Financial Data and Key Metrics Changes - The company achieved a non-GAAP operating margin of 2.6% for the second quarter, a significant improvement from a negative 112.0% in the same period of the prior fiscal year [5][20] - Operating costs and expenses decreased by 55.1% year-over-year to $640.7 million, with non-GAAP operating costs down 55.4% to $621.9 million [18][19] - Net income attributable to New Oriental was $0.7 million compared to a loss of $936.5 million in the same period of the prior fiscal year [20] Business Line Data and Key Metrics Changes - The overseas test prep business recorded a revenue increase of 17% in dollar terms, or 30% in RMB terms year-over-year [7] - The overseas study consulting business saw a revenue increase of about 14% in dollar terms or 27% in RMB terms year-over-year [7] - The adults and university students business recorded a revenue decrease of 9% in dollar terms, but a 2% increase in RMB terms year-over-year [7] Market Data and Key Metrics Changes - The company reported a deferred revenue balance of $1,139.1 million, an increase of 6.9% compared to $1,065.8 million at the end of the second quarter of the prior fiscal year [21] - Koolearn recorded revenue of nearly RMB 2,080.1 million, representing a 590.2% increase from RMB 301.4 million in the same period of the prior fiscal year [14] Company Strategy and Development Direction - The company is focusing on innovative business opportunities and has successfully generated profits from new ventures alongside existing businesses [4][6] - The company plans to continue investing in new initiatives while promoting key remaining businesses to accelerate recovery and pursue profitable growth [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that the overall impact of the pandemic will be temporary and manageable, with expectations for total net revenue in Q3 to be between $702.8 million to $719.8 million, representing a year-over-year increase of 14% to 17% [23] - The company anticipates sustainable profitability across its key businesses and expects new initiatives to maintain an upward growth trajectory [22] Other Important Information - The company has cash and cash equivalents totaling approximately $4.2 billion, indicating a healthy financial position [17] - The company authorized a share repurchase of up to $400 million, with approximately $79 million repurchased as of January 16, 2023 [17] Q&A Session Summary Question: Impact of COVID on February quarter and business expectations - Management indicated that the net impact of COVID is small and remains confident that the overall impact will be temporary and manageable [28][30] Question: Growth rates of new business lines post-COVID - Management expects upward growth in new business lines for Q3 and Q4, with significant revenue growth anticipated [33] Question: Revenue breakdown and margin profile for different business lines - The overseas related business contributed roughly 21% of total revenue, with margins expected to be around 10% to 15% for the year [38][39] Question: Third-quarter revenue guidance and profitability - The overseas related business is expected to contribute 24% to 25% of total revenue in Q3, with the school business contributing 43% to 44% [43] Question: Non-academic tutoring enrollment increase drivers - Management noted that the market is strong, and the profitability of new business lines is better than expected, with revenue growth anticipated to accelerate [59]

Financial Performance - Total net revenues for the second fiscal quarter of 2023 decreased by 3.1% year-over-year to US$638.2 million[2] - Operating loss was US$2.5 million, a significant improvement from the loss of US$768.1 million in the same period of the prior fiscal year[10] - Net income attributable to New Oriental was US$0.7 million, compared to a loss of US$936.5 million in the same period of the prior fiscal year[11] - Non-GAAP operating income for the quarter was US$16.3 million, compared to a loss of US$737.1 million in the same period of the prior fiscal year, marking a 102.2% improvement[3] - The company reported a significant reduction in general and administrative expenses, which decreased from US$822.4 million in the previous year to US$209.0 million[33] - For the three months ended November 30, 2022, New Oriental reported a net income attributable to the company of $732, compared to a net loss of $936,510 for the same period in 2021[35] - Non-GAAP net income attributable to New Oriental for the three months ended November 30, 2022, was $17,750, a significant improvement from a loss of $901,625 in the prior year[35] - The total operating costs and expenses for the three months ended November 30, 2022, were $640,702, down from $1,426,424 in the same period of 2021, reflecting a reduction of approximately 55.1%[35] - The operating margin improved to -0.4% for the three months ended November 30, 2022, compared to -116.7% in the same period of 2021[35] - For the six months ended November 30, 2022, net revenues were $1,383,036, down from $1,967,132 in the same period of 2021, representing a decrease of approximately 29.7%[41] - The company reported an operating income of $75,501 for the six months ended November 30, 2022, compared to an operating loss of $735,670 in the same period of 2021[41] - Non-GAAP operating income for the six months ended November 30, 2022, was $113,347, a significant improvement from a loss of $661,448 in the prior year[43] Cash Flow and Assets - Cash and cash equivalents, term deposits, and short-term investments totaled approximately US$4.2 billion by the end of the fiscal quarter[5] - Net cash flow generated from operations for the second fiscal quarter was approximately US$173.7 million[13] - Deferred revenue balance increased by 6.9% year-over-year to US$1,139.1 million[14] - As of November 30, 2022, New Oriental's total current assets amounted to US$4,617.4 million, an increase from US$4,473.9 million as of May 31, 2022[31] - New Oriental's cash and cash equivalents as of November 30, 2022, were US$1,029.9 million, down from US$1,148.6 million as of May 31, 2022[31] - Cash, cash equivalents, and restricted cash at the end of the period on November 30, 2022, were $1,122,824, compared to $1,050,130 at the end of the same period in 2021[39] - Net cash provided by operating activities for the three months ended November 30, 2022, was $173,670, a turnaround from a cash outflow of $628,322 in the prior year[39] Business Operations - The total number of schools and learning centers was 708 as of November 30, 2022, a decrease of 585 compared to 1,293 as of November 30, 2021[4] - The overseas test preparation and overseas study consulting businesses increased by approximately 17% and 14% year-over-year, respectively[5] - Koolearn recorded revenues of RMB 2,080.1 million (US$293.5 million), a 590.2% increase year-over-year[18] - New Oriental expects total net revenues for Q3 FY2023 to be between US$702.8 million and US$719.8 million, reflecting a year-over-year increase of 14% to 17%[21] - The projected revenue increase in Renminbi for Q3 FY2023 is expected to be in the range of 24% to 27%[22] - The company anticipates ongoing growth in the Chinese private education market, which may impact its future performance positively[26] Corporate Changes - The company plans to change its name from "Koolearn Technology Holding Limited" to "East Buy Holding Limited" to better reflect its business direction[20]

Financial Data and Key Metrics Changes - The non-GAAP operating margin for Q1 2023 was 13%, and the non-GAAP net margin was 11.2%, both higher than the same period last year [7] - Operating income increased by 140.5% year-over-year to $78 million, while non-GAAP income from operations rose by 28.3% year-over-year to $97 million [26] - Net income attributable to New Oriental for the quarter was $66 million, representing a 9% increase year-over-year [26] - Cash and cash equivalents, term deposits, and short-term investments totaled approximately $4.3 billion [23] Business Line Data and Key Metrics Changes - The overseas test prep business recorded a revenue increase of 2% year-over-year [8] - The adults and university students business also saw a revenue growth of about 2% year-over-year [8] - The overseas study consulting business experienced a revenue increase of about 21% year-over-year [8] - New business initiatives contributed approximately 16% of total revenue, with non-academic tutoring being the largest contributor [55] Market Data and Key Metrics Changes - The deferred revenue balance decreased by 30.3% year-over-year, primarily due to the cessation of K-9 academic after-school tutoring services [28] - The top 10 cities in China contributed about 60% of the revenue from the non-academic tutoring business [10] - The revenue contribution from the top 10 cities in China for the intelligence learning system and device business was over 60% [11] Company Strategy and Development Direction - The restructuring process has largely been completed, leading to a new business model that combines existing and innovative business opportunities [6] - The company aims to encourage the all-around development of students while generating profits for shareholders [7] - New Oriental is focusing on expanding its OMO (Online-Merge-Offline) teaching platform and investing in new initiatives to drive growth [14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustainable profitability across key businesses and the growth prospects of new initiatives [30] - The company anticipates lower revenue in Q2 due to seasonality in certain business lines, with a projected revenue range of $601.4 million to $619.2 million [32] - Management is cautiously optimistic about the impact of the ongoing pandemic on business operations, thanks to the OMO system [31] Other Important Information - The company invested $31 million in the OMO teaching platform during the quarter to enhance service quality [14] - A share repurchase plan of up to $400 million was authorized by the Board of Directors [23] Q&A Session Summary Question: What was the enrollment number for non-academic courses last quarter or last financial year? - Management indicated that the non-academic courses were newly launched, and last year's numbers were very small, but this quarter saw 297,000 enrollments [35] Question: Is there seasonality for the full year regarding non-academic enrollment? - Management noted that seasonality should not be very apparent for non-academic courses, unlike other businesses [36][37] Question: What drove the strong gross margin this quarter? - The increase in gross margin was attributed to downsizing of learning centers, lower fixed costs, and growth in revenue from Koolearn [40] Question: What is the growth outlook for each line of business? - Management expects strong growth in overseas-related businesses and new initiatives, with significant contributions from the non-academic tutoring and learning device businesses [45] Question: What is the revenue contribution from non-academic tutoring for Q1? - Non-academic tutoring contributed the largest share among new businesses, with overall new businesses contributing roughly 16% of total revenue [55] Question: What is the revenue breakdown for Q1? - The overseas-related business contributed approximately 24-25% of total revenue, while new businesses contributed about 16% [57]

Financial Performance - Total net revenues for the first fiscal quarter of 2023 decreased by 43.1% year over year to US$744.8 million[2] - Operating income increased by 140.5% year over year to US$78.0 million, with a non-GAAP operating margin of 13.0%[10] - Net income attributable to New Oriental increased by 9.0% year over year to US$66.0 million, with basic and diluted net income per ADS at US$0.39 and US$0.38, respectively[11] - Non-GAAP net income attributable to New Oriental for the quarter was US$83.7 million, representing a 24.7% decrease year over year[12] - Operating costs and expenses for the quarter decreased by 47.8% year over year to US$666.8 million[8] - Net revenues for the three months ended August 31, 2022, were USD 744.8 million, a decrease of 43% compared to USD 1.3 billion for the same period in 2021[28] - Operating income for the same period was USD 78.0 million, significantly up from USD 32.4 million in the prior year, indicating improved operational efficiency[28] - Net income attributable to New Oriental's shareholders was USD 66.0 million, compared to USD 60.5 million in the same quarter of the previous year, reflecting a year-over-year increase of 9%[28] - Non-GAAP operating income for the three months ended August 31, 2022, was USD 97.0 million, with a non-GAAP operating margin of 13.0%, up from 5.8% in the prior year[29] Cash and Assets - Cash and cash equivalents, term deposits, and short-term investments totaled approximately US$4.3 billion by the end of the quarter[5] - Cash and cash equivalents as of August 31, 2022, totaled USD 1.1 billion, a slight decrease from USD 1.15 billion as of May 31, 2022[27] - Total current assets increased to USD 4.6 billion as of August 31, 2022, compared to USD 4.5 billion as of May 31, 2022[27] - Total liabilities decreased to USD 2.2 billion as of August 31, 2022, from USD 2.24 billion as of May 31, 2022[27] - The company’s total equity increased to USD 3.8 billion as of August 31, 2022, compared to USD 3.79 billion as of May 31, 2022[27] Future Outlook - New Oriental expects total net revenues for the second quarter of fiscal year 2023 to be in the range of US$601.4 million to US$619.2 million, reflecting a year-over-year decline of 9% to 6%[16] - The deferred revenue balance at the end of the first quarter of fiscal year 2023 was US$1,012.5 million, a decrease of 30.3% compared to the previous year[15] Operational Focus - The total number of schools and learning centers decreased to 706, down from 744 in May 2022 and 1,556 in August 2021[4] - The overseas test preparation and overseas study consulting businesses increased by approximately 2% and 21% year over year, respectively[5] - New Oriental continues to focus on enhancing its operational performance and liquidity through non-GAAP financial measures, which exclude share-based compensation expenses and fair value changes of long-term investments[26]

Interest Rate Risk - The company has not used any derivative financial instruments to manage interest rate risk exposure, and a hypothetical one percentage point decrease in interest rates would have resulted in a decrease of approximately US$52.6 million in interest income for the year ended May 31, 2022 [766]. - The company has not anticipated being exposed to material risks due to changes in interest rates, although future interest income may be lower than expected [766]. Foreign Exchange Risk - The company's revenues and most expenses are denominated in RMB, with exposure to foreign exchange risk primarily related to cash and cash equivalents in U.S. dollars [767]. - A hypothetical 10% appreciation of the RMB against the U.S. dollar would have resulted in a decrease of RMB18.84 million in the value of U.S. dollar-denominated financial assets as of May 31, 2022 [769]. - The company has not hedged exposures denominated in foreign currencies, and the value of investments in ADSs will be affected by the foreign exchange rate between U.S. dollars and RMB [767]. Investor Relations and Costs - The depositary has agreed to reimburse the company US$15 million for expenses related to the investor relations program, which has been recognized in other income [778]. - Investors requesting the transfer of common shares will bear all associated costs, including a fee of HK$2.50 for each transfer of common shares [791]. - Holders of common shares and ADSs must pay up to US$5.00 per 100 ADSs for each issuance or cancellation related to the ADS program [791]. Transaction Costs - The transaction costs for dealings in common shares on the Hong Kong Stock Exchange include a trading fee of 0.005% of the transaction consideration, charged to both buyer and seller [779]. Share Registration and Compliance - The company intends to move a portion of its issued common shares from the Cayman Islands register to the Hong Kong share register to facilitate fungibility and conversion between ADSs and common shares [783]. - The depositary may require satisfactory proof of identity and compliance with established procedures before issuing ADSs or permitting withdrawal of common shares [789]. Fees and Deductions - The depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees [777]. Financial Health - There are no defaults, dividend arrearages, or delinquencies reported by the company [792].

Financial Data and Key Metrics Changes - Operating costs and expenses for the quarter were $629.7 million, representing a 52.1% decrease year-over-year [28] - Non-GAAP operating costs and expenses for the quarter were $600.9 million, representing a 53.6% decrease year-over-year [28] - Cost of revenue decreased by 57.2% year-over-year to $247.8 million [29] - Net loss attributable to New Oriental for the quarter was $189.3 million, compared to the loss of $45.5 million in the same period last year [31] - Cash and cash equivalents, term deposits, and short-term investments totaled approximately $4.2 billion by the end of the quarter [26] Business Line Data and Key Metrics Changes - The overseas test prep business recorded a revenue increase of 6% in dollar terms for fiscal year 2022 [7] - The overseas study consulting business recorded a revenue increase of about 16% in dollar terms year-over-year for fiscal year 2022 [7] - The adults and university students business recorded a rapid growth of approximately 30% year-over-year for fiscal year 2022 [7] - The non-academic tutoring business has been rolled out in over 50 cities, contributing more than 60% of its revenue from the top 10 cities in China [9][17] - The intelligence learning system and device business has shown improved customer retention rates and scalability, with over 60% revenue contribution from the top 10 cities [10][16] Market Data and Key Metrics Changes - The deferred revenue balance at the end of the quarter was $933.1 million, a decrease of 51.6% compared to $1,926.4 million at the end of the previous quarter [34] - The company has reduced the total number of schools and learning centers to 744 by the end of the fiscal year [19] Company Strategy and Development Direction - The company is focusing on new business opportunities that encourage all-round development of students while generating profit for shareholders [6] - The OMO (Online-Merge-Offline) system has been emphasized as a key component during the restructuring process and is expected to provide flexibility in learning [20] - The company is committed to investing in R&D to enhance its educational services and adapt to regulatory changes [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainable profitability of remaining key businesses and the growth potential of new initiatives [35] - The company expects total net revenues in the first quarter of fiscal year 2023 to be in the range of $641.3 million to $680.6 million, representing a year-over-year decline of 51% to 48% [37] - Management believes that the overall impact of the pandemic on business and financials will be limited due to the OMO system [36] Other Important Information - The company authorized a share repurchase program of up to $400 million from July 28, 2022, through May 31, 2023 [26] - The company invested $36 million in the quarter and $166 million in the full fiscal year to improve and maintain the OMO teaching platform [21] Q&A Session Summary Question: Revenue breakdown for guidance by major categories - Management indicated that a breakdown of revenue would be provided in the next quarter [39] Question: Outlook for the number of learning centers - Management noted that the number of learning centers is higher than previously expected, indicating resilience in traditional business lines [40] Question: Revenue contribution from new initiatives - Management expects the new business initiatives to contribute around 20% of total revenue, excluding DONG FANG ZHEN XUAN [52] Question: GP margin expectations - Management anticipates higher gross margins in the upcoming quarters, driven by revenue growth and operational leverage [58] Question: Competition with public schools - Management believes that their extensive data and teaching experience will provide a competitive edge against public schools [63]

Financial Data and Key Metrics Changes - Operating costs and expenses for the quarter were $755.3 million, representing a 30.6% decrease year-over-year [34] - Non-GAAP operating costs and expenses for the quarter were $725.3 million, a 32.5% decrease year-over-year [34] - Net loss attributable to New Oriental for the quarter was $122.4 million, compared to an income of $151.3 million in the same period last year [38] - Cash and cash equivalents totaled approximately $4.4 billion by the end of the quarter [31] Business Line Data and Key Metrics Changes - Overseas test prep business recorded a year-over-year revenue growth of about 8% for the first nine months of the fiscal year [10] - Overseas study consulting business reported a revenue increase of about 26% year-over-year for the same period [10] - Domestic test prep business targeting adults and university students recorded a rapid growth of approximately 59% year-over-year [10] Market Data and Key Metrics Changes - Deferred revenue balance at the end of the quarter was $971.3 million, a decrease of 47.9% compared to the same period last year [41] - The company reduced the total number of schools and learning centers to 847 by the end of the fiscal quarter [22] Company Strategy and Development Direction - The company is focusing on new business opportunities, including non-academic tutoring and intelligent learning systems [11] - Management emphasized the importance of the OMO (Online-Merge-Offline) system during the restructuring process [23] - Future growth is expected from new initiatives, which are anticipated to become key revenue contributors [80] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainable profitability of remaining key businesses and the growth potential of new initiatives [33] - The company is prepared for a new beginning as it identifies new and profitable market opportunities [43] - Management acknowledged the impact of the pandemic but noted that the OMO system has minimized learning disruptions [48] Other Important Information - The company invested $27 million in the quarter and $129 million in the first three quarters of the fiscal year to improve the OMO teaching platform [26] - The restructuring phase is nearing completion, with expectations of further closures of learning centers [56] Q&A Session Summary Question: What is the sustainability of the learning centers after restructuring? - Management plans to reduce the number of learning centers to between 650 and 700 by the end of the fiscal year [56] Question: How much of the costs this quarter are related to one-off restructuring? - Most one-off costs related to learning center closures were accrued in the first half of the fiscal year [57] Question: What is the revenue contribution from new initiatives? - New business initiatives are expected to contribute over 20% of revenue next year [64] Question: What is the retention rate for new non-academic courses? - Retention rates for non-academic courses are improving and are close to those of academic courses from the previous year [67] Question: How does the company view competition in the new business area? - Management believes competition will lessen as many competitors have exited the market [68] Question: What are the profitability expectations for remaining and new businesses? - Remaining businesses have margins of 10% to 20%, while new businesses are expected to achieve similar margins in the upcoming year [76]

Financial Performance - Total net revenues for the six months ended November 30, 2021, were $1,967,132, representing an increase from $1,874,055 for the same period in 2020, a growth of approximately 5%[4] - Operating loss for the six months ended November 30, 2021, was $(735,670), compared to an operating income of $118,158 for the same period in 2020[4] - Net loss attributable to New Oriental Education & Technology Group Inc. for the six months ended November 30, 2021, was $(875,980), a significant decline from a net income of $228,554 in the same period of 2020[4] - The total operating costs and expenses for the six months ended November 30, 2021, were $2,702,802, significantly higher than $1,755,897 for the same period in 2020, an increase of approximately 53.8%[4] Assets and Liabilities - Total current assets decreased to $5,154,963 as of November 30, 2021, down from $6,574,155 as of May 31, 2021, a decline of approximately 21.5%[2] - Cash and cash equivalents decreased to $1,026,912 as of November 30, 2021, compared to $1,612,211 as of May 31, 2021, a decrease of about 36.2%[2] - Total liabilities as of November 30, 2021, were $5,132,877, down from $3,433,761 as of May 31, 2021, indicating a significant increase in liabilities[3] - Total equity decreased to $4,180,551 as of November 30, 2021, from $5,018,176 as of May 31, 2021, reflecting a decline of approximately 16.7%[3] Cash Flow - The company reported a net cash used in operating activities of $(1,074,835) for the six months ended November 30, 2021, compared to net cash provided by operating activities of $802,276 for the same period in 2020[6] - The company had a net cash provided by investing activities of $653,374 for the six months ended November 30, 2021, contrasting with net cash used in investing activities of $(796,800) for the same period in 2020[6]

Financial Performance - Total net revenues for the fiscal year 2021 reached $4,276,539, an increase of 19.5% from $3,578,682 in 2020[19]. - Operating income for 2021 was $117,266, a significant decrease of 70.7% compared to $399,003 in 2020[19]. - Net income attributable to shareholders for 2021 was $334,414, down from $413,333 in 2020, reflecting a decline of 19.1%[19]. - The company reported a basic net income per share of $0.20 for 2021, down from $0.26 in 2020[19]. - The weighted average shares used in calculating diluted net income per share increased to 1,651,982,384 in 2021 from 1,595,368,900 in 2020[19]. - Cash and cash equivalents as of May 31, 2021, were $1,612,211, an increase from $915,057 in 2020[21]. - Total assets grew to $10,151,053 in 2021, up from $6,556,885 in 2020, marking a 54.5% increase[21]. - Total liabilities increased to $5,132,877 in 2021, compared to $3,687,074 in 2020, representing a rise of 39.1%[21]. - The company recorded goodwill impairment losses of US$28.9 million for the fiscal year ended May 31, 2021, and US$2.9 million in intangible assets impairment losses for the same period[74]. - A loss from fair value change of long-term investments was recorded at US$3.8 million for the fiscal year ended May 31, 2021, with US$5.5 million attributed to an investment in Sunlands[75]. Regulatory Environment - The company faced significant uncertainties due to changes in PRC laws affecting the private education industry, which could materially impact financial performance[25]. - The PRC private education industry, particularly the after-school tutoring sector, has faced significant regulatory changes, including the prohibition of new academic tutoring institutions and the requirement for existing institutions to register as non-profit by the end of 2021[30][31]. - Compliance with the Alleviating Burden Opinion has materially and adversely affected the company's business, financial condition, and results of operations, leading to potential employee layoffs and closure of learning centers[32]. - The company is actively monitoring the evolving regulatory environment and is making efforts to comply with new requirements, which may include further operational adjustments[32]. - The company must comply with various PRC regulations for operating licenses and permits, particularly for K-12 tutoring services, which could materially affect its business if not adhered to[161]. - Changes in PRC laws and regulations, such as the Amended Implementation Rules and Alleviating Burden Opinion, may significantly impact the company's ability to operate private schools[135]. - The evolving regulatory landscape in China regarding data protection is expected to become more stringent, posing challenges for the company's operations[91]. Business Operations and Strategy - The company faced challenges in hiring and retaining qualified teachers due to regulatory requirements for teacher licenses, which may impact the quality of education provided[40]. - The company is exploring new program and service offerings in response to market demands and regulatory changes, which may affect its ability to maintain quality and consistency[44]. - The success of the business is heavily reliant on student enrollments and course fees, with a critical need to attract students without significantly decreasing fees to maintain profitability[37]. - The company has ceased providing tutoring services during national holidays, weekends, and school breaks to comply with new regulations, which may impact revenue generation[32]. - The company must continually enhance its online programs and adapt to technological changes to maintain market share in the competitive online education market[81]. - The company is subject to fluctuations in operating results due to various factors, including economic conditions and regulatory actions affecting private educational services in China[72]. Legal and Compliance Risks - The company was ordered to pay approximately RMB 6.5 million in damages due to copyright infringement claims related to test materials, highlighting ongoing legal risks[47]. - The company is subject to ongoing legal proceedings related to intellectual property rights, which could divert management's attention and resources[49]. - The company may face legal proceedings that could materially affect its business and financial condition, including potential class action lawsuits[95]. - The company may need to rely on legal proceedings to resolve conflicts of interest, which could disrupt business operations and create uncertainty[129]. Market and Competitive Landscape - The private education sector in China is highly fragmented and competitive, with intense competition potentially leading to decreased student enrollments and profitability[52]. - The COVID-19 pandemic has materially impacted the company's business operations, with a shift to online classes and challenges in acquiring new students[55]. - The company faces challenges in retaining key management personnel, which is crucial for its ongoing success[80]. - The brand "New Oriental" is crucial for competitive advantage, and maintaining brand awareness is essential for attracting students and ensuring business success[38][39]. Financial and Capital Management - Additional capital may be required for future developments, and financing may not be available on acceptable terms, impacting growth opportunities[98]. - The company’s ability to raise additional capital is subject to various uncertainties, including market conditions and regulatory policies[99]. - Without sufficient capital, the company may need to reduce growth and limit its ability to develop new businesses or respond to competitive pressures[100]. - The company completed an offering of US$300 million aggregate principal amount of 2.125% notes due 2025[102]. - The company may face challenges in obtaining new leases at desirable locations or renewing existing leases on acceptable terms, which could adversely affect its business[104]. Taxation and Financial Obligations - The company may face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements do not represent an arm's-length price, potentially increasing tax liabilities[137]. - The imposition of penalties for violations of PRC laws could materially and adversely affect the company's business operations and financial results[122]. - The company may be deemed a PRC resident enterprise, subjecting it to a 25% enterprise income tax on global income, which could significantly increase tax burden[186]. - Dividends from PRC subsidiaries are subject to a maximum withholding tax rate of 20%, reduced to 10% in the absence of applicable tax treaties[188]. Investor Relations and Market Perception - The trading prices of the company's ADSs and common shares have shown significant volatility, with a high of US$19.68 and a low of US$1.70 on NYSE from June 1, 2020, to September 23, 2021[213]. - The market price of the company's ADSs may be adversely affected by uncertainties related to the HFCA Act and potential regulatory changes[200]. - The inability of the PCAOB to conduct inspections in China may lead to a loss of investor confidence in the company's financial statements[201]. Operational Risks - The performance and reliability of the online program infrastructure are critical, and any system disruptions could limit student retention and enrollment growth[86]. - The company has experienced cybersecurity incidents in the past, which could lead to economic and reputational damages if student data is compromised[87]. - Compliance with PRC data protection and cybersecurity regulations is essential, and failure to comply may result in penalties and operational disruptions[89].

Financial Data and Key Metrics Changes - Total net revenue for Q3 2021 was $1,190 million, representing a 29% year-over-year increase [5][19] - Operating income was $101.5 million, a 13.5% decrease year-over-year, with a non-GAAP operating income of $115.9 million, reflecting a 14% decrease [19] - Net income attributable to New Oriental was $151.3 million, a 9.9% increase year-over-year, with non-GAAP net income also increasing by 9.9% to $163.2 million [21][19] - Operating margin decreased to 8.5% from 12.7% year-over-year, while non-GAAP operating margin fell to 9.7% from 14.6% [19] Business Line Data and Key Metrics Changes - K-12 all-subjects after-school tutoring business achieved approximately 37% year-over-year revenue growth [5][10] - U-Can middle school and high school business recorded a revenue increase of approximately 35% with student enrollments growing by 56% [10][11] - POP Kids program revenue increased by about 40%, with enrollments up by 61% [11] - Overseas test prep revenue decreased by about 12%, while overseas consulting and study tour business recorded an 11% increase [11][6] Market Data and Key Metrics Changes - Total student enrollments in academic subjects tutoring and test prep courses increased by 43% year-over-year to approximately 2,296,800 [8] - Per program blended average selling price (ASP) increased by about 7% year-over-year [9] - Hourly blended ASP also increased by 7% year-over-year, consistent with normal price increases of 5% to 8% [9] Company Strategy and Development Direction - The company is focusing on expanding its offline business by adding around 20% capacity and enhancing classroom areas [25] - Investments in digital technologies and the OMO system are prioritized to improve service quality and capture market opportunities post-COVID [26][27] - The company aims to leverage its strong financial position to take market share from smaller players during the expected market consolidation [25][24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery trend and long-term market opportunities, emphasizing a balanced investment strategy [24][28] - The company expects total revenue for the next quarter to be in the range of $1,101.9 million to $1,141.8 million, representing a year-over-year increase of 38% to 43% [29] - The K-12 business is expected to grow by 45% to 50% in the next quarter, while overseas test prep is projected to grow around 30% [29] Other Important Information - The company invested $59 million in the quarter to enhance its OMO integrated education ecosystem [13] - Cash and cash equivalents as of February 28, 2021, were $1,569.8 million, up from $915.1 million a year earlier [22] - Deferred revenue increased by 35.7% year-over-year to $1,865.7 million [23] Q&A Session Summary Question: Regulatory environment and potential impacts - Management acknowledged the government's intention to tighten regulations in the after-school tutoring sector but does not foresee material impacts on top-line revenue [32] Question: Summer promotion plans - The company plans to replicate last year's successful summer promotion, expecting higher retention rates and significant enrollments [35] Question: OMO revenue contribution and margin profile - OMO currently contributes single-digit revenue but is expected to grow rapidly, with margins anticipated to be higher than traditional offline classes [38] Question: Outlook for overseas testing and consulting - Management noted a recovery in overseas test prep, with a projected revenue increase of around 30% in the next quarter [41] Question: Capacity expansion plans - The company plans to open more learning centers, particularly in Beijing, and aims for a 20% capacity expansion this fiscal year [45] Question: Margin trends - Management expects margin decline to narrow in the next quarter, with confidence in long-term margin recovery post-pandemic [50]