Point, enough to show the company’s strong ability to resist risks.
New Oriental’s performance is strong, and K-12 business is the main growth engine.
The K-12 field is known as the “golden track” in the education field. The traditional investors’ impression of New Oriental is still in foreign language training institutions, but in fact, New Oriental’s K-12 education business has already accounted for the bulk of revenue .
As early as 2000, New Oriental had deployed K12 education. At that time, K12 was still a blue ocean. New Oriental and Good future< /a>I haven’t stepped out of Beijing yet.
Data shows that the total market size of China’s K-12 out-of-school tutoring market, including English language training for toddlers and children, has increased from 377.5 billion yuan in 2015 to 619.1 billion yuan in 2019, with a compound annual growth rate of 13.2% is expected to further increase to 1.17 trillion yuan by 2024, with a compound annual growth rate of 13.6%.
(Source: New Oriental Prospectus)
The total number of students enrolled in K-12 tutoring has increased from 203 million in 2015 to 325 million in 2019, and is expected to further increase to 660 million by 2024. The compound annual growth rate from 2019 is 15.2%, the penetration rate of the overall K-12 tutoring market will see rapid growth.
According to the prospectus submitted by New Oriental on the Hong Kong Stock Exchange, it has also adjusted its disclosure of business revenue in the financial report to a certain extent. For the year ended May 31, 2020, New Oriental will recognize K-12AST, exam preparation and other courses as a financial reporting division, which includes primary and secondary education, online education, content development and distribution, preschool education, study abroad consulting services, and study tours. The operating segments were merged into “Others” mainly because they did not exceed the 10% quantitative threshold.
K-12 AST, test preparation andDemand is growing rapidly, and many analysts worry that offline education and training institutions may be eaten away by online education institutions.
In fact, the current K-12 tutoring (including English language training for children and children) in China is still mainly offline, but it can be seen that the number of online students has grown rapidly in the past three years , Has been quickly tied with offline.
(Source: New Oriental Prospectus)
If online education was the icing on the cake for education before, then after the epidemic, online education will mean life and death to education.
New Oriental started its online education layout very early. In addition to New Oriental Online, which was established in 2005, in 2014, New Oriental launched an OMO system that integrates online and offline teaching. The resources have been digitized, centralized and analyzed, and applied to New Oriental’s educational service products, thereby improving internal operating efficiency.
After the outbreak of the epidemic, all offline classes were suspended. New Oriental fully launched the online conversion action. It only took three days to complete the online teaching and construction of all courses, and finally 87 branch schools and sub-schools In the company, nearly 2 million students have been smoothly transferred online. New Oriental founder Yu Minhong once said in an interview with the media: “This epidemic has indeed given New Oriental an opportunity to speed up our technological deployment several times faster than before.”
From this perspective, the epidemic is an excellent opportunity for transformation for large companies like New Oriental. The original “ship is difficult to turn around”, in such an extreme external environment, but completed a fast turn. Of course, the pain is inevitable, but in the long run, the price is worth it.
However, during the epidemic, many students were forced to switch to online, and the advantages and disadvantages of online education were more clearly seen. Parents who have not been exposed to online education in the past have found that online education can be used as a supplementary form of education, and some parents feel that online education has an impact on children’s eyes, body, and attention. In fact, the really effective and most acceptable way for parents is OMO out.
In June this year, Yu Minhong redefines the OMO model. He said that the epidemic has accelerated online and offline teaching by educational institutions In the long run, this new model will become an indispensable part of the teaching process.
In September this year, at a media communication meeting, New Oriental publicly disclosed its latest development strategy for the first time: “Dual platforms, dual engines, and dual support.” The “dual platforms” refer to pure online education platforms and OMOs. Education platform. At present, the ground services in the New Oriental school system are integrated into the OMO education sector, including New Oriental primary and secondary schools.
In October of this year, in the 2021 fiscal year Q1 financial report, New Oriental CEO Zhou Chenggang stated that New Oriental has launched OMO online courses in 20 cities and attracted a considerable number of new customers. In the future, New Oriental will focus on investing more resources to promote the high-growth OMO strategy and expand its service coverage to more cities and students. “We believe that the OMO strategy will effectively increase enrollment and accelerate business recovery within this year.”
This summer, with the help of the OMO system, New Oriental achieved good results in its online and sinking market expansion. According to Zhou Chenggang, in Q1 of fiscal year 2021, the number of student registrations for New Oriental’s summer promotion activities reached 1,079,000, a significant increase of 31% year-on-year, and the student retention rate has also increased.
Compared with other companies’ practices of burning money to obtain traffic and then grab market share, it is self-evident that it is higher and lower.
Expand the energy radius through equity funds
In addition, New Oriental mainly expands its investment opportunities in various vertical segments of education through a growth equity fund under its umbrella, thereby creating synergy with existing businesses. An investor familiar with New Oriental told the “Business Data Pie” that New Oriental had established two funds in 2018 and 2019, namely RMB funds and USD funds.
According to the information on the official website, the New Oriental Education and Cultural Industry Fund was initiated by the New Oriental Education and Technology Group and served as a cornerstone investor. It also works with China’s top financial institutions,And so on, are achieved through independent equity investment platforms, and even multiple platforms are deployed at the same time.
In contrast, since 2013, Hao Future’s foreign investment has reached more than 100, mostly in the fields of quality education, study abroad, community and technology, including the subject network, Shunshun Study Abroad, Baby Tree, Reibu English, etc.
However, a large number of investments and acquisitions did have an impact on the performance data of the future, as reflected in the financial report, other income (expenses) and long-term investment impairment losses are huge, and the long-term investment impairment losses in fiscal 2020 will reach 1.54 One hundred million U.S. dollars.
Compared to Good Future using the balance sheet of listed companies to invest in multiple companies in the education ecosystem, New Oriental’s strategy is slightly different. It chooses to participate in equity funds with social capital for investment and does not need to consolidate assets and liabilities. Table, fully achieved financial independence, decision-making independence, and operation independence. This not only makes the balance sheet of listed companies more reasonable and healthy, but also avoids the situation of “big ups and downs” in stock prices, because for China Concept Stocks, changes in the fair value of the investment portfolio each year will directly reflect the net profit. Easily cause stock price fluctuations.
At the press conference announcing the establishment of the fund, Yu Minhong once said that New Oriental hopes to empower the accumulated experience in operation and management, technology research and development, and product content through a more open and independent way, and grow together with startups. , Enrich the service chain of the entire industry to meet the increasingly diverse and individual needs of students and parents.
It can be said that the investment of New Oriental’s equity funds can not only improve the establishment of the ecosystem, but also help the development of the entire industry.
Conclusion
After the rise of online education, for a period of time, All in online and offline have become two extremes. The OMO model gives us the inspiration that the intermediate state that combines the strengths of the two parties may have the highest operational efficiency. .
After all, high-quality content and products are the true essence of education. Compared with the dazzling data obtained from short-term burning of money, the long-term value of business will be more and more recognized over time.
The epidemic is like a large social experiment, To test the adaptability and business model of a company to an extreme degree. For education, it is a catalysis to the online model, but how much change can the epidemic leave for education in the post-epidemic era? New Oriental’s transformation may be the best model.