TAL Education : Investor Presentation - January 2021

TAL Education Group

Investor Presentation

January 2021

Disclaimer

This presentation has been prepared by TAL Education Group (the "Company") solely for information purpose. By viewing or accessing the information

contained in this material, you hereby acknowledge and agree that no representations, warranties or undertakings, express or implied, are made by the Company or any of its directors, shareholders, employees, agents, affiliates, advisors or representatives as to, and no reliance should be placed upon, the accuracy, fairness, completeness or correctness of the information or opinions presented or contained in this presentation. None of the Company or any of its directors, shareholders, employees, agents, affiliates, advisors or representatives accept any responsibility whatsoever (in negligence or otherwise) for any loss howsoever arising from any information presented or contained in this presentation or otherwise arising in connection with the presentation. The information presented or contained in this presentation is subject to change without notice and its accuracy is not guaranteed.

This presentation does not constitute an offer to sell or issue or an invitation or recommendation to purchase or subscribe for any securities of the Company for sale in the United States or anywhere 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") or an 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 this presentation shall form the basis of or be relied upon in connection with any contract or investment decision in relation to any securities or otherwise. This presentation does not contain all relevant information relating to the Company or its securities, particularly with respect to the risks and special considerations involved with an investment in the securities of the Company. Nothing contained in this presentation shall be relied upon as a promise or representation as to the past or future performance of the Company. Past performance does not guarantee or predict future performance. You acknowledge that any assessment of the Company that may be made by you will be independent of this presentation and that you will be solely responsible for your own assessment of the market and the market position of the Company and that you will conduct your own analysis and be solely responsible for forming your own view of the potential future performance of the business of the Company.

Certain statements in this presentation, and other statements that the Company may make, are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended. 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 of assumptions about the Company's operations and other factors, many of which are beyond the Company's control, and accordingly, actual results may differ materially from these forward-looking statements. The Company or any of its affiliates, advisers or representatives has no obligation and does not undertake to revise forward-looking statements to reflect future events or circumstances.

Mission, Vision and Values

Mission

Making Education Better with Love and Technology

Vision

To be a Respectable Education Institution

Values

Customer Orientation, Pragmatism, Innovation, Cooperation

Company Highlights

Industry Leader in Large and Attractive

Market

Strong Brand, Recognized for High Quality Teaching, Proprietary Content, and Student Outcomes

Significant Scale and Reach Offline

and Online

Strong Operational Performance with

Consistent Growth

High Visibility Recurring Revenue Model

with Strong Cash Flow

Leading Edge of Science and Technology

Development

What We Do - Core Business Units

We Cover Core Subjects in the K-12 School Curriculum 1

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

Mathematics

English

Chinese

Physics

Chemistry

Biology

Politics

History

Geography

Small Class

Online School

Personalized Premium Services (1-on-1)

1 "●"Denotes currently offered course

Reform of College Entrance Examination Creates New Opportunities

Examination-Focused Education System

Higher

Education

College Entrance

Examination

- "Gao Kao"

High School Entrance

Examination

- "Zhong Kao"

Middle School Entry Selection Process -"Xiao Sheng Chu"

Primary School Entry Selection Process -"You Sheng Xiao"

1 "3+Comprehensive Exam" to "3+3"

3+Comprehensive Exam: Choose between Comprehensive Liberal Arts and Comprehensive Science

3+3: Choose 3 courses among Physics, Chemistry, Biology, Politics, History and Geography

• Reform of college entrance exam has influenced High School Entrance Exam.
• Longer period, more Complicated rules and increased uncertainty push students to prepare earlier.

2 Gradually Uniform College Entrance Exam

• Efficiency of content development will improve.

Based Upon High Teaching Quality and Differentiated Proprietary Content

Optimized Teacher Management System

Selective Hiring		Comprehensive		Rigorous
Process		Training		Evaluation Process

•

•

Top university graduates Rounds of tests and interviews

•

•

Comprehensive new teacher training Regular ongoing training

•

•

Continuous evaluation Performance based compensation

Proprietary Content Development

Review local curriculum
	Analyze latest	trends		Develop tailored course		Collect teacher and
requirements			materials		student feedback

Regular evaluation and improvement process

Experienced in-house content	External education experts
development team	hired as advisors

IP transfer and content license

agreements with leading international publishers for English subject areas

Straightforward Strategy to Expand Scale Both Offline and Online

Further penetrate	Enter new	Polishing online	Enhance content	Maintain premium
existing markets	markets: Target to	and mobile	offering across	pricing while
by both online and	enter new cities	offerings,	subjects and grade	diversifying
offline offerings	each year	expanding online	levels	programs
		engagement

Large Untapped Geographic Expansion Opportunity

Incremental Center Opportunities

		# of Small Class Centers		# of
	Year			# of One-
	# of	# of Firstleap	Total
City	of	on-One
Learning
	Entry	Peiyou	and Mobby	Centers
		Centers	Centers		Centers
Beijing	2003	88	37	27	152
Shanghai	2008	70	2	16	88
Nanjing	2011	48	23	8	79
Guangzhou	2009	58	2	17	77
Shenzhen	2010	51	1	15	67
Hangzhou	2011	48		7	55
Tianjin	2008	33		6	39
Chongqing	2012	31	6	2	39
Wuhan	2008	30		5	35
Xi'an	2011	22		8	30
Suzhou	2012	22	2	5	29
Shenyang	2012	14	10	2	26
Zhengzhou	2012	21		4	25
Chengdu	2011	16		6	22
Changsha	2014	15		1	16
Jinan	2014	10		3	13
Hefei	2016	8	4		12
Fuzhou	2015	11			11
Qingdao	2014	10		1	11
Taiyuan	2012	9		1	10
Shijiazhuang	2014	10			10
Nanchang	2015	6			6
Foshan	2017	6			6
Changzhou	2017	5			5
Wuxi	2015	5			5
Ningbo	2015	5			5

# of Small Class Centers

	Year			# of	# of
	# of	# of Firstleap	One-on-	Total
City	of
	Entry	Peiyou	and Mobby	One	Learning
	Centers	Centers
		Centers	Centers
Zhenjiang	2017	4			4
Guiyang	2016	4			4
Dongguan	2017	4			4
Xuzhou	2017	4			4
Lanzhou	2017	4			4
Changchun	2016	3			3
Nantong	2017	3			3
Luoyang	2015	3			3
Wenzhou	2017	3			3
Yangzhou	2017	3			3
Zibo	2018	3			3
Huai'an	2018	3			3
Xiamen	2017	2			2
Dalian	2017	2			2
Yantai	2017	2			2
Huizhou	2018	2			2
Zhongshan	2017	2			2
Shaoxing	2017	2			2
Kunming	2018	2			2
Yinchuan	2018	2			2
Weifang	2018	2			2
Hong Kong	2019	2			2
Langfang	2019	2			2
Yancheng	2019	2			2
Handan	2018	1			1
Nanning	2018	1			1

			# of Small Class Centers
		Year			# of	# of
		# of	# of Firstleap	One-on-	Total
City		of
	Peiyou	and Mobby	One	Learning
		Entry
		Centers	Centers	Centers Centers
Urumchi		2018	1			1
Haikou		2018	1			1
Ha'erbin		2018	1			1
Hohhot		2018	1			1
Linyi		2018	1			1
Tangshan		2018	1			1
Jining		2019	1			1
Tai'an		2019	1			1
Suqian		2019	1			1
台州	2019	1			1
Taizhou(	)
Jinhua		2019	1			1
Quanzhou		2019	1			1
Taizhou(泰州)	2019	1			1
Jiaxing		2019	1			1
Zaozhuang		2019	1			1
Lianyungang	2019	1			1
Zhangzhou		2019	1			1
Silicon Valley	2019	1			1
Yueyang		2020	1			1
Changde		2020	1			1
Hengyang		2020	1			1
Zhuzhou		2020	1			1
Xiangtan		2020	1			1
Zhanjiang		2020	1			1
Zhuhai		2020	1			1
Jiangmen		2020	1			1

		# of Small Class Centers	# of	# of
	Year
	# of	# of Firstleap	One-on-	Total
City	of
Peiyou	and Mobby	One	Learning
	Entry
	Centers	Centers	Centers Centers
Shantou	2020	1			1
Xiangyang	2020	1			1
Yichang	2020	1			1
Mianyang	2020	1			1
Deyang	2020	1			1
Wuhu	2020	1			1
Liuzhou	2020	1			1
Zunyi	2020	1			1
Baotou	2020	1			1
Xining	2020	1			1
Baoji	2020	1			1
Baoding	2020	1			1
Xianyang	2020	1			1
Yulin	2020	1			1
Huzhou	2020	1			1
Ganzhou	2020	1			1
Jiujiang	2020	1			1
Chenzhou	2020	1			1
Dongying	2020	1			1
Dezhou	2020	1			1
Heze	2020	1			1
Binzhou	2020	1			1
Maoming	2020	1			1
Jieyang	2020	1			1
Total		769	87	134	990

Ongoing Progress Since IPO in Fiscal Year 2011

Expanding Scale	Increasing Geographical Footprint
# of City Covered	# of Learning Centers	% of Xueersi Peiyou Small Class Revenue Generated Outside Top Five Cities

+1600%	102	+768%	990
6		114
Q3 FY2011	Q3 FY2021	Q3 FY2011	Q3 FY2021
(IPO)		(IPO)

46%		46%	48%
42%	43%	44%	44%

Q1 FY2020 Q2 FY2020 Q3 FY2020 Q4 FY2020 Q1 FY2021 Q2 FY2021 Q3 FY2021

Note: Top Five Cities are Beijing, Shanghai, Guangzhou, Shenzhen, Nanjing.

Growth in Revenue / Net Income

US$MM			CAGR:45.7%									$3,273	+35.0%
															$2,563			$1,119
																	$829
													$1,715
									$620	$1,043
	$178	$226	$314	$434					$198	$367
$111						$117			$20
	$67		$103
$24	$24	$33	$61
																					($44)
																	($110)
FY2011	FY2012	FY2013	FY2014		FY2015	FY2016			FY2017	FY2018		FY2019		FY20201Q3 FY2020Q3 FY2021
					Revenue			Net Income

Note: Year and period are as per fiscal year.

1. Included the partial corrections in relation to "Light Class" business.

Topline Growth Driven by Online and Offline Business

Revenue

US$MM				CAGR:44%
							3,273
									2,563		YoY:
								1,715		+35%
				620		1,043			829		1,119
		314	434
178	226
FY2012	FY2013	FY2014	FY2015		FY2016	FY2017	FY2018	FY2019	FY20201 Q3 FY2020Q3 FY2021

	Student Enrollments of normal
	priced long-term course		Revenue Contribution
'000s	YoY: +47%		Q3 FY2021	Q3 FY2020
	3,397	5%	6%
	2,318	28%	19%
		75%
		66%

Q3 FY2020

Q3 FY2021

Small Class and Others

Xueersi.com

One-on-One

1. Included the partial corrections in relation to "Light Class" business.

Ongoing Investments to Increase Future Growth

Gross Profit

US$MM			CAGR:50%
									1399	1805	YoY:
								833			+29%
							521			467	604
			110	162	231	316
		82
		FY2012	FY2013	FY2014	FY2015	FY2016	FY2017	FY2018	FY2019	FY2020 1	Q3	Q3
											FY2020	FY2021
Margin:	46.2%	48.8%	51.7%	53.2%	51.0%	49.9%	48.6%	54.6%	55.1%	56.4%	53.9%

Operating Income

US$MM

							342
			CAGR:26%		209
							137
			67	85	135				69
21	31	57
											-127
FY2012	FY2013	FY2014	FY2015	FY2016	FY2017	FY2018	FY2019	FY2020	1	Q3	Q3
									FY2020	FY2021
Margin: 11.8%	13.9%	18.3%	15.5%	13.7%	12.9%	12.2%	13.3%	4.2%		8.4%	-11.4%

1. Included the partial corrections in relation to "Light Class" business.

While High Visibility Cash Flows Provide Strength to Balance Sheet

		Cash, Cash Equivalents, Term Deposits								Deferred Revenues
			and Short-term Investments
US$MM												US$MM
										5,098													1,957
			270	492	479	700	1,499	1,516	2,219							132	178	289	519	842	436	781
199	209							86	103
	Feb 29,Feb 28,Feb 28,Feb 28,Feb 29,Feb 28,Feb 28,Feb 28,Feb 29,Nov 30,		Feb 29,Feb 28,Feb 28,Feb 28,Feb 29,Feb 28,Feb 28,Feb 28,Feb 29,Nov 30,
2012	2013	2014	2015	2016	2017	2018	2019	2020	2020			2012	2013	2014	2015	2016	2017	2018	2019	20201	2020

Free Cash Flow

US$MM

856

685

Net Cash Provided by

								379						Operating Activities
		102	148	197			353				Capital Expenditure
73	65		126	194	188
74	7		11		31		35	71

FY20122FY2013 FY2014 FY2015 FY2016 FY20173 FY2018 FY20194 FY2020

1. The Group adopted Revenue from Contracts with Customers ("Topic 606") on March 1, 2018. Reclassification was made from deferred revenue to accrued expenses and other current liabilities for tuition collected that may be refunded to the customers in the future if students withdraw from a course for any remaining classes. The Group adopted government policy from the Third Quarter of Fiscal Year 2019 that advanced tuition fees of more than three months may not be collected.
2. Capital expenditure in fiscal year 2012 was US$74.3 million. The significant increase was primarily related to the purchase of office space for headquarter in Beijing in the amount of $62.5 million.
3. The Group adopted ASU 2016-09 standard on March 1, 2017. The retrospective application resulted in a $9.4 million and $19.5 million reclassification of these cash outflows from operating activities to financing activities on our consolidated statements of cash flows for the years ended February 29, 2016 and February 28, 2017, respectively.
4. Capital expenditure in fiscal year 2019 was US$353.3 million. The significant increase was mainly due to prepayments for purchase of land use right of $209.9 million.

Experienced Management Team and Distinguished Board

Bangxin Zhang: CEO and Director since inception

Yunfeng Bai: Chairman since Jan 2020, President since Oct 2016, Senior VP of TAL from Apr 2011 to Oct 2016, 15+ years with TAL

Jane Jie Sun: Audit Committee Chair, Independent Director since Oct 2010, CEO and Director of Ctrip Inc.

Weiru Chen: Compensation Committee Chair, Independent Director since June 2015, associate professor of strategy at China Europe International Business School ("CEIBS")

Kaifu Zhang: Nominating & Corporate Governance Committee Chair, Independent Director since Oct 2016, assistant professor of Marketing and the Xerox Junior Chair at the Tepper School of Business, Carnegie Mellon University

Yachao Liu: COO effective from Jun 2017, Company Director from Oct 2016 to Jan 2020, Senior VP of TAL from Apr 2011 to Oct 2016, 15+ years with TAL

Rong Luo: CFO effective from Nov 1st 2014, former CFO of eLong Inc.

Mi Tian: CTO effective from May 2020, joined TAL in May 2019

Thank You

Address:15/F Danling SOHO, No. 6 Danling Street, Haidian District, Beijing 100080

Email: [e-mail]

Tel: [phone]