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FY19Q4 and FY19 Full Year Results Presentation November 2019 - - PowerPoint PPT Presentation
FY19Q4 and FY19 Full Year Results Presentation November 2019 - - PowerPoint PPT Presentation
OneSmart International Education Group Limited FY19Q4 and FY19 Full Year Results Presentation November 2019 Section 1 Business Overview We are a Leading Premium K-12 After-school Education Services Provider in China Our Values Our Mission
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We are a Leading Premium K-12 After-school Education Services Provider in China
Notes
- 1. In terms of revenue in 2016 and 2017, according to Frost & Sullivan
- 2. For students from kindergarten to the third grade in Shanghai in terms of revenue in 2016 and 2017, according to Frost & Sullivan
- 3. As of August 31, 2019
- 4. In terms of revenue in 2017, according to Frost & Sullivan
- 5. A student enrollment is defined as a student who takes at least one class in one subject during a certain period. Under this definition, a student taking at least one class in each of two subjects
during a certain period is treated as two student enrollments for the period. The number of students enrolled in our invested K-12 schools and OneSmart Online is not included for this purpose
- 6. For the fourth fiscal quarter ended August 31, 2019
- 7. Fiscal year ended August 31
Well-recognized brand with 432
study centers covering nearly 40 cities in China(3)
Dominant market share of 26%(4) in
Shanghai’s premium K-12 after- school education market
~160,000 average monthly student
enrollments(5)(6)
#1 premium K-12 after-school tutoring
service provider in China(1)
#1 young children mathematics education
service provider in China(2) Founded in Shanghai in 2008
~7,500
full-time teachers(3)
RMB 4.0Bn
revenue in FY2019(7) , nearly doubled from RMB 2.1bn in FY2017,
39.3% 3-year CAGR
Bring out the utmost learning power in each student by cultivating his or her study motivation, capability and perseverance, and enable our students to pursue life-long success Our Mission Build the most trusted ‘‘Third Classroom’’ outside of home and school Our Vision Customer Focus Execution Innovation Teamwork Our Values
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OneSmart VIP
1-on-1, 1-on-3 3rd–12th Grade
HappyMath
1-on-8/10 1-on-8/10
Kids Math
Note:
- 1. In terms of revenue in 2016 and 2017, according to Frost & Sullivan
Also covers Chinese
We Focused on the Three Premium Education Services
Kids English
FasTrack English #1 premium K-12 after-school tutoring
service provider in China(1)
3 to 8 Yrs Old 3 to 8 Yrs Old Focus on STEM English
Premium K-12 1on1 Education Services Premium Young Children Education Services
The largest and most high-end player in China’s education market Primarily focused on premium 1-on-1 format: － Personalized and highly effective, leading to outstanding study
results
－ More suitable than mass class-format tutoring to achieve score
improvements to pass entrance exams
Estimated student base: 45% middle schools, 35% primary schools
and 20% high schools
Also offers a 1-on-3 formats but only takes ~15% of revenues Increasing demand by new generation of sophisticated parents with
largely improved affordability
Focused on the two most sought-after young children education
services:
－ Math: #1 criteria for primary school admission considerations － English: most popular kids education services in China HappyMath was launched in 2013 and FasTrack English was
acquired in January 2018
Offered primarily in 1on8/10 group classes, suitable to kids education
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Premium Market Mid to high-end market Mass market
Our Differentiated Position in China’s Education Services Market
Highest hourly tuition fee
rate in the industry No.1
Most recognized
premium brand
Outstanding learning
results
Note:
- 1. Premium tutoring services refers to either 1-on-1classes priced at or above RMB 200 per session or small group classes priced at or above RMB 120 per session, according to Frost & Sullivan
(1)
NYSE: ONE NYSE: TAL NYSE: EDU
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Premium Market Grows Much Faster than the Entire Sector
169 (30%) 146 (28%) 109 (25%) 349 (74%)
475
324 (75%) 373 (72%)
2018
126 (26%)
2019 2020
395 (70%)
2021
196 (32%) 416 (68%)
2022
Premium CAGR +16% Non-premium CAGR +6% 433 518 564 611
CAGR +9%
Premium after-school tutoring sector grows much faster than the entire market
Source: Frost & Sullivan: China’s K-12 After-School Tutoring Market Study (March 2018)
China K12 AST Market Size (2018 – 2022F) RMB billions
Rising awareness and preferences for individualized learning
Consumption upgrade by increasing number of Mid-Class families
Rising willingness to pay for premium services
Most recognized premium tutoring brands
By 2017 revenue Xueda 1.1% EDU 1.5% 6.1% Others 93.9% TAL 0.5% OneSmart 2.4% Only 0.9% 28% 11% 11% 7% 4% 4% 3% 2% 2% 2% Xueda BestStudy EDU OneSmart Longwen TAL Jinghan Juren Only Xspark
OneSmart leads the market shares of the premium sector … still plenty of room to grow
A RMB 200bn premium market OneSmart only takes 2.4% share today
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Our Distinguished Premium Services are Built on Three Key Pillars: Quality, Services and Innovation
Note:
- 1. Based on Class of 2019 results
1
Our highly personalized learning programs based
- n
students’ academic levels and learning habits provides the most effective way to improve scores during a limited timeframe, a much needed help for our students to prepare for the highly selective entrance exams in China
2
Our 1-on-1 services and learning center environment enable us to better provide personal level caring and more engaged study experience to our students, a support that much appreciated by increasingly sophisticated parents
3
We continuously pursue / upgrade new products and technologies to enhance the learning experience and
- effectiveness. We developed robust teaching system UPC (
Unique Personalized Coach), OMO (online-merge-offline) tools and platforms, AI-powered OneSmart Online, etc.
Teaching Quality Touching Services Innovative Technologies
40%
China avg.
93%
vs.
University Admission Rate(1)
94%
vs. 45-55%
China major city avg. High School Admission Rate(1)
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We are Building our Online Strategies and Investing in OneSmart Online
Learning Center Systems
Back End Teaching and Operations System Powers Front End Online and Offline Integrated Services
Offline Learning Centers Online Platforms and OMO Tools
12 Million Teaching Notes 10 Million Test Questions
UPC
Teaching and Operations System
Cloud- based Storage Teaching Bank Data Analytics KPI Tracking
OneSmart Online
Online and offline integrated: － Cutting-edge technologies － Synergies with offline system and
- perations
Convenience and enhanced services: － Mid-week 1on1 classes at home － On-demand supplementary courses － Enhanced communications Teaching quality ensured: － Improved algorithms, powered by
data collected from offline experience
－ Extensive 1on1 teaching experience
To establish OneSmart Online
as the largest online based premium services platform
To enhance learning
experience and improve customer satisfaction
To drive incremental growth for
both online and offline businesses
To deliver profitable growth
Our Online Strategy
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Superior customer experience supported by personalized premium1-on-1programs that cater to the needs of an individual student, driving outstanding results
Premium services and learning environment
A highly effective tutoring format
94% high school admission rates vs. 45-55% of major cities average
Highly efficient operating system underpinned by robust KPI based incentive structure throughout the organization
Started small, learning centers’ cost and expenses incur almost at linear proportions to revenue growth due to the nature of 1on1 operations
Central planning and annual budget control at center level
Gross margin at ~50% level and Opex % of revenues at ~40% level, both comparable to major class format players
Highly standardized learning center management system
Standardized organizational and incentive structure that can be easily replicated
Standard operating procedure, training and data reporting systems
Deliberate succession plan and career development programs
Our Achievement of Scalable Profitability is Driven by Three Core Advantages in our Business Model
Premium Price Lean Cost Structure Replicable System Scalable Profitability in the Growing 1-on-1 Tutoring Market
OneSmart is the
clear market leader in premium1-on-1 tutoring space
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Solid Ramp-up Record of Centers Opened in the Past Three Years
1.
Reach National Coverage and Scale … Accomplished
2.
Ramp up Newly Opened Centers
3.
Optimize Profitability The Three Step Growth Plan
Shanghai Only OneSmart VIP Learning Centers Actual Performance
Year 1 Margin For Centers Operating >1 Year (<2) Year 2 Margin For Centers Operating >2 Years (<3) Year 3 Margin For Centers Operating > 3 Years
Gross Margin(2) 47% 61% 62% Op Margin(1) (2) (27%) 23% 35%
Including all OneSmart VIP learning centers opened during FY16-FY18 in Shanghai Op Margin (1) breaks even at Q3 of Year 1 on average
Top 10 Cities Outside Shanghai OneSmart VIP Learning Centers Actual Performance
Year 1 Margin For Centers Operating >1 Year (<2) Year 2 Margin For Centers Operating >2 Years (<3) Year 3 Margin For Centers Operating > 3 Years
Gross Margin(2) 44% 51% 55% Op Margin(1) (2) (20%) 7% 16%
Including all OneSmart VIP learning centers opened during FY16-FY18 in top 10
cities outside Shanghai
Op Margin (1) breaks even at Q4 of Year 1 on average
Total 11 cities generated 90% revenue of
OneSmart VIP business, which was 83%
- f total company revenue in FY19;
For centers opened in FY2015 or earlier,
Op Margin(1) during FY19 are:
－ 43% for those in Shanghai; － 27% for those in top 10 cities outside
Shanghai
Notes
- 1. Excluding 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 their margin numbers for performance during the first year of operations; similarly, for those 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;
- The margin figures are aggregates of those centers generated during their own one year window
Historical Ramp-up Record (Updated to FY19 Q4)
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Our Three Year Strategy: a Clear and Focused Plan
Focus on the Three Core Services Lines and Key Regions
－ 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
－ Controlled 10-15% opening rate for new centers in FY2020, followed by slightly
more active expansion in FY2021 and beyond
－ Increased focus on the ramp-up of newly opened centers － Balance top-line growth and margin stability
Operational Enhancement
－ Strengthen core competencies as a premium services provider － Revamp incentive system to further improve productivity － Drive continued product and services innovation through new technologies, and
develop OneSmart Online into the largest online premium education platform
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Section 2
Financial Highlights
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Key Financial Highlights for Fourth Fiscal Quarter of FY2019
Average monthly student enrollments increased by 29.5% YoY
New student headcount increased by 60.2% YoY
Total center number reached 432
- 1. Growth
Topline growth has exceeded 40% YoY
Strong new enrollments growth supports visibility of future revenue growth
- 2. Revenue
Temporary margin pressure due to regulation, R&D spendings and expansion
Expect non-GAAP Op Margin to enter expansion stage in FY20
- 3. Margin
Expect accelerating top-line growth and continuous margin expansion in the next three years
- 4. Outlook
Key Financial Highlights
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117 162 FQ4 2018 FQ4 2019 777 1,047 FQ4 2018 FQ4 2019
HappyMath
2,058 2,863 3,994
FY2017 FY2018 FY2019
Net Revenues(1) OneSmart VIP
RMB MM
Notes
- 1. Net of value-added taxes
RMB MM +55.7% RMB MM +31.2% CAGR CAGR 934 1,311 FQ4 2018 FQ4 2019 212 359 FY2017 FY2018 FY2019 +39.3% CAGR
Strong Top-line Growth Momentum in All Business Segments
FasTrack English
1,840 2,416 FY2017 FY2018 FY2019 73 192 FY2017 FY2018 FY2019 RMB MM 36 76 FQ4 2018 FQ4 2019 +40.4% Growth +34.8% Growth +38.0% Growth +109.9% Growth Fiscal years ended August 31 and fourth quarters ended August 31 3,168 514
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157 225 275 38 66 95 24 51
11
FY2017 FY2018 FY2019
8,711 11,744 13,312
FY2017 FY2018 FY2019
Solid Operating Metrics
+43.6% CAGR
Average Monthly Enrollments Consumed Class Units Number of Classrooms
+23.6% CAGR
Number of Study Centers
+48.8% CAGR
195 315
9,611 12,384 15,590 1,601 2,680 3,639 1,466
FY2017 FY2018 FY2019 15,497 11,212
1,506
22,202
432
OneSmart VIP Happy Math FasTrack English Others
OneSmart VIP Happy Math
FasTrack English
Others +29.5% Growth +45.9% Growth +40.7% CAGR 4,116 5,375 989 1,313 528
536
FQ4 2018 FQ4 2019
6,497
207 5,312 7,752 (in thousand)
76,841 112,145 158,346 122,498 158,649
FY2017 FY2018 FY2019 FQ4 2018 FQ4 2019
433
185 180 219 226 135 139 134 141
FY2018 FY2019 FY2018 FY2019 FY2018 FY2019 FY2018 FY2019
ASP
RMB per class unit
- 2.6%
Decrease(1)
+3.2% Growth +3.4% Growth +5.4% Growth
Note 1.The decrease is mainly due to 1) the consolidation of Tianjin Huaying whose primary business is class programs; 2) business mix changes
Total Happy Math VIP 1v3 VIP 1v1
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391 519 67 83 38
FQ4 2018 FQ4 2019
Gross Profit and Gross Margin(1)
Stable Gross Margin
RMB MM
48.1% 51.3%
935 1,224 1,558 126 203 263 73
FY2017 FY2018 FY2019
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50.6% 49.1% FY 2017 FY 2018 FY 2019 FQ4 2018 FQ4 2019 OneSmart VIP 50.8% 50.6% 49.2% 50.3% 49.6% HappyMath 59.6% 56.5% 51.1% 57.4% 51.1% FasTrack English NA 35.5% 38.2% 38.0% 50.1% Others (101.3%) (20.9%) 22.5% 5.4% 15.1% Overall Gross Margin 51.3% 50.6% 48.1% 50.6% 49.1%
Gross Margin by Segments
50.6% OneSmart VIP Happy Math FasTrack English Others
Notes
- 1. Fiscal years ended August 31 and fourth fiscal quarters ended August 31
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32.0% 32.2% 9.2% 8.9% 2.3% 3.0% 5.9% 6.7% FQ4 2018 FQ4 2019 30.8% 30.5% 31.1% 9.0% 9.9% 11.1% 2.6% 3.0% 3.6% 6.3% 5.9% 6.1% FY2017 FY2018 FY2019
Controlled Cost Structure
51.9% 48.7% 49.4%
Staff costs Rental costs Depreciation and amortization Other costs
49.4% 50.9%
Total Cost % of Net Revenue:
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Non-GAAP Selling & Marketing Expenses as % of Revenues(1) Non-GAAP General & Administrative Expenses as % of Revenues(1)
Efficient Operation Leads to Moderate Expenses
20.2% 17.4% 16.9% 20.4% 17.9% 20.6% RMB MM RMB MM
193 260
FQ4 2018 FQ4 2019 357 485 806 FY2017 FY2018 FY2019 141 282 FQ4 2018 FQ4 2019
Notes 1.Excluding share based compensation expenses
20.7% 19.8% 15.1% 21.5% 368 588 816 FY2017 FY2018 FY2019
G&A expense ratio increase in FY19 was driven by: 1) R&D and related
admin expenses incurred for both offline business and newly launched online strategies; 2) regulatory compliance to support center opennings
If excluding the impact of incremental R&D and other admin expenses and
assuming it grew at the same rate of revenues, our Q4 G&A % Revenues would decrease by 5.5 percentage points
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138 102 FQ4 2018 FQ4 2019 330 376 300 FY2017 FY2018 FY2019 305 229 229 FY2017 FY2018 FY2019 111 76 FQ4 2018 FQ4 2019
Operating Margin: Stabilized and Soon to Expand
Operating Income and Operating Margin Non-GAAP operating Income and Operating Margin (2) Net Income and Net Income Margin (1) Non-GAAP Net Income and Net Income Margin (1) (2)
RMB MM RMB MM RMB MM RMB MM
Notes
- 1. Net income attributable to OneSmart
- 2. Excluding share based compensation expenses
7.5% 16.0% 13.1% 5.7% 259 246 206 FY2017 FY2018 FY2019 14.8% 8.0% 5.2% 12.6% 8.6% 284 392 278 FY2017 FY2018 FY2019 7.0% 13.8% 13.7% 5.6% 83 48 FQ4 2018 FQ4 2019 109 74 FQ4 2018 FQ4 2019 8.8% 3.7% 11.7% 11.9% 5.8% 7.8% 14.8%
If excluded the financial impact of new centers opened in last 12
months (FY18Q4-FY19Q3), non-GAAP Operating Margin would have been 11.4% for the FY19Q4 quarter
The decreases on FY19 margin figures were mainly due to the rise of selling and
marketing expenses and general and administrative expenses to comply with new regulatory standards, invest in R&D on new technologies, and support center openings
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Robust Cash Flows and Healthy Balance Sheet with Low Capex Requirements
Prepayments from Customers Cash and Cash Equivalents and Short-term Investments
RMB MM RMB MM 1,531 1,992 2,162 FY2017 FY2018 FY2019 1,396 2,227 1,832 FY2017 FY2018 FY2019 173 242 284 FY2017 FY2018 FY2019
Operating Cash Flows Capex and Capex as a % of net revenues
RMB MM 8.4% 8.5% 7.1% 773 867 331 FY2017 FY2018 FY2019 208 155 FQ4 2018 FQ4 2019 65 76 FQ4 2018 FQ4 2019 5.8% 7.0%
The decrease of operating cash flow for FY19 was mainly due to the
slower growth of prepayments from customers, caused by the changes
- f our tuition collection time period to comply with the new regulation
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