New Oriental Education & Technology Group Q4 2025 Earnings Call Transcript

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Provided by Quartr
July 30, 2025

Key Takeaways

  • Positive Sentiment: Q4 net revenue excluding Easter buy grew 18.7% YoY and non-GAAP operating margin improved by 410bps to 6.5%, driven by cost controls and operational consistency.
  • Positive Sentiment: New ventures showed strong momentum with new educational initiatives up 33% and integrated tourism business up 71% year-over-year in Q4.
  • Neutral Sentiment: Q1 revenue is guided at $1.46–1.51B (+2–5% YoY) and full-year at $5.15–5.39B (+5–10%), reflecting conservatism amid seasonality and macro headwinds.
  • Positive Sentiment: Company approved a three-year shareholder return plan to allocate at least 50% of annual net income to dividends or buybacks, after repurchasing $700M of ADSs.
  • Negative Sentiment: GAAP net income fell 73.7% YoY to $7.1M in Q4, partly due to a $58.3M goodwill impairment in the kindergarten segment.
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Earnings Conference Call
New Oriental Education & Technology Group Q4 2025
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Operator

Good evening, and thank you for standing by for New Oriental's FY twenty twenty five Fourth 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 now disconnect at this time.

Operator

I would now like to turn the meeting over to your host for today's conference, Ms. Cece Gao.

Sisi Zhao
Sisi Zhao
Director - IR at New Oriental Education & Technology Group

Thank you. Hello, everyone, and welcome to New Oriental's fourth fiscal quarter twenty twenty five 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 Young, 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.

Sisi Zhao
Sisi Zhao
Director - IR at New Oriental Education & Technology Group

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 view expressed today.

Sisi Zhao
Sisi Zhao
Director - IR at New Oriental Education & Technology Group

A number of potential risks and uncertainties are outlined in our public filings with the SEC. New 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. Yang. Stephen, please go ahead.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Thank you, Sisu. Hello, everyone, and thank you for joining us on the call. The start time of the year again. We're pleased to announce that Q4 performance exceeded expectations, demonstrating our strong commitment and capabilities to enhance operational consistency and drive long term value creation. This quarter's total net revenue, excluding revenues generated from Easter by private label products and the live streaming business, increased by 18.7% year over year, mainly contributed by the continued expansion of our new ventures.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Bottom line wise, we are delighted to see that our efforts to reduce costs and improve efficiency have proven effective with non GAAP operating margin. Again, excluding operating margin generated from Easter buy, reached 6.5% this quarter, representing a year over year improvement of four ten basis points. Our key remaining business remains solid, while our new initiatives have also shown positive momentum. Breaking down, for the 2025, overseas test prep business recorded a revenue increase of 15% year over year. Overseas studies consulting business reported revenue increase of about 8% year over year.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Our adults and university students business recorded a revenue increase of 17% year over year. At the same time, our continued investments in new education business initiatives primarily centered on facilitating students all around development, have also delivered consistent progress, further driving the company's overall momentum. Firstly, the nonpayment tutoring business which focus on cultivating students' innovative ability and comprehensive quality, has shown being rolled out to around 60 cities. Market penetration has significantly increased, particularly across higher tier cities. The top 10 cities contribute over 60% of this business.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Secondly, the intelligent learning system and device business, which utilize our path to teaching experience, data, and technology to provide personalized and targeted learning and exercise content to improve students' learning efficiency, has been testing around 60 existing cities. We're happy to see improved customer retention and scalability of this new business. The top 10 cities contribute over 50% of this business. In summary, our new educational business initiatives reported a revenue increase of 33% year over year for the 2025. Moving to our integrated tourism related business line, which includes study tour, research campus for student of k 12 and university students, and tours targeting middle aged and senior audience, recorded a revenue increase of about 71% year over year for the 2025.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Breaking down, both domestic and international study tours and the research camp for k 12 and university students was conducted across 55 cities nationwide, with the top 10 cities contributing over 50% of the revenue. We also provided a series of premium tourism offerings, primarily designed to middle aged and senior audience across 30 feature province in China and internationally. Our product range has also been expanded now includes culture travel, kind of study tour, global study tour, and plant education. With regard to our OMO system, we continue our efforts in developing and revamping our online merge offline teaching platform while leveraging our educational infrastructure and technological strengths across our key business lines and new industries. These efforts aim to deliver more advanced and diversified education service to our customers of all ages.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

A total of $28,000,000 has been invested during the quarter to upgrade and maintain our OMO teaching platform. Beyond OMO, I would like to take this opportunity to highlight our investments in AI and how we integrate it into our teaching ecosystem. Leveraging a combination of open source large models, such as DeepSea and GPT, along with our self developed AI technologies, we have developed new innovative education solutions for our students. Recently, we launched the two new products. First, a new generation for AI powered intelligent learning devices.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

This product features deep AI integration and equipped K Math students with multifunctional tools, including open language coaching, automated essay grading, dictation exercises, classical text recitation, and voice assessment functionality. All designed to enhance learning outcomes while saving the time for both teachers, students, and parents. Second, a new AI driven step smart study solution. This product combines premium content from global sources. Our very own accumulated teaching and researching experience in AI technology.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

These achievements mark key progress in our customer focused education products, positioning us as a leader in applying AI to the education field. We will continue investing in AI to drive future innovation. Not only does AI help enhance our offerings, but also improves internal efficiency. We have launched an AI content creation platform and student performance feedback application, which helps support lesson planning and strengthen homeschool communication. These tools also provide valuable insights into learning habits and user engagement.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Additionally, an AI powered FAQ databases has been created built from our day to day sales conversations, which have significantly reduced training costs for our sales team and improved sales efficiency and conversion rates. Now I would like to to take a moment to talk about the Easter buy. As I know, many of you are interested in it. In the fiscal year 02/2025, Easter buy continues to invest in private label product strategy centered around green, healthy, and quality high quality, while enriching its product portfolio and exploring new categories. It also achieved breakthroughs in its blockbuster products and product upgrades.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

With consistent quality and broad consumer appeal, East Dubai's private label products have become household stables, gaining greater market's recognition. During the reporting period, Easter buy further advanced its multichannel strategy and implemented enhancements to its Easter buy app and Easter buy mini store, all of which have provided users which improved experience. As the business continues to develop steadily, Easter buy has placed greater emphasis on improving operational efficiency and profitability levels to align with the group's overall strategy. Now I would like to take this opportunity to talk about our share repurchase actions. As of 05/31/2025, the company repurchased an aggregate approximately 14,500,000.0 ADSs for approximately $700,000,000 from the open market.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

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

Sisi Zhao
Sisi Zhao
Director - IR at New Oriental Education & Technology Group

Yeah.

Sisi Zhao
Sisi Zhao
Director - IR at New Oriental Education & Technology Group

Thank you, Steven. Now I'd like to share our key financial details for this quarter. Operating cost expenses for the quarter were $1,251,800,000 representing an 11.2% increase year over year. Cost of revenues increased by 5.1% year over year to $569,900,000 Selling and marketing expenses increased by 1.8% year over year to $211,900,000 G and A expenses increased by 9.1% year over year to $409,800,000 Impairment of goodwill was $58,300,000 compared to nil in the same period of the prior fiscal year. Total share based compensation expenses, which were allocated to related operating costs and expenses, increased by 11% to twenty eight point six million dollars in the 2025.

Sisi Zhao
Sisi Zhao
Director - IR at New Oriental Education & Technology Group

Operating loss was $8,700,000 compared to operating income of $10,500,000 in the same period of the prior fiscal year. Non GAAP operating income, excluding share based compensation expenses, amortization of intangible assets resulting from the business acquisitions and impairment of goodwill assigned to the reporting unit of kindergarten business was $81,700,000 representing a 116.3% increase year over year. Net income attributable to New Oriental for the quarter was $7,100,000 representing a 73.7% decrease year over year. Basic and diluted net income per ADS attributable to New Oriental were $04 and $04 respectively. Non GAAP net income attributable to New Oriental for the quarter was $98,100,000 representing a 59.4% increase year over year.

Sisi Zhao
Sisi Zhao
Director - IR at New Oriental Education & Technology Group

Non GAAP basic and diluted net income per ADS attributable to New Oriental were 62¢ and 61¢, respectively. Net cash flow generated from operations for the 2025 was approximately $399,100,000 and capital expenditure for the quarter were $65,900,000 Turning to the balance sheet. As of 05/31/2025, New Oriental had cash and cash equivalents of $1,512,400,000, $1,447,800,000 in term deposits, and $1,873,500,000 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 were delivered at the end of the 2025 was $1,954,500,000 an increase of 9.8% as compared to $1,780,100,000 at the end of the 2024. Now I'll hand over to Stephen to go through our outlook, guidance and our new shareholder return plan.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Thank you, Siti. As we look ahead for fiscal year twenty six, we remain optimistic and committed to not only driving revenue growth, but also placing greater emphasis on upholding profitability across all business lines, supported by various cost control and efficiency enhancements measures. To better reflect our long term strategic priorities and align with the nature of the education industry, characterized by longer business cycles with seasonality.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

We are now providing full year guidance in addition to our quarterly outlook. We believe this standard guidance offers more meaningful and accurate reflection of our business performance and strategy as it smooths out short term seasonal volatility. We encourage investors to focus on this long term indicator, which provides a clearer and more comprehensive view of our business, operational progress, and growth trajectory. We expect total net revenue for the group, including Easter buy in the first quarter of fiscal year 02/1926, 06/01/2025 to 08/31/2025 to be in the range of to be in the range of $1,464,100,000 to $1,507,200,000, representing a year over year increase in the range of 2% to 5%. As for the total net revenue of the pool, also including Easter buy for the full year 2026 06/01/2025 to 05/31/2026, we expect to be in the range of $5,145,300,000 to $5,390,300,000, representing a year over year increase in the range of 5% to 10%.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

You may notice that our fiscal year twenty six q one guidance looks relatively conservative. This is primarily because the group has now entered a more stable and sustainable phase, and we are comparing against the high base of the last year q one. Unlike two years ago, when we were still undergoing major transformation. Moreover, Easter by restructuring have not yet taken place in fiscal year twenty five q one either. Additionally, the earlier timing of the Chinese New Year this year led to temporary class rescheduling, which boosted the revenue recognition in 2025, but will reduce revenue recognition in fiscal year twenty six q one.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

As a result, we expect the year over year revenue growth will accelerate since the second quarter and throughout the rest of the year. Hence, as I mentioned earlier, I would encourage all of you to focus on our annual guidance. Before ending this quarter's earnings summary, I would like to announce that the board approved the three year shareholder return plan yesterday, effective from fiscal year two thousand twenty six as a gesture of appreciation for our shareholders unwavering support. Under this plan, no less than 50% of the company's net income attributable to New Oriental for the preceding fiscal year will be allocated to returning value to shareholder through dividend distributions and or share repurchase. For fiscal year twenty six for for for for for fiscal year twenty twenty six, the board will determine the implementation of the plan based on the net income attributed to New Oriental for the fiscal year ended in 05/31/2025 in due course.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Now to conclude, New Oriental remain committed to delivering premium offerings for our customer who are pursuing sustainable growth and profitability and sharing the fruits of our success with our shareholders. We're also in close collaboration with the government authorities in various province and and and province in China, issuing compliance with the relevant policies, guidelines, and the the related implementation, and adjusting our business operation as required. This is the end of our fiscal year 02/2004 summary. At this point, I would like to open the floor for questions. Operator, please open the call for this. Thank you.

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 a question, we will take one question at a time from each caller. If you have more than one question, please request to rejoin the queue again after your first question has been addressed. To ask a question, please press star Just a moment for our first question.

Operator

First question comes from the line of Felix Liu from UBS. Your line is now open.

Felix Liu
Felix Liu
Executive Director at UBS Group

Good evening. Thank you, management, for taking my question. My question is on your q one and the f one twenty six guidance. We noticed that Q4, the new rental core business actually grew pretty fast. But then as you mentioned, there was a seasonal slowdown in Q1.

Felix Liu
Felix Liu
Executive Director at UBS Group

So may I just ask for more break down of your Q1 as well as full year guidance? What are the drags on the business that led to this slowdown? And the main concern about the drivers for the recovery in growth in after Q1? Thank you.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Okay.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Thank you, Felix. Yeah. The as for the q one guidance, yeah, and there's a whole year guidance of fiscal year twenty six. You know, in the coming q one, we we give the guidance of the the revenue growth will be in the range of 2% to 5%. I must mention, firstly, that we're using the conservative method to give the guidance.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

And there there were some some following reasons. Number one, to some extent, I think our business adversely affects by the economic environment and the international relation changes. So in the coming q one, we we are comparing the the against the high base last year of q one. Both of the core educational business and the East of us. And number two, you know, as for the k 12 business, we have some the cutoff issue.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Because, you know, in this this year's Chinese New New Year was earlier than than before. So that means, you know, some that means, you know, the in the second half of fiscal '25, we had more revenue. And the results is that the in the coming q one, we have less revenue. So this is a cutoff issue. And and and but, you know, as we expect the k twelve revenue growth will be accelerate in the coming q two and the rest of the year in q three and q four.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Because based on our current estimation of this the forecast for the for the whole year and the cash will collect already for the q two courses. So that's why that has that's why we expect the revenue acceleration since q two for the k twelve business. And and the the last reason is, you know, last year q one, Easter buy restructuring has not yet taken place in q one. So we have we will have a hard comparison for Easter buy in in the coming Q1. But in the since q two, it will be better.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

And, yeah, this time, it it seems this quarter, we start to give the the whole year's guidance. We do the guidance of the 5% to 10% year over year growth for the for the whole group. And it shows that the the revenue growth acceleration since q two. And breakdown of the the the different business lines. I think the overseas related business, yeah, it will negatively impact by the economic environment and international situations change.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

So we expect the revenue will be down by roughly four or 5%. And the k 12 business, I think the k nine business for the q one, the revenue growth will be somewhere around 16% year over year. But we do expect the whole year revenue growth for k nine business will be somewhere around 20%. High school business, q one and the whole year will be around year over year growth will be around 11 to 12% or even a little bit more. And the college business, the growth rate will be 10% in the q one and the coming new year.

Felix Liu
Felix Liu
Executive Director at UBS Group

Thank you. Have a nice day.

Operator

Thank you. Just a moment for our next question, please. Next, we have Lucy Yu from Bank of America. Your line is now open, Lucy.

Analyst

I think I have actually a follow-up question on the guidance that you just gave. What is the latest that you have been revised this quarter versus last quarter when you took the guidance for FY '26? So what has changed in terms of line of business? And secondly, just to clarify on the first, the shareholder return program, is it based on reported net income or non GAAP net income? Thank you.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Second question, answer first. You know, the capital allocation for the next three years is calculated based on the net income. The net income as we go to GAAP net income as we go to NewRampo. And I think yeah. This time, we changed the guidance from the the nine used to buy to the whole group, yeah, including the used to buy.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Because, you know, used to buy started to to restructure restructure the business since last year q one. So in the past in past of four, two to a quarter, I think the management of the Easter buy fixed the the operation. And, you know, Easter buy still, we will control the buy. So I think it's a good time for us to give the guidance of the whole group including the the Easter buy. And I I think going forward, we will give the guidance for the whole group including the Easter buy. We'll see.

Analyst

Thank you, Steven. One more follow-up.

Analyst

So the all of guidance revenue growth is all in US dollar or renminbi?

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Dollars. In dollars.

Analyst

And you are using current rate?

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Yeah. We we're yeah.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

We're using the the current the current the exchange rate in the first the the forty five, fifty days of this quarter.

Analyst

Okay. Thank you so much.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Thank you, Lucy.

Operator

Thank you. Next, we have Yuchen Jung from Citi. Your line is now open.

Yikun Zheng
Equity Research Analyst at CITIC Securities Company

Hello. Good evening, Steven and sister. Thank you for taking my question. My question is about the acceleration of our revenue. So what is the main reason for our revenue deceleration, especially for the nonaccept nonaccepting business?

Yikun Zheng
Equity Research Analyst at CITIC Securities Company

So is it because of the competition or it's just our own adjustment? And if we, like, look in our long term, like, in the next few years, how do we think of our growth rate in next few years?

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Thank you. I think the revenue is slowing down. It's mainly due to the the the economic environment and the international relationship change.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Because, you know, we have seen some transparents, you know, some of them doesn't want to send their kids to study abroad in the future. So it will negatively impact our the overseas business. And as for the competition, the k 12 field, I think, yeah, the competition is little bit stronger than that of last year. But I think it's okay, You know? If you compare the competition level now with those a couple of years ago, you know, before the policy, it's much it's much less.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

And so the I think, you know, the market is is still huge, especially for the k nine, not dynamic courses of the the business. So we feel that the the k nine business grow by 10% in the coming of year. I think, you know, during this macro economic situation, I think it's it's still good. And going forward and the yeah. The q one is a little bit weak.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

But the yeah. Based on our current estimate, I think the q q two and q three q four will be better. And in the longer term, I do think the k twelve business will be the key growth driver of the whole group.

Yikun Zheng
Equity Research Analyst at CITIC Securities Company

Yes. Can I have a follow-up question, sir?

Yikun Zheng
Equity Research Analyst at CITIC Securities Company

Because if we if we look at the revenue growth before the policy, maybe our k k 12 revenue growth rate can be over 20%. But but for now, maybe it's just, like, around 15%. So if you look at the next few years, would the growth rate for k twelve business, like, going up to the over 20% or or just around, like, 10 to 20%?

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

I think the k nine business is you know, we don't believe we can get the revenue growth by 20%, you know. It it it it still be very good.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

And and the the high school business, because we we got the all time high in last fiscal year, so we have a high base. So going forward, I think the the revenue growth will be somewhere around 10 to 15% going forward.

Yikun Zheng
Equity Research Analyst at CITIC Securities Company

Okay. Thank you.

Operator

Thank you. Just a moment for our next question, please. Next, we have Alice Chou from bank Citibank. Your line is now open, Alice.

Alice Cai
Analyst at Citigroup Global Markets Inc.

Good evening, Steven. Have two questions. And first one is on the margin trend. Mhmm. How should we think about the operating margin trend for the FY '26?

Alice Cai
Analyst at Citigroup Global Markets Inc.

For the core education business and also the whole business. Because since that we started to provide guidance for the whole business. Right? And my second question is on the goodwill impairment. And can you please give us some more color on this?

Alice Cai
Analyst at Citigroup Global Markets Inc.

Why is there was there a good goodwill associated with kindergarten between two to three weeks? And will the company continue to die back or feel that non non core business and also, like, cultural tourism? Thanks.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Okay. Thank you, Alex. You know, you are a margin question. You know, let us start with the this quarter's margin analysis. You know, in in the in the q four in this quarter, we we we got the four hundred four hundred and ten basis for the margin expansion.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

I think the margin expansion, even for the q four and the whole year, fiscal year twenty five, was mainly due to the operating leverage and the the efficiency headset and the cost control. As you know, we started to do the cost control since March, and we have seen the good results, which helps to drive the margin up. And I do believe the cost control will help the margin profile in the coming year, even the q one and the whole year, fiscal year twenty six. As we look at the margin of the q one, we remain optimistic about the the margin profile in q one, even though we're facing some revenue slowing down, but we still expect the margin expansion in the coming q one. And the whole year margin, I think it's a little bit early to make a forecast of the New Year margin.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

And but, you know, we're doing the cost control. We care more. We focus more about the profitability than the revenue growth. And so I think we will strive to achieve the margin, you know, profile, the healthy margin profile in the in the whole year of the fiscal year twenty six. And so let me summarize.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

You know, when we are slowly slowing down and we care more about the the bottom line, and we will do more cost control and care more about the efficiency enhancement and the more operating leverage to drive the margin up in the coming quarter and the new year. K. So your second question is about the who will department of the kindergarten. Oh, you know, we we acquired the some kindergarten so many years ago. This is roughly 18 years old.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

And, you know, be careful with some reasons, the policy and the the new the new boards, you know, decrypt. So I think we discussed with the the auditors, and I you know, we think the goodwill impairment should be done at this time. So we we did the impairment loss of $60,000,000 in this quarter, but it's all. It's one time.

Alice Cai
Analyst at Citigroup Global Markets Inc.

Yes. May I have a follow-up question? Would like to know more about this culture assurance. Is there any plans to steal back the business? Right? What was that?

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Can you repeat again? Can you repeat it?

Alice Cai
Analyst at Citigroup Global Markets Inc.

Is there any yes. Is there anything to build back the cultural tourism?

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Tourism business. Oh, tourism business. Yeah. We started with the the tourism business one and a half years ago. And the the revenue growth in last fiscal year, fiscal '25, was, you know, extremely high.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

And, you know, most of the rest most of the business, the tourism business are, you know, relate to the summer camp study tour, both domestic and and and internationally. And but going forward, I think the we still need time to build the business model of the tourism. And I think the revenue growth of the tourism just will be slowed down in the in the new year. And, anyway, it's a new business. We need more time to to to fix the bid business model of the chosen business. K? Thank you.

Alice Cai
Analyst at Citigroup Global Markets Inc.

Okay.

Operator

Thank you. Just a moment for our next question, please. Next, we have Timothy Zhao from Goldman Sachs. Your line is now open.

Timothy Zhao
Timothy Zhao
Analyst at Goldman Sachs

Sure. Thank you, Steven, for taking my question. I think my question is regarding the profitability and margin outlook. I think one is regarding the 4.1 percentage point margin increase for the core business for the past quarter. Just wondering if you can help quantify the impact on the cost control measures that you have done since March.

Timothy Zhao
Timothy Zhao
Analyst at Goldman Sachs

And going forward into the new year, like how much room that you have for cost control? And secondly, also on the modern related question on the capacity expansion. Just wondering, I think, the May, how many new learning centers were newly opened? And what is your learning center or the capacity expansion plan into fiscal year Thank you.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

The the margins yeah. Yeah. The q four, we we got the the margin expansion by four hundred four hundred and ten basis point up. And it's really hard for us to to justify how much from the cost control. But it's a anyway, that's a good result, the cost control, and the the to speak to the high operating leverage.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

And going forward, even in the q one coming q one and the new year, I think the cost control will help us to drive the margin up. And and roughly, it's the cost control will give us the the, let's say, the one one hundred to 150 basis points might be up. So this is the roughly estimation. And your second question is about the extension. Right?

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Yeah. Yeah. This thing I think the in the q four, the net add is 9%. It's eight to 9% in learning centers. And and going forward, in the coming New Year, I think our our our plan is to monitor the capacity expansion to ensure alignment of revenue growth.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

So I think as the whole group, we will control the learning center expansion compared to the revenue growth. So we do hope we can have the leverage from the high utilization rate of the new learning centers. So roughly, we originally, we plan to open 10 to 15% of the new learning center. It it depends on the revenue growth. And the and, you know, typically, we set up new learning centers, new learning new learning centers in second half of the year.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

So it's, you know, back loaded. And so I think we have one or two quarters to wait to decide how many learning centers we set up in the second half of the year to prepare for the new year. And so and I must mention that we only allow the cities with the best with the better top end growth and mark good margins to allow them to open the learning centers, especially for the kids' offices. Yeah. Tim, thank you.

Timothy Zhao
Timothy Zhao
Analyst at Goldman Sachs

Thank you, Steven.

Operator

Thank you. Just a reminder, please make sure to ask one question. And if you have more questions, please re queue. Next, we have Diaz Kim from JPMorgan. Your line is now open.

DS Kim
DS Kim
Research Analyst at JP Morgan

Hi. Thank you. Thanks, Steven and Sister, for taking my question. I just have a few follow ups from the previous comment, if that's okay. So you earlier mentioned the margin could go up in the first order.

DS Kim
DS Kim
Research Analyst at JP Morgan

Were you referring to the group level or for educational need? That's the first follow-up to all your point. And second, can I just double check when you say a quick control can give us about, like, hundred hundred fifth 50 bps of margin expansion? Is it regarding first quarter or full year? Just as a follow-up. And I have one more question.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

For the full year, the cost control. And, you know yeah. I I said we because we we we start we we we go back to give the guidance for whole group. So the margin not as guidance is for the group.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

So what I'm saying is the whole group's margin expansion will be happened in q one.

DS Kim
DS Kim
Research Analyst at JP Morgan

Got it. Thank you. And, again, this is kind of follow-up, but I did a very rough calculation based on the numbers that you gave us to break down. And I think we are essentially guiding core education, East Pie, to grow about 11%, 12% in fiscal twenty six versus, I think, last quarter, you mentioned 15% growth.

DS Kim
DS Kim
Research Analyst at JP Morgan

Am I right about this? Or can you comment on education on your apples to apples guidance versus last quarter? Just want to double check.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

The the full year '26. Right? Or '26.

DS Kim
DS Kim
Research Analyst at JP Morgan

Yes, sir.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

'26, sir. Yeah. It it seems to be a little bit lower than, you know, we we get the guidance, you know, last quarter.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Because, you know yeah. As I said, the overdue related business, you know, where we I think, you know, it will next to the impact by the micro economy and the the the the international relationship change. And so we revised the guidance of the fiscal year '26. I think the overseas revenue business will be down by, let's say, the 5% four or 5% year over year. This is for the whole year.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

So this is the a a new change compared to the Got it.

DS Kim
DS Kim
Research Analyst at JP Morgan

Yeah. Thank thank you. So I I think that's probably in place 12% if you have the number. If not, that's totally fine.

DS Kim
DS Kim
Research Analyst at JP Morgan

And final question is in terms of the buyback and dividend, can you give us a little bit of color on how you are thinking about between the two? Like, is it is it it gonna be depend on the level of your prices? Or do you have certain, you know, pockets within that 50% in mind for dividend at least this much? Any sort of a qualitative color would be appreciated, and that's it. Thank you, sir.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

I think, you know, first of all, we finished $700,000,000 share buyback in this quarter in in q four. And also, we we paid $100,000,000 special dividend in last year, in this fiscal year last year last year of September. And so, you know, we had a board meeting yesterday. And, you know, I have I'm happy to see the board approve the new capital allocation program, not only for this year, but also for next three years from fiscal year twenty six to fiscal year twenty eight. So which amounted to the, let's say, the 50% of the net debt, net income.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

And now, you know, we haven't yet decide the the dividend or the share buyback. I think I will discuss with the board, even Michael, to to make a decision to to to justify either the dividend or share buyback or both. But, you know, one more information. I think we still need the the auditors to to give us the final Audi report of the fiscal year twenty five. And I think we will file the the twenty eighth.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

The at the end at the end of roughly, at the September. So by then, I think we will decide, you know, how much amount to do the capital allocation and waste.

DS Kim
DS Kim
Research Analyst at JP Morgan

Yeah. Thank you. And if I just make a comment, another question, I I think many or most investors may prefer, you know, dividend rather than buyback because dividend seems a little more feasible and sustainable.

DS Kim
DS Kim
Research Analyst at JP Morgan

So please please consider, you know and especially if it is a regular dividend, not in the form of special that we did pre pre pre COVID. So just a few cents from me, and thank you so much for your call. Okay.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Thank you, dear. Thank you. You're very welcome. You.

Operator

Thank you. Just a moment for our next question, please. Next, we have Charlotte Wei from HSBC. Your line is now open.

Charlotte Wei
Charlotte Wei
Analyst at UBS

Thank you,

Charlotte Wei
Charlotte Wei
Analyst at UBS

Steven and Suzu for taking my question. I have a question regarding the non academic enrollment. So we I noticed that this quarter's enrollment growth slowed down quite meaningfully. Can I understand can can could you please provide some color on the reasons? And also, can you share with us the summer enrollment growth for the k nine non academic tutoring?

Charlotte Wei
Charlotte Wei
Analyst at UBS

And how does it compare to the industry growth trend? Thank you.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Yeah. As I said, you know, there is some seasonality impact. Yeah. As I said, you know, because of the early Chinese New Year and, you know, some revenues were reported in in in q three and q four last year. And so it will likely see impact to the q one revenue enrollment.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

And, yeah, q one is a it's low, you know, it's it seems to be low. But I think, you know, based on our the numbers, the cash and the student enrollment, we have already got from from customers for the q two courses. I think the numbers are just higher than the q one. So that's why, as I said, we expect the revenue growth will be accelerate in the q two since q two. And that's why we we gave the guidance of a whole year higher than the q one.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

And the industry growth sorry. Sorry. I have no idea about the whole industry growth, and it it's really hard for for me to make a comparison between us and the other competitors. And yeah.

Charlotte Wei
Charlotte Wei
Analyst at UBS

Thank you.

Operator

Thank you. Just a more questions. Thank you.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

K. Thank you.

Operator

Thank you. Just a moment for our next question. Next, we have Alicia Chen from CLSA. Your line is now open.

Elsie Sheng
Analyst at CLSA Limited

Hi. Thank you, Steven and sister. So my question is about the summer. So we we we are now in the summer, so I would like to see if you have any color on the summer student recruitment. For example, like, the new student enrollment growth and also, like, retention rate.

Elsie Sheng
Analyst at CLSA Limited

And do you observe any changes on the demand side? Thank you.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

The demand, it's a little less than we expected, you know, compared to one quarter ago. Yeah. Because of the the whole the economic situation. And but, you know, the but but it's not right, but but I I think it's still good, you know, for the k twelve business, even for the industry. And I don't believe the whole industry is still well.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

And I think we are very few taking the market share. And and yeah. As of that, I don't think for q two, the revenue growth will be accelerated again. And so yeah. And the the enrollment number in the summer.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

We we we have we haven't finished the enrollment window for the summer. So I think next next quarter's earnings call, I will share with the number. Show you the number. Enrollment for the whole time.

Elsie Sheng
Analyst at CLSA Limited

Okay. Thank you. And about the retention rate?

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

The retention is still going up. Hopefully, the the the whole the k nine business and high school business is still going up.

Elsie Sheng
Analyst at CLSA Limited

Okay. Got it. Thank you.

Stephen Zhihui Yang
Stephen Zhihui Yang
Executive President & CFO at New Oriental Education & Technology Group

Thank you.

Operator

Thank you. We are now approaching the end of the conference call. I will now turn the call over to New Oriental's executive president and CFO, Stephanie Young, for his closing remarks.

Stephen Zhihui Yang
Stephen 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 representative. Thank you.

Operator

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

Executives
    • Sisi Zhao
      Sisi Zhao
      Director - IR
    • Stephen Zhihui Yang
      Stephen Zhihui Yang
      Executive President & CFO
Analysts
    • Felix Liu
      Executive Director at UBS Group
    • Analyst
    • Yikun Zheng
      Equity Research Analyst at CITIC Securities Company
    • Alice Cai
      Analyst at Citigroup Global Markets Inc.
    • Timothy Zhao
      Analyst at Goldman Sachs
    • DS Kim
      Research Analyst at JP Morgan
    • Charlotte Wei
      Analyst at UBS
    • Elsie Sheng
      Analyst at CLSA Limited
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