Recruit Holdings Co., Ltd. ($6098)

Welcome to the Recruit Holdings FY 2025 Earnings Call. This call is a simultaneous translation of the original call in Japanese and translation is provided for the convenience of investors only. I'm Ms. Mizuho Shen, Manager of Investor Relations and Public Relations. Earlier at 3:30 p.m., we disclosed the earnings release, earnings summary and the presentation slides of this results call on our IR page. The video and transcript of this results call and the transcript of follow-up meeting and follow-up meeting with sell-side analysts, which will be conducted followed by this results call will be posted promptly on our IR website after the session. Today's presenters are Hisayuki Idekoba, Representative Director, President and CEO; and Junichi Arai, Executive Vice President and Chief Financial Officer.

Hello, everyone.

In the first 25 minutes, Deko and Jun will provide a presentation followed by a Q&A session. Now I'll turn the call over to Deko.

Hello, everyone. My name is Idekoba of Recruit Holdings. [indiscernible] to start with this page regarding revenues and EBITDA+S. I spoke to you around this time last year. I mentioned that we are going to be engaged in various activities utilizing AI. You did not seem convinced yet, but I think numbers are very important to validate at this point. We have been utilizing AI in various areas, and we are now showing results and numbers. For the period that ended, we have achieved a record high profits for the fiscal year 2026. In terms of revenues as well as profits, we are now poised to further accelerate growth. We are adopting AI across many parts of our businesses. And today, I would like to address [indiscernible] because this is an area we are receiving many questions. I would like to elaborate to you how we are utilizing AI to accelerate revenue growth. Now recently, the other day, I recently bought a new tablet because I travel a lot for work, I often download movies onto my tablet. That means that plenty of storage will be required. At the same time, screen size is very important. It has to be reasonably large and easy to watch, not too small. And I found that there was a big price gap between the expensive models and the cheap ones. And it took about one hour just going through the different offerings. And I found that it's very difficult to select a piece of electronics. And then it occurred to me what if everything were offered for free. Now if it were all free, deciding will be incredibly easy. It wouldn't take one hour, just one click will suffice to find the best choice for oneself. And I put this in the context of looking to changing jobs as well. And I found that in a way, it's akin to a completely free e-commerce site. There might be various factors taken into consideration, but you can also apply for a job that pays 2 or 3x your current summary or maybe 2x or 1 day a week of working could [ be your ] condition. For Japanese people, we are very straightforward. Therefore, if it was conditions like this, there will be many applicants overseas. Now please think about this. In the past, in a competitive site when they started jobs. People said that Indeed and Recruit will be overwhelmed because if you ask AI, they can make recommendations in terms of jobs and people were concerned about the future of Indeed. How algorithm is developed, it must be taken into condition, whether it is AI or machine learning, there is not much difference. The best jump for one person want a job that one likes, what is popular is data that is not so relevant because company employers might actually want to hire the person regardless of your intention, HR matching may take significant data from the user side, but that is not significant. It depends on whether the employee will be impressed. So it is two sides of matching that is required company or the employee as many solutions as well, there is data showing the tendency of hiring, but appropriate matching cannot be made. So this is a very unique matching model that we have between [ a job seeker and employee ]. And for -- in the past several years, the employer side, AI development has been areas where we have made investment. Of course, on the user side, the preferenced jobs is also very important. But the employer side have to identify the tendency of hiring for certain positions for certain companies. It's also data that is required in order to have effective matching. That is the reason why we have been making investors on the employer side. This might be difficult to understand. So let me give you an example to illustrate my point. Let's imagine you're running a restaurant with 2 chefs and 10 servers. You are managers of this restaurant. At that time, if one of your servers quit of course, there will be a concern on part of the owner, but it isn't as if the restaurant will remain close for this purpose. There might be some instances where customers have to wait on certain weekdays. But what happened if 1 chef of the 2 chefs quits, situation changes dramatically. In such cases, the owner doesn't care as much about cost. Their priority is to hire someone with solid experience and skills as quickly as possible. Otherwise, the restaurant cannot be operating. A truck company in the United States have more trucks than the drivers. And construction workers are hard to find because of construction of many AI centers. So hiring, which is directly related to value increase is very important. And here, what we are proposing responsive jobs. If it's -- key word there as such is very important. A french chef could be the key word. And the result is where the job is posted. You might understand that matching may not be impacted. But in fact, with AI matching can become very effective. A key word search is made and the result will be [ 32 jobs ]. And if -- however, only 30% are responding to that. But if AI sourcing, AI screening is utilized for certain companies, the [indiscernible] will be made sending e-mail that company is looking for a person like you as a pop-up. And this is accounting for 70% recommendation and AI tools. This is a reflection of the fact that AI is evolving. Furthermore, from last year, we are promoting at the premium product. This is a sponsored job and the better version of the product is [ offices ] premium. Higher quality people can be hired can apply with the utilization of this product. In the past, the chef might have to be hired expeditiously then budget can be increased for this purpose. And for one position, there could be 200 or 300 or 400 applicants. However, on the part of the restaurant, even if 500 people applied, it would be difficult to make the selection, it would be difficult to increase budget for this purpose. But now if the budget can be earmarked and payment can be made, AI matching can be enabled so that high-quality applicants can be identified. This is how evolution is being made. And the hiring period as a result, has been reduced by 50%. This is becoming more effective with AI matching. Now what about the job seeker side? What are the issues facing them? They apply to many ads but receive no replies. So they have a concern that whether the employees are actually seeking for applicants. In order to resolve this problem, the premium ad as well as AI matching can be very effective. The chef could be needed immediately. And the relevant person can be matched. That means that for the sponsored job, if utilized, can receive a response -- the response will be provided 40% earlier. So the motivation of the companies to hire is also very important. And [indiscernible] can be utilized from other sites to obtain data. But the motivation to hire is very important to be identified. This is important for the user and for the job seekers as well. As a result, the March monthly active users was 18% higher than previous year. This is a record high for us. So by utilizing AI, user experience can be enhanced in this way. If there is intention to hire then employers will be willing to pay more. Matching is enabled. That means that the -- [indiscernible] the U.S. for fourth quarter, there has been growth significantly in the United States. Now in this way, I would say that the 25% increase could be subject in price increase, could be subject to criticism but we have to look at the content in more detail. The -- we have to look at the job market overall, globally. Online advertising as well as the job seeking is very small. It's only several percentage points, even though we have 60% to 70%. But the placement and recruitment offline matching is more significant in terms of market size. When we ask companies, they tell us that Indeed free service is utilized and if hiring cannot be made, even though the fee is expensive, the retained search could be utilized by -- to a placement or recruitment agency. With Indeed, low-cost hiring can be enabled. Off-line is more expensive, but because they are pressed for the need to hire, they have to resort to placement and recruitment agency. But if you are able to provide AI matching in the appropriate way. And if we can provide applicants that companies would want to hire, then we would be able to capture more of this market. Now I -- whenever -- when I became CEO, I've been emphasizing the simplified hiring. And when a button is pushed to the next job it should be -- I realized as quickly as possible, this has been enabled by the evolution of technology. This is our mission. Utilizing AI, various [ menu ] money work can be automated, which is a wonderful opportunity for all of us. This is also shown in the performance as well as the actual numbers. Now in this way, utilizing AI significant changes are being made, and it is reflected in our numbers as well. And I feel more confident as management as well. And I believe that the growth rate can be achieved, that is of 10%. 20% -- 10% is [ receivable ]. And when the hiring demand recovers, I believe that 20% of revenue growth can also be achieved. And we expect to exceed margins above 50%. Currently, over the global platform, we are seeing 31 hires per minute, meaning that we are helping someone get hired roughly every 2 seconds. We would like to expand this globally so that we can do more to support people around the world finding the next job. We will continue to make our utmost efforts.

Good afternoon, I'm Arai. How was Deko's presentation? Since he became CEO, about 3 pages before, there was a big circle, and he's been sharing that with you. He's been promoting simply hiring. And I think that the times have caught up with the idea that Deko has been sharing with you. On Indeed, we have seen accumulation of unique data. We are seeing enrichment of this unique data. And with the power of AI, I think we have taken another step closer to realizing the world that Deko has envisaged. And this is an exciting time for us. And since 2024, we have been talking about year zero, making preparations during year zero gaining strength. So that's what we've been saying over the past two years. And I am very pleased to be able to report significant results as our efforts have been reflected in the numbers, and this makes me very happy as well. As you can see from the table of contents for my presentation, like last year, I will present the executive summary at the very top from here on stage. And there will be a meeting with equity research analysts scheduled for later today. And in that meeting, I will cover the remaining items in more detail. First, for FY 2025, I will cover the consolidated results. Revenue, EBITDA+S and basic EPS, each exceeded the revised guidance announced with our Q3 results in February and reached record highs on a full year basis. And for fiscal 2026, we will see further acceleration of this growth based on the assumption of the exchange rate of JPY 154 per U.S. dollar. And although various changes happening in the economy, but we assume no major changes to take place, and we expect revenue and profit growth across all 3 segments particularly driven by progress in business evolution and enhanced efficiency in HR technology, our assumption for consolidated revenue is to increase by 9.0% year-over-year to JPY 4.03 trillion. [ EBITDA+3 ] is expected to increased by 19.5% year-over-year to JPY 949 billion with margin expanding to 23.5%. Basic EPS is expected to increase by 27.8% year-over-year to JPY 447.0. The number of employees decreased from approximately 50,000 at the end of fiscal year 2024 to approximately 45,000 at the end of FY 2025. And we do not currently plan any large-scale hiring in FY 2026 so the number of employees will stay almost flat. Next, I will talk about capital allocation. In FY 2025, we returned a total of JPY 713.1 billion to shareholders. And this resulted in a total payout ratio of 143.5%. We have maintained a high payout ratio. And net cash at the end of March 2026 was JPY 765.9 billion. In May 2024, this was two years ago, I said that we would reduce the net cash from [ JPY 1.1354 trillion ] at the end of March 2024 to JPY 600 billion over the 2-year period ending March 2026. Actually, we had already reached that level in the first half of FY 2025. However, second half results exceeded our assumptions and we ended the year above the JPY 600 billion level. ROE was 22.6% in FY 2024. Last year, it was 31.0%, which is a significant increase. As for our capital allocation policy for the next 3 fiscal years, starting this fiscal year, we are making no changes to the current order of priorities. We intend to maintain year-end gross cash and cash equivalents at around JPY 750 billion. And if we execute a strategic acquisition, we intend to fund most of the required amount with debt while taking our credit ratings into account. Based on our policy of stable and continuous dividends, our dividend outlook for this fiscal year is JPY 13 per share in the first half, JPY 13 in the second half totaling JPY 26 for the full year. Regarding share repurchases, already a share repurchase program for a total of JPY 350 billion has started from April 1 this year. And the current plan is to complete this program by the end of November. And we will make appropriate decisions and act accordingly while monitoring second half cash flow generation, capital market conditions and our share price level for the second round of share repurchases. Going forward, we believe that growth in net income and the continued shareholder returns will, of course, result in higher ROE than 31%. We believe that such higher levels of ROE will be possible. And as you are aware, we operate through 3 segments. Among them, HR Technologies, our revenue growth, profit growth and also margin expansion are substantially higher than those of the other segments. In FY 2026, HR Technologies revenue is expected to reach a new record high of over $10 billion or JPY 1.5 trillion. And this represents about 40% of consolidated revenue. However, staffing, which accounts for 45% records approximately JPY 1.8 trillion in accounting revenue. The margin, excluding wages paid to temporary staff in other words, margin substantially for our company is around JPY 300 billion annually. Accordingly, HR technology accounts for approximately 65% of consolidated gross profit, which we believe better reflects its substantive contribution to consolidated revenue. And profits are even higher. HR Technologies' EBITDA+S accounts for about 70% of consolidated EBITDA+S and it is expected to continue to grow as the core driver of our earnings and value creation. As was mentioned before, as for staffing, we do not expect significant organic growth in staffing under the current business model. However, we will continue to focus on efficiency in our operation and strive to generate stable EBITDA+S margins. Marketing Matching Technologies or MMT will continue refining and evolving its business model to further strengthen its competitive advantages and uniqueness in Japan. And by increasing revenue and improving operating efficiency, we expect EBITDA+S margin of 30% this fiscal year and aim to increase this to 35% by FY 2028. Now I will discuss each segment in more detail. First, HR Technology. Q4 results substantially exceeded the outlook disclosed in February in all regions, including the U.S., Europe and others, which covers Canada and Japan. And as a result, full year revenue in FY 2025 increased by 7.6% year-over-year to $9.67 billion. EBITDA+S margin reflects a progress in efficiency improvements, including lower personnel expenses and significantly exceeding the FY 2024 pro forma margin of 33% and the margin recorded was 37.7% despite FY 2025 being the first year of integration of HR Solutions, of Matching & Solutions. For FY 2026, while U.S. revenue showed strong year-over-year growth of 26% in March and 27% in April. Our full year outlook however, reflects the potential risk from the uncertain economic environment, including geopolitical tensions and commodity price volatility. In the U.S. and in Europe, Canada and other markets, we anticipate continued monetization development including further growth of premium sponsored jobs. In Japan, we expect steady performance of Indeed PLUS and the recovery of the placement business to FY 2024 levels. As a result, we expect revenue to increase by 11% year-over-year on a dollar basis to more than $10 billion, while EBITDA+S margin is expected to increase to 41%. As Deko mentioned earlier, over the medium term, it is well within our reach to not only maintain double-digit annual revenue growth, but to achieve 20% or greater when hiring demand recovers. I also believe it is well within our reach. And at that time, we expect our EBITDA+S margin to exceed 50%. In the U.S. in fiscal year 2025, amid stagnant hiring demand and while the total number of U.S. job postings on Indeed declined by approximately 7% year-over-year, monetization development resulted in revenue of $5.31 billion, an 8.8% year-over-year increase on a dollar basis with a U.S. ARPJ growth rate of 17%. And in fiscal year 2026 based on our assumption for the job market that hiring demand will remain flat after bottoming out in Q4 of FY 2025 assuming the total number of U.S. job postings on Indeed declined by approximately 4% year-over-year. Our outlook is for revenue to increase by 13.6% year-over-year to $6.03 billion or JPY 929.3 billion and for U.S. ARPJ to increase by 18%. We position this fiscal year as a year to steadily lay the groundwork and pave the way for further U.S. revenue growth from FY 2027 onwards. Keeping in mind the Japanese proverb, haste makes waste. We intend to carefully consider the timing and pricing of new plans and product launches before executing them while maintaining close communication with our business clients. As for staffing, revenue in FY 2025 increased by 2.2% year-over-year to [ JPY 1.734 billion ]. By region, revenue in Japan was JPY 846.8 billion, and revenue in Europe, U.S. and Australia was JPY 856.5 billion. EBITDA+S plus margin was 5.9% maintaining the FY 2024 level. In FY 2026, while we do not expect major revenue growth in Japan, our outlook for Europe, U.S. and Australia is for revenue to increase by 5.8% year-over-year in yen terms, supported by performance bottoming out in key markets and a gradual recovery trend. Our outlook is for EBITDA+S this margin of 5.6%, broadly in line with FY 2025 and EBITDA+S of JPY 100.5 billion. Finally, MMT. In FY 2025, Lifestyle led by Beauty drove revenue growth, which increased by 4.7% year-over-year to JPY 564.6 billion while EBITDA+S margin was 27.4%. In fiscal 2026, our outlook assumes continued growth in Lifestyle, and we expect revenue to increase by 7.1% year-over-year to JPY 605 billion. By smoothing out quarterly seasonality in sales promotion and advertising expenses, our outlook is for EBITDA+S margin of 31% in the first half, 29% in the second half and 30% for the full year. Recruit Holdings will continue to pursue its growth strategy as a global technology company consistently amid major changes in the business environment while also working to continue to improve operational efficiency. We respectfully ask for the continued understanding and support of all stakeholders, including shareholders and capital market participants. That concludes my remarks.

Now we would like to proceed to the Q&A session. [Operator Instructions]

Goldman Sachs. My name is Munakata. I thank you very much for this opportunity to ask a question. I would like to ask a question regarding the labor market, the macroeconomic conditions. In -- and you said that there is uncertainty, but strong growth is shown in your performance. In terms of labor shortage as well as the disruption caused by AI, what is the outlook of the labor market going forward? This has been subject to discussion in the equity market, the U.S. labor market outlook is what I would like to ask Mr. Idekoba.

Thank you for the outstanding question. It just so happens that today this morning at the Indeed hiring lab, the U.S. labor market outlook reporter is being published up to 2040. I am participating in [indiscernible]. I'm participating in meetings in the U.S., I have opportunity to speak at various conferences. And some people say that the AI will cause unemployment reach 20% or 30%. As headlines, it will attract more clicks and this is the stronger views. And what I am saying is considered to be positioned to talk and not so interesting. But if you look at the actual data, I'd like to emphasize that by each segment. With AI changes will be different from segment to segment. For example, restaurant is a good case in point. People within the restaurant with the utilization of AI, how is this going to have an impact on the labor as well as construction as for electricians, plumbers. There are different professions that we have to consider. But apart of that, people who are working in the area of IT or working in financial services, the impact will be different from industry to industry. So currently, how many people are working in this sector? We have such data. Therefore, it means that 20% unemployment. We have to look at how it is calculated. There is no validating data. It's just being -- become the narrative of the AI experts. But if you look at the IT industry, AI replacement case is presented in the IT industry. If you look in this area, specifically, 20% job reduction or unemployment impact of 20% could occur. But what is the ratio of people working in the IT industry within the total labor force? The percentage is very small. In the United States, even there is aging of the labor force, more serious than Japan. Having said that, amongst the developed nations, U.S. is a young country, relatively speaking about up until 2030 or 2031, even in the United States, the labor force is subject to decline, baby boomers will be retiring at that point in time and people 65 and above. Labor participation is much lower in the United States compared to Japan, it's around 18%. And in the area of health care as well as -- [ electricians ] will be poised to retire. This impact is going to be more significant than the changes brought about by AI. This is proven by data demonstrated in numbers, which is clear to see. For example, I believe there is tailwind.

Thank you. I understand Deko, if I can present a follow-up question. Regarding simplifying hiring, I would like to ask the following question. To simply by hiring means that AI technological solution could become more cumbersome. For example, you will be overwhelmed with the applications. From your point of view, what is the progress made in simplify hiring? In order to simply further, what is lacking, what areas can further be improved and where it lies the business opportunity in this regard?

Thank you for the outstanding question. For example, in U.S. startups, in many start-ups, if a payment is made on a monthly basis, AI can make application 1,000 times or 2,000 times [indiscernible] of AI instead that person, it's automatic application that is made available in the United States. But companies do not like this which is easy to understand from the point of view of the employees [ assigned ] if applications come in the thousands or 2,000, this will mean incremental cost. Therefore, on the employer side, recapture -- I am not a robot. Both measures against AI have increasingly come to the [ fore ]. Furthermore, even if you like someone, some candidate, they may not come to the interview. Therefore, automatic application made by AI is not enhancing the efficiency. This is a good case in point. On our part, automatic applications are being tested. But we are conscious about [ both sides ], not just in paying for an increase in number of applications. We have identified what is good for the employees. What is good for the users and providing appropriate matching. We are testing this presence. But if it's just utilizing AI for automation, it will just make the process more cumbersome.

Thank you. We will take the next question. Third row from the front.

I am Oum from Nomura Securities. I have two questions. When hiring demand normalizes, you just mentioned that top line further accelerates. When will that happen? This year, you're expecting minus 4% in terms of volumes. So what about next year and the year after that? So that's my first question.

We are looking at various labor data. But when it comes to economic data, I think you are the experts. But as I said before, supply and demand determines this basically. So as you know, when it comes to hiring demand, it's not as strong. And that situation that we are seeing today and perhaps will continue. But looking at the past economic patterns, maybe it's time that demand should start rebounding. More recently, the interesting data that we are looking at is over the past 5 years or so, we have seen continuous decline in hiring of software engineers. But in the U.S., compared to pre-COVID, it has declined to about 50% and many people say AI is taking jobs away from people. But actually, it's increasing in the past 6 months. And if you look at the substance of this, AI is actually creating new job titles, the new job types that we have not seen before. So in that sense, it's not so much AI or the change brought on by AI, but post-COVID. Because of the pandemic, many people were fired and afterwards, the company started hiring em masse and now they've hired too much. So that kind of dynamism has somewhat stabilized. And over the next one to two years, I think the situation will further stabilize. In terms of labor situations, that's what we see. But as for the economy, I will leave that up to the experts.

My second question is regarding U.S. ARPJ increased by 18% is what you mentioned. So next year and beyond, how sustainable is this? As was mentioned before, hiring directly relates to revenue. So if that's the case, you want to hire as soon as possible. I think this kind of story will be valid for next year and beyond. And given the demographic change and population aging, but should we expect the same level of increase, but with the premium sponsored jobs that has contributed to higher results this year?

Thank you for the wonderful question. Personally, that's certainly an area that I would like to specifically address as well. Of course, if possible, we want to aim for 30%, 40%. But at the same time, we don't want to be caught speeding because this directly drives costs up for our employer hiring clients, particularly if they're already paying so much, if the budget has increased by 30%, that's something to be considered and be cautious about. But as I said before, there are certain costs being spent elsewhere and clients are diverting this cost to this JPY 20 million, JPY 30 million being spent. And if this amount is to be increased by 20%. That means JPY 600 million, JPY 700 million increase. So I don't think that will be possible as it is. So in conversations with our customers today, especially in the U.S., the talent acquisition teams, the teams that have to receive the applications go through the resumes and decide who to contact and set up interviews. But for example, in countries like India and the Philippines, they are increasing and the outsourcing these tasks to these countries, and we are seeing an increase in the number of companies that are doing this, and they are diverting budgets from this task to the new area. So structurally, ultimately, employers are able to hire appropriate candidates, and this is reducing their hiring costs. And then we will be able to have nice growth. So as I said, we are not pursuing or prioritizing our revenue first. So we want to make sure that our customers are also being successful. So in that sense, the employers that are currently using premium sponsored jobs and their repeat ratio is higher than regular customers by about 20%. And this is an encouraging fact because they're paying more, they are getting better results. So of course, we have to look at the overall balance as we go along, but we are seeing good results.

Next question, please.

[indiscernible], my name is [ Mariama ]. In the United States, AI is become the reason for restructuring and losing jobs. But [indiscernible] U.S. As mentioned, the in-person hiring is high. So on the part of Indeed, do you think this is a trend of Indeed that you're not impacted by AI restructuring?

Now it's -- you have to [ decide ] whether it's an impression or is it backed up by data as actual facts? The Magnificent Seven is often talked about and they are said to be invoking AI restructuring, it is in the news. Several tens of thousands of people have been laid off. But actually, the number of employees is not really decreasing. What we are often seeing is that AI is not a job killer. It is more of a job reorganizer. I'm sure this is also the case in your companies as well. Someone's job to be replaced by AI, and this person being laid off is quite rare. This certain process of a certain person can be automated. I think this is more prevalent [indiscernible] especially for IT companies inclusive of your company, AI is now part of our workforce. And in this overall context, job allocation must be revisited. This is what is occurring today. For example, a dashboard to view data for looking at charts as well as weekly revenues. We needed dashboards because it is viewed by people, humans. But if it can be done by AI, it is no longer necessary. It doesn't have to be displayed. From the beginning to end, the overall process is where value has to be identifying whether it is contributing to increase in revenues. We shouldn't just focus on one certain area for restructuring purpose. Magnificent Seven, their employees have not decreased in numbers so they are restructuring in certain areas, but they are also incorporating additional people, redesigning the whole process overall. I think this is more closer to the truth. I hope I'm making sense.

But for AI era, as such, that there will be changes in operation with the current Indeed structure. Do I believe you have unique strength. And what is resilient against AI? Do you think that you want to increase jobs that is resilient to AI?

It is not so much for us, but Japan is a very good example. There is population decline in Japan. And some people are seeing that hiring companies will not increase. It all depends on supply and demand because we have been able to increase revenues. And as I mentioned earlier, for auto mechanics, as an example. And they were working on combustion engines, they were working on gasoline-powered cars. And they continue to retire, then there will be no one left to repair these cars. So supply and demand, between the two, there is a disparage. That is the reason why we are being requested on the part of Indeed. And it isn't as if we are focused in terms of marketing specifically to that area.

Next question, second row from the front.

I am Nagao from BofA. I have two questions. First regarding margins, 40% to 50% is possible, as you said, what is the source of your confidence? Where is it coming from? Do you think you can further increase unit price? Or do you think you can improve retention? Are you able to acquire large enterprise customers? What is the background?

Thank you for the Wonderful question. First of all, I've briefly talked about this, but the sale of AI tools is something we've started over the past year or so. Not maybe particularly because the AI tools that we've introduced. But in case of large companies, the legal departments have to check everything and through master agreements, everything is determined. U.S., this is a common practice, and it does take time. But conversely, as I gave an example earlier in case of restaurants, for instance, a restaurant may employ 10 some people. The accounting person is also doing the hiring or the manager, the owner is doing the hiring in many cases. So for those people, if the prices increased by JPY 20,000, JPY 30,000, if they can free up the time and do something else, then they are more likely to introduce this service, and they will like the service and become repeat customers. And this is something we've seen over the years. For SMEs, we provide service. And if we see a very nice repeat ratio. Of course, they recognize that the product is excellent and they are -- they have quite [ stringent ] budgets. In case of large companies, it does take time. And of course, when it comes to AI, different states have different laws and regulations. So it is time-consuming process, but we are seeing more acceptance by our clients. As you know, SMEs when things go south, of course, they may no longer continue with the services. But for large companies, usually they sign annual contracts, and this will certainly contribute to our revenue. And as you know, sales efficiency is affected in terms of having one sales rep going to customers and signing contracts. The fact that we have a higher ratio of large companies, of course, adds to higher efficiency. And internally, there are many areas where AI could be used if we introduce an AI agent in certain tasks and things could improve. So this is something I think about every day from morning to night. So this is certainly enhancing our confidence.

So from a client's perspective, if the ROI exceeds what they're currently paying for, then they will continue with the service, and that's certainly adding to your confidence?

Certainly, perhaps I should not mention this.

Please, please, by all means.

Well, actually, for example, let's say a sales manager has sales reps and the manager checks what kind of sales pitches were made or go to customers together with the sales reps and give us advice. Nowadays, everything can be recorded. AI can score and to give you advice as to what pitches should be made. And if a sales person, sales reps with good results, good performance, gather and bring back their data. Everything can be checked and extracted. And of course, self-service customers can use this in the future. And if that is possible, then maybe we can reach 50%. Maybe I'm wrong, but that's what I'm thinking right now.

Quickly, last question. Looking at your M&A history, when the economy is down, Indeed also was acquired right after the financial crisis. The software valuations are coming down nowadays. And perhaps this is the opportune timing for investing. So what's your plan for M&As?

I think investors say whatever they want, in some cases, up to several years ago, some of the investors have told us to go ahead and buy. But now they praise us. They commend us for not making any acquisitions. And that is because the sauce is coming down, and they commend us for discipline. But over 1,000 unicorns exists. And of course, there are many companies that are struggling. And that is why we are seeing the issue of the private credit. So we are in conversation with many companies. But AI is bringing such a significant dramatic change. A company that's been around for 7, 10 years. The premium is nice and there are many excellent companies if we can share the vision. And if we are aligned, then certainly, we are keen to pursue such opportunities perhaps even more so than before.

Next question, please.

[indiscernible] Group Securities. My name is [indiscernible] I have just one large question regarding ARPJ and price as well as the take rate. And for ARPJ, premium service is strong. AI tool is increasing. When you try to grow this business, how can the price be enhanced for premium services higher by 50%? But will it stop there? Beyond that, what are ways to increase price? Is there a pricing rate? Or does it depend on supply and demand where you can continue to increase? And what about the take rate? After you started the Indeed service, 1% and below has continued for more than 10 years, in fact, so how much progress has been made. Do you think it is possible to exceed 1%? It's very low. Is it not going to be exceeded in the 10 years or 20 years down the road? I don't really understand what is going to happen. Please clarify.

Thank you. Now I talked about the premium sponsored jobs previously. Now in terms of increasing price, I mentioned something similar. On the part of customers, if they can hire in 2 or 3 weeks, let's say. And we see a number of clients increased in this area. I think that there is more room to increase the price. It all boils down to supply and demand, the number of hiring is not changing. In the past, they could have been hiring and taking two months with a certain cost. If we have market share of 80%, 90%, then there is not room for growth. But in many of the customers, they're utilizing other off-line tools or requesting support. Therefore, we are able to capture this pie. I think that is very important for SMEs. They often have teams involved in the work process. For example, recently, a major company globally or in the United States was sitting next to me at dinner. And I found out using AI, how many applications sent, 3.5 billion have been sent to this company. And I asked the President, 3.5 million applications made. If it takes 3 minutes to check the resume, then it's tremendous time. There are screening tools that can be utilized. For example, reducing that to 1/2 or 1/3 would you want such a service? And he was interested, he was eager to discuss immediately. So it isn't as if it's a matter of raising price or not. That is the reason why I have more confidence going forward. And in terms of progress regarding 1%, the number of people hired this increase [indiscernible]. So denominator is also becoming large. So it's very difficult to respond, but I can see that it is increasing. Do we capture the overall -- do we also take [indiscernible] the free job or the sponsored job only? That will have an impact on the calculation. We have to look at that in detail. As I mentioned earlier, for the customers that are willing to have a serious intensive hiring and willing to pay, and this is where we want to provide more support. This is the structure of the matching service. So is the take rate of that platform? Or is it the take rate for the customers that are eager to hire. This will also have a bearing as well. So we will try to disclose better information going forward.

Next question will be the last question. The person sitting in the front row, please.

I'm Yamamura of JPMorgan Securities. We already passed the allotted time, but I would like to ask two questions. The first one is something that's repeatedly been mentioned, the potential of large business clients. If it's simply the number times unit price, there will be a ceiling some time in the future. Maybe that's being discussed. So including the possibilities of monetization in new forms. And in any case then we do have expectations for more large clients. But on the other hand, your sales style has been very much supporting the SMEs and the quality of sales necessary to go after large companies may be different. So where you excel where you have strength larger clients are matched with the strength that you currently have.

Thank you for the wonderful question. It seems like I'm asked questions by internal persons. So that's an excellent question, particularly when it comes to Indeed. Well, I know Recruit. So compared to the Japanese Recruit sales to large clients is where we are somewhat weak. So that's an understanding we have. And when I became Indeed CEO last June, I started to work on rebuilding and to position us as a strategic partner to our business clients rather than being a transactional in the partnership. We wanted to be a strategic partner, and we've made significant investments, and we've introduced change to the teams. So we've implemented various measures. But looking at the current state, the newly developed AI tools are being quite effective. What I'm trying to say is that how are we going to present to clients, the ROI. That's where we were weak in the past. I think we will be able to present this soon. We've already developed the various parts. But when we bring this to clients, how should the sales purchase go and when you ask the AI, everything will be given as advice from the AI. So that's the kind of AI tool that we are developing. And that's where we see further potential for growth. I hope that answers your question.

Yes. And this is my second question. You mentioned earlier the job posting's market condition, it is true that the IT professionals account for a small percentage. And the shortage of labor basically exceeds that. So the impact is small, as you said. And certainly, market participants are gaining this medium to long-term perspective. So if the negative becomes even bigger than, of course, they start to have this concern for Recruit. So hypothetically speaking, if in the future, IT-related professionals are laid off. I think personally, this will happen. Even after they are laid off, they will not become homeless and live on the street rather I think optimization will take place in the overall market. So there will be more mobility of people, then for people switching jobs, pursuing different careers. This is not all negative. And I think in companies, they have a variety of talents, and they want to focus more on the quality. So I think both of these will be effective when it comes to Recruit's business, and that's reflected in the results that you've just presented. That's my view. What's your take?

Well, I would like to talk not based on impression, but on data. So certainly, Indeed hiring lab, the research data that we've published today, looking at this data, you will see which sector has -- which age group of professionals are working and as you can imagine, it's not that we have more of 60s and above working in the IT sector. So where are they working? Maybe as mechanics, in auto repair shops and in the health care sector as well, we have more of 60s and above. So what if they leave, what if they quit? So if we start thinking about this, the story is not as you described. It's not simply AI replacing people as a whole. I think we need to look in more depth. And also, this is not something that is obvious today. But over the past several months, labor participation rate in the U.S. is declining. And this is a rare situation. One thing, and this is only a hypothesis. I'm not sure whether this is true or not, but one thing is that people with not so high salaries, if they are laid off and they cannot find a job, they will be in trouble. But if it's an IT professional or other professionals, even when they are laid off, they can spend the next one year until they find the next job. So I don't know where exactly this labor participation rate is declining, but the overall rate is declining, and this is also contributing to a lower unemployment. But the denominator, in other words, job seekers are decreasing in number. So the economy is not doing so great, and we should not be seeing this kind of trend. This is a very strange trend we are seeing. I'm sure the U.S. government needs to look into this more. But if we specifically talk about the past 5 years, this morning, the data published by the hiring lab I think, is more accurate. In other words, realistically, truck drivers, construction workers and also this -- the immigration policy that's at play here, the policy becoming more stringent, that's affecting the overall numbers. There are certain sectors with many immigrants working and then they include health care, for example. So looking at these factors, unless that is the case, we should not seeing the strong results or there isn't really a relationship, but I hope I answered your question. I will try to put that in the report. Let me think some more about this.

I apologize for going over the scheduled time, but we would like to conclude the earnings call.