New Oriental: Revenue Surges, EPS Lags

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