About China Distance Education Holdings

China Distance Education Holdings Limited primarily focuses on the professional certification and professional development education markets by offering exam preparation courses and a series of complementary services for students across accounting, healthcare, engineering and construction, and legal education industry verticals, among others. The target customers are working professionals, as well as college students. The company’s controlled company, Beijing Zhengbao Yucai Education Technology Company Limited, primarily focuses on China’s (PRC or the People’s Republic of China) college market, by offering business start-up training courses mainly to university students, and learning simulation software aimed at enriching the learning experience of college students and complementing traditional college teaching methods. The company focuses on helping professionals seeking to obtain and maintain professional licenses and to enhance their practical job skills through its professional development courses. As of September 30, 2020, the company’s content library included 265 course offerings, approximately 7,650 classes, and approximately 44,000 hours of audio-video content across 13 subject areas. The company’s online courses feature pre-recorded, high-definition audio-video lectures taught by experts within their respective fields. Lectures could be viewed either through streaming through the Internet or could be downloaded to various devices, including computers, tablets and smart phones. To enhance the students’ learning experience, the company’s online lectures are supplemented by its proprietary Learning Management System, which tracks students’ individual study progress, enables students to record course notes and to collect incorrectly answered questions for future review, as well as provides other content, such as course outlines, exercise questions, mock exams, and Frequently Asked Questions and Answers. In addition, the company provides comprehensive course-related support services that include online tutoring and 24/7 customer service through its call center. As of September 30, 2020, the company offered 78 downloadable and proprietary mobile applications and recorded 13.39 million downloads for the year ended September 30, 2020. The company focuses its online professional education services in four main industries: accounting, healthcare, engineering and construction and legal education. In addition, the company offers other professional education courses, such as online test-preparation courses for self-taught learners pursuing higher education diplomas or degrees and accounting practical skills training courses for college students and working professionals. The company also offers third-party developed online courses through its Online Open Learning Platform, a proprietary education platform that allows users to share their educational content or deliver live courses online. In 2015, the company launched its College Cooperation Program, which enables it to expand its online accounting educational content and services for professional examinations to college and university students, in partnership with colleges and universities. As of September 30, 2020, the company operated 19 websites, including its main website www.cdeledu.com and 18 other websites, each dedicated to a specific industry, profession or discipline. In addition to traditional online courses, the company offers live streaming accounting, healthcare, engineering & construction, and legal courses through an app available on Android and Apple iOS tablets and smart phones. Furthermore, the company sells books and reference materials, offers offline business start-up training courses and offline accounting, healthcare, engineering & construction and legal professional training courses, and provides courseware production services and platform production services for certain customers. Online Education Services The company focuses its online professional education services in four main industries: accounting, healthcare, engineering and construction and legal education. In addition, the company offers other professional education courses, such as online test-preparation courses for self-taught learners pursuing higher education diplomas or degrees, and accounting practical skills training courses for college students and working professionals. The company offers different types of classes for various subjects within each course and multiple courses for each discipline. Each course represents one examination, professional development or continuing education requirement. To access its classes, course participants must first log into their online registered accounts and enroll in its courses. They are able to choose among various lecturers within each class. After selecting a lecturer, course participants could view the lecture videos along with the lecture script and click on hyperlinks for other useful functions during their lecture study. Course participants could receive tutoring support by posting a question on the question and answer board; pause the video to take notes, practice mock exam questions, or evaluate lecturers’ performance; and access the bulletin board or other helpful information. These functions are part of the company’s proprietary Learning Management System, which monitors its course participants’ individual progress, records course notes, and collects incorrectly answered questions for future review; and provides other content, such as course outlines, mock exams, and Frequently Asked Questions and Answers. In addition to traditional online courses, the company offers live streaming accounting, healthcare, engineering and construction, and legal courses and certain fee-based, mobile accounting, healthcare, engineering and construction and legal courses through an app on Android and Apple iOS tablets and smart phones. The company’s live streaming courses are suited for students who desire a technology-based learning solution, but prefer a live course setting and interaction with the lecturer. Accounting Courses The PRC laws and regulations require persons engaging in accounting and related activities to obtain various qualifications and licenses and to meet continuing education requirements. Qualifications and licenses are primarily obtained by passing exams administered by various agencies, and continuing education requirements could be fulfilled by taking courses covering certain subjects. The company offers a suite of online test preparation, continuing education, and professional development courses for accounting professionals in China. Elementary, Intermediate and Advanced Level Accounting Professional Qualification Examinations: The skill level and technical competence of accounting professionals in China are measured by achieving certification at various levels within the accounting profession. These levels are determined by the ability of accounting professionals to pass elementary, intermediate and advanced level accounting professional qualification examinations. Candidates who pass these exams are issued an accounting qualification certificate for their respective level from the Ministry of Finance and the Ministry of Human Resources and Social Security (MOHRSS), jointly. CPA Qualification Examination: Persons who act as certified public accountants in China are required to pass China’s CPA Qualification Examination. This exam is open to all candidates who hold at least an associate college diploma or above degree or an intermediate level of accounting professional qualification certificate. Continuing Education for Accounting Personnel: PRC regulations require persons holding Certificates of Accounting Specialty and Technical Qualifications or performing accounting work to undergo stipulated study hours/credits of continuing education training each year. Failure to comply with these continuing education requirements could result in the suspension or cancellation of such certificate holders’ certifications. Tax Agent Qualification Examination: Prior to August 2014, only registered tax agents were able to carry out tax agency services, issue tax audit reports and handle tax procedures, such as applications for tax registration with relevant authorities on behalf of business entities. Persons wishing to qualify as registered tax agents were required to pass the RTA Qualification Exam. In 2014, the PRC State Council cancelled the RTA Qualification Exam. In 2015, the RTA Qualification Exam was officially changed to the Tax Agent Qualification Exam by the Chinese Certified Tax Agents Association. Professional Development Courses: A series of accounting and tax related professional development courses, or accounting practical skills training courses, are offered to various levels of accounting professionals, from junior accounting staff to senior management staff, aimed at enhancing their practical skills. International Professional Qualification Examinations: A series of international professional qualification examinations courses, including the test preparation courses for the examinations of American Institute of CPAs, Association of Chartered Certified Accountants, and Certified Management Accountant, are offered to accounting professionals seeking international recognized accounting professional qualifications. Healthcare Courses The company provides preparatory courses for various healthcare professional exams. The company offers courses mainly relating to the following four major nationwide healthcare exams: National Practicing Medical Doctor Qualification Examination: This exam is administered by the National Health Commission (the NHC) and is the basic qualification requirement for doctors in China. Healthcare Professional Technical Qualification Examination: This exam is jointly administered by the NHC and the MOHRSS. A person is eligible to apply for the Healthcare Professional Technical Qualification and is able to work as a medical technician in China if he or she passes this qualification examination. National Pharmacist Qualification Examination: This exam is jointly administered by the MOHRSS and the China Food and Drug Administration. Licensed pharmacists in China are required to pass the National Pharmacist Qualification Examination, obtain the Licensed Pharmacist Qualification Certificate and register with the relevant authorities. National Nursing Qualification Examination: This exam is administered by the NHC and is the basic qualification requirement for nurses in China. Health Manager Examination: This exam is administered by the Vocational Skills Appraisal and Guidance Center of the NHC. A health manager is a professional engaged in the monitoring, analysis, evaluation, health maintenance and health promotion of the health of individuals or groups. A person would be issued a Health Manager License to work as a health manager in China if he or she passes this examination. Engineering & Construction Courses The company offers test preparation courses for engineering & construction professionals in China. It offers courses mainly relating to the following exams: Associate Constructor and Constructor Qualification Examinations, Construction Pricing Engineer Qualification Examination, Construction Supervisor Qualification Examination and Real Estate Appraiser Qualification Examination jointly administered by the Ministry of Housing and Urban-Rural Development and MOHRSS; Certified Safety Engineer Qualification Examination jointly administered by the State Administration of Work Safety and MOHRSS; and Consulting Engineer Qualification Examination jointly administered by the National Development and Reform Commission and MOHRSS. The company also offers online continuing education courses to various engineering & construction professionals to help them meet government requirements and maintain their qualifications. Legal Professional Training Courses The company provides test preparation courses for legal professionals seeking to obtain legal professional licenses. Pursuant to the Implementation Measures for the National Uniform Legal Profession Qualification Examination, which became effective on April 28, 2018, personnel to be appointed as judges for the first time; personnel to be appointed as prosecutors for the first time; personnel applying for lawyers’ and notaries’ practice of law and serving as legal arbitrators for the first time; and civil servants of administrative authorities engaging in review of decisions of administrative penalty, administrative reconsideration, administrative ruling and legal consulting are required to pass the national uniform legal profession qualification examination and obtain legal professional qualification licenses. Other Courses The company provides test preparation courses for self-taught learners pursuing higher education diplomas or degrees in various disciplines through its www.zikao365.com Website. They could obtain government accredited diplomas or degrees by completing their self-study and passing the Higher Education Examination for Self-Taught Learners administered by the Ministry of Education. The company has also obtained exclusive rights in certain provinces and cities to offer study process monitoring programs that allow self-taught learners to earn approximately 30% of the credits they need to obtain post-secondary self-taught education degrees in certain provinces and cities in China. Each of the above course offerings follows a similar course production and online delivery model. The company plans to continue to utilize its core online course production and delivery expertise to produce and deliver new courses for additional professions and industries. Course Formats The company offered various regular, premium and elite classes for its course offerings in year 2020, primarily, including various levels of education services at different fees: Foundation Classes: The company’s foundation classes contain detailed materials and instructions to provide course participants with knowledge of specific subject matter. Intensified Focus Classes: The company’s intensified focus classes are designed to provide intensive instruction, on the key topics of specific subject matter to course participants who already have a basic knowledge of the subject matter. Exam Questions Analysis Classes: The company’s exam questions analysis classes contain deep analysis on typical questions and instruction tailored for exam preparation, aimed at helping course participants master the related materials. Crash-Course Classes: The company’s crash-course classes are designed to provide overview of the key topics on specific subject matter in the final weeks prior to an exam. Exam Simulation System and/or the Professional Development Courses: The company’s exam simulation system, which covers certain of its courses, offers a wealth of mock test questions based on actual exams, closely conforms to the syllabus and test requirements of such exams, and covers various key examination points. The system sets a time limit for handing in test ‘papers’, automatically reviews and grades these ‘papers’, and pools wrong answers for repeated exercises, thereby honing the examinees’ test-taking skills. Live Streamed Courses: The company’s live streamed courses are offered with some of its exam subjects, and they are well suited for students who desire technology-based learning solutions, but prefer a live course setting and greater interaction with the lecturer. The company offers regular classes, which provide education services over the subscription period from the month in which the course participant enrolls in the course to the month in which the subscribed course terminates, within one year. The company also offers premium classes that cover the same courses as regular classes at higher fees. However, if a premium class participant fails to pass the course examination and certain pre-agreed conditions are met, the course participant could retake the same premium course for free in the following year or years. In addition, the company offers elite classes for its various major test-preparation courses. With its elite classes, course participants pay substantially higher course fees for enhanced support services and substantially more interactive course participation. After completing an elite class, if a participant fails to pass the relevant exam and certain pre-agreed conditions are met, the course participant could receive a cash refund of the course fees paid from us or from an insurance company. The company focuses on live streaming to complement its pre-recorded online audio video courses, while improving the interaction among students, lecturers and its websites. It offers live streaming of certain accounting, healthcare, engineering & construction and legal courses, which are attracting various audience of students, on its proprietary learning platform and also on third-party social media platforms. Live streaming provides the company’s students with another learning modality option, and helps elevate its brand, showcase its lecturers and drive course enrollments. Other Products and Services Books and Reference Materials The company primarily sells proprietary books and reference materials related to its courses, such as the various levels of Accounting Professional Qualification Examinations, the CPA Qualification Examination, the National Practicing Medical Doctor Qualification Examination, the National Pharmacist Qualification Examination, Associate Constructor and Constructor Qualification Examinations, and Legal Professional Qualification Examination. To promote its online courses, the company sometimes sell books and reference materials together with some privileges, which allow course participants to get various electronic books and take various online courses for free. Its proprietary books and reference materials are authored by its lecturers. Pursuant to agreements with the lecturers, the company owns the copyright to these books and reference materials in various cases. The company engages third-party publishers to publish its books and reference materials and distribute them through third-party bookstores and distributors across China, as well as through its online bookstores and its offices in Beijing. College Oriented Online-to-Offline Products and Services The company launched its College Cooperation Program in 2015. This program focuses on expanding accounting educational content and services mainly for professional examinations to college and university students, in partnership with colleges and universities. This program includes the following four components: Online-Offline Blended Learning: The company works hand-in-hand with college and university partners to deliver a blended online-offline learning program where students could prepare for accounting related certifications and qualifications in school. Practical Training: The company provides students accounting practical skills training courses to prepare them for real-world accounting work. Internship: The company assists students in obtaining virtual internships in accounting where interns could handle real accounting tasks from its enterprise customers using its accounting cloud services. Employment Advisory & Recruitment: The company offers students employment guidance services to help them prepare for job opportunities. Using its big data analysis, the company could match the employment goals of students with the recruitment needs of employers. Professional Oriented Online-to-Offline Products and Services In a focus to help course participants master critical accounting concepts and practical skills, and to guide them in their job search, the company offers employment guidance services for accounting professionals, which bundle accounting practical skills training courses and employment guidance services. Business Start-up Training Courses The company offers business start-up training to university students, job seekers and individuals who are interested in learning how to establish new businesses. For these courses, the company prepares training materials in accordance with local government requirements in various provinces and cities. Sale of Learning Simulation Software The company offers comprehensive accounting simulation-based learning content to college students focusing on improving their learning experience and complementing traditional college teaching methods. Others The company provides offline accounting, tax, healthcare, engineering & construction, and legal professional training to accounting firms and the general public. The company owns Jiangsu Zhengbao Asset Financial Advisory Co., Ltd. (Jiangsu Asset) in November 2017, which provides accounting and related advisory services to small and medium sized enterprises. The company completed the acquisition of an additional 11% and 9% equity interest in Beijing Ruida Chengtai Education Technology Co., Ltd. (Beijing Ruida) in July 2018 and August 2019, respectively, bringing its total equity interest in Beijing Ruida to 60%. Through its acquisition of Beijing Ruida, the company improves its legal education vertical by adding a major Legal Professional Qualification Examination preparation business to its portfolio of education services. The company also provides courseware production services and online platform development services to certain customers on a contractual basis. Educational Content and Delivery Course Creation The company had a content library with 265 course offerings, approximately 7,650 classes, and approximately 44,000 hours of audio-video content, as of September 30, 2020. Lecturers The majority of the company’s lecturers are academics from renowned higher education institutions in China and experienced practitioners within their respective fields. Services to Students Course-Related Support and Services The company employs a service-oriented approach and devote resources to developing course-related support and services for its course participants. The company provides tutorial sessions, which allow course participants to interact with their lecturers and other course participants using their personal computers. The company had 286 tutors as of September 30, 2019, of which 28 are part-time employees. Community-oriented Services on the company’s Websites In addition to using the company’s Websites to access its courses, course participants and visitors to the company’s Websites are also able to access various information and to exchange ideas on topics relating to the various professions and disciplines for which it offers services. The company offers information about exam times and locations, test preparation guidance, regulations and policies relevant to each industry, career planning and industry trends. The company also offers free e-mail accounts to course participants and provide an electronic bulletin board service, which could be accessed on computers or tablets and smart phones through its mobile apps. In addition, course participants and visitors could subscribe for free and helpful daily practice questions. Through these community-oriented features, the company creates virtual communities for course participants and visitors, which foster brand awareness and customer loyalty. In addition, these virtual communities provide the company means of tracking feedback about the company’s courses, lecturers and services, allowing the company to make adjustments and to react to concerns and complaints from its course participants. General Customer Services The company’s customer service representatives counsel potential and existing course participants on its courses and services, assist in course enrollment, process fee payments, conduct regular telephone customer surveys and provide other support services. They are available online and by email or phone, 24 hours a day, seven days a week. The company’s customer service team numbered 280 individuals as of September 30, 2020. The company recruits its customer service personnel from candidates who have good communication skills and high customer service ethics, and provide on-the-job training for its new recruits. Sales and Marketing The company relies on a combination of direct sales and referrals, regional and online sales agents, as well as other sales and marketing activities to market its services and products. Direct Sales and Referrals Majority of the company’s course participants learn about its services and courses through word-of-mouth referrals. As a result, some of the company’s sales are made through its customer service representatives. Regional and Online Sales Agents The company uses regional sales agents to resell its pre-paid study cards bought from it. It provides various discounts to its regional sales agents based on the volume purchased and the method of payment. In addition, these agents typically assist with its promotional activities in their respective regions and provides market feedback, which helps it in planning its marketing strategy and sales activities. In the year ended September 30, 2020, the company had approximately 980 active regional sales agents throughout China. Its regional sales agents primarily include stores and other points of sale that sell books, learning materials and other supplies to its target professionals. Majority of the company’s regional sales agents are appointed on an exclusive basis. The company also uses online sales agents, which are Internet companies, website operators, and WeChat group operators in China that market its course offerings and other services on their platforms. It pays its online agents marketing and promotional fees for each new course participant registered through their platforms. In the year ended September 30, 2020, the company had approximately 740 active online agents. Intellectual Property As of September 30, 2020, the company had registered 262 software copyrights with the National Copyright Administration of the PRC for its proprietary online course delivery platform, customer service system, digital rights management encryption system, streaming media load balancing system, online course creation management system, and certain other aspects of its online education platform, as well as learning simulation software developed by Xiamen NetinNet Software Co., Ltd. (Xiamen NetinNet) and accounting software developed by Jiangsu Asset. It had also registered 680 trademarks with the China Trademark Office and obtained 11 patent certificates from the State Intellectual Property Office, and 23 applications of trademarks and 3 applications of patents are pending. As of September 30, 2020, the company had registered 389 domain names relating to its business with the Internet Corporation for Assigned Names Numbers and China Internet Network Information Center, including all 19 of its operating websites. Seasonality The company has experienced seasonality and expects to continue to experience seasonality in revenues from online education services primarily due to seasonal changes in course enrollment and the timing of various exams. The company has also experienced seasonality in revenues since its acquisition of Xiamen NetinNet and Beijing Ruida in 2016 and 2018, respectively. History China Distance Education Holdings Limited was founded in 2000. The company was incorporated in 2008 in the Cayman Islands.