September 14, 2022
Benesse Holdings, Inc.
Analyst Meeting for Nursing Care and Childcare Business (Company)
Q&A Summary■ Date and Time：Wednesday, September 14, 2022 13:30－15:00■ Respondents: Hitoshi Kobayashi
Representative Director and President, CEOShinya Takiyama
Director and Senior Managing Executive Officer,
Head of the Nursing Care and Childcare Business Company,
Representative Director and President of Benesse Style Care
Co., Ltd.
Shinsuke Tsuboi
Managing Executive Officer, CFO (Chief Financial Officer),
Executive General Manager of Finance & Accounting※ We have taken excerpts from the Q&A session and summarized them. Some of the wording and the order havebeen modified for ease of understanding

Q1. Regarding your future growth strategy for the Nursing Care
Business and the associated use of funds, do you plan to continue
expanding the number of nursing homes and peripheral businesssuch as the HR business? The HR business doesn’t require significant
investment, and nursing home business provides sufficient returns
on a cash flow basis, but have you considered increasing the pace ofexpansion of new nursing homes？
We have not changed our plan to open new nursing homes at a pace of 12per year. We believe institutional nursing care is a business which can be
developed very efficiently on a cash basis. Our strategy for the HRbusiness, as we explained in the presentation, is for growth including M&A
such as last year’s acquisitions. We are not planning significant investmentin the HR business.
1Q2. The amount of investment in the Nursing Care and Childcare
Business over the next 4 years has been largely decided. Can weassume there will be no major fluctuations？
A. Depending on the property, it may be owned by the Company, in whichcase there will be some fluctuation, but we don’t expect a major change.
Q3. Operating the Nursing Care Business with its substantial leaseassets and swollen balance sheet and the Education Business within
the same Group makes it difficult to understand from the perspectiveof company analysis. Couldn’t corporate value be maximized byspinning off the Nursing Care and Education Business into separate
companies?
A. Internally, of course the BS and CF are managed separately by businesssegment. A spin-off is something that should be thought over carefully, but
it is not an issue at this point.
Q4. Operating costs for nursing homes are rising, including the cost offood and utilities. Could you comment on the effect that is having
and your views on passing on those increases?
A. Currently, costs for various items are rising, especially electricity and gas.
Since it is difficult to absorb these increases through company efforts
alone, we are thinking of revising our pricing, including for existing clients,from December.
Q5. Will price revisions be able to cover all of the impact of cost
increases?
A. We are considering price revisions from December, so it will be difficult tocover all of the cost increases within this fiscal year. Although it is hard topredict how costs will move in the next two fiscal years, we aredetermining the amounts needed to compensate for cost increases overthe next few years based on in-house planning and calculating.

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Q6. You plan to expand the number of nursing homes by 12 per year.
What potential do you see for the number of facilities in the longterm, mainly in big cities and areas where many wealthy people
reside?
A. The over 85 population is projected to increase until 2060, and in the areas
where the Benesse Group is expanding the increase in the elderly
population is expected to be greater than the national rate of increase.
Therefore, even if we continue to expand at a rate of 12 homes per year,
we anticipate that there will be demand.
In terms of where we expand, one of our conditions is being able to build adominant position, for example in Fukuoka and Kanazawa, and we areconsidering areas where we can build 5 or more locations, or at least 3. We
will continue to look at expanding into areas other than those we are
currently developing, but for now we are focusing our growth mainly inFukuoka, Hiroshima, Kumamoto, and Kanazawa.
Q7. You have stated that your goal is to increase sales in the HR
business from the current ¥4.5 billion to ¥10 billion by FY2025. Whatis the breakdown? Which operation do you expect to grow – HR
recruitment or HR dispatch?
A. It is easy to generate sales in the HR dispatch business, but in terms ofoperating income, the HR recruitment business is more attractive. Without
going into detail, the HR dispatch business centered around Benesse MCM
Corp. is likely to account for a slightly larger proportion of the ¥10 billion
sales goal. However, the HR recruitment business centered around Heart
Medical Care Co., Ltd. is also growing steadily.
Since the attributes of people seeking temporary staffing jobs and thoseseeking full-time positions are different, we believe that working with twocompanies, Benesse MCM whose strength is in dispatching and Heart
Medical Care whose strength is in referrals, will lead to greater sales.

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Q8. Is it possible to differentiate your HR business from othercompanies in the same industry?
A. In the HR recruitment business, normally a referral fee is received when theperson recruited joins the company, but a more client-friendly system
introduced by Heart Medical Care Co., Ltd. delays payment of the referral fee
until the person has been in the job for one month. This service arose fromthe difficulties nursing care providers have with staff quitting within one
month of starting, and since training content is also provided to prevent early
retirement, it has substantial benefits for clients. We have been in thenursing care industry for a long time, and being able to conduct businessfrom the perspective of understanding the problems nursing care business
operators face is an advantage.
Q9. The occupancy rate for nursing homes has been declining. Whatmeasures are needed to bring the occupancy rate back up to the preCOVID level?
A. Our targets are for the occupancy rate to recover to 93.0% by the end of
March 2023 (FY2022-end) and to regain the pre-COVID level of 95.2% by
the end of March 2024 (FY2023-end). In that context, in addition tobuilding relationships with social workers and care managers at regional
hospitals, we have implemented a short stay initiative that allows people
who need nursing care to experience it with a trial stay. Previously, we
thought there would be little demand for short term stays among people
considering a high-end nursing home, but over the past year or so we haverealized that there is strong demand, even from those who are consideringhigh-end homes. In fact, one-third of those who tried out a short staysigned long-term contracts and moved in within one year.
We are creating considerable area dominance, making it possible to assign
specialized units to carry out regional coordination and to continuously
build relationships with social workers and care managers who can refer us
or contact us for people who are in need of nursing care. We believe that
this will be one of the major breakthroughs toward the recovery of theoccupancy rate.
In addition, we believe that Nursing Care DX initiatives aimed at improving
QOL will be a great advantage as solutions are completed in future.

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Q10. Granda Yotsuya is the first location of Benesse-style sensing homes.
How is it different from existing homes? Is it a differentiator from thecompetition?
A. Granda Yotsuya is the first in a series of what is referred to in-house as“Expensive Granda”. Despite the high price, clients are steadily choosing tolive here and occupancy is progressing. Being able to set the price at thehigher end means that profitability increases accordingly. DX is being usedto improve the care skills of the nursing staff, and even some healthy
residents are able to look at the sensor data themselves and use it tomanage their health. Visualizing their status through sensors is also an
attractive feature which leads to conversation between the user and theirfamily. We believe these features can help increase utilization further.
Sensors were introduced at 6 locations including existing homes in FY2021,and we are planning to add more this year. In our view, integrating goodpractices and changes in clients to develop solutions will lead to further
improvement in product competitiveness at each facility.
Q11. We can understand that restoring the occupancy rate for nursing
homes in the future will improve profitability. After the occupancy raterecovers, will it be possible to further improve the operating profit
margin and ROIC, or should we expect them to be generally flat?
A. We are planning for recovery in the occupancy rate toward FY2025, but
once the rate recovers to the pre-COVID level, the main direction will be tomaintain the operating profit margin and ROIC to some extent.
From the viewpoint of capital efficiency of the Nursing Care and Childcare
Business as a whole, the HR business (recruitment and dispatch) is more
profitable than nursing home care, so our challenge is to expand ourbusiness in these fields and further enhance the overall capital efficiency
and profitability of the Nursing Care and Childcare Business.

5Q12.What do you perceive to be the long-term risks in the Nursing Care
Business? For example, with respect to regulations about opening
facilities, local governments have a condition that private-pay nursing
care homes accept public admissions. Is there a risk that a situation
will arise that makes it difficult to open homes in the future? Does thefact that 35% of sales consists of income from long-term careinsurance pose a risk?
A. Regarding private-pay nursing care homes, local governments haverestrictions on the total number of homes which means that it is not always
possible to build them where we want. In response, we are developing
private-pay nursing residences which account for over half of new homes
opened each year, depending on the year. We have a plan to develop
properties even if there are restrictions on total numbers, and are able todesign products which are as profitable as private-pay nursing care homes.
Also, there are some aspects of long-term care insurance that areuncertain in the medium to long term. However, even if there is a negative
revision of long-term care insurance, the fact that the impact is limited byour low dependence on long-term care compensation (35% of sales) is anadvantage, in our view.
While Long-term care insurance is part of our social infrastructure, it is also
problem for Japan’s public finances. If it were to be eliminated, Japan’selder care itself would collapse. Under such circumstances, we carry out
activities on an ongoing basis through industry associations to ensure that
long-term care compensation is appropriately allocated. Looking atrevisions to long-term care compensation in the past few years, rather
than raising the basic amount of reimbursement, there has been a shift
toward adding to the basic amount where good nursing care is provided.
We believe that by improving the quality of nursing care we will become
eligible for additional reimbursement.
Other risks include securing human resources and property development
risks. We are currently able to reliably secure staff by hiring new graduates.
Interest in property development is also increasing, including fromhealthcare funds and REITs, and we hope to build relationships and develop
properties.

6Q13. Please share your thoughts on synergies between the Nursing Care
Business and other businesses as well as the creation of new added
value, and share examples of initiatives that you are already workingon.
A. There is still a sense of distance between Nursing Care and otherbusinesses in terms of directly linking sales, profits, and clients. However,with our perspective of well-being, we believe that the Benesse Group canfurther enrich human capital in Japan and firmly support people in raisingand enriching their attractiveness. In that respect, we believe it is possible
to connect businesses under the same philosophy so that people who workin nursing care can achieve job fulfilment and develop their skills.
We will explain our philosophy and our views about business again at ESG
briefings and other events.
Q14. Please comment on the competitive environment in high-end nursing
homes from a current perspective as well as your perception of thesituation in the medium term. Also, can you demonstrate yourcompetitive advantage in Fukuoka, Hiroshima, Kanazawa, andKumamoto which are new markets for you?
A. The number of companies developing high-end homes mainly in the Tokyo
metropolitan area seems to have increased in the past 7 ~ 8 years. At thesame time, since land for distinctive high-priced properties in city centers islimited, there are not many competitors who can open and expand multiple
locations at once.
Recently, demand mainly for high-end homes declined due to COVID-19,
but as the virus winds down demand seems to be recovering.
Even in areas where we are newly expanding, for example in Fukuoka
where we are currently developing three locations, Granda Takamiya, thefirst location, is already full, and two more homes in Nishijin and Takeshita
will open this fiscal year. We believe that in new areas as well, through ourresearch we will be able to firmly meet the needs for our services.

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