New Oriental Education & Technology (EDU) 24 Apr 242024 Q3 Earnings call transcript

Good evening, and thank you for standing by for New Oriental's FY 2024 Third Quarter Results Earnings Conference Call. [Operator Instructions] Today's conference is being recorded.

If you have any objections, you may disconnect at this time. I'd now like to turn the meeting over to your host for today's conference, Ms. Sisi Zhao.

you. Thank welcome Third and Earnings Quarter New Call. Conference to everyone, Fiscal Oriental's XXXX Hello,

to for will were New detail well that, the and results and updates Executive financial Our period in Financial Chief earnings be on Services. Stephen and answer Officer, company's Stephen results President Newswire business and are will your released After the website latest questions. on with as share available you. as I Today, I Yang, Oriental's available today earlier and

please we will Private XXXX. Before of safe the contain of forward-looking note U.S. continue, that harbor discussion statements Securities the the Act today Litigation Reform made under provisions

Forward-looking statements and involve inherent risks uncertainties.

risks materially from in may such, outlined expressed the and our results public As filings potential the uncertainties different our with are today. be views SEC. of A number

does statements, forward-looking New update any law. except as undertake Oriental to under applicable obligation any not required

being this As recorded. reminder, conference a is

webcast Oriental's over a Yang. addition, the of call please be to call website will now turn will ahead. go Relations In investor.neworiental.org. I Stephen, Investor on first conference New Mr. this available at

everyone, Hello, Sisi. joining you thank call. you, Thank us on for the and

revenue, new remarkable quarter made that recovery that are growth line quarter We has our business to expectations. diverse business of has invigorating our company's top across portfolio expansion has this The our achieved healthy surpassed steady announce Oriental performance spoken of this volumes our innovative sustained robust endeavors. pleased New to about the while lines, contributions

to resources, of value lines, healthy vital all to our encouraging XX.X% efforts business our maintaining sustainable this customers non-GAAP margin and operating has combined share we shareholders New create stands strive for Bolstered better growth growth business for Oriental's long model, structure. and the term. our by bottom thanks cost as firm a and in respectively, streamlined reaching to market line yields utilized across commitment restructured with margin achieved and operating performance quarter, X.X% the

in some time quarter's to remaining and spend across our like lines would I business performance you the talk to Now detail. about to initiatives new

remaining new initiatives secure reported a in prep business the upward increase overseas RMB Our it terms trajectory, XX% test have the promising business terms in key dollar third tended XX% quarter about or positive of Breaking the down, a of year-over-year momentum. while fiscal for revenue the XXXX.

business year-over-year terms business study XX% RMB students or dollar revenue terms overseas in for The The for quarter. in about or in consulting increase increase revenue quarter. this reported XX% a XX% this of terms XX% of in dollar RMB a and year-over-year adults increase university recorded terms

revolve the deliver Our initiatives, overall multipronged mostly meaningful new which development, have company. around profit and growth to to facilitating students' continued continued

have cities nonacademic the ability have Firstly, XX% approximately especially into elevated contributed we of on China XX courses, cultivating business. reported penetration, XX quality. in innovative tapped around The focuses comprehensive markets XXX,XXX we offered with recorded student this in quarter. have top over higher-tier The cities in tutoring of cities which total existing in this and students' a enrollments

digital tailored device intelligence service adopted enhance efficiency, been designed students learning system cities. business, XX has the a around provide experience learning Secondly, the and learning for to to in

quarter. We over new approximately users XX this XX%. contribution of this with rate XXX,XXX cities from have customer The business top in active and in the enhanced observed initiative recorded is retention paid of this scalability initiative revenue China

quarter. year-over-year a initiatives to life to for RMB have new material XX% increase study smart material Our summary, the of continued of terms contribute business overall the increase reported solutions business, smart in in educational XX% company. In and real education revenue dollar educational our results advancement terms this or

China of newly quarters, and culture we overseas, with of one our tours well as tailored mentioned the integrated addition, in tourism-related offerings creative camp in education. venture line past as as inaugurated diverse In a trips, as business study

New culture travel Oriental's and joy knowledge experience quality are that personal spirit sharing, provide infused from tourism with business culture exchange, shared to fulfillment. premium the

age Within quarter. of the growth new university students business in inspiring line, our study achieved tour business camp and this and K-XX research for

We over XX top with in of and in cities XX% conducted offering revenue of the research tours across study camp country share business. have this over China cities the XX

also provinces. reach and middle-aged XX a of age number We tourism our across all including offerings expand piloted individuals featured the top to notch elderly to groups,

the business still you posted select we're stage planning, in we of availability there at As evaluating this regions, should be the will [indiscernible] the keep updates. preliminary and of timely

in on merge remaining persisted with revamping With of regards our customers and key OMO system, to service infrastructure offline leverage online ages. and provide we advanced the and all educational to new diversified business vision system, platform have our education to our edge technology initiatives

period, flexibility been platform, this reporting maintain of $XX.X a teaching equips million with the to in invested During service us OMO total has which to students. our unrivaled

of momentum development With rapid private products. in this quarter, to regards to a growth the thanks sustainable Buy East Buy, label its East attempts

of enlarged as control to the multi-platform latest the to time As We're like from support we of its including expansion with chains, customer as on investments regions. safeguard strategies, quality well product glad and see the East offerings, have ongoing supply Buy has the establishment part of base company, East product to quality [indiscernible]. the Buy, further following the growth substantial of optimization early devoted strategy ventures East Buy's

the talents enhancements organizational the look label and and management promise propel premium have thankfully growth strengthened for billion. Directors that XX, through the authorized share live deposits, private to May East committed these XXXX to upgrades, The equivalents, July totaling all further is comprehensive of company platform we strategy in program Company’s financial company's the the the offerings latest which $X.X cash July Buy's and of e-commerce. growth Buy company and XX professional statement repurchase XXXX. confident for share leverage In of with sustainable shares of investments customers. With XXXX, company's our that of term streaming share structure short-term have common million repurchase $XXX East and I'm been you and regards nourished user The with approximately healthy financial launched of we further Board XX, improved its made a up products East to XXXX forward authorized Board July in Buy XXXX. a the cash ADSs inputs addition, and our months hence from app or extend position, to by further resources in XX, to XX, company's during Directors into May through loyalty, period to On to

from program. company the under ADSs market repurchase million approximately As of repurchased aggregate of for share XXXX, April yesterday, X an the $XXX.X XX, million approximately open

turn to Sisi, the with call please Sisi to the will you I over ahead. Now about go share key financials.

Operating this $X,XXX.X Buy's compensation and the for share-based were like I'd you growth Now operating representing and increase excludes the year-over-year. expenses to The the quarter label quarter, other private costs increase key live cost due were for expenses, financial related primarily to million, which expenses streaming million, in XX.X% substantial and through for was increase $X,XXX.X Non-GAAP e-commerce the products East a representing cost expenses a walk to details quarter. year-over-year. XX.X% business.

to XX.X% increased by increase representing $XXX.X marketing by expenses, to and to share-based compensation XX.X% $XXX.X Cost year-over-year increased of Non-GAAP Selling XX.X% XX.X% increased by expenses expenses, revenue were quarter for $XXX.X a $XXX.X year-over-year. which million. year-over-year million, the G&A million. million. G&A expenses exclude year-over-year

allocated was was Operating $XXX.X the and million, increase were year-over-year. operating $X.XX, to attributable for increased expenses, $XX.X fiscal net to share-based representing X.X% million, XXXX. and respectively. representing income quarter the a which year-over-year. related Total a compensation in operations Net costs quarter increase XX.X% million income by quarter $XXX.X Non-GAAP attributable increase XX.X% was to from income the $XX.X per year-over-year. ADS were million, for expenses, third $X.XX XX.X% of Oriental Basic representing New income Oriental and New to diluted a

the and X.X% year-over-year. generated $XXX.X $X.XX, quarter flow Non-GAAP for quarter New third per Non-GAAP $XXX.X operations $XX.X diluted ADS and expenditure basic New quarter of attributable $X.XX were to the was XXXX net million, to Net Oriental representing million, income were fiscal from million. income approximately capital respectively. was a increase cash for the for net and attributable Oriental

Turning to balance sheet. the

of had cash XXXX, XX, New equivalents February million. of As Oriental $X,XXX.X cash and

in $X,XXX.X in addition, investments. In company million $X,XXX.X the short-term term million and deposits had

collected New and an the increase customers, of third compared end deferred XXXX revenue of as recognized revenue, of the quarter at third the be $X,XXX.X $X,XXX.X represents will upfront of from the at services year that the fiscal related million, last Oriental's year. which are delivered of end cash as quarter to million fiscal goods for XX.X% was

over guidance. outlook our through Stephen Now hand I'll to go to and

Thank you, Sisi.

building seasonality of our healthy strategic foundation, of the investment the place As a to third operating slower the key resources, our we fourth growth businesses, quarter full of brand focus year, educational and and satisfactory in as collective margin various teaching the due sustaining is which typically the year. coupled at a and rest into comparing on with profit approach confidence the with quarter achieving profitability in terms quarter, the revenue progress growth, in breaks of we year-over-year the expansion our aimed for rooted differential advantage, expected

authorities the As all from lines to work the creative further leading strengthen to on to the latest nation's adhere always, strengthen guidance on business to its diligently level our Chinese education and edge we endeavors. will position enhancing

the lines, the amount while year, and our of cities. staff with the few be expanded some growth, hire business centers a around line existing performance be the to city opened, and by of continue plan fiscal this as tourism-related to this our will reasonable which learning time, top centers to revenue expected will learning of by increase capacity new a for especially we in learning about is continued we match At of across for teachers to in line business. With newly areas year. education regards space, launched center in bottom openings integrated offering major new our expansion business new support classroom and same initiatives and will and capacity classroom new be part evolution to of our XX% better the Most

for fourth to XX% March XXXX sharpen X, The year XXXX, be the total our this net revenue quarter of million, dollar new is offerings inputs to functional XX% to fertilize We XX% be fourth in XX, dedicating year-over-year in conclude, in of the to in representing $X,XXX.X revenue projected of fiscal terms. the the XX% range and expand million range currency, strategic XXXX. To expect New our May is in persistently of capability. determined of to increase to to expected endeavors, our Oriental existing to the XXXX, RMB, $X,XXX.X increase range in quarter

alignment considerations forecasts these expectations as effort our comply this same business application offering policies, a while the year our also XXXX ChatGPT, that AI QX the and the with measures provinces time, to strength will say At This on further operations reasonable view, and also government to of efficiency. must is could the regulatory as that favor in to We and change. margin as authorities resources of of will strong to we well research well growth, continue is measures, required. I the China summary. better and our in new from uplift and our devote further such to preliminary guidance belief in adjust current fiscal as municipalities with as as to subject continue end with latest regulations technologies relevant and cooperate and which operating seek various we reflect and our

these. please I At for would like open floor this questions. Operator, open the you. call point, the for Thank to

[Operator Instructions] the from comes of UBS. Your line Liu first Felix question from

the My question guidance. is strong on growth. growth and on Congratulations

the So in think you different the will could share business mentioned in maybe have capacity also, forward? expansion segments that growth do business. QX? X we more we just a X going can for expansion education maybe the is capacity see lifted of that seasonality first, years? now the And XX%. But you a understand expansion to sustainable to for XX% that year guidance on I QX, you keep you pace How that is color Do in bit

year-over-year a quite quarter Thank as the the you, this bit number there a to revenue give always, as past for are line built QX, Yes, growth, X the guidance. the reasons: know, we in just And be as QX top couple like seems little lot, to conservative quarters. of the which Felix. you guidance lower one, we're revenue guidance than

the the last seasonality, in related year, number year two, And I and basically pandemic, related business, the slower impact QX know, in because the this one. low expected compared for last QX QX is, as to like the normal. QX, number the to the back K-XX overseas is as season. was of typically, without number So QX. typically example, business think is you And X And business our a is and yes, for quarter QX the of

So little line to top that's But XX%. terms in a think guidance to it's why lower. in QX personal dollar XX% XX% be we bit think view, seems guidance the the In terms, XX%. I to my RMB is

I I we're coming margin And think quite that with growth fiscal optimistic year, that whole think strong. the revenue it is in still new the very inflation the fiscal fiscal year 'XX, means year 'XX. for on

the will for the As year-over-year this that's the new the And supply. make centers, very the the taking keep raised expansion guidance plan, market we're again analysis the plan customers yes, this forward, the think guidance will raised strong, we market expansion is actually, to of demand open the share. quarter. capacity XX% I and the of we year, next time, going we we because the expansion because pace demand same of think learning by why almost from and And the I

So are pace we it con I more in share. market of we still for think the growth businesses, And next revenue on different disclose to the as take call. the

we XX% like XX% our university and prep on including is to to school business high be maybe the grow will test overseas by initiative, is estimated roughly, new the tutoring range. driver, new growth And business will roughly And revenue about key XX%. the business, consulting over prep exchange us revenue projection. key will will around when Just growth test do growth. grow students moderately. This And the rate lines, which based XX% domestic be related, the XX%

from Renaissance. comes Zhang question next from Yiwen Our the of line China

incremental group at operating was question margin, So adjusted my of I which was expansion. basis. flattish look the we lot to due a it margin. is was regarding a understood Y-o-Y our If on level OpEx XX.X%,

the on related how it quarters? trend education So it does if at we next basis? expect just to margin, how in you look And expand Y-o-Y would few

meaningful OP non-GAAP think quarter. this But this group's expansion I in education in business, margin margin non-GAAP business quarter. and GP was the the seeing flattish The education margin within OP for we're

utilization the to think margin better and structure, resources quarter. and newly higher the the business for model utilized made and education learning cost business expansion the I so thanks streamlined the this the restructured it centers again

and the think the the in to even forward, fiscal whole leverage in the I we you year think the expansion. year center have XX%, by teachers year, going top coming And and 'XX. match and in so think I 'XX QX, hand. Yes, have as operating very I expansion do guidance staff with in learning growth strong. year year, know, for we new 'XX, the raised fiscal we new of a be fiscal the new will But we And do the hired the more line leverage

growth for see the year with we top line fiscal in the new So 'XX. will expect you healthy education margin the expansion business

expenses, product And and the in business. offerings marketing some for more this also, for chain And growth the the Buy, like especially professional especially Buy's East very support strategies talent think the to Buy of substantial control. And has from yes, East a e-commerce I the supply market. East multi-platform and optimization other the the saw devoted investment cost partly you and think increased. the Buy the of East platform, It and expenses I was the people strong quarter private top and including company, of [indiscernible] recruited the quality the the due to in of line, growth label investment. think then products And I yes, selling

development with this on input going and to forward so And leverage are we forward. Buy's investment And going forward. time this look optimistic East we

the so profit revenue, about going in top growth 'XX. whole group in East for think forward. company business margin we profile summary, for So well, whole group the we line the margin are -- quite optimistic more generate more for the fiscal will the also the as And and expansion education do Buy to year the

America. Our the Yu Lucy of from question comes from Bank next line of

So the on my margins. question is still

for interest, that be quarter. it might looks like, loss-making minority Buy East the from judging So the

a how in we level impact margins the next fiscal for think year? So quarter plan on So margin upcoming year? East those Buy group the upcoming Stephen, do fiscal how the should about and you volatility

Lucy, Buy. report the and the in And -- your East to about July, I'm quarter, full announce East glad in But the the results you, report. half questions year for to year moment Buy hear year next afraid the about will from full report the guidance this I'm and unable I'm our latest with you think East financial I Buy. share at

optimistic And so Yes, that Buy still growth. more the I the of are quite will Buy think this management more this margins will I the quarter. and at that about over with and line East share whole East the top you bear in Buy's profit about [indiscernible] must generate the group. investment color And long the investment think run, time, mention we I of to and fruit but will revenue the from East

question next of TH Hou Capital. Tian line comes Our the from from

question utilization is of center. and them? nonacademic the retention school for learning center and the to What's course related The learning high both also rate the rate expansion

year-over-year I the high the -- [indiscernible] quarter-by-quarter. rate school for and rate student actually think both nonacademic the utilization business are for and retention courses still the improving

And trend the is good is news so for the there. still us seeing we're

I higher centers and we for forward, student rates going utilization learning see rates. existing will so higher And think retention the

months X get us but the the breakeven think, point. we typically, center, of roughly, I couple breakeven for to take kind it ago, spend of point years after will to opened happier it now, learning will And new a XX the months

for rate overseas higher think And higher centers learning the student we for and going expect lines. forward, the so utilization rate I retention

Yes.

question. follow-up one So

the you do center a so the expansion, there's guys before tricky line. when double So so learning reduction,

bit profit saw So time points. of So impact quarter, X because percentage down like much you profit the gross center Buy? it relative a I more, of how was will expansion? because the do margin? margin do you that this gross is If it bigger, little East last expansion the Is same year to then the learning or

Yes.

we the XX%. the expansion center learning again center expansion, think I raised learning by

is for this it's on the to last cash. very picture that X for as of strong, the think I And side, especially X the for whole said, analyze the courses I result it we business quarters. the nonacademic demand

side, to a centers is the And on to or couple environment ago. we classroom top different the years the new open centers. learning the expand bottom only more choose of learning is, both competition and existing performance compared the allow the line And for them line, to key competition area cities, top the

think will In it So margin expansion down. margin the the it I opposite, whole forward. help going will not drag

next the Goldman Our line question comes Timothy from of Zhao from Sachs.

statement. is question the flow regarding My cash

the on flow is one cash on operating think cash a a that operating basis. quarter, I flow. year-on-year for I basically, the So dropped noticed bit this little

Just the that notice flow, cash And or to some color you I financing also existing do rationale wondering on that. reason the share the is expire. about the second, can on repurchase if behind program share

repurchase dividend your return? Any shareholder and Just forward allocation of terms share programs? potential the going on shareholder wondering or policy in regarding further capital thoughts

enrollment I investors not to quarter-by-quarter. business student where for suggest the As Q-on-Q, flow of because cash seasonality, operating window the changes year-on-year, analysis make the the the of cash the by flow,

why you to make that's analysis all year-on-year. I So the suggest guys

year-on-year, revenue top slow guidance QX though increase deferred is it. QX, very strong. the the strong yes, yes. is line the balance even we still quarter, saw for you why And very that's Yes, the if that's give So

quarter. the keep share finished will times plan, we I we almost And whether the But historically, the years buybacks not we fiscal And create more in share Board plan. the X $XXX of buying And with a plan year several million. for decide dividend. couple think to buyback And think extend end, round, announced the to back. as And shareholders. to And repurchase discuss or shares I special I we and value we'll roughly the this keep repurchase share this think share I we ago. half, to this keep will the buying made think times yes, in we

So return, our aim investors the is buyback the capital share dividend. to either to create or value as more

next Our Wang the of question Xinyi from CICC. from comes line

the equity quarter same compared from well So We had question investment period a this financials. actually, about as year. I this the loss method less saw to as last larger interest a investments quarter

wondering I'm So just changes? factors which these to led

kind think, in made I this in of this we yes, quarter. quarter, the in company investor loss

So a do I very quarter. have think bottom onetime on impact the line we this

deduction that X.X is was one onetime. by years ago. time. all negatively X companies I impacted those just policy But a the this think It's

quarter we less Just a Q-on-Q. interest investment follow-up saw this question. Also,

So I'm reason. the just wondering

again, sorry, you repeat it one? can I'm the investment

Yes, investment as this is interest saw we had decreased. I which quarter our income, less other suppose mainly

Yes.

interest been I rate has quarter. China, this think it in in done the

I think some it impacts income. So interest

similar X income X to interest it's previous the dollar with absolute -- pretty Actually, are the number Yes, stable. so quarters.

Congrats results again. on the

[Operator S. more question have one from Instructions] JPMorgan. do D. Kim We from

and Congrats on about ask wanted line Actually, margins to growth amazing again. I expansion. top

I think all you of discussed that. already

small wanted one if follow okay. on up that's Just to thing,

earlier only nonacademic mentioned newly and up does opened expansions center. how new full centers for could margin breakeven primarily accretive, on opened new if take for centers look because do newly those courses, level. long then the say, that You of ramp locations, the level to to it's now the at, hit expansion it center be we to existing But center

new have to that ramp wondering think learning back versus now to more and center the days, this the a has couple fully now in up, I I'm courses K-XX about changed for the breakeven how year another nonacademic? turn it changed primarily for AST took quarters and

point, for centers, is faster. breakeven on I months get even it think but learning more now, take will typically, to X a it average,

around second the new on centers areas. in the the margins somewhere depends think typically, the new I different But that And margin so year, of get centers the learning to XX% learning XX%.

decision the expansion So to we better. That's the it's XX%. why center raise guidance make by much learning

quarter and even but fiscal QX, business, next, think XX%, in more In we 'XX, learning the this centers, I whole the so up for in it good trade-off. drive it's line new year opened higher top will And year 'XX. growth QX, a the the and that student 'XX, year the year fiscal be in better utilization improved education margin the education for of whole of the in because whole business And will believe retention. I fiscal the

level just if of past to higher it's the like days, of be amazing the back may utilization or up have. good, not it's that ramp-up just a center But do make I trade-off in that can or think think earlier I academic, or just faster road, earlier there? XX% follow ramp-up like and/or timing level, K-X breakeven here, the a the down think you some actually more on nonacademic of level margin the faster the is timing the all years margins than better centers you do can ramp-up, in academic thing, the central recovery you i.e., after than than is that even do the five ultimate think

of it This will I time number ago. couple of the I higher that And the shorter a to new think for is, bit number said point. theoretically, learning margin I the one. get Both. than is will breakeven a centers, take little think years the to be ultimate two

business. So revenue learning good open for us to from centers overseas for a the related non-academic it's trade-off more courses,

again. trend an and congrats It's amazing

for Yang, the approached I'll of Executive his call closing to now have We now the remarks. over President turn CFO, conference Stephen the New call. end and Oriental's

for us Again, today. you joining thank

of do Investor to any you. Relations any If or hesitate you our contact representatives. further me please have not questions, Thank

call. Thank for Thank concludes you. conference That participating. today's you

now may You disconnect.