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

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OneSmart International Education Group Limited Investor Presentation January 2019 Disclaimer This presentation contains forward-looking statements made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act

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January 2019

OneSmart International Education Group Limited Investor Presentation

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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.

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Section 1

Company Overview

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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 November 30, 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 first fiscal quarter ended November 30, 2018 7. Fiscal year ended August 31

Well-recognized brand with 367

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

142,387 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)

6,365

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

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OneSmart VIP

1-on-1, 1-on-3 3rd–12th Grade

Kids Math

1-on-8 1-on-14

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 3 to 8 Years Old

#1 young children mathematics

education service provider in China 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

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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

367 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 November 30, 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 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

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Section 2

Key Highlights for First Fiscal Quarter of 2019

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Monthly Average Student Enrollments Increased by 70.5%

Year-over- Year

Net Revenues Increased by 46.6%

Year-over-Year

Net Revenues from OneSmart VIP Programs increased by 33.8%

Year-over-Year

Net Revenues from HappyMath increased by 51.1%

Year-over-Year

New Student Enrollments of FasTrack English increased by 55.6%

Year-over-Year

Key Financial Highlights for First Fiscal Quarter of 2019

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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

 Despite the fact that we opened 6 new learning centers in Shanghai during the first quarter, Non-GAAP operating margin in Shanghai remained above 40%;  Gross profit margin for Mature Learning Centers increased by 0.9% year-over-year;  In the meantime, we continued to see strong momentum in monthly average student enrollment growth by over 50% in cities including Suzhou, Wuxi, Xi’an, Chongqing, Yancheng, Wenzhou, Zhuhai, Tianjin, Lanzhou, Chengdu, Shenyang and Huizhou;  We opened 17 new learning centers during the quarter

 We continued to accelerate our growth in

  • HappyMath. Revenues increased by 51.1%

year-over-year to RMB106.5 million (US$15.3 million) from RMB70.4 million in the same quarter of last fiscal year, while monthly average student enrollments increased by 47.4% year-over-year to

25,803 from 17,500 in the same quarter of

last fiscal year

 Gross profit margin for Mature Learning

Centers increased by 0.7% year-over-year;

 Revenue growth exceeded 100% year-over-

year in cities outside Shanghai such as Beijing (197.7%), Shenzhen (108.6%), Chengdu (142.3%), Xiamen (118.8%) and Suzhou (153.3%);

 Benefiting from customers’ increasing

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

7,900 students were enrolled for the

Chinese language training classes during the first fiscal quarter of 2019.

 We re-positioned FasTrack English as

premium kids English training brand with a focus on STEM English and expanded the

  • peration into new cities including

Guangzhou and Shenzhen with 6 new learning centers opened;

 New student enrollments increased by

55.6% year-over-year, compared to

approximately 30% historical growth before acquisition;

 The above demonstrated our strong

acquisition and integration capabilities, which will continuously accelerate the growth of FasTrack English business nationwide OneSmart VIP HappyMath FasTrack English

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Section 3

Financial Highlights

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70 106

FQ1 2018 FQ1 2019

363 486

FQ1 2018 FQ1 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 first fiscal quarters ended November 30

RMB MM +78.6% RMB MM +51.1% Growth +30.6% CAGR CAGR

441 647

FQ1 2018 FQ1 2019

+46.6% Growth

113 212 359

FY2016 FY2017 FY2018

+36.8% CAGR +33.8% 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

31

FQ1 2018 FQ1 2019

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1,953,624 2,501,211 504,722 726,447 262,418 237,629

FQ1 2018 FQ1 2019 123 157 225 177 242 27 38 66 48 78 24 33 14 FY2016 FY2017 FY2018 FQ1 2018 FQ1 2019 7,486 8,711 11,744 10,098 12,385 FY2016 FY2017 FY2018 FQ1 2018 FQ1 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

66,004 84,531 17,500 25,803 13,175

18,878

FQ1 2018 FQ1 2019

+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

+70.5% Grow th 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 +34.6%

CAGR

+51.6% Grow th 15,497,057 83,504 142,387 3,727,705 2,458,346

367

+63.1% Grow th +22.6% Grow th

Notes 1. Fiscal years ended August 31 and first fiscal quarters ended November 30

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

225

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Gross Profit and Gross Margin(1)

High Gross Margin

RMB MM 52.2% 51.3%

735 935 1224 63 126 203 26 FY2016 FY2017 FY2018

42.7% 40.2%

FY 2016 FY 2017 FY 2018 FQ1 2018 FQ1 2019 OneSmart VIP

51.9% 50.8% 50.6% 40.8% 40.1%

HappyMath

56.3% 59.6% 56.5% 54.2% 52.9%

FasTrack English

NA NA 35.5% NA 22.3%

Others

NA (101.3%) (20.9%) 28.6% 9.7%

Overall Gross Margin

52.2% 51.3% 50.6% 42.7% 40.2%

Gross Margin 148 195 38 56 7 2 2 FQ1 2018 FQ1 2019

50.6%

Notes 1. Fiscal years ended August 31 and first fiscal quarters ended November 30

OneSmart VIP Happy Math FasTrack English Others

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33.1% 33.2% 12.5% 14.8% 3.8% 4.9% 7.9% 6.9%

FQ1 2018 FQ1 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% 57.3%

Staff costs Rental costs Depreciation and amortization Other costs

59.8%

Notes 1. Fiscal years ended August 31 and first fiscal quarters ended November 30

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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% 21.1% RMB MM RMB MM

261 368 588 FY2016 FY2017 FY2018 106 166 FQ1 2018 FQ1 2019 247 357 485 FY2016 FY2017 FY2018 93 137 FQ1 2018 FQ1 2019

24.1% 25.7% 21.2%

Notes 1. Fiscal years ended August 31 and first fiscal quarters ended November 30 2. Excluding share based compensati on expenses

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(11) (43) FQ1 2018 FQ1 2019 291 330 376 FY2016 FY2017 FY2018 234 305 229 FY2016 FY2017 FY2018 (16) (61) FQ1 2018 FQ1 2019

Robust Income and Healthy Margin

Operating Income (loss) and Operating Margin (1) Non-GAAP operating Income (loss) 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 first fiscal quarters ended November 30 2. Net income attributable to OneSmart

19.1% 16.0% 13.1% (2.4%) (6.6%) 15.3%

189 259 246 FY2016 FY2017 FY2017

14.8% 8.0% (3.7%) (9.4%) 12.4% 12.6% 8.6% 6.3% (2.5%)

247 284 392 FY2016 FY2017 FY2018

16.1% 13.8% 13.7% 7.5% 0.3%

28 (16) FQ1 2018 FQ1 2019 33 2 FQ1 2018 FQ1 2019

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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% 6.0%

614 773 945 FY2016 FY2017 FY2018 285 (102) FQ1 2018 FQ1 2019 27 80 FQ1 2018 FQ1 2019 1,053 1,531 1,992 2,219 FY2016 FY2017 FY2018 FQ1 2019 1,010 1,396 2,227 1,524 FY2016 FY2017 FY2018 FQ1 2019

12.4%

Notes 1. Fiscal years ended August 31 and first fiscal quarters ended November 30

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Thank You