Aoba-BBT,Inc. Q4 FY2025 earnings call

• Company Mission & Positioning: Aoba-BBT is an EdTech company focused on developing global leaders, with a vision of building a lifelong learning ecosystem (Life-Time Empowerment) that serves learners from early childhood through executive leadership, combining technology to build capabilities that AI cannot replace.
• Market Environment: Both core segments operate in growing Japanese markets: demand for international K-12 education continues to expand, and recurrent adult education is growing due to AI-driven workplace change that requires continuous upskilling.
• Platform Service Business Growth Strategy:
  • Expand on-campus capacity to meet strong enrollment growth, as existing physical campus capacity is expected to hit limits in the near term, so new campus expansion is a high priority.
  • Officially launch the online International Baccalaureate Diploma Program (DP) for high school in August 2025, which has already attracted enrollees from across the globe.
  • Expand partnerships with domestic educational institutions across Japan that want to add international curriculum, and unify multiple acquired school brands to increase synergy and brand recognition.
• Recurrent Education Business Growth Strategy:
  • Focus growth on corporate training, particularly next-generation leadership development, and grow the high-demand short-form intensive courses for University sub-segment (especially AI/digital/finance focused programs).
  • Restructure the corporate training organization by merging sales and program delivery teams into an integrated value chain, with a dedicated custom program team to deliver tailored solutions that cannot be matched by competitors.
  • Integrate AI technology into English education, and develop business-oriented English programs for global executive candidates.
• Group-wide Strategic Priorities: Continue to improve service quality and customer satisfaction, develop high-value-added services with clear ROI for learners, leverage EdTech and AI to create new value, pursue M&A opportunities for non-organic growth, and strengthen position as a leading EdTech player in the Asian market.

Aoba-BBT achieved 16 consecutive years of revenue growth for the full fiscal year ending March 2025. Total company revenue was 7.7 billion yen, with operating profit of 440 million yen, operating margin of 5.7%, recurring profit of 477 million yen, and net profit attributable to parent company shareholders of 242 million yen. The two core segments:

1. Recurrent Education Business: Total revenue was 3.606 billion yen, a decrease of 26 million yen from the prior year, contributing 46.8% of total company revenue. Operating profit was 87 million yen, a 47 million yen year-over-year decrease. The four sub-segments within this business are:

• University sub-segment: Undergraduate undergraduate enrollment missed plan due to shrinking youth demographic, but short-term 3-month intensive skill-focused courses saw strong enrollment and revenue growth; graduate and BOND-BBT MBA enrollment maintained prior year levels.
• Corporate Human Resource Development sub-segment: 7% year-over-year revenue growth, 12% increase in transaction count, 20% increase in large clients with order values over 10 million yen, 13% increase in new client transactions, with strong demand for customized training and next-generation leadership succession planning.
• IT Management sub-segment: 8% year-over-year revenue growth and 20% operating profit growth; core ITIL certification training held 44% market share and performed strongly, but new agile/Devops training programs missed growth targets.
• English Education sub-segment: Adult and corporate global leadership training saw mild growth, but children's English services only achieved mild year-over-year growth, missing planned targets.

1. Platform Service Business (International Schools): Total revenue was 4.085 billion yen, an increase of 258 million yen from the prior year, contributing 53.2% of total company revenue. Operating profit was 356 million yen, a 104 million yen year-over-year increase, driving all of the company's net profit growth this period. Total group enrollment exceeded 1,500 students, with Aoba-Japan International School and Aoba-Japan Bilingual Preschool hitting record high enrollment. The segment saw 41.5% year-over-year profit growth, driven by tuition revisions and enrollment increases.

• For the FY2026 (ending March 2026) full year, management guidance targets 8.25 billion yen in total revenue, 600 million yen in operating profit, 420 million yen in net profit, and a 7.3% operating margin, representing an increase in profit despite slightly lower projected revenue than the prior year's original plan.
• The projected profit growth on slower revenue growth reflects a shift to a leaner, more productive cost structure with higher labor productivity and improved profitability across the business.

• The company missed its original FY2025 full year performance targets, with revenue 7.3% below plan, operating profit 12% below plan, and net profit 18% below plan, driven by underperformance across multiple recurrent education sub-segments.
• Shrinking youth demographic puts continued pressure on BBT University undergraduate enrollment, creating ongoing headwinds for the University sub-segment.
• Rapid AI adoption in the English language learning industry is increasing price and technology competition, pressuring existing service margins.
• Macroeconomic headwinds including rising domestic prices and shifting exchange rate/interest rate environments create pressure on cost structures and consumer/client demand.
• New agile/Devops training programs in the IT Management sub-segment failed to meet planned growth targets, creating execution risk for new product initiatives.

Q: What is your projected facility capex for FY2026 for new campus construction? / A: Management follows a project-by-project approval process that only approves investment if projected ROI/IRR meets requirements. No large-scale new campus construction capex is included in the current FY2026 guidance, with only minor preliminary planning costs budgeted at this stage. The company will continue to host investor site visits to existing campuses to showcase its blended learning model.

Q: Why does your FY2026 guidance project higher profit even with slightly lower revenue than your prior year's original forecast? Is this from the shift in business mix or cost cuts? / A: It is a combination of multiple factors. Over the past year, the company has adjusted its organizational structure, reallocated human resources, adjusted to changes in external factors including exchange rates, and shifted its product mix to higher-margin offerings. This has created a leaner cost structure and improved labor productivity without increasing overtime, so the company can grow profit even with moderate revenue growth, reflecting a company-wide focus on improving operating margin.

Q: How do current external macroeconomic conditions impact your business? / A: Japan is facing ongoing inflation and shifting exchange/interest rate conditions. In response, the company is prioritizing improving operating margin and profitability over rapid revenue growth, to generate faster operating profit growth and stronger free cash flow to fund future investments in capacity expansion, teacher quality, and educational technology.

Q: What are your plans for expansion outside of the Tokyo metropolitan area, and what are your priority growth areas outside the capital? / A: Management sees growing demand for international education across all regions of Japan, as more families want to provide global education opportunities for their children, and more domestic education institutions want to add international curriculum to their offerings. The company will grow through both direct new campus openings and partnerships with local educational institutions to help them deliver high-quality international education, expanding its reach across Japan while growing its platform service business overall. For adult learners, the company will continue to provide lifelong learning opportunities to help workers adapt to AI-driven workplace change across all regions.