New Oriental Education & Technology Group Q2 2025 Earnings Report

New Oriental Education & Technology Group EPS Results

• Actual EPS: N/A
• Consensus EPS: $0.30
• Beat/Miss: N/A
• One Year Ago EPS: $0.29

New Oriental Education & Technology Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $1.03 billion
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

New Oriental Education & Technology Group Announcement Details

• Quarter: Q2 2025
• Date: 1/21/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, January 21, 2025
• Conference Call Time: 8:00AM ET

New Oriental Education & Technology Group (NYSE:EDU), Inc. is a holding company, which engages in the provision of private educational services. It operates through the following segments: Educational Services and Test Preparation Courses, Private Label Products and Livestreaming E-Commerce, Overseas Study Consulting Services, and Educational Materials and Distribution. The company was founded by Min Hong Yu and Yong Qiang Qian on November 16, 1993, and is headquartered in Beijing, China.

New Oriental Education & Technology Group Q2 2025 Earnings Call Transcript

Key Takeaways

• New Oriental reported 19.4% year-over-year revenue growth in Q2 FY2025 and, excluding EasterBuy and live streaming, revenues rose by 31.3%, driving a 3.2% non-GAAP operating margin.
• Core segments saw broad-based gains: overseas test prep +21% revenue, study consulting +31%, adult & university programs +35%, new education initiatives +43%, and tourism-related offerings +233% year-over-year.
• New education initiatives enrolled approximately 994,000 students in non-dynamic tutoring across ~60 cities, while its intelligent learning system was tested in ~60 cities with top 10 cities contributing ~50% of this revenue.
• EasterBuy expanded its private-label portfolio to 600 SKUs (fresh food, pet food, apparel), representing ~37% of GMV, and leveraged a multi-channel strategy—including online platforms and vending machines—to broaden its consumer reach.
• With approximately $4.8 billion in cash, deposits, and short-term investments, New Oriental paid a $0.06 per share special dividend, executed ≈$543 million of its $700 million share repurchase program, and issued Q3 revenue guidance of +18%-21% in USD (+20%-23% in RMB).

Presentation

[Operator]

Good evening and thank you for standing by for New Oriental's FY 2025 Second 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.

[Operator]

I would now like to turn the meeting over to your host for today's conference, Ms. C. C. Zhao. Thank you.

[Operator]

Please go ahead. C. C.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

Zhao:] Thank you.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

Hello, everyone, and welcome to New Oriental's 2nd fiscal quarter 2025 earnings conference call. Our financial results for the period were released earlier today and are available on the company's website as well as on 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.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

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 view expressed today. A number of potential risks and uncertainties are outlined in our public filings with the SEC.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

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 will now first turn the call over to Mr.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

Yang. Stephen, please go ahead.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

Thank you, C. C. Hello, everyone, and thank you for joining us on the call. We're pleased to inform you that New Oriental has achieved a healthy growth in this quarter's financial performance, which has surpassed our expectations. Revenue grew 19.4% year over year and total net revenues excluding revenues generated from Easterby's private label products and live streaming business increased by 31.3% year over year.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

We're encouraged by the continued growth of our new ventures, which have bolstered company's revenue. We believe they will further progress positively moving forward. New Oriental's bottom line performance for our core education business has also shown solid returns. To better reflect New Oriental's core educational business, we have excluded the operating margins generated from Easter Buy for this quarter. Our operating margin and non GAAP operating margin reached 2.8% and 3.2%, respectively.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

Results from these substantial efforts invested in our offerings and platforms that have been shown effective. Our commitment to sustaining healthy profitability and market share remains strong as we continue to aim for long term value creation for our customers and shareholders. Now I'd like to spend some time to talk about the quarter's performance across our remaining business lines and new initiatives to you in detail. Our key remaining business have showcased a promising trend in adjacent to positive momentum across our new businesses. Breaking it down, the Overseas Test Drive business recorded a revenue increase of 21% year over year for the 2nd fiscal quarter of 2025.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

The overseas study consulting business recorded a revenue increase of about 31% year over year for the 2nd fiscal quarter of 2025. The Adults and University Students business recorded a revenue increase of 35% year over year for this quarter. At the same time, our ongoing investments in new education business initiatives primarily focus on facilitating students' all around development have also continued to thrive with steady growth, fueling the company's momentum. Firstly, the non dynamic tutoring business, which we have now expanded to around 60 existing cities, focused on cultivating students' innovative ability and comprehensive quality. We have attracted the high interest with a total approximately 994,000 student enrollments reported in this quarter.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

The top 10 cities contributes over 60% of this business. Secondly, the intelligent learning system and device business utilize our past teaching experience data technology to provide personalized and targeted learning and exercise content, thereby improving students' learning efficiency. We have tested the adoption of this new business in around 60 existing cities and are pleased to see improved scalability. The revenue contribution of this business from top 10 cities in China is around 50%. Our smart education business, educational materials and digitalized smart study solutions have continued healthy development.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

In summary, our new education business initiatives have recorded a revenue increase of about 43% year over year for the Q2. In addition, our newly integrated tourism related business line, which includes our rooted study tour and research camp business for K-twelve and university students, as well as our tourism business serving middle aged and senior audience, has collectively recorded revenue increase of 2 33% year over year for the Q2. Study tour and research camp business are now operating in around 55 cities across the country, with the top 10 cities in China offering over 50% of the revenue share of this new business. We're also facilitating a number of top notch tourism offerings to all age groups, including the middle aged and elderly individuals across 30 featured provinces in China and globally. With regards to our OMO system, we have persist in revamping our platform, leveraging our educational infrastructure and technology strength in order to provide advanced diversified education service to our customers of all ages.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

During this quarter, we invested $30,900,000 to improve and maintain our OMO teaching platform, which enhance users' experience and supports the growth of our education offerings. Now may I share some updates on EasterBuy's performance. During the reporting period, EasterBuy expanded its product range from fresh food and snacks to diversified portfolio, launching 600 SKUs in private label products by November 2024. This includes healthy care food, pet food and new Chinese style clothing contributing to approximately 37% of total GMV for the 6 months ending in February 2024. We're pleased to see its multiplatform strategy has expanded its consumer base and increased the brand awareness through enriched live streaming products and online shops on platforms like Mini Program, WeChat Mini Store, Tmall, JD, Pinduoduo and Rednote.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

This multichannel approach has driven rapid growth with product label products. Simultaneously, EasterBuy has began exploring offline channels with vending machines in New Oriental's learning centers. The company's app strategy has advanced quickly offering daily necessities and high quality products, leading to increased user contributions and strong loyalty. With regard to the company's latest financial position, I'm pleased to share that the company is in a healthy financial status with cash and cash equivalents, term deposit and short term investments totaling approximately $4,800,000,000 On August 19, 2024, New Oriental announced its Board of Directors approved a special dividend of $0.06 per common share or $0.6 per ADS to holders of common shares and ADS over the quarter as of the close of the business on September 9, 2024, Beijing and Hong Kong Time and New York Time, respectively. The payment date was on or around September 23, 2024 for holders of common shares and September 26, 2024 for holders of ADSs.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

The total cash dividends distributed was approximately $100,000,000

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

Now I would like to take the opportunity to highlight that company's Board of Directors approved a share repurchase program in July 2022 and which the company is authorized to purchase to repurchase up to $500,000,000 of the company's ADS or common shares through the next 12 months. The company's Board of Directors further approved to extend the effective time of the share repurchase program to May 31, 2025 and increasing the aggregate value of shares that the company is authorized to repurchase from $400,000,000 to $700,000,000 As of January 20, 2025, the company repurchased an aggregate of approximately 11,200,000 ADIs for approximately $542,800,000 from the open market. Now I will turn the call over to Sisi to share with you about the key financials. Sisi, please

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

go ahead.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

C. C.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

C. C. C. C. C.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

C. C. C. C. C.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

C. C.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

C. C. C. C. C.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

C. C. C. C. C.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

C. C. C. C. C.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

C. C. C. C. C.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

C. C. C. C. C.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

C. C. C. C. C.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

C. C. C. C. C.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

C.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

C. C. C. C.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

C. C. C. C. C.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

C Non GAAP operating costs and expenses for the quarter, which exclude share based compensation expenses, were $1011,100,000 representing a 23.5% increase year over year. The increase was primarily due to the cost and expenses related to the accelerated capacity expansion for education businesses and newly integrated tourism related business. Cost of revenue increased by 17.9 percent year over year to $498,300,000 Selling and marketing expenses increased by 26.6% year over year to 196.1 $1,000,000 G and A expenses for the quarter increased by 20% year over year to $324,900,000 Non GAAP G and A expenses, which exclude share based compensation expenses, were $319,400,000 representing a 24.7% increase year over year. Total share based compensation expenses, which were allocated to related cost expense operating cost and expenses, decreased by 71.8% year over year to $8,300,000 in this fiscal quarter. Operating income was $19,300,000 representing a 9.8% decrease year over year.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

Non GAAP income from operations for the quarter were $27,600,000 representing a 45.8% decrease year over year. Net income attributable to New Oriental for the quarter was $31,900,000 representing a 6.2% increase year over year. Basic and diluted net income per ADS attributable to New Oriental were $0.20 $0.19 respectively. Non GAAP net income attributable to New Oriental for the quarter was $35,500,000 representing a 29.1%

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

increase

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

year over year. Non GAAP basic and diluted net income per ADS attributable to New Oriental were $0.22 and $0.22 respectively. Net cash flow generated from operations for the 2nd fiscal quarter of 2025 was approximately $313,300,000 and capital expenditure for the quarter was $60,600,000 Turning to the balance sheet. As of November 30, 2024, New Oriental had cash and cash equivalents of $1418,200,000 In addition, the company had $1443,200,000 in term deposits and $1951,400,000 in short term investments. New Oriental's deferred revenue, which represent cash collected upfront from customers and related revenue that were will be recognized as the service or goods are delivered at the end of the Q2 of fiscal year 2025 was $960,600,000 an increase of 19.2 percent as compared to $1645,000,000 at the end of the 2nd fiscal quarter of 2024.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

Now I'll hand over to Stephen to go through our outlook and guidelines guidance.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

I repeated the paragraph that the CCE mentions of the net income. Net income attributable to New Oriental for the quarter was $31,900,000 representing a 6.2% increase year over year. Basic and diluted net income per ADS attributable to New Oriental were $0.2 $0.19 respectively. About outlook and fiscal year 2025 Q3 guidance, in light of the current economic uncertainties, we remain committed to achieving steady and sustainable growth for our core educational business in the coming quarter. Our confidence is bolstered by the solid performance of our diverse business lines and our extensive educational resources.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

We're dedicated to diligently adhering to the latest guidance from the Chinese authorities, including the recently announced National Action Plan with the goals of establishing a high quality education system and unlocking potential across our business lines and innovative efforts. To balance revenue and profitability growth, we will carefully manage our capacity expansion and hiring strategies to support the development of our educational business in the rest of this year. We plan to follow our Europe pace to increase capacity with a focus on new openings in cities with a robust local economy. Simultaneously, we will continue to invest in developing our emerging tourism related ventures. The foundation we have established and the progress we've achieved so far strengthen our confidence in our future performance.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

We expect total net revenue excluding revenues generated from Eastbay in the coming quarter, December 1, 2024 to February 28, 2025 to be in the range of $107,300,000 to $1032,500,000 representing year over year increase in the range of 18% to 21%. The projected increase of the revenue in our functional currency, renminbi, is expected to be in the range of 20% to 23% for the Q3 of the fiscal year 2025. To conclude, New Oriental is dedicated to delivering premium offerings to our customers while pursuing sustainable growth through a strategic blend of capabilities. We'll continue investing in research and applications of advanced technologies, including AI and chat GPT to enhance our educational and product offering. Our aim is to strengthen our competencies, driving growth and operating efficiency.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

We will also continue to seek guidance from and cooperate with the government authorities, comply with the relevant policies, guidelines and any related regulations measures and adjust our business operation as required. As always, we will work diligently to enhance the nation's education level to strengthen its leading position so as to unveil further potential cross of our business lines and realizing our vision. This is the end of our fiscal year 2025 Q2 summary. At this point, C. C.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

And I like to open the floor for questions. Operator, please open the call for these. Thank you.

[Operator]

Thank you. The question and answer session of this conference call will start in a moment. Our first question comes from the line of Yiwen Zhang from China Renaissance. Please go ahead.

[Yiwen Zhang, Research Analyst at China Renaissance]

Yes, perfect. Thanks for taking my question. So my question is about our Q3 revenue guidance. I think you mentioned RMB term is 20% to 23%. It just seems a bit decelerating.

[Yiwen Zhang, Research Analyst at China Renaissance]

Can we understand more which part of the business is actually driving that trend? And how should we think about the rest of the year? Now also, in light of this new guidance, how should we think about the learning center expansion pace as well? Thank you.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

Thank you, Yigal. Yes, about the revenue guidance of Q3. Yes, we gave the guidance of the year over year growth in the range of 20% to 23% in the RMB terms. I must mention that we're using the conservative method to give the guidance of Q3. And the reasons for a little bit of slowdown in the revenue growth in Q3 are as follows.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

Number 1, the uncertainty of the macro economy situation has a certain active impact on the demand of our high end education business, such as the overseas test prep and related business and some 1 on 1 business, which is also high end business. And number 2, with the rapid recovery of the educational business in the last 2 to 3 years, I think the revenue base is gradually increasing. So I think the revenue growth in the Q3 will be a little bit slow down. And number 3, I think the impact of the exchange rate is approximately around 3% point. That's why we gave the guidance in the range of 18% to 21% in dollar terms.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

And I think, yes, even though we are facing to the uncertainty of the macro economy situation change, but I think the management will travel back to grow the revenues. And so we expect to be the guidance we give to the investors in Q3. And I think on the other hand, I think we will care more about the balance between the revenue growth and the operating efficiency at the same time for the long term. As for the expansion plan, this quarter, we opened this quarter, we the expansion in Q2, the expansion was 5% Q on Q in Q2. And for the whole year, we would have the second half of the year left.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

And in the whole year, we plan to open 20% to 25% of the new learning centers. I think we only open the new learning centers in the cities that the last year top line and bottom line performance well, and we allow them to open more learning centers. And we still care more about the utilization of the new learning centers. So yes, that's why I said we care more about the top line growth and the margins. Thank you, Piyush.

[Operator]

Thank you for the questions. Next question is from the line of Felix Liu from UBS. Please go ahead.

[Felix Liu, Director - Equity Research at UBS Group]

Good evening and thank you management for taking my question. May I just follow-up on one of the issue that you mentioned, which is macro impacting the higher end business. Do you see any potential risk to your more mass market services such as the new education businesses? And can management comment on the competition landscape that you are observing on the ground across your business lines? Has competition played into a role in the growth deceleration?

[Felix Liu, Director - Equity Research at UBS Group]

Thank you.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

I think for the new business, we still guide the Q2 guidance about 40% in our midterm year over year growth. And so it's still very strong. And as for the competition, yes, we have seen some a little bit strong competition in the market, but I think we're fine. So we're still taking more market share from the market. And because of the base in the Q3, we guided 40% year over year growth because of the high base.

[Felix Liu, Director - Equity Research at UBS Group]

Thank you.

[Operator]

Thank you for the questions. One moment for the next question. Next question comes from the line of Lucy Yu from Bank of America Securities. Please go ahead.

[Lucy Yu, Incoming Investment Banking Analyst at Bank of America Merrill Lynch]

Thank you. So Stephen, I remember earlier you gave the full year guidance for 25% or 30% revenue growth excluding Ezbuy. So given that the next quarter you are forecasting around like 21% to 23%, so that's been in that 4th quarter we have to accelerate our revenue expansion revenue growth or we are aiming for a slower growth this year? Thank you.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

Yes. As I said, the uncertainty of the macro economy situation, I think we need 1 more quarter to see to give you the Q4 guidance. So I think for the whole year, yes, we're facing a little bit of slowing down in Q3. And but for the whole year, I think in R and B term, we still got the top line growth of the year over year growth by less than 25% in RMB terms or more for the whole year guidance. Lucy?

[Lucy Yu, Incoming Investment Banking Analyst at Bank of America Merrill Lynch]

And that's it. Thank you so much.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

Thanks, Lucas.

[Operator]

Our next question comes from Timothy Zhao of Goldman Sachs. Please go ahead.

[Timothy Zhao, Equity Research Analyst at Goldman Sachs]

Thank you. Hi, Stephen. Hi. My question is regarding your new education initiative. I noticed that when you report your student enrollment number, I think for this quarter, the academic tutoring, enrollment growth was around 20 6%.

[Timothy Zhao, Equity Research Analyst at Goldman Sachs]

Just wondering, could you further elaborate on that? And what is the more normalized growth that we can expect in terms of the student enrollment for the academic tutoring? And also a follow-up question, I think, on the Learning Center ramp up. I think you mentioned that you see slightly more competition on the ground. Could you share, I think, what is the latest like learning center ramp up pace in terms of the time for breakeven, time to reach a more like mature stage and also the utilization rates that you see on the ground?

[Timothy Zhao, Equity Research Analyst at Goldman Sachs]

Thank you.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

Okay. Timothy, regarding your enrollments question, actually, if you look at the full year roughly, because quarterly enrollments number will be impacted by like the registration window, etcetera. So there will be some fluctuation of growth. And year over year, actually, the we are comfortable with roughly about 40% plus growth for new business, including the non academic tutoring. And this business should grow similar or even faster.

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

And roughly about 5%, maybe 4% to 6% of ASP increase. And if you deduct that, the rest are volume increase, which is mostly driven by the enrollment number that you can see from our release.

[Operator]

Thank you for the questions. One moment for the next question. Next question comes from the line of Elsie Sheng from CLSA. Please go ahead.

[Elsie Sheng, Analyst at CLSA Limited]

Hi. Thank you for taking my question. I just want to follow-up on the pressure that you mentioned on the overseas and more premium business, the 1 on 1 business. So how do you measure the magnitude of this impact from macro? Because usually we understand that education in nature should be more resilient than other types of consumption.

[Elsie Sheng, Analyst at CLSA Limited]

So how many how do you see the risk going forward for this business if we assume that macro going forward continue to remain such as in a weak status?

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

Last quarter, we gave the guidance of the overseas test lab business grow by, let's say, 20%. And because we have seen some parents, that's in some parents change their idea to send their kids to study abroad in the future because of the macro economy situation change. So I think in the Q3, the overseas test fab business will grow by less than somewhere around 15%. And so it's a little bit decelerated. And but this is the real situation.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

And but for the K-twelve business is okay. And we gave the guidance of 40% year over year growth in mainly Q3. And so let's see and to the let's see for another quarter, we will give the guidance Q4 in next earnings call.

[Elsie Sheng, Analyst at CLSA Limited]

Okay. Thank you.

[Operator]

Thank you for the questions. Our next question comes from Ellis Chai from Citi. Alice, your line is open. Please go ahead. I'm not hearing from Alice.

[Operator]

I would like to take the next question. We have a next question from the line of Dong Seok Kim from JPMorgan. Please go ahead.

[DS Kim, Analyst at JP Morgan]

Thank you. Hi, Stephen. Hi, C. C. Thanks for taking my question.

[DS Kim, Analyst at JP Morgan]

And my name is TS Kim, sorry. Can I follow-up on full year guidance again? I guess, now as you kind of briefly remarked, we can expect over 25% growth in revenue per ton for the full year versus I think previously market or management kind of expected about 30%, so about 5 point deceleration makes a lot of sense. But how about OP margin? Can we still expect up to about 150% expansion for the Education full year margin core business?

[DS Kim, Analyst at JP Morgan]

And if okay, can you also help elaborate a bit on the segment growth number baked in the full year revenue guidance, especially the new business? I think Susie remarked 40% plus growth there, but just wanted to double check other segment and a little more details. Thank you.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

Okay. Yes, let's start with the this quarter margin analysis in Q2. The non GAAP OP margin for the educational business, which excluding the Easter buy this quarter was expanded by 12 basis points year over year. And I think it's mainly due to the some reasons, because of the top line growth are good in this quarter and we started to bear fruit of the learning center expansion last year, especially in the second half of last year. So it's driving utilization rates up and get more operational leverage.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

And yes, as I said, we started to make some cost and expenses control within the company. So this quarter, we get the operating leverage and drive the margin up. And as for the margin outlook for the second half of the year, as a fact, I think the we're facing some slowing down of the overseas related business. So I think the margin drag will be headed in the second half of the year from the overseas related business. And also, the newly tourism business will drive the market in the second half.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

And so I think in the second half of this year, we will meet some margin pressure. And as the margin outlook for the next year, I think we will still expect the margin expansion for the whole company because the K-twelve margin will be expanded in the New Year and in the second half of the year as well. And in the second half of this year as well. And we will start to cut the cost expenses of the overseas related business. And we expect the margin profile of the tourism business next year will be better than that of this year.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

So this is the margin analysis.

[Operator]

Thank you. Once again, we have the line from Alice Tai from Citi. Alice, hi, hi.

[Alice Cai, Analyst at Citigroup Global Markets Inc.]

Thank you, management, for the opportunity to

[Sisi Zhao, Investor Relations Director at New Oriental Education & Technology Group]

Well, Alice, there's some echo in your side, so we cannot hear you clearly. Now it's better.

[Alice Cai, Analyst at Citigroup Global Markets Inc.]

Maybe someone's okay. Thank you, management, for the opportunity to ask questions. I have 2 questions today. The first one is, I noticed that you are considering a regular dividend policy, which is quite interesting given the current strong market demand, right? In this regard, I'd like to ask, does it still have any anticipated softening in demand and therefore a planned moderation in CapEx spending going forward?

[Alice Cai, Analyst at Citigroup Global Markets Inc.]

Additionally, do you have an estimated time line for when this dividend policy might be declared? Furthermore, how to view this balance between business expansion and shareholder returns? Next, regarding the reported improvement in breakeven time line for recently opened learning centers. I would like to know, shall we expect similar efficiency levels for future new learning centers? Thank you so much.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

Yes. 2nd question, answer first. I think the typically we spend 6 months to get the breakeven point of the new learning centers. So the ramp up pace has not changed. And as for the shareholders capital allocation, we announced $700,000,000 share buybacks.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

And now we're finished of 540 $2,800,000 And I think we'll keep buying the share buyback and in the open market. And as for the special dividends, yes, we have paid $1,000,000 in September as the special dividend. Typically, the Board of Directors will discuss the New Year capital allocation policy in July. And but anyway, it depends on the market cap, the stock price. And but we I think the management will aim to create more value to the shareholders at the capital return.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

Thank you.

[Operator]

Thank you for the questions. Next question will come from the line of Yanbo Qing from Iron Group. Please go ahead.

[Yanbo cheng, SPEAKER at Iron Group]

Hi. Can you hear me?

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

Yes, please go ahead, Yanbo.

[Yanbo cheng, SPEAKER at Iron Group]

Yes. Thank you. So my question is about how do you perceive the regulatory landscape on your core and non core businesses such as the tourism business? Do you see there are there any heightened or lessen regulatory risks in those business areas? Thank you.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

On the regulation side, there's no change now. And I think we're okay to open the new learning centers to get the license from the local government. And so that's why we want to change our expansion plan of this year. And on front, on the regulation side, our attitude is neutral to positive. I think as a list goal will apply for the requirements of the new government things 3 years ago, the policy change.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

Now the situation has no change in the region. So that's it. Thank you.

[Operator]

Thank you for the questions. We are now approaching the end of the conference call. I will now turn the call over to Neil Orento's Executive President and CFO, Mr. Steven Yang, for his closing remarks.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

Again, thank you for joining us today. If you have any further questions, please do not hesitate to contact me or any of our Investor Relations, the representatives. Thank you.

[Operator]

That does conclude today's conference call. Thank you for your participation. You may now disconnect your lines.

[Zhihui Yang, Executive President & CFO at New Oriental Education & Technology Group]

Thank you.

Participants

Executives

• Sisi Zhao, Investor Relations Director
• Zhihui Yang, Executive President & CFO

Analysts

• Yiwen Zhang, Research Analyst at China Renaissance
• Felix Liu, Director - Equity Research at UBS Group
• Lucy Yu, Incoming Investment Banking Analyst at Bank of America Merrill Lynch
• Timothy Zhao, Equity Research Analyst at Goldman Sachs
• Elsie Sheng, Analyst at CLSA Limited
• DS Kim, Analyst at JP Morgan
• Alice Cai, Analyst at Citigroup Global Markets Inc.
• Yanbo cheng, SPEAKER at Iron Group