The Best e-Learning Service Company -...

The Best e-Learning Service Company

Investor Relations 2010www.megastudy.netwww.megastudy.net

www.megastudy.netwww.megastudy.net

2

1. What We Do 32. Business Domain 43. Educational System 54. Business Structure 65. Service Process 76. Membership & Sales in On-line 87. Market Growth 98. Market Expansion & Entry Barrier 109. Offline Education 11

10. Market Size & Growth 1211. Business Road Map 1312. Performance & Projection 1413. Profit Summary 1514. Balance Sheet Summary 16

ContentsContents


3

• First mover in e-learning• Dominant market leader

Technology Side Contents Side

Megastudy

Digital streaming tech.Image recording & processing tech.Learning & grade management tech.

Pool of the best lecturersCustomer-oriented high quality contentsWell-balanced On/Off network

Leading IT based e-Learning Service Company

GPA KoreanSAT

Essay &

Interview

Middle School

Current Major Business

High School Market

OverseasKindergarten& Elementary

School

Mbest, Pure On-line(20% of sales)

College/AdultEducation

What We doWhat We do

High-density,Dynamic Society

High broadbandInternet penetration

High zealfor education

Huge privateEducation market

On-line (55% of sales)Off-line (25% of sales)


4

Subsidiary

megastudy.net

mbest.net

7 locations in Seoul

On-line Off-line Academic Institutes

mjunior.net

MegaBooksMega MD Veritas M

• Equity Holdings : 66.8%• Performance in ‘09

Sales : 8.7 bn wonNet Profit : 0.1 bn won

- Special graduate School (Medical, Dental, Pharmaceutical and Law) entranceexam prep. courses

- Started from 2008 by acquisition of the existing company “Pareto”

- Extend the market by utilizing the Megastudy’s experienced customer base

MegaNEXT HyungsulEdu


Sales : 4.6 bn wonNet Loss : 2.4 bn won

- State exam for civil service workers and certificates/licenses test prep. courses- Invested in 2005 and as a way of restructuring and exit, invited other educational company > now 2nd

largest holder and no more managerial and financial input.- Through service internal restructuring with partner, loss amount is decreasing and further negative impact on the company will be limited.

- Publishing supplementary books in High School

- In 2001 started the business which covered close-purpose publishing only related withonline lectures > converted and enlarged it to open-purpose publishing and 100%owned subsidiary in 2009.

- English language, job relatededucation for university students& adults

- Start an active operation and marketing activity from thebeginning of 2010



- Off-line schools located in the Northern part of Seoul for high school students and re-takers (Seongbuk and JunggyeMegastudy)

- Acquired the school managed by star teacher in Megastudyas a package deal for renewalof lecturer contract in Feb,2009and manage directly under Megastudy brand

High School

Middle School

Elementary School

• Equity Holdings : 100%• Performance in ‘09

Sales : 11.0 bn wonNet Profit : 0.4 bn won

• Equity Holdings : 100%• Performance in ‘09


megagosi.netmegamd.co.kr/ megals.co.kr megabooks.co.kr

Business DomainBusiness Domain


5

PrimaryEducationPrimaryPrimary

EducationEducation

SecondaryEducationSecondarySecondaryEducationEducation

HigherEducation

HigherHigherEducationEducation

K-6KK--66

Undergraduate & Graduate School

Undergraduate & Undergraduate & Graduate SchoolGraduate School

Middle School1-3 (7-9)

Middle SchoolMiddle School11--3 (73 (7--9)9)

High School1-3 (10-12)

High SchoolHigh School11--3 (103 (10--12)12)

Early Application

Regular Application

UniversityGPA

University-specific exams

KSAT

Educational SystemEducational System

GPA

Extra curricular activity

University-specific exams

KSAT (minimum requirement

for early application II)

Middle School

• Preparing for G.P.A

• Preceding Studyfor High School

G P A - Academic performance records in high school times

K S A T - National Standardized Exam. once a year- 3rd week of Nov.

University-Specific

Exam

- Essay writing style- Interview test- Knowledge based test

Re-takersReRe--takerstakers

< Education System > < University Entrance Exam >


6

Business StructureBusiness Structure

Providing Online Lectures/Materials

Synergy through combination of online & offline

Off-line

On-line

■ Online Biz : Provide lectures to students via video streaming over the internet

■ Offline Biz : Develop contents to maximize synergy effect for online business and provide a basis for contact

with customers

Synergy through combination of online & offline lectures

Offline Educational Institutes

(7 Institutes )

Contents Providing Base

Offline Lecture

FILMING/EDITINGUPLOAD

STREAMING

FILMING/EDITINGUPLOAD

STREAMING

Online Lecture VOD Service

KSAT GPAUniversity

-specific exams

Find Out What Customers need

Search For New Lecturers

Complements the weakness of only online business


7

Service ProcessService Process

Subject Offline

OnLine

Korean 66 14

English 62 15Mandatory

Mathematics 82 20

Social Studies(11 subjects)

41 28

KSAT Optional

Sciences(8 subjects)

42 21

Essay & Interview 16 18

2nd Foreign Language 6 4

Megastudy 315 120

Single Subject Class

1,000 Minutes

60 ~ 90 Days

10 ~ 15 Chapters

VOD Type Service

Off-

line Single Subject Class

2 Months (8 Weeks)

2~3 hours / week

16 ~ 20 Hours

₩ 190,000

Lecture ₩ 65,000Material ₩ 10,000

On-

line

1/31/3

Term-Based Course

Cover all Subjects

Close care by in-house tutors

6 Months (₩760,000)

12 Months (₩1,280,000)

■ Middle School

Mbest - 117

Megastudy & Mbest 315 237

■ The number of teachers in Megastudy & Mbest

Mbe

st


8

MembershipMembership & Sales in Online& Sales in Online

■ PenetrationRegisteredMembers

PaidSubscribers

Numbers Numbers % Numbers %

1st grade 670 108 16% 53 8%

2nd grade 661 174 26% 79 12%

3rd grade 634 297 47% 147 23%

Re-takers 200 155 78% 117 59%

Total 2,165 734 34% 396 18%

<unit : thousand>

Elementary (54) (14)

1st grade 657 64 9.7% 25 3.9%

2nd grade 677 89 13.2% 33 4.9%

3rd grade 674 105 15.6% 31 4.6%

Others (454) (29)

Middle SchoolTotal 2,007 258 12.8% 118 5.9%

Current Registered Members( 1.764) Graduated Students

■ Middle School Online Sales Trend’06 ’07 ’08 ’09 ’10(E)

Online sales (billion won) 12.1 23.8 34.6 44.6 54.0

Subscribers (thousand) 215 354 582 766 957

Paid Subscribers(thousand)

43 77 102 132 149

Sales per paid subscribers (thousand won)

278 310 338 338 361

Weight of Number ofTerm-Based Course

24% 28% 33% 33% 34%

Weight of Sales ofTerm-Based Course

56% 62% 68% 69% 71%

■ High School Online Sales Trend’06 ’07 ’08 ’09 ’10(E)

Online Sales (billion won) 56.1 73.8 91.2 109.2 127.3

Subscribers (thousand) 1,468 1,799 2,123 2,498 2,907

Paid Subscribers (thousand) 254 310 351 396 434

Number of bought Lectures (thousand)

1,045 1,242 1,414 1,631 1,794

Sales per paid subscriber(thousand won)

221 238 260 276 293

Hig

h Sc

hool

Mid

dle

Scho

ol


20.3%

23.2%

16.6%18.3%

7.9%7.0%6.4%

4.4%3.6%2.9%2.2%

0.5%

12.0%11.8%10.2%

7.2%7.1%5.9%4.6%

2.1%

18.9%17.7%

16.0%14.6%

6.8%

14.3%15.2%

12.9%11.3%

9.8%8.6%

4.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

'2002 '2003 '2004 '2005 '2006 '2007 '2008 '2009

HS 1st HS 2nd HS 3rd Megastudy

9

Online MarketPaid Service

MegastudyETOOSVitaEdu

Free Service

EBSiTeachMe

KangNamGu

Offline Market

JungilCheongsol

：

DaesungJongro

Megastudy

Market GrowthMarket Growth

■ Paid Member Penetration in High School Market

■ Paid Member Penetration in Middle School Market

Stab

le Gro

wth S

tage

Industrial Growth Curve

Initia

l Stag

e

Offline Market

Potential Market

For Megastudy

Online MarketPaid Service

Mbest1318 Class

EduClubSoobakc.com

:

Free Service

EBSi:

High School

Middle School

Total

3.9%

4.9%4.6%

0.2%0.6%

0.8%

1.3%

2.4%2.8%

0.2%0.8%

1.1%1.6%

3.0%

4.0%

0.8%0.3%

1.0%

1.6%

2.7%

3.7%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

'2003 '2004 '2005 '2006 '2007 '2008 '2009

MS 1st MS 2nd MS 3rd


10

CommunityCommunication

CustomizedInformation

LearningSupportingService

■ One stop learning place & high loyalty of customers

Off-lineEvent

Market Expansion & Entry BarrierMarket Expansion & Entry Barrier

Suggest a customized learning road mapProvide advice on selecting lectures

Provide best information about college entrance at the most optimum time (scoring service, college application assistance service, etc.)

M-Zone : Entertainment & informationT-Zone : communication with lecturers Cheer on students during examination

5~6 times per year

Popular off-line events

■ Steadfast Infrastructure & High Entry Barrier

■ Virtuous Cycle

Contents

(Lecture)

Offline

Institute

Membership

High daily

website Hits

Popular website,

attract quality

lecturers

Quality lecturers

reinforce the cutting

edge of the website

and increase traffic


11

Offline EducationOffline Education

Single subject classCombined class

Re-takers general class7,000

(1,050)High School students

Re-takers2003. 07

Launch Product Customer Capacity/mo.

Kangnam


Re-takers general class12,000(900)

High School studentsRe-takers2004. 11Kangbuk


Re-takers general class4,000

(1,000)High School students

Re-takers2004. 11Seocho


14,000(700)

High School studentsRe-takers2005. 12Noryangjin

Re-takers general class(Boarding School) 200Re-takers2006. 12Namyangju


Re-takers general class1,000(700)

High School studentsRe-takers2008. 11Shinchon

500Re-takers2008. 11Kwangju Re-takers general class(Boarding School)

Monthly Capacity for Single subject class

Monthly Capacity for Re-takers general class

Single subject class – specialize in one subject courseCombined class – general course of all subjects for high school students after regular schoolRe-takers general class – general course of all subject run all day like a regular school graduates


12

2.7% of

high school

& Re-takers

market

160bn won

Market Size & GrowthMarket Size & Growth

2.92.4

1.7 1.6

0.5 0.9

4.55.0

4.84.1

3.3

4.2

5.04.9

1.31.7

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Ko r ea Un i t ed

St a t es

Can ada Aust r a l i a Japan Spa in N ew

Zea la n d

OECD

aver a ge

Public Education Expenditure % of GDP

Private Education Expenditure % of GDP

0

100

200

300

'04 '05 '06 '07 '08 '09 '10 '11 '121.0%

2.0%

3.0%

4.0%Online Market Size Online % of Market

Elementary School W 10.8 t High School W 5.2 t

Middle School W 6.1 t

■ Education Expenditure of OECD Countries <% of GDP> ■ Expenditure on Education per households

■ Private Education Market in 2009

* Spending by households on total education and private education rose by 7.1% and 12.0% p.a respectively for past 10 years. < The National Statistical Office >

■ Online-Lectures Market Size in High School & Re-takers

• We estimate total private education market to be W23t in 2009, and college entrance prep market to be W5.9t.

< Ministry of Edu in 2009 / Megastudy >

■ Online-Lectures Market Size in Middle School1.5 % of Middle schoolmarket90bn won

bn ₩

0

50

100

150

200

'04 '05 '06 '07 '08 '09 '10 '11 '120.0%

1.0%

2.0%

3.0%Online Market Size Online % of Marketbn ₩

Re-takers W 0.7 t

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 20086

7

8

9

10

11

12

13

Public Education Private Education % of Education

(%)(million won)


13

Business Road MapBusiness Road Map

•No Business•Potential M&A•EnglishXX2.8 tril. won700 thou.Kindergarten

•Pure Online•Offline entry and expansion•Publishing•English

X6.1 tril. Won2.0 mil.Middle School(13~15)

•State exam•Qualifying exam•MEET/DEET/PEET•English/LEET

2.5 tril. wonAdult & College

•Online & Offline•Offline expansion•Publishing

5.9 tril. Won2.2 mil.

(Including Re-takers)High School

(16~18)

•Online penetration•Potential M&A•EnglishX10.8 tril. Won3.5 mil.

Elementary School (7~12)

Online

Overseas

Business

Current status and New Business

OfflinePrivate market size

The number of students

ChinaVietnam


14

Performance & Projection Performance & Projection

2007 2008 2009 2010(E)Revenue 163.4 202.3 238.3 273.0

Gross Profit 102.1 127.0 151.4 173.5

GP margin 63% 63% 64% 64%

Operating Profit 58.4 67.6 84.7 98.3

OP margin 36% 33% 36% 36%

Net Profit 46.2 51.5 68.6 80.6

Net margin 28% 25% 29% 30%

<unit : billion won>

Amount OP margin Growth Amount OP

margin Growth Amount OP margin Growth Amount OP

margin Growth

HighOn-Line 88.1 52% 32% 108.5 51% 23% 129.9 51% 20% 150.6 51% 16%

Off-Line 44.8 14% 47% 50.4 15% 13% 56.7 12% 12% 60.8 11% 7%

Middle 26.3 25% 77% 37.8 20% 43% 48.0 24% 27% 58.1 24% 21%

etc 4.1 -3% 71% 5.6 -6% 35% 3.7 -10% -34% 3.5 16% -5%

R O E 33.5% 31.4% 34.1% 30.1%

On : 72% Hi : 84% On : 74% Hi : 81% On : 75% Hi : 80% On : 77% Hi : 78%

Off : 28% Mi : 16% Off : 26% Mi : 19% Off : 25% Mi : 20% Off: 23% Mi : 22%


15

Profit Summary Profit Summary –– 3Q3Q

<unit : billion won>

Accumulative2009 2010

2009 2010

3Q 3Q YoY 3Q 3Q YoY

Revenue 77.8 76.5 -2% 191.4 194.7 +2%

Online Lectures 50.7 49.9 -2% 119.8 120.0 0%

Materials 8.3 5.3 -36% 18.6 14.4 -23%

Offline 17.4 19.2 10% 49.2 53.0 +8%

Others 1.5 2.1 44% 3.8 7.3 +93%

COGS 28.1 29.0 +3% 70.1 73.9 +5%

Operating Expense 17.0 17.7 +4% 48.4 49.4 +2%

Operating Profit 32.8 29.7 -9% 72.8 71.4 -2%

OP margin(%) 42.1% 38.8% 38.1% 36.7%

Net Profit 26.8 23.4 -13% 5.88 57.2 -3%

Net margin(%) 34.4% 30.6% 30.7% 29.4%


16

Balance Sheet SummaryBalance Sheet Summary<unit : billion won>

2008 2009 2010 3QTotal Assets 211.6 285.0 328.5

Current assets 85.1 165.7 179.3

Non-Current assets 126.5 119.3 149.2

Investment Assets 36.3 35.6 48.3

Tangible Assets 53.7 49.1 67.0

Intangible Assets 2.8 3.5 3.4

Other Non Current Asset 33.7 31.1 30.5

Total Liabilities 44.6 49.7 50.2

Current Liabilities 43.3 47.9 47.7

Non-Current Liabilities 1.3 1.8 2.5

Total Shareholder’s Equity 167.0 235.3 278.3

Paid-in Capital 3.2 3.2 3.2

Capital Surplus 28.3 28.3 28.3

Retained Earnings 161.2 223.2 266.0

Capital adjustment (-)5.8 0.6 0.7

Treasury Stock (-)20.0 (-)20.0 (-)20.0

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