NEW ORIENTAL(EDU) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total net revenue for Q2 2021 was $887.7 million, a 13.1$919.8 million [21] - Net income attributable to New Oriental was $53.9 million, a 0.9$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]