FY19 Q3 Earnings Presentation July 2019 Section 1 Business and - PowerPoint PPT Presentation

OneSmart International Education Group Limited FY19 Q3 Earnings Presentation July 2019

Section 1 Business and Strategy Updates

Focused on the Three Core Services: Plenty Room to Grow Premium K-12 1on1 Tutoring Services  #1 player in the premium tutoring services (2) market in China … yet only 2.4% share  Primarily focused on premium 1-on-1 tutoring format: OneSmart VIP － A materially different tutoring demand than class format － Personalized and highly effective, leading to outstanding study results  Premium tutoring services (2) , taking 25% share of a RMB 433bn tutoring market in 2018, is expected to grow at 16% CAGR 2017-2022, much faster than the overall tutoring market (9%) Premium K-12 tutoring market share distribution Most recognized premium tutoring brands #1 premium K-12 after-school tutoring By revenue in 2017 service provider in China (1) 3rd – 12th Grade 1-on-1, 1-on-3 Source: Frost & Sullivan: China’s K -12 After-School Tutoring Market Study (March 2018) Premium Young Children Education Services  HappyMath (launched in 2013) and FasTrack English (acquired in January 2018): expands HappyMath FasTrack English target customers base to younger population, building a future K-12 customer pool Kids English Kids STEAM  Fast growing demand driven by rising newborn population and increasing demand by new generation of young parents with largely improved affordability  Focused on the two most sought-after young children education services: － Math: #1 criteria for primary school admission considerations Also covers Chinese Focus on STEM English － English: most popular kids education services in China 1-on-10 3 to 8 Yrs Old  Offered primarily in 1on10 small group classes, suitable to kids education 1-on-10 3 to 8 Yrs Old Notes 3 1. In terms of revenue in 2016 and 2017, according to Frost & Sullivan Premium tutoring services refers to either 1-on-1classes priced at or above RMB 200 per hour or small group classes priced at or above RMB 120 per hour 2.

Distinguished Core Competencies: Extremely High Entry Barrier 1 Superior customer experience supported by personalized premium1-on-1programs that cater to the needs of an individual student, driving outstanding results Premium  A more effective tutoring format than class format for teenage students Price  Specially suitable for mass average students to prepare for demanding admission exams in China  90%+ high school admission rates vs. approx. 50% of country average 2 Highly efficient operating system underpinned by robust KPI Scalable based incentive structure throughout the organization Lean Profitability  Our KPI based incentive structure is proportionally tied to revenue and net Cost in the Growing profit at all levels, which helps control, actually almost fix our cost and operating expenses at a reasonable ratio of revenues Structure 1-on-1Tutoring  GPM at approx. 50% level, comparable to major class format players Market  Opex % of Revenue below 40%, lower than major class format players  OneSmart is the 3 clear market leader Highly standardized learning center management system in premium1-on-1 tutoring space  Standardized organizational and incentive structure that can be easily Replicable replicated: 1) teaching & quality control, 2) customer services, 3) sales & System marketing, and 4) recruiting & training  Standard operating procedure, training system, and data reporting  Deliberate succession plan and career development programs 4

The Three Step Growth Plan: Initial Step of National Coverage Completed OneSmart Learning Center Numbers Non-GAAP Op Margin (1) : 5.8% 19.1% 16.0% 13.1% 12.7% 48% CAGR The Three Step Growth Plan 29% CAGR 430 315 195 Reach National Coverage 150 1. 117 and Scale FY15 FY16 FY17 FY18 FY19 Q3 Controlled Expansion Stage Ramp up Newly Opened Rapid Expansion Stage 2.  Margin optimized  Margin temporarily pressured Centers National Coverage and Scale Optimize Profitability 3. FY15 FY19Q3 117 Study Centers 430 Study Centers 14 Cities in China 43 Cities in China 5 Notes 1.Excluding share based compensation expenses

Solid and Proven Ramp-up Record of Centers Nationwide Historical Ramp-up Record Shanghai Only OneSmart VIP Learning Centers Actual Performance Year 1 Margin Year 2 Margin Year 3 Margin The Three Step Growth Plan For Centers For Centers For Centers Operating Operating Operating >1 Year (<2) >2 Years (<3) > 3 Years Reach National Coverage Gross Margin (2) 47% 63% 61% 1. Op Margin (1) (2) (26%) 30% 31% and Scale  Including all OneSmart VIP learning centers opened during FY16-FY18 in Shanghai Ramp up Newly Opened 2.  Op Margin (1) breaks even at Q3 of Year 1 on average Centers Top 10 Cities Outside Shanghai Optimize Profitability OneSmart VIP Learning Centers Actual Performance 3. Year 1 Margin Year 2 Margin Year 3 Margin For Centers For Centers For Centers  Total 11 cities generated 92% revenue of Operating Operating Operating OneSmart VIP business, which was 84% >1 Year (<2) >2 Years (<3) > 3 Years of total company revenue in FY18; Gross Margin (2) 45% 49% 57%  For centers opened in FY2015 or earlier, Op Margin (1) during FY18 are: Op Margin (1) (2) (20%) 3% 20% － 42% for those in Shanghai;  Including all OneSmart VIP learning centers opened during FY16-FY18 in top 10 － 28% for those in top 10 cities outside cities outside Shanghai Shanghai  Op Margin (1) breaks even at Q4 of Year 1 on average Notes 1. E xcluding regional and headquarters’ overhead and share based compensation expenses; 2. Margin figures for the three center baskets: • For those centers have been operating for over 1 year but less than 2 years, we are showing here their margin numbers for their performance during the first year of operations to ensure sufficient data points; similarly, for those have been operating for over 2 years but less than 3 years we are showing their performance from 13th-24th month of operations; and those more than 3 years we are showing numbers from 25th-36th month; 6 The margin figures are aggregates of those centers generated during their own one year window. The one year window may not necessarily be the exact same year for individual centers. For example, margin figure for “C enters • Operating >2 Years (<3)”, is the sum of margins generated by centers with total operation tenors between 2 and 3 years durin g their own correspondent year 2 of operations

Management Model Output for FY20-FY22 Please note that below is an output of management planning model, which is based on a key assumption of applying historical center ramp-up economics to newly opened centers. It is NOT a company guidance for future financial performance as situations The Three Step Growth Plan may change. Reach National Coverage 1. Three Year Management Planning Model Output FY20-FY22 FY20 FY21 FY22 and Scale Revenue YOY 30 – 35% 35 – 45% 35 – 45% Ramp up Newly Opened 2. Growth % Centers Non-GAAP Op 11 – 13% 13 – 15% 14 – 16% Margin (1) Optimize Profitability 3. Capacity Expansion Assumed: % of Numbers of 15 – 20% 20 – 30% 20 – 30% New Centers 7 Notes 1.Excluding share based compensation expenses

Strategy Going Forward: a Clear and Focused Plan for the Next Three Years Focus on the Three Core Services Lines and Key Regions 1 － Three core services lines: OneSmart VIP, HappyMath and FasTrack English － Accelerate scale-up of top 20 cities to achieve faster growth and margin expansion － Selective acquisitions with a focus on supporting the three core services lines Balanced Capacity Expansion 2 － Controlled 15-20% opening rate for new centers in the new fiscal year － Increased focus on the ramp-up of newly opened centers － Balance top-line growth and margin stability Operational Enhancement 3 － Strengthen core competencies as a premium services provider － Revamp incentive system to further improve productivity － Drive continued product and services innovation through new technologies 8

Section 2 Financial Highlights

Key Financial Highlights for Third Fiscal Quarter of FY2019 Key Financial Highlights  Monthly average student enrollments increased by 40% YoY 1. Growth  Total center number reached 430, with 29 openings during Q3  One-off regulatory impact on top-line growth, expecting to normalize 2. Revenue in the next few months  Temporary margin pressure due to expansion is near bottom, 3. Margin expecting non-GAAP Op Margin to enter expansion stage in FY20  Accelerating top-line growth and continuous margin expansion 4. Outlook expected in the next three years 10

Strong Top-line Growth Momentum in All Business Segments Net Revenues (1) OneSmart VIP Fiscal years ended August 31 and third quarters ended May 31 RMB MM +30.6% +25.9% +29.3% RMB MM Growth Growth CAGR 2,416 2,120 1,840 1,639 1,416 887 705 2,863 +36.8% CAGR 2,683 FY2016 FY2017 FY2018 FQ3 2018FQ3 2019 9M 2018 9M 2019 +39.1% HappyMath Growth RMB MM +45.6% +41.9% +78.6% 2,058 Growth Growth 352 CAGR 359 1,929 242 212 129 113 1,529 91 +32.6% Growth FQ3 FQ3 9M 2018 9M 2019 FY2016 FY2017 FY2018 2018 2019 1,093 FasTrack English 824 +77.5% +216.1% RMB MM Growth Growth 117 73 46 37 26 FY2016 FY2017 FY2018 FQ3 2018 FQ3 2019 9M 2018 9M 2019 FY2016 FY2017 FY2018 FQ3 FQ3 9M 2018 9M 2019 2018 2019 Notes 11 1. Net of value-added taxes