ＫＩＹＯラーニング（7353） – [Delayed]Financial Results Presentation for Q1, Fiscal Year Ending December 2022

Financial Results Presentation for Q1, Fiscal Year Ending December 2022May 2022KIYO Learning Co., Ltd.Growth (Tokyo Stock Exchange): 7353・Financial Results Presentation for Q1, Fiscal Year Ending ContentsDecember 2022・KPIs and Topics by Business・Future Policies (Revisited)2Financial Results Presentation for Q1, Fiscal Year Ending December 20223FY2022 Q1 Performance Highlights• Net sales increased 35.2% year-on-yearSales of 588 million yen (up 153 million yen year on year); continued high growth• Each stage of profits settled at expected levels due to proactive investment in advertising expenses (TV commercials)Operating loss 398 million yen narrower year on year• Studying Business drove company growthNet cash-based sales for the Studying Business increased 28.7% year on year to 814 million yenNew paid members increased by 38.4% year on year to 17,957• Corporate education business also continued high growthNet sales in the Corporate Education Business increased 48.5% year on year to 47 million yenContracted companies with AirCourse increased by 72 versus the end of the previous fiscal year4FY2022 Q1 PerformanceNet sales increased +35.2% year-on-year to 588 million yenOperating income decreased 398 million yen year on year to -465 million due to investment in TV commercials(Millions of yen)CategoryRevenuesStudying BusinessCorporate Education BusinessCost of salesGross profitSG&AOperating incomeOrdinary incomeNet incomeFY2021 Q1 (Results)FY2022 Q1 (Results)FY2022 (Performance Forecast)Year-on-year changeProgress(%)4354033271363430-67-67-575885414797490956-465-466-3953,2002,9452554752,7252,57515015014935.2%34.1%48.5%36.3%35.0%121.9%—18.4%18.4%18.6%20.6%18.0%37.1%—5Sales by BusinessStudying Business sales rose +34.1% year on yearCorporate Education Business rose +48.5% year on year(Millions of yen)CategoryRevenuesStudying BusinessCorporate Education BusinessFY2021 Q1 (Results)FY2022 Q1 (Results)FY2022 (Performance Forecast)Year-on-year changeProgress(%)43540332588541473,2002,94525535.2%34.1%48.5%18.4%18.4%18.6%6Cost Structure (FY2022 Q1)Proactive investments in advertising expenses, including TV commercials, and in securing talented personnel toward growth(Millions of yen)1,200Cost Analysis (Year-on-year change)(Cost of sales: 97, SG&A: 956)171,05481323647590Subcontract expenses (SG&A) 2%Sales commissions (SG&A) 2%Personnel expenses (SG&A) 6%Other (SG&A) 7%Subcontract expenses (cost of sales) 9%764Advertising expenses (SG&A) 72%1,0008006004002000(Cost of sales: 71, SG&A: 430)15502818184870602652021年1QFY2021 Q12022年1QFY2022 Q1* 50 employees (including part-timer) as of March 2022 (+5 year on year)7Studying Business: KPIsNew paid members1 increased (up +38.4% year-on-year in FY2022 Q1)Net cash-based sales2 also grew (up +28.7% year-on-year in FY2022 Q1)Number of New Paid MembersNet Cash-Based Sales(Persons)(Millions of yen)814YoY+28%63320,00018,00016,00014,00012,00010,0008,0006,0004,0002,000017,957 YoY+38%12,976 90080070060050040030020010007,509 3,485 4,266 360197149FY2018 Q1FY2019 Q1FY2020 Q1FY2021 Q1FY2022 Q1FY2018 Q1FY2019 Q1FY2020 Q1FY2021 Q1FY2022 Q11 The number of new paid members refers to the number of (unique) paid members newly acquired during the period2 Net cash-based sales refers to the amount of orders received during the period (net sales are apportioned across periods over the periods of the corresponding courses taken)8*Includes those via corporate services*Includes those via corporate servicesStudying Business: Quarterly Net Cash-Based Sales Over TimeCash-based sales in Q1 (Jan-Mar) increased +28% year-on-year to 814 million yenYoY+28%814YoY+75%633(Millions of yen)9008007006005004003002001000149YoY+82%360YoY+32%1971Q2Q3Q4Q1Q2Q3Q4Q3Q4Q1Q2Q3Q4Q1QFY2018FY2019FY2021FY20222Q1QFY20201 Percentage notations show growth rates compared to quarterly cash-based sales for each fiscal year (including those via corporate services)9Studying Business: Quarterly Trends in Sales and ProfitQuarterly trends in sales and profit for previous years are as described below.We post sales on a cash basis when courses are purchased.Cash-based sales are divided evenly into accrued sales every month until the end of the course. In this way, the percentage of the sales accrual declines toward the second half of the fiscal year.Q1 (Jan-Mar)Q2 (Apr-Jun)Q3 (Jul-Sep)Q4 (Oct-Dec)Trends for Company coursesFew test daysMost frequent test days for difficult qualificationsSomewhat frequent test daysCash-based salesAccrual-based salesMany people start learning with aim of acquiring qualificationsSales high at the beginning of the year, trending slightly low after thatSince cash-based sales are apportioned over the long term, contributions from accrual-based sales tends to be smallTrending slightly low due to being immediately before tests for difficult qualificationsCash-based sales are on a downward trend, but prorated accrual-based sales are trending upIncrease in new course purchases and renewal courses immediately post-testDue to concentrated deadlines for major courses prorated accrual-based sales have growing contribution to the current periodHigh purchase demand for courses for the next year’s testsSince most of cash-based sales are apportioned to the next period, the contribution of accrual-based sales to the current period is smallerProfit trendPoorMiddlingGreatGoodRatio of cash-based sales (quarterly) to accrual-based sales (full year)(average range in previous years)75% to 85%70% to 80%40% to 50%15% to 25%*The average range above is the average range of the previous fiscal year; there is no guarantee that the trend noted will be the same in future years.10Studying Business: Advertising Expenses RatioAdvertising expense ratio1 increased due to aggressive spending, including TV commercialsTV commercials have increased awareness of our services(Millions of yen)Net Cash-Based Sales and Advertising Expenses Ratio Over Time現金ベース売上広告宣伝費率3,0002,5002,0001,5001,000500050.0%43.6%44.3%32.7%92.1%100.0%90.0%80.0%70.0%60.0%50.0%40.0%30.0%20.0%10.0%0.0%FY20182018年12月期2019年12月期FY20192020年12月期FY2020FY20212021年12月期FY2022 (Q1)2022年12月期(1Q)1 Advertising expenses ratio ＝ (Advertising expenses incurred in the Studying Business) ÷ (Cash-based sales)11Studying Business: Growing Recognition Through TV CommercialsIn January 2022, we launched a TV commercial featuring Hiroshi Tamaki as the main characterAiming for medium- to long-term growth by establishing a brand image and raising recognitionThrough Mr. Tamaki, who has played a wide range of roles on screen, we convey the message that we support people who aspire to new things.The new commercial, titled, What is Your Aspiration, begins with a striking scene of Hiroshi Tamaki standing against the backdrop of the vast ocean, lighted in the morning glow.Mr. Tamaki says, “Adults who aspire to something new are pretty amazing.” He then asks, “What is your aspiration?” Welcomed The New Year, we encouraged people to take note of Mr. Tamaki’s powerful message and positive attitude, urging on people who aspire to new things and considering new challenges.12Studying Business: Expanded course lineupFollowing the 1st class architect course, 2nd class architect course started in April Expanded pyramid structure for qualifications ranging from easy to difficultBusiness and ManagementLawAccounting and FinanceReal Estate‣ Small and Medium Enterprise Management Consultant‣ Professional Engineer‣ Sales Professional‣ Hazardous Materials Engineer‣ Mental Health Management® Qualification‣ Bar Examinations and Preliminary Examinations‣ Judicial Scrivener‣ Administrative Scrivener‣ Labor and Social Security Attorney‣ Patent Attorney‣ Japan Business Law Examination®‣ Intellectual Property Management Skills Test®‣ Personal Information Protection Officer‣ Certified Public Tax Accountant‣ Bookkeeper‣ FP‣ Securities Broker Representative‣ Loan Officer‣ Real Estate Broker‣ Registered Architect‣ Licensed Strata Management Consultant/Building Manager‣ Certified Property ManagerBusiness Skills‣ Civil Servant‣ Consultant Training CourseCivil ServantITSpecialistSpecialist‣ IT Passport‣ Basic Information Technology Medical‣ Applied Information Technology ‣ National Nurse Examination‣ Registered DistributorLanguages‣ TOEIC® TEST PreparationDifficult QualificationsMedium-Difficult QualificationsHigh unit price: High revenue per courseFewer examineesStep up from easy qualificationsEasy QualificationsLow unit price, small revenue per courseMore examinees13Corporate Education Business: KPIsWith Corporate Education Business sales growth (+48.5% year on year), the number of AirCourse contracted companies increased by +72 companiesAverage churn rate for AirCourse in Q1 FY2021 was 1.90%*, reflecting the development of a stock business model with a high retention rateCorporate Education Business SalesAirCourse Contracted Companies(Millions of yen)(No. of companies)300250200150100500255Progress(%)+18.6%350300250200150100500119YoY+48%6615010736FY2019FY2020FY202147FY2022 Q1292YoY+72companies220*The average churn rate is calculated by taking the monthly stock sales for AirCourse (monthly sales minus spot sales) and determining the rate of decrease from the previous month to the current month due to churn (= monthly termination rate), and averaging these numbers over a full yearFY2019FY2020FY2021FY2022 Q114Corporate Education Business: Moving into a phase of rapid growth driven by gains in large-scale customersIncrease in orders from large companies in addition to medium-sized companiesIncrease in expertise in employee training through successful customer case studies, and increase in impact of case study-based sales activitiesAirCourse User Companies (Partial)Full utilization of e-learning promotes growth of each individualWe have an in-house qualification test system that has evolved into a movement, achieving a 15.2% increase in order unit pricee-learning covers all aspects of “onboarding for mid-career hires,” “preparation for qualification exams,” and “employee benefits”Centralized management of training information through e-learning, drastically reducing labor hours required for administration!NEO CAREER CO., LTD.SHIFT Inc.Nichii Carepalace CompanyGurunavi, Inc.15Corporate Education Business: Major expansion of standard courses・Significantly expanded the number of courses offered from 405 at the end of December 2021 to 450 as of March 31, 2022・Actively expanding content to include practical work-based courses compatible with the latest Microsoft 365 apps, basic production management, IT skills, harassment, MBA series, mental health and Revised Act on the Protection of Personal InformationFrom new recruits to managersFull range of hierarchy-specific educationWide range of applicationsEducation by topicManagementCoaching, team/staff development, etc.Mid-level employeesLess-experienced employeesNew hiresLogical thinking, external communications, etc.Business manners, English, telephone skills, business card exchange, etc.Leadership, project management, etc.IT skillsComplianceAnti-harassmentSalesHuman resources and labor relations16Reskilling and DX Education Package Launch*・The first phase of collaboration with DATAMIX, with whom we entered into a capital and business alliance in January 2022・Offering e-learning content, DX human resources development education, skill tests, learning management systems (LMS), and original DX content production services; facilitating the systematic reskilling of employees at companies pursuing DXDX Core Human ResourcesProfessionalsGeneral EmployeesReskilling & DX Education Package4. DX core human resources development and training3. Original DX content production5. IT professional enhancement(e-learning)6. Practical data analysis skills testing2. Basic DX skills enhancement1. IT literacy enhancement(e-learning)DX Infrastructure7. Learning management system*This service will be available beginning March 202217Future Policies (Revisited)*Excerpts from materials published on February 14, 202218Market Potential and Direction of Business Development・We expect the qualification market for individuals to recover compared with FY2020, when the market declined due to the COVID-19 pandemic・The shift to online training is gaining wider acceptance in the corporate market. Demand in the e-learning and video education markets is also growing rapidly, as services are conducted online and remotely・Demand for re-learning (reskilling) is increasing for both individuals and corporations.DomesticIndividuals(*1)DomesticCorporate(*1)Qualifications185 billion yenCurrent TargetLanguage Education (for adults)180 billion yenDistance Learning (for adults)86.5 billion yenE-Learning and Video Education (B2B) 95.1 billion yenCurrent TargetCorporate Training525 billion yenIndividual Sales2.11 billion yen (*2)(FY2021)＋Corporate Sales0.15 billion yen (*2)(FY2021)tnempoeveDl erutuFtnempoeveDl erutuFOverseas CorporateFuture Target*1: Figures are forecasts for fiscal 2021 based on White Paper on the Education Industry, Fiscal 2021 Edition by Yano Research Institute.*2: Figures are rounded to the nearest million yen.19Further Acceleration of a Digital Transformation in Learning1. Reskilling and relearningAn era in which people continue to learn throughout their lives2. Acceleration of the shift toward digital-based learningOnline learning is becoming more common, and we are entering an era of learning through digital means3. An era in which data has valueA transition away from conventional instruction based on intuition and experience to content and services that utilize accumulated data4. Advancements in AI-based individual learning optimization and visualizationLearning efficiency improves through personalized learning for each user based on data and AI, rather than the conventional uniform learning model5. Recruitment and training of human resources has become a top priority for companiesIn the age of digital transformation (DX), the ability to develop excellent human resources is becoming an important management strategy➔ KIYO Learning is looking at a tremendous opportunity20Objectives and Purpose in Updating the Medium-Term Management Plan 2023ObjectivesBackground• To invest in growth and implement strategies to become No.1 in our target markets• The market opportunity is growing with DX and the online shift in learning• The online learning market is expanding rapidly, and investment to enhance products and services is becoming more important• Competition in the market is intensifying in terms of marketingPurpose in Updating the Medium-Term Management Plan• Focus on growth potential and increase investment to become No.1 in the shortest time possible••Increase marketing costs in a flexible manner to survive the market competitionIncrease investment to strengthen products and services• Our forecast for each profit measure in 2022 will be lower than the initial target due to an increase in investments• Targets for 2023 are shown as a range to allow for flexible response to changes in the competitive environment and other circumstances• The emphasis is on speed, including alliances, to capture reskilling demand21Initiatives and Policies in Our Current Medium-Term Management Plan Toward Our Long-Term VisionUnder our current medium-term management plan, we have positioned the growth of existing businesses (Studying Business and Corporate Education Business) as the most important targets.• As there is plenty of room for growth in existing businesses, we will place the highest priority on growth through investments in existing businesses and becoming, striving to carve a place as market leader.As we pursue the measures above, we will acquire the organizational capabilities and management resources necessary to develop new businesses• Strengthen existing organizational capabilities (learning systems, AI and data utilization, content development, marketing and sales, low-cost operations)• Acquire business management systems and further expertiseOur search for new businesses will begin under the current medium-term management plan• Search for and develop new business when promising opportunities are found• According to the nature of the business in question, we will consider in-house development (organic growth), business alliances, equity tie-ups (investments), M&A, etc.• We expect to begin the development of new businesses in earnest under the next medium-term management plan (2024-2026); however, we may begin during the current medium-term management plan depending on the nature of the business and the opportunities involvedUnder the current medium-term management plan period, we will prioritize investment in growth over dividends• As long as we maintain a high growth rate through investment, we will increase corporate value by investing in growth rather than emphasizing dividends22D i s c l a i m e rThis document makes forward-looking statements based on current plans, estimates, outlooks and/or forecasts regarding trends in the Company’s industry and regarding its business lines.A variety of risks and uncertainties is inherent in these forward-looking statements. Risks, uncertainties, and other factors that are already known or not yet known may lead to results differing from those found in these forward-looking statements.The Company’s actual business lines and performance may differ in the future versus content of forward-looking statements in this document.Forward-looking statements in this document are made by the Company based on the information available at the time of this document’s drafting, and no forward-looking statements shall be updated or changed to reflect future events or circumstances.*The Japan Business Law Examination is a registered trademark of the Tokyo Chamber of Commerce and Industry.*Mental Health Management® is a registered trademark of the Osaka Chamber of Commerce and Industry.*The Intellectual Property Management Skills Test is a registered trademark of the Foundation for Intellectual Property*TOEIC is a registered trademark of ETS.This product is not endorsed or approved by ETS.23