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

July 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

4

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 May 31, 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 May 31, 2018

7.

Fiscal year ended August 31

Well-recognized brand with 302

study centers covering 43 cities in China(3)

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

after-school education market

124,892 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)

5,629

full-time teachers(3)

RMB2.1Bn

revenue in FY2017(7) with

37.4% 3-year CAGR

6

Premium Tutoring Services

1-on-1, 1-on-3 3rd–12th Grade

Kids Math

1-on-8 1-on-14

Language and Culture Programs New Program Initiatives

OneSmart Online OneSmart Class OneSmart Overseas Language Training OneSmart Overseas Study Consultation OneSmart Study Camp HappyMath 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

Kids English #1 premium K-12 after-school tutoring

service provider in China 3 to 8 Years Old

#1 young children mathematics

education service provider in Shanghai 3 to 8 Years Old Kids English with a focus on STEM English

7

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

302 Study Centers in 43 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 May 31, 2018

2013

8

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

9

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

10

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 Third Fiscal Quarter of 2018

12

Monthly Average Student Enrollments1 Increased by 44.7% Year-

• ver-Year

Net Revenues Increased by 37.6% Year-over-Year Net Revenues from OneSmart VIP Programs increased by 29.0%

Year-over-Year

Net Revenues from HappyMath increased by 76.0% Year-over-Year New Student Enrollments of newly acquired FasTrack English

increased by 138.0% Year-over-Year

Non-GAAP Net Income Attributable to OneSmart’s Shareholders

increased by 26.7% Year-over-Year

Key Financial Highlights for Third Fiscal Quarter of 2018

13

Key Business Highlights for Third Fiscal Quarter of 2018

OneSmart VIP



Steady growth in Shanghai- Monthly average student enrollments in Shanghai increased by 26.6% year-over-

• year. OneSmart VIP in Shanghai continued to achieve a

healthy EBIT margin of above 40% during the third fiscal quarter of 2018;



Extremely strong growth in markets

• utside

Shanghai. Monthly average student enrollments increased by over

50% in 14 cities, most of which we entered during the past

two years:



Opened 19 new OneSmart VIP learning centers during the quarter;



Revenues from 1-on-3 programs increased by 62.6% year-

• ver-year;



Extended OneSmart VIP business into overseas language training, overseas consultation, and study camp programs to provide premium families one-stop shopping opportunities and further accelerate the growth. HappyMath



Revenues increased by 76.0% year-over-year to RMB90.6 million with monthly average student enrollments increased by 75.1% year-over-year to 21,178



Revenue in mature market such as Shanghai increased by

59.4% year-over-year.



Revenues in Shenzhen and Guangzhou increased by more than 50% year-over-year; revenues in Chengdu, Xiamen, Nanjing and Changsha all achieved more than 100% growth year-over-year; while revenues in Beijing and Suzhou increased by

264.5%

and

384.9%

year-over-year, respectively.



More than 4,200 students were enrolled for the Chinese subject during the third fiscal quarter of 2018.



Average subjects taken by HappyMath student were 1.22 subjects in May 2018.

14

Successful Acquisition & Integration of FasTrack English



With

• ur

“Standard Operation Perfection System” (“SOPS”), we successfully accelerated the growth of newly acquired FasTrack English business. We re- positioned it as premium kids English brand with a focus

• n STEM English, successfully opened 8 new learning

centers and managed to expand the operation into Shenzhen;



New student enrollments increased by 138.0% year-

• ver-year during the third fiscal quarter of 2018 vs

approximately 30.0% historical growth before acquisition;



The above demonstrated

• ur

strong execution capabilities to continuously integrate and manage our growth from acquired business. We will engage in more acquisitions as

• ne

major approach to further consolidate the fragmented market and accelerate our top-line growth.

Key Business Highlights for Third Fiscal Quarter of 2018 (Cont’d)

Incubation & Strategic Investment in Yimi Online



Initial investment in 2015, subsequent investment together with Blue Lake Capital in 2018



A leading online platform that focuses on 1v1 or 1v6 live after school tutoring courses



100% Full Time teachers



Latest round of valuation: USD 80 Million



For the first six-month ended June 30, 2018, gross billings and revenues increased by 523.6% and

338.6% year-over-year, respectively. Student

enrollments in June 2018 increased by 469.8% year-

• ver-year

15

Sources Frost & Sullivan, Company

Tremendous Achievements Accomplished by Us and Our Students

Notes

• 1. Classes of 2017 for university and high school admission rate, class of 2018 for admission to top 10 private primary schools
• 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.

>60%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)

Section 3

Financial Highlights

17

51 91 141 242

FQ3 2017 FQ3 2018 9M 2017 9M 2018 HappyMath 546 705 1,273 1,639 FQ3 2017 FQ3 2018 9M 2017 9M 2018

1,089 1,529 2,058

FY2015 FY2016 FY2017

+72.1% Growth

Net Revenues(1) OneSmart VIP

RMB MM

Notes

• 1. Fiscal years ended August 31 and fiscal third quarters ended May 31

RMB MM +100.1% RMB MM +76.0% Growth +33.1% CAGR +29.0% Growth CAGR

599 824 1,421 1,929

FQ3 2017 FQ3 2018 9M 2017 9M 2018

+37.6% Growth

53 113 212

FY2015 FY2016 FY2017

+37.4% CAGR Growth +35.8% +28.8% Growth

Strong Top-line Growth Momentum in Different Business Segments

26 37

FQ3 2017 FQ3 2018 9M 2017 9M 2018 FasTrack English

1,036 1,416 1,840

FY2015 FY2016 FY2017

18

2,735,998 3,425,157 6,667,587 8,267,726 387,770 627,018 1,051,334 1,691,406 154,314 225,902

FQ3 2017 FQ3 2018 9M 2017 9M 2018

3,123,768 7,718,921 10,185,034 4,206,489

102 123 161 163 220 15 27 34 33 60 22 FY2015 FY2016 FY2017 FQ3 2017 FQ3 2018 OneSmart VIP Happymath FasTrack 196 6,570 7,486 8,711 8,218 10,840 FY2015 FY2016 FY2017 FQ3 2017 FQ3 2018

Scaling-up in Various Metrics

36,946 48,153 63,295 3,797 7,867 13,545

FY2015 FY2016 FY2017

76,841

74,235 96,810 62,756 84,781 12,094 21,178 11,359 17,445 6,904 6,633

FQ3 2017 FQ3 2018 9M 2017 9M 2018

86,329 74,115 108,858 +37.3% CAGR Growth +46.9%

Average Monthly Enrollments(1) Consumed Class Units(1) Number of Classrooms(1)

+15.2% CAGR

Notes

• 1. Fiscal years ended August 31 and fiscal third quarters ended May 31

Number of Study Centers(1)

+29.1% CAGR +54.1% Growth

117 150 195 302

+44.7% Growth +31.9% Growth 40,743 56,019 124,892

5,461,538 7,618,276 9,611,332 463,927 935,902 1,600,858

FY2015 FY2016 FY2017

11,212,290 5,925,465 8,554,178 +37.6%

CAGR OneSmart VIP Happy Math FasTrack English OneSmart VIP Happy Math FasTrack English

+34.7% Growth +31.9% Growth

19

Gross Profit and Gross Margin(1)

High Gross Margin

RMB MM

Notes

• 1. Fiscal years ended August 31 and fiscal third quarters ended May 31

46.7% 52.2% 51.3%

55.7% 55.3%

487 735 939 22 63 120 FY2015 FY2016 FY2017 304 396 647 832 28 51 82 136 FQ3 2017 FQ3 2018 9M 2017 9M 2018

Happy Math

51.5% 50.7%

FY 2015 FY 2016 FY 2017 FQ3 2017 FQ3 2018 9M 2017 9M 2018 Premium Tutoring

47.0% 51.9% 51.0% 55.7% 56.2% 50.8% 50.8%

Happy Math

41.8% 56.3% 56.7% 54.6% 56.0% 58.2% 56.1%

FasTrack English

NA NA NA NA 38.3% NA 32.9%

Overall Gross Margin

46.7% 52.2% 51.3% 55.7% 55.3% 51.5% 50.7%

Gross Margin

OneSmart VIP FasTrack English Others

20

29.3% 28.2% 30.8% 29.9%

7.9% 9.0% 9.2% 10.3% 2.2% 3.1% 2.5% 3.3% 4.9% 4.4% 6.0% 5.9%

FQ3 2017 FQ3 2018 9M 2017 9M 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

Clear Cost Structure

Notes

• 1. Fiscal years ended August 31 and fiscal third quarters ended May 31

53.3% 47.8% 48.7% 44.3% 44.7%

Staff costs Rental costs Depreciation and amortization Other costs

48.5% 49.3%

21

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 third quarters ended May 31
• 2. Excluding share based compensation expenses

13.6% 19.3% 18.6% 16.1% 17.4% 22.4% 17.0% 17.9% 15.4% 15.8% RMB MM RMB MM

244 261 368 50 100 150 200 250 300 350 400 FY2015 FY2016 FY2017 82 159 264 395 FQ3 2017 FQ3 2018 9M 2017 9M 2018 202 247 357 FY2015 FY2016 FY2017 92 130 250 344 FQ3 2017 FQ3 2018 9M 2017 9M 2018

18.6% 20.5% 17.6% 17.8%

22

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 third quarters ended May 31
• 2. Net income attributable to OneSmart

5.8% 19.1% 16.0% 26.7% 20.2%

63 234 305 FY2015 FY2016 FY2017 160 167 218 238 FQ3 2017 FQ3 2018 9M 2017 9M 2018

15.3% 12.3% 5.8%

56 189 259 FY2015 FY2016 FY2017

15.3% 14.8% 24.9% 6.9% 13.8% 6.1%

63 291 330 FY2015 FY2016 FY2017

5.1% 12.4% 12.6% 20.4% 7.1% 11.5% 8.5%

56 247 284 FY2015 FY2016 FY2017

5.1% 16.1% 13.8% 22.2% 20.4% 13.0% 14.7%

149 57 196 118 FQ3 2017 FQ3 2018 9M 2017 9M 2018 122 58 163 163 FQ3 2017 FQ3 2018 9M 2017 9M 2018 133 169 185 283 FQ3 2017 FQ3 2018 9M 2017 9M 2018

23

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 third quarters ended May 31

4.3% 5.5% 8.4% 6.3% 7.6%

396 614 773 FY2015 FY2016 FY2017 234 323 490 659 FQ3 2017 FQ3 2018 9M 2017 9M 2018 38 63 134 177 FQ3 2017 FQ3 2018 9M 2017 9M 2018 742 1,053 1,531 1,966 FY2015 FY2016 FY2017 FQ3 2018 516 1,010 1,396 2,354 FY2015 FY2016 FY2017 FQ3 2018

9.5% 9.2%

Thank You