Financial Performance - For the second quarter of fiscal year 2024, net revenue increased by 36.3% year-over-year to $869.6 million[5] - Operating profit for the second quarter was $21.3 million, compared to an operating loss of $2.5 million in the same period last year, representing a 957.8% improvement[6] - Net profit attributable to New Oriental shareholders surged by 4,007.4% year-over-year to $30.1 million[5] - For the first half of fiscal year 2024, net revenue rose by 42.4% year-over-year to $1.97 billion[7] - Non-GAAP operating profit for the second quarter was $50.9 million, a 212.2% increase from $16.3 million in the previous year[6] - Basic earnings per ADS for the second quarter was $0.18, compared to $0.00 in the same period last year, reflecting a 4,092.1% increase[6] - Non-GAAP net profit attributable to New Oriental for the second quarter was $50.2 million, up 182.6% from $17.8 million year-over-year[6] - For the first six months of fiscal year 2024, the company reported net revenue of $1.969 billion, a year-over-year increase of 42.4%[17] - The company reported a net profit of $34.7 million for the quarter, up from $16.6 million in the same quarter of the previous year, which is an increase of approximately 109.5%[29] - The company reported a net profit of $101.167 million for the six months ended November 30, 2023, reflecting an increase from the previous period[45] Operational Metrics - The total number of schools and learning centers increased to 843, up by 50 from 793 as of August 31, 2023, and up by 135 from 708 as of November 30, 2022[9] - The total number of schools as of November 30, 2023, was 83[9] - The company’s new education business achieved a revenue increase of 68.3% year-over-year, with 786,000 registrations in non-subject tutoring services[12] - The company plans to continue expanding its market presence and investing in new technologies to drive future growth[36] Cash Flow and Assets - The net cash flow from operating activities for the quarter was approximately $300.6 million, with capital expenditures of $43.4 million[15] - The company’s cash and cash equivalents totaled approximately $1.94 billion, with total short-term investments amounting to $1.57 billion as of November 30, 2023[16] - Cash and cash equivalents increased to $1.94 billion as of November 30, 2023, from $1.66 billion as of May 31, 2023, showing a growth of about 16.7%[26] - The company’s total current assets reached $4.98 billion, up from $4.41 billion, reflecting an increase of approximately 12.7%[26] - The total assets as of November 30, 2023, amounted to $7.13 billion, up from $6.39 billion as of May 31, 2023, reflecting a growth of approximately 11.5%[27] - Total liabilities increased to $3.04 billion as of November 30, 2023, compared to $2.58 billion as of May 31, 2023, marking an increase of about 17.8%[27] Deferred Revenue and Liabilities - Deferred revenue at the end of the second quarter was $1.645 billion, representing a 44.4% increase compared to $1.139 billion at the end of the same quarter last year[16] - Deferred revenue as of November 30, 2023, was $1.64 billion, compared to $1.34 billion as of May 31, 2023, representing an increase of about 22.9%[27] - Total liabilities were reported at $3,035,687, showing a minimal change of $782 from the prior period[49] Shareholder Information - The company has authorized a share repurchase plan of up to $400 million, extended until May 31, 2024, with approximately 6.0 million ADS repurchased for about $194.2 million as of January 23, 2024[11] - Basic earnings per American Depositary Share (ADS) for the quarter were $0.18, compared to $0.00 in the same period last year, indicating a positive shift in profitability[32] Accounting and Compliance - The financial results are prepared in accordance with International Financial Reporting Standards (IFRS)[19] - The company emphasizes the importance of Non-GAAP financial metrics for assessing performance and liquidity[24] - The adjustments made in the financial statements reflect the differences in accounting policies between US GAAP and IFRS, ensuring compliance with both standards[44] - The company has engaged Deloitte for limited assurance on the financial adjustments, confirming no significant discrepancies were found[43] Future Outlook - The company’s future outlook includes continued focus on market expansion and potential new product development[1] - The management's forward-looking statements are subject to inherent risks and uncertainties, which may lead to actual results differing materially from those projected[23]

Core Viewpoint - New Oriental Education & Technology Group Inc. reported strong financial results for the second fiscal quarter of 2024, with significant year-over-year growth in revenues and net income, indicating a robust recovery and expansion in its educational services and related businesses [1][4]. Financial Highlights - Total net revenues for the second fiscal quarter increased by 36.3% year over year to US$869.6 million [2][6]. - Operating income was US$21.3 million, a turnaround from a loss of US$2.5 million in the same period of the prior fiscal year [2][9]. - Net income attributable to New Oriental surged by 4,007.4% year over year to US$30.1 million [2][10]. - Non-GAAP operating income for the quarter was US$50.9 million, representing a 212.2% increase year over year [2][9]. - The company reported a positive operating cash flow of US$300.6 million for the quarter [4][12]. Operational Highlights - The total number of schools and learning centers increased to 843 as of November 30, 2023, up from 793 as of August 31, 2023 [3]. - The overseas test preparation and overseas study consulting businesses grew by approximately 46.5% and 31.7% year over year, respectively [4]. - Domestic test preparation for adults and university students recorded a growth of approximately 42.7% year over year [4]. - New educational business initiatives achieved a revenue growth of 68.3% year over year, with non-academic tutoring courses attracting approximately 786,000 student enrollments [4]. Cost and Expenses - Operating costs and expenses for the quarter were US$848.3 million, a 32.4% increase year over year [7]. - Selling and marketing expenses increased by 62.2% year over year to US$155.0 million [7]. - General and administrative expenses rose by 29.6% year over year to US$270.7 million [7]. Balance Sheet and Cash Flow - As of November 30, 2023, New Oriental had cash and cash equivalents totaling approximately US$1.9 billion, with total cash, cash equivalents, term deposits, and short-term investments amounting to approximately US$4.8 billion [13]. - Deferred revenue increased by 44.4% year over year to US$1.645 billion [13]. Outlook - New Oriental expects total net revenues for the third quarter of fiscal year 2024 to be in the range of US$1,070.9 million to US$1,093.5 million, reflecting a year-over-year increase of 42% to 45% [18].

Financial Performance - Total net revenues for the second fiscal quarter of 2024 increased by 36.3% year over year to US$869.6 million[2] - Operating income was US$21.3 million, compared to a loss of US$2.5 million in the same period of the prior fiscal year, representing a 957.8% increase[3] - Net income attributable to New Oriental surged by 4,007.4% year over year to US$30.1 million for the second fiscal quarter of 2024[3] - Non-GAAP net income attributable to New Oriental for the quarter was US$50.2 million, representing a 182.6% increase year over year[13] - New Oriental's net income for the three months ended November 30, 2023, was RMB30,066 (US$4.2 million), compared to RMB732 (US$0.1 million) in the same period of the prior year[30] - Non-GAAP net income attributable to New Oriental for the three months ended November 30, 2023, was $50,158 thousand, compared to $17,750 thousand in the prior year, representing an increase of 182%[32] - For the six months ended November 30, 2023, net revenues were $1,969,621 thousand, a 42.3% increase from $1,383,036 thousand in the same period of 2022[38] - The company reported a net income of $214.866 million for the six months ended November 30, 2023, compared to $101.167 million for the same period in 2022, reflecting a year-over-year increase of approximately 112.3%[52] Business Growth - The total number of schools and learning centers reached 843, an increase of 50 compared to the previous quarter[5] - The overseas test preparation and overseas study consulting businesses grew by approximately 46.5% and 31.7% year over year, respectively[5] - New educational business initiatives achieved 68.3% revenue growth year over year, with approximately 786,000 student enrollments in non-academic tutoring courses[6] - For the first six months ended November 30, 2023, East Buy recorded total revenue of RMB2,795.0 million (US$386.3 million), a 34.4% increase from RMB2,080.1 million in the same period of the prior fiscal year[19] - East Buy's net profit for the same period was RMB249.2 million (US$34.4 million), a 57.4% decrease from RMB585.3 million in the prior fiscal year[19] Cash Flow and Assets - Operating cash flow for the quarter was approximately US$300.6 million, with cash and cash equivalents totaling around US$4.8 billion[6] - New Oriental's total current assets increased to RMB4,976.9 million (US$688.5 million) as of November 30, 2023, from RMB4,413.9 million (US$610.5 million) as of May 31, 2023[29] - New Oriental's cash and cash equivalents increased to RMB1,942.6 million (US$268.5 million) as of November 30, 2023, from RMB1,663.0 million (US$230.5 million) as of May 31, 2023[29] - Cash, cash equivalents, and restricted cash at the end of the period on November 30, 2023, totaled $2,120,746 thousand, up from $1,122,824 thousand a year earlier, marking an increase of 88.9%[36] Liabilities and Equity - Total liabilities for New Oriental increased to RMB3,035.7 million (US$420.5 million) as of November 30, 2023, compared to RMB2,577.7 million (US$360.5 million) as of May 31, 2023[29] - The total liabilities as of November 30, 2023, were $3.036 billion, which is consistent with the previous reporting period[53] - The company’s total equity as of November 30, 2023, was $4.075 billion, a slight decrease from $4.096 billion as of May 31, 2023[53] Future Outlook - New Oriental expects total net revenues in the third quarter of fiscal year 2024 to be in the range of US$1,070.9 million to US$1,093.5 million, representing a year-over-year increase of 42% to 45%[20] Operating Costs - Total operating costs and expenses for the three months ended November 30, 2023, were $848,258 thousand, up from $640,702 thousand in the same period of 2022, reflecting a 32.4% increase[32] - The cost of revenues for the six months ended November 30, 2023, was $860.411 million, up from $638.174 million for the same period in 2022, representing an increase of approximately 34.7%[51] Tax and Fair Value Changes - The provision for income taxes for the six months ended November 30, 2023, was $74.231 million, compared to $26.912 million for the same period in 2022, indicating an increase of approximately 175.5%[52] - The company recognized a gain from fair value change of investments amounting to $18.166 million for the six months ended November 30, 2023, compared to a loss of $1.539 million for the same period in 2022[52] Accounting Policies - The adjustments made in the reconciliation of financial results under IFRSs reflect the different accounting treatments according to the Group's accounting policies, ensuring compliance with both US GAAP and IFRSs[49]

Core Viewpoint - New Oriental Education & Technology Group Inc. is expected to report strong growth in both earnings and net revenues for the second quarter of fiscal 2024, driven by increased demand in its test preparation and overseas study consulting businesses [1][2][3]. Financial Performance - In the last reported quarter, net revenues exceeded the Zacks Consensus Estimate by 10.2%, with year-over-year growth of 135.4% in earnings and 47.7% in net revenues [1]. - The Zacks Consensus Estimate for fiscal Q2 2024 earnings per share is 27 cents, reflecting a 170% increase from the previous year's 10 cents [2]. - The consensus for net revenues is projected at $828.1 million, indicating a 29.7% growth from $638.2 million reported a year ago [2]. Growth Drivers - The anticipated revenue growth is attributed to rising demand from both domestic and international markets, particularly among adults and university students for test preparation services [3]. - New educational initiatives, including non-academic tutoring and intelligent learning systems, are expected to contribute positively to revenue growth and the expansion of schools and learning centers [3][4]. - The company is focusing on enhancing service quality and operational efficiencies, which are likely to improve margins [4]. Earnings Prediction Model - The current model does not predict an earnings beat for New Oriental, as it lacks a positive Earnings ESP and a higher Zacks Rank [5]. - The Earnings ESP for New Oriental is 0.00%, and it holds a Zacks Rank of 3 [5].

Industry Overview - The Covid-19 crisis accelerated the digitalization of in-person functionalities, significantly impacting remote learning stocks [1] - The online education market is projected to generate revenue of $87.51 billion by the end of this year, with a compound annual growth rate (CAGR) of 11.05% through 2028, potentially reaching $133.1 billion [1] Company Analysis: New Oriental Education (EDU) - New Oriental Education is the largest comprehensive private educational company in China, with a market revenue of approximately $130 billion [2] - The company is well-positioned to benefit from the projected growth in the K-12 education sector following a downturn during the pandemic [2] Company Analysis: Stride (LRN) - Stride is a for-profit education company providing online and blended education programs, with a significant return of almost 85% in equity value over the past 52 weeks and 131% over the past five years [5] - The company has a price/earnings-to-growth (PEG) ratio of 0.65X, lower than 63.22% of its peers, and is rated a strong buy with a price target of $66.75 [6] Company Analysis: Grand Canyon Education (LOPE) - Grand Canyon Education offers online and on-campus programs and is recognized as Arizona's premier Christian university [7] - The company is fairly valued with a trailing-year earnings multiple of 19.7X, and it enjoys a strong buy rating with a price target of $145.67 [8]

Company Overview - New Oriental Education and Technology Group Inc. is a provider of private educational services in China, offering a wide range of educational programs, services, and products to a diverse student population throughout the country [5]. Financial Results Announcement - The company will report its financial results for the second quarter ended November 30, 2023, before the U.S. market opens on January 24, 2024 [1]. - An earnings conference call will be hosted by New Oriental's management at 8 AM on January 24, 2024, U.S. Eastern Time [1]. Conference Call Details - Participants can register in advance for the conference call using a provided link, which will give them access to dial-in numbers and a unique personal PIN [3]. - A live and archived webcast of the conference call will be available for access [3]. Replay Information - A replay of the conference call will be accessible via the webcast on-demand until January 24, 2025 [4].

Financial Data and Key Metrics Changes - New Oriental reported a significant increase in operating income of 163% year over year, reaching $205.1 million, while non-GAAP income from operations increased by 152.2% to $244.8 million [18][19] - Net income attributable to New Oriental was $165.4 million, representing a 150.6% increase year over year, with basic and diluted net income per ADS at $0.99 [19] - The company had cash and cash equivalents totaling approximately $4.6 billion, with a deferred revenue balance of $1.401 billion, an increase of 38.4% year over year [16][19] Business Line Data and Key Metrics Changes - The Overseas Test Prep Business saw a revenue increase of 52% in dollar terms, or 62% in RMB terms year over year [7] - The Overseas Study Consulting Business recorded a revenue increase of 27% in dollar terms, or 35% in RMB terms year over year [7] - New education business initiatives achieved a revenue increase of 103% in dollar terms, or 117% in RMB terms year over year [9] Market Data and Key Metrics Changes - The non-dynamic children business recorded approximately 438,000 student enrollments, with the top ten cities in China contributing over 60% of the revenue [8] - The Intelligent Learning System and Device Business reported approximately 181,000 active paid users, with revenue contribution from the top ten cities in China also around 60% [9] Company Strategy and Development Direction - The company plans to increase its learning center capacity by about 15% to 20% throughout fiscal year 2024, focusing on cities with strong performance [21] - New Oriental aims to leverage its brand advantage and solid foundation to capture more market share and enhance profitability through innovative educational offerings [20][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustainable growth for the remainder of fiscal year 2024, citing strong demand in the education sector and a favorable regulatory environment [20][31] - The company anticipates total net revenue for Q2 of fiscal year 2024 to be in the range of $785 million to $804 million, representing a year-over-year increase of 23% to 26% [21] Other Important Information - The company has authorized a share repurchase program of up to $500 million, extending it through May 31, 2024, with approximately $193.3 million repurchased as of October 24, 2023 [16] Q&A Session Summary Question: November quarter revenue guidance and growth drivers - Management clarified that the guidance reflects a conservative approach, with typical seasonality affecting Q2, but strong demand is expected to continue [25][26] Question: Capacity expansion plans - Management confirmed a 6% new capacity addition this quarter, with plans for 15% to 20% expansion for the year, focusing on top-tier cities [29][30] Question: Margin expansion analysis - The operating margin increased due to improved utilization of resources and higher margins from new business lines, with optimism for continued margin growth [33][35] Question: Long-term growth for existing businesses - Management is optimistic about top-line growth for existing businesses due to strong demand and reduced competition post-COVID [37][39] Question: Growth of Intelligent Learning Devices - The company is seeing strong demand for its Intelligent Learning Devices, with plans to enhance product quality and expand user numbers [42][44] Question: Shareholder return policy - Management reiterated commitment to the share buyback program, aiming to create value for shareholders [46][47]

Financial Performance - For the first quarter of fiscal year 2024, net revenue increased by 47.7% year-over-year to $1,100.0 million[3] - Operating profit for the first quarter rose by 163.0% year-over-year to $205.1 million[3] - Net profit attributable to New Oriental shareholders increased by 150.6% year-over-year to $165.4 million[3] - Non-GAAP operating profit for the first quarter was $244.8 million, up 152.2% year-over-year[4] - Net profit attributable to shareholders was $165.4 million, reflecting a year-over-year increase of 150.6%[11] - Non-GAAP net profit attributable to shareholders was $189.3 million, up 126.2% year-over-year[12] - Basic earnings per share for the three months ended August 31, 2023, was $0.10, up from $0.04 in the same period of 2022, representing a growth of 150%[25] - Net income attributable to New Oriental was $189.318 million for the three months ended August 31, 2023, up from $83.706 million in the same period of 2022, marking a 126.5% increase[27] - Basic net income per American Depositary Share (ADS) was $1.15 for Q3 2023, compared to $0.49 for Q3 2022, reflecting a significant growth of 134.7%[28] Operating Metrics - The total number of schools and learning centers reached 793, an increase of 45 from the previous quarter and 87 from the same period last year[6] - The overseas exam preparation and consultation business grew by 51.7% and 26.6% year-over-year, respectively[6] - Operating costs and expenses for the quarter were $894.9 million, a year-over-year increase of 34.2%[10] - Revenue cost increased by 41.4% to $441.2 million, while sales and marketing expenses rose by 37.9% to $136.1 million[10] - The total operating costs and expenses for the three months ended August 31, 2023, were $894,897, up from $666,833 in the previous year, reflecting an increase of approximately 34.1%[25] - The total operating expenses, excluding stock-based compensation, were $855.266 million for Q3 2023, compared to $647.778 million in Q3 2022, indicating a 32% increase[27] - Selling and marketing expenses rose to $7.427 million in Q3 2023 from $0.580 million in Q3 2022, a substantial increase of 1,178.4%[29] - General and administrative expenses increased to $27.232 million in Q3 2023 from $18.585 million in Q3 2022, reflecting a growth of 46.6%[29] Cash Flow and Assets - The company recorded a net operating cash flow of $335.8 million for the quarter[7] - Net operating cash flow for Q1 FY2024 was approximately $335.8 million, with capital expenditures of $132.5 million[13] - Cash and cash equivalents as of August 31, 2023, totaled $1,748.9 million, with short-term investments amounting to $1,423.9 million[13] - Cash and cash equivalents increased to $1.890721 billion at the end of Q3 2023, up from $1.137112 billion at the end of Q3 2022, showing a growth of 66.3%[30] - The company reported a net cash provided by operating activities of $335.786 million for Q3 2023, compared to $185.247 million in Q3 2022, an increase of 81.1%[30] Future Outlook - For Q2 FY2024, the company expects total net revenue to be between $785.0 million and $804.2 million, representing a year-over-year increase of 23% to 26%[14] - The company plans to continue focusing on enhancing product and service quality while leveraging its brand advantages to capture new market opportunities[6] - The company is focused on expanding its self-operated products and live e-commerce business, which contributed to the increase in operating costs[10] Deferred Revenue and Liabilities - Deferred revenue balance at the end of Q1 FY2024 was $1,401.4 million, a 38.4% increase from $1,012.5 million at the end of Q1 FY2023[13] - The company reported a significant increase in deferred revenue, totaling $1,401,420 as of August 31, 2023, compared to $1,337,630 as of May 31, 2023, which is an increase of about 4.8%[24] - Total assets as of August 31, 2023, were $6,674,715, an increase from $6,392,458 as of May 31, 2023, indicating a growth of approximately 4.4%[23][24] - Total liabilities as of August 31, 2023, were $2,695,194, compared to $2,577,670 as of May 31, 2023, reflecting an increase of about 4.6%[24] Non-GAAP Metrics - The company emphasized the importance of Non-GAAP financial metrics for providing additional insights into operational performance and liquidity, which are not reflected in GAAP measures[22] - New Oriental reported a non-GAAP operating profit of $244.755 million for the three months ended August 31, 2023, compared to $97.044 million in the same period of 2022, representing a year-over-year increase of 152.5%[27] - The non-GAAP operating profit margin improved to 22.3% in Q3 2023 from 13.0% in Q3 2022[27] - Weighted average shares used to calculate basic net income per ADS decreased to 1,651,203,885 in Q3 2023 from 1,700,829,829 in Q3 2022, a reduction of 2.9%[28]

Revenue Growth - Total net revenues increased by 47.7% year over year to $1,100.0 million for the first fiscal quarter of 2024[2][3] - Net revenues for the three months ended August 31, 2023, increased to $1,100,021 thousand, up from $744,822 thousand in the same period last year[26] - New Oriental expects total net revenues in the second quarter of fiscal year 2024 to be in the range of $785.0 million to $804.2 million, representing a year-over-year increase of 23% to 26%[16] Profitability - Operating income increased by 163.0% year over year to $205.1 million for the first fiscal quarter of 2024[2][3] - Net income attributable to New Oriental increased by 150.6% year over year to $165.4 million for the first fiscal quarter of 2024[2][3] - Operating income for the three months ended August 31, 2023, was $205,124 thousand, compared to $77,989 thousand in the same period last year[26] - Non-GAAP operating income for the three months ended August 31, 2023, was $244,755 thousand, compared to $97,044 thousand in the same period last year[28] - Net income attributable to New Oriental Education & Technology Group Inc.'s shareholders for the three months ended August 31, 2023, was $165,386 thousand, up from $66,002 thousand in the same period last year[26] - Non-GAAP net income attributable to New Oriental for the three months ended August 31, 2023, was $189,318 thousand, compared to $83,706 thousand in the same period last year[28] Operating Margins - GAAP operating margin for the quarter was 18.6%, an improvement of 810 basis points year over year[6] - Non-GAAP operating margin for the quarter was 22.3%, an improvement of 930 basis points year over year[6] Business Expansion - The total number of schools and learning centers increased to 793 as of August 31, 2023, up from 748 as of May 31, 2023[4] - Overseas test preparation and overseas study consulting businesses grew by 51.7% and 26.6% year over year, respectively[5] - New educational business initiatives achieved 103.3% revenue growth year over year, with 438,000 student enrollments and 181,000 active paid users[5] Cash Flow and Liquidity - Net operating cash inflow for the first fiscal quarter of 2024 was $335.8 million[14] - Cash, cash equivalents, and restricted cash at the end of the period were $1,890,721 thousand, up from $1,137,112 thousand in the same period last year[32] - Net cash provided by operating activities for the three months ended August 31, 2023, was $335,786 thousand, compared to $185,247 thousand in the same period last year[32] Assets and Liabilities - Total assets as of August 31, 2023, were $6,674,715 thousand, compared to $6,392,458 thousand as of May 31, 2023[24] - Total liabilities as of August 31, 2023, were $2,695,194 thousand, compared to $2,577,670 thousand as of May 31, 2023[24] Share-Based Compensation - Share-based compensation expenses for the three months ended August 31, 2023, were $39,631 thousand, up from $19,055 thousand in the same period last year[30]

Share Structure and Financial Reporting - The company has a total of 1,643,162,653 ordinary shares with a par value of $0.001 as of May 31, 2023[5] - The company is classified as a large accelerated filer according to the Securities Exchange Act rules[6] - The company follows U.S. Generally Accepted Accounting Principles (GAAP) for its financial statements[7] - The company's financial statements are consolidated under US GAAP, including the financial performance of its variable interest entities[9] - The company's financial data is presented in USD, with conversions based on exchange rates as of May 31, 2023[10] - The company's financial reporting currency is USD, with certain data converted for reader convenience[10] - The company's consolidated affiliated entities contributed 99.9%, 99.6%, and 99.5% of total net revenue for fiscal years 2021, 2022, and 2023 respectively[16] - The company's financial statements consolidate the financial performance of VIEs under U.S. GAAP[16] - The company's ability to consolidate financial statements under US GAAP may be impacted if penalties prevent it from directing activities or obtaining economic benefits from consolidated entities[113] Operational Structure and Subsidiaries - New Oriental Education & Technology Group Inc. operates through its Chinese subsidiaries, variable interest entities, and their affiliates in China[9] - The company operates in China through contractual arrangements with variable interest entities (VIEs) and their subsidiaries[16] - The company's Chinese subsidiaries and VIEs have entered into various contractual agreements, including equity pledge agreements, exclusive option agreements, and service agreements[17][18][19] - The company is considered the primary beneficiary of the VIEs due to the contractual arrangements[19] - New Oriental Education & Technology Group Inc. owns 100% of its key subsidiaries and variable interest entities as of May 31, 2023[20] - The company operates 79 schools in China through its subsidiaries[20] - Beijing Century Friendly Education Investment Co., Ltd. is 99% owned by the company's founder and executive chairman, Yu Minhong, and 1% owned by the executive president and CFO, Yang Zhihui[22] - The company's contractual arrangements with variable interest entities may not be as effective as direct ownership in providing operational control[22] - The company's Chinese operations rely on contractual arrangements, which are less effective than direct ownership in providing operational control[114] - The company operates in China through contractual arrangements with New Oriental China and its schools, which hold important assets for business operations[124] Regulatory and Legal Risks - The company faces risks related to the enforceability of its contractual arrangements with variable interest entities under Chinese regulations[23] - Changes in Chinese laws or regulations could lead to severe penalties or forced divestment of interests in certain businesses[23] - The company's American Depositary Shares and/or ordinary shares could significantly depreciate or become worthless if the variable interest entity structure is disallowed by Chinese regulators[23] - The company faces risks related to regulatory approvals for overseas offerings, antitrust actions, and data privacy regulations in China[24] - The company's operations and overseas financing activities require permits from Chinese regulatory authorities[25] - The company has obtained necessary licenses for its business operations in China, including ICP and EDI licenses[25] - The company is not currently required to undergo cybersecurity review by the Cyberspace Administration of China for overseas securities offerings[26] - The company must complete filing procedures with the China Securities Regulatory Commission for future overseas securities offerings[26] - The Chinese government has increased supervision and control over overseas listings and foreign investments[27] - Uncertainty exists regarding future regulatory approvals for overseas securities offerings in China[27] - Failure to obtain necessary approvals could result in penalties, including fines and suspension of operations[27] - The company faces risks from potential changes in college admissions and assessment exams in China and the US, which could reduce demand for its services[82] - The company may face penalties, refunds, or negative publicity if it fails to comply with regulations for tutoring services for grades 10-12[63] - The company could be required to cease tutoring services for grades 10-12, impacting its financial performance[63] - The company's smart learning systems and devices may be considered subject-based AST institutions, potentially leading to penalties, suspension of operations, or other regulatory actions if deemed non-compliant with the "Double Reduction" policy[65] - The company faces potential legal claims and disputes related to copyright infringement and unauthorized use of third-party names for marketing, which could lead to increased expenses and revenue loss[70] - The company has faced intellectual property infringement claims in the past, including a RMB 6.5 million damages payment in 2004[69] - The company is subject to Chinese laws and regulations governing data collection, storage, and privacy protection, with potential penalties for non-compliance[93] - The Data Security Law of the People's Republic of China, effective from September 2021, mandates security review procedures for data-related activities that may impact national security[94] - Network platform operators with over 1 million users' personal information must apply for cybersecurity review before listing overseas[94] - The Cybersecurity Review Measures, effective from February 2022, require critical information infrastructure operators to undergo cybersecurity review for procurement of network products and services[94] - The Personal Information Protection Law, effective from November 2021, defines personal information and sensitive personal information, imposing strict processing rules[95] - Data processors transferring important data or personal data overseas must undergo security assessments under the Data Export Security Assessment Measures, effective from September 2022[96] - Data processors transferring personal information of over 100,000 individuals or sensitive personal information of over 10,000 individuals since January 1 of the previous year must apply for security assessments[96] - The draft Data Security Management Regulations propose annual data security assessments for data processors handling "important data" or listing overseas[94] - The draft amendments to the Cybersecurity Law propose increased legal liabilities for violations of cybersecurity obligations by critical information infrastructure operators[94] - The scope of "critical information infrastructure operators" remains unclear, with potential additional obligations under Chinese cybersecurity laws[94] - The company has applied for security assessments for certain data transfers overseas under the Data Export Security Assessment Measures[96] - The company's business operations are currently in compliance with China's cybersecurity, data security, and personal data protection laws, but future regulations may become stricter and could lead to additional costs and liabilities[97] - The company faces potential fines and administrative measures if its advertising and promotional content violates Chinese laws and regulations, including restrictions on educational advertising[98] - The company cannot guarantee full compliance with all advertising and promotional content regulations, especially given increased government scrutiny[99] - The company may face legal disputes that could significantly impact its business, financial performance, and reputation[100] - The company is facing a putative shareholder class action lawsuit, which could significantly impact its business, financial condition, operating results, cash flow, and reputation[101] - The company may require additional funding for future development, including new business plans, investments, or acquisitions, but there is no guarantee it can secure financing on acceptable terms[102] - The company issued $300 million in 2.125% notes due in 2025, and failure to comply with the trust indenture or other debt agreements could lead to accelerated repayment and liquidity issues[103] - The company’s rental costs and ability to secure leases at desirable locations could significantly impact its business, with potential relocation costs and penalties for unregistered leases[104] - Some of the company’s leased properties do not fully comply with fire safety regulations, which could result in fines, relocation, and additional expenses[105] - Food safety and product quality are critical to the reputation and business success of Oriental Selection, with potential penalties for non-compliance with regulations[106] - The company's contractual arrangements with variable interest entities in China are subject to regulatory risks, potentially leading to severe penalties or loss of business interests[108] - Foreign ownership in value-added telecommunications services in China is restricted, with internet information service providers capped at 50% foreign ownership[109] - The company may be required to terminate contractual arrangements with its smart learning system entities if they are deemed as subject to the Double Reduction Policy[112] - The company could face penalties including license revocation, revenue confiscation, and operational restrictions if found in violation of Chinese laws or regulations[113] - The company’s operations may be significantly impacted by changes in Chinese laws, regulations, and policies governing private education, such as the "Double Reduction" policy[119] - The company’s use of seals (company, contract, and financial) is strictly controlled, with approvals required from legal, administrative, or financial departments to prevent misuse[118] - Misuse or unauthorized control of seals by designated legal representatives could disrupt the company’s normal business operations and require significant time and resources to resolve[118] - The company’s subsidiaries and New Oriental China may face restrictions on their ability to pay dividends or make other payments due to debt obligations or tax adjustments[120] - The company’s tax liabilities could increase if Chinese tax authorities adjust transfer pricing or impose penalties for underpaid taxes, negatively impacting net profits[119] - The company’s private schools must allocate a minimum of 25% of annual net profits or asset value increases to development funds, depending on their classification[120] - The company’s reliance on dividends and payments from its Chinese entities could limit its ability to invest, acquire, or fund its business operations[120] - Offshore holding company's ability to provide loans or additional capital to Chinese subsidiaries may be restricted by Chinese regulations and government currency exchange controls, potentially impacting liquidity and funding capabilities[121] - Loans to Chinese subsidiaries must comply with Chinese regulations, including registration with the State Administration of Foreign Exchange (SAFE) and adherence to statutory limits[121] - Capital injections into Chinese subsidiaries must be filed and reported to the Ministry of Commerce or its local departments, but are unlikely to fund New Oriental China and its schools due to regulatory constraints[122] - SAFE regulations (Circular No. 19 and No. 16) restrict the use of RMB converted from foreign currency registered capital, potentially limiting the company's ability to transfer foreign currency and impacting liquidity[122] - SAFE Circular No. 28 allows foreign-invested enterprises to use RMB converted from foreign currency for equity investments in China, provided it complies with applicable laws and the negative list for foreign investment[122] - Chinese laws and regulations may continue to limit the use of proceeds from overseas offerings, potentially affecting the company's ability to capitalize its Chinese business[123] - Bankruptcy or liquidation proceedings involving New Oriental China or its schools could result in the loss of assets, reducing operational scale and impacting revenue generation[124] - Changes in China's economic, political, or social conditions, or government policies, could significantly impact the company's business, financial condition, and operating results[126] - China's economic growth has slowed since 2010, with COVID-19 negatively impacting the economy in 2022[127] - Global economic recession and geopolitical tensions could adversely affect the company's financial performance and access to financing[128] - Uncertainties in China's legal system and regulatory changes may pose risks to the company's operations[129] - Increased Chinese government oversight of overseas listings could lead to significant adverse changes in the company's operations and stock value[130] - Future regulatory approvals for overseas securities offerings may be delayed or denied, impacting the company's ability to raise capital[131] - The company may face significant uncertainty regarding the classification of its contractual arrangements as foreign investment under the PRC Foreign Investment Law, potentially requiring the termination of existing arrangements or sale of related business operations[132] - Non-compliance with Chinese internet content regulations could lead to penalties, license revocation, and website closures, adversely affecting the company's operations and reputation[133] - The company must obtain multiple licenses and permits for its education and e-commerce businesses, including ICP, food operation, publication operation, and performance operation licenses[134] - The company is required to comply with various health, safety, and food regulations, and failure to obtain or renew necessary licenses could result in fines, legal sanctions, or service suspension[135] - Chinese residents establishing offshore special purpose companies must register with the State Administration of Foreign Exchange, and failure to do so may limit the company's ability to inject capital into its Chinese subsidiaries or repatriate profits[136] - The company must submit applications to the State Administration of Foreign Exchange (SAFE) for employees participating in equity incentive plans, with no guarantee of approval[138] - Non-compliance with SAFE regulations could result in fines, legal sanctions, and restrictions on employees' ability to exercise stock options or repatriate funds[138] - The company's offshore offerings may require approval from the China Securities Regulatory Commission (CSRC) or other government agencies, with uncertain timelines[138] - Acquisitions in China are subject to complex procedures under the Anti-Monopoly Law and may face delays in obtaining necessary approvals[138] - Overseas investments by Chinese-controlled entities exceeding $300 million in non-sensitive projects must report to the National Development and Reform Commission (NDRC)[139] - The company must comply with new CSRC regulations for overseas securities issuance and listing, including filing requirements for future offerings[140] - The company is required to establish a confidentiality and archive management system for overseas securities issuance under new CSRC rules[140] - Rising labor costs in China may significantly impact the company's profitability and operating performance[142] - The company is required to contribute to government-mandated employee welfare programs, including social insurance and housing funds, based on a percentage of employee salaries[143] - Chinese government controls on currency exchange may limit the company's ability to pay dividends to foreign shareholders[144] - Fluctuations in the RMB exchange rate could have a material adverse effect on the company's revenue, earnings, and financial condition[145] - Limited availability of hedging tools in China to mitigate foreign exchange risk[146] - Potential regulatory penalties or sanctions if the company fails to obtain necessary approvals or complete required filings for overseas issuances[141] - The company may face fines, late fees, or legal sanctions if it fails to make sufficient employee welfare payments[143] - Future restrictions on foreign currency access could hinder the company's ability to meet its currency needs[144] - The company currently has no hedging transactions in place to mitigate foreign exchange risk[146] - Regulatory uncertainty or negative reports regarding approval requirements could adversely affect the company's business and stock price[141] - The company faces uncertainty in obtaining and maintaining necessary licenses for its online business in China, particularly regarding internet audio-visual programs, broadcasting, and online education activities[153] - The company has re-submitted or is in the process of re-submitting filings for its educational mobile applications to comply with the "Double Reduction" policy[153] - The company may need additional or updated ICP licenses to cover all its current telecommunications services due to potential changes in regulatory interpretations[153] - The company's live-streaming e-commerce business through Dongfang Zhenxuan does not require an internet culture business license as it primarily involves agricultural product sales[153] - The company could face penalties, legal sanctions, or suspension of online tutoring services if it fails to obtain required licenses or permits[154] - PCAOB's inability to inspect the company's auditors in China previously deprived investors of the benefits of such inspections[155] - The company's American Depositary Shares (ADS) could be delisted from U.S. exchanges if PCAOB is unable to inspect its auditors for two consecutive years[155] - PCAOB removed China and Hong Kong from the list of jurisdictions where it cannot inspect or investigate registered public accounting firms, and the company expects not to be identified as a Commission-Identified Issuer under HFCAA after submitting its Form 20-F for the fiscal year ending May 31, 2023[156] - If the company is identified as a Commission-Identified Issuer under HFCAA for two consecutive years, its securities will be prohibited from trading on U.S. national securities exchanges or over-the-counter markets, severely impacting its ability to raise funds[156] - Overseas regulators may face difficulties conducting investigations or obtaining evidence within China due to legal procedures and the lack of effective cooperation mechanisms with U.S. securities regulators[157] - The company’s ADS and ordinary shares have experienced significant price volatility, with ADS closing prices ranging from $12.60 to $58.70 on the NYSE and ordinary shares ranging from HK$10.10 to HK$46.40 on the HKEX between June 1, 2022, and September 21, 2023[160] - The company’s organizational bylaws include provisions that differ from HKEX rules, such as requiring at least one-third of total voting rights to convene an extraordinary general meeting, which was revised to align with HKEX rules in March 2021[158] - If 55% or more of the global trading volume of the company’s ordinary shares and ADS in the most recent fiscal year occurs on the HKEX, the company will be considered dual-primary listed and lose certain exemptions, potentially increasing compliance costs[159] - The trading market of the company's ordinary shares and/or American Depositary Shares (ADS) may be negatively impacted by downgrades or cessation of coverage by securities or industry analysts, potentially leading to price and volume declines[161] - ADS holders have fewer rights compared to ordinary shareholders and must exercise their rights through the depositary, which may result in delayed or missed voting opportunities[162] - ADS holders may have limited participation in future rights offerings, potentially leading to equity dilution[163] - ADS transfers may be subject to restrictions by the depositary, including closure of transfer books or refusal to register transfers under certain circumstances[164] - Judgments obtained by shareholders against the company may not be enforceable due to the company's incorporation in the Cayman Islands and primary operations in China[165] - The recognition and enforcement of foreign judgments in China are subject to treaties or reciprocity principles, and there is no such treaty between China and the United States[166] - Shareholders of the company, as a Cayman Islands exempted company, may have more limited rights compared to shareholders of companies incorporated in the United States or Hong Kong[167] - The company's articles of association include anti-takeover provisions that may adversely affect the rights of ordinary shareholders and ADS holders[168] - The company is classified as a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes as of May 31, 2023, potentially leading to significant tax consequences for U.S. holders of ADS or ordinary shares[169] - Differences between Hong Kong and U.S. capital markets may adversely impact the trading prices of the company's ordinary shares and/or ADS[170] - Exchange between ordinary shares and ADS may negatively affect liquidity and/or trading prices of both securities[171] - Delays in exchanging ordinary shares for ADS (or vice versa) may prevent investors from settling or selling their securities during the delay period[172] - The company's ordinary shares may not maintain an active trading market on the Hong Kong Stock Exchange, potentially leading to significant price volatility[173] - The current total stamp duty rate for transferring shares in Hong Kong is 0.2%, with 0.1% paid by each of the buyer and seller[174] - The company repurchased 952,000 ADS at a total cost of $56.0 million, with a weighted average repurchase price of $58.78 per ADS[177] - The company issued $300 million of 2.125% notes due in 2025, with net proceeds of