FY20 Q2 Results Presentation May 2020 Section 1 Business Updates - - PowerPoint PPT Presentation

May 2020

OneSmart International Education Group Limited FY20 Q2 Results Presentation

Section 1

Business Updates

3

Strong company response and results under the unprecedented COVID-19 pandemic situation

Strong Company Response Unprecedented Impact

 All of our learnings centers

have been temporarily closed since January 2020

 All public schools in China

have also been temporarily closed without reopen schedule being provided

 All classes and customer

acquisitions conducted through our online platform during the last few months

 All employees have been

working from home till late April 2020

 Majority of existing students were

successfully migrated online within just a couple of weeks since the outbreak (without price discount incentive)

 Our online platform has been

serving approx. 160,000 student enrollments since February 2020, a massive increase from just a few thousands in late 2019

 Customer satisfaction rate on

• nline platform remained 90%+,

resulting in low refund rates (2.3% in February) and high renewal rates

 Company Q2 revenue retained at

the level of same period last year The speed, scale and results prove

• ur strong ability

to strategically manage and

• perate a premium
• nline business

4

Impact is expected to be one-off and has a swift pattern

Premium K-12 1on1 Business Impact Assessment Enrollments* Trend Young Children Education Businesses



A swift drop in an environment when the public schools are closed and there is massive supply of free or low priced online classes



Temporally challenging for us to deliver the distinguished value of our premium education services when students stay at home and the score improvement demand is not as urgent



The demand is expected to return in a fast fashion as schedules of most schools reopen and all entrance exams in China are now fixed



Our young children education businesses may have a slightly longer period of impact as kindergartens and some primary schools will reopen a few months after other public schools, according to government policy



Expect Shanghai kindergartens to open soon



Revamped products and online acquisition practices to handle the change

60 70 80 90 100 110 120

Jan Feb Mar Apr Mid-May

千

Monthly Average Enrollments (‘000) 30 40 50 60

Jan Feb Mar Apr Mid-May

Monthly Average Enrollments (‘000)

As of May 15, 2020, 54 of our VIP centers have reopened under government permission. We expect that number to increase over the next few months

* Enrollments data exclude Huaying and pure online businesses

2020 2020 Pandemic, online only Learning Centers + Online Pandemic, online only

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Penetrating markets in various provincial capitals and regional center cities with localized teaching and academic research methods Technology development including CTS (Cloud Teaching System) 6.0: over 12 years experience on middle/back-end platform technology/data/content OMO triple teachers (cloud teacher, cloud study keeper and cloud advisor) ensures high quality teacher, high quality learning experience and high quality services Comprehensive product mix including big class, small group class and 1-on-1 creates synergies and extend customer lifetime value

精锐在线的目标 —— 中国最大的中高端在线学习平台

Its OMO Model Effectively Reduces Cost of Acquisitions, Improves Customer Loyalty and Provide Localized Curriculum Development

Offline acquisition of customer through Learning Centers and AI centers; Multiple online marketing channels as well as Private traffic pool

OneSmart Online, the leading online premium education platform in China, is built on distinguished competitive advantages

6

• We will focus on offline learning centers in top

10 cities where services is emphasized and OneSmart Online will serve as complementary offerings to meet the needs of cost-efficient demand and convenience

• OneSmart Online will serve as main growth

driver to rapidly gain market share in tier 2 and tier 3 cities through AI cloud centers, multiple online marketing channels and private traffic pool.

• Online class delivery：cloud teacher + cloud

study keeper + AI data driven

一线城市

Incremental Driver in Top 10 Cities and Main Growth Driver in Tier 2 & 3 Cities Student Enrollments Increased by 370% Over Three Months

3,628 13,288 5,000 10,000 15,000 2020.2 2020.5

Pure Online Student Enrollments (Excluding promotion classes)

OneSmart Online is delivering strong momentum in customer acquisitions

7

OMO获客及私域流量运营

AI Cloud Center

Private Traffic Pool

Traffic Gathering and Referral

User Referral Subscription account, personal account, mini program, APP Platform operation, social community referral, cross-sell from CRM

Traffic from Both Online and Offline Channels OneSmart Online APP Online Teaching and Services

Acquisition cost is well managed thanks to our OMO model and private traffic pool built previously

8

在线产品持续升级

OneSmart Online 1-1 Triple teachers

Fulltime teachers, localized teaching and development platform, personalized teaching

 Smart Online Teaching and Development Platform  Smart Online Teaching Preparation Platform  Live Broadcasting Cloud Classroom － Six steps teaching method － Interactive teaching － Data collection  Smart Administration System  Smart Service System

Active tracking and feedbacks, study clubs/ seminars, family education cloud courses

 CRM  Smart Assessment System

Customized teaching program, personalized academic planning, intelligent matching with cloud teachers

 APP Technology + Content － “Zero distance” between home and school － Smart error track book － Student performance track

Classes are delivered on our latest advanced version of online teaching system: CTS 6.0

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VIP

OMO

Operation Support

Marketing Center Customer Center CRM Marketing, UPC Operation, LMS Teaching, IMES Assessment Teaching & Research Center Big Data Computing Data Service User Profile Happy Math FasTrack English Online Young Children Education Online Middle School International Education Trading Center Service Center Teaching Center Assessment Center Live broadcasting Center

Customer Satisfaction Center

Data Visualization

Front-end Business

Online Offline

Data Center

Business Middle-end Platform Data Middle-end Platform

System Monitor Cyber Monitor Security CI/CD Back-end Middle-end Front-end Support Support

AI

Voice Recognition NLP Image Recognition Text Analysis

BigData

Spark Hadoop/Hbase/Hive Kyligence Flink/Storm

Cloud

Micro- service K8S/Docker/ELK Cache MQ/RDS/CDN

OneSmart System Structure

Technical Support

OneSmart Online is built on solid foundation of middle and back-end Data, Content & Technology

Section 2

Financial Highlights

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Key highlights for the second fiscal quarter of FY20



Retained the vast majority of revenue yoy, by converting students online



Serving approx. 160,000 enrollments online since the outbreak of COVID-19



OneSmart Online is well-positioned to generate incremental growth

• 1. Revenue
• 2. Margin



Business gradually returns to normal level starting May 2020 as public schools and our learning centers started to reopen, and entrance exams are fixed in July 2020; OneSmart Online drives strong incremental growth

• 3. Outlook

Key Highlights



GPM pressure mainly due to one-off revenue drop due to COVID-19 impact, coupled with previous quarter’s added teacher cost to improve online offerings, and increased rental costs to comply with new regulatory requirements



OPM pressure due to 1) one-off revenue drop; 2) increased R&D spending



Expect margin will start to expand in FY21

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117 117 224 231 FQ2 2019 FQ2 2020 H1 2019 H1 2020 747 685 1,233 1,286 FQ2 2019 FQ2 2020 H1 2019H1 2020

HappyMath

2,058 2,863 3,994

FY2017 FY2018 FY2019

Net Revenues OneSmart VIP

RMB MM RMB MM +55.7% RMB MM +31.2% CAGR CAGR 943 886 1,589 1,683 FQ2 2019FQ2 2020 H1 2019 H1 2020 +5.9% Growth

• 6.0%

Growth 212 359 FY2017 FY2018 FY2019 +39.3% CAGR

Top-line growth in the three business segments

FasTrack English

1,840 2,416 FY2017 FY2018 FY2019 73 192 FY2017 FY2018 FY2019 RMB MM 39 51 71 100 FQ2 2019 FQ2 2020 H1 2019 H1 2020 +30.2% Growth Fiscal years ended August 31 and fiscal quarters ended February 3,168 514 +4.3%

Growth

+3.1% Growth +40.9% Growth

• 8.4%

Growth

• 0.6%

Growth

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3,603

3,351 6,104 6,327 770 875 1,496 1,701 321 341 583 717 391 330 391 678

FQ2 2019 FQ2 2020 H1 2019 H1 2020

8,711 11,744 13,312 12,991 13,316

FY2017 FY2018 FY2019 FQ2 2019 FQ2 2020

Operating metrics

+43.6% CAGR

Average Monthly Enrollments Consumed Class Units Number of Classrooms

+23.6% CAGR

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

OneSmart VIP Happy Math FasTrack English Others

OneSmart VIP Happy Math

FasTrack English

Others +8.3% Growth +40.7% CAGR (in thousand)

433

ASP

RMB per class unit

• 2.4%

Growth

• 1.5%

Growth

• 12.5%

Growth

Note 1.The decrease of ASP of HappyMath is mainly due to 1) the fact that we entered into more cities outside Shanghai in which we adopted lower pricing policies; 2) launch of short term promotional classes as a new marketing campaign

Company Happy Math VIP 5,084 8,574 +2.5% Growth

185 181 207 204 152 133 123 150

FQ2 2019 FQ2 2020 FQ2 2019 FQ2 2020 FQ2 2019 FQ2 2020 FQ2 2019 FQ2 2020

63,295 85,830 99,226 13,545 18,884 27,024 7,431 15,934

16,162

FY 2017 FY 2018 FY 2019 112,145 76,841

97,253 105,251 90,892 101,473 26,009 27,530 25,906 27,749 17,033 22,961 15,104 21,734

15,876 13,426 17,377 14169

FQ2 2019 FQ2 2020 H1 2019 H1 2020

156,171 169,168 158,346 149,279 +22.4% Growth FasTrack English +10.6% Growth 165,125 4,898 9,424 +9.9% Growth

• 3.7%

Growth

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Gross Profit and Gross Margin(1)

Gross margin

RMB MM

48.1% 51.3%

935 1,224 1,558 126 203 263 73

FY2017 FY2018 FY2019

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49.5% 45.7% FY 2017 FY 2018 FY 2019 FQ2 2019 FQ2 2020 OneSmart VIP 50.8% 50.6% 49.2% 50.2% 41.0% HappyMath 59.6% 56.5% 51.1% 57.4% 38.7% FasTrack English NA 35.5% 38.2% 30.2% 35.2% Others (101.3%) (20.9%) 22.5% 32.0% 37.0% Overall Gross Margin 51.3% 50.6% 48.1% 49.5% 40.2%

Gross Margin by Segments

50.6%

Notes

• 1. Fiscal years ended August 31 and second fiscal quarters ended February 29, 2020

 The decrease of gross margin was mainly due to one-off

revenue drop caused by the impact of COVID-19 as all of our

• ffline learning centers were temporarily shutdown as required

by the government, coupled with previous quarter’s added teacher cost to improve online offerings, and increased rental costs to comply with regulatory requirements

375 281 570 505 67 45 124 85 12 18 19 28 12 12 15 18 FQ2 2019 FQ2 2020 H1 2019 H1 2020

40.2% 37.9% OneSmart VIP Happy Math FasTrack English Others

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28.6% 34.7% 30.5% 35.8% 11.7% 14.4% 13.0% 15.1% 3.9% 5.5% 4.3% 5.5% 6.3% 5.3% 6.5% 5.8% FQ2 2019 FQ2 2020 H1 2019 H1 2020 62.1% 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

Cost structure

51.9% 48.7% 49.4%

Staff costs Rental costs Depreciation and amortization Other costs

50.5% 54.3%

Total Cost % of Net Revenue:

59.8%

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Non-GAAP Selling & Marketing Expenses as % of Revenues(1) Non-GAAP General & Administrative Expenses as % of Revenues(1)

Selling & marketing expenses, and G&A expenses

20.2% 17.4% 16.9% 20.4% 17.9% 20.6% RMB MM RMB MM

191 197 357 391

FQ2 2019 FQ2 2020 H1 2019 H1 2020 357 485 806 FY2017 FY2018 FY2019 173 178 310 351 FQ2 2019 FQ2 2020 H1 2019 H1 2020

 Q2 G&A expenses increase was mainly due to increased R&D

expenses to support development of OneSmart Online

20.3% 22.5% 18.3% 19.5% 368 588 816 FY2017 FY2018 FY2019 22.2% 23.3% 20.1% 20.8%

Notes 1.Excluding share-based compensation expenses

 The increase of Q2 marketing expenses % of revenue was

mainly due to 1) revenue drop; 2) increased % spending in

• nline channels during the pandemic situation

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102 (18) 59 (105) FQ2 2019 FQ2 2020 1H 20191H 2020 330 376 300 FY2017 FY2018 FY2019 305 229 229 FY2017 FY2018 FY2019 90 (55) 29 (169) FQ2 2019 FQ2 2020 1H 2019 1H 2020

Operating margin

Operating Income (Loss) and Operating Margin Non-GAAP Operating Income (Loss) and Operating Margin (2) Net Income (Loss) and Net Income (Loss) Margin (1) Non-GAAP Net Income (Loss) and Net Income (Loss) Margin (1) (2)

RMB MM

Notes

• 1. Net income attributable to OneSmart; 2. Excluding share-based compensation expenses

7.5% 16.0% 13.1% 5.7% 259 246 245 FY2017 FY2018 FY2019 14.8% 8.0% 6.1% 12.6% 8.6% 284 392 317 FY2017 FY2018 FY2019 7.9% 13.8% 13.7% 5.0% 65 (16) 49 (106) FQ2 2019 FQ2 2020 H1 2019 H1 2020 77 20 79 (42) FQ2 2019 FQ2 2020 H1 2019 H1 2020 6.9% 3.1% 8.2% 9.6% 1.8% 3.7% 10.9%

 The decrease of margin was mainly due to one-off revenue drop due

to the impact of COVID-19. We expect margin will return to normal level and start to expand in FY21.

• 6.2%
• 10.1%
• 2.0%
• 6.2%
• 1.8%
• 6.3%

2.3%

• 2.5%

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Operating cash, Capex and cash balance

Prepayments from Customers Cash and Cash Equivalents and Short-term Investments

RMB MM RMB MM 1,531 1,992 2,171 1,970 2,386 FY2017 FY2018 FY2019 FQ2 2019 FQ2 2020 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% 773 867 345 FY2017 FY2018 FY2019 (140) (7) (263) 7 FQ2 2019 FQ2 2020 1H 2019 1H 2020 91 68 171 158 FQ2 2019FQ2 2020 H1 2019 H1 2020 10.8% 9.6% 1,396 2,227 1,841 1,065 1,492 FY2017 FY2018 FY2019 FQ2 2019 FQ2 2020 7.7% 9.4%

Thank You