Post on 27-Sep-2020
2019Q2INVESTOR PRESENTATION
Puxin Limited
Successful Consolidator Of The After-school Education Industry In China
AUG 2019
1
Safe Harbor Statement
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.
2
Agenda
• Q2 2019 Operational and Financial Highlights
• Company Overview
• After-school Education Market Overview
• Appendix
敦兮若朴敝而新成
3
519,962
725,118
2018Q2 2019Q2
Total Enrollments
YoY: 39.5%
4
62.2%
71.4%
2018Q2 2019Q2
Student Retention Rate
YoY: 9.2PP
Operational Highlights
5
(in RMB thousands)
531,304
632,922
2018Q2 2019Q2
Net Revenues
YoY: 19.1%
388 398
2018Q2 2019Q2
Number of Learning centers
Operational Highlights
6
Financial Highlights
7
(in RMB thousands)
242,722
300,094
2018Q2 2019Q2
Gross Profit
YoY: 23.6%
Financial Highlights
(in RMB thousands)
45.7%
47.4%
2018Q2 2019Q2
Gross Margin
YoY: 1.7PP
8
(in RMB thousands)
(86,050)
(168,708)
2018Q2 2019Q2
Operating Loss
YoY: 96.1%
(in RMB thousands)
(60,994)
(53,339)
2018Q2 2019Q2
Adjusted Operating Loss
YoY: 12.6%
Financial Highlights
9
(in RMB thousands)
(156,240)
(159,787)
2018Q2 2019Q2
EBITDA
YoY: 2.3%
(in RMB thousands)
(38,699)
(25,801)
2018Q2 2019Q2
Adjusted EBITDA
YoY: 33.3%
Financial Highlights
531.3 669.7
531.4 615.7 632.9
2Q18 3Q18 4Q18 1Q19 2Q19
242.7 295.1
225.2 280.1 300.1
2Q18 3Q18 4Q18 1Q19 2Q19
• 2Q Revenue RMB632.9 million
– Grew 19.1% Y/Y and 2.8% Q/Q
• 2Q Gross Profit RMB300.1 million
– Grew 23.6% Y/Y and 7.1% Q/Q
– 47.4% gross margin
• 2Q Adjusted EBITDA RMB(25.8) million
– Grew 33.3% Y/Y
19.1% Revenue Growth and 33.3% Adjusted EBITDA Growth Y/Y in 2Q 2019
Gross Profit and Margin
45.7% 44.1% 42.4% 45.5% 47.4%
(RMB millions)
Revenue
(RMB millions) ▲ 19.1%Y/Y
▲ 23.6% Y/Y
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• 2Q Total Enrollments: 725,118
– Grew 39.5% Y/Y
• 2Q Student Retention Rate 71.4%
– Grew 9.2PP Y/Y
39.5% Enrollments Growth and 9.2PP Retention Rate Growth Y/Y in 2Q 2019
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520.0 544.3 521.2 402.1
725.1
2Q18 3Q18 4Q18 1Q19 2Q19
(thousands)▲ 39.5%Y/Y
388 386 386
390
398
2Q18 3Q18 4Q18 1Q19 2Q19
Number of Learning Centers
Enrollments
12
(in RMB thousands)
Case Study
Net Revenue 2018H1 2019H1 H/H
School A 11,955 16,248
School B 26,237 34,250
School C 26,393 33,019
School D 22,448 29,366
School E 12,005 16,371
School F 30,312 48,707 60.7%
36.4%
30.8%
25.1%
30.5%
35.9%
OP Income 2018H1 2019H1 H/H
School A (828) 1,495
School B 7,858 12,388
School C 88 6,362
School D 2,575 7,901
School E 1,820 5,317
School F (998) 5,435 644.6%
192.1%
206.8%
7129.5%
57.6%
280.6%
Agenda
• Q2 2019 Operational and Financial Highlights
• Company Overview
• After-school Education Market Overview
• Appendix
敦兮若朴敝而新成
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Experienced Leadership
Peng Wang
Chief Financial Officer
✓ 15 years’ experience in education industry
✓ Senior vice president at China Hi-Tech Group Co. Ltd. From 2016 to 2017
✓ Principal of a school under New Oriental (NYSE: EDU) from 2010 to 2016
✓ Doctor’s degree in economics from Renmin University of China
Yunlong Sha
Founder, Chairman, and Chief Executive Officer
✓ 21 years’ experience in education industry
✓ Senior vice president and various managerial positions at New Oriental (NYSE: EDU) from
2001 to 2014
✓ EMBA degree from Cheung Kong Graduate School of Business and bachelor’s degree in law
from Renmin University of China
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Who We Are – Successful AST Consolidator in China
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Founded in 2014, with 54 acquired schools and 398 learning centers in 35 cities
The third largest after-school education services provider in China
Total enrollments were 725,118, an increase of 39.5% YoY in 2019Q2
Clear corporate strategy & vision and effective execution that attract high-quality talents to join
Puxin Business System (PBS), a unique modular management system that incorporates best practices of
operating after-school learning centers, creates high entry barriers for competitors
Experienced management team with 16+ years of experience in China’s education industry
Selective teacher hiring process with an emphasis on continual training and rigorous evaluation for teachers
① Source: Frost & Sullivan
①
Strong acquisition capability
- Standard and efficient selection process
- Successful track records
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Excellent integration capability
- Integration starts in the due diligence stage
- Completion of the standardization process in a short time
- Sufficient reserve of talents
Market consolidation opportunities
- Leaders experienced faster growth than the industry
- Plenty of valuable small institutions face operation difficulties and
want to exit
Synergies to drive
the growth
Good reputation
attractive to institutions
with intention to sell their
businesses
Puxin’s Business Model
Providing Comprehensive Education Services
What We Do
17
Our portfolio brands
Agenda
• Q2 2019 Operational and Financial Highlights
• Company Overview
• After-school Education Market Overview
• Appendix
敦兮若朴敝而新成
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Source: Frost & Sullivan
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Large Addressable Market with Healthy Growth
251284
321
364
411
465
511
562
617
678
745
2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E
After-School K-12 Tutoring Market Size (Rmb bn)
1315
1821
25
29
34
39
45
52
60
2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E 2022E
Study-Abroad Test Prep And Consulting Services Market Size (Rmb bn)
10,000
1,000
Annual revenue (Rmb mn)
100
10
No. of organizations5 60 600
Nationwide presence,
Over Rmb1bn annual revenue,
Less than 5% of market share
Provincial-level leaders,
100-1,500mn annual
revenue
City-level leaders,
30-150mn annual revenue
Small-scale tutoring institutions,
Less than 30mn annual revenue,
Over 10,000 in China
20Source: Company Estimate
The highly fragmented market promises opportunities for consolidation
High Degree of Fragmentation Presents Opportunity
Common Problems Faced By Small-Scale Institutions
Low customer lifetime value
Lack of diversity for recruitment channels
Weak R&D capabilities
Limited room for team development
No experience in competing against national leaders
Solutions By Puxin
Raising retention rate
Diversifying channels via online-offline integration
Systematizing product development
Creating ample room for development via centralized
management and planning for nationwide expansion
Centralized expertise sharing in teaching, marketing,
school management, etc.
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Standardized Solution for Acquired Institutions
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Typical Path of A Turnaround
PUXIANPositive Talent
Development
PUYOU PUXING
Principal Selection Training
Institute
• Top talent training plan
• 9 months per session
• Theory + practice
• 13 sessions delivered
• Middle-level management training
• Various lines of training
• Selection every 6 months
• Training for front-line staff
and management trainee
• Talent exploration plan
• Selection every 3 months
• Tiered talent management
• Veteran management leading
new schools
• New management leading
established schools
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Education Expertise-Oriented Talent System
Agenda
• Q2 2019 Operational and Financial Highlights
• Company Overview
• After-school Education Market Overview
• Appendix
敦兮若朴敝而新成
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As of December 31, 2018 As of June 30, 2019
RMB’000 RMB’000 USD’000
Current assets
Cash and cash equivalents 778,006 500,556 72,914
Restricted Cash, current portion - 344,700 50,211
Inventories 9,659 11,280 1,643
Prepaid expenses and other current assets 128,638 98,639 14,368
Total current assets 916,303 955,175 139,136
Non-current assets
Restricted cash, non-current portion 40,971 39,141 5,701
Operating lease right-of-use assets - 804,322 117,163
Property, plant and equipment, net 248,801 270,933 39,466
Intangible assets 218,978 210,309 30,635
Goodwill 1,243,817 1,358,165 197,839
Deferred tax assets 3,456 1,478 215
Rental deposit 64,693 64,765 9,434
Other non-current assets - 34,000 4,953
Total non-current assets 1,820,716 2,783,113 405,406
Total assets 2,737,019 3,738,288 544,542
Liabilities and shareholders’ liabilities
Current liabilities
Accrued expenses and other current liabilities 515,623 766,598 111,669
Income taxes payable 15,755 12,131 1,767
Deferred revenues, current portion 876,861 1,011,142 147,289
Operating lease liabilities, current portion - 225,249 32,811
Amounts due to related parties 54,493 22,898 3,335
Bank borrowing 106,600 353,900 51,551
Promissory notes, current portion 361,888 171,625 25,000
Total current liabilities 1,931,220 2,563,543 373,422
Consolidated Balance Sheet
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As of December 31, 2018 As of June 30, 2019
RMB’000 RMB’000 USD’000
Non-current liabilities
Deferred revenue, non-current portion 121,191 110,939 16,160
Operating lease liabilities, non-current portion - 516,397 75,222
Deferred tax liabilities 71,031 68,637 9,998
Franchise deposits 1,763 1,873 273
Derivative liabilities 63,942 164,279 23,930
Total non-current liabilities 257,927 862,125 125,583
Total liabilities 2,189,147 3,425,668 499,005
Shareholders’ equity:
Ordinary shares 62 62 9
Additional paid-in capital 1,944,325 2,154,533 313,843
Statutory reserve 4,595 4,595 669
Accumulated other comprehensive income 68,214 66,133 9,633
Accumulated deficits (1,469,303) (1,912,718) (278,619)
Total Puxin Limited shareholders’ equity 547,893 312,605 45,535
Non-controlling interests (21) 15 2
TOTAL SHAREHOLDERS’ EQUITY 547,872 312,620 45,537
TOTAL LIABILITIES AND TOTAL SHAREHOLDERS’ EQUITY 2,737,019 3,738,288 544,542
Consolidated Balance Sheet (Cont’d)
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2018Q2 2019Q2
RMB’000 RMB’000 USD’000
Net Revenues 531,304 632,922 92,195
Cost of revenues 288,582 332,828 48,482
Gross profit 242,722 300,094 43,713
Operating expenses:
Selling Expenses 210,025 241,739 35,213
General and administrative expenses 118,747 227,063 33,075
Total operating expenses 328,772 468,802 68,288
Operating loss (86,050) (168,708) (24,575)
Interest expense 12,606 10,193 1,485
Interest income 181 4,144 604
Foreign exchange gain - 179 26
Loss on changes in fair value of convertible notes, derivative liabilities and warrants 92,485 18,617 2,712
Gain on disposal of subsidiary 93 - -
Loss before income taxes (190,867) (193,195) (28,142)
Income tax (benefits) expenses (2,476) 1,424 207
Net loss (188,391) (194,619) (28,349)
Less: Net attributable to non-controlling interest 19 18 3
Net loss attributable to Puxin Limited (188,410) (194,637) (28,352)
Net loss per ADS attributable to Puxin Limited, Basic and diluted (2.88) (2.28) (0.34)
Weighted average shares used in calculating basic and diluted net loss per share 130,533,721 170,511,022 170,511,022
Consolidated Income Statement
Note: In thousands of RMB and USD, except for share, per ADS data
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T h a n k Y o u
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