DIP Corp

TSE:2379

Earnings Call Transcript

[Hideki Tomita, executive]

This is the financial results briefing session for Q3 fiscal year ending February 2025. Thank you so much for your participation despite your busy schedule. Now I'd like to start from, toward enhancing corporate value. Today, this year's theme is innovation. We've been taking on new challenges. We've been working on various initiatives.

First one is the new business, Spot Baitoru. Let us talk about the progress we are making with this new product. Spot Baitoru, we have released and on December 12, we have expanded on a nationwide basis. Simultaneously, we have started our TV commercials. We are a late comer. And -- but we are already strong in part-time shift market. We already have a strong customer base. We have a lot of users. So we are going to leverage the existing asset to promote this new product and we do have a unique function service, which is called Good Job Bonus, which is highly appreciated, especially by users.

Next, let me talk about Baitoru Talk. This is about managing shift. It will make the task easier. This is an app connecting our clients with us when they have need for spot positions, they can easily place orders, and if they find an opening, they can easily access to ourselves people. We're still under trial period, but we've been introducing this new service to multiple companies and enterprise companies. They have been saying that this is exactly the service they've been awaited for. So the service is highly appreciated by our customers, which should be a promising service.

And this new service Spot Baitoru is going to be quite important for our future. So we have appointed Mr. Takamasa Nagae who used to work at Recruit and then worked at JT to promote Ploom TECH, which is electronic tobacco product. He has been responsible for this product. And I believe the situation is kind of similar because JT at the time, they had to compete with [ Marlboro, IQOS ], JT was a late comer, and that's exactly the situation we are currently facing with. There is already a major player in this field. And as a latecomer, we are entering into this business, and we are aiming to win the business. So we are expecting Mr. Nagae to leverage his experience and grow our business.

Next is about dip AI. Let me talk about the progress. This is a new format of hiring, finding new job positions. Using AI technologies, person who is searching for a job can find the right job. We are not expecting this service -- is to have visible contribution to our earnings in a short-term perspective. However, we are going to leverage AI technologies and through conversations between us and job seeker, they should be able to find the right job easier.

And finding job using AI technology, we want to make sure dip is the first comer, and we are finding that satisfaction level among those job seekers who have already used this service is very high. The illegal or job position is one of the social problems at this moment. And this dip AI technology is good for that situation as well.

Well, this new business, this new service to make this innovation successful. We are going to drastically change our organization. The scale of the change is going to be unprecedented level in our history. Till now our sales organization is based on region. There are territories where regional markets, and by region, we've been assigning our sales teams. That has been our main style. But what has been happening as a result is, for example, at Machida office, we ask people to find opportunities in Machida, and one sales person is going to take care of companies whose jobs are light duty and another company who are in food industry and another company who are in another industry.

If that's the case, our salespeople can now become industry specialists. They can sell Baitoru product, but should have difficult time to have deep discussions, so we're going to revisit our organization. Our organization is now going to be industry based, and we're going to shift towards Solution Sales Organization. Our salespeople, we believe they are consultant for our customers to hire people in that sense to further enhance their skills, we believe it is better if they can become industry specialists, and they should be able to consult with various situations.

And as a result, we believe that our salespeople or productivity can become significantly higher. This is going to be a major organizational change. So we need to have enough preparatory period. In that sense, we are expecting to make it happen from June this year. We already announced this change in fall last year, and we've been hearing voices from our employees. And we're making sure that all of our employees are fully convinced before they make it happen. And our employees, they are -- they have very positive impression on this change because they see their market value can be enhanced. They are willing to study more about specific industries and to improve their productivity. And of course, as a result, they're expecting their salary should become higher. They are highly motivated.

Next is about our marketing activities. The baseball season is done. We miss it. But last year, at the Dodgers World Series victory. Japanese population we're paying strong attention to these games. The view rate was quite high. And at games, including World Series, our advertisement. These were virtual advertisement, that backstop advertising when games were being aired, at Japan, including NHK, our advertisements being aired.

Mr. Ohtani was contributing a lot to these games, and we could enjoy very big advertisement effect. It also motivated our employees and actually Dodgers won, and when our sales people were visiting our customers, our customers were welcoming our salespeople with applaud. So that was a very good news for us, and it also increased our people's motivation.

Next is about conference. Labor Force Solution Conference, we held 2 years ago, that was well accepted and people were expecting us to hold it again. So we did so at the end of October of last year. The conference was held on October 29, and the satisfaction level became even higher than the previous time. The theme was AI and also we discussed Spot Baitoru, and we also conducted a survey with as many as 10,000 people. This was a marketing survey. And we -- the focus was what make you more satisfied when working, and survey results were well accepted by our customers. They showed great interest in those results.

And especially Spot Baitoru, it seems that the spot-based job positions, increasing job satisfaction among workers significantly. That is why we are getting even more motivated to further grow our Spot Baitoru business.

Next is about leveraging AI technologies. This year, our target is to reduce 500,000 working hours by using more AI technologies. And we are making a good progress as end of Q3, we could reduce 380,000 hours already. Details you will find on the right-hand side. That's it from me. Thank you.

[Masatsugu Shidachi, executive]

This is Shidachi speaking. And so from my side, first of all, I would like to present about the consolidated results for the third quarter. For the third quarter, on a consolidated basis, the sales are up by 3.8% compared to the previous year, and OP was down 6.2% on a year-on-year. The reason why the OP was down year-on-year basis was due to the investment in corporate advertisement using Ohtani and also by enhancing the [ dip ] awareness -- increased awareness of dip AI. And these were already included in the initial forecast. And so the year-on-year decline in OP is already in line with the initial plan.

And for the Personnel Recruiting segment, the OP is negative, but that is because the Spot Baitoru P&L has been included in the Personnel Recruiting segment starting from the third quarter this year and that was the reason.

And next, I would like to talk about the sales trend of media services compared to the market. The adjusted applicant ratio is generally linked to the market growth rate. And this has improved slightly to minus 4.6% in the third quarter. And so from third quarter to the fourth quarter, the market is gradually improving. That is my impression. And although the growth rate of media sales have declined slightly in the third quarter compared to the second quarter, we expect the growth rate to be better in the third quarter compared to -- sorry, to be better in the fourth quarter compared to the third quarter. And dips media sales growth rate is better than the market growth rate. And so we think that the market share is growing.

And next, moving on to SG&A expenses. As I explained earlier, the expense ratio growth of 5% from 18% to 23% due to the increased investment as I explained. And as Tomita explained earlier, the effect of this investment is reflected in increased awareness and trust in our services. And so we think out that this will lead to sales expansion in the future. And personnel expenses were flat against the previous year. The number of new graduate hiring has reduced from 600 last year to 300 this year and the freeze of mid-career hiring a temporary increase in resignation, of course, a number of employees to be lower than last year.

And on the other hand, we have been working on improving the employee compensation. So the level is similar to last year. And I would like to add some discussion about the temporary increase in resignation. We don't think this is a unique issue to dip. The high number of resignation among the new graduates are known as the COVID generation is happening in many companies. In fact, according to the statistics from companies with more than 1,000 employees show that the [3-year ] resignation rate of new graduates who joined in 2019 and those who joined in 2021 is several percentage points higher than that of -- for the so-called COVID generation, new graduates.

And in case of dip, the percentage of employees who joined dip during COVID is higher than that of other companies, which is why the resignation rate, I think, is higher. And well, the more companies switching from a remote work back to office, the resignation rate tends to increase. And in April, we have decided to bring everybody back to the office. So I think that is one of the reason why the resignation has increased tentatively and with this in background, I think the resignation has increased.

On the other hand, in order to reduce the number of resignation, dip has been taking measures such as improving the office environment or enhancing our compensation and also incorporating our remote work depending on the nature of the work. And furthermore, we believe that the shift to a solution sales structure will improve the expertise of our employees and increase their sense of contribution to client, companies, as a group of professionals, thereby reducing the resignation rate. And we hope that these efforts will reduce the resignation rate.

In addition, we plan to hire about 50 mid-career sales reps between this fiscal year and next year. And the increase in other expenses, as we explained at the second quarter results announcement, is due to an increase in land rent following the opening of the Yotsuya office and the expansion of the head office.

Next on moving on to the full year forecast. And there is no change from the numbers that we announced at the April and there's a change in the making, so I will not explain the details.

And next, I would like to talk about progress of the DX business. The KOBOT series lineup are shown here, but there is no update here. So I will skip out the explanation. And here is the third quarter results for the DX business. Our sales increased by 12% year-on-year. And as we explained in our last financial results on meeting, in the third quarter, we were able to return to an upward trend for both flow and stock products, we are able to increase sales.

And next moving on to the number of companies who are subject to billing, we were able to increase as well, and breaking it down into KPS, our growth in sales are driven by an increase in the number of companies subject to monthly billing. And the increase in the number of companies is mainly driven by the steady sales of KOBOT for MEO. And we have high targets for in fourth quarter for both ourselves and a number of companies, but we will do our best to expand sales of products in the HR and recruiting and sales promotion areas of that, so that we can achieve our targets.

And I would like to talk about the progress in third quarter and topics in fourth quarter. In the area of recruiting and HR, we had conducted a discount campaign, but because the campaign has ended, the sales has gone back to an upward trend, and we have introduced by Baitoru Talk and a number of companies have increased. We are in the feasibility phase. So we plan to reflect the customers' feedback into our product development and our plan to launch the product in full scale in spring of this year.

And in the area of sales promotion, MEO KOBOT continues to steadily increase the number of companies. And in addition, we have completed the installation of Patronage KOBOT web membership card function into MEO KOBOT. And in the fourth quarter, we plan to reduce the churn rate by supporting a series of processes from acquiring new customers to converting to regular customer by bundling MEO KOBOT with Patronage KOBOT. And we also plan to release a report that will show the effectiveness of the web membership card function that I mentioned earlier. And there are no changes to the 4-year plan, and so I will skip the explanation of this page.

And so now I would like to talk about the progress of the Personnel Recruiting segment. The media sales growth was 2.9% year-on-year. And the sales growth rate for the second quarter was 3.6% of growth rate has slowed down. However, as I mentioned earlier, we hope to increase the growth rate in Q4 compared to Q3.

And I will explain the breakdown of the sales growth by a number of companies and unit price. A number of contracted companies, growth was 0.4% year-on-year, which is a slowdown. And this was mainly due to the decline in sales reps, but we are already taking actions to reduce recognition. And as I explained earlier, and also, we are hiring sales as mid-career, and we are also working to improve productivity. And through these efforts, we will try to increase the number of contracted companies in Q4 and onwards.

And on the other hand, the unit price per client has been below the previous year's level, but this has started to positive to -- in the third quarter to 2.9%, compared to last year. And this was due to an increase in unit price, mainly among our major client companies and human resource companies, such as temporary staffing agencies. And this page I will explain -- I will skip the explanation.

And next is related to the app downloads. We are continuing with #1 app downloads. And the KPI on the job seeker side continues to be very solid. And as we explained before, the MAU level -- this is a different trend of the aggregation site, but that is different because of the difference in the target.

Now I would like to talk about the progress of the media service and the topics for the fourth quarter. First is the improvement of the productivity of our sales staff. We are promoting the use of dip [indiscernible] , which is our tool reduce the time spent on drafting job applications and a tool improve the efficiency or proposal of preparation, which enables sales staff collect data by talking to generative AI.

In the fourth quarter, we will expand our sales by cross-selling existing media and Spot Baitoru, taking advantage of our strength in providing both shift and spot services. We have been challenging the cross-sell in media, in DX, in the past. But although these are different business model, we are working with our customers so that we can sell spot and shift as we did with that media and DX, and we think this will be a unique strength for dip. And as our President have mentioned the solution sales structure will start, and once at this start, we think all the efforts will accelerate even more.

And the second growth business continuing with the other quarter in the fourth quarter, we can continue focusing and expand sales in the logistics, office and medical/nursing care fields. And in the third area of increasing market share in suburban areas, we have made progress in expanding our agency network, and so we are currently working to increase the sales of the newly contracted agencies.

Now I would like to talk about the permanent placement service. So the sales were down 2.3% compared to the last year. And as I already mentioned, the second quarter result, -- this was mainly due to the impact of the low number of new graduates hired this fiscal year. In the fourth quarter, we expect the sales growth to turn positive driven by a better productivity.

And this is the progress of the permanent placement service and the topics for the fourth quarter. First point is the improvement of productivity of career advisers. We have completed the improvement of the job search screen UI, and this is used by the career advisers. And in the fourth quarter, we will promote the use of CAs to improve the productivity. And the second and the third strategy is a continuation from the third quarter, so I will skip the explanation.

And finally, for the overall Personnel Recruiting Service, combining media and permanent placement in the third quarter, the sales increased by 2.8% year-on-year. And this is for your reference, but there's no change to the full year plan. That is all for me. Thank you very much.

[Hideki Tomita, executive]

Well, year-end dividend, no change with our expectation. Year-end dividend will be JPY 48 and full year basis JPY 95, as we have been expecting for. Shareholder special benefit program, Mr. Ohtani design QUO card, which was highly appreciated by our shareholders. It's going to be presented at this time again. That was it.

Finally, we'd like to show you a short video, focusing on our Solution Sales Organization, which should be a hot topic for our business at this moment. This is a video for the opportunity. We provide explanation to our employees.

[Presentation]

[Hideki Tomita, executive]

This year, we have announced 2 innovations. I believe everyone fully understands how crucial these 2 innovations are for the future of dip and how they will influence the future of our company. I am always thinking how to successfully implement these 2 innovations. For sure, what is important is the organization and the team. Can our team and organization succeed in its current state. How can we further improve our sales performance and productivity. What should we do to significantly enhance our productivity? What kind of salesperson is valuable to enhance productivity. What makes customers wanting to see you? Solution? Ability.

Customers should want to see a salesperson who has the ability to solve the problems they face. What skills are necessary for that solution ability I believe the answer is industry knowledge. A person who has a deep understanding of the industry who also knows about the competitors and who also understands our work well. This should be the person who can be relied upon.

Thinking about another reason, well, employees are wanting to develop their skills. And some employees when leaving our company. They say they leave because they have already developed their recruitment skills enough or they can no longer further develop their skills working at dip. I do not believe so, but some people feel this way. What is the way to further increase the value of individuals while working at dip? Ultimately, it is about becoming a specialist.

A person who can say, "I am a specialist in this industry." I believe this will raise their value. You might think if their value increases, they may leave for another job, but I think it is the other way around. When employees join our company, their value will keep increasing their skills will keep improving and their market value will keep growing. That is why they feel they want to keep working with us. I believe this is what we can offer to ensure that they stay with us for longer-term period.

[Masatsugu Shidachi, executive]

Dip has introduced various products and services to the market, including Hatarako.net, Baitoru and many others to grow these products as big as possible, we have built our structures. As a result, we have become the leader who enjoys the biggest market share in the fixed-term employment media market. Looking into the future, we are transitioning into a solution company. We are starting this project with the vision of becoming a labor for solution company. This has been enabled by the evolution of the company.

Based on the media business, dip has been expanded into Spot Baitoru, dip AI and DX. We have been able to develop an environment in which we can contribute to solve our customers' labor force challenges from multiple angles.

Moving forward, our sales organization will become industry specific to increase market share in each industry. We will devise strategies, equip ourselves with the right tools and work to deliver solid results. That is how our organization is going to be. This is the concept behind the Solution Sales Organization we are aiming for, dip is undergoing a second founding, transformation and evolution the company itself is taking on this kind of challenge. I hope you take it that way.

[Takatsune Inoue, executive]

This is what I myself experienced when I was a salesperson, but when you are specialist in an industry and acquire a lot of industry knowledge, you become highly trusted by customers. They will consult with you about anything. Your sense of self efficacy increases a lot. And when that happens, your motivation for work rises significantly. As a result, performance also improves. In Solution Sales Organization, specializing in an industry and accumulating knowledge and information is not just about changing the structure. It is more about your own working style and the joy you can derive from your work.

[Tomohiro Kitazato, executive]

I believe that enhancing your expertise means becoming a partner to the executives of companies in that industry.

What does it take to become a partner?

From my years of experience in sales, I have learned that without industry knowledge, you cannot become one. If the discussion is limited to recurrent, you will only be able to talk with the recruitment department. However, to get in front of top executives, you need to discuss things like competitive movements, market trends and regulatory changes.

Once you reach the top, you will see many more challenges beyond recruitment such as financial concerns, competitive pressures and regulatory issues. As I did in myself days, when you help solve challenges beyond recruitment, you expand your scope of work and the gratitude you receive from customer increases.

The more problems you help solve the more rewarding or your work becomes. The cumulative satisfaction of solving customers' problems is what I believe brings fulfillment in work. With Solution Sales Organization, I think this cumulative satisfaction will continue to grow. Which connects to the idea of solutions we are discussing today.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]