Outlook for Waseda Academy's future

1. Performance Outlook for March 2025

For the consolidated performance of the fiscal year ending March 2025, revenue is expected to be 34,741 million yen, an increase of 5.7% compared to the previous year, operating profit is expected to be 2,966 million yen, an increase of 2.7% YoY, ordinary profit is expected to be 3,003 million yen, an increase of 1.8% YoY, and net income attributed to the parent company's shareholders is expected to be 1,927 million yen, a decrease of 9.6% YoY. Revenue is expected to increase for the 14th consecutive term due to the increase in the number of students at the cram school and the rise in the unit price of sales, as well as the contribution of new businesses. Although the cost of human investment, system investment, and advertising and publicity expenses will increase, it is expected that the effect of increased revenue will offset these costs, and both operating profit and ordinary profit are estimated to increase for the 4th consecutive period. As for the net income attributed to the parent company's shareholders, we expect a decrease due to the assumption that the amount of tax deductions due to the wage increase promotion tax system will decrease from the previous year.

Regarding the performance plan for the first half, revenue is expected to increase by 5.5% YoY to 16,865 million yen, and operating profit is expected to decrease by 24.7% YoY to 1,034 million yen. The main reason for this is the concentration of advertising and publicity expenses in the first half. We will develop a promotion in collaboration with the popular manga series "Haikyu!!", which is about high school volleyball. Although we have already started transportation advertising from May 2024, the number of inquiries from junior high and high school students has increased rapidly and the advertising effect has already begun.

(1) Sales by department and forecast for the number of students at the cram school

Sales by department are expected to be 20,620 million yen, an increase of 5.8% YoY for elementary school department, 11,985 million yen, an increase of 2.8% YoY for junior high school department, and 1,862 million yen, an increase of 18.9% YoY for high school department. The average number of students assumed is 48,209, an increase of 1.8% in total, with the number of students at the elementary school department increasing by 2.7% and the number of students at the junior high school department decreasing by 0.7%. As for the high school department, we anticipate that it will contribute to the operation of TOEIC Satellite Preparatory School, which opened in March 2024. Although the start-up period after the opening was slow, we plan to strengthen the approach to graduates while nurturing them. The unit sales price per student is expected to increase by just under 4% on average. The main reason for this is that we expect the composition ratio of the examination grade with a high unit sales price to increase for each elementary, junior high and high school department in the fiscal year ending March 2025. In fact, the number of third-year students in the junior high school department has been growing steadily, up about 4% compared to the same month of the previous year since April, while the number of first-year students has been declining by 8%.

It seems that the fourth to sixth graders have continued to grow steadily in the elementary school department, but the fourth graders and below have only slightly increased. We expect that the fiscal year ending March 2025 will also proceed smoothly with high pass rates for the examination grade, backed by the high pass rates for previous years. In addition, the revenue of the newly grouped Future Education for Infants and Toddlers is expected to increase by just over 100 million yen.

(2) Expansion of schools

As for new school openings, it is expected that Waseda Academy (elementary and junior high school departments) will open two schools, Individual Study Hall will open three schools, and TOEIC Satellite Preparatory School will open three to four schools, and the number of franchisee schools for Individual Study Hall is expected to increase. Regarding Waseda Academy, it has been decided to open Harumi School (Chuo-ku, Tokyo) in July 2024. Harumi is in the growing bay area and has already started accepting registrations for enrollment briefings, and it seems to have filled up capacity early on, contributing to an increase in the number of students at the cram school.

(3) Factors affecting changes in operating profit

Operating profit is expected to increase by 77 million yen YoY. When looking at the factors of increase/decrease, we anticipate an increase of 1,873 million yen in revenue, and an increase of 896 million yen in human investment (4% wage increase, increase in personnel, increase in training and recruitment costs), an increase of 329 million yen in land rent (new school opening, expansion and relocation, rent increases), an increase of 181 million yen in advertising and publicity/promotion costs, an increase of 61 million yen in school trip expenses (expanding the target grade to accommodate, increased participation), an increase of 128 million yen in depreciation and other expenses (school building facilities, DX investment), and an increase of 201 million yen in other expenses.

The sales cost ratio is expected to decrease by 0.7 points from the previous period's 69.8% to 69.1%. The main reason is the decrease of raw material cost rate by 0.8 points due to the decrease in the purchase of trial materials due to a decrease in the unit price of some trials. On the other hand, the selling, general and administrative expense ratio is expected to increase by 0.9 points from the previous period's 21.4% to 22.3%. This is due to the increase in labor costs by 0.3 points due to wage increases and increases in the number of employees, as well as an expected increase of 0.2 points in advertising and publicity expenses and an increase of 0.4 points in other expenses. Advertising and publicity expenses are expected to end completely with newspaper inserts and strengthen web advertising, as well as increase advertising expenses for strengthening talent acquisition. Other expenses are primarily due to an increase in depreciation expenses due to DX investment promotion, such as the enhancement of the functionality of "Waseda Academy Online".

(Written by FISCO guest analyst, Jo Sato)