Investor Relations 2007 The Best e-learning Service Company
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. What We Do Business Domain Educational System Business Structure Service Process Membership & Sales in On-line Market Growth Market Expansion & Entry Barrier Offline Education Market Size & Growth Population of Students Business Road Map Sales Structure & Ratio Performance & Projection Profit Summary Balance Sheet Summary 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Leading IT based e-learning Service Company Technology Side High-density, Dynamic Society High broadband Internet penetration Digital streaming tech. Image recording & processing tech. Learning & grade management tech. First mover in e-learning Dominant market leader Megastudy High School Market Contents Side High zeal for education Huge private Education market Pool of the best lecturers Customer-oriented high quality contents Well-balanced On/Off network Kindergarten & Elementary School Middle School GPA Korean SAT Essay & Interview College/Adult Education Overseas Mbest (To be merged) Current Major Business
On-line Off-line Academic Institutes megastudy.net High School mbest.net 7 locations in Seoul Middle School Subsidiary megagosi.net Exams for civil service personnel passmeca.net Qualifying exams for certificates HeeSo Megastudy Off-line school for state exams Equity Holdings : 40.0% Date of Foundation : April, 2005 Sales in 2006 : 4,263 million won Net Loss in 2006 : 473 million won MegaPnP A publishing and printing company that produces materials for online lectures and publicity booklets of Megastudy Equity Holdings : 43.8% Date of Foundation : August, 2001 Sales in 2006 : 2,399 million won Net Profit in 2006 : 79 million won
< Education System > < Entrance Exam Factors Change> Primary Education K-6 OLD NEW Secondary Education Higher Education Middle School 1-3 3 (7-9) High School 1-3 3 (10-12) 12) Undergraduate & Graduate School Re-takers G P A K S A T University -Specific Exam Absolute Evaluation Remarks based Evaluation Relative Evaluation 9 th grade system - Essay & Interview style tests - Increase the weight Early Application Middle School Preparing for G.P.A Preceding Study for High School GPA Extra curricular activity University-specific exams KSAT (minimum requirement Regular Application GPA University-specific exams University for early application II) KSAT
Off-line Online Biz : Offline Biz : Complements the weakness of only online business On-line
Teachers in Megastudy & Mbest Off Subject line Korean 54 Mandatory English 54 1/3 K S Mathematics 54 A Social Studies 40 (11 subjects) T Optional Sciences 41 (8 subjects) Middle School Essay & Interview 64 2 nd Foreign Language 7 Megastudy 314 Mbest - 314 Megastudy & Mbest Off-line On-line Mbest On Line 15 18 15 20 17 38 5 128 98 226
High School Middle School Penetration 1 st grade 2 nd grade 3 rd grade Re-takers Total Elementary 1 st grade 2 nd grade 3 rd grade Others Middle School Total 200 Registered Members 150 75% Paid Subscribers Numbers Numbers % Numbers % 436 431 412 1,478 690 701 684 2,075 62 104 237 553 (12) 23 34 37 (109) 94 14% 24% 57% 37% 3.3% 4.9% 5.4% 4.5% <unit : thousand> 26 43 102 73 254 (4) 9 11 11 (9) 31 6% 10% 25% 35% 17% (915) Graduated Students Current Registered Members 1.3% 1.6% 1.6% 1.5% Online Sales Trend Online Sales Subscribers Paid Subscribers Middle School Market Sales per paid subscribers (unit : thousand won) Weight of Number of Term-Based Course Weight of Sales of Term-Based Course (billion won) (thousand) (thousand) Number of bought Lectures (thousand) Sales per paid subscriber (thousand won) Online sales (unit : million won) Subscribers (unit : thousand) Paid Subscribers (unit : thousand) 2002 2003 2004 2005 2006 16.0 240 76 341 210 34.3 568 169 650 204 2003 842 22 7 126 0% 0% 35.6 850 190 795 187 2004 3,541 87 20 177 3% 6% 43.5 1,150 220 895 197 2005 5,782 135 27 218 13% 35% 56.1 1,468 254 1,045 221 2006 12,058 215 43 278 24% 56%
Paid Member Penetration in High School Market 30.0% 24.8% 25.0% 22.5% 20.0% 21.0% 20.0% High School 15.0% 10.0% 5.0% 0.0% 10.1% 9.9% 10.0% 8.4% 6.6% 3.1% 3.3% 4.0% 5.0% 5.8% 0.8% '2002 '2003 '2004 '2005 '2006 HS 1st HS 2st HS 3st Stable Growth Stage Online Market Offline Market Middle School Industrial Growth Curve Initial Stage Online Market Offline Mrket Mbest 1318 Class EduClub IwillPass : 1.8% 1.6% 1.4% 1.2% 1.0% 0.8% 0.6% 0.4% 0.2% 0.0% Paid Member Penetration in Middle School Market 0.2% 0.3% 0.2% 0.8% 0.6% 0.8% 1.1% 0.8% 1.0% 1.6% 1.6% 1.3% '2002 '2003 '2004 '2005 '2006 MS 1st MS 2st MS 3st
One stop learning place & high loyalty of customers Suggest a customized learning road map Provide advice on selecting lectures Steadfast Infrastructure & High Entry Barrier Provide best information about college entrance at the most optimum time (scoring service, college application assistance service, etc.) M-Zone : Entertainment & information T-Zone : communication with lecturers Cheer on students during examination Virtuous Cycle 5~6 times per year Popular off-line events
Kangnam Songpa Kangbuk Seocho Launch Product Customer Capacity/mo. 7/2003 11/2004 11/2004 11/2004 Single subject class Combined class Re-takers general class Single subject class Combined class Re-takers general class Single subject class Combined class Re-takers general class Single subject class Combined class Re-takers general class High School students Re-takers Elementary & Middle school High School students Re-takers High School students Re-takers High School students Re-takers 6,000 (850) 2,000 (250) 12,000 (1,100) 4,000 (850) Daechi 12/2004 Essay-writing Combined class High School students 1,000 Noryangjin 12/2005 Single subject class Combined class High School students Re-takers 13,000 (600) Namyangju 12/2006 Re-takers general class (Boarding School) Re-takers 300 Single subject class specialize in one subject course Monthly Capacity for Single subject class Combined class general course of all subjects for high school students after regular school Re-takers general class general course of all subject run all day like a regular school graduates Monthly Capacity for Re-takers general class
(million w on) 3.00 (%) 12.0 2.50 2.00 1.50 1.00 0.50 11.0 10.0 9.0 8.0 7.0 Korea's education expenses portion of per capita income is the highest among OECD nations. Education at a Glance - OECD Indicators 2005> 500 Elementary School W 10 t High School W 3.3 t Middle School W 5.6 t We estimate total private education market to be W19t in 2006, and college entrance prep market to be W3.3t 7.2 % of high school market 220bn won 2.0 % of Middle school market 100bn won 0.00 1982 1984 1986 1988 1990 1992 1994 Public Education Private Education % of Education Spending by households on total education and private education rose by 8.3% and 11.4% p.a respectively for past 10 years. The National Statistical Office 1996 600 400 300 200 100-400 300 200 100 - Online Market Size Online % of Market '04 '05 '06 '07 '08 '09 '10 '04 '05 '06 '07 '08 '09 '10 1998 2000 2002 2004 6.0 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Online Market Size Online % of Market 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0%
Middle School Students <unit : thousand> 2006 1999 2000 2001 2002 2003 2004 2005 2007 2008 2009 2010 Middle School 1 st 616 611 614 628 624 691 705 690 685 663 654 625 Middle School 2 nd 640 614 608 610 625 621 688 701 687 682 660 651 Middle School 3 rd 641 635 609 603 606 621 618 684 697 683 678 656 High School Total 1,897 1,861 1,831 1,841 1,855 1,934 2,011 2,075 2,069 2,028 1,992 1,932 High School Students 2006 1999 2000 2001 2002 2003 2004 2005 2007 2008 2009 2010 High School 1 st 451 412 415 410 416 424 438 440 496 491 491 479 High School 2 nd 472 445 406 409 404 409 417 431 434 490 485 486 High School 3 rd 477 467 439 400 405 399 405 414 428 431 487 482 High School Total 1,399 1,324 1,260 1,220 1,224 1,232 1,260 1,285 1,358 1,411 1,463 1,447 In high school sector, we consider only academic schools of which almost all students try to enter universities and exclude the vocational high schools which takes about 30% of all high school students.
Expansion of existing market & entry into new market 05 06 07 08 State/Qualifying exam U p w a r d (Adult) MEET/DEET/ Law School College transfer & English / Language B2B Existing Biz (high school) KSAT GPA (1 st and 2 nd year student expansion) Contents diversification Downward (Kindergarten, elementary, middle school ) Middle school Kindergarten & elementary school Overseas Entry into Chinese & Japanese markets
Sales Structure <unit : billon won> Lectures Online Materials Institutes Offline Others <unit : billon won> 2001 2002 2003 2004 2005 2006 2007(E) Online Lectures Materials 3.6 0.5 84% 11% 16.0 2.7 79% 13% 34.5 6.7 75% 15% 35.6 6.4 71% 13% 43.9 8.0 62% 11% 59.0 10.3 58% 10% 88.5 13.5 58% 10% Offline 0.2 4% 1.6 8% 4.7 10% 8.3 17% 19.1 27% 32.0 32% 46.0 32% Sales Total 4.3 100% 20.4 100% 46.0 100% 50.3 100% 71.0 100% 101.3 100% 148.0 100%
<unit : billion won> 2004 2005 2006 2007(E) Revenue 50.3 71.0 101.3 148.0 Online Lectures 35.6 71% 43.9 62% 59.0 58% 88.5 60% Online Materials 6.4 13% 8.0 11% 10.3 10% 13.5 9% Offline 8.3 16% 19.1 27% 32.0 32% 46.0 31% COGS 18.2 27.1 38.2 54.7 Operating Expense 12.3 19.2 30.8 43.3 Operating Profit 19.8 24.7 32.3 50.0 OP margin 39% 35% 32% 34% Net Profit 14.8 20.9 26.5 39.0 Net margin 29% 29% 26% 26% OP margin 2004 2005 2006 2007(E) Online Lectures Materials 50% 19% 48% 22% 49% 25% 47% 25% Offline 9% 16% 18% 19% R O E 32.6% 27.0% 25.7% 29.5%
<unit : billion won> 2006 2007 2006 Accumulative 2007 3Q 3Q YoY 1~3Q 1~3Q YoY Revenue 34.5 55.4 +60% 79.7 127.5 +60% Online Lectures 21.1 34.7 +65% 44.9 75.2 +68% Materials 3.9 6.1 +58% 8.1 12.2 +51% Offline 9.3 14.5 +46% 26.7 40.1 +50% COGS 12.3 19.5 +59% 30.0 46.9 +57% Operating Expense 7.3 10.8 +48% 21.1 31.2 +48% Operating Profit 14.9 25.0 +68% 28.7 49.4 +72% OP margin(%) 43.1% 45.1% 36.0% 38.7% Net Profit 10.7 16.9 +59% 23.0 37.1 +62% Net margin(%) 30.9% 30.5% 28.8% 29.1%
<unit : billion won> 2004 2005 2006 3Q 2007 Total Assets 73.6 105.2 143.4 194.1 Current assets 56.1 57.1 73.0 79.8 Non-Current assets 17.5 48.2 70.3 114.3 Investment Assets 1.3 8.6 18.8 35.4 Tangible Assets 8.7 23.7 30.7 47.8 Intangible Assets 0.6 0.5 0.7 3.5 Other Non Current Asset 6.9 15.3 20.2 27.7 Total Liabilities 8.5 14.7 28.1 40.2 Current Liabilities 7.9 12.3 22.4 30.8 Non-Current Liabilities 0.6 2.4 5.7 9.5 Total Shareholder s Equity 65.1 90.5 115.4 153.8 Paid-in Capital 3.0 3.0 3.2 3.2 Capital Surplus 24.1 24.1 28.3 28.3 Retained Earnings 37.7 58.7 80.5 111.9 Capital adjustment 0.3 4.8 3.3 10.4