New Oriental Education & Technology Group Q2 2026 New Oriental Education & Technology Group Inc Earnings Call | AllMind AI Earnings | AllMind AI
Q2 2026 New Oriental Education & Technology Group Inc Earnings Call
Operator: Good evening, and thank you for standing by for New Oriental's FY 2026 Q2 results earnings conference call. At this time, all participants are in listen-only mode. After management prepared remarks, there will be a question and answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Ms. Sisi Zhao. Thank you. Please go ahead.
Operator: Good evening, and thank you for standing by for New Oriental's FY 2026 Q2 results earnings conference call. At this time, all participants are in listen-only mode. After management prepared remarks, there will be a question and answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today's conference, Ms. Sisi Zhao. Thank you. Please go ahead.
Speaker #1: Remarks: There will be a question-and-answer session after management prepares. Today's conference is being recorded. If you have any objections, you may disconnect at this time.
Speaker #1: I would now like to turn the meeting over to your host for today's conference, Ms. Sisi Zhao. Thank you. Please go ahead.
Speaker #2: Thank you. Hello, everyone, and welcome to New Oriental's second fiscal quarter 2026 earnings conference call. Our financial results for the bid period were released earlier today, and available on the company's website as well as on newswire services.
Sisi Zhao: Thank you. Hello, everyone, and welcome to New Oriental's Q2 fiscal 2026 earnings conference call. Our financial results for the second period were released earlier today and are available on the company's website as well as newswire 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 and I will be available to answer your questions. Before we continue, please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in our public filings with the SEC.
Sisi Zhao: Thank you. Hello, everyone, and welcome to New Oriental's Q2 fiscal 2026 earnings conference call. Our financial results for the second period were released earlier today and are available on the company's website as well as newswire 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 and I will be available to answer your questions. Before we continue, please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in our public filings with the SEC.
Q2 2026 New Oriental Education & Technology Group Inc Earnings Call
Speaker #2: Today, Stephen Yang, Executive President and Chief Financial Officer, and I will share New Oriental's latest earnings results and visit updates in detail with you.
Speaker #2: After that, Stephen and I will be available to answer your questions. Before we continue, please note that the discussion today will contain forward-looking statements, made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.
Speaker #2: Forward-looking statements involve inherent risks and uncertainties, as such, our results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in our public filings with ASEC.
Sisi Zhao: 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 Oriental's investor relations website at investor.neworiental.org. I'll now first turn the call over to Mr. Yang. Stephen, please go ahead.
Sisi Zhao: 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 Oriental's investor relations website at investor.neworiental.org. I'll now first turn the call over to Mr. Yang. Stephen, please go ahead.
Speaker #2: 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.
Speaker #2: In addition, a webcast of this conference call will be available on New Oriental's semester relations website. Investor.neworiental.org. I will now first turn the call over to Mr. Yang.
Speaker #2: Stephen, please go
Speaker #2: ahead. Thank you, Sisi.
Stephen Yang: Thank you, Cici. Hello, everyone, and thank you for joining us on the call. I'm pleased to report a strong set of results for the second fiscal quarter of 2026. Our continued focus on operational efficiency and disciplined resource management has been a key driver of our solid performance and continues to support our path to sustainable profitability. We're delighted to see strong profit growth, accompanied by a significant improvement in non-GAAP operating margin, up more than 4 percentage points, again, exceeded our expectations. This quarter, total net revenue grew 14.7% year-over-year to $1.19 billion. Non-GAAP operating income more than tripled, rising 206.9% to $89.1 million. Non-GAAP net income attributable to New Oriental increased 68.6% to $72.9 million.
Stephen Yang: Thank you, Cici. Hello, everyone, and thank you for joining us on the call. I'm pleased to report a strong set of results for the second fiscal quarter of 2026. Our continued focus on operational efficiency and disciplined resource management has been a key driver of our solid performance and continues to support our path to sustainable profitability. We're delighted to see strong profit growth, accompanied by a significant improvement in non-GAAP operating margin, up more than 4 percentage points, again, exceeded our expectations. This quarter, total net revenue grew 14.7% year-over-year to $1.19 billion. Non-GAAP operating income more than tripled, rising 206.9% to $89.1 million. Non-GAAP net income attributable to New Oriental increased 68.6% to $72.9 million.
Speaker #3: Hello, everyone, and thank you for joining us on the call. I'm pleased to report a strong set of results for the second fiscal quarter of 2026.
Speaker #3: Our continued focus on operational efficiency and disciplined resource management has been a key driver of our solid performance and continues to support our path to sustainable profitability.
Speaker #3: We're delighted to see strong profit growth accompanied by a significant improvement in non-GAAP operating margins—up more than 4 percentage points. Again, exceeded our expectations.
Speaker #3: This quarter, total net revenue percent year over year grew 14.7 percent to $1.19 billion. Non-GAAP operating income more than tripled, rising 206.9 percent to $89.1 million.
Speaker #3: Non-GAAP net income attributable to New Oriental increased 68.6 percent to 72.9 million dollars. Our core business remains steady and I'm pleased to share that our new initiatives are gaining traction and making meaningful contributions to the group's overall performance.
Stephen Yang: Our core business remains steady, and I'm pleased to share that our new initiatives are gaining traction and making meaningful contribution to the group's overall performance. For the second fiscal quarter, our K-9 new educational business and high school tutoring business reported accelerated year-over-year revenue growth, outpacing the previous quarter. Overseas-related business have shown resilience, delivered modest revenue growth despite the ongoing macroeconomy headwinds, exceeding our earlier conservative expectations. Overseas test prep business recorded a revenue increase of 4% year-over-year. Overseas study consulting business recorded a slightly decrease of about 3% year-over-year. Our adults and university students business recorded a revenue increase of 13% year-over-year. As for our continued investments in new education initiatives, including non-academic tutoring and our Intelligent Learning System and devices, deliver solid, sustainable results. Revenue from this business grew 22% year-over-year this quarter.
Stephen Yang: Our core business remains steady, and I'm pleased to share that our new initiatives are gaining traction and making meaningful contribution to the group's overall performance. For the second fiscal quarter, our K-9 new educational business and high school tutoring business reported accelerated year-over-year revenue growth, outpacing the previous quarter. Overseas-related business have shown resilience, delivered modest revenue growth despite the ongoing macroeconomy headwinds, exceeding our earlier conservative expectations. Overseas test prep business recorded a revenue increase of 4% year-over-year. Overseas study consulting business recorded a slightly decrease of about 3% year-over-year. Our adults and university students business recorded a revenue increase of 13% year-over-year. As for our continued investments in new education initiatives, including non-academic tutoring and our Intelligent Learning System and devices, deliver solid, sustainable results. Revenue from this business grew 22% year-over-year this quarter.
Speaker #3: For the second fiscal quarter, our K9 new educational business and high school tutoring business recorded accelerated year-over-year revenue growth, outpacing the previous quarter. Overseas-related businesses have shown revenue growth despite the ongoing macroeconomic headwinds exceeding our earlier conservative expectations.
Speaker #3: Overseas taxpayer business recorded revenue increase of 4 percent year over year. Overseas study consulting business recorded a slightly decrease of about 3 percent year over year.
Speaker #3: Our adults and university students' business recorded revenue increase of 13 percent year over year. As for our continued investments in new education initiatives, including non-academic tutoring and our intelligent learning system and devices, deliver solid, sustainable results.
Speaker #3: Revenue from this business grew 22 percent year over year this quarter. Our non-academic tutoring business has been rolled out to around 60 existing, steadily grown cities.
Stephen Yang: Our non-academic tutoring business has been rolled out to around 60 existing cities. Market penetration has grown steadily, particularly across high-tier cities. The top 10 cities contribute over 60% of the revenue. As for our intelligent learning system and device business, that has been launched in around 60 cities. We're encouraged by improved customer retention and scalability of the new initiative. The top 10 cities contribute over 50% of this business. Turning to our integrated tourism-related business, our domestic and international study tours and research camp for K-12 and university students were held in 55 cities across China, with the top 10 cities contributing over 50% of the revenue. In parallel, our newly launched tourism offering for middle-aged and senior citizens have been well received, now available in 30 key provinces and international markets.
Stephen Yang: Our non-academic tutoring business has been rolled out to around 60 existing cities. Market penetration has grown steadily, particularly across high-tier cities. The top 10 cities contribute over 60% of the revenue. As for our intelligent learning system and device business, that has been launched in around 60 cities. We're encouraged by improved customer retention and scalability of the new initiative. The top 10 cities contribute over 50% of this business. Turning to our integrated tourism-related business, our domestic and international study tours and research camp for K-12 and university students were held in 55 cities across China, with the top 10 cities contributing over 50% of the revenue. In parallel, our newly launched tourism offering for middle-aged and senior citizens have been well received, now available in 30 key provinces and international markets.
Speaker #3: Market penetration has particularly across high-tier cities. The top 10 cities contribute over 60 percent of the revenue. As for our intelligent learning system and device business, it has been launched in around 60 cities.
Speaker #3: We're encouraged by improved customer retention and scalability of the new initiative. The top 10 cities contribute over 50 percent of this business. Turning to our integrated tourism-related business, our domestic and international study tours and research camp for K12 and university students were held in 55 cities across China, with the top 10 cities contributing over 50 percent of the revenue.
Speaker #3: In parallel, our newly launched tourism offering for middle-aged and senior citizens has been well received and is now available in 30 key provinces and international markets.
Speaker #3: We've expanded our product portfolio to include cultural travel, China study tour, global study tour, and camp education, all designed to deliver enriching experiences through culture and knowledge sharing.
Stephen Yang: We've expanded our product portfolio to include culture travel, China study tour, global study tour, and camp education, all designed to deliver enriching experience through culture and knowledge sharing and personal growth. We're now also exploring opportunities in the health and wellness sector for seniors. We'll partner with over thirty health and wellness spaces in locations such as Hainan, Yunnan, and Guangxi, piloting the segments with a light asset model. With regards to our OMO system, our efforts in developing and revamping our online merge offline teaching platform continues. These efforts aim to deliver more advanced and diversified education services to our customers of all ages. A total of $28.4 million has been invested during this quarter to upgrade and maintain our OMO teaching platforms. Beyond OMO, we continue to focus on our venture in AI, encouraged by the positive market feedback.
Stephen Yang: We've expanded our product portfolio to include culture travel, China study tour, global study tour, and camp education, all designed to deliver enriching experience through culture and knowledge sharing and personal growth. We're now also exploring opportunities in the health and wellness sector for seniors. We'll partner with over thirty health and wellness spaces in locations such as Hainan, Yunnan, and Guangxi, piloting the segments with a light asset model. With regards to our OMO system, our efforts in developing and revamping our online merge offline teaching platform continues. These efforts aim to deliver more advanced and diversified education services to our customers of all ages. A total of $28.4 million has been invested during this quarter to upgrade and maintain our OMO teaching platforms. Beyond OMO, we continue to focus on our venture in AI, encouraged by the positive market feedback.
Speaker #3: We're now also exploring opportunities in-house in the wellness sector for seniors. We have 30 health and wellness spaces in locations such as Hainan, Yunnan, and Guangxi, piloting the segments with a light asset model.
Speaker #3: With regards to our OMO system, our efforts in developing and revamping our platform continue. These efforts aim to deliver more education services to our customers of advanced and diversified all ages.
Speaker #3: A total of 28.4 million dollars has been invested during this quarter to upgrade and maintain our OMO teaching platforms. Beyond OMO, we continue to focus on our venture in AI.
Speaker #3: Encouraged by the positive market feedback, we have been and will continue to refine and embed AI across our offerings to strengthen New Oriental's core capabilities.
Stephen Yang: We have been, and will continue to refine and embedded AI across our offerings to strengthen New Oriental's core capabilities. Simultaneously, we're also leveraging AI to streamline internal operations, thereby boosting efficiency and providing enhanced support for our teaching staff. As an industry leader, we're dedicated to driving long-term revenue growth through dual focus on product innovation and operational efficiency. In upcoming quarters, we look forward to sharing tangible results and positive highlights on performance that are backed by our investment in AI. Now, turning to the East Buy's performance. I'm pleased to share that during the reporting period, East Buy remained customer-centric and made strong progress in both product development and supply chain enhancements. East Buy has expanded beyond its original focus on fresh foods and snacks to offer a broader, more diversified product range.
Stephen Yang: We have been, and will continue to refine and embedded AI across our offerings to strengthen New Oriental's core capabilities. Simultaneously, we're also leveraging AI to streamline internal operations, thereby boosting efficiency and providing enhanced support for our teaching staff. As an industry leader, we're dedicated to driving long-term revenue growth through dual focus on product innovation and operational efficiency. In upcoming quarters, we look forward to sharing tangible results and positive highlights on performance that are backed by our investment in AI. Now, turning to the East Buy's performance. I'm pleased to share that during the reporting period, East Buy remained customer-centric and made strong progress in both product development and supply chain enhancements. East Buy has expanded beyond its original focus on fresh foods and snacks to offer a broader, more diversified product range.
Speaker #3: Simultaneously, we're also leveraging AI to streamline internal operations, thereby boosting efficiency and providing enhanced support for our teaching staff. As an industry leader, we're dedicated to driving long-term revenue growth through a dual focus on product innovation and operational efficiency.
Speaker #3: In the upcoming quarters, we look forward to sharing tangible results and positive highlights on performance that are backed by our investments in AI. Now, turning to the East Buy performance, I'm pleased to share that during the reporting period, East Buy remained customer-centric and made strong progress in both product development and supply chain enhancement.
Speaker #3: East Buy has expanded beyond its original focus on fresh food and snacks to offer a broader, more diversified product range. As of the end of the period, private label SPUs reached 801.
Stephen Yang: As of the end of the period, private label SKUs reached 801. New categories include seafood, healthcare products, kitchen condiments, meats, eggs, dairy, and personal care, household, and cleaning items, paper goods, home textiles, apparel, and underwear. These offerings are thoughtfully created to meet customers' growing demand to health, quality of life, and convenience.... They've contributed to both sales and profit growth to the group, while further optimizing its product mix. Beyond expanding SKUs, East Buy also focused on products iteration, cost efficiency, and targeted marketing to build blockbuster products that resonate strongly with the customers. At the same time, East Buy began exploring offline channels, leveraging its strong brand recognition and New Oriental's learning center network. With the vending machine model now profitable in select cities, we plan to scale this initiative nationwide.
Stephen Yang: As of the end of the period, private label SKUs reached 801. New categories include seafood, healthcare products, kitchen condiments, meats, eggs, dairy, and personal care, household, and cleaning items, paper goods, home textiles, apparel, and underwear. These offerings are thoughtfully created to meet customers' growing demand to health, quality of life, and convenience.... They've contributed to both sales and profit growth to the group, while further optimizing its product mix. Beyond expanding SKUs, East Buy also focused on products iteration, cost efficiency, and targeted marketing to build blockbuster products that resonate strongly with the customers. At the same time, East Buy began exploring offline channels, leveraging its strong brand recognition and New Oriental's learning center network. With the vending machine model now profitable in select cities, we plan to scale this initiative nationwide.
Speaker #3: New seafood, healthcare products; categories include kitchen condiments, meats, eggs, dairy, and personal care, household and cleaning items, paper goods, home textiles, apparel, and underwear.
Speaker #3: These offerings are thoughtfully created to meet customers' growing demand for health, quality of life, and convenience. They have contributed to both sales and profit growth for the group.
Speaker #3: While further optimizing its product mix, beyond expanding SPUs, East Buy also focused on product iteration, cost efficiency, and targeted marketing to build blockbuster products that resonate strongly with the customers.
Speaker #3: At the same time, east by began exploring offline channels leveraging its strong brand recognition and New Oriental's learning center network. With the vending machine model now profitable in select cities, we plan to scale this initiative nationwide.
Speaker #3: All in all, we're pleased to see east by focused and back on track. Making a positive contribution to the group. Both top line and bottom line.
Stephen Yang: All in all, we are pleased to see East Buy refocused and back on track, making a positive contribution to the group, both top line and bottom line. We expect East Buy to contribute more revenue and profits to the group in future, while continuously enhancing our brand influence. Now, I will turn the call over to Cissy to share with you about the key financials. Please go ahead, Cissy.
Stephen Yang: All in all, we are pleased to see East Buy refocused and back on track, making a positive contribution to the group, both top line and bottom line. We expect East Buy to contribute more revenue and profits to the group in future, while continuously enhancing our brand influence. Now, I will turn the call over to Cissy to share with you about the key financials. Please go ahead, Cissy.
Speaker #3: We expect east by to contribute more revenue and profits to the group in the future. While continuously enhancing our brand influence. Now, I will turn the call over to Sisi to share with you about the key financials.
Speaker #3: Please go ahead, Sisi.
Speaker #2: Thank you, Steven. Let me now walk you through the key financial highlights for the quarter. Operating costs and expenses for the quarter were $1,125.1 million, representing a 10.4 percent increase year over year.
Sisi Zhao: Thank you, Stephen. Let me now walk you through the key financial highlights for the quarter. Operating costs and expenses for the quarter were $1,125.1 million, representing a 10.4% increase year-over-year. Cost of revenues increased by 11.8% year-over-year to $556.9 million. Selling and marketing expenses decreased by 1.1% year-over-year to $194 million. G&A expenses for the quarter increased by 15.2% year-over-year to $374.3 million. Total share-based compensation expenses, which were allocated to related operating costs and expenses, increased by 156.8% to $21.4 million in Q2 of 2026.
Sisi Zhao: Thank you, Stephen. Let me now walk you through the key financial highlights for the quarter. Operating costs and expenses for the quarter were $1,125.1 million, representing a 10.4% increase year-over-year. Cost of revenues increased by 11.8% year-over-year to $556.9 million. Selling and marketing expenses decreased by 1.1% year-over-year to $194 million. G&A expenses for the quarter increased by 15.2% year-over-year to $374.3 million. Total share-based compensation expenses, which were allocated to related operating costs and expenses, increased by 156.8% to $21.4 million in Q2 of 2026.
Speaker #2: Cost of revenues increased by 11.8 percent year over year to $556.9 million. Selling and marketing expenses decreased by 1.1 percent year over year.
Speaker #2: To 194.194 million dollars, G&A expenses for the quarter increased by 15.2 percent year over year. To 374.3 million dollars, total share-based compensation expenses, which were allocated to related operating costs and expenses, increased by 156.8 percent.
Speaker #2: To $21.4 million in the second fiscal quarter of 2026. Operating income was $66.3 million, representing a 244.4 percent increase year over year.
Sisi Zhao: Operating income was $66.3 million, representing a 206.44% increase year-over-year. Non-GAAP income from operations for the quarter was $89.1 million, representing a 206.9% increase year-over-year. Net income attributable to New Oriental for the quarter was $45.5 million, representing a 42.3% increase year-over-year. Basic and diluted net income per ADS attributable to New Oriental were 29 cents and 28 cents, respectively. Non-GAAP net income attributable to New Oriental for the quarter were $72.9 million, representing a surge of 68.6% year-over-year. Non-GAAP basic and diluted net income per ADS attributable to New Oriental were 46 cents and 45 cents, respectively.
Sisi Zhao: Operating income was $66.3 million, representing a 206.44% increase year-over-year. Non-GAAP income from operations for the quarter was $89.1 million, representing a 206.9% increase year-over-year. Net income attributable to New Oriental for the quarter was $45.5 million, representing a 42.3% increase year-over-year. Basic and diluted net income per ADS attributable to New Oriental were 29 cents and 28 cents, respectively. Non-GAAP net income attributable to New Oriental for the quarter were $72.9 million, representing a surge of 68.6% year-over-year. Non-GAAP basic and diluted net income per ADS attributable to New Oriental were 46 cents and 45 cents, respectively.
Speaker #2: Non-gap income from operations for the quarter was 89.1 million dollars, representing a 206.9 percent increase year over year. Net income attributable to New Oriental for the quarter was 45.5 million dollars, representing a 42.3 percent increase year over year.
Speaker #2: Basic and diluted net income per ADS attributable to New Oriental were $0.29 and $0.28, respectively. Non-GAAP net income attributable to New Oriental for the quarter was $72.9 million, representing a surge of 68.6 percent year over year.
Speaker #2: Non-GAAP basic and diluted net income per ADS attributable to New Oriental were $0.46 and $0.45, respectively. Net cash flow generated from operations for the second fiscal quarter was approximately $323.5 million, and capital expenditure for the quarter was $23.7 million.
Sisi Zhao: Net cash flow generated from operation for the second fiscal quarter was approximately $323.5 million, and capital expenditure for the quarter were $23.7 million. Turning to the balance sheet. As of 30 November 2025, New Oriental had cash and cash equivalents of $1,842.9 million. In addition, the company had 1,609.9 million dollars in term deposits and $1,875.2 million in short-term investment.
Sisi Zhao: Net cash flow generated from operation for the second fiscal quarter was approximately $323.5 million, and capital expenditure for the quarter were $23.7 million. Turning to the balance sheet. As of 30 November 2025, New Oriental had cash and cash equivalents of $1,842.9 million. In addition, the company had 1,609.9 million dollars in term deposits and $1,875.2 million in short-term investment.
Speaker #2: Turning to the balance sheet, as of November 30, 2025, New Oriental had cash and cash equivalents of $1,842.9 million. In addition, the company had $1,609.9 million in term deposits and $1,875.2 million in term deposits in short-term investments.
Speaker #2: New Oriental's deferred revenue, which represents cash collected upfront from customers and related revenue that will be recognized as a service or goods are delivered, at the end of the second quarter of fiscal year 2026, was $2,161.5 million, an increase of 10.2 percent as compared to $1,960.6 million year over year.
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 were delivered at the end of the second quarter of fiscal year 2026, was $2,161.5 million, an increase of 10.2% as compared to $1,960.6 million year-over-year. Now, I'll hand over to Stephen to go through our outlook and guidance.
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 were delivered at the end of the second quarter of fiscal year 2026, was $2,161.5 million, an increase of 10.2% as compared to $1,960.6 million year-over-year. Now, I'll hand over to Stephen to go through our outlook and guidance.
Speaker #2: Year on year. Now, I'll hand over to Steven to go through our outlook and
Speaker #2: guidance. Thank you,
Stephen Yang: Thank you, Sisi. We're very encouraged by the strong results we've achieved this quarter and in the first half of the fiscal year, 2026. These outcomes give us greater confidence in our operational resilience and the growth trajectory. Looking ahead, we will continue to pursue a balanced approach to revenue and profitability growth. We remain committed to cost discipline and sustainable profitability across all business lines. At the same time, we will take a thoughtful, strategic approach to capacity expansion and hiring, ensuring that growth does not come at the expense of quality. We plan to deepen our presence in cities that demonstrate strong top and bottom line performance, while continuing to manage the resource carefully. We will closely monitor the pace and scale of the new openings, aligning them with operational needs and financial performance throughout the year.
Stephen Yang: Thank you, Sisi. We're very encouraged by the strong results we've achieved this quarter and in the first half of the fiscal year, 2026. These outcomes give us greater confidence in our operational resilience and the growth trajectory. Looking ahead, we will continue to pursue a balanced approach to revenue and profitability growth. We remain committed to cost discipline and sustainable profitability across all business lines. At the same time, we will take a thoughtful, strategic approach to capacity expansion and hiring, ensuring that growth does not come at the expense of quality. We plan to deepen our presence in cities that demonstrate strong top and bottom line performance, while continuing to manage the resource carefully. We will closely monitor the pace and scale of the new openings, aligning them with operational needs and financial performance throughout the year.
Speaker #3: Sisi: We're very encouraged by the strong results we've achieved this quarter and in the first half of fiscal year 2026. These outcomes give us greater confidence in our operational resilience and growth trajectory.
Speaker #3: Looking ahead, we will continue to pursue a balanced approach to revenue and profitability growth. We remain committed to cost discipline and sustainable profitability across all business lines.
Speaker #3: At the same time, we will take a thoughtful strategic approach to capacity expansion and hiring. Ensuring that growth does not come at the expense of quality.
Speaker #3: We plan to deepen our presence in cities that demonstrate strong top-line and bottom-line performance, while continuing to manage resources carefully. We will closely monitor the pace and scale of the new openings, aligning them with operational needs and financial performance throughout the year.
Speaker #3: Given our positive momentum, momentum, including the healthy growth of our K12 business and the recovery of east by, we are now in a more optimistic position regarding our business outlook.
Stephen Yang: Given our positive momentum, including the healthy growth of our K-12 business and the recovery of East Buy, we are now in a more optimistic position regarding our business outlook. We expect the total net revenue for the group, including East Buy, in Q3 of the fiscal year 2026, 1 December 2025 to 28 February 2026, to be in the range of $1,313.2 million to $1,348.7 million, representing a year-over-year increase in the range of 11% to 14%.
Stephen Yang: Given our positive momentum, including the healthy growth of our K-12 business and the recovery of East Buy, we are now in a more optimistic position regarding our business outlook. We expect the total net revenue for the group, including East Buy, in Q3 of the fiscal year 2026, 1 December 2025 to 28 February 2026, to be in the range of $1,313.2 million to $1,348.7 million, representing a year-over-year increase in the range of 11% to 14%.
Speaker #3: We expect the total net revenue for the group, including east by, in the third quarter of the fiscal year 2026, December 1st, 2025, to February 28th, 2026, to be in the range of 1,313.2 million dollars to 1,348.7 million dollars, representing year over year increase in the range of 11 percent to 14 percent.
Stephen Yang: As the full fiscal year 2026, we're restating our total net revenue guidance for the group to be in the range of $5,292.3 million to 5,488.3 million, representing a year-over-year increase in the range of 8% to 12%. This expectation reflects our current outlook, taking into account recent regulatory developments, as well as our preliminary view of market conditions. They remain subject to change. I would like to give you an update on our shareholder return plan for fiscal year 2026.
Stephen Yang: As the full fiscal year 2026, we're restating our total net revenue guidance for the group to be in the range of $5,292.3 million to 5,488.3 million, representing a year-over-year increase in the range of 8% to 12%. This expectation reflects our current outlook, taking into account recent regulatory developments, as well as our preliminary view of market conditions. They remain subject to change. I would like to give you an update on our shareholder return plan for fiscal year 2026.
Speaker #3: As the full fiscal year 2026, we're raising our total net revenue guidance for the group to be in the range of 5,292.3 million dollars to 5,488.3 million dollars, representing a year over year increase in the range of 8 percent to 12 percent.
Speaker #3: This expectation reflects our current outlook, taking into account recent regulatory developments as well as our preliminary view of market conditions. This remains subject to change.
Speaker #3: I would like to give you an update on our shareholder return plan for fiscal year 2026. In October 2025, we announced that, pursuant to the previously adopted three-year shareholder return plan, the board of directors had approved an ordinary dividend of $0.12 per common share, or $1.20 per ADS.
Stephen Yang: In October 2025, we announced that pursuant to the previous adopted three-year shareholder return plan, the board of directors had approved an ordinary dividend of $0.12 per common share, or $1.2 per ADS, to be distributed in two installments as part of the shareholder return for the fiscal year 2026. As of today, the first installment has been fully paid to shareholders and ADS holders. Details of the second installment will be determined and announced in due course. Additionally, we also announced a share repurchase program, under which New Oriental is authorized to repurchase up to $300 million of its ADS or common shares over the subsequent 12 months.
Stephen Yang: In October 2025, we announced that pursuant to the previous adopted three-year shareholder return plan, the board of directors had approved an ordinary dividend of $0.12 per common share, or $1.2 per ADS, to be distributed in two installments as part of the shareholder return for the fiscal year 2026. As of today, the first installment has been fully paid to shareholders and ADS holders. Details of the second installment will be determined and announced in due course. Additionally, we also announced a share repurchase program, under which New Oriental is authorized to repurchase up to $300 million of its ADS or common shares over the subsequent 12 months.
Speaker #3: To be distributed in two installments as part of the shareholder return for the fiscal year 2026. As of today, the first installment has been fully paid to shareholders and ADS holders.
Speaker #3: Details of the second installment will be determined and announced in due course. Additionally, we also announced a share repurchase program, and which New Oriental is authorized to repurchase up to 300 million dollars of its ADS or common shares over the subsequent 12 months.
Speaker #3: As of January 27th, yesterday, we had repurchased a total of approximately 1.6 million ADS for an aggregate consideration of approximately $86.3 million from the open market, and this share repurchase plan.
Stephen Yang: As of 27 January, yesterday, we had repurchased a total of approximately 1.6 million ADS for an aggregate consideration of approximately $86.3 million from open market under this share repurchase plan. To conclude, New Oriental remains firmly committed to sustainable growth, delivering high quality offerings to our customers and creating long-term value for our shareholders. We also continue to work closely with government authorities across provinces and municipalities in China to ensure full compliance with the relevant policies, regulations, measures, and to adjust our operations as needed in this response. This is the end of our fiscal year 2026 Q2 summary. At this point, I would like, with Cissy, to open the floor for questions. Operator, please open the call for this. Thank you.
Stephen Yang: As of 27 January, yesterday, we had repurchased a total of approximately 1.6 million ADS for an aggregate consideration of approximately $86.3 million from open market under this share repurchase plan. To conclude, New Oriental remains firmly committed to sustainable growth, delivering high quality offerings to our customers and creating long-term value for our shareholders. We also continue to work closely with government authorities across provinces and municipalities in China to ensure full compliance with the relevant policies, regulations, measures, and to adjust our operations as needed in this response. This is the end of our fiscal year 2026 Q2 summary. At this point, I would like, with Cissy, to open the floor for questions. Operator, please open the call for this. Thank you.
Speaker #3: To conclude, New Oriental remains firmly committed to sustainable growth, delivering high-quality offerings to our customers, and creating long-term value for our shareholders. We also continue to work closely with government authorities across provinces and municipalities in China to ensure full compliance with relevant policies and regulatory measures.
Speaker #3: And to adjust our operations as needed in this response. This is the end of our fiscal year 2026 Q2 summary. At this point, I would like Sisi to open the floor for questions or further—please open the call for questions.
Speaker #3: these. Thank you. Thank
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[Analyst]: Hi, good evening. Hi, good evening, Stephen and Cissy. First of all, congratulations on the very solid second quarter results, as well as on the lift to your full year guidance. My question is on your guidance. Can management provide some breakdown on the segment growth as much as you can? I'm keen to understand the key drivers for the lift to your full year guidance. Thank you.
[Analyst]: Hi, good evening. Hi, good evening, Stephen and Cissy. First of all, congratulations on the very solid second quarter results, as well as on the lift to your full year guidance. My question is on your guidance. Can management provide some breakdown on the segment growth as much as you can? I'm keen to understand the key drivers for the lift to your full year guidance. Thank you.
Speaker #4: Hi, good evening. Hi, good evening, Steven and Sisi. First of all, congratulations on very solid second-quarter results, as well as on the lift to your four-year guidance.
Speaker #4: My question is on your guidance. Commencement provides some breakdown on the segment growth as much as you can. I'm keen to understand the key drivers for the lift to your four-year guidance.
Speaker #4: Thank you.
Stephen Yang: Yeah, thank you, Felix. So let us start with this quarter's revenue growth analysis. You know, we're very pleased to see the acceleration. What I mean is the growth of the K-12 business. You know, as you know, I think this our strategy this year is to improve the product quality and service quality. And we have seen good results in Q2. You know, we have seen the higher student retention rates and the better feedback from the customers. And so this is the K-12 business. And so in Q3, I think the K-12 business will grow somewhere around 20% year-over-year. Yeah, or more. So let's say it's in 20% plus year-over-year growth. And overseas. Yeah, overseas business, yeah, we met some the revenue growth pressure.
Stephen Yang: Yeah, thank you, Felix. So let us start with this quarter's revenue growth analysis. You know, we're very pleased to see the acceleration. What I mean is the growth of the K-12 business. You know, as you know, I think this our strategy this year is to improve the product quality and service quality. And we have seen good results in Q2. You know, we have seen the higher student retention rates and the better feedback from the customers. And so this is the K-12 business. And so in Q3, I think the K-12 business will grow somewhere around 20% year-over-year. Yeah, or more. So let's say it's in 20% plus year-over-year growth. And overseas. Yeah, overseas business, yeah, we met some the revenue growth pressure.
Speaker #3: let us start with the this Yeah, thank you, Felix. So quarter's revenue growth analysis. You know, we're very pleased to see the acceleration what I mean is the growth of the K12 business.
Speaker #3: You know, as you know, I think our strategy this year is to improve the product quality and service quality. And we have seen good results in Q2.
Speaker #3: You know, we have seen the higher student retention rates and the better feedback from the customers. And so this is the K12 business. And so, in Q3, I think the K12 business will grow somewhere around 20 percent year over year.
Speaker #3: Yeah, or more. So let's say it's in 20 percent plus year over year growth. And overseas, yeah, overseas related business, yeah, we made some the revenue growth pressure.
Speaker #3: But I think, you know, we in the Q2, you know, we still got the top line growth of the overseas tax prep by, you know, 4 percent year over year growth.
Stephen Yang: But I think, you know, we in the Q2, you know, we still got the top line growth of the overseas test prep by, you know, 4% year-over-year growth. And, you know, we're quite resilient. And actually, I think we, we are taking the market share from the, from the market. And so in the Q3, let's say in the second half of the year, so I do believe, you know, the revenue growth will be flattish of the overseas-related business. It's still a drag, but it is, but I think we will do as, you know, as good as we can. College business, you know, let's say the 14, 15% top line growth. And yeah, this is a breakdown.
Stephen Yang: But I think, you know, we in the Q2, you know, we still got the top line growth of the overseas test prep by, you know, 4% year-over-year growth. And, you know, we're quite resilient. And actually, I think we, we are taking the market share from the, from the market. And so in the Q3, let's say in the second half of the year, so I do believe, you know, the revenue growth will be flattish of the overseas-related business. It's still a drag, but it is, but I think we will do as, you know, as good as we can. College business, you know, let's say the 14, 15% top line growth. And yeah, this is a breakdown.
Speaker #3: And, you know, we're quite resilient. And actually, I think we we are taking the market share from the from the market. And so in the Q3, let's say in the second half of the year, so I do believe you know the revenue growth will be flattish of the overseas related business.
Speaker #3: It's still a drag, but it's but I think we will do as you know as good as we can. College business, you know, let's say the 14, 15 percent top line growth.
Speaker #3: And yeah, this is a breakdown. And so, in the second half of the year, I think, you know, we're quite positive about the revenue growth.
Stephen Yang: And so, in the second half of the year, I think, you know, we're kind of positive about the revenue growth and the, you know, even higher margin. Because, you know, since last year, you know, March 2025, we started to do the cost control. And I think we have done a great job. And going forward, we'll do more on cost control. So it will improve the margin expansion going forward, in the second half of the year and the year after. Philip?
Stephen Yang: And so, in the second half of the year, I think, you know, we're kind of positive about the revenue growth and the, you know, even higher margin. Because, you know, since last year, you know, March 2025, we started to do the cost control. And I think we have done a great job. And going forward, we'll do more on cost control. So it will improve the margin expansion going forward, in the second half of the year and the year after. Philip?
Speaker #3: And then, you know, even the higher margin. Because, you know, things last year—you know, March 2025—we started the cost control. And I think we have done a great job.
Speaker #3: And going forward, we'll do more on cost control. So it will improve the margin expansion going forward in the second half of the year.
Speaker #3: And the year after. Felix.
Speaker #4: Okay, this is great progress.
[Analyst]: Okay, this is great progress, and thank you.
[Analyst]: Okay, this is great progress, and thank you.
Speaker #3: Thank And thank you.
Speaker #3: You. Moment for the next questions.
Stephen Yang: Thank you.
Stephen Yang: Thank you.
Operator: Moment for the next questions. Our next questions comes from Alice Cai of Citibank. Please go ahead.
Operator: Moment for the next questions. Our next questions comes from Alice Cai of Citibank. Please go ahead.
Speaker #2: Our next questions come from Alice Chai of Citibank. Please go ahead.
Speaker #5: Good evening, management. Thank you for taking my questions, and congratulations on the strong results. We heard about the business unit integration between your tax prep and consulting units.
Alice Cai: Good evening, management. Thank you for taking my questions, and congratulations on the strong results. We heard about that the business unit integration between your test prep and consulting units. There I have two questions, quick questions. First, what is the expected margin expansion from this merge? And can it effectively offset the headwinds in the US market? Second, regarding efficiency, how much reduction do you expect in the customer cost acquisition? And what is your target for the cross-selling rate? Thank you so much.
Alice Cai: Good evening, management. Thank you for taking my questions, and congratulations on the strong results. We heard about that the business unit integration between your test prep and consulting units. There I have two questions, quick questions. First, what is the expected margin expansion from this merge? And can it effectively offset the headwinds in the US market? Second, regarding efficiency, how much reduction do you expect in the customer cost acquisition? And what is your target for the cross-selling rate? Thank you so much.
Speaker #5: They all have two questions, quick questions. First, what is the expected margin expansion from this merge? And can it effectively offset the headwinds in the U.S. market?
Speaker #5: Second, regarding efficiency, how much reduction do you expect in the customer acquisition cost? And what is your target for the cross-selling rate? Thank you so much.
Speaker #3: Yeah, yeah, yeah. I think, yeah, I saw the news, you know, of the merging of the overseas tax prep business and the consulting business.
Stephen Yang: I think I saw the news, you know, of the merging of the overseas test prep business and the consulting business. As you know, before the merging, overseas test prep, you know, the unit and the consulting business, you know, provide the service to their clients respectively. Each side has their own management teams, teachers, marketing staff, and admin staff. I think, you know, we now put it together. You know, we merged the overseas test prep and consulting business. I think the merge, so let's say the restructuring aims to provide a customer with a one-stop service. I think we will provide even better service to the customers. And also to reduce absolutely some cost and expenses.
Stephen Yang: I think I saw the news, you know, of the merging of the overseas test prep business and the consulting business. As you know, before the merging, overseas test prep, you know, the unit and the consulting business, you know, provide the service to their clients respectively. Each side has their own management teams, teachers, marketing staff, and admin staff. I think, you know, we now put it together. You know, we merged the overseas test prep and consulting business. I think the merge, so let's say the restructuring aims to provide a customer with a one-stop service. I think we will provide even better service to the customers. And also to reduce absolutely some cost and expenses.
Speaker #3: And as you know, before the merging, overseas tax prep, you know, the units and consulting business, you know, provide the service to their clients respectively.
Speaker #3: And each side has their own management teams, teachers, marketing staff, and admin staff. And I think, you know, now we put it together—you know, we merged the overseas tax prep and consulting business.
Speaker #3: And I think the merge so let's say the restructuring aims to provide customers with a one-stop service. And I think the we will provide even the better service to the customers.
Speaker #3: And also, to the reduced absolutely some cost and expenses. Because, you know, we put it together and I think the, you know, one person can do more jobs, you know, in a stronger than before.
Stephen Yang: Because, you know, we put it together, and I think the, you know, one person can do more jobs, you know, even stronger than before. So, let's wait till the next quarter's earnings call. I will share with you about the, like, how much cost we can save or even the, the, to how much can get more revenue or improve the top-line growth and to save some cost to help the group margin profile. Alice, thank you.
Stephen Yang: Because, you know, we put it together, and I think the, you know, one person can do more jobs, you know, even stronger than before. So, let's wait till the next quarter's earnings call. I will share with you about the, like, how much cost we can save or even the, the, to how much can get more revenue or improve the top-line growth and to save some cost to help the group margin profile. Alice, thank you.
Speaker #3: So let's wait till the next quarter's earnings call. I will share with you about how much cost we can save, or even how much more revenue we can get, or improve the top line growth and to save some cost to have the margin profile.
Speaker #5: Okay,
Alice Cai: Okay, thanks. It's very helpful.
Alice Cai: Okay, thanks. It's very helpful.
Speaker #5: thanks. Alice.
Speaker #5: It's very Thank you. helpful.
Speaker #2: One moment for the next question. Our next questions come from Lucy Yu from Bank of America Securities. Please go ahead.
Operator: One moment for the next question. The next question comes from Lucy Yu from Bank of America Securities. Please go ahead.
Operator: One moment for the next question. The next question comes from Lucy Yu from Bank of America Securities. Please go ahead.
Lucy Yu: Thank you. Hi, Stephen. So, congratulations. So my question is on the margin expansion in the second quarter, which has been more than one percentage point. Could you please elaborate on the margin expansion, what is driving that? And how should we think about the margin expansion magnitude in the second half? Thank you.
Speaker #5: Thank you. Hi, students. This is congratulations. So my question is on the margin expansion in the second quarter, which has been more than one percentage point.
Lucy Yu: Thank you. Hi, Stephen. So, congratulations. So my question is on the margin expansion in the second quarter, which has been more than one percentage point. Could you please elaborate on the margin expansion, what is driving that? And how should we think about the margin expansion magnitude in the second half? Thank you.
Speaker #5: Could you please elaborate on the margin expansion? What is driving that? And how should we think about the margin expansion magnitude in the second half?
Speaker #5: Thank you.
Speaker #3: Oh, yeah. Okay. Yeah. Lucy, you know, I think your question is about margin. Yeah, even as I said, even though we made some margin drag from the overseas-related business, we still got the group margin expansion in Q2. You know, the non-GAAP OP margin, 470 basis points year over year, was increased by 400 year.
Stephen Yang: Oh, yeah. Okay. Yeah, Lucy, you know, I think your question is about margin. Yeah, even as, as I said, even though we missed some margin drag from the overseas-related business, but we, we still got the group margin expansion Q2, you know. The non-GAAP OP margin was increased by 470 basis points year-over-year. I think the margin expansion was mainly driven by the better utilization, the higher operating leverage and cost control, and also the profit contribution from the East Buy. And, I think, you know, we will continuously focus on operational efficiency and disciplined resource management, let's say, in the cost control. You know, we control the learning center expansion plan, and we control the marketing expenses.
Stephen Yang: Oh, yeah. Okay. Yeah, Lucy, you know, I think your question is about margin. Yeah, even as, as I said, even though we missed some margin drag from the overseas-related business, but we, we still got the group margin expansion Q2, you know. The non-GAAP OP margin was increased by 470 basis points year-over-year. I think the margin expansion was mainly driven by the better utilization, the higher operating leverage and cost control, and also the profit contribution from the East Buy. And, I think, you know, we will continuously focus on operational efficiency and disciplined resource management, let's say, in the cost control. You know, we control the learning center expansion plan, and we control the marketing expenses.
Speaker #3: I think the margin expansion was mainly driven by the better utilization, the higher operating leverage, and cost control. And also, the profit contribution from the Easter buy.
Speaker #3: And I think, you know, we will, you know, continuously focus on operational efficiency and disciplined resource management. Let's say in cost control—you know, we control the learning center expansion plan.
Speaker #3: And we control the, you know, the marketing expenses. You saw the numbers, you know, the results. And I think going forward, even in Q3 and Q4, the second half of the year, we will get the margin expansion, you know.
Stephen Yang: You saw the numbers, you know, the results. I think, going forward, even the Q3 and the Q4, in the second half of the year, we will get the margin expansion, you know. I don't want to give the detailed guidance because, you know, typically, we'd only give the margin guidance. But, you know, we are quite optimistic about the margin expansion in the second half of this year. Lucy.
Stephen Yang: You saw the numbers, you know, the results. I think, going forward, even the Q3 and the Q4, in the second half of the year, we will get the margin expansion, you know. I don't want to give the detailed guidance because, you know, typically, we'd only give the margin guidance. But, you know, we are quite optimistic about the margin expansion in the second half of this year. Lucy.
Speaker #3: I want to give the detailed guidance because, you know, typically we don't give the margin guidance. But, you know, we are quite optimistic about the margin expansion in the second half of this year.
Speaker #3: Lucy. Thank you.
Speaker #5: Alice, thank you so much,
Lucy Yu: Understood. Thank you so much, Stephen.
Lucy Yu: Understood. Thank you so much, Stephen.
Speaker #5: Stephen.
Stephen Yang: Thank you.
Stephen Yang: Thank you.
Speaker #2: Moment for the next question. Next questions will come from Niayi Kuncheng from Citix. Please go ahead.
Operator: Wait for the next question. Next questions will come from the line of Yi Kuan Cheng from Citics. Please go ahead.
Operator: Wait for the next question. Next questions will come from the line of Yi Kuan Cheng from Citics. Please go ahead.
Speaker #6: Good evening. This is Stephen. Thank you for taking my question, and I also congratulate you on the strong results. So, my question is about the overseas business.
Yi Kuan Cheng: Good evening, Stephen. Thank you for taking my question, and also congrats on the strong results. So my question is about the overseas business. As you mentioned, that the overseas business has very, like, 4% growth rate. Actually, the market condition is quite challenging, so just wondering the future trends and the main reasons for the, for this overseas business that can get such a good result. Thank you.
Yi Kuan Cheng: Good evening, Stephen. Thank you for taking my question, and also congrats on the strong results. So my question is about the overseas business. As you mentioned, that the overseas business has very, like, 4% growth rate. Actually, the market condition is quite challenging, so just wondering the future trends and the main reasons for the, for this overseas business that can get such a good result. Thank you.
Speaker #6: As you mentioned, the overseas business has achieved around 4% growth. Actually, the market condition is quite challenging. So I'm just wondering about the future trends and the main reasons why the overseas business was able to achieve such a good result.
Speaker #6: Thank you.
Speaker #3: Yeah, I think, yeah, as I said, you know, the overseas related business, you know, needs some impacts of the economy environments, you know, outside.
Stephen Yang: Yeah, I think, yeah, as I said, you know, the overseas-related business, you know, needs some impacts of the economy environments, you know, outside. But I think our team have done a great job. You know, they have shown very resilient, you know, in the first half of the year. And we believe they will taking the more market share from, you know, all the competitors. And also, you know, I think the group gave the team more support than before because they need some pressure. We should help them to do more jobs. And going forward, in the second half of the year, you know, I think I just want to give the guidance. The flat is a little bit down, at low single digit growth.
Stephen Yang: Yeah, I think, yeah, as I said, you know, the overseas-related business, you know, needs some impacts of the economy environments, you know, outside. But I think our team have done a great job. You know, they have shown very resilient, you know, in the first half of the year. And we believe they will taking the more market share from, you know, all the competitors. And also, you know, I think the group gave the team more support than before because they need some pressure. We should help them to do more jobs. And going forward, in the second half of the year, you know, I think I just want to give the guidance. The flat is a little bit down, at low single digit growth.
Speaker #3: But I think our team has done a great job. You know, they have shown very resilient in the first half of the year. And we believe they will take more market share from, you know, all the competitors.
Speaker #3: And also, you know, I think the group gave the team more support than before, because they made some pressure. We should help them to do more jobs.
Speaker #3: And going forward, in the second half of the year, you know, I think I just want to give the guidance. The flat is a little bit dumb.
Speaker #3: Let's look at low single-digit growth, because, you know, the outside environment, you know, has no change. But I believe our team will do a great job as they did in the first half of the—
Stephen Yang: Because, you know, the outside environment, you know, has no change. But I believe our team will do the great job as they did in the first half of the year.
Stephen Yang: Because, you know, the outside environment, you know, has no change. But I believe our team will do the great job as they did in the first half of the year.
Speaker #3: year. Thank you,
DS Kim: Thank you, Stephen.
DS Kim: Thank you, Stephen.
Speaker #2: For Stephen, next question. Our next question comes from DS Kim of JP Morgan. Please go ahead.
Operator: For the next question. Our next question comes from DS Kim of J.P. Morgan. Please go ahead.
Operator: For the next question. Our next question comes from DS Kim of J.P. Morgan. Please go ahead.
Speaker #2: ahead. Hi, Stephen.
DS Kim: Hi, hi, hi, Stephen. Hi, Cecilia. Congrats on the great quarter, and I hope that this is first of many, many more quarters to come. Before I actually ask my question, can I double-check on Lucy's earlier question on margin? Can we talk about how much of the margin expansion in Q2, not the forward-looking, but Q2, came from core education versus East Buy, to the extent that you can elaborate? I have my question after this.
DS Kim: Hi, hi, hi, Stephen. Hi, Cecilia. Congrats on the great quarter, and I hope that this is first of many, many more quarters to come. Before I actually ask my question, can I double-check on Lucy's earlier question on margin? Can we talk about how much of the margin expansion in Q2, not the forward-looking, but Q2, came from core education versus East Buy, to the extent that you can elaborate? I have my question after this.
Speaker #7: Hi, sister. Congrats on the great quarter, and I hope that this is the first of many, many more quarters to come. Before I actually ask my question, can I double-check on Lucy's earlier question?
Speaker #7: On margin, can we talk about how much of the margin expansion in Q2—not the forward looking—but Q2, came from core education versus East Buy, to the extent that you can elaborate?
Speaker #7: And I have my question after.
Speaker #7: And I have my question after this. Yeah.
Sisi Zhao: Yeah. Actually, East Buy also reported their first year first half results, so you can roughly calculate. So, if you take out East Buy, all the rest together, margin expansion is roughly about 300 basis points, margin expansion year-over-year.
Sisi Zhao: Yeah. Actually, East Buy also reported their first year first half results, so you can roughly calculate. So, if you take out East Buy, all the rest together, margin expansion is roughly about 300 basis points, margin expansion year-over-year.
Speaker #5: Actually, East by also reported their first half results. So you can roughly calculate. So if you take out East by all the rest together, margin expansion is roughly about 300 bips margin expansion year over
Speaker #7: Thank
Speaker #7: you. And my actual question is year. for our new education business is great that we printed more than 20% growth. What do you think in your view is like sustainable growth rate for the segment from here?
DS Kim: Thank you. My actual question is for our new education business; it's great that we printed more than 20% growth. What do you think, in your view, is like sustainable growth rate for this segment from here? Say, assuming stable 10% capacity expansion for like next 3 to 5 years. Say, you know, like 10% for the group capacity expansion; maybe that means K-9 capacity can grow maybe 15% per annum, and then we can add on maybe 4-5% of ASP growth and couple more points for efficiency gain or utilization gain, if you will. Does that mean that can we continue to expect, say, 20%+ growth? Not...
DS Kim: Thank you. My actual question is for our new education business; it's great that we printed more than 20% growth. What do you think, in your view, is like sustainable growth rate for this segment from here? Say, assuming stable 10% capacity expansion for like next 3 to 5 years. Say, you know, like 10% for the group capacity expansion; maybe that means K-9 capacity can grow maybe 15% per annum, and then we can add on maybe 4-5% of ASP growth and couple more points for efficiency gain or utilization gain, if you will. Does that mean that can we continue to expect, say, 20%+ growth? Not...
Speaker #7: Say assuming stable 10% capacity expansion for like next three to five years, say, you know, like 10% for the group capacity expansion, maybe that means K9 capacity can grow maybe 15% per annum.
Speaker #7: Add on maybe 4%, 5% of ASP growth and a couple more, and then we can add points for efficiency gain or utilization gain, if you will.
Speaker #7: Does that mean that can we continue to expect say 20% plus growth, not I'm not talking about second half, but like next few years based on this level of capacity expansion?
DS Kim: I'm not talking about second half, but, like, next few years based on this level of capacity expansion, or, you know, the growth algorithm or formula can change versus what we had in the past?
DS Kim: I'm not talking about second half, but, like, next few years based on this level of capacity expansion, or, you know, the growth algorithm or formula can change versus what we had in the past?
Speaker #7: Or, you know, the growth algorithm or formula can change versus what we had in the past?
Stephen Yang: Yes, I think that it's a great question. You know, we changed our strategy, you know, before the starting of this fiscal year. You know, we slowed down the learning center expansion from 20-30 percent, you know, the year before, to let's say the 10 percent. So that means we put more focus on the quality and quality improvement. So I think all the business line, even the high school and the K-9 business, the student retention rate is getting higher. You know, I think it's even better than we expected. And also, that means we got the better word of mouth, so we don't need to spend, like, crazy marketing expenses to acquire the new student enrollment.
Stephen Yang: Yes, I think that it's a great question. You know, we changed our strategy, you know, before the starting of this fiscal year. You know, we slowed down the learning center expansion from 20-30 percent, you know, the year before, to let's say the 10 percent. So that means we put more focus on the quality and quality improvement. So I think all the business line, even the high school and the K-9 business, the student retention rate is getting higher. You know, I think it's even better than we expected. And also, that means we got the better word of mouth, so we don't need to spend, like, crazy marketing expenses to acquire the new student enrollment.
Speaker #3: it's a great question. You know, we Yes, I think changed our strategy, you know, before the starting of this fiscal year. You know, we you know, we slowed you know, we slowed down the learning center expansion from 20, 30%, you know, the year the year before, to let's say the 10%.
Speaker #3: So that means we put more focus on the quality and quality improvement. So I think all the business line, even the high school and the K9 business, the student retention rate is getting higher.
Speaker #3: You know, I And also, that means we got the better word of mouth. So we don't need to spend like crazy marketing expenses to acquire the new student enrollment.
Speaker #3: That means, you know, we got the new student enrollment by better word of mouth. And so I think in the second half of the year, you know, we got the 20% plus the top line growth of the K12 business.
Stephen Yang: That means, you know, we got the new student enrollment by better word of mouth. And so I think in the second half of the year, you know, we got the 20% plus the top-line growth of the K-12 business. I believe we will keep the sustainable growth even in the year after. Because, you know, the better quality and also the even the more, the high, the competitive edge of New Oriental, I think we deserve to get more student, new student enrollment, even we could cut some marketing expenses. And also, you know, definitely we will see more leverage because, you know, we just opened, like I said, 10% new learning centers, but, you know, the revenue growth is something somewhere around 20%. So it will...
Stephen Yang: That means, you know, we got the new student enrollment by better word of mouth. And so I think in the second half of the year, you know, we got the 20% plus the top-line growth of the K-12 business. I believe we will keep the sustainable growth even in the year after. Because, you know, the better quality and also the even the more, the high, the competitive edge of New Oriental, I think we deserve to get more student, new student enrollment, even we could cut some marketing expenses. And also, you know, definitely we will see more leverage because, you know, we just opened, like I said, 10% new learning centers, but, you know, the revenue growth is something somewhere around 20%. So it will...
Speaker #3: I believe we will keep the sustainable growth in the year after. Because, you know, the better quality and also the even the more the high the competitive the ads of new rental, I think we deserve to get more student new student enrollment.
Speaker #3: You know, we cut some marketing expenses. And also, you know, definitely we will see more leverage. Because, you know, we just opened, let's say, 10% new learning centers, but you know, the revenue growth is somewhere around 20%.
Speaker #3: So you will see the higher utilization rate, and the higher margin of the K12 business.
Stephen Yang: You will see the higher utilization rate and the higher margin of the K-12 business. Yes.
Stephen Yang: You will see the higher utilization rate and the higher margin of the K-12 business. Yes.
Speaker #3: Yes. Thank you so much,
DS Kim: Thank you so much, sir, and I hope to see that coming through in many more years to come. Thank you.
DS Kim: Thank you so much, sir, and I hope to see that coming through in many more years to come. Thank you.
Speaker #7: Sir, and I hope to see that coming through in many more years to come. Thank you.
Speaker #3: Yeah, and also, you know, I want to add one point to Sisi's comments. You know, in Q3, I do believe we got the margin improvement from both core business and East.
Stephen Yang: Yeah. And also, you know, I want to add one point to Sisi's comments. You know, in the Q3, I do believe we got the margin improvement from both core business and East Buy.
Stephen Yang: Yeah. And also, you know, I want to add one point to Sisi's comments. You know, in the Q3, I do believe we got the margin improvement from both core business and East Buy.
Speaker #3: by.
Speaker #7: Thank you,
DS Kim: Thank you, sir.
DS Kim: Thank you, sir.
Speaker #2: Thank you for the questions, sir. As a reminder, to ask questions, please press star 11 and wait for a name to be announced. Our next question comes from Timothy Zhao of Goldman Sachs.
Operator: Thank you for the questions. As a reminder, to ask question, please press star one one and wait for your name to be announced. Our next question comes from Timothy Zhao of Goldman Sachs. Please go ahead.
Operator: Thank you for the questions. As a reminder, to ask question, please press star one one and wait for your name to be announced. Our next question comes from Timothy Zhao of Goldman Sachs. Please go ahead.
Speaker #2: Please go ahead.
Speaker #8: Right. Hi, Stephen. Hi, sister. Congrats on the study results. So my question is that I recall in the last quarter results, you mentioned that I think about some of the new AI initiatives that you are launching, just wondering if you can share any tangible results or any updates on the AI investments that you are making.
Timothy Zhao: Great. Hi, Stephen. Hi, Sisi. Congrats on the solid results. So my question is that, I recall in the last quarter results, you mentioned that, I think, about the, some of the new AI initiatives that you are launching. Just wondering if you can share any tangible results or any updates on the AI investments that you are making. For example, of the new course format, that you launched probably in the, late last year. Just wondering if there's any progress on that. Thank you.
Timothy Zhao: Great. Hi, Stephen. Hi, Sisi. Congrats on the solid results. So my question is that, I recall in the last quarter results, you mentioned that, I think, about the, some of the new AI initiatives that you are launching. Just wondering if you can share any tangible results or any updates on the AI investments that you are making. For example, of the new course format, that you launched probably in the, late last year. Just wondering if there's any progress on that. Thank you.
Speaker #8: example, some of the new course For format that you launched probably in the late last year, just wondering if there's any progress on that.
Speaker #8: Thank
Speaker #8: you. I think, you
Stephen Yang: I think, you know, in the last three months, I think our team have done a lot on the new offerings of the new AI product. And I think we need one - maybe one quarter - to testify the new offerings. And also, you know, I believe it will contribute more revenue going forward. And one more point is, you know, even the - I think the AI technology help us on the existing product. It, you know, you saw the higher student retention rate. Yeah, we put more focus on the, like, the product quality and even service quality, but I do believe the AI helps us to get even higher the student retention rate going forward.
Stephen Yang: I think, you know, in the last three months, I think our team have done a lot on the new offerings of the new AI product. And I think we need one - maybe one quarter - to testify the new offerings. And also, you know, I believe it will contribute more revenue going forward. And one more point is, you know, even the - I think the AI technology help us on the existing product. It, you know, you saw the higher student retention rate. Yeah, we put more focus on the, like, the product quality and even service quality, but I do believe the AI helps us to get even higher the student retention rate going forward.
Speaker #3: know, in the last three months, I think our team you know, have done a lot on the new offerings of the new AI product.
Speaker #3: And I think we need one maybe one quarter to test defy you know, the new offerings. And also, you know, and I believe it will contribute more revenue going forward.
Speaker #3: one more point is, you know, And even I think the AI technology helped us on the existing product. You know, you saw the higher student retention rate.
Speaker #3: Yeah, we put more focus on the, like, product quality and even the service quality. But I do believe the AI helped us to guide the even higher student retention rate going forward.
Speaker #3: So, and also, the AI helped us to get more official efficiency to save some, you know, expenses and cost. So, AI helps the whole group, you know, three points: new offerings, and the existing products improvement, and the cost saving.
Stephen Yang: So, and also the AI help us to get more efficient and efficiency to save some, you know, expenses and cost. So AI helps the whole group, you know, three points, new offerings and the existing products, improvement, and the cost saving. So, you know, I think we should spend a little bit more on AI technology, but it's not that, it's not that much, and we'll control the whole spending. But I think we will bear more fruit from the AI investment going forward.
Stephen Yang: So, and also the AI help us to get more efficient and efficiency to save some, you know, expenses and cost. So AI helps the whole group, you know, three points, new offerings and the existing products, improvement, and the cost saving. So, you know, I think we should spend a little bit more on AI technology, but it's not that, it's not that much, and we'll control the whole spending. But I think we will bear more fruit from the AI investment going forward.
Speaker #3: So, you know, I think we should spend a little bit more on AI technology, but it's not it's not that much. And we will control the whole the spending.
Speaker #3: But I think we will bear more fruit from the AI investments going forward.
Speaker #3: forward. Got it.
DS Kim: Got it. Thank you, Stephen.
DS Kim: Got it. Thank you, Stephen.
Speaker #8: Thank you,
Speaker #8: Stephen. Moment for the next
Operator: Moving forward, the next question. Our next question comes from Elsie Sheng from CLSA. Please go ahead.
Operator: Moving forward, the next question. Our next question comes from Elsie Sheng from CLSA. Please go ahead.
Speaker #2: Our next question comes from LC Sheng from CLSA. Please go ahead.
Elsie Sheng: Hi, Stephen. This is -- congratulations on the result. I have a follow-up question on the margin expansion, because if we're looking into the details, in Q2, the gross margin is going up, and also the margin expense ratio is also going down. And, because I noticed that you earlier mentioned that you have initiated cross-department customer service system to improve the service efficiency and also reduce the customer acquisition cost. So I wonder if the decrease in the marketing expense ratio related to this initiative, and if it's so, how do you expect the impact of this going forward? Do you expect this trend of lower marketing expense ratio to continue in the next few quarters? Thank you.
Speaker #4: Hi, Stephen. This is Sisi. Congratulations on the results. I have a follow-up question on the margin expansion because, if we look into the details, in the second quarter, the gross margin is going up.
Elsie Sheng: Hi, Stephen. This is -- congratulations on the result. I have a follow-up question on the margin expansion, because if we're looking into the details, in Q2, the gross margin is going up, and also the margin expense ratio is also going down. And, because I noticed that you earlier mentioned that you have initiated cross-department customer service system to improve the service efficiency and also reduce the customer acquisition cost. So I wonder if the decrease in the marketing expense ratio related to this initiative, and if it's so, how do you expect the impact of this going forward? Do you expect this trend of lower marketing expense ratio to continue in the next few quarters? Thank you.
Speaker #4: And also, the marketing expense ratio is going down. And because I noticed that you earlier mentioned that you have initiated a cross-department customer service system to improve service efficiency and also reduce customer acquisition cost.
Speaker #4: So I wonder if the decrease in the marketing expense ratio is related to this initiative and, if so, how do you better impact this going forward?
Speaker #4: Do you expect this trend of lower marketing expense ratio to continue in the next few quarters? Thank you.
Speaker #3: I think the situation will continue. Because, you know, yeah, first of all, we put more focus on the product itself, rather than spend, you know, more money on marketing. But growth is still very healthy.
Stephen Yang: I think the situation will continue because, you know, yeah, first of all, we put more focus on the product itself, rather than spend even more money on marketing. But growth is still very healthy. And also, as you said, you know, we set up a new customer service department, and, you know, that means, I think we will bring the information within New Oriental, even the old departments, overseas consulting, college, K-12 business, high school, K-9, and even other business, and the tourism business at East Buy. So I think these new departments will bring us, you know, more traffic, even within New Oriental customer resources. So this is a, I think that is a very good tool to save more marketing expenses.
Stephen Yang: I think the situation will continue because, you know, yeah, first of all, we put more focus on the product itself, rather than spend even more money on marketing. But growth is still very healthy. And also, as you said, you know, we set up a new customer service department, and, you know, that means, I think we will bring the information within New Oriental, even the old departments, overseas consulting, college, K-12 business, high school, K-9, and even other business, and the tourism business at East Buy. So I think these new departments will bring us, you know, more traffic, even within New Oriental customer resources. So this is a, I think that is a very good tool to save more marketing expenses.
Speaker #3: And also, as you said, you know, we set up the new customer service department. And, you know, that means I think we will bring the information within New Rental, even the old departments, overseas consulting, college, K12 business.
Speaker #3: High school K9 and even other business. And the tourism business on the East by. So I think this new department will bring us, you know, more traffic, even within new rental customer resources.
Speaker #3: So this is a I think it's a very good tool to save more marketing expenses. And also, you know, we just set up the 10% new learning center this year.
Stephen Yang: And also, you know, we just set up the 10% new learning center this year, so we don't need to spend more money on marketing. And, yeah, even in the Q1, you know, some competitors, you know, did some summer promotion or even the free course in the summer. But, you know, we are happy to see more students from our competitors came back to New Oriental in autumn. So that means, you know, our core competency or the product quality, quality tends to be better. And going forward, I think the selling marketing expenses as the percentage of the revenue will go down, going forward, in the second half of the year and the year after.
Stephen Yang: And also, you know, we just set up the 10% new learning center this year, so we don't need to spend more money on marketing. And, yeah, even in the Q1, you know, some competitors, you know, did some summer promotion or even the free course in the summer. But, you know, we are happy to see more students from our competitors came back to New Oriental in autumn. So that means, you know, our core competency or the product quality, quality tends to be better. And going forward, I think the selling marketing expenses as the percentage of the revenue will go down, going forward, in the second half of the year and the year after.
Speaker #3: So we don't need to spend more money on marketing. And yeah, even in the Q1, you know, some I know some competitors you know, did some summer promotion where even the free course in the summer.
Speaker #3: But, you know, we are happy to see more students from our competitors came back to new rental in autumn. So that means, you know, our core competency was the product quality. Quality turns to be better.
Speaker #3: And going forward, I think the selling and marketing expenses as a percentage of revenue will go down. Going forward, even in the second half of the year and the year after.
Speaker #4: Thank you. It's very helpful.
Elsie Sheng: Thank you. It's very helpful.
Elsie Sheng: Thank you. It's very helpful.
Speaker #3: Thank
Stephen Yang: Thank you.
Stephen Yang: Thank you.
Speaker #3: Thank you for the questions.
Operator: Thank you for the questions. We're now approaching the end of the conference call. I'll now turn the call back to New Oriental's Executive President and CFO, Mr. Stephen Yang, for his closing remarks.
Operator: Thank you for the questions. We're now approaching the end of the conference call. I'll now turn the call back to New Oriental's Executive President and CFO, Mr. Stephen Yang, for his closing remarks.
Speaker #2: We're now approaching the end of the conference call. I'll now turn the call back to new rentals executive president and CFO, Mr. Stephen Yang, for his closing
Speaker #2: Remarks. Again, thank you for joining us.
Stephen Yang: Again, thank you for joining us today. If you have any further questions, please do not hesitate to contact me or any of our investor relations representatives. Thank you. Thank you very much.
Stephen Yang: Again, thank you for joining us today. If you have any further questions, please do not hesitate to contact me or any of our investor relations representatives. Thank you. Thank you very much.
Speaker #3: Today, if you have any further questions, please do not hesitate to contact me or any of our investor relations representatives. Thank you. Thank you very much.
Operator: That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.
Operator: That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.
