Recruit Holdings Co., Ltd. (6098) Q2 2027 Earnings Call Transcript

Thank you for joining the Recruit Holdings FY2026 Q2 Earnings Call. This call is a simultaneous translation of the original call in Japanese, and translation is provided for the convenience of investors only. Earlier at 3.30 p.m., we disclosed the earnings release, earnings summary, and the presentation slides of this result call on our IR page. The video and transcript of this result call will be posted on our IR website after the session. Today's presenters are Hisayuki Hidekova, Representative Director, President, and CEO, and Junichi Arai, Executive Vice President and Chief Financial Officer. In the first 30 minutes, Dickel and Jun will provide a presentation followed by a Q&A session with Dickel until around 5.20 p.m. After that, starting at 5.30 p.m., we will hold a follow-up meeting with Jun for cell-side research analysts. A transcript of this session will also be published on our IR website promptly after it concludes. Now I'll turn the call over to Dickel. Hello, everyone. I am Dekul from Recruit Holdings. Thank you all for taking the time to join us today. First, I would like to walk you through the Q2 highlights for our HR technology business. Q2 delivered strong results, up 27.5% year-on-year in U.S. dollar terms and up 36.6% year-on-year in the U.S. It's now been more than a year since we rolled out our new AI products. I was worried that lapping those launches might create a slight drag on our year-over-year growth, but our revenue held strong and kept climbing through Q2. Overall, the positive trajectory from Q1 continued, and by capitalizing on strong AI tailwinds, we successfully expanded both our top and bottom lines. Our marketplace continues to steadily evolve by leveraging AI. When customers increase their budgets, they meet job seekers who are more likely to be hired faster. As a result, we are seeing healthy momentum in customers upgrading to higher-priced tiers alongside steady revenue per job expansion within each tier. By customer segment, in Q2, once again, small and medium-sized business clients were the primary driver of our revenue growth. Both key engines, the number of clients sponsoring jobs directly on Indeed and the revenue per sponsored job posting continue to show strong, sustained growth. As I said at our last earnings call, for small businesses, an unfilled position is a matter of life and death. When clients use our AI products, time to hire is cut dramatically. This is the time that is required to hire, and it can be cut dramatically. They value this overwhelming speed far more than simply reducing the cost to make a hire. That is the main reason they choose our higher-value AI-powered products. While larger clients tend to take longer when adopting new AI products compared to SMBs, revenue from those clients has continued to show solid year-over-year growth. We are driving several key initiatives here, such as introducing annual contracts, making premium-sponsored jobs more accessible, and realigning our sales organization to more effectively serve this segment. There's still plenty of work ahead for the enterprise segment, and our real inflection point and growth are still ahead of us, but progress so far has been solid. But regardless of the segment, when asked what product Indeed is offering, I always answer it is the higher, our AI tools and advertising products. are simply evolving ways to monetize that core value. As AI advances, we embed it directly into our products and monetize it, allowing our entire platform to evolve alongside the technology. Going forward, by integrating AI into every corner of our platform, job seekers can land better jobs faster, and employers can make quality hires more efficiently. As an example, compared to Q1, user numbers for our AI agent for job seekers, CareerScout, grew by 65 percentage points, while companies using our AI agents for employers, TalentScout, increased by 40 percentage points. We are now able to deliver a faster, fresher experience for both job seekers and hiring teams. But AI is not just driving our product development. It is improving how we operate internally. For example, engineering productivity at Indeed is up over 65% compared with 2024. That is helping us build faster. This second quarter reaffirmed just how structurally aligned our HR technology business is with the rapid evolution of AI. New AI agents are emerging every day. And like many of you, I am genuinely amazed by the sheer pace of innovation and excited by how AI is streamlining everyday tasks. However, hiring is fundamentally different problem in a two-sided marketplace like recruitment. A single-sided AI agent hits an obvious ceiling. Unlike e-commerce, where a buyer simply picks up a product at a set price tag, Hiring requires simultaneous, mutual decision-making. It only works when both sides reach a healthy compromise. A job seeker and an employer... Rarely find a 100% textbook match. Instead, they calibrate their expectations, meet in the middle, and shake hands. How to bridge this very human nuanced exchange rapidly and easily through technology? That is precisely what we are tackling. An AI agent built solely for the candidate cannot infer a recruiter's real constraints or unspoken priorities from a job description alone. Conversely, an employer-side agent misses the behavioral signals, context, and latent potential behind a static resume. Because we sit at the intersection of both sides, we are focused on understanding the full picture and how to facilitate the most valuable match possible. I believe this is an enduring moat that general-purpose platform cannot easily replicate. Now, I know everyone's question is, what should we expect in terms of future growth? Based on our first-half performance and current outlook, we now expect full-year HR technology segment revenue to reach $11.9 billion, up 23.2% year-on-year on a U.S. dollar basis. Outpacing the 18.7% year-on-year outlook we shared in August, we are also forecasting an EBITDA plus S margin of around 46.5% for the segment. This outlook represents our estimate based on what we can see as of today. At our Q3 earnings announcement next February, we plan to share the expected full-year outlook. While there may be short-term changes in the business environment, we remain firmly committed to taking the long view and prioritizing lasting customer relationships as we steer the business toward our goal of helping job seekers find jobs faster, automating manual tasks with AI, and improving recruiting productivity around the world. This is my overall update. For the detailed financial figures, I will hand it over to our CFO, Arai-san. Arai-san, please go ahead. Thank you. I am Junichi Arai, CFO. Thank you for joining us today. So, we disclosed our numbers about one hour ago, so let me use the presentation slide to explain. Today, I'd like to highlight three key points from our results announcement. One, in HR technology, Q2 revenue reached a new quarterly record high as strong performance from Q1 continued. For the full year, As Ideko-ba-san just said, we now expect revenue to increase 23.2% year-on-year to $11.9 billion, further exceeding the revised outlook from August, with an EBITDA plus S margin of 46.5%. 2. While Q2 consolidated revenue reached a quarterly record high, we are leaving the full-year guidance unchanged. from what was upwardly revised in August. Three, gross cash reached 988.2 billion yen at the end of September as first half results significantly exceeded our initial expectations, but we expect our capital efficiency for this fiscal year to reach the highest level since our IPO. So these three are the highlights. Let me go one by one. Turning to HR technology, Q2 segment revenue maintained the trend from Q1, increasing 27.5% year-on-year on a U.S. dollar basis. In the first half, segment revenue grew 24.2% year-over-year, significantly exceeding our expectations. For the second half of this fiscal year, taking into account seasonal revenue declines in Q3 during the holiday season in the U.S. and Europe, we expect segment revenue to be up 0.9 percentage point, roughly in line with the first half, and up 22.3 percentage point year-on-year. For the full year, we expect segment revenue on a U.S. dollar basis to reach $11.9 billion, up 23.2% year-on-year, further exceeding the $11.4 billion, or 18.7% year, increase year-over-year, shared in August. We also expect the full year segment EBITDA plus S margin of 46.5%. Our consolidated financial results and guidance comprise the total revenues and profits of our three businesses, HR technology, staffing, and marketing matching technologies, as well as corporate expenses. Regarding consolidated results, Q2 revenue was 1 trillion 94.6 billion yen, up 19.7 percent year-on-year, driven primarily by revenue growth in HR technology. The EBITDA plus S margin was 27.2 percent, and basic EPS was 150.54 yen, up 68.8 percent year-on-year. For the first half, revenue increased 19.3 percent year-on-year to 2,139,000,000 yen, and EBITDA plus S margin reached 27.6 percent, significantly exceeding the 22 percent recorded in the first half of the previous fiscal year. Regarding full-year consolidated guidance, we are leaving the guidance upwardly revised in August unchanged. This is because, assuming an exchange rate of 156 yen to the U.S. dollar for the second half, the increase in revenue and profit in HR technology mentioned earlier is expected to have an impact of only approximately 4 percent on EBITDA plus S. And approximately 5% on basic EPS, compared to the full-year consolidated guidance upwardly revised in August. The full-year outlook for staffing and MMT remains unchanged. At our Q3 earnings announcement next February, we plan to share our latest outlook of full-year results for both the consolidated and each of our three segments. As shared in August, Regarding the on-site inspection by the Japan Fair Trade Commission conducted in June this year on suspicion of Anti-Monopoly Act violation in staffing in Japan, we continue to cooperate with the inspection. Because it is difficult to reasonably estimate the financial impact at this time, it is not incorporated into this guidance. In addition, we detected unauthorized external access to systems related to car sensor net operated by automobile within others in MMT on October 17th this year and temporarily suspended related services that evening. Services were restored by October 22nd. We estimate the impact on revenue in the second half of this fiscal year to be several hundred million yen, and consider the financial impact on consolidated results to be minor. Regarding capital allocation, we repurchased approximately 16.35 million shares for 177.6 billion yen during the first half. The execution period for our ongoing share repurchase program has been extended from the initially scheduled end of November this year to the end of March next year. Gross cash stood at 988.2 billion yen as of the end of September, reflecting first-half financial performance significantly exceeding our initial guidance while effectively maintaining a debt-free balance sheet. If capital is not allocated to large-scale acquisitions or other opportunities during this fiscal year, It will be difficult to achieve our initial goal of holding gross cash to around 750 billion yen at the end of the fiscal year. However, based on our latest financial guidance, we believe we will achieve an ROE, a key metric of capital efficiency, significantly higher than 31 percent in FY25. In addition, because gross cash account for approximately 4 percent of our recent market cap, we believe our cash position is well-balanced with our market cap, preserving the soundness of our consolidated balance sheet while maintaining high capital efficiency. Regarding dividends, the Board of Directors resolved today to pay an interim dividend of 13 yen per share. For the year-end dividend, in line with initial expectations, we anticipate 13 yen per share, bringing the full-year dividend 26 yen. Next, I will review performance by business.

First, turning to HR technology, in Q2, segment revenue maintained the trend from Q1 and reached a new quarterly record high, increasing 27.5% year-over-year on a U.S. dollar basis to $3.0 billion. Segment EBITDA plus S margin was 47.6%, up slightly from Q1. For the first half, segment revenue on a U.S. dollar basis grew 24.2% year-on-year to $5.9 billion. For the second half, based on first-half results and our latest performance outlook by region, we expect segment revenue to reach $5.9 billion, up 22.3 percent year-over-year and up 0.9 percent compared to the first half. In Q3, we factor in the usual seasonal tendency for activity to be lower than in Q2, as hiring slows during the holiday season in the U.S. and Europe and others. For Q4, given the difficulty engaging the strength and speed of the resumption of hiring activity in the U.S. and Europe and others from January onward, our assumptions are based on current conditions. In the first half, the segment EBITDA margin expanded significantly from 31.5 percent in the same period of the previous fiscal year to 43.2 percent. Segment EBITDA plus S margin also increased from 36.5 percent in the same period of the previous fiscal year to 47.5 percent. The primary driver was that while revenue grew, broadly defined personnel expenses comprising The total of employee benefit expenses, including share-based payment expenses and service outsourcing expenses, remained roughly flat, decreasing as a percentage of revenue from approximately 46 percent in the same period last year to approximately 36 percent. For the second half, we expect the segment EBITDA margin to be 42 percent, slightly below 43.2 percent in the first half, taking into account increasing AI-related compute and infrastructure expenses, which We manage with a clear focus on return on investment, and which are partly offset by lower personnel expenses, as well as strategic expense increases, such as advertising expenses, to drive revenue growth in Japan in the next fiscal year. The segment EBITDA plus S margin is expected to move from 47.5% to 45.5%, reflecting the typical seasonal decrease in IFRS-based share-based payment expenses in the second half compared to the first half, which we estimate at approximately $45 million this fiscal year. We now expect full-year segment revenue to reach $11.9 billion, up 23.2 percent year-on-year, further exceeding the 18.7 percent year-over-year increase disclosed in August. We also expect the full-year segment EBITDA pluses margin to be approximately 46.5 percent. By region, the latest full-year U.S. revenue outlook has been increased by $320 million, the largest adjustment to our segment outlook. We expect the U.S. to account for 58.5 percent of full-year segment revenue. And have raised our outlook from a 25.1 percent increase year-on-year in the August revision to a 31.2 percent increase, reaching $6.9 billion. For Europe and others, our latest outlook is for a 24.1 percent year-on-year increase, reaching $2.5 billion, up slightly from the 23.2 percent projected in August. For Japan, our latest outlook has been raised by 13 billion yen from the August outlook, with revenue expected to reach $2.4 billion on a U.S. dollar basis, up 4.2 percent year-over-year. Next, I will review performance by region in detail, starting with the U.S. In Q2, U.S. revenue was $1.82 billion, up 36.6 percent year-on-year, further exceeding the previous record high set in Q1, driven by further monetization development, led by our higher-value AI-powered products, such as premium-sponsored jobs. As the total number of U.S. job postings declined approximately 2 percent year over year, the U.S. Op-J growth rate, which indicates monetization progress, remained at a high level following Q1, reaching 39 percent. As a result, first-half revenue reached $3.46 billion, up 33.4% year-over-year, with the total number of U.S. job postings down approximately 3% year-on-year. The U.S. ARPJ growth rate was 37%. Revenue from hosted jobs posted directly on Indeed, primarily by small and medium-sized business clients, which continues to account for the majority of paid job advertising revenue, drove the growth in U.S. revenue. The driver of revenue growth was an increase in revenue per paid job ad resulting from upsells, exemplified by the shift to premium-sponsored jobs, along with an increase in the number of new clients. Revenue from enterprise business clients and medium-sized business clients through indexed jobs, which are job listings gathered by Indeed from career sites, applicant tracking systems, or ATS, and across the web also increased. However, because enterprise business clients often require more time than small and medium-sized businesses to evaluate and adopt new products, their contribution to first-half revenue growth was limited compared to that from small and medium-sized business clients. For the second half, assuming the change in the total number of U.S. job postings is flat year-over-year, while the growth trend driven by monetization progress in the first half continues steadily, we expect revenue to increase 1.3 percent compared to the first half and 29.1 percent year-over-year to $3.5 billion, taking into account the seasonal decline in Q3 during the holiday season. As a result, we expect the U.S. ARPJ growth rate to be approximately 29 percent, reflecting continued strong monetization progress. For the full year, we expect U.S. revenue to reach $6.97 billion, up 31.2 percent year-over-year, further exceeding the $6.65 billion or 25.1 percent year-on-year increase upwardly revised in August. As I mentioned earlier, this revenue growth amidst a soft market where the total number of U.S. job postings is expected to be down around 1 percent year-on-year reflects business clients recognizing the value of our higher-value products, such as premium-sponsored jobs, and choosing to adopt them and stay with them. We believe this strength is quantitatively demonstrated by our full-year U.S. OBJ growth rate outlook of approximately 33 percent. Looking ahead by acquiring new clients and delivering and further monetizing value-added products, we aim to continuously outperform the job market, including changes in the total number of U.S. job postings to achieve further growth. Turning to Europe and others. Q2 revenue was $650 million, up 29.1 percent year-on-year. On a local currency basis, the primary driver was continued monetization development, led by expanded adoption of premium-sponsored jobs, including year-over-year increases of approximately 40 percent in the U.K. and approximately 59 percent in Canada. For the full year, we expect revenue to reach $2.5 billion, up 24.1% year-over-year, slightly exceeding the 23.2% year-over-year increase expected in the August outlook. As in the past, approximately two-thirds of this revenue is generated by the UK, Canada, and Germany. Lastly, in Japan, Q2 revenue was 95.1 billion yen, up 13.2 percent year-on-year. This was driven by Indeed Plus in job advertising services continuing to perform strongly above initial expectations due to an increase in paid job ads and higher unit prices, and placement services generating revenue that already exceeds FY 2024 levels as restructuring and enhancement measures bore fruit. Assuming this trend continues in the second half, after offsetting factors such as the remaining partial impact from changing revenue recognition from growth to net, as well as revenue decreases from exiting or downsizing unprofitable businesses, we expect full-year revenue on a Japanese yen basis to increase 9.1 percent year-on-year to 380 billion yen, an increase of approximately 13 billion yen from the August full-year outlook. And on a U.S. dollar basis, to reach $2.4 billion, up 4.2 percent year-over-year. Turning to staffing, Q2 segment revenue was 462.3 billion yen, up 9.7 percent year-over-year. In Japan, Revenue was 216.8 billion yen, up 3.5 percent year-on-year, driven by continued stable performance. In Europe, U.S., and Australia, revenue was 245.4 billion yen, up 15.8 percent year-on-year, reflecting strong performance in the U.S., capturing solid demand, as well as signs of recovery in staffing demand in Europe and Australia, despite market conditions in both regions remaining challenging. The segment EBITDA plus its margin was 5.8%. For the first half, segment revenue was 917.5 billion yen, up 10.6% year-on-year, with a segment EBITDA plus its margin of 6.0%. For the second half, we expect segment revenue to increase 4.5% year-on-year to 913.4 billion yen, with a segment EBITDA plus its margin of 5.2%. There's no change to the four-year outlook shared in August of segment revenue of 1,831,000,000 yen and segment EBITDA plus S margin of 5.6 percent. Finally, turning to... Marketing Matching Technologies, or MMT. In Q2, segment revenue was 149.5 billion yen, up 3.5 percent year-on-year. In lifestyle, revenue grew 10.1 percent year-on-year, driven significantly by revenue growth in beauty, where the GMV-linked model progressed successfully. Housing and real estate revenue decreased 2.9 percent year-on-year. Excluding the accounting revenue reduction impact of approximately 1.9 billion yen, revenue grew 2.0 percent year-over-year. The accounting impact was due to the change in the allocation method for revenue recognition associated with the accounting system renewal at the beginning of this fiscal year, as explained in November last year. Segment EBITDA pluss margin was 27 percent, reflecting the smoothing out of quarterly seasonality in advertising and sales promotion expenses shared in May. For the first half, segment revenue was 291.4 billion yen, up 3.6 percent year-on-year, with an EBITDA pluss margin of 31.4 percent. For the second half, we expect segment revenue to increase 10.6 percent year-on-year to 313.5 billion yen, with an EBITDA plus S margin of 28.7 percent. As mentioned at the beginning, we expect the financial impact on the second-half performance outlook from the temporary suspension of car sensor net-related services in automobile within others to be minor. There is no change to the four-year outlook of MMT, with segment revenue expected to increase 7.1 percent year-on-year to 605 billion yen and a segment EBITDA plus its margin of 30 percent. This concludes my presentation.

Now we would like to proceed to the Q&A session. First, Goldman Sachs. Munakata-san, please. Yes, this is Munakata from Goldman Sachs Securities. Thank you very much for this opportunity. So, Deko, I have a question to you. In the first half of October, Meta announced Muse, and your share price fell. That was impressive. So, as Deco said, a two-sided marketplace, or the job seekers and the employers. You have very detailed data from both sides, and I understand that you have that strength, but like Muse, personal AI agent, looks for jobs. Once this kind of world becomes more commonplace, so this monetize, your underlying premise of monetization will change, do you think, and will this be an opportunity for your earnings growth? Thank you. Thank you for the question. Great question. So it's not just about Muse, but AI agent. Looking for jobs. AI agents can find jobs. Google for jobs does that, too. And it's becoming quite commoditized. So looking for jobs, finding jobs can be done. But the key, the problem here is the application for jobs. A large client's enterprise clients. Are receiving many applications by AI agents, so 100 or 1,000 per person and per case, and many companies are struggling how to handle that. The overall application, they ask indeed to use the hiring bot to organize the application. The click-based billing is now changing to the performance payment, performance billing. The companies that are close to hiring who know a person who they want to hire, and when they click and apply, We can offer a recommendation close to the users. So we can look at both sides, the demand and supply, to maximize the matching. I think we are ahead of others in that area. Because of the way agent is set up, if it just satisfies those that are looking for jobs, it's still difficult for them to do it. But pay-per-click is evolving. Cost per hire takes time. So cost per interview or cost per qualified application is now being tried. So certain qualifications, so if a person with so-and-so certification applies, then we will pay. That kind of test is possible. So, corporate client system, or... Or we also do AI screening. Only those who fulfill the criteria can apply. We're using the screening. Those who fulfill the requirement can be charged. We can make evolution. So this indeed has been doing cost per performance all along. And so with AI, the system visibility may improve. This will become a better, fair, more fair environment. So you are right. We think this is an opportunity for us because the traditional offline Asians Recruit agents and recruit agencies and those similar companies are doing business. So we can enter that space more affordably, and this will be an opportunity in the medium to long term. Thank you very much. That was clear. Personally, I think this kind of large change, this business model transformation and the job seekers and the client's mindset will change. It will accelerate the change of the mindset. So I have high expectations. Thank you. Another question, follow-up question from a different perspective, a short-term question. In this current quarter, Deco, you said at the outset that the growth rate is already high, so there may be – there was a risk of this growth rate settling down, but clients are now more mindful of time to hire, and the momentum is still being maintained, you said. So, U.S. ARPJ is now growing strongly. Clients are satisfied with the added value. And any hesitation or concerns on the monetization development? Am I correct to understand that that is the case? Just to make sure that that is the case. And new clients, industry or region, is there any particular industry, region, or are you developing in a fairly even fashion? Thank you. Thank you for the question. First, whether we have concerns on monetization. I think that was your question. What I often think is... Many companies' AI cost is rising, and CFO is saying that we want to manage AI costs properly. I think it's similar to that. We're not concerned, but we want to align with the client's speed because HR portion and the main business portion has a slight gap. What I'm trying to say is we... Send the applicants that they want to hire right away. They're happy because they can hire very quickly, and they can hire one after another. So they use money they pay to us, and our earnings rise. But then the company hires. Will their sales increase thanks to the hire? Or if the hiring process is automated, the people can be reallocated somewhere else to do other jobs. So clients, because the AI is changing so rapidly, clients, it's difficult for them to catch up or check. So we have to ascertain that, that speed. It often happens that with customers with annual deal, Because this is so impactful, they tend to spend more money than the annual deal amount. And if this has a positive cycle with business sales increase, that's okay. But we need to check that the bigger hire is leading to business improvement with the customer, with the client. From the second half last year, December, January, February, March, new products using AI or a new way of doing business was launched one after another. And so we have to check the numbers on a year-on-year basis. It's still difficult to foresee, still. So from those two points. We have that focus. Now, new clients, whether there are particular industries or regions, no, not really. Overall, the U.S. The skilled blue collar, blue collars that need skills, because baby boomers are retiring, the blue collar with skills, that's a big area with strong demand, and data center is another area we often hear, but data center, only 1% or so. So it's not like data center is driving the growth of sales. Thank you very much. I understand well.

Thank you. Thank you. Next, from JPMorgan Securities, Yamamura-san, please go ahead. Thank you. This is Yamamura from JPMorgan Securities. Can you hear me? Yes. Thank you. So, yes, this is my question regarding U.S. ARPJ, as always. I always ask questions about that. So this time, I would like to ask about the change in your volume projection, looking at the external data, advertisements. On a year-over-year basis, there is a negative trend, but it is recovering, as it appears, in fact. Based on your outlook from minus 4 to minus 1 percent, although it still remains in the negative domain, you are making an upward revision. Is this due to macroeconomic factors, or is it what you are referring to from the beginning of your presentation, expansion among new clients? Maybe you are trying to further expand your customer base, and this is a reflection of that strategy? From the very beginning, high-end products may not be used by clients right away, but maybe starting with lower-end products on a trial basis and you go deeper into those particular clients, that's another approach. So are you intentionally expanding your base, or is this the effect of some external factors? How should we read these numbers? Thank you. My apologies. You talked about the number of ads. Do you mean by the number of paying jobs, or the number of paid jobs, or are you referring to hiring lab data, the U.S. total number of jobs? Which are you referring to? It would be the latter. I see. So first, let me talk about the U.S. hiring state of play or hiring demand. We are seeing a slight increase in the hiring demand as a leading indicator for staffing. For instance, looking at the past three decades of data, when the economy turns positive as a leading indicator, we see increase in hiring demand for temp workers. Companies tend to start hiring with temp workers and then eventually make a shift to full-time workers. So over the past three decades, seeing stronger hiring demand among temp staff is a leading indicator. Currently in the U.S. It is currently trending at plus 10 percent above market. So there is a possibility that this will have a spillover effect to the full-time worker domain. But currently, we are still in the negative domain to maybe plus or minus zero percent level. Whether we will see further uptake? Well, over a hundred U.S. economists were interviewed and taking the middle point data. They will say that we should expect plus or minus zero percent. That's the consensus among those economists. So we are using such data and projecting maybe the level will be plus or minus zero. So that's the current assumption. And looking at the past, If you look at Indeed revenue, the overall U.S. higher-in-demand. It has almost 100 percent correlation. The trends were in sync with the U.S. hiring trend. But over the past two to three years, separate from this trend, we are seeing some different trend. For example, the monetization developments due to supply and demand situations, companies are willing to pay more for highly qualified candidates. So with monetization development, it's no longer a model where higher-in-demand solely determines the company's revenue. But with higher-in-demand, this is the first time we're experiencing this since we've made a change to the monetization model. So once the higher-in-demand is up and Thank you. Of course, since this is the first time, we are seeing what happens, and we are testing various approaches. New clients using entry-level products, low-end products, and then eventually shifting to higher-end, expanding our customer base. I believe that was part of your question. Actually, many of the new clients are using premium products. We are seeing increase among new clients using the premium. And this is due to the fact that these companies are struggling right now and have strong needs to hire people. So rather than expanding the customer base, it's more like this. For instance, 1,000 jobs, so 5,000 jobs. These are larger employers. Who want to hire in that volume, and they have a budget of 1 million per month. Let's say. But by using premium-sponsored jobs, since their hiring success goes up, they want to use premium-sponsored jobs. So if they want to keep the same budget of one million, then they can no longer hire 1,000 candidates. They would have to reduce the number of people they hire. So, in that sense, there are some clients who are reducing the number of paid job ads, but overall, we are not seeing this generalization that new clients are using lower-end products. I don't know if that answers your question. I see. So, even if it's a new client, they tend to go with premium products and sign contracts for these higher-end products. Yes, we are seeing many clients like that. And if you go to job post, you will see that in the job post as well with the AI, what is the situation? These services may be more fitting for your company's circumstances and so on. So for clients using premium, I think this is giving a positive impact, I see. As a follow-up, as you said earlier, so let's say hypothetically going forward, the U.S. If the job ad trend starts to recover, then what is the impact that you foresee at this time? Well, of course, I hope that revenue will also continue to grow. But as I briefly She mentioned earlier. The fact that companies are able to hire readily and seeing positive contributions to their revenues, I think this is certainly something that companies themselves would like to check and verify. There will be a step for such check. Costs increasing, and CFO only see the cost increasing. That's not the situation that we want. And so we are more concerned about analytics and tools to properly show the ROI. We are focused on development of such tools and other analytics. We need to maintain a trust and confidence of our customers in us and to be their partners in the medium to long term. So that's our focus. I see that's very clear. Thank you very much. Thank you. Next Nomura Securities, Wonsam, please.

Oh, from Nomura Securities. Thank you very much. So, indeed, large corporate business is my question. So far, SMBs, you're having big sales, and the questions are tilted to that. But in the medium to long term, I think there will be another inflection point for the large corporates as well. So product and sales and PSJ, as you hone, I hope that the turning point will come very soon. So any large scheme that you have in mind or maybe things will materialize, if you could give more color on the large corporate enterprise client side. Large clients' turning point, inflection point, the growth rate is rising steadily. And I mentioned this in the script earlier. Large corporates take time to use new products. So the sales cycle is longer. But we are acquiring large corporates steadily. So with large corporates with a sizable budget, the annual deal is also being acquired steadily. So it's not a sudden inflection point. We are gradually and steadily capturing those clients. For example, One common pattern is one particular department tries, and then other departments also try and expand throughout the company. That is one common way of the spread we're seeing. So it's not like SMBs where we have a clear inflection point and start seeing a clear, sudden increase. We think it's more a gradual, steady increase, and we are working hard to make that happen. Does this answer your question? Thank you. And my follow-up question is, the PSJ impact is so good. Hiring is done, and the HR department is happy, but the business units have some time lag, including the reshufflement or reassignment of people. So are there signals? Were there signals in customer on-site that led you to think like that, or are you just guessing that that may be the case? Thank you for the question. Especially with the clients with annual deals. The amount of money, many companies have certain amount of money per month, and their usage exceeds 100%, and they front load, and the amount that they plan to use that year was already used up early on. And so we talk with those clients and say, maybe you have to increase the amount next year. And then the discussion leads to ROI. And the company says, well, we can hire so easily in big volume, and so we tend to spend so much more than we thought. The business, there may be a gap between the hiring status and the business unit situation. SMBs, where presidents have the direct control, says, well, presidents are very happy they can have good quality applicants so quickly, but And they say the spending goes up, but I understand it makes sense, so that's okay. But when there is a gap between the HR department and business side, they have to explain to each other more. And this is actually happening. So does this answer your question? Of course. So this is for other listeners, too. SMBs, they have the posts, they are posting posts that they have to fill no matter what. But large corporates, maybe they're spending quicker than they planned. And so the impact on the sales, impact, sales growth, like ourselves. Many tech companies In development, software engineers use AI tool, and the development speed goes up, and the cost goes up. But, of course, if the sales increase, that's great, but software engineers' speed goes up, but the sales doesn't go up, then you have to think about cost. If the sales doesn't go up, it's probably similar to that. Thank you very much.

Thank you. We are running out of time, so we will next take the last question. Enagao-san of Bio Bay. Please go ahead. This is Naga Ono from B of A. Regarding AI and personnel cost structure is my question about looking at first half, personnel expenses were controlled to the same level as previous year, and HR tech margin increased to 47.5 percent. And with AI, internal productivity, of course, contributed to higher profitability, I believe. But with higher revenue... Management does not increase headcount. How long do you continue with this approach? And in relation to what was mentioned previously, the current personnel expense ratio or with the fixed costs structured, can we also expect further growth of revenue? What is your view? Yes, thank you for the question. Well, there are some details if you look closely for sales. The plan is a slight increase in terms of headcount, but having said that, There are still some areas where we can expect higher productivity with AI, and there are many ways and measures that we can still implement. So from that perspective, we are seeing more focus and prioritization compared to before. And also, simply, in several of the countries, our market share is still low. So in those markets. With more leeway, of course, there is an option of spending more marketing costs so that we will be competitive in the medium to longer term. So that's why we are presenting those numbers for the second half. But personally, I believe there's more we can do with AI. So this is certainly a challenge that we'd like to take on. I hope that answers your question. Certainly. As a follow-up, in the medium term, EBTA margin of 50 percent is a guidance that you have for the medium term. I'm looking at the Q2 results. The higher revenue, 70 percent of that is profit. So 50 percent, is it just a milestone, or is it something else? Investments for growth, costs, and profit, all of these are imbalanced, and 50 percent is determined based on that. So what is your ideal for the medium term? What is the margin level that you will be comfortable with in the medium term? Well, 50% is, how should I say, is not a goal for us. That's not an image we have. With more usage of AI, we may be able to achieve higher than that. And, of course, for the overall balance, we have to think about marketing and certain areas or operations that cannot be replaced by AI, for instance, sales. For those areas, of course, I've talked about focus and prioritization. There will be a further focus and prioritization in those areas. But personally, if my job is… I'm going to be replaced by AI. That's certainly something I wish for it to happen. And when I think about why my job cannot be replaced by AI, I can certainly pinpoint to some things, some areas. So if I pursue and focus on those areas, it's not so much reducing costs, but more about increasing the speed of management. That's the priority for me. And I am working towards that goal, and as a result, the productivity is enhanced. That is the image. That I am working against. Why is my job not replaced or automated by AI? So that's the question I frequently ask myself. I hope I'm making sense. Yes, certainly you focus on the speed of management. Your message is very clear. Thank you, Deco. Well, so when I think about signals, there are signals being emitted. AI agents in usage, and then there will be a stage or step for us to evaluate and retraining, relearning. There should be a loop, a cycle of that, but currently the loop is not being executed. That indicates to a lack of data. So by supplementing this, by making sure that this loop is running Thank you.

Thank you. That brings the Q&A session to a close. So with that, we will close the earnings call on FY2026 Q2 consolidated results, and the follow-up with Jun will start in five minutes with the analysts. Thank you very much.