Together with the third quarter of education technology loss narrowed education informatization into a new blue ocean

Reporter Xu Jie

After the implementation of the education "double reduction" policy, the K12 track was collectively dudded, but the financing performance of the education information track was excellent, showing good potential, and became the direction of the transformation of many education and training institutions.

"Smart education products can cover all ages of preschool education, K12, vocational education, and higher education. Many enterprises are also aiming at the education informatization track because of their wide product coverage, which reduces the obstacles in the transformation process of education enterprises. An industry insider told the Securities Daily reporter.

After announcing the suspension of its subject-based off-campus training services in China's K-12 phase at the end of last year, on January 18, EdTech (YQ.US), which was listed in the United States, released its third quarter 2021 financial results. Together, education technology started from the school business in the early days, and now it has returned again, saying that in the future, it will focus more on core teaching application scenarios such as homework, and comprehensively transform into a SaaS software service provider that helps the digital transformation and upgrading of China's basic education.

It is worth noting that from the financial report of education technology, it can be seen that it has made timely business and personnel adjustments after the "double reduction" policy, and the corresponding loss has also been reflected in the third quarter of 2021.

Find new profit directions in on-campus and off-campus business

On December 4, 2020, EdTech was listed on the NASDAQ. Prior to the listing, EDT completed a total of 7 rounds of financing, including Zhen Fund, Shunwei Capital, Tiger Fund, HCapital, Temasek, DST, CITIC Industry Fund and other well-known institutions. On the night of the listing, Lei Jun, Wang Qiang, and Xu Xiaoping also appeared to support.

However, half a year later, the "double reduction" policy was introduced, and on December 7, 2021, EdTech officially announced that it had stopped its off-campus training services in the discipline category at the K-12 stage in China. According to the financial report data, in the third quarter of 2021, the net income of education technology was 496.8 million yuan, an increase of 61.8% year-on-year; the adjusted net loss narrowed from 521 million yuan in the same period of 2020 to 457 million yuan, and an education technology insider told the Securities Daily reporter, "This includes a one-time loss of the enterprise after the 'double reduction'." ”

The insider said that after the release of the "double reduction" policy, the company actively transformed, on the basis of a series of combinations of organizational structure adjustment, personnel structure optimization, etc., to find a new profit direction in the school and off-campus business, and to achieve a new model of healthy development with profit as the goal.

These initiatives have been reflected in the company's third quarter earnings report. In the third quarter of 2021, the Company's general and New Deal expenses were $123 million, an increase of 38.4% year-on-year. In this regard, the above-mentioned company insider told the "Securities Daily" reporter: "The fee has increased compared with the same period last year, mainly due to the increase in the severance pay required for layoffs affected by the new regulations." At the same time, the company's sales and marketing expenses were 389 million yuan, down 21.6% year-on-year, and the decline was mainly due to the reduction in brand advertising and promotion course expenses. ”

Informatization of education has become a new blue ocean

After the "double reduction", entering the school has become one of the development directions of online education enterprises, among which helping the school to do the education information system has become one of the breakthroughs in the school. "We have seen that some data show that a major feature of the financing of the education industry from July to December 2021 is that education informatization, new vocational education and new quality education have become the three giants of financing, of which the average amount of education informatization financing is the highest." A practitioner told reporters.

According to the data of the Prospective Research Institute, the total scale of the mainland education informatization market has reached 433.5 billion yuan in 2020, with a compound growth rate of 9% in the past five years. In the future, this proportion is expected to continue to be greatly improved, and it is expected that by 2030, the total size of the education informatization market will exceed the trillion yuan mark. Many companies have also chosen to march into this track. Previously, NetEase Youdao's "Youdao Excellent Class" explored AI intelligent education, Lenovo released a smart education interactive screen, iFLYTEK won the bid for the Wuhan smart education project, and Squirrel Ai joined hands with Alibaba Cloud and Lenovo to create a smart education classroom.

It is reported that together education will also shift the focus and resources to two new directions. The first is to launch new teaching and learning SaaS products, as an upgrade of previous on-campus products and services, focusing on improving the efficiency and effectiveness of core teaching scenarios such as homework and classroom teaching. At present, more than 50 cities use SaaS products for education together.

The other direction is to provide personalized self-directed learning products applied to family scenarios, replacing the traditional after-school tutoring services in the past. But Liu Chang, founder and CEO of Together Education, said on a conference call after the earnings report that the product is not tutoring, but uses the company's technology and data insights to provide targeted learning content to students. Self-directed learning products are charged by discipline, and the subscription fee for one discipline is between 2500 yuan and 3000 yuan per year. Since the launch of the product about a month ago, the number of paid subscriptions to self-learning products has exceeded 300,000.

"Although the track has frequent financing incidents, there is still a big gap in terms of amount from K12 and vocational education tracks. And how to achieve personalization is the biggest difficulty in the process of enterprise service, and this track also needs to have sufficient financial strength. The above-mentioned industry insiders pointed out, "As a company engaged in education informatization, in the final analysis, the advantages are still reflected in the technical strength." Using big data, artificial intelligence, cloud computing and other methods to achieve breakthroughs in more digital education resources, and then forming a connection between the upstream and downstream software and hardware industry chains, which is the focus of future development. ”

(Editing by Shangguan Monroe)