GSX Techedu : Fourth Quarter 2019 Presentation

Investor Presentation

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Disclaimer

This presentation has been prepared by GSX Techedu Inc. (the "Company") solely for informational purposes and does not constitute an offer to sell or issue or the solicitation of an offer to buy or acquire securities of the Company in any jurisdiction or an inducement to enter into investment activity, nor may it or any part of it form the basis of or be relied on in connection with any contract or commitment whatsoever.

This document has been prepared by the Company solely for use at this presentation. The information contained in this presentation, including the Company's unaudited result of operation for the fourth quarter of 2019, has not been independently verified. No representation, warranty or undertaking, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or the opinions contained herein. None of the Company or any of its affiliates, directors, officers, advisors or representatives will be liable (in negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising from or in connection with this presentation.

This presentation contains statements that constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include descriptions regarding the intent, belief or current expectations of the Company or its officers with respect to the consolidated results of operations and financial condition of the Company, which can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Such forward- looking statements are not guarantees of future performance and involve risks and uncertainties, and actual results may differ from those in the forward- looking statements as a result of various factors and assumptions. The Company or any of its affiliates, directors, officers, advisors or representatives has no obligation and does not undertake to revise forward-looking statements to reflect new information, future events or circumstances after the date of this presentation, except as required by law.

1

OUR MISSION

MAKE EDUCATION BETTER THROUGH TECHNOLOGY

2

Leadership in China's Online K-12Large-classAfter-school Tutoring Market(1)

Higher

Quality

LIVE

Higher			Higher
Efficiency	ONLINE	LARGE-	Profitability
	CLASS

Laser-focused on Online Live Large-class Tutoring

Note:
(1)	3rd largest online K-12large-classafter-school tutoring service provider in China in terms of gross billings in 2018, according to Frost & Sullivan	3

GSX Q4 FY2019 Overview

Total Enrollments(1)

Gross Billings

Net Revenues

1,120,000

RMB 1,579mn

RMB 935mn

290%	Q4 FY2019 vs	396%	Q4 FY2019 vs	413%	Q4 FY2019 vs
YoY growth	YoY growth	YoY growth
	Q4 FY2018		Q4 FY2018		Q4 FY2018

Net Profit

RMB 174mn

(GAAP)

RMB 198mn

(Non-GAAP)(2)

21% Q4 FY2019 adjusted net margin(2)

Notes:

1. "Total enrollments" for a certain period refer to the cumulative number of courses (priced at or above RMB9.9) enrolled in and paid for by the students, including multiple paid courses enrolled in and paid for by the same student
2. Adjusting for share-based compensation expenses of RMB 23mn

4

Company Highlights

01
Leadership in China's online K-12large-classafter-school tutoring
	market

02	Superior education quality

03	Robust proprietary technology infrastructure and application

04	Highly scalable business model with exceptional operating efficiency

05	Renowned founder and seasoned management team with a
	corporate

DNA of student service

5

Our Comprehensive Courses and Service Offerings

Core expertise in online K-12 courses across all primary and secondary grades

		Elementary School					Middle School				High School
1	2	3	4	5	6	7	8	9	10	11	12

Mathematics

English

Chinese

Physics

Chemistry

Biology

History

Geography

Political Science

Offered by us	6

Superior Education Quality

High Quality Instructors and Professional Tutors

High Quality Instructors
Teaching and being role model
Graduates from PKU and TSU	Disseminate China's scarce high
as well as the Ivy League
	quality teaching resources through
Seasoned academic gurus	specialization and collaboration
from top education institutions	Centralized
Highest average compensation	Recruitment
among the online service providers	System

Professional Tutors

Tutoring and providing emotional support

• Proficient in the relevant subjects
• Responsible
• Able to communicate and learn fast

Fresh and recent graduates of reputable universities in China

33 links of work flow

7

Superior Education Quality

In-house Curriculum Development

Continuous

feedback from

education quality assurance team

Continuous

feedback from

students

Education Content Development Process	Involvement of both	Closely follow up
Substantially all of our course materials are	instructors and course	with the national
designed and developed in-house	development experts	syllabus
	1	2

8In-House

Education Content Development Team Members

Dedicated content development experts

Instructors directly involved in the development process

7

6	5
Deliver hard	Standardized
copies to students	curriculum

3

4

Course outlines

Multiple rounds of interview and pilot testing for up to 6- 12 months

Format and design

are further tailor made to cater to online class format

Interactive live broadcasting courseware

TextbooksExercise

8

Superior Education Quality

Robust Proprietary Technology Infrastructure and Application

Live Broadcasting

 Since July 2014

 A maximum of 100,000 students

 Average delay time <300 milliseconds

"BOSS"(1) and

Business Intelligence

System

• Manage courses, students and exercise performance feedback in a seamless manner
• Timely analyze data

Proprietary	Improvement
in
Technology	Operational
	Efficiency	AI and Big Data

 >15,000 dimensions student behavioral data

 Self-reinforced feedback loop

 Auto-feed practice questions

Efficient operations

High quality course offerings

Engaged student learning experience

Note:

1. Business Operations Support System

9

Our Experienced Management Team and Distinguished Board

Larry Xiangdong Chen Founder, Chairman and CEO

• Chairman and CEO since our inception
• Visionary and renowned industry leader with more than 30 years of experience in the education industry

Ming Liao Independent Director

• Independent director since June 2019
• Founding partner and director of Prospect Avenue Capital since July 2016

Yiming Hu Independent Director

• Independent director since June 2019
• Chairman of the board of Dongfang Beidou Technology (Beijing) Co., Ltd since April 2018

Xin Fan Independent Director

• Independent director since June 2019
• Chief Financial Officer of Bilibili Inc (NASDAQ:BILI) since September 2017

Xiuping Qi Vice President

• Vice president since May 2016
• Previously worked at Qunar and Alibaba

Wei Liu Vice President

• Vice president since November 2018
• Previously worked at Sohu and Accenture

Nan Shen Chief Financial Officer

• Chief Financial Officer since December 2018
• Previously worked at China Sinoedu Co., Ltd. and PwC

>60 years of combined	Strong	Corporate DNA of student	Tech-savvy	Passion for Education
industry experience	organizational capability	services

10

Phenomenal Business Growth

Net Revenues(1)

(RMB millions)

FY18: RMB 397mn FY19: RMB 2,115mn

Adjusted Gross Profit(2)

(RMB millions)						80%
Margin%
100%					73%	73%
56%	61%	62%	69%	70%

900

YoY: 413% growth

935

1,000

50%

-

800

(50%)

YoY: 499% growth

745

800

700

600

500

557

600

47 69

354

269

182

99

(100%)

(150%)

400

(200%)

200

(250%)

26 42

125

62

406

257

188

400

300

200

100

• (300%)

-

1Q18	2Q18	3Q18	4Q18	1Q19	2Q19	3Q19	4Q19
Accelerating YoY Increase:	5.4x	5.7x	5.1x	5.6x	5.1x

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

4Q19

Notes:		11
(1)	Revenues net of discount, value added tax and related surcharges
(2)	Adjusted gross profit has excluded share-based compensation; GAAP gross margin in Q4 FY2019 is 79%

Phenomenal Business Growth (Cont'd)

Total Enrollments(1)											Gross Billings
(Thousands)													(RMB millions)
														YoY: 396% growth		1,579
												1,200												1,600
								1,120
						YoY: 291% growth
																								1,400
												1,000
																								1,200
								820
												800
																								1,000
																						880
							592																	800
												600
																					599
																								600
												400
				287
			241														318	300					400
		169			211
											200					169
																107								200
71											61
												-													-
	1Q18	2Q18	3Q18	4Q18	1Q19	2Q19	3Q19	4Q19				1Q18	2Q18	3Q18	4Q18	1Q19	2Q19	3Q19	4Q19

Notes:
(1)	"Total enrollments" for a certain period refer to the cumulative number of courses (priced at or above RMB9.9) enrolled in and paid for by the students, including multiple paid courses enrolled in and paid for by the same student	12

Rapid Improvement in Profitability

Adjusted Operating (Loss) / Profit(1)

(RMB millions) Margin%

				16%	17%			20%	240
	(8%)	0%	0%	9%	1%
-
								191
									190
(100%)
									140
(200%)
									90
(300%)
					47
(400%)				28		31			40
		0	0				7
(500%)	(4)								(10)
	1Q18	2Q18	3Q18	4Q18	1Q19	2Q19	3Q19	4Q19

Adjusted Net (Loss) / Profit(2)

(RMB millions)						21%
Margin%	0%	1%	15%	14%	9%	4%
(7%)

-

198

(100%)

(200%)

(300%)

	28	38	31
(400%)
	20

0 1

(500%)(3)

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

4Q19

240

190

140

90

40

(10)

Notes:		13
(1)	Adjusted operating profit / (losses) has excluded share-based compensation; GAAP operating profit in Q4 FY2019 is RMB168mn
(2)	Adjusted net profits / (losses) have excluded share-based compensation; GAAP net profits in Q4 FY2019 is RMB174mn

Strong Cash Flows and Robust Balance Sheet

Operating Cash Flows	Cash and Cash Equivalents, Short-term and Long-term Investments
(RMB millions)	(RMB millions, as of the end of each period)
			2,736

1,285

	242
					236
			35
(50)
2017	2018	2019	2017	2018	2019

14

Our Growth Strategies

1	2	3	4				5
Continue to
enhance the		Strengthen
quality of
Attract and	technologies
education	Expand course	Enhance brand
develop	and data
services and	offerings	recognition
teaching talent	analytics
students'
	capabilities
learning
experience

Enhance Student Engagement and Increase Paid Course Enrollment

15

Thank You

Investor Relations Contact:

Sandy Qin, CFA

[e-mail]

Tower C, Beyondsoft Building, 7 East Zone, 10 Xibeiwang East Road, Haidian District, Beijing 100193