■Future Outlook LeTech <3497> expects an increase in sales and ordinary income of more than 20%, with sales of 2.14 billion yen (+33.8% YoY), operating income of 150 million yen (+7.7% YoY), ordinary income of 100 million yen (+21.7% YoY), and net income of 1.03 billion yen (-11.4% YoY) for the July 2024 term, and has maintained its initial forecast (announced in September 2023).
2. Global strategy
Waseda Academy <4718> has started a 3-year mid-term management plan from the fiscal year ending March 2024. The first year of 2024 ended with slightly lower revenue, but exceeded the plan in terms of profit. In the fiscal year ending March 2025, both revenue and operating profit exceeded the initial target, and the plan is to achieve the goal of ordinary profit one year ahead of schedule in the fiscal year ending March 2026. Although the growth of the number of students has slowed down, a profit-based upward factor has been realized by raising the tuition fees and promoting DX investment to improve business efficiency.
The midterm management plan aims to achieve sustainable growth by providing "original value" and "real value (Wase value)" while continuing to increase the number of students and maximize LTV under the environment where competition intensifies due to the progress of depopulation and the change in the environment of high school and university entrance exams. For the elementary school division, the number of students is expected to continue to increase steadily as well, as private junior high schools have a strong demand and there are high pass rates at prestigious schools, and it offers a convenient service with "Waseda Academy Online". As a measure to maximize LTV, it is a strategy to expand into the field of early childhood education and capture customers from before school enrollment, by providing services such as "individual study hall" and the newly launched "Toshin Satellite Prep School" based on the main business of "Waseda Academy".
Looking at the revenue composition ratio of Waseda Academy alone in the fiscal year ending March 2023, the standard school building (middle and high school entrance exam group instruction type) accounts for 86.6%, while the university entrance exam department accounts for 3.0% and the individual instruction accounts for 8.4%, respectively. They see a great potential for growth in the future, including the field of early childhood education business. It is expected that the future trend will be noteworthy, as improving LTV can reduce customer acquisition costs and lead to an increase in profitability. The main measures in the midterm management plan are as follows.
a) Steady growth of standard school buildings
For standard school buildings, we will keep the pace of opening new schools to about one per year, but for school buildings with strong demand, we will aim to increase the number of students per school by relocating or renovating the buildings. The number of students at the end of March 2024 for 2 schools (Shibuya school, Musashi Urawa school) that relocated and expanded in the previous period increased by 16.6% compared to before relocation (end of March 2022). Factors such as improvement in learning environment such as facility equipment due to relocation are also considered. In the future, the company will improve the quality of teaching services by strengthening the training of teachers and administrative staff, expanding services with high added value utilizing ICT to improve customer satisfaction and increase the number of students, which is a strategy to continue to increase the number of students.
b) Develop new areas for the university entrance exam department
With the launch of the Toshin Satellite Prep School business, the university entrance exam department aims to further increase the number of students and revenue. In the past, Waseda Academy had a small number of students and revenue, as it targeted students aiming to enter prestigious universities such as Tokyo University and Waseda University, but there is room for expanding the number of students by approaching the more than 10,000 "graduates" each academic year. As for school expansion, they plan to open 3-4 schools in the fiscal year ending March 2025, and then expand according to the situation in each area. Toshin Satellite Prep School, including Toshin High School, already has more than 200 schools in the Tokyo metropolitan area, and it is thought that the key to growth is how to capture the "graduates" amidst intense competition for new students. In regard to the university entrance exam department including Toshin Satellite Prep School, the company aims to double the number of students to 4,000 and the revenue to about 1.8 billion yen in the fiscal year ending March 2027.
c) Accelerate the expansion of the individual instruction department
As of March 2024, the individual guidance department has steadily expanded to 71 schools including FC schools towards the goal of achieving a structure of 100 schools by March 2027, including FC schools. The company aims to establish the top position in individual guidance for difficult school entrance exams in the Tokyo metropolitan area and will continue to open 9-10 branches annually, including FC schools. Regarding the branches, the strategy is to increase synergy by opening them near standard branches and attracting students who attend other individual guidance schools as well as graduates to individual education institutes. The target is to increase revenue from about 2.5 billion yen in fiscal year March 2023 to about 3.5 billion yen, a 1.4-fold increase in fiscal year March 2027.
d) Expansion into the preschool education field.
The wholly-owned subsidiary Yoji Miraikyoiku, which was incorporated in January 2024, operates three preschool education schools for kindergarten and elementary school entrance exams in Tokyo, including the Ebisu, Azabu-Juban, and Koishikawa schools. The purpose of this grouping is to share education knowledge for preschool children and to enhance contact with a customer base (preschool children and their guardians) that has had little contact with the company, to create a path to "Waseda Academy" and to maximize LTV. The high affinity between both companies' management philosophies and businesses is expected to generate synergy, including efforts to expand opportunities for women.
The sales volume in the past three periods has remained stable, at slightly over 100 million yen, and the company will continue to increase the number of branches and strive to raise the unit price of sales by improving the curriculum for entrance exam preparation. Therefore, the policy is to focus on recruiting and cultivating personnel after the fiscal year March 2026. Although the impact on short-term consolidated performance is expected to be minor, it is expected to contribute to synergy creation in the medium to long term.
e) Differentiation from other companies through DX strategy.
The company has earned high evaluations from customers and has expanded its number of students by actively providing various services using ICT such as 'Waseda Academy DUAL' and 'Waseda Academy Online' since the outbreak of COVID-19. Therefore, even amid declining birth rates, the company aims to expand its share and achieve growth by continuing its DX strategy in the future.
In March 2025, the company will officially release the achievement management system 'G-Navi,' which utilizes past simulated test data. The results of students' simulated exams will be compared and analyzed with a large amount of past simulated test data using AI technology for career and study guidance. While in the past this was conducted subjectively based on previous experience, the analysis and utilization of past big data will enable efficient study guidance and accurate career guidance, which is expected to lead to higher pass rates for desired schools. Customers, including students and guardians, can compare past data to gain a better sense of satisfaction than before, which will improve customer satisfaction.
f) Promotion of personnel development and recruitment.
To provide high-quality classroom services, the company has launched a teaching initiative project to improve teaching abilities. Specifically, it is working to improve educational skills with video training on teacher manuals, mutual class observation, various training programs, and organizing mock teaching contests.
Regarding recruitment, efforts have been made to improve internal recruitment (promotion of part-time employees to full-time employees, employment of graduates as part-time employees, etc.) and improve recruitment methods (efficient recruitment advertising, strengthening of recruitment procedures that integrate headquarters and branches) in addition to launching the joint explanatory event "Education and Job Hunting EXPO" for university and graduate students interested in education and the education industry since 2023. Schools and businesses from four areas related to education, including schools, individual educational institutes, publishing, and EdTech, gather to hold explanatory meetings in seminar format, and cope with job counseling in individual counseling booths. The event is scheduled to be held in June 2024.
(Written by FISCO guest analyst, Jo Sato)