Persol Holdings Co Ltd

TSE:2181

Q3-2025 Earnings Call

[和田 孝雄, executive]

Hello. I am Wada, CEO of Persol Holdings. Thank you very much for joining us today. I have 3 points I would like to convey to you today. The first is the summary of fiscal 2024 Q1 to Q3 cumulative results and the business outlook. The second is about the M&A in BPO business. And the third is the topics of our company. First, I will talk about the summary of fiscal 2024 Q1 to Q3 cumulative results. We performed strongly with revenue of JPY 1,086.2 billion, adjusted EBITDA of JPY 64.8 billion and operating profit of JPY 48.4 billion. In Q4, we would like to promote marketing investments proactively. Taking that into consideration, we are going to aim for profit growth of around 10% next fiscal year.

Next is about BPO business. We acquired 100% of the shares of the former Fujitsu Communication Services. We will explain the future BPO strategy later on.

The third is the topics. On January 24, 2025, we issued human capital report. Another point we would like to mention is that we received Tokyo Governor Prize for Corporate Governance of the Year in 2024, granted by the Japan Association of Corporate Directors. First, we will have CFO, Tokunaga, explain the financial results.

[Junji Tokunaga, executive]

Hello. I'm Tokunaga, CFO. I will explain the summary of Q1 to Q3 cumulative results and the status of each SBUs. As was mentioned at the beginning, both the Q3 alone and Q3 cumulative were strong. To be specific, revenue increased 9.6% year-on-year to JPY 1,086.2 billion. IFRS-based operating profit increased 18% to JPY 48.4 billion. And the most important KPI for us, which is adjusted EBITDA, increased 21% to JPY 64.8 billion.

Now let me explain the analysis of change in adjusted EBITDA year-on-year. On the very left, we have fiscal 2023 Q1 to Q3 adjusted EBITDA, which was JPY 53.4 billion. On the very right, we have Q1 to Q3 of this fiscal year, which was JPY 64.8 billion. Looking at the breakdown, first at gross profit. It continued to grow at around 10% per quarter from Q1 to Q3, growing strongly. On the SG&A side, it was mainly impacted by increase in personnel expenses, but we were able to optimize the increase at around JPY 4 billion to JPY 5 billion from Q1 to Q3.

Now looking at adjusted EBITDA in Q3 this fiscal year, it was JPY 22 billion against last year's Q3 of JPY 18.4 billion. The result was JPY 22 billion, but compared to the forecast in November at the time of the financial results briefing, there is an upside of more than JPY 3 billion. The reasons behind this upside was that gross profit was almost in line with our plan, so the contribution was mainly through optimization of SG&A expenses.

Next slide shows the change from adjusted EBITDA of JPY 64.8 billion to IFRS-based operating profit of JPY 48.4 billion. There is an increase in depreciation and accrued paid leave year-on-year, respectively, but there were no major changes in the trend.

This is a forecast on Q4, which is January to March period. Q3 exceeded by JPY 3 billion plus, but full year forecast of JPY 76 billion will not be revised. When we look at the breakdown, first, gross profit is expected to increase about 10% year-on-year also by JPY 7.1 billion. As for SG&A, mainly personnel expenses or fixed expenses are expected to increase by JPY 5.6 billion. As explained at the beginning, including the upside in Q3 this time, we are planning to make investments in IT systems that will contribute to cost reduction from next fiscal year onwards, including marketing investments at Doda and so on.

Page 8 shows gross profit and adjusted EBITDA from fiscal 2022 to fiscal 2024 on a quarterly basis. The green line graph shows the numbers, excluding the COVID-related projects. I will start with gross profit. It was JPY 297.4 billion in fiscal 2023. We are expecting about 12% growth to reach JPY 332.6 billion. Excluding the COVID-19-related projects, fiscal 2023 adjusted EBITDA was JPY 68.5 billion. We are aiming to achieve 10.4% growth to JPY 75.6 billion.

This slide is on the outlook of the market environment and business toward fiscal 2025. First, on workforce businesses, namely staffing, BPO, technology and others, we are not assuming any major changes compared to the current. To be specific, staffing is expected to grow about 5%. We also believe BPO and technology can grow double digit. The other business is digital platform business. This is mainly Career business, which is placement business. Although corporate demand is strong, job seekers continue to be cautious about changing jobs. In any case, we aim to achieve adjusted EBITDA growth of around 10% in the next fiscal year.

Starting from here, our revenues by SBU. As you can see, we achieved revenue increase in all segments. As for Asia Pacific, the impact of foreign exchange was around JPY 22 billion. Even excluding the impact of foreign exchange, growth of almost 10% was achieved.

Next page is on adjusted EBITDA by SBU. In Staffing SBU, which is the pillar of our business, adjusted EBITDA grew close to 20%. Career SBU also achieved adjusted EBITDA growth of almost 30%. This is on operating profit by SBU. The trend is similar to adjusted EBITDA, so I will omit explaining.

We have referenced materials for 3 pages from Page 13, showing revenue, adjusted EBITDA and operating profit by SBU year-on-year and the progress. Please refer to them later.

From here, we will explain the financial results summary by SBU and the current status. Let me start with Staffing SBU, our main pillar of business. As explained at the beginning, revenue increased 5% year-on-year and adjusted EBITDA increased around 20% year-on-year. For the performance of our KPIs, number of active staffs increased 2.6% year-on-year and average charge price increased by around 2%. As for the increase in revenue of 5.6% year-on-year in Q3, this is due to the increase in operating days from 61 days last fiscal year to 62 days this fiscal year, as shown in the table in the middle.

We have a business topic on Staffing SBU. As is shown on this page, Persol ranked first in overall satisfaction level ranking of staffing companies and also ranked first in the level of intention to continue working for 2 consecutive years.

Next is BPO SBU. BPO SBU saw a decrease in profit due to absence of COVID-19-related projects. But if you look at the table on the right, for organic revenue, excluding COVID-19-related projects, it is continuing to grow steadily. For BPO SBU, Mr. Wada will be explaining about the objective and achievements of the acquisition later.

The third SBU is Technology SBU. Revenue increased around 12%. Adjusted EBITDA grew 15%, performing strongly. Please take a look at the KPIs at the bottom. Number of engineers under IT/DX solutions was 3,390, an increase of 17% year-on-year. Average sales per unit also increased 2.7% year-on-year, demonstrating strong performance. Please take a look at the middle, showing mechanical and electric engineering. The number of engineers increased 9% year-on-year to 3,620. Average sales per unit grew substantially also by 3.7% to JPY 840,000.

As for registered temporary staffing, there is a slight decrease in number of dispatched engineers. Number of operating engineers that are permanent employees, which means excluding registered temporary staffs and freelancers in Q3 was 7,014. It is a significant increase from 6,200 in Q3 of last fiscal year. Also, for average sales per unit shown at the bottom, it is also growing steadily.

There are 2 topics on technology SBU. But because of time, I will just touch on the second point only. We made an investment in Dialog, a manufacturing and logistics company. Through the collaborations with them, we would like to grow our service contract work for logistics and warehousing industry and increase the number of dispatched engineers.

The fourth SBU is Career SBU. Revenue grew around 14% year-on-year for Q1 to Q3 cumulative. Also, as mentioned in the beginning, adjusted EBITDA grew around 30%. Based on the market situation, number of consultants were maintained at around 2,400. We will focus more on improving the productivity of consultants going forward. We have here the business topics for Career SBU. We have received awards as described, but because of time, please refer to them later.

The last SBU is Asia Pacific SBU. As was explained earlier, revenue increased 16% year-on-year, including the impact of foreign exchange. Revenue increased around 10%, excluding the impact of foreign exchange. Adjusted EBITDA grew more than 30%. As for each of the market, placement business remained relatively weak. Temporary staffing remained steady in all countries with some exceptions. Facility management service continued its strength, just the same as in Q2. This is business topics for Asia Pacific SBU. We received an award for work at Melbourne Airport. But because of time constraints, I would like to omit the details.

The last is others and adjustments. Others include Shareful, which is a gig-type jobs. This fiscal year, we would like to invest firmly in Shareful. Adjusted EBITDA decreased from negative JPY 500 million to negative JPY 2.4 billion this fiscal year, but we would like to continue to enhance our marketing investments here. Adjustments include adjustments of holdings and others. There are no major changes compared to the last fiscal year.

The last topic is Persol Research and Consulting. We have the list of investigative and research findings here. I would appreciate if you could refer to them later. This was the overview of Q3 results and the current status of SBUs from me.

[和田 孝雄, executive]

Next, I would like to explain about the BPO business. Effective on February 3, 2025, we acquired 100% shares of Fujitsu Communication Services for JPY 20 billion. With this transaction, we changed the name of the company to Persol Communication Services. Let me explain the purpose of this acquisition. Our intention is to enhance our IT-related support and operational support and expand the overall BPO strengths.

We have these 3 businesses, and we are going to be enhancing our BPO business with this acquisition. We can classify the BPO business into specialized BPO and general purpose BPO at a high level. Conventionally, we have been strong in general purpose BPO and specialized BPO was considered to be an area to bolster. Through IT system operational planning, operation and support with highly knowledgeable IT resources in the specialized BPO domain, we believe we will be able to broaden the scope of the BPO work and be able to go deeper in each customer and expand the breadths of the contract work. With such a plan in mind, we would like to move forward.

We are aiming for a revenue CAGR of 10% by fiscal 2028 and believe we will be able to increase the adjusted EBITDA margin to 8% level by fiscal 2028 from the current 5.5%. We will be driving cross-selling, going deeper in priority domains and fully utilize our sales resources and the network to capture higher-margin BPOs in IT domain. By taking such initiatives, we would like to drive the growth of BPO business overall.

Next is on group topics. As mentioned, we are going to enhance BPO business. We also published human capital report to demonstrate our intention to proactively invest in human capital. I would like to ask you to read through this to gain better understanding of Persol Group's initiatives and business management based on human capital. Related to this human capital report, our initiatives on diversity to promote women's activities has been highly evaluated and received Tokyo Governor Prize for Corporate Governance of the Year 2024 granted by the Japan Association of Corporate Directors. There was an award ceremony the other day, which I attended and felt very much honored to have been chosen among such prominent companies.

Thank you for your attention. This concludes the brief