Q3 2026 New Oriental Education & Technology Group Inc Earnings Call

April 22, 2026

Operator: Good evening, and thank you for standing by for New Oriental's FY 2026 Q3 results 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. Today's conference is being recorded. If you have any objections, you may disconnect at this time. I'd now like to turn the meeting over to your host for today's conference, Ms. Sisi Zhao.

Good evening and thank you for standing by for New Oriental's FY2026 third quarter results 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.

Today's conference is being recorded.

If you have any objections, you may disconnect at this time, and I'd like to turn the meeting over to your host for today's conference, Miss Sisi Zhao.

Sisi Zhao: Thank you. Hello, everyone, and welcome to New Oriental's Q3 2026 Earnings Conference Call. Our financial results for the period were released earlier today and are available on the company's website as well as on 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.

Thank you. Hello everyone, and welcome to New Oriental's third fiscal quarter 2026 earnings conference call. Our financial results for the period were released earlier today and are available on the company's website, as well as on newsweb 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.

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.

Forward-looking statements involved in herein, 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. 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 our investor relations website at investor.neworiental.org.

Stephen Zhihui Yang: Thank you, Cissy. Hello, everyone, and thank you for joining us on the call. I'm glad to share with you that Q3 of this fiscal year marks another quarter of solid results and consistent growth. We're pleased to see that after several consecutive quarters of the revenue growth exceeding expectations, this quarter has once again surpassed expectations. This reinforced our confidence in the correctness of our strategy and our optimism about future performance. We are even more delighted to see the margin expansion in our core business, along with the significant contribution from the outstanding performance of East Buy. Our focus on operational efficiency and investment on strategic initiatives have again driven satisfactory performance and continue to lead our path to sustainable profitability. This quarter, total net revenue grew by 19.8% year-over-year to $1,417.3 million.

Stephen Yang: Thank you, Sisi. Hello, everyone, and thank you for joining us on the call. I'm glad to share with you that Q3 of this fiscal year marks another quarter of solid results and consistent growth. We're pleased to see that after several consecutive quarters of the revenue growth exceeding expectations, this quarter has once again surpassed expectations. This reinforced our confidence in the correctness of our strategy and our optimism about future performance. We are even more delighted to see the margin expansion in our core business, along with the significant contribution from the outstanding performance of East Buy. Our focus on operational efficiency and investment on strategic initiatives have again driven satisfactory performance and continue to lead our path to sustainable profitability. This quarter, total net revenue grew by 19.8% year-over-year to $1,417.3 million.

Oh, now first, I'll turn the call over to Mr. Young Stephen. Please go ahead. Thank you, Cece.

Hello everyone, and thank you for joining us on the call.

I'm glad to share with you that Q3 of this fiscal year marks another quarter of solid results and consistent growth.

We're pleased to see that after several consecutive quarters of revenue growth exceeding expectations, this quarter has once again surpassed expectations.

This reinforced our confidence in the correctness of our strategy and our optimism about future performance.

We're even more delighted to see the margin expansion in our purpose.

Along with the significant contribution from the outstanding performance of East Dubai.

Our focus is operational efficiency and investment in strategic initiatives. We have, again, driven satisfactory performance and continue to lead our path to sustainable profitability.

Stephen Zhihui Yang: Non-GAAP operating income rose 42.8% to $202.9 million, while non-GAAP net income attributed to New Oriental increased 34.3% to $152.2 million. Both our core business and new initiatives are gaining meaningful traction this quarter. Breaking it down. Overseas test prep business recorded a revenue increase of 7% year over year for this quarter. Overseas study consulting business recorded a revenue decrease of about 4% year over year for this quarter. Our adults and university students business recorded the revenue increase of 15% year-over-year this quarter. As for our new education initiatives, including non-academic tutoring and our intelligent learning system and devices, delivered sustainable revenue that grew 23% year-over-year this quarter. Our non-academic tutoring business have 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 this business.

Stephen Yang: Non-GAAP operating income rose 42.8% to $202.9 million, while non-GAAP net income attributed to New Oriental increased 34.3% to $152.2 million. Both our core business and new initiatives are gaining meaningful traction this quarter. Breaking it down. Overseas test prep business recorded a revenue increase of 7% year over year for this quarter. Overseas study consulting business recorded a revenue decrease of about 4% year over year for this quarter. Our adults and university students business recorded the revenue increase of 15% year-over-year this quarter. As for our new education initiatives, including non-academic tutoring and our intelligent learning system and devices, delivered sustainable revenue that grew 23% year-over-year this quarter. Our non-academic tutoring business have 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 this business.

This quarter, total net revenue grew by 19.8% year-over-year to $1,417.3 million. Operating income rose 42.8% to $202.9 million, while non-GAAP net income attributable to New Oriental...

Increased 34.3% to 152.2 million.

Both our core business and new, new initiatives are gaining meaningful traction this quarter.

Breaking down, overseas has tracked businesses recorded the revenue increase of 7% year-over-year for this quarter.

Overseas study consulting business recorded revenue decrease.

Of about 4% over the year for this quarter.

University students business recorded a revenue increase of 15% year-over-year this quarter.

As for our new education initiatives, including non-academic tutoring and our intelligent learning system and devices, they delivered sustainable revenue that grew to $23,000 year over year this quarter.

Stephen Zhihui Yang: Our intelligent learning system and devices business that leverages our teaching expertise and data analytics to provide adaptive learning solutions has been launched in around 60 cities. We're encouraged by enhanced customer retention and scalability of this new business. The top 10 cities contribute over 50% of the business. Turning to our integrated tourism-related business, which includes study tours and research camps for K12 and university students, as well as new cultural tours for middle-aged and senior travelers. We're delighted that the cultural China study tour, global study tour, and camp education products continues to be well-received, providing customers with valuable knowledge, personal growth, and cultural enrichment. Our student programs now operates in approximately 55 cities nationwide, where the top 10 cities generates over 50% of the revenue. Our other top-notch adult tourism offerings span around 30 provinces domestically and selected international destinations.

Stephen Yang: Our intelligent learning system and devices business that leverages our teaching expertise and data analytics to provide adaptive learning solutions has been launched in around 60 cities. We're encouraged by enhanced customer retention and scalability of this new business. The top 10 cities contribute over 50% of the business. Turning to our integrated tourism-related business, which includes study tours and research camps for K12 and university students, as well as new cultural tours for middle-aged and senior travelers. We're delighted that the cultural China study tour, global study tour, and camp education products continues to be well-received, providing customers with valuable knowledge, personal growth, and cultural enrichment. Our student programs now operates in approximately 55 cities nationwide, where the top 10 cities generates over 50% of the revenue. Our other top-notch adult tourism offerings span around 30 provinces domestically and selected international destinations.

I will. Now, damaged children business has been rolled out to around 60%. Cities market penetration has fallen steadily, particularly across high-tier cities. The top 10 cities contribute over 60% of this business.

Our intelligence learning system and device business.

That's leveraged our teaching expertise and data analytics to provide adaptive learning solutions, which have been launched in around 60 cities.

We're encouraged by enhanced customer retention and the scalability of this new business. The top 10 cities contribute over 50% of the business.

Turning to our in integrates tourism related business, which includes Study Tours and research camps for k12 and University students as well as new cultural tours for Middle Ages. And Senior Travelers. We're delighted to. We are delighted that the C culture, travel China Study tour, Global study tour and Camp education products continues to be well received

Providing customers with valuable knowledge, personal growth, and cultural enrichment.

Our student programs now offer rates in approximately 55 cities nationwide, with the top 10 cities generating over 50% of the revenue.

And our other.

Stephen Zhihui Yang: We're also expanding into senior health and wellness tourism through partnership with over 40 wellness facilities in Hainan, Yunnan, and Guangxi, utilizing an asset-light model to pilot the emerging opportunity. We continue to invest in our online merge offline teaching platform, leveraging our educational infrastructure and technology capabilities to deliver advanced personalized learning experience across all age groups. This quarter, we invested $30.6 million to enhance and maintain our OMO platform, which enabled us to provide high-quality instruction to students while adapting to their individual learning needs. Turning to East Buy. East Buy remains committed to delivering premium products and service to Chinese families. It has advanced its multi-platform, multi-account strategy by launching specialized vertical live streaming channels on Douyin, including East Buy Home, East Buy Food & Beverages, and East Buy Nutrition and Health.

Stephen Yang: We're also expanding into senior health and wellness tourism through partnership with over 40 wellness facilities in Hainan, Yunnan, and Guangxi, utilizing an asset-light model to pilot the emerging opportunity. We continue to invest in our online merge offline teaching platform, leveraging our educational infrastructure and technology capabilities to deliver advanced personalized learning experience across all age groups. This quarter, we invested $30.6 million to enhance and maintain our OMO platform, which enabled us to provide high-quality instruction to students while adapting to their individual learning needs. Turning to East Buy. East Buy remains committed to delivering premium products and service to Chinese families. It has advanced its multi-platform, multi-account strategy by launching specialized vertical live streaming channels on Douyin, including East Buy Home, East Buy Food & Beverages, and East Buy Nutrition and Health.

Top-notch adult tourism offerings spend around 30 provinces domestically and select the international destinations. We're also expanding into similar health and wellness tourism through partnerships with over 40 wellness facilities in Highland, Ya, and Gooey, utilizing an asset-light model to pilot the emerging opportunity.

We continue to invest in our online-merge-offline teaching platform, leveraging our educational infrastructure and technology capabilities to deliver advanced, personalized learning experiences across all age groups. This quarter, we invested $30.6 million to enhance and maintain our OMO platform, which enabled us to provide high-quality instruction to students while adapting to their individual learning needs.

Stephen Zhihui Yang: It also continuously optimized its live streaming content and introduced innovative engagement initiatives, including large-scale live campaigns for streamer recruitment and supplier conferences as part of its efforts to strengthen team capabilities, supplier partnerships, and customer engagement. Looking ahead, East Buy will look to expand its private label portfolio, enhance product R&D and quality control, accelerate app membership ecosystem development, and grow its offline footprint steadily through vending machines and experience stores. Together, these initiatives will drive greater operational efficiency and advance supply chain excellence, supporting sustainable long-term growth. Besides upgrading our OMO system, encouraged by the positive feedback on our AI applications, we continue to integrate AI across our offerings to strengthen core capabilities. Simultaneously, we're expanding the use of AI to streamline internal operation, thereby boosting efficiency and elevating the support from our teachers and staff.

Stephen Yang: It also continuously optimized its live streaming content and introduced innovative engagement initiatives, including large-scale live campaigns for streamer recruitment and supplier conferences as part of its efforts to strengthen team capabilities, supplier partnerships, and customer engagement. Looking ahead, East Buy will look to expand its private label portfolio, enhance product R&D and quality control, accelerate app membership ecosystem development, and grow its offline footprint steadily through vending machines and experience stores. Together, these initiatives will drive greater operational efficiency and advance supply chain excellence, supporting sustainable long-term growth. Besides upgrading our OMO system, encouraged by the positive feedback on our AI applications, we continue to integrate AI across our offerings to strengthen core capabilities. Simultaneously, we're expanding the use of AI to streamline internal operation, thereby boosting efficiency and elevating the support from our teachers and staff.

Turning to East Buy, East Buy remains committed to delivering premium products and service to Chinese families. It has advanced its multi-platform, multi-account strategy by launching specialized vertical live streaming channels, including East Buy Home, East Buy Food and Vegetables, and East Buy Nutrition and Health.

It also continuously optimizes live streaming content and introduced innovative engagement initiatives, including large-scale, live campaigns for streamer recruitment and supplier conferences, as part of its efforts to strengthen team capabilities, supplier partnerships, and customer engagement.

Looking at East by will look to expand its private label portfolio. Enhance product R&D and quality control accelerate app membership. Ecosystem, development and growth is offline football and steadily through vending machines and experience stores.

Together, this initiative will drive greater operational efficiency and an advanced supply chain, supporting sustainable long-term growth.

Besides upgrading our OMO system, increased by the positive feedback on our AI applications, we continue to integrate AI across our offerings to strengthen core capabilities.

Simultaneously.

Stephen Zhihui Yang: Driving innovation in product capabilities and operational excellence continue to fuel our pursuit of the sustainable revenue growth. We look forward to sharing measurable results from our AI investments in the quarters ahead. I would also like to take this opportunity to share a new strategic initiative with you. Historically, New Oriental has focused on serving our customers as each individual. Going forward, we're expanding the perspective to serve the entire family unit. Given our diversified offering across different age groups and demographics, we're uniquely positioned to adopt full lifecycle, full-spectrum approach that addresses the evolving needs of each family member, from children to parents to seniors. To support the shift, we launched the New Oriental Home, a private domain platform that integrates our education service, East Buy offerings, and the cultural tourism product into one unified ecosystem.

Stephen Yang: Driving innovation in product capabilities and operational excellence continue to fuel our pursuit of the sustainable revenue growth. We look forward to sharing measurable results from our AI investments in the quarters ahead. I would also like to take this opportunity to share a new strategic initiative with you. Historically, New Oriental has focused on serving our customers as each individual. Going forward, we're expanding the perspective to serve the entire family unit. Given our diversified offering across different age groups and demographics, we're uniquely positioned to adopt full lifecycle, full-spectrum approach that addresses the evolving needs of each family member, from children to parents to seniors. To support the shift, we launched the New Oriental Home, a private domain platform that integrates our education service, East Buy offerings, and the cultural tourism product into one unified ecosystem.

We're expanding the use of AI to streamline internal operations, thereby boosting efficiency and elevating the support from our teachers and staff.

Driving innovation in product capabilities and operational excellence continue to fuel our pursuit of sustainable revenue growth. We look forward to sharing more results from our AI investments in the quarters ahead.

Has focused on serving our customers as each individual.

Going forward, we're expanding the prospective to serve entire family units.

Given our diversified offering across different age groups and demographics.

We're uniquely positioned to adopt a full life cycle, full spectrum approach that addresses the evolving needs of each family member, from children to parents to seniors.

Stephen Zhihui Yang: Through a single app, families can conveniently access, manage, and redeem services tailored to different members, enabling seamless cross-category engagement and deeper household-level relationships. This platform is already demonstrating strong user engagement and retention through scenario-based marketing and integrated service offerings, significantly enhancing customer lifetime value. At the same time, the precision-driven operations improve conversion efficiency and optimize overall operating costs. We have now launched this pilot program in 12 cities as test beds, including Hangzhou, Suzhou, Xi'an, and Wuhan. With over 330,000 registered families, the platform has achieved campaign activation rates of 10% to 15%, significantly outperforming many public domain e-commerce platforms. This performance demonstrates the high reach and precision advantages of our education-focused private domain ecosystem. Now I will turn the call over to Sisi to share with you about the key financials. Sisi, please go ahead.

Stephen Yang: Through a single app, families can conveniently access, manage, and redeem services tailored to different members, enabling seamless cross-category engagement and deeper household-level relationships. This platform is already demonstrating strong user engagement and retention through scenario-based marketing and integrated service offerings, significantly enhancing customer lifetime value. At the same time, the precision-driven operations improve conversion efficiency and optimize overall operating costs. We have now launched this pilot program in 12 cities as test beds, including Hangzhou, Suzhou, Xi'an, and Wuhan. With over 330,000 registered families, the platform has achieved campaign activation rates of 10% to 15%, significantly outperforming many public domain e-commerce platforms. This performance demonstrates the high reach and precision advantages of our education-focused private domain ecosystem. Now I will turn the call over to Sisi to share with you about the key financials. Sisi, please go ahead.

To support the shift, we launched the new Oriental Home, a private domain platform that integrates our education service, each by East by offerings, and the culture tourism products into one unique ecosystem.

Through a single app, families can conveniently access, manage, and redeem services tailored to different members, enabling seamless cross-category engagement and deeper household-level relationships.

This platform is already demonstrating strong user engagement and retention through scenario-based marketing and integrated service offerings, significantly enhancing customer lifetime value.

At the same time, the position-driven officials improve conversion, efficiency, and optimize overall operating cost.

We have now launched this pilot program in 12 cities as test beds, including Hundro Sudo, Hian, and Wuhan.

With over 330,000 registered families.

The platform has achieved campaign activation rates of 10% to 15%, significantly outperforming many public domain e-commerce platforms. This performance demonstrates the high reach and precision advantages of our Education Folks private domain ecosystem.

Sisi Zhao: Yeah. Thank you, Stephen. Let me now walk you through the key financial highlights for the quarter. Operating costs and expenses for the quarter were $1,237 million, representing a 16.9% increase year over year. Cost of revenue increased by 23.4% year over year to $656.2 million. Selling and marketing expenses increased by 9.1% year over year to $198.8 million. General and administrative expenses for the quarter increased by 10.8% year over year to $382.1 million. Total share-based compensation, which were allocated to related operating costs and expenses, increased by 30.9% to $21.1 million in Q3 of fiscal year 2026. Operating income was $180.3 million, representing a 44.8% increase year over year. Non-GAAP income from operations for the quarter was $202.9 million, representing a 42.8% increase year over year. Net income attributable to New Oriental for the quarter was $126.8 million, representing a 45.3% increase year over year.

Now, I will turn the call over to Cece to share with you about the key financial and physical head. Yeah,

Thank you Stephen let me now work you through the key financial highlights for the quarter operating costs and expenses for the quarter or 1237 million representing a 16.9% increase uh year-over-year cost of Revenue increased by 23.4% year-over-year to 656.2 million setting a marketing expenses increased by 9.1% year-over-year to 198.8 million Jenner General and administrative expenses for for the quarter increased by 10.8% a year over year to 382.1 million.

Total share-based compensation, which were allocated to related operating costs and expenses, increased by 30.9% to $21.1 million. In the third quarter of fiscal year 2026, operating income was $180.3 million, representing a 44.8% increase year-over-year. Non-GAAP income from operations for the quarter.

Whereas 202.9 million.

Sisi Zhao: Basic and diluted net income per ADS attributable to New Oriental were $0.80 and $0.79 respectively. non-GAAP net income attributable to New Oriental for the quarter was $152.2 million, representing an increase of 34.3% year-over-year. non-GAAP basic and diluted net income per ADS attributable to New Oriental were $0.97 and $0.95 respectively. Net cash outflow generated from operations for Q3 of fiscal year 2026 was approximately $7.5 million, and capital expenditure for the quarter was $68.8 million. Turning to the balance sheet. As of 28 February 2026, New Oriental had cash and cash equivalents of $1,783.4 million. In addition, the company had $1,491.7 million in term deposits and $1,953.2 million in short-term investments. New Oriental's deferred revenue, which represents cash collected upfront from customers and related revenue that will be recognized as the services or goods are delivered.

Representing a 42.8% increase year-over-year, net income as reported by New Oriental for the quarter was $126.8 million, representing a 45.3% increase year-over-year. Basic and diluted net income per ADS actually grew, too, New Oriental.

Or 80 cents and 79 cents, respectively. Non-GAAP net income attributable to New Oriental for the quarter was $152.22 million, representing an increase of 34.3% year-over-year. Non-GAAP basic and diluted net income per ADS, as we will go to in Oriental, were 97 cents and 85 cents, respectively.

Net cash outflow generated from operations for the third quarter.

Fiscal year 2026 was approximately $7.5 million, and capital expenditures for the quarter were $68.8 million. Turning to the balance sheet, as of February 28, 2026, New Oriental had cash and cash equivalents of $1,783.4 million. In addition, the company had $1,491.7 million in term deposits and $1,953.2 million in short-term investments.

Sisi Zhao: At the end of fiscal Q3 2026 was $1,885.9 million, an increase of 7.8% as compared to $1,749.9 million year-over-year. Now, I'll hand over to Steven to go through our outlook and guidance.

Your rental is deferred revenue, which represents cash collected upfront from customers and related revenue that will be recognized as the services or goods are delivered at the end of the third fiscal quarter.

Uh, 2026.

Was $1,885.9 million, an increase of 7.8% as compared to $1,749.9 million year-over-year.

Stephen Zhihui Yang: Thank you, Sisi. The healthy results we achieved this quarter reinforce confidence in our operational resilience and growth trajectory. Looking ahead, we remain focused on balanced growth, advancing both revenue and profitability in parallel. We will expand capacity and talent strategically, ensuring the growth does not come at the expense of quality. We plan to deepen our presence in markets with proven top- and bottom-line performance while maintaining disciplined resource allocation. We will calibrate the pace and scale of new openings throughout the year, aligning expansion decisions with operational needs and financial results. Cost discipline and sustainable profitability across all business lines continue to be foundational to our strategy. In the coming quarter, what I mean is in the coming Q4, we expect greater cost control to be realized as a result of restructuring and consolidation of our overseas business.

Stephen Yang: Thank you, Sisi. The healthy results we achieved this quarter reinforce confidence in our operational resilience and growth trajectory. Looking ahead, we remain focused on balanced growth, advancing both revenue and profitability in parallel. We will expand capacity and talent strategically, ensuring the growth does not come at the expense of quality. We plan to deepen our presence in markets with proven top- and bottom-line performance while maintaining disciplined resource allocation. We will calibrate the pace and scale of new openings throughout the year, aligning expansion decisions with operational needs and financial results. Cost discipline and sustainable profitability across all business lines continue to be foundational to our strategy. In the coming quarter, what I mean is in the coming Q4, we expect greater cost control to be realized as a result of restructuring and consolidation of our overseas business.

Now, I'll hand over to Stephen to go through our outlook and guidance. Thank you.

The healthy results we achieved this quarter reinforce confidence in our optional resilience and growth trajectory looking ahead. We will remain focused on balanced growth, advancing both revenue and profitability in parallel.

We will expand capacity and talent strategically, ensuring the growth does not come at the expense of quality. We plan to deepen our presence in markets with proven top and bottom line performance.

While maintaining discipline and resource allocation, we will calibrate the pace and scale of new openings throughout the year, aligning expansion decisions with official needs and financial results.

Cost discipline and sustainable profitability across all business lines continued to be foundational to our strategy in the coming quarter.

Stephen Zhihui Yang: A certain level of fixed expense will be reduced, enabling us to pave the way for higher operational efficiency and a better margin profile next year. There will be certain one-off expenses in the coming quarter related to these structural adjustments. Even so, we remain confident in our Q4 profit margin. Looking ahead to the next fiscal year, we have strong confidence in our core education business and East Buy. We will continue to drive sustainable and healthy growth through product enhancement and quality improvement, while further optimizing operational costs and enhancing the efficiency and profitability. Considering the positive momentum and the cost management measures across our business lines, we expect the total net revenue for the group in Q4 of fiscal year 2026 to be in the range of $1,429.6 million to $1,466.9 million, representing year-over-year increase in the range of 15% to 18%.

Stephen Yang: A certain level of fixed expense will be reduced, enabling us to pave the way for higher operational efficiency and a better margin profile next year. There will be certain one-off expenses in the coming quarter related to these structural adjustments. Even so, we remain confident in our Q4 profit margin. Looking ahead to the next fiscal year, we have strong confidence in our core education business and East Buy. We will continue to drive sustainable and healthy growth through product enhancement and quality improvement, while further optimizing operational costs and enhancing the efficiency and profitability. Considering the positive momentum and the cost management measures across our business lines, we expect the total net revenue for the group in Q4 of fiscal year 2026 to be in the range of $1,429.6 million to $1,466.9 million, representing year-over-year increase in the range of 15% to 18%.

What I mean is, in the coming Q4, we expect greater cost control to be realized as a result of restructuring. And with the consolidation of our overseas business, a certain level of fixed expense will be reduced, enabling us to pave the way for higher operational efficiency and a better margin profile next year.

There will be certain one-off expenses in the coming quarter related to the structural adjustments. Even so, we remain confident in our fourth quarter profit margin.

Looking ahead to the next fiscal year, we have strong confidence in our core education business, and we believe we will continue to drive sustainable and healthy growth through product enhancement and quality improvement.

We will further optimize operational costs and enhance the efficiency and profitability.

Stephen Zhihui Yang: Driven by the encouraging growth across various business lines, New Oriental raised the full year guidance of total net revenue in fiscal year 2026, 1 June 2025 to 31 May 2026, to be in the range of $5,561.4 million to $5,598.7 million, representing year-over-year increase in the range of 13% to 14%. These expectations reflect our current outlook based on recent levels of our development and the prevailing market conditions. Both of which remain subject to change. I'd also like to give you an update on our shareholder return plan for fiscal year 2026. In October 2025, we announced that pursuant to our previously adopted three-year shareholder return plan, the board of directors has approved the ordinary dividend of $0.12 per common share or $1.2 per ADS to be distributed in two installments as part of the shareholder's return for fiscal year 2026.

Stephen Yang: Driven by the encouraging growth across various business lines, New Oriental raised the full year guidance of total net revenue in fiscal year 2026, 1 June 2025 to 31 May 2026, to be in the range of $5,561.4 million to $5,598.7 million, representing year-over-year increase in the range of 13% to 14%. These expectations reflect our current outlook based on recent levels of our development and the prevailing market conditions. Both of which remain subject to change. I'd also like to give you an update on our shareholder return plan for fiscal year 2026. In October 2025, we announced that pursuant to our previously adopted three-year shareholder return plan, the board of directors has approved the ordinary dividend of $0.12 per common share or $1.2 per ADS to be distributed in two installments as part of the shareholder's return for fiscal year 2026.

Considering the positive momentum and cost management measures across our business lines, we expect the total net revenue for the group in the fourth quarter of fiscal year 2026 to be in the range of RMB 1,000.4 million to RMB 1,466.9 million, representing a year-over-year increase in the range of 15% to 18%.

Driven by the encouraging growth across various business lines, New Oriental risks before your guidance of total net revenue in fiscal year 2026—June 1, 2025 to May 31, 2026—to be in the range of $5,561.

204 million.

To $5,598.7 million dollars, representing a year-over-year increase in the range of 13% to 14%.

These expectations reflect our current outlook based on recent levels, rate development, and prevailing market conditions.

Market conditions, both for the rich, remain subject to change.

Stephen Zhihui Yang: As of today, the first installment has been fully paid to shareholders and ADS holders. The second installment, $0.06 per common share or $0.6 per ADS, will be paid to holders of common shares and holders of ADS of record as of the close of business on 15 May 2026, Beijing, Hong Kong time and New York time, respectively. We expect the payment date to be on or around 2 June 2026 or 5 June 2026 for holders of common shares and holders of ADS respectively. Additionally, we announced that a share repurchase program in which New Oriental is authorized to repurchase up to $300 million of its ADS or common shares over the subsequent 12 months in the open market.

Stephen Yang: As of today, the first installment has been fully paid to shareholders and ADS holders. The second installment, $0.06 per common share or $0.6 per ADS, will be paid to holders of common shares and holders of ADS of record as of the close of business on 15 May 2026, Beijing, Hong Kong time and New York time, respectively. We expect the payment date to be on or around 2 June 2026 or 5 June 2026 for holders of common shares and holders of ADS respectively. Additionally, we announced that a share repurchase program in which New Oriental is authorized to repurchase up to $300 million of its ADS or common shares over the subsequent 12 months in the open market.

I would also like to give you an update on our shareholder return plan for fiscal year 2026. In October 2025, we announced that, pursuant to its previously adopted three-year shareholder return plan, the Board of Directors had approved the authorized rate dividends of $0.12 per common share, or $1.22 per ADS, to be distributed in two installments as part of the shareholder return for the fiscal year 2026.

Also, look at today. The first of the installments has been fully paid to shareholders and ADS holders. The second installment, $0.06 per common share or $0.60 per ADS, will be paid to holders of common shares and holders of ADS of the record as of the close of business on May 15, 2023, Beijing, Hong Kong, and New York time respectively.

With exact payment dates to be on or around June 2, 2026, were due, and fifth to June 26 for holders of common shares and holders of ADS, respectively.

Additionally, we announced a share repurchase program, under which New Oriental is authorized to repurchase up to $300 million.

Stephen Zhihui Yang: As of 21 April 2026, yesterday, we had repurchased a total of approximately 3.3 million ADS for an aggregate consideration of approximately $184.3 million from the open market under this share repurchase program. In closing, New Oriental remains firmly committed to sustainable growth, delivering exceptional value to our customers and generating long-term returns to our shareholders. We continue to maintain close collaboration with the government authorities in China, ensuring full compliance with relevant policies and regulations, and adapting our operations to evolving requirements. This is the end of our fiscal year 2026 Q3 summary. At this point, I would like to open the floor for questions. Operator, please open the call for this. Thank you.

Stephen Yang: As of 21 April 2026, yesterday, we had repurchased a total of approximately 3.3 million ADS for an aggregate consideration of approximately $184.3 million from the open market under this share repurchase program. In closing, New Oriental remains firmly committed to sustainable growth, delivering exceptional value to our customers and generating long-term returns to our shareholders. We continue to maintain close collaboration with the government authorities in China, ensuring full compliance with relevant policies and regulations, and adapting our operations to evolving requirements. This is the end of our fiscal year 2026 Q3 summary. At this point, I would like to open the floor for questions. Operator, please open the call for this. Thank you.

As of April 21st, 2026, yesterday, we had purchased a total of approximately 3.3 million ADS for aggregate consideration of approximately $184.3 million from the open market, and this share repurchase program.

In closing, New Oriental remains firmly committed to sustainable growth, delivering exceptional value to our customers, and generating long-term returns to our shareholders.

We continue to maintain close collaboration with the government authorities in China, ensuring full compliance with relevant policies and regulations, and adapting our officials to evolving requirements.

Operator: Thank you. The question and answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions, we will take one question at a time from each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed. To ask a question now, please press star one one on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star one one again. We will now take our first question from the line of Jenny Yuan from UBS. Please ask your question, Jenny. Your line is open.

This is the end of our physical year, 2026 Q3 summary at this point. I would like to open the floor for questions. Operator, please open the call for this. Thank you, thank you.

The question and answer session of this conference call will start in a moment in order to be fair to all callers who wish to ask questions. We will take one question at a time from each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed.

To ask a question, now please press star, one one, on your telephone keypad and wait for your name to be announced to requeue your question. Please press star, one one, again.

We will now take our first question from the line of Jenny Yen from UBS. Please ask your question, Jenny, your line is open.

Jenny Yuan: Let me translate myself.

Stephen Zhihui Yang: Okay, go ahead.

Stephen Yang: Okay, go ahead.

Um, so let me transfer myself. So,

Jenny Yuan: Sorry.

Stephen Zhihui Yang: Go ahead.

Stephen Yang: Go ahead.

Okay, go ahead.

Jenny Yuan: Thank you for that. Congrats on the strong set of results this quarter. My question is about margin trends. We know that OP margin expanded meaningfully by 2.3 percentage points this quarter, which is very impressive. Could management please help us break down the key drivers behind this margin expansion? In addition, what is your view, your outlook for margin trends in next quarter and for the next fiscal year? Thank you.

Go ahead.

Stephen Zhihui Yang: Yeah. Thank you, Jenny. I think that is a good question about margin. Let us start with the margin analysis this quarter. Even though we meet some margin drag from the overseas related business, but we still got good margin expansion by 230 basis points. I think the margin expansion was mainly due to the better realization operating leverage and the cost control, and as well, the more profit contribution from East Buy. As you know, we started to do the cost control since March 2023 last year. In last 11 months, I think we have seen the very good result, and which helps to drive the margin up. Our focus on operational efficiency and disciplined resource management has been the key driver of the margin expansion. Next quarter margin, the Q4, I think we remain optimistic on margin expansion in Q4.

Stephen Yang: Yeah. Thank you, Jenny. I think that is a good question about margin. Let us start with the margin analysis this quarter. Even though we meet some margin drag from the overseas related business, but we still got good margin expansion by 230 basis points. I think the margin expansion was mainly due to the better realization operating leverage and the cost control, and as well, the more profit contribution from East Buy. As you know, we started to do the cost control since March 2023 last year. In last 11 months, I think we have seen the very good result, and which helps to drive the margin up. Our focus on operational efficiency and disciplined resource management has been the key driver of the margin expansion. Next quarter margin, the Q4, I think we remain optimistic on margin expansion in Q4.

And congrats on the, on the strong set of results. Um, my question about, uh, modern Trends. So we know that open margin, spend meaningful, you buy, uh, 2.3% point this quarter, uh, which is very impressive. So management, please help us break down the key drivers behind this margin expansion. Um, and then, in addition, what is your view? Your outlook for margin Trends in next Korean for the next physical year. Thank you.

Yeah. Uh, thank you Jenny. I think that is a good question about murder. You know. Uh let us start with the murder analysis of this quarter, you know, even though we missed the margin drag from the overseas related business, uh but it was still got a good margin expansion by 230 basis points up, and I think the margin expansion was mainly due to the battery utilization operating leverage and the cost control. And uh, and as well, the, uh, the more profit contribution from Easter buy, as you know, we started to do the cost control since March, uh, 2025 last year. So, uh, in the in, in, in last 11 months, I think we have seen the very good results and which helps to drive the margin up. And so, our focus on official efficiency and discipline. The resource management has been a key driver of the margin expansion.

Stephen Zhihui Yang: Even though there will be some certain one-off expenses in the coming quarter, in Q4, related to the structural adjustments, the consolidation between the overseas test prep and the consulting. This is one-off expenses. Even so, we still remain confident in the Q1 margin expansion for the whole group. This is Q4 margin guidance. As for the margin outlook for the next year, the new fiscal year, I think we will focus on the profitability across all the business lines and drive to achieve the margin expansion in the coming new year. I think we are quite optimistic about the margin expansion for core educational business and we expect the East Buy will generate more profits in the coming new year. Jenny?

Stephen Yang: Even though there will be some certain one-off expenses in the coming quarter, in Q4, related to the structural adjustments, the consolidation between the overseas test prep and the consulting. This is one-off expenses. Even so, we still remain confident in the Q1 margin expansion for the whole group. This is Q4 margin guidance. As for the margin outlook for the next year, the new fiscal year, I think we will focus on the profitability across all the business lines and drive to achieve the margin expansion in the coming new year. I think we are quite optimistic about the margin expansion for core educational business and we expect the East Buy will generate more profits in the coming new year. Jenny?

Next quarter margin. Uh, the Q4, I think we remain optimistic on margin, uh, expansion in Q4 even though, you know, we—we will, uh, there will be some, like, certain one-off expenses in the coming quarter in Q4 related to the structural adjustments. You know, the consolidation between the overseas test and the Consulting. This is one of the EX expenses. Even so, we still remain the confidence.

In the fourth quarter, margin extension for the whole group.

Uh, profits in the coming year.

Jenny.

Sisi Zhao: Thank you, Claire.

Jenny Yuan: Thank you, Claire.

Stephen Zhihui Yang: Thank you.

Stephen Yang: Thank you.

Thank you very clear.

Operator: Thank you. We will now take our next question from Alice Chai from Citi. Please go ahead, Alice. Your line is open.

Thank you.

We will now take our next question. From Alice Psy from City, please go ahead and list your question. Your line is open.

Alice Chai: Good evening, Sisi and Stephen. Congratulations on the strong result. May I ask the question on capacity expansion plans for Q4 and also for FY 2027? Thanks.

Alice Cai: Good evening, Sisi and Stephen. Congratulations on the strong result. May I ask the question on capacity expansion plans for Q4 and also for FY 2027? Thanks.

And congratulations.

May I ask the question on the capacity expansion plan for Q4 and also for fiscal year 2027? Thanks.

Stephen Zhihui Yang: Yeah. The expansion, I think, as we guided at the starting time of this fiscal year, we plan to open 10% to 15% new capacities. I think the net add of the new learning centers in the first three quarters was 8%. That means in the first three quarters, the net add is 8%. I think the whole year, the net expansion is somewhere around 10% to 13%, 14%. Yeah, as I said, we only allow the cities with the good performance of the top line, bottom line last year to open more the learning centers. We care more about the better utilization and the margins of the whole group. I think we still focus on the. We put the new student enrollments into the existing learning centers. I think if you show the utilization rate, it will be up for the group.

Stephen Yang: Yeah. The expansion, I think, as we guided at the starting time of this fiscal year, we plan to open 10% to 15% new capacities. I think the net add of the new learning centers in the first three quarters was 8%. That means in the first three quarters, the net add is 8%. I think the whole year, the net expansion is somewhere around 10% to 13%, 14%. Yeah, as I said, we only allow the cities with the good performance of the top line, bottom line last year to open more the learning centers. We care more about the better utilization and the margins of the whole group. I think we still focus on the. We put the new student enrollments into the existing learning centers. I think if you show the utilization rate, it will be up for the group.

yeah, you

Spanish, I think, you know, uh, you know, as we got it, you know, at the, uh, the starting time of this fiscal year, you know, we planned to, uh, open 10 to 15% new capacities. I think the net at the new Learning Centers, in first 3 quarters, uh, was 8%. So this is, uh, you know, uh, in—in—that means in the first 3 quarters, the net is 8 percent. So, I think the, the whole year is, uh, the, uh, the net extension, uh, is somewhere around 10 to, like, 13 or 14%. Yeah. As I said, you know, we only allow the, uh, the, uh, the cities with the good performance of the, uh, the top line and bottom line last year to open more, uh, the Learning Center.

Stephen Zhihui Yang: Next year, I think we will continue to open somewhere around 10% or even a little bit more learning centers in the new year. On the other hand, don't forget, we do have a lot of online and the OMO products and offerings. For some online business, we even don't need the existing learning centers. I do believe in the coming new year, the utilization rate will continuously go up going forward. Alice, thank you.

Stephen Yang: Next year, I think we will continue to open somewhere around 10% or even a little bit more learning centers in the new year. On the other hand, don't forget, we do have a lot of online and the OMO products and offerings. For some online business, we even don't need the existing learning centers. I do believe in the coming new year, the utilization rate will continuously go up going forward. Alice, thank you.

ERS and we care more about the better utilization and to and, uh, and the, the margins of the whole group. So I think we, we still Focus, uh, on the, we put the new student enrollments into the existing Learning Centers. And so, I think if you show the utilization rate, it will be up for the group.

And next year, I think, uh, we we will continue to open somewhere around 10% or even a little bit more uh Learning Centers in the uh uh in in the new year. But on the other hand don't forget, we do have a lot of online and the omo products and offerings. We don't, you know, for some online business, we even don't need the exist existing Learning Centers so I believe in the coming new year, the utilization rate will continuously you know, go up.

Going forward.

Alice Chai: Thank you. It's very helpful.

Alice Cai: Thank you. It's very helpful.

Operator: Thank you. We will now take our next question from Lucy Yu from Bank of America Securities. Please go ahead, Lucy. Your line is open.

Alice, thank you. Thank you. Very helpful.

Thank you.

We will now take the next question from Lucy Yu from Bank of America Securities. Please go ahead, Lucy, your line is open.

Lucy Yu: Thank you. Hi, Stephen. This is Lucy from Bank of America. I have a question on margin as well. You mentioned that there will be one-off restructuring expense in the coming quarter. Would you please quantify how much would that be in either US dollar term or in the margin or as a percentage of revenue? That's in the May quarter. Also, you mentioned a new strategy that will possibly lower the selling and distribution expense or the marketing expense next year. What's your target on the sales and the marketing expense for 2027? Thank you.

Stephen Zhihui Yang: Yeah. I think the one-off expenses in the coming Q4 relate to the structural adjustments of the overseas related business. I think the negative impact on margin is roughly 50 bps to 100 bps. Roughly $10 to $15 million is one-off. But even so, we still maintain the confidence to get the margin expansion for the whole group in the coming Q4. What I mean is, even though we include the one-off expenses into the forecast, we still get the margin expansion in Q4. Your question about the marketing expenses plan next year. Yeah, I think. We're doing the cost control, and also we put more focus on the product quality enhancements. We don't need to spend crazy money on marketing, going forward, like what we did in the last three quarters.

Stephen Yang: Yeah. I think the one-off expenses in the coming Q4 relate to the structural adjustments of the overseas related business. I think the negative impact on margin is roughly 50 bps to 100 bps. Roughly $10 to $15 million is one-off. But even so, we still maintain the confidence to get the margin expansion for the whole group in the coming Q4. What I mean is, even though we include the one-off expenses into the forecast, we still get the margin expansion in Q4. Your question about the marketing expenses plan next year. Yeah, I think. We're doing the cost control, and also we put more focus on the product quality enhancements. We don't need to spend crazy money on marketing, going forward, like what we did in the last three quarters.

Uh, thank you. Hi, this is, this is Lucy from Bank of America. Uh, I have a question on margin as well. So, uh, you mentioned that there will be one-off restructuring expense in the coming quarter. Would you please, uh, like, quantify how much that would be, uh, in either US dollar terms or in the margin, or as a percentage of revenue? Uh, so that's in the main quarter. And also, uh, you mentioned that new strategy that will possibly lower the selling and distribution expense, or the marketing expense next year. So what's our target on the sales and the marketing expense for '27? Thank you.

Yeah. Uh, I think, you know, the 1 off, uh, the expense in the, in the coming to 4, you know, relate to the, uh, the structure adjustments, you know, of the overseas the business, I think the, uh, negative impacts, uh, on margin is roughly 50 bits to 100 BS. So roughly, uh, 10 to 15 million dollars is 1 of. But even we, uh, even though, but we still remain the confidence to get the margin extension for the whole group, in the coming Code 4. You know what I mean? Is we include the even though we include the, uh, the 1 of expenses into the, uh, forecast we still get the margin into 4.

Stephen Zhihui Yang: In the coming new year, we expect that the marketing expenses as the percentage of the revenue will be down. It's another factor to have the margin up. Lucy?

Stephen Yang: In the coming new year, we expect that the marketing expenses as the percentage of the revenue will be down. It's another factor to have the margin up. Lucy?

And, uh, and, uh, question about the marketing expenses, uh, plan next year, you know? Yeah, I think the next, uh, you know, we're doing the cost control and also we put more focus on the, uh, the uh products, uh, quality enhancements. So we do need to spend crazy money on marketing, going forward, like what we did, uh, in the last 3 quarter, uh, quarters. And in the coming year, I we expect that the marketing expenses as the percentage of the revenue will be done. So, uh, it's another factor to have the margin up.

Lucy Yu: Thank you so much, Steven. That's very clear.

Thank you so much, Stephen. That's currently

Stephen Zhihui Yang: Thank you.

Stephen Yang: Thank you.

Operator: Thank you. We will now take our next question from Yiqun Zhong from CITIC Securities. Please go ahead, Yiqun. Your line is open.

Thank you.

Yiqun Zhong: Hello, Steven, Sisu. Thank you for taking my question, and congratulations on the strong results. My question is about the momentum of K-12 business. I remember last summer, our K-12 business has gone through some deceleration. How do we think of the growth trend and the competition for K-12 business in this summer? Thank you.

Chongguang Feng: Hello, Steven, Sisi. Thank you for taking my question, and congratulations on the strong results. My question is about the momentum of K-12 business. I remember last summer, our K-12 business has gone through some deceleration. How do we think of the growth trend and the competition for K-12 business in this summer? Thank you.

We will now take our next question from Yuan Chen from Citics. Please go ahead, Yuan, your line is open.

Hello, Sisi. Thank you for taking my question and congratulations on the strong result. My question is about the momentum of K to 12 business. I remember last summer, our K to 12 business went through some deceleration. So how do we think about the growth trend and competition for this business this summer? Thank you.

Stephen Zhihui Yang: On the K-12 business. Yeah. I think we beat the guidance again of the K-12 business in Q3. I think, actually, we beat the guidance in the two to three quarters in a row. I think in the Q4, we are very optimistic about the K-12 revenue growth. I think the reason is, this year we changed the strategy. We put more focus and resource on the product quality enhancement. I think it drives the student retention rate up and drive the utilization rate up. In the Q4, I think our K-12 business still got the revenue growth about, let's say, 15% to 20%. K-9, let's say 20%+ top-line growth. High school business, let's say 15% to 20%.

Stephen Yang: On the K-12 business. Yeah. I think we beat the guidance again of the K-12 business in Q3. I think, actually, we beat the guidance in the two to three quarters in a row. I think in the Q4, we are very optimistic about the K-12 revenue growth. I think the reason is, this year we changed the strategy. We put more focus and resource on the product quality enhancement. I think it drives the student retention rate up and drive the utilization rate up. In the Q4, I think our K-12 business still got the revenue growth about, let's say, 15% to 20%. K-9, let's say 20%+ top-line growth. High school business, let's say 15% to 20%.

For all business. Uh, yeah. I think we, we beat the guidance again of the Q3 business, you know. Uh, I think, you know, we actually, we built the guidance, you know, in, uh,

like the

2 to 3 polar in a row. And, uh, and I think in Q4 we still, uh, we are very, uh, optimistic about the K12 revenue worlds.

I think the reason is, you know, this year we changed the strategy; uh, we put more focus and resources on the, uh, on the product.

Stephen Zhihui Yang: I think going forward, even in the next year or next year after, I think we still get the very healthy growth of the K-12 business. Because, now I think our quality is better than that of last year, and also the student retention rate is up. That's why we don't need to spend crazy money on marketing to recruit the new student enrollment. I think we're quite optimistic about the K-12 business, the growth going forward. Yiqun. Thank you.

Stephen Yang: I think going forward, even in the next year or next year after, I think we still get the very healthy growth of the K-12 business. Because, now I think our quality is better than that of last year, and also the student retention rate is up. That's why we don't need to spend crazy money on marketing to recruit the new student enrollment. I think we're quite optimistic about the K-12 business, the growth going forward. Yiqun. Thank you.

Quality, uh, enhancement. And so, I think it drives the student retention rate up and drive, the utilization rate up. And, uh, so in, in the Q4, I think our Q2 our business, you know, still got the, uh, the, the revenue growth about, let's say the 15 to 20%. Uh K9 like the 20% Topline growth plus 20% plus uh top 10 growth and high school business, uh let's say the 15 to 20%. So I think going forward even in the next year we're next year. After I think we we we still get the very healthy, uh, growth of the kids offices.

Because, you know, now I think our policy is better than that of last year. And also, the student retention rate is up, and uh, and so that's why we don't need to spend crazy money on marketing to, to recruit the new student moments.

and uh,

And so I think we're quite optimistic about the people, our business, uh, the growth,

Going forward.

Yiqun Zhong: Thank you, Stephen. It's very clear.

Chongguang Feng: Thank you, Stephen. It's very clear.

because,

Thank you, thank you. It's quite clear.

Operator: Thank you. We will now take our next question from Elsie Sheng from CLSA. Please go ahead, Elsie. Your line is open.

Thank you.

And we will now take a next question from Elsie. Champs from clsa. Please go ahead. Elsie. Your line is open.

Elsie Sheng: Thank you, Steven and Sisu. Congratulations on the strong result. My question is about overseas business. I noticed that the revenue growth of this overseas test prep has been accelerating over the past two quarters. Could you give us more color on the reason behind? Is it because the demand is coming back or is it because we take more market share? What's the outlook for the overseas growth in Q4 and next year? Thank you.

Elsie Sheng: Thank you, Steven and Sisi. Congratulations on the strong result. My question is about overseas business. I noticed that the revenue growth of this overseas test prep has been accelerating over the past two quarters. Could you give us more color on the reason behind? Is it because the demand is coming back or is it because we take more market share? What's the outlook for the overseas growth in Q4 and next year? Thank you.

Stephen Zhihui Yang: Yeah. Due to the negative impact of the economic environment and the international situation, I think, yeah, our overseas business was negatively impacted by the outside environment. I think our overseas team have shown the resilience in almost everything. Even in the coming Q4, I think the overseas business resilience year over year will be flattish or low single digits up. Y/Y is the revenue increase. We have a great team to do the great job in almost all the cities. Next year, I do believe we can do even better because since last quarter, we started to do consolidation of the overseas test preparation and the overseas consulting.

Stephen Yang: Yeah. Due to the negative impact of the economic environment and the international situation, I think, yeah, our overseas business was negatively impacted by the outside environment. I think our overseas team have shown the resilience in almost everything. Even in the coming Q4, I think the overseas business resilience year over year will be flattish or low single digits up. Y/Y is the revenue increase. We have a great team to do the great job in almost all the cities. Next year, I do believe we can do even better because since last quarter, we started to do consolidation of the overseas test preparation and the overseas consulting.

Uh, thank you Stephen, and this is. Congratulations on the strong result. My question is about overseas business. So, uh, I noticed that the revenue growth of the overseas tax prep has been accelerating over the past 2 quarters. Could you uh, give us more color on the reason behind and uh, is it because the demand is coming back? Or is it because we take more market share. And, uh, what's the outlook for the overseas, uh, growth in the fourth quarter? And next year? Thank you.

Uh, yeah.

you know, due to the

The, uh, the, the economic environments and the international situation. I think. Yeah, but our overseas, uh, business, uh, was negatively impacted by, by the, uh, the outside environment. But I think the, uh, you know, our, uh, team of the overseas have shown the resilience, you know, uh, almost every city, and so, uh, you know, uh, we, uh, even, even in the coming Q4, I think the overseas little business will get, like, the, like your, your year over year will be flat or low single digits, uh, up.

Stephen Zhihui Yang: Going forward, I think we will provide a better one-stop service and product to the students, and also we'll do some cost control to save some fixed cost expenses. Also in the coming new year, I do believe the overseas business margin will be up.

Stephen Yang: Going forward, I think we will provide a better one-stop service and product to the students, and also we'll do some cost control to save some fixed cost expenses. Also in the coming new year, I do believe the overseas business margin will be up.

What, what I mean, is the revenue increase and, uh, so thanks for. Thanks for the the, you know, we have a great team to do the great job, uh, in almost all the cities. And, uh, and next year, I do believe we can do even better because you know things uh, last quarter we we started to be consolidation of the overseas Tesla and the overseas Consulting, you know. So going forward I think we will provide a better 1-star service and products to the students. And also we'll do some cost control to save some uh fixed cost and expenses. So and and and also, in the coming year, I do believe the overseas related. Business margin will be up.

Elsie Sheng: Very clear. Thank you.

Stephen Zhihui Yang: Thank you.

Stephen Yang: Thank you.

Very clear. Thank you.

Operator: Thank you. We will now take our next question from D.S. Kim of JP Morgan. Please go ahead, D.S., your line is open.

Thank you.

Operator: Thank you. We will now take our next question from D.S. Kim of JP Morgan. Please go ahead, D.S., your line is open.

So, thank you.

We will now take the next question from DS Kim of JP Morgan. Please go ahead, DS. Your line is open.

D.S. Kim: Hi, Steven. Hi, Sisu. Congrats on the strong beat. Actually, all my questions have been answered already, so let me just ask a couple of follow-up. First, you mentioned a $10 million one-off expense in Q4. Can I just double-check it would be purely contained in Q4, or can it be additional one-off spilling over into next year? I think it's just one-off, but just to provide some confidence and comfort to the market on a margin expansion next year, just to clarify. Second, you mentioned the expansion, 10% to 13%, 14% expansion. Can I double-check, is that number of centers or the size of a classroom, like area size expansion? And more importantly, what does this group level expansion mean specifically for K9, like class capacity, if you will, this and next year?

DS Kim: Hi, Steven. Hi, Sisi. Congrats on the strong beat. Actually, all my questions have been answered already, so let me just ask a couple of follow-up. First, you mentioned a $10 million one-off expense in Q4. Can I just double-check it would be purely contained in Q4, or can it be additional one-off spilling over into next year? I think it's just one-off, but just to provide some confidence and comfort to the market on a margin expansion next year, just to clarify. Second, you mentioned the expansion, 10% to 13%, 14% expansion. Can I double-check, is that number of centers or the size of a classroom, like area size expansion? And more importantly, what does this group level expansion mean specifically for K9, like class capacity, if you will, this and next year?

Stephen Zhihui Yang: I think the one-off expenses, what I said is, I think majority of the one-off expenses will be happening in Q4. It's a one-off. Even we consider the one-off expenses drag, but we still get the whole group margin expansion in Q4. It's better to the future because we spend some of the one-off expenses in Q4, but as a result, we reduce the fixed cost expenses in the coming year. That's why I said we will drive the margin up of the overseas business in the coming new year. Your second question is about-

Stephen Yang: I think the one-off expenses, what I said is, I think majority of the one-off expenses will be happening in Q4. It's a one-off. Even we consider the one-off expenses drag, but we still get the whole group margin expansion in Q4. It's better to the future because we spend some of the one-off expenses in Q4, but as a result, we reduce the fixed cost expenses in the coming year. That's why I said we will drive the margin up of the overseas business in the coming new year. Your second question is about-

Hey, Stephen. Hey sissy, uh, congrats on the strong beat, uh, actually all my questions. I have been answered already, so let me just ask a couple of follow-up first. Um, you mentioned a 105 million dollar 105 expense in 42? Can I just double check? It would be purely contained in 4k or can it be additional 1 off spilling over into next year? I think it's just 1 off but just to provide some confidence and comfort to the market on the margin expansion. Next year, just to clarify second. Uh, you mentioned, um, the expansion, you know, 10 to, uh, 13 14% expansion, can I double check is that number of centers or, uh, the size of a classroom like area size expansion. And more importantly, what does this group level expansion means? Specifically for K9, you know, like class capacity if you will this, and next year,

The 1 of expenses, it will be high bending so Q4 so it's a 1 off but, you know, even we considered it the 1 off, uh, expense track. But we still got the whole group of margins extension in Q4 and but, you know, it, uh, it's better to the Future because we, uh, we spend some the, uh, 1-off expenses in Q4. But we as a result

Reduce the fixed cost and expenses uh, you know, in the coming year. So that's why aside, we will drive the merger up of the overseas business in the coming year.

Sisi Zhao: Capacity.

Sisi Zhao: The capacity. Yeah.

And uh, your second question is about—

Sisi Zhao: square meter.

The capacity. Yeah. What what

Stephen Zhihui Yang: Yes, square meter. Yeah. What I'm saying is in square meter size.

Stephen Yang: Yes, square meter. Yeah. What I'm saying is in square meter size.

Sisi Zhao: Mm-hmm.

Stephen Zhihui Yang: This is in that add. Most of the new capacity we build up is in the K12 business. Don't forget the K12 business. It's not official guidance, but based on our current estimation, I think the next year top line growth will be somewhere around 15% or 20%. Let's say close to 20% or even more. We still have the leverage. Even if we open 10% to 15% of the new capacity, we still have the leverage to drive the average utilization rate up going forward. As for the cost and expansion discipline, I think the local teams support my job. I believe they will do a better job in the coming new year. They have done a great job in this year.

Stephen Yang: This is in that add. Most of the new capacity we build up is in the K12 business. Don't forget the K12 business. It's not official guidance, but based on our current estimation, I think the next year top line growth will be somewhere around 15% or 20%. Let's say close to 20% or even more. We still have the leverage. Even if we open 10% to 15% of the new capacity, we still have the leverage to drive the average utilization rate up going forward. As for the cost and expansion discipline, I think the local teams support my job. I believe they will do a better job in the coming new year. They have done a great job in this year.

This is in that.

Stephen Zhihui Yang: I do believe they will do more or better job in the coming new year on the cost control and the control of the expansion plan. Yes.

Stephen Yang: I do believe they will do more or better job in the coming new year on the cost control and the control of the expansion plan. Yes.

You know, most of the new capacity we, uh, we build up is in the Kcloud business and, uh, but don't forget the case Wow business. You know, the topline growth will last less, you know, it's not an official guidance, but it's, you know, based on the, um, our current estimation. I think the next year top end goals will be somewhere around 15% or 20%. Let's say close to 20% or even more. So we still have the leverage. If we open, like, potential 15% of the new capacity, we still have the leverage to drive the, the, the average utilization rate up going forward. So, and, uh, I think that as for, as for the, uh, the cost and the expansion discipline, I think the local teams, you know, support my job. Uh, you know, uh, I believe they will do a better job in the coming year, you know, even they, they, they, you know, they have done a great job in this year, so I do believe they will do more or better.

Job in the coming year on the cost control and the control of the success expansion plan.

D.S. Kim: Thank you, sir. Yeah. I think I absolutely agree with you that we need to make the hard decision to optimize our cost structure into next year. Just to double-check, I know it could be a little sensitive, but broadly speaking, the one-off when we say it is optimization of our workforce and the staff, that's one-off, right? It's not like we are ongoing spending money on restructuring. It's just really that we had to make hard decision, and there was some related cost to it in Q4. Is that fair understanding?

DS Kim: Thank you, sir. Yeah. I think I absolutely agree with you that we need to make the hard decision to optimize our cost structure into next year. Just to double-check, I know it could be a little sensitive, but broadly speaking, the one-off when we say it is optimization of our workforce and the staff, that's one-off, right? It's not like we are ongoing spending money on restructuring. It's just really that we had to make hard decision, and there was some related cost to it in Q4. Is that fair understanding?

Stephen Zhihui Yang: Yes. Correct. Yeah.

Stephen Yang: Yes. Correct. Yeah.

D.S. Kim: Thank you, sir.

DS Kim: Thank you, sir.

Yes. Thank, thank you, sir. Yeah, I I think I absolutely agree with you that, uh, like it's kind of, we need to do that hard, uh, to make the hard decision to, uh, optimize our core structure into next year, but just to double check, I know you it's a, it could be a little sensitive. But broadly speaking the 1 of, when we say this kind of optimization of our Workforce and the staff, that's 1 of, right? So uh like it's not like we are ongoing spending money on, you know. Restructuring is just really that we have to make hard decision and uh there was some you know, related cost to it in 4k. Is that fair understanding? Yes. Yes. Yes correct.

Stephen Zhihui Yang: All right.

Stephen Yang: All right.

D.S. Kim: That's very clear. Thank you.

DS Kim: That's very clear. Thank you.

Stephen Zhihui Yang: Thank you. Yes.

Stephen Yang: Thank you. Yes.

Thank you, sir. All right, that's very clear. Thank you.

Sisi Zhao: Thank you. We will now take the next question from Jane Yuan of CICC. Please ask your question, Jane. Your line is open.

Thank you, yes.

Thank you.

We will now take a next question. From Jane Yuan of cic please ask your question Jane, your line is open.

Jane Yuan: Good evening, Steve and Sisi. Congratulations on this quarter's strong performance. I noticed that on the non-academic business side, revenue top line growth remains strong, but I see a slight moderation in the number of paid user growth for the learning device. Could you help us understand what's behind the shift? Thanks.

Jing Yuan: Good evening, Steve and Sisi. Congratulations on this quarter's strong performance. I noticed that on the non-academic business side, revenue top line growth remains strong, but I see a slight moderation in the number of paid user growth for the learning device. Could you help us understand what's behind the shift? Thanks.

Good evening, this is congratulations on this quarter's strong performance. I noticed that on the new allocation business side, revenue and topline growth remain strong, but I see a slight moderation in the number of paid user growth.

Stephen Zhihui Yang: Yeah, I think it's because of the disclosure difference. I think the paid user. What I'm saying is the online students, the online paid users pay more money and enroll more subjects at the same time, so it's better than before. Secondly, we do have some seasonal or the timing difference issue. I suggest you look at the enrollment and the deferred revenue and the GAAP revenue in more long-term. That's why we gave the whole year guidance since this year. I think the trend is good of the K12 business. In Q4, I do believe the revenue growth will be very healthy and will continue to grow the business even in Q4 and the new year.

For the learning device, could you help us understand what's behind the shift? Thanks.

Stephen Yang: Yeah, I think it's because of the disclosure difference. I think the paid user. What I'm saying is the online students, the online paid users pay more money and enroll more subjects at the same time, so it's better than before. Secondly, we do have some seasonal or the timing difference issue. I suggest you look at the enrollment and the deferred revenue and the GAAP revenue in more long-term. That's why we gave the whole year guidance since this year. I think the trend is good of the K12 business. In Q4, I do believe the revenue growth will be very healthy and will continue to grow the business even in Q4 and the new year.

The pay dealer. Yeah, I think you know,

I think this because of this, some disclosure, you know uh the difference. So you know um,

For the timing difference issue. And so I suggest your uh, look at the enrollment and the different revenue and the Gap Revenue in more long term. So that's why, you know, we, we give the whole year guidance, you know, things that the, uh, this year. And so I think the trend is good or big to our business and the Q4, I don't believe the revenue growth will be uh, very healthy and uh, will continue to grow the business even in the Q4 and the new year.

Jane Yuan: Okay, great. Thanks. That's very clear.

Jing Yuan: Okay, great. Thanks. That's very clear.

Stephen Zhihui Yang: Yeah.

Stephen Yang: Yeah.

Okay, great. Thanks. That's very clear.

Sisi Zhao: Thank you. We will now take the next question from Charlotte Wei of HSBC. Please go ahead, Charlotte. Your line is open.

Thank you.

We will now take our next question. From Charlotte away of HSBC. Please go ahead. Charlotte, your line is open.

Charlotte Wei: Thank you, Steve and Sisi, for taking my question, and congrats on a really strong quarter of results. My question is regarding AI impact. On one hand, we can see AI clearly improve operational efficiency and support margin expansion. On the other hand, how do we expect AI can change the core tutoring formats that EDU is currently offering? Over the next 12 to 24 months, what kind of opportunities and threats do you see from the AI? Thank you.

Stephen Zhihui Yang: I will ask Sisi to answer your question. Sisi is an AI expert.

Stephen Yang: I will ask Sisi to answer your question. Sisi is an AI expert.

Thank you, Stephen. And this is for taking my question and congrats on a really strong quarter of results. So my question is regarding AI impact. Uh, on 1 hand, we can see EI, clearly improve like operational efficiency and the support margin expansion on the other hand. So, how do we expect, like AI can change the call? Uh, tutoring formats. The edu is currently offering. So, like over the next 12 to 24 months, what kind of opportunities and threats? Do you see from the AI? Thank you.

Sisi Zhao: Okay. Yeah. Actually, we are exciting about the opportunity to implement AI technology into our business. It's a big opportunity for companies like us with capital advantages, and also we can hire top people and also have the best educational experience in this industry. We have the best position to implement AI technology into our area. Three things we're doing, and we're making progress, and also want to share with each of you. Firstly, we are implementing AI technology into all key business lines. For not only those online products or hardware products like our intelligent learning device, we have all the AI functions embedded into it, and keep monetizing it and enhancing students' learning experience, and improve the learning efficiency of our customers as well.

I will ask for the CC to answer a question. You know, cc is a AI expert. Okay. Yeah. So actually, uh, we are, uh, exciting about the opportunity to implement AI technology and into our, our business. Uh, you know, it's a big opportunity for companies like us with capital, uh, advantages. And also, we can hire, uh, top people and also have the best educational experience in this industry. Uh, so we have the best position to implement AI technology into our area and, uh, 3 things we're doing and, uh, we're making progress. Um, and also want to share with each of you. Uh, firstly, um, we are implementing, uh, AI technology into all key business lines. Uh, so for not only, uh, those online products or Hardware, uh, products like our, uh, intelligent learning device. We have all the AI functions in it, embedded in the into it and, um, keep monetizing.

Sisi Zhao: Even offline classes for young people, for young students and all ages, actually, they can implement some AI functions in the class. We are collecting the data and combining it with our teaching and learning experience to have all the data to possess more and more value to help us to even explore even more product opportunities in the future. Existing products are enhancing the quality and also enhancing the competitive advantage using the AI, implementing the AI technology. Second thing we're doing is to help us, especially this year and coming 1 to 2 years, our key theme is to enhance the overall efficiency, bring the healthy growth, plus the profitability enhancement. The AI can give us a lot of help for each process of our daily work, for all the teachers, salespeople, and teacher assistants, even functional department staffs.

It and enhancing, uh, students, uh, learning experience and, uh, in improve the learning, um, efficiency of our customers, as well and even offline classes. Uh, for young people for, for, for young students and, uh, uh, uh, all ages actually, they can Implement some AI, uh, functions in in the class. And we are collecting the data and, uh, uh, combining it with our teaching and learning experience to

Have all the data, uh, to possess more and more value, uh, to help us, to to, to even Explore, uh, even more, uh, product opportunities in the future. Uh, so, so existing, uh, products are enhancing the quality and also, uh, enhancing the, the, uh, comparative, uh, competitive Advantage, uh, using the AI implementing, the AI technology. Um, and, and second thing, uh, we're doing is to, uh, help us. Uh, you know, this year is, especially this year and, uh, coming 1 to 2 years, our key Sim is to enhance the overall efficiency, you know, bring the Healthy Growth, uh, plus the, the profitability enhancement, uh, you know, the AI can can, um, put a lot of, uh, uh, uh, can can give us a lot of help. Uh, you know, for each, um, progress of our, uh, daily work, uh, for all the teachers, uh, sales people

Sisi Zhao: The whole working process can implement AI technology to enhance the efficiency. We have already seen some certain business labor costs got reduced, or the labor hours got reduced. We're doing some restructuring for certain business, for example, the overseas-related business, and also some other business as well. We want to implement more and more AI technology into the working process to benefit from these efficiency improvement. This is the second thing. It's an ongoing work, so we will continue closely following the trend of AI technology's involvement and keep using it into the whole working process. Teachers are saving more and more time so that our teachers' utilization can also improve together with the trend. Third biggest thing, actually, we're also exciting and waiting for the results, is that we have several piloting team.

For teachers and teacher assistants, even functional department staff, the whole working process can implement AI technology to enhance. Um, the

Efficiency. So we have already seen some certain business, you know, uh, labor costs got reduced or the uh, labor hours uh, got reduced. And also, you know, we're doing some restructuring uh, for certain business. Uh, for example, the overseas related business, um and also some other business as well. So we want to use uh, Implement more and more are technology into the working process to to benefit from uh, these uh, efficiency Improvement. Uh, so this is the second thing uh, it's an ongoing work, uh, so it will continue closely following

Sisi Zhao: They're working on some new products implementing purely AI technology so we can get rid of, or depend very little on human resource, but we can combine the AI technology with our teaching and learning experience, and certain content, so that we can come up with some innovative, actually, educational products, which is different from currently what we're doing for offline. But using the AI technology to bring students the learning experience, similar with offline face-to-face teaching, but using AI technology, we're exploring some opportunities here now, and hopefully in coming several months, maybe we can see some new products coming. Yeah. Actually, the company are devoting a lot of new resources into the AI area. It's an ongoing process, but definitely together with our strategy, we'll implement more of the AI technology, keep catching up the trend, and benefit more going forward. Okay.

Uh, utilization can also improve, uh, together with the trend. Um, and third biggest thing. Uh, actually we are, we're also exciting and waiting for, for the results is that we have several uh, pallet team. Uh, they're working on some new products implementing, uh, purely AI technology. So we can get rid of or depends very, very little on, uh, humor Source, but we can combine the AI technology with our teaching and learning experience and uh, certain content. Uh, so, so that we can come up with some uh, uh uh, uh, Innovative actually educational products, uh, which is different from currently, what we are doing, uh, for offline. But using the, uh, AI technology to bring students, uh, The Learning Experience, um, similar with offline, uh, uh, face-to-face teaching. But using AI technology, so we're exploring

Some opportunities here now. Um, and hopefully, in in, in coming several months. Maybe we can see some new products coming. Yeah. So, uh, actually, uh, the company are devoting a lot of new resources into the AI uh, area. Uh, it's an ongoing process but uh, definitely. Uh, together with our strategy we will uh put more uh Implement more of the AI technology keep catching up the trend and benefit more uh going forward.

Okay.

Charlotte Wei: This is very helpful. Thank you, Sisi Zhao.

This is very helpful. Thank you, Susie.

Operator: Thank you. We will now take our next question from Timothy Zhao of Goldman Sachs. Please go ahead, Timothy. Your line is open.

Thank you.

We will now take our next question. From Timothy Chow of Gman sax. Please go ahead. Timothy. Your line is open.

Timothy Zhao: Great. Hi, Stephen Yang. Hi, Sisi Zhao. Thank you for taking my question, and congrats on the solid results. My question is regarding your longer-term margin profile. As you have discussed a lot about the new initiatives extending the full life cycle of the customers, and AI can help improve the overall operating efficiency, including the overseas test preparation and consolidation integration, just wondering if you can share any updates on your view on the longer-term operating margin of EDU business and EDU's educational business. Thank you.

Great. Uh, hi, Stephen. Hi. Thank you for taking my question and congrats on the solid results. Uh, my question is, is regarding your, uh, longer term margin profile. Uh, as you have discussed a lot about the new initiatives and the full life cycle, the customer's and AI can help improve the oral operator efficiency and including the overseas, uh, test prep and Consulting integration. Just wondering if you can share any updates on your view on the longer term, uh operating margin, uh of EDU Business and edu's, education of AWS. Thank you.

Stephen Zhihui Yang: Thank you, Tim. The margin question. As I said, the coming year, I think we're kind of optimistic about the margin expansion because of the higher utilization rates and even the better operational leverage. Because of the cost control, we reduce the fixed cost and expenses. In the next year, the margin will be up, and I do believe we will get the margin expansion in next three years. We do hope we can get better margin step by step in next three or even long term. I think next quarter, I will give the detailed guidance for margin next quarter for the next year, but we're quite optimistic about the long-term margin expansion going forward. Thank you, Tim.

Stephen Yang: Thank you, Tim. The margin question. As I said, the coming year, I think we're kind of optimistic about the margin expansion because of the higher utilization rates and even the better operational leverage. Because of the cost control, we reduce the fixed cost and expenses. In the next year, the margin will be up, and I do believe we will get the margin expansion in next three years. We do hope we can get better margin step by step in next three or even long term. I think next quarter, I will give the detailed guidance for margin next quarter for the next year, but we're quite optimistic about the long-term margin expansion going forward. Thank you, Tim.

uh, thank you Tim, you know the market question, you know, after that uh, you know, uh, the

Coming new year. I think we're quite optimistic about the emerging expansion because of the, the higher, uh, the utilization rates and even the better, uh, Leverage The Leverage operation, uh, leverage. And also, you know, the, uh, because of the, the cost control, we reduce the, uh, fixed cost and expenses and so in the next year, the margin will be up. And I don't, I don't believe, we will get the margin expansion in next 3 years. So uh,

We do hope we can get better margin. Uh, you know, step by step in next 3 or even long, uh, long term. So, uh, and, uh, I think next quarter, I will give the guidance of the the detail, guidance of the margin. Uh next uh, next quarter for the next year and but we're quite optimistic about the long-term. Merger expansion going forward. Thank you.

Tim.

Timothy Zhao: Sure. Thank you, Stephen.

Sure, thank you. Stephen.

Operator: Thank you. We are now approaching the end of the conference call. I'll now turn the call over to New Oriental's Executive President and CFO, Stephen Yang, for his closing remarks.

Thank you.

Sisi Zhao: Again, thank you for joining us today. If you have any further questions, please don't hesitate to contact me or any of our investor relations representatives. Thank you.

Stephen Yang: Again, thank you for joining us today. If you have any further questions, please don't hesitate to contact me or any of our investor relations representatives. Thank you.

And we are now approaching the end of the conference call. I'll now turn the call over to New Oriental’s Executive President and CFO, Steven Yang, for his closing remarks.

Again, thank you for joining us today. If you have any further questions, please do.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect your lines.

I would say to contact me or any of our investor relations representatives. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect your lines.

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