Company Operations - As of May 31, 2023, the company operates a physical network of 85 schools and 663 learning centers across 78 cities in China, employing approximately 26,600 teachers[301]. - The company has ceased offering K-9 Academic AST Services since the end of 2021, resulting in the closure of certain schools and learning centers[305]. - The company offers a variety of educational programs, including test preparation courses and online education, with classroom-based courses designed to be completed in 2 to 16 weeks[308]. - The company has a distribution network consisting of 9 self-operated bookstores and 241 third-party distributors, providing access to a nationwide network of online and offline bookstores[302]. - The company has implemented an OMO (Online-Merge-Offline) system to enhance operational efficiency by combining offline and online learning[301]. - The company has expanded its non-academic tutoring courses to around 60 cities in China since their launch in 2021[313]. - The intelligent learning systems and devices had 183,000 active paid users in the fiscal year ended May 31, 2023, although their contribution to the business was immaterial[314]. - The company developed and edited approximately 516 titles and distributed around 17.0 million books in China during the fiscal year ended May 31, 2023[319]. - The company’s proprietary teaching content development involved around 1,400 personnel as of May 31, 2023, ensuring consistent teaching quality across services[328]. Financial Performance - The company raised approximately US$1.48 billion in net proceeds from its listing on the Hong Kong Stock Exchange on November 9, 2020[297]. - A share repurchase program was authorized in July 2022, allowing the company to repurchase up to US$400 million of its ADSs or common shares through May 31, 2023, with an extension through May 31, 2024[299]. - The company completed a share repurchase of 952,000 ADSs for US$56.0 million at a weighted average purchase price of US$58.78 per ADS during its previous repurchase program[296]. - In the fiscal year ended May 31, 2023, the company had approximately 495,000 student enrollments in test preparation courses, with 284,000 in overseas courses and 211,000 in PRC courses[312]. - The company reported approximately 1,621,000 student enrollments in non-academic tutoring courses for the fiscal year ended May 31, 2023[313]. - The company expects seasonal fluctuations in operations, with the highest revenue from test preparation courses typically occurring in the first fiscal quarter[337]. - The company has established a strong brand recognition in the private education sector, contributing to significant organic growth through referrals[329]. - The company leverages its OMO system to enhance student acquisition effectiveness while reducing costs[329]. Regulatory Environment - The 2015 amended Education Law allows for-profit educational institutions, effective from June 2016, reversing the previous prohibition[340]. - The 2016 Amended Private Education Law introduced a classification system for private schools, allowing for-profit and non-profit categories, with compulsory education schools remaining non-profit[346]. - For-profit private schools can retain profits and set their own tuition fees without prior government approval, while non-profit schools must adhere to regulated fee structures[346]. - The Amended Implementation Rules require for-profit schools to allocate at least 10% of their audited annual net income to a development fund[351]. - The State Council's 2018 Circular 80 imposes strict regulations on after-school tutoring institutions, including safety requirements and limitations on training content[357]. - After-school tutoring institutions are prohibited from conducting advanced training outside the formal school curriculum for primary and secondary students[359]. - Local authorities are tasked with formulating standards for after-school tutoring institutions, ensuring compliance with safety and operational requirements[357]. - The 2021 Guiding Opinions prohibit after-school tutoring institutions from providing training for preschool children in violation of regulations[361]. - The Ministry of Education emphasizes the need for local governments to manage homework assignments to prevent increased burdens on students from after-school programs[361]. - The government encourages social forces to invest in private education, enhancing support through financial investment and preferential policies[347]. - The Alleviating Burden Opinion prohibits new after-school tutoring institutions for compulsory education and mandates existing ones to register as non-profit[362]. - Online academic tutoring institutions must undergo review and re-approval, with non-compliance leading to cancellation of licenses[362]. - After-school tutoring institutions are restricted from operating during national holidays, weekends, and school breaks[363]. - Fees for academic tutoring in compulsory education will be subject to government price management to prevent excessive charges[363]. - By May 15, 2022, approximately 88% of non-academic tutoring institutions had implemented third-party custodians or risk reserve funds for managing prepaid fees[375]. - The MOE requires all academic after-school tutoring institutions to complete registration as non-profit by the end of 2021, suspending student enrollment until then[368]. - Non-academic tutoring institutions must comply with safety and qualification standards, and cannot charge fees in a lump sum for more than 60 sessions or for a course length exceeding three months[380]. - The Interim Measures for Administrative Penalties on Off-campus Tutoring will take effect on October 15, 2023, imposing penalties for illegal tutoring activities[381]. - The regulations on after-school tutoring are subject to change, which may require the company to adapt its services to remain compliant[382]. - The MOE has established guidelines to strengthen supervision over after-school tutoring institutions, including the prohibition of disguised academic tutoring[377]. Online Education Regulations - The Preschool Opinions aim to achieve a pre-school gross enrollment rate of 85% by 2020 and a coverage of kindergartens with universal access of 80% by 2020[385]. - The regulations prohibit non-state capital from controlling non-profit kindergartens and restrict private kindergartens from listing as public companies[385]. - Online after-school tutoring institutions must publicly disclose teacher qualifications and maintain records of tutoring content for over one year[386]. - Each online class is limited to a maximum duration of 40 minutes, with breaks of at least 10 minutes between classes[386]. - The MOE requires that online after-school tutoring institutions obtain a private school operation permit by the end of 2021[393]. - The filing for mobile internet applications must be completed by March 2024 for apps that began operating before July 21, 2023[397]. - Internet information service providers must obtain an ICP license to operate commercial internet services in China[399]. - Educational live streaming activities are not classified as online performances, thus not requiring an Internet Culture Operation License[402]. - The MOE emphasizes the importance of data security systems for online education applications, particularly for those targeting minors[394]. - The regulations restrict online education products for minors from including links to online games or irrelevant advertisements[392]. - The company is required to obtain a License for Online Transmission of Audio-Visual Programs, but there is uncertainty regarding whether its online business falls within the definition of "Audio-visual Programs" as per the regulations[404]. - The PRC Cybersecurity Law mandates that network operators must obtain consent from individuals before collecting personal information and must not gather unrelated personal information[406]. - The company must comply with the Personal Information Protection Law, which includes handling sensitive personal information and ensuring the security of personal data[413]. - The company is subject to the Measures on Security Assessment of the Cross-border Transfer of Data, which requires security assessments for transferring personal data overseas if certain thresholds are met[418]. Permits and Compliance - The company’s subsidiaries have obtained relevant Permits for Operating Publications Business, which are subject to inspections by regulatory authorities[422]. - The company has obtained the necessary permits for outbound tourism operations through its subsidiary, Beijing New Oriental Walkite International Travel Co., Ltd[425]. - The Ministry of Education (MOE) guidelines stipulate that overseas study tours for primary and middle school students must have a study schedule comprising at least 50% of the total itinerary[426]. - The MOE's Opinions on Education Fees clarify that for-profit private schools can set their own fee levels, while non-profit schools are regulated by provincial governments[428]. - The NDRC, MOE, and SAMR have established that fees for after-school tutoring in compulsory education are subject to government-guided pricing[429]. - The MOE's Administrative Measures require that pre-paid tutoring fees be deposited into special accounts, separate from the institution's funds[430]. - The PRC Advertising Law mandates that companies engaging in advertising must obtain a business license that includes advertising in their scope[431]. - The PRC Consumer Protection Law requires business operators to provide accurate information regarding goods and services and ensure compliance with quality standards[436]. - The E-Commerce Law of the PRC emphasizes fair market competition and prohibits e-commerce operators from imposing unreasonable restrictions on transactions[442]. - The company’s livestreaming e-commerce business does not require an Internet Culture Operation License as it focuses on the sale of agricultural products[441]. - The Trial Administrative Measures for Online Livestreaming Sales mandate that channel operators ensure the authenticity of information provided and maintain records of products and suppliers[443]. Foreign Investment and Regulations - The 2021 Negative List restricts foreign investment in 12 industries, including pre-school education and senior high school education, requiring cooperative joint ventures with a dominant domestic role[449]. - Foreign investors are prohibited from holding more than 50% equity in telecommunications enterprises providing value-added services, requiring approvals from MIIT and Ministry of Commerce[458]. - The Foreign Investment Law implements a pre-establishment national treatment system, ensuring foreign investments are treated equally to domestic investments, except in prohibited industries[451]. - The Anti-Monopoly Law mandates that transactions involving concentrations with specified turnover thresholds must be cleared by SAMR before completion[444]. - Foreign investment in publishing, including books and electronic publications, is prohibited under the 2021 Negative List[456]. - The MOFCOM Order No. 4 of 2020 allows for the inclusion of foreign entities in the list of unreliable entities based on their impact on China's sovereignty and security[447]. - The Foreign Investment Law replaced previous regulations and allows existing foreign-invested enterprises to maintain their corporate forms for five years post-implementation[450]. - The 2021 Negative List requires foreign educational organizations to operate in cooperation with Chinese counterparts in restricted industries[453]. - The regulations on foreign currency exchange allow RMB to be freely convertible for current account items, but capital account items require prior approval from SAFE[464]. - The Anti-Monopoly Guidelines for the Internet Platform Economy specify circumstances under which internet platform activities may be deemed monopolistic[445]. - SAFE Circular 142 regulates the conversion of foreign currency capital into RMB for foreign-invested companies, restricting its use to approved business scopes and requiring SAFE's approval for any changes[465]. - SAFE Circular 19 allows RMB capital converted from foreign currency to be used for equity investments in China, but applications for such investments are often rejected if they exceed the business scope[466]. - SAFE Circular 28 permits foreign-invested companies to use RMB converted from foreign currency for equity investments in China, provided they comply with applicable laws and the negative list on foreign investment[466]. Taxation and Compliance - The Overseas Listing Trial Measures, effective March 31, 2023, require domestic companies seeking to list overseas to fulfill filing procedures with the CSRC[482]. - The CSRC has established a six-month transition period for companies that have obtained overseas regulatory approvals prior to the effective date of the Overseas Listing Trial Measures[483]. - The EIT Law imposes a uniform 25% enterprise income tax rate on both foreign-invested and domestic enterprises, with a preferential 15% rate for "high and new technology enterprises"[486]. - Non-compliance with SAFE regulations may lead to penalties, including restrictions on foreign exchange activities and dividend distributions[469]. - The M&A Rule requires prior notification to the Ministry of Commerce for foreign investors taking control of PRC domestic enterprises in certain situations[481]. - The implementation of employee stock ownership programs requires filing with local tax authorities before execution and exercise of share options[477]. - The regulations on labor require employers to establish labor contracts and ensure wages meet local minimum standards[472]. - Software enterprises established after January 1, 2011, are exempt from enterprise income tax for two years starting from their first profitable year, followed by a 12.5% tax rate for the next three years[487]. - Enterprises established before January 1, 2011, can continue to enjoy similar tax preferential treatments until their tax holiday expires[488]. - Software enterprises must provide filing documents for preferential tax treatments when filing annual enterprise income tax returns[489]. - The enterprise income tax law states that foreign enterprises with "de facto management bodies" in China are considered "resident enterprises" and subject to a 25% tax rate on global income[490]. - The SAT issued a bulletin in August 2011 clarifying the determination of resident status and tax withholding for PRC-controlled offshore enterprises[491].

NEW ORIENTAL(EDU) - 2023 Q4 - Annual Report ...

Financial Data and Key Metrics Changes - New Oriental reported a significant recovery in financial performance, with operating margin reaching 5.6% and non-GAAP operating margin at 9.1% for the quarter, indicating resilience across business lines [5][6] - Operating income was $48.1 million compared to a loss of $105.6 million in the same period last year, while non-GAAP income from operations was $78.6 million compared to a loss of $76.9 million [18][19] - Net income attributable to New Oriental for the quarter was $29 million, a substantial improvement from a loss of $189.3 million in the prior year [19] Business Line Data and Key Metrics Changes - The overseas test prep business reported a revenue increase of 52% in dollar terms or 62% in RMB terms year-over-year [8] - The overseas study consulting business recorded a revenue increase of about 6% in dollar terms or 13% in RMB terms year-over-year [8] - The adults and university students business saw a revenue increase of 34% in dollar terms or 43% in RMB terms year-over-year [9] Market Data and Key Metrics Changes - The deferred revenue balance increased by 43.4% year-over-year, reaching $1.34 billion, indicating strong demand and future revenue recognition [20] - Cash and cash equivalents totaled approximately $4.5 billion, reflecting a healthy financial position [16] Company Strategy and Development Direction - The company plans to increase capacity by 15% to 20% in the new fiscal year, focusing on existing cities and expanding classroom areas in high-performing locations [21][22] - New Oriental aims to leverage its brand advantage and solid foundation to capture market opportunities, particularly in overseas-related courses and non-academic offerings [21][30] - The company is committed to integrating new technologies such as AI and ChatGPT into its educational offerings to enhance operational efficiency and growth [23] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the business trajectory, driven by post-COVID recovery and strong demand for educational services [21][30] - The company anticipates total net revenue in the first quarter of fiscal year 2024 to be in the range of $983.2 million to $1,005.5 million, representing a year-over-year increase of 32% to 35% [22] Other Important Information - The company repurchased approximately 5.9 million ADS for about $191.7 million under its share repurchase program [16] - Operating costs and expenses increased by 29% year-over-year, primarily due to growth in East Buy's private label products and live streaming e-commerce business [17] Q&A Session Summary Question: Capacity expansion plans - Management confirmed a capacity expansion of 15% to 20% for FY '24, primarily in existing cities, driven by strong demand in overseas test prep and non-academic courses [26][27] Question: Drivers of strong growth guidance - Management attributed strong growth to post-COVID recovery, increased demand for overseas-related courses, and reduced competition in the market [30][31] Question: Selling expenses increase - Selling expenses rose due to increased market demand, with expectations of continued spending in the new fiscal year while maintaining operating leverage [33][34] Question: Revenue breakdown by segments - Management provided a revenue mix for Q4, indicating overseas-related business contributed about 11% from test prep and 17% from consulting [39] Question: Cultural tourism services - Management highlighted the potential of the cultural tourism market, leveraging teacher expertise to create unique offerings for middle-aged and older demographics [43][44]

Financial Data and Key Metrics Changes - The company reported a GAAP operating margin of 8.8% and a non-GAAP operating margin of 11.7% for the quarter [6] - Operating income increased by 147.1% year-over-year to $66.5 million, while non-GAAP operating income rose by 179% to $87.9 million [17] - Net income attributable to New Oriental was $81.6 million, representing a 166.7% increase year-over-year [17] - Non-GAAP net income for the quarter was $95.4 million, reflecting a 199.9% increase year-over-year [18] - Cash and cash equivalents, term deposits, and short-term investments totaled approximately $4.3 billion [14] Business Line Data and Key Metrics Changes - The overseas test prep business recorded a revenue increase of 13% in dollar terms or 23% in RMB terms year-over-year [8] - The adults and university students' business saw a revenue decrease of 3% in dollar terms or a 5% increase in RMB terms year-over-year [8] - Non-academic tutoring courses had 218,000 student enrollments this quarter, with the top 10 cities in China contributing about 60% of the revenue [9] - The intelligence learning system and device business had 108,000 active paid users this quarter, with revenue contribution from the top 10 cities in China around 60% [9] Market Data and Key Metrics Changes - Deferred revenue balance increased by 19.8% year-over-year to $1.163 billion [19] - The company is seeing strong demand for overseas test prep and consulting business due to reduced competition in the market [25] Company Strategy and Development Direction - The company aims to sustain healthy growth in market share and pursue innovative endeavors as the economy recovers [7] - Plans to moderately increase capacity in learning centers and expand classroom areas in major cities [20] - The company is exploring opportunities in cultural tourism, leveraging its educational resources and teacher expertise [37][38] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of key business lines and the potential for further market share growth as the pandemic subsides [20] - The company expects total net revenue in Q4 FY 2023 to be in the range of $801.8 million to $822.7 million, representing a year-over-year increase of 53% to 57% [20] Other Important Information - The company invested $26.8 million in the OMO teaching platform during the reporting period [12] - The share repurchase program authorized up to $400 million, with approximately $157.6 million repurchased as of April 18, 2023 [14] Q&A Session Summary Question: Key drivers for fourth quarter growth and FY 2024 expectations - Management highlighted strong demand for overseas test prep and consulting, with less competition in the market as key drivers for growth [25][26] Question: Earnings contribution from Tung-Jung Hsieh - Management noted that East Buy has proven to be a successful business model, contributing significantly to overall revenue and profit growth [31] Question: Breakdown of new initiatives revenue and long-term business direction - The largest revenue contributor among new initiatives is non-academic tutoring, with strong demand and retention rates [34] - The intelligent learning device business is also gaining traction and expected to contribute more revenue [35] Question: Cash management and share buyback versus special dividends - Management stated that the decision on share buybacks versus special dividends will depend on the Board's evaluation [41] Question: Retention rates for non-academic tutoring - Retention rates for non-academic children's courses are over 70%, while the renewal rate for the intelligence learning system devices is over 60% [42] Question: Profitability of new businesses - Overall margins for new businesses are over 10%, with expectations for improvement in the upcoming quarters [45] Question: Growth opportunities in non-academic tutoring - Management sees growth opportunities in both top-tier and lower-tier cities, leveraging existing educational infrastructure [50]

Financial Performance - Total net revenues for the third fiscal quarter of 2023 increased by 22.8% year over year to US$754.2 million[2]. - Operating income rose by 147.1% year over year to US$66.5 million, with a non-GAAP operating income increase of 179.0% to US$87.9 million[10]. - Net income attributable to New Oriental increased by 166.7% year over year to US$81.6 million, with non-GAAP net income rising by 199.9% to US$95.4 million[11][12]. - Net revenues for the three months ended February 28, 2023, were USD 754.2 million, an increase from USD 614.1 million in the same period of 2022, representing a growth of approximately 22.8%[29]. - Operating income for the same period was USD 66.5 million, compared to an operating loss of USD 141.2 million in the prior year[29]. - Net income attributable to New Oriental's shareholders for the three months ended February 28, 2023, was USD 81.6 million, a significant recovery from a net loss of USD 122.4 million in the same period of 2022[29]. - Non-GAAP net income for the three months ended February 28, 2023, was $95,362, compared to a non-GAAP net loss of $95,503 in the same period last year[31]. - The company reported a net income per ADS of USD 0.49 for the three months ended February 28, 2023, compared to a net loss per ADS of USD 0.72 in the prior year[29]. - The company achieved a non-GAAP net income per ADS of $0.57 for the three months ended February 28, 2023, compared to a non-GAAP net loss per ADS of $0.56 in the same period last year[31]. Cash Flow and Assets - The company reported a positive operating cash flow of US$190.5 million for the quarter, with cash and cash equivalents totaling approximately US$4.3 billion[5][13]. - Cash provided by operating activities for the three months ended February 28, 2023, was $190,482, a turnaround from cash used of $234,965 in the prior year[35]. - Total current assets as of February 28, 2023, were USD 4.7 billion, an increase from USD 4.5 billion as of May 31, 2022[27]. - The company’s cash and cash equivalents were USD 1.3 billion as of February 28, 2023, up from USD 1.1 billion a year earlier[27]. - The cash, cash equivalents, and restricted cash at the end of the period on February 28, 2023, stood at $1,431,001, compared to $1,511,242 at the end of the same period in 2022[35]. Expenses and Liabilities - Operating costs and expenses decreased by 9.0% year over year to US$687.7 million, with general and administrative expenses down by 25.4% to US$215.5 million[8]. - Total liabilities increased to USD 2.3 billion as of February 28, 2023, compared to USD 2.2 billion as of May 31, 2022[27]. - Total operating costs and expenses for the nine months ended February 28, 2023, were $1,995,197, down from $3,458,087 in the same period of 2022, reflecting a reduction of approximately 42.4%[37]. Deferred Revenue and Equity - The deferred revenue balance increased by 19.8% year over year to US$1,163.2 million as of February 28, 2023[14]. - Deferred revenue as of February 28, 2023, was USD 1.2 billion, compared to USD 933.1 million as of May 31, 2022, indicating a growth of approximately 25%[27]. - New Oriental's total equity increased to USD 3.9 billion as of February 28, 2023, from USD 3.8 billion as of May 31, 2022[27]. Business Operations and Strategy - The total number of schools and learning centers was 712 as of February 28, 2023, a decrease of 135 compared to 847 as of February 28, 2022[4]. - East Buy has achieved significant progress in its private label products and livestreaming e-commerce business, contributing to revenue growth[5]. - The company is focused on expanding its educational services and enhancing its brand presence in the competitive private education sector in China[22]. - The company has repurchased approximately 5.1 million ADSs for approximately US$157.6 million under its share repurchase program[6].

Financial Data and Key Metrics Changes - The company achieved a non-GAAP operating margin of 2.6% for the second quarter, a significant improvement from a negative 112.0% in the same period of the prior fiscal year [5][20] - Operating costs and expenses decreased by 55.1% year-over-year to $640.7 million, with non-GAAP operating costs down 55.4% to $621.9 million [18][19] - Net income attributable to New Oriental was $0.7 million compared to a loss of $936.5 million in the same period of the prior fiscal year [20] Business Line Data and Key Metrics Changes - The overseas test prep business recorded a revenue increase of 17% in dollar terms, or 30% in RMB terms year-over-year [7] - The overseas study consulting business saw a revenue increase of about 14% in dollar terms or 27% in RMB terms year-over-year [7] - The adults and university students business recorded a revenue decrease of 9% in dollar terms, but a 2% increase in RMB terms year-over-year [7] Market Data and Key Metrics Changes - The company reported a deferred revenue balance of $1,139.1 million, an increase of 6.9% compared to $1,065.8 million at the end of the second quarter of the prior fiscal year [21] - Koolearn recorded revenue of nearly RMB 2,080.1 million, representing a 590.2% increase from RMB 301.4 million in the same period of the prior fiscal year [14] Company Strategy and Development Direction - The company is focusing on innovative business opportunities and has successfully generated profits from new ventures alongside existing businesses [4][6] - The company plans to continue investing in new initiatives while promoting key remaining businesses to accelerate recovery and pursue profitable growth [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that the overall impact of the pandemic will be temporary and manageable, with expectations for total net revenue in Q3 to be between $702.8 million to $719.8 million, representing a year-over-year increase of 14% to 17% [23] - The company anticipates sustainable profitability across its key businesses and expects new initiatives to maintain an upward growth trajectory [22] Other Important Information - The company has cash and cash equivalents totaling approximately $4.2 billion, indicating a healthy financial position [17] - The company authorized a share repurchase of up to $400 million, with approximately $79 million repurchased as of January 16, 2023 [17] Q&A Session Summary Question: Impact of COVID on February quarter and business expectations - Management indicated that the net impact of COVID is small and remains confident that the overall impact will be temporary and manageable [28][30] Question: Growth rates of new business lines post-COVID - Management expects upward growth in new business lines for Q3 and Q4, with significant revenue growth anticipated [33] Question: Revenue breakdown and margin profile for different business lines - The overseas related business contributed roughly 21% of total revenue, with margins expected to be around 10% to 15% for the year [38][39] Question: Third-quarter revenue guidance and profitability - The overseas related business is expected to contribute 24% to 25% of total revenue in Q3, with the school business contributing 43% to 44% [43] Question: Non-academic tutoring enrollment increase drivers - Management noted that the market is strong, and the profitability of new business lines is better than expected, with revenue growth anticipated to accelerate [59]

Financial Performance - Total net revenues for the second fiscal quarter of 2023 decreased by 3.1% year-over-year to US$638.2 million[2] - Operating loss was US$2.5 million, a significant improvement from the loss of US$768.1 million in the same period of the prior fiscal year[10] - Net income attributable to New Oriental was US$0.7 million, compared to a loss of US$936.5 million in the same period of the prior fiscal year[11] - Non-GAAP operating income for the quarter was US$16.3 million, compared to a loss of US$737.1 million in the same period of the prior fiscal year, marking a 102.2% improvement[3] - The company reported a significant reduction in general and administrative expenses, which decreased from US$822.4 million in the previous year to US$209.0 million[33] - For the three months ended November 30, 2022, New Oriental reported a net income attributable to the company of $732, compared to a net loss of $936,510 for the same period in 2021[35] - Non-GAAP net income attributable to New Oriental for the three months ended November 30, 2022, was $17,750, a significant improvement from a loss of $901,625 in the prior year[35] - The total operating costs and expenses for the three months ended November 30, 2022, were $640,702, down from $1,426,424 in the same period of 2021, reflecting a reduction of approximately 55.1%[35] - The operating margin improved to -0.4% for the three months ended November 30, 2022, compared to -116.7% in the same period of 2021[35] - For the six months ended November 30, 2022, net revenues were $1,383,036, down from $1,967,132 in the same period of 2021, representing a decrease of approximately 29.7%[41] - The company reported an operating income of $75,501 for the six months ended November 30, 2022, compared to an operating loss of $735,670 in the same period of 2021[41] - Non-GAAP operating income for the six months ended November 30, 2022, was $113,347, a significant improvement from a loss of $661,448 in the prior year[43] Cash Flow and Assets - Cash and cash equivalents, term deposits, and short-term investments totaled approximately US$4.2 billion by the end of the fiscal quarter[5] - Net cash flow generated from operations for the second fiscal quarter was approximately US$173.7 million[13] - Deferred revenue balance increased by 6.9% year-over-year to US$1,139.1 million[14] - As of November 30, 2022, New Oriental's total current assets amounted to US$4,617.4 million, an increase from US$4,473.9 million as of May 31, 2022[31] - New Oriental's cash and cash equivalents as of November 30, 2022, were US$1,029.9 million, down from US$1,148.6 million as of May 31, 2022[31] - Cash, cash equivalents, and restricted cash at the end of the period on November 30, 2022, were $1,122,824, compared to $1,050,130 at the end of the same period in 2021[39] - Net cash provided by operating activities for the three months ended November 30, 2022, was $173,670, a turnaround from a cash outflow of $628,322 in the prior year[39] Business Operations - The total number of schools and learning centers was 708 as of November 30, 2022, a decrease of 585 compared to 1,293 as of November 30, 2021[4] - The overseas test preparation and overseas study consulting businesses increased by approximately 17% and 14% year-over-year, respectively[5] - Koolearn recorded revenues of RMB 2,080.1 million (US$293.5 million), a 590.2% increase year-over-year[18] - New Oriental expects total net revenues for Q3 FY2023 to be between US$702.8 million and US$719.8 million, reflecting a year-over-year increase of 14% to 17%[21] - The projected revenue increase in Renminbi for Q3 FY2023 is expected to be in the range of 24% to 27%[22] - The company anticipates ongoing growth in the Chinese private education market, which may impact its future performance positively[26] Corporate Changes - The company plans to change its name from "Koolearn Technology Holding Limited" to "East Buy Holding Limited" to better reflect its business direction[20]

Financial Data and Key Metrics Changes - The non-GAAP operating margin for Q1 2023 was 13%, and the non-GAAP net margin was 11.2%, both higher than the same period last year [7] - Operating income increased by 140.5% year-over-year to $78 million, while non-GAAP income from operations rose by 28.3% year-over-year to $97 million [26] - Net income attributable to New Oriental for the quarter was $66 million, representing a 9% increase year-over-year [26] - Cash and cash equivalents, term deposits, and short-term investments totaled approximately $4.3 billion [23] Business Line Data and Key Metrics Changes - The overseas test prep business recorded a revenue increase of 2% year-over-year [8] - The adults and university students business also saw a revenue growth of about 2% year-over-year [8] - The overseas study consulting business experienced a revenue increase of about 21% year-over-year [8] - New business initiatives contributed approximately 16% of total revenue, with non-academic tutoring being the largest contributor [55] Market Data and Key Metrics Changes - The deferred revenue balance decreased by 30.3% year-over-year, primarily due to the cessation of K-9 academic after-school tutoring services [28] - The top 10 cities in China contributed about 60% of the revenue from the non-academic tutoring business [10] - The revenue contribution from the top 10 cities in China for the intelligence learning system and device business was over 60% [11] Company Strategy and Development Direction - The restructuring process has largely been completed, leading to a new business model that combines existing and innovative business opportunities [6] - The company aims to encourage the all-around development of students while generating profits for shareholders [7] - New Oriental is focusing on expanding its OMO (Online-Merge-Offline) teaching platform and investing in new initiatives to drive growth [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustainable profitability across key businesses and the growth prospects of new initiatives [30] - The company anticipates lower revenue in Q2 due to seasonality in certain business lines, with a projected revenue range of $601.4 million to $619.2 million [32] - Management is cautiously optimistic about the impact of the ongoing pandemic on business operations, thanks to the OMO system [31] Other Important Information - The company invested $31 million in the OMO teaching platform during the quarter to enhance service quality [14] - A share repurchase plan of up to $400 million was authorized by the Board of Directors [23] Q&A Session Summary Question: What was the enrollment number for non-academic courses last quarter or last financial year? - Management indicated that the non-academic courses were newly launched, and last year's numbers were very small, but this quarter saw 297,000 enrollments [35] Question: Is there seasonality for the full year regarding non-academic enrollment? - Management noted that seasonality should not be very apparent for non-academic courses, unlike other businesses [36][37] Question: What drove the strong gross margin this quarter? - The increase in gross margin was attributed to downsizing of learning centers, lower fixed costs, and growth in revenue from Koolearn [40] Question: What is the growth outlook for each line of business? - Management expects strong growth in overseas-related businesses and new initiatives, with significant contributions from the non-academic tutoring and learning device businesses [45] Question: What is the revenue contribution from non-academic tutoring for Q1? - Non-academic tutoring contributed the largest share among new businesses, with overall new businesses contributing roughly 16% of total revenue [55] Question: What is the revenue breakdown for Q1? - The overseas-related business contributed approximately 24-25% of total revenue, while new businesses contributed about 16% [57]

Financial Performance - Total net revenues for the first fiscal quarter of 2023 decreased by 43.1% year over year to US$744.8 million[2] - Operating income increased by 140.5% year over year to US$78.0 million, with a non-GAAP operating margin of 13.0%[10] - Net income attributable to New Oriental increased by 9.0% year over year to US$66.0 million, with basic and diluted net income per ADS at US$0.39 and US$0.38, respectively[11] - Non-GAAP net income attributable to New Oriental for the quarter was US$83.7 million, representing a 24.7% decrease year over year[12] - Operating costs and expenses for the quarter decreased by 47.8% year over year to US$666.8 million[8] - Net revenues for the three months ended August 31, 2022, were USD 744.8 million, a decrease of 43% compared to USD 1.3 billion for the same period in 2021[28] - Operating income for the same period was USD 78.0 million, significantly up from USD 32.4 million in the prior year, indicating improved operational efficiency[28] - Net income attributable to New Oriental's shareholders was USD 66.0 million, compared to USD 60.5 million in the same quarter of the previous year, reflecting a year-over-year increase of 9%[28] - Non-GAAP operating income for the three months ended August 31, 2022, was USD 97.0 million, with a non-GAAP operating margin of 13.0%, up from 5.8% in the prior year[29] Cash and Assets - Cash and cash equivalents, term deposits, and short-term investments totaled approximately US$4.3 billion by the end of the quarter[5] - Cash and cash equivalents as of August 31, 2022, totaled USD 1.1 billion, a slight decrease from USD 1.15 billion as of May 31, 2022[27] - Total current assets increased to USD 4.6 billion as of August 31, 2022, compared to USD 4.5 billion as of May 31, 2022[27] - Total liabilities decreased to USD 2.2 billion as of August 31, 2022, from USD 2.24 billion as of May 31, 2022[27] - The company’s total equity increased to USD 3.8 billion as of August 31, 2022, compared to USD 3.79 billion as of May 31, 2022[27] Future Outlook - New Oriental expects total net revenues for the second quarter of fiscal year 2023 to be in the range of US$601.4 million to US$619.2 million, reflecting a year-over-year decline of 9% to 6%[16] - The deferred revenue balance at the end of the first quarter of fiscal year 2023 was US$1,012.5 million, a decrease of 30.3% compared to the previous year[15] Operational Focus - The total number of schools and learning centers decreased to 706, down from 744 in May 2022 and 1,556 in August 2021[4] - The overseas test preparation and overseas study consulting businesses increased by approximately 2% and 21% year over year, respectively[5] - New Oriental continues to focus on enhancing its operational performance and liquidity through non-GAAP financial measures, which exclude share-based compensation expenses and fair value changes of long-term investments[26]

Interest Rate Risk - The company has not used any derivative financial instruments to manage interest rate risk exposure, and a hypothetical one percentage point decrease in interest rates would have resulted in a decrease of approximately US$52.6 million in interest income for the year ended May 31, 2022 [766]. - The company has not anticipated being exposed to material risks due to changes in interest rates, although future interest income may be lower than expected [766]. Foreign Exchange Risk - The company's revenues and most expenses are denominated in RMB, with exposure to foreign exchange risk primarily related to cash and cash equivalents in U.S. dollars [767]. - A hypothetical 10% appreciation of the RMB against the U.S. dollar would have resulted in a decrease of RMB18.84 million in the value of U.S. dollar-denominated financial assets as of May 31, 2022 [769]. - The company has not hedged exposures denominated in foreign currencies, and the value of investments in ADSs will be affected by the foreign exchange rate between U.S. dollars and RMB [767]. Investor Relations and Costs - The depositary has agreed to reimburse the company US$15 million for expenses related to the investor relations program, which has been recognized in other income [778]. - Investors requesting the transfer of common shares will bear all associated costs, including a fee of HK$2.50 for each transfer of common shares [791]. - Holders of common shares and ADSs must pay up to US$5.00 per 100 ADSs for each issuance or cancellation related to the ADS program [791]. Transaction Costs - The transaction costs for dealings in common shares on the Hong Kong Stock Exchange include a trading fee of 0.005% of the transaction consideration, charged to both buyer and seller [779]. Share Registration and Compliance - The company intends to move a portion of its issued common shares from the Cayman Islands register to the Hong Kong share register to facilitate fungibility and conversion between ADSs and common shares [783]. - The depositary may require satisfactory proof of identity and compliance with established procedures before issuing ADSs or permitting withdrawal of common shares [789]. Fees and Deductions - The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees [777]. Financial Health - There are no defaults, dividend arrearages, or delinquencies reported by the company [792].