MEIKO NETWORK JAPAN CO.,LTD. Q2 FY2025 earnings call

Core Purpose & Mid-Term Plan Overview

• The company's purpose is "create the memory of 'you can do it if you try'", with a vision to become a corporate group that opens up people's potential and realizes a bright future.
• The three-year mid-term management plan "MEIKO Transition" started this fiscal year, focusing on improving profitability and building a growth foundation for the future, structured around two core transitions: Business Transition and Human Transition.

Business Transition Progress

• Portfolio Evolution: Core Meikojuku direct-operated business delivered large profitability improvement via region-tailored strategies. Japanese language school business recovered to near full capacity and will implement further operational rationalization including school name unification and back-office integration. The company decided to exit the unprofitable MYLAB programming classroom business. Human resources/training business, positioned as a future growth area, now accounts for one quarter of other business revenue and is expected to deliver full-year profit contribution this term.
• Customer Base Expansion: The company is entering the correspondence high school business to address the growing social issue of increasing numbers of school-refusal children. It has formed a business partnership with school corporation Ueda Kouryou Gakuen (operator of Sakura International High School) to prepare for the opening of the (provisional) Meikojuku High School in April 2026, leveraging the partner's operational know-how and the company's nationwide network.
• Alliance Strategy Acceleration: The company is actively pursuing partnerships with complementary partners. Jiritsu Gakushu RED business added Sawaya Club (a subsidiary of Uchiyama Holdings) as a franchisee, and the company will continue to pursue alliances with aligned companies.
• Group Alliance Realization: The two company-operated Japanese language schools will unify their brand under the well-recognized Waseda EDU Japanese School name, combined with sales and back-office rationalization to strengthen the brand's top-5 industry position.
• Safe and Secure Environment: 100% of all Meikojuku classrooms (including franchise locations) now have security cameras installed. Psychological aptitude testing is fully rolled out for direct-operated classroom staff and has been launched for franchise classrooms this term.

Human Transition Progress

• A new management structure launched in November 2024, with town hall meetings held for all executives and employees. The company promotes group-wide acquisition of hospitality coordination qualifications from the Japan Hospitality Promotion Association to embed its purpose.
• 34 employees have completed cross-group job rotations (intra-group secondments) to develop future executive talent via diverse operational experience. A talent management system is scheduled to be introduced this term to systematize group-wide human resource utilization.

1. Meikojuku Direct-Operated Business: Revenue is 7.262 billion yen, with a 532 million yen year-over-year increase. Operating profit is 1.183 billion yen, with a 365 million yen year-over-year increase. This segment accounts for 59.4% of total consolidated revenue. As of the quarter end, the number of classrooms increased by 13 year-over-year to 487.
2. Meikojuku Franchise (FC) Business: Revenue is 2.038 billion yen, with a 38 million yen year-over-year decrease. Operating profit is 702 million yen, with a 51 million yen year-over-year increase. This segment accounts for 16.7% of total consolidated revenue. The number of classrooms decreased by 63 year-over-year to 1,215 due to area restructuring, but royalty income increased from higher enrolled student numbers.
3. Japanese Language School Business: Revenue is 725 million yen, with a 58 million yen year-over-year increase. Operating profit is 164 million yen, with a 53 million yen year-over-year increase. This segment accounts for 5.9% of total consolidated revenue. Enrolled student numbers increased by 162 year-over-year to 1,829, recovering to near the 2,340 total capacity limit across two campuses.
4. Other Businesses: Revenue is 2.205 billion yen, with a 531 million yen year-over-year increase. Operating profit is 207 million yen, with a 260 million yen year-over-year increase. This segment accounts for 18.0% of total consolidated revenue. Growth was driven by consolidation of Meiko Wellness from the start of the period, and improving performance at the Kids business, Jiritsu Gakushu RED business, and Simple Inc. The Kids business achieved 11.4% year-over-year revenue growth, and Meiko Wellness opened a new child development support day service facility in February 2025. Overall, all segments achieved year-over-year operating profit growth, and total Meikojuku (direct + franchise) enrolled students increased 4.3% year-over-year.

• Full-year 2025 August term consolidated revenue guidance is revised upward 6.5% from the original plan to 24.5 billion yen, driven by continued strong performance expectations for the second half.
• Full-year consolidated operating profit guidance is revised upward 36.4% from the original plan to 15 billion yen, even after accounting for additional strategic investment for long-term growth foundation.
• The company maintains its planned annual dividend of 26 yen per share (13 yen for the second quarter, 13 yen for year-end), which is a 2 yen increase year-over-year. Dividends are determined based on a target dividend on equity (DOE) range of 5% to 7%.
• The guidance accounts for expected temporary seasonality: the third quarter typically sees temporary profit weakness from student attrition after graduation and higher recruitment costs for the new academic year. It also includes delayed strategic investment from the first half pushed to the second half, plus three new focused second-half initiatives: strengthening human capital management (including base salary increases to improve employee satisfaction), environmental/digital investment to improve customer satisfaction, and strategic investment in growth areas including M&A and new business development to evolve the business portfolio.

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