Xueda Education (000526. SZ) recently released its 2023 annual report, and after more than two years of exploration, the transformation after the "double reduction" can be said to be basically completed.
This is mainly reflected in three aspects:
In terms of performance, the revenue in 2023 will be about 2.21 billion yuan, a year-on-year increase of more than 23%, which is close to the revenue level of about 2.43 billion yuan in 2020 before the "double reduction", and the net profit attributable to shareholders of listed companies will be about 150 million yuan, a year-on-year increase of more than 10 times, significantly exceeding the profit level of about 40 million yuan in 2020.
In terms of business, Xueda Education has clarified the four major businesses of personalized education, vocational education, cultural reading, and medical and educational integration, and has shifted from off-campus training in the past to diversification.
In terms of governance, founder Jin Xin has assumed the chairmanship on April 25, and two senior vocational education practitioners have been nominated to the board of directors, which is conducive to the management to further focus on business transformation.
Over the past two years, Xueda Education has been a typical example of the transformation of an education company, and how Xueda Education chooses the direction of transformation, what twists and turns it encounters in the transformation process, what adjustments it makes, and what the prospects of transformation are, all of which are of great value.
Optimize the structure of personalized education products
According to the 2023 annual report released by Xueda Education on the evening of April 26, the operating income was about 2.21 billion yuan, a year-on-year increase of 23.09%, and the net profit attributable to shareholders of listed companies was about 150 million yuan, a year-on-year increase of 1035.24%.
The annual report pointed out that during the reporting period, the company adhered to the development strategy and continued to actively optimize the business layout. Operating income and net profit both achieved positive growth.
(Xueda Education's performance in recent years, unit: 100 million yuan Source: company's annual report)
Growth is accelerating. According to the first quarter report of 2024 released on the same day, the operating income was about 705 million yuan, a year-on-year increase of 35.97%, and the net profit attributable to shareholders of listed companies was about 50 million yuan, a year-on-year increase of 886.44%.
The methodology of Xueda's education business transformation is "what the state encourages + what you are good at".
On February 8, 2024, the Ministry of Education issued the Regulations on the Administration of Extracurricular Training (Draft for Comments), which clarified the basic positioning of extracurricular training as a useful supplement to school education, and clarified the non-profit positioning of academic training in the compulsory education stage, so that the education and training industry can see the certainty of the future of other businesses.
For a period of time, the traditional business of leading institutions such as New Oriental, Gaotu and Xueda Education has maintained rapid growth, but the reasons for growth are common and different.
External factors bring industry-wide benefits. According to a research report released by China Merchants Securities in January this year, at present, the policy of the traditional education track is relatively stable, restricting the issuance of academic licenses, and the number of licensed institutions is scarce, which has led to a serious imbalance between the supply and demand of the traditional education track.
A large number of small and medium-sized institutions have been cleared, and there are not many compliance institutions with a national layout and high brand awareness in the industry, so they have gained more market space.
Internally, there is a clear differentiation. New Oriental's financial report for the third quarter of fiscal year 2024 released on April 25 showed that 68 new learning centers were added in the quarter. In the first quarter of fiscal year 2024, New Oriental expects a year-on-year expansion of 15%-20% of its outlets for the full fiscal year, and an expected growth rate of about 20% in the second quarter, and now it is expected to increase the growth rate to about 30%.
Xueda Education has not increased its learning centers, and the annual report shows that as of the end of 2023, there are nearly 240 personalized learning centers, which is basically the same as the previous year.
Its growth is driven by the optimization of product structure. In the past, Xueda Education's personalized education business was mainly one-on-one training, but at present, in addition to one-to-one, group classes and small class products have been added, and relying on the self-developed "double helix" smart education model to achieve online and offline complementary teaching.
Jin Xin, founder and chairman of Xueda Education, told the 21st Century Business Herald, "The proportion of one-on-one training revenue has dropped from more than 90% to more than 60%, and the profitability of Xueda Education has been significantly enhanced due to the optimization of product structure." ”
More importantly, Xueda Education has run out of the second growth curve of full-time learning base. According to the annual report, during the reporting period, the company has laid out more than 30 full-time training bases for college entrance examination repeaters, art candidates and other student groups in many provinces and cities across the country, and has also set up full-time bilingual schools in Dalian, Ningbo and other places in combination with the needs of regional education development.
"Whether it is a traditional business, a full-time base or a school business, the core of the school philosophy is personalized education. Jin Xin said.
Xueda Education told the 21st Century Business Herald that Xueda Education has built three Wengu bilingual schools in Cixi, Zhejiang Province and Dalian, Liaoning Province, with more than 1,000 students at present. In addition, Xueda Education's high school projects in Zhumadian in Henan, Qingdao in Shandong, and Suzhou in Jiangsu will be implemented successively.
Launched three new businesses
Vocational education, cultural reading, and the integration of medical education are the new businesses of Xueda Education, which are currently advancing rapidly.
The methodology of these new businesses also reflects "what the state encourages to do + what you are good at".
Vocational education is closely linked to economic and social development, and in the past two years, the state has issued a number of policies to encourage the development of vocational education. In July 2023, the General Office of the Ministry of Education issued the "Notice on Accelerating the Key Tasks of Accelerating the Construction and Reform of the Modern Vocational Education System", proposing that all localities should support leading enterprises, high-level colleges and vocational schools to take the lead, and jointly participate with industry organizations, schools, scientific research institutions, upstream and downstream enterprises, etc., to form a number of cross-regional industry and education integration communities with deep integration of industry and education, efficient service docking, and support for the development of the industry.
Xueda Education was the first to cooperate with secondary vocational schools to set up vocational and general education integration classes, giving full play to the advantages of subject training, and helping secondary vocational students to participate in the vocational education college entrance examination.
Jin Xin told the 21st Century Business Herald that this model has a good effect on running a school, but the cost of cooperation and communication is high and the business model is not good enough.
Since then, Xueda Education has shifted to operating secondary vocational schools independently. The annual report shows that 3 secondary vocational schools have been acquired and a number of schools have been managed and operated. According to reports, the expansion will continue this year.
In the field of higher vocational education, the annual report shows that Xueda Education's vocational education focuses on the two major directions of "specialization, refinement, special innovation" and "shortage of talents", and has reached cooperation with a number of vocational colleges and industry enterprises.
According to the annual report, Xueda Education will successfully implement the integrated circuit, microelectronic technology and device manufacturing majors in its Datong Secondary Vocational and Technical School in 2023, filling the gap of the new generation of information industry technology in the professional field of secondary vocational schools.
According to the above-mentioned people from Xueda Education, the landing majors also include low-altitude economy, green and dual carbon, health care and other fields.
In addition, the board of directors of Xueda Education announced on April 27 that Feng Xiao, director of the professor committee of the Sino-German School of Engineering of Tongji University, was elected as an independent director, and Xu Huilong, vice president of Tsinghua Unigroup and director of the industrial development center, was elected as a non-independent director. The appointment of these two senior practitioners in the field of vocational education and the integration of industry and education to the board of directors will bring new momentum to the development of vocational education at Xueda.
"At present, the number of students in the vocational education sector is not very large, and we need to continue to expand the scale, and the goal is to account for more than 10% of revenue by next year. Jin Xin said.
In the field of cultural reading, why does Xueda Education "buck the trend" in the difficult situation of physical bookstore operation?
In terms of policy orientation, the annual report pointed out that the government work report has mentioned "national reading" for 11 consecutive years, and has changed from "advocacy" to "in-depth promotion", which means that national reading has entered a new stage of development.
Xueda Education has opened 10 bookstores. Juxiang Bookstore is a complex cultural space that integrates book sales, book lending, coffee and light food, cultural and creative exhibitions, cultural salons, space leasing and other formats, with the goal of opening 100 stores in 5 years.
"Traditional brick-and-mortar bookstores certainly don't make money, but if they become part of the overall business, they don't work with other businesses," Jin Xin said, adding that "culture and education are naturally linked."
In addition, the goal of Juxiang Bookstore is to create an online and offline integration product similar to Fan Deng Reading, but Fan Deng Reading is expanding from online to offline, and Juxiang Bookstore is starting from offline.
"At present, the cost of online customer acquisition is high and the stickiness is weak, on the contrary, the offline traffic of physical bookstores is not only large, but also accurate and sticky, and users gather within 3-5 kilometers of the bookstore, and some will visit multiple times a week. Jin Xin said.
However, he told the 21st Century Business Herald that physical bookstores must also form a certain scale in order to have a traffic effect and support new business opportunities.
Another business that has attracted much attention for the integration of medical and education has appeared for the first time in the annual report of Xueda Education, which shows that this is the university's adoption of a "hospital + home + school" comprehensive intervention model to provide adaptive development solutions for children facing challenges such as autism, attention deficit, and learning difficulties.
According to the China Disabled Persons' Census Report released by the China Disabled Persons' Federation in 2023, the number of autistic patients in mainland China has exceeded 13 million, and the number is increasing at a rate of nearly 200,000 per year.
According to the Guidelines for the Prevention and Treatment of Attention Deficit Hyperactivity Disorder (Second Edition) published in 2015, about 6% to 9% of school-age children worldwide are affected by ADHD, and the prevalence rate in China is 6.3%.
In August 2023, the Ministry of Education and other three departments issued the "Opinions on Implementing the Action Plan for Expanding the Excellence and Quality of Basic Education in the New Era", which proposes to expand special education resources and promote provincial capitals, cities with separate planning and larger cities to accelerate the construction of special education schools for children with autism.
"We found that many children do not do well in school, not because they 'don't want to learn', but because they can't learn, that is, due to psychological factors that are not intellectual. This kind of 'disease' needs treatment and training, but there is a serious shortage of doctors and rehabilitation therapists in related specialties in China, and it is urgent to increase the investment of social capital. Jin Xin said.
How cash flow can ensure continuous expansion
The 2023 annual report is also of symbolic significance to Jin Xin, the founder of Xueda Education. According to the annual report, Jin Xin has served as the chairman of the group on April 25.
Xueda Education announced on April 23 that Wu Shengwu, the former chairman, applied for resignation as chairman due to personal development reasons. Wu Shengwu also serves as the executive vice president of Tsinghua Unigroup.
Xueda Education was founded in September 2001 and listed on the New York Stock Exchange in November 2010. In 2016, Xueda Education completed privatization and returned to A-shares through backdoor Yinrun Investment. However, due to strong twists and turns during the period, Jin Xin once left the board of directors of the listed company.
The consideration for its privatization came from a loan of RMB2.35 billion from Tibet Ziguang Zhuoyuan Technology Co., Ltd. ("Ziguang Zhuoyuan"). In January 2016, the controlling shareholder of Xueda Education was changed to Unisplendour Zhuoyuan. In June 2020, the controlling shareholder of the company was changed from Ziguang Zhuoyuan to no controlling shareholder.
In April 2021, Jin Xin returned and became the actual controller of Xueda Education through the holding of persons acting in concert.
At present, the single largest shareholder of Xueda Education has been changed to the "Special Account for the Disposal of Property of Bankrupt Enterprises of Tsinghua Unigroup Co., Ltd.", and the shareholding ratio has dropped to 13.16%.
The repayment of the huge debt of 2.35 billion yuan due to privatization is nearing completion. According to the annual report, as of the disclosure date of the report, the company's remaining loan principal to Unisplendour Zhuoyuan was about 464 million yuan, further reducing the company's asset-liability ratio.
In 2023, the net operating cash flow of Xueda Education will be about 610 million yuan, and it will continue to have a net inflow of about 440 million yuan in the first quarter of this year. This creates room for repayment and leaves more room for imagination for further development in the field of transformation in the future.
"Looking forward to the whole year, the principle of Xueda education is still to adhere to sustained and healthy growth. Jin Xin told the 21st Century Business Herald.
I believe that Xueda, which adheres to long-termism and aims to become an enterprise that is "valuable to customers, valuable to society, and valuable to the country", will also present more surprises in 2024.