May 19, 2023
Benesse Holdings, Inc.
Transformation Business Plan Briefing Q&A Summary■Date and Time︓ Friday, May 19, 2023, 16:00－17:30■Respondents: Hitoshi Kobayashi,Representative Director and President, CEO
Shinsuke Tsuboi, Managing Executive Officer, CFO,
Executive General Manager of Finance and Accounting
Koutarou Ueda,
Managing Executive Officer, CSO, Executive General Manager ofCorporate Planning and Promotion※ We have taken excerpts from the Q&A session and summarized them. Some of
the wording and the order have been modified for ease of understanding.

Q. You have been taking steps to resolve structural issues in the businessenvironment of the Education Business in Japan. They have provenunsuccessful and here you present a new set of measures. Which part ofthe issues in Japanese education should we start to address in the firstplace?
A. It is a fact that earnings saw a V-shaped recovery from FY2019 to FY2022.
Shinkenzemiʼs operating income in FY2022 exceeded that of FY2019, when wewere still recovering from the incident of personal data breach in 2014.
We recognize that educational issues are deeply rooted and increasingly complex,
as you pointed out. The issues have changed even more drastically due to theimpact of COVID-19. These changes include schoolsʼ shift to online learning andDX, which have in turn affected childrenʼs motivation. In addition, entrance
exams have undergone reforms, and needs have become more diverse andmultidimensional, not only for individuals but also for schools. No single producthas been able to address all of these changes, and we intend to meet thesechanges by ramping up our efforts to carry out the plan we have presented today.
While the mass market for education may not be an area of steady growth likeother industries, it is necessary for Japanese education to answer increasingly
diverse and multidimensional needs, and that is what we must do. By thoroughly
implementing the measures we described, I believe we can achieve sufficiently
stable profits as a business.
Q. In the Transformation Business Plan, you have presented business
investments of ¥50.0bn for core businesses and \53.0bn for new fields.
What is your forecast for each year in terms of CAPEX and depreciation
and amortization?
Also, how much upfront cost do you expect to hit the statements of income,and what amounts are you anticipating for FY2023 and FY2025?
A. For CAPEX, we are expecting an increase of around ¥3.0bn to ¥4.0bn in FY2023
compared to FY2022, mainly in the School & Teacher Support Business.
From FY2023 to FY2025, we expect to invest equal amounts of around ¥15.0bn
to ¥20.0bn for each year.
The amount of strategic investment to hit the statements of income is expected
to be around ¥3.0bn in FY2023, as presented at the financial results briefing. InPhase 2 of the medium-term management plan, we expect to record around thesame amount each year.
Q. I believe Shinkenzemi is a central component of Core Education. Since you
indicated that enrollment is not considered a KPI, it seems you are taking
a hands-off approach to Shinkenzemi sales. Based on this assumption, areyou aiming to improve profitability and grow income? Or do you envision
Shinkenzemi as something that will change completely going forward? I
would like to know how we should view Shinkenzemi in the future.
A. Shinkenzemi is currently a single packaged product, but at times we may go
beyond the existing model of Shinkenzemi. The most important thing is not tobuild enrollment but to increase customer satisfaction. We need to consider not
overall enrollment but rather retention and the type of people who are enrolled
in order to be profitable and make a contribution to the society. We believe theshift to BYOD in FY2026 and beyond will lower the price of Shinkenzemi andreduce the hurdle for students to take it.
In terms of improving income, we will also consider EVERES and ChallengeSchool, which have low sales costs and high margins, to explore the best option.
We are also considering the idea of having an on-site business (classrooms) forShinkenzemi. We believe it is necessary to change the existing framework ofShinkenzemi and come up with a way in which it can be used by all people. Thistransformation plan is all about aggressively and boldly taking on the challengeof such initiatives while keeping an eye on income and ROI.
Q. You said that Shinkenzemi is about more than just enrollment and thatyou plan to change its format. What are Shinkenzemiʼs universal strengths,in a nutshell?
A. I donʼt want to give you a wrong impression, but Shinkenzemi has an excellent
business model. It allows us to reach customers throughout Japan and build aclient base. However, it would be a mistake to assume that this strength willcontinue. Currently, Shinkenzemi is unable to meet the diverse needs of its clientsand the various academic and career paths they take. While maintaining theclient base of Shinkenzemi, we are determined to deliver unique services in andaround Shinkenzemi. We will decide whether to call it "Shinkenzemi" or"Shinkenzemi +α" after listening to feedback from our customers.
Q. The future of BYOD seems like an important factor affecting Shinkenzemi.
Could you give us an update on the present situation of the GIGA School
Program: whether BYOD is likely to be approved, and whether it is still
unclear what moves will be made by the Ministry of Education, Culture,Sports, Science and Technology?
A. It is difficult to provide clear information right now. The GIGA School Program
began with the government's decision prompted by the COVID-19 pandemic todistribute tablet devices to elementary and junior high school students
throughout Japan. We do not know if the government will distribute devices toall students again for the 2025 replacement. Either way, the growing rate ofdevice ownership and at-home use in addition to school use present an
opportunity for Benesse. We are considering making it possible to use
Shinkenzemi without another device. Also, our current pricing includes the tablet,and we believe that pricing without the tablet will lower the initial hurdle forstudents to enroll in Shinkenzemi.

Q. As you indicated an intention to expand the India business and Universityand Working Adult Business and presented a highly ambitious sales plan,I believe you are currently in the investment phase. How do you plan toreturn profits in the future, and how will you evaluate the returns?
A. In terms of our approach to returns, it is important to closely watch individual
capital efficiency indicators such as ROI, ROIC, and IRR. For new fields, we areaware that the WACC is currently about 5.6%, and one major benchmark will bewhether or not we can sufficiently exceed that level. Benesse currently uses JGAAP, and when we make large investments in the future, we would like toemphasize cash indicators such as EBITDA in addition to operating income.
We will also evaluate individual investments, such as whether the integration ofSkyHive and Udemy will lead to deeper solutions for customer issues and further
business promotion. We will look at the service or business on its own, as wellas the investment and recovery generated within this business model. We are
not trying to make baseless investments to generate sales of \100.0bn.
Q. Can you explain the time frame for the University and Working Adult
Business? Are you expecting it to expand to a certain scale of sales by theend of the current medium-term management plan in FY2025, andgenerate income as a single revenue driver after that?
A. Although we refrain from sharing specific figures, we do expect a certain level ofincome by FY2025.
At the same time, we can increase the probability of achieving the business planby enhancing learning content, including Udemy in particular. Such an
opportunity could give rise to an investment decision even if it is not in the current
profit-and-loss plan.
However, we do not yet know the full extent of the cost burden by FY2025, as it
depends on the form of investment. As of now, we plan to produce solid numbers
by FY2025, but since the University and Working Adult Business is an area
expected to drive growth beyond that point, we will consider various factors ona case-by-case basis.
Q. You indicated that Shinkenzemi enrollment has fallen because of a decline

in children's motivation, but parents must want their children to learn.
Wouldn't Red Pen Teacher be an effective way of raising and sustaining
children's motivation? I think Red Pen Teacher is worth revisiting, but is it
one of your strengths? With the increased focus on coaching, do you intend
to expand services related to Red Pen Teacher?
A. After the transition from paper to digital tests, we have shortened the period ofRed Pen Teacher returning the tests. We recognize that this is a very important
service, especially considering the high submission rate among younger childrenof primary schools.
On the other hand, with digital learning, it is important for students not to be leftall alone when studying at home, but rather to connect with others. In addition
to Red Pen Teacher, we are strengthening services that connect them with older
students in their own high schools. Since the distribution of digital devices allows
us to monitor the children's learning progress, we will also reinforce the use ofphone calls and other tools to check on their progress and boost their motivation.
For those who still have difficulties, we plan to expand into offline services suchas classrooms.
While Red Pen Teacher is a valuable service for those currently taking the course,
we will continue to work on other measures also to boost motivation, such as
connecting with and supporting others, as a theme of Shinkenzemi.