2024-04-24 14:54Financial Data and Key Metrics Changes - New Oriental reported an operating margin of 9.4% and a non-GAAP operating margin of 11.7% for the quarter, reflecting a strong bottom line performance [4][14] - Operating costs and expenses increased by 59.1% year-over-year to $1,093.9 million, with non-GAAP operating costs rising by 60.1% to $1,066.4 million [13] - Net income attributable to New Oriental was $87.2 million, a 6.8% increase year-over-year, while non-GAAP net income was $104.7 million, representing a 9.8% increase [14][15] Business Line Data and Key Metrics Changes - The overseas test prep business saw a revenue increase of approximately 53% in dollar terms or 59% in RMB terms year-over-year [5] - The overseas study consulting business recorded a revenue increase of about 26% in dollar terms or 31% in RMB terms year-over-year [6] - New educational business initiatives reported a revenue increase of 73% in dollar terms or 80% in RMB terms year-over-year [8] Market Data and Key Metrics Changes - The top 10 cities in China contributed over 60% of the non-academic tutoring courses business, with approximately 355,000 student enrollments recorded [6] - The intelligence learning system and device business had approximately 188,000 active paid users, with over 55% of revenue coming from the top 10 cities [7] Company Strategy and Development Direction - New Oriental plans to increase its capacity by about 30% for the fiscal year, with new learning centers expected to open in cities with strong performance [18] - The company aims to leverage new technologies such as AI and ChatGPT to enhance its offerings and improve operational efficiency [19][20] - The strategic focus includes sustaining healthy growth and expanding market share across all business lines [4][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining healthy growth despite Q4 typically being a slower quarter due to seasonality [17] - The company anticipates total net revenue for Q4 2024 to be in the range of $1,101.5 million to $1,127.3 million, representing a year-over-year increase of 28% to 31% in dollar terms [19] - Management highlighted the importance of adhering to guidance from Chinese authorities to enhance the nation's education level [20] Other Important Information - New Oriental's cash and cash equivalents, term deposits, and short-term investments totaled approximately $4.8 billion [11] - The company has authorized a share repurchase program, extending it through May 31, 2024, with approximately $195.3 million repurchased as of April 23, 2024 [12] Q&A Session Summary Question: Growth in different business segments in Q4 and capacity expansion sustainability - Management noted that Q4 is expected to be slower due to seasonality, but they remain optimistic about revenue growth across segments, with a capacity expansion guidance raised to 30% [22][24][25] Question: Education business margin expansion - Management indicated that the education business is seeing meaningful gross profit margin and non-GAAP operating margin expansion, with expectations for continued improvement in fiscal year 2025 [28][30] Question: East Buy margin volatility impact - Management could not provide specific financial results for East Buy but expressed optimism about its long-term growth and profitability [34] Question: Retention and utilization rates for learning centers - Management reported improving retention and utilization rates for both high school and non-academic courses, with a shorter breakeven period for new learning centers [38][40] Question: Operating cash flow drop and capital allocation - Management suggested analyzing cash flow on a year-over-year basis due to seasonality and confirmed ongoing share repurchase plans while discussing potential dividends [44][46] Question: Factors leading to larger loss from equity method investments - Management attributed the losses to a one-time impact from previous policy changes affecting investor companies [48][49]