(1)Group Management Policy
The basic principle of the Group is to focus on "creating new value for our society to contribute to a brighter world where all individuals can live life to the fullest." The Group's Vision is "Follow Your Heart"; the defined Mission of the Group is "Opportunities for Life. Faster, simpler, and closer to you"; and the established Values of the Group are "WOW THE WORLD", "BET ON PASSION" and "PRIORITIZE SOCIAL VALUE".
(2)Target Management Key Performance Indicators (KPIs)
The Group flexibly and aggressively carries out various growth investments, including mergers and acquisitions, in order to achieve profitable growth over the long-term, and focuses on managing an appropriate balance of investments and earnings growth as well as increasing shareholder value. Therefore, the Group has set adjusted EBITDA *1 and adjusted EPS *2 as target management KPIs to maximize its enterprise value.
The Group adopted IFRS 16 in Q1 FY2019, and changed its accounting policy. Pursuant to IFRS 16, a lessee generally must recognize a "right-of-use asset" for all leases, such asset representing the right to use the underlying asset over the term of such leases. A lessee also must recognize as its financial liability the lessee's obligation to make future lease payments. Under previous accounting standards, IAS 17, a company recorded lease payments of operating leases as rent expense. However under IFRS 16, a company must record depreciation for its right-of-use assets and an interest expense on its lease liability. As a result of the adoption of IFRS 16, EBITDA will increase because rent expense will decrease, while the depreciation of the right-of-use asset will increase. Therefore the Company decided to change the management KPI from EBITDA to adjusted EBITDA (such EBITDA is adjusted to exclude the main impact of the IFRS 16 adoption) to ensure comparability with the prior management KPI.
*1. Adjusted EBITDA = operating income + depreciation and amortization(excluding depreciation of right-of-use assets) ± other operating income/expenses
*2. Adjusted EPS = adjusted profit *3 / (number of shares issued at the end of the period - number of treasury stock at the end of the period)
*3. Adjusted profit = profit attributable to owners of the parent ± adjustment items *4 (excluding non-controlling interests) ± tax reconciliation related to certain adjustment items
*4. Adjustment items = amortization of intangible assets by acquisitions ± non-recurring income/losses
(3)Group Business Environment and Group Management Strategy
The Group believes swift decision making is essential to maximize enterprise value and shareholder value by actively responding to the rapidly transforming Internet business industry and identifying business opportunities globally. In order to do so, the Group operates its businesses through each of its three Strategic Business Units ("SBU"s), HR Technology, Media & Solutions and Staffing. Furthermore, the Group established respective SBU Headquarters for each SBU, and operates under such management structure. This organizational structure enhances the management capabilities of each SBU Headquarters to execute its own independent strategy in a self-sustaining manner; the SBU structure also enables the Company to focus on and strengthen its holding company functions, including Group monitoring and governance; through these many positive impacts of the SBU structure, the Group enterprise value is increased.
The Group offers various matching solutions connecting individual users and enterprise clients, and continues to enhance its ability to match by minimizing inconvenience and satisfying demands of users and clients. By leveraging technology, the Group focuses on improving the capabilities of its matching services to offer users the best results, and supports clients, mainly SMEs, to optimize their business operations.
Notably, the Group aims to become the global leader in the HR matching market (the size of which is estimated by the Group as approximately 150 billion US dollars *1 ) by utilizing innovation and creativity driven by technology. The HR matching market includes job advertising and talent sourcing tools, placement and search, and temporary staffing. The global online job advertising market, which is the main business of the HR Technology segment, is estimated to be approximately 15 billion US dollars *2 in annual revenue, and it is growing as more than 5 billion US dollar *3 offline job advertising market flows into online. The placement and search market is estimated to be approximately 50 billion US dollars *4 in revenue globally. The temporary staffing market is estimated to be approximately 445 billion US dollars *4 in revenue globally, while the gross profit for staffing companies (subtracting the amount of salary for temporary staff and related costs from the total revenue) is estimated to be approximately 81 billion US dollars *5 .
The HR Technology segment aims to further expand its presence globally through Indeed, an online job search engine, and Glassdoor, an online job and company information site. The segment aims to drive future growth by investing in its existing online job advertising business and to execute new business development and M&A to make recruiting processes more efficient.
The Media & Solutions segment strives for stable growth by improving its existing businesses (particularly its advertising businesses) and strengthening its relationship with existing and new clients through operational and management support services.
In the Staffing segment, Japan operations aim for stable growth against a backdrop of a tight labor market environment in Japan. Overseas operations focus on improving adjusted EBITDA margin continuously by fully implementing its Unit Management System.
*1.Source: SIA, www.staffingindustry.com; 2018 company estimates, consisting of the job advertising and talent sourcing tools market, the placement and search market, and the temporary staffing market (gross profit)
*2.Source: 2018 company estimates, consisting of online job advertising, employer branding, and talent sourcing tools
*3.Source: 2018 company estimates
*4.Source: SIA, Global Staffing Industry Market Estimates and Forecast: November 2018 Update, company estimates; assumes 6% industry growth rate in 2018
*5.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)