OneSmart International Education Group Limited Investor Presentation - - PowerPoint PPT Presentation

May 2018

OneSmart International Education Group Limited Investor Presentation

2

Disclaimer

This press release contains forward-looking statements made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. OneSmart may also make written or oral forward- looking statements in its reports filed with or furnished to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Any statements that are not historical facts, including statements about OneSmart's beliefs and expectations, are forward-looking statements that involve factors, risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Such factors and risks include, but not limited to the following: OneSmart's goals and strategies; its future business development, financial condition and results of operations; its ability to continue to penetrate premium K-12 after-school education services market; diversify and enrich our education offerings; enhance the development and management of our teacher team and teaching materials; competition in our industry in China; its ability to maintain and expand online education presence; relevant government policies and regulations relating to the corporate structure, business and industry; and its ability to protect our students’ information and adequately address privacy concerns . Further information regarding these and other risks, uncertainties or factors is included in the Company's filings with the U.S. Securities and Exchange Commission. All information provided in this press release is current as of the date of the press release, and OneSmart does not undertake any obligation to update such information, except as required under applicable law.

Section 1

Company Overview

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Who We Are – Mission, Vision and Values

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

• 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’’
• utside of home and school

Our Vision

• CEIT:
• Customer Focus
• Execution
• Innovation
• Teamwork

Our Values

5

Who We Are - Largest Premium K-12 Education Service 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 February 28, 2018 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 fiscal quarter ended February 28, 2018 7. Fiscal year ended August 31

Well-recognized brand with 273

study centers covering 41 cities in China(3)

Dominant 2017 market share of 26.3%(4) in Shanghai’s premium K-12

after-school education market

102,613 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 Shanghai(2)

5,044

full-time teachers(3)

RMB2.1Bn

revenue in FY2017(7) with

37.4% 3-year CAGR

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Premium Tutoring Services

1-on-1, 1-on-3 3rd–12th Grade

Premium Young Children Education Services

1-on-8 Kindergarten – Primary School

Language and Culture Programs New Program Initiatives

OneSmart Online OneSmart Class OneSmart Elite English OneSmart Overseas Language Training OneSmart Study Camp HappyMath

Largest Premium K-12 After-school Education Service Provider in China(1) Largest Young Children Mathematics Education Service Provider in Shanghai (2)

OneSmart VIP

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

also covers Chinese and STEM education

What We Do

FasTrack English

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Our Key Milestones

2008 2018

Launched Our UPC System(1) Opened Our First Study

Center in Shanghai

Opened Our First Study

Center Outside Shanghai

Launched

HappyMath Program

Number of Study Centers Surpassed 100 Launched 1-on-3 Programs

273 Study Centers in 46 Cities in China(2)

Listed on NYSE on March 28, 2018

2009 2012 2014 2016

U.S. Secretary of Education

• Dr. John B. King Jr.

visited OneSmart

Notes 1. Unique Personalized Coach, an operational management system that enables us to build a set of robust operational and management information solutions that integrate and unify our operations and improve the efficiency of how we expand and operate our study center network 2. As of February 28, 2018

2013

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Company Highlights

Leader in premium K-12 after-school education services market with established brands Significant expertise in teaching staff management and curriculum development brings R&D economy of scale Customized and comprehensive learning experience powered by innovation Robust teaching and operation system supported by our standardized technology platform Comprehensive suite of service offerings that significantly extend life time value of customers for margin expansion Experienced management team with proven track records

6 1 3 4 2 5

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Core Operation Strategies

Our future core operation strategies will focus on customer satisfaction, profitable growth and diversification of our business

• Strengthen our

technologies and in-house teaching capabilities

• Expand our online education presence
• Enrich our

education program offerings

Profitable Growth Diversification

1

Customer Satisfaction

• Continue to

penetrate premium K-12 tutoring market

• Enhance the

development and management of our teacher team and teaching materials

2 3

• Pursue selective strategic

investments and acquisitions to further build ecosystem

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1 3 4 2

Expand more subjects taken by each student and maximize student life-time revenue

 Start offering Chinese, science, and computer programming subjects at HappyMath centers  Cross-selling among Happymath and FasTrack English students

Manage geographic expansion profitably

 Further penetrate into top cities that we operate to achieve higher marketing and G&A efficiency

and ensure early ramp-up of new learning centers

 Selectively enter into new cities with great market potential

Enrich product and service offerings

 Successfully acquired FasTrack English in Jan 2018  Launched OneSmart Class and OneSmart Online programs

Continuous margin expansion opportunity through better product mix

 Higher revenue contribution from 1 on 3 premium tutoring services and 1 on 8 young children education

programs

Roadmap to Revenue Growth and Margin Expansion

Section 2

Key Highlights for Second Fiscal Quarter of 2018

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 Net revenues increased by 34.1%  Net income attributable to OneSmart increased by 107.3%  Monthly average student enrollments increased by 38.4%  Net revenues from premium young children education services

increased by 82.1%

 Operating profit margin increased by 330 bps  Prepayments from customers increased by 44.0%

Key Highlights for Second Fiscal Quarter of 2018

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Sources Frost & Sullivan, Company

1 Customer Satisfaction – Tremendous Achievements Accomplished by Us and Our Students

Notes 1. Classes of 2017 2. Out of more than 27,000 interviewees who responded to questionnaires to parents of students attending OneSmart VIP programs 3. 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 4. Quarterly student retention rates for fiscal years ended August 31, 2015, 2016, 2017 and three months ended February 28, 2018 5. Out of more than 400 interviewees who responded to questionnaires to parents of students attending HappyMath programs

40%

China avg.

91%

vs.

University Admission Rate(1)

90%

vs. 57%

China avg.

45%

vs. 8%

Shanghai avg.

Students’ Success in School Admission and Exams Yielding High Satisfaction Rate

91%

Parents are Satisfied to Our Teaching Service(2)

74%

Students Making Progress under Our Program(2)

40%

Parents of Students Taking HappyMath Gave Full Satisfaction Score(5)

Highest average hourly

tuition fee rate among peers

Exceptional quarterly retention

rate maintained at ~80% (4)

High average monthly student

enrollment(3) growth at

~37.3% 3-year CAGR

41 56 77 FY15 FY16 FY17 ‘000

Exceptional Operational and Business Results

High School Admission Rate(1) Admission to Top 10 Private Primary Schools(1)

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Designed Classroom

a a

OneSmart App PLI Analysis Customized Teaching Methods Integrated Offline-to-Online Services Well-trained Teachers

1 Customer Satisfaction – Integrated Offline-to-Online Services Supported by Powerful Technology Platform

iOneSmart + iHappyMath Offline Study Centers Student

• Communication channel with teachers
• Real-time study progress tracking
• Class scheduling and lesson

management

• Access personal records
• Track performance in real-time
• Communication channel

with teachers

• Teaching notes

Parents

• Customized student records
• Live interaction with students

and parents outside of class

Teacher

• Personalized mentoring
• Connects parents and

teachers to create the best study plans for students

Study Advisor

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1 Customer Satisfaction – Deployment of Latest Education Technology

ALTS

Knowledge Mapping Resource Database Adaptive Learning Socialized Feedback Data Mining

• In December 2017, we launched iOneSmart Study Master version 10.0 applications to

incorporate the latest application of Adaptive Learning Through Socialization (ALTS) and data analytic technology to fine-tune our personalized aptitude assessment, personalized teaching plan and visualized learning progress reports.

• We upgraded approximately 20% of our OneSmart VIP and HappyMath classrooms with up-to-date

hardware and software during the second fiscal quarter of 2018

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2 Profitable Growth –Roadmap to Revenue Growth and Margin Expansion

1 3 4 2

Expand more subjects taken by each student and maximize student life-time revenue

 Start offering Chinese, science, and computer programming subjects at HappyMath centers，

approximately 3,000 student enrollments in Chinese subject in Feb 2018 Manage geographic expansion profitably

 Further penetrate into top cities that we operate to achieve higher marketing and G&A efficiency

and ensure early ramp-up of new learning centers – new study centers opened in mature and sub- mature markets accounted for over 80% of total new centers

 Over 50% YOY growth in Student Enrollments in 10 key second tier cities including Chengdu,

Suzhou, Xiamen, Chongqing, Changsha, Kunming, Fuzhou, Shenyang, Dalian and Tianjin during the second quarter of 2018 Enrich product and service offerings

 Successfully acquired FasTrack English in Jan 2018  Launched OneSmart Class and OneSmart Online programs

Continuous margin expansion opportunity through better product mix

 Higher revenue contribution from 1 on 3 premium tutoring services and 1 on 8 young children education

programs – 1 on 3 program as a percentage of total revenue increased to 16.4% from 12.1%

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3 Diversification – Acquisition of FasTrack English

Unique and Effective Curriculum: PIER 3 Comprehensive Courses with Targeted Milestones

Professional and systematic curriculum that stimulates learning interest Internationally recognized vocabulary recognition and pronunciation teaching system Cultivate ability to create connections among w ords and sentences Incorporates English on- stage speaking element Curriculum supplemented w ith American teaching materials The only study platform combining

• nline and offline elements nationw ide

Basic Intermediate Advanced

Positive Innovative English Reinforcement

Classes completely taught in English, focused on helping children develop the ability to think

intuitively in English through massive amounts of

listening and speaking practice Focused on teaching basic grammar, and helping children develop the ability to build sentences and

independently create basic written pieces

Focused on cultivating advanced reading

comprehension, systematic essay-writing,

and fluid English communication abilities

Rated as the “Most Influential Children Education Institution” in China by numerous education- focused media outlets One of top 20 most valuable foreign language education brands

Highly reputable English education institution for children from ages 3 to 12

Tremendous cross- selling opportunity between FasTrack English and HappyMath 15 study centers in 2 cities with 5,935 student enrollments as of Feb 28, 2018

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3 Diversification – Strategic Investment in Yimi Online Tutoring

450 1,645 Q1 2017 Q1 2018 7 45 Q1 2017 Q1 2018 4 20 Q1 2017 Q1 2018

+266% Growth +512% Growth +370% Growth

 Initial investment in 2015, subsequent

investment together with Blue Lake Capital in 2018

 A leading online platform that focuses

• n 1v1 or 1v6 live after school tutoring

courses



100% Full Time teachers



Latest round of valuation: USD 80 Million Monthly Average New Enrollments Gross Billing

RMB MM

Revenue

RMB MM

Section 3

Financial Highlights

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49 89 87 160 FQ2 2017 FQ2 2018 H1 2017 H2 2018 432 562 712 921 FQ2 2017 FQ2 2018 H1 2017 H1 2018 Net Revenues(1) Premium K-12 Tutoring – Net Revenues(1)

Strong Momentum in Both Top and Bottom Lines

RMB MM

Notes 1. Fiscal years ended August 31 and fiscal second quarters ended February 28

RMB MM

Premium Young Children – Net Revenues(1)

+100.1% RMB MM +82.1% Growth +32.5% CAGR +30.0% Growth CAGR

1,089 1,529 2,058 FY2015 FY2016 FY2017 495 663 821 1,10 5 FQ2 2017 FQ2 2018 H1 2017 H1 2018

+34.1% Growth

1,026 1,383 1,801 FY2015 FY2016 FY2017 53 113 212 FY2015 FY2016 FY2017

+37.4% CAGR Growth +34.5% +29.3% Growth +82.6% Growth

Strong Top-line Growth Momentum in Both Premium K-12 Tutoring and Premium Young Children Education

21 2,689,402 3,520,199 4,595,153 5,978,545

FQ2 2017 FQ2 2018 H1 2017 H1 2018

5,925,465 8,554,178 11,212,190

FY2015 FY2016 FY2017

Scaling-up in Various Metrics

40,743 56,019 76,841

FY2015 FY2016 FY2017

74,159 102,61 3 68,008 96,746

FQ2 2017 FQ2 2018 H1 2017 H1 2018

+37.3% CAGR +38.4% Growth Growth

+42.3%

Average Monthly Enrollments(1)

+37.6% CAGR +30.9% Growth

Consumed Class Units(1) 6,570 7,486 8,711 8,229 10,142 FY2015 FY2016 FY2017 FQ2 2017 FQ2 2018

+23.2% Growth

Number of Classrooms(1)

+15.2% CAGR

Notes 1. Fiscal years ended August 31 and fiscal second quarters ended February 28

+30.1% Growth

Number of Study Centers(1) 98 117 153 138 193 15 27 34 31 56 15 4 6 8 7 9 FY2015 FY2016 FY2017 FQ2 2017 FQ2 2018 OneSmart VIP Happymath FasTrack Others

+29.1% CAGR +55.1% Growth

117 150 195 176 273

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30.8% 29.8% 31.9% 31.1%

9.4% 10.4% 10.2% 11.2% 2.2% 3.3% 2.6% 3.5% 6.7% 6.4% 6.8% 7.0%

FQ2 2017 FQ2 2018 H1 2017 H1 2018

32.5% 31.7% 31.1% 11.1% 8.4% 9.1% 4.2% 2.9% 2.6% 5.5% 4.8% 5.9%

FY2015 FY2016 FY2017 Gross Profit and Gross Margin(1) Cost Structure(1)

High Gross Margin and Clear Cost Structure

RMB MM

Notes 1. Fiscal years ended August 31 and fiscal second quarters ended February 28

46.7% 52.2% 51.3%

50.9% 50.1%

53.3% 47.8% 48.7% 49.1% 49.9%

509 799 1,055 FY2015 FY2016 FY2017 252 332 398 521 FQ2 2017 FQ2 2018 H1 2017 H1 2018

Staff costs Rental costs Depreciation and amortization Other costs 48.5% 47.2%

51.5% 52.8%

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Non-GAAP Selling & Marketing Expenses as % of Revenues(1)(2) Non-GAAP General & Administrative Expenses as % of Revenues(1)(2)

Efficient Management Leads to Lower and Stabilizing Expenses

Notes 1. Fiscal years ended August 31 and fiscal second quarters ended February 28 2. Excluding share based compensati on expenses

22.9% 19.5% 18.6% 16.1% 17.4% 22.4% 17.0% 17.9% 18.5% 18.2% RMB MM RMB MM

244 261 368 FY2015 FY2016 FY2017 113 129 183 236 FQ2 2017 FQ2 2018 H1 2017 H1 2018 202 247 357 FY2015 FY2016 FY2017 91 121 158 214 FQ2 2017 FQ2 2018 H1 2017 H1 2018

22.2% 21.3% 19.2% 19.4%

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Robust Income and Healthy Margin

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

RMB MM RMB MM RMB MM RMB MM

Notes 1. Fiscal years ended August 31 and fiscal second quarters ended February 2. Net income attributable to OneSmart

5.8% 19.1% 16.0% 9.6% 12.4%

63 234 305 FY2015 FY2016 FY2017 47 82 58 71 FQ2 2017 FQ2 2018 H1 2017 H1 2018

7.0% 6.5% 5.8%

56 189 259 FY2015 FY2016 FY2017

15.3% 14.8% 8.5% 11.8% 5.7% 5.6%

63 291 330 FY2015 FY2016 FY2017

5.1% 12.4% 12.6% 7.5% 11.7% 5.0% 9.5%

56 247 284 FY2015 FY2016 FY2017

5.1% 16.1% 13.8% 8.6% 12.3% 6.3% 10.4%

42 78 47 62 FQ2 2017 FQ2 2018 H1 2017 H1 2018 37 77 41 105 FQ2 2017 FQ2 2018 H1 2017 H1 2018 43 81 52 115 FQ2 2017 FQ2 2018 H1 2017 H1 2018

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47 84 173 FY2015 FY2016 FY2017

Robust Cash Flows and Healthy Balance Sheet with Low Capex Requirements

Operating Cash Flows(1) Capex and Capex as a % of net revenues(1) Prepayments from Customers(1) Cash and Cash Equivalents and Short-term Investments(1)

RMB MM RMB MM RMB MM RMB MM

Notes 1. Fiscal years ended August 31 and fiscal second quarters ended February

4.3% 5.5% 8.4% 16.2% 13.2%

396 614 773 FY2015 FY2016 FY2017 156 51 256 336 FQ2 2017 FQ2 2018 H1 2017 H1 2018 80 88 97 114 FQ2 2017 FQ2 2018 H1 2017 H1 2018 742 1,053 1,531 1,793 FY2015 FY2016 FY2017 FQ2 2018 516 1,010 1,396 1,115 FY2015 FY2016 FY2017 FQ2 2018

11.8% 10.4%

Thank You