OneSmart International Education Group Limited FY19Q4 and FY19 Full Year Results Presentation November 2019
Section 1 Business Overview
We are a Leading Premium K-12 After-school Education Services Provider in China Our Values Our Mission Our Vision Bring out the utmost learning power in each Customer Focus Build the most trusted student by cultivating his or her study Execution ‘‘Third Classroom’’ outside of home motivation, capability and perseverance, and Innovation and school enable our students to pursue life-long success Teamwork Dominant market share of 26% (4) in #1 premium K-12 after-school tutoring Well-recognized brand with 432 Shanghai’s premium K -12 after- study centers covering nearly 40 service provider in China (1) cities in China (3) school education market #1 young children mathematics education service provider in China (2) Founded in Shanghai in 2008 RMB 4.0Bn ~7,500 ~160,000 average monthly student revenue in FY2019 (7) , nearly doubled enrollments (5)(6) full-time teachers (3) from RMB 2.1bn in FY2017, 39.3% 3-year CAGR 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 August 31, 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 fourth fiscal quarter ended August 31, 2019 3 7. Fiscal year ended August 31
We Focused on the Three Premium Education Services Premium K-12 1on1 Education Services The largest and most high- end player in China’s education market OneSmart VIP Primarily focused on premium 1-on-1 format: － Personalized and highly effective, leading to outstanding study results － More suitable than mass class-format tutoring to achieve score #1 premium K-12 after-school tutoring improvements to pass entrance exams service provider in China (1) Estimated student base: 45% middle schools, 35% primary schools and 20% high schools 3rd – 12th Grade 1-on-1, 1-on-3 Also offers a 1-on-3 formats but only takes ~15% of revenues Premium Young Children Education Services Increasing demand by new generation of sophisticated parents with HappyMath FasTrack English largely improved affordability Kids English Kids Math Focused on the two most sought-after young children education services: － Math: #1 criteria for primary school admission considerations Also covers Chinese Focus on STEM English － English: most popular kids education services in China HappyMath was launched in 2013 and FasTrack English was 1-on-8/10 3 to 8 Yrs Old 3 to 8 Yrs Old 1-on-8/10 acquired in January 2018 Offered primarily in 1on8/10 group classes, suitable to kids education 4 Note: 1. In terms of revenue in 2016 and 2017, according to Frost & Sullivan
Our Differentiated Position in China’s Education Services Market (1) Premium Market NYSE: ONE Mid to high-end market NYSE: TAL Mass market NYSE: EDU No.1 Most recognized Highest hourly tuition fee Outstanding learning premium brand rate in the industry results Note: 5 1. Premium tutoring services refers to either 1-on-1classes priced at or above RMB 200 per session or small group classes priced at or above RMB 120 per session, according to Frost & Sullivan
Premium Market Grows Much Faster than the Entire Sector Premium after-school tutoring sector grows OneSmart leads the market shares of the premium sector … still plenty of room to grow much faster than the entire market China K12 AST Market Size (2018 – 2022F) By 2017 revenue RMB billions 6.1% CAGR 611 OneSmart only OneSmart A RMB 200bn +9% takes 2.4% 2.4% 564 premium market share today 518 Premium 196 EDU 475 (32%) Others 169 CAGR +16% 1.5% 93.9% (30%) 146 433 (28%) 126 Xueda 1.1% (26%) 109 (25%) Only 0.9% TAL 0.5% 416 Non-premium 395 373 349 (68%) CAGR +6% (70%) 324 (72%) Most recognized (74%) (75%) premium tutoring brands OneSmart 28% TAL 11% 2018 2019 2020 2021 2022 EDU 11% Xueda 7% Rising awareness and preferences Longwen 4% for individualized learning BestStudy 4% Jinghan Consumption upgrade by increasing 3% number of Mid-Class families Juren 2% Only 2% Rising willingness to pay for Xspark 2% premium services 6 Source: Frost & Sullivan : China’s K-12 After-School Tutoring Market Study (March 2018)
Our Distinguished Premium Services are Built on Three Key Pillars: Quality, Services and Innovation 93% 1 Teaching Quality University 40% vs. Admission China avg. Rate (1) Our highly personalized learning programs based on students’ academic levels and learning habits provides the most effective way to improve scores during a limited 94% High School 45-55% vs. timeframe, a much needed help for our students to prepare Admission China major city avg. for the highly selective entrance exams in China Rate (1) 2 Touching Services Our 1-on-1 services and learning center environment enable us to better provide personal level caring and more engaged study experience to our students, a support that much appreciated by increasingly sophisticated parents 3 Innovative Technologies We continuously pursue / upgrade new products and technologies to enhance the learning experience and effectiveness. We developed robust teaching system UPC ( Unique Personalized Coach), OMO (online-merge-offline) tools and platforms, AI-powered OneSmart Online, etc. Note: 7 1. Based on Class of 2019 results
We are Building our Online Strategies and Investing in OneSmart Online Back End Teaching and Powers Front End Online and Offline Integrated Services Operations System 12 10 Offline Million Million Learning Teaching Test Data Cloud- Centers Learning Center Systems Notes Questions Analytics based Storage Teaching Bank KPI Tracking OneSmart Online UPC Teaching and Operations Online and offline integrated: System － Cutting-edge technologies － Synergies with offline system and operations Convenience and enhanced services: Online Our Online Strategy Platforms － Mid-week 1on1 classes at home and OMO To establish OneSmart Online － On-demand supplementary courses Tools as the largest online based － Enhanced communications premium services platform To enhance learning Teaching quality ensured: experience and improve － Improved algorithms, powered by customer satisfaction data collected from offline To drive incremental growth for experience both online and offline businesses － Extensive 1on1 teaching experience To deliver profitable growth 8
Our Achievement of Scalable Profitability is Driven by Three Core Advantages in our Business Model 1 Superior customer experience supported by personalized premium1-on-1programs that cater to the needs of an individual student, driving outstanding results Premium Premium services and learning environment Price A highly effective tutoring format 94% high school admission rates vs. 45-55% of major cities average 2 Highly efficient operating system underpinned by robust KPI Scalable based incentive structure throughout the organization Lean Profitability Started small, learning centers’ cost and expenses incur almost at linear Cost in the Growing proportions to revenue growth due to the nature of 1on1 operations Structure Central planning and annual budget control at center level 1-on-1 Tutoring Market Gross margin at ~50% level and Opex % of revenues at ~40% level, both comparable to major class format players OneSmart is the 3 clear market leader Highly standardized learning center management system in premium1-on-1 tutoring space Standardized organizational and incentive structure that can be easily Replicable replicated System Standard operating procedure, training and data reporting systems Deliberate succession plan and career development programs 9
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