Text: Xiangshan Finance Author: Liu Neng
On February 27, Quantum Song (QSG), an adult online education company specializing in financial business courses, released its financial report for the second quarter of fiscal 2023.
According to the financial report, Quantum Song's Q2 revenue in 2023 was 786.4 million yuan, an increase of 19.3% month-on-month and a year-on-year decrease of 2.2%. Net loss for the second quarter of fiscal 2023 was $41.4 million (US$6 million), 57.4% narrower than $97.3 million in the first quarter of fiscal 2023.
More and more ordinary investors are entering the financial market, but ordinary investors, as whites in the capital market, do not have enough financial knowledge, lack basic judgment ability, need to improve their financial literacy, have a certain ability to identify financial risks, financial education has become a potential rigid need. As an adult online education company focusing on financial business courses, what signal does Quantum Song's earnings report send?
The "signal" from the first earnings report
According to the Tianyancha Professional App, Quantum Song was listed on the NASDAQ on January 25 this year at an issue price of $12.50 per ADS (American Depositary Shares), issuing a total of 3.25 million ADSs and raising a total of $40.63 million. Therefore, this is equivalent to the first financial report released by Quantum Song after its listing, which is of great significance.
Happily, Quantum Song's revenue for the second quarter of fiscal 2023 was RMB786.4 million (US$114 million), an increase of 19.3% from the first quarter of the fiscal year ended June 30, 2023 (the "First Quarter of Fiscal 2023"). However, revenue decreased by 2.2% compared with the second quarter of fiscal 2022, indicating that Quantum Song's revenue growth was somewhat weak.
At the same time, although Quantum Song had a net loss of 41.4 million yuan (US$6 million) in the second quarter of fiscal 2023, it was actually narrowed by 57.4% compared to 97.3 million yuan in the first quarter of fiscal 2023, but still did not reach the net profit level of 46.1 million yuan in the second quarter of fiscal 2022.
Quantum Song's adjusted net profit turned positive from negative to positive in the second quarter of fiscal 2023 to 21.8 million yuan (US$3.2 million), compared to an adjusted net loss of 50.9 million yuan in the first quarter of fiscal 2023 and adjusted net profit of 77.6 million yuan in the second quarter of fiscal 2022. The operational stability of Quantum Song still needs to be improved.
In the second quarter of fiscal 2023, Quantum Song's revenue from personal online learning services, enterprise services, and other services was 704 million yuan (US$102.1 million), 82.3 million yuan (US$11.9 million), and 100,000 yuan (US$0.01 million), respectively.
From the perspective of revenue proportion, the income of personal online learning services in these three parts is the top priority.
Compared to the previous fiscal year, Quantum Song's revenue from personal online learning services increased by 4.7% year-over-year. The main reason is the decrease in revenue from financial literacy courses and other services in the income of individual online learning services. A decrease of RMB139.3 million (US$20.2 million) in financial literacy program revenue was partially offset by an increase of RMB170.8 million (US$24.8 million) in revenue from other personal interest courses.
Now we have entered a full financial era: from personal life to employment and entrepreneurship, from wealth management to pension security, finance has penetrated into all aspects of everyone's life, it can be said that the lack of financial knowledge and ability has become a major obstacle to the recovery of financial awareness, and financial education has become a breakthrough. But what makes people wonder is that the financial literacy course of Quantum Song has become "unfragrant" for some reason?
In the view of Xiangshan Finance, the financial literacy course of Quantum Song has made more and more people aware of the importance of financial management, but it has not made these investment whites aware of their "leek attributes", after entering the investment market to test the waters, they also need to personally recognize the risk attributes in investment, which will dissuade a considerable number of people, after all, everyone's acceptance of risk is different.
As for Quantum Song's corporate services revenue, it increased 68.2% year-over-year, primarily due to an increase of RMB38 million (US$5.5 million) in revenue from marketing services provided by the Company to Beijing Baichuan Insurance Brokerage Co., Ltd., which has been a related party of the Company since its sale to its affiliates in March 2022.
Other services revenue declined negligibly to RMB100,000 (US$0.01 million) in the second quarter of fiscal 2023 from RMB82.6 million in the second quarter of fiscal 2022, primarily due to lower revenue from insurance brokerage services. In early 2022, the company ceased such operations and sold them to an affiliated company.
Long-term sustainability remains to be tested
According to the financial report, as of December 31, 2022, the total registered users of Quantum Song increased from 37.2 million on December 31, 2021 to about 77.8 million, an increase of 109.1%. Paying learners grew 33.3% year-over-year to approximately 400,000 in the second quarter of FY2023.
The growth of registered users and paying users is welcome, but the conversion rate of paying users is somewhat worrying, with registered users increasing by 109.1% and paying users only increasing by 33.3%. It can be seen that the conversion rate of paid users of Quantum Song has been further reduced. Compared with 77.8 million registered users and about 400,000 paying users, the conversion rate of paid users has been less than 1%, and its long-term development sustainability remains to be tested.
As for Quantum Song's cost of revenue, it decreased 1.6% year-over-year to $99.3 million (US$14.4 million) in the second quarter of fiscal 2023 from $109 million in the second quarter of fiscal 2022, primarily due to a decrease in labor outsourcing costs of $17.1 million (US$2.5 million), partially offset by an increase in employee costs of $11.6 million (US$1.7 million), including an increase in share-based compensation of RMB4.2 million (US$0.6 million).
Previously, according to the prospectus of Quantum Song, as of November 30, 2022, the company had 2,269 full-time employees, in addition to more than 1,300 part-time employees. The reduction in labor outsourcing costs may be due to the reduction of part-time employees.
Let's look at the cost of Quantum Song.
Sales and marketing expenses increased 11.2% year-over-year, from $560.2 million in the second quarter of fiscal 2022 to $622.9 million (US$90.3 million) in the second quarter of fiscal 2023, primarily due to an increase in marketing and promotion expenses of $72.1 million (US$10.4 million).
Research and development expenses increased 24.6% year-over-year from $51.6 million in the second quarter of fiscal 2022 to $64.3 million (US$9.3 million) in the second quarter of fiscal 2023, primarily due to an increase in share-based compensation expense of $10.8 million (US$1.6 million).
General and administrative expenses increased 15.5% year-over-year from $38.5 million in the second quarter of fiscal 2022 to $44.5 million (US$6.5 million) in the second quarter of fiscal 2023, primarily due to an increase in stock-based compensation expense of $11.4 million (US$1.6 million).
Overall, Quantum Song's expenses are growing, and the increase in various expenses, in addition to the increase in stock-based compensation expenses, is mainly due to the increase in marketing and promotion expenses, which requires Quantum Song to be more vigilant.
From the current development of Quantum Song, it can be seen that financial education has two development directions:
First of all, enterprises really make efforts to educate the financial business, and try their best to avoid those newcomers becoming leeks waiting to be "cut".
With the continuous awakening of residents' financial awareness, the overall market plate of financial education can be said to be constantly expanding and growing, and financial education will become a capital depression that needs to be tapped in the future.
Investment is a double-edged sword with both benefits and risks, and some of them will inevitably be deterred, but it also makes more young investors realize the importance of financial knowledge and increases investors' demand for financial knowledge.
Financial management is an inevitable long-term trend, and there are potential long-term dividends in the financial education industry.
In addition, Quantum Song also has a trend towards the direction of import-type products: it is to use financial education courses to cultivate user trust and stickiness with high cost performance, and then help enterprises to promote marketing and achieve profits from the B side, that is, enterprise services.
With the influx of more and more people and institutions into the field of financial education courses, users' financial awareness has initially germinated, but there is still a lack of sufficient trust in financial education institutions, and there is a high probability that they will be contacted, but there is very little in-depth recognition.
Under the basic financial business course, users can learn a lot of financial knowledge that they have not been exposed to before, which plays a role in popularizing financial knowledge for users, which is cost-effective and more practical.
However, today's course system is not mature, and it is far from enough to enter the professional financial investment field by relying on these basic knowledge, so practitioners are likely to choose to use courses to mature users, and then help enterprises do marketing promotion.
Finally, the stock market is risky and investment needs to be cautious, which is the immutable truth of the capital market. Even in the field of financial education, it is hoped that investors can maintain a sense of risk and avoid being deceived.
Disclaimer: This article is based on the company's statutory disclosure and public information, but the author does not guarantee the completeness and timeliness of the information. In addition: the stock market is risky, and you need to be cautious when entering the market. The article does not constitute investment advice, and investment must be determined by oneself.