Q1 2020 Earnings Call
Ladies and gentlemen, good evening and thank you for standing by for New Orientals first fiscal quarter.
20 earnings conference call.
This time, all participants are in a listen only mode.
After managements prepared remarks, there will be a question answer session.
Today's conference is being recorded.
If you have any objections you may disconnect at this time.
No liked it during the meeting over to your host for today's conference.
Mrcc jobs.
Thank you Hello, everyone and welcome to new Orientals first fiscal quarter touches on 20 <unk> earnings conference call our financial results for the period.
To date and are available on the company's website as well as on Newswire services. Today, you will hear from Stephen Yang Chief Financial Officer. After his prepared remarks, Stephen and I will be available to answer your question.
Before we continue please note that the discussion today will contain forward looking statements made under the safe Harbor provisions of the U.S. Private Securities Litigation Reform Act.
90 95.
Forward looking statements involve inherent risks and uncertainties as such our results may be materially different from the views expressed today.
A number of potential risks and uncertainties are outlined in public filings with the FCC, New Oriental does not undertake any obligation to update any forward looking statements, except as required under applicable law. As a reminder, these conference is being recorded in addition, a webcast off.
This conference call will be available on your around talking Investor Relations website at Investor Dot New Oriental Dot work.
Now I'll turn the call over to Mr.
Stephen Please go happy Cinco Susie.
Collateral one thing to do not just on the call.
We're pleased to be good physical your pull on 20.
Well there.
Topline wells, which exceeded the high end of our expects ranch RV terms.
For the first quarter two on plenty.
Hi, I'm told reporters Nox rescue one solvent $71.8 million.
Were present, your gross or 24.6% or 20 like point something percent if my short.
<unk>.
That's revenue.
Educational programs and services for the quarter.
<unk> hundred $96.5 million, representing a 25% in Chris you here.
Or 30% is measured she RMB.
Okay, well strive for kids and Paul After school tutoring does business recorded significant gene, Chris It's doing woman's together with the old Wyoming responses received from the summer promotion can come back.
Oh segment, Mike Great contributions to this quarter's outstanding performance.
In the first quarter fiscal year 2020.
We continue to implement Oh, well pull them optimized market strategy and the terrorists out capacity expansion you cities, where we see potential for rocket wells a strong profitability.
During this quarter.
That's not all seven learning centers, you listen to seize the total square meters Clos Maria.
The quarter newquist, approximately 24% year over year, that's wafer so quarter over quarter.
Along with our succession plan.
Or total student enrollment Dominic subjects children, a test prep courses.
In the first fiscal quarter pull them 20 increased by 15.4% year over year to cross nearly 2 million switched from goods and my solvent and.
I'm not haulage and two of that.
At this point, please don't be higher than normal inclusive.
And then it'll still be wellness is primarily due to the speed of Alton awesome smack into two sections.
A change we adopt to me the latest regulatory requirements since November two HM.
Which new student enrollments for the.
The allowance Mesler, what chocolate separately.
Explain the number was doing requirement and sees Clark for the first the hopper altrom semester.
In previous quarter.
Both for the second half were both in both towards reported first quarter. That's why that's before in second quarter.
Our two the change, which historically collectibles for some of the tuition fees and the recorded the screen woman, who ultimately smelter in fourth quarter over the prior fiscal year.
Meanwhile, we also continue to deepen our all I'm worse off last underwrites classroom teaching system.
Particular.
Oh and move it is instructive courseware pop kids program in cement cities right.
Great anymore, and Brexit from high pulled the learning experience for our student.
We also made further strategic investments into duties from model classes.
New initiatives for pure all I can talk to us run through core and I'll call.
With all core competency in both offline all I had the goods and services.
We're confident to capture the substantial business opportunities in most he'll cities a remote areas in China moving forward.
[noise]. Furthermore.
Well like to take this opportunity to highlight the success of our summer promotion campaign. That's briefly mentioned earlier similar with the previous years all for low cost offline travel horses for multiple subjects across most already consistencies during the summer period.
Beginning with students before they begin second versus.
The largest feel for most of this year was launched in 43 season anymore, but we're encouraged to see but even with the doubled average.
Most of price compared to last year or total promotion enrollments reached 820 solvents and.
Hey, 8% increased year over year, accompanied by you probably still going to retention rates year over year.
No, but this promotion enrollments were not equals yellow reports you woman's overall sukumar persons I'll still guns were quotes from summer promotion campaign. We're successfully returned us comfortable customers for full price of course fully ultimate Tsum Tsum after which is 5%.
Higher than the rest blockier.
We're confident that this will boost our rather mail and drive public walls 12, the whole office, where you were put on <unk>.
Well for a belief yelp summer promotion strategy in generating long term benefits unforeseen. This continues to be a successful and effective strategy throughout rubber we have to market share.
I'm not quite a long term loyal sudan's customers include wall after sports central markets.
Oh. This study has moved from buzz with southern throughput Paul We expect continued improvements in retention rates as a customer loyalty wonderful, thereby rather wells in the next week so six years.
Do you see business laid a solid foundation for stronger wells in a long term.
For those demands our leadership in the markets.
Another highlight over the first quarter fiscal year to loving 20, it's our year over year altered your margin expansion, which is compounded by a strong bottom line performance already <unk> GAAP operating income increased by 46% <unk>, 8% year over year in dollar terms parts Neely.
20 that $67.2 million well non-GAAP operating margin rose by three on a 60 basis points to 24.0% from 20.4% a year ago.
It should go to a strong you additional wage and operational efficiency.
Listen to our one off somewhat promotions life.
Well continue to focus on full though and this went.
And we are confident its ability to deliver stable and policy its margin expansion this year and great sustainable long term, rather flush customers and shareholders.
I will now turn to pricing.
I want to blended ASP, which is cash flow new divided by total student enrollment decreased by about 13% year over year, we'd like to know about the lower than normal blended ASP is primarily due to the change intuition fee collection schedule for our kids Love After school tutoring courses.
Explained above the number of the students we recorded in the model fees collected during the quarter only reflect the second half of the ultimate see master therefore, our blended to ask people to quarter. Two on 20 appears to be lower.
Our people and the ASP, which GAAP revenue divided by the total teaching hours.
Increased by approximately 5% you really RMBS harmless breaking dawn.
Already blend the S.P. the U can middle School High school rate.
Increased by 7% off cave increased by 9% and overseas I was flat broke <unk> increased by 7% all year over year Arby's arms.
Yes.
No we won't move out to be first quarter performance across our individual business lines Archie revenue driver too tall, Oh subjects after school tutoring business.
Chief you'll be your revenue growth of 35% <unk> U.S. dollar terms or 40% RMB terms.
To provide brick Dalton walls, you'll kind of Middle School High school subjects absolute schoolchildren business reported revenue increased 33% in dollar terms or 38% Yami terms for the quarter.
See enrollments grew apart smelly, 65%, you'll be or for the quarter.
Pop Kids program delivered outstanding results with revenue up about 38% in dollar terms or 44% army terms for the quarter.
Enrollments was off about 70%.
For the quarter.
Oh slabs business recorded revenue increased 5% in dollar terms or 10%, yeah I'll be terms <unk> [noise].
[noise] or consulting business.
Record of the revenue growth of about 23% in dollar terms or 28%, Yeah Army terms year over year for the quarter.
Finally, we actually personal lives classes business recorded the rest of world of above my 10% year over year in dollar terms or 24% CRB, it's obviously year over year for the quarter.
Next I'll provide some updates on the progress were making with our optimized market strategy in terms of offline expansion as mentioned earlier this quarter, we audits and that's a set of learning centers.
In existing cities altogether, the increased the total square meter solved the class my area.
I've approximately 24% year over year every person quarter over quarter by the end of this quarter.
Or duties from model.
That's being pulled them successful because being introduced into a pop kids program in 46 existing cities and you can pull them, it's 30 exceeding cities and for both for one in southern new cities for the deepening our market penetration in both markets web tapped into it.
Model also supported before very important no customer retention and scalability able to know model.
Well this pullback resulting in mind.
We will continue this clarity in the coming water.
On the digital technologies.
We've asked it $30 million in fourth quarter.
<unk> for them and 10 or online merge off line some of the last classroom teaching system.
Most of all the last month.
Well good quarter to energy and expenses.
But people are we will like to highlight the implementation of our digital instructive course wonderful pop kids program in some major cities.
The digitally enabled of courseware stresses and centralized our teaching and learning quality.
Both the approximately sufficiency and deliver improved student experience and satisfaction.
We've also means higher thickness of our enrollment student customers. Furthermore.
Also made stable for was immaterial on core dotcom business line and other supplementary ally educational products.
Which is experiencing growing market demands.
More resources are lasted into the executing it just seems oh.
Oh I kicked off after school tutoring business in fiscal year to about 20.
The last month includes constant developments futures recruiting and training sales marketing R&D. Another lessons recall census to drive the Bulls off Neal pure online programs.
This programs, we're able to reach more since you launched you'll see a instructive scalable manner.
We believe this will help cooler dot com to gain market share all education area and thrown off topline goals.
Now let me work go through with other key financial details for the first quarter.
Oh switching costs expenses for the quarter were $825.6 million, we're presenting a 17.9% English the over a year.
non-GAAP operating costs and expenses for the quarter, which excludes share based compensation expenses were 814.6.
Men and dollars represented 18.7% Krissy, you'll do you.
Possible rather than the increased by 19.8% you'll be or one of the $40.2 million, primarily due to increasing teachers compensation for teaching hours and rental costs for the increased number of school some learning centers the operation.
Selling marketing expenses increased by only 1.9% year over year to one with them and $1.2 million.
General and administrative expenses for the quarter increased by 21.6% year over year to try to $84.2 million.
Gotcha, no doubt DNA expenses, which exclude share based compensation expenses were $273.5 million, representing a 24.5 for sense you can Christy we are.
Total share based compensation expenses, which were allocated to relates.
<unk> expenses decreased by 20.8%.
To $11 million into first quarter.
Hello flights.
Oh 15 car.
We're pleased with a $46.2 million.
We're presenting on a 52.6% increase year over year.
non-GAAP income from operations for the quarter.
Was $257.2 million, representing a 46.8% newquist year over year operating margin for the quarter was 23.0% compared to 88, 10, I'm sorry compared to 18.8% in September .
Over the prior fiscal year, non-GAAP operating margin, which exclude share based compensation expenses for the quarter was 24% compared to 20.4% Centro prior fiscal year.
Net income attributable to new Oriental for the quarter was $209.0 million, which we're subject 69.6% Inglis from the same Pos prior fiscal year.
Basic and diluted earnings per Mcf attributable to new Oriental were 1.3, $2 and the 1.3 $1 with.
Respectfully.
non-GAAP net income attributable to New York Oriental for the quarter was $230.2 million, representing a 25.0% inquiries from the central or prior fiscal year.
non-GAAP basic and diluted earnings per Ats attributable to new Oriental were 1.45 dollar and 1.4 $4 respectively.
That's a leading cash flow for the first quarter of 220, well talk to nearly three on the $64.6 million.
Capital expenditures for the quarter.
Were $64.3 million, which were primarily attributable opening of 43 facilities and when the missions of existing learning centers.
Turning to the balance sheets.
So all those 31st the two on 19.
Oriental had cash cash equivalent of 900 and.
And $73.2 million. In addition, the company has $351.6 million interim deposit and to log in and $10.7 million. This short term you must sense. That's so August August 31st to London actions.
Your new orientals deferred revenue balance, which is cash platform graduate students full courses and the rest cannot proportionally as revenue I studies structures delivered.
I'll handle the first quarter fiscal year blown 20.
1000 $330.7 million.
In personal 16%, that's the compared to 1001 with a $46.7 million of end up the first quarter fiscal year collection.
For more favourable increase was due to a change of the two you shouldn't see collection schedule for K 12 business.
Compliant with the latest the regulatory requirements.
This challenge was implemented during the second quarter fiscal year 2019.
Before moving onto our property for the second quarter I would like to take a moment to reiterate our broader goals and our optimized market strategy.
First.
We will continue to focus our expansion of our offline this thing.
Aimed at around 20% of capacity you physically or 20.
Which includes new learning centers and Green coffee.
Earlier for.
Suddenly for learning centers for kids 12 distance Manley.
This one will continue to roll out or dual teacher model schools to a number of new build your city in certain carbons.
For the whole year.
Segment will continue to leverage Oh, you've asked mentioned the digital technologies, France, extending a new features of our OEM all system to more off let alone were trending on test prep offerings, especially for K 12 children Oversea test prep she business.
Well continue to make such investments and we believe that's the total spending upsell absolute dollar terms in fiscal year, two on 20, well inputs moderately compared with the playwear fiscal year.
Furthermore, we will also continue as we love to yen and execute new initiatives, including product content development teams recruiting training R&D as well as sales marketing L. pure all I could route.
Two phone business.
Our pool it all comes out for others point I would like to reiterates that wouldn't leaves the strong growth in our offline business will offset the all new investments he expenses all our bottom line.
Third our top priority will remain as the focused on optimizing the utilization on facilities and controlling costs and expenses across the organization to drive continued margin expansion and the interest of Attritional deficiencies.
The new facilities between fiscal year 2018, and to one night Ching are being ramped up that's a more efficient level, we expect our non-GAAP operating margin of the ultimate alone. We're trying to test foot club business to continue to expense in the rest over the fiscal year until I'm 20.
With a strong operating leverage of consistently improved utilization rates are above the offline business walls wont be able to cover the margin pressure from our all investment.
On the whole.
We expect our overall non-GAAP operating margin to improve year over year in fiscal year, two on 20 comparatively the year over year decline loves to for four years, reflecting our healthy strong growth trends.
Finally, the recent RMB depreciation against the U.S. dollars well also impacts our earnings in dollar terms for the first quarter of two buttons.
Tony.
And then second quarter of the pulled up 20.
Again, I like to emphasize the fundamentals of our business remains strong I still believe.
Optimized market strategy being the focus I folate, we're confident that the new Oriental we're continuing to capture a subset dependable growth opportunities in the market.
The live or long term value for our shareholders.
Looking out of the near term and our expectations for the next quarter. We expect total net revenues in the second quarter of physical you're told on 22 women rental.
$153.6 million to $771.0 million, representing a year over year gross in the run dropped 26% to 29% in dollar terms.
The project for Bros. Write off rumley, our functional currency RMB and expect to be in the rendell, 30% to 33% for the second quarter fiscal year called on 20.
They essentially it used to calculate expects the revenue for the second quarter fiscal year two of them 27.11.
Historically accentuates used to calculate revenues for the second quarter or physical your 2019 was 6.90.
I love to mention that this pick Patsy trends reflect New York, New orientals, calling them pretty minimal deal, which is subject to change.
At this point I will take precedence with CZ operator, please open the call. This.
The question and answer session. If this conference call will start in them.
In order to be fair to all callers, who wish to ask question.
One question at a time from each caller.
If you have more than one question. Please request to join the question Keith again after your first question distress.
If you wish to off your question. Please press star one on your telephone now.
As we usually forgetting to be announced if you wish to cancel your question. Please press the pound or how sticky.
[noise]. Your first question comes from the line of Mark <unk> from Citi. Please ask your question.
Hi management congratulations for the very strong results. My question is I think the non-GAAP operating margin a 350 Bips is very back with a price do you have any analysis for the brick style off lease up.
Because they've got quite a bit higher than the previous guidance. Thanks.
Okay, Yeah, the our non-GAAP all through the margin or rose by 360.
This pool in the you'll be or is this quarter I think it is a much better than we expected Oh, we months ago and I mean, the all I'll I'll ask first keep a healthy balance between the capacity expansion of and the operating efficiency hi have paid off in leases in this quarter and I think there were.
We have in the the first line. If you know you <unk> you have seen strong utilization rate.
In this quarter, because you know our expansion plan I like fashion a capacity this year this quarter as only <unk> percent quarter over quarter, but if we got the army's from we've got a the 29.7% or revenue flows and number two as you know we only half the cost.
Control or whether you need a company.
And number three lots of money as seasonal we have to be a one off summer promotion swipe cost because we live supply from 20 that Ah report on average lot. The EUR 400 RMB. This here. So it's a healthy odd the marketing spend show and I think the from the other one off the coffee so.
Summer promotion, a positive impact will be somewhere around London based point and solving all the others Ali.
Comes from the operating leverage and high utilization rates.
And ER and yeah keep going forward I think we within the the rest of the this fiscal year. We're confident that we will have the margin expansion in the rest the or because you know as I said guided.
The I, usually lapa earnings call I'll expansion plan. This year is somewhere around 20%, but you know our topline growth for the whole year will be 30%. Your world. So we believe we'll have the more leverage on the rental side and to end the SGN Janney side as well.
Thanks Mark.
Thanks, So may I understand if the first reason, it's epocrates and the second and bigger than the third <unk> sequence for the help.
Oh, yes.
Yes, so yeah I suppose on the the I'd be a the major wasn't man or the or see margin driver. It comes from the better utilization rate and the operational efficiency.
Okay. Thank you.
Thanks Mark.
Once again in order to be fair to all callers, who wish to ask questions. We will take one question. It a time from each caller.
Your next question comes from the line of young Dal from Sea ice easy. Please ask your question.
Oh, Hey, all people took effect so no change a quick question, Okay Trups that.
For the whole year.
Color on your margin guidance and well basically on will all signed long long hope you all.
The margin hanging wall I don't hold.
Oh, Wow, JP Morgan or maybe you can quantify.
I'll be Uh huh.
Okay I forgot it you know what are you going on this quarter. When we go to the birdie good results of the murdering essentially a a three on a 60 basis points margin expansion. This water level whole year. Yeah. We you wouldn't believe we'll have the margin expansion and the rest of the year Adam and.
Yeah.
Most of the RV market, especially in comes from the are the offline business, especially for the kids, while business and yet the I. I think the ally a part of the all I'm a site in steel dry Ah, but even though I think the black will be offset by the on the offline business smart expansion I don't have that detail numbers because you know we just.
Happy one quarter path, but it's a whole year as a whole I saw the company has a whole the whole margin will be extended in the fiscal year plenty.
<unk>.
Okay. Thanks.
Your next question comes from the line of genius.
Well its Newsweek research. Please ask your question.
Hey, good evening, everyone. Thanks for taking my question Steven I think you mentioned on their prepared remarks that on a teaching our basis that pricing was up 5% if I heard that correctly I guess, what the rest of the or how should we expect that should we with the utilization continued to ramp in demand environment being strong should we see that number accelerate throughout the year.
Thanks.
[noise] yeah.
The the price question first.
I think you don't be a hourly rates or be a already rates basis and all the overall the applies for this quarter.
Was a increased by five 5% army terms and Oh, so within that 7% off the you can't business. They cross English life or sense of the pop kids persons pricing, Chris and going forward I think when all the change our pricing strategy. So I in the rest of the.
This fiscal year, the price increase for the whole business overall will be 5% to 10% or RMB terms year over year and yeah. We do we have seen more leverage.
I'll just elaborate awful the first quarter and ER and we do believe.
We'll see more leverage a in the rest of the year as John Yeah, I think that idea on my answer to the to the first of Hudson.
We don't believe I will see more leverage in the rest of the year and job, but ER and yeah, Yes, I think that I want to give the diesel guidance for the awfully Martinez for Q2, and the rest of year, but we believe we'll have the market expansion the I'd be off site.
Great. Thank you Jim.
Thanks.
Your next question comes from the line of Shang Chung from Morgan Stanley . Please ask your question.
Oh. Thank you for taking my question I want to I'll have more color fuel imagine kindness, Oh about the operating expense I think Steve can you mentioned that data in infants quoted the DRAM most of whom the team and the products so much any cost TCEP.
A singular Wow this assessment of TV snow. So if we look ahead a fee income even though in the coming through in the next summer.
Stephen do you expect more spend beyond Oh, the ourself marquee team.
Cool nights, so that's more ready and yeah. So indeed quite yet so what fuel a guidance outlook fiasco.
Well self marketing Sandy.
Second half of Tcs.
Thank you.
Yeah, no this quarter, it or southern Oregon as fast as a interest only by a 1% in dollar terms he'll be here and so this is our the strategy a you know a a regional ups that you know a within the core I think we continue as we lap.
The more resources for money on the product and the teacher recruitment and training and the tons of development.
Well skin market and but you know we are we will spend the reasonable marketing expenses within cooler and platform a you know reasonable way.
And what we want to use the burning money way to acquire still get students actually dipped in the offline business.
Also for a quarter or the other half fall off line business. Yeah, I think do you ever if I'm not for remember clearly last quarter, our selling marketing expenses.
During the Inglis a lot. So all I don't believe Oh, we will have more leverage on the southern Martin side going forward.
And ER.
Yeah, that's my answer and ER and also we.
Yes.
Oh, I can still be edge DNA and of course that like the rentals. We do have the more leverage going forward. That's why did and they said American side yeah.
Thank you.
Extrusions.
Your next question comes from the minus Beanie Wong from HSBC. Please ask your question.
I can look I hate definite even a management. Thank you for taking my questions. So my question is actually on the I'll close in the top tier cities. So we see that there's also in has a competition right. So how do you see that the trend in terms of your market share Keith in those types teeth tier cities and also if you look at <unk>.
The next quarter, well I'll walk right a excluding the efficacy patches actually is still quite strong. So can you help us to understand how much of that districts in my my.
Enrollment growth and then how do you see that the tranquil <unk> and also could listen I kind of like you know update attempts I go fishing on your online education strategy has not thank you.
Okay.
I can assure what people are one number the top 10 cities. They love the trailing 12 month or the rather was 14 toxicities.
<unk> was 36% I'd be in terms of year over year and I think we were seeing the good trend actually were seeing these revenue acceleration in all those almost overseas. So go back to catch up all the guidance and for the Q2 when can we get the Guy Bebe Guy.
As of the Taliban blows up by about 30% to public reports on the RV some year over year roles and within it I'm most of the Bulls will come from the UK ball business for U can Middle School High School I think it with the of girls in as a second quarter won't be 45% plus.
We are in the second quarter and we'll talk if there are the gross will be somewhere around 50%, 50% five zero percent deal year and oversea test prep.
Business wells will be somewhere around 10%. So it looks like a liver disease BBP total or the overall growth will be somewhere around a fairly easily persons.
And so what.
The real name the key driver guard revenue growth yes.
The question, Chris will be somewhere.
Between 5% to 10%.
Most of the girls comes from the go comes from the Opdivo enrollment balls and so I don't believe a you know the retention rate off the after the summer promotion was 59% from the summer promotion and ER and the is is 5% higher than the number of loftier. So would you be.
The most of most of these still Dennis will stay with us for at least one year, we hopefully fleet for six years. So it will help the movements wells that's Uh huh.
Thank you.
Okay. Thank you so much very clean Air Act.
Thank you.
Your next question comes from the line that's absolutely.
Please ask your question.
Hi, a thanks, Steven Thanks for taking my questions are very strong quarter two quick questions first.
I think you got it around the 20% full year fiscal year capacity growth well I think this quarter, you're doing plus 4% you're on your buses that implies some kind of a deceleration.
Into the second half this fiscal year and second I think we just passed through a very a fears of strip of competition.
Summer for a lot.
I'm just wondering whether there's an aggressive promotions has an impact that arent himself on business anyway. Thank you.
Okay. The capacity has oh, yes, if you know we have this seasonality or off the expansion of quarter like quarters, Oh, It's just that if we go back to the lost to your the extension you don't we set up most of the learning centers in set up.
The second half of the fiscal year. So this year, where we use the same strategy at all and so we as its back loaded within the same fiscal year and the reason.
That we opened more rather than those in the second a couple of years, it's because we prepare for the coming you summer Pat and so we don't change the guidance will be expansion plan, a I see your 20% expansion plan for the whole yet.
I love it.
And to.
The the.
Companies. It's a great question I think the you know.
Firstly.
The market, so huge even though where they were one of the market leader, but you know our offline business the murky shares only 2% somewhere around 2%. So the CE Mark is huge enough.
And so far we haven't seen any negative impact from the our recent aggressive online education competition and in fact, we are wary <unk> revenue acceleration runway.
In the offline business side, you know, even though we have seen some players to spend lost all the online education on the marketing or something like expensive, but the key issue. We after we were surprised with double pricing, but someone for most of what's still got the 820 felt.
Since enrollments, which is 8%.
The inquest compared to last year, and then whichever is higher than we expected to be night person. It's good results and the our strategy, it's weak higher more we care, both offline business and all and just in schools and so that means.
We will have to rules engine offline and online. So the all I guess I suppose that we are we're still in process will be a investment pure what do you spend more money and time on the R&D and product development and future strain, we're stuck screening and ER and so.
Oh, I, so part of the rentals future, but we won't do but you know Ali I'll hand, the offline bins business, I think where green good for the outlet business. Okay. So.
We have true rules engine.
In future.
Okay. Thank you.
Once again in order to be fair to all callers, who wish to ask questions. We will take one question at a time from each caller. If you have more than one question. Please request to joined a question can you again. After your first question has been a chance.
Your next question comes from the line of the on home from Th capital. Please ask your question [noise].
She's feeling that congratulation on a good quarter actually the crushing issue related to you I I'm flying to teach her mouth, though so what I you know if youd email expand into school by school or will be somewhat somehow snow wear and tear it's actually if you do.
They do teacher, and kinda actually extend and great pets. The gross so I wonder if youre future plans, how many at the expansion will come from that due to Ah expansion and also do teacher, how much you know each.
Contribute to that market expansion. So that's the question. Thank you.
[noise] I guess, a great question before they do get her model.
After the duties for model.
<unk> 46 existing cities for the pocket and 30 cities for you'll kind of business and the is settled here seats for for both pop kids. So you can business.
And so we're happy to see they increased market penetration in the low tier Gillis both markets low tier cities. So we plan to open a 10 to 15 war new cities business with the duties are model, Okay. In Mexico, 12 month, and Oh, Yeah. The why don't you Trokendi phase two so many filled out the other thing.
In time compared with the offline business.
Lastly, as part of all these computer model should be higher on the offline business so going forward.
We I think the duties model business will help the margin.
The expansion for the whole company.
Thank you asked the question.
Yeah.
Your next question comes from the line of Louisiana.
From Bank of America Merrill Lynch. Please ask your question.
Oh, Hi, Stephen Thanks for taking my question.
You just mentioned that you missed second quarter, you can is about to deliver 45% Pos growth with kids delivering 15%.
The growth rate is accelerating from the first quarter. So my understanding is that the better than expected retention rate them from a promotion my had something to do with the acceleration.
My understanding correct.
Yes, because <unk> number was we had adverse ball the retention rates from the opposite of summer promotion. This number why was that number two or so we have seen the <unk> of the student retention rates for the normal classes. Both you can pop kids are are driving off so at testified beep.
The we that's new Oriental is providing better.
Service and parts to the customers students customers. So they are better he loved by their the ER, the sooner retention rates and ER and the on the higher because it isn't right from the summer promotion and lastly, you know we will them more learning centers.
In India and into one to two and also where rep ramping up the the learning sometimes we set up the last two years. So that means we will feel more so the students into the current learning centers.
How about two to collect the revenue acceleration into true.
Let me work.
Thank you ma'am please.
The retention rate for normal class, a this quarter and how is that comparing to the previous quarter.
Okay, B B U can middle School High school business, the ER, the Iwear attrition rates.
In a in this quarter as close to 80% and pop kids, it's close close to 90% through its interests sold compared to last a year a week, regardless of 3% to 5% a higher right.
Sure.
Okay. Thank you very much.
Thanks.
<unk>.
Your next question comes from the line as Christine Cho of Goldman Sachs. Please ask your question.
I think you congratulations on Stephen TCH, but one question so seems like a even pretty mature cities like Beijing itself to a very good start this year what are some key drivers behind this acceleration. Thank you.
Well I think yeah we.
For the Star only a for Beijing School did very good results, but also for the Oh, so far be it the other big cities and ER I think you know odd things. The this is a a lost already you know we we were starting three left on the new products things US we are three four years ago and.
So this we will start we start to bear foods off the Beast historical investments and also we used to be new the are you revamped pop kids program.
Product compared to before it's more instructive more adopted for that for Kip Sobi, the kids and their parents love the new products than we expected. So it helps us to have gotten better a student retention rates and ER so anyway.
Believes the Big City, you and with a high base number wouldn't believe the kind of got like healthy.
Growth in the future going forward.
Thanks, Andrew Kristen.
Thanks.
Your next question comes from the line I feel like fees from you'd be athlete ask your question.
Hello, Steven Fisher, congratulations on the almost around quarter end. Thanks for taking my question.
I think you mentioned that the biggest read them for the.
Margin expansion. This quarter is the utilization improvement. So may I know what is the current his ization level and how much upside do we expect it going forward.
Thank you very much.
Hard to utilize overall utilization is 21%.
And to 2% improvement when compared with asking here.
So the key driver is a U can and pop kids Cantwell goodness.
So the learning centers are ramping up a faster than before and you live nation not improved.
Thank you and going forward going forward I think we well I think we will see higher utilization rates in the rest of the year. Because you can it is having a simple math you know your king I suggest that Youre your guys compared the topline growth with the expansion plans so that.
As we feel more students into be the existing learning centers. This is the math okay.
Great. Thank you very much.
Your next question comes from the line of allocation from Credit Suisse. Please ask your question.
Hi management think of it taking my questions.
So I've asked about a if we.
Through the impacts from a the regulation changes into should be collection, what will be the.
Student enrollment growth for you can help Keith Thank you.
For this quarter.
The for the Kids Love business, if you will take all the the or the impact of the regulation I think the enrollment was for a 40 for the UK for the you kind of Hopkins together will be somewhere around 30, 30%, who pretty buffers on this is the real enrollment growth okay.
Okay. Thank you.
Okay. Thanks.
Your next question comes from the line told me Wong from China merchants. Please ask your question.
Hi, Thank you.
My question.
You mentioned a lot of both the success in the retention rate increase and this year. He can share with somewhat of an ex those who maybe strategies or other learning center level or what kind of efforts if the teacher made or any kind of special programs that you know led to such a good result, maybe just a little bit of anecdotal evidence.
Thank you.
Yeah, I actually if our progress side, we keep rolling out our online offline.
First a standardized teaching system to the whole network and also we.
That's it money and also our teacher resources to refine that standardized products for example, like pop kids right. This year from this summer we I rode out our new courseware to make the class more interactive and also I is very very important.
Feet, new feature out the new courseware is that our teachers can save a lot of time and teaching quality can be improved because it's more and more standardized teaching process and also by interactive features a new features a students are more interested in in the class and also the effectiveness.
And stickiness out the customer are also improved and it's shown by the numbers in those cities are using the new product. So that's why didn't you feature often hold a standardized that system.
Going forward, we'll keep investing in having one more new features new new service is a better services to our customers. So that's why I key driver and also like teachers.
Get their service quality, our Oh still got improved and we are training process for teachers are getting more and more standardized the because the product. It's a standardized so for example, like starting from last year last summer.
We train our you can't teachers, using the new merger right.
System to train our teachers, the especially new teachers to how are those teachers to a improved that teaching quality in short paired off time and also the a teaching overall teaching quality got improved a lot. So that's a the benefit that we can get from odd to standardize nation Oh.
Teaching product.
Okay thing about that we raised the price we doubled the price of this summer promotions this year.
But we still got to 8% you woman false Oh, yeah from the 12 to RMB per quarter true this year for it.
RMB per course yellow front is that something that's as some money. So I think it would be the study for us as a is better for us to identify who are real customers and also how we do believe we were providing better quality service and product to be.
Customer.
A student.
Okay. Thanks, and congrats on the strong results. Thank you are thinking.
Thank you very much.
We are now approaching the end of the conference call I will now turn the call over 10, New Orientals, Yes, Stephen Yang for his closing remarks [noise].
[noise]. Thank you all again for joining US today, you will have any further questions. Please to know how to get to contact me, where any of our Investor Relations Representatives. Thank you.
[noise], ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.