New Oriental Education & Technology (EDU) 31 Jul 242024 Q4 Earnings call transcript

Good evening, and thank you for standing-by for New Oriental's Full Year 2024 Fourth 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 would now like to turn the meeting over to your host for today's conference, Ms. Sisi Zhao. Please go ahead.

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

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

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

inherent involve statements Forward-looking and uncertainties. risks

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

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

recorded. As is a being conference this reminder,

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

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

New might have to like we to We who Before extend believing separation of been latest Oriental. the Time be there in Yuhui. our supporting and would firstly understand some with those questions and regards gratitude begin, to we with Buy East

Buy. we like has a growth stress colleague to who East would performance, ours beloved that was Oriental's Dong New of amount drove considerable upon of into transparent carefully a instrumental decision go made we communication of Before been and Yuhui, this with

will a a the path fully range cost-effective the his our over to knowledge channels, the and our customers of teams, are in healthy, up built yet we valued products new expand sharing, long our multi-pronged best platform, Buy dedicated continue to to our term. to leverage the presence to of regards promotion which XXX to and healthy successfully premium, years. A send we East in the over far-reaching And venture, strategic for offer for culture promise As our SKUs company customer-centric to partnerships, our in we anchored devoting to live distribution diverse dissemination, customers, very pivot exceptional delicious, the growth by best remains product stable works. forging Yuhui propel

please deep For Oriental's dive let's East fiscal more announcement. XXXX now, details, performance. refer latest into And New to year Buy's

pleased growth company's a a fulfilled in New has For financial while across fiscal of to business line results lines, ventures fueled company growth Oriental's innovative quarter, stable invigorated of the are our portfolio solid healthy Strong that top healthy demands have XX.X%. revenue of our with recovery businesses key contributions. achieved the have this have we with announce our --

have expansion in operating margin and led platform has short-term yields, investment private of business, on in operating X.X% tourism-related and Yuhui, staff reaching for management operating New margin Except with label the this Oriental's as with certain and this as X.X% and line additional bottom to and capacity performance expenses East newly to to Buy's in our our cost products accelerated the Time related respectively. spending quarter, well quarter. margin achieved and incentives non-GAAP integrated a impact for

and on we will operating in demand, We investment. the move next However, business that educational of reduce for facilities right strongly made anticipate coupled we with to as increasing improve to margins right the the fiscal market efficiency. the year pressure impose we the utilization the continue believe the

year satisfactory the XXXX. our excluding expect the quarter full operating for XXXX operating will of year-over-year first expand Buy, fiscal of We in East deliver margin company, the and profit

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

trend revenue year-over-year or encouraging a of the in of dollar about an RMB it terms, in remaining the university shown for increase and or recorded increase increase in a terms, terms a RMB in quarter. terms, RMB in overseas business down, revenue revenue test-prep business adults initiatives key recorded XX% XX% this momentum. in business The have XX% this the of first fiscal XXXX. dollar year-over-year recorded students' XX% new consulting of business secured Breaking terms overseas XX% dollar positive and quarter XX% increase Our or for terms for study quarter. The year-over-year

ventures. Our to revolve which have a facilitating around in all-round mostly initiatives, continued respective students' development, new momentum their sustain strong

on in have around Firstly, offered focuses tutoring innovative which non-academic ability quality. cities, XX students' existing courses, cultivating the we comprehensive and

excited which total We of especially top cities cities, fiscal penetration recorded enrollments those we high-tier China markets quarter. further see into, approximately contribute in The in XX are XX% this tapped this to students' in in over business. XXX,XXX have

and business Learning cities. Secondly, System around has been Device the Intelligent adopted in XX

XXX,XXX We retention reported and revenue this quarter. in contribution The from active happy is paid see customer in XX users XX%. initiative the approximately over top are to this scalability, with of cities stable China

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

the offerings our line, In addition, has tailored tourism-related the of and study well China one as with diverse creative integrated cultural trips, is camp in of education. endeavors, overseas, business newly tours

of tour university research line, the to business quarter. study sustainable continued and K-XX and age Within students for camp achieve this business growth our

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

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

ages. updates. With and stage visibility remaining to key our we of system, ], As timely leveraged testing education have in in the business the service OMO infrastructure regards all edge be initiatives, posted we education a evaluating at on new and you advanced, provide should to there revamping a proceeded vision of we planning, will business (sic) selected to our preliminary with technology testifying platform are and and still of customers our [ regions, keep diversified

During totaling financial to total cash the confident in $XX.X with cash that short-term the reporting in unrivaled $X.X share which invested service to is to platform, deposits financial status, maintain I and flexibility equivalents, million has equips regards been latest the us OMO position, our of am period, a company company's teaching with students. With with the a investments you billion. and healthy approximately term to

under in to the to Board to company's like the the would Directors share July approved is authorized up which million company of we XXXX, addition, of a $XXX repurchase highlight repurchase In the company's program company's months. share the ADS time further Directors or to to extend next through program The repurchase May common the XXXX. of approved effective of XX, shares XX Board

company approximately approximately July X.X for million repurchased the XX, million the an ADSs of XXXX, aggregate open from $XXX.X market. of As

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

Okay.

online by variable Before entity into subsidiary at of inform an an interest business the interest East that to Buy's Buy subsidiaries and acquire and our go owned RMB the like its variable line and financials, we'd quarter. Upon key company's valuation. of entered recorded both education entities in financial consideration negotiations, to the aggregate reorganization, into fiscal after East we wholly agreement you with business consideration The company's with consolidated as part X.X acquisition and education arm's-length is financial East independent parties to -- billion. an was statements completed consolidated from The and now consolidated this by was online services. reference completion, was the deconsolidated East under agreed educational was from Buy's statements business company Buy's

of accelerated Now, were million operating $XX.X cash for $X.XX to XXXX quarter for related net The and approximately attributable quarter, USD and for costs flow was and expenses, Non-GAAP net diluted the fiscal and XX.X% G&A decreased expenses and operations from net $XXX.X in expenses quarter representing XX.X% compensation XX.X% was details quarter. million, increased Oriental were X,XXX.X respectively. fiscal expenditure East income quarter increased which the share-based generated representing key respectively. Net G&A was was to $XXX.X quarter operating million, XX.X% $XXX.X income Oriental representing which million, $X.XX to Non-GAAP to for to share-based expansion X,XXX.X income fourth expenses, Selling decrease operations expenses related compensation a the $X.XX, the Oriental XX.X% expenses, Oriental income business, capacity the fourth to business. Cost attributable decrease by million. was XX.X% and by $X.XX expenses, exclude year-over-year. Non-GAAP this live X.X% attributable $XX.X Net quarter New year-over-year in New were million, million. increased year-over-year. basic year-over-year ADS representing for a growth revenue expenses for by and was expenses e-commerce excludes the and education a year-over-year $XXX.X marketing by New year-over-year. Basic $XX.X compensation increase representing quarter quarter Buy's streaming, of XX.X% to XXXX. Operating our for capital million, the were a XX.X% income million. year-over-year. per million, a for was Operating $XX.X to of were $XX.X Total XX.X% the from diluted and income ADS $XXX.X costs private decrease Non-GAAP the substantial year-over-year. million expenses, quarter which allocated to increase decrease XX.X% products, due representing increase a were costs financial and a for representing the to attributable Non-GAAP USD $XX million, per costs primarily for label million. increase New year-over-year. for year-over-year. and to the share-based

balance the to sheet. Turning

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

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

revenue, from recognized the the related at million $X,XXX.X the fourth be year. service cash will delivered, quarter quarter XX.X% was fiscal which [ the of (sic) $X,XXX.X [ $XXX.X end goods an as end XXXX of as the fiscal million (sic) collected deferred of Oriental's representing revenue compared to upfront of represents million year customers are last ] that of ], fourth at or New and increase

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

Thank you, Sisi.

resources time ahead our by the trajectory we continuously will demand, the fueled by rooted of have on healthy of Oriental's New stood XXXX, for that through look As growth we're a educational embark time. confident supported that strong business

delivering and the for We year. Simultaneously, fiscal firm East Buy profit margin attaining except first the in for quarter of for satisfactory whole the the expansion we in a belief company have operating full invested XXXX to expect growth nationwide new we belief year. contribute and the rollout that for resource meaningful fiscal a tours in revenue significant for of will these our new tremendous achieve business tourism-related

top in the manage and a for revenue growth, around hiring closely XXXX. Most of will As will we openings our XX% and Rest during Year. in between development performance. line fiscal bottom the the profitability new XX% we and in be pace business plan the New the year. balance to expansion openings healthy year operations we monitor the to and performance by with launched ensure scale line capacity cautiously capacity new We local to cities better educational of underpin increase accordance assured, and financial will the to our the

the $X,XXX.X in total in increase quarter XXXX million, the XX%. the August $X,XXX.X Buy, to of expect XXXX, excluding to revenue, June We to million of X, XXXX, fiscal in net XX% to year-over-year range be XX, of revenue year from East representing generated first range

to first that promising for estimation, conclude, on East a of margin day adventurer long-term customers, priorities except In stand valued Oriental as current in offerings, as been to will our we operating be changes society from support quarter the years, addition, firm and expect expanded the premium amid year-over-year. To has for the the New company known Thanks transformation. sails its resilient on our the for Buy back our in voyage, giving based one. whole the

resources on fee such a of efficiency. As of and and operating research product vision technologies new growth educational to AI our offerings, reasonable application our strength always, in ChatGPT we pursuit and will and as with devote into uplift

provinces various We of seek the cooperate relevant adjust government operations and guidance from with our required. to to our China, as authorities further policies, comply will as well in as in continue business with

is for to change. This We please these well say the our lines considerations enhancing preliminary call and unveil across as as will all the vision. to questions. current you. our so that as the also which to At measure QX our business nation's XXXX of I work Operator, and the leading this I diligently view, Thank regulatory realize level these. our summary. point, subject would fiscal of further end like floor our open to is education and strengthen expectations forecasts latest potential to must reflect the its year for open position

question is Our Instructions] from Cai Citi. first Alice from [Operator

Since not question new left Could cities, about is planning growth have please to room color in growth existing you for strategy. the reaching about saturation? how locations share into a your I before this? expand you are much your

Okay. Yes.

As think -- of line the plan, the new openings I about of the increase we the expansion with to we and I the the in I to the keep the margin as and expansion of I we the cities. line XX% -- growth the balance in cities scale care most performance, we for year. expansion areas year the think by the margin top centers, will open plan will the be and in think And the growth both in classroom new of new the fiscal more the learning center the And most existing openings. We will in XX% I monitoring expansion. And 'XX. the new said, fiscal learning capacity mostly pace better top think

So rate think this to New strategy. will I utilization I think is the rental. XX%, classroom the And the the growth the in cover up. by upon the the of extension strong New revenue we Year, new our XX% center learning coming keep will Year in incremental And

from will Renaissance.com. Yiwen from of question We China take line the the now next Zhang

this margin would to I So up like quarter. decline on follow the in fiscal

we recurring? at So education actually ones see trending you several also one-off, if now, more in reasons margin are about ones discuss like Could remarks. quarter? your how in we look And prepared do business which which mentioned fiscal last the are you

Yes.

quarter's this this OP with start decreased quarter. the Let's margin Yes, analysis. in

private reasons. the newly tourism accelerated also new quarters. Time last the I with even management number some East Buy's Number the this costs business. and think is, and the we it's mainly so extension incentive due certain to one, one-time staff investments to we sales to label center we reason, in quarter made the additional X in the learning the QX. a of in couple the in two three invested and number with And and And related expenses Yuhui. products And

East XXX basis of expanded QX. the expenses margin QX onetime will the be we I in whole of company, think some partly margin costs the for as the So in OP outlook, expect is of incremental And and the coming expenses year-over-year. excluding Buy, the by points

operating more In you the the means efficiency leverage the be that company except are see So operating year the will QX. And in we Buy. East higher will optimistic coming the and XXXX, the quite about margin fiscal of margin for expanded. expansion

think operating rates and we the keep the said, we learning utilization get center -- as -- will leverage will I keep more I up.

educational margin just this one will is And the quarter, time. So margin the next see decrease you expansion for business. quarter's

Liu We will question from now from take the the Felix line next of UBS.

the lot on you Oriental. My First, be decisions a believe long-term New and with want expansion. is situation respect beneficial the Yuhui of branding that handled question have say a to I how I the just to the follow-up New margin Oriental Dong to will of made

also the in QX? And you following from do on margin for mainly this the mentioned the driver XXX be do expect of underlying see by even think year? that You margin the peak expansion improvement? Or margin expansion? also you QX, to of check the potential improvement of the pace bps. your the driver, expansion operating the momentum the or quarters pace you margin to or expect will you QX margin has May for leverage? you improve do as on the continue rest Or expectation after of segment Do the expand I see

the XXX yes, QX will we season expanded in educational guided the business Yes. for And peak as margin expansion business. for the points. as the by for basis know, is outlook, Felix, educational be margin you QX the

so we're And the expansion as detail. year, QX I the posting we'll to QX, to guys think said, about But of whole margin yes. rest you for education leverage, in in the the operating about confident the I year keep expansion margin business. And quite the

competition QX. know very, think in K-XX less market demand I for educational centers and You think I for hired business, is though the especially the the -- learning money both market in share oversea-related and have more operating have very take quite seen we the we strong. And business, market. the demand and we know this investing are more human from optimistic QX business, where But even people competitors more do the the opened for mean, I to we market that take Oriental more But New leverage we're the in hand. market resources share. more And will

mean by or, top-line QX -- business I I So think top-line the beat leverage Year. the New the we top the in will growth. What we the again growth will will line is hopefully, guidance

and And the in whole QX believe year the so would expansion XXXX. margin of I the

the line from We of Bank take the America. of will now next question from Alice Ma

is of This Bank Lucy from America.

have a versus on So growth pace. question the capacity expansion the enrollment I

been So actually looking of past like it's I quarter, learning number enrollment our grow know we're XX% is only centers higher basis, difference, if expanded enrollment always has at pace. looking like year-over-year quarters, expansion this tutoring than non-academic we're but the a XX%. a on the not capacity but by the growth at big if

reason? Is the should between about X? these we or of how difference timing it think some So because other

like because like of student the it's Partly the enrollment window, timing the timing, the difference. open --

since this the I Yes, added we year, that's but capacity. -- quarter think bear -- I of of the I fruit expected, And fiscal will have think new little think I QX. the a this than in so said, the at yes, -- we we bigger end as bit -- XX% around

XX% the in business even the XX% in this business, of year-over-year. So is for in will And growth around new K-XX, somewhere coming summer RMB quarter top XX% the growth. the revenue year-over-year new line the in for for -- we new the to believe example, QX, the terms be the XX% business as for

think decreased learning cover because the the hand, think So centers. And center the the gets I markets cost revenue meter per per learning lot. I rentals will new of on change the the incremental other a square

get So on cost I forward, expenses do believe going other operating the and Lucy. the we rentals, on leverage will

I compensation question a quarter one-off like mentioned that is Dong may, you the Sorry, just there's if May one small of amount Yuhui. to in paid small

in compensation Yuhui any think that So it's be the Dong to I will all. be will That one-off, first but quarter? paid

Yes.

some related happens sale and QX be the of the will think expenses to coming Yuhui -- the costs I Tongxing and the the -- in QX.

So the we posted we will you QX. tell call spend But next keep earnings in much to coming exact in you numbers the of it's onetime. the how

We Goldman next take from line the of the will now Sachs. Zhao from question Timothy

regarding question my year. your fiscal is new for So the revenue outlook

test-prep, certain you consulting, revenue and the K-XX of the K-XX, the wondering on business, Just give if can growth different us the initiative. overseas new for guidance including segments the traditional

I think helpful. that be would very

Yes.

year revenue expanded XX% give for of around we will the will will different somewhere around for be increased by segments business, way. revenue think think be the the year-over-year. XX% the XX% be line high outlook I XX%. by revenue as guidance new will the new business, fiscal business, school growth I the XX%. -- business for growth coming somewhere as I will And think will the As new -- most year-over-year. And the for the XX% around be to in always, -- And -- by to the somewhere test-prep be Year the conservative top And to New the growth business in the -- the growth oversea XX% consulting year revenue in

next now Charlotte will the We HSBC. line of Wei from take from the question

is question landscape. My regarding competitive

have players small more been local expansion. of terms noticed we aggressive in So,

cities? share rate? enrollment the competition this you in color summer especially you the student on in intensifying do see and growth summer, So, more So, can top-tier retention

the of as open competition I ago, is But the policy. whole the centers couple now environments, than more the before analysis or in for less competitors some competition, seen situation we a the have As the lot yes, a competition of years think top I some invest money cities. think, learning

the student take of I to considering XX% -- the I out the guidance, opportunity the this is the student given business, there I I services think style XX% competition think we will QX, Buy. And students. QX. already good. for excluding more the And to have So, will growth for to of it's seize market yes, think take the the year-over-year. be and guidance summer, the less. And in And be and the will and new the dollar enrollment terms the is in East range share very the in the top-line believe the rental provide in education guidance, and And enrollment

in and I optimistic growth QX. quite So, think we're the market you. Thank the top-line expansion about

shareholder May of cash another regarding question the hand. a we I have return, have because on lot

your like, consider, plan share retires? So, buyback do plan upsize if current you the

$XXX we Yes, we until buyback hand. the have the share do And finished in program yesterday, million. million $XXX

$XXX have $XXX somewhere we means million million that -- So left.

and So, million I we with think to program, $XXX the finish I the discuss think the the million the to or first the share finish more think dividend of Michael step, even once investors. And Board buyback. I share about buyback allocation, share types $XXX will the we'll buyback

cash the a think we're company, yes, have Our you're $X.X have billion off cash. cash, hand. lot of And in we paying I we right,

we I more to create capital think I and investors. the pay shareholders the think to allocation value we should will So more

the take question [Operator Instructions] from We next Zhao line of will CICC. Liping the now from

tourism quick your one Just on business. question

for QX business the So the how will revenue XXXX, whole of line contribution in track. much that revenue contribute? much also fiscal business ahead and bottom your how outlook your looking year tourism contribution And

expect the Yes, and million. somewhere as and year year last year 'XX, RMB X.X be whole billion. of the tourism the 'XX, that revenue the will in in RMB fiscal year, was for around the revenue fiscal And we XXX business,

the tourism growth is I XXX% be year-over-year. QX, business the our somewhere revenue of around the this will So in expectations. think And

number. big a Just

on also And that bottom the how line, much impact? will

year the suffer last a we loss business, In tourism the just 'XX, investment. fiscal we we the that in will year. pace this because started of business business started and think still the I Because year

fiscal business loss profitable. we in is 'XX, think the but I in somewhere XXX million. 'XX business be think So, This tourism I expectations. our the business will -- the around be the year will And of year tourism fiscal believe RMB the

will Morgan. question from [Operator take D.S. Instructions] now We the JP line next the from of Kim

in heard or one end any Would on up, on that think, environment, have on it And recent be back paper appreciated. hear could any February you I just if of January, anecdotal public whatnot? the updates follow know, from have that given you was the comment you concerns can. early there quick color I Feb. policy, see and tutoring any If the you listen regulatory the market I as a you and consultation all on and share, Have would regulators or ground? the

And new seen I not always, be will forward, regulation years. I we education last expect regulations, regulations. the industry even after. has as changed. haven't leader year think the environment stabilized we And as I year X the think as And the going new think I comply in said, the in or with any the regulation would the coming

up. follow I If may

try. About -- and I from for discussed could think quarter, Tongxin? me that Yuhui you was not, that believe if just impact you there If were past one-offs was could one-off totally fourth for share? how a roughly purpose, the Can the quantify, Dong what you just you let fine. already all. But modeling you much if

to in announce because Buy earnings the numbers unable the share I late August. I'm afraid their I'm will think detailed East with but, Yes,

numbers think the share in August. ask think, in Buy call the Buy, I -- these East the the Yes. earnings will management of of the of about I more to color questions East So, parties

Thank you.

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

Again, thank you for joining us today.

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

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