Recruit Holdings Co., Ltd. (6098) Earnings Call Transcript & Summary

Thank you for joining Recruit Holdings Sustainability Update. First, we will provide an update on the progress of Prosper Together for fiscal 2023 through a prerecorded video. After that, around 4:20 p.m., we will begin the fireside chat with Sena and Arai. Please wait until we start.

Hi. I'm Sena, COO and Director of Recruit Holdings. Thank you for joining our sustainability update. Today, I would like to share our 2023 progress for Prosper Together, the third pillar of our business strategy. Following that, I'll be joined by Jun Arai for a fireside chat and answering questions live. We have set 5 sustainability goals that we aim to achieve by 2030. We set these goals 3 years ago in 2021. And while some are progressing smoothly, others have been more challenging. Today, I'll be open and honest about both. First, let me talk about the E pillar, environment. We have met our short-term goal of reaching carbon neutrality throughout our business activities for 3 consecutive years since 2021. We are on track to achieve it again in 2023. Our long-term goal is to achieve carbon neutrality of GHG emissions across our entire value chain. To this end, we're working with our partner companies to reduce Scope 3 emissions, which account for more than 95% of our company's GHG emissions. Through these activities in 2023, we were recognized as one of the A listed companies by CDP and NGO that has one of the largest environmental databases in the world. This is the highest rating given to a company for its leadership in corporate disclosure transparency and performance on climate change. Next, I'll talk about the S pillar, social. For many people around the world, having a job is one of the most important facets of life. However, approximately 40% of people could fall into poverty if they don't have income for 3 months. To address this, we're committed to our goal of reducing the time it takes to get hired by half by 2030. We aim to do this by significantly speeding up the job matching process. For job seekers and employers, finding a job and hiring people still involves many processes and can be long and stressful. Our challenge is to make these processes as simple and fast as possible. To achieve this, we need to be able to measure the duration and to make it shorter. We have been diligently working on this through a trial and error. In 2023, we focused on reducing the time to hire for employers and accelerated the advancement of our products. Indeed, CEO, Chris Hyams, will provide more details on this initiative later. Next, let's talk about the third goal we aim to achieve by 2030: Helping 30 million people facing barriers in the label market get hired. Some issues simply cannot be solved by improving the accuracy and efficiency of matching alone. In an ideal world, hiring should be determined by the skills and abilities required for the job. However, in reality, labor market barriers such as educational background, disabilities and access to technology negatively impact job seekers when finding and keeping a job. We have been addressing the 5 common labor market barriers that exist across the world. This past fiscal year, we stepped up our efforts to remove barriers for refugees in response to growing global concern. As geopolitical tension rise, the number of people forced to leave their homelands has hit record highs. Consequently, the number of people needing jobs increased as they sought to rebuild their lives in their new locations. Our HL Technology business has partnered with international humanitarian organizations to hold job fairs across European countries for job seekers with refugee backgrounds. Our staffing business, especially our European subsidiaries with expertise in supporting job seekers who have migrated, has led efforts to promote hiring refugees to business clients and provided interpretation support during interviews for job seekers facing language barriers. Moving forward, we'll continue to exchange information with international humanitarian organizations, strive to understand local situation and needs and provide ongoing support. Over the 3 years leading up to 2023, we have helped more than 6.9 million job seekers facing barriers get hired. Finally, let's discuss gender parity. Our fourth and fifth sustainability goals are to achieve gender parity at all employee levels and among the member of the Board of Directors by 2030. For employees, we're nearly at gender parity. For managers, we're working toward achieving our 3-year target by expanding the pool of management candidates through talent development. And for senior management, women representations improved from 10% in 2021 when the goal was set to 27% in April 2024. For the Board of Directors, it rose from 20% to 33%. We will continue to consider the Board of Directors candidates based on the skills and backgrounds necessary to achieve our mid- to long-term strategies. In addition to these 5 goals, during 2023, we also deep dived on 2 themes that are important to us. The first theme is a responsible use of technology. As technology rapidly evolves, the discussions are broadening worldwide concerning AI's potential risks of equine and amplifying human biases. LaFawn Davis, Chief People and Sustainability Officer at Indeed will provide more details on this later. The second theme is the sustainability disclosure regulations, which are advancing mainly in Europe. We're working together as a group to prepare for these regulations while keeping up with the latest information. We recognize we have set very ambitious goals that won't be easy to achieve. But because it is not easy, we believe exceptional ideas and innovations will be born out of it. We will continue taking on challenges. In turn, together with our stakeholders, we'll achieve true social impact and long-term growth, whereby we can all prosper together. Next, Indeed CEO, Chris Hyams will share more about our second goal of reducing the time it takes to get hired by half.

Hello. I am Chris Hyams, I'm CEO of Indeed, and I'm happy to be here today to talk about speed with a focus on employer time to hire and the critical importance of time to hire on Indeed's vision and strategy as well as a significant impact on society. At Indeed, our mission is to help people get jobs. This is what gets us out of bed in the morning and what keeps us going all day. Our vision is to make getting a job as simple and fast as pushing a button. Our strategy is to transform from a search engine to a 2-sided marketplace. For more than a decade, we've been working to bring the apply, interview and hire steps onto the Indeed platform. The more of this process that happens on Indeed, the more we can help to make them simpler and faster. In 2021, we set a transformational sustainability commitment to shorten job search duration by 50% by the year 2030. For employers, of course, this would mean hiring faster. Speed to connection can make all the difference to employers when competing for talent. Our data shows that candidates who receive an outreach within 4 hours of applying are 95% more likely to get hired than those receiving an outreach a week later. Accelerating speed is an important objective with meaningful impact to both society and our core business goals of growing hires and revenue. But this commitment is not just about speed or efficiency. According to the OECD or Organization for Economic Cooperation and Development, nearly 40% of OECD households would fall below the poverty line if they were to lose income for 3 months or more. For the estimated 500 million people who might fall into poverty, shorter job search duration could mean the difference between losing a home or remaining safe and secure. So let's talk about the connection of a job seeker search duration to an employer's time to hire. To shorten job search duration, we need to understand the journey. Measuring job search duration is challenging because it's not empirically clear when a job seeker has actually started looking for a job with intention versus just browsing out of curiosity. On the other side of the job seeker search journey is the employer hiring journey. Unlike the job seeker search duration, employer time to hire is simple and empirical for Indeed to understand and measure. The journey starts when a job is created on Indeed, and it ends with a successful hire. While that starting point is clear. We know when a job first appears. We've had to work to measure the endpoint of a hire. For many years now, we've invested in understanding this most critical part of the employer journey. We collect signals throughout the indeed platform and also survey job seekers and employers. This measurement has helped us better understand every aspect of our product platform to gain insight into what factors drive hires. To sum up, we have 2 distinct measurements. Job search duration reflects the time it takes on the job seeker journey from starting the search to getting hired. Time to hire reflects the employer journey from creating a job to making a hire. We'll continue our efforts to measure and reduce job search duration, but for today, I'll share more about the employer journey and Indeed strategy to reduce time to hire. As of December 2023, the mean time to hire for an employer was 55 days. This represents the time from job creation on Indeed to the point of a confirmed hire. We can also measure duration between milestone points across the hiring process. So let's take a look at some of these journey points and the strategies to improve speed across the process. In general, employers receive many applications before finding the candidate who they ultimately hire. We refer to the candidate who has ultimately hired for the job as the golden candidate. When the golden candidate applies, we call it the golden apply. So 1 key measurement for us is the time from job creation to the time of the golden apply. The next journey milestone is the time from golden apply to employer response. In other words, how long does it take for an employer to respond to the golden candidate's application. Finally, we look at the time from employer response to the end of the journey, the hire. Putting this all together, time to hire is split across 3 distinct steps: 40% of the journey is spent waiting for the right job seeker to apply from job creation to golden apply. 20% is spent from golden apply to employer response. And finally, the last 40% is from employer response to higher. We need to make improvements across all of these steps to reduce time to hire, and we believe that time to hire reductions will support our ambitious goal of reducing job search duration by 50% by the year 2030. Our approach to reducing overall time to hire is composed of distinct initiatives for each of these steps, making it faster and more efficient for both the employer and the job seeker. Let's start with the first part of the journey. Job creation to golden apply. For this phase, our focus is on improving matching to drive faster engagement. First, with the Indeed smart sourcing product, we're using generative AI in powerful ways to help employers evaluate potential candidates and reduce time to source significantly. AI-powered match candidates, now part of smart sourcing, delivers quality matches to employers based on qualifications and activity. Employers can quickly connect with the qualified match candidates and invite them to apply for their roles. Match candidates are 17x more likely to apply to a job than to a job they see in search. This high-quality matching leads to faster time to finding the right candidate. Critically, the median time for job seeker response to a match candidate invitation is less than 5 hours. As we continue to expand smart sourcing adoption, we can reduce the time from job creation to golden apply. Next, we are focused on optimizing the timing of recommendation delivery. Job seekers receive recommendations on their homepage when they visit Indeed and we also send recommendations directly to them. We're working to optimize the send time of these recommendations, personalizing delivery to when job seekers are most likely to be active, which will improve the overall likelihood of connection. And of course, we'll do the same for employer recommendations. We send recommendations to job seekers across multiple channels, including e-mail and mobile app Push Notifications. Job recommendations sent via Push are most likely to result in an application. But we need to be thoughtful to not send too many notifications to any one job seeker. We're working to divert the highest quality recommendations to the highest engagement channels in order to maximize the likelihood of engagement. The next part of the journey is golden apply to employer response. For this phase, our focus is on messaging and employer engagement. Last year, we launched a new and improved mobile app for employers, designed to drive faster connections. Employers using the app and receiving app push notifications, respond to job seekers 20% faster. We plan to add smart sourcing capabilities to the app and also launch an Android version, which we expect will further accelerate adoption and improve response times overall. Indeed's built-in messaging feature makes it simple and fast to connect on the Indeed platform. Since we launched messaging in 2019, employers and job seekers have sent billions of messages on Indeed. Job seekers typically reply within 2 hours when employers message them directly on Indeed. And with the introduction of a chat-based experience over the past year, it's gotten even faster. We're working to make messaging even simpler through UI improvements and by introducing additional channels like SMS. Additionally, with smart sourcing, employers can use smart messages to quickly connect with qualified candidates using AI-generated personalized outreach. AI-generated employer responses make it simpler and faster for employers to respond and help engage qualified candidates quickly and move them to the interview stage. Job seekers can also use AI-generated prompts to respond to employer messages, further expediting the process. The final part of the journey is employer response to hire. For this phase, our focus is on hiring automation and ATS, or applicant tracking system, interoperability. Indeed Apply is a key technology that enables job seekers to complete a job application directly on the Indeed platform without having to navigate to an external site. Indeed Apply is simple and fast for job seekers and increases conversion rate for employer applications. Jobs posted directly to Indeed all support Indeed Apply. With the Indeed Apply sync API, jobs posted on ATSs can now support the same simple and fast application process. We've integrated with more than 300 ATSs globally, and we'll be launching new integrations from 4 of the largest ATSs in the world later this year. Interview scheduling is one of the most manual and time-consuming parts of hiring. We offer a number of solutions to make scheduling simpler and faster, including options to schedule interviews on our own video interview platform, Indeed Interview. Last year, employers and job seekers completed 8 million interviews on Indeed. On average, employers who interview on Indeed hire 44% faster. An average time to first interview for a job seeker is just 4 days compared to weeks for many alternative hiring methods. We've built new automation tools to make it simpler and faster for employers to create apply to higher workflow automation. And we've seen a 20x growth in the number of connections through automation in the past year. While we have solid measurements in place, we know that reducing time to hire is a huge challenge. In order to improve time to hire, we need to change job seeker and employer behavior, both on and off Indeed. This is an extraordinarily ambitious undertaking. However, the potential impact to society and our business is significant, and the effort is worthwhile. While I've discussed employer time to hire today, we also have an ambitious commitment to reduce job search duration by 50%. We need to continue to innovate every step of the hiring process to reduce both time to hire and job search duration. Now I will turn it over to Indeed's Chief People and Sustainability Officer, LaFawn Davis, to talk about how we use technology and AI responsibly across all of our initiatives.

Thank you, Chris. I'm LaFawn Davis, Chief People and Sustainability Officer at Indeed. At Indeed, we help all people get jobs, reducing [Audio Gap] and it's deeply connected to hiring more efficiently. Chris took us through examples of how Indeed's matching and hiring platform can accelerate speed. And I will discuss how these products and tools are built with equity in mind. Indeed will harness the power of AI to make hiring simpler and faster. We know that AI tools have been built with inherent human-created biases. We want to make sure AI doesn't become another barrier for job seekers to overcome. When used ethically, AI can be a powerful tool to move the needle forward as we level the playing field, establish equity and help break down bias and barriers for job seekers. I want to stress that humanity is at the core of it all and will always be the driving factor when building for better work. We have several strategies in place to combat bias, including building a strong team who can leverage scientific rigor and analytical tools for our AI systems, building scalable tools that Indeedians can use to develop and deploy AI responsibly, and building for humans. Humans still need to be involved in every step of the hiring process and we are deeply involved in internal standard setting and education. I strongly believe that keeping the human and human resources is the path forward toward a more equitable world of work. At Indeed, we believe the path towards building a better world of work starts with responsible AI. We're on our own journey with equitable hiring and are continuously evaluating and redesigning our hiring processes with a lens of inclusion. We're adopting best practices as we learn and are committed to driving change across fair chance hiring, accessibility, skills-first hiring and economic security. Humanity is the key to building a more equitable society. We want to use our technology, expertise and scale to help eliminate biases and ensure all people have access to quality work.

[Interpreted] Thank you. I'd like to now move on to the fireside chat with Sena and Jun Arai, and [indiscernible] of PR Department, and this call is a simultaneous translation of the original call in Japanese. After the fireside chat, we will have a dedicated Q&A session to answer your questions. [Operator Instructions] And we are recording today's session. Presentation materials can also be obtained from our website. So Mr. Arai take over from here, please.

[Interpreted] Thank you. I am Arai. So this fireside chat is actually a third this year. And I would like to ask the same question that we asked last year, as we saw in the video, you mentioned that the progress on the 5 goals varies and mixed. So can you explain more about that?

[Interpreted] Yes. So to be honest, some are going well, but some are not going so well. We are struggling with some of them. But the ones that we are struggling with, I think we have made some progress and signs of improvement this year.

[Interpreted] Okay. So among the 5 goals, and let me see the 5 goals. And if you look at the 5 goals, which ones are going well?

[Interpreted] Yes. So among the 5 year environment and second of the social impact goal, helping 30 million job seekers facing barriers and a 50% women representation on the Board of Directors. For those 3, I think it's going well relatively speaking.

[Interpreted] Okay. But in the video earlier, you mentioned that CDP was something I have not heard of CDP. So what was evaluated by CDP?

[Interpreted] Okay. So -- for those of you who do not know what CDP is, let me explain. So CDP is a U.K.-based NGO. And -- it has a very comprehensive collection of data on the environment. It's often referred to by many of the institutional investors. And as a result of that, it's promoting companies' actions to solve the environmental issues. So CDP every year, sent out questionnaires to companies about 3 areas: climate change, forest and water security. And based on the response from the companies, they would wait and evaluate the level of transparency and also the level of disclosures. And especially in climate change, there are the most number of responses in this area, and we were able to make it on the A list in fiscal 2023. So that's what we were talking about on the video. And the A list accounts for about maybe 400 companies among the 23,000 companies who respond. So it's 1.5%-or-so. So for us, it was the first. So I'm very proud that we were able to make it on the A list. That's what I meant when I said it on the video.

[Interpreted] Okay. So is that your goal?

[Interpreted] No, not at all. Actually, I did boast about it, but what we are aiming for is to achieve carbon neutrality across the entire value chain. So there's many things that we still have to overcome. So we would like to make further efforts towards 2030.

[Interpreted] Okay. So CDP is rating agency dedicated to environment, I suppose. And so that rating agency evaluate the company. And it seems that money goes to those with good initiatives and not so much to those with poor ratings, correct?

[Interpreted] Yes.

[Interpreted]. Okay, let me go back to the original question. So looking at this slide again, so which are the areas where it has proven to be more challenging?

[Interpreted] Well, the other 2, the remaining 2 out of the 5 are something that we are struggling with. So in social impact, reducing the time it takes to get hired by half and also achieving gender parity among the senior executives and managerial positions in all employee levels. We are still in the trial and error process.

[Interpreted] But you are making progress, I understand?

[Interpreted] Well, even in the difficult situations, we are making various trials. And there are some signs of gradual progress. Yes, that's my take.

[Interpreted] Okay. So for today, we'll focus on the 2 goals: Reducing the time it takes to get hired by half and achieving gender parity at all employee levels. So with those focuses, I'd like to ask you about the various efforts made in fiscal '23 that investors might be keen to know about. So let's ask first about the first one. The goal to reduce the time it takes to get hired by half. So it was mentioned by Chris in the video that you're introducing a new metric, time to hire, so what's the different -- relationship between time to hire and time to get hired?

[Interpreted] Okay. Maybe look back in the history of our efforts to explain that. So to reduce the time it takes to get hired by half. What we have been doing in the initial year was sending surveys to job seekers who are flagged as hired or employed on Indeed. Yes, so you were doing that -- looking for a job. And although way up to the point when you were hired, that's the time it takes to get hired from the job seekers' perspective. And based on the data that we have compiled, we have established a baseline of 15 weeks, that was from the perspective of the job seekers. However, in reality, no, we have taken on this challenge over 10 years. And every month, 350 million users use Indeed. So sending out the questionnaires to each one of them and asking them when did you start job search? It's not sustainable. And they may not be accurate. They may not really remember accurately exactly when they started to look for a job. So we want to take digital signals from the platform to identify the signals of start of a job search and end of a job search. We've done that for 2 years, but after 2 years, we were not able to identify anything that was really on the spot. That is because the job search beginning is very difficult to identify. For example, it may be the same behavior, but you may be just browsing out of curiosity or you may be very serious about finding [Audio Gap] the behavior and the combination of that behavior with the signal, we want to put together a model to estimate, but to be accurate to identify duration of -- beginning of a job search to the end. We were not able to find a solution after a trial and error after 2 years. So that's where we are today. But if we are able to measure it, then that's where we want to start. Yes, we want to shorten, reduce the time it takes to get hired. So if you want to really reduce the time and we try to look for a solution after 2 years, so we decided to opt for a solution that is much more accurately measurable, although it may not be the best. So not the job seeker, but the employer side perspective, it may be more accurate because you posted a job, that's the start of a job looking for a person to hire. So we were originally looking at -- from the perspective of a job seeker to reduce the time for the job seeker to get hired, but we were not able to do it accurately. So we decided this time to go for a perspective from the employer from posting a job to the hired, and that's time to hire. So we want to try to shorten that time to hire using our product.

[Interpreted] Okay. I understand. So you're looking at it from the employers perspective rather than the job seeker. Okay. Understood. So the development of the product and the accuracy of the measurement can be captured real-time if you moved to that perspective. So that is going to be the metric that you'll be using going forward?

[Interpreted] Well, we were looking at trying to look at job seekers' perspective, but we're not able to come up with the metric that we wanted to identify. But we say often in Indeed, what can be measured, can be improved. In other words, if you cannot measure it, then you cannot improve it. So if you want to shorten the time, we have performed many A/B testing, and it was an iterative process. But we do want to shorten the time to hire. So that's why we decided to opt for the employer's perspective so that we can have a measurable data, that's time to hire. So the amount of data, the coverage and accuracy can be measured. So that's why we think it's significant. But we want to really drive to shorten the time to hire, and we are doing various tests. So the actual results can be reported to you maybe next year, about this time of the year, hopefully. But we have shifted to this. And already some good signs, positive signs observed. For example -- so we are able to measure the data or metric now. So now for the first time, we are able to include speed as OKR. What's OKR? Objectives and key results. So it's something that you can track and celebrate if it's achieved. So unless you can measure it accurately, you cannot make it into an OKR. So the employers' perspective is now measurable and you can now improve on the product, and you can judge through A/B test, whether that measure is effective or not. So I'll give you a report on the effect of this now. But at least, we are moving forward and making progress.

[Interpreted] Okay. And as was mentioned by Chris in the video earlier, so through time to hire metric, and we've incorporated the employer's perspective. So we will become the platform of choice, both from the employers and the job seekers. And that I understand. And also from a mid- and short-term perspective, I think speeding up the process has become more visible in terms of its relation to its relation to its financial results.

[Interpreted] Yes, from the management perspective, we have always considered both employers' and job seekers' perspective. And in the short term, we do want to reduce the time to hire from the employers' perspective. If you look at the amount of jobs posting in the U.S., it increased immediately after the pandemic, and then it has moderated or slowed down over the past year. But when there was a rapid decrease in the number of job postings in the past, the unemployment rate used to go up historically, but not this time. This should mean that just like Japan, in the U.S., the labor population is aging, so there is a tightening of the labor pool. Yes, I think [indiscernible] was talking about it during the recent earnings presentation. Yes, right. So there's a decoupling of the decrease in job openings and the unemployment rate. So from the employers and recruiters perspective, this means that there is a decreasing supply of talent in the labor market. And this would be a risk because if they were able to find a talent, they need when they needed it, they would have captured the opportunity. So I think by using our platform, I think it will be more attractive for them. So in 2021, when we came up with this concept of reducing the time to get hired by half, that's -- the matching efficiency will be doubled and also the monetize opportunities can be doubled. That was the original concept. But the macro situation is deteriorating. And in the circumstances, I think the efficiency can be more than double. That's optimistic view. So higher value-add service can be provided by us. So then the corporate value, the enterprise value and the social impact would be more linked together.

[Interpreted] That's great. Okay. So I'd like to go to the next item, where what you were talking about the increasing our percentage of women managers and can you really look at the slide, again? Yes. So 2023 progress. So if you look at the senior management, there was an improvement, but overall for managers, it looks like it's flat. The growth is flat. For the short term in the 3-year term and that's 2024, the 3rd year of the 3-year term -- and so right now is where we're at and do you think you'll be able to achieve the target?

[Interpreted] Okay. That's a great question because we are struggling with the percentage of women managers among employees. The numbers that were shown was for the whole group and the middle line was the overall managers, and that's flat -- for 2023. But -- and we haven't disclosed this elsewhere, but there's a very different situation domestically versus internationally. So maybe I can explain them separately. First of all, in Japan Well, let's look at the slide again, then. All right. Yes, this is a good one. So if you look at the slide, in Japan, we have Recruit, which is the biggest business in Japan. And here, we're looking at the changes in the percentage of women managers and the utilization of leveraging women talent, we've been working on this for a long time. And 2006 was the year that we set a specific goal.

[Interpreted] And this was the year that you entered or joined Recruit?

[Interpreted] Yes, that's correct. And if you look at this graph, in those times, there were only like 10% of women managers, very average compared to other Japanese companies, but we've done various initiatives since then. And in 2022, we exceeded 30% for the first time for managers, women managers. And then in 2023, this came to 34%. And just April this year, this came to 36%.

[Interpreted] That's a good level.

[Interpreted] Yes. So in terms of the domestic market, I can say that we're improving.