- Revenue Growth: 19.4% year-over-year increase.
- Net Revenue (Excluding East Buy): 31.3% year-over-year increase.
- Operating Margin: 2.8%.
- Non-GAAP Operating Margin: 3.2%.
- Overseas Test Prep Revenue: 21% year-over-year increase.
- Overseas Study Consulting Revenue: 31% year-over-year increase.
- Adults and University Students Revenue: 35% year-over-year increase.
- New Education Business Initiatives Revenue: 43% year-over-year increase.
- Integrated Tourism-related Business Revenue: 233% year-over-year increase.
- Operating Income: $19.3 million, 9.8% decrease year-over-year.
- Non-GAAP Operating Income: $27.6 million, 45.8% decrease year-over-year.
- Net Income: $31.9 million, 6.2% increase year-over-year.
- Non-GAAP Net Income: $35.5 million, 29.1% increase year-over-year.
- Net Cash Flow from Operations: $313.3 million.
- Capital Expenditures: $60.6 million.
- Cash and Cash Equivalents: $1,418.2 million.
- Term Deposits: $1,443.2 million.
- Short-term Investments: $1,951.4 million.
- Deferred Revenue: $1,960.6 million, 19.2% increase year-over-year.
- Expenses: $1,019.4 million, 20.2% increase year-over-year.
- Cost of Revenue: $498.3 million, 17.9% increase year-over-year.
- Selling and Marketing Expenses: $196.1 million, 26.6% increase year-over-year.
- G&A Expenses: $324.9 million, 20% increase year-over-year.
- Non-GAAP G&A Expenses: $319.4 million, 24.7% increase year-over-year.
- Share-based Compensation Expenses: $8.3 million, 71.8% decrease year-over-year.
- Special Dividend: $0.06 per common share or $0.6 per ADS.
- Share Repurchase Program: $542.8 million spent on repurchasing 11.2 million ADSs.
Release Date: January 21, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- New Oriental Education & Technology Group Inc (EDU, Financial) achieved a 19.4% year-over-year revenue growth, surpassing expectations.
- The company's new ventures contributed significantly to revenue, with a 31.3% increase excluding East Buy's private label products and live streaming business.
- The Overseas Test Prep business saw a 21% year-over-year revenue increase, while the Adults and University Students business recorded a 35% increase.
- New education business initiatives, including Non-Academic Tutoring and intelligent learning systems, reported a 43% year-over-year revenue increase.
- The newly integrated tourism-related business line experienced a 233% year-over-year revenue increase, showcasing strong growth potential.
Negative Points
- Operating income decreased by 9.8% year over year, indicating potential challenges in maintaining profitability.
- Non-GAAP income from operations decreased by 45.8% year over year, highlighting significant pressure on operational efficiency.
- Expenses for the quarter increased by 20.2% year over year, driven by accelerated capacity expansion and new business investments.
- The company faces macroeconomic uncertainties impacting high-end education business demand, such as Overseas Test Prep.
- Revenue growth guidance for Q3 indicates a deceleration, with expected growth in the range of 18% to 21% in dollar terms.
Q & A Highlights
Q: Can you explain the deceleration in Q3 revenue guidance and its impact on learning center expansion?
A: The Q3 revenue guidance shows a growth of 20% to 23% in RMB terms, reflecting a conservative approach due to macroeconomic uncertainties affecting high-end education demand. Despite this, we plan to expand learning centers by 20% to 25% this year, focusing on cities with strong performance. We aim to balance revenue growth with operational efficiency.
Q: How is the macroeconomic environment affecting your mass-market services and competition?
A: Despite macroeconomic challenges, our new education businesses are projected to grow by 40% year-over-year in RMB terms. While competition is present, we are gaining market share. The growth deceleration is mainly due to a high base effect.
Q: Given the Q3 guidance, how does this affect your full-year revenue growth expectations?
A: Despite a slight slowdown in Q3, we expect full-year revenue growth of over 25% in RMB terms. We are monitoring economic conditions and will provide Q4 guidance in the next earnings call.
Q: Can you elaborate on the growth and efficiency of new education initiatives and learning centers?
A: New education initiatives, including non-academic tutoring, are expected to grow by over 40% annually. Learning centers typically reach breakeven in six months, and we maintain a focus on utilization and operational efficiency.
Q: How do you view the regulatory landscape for your core and non-core businesses?
A: The regulatory environment remains stable, with no significant changes affecting our operations. We continue to comply with government requirements and maintain a neutral to positive outlook on regulations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
