Q1 2024 New Oriental Education & Technology Group Inc Earnings Call
Okay.
Good evening and thank you for standing by for New Orientals fiscal year 'twenty 'twenty four first quarter results earnings conference call. At this time all participants are in a listen only mode. After management's prepared remarks there'll be a question and answer session. Today's conference is being recorded.
If you have any objections you may disconnect at this time I would now like to turn the meeting over to your host today.
Mr. Zhao please.
Thank you.
Hello, everyone and welcome to New Orientals first fiscal quarter 2024 earnings conference call. Our financial results for the period were released earlier today and are available on the company's website as well as on Newswire services today, Steven Young executive President and Chief Financial Officer, and I will share.
Rentals latest earnings results and business updates in detail with you after that Stephen and I will be available to answer your questions. 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 of 1995 for a look.
Statements involve inherent risks and uncertainties.
As such our results may be materially different from the view expressed today a number of potential risks and uncertainties are outlined in our public filings with the SEC New Oriental does not undertake any obligation to update any forward looking statements, except as required under applicable law. As a reminder, this conference is being recorded.
Addition, a webcast of this conference call will be available on new Orientals Investor Relations website at Investor Day, Oriental Dot Org, Oh now I'll first turn the call over to Mr. Yao. Please go ahead.
Thank you Susie Hello, everyone and thank you for joining us on the call.
Oh, great pleasure to announce the new Oriental has vintage of your car.
You can start of fiscal year, 2024, but delivering a set of robust financial results. This quarter with topline performance, beating the high end of our expectations. Following a tireless year of trial and developments, our multi pronged business lives have pivoted toward.
First a stable recovery and anchored fruitful yields.
Mainly benefiting from the strong post COVID-19 recovery of demand.
Consumption and traveling while our new business has begun making meaningful contributions to the company's revenue, thereby invigorates growth and margin expansion.
Our bottom line performance has also achieved a promising gross or operating margin and non-GAAP operating margin, reaching 18, 6% and 22, 3% restructured maybe for this quarter.
Picturing, a solid resilience across our business lines. Thanks to our ongoing efforts in brushing up on operational efficiency and cost control.
Delegates plans of our restructured business model better utilize resources and streamline the cost structure have sharpens, our capability to yield a better than expected margins in this fiscal quarter as well as enlivens already exploration and in genius ventures.
Coupled with the company's symbol profitability resilient business lives and the emerging new initiatives will have firm conviction and maintaining a healthy growth.
Our market share and creating sustainable value for our customers and shareholders in the long term.
Now I would like to spend some time to talk about the quarters.
Formats across our remaining business lines and new initiatives to you in detail.
Our key Romanian business secured a promising trends coupled with the positive momentum in our new initiatives breaking it down the oversea test prep business recorded a revenue increase of 52% in dollar terms or 62% in RMB terms year over year for the fiscal quarter.
<unk> of July 24.
The overseas study consulting business recorded a revenue increase of about 27% in dollar terms or 35% in RMB terms year over year for this quarter.
I don't see University students business recorded a revenue increase of 26% in dollar terms were at 34% in RMB terms year over year for this quarter.
As mentioned in the past quarters, we have lost several new initiatives, which mostly red Wolf ranch facilitating students all around developments I'm pleased to share that these initiatives have continued to exceed our expectations about yielding consistent gross and the meaningful a meaningful profits to the company.
Yes.
Firstly did not dynamic children business, which would have offers you know around the six key existing cities focus on cultivating still dance you nobody facility and a comprehensive quality, we're happy to see increased penetration in those markets, we have tapped into especially in higher tier cities with a.
Approximately 438 solvent student enrollment recorded in this physical quarter.
Top 10 cities in China contribute over 60% of the revenue of this business.
The intelligence learning system and device business.
Service designed to provide tailored digital learning experience for students.
Has it been adopt run six to 60 cities.
We're thrilled.
To see improved customer retention and scalability of this new business with approximately 181.
It's all of them active paid users reported in this quarter.
The revenue contribution of this initiative from the top 10 cities in China, it's around the 60%.
Our smart education business educational materials and utilize the smart study solutions.
Have continue to contribute material results.
So the overall advanced.
Vast amounts of the company.
In summary, our new education business initiatives reported a revenue increase of 103% in dollar terms or 117% increase in RMB terms year over year for the first quarter of 2024.
In addition, beginning in this.
Our fiscal year, we're pleased to announce a newly integrated business line, which will be.
Comprised of all.
All of our tourism business targeting diverse age groups. This includes our wild grounded study tour and researched cabs business for students of K 12, and University agents as well as our newly established tourism business. That's mainly serves middle age has seen their audience.
Upon consolidation this tourism related business line will utilize new Oriental stress of knowledge sharing star teachers, and reputable branding to visualize our capability of serving customers for all age groups.
It's Mike.
It's our great pleasure to share the performance of new business line in detail.
Our study tour and research can business initiative that aims to offerings students of K 12, and University agents the opportunity to utilize their free time to broaden to sculpt knowledge and cultivated subject interest has achieved encouraging growth in this summer.
Thanks to the strong pulse Colby to recover rail demand.
Resumes of conception and traveling we have conducted studies study tour and the research camps, you over 50 cities across the country with the top 10 cities in China.
Offering over 65% of the revenue share of this.
New initiatives.
Finally, we expect from new business to contribute meaningful revenue in this fiscal year.
Yes addition to success of our study tour and the research camp offerings would also began venturing into the tourism business to expand our reach to all age groups, including the middle aged and elderly individuals.
During this fiscal quarter with pilot a number of top quality tourism offerings in future to provinces, including Georgia, So twine, Shanxi Gansu and whatnot.
And the word sincerely grateful for the increasing traction that this normal adventures have gains.
That's why we're still at a very preliminary stage of planning has the filing and then finally evaluating the visibility of this business in selected districts. We will keep you posted it should there be a timely updates on this new mortgage.
With regard to our old Atmos system.
Persist in random revamping our platform.
Leveraged our educational infrastructure and technology edge.
Our remaining key business and new business with a mission to provide advanced.
Diversified educational service to customers of all ages.
This reporting periods, a total of $45 $6 million has been invested in our O&M, all teaching platform, which equips us.
With the flexibility to maintain top notch service to students during the pandemic.
Sure. These reporting periods is the bi has embraced our multi platform strategy throughout all facial debut on new platforms, including cobalt and its own app.
Yeah, well there are two enlarged customer base and amplify is brown inflows.
Each by you used to buy consistently adhere to developing its private label products. That's our healthy tasty high quality with good value for money and that has a chance instrumental breakthroughs with screams of dual product rollouts each months.
From <unk> to daily necessities, if the bias lapsed streaming E. Commerce has not only helped our customers Rick good bargains, but also helps farmers producers and local enterprise sell their products through strategic marketing strategies.
In addition, the brand continue to drawing hands with local governments to promote unique agriculture products from region to region nurturing public appreciation to worse diverse cultures through inventive content.
It also pioneered a new mode of lapsed screaming that's incorporated.
What the product traceability.
<unk> our lead teams would urge the reasons of our private label products factories and ulcers.
Our livestreams, absolutely or by offered assurance to the customers.
Ooh guarantee and products authenticity and visibility.
With regard to the company's latest financial position and confidence to share with you that the company is in a healthy financial status with cash and cash equivalents term deposits and short term investments totaling approximately four point.
6 billion.
<unk> four.
$4 6 billion.
On July 26, 2022, the company's board of directors authorized a share repurchase of up to $5 million. Some of the company where common shares during the periods from two launch July 20th.
In 2022 through May 31 to 23, the company's board of directors further of authorized the company to extend its share repurchase program launched in July.
So what I'm trying to buy 12 months through May 31, 2024 as of October 24th 2023, the company repurchased an aggregate of approximately $6 million for approximately 193 $3 million from the open market and this program.
Now I will turn the call over to <unk> to share with you about the key financials. Please go ahead.
Now I'd like to walk you through the other key financial details for this call their operating costs and expenses for the quarter were $894 $9 million, representing a 34, 2% increase year over year non-GAAP operating costs and expenses for the quarter, which excludes share based compensation expenses were 800.
$55 3 million, representing a 32% increase year over year. The increase is primarily due to the holiday expenses related to the substantial growth in is to buy private label products and lifestream ecommerce business.
Cost of revenue increased by 41, 4% year over year to $441 2 million selling and marketing expenses increased by 37, 9% year over year to $136 1 million G&A expenses for the quarter increased by 24% year over year to 300.
$17 $6 million non-GAAP, G&A expenses, which excludes share based compensation expenses were $293 million, representing a 22, 3% increase year over year total share based compensation expenses, which works allocated to related operating costs and expenses increased by one.
8% to $39 6 million in the first quarter.
Up to that 24 operating income was $205 1 million, representing a 163% increase year over year non-GAAP income from operations for the quarter was $244 $8 million.
Representing a 152, 2% increase year over year net income attributable to new Oriental for the quarter was $165 $4 million, representing a 156% increase year over year.
Basic and diluted net income per ads attributable to new Oriental or $1.
And 99 cents respectively.
Net non-GAAP net income attributable to new Oriental for the quarter was $189 3 million, representing a 126, 2% increase year over year non-GAAP basic and diluted net income per ads attributable to new oriental or $1.
One $1 plan.
One dollar and <unk>.
And $1 13, respectively.
Net cash net cash flow generated from operations for the first fiscal quarter of 2024 was approximately 335 $8 million and capital expenditure for the quarter or $132 $5 million.
Turning to the balance sheet.
As of October 31, 2023, new Oriental had cash and cash equivalents of 1748 nine.
$9 million.
In addition, the company had $1399 $4 million in term deposits and 1423 $9 million in short term investments new orientals deferred revenue balance.
At the end of the fiscal first fiscal quarter of 2024 was 1400 and the one $4 million, an increase of 38, 4% as compared to $1012 $5 million.
At the end of the first fiscal quarter of last fiscal year now.
Hand over to Stephen to go through our outlook and guidance.
Okay.
Our confidence in parking a healthy journey of sustainable growth for the rest of this fiscal year building on the combination of our brand advantage.
<unk> Q3 influential teaching content and resources and solid foundation.
We're also committed to work diligently adhering to the latest guidance from the Chinese authorities on enhancing the nation's either patient level to strengthen its leading position to further unveil our potential all business lines and the credit and and.
And creative endeavors.
With regard with regards to the learning center in the classroom space, we plan to increase our capacity by about 15% to 20% by which a reasonable amount of new learning centers is expected to be opened while classroom areas of suddenly because if you're learning centers will be expanded.
<unk>.
Major cities most of the new openings will be launched in the Cds with better topline and Bottomline portfolio.
We'll keep monitoring the pace and scale of the new openings or according to the local operation and financial results in this fiscal year.
Despite the historical seasonality of some new orientals made our businesses, which will usually results.
Lower peer rates for every second quarter, we remain confident in sustaining a healthy growth across all business lines. In summary, we expect total net revenue in the second quarter of fiscal year 2024 to be in the range of.
$785.0 million to $804 $2 million, representing year over year increase in the range of 23% to 26% to.
To conclude we're confident achieving satisfactory operating profit level.
And improving our profitability in the rest of the physical year 2024.
As always new Oriental plays grit determination to cultivate new endeavors.
Endeavors and are bolstered our existing capabilities simultaneously well devotes reasonable resources on research and application of new technologies, such as AI and chat GPT into our educational product offerings with a vision to uplift our stress and pursue that.
Growth and operational efficiency in the future.
We will also continue to seek guidance from and the culprits with government authorities.
<unk> aligned with its efforts to comply with the relevant policies regulations and measures as well as to further adjust our business operations as required.
I must say that this expectations and forecast reflects our consideration of the latest regulatory matter as well as current and preliminary view, which is subject to change.
This is for the end of our fiscal year 2020 for Q1 summary at this point.
Like to open the floor for questions. Operator, please open the call for these thank you.
Thank you the question and answer of this conference will begin in a moment in order to be fair, all callers, who wish to ask a question. We will take one question at a time from each caller. If you have more than one question. Please rejoin the queue.
After your first question has been addressed to.
To ask a question you will need to press star one one on your telephone to withdraw your question. Please press star one again, please wait for your name to be announced please standby, while we compile the Q&A roster one moment for your first question. Please.
Okay.
Our first question comes from <unk>, Zhang with China Renaissance. Your line is now open.
Hey, Thank you could you have any management thanks for taking.
My question. So my question here about why you know.
November quarter revenue guidance.
Look at the Y O Y growth there was a big deceleration versus the August quarter.
As you walk through us Oaxaca driver behind that and probably you can also talk about what you know what the Hell do I say that goes to Archrock.
Of course definitely checkmark. Thank you yeah as for the revenue guidance for Q2.
Actually it's not.
The deceleration.
I want to emphasize the following points of the Q2 guidance Firstly as always we take a conservative approach.
Given the guidance of Q2.
Secondly, the exchange rates negatively impact the revenue growth guidance by by approximately three basis points.
Thirdly.
You know I think.
It's also needs to be noted that typically Q2 is our seasonally slow quarter for most of our education business.
With the lower than euro revenue and profit.
Given the strong.
Demand off the.
The growth momentum we have seen so far this year.
Quite a confidence that the whole year's revenue growth will be better than we originally expected, especially in last quarter.
Operator: Good evening, and thank you for standing by for new Oriental fiscal year, 2024, first quarter results earnings conference call. At this time, all participants are in a listen-only mode. As in management's prepared remarks, there will be a question and answer session.
And what would give the guidance on the top line growth and this quarter.
Well I think we gave the better.
The guidance were higher.
Operator: Today's conference is being recorded. If you have any objections, you may disconnect at this time.
Guidance and that is the last quarter, okay for the whole year.
And.
Sisi Zhao: I would now like to turn the meeting over to your host today, Mrs. Sisi Zhao. Please, thank you.
And lastly, you know is the buy will starts to have a higher base comparisons since Q2. This year and overall I think you know benefiting from the post COVID-19.
Sisi Zhao: Hello everyone, and welcome to New Oriental's first fiscal quarter, 2024, earnings conference call. Our financial results for the period were released earlier today, and available on the company's websites as well as newsware services.
Economy recovery, we have seen strong demands in education sector, especially in the overseas related business and not so good.
Sisi Zhao: Today, Stephen Yang, executive president and chief financial officer and I will share New Oriental's latest earnings results and visit updates in detail with you. After that, Stephen and I will be available to answer your questions.
We're in business.
<unk>.
Leveraging our brands are the advantage of new Oriental and the.
The good compounds in resources and.
Our long established the solid foundation I think we will continue to see great opportunity and to take more market share in the future. Thank you.
Sisi Zhao: Before we continue, please note that the discussion today will contain four looking statements, made under the safe hopper provisions of the U.S, private securities litigation reform act of 1995, four looking statements involved in terrorist and incidences. As such, our results may be materially different from the view expressed today. A number of potential risks and coincidences are outlined in our public findings with the SEC. New Oriental does not undertake any obligation to update any four looking statements, except as required under applicable law.
Thank you.
One moment for our next question.
Yeah.
Yes.
Our next question comes from the line of Felix Liu with UBS. Your line is now open.
Yeah.
Hi, Good evening management and thank you for taking my question and congratulations on the very strong first quarter results.
My question is on your capacity plan.
Operator: As a reminder, this conference has been recorded. In addition, a webcast of this conference call will be available on New Oriental's Investor Relations website at investor.NewRental.org.
I noticed that in this quarter your capacity.
Q and your learning center expansion accelerated from fourth quarter last year.
Sisi Zhao: I will now first turn the call over to Mr. Yang. Stephen, please go ahead. Thank you, CC.
Check your plan capacity plan from here do we expect this <unk> kiln on utilization pace to maintain throughout this year or are there any seasonality is with capacity expansions quarter by quarter and how do you see the current regulation landscape why regulation environment.
Stephen Yang: Hello, everyone, and thank you for joining us on the call. It's a great pleasure to announce the New Oriental has painted an encouraging start of fiscal year 2024, by delivering a set of robust financial results this quarter, with top-line performance beating the high end of our expectations. Following a terrorist year of 12 and development, our multi-pronged business alliance have pivoted towards a stable recovery and anchored fruitful use. Many benefiting from the strong post-COVID recovery of demand, conception, and traveling.
Capacity expansions. Thank you.
This quarter, we added 6% and new capacity in this quarter and you know as you know we will.
Increased our capacity expansion by about 15% to 20% for the for the whole year fiscal year 'twenty four and our society, we will open a reasonable amount of new learning centers, where new classroom areas in the in the top tier cities.
Stephen Yang: While our new businesses have begun making meaningful contributions to the company's revenue, thereby, evigorates growth and margin expansion. Our bottom-line performance has also achieved a promising growth. Our operating margin and non-gap operating margin reaching 18.6 percent and 22.3 percent respectively for this quarter. Depicting a solid resilience across our business lines, thanks to our ongoing efforts in brushing up on operational efficiency and cost control. To delegate the plans of our re-structured business model, better utilize resources and streamline cost structure, have sharpened our capability to yield better than in fact the margins in this physical quarter, as well as in life and our exploration and the ingenious venture.
With the good performance of the topline and bottom line and.
As I saw that you know the market.
The.
Demand.
And that sector is very strong that's why we've raised the guidance of the whole year of topline growth and the learning center expansion plan for the for the whole year as for the regulation side I think the so far so good.
And I think going forward, we expect the the.
Regulation.
Congratulations as well will be stabilized.
Yeah.
In future and.
And that's it and one more point I want to add.
I think <unk>.
For the for the Q2 to Q.
Q2, Q3 and Q4.
I think we will.
Stephen Yang: Coupled with the company's sustainable profitability, resilient business lines and emerging new initiatives will have firm conviction in maintaining a healthy growth of our market share and creating sustainable value for our customers and shareholders in the long term.
Following the guidance of the learning center expansion for the whole year of 15% to 20% and maybe in the Q4, you'll know when we look at the.
The budgets of physical <unk>, maybe it will raise the guidance for the learning center expansion plan again.
Stephen Yang: Now, I would like to spend some time to talk about the quarter's performance across our remaining business lines and new initiatives to you in detail. Our key remaining business secure, promising trends, coupled with the positive momentum in our new initiatives, breaking down the Overseas Test Prep business recorded the revenue increase of 52% in dollar terms or 62% in R&B terms COEA for the fiscal quarter of 2024. The Overseas Study Consulting Business recorded the revenue increase of about 27% in dollar terms or 35% in R&B terms COEA for this quarter.
In Q4, yeah. Thank you.
Okay very clear thank you.
One moment for our next question please.
Yes.
Our next question comes from the line of Lucy Yu with Banc of America Securities. Your line is now open.
Hi, Stephen this is Lucy.
A question on the margin. So this quarter, we have seen the op margin expanded unlock like Tony.
Well it is a pretty high level, even compared to our historical kind of op margin.
Thank you Juan so how could we be Colby <unk> margin expansion and how should we think about that margin expansion for the rest of it yes. Thank you.
Stephen Yang: The adults, the university students' business recorded the revenue increase of 26% in dollar terms or 34% in pressing R&B terms COEA for this quarter. As mentioned in the past quarters, we have launched several new initiatives which mostly revolve around facilitating students or R&B development and please to share that these initiatives have continued to exceed our expectations by using consistent growth and meaningful profits to the company. Firstly, the not-demic children business which we have offered in around 60 existing cities focused on cultivating students' innovative ability and comprehensive quality.
Thank you Lucy let us start with the this quarter margin analysis.
The GP margin op margin increased a lot.
In this quarter was mainly driven by the following reasons number one the utilization and improving of our learning centers and the teaching resources in Christie.
The learning center merger.
That means we have lower <unk>.
Fixed costs and expenses compared to that of last year.
And number two.
This margin is over 20%.
In this quarter.
Profit growth is faster than we expected two years ago.
It started the business two years ago.
And the recovery of the remaining business, especially in the overseas related business in China generally the higher margin in this quarter.
Stephen Yang: We are happy to see increased penetration in those markets we have tapped into, especially in higher tier cities with a total approximately 438,000 student enrollment recorded in this physical quarter. The top ten cities in China contribute over 60% of the revenue of this business. Secondly, the intelligence learning system and device business are service designed to provide the tailored digital learning experience for students, has been adopted around 60 cities where thrilled to see improved customer retention and scalability of this new business with approximately 181,000 active pay users reported in this quarter.
<unk> is higher than that.
It's definitely higher than that of last year and number three is to buy enjoys a higher margin and as we head into the fiscal year.
Fiscal year 'twenty.
<unk> thousand for Q2, I think it will operating leverage and higher utilization.
The remaining business lines and the new business Alliance will.
Generates the more profit.
To the group and so I think we are optimistic on margin expansion and sustainable.
Stability in Q2, and even the rest of the whole year.
I think what you know.
You know the whole team will continue to work together to seek profitable growth in fiscal year 'twenty four and I think we believe will create more value to the shareholders over the long run. Thank you Lucy.
Stephen Yang: The revenue contribution of this initiative from the top ten cities in China is around 60%. Most smart education business, educational materials and digitalized smart study solutions have continued to contribute material results to the overall advancements of the company. In summary, our new education business initiatives recorded the revenue increase of 103% in dollar terms or 17% increase in RB terms year over year for the first quarter of 2024.
Thank you.
One moment for our next question please.
Our next question comes from the line of D. S. Kim with J P. Morgan Your line is now open.
Hi, Steven Hiseq with evening.
Thanks for taking my question and by the way congrats on the quarter I think two.
$45 million of appeal as the second best level, only backward, which is pretty amazing.
Thanks anyway.
Stephen Yang: In addition, beginning in this fiscal year, we are pleased to announce a newly integrated business line which will be will be comprised of all our tourism related business, targeting diverse age groups. These include our wild grounded study tour and research camp business for students of K-12 and university ages, as well as our newly established tourism business that mainly serve middle-aged and senior audience. Upon consolidation, this tourism related business line will utilize new rental strengths of knowledge sharing, start teachers and reputable branding to visualize our capability in serving customers for all age groups.
Anyway I have.
Hey level question on our long term growth as Gaslog.
Yes, so we talked a lot of the other new businesses, which are completely different animal and can continue to grow triple digit I'm sure, but for all the businesses existing businesses like overseas study high schools, how shall we think about the sustainable growth from here I E. I mean <unk>.
<unk> revenues I think both of them are probably at backward novel, So it's no longer recovery phase and what's going to drive the growth further from here say, if you were to break out different levers like sentry expansions, we discussed 15% to 20% versus utilize each on growth how much further room can.
The drive here and the price hikes.
Stephen Yang: It's our great pleasure to share the performance of new business line detail. Our study tour and research camp business initiative that aims to offering students of K-12 and university ages the opportunity to utilize their free time to broaden the scope knowledge and cultivate the subject of interest has achieved the encouraging growth in this summer. Thanks to the strong post-COVID recovery of demand resumes consumption and traveling, we have conducted study tour and research camp in over 50 cities across the country.
And how shall we think about say next two to three years annual growth for the old businesses from here. Thank you.
You know I think for the for the existing business such as the Oversea test rats, oversea consulting and the adults N J D University students business.
So I think.
Our analysis the market like this on demand side, we have seen the strong demands for the overseas consulting business and for the college.
And on supply side, you'll know after the the Covance and the policy.
Stephen Yang: With the top 10 cities in China offering over 55% of the revenue share of this new initiative. We finally expect a new business to contribute minimal revenue in this fiscal year. In addition to success of our study tour and the research camp offerings, we also began venturing into the tourism business to expand our reach to all age groups, including the middle age and elderly individuals. During this physical quarter, we've paletteed a number of tough quality tourism offerings in featured provinces, including Zhuojiang, Sichuan, Shanxi, Gansu, and Huanan, and we're sincerely grateful for the increasing traction that these novel adventures have gained. As we are still at a very preliminary stage of planning, testifying and evaluating the availability of this business in selected districts, we will keep you posted. Should there be timely updates on this new voyage?
We have seen a lot of players disappear from the market. So that means we're facing less competition.
So I think I think the existing business, including the overseas related business and announced in college students business I think we will generate the top line growth very good.
The next two or three years, so we're quite optimistic about the topline growth and the margin expansion for the existing business.
And as for the utilization rates.
And for overall in this quarter, even more acute in Q1 to us.
The the high season of the educational products so in Q1.
Utilization rates in Q1.
We're around 65% so that means the two thirds and but I think we have a long way to go and you know as I sat in this fiscal year.
Stephen Yang: With regard to our OMO system, we have persisted in preventing our platform and leveraged our educational infrastructure and technology age on remaining key business and new business with a vision to provide advanced diversified education service to customers of all ages. During this reporting period, a total of $45.6 million has been invested in our OMO teaching platform, which equips us with the flexibility to maintain top notch service to students during the pandemic.
This fiscal year, we'll plan to open a few teams with 'twenty one.
Percent, new capacity, but our topline growth.
We would be that would be the guidance every quarter and then we'll raise the guidance of the whole year top line growth I think the the top line the healthy top line growth will cover.
<unk>.
The rental of something new capacity. So that means we don't have the operating leverage in your hands and going forward. I think we will see you will see more operating leverage for all business lines. It will be dropped the margin up.
Thank you Jess.
Stephen Yang: During this reporting period, East Dubai has embraced a multi-platform strategy through an official debut on new platforms, including Taobao and its own app. In order to enlarge its customer base and amplify its brand influence. Each buy, it is the buy consistently adhered to developing its private label products that are healthy, tasty, high quality, with good value for money, and has attained instrumental breakthroughs with streams of new products rolled out each month.
Thank you.
As a reminder to ask a question you will need to press star one on your telephone.
Again that star one wanted to ask a question.
Again to ask a question Thats Star one one.
We are now approaching the end of the conference I would now turn the call over to new Orientals Executive President and Chief Financial Officer, Stephen Yang for his closing remarks.
Again, thank you for joining us today, if you have any further questions. Please.
Stephen Yang: From groceries to daily necessities, if the buy's life streaming e-commerce has not only helped customers rip good bargains but also helped farmers, producers, and local enterprise sell their products through strategic marketing strategies. In addition, the brand continue to draw in hands with local government to promote unique agriculture products from region to region, nurturing public appreciation towards diverse cultures through inventive content. It also pioneered a new mode of life streaming that's incorporated with the product's disability by which our lead teams would unearth the regions of our private label products, factories, and acres. Our life streams have fear by, offered assurance to the customers through guaranteeing products authenticity and visibility.
Yes.
Oh.
Operator.
We'd probably have one more question from.
Alice.
Alright.
Okay. Thank you.
One moment for our next question.
Go ahead. Please answer the question from County, Wang with CIC. Your line is now open please.
Hi, Stephen this is Tony.
So congrats on very strong set of results also I just have a quick question our intelligent learning devices.
Does the active users this quarter had a quite impressive road like double Q on Q, that's actually what's driving such a strong brown and how quickly.
This business is evident.
Thank you.
Okay, Yeah, actually where there is a slide with our.
The development of the new initiatives, especially for these kind of targeting younger kids.
Stephen Yang: With regard to the company's latest financial position, I'm confident to share with you that the company is in a healthy financial status with cash and cash equivalent term deposits and short term investments totaling approximately 4.6 billion dollars, 4.6 billion dollars. On July 26th, 2022, the company's Board of Directors authorized the share repurchase of up to $200 million of the company ADS were common shares. During the period from July 28th, 2022, through May 31st, 2023, the company's Board of Directors further authorized the company to extend its share repurchase program launched in July 2022, by 12 months through May 31st, 2024. As of October 24th, 2023, the company repurchased an aggregate of approximately 6 million ADS for approximately $193.3 million from the open market energy program.
K 12 students new initiatives.
The new intelligent learning devices business last year, we rolled out in.
All of the cities and now we're seeing a huge amount.
The service is quite innovative in terms of the offering.
Using our ALDA.
All of the technologies that we accumulated in last several years that we have the cutting edge.
Technology and content as well and offering students a unique experience that.
Helps students.
It has their academic study ability I, especially self-study ability as well.
Actually the mountains in all kinds of cities high tier slow tiers are also are all very strong and.
We are confidence in these kind of user number increased improvements year over year and definitely we're also.
In the process of enhancing the quality of our products and services as well and so we'll make efforts in increasing the user number as well as enhancing.
Sisi Zhao: Now, I will turn the call over to Sisi to share with you about the key financials. Please go ahead.
<unk>.
Sisi Zhao: Now, I'd like to walk you through the other key financial details for this call-der. Operating calls and expenses for the call-der were $894.9 million, representing a 34.2% increase year over year. Non-gap operating calls and expenses for the call-der, which include share-based compensation expenses, or $85.3 million, representing a 32% increase year over year. The increases are primarily due to the call-day expenses related to the substantial growth in, is to buy, a private label, products, and a live streaming e-commerce business.
Tuition like this kind of subscribing fee renew a race as well and also we want to expand to more subjects for all the existing users. So.
In summary, actually the high demand.
Also the bat.
Our content and technology and all the service or the sub mental forward the development for these new initiatives.
And now we will try to continue to enhance the quality and try to maintain this kind of healthy growth for these new initiatives. Okay.
Sisi Zhao: Calls of revenue increased by 41.4% year over year, to $41.2 million, sending and marketing expenses increased by 37.9% year over year, to $136.1 million. DNA expenses for the call-der increased by 24% year over year, to $317.6 million. Non-gap DNA expenses, which include share-based compensation expenses, or $290.3 million, representing a 22.3% increase year over year. Total share-based compensation expenses, which works allocated to related operating calls and expenses, increased by 108% to $39.6 million in the first call-der of 2024.
Yeah.
Okay. Thank you.
Thank you.
One moment for our next question.
Okay.
Our next question will come from the line of D. S. Kim with J P. Morgan Your line is now open.
Alright.
Hi, sorry can I follow up.
One more question regarding shareholder return policy.
I think I do think that our stuff gets very very cheap still bought.
I noticed that the buyback activity past three months has been pretty minimal.
I'm just wondering given the stock rallied so far have you considered that shifting the policy a little towards dividend or some other way or are we going to keep.
Sisi Zhao: Operating income was $205.1 million, representing a 163% increase year over year. Non-gap income from operations for the call-der was $244.8 million, representing a 152.2% increase year over year. The income attributable to New Oriental for the call-der was $165.4 million, representing a 150.6% increase year over year. Basic and diluted income per ADS attributable to New Oriental for $1.9 million, respectively. Non-Gab Net Income Agifilful to Neurantal for the Calder, was $189.3 million, representing a 126.2% increase year over year.
Reiterating this buyback policy for the rest of the year and next year. Thank you.
Yeah. As you know you know, we announced a $400 million share buyback plan.
And so far we're finished all wanted $93 $4 million.
And I think we are we will buy more shares going forward in the rest of this year and as always we aim to create more value to the shareholders on capital return sites.
Yes.
Thank you.
As a reminder to ask a question you will need to press star one one on your telephone again that star one one on your telephone to ask your questions.
Sisi Zhao: Non-Gab basic and diluted net income per ADS, Agifilful to Neurantal, or $1.15 and $1.13 respectively. Net cash flow generated from operation for the first fiscal quarter of 2024 was approximately $335.8 million, and capital expenditure for the quarter, or $132.5 million. Turning to the balance sheet, as of October 31, 2023, Neurantal had cash and cash equivalence of $1,748.9 million. In addition, the company had $1,394 million in term deposit, and $1,423.9 million in short term investments.
Okay.
Again as a reminder to ask a question Thats Star one one.
And at this time I am showing no further questions. We are approaching the end of the conference call I will now turn the call over to new Orientals Executive President and Chief Financial Officer, Steven Wang for any closing remarks.
Again, thank you for joining us today.
Any further questions. Please do not hesitate to contact me or any of our Investor Relations Representatives. Thank you.
This concludes today's conference call. Thank you for your participation you may now disconnect everyone have a wonderful day.
Yeah.
Okay.
[music].
Sisi Zhao: Neurantal's deferred revenue balance at the first of fiscal quarter of 2024 was $1,401.4 million, an increase of $38.4 as compared to $1,012.5 million at the end of the first fiscal quarter of last fiscal year.
Okay.
Okay.
Yes.
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Stephen Yang: Now, at hand over to Stephen to go through our outlook and guidance, Stephen. We're confident in parking a healthy journey of sustainable growth for the rest of this fiscal year, building on the combination of our brand advantage, rooted history, influential teaching content, and resources, and solid foundation. We're also committed to work diligently adhering to the latest guidance from the Chinese authorities on enhancing the nation's education level to strengthen its leading position to further unveil our potential in all business lines and creative endeavors.
Stephen Yang: With regards to the learning center and classroom space, we plan to increase our capacity by about 15% to 20%, by which a reasonable amount of new learning centers is applied to the open. While classroom areas of some existing learning centers will be expanded in a few major cities, most of the new openings will be launched in the cities with better top line bottom line performance will keep monitoring the pace and scale of the new openings according to the local operation and financial results in this fiscal year. Despite the historical seasonality of some new rentals made their businesses, which will usually result in a slower period for every second quarter.
Stephen Yang: We remain confident in sustaining a healthy growth across all business lines in summary. We expect total net revenue in the second quarter of fiscal year 2024 to be in the range of $785.0 million to $800.4.2 million, representing EOV or increase in the range of 23% to 26%.
Stephen Yang: To conclude, we're confident in achieving satisfactory operating profit level and improving our profitability in the rest of the physical year to run 24. As always, New Oriental plays a great determination to cultivate new endeavours and are bolstered our existing capabilities simultaneously, will devote reasonable resources on research and application of new technologies such as AI and chat TPP into our educational and product offerings, with the vision to uplift our strengths and pursue the growth and operational efficiency in the future.
Stephen Yang: We will also continue to seek guidance from and cooperate with government authorities in a line with these efforts to comply with relevant policies, regulations and measures, as well as to further adjust our business operations as required.
Stephen Yang: I must say that these expectations and forecasts reflect our considerations of the latest regulatory measure, as well as current and preliminary view, which is subject to change.
Stephen Yang: This is the end of our physical year to run 24Q1 summary.
Sisi Zhao: At this point, I'd like to open the floor for questions, or please please open the call for these. Thank you. The question and answer of this conference will begin in a moment. In order to be fair, all scholars who wish to ask a question, we will take one question at a time from each caller. If you have more than one question, please rejoin the queue after your first question has been addressed.
Sisi Zhao: To ask a question, you'll need to press star 1-1 on your telephone. To withdraw your question, please press star 1-1 again. Please wait for your name to be announced. Please stand by, will we compile the Q&A roster? One moment for our first question, please.
Yiwen Zhang: Our first question comes from Yiwen Zhang with China Renaissance. Your line is now open. Thank you.
Stephen Yang: Good evening, management. Thanks for taking my question. My question is about why you know the environmental quarter revenue guidance. You know, if we look at the wildlife growth, there was a bit of differentiation versus the August quarter. Can you work through us, what are the drivers behind it? And probably you can also talk about how do we say that growth artwork across different segments? Thank you. Yeah, as for the revenue guidance of Q2, actually, it's not the acceleration.
Stephen Yang: You know, I want to emphasize the following points of the Q2 guidance. Firstly, you know, as always, we take a conservative approach in giving the guidance of Q2. Secondly, the exchange rates negatively impact the revenue growth guidance by approximately three basis of points. Thirdly, you know, I think it's also need to be noticed that typically Q2 is our seasonally slow quarter. For more to our education business with the lower than a euro revenue and profit.
Stephen Yang: Given the strong demand of the growth momentum, we have seen so far this year, we are quite confident that the whole year's revenue growth will be better than we originally expected, especially in last quarter. We give the guidance from the top of our growth and this quarter, I think we give the better guidance or higher guidance than that of the last quarter, for the whole year. Lastly, East Dubai will start to have a higher base comparison since Q2 this year.
Stephen Yang: Overall, I think, depending from the post-COVID, the economy recovery, we have seen the strong demand in education sector, especially in the overseer-led business and now a diamond program business. By leveraging our brand, the advantage of New Oriental and the good contents and resources and our long-established foundations, I think we'll continue to see great opportunity and to take more market share in the future. Thank you. One moment for our next question.
Felix Lu: Our next question comes from the line of Felix Lu with UBS. Your line is now open. Hi, good evening management and thank you for taking my question and congratulations on the very strong first quarter results.
Stephen Yang: My question is on your capacity plan. I noticed that in this quarter, your capacity, your Q1Q, new learning center expansion accelerated from force quarter last year. So my edge, check your capacity plan from here. Do we expect this Q1Q new addition pace to maintain throughout this year, or are there any seasonalities with capacity expansions? Quarterback quarter.
Stephen Yang: How do you see the regulation landscape or regulation environment around capacity expansions? Thank you. This quarter, we added 6% new capacity in this quarter. As you know, we increased our capacity expansion by about 15% to 20% for the whole year, fiscal year 24. And as I said, we will open a reasonable amount of new learning centers where new classroom areas in the top tier cities with the good performance of the top and bottom line.
Stephen Yang: And as I said, you know, the market demand education sector is very strong. That's why we raised our guidance of the whole year of the top line growth and the learning center expansion plan for the whole year. As for the regulation side, I think the so far so good, you know, we and I think going forward, we expect the regulation, the regulations will be stabilized[inaudible] One moment for our next question, please.
Lucy Yu: Our next question comes from the line of Lucy Yu with Bank of America Securities. Your line is now open. Hi, Steven, this is Lucy. Have a question on a margin. So this quarter, we have seen the OP margin expanded a lot and reached like 22%, which is a pretty high level. Even compared to our historical kind of OP margin, especially in Q1.
Stephen Yang: So how could we decoding the margin expansion and how should we think about the margin expansion for the rest of the year? Thank you. Thank you, Lucy.
Stephen Yang: Let us start with this quarter margin analysis. You know, the GB margin, the OP margin increased a lot in this quarter, was mainly driven by the following reasons. Number one, the utilization and improving of our learning centers and teaching resources increased the learning center margin. That means we have lower fixed costs and expenses compared to that of last year. Number two, this margin is over 20% in this quarter. You know, the profit of growth is faster than we expected, you know, two years ago.
Stephen Yang: You know, we started the business of two years ago. And the recovery of the remaining business, especially in the overseer led business, you know, generally the higher margin in this quarter, you know, is higher, definitely, definitely higher than that of last year. And number three is that you know, is the buy enjoys a higher margin.
Stephen Yang: And as we're having to the fiscal year, fiscal year, 24 Q2, I think we'll offer new leverage and higher utilization and the remaining business lines and the new business lines will, you know, generate the more profit for that to the group. And I think we are optimistic on margin expansion and sustainable profitability in Q2 and in the rest of the whole year. I think we'll, you know, the whole team will continue to work together to seek profit of growth in the fiscal year, 24. And I think we believe will create more values to the shareholders over the long run. Thank you, Lucy. Thank you.
Operator: One moment for our next question, please.
DS Kim: Our next question comes from the line of DS Kim with JP Morgan. Your line is now open. Hi, Steven. Hi, see good evening. And thanks for taking my question. And by the way, congrats on the quarter. I think 245 million people is the second best level on record, which is pretty amazing.
Stephen Yang: Anyway, anyway, I have a high level question on a long term growth is that's okay. I guess we talked a lot about our new businesses, which are completely different. [inaudible] here. You know, I think, yeah, for the for the existing business, such as the overseas test rat, overseas consulting, and the adult and the university students business, you know, I think that analysis the market like this, on demand side, we have seen the strong demand for the overseas test rat consulting business and for the college business.
Stephen Yang: And on supply sites, you know, after the COVID and the policy, we have seen a lot of players disappear from the market. So that means we're facing less competition. So I think, I think the existing business, including the overseas business and the adults and college students business, I think we will generate the top-line growth very good in the next two to three years. So we're quite optimistic about the top-line growth and the market expansion for the existing business.
Stephen Yang: And as for the utilization rates, right, and for overall, you know, in this corner, you know, Q1, Q1 is the high season of the educational products. So in Q1, the utilization rates in Q1 are somewhere around 65%, so that means the two-thirds. And but I think we have a long way to go. And you know, yeah, as a fact, in this fiscal year, in this fiscal year, we'll plan to open 15 to 20% percent new capacity.
Stephen Yang: But our top-line growth, you know, we beat the guidance every quarter, and we raise the guidance of the whole year top-line growth. I think the top-line, the healthy top-line growth will cover the rental of the new capacity. So that means we do have the operating leverage in hand. And going forward, I think you will see more operating leverage for all business lines. It will be drive the martyr up. Thank you, DS. Thank you.
Operator: As a reminder, to ask a question, you'll need to press star 11 on your telephone. Again, that star 11 to ask your question. Again, to ask your question that star 11.
Operator: We are now approaching the end of the conference.
Stephen Yang: I would now turn the call over to new Oriental's executive president and chief financial officer, Stephen Yang, for his closing remarks. Again, thank you for joining us today. If you have any further questions, please do.
Operator: Operator, we probably have one more question from one. Okay. All right. Okay, thank you. One moment for our next question.
Keanu Wang: The question from Keanu Wang with CICC. Your line is now open. Go ahead, please. Hi, Stephen, this is the meeting. This is timing from CICC. So congrats on a very strong set of results. So I just have a quick question. Our intelligence learning devices. So we've seen that the active pick users, this quarter, had a quite impressive growth, like double Q and Q. So actually, what is driving such a strong growth? And how is the expected business in the median terms? Thank you.
Stephen Yang: Okay, yeah, actually we are very satisfied with the development of the new initiatives especially for this kind of targeting younger kids like K-12 students, new initiatives, like the new intelligence learning device business last year we rode out in almost all the cities and now we're seeing a huge amount for the service you know it's quite innovative in terms of the offering using our all the technologies that we accumulated in last several years that we have the cutting edge technology and content as well and offering students a unique experience that helps students to enhance their academic study ability especially self-study ability as well so actually the demands in all kinds of cities, high tiers, low tiers are also are all very strong and you know we are confident in this kind of user number increase improvement year over year and definitely we're also in the process of enhancing the quality of our products and the services as well and so we will make efforts in increasing the user number as well as enhancing the tuition like this kind of subscribing fee renewal raise as well and also we want to expand to more subjects for all the existing users so in summary actually the high demand and also the best content and technology and all the service are the fundamental for the development for this new initiative and we will try to continue to enhance the quality and try to maintain this kind of healthy growth for this new initiative, okay. Thank you. One moment for our next question.
DS Kim: Our next question will come from the line of DS Kim with JP Morgan your line is now open. Hi, sorry, can I follow up one more question here regarding a show for the return policy. I think I do think that our stock is very, very cheap still but I noticed that the buyback activity past three months has been pretty minimal and I'm just wondering given the stock rally so far.
Stephen Yang: Have you considered shifting the policy a little toward dividend or some other way or are we going to keep a reiterating this buyback policy for the rest of the year and next year. Thank you. Yeah, as you know, you know, we announced the $40 million share buyback plan and so far, you know, we finished $193.4 million and I think we will buy more shares going forward in the rest of this year.
Stephen Yang: And you know, as always we aim to create more values to the shareholders on capital return side. Thank you, DS. Thank you. As a reminder to ask a question, you'll need to press star 11 on your telephone. Again, that star 11 on your telephone to ask your question. Again, as a reminder to ask a question that star 11.
Operator: And at this time, I'm showing no further questions. We are approaching the end of the conference call.
Stephen Yang: I will now turn the call over to the new Oriental Executive President and Chief Financial Officer, Steven Wang, for his closing remarks. Again, thank you for joining us today. If you have any further questions, please do not hesitate to contact me or any of our investor-religion representatives. Thank you.
Operator: This concludes today's conference call. Thank you for your participation.
Operator: You may now disconnect everyone, have a wonderful day.