After active transformation, the performance of educational enterprises has achieved results. The former education giants have recently released their new financial quarter transcripts, with New Oriental's net profit reaching a historical peak of 90%, and TAL has also achieved a turnaround.
The strength of their ability to make money also makes the two companies have different attitudes towards the outside world. The selection of star businesses in front of the platform, which has driven various business lines of New Oriental, is actively expanding. However, TAL has not changed its low-key habit. Of course, TAL's star product, Xueersi Learning Machine, has many players entering the market and the related risks it faces have not dissipated.
Transformation Achieves Results
On the evening of October 26th, TAL announced its unaudited financial report for the second quarter of the 2024 fiscal year ended August 31, 2023. Its net income increased from $294 million in the same period last year to $412 million in the current quarter, a year-on-year increase of 40.1%; The net profit attributable to TAL was $37.902 million, while the net loss attributable to TAL for the same period last year was $787 million.
According to a reporter from the education industry, TAL's XRS learning machine is highly favored by parents in the market, and its sales in the Q2 of the 2024 fiscal year exceeded the company's internal expectations. The reporter sought confirmation from TAL regarding the specific reasons for Q2's turnaround, but they did not provide a positive response.
After the "double reduction", TAL continues to focus on learning services, live streaming sales, and intelligent hardware. As early as February 6 this year, TAL's XRS publicly launched its first tablet intelligent learning machine. As of October 27, in the flagship store of Tiktok XRS electronic education, more than 140000 XRS intelligent learning machines had been sold.
Meanwhile, TAL's sales and marketing expenses increased by 48.9% from $78.1 million in the second quarter of fiscal year 2023 to $116.3 million.
In an interview with a reporter from Huaxia Times, Zhang Guo of Liangchao Technology stated that from the perspective of financial expenses, the marketing costs of TAL are highly positively correlated with revenue, indicating that TAL's own business is more focused on operations and marketing. The increase in marketing expenses has a significant impact on the expansion of revenue scale.
On the evening of October 25th, New Oriental (EDU) submitted its Q1 financial year 2024 report card. As of August 31, 2023, New Oriental's revenue for the first quarter was $1.1 billion, a year-on-year increase of 47.7%, and its net profit was $165.4 million, a year-on-year increase of 150.6%. Compared with the historical peak quarterly net profit of 209 million US dollars in Q1 of fiscal year 2020, New Oriental's net profit has now returned to 90% of this peak.
New Oriental stated in its financial report that the growth in revenue is mainly driven by the new education business, the self operated products selected by Oriental, and the live streaming e-commerce business. Among them, the revenue from new education businesses increased by 103.3% year-on-year, becoming one of the key driving forces for revenue growth and profit margin improvement.
The new education business of New Oriental includes non disciplinary tutoring courses, such as story performance, eloquence, writing and other literacy courses, as well as quality courses such as programming, art, robotics, and science. Currently available in approximately 60 cities, with approximately 438000 students registered in Q1. Other new educational businesses also include intelligent learning systems and devices, as well as intelligent education and intelligent learning solutions, including learning machines.
New Oriental's traditional education business has also shown strong signs of recovery, with overseas exam preparation and overseas study consulting business increasing by approximately 51.7% and 26.6% respectively year-on-year in the first quarter. The domestic exam preparation business for adults and college students increased by approximately 25.5% year-on-year.
Of course, Eastern Selection has also been mentioned as a star business. This quarter, Dongfang Selection made significant progress in its live streaming e-commerce business, reaching out to a wider customer base through a multi-platform strategy to enhance brand awareness and influence, "said Zhou Chenggang, CEO of New Oriental, in his financial report. During the reporting period, Dongfang Selection officially launched live streaming activities on new platforms on Taobao and self operated apps, while launching new products on its own brand products every month, Breakthroughs have been made in various product categories, from catering and food to daily necessities.
Continue to advance
Although the transformation of the two companies has achieved initial results, they are facing fierce market competition and both companies are continuing to make efforts.
Before the annual most important shopping festival, Double Eleven, Dongfang Zhenxuan officially announced the launch of paid membership business. Paid members have an annual fee of 199 yuan and can enjoy a large number of shopping discounts. Unlike many offline paid membership mechanisms, members with low shopping frequency and ultimately not cost-effective can apply for cash card refunds.
On October 17th, Zhang Yi, Chief Analyst of iMedia Consulting, stated in an interview with a reporter from China Times that the membership price of 199 yuan is more favorable compared to well-known international supermarket membership prices, and compared to domestic online shopping platforms, the price is at a moderate level. Overall, the pricing of 199 yuan is relatively cautious and can attract more consumers.
Although the membership prices selected by Dongfang are somewhat discounted compared to existing online and offline membership stores on the market, some consumers still believe that the pricing is on the high side. It is worth noting that compared to the previous Dongfang Selection event where the transcript was released, Dongfang Selection did not release the transcript in a timely manner for this new member business.
In addition to Eastern selection, New Oriental is also actively expanding its cultural and tourism business. During the financial report conference call, Yang Zhihui, CEO and CFO of New Oriental, revealed that starting from this fiscal year, New Oriental will integrate a new business line, including tourism related businesses targeting different age groups, covering both student research camps and the newly established middle-aged and elderly cultural and tourism business. He mentioned that during the summer, New Oriental conducted learning tours and research camps in more than 50 cities across the country, resulting in growth in its research, cultural, and tourism business. It is expected that the new business will contribute revenue in this fiscal year. However, Yang Zhihui also bluntly stated, "Currently, the tourism business is relatively in its early stages
Compared to the active and high profile of New Oriental, TAL is very low-key. According to sources, a reporter from China Times learned that TAL will launch a learning machine with light field display next year. The industry believes that if TAL, which has great advantages in content, launches a learning machine with light field display technology, its competitiveness will be further strengthened, further widening the gap with other learning machine players, and gaining the favor of parents and students. On October 27th, the reporter sought confirmation from TAL, but the other party did not reply.
The risk of the learning machine race still exists
However, the market is currently also concerned about the impact of policies on the learning machine track. According to reporters, the "Regulations on the Protection of Minors' Network" (hereinafter referred to as the "Regulations") will come into effect on January 1, 2023. The regulations state that minors' network protection software and intelligent terminal products specifically designed for use by minors should have the ability to effectively identify illegal information and information that may affect the physical and mental health of minors, protect their personal information rights, and prevent them from becoming addicted to the internet Convenient for guardians to fulfill their guardianship duties and other functions.
At the same time, the Regulations also require manufacturers of intelligent terminal products to install minors' network protection software before the product leaves the factory, or to prominently inform users of the installation channel and method. Sellers of intelligent terminal products should prominently inform users of the installation of network protection software for minors, as well as the installation channels and methods, before the product is sold.
It is worth noting that on October 24th, some parents claimed to have discovered some inappropriate content in their children's iFlytek learning machine. Subsequently, iFlytek staff responded to the situation by stating that the article has been permanently removed from the shelves and a systematic investigation has been conducted.
Liu Qingfeng, Chairman of iFLYTEK, also responded that the content had been removed from the shelves as soon as it was discovered, and punishment had been imposed on the partners responsible for ensuring content security. At the same time, the internal content review mechanism used for large models has been placed on the learning machine, striving to make the content review of the learning machine more strict.
Regarding whether this policy will affect the development of the learning machine market in the future, Zhang Guo believes that regulation will also increase entry barriers and protect existing competitors in the market. He further analyzed that after the implementation of the Regulations, the demand for smart education hardware in the entire market will increase. However, the test for smart education manufacturers lies in content review. If AI is added, the uncontrollability will be enhanced, and overall, the advantages and disadvantages will be accompanied.
In terms of content auditing, most large companies rely on AI technology combined with manual auditing. It is generally not difficult to audit educational materials already owned by manufacturers such as learning machines. If past materials are not strictly processed, they will be used on learning machines, which will lead to the situation of iFlytek. For some manufacturers who started from hardware manufacturers and layout learning machines, because their educational materials are relatively messy, auditing The nuclear pressure will be even greater Zhang Guo said.