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

April 2019

OneSmart International Education Group Limited Investor Presentation

2

Disclaimer

This presentation 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 presentation is current as of the date of the presentation, 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 – Leading Diversified Premium K-12 After-school 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, 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 first fiscal quarter ended February 28, 2019

7.

Fiscal year ended August 31

Well-recognized brand with 401

study centers covering 42 cities in China(3)

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

after-school education market

156,171 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)

6,613

full-time teachers(3)

RMB2.9Bn

revenue in FY2018(7) with

36.8% 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

5

OneSmart VIP

1-on-1, 1-on-3 3rd–12th Grade

Kids Math

1-on-8 1-on-10

Newly Acquired & New Program Initiatives

OneSmart Class OneSmart International Education 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, Computer Programming and Science Education

What We Do

FasTrack English

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

service provider in China(1) 3 to 8 Years Old

#1 young children mathematics

education service provider in China(2) 3 to 8 Years Old Kids English with a focus on STEM English

OneSmart Study Camp Tianjin Huaying OneSmart Small Group Class Tus-Juren

Strategic Investments in Online Education

Yimi Online Tutoring UUabc BestMath

6

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

401 Study Centers in 42 Cities in China(2)

Listed on NYSE on March 28, 2018 Successfully acquired FasTrack English Successfully acquired Tianjin Huaying Strategically invested in Tus-Juren

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, 2019

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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Our “3T Foundation” and Core Operation Strategies

Our future core operation strategies will focus

• n 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

Teaching Innovation Touching Services Technology Integration

3T Foundation

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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 and Tianjin Huaying in Aug 2018  Strategically invested in Tus-Juren, Yimi Online Tutoring, UUABC and BestMath  Launched OneSmart Small Group Class and OneSmart Class programs

Continuous margin expansion opportunity through better product mix

 Higher revenue contribution from 1 on 8 HappyMath and 1 on 14 FasTrack English

Roadmap to Revenue Growth and Margin Expansion

Section 2

Key Highlights for Second Fiscal Quarter of 2019

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Monthly Average Student Enrollments Increased by 52.2% Year-over-

Year

Net Revenues Increased by 42.1% Year-over-Year Net Revenues from OneSmart VIP Programs increased by 30.8%

Year-over-Year

Net Revenues from HappyMath increased by 45.1% Year-over-Year Net Revenues from FasTrack English increased by 257.5% Year-over-

Year

Key Financial Highlights for Second Fiscal Quarter of 2019

12

Three Pillars to Drive the Growth

Strategic Investments & Acquisitions Online Education Core Premium K-12 Education Business

• OneSmart VIP
• HappyMath
• FasTrack English

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Core Premium K-12 Education Business

 We launched new online broadcasting program during weekdays to provide more value-added services to our students;  We continued to see strong growth momentum when we expand into existing tier II and tier III cities. Monthly average student enrollment increased by over 50% year-

• ver-year in Suzhou, Wuxi, Chengdu,

Changsha, Xi’an, Chongqing, Yancheng, Taizhou, Wenzhou, Zhuhai, Tianjin, Lanzhou, Ningbo and Shaoxing.  We opened 17 new OneSmart VIP learning centers during the quarter and will continue to further penetrate into more existing tier II and tier III cities.

 We continued to accelerate our growth in

• HappyMath. Monthly average student

enrollments increased by 57.3% year-over- year;

 We continued to see strong growth

momentum in cities outside Shanghai. Monthly average student enrollment growth exceeded 100% year-over-year in Beijing, Shenzhen and other core tier II and tier III cities including Hangzhou, Chengdu and Xiamen;

 Benefiting from customers’ increasing

demand for Chinese language training and science program, average subjects taken by each student expanded rapidly. More than

8,600 students were enrolled for the

Chinese language training classes during the second fiscal quarter of 2019;

 We opened 10 new HappyMath learning

centers during the quarter and will continue to further penetrate into more existing and new tier II and tier III cities.

 Monthly average student enrollments increased

by 162.2% year-over-year;

 We launched the online i-Makii study master

platform to enhance intelligent and interactive study assistance and to provide comprehensive visualized learning experiences to our students;

 We managed to substantially raise the

average selling price of our upgraded product and services across all centers and accordingly, gross profit margin of FasTrack English increased by approximately 10% during the second fiscal quarter of 2019; and

 We opened 7 new FasTrack English learning

centers during the quarter and will continue to further penetrate into more existing and new tier II and tier III cities. OneSmart VIP HappyMath FasTrack English

Section 3

Financial Highlights

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81 117 151 224 FQ2 2018 FQ2 2019 H1 2018 H1 2019 572 747 935 1,233 FQ2 2018FQ2 2019 H1 2018 H1 2019

HappyMath

1,529 2,058 2,863 FY2016 FY2017 FY2018

Net Revenues(1) OneSmart VIP

RMB MM

Notes

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

RMB MM +78.6% RMB MM +45.1% Growth +30.6% CAGR CAGR 663 943 1,105 1,589 FQ2 2018 FQ2 2019 H1 2018 H1 2019 +42.1% Growth 113 212 359 FY2016 FY2017 FY2018 +36.8% CAGR +30.8% Growth

Strong Top-line Growth Momentum in Different Business Segments

FasTrack English

1,416 1,840 2,416 FY2016 FY2017 FY2018 73 FY2016 FY2017 FY2018 RMB MM 39 11 71 FQ2 2018 FQ2 2019 H1 2018 H1 2019 11 +43.9% Growth +31.9% Growth +47.9% Growth +257.5% Growth +542.5% Growth

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2,843,945 3,602,652 4,797,569 6,103,863

579,666 769,846

1,084,388 1,496,293 320,678 96,588 583,096 390,929 390,929

FQ2 2018 FQ2 2019 H1 2018 H1 2019

123 157 225 201 259 27 38 66 57 88

24 15 40 14

FY2016 FY2017 FY2018 FQ2 2018 FQ2 2019

7,486 8,711 11,744 10,988 12,991

FY2016 FY2017 FY2018 FQ2 2018 FQ2 2019

Scaling-up in Various Metrics

48,153 63,295 85,830 7,867 13,545 18,884 7,431

FY2016 FY2017 FY2018 112,145 +41.5% CAGR

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

+25.3% CAGR

Number of Study Centers(1)

+44.9% CAGR

150 195 315

+52.2% Growth 56,019 76,841

7,618,276 9,611,332 12,383,864 935,902 1,600,858 2,680,033 433,160

FY2016 FY2017 FY2018 11,212,290 8,554,178 +44.4% Growth 15,497,057 156,171 5,084,105 3,520,199

401

+46.9% Growth +18.2% Growth

OneSmart VIP Happy Math FasTrack English Others OneSmart VIP Happy Math FasTrack English Others

273

OneSmart VIP Happy Math FasTrack English Others

+54.3% Growth 102,613 149,279 96,746 5,978,545 8,574,181 +43.4% Growth

Notes

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

79,584 97,253 72,794 90,892 16,532 26,009 17,455 25,906 17,033 6,497 15,104

15,876

17,377

FQ2 2018 FQ2 2019 H1 2018 H1 2019

6,497

96,588

+34.6% CARG

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289 375 437 570 47 67 85 124 12 2 19 2 12 15

FQ2 2018 FQ2 2019 H1 2018 H1 2019

Gross Profit and Gross Margin(1)

High Gross Margin

RMB MM

52.2% 51.3%

735 935 1,224 63 126 203 26

FY2016 FY2017 FY2018 50.1% 45.7% FY 2016 FY 2017 FY 2018 FQ2 2018 FQ2 2019 H1 2018 H1 2019 OneSmart VIP 51.9% 50.8% 50.6% 50.5% 50.2% 46.7% 46.2% HappyMath 56.3% 59.6% 56.5% 57.9% 57.4% 56.2% 55.2% FasTrack English NA NA 35.5% 20.3% 30.2% 20.3% 26.7% Others NA (101.3%) (20.9%) NA 32.0%

• 40.7%

23.5% Overall Gross Margin 52.2% 51.3% 50.6% 50.1% 49.5% 47.2% 45.7%

Gross Margin

50.6% OneSmart VIP Happy Math FasTrack English Others 49.5% 47.2%

Notes

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

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29.8% 28.6% 31.1% 30.5% 10.4% 11.7% 11.2% 13.0% 3.3% 3.9% 3.5% 4.3% 6.4% 6.3% 7.0% 6.5% FQ2 2018 FQ2 2019 H1 2018 H1 2019 31.7% 30.8% 30.5% 8.4% 9.0% 9.9% 2.9% 2.6% 3.0% 4.8% 6.3% 6.0% FY2016 FY2017 FY2018

Clear Cost Structure

47.8% 48.7% 49.4% 49.9%

Staff costs Rental costs Depreciation and amortization Other costs

52.8%

Notes

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

50.5% 54.3%

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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

16.1% 17.4% 16.9% 17.0% 17.9% 20.6% 18.2% RMB MM RMB MM 261 368 588 FY2016 FY2017 FY2018 129 191 236 357 FQ2 2018 FQ2 2019 H1 2018H1 2019 247 357 485 FY2016 FY2017 FY2018 121 173 214 310 FQ2 2018 FQ2 2019 H1 2018 H1 2019 19.5% 20.3% 18.3%

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

21.3% 22.5% 19.4% 19.5%

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82 102 71 59 FQ2 2018 FQ2 2019 H1 2018 H1 2019 291 330 376 FY2016 FY2017 FY2018 234 305 229 FY2016 FY2017 FY2018 78 90 62 29 FQ2 2018 FQ2 2019 H1 2018 H1 2019

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. Second fiscal quarters ended February 28
• 2. Net income attributable to OneSmart

19.1% 16.0% 13.1% 15.3% 189 259 246 FY2016 FY2017 FY2017 14.8% 8.0% 12.4% 12.6% 8.6% 11.7% 247 284 392 FY2016 FY2017 FY2018 16.1% 13.8% 13.7% 12.3% 5.0% 77 65 105 49 FQ2 2018 FQ2 2019 H1 2018 H1 2019 81 77 115 79 FQ2 2018 FQ2 2019 H1 2018 H1 2019 6.9% 9.5% 3.1% 8.2% 10.4% 11.8% 9.6% 5.6% 1.8% 12.4% 3.7% 6.5% 10.9%

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84 173 255 FY2016 FY2017 FY2018

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 5.5% 8.4% 8.9% 13.2% 614 773 945 FY2016 FY2017 FY2018 51 (140) 336 (263) FQ2 2018FQ2 2019 H1 2018 H1 2019 88 91 114 171 FQ2 2018 FQ2 2019 H1 2018 H1 2019 1,053 1,531 1,992 1,970 FY2016 FY2017 FY2018 FQ2 2019 1,010 1,396 2,227 1,065 FY2016 FY2017 FY2018 FQ2 2019 10.4%

Notes

• 1. Second fiscal quarters ended February 28

9.6% 10.8%

Thank You