■ Shonan Shingaku Kenkyusha <4720> Performance Trend

2. Sales Trends by Department and Group Company

(1) Children's Education Division (Stand-alone)

In the Children's Education Division (standalone), we operate the brain education class "Kubota's uken" for infants, the "Atama GYM" for preschool children (total of 14 directly managed and franchised classrooms), the English school "Zoo Phonics Academy" for infants, preschoolers, and elementary school students (total of 12 directly managed and franchised schools), the English learning after-school care "Hokago Homestay E-CAMP" (2 directly managed classrooms), the individual tutoring school specialized in arithmetic "Ringo Juku" (28 directly managed classrooms), and the "Shonan Lumina Nursery School" (1 directly managed nursery school). In addition, we have opened 7 "Kids Brain Park (formerly Shonan Brain Park)" locations that provide multiple educational services at one site, and provide the "Kubota-style child rearing method" as a solution to private educational institutions (68 nurseries and kindergartens).

※ In addition to "Kubota's uken" and "Atama GYM", we provide a total of 13 services, such as "Ringo Juku", "Zoo Phonics Academy", an abacus class that applies the mechanism of abacus to tablet devices called "Soro Touch", a painting and art class called "Atelier Taiyo no Ko", a programming class called "Viscuit", a science experiment in English called "Little Scientist", a program to develop thinking and expression skills called "P4C Little Thinkers", a English class called "Kodomo Eigo Club", an art x programming class called "Kids Tinkering" (different services are available at each location).

The net sales for the fiscal year ending March 2024 amounted to 736 million yen, an increase of 4.8% compared to the previous year. In October 2022, we absorbed and merged the subsidiary Littleland, resulting in a decrease in sales of 31 million yen when compared on a comparable basis including Littleland. The decrease in sales was attributed to the fact that the number of directly operated classrooms for the former "Kubota's uken" decreased by 2 classrooms compared to the previous year-end and the number of new enrollments was sluggish due to the outbreak of infections in the summer. The reason why the company implemented rebranding in April 2024 is that the brand power as a brain development method for infants has been high so far, but there have been challenges in terms of brand appeal for preschool children, and it was considered effective to separate them into separate brands and conduct recruitment activities. Also, the number of contracts for the introduction of the "Kubota-style childcare method" to other nurseries and kindergartens steadily increased by 4 compared to the previous year-end, reaching 68.

In other services, "Ringo Juku" and "Zoo Phonics Academy" increased their sales due to an increase in the number of students. As for "Lumina Nursery School", the sales remained at the same level as the previous year as it reached almost full capacity. Among the "Ringo Juku" programs, those held at "Shonan Covets" are recorded as sales in the individual tutoring department, but the revenue share of the FC classrooms of Akashi Network Japan, which started in spring 2024, is recorded as sales in the Children's Education Division. Although the "Ringo Juku" classes at "Shonan Covets" have a small scale with an average of about 10 students compared to the classrooms in "Kids Brain Park" (about 30 to 100 students), they are steadily increasing (monthly tuition fee is about 0.02 million yen for the once-a-week course). Although the International School of "Zoo Phonics Academy" struggled with competition, the after-school program performed well and contributed to the increase in sales. The English learning after-school care "Hokago Homestay E-CAMP" also increased its sales due to an increase in the number of students.

(2) Individual Tutoring Department

In the individual instruction division, we are expanding the individual coaching school under the "Jonan Kobetsu" brand (targeting elementary, junior high, high school, and high school graduates) directly and through the franchise system. The composition ratio of the number of students is the highest for junior high school students, accounting for about 40%, followed by high school students and primary school students, both accounting for about 30%. As a result of rationalizing and integrating unprofitable classrooms by the end of the fiscal year in March 2024, the total number of classrooms decreased by 11 from the previous period to 225 classrooms in total for direct operation and franchise.

Revenue decreased by 3.4% to ¥1,306 million, continuing the trend of declining revenue compared to the previous period. The breakdown shows that revenue from directly operated classrooms decreased by 3.8% to ¥991 million, and revenue from franchise classrooms decreased by 2.2% to ¥314 million. In recent years, there has been an increasing number of students choosing comprehensive and school-recommended selection methods for university entrance exams, resulting in a decrease in high school students, especially those in higher grade levels with higher unit prices. In addition, the rationalization and integration of unprofitable classrooms contributed to the decrease in revenue. However, for junior high school students, the "Study Free Plan" that allows them to take online or face-to-face classes depending on their own convenience, in addition to the individual instruction system that covers all five subjects and has a ratio of 1:2, was well received. This enabled us to maintain the same number of students as the previous period and contribute to an increase in per-student unit price. About 30% of junior high school students choose the "Study Free Plan", and the percentage has been increasing year by year. For primary school students, the introduction of the "Ringo Juku" program resulted in a significant increase of approximately 40% in lower grades (grades 1-3) compared to the previous period, and an overall increase of single digits for all grades. For high school students, the decreasing trend continued, but there are bright signs of halting the decrease for junior high school and primary school students.

(3) Video Division In the video division, we are expanding the "Kawai Juku Manabisu" (for high school students) as a franchisee of the major prep school, Kawai Juku. The video lessons can be viewed on demand, allowing students to study at their own pace. By combining the teaching know-how accumulated through prep school operations, the company has achieved high pass rates and increased customer satisfaction, resulting in successful student acquisition. Other franchisees mainly focus on learning centers for elementary and junior high school students, and it is believed that differentiation is achieved in terms of know-how in exam preparation and career guidance. In fact, in the university entrance exams in spring 2024, the company's own schools took the top spot out of 345 Manabisu branch schools in terms of the number of successful examinees in national public universities, top private universities, and GMARCH schools.

In the video division, we are expanding the "Kawai Juku Manabisu" (for high school students) as a franchisee of the major prep school, Kawai Juku. The video lessons can be viewed on demand, allowing students to study at their own pace. By combining the teaching know-how accumulated through prep school operations, the company has achieved high pass rates and increased customer satisfaction, resulting in successful student acquisition. Other franchisees mainly operate learning centers for elementary and junior high school students, and it is believed that differentiation is achieved in terms of know-how in exam preparation and career guidance. In fact, in the university entrance exams in spring 2024, the company's own schools took the top spot out of 345 Manabisu branch schools in terms of the number of successful examinees in national public universities, top private universities, and GMARCH schools.

Revenue for the fiscal year ending March 2024 decreased slightly by 3.1% to ¥1,603 million. Although the number of third-year high school students who took the summer courses recovered, the number of attendees decreased or the attendance rate declined in the second half due to an increase in applicants for the comprehensive selection test. In addition, the number of second-year students was also sluggish, which contributed to the decrease in revenue. Similarly, the whole Kawai Juku Manabisu also experienced a decrease in revenue for the second consecutive period, and it is considered that not only the declining birth rate but also the negative impact of changes in the university entrance exam environment continued. The number of branches at the end of the period remained the same as the previous period at 22.

(Written by FISCO guest analyst, Jo Sato)