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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 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%.
Total Net Revenue Increased by 6.1% year-over-year. This growth was driven by strong capabilities, enhanced operational resilience, and sustainable profitability.
Non-GAAP Operating Margin Reached 22%, representing a year-over-year improvement of 100 basis points. This improvement was due to efforts in managing costs and streamlining efficiency.
Overseas Test Prep Business Revenue Increased by about 1% year-over-year. No specific reasons for the change were mentioned.
Overseas Study Consulting Business Revenue Increased by about 2% year-over-year. No specific reasons for the change were mentioned.
Adults and University Students Business Revenue Increased by 14% year-over-year. No specific reasons for the change were mentioned.
New Educational Business Initiatives Revenue Increased by about 15% year-over-year. This growth was driven by investments in facilitating students' all-around development.
Operating Costs and Expenses $1,212.2 million, representing a 6.1% increase year-over-year. No specific reasons for the change were mentioned.
Cost of Revenues Increased by 9.3% year-over-year to $637.8 million. No specific reasons for the change were mentioned.
Selling and Marketing Expenses Increased by 3.6% year-over-year to $200.6 million. No specific reasons for the change were mentioned.
G&A Expenses Increased by 2.4% year-over-year to $373.8 million. No specific reasons for the change were mentioned.
Share-Based Compensation Expenses Increased by 239.8% year-over-year to $23.3 million. No specific reasons for the change were mentioned.
Operating Income $310.8 million, representing a 6% increase year-over-year. No specific reasons for the change were mentioned.
Non-GAAP Operating Income $335.5 million, representing an 11.3% increase year-over-year. No specific reasons for the change were mentioned.
Net Income Attributable to New Oriental $240.7 million, representing a 1.9% decrease year-over-year. No specific reasons for the change were mentioned.
Non-GAAP Net Income Attributable to New Oriental $258.3 million, representing a 1.6% decrease year-over-year. No specific reasons for the change were mentioned.
Net Cash Flow from Operations Approximately $192.3 million. No year-over-year comparison or reasons for the change were mentioned.
Capital Expenditure $55.4 million. No year-over-year comparison or reasons for the change were mentioned.
Deferred Revenue $1,906.7 million, an increase of 10% compared to $1,733.1 million at the end of the first fiscal quarter of 2025. No specific reasons for the change were mentioned.
Non-academic tutoring business: Focused on cultivating students' innovative ability and comprehensive qualities, rolled out to around 60 cities, with top 10 cities contributing over 60% of this business.
Intelligent learning system and device business: Utilizes past teaching experience and data technology to provide personalized learning content, tested in 60 cities, with top 10 cities contributing over 50% of this business. Revenue increased by 15% year-over-year.
AI-powered intelligent learning device and smart study solution: Launched to transform education through technology, with positive market feedback and ongoing refinements.
Integrated tourism-related business line: Includes domestic and international study tours and research camps for K-12 and university students across 55 cities, with top 10 cities contributing over 50% of revenue. Expanded product range to include cultural travel, China study tour, global study tour, and camp education.
East Buy's private label portfolio: Focused on nutritious food products, strengthened quality management, and advanced its app and membership platform to connect customers to premium products and services.
Operational efficiency: Non-GAAP operating margin reached 22%, a year-over-year improvement of 100 basis points. Investments in AI are being leveraged to streamline internal operations and boost efficiency.
OMO teaching platform: Invested $28.5 million to upgrade and maintain the online merging offline teaching platform, aiming to deliver advanced and diversified education services.
Capacity expansion and hiring: Strategic approach to expand presence in cities with strong performance while managing resources carefully.
AI integration: Embedding AI across offerings to strengthen core capabilities and streamline operations.
Regulatory Compliance: The company is in close collaboration with government authorities in various provinces and municipalities in China to ensure compliance with relevant policies, guidelines, and regulations. This indicates potential regulatory hurdles that could impact operations if not managed properly.
Cost Management: Operating costs and expenses increased by 6.1% year-over-year, with specific increases in cost of revenues (9.3%), selling and marketing expenses (3.6%), and G&A expenses (2.4%). This could challenge profitability if not controlled effectively.
AI Integration: While the company is investing in AI-powered intelligent learning devices and solutions, there is inherent risk in the adoption and scalability of new technologies, as well as potential market acceptance challenges.
Market Penetration: The non-academic tutoring business and intelligent learning system business are concentrated in high-tier cities, with the top 10 cities contributing over 50-60% of revenue. This reliance on a limited number of markets could pose risks if these markets face economic or competitive pressures.
Revenue Growth Dependency: Revenue growth in the K-12 business is projected to accelerate, but it is heavily dependent on enhanced service quality and student retention rates, which could be impacted by external factors such as competition or changing customer preferences.
Economic Uncertainty: The company’s financial performance, including net income, showed a slight decrease year-over-year, which could be indicative of broader economic uncertainties or operational challenges.
Revenue Guidance for Q2 FY 2026: Total net revenue for the group, including East Buy, is expected to be in the range of $1,132.1 million to $1,263.3 million, representing a year-over-year increase of 9% to 12%.
Revenue Guidance for Full FY 2026: Total net revenue for the group, including East Buy, is projected 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%.
K-12 Business Growth: Revenue growth in the K-12 business is expected to accelerate in Q2 FY 2026, driven by enhanced service quality and improved student retention rates.
Operational Efficiency and Margin Improvement: The company aims to further improve margins and operational efficiency while maintaining cost control and sustainable profitability across all business segments.
Capacity Expansion and Hiring: Plans to increase presence in cities with strong top-line and bottom-line performance, while carefully managing resources and aligning new openings with local needs and financial results.
Ordinary Cash Dividend: The Board of Directors has approved an ordinary cash dividend of $0.12 per common share or $1.2 per ADS, to be paid in two installments totaling approximately $190 million. The first installment of $0.06 per common share or $0.6 per ADS will be paid to holders of record as of November 18, 2025. The second installment of $0.06 per common share or $0.6 per ADS is expected to be paid around 6 months after the first installment, with details to be announced later.
Share Repurchase Program: The company has announced a new share repurchase program, allowing for the repurchase of up to $300 million of its ADS or common shares from the open market over the next 12 months.
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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