DIP Corp

TSE:2379

Earnings Call Transcript 2024-Q4

[Hideki Tomita, executive]

[Interpreted]

Thank you very much for participating in our earnings briefing session. We are going to announce the 27th fiscal year earnings results.

The first one is -- well, finally, we are going to enter into the spot work space. That's something we have made announcement. They are being very successful. And we have not been just taking wait-and-see attitude since 5 years ago or so. We've been discussing to enter into this field. However, there have been other new businesses as well. So -- and of course, there has been this existing player and we wanted to make sure we differentiate -- clearly differentiate ourselves when we are going to enter into this business as a late comer or as a follower. And these details cannot be announced at this moment. But we are now getting fully prepared to enter into this space.

In fiscal year 2023, the market size was JPY 20 billion. Which will become JPY 100 billion equivalent by 2027. So this is quite an attractive market. In that sense, as player to take on this new challenge. We want to become the #1 player in the future. We are strongly determined to make it happen. We believe we have a possibility to win. And as our first step, we'd like to leverage the 20-year equivalent careers we've been able to develop in this field. We have been able to acquire a lot of customers and users, which should be considered as very strong strength.

And another strength we have is the salespeople. We have many -- a lot of salespeople we have -- we have as many as 2,000 salespeople. Or we -- we are not only saying we have a lot of sales people, but we've been able to accumulate know-how and build stronger teamwork. And all of these employees are strongly connected based on our philosophy. We believe this can be considered as a strong weapon we have to enter into this spot work space.

So if we are going to enter into this market. And we believe that we are the #1 in nonfixed term workers. And of course, they should be sometimes looking for spot works. And if that's the case, we are going to introduce them job opportunities with which they can be paid on a daily basis.

The spot work space. We have strong customer base, a lot of many number of users and strong sales structure. And with these strong 3 pillars, we are now determined to enter into this field. Please have high expectations.

Let me move on. This is something we announced last year. And this is a service we are going to release this year. By the way, [ Baitoru Free ], we are expecting to release in fall autumn this year.

And the other product we are going to release is AI agent. Finally, starting from May this year, we are going to release on a test basis. This is a service we announced last year. We've been continuously working on development. And originally, we were expecting to release the test version last year but this is a new service. So we have had to keep tuning -- polishing the product.

And now, we expect that we are going to have 5 phases or levels for this service. Now we are reaching level 2 where we can understand the users' needs through dialogue and make specific proposals. Demonstrational video is available. So please take a look.

[Presentation]

This is a prototype AI agent. Let me introduce the basic functions. First of all, you can search job through conversation I will give you 3 options, and you can just choose 1 of them. You do not need to text, and you can have a quick conversation. In addition, you can input free text to tell what kind of job you are looking for? AI will understand sorts out your needs, and have better understanding.

You can talk to the AI anytime you want and anything you want. For example, if you are having trouble with interview, you can just ask the AI. And no matter what kind of question you asked, the AI will deep dive the situation and provide you appropriate advises.

And the conversation cannot -- can be anything. It may not need to be something directly linked to your job. You can find the right job you were looking for. Through dialogue, your vague need will become clear. And based on this rich job information data, AI will figure out the right one for you. You may be able to find the job, you may not be able to find only on yourself. New era is starting to find the right job. DIP AI agent who will always be there for you to find the right job.

That is how it will look like. It's going to be a totally new concept through conversation, dialogue, AI will tell you the right job. And AI agent will be available for spot work -- spot works as well.

Potential users' potential needs will become clear and users' long-term growth should be taken into consideration when finding the new job. That's what AI agent will make it happen. We believe that we are going to be able to play another role.

Now -- let's talk about Mr. Shohei Ohtani. He has become our brand ambassador. And the effect we'd like to share -- what kind of big effect he's been able to let us achieve. The publicity, well, the timing was right. And when we announced this contract that happened to be on the same day when -- Well, we intentionally made the announcement on the same date when the announcement of [indiscernible] joining the baseball team. So we could hold an interview and the interview was aired by 60 TV programs and in total, 2 hours.

And other than that, the video -- the interview video was viewed by 4 million times. So this interview became very popular and the advertising conversion rate became -- achieved JPY 1.65 billion.

The contract compared to other celebrities, the contract price was much higher, we have to say. But as a result, we've been able to be talked about a lot. And at this moment, we are feeling that the effect -- the size of effect has been very enough. And it's just new. So we are going to keep exposing him more in the future.

And talking about the effect. For example, talking about tip awareness as a company. Before the commercial, it was 64%, but now become 74%. So our corporate awareness has become much higher. And the TV commercial, this is advertising the company corporation.

And after the corporate TV commercial, we've been airing the product, TV commercial as well, including Baitoru and Hatarako.net. And as a result, the effect for these commercials have become much higher. As you see on this page, the number of visits and the number of applications for these products have increased significantly. And TV program called Showtime, MLB [ information ] program, we are sponsoring.

Next is about improving the productivity by leveraging the AI technologies. On a company-wide basis, we've been leveraging more AI technologies to further improve our productivity. The title is DIP AI force, and we are going to further accelerate this initiative. This year's target is to reduce 1 hour per headcount. And in total, of 500,000 hours, we are aiming to reduce.

And this is going to be applied to engineers, sales, planning, people and everyone in our company. We're going to proactively leverage AI technologies to further improve our productivity.

New grads this year, we have welcomed 315, all of them joined us on April 1. Most of them, almost all of them are going to be working as salespeople, 290 are going to work as our sales. Compared to last year's new grads, this year, the number is going to be much less. But by leveraging more AI technologies, the productivity is going to be higher. And as much as possible.

Well, we'd like to achieve as big as possible with as less number of people as possible. And we're going to keep developing -- nurturing these 315 new grads. Our training was held for these new grads last year in Tokyo -- last month in Tokyo. In this month, we have had another training at Atami a little bit far away from Tokyo or like -- Again, inviting all of the new grads. And this is kind of a culture we have. Those new grads participating these trainings, their mindset, motivation has become much higher.

Next is about strengthening management structure. Almost no change compared to last year. But Mr. Kazuhisa Iwata, is now newly appointed as Audit and Supervisory Committee member and Director. Next, let us introduce our CxO. We have newly established what we call CPO, Chief Philosophy Officer because we are managing our business based on our philosophy. And to make sure this philosophy penetration is going to be higher in the future, we have appointed Ms. Mayuko Ueno. She is going to be the first female or CxO in DIP. She joined us in 2007, and she's been working in our sales team and HR team and our strength. The DIP General Meeting. She's been leading to hold these meetings.

And as CIO and CTO, we have appointed Mr. Takatomo Suzuki, DIP's AI [indiscernible], he has been making a lot efforts, he's been contributing a lot for this new service. That's it for me.

[Masatsugu Shidachi, executive]

This is Shidachi speaking. Again, from this point onwards, I would like to take over and present. First of all, I would like to give you an update on the fourth quarter consolidated result. For the fourth quarter sales grew by 7% and OP grew by 44% we were able to achieve JPY 2.9 billion in OP. And that was because the cost suppression was doing quite and we were able to improve the operating profit margin.

And in terms of the market environment, for the part-time job advertisement market, since the second half of last year, it was quite weak. However, we think it has hit the bottom in December. And starting from January onwards, we are starting to see some recovery mainly in the restaurant industry. And on a segment-by-segment basis, for the DX business sales grew by 24%, and segment profit grew by 41%. So it's doing very well.

For the personal recruiting service, sales grew by 5%. And for the third quarter, the growth was 4.5%, so we're seeing some improvement. And the segment profit was plus 56%, which is an increase by JPY 1.5 billion, and that was mainly driven by the more efficient ads and promotion costs. And in addition to that, the promotion cost for Mr. Ohtani was included in the corporate-wide adjustment. And so therefore, that was the big reason for the large increase in profit.

Our next in ads and promotion costs, we have been very efficient on the ads and promotion cost and the ad expense ratio has gone down by 5 points. As was explained from Mr. Tomita, our CEO, the corporate branding of Mr. Ohtani was aired, along with the service commercial and because of that, we're seeing a higher effect for the existing services commercial, and we're seeing more applications.

And in terms of the personnel expense ratio, it's almost the same as the fourth quarter last year. We gave [indiscernible] , JPY 350 million of special bonus in the fourth quarter, but we did not pay that in the fourth quarter of this year. And even excluding that, we were able to suppress the personnel cost. And also we had been thoroughly managing the cost, including the [indiscernible] hiring.

And next, now moving on to the consolidated result. Compared to the forecast revised in January, we were able to exceed both revenue and profit. And at the time of the January for Media Services, we were expecting the growth for January and February to be about 1% compared to the previous year. But with the promotion of Mr. Ohtani, the sales people were highly motivated. And as a result of that, for January and February in average, the growth was about 7%. And so we saw an upside of sales by about JPY 500 million.

And on top of that, that we were able to suppress an ads and promotion cost. Also, therefore, we saw an upside of JPY 800 million in operating profit.

And so now I would like to talk about the full year forecast for this fiscal year. So this is the forecast for this fiscal year. The assumption of the sales growth is 7%. And if we just -- we are looking -- having a conservative view on the part-time job [indiscernible] very spend market. To be more specific, last period market growth was plus 2%. That will be the growth for the previous year.

But for this fiscal year, we're expecting the market growth to be 0%, and that was the assumption of the forecast. And also, the operating profit growth is 5%. And that is because we have a conservative forecast on the sales. And also, we have new services being developed like Baitoru Free and AI agent and also, we have a total of JPY 700 million that is related to the cost of developing AI usage internally. And we want to make those investments that would translate into the future growth.

So I hope you would have a understanding. Just for your reference, I would like to talk about part-timers, market, and now you're seeing the new job openings compared to the previous year, and I would like to give you more details.

After April this year, the market growth is expected to improve. That is our view. And the reason is because we think that the market has bottomed in December of last year. And in addition to that, after April of last year, the market growth rate is very low. As you can see on the chart. And so because of the -- on a year-on-year basis, the hurdle is lower. That is our understanding. And because of that, the assumption of market growth rate of 0%, which is the assumption of the forecast that we believe is a conservative subject.

So moving on to the expenses. So starting from the personnel expenses, the new grads we hired this year, were 315. As mentioned by [indiscernible] was much lower than 600 last year. And the [indiscernible] hires are lower by 100 people, and we're expecting to hire about 70 this year. And as a result of that head count will not increase that much compared to the beginning of the year compared to the end of the year, and therefore, we think we can suppress the personnel expenses. And the other costs are shown here on the charts, I will skip the explanation.

And next, I would like to move on and talk about the business overview of each business. Starting from the DX business. The DX business sales or 24% growth compared to the previous year. So we're seeing steady growth. The stuff products, especially the [indiscernible] cobalt that is promotion support is doing really well, so which I said this ride. And I would like to show you the results for the fourth quarter.

So sorry, the KPI within the performance. If you could look at the KPI, please. For the third quarter, if you look at the number of companies, we were able to grow by 500 companies, and this was a driver in delivering the performance.

And so I would like to now move on and talk about the strategies for this fiscal year. For the part-time recruitment ads, [indiscernible] especially the mid- and small-sized companies, although we cross-sell the DX products may not be purchased along with the mid products. So targeting these customers, we are going to launch a product that combines the advertisement for recruiting a DX product in the second half. And if this -- and with that, that we think we can drive, the expansion of the low end products. And when you think of that, the number of contracted companies, we think we can grow much further, and that is our first strategy.

And for next year as a preparation for the large customers. Well, we don't -- cobalt for the SMEs, and we were selling those cobalts. But for the larger enterprises, we are adding some functions for the invite schedule in cobalt. And even for the existing large enterprises, we would like to start the sales and we would like to drive this. Seriously, I hope you would continue expecting for that.

And the second strategy is for the promotion support, we have a [indiscernible] cobalt. And this is the core product for this area. But after 3 months, after the implementation, you are able to the actual result and we see that as a track record, and we think this is going to sell well. So we're going to increase dedicated sales of our DX to drive the expansion even more. And by doing this, we think we can expand the sales even further.

And this is the plan for this fiscal year for DX business. As I mentioned, based on the strategy, we're expecting the number of contracted companies will grow dramatically. And by doing so with can grow the sales.

And also in order to capture new customers for [indiscernible] cobalt, we're going to increase the dedicated sales reps per DX and that would mean that the increased personnel cost. So the segment of profit growth will be a little bit more moderate compared to the sales growth.

That was it for the DX business and I would like to now talk about the progress of the personal recruiting services business. For -- I would like to talk about our media business as well as permanent placement business.

And starting from the Media business [indiscernible] sales. Compared to the previous year, the sales grew by 4.9%. And the market is negative growth, as you see. So it means that we're constantly gaining our market share.

Next, is regarding the number of contracted companies that we are able to constantly grow the number of contracted companies. And also in terms of [indiscernible] price, we'll continue with minus trend compared to the previous year. So following the third quarter, it was still negative in the fourth quarter. And that is because the small customers that have low ASP has grown, and therefore, the overall ASP has gone down. And the dispatching agencies and the BPOs that used to have higher ASPs are now all seeing the ASP decline and those are the reasons.

And in the material, you see the user-related KPIs, but these are trending quite well. Also, I will skip this -- the explanation.

And now I would like to move on and jump to Page 37 and talk about the challenges and the strategies for the media services for this fiscal year. So I've clarified it and by separating it to get the challenges and strategies. And so the first key strategy is to improve productivity. As I mentioned earlier, the productivity per person being higher is the challenge for Media business. So using the role playing tools or negotiation analysis stores using AI the junior sales reps are able to improve their consultative capabilities, and we think we can improve the productivity that way. So this is already implemented.

The second strategy is that last year, in the area of BPO and dispatching business market, there was a sudden worsening of the market. And we were not able to flexibly change our sales strategies and that's a learning. But for the growth industry, we are preparing the strategies, and we will be executing this. And along with that, the promotions targeting these industries will also be reinforced.

And the third strategy is regarding the market share for suburban rural areas. Compared to the metropolitan areas, suburban areas and rural areas, market share is still low. So by increasing the direct sales force and increasing the distributor network, we want to grow the market share. That was all for the media business.

And now moving to the permanent placement business. Well, our sales grew up by 13.7% and third quarter grew by 3.0%. And so the growth pace is accelerated. And that is because Nursing Care de Hatarako that we launched last year is doing well, and that's allowing us to enjoy faster sales growth.

And moving on to the strategy for the permanent placement service. One is to improve the productivity of the career advisers. The productivity per person is still low for the carrier adviser, and that is the challenge. And by having a trading organization for the new graduates being ramped up this year. We want to quickly develop the new graduates without lowering the productivity of the existing employees. And unlike with the media services, we will use AI-powered tools like negotiation analysis, role-playing tools. and by also improving the UI for customer companies and facilities database. We will allow the career advisers to search the candidates more easily to improve the productivity.

Second is that we will be reinforcing the promotion for medical and nursing care for media. And the core industries, [indiscernible] will be medical and nursing care and the promotion for those industries will be reinforced. And that way, we expect that inflow into the permanent placement service will increase because the medical and nursing care-related users will increase so we expect some synergy for those 2 businesses. And that will be all for my presentation. Thank you very much.

[Hideki Tomita, executive]

The year-end dividend last year was JPY 48 the previous year, that was JPY 38, meaning that we increased the dividend year-end dividend by JPY 10. And this year, our plan is to return the same, so JPY 88 in total is the plan we have. The total shareholder turn payout ratio is going to be 65% or higher.

And talking about the special shareholder benefit, Mr. Ohtani QUO card, kind of prepaid card will be the gift. We will be the giving the QUO cards clear holder clear file, and we also have calendars for our customers. And once we make this announcement, actually, the number of shareholders individual shareholders increased a lot. Compared to August last year, when we still did not have contract with Mr. Ohtani, the number of individual shareholders increased by 17,000. Now the number of retail or individual shareholders is 33,000. So Mr. Ohtani is playing an important role here as well.

Every year, we are showing you the video of our General Meeting this year. More than 3,000 employees have participated in this meeting and the meeting has become -- has provided a lot of satisfaction among our employees. We want to share the full version. But since there's limited time, actually, the meeting took place for 6.5 hours. So we're going to share you a 14-minute version. Please take a look.

[Presentation]

Innovation is the corporate philosophy of DIP. When I established this company, what I wanted to achieve was to materialize ideas and create innovation, which has become our corporate philosophy. And I believe you have joined our company feeling sympathy to this philosophy. Then why this desire create innovation, which has anyway being our desire since our establishment has to be this year's theme. The answer is because this year is going to be year when we need to take on the greatest challenge ever since our establishment.

Till now we have been creating various innovations. We established a portal website for job seekers to search for a 10-step [indiscernible] . We developed an environment where part timers can find their shop online when the only option they had was to rely on paper-based free media. But the scale of the innovation, we are aiming to create this year is going to be an unprecedented one.

Bringing AI agent into the society is an innovation on a global basis. I am not saying this is going to be a greater challenge for DIP. It is much greater. We are talking about a globally great innovation, which is going to change the world.

With a new idea, which our competitor does not have as a weapon, DIP is finally entering into this new business. Today, DIP is announcing a long-awaited new service. It is Baitoru Free. Our competitor is no longer only [indiscernible] work. It is no longer only indeed. Strong players like Atami and [indiscernible] are becoming our new competitors.

We have not been taking wait and see attitude. Actually 5 years ago, I decided to join this market and shared the idea at our Board meeting. So we have been getting prepared. Then you may say, why 5 years later, we still do not have the product. There have been various situations taking place. And even very recently, the team is reworking on the product to fundamentally change the product. It has been taking time following these various situations. But my idea itself, although I cannot share the specifics until we actually release the service. We are filing for a patent. And if we are anyway going to enter into this existing market, I want to do so while making sure our service is clearly differentiated.

By the way, having a differentiated service is not the only reason we can win. There are 3 more. Can you think of any of them? Please raise your hand if you can. It is you, your career know-how and teamwork. And our employees, quality and power, which have been developed through our long-term history. This is the greatest factor, which makes me confident to become the winner. The other strength is our customers. the trust relationship you've been able to create with our customers. The number of customers and the relationships we have been able to build with our customers and users you've been able to create a great relationship with our users by working on various initiatives, including raise the hourly wage, due away with age bias and by focusing on user first.

Through these initiatives, we've been able to build great relationships with our users and gain loyalty from them. I believe we are much stronger here. late comer is set to be disadvantaged, but I believe we have enough strength to catch up with them. And I am actually confident to make it happen.

We are going to win in this market seriously, making a bit to our future. The 28th fiscal year, DIP General Meeting. We will create a new era take on a challenge as innovator. At the end of 2022, when generative AI was making a breakthrough, I made an announcement to enter into AI business, a big dream is making a step forward to enter into that new era.

I'm sure Professor [indiscernible] various people have been working -- wanting to work with you. Under such a circumstance, why you chose us? Well, basically, I'd like to corporate with people who are aiming to improve the society. We have to make changes. In addition, I believe personal market has very strong affinity with generative People are wanting to work with job satisfaction. But there have been no technologies to make it happen. Now we are living in an era where workers' liquidity is high and where various new carriers are being developed. But there has been no service telling these workers. How you can find a drop, which will provide you a job satisfaction. But if AI can provide a solution here. I believe the market can be gigantic or a tremendous change can be expected.

I have been working in the Internet industry for more than 25 years. The higher the Internet penetration has been the more convenient society has been. However, Japanese people's happiness level has just kept declining. This should mean although Internet has been improving the convenience, it has not been contributing to make people happier. But now with AI technologies, I believe, for the first time in our life, now there is a possibility that there can be a solution to improve job satisfaction and that people live a more meaningful lives.

Agree. I believe the role we are going to play in the future is going to be different compared to the role we have been playing till now. Till now, it's being the user side who's been choosing the job from the list we've been providing. But from now on, it is going to be us who is going to work on the matching after having good understanding of the user, including where is the geographical area, the user is working to work and they get a proposal, recommends the very right job to the user. We will even provide support to the user's future. This is going to be a new business model. This exactly means we are going to provide matching to enable users achieving happiness.

Now we are working together with Matsuo Institute to develop AI agent. As our first step, we asked the Institute to define what kind of evolution we are going to aim to achieve? Could you please talk about it?

First of all, having said, we are going to make a big change. We need to start from making a steady first step. And this first step should be providing better matching, leveraging current generative AI LLM, large language models technologies. We're going to improve the accuracy based on the existing technologies. Matching accuracy will be higher if we ask the users needs under such a process.

We will start from figuring out what is the best way to ask their needs and convert them into our proposals. Once we achieve that, we should be able to have deeper conversation with the users and we should be able to have better understanding on the users, including what makes them happier and what makes them having tough failing. And accordingly, we will be able to make more individualized proposals.

Our proposal or quality becomes high enough. Users will start feeling having a friendly relationship with us. AI agent will become equivalent to their real friends who are always there for them to think together and figure out better ways together. At the end of the day, all of these processes will be fully automated. AI agent will be there from the very beginning and always be there throughout the journey and keep living together.

Thank you. once we have visibility on the road map, how it is going to keep evolving? It will be easier to have an image, and it will make us more exciting. As a result, the direction for the development will become very solid. That is the impression I have.

Thinking about the future of our market, I am sure that especially white collar workers are going to be affected in various ways. But most of our work workers in dips market, they are getting involved with physical works, which should be hardly replaced by AI technologies.

In addition, we know that lower birth rate and aging society will further develop in the future, meaning labor is going to be in short for sure in the future. Needless to say, our market becomes more active when labor is in short than when labor are excess. In that sense, I believe there is a huge opportunity sitting right in front of us.

Now we are living in an era when we can provide job matching to everyone, provide matching service, which will let workers feel happiness. We should be able to provide value-added matching to everyone, including part timers and fixed-term workers let's develop a matching service, which will provide high value-added matching service, leveraging AI technologies. Now the environment is in place. where we can take on this challenge. We will be able to provide a solution to those job seekers who have not been able to come across with a good workplace. We will be able to provide support to those people.

We have been facing a labor shortage situation. This is the purpose why we are going to take on this challenge to develop AI agent develop and provide a new solution based on the philosophy and leveraging existing technologies. I will believe that it will be able to make it happen. We will do it. We will create a new era of DIP with AI agents.

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