Persol Holdings Co.,Ltd. (2181) Earnings Call Transcript

Hello. I am Tao Mineo, CSO. Thank you for your time today. I have been involved in the creation and growth of multiple businesses within the group. I am currently responsible for the group-wide management strategy and business portfolio. Today, I will explain our group-wide approach to growth and our future focus area, frontline workers. First, -- here is the group's overall approach. We had redefined business portfolio toward 2030 and beyond based on market growth potential and competitive advantage in the AI era. As you can see, staffing BPO and Asia Pacific SBUs are domains to enhance stronger profit base while maintaining stable revenue growth. Career and technology are domains with sustained market growth and has high potential for upside through business model transformation. We will advance ahead with AI model implementation and shift toward higher value-added domains to drive a high-growth, high profitability business. At the top of the slide on the right, we have R&D FU and Gojob, which are new domains with strong growth potential. Leveraging synergies between Gojob and domestic businesses, we are going to consolidate our focus domain on frontline worker. Broadly speaking, our core strategy is to hone our ability to generate profits from existing businesses and shift resources to areas that will grow in the AI era. Next, I'd like to talk about frontline worker domain. Frontline work is where workers are in charge of on-site operation and have touch points with customers and users. These are domains such as manufacturing, logistics, construction, maintenance, food service and nursing care, where people create value in the front lines. There are 2 reasons why these markets are important. One is because of structural labor shortages. In addition to decline in working population, substitution by AI is difficult. Even by 2035, huge labor shortage is expected. The second is because we expect that there will be increasing workforce mobility from white-collar workers driven by AI. To accommodate this trend, we believe it's important as an infrastructure supporting career transitions and labor mobility will continue to grow. What would be needed at such a time is a system that enables individuals to transition to their next job opportunity. From a company's perspective, it is necessary to establish a system for securing the workforce that encompasses not only hiring but also workforce planning, retention and development. Then how can Persol create value in this domain? Our strength lies in offering options for a wide variety of work styles cross-sectionally, such as temporary staffing, placement business and gig-type jobs. We are not going to offer them individually, but integrate them with AI and data to offer as a cross-sectional matching base. Through such efforts, benefits such as increase in income or long-term employment can be offered to individuals and benefits such as strengthened recruiting capabilities, talent retention can be enjoyed by the companies. The key point is that this goes beyond simply securing a single candidate and finalizing their hire. It allows us to address both the company's workforce planning and the creation of career opportunities for individuals. We believe this is a domain that only we at Persol as a company that operates multiple services and holds a wealth of data can tackle. Last of all, I would like to share our thoughts on AI, which supports this platform. The conventional recruitment services has primarily relied on a model that matches candidates and job openings based on registered information and job postings at a given point in time. But going forward, we will evolve the model to the one where individual data are acquired continuously and optimal recommendations will be made more frequently, continuously collecting individual data and updating their status constantly. This has been realized because of the use of AI. Based on this, algorithm will estimate aptitude, enabling high precision, speedy AI matching. As data accumulates and learns, we can continue to improve our proposals to the users. Through this cycle, we believe we will be able to drive user activation, improve LTV and create high added value. In the frontline worker market, Persol will create a platform to offer individuals opportunities to work and at the same time, to solve workforce issues at companies. This concludes my presentation. Thank you.

I am [ Fino ] from Career SBU. Thank you for your time today. Today, I will explain the growth strategy of Career SBU, starting with the market assumptions, transformation to an AI-driven placement business model and strengthening of high-income segment in the order. Today, I'd like to focus especially on how we can transition from a highly volatile business model to a structure that enables stable growth through the usage of AI and data. Speaking for myself, having long been involved in the job placement and technology domains, I view the current market environment not as a temporary phenomenon, but as an opportunity for a structural shift. I would like to explain the specifics today. First, let me state the premise. Career SBU has 3 main businesses of placement, job recruitment media and side job and freelancer support. While placement accounts for about 60% of revenue, we are characterized by a multilayered structure in which we engage with customers through a combination of multiple services. Out of the placement business, high-income group whose annual income is JPY 6 million or higher account for 1/4. As such, we are shifting towards high value-add domain. I will explain later, but this structure itself is the foundation for the usage of AI and the growth of high-income segment growth. Next is about market perception. In the short term, we expect companies to continue selective hiring and demand for high-income group to continue strongly. Over the mid- to long term, in addition to the declining working population and rising job mobility, there will be an increase in job transition and career support demand. While the use of AI will help streamline recruitment processes, decision-making support is expected to remain as an area that can only be materialized by humans. In this context, we believe that our company is well positioned to maintain and strengthen our competitive advantage even in the age of AI, thanks to [ Judah's ] ability to attract individuals, its multilayered services and its proprietary data. Let me go into the main part from here. We will implement an AI model in the placement business to shift to a high-growth, high profitability business structure. There are 2 points to realize this. First is to structure the matching process with human and proprietary data and AI. The second is to strengthen businesses in areas with high growth, namely the placement for the high-income group and side jobs freelancers. This is [ Hiro ]. Through such efforts, we aim to realize revenue growth of 7% to 10% year-on-year and adjusted EBITDA margin of 20% or more in fiscal 2028. We believe that this will mark a shift toward a model that simultaneously boosts both growth and profitability rather than simply improving efficiency. Next is our approach on AI. From fiscal 2026 through fiscal 2027, we plan to move forward with the introduction of AI into the hiring process, and we aim to complete the implementation of AI across the entire process by fiscal 2028. We already have a proven track record of AI adoption and creation of job postings. I believe what is important is the segregation of roles. Having AI handle process-intensive tasks while humans focus on decision-making support. With this design, we aim to improve both the productivity and outcomes simultaneously. Now the most important point here is we are not just using AI just to reduce costs, but believe it is an investment to grow revenue. To be concrete, 24/7 counseling will be possible with AI counseling, enabling outreach to previously underserved users. We, therefore, aim to increase counseling rate by 1.2x. Furthermore, in matching using proprietary data, we aim to increase the conversion rate by 1.3x. In other words, we intend to create a structure that increases both the total number of counseling users and the conversion rate. Furthermore, by leveraging data that provides insights into factors such as user preferences and corporate culture, we will provide decision-making support that leads to highly satisfactory outcomes. As a result, we'd like to create a model that goes beyond mere efficiency improvements, but one that enhances both the number of users we can support and the quality of that support. This is just an illustrative example. Individual processes are shown here. From the perspective of job seekers, AI will handle tasks such as counseling, interview practice, scheduling and document creation. The key point is that AI will enable us to provide support to job seekers whom consultants have been unable to fully assist until now on a much broader basis. Furthermore, we aim to achieve both efficiency and added value by having human support the final decision-making process. Next, I'd like to talk about high-income segment. We have achieved high revenue growth in the past 3 years in the high-income group. Going forward, we intend to evolve this into a replicable growth model by combining the integration of multilayered services, strengthening our consulting capabilities and implementing brand strategies. In other words, I believe we are now in a phase where we are not just riding the wave of a growing market, but are actively working to develop a winning strategy. High-income segment is not just job placement only, but includes HiPro's side jobs and freelancer support. We aim to grow our market share through the growth of both of these businesses. We aim to achieve continuous growth. Looking at the figures, in fiscal 2028, which is during the current midterm management plan, we aim to achieve CAGR of 10% or more in high-income segment and CAGR of 20% or more in the side jobs and freelancers support, the high-growth segment. As a concrete way to grow the high-income segment in placement business, we aim to bolster the 360-degree recruitment consultant organization and strengthen the strategies of the 2 brands, doda and doda X further. Until now, doda has primarily focused on job seekers with annual incomes ranging from JPY 4 million to JPY 6 million. But going forward, we plan to expand our services to those earning JPY 6 million to JPY 8 million. Additionally, we intend to strengthen our services on doda X for those earning JPY 8 million or more. This is not simply a matter of strengthening our sales efforts. It means redesigning our business model to better suit high-income segment. Through this, we will enhance the sustainability of our growth. To summarize, we will transform our revenue structure to evolve our placement business model by using AI and drive growth in the high-income segment. This is a major strategy of Career SBU. Thank you for your attention.

Hello, everyone. I am Masaki from Technology SBU. Thank you very much for taking your time out of your busy schedule. Now I'd like to start my presentation. This is the first page. Let us, first of all, introduce our SBU. We have diverse service models and industry as shown on the left. At the bottom left of the right side, we have businesses from a wide range of companies brought together like Nissan Diesel Technical Research Institute, a company with diesel engineer specialists and Persol ABC Technology, formerly engineers of Panasonic Consumer Appliances. Furthermore, members from various SBUs within the Persol Group who developed systems came together. And when members from the temporary staffing business joined, our technology SBU was established. And the business is run by management from various backgrounds, such from major manufacturers, consulting firms, major SIs and others as described on the right bottom of the slide. And currently, we are divided into 3 subsegments of IT/DX solutions, engineering and registered temporary staffing, freelancers. We have our mission described, create better working opportunities for engineers. And the other mission is to improve productivity for individuals and organization, which we have been upholding since 2020. We are operating our business with these 2 missions. Let me share some case studies. This is a photo of engineering on the left. This is Oki Islands with autonomous driving bus. There are many autonomous driving buses everywhere in the world, but this one is the first in the world in autonomous driving between islands and getting on and off the vessels by bus. We are conducting on-site verification in Japan, and it is successful. On the right are photos related to AI initiatives. At the left top is a tractor we bought of a certain manufacturer. We removed the engine and made it into an EV. Furthermore, we made the front styling based on the design by generative AI. We were able to realize this in a little over a year. We brought this to a trade show the other day and received many inquiries. We are currently receiving many requests for retrofit such as converting the existing engine or diesel engine cars, trucks and others to autonomous driving or electrified vehicles. Please take a look at the photo in the middle left. This is physical AI, which is in trend now. We are in the business of helping robots eliminate error rates through the use of AI and cameras. The very bottom is related to ChatGPT. When ChatGPT for groups was released, we were able to start using it right away. So our team implemented it. so that all employees in the group could use it. Now to make it happen, what do we want to achieve? As described in the middle, while maintaining revenue CAGR of 10%, we call it 10 by 10 or 10 by 12 internally, but aim to achieve 10% adjusted EBITDA margin in 2028. And in fiscal 2030, achieved 12%. These are the metrics we use internally. For nonfinancial indicators, as we have moved from deflationary times to inflationary times, we have committed internally to increase pays to employees by inflation rate plus 1%. I'd like to once again inform you of our SBU's history and the future. Under our previous midterm management plan, from fiscal 2023 to fiscal 2025, we achieved 10% growth by steadily advancing our growth initiatives in line with the plan. From fiscal 2026 to 2028 and beyond to fiscal 2030, we will commit to achieving adjusted EBITDA margin of 10% and then increase it to 12% by fiscal 2030 as described on the right. How are we going to achieve that? But before that, let me talk about our market view. Let me start with supply and demand tightness. Against the backdrop of growing needs for AX, DX and productivity improvements, we are receiving many inquiries due to shortage of labor. The second is about qualitative change. We have come to the conclusion that simply providing personnel and engineers is no longer enough. So we've been emphasizing the need to arm ourselves with AI within our SBU. From the stage of being able to use AI, we aim to be able to make full use of AI. And ultimately, we want to be able to become experts for increased scarcity, AI and physical is written. This is different from physical AI. It means utilizing AI to be close to customers, working alongside them to enter into the front line. For example, we are being praised about company uniforms. Increasing scarcity of the value can be created if we can enter into our customers' factory, wearing their company uniform, working together with them. Let me explain the impact of AI based on our perception of the market. You may know much more than I do, given that this is set to have an impact on the scale of the industrial revolution, we've been quite surprised ever since the cloud code was introduced. Where is the value shifting? We believe value will shift towards both end of the smile curve. In such an environment, what is our strength? As I mentioned earlier, technology SBU is made of 12 companies combined together. It is precisely this power of transformation, cherishing each person's past and history while evolving toward the future. This is exactly what the members gathered here today have achieved. What is written here are examples of engineers who used to handle design and development. Now transitioning to roles where they leverage AI to establish basic designs and set policy. While engineers who used to handle maintenance and support are now moving into on-site, helping on-site staff advance their implementation skills, et cetera. Engineers work alongside on-site workers and our workforce continues to evolve in a flexible manner, learning from them. I believe this ability to adapt and transform is crucial in the age of AI. Now regarding our competitive advantage, I might sound like I'm bragging, but please take a look at the left side. In January, we were selected by Oricon and awarded the #1 in customer satisfaction among human resource agencies. Please take a look at the left bottom next to attracting talents. We are now able to hire as many engineers with science background as we want. We were featured in Nikkei Newspaper in May. We were chosen as #1 in IT and engineering category. We were also ranked #10 overall in [indiscernible]. Furthermore, we are developing talents. We established a company together with Serverworks to do temporary staffing of AWS. 80 of our engineers and more than 90% of our staff have already earned the SA professional certification, which is the highest level of qualification available, and we are currently leveraging this expertise to provide close support to our clients. As for retention of talents, our turnover rate has been below 10% in the past 3 years. We'd like to contribute more to our customers by improving their productivity, leveraging our strength to attract talents, develop talents and retain talents. On the right side of competitive advantages, we have a photo of SkyDrive's air mobility. Maybe you have seen this at the Expo held in Osaka. Our engineer has been working under President Fukuzawa for the past 5 years for the wings. On the right, we have autonomous delivery robots. It is delivering lunch boxes. We manufactured, implemented these robots in Koka City in Shiga Prefecture and the POC was successful recently. Left bottom is a request from Hokkaido Airport. We take pride that we are the only one designing [ snow files ] in Japan nowadays. We recently received a request to implement autonomous driving capabilities in response to an aging population. We conducted our own experiments, and we successfully achieved retrofit autonomous driving, which was even featured in the news. On the right, let us introduced 2 products on PABCT. This is called AI Kura Lab. To make Japanese, master brewers are seasonal workers and is a challenging job. Therefore, there is a decrease in number of master brewers. To address this issue, we developed a way that enables anyone to perform the process. We attached camera and sensors to the tank so that it can be viewed on smartphone. And when mold is bubbling, you know you should sir. On the right, we have Mizomiukun. We received good design award. I would like to explain more about it. So if anyone is interested, please make an appointment. Moving on to strategies for growth toward 2030. I'd like to mention 2 points about further shift toward a solution drive business, which I had been talking about from the previous midterm management plan. This is about transforming our capabilities, transforming our talents and also to transform the market. We've become engineers who can fully harness the power of AI. And as AI-equipped engineers, we are now capable of taking on roles such as PMO or consultants. With the market expanding, we hope to secure opportunities in sectors like defense and aerospace as well. As for how we will achieve our goals, I mentioned 10x10 and 10x12 earlier. This page explains how we will make that happen. One is to expand our sales volume, and we intend to maintain a growth rate of 10% or more. Second, we have already planned to increase our gross profit margin by about 3 percentage points going forward. Third, we plan to further reduce our SG&A ratio by 3 percentage points. This will allow us to achieve our 10x10 goal. And while we are now aiming for 10x12, I hope that by fiscal 2030, we will be able to merge with or partner with another company and continue to grow together. That is what I am thinking. This is the last page. Let me reiterate, make it happen. Our goals are 10 by 10 by fiscal 2028 and 10x12 by fiscal 2030. This concludes my presentation of Technology SBU. Thank you for your attention.

I am Ichimura from BPO SBU. Thank you for your time today. I would like to take you through our SBU strategy and initiatives we are taking. This is the basic information about BPO SBU, including sales composition and others. About 60% of the total is BPO business, which is operations. In this field, while we support our clients' core business operations, there are also many domains where we handle corporate and indirect department functions. In addition, domains such as PMO and BPR have been growing significantly in recent years, and these domains are currently experiencing a boom as new initiatives. We also have CX business, which is mainly communication domain. We are offering sales and marketing, customer support, technical support and others. The last one is professional business, where we provide consulting service. At a high level, we are offering HR consulting and technology consulting. These are the businesses we have and the breakdown is as shown. On this slide, we have summarized our market view and competitive advantages. Against the backdrop of clear labor shortages, the demand for BPO has continued to increase substantially. Rather than simply adding more staff, we believe that if we sustainably manage these operations while reviewing the work processes themselves, this kind of demand will continue to grow. In addition, the impact of AI is an issue that we must seriously address. We expect demand for routine and simple tax to partially decline as they are replaced with AI. However, we believe demand will continue to expand in areas such as business design, improvement and reform. This is where we'd like to capture the market. I've included a diagram showing how we approach AI within our business process. Vertically, we have the scope of services, including BPO business, CX business and professional business that I had talked about earlier. Horizontally, we have business processes for customers to proceed with various topics or to promote their businesses. The starting point would be framework and policy design. Once they are solidified, business design, development and enhancement stage will follow. As the operation starts, the processes start to run, and we are able to leverage the capabilities of each business at every phase. In that context, regarding the role and impact of AI, I believe that routine operational tasks will undergo significant changes as AI increasingly takes over the work currently performed by humans. On the other hand, in other processes, leveraging AI will lead to improvements in productivity, quality and others. Therefore, we view the shift toward AI as an opportunity rather than a threat, and we intend to take on the challenge proactively and boldly. This is a summary of things to be achieved under the midterm management plan. The biggest point is to achieve adjusted EBITDA margin of 8% in fiscal 2028. Our goal is to further enhance our current earnings power and achieve both improved profitability and increased productivity. As for the initiatives we're taking to achieve this, which I'll touch on briefly later, the key points will be how to integrate AI into our current operations or how to create operations that are driven by AI. Of course, developing the talent who support that effort is something we cannot avoid. In fact, it is an area we should actively focus on. First, implementation of AI-driven operations. We thoroughly understand our customers' operations and manage them accordingly. Furthermore, the fact that new operations are constantly being created even at this very moment and that we have a wealth of use cases is one of our strengths. We will, therefore, move quickly to implement an update that further integrates AI in this area, demonstrate the track record of AI utilization in internal operations before rolling out solutions to customers. Our company also has corporate and indirect support functions, and we have been working since last fiscal year to figure out how to redesign these processes to incorporate AI. Since this initiative is directly linked to our support for the corporate functions of the clients we serve in the market, we intend to move forward aggressively with launching this service while thoroughly addressing success stories, lessons learned and risk management. Next is about automation of operational processes. Just as an example, we are sharing automation of marketing process. Embedding AI, including automation tools, will enable significant labor saving or leading to final conclusions without involving humans. We have already announced such a service to the public under the name Zero operations, and we have been receiving many inquiries about it. There is another use case. It is missing AI agent. This solution is used in various settings such as contact centers, service departments and support desks. While there are already a wide variety of voice AI-powered response systems available on the market, we are conducting research and compiling case studies on how to use these systems to identify the root cause of an issue by posing the right questions from our end based on how the inquiry is handled. We have already implemented many for our customers, and we are currently working on them, including some refinements. While this is just one example of how AI is being utilized, we intend to continue developing more of such applications in the future. Next, I believe we will need to transform or rather update the talent that will take on this role. First, while we take a level-headed view that many routine tasks are likely to be replaced by AI, we believe that the value of our BPO services will shift from simply streamlining these operations to areas such as design, improvement and further advancement. This slide shows our characteristics and strength. I'd like to emphasize our process design capability, especially. We already have many processes that we own. The key for the BPO development in the future is to update them into AI version. We already have a few thousand employees who have the capability of process design. We intend to take action fully during the current midterm management plan to further expand this area in the future through education. We are now proactively promoting acquisition of AI utilization skills to our employees and staff. What sets us apart is that while there are countless opportunities to learn through classroom lessons, we focus on immediately applying that knowledge in practice. We believe we can effectively enhance the speed at which we update our employee skills and improve the quality as well. We have a track record of having a few thousand headcounts attending such curriculum updating their skills. We intend to accelerate this process to raise their capabilities to increase the value of business. I apologize for rather lengthy explanation, but that concludes my presentation on the BPO SBU. Thank you for your attention.

Hello. I am Kimura from Staffing SBU. Now I will start with the strategies of the Staffing SBU. First, let me introduce Staffing SBU. On the left, we have breakdown of revenue by job type. Clerical work accounts for 86% as a main job type. The pie chart in the middle shows the breakdown of revenue by company size. Majority exceeding 65% are SMEs and mid-tier enterprises. The pie chart on the right shows the breakdown of revenue by industry. As you can see, we have secured a sales channel spanning a wide range of industries. Let us share our view of the market. The first point is that with advances in technology, there is growing demand for clerical staff with strong digital skills. Second, the ability to enhance added value through continuous engagement-driven staff development and the design of job roles determines competitiveness. Third, in fields where it is difficult to attract enough workers, including those responsible for social infrastructure, such as construction and other physical work, labor shortages have become increasingly serious. In response to these changes in the market environment, we will further sharpen our competitive edge by leveraging Tempstaff's strong brand power, a wealth of business resources and our ongoing value proposition to both individual and corporate customers. It is said that advances in technology are changing the way we work and leading to changes in job types. The clerical work, which is our core area of business, is expected to be significantly affected. The temporary staffing market for clerical work is currently worth JPY 2.3 trillion. While it is projected to grow slightly until 2030, contraction by 10% is expected by 2035 due to technological advancements. On the other hand, the total number of workers in Japan is approximately 69 million. Of these, approximately 2.2% are temporary workers. When we look at the Japanese labor market as a whole, we believe there is still much more that we at the staffing SBU can do to support job seekers, staff and companies. We need to address this as a leading company in the market. We aim to identify social issues, drive changes in the way people work and grow our business. We will leverage our strength and drive business transformation through the use of technology. Specifically, we will focus on 2 areas: expanding our market share and improving profitability. We will explain this in more details starting on the next page. For many years, we have been promoting our business, primarily targeting women in clerical work. Looking ahead to a future where administrative work will increasingly be replaced by AI, we must effectively leverage the strength we currently possess and embrace new challenges and transform to explore a wide range of possibilities. The diagram on the left illustrates the points of contact between staff and clients. By optimally matching human and digital elements, we aim to maximize lifetime value and drive the evolution of our business. And as shown in the diagram on the right, we will expand the services we offer, both vertically and horizontally to broaden our areas of growth. The first is highly skilled human resources. We aim to increase hourly wages by providing digital skills trainings to various industries that require specialized knowledge and technical expertise and by placing the trained personnel in those roles, we will also expand our services to the construction and light work sectors where there is a significant supply-demand gap and strong demand for workers is anticipated. Last December, [ Ayama Dejitsu, ] a company specializing in introducing designers, joined our group in collaboration with the CAD operator and design support services provided by Persol Tempstaff. We have also begun dispatching teams that include personnel for upstream processes. By offering a wide variety of employment opportunities, we aim to expand our market share. Our core company, Persol Tempstaff, has been dedicated to supporting our staff for over 50 years. Our annual staff survey highlights our strength, such as our ability to look beyond superficial issues and truly understand the context, the trusting relationships that help staff move forward when they face uncertainty or difficulties and the capacity to deeply understand others and communicate effectively with them. Our actions standing by our staff and continuing to do so have built trust over time, transforming isolated moments into a continuous relationship. This is precisely the value that comes from human involvement. To further enhance this strength, we will continue to advance the digitalization of our internal operations. We are working to transform our business company-wide and improve our processes through the use of AI with the goal of maximizing the value we deliver through human and digital technologies and improving profitability. In fiscal 2028, we aim to achieve an adjusted EBITDA margin of just over 6%. I will explain our specific strategies in the following slides. Let me explain the first strategy. While staffing services are generally viewed as simply matching job openings with job seekers, we place a high priority on continuity by supporting each staff member's work style and career path while developing the talent needed for our clients' businesses, we aim to foster the ongoing growth of both our staff and the companies they work for. Through optimal matching that combines individual strength with digital technology, we aim to create opportunities where staff can apply their work experience to their next job and continue to grow. For example, if a candidate wants to develop their skills in an accounting role, we will have them gain work experience through an accounting position that accepts candidates with no prior experience. Then for the next assignment, we will introduce them to an accounting position that requires experience. This approach enables our staff to grow and earn higher wages while also helping us provide clients with the talent they need. To achieve this, we need to accumulate data from our interactions with staff, such as the practical experience they've gained at their assignments and their current career aspirations and incorporate them into our matching algorithm. The power of AI and digital technology is indispensable in this regard. And I believe it's important not to stop at simply matching data, but to have human involvement to provide strong motivation and deliver that final mile. Next is the second strategy. While our services have primarily focused on temporary staffing, -- we believe our true goal is to solve our clients' problems. When solving problems based on customer touch point data, we identify our clients' deeper challenges by leveraging the continuous touch point information such as sales activities, order details and information on staff currently on assignment that is unique to our staffing services. We then deliver new value by offering innovative services designed to address those challenges. For example, improving productivity is a human resources challenge that every client faces. To achieve productivity improvements, -- there is one major hurdle to overcome, the challenge of digital implementation. We believe we can help our clients improve their productivity by going beyond simply providing labor as has been the case in the past. Instead, we propose solutions based on all the information accumulated through ongoing interactions from reevaluating the design of our clients' business operations and job roles to staff deployment and training. Furthermore, our work does not end with the proposal. We provide ongoing support to ensure operations run smoothly afterwards. It is through these efforts that we believe we can help our clients achieve greater productivity. Next is the third strategy. We place great importance on providing our staff with ongoing employment opportunities and supporting our clients' continued business operations. As we have mentioned in our previous strategies, we anticipate that demand for clerical staff with higher digital skills than currently available will grow in the clerical sector, which is our core business currently. Therefore, we aim to develop and deploy personnel with digital skills. Furthermore, we believe that even as AI and digitalization continue to advance, there will still be industries and job types that require human workers. By developing and expanding labor markets where the supply of workers is a challenge, we aim to bridge the hourly wage gap in the labor market. For example, in the construction industry, while construction investment is expanding, driven in part by the need to address aging infrastructure, the shortage of workers is becoming increasingly severe. We believe that by combining our long established capacity to supply talent with the design platform of Aoyama Geijutsu, which joined our group last year, we will be able to provide services that cover the full spectrum of architectural design processes from design to the construction site. Furthermore, sectors such as manufacturing and transportation employ a large number of temporary workers. While we anticipate a decline in these numbers due to advances in automation and robotics, we believe that labor shortages will persist. In addition to the broad coverage provided by Persol Tempstaff, we believe that strengthening our existing businesses such as Persol Factory Partners, which focuses on manufacturing positions and Persol field staff, which focuses on light industrial work will enable us to contribute to the creation of even more employment opportunities. The diagram on the left illustrates strategies 1 through 3, which we have discussed so far. We will enhance our existing business model and take a more active role in solving customer challenges. We will also continue to expand into the construction, manufacturing and light industrial sectors where strong demand is anticipated. Through these initiatives, we will not only increase the number of active staff and raise our average billing rate, but also reduce SG&A expenses through the digital transformation of our company. At the staffing SBU, our value proposition is provide working people with possibilities, insight and options, achieving work and smile through ongoing engagement. Our key focus is to create the greatest possible employment opportunities going beyond simply providing temporary staffing services. We aim to become a company that job seekers, staff and corporate clients all consider their go-to choice whenever they need assistance. In other words, to turn them into our loyal supporters. The Staffing SBU is positioned as a core business within the Persol Group. We will continue to maintain steady growth while strengthening our earnings base through productivity improvements. This concludes the explanation of strategy of Staffing SBU. Thank you.

Hello. Thank you for joining us at IR Day 2026. I am Tsuge, Executive Officer, CIO and CAIO. It is a pleasure to meet you. Although we have limited time today, I'd like to share my thoughts on these 3 points. The first is an overview of the new technology strategy. While the group has announced its new midterm management plan, we are also formulating a strategy for this midterm plan as part of our new technology strategy. I have summarized everything on this single slide, and I hope to use it to explain the big picture. First, as part of our new technology strategy, we have set the goal of shifting to AI-first business model. Towards an era of new work where AI and humans collaborate, our company is committed to promoting the use of AI. At the same time, we aim to create a world where each person can enjoy freedom and expanded potential, a world full of personal authenticity. With this in mind, we are striving to shift to AI-first business model that can make this a reality, and we have set this as our goal. Now regarding the key themes for achieving this, we have identified 3 points. The first is AI and business. Please note that business here refers to operations. While there are various operations within each SBU and across the group, our top priority is to use AI to thoroughly shift them into AI-first business models suited to the AI era. Second, since we must simultaneously adapt the work styles of Persol Group employees to the AI era, we have established the concept of AI and work, where work refers to the update of Persol Group employees' work styles for the AI era. Finally, regarding AI and data, I believe that data plays a significant role in determining AI's competitive advantage and competitiveness. Since the Persol Group as a whole possesses a vast amount of data, we intend to make full use of it to leverage the power of AI. With these 3 key themes, business work and data as their focus, we aim to shift to AI-first business model. As for the basis for implementation that underpins these principles, I have summarized the 3 points outlined here. I have often wondered whether the theme of this basis for implementation, which has existed through the IT era, the DX era and the upcoming AI era has been present since the IT era itself. However, I believe that the nature of this foundation in the IT era, the DX era and the upcoming AI era is fundamentally different. And I would like to update this foundation to suit the AI era. -- infrastructure, security, global collaboration, governance and people and organizations. I believe AI is relevant to all of these key areas. So I intend to rebuild the foundation for implementation to suit the AI era. Due to time constraints, I can only cover this much of the big picture today, but we have formulated detailed plans for each of these 6 areas, which combine key themes and foundations for implementation. So I hope to share those with you when we have the opportunity. Second, I'd like to talk about the group's overall priorities for AI investment. I believe each SBU shared its strategy earlier. And among those, the SBUs will certainly be stepping up their AI investments. While each SBU will make its own investments, it is also important to determine how to allocate resources across the entire group, prioritizing some areas over others in order to maximize results for the group as a whole. Therefore, as we formulate our midterm management plan, we are also considering the group-wide priorities. Here on the left, you will find a brief summary of each SBU's AI policy. We have plotted these on a graph with impact on the vertical axis and time line on the horizontal axis. First, we have designated initiatives with a short time line and high impact as our top priority quadrant, number one. Next, in area # 2, we have categorized initiatives with a slightly longer time line, but high impact as our challenge quadrant. Third, we have designated initiatives with a near-term implementation time line that can deliver quick win as a quadrant, which is number three. We have mapped each initiative in this manner. Here are the results. What is shown here represents only a very small fraction of the total. Additionally, the colors indicate each SBU and each SBU is planning various initiatives within its respective quadrants. After completing this mapping, our priority strategy is to first focus on our investments on quadrants 1, 2 and 3 within staffing and career, which are our concentrated investment and aggressive investment areas. Furthermore, for BPO, technology and Asia Pacific, we have decided to focus our investments primarily on quadrant #1. Through this approach, we have designed the overall strategy so that not only each SBU, but the entire group can carefully consider how to maximize the impact of our limited AI investment budget. As for the results, during the period covered by the current midterm management plan, based on cumulative figures from the income statement, we estimate that for an AI investment of approximately JPY 19 billion, the effect will be about 1.8x the investment under the base case scenario and about 2.3x the investment in a best case scenario with an upside. Please note that these figures are based on a limited period within this midterm management plan. Naturally, for initiatives launched in the latter half, such as those introduced in the second or third year, the point at which full results become apparent may come later than what is shown here. On the other hand, the initiatives we were able to implement during current midterm management plan period will accumulate effects year after year, continue to yield results even beyond the planned time frame. Therefore, I would like you to view these figures strictly as a benchmark for investment and results specific to current midterm management plan period. I think it might be a little hard to visualize based on this alone. So to give you a clearer picture using some numbers, which you'll see on the right, while these are cumulative figures, we've calculated an improvement in adjusted labor productivity of approximately 15% to 24%, a reduced working hours as stated. And finally, an impact on adjusted EBITDA of roughly this magnitude. Since these figures are already factored into the targets announced in our current midterm management plan, we intend to leverage AI to ensure we achieve the goals set for the plan period, thereby further strengthening the likelihood of meeting the targets we have declared in the plan. This was a discussion about the group-wide priorities for AI investment. Finally, to elaborate a bit on whether the various initiatives I have discussed in the first and the second points can actually be implemented. I'd like to briefly touch on the execution structure that supports our AI strategy. First, the first point is strengthening human resource and organizational capabilities, which is on the left. It states that we have over 2,000 technology-oriented human resources within the group. Thanks to our efforts to recruit and develop technology talent during the previous midterm management plan period, we currently have over 2,000 technology-oriented human resources on our team. Please note that this figure of 2,000 excludes engineers who are performing engineering work at client sites. It specifically refers to technology talents working directly for the Persol Group. 2,000 employees includes AI and data talents as well as many technology talents who have developed a deep understanding of HR and therefore, understand the business. And since we established various in-house development structure during the previous midterm management plan period, we are well positioned now to successfully develop our products in-house. We intend to leverage the capabilities of these 2,000 employees to significantly accelerate our initiatives in the coming AI era. Second, in April 2026, we established a new division under my leadership at the holding company called the Group AI division. We have centralized AI and data talent in this division, and we have launched it with many employees involved in AI now assigned to this division. To prevent duplicate AI investments across each SBU and to generate synergies that would further accelerate these initiatives across the entire group, we established a central organization to handle major projects. By centralizing the group's AI talent in this way, we aim to ensure that our AI and data initiatives are carried out thoroughly, efficiently and effectively. We will continue to collaborate closely with each SBU. We aim to lead the group-wide efforts in sharing know-how across SBUs and establish common environments and infrastructure. Finally, there is one more point I'd like to make. Regarding the acquisition of Global Advanced AI technology, let me touch on Gojob. Gojob is a temporary staffing SaaS platform that operates in Europe and the States. Historically, the temporary staffing industry, including in Japan, has been built by a wide range of people. Gojob is a company that operates a platform designed to replace human labor with AI and technology as much as possible, thereby further enhancing the value of the temporary staffing business. From my perspective, I can see that this initiative, including the AI agents and the platforms features has evolved significantly, and I feel it is more advanced than its Japanese counterparts. Therefore, I intend to ensure that we fully incorporate these capabilities and expertise into our group. First, we would like to explore ways to create synergies with our group domestic temporary staffing business. As you know, our domestic temporary staffing business is a very large business. So even a small integration of these products can have a significant impact. Looking ahead to the coming AI era, we intend to fully leverage Gojob's expertise and products to continuously update our domestic temporary staffing business model so that it is well suited for this new era. The second point is our expansion into new frontline worker domain, which we also announced in the current midterm management plan. We have confirmed that Gojob's features are highly compatible with this initiative as well. So we intend to leverage Gojob's capabilities to ensure steady growth and accelerate new expansion into these new services. Therefore, by acquiring these global advanced AI technologies, we aim to firmly accelerate the adoption of AI across the entire group moving forward. This is the final slide. As we enter an era of a new way of working where AI and humans collaborate, our group is firmly committed to promoting the use of AI. At the same time, we aim to create a world which expands individual freedom and potential toward a world where individuality thrives. We intend to build AI-driven businesses that are fully aligned with this vision. Although today's session was brief, I provided an overview of our AI technology strategy and added a few points regarding the group's overall technology strategy. Thank you for your attention. I ask for your continued support. [Statements in English on this transcript were spoken by an interpreter present on the live call.]