In 2011, Zhang Xiaolong and his people took Foxmail and sold it to Tencent. Zhang Xiaolong, who came to Tencent, has only done one thing in Tencent until today, that is, WeChat.
Almost at the same time, another young man named Zhang Xiaolong began to work hard in the field of examination.
In 2013, when Zhang Xiaolong's WeChat began to dominate the world, another Zhang Xiaolong joined the ape question bank and was responsible for the examination business.
In 2015, Zhang Xiaolong led the online examination business to be independent from the ape question bank and established Chalk Technology.
In the process of entrepreneurship, Zhang Xiaolong identified two points and avoided the disaster of later destruction.
The first point is to firmly believe that online business is fundamental; the second point is to insist on doing vocational education (public examination) instead of K12.
When other education companies enter the offline K12 on a large scale to make quick money, the development of chalk is relatively low, and even seems a little shabby.
But entrepreneurship is a marathon, the important thing is not how fast you can run, but how far you can run, sometimes, slow is fast.
On 28 February 2022, Chalk filed an IPO application with the Hong Kong Stock Exchange.
In the prospectus, the company will also write a special book on the special advantages of online users:
With the huge user base and good reputation accumulated by our online business, we are able to identify users with offline education needs and convert them into offline students, which allows us to quickly and effectively expand our offline business. In 2021, approximately 67.5% of all offline course payers will convert from paying users of our online services. We have also established a robust, centralized operational system to ensure the synergies and operational efficiencies of the combination of online and offline ("OMO").
To summarize simply, the company's profit model is to attract a large user group through relatively low online prices, and then convert the target customers into high-value offline users.
First, increase income does not increase profits
Judging from the prospectus, although the revenue is constantly growing, the company has not yet found a very clear profit model.
Source: Flush iFind, Cartography: Poetry and Starry Sky
In 2019, the company's revenue was 1.16 billion; in 2020, it almost doubled to 2.13 billion; as of the third quarter of 2021 disclosed in the prospectus, the revenue was 2.633 billion yuan from January to September.
While revenue grew steadily, net profit fell off a cliff. Losses were 154 million, 484 million and 1.228 billion respectively (first three quarters).
However, unlike many Internet companies, the company's gross profit has been positive for the past three years. In 2019, it was 536 million, and in 2020, it was still 490 million affected by the epidemic, and 516 million in the first three quarters of 2021.
For start-ups, there are two major difficulties in moving towards profitability.
The first level is the Maori Pass. Like Xiaopeng and Weilai, it is difficult to maintain positive gross profit when they are listed, which chalk has done;
The second hurdle is the cash flow barrier. That is to say, the net operating cash flow should be positive, Jingdong can lose 15 consecutive years, investors still do not give up, it is precisely because Jingdong's operating net cash flow is most of the years are positive, and to the surprise of Starry Sky Jun, chalk has also done it.
With positive gross profit and positive net operating cash flow, the company's losses are expected to be made up in the future.
Second, the main cause of loss
So, the question is, what is the reason for the company's loss?
The income statement of the third quarter of 2021 shows that the two largest expenses of the company, one is the sales expense, up to 554 million, which basically swallows up all the gross profit; but the administrative expense, which is 811 million against the sky, of which is mainly caused by share payments.
The large expenses paid by shares will not be continuous and will have little impact on the company's future performance, but the surge in selling expenses needs to be said.
According to the prospectus, in order to support offline expansion, the promotion service and brand efforts have increased, resulting in an increase in promotion expenses. The company even said in the prospectus that it incurred huge costs to support offline expansion.
The word "huge" was used.
In other words, the company is in transition, in order to transform at the expense of huge sales expenses, not only that, the company is not hesitant to give up high gross profit margins.
According to the company's prospectus, the company's gross profit margin fell from 46.2% in 2019 to 23.0% in 2020.
Looks like it's affected by the pandemic, right?
In the first three quarters of 2021, it continued to slash, falling to 14.94%.
It can be said that it is very tragic.
In fact, this is also related to the fierce competition in the offline market, zhonggong, Huatu and other traditional offline giants have occupied the ecological niche, and if you want to share a piece of the pie, you will inevitably need a higher cost performance.
But then again, because of the radical operation of Zhonggong, the huge loss in 2021 has also exposed potential problems such as profit transmission, which is likely to be an excellent opportunity for chalk to reshuffle and erect a brand image.
Third, risks and opportunities
Judging from the 100-page prospectus, Chalk's financial situation has surprises and hidden worries.
In particular, the company's unswerving shift from online to offline since 2020 remains to be seen whether it can reap success in the future. Whether it will be blocked by traditional giants is unknown.
However, from the perspective of the company's cash flow, the company's capital chain is relatively good, and the listing financing is conducive to the company's further offline expansion.
The end of the universe is the end of the examination, the end of the examination, in addition to the middle, there is also chalk.