Among them, the number of college students is over 2.9 million. At present, only four regions haven’t opened colleges or universities, namely Beijing, Hebei, Hubei, and Heilongjiang.

The returned students also include:

• Senior middle school: 21.615 million from all provinces
• Vocational college: 3.27 million from 24 provinces
• Junior middle school: 31.48 million from 29 provinces
• Primary schools: 43.84 million from 21 provinces
• Kindergarten: 4.58 million from 8 provinces

Postponed or canceled purchase due to Covid-19: China vs. US vs. UK

The huge increase in GSX’s revenues was mainly driven by the growth in paid course enrollments for K-12 courses.

Cost of revenues rose 245.5% to RMB283.3 million from RMB82.0 million in Q1 2019. The increase was mainly due to the increase in compensation for instructors and tutors, learning materials, as well as the extra costs paid for supporting our services offered for free during the COVID-19 outbreak.

GSX’s gross profit increased by 442.1% to RMB1,014.3 million from RMB187.1 million in the first quarter of 2019. Gross profit margin increased to 78.2% from 69.5% in the same period of 2019, primarily as a result of economies of scale.

Non-GAAP gross profit increased 448.4% to RMB1,028.2 million from RMB187.5 million in the same period of 2019. Non-GAAP gross profit margin increased to 79.2% from 69.7% in the same period of 2019.

Operating expenses were RMB922.4 million, increasing from RMB144.4 million in the first quarter of 2019.

Selling expenses increased to RMB757.2 million from RMB99.5 million in the first quarter of 2019. The increase was primarily a result of higher marketing expenses to expand the user base and enhance our brands, an increase in compensation to sales and marketing staff, as well as free course promotional expenses to acquire traffic during the COVID-19 outbreak.

Research and development expenses increased by 227.0% to RMB99.4 million, from RMB30.4 million in the first quarter of 2019. The increase was primarily due to an increase in the number of course professionals and technology development personnel, as well as an increase in compensation for such staff.

General and administrative expenses increased to RMB65.8 million from RMB14.4 million in the first quarter of 2019. The increase in general and administrative expenses was mainly due to an increase in the number of general and administrative personnel and an increase in compensation paid to general and administrative staff.

Income from operations was RMB91.9 million, compared with RMB42.7 million in the first quarter of 2019. Non-GAAP income from operations increased to RMB134.7 million, from RMB46.5 million in the first quarter of 2019.

Aggregation of interest income and realized gains from investments this quarter, representing the income received from cash, cash equivalents, short-term and long-term investments, increased 1,045.5% to RMB12.6 million, from RMB1.1 million in the first quarter of 2019. This resulted from an increase of cash, cash equivalents, short-term and long-term investments.

Other income increased to RMB61.9 million, from RMB533 thousand in the first quarter of 2019. The increase was primarily due to the value-added tax exemption offered by the government, partially offset by the related cost, during the COVID-19 outbreak, which amounted to RMB53.2 million, as well as government subsidies of RMB8.2 million received in the first quarter of 2020.

Net income increased to RMB148.0 million, from RMB33.9 million in the first quarter of 2019.

Non-GAAP net income increased to RMB190.7 million, from RMB37.7 million in the first quarter of 2019.

Net operating cash inflow for the first quarter of 2020 was RMB117.7 million, an 82.2% increase from RMB64.6 million in the first quarter of 2019.

Basic and diluted net income per ADS were RMB0.62 and RMB0.59, respectively, in the first quarter of 2020.

Non-GAAP basic and diluted net income per ADS, were RMB0.80 and RMB0.76, respectively, in the first quarter of 2020.

As of March 31, 2020, GSX had 159,165,833 ordinary shares outstanding.

As of March 31, 2020, GSX had RMB565.2 million of cash and cash equivalents, RMB1,003.1 million of short-term investments and RMB1,169.0 million of long-term investments, compared with RMB74.0 million of cash and cash equivalents, RMB1,473.5 million of short-term investments and RMB1,188.3 million of long-term investments as of December 31, 2019.

The increasing of cash and cash equivalents is mainly due to the maturity of short-term wealth management investments in the first quarter of 2020.

As of March 31, 2020, ITS deferred revenue balance was RMB1,338.8 million, largely flat from RMB1,337.6 million as of December 31, 2019. Deferred revenue primarily consisted of tuition collected in advance.

GSX’s board of directors authorized a share repurchase program under which it may repurchase up to US$150 million of its shares, effective until May 6, 2022.

Kaplan Fox & Kilsheimer LLP is investigating claims on behalf of investors of GSX. A complaint has been filed against GSX on behalf of investors that purchased GSX securities.

On June 6, 2019, GSX conducted its initial public offering (“IPO”) by issuing 19.8 million ADSs at $10.50 per share.

According to the complaint, on February 25, 2020, Grizzly Research LLC (“Grizzly”) published a report highlighting multiple alleged issues with GSX’s business and financial operations (the “Grizzly Report”).

Specifically, the Grizzly Report alleged, among other issues, that GSX “has been drastically overstating its profitability in its US public filings, especially for 2018″; Grizzly “found multiple strong indications of past and current order ‘brushing,'” which are “essentially fake student enrollments to boost student count”; “many of GSX’s reported students do not actually exist”; and “[w]hile [GSX] touts its high-quality teacher recruitment mechanism, [Grizzly] found a sign-up website that was not functional, multiple allegations of GSX hiring teachers right out of college with no prior experience, and fabricated teachers profiles.”

Following the publication of the Grizzly Report, the price of GSX’s ADSs fell $1.33 per share, or 2.93%, to close at $44.09 per ADS on February 25, 2020.

Then, according to the complaint, on April 14, 2020, Citron Research published a report highlighting additional alleged issues with GSX’s business and financial operations (the “Citron Report”), including, among other issues, that GSX’s “2019 revenue was overstated by 70%,” that “sales revenues are largely exaggerated,” and that GSX’s “filings are riddled with suspicious transactions.”

Following the publication of the Citron Report, the price of GSX’s ADSs fell $0.20 per share, or 0.64%, to close at $31.20 per share on April 14, 2020, 31.3% lower that the closing price prior to the issuance of the Grizzly Report and the Citron Report.

Over 72 thousand organizations offer 178 thousand courses on Tencent Class in 2019. And, revenues of the top 100 organizations grew by 62%, according to Chen Shujun, VP of Tencent Education.

More than 30 educational institutions have witnessed their revenues surpass 10 million yuan (US$1.5 million) in 2019, according to Tencent Class Report. 70 percent of the users are under 29 years old, with the post-00s (those born in and after 2000) generation increasing significantly.

19 Chinese cities, including 4 tier-1 cities (14.5%) and 15 new tier-1 cities, contribute to 38.1% of total users. Top sources of Tencent Class users are Guangdong, Shandong, Henan, Jiangsu, and Zhejiang.

Tencent Class subsidized 35-100% of traffic cost and the total traffic investment for Tencent Class grew by over 700% compared with 6 months ago.

In 2020, Tencent Class will continue to upgrade and improve the efficiency of institutional customer acquisition through data from four aspects.

First, it will consolidate the mainstream channels of SEM, Tencent Ads, and Weibo Ads. And, it will utilize more channels such as Xiaohongshu and Zhihu to help the organizations drive traffic.

Second, it will deepen information flow and broaden the orientation to find potential users of high quality.

Third, CRM 2.0 provides link monitoring and user life cycle management; fourth, explore a new marketing path that suits the actual capabilities of the organization.

From essential-qualities oriented education to K12 education system, coding education is taking off across China. Nowadays, China has placed coding in the national school curriculums and 4-to-12 year-olds are required to learn computer programming.

WeCode, aiming to turn programming training for 4-to-12 year-olds a subject, has secured nearly ten million yuan in the angel investment. In addition, WeCode has developed products targeting both students and schools.

For teachers in schools, the SaaS learning and administration platform is available for teachers to present relevant coding teaching, practicing, and testing items. Moreover, to better tailor this course to students wherever internet and browser are available, WeCode launched cloud translator.

For those 4-to-12-year-olds students, WeCode developed a Python pre-recorded video interactive curriculum. Given that Python has already been a part of college-entrance exam gaokao, WeCode put more effort into the establishment of tool and content.

Some might wonder why WeCode wants to pre-record curriculum considering the small class is so popular today. To put it simply,  it is costly to hire programming teachers and there are not enough qualified programming teachers.

To deal with the might-be problems of inadequate surveillance and difficulty of staying focused for a long time, WeCode designed every course to be within 15 minutes in length with 10 interesting interactive questions in between in order to keep students’ attention in learning.

Practice counts a lot for computer programming learning. Therefore, WeCode developed an AI-accompanied programming system with the left-screen for correction and right screen for code-writing. Students can ask a real teacher if the AI teacher fails to solve the problem.

It’s not late for WeCode to enter this market even if coding education for 4-to-12 year-olds has been gaining popularity since 2016. This market still has a lot left to be explored with such a low penetration. In the beginning, it is important for platforms to lower the cost to attract parents.

Top mobile apps in China in Q2 2018

Research from a recently released HSBC report entitled “The Value of Education: Higher and Higher” reveals how parents’ attitudes towards and spending on their children’s education varies across the globe. In particular, it looks at parents’ attitudes towards university education abroad and online education, as well as their spending and investment in education. The following is a review and summary of core data and conclusions.

This research also shows that Chinese parents are among the most committed to their children’s education when compared to parents around the globe. They are among the most willing to support their children’s education up to the post-graduate level and spend as much on average as parents from several much wealthier nations.

In addition, the report reveals broad trends regarding parents’ attitude towards education abroad, online education, and education spending globally.

Chinese parents are broadly committed to ensuring a good education for their child; to this end, they are much more likely than average to prepare financially for significant education expenditures, consider post-graduate education for their children, and pay for private schooling. They are among the most willing to send their children abroad for university, as well.

Attitudes towards online education

Global attitudes towards online education are mixed, with most parents simultaneously expressing some willingness to consider an online degree because of the cost savings and increased flexibility…

… And expressing caution at the potential downsides of such degrees, including the lack of interaction with peers and professors, limits on networking opportunities, and questions about suitability for some subjects.

Nonetheless, most parents, in the end, say that they would consider an online university degree for their child, with the highest percentages coming from large developing economies such as India, Indonesia, and China.

Beyond school: Educational experiences

Beyond a normal university education, many parents would consider allowing children to engage in other related experiences, such as study abroad programs, school exchanges, or work placement programs.

Attitudes towards education abroad

By far the most common such “experience”, however, is allowing a child to go to a full university program abroad, something widely considered by parents globally, most especially in the developing world.

Many parents are concerned about the costs of such an education, not just monetary but also in terms of safety and homesickness, but against this, they must weigh benefits including allowing their children to acquire new language skills, experience working abroad, and greater confidence and independence, as well as exposure to foreign cultures.

Many parents have specific universities in mind when they consider sending their children abroad; in evaluating these schools, they most frequently consider the quality of the teaching and education, the universities’ prestige, and post-graduation employment opportunities.

Additionally, parents who send their children abroad for university have clear preferences for certain countries; the top four common destinations are the four developed nations of the Anglosphere, with the US in the lead. Closely trailing them are other major developed economies, with Germany, France, and Japan among them.

Despite the doubts discussed above, a majority of parents in developing countries would consider sending their children abroad for university. Meanwhile, parents in developed nations are less likely to want their children to go abroad for university, possibly because they have fewer qualms about the quality of the education available at home.

Majors, post-graduate education, and careers

Parents show a strong preference for majors such as medicine, business, finance, and engineering, which seems linked to their belief that education is a route to better employment prospects. Chinese parents are most likely to prefer business and finance majors, with a full 20% responding in favor.

Parents’ belief in the value of education in the job market is especially strong regarding post-graduate education; over 90% of Chinese parents think post-graduate education will provide better job opportunities to their children, and 95% would consider sending their children, among the highest percentage of any nation’s parents.

Educational Spending

Globally, the average parent spends some US$44,221 on a child’s education, split roughly evenly between primary, secondary, and university education.

Average spending among Chinese parents is very close to the global average, despite China being much less wealthy on average than the other countries surveyed. For example, Chinese parents were apt to spend more on their children’s education than parents in Australia, the UK, Canada, or France, and only marginally less than those in the US and Taiwan.

Meanwhile, culturally Chinese Hong Kong topped the list, with the average parent spending more than US$130,000 on a child’s education.

Beyond their finances, parents also make other sacrifices to support a child’s education, including reducing their “me-time”, cutting back on holidays, and changing their working styles and times.

Private education is also very common, especially in the developing world, and most especially in the Sinosphere. Parents in developed economies are less likely to pay private tuition, preferring public schools, but parents in developing economies may send their children to private school in the absence of a strong public school option.

In China, public schools are generally of reasonable quality, but parents pay for private tutors and after-school programs to give their children a leg-up in the cutthroat competition for university spots and jobs.

Education: An investment in the future

Most parents invest in education for their children because they’re optimistic about their children’s prospects and want them to have a better life than they otherwise would.

In part because the competition is so fierce, developing world parents have high aspirations for their children, that they will beat the average and have a better future than their peers.

Investment in education, for these parents, is a way to help their children achieve this brighter future.

Total revenues of China’s online education market reached 45.84 billion yuan (US$6.64 billion) in the first quarter of 2017, with an increase of 64.9% YoY or decrease of 4.8% QoQ according to data from the research company Analysis.

Children education is the most active section in China’s online education market with close to 170 million monthly active users in Q1 2017.

Baidu’s Zuoyebang is the most active online education mobile app in China with 43.589 million MAU in March 2017. It helps the primary and secondary school students with their homework.

China’s online education market is estimated to exceed 162 million users in 2019 from 90 million in 2016; and, this market will grow to exceed 269 billion yuan (US$39 bn) in 2019 from 156 billion yuan (US$22.7 bn) in 2016. 

Online language education market in China exceeded 30.2 billion yuan (US$4.39 bn) with over 17 million users in 2016 with an increase of 26.9% YoY. It’s estimated to grow to 51.68 billion yuan (US$7.51 bn) in 2019 with over 30 million users.

Also read: China Online Learning Market Overview for 2016

Online videos became mainstream media for online learning in China in 2016 with Netease leading in online learning market in China according to a recent survey conducted by Netease and Guokr.

The top three online learning platforms are Netease Open (open.163.com), Zhihu mobile app, and Netease Courses (study.163.com) while TED also made it to the top five.

Paying for online learning content is much more accepted in China in 2016; quality content is a key factor. 70% respondents paid for online learning in 2016 comparing with only 26% a year ago.

Online videos became mainstream media for online learning in China in 2016, being the top engagement (41.97%) of online learners & followed by downloading paid content (26.29%) and paid apps (18.11%). Personal interests and professional skills are the top reasons for online learning in China.

Three-quarters of online learners are satisfied in the learning content.

China online education market was predicted to reach 119.2 billion yuan (US$18.1 billion) with 72.27 million users in 2015 according to iResearch. The online language market was estimated to reach 23.6 billion yuan (US$3.6 billion) in 2015.

China online education market was predicted to reach 119.2 billion yuan with a YoY increase of 19.4% in 2015 according to iResearch. With more users studying online, the transactions will reach 204.6 billion yuan (US$31.1 billion) in 2018.

The number of China’s online education users was predicted to reach 72.27 million in 2015. The number is predicted to reach 132.21 million in 2018. Increasing China online internet users and developing online educational products is the driving force of the growth.

China online high education and professional education market accounted for 84.4% in 2015. Adult education is popular online while preschool education and corporate education is expected to make up more market share in the next several years.

Internationalized China accelerated large demands for foreign language speakers. The online language market was estimated to reach 23.6 billion yuan in 2015 and it will maintain a steady growth in the next several years.

Although the number of China online language users was only 17.66 million in 2015, the number will exceed 31 million in 2018. Relatively low education cost, personalized classes, verified products, and available mobile apps drive the increase.

Limitations of the traditional education model have prompted demands for the online education industry. Owing to China education policy reform and local educational infrastructure, online education has generally been considered as a promising industry in China.

Currently, New Oriental, Tomorrow Advancing Life, Xueda Education, and other traditional education institutions have started using the internet to communicate with students and teachers. WeChat, QQ, and other social media are useful tools. Many e-business companies are also bullish on China’s online education market. For example, Alibaba invested in VIPABC in 2015. Online education market will account more in the education market.

Also read: Weibo Users Insights 2015

China “exports” the most number of students studying overseas in the world according to a UNSCO’s report. China and India, which have the most people in the world, also have the most students studying overseas in 2012.

In 2012, Chinese overseas students reached 694,400, ranking the top in the world, followed by India and South Korea with 189,500 and 123,700 overseas students respectively.

Also read: China Tourists Travel Intention Study 2015

As of November 2014, the number of education apps was over 70,000, representing 10% of total apps in China. Education app ranked the second in Apple App Store, following the game apps.

Sina Education channel conducted a research about China education apps involving internet users all over the country. The research focused on content, technology and interactivity of education apps, including top 200 education apps categorized as foreign language learning, examination, primary & secondary school course learning, preschool study and so on in China mobile app stores.

The Sina study shows that the most used education apps were foreign language learning apps and examination ones. Users spent about 30 minutes per day among 30.9% foreign language learning apps. However, as there was a lot of foreign language learning apps and developers, users’ willingness to pay for such apps is not so high with an average spend of about RMB42 yuan.

Besides, preschool study app ranked top among all education apps and users spent an average of 94 yuan at present in China; while in the future, they would like to pay 178 yuan for such apps according to the research.

Among all the education apps, 28.1% examination app users used it for an average 40 minutes every day, much longer than other app’s usage time in China. Such apps attracted many diligent learners in China.

Online education is rising in China. Baidu launched online education platform Chuanke where students can learn anytime on any type of devices being a PC, smartphone or tablet. They can also receive SMS alerts for class notifications via mobile app.

Also read: Top 100 Mobile Apps in China

Baidu launched an online education platform Chuanke.com for organizations and individuals to offer courses online.

Chuanke.com empowers educators with both video one demand courses, live streaming video education tools, and other education tools such as assignments, tests and references. The online classroom is also designed with interactive capability for engagement between teachers and students.

Students can learn anytime on any type of devices being a PC, smartphone or tablet. They can also receive SMS alerts for class notifications.

In addition to online teaching tools, Baidu Chuanke offers marketing suites including various virtual school design templates, data reports, coupon offers, and promotions for high quality courses.

On October 8th, 2013, an online free classes platform Coursera joined with Chinese online education platform NetEase to launch a Chinese language Coursera Zone.

Coursera Zone will offer syllabus, FAQ and discussion forum in Chinese. What’s more, Coursera Zone would provide more classes in Chinese, NetEase would select some online classes and store them in its servers to improve video watching experience.

Except for cooperating with NetEase, Coursera also seeked for other partners in and outside China to enlarge its online Chinese classes, such as Beijing University and National Taiwan University. Coursera would also plan to cooperate with Guokr.com, a Chinese science and technology interests social community, and Yeeyan, a Chinese translation volunteer group, to translate Coursera courses into Chinese.

Course Zone would be opened on NetEase. Except for offering Cousera online classes, NetEase would also provide other online education videos with translation, such as TED and Khan Academy.

Taobao educational platform Taobao Tongxue, which literally means Taobao Classmates, was launched in August 2013. It combined offline education with online alive educational videos, including K12 entrance exam,  vocational training and other mainstream educational aspects.

Also, Taobao Tonxue allows users to set up their own courses, as long as their uploaded courses meet Taobao’s requirements, and their courses could be showed and sold on Taobao Tongxue; however, the profit details are not clear yet.

Taobao’s entering into the online educational field means that the online educational industry has become a big and potential blue ocean market. What’s more, Taobao Tongxue will cause ripples in the online educational system. Some core competitive online educational institutions will become the leaders in the reshuffle, and the small platforms that lack of the core advantages will be eliminated in the process. And the offline educational institutions will face more severe challenges.