“The end of the universe is the public examination”, the time to 2022, the “public examination fever” is still the same, the number of applicants for the national examination exceeded 2 million for the first time, but domestic education and training institutions are experiencing a harsh winter.

In 2021, in the storm of education and training rectification, off-campus training institutions for basic education became the eye of the storm, and head institutions such as New Oriental, Good Future, Gaotu, Ape Tutoring, and Homework Gang fell one after another.

Zhonggong Education, which is on the civil service examination training track, is also experiencing the darkest moment, the performance stock price has been “double-killed”, the market value of 100 billion yuan has been wiped out, and the net profit has made a big profit of 2.3 billion yuan from the end of 2020 to a big loss of 891 million yuan in the third quarter of 2021. At the same time, as the tide receded, the hidden problems gradually surfaced.

The business model is tested

The civil service training of Zhonggong Education includes two modes: ordinary class and agreement class, and the ordinary class “pays money with one hand and attends classes with the other”, and the business is relatively simple. What really makes Zhonggong Education stand out on the public examination training track is the agreement class.

The so-called agreement class means that the public examination training is based on the premise of “no refund” at the time of registration, and the registration fee is paid in advance, and after the test results are announced, if the candidate fails the exam, some can be 100% fully refunded according to the agreement signed, and some will be refunded after deducting part of the tuition and miscellaneous fees.

Due to the low acceptance rate of the civil service examination, it is clear that for many candidates, spending a lot of money and time on training is not worth the cost. Therefore, this “but refundable” training model attracts a large number of candidates, and because of this, the price of the agreement class is very expensive, usually ranging from 20,000-50,000 yuan.

Since 2017, Zhonggong Education has increased the promotion of agreement classes, and the proportion of agreement classes in face-to-face courses has increased from 59.02% to 73.75%, and the company’s revenue has increased by 56% during the same period.

In recent years, the agreement class model has contributed about 75% of the income to Zhonggong education, in addition to the civil service examination, Zhonggong education has used the agreement class in a large area of public institution examinations, teacher recruitment examinations and other examination subjects.

So the question is, since the agreement class “does not refund the fee”, then where does the income of Zhonggong education come from?

You know, through the agreement class, Zhonggong Education has established a capital plate of up to 10 billion, and the students’ tuition fees are collected into public education and then deposited into the capital pool, which is about 10 months before and after, and the time difference in between has become an important source of profit for Zhonggong Education.

From 2019 to 2020, the wealth management assets of Zhonggong Education always accounted for more than 20% of the total assets, and the highest reached 70%. In the past two years, the company has spent 27 billion yuan and 40.53 billion yuan respectively to purchase wealth management products and time deposits.

In 2019, the investment income of Zhonggong Education reached 259 million, accounting for 12.41% of the total profit, and the investment income mainly came from wealth management and time deposit settlement. In 2020, it obtained investment income of 257 million yuan, accounting for 9.64% of the total profit.

This is also an important reason why complaints about the “difficulty of refunding” in public education have appeared frequently. For Zhonggong Education, as much as possible to occupy the funds can bring real benefits to the company. On the Black Cat complaint platform, as of January 24, 2022, the number of complaints about Zhonggong Education was as high as 3,329, and the complaints focused on the problem of “difficulty in refunding”.

For example, on January 15, some users complained that they finished the exam in May 2021, and at that time Zhonggong promised to refund the fee after the exam, but so far the 31800 tuition fee has not been refunded, and the phone cannot be reached.

According to a former grassroots source of Zhonggong Education, the refund cycle of Zhonggong Education is 30-45 working days, and when it reaches the limit, it can be delayed for about two months after the refund is determined. The instructions he received were: “Students who are good at talking can procrastinate, and those who are not good at talking will be dealt with urgently.” ”

This unscrupulous default on refunds has brought short-term benefits to the company, but it has cost the company’s reputation and brand dearly.

Obviously, there is currently a lack of necessary supervision on the misallocation of funds and the term of education and training institutions in China. With the rectification of off-campus training institutions such as K12, public examination training may be included in the supervision of funds, and the business model of “agreement class – high cash reserve – investment real estate” of Zhonggong Education will be tested.

Usher in a strong challenger

Although the education and training industry has experienced a rectification storm in 2021, the golden track of public examination training has been bet on by capital.

In February last year, Chalk Education announced the completion of a series A financing of US$390 million, led by IDG Capital and Zhixin Capital, CPE, DCP Capital, etc., which is the first round of public financing since the establishment of Chalk Education in 2015. This financing has also become one of the largest single financings in the field of vocational education.

In recent years, on the track of public examination training, chalk education has become a big dark horse, expanding rapidly, and forming a direct competition with Zhonggong education. Its online market share has reached 80%, and in 2020, the number of offline education centers has expanded from 30 to 396, and the number of teams has also increased from more than 1,000 to more than 10,000, most of which are new teachers.

For education and training institutions, the biggest bottleneck to offline expansion lies in teachers. In 2020, Chalk Education had more than 14,000 employees, of which the teaching team accounted for more than 75%. Among them, there are a large number of outstanding teachers from Zhonggong, Huatu and other institutions.

Under the circumstance that the reputation of Zhonggong education is declining, chalk education has gained the goodwill of many students and teachers, and it has also horizontally expanded offline services for teachers, medical care, postgraduate entrance examinations and other subjects, and the overlap with Zhonggong education business will become higher and higher. For Zhonggong, chalk education has become a competitor that should not be underestimated.