New Oriental Education & Technology Group Inc. Q4 FY2025 earnings call

• Q4 performance exceeded expectations, total net revenue (excluding East Buy private label product and live streaming business) increased by 18.7% year-over-year, non-GAAP operating margin (excluding East Buy) reached 6.5% with a year-over-year improvement of 410 basis points.
• New educational business initiatives: Non-academic tutoring business rolled out to around 60 cities, intelligence learning system and device business tested in around 60 cities.
• Integrated tourism-related business had a 71% year-over-year revenue increase, with 55 cities covered for study tour and research camp.
• Invested $28 million in Q4 to upgrade and maintain OMO teaching platform.
• Applied AI in teaching, launched new generation of AI-powered intelligent learning devices and AI-driven smart study solution, and developed AI content creation platform, student performance feedback application, and AI-powered FAQ databases.
• East Buy continued private label product strategy and multichannel development.
• Repurchased approximately 14.5 million ADS's for approximately $700 million from the open market as of May 31, 2025.

For the fourth quarter of 2025: Overseas test prep business recorded a revenue increase of 15% year-over-year. Overseas studies consulting business reported a revenue increase of about 8% year-over-year. Adults and university students business recorded a revenue increase of 17% year-over-year. Non-academic tutoring business, focusing on cultivating students' innovative ability and comprehensive quality, has been rolled out to around 60 cities, with the top 10 cities contributing over 60% of this business. Intelligence learning system and device business has been tested in around 60 existing cities, with the top 10 cities contributing over 50% of this business. New educational business initiatives reported a revenue increase of 33% year-over-year for the fourth quarter of 2025. Integrated tourism-related business line, including study tour, research camp business for student of K-12 and university students and towards targeting middle-aged senior audience, recorded a revenue increase of about 71% year-over-year for the fourth fiscal quarter of 2025, with both domestic and international study tours and the research camp for K-12 and university students conducted across 55 cities nationwide, and the top 10 cities contributing over 50% of the revenue. A total of $28 million have been invested during the quarter to upgrade and maintain our OMO teaching platform. In fiscal year 2025, East Buy continued to invest in private label product strategy centered around green, healthy and quality, enriched its product portfolio, and advanced its multichannel strategy with enhancements to its app and ministore.

• For the first quarter of fiscal year 2026 (June 1, 2025 to August 31, 2025), total net revenue including East Buy is expected to be in the range of $1,464.1 million to $1,507.2 million, representing a year-over-year increase of 2% to 5%.
• For the full year 2026 (June 1, 2025 to May 31, 2026), total net revenue including East Buy is expected to be in the range of $5,145.3 million to $5,390.3 million, representing a year-over-year increase of 5% to 10%.
• Board approved a 3-year shareholder return plan, with no less than 50% of the company's net income attributable to New Oriental for the preceding fiscal year allocated to returning value to shareholders through dividend distributions and/or share repurchases.

• Macro-economic environment and international relations changes may impact business.
• Policy changes could affect noncore businesses such as kindergartens.
• Overseas-related businesses may be negatively impacted by macro-economy and international situation changes.
• K-12 business may be affected by seasonal factors like earlier Spring Festival leading to revenue recognition shifts.

Q: On your Q1 and FY '26 guidance, asked about breakdown and drags on business.

A: Q1 guidance is conservative due to comparison with high base last year Q1, East Buy restructuring not in '25 Q1, and earlier Spring Festival affecting revenue recognition; revenue growth expected to accelerate from Q2 with K-12 business seeing 20% growth for the whole year, overseas-related business down 4%-5% year-over-year.

Q: What is the major difference in guidance revised this quarter versus last quarter in terms of line of business and shareholder return program basis?

A: Changed to give guidance for the whole group including East Buy, shareholder return program based on GAAP net income attributable to New Oriental.

Q: About revenue deterioration, main reason for non-academic business and long-term growth rate?

A: Revenue slowing down mainly due to economic environment and international relations change; K-12 business expected to have 20% growth in coming year.

Q: On margin trend for FY '26 and goodwill impairment?

A: Margin expansion in Q4 due to operating leverage, efficiency enhancements, and cost control; expect margin expansion in Q1 of FY '26, goodwill impairment of kindergarten due to policy and other reasons, one-time loss.

Q: On margin outlook, profitability, and learning center expansion?

A: Cost control can give 100-150 basis point margin expansion for full year; Q4 net add of learning centers around 8%-9%, plan to monitor capacity expansion aligned with revenue growth.

Q: On margin level (group or core education) and cost control impact on margin?

A: Margin expansion in Q1 is for group level, cost control for full year can give 100-150 basis point margin expansion.

Q: On buyback and dividend color?

A: Board will decide on dividend and share buyback after auditors' final report, considering 50% of GAAP net income.

Q: On non-academic enrollment, reasons for slowdown and summer enrollment?

A: Seasonality impact with early Spring Festival affecting Q1 enrollment, but revenue growth expected to accelerate from Q2; no information on industry growth comparison, summer enrollment window not finished yet.

Q: On summer student recruitment, new student enrollment growth and retention rate?

A: Demand less than expected due to economic situation, but K-12 business still good, retention rate still going up for K-9 and high school business.