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Investor PresentationJanuary 2019
2
DisclaimerThis presentation has been prepared by Four Seasons Education (Cayman) Inc. (the “Company”) solely for informational purposes and has not been independently verified.No representations, warranties or undertakings, express or implied, are made by the Company or any of its affiliates, advisers or representatives or the underwriters as to, andno reliance should be placed upon, the accuracy, fairness, completeness or correctness of the information or opinions presented or contained in this presentation. None of theCompany nor any of its affiliates, advisers, or representatives or the underwriters accept any responsibility whatsoever (in negligence or otherwise) for any loss howsoeverarising from any information presented or contained in this presentation or otherwise arising in connection with the presentation. The information presented or contained in thispresentation is subject to change without notice and its accuracy is not guaranteed.
Certain statements in this presentation, and other statements that the Company may make, are forward-looking statements. These statements reflect the Company’s intent,beliefs or current expectations about the future. These statements can be recognized by the use of words such as “expects,” “plans,” “will,” “estimates,” “projects,” “intends,”“anticipates,” “believes,” “confident” or words of similar meaning. These forward-looking statements are not guarantees of future performance and are based on a number ofassumptions about the Company’s operations and other factors, many of which are beyond the Company’s control, and accordingly, actual results may differ materially fromthese forward-looking statements. Neither the Company nor any of its affiliates, advisers or representatives or the underwriters have any obligation and they do not undertaketo revise forward-looking statements to reflect future events or circumstances.
This presentation does not constitute an offer to sell or issue or an invitation to purchase or subscribe for any securities of the Company for sale in the United States oranywhere else. No securities of the Company may be sold in the United States without registration with the United States Securities and Exchange Commission (the “SEC”) oran exemption from such registration pursuant to the Securities Act of 1933, as amended (the “Securities Act”) and the rules and regulations thereunder. No part of thispresentation shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. Specifically, these materials do not constitute a “prospectus”within the meaning of the Securities Act. This presentation does not contain all relevant information relating to the Company or its securities, particularly with respect to therisks and special considerations involved with an investment in the securities of the Company and is qualified in its entirety by reference to the detailed information in theprospectus relating to the proposed offering. The Company has filed a registration statement on Form F-1 with the SEC relating to its securities to be offered in the UnitedStates, but the registration statement has not yet become effective. Any public offering of the Company’s securities to be made in the United States will be made solely on thebasis of the information contained in the statutory prospectus included in such registration statement. The prospectus contains detailed information about the Company, itssubsidiaries, management, the consolidated financial statements and risks and uncertainties associated with its business and industry. Any decision to purchase theCompany’s securities in the proposed offering should be made solely on the basis of the information contained in the prospectus relating to the proposed offering.
In evaluating our business, we use certain non-GAAP measures as supplemental measures to review and assess our operating performance. These non-GAAP financialmeasures have limitations as analytical tools, and when assessing our operating performances, investors should not consider them in isolation, or as a substitute for netincome attributable to the Company or other consolidated statement of operations data prepared in accordance with U.S. GAAP.
Section 1
Company Overview
4
Who We Are
Students Enrollment (1)
45,8573QFY2019
Effective Education
100% IMO(2) Shanghai gold medalists in the past five years were Four Seasons students (3)
Notes1. Student enrollment is defined as the cumulative number of courses enrolled in and paid for by our students during the respective period, including multiple courses enrolled in and paid for by the same student; for example, if a student enrolls in two courses, he/she is counted as two students2. International Mathematical Olympiad3. Considering only the China team members
LearningCenters
56Nov 2018
10Feb 2015
Cities 9Nov 2018
1Feb 2015
Network
Leadingafter-school math education service
provider
5
What We Do
KindergartenLaunched in 2015
Middle SchoolLaunched in 2017
Elementary SchoolLaunched in 2010
• Offering synchronous tutoring programs and a variety of interest-oriented classes as an effective supplement to standard school study
• Nurturing a passion for math and learning at a critical stage in development
• Providing various Chinese and English tutoring programs
• Delivering courses of all middle school compulsory subjects , including math, physics, chemistry, etc.
• Addressing students’ needs for synchronous tutoring programs which help review and consolidate knowledge therefore achieve better academic performance
• Focusing on logical thinking training and picture talking
• Developing basic logic and cognitive skills
• Acquisition of a renowned early childhood education tutoring provider in Shanghai
Champion Course
Gold Medal Course
Elite Course
Excellence Course
Advancement Course
Standard Programs Ivy Programs
LargeGroup
(21-35 Students)
SmallGroup
(15-20 Students)
Rolling Basis
Small Group
Customized Pacing
Specific Topics
6
Growth Potential for K-12 After-School Education Services Market
Source: (i) a report prepared at our request by Frost & Sullivan, an independent market research firm, in June 2017; (ii) ‘A new era of education China education development report 2018’, Deloitte ReportNotes:1. Tier 1 cities refer to four most developed cities in China which features with strong economic development and high per capita disposable income, are recognized as densely populated as well as culturally and economically influential, namely Beijing, Shanghai, Guangzhou and Shenzhen, based on IPO prospectus2. Penetration rate refers to the percentage of k-12 population who enrolled in after-school education services
Household Spending on After-school Educational Services in 2016
Robust Growth Forecast from Shanghai and Non-Tier 1 Cities(1)
6.7 7.5
17.7
Non-Tier 1 Cities China Shanghai
25.2% 26.5%
65.2%
Non-Tier 1 Cities China Shanghai
RMB K
Penetration Rate of K-12 After-school Educational Services in 2016(2)
%
Competition for High Quality
Education Resources
Increasing Disposable
Income
20322281
25472845
31753541
39304331
47515184
5640
0
1000
2000
3000
4000
5000
6000
2011 2012 2013 2014 2015 2016 2017 2018E 2019E 2020E 2021E
China's after-school tutoring revenue (RMB100 million)
Total revenue of China's after-school tutoring market
Section 2
Investment Highlights
8
Investment Highlights
Proprietary Personalized Curriculum3
Strong Faculty Supported by Stringent Recruiting and Training Programs4
Strong Brand and Market Leadership2
Standardized Operations and Highly Scalable Business Model5
Highly Effective Education1
9
Four Seasons (1) Shanghai average (3)
24% <1% 60% 6%
Highly Effective Education1
Exceptional Admission Rates Compared to Shanghai AverageIn Shanghai in 2016
Notes1. Based on Company survey conducted in 2016 of students who have taken at least one Four Seasons standard or Ivy program course2. 24% of Four Seasons’ standard and Ivy program graduates in 2016 were admitted into the top five middle schools in Shanghai3. According to Frost & Sullivan Report
Four Seasons (1)(2) Shanghai average (3)
Top 5 Middle Schools Top 30 Middle Schools
10
Our Programs are Widely Respected for Their Effectiveness
Recognized by Leading K-12 Schools
Four Seasons
Shanghai Foreign Language Primary
School Affiliated to SISU1
Shanghai Pinghe Bilingual School
Shanghai World Foreign Language
Middle School
Only after-school educational service providerteaching proprietary math courses in K-12 schools
in Shanghai
Proprietary curriculum delivered to K-12 schools
… …
1
Our Students Excel in Various Competitions
Note1. Shanghai International Studies University
Sudoku
ü 2018 Tianjin Junior Bridge Open Tournament Winners
Award-winning inü China Sudoku Conferenceü "China Science and
Technology Press Cup" 2018ü 2018 City Cup League
Bridge
11
Strong Brand and Market Leadership
Sales & marketing expenses only accounted for 9.1% of revenue (2)
2
Notes1. Ranking by gross billings and number of students in 2016 and the six months ended June 30, 2017, according to Frost & Sullivan Report2. Marketing expenses as % of revenue in 3QFY19
The go-to brand for math education
Teaching proprietary math courses in K-12 schools.
#1after-school math education
service provider for elementary school students in Shanghai (1)
12
Proprietary Personalized Curriculum
Four Seasons Curriculum
Innovative
Creative
DivergentThinking
Problem-solving
Oriented
Effective
Challenging
3
Traditional Curriculum
Memorization
Repetition
+
Teachers experienced in course design
Led by consultant team of expert educators
Headed by Mr. Peiqing Tian, Chairman and CEO
Massive Problem
SetDatabase
Experience from Math Olympiads
StudentEvaluation
System
TeacherFeedback
EducationResearch
Teaching
Tests /Assessment
Feedback /Analysis
CurriculumDevelopment
Dynamic in-house curriculum design process Personalized education empowered by strong curriculum design team
VS
13
§ Pre-class discussions
§ Sitting in on experienced teachers’ classes and substituting for absent teachers
§ Feedback from experienced teachers20%
Pre-job Training
Ongoing Training
On-the-job Satisfaction
Recruitment
§ Written exams and interviews
§ Mock lectures
§ Presentations to panels
candidates passing evaluation
4
Channels for Recruiting Teachers• Graduates from normal universities
and other renowned tertiary education institutions
• Principals and experienced teachers from public schools
Systematic recruitment and training programs facilitate scalable growth
Strong Faculty Supported by Stringent Recruiting and Training Programs
Feedback from students
Training to provide better service to both parents and students
9-tier teacher promotion system
1-2 Ongoing training sessions per week
Dedicated and capable educators
Encouraged to try innovative methods
Culture ofself-improvement
Sense of satisfaction
14
Standardized Operations and Highly Scalable Business Model5
Learning Centers
Key factors supporting rapid and efficient expansion
Experience from over 10 yearsof successful operations
Centralized training program for new teachers
Efficient process for designing and updating course programs
Centralized administrative and management system
February 2015
10
February 2016
21
February 2017
29
November 2018
56
February 2018
38
Section 3
Growth Strategies
16
Addressing Educational Needs Across Broader Age Groups
Significant synergies across offerings driving lifetime value of students
Elementary School
§ Launched in 2017§ Natural extension of business,
providing students with a seamless transition into the next stage of education
Middle SchoolKindergarten
§ Launched in 2015§ Focusing on training in basic logic,
reasoning and cognitive abilities
§ Building a solid foundation for formal math education
17
Providing Broader and More Diversified Courses
Mathas Core
Chinese
English Smart
MathSTE
M
Ø SHANE English(Foreign teachers oral English)
Ø Phonetic symbols、New Concept English(Chinese teachers)
Ø Covering elementary School Students and Middle School Students
Ø Writing, Readingand Comprehensive exercises
ü Leading position in Math education
ü Math related cartoons and puzzles for younger children
ü “One Lesson One Exercise”
Extending to strategic reasoning and logic lessons & games:ü Sudokuü Rubik's Cubeü Bridge
ü Paintingü STEMü Study tour and
Hands-on Inquiry Based Learning(HIBL)
18
Math Lab Project
Core: • Experiments • Intelligence
Goals:• To cultivate students' core mathematical literacy• To enhance teachers’ math-teaching skills and math culture connotation• To develop personalized learning through information technology
Dimensions:• Math culture introduction• Math activities experience• Math learning exploration• Math resources cloud storage
Math Lab(Jointly developed
with ECNU(1))
1
2
3
4
5
Value:• Through math experiments, students will be able to grow their learning interest, deepen their
understanding of math and strengthen the problem-solving skills in various hands-on activities.
Courses• Math culture courses• Math thinking courses• Math activities courses• Logic-based games• comprehensive math coursesNote
1. East China Normal University
19
Our Activities and Class Experience
Rubik's cube Sudoku NewdokuPuzzles Tangram Linked rings
22
20
Expansion of Our Learning Center Network
Increasing Presence outside of ShanghaiØ Focusing on Yangtze River DeltaØ Key cities: Shenzhen and ChongqingØ Tier 2 and tier 3 cities: Curriculum export
Notes:1. As of November 30, 2018
Number of learning centers (1)
(1)
Jiangxi: 1 Learning Center
Anhui: 1 Learning Center
Jiangsu: 4 Learning Centers
Shanghai: 46 Learning Centers
Our network of learning centers
Fuzhou: 1 Learning Center
Shenzhen: 1 Learning Center
Zhejiang: 1 Learning Center
Chongqing: 1 Learning Center
Section 4
Financial Highlights
22
Quarterly Financials OverviewRevenue and profitability are typically higher in FQ1 – FQ3 as fewer classes are offered in FQ4 because of Chinese New Year.
Quarterly RevenueRMB MM
69 7787
6786 93 91
FQ1'18 FQ2'18 FQ3'18 FQ4'18 FQ1'19 FQ2'19 FQ3'19
Quarterly Gross Margin%
68% 64% 65% 56% 56% 52% 53%
FQ1'18 FQ2'18 FQ3'18 FQ4'18 FQ1'19 FQ2'19 FQ3'19
Quarterly Adjusted Operating Margin(1)
%
35% 33% 32% 12% 25% 18% 18%
FQ1'18 FQ2'18 FQ3'18 FQ4'18 FQ1'19 FQ2'19 FQ3'19
Notes1. Adjusted operating income is defined as operating income excluding share-based compensation expenses. Adjusted operating margin is defined as adjusted operating income divided by revenue.
Appendix
24
Consolidated Income Statement
Condensed Income Statement (1)
RMB '000s
FY2016 FY2017 FY2018 FQ3’18 FQ3’19Revenue:Total revenue 93,801 203,188 300,533 87,240 91,167
Total cost of revenue` (54,986) (85,349) (109,444) (30,156) (43,064)Gross Profit 38,815 117,839 191,089 57,084 48,103
% Gross margin 41.4% 58.0% 63.6% 65.4% 52.8%
General and administrative expenses (27,725) (42,071) (92,932) (25,631) (32,083)Sales and marketing expenses (4,827) (12,563) (36,565) (9,840) (8,336)
Operating income 6,263 63,205 61,592 21,613 7,684% Operating margin 6.7% 31.1% 20.5% 24.8% 8.4%
Net income (31,088) 17,339 41,844 10,659 2,686% Net margin (33.1)% 8.5% 13.9% 12.2% 2.9%
Adjusted net income (2) 1,620 49,175 65,314 16,970 13,661% Adjusted net margin 1.7% 24.2% 21.7% 19.5% 15.0%
Notes1. Fiscal year ended February 282. Excluding share-based compensation expenses and fair value change of investments measured at fair value.
25
Consolidated Balance Sheet and Cash Flow Statement
Condensed Balance Sheet (1)
RMB '000sFY2016 FY2017 FY2018 FQ3’18 FQ3’19
Cash and cash equivalents 42,328 230,968 583,324 925,425 496,965
Property and equipment, net 2,348 7,395 23,920 21,046 30,983
Total assets 90,952 296,126 792,282 974,964 964,129
Deferred revenue 38,101 84,843 90,101 132,478 79,947
Total liabilities 91,899 124,683 134,334 200,153 179,495
Total mezzanine equity 22,174 163,807 - - -
Total equity (23,121) 7,636 657,948 774,811 784,634
Total liabilities mezzanine equity and equity 90,952 296,126 792,282 974,964 964,129
Condensed Cash Flow Statement (1)
RMB '000sFY2016 FY2017 FY2018
Net cash from operating activities 1,009 119,479 97,533
Net cash from / (used in) financing activities 600 74,903 461,221
Net cash from / (used in) investing activities (6,915) (10,176) (171,647)
Including: capex (1,630) (6,661) (23,113)
Net change in cash and cash equivalents (3,360) 188,640 352,356
Cash and cash equivalents at end of the period 42,328 230,968 583,324
Note1. Fiscal year ended February 28