■Performance Trends
1. Summary of financial results for the 2nd quarter of the fiscal year ending 2024/8
Progrit's financial results for the second quarter of the fiscal year ending 2024/8 include sales of 2,045 million yen (up 51.3% from the same period last year), gross profit of 1,503 million yen (up 56.7% from the same period), operating income of 539 million yen (up 91.2% from the same period), ordinary profit of 530 million yen (up 91.2% from the same period), and quarterly net profit of 395 million yen (up 110.0% from the same period), which hit record highs for the second quarter. Overseas travel opportunities have increased mainly for business people due to the lifting of behavioral restrictions due to the COVID-19 pandemic, and as web communication with overseas has become established since the COVID-19 pandemic, the need to use English in earnest has increased more than before. There is a high need for global human resources who can use English in companies that have already expanded into overseas markets or are planning to expand in the future, and there is a high level of motivation for practical English proficiency even among working adults and students thinking about responding to such requests.
In particular, among people seeking higher results in a short period of time, attention to English coaching services has increased from conventional English conversation services, and the number of the company's service participants has steadily increased. Sales showed high growth, with English coaching services increasing 42.7% from the same period last year to 1380 million yen, and subscription services increasing 73.8% to 664 million yen, both showing high growth, and overall sales also recorded record highs of 2,045 million yen, up 51.3% from the same period. On the profit side, in addition to the increase in sales, there were also results of efforts aimed at increasing profitable subscription services and improving productivity of English consultants, and gross profit margin increased 56.7% to 1,503 million yen, and gross profit margin increased 2.5 points to 73.5%. Operating profit increased 91.2% to 539 million yen, and despite an increase of 150 million yen in advertising investment to expand awareness, it is evident that sales are strong. The operating margin increased 5.5 points from the same period to 26.4%.
Looking at quarterly sales trends for the second quarter of the 2024/8 fiscal year by service, the year-on-year growth rate for English coaching services continues to be high, with 40.6% in the first quarter and 44.9% in the second quarter. Since the number of customers also increases as sales increase, productivity improvements for consultants are being implemented to strengthen their ability to respond to customers. Specifically, the maximum number of compatible customers per consultant has been raised from the previous 15 to 16 from the 2024/8 fiscal year. The amount of consultants' work will increase simply by raising the number of compatible customers, but in addition to reviewing the work details performed by consultants and narrowing down the work that consultants should handle, we have constructed a system to reduce the burden on consultants by constructing a system where AI responds to questions in English from customers. We are also continuing to increase the number of consultants. According to the plan after revising the earnings forecast for the fiscal year ending 2024/8, a net increase of 25 to 28 people is planned throughout the fiscal year, and the idea is to maintain the average waiting period for customers to take courses at about 1 month and a half. Note that the waiting period is positioned as a preparation study period, and since learning materials are provided to customers and guidance on learning methods is provided, it is said that there are no complaints from customers or issues such as course cancellations.
For consultants, we have a system in place where they can continuously improve their skills, such as “BPS” to share consulting best practices, “CS up” where fellow consultants give advice on issues faced by consultants, and coaching training to acquire professional coaching skills. Also, since the company's consultants are uniformly in charge of the number of customers set so that they can have some time to spare, even when such training time is included, there is very little variation in productivity.
Efficiency improvements such as DX in internal operations have also progressed, and productivity, such as the number of customers in charge, has also improved from the previous fiscal year. In terms of treatment, the salaries of about 120 people, such as consultants and counselors for English coaching services, were raised uniformly by 500,000 yen a year from 2023/9, and the first-year annual income was set to 4.5 million yen, which greatly exceeds the average annual income of 3.66 million yen in the service industry. Furthermore, in the plan after revising the earnings forecast for the fiscal year ending 2024/8, payment of performance bonuses of 40 to 60 million yen is also being considered ※. As for teaching materials and apps, in addition to completely renewing the curriculum for the IELTS and TOEFL iBT (R) TEST courses, where the number of test takers is increasing, we have launched an English learning support service “PROGRIT TEST” that utilizes ChatGPT, and a “progrit speech checker” with a function to display SPM (number of sentences per minute) and WPM (number of words per minute) at the same time as speech is transcribed, Customer satisfaction is increasing while proceeding with updates.
*The actual amount to be paid will be determined based on the achievement status of full-year results.
Also, in corporate training, introduction progressed mainly as part of in-house selection type training and welfare programs, and the number of business partner companies increased by 31 from the end of the previous fiscal year to 262 companies at the end of 2024/2. Since the previous fiscal year, new corporate sales managers have been assigned to expand corporate transactions, and organizational reforms have been carried out to double the number of sales employees. At the same time, the amount of customer contact per person was raised by more than 2 times by creating customer visit times and opportunities by formalizing and systematizing material preparation, etc., and improving the efficiency of survey/visit preparation using AI, etc. The idea is to prioritize corporations with many employees who have high needs for learning English, promote proposal activities, and lead to an increase in the number of customers.
Meanwhile, the number of paid subscription service members grew steadily to 6,441 in the 2nd quarter of the 2024/8 fiscal year alone, up 47.7% from the same quarter last year, and monthly sales grew to 114 million yen. Quarterly sales for the 2024/8 fiscal year ended 2024/8 were 322 million yen, up 86.1% from the same period last year in the first quarter, and 342 million yen, up 63.6% from the same period last year in the second quarter, and continued to grow at a high rate. As for the subscription service, customer satisfaction has been raised while proceeding with updates, such as improving the visibility of correction results and adding dictation test functions and teaching materials, etc., and the cumulative number of corrections has exceeded 1 million, and the number of teaching materials has exceeded 1,000. Initially, it was offered as a continuing course for English coaching service graduates, and it has grown along with the increase in the number of participants in English coaching services, but now the speed of growth as a standalone service has surpassed, and conversely, it is also creating a flow of attracting customers from subscription services to English coaching services.
The sales composition ratio for subscription services was 33.6% for the 2nd quarter of the 2024/8 fiscal year alone, up 2.7 points from the same quarter last year. Compared to 16.1% of the 2022/8 first quarter alone, it can be seen that it has more than doubled, and compared to English coaching services influenced by the number of consultants, it can be seen that the growth speed is fast and profitability is high.
Regarding quarterly standalone sales for the fiscal year ending 2024/8, the first quarter was 1,025 million yen, up 52.0% from the same quarter last year, and the second quarter was 1020 million yen, up 50.6% from the same quarter last year, maintaining almost the same growth rate. Gross profit also showed steady growth of 760 million yen, up 56.1% from the same period in the first quarter, and 743 million yen, up 57.4% from the same period in the second quarter. An increase in the sales structure ratio of highly profitable subscription services and an improvement in the occupancy rate of consultants have contributed, and earnings have remained stable.
(Author: FISCO Analyst Tomokazu Murase)