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].

Financial Data and Key Metrics Changes - Operating costs and expenses for the quarter were $629.7 million, representing a 52.1% decrease year-over-year [28] - Non-GAAP operating costs and expenses for the quarter were $600.9 million, representing a 53.6% decrease year-over-year [28] - Cost of revenue decreased by 57.2% year-over-year to $247.8 million [29] - Net loss attributable to New Oriental for the quarter was $189.3 million, compared to the loss of $45.5 million in the same period last year [31] - Cash and cash equivalents, term deposits, and short-term investments totaled approximately $4.2 billion by the end of the quarter [26] Business Line Data and Key Metrics Changes - The overseas test prep business recorded a revenue increase of 6% in dollar terms for fiscal year 2022 [7] - The overseas study consulting business recorded a revenue increase of about 16% in dollar terms year-over-year for fiscal year 2022 [7] - The adults and university students business recorded a rapid growth of approximately 30% year-over-year for fiscal year 2022 [7] - The non-academic tutoring business has been rolled out in over 50 cities, contributing more than 60% of its revenue from the top 10 cities in China [9][17] - The intelligence learning system and device business has shown improved customer retention rates and scalability, with over 60% revenue contribution from the top 10 cities [10][16] Market Data and Key Metrics Changes - The deferred revenue balance at the end of the quarter was $933.1 million, a decrease of 51.6% compared to $1,926.4 million at the end of the previous quarter [34] - The company has reduced the total number of schools and learning centers to 744 by the end of the fiscal year [19] Company Strategy and Development Direction - The company is focusing on new business opportunities that encourage all-round development of students while generating profit for shareholders [6] - The OMO (Online-Merge-Offline) system has been emphasized as a key component during the restructuring process and is expected to provide flexibility in learning [20] - The company is committed to investing in R&D to enhance its educational services and adapt to regulatory changes [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainable profitability of remaining key businesses and the growth potential of new initiatives [35] - The company expects total net revenues in the first quarter of fiscal year 2023 to be in the range of $641.3 million to $680.6 million, representing a year-over-year decline of 51% to 48% [37] - Management believes that the overall impact of the pandemic on business and financials will be limited due to the OMO system [36] Other Important Information - The company authorized a share repurchase program of up to $400 million from July 28, 2022, through May 31, 2023 [26] - The company invested $36 million in the quarter and $166 million in the full fiscal year to improve and maintain the OMO teaching platform [21] Q&A Session Summary Question: Revenue breakdown for guidance by major categories - Management indicated that a breakdown of revenue would be provided in the next quarter [39] Question: Outlook for the number of learning centers - Management noted that the number of learning centers is higher than previously expected, indicating resilience in traditional business lines [40] Question: Revenue contribution from new initiatives - Management expects the new business initiatives to contribute around 20% of total revenue, excluding DONG FANG ZHEN XUAN [52] Question: GP margin expectations - Management anticipates higher gross margins in the upcoming quarters, driven by revenue growth and operational leverage [58] Question: Competition with public schools - Management believes that their extensive data and teaching experience will provide a competitive edge against public schools [63]

Financial Data and Key Metrics Changes - Operating costs and expenses for the quarter were $755.3 million, representing a 30.6% decrease year-over-year [34] - Non-GAAP operating costs and expenses for the quarter were $725.3 million, a 32.5% decrease year-over-year [34] - Net loss attributable to New Oriental for the quarter was $122.4 million, compared to an income of $151.3 million in the same period last year [38] - Cash and cash equivalents totaled approximately $4.4 billion by the end of the quarter [31] Business Line Data and Key Metrics Changes - Overseas test prep business recorded a year-over-year revenue growth of about 8% for the first nine months of the fiscal year [10] - Overseas study consulting business reported a revenue increase of about 26% year-over-year for the same period [10] - Domestic test prep business targeting adults and university students recorded a rapid growth of approximately 59% year-over-year [10] Market Data and Key Metrics Changes - Deferred revenue balance at the end of the quarter was $971.3 million, a decrease of 47.9% compared to the same period last year [41] - The company reduced the total number of schools and learning centers to 847 by the end of the fiscal quarter [22] Company Strategy and Development Direction - The company is focusing on new business opportunities, including non-academic tutoring and intelligent learning systems [11] - Management emphasized the importance of the OMO (Online-Merge-Offline) system during the restructuring process [23] - Future growth is expected from new initiatives, which are anticipated to become key revenue contributors [80] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainable profitability of remaining key businesses and the growth potential of new initiatives [33] - The company is prepared for a new beginning as it identifies new and profitable market opportunities [43] - Management acknowledged the impact of the pandemic but noted that the OMO system has minimized learning disruptions [48] Other Important Information - The company invested $27 million in the quarter and $129 million in the first three quarters of the fiscal year to improve the OMO teaching platform [26] - The restructuring phase is nearing completion, with expectations of further closures of learning centers [56] Q&A Session Summary Question: What is the sustainability of the learning centers after restructuring? - Management plans to reduce the number of learning centers to between 650 and 700 by the end of the fiscal year [56] Question: How much of the costs this quarter are related to one-off restructuring? - Most one-off costs related to learning center closures were accrued in the first half of the fiscal year [57] Question: What is the revenue contribution from new initiatives? - New business initiatives are expected to contribute over 20% of revenue next year [64] Question: What is the retention rate for new non-academic courses? - Retention rates for non-academic courses are improving and are close to those of academic courses from the previous year [67] Question: How does the company view competition in the new business area? - Management believes competition will lessen as many competitors have exited the market [68] Question: What are the profitability expectations for remaining and new businesses? - Remaining businesses have margins of 10% to 20%, while new businesses are expected to achieve similar margins in the upcoming year [76]

Financial Performance - Total net revenues for the six months ended November 30, 2021, were $1,967,132, representing an increase from $1,874,055 for the same period in 2020, a growth of approximately 5%[4] - Operating loss for the six months ended November 30, 2021, was $(735,670), compared to an operating income of $118,158 for the same period in 2020[4] - Net loss attributable to New Oriental Education & Technology Group Inc. for the six months ended November 30, 2021, was $(875,980), a significant decline from a net income of $228,554 in the same period of 2020[4] - The total operating costs and expenses for the six months ended November 30, 2021, were $2,702,802, significantly higher than $1,755,897 for the same period in 2020, an increase of approximately 53.8%[4] Assets and Liabilities - Total current assets decreased to $5,154,963 as of November 30, 2021, down from $6,574,155 as of May 31, 2021, a decline of approximately 21.5%[2] - Cash and cash equivalents decreased to $1,026,912 as of November 30, 2021, compared to $1,612,211 as of May 31, 2021, a decrease of about 36.2%[2] - Total liabilities as of November 30, 2021, were $5,132,877, down from $3,433,761 as of May 31, 2021, indicating a significant increase in liabilities[3] - Total equity decreased to $4,180,551 as of November 30, 2021, from $5,018,176 as of May 31, 2021, reflecting a decline of approximately 16.7%[3] Cash Flow - The company reported a net cash used in operating activities of $(1,074,835) for the six months ended November 30, 2021, compared to net cash provided by operating activities of $802,276 for the same period in 2020[6] - The company had a net cash provided by investing activities of $653,374 for the six months ended November 30, 2021, contrasting with net cash used in investing activities of $(796,800) for the same period in 2020[6]

Financial Performance - Total net revenues for the fiscal year 2021 reached $4,276,539, an increase of 19.5% from $3,578,682 in 2020[19]. - Operating income for 2021 was $117,266, a significant decrease of 70.7% compared to $399,003 in 2020[19]. - Net income attributable to shareholders for 2021 was $334,414, down from $413,333 in 2020, reflecting a decline of 19.1%[19]. - The company reported a basic net income per share of $0.20 for 2021, down from $0.26 in 2020[19]. - The weighted average shares used in calculating diluted net income per share increased to 1,651,982,384 in 2021 from 1,595,368,900 in 2020[19]. - Cash and cash equivalents as of May 31, 2021, were $1,612,211, an increase from $915,057 in 2020[21]. - Total assets grew to $10,151,053 in 2021, up from $6,556,885 in 2020, marking a 54.5% increase[21]. - Total liabilities increased to $5,132,877 in 2021, compared to $3,687,074 in 2020, representing a rise of 39.1%[21]. - The company recorded goodwill impairment losses of US$28.9 million for the fiscal year ended May 31, 2021, and US$2.9 million in intangible assets impairment losses for the same period[74]. - A loss from fair value change of long-term investments was recorded at US$3.8 million for the fiscal year ended May 31, 2021, with US$5.5 million attributed to an investment in Sunlands[75]. Regulatory Environment - The company faced significant uncertainties due to changes in PRC laws affecting the private education industry, which could materially impact financial performance[25]. - The PRC private education industry, particularly the after-school tutoring sector, has faced significant regulatory changes, including the prohibition of new academic tutoring institutions and the requirement for existing institutions to register as non-profit by the end of 2021[30][31]. - Compliance with the Alleviating Burden Opinion has materially and adversely affected the company's business, financial condition, and results of operations, leading to potential employee layoffs and closure of learning centers[32]. - The company is actively monitoring the evolving regulatory environment and is making efforts to comply with new requirements, which may include further operational adjustments[32]. - The company must comply with various PRC regulations for operating licenses and permits, particularly for K-12 tutoring services, which could materially affect its business if not adhered to[161]. - Changes in PRC laws and regulations, such as the Amended Implementation Rules and Alleviating Burden Opinion, may significantly impact the company's ability to operate private schools[135]. - The evolving regulatory landscape in China regarding data protection is expected to become more stringent, posing challenges for the company's operations[91]. Business Operations and Strategy - The company faced challenges in hiring and retaining qualified teachers due to regulatory requirements for teacher licenses, which may impact the quality of education provided[40]. - The company is exploring new program and service offerings in response to market demands and regulatory changes, which may affect its ability to maintain quality and consistency[44]. - The success of the business is heavily reliant on student enrollments and course fees, with a critical need to attract students without significantly decreasing fees to maintain profitability[37]. - The company has ceased providing tutoring services during national holidays, weekends, and school breaks to comply with new regulations, which may impact revenue generation[32]. - The company must continually enhance its online programs and adapt to technological changes to maintain market share in the competitive online education market[81]. - The company is subject to fluctuations in operating results due to various factors, including economic conditions and regulatory actions affecting private educational services in China[72]. Legal and Compliance Risks - The company was ordered to pay approximately RMB 6.5 million in damages due to copyright infringement claims related to test materials, highlighting ongoing legal risks[47]. - The company is subject to ongoing legal proceedings related to intellectual property rights, which could divert management's attention and resources[49]. - The company may face legal proceedings that could materially affect its business and financial condition, including potential class action lawsuits[95]. - The company may need to rely on legal proceedings to resolve conflicts of interest, which could disrupt business operations and create uncertainty[129]. Market and Competitive Landscape - The private education sector in China is highly fragmented and competitive, with intense competition potentially leading to decreased student enrollments and profitability[52]. - The COVID-19 pandemic has materially impacted the company's business operations, with a shift to online classes and challenges in acquiring new students[55]. - The company faces challenges in retaining key management personnel, which is crucial for its ongoing success[80]. - The brand "New Oriental" is crucial for competitive advantage, and maintaining brand awareness is essential for attracting students and ensuring business success[38][39]. Financial and Capital Management - Additional capital may be required for future developments, and financing may not be available on acceptable terms, impacting growth opportunities[98]. - The company’s ability to raise additional capital is subject to various uncertainties, including market conditions and regulatory policies[99]. - Without sufficient capital, the company may need to reduce growth and limit its ability to develop new businesses or respond to competitive pressures[100]. - The company completed an offering of US$300 million aggregate principal amount of 2.125% notes due 2025[102]. - The company may face challenges in obtaining new leases at desirable locations or renewing existing leases on acceptable terms, which could adversely affect its business[104]. Taxation and Financial Obligations - The company may face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements do not represent an arm's-length price, potentially increasing tax liabilities[137]. - The imposition of penalties for violations of PRC laws could materially and adversely affect the company's business operations and financial results[122]. - The company may be deemed a PRC resident enterprise, subjecting it to a 25% enterprise income tax on global income, which could significantly increase tax burden[186]. - Dividends from PRC subsidiaries are subject to a maximum withholding tax rate of 20%, reduced to 10% in the absence of applicable tax treaties[188]. Investor Relations and Market Perception - The trading prices of the company's ADSs and common shares have shown significant volatility, with a high of US$19.68 and a low of US$1.70 on NYSE from June 1, 2020, to September 23, 2021[213]. - The market price of the company's ADSs may be adversely affected by uncertainties related to the HFCA Act and potential regulatory changes[200]. - The inability of the PCAOB to conduct inspections in China may lead to a loss of investor confidence in the company's financial statements[201]. Operational Risks - The performance and reliability of the online program infrastructure are critical, and any system disruptions could limit student retention and enrollment growth[86]. - The company has experienced cybersecurity incidents in the past, which could lead to economic and reputational damages if student data is compromised[87]. - Compliance with PRC data protection and cybersecurity regulations is essential, and failure to comply may result in penalties and operational disruptions[89].

Financial Data and Key Metrics Changes - Total net revenue for Q3 2021 was $1,190 million, representing a 29% year-over-year increase [5][19] - Operating income was $101.5 million, a 13.5% decrease year-over-year, with a non-GAAP operating income of $115.9 million, reflecting a 14% decrease [19] - Net income attributable to New Oriental was $151.3 million, a 9.9% increase year-over-year, with non-GAAP net income also increasing by 9.9% to $163.2 million [21][19] - Operating margin decreased to 8.5% from 12.7% year-over-year, while non-GAAP operating margin fell to 9.7% from 14.6% [19] Business Line Data and Key Metrics Changes - K-12 all-subjects after-school tutoring business achieved approximately 37% year-over-year revenue growth [5][10] - U-Can middle school and high school business recorded a revenue increase of approximately 35% with student enrollments growing by 56% [10][11] - POP Kids program revenue increased by about 40%, with enrollments up by 61% [11] - Overseas test prep revenue decreased by about 12%, while overseas consulting and study tour business recorded an 11% increase [11][6] Market Data and Key Metrics Changes - Total student enrollments in academic subjects tutoring and test prep courses increased by 43% year-over-year to approximately 2,296,800 [8] - Per program blended average selling price (ASP) increased by about 7% year-over-year [9] - Hourly blended ASP also increased by 7% year-over-year, consistent with normal price increases of 5% to 8% [9] Company Strategy and Development Direction - The company is focusing on expanding its offline business by adding around 20% capacity and enhancing classroom areas [25] - Investments in digital technologies and the OMO system are prioritized to improve service quality and capture market opportunities post-COVID [26][27] - The company aims to leverage its strong financial position to take market share from smaller players during the expected market consolidation [25][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery trend and long-term market opportunities, emphasizing a balanced investment strategy [24][28] - The company expects total revenue for the next quarter to be in the range of $1,101.9 million to $1,141.8 million, representing a year-over-year increase of 38% to 43% [29] - The K-12 business is expected to grow by 45% to 50% in the next quarter, while overseas test prep is projected to grow around 30% [29] Other Important Information - The company invested $59 million in the quarter to enhance its OMO integrated education ecosystem [13] - Cash and cash equivalents as of February 28, 2021, were $1,569.8 million, up from $915.1 million a year earlier [22] - Deferred revenue increased by 35.7% year-over-year to $1,865.7 million [23] Q&A Session Summary Question: Regulatory environment and potential impacts - Management acknowledged the government's intention to tighten regulations in the after-school tutoring sector but does not foresee material impacts on top-line revenue [32] Question: Summer promotion plans - The company plans to replicate last year's successful summer promotion, expecting higher retention rates and significant enrollments [35] Question: OMO revenue contribution and margin profile - OMO currently contributes single-digit revenue but is expected to grow rapidly, with margins anticipated to be higher than traditional offline classes [38] Question: Outlook for overseas testing and consulting - Management noted a recovery in overseas test prep, with a projected revenue increase of around 30% in the next quarter [41] Question: Capacity expansion plans - The company plans to open more learning centers, particularly in Beijing, and aims for a 20% capacity expansion this fiscal year [45] Question: Margin trends - Management expects margin decline to narrow in the next quarter, with confidence in long-term margin recovery post-pandemic [50]

Financial Data and Key Metrics Changes - Total net revenue for Q2 2021 was $887.7 million, a 13.1% increase year-over-year [6] - Operating costs and expenses increased by 21% year-over-year to $919.8 million [21] - Net income attributable to New Oriental was $53.9 million, a 0.9% increase from the same period last year [23] - Non-GAAP net income increased by 21.3% year-over-year to $69.1 million [23] - Operating loss for the quarter was $32.1 million compared to a loss of $25.3 million in the previous year [22] Business Line Data and Key Metrics Changes - K-12 after-school tutoring business revenue grew approximately 26% year-over-year [11] - U-Can middle and high school tutoring revenue increased by approximately 27% [11] - POP Kids program revenue rose by about 24% [12] - Overseas test prep business revenue decreased by about 29% year-over-year, showing signs of recovery compared to a 51% decrease in the previous quarter [12] - VIP personalized class business recorded a cash revenue increase of about 20% year-over-year [13] Market Data and Key Metrics Changes - Total student enrollments in academic subjects tutoring and test prep courses increased by 10.4% year-over-year to approximately 4,183,100 [9] - Per program blended average selling price (ASP) increased by about 13% year-over-year [10] - Hourly blended ASP remained flat year-over-year, with U-Can classes increasing by 8% and overseas test prep programs increasing by 13% [10] Company Strategy and Development Direction - The company is focusing on expanding its OMO (Online-Merge-Offline) system to enhance flexibility and reach [7][8] - Plans to expand offline business capacity by 20% to 25% in fiscal year 2021 [26] - Emphasis on cost control and effective marketing strategies to cushion pandemic impacts [8][21] - The company aims to leverage digital technologies and enhance its OMO system for better service delivery [27][28] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about recovery trends despite ongoing pandemic challenges [25] - The company expects total revenue for the next quarter to be in the range of $1,098.6 million to $1,144.8 million, representing a year-over-year increase of 19% to 24% [32] - Management highlighted the importance of maintaining a stable investment strategy for sustainable growth [25][30] Other Important Information - The company invested $54 million in the OMO integrated education ecosystem during the quarter [14] - Cash and cash equivalents as of November 30, 2020, were $2,643.2 million, significantly up from $915.1 million as of May 31, 2020 [24] Q&A Session Summary Question: Importance of OMO strategy for future growth - Management emphasized the OMO model's role in enhancing student retention and satisfaction, contributing to overall revenue growth [36][38] Question: FY22 guidance on revenue growth and capacity expansion - Management indicated expectations for booming revenue growth in FY22, with a focus on expanding capacity and improving service quality [40] Question: Impact of COVID-19 on guidance and enrollment growth - Management acknowledged potential negative impacts from COVID-19 but expressed confidence in better preparedness compared to previous outbreaks [42][43] Question: Pricing strategy amidst competition - Management stated that pricing strategies remain consistent, focusing on quality over price, which is valued by parents and students [50][51] Question: Capital allocation strategy going forward - Management plans to use raised funds for potential valuable investments and to continue rewarding investors through dividends and buybacks [58]

Financial Data and Key Metrics Changes - Total net revenue for Q1 2021 was $986.4 million, representing an 8% decrease year-over-year, which was better than previous guidance [4] - Net revenues from education programs and services were $935.6 million, a 6.1% decrease year-over-year [4] - Operating income was $150.3 million, a 38.9% decrease year-over-year, with a non-GAAP operating income of $166.1 million, down 35.4% year-over-year [19] - Net income attributable to New Oriental was $174.7 million, a 16.4% decrease from the same period last year [20] - Operating margin for the quarter was 15.2%, compared to 23.0% in the same period of the prior fiscal year [19] Business Line Data and Key Metrics Changes - K-12 after-school tutoring business achieved year-over-year revenue growth of approximately 8% [8] - U-Can middle and high school all-subjects after-school tutoring business recorded a revenue increase of approximately 9% and student enrollments grew 23% year-over-year [8] - POP Kids program saw a revenue increase of about 3.5% with a 17% increase in enrollment [9] - Overseas test prep business recorded a revenue decrease of about 51% due to pandemic-related challenges [9] - VIP personalized class business experienced a cash revenue decline of about 10% year-over-year [10] Market Data and Key Metrics Changes - Total student enrollments in academic subjects tutoring and test preparation courses increased by about 13.5% year-over-year to approximately 2,961,100 [5] - Deferred revenue balance increased by 17.5% year-over-year to $1,563.1 million [21] - The company opened seven new offline training schools, increasing classroom area by approximately 23% year-over-year [12] Company Strategy and Development Direction - The company is focusing on expanding its offline business by adding around 20% to 25% capacity, including new learning centers [22] - Investment in digital technologies and the OMO system will be leveraged for K-12 distance and overseas test prep offerings [24] - The company aims to capture market share from smaller players during the post-COVID market consolidation [23] - Continued investment in teacher training and technology platforms to enhance the OMO integrated education ecosystem [14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about recovery trends and market opportunities despite ongoing pandemic challenges [21] - The company expects total revenue for the next quarter to be in the range of $863.7 million to $887.3 million, representing a year-over-year increase of 10% to 13% [28] - Management highlighted the importance of maintaining a stable investment strategy focused on product quality and teacher salaries [22] Other Important Information - The company invested $39 million in the quarter to improve its OMO integrated education ecosystem [14] - The summer promotion campaign resulted in a 31% increase in total promotion enrollments year-over-year, reaching 1,079,000 [10] Q&A Session Summary Question: What caused the significant decline in gross margin year-over-year? - Management noted that the gross margin was down by roughly 6% due to an 8% revenue decline and increased teacher salaries [34] Question: What is the current utilization rate of offline classes? - Management indicated that it is difficult to disclose the utilization rate due to the pandemic but expects it to improve as operations normalize [38] Question: Can you discuss the outlook for the overseas test prep business? - Management acknowledged a 51% decline in overseas test prep revenue but expects gradual recovery in Q2 with a forecasted decline of 30% to 35% [41] Question: What is the guidance for FY '21 and operating margin targets? - Management provided guidance for Q2 revenue growth of 10% to 15% and indicated that margin decline will continue to narrow in Q2 [44] Question: How will the company approach capacity expansion amid the pandemic? - Management aims to add 20% to 25% new capacity in FY '21 and sees opportunities to capture market share during consolidation [74]

Executive Compensation and Benefits - For the fiscal year ended May 31, 2020, the company paid approximately US$1.8 million in cash to executive officers and non-executive directors[554]. - The company contributed US$106,000 to pension insurance, medical insurance, housing fund, unemployment, and other benefits for executive officers and non-executive directors[554]. - The company has entered into employment agreements with executive officers, allowing termination for cause without notice or remuneration[551]. - Each executive officer is required to maintain confidentiality regarding the company's trade secrets and confidential information[553]. - The compensation committee is responsible for reviewing and approving the total compensation package for the chief executive officer and other executive officers[573]. Share Incentive Plans - The 2006 Share Incentive Plan allows for a maximum of 8,000,000 shares to be issued, with additional shares added annually since 2007[555]. - The 2006 plan expired in January 2016, and no additional awards may be granted under this plan[556]. - The company has a vesting schedule where one-sixth of the common shares underlying an option will vest every six months[562]. - The exercise price of options under the 2006 plan may be fixed or variable, determined by the plan administrator[561]. - The 2016 Share Incentive Plan allows for the issuance of up to 10,000,000 shares, with 1,256,505 non-vested equity shares outstanding as of May 31, 2020[563]. - The company amended its 2006 share incentive plan in September 2012, allowing the administrator to reduce the exercise price of outstanding options without shareholder approval, provided it does not incur significant additional share-based compensation expenses[708]. - The company adopted its 2016 share incentive plan in January 2016, following home country practice and obtaining board approval without requiring shareholder approval[708]. Board of Directors and Governance - The company’s independent directors include notable figures such as Robin Yanhong Li, co-founder of Baidu, and Denny Lee, former CFO of NetEase[548][549]. - The company’s executive team includes experienced professionals with backgrounds in finance, education, and technology[543][544][545]. - The board of directors consists of six members, including three independent directors, complying with NYSE requirements for independent oversight[569]. - The audit committee held meetings or passed resolutions 14 times in the fiscal year ended May 31, 2020, ensuring oversight of financial reporting processes[572]. - The nominating and corporate governance committee is tasked with selecting nominees for the board and ensuring compliance with corporate governance standards[574]. - The company has a board of directors consisting of three independent directors and three executive officers, maintaining independent audit, compensation, and governance committees[707]. - The company has no significant differences in corporate governance practices compared to domestic listed companies as per NYSE requirements[709]. Financial Performance and Position - The company reported a net income of $1.02 billion for the year ended May 31, 2020, compared to $1.05 billion in 2019, a decrease of approximately 3%[730]. - Total assets increased from $3.98 billion in 2018 to $6.56 billion in 2020, representing a growth of approximately 64%[738]. - Cash and cash equivalents decreased from $1.41 billion in 2019 to $915.06 million in 2020, a decline of about 35%[738]. - Short-term investments rose significantly from $1.67 billion in 2019 to $2.32 billion in 2020, an increase of approximately 39%[738]. - Total liabilities increased from US$1,763,017 in 2018 to US$3,687,074 in 2020, representing a growth of 108.5%[740]. - Total equity rose from US$2,008,071 in 2018 to US$2,869,811 in 2020, an increase of 43%[742]. - Retained earnings grew significantly from US$1,352,543 in 2018 to US$1,986,411 in 2020, reflecting a rise of 46.8%[742]. - Additional paid-in capital increased from US$129,059 in 2018 to US$456,088 in 2020, marking a growth of 253.5%[742]. Legal and Regulatory Matters - The company has been involved in a putative securities class action lawsuit, with ongoing proceedings related to allegations of material misstatements in public filings[596]. - The lease agreements with Metropolis Holding were approved by all directors, including disinterested directors, ensuring compliance with related party transaction regulations[589]. - The company has not entered into any material contracts outside the ordinary course of business, except those described in the annual report[644]. - Under Cayman Islands law, the company is not required to hold annual shareholders meetings every year, and it did not hold one in the fiscal year of 2020[709]. Taxation and Financial Reporting - There are no taxes levied on profits, income, or gains in the Cayman Islands, and no inheritance tax or estate duty applies[647]. - The company may be classified as a "resident enterprise" under PRC tax law if it meets specific criteria, which could subject dividends to a 10% withholding tax[649]. - The company does not intend to determine earnings and profits based on U.S. federal income tax principles, and distributions will generally be reported as dividends[656]. - The company maintained effective internal control over financial reporting as of May 31, 2020, as confirmed by an independent audit[692]. - The company adopted new accounting standards for leases in 2020, impacting the financial reporting of operating lease liabilities[731]. Risk Management - The company has not been exposed to material risks due to changes in interest rates, but a hypothetical one percentage point decrease in interest rates would have resulted in a decrease of approximately US$33.6 million in interest income for the year ended May 31, 2020[675]. - All revenues and most expenses are denominated in RMB, with exposure to foreign exchange risk primarily related to cash and cash equivalents denominated in U.S. dollars[676]. - The company does not believe it currently has any significant direct foreign exchange risk and has not hedged exposures denominated in foreign currencies[676]. - The conversion of Renminbi into foreign currencies is based on rates set by the People's Bank of China, and fluctuations in the exchange rate can significantly impact the value of investments[677].