New Oriental (EDU) Q1 2027 Earnings Call Transcript

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DATE

Wed, Oct. 28, 2026

CALL PARTICIPANTS

• Executive President and Chief Financial Officer - Stephen Zhihui Yang
• Investor Relations - Sisi Zhao

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TAKEAWAYS

• Net Revenues -- $1,874.5 million, representing 23.1% year-over-year growth driven by expansion in new educational initiatives and East Buy e-commerce performance.
• Non-GAAP Operating Income -- $406.8 million, a 21.2% increase reflecting enhanced operational efficiency and improved utilization of learning centers.
• Net Income -- $273.2 million, an increase of 13.5% year over year.
• Non-GAAP Diluted Net Income Per ADS -- $1.92, compared to $1.61 in the same period of the prior fiscal year.
• Overseas Test Preparation and Consulting Revenue -- grew approximately 7.7%, demonstrating resilience despite international headwinds and economic shifts.
• Adults and University Students Business Revenue -- increased 22.3%, supported by consistent domestic demand for test preparation.
• New Educational Business Initiatives Revenue -- rose 24.7%, driven by growth in nonacademic tutoring and intelligent learning products.
• Nonacademic Tutoring Enrollments -- reached 476,000 across 60 cities, though management noted a timing-related enrollment shift from students registering earlier in the preceding quarter.
• Intelligent Learning System and Device Users -- totaled 515,000 active paid users across approximately 60 cities, reflecting improved customer retention.
• Deferred Revenue -- $2.12 billion as of Aug. 31, 2026, representing an 11.2% increase year over year.
• Operating Costs and Expenses -- $1.50 billion, a 23.7% increase primarily attributed to the growth of East Buy's private label and live streaming business.
• Selling and Marketing Expenses -- $262.2 million, up 30.7% due to increased brand investment and channel expansion for e-commerce.
• General and Administrative Expenses -- $420.7 million, a 12.6% increase year over year.
• Operating Cash Flow -- approximately $195.4 million generated during the first quarter.
• Capital Expenditures -- $65.8 million, focused on facility improvements and capacity expansion.
• Total Cash and Investments -- $5.62 billion, including $1.75 billion in cash and cash equivalents, $1.44 billion in term deposits, and $2.42 billion in short-term investments.
• Fiscal Year 2027 Revenue Guidance -- projected between $6,453.9 million and $6,680.3 million, representing a 14% to 18% annual increase.
• Shareholder Dividends -- $300 million total, to be paid as an ordinary cash dividend of $2.00 per ADS in two installments.
• Share Repurchase Program -- $200 million newly authorized for the next 12 months following the completion of a previous $300 million repurchase program.
• Learning Center Capacity -- expanded 2% quarter over quarter, with management targeting 10% to 15% net capacity growth for the full fiscal year.

SUMMARY

New Oriental Education & Technology Group Inc. (NYSE:EDU) reported revenue growth that exceeded its guidance upper range, supported by the resilience of core educational services and rapid expansion in its East Buy e-commerce subsidiary. Management reported that while individual business segments saw operating margin expansion, the consolidated margin remained stable due to a shifting revenue mix as East Buy increased its share of total group revenue. The company is prioritizing its synergistic ecosystem through the New Oriental Home platform, which integrates education, e-commerce, and tourism products to lower customer acquisition costs. Strategic focus remains on disciplined capacity expansion in high-tier cities and the deployment of AI-powered vertical learning systems to enhance service quality and student retention.

• The company launched the New Oriental Home app to consolidate household-centric services, reaching 1.68 million registered families across 69 cities with a 33% campaign activation rate.
• Stephen Zhihui Yang described the company's AI initiative as a specialized vertical learning system developed from its educational heritage, distinguishing it from general-purpose large language models.
• East Buy expanded its private label portfolio to over 1,000 products and its channel matrix to more than 30 vertical accounts on the Douyin platform.
• Management is piloting instant retail capabilities in Beijing and Shanghai, utilizing front warehouses to test one-hour delivery for private label goods.
• The company plans to open new learning centers in a limited number of new cities while focusing most expansion on increasing utilization within its existing 60-city footprint.
• Stephen Zhihui Yang stated, "Our hope is for these efforts to collectively reinforce the New Oriental's standing as the trusted name among Chinese households."
• The integrated tourism business, which includes study tours and cultural travel for seniors, expanded to 55 cities and generates over 50% of its revenue from the top 10 cities.

INDUSTRY GLOSSARY

• ADS: American Depositary Share, representing a specific number of common shares in a foreign company trading on U.S. exchanges.
• Douyin: A major short-video and live streaming platform in China, equivalent to TikTok.
• East Buy: New Oriental's subsidiary focused on private label products and live streaming e-commerce.
• K-9: Kindergarten through ninth grade education services.
• New Oriental Home: An integrated digital platform combining educational services, e-commerce, and cultural tourism for households.
• Nonacademic tutoring: Educational services focused on non-core school subjects such as arts, sports, and soft skills.
• OMO: Online-Merge-Offline, a teaching platform that integrates physical learning centers with digital tools.
• SPU: Standard Product Unit, a term used to identify a specific product model in retail.

Full Conference Call Transcript

Operator: Good evening, and thank you for standing by for New Oriental's F 27 First Quarter Results Earnings Conference Call. At this time, participants are in listen only mode. After management's prepared remarks, there will be a Q&A session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. And I would like to turn the meeting over to your host for today's conference, Ms. Sisi Zhao.

Sisi Zhao: Thank you. Hello, everyone, and welcome to New Oriental's first fiscal quarter 27 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, Zhihui 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, Steven 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 US Private Securities Litigation Reform Act of 2000. 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. 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 the conference call will be available on New Oriental Investor Relations website at investor.neworiental.org. I will now first turn the call over to Mr. Yang. Steven, please go ahead.

Zhihui Yang: Thank you, Sisi. Hello, everyone, and thank you for joining us on the call. We are pleased to start the new fiscal year. With an encouraging first quarter. With revenue growth exceeding our guidance upper range. In addition to the resilience of our core business, East Buy and our new venture have also contributed outstanding results to the group this quarter. I am glad to report our efforts across all of our business initiatives have resulted in healthy growth amid economic headwinds and external challenges. In this quarter, total net revenue grew 23.1% year over year, to $1.87 thousand million. And non GAAP operating income rose 21.2% to $406.8 million.

Our core education business and East Buy recorded year over year expansion in their respective operating margins. Primarily attributable to the enhanced operational efficiency and improved utilization of our learning centers. I do want to highlight here that East Buy experienced a rapid growth in the past quarter. Which means it is now accounts for a larger share of the group's revenue. And therefore carries greater weight in our consolidated operating margin. Please rest assured that our overall margin remain very stable. Yet, we would encourage you to also look at each business on a stand alone basis. As this gives a clearer and more accurate picture of our underlying performance.

As I said, all of our business lines continue to maintain healthy margins. At the group level, the consolidated margin reflects both the margin of each business and its relative share of revenue. So changes in the business mix can influence the overall figure without indicating any deterioration in the underlying businesses. Now I am pleased to share this strong momentum demonstrated by our core business and new initiatives this quarter in detail. Breaking it down, overseas test-prep business recorded revenue increase of about 8% year over year for this quarter. Overseas study consulting business recorded revenue increase of about 7% year over year for this quarter.

Our adults and university students business recorded a revenue increase of 22% year over year for the first quarter. Of 2027. Our non-academic tutoring business has been rolled out to around 60 existing cities. Market penetration has seen steady growth, particularly across high tier cities. The top 10 cities contribute over around 60% of the business. Our intelligent learning system and device business has been launched in around 60 cities. We are encouraged by continued enhancement in customer retention and scalability. With the top 10 cities contribute around 50% of this business, In summary of the above, our new educational business initiatives deliver a 25% year-over-year revenue increase in the first quarter of 2027. Turning to our integrated tourism business.

Which spans study tours and research camps for K-12 and university students, as well as cultural tours for middle aged and senior travelers. We have been leveraging our culture travel China Study for global study tour, and cap education products. To deliver value through knowledge enrichment. Personal growth, and experience for cultural immersion. Our students programs now operates in about 55 cities across China. With the top 10 cities generating over 50% of the revenue. Our premium add-on offerings cover around 30 provinces in China along with selected international destinations. We are also expanding into senior health and wellness tourism through asset light model.

Partnering with more than 65 wellness facilities in key destinations such as Hainan, Yunnan, Guangxi, and Shandong. As for our OMO teaching platform, investments in revamping and upgrading the system continue to be in the works. In this quarter, we invested $28.2 million. To improve and maintain our OMO platform. Which enable us to provide uninterrupted high-quality instructions to students and cater to their individual learning needs. Building on a long-term, viable, proprietary AI powered personalized learning platform Ongoing investment and the refinements of AI enabled products remain our organizational priorities. To which we expect progress contributions in the coming quarters. The platform has completed in the first phase of deployment generating meaningful sales. Within just 25 days of launch.

Purpose-built as a specialized vertical learning system rather than a general purpose large language model. It flows from New Oriental's deep educational heritage. And enhance the competitiveness of our product in many aspects. This encouraging early results affirms strong market traction and a product market fit. And we will continue to advance AI driven solutions to extend our market reach and improve operational efficiency. Now turning to the East Buy. We are hugely encouraged by its rapid growth in the first quarter of fiscal year 2027. Which underscores the success of our ongoing pursuit of evolution and optimization We accelerate private label development and our very own 3-highest standard. High safety, high quality taste, and high value for money.

Students raw material screening factory audits, and finished product testing, before every product launch reflects our commitment to stringent quality control. Today, our private label lineup has grown beyond 1 thousand SKUs across food, nutrition, and health apparel, skincare, and other categories. Notably, several flagship products have managed to deliver robust sales. For its live streaming platform, the addition of professional live streamers, and operational specialist has strengthened East Buy's content capabilities The new vertical accounts launched on Douyin have now expanded our channel matrix to over 30 channels. Across a wide range of product categories. We also draw on user feedback to continually improve the customer experience in our live streaming platforms.

Offline sales via our network, East Buy can leverage New Oriental's nationwide learning center network. To explore new retail opportunities. We currently have 4 offline experience stores and our advancing campus store rollout on the group level. We have also developed instant retail capabilities with front warehouses in place and a 1-hour delivery trial underway in Beijing and Shanghai. For the rest of the year, East Buy will continue its multichannel strategy to cast a wider net accelerate private label development in food and daily necessities, optimize membership operations, its proprietary app, and improve supply chain efficiency. Together, we are convinced that these initiatives will support sustainable growth and deliver a lasting impact.

Now I would like to share updates on a new initiative we have been piloting since fiscal year 26 Q3, and that is new oriental home. This family centric app assembles our education services, East Buy offerings, and a cultural tourism product into a single platform. Serving the entire household, at every stage of life. New oriental homes scale up a full spectrum resource hub that caters not only to learning, but extensive individual needs. The point based incentive program which now reached large number of students. Has become moving into the daily teaching and customer service while linking positive learning habits to product and rewards redemption reward redemption.

We are excited to share that our registered users rose substantially with over half of them proactively redeeming points across our 10 learning and family oriented offerings. Collectively, these results validate our education offerings can extend naturally into a 1 stop shop for the broader family. Focusing on the customer and all that we can offer in a synergistic ecosystem. New Oriental Home also lowers customer acquisition cost. And improves cross selling efficiency. This program has been launched across 69 cities including Chongqing, Hangzhou, Guangzhou, and Xian, with over 1.68 million registered families. By the end of this quarter.

New Oriental Home has achieved cumulative activity participant rates of over 90% scoring a campaign activation rate for the quarter reached 33%. And significantly outperforming many public domain e-commerce platforms. We are ecstatic with the opportunity to further enhance customer lifetime value and are eager to build on this encouraging momentum in the quarters ahead. Now I will turn the call over to Sisi to share with you the key financials.

Operator: Sisi, please go ahead.

Sisi Zhao: Yeah. Thank you, Stephen. Let me now walk you through the key financial highlights for the quarter. Operating cost and expenses for the quarter were $1.5 thousand million representing a 23.7% increase year over year. The increase was primarily due to the cost and related to the substantial growth in East Buy private label products and live streaming ecommerce business. Cost of revenue increased by 28.1% year over year. To $817 million Selling and marketing expenses increased by 30.7% year over year.

To $262.2 million G&A expenses for the quarter increased by 12.6% year over year. $420.7 million Total stock based compensation expenses, which were allocated to related operating costs and expenses, increased by 31.3% to $30.6 million in the first quarter. Of 2027. Operating income was $374.7 million representing a 20.5% increase year over year. Non GAAP income from operations for the quarter excluding share based compensation expenses and amortization of intangible assets, resulting from business acquisitions, $406.8 million representing a 21.2% increase year over year. Net income attributable to New Oriental for the quarter was $273.2 million representing a 13.5% increase year over year. Basic and diluted net income per ADS attributable to New Oriental were $1.76 and $1.74, respectively.

Non GAAP net income attributable to New Oriental for the quarter was $3.3 thousand million representing a 16.5% increase year over year. Non GAAP basic and diluted net income per ADS attributable to New Oriental, were $1.94 and $1.92, respectively. Respectively. Net cash flow generated from operation for the first fiscal quarter of 2027 was approximately $195.4 million and capital expenditure for the quarter were $65.8 million. Turning to the balance sheet. As of August 31, 2026, New Oriental had cash and cash equivalents of $1.75 thousand million In addition, the company had $1.44 thousand million in term deposits.

And $2.42 thousand 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 at the end of the first fiscal quarter of 2027 was $2.12 thousand million an increase of 11.2% as compared to $1.91 thousand million year-over-year. Now I will hand over to Steven to go through our outlook and guidance.

Zhihui Yang: Thank you, Sisi. We have entered a new phase with healthy performance this quarter. which injects confidence in our operational resilience and the growth trajectory. Looking ahead, we are particularly confident in sustaining our momentum across our core business and new endeavors. With expectations that our diverse initiatives to deepen customer engagement will drive margin expansion. Greater operational efficiency, and strong shareholder yields. Strategic expansion of capacity and nurturing talent remain our focus. We plan to deepen our presence in markets with solid top and bottom line performance. Expansion decisions will be carefully calibrated throughout the year. Guided by the operational readiness, customer demand, and financial results.

Continuous pursuit of new initiatives will not hinder our commitment in delivering promising service quality, sustainable profitability, and cost discipline. In addition to confidence in healthy growth of our core education business, we will always support East Buy and other new initiatives with customer centric mindset and without compromising the quality standard. Our hope is for these efforts to collectively reinforce the New Oriental's standing as the trusted name. Among Chinese households. We will also review our cost reduction and enhancement measures. From time to time to improve our operational efficiency and margin profile.

Considering the positive momentum and disciplined measures across our business lines, we are pleased to reiterate the previous provided full year guidance of total net revenue in the fiscal year 2027. To be in the range of $6.45 thousand million to $6.68 thousand million. Representing a year over year increase in the range of 14% to 18%. These expectations reflect our current outlook. And based on the recent regulatory development prevailing market conditions, both of which remain subject to change. To update everyone on the shareholder return, for the fiscal year 26, The company announced a share repurchase program in October 2025.

And which company authorized to repurchase up to $200 million of its ADS or common shares over the subsequent 12 months. As of October 20, 2026, the company has fully utilized the $300 million repurchase amounts of authorized under its 2026 shares repurchase program for an aggregate of approximately 56.2 million common shares. Including common shares represented by ADS. From the open market. Before closing my remarks, I like to provide an update on our shareholder return plan for this fiscal year. As part of the implementation of the 3-year shareholder return plan adopted in July 2025. The fiscal year 2027.

The board of directors of the company previously approved an ordinary cash dividend and a new share repurchase program in July 2026. The company announced today that its board of directors has also approved an ultimate cash dividend as the fiscal year 2027 of $0.2 per common share or $2.00 per ADS, which will be distributed in the US dollar in 2 installments. For the first installments, $0.10 per common share or $1.00 per ADS will be paid to holders of the common shares and ADS of record as close of the business on November 18, 2028. Beijing, Hong Kong time, and New York time. Respectively.

Then for the second installment, $0.10 per common share or $1.00 per ADS will be paid to holders of common shares in ADS of record, a date that will That will be further determined by the board of directors of the company in due course. The payment date for the first installment is expected to be on or around December 1, 2026. And 12/04/2026 holders of common shares and holders of the ADS, respectively. For the second installment, payment date is expected to be around 6 months after the payment dates of the first installment. Further details regarding the record dates and payment dates for the second installment will be announced by the company in due course.

The aggregates amount of the cash dividend to be paid in 2 installments is expect to approximately $300 million. Pursuant to the 2027 share repurchase program. The company may repurchase up to $200 million of its ADS or common shares over the subsequent 12 months following the board approval. As of October 27, 2026, the company has yet to repurchase any common shares under the 2027 share repurchase program. The company's proposed the repurchase may be made from time to time in the open market. And prevailing market price in privately negotiated transactions in block trades and or through other legally permissible means. Depending on the market conditions and the accordance with the applicable rules and regulations.

The board of directors of the company will review and share repurchase program periodically and may authorize adjustments to its terms and size. The company expect to fund the repurchase out of this existing cash balance. To conclude, long term value creation remains the fuel of the engine. And we are keen to share with our shareholders the yields of the sustainable growth we are painting for the future. We continue to collaborate closely with the government authorities across China. Ensuring full compliance with the relevant policies and regulations while adapting our operations responsibly and to meet the requirement. This is the end of the fiscal year 2027 Q1 summary.

At this point, I would like to open the floor for questions. Operator, please open the call for this.

Operator: Thank you. The Q&A session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions, we would take 1 question at a time from each caller. If you have more than 1 question, please request to join the question queue again after your first. To withdraw your question, please press star 11 again. We will now proceed to take our first question. And our first question comes from the line of Jenny Yuan from UBS. Please ask your question, Jenny. Your line is open.

Jenny Yuan: Hi, Stephen. Hi, Sisi. Thanks for taking my And my question is on margins. So in this quarter, the overall OP margin was broadly stable year over year. While both the core education and East Buy delivered year over year margin expansion. And you explained that the overall margin performance was more due to the changes in revenue mix. But if this trend continues, how should we think about the outlook for overall margin expansion? And what are the key drivers of margin improvement going forward? Thank you.

Zhihui Yang: Thank you, Jenny. Yeah. Let us start with the margin analysis of this quarter. Yeah. I think you are right. Both our core education business and the East Buy reported year-over-year margin expansion. Due to the enhanced operational efficiency and the improved utilization of the learning centers. And in Q1, East Buy's rapid growth increased its share of the total revenue. And typically in Q1, because of the seasonality, core education business margins is higher than East Buy because of the seasonality. So this shift in our revenue mix kept our consolidated operating margin at a stable level. On the. For the whole group.

And going forward, I think we remain confident in the margin profile of the each business line. Both the core educational business and East Buy. So we expect the margin of the. All the business line will be expanded in the new year. In this fiscal year 2027. I think the margin expansion you know, will be, you know, will be. Will come from the higher operational efficiency even the better utilization of the learning centers. And, also, you know, we started the cost control since March last year, 2025. And now I think we have seen the good result. And we. Which helps us to drive the margin up.

And I will continue to be cost control, you know, going forward. So it will help the margin profile going forward. Jenny, thank you.

Jenny Yuan: Thank you, Stephen, for the color. They are clear.

Operator: Thank you. Thank you. We will now take our next question from the line of Elsie Sheng from CLSA.

Elsie Sheng: Thank you, Stephen. And Sisi for taking my question. So my question is mainly on revenue growth outlook because this quarter, we see a really strong revenue growth, and it is much higher than our full year revenue guidance. Also, what is the outlook for the next few quarters and maybe the possibility of raising our full year revenue guidance? Especially if we look at by segment I noticed that the overseas business growth actually accelerated versus the previous quarter. Wondering what is the driver, and does this mean that overseas business will see a turning point or recovery? Thank you.

Zhihui Yang: Okay. Yeah. Thank you, Elsie. I think your question is about the revenue the growth outlook for the whole year. And, yeah, as you know, I think, you know, this quarter, the Q1, the revenue growth, you know, exceeded our expectations. Again, And I think I think the reason is because we are seeing all the business lines grows very fast. And starting from fiscal year 2027, we are making a change to give the annual guidance rather than the quarter guidance, but given the Our positive momentum I think in the coming Q2, even the rest of the year, I think the revenue growth will be very healthy.

And you know, I will give you the breakdown of the revenue outlook of the annual guidance, you know, by different business lines. I think the overseas test-prep business you know, this year's revenue growth will be over 5% year-over-year in dollar terms. And for our new business, I think the revenue growth will be roughly high teens. Or is that close to 20% or roughly 20%. And the high school business, roughly 15% top-line growth year over year. And college business, I think the revenue growth will be around 20% or even maybe higher. And the East Buytes you saw the numbers.

Of the revenue growth in Q1 of the East Buy, you know, we had a very rapid growth in. Of the East Buy And I believe East Buy's revenue will be accelerated in Q2. So the in the. For the. So this the breakdown of the different business lines' growth for the fiscal year 2027. And I think even in the coming Q2, we expect the revenue growth of the whole group will be higher than the revenue growth of the Q1. So I think we will get even more satisfied with the revenue growth in the coming Q2. And, oh, another question is about the reason of the overseas-related business.

You know, I think we, you know, in Q1, we got a 7%, 8% the top-line growth. And, yeah, I think you know, due to the impact of the economic environment, and the. Even the international situation headwinds, we met some revenue growth pressure last year. But I think, you know, our team have shown the resilience in. Even in the Q1 and in the in the new year. So we believe that we will take more market share from the competitors continuously, you know, in Q2, Q3, and Q4. So I think for the overseas test-prep business, for the. This year, the growth will be over 5%.

I think it is, you know, even stronger than we expected, you know, last year. Thank you, Elsie.

Elsie Sheng: Thank you. it is very helpful.

Operator: Okay. Thank you. Our next question comes from the line of Alice Cai from Citibank.

Alice Cai: Good evening, Stephen and Sisi. My question is on non-academic tutoring enrollment. Because it was down about 10% year-over-year after calculation. But new initiatives revenue grew about 25%. Could you help us understand the gap? Is there anything changed in how you count the enrollments? Thanks.

Sisi Zhao: Okay. Yeah. So in terms of the revenue, you know, we are booking the rev. The enrollments. Sorry. We are booking the enrollments on time basis. So basically, if you look at last quarter. Actually, year, the enrollment is. Yijing is earlier than last year. So for if you look at last quarter, our enrollments growth is more than 25% So, it is much higher than the revenue growth of last quarter. Because, a lot of students this year registered earlier than last year. For both the summer quarter and autumn, quarter. Autumn semesters course. So you saw that the enrollment increased dramatically last quarter. And this quarter, because of the pre, enrollment, so the actual enrollment number for.

Comparing with last year, is lower. And so I would suggest you to combine these 2 quarters together to match, with the, revenue growth So you will see the, similar trends for that.

Zhihui Yang: So it is, timing difference. Enrollment is on timing. On time basis, but revenue is on a crew basis. So if you will take 2 quarters together, put together to do the calculation, you will see is much more reasonable. Yeah. So that is the key reason. Yeah. So I think the time went or changed time by time. And so that is why we guided investors you know, the revenue growth by annual basis. So I want to reiterate that the K-9 business, the new business, you know, the growth rate in the whole year will be somewhere around 20% year-over-year in the dollar terms. So we have no change Thank you, Alice.

Alice Cai: Okay. it is very clear. Very clear and helpful.

Operator: Thank you. Thank you. Our next question comes from the line of Lucy Yu from Bank of America Securities.

Analyst: Thank you. I just had 1 question on the learning center expansion pace. So how many learning centers we have added this quarter? And what would that imply year over year growth? Thank you.

Zhihui Yang: Regarding the learning centers. Yeah. I think we added 2% new capacity in Q1. This is quarter-on-quarter. So this is the net add quarter-on-quarter, 2%. And, you know, for the whole year, you know, we plan to open let's say, 10% to 15% in the learning centers. You know, in the you know, I think most of them, opening new learning centers in existing cities. And so we do plan to open more learning centers and a couple of new cities. in the coming new year. So this is another change. Because, you know, we feel quite optimistic about the business of the new educational business. And.

But I think because we are happy to see the student retention rate improvements, that means we provide even higher quality service to students and to the customers. And to drive the utilization rate up. So I think we are quite optimistic on the new business and even the OMO business within the K-12 business. So I think, in the in the coming New Year, if we open 10% to 15% new learning centers, I think the overall utilization rate will be up. In the New Year. Lucy?

Analyst: Understood. Very clear. Thank you, Stephen.

Operator: Thank you. Thank you. And our next question comes from the line of DS Kim from JPMorgan.

DS Kim: Hi, Stephen. Hi, Sisi. Thanks for taking my question. And by the way, congrats on the all time high revenue and record high for this, I think. The best numbers in the past 33 years, so kudos to that. And despite the stock's reaction, I think the underlying operating trend looks pretty solid, at least to me. I was gonna ask about enrollment, but you already explained very well. And revenue growth for new business can sustain nearly 20% anyway. So that is more telling I think, than the enrollment trend.

So maybe perhaps, let me ask about East Buy's profit I know you cannot talk about the exact number, because of the disclosure, but can we comment on the high level, say, when I look at minority interest, I think the momentum sequentially was down 8% quarter-over-quarter. So it is just. We take that as a directional signal that East Buy profit dollar was down sequentially, or is that the simplistic way to look at it? And just as a follow-up, you just mentioned about the expansion. Can I just double check what does that 10% to 15% learning center expansion mean? For K-9? Or new businesses, new education businesses classroom expansion.

Does that imply a much higher number given that we probably would have had high school. Thank you so much.

Zhihui Yang: Yeah. Thank you, DS. You know, the yeast buy in the Q1, the yeast buy not got operating margin. You know, as expanded year over year. And, yeah, you look at the number of the MI Because, you know, East Buy, you know, it should be, you know, grant the ESOPs last quarter. So I think, you know, typically based on GAAP, you know, typically, it is recorded to more share based compensation in the first year. And so it is a drag in net profit. But if you look at the non GAAP basis, I believe the East Buys non GAAP OP margin and the non GAAP net margin in Q1 you know, is expanded.

So this is my answer of the. Of your question about the East West margin. And your second question is about the enrollment Can you repeat the. You say your second question again? Sorry. Thank you, sir. I know that makes a lot of sense to non-GAAP. Just wanted to double check. 10% to 15% learning center expansion that you mentioned what does that mean? For K-9? New education business classroom capacity in particular? If you click this course. To a degree. I think, you know, roughly 15% for the K-9 business. You know, it is got Because, yeah, it will be higher than the average.

DS Kim: Thank you, sir.

Operator: Thank you. We will now move to our next question from the line of Timothy Chow from Goldman Sachs. Please ask your question, Timothy. Your line is open.

Analyst: Thank you. Thank you, Stephen and Sisi for taking my question. I think just a quick follow-up on the margin question regarding East Buy. I think, Steven, in the beginning, you mentioned that for this year, you expect the margin expansion across all business lines. Just want to clarify here whether when you refer all business line, whether that, include espies or not. And, for my question, I think I want to understand more about the new oriental home. I think definitely a lot of the operating metrics that you share is quite encouraging, including the membership and also the activation rate.

Just wondering if you can help us better understand how those new rental home and all those operating metrics translate into the financials. I e, whether that helps you to save the sales marketing, and is there a way to quantify that? That will be very helpful. Thank you.

Zhihui Yang: Thank you, Timothy. You know, in the Q1, the core education business the margin is up. it is expanded. And as well, East Buy's non gap OP margin is expanded. So both of the business, the margin is expanded in Q1. And you know, going forward, you know, first of all, I think the. Both of the business, you know, core business education business, East Buy, we expect the margin expansion going forward. And do not forget, you know, East Buy's revenue growth you know, We have covered this business for, you know, roughly 3 quarters ago. And in the in the in the Q1, you know, we got East Buy. Got very fast revenue growth.

And I think we would. I would believe in the coming Q2 the revenue growth of the East Buy will be accelerated compared to the Q1. And I think the margin profile of East Buy you know, will be positive. Going forward. So this is, you know, the East Buys and even the educational business you know, different business, you know, margin. And even the revenue growth, the forecast. And, you know, I will ask Sisi to answer a question about the new oriental home.

Sisi Zhao: Yes. Actually, New Oriental Home is a new platform that we start operation since second half of last year. Actually, this platform is quite exciting, in terms of that, it is a platform that combining all our key business lines, not only education, but also East Buy and tourism. You know, we are operating on each household as a whole entity to operate actually attracted a lot of users already. Registered family numbers already increased to 1.6 million, over 1.6 million already and still increase covering all kinds of educational products and still increasing not only our own customers, but also some related outside New Oriental's existing customers. So the user number is meaningful.

And also, we are operating this using a new kinds of ways And, you know, the participation rate is also very high. So cumulatively, 90% participation, which means customers; actually, the users of the. Vast majority of the users are actively attending, all kinds of activities that we organized through the platform. And, also, the latest activation rates is over 30%, so these numbers are exciting. And also, going forward, as we have this platform, bigger and bigger and have all the related customers signing in, and it can start to generate because this is a sales platform. Like, we can easily cross sell.

Our products, not only educational, but already using the credit based operation to have some cross selling from education business to East Buy, the live streaming business and also have the ability to generate maybe, even more revenue. From this, new revenue from this platform. But, actually, it. it is still early stage for this new initiative and we will keep updating everyone of the new progress of the platform. And at the same time, this is also a platform help us to reduce the customer acquisition cost. Because we used to have individual business units covering different ages of customers.

But now we are now in using the platform to operate and also to manage the needs of the whole family. So we can, easily use the related to education, action. Activities that customers are attending and then easily reduce customer acquisition and cross-sell different business lines to the same group of customers. So this is also exciting trend that we can reduce We are expecting that very, very effectively, we can reduce the customer acquisition cost and expenses, operation will be reduced because of the platform. So going forward, we will keep updating the progress of the platform to all of you. Yeah. Thank you.

Analyst: Thank you, Steven and Sisi, for the answers.

Operator: Thank you. And our next question comes from the line of Yikun Zheng from Citi. Please go ahead, Yikun. Your line is open.

Yikun Zheng: Hi, Steven and Sisi. My question is about the potential for your core business margin. Since the current margin level is already very healthy, and you are still rolling out the cost reduction plan So just wondering how much further there is for their margin expansion going forward. Thank you.

Zhihui Yang: Yeah. I think yeah, you know, going forward, I think the core education business margin you know, we expect to be expanded. And, you know, because of the, you know, as I said, opened the learning centers, with the, you know, more, you know, discipline and 10% to 15%. And so we do hope to get the higher utilization rate And even though we have potential operating leverage, going forward. And as I said, we started the cost control last year, and we will continue to do the cost control.

So I think, even, like, the cost and expense the selling marketing, even the GNA profile, I think we can say you know, some money to drop to the bottom line. Yeah. This is, you know, my analysis of the margin profile of the core education business. Thank you. So if you look at the margin in the fiscal year 28 or the fiscal year 29, will the margin expansion still be our top priority? Yeah. Yes. Because, you know, we changed our strategy since last year. You know?

We care more about the quality improvements and even the higher student retention rate And, we do not want to open too many learning centers and we care more about the higher utilization rate And so, even in the next 2 to 3 years, I think our plan is to drive the margin up you know, step by step.

Yikun Zheng: Thank you, Stephen.

Operator: Thank you. And our next question comes from the line of Jing Yuan from CICC.

Jing Yuan: Good evening. My name is Jing. Steven, and Sisi. I am I know we have discussed a lot about the margin, but my question is do you want to dive deeper about the operating margin? Like, you said. You suggest that we look at the operating margin of the educational business and East Buy separately. So could you provide more color on the margin improvement for the like, especially education business? If possible, the magnitude. And how should we look like. Look for. Looking forward, how is the outlook for their separately, like, the operating margin sense?

Zhihui Yang: So, yeah, as I said, in the Q1, you know, the core education business margin was, you know, is expanded. You know? And the East Buy's margin has expanded you know, as well. But the margin expansion of East Buy, you know, is higher than the core education business. Because of different, you know, revenue growth level. And, yeah, I do not want to say too much words on the seasonality. But if you look at the annual basis, it is what it is. And going forward, you know, I do believe East Buy first I do believe the margin of the EsterBio will be expand. Expanded in the coming year.

And for the core education business, you know, we will do the rough things. You know, keep. Make the learning center utilization rate up. Keep doing the cost control and, you know, to provide investors a more satisfying the margin profile going forward.

Jing Yuan: Got it. Thank you.

Operator: Thank you. We have now approached the end of the conference call I will now turn the call over to New Oriental's Executive President and CFO, Steven Yang for his closing remarks.

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

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

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