NEW ORIENTAL(EDU) - 2025 Q3 - Quarterly Report

Financial Highlights for the Third Fiscal Quarter Ended February 28, 2025 New Oriental reported a slight decrease in total net revenues for Q3 FY2025, but core revenues, excluding East Buy, grew strongly, alongside increases in operating and net income attributable to shareholders Key Financial Results Key Financial Results (3Q FY2025) | Metric | 3Q FY2025 (US$ thousands) | 3Q FY2024 (US$ thousands) | % change | | :------------------------------------------------ | :----------------------- | :----------------------- | :------- | | Net revenues | 1,183,055 | 1,207,286 | -2.0% | | Operating income | 124,519 | 113,432 | 9.8% | | Non-GAAP operating income | 142,056 | 142,359 | -0.2% | | Net income attributable to New Oriental | 87,255 | 87,167 | 0.1% | | Non-GAAP net income attributable to New Oriental | 113,344 | 132,279 | -14.3% | | Net income per ADS - basic | 0.54 | 0.53 | 2.7% | | Net income per ADS - diluted | 0.54 | 0.52 | 2.9% | | Non-GAAP net income per ADS - basic | 0.70 | 0.80 | -12.1% | | Non-GAAP net income per ADS - diluted | 0.70 | 0.79 | -12.0% | Key Financial Results (9M FY2025) | Metric | 9M FY2025 (US$ thousands) | 9M FY2024 (US$ thousands) | % change | | :------------------------------------------------ | :----------------------- | :----------------------- | :------- | | Net revenues | 3,657,107 | 3,176,907 | 15.1% | | Operating income | 436,924 | 339,898 | 28.5% | | Non-GAAP operating income | 472,550 | 441,017 | 7.2% | | Net income attributable to New Oriental | 364,616 | 282,619 | 29.0% | | Non-GAAP net income attributable to New Oriental | 418,988 | 402,417 | 4.1% | | Net income per ADS - basic | 2.24 | 1.71 | 30.9% | | Net income per ADS - diluted | 2.22 | 1.69 | 31.7% | | Non-GAAP net income per ADS - basic | 2.57 | 2.43 | 5.6% | | Non-GAAP net income per ADS - diluted | 2.55 | 2.40 | 6.5% | - Total net revenues decreased by 2.0% year over year to US$1,183.1 million for the third fiscal quarter of 2025[7] - Total net revenues, excluding revenues generated from East Buy private label products and livestreaming business, increased by 21.2% year over year to US$1,038.3 million[7] - Operating income increased by 9.8% year over year to US$124.5 million[7] - Net income attributable to New Oriental increased by 0.1% year over year to US$87.3 million[7] Operating Highlights for the Third Fiscal Quarter Ended February 28, 2025 Management highlighted strong growth in core educational segments and new initiatives, supported by AI investments and operational efficiency, while the share repurchase program was extended and increased Management Commentary - Michael Yu (Executive Chairman) highlighted 21.2% YoY revenue growth (excluding East Buy), strong performance in overseas test prep (+7.1%), overseas study consulting (+21.4%), domestic adult/university test prep (+17.0%), and new educational businesses (+34.5%)[8] - Chenggang Zhou (CEO) emphasized continued capacity monitoring, revamping the online-merge-offline teaching system, and investing in AI-related technologies[8] - Stephen Zhihui Yang (CFO) noted a GAAP operating margin (excluding East Buy) of 12.1% (vs. 14.0% prior year) and Non-GAAP operating margin of 13.3% (vs. 15.1% prior year), attributing margin pressure to slower overseas business growth and new tourism investments, with anticipated easing in future quarters[8] Share Repurchase Program - The Share Repurchase Program was extended to May 31, 2025[9] - The aggregate value of shares authorized for repurchase was increased from US$400 million to US$700 million[9] - As of April 22, 2025, approximately 14.4 million ADSs were repurchased for approximately US$695.5 million[9] - Revenues from overseas test preparation and overseas study consulting businesses increased by approximately 7.1% and 21.4% year over year, respectively[8] - The domestic test preparation business targeting adults and university students grew by approximately 17.0% year over year[8] - New educational business initiatives maintained strong momentum with revenue growth of 34.5% year over year[8] - Non-academic tutoring courses attracted approximately 408,000 student enrollments, and intelligent learning system and devices had approximately 309,000 active paid users[8] - The company is investing in the application of AI-related technologies within the education sector and revamping its online-merge-offline teaching system[8] - The Share Repurchase Program was extended to May 31, 2025, and the authorized value increased from US$400 million to US$700 million[9] Detailed Financial Results for the Third Fiscal Quarter Ended February 28, 2025 This section details New Oriental's Q3 FY2025 financial performance, showing significant core educational revenue growth despite a slight overall decline due to East Buy's business, alongside breakdowns of costs, income, cash flow, and balance sheet items Net Revenues - Total net revenues for the third fiscal quarter of 2025 were US$1,183.1 million, representing a 2.0% decrease year over year[10] - Net revenues, excluding revenues generated from East Buy private label products and livestreaming business, were US$1,038.3 million, representing a 21.2% increase year over year[10] - The growth was mainly driven by the increase in net revenues from the Company's educational new business initiatives[10] Operating Costs and Expenses - Operating costs and expenses for the quarter were US$1,058.5 million, representing a 3.2% decrease year over year[11] - Cost of revenues decreased by 17.6% year over year to US$531.6 million[14] - Selling and marketing expenses increased by 13.0% year over year to US$182.2 million[14] - General and administrative expenses increased by 19.8% year over year to US$344.7 million[14] - Total share-based compensation expenses decreased by 41.3% to US$16.1 million[12] Operating Income and Operating Margin - Operating income was US$124.5 million, representing a 9.8% increase year over year[13] - Operating margin for the quarter was 10.5%, compared to 9.4% in the same period of the prior fiscal year[15] - Non-GAAP income from operations was US$142.1 million, representing a 0.2% decrease year over year[13] - Non-GAAP operating margin for the quarter was 12.0%, compared to 11.8% in the same period of the prior fiscal year[15] Net Income and Net Income per ADS - Net income attributable to New Oriental for the quarter was US$87.3 million, representing a 0.1% increase year over year[16] - Basic and diluted net income per ADS attributable to New Oriental were US$0.54 and US$0.54, respectively[16] Non-GAAP Net Income and Non-GAAP Net Income per ADS - Non-GAAP net income attributable to New Oriental for the quarter was US$113.3 million, representing a 14.3% decrease year over year[17] - Non-GAAP basic and diluted net income per ADS attributable to New Oriental were US$0.70 and US$0.70, respectively[17] Cash Flow - Net operating cash inflow for the third fiscal quarter of 2025 was approximately US$1.0 million[18] - Capital expenditures for the quarter were US$52.4 million[18] Balance Sheet - As of February 28, 2025, New Oriental had cash and cash equivalents of US$1,418.8 million[19] - The Company had US$1,411.7 million in term deposits and US$1,853.6 million in short-term investment[19] - Deferred revenue at the end of the third quarter of fiscal year 2025 was US$1,749.9 million, an increase of 15.0% year over year[20] - Net revenues decreased by 2.0% YoY to US$1,183.1 million, but excluding East Buy's business, they increased by 21.2% to US$1,038.3 million[10] - Operating costs and expenses decreased by 3.2% YoY to US$1,058.5 million, primarily due to a 17.6% decrease in cost of revenues[11][14] - Operating income increased by 9.8% YoY to US$124.5 million, with GAAP operating margin improving to 10.5%[13][15] - Net income attributable to New Oriental increased marginally by 0.1% YoY to US$87.3 million[16] - Net operating cash inflow was approximately US$1.0 million, and deferred revenue increased by 15.0% YoY to US$1,749.9 million[18][20] Financial Results for the Nine Months Ended February 28, 2025 For the first nine months of FY2025, New Oriental achieved substantial year-over-year growth across key financial metrics, including net revenues, operating income, and net income, demonstrating strong overall performance Net Revenues (9M FY2025) - For the first nine months of fiscal year 2025, New Oriental reported net revenues of US$3,657.1 million, representing a 15.1% increase year over year[21] Operating Income and Operating Margin (9M FY2025) - Operating income was US$436.9 million, representing a 28.5% increase year over year[22] - Operating margin for the first nine months of fiscal year 2025 was 11.9%, compared to 10.7% for the same period of the prior fiscal year[23] - Non-GAAP operating income was US$472.6 million, representing a 7.2% increase year over year[22] - Non-GAAP operating margin was 12.9%, compared to 13.9% for the same period of the prior fiscal year[23] Net Income and Net Income per ADS (9M FY2025) - Net income attributable to New Oriental for the first nine months of fiscal year 2025 was US$364.6 million, representing a 29.0% increase year over year[24] - Basic and diluted net income per ADS attributable to New Oriental amounted to US$2.24 and US$2.22, respectively[24] Non-GAAP Net Income and Non-GAAP Net Income per ADS (9M FY2025) - Non-GAAP net income attributable to New Oriental for the first nine months of fiscal year 2025 was US$419.0 million, representing a 4.1% increase year over year[25] - Non-GAAP basic and diluted net income per ADS attributable to New Oriental amounted to US$2.57 and US$2.55, respectively[25] - Net revenues increased by 15.1% year over year to US$3,657.1 million[21] - Operating income increased by 28.5% year over year to US$436.9 million[22] - Net income attributable to New Oriental increased by 29.0% year over year to US$364.6 million[24] - Non-GAAP net income attributable to New Oriental increased by 4.1% year over year to US$419.0 million[25] Outlook for the Fourth Quarter of the Fiscal Year 2025 New Oriental anticipates total net revenues, excluding East Buy's private label products and livestreaming business, to increase by 10% to 13% year-over-year in USD for Q4 FY2025 - New Oriental expects total net revenues (excluding East Buy) in 4Q FY2025 to be in the range of US$1,009.1 million to US$1,036.6 million[26] - This represents a year-over-year increase in the range of 10% to 13% in USD[26] - The projected increase of revenue in Renminbi is expected to be in the range of 12% to 15% for 4Q FY2025[26] Conference Call Information New Oriental's management will host an earnings conference call on April 23, 2025, to discuss Q3 results, with registration, live webcast, and replay details provided - An earnings conference call will be hosted at 8 AM on April 23, 2025, U.S. Eastern Time[28] - Participants can register in advance via the provided link: https://register-conf.media-server.com/register/BI231c9f564a7a444faff3195dc3db509f[29] - A live and archived webcast will be available at http://investor.neworiental.org, with replay available until April 23, 2026[30][31] About New Oriental New Oriental is a leading Chinese private educational services provider, offering diverse programs including test preparation, e-commerce, and consulting, and is dual-listed on NYSE and SEHK - New Oriental is a provider of private educational services in China[32] - Offerings include educational services and test preparation courses, private label products and livestreaming e-commerce, and overseas study consulting services[32] - New Oriental is listed on NYSE (EDU) and SEHK (9901.SEHK)[32] Safe Harbor Statement This section highlights forward-looking statements subject to inherent risks and uncertainties, with the company disclaiming any obligation to update them except as legally required - The announcement contains forward-looking statements under the 'safe harbor' provisions of the U.S. Private Securities Litigation Reform Act of 1995[34] - Forward-looking statements involve inherent risks and uncertainties, such as the Company's ability to manage business changes, execute strategies, and adapt to PRC laws and regulations[34] - New Oriental does not undertake any obligation to update any forward-looking statement, except as required under applicable law[34] About Non-GAAP Financial Measures New Oriental uses non-GAAP financial measures, excluding items like share-based compensation, to provide supplemental insights into operating performance and liquidity for management and investors, despite inherent limitations - Non-GAAP financial measures exclude items such as share-based compensation expenses, amortization of intangible assets from business acquisitions, and various investment-related gains/losses[35] - These measures provide meaningful supplemental information regarding performance and liquidity by excluding items not indicative of operating performance from a cash perspective[36] - A limitation is the exclusion of certain items that are significant recurring expenses, which is addressed by providing specific GAAP reconciliation information[36] Contacts Contact information for investor and media inquiries is provided, including names, telephone numbers, and email addresses for FTI Consulting and New Oriental Education & Technology Group Inc - For investor and media inquiries, contacts are Ms. Rita Fong (FTI Consulting) and Ms. Sisi Zhao (New Oriental Education & Technology Group Inc)[37] - Contact details include phone numbers (+852 3768 4548, +86-10-6260-5568) and email addresses (rita.fong@fticonsulting.com, zhaosisi@xdf.cn)[37] Condensed Consolidated Financial Statements This section presents New Oriental's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, cash flows, and non-GAAP reconciliations, for the three-month and nine-month periods ended February 28, 2025 Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (As of Feb 28, 2025 vs. May 31, 2024) | Metric | As of Feb 28, 2025 (USD thousands) | As of May 31, 2024 (USD thousands) | | :--------------------------------- | :--------------------------------- | :--------------------------------- | | Total assets | 7,447,209 | 7,531,673 | | Total liabilities | 3,471,675 | 3,482,659 | | Cash and cash equivalents | 1,418,786 | 1,389,359 | | Short-term investments | 1,853,591 | 2,065,579 | | Deferred revenue (current) | 1,749,923 | 1,780,063 | | Property and equipment, net | 724,976 | 507,981 | | Right-of-use assets | 727,018 | 653,905 | Condensed Consolidated Statements of Operations (Three Months) Condensed Consolidated Statements of Operations (3 Months Ended Feb 28, 2025) | Metric | 3 Months Ended Feb 28, 2025 (USD thousands) | 3 Months Ended Feb 29, 2024 (USD thousands) | | :------------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net revenues | 1,183,055 | 1,207,286 | | Cost of revenues | 531,586 | 644,786 | | Selling and marketing | 182,240 | 161,259 | | General and administrative | 344,710 | 287,809 | | Total operating cost and expenses | 1,058,536 | 1,093,854 | | Operating income | 124,519 | 113,432 | | Net income attributable to New Oriental | 87,255 | 87,167 | | Net income per ADS - Basic | 0.54 | 0.53 | | Net income per ADS - Diluted | 0.54 | 0.52 | Reconciliations of Non-GAAP Measures to GAAP Measures (Three Months) Non-GAAP Reconciliations (3 Months Ended Feb 28, 2025) | Metric | 3 Months Ended Feb 28, 2025 (USD thousands) | 3 Months Ended Feb 29, 2024 (USD thousands) | | :------------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Operating income (GAAP) | 124,519 | 113,432 | | Share-based compensation expenses | 16,119 | 27,470 | | Amortization of intangible assets | 1,418 | 1,457 | | Non-GAAP operating income | 142,056 | 142,359 | | Operating margin (GAAP) | 10.5% | 9.4% | | Non-GAAP operating margin | 12.0% | 11.8% | | Net income attributable to New Oriental (GAAP) | 87,255 | 87,167 | | Non-GAAP net income attributable to New Oriental | 113,344 | 132,279 | | Non-GAAP net income per ADS - Basic | 0.70 | 0.80 | | Non-GAAP net income per ADS - Diluted | 0.70 | 0.79 | - Total share-based compensation expenses allocated to operating costs and expenses decreased by 41.3% YoY from US$27,470 thousand to US$16,119 thousand[42][43] Condensed Consolidated Statements of Cash Flows (Three Months) Condensed Consolidated Statements of Cash Flows (3 Months Ended Feb 28, 2025) | Metric | 3 Months Ended Feb 28, 2025 (USD thousands) | 3 Months Ended Feb 29, 2024 (USD thousands) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net cash provided by operating activities | 963 | 109,436 | | Net cash provided by investing activities | 79,891 | 11,285 | | Net cash used in financing activities | (94,581) | (33,492) | | Net change in cash, cash equivalents and restricted cash | (21,796) | 68,328 | Condensed Consolidated Statements of Operations (Nine Months) Condensed Consolidated Statements of Operations (9 Months Ended Feb 28, 2025) | Metric | 9 Months Ended Feb 28, 2025 (USD thousands) | 9 Months Ended Feb 29, 2024 (USD thousands) | | :------------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net revenues | 3,657,107 | 3,176,907 | | Cost of revenues | 1,613,419 | 1,508,562 | | Selling and marketing | 572,053 | 452,345 | | General and administrative | 1,034,711 | 876,102 | | Total operating cost and expenses | 3,220,183 | 2,837,009 | | Operating income | 436,924 | 339,898 | | Net income attributable to New Oriental | 364,616 | 282,619 | | Net income per ADS - Basic | 2.24 | 1.71 | | Net income per ADS - Diluted | 2.22 | 1.69 | Reconciliations of Non-GAAP Measures to GAAP Measures (Nine Months) Non-GAAP Reconciliations (9 Months Ended Feb 28, 2025) | Metric | 9 Months Ended Feb 28, 2025 (USD thousands) | 9 Months Ended Feb 29, 2024 (USD thousands) | | :------------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Operating income (GAAP) | 436,924 | 339,898 | | Share-based compensation expenses | 31,297 | 96,661 | | Amortization of intangible assets | 4,329 | 4,458 | | Non-GAAP operating income | 472,550 | 441,017 | | Operating margin (GAAP) | 11.9% | 10.7% | | Non-GAAP operating margin | 12.9% | 13.9% | | Net income attributable to New Oriental (GAAP) | 364,616 | 282,619 | | Non-GAAP net income attributable to New Oriental | 418,988 | 402,417 | | Non-GAAP net income per ADS - Basic | 2.57 | 2.43 | | Non-GAAP net income per ADS - Diluted | 2.55 | 2.40 | - Total share-based compensation expenses decreased by 67.6% YoY from US$96,661 thousand to US$31,297 thousand[48][49] Condensed Consolidated Statements of Cash Flows (Nine Months) Condensed Consolidated Statements of Cash Flows (9 Months Ended Feb 28, 2025) | Metric | 9 Months Ended Feb 28, 2025 (USD thousands) | 9 Months Ended Feb 29, 2024 (USD thousands) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net cash provided by operating activities | 497,470 | 745,808 | | Net cash used in investing activities | (5,136) | (289,912) | | Net cash used in financing activities | (486,494) | (51,208) | | Net change in cash, cash equivalents and restricted cash | 173 | 383,647 | - The financial statements include Condensed Consolidated Balance Sheets, Statements of Operations, Statements of Cash Flows, and Reconciliations of Non-GAAP Measures to GAAP Measures[38][40][42][44][46][48][50] - Statements cover both the three-month and nine-month periods ended February 28, 2025, and the corresponding periods in the prior fiscal year[41][47]