■Business Overview of AIAI Group <6557> 3. Revenue Characteristics Typically, the revenue characteristics of accredited nurseries are such that start-up costs such as initial costs and hiring costs precede the opening of new facilities. In the first few years after opening, the high-age class (3-5 years old) tends to operate at a deficit due to low enrollment and low enrollment rates. However, as children in the low-age class (0-2 years old) progress through promotion, the number of high-age class enrollments and enrollment rates increase, resulting in increased revenue, gross profit, and eventually turnaround to profitability (profit). It is said to happen 3-4 years after opening. The satisfaction rate (operation rate) for all AIAI NURSERY facilities temporarily decreases due to an increase in the capacity due to the opening of new facilities (as a rule, accredited nurseries are open on April 1), but then follows an upward trend as the number of enrolled children increases. Looking at the transition of the monthly number of children and satisfaction rate from January 2023 to March 2024, the number of children increased due to the opening of five new facilities (one of which expanded its capacity and moved) in April 2023, but the capacity increase resulted in a decrease in the satisfaction rate. However, the satisfaction rate is generally on an increasing trend as the number of children increases. On the cost side, the cost ratio of the new facility opening-related costs, such as in the 1st-3rd quarter before and after the new opening and the 4th-6th quarter, increases, but then decreases in the 7th-9th quarter and the 10th-12th quarter due to an increase in the number of enrollments or an increase in the satisfaction rate. As for subsidies related to accredited nurseries, outsourcing fees and operational subsidies (subsidies for children and childcare workers, rent subsidies for facilities, etc.) are included in the revenue, while subsidies related to facility opening (a certain percentage of investment amount for new opening-related subsidies) are included in non-operating income. Costs related to operation (personnel expenses and property expenses related to nursery school operation) are included in operating expenses, while costs related to facility opening preparation are included in non-operating expenses. Discrepancies in the amount of subsidy income and timing of recording can be factors in revenue volatility. The company has been promoting the active opening of AIAI NURSERY to build a revenue base, so strategic expenses have continued to result in operating deficits. However, the number of profitable gardens has increased after 3-4 years since opening, and the operating profit has been improving further due to the increase in revenue. In addition, AIAI PLUS has the advantage of being able to operate in the same building as AIAI NURSERY, which can reduce investment costs compared to AIAI NURSERY. Moreover, there are merits such as strengthening customer attraction and hiring power through synergy effects by being co-located with AIAI NURSERY and strategic personnel placement. Furthermore, AIAI PLUS has the advantage of being able to achieve early profitability compared to AIAI NURSERY, as it has the flexibility to set its opening time freely unlike AIAI NURSERY, which is open on April 1 as a rule. 4. Risk Factors and Countermeasures / Challenges General risk factors in the childcare field include a decrease in users, policy changes by national and local governments, related regulations and permits, accidents and infectious diseases at facilities, difficulty in securing childcare workers, and intensifying competition.
3. Revenue Characteristics As for revenue characteristics of accredited nurseries, initial costs such as start-up costs and hiring costs first precede the opening of new facilities. In the first few years after opening, it tends to operate at a deficit due to low enrollment and low enrollment rates, especially high-age class (3 to 5 years old). However, as children in the low-age class (0-2 years old) progress through promotion, the number of high-age class enrollments and enrollment rates increase, resulting in increased revenue, gross profit, and eventually turnaround to profitability (profit). It is said to happen 3-4 years after opening.
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The satisfaction rate (operation rate) for all AIAI NURSERY facilities temporarily decreases due to an increase in the capacity due to the opening of new facilities (as a rule, accredited nurseries are open on April 1), but then follows an upward trend as the number of enrolled children increases. Looking at the transition of the monthly number of children and satisfaction rate from January 2023 to March 2024, the number of children increased due to the opening of five new facilities (one of which expanded its capacity and moved) in April 2023, but the capacity increase resulted in a decrease in the satisfaction rate. However, the satisfaction rate is generally on an increasing trend as the number of children increases. On the cost side, the cost ratio of the new facility opening-related costs, such as in the 1st-3rd quarter before and after the new opening and the 4th-6th quarter, increases, but then decreases in the 7th-9th quarter and the 10th-12th quarter due to an increase in the number of enrollments or an increase in the satisfaction rate. As for subsidies related to accredited nurseries, outsourcing fees and operational subsidies (subsidies for children and childcare workers, rent subsidies for facilities, etc.) are included in the revenue, while subsidies related to facility opening (a certain percentage of investment amount for new opening-related subsidies) are included in non-operating income. Costs related to operation (personnel expenses and property expenses related to nursery school operation) are included in operating expenses, while costs related to facility opening preparation are included in non-operating expenses. Discrepancies in the amount of subsidy income and timing of recording can be factors in revenue volatility.
As for subsidies related to accredited nurseries, outsourcing fees and operational subsidies (subsidies for children and childcare workers, rent subsidies for facilities, etc.) are included in the revenue, while subsidies related to facility opening (a certain percentage of investment amount for new opening-related subsidies) are included in non-operating income. Costs related to operation (personnel expenses and property expenses related to nursery school operation) are included in operating expenses, while costs related to facility opening preparation are included in non-operating expenses. General risk factors in the childcare field include a decrease in users, policy changes by national and local governments, related regulations and permits, accidents and infectious diseases at facilities, difficulty in securing childcare workers, and intensifying competition.
In addition, AIAI PLUS has the advantage of being able to operate in the same building as AIAI NURSERY, which can reduce investment costs compared to AIAI NURSERY. Moreover, there are merits such as strengthening customer attraction and hiring power through synergy effects by being co-located with AIAI NURSERY and strategic personnel placement. Furthermore, AIAI PLUS has the advantage of being able to achieve early profitability compared to AIAI NURSERY, as it has the flexibility to set its opening time freely unlike AIAI NURSERY, which is open on April 1 as a rule.
4. Risk Factors and Countermeasures / Challenges General risk factors in the childcare field include a decrease in users, policy changes by national and local governments, related regulations and permits, accidents and infectious diseases at facilities, difficulty in securing childcare workers, and intensifying competition.
General risk factors in the childcare field include a decrease in users, policy changes by national and local governments, related regulations and permits, accidents and infectious diseases at facilities, difficulty in securing childcare workers, and intensifying competition.
In the field of childcare, progress has been made in resolving the issue of children on waiting lists, but it is anticipated that competition and profitability will also decline due to a decrease in users in the future. However, while the issue of waiting lists for nursery schools is being addressed, there is also a change in the business environment, which is the increasing number of children with developmental disabilities. Our company believes that the business environment is generally favorable. As measures for the government's declining birthrate policy and the improvement of the quality of childcare/education, a new system called the "Child Anyone Commuting System (tentative name)" that allows anyone to use childcare from 6 months to under 3 years old regardless of the caretaker's employment status will be implemented from 2026, following its institutionalization in 2025, and there will be changes in the standard of the number of children per nursery school teacher, the introduction of a system called the "Reservation Slot for Nursery School" to make it easier for parents who retired at the time of childbirth to leave their children in nursery schools, and the start of national use of region-specific nursery teachers, which was previously only implemented in special wards, and the expansion of subsidies for childcare assistants who are qualified to alleviate the shortage of nursery teachers will all contribute to a significant turning point in childcare policies from 2024.
The company has maintained its competitive advantage not only in the field of childcare, but also in the field of treatment for preschool children with a high demand by promoting a dominant strategy centered on Chiba prefecture. We also plan to promote new business model construction such as the expansion of AIAI PLUS and AIAI VISIT in response to changes in the business environment. Our company believes that the changes in childcare policies from 2024 will also have the potential to expand business opportunities and demonstrate our competitive advantage.
(Authored by FISCO guest analyst Masanobu Mizuta)