NEW ORIENTAL(EDU)2024-10-23 14:52Financial Data and Key Metrics - Total net revenues increased by 30.5% YoY, with core educational business revenues (excluding East Buy) growing by 33.5% YoY [3] - Operating margin and non-GAAP operating margin reached 23.7% and 24.4%, respectively, representing YoY improvements of 370 basis points and 220 basis points [4] - Net income attributable to New Oriental increased by 48.4% YoY to 264.7 million [12] - Net cash flow from operations was 80.2 million [12] - Cash and cash equivalents, term deposits, and short-term investments totaled approximately 24.6 million in its OMO teaching platform to enhance service flexibility [8] - East Buy expanded its product offerings to 488 SKUs and diversified its sales channels, including Tmall, JD, Pinduoduo, and Xiaohongshu [8][9] - The company plans to increase capacity by 20% to 25% in FY2025, focusing on cities with strong financial performance [14] - New Oriental is committed to integrating AI and ChatGPT into its educational offerings to improve efficiency and growth [16] Management Commentary - Management expressed confidence in maintaining healthy growth for the core educational business, supported by solid educational resources [14] - The company is cautiously managing capacity expansion and hiring to balance revenue and profitability growth [14] - Management expects steady growth and satisfactory operating profit for the full fiscal year, despite Q2 being a slower season [15] Q&A Session Question: Second quarter guidance and capacity expansion [18] - Management explained that Q2 is typically a slower quarter due to seasonality but expects revenue growth to accelerate in Q3 and Q4, with full-year growth around 30% YoY [19] Question: Capacity expansion and margin improvement [21] - The company plans to increase capacity by 20% to 25% for FY2025, with margin expansion expected for the full year despite minor pressure in Q2 [22] Question: Margin improvement drivers [24] - Margin improvement was driven by positive top-line growth across business lines, increased utilization rates from learning center expansion, and cost control measures [25] Question: Cultural tourism revenue and profitability [27] - Tourism-related business contributed approximately $90 million in Q1, with profitability expected to be loss-making for the full year [29] Question: K-12 new initiatives revenue breakdown [32] - Non-academic tutoring and intelligent learning device businesses grew by over 50% YoY, with similar growth rates for both segments [33] Question: Growth breakdown for Q2 [35] - Overseas-related business is expected to grow over 20%, domestic test prep and university students business over 30%, and new businesses over 50% [35] Question: New business growth clarification [37] - Non-academic tutoring and intelligent learning device businesses grew over 55% YoY, with non-academic tutoring contributing more than half of new educational business revenue [38][39] Question: Second quarter margin pressure [45] - Q2 margin pressure is attributed to seasonality, tourism business losses, and conservative guidance, with expectations of better performance in Q3 and Q4 [46] Question: East Buy revenue and guidance [51] - East Buy's financial results will be detailed in the next quarter, with Q2 guidance excluding East Buy's revenue [52] Question: New business growth and high school business performance [55] - New educational initiatives are expected to grow around 45% to 46% in Q2, with non-academic tutoring and intelligent learning devices growing over 50% [56]