TechnoPro Holdings, Inc. (6028) Earnings Call Transcript & Summary

I am Hagiwara, CFO of TechnoPro Holdings. Thank you for joining today's full year financial results briefing. Operating profit for the fiscal year ended June this year, the second year of our 5-year medium-term management plan exceeded the initial forecast of JPY 20 billion but fell short of the upward revised guidance of JPY 22 billion at the second quarter by around JPY 200 million. I'm very sorry for under delivering. As explained in the third quarter briefing, we have not cut back on expenses that should be necessary for medium to long-term growth. Deprioritizing the achievement of our full year guidance, we have never relaxed our investment in hiring and training to actively respond to robust demand from customers. In contrast, as CEO, Yagi, will explain in his presentation, the business environment surrounding supply side is starting to change gradually. Human resources shall be our most important assets and HR-related expenses account for most of our cost structure. Therefore, pay hike momentum and greater labor market fluidity in Japan could considerably affect our business and SG&A expenses, including those for hiring and training are also on the rise. Although these risk factors were basically incorporated to a certain extent in the midterm plan discussions at the Board of Directors over the course of a year, we feel that speed and impact of their emergence have exceeded our initial expectations. In order to clearly grasp these creeping changes in business environment, tackle them preemptively and then achieve sustainable earnings growth. Our management capability, i.e., ability to execute business strategy and deliver the results will be increasingly called into question. Under this midterm plan, we are promoting business transformation centered on the evolution of our core business while assembling high-skill talent who can play an active role in a variety of technological fields and recreating talent in line with technological trends. Now I will explain the summary of the full year financial results. Key KPIs in Japan, the update of overseas operations and the guidance for the new fiscal year. First, let's look at the financial overviews on Page 2. Revenue for the full year was JPY 199.8 billion, up 11.8% year-on-year, while GP was JPY 52.9 billion, plus JPY 6.0 billion or up 12.9% year-on-year and GP margin was 26.5%, an improvement of 0.3 points from the previous year. Please see the comments section for the main breakdown of GP increases. The bench cost associated with inexperienced mid-career hires as a pre-requisite for training and longer training periods for some of new graduates shall be positioned as strategic upfront investment. In addition, the increase in seasonal bonuses included the consequence of larger number of eligible engineers, while financial results linked bonuses fluctuated based on actual annual profit. Core operating profit for the full year was JPY 21.3 billion, up 12.3% year-on-year, while operating profit was JPY 21.8 billion. up only 5.8% compared to the previous year when there was a gain of JPY 1.8 billion from the reversal of put option liabilities. SG&A expenses increased by JPY 3.7 billion year-on-year with an SG&A ratio of 15.8%, up 0.2 points year-on-year. In addition to the midterm plan implementation cost for expanding the solution business, we recognize that the cost necessary to sustainably grow our core business is also inflating. Therefore, we believe that it would take a little more time to enjoy the decline in SG&A ratio with being accompanied by top line growth, the so-called operating leverage. Net profit for the full year was JPY 15.3 billion, a little lower than the previous year. However, a certain amount of corporate tax was deducted due to the application of tax credits for promotion of salary increases at some subsidiaries. Consequently, we were able to exceed the guidance of JPY 15 billion. Pages 3 and 4 show the quarterly performance of each P&L item and historical key KPIs in Japan. Among the key KPIs, working hours per day in the fiscal year ended June this year remained below both the previous year and the forecast, pushing down average monthly unit sales price slightly. If overtime work is reduced, take-home pay of engineers will also get reduced. Therefore, for the retention purposes, it is becoming more and more imperative to jack up the contract price by improving technical skills through training and practical experience and then to raise the level of base salaries and bonuses. Page 5 shows the progress of investment for midterm plan implementation in its first 2 years. The upward trend in hiring and training costs is also evident in the solution business and these costs exceeded the budget in the fiscal year ended June this year. In terms of strategic projects, some M&A-related expenses were not spent, but investment in other items, including internal digitalization progressed as planned. In the latter 3 years of the midterm plan, we plan to invest 0.2% to 0.3% of sales each year to recruit and train solution talents. On the other hand, strategic project-related expenses are supposed to decrease, excluding M&A-related ones and the recording of provision for stock-based compensation will remain constant every year unless there is a change in the projected compensation amount. Accordingly, going forward, we expect the ratio of these costs of midterm plan implementation to sales to fall below 1%. Please refer to Page 6 for a summary of the purpose of these kinds of investment and their impact on financial performance. Page 7 shows the full year results, and Page 8 shows the only fourth quarter ones by segment, respectively. Comparing actual results of each segment with the forecast that made up operating profit of JPY 22 billion in the upward revised guidance, the R&D outsourcing missed its target by around JPY 200 million, while the construction management exceeded its target by around JPY 200 million, indicating that the domestic businesses total was almost in line with the forecast. In the R&D outsourcing, the utilization ratio was relatively weak in the second half because of incessant spending for hiring and training, while price negotiations at the March contract renewals went well. So in the fourth quarter, we were able to reduce the projected shortfall to some extent. In the overseas, operating profit ended up with JPY 1.9 billion, around JPY 400 million short of the forecast of JPY 2.3 billion. In particular, the fourth quarter profit was down by around JPY 300 million year-on-year, accelerated upfront investment by Robosoft is also one of the reasons for a downfall in profit but I will explain the update of each foreign subsidiary in separate slides. Page 9 shows balance sheet and cash flows. We continue to maintain sound financial health and are proceeding with the recently announced share buyback. Also, by the end of this year, minority shareholders of Orion, a U.K. subsidiary, are scheduled to exercise put option of their remaining stocks. For your reference, denominated funds for the stock acquisition have been procured through the exchange forward contracts set when the GBP was still cheap as well as the dividend distributed from Orion so far. The currency fluctuation risk due to recent appreciation of the Pound has already been hedged. From Page 10 onward, we will look at the key KPIs for our domestic business. Please refer to the Factbook file posted on our website for the detailed KPIs, including historical data. The number of engineers as of the end of June this year was 24,125 plus 2,077 or up 9.4% compared to a year ago. The average utilization ratio for the full year was 95.2%, down 0.1 points year-on-year, while the average utilization ratio in the fourth quarter was 93.1%, down 1.0 points year-on-year, and the utilization ratio at the end of June this year stayed at 94.2%. Some investors may be concerned about a drop in customer demand due to our weak utilization ratio. However, the reasons for decline in the utilization ratio are very clear, such as the fact that the speed of assignment has slowed down with the aim of securing a higher contract price and that a larger number of new graduates than before has deliberately undergone strategic training programs for 3 months or more. Based on detailed KPI analysis, we're conducting diligent operations with an awareness of GP margin, while looking at the balance between price hike and bench cost as well as the ROIC criteria. Out of the 207 new graduates eligible for strategic training programs, the remaining 60 who will not be utilized in the first quarter of the new fiscal year are scheduled to be firstly assigned after October this year. Also, in the first quarter, we plan to recruit about 90 inexperienced personnels as a prerequisite for training in the IT field as well. In addition, we continue to focus on pricing for the reassignment of engineers who returned after their contract expiration in June this year. So the average utilization ratio in the first quarter is expected to be slightly below 95%. Please note that our inexperienced hires in the IT domain as an effort to develop software engineers who can handle digital technologies such as data science and cloud. Therefore, we're targeting talents with their potential ascertain. And at this moment, we could not expect mass hiring in this initiative. For your reference, the price for the first assignment after intensive training starts at least in the upper half of JPY 500,000. Pages 11 and 12 show the distribution and year-on-year growth rate of assigned engineers by technology and industry sector. I'll spare you the details. The next topic is the status of recruitment and turnover. The competitive environment for attracting experienced engineers stays extremely tough but we were able to hire 3,312 mid-careers and 1002 new graduates for the full year, totaling 4,314 while maintaining the hiring hurdles with seeking quality. The portion of new hires through fee-based permanent placement agencies has increased to around 70% in exchange for quality focus and the hiring cost has significantly increased compared to the previous year, although there is no fee unless the applicants join the company. Expecting this trend to continue, we'll strive to improve the return on investment in recruitment. On the other hand, using a fee-based permanent placement agency can prevent skill mismatch, lowering the percentage of engineers who leave the company immediately after joining, and the turnover ratio has been under control so far. Our LTM based turnover ratio for the fourth quarter was 7.7%, keeping the same level as the previous year. However, as the recent turnover ratio tends to surge, we will pay even more attention. Page 14 shows the change in its waterfall chart in unit sales price. The average monthly unit sales price for the full year was JPY 669,000, plus JPY 11,000 or up 1.6% year-on-year. In addition, the base charge or contract price for our existing dispatch engineers at the end of June this year, which is not affected by working days or overtime hours increased by 4.0% compared to a year ago, partly because of our charge-up and shift-up efforts at the March contract renewals this year. In July this year, we revised the wage of our engineers based on regular salary increment and promotions, but through aggressive price negotiations with an awareness of the supply-demand gap, we were able to pass on the amount that exceeded the pay hike to our customers. Consequently, in the new fiscal year, we think that we could avoid a deterioration in GP margin due to wage inflation. Next is the update of our overseas subsidiaries. Demand from existing customers in North America, which account for about 60% of Robosoft sales weakened, but Robosoft has gradually succeeded in acquiring new accounts. Its sales bottomed out in the first quarter and continued to grow quarter-on-quarter thereafter. GP margin, which fell below 40% in the first half due to huge pay hike in India and a decline in utilization ratio recovered to the 40% level in the second half, as the price was passed on to customers and the utilization ratio improved, we believe that we could maintain the low 40% range in the new fiscal year as well. Gaining confidence in cultivating new logos in each region, Robosoft has been accelerating sales and marketing-related investments since April this year. Specifically, Robosoft has newly hired 5 presales consultants in the United States and Europe, which are end customer markets and is also actively working on event participation and digital marketing. As a result, SG&A expenses for the fourth quarter increased by about JPY 100 million compared to the third quarter, and operating profit for the fourth quarter decreased accordingly. Because these investments for sustainable top line growth must be made in advance, operating profit in the first half of the new fiscal year is supposed to be lower than the previous year. But on a full year basis, Robosoft plans to grow sales by 25% and operating profit by 20%, respectively. TechnoPro China was able to secure full year profit at the same level as the previous year. Although operating profit dropped significantly in the second half due to the completion of a series of high-margin projects related to semiconductor and LCD manufacturing equipment. In the new fiscal year, TechnoPro China currently expects its earnings to decline due to the uncertainty of Chinese economy and the geopolitical risks. As the countermeasures, TechnoPro China will try to boost the number of high value-added solution projects and develop new direct transactions with Chinese companies to limit the extent of the decline in operating profit as much as possible. Helius recorded a decrease in operating profit in the fourth quarter because of bonus increases based on good performance, while for the full year, sales and real profit, excluding government subsidies, grew significantly. In the new fiscal year by expanding profit margin due to the shift to customers with higher price and the launch of offshore delivery services, Helius expects higher profit growth than sales one. Orion has had a tough year impacted by high inflation and economic recession in the U.K. Although Orion was able to offset engineers wage hike to some extent by passing on cost to the customers, profit margin is trending downward due to an increase in SG&A expenses, including salaries for administrative staff. Transaction with a big new customer will begin soon and earnings growth is expected in the new fiscal year. However, given Orion's business centered on mechanical domain, we may consider exploring strategic alternatives from the perspectives of consistency with the group's strategy. Page 17 as guidance for the new fiscal year and Page 18 as a breakdown by segment. In the full year forecast, sales, core operating profit and operating profit are projected to grow by more than 10%, respectively. And I think TechnoPro standard growth level has been back. Even so, due to creeping changes in business environment, upward pressure on cost of goods sold and SG&A expenses are rising, and we've not been satisfied with the improvement in profit margin. The 11.1% operating profit margin for the new fiscal year as the same level as the plan for the third year of the midterm plan while the SG&A ratio has not yet fallen below the expectations in the midterm plan and is currently expected to stay in the high 15% range, almost same level as in the previous year. Having said that, GP margin improvement has progressed significantly compared to the midterm plan and consequently, the operating profit margin is supposed to be in line with the midterm plan. Also, please be aware that we'll get off to a slow start under the assumption that the year-on-year growth of each profit in the first half of the new fiscal year would stay lower than the full year. In the first quarter of the previous year, the reversal of allowance for paid leave boosted profit by around JPY 500 million and hiring cost per engineer in the first half of the previous year was still lower than the current level. We can say that operating profit for this first quarter at least is expected to be much lower than the previous year. Finally, please see Page 19. Despite the expected decrease in net profit, we announced the annual dividend forecast of JPY 72, the same amount as the previous year. However, based on the advice from some shareholders regarding the importance of progressive dividend to maintain stable increases, the annual dividend is declared at JPY 75 per share plus JPY 3 from the previous year with an annual dividend payout ratio of 52.6%. For the new fiscal year as well, while keeping stock price in mind, we are forecasting an annual dividend of JPY 80 per share. an increase of JPY 5 with a dividend payout ratio of 51.4%. Additionally, the previously announced share buyback program of JPY 3 billion is progressing as planned, and we will fully use up its quota by the end of September this year. Our business is expected to generate abundant free cash flows. So we've implemented a capital policy that emphasizes capital efficiency. Please note that the company was selected as a constituent of the JPX Prime 150 Index which began calculating in July this year and has been evaluated for its return on capital based on the equity spread criteria. I believe that investors are very interested in the progress of our business transformation and solution business both of which anticipate changes in business environment. We are planning a small meeting with our COO, Shimaoka as a main speaker in late August this year. For more information, please contact our Investor Relations team. That's all for my presentation. Thank you very much.

I am Yagi, CEO of TechnoPro Holdings. Thank you for joining us today. I will explain the current business environment, the progress of midterm plan and our sustainability management. First, let me share the current business environment based on our domestic KPIs. Page 2 shows the trend of contract renewals every 3 months. The contract renewal ratio for March, which has the highest number of contracts up for renewals in a year was 90.3% this year, almost same as the usual level. Also, at the end of June this year, there were no significant large cancellations and the contract renewal ratio ended up with 93.2%. It would have been 94.2%, calculated if no cancellation was initiated by us through the shift up initiatives. We continue to monitor the business conditions and trends of our domestic customers due to the prolonged Ukraine conflict, economic slowdown in China and interest rate hike in the U.S. and Europe. Additionally, the recent monetary policy adjustment by the Bank of Japan also requires attention. However, as of now, we have not observed significant changes in our customer situation, and we anticipate that active price negotiations at the timing of contract renewals will be possible in the near term given the current demand-supply imbalance. Page 3 shows the trend of new orders, which also reflects the strong R&D needs of our Japanese customers. At the last second quarter, there was a decrease in the number of new orders, especially in the IT area, which may have raised concerns about the business sentiment. However, during recent third and fourth quarters, new orders increased year-on-year and quarter-on-quarter, except in the machinery area. Even in the machinery area, the year-on-year decline has been minimal and the trend of increasing orders in leading-edge technologies is here to stay. Furthermore, we have also received many software-related orders from automotive manufacturers recently. Page 4 shows the trend of mid-career recruitment by technology. In the fiscal year ended June 2023, we were able to achieve 3,312 mid-career hires, exceeding our initial budget. Among these hires, 401 were inexperienced engineers requiring OJT and 132 were non-Japanese ones. To meet the strong demands of customers, we recognize that relying solely on experienced hires is not sufficient, given the intense competition in the hiring market. Therefore, we plan to actively pursue inexperienced hires. In this initiative, we will provide effective and efficient training tailored to their assigned positions in order to enhance the return on investment. Next, I will explain the progress of the midterm plan, starting with financial performances. Page 6 provides a summary of the midterm plan numerical targets. The final year's target for the fiscal year 2026 includes potential contributions from M&A, and therefore, remains unchanged at this moment. In evaluating our real performance, I'd like you to see core operating profit rather than operating profit, which may include extraordinary profit and loss items. Apologies for not meeting the upwardly revised guidance for the fiscal year 2023. However, we were able to exceed initial targets of the midterm plan. The first 2-year CAGR stood at 11.3% for revenue and 10.1% for core operating profit. To achieve the planned value for the final year, the remaining 3 years would require the CAGR of 7.7% for revenue and 14.4% for core operating profit. Considering these factors, we're forecasting up 10.1% year-on-year growth in revenue and up 14.6% year-on-year growth in core operating profit for the fiscal year 2024 guidance. We are fully aware of the need to focus on achieving higher growth at core operating profit level by recouping our past and ongoing necessary investment. Page 7 shows the actual and planned figures for revenue, operating profit and ratios on revenue. The black borders on bar graphs from the fiscal year 2024 indicate the M&A contribution that was initially expected in the midterm plan. For the fiscal year 2023, revenue and operating profit exceeded the initial target in the midterm plan by up 7.2% and up 18.0%, respectively. The guidance for the fiscal year 2024 indicates that even without factoring in new M&A contribution, both revenue and operating profit are expected to surpass the initial targets for the third year of the midterm plan. In the guidance for the fiscal year 2024, GP margin is also forecasted to exceed the initial plan following the trend of the past 2 years. However, SG&A ratio is anticipated to remain at almost same level as the previous year, resulting in OP margin of 11.1%, which aligns with the plan set for the third year of the midterm plan. For this period, the inflating cost pressure will be balanced by improvement in GP margin. Due to changes in the business environment beyond what was anticipated at the midterm plan formulation, the additional time will be required to achieve the targeted reduction in SG&A ratio for the attainment of the OP margin targeted at the final year. On Page 8, we present the actual and planned revenue and composition ratio for each business. For all businesses, the CAGR for revenue in the first 2 years exceeded the 5-year CAGR. In terms of the comparison between the results for the fiscal year 2023 and the midterm plan, the core business achieved up 2.0%, the solution business up 10.7% and the overseas business up 46.7%, all surpassing the planned figures. Particularly, the overseas business has already achieved sales of JPY 23.5 billion with a composition ratio to consolidated one being 11.8%. This suggests that achieving the final year's target is within reach, even without further overseas M&S. The growth of the solution business sales at 2-year CAGR of 19.0% is attributed to the positive impact of previous investment. With remaining 3-year CAGR of 13.1%, it is possible to meet the final year's target of JPY 57 billion. While some contribution is expected from the newly established consulting and advisory department, the acquisition of solution-oriented companies in Japan may be crucial to enhance the likelihood of plan achievement. It should be noted that while the growth rate of the core business sales is relatively low, it has contributed to nurturing talent for the solution business as per the strategic plan. Page 9 shows the results and plans for Japan business KPIs. Due to strong hiring and a certain level of restraint in retirement, 2-year CAGR for the number of engineers reached 8.9% and surpassing the 5-year CAGR plan of 6.2%, an absolute number of engineers has also progressed 1 year ahead of the plan. However, the increase in new graduates and inexperienced hires, along with the reduction in overtime hours in the core business has resulted in a slowdown in the growth of average unit sales price. While achieving the planned target for average price was recognized as some challenges from the beginning, our efforts will continue to focus on price improvement in the core business as well as expansion of the proportion of the solution business. Page 10 shows ROIC trends for the past 3 years for companies acquired. The overall ROIC for the previous period was 9.9%, which exceeded the capital cost of 8.2%, but it fell slightly short of the internal hurdle rate of 10%. This was mainly due to Boyd & Moore Executive Search, facing a significant decline in performance due to the impact of headcount reduction and hiring freezes in overseas and foreign companies. However, other subsidiaries, such as PC Assist, responsible for engineer training business and PROBIZMO, engaged in IT outsourcing business have achieved high and improving ROIC levels. TOQO, which had an ROIC in the 6% range for the previous period is implementing specific measures to reach the 10% target. As there is room for M&A investment budget during the midterm plan, we continue to pursue new opportunities. However, we believe that priority should be given to aligning with the group strategy. Even for the already acquired group companies, there is a possibility of selling to a best owner that can replace us depending on our strategic review. In the following part, I will explain the performance of the first 2 years of the midterm plan and then provide an explanation of the initiatives for the remaining 3 years. Page 12 as a conceptual diagram of our business strategy framework in the midterm plan announced 2 years ago. During the midterm plan period, we aim for growth in the solution business. the engineer training business and the DX promotion business as a form of evolution, leveraging the value chain and the base of customers and engineers within the core business. We consider this strategy as a step-wise transformation of the business model, which can be made possible by the strong foundation of the core business. Page 13 is the road map that was also presented 2 years ago, outlining the solid foundation for core business evolution phase for the first 2 years and the accelerated growth phase for the latter 3 years. It lists key to do items aligned with the strategies of each business. Page 14 describes the underlying logic behind the midterm plan. The traditional business model of being a headcount provider was essentially a wholesale trading business, where the focus was on gathering a large number of talents matching demand and dispatching them to customers. However, with the further tightening of labor supply constraints, such as the decline in the domestic workforce population, the traditional model may face limitations in growth. To address this, we aim to pursue a new business model that can create new demand and enhance price negotiation power through the creation of talents and the development of problem-solving services that customers seek. The new model emphasizes price and profit margin while allowing for a slight decrease in utilization ratio. It also recognizes the increasing importance of R&D and manufacturing, processes similar to those in the manufacturing industry, in addition to the traditional procuring and sales in the value chain. Building and analyzing our skill data foundation would correspond to R&D, while re-skilling engineers would correspond to manufacturing. Page 15 summarizes the review of the first 2 years and the identified challenges and changes in the current business environment. Some achievements were attained as planned in the original road map. While there were initiatives that experienced delays or we're still in the process of penetration. On the other hand, we have seen business environment changes beyond our control or even beyond what was anticipated at the timing of the midterm plan formulation. In essence, the core business, which is our backbone, has faced surging cost pressure for its sustainable growth, and this trend is expected to continue. While not reaching the scale of great resignation, seen in the West, labor market fluidity has been increasing in Japan as well, particularly the growing momentum of wage hike in Japan since the beginning of this year has exceeded expectations. If we cannot offer attractive wage levels, it will become difficult to attract and retain employees, leading to a potential deterioration in turnover ratio. The proportion of using fee-based recruitment services for our mid-career hires has rapidly increased to around 70% now. As inexperienced hires requiring OJT increases, not only recruiting costs but also bench costs and training expenses have also risen. If the core business falters, the gradual transformation of the business model may become uncertain, so proactive measures are necessary to address the situation. Based on the recognition of such challenges and changes in the business environment, the slide on Page 16 maps out strategic initiatives to achieve higher profit growth by focusing on revenue growth, GP margin expansion and SG&A ratio reduction. For example, in the core business, with soaring cost pressure on recruitment and development, there is a need to improve efficiency based on ROIC. This involves achieving the right mix of recruitment and development tailored to the attributes of candidates and price hike as well. In addition, if you follow the starting point of the arrows that represent the relationship between each item, you can reach action items related to our engineer training and DX promotion business, such as skill level visualization using skill data foundation, et cetera. This suggests that it will be extremely important to fully utilize the vast amount of data that contributes to analysis to enhance the lifetime value of engineers. So that we can improve the efficiency of recruitment and training as well as the accuracy of order and skill matching. Next, I will explain the progress of the solution business so far. In the midterm plan, we aim to increase the proportion of the solution business in both R&D outsourcing and overseas segments to improve the overall GP margin. The progress can be seen on Page 18, which shows the trend of GP margin for both segments on an LTM basis. In the R&D outsourcing, we were able to achieve GP margin higher than those of the fiscal years 2021 and 2022 throughout the fiscal year 2023. In the overseas, LTM based fourth quarter GP margin was lower than the previous year due to operating profit decline for a single period of last fourth quarter. However, the overseas GP margin has been maintained in the 27% range, surpassing that of the R&D outsourcing in Japan. We anticipate further improvement in the overseas GP margin with an increasing share of revenue from Robosoft, which maintains its GP margin of over 40%. Page 19 lists the digital technologies and solution offerings that we are prioritizing. Page 20 is a slide of revenue, number of assigned engineers and average unit sales price in the Japan solution business. Both revenue and monthly average number of assigned engineers have achieved steady growth. The difference between the assigned engineers ratio of 18.2% and the revenue ratio 22.6% for the combined R&D and Construction Management segments as due to a premium of plus 17.5% on the average unit price. This indicates that investment in the recruitment and development of solution-focused talent can be well justified. However, the growth in average unit sales price has slowed down due to an increase in the allocation of junior engineers. Improving the capability to respond to high-value areas with higher willingness to pay customers and securing more project managers with higher charges are still challenges to be addressed. Page 21 explains the use of Center of Intelligence, COI and Center of Excellence, COE to strengthen the solution business. In line with the value chain mentioned on Page 14, COI correspond to R&D and COE correspond to manufacturing. Starting this fiscal year, we have initiated efforts to identify and prioritize key areas of focus within the solution offerings based on technological trends, market research and internal capability assessment. Additionally, we have also identified areas of focus for cross-functional collaboration to accumulate and enhance solution capabilities consistently from marketing to delivery. By avoiding superficial and scattered operations. We aim to establish early on TechnoPro's competitive and foundational services that give us a winning edge and become key pillars of our business. On Page 22, for your reference, we have included examples of utilizing COI and COE in our high revenue services of cloud, network and development efficiency solutions. Page 23 shows our solution providing model, which differentiates us from other competitors like strategy consulting firms and system integrators, which has been explained since the announcement of the midterm plan. Our engineers working at the customer sites for R&D activity can quickly catch the customers' real pain points, enabling us to provide optimal delivery covering planning, proposal, design and implementation. On Page 24, the graph show the results of the one-click reporting, which is a sales promotion leveraging engineers. The decrease in the number of reports compared to the previous year is primarily due to the rule change where incentives are now granted only upon successful winning contracts. The number of orders and the amount of revenue through the one-click reporting process have increased. The exclusive order rate and contract winning rate also remained at a higher level compared to regular orders initiated by our sales representatives. On Page 25, we provide an update on the achievements in training engineers who can contribute to new technology areas where growing demand as expected. In the fiscal year 2023, there has been significant progress in nurturing cloud engineers, and we have reached an aggregate of 1,850 AWS certifications acquired by our engineers so far. This must be a rapid progress towards our goal under the partnership with Amazon to have an aggregate of 3,000 certifications. We will continue to promote the allocation of certified engineers to suitable projects while promoting their training. Page 26 outlines our global strategy. We maintain our focus on promoting India offshore delivery with Robosoft as the core. In addition to deploying sales personnel in Robosoft's U.S. and U.K. offices, we will also strengthen collaboration with our Japan operating companies and Helius to further expand our customer base in each region. Next, I will explain about our sustainability management. Page 28 is our value creation process chart. Here, I will skip detailed explanation, but I would like to emphasize that TechnoPro focuses on deploying technology and talent as key management resources to achieve various outcomes that contribute to the realization of our purpose and a sustainable society through the outputs obtained from these resources in our business activities. Page 29 shows the organizational structure for promoting sustainability management. In addition to the Sustainability Committee and ERM Committee, we have recently established the Management Development Committee. Utilizing this new committee, we aim to concretize and implement succession plans for key positions as part of our human resources strategy aligned with the business strategy. We will work towards strategically allocating, developing and recruiting managerial talent. Page 30 covers the human capital management. In our business model, it is evident that human resources are the source of value creation. Our approach to human capital as an integral part of executing our business strategy and the economic value derived from investing in human capital as a key driver of our growth. Moreover, creating social value aligns with our purpose of pursuing sustainable society. Page 31 illustrates the relationship between human capital initiatives and shareholder value enhancement. While many of the human capital related KPIs included in this chart have been previously disclosed in our financial reports and as materiality KPIs, we have now explicitly linked them to value drivers. We would like to promote the understanding of these metrics, along with the concept of ROIC across our organization. Finally, let me introduce recent topics related to external evaluations. As mentioned by CFO, Hagiwara, TechnoPro has been selected for the JPX Prime 150 Index. Additionally, in the ESG domain, we have been newly selected for the Morningstar Japan ex-REIT Gender Diversity Tilt Index and the FTSE Blossom Japan Index this year. This means we have been included in all 6 ESG investment indices adopted by the GPIF. As such evaluations are relative, there is a possibility that our ratings may decrease if other companies make further progress in their initiatives. Therefore, we will continue to work on to improve our sustainability agenda proactively. That concludes my presentation. Thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]