Core Viewpoint - New Oriental's Q3 financial report shows a mixed performance with a revenue increase but underlying concerns about future growth and profitability [2][3][6] Financial Performance - For the first three fiscal quarters of 2025, New Oriental reported a cumulative revenue of $3.657 billion, a 15.1% increase from $3.177 billion in the same period last year [2] - The net profit for the same period reached $364 million, reflecting a 29.0% year-on-year growth, significantly outpacing revenue growth [2] - In Q3, net revenue decreased by 2% to $1.183 billion, which was below market expectations [3][8] - Excluding the impact of its e-commerce and live-streaming business, revenue actually increased by 21.2% to $1.038 billion [7] Business Segments - The core education business showed structural growth, with significant revenue increases in overseas exam preparation (7.1%) and domestic exam preparation for adults and college students (17%) [7] - New Oriental's new education business maintained strong growth, with a revenue increase of 34.5% in the quarter [7] Market Reactions - Following the earnings report, New Oriental's stock performance was mixed, with a decline of 0.68% in the US market and a rise of over 5.6% in Hong Kong, indicating divergent investor sentiment [3] - Several financial institutions, including Macquarie and JPMorgan, have lowered their target prices for New Oriental following the earnings report [4][13] Future Guidance - New Oriental's management has indicated that profit pressures are expected to ease in the coming quarters due to cost-cutting measures [10][11] - The company forecasts a revenue growth of 10%-13% for Q4 of fiscal 2025, which is lower than market expectations [11][13] Cash Position - As of the end of February, New Oriental had a total cash and short-term investments of $4.4 billion, with $2.68 billion available for discretionary use after accounting for deferred revenue [17]

Financial Data and Key Metrics Changes - Total net revenue decreased by 2% year over year, but net revenue excluding Easter buy increased by 21.2% year over year [6] - Operating income increased by 9.8% year over year to $124.5 million [17] - Net income attributable to New Oriental increased by 0.1% year over year to $87.3 million [18] - Non-GAAP net income decreased by 14.3% year over year to $113.3 million [18] - Cash and cash equivalents totaled approximately $1.42 billion, with total assets around $4.7 billion [19] Business Line Data and Key Metrics Changes - Overseas test drive business revenue increased by 7% year over year [9] - Overseas study consulting business revenue increased by 21% year over year [9] - Adults and university students business revenue increased by 17% year over year [9] - New educational business initiatives recorded a revenue increase of 35% year over year [11] - Integrated tourism-related business line revenue increased by 85% year over year [11] Market Data and Key Metrics Changes - Top 10 cities contributed over 60% of the overseas test drive business [10] - Top 10 cities contributed approximately 50% of the intelligent learning system and device business [11] - Revenue contribution from top 10 cities in integrated tourism-related business exceeded 50% [12] Company Strategy and Development Direction - Company remains committed to long-term value creation and operational consistency [6] - Continued investments in AI and technology integration to enhance educational offerings and operational efficiency [14][22] - Share repurchase program extended with an increased aggregate value from $400 million to $700 million [15] Management Comments on Operating Environment and Future Outlook - Management anticipates total net revenue growth in the range of 10% to 13% for the upcoming quarter [20] - Cost control measures initiated to enhance efficiency and operating margins [21] - Management expects overseas related business growth to be in the range of 5% to 10% in the upcoming quarter [27] Other Important Information - Operating costs decreased by 3.2% year over year, while selling and marketing expenses increased by 13% [17] - Deferred revenue increased by 15% year over year to approximately $1.75 billion [19] Q&A Session Summary Question: Drivers of slowdown in overseas related businesses - Management indicated that the slowdown is due to macroeconomic conditions and international relations changes, projecting growth of 5% to 10% for overseas related business in Q4 [27] Question: Breakdown of other business growth in Q4 - Management provided estimates for Q4 growth: overseas related business around 8%, domestic university students business around 19%, high school business around 16-17%, and K-9 educational business around 30-35% [30] Question: K-9 offline enrollment growth and learning device impact - Management explained that slower K-9 growth is impacted by enrollment timing differences and expects K-9 business to grow over 35% in Q4 [41] Question: Sustainability of margin expansion into FY26 - Management expects margin expansion due to ongoing cost control and efficiency enhancements, aiming for a lower percentage of headquarters expenses in FY26 [70][72] Question: Future shareholder payback plans - Management confirmed ongoing discussions for future capital allocation plans, including potential dividends and share buybacks [50] Question: Growth expectations for other business segments next year - Management anticipates similar growth rates for core business lines as in Q4, with overseas related business stabilizing and K-9 new business expected to grow around 25-30% [58] Question: AI and technology development strategy - Management emphasized the integration of AI in teaching and learning processes, enhancing efficiency and data collection for better student outcomes [63][64] Question: Learning hardware business strategy amid competition - Management expressed confidence in the learning hardware business model, leveraging educational strengths and technology to maintain competitive margins [81][83]