New Oriental Education & Technology Group Inc (EDU) 2023 Q3 法說會逐字稿

Good evening and thank you for standing by for New Oriental's FY 2023 Third Quarter Results Earnings Conference Call. (Operator Instructions) Today's conference is being recorded. If you have any objections, you may disconnect at this time.

晚上好，感謝您支持新東方 2023 財年第三季度業績收益電話會議。 （操作員說明）正在錄製今天的會議。如果您有異議，此時您可以斷開連接。

I'd now like to turn the meeting over to your host for today's conference, Ms. Sisi Zhao. Thank you. Please go ahead.

我現在想將會議轉交給今天會議的主持人趙思思女士。謝謝。請繼續。

Hello, everyone, and welcome to New Oriental's third fiscal quarter 2023 earnings conference call. Our financial results for the period were released earlier today and are available on the company's website as well as on Newswire services. Today, Stephen Yang, Executive President and Chief Financial Officer, and I will share New Oriental's latest earnings results and business updates in detail with you. After that, Stephen and I will be available to answer your questions. Before we continue, please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the view expressed today. A number of potential risks and uncertainties are outlined in our public filings with the SEC. New Oriental does not undertake any obligation to update any forward-looking statements except as required under applicable law. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on New Oriental's Investor Relations website at investor.neworiental.org.

大家好，歡迎來到新東方2023財年第三季度財報電話會議。我們這一時期的財務業績已於今天早些時候發布，可在公司網站和新聞專線服務上查閱。今天，我將與執行總裁兼首席財務官楊振寧一起為大家詳細分享新東方最新的財報和業務動態。之後，斯蒂芬和我將有空回答您的問題。在我們繼續之前，請注意今天的討論將包含根據 1995 年美國私人證券訴訟改革法案的安全港條款作出的前瞻性陳述。前瞻性陳述涉及固有的風險和不確定性。因此，我們的結果可能與今天表達的觀點存在重大差異。我們向美國證券交易委員會提交的公開文件中概述了一些潛在的風險和不確定性。除適用法律要求外，新東方不承擔任何更新任何前瞻性陳述的義務。提醒一下，這次會議正在錄製中。此外，本次電話會議的網絡直播將在新東方的投資者關係網站 investor.neworiental.org 上提供。

I will now first turn the call over to Mr. Yang. Stephen, please go ahead.

我現在先把電話轉給楊總。斯蒂芬，請繼續。

Thank you, Sisi. Hello, everyone, and thank you for joining us on the call. It's our great pleasure to announce that upon the completion of the restructuring process and the introduction of our new businesses, we have managed to deliver a set of remarkable financial results this quarter with both top line and bottom line beating the expectations. This result is also boosted by the macro trends of economy recovery as the pandemic subsides. Business activity is resuming as people raise their confidence in consumption while we observe the demand for our products and services is gradually increasing. We have also achieved a GAAP operating margin and non-GAAP operating margin of 8.8% and 11.7%, respectively, for this quarter. Our key remaining business have continued to demonstrate solid recovery.

謝謝你，茜茜。大家好，感謝您加入我們的電話會議。我們很高興地宣布，在完成重組過程和引入新業務後，我們在本季度成功交付了一系列出色的財務業績，營收和利潤均超出預期。隨著大流行消退，經濟復甦的宏觀趨勢也推動了這一結果。隨著人們對消費的信心增強，商業活動正在恢復，同時我們觀察到對我們產品和服務的需求正在逐漸增加。本季度，我們還分別實現了 8.8% 和 11.7% 的 GAAP 營業利潤率和非 GAAP 營業利潤率。我們的主要剩餘業務繼續表現出穩健的複蘇。

In particular, our overseas test prep and overseas study consulting business have performed exceptionally and recorded continuous year-over-year revenue increment thanks to the strong post COVID recovery across (technical difficulty). Our restructured business model, streamlined cost structure coupled with the emerging new business have not only helped us yield better than expected margins in this fiscal quarter; but also effectively diversify our business and enable us to offset certain historical seasonality. As we head into the fourth quarter; our solid profitability, strong performing remaining business lines and emerging new business initiatives in this quarter reaffirm our belief in sustaining a healthy growth of our market share and pursuing innovative endeavors as we wrestle with the encouraging environment of recovery.

特別是，我們的海外備考和留學諮詢業務表現出色，由於 COVID 後的強勁復甦（技術困難），收入連續同比增長。我們重組的業務模式、精簡的成本結構以及新興的新業務不僅幫助我們在本財季獲得了好於預期的利潤率；但也有效地使我們的業務多樣化，使我們能夠抵消某些歷史季節性。當我們進入第四季度時；本季度我們穩健的盈利能力、表現強勁的剩餘業務線和新興的新業務計劃重申了我們在與令人鼓舞的複蘇環境作鬥爭時保持市場份額健康增長和追求創新的信念。

Now I'd like to spend some time to talk about the quarter's performance across our main business lines and new initiatives to you in detail. Our key remaining business got a promising trend and the new initiatives have shown positive momentum. Breaking it down, the overseas test prep business recorded a revenue increase of 13% in dollar terms or 23% in RMB terms year-over-year for this quarter. The overseas (technical difficulty) of about 5% in dollar terms or 13% in RMB terms year-over-year for this quarter. The adults and university students business recorded a revenue decrease of 3% in dollar terms or 5% increase in RMB terms year-over-year for this quarter. As mentioned in the previous quarters, we have also launched several new initiatives, which mostly revolve around facilitating students' all-round development. I'm glad to share with you that these new initiatives have continued to exceed our expectations by sustaining a positive momentum and generating meaningful profits to the group.

現在我想花一些時間向您詳細介紹本季度我們主要業務線的表現和新舉措。我們的主要剩餘業務趨勢良好，新舉措顯示出積極勢頭。細分來看，本季度海外備考業務收入按美元計算同比增長13%，按人民幣計算同比增長23%。本季度海外（技術難度）按美元計算同比增長約 5%，按人民幣計算同比增長 13%。本季度成人及大學生業務收入按美元計算同比下降3%，按人民幣計算同比增長5%。正如前幾個季度所述，我們還推出了多項新舉措，主要圍繞促進學生的全面發展展開。我很高興與您分享，這些新舉措通過保持積極的勢頭並為集團創造可觀的利潤，繼續超出我們的預期。

First, the nonacademic tutoring courses, which we have offered in over 60 cities, focuses on cultivating students (technical difficulty). We're happy to see (technical difficulty) 118,000 student enrollments recorded in this quarter. The Top 10 cities in China have contributed about 60% of the revenue of this business. Secondly, the intelligent learning system and device business is a service designed to provide a tailored digital learning experience for students as we utilize our past teaching experience, data, technology to provide personalized target learning and exercise content. Our continuous investments in technology has built a competitive edge, which drives our navigation amidst the challenges from the past year. We have tested this adoption in around 60 existing cities with 108,000 active paid users in this quarter and are delighted to see improved customer retention and scalability of this new business. The revenue contribution from the Top 10 cities in China is around 60%.

第一，我們在60多個城市開設的非學歷輔導課程，以培養學生（技術難度）為主。我們很高興看到（技術難度）本季度有 118,000 名學生入學。中國前10大城市貢獻了該業務約60%的收入。其次，智能學習系統和設備業務是一項旨在為學生提供量身定制的數字學習體驗的服務，因為我們利用過去的教學經驗、數據、技術提供個性化的目標學習和練習內容。我們在技術上的持續投資建立了競爭優勢，這推動了我們在過去一年的挑戰中航行。本季度，我們已經在擁有 108,000 名活躍付費用戶的大約 60 個現有城市中測試了這種採用，並且很高興看到這項新業務的客戶保留率和可擴展性有所提高。中國前 10 名城市的收入貢獻約為 60%。

Meanwhile, the study tour and research camp business is an initiative that aims at offering students of K12 and university ages the opportunity to fully leverage their free time to broaden the scope knowledge and cultivate subject interest. We have conducted these study tour and research camps in over 50 cities across the country. The revenue contribution from the Top 10 cities in China is over 55%. Last, but not least, our smart education business; which comprises smart teaching, smart hardware, science, technology, innovation, education and other services; serves the local governments, education authorities, schools and kindergartens. Our education materials and digitalized smart study solutions, a self-learning system which leverages the advanced technology, enable students to have complete control over the pace and flexibility of learning in an age where remote learning becomes increasingly mainstream.

同時，遊學研學營業務旨在為K12和大學階段的學生提供充分利用空閒時間拓寬知識面、培養學科興趣的機會。我們已經在全國50多個城市開展了這些遊學和研學營。中國Top 10城市的收入貢獻超過55%。最後但同樣重要的是，我們的智能教育業務；其中包括智慧教學、智能硬件、科技創新教育等服務；服務於地方政府、教育主管部門、學校和幼兒園。我們的教材和數字化智能學習解決方案是一個利用先進技術的自主學習系統，使學生能夠在遠程學習日益成為主流的時代完全控制學習的節奏和靈活性。

We also offer exam prep courses designed for students with junior college diplomas to obtain bachelor's degrees. The above mentioned business have been gaining wide traction and contributes the overall growth of the company and has attained incremental profits since the last quarter. With regards to our OMO system, we continued our efforts in developing and revamping the platform and kept leveraging our educational infrastructure and technology strength over our remaining key business and new business to provide more advanced and diversified educational service for our customers. During the reporting period, we invested $26.8 million in the quarter to further improve and maintain our OMO teaching platform. Now I'd like to give you all an update on East Buy's latest performance. During the reporting period, East Buy has proved itself as a successful business model with instrumental breakthroughs in both business operations and financial performance.

我們還提供專為具有大專文憑的學生設計的考試準備課程，以獲得學士學位。上述業務受到廣泛關注，為公司的整體增長做出了貢獻，自上個季度以來實現了增量利潤。在OMO系統方面，我們繼續努力開發和改造平台，並繼續利用我們的教育基礎設施和技術優勢在我們剩餘的重點業務和新業務上，為我們的客戶提供更先進、更多元化的教育服務。在報告期內，我們在本季度投資了 2680 萬美元，以進一步完善和維護我們的 OMO 教學平台。下面就為大家介紹一下東買的最新業績。報告期內，東買證明了自己的商業模式是成功的，在業務運營和財務業績上均取得了重要突破。

The business has continued to offer a remarkable contribution to the company's overall revenue and profit growth. East Buy continued to invest substantial resources in improving product quality and variety under its private label (inaudible) and its customer-centric strategy and content caliber during the reporting period. East Buy remains rigorous in applying stringent standard in supplier selection to only source products of top notch quality and safeguards active collaborations with SF Express and the JD Group to continuously refine delivery process and service. To set itself apart from conventional livestreams, East Buy also upholds its unique feature of integrating intelligence dissemination alongside product sales with the vision to foster nationwide cultural and knowledge sharing. The series of the East Buy's in-person live streaming and participation in cultural documentaries and exhibitions have not only increased the traffic to East Buy's platform and boost sales, but also elevated audience engagement and awareness on the preservation of Chinese cultural resources.

該業務繼續為公司的整體收入和利潤增長做出顯著貢獻。在報告期內，East Buy 繼續投入大量資源來提高其自有品牌（聽不清）的產品質量和多樣性，以及以客戶為中心的戰略和內容質量。 East Buy在供應商選擇方面仍然嚴格採用嚴格的標準，只採購一流質量的產品，並與順豐和京東集團積極合作，不斷完善交付流程和服務。區別於傳統直播，東買還秉承將情報傳播與產品銷售相結合的獨特特色，以促進全民文化和知識共享為願景。東買的系列直播、參與文化紀錄片和展覽，不僅增加了東買的平台流量和銷量，也提升了觀眾的參與度和保護中國文化資源的意識。

It's inspiring to see that East Buy has grown significantly since inception and has not only become a well-known platform for promoting healthy top quality and cost effective products with loyal customer base, but also advocates appreciation of the country's cultural assets for the betterment of the community. With regards to the company's latest financial position, I'm confident to share with you that the company is in a healthy financial status with cash and cash equivalents, term deposits and short-term investments totaling approximately $4.3 billion. On July 26, 2022 the company's Board of Directors authorized a share repurchase of up to $400 million of the company ADS or common shares during the period from July 28, 2022 through May 31, 2023. As of April 18, 2023 the company repurchased an aggregate of approximately 5.1 million ADS for approximately $157.6 million from the open market under the share repurchase program.

令人鼓舞的是，東買自成立以來發展迅猛，不僅成為擁有忠實客戶群的健康優質高性價比產品的知名推廣平台，更倡導升值國家文化資產，造福人類。社區。關於公司的最新財務狀況，我有信心與大家分享，公司財務狀況良好，現金和現金等價物、定期存款和短期投資總額約為 43 億美元。 2022 年 7 月 26 日，公司董事會授權在 2022 年 7 月 28 日至 2023 年 5 月 31 日期間回購最多 4 億美元的公司 ADS 或普通股。截至 2023 年 4 月 18 日，公司回購了根據股票回購計劃，從公開市場總計約 510 萬股美國存託憑證，價值約 1.576 億美元。

Now I will turn the call over to Sisi to share with you about the key financials. Sisi, please go ahead.

現在我將把電話轉給 Sisi 與您分享關鍵的財務信息。思思，請繼續。

I'd like to walk you through the other key financial details for this quarter. Operating cost and expenses for the quarter were $687.7 million, representing a 9% decrease year-over-year. Non-GAAP operating cost and expenses for the quarter, which exclude share-based compensation expenses, were $666.3 million, representing an 8.1% decrease year-over-year. The decrease was primarily due to the reduction of facilities and number of staff as a result of the downsizing in the fiscal year 2022. Cost of revenue decreased by 0.9% year-over-year to $369.6 million. Selling and marketing expenses increased by 9.5% year-over-year to $102.6 million. G&A expenses for the quarter decreased by 25.4% year-over-year to $215.5 million. Non-GAAP G&A expenses, which exclude share-based compensation expenses, were $194.5 million, representing a 25.1% decrease year-over-year.

我想向您介紹本季度的其他關鍵財務細節。本季度的運營成本和支出為 6.877 億美元，同比下降 9%。本季度的非美國通用會計準則運營成本和費用（不包括股權激勵費用）為 6.663 億美元，同比下降 8.1%。減少的主要原因是 2022 財年裁員導致設施和員工人數減少。收入成本同比下降 0.9% 至 3.696 億美元。銷售和營銷費用同比增長 9.5% 至 1.026 億美元。本季度的 G&A 費用同比下降 25.4% 至 2.155 億美元。不包括基於股份的補償費用的非 GAAP G&A 費用為 1.945 億美元，同比下降 25.1%。

Total share-based compensation expenses, which were allocated to related operating cost and expenses, decreased by 28.6% to $21.4 million in the third fiscal quarter of 2023. Operating income was $66.5 million, representing a 147.1% increase year-over-year. Non-GAAP operating income for the quarter was $87.9 million, representing a 179% increase year-over-year. Net income attributable to New Oriental for the quarter was $81.6 million, representing a 166.7% increase year-over-year. Basic and diluted net income per ADS attributable to New Oriental were $0.49 and $0.48, respectively. Non-GAAP net income attributable to New Oriental for the quarter was $95.4 million, representing a 199.9% increase year-over-year. Non-GAAP basic and diluted net income per ADS attributable to New Oriental were $0.57 and $0.56, respectively.

2023 年第三財季，分配給相關運營成本和費用的基於股份的薪酬支出總額下降 28.6% 至 2140 萬美元。營業收入為 6650 萬美元，同比增長 147.1%。本季度非美國通用會計準則營業收入為 8790 萬美元，同比增長 179%。本季度歸屬於新東方的淨利潤為 8160 萬美元，同比增長 166.7%。歸屬於新東方的每 ADS 基本和稀釋淨收入分別為 0.49 美元和 0.48 美元。本季度歸屬於新東方的非美國通用會計準則淨利潤為 9540 萬美元，同比增長 199.9%。歸屬於新東方的每 ADS 的非美國通用會計準則基本和稀釋淨收入分別為 0.57 美元和 0.56 美元。

Net operating cash flow for the third fiscal quarter of 2023 was approximately $190.5 million and capital expenditure for the quarter were $49.2 million. Turning to the balance sheet. As of February 28, 2023 New Oriental has cash and cash equivalents of $1,329.5 million. In addition, the company had $1,413.5 million in term deposits and $1,568.1 million in short-term investments. New Oriental's deferred revenue balance, which is the cash collected from registered students for courses and recognized proportionally as revenue as instructions are delivered, at the end of the third fiscal quarter of 2023 was $1,163.2 million, an increase of 19.8% as compared to $971.3 million at the end of the third fiscal quarter of fiscal year 2022.

2023 年第三財季的淨運營現金流約為 1.905 億美元，本季度資本支出為 4920 萬美元。轉向資產負債表。截至2023年2月28日，新東方擁有現金及現金等價物13.295億美元。此外，該公司還有 14.135 億美元的定期存款和 15.681 億美元的短期投資。新東方的遞延收入餘額，即從註冊學生那裡收取的課程現金，並在交付指令時按比例確認為收入，在 2023 年第三財季末為 11.632 億美元，比 9.713 億美元增長 19.8%在 2022 財年第三財季末。

Now I will hand over to Stephen to go through our outlook and guidance.

現在我將交給斯蒂芬來完成我們的展望和指導。

Looking ahead to the fourth quarter, which has historically been one of our seasonal peak quarter, our key remaining business are in the process of recovery with the opportunity of further taking up market share as the pandemic subsides. As you know, the company remains tireless in seeking new opportunities with greater flexibility and strong cash flows and we are confident embarking on all-round journey that ensures sustainable growth. For our new businesses, the encouraging performance that these business have achieved in the previous quarters proved that we are heading towards the right direction. We firmly believe that business will sustain a healthy growth and generate meaningful profit to the company in the fourth quarter and going forward.

展望第四季度，這一直是我們的季節性高峰季度之一，我們的主要剩餘業務正在復蘇，隨著大流行的消退，有機會進一步佔據市場份額。如您所知，公司一直在不懈地尋求具有更大靈活性和強勁現金流的新機會，我們有信心踏上確保可持續增長的全方位旅程。對於我們的新業務，這些業務在前幾個季度取得的令人鼓舞的業績證明我們正朝著正確的方向前進。我們堅信業務將在第四季度及未來保持健康增長並為公司帶來可觀的利潤。

With regards to the learning center and classroom space, we are planning to increase our capacity moderately, which we expect a small quantity of the new learning centers will be opened and classroom areas of some existing learning centers will be expanded in a few major cities. In summary, we expect total net revenue in the fourth quarter of fiscal year 2023, March 1 of 2023 to May 31 of 2023, to be in the range of $801.8 million to $822.7 million, representing year-over-year increase in the range of 53% to 57%. As the profitability we recorded year-to-date has reaffirmed our success and dedication in turning a new page, we're also confident in achieving a satisfactory operating profit level in the full year of fiscal year 2023. To conclude, we are now taking multipronged operational excellence to accelerate our recovery and anchor sustainable growth.

在學習中心和教室空間方面，我們計劃適度增加我們的容量，我們預計將開設少量新學習中心，並在幾個主要城市擴大一些現有學習中心的教室面積。總之，我們預計 2023 財年第四季度（2023 年 3 月 1 日至 2023 年 5 月 31 日）的總淨收入將在 8.018 億美元至 8.227 億美元之間，同比增長范圍為53% 到 57%。由於我們今年迄今錄得的盈利能力重申了我們翻開新一頁的成功和奉獻精神，我們也有信心在 2023 財年全年實現令人滿意的營業利潤水平。總而言之，我們現在採取多管齊下的卓越運營，以加速我們的複蘇並鞏固可持續增長。

Simultaneously, we will cautiously research and unveil the potential in new market opportunity and try to apply to new technologies such as AI and ChatGPT into our education and product offerings with the vision to uplift our innovative capability in pursuit of profitable growth and increasing the operating efficiency. We stay committed to seek guidance from the COVID with the government authorities in alignment with its efforts to comply with the relevant policies as well as to further adjust our business operations as required. I must say that these expectations and forecasts reflect our consideration of the latest regulatory measures as well as the current and preliminary view, which is subject to change.

同時，我們將謹慎研究和發掘新市場機會的潛力，並嘗試將 AI 和 ChatGPT 等新技術應用到我們的教育和產品供應中，以提升我們的創新能力，以追求盈利增長和提高運營效率.我們將繼續致力於尋求 COVID 與政府當局的指導，以配合其遵守相關政策的努力，並根據需要進一步調整我們的業務運營。我必須說，這些預期和預測反映了我們對最新監管措施的考慮以及當前和初步的看法，可能會發生變化。

This is the end of our fiscal year 2023 Q3 summary. At this point, I would like to open the floor for questions. Operator, please open the call for this. Thank you.

這是我們 2023 財年第三季度總結的結尾。現在，我想開始提問。接線員，請為此打開呼叫。謝謝。

(Operator Instructions) Our first question comes from the line of Felix Liu from UBS.

（操作員說明）我們的第一個問題來自瑞銀的 Felix Liu。

Congratulations on the very strong results. My question is on your forward-looking guidance for the fourth quarter. I know the year-on-year growth looks very impressive. May I know what are the key drivers or the good performing business segments that are driving this fourth quarter growth. And if we look at slightly beyond the next quarter for the next fiscal year, what are the business segments that you expect the fastest growth in FY '24?

祝賀你取得了非常好的結果。我的問題是關於您對第四季度的前瞻性指導。我知道同比增長看起來非常可觀。我想知道推動第四季度增長的主要驅動因素或表現良好的業務部門是什麼。如果我們著眼於下一財年的下一個季度之後，您預計 24 財年增長最快的業務部門是什麼？

I think we remain confident and optimistic about the business performance in the Q4 or the fourth quarter and the new fiscal year 2024. And firstly, I think the macro trend of the economy recovery as the pandemic subsides where we're seeing the people rebuild their confidence in consumption and we're also seeing the products and the demand and the requirement of the service is gradually increasing. And as for the different business lines, the remaining business such as the overseas related business, on demand side we have seen the strong demand for overseas test prep and consulting business. And on supply side, we have seen some players disappear from the market. That means we're facing less competition. So that's why we're optimistic about the overseas related business going forward.

我認為我們對第四季度或第四季度以及新的 2024 財年的業務表現仍然充滿信心和樂觀。首先，我認為隨著大流行消退，經濟復甦的宏觀趨勢我們看到人們重建他們的生活對消費的信心，我們也看到產品和需求以及服務的要求正在逐漸增加。至於不同的業務線，其餘業務如海外相關業務，在需求方面我們看到了對海外考試準備和諮詢業務的強勁需求。在供應方面，我們看到一些參與者從市場上消失了。這意味著我們面臨的競爭較少。這就是為什麼我們對未來的海外相關業務持樂觀態度。

And for our new business, I think the encouraging performance in the Q3 in this quarter and even the last couple of quarters have shown that we are heading towards the right direction and we believe the business will be able to maintain the very strong top line growth and generate more profit for the company. And so that's why we guided the very strong top line growth in Q4 to be in the range of 53% to 57% in dollar terms. If you translate into RMB terms, that would be much more higher. And as for the bottom line wise, I think we're confident in achieving the greater operating profit in the Q4 and the new year. And next year I think the key growth driver will be the number one -- if I run them, the number one should be the new business. We started the new business such as the nonacademic courses since 15, 16 months ago and it grows very fast in this year and also we believe next year the growth rate will be very high. And Sisi, you want to add something?

對於我們的新業務，我認為本季度乃至過去幾個季度的令人鼓舞的表現表明我們正朝著正確的方向前進，我們相信該業務將能夠保持非常強勁的收入增長並為公司創造更多利潤。因此，這就是為什麼我們將第四季度非常強勁的收入增長指導為以美元計算在 53% 至 57% 的範圍內。如果換算成人民幣的話，會高很多。至於底線，我認為我們有信心在第四季度和新的一年實現更高的營業利潤。明年我認為主要的增長動力將是第一——如果我經營它們，第一應該是新業務。我們從15、16個月前就開始了非學術課程等新業務，今年增長非常快，我們相信明年的增長率會很高。思思，你想補充點什麼嗎？

Just one thing that if you look at Q4's guidance because if you look at historically last year since Q4 is the very first quarter that we did not have the -- we terminated the K-9 academic tutoring. So that's the first quarter to be like-for-like increase. So that's why you compare with previous quarters, the growth rate is higher

有一件事，如果你看一下第四季度的指導，因為如果你回顧去年的歷史，因為第四季度是我們沒有的第一季度——我們終止了 K-9 學術輔導。所以這是第一個同比增長的季度。所以這就是為什麼你與前幾個季度相比，增長率更高

Our next question comes from the line of Lucy Yu from Bank of America.

我們的下一個問題來自美國銀行的Lucy Yu。

This is Lucy from BAML. I have 1 question on consolidation. So if we're looking at the minority interest, it seems that the net profit for consolidation has decreased Q-on-Q. Could you please elaborate the reason behind that and how should we think about the earnings contribution from the margin trend going forward?

我是 BAML 的露西。我有 1 個關於整合的問題。因此，如果我們關注少數股東權益，合併後的淨利潤似乎環比下降。您能否詳細說明這背後的原因，以及我們應該如何看待未來利潤率趨勢對收益的貢獻？

I think during this quarter the East Buy has proved itself as a successful business model and this business contributes to offer the remarkable contribution to the company overall revenue and profit margin. And this quarter East Buy continued to invest the substantial resources in improving the product quality and collaborates with the JD and the SF Express to provide better delivery services and so they invested some money. But I think I can't tell the detail of the margin analysis or the profit analysis because of the compliance. And so I think next quarter the (foreign language) management -- East Buy's management will share with you guys more information in detail.

我認為在本季度，East Buy 已證明自己是一種成功的商業模式，該業務為公司整體收入和利潤率做出了顯著貢獻。而本季度東購繼續投入大量資源提升產品質量，並與京東、順豐合作提供更好的配送服務，因此投入了一些資金。但我認為由於合規性，我不能說出保證金分析或利潤分析的細節。因此，我認為下個季度（外語）管理層 - East Buy 的管理層將與大家分享更多詳細信息。

Our next question comes from the line of Candis Chan from Daiwa.

我們的下一個問題來自 Daiwa 的 Candis Chan。

Congratulations on the very strong set of results. My questions are related to the new businesses. So firstly, may I know the rough breakdown of our new initiatives revenue? And my second question is about the longer-term business direction going forward. Just now we see that our business has become more diversified and not only East Buy has done very well, even for New Oriental livestream channels on Douyin also see very decent GMV trend. So Michael like also talked about you enter into the cultural tourism as well. So I'm just wondering like what will be the key development areas for New Oriental in the following years and I would like to know more about whether we have any plans to enter into the learning device market as well or some other new areas?

祝賀你取得了非常好的結果。我的問題與新業務有關。那麼首先，我可以知道我們新舉措收入的粗略細分嗎？我的第二個問題是關於未來的長期業務方向。剛才我們看到我們的業務越來越多元化，不僅東買做得很好，就連抖音上的新東方直播頻道也看到了非常不錯的GMV趨勢。所以邁克爾也喜歡談到你也進入了文化旅遊。所以我想知道未來幾年新東方的重點發展領域是什麼，我想知道我們是否有計劃進入學習設備市場或其他一些新領域？

Okay. As for the education nature new initiatives actually if you look at the revenue contribution, the biggest one is the nonacademic tutoring. So this is the one that we're using our existing teaching resources and developing the content very, very quickly and also use our own existing channels to get students. So this year is actually the year 1 to largely develop these new kind of initiatives and we are seeing that the demand is very strong and also the retention and also the operating data are trending towards a very good situation. And also we are confident for this business to continue to grow very nicely and also contribute more and more meaningful revenue and also get very good profitability as well. And also the second biggest education nature new initiative is the intelligent learning device business. Also this is a good way to have students to do the self-study using our technology, get access to our teaching system using the hardware, the learning machine.

好的。至於教育性質的新舉措，實際上如果你看收入貢獻，最大的是非學術輔導。所以這是我們正在使用我們現有的教學資源並非常非常快速地開發內容並且還使用我們自己現有的渠道來吸引學生的那個。所以今年實際上是在很大程度上開發這些新舉措的第一年，我們看到需求非常強勁，而且保留率和運營數據都趨向於非常好的情況。而且我們也有信心這項業務將繼續非常好地增長，並貢獻越來越多有意義的收入，並獲得非常好的盈利能力。而第二大教育性質的新舉措是智能學習設備業務。這也是讓學生使用我們的技術進行自學、使用硬件、學習機訪問我們的教學系統的好方法。

So this is also something very new and it's a new model and new product, but also gaining a lot of interest from our customers and we're also using our existing channel like all the local schools and learning centers to roll out these new products and also getting satisfactory retention and renewal of tuition fees. And also this is a business that we are also feeling confidence to contribute more and more revenue and also have good profitability as well. And next to these 2 -- actually these 2 already contribute vast majority of our educational new initiatives. We do have confidence in several other ones like the study tour business, campaign business which actually had some negative impacts during the pandemic period in last 1 year. But we're confident for the future for this new initiative because the high demands we're seeing from local markets and also we also have very strong resources to develop this new business and together with several other ones that we have mentioned on the call. So we keep making efforts on developing all these new initiatives and hopefully, all these directions are all right and also contribute more and more meaningful revenue and profit.

所以這也是非常新的東西，它是一種新模式和新產品，但也引起了我們客戶的極大興趣，我們還利用我們現有的渠道，如所有當地學校和學習中心，推出這些新產品和還獲得令人滿意的學費保留和更新。這也是一項業務，我們也有信心貢獻越來越多的收入，並且也有良好的盈利能力。除了這 2 個——實際上，這 2 個已經貢獻了我們教育新計劃的絕大部分。我們確實對其他幾個業務有信心，例如游學業務，競選業務，這些業務在過去一年的大流行期間實際上產生了一些負面影響。但我們對這項新計劃的未來充滿信心，因為我們看到當地市場的高需求，而且我們也有非常強大的資源來發展這項新業務以及我們在電話會議上提到的其他幾項業務。因此，我們不斷努力開發所有這些新舉措，希望所有這些方向都是正確的，也能貢獻越來越多有意義的收入和利潤。

And let me answer your last question about the cultural tourism. I think some of you may have read online that Michael said that we are considering expanding the cultural tourism business. I think it's indeed a big potential in the country. And as you know, we do have a lot of teachers, some of them are star teachers. I think going forward by leveraging our teachers' knowledge in general studies, cultural studies and history; I think we believe we would be able to offer one of a kind cultural tourism offering. Combined with the entertainment and the educational -- the cultural education for all age groups; the kids, the college students and like the old people, right, and for all ages. And in addition, I think we may also be able to leverage our distribution channel like (foreign language) and East Buy and the other online streaming channels within the company and also we do have a lot of schools and learning centers as the distribution channel for the new business. But now we are still at a very early stage of planning and evaluating the new business at the moment. So if we have any updates, we'll keep you updated.

我來回答你最後一個關於文化旅遊的問題。我想你們中的一些人可能已經在網上看到邁克爾說我們正在考慮擴大文化旅遊業務。我認為這在國內確實是一個巨大的潛力。如您所知，我們確實有很多老師，其中一些是明星老師。我認為通過利用我們教師在通識教育、文化研究和歷史方面的知識來向前邁進；我認為我們相信我們能夠提供一種文化旅遊產品。寓教於樂——全年齡段的文化教育；孩子們、大學生和喜歡老人的人，對的，老少皆宜。此外，我認為我們還可以利用我們的分銷渠道，如（外語）和 East Buy 以及公司內的其他在線流媒體渠道，而且我們確實有很多學校和學習中心作為分銷渠道新業務。但現在我們仍處於規劃和評估新業務的早期階段。因此，如果我們有任何更新，我們會及時通知您。

(Operator Instructions) Our next question comes from the line of Linda Huang from Macquarie.

（操作員說明）我們的下一個問題來自麥格理的 Linda Huang。

This is Linda from Macquarie. My question is quite simple. My key question is regarding for our cash because I still see that we keep piling up the cash and already operating cash flow generation ability is also quite strong. So in addition to the share buyback, we think about use the other ways such as like a special dividend return to the shareholder? So that would be the first one. And the second question is regarding about the nonacademic tutoring business. So Sisi just mentioned about that we're also seeing very good retention rate. So what is this retention right now and how does this compare to the regulation period?

我是麥格理的琳達。我的問題很簡單。我的關鍵問題是關於我們的現金，因為我仍然看到我們一直在積累現金，而且已經產生運營現金流的能力也相當強。那麼除了股票回購之外，我們考慮用其他方式比如特別股息回報股東？所以這將是第一個。第二個問題是關於非學術輔導業務。所以 Sisi 剛剛提到我們也看到了非常好的保留率。那麼現在的保留率是多少，與監管期相比如何？

As you know, we announced $400 million share buyback program last year so till now we purchased $157 million from the open market to repurchase the share back. And I think our thinking is about the valuation. At this time, we should see the share buyback. Historically, sometimes we bought the share back, sometimes we pay the special dividend. So this time the share buyback. Next time I think it depends on the decision made by the Board of Directors next year. And the retention rates for the nonacademic course, I think for the nonacademic tutoring courses, the retention rate is over 70% in this quarter. You saw we are driving up the retention rate compared to before. And for the intelligent learning system devices, I suggest that the renewal rate is over 60% already.

如您所知，我們去年宣布了 4 億美元的股票回購計劃，所以到目前為止我們從公開市場購買了 1.57 億美元來回購股票。我認為我們的想法是關於估值。這個時候應該看到股票回購。從歷史上看，有時我們回購股票，有時我們支付特別股息。所以這次股票回購。下一次我覺得要看明年董事會的決定了。而非學術課程的保留率，我認為對於非學術輔導課程，本季度的保留率超過 70%。您看到與以前相比，我們正在提高保留率。而對於智能學習系統設備，我建議更新率已經超過60%。

Next we have a follow-up question from the line of Candis Chan from Daiwa.

接下來我們有來自 Daiwa 的 Candis Chan 的後續問題。

I just want to follow up on the profitability because you just mentioned for new businesses essentially they are now contributing very strong revenue and also good profitability. Can you share a little bit more on the margins of the new businesses, particularly for the nonacademic tutoring or the intelligent learning devices?

我只想跟進盈利能力，因為你剛才提到新業務基本上它們現在貢獻了非常強勁的收入和良好的盈利能力。您能否分享更多關於新業務的利潤，特別是非學術輔導或智能學習設備？

Yes. I think the new business -- overall, the new business margin is over 10% already. We started business just 15, 16 months ago so it's a quite new business. As we said, we made cautiously about the new investments of the new business so it takes less time to make it profitable for the new business. And I think we expect the margin of new business will go up in the Q4 and the new year. It's okay? Is it clear?

是的。我認為新業務——總的來說，新業務的利潤率已經超過 10%。我們在 15、16 個月前才開始營業，所以這是一項全新的業務。正如我們所說，我們對新業務的新投資持謹慎態度，因此新業務盈利所需的時間更短。我認為我們預計新業務的利潤率將在第四季度和新的一年上升。沒關係？清楚嗎？

Yes, that's very helpful. Thank you.

是的，這很有幫助。謝謝。

Our next follow-up question comes from Felix Liu from UBS.

我們的下一個後續問題來自瑞銀的 Felix Liu。

I just want to have a follow-up on the market landscape of nonacademic tutoring. I know we have most of our revenue coming from the Top 10 cities. What do you see as the biggest growth opportunity ahead? Do you think it's more about ramping up our market share in existing top cities or do you see a lot of opportunity in other cities especially lower tier cities for nonacademic tutoring?

我只是想跟進一下課外輔導的市場格局。我知道我們的大部分收入來自前 10 名城市。您認為未來最大的增長機會是什麼？您認為這更多是為了提高我們在現有頂級城市的市場份額，還是您在其他城市尤其是低線城市看到了很多非學術輔導的機會？

I think as I said, we're seeing less competition for the nonacademic tutoring business. Actually we are taking market share in both top tier cities and low tier cities and going forward, I think almost all the cities the growth will be fast. And Sisi, you want to add?

我認為正如我所說，我們看到非學術輔導業務的競爭正在減少。事實上，我們正在搶占一線城市和低線城市的市場份額，並且在未來，我認為幾乎所有城市的增長都會很快。還有思思，你想補充嗎？

Yes. Actually now we're seeing the Top 10 cities contributing like over 60% of overall revenue for this category. And I think the growth will come from both taking continued expense and taking shares. It's very, very early stage for this kind of new services and also the new market and we definitely have opportunity to take market share in all the existing cities especially these kind of major cities, top tier cities. And also our feeling is that the demand for this kind of nonacademic tutoring is not only for higher tier cities, but also like all the existing cities we are in. Like around 70, 80 cities that we still have all the schools and learning centers and we use our existing educational infrastructure and also leveraging our brand name, educational brand name. We have the advantage to expand this kind of new business and the demand is very high.

是的。實際上，現在我們看到前 10 大城市貢獻了該類別總收入的 60% 以上。而且我認為增長將來自持續支出和股份。這種新服務和新市場還處於非常、非常早的階段，我們肯定有機會在所有現有城市，尤其是這些主要城市、一線城市佔據市場份額。而且我們的感覺是，對這種非學術輔導的需求不僅適用於高線城市，而且與我們所在的所有現有城市一樣。像大約 70、80 個城市，我們仍然擁有所有的學校和學習中心，我們使用我們現有的教育基礎設施，並利用我們的品牌名稱，教育品牌名稱。我們有優勢去拓展這種新業務，需求量很大。

(Operator Instructions) Thank you. So we now approach the end of the conference call. I will now turn the call over to New Oriental's Executive President and CFO, Stephen Yang, for his closing remarks.

（操作員說明）謝謝。所以我們現在接近電話會議的尾聲。我現在將把電話轉交給新東方的執行總裁兼首席財務官 Stephen Yang，他將發表閉幕詞。

Again thank you for joining us today. If you have any further questions, please do not hesitate to contact me or any of our Investor Relations representatives. Thank you.

再次感謝您今天加入我們。如果您有任何其他問題，請隨時與我或我們的任何投資者關係代表聯繫。謝謝。

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

謝謝。今天的電話會議到此結束。感謝您的參與。您現在可以斷開連接。