, and contributes to the overall sustainability of SMEs' businesses. As a result, the Company believes that SaaS solutions support SMEs in growing their businesses and increasing customer satisfaction.

The Company estimates there may be roughly 2.9 million business locations and stores*² in Japan at which Air BusinessTools can be used, which represents a sizable growth opportunity. Recently, the number of accounts for AirPAY, a SaaS solution for accepting cashless payments, has significantly increased supported by the Japanese government initiative to encourage business owners to accept cashless payments in conjunction with the consumption tax hike. AirPAY had approximately 149,000 registered accounts*³ as of March 2020, an increase of 167% compared to March 2019. The demand for AirPAY has continued to be strong since the tax increase in October 2019.

An increasing number of clients who use AirPAY have also subscribed to other Air BusinessTools solutions. Among the approximately 149,000 AirPAY registered accounts*³ as of March 2020, approximately 102,000 registered accounts have also subscribed to other Air BusinessTools solutions. The Company believes the growth in AirPAY accounts will lead the overall growth of Air BusinessTools accounts.

6. FAQ's

In this document, the terms the "Company," "Recruit Group," "we," and "our" refer to Recruit Holdings Co., Ltd. and its subsidiaries unless otherwise indicated. The "Holding Company" refers to Recruit Holdings Co., Ltd. ("Recruit Holdings") on a standalone basis. SBU stands for strategic business unit.

Recent Highlights

Q1：
How has COVID-19 affected your financial performance?

A1：
Due to a significantly uncertain outlook caused by the global spread of COVID-19, economic activity, including consumer and business activity, has been negatively affected globally, including in Japan. As a result, beginning in March 2020 the Company's revenue and profits across all three businesses were negatively impacted and may be further negatively impacted in future periods.

HR Matching businesses, which are comprised of HR Technology and Staffing, and the HR Solutions in Media & Solutions, have been negatively affected, as employers have turned cautious on hiring while assessing the current economic situation and adapting to social distancing and other restrictions in many countries around the world.

Also, Marketing Solutions, in Media & Solutions, has also been negatively affected by reduced demand for advertising services, especially in the Travel, Dining and Bridal businesses as a result of the state of emergency and shelter-in-place request in Japan.

The Company has experienced a continued adverse impact on its business from the global spread of COVID-19, with consolidated revenue decreasing approximately 21%*¹, year on year in April 2020.

HR Technology year on year monthly revenue*², on a US dollar basis, increased approximately 26% and 4% in February and March 2020 respectively, and decreased 35% in April 2020. Revenue began to stabilize in mid-April, although the future outlook contains significant uncertainty.

Media & Solutions revenue*² *³ in February 2020 increased approximately 5%, in March 2020 decreased approximately 10%, and in April decreased approximately 23% year on year.

Staffing revenue*²  in February, March, and April 2020 was up by approximately 0.1%, by approximately 0.2% and down by approximately 12% year on year respectively.

---

Q2：
What is the Company's short-term strategy against the potential negative impact to revenue and profit resulting from the global spread of COVID-19?

A2：
We plan to continue to invest in the area of our mid- to long- term strategy, while controlling costs according to business situations, such as advertising and marketing expenses in HR Technology and Media & Solutions.

---

Q3：
In Japan operations in Staffing, how does compensation for lost income for temporary staff affect your cash on hand as the number of companies which close their business due to COVID-19 increases?

A3：
If temporary staff are idled due to the suspension of enterprise clients' business during the contract period, the Company is required to pay compensation to the temporary staff workers, but this cost is expected to be charged back to the enterprise clients based on the individual dispatch contracts. If enterprise clients are unable to pay for the compensation for the lost income, we may consider applying for Japanese government subsidies for employment adjustment, which support companies trying to maintain employment in a challenging business environment. As a result, we believe there is a limited chance that our cash on hand will be impacted.

---

Q4：
What is your consolidated financial guidance for FY2020?

A4：
Due to the uncertainty and rapidly evolving conditions around the world, the Company is unable at this time to reliably predict the impact that the global spread of novel COVID-19 will have on its FY2020 financial performance. The Company plans to provide consolidated financial guidance for FY2020 when the Company is able to reasonably estimate the impact of the global spread of COVID-19 on its business. Based on the broad impact on business performance, the global spread of COVID-19 may continue to impact performance in Q2 FY2020 and beyond.

---

Q5：
What is your dividend forecast for FY2020?

A5：
Per the Company's Dividend Policy, the consolidated dividend payout ratio is set at approximately 30% of profit attributable to owners of the parent excluding non-recurring income/losses. As previously discussed the Company is unable at this time to reliably predict the FY2020 financial performance, hence the dividend forecast will also not be disclosed at this time.

---

Mid- to Long- Term Strategy

Q6：
There is concern about the impact on business performance due to the spread of COVID-19. Is this resulting in any change in your mid- to long-term strategy? Has the situation forced you to delay strategic investments?

A6：
There are no changes regarding our mid- to long-term strategy: "Aim to become the global leader of the HR Matching market" and "Improve productivity of clients' businesses through software as a service ("SaaS") solutions with a focus on Air BusinessTools".

In a world with COVID-19, we are adapting our offerings to develop more convenient and efficient matching solutions that address changes in individual users' job search and/or consumption activities, and changes in employers' hiring needs and business environment.

We will continue to actively invest in these priority areas in order to achieve long-term business growth and corporate value improvement.

---

Q7：
Will the Company's strategy of focusing on the growth of the HR Matching business, and the size of that opportunity, change due to the current and future risk of a global recession?

A7：
We believe there will be no changes regarding the strategy that we've previously discussed. The Company continues aiming to become the global leader in the HR Matching market, for which the Company estimates annual revenue to be over 159 billion US dollars*¹, by utilizing innovation and creativity driven by technology.

The Company believes the size of the global HR Matching market will decrease significantly in the near-term, including in 2020 due to the impact of the COVID-19 pandemic as revenue in the HR Matching market tends to be highly correlated with overall economic growth as well as conditions in labor markets. However, the resulting uncertainty and rapidly evolving conditions around the world prevent the Company from reliably predicting the magnitude of the negative impact on the HR Matching market in 2020 or subsequent years. During these unprecedented times, the Company remains fully committed to supporting job seekers and employers through its resources and technology. The Company will continue to invest proactively and strategically to become a global leader in the HR Matching market in the mid- to long-term.

---

Q8：
Why is the expansion of Air BusinessTools a strategic focus?

A8：
The Company believes there is a sizable long-term growth opportunity to provide operational support services empowered by technology, that is delivered through SaaS solutions to help improve productivity for SMEs in Japan.
The Company believes this opportunity may accelerate during the challenging business environment caused by COVID-19, as SMEs have been significantly impacted and need to reduce their day-to-day operational costs, which is the primary value provided by Air BusinessTools.

The Company aims to solve various challenges SMEs face every day in their business operations by providing Air BusinessTools across a variety of categories in Japan.

---

Q9：
What will drive the future growth of Air BusinessTools?

A9：
We place great importance on the total number of accounts, a primary KPI, for SaaS solutions including Air BusinessTools.
Air BusinessTools is focused on increasing the number of accounts by leveraging the Company's strong market position and relationships with existing clients while at the same time attracting new SME clients through online media and other channels.

Recently, the number of accounts for AirPAY, a SaaS solution for accepting cashless payments, has significantly increased, supported by the Japanese government initiative, to encourage individual users and business owners to accept cashless payments in conjunction with the consumption tax hike. AirPAY had approximately 149,000 accounts as of March 2020, an increase of 167% compared to March 2019. We estimate this current market penetration represents roughly 5% of the number of potential customers of Air BusinessTools in Japan*¹, potentially signaling that there is still plenty of room for expansion.

An increasing number of clients who use AirPAY have also subscribed to other Air BusinessTools solutions. Among the approximately 149,000 AirPAY accounts as of March 2020, approximately 102,000 accounts have also subscribed to other Air BusinessTools solutions. The Company believes the growth in AirPAY accounts will lead the overall growth of Air BusinessTools accounts.

---

Financial Health

Q10：
Does the Company believe it is in a strong financial position?

A10：
Yes. The goal of the Company's financial policy is to maintain a strong consolidated financial position resulting in appropriate credit ratings. Financing through borrowing is utilized as necessary to achieve the goals of this policy. As of March 31, 2020, the balance of cash and deposits was 421.2 billion yen, and the balance of interest-bearing debt was 136.6 billion yen (of which the interest-bearing debt with payments due within 1 year was 25.8 billion yen).

The Company believes it is important to maintain a sufficient level of shareholders' equity in order to be able to respond flexibly to investment opportunities for future growth, while at the same time enhancing its ability to address possible risks relating to its business operations and assets. Equity attributable to owners of the parent was 988.4 billion yen and the ratio of equity attributable to owners of the parent to total assets was 49.4% as of March 31, 2020.

The Company has also entered into overdraft agreements with four financial institutions to secure liquidity and raise working capital funds efficiently. The maximum amount of borrowings under these overdraft agreements was 113 billion yen as of March 31, 2020, and the entire amount remains unused.

In addition, the Company entered into a committed credit facility agreement providing for with a total maximum borrowing amount of 399.9 billion yen on April 30, 2020. The entire amount available under these credit facilities remains unused as of May 27, 2020. The Company maintains agreements with the aim of ensuring sufficient liquidity in the event of significant changes in the business environment.

---

Financial Result for Q4 and FY2019

Consolidated Results

Q11：
How do you evaluate the consolidated results for FY2019 against your earlier guidance?

A11：
For FY2019, we met our revised financial guidance announced on Feb 14, 2020 of increases in both revenue and adjusted EBITDA in HR Technology and Media & Solutions, exceeded our adjusted EBITDA guidance of 320 billion yen, and exceeded our high single-digit growth guidance for consolidated adjusted EPS as we announced on May 2019.

For HR Technology, on a US dollar basis, revenue growth for FY2019 was 32.7% year on year, almost achieving our original expectation of approximately 35%. Also, the financial results of Media & Solutions and Staffing were in line with our guidance, with increases in both revenue and adjusted EBITDA for Media & Solutions and decreases in both revenue and adjusted EBITDA for Staffing.

For each business, overall results were in line with our guidance, other than the revenue decrease in HR Solutions in Media & Solutions which was expected to increase by low single-digits. COVID-19 impacted HR Solutions as many enterprise clients were cautious in their recruiting activities, resulting in a decline in revenue.

---

Q12：
Why was there an operating loss of 6.2 billion yen while revenue increased by 1.6% year on year?

A12：
The Q4 FY2019 consolidated operating loss included goodwill and intangible asset impairment losses of 31.0 billion yen primarily related to the overseas operations of Marketing Solutions of Media & Solutions, and the Australian operations of Staffing. Excluding impairment losses, consolidated operating income for Q4 FY2019 was 24.7 billion yen. This was a decrease of 19.9% year on year, mainly due to an increase in depreciation related to expansion of business operations and other one-off expenses.

---

Q13：
What is the background of the impairment losses in the financial statements? Please disclose the amount of goodwill as of March 31, 2020.

A13：
Due to changes in investment priority in Media & Solutions, Hotspring Ventures Limited, the entity that operates Treatwell, the European beauty business, recorded a goodwill impairment losses of 14.5 billion yen. Quipper Limited, an online learning support platform for students, recorded 2.3 billion goodwill impairment losses, as a result of reviewing the business plan to reflect the changes in the business environment beyond the impacts of COVID-19 as of March 2020. A total of 18.1 billion yen was recorded as goodwill and intangible asset impairment losses for Media & Solutions. For Quandoo GmbH, the European dining business, no goodwill remains.

Staffing recorded impairment losses of 12.8 billion yen for Q4 FY 2019 including goodwill impairment of 7.8 billion yen for Chandler Macleod Group Limited in Australia and an intangible asset impairment of 3.8 billion yen for USG People Germany GmbH. These were mainly due to decreased future cash flow forecasts as a result of revised business projections, reflecting business performance in FY2019 which was negatively affected by an uncertain economic outlook in the markets such businesses operated, as well as the expectation that the negative impact caused by COVID-19 will continue for a certain period of time.

The Outstanding amount of goodwill for each SBU as of March 31, 2020 is below:

	Outstanding Goodwill
HR Technology	196.4
Media & Solutions	1.8
Japan	-
Overseas	1.8
Staffing	184.8
Japan	27.7
North America	13.9
Europe	137.6
Australia	5.5
Total	383.1

7. Audio

8. Results Materials

Latest Investor's Kit for FY2019（1.87 MB）（ZIP）

Earnings Release for FY2019 (995 KB)

Financial Results Summary for FY2019 (514 KB)

Supplemental Financial Data for FY2019（183 KB ）（Excel）

FAQ's for Q4 and FY2019 (117 KB)

Conference Call Transcript for FY2019 (309 KB)