FY20 Q1 Results Presentation February 2020 Section 1 Business - PowerPoint PPT Presentation

OneSmart International Education Group Limited FY20 Q1 Results Presentation February 2020

Section 1 Business Updates

China afterschool tutoring (AST) market: tremendous potential exists in online sector, with lower tier cities generating majority of growth Rapid increase of online penetration rates Student population Online AST market is growing 4x faster than market average: • 41% online AST enrollment penetration by 2025E from 15% in 2019E, or 54mn K-12 online AST students • May further increase driven by rising online adoption under recent coronavirus situation 61% of online AST students to come from low- Online students distribution by city tier tier cities (Tier-3 and below), for a number of reasons : • Lower tier cities takes 70% of total K-12 student populations of China • Lack of quality teachers in lower tier cities leads to demand for online AST providing quality teachers • Lower competition due to low penetration rate by offline AST players Note: Tier-1 includes 4 cities, Tier-2 includes 45 cities; 3 Source: NBS, CEIC, Goldman Sachs Research

OneSmart online positioning: Focus on premium services to provide more effective learning experience and outcome Offline Business Online Business Differentiated Segment OneSmart Online Focused on premium online 1on1 NYSE: ONE  Premium sector grows much faster than  Effectiveness ensured by high Premium overall market: 16% vs. 9% (2018-2022F engagements, tailor-made programs CAGR) and AI powered smart teaching Market  Premium 1on1 provides most effective  Suitable for younger students vs. learning: OneSmart high school admission online big classes suitable for self • K-12 premium 1on1 rates 94% vs. 50% China average driven older students • Small group young  Target score improvement demand due to  OMO model integrated with offline children education entrance exam competition vs. regular operations, to ensure services quality advanced learning demand by big class player and manage customer acquisition cost Mass to high-end Online big class players market Online recorded class players • Class format NYSE: EDU NYSE: TAL • Lower price Note: Premium market 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 Source : Frost & Sullivan: China’s K -12 After-School Tutoring Market Study 4

OneSmart online products designed for incremental demand, helps expand into areas where offline centers cannot yet cover Customer Demand Served by OneSmart Online Customer Types OneSmart Online Existing Customer New Customer More frequency Same city but long 1. Weekday online classes while also save distance from commute time: • Weekday online classes offered to 希望加频的同时 OneSmart center: Convenience all existing offline students for 希望节约往返校区的时间 convenience and higher frequency Weekday online OMO model of study courses Customer Needs 2. OneSmart OMO model Better teacher • Convenient for students at long For high school distance to our centers or students Better students* / prefer online education Teacher • Choices for higher quality teachers OMO model located in the largest cities of China * Online education suitable for high school students because: Lower tier city students demand for higher quality teachers often gathered in the largest cities of 1. China such as Beijing and Shanghai College entrance exam is more standardized countrywide in China; 2. 5 Students more self driven thus more concentrated when doing online classes 3.

Online offerings provide a much larger addressable market OneSmart Business Line / City Tier Matrix Growth Strategy Positioning OneSmart Offline Business Higher • Upgrade to more premium Elite products to drive incremental growth Tier 1 & 15 Largest • Growth strategy is to scale up the top 20 cites Tier 2 Cities to achieve city level operations efficiency and OneSmart Offline economy of scale & Weekday Online • Incremental growth and margin expansion driven by ramp-up of the 237 centers opened Tier 2 Cities in FY18 & FY19 OneSmart Offline & Online OMO OneSmart Online Tier 3 Cities • Expand our offerings to cover students OneSmart located far from our currently limited center Online OMO network in tier 2 cities • Possibility to enter tier 3 or even lower tier cities where we have not entered yet City Tier Lower Higher Note: Tier-1 includes 4 cities, Tier-2 includes 45 cities 6

OneSmart OMO model: integrated with offline business and offers supplementary and compelling value proposition OneSmart OMO Model Customer Offline Center acquisition Student Show-room Consultancy Assessment Offline and Online integrated OneSmart APP Teaching & Online Platform Services Teaching Feedback & Services Supplementary to offline business to capture larger market demand Customer Demand Products Economics Proven unit economics (Per 1on1 format and typically OneSmart Prefer effectiveness of onsite Student OP Margin >25%) and focused on one or two Offline Model 1on1 tutoring margin expansion driven by new subjects center ramp-up 1. Unit economics comparable to 1. Time and convenience 1. Offerings of more subjects offline model OneSmart 2. No limitation on distance 2. 1on1 and group formats 2. Some discounts to offline pricing, 3. Cover more lower tier cities 3. Choices of shorter term OMO Model offset by rental savings, 4. Choices of high quality teacher packages efficiency & low acquisition cost 7

OneSmart product map: matched offline and online products across our three major business lines OneSmart Product Map Offline Businesses OneSmart Online Weekday Online OMO Model Classes 1on1 Online classes OneSmart VIP for K-12 tutoring OneSmart Online 1on1 OneSmart Online 1on1 1on1 K-12 tutoring for High School for Middle School Online small group classes for HappyMath HappyMath Online Small Group Class for students Young Children Math Primary School & Kindergarten Online 1on1 or small FasTrack group classes for FasTrack English English students Kids English 8

Our past investments in online sector helped faster development of OneSmart Online products and technologies OneSmart Online Strategic Investments in Online Education 2015 - 2019 2018 --  One of the leading premium and best  Launched in early 2018 rated online 1on1 platforms based on 1 Yimi  Weekday product offered customer rating and renewal Online  100% full time teachers Weekday Online 1on1 to existing offline students Tutoring  OneSmart invested in 2015 and add-  Interactive and AI powered on investment in 2018 OneSmart Online’s OMO model 2  Business model tested since the beginning  Online kids English by native speaking teachers of 2019  OneSmart invested in 2016  Rolled out to more than 10 cities currently Cooperation with Yimi Online Tutoring 3  Online young children math  Yimi has industry leading AI algorism in  OneSmart invested in 2017 developing online 1on1 tutoring programs, with 5 years’ dedicated innovation  OneSmart and Yimi co-tested its OMO model since Jan 2019 and validated unit  Online kids books, teaching and tools economics  OneSmart invested in 2019 9

Offline operations update: Continue to achieve satisfactory ramp-up performance for newly opened centers Historical Ramp-up Record (Updated to FY20 Q1) 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) 45% 61% 62% 1. and Scale … Accomplished Op Margin (1) (2) (31%) 24% 33%  Including all OneSmart VIP learning centers opened during FY16Q2-FY19Q1 in Ramp up Newly Opened 2. Shanghai  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 75% >1 Year (<2) >2 Years (<3) > 3 Years of total company revenue in FY20Q1; Gross Margin (2) 43% 58% 56%  For centers opened in FY16Q1 or earlier, Op Margin (1) during prior 12 months are: Op Margin (1) (2) (18%) 22% 19% － 42% for those in Shanghai;  Including all OneSmart VIP learning centers opened during FY16Q2-FY19Q1 in － 27% for those in top 10 cities outside top 10 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 their margin numbers for performance during the first year of operations; similarly, for those over 2 10 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

Section 2 Financial Highlights