Core Viewpoint - New Oriental Education and Technology Group Inc. will report its financial results for the third quarter ended February 28, 2025, on April 23, 2025, before the U.S. market opens [1] Group 1: Financial Reporting - The earnings conference call is scheduled for 8 AM on April 23, 2025, U.S. Eastern Time [1] - Participants can register in advance for the conference call to receive dial-in numbers and a unique personal PIN [2] - A live and archived webcast of the conference call will be available on the company's investor relations website [4] Group 2: Company Overview - New Oriental is a provider of private educational services in China, offering a variety of educational programs, services, and products [5] - The company's offerings include educational services, test preparation courses, private label products, livestreaming e-commerce, and overseas study consulting services [5] - New Oriental is listed on both NYSE (NYSE: EDU) and SEHK (9901.SEHK), with its American Depositary Shares (ADSs) representing ten common shares [5]

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The report highlights that the company's education business continues to grow, with non-core business impacts being limited [3] - The company has a strong cash flow position, with a net operating cash flow of $313.3 million for FY2025Q2 and a total cash reserve of approximately $4.813 billion [7][9] - The company is expected to achieve revenue growth of 25.0% and 20.0% for FY2025 and FY2026, respectively, with Non-GAAP net profit growth of 34.2% and 33.7% for the same periods [11] Financial Performance - For FY2024, the company reported revenue of $4.314 billion, with a year-on-year growth of 43.9%. Projections for FY2025 and FY2026 are $5.392 billion and $6.470 billion, respectively [4] - Non-GAAP net profit for FY2024 was $381 million, with expected growth to $512 million in FY2025 and $684 million in FY2026 [4] - The gross margin is projected to be stable, around 52.0% to 53.0% over the next few years [4] Business Segments - The education business segment showed a net revenue growth of 31.3% in FY2025Q2, with specific growth in overseas exam preparation and consulting services [9] - New educational initiatives are experiencing rapid growth, with a 42.6% increase in enrollment for non-subject tutoring services [9] Cash Flow and Share Buyback - The company has maintained a robust cash flow, with significant cash reserves and ongoing share buyback programs totaling $542.8 million [7][9]

Core Insights - New Oriental Education & Technology Group Inc. reported mixed results for Q2 fiscal 2025, with earnings missing estimates while net revenues exceeded expectations, leading to a 23.2% drop in stock price [1][3]. Financial Performance - Adjusted earnings were 22 cents per ADS, missing the consensus estimate of 47 cents by 53.2%, and decreased 24.1% year-over-year [3]. - Total revenues reached $1,038.6 million, slightly surpassing the consensus by 0.4% and growing 19.4% year-over-year. Excluding certain revenues, net revenues were $894.2 million, marking a 31.3% increase compared to the previous year [4]. - The overseas test preparation and study consulting segments grew by 21.1% and 31.0% year-over-year, while the domestic test preparation business saw a 34.9% increase [5]. Business Initiatives - New educational initiatives recorded a 42.6% revenue increase year-over-year, with non-academic tutoring courses offered in about 60 cities, attracting approximately 994,000 student enrollments [6]. - The company focused on aligning capacity expansion with revenue growth and enhancing its online-merge-offline teaching system [2]. Cost and Expenses - Cost of revenues increased by 17.9% year-over-year to $498.3 million, while non-GAAP operating costs rose 23.5% to $1,011.1 million, primarily due to accelerated capacity expansion and new business integrations [7]. - Selling and marketing expenses increased by 26.6%, and non-GAAP general and administrative expenses rose by 24.7% [8]. Operating Margins - Non-GAAP operating income was $27.6 million, down 45.8% year-over-year, with a non-GAAP operating margin of 2.7%, a decrease of 320 basis points from the previous year [8]. - The non-GAAP operating margin, excluding certain contributions, improved by 12 basis points year-over-year to 3.2%, indicating resilience in managing profitability [9]. Cash Position - As of November 30, 2024, the company had total cash and cash equivalents of approximately $1,418.2 million, up from $1,389.4 million at the end of fiscal 2024 [10]. Share Repurchase Program - The board approved a share repurchase program, increasing the authorization to $700 million, with approximately 11.2 million ADS repurchased for $542.8 million as of January 20, 2025 [11]. Future Guidance - For Q3 fiscal 2025, the company expects total revenues, excluding certain revenues, to be between $1,007.3 million and $1,032.5 million, indicating an 18-21% growth year-over-year [12].

Investment Rating - Maintain BUY rating with a revised target price of US$80 0 (previous US$87 0) [1] Core Views - New Oriental's 2QFY25 net revenue grew 19% YoY to US$1 039mn (+31% YoY excluding East Buy revenue) in line with estimates but non-GAAP net income declined 29% YoY to US$36mn below estimates due to East Buy adjustment and tourism business investments [1] - Management guided 3QFY25E net revenue (excluding East Buy) to grow 18-21% YoY to US$1 01-1 03bn below expectations due to macro uncertainty and intensifying competition [1] - FY25-27E total revenue forecasts trimmed by 2-3% due to softer-than-expected revenue guidance [1] Earnings Summary - FY25E revenue forecast at US$5 081mn with adjusted net profit of US$439 4mn and EPS of US$2 65 [2] - FY27E revenue forecast at US$6 725mn with adjusted net profit of US$829 8mn and EPS of US$5 01 [2] - P/E ratio expected to decline from 25 4x in FY25E to 13 8x in FY27E [2] Business Segments - Overseas test prep and study consulting revenue grew 21% and 31% YoY respectively in 2QFY25 accounting for 24% of total revenue [5] - Domestic test prep revenue grew 35% YoY accounting for 9% of total revenue in 2QFY25 [5] - New educational initiatives revenue grew 43% YoY in 2QFY25 driven by non-academic tutoring (student enrolment +26% YoY) and intelligent learning systems (active paid users +44% YoY) [5] - East Buy revenue declined 9% YoY with a net loss of US$13 5mn in 1HFY25 but would have recorded US$4 6mn net income excluding the impact of Time with Yuhui disposal [5] - Tourism business revenue grew 233% YoY in 2QFY25 [5] Financial Forecasts - FY25E revenue revised down 2 6% to US$5 080 9mn with gross profit revised down 3 8% to US$2 721 0mn [6] - FY25E non-GAAP net income revised down 15 0% to US$439 4mn with EPS revised down 15 0% to US$2 7 [6] - Gross margin expected to be 53 6% in FY25E down 0 7ppt from previous forecast [6] Valuation - Educational and consulting business valued at US$77 1 (96% of total valuation) based on 28x FY25E PE [8] - East Buy valued at US$1 6 (2% of total valuation) based on 8x FY25E PE [8] - Tourism and others business valued at US$1 3 (2% of total valuation) based on 10x FY25E PE [8] - Sum-of-the-parts valuation of US$14 773 7mn with a 10% holdco discount resulting in a total valuation of US$13 296 3mn [9] Peer Comparison - Education sector average PE of 28 4x for FY25E and 16 1x for FY26E [11] - E-commerce sector average PE of 8 0x for FY25E and 7 0x for FY26E [11]

Financial Data and Key Metrics - The company released its financial results for the second fiscal quarter of 2025, which are available on the company's website and Newswire services [3] Business Updates and Strategy - The company's Executive President and Chief Financial Officer, Stephen Yang, along with Investor Relations Director, Sisi Zhao, will provide detailed updates on the latest earnings results and business developments [3] Forward-Looking Statements - The discussion during the conference call will include forward-looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995 [4] - These statements involve inherent risks and uncertainties, and actual results may differ materially from those expressed [4] - The company has outlined potential risks and uncertainties in its public filings with the SEC and does not undertake any obligation to update any forward-looking statements [4] Q&A Session - The management will be available to answer questions after the prepared remarks [3]

Core Insights - New Oriental Education & Technology Group reported strong revenue growth of 19.4% year-over-year, reaching $1.04 billion, surpassing analyst expectations of $1.01 billion [2][4] - The company faced challenges in adjusted earnings per share (EPS), reporting $0.22, which was below the forecasted $0.30, indicating a 24% decline from the previous year [4][8] - The operating margin decreased from 2.5% to 1.9%, attributed to increased operational costs related to business expansion and regulatory adaptations [4][8] Financial Performance - Revenue for Q2 FY2025 was $1.04 billion, a 19.4% increase from $869.6 million in Q2 FY2024 [4] - Adjusted EPS was $0.22, down from $0.29 in the same quarter last year [4] - Net income rose to $31.9 million, a 6.2% increase from $30.1 million in Q2 FY2024 [4] Operational Developments - The revenue growth was primarily driven by the expansion of non-academic tutoring services and intelligent learning systems, with a notable 31.3% growth when excluding contributions from East Buy [7] - Key segments such as overseas test preparation and study consulting saw growth rates of 21% and 31%, respectively, demonstrating the company's adaptability to regulatory changes [8] Regulatory Environment - The company continues to navigate challenges from China's "double reduction" policy, which aims to reduce student workloads and private tutoring hours, necessitating a pivot towards diversification and strategic cost management [9] - Operational costs increased by 20% year-over-year, reflecting the impact of regulatory adaptations [9] Strategic Outlook - Looking ahead, New Oriental projects a revenue increase of 18% to 21% for Q3 FY2025, excluding East Buy contributions, with a focus on expanding private label products and enhancing digital outreach [12] - Management is committed to strategic growth and profitability, emphasizing diversification and leveraging technology to capture new revenue opportunities [10][12]

Group 1 - U.S. stock futures are higher, with Dow futures gaining over 200 points [1] - New Oriental Education & Technology Group Inc. reported weak quarterly earnings, with adjusted earnings of 22 cents per share, missing the analyst consensus estimate of 30 cents per share [1] - The company's quarterly sales were $1.04 billion, slightly beating the analyst consensus estimate of $1.03 billion [1] Group 2 - New Oriental Education & Technology Group shares fell 16.2% to $50.98 in pre-market trading [2] - TechTarget, Inc. shares tumbled 19.5% to $14.00 in pre-market trading [3] - Baird Medical Investment Holdings Limited shares fell 18.2% to $7.24 after a previous jump of 63% [3] - Ranpak Holdings Corp. shares dipped 18.2% to $5.21 in pre-market trading [3] - Rayonier Advanced Materials Inc. shares declined 17.1% to $6.24 in pre-market trading [3] - SWK Holdings Corporation shares dipped 14.3% to $14.00 in pre-market trading [3] - Walgreens Boots Alliance, Inc. shares fell 6.8% to $11.66 following a lawsuit from the U.S. Justice Department [3] - Contineum Therapeutics, Inc. shares fell 6.8% to $11.60 in pre-market trading [3] - Tile Shop Holdings, Inc. shares fell 3.6% to $6.78 in pre-market trading [3]

Financial Performance - New Oriental reported net revenues of US$1,038.6 million for the second fiscal quarter of 2025, a 19.4% increase year over year [8][12] - Operating income decreased by 9.8% year over year to US$19.3 million, while non-GAAP operating income fell by 45.8% to US$27.6 million [16][19] - Net income attributable to New Oriental increased by 6.2% year over year to US$31.9 million, with basic and diluted net income per ADS at US$0.20 and US$0.19 respectively [18][19] Revenue Breakdown - Total net revenues, excluding revenues from East Buy private label products and livestreaming business, increased by 31.3% year over year to US$894.2 million [8][12] - The overseas test preparation and overseas study consulting business grew by approximately 21.1% and 31.0% year over year [7] - Domestic test preparation targeting adults and university students recorded a growth of approximately 34.9% year over year [9] Operating Costs and Expenses - Operating costs and expenses for the quarter were US$1,019.4 million, representing a 20.2% increase year over year [14] - Non-GAAP operating costs and expenses, excluding share-based compensation, were US$1,011.1 million, a 23.5% increase year over year [14] - Total share-based compensation expenses decreased by 71.8% to US$8.3 million [15] Cash Flow and Balance Sheet - Net operating cash inflow for the second fiscal quarter was approximately US$313.3 million, with capital expenditures of US$60.6 million [20] - As of November 30, 2024, cash and cash equivalents totaled approximately US$1.4 billion, with total assets amounting to US$7.6 billion [21][44] Shareholder Returns - The board approved a special cash dividend of US$0.06 per common share, totaling approximately US$100 million distributed [10] - A share repurchase program was extended, increasing the authorized repurchase amount from US$400 million to US$700 million [11] Future Outlook - New Oriental expects total net revenues for the third quarter of fiscal year 2025 to be in the range of US$1,007.3 million to US$1,032.5 million, reflecting a year-over-year increase of 18% to 21% [31]

Investment Rating - The report maintains an "Overweight" rating for New Oriental (EDU N) [2] Core Views - New Oriental's FY25Q1 revenue reached $1 44 billion, a year-over-year increase of 30 5%, with Non-GAAP net income attributable to shareholders at $265 million, up 39 8% year-over-year [1] - The company's core education business operating margin improved to 23 7%, a 370bps increase year-over-year, while the Non-GAAP operating margin stood at 24 4%, up 220bps [2] - New Oriental's education new business revenue grew by 49 8% year-over-year, with non-academic class enrollments reaching 484,000, a 10 5% increase [3] - The company's overseas test preparation and study abroad consulting businesses saw revenue growth of 18 8% and 20 7% respectively, while adult and college domestic test preparation business revenue increased by 30 4% [3] Business Performance - New Oriental's total number of schools and learning centers increased to 1,089, with 64 new learning centers added in the quarter [2] - The company's active paying users for its intelligent learning system reached 323,000, a 78 5% year-over-year increase [2] - New Oriental's cash and cash equivalents balance stood at $1 15 billion, supporting the company's expansion in the education business [2] Financial Projections - The report forecasts adjusted net income attributable to shareholders for 2025-2027 at $502 million, $642 million, and $740 million, representing year-over-year growth rates of 31 8%, 27 9%, and 15 3% respectively [3] - Revenue projections for 2025-2027 are $5 33 billion, $6 49 billion, and $7 40 billion, with year-over-year growth rates of 23 6%, 21 7%, and 14 1% [4] - The company's PE ratios for 2025-2027 are projected at 20x, 16x, and 14x respectively [3] Industry Analysis - The education industry continues to show strong demand, particularly in the non-academic and test preparation segments [3] - New Oriental's multi-line strategy post the "Double Reduction" policy has entered a new growth cycle, with stable market share and continuous growth in new store openings [3]

Investment Rating - The report maintains a "BUY" rating for New Oriental, with a target price of US$87.00, down from the previous target of US$95.00, indicating a potential upside of 29.6% from the current price of US$67.13 [4][2]. Core Insights - New Oriental reported a net revenue growth of 30.5% YoY to US$1,435 million in 1QFY25, aligning with estimates. Non-GAAP net income increased by 39.8% YoY to US$265 million, driven by improved operating margins in core educational services [2]. - The company anticipates a revenue growth of 25-28% YoY for 2QFY25, with expectations of reaccelerated growth in 3Q and 4Q, maintaining a full-year growth outlook of approximately 30% YoY for FY25 [2]. - The report highlights strong performance in core educational businesses, with overseas-related revenue up 19% YoY and new educational initiatives growing by 50% YoY in 1QFY25 [2]. - The tourism business showed significant growth, with a 221% YoY increase in revenue from study tours and research camps for K12 and university students [2]. Financial Summary - For FY25E, total revenue is projected at US$5,216 million, with adjusted net profit expected to reach US$516.9 million. The adjusted EPS is forecasted at US$3.12 [3][11]. - The report indicates a gross margin of 54.3% and an operating margin of 9.7% for FY25E, with expectations for gradual improvement in profitability metrics over the following years [6][14]. - The company’s total assets are projected to grow from US$7,532 million in FY24 to US$10,634 million by FY27, reflecting a strong balance sheet position [12]. Valuation Methodology - The valuation employs a sum-of-the-parts (SOTP) approach, attributing US$83.4 million to the educational and consulting business, US$1.0 million to East Buy, and US$2.6 million to tourism and other ventures [8][9]. - The educational and consulting segment is valued at a premium PE of 27x FY25E, reflecting New Oriental's leadership in the educational services market in China [8].