(EDU) 2024 Q1 法說會逐字稿

Good evening, and thank you for standing by for New Oriental's Fiscal Year 2024 First 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，感謝您出席新東方2024財年第一季業績電話會議。 （操作員指示）今天的會議正在錄音。如果您有任何異議，您可以此時斷開連接。

I would now like to turn the meeting over to your host today, Ms. Sisi Zhao. Please go ahead.

現在我想把今天的會議交給主持人趙思思女士。請繼續。

Hello, everyone, and welcome to New Oriental's First Fiscal Quarter 2024 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.

大家好，歡迎參加新東方2024年第一季財報電話會議。我們這段期間的財務表現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看。今天，我和執行總裁兼財務長楊士強將與大家詳細分享新東方最新的財報和業務動態。之後，史蒂芬和我將回答您的問題。

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 we expressed today.

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做出的前瞻性陳述。前瞻性陳述涉及固有的風險和不確定性。因此，我們的結果可能與我們今天表達的觀點有重大不同。

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.

我們向美國證券交易委員會提交的公開文件中概述了許多潛在的風險和不確定性。除適用法律要求外，新東方不承擔更新任何前瞻性聲明的義務。提醒一下，本次會議正在錄製中。此外，本次電話會議的網路直播將在新東方投資者關係網站investor.neworiental.org上播出。

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先生。史蒂芬，請繼續。

Thank you, Sisi. Hello, everyone, and thank you for joining us on the call. It's a great pleasure to announce that New Oriental has painted an encouraging start of fiscal year 2024 by delivering a set of robust financial results this quarter with top line performance beating the high end of our expectations. Following a tireless year of trial and development, our multipronged business lines have pivoted towards a stable recovery and anchored fruitful yields, mainly benefiting from the strong post-COVID recovery of demand, consumption and travelling.

謝謝你，茜茜。大家好，感謝您加入我們的通話。很高興地宣布，新東方在本季度公佈了一系列強勁的財務業績，營收表現超出了我們的預期上限，為 2024 財年描繪了令人鼓舞的開局。經過一年的不懈努力和發展，我們的多管齊下的業務已轉向穩定復甦並取得豐碩成果，主要受益於疫情後需求、消費和出行的強勁復甦。

While our new business have begun making meaningful contributions to the company's revenue, thereby invigorate growth and margin expansion. Our bottom line performance has also achieved a promising growth. Our operating margin and non-GAAP operating margin reaching 18.6% and 22.3%, respectively, for this quarter, depicting a solid resilience across our business lines, thanks to our ongoing efforts in brushing up on operational efficiency and cost control.

同時，我們的新業務已開始為公司的收入做出有意義的貢獻，從而刺激成長和利潤擴張。我們的獲利業績也實現了可喜的成長。本季我們的營業利潤率和非公認會計原則營業利潤率分別達到 18.6% 和 22.3%，這得益於我們不斷努力提高營運效率和成本控制，這表明我們整個業務線具有堅實的彈性。

The delicate blend our restructured business model, better utilized resources and streamlined cost structure have sharpened our capability to yield better than expected margins in this fiscal quarter, as well as enlivens our exploration of ingenious ventures, coupled with the company's sustainable profitability, resilient business lines and emerging new initiatives we have firm conviction in maintaining a healthy growth of our market share and creating sustainable value for our customers and shareholders in the long term.

我們重組後的業務模式、更好地利用資源和簡化的成本結構的微妙結合，增強了我們在本財季獲得高於預期利潤率的能力，並激發了我們對獨創性企業的探索，加上公司的可持續獲利能力、有彈性的業務線以及新興的新舉措，我們堅信保持市場份額的健康成長，並為我們的客戶和股東長期創造可持續的價值。

Now I would like to spend some time to talk about the quarter's performance across our remaining business lines and new initiatives to you in detail. Our key remaining business secured a promising trend coupled with the positive momentum in our new initiatives. Breaking it down, the overseas test prep business recorded a revenue increase of 52% in dollar terms or 62% in RMB terms year-over-year for the [first] (added by company after the call) fiscal quarter of 2024.

現在我想花一些時間向大家詳細介紹本季我們剩餘業務線的表現以及新舉措。我們主要的剩餘業務確保了有希望的趨勢，加上我們新舉措的積極勢頭。細分來看，2024 年第一財季（由公司在電話會議後新增），海外考試準備業務的營收以美元計算年增 52%，按人民幣計算成長 62%。

The overseas study consulting business recorded a revenue increase of about 27% in dollar terms or 35% in RMB terms year-over-year for this quarter. The adults and university students business recorded a revenue increase of 26% in dollar terms or a 34% increase in RMB terms year-over-year for this quarter.

本季留學諮詢業務的營收以美元計算年增約27%，以人民幣計算年增35%。本季成人和大學生業務的美元收入年增 26%，人民幣收入年增 34%。

As mentioned in the past quarters, we have launched several new initiatives, which mostly revolve around facilitating students' all-around development. I'm pleased to share that these initiatives have continued to exceed our expectations by yielding consistent growth and meaningful profit to the company.

正如過去幾季所提到的，我們推出了幾項新舉措，主要圍繞著促進學生的全面發展。我很高興地告訴大家，這些措施為公司帶來了持續的成長和可觀的利潤，持續超出了我們的預期。

Firstly, the non-academic tutoring business which we have offered in around 60 existing cities, focused on cultivating students' innovative ability and comprehensive quality. We're happy to see increased penetration in those markets we have tapped into, especially in higher-tier cities with a total of approximately 438,000 student enrollment recorded in this fiscal quarter. The top 10 cities in China contributed over 60% of the revenue of this business.

首先，我們在現有約60個城市開展非學業輔導業務，並專注於培養學生的創新能力和綜合素質。我們很高興看到我們所涉足的市場的滲透率有所提高，特別是在二、三線城市，本財季約有 438,000 名學生入學。中國前10名城市貢獻了該業務60%以上的收入。

Secondly, the intelligent learning system and device business, a service designed to provide tailored digital learning experience for students has been adopted in around 60 cities. We're thrilled to see improved customer retention and scalability of this new business with approximately 181,000 active paid users recorded in this quarter. The revenue contribution of this initiative from the top 10 cities in China is around 60%.

其次，智慧學習系統及設備業務已在約60個城市落地，為學生提供量身訂製的數位學習體驗。我們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，本季活躍付費用戶約為 181,000 名。中國前10名城市的這項措施的收入貢獻在60%左右。

Our smart educational business, educational materials and digitalized smart study solutions have continued to contribute material results to the overall advancement of the company.

智慧教育業務、教材和數位化智慧學習解決方案持續為公司整體進步貢獻物質成果。

In summary, our new education business initiatives recorded a revenue increase of 103% in dollar terms or 117% increase in RMB terms year-over-year for the first [fiscal] (added by the company after the call) quarter of 2024.

總而言之，我們新的教育業務計劃在 2024 年第一季（由公司在電話會議後添加）的收入按美元計算同比增長 103%，按人民幣計算同比增長 117%。

In addition, beginning in this fiscal year, we're pleased to announce a newly integrated business line, which will be comprised all of our tourism related business, targeting diverse age groups. This includes our well grounded study tour and research camp business for students of K-12 and university ages as well as our newly established tourism business that mainly serve middle-aged and senior audience.

此外，從本財年開始，我們很高興地宣布一個新的整合業務線，該業務線將包含我們所有的旅遊相關業務，針對不同的年齡層。這包括我們為K-12和大學年齡層的學生提供的紮實的遊學和研究營業務，以及我們新成立的主要服務於中老年受眾的旅遊業務。

Upon consolidation, this tourism-related business line will utilize New Oriental's strength of knowledge sharing, star teachers and reputable branding to visualize our capability in serving customers of all age groups.

整合後，旅遊相關業務線將運用新東方的知識分享、明星師資、品牌優勢，展現新東方服務各年齡層顧客的能力。

It's our great pleasure to share the performance of new business line in detail. Our study tour and research camp business, an initiative that aims to offering students of K-12 and university ages, the opportunity to utilize their free time to broaden the scope knowledge and cultivate subject interest has achieved encouraging growth in this summer.

我們很高興詳細分享新業務線的表現。我們的遊學和研究營業務旨在為K-12和大學年齡的學生提供利用空閒時間擴大知識範圍和培養學科興趣的機會，今年夏天取得了令人鼓舞的增長。

Thanks to the strong post-COVID recovery of demand, resumed the consumption and traveling. We have conducted study tour and research camp in over 50 cities across the country. With the top 10 cities in China, offering over 55% of the revenue share of this new initiative. We fondly expect new business to contribute meaningful revenue in this fiscal year.

得益於疫情後需求的強勁復甦，消費和出行得以恢復。我們在全國50多個城市開展了遊學和研學營活動。中國前10名城市為這項新措施提供了超過55%的收入份額。我們熱切地期望新業務在本財年貢獻可觀的收入。

In addition to success of our study tour and the research camp offerings, we also began venturing into the tourism business to expand our reach to all age groups, including the middle-aged and elderly individuals.

除了遊學和研究營活動的成功外，我們還開始涉足旅遊業務，將我們的業務範圍擴大到所有年齡段，包括中老年人。

During this fiscal quarter, we piloted a number of top quality tourism offerings in featured provinces, including Zhejiang, Sichuan, Shaanxi, Gansu and Henan, and we're sincerely grateful for the increasing traction that these novel adventures have gained. As we are still at a very preliminary stage of planning, testifying and evaluating the viability of this business in selected districts, we will keep you posted should there be timely updates on this new voyage.

在本財季，我們在浙江、四川、陝西、甘肅和河南等特色省份試辦了多項優質旅遊產品，我們衷心感謝這些新穎的冒險活動所獲得的越來越大的吸引力。由於我們仍處於規劃、驗證和評估該業務在選定地區的可行性的非常初步階段，因此如果有有關此新航程的及時更新，我們將隨時通知您。

With regard to our OMO system, we have persisted in revamping our platform and leveraged our educational infrastructure and technology edge on remaining key business and new business with a vision to provide advanced diversified education service to customers of all ages. During this reporting period, a total of $45.6 million has been invested in our OMO teaching platform, which equips us with the flexibility to maintain top-notch service to students during the pandemic.

在OMO體系方面，我們堅持平台改造，利用教育基礎設施和技術優勢，致力於剩餘重點業務和新業務，為全年齡層客戶提供先進的多元化教育服務。在本報告期間內，我們的 OMO 教學平台總共投資了 4560 萬美元，這使我們能夠靈活地在大流行期間為學生提供一流的服務。

During this reporting period, East Buy has embraced a multi-platform strategy through our official debut on new platforms, including Taobao and its own app in order to enlarge its consumer base and amplify its brand influence. East Buy consistently adhere to developing its private label products that are healthy, tasty, high quality with good value for money and has attained instrumental breakthroughs with streams of new products roll out each month.

報告期內，東買採取多平台策略，正式登陸淘寶、自有APP等新平台，擴大消費群體，擴大品牌影響力。東買始終堅持開發健康、美味、高品質、高性價比的自有品牌產品，並取得了重大突破，每月都有大量新品推出。

From groceries to daily necessities, East Buy's live streaming e-commerce has not only helped customers reap good bargains, but also helped farmers, producers and local enterprise sell their products through strategic marketing strategies. In addition, the brand continued to join hands with local governments to promote unique agricultural products from region to region, nurturing public appreciation towards diverse cultures through inventive content.

從食品雜貨到生活必需品，東買的直播電商不僅幫助顧客撿到便宜，還透過策略行銷策略幫助農民、生產者和當地企業銷售他們的產品。此外，該品牌繼續與地方政府合作，在不同地區推廣獨特的農產品，透過創意內容培養大眾對多元文化的欣賞。

It also pioneered a new mode of live streaming that's incorporated with the product traceability by which our lead teams would unearth origins of our private label products, factories and orchards. Our live streams have thereby offered assurance to the customers through guaranteeing products, authenticity and visibility.

它還開創了一種新的直播模式，與產品可追溯性相結合，我們的領導團隊可以透過這種模式挖掘我們的自有品牌產品、工廠和果園的起源。因此，我們的直播透過保證產品、真實性和可見性為客戶提供了保證。

With regard 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 $4.6 billion.

關於公司最新的財務狀況，我有信心與大家分享，公司財務狀況健康，現金及現金等價物、定期存款和短期投資總計約46億美元。

On July 26, 2022, the company's Board of Directors authorized a share repurchase of up $400 million of the company ADSs or common shares during the period from July 28, 2022 through May 31, 2023. The company's Board of Directors further authorized the company to extend its share repurchase program launched in July 2022 by 12 months through May 31, 2024. As of October 24, 2023, the company repurchased an aggregate of approximately 6 million ADSs for approximately $193.3 million from the open market under this program.

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。公司董事會進一步授權公司將其於2022 年7 月啟動的股票回購計畫延長12 個月，直至2024 年5 月31 日。截至2023 年10 月24 日，該公司根據該計畫從公開市場回購了總計約600 萬股美國存託股，價值約1.933 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，我將把電話轉給塞西，與您分享關鍵的財務數據。茜茜，請繼續。

Now I'd like to walk you through the other key financial details for this quarter. Operating costs and expenses for the quarter were $894.9 million, representing a 34.2% increase year-over-year. Non-GAAP operating cost and expenses for the quarter, which exclude share-based compensation expenses, were $855.3 million, representing a 32% increase year-over-year. The increase was primarily due to the cost expenses related to the substantial growth in East Buy private label products and live streaming e-commerce business.

現在我想向您介紹本季的其他關鍵財務細節。該季度營運成本和費用為 8.949 億美元，年增 34.2%。本季非 GAAP 營運成本和費用（不含股權激勵費用）為 8.553 億美元，較去年同期成長 32%。成長主要是由於東買自有品牌產品和直播電商業務大幅成長相關的成本費用。

Cost of revenue increased by 41.4% year-over-year to $441.2 million. Selling and marketing expenses increased by 37.9% year-over-year to $136.1 million. G&A expenses for the quarter increased by 24% year-over-year to $317.6 million. Non-GAAP G&A expenses, which exclude share-based compensation expenses, were $290.3 million, representing a 22.3% increase year-over-year. Total share-based compensation expenses, which were allocated to related operating costs and expenses, increased by 108% to $39.6 million in the first fiscal quarter of 2024.

收入成本年增 41.4% 至 4.412 億美元。銷售和行銷費用年增 37.9%，達到 1.361 億美元。該季度的一般管理費用年增 24%，達到 3.176 億美元。非 GAAP G&A 費用（不含股權激勵費用）為 2.903 億美元，較去年同期成長 22.3%。 2024 年第一財季，分配給相關營運成本和費用的股權激勵費用總額增加了 108%，達到 3,960 萬美元。

Operating income was $205.1 million, representing a 163% increase year-over-year. Non-GAAP income from operations for the quarter was $244.8 million, representing a 152.2% increase year-over-year. Net income attributable to New Oriental for the quarter was $165.4 million, representing a 150.6% increase year-over-year. Basic and diluted net income per ADS attributable to New Oriental were $1.00 and $0.99, respectively.

營業收入為 2.051 億美元，年增 163%。本季非 GAAP 營運收入為 2.448 億美元，年增 152.2%。該季度歸屬於新東方的淨利潤為1.654億美元，年增150.6%。新東方每股ADS基本淨利和稀釋後淨利分別為1.00美元和0.99美元。

Non-GAAP net income attributable to New Oriental for the quarter was $189.3 million, representing a 126.2% increase year-over-year. Non-GAAP basic and diluted net income per ADS attributable to New Oriental were $1.15 and $1.13, respectively. Net cash flow generated from operations for the first fiscal quarter of 2024 was approximately $335.8 million and capital expenditure for the quarter were $132.5 million.

本季新東方應佔非美國通用會計準則淨利潤為 1.893 億美元，年增 126.2%。非公認會計準則下新東方每股美國存託股基本淨利和稀釋後淨利分別為 1.15 美元和 1.13 美元。 2024 年第一財季營運產生的淨現金流量約為 3.358 億美元，該季度的資本支出為 1.325 億美元。

Turning to the balance sheet. As of [August] (corrected by company after the call) 31, 2023, New Oriental have cash and cash equivalents of $1,748.9 million. In addition, the company had $1,399.4 million in term deposits and $1,423.9 million in short-term investments. New Oriental's deferred revenue balance at the end of the first fiscal quarter of 2024 was $1,401.4 million, an increase of 38.4% as compared to $1,012.5 million at the end of the first fiscal quarter of last fiscal year.

轉向資產負債表。截至2023年8月31日（電話會議後公司更正），新東方擁有現金及現金等價物17.489億美元。此外，該公司還有13.994億美元的定期存款和14.239億美元的短期投資。新東方截至2024年第一財季末的遞延收入餘額為14.014億美元，較上財年第一財季末的10.125億美元成長38.4%。

Now I'll hand over to Stephen to go through our outlook and guidance. Stephen?

現在我將交給史蒂芬來介紹我們的展望和指導。史蒂芬？

We're confident in embarking a healthy journey of sustainable growth for the rest of this fiscal year, building on the combination of our brand advantage, rooted history, influential teaching content and resources and solid foundation. We're also committed to work diligently adhering to the latest guidance from the Chinese authorities on enhancing the nation's education level to strengthen its leading position to further unveil our potential in all business lines and creative endeavors.

我們有信心憑藉我們的品牌優勢、深厚的歷史、有影響力的教學內容和資源以及堅實的基礎，在本財年剩餘時間裡開啟健康可持續增長的旅程。我們也致力於遵守中國當局關於提高國家教育水平的最新指導意見，以鞏固其領先地位，進一步發揮我們在所有業務線和創意活動中的潛力。

With regards to the learning center and classroom space, we plan to increase our capacity by about 15% to 20%, by which a reasonable amount of new learning centers is expected to be opened. while classroom areas of some existing learning centers will be expanded in a few major cities. Most of the new openings will be launched in the cities with better top line and bottom line performance. We will keep monitoring the pace and scale of new openings according to the local operation and financial results in this fiscal year.

在學習中心和教室空間方面，我們計劃將容量增加約15%至20%，預計將開設合理數量的新學習中心。同時，一些主要城市的一些現有學習中心的教室面積將會擴大。大部分新店將開設在營收和利潤表現較好的城市。我們將根據本財年當地的營運和財務業績，持續監控新開幕的步伐和規模。

Despite the historical seasonality of some New Oriental's major businesses, which will usually result in a slower period for every second quarter. We remain confident in sustaining a healthy growth across all business lines.

儘管新東方的一些主要業務存在歷史季節性，這通常會導致每個第二季度的成長放緩。我們對各業務線保持健康成長仍充滿信心。

In summary, we expect total net revenue in the second quarter of fiscal year 2024 to be in the range of $785.0 million, to $804.2 million, representing a year-over-year increase in the range of 23% to 26%.

綜上所述，我們預計 2024 財年第二季的總淨收入將在 7.85 億美元至 8.042 億美元之間，年增 23% 至 26%。

To conclude, we're confident in achieving satisfactory operating profit level and improving our profitability in the rest of fiscal year 2024. As always, New Oriental places great determination to cultivate new endeavors that are bolstered by our existing capabilities. Simultaneously, we'll devote reasonable resources on research and application of new technologies such as AI and ChatGPT into our educational and product offerings with a vision to uplift our strengths and pursue the growth and operating efficiency in the future.

總而言之，我們有信心在2024財年剩餘時間內實現令人滿意的營業利潤水平並提高盈利能力。一如既往，新東方決心在現有能力的基礎上培育新的事業。同時，我們將投入合理的資源來研究人工智慧和ChatGPT等新技術並將其應用到我們的教育和產品中，以期提升我們的優勢並追求未來的成長和營運效率。

We will also continue to seek guidance from and cooperate with government authorities in aligned with these efforts to comply with the relevant policies, regulations and measures as well as to further adjust our business operations as required. I must say that these expectations and forecasts reflects our considerations of the latest regulatory measure as well as current and preliminary view, which is subject to change.

我們也將繼續尋求政府部門的指導和配合，以遵守相關政策、法規和措施，並根據需要進一步調整我們的業務運作。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觀點，這些觀點可能會改變。

This is the end of our fiscal year 2024 Q1 summary. At this point, I'd like to open the floor for questions. Operator, please open the call for these. Thank you.

這是我們 2024 財年第一季總結的結尾。現在，我想請大家提問。接線員，請打開這些電話。謝謝。

(Operator Instructions) Our first question comes from Yiwen Zhang with China Renaissance.

（操作員說明）我們的第一個問題來自華興資本的張一文。

So my question is about November quarter revenue guidance. If we look at the Y-o-Y growth there was a bit of deceleration versus the August quarter. Can you walk through us what are the drivers behind? And probably you can also talk about -- how do we see the growth outlook across different segments?

所以我的問題是關於 11 月季度收入指引。如果我們看一下同比增長，就會發現與八月季度相比略有減速。您能告訴我們背後的驅動因素是什麼嗎？也許您也可以談論—我們如何看待不同細分市場的成長前景？

Yes. As for the revenue guidance for Q2, actually, it's not the deceleration. I want to emphasize the following points of the Q2 guidance. Firstly, as always, we take a conservative approach in giving the guidance of Q2. Secondly, the exchange rates negatively impact the revenue growth guidance by approximately 3 basis points. Thirdly, I think it also needs to be noticed that typically, Q2 is our seasonally slow quarter for most of our education business with the lower than usual revenue and profit.

是的。至於第二季的營收指引，其實並不是減速。我想強調第二季指導的以下幾點。首先，一如既往，我們對第二季的指引採取保守態度。其次，匯率對收入成長指引產生約 3 個基點的負面影響。第三，我認為還需要注意的是，第二季度通常是我們大部分教育業務的季節性淡季，收入和利潤都比平常低。

Given the strong -- the demand of the growth momentum we have seen so far this year, we are quite confident that the whole year's revenue growth will be better than we originally expected, especially in last quarter. We give the guidance on the top line growth. And this quarter, we -- I think we gave the better -- the guidance or higher guidance than that of the last quarter, okay, for the whole year. And lastly, East Buy will start to have a higher base comparison since Q2 this year.

鑑於今年迄今為止我們所看到的強勁成長動力的需求，我們非常有信心全年的營收成長將好於我們最初的預期，尤其是上個季度。我們提供有關營收成長的指導。這個季度，我們——我認為我們給出了比上個季度更好的——全年指導或更高的指導。最後，從今年第二季開始，東買將開始有更高的基數比較。

And overall, I think benefiting from the post-COVID, the economy recovery, we have seen strong demand in education sector, especially in the overseas-related business and non-academic tutoring business. And by leveraging our brand, the advantage of New Oriental and the good content and resources and our long established solid foundation. I think we'll continue to see great opportunity and to take more market share in the future. Thank you.

整體而言，我認為受益於疫情後的經濟復甦，我們看到教育產業的強勁需求，特別是海外相關業務和非學術輔導業務。並藉助我們的品牌、新東方的優勢以及良好的內容和資源以及我們長期建立的堅實基礎。我認為我們將繼續看到巨大的機會並在未來獲得更多的市場份額。謝謝。

One moment for our next question. Our next question comes from the line of Felix Liu with UBS.

請稍等一下我們的下一個問題。我們的下一個問題來自瑞銀集團的 Felix Liu。

Congratulations on the very strong first quarter results. My question is on your capacity plan. I noticed that in this quarter, your capacity, your Q-on-Q new learning center expansion accelerated from fourth quarter last year. So may I check your plan -- capacity plan from here? Do we expect this Q-on-Q new additional pace to maintain throughout this year? Or are there any seasonalities with capacity expansions quarter-by-quarter? And how do you see the regulation landscape or regulation environment around capacity expansion?

恭喜第一季非常強勁的業績。我的問題是關於你們的容量計劃。我注意到，在這個季度，你們的容量、你們的新學習中心的擴張速度比去年第四季有所加快。那麼我可以從這裡查看您的計劃——容量計劃嗎？我們預計今年全年將保持這種環比新的成長速度嗎？或是否有季節性產能擴張的情況？您如何看待圍繞產能擴張的監管格局或監管環境？

This quarter, we added 6% new capacity in this quarter. And as you know, we increased our capacity expansion by about 15% to 20% for the whole year -- fiscal year '24. And as I said, we will open a reasonable amount of new learning centers or new classroom areas in the top-tier cities with the good performance of the top line and the bottom line. And as I said, the market -- the demand in education sector is very strong. That's why we've raised the guidance of the whole year of the top line growth and the learning center expansion plan for the whole year.

本季，我們新增產能6%。如您所知，我們全年（24 財年）的產能擴張增加了約 15% 至 20%。正如我所說，我們將在營收和淨利潤表現良好的一線城市開設合理數量的新學習中心或新教室區域。正如我所說，市場——教育領域的需求非常強勁。這就是為什麼我們上調了全年營收成長指引和全年學習中心擴張計畫。

As for the regulation side, I think so far so good. We -- and I think going forward, we expect the regulations will be stabilized in the future. And that's it.

至於監管方面，我認為到目前為止還不錯。我認為，展望未來，我們預計法規將在未來趨於穩定。就是這樣。

And 1 more point I want to add. I think for the Q2, Q3 and Q4, I think we will -- following the guidance of the learning center expansion for the whole year of 15% to 20%, and maybe in the Q4, when we look at the budgets of fiscal year '25, maybe we will raise the guidance, the learning center expansion plan again in Q4. Yes. Thank you.

我還想補充一點。我認為對於第二季度、第三季度和第四季度，我認為我們會——遵循全年學習中心擴張 15% 至 20% 的指導，也許在第四季度，當我們查看財年預算時'25 ，也許我們會在第四季再次提高指導、學習中心擴張計劃。是的。謝謝。

One moment for our next question, please. Our next question comes from the line of Lucy Yu with Bank of America Securities.

請稍等一下我們的下一個問題。我們的下一個問題來自美國銀行證券的 Lucy Yu。

Stephen, this is Lucy. I have a question on the margin. So this quarter, we have seen the OP margin expanded a lot and reached like 22%, which is a pretty high level even compared to our historical kind of OP margin, especially in Q1. So how could we be holding the margin expansion? And how should we think about the margin expansion for the rest of the year?

史蒂芬，這是露西。我有一個關於邊緣的問題。因此，本季度，我們看到營運利潤率大幅成長，達到 22% 左右，即使與我們歷史上的營運利潤率相比，這也是一個相當高的水平，尤其是在第一季。那我們要如何才能維持利潤率擴張呢？我們該如何看待今年剩餘時間的利潤率擴張？

Okay. Thank you, Lucy. Let us start with this quarter margin analysis. The GP margin -- the OP margin increased a lot in this quarter was mainly driven by the following reasons: number 1, the utilization in improving of our learning centers and teaching resources increase the learning center margin. That means we have lower fixed cost expenses compared to that of last year.

好的。謝謝你，露西。讓我們從本季的利潤率分析開始。 GP利潤率－OP利潤率在本季度大幅增長主要是由以下原因推動的：第一，我們學習中心和教學資源的利用率的提高提高了學習中心的利潤率。這意味著與去年相比，我們的固定成本支出較低。

And number 2, new business margin is over 20% in this quarter. The profit growth is faster than we expected 2 years ago. We started the business 2 years ago. And the recovery of the remaining business, especially in the overseas related business, generally the higher margin in this quarter is higher, definitely higher than that of last year.

第二，本季新業務利潤率超過 20%。利潤成長快於我們兩年前的預期。我們兩年前開始創業。而剩下的業務的復甦，特別是海外相關業務，一般來說這個季度的利潤率是比較高的，肯定比去年高。

And number 3 is East Buy enjoys a higher margin. And as we head into the fiscal year '24 Q2, I think with the operating leverage and higher utilization and the remaining business lines and the new business lines will generate the more profit to the group and I think we are optimistic on margin expansion and sustainable profitability in Q2 and in the rest of the whole year. I think we -- the whole team will continue to work together to seek profitable growth in fiscal year '24. And I think we believe will create more value to the shareholders over the long run. Thank you, Lucy.

第三名是東買享有較高的利潤率。隨著我們進入24財年第二季度，我認為隨著營運槓桿和更高的利用率以及剩餘業務線和新業務線將為集團帶來更多利潤，我認為我們對利潤率擴張和可持續發展持樂觀態度第二季和全年剩餘時間的獲利能力。我認為我們整個團隊將繼續共同努力，尋求 24 財年的獲利成長。我認為，從長遠來看，我們相信將為股東創造更多價值。謝謝你，露西。

One moment for our next question, please. Our next question comes from the line of D.S. Kim with JPMorgan.

請稍等一下我們的下一個問題。我們的下一個問題來自 D.S. Kim 與摩根大通的對話。

And by the way, congrats on the quarter, I think $245 million OP was the second best level on record, which is pretty amazing.

順便說一句，恭喜這個季度，我認為 2.45 億美元的 OP 是有史以來第二高的水平，這非常驚人。

Thank you.

謝謝。

Anyway, I have a high-level question on long-term growth, if that's okay. I guess we talked a lot about our new businesses, which are completely different animal and can continue to grow triple digit, I am sure. But for old businesses, existing businesses like overseas study high schools, how shall we think about the sustainable growth from here, i.e., I mean, segment revenues, I think both of them are probably at backward high level. So it's no longer recovery phase.

不管怎樣，我有一個關於長期成長的高級問題，如果可以的話。我想我們談論了很多關於我們的新業務，它們是完全不同的動物，並且可以繼續增長三位數，我確信。但是對於老企業，像留學高中這樣的現有企業，我們應該如何思考從這裡開始的可持續增長，即我的意思是，分部收入，我認為它們都可能處於落後的高水平。所以現在已經不是恢復階段了。

And what's going to drive the growth further from here, say, if you were to break out different levers, like center expansions we discussed 15%, 20% versus utilization growth, how much further room can we drive here and the price hikes if any? And how should we think about, say, next 2 to 3 years, annual growth for the old businesses from here?

比如說，如果你要打破不同的槓桿，例如我們討論的中心擴張 15%、20% 與利用率增長，我們可以在這裡進一步推動多少空間以及價格上漲（如果有） ？我們該如何考慮未來 2 到 3 年老企業的年增長？

I think, yes, for the existing business, such as the overseas test prep, overseas consulting and the adults and the university students business, I think let's analysis the market like this. On demand side, we have seen the strong demand for the overseas test prep consulting business and for the college business.

我想，是的，對於現有的業務，例如海外準備、海外諮詢以及成人和大學生業務，我想我們這樣分析一下市場。在需求方面，我們看到了海外準備諮詢業務和大學業務的強勁需求。

And on the supply side, after the COVID and the policy, we have seen a lot of players disappear from the market. So that means we are facing less competition. So I think the existing business, including the overseas related business and the adult and college students business, I think we will generate the top line growth very good in the next 2, 3 years. So we are quite optimistic about the top line growth and the margin expansion for the existing business.

而在供給方面，在疫情和政策之後，我們看到許多參與者從市場上消失。這意味著我們面臨的競爭較少。所以我認為現有的業務，包括海外相關業務以及成人和大學生業務，我認為我們將在未來兩三年內產生非常好的收入成長。因此，我們對現有業務的營收成長和利潤率擴張非常樂觀。

And as for the utilization rate, right? And for overall, in this quarter, in Q1 -- Q1 is the high season of the educational products. So in Q1 -- the utilization rate in Q1 is somewhere around 65%. So that means the 2/3. And -- but I think we have a long way to go. And yes, as I said, in this fiscal year, we'll plan to open 15% to 20% new capacity.

至於利用率，對嗎？整體來說，這個季度，Q1－Q1是教育產品的旺季。因此，第一季的利用率約為 65%。所以這意味著 2/3。而且——但我認為我們還有很長的路要走。是的，正如我所說，在本財年，我們將計劃開設 15% 至 20% 的新產能。

But our top line growth is -- we'll beat the guidance every quarter, and we raised guidance of the whole year top line growth. I think the top line -- the healthy top line growth will cover the rentals of the new capacity. So that means we do have the operating leverage in hand. And going forward, I think we will see -- you will see more operating leverage for all business lines. It will drive the margin up. Thank you, D.S.

但我們的營收成長是——我們每個季度都會超過指導，我們提高了全年營收成長的指導。我認為健康的收入成長將涵蓋新產能的租金。所以這意味著我們確實擁有營運槓桿。展望未來，我認為我們將會看到—所有業務線的營運槓桿都會增加。這將推動利潤率上升。謝謝你，D.S.

(Operator Instructions) We are now approaching the end of the conference. I would now turn the call over to New Oriental's Executive President and Chief Financial Officer, Stephen Yang, for his closing remarks.

（操作員指示）會議即將結束。我現在請新東方執行總裁兼財務長楊志強致閉幕詞。

Again, thank you for joining us today. If you have any further questions, please do -- is that?

再次感謝您今天加入我們。如果您還有其他問題，請詢問—是嗎？

Operator, we probably have 1 more question from 1 analyst. We will take that.

接線員，我們可能還有 1 位分析師提出的 1 個問題。我們會接受的。

All right. Okay. One moment for our next question. The question is from Caini Wang with CICC.

好的。好的。請稍等一下我們的下一個問題。問題來自中金公司王彩妮。

Go ahead, please.

請繼續。

Stephen, this is Caini Wang from CICC. So congrats on a very strong set of results. So I just have a quick question on intelligent learning devices. So we've seen that the active users this quarter had a quite impressive growth, like double Q-on-Q. Actually, what is driving such a strong growth? And how would we expect this business in the medium term?

史蒂芬，我是中金公司的王彩妮。因此，祝賀我們取得了一系列非常強勁的成果。我只是想問一個關於智慧學習設備的問題。因此，我們看到本季的活躍用戶成長相當可觀，季增了一倍。事實上，是什麼推動瞭如此強勁的成長？從中期來看，我們對這項業務有何預期？

Okay. Yes. Actually, we are very satisfied with the development of the new initiatives, especially for this kind of targeting younger kids, like K-12 students, new initiatives, like the new intelligent learning device business, last year, we rolled out in almost all the cities. And now we're seeing a huge demand for the service. It's quite innovative in terms of the offering using our -- all the technologies that we accumulated in the last several years that we have the cutting-edge technology and content as well and offering students a unique experience that helps students to enhance their academic study ability, especially self-study ability as well.

好的。是的。事實上，我們對新措施的發展感到非常滿意，特別是針對這種針對年齡較小的孩子，例如K-12學生的新舉措，例如新的智慧學習設備業務，去年我們在幾乎所有的市場都推出了。城市。現在我們看到對該服務的巨大需求。就使用我們在過去幾年中累積的所有技術而言，它是相當創新的，我們擁有尖端的技術和內容，並為學生提供獨特的體驗，幫助學生提高他們的學術學習能力，特別是自學能力也是如此。

So actually, the demand in all kinds of cities, high tiers, low tiers are also -- are all very strong. And we are confident in this kind of user number increase improvement year-over-year. And definitely, we are also in the process of enhancing the quality of our products and the services as well. So we will make efforts in increasing the user number as well as enhancing the tuition, like this kind of subscribing fee renewal rates as well. And also, we want to expand to more subjects for all the existing users.

所以實際上，各種城市的需求，無論是高線城市或低線城市，都非常強勁。我們對這種用戶數量逐年增長的改善充滿信心。當然，我們也在提高產品和服務的品質。所以我們會努力增加用戶數量並提高學費，就像這種訂閱費續費率一樣。此外，我們希望為所有現有用戶擴展更多主題。

So in summary, actually, the high demand and also the best content and technology and all the service are the fundamental for the development for this new initiative. And we will try to continue to enhance the quality and try to maintain this kind of healthy growth for this new initiative, okay?

所以綜上所述，實際上，高要求以及最好的內容和技術以及所有的服務是這個新措施發展的根本。我們會努力繼續提高質量，努力讓這個新舉措保持這種健康的成長，好嗎？

One moment for our next question. Our next question will come from the line of D.S. Kim with JPMorgan.

請稍等一下我們的下一個問題。我們的下一個問題將來自 D.S. Kim 與摩根大通的對話。

Sorry, can I follow up 1 more question here regarding shareholder return policy. I think -- I do think that our stock is very, very cheap still. But I noticed that the buyback activity past 3 months has been pretty minimal. I'm just wondering, given the stock value so far, have you considered shifting the policy a little towards dividend or some other way? Or are we going to keep reiterating this buyback policy for the rest of the year and next year?

抱歉，我可以再跟進 1 個有關股東回報政策的問題嗎？我認為——我確實認為我們的股票仍然非常非常便宜。但我注意到過去三個月的回購活動非常少。我只是想知道，考慮到迄今為止的股票價值，您是否考慮過將政策稍微轉向股息或其他方式？還是我們會在今年剩餘時間和明年繼續重申這項回購政策？

Yes. As you know, we announced a $400 million share buyback plan. And so far, we finished $[193.3] (corrected by company after the call) million. And I think we will buy more shares going forward in the rest of this year. And as always, we aim to create more values to the shareholders on capital return side. Thank you, D.S.

是的。如您所知，我們宣布了一項 4 億美元的股票回購計畫。到目前為止，我們完成了 $[193.3]（由公司在電話會議後更正）萬美元。我認為我們將在今年剩餘時間內購買更多股票。我們一如既往地致力於在資本回報方面為股東創造更多價值。謝謝你，D.S.

(Operator Instructions) And at this time, I'm showing no further questions. We are approaching the end of the conference call. I would now turn the call over to New Oriental's Executive President and Chief Financial Officer, Stephen Yang, for his closing remarks.

（操作員說明）此時，我不會再提出任何問題。電話會議即將結束。我現在請新東方執行總裁兼財務長楊志強致閉幕詞。

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。

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.

今天的電話會議到此結束。感謝您的參與。您現在可以斷開連線。祝大家有美好的一天。