PROGRIT Inc. marks its 10th anniversary with a target of JPY 100B in revenue by 2035, driven by both M&A and organic growth. EC PMI and expansion into corporate and children's English are the next areas of focus.

Summary

In FY8/2026, PROGRIT Inc. posted record results at every profit line, from revenue through net income, and beat its company guidance as revised in July. To deliver its 2035 Vision, management expects M&A to account for a larger share of entries into new domains. It outlined a phased approach that starts with small- and mid-sized deals to build PMI capabilities. For FY8/2027, the plan calls for revenue growth to outpace profit growth, reflecting a full year of consolidation of The English Company (EC). Margin improvement at EC through PMI will be the key swing factor. On AI, management does not expect demand for English learning to shrink. It did, however, flag API cost management as a serious challenge going forward.

Key Points (Earnings Takeaways and Growth Initiatives)

• Management Strategy and Market View
  • Management framed JPY 100B in revenue by 2035 as a floor. It sees roughly JPY 50B from M&A and JPY 50B from organic growth as a realistic split
  • It described the first 20 years as a preparation phase, with the company's "real start" beginning in 2035
  • Management voiced conviction that English learning demand will not decline. Even as AI translation spreads, the value of speaking English directly remains unchanged
  • It stressed that the company has never been run with a deflationary mindset since its founding. It will continue raising prices in line with the value delivered
• Current Business Progress and Drivers
  • 4Q English coaching revenue rose 53.8% and subscription revenue rose 41.7%. Growth was driven by the EC consolidation and successful marketing for Shadoten
  • From this fiscal year, the company front-loaded investment into 1H and concentrated advertising in 2Q, when New Year demand peaks. The model shifted to generating profits in 3Q and 4Q, and results landed in line with initial guidance
  • 4Q operating income was JPY 450M (+185.1%). In the prior year, 4Q profit contribution was thin; this year, profits were spread more evenly across quarters
  • The decline in OPM reflects dilution from the EC consolidation. The CFO noted that underlying margins on a standalone basis have not declined
• Key Strategic Initiatives and Inflection Points
  • The company launched social contribution activities to mark its 10th anniversary. It plans to donate around 1% of recurring profit (JPY 14M already executed this year) and provide its app free of charge (approx. JPY 22M)
  • It launched PROGRIT Points. The points can currently be used toward coaching programs, and extension to subscriptions will depend on customer needs
  • The company is advancing learning-data integration across its apps. Management also outlined a concept to generate Purowazu vocabulary lists from Diatoku conversation data
  • Management put the likelihood of entering new domains via M&A at 6:4 to 7:3. An executive officer system will be introduced from the 11th fiscal year to strengthen the management base

Outlook and Strategy

• The FY8/2027 company plan calls for revenue of JPY 9,500M (+24.2%) and operating income of JPY 1,750M (+15.0%). It assumes +23–28% growth in English coaching and +20–25% in apps
• Annualizing underlying 4Q revenue of JPY 2,262M yields approx. JPY 9,048M (our estimate). The plan builds in growth above this run-rate
• EC has been improving from the losses it was generating at the time of acquisition. Management says PMI is on track and aims to lift EC's margins by transferring PROGRIT Inc.'s know-how
• The growth strategy rests on three pillars. The first is raising LTV in existing businesses by optimizing learning with AI and data. The second and third are expansion into global talent development and children's English
• Management will not rush into large deals. It will build PMI experience through realistically sized transactions, then pursue deals that are large relative to the company's size when the timing is right
• Management expressed interest in exporting the English coaching model overseas. AI products will be developed with global rollout in mind. The dividend is set to rise to JPY 32 per share annually (payout ratio of 30.4%)

Positive Factors

• Operating CF of JPY 1,604M and cash and deposits of JPY 4,241M. The core business's earnings power funds both M&A and shareholder returns
• Monthly app revenue reached approx. JPY 225M for Shadoten and approx. JPY 64M for Supifuru. The subscription revenue base continues to deepen
• Coverage stands at only 23% among companies with revenue of JPY 1T or more, and 9% among those with JPY 300B or more. This leaves substantial headroom in the corporate segment
• The corporate training services market is worth JPY 607.5B and has grown at roughly 4.7% annually since FY2020. The shift toward human capital management is a tailwind
• The CEO personally engages with executives at large companies. He has found that many face a bottleneck in global talent
• Insourcing previously outsourced engineers cut 4Q R&D expenses to JPY 60M from JPY 87M a year earlier

Concerns and Risks

• Embedding AI into products is driving up API costs. Management acknowledges cost control as a serious challenge, and server/API costs rose by JPY 64M in the prior fiscal year
• Due to EC's low profitability, the FY8/2027 plan assumes gross profit margin falling to 70.4% and OPM to 18.4%
• A JPY 830M share buyback and long-term borrowings lowered the equity ratio from 50.4% to 36.3%. Goodwill of JPY 283M was also recognized
• Roughly half of the growth target relies on M&A. Deals depend on counterparties, and PMI execution will determine success
• In the children's segment, parents are the paying customers, requiring a shift in messaging. The company will also compete with English conversation schools and cram schools offering long-term services
• During the transition to consolidated reporting, quarterly comparisons in the Tanshin diverge from underlying performance. Disclosures require careful interpretation

Performance Highlights

In FY8/2026, PROGRIT Inc. posted record results at every profit line, from revenue through net income. Against the revised guidance issued on July 9, 2026, revenue came in at 101% and operating income at 105%. The EC consolidation lowered gross profit margin to 73.5%. Even so, higher gross profit absorbed increased advertising and personnel expenses, and operating income rose by JPY 318M.

Segment Results

• Shadoten Paid Members: 13,363 (+31.3% YoY)
• Supifuru Paid Members: 15,926 (2.2x YoY)
• Continuation Course Enrollment Rate Among Regular Course Graduates (4Q): 72% (+1pt YoY)
• Referral Share of New Contracts (4Q): 23% (+6pt YoY)
• Graduate Satisfaction (4Q): 4.5 (Flat YoY)
• Corporate Training Clients: 412 (+72 vs. Prior FY-End)
• Employees (Consolidated): 393 (+155 vs. Prior FY-End)

Q&A List

• Q

  4Q revenue for the prior fiscal year (FY8/2026) appears to be JPY 2.5B in the Tanshin, while this year's revenue guidance is JPY 9.5B. Multiplying JPY 2.5B by four gives JPY 10B. What explains the lower figure?

  A

  It is true that the figures are quite hard to read this time because we are transitioning from standalone to consolidated reporting. That is why we included supplementary notes in the earnings presentation. Deriving the difference between the 3Q and 4Q figures in the Tanshin will likely produce a distorted picture, so let me walk through it carefully. The English Company joined the group in April, during 3Q. The 3Q-end balance sheet in the Tanshin was disclosed on a consolidated basis, but the income statement was on a standalone basis. As a result, comparing Tanshin figures creates a gap between standalone 3Q and consolidated 4Q. The English Company's consolidation period this time was five months, and all five months were booked in 4Q. Because more than the usual three months of revenue is consolidated, backing out the difference makes 4Q revenue appear to be JPY 2.5B. Please compare this with the quarterly revenue stacked chart on page 12 of the earnings presentation, which shows 4Q at JPY 2,262M. As noted there, the presentation allocates EC's results into two-month and three-month portions to match the actual periods. Underlying combined revenue for the two companies for June, July and August was therefore JPY 2,262M. On that basis, the JPY 9.5B revenue guidance clearly builds in solid growth. The Tanshin disclosure format was decided in consultation with the TSE. It can be difficult to follow on its own, so please review it alongside the presentation.

• Q

  Will the competition for children's English learning services be existing cram schools and English conversation schools? Or are you envisioning something like short-term intensive courses?

  A

  We think children's English education is somewhat different from adults'. Rather than the short-term intensive approach of PROGRIT, education services for children should be delivered over a much longer period. So, to answer your question, the competitors would be English conversation schools and cram schools.

• Q

  You have started introducing PROGRIT Points, which can currently be used for discounts on coaching services. Are there plans to make them usable for subscription services as well?

  A

  As you noted, we first introduced a system that allows points to be used for PROGRIT, our coaching service. Nothing has been decided regarding next steps. However, we always set our development priorities by listening to customers. If it reflects customer feedback and needs and is meaningful to them, extending points to subscriptions is entirely possible.

• Q

  Is in-house product development the base case for entering new markets (going organic on your own), or will you use M&A?

  A

  Both M&A and organic growth are options. Our current view is that M&A is more likely, at roughly 6:4 or 7:3. In both children's English education and corporate training for global talent development, there are excellent companies out there. If we can work with such companies, that would likely be the faster route. That said, inorganic growth depends entirely on the counterparty and cannot proceed on our wishes alone. We will keep both options open, advancing discussions with potential partners while also considering in-house development.

• Q

  In the context of AI, how do you assess both the negative and positive impacts on your business plan?

  A

  Starting with the negatives, honestly, we don't think there are many. The most impactful negative scenario would be AI reducing demand for English learning itself, causing the market to shrink. That is beyond our control and is a concern. However, our logic tells us it will not happen, and in reality it is not happening at all. AI translation is already highly advanced. Meetings can be translated with subtitles, including on Zoom, and you can even convert to audio and use smart glasses. Many people use these tools, yet the conclusion remains that speaking English directly is better. From my discussions with many people, my sense is that this has become a firm conviction for most. Our customers' behavior points the same way, so at least that negative does not apply. If anything, we are embedding more and more AI into our products. Diatoku is a fully AI-focused product, and we will build AI into Supifuru, Shadoten and our English coaching service, PROGRIT. AI may look efficient, but every use incurs API costs, so cost control will undoubtedly become a serious challenge. It is somewhat true that applying AI to everything improves efficiency and quality, but it can also come at enormous cost. Managing that balance is critical. As for positives, there are countless, but product evolution is the biggest. Traditionally, offering English conversation lessons required hiring large numbers of teachers. Now, a single AI model can hold conversations with every customer. That is just one example; we can also increasingly customize each customer's curriculum. AI will certainly transform the learning experience into something entirely different, and we want to lead that change.

• Q

  On children's education, as a parent of a three-year-old, I find the phrase "for those who are serious about learning English" somewhat off-putting. Parents are the paying customers, and overly strong messaging could make the business harder. How do you view this?

  A

  In that sense, the tone of our messaging will be quite different from PROGRIT. Businesspeople pursue English with strong short-term goals, so the message is to work hard and commit over a short period. Children are naturally different. For them, English learning should be enjoyed over the long term, not something done by holding your breath for a short sprint. The messaging for children's English education will therefore change substantially. My point is less about being "serious." Rather, an English business whose sole objective is helping children get familiar with and enjoy English is not, at least for now, a domain PROGRIT Inc. should pursue. We want to offer education services through which children reliably build English proficiency. This would give them a high probability of thriving as global talent or developing an interest in the world and spreading their wings. (CFO Addendum) I also have a child in elementary school. Adults working hard based on purpose and rational judgment is entirely different from children's motivation. We intend to move forward with a firm understanding of this.

• Q

  Margins have been gradually declining since FY2025. Will this trend continue, or do you plan to improve them?

  A

  (CFO) First, on our own basis, underlying margins for FY2025 and FY2026 have not declined. This year included a partial consolidation period, and next fiscal year will be the first with a full 12 months of consolidation. The English Company was loss-making when it joined the group. It is now on an improving trend, and profitability will continue to improve. That said, its profitability is currently low. This consolidation effect is what makes overall margins appear lower for FY2026 and FY2027. We are by no means satisfied with this. Because EC operates a similar business, we believe we have a clear, granular view of it, and we will work diligently to improve company-wide margins.

• Q

  It is great that businesspeople lacking confidence in English can become proficient through the PROGRIT method. How should we think about the need for English education at the childhood stage?

  A

  Questions about the merits of English education exist on many layers, and I may not fully understand which one you mean, so let me answer based on a hypothesis. Even if you cannot speak English as an adult, you can become proficient through programs such as PROGRIT. It is a fact that you can catch up whether you are a university student, a working adult or any age. At the same time, it is also very hard. Having served businesspeople with PROGRIT for 10 years, we believe we understand in considerable detail how they acquire English and go on to succeed globally. Although PROGRIT provides an excellent environment and maximum support, everyone puts in tremendous effort. They become able to speak English by working at it during extremely busy schedules while holding down jobs. Meanwhile, English is now part of Japan's default education curriculum, at least currently, and most university entrance exams include English. Given that, my view is that it is ideal to learn English as a child and, in a sense, "graduate" from English study there before becoming a student or working adult. Calling it "efficiency" might be misleading. I'm not sure if this answers your question, so please ask again if I missed the point.

• Q

  Please tell us about progress in the corporate segment and your expectations from next fiscal year onward.

  A

  The corporate business is progressing well. We are increasingly winning support from very large enterprises and major corporations. Alongside this, I believe our quality has risen considerably as we evolve from a PROGRIT that supports individuals to a service supporting entire organizations. I make a point of holding discussions with executives at various companies and sense genuinely strong demand. For large Japanese companies to grow further, they need to expand their global share. Whether they target revenue share or overseas profit ratio varies by company, but a great many have made overseas revenue and business expansion a pillar of their growth strategy. They are also exploring M&A, but actually running those businesses naturally requires talent. We recognize that this is a bottleneck for a large number of companies. We expect demand for corporate global talent development to keep growing, and we intend to expand our support capabilities, including headcount.

• Q

  At the start of the presentation, you mentioned aiming to become a JPY 100B revenue company. Do you plan to get there through M&A?

  A

  Honestly, much of the specific breakdown will depend on how things play out. Roughly speaking, we see about JPY 50B from M&A and JPY 50B from organic growth as realistic. It might end up 7:3 or 4:6, but that is the general picture. We will of course pursue M&A actively, but we still need to grow organically as aggressively as possible, so we will focus firmly on both. M&A increases revenue and profit once executed, but that alone means nothing. What matters is how well we can grow the acquired company afterward, and building our PMI capabilities is essential. In that sense, we need to further raise our M&A experience and capabilities as a company, and executing a certain number of deals is important. Rather than acquiring a very large company in the short term, we will build experience through realistically sized deals that would not sink the company if they failed. Once we have strengthened our PMI capabilities, we want to take on M&A that is large relative to our size when the moment is right.

• Q

  What kinds of companies are you targeting for M&A? Please also give an update on current M&A-related activities.

  A

  As mentioned earlier, children's English education is a very real possibility, as is the corporate training space. Beyond that, peers in the adult English market where we currently operate could also be candidates. We are not narrowing our options and are continuously advancing negotiations.

• Q

  Please share any thoughts on global expansion.

  A

  There are two points. First, as far as I know, the English coaching business model currently exists only in Japan. I see it as an invention of sorts: an excellent mechanism for adults to improve their English that does not yet exist elsewhere. At some stage, I would very much like to take on the challenge of exporting this model. Second, AI-driven products in particular face far fewer language barriers. Rather than competing only in Japan, we also want to develop products designed for global rollout from the outset. We will always keep overseas expansion in view. At the same time, Japan is arguably the frontrunner in English-related challenges, meaning the country where the problem is greatest, so executing well in Japan remains extremely important. Balancing these, we will carefully judge when to go overseas.

• Q

  I see your advance-payment and subscription model as a source of excellent capital efficiency. As you scale, will you continue to prioritize advance payments and subscriptions? Beyond revenue targets, please share your medium- to long-term thinking on capital efficiency.

  A

  (CFO) Our current revenue mix is dominated by the consumer business, and as you noted, services to individuals are provided on a subscription or advance-payment basis. In contrast, corporate clients often pay after service delivery, such as via invoice. We consider this standard practice in corporate transactions. As Okada explained in the presentation, we will place considerable emphasis on the corporate segment, so we will not necessarily prioritize advance payments. (CEO Addendum) This may be a slightly different angle, but while advance payments and subscriptions are of course beneficial, what we want to prioritize is being a company that raises prices properly. This has been our consistent management policy since our founding. Japan has long been described as deflationary, but over these 10 years we have never once run the company with that mindset. We believe the right approach is to always deliver excellent value to customers and set pricing commensurate with it. We will never stop refining our products and services every day so that customers receive more than what they pay for. If customer satisfaction rises as a result, we will raise prices with their understanding. That lifts margins and allows us to raise employee salaries further. It also increases our social contribution donations and, naturally, shareholder returns. We are committed to executing on this consistently.