The business is difficult to leave the side and questioned, and Hong En strives to go to the sea

Recently, Hong En announced unudal financial results in the second quarter of 2022.

During the reporting period, the company's revenue profit increased doubled. Compared with the K12 teaching and training institutions that were in the wind and rain, Hong En's adversity growth performed well.

However, it should not be ignored that Hong En's main business is in the gray area of ​​supervision. Overseas and hardware have become the direction of Hong En's attention.

Dazzling performance

Looking back at Hong En's second quarter, unlike many traditional teaching and training institutions that have been in the wind and rain, the company has almost no affected, and the growth is still stable.

In the second quarter, the company realized revenue of 231 million yuan, an increase of 4.2%year -on -year. For the increase in income, Hong En said it was brought by the increase in user participation. In the second quarter, the company's average number of monthly use households was 18.2 million, an increase of 17.6%year -on -year. The official said that "the average MAU has maintained a double -digit growth and successfully expanded the user base." During the reporting period, paid users decreased by 6%from the previous month to 1.51 million, a certain degree of decline. However, calculating the average user contribution income found that the average contribution of Q2 per user was 152.98 yuan, and the number of Q1 was 150.93 yuan. This shows that although paid users have declined slightly from the previous month, the company has achieved certain results in the fine operations of users, with an average of each user's contribution income growing up month -on -month, and user conversion efficiency has improved.

In the case of increasing revenue, Hong En continues to optimize costs. In the second quarter, Hong En's total operating fee was 141 million yuan, a year -on -year decrease of 10.9%. Among them, Q2's research and development costs decreased by 16%year -on -year to 78.2 million yuan, which was also decreased from the previous month compared with the 96.6 million yuan of Q1. Perhaps because of concerns about the integration, Hong En Q2's marketing strategy is still cautious. Sales and marketing costs are only 33.5 million yuan, a year -on -year decrease of 26%. During the reporting period, only management costs increased by 49%year -on -year to 28.8 million yuan, but this was mainly brought by the company's corporate governance and compliance structure, not regular expenditure.

It can be seen that although the revenue in the second quarter has not increased significantly, Hong En's "saving clothing and shrinking food" still maintains a more optimistic profit status. During the reporting period, the company's net profit was 21.8 million yuan, and the same period last year was 1.9 million yuan. The gross profit increased by 5.8%year -on -year to 163 million yuan. The gross profit margin was 70.8%. Compared with the same period last year, it also increased.

With the increase in stable performance, the company's cash flow has not been affected. As of June 30, 2022, Hong En's cash, cash equivalents, and regular deposits were 856 million yuan, and the amount was 855 million yuan as of the end of 2021. During the same period, the company's deferred income and customer cushion were 314 million yuan, and at the end of last year, it was 303 million yuan. None of the two amounts changed much.

In general, Hong En maintained a steady growth in the first half of the year. However, such a performance has not been sought after by the secondary market. As of the close of the Eastern Time on September 27, the company's stock price was $ 1.85/share, a 85%listed price of $ 12.

The coldness of the capital market seems to show that Hong En's future is not a frank journey, and compliance is always a problem that the company cannot bypass.

From "Hong En Education" to "Hong En"

In the first half of this year, Hong En changed its name in a low -key, from "Hong En Education" to "Hong En", and changed the positioning of "educational enterprises" to "science and technology puzzle product enterprises". Behind the de -educationalization, the Sword of Damoris, which reflects the compliance, is always hanging above the company's head.

Hong En owns a variety of preschool education APPs, including Hong En literacy, Hong Ensi, Hong En Pinyin, Hong En ABC, etc., all facing preschool children 3-8. Whether it is literacy, pinyin, or mathematics, it is suspected of teaching the curriculum knowledge in primary school in advance. However, the "dual reduction" policy clearly stipulates that online training for preschool children shall not be carried out. It is strictly forbidden to carry out the training of offline disciplines (including foreign languages) for preschool children in the name of preschool classes, childhood connection classes, and thinking training classes.

The new version of the "Protection Law of the Minor" is also clear that kindergartens and off -campus training institutions shall not conduct elementary school education on juveniles before school. In May of this year, Beijing issued the "Notice on Further Doing the File and Management of Education Mobile Internet Applications", which stipulates that it will no longer accept applications for the mobile application filing of education on the frontline of education. At that time, some experts analyzed that this meant that all children's education apps targeted at 3-6 years must be removed.

In addition to the suspicion of discipline training, Hong En's APP also has problems such as irregular fees and privacy unsatisfactory. Taking Hong En Literacy as an example, in the special operation of the "Pure Network 2020", the National Computer Virus Emergency Treatment Center once named Hong En's literacy suspected of privacy and unsatisfactory behavior. At the same time, on the black cat complaint education and training black list, Hong En's literacy has also been ranked many times. The search found that in the 46 complaints of Hong En's literacy in the past 30 days, there were multiple complaints mentioned "no reason for no deduction" and "automatic renewal fees without prompts".

The irregularity of online training charges is the key concern of the Ministry of Education. The problem has been mentioned many times in online training inspections, and the punishment efforts will continue to increase. It is expected that the charging supervision of online training will continue to tighten. With the formal implementation of the Personal Information Protection Law, personal privacy protection has also ushered in a new era, and the issue of compliance is becoming a huge challenge for Hong En.

At present, although Hong En's app can still download and run normally, the specific ownership of the product still has uncertainty, and the risk of compliance is greater. Under the signal of rigorous supervision, Hong En clearly felt the pressure. In addition to changing the name of the company, Hong En also renamed "Hong En Mathematics" "Hong En Siwei" and renamed "Hong En British" to "Hong En ABC". In the 2021 annual report, the expression of Hong En's income composition also changed. According to the 2020 report, the company's income composition is a learning service and learning materials and equipment, and the 2021 report was changed to online subscriptions and offline products and others. The transformation saying seems to be intended to transform its own image from "education and training provider" to "content provider", so that the company's business does not seem to be educational training, but content payment.

However, compared to the specific data, it was found that Hong En just changed the saying that the corresponding data fits, and the business itself has not changed. In July of this year, Hong En launched Hong En writing. Although the team claims "designed for children 6-12 years old", in the Apple App Store, the applicable group of this application is still "4 years old+", which still includes some preschool children. It is still education, which means that new products are also facing violations of regulations.

The "text game" that changes the wording cannot solve the risk of violations. Once regulators are defined with the company's products into illegal regulations. Compared with the current K12 teaching and training enterprises, Hong En's ability to resist risks will be very limited.

In the uncertainty, Hong En revealed in the second quarter's financial report that he was accelerating the overseas and layout of smart hardware. Can this become Hong En's retreat?

Look for retreat

In the first quarterly report, Hong En revealed that he would expand his influence in the international market to meet the growing demand for overseas families in high -quality parenting products. In the second quarter financial report, Hong En CFO Wang Weiwei mentioned that the company has officially launched the brand BEKIDS for the international market, and is committed to promoting the comprehensive development of children through the Steam course, and the layout can be described as rapid.

According to the financial report, in addition to the Apple App Store, Hong En also launched the ihuman Chinese (Hong En Literature) and ihuman STORIES (Hong En Animation Story) in Google App Store. In Wang Weifei, these products meet the needs of overseas families, which can stimulate children's interest in Chinese language and culture, while maximizing cross -market collaboration. However, the size and income obtained by these applications in overseas markets have not announced specific numbers.

In addition to international business, smart hardware is also the direction of Hong En's efforts. In the first quarter, Wang Weiwei said that the company is actively deploying and further expanding the investment of smart hardware. In the second quarterly report, Dai Peng, director and CEO of Hong En, mentioned the newly launched Hong En writing, pointed out that when the application and intelligent writing pens are used, it will be seamlessly integrated with software and hardware. New handwriting method. At present, Hong Enjing's official flagship store shows that the company has launched products such as screenless learning machines, intelligent writing, bilingual pens and other products supporting APP.

It can be seen that under the trend of tightening preschool education supervision in China, Hong En is on the one hand to deploy smart hardware sectors with relatively small compliance risks, and on the other hand, it also tries to take a new way in overseas markets. However, in 2021, the company's online subscription revenue was 832 million yuan, accounting for 88%of the total income, and offline products and other revenue were achieved only 112 million yuan. It is undeniable that the subscription income of the APP will still be the main force of the company's income for a long time. It is uncertain whether the new business can bring scale income.

Moreover, education companies that target overseas markets are not only Hong En. New Oriental, Netlong, zebra, Painting and other companies are working on overseas markets. Taking the Net Dragon as an example, the shipping volume of the international interactive tablet market of Netlong in the first half of this year increased by 71.5%year -on -year, and it has signed a contract with the Egyptian government to provide 94,000 tablets to the K12 schools across the country. It is expected to start shipping in the second half of the year. Essence The succession of its intelligent hardware and the national B2G project has allowed the company to achieve 2.4 billion yuan in education business income in the first half of the year, an increase of more than 70 % year -on -year.

Education hardware, Chinese education, quality education, B -side business ... In the case of limited domestic education market imagination, the way educational companies go to sea are becoming increasingly diversified and refined. On the one hand, this means that overseas markets are more complicated and have high requirements for localization. Hong En's international business must face huge challenges; on the other hand, it must be seen that although the overseas business of companies such as Netlong seems to be prosperous, But most of them are still in a state of losses. For Hong En, large -scale entry into international business is likely to drag the performance.

In the face of compliance issues in domestic business, going to sea is a fight that Hong En had to do. However, in the face of intricate environments and different policies of various countries, there is still a long way to take a long way to take the business that may collapse at any time.

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