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01/10 16:57
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presents a positive outlook with a 59.4% revenue increase and strong cash flow. The Q&A reveals challenges such as economic factors affecting guidance but also highlights optimism in margin improvements and K-12 growth. The expanded share repurchase program and expected margin expansion further support a positive sentiment. Despite some uncertainties in non-academic segments, the overall guidance and strategic initiatives indicate a favorable stock price movement.
Total Net Revenue (excluding East Buy) Increased by 18.7% year-over-year, mainly due to the continued expansion of new ventures.
Non-GAAP Operating Margin (excluding East Buy) Reached 6.5%, representing a year-over-year improvement of 410 basis points, attributed to cost reduction and improved efficiency.
Overseas Test Prep Business Revenue Increased by 15% year-over-year.
Overseas Studies Consulting Business Revenue Increased by 8% year-over-year.
Adults and University Students Business Revenue Increased by 17% year-over-year.
New Educational Business Initiatives Revenue Increased by 33% year-over-year, driven by investments in facilitating students' all-around development.
Integrated Tourism-Related Business Line Revenue Increased by 71% year-over-year, with contributions from domestic and international study tours and research camps.
Operating Costs and Expenses Increased by 11.2% year-over-year to $1,251.8 million.
Cost of Revenues Increased by 5.1% year-over-year to $569.9 million.
Selling and Marketing Expenses Increased by 1.8% year-over-year to $211.9 million.
G&A Expenses Increased by 9.1% year-over-year to $409.8 million.
Impairment of Goodwill $60.3 million compared to $0 in the same period of the prior fiscal year.
Non-GAAP Operating Income $81.7 million, representing a 116.3% increase year-over-year, excluding share-based compensation expenses, amortization of intangible assets, and impairment of goodwill.
Net Income Attributable to New Oriental $7.1 million, representing a 73.7% decrease year-over-year.
Non-GAAP Net Income Attributable to New Oriental $98.1 million, representing a 59.4% increase year-over-year.
Net Cash Flow from Operations Approximately $399.1 million for the quarter.
Capital Expenditures $65.9 million for the quarter.
Deferred Revenue $1,954.5 million, an increase of 9.8% compared to $1,780.1 million at the end of the fourth quarter of fiscal year 2024.
Non-academic tutoring business: Focused on cultivating students' innovative ability and comprehensive quality, rolled out to around 60 cities, with top 10 cities contributing over 60% of the business.
Intelligence learning system and device business: Utilizes past teaching experience data and technology for personalized learning, tested in 60 cities, with top 10 cities contributing over 50% of the business. Reported a revenue increase of 33% year-over-year.
AI-powered intelligent learning devices: New generation devices with features like spoken language coaching, automated grading, and voice assessment, aimed at enhancing learning outcomes.
AI-driven smart study solution: Combines global premium content and AI technology for personalized education solutions.
Integrated tourism-related business: Includes study tours and research camps for K-12 and university students, expanded to 55 cities, with top 10 cities contributing over 50% of revenue. Revenue increased by 71% year-over-year.
East Buy private label products: Focused on green, healthy, and high-quality products, expanded product portfolio, and enhanced app and ministore for better user experience.
Operational efficiency: Non-GAAP operating margin improved to 6.5%, a year-over-year improvement of 410 basis points.
AI integration: Developed AI tools for content creation, student feedback, and sales efficiency, reducing training costs and improving conversion rates.
Shareholder return plan: Board approved a 3-year plan to allocate no less than 50% of net income to dividends and/or share repurchases.
Long-term guidance: Shifted to providing full-year guidance to reflect long-term strategic priorities and smooth out seasonal volatility.
Regulatory Compliance: The company is in close collaboration with government authorities in various provinces in China to ensure compliance with relevant policy guidelines and related implementations. This indicates potential regulatory hurdles and the need for continuous adjustments to business operations.
Revenue Growth Challenges: The fiscal year 2026 Q1 guidance appears conservative due to factors such as a high base comparison from the previous year, East Buy's restructuring, and temporary class rescheduling caused by the earlier timing of the Chinese New Year. These factors may impact short-term revenue growth.
Cost and Expense Management: Operating costs and expenses increased by 11.2% year-over-year, with specific increases in cost of revenues, selling and marketing expenses, and G&A expenses. This could pressure profitability if not managed effectively.
Impairment of Goodwill: The company reported $60.3 million in impairment of goodwill, compared to zero in the prior fiscal year. This indicates potential challenges in certain business segments.
Profitability Concerns: Operating loss of $8.7 million was reported compared to operating income of $10.5 million in the prior fiscal year. This reflects a decline in profitability.
Dependence on Top Cities: New business initiatives and revenue growth are heavily reliant on the top 10 cities, which contribute over 50% to 60% of revenues in various segments. This concentration risk could impact performance if these markets face challenges.
AI Integration Costs: Significant investments in AI and OMO teaching platforms, including $28 million in the quarter, could strain resources if these technologies do not yield expected returns.
Revenue Growth for FY 2026: The company expects total net revenue for the group, including East Buy, in the first quarter of fiscal year 2026 (June 1, 2025, to August 31, 2025) to be in the range of $1,464.1 million to $1,507.2 million, representing a year-over-year increase of 2% to 5%. For the full fiscal year 2026 (June 1, 2025, to May 31, 2026), total net revenue is expected to be in the range of $5,145.3 million to $5,390.3 million, representing a year-over-year increase of 5% to 10%.
Profitability Focus: The company plans to uphold profitability across all business lines through cost control and efficiency enhancement measures.
Annual Guidance Emphasis: The company encourages investors to focus on annual guidance rather than quarterly outlooks to provide a clearer and more comprehensive view of business performance and growth trajectory.
Shareholder Return Plan: A 3-year shareholder return plan has been approved, effective from fiscal year 2026. No less than 50% of the company's net income attributable to New Oriental for the preceding fiscal year will be allocated to returning value to shareholders through dividend distributions and/or share repurchases.
Shareholder Return Plan: The Board approved a 3-year shareholder return plan effective from fiscal year 2026. Under this plan, no less than 50% of the company's net income attributable to New Oriental for the preceding fiscal year will be allocated to returning value to shareholders through dividend distributions and/or share repurchases.
Share Repurchase Actions: As of May 31, 2025, the company repurchased an aggregate of approximately 14.5 million ADS's for approximately $700 million from the open market.
The earnings call reflects a positive sentiment due to revenue growth in educational initiatives, operating income increase, and a strong shareholder return plan. Despite some declines in net income, the optimistic growth outlook in K-12 and high school segments, margin expansion, and strategic cost control measures indicate positive future performance. The Q&A insights emphasize management's confidence in overcoming competitive challenges and maintaining high shareholder returns. However, increased SBC expenses and lack of specific guidance details introduce some caution, but overall, the sentiment leans positive, predicting a stock price increase of 2% to 8%.
The earnings call presents a positive outlook with a 59.4% revenue increase and strong cash flow. The Q&A reveals challenges such as economic factors affecting guidance but also highlights optimism in margin improvements and K-12 growth. The expanded share repurchase program and expected margin expansion further support a positive sentiment. Despite some uncertainties in non-academic segments, the overall guidance and strategic initiatives indicate a favorable stock price movement.
Earnings call summary presents mixed signals: revenue miss but optimistic growth in several segments; strong share repurchase plan, but increased expenses and flat non-GAAP income. Q&A reveals concerns about overseas growth and competition, but management expects margin expansion and growth in core segments. Overall, the sentiment is balanced with both positive and negative factors, leading to a neutral prediction.
The earnings call reveals strong financial performance with a 30.5% revenue increase and 23.7% operating margin. The optimistic guidance and strategic initiatives, including capacity expansion and AI integration, are positive indicators. The extended share repurchase program is also a favorable signal. Despite some concerns about cost increases and unclear responses on tourism margins, the overall sentiment is positive, suggesting a stock price increase of 2% to 8% over the next two weeks.
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