Puxin Limite ted Investor Presentation March 2019 / Becoming is - - PowerPoint PPT Presentation

Puxin Limite ted Investor Presentation

March 2019

敦兮若朴 / 敝而新成

Becoming is better than being

Safe fe Harbor bor Sta tatement tement

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. The Company 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 the Company’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: its goals and strategies, its ability to achieve and maintain profitability, its ability to attract and retain students to enroll in its courses, its ability to effectively manage its business expansion and successfully integrate businesses it acquired, its ability to identify or pursue targets for acquisitions, its ability to compete effectively against its competitors, its ability to improve the content of its existing courses or to develop new courses, and relevant government policies and regulations relating to the Company’s corporate structure, business and industry. Further information regarding these and other risks 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 press release, and the Company does not undertake any obligation to update such information, except as required under applicable law.

• 01. COMPANY OVERVIEW
• 02. STRATEGIC & OPERATIONAL HIGHLIGHTS
• 03. FINANCIAL HIGHLIGHTS
• 04. OPERATIONAL PERFORMANCE
• 05. APPENDIX

Contents Contents

COM OMPANY ANY OV OVER ERVIEW VIEW

01. .

敦兮若朴 / 敝而新成

Mission, Vision and Values

Mission —— 知识改变命运，学习成就未来

We believe that education inspires personal growth and creates opportunities. Our mission is to empower people to build better lives through learning.

Vision —— 致力教育培训 引领行业发展

We are committed to providing high-quality education services to students and to enhancing service quality in China’s after-school education industry by applying our acquisition and integration expertise.

Values —— 敦兮若朴 敝而新成

We value sincerity, simplicity, and humbleness which we believe ideally positions us for future growth.

01

Who We Are

1.8 Million+

Student Enrollments 1

35 Cities 386 Learning Centers1

China’s 3rd Largest After-School Education Service Provider2 Comprehensive: K-12 + Study-abroad tutoring

Industry Consolidator M&A

Integration

51 Acquired schools1 4,500+

Full-time Teachers & Consultants 1

Note: 1. Data as of DEC 31, 2018. 2. Based on the Frost & Sullivan report, in terms of student enrollments in 2017.

02

Providing Comprehensive Education Services

What We Do

Extra-curricular courses Online platform K-12 after-school education services Study-abroad tutoring & consulting services

Puxin Brand

03

017

Established on Sep. 28, 2014 First acquisition on Apr. 2015 Revenue exceeded RMB1 billion, by the end of 2017 Listed on NYSE on Jun. 15, 2018 Acquired Global Education, the No.1 IELTS brand in China, in Aug. 2017

Corporate Milestones

2014 2015 2017 2017 2018

04

Leading ng Positio ion

Leading position in China’s after-school education market

Track Record

Track record of disciplined acquisitions and integration

Establi lish shed d Reputati tion

• n

Established reputation underpinned by teaching quality Modular and evolving management system

PBS System

Visionary management team and sophisticated talent management system

Experie ienc nced d Team & Talent t Manage geme ment nt System

Investment Highlights

05

02. .

STRA TRATEGIC TEGIC & O OPE PERA RATION TIONAL AL HIGH IGHLIGHTS IGHTS

敦兮若朴 / 敝而新成

Ecological Chain

M&A M&A

Organic Growth Physical Expansion

Generating Organic Growth and Acquiring School

Integration

06

Ecological Chain Industrial Chain Value Chain

Deploy Strategy

Budget Planning & Management Internal Reporting & Communication Operational Management

Enrollment Business Adjustments Knowledge Sharing Rapid Execution

P L A N N I N G R E V I E W

Financial Budgeting Business Management Operational Planning Operational Targets Business Review Management Meetings Strategy Outlook

Modular and Evolving Management System

Covering over 3,000 operation and management processes Closely tracks more than 10,000 day-to-day tasks required for smooth daily operations Applied throughout the entire

• perational process

Puxin Business System

07

Sophisticated Talent Management System

Builds a high-quality talent pool to support long-term growth

Designed for highly-talented staff to strengthen teaching skills and build a solid mid-level management talent pool Designed for mid-level management Building a strong talent pool to fuel Puxin’s long-term development Designed for senior management to strengthen

• verall leadership capabilities

Puxin Leadership

Puxin Talents

08

Offline Offerings Online 1-on-1 Youke

HQCLASS.cn

Improving User Stickiness Traffic Acquisition Quality Resource Sharing

Retention Referral

Online and Offline Integration

Customized Courses

Online Platform with Foreign Teachers Dual-teacher

Word of Mouth Marketing

09

03. .

FI FINANCIAL NANCIAL HI HIGH GHLIG LIGHTS HTS

敦兮若朴 / 敝而新成

• Net Revenues of RMB531.4 million, an increase of 24.2% YoY
• Gross Profit of RMB225.2 million, an increase of 46.2% YoY
• Gross margin of 42.4%

4Q 2018 Financial Highlights-(GAAP)

Gross Profit and Margin

Margin (RMB millions)

Net Revenues

(RMB millions)

428.0 531.4

Q417 Q418 24.2%

154.0 225.2

Q417 Q418 46.2% 36.0% 42.4%

10

(RMB’000) Q4 FY2017 Q4 FY2018 Q4 FY2018 vs. Q4 FY2017 Net revenues

427,952 531,441 24.2%

Gross profit

154,026 225,206 46.2%

Gross margin

36.0% 42.4% 640bps

Operating loss

(165,150) (165,930) 0.5%

Operating margin

(38.6%) (31.2%) 740bps

Loss before income taxes

(216,057) (232,475) 7.6%

Net loss attributable to Puxin Limited

(217,426) (239,740) 10.3%

Net margin

(50.8%) (45.1%) 570bps

4Q 2018 Financial Highlights-(GAAP)

11

427,952 154,026 (165,150) (217,426) 531,441 225,206 (165,930) (239,740) Revenue Gross profit Operating profit/(loss) Net income/(loss) Q417 Q418 24.2%

46.2%

0.5% 10.3%

Gross Profit and Margin Operating Loss and Margin Net Loss Attributable to Puxin Limited and Margin

(RMB’000)

• Significantly strengthened margin profiles
• Gross margin increased 640 bps YoY

154,026 225,206

Q417 Q418 640bps 36.0% 42.4% (165,150) (165,930) 740bps (38.6%) (31.2%) Q417 Q418 (217,426) (239,740) 570bps (50.8%) (45.1%) Q417 Q418

4Q 2018 Financial Highlights-(GAAP)

• Operating margin improved 740 bps YoY
• Net margin improved 570 bps YoY

12

• Adjusted operating margin increased 1,100 bps YoY
• Adjusted net margin increased 490bps YoY

(RMB’000)

(144,018) (120,728) 1,100 bps (33.7%) (22.7%) Q417 Q418 (148,753) (158,918) 490bps (34.8%) (29.9%) Q417 Q418

Adjusted Operating Loss2 and Margin Adjusted Net Loss Attributable to Puxin Limited3 and Margin

Note：1. Adjusted operating loss is a non-GAAP financial measure, which is defined as operating loss excluding share-based compensation expenses. 2. Adjusted net loss attributable to Puxin Limited is a non-GAAP financial measure, which is defined as net loss attributable to Puxin Limited excluding share-based compensation expenses and loss/gain on changes in fair value of convertible notes, derivative liabilities and warrants.

4Q 2018 Financial Highlights-(non-GAAP)

13

04. .

OP OPER ERATIONA TIONAL HI HIGH GHLIGHTS LIGHTS

敦兮若朴 / 敝而新成

• Total enrollments were 521,161, an increase of 45.0% YoY
• Improving operating efficiency：class utilization rate increased 800 bps YoY and student retention

rate increased 350 bps YoY

4Q 2018 Operational Highlights

Total Enrollment Class Utilization Rate Student Retention Rate

359,528 521,161

Q417 Q418

45.0%

70.6% 78.7%

Q417 Q418

800bps 67.7% 71.2%

Q417 Q418

350bps

14

Number of Learning Centers

• Continuously optimizing productivity capacity & ensuring compliance
• Focused on growing existing learnings centers organically on an annual basis

Q4 FY2017 Q4 FY2018

408 6 （14） 400 386 7 5 （12） 386

0930 acquired built closed 1231 0930 acquired built closed 1231

4Q 2018 Operational Highlights

22

05. .

APP PPENDIX ENDIX

敦兮若朴 / 敝而新成

As of December 31, 2017 As of December 31, 2018 RMB’000 RMB’000 Assets Current assets Cash and cash equivalents 164,684 778,006 Inventories 10,408 9,659 Prepaid expenses and other current assets 132,473 128,638 Amounts due from related parties 113

• Total current assets

307,678 916,303 Non-current assets Restricted cash 24,478 40,971 Property, plant and equipment, net 221,212 248,801 Intangible assets 243,927 218,978 Goodwill 1,152,913 1,243,817 Deferred tax assets 3,012 3,456 Rental deposits 55,173 64,693 Total assets 2,008,393 2,737,019 Liabilities Current liabilities Accrued expenses and other current liabilities 350,446 515,623 Income taxes payable 10,022 15,755 Deferred revenues, current portion 906,480 876,861 Amounts due to related parties 3,836 54,493 Bank borrowing – 106,600 Promissory notes-current portion – 361,888 Total current liabilities 1,270,784 1,931,220

Consolidated Balance Sheet

23

As of December 31, 2017 As of December 31, 2018 RMB’000 RMB’000 Non-current liabilities Deferred revenue, non-current portion of the consolidated VIE without recourse to the Group 128,890 121,191 Deferred tax liabilities of the consolidated VIE without recourse to the Group 77,580 71,031 Franchise deposits of the consolidated VIE without recourse to the Group 3,856 1,763 Convertible notes 499,192 – Promissory note, non-current portion 162,658 – Derivative liabilities 18,218 63,942 Warrant – – Total liabilities 2,161,178 2,189,147 Commitments and Contingencies Mezzanine equity Convertible redeemable preferred shares 120,000 – Shareholders’ deficit Ordinary shares 34 62 Additional paid-in capital 391,099 1,944,325 Surplus reserve - statutory surplus reserve

• 4,595

Accumulated other comprehensive income 15,718 68,214 Accumulated deficit (679,613) (1,469,303) Total Puxin Limited shareholders’ deficit (272,762) 547,893 Non-controlling interest (23) (21) Total Shareholders' deficit (272,785) 547,872 Total liabilities, mezzanine equity and total shareholders / (deficit) 2,008,393 2,737,019

Consolidated Balance Sheet (Cont’d)

24

Consolidated Income Statement

FY201 2017 7 FY201 2018 8 FY201 2017 7 FY201 2018 8 RMB1, B1,000 000 (except xcept as noted) ted) 1Q 1Q 2Q 2Q 3Q 3Q 4Q 4Q 1Q 1Q 2Q 2Q 3Q 3Q 4Q 4Q RMB’000 RMB’000 Net t reven venues ues 198,203 238,047 418,360 427,952 495,708 531,304 669,664

531,441

1,282,562

2,228,117

Cost st of reven venues ues 120,075 141,535 258,806 273,926 273,458 288,582 374,614

306,235

794,342

1,242,889

Gross

• ss profit
• fit

78,128 ,128 96,512 ,512 159,55 9,554 4 154,02 4,026 6 222,25 2,250 242,72 2,722 2 295,05 5,050

225,206

488,22 8,220 985,22 5,228 Opera erating ting expense penses: s: Selling expenses 54,920 72,686 140,677 176,644 164,647 210,025 237,291

236,125

444,927

848,088

General and administrative expenses 54,177 65,769 100,270 142,532 383,373 118,654 118,845

155,011

362,748

775,883

Total tal operati erating ng expen penses ses 109,09 9,097 7 138,45 8,455 5 240,94 0,947 7 319,17 9,176 6 548,02 8,020 328,67 8,679 9 356,13 6,136 6

391,136

807,67 7,675 5 1,623, 623,971 971 Operating loss (30,969) (41,943) (81,393) (165,150) (325,770) (85,957) (61,086)

(165,930)

(319,455)

(638,743)

Interest expense – – 2,150 3,406 5,040 12,606 9,827

32,049

5,556

59,522

Interest income / (loss) 346 110 53 40 103 181 1,418

1,124

549

2,826

Loss(Gain) on changes in fair value of convertible notes, derivative liabilities and warrants – – 22,795 47,541 23,665 92,485 (20,022) 35,620 70,336 131,748 Loss on extinguishment of convertible notes

• 900
• 900

Loss ss before fore incom come e taxes xes (30,62 0,623) 3) (41,83 1,833) 3) (106,2 06,285) 85) (216,0 16,057) 57) (355,2 55,272) 72) (190,8 90,867) 67) (49,47 9,473) 3)

(232,475)

(394,7 94,798) 98) (828,0 28,087) 87) Income tax expenses 189 258 656 1,333 (223) (2,476) 746

7,275

2,436

5,322

Net t loss ss (30,81 0,812) 2) (42,09 2,091) 1) (106,9 06,941) 41) (217,3 17,390) 90) (355,0 55,049) 49) (188,3 88,391) 91) (50,21 0,219) 9)

(239,750)

(397,2 97,234) 34) (833,4 33,409 09) Less: Net loss attributable to non- controlling interest (16) 31 28 36 (25) 19 18

(10)

79

2

25

Thank You

March 2019