Q3 2025 New Oriental Education & Technology Group Inc Earnings Call
Okay.
Speaker Change: Good evening and thank you for standing by for New Orientals third fiscal quarter 2025 earnings Conference call. At this time all participants are in a listen only mode. After management's prepared remarks, there will be a question and answer session.
Speaker Change: Today's conference is being recorded if you have any objections you may disconnect at this time.
Seafood gel: I'd now like to turn the meeting over to your host for today's conference Ms Seafood gel.
Speaker Change: Okay.
Steven: Thank you Hello, everyone and welcome to New Orientals third fiscal quarter 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 is Steven <unk> Executive President and Chief Financial Officer and art.
Steven: Sure New Orientals latest earnings results and business updates in detail with you after that even and I will be available to answer your questions. Before we continue. Please note that the discussion today will contain forward looking statements made under the safe Harbor provisions of the U S private security.
Steven: Issue Reform Act of 90 95.
Steven: Forward looking statements involve inherent risks and uncertainties.
Steven: As such our results may be materially different from the BOE expressed today.
Steven: 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 urea.
Steven: So its investor relations website at Investor <unk>, New Oriental Dot Org.
Mr. Yao: Now I'll first turn the call over to Mr. Yao. Please go ahead.
Mr. Yao: Hello, everyone and thank you for joining us on the call.
Mr. Yao: Our Q3 results reflect a steady performance reinforcing our ongoing commitment to lots of value creation and operational consistency.
Mr. Yao: Despite our revenue decreased by 2% year over year, but the total net revenue excluding revenue generates from used to buy it increased by 21, 2% year over year.
Mr. Yao: Continuing the growth of our new ventures has can contribute to the company's rapidly.
Mr. Yao: Anticipates further progress in the future.
Mr. Yao: You are as well as bottom line performance.
Mr. Yao: Our poor educational business has also shown stable returns.
Mr. Yao: Better reflects new Orientals, who I had a crystal ball business. We have closed the operating margin generated from east to buy it for this quarter, our operating margin and non-GAAP operating margin, excluding operating margin non-GAAP operating margin generally from east to buy it for the quarter reached 12.1.
Mr. Yao: 1% and 13, 3%, respectively, resulting from the substantial efforts in baskets offerings and platforms.
Mr. Yao: No I would like to spend some time to talk about each business lines and new he's sitting next to you in detail.
Mr. Yao: Our key remaining businesses are showing promising trends in our new initiatives.
Mr. Yao: Uh huh.
Mr. Yao: Australia, its positive momentum breaking down.
Mr. Yao: The overseas test prep business recorded a revenue increase of 7% in dollar terms year over year for this quarter.
Mr. Yao: The overseas study consulting business reported a revenue increase of about 21% in dollar terms year over year for this quarter.
Speaker Change: I don't see University students.
Speaker Change: As reported a revenue increase of 17% in dollar terms year over year.
Speaker Change: For this quarter.
Speaker Change: Meanwhile, our ongoing investments in new educational business initiatives, primarily focused on facilitating students all around developments have sustained steady growth further driving the companys momentum.
Speaker Change: Firstly, the dominant childrens business.
Speaker Change: <unk> now roll out to around the 60 cities full students were happy to see increased market penetration in both markets, perhaps tapping into especially in high tier cities. The top 10 cities contribute over 60% of this business secondly, the intelligence the learning system and device.
Speaker Change: We have carpet.
Speaker Change: The adoption of this new initiative in Proximally 60 existing cities and we're pleased to see improvement to customer retention and scalability. The top 10 cities contribute approximately 50% of services.
Speaker Change: As for the Smart education business education mature until utilize smart study solutions. They have all continued healthy development in summary, our new education business initiatives combined.
Speaker Change: Recorded a revenue increase of 35% year over year for this quarter.
Speaker Change: With regards to our chip integrated tourism related just to fly it for firms exceptionally with a revenue increase of 85% year over year for this quarter.
Speaker Change: We received very positive feedback with our Rancho cultural travel.
Speaker Change: China study toward global study toward and cap education products.
Speaker Change: We have also conducted a study of tourists and research can both internationally and domestically from students of K 12.
Speaker Change: H in around 65 cities across the country.
And the top 10 cities revenue contribution is over 50% middle age at the senior audience targeted towards and products.
Speaker Change: Are also available in 30 feature province in China and internationally.
Speaker Change: This business line has began to 10 minutes trades has potential to contribute meaningful revenue to the group.
Speaker Change: While we're encouraged by the positive achievements across our various business lines. We remain committed to provide the path to 12 customers. We have been and will continue strategically investing in.
Speaker Change: Our business too.
Speaker Change: Elevates, the overall user experience driving greater efficiency and capacity.
Speaker Change: Building on the progress from the previous quarter, we have continued to refine our online merge offline teaching platform.
Speaker Change: $29 $7 million has been invested in this quarter to improve and manpower or more teaching platform, which provides us the flexibility to continue our high quality service to students.
Speaker Change: Beyond the O M. All I would like to take this time to highlight how our investments in AI and how we integrate AI.
Speaker Change: Two our teaching ecosystem.
Speaker Change: It is area, we have looked at and then investing in over a long period of time.
Speaker Change: Rental has leverage a combination of open source large language models, such as <unk> and GPT and stops developer AI technologies to develop innovative education solutions and enhanced learning experience.
Speaker Change: Power tools, such as ethnic waiting speaking assessments and error correction.
Speaker Change: Books deliver intelligence evaluations and customized learning class essentially improving the students' outcomes, while saving the time for both teachers.
Speaker Change: <unk>.
Speaker Change: To further drive internal efficiency, we introduced on our AI content creation platform and students' performance feedback applications to support lesson planning and stress the home School communications.
Speaker Change: These tools has also allow us to collect meaningful data on learning habits, and the user engagement, giving us deeper insights into how students and families interact with our services.
Speaker Change: In addition.
Speaker Change: Compute.
Speaker Change: Port its comprehensive F Ecu knowledge database with analysts solve our sales conversations.
Speaker Change: By using the database.
Speaker Change: We're able to reduce the training costs for our salespeople and boost the sales efficiency and the conversion rates.
Speaker Change: Yeah.
Speaker Change: As I industry leader, we're dedicated to driving long term revenue growth by strengthening our product capability and optimized management efficiency.
Look forward to sharing tangible results from our investments in AI.
Speaker Change: Integration and there are positive impacts on our performance.
Speaker Change: Now I would like to take this opportunity to talk about our share repurchase actions.
Speaker Change: The company's board of directors further approved extending the effective time of the share repurchase program through May 31 2025.
Speaker Change: Creasing the aggregate value of the shares that the company is authorized to repurchase from $400 million to $700 million.
Speaker Change: As of April.
Speaker Change: <unk> 2020.
Speaker Change: The company repurchased aggregates approximately $14 4 million for.
Speaker Change: Approximately 695 $5 million from the open market and the share repurchase program.
Now I will turn the call over to <unk> to share with you about the key financials.
Speaker Change: Please go ahead.
Speaker Change: Sure Steven now I'd like to share some financial details for the quarter operating call. Thanks benefits for the quarter or $1058 5 billion.
Speaker Change: Representing a three 2% decrease year over year cost of revenues decreased by 17, 6% year over year to $531 $6 million selling and marketing expenses increased by 13, 13% year over year to $182 $2 million G&A.
Speaker Change: <unk> for the quarter increased by 19, 8% year over year to $344 $7 million.
Speaker Change: Total share based compensation expenses, which are allocated to related operating costs and expenses decreased by 41, 3% to $16 1 million in the third quarter of two.
Speaker Change: 2025, operating income was $124 $5 million, representing a nine 8% increase year over year non-GAAP income from operations, excluding share based compensation expenses and amortization of intangible assets, resulting from business acquisitions was wondering.
Speaker Change: $42 1 million, representing a 0.2% decrease year over year.
Speaker Change: Net income attributable to new Oriental for the quarter was $87 $3 million, representing a 0.1% increase year over year basic and diluted net income per avs attributable to new Oriental were.
Speaker Change: 50 454, respectively.
Speaker Change: non-GAAP net income attributable to new Oriental for the quarter was $113 $3 million, representing a 14, 3% decrease year over year non-GAAP basic and diluted net income per ads attributable to new Oriental were 70% and 70 cents.
Speaker Change: Respectively.
Speaker Change: Net cash flow generated from operations for the third fiscal quarter of 2025, whereas the approximately $1 million and capital expenditure for the quarter were $52 $4 million.
Speaker Change: Turning to the balance sheet as of February 28, 2000.
Speaker Change: 25.
Speaker Change: Oriental had cash and cash equivalents.
Speaker Change: $1418 8 million.
Speaker Change: $1411 $7 million in term deposits and one $1853 $6 million and short term investments.
Speaker Change: Totaling approximately $4 $7 billion. The company is in a healthy financial position.
Speaker Change: New Oriental deferred revenue, which.
Speaker Change: Representing cash collected upfront from customers and related revenue that will be recognized as the services and goods are delivered at the end of the third fiscal quarter of 2025.
Speaker Change: Well its $1749 9 million.
Speaker Change: An increase of 15% compared to $1521 $7 million at the end of the third quarter of last fiscal year.
Speaker Change: Now ill hand over to Stephen to go through our outlook and guidance. Thank you.
Speaker Change: Or the evolving market dynamics will remain committed to resilience and are focused on achieving steady sustainable growth across our business lines in the coming quarter.
Leveraging our experience in navigating shifting conditions, we're confident in our ability to advance our business lines.
Speaker Change: The real leader.
Speaker Change: The strong performance of our diverse operations and the depth of the educational resources further strengthens our confidence in the sustained the bulk wells.
Speaker Change: We expect the total net revenue excluding revenue generated from the east to buy in the coming quarter.
Speaker Change: March one 2025 through May 31, 2025 to be in the range of 1009 1 million.
Speaker Change: Q1 thought on that.
Speaker Change: A $36 $6 million representing year over year increase in the range of 10% to 13% that protects the increased revenue in our functional currency RMB.
<unk> to be in the range of 12% to 15% for the first quarter fiscal year 2025.
Speaker Change: In addition, the slowdown the revenue growth of our overseas related business and the investment investments in newly integrated tourism related business.
Speaker Change: Lots of the short term impact our operating margin this quarter.
We have initiated initiatives our cost control and efficiency has been across all business lines. Since this quarter and we expect these actions to take effect in the coming quarters.
Speaker Change: We anticipate the non-GAAP operating margin quarter educational business will expense year over year in the coming fourth quarter.
Speaker Change: I must say that this expectations and forecast reflects our considerations of latest regulatory matters.
Speaker Change: As well as the current and preliminary view, which is subject to change.
Speaker Change: To conclude we are oriented towards dedicated to delivering premium offerings to our customers while pursuing sustainable growth through our strategic plan those capabilities. We will continue investing in our business and different applications advanced the technology.
Speaker Change: These <unk>.
Speaker Change: Including AI.
Speaker Change: Jim is to strengthen our competency is driving growth and improve operating efficiency.
Speaker Change: We will also continue to seek guidance from and cooperating with the government authorities in China.
Speaker Change: Ensuring the compliance with the relevant the policy of skylines and any related implementation regulations and measures.
Speaker Change: Adjust our business operations as required as always we will work diligently to enhance the nation's education level to strengthen its leading position.
Speaker Change: Unlocking further potential across all of our business lines and realizing our vision.
Speaker Change: This is the end of our fiscal year 2025, Q3 summary, as at this point I would like to open the floor for questions.
Speaker Change: Peter Please open the call for peace. Thank you.
Speaker Change: Thank you.
Speaker Change: The question and answer session of this conference call will start in a moment.
Speaker Change: 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.
Speaker Change: Ask your question now please press star one one on your telephone keypad and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: We will now take our first question from the line of Felix Liu from UBS. Please ask your question Felix.
Speaker Change: Yes.
Felix Liu: Thank you and good evening management and thank you for taking my question.
Speaker Change: My question is on the overseas related businesses.
Speaker Change: You mentioned that the slowdown in overseas test prep and consulting.
Speaker Change: Cost.
Speaker Change: What's the cost.
Speaker Change: The deceleration in Q4 wealth managers.
Speaker Change: The check what has been the major drivers of the slowdown do you think the situation could get worse with this ongoing tariffs and what is your outlook for this business, especially when do you think well bottom out. Thank you.
Speaker Change: Yes, I think the oversea related business, including the oversea test prep and the consultant business.
Speaker Change: The slowdown is due to the impact of the macro.
Speaker Change: Economy.
Speaker Change: Situation and the international relations change situations and so based on our.
Speaker Change: Current guidance on the Q4, I think the overseas related business.
Speaker Change: We will be.
Speaker Change: We will be growth.
Speaker Change: In the range of 5% to 10% in the Q4.
Speaker Change: And in the coming new year.
Speaker Change: We have not finished the budget but.
Anticipate the oversea test prep business will grow by 5% to 10% in the new year and in Oversea consulting business I think the growth.
Speaker Change: Will be zero or flattish in the.
Speaker Change: In the coming a year, that's what I'm, saying now is based on our.
Speaker Change: <unk>.
Speaker Change: The.
Speaker Change: Conservatives estimation for the new year.
Speaker Change: So let's.
Speaker Change: Yes.
Speaker Change: Okay great.
Speaker Change: Thank you.
Speaker Change: We will now take our next question from the line of Lucy Yu from Bank of America Securities. Please ask your question Betsy.
Speaker Change: Thank you so much. So my question is more on the fourth quarter guidance you did mention that oversea test prep is going to slow down.
Speaker Change: The reason of our breakdown of the other business growth in the fourth quarter. Thank you.
Speaker Change: Yes, so roughly like based on our forecast for Q4.
Speaker Change: In the RMB terms.
Speaker Change: The overseas related business will grow around 8%.
Speaker Change: Domestic university students business will grow maybe around 19% and the.
Speaker Change: The high school business growth will be around 16% to 17% and the new patent.
Speaker Change: <unk> new business educational business.
Speaker Change: We'll grow maybe around 30, 30% to 35%.
Speaker Change: So that's the.
Speaker Change: Rough estimation based on our current forecast for Q4 this is RMB growth.
Speaker Change: And you feel one U S dollar.
Speaker Change: Gross maybe each line roughly deduct by by roughly 2% two 3%.
Speaker Change: But we must have mentioned thats, where youre seeing the conservative too.
Speaker Change: To keep the guidance of Q4, yes.
Speaker Change: Understood. Thank you so much.
Speaker Change: Thank you. Thank you.
Speaker Change: Our next question comes from the line of Alex <unk> from Citibank. Please ask your question Alice.
Speaker Change: Okay.
Speaker Change: I noticed that.
Speaker Change: The line gentlemen grew by 15.
Speaker Change: Got it.
Speaker Change: <unk>.
Speaker Change: Okay, well, let me back in.
Speaker Change: Increased by 15, 4%.
Lindsay Budd: Sure Lindsay Budd.
Speaker Change: Any offline.
Speaker Change: And how much of the lower non plc.
Doug: Thanks, Doug.
Doug: Okay. Thanks.
Doug: Can you repeat again.
Speaker Change: I think we cannot hear you very clearly can you repeat the question again I think that you are.
Doug: Your line is not clear.
Speaker Change: Alice.
Speaker Change: Okay, Okay Jimi mall.
Speaker Change: A bit better. Please say again of your question. Thank you.
Speaker Change: Okay.
Speaker Change: I noticed that the canine offline enrolment grew by 15, 15%.
Speaker Change: On a year over year, this quarter, which is slower than expected.
Speaker Change: Well, let me divide feels the increased by 54% year over year, our lending deposits starting to replace.
Speaker Change: Please.
Speaker Change: And how much of that lower came nine closed it simply because.
Speaker Change: They are getting bigger.
Speaker Change: Is that clear now.
Speaker Change: Yes.
Speaker Change: Yes actually.
Speaker Change: Growth for the non academic tutoring business. This year is a little bit impacted by the timing difference of cutoff of each quarter and also.
Speaker Change: Because we have some enrollment that's last year divide it into two parts.
Speaker Change: For the spring quarter, and awesome quarter, but this year some cities combined as one enrollment so that's also.
Speaker Change: Playing the relatively slower growth of the enrollments.
Speaker Change: That's what the revenue growth and.
Speaker Change: The learning pad.
Speaker Change: For Middle School students, mainly it's also.
Speaker Change: Boeing there very fast and.
Speaker Change: This year the number of users increase dramatically compared with last year, Yes, and next year. We also continue to believe that.
Speaker Change: B K Tonight.
Speaker Change: Including mainly the elementary school.
Speaker Change: Economic tutoring and the Middle School learning pad business will continue to drive the overall growth will be the fastest growth category.
Speaker Change: So within within the Q4 guidance.
Speaker Change: <unk> business.
Speaker Change: We expect the canine business will grow by over 35% year over year in Q4.
Speaker Change: Alex.
Alex: Okay. Thank you so much very clear.
Thank you.
Speaker Change: We will now take our next question from Timothy Zhao from Goldman Sachs. Please ask your question Timothy.
Timothy Zhao: Sure. Thank you for taking my question I think you mentioned that in the fourth quarter. This year you do expect the op margin for the Corbin is to expand on a year on year basis I'm. Just wondering how do you think about the sustainability of the margin expansion into fiscal year, 2026, and what kind of.
Timothy Zhao: Macro risk that you're going to take to increase the operating efficiency and how to think about it.
Timothy Zhao: No.
Timothy Zhao: Yes.
The revenue growth margin.
Timothy Zhao: As I said we.
Timothy Zhao: We expect the margin expansion in the coming.
Timothy Zhao: Two four.
Timothy Zhao: <unk>.
Speaker Change: You know I think this is mainly due to following reasons number one we started to do.
Timothy Zhao: Two the cost control and the efficiency has been since this quarter and so you know.
Timothy Zhao: To believe it will take few facts.
Timothy Zhao: To help the margin profile in Q4, and the next fiscal year.
Timothy Zhao: And secondly.
Timothy Zhao: I think we continue to focus on improving lead to use.
Timothy Zhao: Utilization facilities and so we're doing the cost control in all business lines when the companies because of the slow in them I think that's reasonable.
Timothy Zhao: To do this time and.
Timothy Zhao: For the new year fiscal year 2006 with <unk>.
Timothy Zhao: Aleve woke abbvie.
Timothy Zhao: Margin expansion for the education business, and all which excluding the Easter.
Timothy Zhao: Mr Bai.
Timothy Zhao: The margin expansion in the new year.
Timothy Zhao: Okay, great. Thank you Steven.
Timothy Zhao: Thank you.
Timothy Zhao: Thank you.
Timothy Zhao: Our next question comes from the line of Quinn from Citigroup. Please ask your question Edwin.
Hello, and thank you for taking my question.
Timothy Zhao: It's about the shareholder feedback.
Timothy Zhao: We are glad to see that we have almost finished our ongoing purchase plan. So.
Timothy Zhao: We have some more shareholder paid that back in the future, but dividend or new repurchase plan. Thank you.
Timothy Zhao: Yes.
Timothy Zhao: Almost.
Timothy Zhao: Finished the $700 million short share buybacks and.
Timothy Zhao: As well, we have already paid $1 million special dividend in September last year, and so that means the last two years, two and half year, we paid $800 million.
Timothy Zhao: Already.
Timothy Zhao: <unk>.
Timothy Zhao: Going forward I think in the near future I think I will discuss with the board to to do the.
Timothy Zhao: Another the <unk>.
Timothy Zhao: Capital allocation plan.
Timothy Zhao: To the investors and.
Timothy Zhao: Yes.
Speaker Change: We're coming up with the cash and we generally see next.
Speaker Change: Cash flow and make profit every year. So I think it's reasonable for us to pay to pay the <unk>.
Speaker Change: Capital allocations, we Messrs Mueller the sum.
Speaker Change: Dividends.
Speaker Change: The regular dividends special dividends combined with the share buyback.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you. Your next question comes from the line of Elsie Sheng from CLSA. Please ask your question Elsie.
Okay.
Elsie Sheng: Thank you Steven.
Speaker Change: So my question is.
Speaker Change: It's more about the outlook next year. So you mentioned on the expectation for the growth of overseas business.
Speaker Change: Next financial year could you also update.
Speaker Change: No expectation of closed for other business segment in the next year. Thank you.
Speaker Change: I think 50 will give you the guidance yet.
Speaker Change: Actually I think is reasonable to continue to estimate maybe similar grows.
Speaker Change: With Q4's revenue growth for all the core business lines for our next fiscal year.
Speaker Change: As we said the continued pressure definitely is from the overseas related business and jobs.
Speaker Change: But we do believe that this business will stabilize and based on so far is estimation.
Speaker Change: Single digit growth.
Speaker Change: It's okay for us.
Speaker Change: And it's already comes from where it is for us.
Speaker Change: And for.
Speaker Change: For the.
Speaker Change: The new business K to nine new business should grow at around 25, maybe 25% to 30% growth.
Speaker Change: The high high end probably.
Speaker Change: Growth is from the Middle School session and also elementary school students because the higher base.
Speaker Change: Our revenue scale is already bigger than before the policy level and the gross <unk> around this kind of level is also.
Speaker Change: Something that will show sustainable and healthy pace and our high school business continue maybe around 15, 12% to 13% plus 13% growth conservatively speaking as well.
Speaker Change: The tourism business.
Speaker Change: Probably around <unk>.
Speaker Change: 15 to 15% to 20% growth also a conservative estimation for next year. Okay. That's all the core business lines.
Speaker Change: Okay. Thank you it's very clean.
Speaker Change: Yes.
Speaker Change: Thank you.
Speaker Change: As a reminder to ask a question now please press star one on your telephone keypad.
Speaker Change: We will now take our next question from Charlotte Wei from HSBC. Please ask your question is Charlotte.
Speaker Change: Okay.
Charlotte Wei: Thank you management for taking my question I have a question.
Charlotte Wei: Related to the new will take longer to develop so how do you expect to AI and large language model, where we shape. The education industry can you share with us.
Charlotte Wei: Our strategy and investment plan for this area. Thank you.
Charlotte Wei: Yes.
Charlotte Wei: As I said.
Charlotte Wei: Actually we started to you will see AI technology to help the.
Speaker Change: The whole process of seat teaching and learning.
Speaker Change: From both the future size and students and parents sides, yeah as I said.
Speaker Change: We have two issues.
Speaker Change: Some AI tools like the ice equating speaking assessments and there is some error correction notebooks.
Speaker Change: Oh this behavior, our oldest new technology has helped us to grasp.
<unk> be more data from the students and to help the students.
Speaker Change: The study outcome even better.
Speaker Change: But we don't have the plan to two.
Speaker Change: Due to the like the big model.
Speaker Change: I think that the investments will be reasonable going forward.
Speaker Change: And on the other hand on the cost control side, you know I think.
Speaker Change: The AI technology to help us to do like some of these cells.
These salespeople and even some.
Speaker Change: On the Gis Gis side, I think it will make.
Speaker Change: Make us the work more efficiency, we can save some.
Speaker Change: And our people and expenses all these selling marketing expenses and G&A expenses. So it will help us to drive the margin.
Speaker Change: So this is another benefit from the technology.
Speaker Change: Thank you very clear.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: As a reminder to ask a question. Please press star one on your telephone we will now take our next question from <unk> Kim from Jpmorgan. Please ask your question D. S.
Speaker Change: Hi, Stephen Hi, <unk>.
Speaker Change: Thanks for taking my question I think most of my questions have already been answered but.
Speaker Change: Two minor stuff.
Speaker Change: Can we talk a bit about expansion on the center capacity expansion plan for next year I got disconnected in the middle. So you may have already discussed AD sorry, sorry, if you did that already thats, a and B are you seeing.
Speaker Change: We talked a bit about cost controls starting this quarter I'm just wondering what kind of could control. We are planning to do like we did involve some.
Speaker Change: Rationalization of our own workforce and if that were the case would there be some one off expenses related to <unk>.
Speaker Change: The workforce adjustment or let me talk about it.
Speaker Change: Cost control is more about spending less than previous budget, hence there wouldn't be any meaningful one off around there and now that I think nobody can I ask one more thing.
Speaker Change: Do we think about the headquarter.
Speaker Change: <unk> had closed for 2026, I think last year or this.
Speaker Change: Fiscal year.
Speaker Change: We are spending probably about mid to high teens more than last year on the headquarter overheads, how shall we think about that overhead cost into 2026. Thank you so much sir.
Speaker Change: Tier three question the learning.
Speaker Change: Center expansion plan for the new year right.
Speaker Change: I think we plan to open 10% to 15% new capacity in the.
Speaker Change: In the in the.
Speaker Change: A new year.
Speaker Change: A little less than.
Speaker Change: In fiscal year 'twenty five this is roughly 20% plus and next year, 10% to 15% and I think.
Speaker Change: It will be almost back loaded in Q3 and Q4.
Speaker Change: To prepare for the year after next year.
Speaker Change: So I think you'll see our key.
Speaker Change: Job is too.
Speaker Change: Rates the utilization rates for.
Speaker Change: For the new year fiscal year 'twenty six the cost control I think the cost control.
Speaker Change: Assignment is not one time jobs. So we started we started to do the cost control this quarter and I think we will keep doing the cost control in the in the whole year of fiscal.
Speaker Change: Fiscal year two.
Speaker Change: <unk> thousand six.
Speaker Change: I know.
Speaker Change: We're facing the challenges of tile the slowing down of the.
Speaker Change: Top line growth, so I think that's reasonable.
Speaker Change: For us to do with the cost control continuously and so it will help the higher efficiency and the margin profile of the whole company, we had a <unk>.
Speaker Change: Expenses.
Speaker Change: This is roughly how the covers expenses roughly 6% of the total educational rather than in the 6% of the total.
Speaker Change: Education, and our core business.
Speaker Change: Just to double check.
Speaker Change: Yes, 6%.
Speaker Change: Okay.
Speaker Change: So the ratio would be similar to this year this year versus next year, we're sorry I missed that.
Speaker Change: Last year I think our job is to make the percentage even lower in the last day of the 5% plus or 5% of the total revenue.
Speaker Change: They've had a quarter or quarters.
Speaker Change: The expenses so that means.
Speaker Change: We will get the leverage on the headquarters expenses in the fiscal year 26, It will help the margins up.
Speaker Change: Thank you Peter I think it's really clear and I agreed that we should focus on our utilization and efficiency. In this hard time became delivered margin expansion. Thank you so much okay.
Speaker Change: Thank you.
As a reminder to ask a question. Please press star one on your telephone keypad.
Speaker Change: Once again Thats star one one of <unk> questions.
Speaker Change: We now have a follow up question.
Kim: From the line of <unk> Kim from JP Morgan. Please go ahead D S.
Speaker Change: Sorry, yes. Thank you just a follow up since other other transient question.
Speaker Change: Are you seeing earlier, you said canine new businesses next year plenty of 26 weeks back to about 25% to 30% growth in Diamond <unk> can I double check. If this is only for canine, excluding other new businesses or new businesses, including non canine 425%.
Speaker Change: Yeah.
Speaker Change: Including including everything so the key ones are the non.
Speaker Change: <unk> and Pat and also we added other minor things together.
Speaker Change: Thank you that means a canine should grow faster than what youll give us with.
Speaker Change: It's not yes, absolutely similar to this quarter. So thank you. Thank you so much.
Speaker Change: Yes.
Nick: Thank you Nick.
Nick: Next a follow up question comes from the line of Felix Liu from UBS. Please ask your question Felix.
Felix Liu: Thank you management I actually have one additional question on the learning hardware business.
I noticed that recently some of our competitors.
Felix Liu: We will also sell learning hardware today.
Felix Liu: <unk> launched a new models that are.
Felix Liu: Cheaper increasingly cheaper and cheaper prices.
Felix Liu: How do you think about our strategy in that learning hardware business and how should we think about competition pressure from price cuts from other players. Thank you actually were quite confidence on the.
Felix Liu: Future of these learning pads device model, especially that will elaborate are.
Felix Liu: Strength in the educational sector, we have this kind of interactive teaching a learning system.
Speaker Change: So we have our users.
Felix Liu: Creates the stickiness of our customers they not only.
Felix Liu: Buying the products, but also the subscribe the content.
Felix Liu: And the process of using our system to continue their self study and.
Felix Liu: Create the stickiness and dog Pend generates recurring revenue. So we're still confident that this is the best model to.
Felix Liu: <unk> to us and also to leverage our education strengths.
Felix Liu: And also by using more and more AI technologies, we're now developing all kinds of AR.
Felix Liu: <unk> and <unk>.
Felix Liu: New functions embedded into our service process. So that's the learning.
Our experience for our customers, where we enhanced going forward gradually.
Felix Liu: And also provide them more and more technology supported and also.
Felix Liu: With the real teacher supporting a learning process for them.
Felix Liu: So we believe that the.
Felix Liu: These business will continue to be the key growth driver for our overall revenue and also the operating margins.
Felix Liu: This year, we have already used in this business to generate over 22, 23% operating margin, which is similar with R. R.
Felix Liu: Other.
Speaker Change: Hi offline teaching class.
Speaker Change: Margin and also we have confidence that it has potential to continue to enhance the margin because of the involvement of more technology and do all we can.
Speaker Change: Leverage and does save more time for our.
Speaker Change: Labor costs and also our teachers can serve more students than before so the business model is better than even offline training format yeah.
Speaker Change: Yes.
Speaker Change: Thank you that's very clear.
Speaker Change: Thank you.
Speaker Change: We are now approaching the end of the conference call I'll now turn the call over to new Orientals Executive President and CFO, Stephen Yang for his closing remarks.
Speaker Change: Again, thank you for joining us today.
Speaker Change: If you have any further questions. Please do not hesitate to contact me or any of our competitor Investor Relations Representatives. Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
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