Q1 2025 New Oriental Education & Technology Group Inc Earnings Call
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Speaker Change: Good evening and thank you for standing by for New Orientals FY 2025 first quarter results earnings Conference call. At this time, all participants are in listen only mode.
Speaker Change: After managements prepared remarks, there will be a question and answer session. Today's conference is being recorded.
Speaker Change: If you have any objections you may disconnect at this time.
Speaker Change: But now I'd like to turn to meet Shanghai, but your host for today's conference Mr. Chi Chow.
Chi Chow: Thank you Hello, everyone and welcome to New Orientals first the physical counter 2025 earnings conference call. Our financial results for the periods were released earlier today and are available on the company's website as well as on newswire services today, Steven Y'all, exactly what the president and Chief Financial Officer and I.
Chi Chow: Well sure do rental its latest earnings results and business updates in detail with you after that Stephen and I will be available to answer your questions before we come to you now. Please note that the discussion today will contain forward looking statements made under the safe Harbor provision of the U S. Private Securities Litigation Reform Act of 90 95.
Chi Chow: Forward looking statements involve inherent risks and uncertainties.
Chi Chow: Such our results may be materially different from the view expressed today.
Chi Chow: 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 in addition, a webcast of this conference call will be available on new Orientals investor.
Chi Chow: <unk> web site at Investor adopt new Oriental or.
Chi Chow: I will now.
Mr. Yao: Turn the call over to Mr. Yao from Stephens. Please go ahead. Thank you Susie.
Hello, everyone and thank you for joining us on the call.
Mr. Yao: We're pleased to announce that the company has forged a healthy growth across our key business lines, you alignment would be expectations with a top line growth of 35% this quarter.
Mr. Yao: Total net revenues, excluding revenues generated from east to buy private label products and the live streaming business increased by 33, 5% year over year.
Mr. Yao: In particular, we're impressed by the highly encouraging growth.
Mr. Yao: The new endeavors have anchors, which have significantly contributed to the core building blocks.
Mr. Yao:
Mr. Yao: At the same time, you arent host bottom line performance for the core educational business has also achieved healthy yields offered few margin wise, we have excluded the operating margins generated from east to buy for this quarter for a better reflection of the performance of.
Mr. Yao: No rentals core educational business.
Mr. Yao: The operating margin and non-GAAP operating margin for this quarter have reached 23, 7% and 24, 4%, representing 370, and 220 basis point improvement year over year, respectively.
Mr. Yao: We're pleased to see the tremendous efforts.
Mr. Yao: That's with volatility in schwab offerings and platforms, sparking positive growth across our business lines.
Mr. Yao: Our commitment to maintaining a healthy profitability and market share stats firm as we strive to create sustainable value for them.
Mr. Yao: Customers and shareholders in the long term.
Mr. Yao: Now I would like to spend some time to talk about the quarter's performance across our existing business lines and new initiatives to you in detail.
Mr. Yao: Our key remaining business continue to secure our encouraging trends this quarter.
Mr. Yao: Breaking it down the oversea test prep business recorded a revenue increase of 19% year over year for the fiscal <unk>.
First quarter of 2025.
Mr. Yao: So overseas study consulting business reported revenue increase of about 21% year over year for this quarter.
Also in the University students business recorded a revenue increase of 30% year over year for this quarter.
Mr. Yao: The ongoing investments, our new education on business initiatives, which mostly revolved around specifically students oh around development.
Mr. Yao: Pouch the company's N. Gen two innovation, having secure strong momentum in their respective ventures.
Mr. Yao: Firstly he not.
Mr. Yao: Dominic of children courses, which we have offered around the 60 cities focus on cultivating students in a way that's <unk>.
Mr. Yao: And the temporary Hudson's equality.
Mr. Yao: Were pleased to receive solid interest with a total of approximately 484000 student enrollments reported in this quarter. The top 10 cities in China contributes over 60% of this business.
Mr. Yao: Secondly, the intelligence learning system and device business I've seen.
Mr. Yao: Adopted in around 60 series.
Mr. Yao: We're happy to see elevated customer visitation is scalability with approximately 323000 active users reported in this quarter.
Mr. Yao: The revenue contribution of these initiatives from the top 10 cities in China, it's around the 55%.
Mr. Yao: Our smart education business educational material and to utilize smart study solutions have continued to contribute material yields to the overall advancement of the company.
Mr. Yao: In summary, our new educational business initiatives have reported a revenue increase of 50% year over year for this quarter.
Mr. Yao: In addition, our newly integrated tourism related business line is now comprised of a diverse offerings of cultural trips study of tourists in China and overseas as well as the account education.
Mr. Yao: With me in the business line, our study tour and research Caf business for students of K 12, and University H achieved tremendous growth this quarter with an increase of 221% revenue year over year for this quarter.
Mr. Yao: We have operated study towards research account business.
Mr. Yao: Over 55 cities across the country with a top 10 cities in China offering over 55% of revenue share of this new business.
Mr. Yao: The number of top notch tourism offerings. We're also piloting to expand our reach to all age groups.
Mr. Yao: We brought in the middle aged elderly individuals around the six <unk> feature to provinces in China and globally.
Mr. Yao: As far as well as this quarter.
Mr. Yao: Our devotion to deliver premium or offerings, so our value of the customers and we believe these new business lines will contribute continuously meaningful revenue from this fiscal year.
Mr. Yao: With regards to our <unk> system.
Mr. Yao: We have perceived in revamping, our platform and leverage our educational infrastructure and technology edge, our remaining key business and new initiatives with a vision to provide advanced diversify the outpatient service to customers of all ages and this quarter our total of 2000.
Mr. Yao: $4 $6 million has been the masses.
Mr. Yao: <unk> teaching platform, which equips us with the flexibility to maintain a rivaled service to students.
Mr. Yao: In terms of in terms of the <unk> performance. Since April 2022 is the bi has launched a total of 188 skus in private label products in just two years.
Mr. Yao: Our products categories.
Mr. Yao: Landed into a well diversified product mix to date.
Mr. Yao: During the reporting period is the buy also at least the significance of the offering only products with a high cost of performance, which has proven effective in reiterating is the best value in the minds of our current and new users.
Speaker Change: That's true our multichannel strategy that has been.
Speaker Change: That has driven sustained low growth if the box footprints.
Speaker Change: Expanded from our last streaming channels to be lack of Tmall JD to total and sell homes will.
Speaker Change: Amplify our reach to a wider customer base.
Speaker Change: In the new year is to buy we'll explore offline channels by examining the partnership with offline schools on the biannual rental brands and the other parties.
Speaker Change: Part of our mission to initiate the offline sales network and they enhance our brand awareness to the greater expense.
Speaker Change: With regards to the company's latest financial position I am pleased to share that the company has seen a healthy financial status with the cash and cash equivalents term deposits and short term investments totaling approximately $4 9 billion.
Speaker Change: Now I would also like to take the opportunity to highlight the company's board of directors approved a share repurchase program in July 2022, and of which the company is authorized to repurchase up to $500 million.
Speaker Change: After the company avs or common shares through the next 12 months the company's board of directors further approach to assembly effective time of the share repurchase for one to May 31, 2025, and the increasing the aggregate value of the shares that the company is authorized to repurchase.
Speaker Change: $400 million.
Speaker Change: So $700 million.
As of October 20, <unk> 2024, the company repurchased.
Speaker Change: I worked at approximately $9 8 million ABS for approximately $457 $9 million from the open market.
Now I will turn the call over to <unk> to share with you about the key financials.
Speaker Change: Let's go ahead and you'll see that.
Speaker Change: I'd like to share our key financial details for this quarter.
Speaker Change: Cost and expenses for the quarter.
Speaker Change: 11, <unk> hundred $42 3 million, representing a 27, 6% increase year over year, non-GAAP operating cost and expenses for the color.
Speaker Change: It excludes share based compensation expenses.
Speaker Change: 11, <unk> hundred 30 <unk>.
Speaker Change: $735 4 million representing.
Speaker Change: Representing a 32.
Speaker Change: 8% increase year over year, the increase was primarily due to the call. Thanks benefits related to accelerated capacity expansion for educational business and newly integrated tourism related business.
Speaker Change: Cost of revenues increased by 32, 3% year over year to $583 5 million.
Speaker Change: Marketing expenses increased by 42, 3% year over year to $193 7 million G&A.
Speaker Change: G&A expenses for the quarter increased by 15% year over year to $365 1 million.
Speaker Change: non-GAAP G&A expenses, which excludes share based compensation expenses were $354 $5 million, representing about 22, 1% increase year over year.
Speaker Change: Total share based compensation expenses, which were allocated to related operating costs and expenses decreased by 82, 7% to $6 9 million in the first fiscal quarter up to about 25% operating income was $293 $2 million, representing a 42 nine.
Speaker Change: An increase year over year non-GAAP income from operation operations for the quarter, whereas $300 million, representing a 22, 6% increase year over year.
Speaker Change: Net income attributable to new Oriental for the quarter was $245 4 million.
Speaker Change: Representing a 48, 4% increase year over year basic and diluted net income per ads attributable to new Oriental were.
Speaker Change: $1 49, and $1 48.
Speaker Change: Great respectively, non-GAAP net income attributable to new Oriental for the quarter was $264 $7 million representing.
Speaker Change: Representing a 338 39, 8% increase year over year, non-GAAP basic and diluted net income per ads attributable to new Oriental were $1 61.
Speaker Change: $1 60, respectively.
Speaker Change: Net cash flow generated from operations for the first fiscal quarter of 2025.
Speaker Change: Approximately $183 two.
<unk>.
Speaker Change: Capital expenditure for the quarter were $82 million.
Speaker Change: Turning to the balance sheet as of August 31, <unk> 31 to 24, New Oriental had cash and cash equivalents of 1100 $47 million. In addition, the company had.
Speaker Change: <unk> hundred 13 8 million in term deposits and.
Speaker Change: <unk> thousand $248 $6 million in short term investments, new orientals deferred revenue, which representing cash collected upfront from customers and related revenue.
Speaker Change: That will be recognized as the service or goods are delivered.
Speaker Change: And also first quarter of fiscal year 2025.
Speaker Change: $733 1 million, an increase of 23, 7% as compared to 15, <unk> hundred $1 4 million at the end of the first quarter of last fiscal year now ill hand over to Stephen to go through our outlook and guidance. Thank.
Stephen: Thank you Susie.
Stephen: With the encouraging performance achieved from our diverse business lines.
Stephen: Our solid education of the sources that have stood the test of time, we're bullish on maintaining a healthy growth for our core educational business simultaneous with the bolt ongoing investments.
Stephen: Spending our new tours unrelated business.
Stephen: Leaf that this course will nourish more extensive nationwide rollouts of our tours in the in this fiscal year.
Stephen: While we strive to safeguard a healthy balance between revenue and profitability growth. We will also cautiously managed our capacity expansion Harris to underpin the development of our additional business in this new era.
Stephen: We plan to increase our capacity by around 20% to 25% for this fiscal year. The most of the new openings will be launched in the cities with better top and bottom line performance rest assured that we will closely monitor the pace and scale new openings in accordance.
Stephen: To the local operations and financial performance during the year.
Stephen: Every second quarter of our financial year tends to be a slower rate due to the seasonality of our business being.
Stephen: In fact, we remain confident attending a steady growth and the satisfactory operating profits for the for the full fiscal year.
Stephen: We expect total net revenues excluding revenues generated from used to buy in the second quarter of the fiscal year 2025 September one 2024 through November 32024 to be in the range of $861 4 million to 871 eight.
Stephen: Million.
Stephen: Representing a year over year increase in the range of 25% to 28% yes.
Stephen: Yes.
Stephen: Based on our current estimation, we expect the operating margin for the whole company, except for Easter by for the fiscal year 2025, we will expense year over year.
Stephen: I must say that these expectations and forecast reflect our considerations of the latest regulatory matter.
Stephen: As well as our current and preliminary view, which is subject to change.
Stephen: To conclude new Oriental will always pursue premium offerings to our customers simultaneously achieve sustainable growth.
Stephen: To achieve that we will continue to devote necessary resources on research and application of new technologies, such as AI and check CBD into our education on product offerings with the ambition to at least our strengths to pursue to the growth in our pricing efficiency.
Stephen: We will also continue to seek guidance from the from and cooperated with the government authorities.
Stephen: Comply with the relevant policies guidelines and any related regulations as well as to further adjust our business operations as required.
Stephen: As always we will work diligently to enhancing the nations education level to strengthen the.
Stephen: <unk>, leading position so as to unveil further potential across all our business line and realizing our vision.
Stephen: This is the end of our fiscal year 2025, Q1 summary at this.
Speaker Change: Points I would like to open the floor for questions. Operator, Please open the call for beef. Thank you.
Speaker Change: Thanks for 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.
Speaker Change: If you have more than one question. Please request to join the question queue again. After your first question has been addressed.
Speaker Change: If you would like to ask a question you will need to press star one and one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one on one again.
Speaker Change: Thank you.
Speaker Change: We will now take our first question is.
Speaker Change: From the line of Felix Liu from UBS. Please go ahead.
Speaker Change: Okay.
Felix Liu: Good evening management. Thank you for taking my question.
Felix Liu: My question is on your second quarter guidance.
Felix Liu: We noticed that in the first quarter your capacity expansion was over 30 pricing year on year, but the number of learning Center. However, if we look at your second quarter guidance.
Felix Liu: Slower than your capacity expansion in the first quarter.
Felix Liu: So how should we think about the gap between capacity growth and revenue guidance.
Felix Liu: Can management share your outlook for the.
Felix Liu: Second half gross well do we expect to see that revenue growth to converge with capacity.
Felix Liu: <unk>.
Speaker Change: Yes, I think yes, thank you Felix as for the Q2 guidance.
Felix Liu: We gave the guidance of.
Felix Liu: The topline growth will be in the range of $25 two.
Felix Liu: 28% in dollar terms year over year.
Felix Liu: As you know every second quarter tends to be a slower quarter due to the seasonality of our education business.
Felix Liu: And but you know we will remain confident opinion, a steady growth of around 30% year over year.
Felix Liu: For the whole year, so that means we expect the revenue growth.
Felix Liu: Loading is to buy in Q3, and Q4 will be accelerated compared to the growth of Q2.
Felix Liu: So you know as you know, even though we have seen some impacts of the existing <unk>.
Felix Liu: Amit environments like the overseas business.
Felix Liu: We will expect for the full fiscal year revenue growth.
Felix Liu: <unk>.
Felix Liu: Except for you to buy will be around 30% year over year.
Felix Liu: Yes.
Felix Liu: <unk>.
Felix Liu: More learning centers in last year, Q3, and Q4 as well.
Felix Liu: We have seen will run up the learning centers are much faster than before and so I think we will feel would be new.
Felix Liu: Learning since it's more students into the learning centers.
Felix Liu: Specialty.
Felix Liu: Three in Q4, so we're quite optimistic about the.
Felix Liu: The top line growth for the whole year.
Speaker Change: For the whole year. Thank you Felix.
Felix Liu: Thank you.
Felix Liu: Thank you.
Speaker Change: We'll now take our next question.
This is from the line of Alice Cai from Citi. Please go ahead.
Good evening Steven.
Thanks for taking my question I have a question about the pension.
Speaker Change: Q2 is typically a low season.
Speaker Change: Joey slowing down.
Speaker Change: During this period to improve margin and Jay is that.
That should be concentrated in Q1, and Q4 of what can be bought and for the upcoming.
Speaker Change: Where are you focused on encouraging penetration in existing cities rather than showing new one.
Speaker Change: Yes.
Speaker Change: But I know this quarter of Q1, we have added around the 6% steel capacity.
Speaker Change: And so as I said we.
Speaker Change: We plan to.
Speaker Change: Uh huh.
Speaker Change: Our capacity expansion by 20% to 25% for the whole year.
Speaker Change: Last year, we opened more learning centers, but this year I think we will open the learning centers.
Speaker Change: More healthy pace, 20% to 25% and.
Speaker Change: Yeah.
Speaker Change: Our society.
Speaker Change: Run off the learning centers much faster than before and so I think that as the whole year wise I think the margin you will see margin expand it for the whole year and mainly in the Q2, yes, we might be need some margin.
Many margin pressure into Q2 because of the seasonality Q2 is the low season, but we do believe for the whole year. The margin will be expanded for the education business, except for for Easter Bye.
Speaker Change: Thanks Robert.
Speaker Change: Thanks.
Speaker Change: Thank you.
Speaker Change: We will now take our next question.
And this is from UN I apologize UN Zhang from China Renaissance. Please go ahead.
Speaker Change: Yeah, great. Thanks for taking my question. So my question here is ill follow up after my answering.
Speaker Change: Very good Sam.
Speaker Change: <unk> increased to 120 bps.
Speaker Change: Y O y basis with both entertain a previous quarter. So can you discuss more about what's driving this improvement.
Speaker Change: Should we think about our <unk> drive us to play out in the rest of the year. Thank you.
Speaker Change: Thank you Yvonne.
Speaker Change: Ask the question about the margin lot of startup would be merger analysis of this quarter. The non-GAAP op margin for educational business, which excluding the bi was extended by 2000.
Speaker Change: And 20 basis points year over year.
Speaker Change: As you know I think last year Q1, op margin was high base. So that means we have.
Speaker Change: Harder comparison this quarter.
Speaker Change: Got it.
Speaker Change: The margin expansion by 220 basis points year over year.
Speaker Change: This was mainly due to the following reasons.
Speaker Change: Number one we're pleased to see that but this is the lines achieved the positive topline growth for all business lines.
Speaker Change: Two is we started to bear fruits of the learning center expansion of lost a year, perhaps that would be the overall utilization rates up and thats more operating leverage number three we started to make cost control in the whole company and we leverage more over.
Speaker Change: Hot in this quarter.
Speaker Change: Even though we spend more money on.
Speaker Change: The new tourism business.
Speaker Change: But.
Speaker Change: The personal business, except for the Bayou steel called margin expansion.
Speaker Change: The higher than we expected and I saw the margin outlook.
Speaker Change: Due to the seasonality of the business every second quarter is the low season. So we're likely to experience some minor margin pressure in the second quarter, but FSS.
Speaker Change: We work product confidence about Q3 and Q4. So we are optimistic on the margin profile for the education business.
Speaker Change: Excluding Easter by in the whole year, and I think we expect that the whole year Mark of the non-GAAP op margin will be expanded.
Speaker Change: Thank you Eva.
Eva: Thank you.
Speaker Change: We will now take our next question.
Speaker Change: This is from Lucy Yu from Bank of America. Please go ahead.
Speaker Change: Hi, Sterling.
Lucy Yu: But just to clarify as you may have said second quarter non-GAAP op margin will be under pressure.
Lucy Yu: Do you mean that excluding <unk> were going to see margin contraction on a year over year basis. So just to clarify on that.
Speaker Change: Actually my question is on the cultural tourism.
Speaker Change: Mentioned that or Ken revenue was up by over 200% year over year.
Speaker Change: So Matt now like how much revenue.
Speaker Change: That cultural tourism contributed this quarter and.
Speaker Change: Is that.
Speaker Change: <unk> segment loss, making a profit making for this quarter. Thank you.
Speaker Change: Yeah, the margin the timing margins pressure in Q2.
Speaker Change: Well that is only related to the education business and because you know we guided the 25% to 22, 28% top line growth and the Q2 is the low season of sea.
Speaker Change: B.
Speaker Change: The educational business. So I think you will see more leverage.
Speaker Change: In Q3, and Q4 and so this is not the b cell.
Speaker Change: We're quite optimistic optimistic about the margin profile in Q3, and Q4 and the tour them. The SaaS. Yeah Q1 was the peak season for the tourism business, such as the <unk> business and the overseas study toward the Maverick study tour.
Speaker Change: So the revenue of the Q1 was somewhere around 90.
Speaker Change: $19 million, obviously tourism vis vis the revenue in Q1 and yeah. We were profitable in Q1 because of the peak season, but for the whole year I think we will feel loss, making.
Speaker Change: The chosen business it's just.
Speaker Change: Just the first year, we would need more time to testify the products and the business models for the tourism.
Speaker Change: We're quite confident about the developments of the tourism business.
Speaker Change: Lucy.
Lucy Yu: Thank you Steven.
Lucy Yu: Thank you.
Speaker Change: We will now take our next question.
Speaker Change: This is from Timothy <unk> from Goldman Sachs. Please go ahead.
Timothy: Hi, Steven Thank you for taking my question. My question is regarding your.
Timothy: K 12, new initiatives just wondering if you can breakdown in terms of the revenue growth be trend, not becoming tutoring and intelligent devices and services and a related question on this specific segment ASI do noticed that I think for the napkin Turing into quarterly new enrollment for the past quarter. It grew by around <unk>.
Timothy: 7% year on year.
Timothy: Compared to close to 40% a quarter ago. Just wondering if you can elaborate more on DAU growth and what kind of growth that we should expect on the enrollment.
Timothy: I think for the following quarters versus only 11% for this quarter. Thank you.
Speaker Change: With the good with the team about the revenue breakdown, whether we're getting the new business, yes, the new K Tonight educational related including the <unk>.
Speaker Change: Alright, now make tutoring and intelligent learning devices business grew by over 50% in Q1 15.
Speaker Change: 56% and both are growing at similar rates.
Speaker Change: And Doc.
Yes.
Speaker Change: Question about the enrollment, yes, enrolment growth, albeit <unk> seems to be low in this quarter.
Speaker Change: <unk>, we opened the summer.
Speaker Change: The windfall earlier than that of last year. So we saw that as would reported more.
More student enrollment and last year Q4, this was kind of the timing difference and.
Speaker Change: And so if you combine Q4 and Q1, but enrollment growth will be.
Speaker Change: Normal.
Speaker Change: Some of our strong absolutely.
Speaker Change: And.
Speaker Change: Even though they would be Q to Q2.
Speaker Change: It will be low season for the work my confidence.
The whole year.
Speaker Change: Telephone poles.
Speaker Change: And I.
Speaker Change: I think you will see that accelerating topline interim financial report.
Speaker Change: And so for the new businesses I think we still keep the same guidance of the 40% to 50% top line growth for the new businesses.
Speaker Change: For the full year.
Speaker Change: Yes.
Speaker Change: Thank you Stephen Thank you Sir.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: We'll now take the next question.
Speaker Change: This is from Charlotte Wei from HSBC. Please go ahead.
Speaker Change: Right.
Speaker Change: Okay.
Charlotte Wei: Congratulations on your strong results. Thank you Steven and this is for taking my question.
Charlotte Wei: Could you please share more color on the growth in different business segments in the second quarter. Thank you.
Okay.
Charlotte Wei: Yeah, actually if I look quarter, yeah, they are asking the guidance.
Charlotte Wei: For the guidance.
Charlotte Wei: Yeah.
Charlotte Wei: Okay, Yeah overseas related business will grow.
Charlotte Wei: About over 20% and domestic test prep.
Charlotte Wei: These students business grow it will be over 30%.
Charlotte Wei: 30% to 35% and high school business grow like 20%.
Charlotte Wei: And the new business will grow like over 50%.
Around 50%.
Speaker Change: Thank you very clear thank you.
Speaker Change: Thank you.
Speaker Change: We will now take our next question.
Speaker Change: This is from <unk> Kim from Jpmorgan. Please go ahead.
Speaker Change: Hi, Stephen Hi, <unk>. Thanks for taking my question I just have a follow up on all your points that you made on new businesses. If I may did you.
Speaker Change: Just say this past quarter, new businesses grew over 56% did I hear it correctly because from the press release I think I mean, it's a minor thing about a press release seems to say 49, 8%. This quarter. So just wanted to double check if I look yes, yes.
Speaker Change: Yes, that's the growth for non academic tutoring and intelligent learning devices over 55%.
Speaker Change: Oh, Okay. So that means this.
Speaker Change: New educational business initiative has something else as well as EMEA asked kind of what else is here and also can you. If you could give us the breakdown in terms of the current revenue or lost revenue between.
Speaker Change: Non academic <unk> versus <unk> and some others how has the mix within this sub segment.
Speaker Change: Yes.
Speaker Change: Every quarter. The contribution is similar so the non academic tutoring is roughly about half more than half of the new educational business and roughly about one third is the intelligent learning devices business and these two are growing faster than the rest are smaller categories.
Speaker Change: And smaller category. If I may is like booksellers, who are now you can check out what dose we have here.
Speaker Change: Thanks Sarah.
Sarah: Yes, intelligent books and also some to be business.
Sarah: Okay.
Speaker Change: Got it thank you very Montana, if I can.
Speaker Change: My follow up on earlier you maintained on kindly gave us a breakdown of the growth momentum for <unk> guidance can I double check whether that was based on U S dollar versus renminbi and if you could provide.
Speaker Change: First quarter similar breakdown between our segment growth if possible it would be great. Thank you so much and I'll go back to the queue.
Speaker Change: Through our guidance.
Speaker Change: Just to share.
Speaker Change: Exchange rates are already was yes, we are.
Speaker Change: All I can share with you the exchange right now we're using four for Q1 quarter and the guidance powder is now okay.
Speaker Change: Yes, my earlier growth was it based on.
Speaker Change: Yes.
Speaker Change: Yes, Q1, Q1 exchange rate is $7 22.
Speaker Change: And.
Speaker Change: Q2 is 7.0.
Roughly.
Speaker Change: Thank you very much.
Thank you.
Speaker Change: As a reminder, if you would like to ask a question you compress star one one on your telephone.
Speaker Change: Your name to be announced.
Once again Thats star one.
Speaker Change: One if you would like to ask a question.
Yes.
Speaker Change: Okay.
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Speaker Change: Yes.
Speaker Change: We have another question coming through.
Speaker Change: Please standby.
Speaker Change: This is from the line of Lucy Yu from Bank of America. Please go ahead.
Speaker Change: Stephen Sorry, I, just want to follow up on the second quarter.
Speaker Change:
I know that your status on loan season.
Speaker Change: Is it looking at the top line is still growing at almost 25% to 28% which is no.
Speaker Change: Why should.
Speaker Change: Should we think that the open margin will decline all contract on a year over year basis is there any other like.
Speaker Change: Investments are you going to step up or some other reason thank you.
Speaker Change: Yes.
Speaker Change: Yes. The Q2 is the low season for all business lines see overseas related even for the <unk> business and the tourism business will have tiny.
Speaker Change: Revenue from the tourism business. So we thought we would.
Speaker Change: Suffered a loss the tourism business in Q2 and <unk>.
Speaker Change: And so if you saw the numbers.
Speaker Change: Should arguably abbvie Q2 every year wont be at the low margin profile for the whole company.
Speaker Change: And our society.
Speaker Change: We will open more learning centers in the second half of last year, but we will still need more time to feel the students into the learning centers.
Speaker Change: All right.
Speaker Change: I must mention that we are.
Speaker Change: Using the.
Speaker Change: The conservative approach to keep the margin guidance.
Speaker Change: Please.
Speaker Change: Let's see.
Speaker Change: Mr. Lance how much like loss or margin drag having stocked inc. From tours in the second quarter.
Speaker Change: Yes.
Speaker Change: I think it's too early to say that but it's.
Speaker Change: Still other Martin dry and also once a week.
Speaker Change: We spent some more expenses.
Speaker Change: More expenses in <unk>.
Speaker Change: Even in the marketing and.
Speaker Change: In the coming Q2, but I think we will yes.
Speaker Change: As Joe said, we spend more money on the marketing in Q1, but we started to control the seller market consensus in Q2.
Speaker Change: We're still in the process and so.
Speaker Change: That's why we got.
Speaker Change: The margin tiny pressure in Q2, but we expect we will do better than we expected our margin wise.
Speaker Change: Mhm.
Speaker Change: Okay.
Speaker Change: Okay.
Mr Stevens: Mr Stevens.
Mr Stevens: Let's put this way so if we excluding <unk>, if we excluding cultural tourism will the ramp up of revenue rest of the business still see margin contraction in second quarter.
Mr Stevens: Yes, I think so I think the if you take.
Mr Stevens: Take out the impact of the chosen business I think the margin will be better than the than the the overall company.
Mr Stevens: Admin profile, except for Easter back no. We don't give the guidance of the Easter Bye bye.
Mr Stevens: Well in the market.
Speaker Change: Thank you so much thank you Lucy.
Lucy Yu: Thank you.
Speaker Change: Well now take our next question.
Speaker Change: This is from Timothy Zhao from Goldman Sachs. Please go ahead.
Timothy Zhao: Great. Thank you Steve and if this is so I think the follow up question.
Timothy Zhao: East by housing one is on I think your revenue guidance.
Timothy Zhao: I think Joe what's the transaction between parent company and you buy regarding that you Spice education periods previously.
Timothy Zhao: Just wondering in your guidance for the EU Court because if you do educational services does that include the spice previous education business at that time.
Timothy Zhao: The I think four of what your spy I think the implied revenue of what your factory job.
Secondly on a Q on Q basis, just wondering if you kind of elaborate on what is there.
Background or the ratio now behind that and how should we think about the revenue going forward. Thank you.
Timothy Zhao: The guidance of Q2 top line growth in the range of 25% to 28% is the core <unk> business, except for Easter Bob Okay and.
Timothy Zhao:
Timothy Zhao: I'm very glad to hear from you about the the question that used to buy but I am afraid.
Speaker Change: I'm unable to share the latest financial results once they used to buy the Chelsea Ono they will announce their half year report in the next quarter. So on Mexico, There I think we both party.
Speaker Change: Our parent company and at least to buy we'll announce the used by financial status.
Speaker Change: More detail next quarter.
Speaker Change: Yes.
Speaker Change: Sure sure so just to clarify on the guidance.
Speaker Change: I think if you look at it you spike premise.
Half year financial with 40 of our education business, which is now part of <unk> core business is around $30 million to $40 million per quarter.
Speaker Change: When you talk about Iron 40, do you record. Your question Ben is so when you look at on a year on year basis.
Speaker Change: A lot to your number for Ya qualification Ben.
Speaker Change: That also include your spy side you campaign is right.
Ben: Yes, correct.
Speaker Change: So your understanding is totally crap. So so when we gave guidance we do apple to Apple.
Speaker Change: So bose the comparison quarter and the guidance quarter. Both include the education portion of each device.
Speaker Change: Business.
Speaker Change: Is that clear.
Speaker Change: Yes. Thank you. Thank you thank.
Steven Y'all: Thank you Steven.
Steven Y'all: Thank you.
Speaker Change: We'll now take our next question.
Speaker Change: This is from D S. Kim from Jpmorgan. Please go ahead.
Speaker Change: Hello, Sir.
Speaker Change: Sorry, I didn't mean to beat a dead horse here, but some investors were asking me just now on this so I thought it would be better to clarify things on new businesses again, sorry, So just to be clear. When you earlier commented that next quarter growth guidance of new business is up over 50.
Speaker Change: Did you mean could include other smaller businesses or only non academic and intelligent learning devices I E. If you compare that 50% or over 50% growth next quarter. How does that number look this quarter August quarter, and then similarly for.
Speaker Change: Hi, Scot.
Speaker Change: We expected 20% growth as you said next quarter, how was the growth this quarter would you be able to comment back sorry for.
Speaker Change: Question, Yes to make it clear for Q2 with guidance for our overall new initiatives, new educational in Asia, including.
Speaker Change: All the things so.
Speaker Change: It's around 45%.
Speaker Change: And if you only look at noneconomic tutoring and it hasn't learned device the two key ones.
Speaker Change: It's over 50%.
Speaker Change: And the high school.
Speaker Change: <unk> High school business Q1's growth is up about 20% to 21%.
Speaker Change: Okay.
Speaker Change: Thank you that's very clear so about five points.
Speaker Change: Four 5%, a deceleration or the new businesses in terms of apples to Apple, which I think is pretty great given that the base get the comps got much tougher. So thank you for the clarification.
Speaker Change: Okay.
Speaker Change: Okay.
Thank you.
Speaker Change: We are now approaching 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.
Speaker Change: Yeah.
Stephen Yang: Thank you again for joining us on today, if you have for any further questions. Please do not hesitate to contact me or any of our investor.
Stephen Yang: Relations Representatives. Thank you.
Stephen Yang: Yes.
Speaker Change: Thank you. This concludes today's conference call. Thank you for participating and you may now disconnect.
Speaker Change: Okay.
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