New Oriental Education & Technology Group Inc. Q1 FY2026 earnings call

• The company has entered a stable growth trajectory. This quarter's total net revenue increased by 6.1% year-over-year, non-GAAP operating margin reached 22% with a year-over-year improvement of 100 basis points. - New educational business initiatives: Non-academic tutoring business rolled out to around 60 cities, intelligent learning system and device business tested in around 60 cities. - Integrated tourism-related business: Connected study tours and camps across 55 cities, expanded premium tourism offerings. - OMO system: Invested $28.5 million during the quarter to upgrade and maintain. - AI venture: Newly launched AI-powered intelligent learning device and smart study solution, leveraging AI to transform education and streamline internal operations. - East Buy: Enriched private label portfolio, advanced app and membership platform, focused on improving operational efficiency and profitability.

1. Overseas test prep business: Revenue increased by about 1% year-over-year. 2. Overseas study consulting business: Revenue increased by about 2% year-over-year. 3. Adults and university students business: Revenue increased by 14% year-over-year. 4. New educational business initiatives: Recorded a revenue increase of about 15% year-over-year. The top 10 cities contribute over 60% of the non-academic tutoring business and over 50% of the intelligent learning system and device business. 5. Integrated tourism-related business line: Domestic and international study tours and research camps for K-12 and university students are connected across 55 cities, with the top 10 cities contributing over 50% of revenue. Also provides premium tourism offerings for middle-aged and senior audiences across 30 featured provinces in China and internationally, expanding product range to include cultural travel, China study tour, global study tour and camp education. 6. East Buy: Strategically invested in private label portfolio, nutritious food product line stood out, strengthened quality management, advanced East Buy app and membership platform, focusing on improving operational efficiency and profitability metrics.

• Expect total net revenue for the group including East Buy in Q2 FY 2026 (September 1, 2025 to November 30, 2025) to be in the range of $1,132.1 million to $1,263.3 million, representing year-over-year increase of 9% to 12%. - Project notable acceleration of revenue growth in K-12 business in Q2. - For full FY 2026, expect total net revenue including East Buy to be in the range of $5,145.3 million to $5,390.3 million, representing year-over-year increase of 5% to 10%. - Shareholder return plan: Ordinary cash dividend of $0.12 per common share or $1.2 per ADS in two installments, total approx. $190 million. First installment $0.06 per common share or $0.6 per ADS paid on Nov 18, 2025. Second installment to be determined. Share repurchase program: May repurchase up to $300 million of ADS or common shares from open market over next 12 months.

• Forward-looking statements involve inherent risks and uncertainties. Results may differ materially from views expressed. Potential risks and uncertainties outlined in public filings with the SEC. - Impact from external environment on overseas-related business, such as international relationship changes.

Q: Felix Liu asked about the latest competition landscape in K-12, adjustments to strategy and reasonable level of sustainable growth for K-12 business in mid- to long term.

A: Zhihui Yang said revenue growth accelerated in K-12 business since Q2, target is to enhance product and service quality, student retention rate up, K9 new business expected to have over 20% year-over-year growth in 2026, high school business double-digit growth.

Q: Alice Cai asked about the jump in SBC to $23 million this quarter, driver and outlook.

A: Zhihui Yang said SBC increased because of granting ADS shares to management, staff and teachers in next 3 years, SBC expenses expected to be similar in coming quarters with this quarter's level initially then decrease later.

Q: Lucy Yu asked about breaking down overseas test prep growth by age and consulting growth by subsegment, sustainability and impact on guidance.

A: Zhihui Yang said younger age students group in overseas test prep grew over 25% year-over-year, non-U.S. and U.K. consulting business and background improving business in overseas consulting grew fast, still guide overseas-related business to be down low single digits in Q2 but believe can do better than guidance.

Q: D.S. Kim asked about shareholder return policy, how to think about it going forward.

A: Zhihui Yang said Board approved 3-year shareholder return plan, this year paid $190 million dividend (50% of last year's net profit) and $300 million share buyback program, next year will discuss new capital allocation program, keep high payout ratio and yield.

Q: Lucy Yu followed up on overseas business细分.

A: Zhihui Yang detailed younger age group in test prep and non-U.S./U.K. and background improving in consulting grew fast.

Q: Yikun Zheng asked about driver of operating margin.

A: Zhihui Yang said margin expansion in Q1 due to better utilization, operating leverage, cost control and profit contribution from East Buy, optimistic about margin expansion in Q2 and whole year.

Q: Yiran Sheng asked about tax rate.

A: Zhihui Yang said Q1 tax rate higher due to withholding tax from WFOE to ListCo for dividends, ETR likely higher this year due to more dividends paid to investors for capital allocation.

Q: Timothy Zhao asked about Q2 K9 new initiatives.

A: Zhihui Yang said junior high school business revenue growth faster than kids' business due to low base and better product, expect K9 new business growth acceleration in Q2 and whole year.