Subscription revenue up 44.5% and English coaching growth drove a beat versus plan. EC integration and a JPY 10 dividend hike set the stage for the next growth phase.

Key Positives From The Full-Year Results

Revenue reached JPY 7,647M (+33.1% YoY vs. FY25 non-consolidated) and operating income JPY 1,521M (+26.5% YoY). Both set records at every profit level and came in above the July revised plan. Subscription-based English learning services (+44.5% YoY) led growth. The company built up recurring revenue while keeping S&M expenses under control during the year.

• Beat Versus Revised Plan
  : Results exceeded the July 9 revised plan by JPY 47M in revenue, JPY 71M in operating income and JPY 130M in net income.
• 4Q Margin Recovery
  : 4Q operating income was JPY 450M (+185.1% YoY), and OPM recovered to 19.9%. The playbook of front-loading advertising in 1H and smoothing profit in 2H worked as intended.
• App Subscriber Growth
  : Shadoten had 13,363 paid members (+31.3% YoY) and Supifuru 15,926 (2.2x YoY). We estimate combined monthly revenue for the two services at approx. JPY 289M.
• Customer Loyalty
  : The continuation course enrollment rate was 72% and the referral share 23% (4Q). Loyalty metrics remain high, which helps limit reliance on advertising.
• Corporate Training
  : Client companies reached 412 (+72 vs. prior FY-end). The corporate channel continues to expand, anchored by the Global Talent Forum.

Key Concerns From The Full-Year Results

The JPY 830M share buyback was debt-funded, so the equity ratio fell to 36.3% (50.4% at prior FY-end). The FY27 plan assumes lower margins, with a gross profit margin of 70.4% (-3.1pt) and OPM of 18.4%. Converting top-line growth into profit is the key challenge.

• OPM Contraction
  : OPM was 19.9% (-1.0pt YoY). Higher advertising costs (-JPY 541M) and personnel/recruiting costs (-JPY 332M) partly offset gross profit growth.
• EC Profitability
  : Had EC been consolidated from the start of the fiscal year, it would have added an operating loss of JPY 56M (7 months). EC was loss-making before the acquisition. The key question now is whether the FY27 assumption of "profitability after goodwill amortization" is achievable.
• Subscription Slowdown
  : 4Q subscription revenue grew only +3.6% QoQ. Supifuru paid members rose +4.8% QoQ, down from +46.8% in 2Q (our estimate).
• Non-Operating Expenses
  : Non-operating expenses of JPY 42M consisted mainly of a JPY 20M valuation loss on investment securities and JPY 14M in donations. Donations will recur every year at roughly 1% of recurring profit.
• Undisclosed Loan
  : The company booked JPY 199M in long-term loans receivable for the first time. The earnings release does not disclose the borrower or the purpose.

Focus Areas / Items To Monitor Going Forward

• EC Contribution
  : We will track EC's full-year contribution and its progress toward profitability after goodwill amortization. The split between organic growth and consolidation effect within the +23–28% English coaching plan is key to assessing margins.
• App Ecosystem Effects
  : We will watch whether PROGRIT Points and learning-data integration lower churn and drive cross-use across the English learning app portfolio. The main question is whether subscription revenue reaccelerates after slowing in 4Q.
• Capacity Management
  : The plan assumes two new schools and a net increase of 20–25 consultants. We want to see how the company manages course waiting periods, and how efficiently it acquires new customers while keeping the S&M ratio at 35–40%.

Key Financial Highlights

*The company moved to consolidated reporting this fiscal year, so all YoY comparisons are against FY25 non-consolidated results. YoY figures for SG&A and EPS are our estimates; all others are company disclosures. *Operating income bridge (company disclosure): Gross profit increase of +JPY 1,362M, offset by advertising costs (-JPY 541M), personnel/recruiting costs (-JPY 332M), commissions paid (-JPY 64M), server/API costs (-JPY 64M) and other (-JPY 41M). *Net income includes an income tax adjustment of -JPY 129M, which reduced the tax burden.

Performance By Business Segment

The company reports a single segment, the English coaching business. In 4Q, both English coaching and subscription services posted record quarterly revenue. Together with the EC consolidation, this lifted full-year revenue by more than 30%.

Segment Performance Table

Progress Versus Full-Year Guidance

Against the July 9 revised plan, the company delivered 100.6% of revenue, 104.9% of operating income and 113.3% of net income (our estimates). As management indicated, it hit the plan by front-loading investment in 1H and building profit in 2H.

• 2Q Margin Dip
  : Advertising spend is concentrated in the January peak season, so 2Q OPM tends to be lower. FY26 2Q OPM was 15.3%.
• Business-Day Effect
  : English coaching revenue is recognized by number of business days. 2Q has the fewest business days (83) because of the year-end holidays. This can create a revenue gap of up to 8.8% versus 1Q (91 days).

Next Fiscal Year Guidance

The FY27 plan calls for higher revenue (+24.2%) and higher operating income (+15.0%). It assumes growth of +23–28% in English coaching, including a full year of EC consolidation, and +20–25% in English learning apps. The company expects the S&M ratio to stay at 35–40%, in line with this year, and has factored in a decline in gross profit margin to 70.4%.

• Revenue
  : JPY 9,500M (+24.2%)
• Operating Income
  : JPY 1,750M (+15.0%)
• Recurring Profit
  : JPY 1,735M (+15.9%)
• Net Income
  : JPY 1,200M (+8.0%)
• EPS
  : JPY 105.22 (+16.5%)

Commentary On Shareholder Returns

• FY26 Dividend
  : The annual dividend was JPY 22 (JPY 11 interim, JPY 11 year-end). This is a JPY 3 increase from JPY 19 in the prior year, for a payout ratio of 24.4%.
• FY27 Dividend Forecast
  : The forecast is JPY 32 per year (JPY 16 interim, JPY 16 year-end), a JPY 10 increase and a 30.4% payout ratio. This meets the company's basic policy of a payout ratio of around 30%.
• Share Buyback
  : The company repurchased JPY 830M of its own shares during the year. The buyback was executed via ToSTNeT-3 to absorb shares the founder's side wished to sell. Treasury shares stood at 1,350,416 at fiscal year-end.
• New Social Contribution Policy
  : To mark its 10th anniversary, the company adopted a policy of donating roughly 1% of recurring profit each year and continuing to offer its English learning apps free of charge every year.

Financial Position

The equity ratio fell to 36.3% because the share buyback was debt-funded. Even so, the company remains effectively debt-free, with cash and deposits of JPY 4,241M exceeding interest-bearing debt of JPY 1,069M. Rising contract liabilities supported strong operating cash flow of JPY 1,604M.

Disclosures Released Alongside The Earnings Announcement

Major Announcements During The Quarter

Large-Shareholding Filings / Material Proposals Over The Past Year

• Shuntaro Yamazaki (joint holder: HOHETO): 15.84%→15.55% (2025/10/30) - Held as a stable shareholder by the founder and his asset management company
• Shuntaro Yamazaki (joint holder: HOHETO): 15.55%→7.64% (2026/07/10) - Large short-term transfer. Shares were sold into the company's ToSTNeT-3 buyback, and HOHETO ceased to be a major shareholder
• Shuntaro Yamazaki (joint holder: HOHETO): 7.64%→7.64% (2026/07/15) - Change in material contracts, such as collateral agreements
• Asset Management One: 8.47%→7.57% (2025/11/10) - Held under investment trusts and discretionary investment contracts
• Asset Management One: 7.57%→6.43% (2026/02/06) - Held under investment trusts and discretionary investment contracts
• Asset Management One: 6.43%→5.32% (2026/03/06) - Held under investment trusts and discretionary investment contracts
• Asset Management One: 5.32%→4.20% (2026/04/22) - Fell below 5%; held under investment trusts and discretionary investment contracts