Link and Motivation Inc. ($2170)

This is Yoshihisa Ozasa, Chairman and Representative Director of Link and Motivation. I would like to begin the earnings briefing for the three months ended March 31, 2026. Here is today's agenda. First, I will provide an overview of the company; second, performance report; third, an update on progress of the medium-term growth strategy; and fourth, on the progress of share repurchase program. Now let's begin with the company overview. Our mission is through motivation engineering, we provide opportunities to transform organization and individuals and create a more meaningful society. Each division and company operates under this mission. This slide shows our business structure consisting of three divisions. First, at the top is the Organizational Development Division. This division supports the creation of organizations that individuals choose. We refer to this as the motivation companies, and this division includes the Consulting and Cloud business and the IR Support business. Next is the Individual Development Division. This division supports creating individuals that organizations choose. We refer to this as i-companies, and this division includes our Career School business and our Crime school business. Finally, shown at the bottom of the slide is the Matching division, providing opportunities to link organizations and individuals. And this division includes our ALT placement business and our personnel placement business. Next, I would like to present the consolidated business results for the first quarter of the fiscal year ending December 2026. First, regarding revenues, we saw growth primarily driven by the Consulting and Cloud business, resulting in a significant year-on-year increase of 14.1%, progressing as expected. Operating income was also driven by growth in the Consulting and Cloud business. As a result, operating income also saw a substantial year-on-year increase, up 21.9%, which is also progressing as expected. This slide shows the revenues and gross profit by segment. First, the Organizational Development Division. As a result of growth in our core Consulting and Cloud business, revenue increased significantly, up 18.7% year-on-year and gross profit rose 20.2%. Next is the Individual Development Division in the middle. Although the Crime School business grew, the number of enrollments in existing classes in the Career School business decreased, resulting in both revenue and gross profit falling below the previous year's levels. Next is the Matching division, driven by strong growth in the Personnel Placement business centered on OpenWork, revenue increased substantially by 14.4% year-on-year and gross profit rose 18% year-on-year. Next is a summary of each division. First, the Consulting and Cloud business. Driven by the growth of Motivation Cloud, both revenue and gross profit saw substantial year-on-year growth with revenue up 11.2% and gross profit up 11.5% compared to the previous year. IR Support business. Following the acquisition since second quarter of FY '25, we made two IR support companies, our wholly-owned subsidiaries. Thanks to the high-margin video streaming services offered by these two companies, both revenue and gross profit saw substantial year-on-year increases with revenue up 48.2% and gross profit up 80.7%. Finally, please look at the graph on the right. This shows Motivation Cloud's monthly fee revenue, up 20% year-on-year, and this is also showing strong growth. Next is the Individual Development Division. Regarding the Career School business, both revenue and gross profit fell below previous year's levels due to a decline in the enrollment in existing classes. Revenue was 90% of the previous year and gross profit was 88.6% of the previous year. Please look at the graph on the right. Amidst structural reforms, we have focused on online courses, but results have been slow to materialize, resulting in performance that is nearly flat from the previous year. As for the Cram School business, the number of enrollment and revenue per enrollee increased as expected with revenue rising significantly, up 12.5% and gross profit up 20.5% year-on-year. Next is the Matching division. First, regarding the ALT placement business, as a number of placements increased as expected, revenue saw a substantial year-on-year increase, up 11.3% and gross profit up 8.8%. Next is our Personnel Placement business. Here, OpenWork recruiting grew in line with expectations, resulting in a substantial year-on-year increase in revenue, up 21.5% and a significant increase in gross profit, up 24.7%. The graph on the right shows OpenWork recruiting sales, up 43.5% year-on-year, and this division has also grown substantially. This slide shows the selling, general and administrative expenses. As a result of focusing on investments to accelerate growth, these expenses increased significantly year-on-year, up 19.2%. In particular, due to enhanced marketing efforts for Motivation Cloud, sales-related expenses rose significantly, up 23.8% year-on-year. This is the consolidated statements of financial position. Assets decreased due to a decline in cash and cash equivalents, while liabilities decreased slightly. Shareholder's equity decreased due to share repurchase. Now, regarding dividends, we are continuing our policy of paying quarterly dividends, which allows for flexible payouts to shareholders. We plan to pay a dividend of JPY 4.1 per share for the first quarter on June 25. The graph on the right shows the trend in annual dividends. While there was a temporary pause around the time of COVID-19 pandemic, we have since been steadily increasing our dividends. Next, I will report on the progress of our medium-term growth strategy, the third point on the agenda. As shown on this slide, we have set a target of achieving JPY 15 billion in operating income in 2030 with a milestone of reaching JPY 10 billion in 2028. We are also focusing on shifting to a recurring revenue model, primarily through our consulting and cloud business and aim to achieve an ARR, annual recurring revenue of JPY 24 billion in 2030 as a key indicator. As a milestone toward this goal, we are targeting JPY 15 billion in 2028. Specifically, regarding Motivation Cloud, we will focus on expanding new services for our existing major company customers while also broadening our reach to include medium-sized domestic companies and by doing so, realize accelerate growth of ARR. There are two points I would like to highlight. The first is expansion of new services and the second is expansion of existing services to medium-sized domestic enterprises. This is the overall service structure of Motivation Cloud. Until now, in response to the trend towards mandatory disclosure of human capital information, we have expanded our diagnostic services primarily among major enterprises. As the needs of major companies shift from disclosure to transformation, we will also focus on expanding our transformation services. First, our diagnostic engagement service, Motivation Cloud Engagement is a service that boasts an overwhelming market share, having held the #1 position for 9 consecutive years. Moving on to transformation services. In addition to our existing Sharing Service, Role Development Service and DX Digital Transformation Support Service and Peer Bonus Service, we will be launching new Recruiting Support Service, and Management Support Service. First, regarding the Recruiting Support Service. In terms of the market environment, while recruitment costs are rising for all companies, fill rates are declining and satisfaction with the quality of hires remains low. Going forward, an outcome-oriented approach that is simultaneously achieving both the quantity and quality in recruiting is required. Until now, we have provided side-by-side support through consulting in the recruitment domain. However, moving forward, we will transition from side-by-side support consulting to a cloud-based model and promote DX in recruiting, enabling us to support even more customers through what we call the Motivation Cloud Entry Management. Its key features include significantly streamlining the process where consultants previously handled everything from target setting to side-by-side support through cloud-based services while also enabling accurate transformation support driven by data. We will provide support through the use of Bridge aptitude test, the introduction of virtual interview systems and ongoing consulting support from consultants to drive results. The monthly fee revenue immediately following the release, while Motivation Cloud Engagement generated approximately JPY 5.5 million, Motivation Cloud Entry Management has generated JPY 7.5 million, indicating a very smooth launch. The second point is our management support service. While AI-driven business efficiency continues to advance, the burden of management remains heavy and the importance of implementation support is expected to grow in the future. We aim to expand new in-house development of cloud services that helps managers free up time to focus on the tasks they should be prioritizing. Given the market environment, where support for management execution is becoming increasingly important, we are making steady progress towards releasing a new in-house developed cloud service by the end of 2026 that utilizes AI agents that allow managers to gain more time so that they can concentrate on their core responsibilities. This is our growth strategy for expanding our existing services. Regarding our existing services, we're expanding our target to include domestic medium-sized enterprises and promoting the adoption of Motivation Cloud engagement. First, as shown here, we have secured adoptions from top-tier companies across various industries, delving deeper into those specific sectors. Adoption is accelerating in the manufacturing and construction industries. Order status for the first quarter of this year: We have secured 15 orders in the manufacturing sector and 4 in construction, indicating a gradual expansion from large enterprises to domestic medium-sized enterprises. Next, fourth agenda on the progress of our share repurchase program. The share repurchase is proceeding smoothly. We have acquired 36.65% of the total outstanding shares, representing 41.67% of the total share value. This is our largest ever share repurchase program totaling JPY 6 billion, and the time line runs through August 31 of this year. We expect smooth progress going forward. And here's an overview of our core business operations. While some divisions such as the Individual Development Division are facing challenges, our key focus areas, the Organizational Development Division and the Matching division are growing steadily, benefiting from favorable market conditions. We hope you will continue to have high expectations for our future growth. And this concludes our earnings briefing. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]