Q3 2024 New Oriental Education & Technology Group Inc Earnings Call
Okay.
Operator: Good evening, and thank you for standing by for New Oriental's FY 2024 Third Quarter Results and Earnings Conference Call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be questions and a sound session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I'd now like to turn the meeting over to your host for today's conference, Ms
Speaker Change: Good evening and thank you for standing by for New Orientals, FY 2024 third quarter results earnings Conference call.
At this time all.
Speaker Change: Participants are in listen only mode.
Speaker Change: After management's prepared remarks there'll be a question there's.
Speaker Change: There's no question.
Speaker Change: Today's conference is being recorded.
Speaker Change: If you have any objections you may disconnect at this time.
Speaker Change: I'd now like to turn the meeting over to your host for today's conference Mitsubishi Zhao.
Sisi Zhao: Thank you. Hello, everyone, and welcome to New Oriental's third 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 Newsware's service website. Today, Stephen Yang, Executive President and Chief Financial Officer, and I will share New Oriental's latest earnings results and business updates in detail with you. After that, Stephen and I will be available to answer your questions.
Sisi Zhao: Thank you Hello, everyone and welcome to New Orientals third fiscal quarter of 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 unused where services.
Sisi Zhao: Today, even yeah, exactly president and Chief Financial Officer, and I will share your 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 gist.
Sisi Zhao: 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. Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from those expressed today. A number of potential risks and uncertainties are outlined in our public filings with the ASEC. New Oriental does not undertake any obligation to update any forward-looking statements, except as required under applicable law.
Sisi Zhao: Session today will contain forward looking statements made under the safe Harbor provisions of the U S. Private Securities Litigation Reform Act of matching that default, but for looking statements involve inherent risks and uncertainties as such our results may be materially different from the views expressed today.
Sisi Zhao: 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.
Sisi Zhao: As a reminder, this conference call is being recorded. In addition, a webcast of this conference call will be available on New Oriental's investor relations website at investor.neworiental.org. I'll now first turn the call over to Mr. Yang. Stephen, please go ahead. Thank you, Sisi.
Sisi Zhao: As a reminder, this conference is being recorded in addition, a webcast of this conference call will be available on your Orientals Investor Relations website at.
Sisi Zhao: At Investor adopt new Oriental Dot works.
Sisi Zhao: I'll now first turn the call over to Mr. Yao Steven Please go ahead.
Zhihui Yang: Sisi. Hello everyone, and thank you for joining us on the call. We are pleased to announce that New Oriental has achieved robust growth this quarter that has surpassed our expectations. The remarkable child plan performance this quarter has spoken volumes about sustained recovery across our diverse business lines, while steady expansion of our new business made healthy contributions to the company's revenue, invigorating our portfolio of innovative endeavors. New Oriental's bottom line performance has achieved encouraging yields, with its operating margin and non-gap operating margin reaching 9.4% and 11.7% for this quarter, respectively.
Yao Steven: Thank you Susie Hello, everyone and thank you for joining us on the call.
Yao Steven: We're pleased to announce that.
<unk> has achieved that robust growth this quarter that have surpassed our expectations.
Yao Steven: Mark will top line performance this quarter have spoken volumes about sustained recovery across our diverse business lines, while steady expansion of our new business.
Yao Steven: Made healthy contributions to the company's revenue the big rating our portfolio of innovative endeavors.
Yao Steven: New Orientals bottom line performance has achieved encouraging yields with operating margin and non-GAAP operating margin, reaching nine 4% and 11, 7% for this quarter respectively.
Zhihui Yang: Thanks to the combined efforts of our restructured business model by utilizing resources and streamlining cost structure, bolstered by vital growth across all business lines, our commitment to maintaining a healthy market share growth stands firm as we strive to create sustainable value for our customers and shareholders in the long term. Now, I would like to spend some time talking to you in detail about the quarter's performance across our remaining business lines and new initiatives.
Yao Steven: Thanks to the combined.
Yao Steven: Combine the efforts of our restructured business model further utilizing our resources and a streamlined cost structure.
Yao Steven: I'll start by a vital growth across all business line, our commitment to maintaining a healthy market share growth stands firm as we strive to create sustainable value for our customers and shareholders in the long term.
Yao Steven: Now I would like to spend some time to talk about the quarter's performance across our remaining business ally and new initiatives to you in detail.
Zhihui Yang: Our key remaining businesses have enjoyed a promising upward trajectory while the new initiatives secure positive momentum. Hurricane Zhang, the overseas test drive business, reported a revenue increase of about 53% in dollar terms or 59% in RMB terms year-over-year for the third fiscal quarter of 2024.
Yao Steven: Our key Romanian business, how dependent are promising upwards trajectory, while the new initiatives secure positive momentum.
Yao Steven: <unk> Dong the oversea test prep business recorded a revenue increase of about.
Yao Steven: 53% in dollar terms or 59% the RMB terms year over year for the third fiscal quarter of 2020 for the overseas study consulting business recorded a revenue increase of about 26% in dollar terms were 31% in the RMB terms year over year for this quarter.
Zhihui Yang: The overseas study consulting business recorded a revenue increase of about 26% in dollar terms or 31% in RMB terms over a year for this quarter. The adults and university students' business recorded a revenue increase of 53% in dollar terms or a 60% increase in RBI terms for this quarter. Our multi-pronged new initiatives, which mostly revolve around facilitating students' all-round development, have continued to deliver continued growth and meaningful profits to the company.
Yao Steven: The Donaldson University students business recorded a revenue increase of 50.
Yao Steven: 53% in dollar terms or a 60% increase the RMB terms year over year for this quarter.
Our multi pronged new initiatives, which mostly revolve around facilitating students around developments have continued to deliver continued growth and many meaningful profits to the company.
Zhihui Yang: The non-academic children's courses, which we have offered in around 60 visiting cities, focus on cultivating students' innovative ability and comprehensive quality. The markets we have tapped into have recorded elevated penetration, especially in higher-tier cities, with a total of approximately 355,000 student enrollments recorded in this quarter. The top 10 cities in China contribute over 60% of this business.
Yao Steven: Firstly.
Yao Steven: Tom a tutoring courses, which we have offered in around 68 physical cities focus on cultivating students.
Ability and comprehensive quality.
Yao Steven: In markets, we have tapped into have reported.
Yao Steven: It is penetration, especially in higher tier cities with a total of approximately $365 doing walnuts reported in this quarter. The top 10 cities in China contributed over 60% of this business.
Zhihui Yang: Secondly, the Intelligence Learning System and Device Business, which serves as... designed to provide a tailored digital learning experience for students to enhance learning efficiency, has been adopted in around 60 cities. We have observed enhanced customer retention rates and scalability of this new initiative, with approximately 188,000 active paid users recorded in this quarter. The revenue contribution of this initiative from the top 10 cities in China is over 55%.
Yao Steven: Secondly, the intelligence learning system and device business our service.
Yao Steven: Designed to provide a tailored digital learning experience for students to enhance learning efficiency has been adopted in around 60 <unk> Steve.
Yao Steven: <unk> observed that you have the customer retention rates and the scalability of this new initiative business.
Yao Steven: With approximately 188 solvent active data users recorded in this quarter. The revenue contribution of this initiative from the top 10 cities in China is over 55%.
Zhihui Yang: Our smart education business, educational, material, and digitalized smart study solutions have continued to contribute material results to the overall advancements of the company. In summary, our new educational business initiatives reported a revenue increase of 73% in dollar terms or an 80% increase in RMB terms year-over-year for this quarter. In addition, as mentioned in the past quarters, we inaugurated a newly integrated tourism-related business line as one of our creative ventures. Tailored with diverse offerings of cultural trips, study tours in China and overseas, as well as camp education, New Oriental's cultural tourism business shares the spirit, and provides premium quality travel experiences that are infused with joy from culture exchange, knowledge sharing, and personal fulfillment.
Yao Steven: Our smart education business education, no material and utilize the smart study solutions have continued to contribute mature results to the overall advancement of the company.
Yao Steven: In summary, our new educational business initiatives reported a revenue increase of 73% in dollar terms or 80% increase in RMB terms year over year for this quarter.
Yao Steven: Additionally, as mentioned in the past quarters, we elaborate it a newly integrated tourism related to the business line.
Yao Steven: One of our creative venture.
Yao Steven: Tailored with diverse offerings of culture trips study tours in China, and overseas as well Ken Camp education.
Yao Steven: <unk> cultural tourism business shared the spirit to provide premium or quality travel experience.
Yao Steven: Our infused the withdrawing from cultural exchange knowledge sharing and personnel.
Yao Steven: Personal fulfillment.
Zhihui Yang: Within the new business line, our study tour and research camp business for students of K-12 and university age achieved inspiring growth in this quarter. We have conducted study tours and research camps in over 50 cities across the country, with the top 10 cities in China offering over 55% of revenue share of this business. We also piloted a number of top-notch tourism offerings to expand our reach to all age groups, including middle-aged and elderly individuals across 25 featured provinces.
Yao Steven: We begin the new business line, our study tour and the research cap business before still unsold K 12, and University H achieved inspiring growth in this quarter.
Yao Steven: We have conducted the study towards and research account in over 50 cities across the country with a top 10 city in China offering over 55% of revenue share of this business.
Yao Steven: We're also piloting a number of top notch tourism offerings to expand our reach to all age groups, including middle aged and elderly individuals across 25 featured provinces.
Zhihui Yang: As we are still at the preliminary stage of planning, testifying, and evaluating the viability of this business in selected regions, we will keep you posted should there be timely updates. With regard to our OMO system, Online Merge Offline system, we have persisted in revamping our platform and leveraging our educational infrastructure and technology edge on remaining key business, a new initiative with the vision to provide advanced diversified education services to customers of all ages.
Yao Steven: As well as steel preliminary stage over the planning has refi and the value aiding the availability of this business is like the regions. We will keep you posted should there be timely updates.
Yao Steven: With regards to our <unk> system.
Yao Steven: Merge offline system will have to persist in revamping, our platform and leverage our educational infrastructure and technology edge on our remaining key business.
Yao Steven: A new initiative with ambition to provide advanced diversified education service to customers of all ages.
Zhihui Yang: During this reporting period, a total of $25.5 million has been invested in our OMO teaching platform, which equips us with the flexibility to maintain a rival service to students. With regard to the Eastern Bai... Easterbuy attained sustainable growth momentum in this quarter thanks to the rapid development of its private-label product. As part of the ongoing expansion strategy for an early venture like EasterBuy, we have devoted substantial investments to support the growth of the company, including the optimization of EasterBuy's multi-platform strategies, supply chains, product offerings, as well as quality control to safeguard product quality and region. We're glad to see the East Dubai has further expanded its customer base following the latest establishments of Time with Yuhui channel on Douyin.
Yao Steven: During this reporting period, a total of $25 $5 million has been invested.
Yao Steven: More packaging platform, which equips us with the flexibility to maintain unrivaled service to students.
Yao Steven: With regards to the Easter by Easter.
Yao Steven: If the buy tens of sustainable growth momentum in this quarter. Thanks to our rapid development of its private label products.
Yao Steven: As part of the ongoing expansion strategy for our early venture like Easter by we have devoted a substantial investments to support the growth of the company, including the optimizations that used to buy multi platform strategies supply chains.
Yao Steven: Product offerings as well as policy control to safeguards on product quality and our regions.
Yao Steven: We're glad to see the ease the bi has further large this customer base. Following the latest establish amounts of time with the <unk> channel and OEM.
Zhihui Yang: In addition, further enhancements in ISTABYTE have been made through our comprehensive organizational structure, strategy hands for professional talents, and upgrades, all of which strengthened Easter Bunny's private label products and live streaming e-commerce. The resources we committed to East Dubai have thankfully nurtured improved user management and loyalty. And we look forward to leverage these inputs to propel further growth of the platform that promises premium offerings and sustainable growth for our customers.
Yao Steven: Yes.
Yao Steven: Further it has plans he needs to buy have been made through our comprehensive authorization on structured strategy hands for professional talents in app upgrades.
Yao Steven: All of which strengthened if the bias private label products and last streaming live streaming e-commerce.
Yao Steven: The resources, we committed into Easter by have thankfully, no nourished improved user management and loyalty.
Yao Steven: And we'll look forward to leverage these inputs to propel further growth of the platform that promise premium offerings and sustainable growth for our customers.
Zhihui 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 state, with cash and cash equivalent term deposits and short-term investments totaling approximately $4.8 billion on July 26, 2022. Furthermore, the company's board of directors authorized the share repurchase of up to $500 million of the company's ADS, or common shares, during the period from July 28, 2022 to May 31, 2023. The company's board of directors further authorized the company to extend its share repurchase program launched in July 2022 by 12 months to May 31, 2024.
Yao Steven: With regards to the company's latest financial position I am confident to share with you that the company is.
Yao Steven: In a healthy financial statements.
Yao Steven: With cash and cash equivalents term deposits and short term investments.
Yao Steven: Totally approximately $4.8 billion.
Yao Steven: On July 26 2022.
Yao Steven: The company's board of directors authorized a share repurchase of up to $500 million of the company Avs, where common shares during the period from July 28, 2022 through May 31 2023.
Yao Steven: Companys Board of directors further authorized the company to extend its share repurchase program launched in July 2022 by 12 months to May 31, 2024 as of today.
Zhihui Yang: As of yesterday, April 23, 2024, the company repurchased an aggregate of approximately 6 million ADS for approximately $195.3 million from the open market and the share repurchase program. Now, I will turn the call over to Sisi to share with you about the key financials. Sisi, please go ahead.
Yao Steven: As of yesterday April 23, 224, the company repurchased an aggregate of approximately $6 million avs for approximately.
Yao Steven: $195 $3 million from the open market and on the share repurchase program.
Speaker Change: Now I will turn the call over to <unk> to share with you about the key financials. Please go ahead.
Sisi Zhao: Now I'd like to walk you through the other key financial details for this quarter. Operating costs and expenses for the quarter were $1,093.9 million, representing a 59.1% increase year-over-year. Non-GAAP operating costs and expenses for the quarter, which excludes share-based compensation expenses, were $1,066.4 million, representing a 68.1% increase year-over-year. The increase was primarily due to costs related to substantial growth in e-supplies, private label products, and live-streaming e-commerce business. Cost of revenue increased by 74.5% year-over-year to $644.8 million. Selling and marketing expenses increased by 57.1% year-over-year to $161.3 million.
Speaker Change: Now I'd like to walk you through the other key financial details for this quarter operating costs and expenses for the quarter or $1093 9 million representing.
Speaker Change: Representing a 59, 1% increase year over year, non-GAAP operating cost and expenses for the quarter, which excludes share based compensation expenses were $1066 4 million representing.
Speaker Change: Representing a 61% increase year over year. The increase was primarily due to the cost expenses related to the substantial growth and is the buys private label products and life streaming E Commerce business.
Speaker Change: Cost of revenue increased by 74, 5% year over year to $644 8 million.
Speaker Change: Selling and marketing expenses increased by 57, 1% year over year to $161 $3 million G&A expenses for the quarter increased by 33, 6% year over year to $287 $8 million non-GAAP, G&A expenses, which excludes share based compensation.
Sisi Zhao: G&A expenses for the quarter increased by 33.6% year-over-year to $287.8 million. Non-GAAP G&A expenses, which exclude share-based compensation expenses, were $273.6 million, representing a 40.7% increase year-over-year. Total share-based compensation expenses, which were allocated to related operating costs and expenses, increased by 28.3% to $27.5 million in the third fiscal quarter of 2024.
Speaker Change: Benches or $273 6 million.
Speaker Change: Renting a 47% increase year over year.
Speaker Change: Total share based compensation expenses, which were allocated to related operating costs and expenses increased by 28, 3% to $27 $5 million in the third fiscal quarter of 2024.
Speaker Change: Operating income, whereas wandered start $10 4 million, representing a 76% increase year over year non-GAAP income from operations for the quarter, whereas $149 million, representing a 63% increase year over year.
Zhihui Yang: Operating income was $113.4 million, representing a 70.6% increase year-over-year. Non-GAAP income from operations for the quarter was $140.9 million, representing a 60.3% increase year-over-year. Net income attributable to New Oriental for the quarter was $87.2 million, representing a 6.8% increase year-over-year. Basic and diluted net income per ADS attributable to New Oriental were $0.53 and $0.52, respectively. Non-GAAP net income attributable to New Oriental for the quarter was $104.7 million, representing a 9.8% increase year-over-year.
Speaker Change: Net income attributable to new Oriental for the quarter was $87 $2 million, representing a six 8% increase year over year basic and diluted net income per ads attributable to new Oriental.
Speaker Change: 50, 50, <unk> and 58 <unk> respectively.
Speaker Change: non-GAAP net income attributable to new Oriental for the quarter was $104 $7 million.
Speaker Change: Entering a nine 8% increase year over year, non-GAAP basic and diluted net income per aes attributable to new Oriental were six phase III <unk> <unk>, respectively.
Speaker Change: Net cash flow generated from operations for the third fiscal quarter of 2024 was approximately $109 4 million and capital expenditure for the quarter were $81 million.
Speaker Change: Turning to the balance sheet as of February 29, 2024, New Oriental had cash and cash equivalents.
Zhihui Yang: Non-GAAP basic and diluted net income per ADS attributable to New Oriental was $0.63 and $0.63, respectively. Net cash flow generated from operations for the third fiscal quarter of 2024 was approximately $109.4 million, and capital expenditure for the quarter was $80.1 million. Turning to the balance sheet, as of February 29, 2024, New Oriental had cash and cash equivalents of $2,013.6 million. In addition, the company had $1,570.8 million in term deposits and $1,175.3 million in short-term investments.
Speaker Change: $2013 $6 million.
Speaker Change: In addition, the company had.
Speaker Change: <unk> hundred $78 million in term deposit and.
Speaker Change: 11, <unk> hundred $75 $3 million in short term investments, new orientals deferred revenue, which represents cash collected upfront from customers and related revenue that will be recognized as the services or goods are delivered at the end of the third quarter of fiscal year 2024.
Speaker Change: <unk> or <unk> hundred $21 7 million, an increase of 38% as compared to 11, <unk> hundred $63 2 million at the end of the third quarter of last fiscal year now I'll hand over to Stephen to go through our outlook and guidance.
Stephen: Thank you Susan.
Stephen: As we progress into the fourth quarter, which is typically expected a slower quarter comparing with the third quarter in terms of the revenue growth and profitability due to various seasonality of our key educational businesses, we placed confidence in sustaining a healthy growth.
Zhihui Yang: New Oriental's Deferred Revenue, which represents cash collected up front from customers and related revenue that will be recognized as the services or goods are delivered at the end of the third quarter of fiscal year 2024, is worth $1,521.7 million, an increase of 30.8% as compared to $1,163.2 million at the end of the third quarter of last fiscal year. Now I'll hand over to Stephen to go through our outlook and guidance. Thank you, Sisi.
Stephen: Building on the collective bricks of our route its foundation brand advantage and influential teaching resources.
Stephen: Our strategic focus and investments.
Stephen: <unk> aimed at achieving satisfactory.
Stephen: Operating profit in the rest of the year, coupled with the year over year margin expansion for the full year.
Stephen: We will work diligently to adhere to the latest guidance from the Chinese authorities are enhancing the nation's education level to strengthen its leading position to further strengthen our etch all business lines and the creative endeavors.
Stephen: With regards to the learning center and classroom space as part of the continued evolution of our offering across business lines, we plan to increase our capacity by around about 30% for this fiscal year I wish a reasonable amount of new.
Zhihui Yang: As we progress into the fourth quarter, which is typically expected to be a slower quarter compared with the third quarter in terms of revenue growth and profitability due to the varied seasonality of our key educational business, we place confidence in sustaining healthy growth building on the collective bricks of our rooted foundation, grand advantage, and influential teaching resources. Our strategic focus and investment approach aim at achieving satisfactory results. Yiwen Zhao, Tianxiao Hou, Caini Wang, Timothy Zhao, Tianxiao Hou, Caini Wang, New Oriental Education & Technology Group Inc. As always, we will work diligently to adhere to the latest guidance from the Chinese authorities on enhancing the nation's education level to strengthen its leading position, to further strengthen our edge on all business lines and creative endeavors
Stephen: Learning centers.
Stephen: Expected to be opened while classroom areas of some existing learning centers will be extended.
Stephen: Major cities.
Stephen: Most of the new openings will be launched in the city with better topline and Bottomline performance in this year.
Stephen: At the same time we.
Stephen: We will continue to hire new teachers and staff to match our capacity expansion and supports our revenue growth, especially for new application business initiatives and newly integrated tourism related business.
We expect total net revenue in the fourth quarter.
2024 March one 2024 to May 31, 2024 to be in the range of 1001, hundreds and one $5 million to 1000.
Stephen: $127 3 million representing year over year increase in the range of 28% to.
Stephen: 231% in dollar terms.
Stephen: The projected increase of revenue our functional currency RMB is expected to be in the range of 34% to 37% for the fourth quarter of this fiscal year 2024.
Zhihui Yang: With regard to the learning center and classroom space, as part of the continued evolution of our offerings across business lines, we plan to increase our capacity by around about 30% for this fiscal year, by which a reasonable number of new learning centers is expected to be opened, 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 city with better top-line and bottom-line performance this year at the same time.
Stephen: To conclude new Oriental is determined to persistently expand our existing offerings and the FERC last new endeavors.
Stephen: Integrating strategic inputs to sharpen our capabilities, we will also.
Stephen: So continue to devote reasonable resources on research and application of new technologies, such as AI Untracked GPT is while our feelings and strong belief that we could uplift our strengths to favor further growth better margin and operate operating efficiency.
Zhihui Yang: We will continue to hire new teachers and staff to match our capacity expansion and support our revenue growth, especially for new education business initiatives and newly integrated tourism-related projects. We expect total net revenue in the fourth quarter to be in the range of $1,101.5 million to $1,127.3 million, representing a year-over-year increase in the range of 28% to 31% in dollars.
Stephen: At the same time, we will also continue to seek guidance from and comp rates with the governmental authorities in various provinces and municipalities in China alignment with his efforts to comply with the relevant policies regulations and measures as well as to further adjust our business to operate.
Stephen: <unk> is required.
Stephen: I must say that these expectations and forecast reflects our considerations of the latest regulatory matter as well as our current and preliminary review, which is subject to change.
Speaker Change: This is the end of our fiscal year 2020 for Q3, a summary of these points I would like to open the floor for questions. Operator. Please open the call for beef. Thank you.
Zhihui Yang: The projected increase in revenue in our functional currency, RMB, is expected to be in the range of 34% to 37% for the fourth quarter of this fiscal year, 2024. To conclude, New Oriental is determined to persistently expand our existing offerings and fertilize new endeavors, delegating strategic inputs to sharpen our capability. We will also continue to devote reasonable resources to research and application of new technologies such as AI and chat GPT into our office with the strong belief that we could uplift our strength to favor further growth, better margins, and operating efficiency.
Speaker Change: Thank you.
Speaker Change: Question and answer session of this conference call will start in a moment 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 join the question queue again. After your first question has been addressed to answer questions.
Speaker Change: Now please press star one on your telephone keypad.
Speaker Change: You had an automated message advising yohan is raised to.
Speaker Change: To withdraw your question. Please press star one again.
Zhihui Yang: At the same time, we will also continue to seek guidance from and cooperate with government authorities in various provinces and municipalities in China in alignment with these efforts to comply with relevant policies, regulations, and measures, as well as to further adjust our business operations as required. I must say that these expectations and forecasts reflect our considerations of the latest regulatory measures as well as our current and preliminary view, which is subject to change. This is the end of our fiscal year 2024 Q3 summary. At this point, I would like to open the floor to questions. Operator, please open the call for these. Thank you.
Speaker Change: Your first question comes from the line of Felix Liu from UBS. Please ask your question Felix.
Speaker Change: Yes.
Felix Liu: Hi, Good evening management and thank you very much for taking my question and congratulations on the strong growth and guidance.
Felix Liu: My question is on <unk>.
Felix Liu: So first I understand that Q4, we will have a bit of seasonality in the education business than maybe could you just share more color on the growth in different business segments in Q4.
Felix Liu: And also you mentioned that the capacity guidance expansion guidance for the year is now let it to 30%.
Felix Liu: How do you see that.
Felix Liu: Capacity expansion pace going forward or do you think 30% is sustainable.
Felix Liu: Expansion that we can maybe keep for two to three years. Thank you.
Operator: The question and answer session of this conference call will start in a moment. 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 join the question queue again after your first question has been addressed. To ask a question now, please press star 1 1 on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Your first question comes from the line of Felix Liu from UBS. Please ask your question, Felix.
Speaker Change: Thank you Alex.
Speaker Change: Yes, as you know we'd be at the top line guidance this quarter a lot.
Speaker Change: No.
Speaker Change: No.
Speaker Change: Just like the past couple of quarters and.
Speaker Change: As for the revenue guidance in Q4, which seems to be a little bit lower.
Speaker Change: And then the Q3 year over year.
Speaker Change: Year over year revenue.
Speaker Change: The growth there are three reasons.
No.
Speaker Change: Number one as always we're quite conservative to give the guidance. So this is number one and number two yes. As you know Q4 is typically expect a slower quarter.
Speaker Change: Compared to Q.
Speaker Change: Q1 and Q3.
Speaker Change: And because of the seasonality.
Speaker Change: For example, like before the.
Speaker Change: The K to.
Speaker Change: Trough related business and the overseas related business typically Q to Q4.
Speaker Change: The low season.
Felix Liu: Hi, good evening management. Thank you very much for taking my question and congratulations on the strong growth and guidance. My question is on growth. So, first, I understand that in Q4 we will have a bit of seasonality in the education business, but maybe you could just share more color on the growth in different business segments in Q4. And also, you mentioned that the capacity guidance, the expansion guidance for the year is now lifted to 30%. How do you see that as a capacity expansion pace going forward? Do you think 30% is a sustainable expansion that we can maybe keep for two to three years?
Speaker Change: And number three years.
Speaker Change: Last year Q4.
Speaker Change: What are the impacts of the pandemic I think our business.
Speaker Change: In last year Q4 was basically back to normal. So that's why we gave the Q.
Speaker Change: Q4 top line guidance seems to be a little bit lower but I think in my personal view I think the the.
Speaker Change: The guidance.
Speaker Change: In dollar terms <unk>, 28% to 31% in RMB term is 34% to 37%.
Speaker Change: It is still very strong and.
Speaker Change: And and I think in the coming new fiscal year that means the fiscal year 'twenty five work class optimistic mistake on our revenue growth will be with the marketing space for the whole fiscal year.
Speaker Change: As for the expansion plan, yes, we raised the guidance of the.
Speaker Change: The capacity expansion.
Zhihui Yang: Thank you, Felix. Yeah, yeah, as you know, we did the top line guidance a lot this quarter. You know, just like the past couple of quarters. And, you know, as for the revenue guidance in Q4, which seems to be a little bit lower than the Q3 year-over-year revenue growth, there are three reasons.
Speaker Change: By 30% year over year this time.
Speaker Change: We're actually we're taking market share and I think with demands from the customers are very strong and Thats why we raised the guidance of the assessment plan again this quarter and going forward next year I think we will keep you.
Speaker Change: Almost the same pace to open the new learning centers because.
Zhihui Yang: You know, number one, as always, we're quite conservative to give the guidance. Sisi Zhao, Tianxiao Hou, Candis Chan, New Oriental Education & Technology Group Inc. And number three is, in last year's Q4, without the impact of the pandemic, I think our business in last year's Q4 was basically back to normal, so that's why we gave the Q4 power plant guidance seems to be a But in my personal view, I think the guidance, you know, in dollar terms, it's at 28 to 31 percent. In RMB terms, it's 34 to 37 percent. I think it's still very strong.
Speaker Change: Because we when we make when they made the analogy.
Speaker Change: The markets demand and supply.
Speaker Change: Supply so I think we're still on pace to take more market share.
Speaker Change: And as for the the.
Speaker Change: <unk> revenue growth of the different business lines.
Speaker Change: <unk>.
Speaker Change: Roughly <unk> of our key business lines like overseas related equal.
Speaker Change: Including the test prep and consulting.
Speaker Change: We will grow roughly about 15% to 20% range and.
Speaker Change: Domestic test prep University students business revenue growth will be around 20%, 25%.
Speaker Change: And.
Speaker Change: High school tutoring will grow moderately and Dod.
Zhihui Yang: And I think in the coming new fiscal year, that means fiscal year 25, we're quite optimistic about revenue growth with the margin station for the whole fiscal year 25. As for the extension plan, yeah, we raised the guidance on the capacity extension, you know, by 30 percent this time. Because, you know, we're actually taking market share, and I think the demands from customers are very strong, and that's why we raised the guidance on the extension plan again this quarter.
Speaker Change: The new business new initiatives.
Speaker Change: Key growth driver will be over maybe 60% revenue growth. This based on is it based on the exchange rate that estimated by us while I do with our projections.
Speaker Change: Right Okay.
Speaker Change: Okay, that's very clear thank you. Thank.
Speaker Change: Thank you.
Speaker Change: Thank you Felix.
Speaker Change: Our next question comes from the line of you win some.
China Renaissance: China Renaissance. Please ask your question.
Zhihui Yang: And going forward, next year, I think we will keep almost the same pace to open the new learning centers because we have done an analysis of the market's demand and the supply. So I think we're still on the pace to penetrate more markets.
Speaker Change: Good evening management, Thanks, putting taking my question. So my question here.
Speaker Change: The hour monitoring period, what kind of group level operation, our trucking operation monitoring and towards your own.
Speaker Change: 7%, which was flattish.
Zhihui Yang: And as for the revenue growth of the different business lines, if we discuss it in the next quarter, just roughly, for key business lines, like overseas-related, including test prep and consulting, will grow roughly about 15 to 20 percent. And domestic test prep, university students' business revenue growth will be around 20 to 25 percent. And, you know, high school tutoring will grow moderately. And the new business, new initiative, which is the key growth driver, will be over maybe 60 percent revenue growth. This is based on the exchange rate that is estimated by us when we do the projection.
Speaker Change: <unk> understood.
Speaker Change: Totally incremental.
Speaker Change: I will pass.
Speaker Change: Route to Italian oil supply.
Speaker Change: Expansion so.
Speaker Change: Just look at the education monitoring how does it expand our YY business, how would you expect churn anything unsecured quarters. Thank you.
Speaker Change: Yes, yes.
Speaker Change: The group's non-GAAP op margin was flattish in this quarter and.
Speaker Change: Within the education business I think we're seeing the meaningful GP margin and non-GAAP op margin extent expansion for education business in this quarter.
Speaker Change: I think the SaaS to view combined with the newly.
Zhihui Yang: when we do the projection,
Speaker Change: These businesses.
Felix Liu: Okay, that's very clear. Thank you.
Speaker Change: Structured model and the higher utilize the resources and the better.
Operator: Thank you for like. Our next question comes from the line of Yiwen Zhang. From China Renaissance, please ask your question, Yiwen.
Speaker Change: The utilization for the learning centers and the streamlined cost structure. So it make the education business margin expansion again this quarter.
Yiwen Zhang: Good evening, management. Thanks for taking my question.
Yiwen Zhang: So my question regarding our margin, if we look at the group level operation, just operation margin, it was 11.7%, which was fattish on a one-on-one basis. I understood that a lot of the incremental OPAS was due to the, you know, it's by expansion. So if we just look at the education rate and margin, how does it, you know, expand on a one-on-one basis? And how would you expand to China in the next few quarters? Thank you.
Speaker Change: And.
Speaker Change: So going forward I think in the in the coming Q4.
Speaker Change: Felipe.
Whole year.
Speaker Change: The new year.
Speaker Change: Physical Youre 25, I think we do have the operating room.
Speaker Change: <unk> yeah.
Speaker Change: Yes.
Speaker Change: As you know we raised the guidance of the learning center expansion by 30% and we hire more teachers and stops to to match with the new expansion, but I think the top line growth.
Speaker Change: In the new fiscal year 'twenty five we'll be very strong and we will have the leverage in fiscal year 95. So we expect you will see the margin expansion with the help with the healthy top line growth for education business.
Zhihui Yang: Yes, the group's non-gap OP margin was sluggish in this quarter, but within the education business, I think we're seeing meaningful GP margin and non-gap OP margin extension for the education business in this quarter. I think that thanks to the combined, the new business structure model, and the higher utilized resources, and the better the utilization for the learning centers, and the streamlined cost structure, so it makes the education business margin expansion again this quarter. And so going forward, I think in the coming Q4 and even for the whole year, the new year, fiscal year 2025, I think we do have operating leverage in hand.
Speaker Change: In fiscal year in the new fiscal year 'twenty five yes.
Speaker Change: We used to buy yes, I think the cost of expenses essentially for the selling marketing expenses this quarter increased.
Speaker Change: Was it primarily due to partially due to the Easter buys.
Speaker Change: The investments and yeah.
Speaker Change: Yes, I think.
Speaker Change: You saw the very strong.
Speaker Change: The growth is biased topline, especially for the private label products and the E Commerce business and I think used the buyer has devoted substantial investments to support the growth of the company.
Speaker Change: Clothing, the like the.
Speaker Change: Optimization of the multi.
Zhihui Yang: Yeah, as you know, we raised the guidance for the Learning Center expansion by 30 percent, and we hired more teachers and staff to match the new expansion, but I think the top-line growth in the new physical year 25 will be very strong, and we do have the leverage in physical year 25, so we expect you will see margin expansion with healthy top-line growth for the education business in the new physical year 25. Yeah, and the East Dubai, yeah, I think the cost of the expenses, especially for the selling market expenses, this quarter's increase was primarily due to, partially due to, the East Dubai.
Speaker Change: <unk> platform strategies.
Speaker Change: In <unk>, the other platform supply chain and product offerings and the quality control and also with the buy recruit some more.
Speaker Change: Professional talent people from the market and so we are.
Speaker Change: Domestic is the bias.
Speaker Change: Development going forward and we look forward to leverage these investments.
Speaker Change: DC leverage this investment where imports at this time and going forward. So in summary, the margin profile for the whole group. So we're optimistic about the margin expansion for the whole group in.
Speaker Change: For the <unk> business and in fiscal year 'twenty five.
Zhihui Yang: And I think East Dubai has made a substantial investment to support the growth of the company, including the optimization of the multi-platform strategies in Douyin, Taobao, and the other platforms, supply chain and product offerings, and quality control. And also, East Dubai recruits some more professional talent from the market. And so we are optimistic about East Dubai's development going forward, and we look forward to leveraging this investment or input this time and in the future.
Speaker Change: And also as well we do think.
Speaker Change: The east Dubai will generate more revenue top line growth and more profit to the company going forward.
Speaker Change: Okay.
Speaker Change: Okay. Thank you that's very clear.
Speaker Change: Thank you.
Speaker Change: Thank you Wang.
Speaker Change: Our next question comes from the line of Lucy Yu from Bank of America. Please ask your question Lucy.
Lucy Yu: Thank you Steven.
Lucy Yu: So my question is still on our margins. So it looks like switching from the minority interest is that <unk> might be loss, making for the corner. So how should we think about the east by margin volatility impact on the group level.
Zhihui Yang: So in summary, the margin profile for the whole group. So we're quite optimistic about the margin expansion for the whole group for the education business and in fiscal year 2025. And also, we do think East Dubai will generate more revenue, top-line growth, and more profit to the company going forward.
Lucy Yu: The upcoming quarter and upcoming fiscal year.
So Steven how do you plan those margins for the next fiscal year. Thank you.
Steven: Lucy you and I'm glad to hear from you.
Speaker Change: Two questions about the ERP supply because you know I'm afraid.
Yiwen Zhang: Okay, thank you. That's very clear.
Operator: Our next question comes from the line of Lucy Yu from Bank of America. Please ask your question, Lucy.
Speaker Change: Unable to share or whether you have other legends financial result.
At this moment and our guidance for the full they used to buy and you know in the next quarter in July I think.
Lucy Yu: Thank you, Stephen. So my question is still on the margins. It looks like, judging from the minority interest, that ESPY might be loss-making for the quarter. So how should we think about the ESPY margin volatility impact on our group level in the upcoming quarter and upcoming fiscal year? So Stephen, how do you plan those margins for the next fiscal year? Thank you. Lucy, you know, I'm glad to hear it.
Speaker Change: The buyer will enough there.
Speaker Change: The whole year report half year report and the full year report and so over time I think the managements of some function of Easter buyer will share more color with you about the margins and that would be top line growth, yes, but I must mention that words are still quite optimistic about the b E.
Speaker Change: The bias investments in this quarter and over the long run I think the Easter by.
Zhihui Yang: Lucy, you know, I'm glad to hear from you with the questions about East Dubai, but you know, I'm afraid I'm unable to share with you the latest financial results at this moment and our guidance for East Dubai. And you know, in the next quarter, in July, I think East Dubai will announce its whole-year report, half-year report, and the whole-year report. And so at that time, I think the management of Dongfang Zhenxuan in East Dubai will share more color with you about the margins and the top-line growth.
Speaker Change: Will bear fruit from this wound investments and will generate more revenue and profits to the hopeful we'll see.
Speaker Change: Thank you Steven.
Speaker Change: Thank you. Thank you Lucy.
Speaker Change: Our next question comes from the line of.
Speaker Change: Kim <unk> from T. H capital. Please ask your question piano.
Kim: Yes, Hi, Steven Cc.
Kim: This is related to the.
Kim: The high school.
Kim: <unk> learning center expansion and also the.
Zhihui Yang: Yeah, but I must mention that we're still quite optimistic about the East Dubai investment in this quarter. And over the long run, I think the East Dubai Mall will bear fruit from this long investment and will generate more revenue and profit for the whole.
Kim: Dan Cohrs learning Center.
Kim: Retention rates and utilization great for.
For both of them. Thank you.
I think for the utilization.
Utilization rates in the us.
Kim: Still been a retention rate for both the high school business and the timing of courses for Kenai.
Operator: Thank you. Thank you, Lucy. Our next question comes from the line of Tian Hou from TH Capital. Please ask your question, Tian.
Our.
Still improving.
Kim: Year over year actually quarter by quarter and saw.
Kim: And so.
Kim: The good news for US is we're seeing the trend is still there and so going forward we will.
Tianxiao Hou: Yes, hi Stephen, and Sisi. The question is related to the high school learning center expansion and also the non-academic course learning center. You know, what's the retention rate and utilization rate for both of them? Thank you.
Kim: I think we will see you'd be higher.
Kim: The utilization rates for the afore this business.
Kim: For the existing learning centers, and the and the higher the peak.
Zhihui Yang: I think the utilization rate and the student retention rate for both the high school business and the non-academic courses for K-9 are still improving year-over-year, actually quarter-by-quarter. And so the good news for us is we're seeing the trend is still there. And so going forward, I think we will see higher utilization rates for the existing learning centers and higher student retention rates, and you know a couple of years ago, typically it would take us for 12 months to get the breakeven point.
Kim: Still the retention rates and a.
Kim: A couple of year ago. So go cyclically, it's will spend us for 12.
Kim: 12 months to get the breakeven point.
Kim: No.
Kim: After we open the new learning center, but now I think roughly it will take the happier lastly, with six months to kind of a breakeven point.
Kim: And so I think going forward.
Kim: We expect the better the higher you will.
Kim: Utilization rates four learning centers and the higher so its students' retention rates for all business lines.
Zhihui Yang: [inaudible]
Tianxiao Hou: Thank you. Yeah, so one follow-up question. So before the double reduction, so when you guys do the learning center expansion, there's a tricky line. So, how much you do the expansion, if you do it bigger, it will impact the growth profit margin. So, I saw this quarter, the growth profit margin relative to last year at the same time was down like 5 percentage points. Is that because of the learning center expansion or because of E-SPI?
Speaker Change: Thank you yes.
Speaker Change: So one follow up question so before the Apple reduction so when you guys do the learning center expansion. So there is two key line so how might be into an expansion. If you do they've been bigger more than will be impacted gross profit margin. So I saw this quarter.
Speaker Change: Gross profit margin relative to last year same time with stomach a five five percentage points is that the cost learning center expansion or is because the eastside.
Zhihui Yang: Yeah, I think the Learning Center expansion, we raised the Learning Center expansion by 30%. I think it's, it's the results that we analyzed the whole picture of this business for the last three, two to three quarters. And as I said, on the math side, it's very strong, especially for the non-assignment courses for the CAT. And on the competition side, you know, the competition environment is different compared to a couple of years ago.
Speaker Change: Yes, I think the learning center expansion we risk.
Speaker Change: Again, the learning center expansion by 30% I think.
Speaker Change: As the results that we as analysts the whole picture of this business for the last three two to three quarters.
And I'll just add that on demand side is very strong, especially for b.
Speaker Change: And of course, its a FERC for the cash and and on the competition side.
Speaker Change: The competition environment.
Speaker Change: It's different compared to a couple of years ago.
Zhihui Yang: And so I think, you know, and the key is we only choose the top performing cities, both the bottom line and the top line and bottom line to allow them to open more learning centers or expand the new classroom area for the existing learning. So I think it will not drag the whole margin. On the contrary, it will help the margin expansion.
And so I think.
Speaker Change: Under the key is we only choose the top pro forma performance Cds.
Both the bottom line and all at the topline and Bottomline to up to allow them to open more learning centers or extend the new classroom area for the existing learning centers. So I think it will not drag the whole Margarita.
Speaker Change: The opposite it will help the margin expansion going forward.
Tianxiao Hou: Yes. Got it. Thank you so much, Stephen. Good quarter. Thank you.
Speaker Change: Okay got it thank you so much.
Speaker Change: Good quarter. Thank you.
Speaker Change: Yes.
Speaker Change: Thank you Tim.
Operator: Our next question comes from the line of Timothy Zhao from Goldman Sachs. Please ask your question, Timothy.
Speaker Change: Our next question comes from the line of Timothy Zhao from Goldman Sachs. Please ask your question Timothy.
Timothy Zhao: Great. Hi Stephen. Hi Sisi.
Timothy Zhao: Thank you for taking my question. My question is regarding the cash flow statement. So basically, one is on the operating cash flow. I noticed that for this quarter, I think the operating cash flow dropped a little bit on a year-on-year basis. Just wondering if you can share some color on the rationale or the reason behind that.
Timothy Zhao: Great Hi, Stephen Hi, Susan. Thank you for taking my question. My question is regarding the cash flow statement.
Timothy Zhao: One is on the operating cash flow I noticed that for this quarter.
Timothy Zhao: Operating cash flow drop a little bit on a year on year basis. I was wondering if you can share some color on the rationale or the reason behind that.
Timothy Zhao: And second, also on the financing cash flow, I do notice that the existing share purchase program is about to expire. Just wondering, regarding your capital allocation and the shareholder return, any thoughts on the shareholder policy going forward in terms of potential dividends or further share purchase programs? Thank you.
Timothy Zhao: And also on the financing cash flow I do notice that.
Timothy Zhao: Because this gain share repurchase program is about food.
Timothy Zhao: <unk> just wondering regarding your capex allocation and shareholder return and your thoughts.
On the shareholder return policy going forward in terms of potential dividend or for their share per share repurchase programs. Thank you.
As for the operation operating cash flow I think you know I suggest the investors to make the analysis of the cash flow by year on year.
Zhihui Yang: As for the operation's operating cash flow, I think, you know, I suggest investors make the analysis of the cash flow by year on year, not by queue on queue. Because of business seasonality or the student enrollment window changing, you know, quarter by quarter.
Timothy Zhao: Not Q on Q, because the business has seasonality or the student's enrollments Wendell changed.
Timothy Zhao: Quarter by quarter sold.
Zhihui Yang: So that's why I suggest to your guys to do the analysis year on year. So if you see the deferred revenue balance year on year, the increase is still very strong. And so, yeah, that's it.
Timothy Zhao: That's why I suggest for your guys to make the analysis year on year. So if you saw the deferred revenue balance year on year.
Timothy Zhao: The increase.
Timothy Zhao: Still very small and.
Speaker Change: So yes, that's it.
Zhihui Yang: And that's why we give very strong top-line guidance for Q4. Even though Q4 is a week, it's a slow quarter. And as for the share buyback plan, yeah, I think we keep creating more value for the shareholders, and I think we will keep buying back shares. And, you know, this round, we announced the share repurchase plan two years ago, roughly two years ago, and we finished almost half of it when. And I think we'll keep buying in this quarter. And at the end of this fiscal year, I think we will discuss with the Board how to create more value for investors as they make capital returns, either through a share buyback or dividend.
Speaker Change: And that's why we gave the the very strong.
Speaker Change: Topline guidance for Q4.
Speaker Change: Even though Q4 is a week.
Speaker Change: The slower quarter yeah.
Speaker Change: And and.
And for Us.
Speaker Change: Sure.
Speaker Change: Back plan, Yes, I think.
Speaker Change: We keep to create more value to the shareholders and I think we will chips.
Speaker Change: Buying the share back and this round, we announced the share repurchase plan two years, roughly two years ago and we.
Speaker Change: The finished almost a half one 190 $495 million and I think we'll keep buying in this quarter and.
And.
Speaker Change: This fiscal year and.
Speaker Change: We will discuss with the board.
Speaker Change: To this item.
Speaker Change: Whether or not to accept it because pants.
Speaker Change: The share repurchase plan and but historically, we made a couple of times share buybacks and a couple of sub several times the substantial dividend. So our aim is to create more value to the investors as a capital return either share buyback or dividends.
Timothy Zhao: Thank you. Thank you, Stephen, and good health.
Operator: Thank you, Timothy. Our next question comes from the line of Caini Wang from CICC. Please ask your question, Caini.
Thank you Ken.
Caini Wang: Hi Stephen and Sisi, actually I have a question about the financials. So we saw a larger loss from equity method investments this quarter, as well as a lower investment interest this quarter compared to the same period last year. So I'm just wondering which factors led to these changes. Thank you.
Ken Camp: Thank you. Thank you Stephen that's helpful.
Speaker Change: Thank you Timothy.
Speaker Change: Our next question comes from the line of.
Speaker Change: Tiny Huang from C. ICC. Please ask your question Tony.
Speaker Change: Okay.
Tiny Huang: Thanks Steven.
Tiny Huang: Actually I have a question about the financial.
Tiny Huang: We saw a large.
Tiny Huang: From equity method investments.
Tiny Huang: Quanta as well as.
Tiny Huang: Net investment income this quarter compared to the thank you very much.
Speaker Change: So I'm, just wondering which sector.
Speaker Change: Changes thank you.
Speaker Change: So I think yes, we in this quarter were made.
Zhihui Yang: I think, yeah, we in this quarter made the, you know, true, the investor company in par loss this quarter. So, I think we do have a one-time impact on the very bottom line this quarter. I think that all those two companies were negatively impacted by the two deduction policy two and a half years ago, but it is just one time. It's not, you know, it's just one time.
Speaker Change: True.
Speaker Change: <unk>.
Speaker Change: The investor.
Speaker Change: Investor Company in power loss in this quarter. So I think we do have the one time impacts on the.
Speaker Change: The very bottom line this quarter I think the all of those two companies was negatively impact.
Speaker Change: By the by the two.
Speaker Change: The deduction, our policy to two and a half years ago and but it is a onetime it's not.
Caini Wang: Yeah, thank you. Just a follow-up question about the, as we also saw less investment interest this quarter, queue-on-queue, so I'm just wondering the reason.
Speaker Change: As just one time.
Speaker Change: Okay. Thank you and just a final question.
Speaker Change: Also we saw less investment interests at this quarter Q on Q.
Speaker Change: Good morning.
Caini Wang: I'm sorry, can you repeat it again?
Speaker Change: I'm sorry.
Speaker Change: Pete again.
Speaker Change: Somewhat.
Caini Wang: Yeah, as you saw, less other income, which I suppose is mainly our investment interest.
Pete: Yes, yes.
Pete: As you saw less other income, which I suppose is mainly.
Zhihui Yang: The interest rate in China has been down this quarter, and so I think it impacts some interest income.
Pete: Net interest.
Pete: Okay.
Pete: Decreased.
Pete: Yes.
Pete: Thank the.
Pete: The interest rate.
Pete: In China.
Pete: As has been done.
Zhihui Yang: Actually, the interest income is the absolute dollar number similar to the previous one to two quarters. It's pretty stable.
Pete: And in it.
Pete: In this quarter and so I think its impact some interest income.
Pete: Yeah actually the interest income is the absolute dollar number or similar was premise one to two quarters, yeah, yeah yeah.
Caini Wang: That's it. Thank you, students at CICI. Congratulations on your results again. Thank you. As a reminder, two authentic classes.
Pete: Stable.
Speaker Change: Thank you Steven.
Speaker Change: Congrats on the results again.
Speaker Change: Thank you.
Speaker Change: Thank you.
Operator: As a reminder, to ask a question now, please press star 1 on your telephone keypad. Once again, to ask a question, please press star 11 on your telephone keypad. Once again, that's star 11 for questions, ladies and gentlemen. All right, we are now approaching the end of the conference call. We do have one more question from D.S. Kim from J.P. Morgan. Please ask your question.
Speaker Change: As a reminder to ask that question now please press star one one on your telephone keypad.
Speaker Change: Yes.
Once again, you'll ask a question. Please press star one on your telephone keypad.
Speaker Change: Once again Thats star one.
Speaker Change: For questions, ladies and gentlemen.
Speaker Change: Yes.
Speaker Change: Alright, we have now approaching the end of the conference call.
Speaker Change: We do have one more question from DS Kim from Jpmorgan. Please ask your question D S. Kim.
D.S. Kim: Hello, sir. Good evening, and congrats on the amazing top-line growth again. Actually, I wanted to ask about margins and expansion. I think you've already discussed all of that, so just wanted to follow up on one small thing, if that's okay. You mentioned earlier that new center expansions now could be a margin of credit because it's primarily an expansion of the existing center, but if we only look at, say, newly open locations, newly open centers for non-academic courses, how long do you think it takes for those new centers to hit break-even and then to ramp up to the full level on the central level?
DS Kim: Hello, Sir good evening and congrats on an amazing topline growth again actually I wanted to ask about margins and expansion I think you are ready to discuss all of that so just wanted to follow up on one more thing. If that's okay. You manage on all year that a new center expansions are now could be a margin or Craig.
DS Kim: Because it is primarily expansion of the existing center.
DS Kim: If we only look at say newly opened locations newly opened centers for non academic courses, how long do you think how long.
DS Kim: Does it take for those new centers to hit breakeven and then to ramp up to the full level on defense held up I think back in the days. It took about a year to turn breakeven for the new learning Center K 12 ft and another a couple more quarters to fully ramp up and I'm wondering how this has changed.
D.S. Kim: I think back in the days, it took about a year to turn break-even for the new learning center at K-12 AST and another couple more quarters to fully ramp up, and I'm wondering how this has changed now versus now that the courses have changed it to primarily non-academic courses.
DS Kim: And now versus now that.
DS Kim: Of course, it has changed it to primarily for non academic.
Zhihui Yang: I think, you know, now, typically, on average, it will take six months to get a pretty good point. That means we will have the learning centers even faster. And so in the second year, typically, the margin of the new learning centers depends on the different areas. But I think the margin of that new learning center will get somewhere around 15 to 20 percent. So it's much faster. That's why we made the decision to raise the learning center expansion guidance by 30%. And so I think this is a good trade-off.
DS Kim: I think <unk>.
DS Kim: <unk> typically on average.
DS Kim: It will take the six months.
DS Kim: The breakeven point.
DS Kim: Got one up the learning centers.
DS Kim: More faster.
DS Kim: So.
DS Kim: And the second year.
DS Kim: During the year, but typically the margin of the new learning centers is dependent on the different areas, but I think the margin of that new learning centers to get somewhere around the 15% to 20%. So it's a much faster. So that's why we make the decision to raise the learning center expansion guidance by 30 <unk>.
DS Kim: And so I think it's a good trade off this wrong in this water in Mexico in Q3 Q4, even for the whole year.
Zhihui Yang: You know, this round, in this quarter, in Q3, Q4, even for the whole year, in physical year 24, we will have more earnings than 30%. But it will drive the top line growth up in the new fiscal year, 25. And I believe that for the whole business, the whole margin of the education business will be improved in the fiscal year 24, because of better utilization and higher student
DS Kim: Fiscal year 'twenty four we opened more earnings in the 30%, but it's will drive the top line growth up in interest in the new fiscal year on the five and I believe that for the whole business either kitchen business. The whole margin of the education business will be improved in the.
DS Kim: Fiscal year, 'twenty, four because the battery utilization and the higher students break syndrome.
D.S. Kim: Thank you, sir. I think it's not just good; it's an amazing trade-off to have. But if I may follow up here, like, do you think that faster ramp-up or faster break-even is just a timing thing, earlier recovery, earlier ramp-up in utilization? Or do you think that even after the ramp-up, the ultimate level of center-level margin can actually be higher than back in the days, the academic days? I.e., like, at a central level, do you think that five years down the road, some of the non-academic centers can make more than 20% margins better than the K-9 academic centers of the past? Or just the timing is all the
Speaker Change: Thank you Sir I think it's not just with this amazing trade off to have but if I if I may follow up here.
Speaker Change: Do you think that fast turbine Bubba faster breakeven is just a timing thing earlier.
Recovery, all year ramp up in utilization and or do you think that even after the ramp up the ultimate level of center level margin tend to be actually higher than that.
Speaker Change: Back in the days to academic I E like on a central level do you think that five years down the road some of the non academic centers can make more than 20% margins are better than the canine academic of the past or just a timing is all year.
Zhihui Yang: Both, you know, yeah, as I said, it will take a shorter time to get the break-even point. You know, this is number one. And number two is, you know, theoretically, I think the ultimate or the margin of the new learning centers will be a little bit higher than a couple of years. So, it's a good trade-off for us to open more learning centers for non-academic courses and work for the overseas related.
Speaker Change: Both.
Speaker Change: Yes, I said that.
Speaker Change: It will take the shorter time to get the breakeven point.
Speaker Change: This is number one and number two is if your outlook throughout <unk> I think the ultimate or the margin.
Speaker Change: Of the dealer new learning centers, I think will be a little bit higher than a couple of years ago.
Speaker Change: So it's a good trade off for us to open more learning center for non academic courses, where even for the overseas related business.
Speaker Change: <unk> is an amazing trend and Ah Congrats again, thank you.
D.S. Kim: It's an amazing trend, and congrats again.
Speaker Change: Thank you.
Speaker Change: Thank you, yes, we have now approached the end of the conference call I will now turn the call over to new Orientals Executive President and CFO, Stephen Yang for his closing remarks.
Zhihui Yang: We have now approached the end of the conference call. We will now turn the call over to New Oriental's President and CFO, Steven Yang, for his closing remarks.
Zhihui Yang: 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 relations representatives.
Zhihui Yang: Again, thank you all for joining us today.
Zhihui Yang: You have any further questions. Please do not hesitate to contact me or any of our Investor Relations Representatives. Thank you.
Operator: Thank you. That concludes today's conference call. Thank you for participating. You may now disconnect.
Thank you that concludes today's conference call. Thank you for participating you may now disconnect.
Zhihui Yang: [music].