New Oriental Education & Technology Group (NYSE: EDU ), a provider of educational services in China, released its Q3 FY2025 quarterly report on April 23. This happened not long after the stock hit a new 52-week lowWelcome to my author's site. As an avid follower of SeekingAlpha, I take great interest in articles posted as the subject matter is often something that appeals to me. However, I will sometimes encounter an article that I might not agree with. My purpose is to present an alternative view to reader ...

Financial Data and Key Metrics Changes - The company's total net revenue decreased by 2% year over year, but net revenue excluding Eastbuy increased by 21.2% year over year [9] - Operating income increased by 9.8% year over year to $124.5 million, while non-GAAP income from operations decreased by 0.2% year over year to $142.1 million [26] - Net income attributable to the company was $87.3 million, a slight increase of 0.1% year over year [27] - Non-GAAP net income decreased by 14.3% year over year to $113.3 million [27] - Cash and cash equivalents totaled approximately $1.4 billion, with total cash and short-term investments around $4.7 billion [28][29] Business Line Data and Key Metrics Changes - The overseas test drive business recorded a revenue increase of 7% year over year [11] - The overseas study consulting business reported a revenue increase of about 21% year over year [11] - The adults and university students business recorded a revenue increase of 17% year over year [11] - New educational business initiatives recorded a revenue increase of 35% year over year [15] - The integrated tourism-related business line performed exceptionally with a revenue increase of 85% year over year [15] Market Data and Key Metrics Changes - The top ten cities contributed over 60% of the children business revenue, while the top ten cities contributed approximately 50% of the intelligent learning system and device business [12][13] - The company has expanded its reach to around 60 cities for its children business and has conducted study tours in around 55 cities [12][16] Company Strategy and Development Direction - The company is committed to long-term value creation and operational consistency, focusing on enhancing user experience and driving efficiency [8][17] - Investments in AI technologies are being integrated into the teaching ecosystem to improve learning outcomes and operational efficiency [19][20] - The board approved an extension of the share repurchase program, increasing the total value from $400 million to $700 million [23] Management's Comments on Operating Environment and Future Outlook - Management anticipates steady sustainable growth across business lines despite macroeconomic challenges [30] - The company expects total net revenue excluding Eastbuy for the next quarter to be in the range of $1,009.1 million to $1,036.6 million, representing a year-over-year increase of 10% to 13% [31] - Cost control initiatives are being implemented to enhance operating margins in the upcoming quarters [32] Other Important Information - The company has invested $29.7 million in improving its online merge offline teaching platform [18] - Deferred revenue increased by 15% year over year, indicating strong future revenue recognition [29] Q&A Session Summary Question: What are the major drivers of the slowdown in overseas-related businesses? - Management attributed the slowdown to macroeconomic conditions and changes in international relations, projecting growth in the range of 5% to 10% for the overseas-related business in Q4 [39] Question: Can you provide a breakdown of other business growth in Q4? - Management forecasted growth of approximately 19% for domestic university students, 16-17% for high school, and 30-35% for K-9 educational business [45] Question: What is the outlook for K-9 business growth? - Management expects K-9 business to grow by over 35% year over year in Q4, despite slower growth in enrollment due to timing differences [59] Question: How will the company manage cost control and efficiency? - Management indicated that cost control is an ongoing effort, focusing on improving utilization rates and operational efficiency [92] Question: What are the expectations for headquarters overhead costs in 2026? - Management aims to reduce headquarters expenses to around 5% of total revenue in fiscal year 2026 [95]

BEIJING, April 23, 2025 /PRNewswire/ -- New Oriental Education & Technology Group Inc. (the "Company" or "New Oriental") (NYSE: EDU/ 9901.SEHK), a provider of private educational services in China, today announced its unaudited financial results for the third fiscal quarter ended February 28, 2025, which is the third quarter of New Oriental's fiscal year 2025. Financial Highlights for the Third Fiscal Quarter Ended February 28, 2025 Total net revenues decreased by 2.0% year over year to US$1,183.1 million ...

Core Viewpoint - New Oriental Education and Technology Group Inc. will report its financial results for the third quarter ended February 28, 2025, on April 23, 2025, before the U.S. market opens [1] Group 1: Financial Reporting - The earnings conference call is scheduled for 8 AM on April 23, 2025, U.S. Eastern Time [1] - Participants can register in advance for the conference call to receive dial-in numbers and a unique personal PIN [2] - A live and archived webcast of the conference call will be available on the company's investor relations website [4] Group 2: Company Overview - New Oriental is a provider of private educational services in China, offering a variety of educational programs, services, and products [5] - The company's offerings include educational services, test preparation courses, private label products, livestreaming e-commerce, and overseas study consulting services [5] - New Oriental is listed on both NYSE (NYSE: EDU) and SEHK (9901.SEHK), with its American Depositary Shares (ADSs) representing ten common shares [5]

Investment Rating - The investment rating for the company is "Buy" (maintained) [1] Core Views - The report highlights that the company's education business continues to grow, with non-core business impacts being limited [3] - The company has a strong cash flow position, with a net operating cash flow of $313.3 million for FY2025Q2 and a total cash reserve of approximately $4.813 billion [7][9] - The company is expected to achieve revenue growth of 25.0% and 20.0% for FY2025 and FY2026, respectively, with Non-GAAP net profit growth of 34.2% and 33.7% for the same periods [11] Financial Performance - For FY2024, the company reported revenue of $4.314 billion, with a year-on-year growth of 43.9%. Projections for FY2025 and FY2026 are $5.392 billion and $6.470 billion, respectively [4] - Non-GAAP net profit for FY2024 was $381 million, with expected growth to $512 million in FY2025 and $684 million in FY2026 [4] - The gross margin is projected to be stable, around 52.0% to 53.0% over the next few years [4] Business Segments - The education business segment showed a net revenue growth of 31.3% in FY2025Q2, with specific growth in overseas exam preparation and consulting services [9] - New educational initiatives are experiencing rapid growth, with a 42.6% increase in enrollment for non-subject tutoring services [9] Cash Flow and Share Buyback - The company has maintained a robust cash flow, with significant cash reserves and ongoing share buyback programs totaling $542.8 million [7][9]

Core Insights - New Oriental Education & Technology Group Inc. reported mixed results for Q2 fiscal 2025, with earnings missing estimates while net revenues exceeded expectations, leading to a 23.2% drop in stock price [1][3]. Financial Performance - Adjusted earnings were 22 cents per ADS, missing the consensus estimate of 47 cents by 53.2%, and decreased 24.1% year-over-year [3]. - Total revenues reached $1,038.6 million, slightly surpassing the consensus by 0.4% and growing 19.4% year-over-year. Excluding certain revenues, net revenues were $894.2 million, marking a 31.3% increase compared to the previous year [4]. - The overseas test preparation and study consulting segments grew by 21.1% and 31.0% year-over-year, while the domestic test preparation business saw a 34.9% increase [5]. Business Initiatives - New educational initiatives recorded a 42.6% revenue increase year-over-year, with non-academic tutoring courses offered in about 60 cities, attracting approximately 994,000 student enrollments [6]. - The company focused on aligning capacity expansion with revenue growth and enhancing its online-merge-offline teaching system [2]. Cost and Expenses - Cost of revenues increased by 17.9% year-over-year to $498.3 million, while non-GAAP operating costs rose 23.5% to $1,011.1 million, primarily due to accelerated capacity expansion and new business integrations [7]. - Selling and marketing expenses increased by 26.6%, and non-GAAP general and administrative expenses rose by 24.7% [8]. Operating Margins - Non-GAAP operating income was $27.6 million, down 45.8% year-over-year, with a non-GAAP operating margin of 2.7%, a decrease of 320 basis points from the previous year [8]. - The non-GAAP operating margin, excluding certain contributions, improved by 12 basis points year-over-year to 3.2%, indicating resilience in managing profitability [9]. Cash Position - As of November 30, 2024, the company had total cash and cash equivalents of approximately $1,418.2 million, up from $1,389.4 million at the end of fiscal 2024 [10]. Share Repurchase Program - The board approved a share repurchase program, increasing the authorization to $700 million, with approximately 11.2 million ADS repurchased for $542.8 million as of January 20, 2025 [11]. Future Guidance - For Q3 fiscal 2025, the company expects total revenues, excluding certain revenues, to be between $1,007.3 million and $1,032.5 million, indicating an 18-21% growth year-over-year [12].

Investment Rating - Maintain BUY rating with a revised target price of US$80 0 (previous US$87 0) [1] Core Views - New Oriental's 2QFY25 net revenue grew 19% YoY to US$1 039mn (+31% YoY excluding East Buy revenue) in line with estimates but non-GAAP net income declined 29% YoY to US$36mn below estimates due to East Buy adjustment and tourism business investments [1] - Management guided 3QFY25E net revenue (excluding East Buy) to grow 18-21% YoY to US$1 01-1 03bn below expectations due to macro uncertainty and intensifying competition [1] - FY25-27E total revenue forecasts trimmed by 2-3% due to softer-than-expected revenue guidance [1] Earnings Summary - FY25E revenue forecast at US$5 081mn with adjusted net profit of US$439 4mn and EPS of US$2 65 [2] - FY27E revenue forecast at US$6 725mn with adjusted net profit of US$829 8mn and EPS of US$5 01 [2] - P/E ratio expected to decline from 25 4x in FY25E to 13 8x in FY27E [2] Business Segments - Overseas test prep and study consulting revenue grew 21% and 31% YoY respectively in 2QFY25 accounting for 24% of total revenue [5] - Domestic test prep revenue grew 35% YoY accounting for 9% of total revenue in 2QFY25 [5] - New educational initiatives revenue grew 43% YoY in 2QFY25 driven by non-academic tutoring (student enrolment +26% YoY) and intelligent learning systems (active paid users +44% YoY) [5] - East Buy revenue declined 9% YoY with a net loss of US$13 5mn in 1HFY25 but would have recorded US$4 6mn net income excluding the impact of Time with Yuhui disposal [5] - Tourism business revenue grew 233% YoY in 2QFY25 [5] Financial Forecasts - FY25E revenue revised down 2 6% to US$5 080 9mn with gross profit revised down 3 8% to US$2 721 0mn [6] - FY25E non-GAAP net income revised down 15 0% to US$439 4mn with EPS revised down 15 0% to US$2 7 [6] - Gross margin expected to be 53 6% in FY25E down 0 7ppt from previous forecast [6] Valuation - Educational and consulting business valued at US$77 1 (96% of total valuation) based on 28x FY25E PE [8] - East Buy valued at US$1 6 (2% of total valuation) based on 8x FY25E PE [8] - Tourism and others business valued at US$1 3 (2% of total valuation) based on 10x FY25E PE [8] - Sum-of-the-parts valuation of US$14 773 7mn with a 10% holdco discount resulting in a total valuation of US$13 296 3mn [9] Peer Comparison - Education sector average PE of 28 4x for FY25E and 16 1x for FY26E [11] - E-commerce sector average PE of 8 0x for FY25E and 7 0x for FY26E [11]

Financial Data and Key Metrics - The company released its financial results for the second fiscal quarter of 2025, which are available on the company's website and Newswire services [3] Business Updates and Strategy - The company's Executive President and Chief Financial Officer, Stephen Yang, along with Investor Relations Director, Sisi Zhao, will provide detailed updates on the latest earnings results and business developments [3] Forward-Looking Statements - The discussion during the conference call will include forward-looking statements made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995 [4] - These statements involve inherent risks and uncertainties, and actual results may differ materially from those expressed [4] - The company has outlined potential risks and uncertainties in its public filings with the SEC and does not undertake any obligation to update any forward-looking statements [4] Q&A Session - The management will be available to answer questions after the prepared remarks [3]

Core Insights - New Oriental Education & Technology Group reported strong revenue growth of 19.4% year-over-year, reaching $1.04 billion, surpassing analyst expectations of $1.01 billion [2][4] - The company faced challenges in adjusted earnings per share (EPS), reporting $0.22, which was below the forecasted $0.30, indicating a 24% decline from the previous year [4][8] - The operating margin decreased from 2.5% to 1.9%, attributed to increased operational costs related to business expansion and regulatory adaptations [4][8] Financial Performance - Revenue for Q2 FY2025 was $1.04 billion, a 19.4% increase from $869.6 million in Q2 FY2024 [4] - Adjusted EPS was $0.22, down from $0.29 in the same quarter last year [4] - Net income rose to $31.9 million, a 6.2% increase from $30.1 million in Q2 FY2024 [4] Operational Developments - The revenue growth was primarily driven by the expansion of non-academic tutoring services and intelligent learning systems, with a notable 31.3% growth when excluding contributions from East Buy [7] - Key segments such as overseas test preparation and study consulting saw growth rates of 21% and 31%, respectively, demonstrating the company's adaptability to regulatory changes [8] Regulatory Environment - The company continues to navigate challenges from China's "double reduction" policy, which aims to reduce student workloads and private tutoring hours, necessitating a pivot towards diversification and strategic cost management [9] - Operational costs increased by 20% year-over-year, reflecting the impact of regulatory adaptations [9] Strategic Outlook - Looking ahead, New Oriental projects a revenue increase of 18% to 21% for Q3 FY2025, excluding East Buy contributions, with a focus on expanding private label products and enhancing digital outreach [12] - Management is committed to strategic growth and profitability, emphasizing diversification and leveraging technology to capture new revenue opportunities [10][12]

Group 1 - U.S. stock futures are higher, with Dow futures gaining over 200 points [1] - New Oriental Education & Technology Group Inc. reported weak quarterly earnings, with adjusted earnings of 22 cents per share, missing the analyst consensus estimate of 30 cents per share [1] - The company's quarterly sales were $1.04 billion, slightly beating the analyst consensus estimate of $1.03 billion [1] Group 2 - New Oriental Education & Technology Group shares fell 16.2% to $50.98 in pre-market trading [2] - TechTarget, Inc. shares tumbled 19.5% to $14.00 in pre-market trading [3] - Baird Medical Investment Holdings Limited shares fell 18.2% to $7.24 after a previous jump of 63% [3] - Ranpak Holdings Corp. shares dipped 18.2% to $5.21 in pre-market trading [3] - Rayonier Advanced Materials Inc. shares declined 17.1% to $6.24 in pre-market trading [3] - SWK Holdings Corporation shares dipped 14.3% to $14.00 in pre-market trading [3] - Walgreens Boots Alliance, Inc. shares fell 6.8% to $11.66 following a lawsuit from the U.S. Justice Department [3] - Contineum Therapeutics, Inc. shares fell 6.8% to $11.60 in pre-market trading [3] - Tile Shop Holdings, Inc. shares fell 3.6% to $6.78 in pre-market trading [3]