New Oriental Education & Technology Group Inc. Q3 FY2026 earnings call

Q3 marks solid results and consistent growth with revenue exceeding expectations. Focus on operational efficiency and strategic initiatives. Invested $30.6 million in OMO platform. Integrated AI across offerings. Launched New Oriental Home private domain platform with 330,000+ registered families and 10%-15% campaign activation rate. East Dubai advanced multi-platform, multi-account strategy with specialized live streaming channels and optimized content.

TotalNet's revenue grew by 19.8% year-over-year to $1,417.3 million. Non-GAAP operating income rose 42.8% to $202.9 million, while non-GAAP net income attributed to new rental increased 34.3% to $152.2 million. Overseas test drive business recorded revenue increase of 7% year-over-year. Overseas study consulting business had revenue decrease of about 4% year-over-year. Adults and university students business had revenue increase of 15% year-over-year. New education initiatives including non-academic tutoring and intelligent learning system and devices had sustainable revenue growth of 23% year-over-year. Integrated tourism-related business student programs operate in approximately 55 cities nationwide with top 10 cities generating over 50% of revenue. East Dubai advanced multi-platform strategy and expanded private label portfolio.

Q4 total net revenue expected in range of $1,429.6 million to $1,466.9 million, +15% to 18% YOY. Full year FY2026 total net revenue guidance raised to $5,561.4 million to $5,598.7 million, +13% to 14% YOY. Q4 margin expected despite one-off expenses related to structural adjustment. Share repurchase program with $300 million authorization, first dividend installment paid, second to be paid in June 2026.

Q: About margin trends and drivers, A: Margin expansion due to better utilization, operating leverage, cost control and Easter by's profit contribution. Q4 margin expected to expand despite one-off expenses. Next year margin outlook optimistic for core education and Easter by.

Q: About capacity expansion plan, A: Net new learning centers in first three quarters 8%, whole year net extension ~10% to 14%, focus on cities with good top and bottom line, continue to open ~10% or more learning centers next year with focus on utilization.

Q: About one-off expense in Q4 and marketing expense plan, A: One-off expense in Q4 related to overseas business restructuring, negative impact on margin 50 bps to 100 bps ($10 to $15 million). Marketing expense as percentage of revenue to be down next year.

Q: About K-12 business momentum, A: Q4 K-12 revenue growth optimistic due to product quality enhancement, student retention and utilization rate up, K-9 ~20%+ top-line growth, high school ~15% to 20% growth.

Q: About overseas business growth, A: Overseas business negatively impacted by external environment, Q4 likely flattish or low single digits up, next year better with one-stop service, cost control and margin improvement.

Q: About one-off expense and capacity expansion detail, A: One-off expenses mostly in Q4, capacity expansion in square meter size, majority in K-12 business with top-line growth expected.

Q: About new allocation business paid user growth, A: Due to disclosure difference, look at enrollment, deferred revenue and gap revenue in long term, trend good.

Q: About AI impact, A: Implement AI in all key business lines, enhance existing products' quality and comparative advantage, improve overall efficiency in working process, explore new AI-based educational products.

Q: About longer-term margin profile, A: Quite optimistic about long-term margin expansion due to higher utilization, operation leverage and cost control, next year margin expected to be up.