This article was first issued from WeChat public number: Yourseeker, title map from:Oriental IC
In the recent hot season, most people will use this to understand the business progress and financial status of listed companies, and also to fulfill their previous judgments on the market.
Someone is happy with someone, this is a normal thing. But in the past two weeks, the education industry giants – New Oriental, a good future, are somewhat embarrassed.
October 22 New Oriental released its first quarter results for FY 2020. Revenue increased by 24.6% year-on-year to US$1.072 billion, and profit increased by 52.6% year-on-year to US$246 million, both higher than market expectations.
The paradox is that after the earnings report, its stock price rose about 3% before the market, and then turned sharply after the market opened, eventually closing down more than 7%.
After two days, October 24, Good Future also announced the latest season (according to its caliber is the second quarter of fiscal year 2020) Results, a single quarter net loss of 14.4 million US dollars, less than previously expected, far less than the net profit of 77 million US dollars in the same period last year.
The paradox is that after the results announcement, its share price opened 8% higher, and it closed up 13% at the close. It will be better for the future market value, and once again firmly stabilize the education industry’s market value first.throne.
With the notion that the market doesn’t lie, I did a lot of research in curiosity. I hope that I can combine the ups and downs of the education turmoil in the past two years, as well as the different choices of the giants, rookies and the first class, to explain why this is.
1, the general loss of education companies has become the new normal?
Don’t feel that the data for the most recent quarter is just an outlier. As early as three months ago, the financial report for the first quarter of the fiscal year 2020 was announced in the future. The growth rate of the quarter was lower than market expectations. What is most surprising is that this is the first quarterly loss in the first nine years since its listing in the future.
In the same period, New Oriental Online (note that it is not New Oriental) released its first annual report after listing. The company landed at the Hong Kong Stock Exchange at the end of March this year and has close ties with New Oriental. It is also the first online education company listed in Hong Kong. The data shows that its revenue growth in the 2019 fiscal year is still acceptable, but the profit is also turned from profit to loss.
Looking forward, less than a year later, New Oriental’s second quarter earnings for the 2019 fiscal year(2018 Disclosure at the end of the year Obviously, since 2012, this veteran education company has suffered a quarterly loss for the first time.
As the two largest listed companies in the field of traditional education and training, New Oriental and the future have revenues of billions of dollars and net profits of hundreds of millions of dollars in the past two years. However, there have been rare losses in recent times. Apart from regulatory factors, the main reason is that the two companies have begun to invest heavily in online education.
In the last two years, online education has become one of the few and long-lived outlets in the Internet industry. Not only the giants in the secondary market are willing to pay high costs to continue to raise, but many VCs in the primary market have also invested large sums of money in startups in this field, and everyone is scrambling to burn money into the market.
But the competition is getting hotter and hotter, and startups have to bear the constant high marketing costs, and the general loss is the norm. Even the players who have been deeply ploughed for a long time are caught in the financial quagmire because of short-term profitability.
Is this money burned?Count? In the short term, the practice of burning money for share is a consensus, because the market behind it is huge.
The most direct evidence is that the scale of online education users is continuing and growing at a high rate. According to Questmobile data, as of June 2019, the educational learning app has more than 480 million monthly activities. The acceptance of online education by a large number of users is constantly improving.
In addition to the increased penetration rate, the demand for low-line cities is stronger than that of first- and second-tier cities. This coincides with the “sinking market dividend” that has been talked about in recent years in the fields of short video and e-commerce.
In consideration of market share, in the face of new markets that have not yet formed a stable demand for online learning, education companies have extended the tradition of the Internet industry – subsidies and even free money-burning strategies, and capital has chosen to help .
This has caused most online education companies to use KPIs for registered users and active users, and generally do not pay much attention to the Achilles heel of high marketing costs and weak profitability.
But is the user attracted by low-cost promotion accurate enough? How is loyalty? Will they generate secondary consumption?
In theory, from the pursuit of user scale to actual profitability is a necessary path. For online education companies, cheapness is unlikely to be a core competency.Brands and services are the only ones. The latter will bring pricing power and will ultimately determine the space for future price increases.
2, why do players compete for online K12?
Online education is a general term for the industry, and it can be subdivided into many subcategories. If we sort by month, we can find that as of June 2019, the order of online education from large to small is: K12, dictionary translation, educational tools, language learning, preschool education, vocational education, higher education.
The reason why the K12 track is highly sought after, I think there are four main reasons:
First, K12 is indeed the largest user in the field of education and learning. This type of app is close to 220 million (June 2019 data) /span>. According to the statistics of the Ministry of Education, the total number of students enrolled in the K12 stage in 2018 reached 173 million, of which 103 million were ordinary primary school students, 46.526 million were ordinary junior high school students, and 23.754 million were ordinary high school students.
The huge K12 student base has remained stable for a long time, which is the foundation of the K12 education industry.
Second, K12 learning and education and training are all oriented to the needs of the test, which is a strong need. Parents and students face the pressure of test-taking and the demand for points, and will inevitably choose the method of off-campus training and counseling to make up for the lack of classroom education.
Thirdly, for the new generation of 80s and 90s parents, the contact and connection with the Internet is closer than that of the previous generation, and the acceptance of the new model of online education is naturally greater.
Finally, there is still a lot of room for K12 education to expand, because the degree of onlineization is still very low. According to iResearchStatistics and accounting, in 2018, China’s online education market accounted for no more than 10% of the overall education market revenue scale. That is to say, offline education still firmly holds the absolute mainstream position.
The specific level of online education in the adult education market is higher (20~35%), under 18 years old The online education of the crowd is very low, no more than 10%.
Since online education can make up for and transform traditional offline education, it is subject to the scarcity of quality resources in the K12 field (total amount, uneven distribution) /span>, inefficient (depending on manpower, process opacity, uncertain effects), online education theory can also play a huge role.
From another perspective, in the primary market in 2018, the K12 project also accounted for three of the top ten investment and financing cases in the education sector, and became the highest proportion of the segmentation track.
3, aggressive players choose a strategic loss?
The most aggressive players from the offline line are not good for the future.
In the beginning of 2003, Zhang Bangxin opened the first Olympic teaching class and then gradually expanded the teaching categories and campus cities. At present, there are five major business groups in the future: K12 and comprehensive capabilities, smart education, education open platform, quality education, international and lifelong education.
where K12 and the Integrated Capabilities Group are the core of the business, learning and thinking (small class), Aizhikang(one-to-one) become the main source of revenue. Quality education The business group is targeting the long-term track, and the international and lifelong education business group is targeting “after K12.” As for the open platform of smart education and education, it is the positioning of to B, empowering public systems and external training institutions.
It can be said that the future is not only the domestic K12 extracurricular training leader, but also the comprehensive education ecology of online + offline, platform + content, K12 extracurricular tutoring + quality education.
Of course, this industry is not a big one. From the scale of revenue, New Oriental has always been a strong opponent of a good future. At the same time, many startup companies have achieved super high growth rates because of cutting into market segments, making the industry’s top two such as Mang.
Good future total revenue for the last four quarters was $2.716 billion; and New Oriental’s revenue for the last four quarters totaled $3.096 billion, of which K12 business contributed 64%, or $1.981 billion. As for the elite education in the third place in the industry, the revenue in the last four quarters was 3.617 billion yuan, less than one-fifth of the top two in the industry.
Good for the first quarter of the fiscal year, 2020, the first quarter of the financial report was released. The revenue increased by 27.63% year-on-year to US$703 million, but the profit was listed for the first time in 9 years. At the time of the performance, the stock price fell by more than 10%.
From the perspective of the company’s business, the three driving forces for good future growth in this quarter are: Xuesi Sipei, online school and online business (network school Refers to the online education section, which is equivalent to the online supplement of Peiyou).
Study and think betterThe next business has been a good long-term revenue, with a quarterly share of 64%, down from 71% in the same period last year. The reason is that the school and the online business are also growing. In the first quarter of FY 2020, the school-based revenue share of the school has risen to 15%, while the income from learning and online has also reached 7%.
Since learning, Si Peiyou’s revenue increased by 22%, net school revenue growth rate was 122%, and online business revenue increased by 165%. The three together helped the future to achieve 28% revenue growth. From this we can also see that online business is still in a state of rapid growth, and revenue contribution is also rising.
School and think online school has always been a good revenue for future online education. Revenue in FY 2019 was US$ 340 million, a significant increase of 183.5% year-on-year. The main driver is the continued high growth in the number of students participating in the training.
As you can see from the chart below, the number of online course enrollments has increased year by year since FY14. As of FY 2019, online courses contributed approximately 40% of enrollment.
In other words, not only from the perspective of revenue, but also from the composition of enrollment, the contribution of online courses has become increasingly prominent.
If the future hopes to go further, it is inevitable that the online business will be more firmly bet.
Online education is a trend, and a good future quarterly loss is only the result, so what is wrong with it now?
At present, the main problem is that marketing costs continue to soar. The cost of a good future in the previous quarter was unexpectedly high. Marketing expenses were US$155 million, up 64.43% year-on-year; administrative and administrative expenses were US$176 million, up 40.30% year-on-year.
The good explanation given in the future is that the increase in sales and marketing investment, the increase in administrative and management personnel and the increase in salary led to an increase in the expense ratio this quarter, which directly affected the net profit.
In the analyst conference call after the earnings announcement, goodFuture CFO Luo Wei also said that the main reasons for the loss are: “further expanding the product and scale of online business, and increasing technical input.”
In other words, high growth rates come at a price.
For a long time, the future is very dependent on external traffic. Therefore, it invests in K12-related businesses, and on the other side, it has to advertise a large number of users to reach more users.
In recent quarters, (especially this summer), online education leaders have launched online and offline channels. According to media reports, online education Top3’s learning and thinking, counseling, and homework help, the daily average amount of advertising is more than 10 million yuan. As the atmosphere for competition is in full swing, the total amount of advertising for online education companies participating in the summer enrollment campaign in 2019 will reach 3 to 4 billion yuan.
At the same time, this year’s major institutions in the summer have also started the “price war” of online live class. For example, the school and the school will open the “49 yuan summer trial class”, and the counselor will launch the “49 yuan summer system class”, and the homework will help to open a special course of 50/99 yuan.
Revenue growth is less than expected, online burning is too fierce, and a number of factors are superimposed. It is not difficult to understand that the ugly financial report in the previous quarter triggered a sharp fall in stock prices.
But the above problems have been alleviated after the release of the new quarterly earnings report.
One is that revenue growth is getting better. According to the financial report, the future 2020Q2 revenue increased by 33.8% year-on-year to 937 million US dollars, exceeding the company’s previous guidance limit (31%) , and Reversed the slowdown in revenue growth in the previous quarter.
Second, one reason for the net profit loss this quarter is still the substantial increase in sales expenses (an increase of 111 million yuan), which is in line with its The logic of still selling online money has not turned very suddenly.
4, rookie and giants are benevolent
Good future is just online education andAn important player in K12 education, in order to restore the overall picture of the industry, it is necessary to borrow different companies from different endowments to compare multiple dimensions.
Look at New Oriental Online, who to learn, fluent, 51Talk, Suntech’s current situation (In view of the fact that some companies’ latest quarterly earnings have not been updated, I chose the annual or quarterly data that no one suffers).
New Oriental Online
New Oriental Online’s revenue for FY 2019 was 919 million yuan, a year-on-year increase of 41.27%. Among them, university education business accounted for a large proportion, with users accounting for 59.33% and revenue accounting for 68.71%. University education, K12 education and preschool education The revenue growth rate was 36.5%, 80.8%, and 205.8%, respectively.
The growth of its K12 segment was mainly due to an 188.3% increase in the number of students paying in FY2019.
At present, New Oriental Online has two main businesses for K12 online education:
One of them is Dongfang Youbo, which has now entered 63 cities in 15 provinces in China. Mainly located in 3-5 line city users, priced at 5000-6000 yuan / door. The company expects that a single city will contribute positive profits in FY 2021;
The second is online big class, officially launched in FY 2019, and is currently in its infancy. It is more broadly positioned, with the goal of covering all cities on the 1-5 line, with inclusive properties, priced at 2000-3000 yuan / door.
Although the revenue in FY 2019 achieved a good year-on-year growth of 41.3%, the profit was changed from a profit of RMB 82.026 million in FY 2018 to a loss of RMB 64.109 million.
The financial report explained that this was mainly due to the large amount of resources invested in the 2019 fiscal year to improve the quality of the course and expand the K12 business. As a result, the cost of teaching staff increased by 54.6% year-on-year, the cost of course researchers increased by 73.1%, and the cost of teaching materials increased by 67.3%.
In addition, sales and marketing expenses increased by 98.2%, and sales expense ratio increased to 48.28%, mainly because