Q1 2025 New Oriental Education & Technology Group Inc Earnings Call

Operator: Good evening and thank you for standing by for New Oriental's FY 2025 First Quarter Results Earnings Conference Call. At this time all participants are in listen-only mode. After management's prepared remarks there will be a question and answer session.

Operator: Today's conference is being recorded. If you have any objections, you may disconnect at this time.

Operator: I'd now like to turn the meeting over to your host for today's conference, Sisi Zhao. Thank you.

Sisi Zhao: Hello, everyone, and welcome to New Oriental's first Fiscal Quarter 2025 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 services. 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 will be available to answer your questions.

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 Security Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainty. As such, our results may be materially different from the view expressed today. A number of potential risks and uncertainties are outlined in our public findings 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 is being recorded. In addition, a webcast of this conference call will be available on New Oriental's website at investor.neworiental.org.

Stephen Yang: I will now first turn the call over to Mr. Yang. Stephen, please go ahead.

Stephen Yang: Thank you, Sisi.

Stephen Yang: Hello, everyone, and thank you for joining us on the call. We're pleased to announce that the company has forged a healthy growth across our key business line in alignment with the expectations, with a top-line growth of 30.5% this quarter. Total Net Revenues, excluding revenues generated from e-supply, private label products, and live streaming businesses. increased by 33.5% year-over-year. In particular, we are impressed by the highly encouraging growth that the new endeavours have anchored, which has significantly contributed to the core building blocks of the company. At the same time, New Oriental's bottom-line performance for our core educational business has also achieved healthy yields.

Stephen Yang: Operating margin-wise, we have excluded the operating margins generated from East Dubai for this quarter for better reflection of the performance of New Oriental's core educational business. The operating margin and non-GAP operating margin for this quarter have reached 23.7% and 24.4%, representing 370 and 220 basis point improvements over the years. We're pleased to see the tremendous efforts that we devoted into our offerings and platforms, sparking positive growth across our business line. Our commitment to maintaining a healthy profitability and multi-share stands firm as we strive to create sustainable value for our customers and shareholders in the long term.

Stephen Yang: 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. Our key remaining businesses continue to secure encouraging trends this quarter. Breaking it down, the overseas hedge fund business recorded a revenue increase of 19% year-over-year for the first fiscal quarter of 2025. The overseas study consulting business recorded revenue increase of about 21% year-over-year for this quarter. The adults and university students' business recorded a revenue increase of 30% year-over-year for this year. The ongoing investments on our new educational business initiatives, which mostly revolve around specifically students' all-round development, have propelled the company's engine to innovation, having secured strong momentum in their respective ventures.

Stephen Yang: Firstly, the non-academic children's courses, which we have offered in around 60 existing cities, focus on cultivating students' innovative ability and comprehensive quality. were pleased to receive solid interest with a total of approximately 484,000 student enrollments reported in this quarter. The top 10 cities in China contribute over 60% of this number. Secondly, the intelligent learning system and device business has been adopted in around 60 cities. We are happy to see elevated customer retention and scalability, with approximately 323,000 active users recorded in this quarter. The revenue contribution of these initiatives from the top 10 cities in China is around 55%.

Stephen Yang: Our smart education business, educational material, and digitalized smart study solutions have continued to contribute material yields to the overall advancement of the company. In summary, our new educational business initiatives have recorded a revenue increase of 50% year-over-year for this quarter.

Stephen Yang: In addition, our newly integrated tourism-related business line is now comprised of diverse offerings of cultural trips, study tours in China and overseas, as well as the CAMP education. Within the business line, our study tour and research camp business for students of K-12 and university age achieved tremendous growth this quarter, with an increase of 221% in revenue year-over-year for this quarter. who have operated study tours and research camp visits in over 55 cities across China. with the top 10 cities in China offering over 55% of revenue share of this new business. A number of top-notch tourism offerings were also piloted to expand our reach to all age groups.

Stephen Yang: including the middle-aged and elderly individuals around 30 featured provinces in China globally. This inspiring growth this quarter has affirmed our devotion to deliver premium offerings to our valued customers, and we believe this new business line will contribute continuously meaningful revenue from this fiscal year.

Stephen Yang: with regards to our OMO system. We have persisted in revamping our platform and leveraged our educational infrastructure and technology edge on remaining key pieces and new initiatives, with a vision to provide advanced, diversified education service to customers of all ages. In this quarter, a total of $24.6 million has been invested in our OMO teaching platform, which equips us with the flexibility to maintain a rival service to students. In terms of the eStarbuy's performance, since April 2022, eStarbuy has launched a total of 488 SKUs in private label products in just two years. Our products categories have expanded into well-diversified product names today.

Stephen Yang: During the reporting period, Eastbyte also uplifts the significance of the offering-only product with high-cost performance, which has proven effective in reiterating Eastbyte's value in the minds of our current and new users. In addition, thanks to our multi-channel strategy that has driven sustainable growth, Eastbyte's footprints have We expanded from our live streaming channels to the likes of Timo, JD, Pinduoduo, and Xiaohongshu as they amplify our reach to a wider customer base.

Stephen Yang: In the new year, Easter Byte will explore offline channels by examining the partnership with offline schools owned by New Oriental Grant and other parties. are part of our vision to initiate an offline sales network and enhance our brand awareness to a great extent.

Stephen Yang: With regards to the company's latest financial position, I'm pleased to share that the company is in a healthy financial status with cash and cash-equivalent term deposits and short-term investments totaling approximately $4.9 billion. Now, I would also like to take the opportunity to highlight that the company's board of directors approved a shared repurchase program in July 2022, under which the company is authorized to repurchase up to $400 million. of the company ADS for common shares through the next 12 months. The company's board of directors further approves to extend the effective time of the share repurchase program to May 31, 2025 and increasing the aggregate value of the shares that the company is authorized to repurchase from $400 million to $700 million.

Stephen Yang: As of October 22, 2024, the company would purchase... an aggregate of approximately 9.8 million ABS for approximately $457.9 million from the open market.

Sisi Zhao: Now I will turn the call over to Sisi to share with you about the key financials. Sisi, please go ahead.

Sisi Zhao: Thank you, Stephen.

Sisi Zhao: I'd like to share our key financial details for this quarter. Operating costs and expenses for the quarter were $1,142.3 million, representing a 27.6% increase year-over-year. Non-GAAP operating costs and expenses for the quarter, which excludes share-based compensation expenses, were $1,135.4 million, representing a 32.8% increase year-over-year. The increase was primarily due to the costs and expenses related to accelerated capacity expansion for educational business and newly integrated tourism-related business. Cost of Revenues increased by 32.3% year-over-year to $583.5 million. Selling and Marketing Expenses increased by 42.3% year-over-year to $193.7 million. G&A Expenses for the quarter increased by 15% year-over-year to $365.1 million.

Sisi Zhao: Non-GAAP G&A Expenses, which include share-based compensation expenses, were $354.5 million, representing a 22.1% increase year-over-year. 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 of 2025. Operating income was $293.2 million, representing a 42.9% increase year-over-year. Non-GAAP income from operations for the quarter was $300 million, representing a 22.6% increase year-over-year. Net income attributable to New Oriental for the quarter was $245.4 million, representing a 48.4% increase year-over-year. Basic and diluted net income per ADS attributable to New Oriental were $1.49 and $1.48, respectively.

Sisi Zhao: Non-GAAP net income attributable to New Oriental for the quarter was $264.7 million, representing a 39.8% increase year-over-year. Non-GAAP basic and diluted net income per ADS attributable to New Oriental were $1.61 and $1.60, respectively.

Sisi Zhao: Net cash flow generated from operation for the first fiscal quarter of 2025 was approximately $183.2 million and capital expenditure for the quarter were $80.2 million. Turning to the balance sheet, as of August 31, 2024, New Oriental had cash and cash equivalents of $1,147 million. In addition, the company had $1,513.8 million in term deposits and $2,248.6 million in short-term investments.

Sisi Zhao: New Oriental's deferred revenue, which represents cash collected upfront from customers and related revenue, that will be recognized as the service or goods are delivered. At the end of the first quarter of fiscal year 2025, $733.1 million, an increase of 23.7%, as compared to $1,401.4 million at the end of the first quarter of last fiscal year.

Stephen Yang: Now, I'll hand over to Stephen to go through our outlook and guidance. Thank you, Sisi. With the encouraging performance achieved from our diverse business lines, backed by our solid educational resources that have stood the test of time, we are bullish on maintaining a healthy growth for our core educational business. Simultaneously, we will devote ongoing investment in expanding our new tourism-related business, in the belief that this input will nourish the more extensive nationwide flow-out of our tours in this fiscal year. While we strive to safeguard a healthy balance between revenue and profitability growth, we will also cautiously manage our capacity expansion and hirings to underpin the development of our educational business in this new year.

Stephen Yang: We plan to increase our capacity by around 20-25% for this fiscal year. The most new openings will be launched in cities with better top-line and bottom-line performance. Rest assured that we will closely monitor the pace and scale of new openings in accordance to the local operations and financial performance during the year. Every second quarter of our financial year tends to be a slower period due to the seasonality of our business. That being said, we remain confident in attaining a steady growth and a satisfactory operating profit for the full fiscal year.

Stephen Yang: We expect total net revenues, excluding revenues generated from East Dubai in the second quarter of the fiscal year 2025, September 1, 2024 to November 30, 2024, to be in the range of $851.4 million to $871.8 million, representing an year-over-year increase in the range of 25% to 28%. In addition, based on our current estimation, we expect the operating margin for the whole company except for Easter bag for the fiscal year 2025 will expand year-over-year. 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.

Stephen Yang: To conclude, New Oriental will always pursue premium offerings to our customers, simultaneously achieve sustainable growth. To achieve that, we will continue to devote necessary resources on research and application of new technologies, such as AI and chat GPD, into our education and product offerings, with a vision to uplift our strengths to pursue the growth in operating efficiency. We will also continue to seek guidance from and cooperate with government authorities. comply with the relevant policies, guidelines, and any related regulations, as well as to further adjust our business operation as required. As always, we will work diligently to enhancing the nation's education level to strengthen the leading position so as to unveil further potential across all our business lines and realizing our vision.

Stephen Yang: This is the end of our fiscal year 2025 Q1 summary.

Sisi Zhao: At this point, I would like to open the floor for questions.

Operator: Operator, please open the call for these. 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. If you would like to ask a question you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again.

Operator: Thank you.

Felix Liu: We will now take our first question. This is from the line of Felix Liu from UBS. Please go ahead.

Felix Liu: Good evening, management. Thank you for taking my question. My question is on your second quarter guidance. We noticed that in the first quarter, your capacity extension was over 30% year-on-year by the number of learning However, if we look at your second-quarter guidance...

Felix Liu: Slide 23 How should we think about the gap between capacity growth and revenue guidance? Can you share your outlook for second half growth? Do we expect to see the revenue growth converge with capacity?

Stephen Yang: Yeah, I think, yeah, thank you, Felix. As for the Q2 guidance, you know, we give the guidance of, you know, the top-line growth will be in the range of the 25% to 28% in dollar terms year-over-year.

Stephen Yang: But as you know, you know, every second quarter tends to be a slower quarter due to the seasonality of our education business. And, but you know, we will remain confident in attaining a steady growth of around 30% year-over-year, you know, for the whole year. So that means we expect the revenue growth, including Mr. Bai, in Q3 and Q4, will be accelerated compared to the growth of Q2. So, you know, as you know, even though we have seen some impacts of the existing economic environment, like the overseas relatives, but we will expect the full fiscal year revenue growth, which, you know, except for Dubai, will be around 30% yield.

Stephen Yang: And, yeah, you know, we opened, you know, more learning centers in last year, Q3 and Q4. And, but, you know, we have seen, we ramp up the learning centers, you know, much faster than before. And so, and I think we will feel the new learning centers more students into the learning centers, especially in Q3 and Q4. So we're quite optimistic about the top-end growth for the whole year. for the whole year.

Alice Cai: We will now take our next question. This is from the line of Alice Cai from Citi, please go ahead.

Alice Cai: Good evening, Stephen and Sisi. Thanks for taking my question. I have a question about the CAPEX expansion. Since Q2 is typically a low season, are you considering slowing down CAPEX expansion during this period to improve margins? And do you expect CAPEX to be concentrated in Q1 and Q4 for FY25? And for the upcoming quarters, will you focus on encouraging penetration in existing cities rather than entering new ones?

Stephen Yang: Thank you.

Stephen Yang: Yeah, you know, by the end of this quarter, Q1, we have added around 6% new capacity.

Stephen Yang: And so, as I said, you know, we plan to, you know, increase our capacity expansion by 20% to 25% for the whole year. And, you know, last year we opened more learning centers, but this year I think we will open the learning center at a more, you know, healthy pace, 20% to 25%. And yeah, as I said, you know, we ramped up the learning centers much faster than before. And so I think as the whole year-wise, I think the margin, you will see the margin expanded for the whole year. And in the Q2, yeah, we might meet some like margin, like tiny margin pressure in the Q2 because of the seasonality.

Stephen Yang: Q2 is the new season.

Stephen Yang: But we do believe for the whole year, the margin will be expanded for the educational business, except for for East Dubai.

Alice Cai: Thank you, Alice.

Alice Cai: Thank Thank you.

Yiwen Zhang: We'll now take our next question. And this is from Yiwen Zhang from China Renaissance.

Yiwen Zhang: Please go ahead. Yeah, great. Thanks for taking my question.

Yiwen Zhang: So my question is about follow-up on the margin. So it's, you know, very good to see our OP margin increase 220 bps on a y-to-y basis, reversing the dip in the previous quarter. So can you discuss more about what are driving this, you know, improvement and how should we think about the drivers to play out in the rest of the year? Thank you.

Stephen Yang: Thank you, Yiwen. You asked the question about the margin. You know, let us start with the margin analysis of this quarter. The non-GAAP OP margin for educational business, which excluding e-buy, was expanded by 20 basis points year-over-year. As you know, I think, you know, last year Q1, OP margin was high-based. So that means we have a hard comparison this quarter. But we still got the margin extension by 220 basis points year-over-year. I think this is mainly due to the following reasons. Number one, we're pleased to see that business lines achieved the positive top-line growth for all business lines.

Stephen Yang: And number two is, we started to bear fruit of the Learning Center expansion of last year. It strikes the overall utilization rate up and get more operating leverage. Number three, you know, we started to make cost control in the whole company, and we leveraged more overhead in this quarter. Even though we spent more money on the new tourism business, but, you know, the educational business, except for East Dubai, we still got the margin extension higher than we expected. And as for the margin outlook, you know, due to the seasonality of the business, every second quarter is the low season.

Stephen Yang: So we're likely to experience some minor margin pressure in the second quarter. But as I said, you know, we were quite confident about the Q3 and the Q4. So we're optimistic on the margin profile for the educational business, including East Dubai in the whole year. And I think we expect that the whole year, the Nangab OP margin will be expanded, you know, for the whole year.

Yiwen Zhang: Thank you, Yiwen.

Lucy Yu: Thank you. We will now take our next question.

Lucy Yu: This is from Lucy Yu from Bank of America, please go ahead. Hi Stephen and Sisi. But just to clarify, Stephen, you said the second quarter non-GAP-OP margin will be under pressure. Do you mean that excluding East Baye, we're going to see margin contraction on a year-over-year basis?

Lucy Yu: So just to clarify on that, and actually my question is on the cultural tourism. You did mention that a camp revenue was up by over 200% year-over-year. So may I know how much revenue that cultural tourism contributed this quarter? And is that business segment loss-making or profit-making for this quarter? Thank you.

Stephen Yang: Yeah, you know, the, yeah, the margin, the tiny margins pressure in Q2, what, you know, what I said is only related to the educational And because, you know, we got it at 25% to 28% top line growth, and Q2 is the low season of the educational business. So I think that you will see more leverage in Q3 and Q4.

Stephen Yang: And so this is the, so as I said, we're quite optimistic about the margin profile in Q3 and Q4. And the tourism business, yeah, the Q1 was the peak season for the tourism business, you know, such as the camp business and the overseas study tour, you know, the magnetic study tour business. So the revenue of the Q1 was somewhere around 90 million dollars of the tourism business. This is the revenue in Q1. And yeah, we are profitable in Q1 because of the peak season. But for the whole year, I think we will feel loss-making of the tourism business.

Stephen Yang: But you know, it's just the first year.

Stephen Yang: We need more time to testify the product and the business models for the tourism. But we're quite confident about the development of the tourism business.

Lucy Yu: Thank you, Lucy. Thank you, Stephen.

Lucy Yu: Thank you.

Timothy Zhao: We'll now take our next question. This is from Timothy Zhao from Goldman Sachs.

Timothy Zhao: Please go ahead.

Timothy Zhao: Hi Sisi, hi Steven. Thank you for taking my question. My question is regarding...

Timothy Zhao: Just wondering if you can break down in terms of the revenue growth between the non-academic related questions on this specific segment is I do notice that I think for the non- Thank you very much. What kind of growth that we should expect on the enrollment? The new K-9 educational related including the non-academic tutoring and intelligent learning device business grew by over 50% in Q1, 56% and both are growing at similar rates. And the second question about the enrollment, the enrollment growth of the K-12 seems to be low in this quarter because we opened the summer enrollment window earlier than that of last year.

Timothy Zhao: So that means we reported more student enrollment in last year, Q4. It's kind of the timing difference. And so if you combine the Q4 and Q1, the enrollment growth will be normal, and it's very strong. And as I said, even though the Q2 will be the low season, but we're quite confident about the whole year, the tough end. And I think we will see even the accelerating Taotai. And for the new businesses, I think we still keep the same guidance of the 40 to 50% top-line goals for the new business.

Timothy Zhao: For more information, please visit www.fema.gov Thank you.

Charlotte Wei: And I'll take the next question. This is from Charlotte Wei from HSBC, please go ahead. Congratulations on your strong results.

Charlotte Wei: Thank you Stephen and Sisi for taking my question. Could you please share more color on the growth in different business segments in the second quarter? Thank you.

Stephen Yang: Yeah, actually, yeah, you're asking the guidance. For the guidance call, yeah, okay. Yeah, overseas related business will grow like about over 20% and domestic test prep university students business grow will be over 30%, 30, 35% and high school business grow like 20% and the new business will grow like over 50%, around 50%. Thank you.

Stephen Yang: Very clear. Thank you.

D.S. Kim: We will now take our next question.

D.S. Kim: This is from D.S. Kim from J.P.

D.S. Kim: Morgan.

D.S. Kim: Please go ahead. Hi, Steven. Hi, Sisi. 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 say this past quarter, new businesses grew over 56 percent? Did I hear it correctly? Because from the press release, I think, I mean, it's a minor thing, but a press release seems to say 49.8 percent this quarter. So just wanted to double check if I'm looking. Yeah, that's the growth for non-academic tutoring and intelligent learning device, the over 55 percent. Oh, okay. So that means this new educational business initiative has something else as well.

Stephen Yang: May I ask what else is here? And also, can you, if you could, give us the breakdown in terms of like current revenue or last year revenue between non-academic tutoring versus intelligence and some others? How's the mix within this subsegment?

Stephen Yang: Yeah, actually every quarter the contribution is similar, so the non-academic tutoring is roughly about more than half of the new educational business, and roughly about one-third is the intelligent learning device business, and these two are growing faster than the rest smaller categories. A smaller category, if I may, is like book sales, or may I check out what else we have here? Yeah, intelligent books and also some to-be business. Got it.

Timothy Zhao: Thank you very much. And if I may follow up on earlier, you mentioned and kindly gave us a breakdown of the growth momentum for 2Q guidance. Can I double check whether that was based on US dollar versus renminbi? And if you could provide this first quarter similar breakdown between a segment growth, if possible, it would be great. Thank you so much. And I'll go back to the Just to share about the exchange rates we are using. Yeah, I can share with you the exchange rate that we're using for Q1 quarter and the guidance quarter. Is that okay?

Timothy Zhao: Yes, the earlier group, was it, based on U.S.A.? Yes. Yeah, Q1 exchange rate is 7.22, and Q2 is 7.08.

Timothy Zhao: Thank you very much.

Operator: Thank you. As a reminder, if you would like to ask a question, you can press star 1 and 1 on your telephone and wait for your name to be announced. Once again, that's star 1 and 1 if you would like to ask a question. Once again, if there are any further questions, please press star 1 and 1 on your keypad.

Operator: We have another question coming through. Please stand by.

Lucy Yu: This is from the line of Lucy Yu from Bank of America, please go ahead. Stephen, sorry, just want to follow up on the second quarter margin. I know that you said it's a low season, but if you're looking at the top line, it's still growing at over 25% to like 28%, which is not low. So why should we think that the open margin will decline or contract on a year-over-year basis? Is there any other investment that you're going to step up or some other reasons? Thank you. Yeah, the Q2 is the low season for all business lines, the overseas-related, even for the K-pop business and the tourism business.

Stephen Yang: We have tiny revenue from the tourism business, so we will suffer the loss of the tourism business in Q2. And so if you saw the numbers, you know, every Q2 every year will be the low margin profile. And yeah, as I said, you know, we will open more learning centers in the second half of the last year, but we will still need more time to fill the students into the new learning centers. So, yeah, and I must mention that, you know, we are using the conservative approach to give the margin guidance, as always.

Stephen Yang: Lucy. And just may I follow up that how much like loss or margin drag have you sucked in from tourism in second quarter? Thank you. I think it's too early to say that, but you know, it is still a market drag. And also, you know, we spend some, you know, more expenses, more expenses even in the marketing and in the coming Q2. But I think we will, yeah, as you said, we spend more money on the marketing in Q1, but we started to control the selling market. Thank you very much.

Stephen Yang: Understood, Stephen. So, let's put it this way. So, if we're excluding East Baye, if we're excluding cultural tourism, will the rest of the business still see margin contraction in the second quarter? Yes, I think so. I think the if we take off the impact of the chosen business, I think the margin will be better than the than the the the overall company margin profile, except for Easterbuy, you know, we don't get the guidance of the Easterbuy by top line growth in the market.

Lucy Yu: Alistair. Thank you so much.

Lucy Yu: Thank you Lucy. Thank you.

Timothy Zhao: And now take our next question. This is Timothy Zhao from Goldman Sachs.

Timothy Zhao: Please go ahead. Great, thank you, Steve and Sisi.

Timothy Zhao: So I think a follow-up question on eSpy, I think one is, I think your revenue guidance, I guess, I think there was. I'm just wondering, in your guidance for the EDU Corps... Spice.

Stephen Yang: © 2013 University of Georgia College of Agricultural and Environmental Sciences UGA Extension Office of Communications and Creative Services on a week-on-week basis. background or the rationale behind that and how should we think about it. The guidance of Q2 top angles in the range of 25% to 28% is the core education business except for East-West. And, you know, I'm very glad to hear from you about the question of the Easter Buy.

Stephen Yang: But, you know, I'm afraid, you know, I'm unable to share the latest financial results of the Easter Buy because, you know, they will announce their half-year report in this next quarter. So next quarter, I think we, the both parties, you know, the parent company and the Easter Buy will announce the Easter Buy's financial status in much more detail next quarter. Sure, sure.

Timothy Zhao: So just to clarify on the guide. I think if you look at eSpy's previous half-year financials for their education. Now part of EDU Corp. around like 30-40 million US dollars per quarter. Just wondering when you talk about the guidance for EDU core education So when you look at it on a year-on-year basis, the last year number for EDU core... that also includes Yispai. Yeah, correct, Timothy. So your understanding is totally correct. So when we give guidance, we do apple-to-apple comparison. So both the comparison quarter and the guidance quarter both includes the educational portion of this device.

Stephen Yang: Is that clear?

Timothy Zhao: Yes. Thank you.

D.S. Kim: We'll now take our next question.

D.S. Kim: This is from D.S. Kim from J.P. Morgan.

D.S. Kim: Please go ahead. Hello, sir. Sorry, I didn't mean to beat a dead horse here, but some ambassadors were asking me just now on this, so I thought it would be better to clarify things on new businesses again, sorry.

Stephen Yang: So just to be clear, when you earlier commented that next quarter growth guidance of new businesses of over 50%, did you mean to 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 for this quarter, August quarter? And then similarly for high school businesses, we expected 20% growth as you said next quarter. How was the growth this quarter? Would you be able to comment on that? Sorry for a redundant question.

Stephen Yang: Yeah, to make it clear, for Q2's guidance for overall new initiatives, new educational initiatives, including all the things, so together is around 45, 46% growth. And if you only look at non-academic tutoring and intelligent learning device, the two key ones, the growth is over 50%. Okay, and the high school business, high school business Q1's growth is about 20%, 20 to 21%.

D.S. Kim: Thank you, that's very clear. So about four or five percent deceleration for the new businesses in terms of Apple stuff, which I think is pretty great given that the base, the comms got much tougher.

D.S. Kim: So thank you for the clarification.

D.S. Kim: Thank you.

Sisi Zhao: We are now approaching the end of the conference call.

Stephen Yang: I will now turn the call over to New Oriental's Executive President and CFO Stephen Yang for his closing remarks. Thank you again for joining us on today. If you have any further questions, please do not hesitate to contact me or any of our investor relations representatives.

Stephen Yang: Thank you.

Operator: This concludes today's conference call. Thank you for your time.