Recruit : FY2018 Financial Results and Mid-Term Strategy Presentation Material

May 14, 2019 at 06:53 am

FY2018 Financial Results and Mid-Term Strategy

Recruit Holdings Co., Ltd.

Masumi Minegishi

President, CEO, and Representative Director

May 14, 2019

Disclaimer

In preparing these materials, Recruit Holdings Co., Ltd. relies upon and assumes the accuracy and completeness of all available information. However, we make no representations or warranties of any kind, express or implied, about the completeness and accuracy. This presentation also contains forward-looking statements. Actual results, performance and achievements are subject to various risks and uncertainties. Accordingly, actual results may differ significantly from those expressed or implied by forward-looking statements. Readers are cautioned against placing undue reliance on forward-looking statements.

Third parties are not permitted to use and/or disclose this document and the contents herein for any other purpose without the prior written consent of Recruit Holdings Co., Ltd.

Table of Contents

1.FY2018 Highlights

2.Three-YearHistorical Summary (FY2016-FY2018)

3.Long-TermGoals of Recruit Group

4.Mid-TermSegment Strategies

5.Governance Structure

6.Management KPIs and Financial Policies

7.FY2019 Consolidated Financial Guidance

FY2018 Performance Highlights

Consolidated

1. FY2018 Highlights

Record-highs for revenue, EBITDA and adjusted EPS

HR Technology

Revenue increased +54.0%(1)yoy in US dollar terms to 2.9 billion US dollars

Media & Solution

EBITDA grew +10.4% yoy and EBITDA margin improved 90 basis points to 23.9%

Staffing

EBITDA increased +14.1% yoy and EBITDA margin improved 80 basis points to 6.4%, despite 0.7% decrease in revenue

(1) The US dollar based revenue reporting represents the financial results of operating companies in the HR Technology segment on a US dollar basis, which differ from
the consolidated financial results of Recruit Holdings Co., Ltd (the "Company"). Assuming IFRS 15 was applied in FY2017 on a pro forma basis.	4

FY2018 Consolidated Financial Results

1. FY2018 Highlights

(in billions of yen, unless otherwise stated)	FY2017	FY2018
	Full-year	Full-year	YOY

Revenue	2,173.3	2,310.7	+6.3%

EBITDA	258.4	293.2	+13.5%

EBITDA margin	11.9%	12.7%	+0.8pt

Operating Income	191.7	223.0	+16.3%

Profit attributable to	151.6	174.2	+14.9%
owners of the parent

Adjusted profit	144.9	178.9	+23.5%

Adjusted EPS (yen)	86.74	107.10	+23.5%

Three-Year Performance Highlights

Management Key Performance Indicators

EBITDA grew to 293.2 billion yen

2.Three-YearHistorical Summary (FY2016-FY2018)

Adjusted EPS: 3 yr. CAGR 15.5%, exceeding the target

"Further growth in overseas business": Overseas revenue increased to approximately 46% of total by acquisitions of USG People and Glassdoor, and growth in the HR technology segment

"Sustainable growth in Japan business": Expanded and strengthened the individual user and enterprise client base, and created new growth areas

Financial Policies and Shareholder Returns

Exceeded ROE target of 15% in all three fiscal years

Increased dividend per share consistently by implementing interim dividend from FY2017

Revenue and EBITDA Growth

2.Three-YearHistorical Summary (FY2016-FY2018)

(in billions of yen)	Revenue	(in billions of yen)	EBITDA

2,310.7

	2,173.3
					293.2


		1,941.9

						258.4
				232.2

1,588.6



			202.2

FY2015

FY2016

FY2017

FY2018

FY2015

FY2016

FY2017

FY2018

（1）The Company adopted IFRS from the beginning of the FY2017. Figures for FY2016 were calculated assuming IFRS were applied on pro forma basis. Figures for FY2015 are based on Japanese GAAP.

（2）The Company changed the structure of its reportable segments from FY2016; figures for FY2015 under the current structure are not available.

Three-Year Segment Performance

HR Technology

2.Three-YearHistorical Summary (FY2016-FY2018)

Revenue increased by approximately 4x from 0.7 to 2.9 billion US dollars(1)

Operates websites in 60+ countries

Glassdoor acquisition

Media & Solutions

Remained No.1 by revenue in almost all major subsegments(2)in Japan while maintaining high EBITDA margin

Expanded new businesses such as Air Seriesand Study Sapuri

Staffing

Became the 5th largest global staffing firm(3)through USG People acquisition

EBITDA margin increased from 5.6% to 6.4%

（1）The US dollar based revenue reporting represents the financial results of operating companies in the HR Technology segment on a US dollar basis, which differ from the consolidated financial results of the Company.

（2）The Company uses comparative information only when companies disclose theire revenue.

（3）Source: SIA (Staffing Industry Analysts), "Largest Global Staffing Firms 2018"	8

Enhancing Shareholder Value

2.Three-YearHistorical Summary (FY2016-FY2018)

Stock price(1)increased by approximately 2.8x(2)in three years

（1）Stock price is adjusted to reflect the three-for-one stock split effective on July 1, 2017.
（2）03/31/2016 to 03/29/2019	9

Table of Contents

1.FY2018 Highlights

2.Three-YearHistorical Summary (FY2016-FY2018)

3.Long-TermGoals of Recruit Group

4.Mid-TermSegment Strategies

5.Governance Structure

6.Management KPIs and Financial Policies

7.FY2019 Consolidated Financial Guidance

Provide Effective Matching Solutions

3．Long-Term Goals of Recruit Group

Leveraging technology to improve matching across HR and Media businesses

Individual

Users

HR Technology

Media & Solutions

Enterprise

Clients

Staffing

Growth and Evolution in HR Matching

3．Long-Term Goals of Recruit Group

Leveraging technology to drive innovation in overall HR matching businesses

：HR Technology

Improve matching efficiency to lead the evolution of all HR matching businesses in Recruit Group

：HR Solutions in Media & Solutions / Staffing

Continue to improve existing businesses

Employing disruptive technological innovation to become the global leader in the HR matching market

Growth and Evolution in HR Matching

3．Long-Term Goals of Recruit Group

Innovate the estimated $150 billion+(1)HR matching market with effective matching solutions

Job advertising & talent sourcing tools


	Online	Oﬄine
: Total ~$20B+(2)
	$15B	$5B+

Placement & Search

: Total ~$50B(3)

Temp Staﬃng Market

	Gross Proﬁt(4)
			: Total ~$445B(3)
	~$81B

(1)Source: SIA (Staffing Industry Analysts), www.staffingindustry.com; 2018 company estimates, consists of the job advertising and talent sourcing tools market, the placement and executive search market, and the temporary staffing market (gross profit)

(2)Source: 2018 company estimates, consists of online job advertising, employer branding, and talent sourcing tools

(3) Source: SIA, Global Staffing Industry Market Estimates and Forecast: November 2018 Update, company estimates; assumes 6% industry growth rate (2018)	13
(4) Assumes gross profit margin of 18.3% calculated based on the weighted average of the top 3 publicly traded global staffing companies in terms of revenue (2018)

Growth and Evolution in HR Matching

3．Long-Term Goals of Recruit Group

Recruit Group HR matching business(1)in FY2018: 870 billion yen

Staffing	HR
(Gross Profit)	Technology

Total(2):

Approximately

1,270

billion yen

M&S:

Marketing

SolutionsM&S:

HR Solutions

HR matching

business

(1)	Business scale of HR matching businesses comprised of revenue of (i)HR Technology, (ii) HR Solutions in Media & Solutions and (iii) Staffing excluding salary for temporary
	staff etc.
(2)	"Total" comprised of (1) and revenue of Marketing Solutions in Media & Solutions	14

Mid-term Segment Strategies

HR Technology

4. Mid-Term Segment Strategies

Promote further growth of online job advertising business

Expand capabilities through internal investment and M&A in online HR matching businesses

Media & Solutions

Focus on stable growth in advertising business and expand operational and management support service across subsegments

Aim for stable revenue growth and keep adjusted EBITDA margin at a current level

Staffing

Improve adjusted EBITDA margin on a global scale

HR Technology

4. Mid-Term Segment Strategies

Promote further expansion of HR matching businesses

Media & Solutions

4. Mid-Term Segment Strategies

Create more value for existing and potential enterprise clients of Marketing Solutions by offering both advertising business and operational and management support services

：Help existing enterprise clientsincrease revenue

Increase the number of customers through Hot Pepper Gourmetand Operational Support Package

Increase spend per customer, leveraging data science of AirREGI

：Help potential enterprise clients improveoperational efficiency

Offer Air Seriesto realize low-cost operations management

Achieve stable revenue growth and maintain adjusted EBITDA margin through these actions

©Recruit Holdings

Media & Solutions

4. Mid-Term Segment Strategies

Expand the operational and management support service,Air Series

	Existing	New

Enterprise Clients	Enterprise Clients

Staffing

4. Mid-Term Segment Strategies

Continue to improve adjusted EBITDA margin globally

	Japan operations				Overseas operations
（in billions		（	billions

of yen）	（%）	yen）		（%）

FY2016

FY2017

FY2018

FY2016

FY2017

FY2018

EBITDA

EBITDA margin

Nomination of Board of Directors

5．Governence Structure

After the General Meeting of Shareholders to be held in June 2019, there will be 7 members on the Board

：Candidate for Board of Directors - Hisayuki Idekoba

-has a proven track record employing technology to drive growth and innovation across many of our businesses

-has contributed significantly to the steady growth of Indeed and the globalization of the Group in recent years

Nominate at least one female Board Director candidate for the General Meeting of Shareholders by June 2021

Table of Contents

1.FY2018 Highlights

2.Three-YearHistorical Summary (FY2016-FY2018)

3.Long-TermGoals of Recruit Group

4.Mid-TermSegment Strategies

5.Governance Structure

6.Management KPIs and Financial Policies

7.FY2019 Consolidated Financial Guidance

Management KPIs and Financial

Management KPIs

6. Management KPIs and Financial Policies

Adjusted EBITDA(1)and Adjusted EPS

Financial Policies - Capital Efficiency

Maintain ROE of approximately 15%

Financial Policies - Capital Allocation

1.Dividends: Implement twice a year - Interim andyear-end Target consolidated payout ratio of approximately 30%(2)

2.M&A: Strategic acquisitions primarily in the HR Technology segment

3.Stockbuy-back: Consider implementing a share repurchase program based on the capital market environment and financial outlook

		22
（1）Adjusted EBITDA: operating income + depreciation and amortization(excluding depreciation of right-of-use assets) ± other operating income/expenses
（2）Consolidated payout ratio: approximately 30% of Profit available for dividends (profit attributable to owners of the parent excluding non-recurring income/losses)

FY2019 Consolidated Financial Guidance

8. FY2019 Consolidated Financial Guidance

Consolidated revenue and adjusted EBITDA are expected to increase, with revenue and adjusted EBITDA increasing in all three segments

Management KPIs

Adjusted EBITDA is expected to be in the range of 310 billion yen to 330 billion yen, exceeding the previous fiscal year

Adjusted EPS is aimed to grow high single digits compared to FY2018

Dividends

FY2019 - Annual 30 yen: interim 15 yen and year-end 15 yen

* Assumed foreign exchange rates for FY2019: JPY 107 per US dollar, JPY 129 per Euro, JPY 78 per Australian dollar	23

FY2019 Segment Financial Guidance

HR Technology

8. FY2019 Consolidated Financial Guidance

Revenue in US dollar terms is expected to grow 35% plus or minus a few percent

Adjusted EBITDA margin is expected to be plus or minus a few percent compared to FY2018

Media & Solutions

Revenue is expected to grow mid single digits in Marketing Solutions and low single digits in HR Solutions

Adjusted EBITDA margin is expected to be the same level of FY2018

Staffing

Revenue is expected to grow low single digits in both Japan and Overseas operations

Adjusted EBITDA margin is expected to increase slightly

Appendix

FY2018 Full-year and Q4 Financial Results

	FY2017	FY2018	FY2017	FY2018
(in billions of yen, unless otherwise	Q4	Q4	YOY	Full-year	Full-year	YOY
stated)
Revenue	556.4	580.3	+4.3%	2,173.3	2,310.7	+6.3%

EBITDA	42.7	53.1	+24.2%	258.4	293.2	+13.5%

EBITDA margin	7.7%	9.2%	+1.5pt	11.9%	12.7%	+0.8pt

Operating Income	25.1	30.9	+23.1%	191.7	223.0	+16.3%

Profit attributable to	23.0	28.2	+22.4%	151.6	174.2	+14.9%
owners of the parent

Adjusted profit	22.1	27.8	+25.7%	144.9	178.9	+23.5%

Adjusted EPS (yen)	13.26	16.67	+25.7%	86.74	107.10	+23.5%

FY2018 Full-Year and Q4 Financial Results by Segment

Revenue(in billions of yen)	FY2017	FY2018	FY2017	FY2018
Q4	Q4	YOY	Full-year	Full-year	YOY
Consolidated Results	556.4		580.3	+4.3%	2,173.3	2,310.7	+6.3%
HR Technology	61.9		90.0	+45.4%	218.5	326.9	+49.6%
Media & Solutions	181.2		193.7	+6.9%	679.9	721.4	+6.1%
Staffing	319.9		304.1	-4.9%	1,298.8	1,290.2	-0.7%
Eliminations and Adjustments		-6.6		-7.6	-	-24.0	-27.9	-
EBITDA(in billions of yen)

Consolidated Results	42.7		53.1	+24.2%	258.4	293.2	+13.5%
HR Technology	7.3		10.5	+44.1%	30.6	47.4	+55.0%
Media & Solutions	27.8		32.2	+16.2%	156.1	172.4	+10.4%
Staffing	9.8		13.6	+39.2%	72.7	82.9	+14.1%
Eliminations and Adjustments	-2.2		-3.4	-	-1.0	-9.5	-
EBITDA margin

Consolidated Results	7.7%		9.2%	+1.5pt	11.9%	12.7%	+0.8pt
HR Technology	11.9%		11.8%	-0.1pt	14.0%	14.5%	+0.5pt
Media & Solutions	15.3%		16.7%	+1.3pt	23.0%	23.9%	+0.9pt
Staffing	3.1%		4.5%	+1.4pt	5.6%	6.4%	+0.8pt
								27

FY2017-FY2018 Quarterly Consolidated EBITDA by Segment

HR Technology

Media & Solutions

(in billions of yen)

71.8

76.4

84.8

78.7 76.5

67.3

53.1

42.7

FY2017				FY2018

HR Technology

(in billions of yen, unless otherwise stated)	FY2017	FY2018	FY2017	FY2018

Revenue	Q4	Q4	YOY	Full-year	Full-year	YOY
HR Technology	61.9	90.0	+45.4%	218.5	326.9	+49.6%
Reference: Revenue in	572	816	+42.6%	1,976	2,944	+49.0%
million of US dollars(1)

EBITDA

HR Technology

7.3

10.5

+44.1%

30.6

47.4 +55.0%

(in billions of yen, unless			FY2017					FY2018
otherwise stated)
	Q1	Q2	Q3	Q4	Full-year	Q1	Q2	Q3	Q4	Full-year
Revenue(1)	402	460	490	557	1,911	634	739	754	816	2,944
- IFRS 15 applied

YOY	-	-	-	-	-	57.6%	60.6%	53.7%	46.3%	54.0%

(1) The US dollar based revenue reporting represents the financial results of operating companies in the HR Technology segment on a US dollar basis, which differ from
the consolidated financial results of the Company. Assuming IFRS 15 was applied in FY2017 on a pro forma basis.	29

Media & Solutions

(in billions of yen, unless otherwise stated)	FY2017	FY2018	FY2017	FY2018

Revenue	Q4	Q4	YOY	Full-year	Full-year	YOY
Media & Solutions	181.2	193.7	+6.9%	679.9	721.4	+6.1%
Marketing Solutions	96.4	105.2	+9.0%	378.5	400.4	+5.8%
Housing and Real Estate	24.7	28.1	+13.5%	98.1	104.1	+6.1%
Bridal	13.1	13.0	-1.2%	55.4	54.9	-0.9%
Travel	14.2	14.9	+5.1%	58.8	61.6	+4.7%
Dining	9.7	10.0	+3.4%	37.3	38.8	+4.0%
Beauty	16.8	18.7	+11.1%	63.8	72.0	+12.9%
Others	17.8	20.3	+14.5%	64.8	68.7	+6.0%
HR Solutions	83.0	86.6	+4.3%	294.4	316.8	+7.6%
Recruiting in Japan	76.8	78.2	+1.8%	270.6	283.9	+4.9%
Others	6.1	8.3	+36.7%	23.7	32.8	+38.3%
Eliminations and Adjustments	1.7	1.9	+9.8%	7.0	4.1	-41.2%
EBITDA
Media & Solutions	27.8	32.2	+16.2%	156.1	172.4	+10.4%
Marketing Solutions	15.5	18.8	+21.4%	95.2	109.8	+15.3%
HR Solutions	16.4	17.9	+9.1%	74.5	79.2	+6.3%
Eliminations and Adjustments	-4.1	-4.5	-	-13.6	-16.6	-
							30

Staffing

(in billions of yen, unless otherwise stated)	FY2017	FY2018	FY2017	FY2018

Revenue		Q4	Q4	YOY	Full-year	Full-year	YOY
Staffing	319.9	304.1	-4.9%	1,298.8	1,290.2	-0.7%

Japan operations	128.9	133.4	+3.5%	509.2	542.5	+6.5%

Overseas operations	190.9	170.7	-10.6%	789.5	747.7	-5.3%
EBITDA

Staffing	9.8	13.6	+39.2%	72.7	82.9	+14.1%

Japan operations	2.7	6.6	+145.7%	33.8	43.0	+27.3%
Overseas operations	7.1	7.0	-1.4%	38.9	39.8	+2.5%

Candidate for Board Director

Hisayuki Idekoba

April 1999 Joined the Company

April 2012 Corporate Executive Officer in charge of R&D and Asia Job

Board at Global Headquarters

Chairman of Indeed, Inc.

October 2013 CEO & President of Indeed, Inc.

October 2015 CEO of Indeed, Inc.

April 2016 Managing Corporate Executive Officer in charge of Global

Online HR Business (current HR Technology Business)

January 2018 Senior Managing Corporate Executive Officer in charge of Operation (COO)

Director and CEO of RGF OHR USA, Inc. (at present) Director and Chairman of Recruit Global Staffing B.V. (at present)

April 2019 Senior Managing Corporate Executive Officer in charge of

Corporate Planning (CSO), Administration (CRO) and

Operation (COO) (at present)

Director of Indeed, Inc. (at present)

* Appointed to be a Board Director of the Company, after the Ordinary General Meeting of Shareholders scheduled in June 2019.	32

Adjustment items for EBITDA and Adjusted Profit

(in billions of yen)	FY2018

EBITDA	Q4	Full-year
Operating	30.9	223.0
income

Other operating	-0.3	-9.1
income

Other operating	+4.7	+8.1
expenses

Depreciation	+17.7	+71.1
and amortization

EBITDA	53.1	293.2

(in billions of yen)	FY2018

Adjusted Profit	Q4	Full-year
Profit (loss) attributable to	28.2	174.2
owners of the parent

Amortization of intangible assets	+5.0	+22.2
arising due to business combinations

Non-recurring income	-2.5	-9.0

Non-recurring losses	+4.6	+8.0

Tax reconciliation regarding the	-7.5	-16.5
adjustment items

Adjusted Profit	27.8	178.9

Adjusted EBITDA

EBITDA excluding the impact of IFRS 16, being applied beginning in FY2019

(in billions of yen)		Impact of		FY2018
	FY2018	IFRS 16			assuming IFRS
	(1)
		adoption		16 adoption
	Full-year	Full-year		Full-year

Operating income	223.0	+1.2	224.3
Other operating income	-9.1	-	-9.1
Other operating expenses	+8.1	-	+8.1
Depreciation and amortization	+71.1	+33.4	+104.5
EBITDA	293.2	+34.6	327.9
Depreciation and amortization	-	-33.4	-33.4
（right-of-use-assets）
Adjusted EBITDA	-	+1.2	294.5

（1）Assuming IFRS 16 was applied to financial statement in FY2018 on a pro forma basis. These figures are estimated based on lease contract as of September 30, 2018 and are unaudited.

Notes

EBITDA: operating income + depreciation and amortization ± other operating income/expenses

Adjusted EBITDA: operating income + depreciation and amortization(excluding depreciation of right-of-use assets) ± other operating income/expenses

Adjusted profit: profit attributable to owners of the parent ± adjustment items* (excluding non-controlling interests) ± tax reconciliation related to certain adjustment items

*Adjustment items = amortization of intangible assets by acquisitions ± non-recurring income/losses

Adjusted EPS: adjusted profit / (number of shares issued at the end of the period -number of treasury stock at the end of the period)

Profit available for dividends = profit attributable to owners of the parent ± non-recurring income/losses, etc.

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Recruit Holdings Co. Ltd. published this content on 14 May 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 14 May 2019 10:52:10 UTC

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