■Future outlook

1. Earnings Forecast for the Fiscal Year Ending 2024/8

PROGRIT ＜9560＞ announced revised earnings forecasts for the fiscal year ending 2024/4 and 2024/8. The revised net sales were 4,250 million yen (up 11.8% from the initial plan), operating income was 750 million yen (up 23.0% from the same period), ordinary profit was 740 million yen (up 21.3% from the same period), and net income was 540 million yen (up 22.7% from the same period), and both sales and profits were revised upward. As a result, sales increase of 40.6% from the previous fiscal year, operating profit increased by 50.9%, ordinary profit increased by 50.1%, and net profit increased by 49.7%, and we expect a significant increase in sales and profit.

The reason for the upward revision is that recruitment activities progressed smoothly against the backdrop of improved treatment for English consultants, etc., and as a result of increasing the number of consultants, service supply capacity was strengthened, and subscription services are growing steadily. As for English coaching services, the average waiting period for course applicants has been an important management target since the beginning, but as of the 2nd quarter of the 2024/8 fiscal year, it is approximately 1 month and a half. The company believes that maintaining the same level is important to prevent customer churn, and it seems that it has determined that by increasing the number of consultants and stabilizing service supply capacity in response to an increase in customers, sales will be further increased, and growth of 33 to 38% is possible for the full year. As a premise of the revised earnings forecast, it is a plan to aim for a net increase of 25 to 28 consultants by the end of the 2024/8 fiscal year (the planned value before the earnings forecast revision is a net increase of 13 to 18 people), and it seems that recruitment activities for that purpose are progressing smoothly. Regarding subscription services, the number of paid members of “Shadten” as of the 2nd quarter of the 2024/8 fiscal year has shown significant growth, with a 47.7% increase compared to the same period last year, and based on the fact that monthly sales also continue to grow to about 114 million yen, they aim for full-year growth of 50 to 55% for the entire subscription service.

In terms of sales, the second half is expected to be 2,205 million yen (up 31.8% from the same period last year) out of the sales forecast of 4,250 million yen. In terms of profit for the second half of the fiscal year, operating income is 210 million yen (down 2.1% from the same period), ordinary profit is 209 million yen (down 2.8% from the same period), and quarterly net profit is 144 million yen (down 16.2% from the same period), which is expected to decrease. The reason we anticipate a decline in profit is mainly to make additional investments of 200 to 250 million yen in marketing activities, including cognitive advertising, in the second half of the fiscal year. By continuing to carry out in-train advertisements that have been carried out since January this year and in-station advertisements in the Chubu/Kansai area, we aim to obtain the first recall of potential customers related to the company's services, leading to an expansion in the number of contracts in the future. In addition, human resource investment is planned as an additional investment of 15 to 20 million yen to strengthen recruitment of new graduates for the 2025-2026/8 fiscal year.

Based on the fact that both are positive investments for improving future performance, and that the operating profit margin compared to the previous fiscal year is expected to improve 1.2 points from 16.4% to 17.6% after incorporating additional investments when looking at the full year, we see no cause for concern. Note, according to the company's policy, investments in marketing activities are made for the purpose of improving future performance, but they are not considering sacrificing current performance, and they are only trying to balance current performance. This way of thinking has also been applied to earnings forecasts for the current fiscal year, and the idea is to make necessary investments while aiming to increase profit margins compared to the previous fiscal year.

(Author: FISCO Analyst Tomokazu Murase)