(EDU) 2024 Q2 法說會逐字稿

Good evening, and thank you for standing by for New Oriental's FY 2024 Second 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財年第二季業績電話會議。 （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'd now like to turn the meeting over to your host for today's conference, Ms. Sisi Zhao.

現在我想把會議交給今天會議的主持人趙思思女士。

Thank you. Hello, everyone, and welcome to New Oriental's second fiscal quarter 2024 earnings conference call. Our financial results for the second quarter were released earlier today, and are available on the company's website as well as on Newswire Services.

謝謝。大家好，歡迎參加新東方2024年第二財季財報電話會議。我們今天早些時候發布了第二季度的財務業績，可在公司網站和新聞專線服務上查看。

Today, Stephen Yang, 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.

今天，我和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 views 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.

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風險和不確定性。因此，我們的結果可能與今天表達的觀點有重大差異。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，新東方不承擔任何更新任何前瞻性聲明的義務。

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.

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上進行。

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斯蒂芬先生。請繼續。

Thank you, Sisi. Hello, everyone, and thank you for joining us on the call. It's our pleasure to announce that New Oriental has delivered a set of fruitful financial results that have surpassed our expectations this quarter. Our diverse business lines have embarked a healthy recovery and anchored stable top line performance, while the enduring momentum of our new business has made a meaningful contribution to the company's revenue and continuing to pave the way for further acceleration.

謝謝你，茜茜。大家好，感謝您加入我們的通話。我們很高興地宣布，新東方本季取得了一系列超出我們預期的豐碩財務表現。我們的多元化業務線已經開始健康復甦，並保持了穩定的營收業績，而新業務的持久勢頭為公司的收入做出了有意義的貢獻，並繼續為進一步加速鋪平道路。

New Oriental's bottom line performance has achieved promising growth with operating margin and non-GAAP operating margin reaching 2.5% and 5.9% for this quarter, respectively. Thanks to our unwavering efforts to brush up our operational efficiency and cost control, as well as the combined efforts of our restructured business model, were used less resources and streamlined cost structure. Encouraged by the company's sustainable profitability, resilient business lines and fostering new business, we've been forced our commitment to maintain a healthy market share growth and creating sustainable value for customers and shareholders in the long term.

新東方的淨利潤實現了可喜的成長，本季營業利潤率和非美國通用會計準則營業利潤率分別達到2.5%和5.9%。由於我們堅定不移地提高營運效率和成本控制，以及重組業務模式的共同努力，資源消耗減少，成本結構精簡。在公司可持續獲利能力、富有彈性的業務線和培育新業務的鼓舞下，我們被迫致力於保持健康的市場份額成長，並長期為客戶和股東創造可持續的價值。

Now, I'd 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 have depicted a propitious trend, while the new initiatives secured positive momentum. Breaking it down, the overseas test prep business recorded the revenue increase of 47% in dollar terms or 50% in RMB terms year-over-year for this quarter. The overseas study consulting business recorded revenue increase of about 32% 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 43% in dollar terms or 46% increase in RMB terms year-over-year for this quarter.

現在，我想花一些時間向您詳細介紹本季度我們剩餘業務線的業績以及新舉措。我們主要的剩餘業務呈現出良好的趨勢，而新舉措則確保了積極的勢頭。具體來看，本季海外備考業務的美元收入年增47%，人民幣營收年增50%。本季留學諮詢業務的美元收入年增約32%，人民幣計算收入年增約35%。本季成人和大學生業務的美元收入年增 43%，人民幣收入年增 46%。

As mentioned in the past quarters, we have launched multipronged new initiatives, which mostly revolve around facilitating students around development. They have continued to prosper with consistent growth, delivering meaningful profits to the company. Firstly, the non-academic tutoring courses, which we have offered in around 60 existing cities, focus on cultivating students' innovative ability and comprehensive quality. The markets we have tapped into have recorded elevated penetration, especially in higher-tier cities with a total of approximately 786,000 students enrollment recorded in this quarter. The top 10 cities in China contribute over 60% of the revenue of this business.

正如過去幾季所提到的，我們推出了多管齊下的新舉措，主要圍繞著促進學生的發展。他們持續繁榮，持續成長，為公司帶來了可觀的利潤。首先，我們在現有約60個城市開設的非學業輔導課程，著重培養學生的創新能力和綜合品質。我們所涉足的市場滲透率有所提高，尤其是在一線城市，本季約有 786,000 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 devices business, a service designed to provide a tailored digital learning experience for students to enhance learning efficiency has been adopted in around 60 existing cities. We have observed enhanced customer retention rate and scalability of this new initiative. Approximately 181,000 active paid users reported in this fiscal quarter. The revenue contribution of these initiatives from the top 10 cities in China is around 55%. Our smart education business, educational materials and digitalized smart study solutions have continued to contribute material results to the overall (technical difficulty).

其次，智慧學習系統及設備業務已在約60個現有城市採用，旨在為學生提供量身定制的數位學習體驗，並提高學習效率。我們觀察到這項新措施提高了客戶保留率和可擴展性。本財季約有 181,000 名活躍付費用戶。這些措施對中國前10名城市的收入貢獻約為55%。我們的智慧教育業務、教材和數位化智慧學習解決方案持續為整體（技術難度）貢獻物質成果。

In summary, our new educational business initiatives reported a revenue increase of about 68% in dollar terms or 72% increase in RMB terms year-over-year for this fiscal quarter. In addition, as mentioned in the last quarter, we have inaugurated a newly integrated tourism-related business line as one of our innovative ventures tailored with diverse offerings of cultural trips, study tours in China and overseas as well as camp education. New Oriental's cultural tourism business shared the spirit to provide premium quality of travel experience that are infused with joy from cultural exchange, knowledge sharing and personal fulfillment.

總而言之，我們新的教育業務計劃報告稱，本財季的收入按美元計算同比增長約 68%，按人民幣計算同比增長 72%。此外，正如上季度所提到的，我們還推出了新的綜合旅遊相關業務線，作為我們的創新業務之一，為您量身定製文化之旅、國內外遊學以及營地教育等多元化服務。新東方文化旅遊業務秉承提供高品質旅遊體驗的精神，讓人們在文化交流、知識分享和個人成就感中充滿樂趣。

Within this new business line, our study tour and research camp business for students of K-12 and university ages anchors encouraging growth this quarter. Thanks to a strong post-COVID recovery of demand and resumed traveling. We have conducted study tours and research camps in over 50 cities across the country with the top 10 cities in China offering over 55% revenue share of this new initiative. And also pilots a number of top-notch tourism offerings to expand our reach to all age groups, including the middle-aged and elderly individuals across 17 featured provinces. As we are still at a preliminary stage of planning, testifying, and evaluating the viability of the business in selected regions, we will keep you posted should there be timely updates.

在這個新業務領域，我們針對 K-12 和大學年齡層學生的遊學和研究營業務在本季度取得了令人鼓舞的成長。得益於疫情後需求的強勁復甦和旅行的恢復。我們在全國50多個城市開展了遊學和研學營，其中中國排名前10的城市為這項新舉措提供了超過55%的收入份額。並在17個特色省份試行一批精品旅遊產品，擴大涵蓋全年齡段，包括中老年人。由於我們仍處於規劃、驗證和評估選定地區業務可行性的初步階段，如果有及時更新，我們將及時通知您。

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 $28.7 million has been invested in our OMO teaching platform, which equip us with the flexibility to maintain unrivaled service to students continuously.

在OMO系統方面，我們堅持平台改造，利用教育基礎設施和技術優勢，在剩餘重點業務和新業務上，為各年齡層客戶提供先進、多元化的教育服務。在報告期間內，我們的 OMO 教學平台總共投資了 2,870 萬美元，這使我們能夠靈活地持續為學生提供無與倫比的服務。

During the reporting period, East Buy has attained strong growth momentum through a series of new initiatives aimed to foster the development of its private label products and upgrades on customer service. A comprehensive detailed optimization of product quality has been conducted. And East Buy has made remarkable breakthroughs in supply chain integration, boosting its private label products to a total of 264 SKUs. Furthermore, nationwide broadcast events across provinces were launched with the consistent support from local cultural and tourism authorities.

在報告期間內，東買透過一系列新措施促進自有品牌產品發展和客戶服務升級，取得了強勁的成長動力。對產品品質進行了全面細緻的優化。東買在供應鏈整合方面取得了顯著突破，自有品牌產品數量達到264個。此外，在當地文化和旅遊部門的大力支持下，全國跨省轉播活動也相繼展開。

East Buy also began introducing cultural tourism products and incorporates century-long history, culture, geographies and folklore into [the hours] with live streaming e-commerce broadcast, presenting lively introductions of historical monuments, tourism attractions and local specialties to their audience. We look forward to witnessing the continued growth of the East Buy and its positive reception within the community.

東買也開始推出文旅產品，透過電商直播將百年歷史、文化、地理、民俗融入其中，為觀眾生動介紹歷史古蹟、旅遊景點、當地特產。我們期待見證東買的持續發展及其在社區中的積極反響。

With regard to the company's latest financial position, I'm confident to share with you that the company is a healthy -- is in a healthy financial status with cash and cash equivalent, term deposit and short-term investments totaling approximately $4.8 billion.

關於公司最新的財務狀況，我有信心與大家分享，公司財務狀況良好，現金及現金等價物、定期存款和短期投資總計約48億美元。

On July 26, 2022, the company's Board of Directors authorized a share repurchase of up to $400 million of the company's ADS 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 January 23, 2024, the company repurchased an aggregate of approximately 6 million ADS for approximately $194.2 million from the open market under the share repurchase 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2024 年1 月23 日，該公司根據股票回購計畫從公開市場以約1.942 億美元回購了總計約600 萬股美國存託股。

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 go through the (technical difficulty) for this quarter.

現在，我想介紹一下本季的（技術難點）。

Operating costs and expenses for the quarter were $848.3 million, representing a 32.4% increase year-over-year. Non-GAAP operating costs and expenses for the quarter, which exclude share-based compensation expenses, were $818.7 million, representing a 31.6% increase year-over-year. The increase was primarily due to the cost and expenses related to the substantial growth in East Buy's private-label products and live streaming e-commerce business.

該季度營運成本和費用為 8.483 億美元，年增 32.4%。本季非 GAAP 營運成本和費用（不含股權激勵費用）為 8.187 億美元，較去年同期成長 31.6%。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和費用。

Cost of revenue increased by 25.7% year-over-year to $422.6 million. Selling and marketing expenses increased by 62.2% year-over-year to $155 million. G&A expenses for the quarter increased by 29.6% year-over-year to $270.7 million. Non-GAAP G&A expenses, which exclude share-based compensation expenses, were $256.1 million, representing a 34.2% increase year-over-year. Total share-based compensation expenses, which were allocated to related operating cost expenses, increased by 57.3% to $29.6 million in the second fiscal quarter of 2024.

收入成本年增 25.7% 至 4.226 億美元。銷售和行銷費用年增 62.2%，達到 1.55 億美元。該季度的一般管理費用年增 29.6% 至 2.707 億美元。非 GAAP G&A 費用（不含股權激勵費用）為 2.561 億美元，較去年同期成長 34.2%。 2024 年第二財季，分配給相關營運成本費用的股權激勵費用總額增加了 57.3%，達到 2,960 萬美元。

Operating income was $21.3 million, compared to a loss of $2.5 million in the same period of the prior fiscal year. Non-GAAP income from operations for the quarter was $50.9 million, representing a 212.2% increase year-over-year.

營業收入為 2,130 萬美元，而上一財年同期虧損 250 萬美元。本季非 GAAP 營運收入為 5,090 萬美元，年增 212.2%。

Net income attributable to New Oriental for the quarter was $30.1 million, representing a 4,007.4% increase year-over-year. Basic and diluted net income per ADS attributable to New Oriental were $0.18 and $0.18, respectively.

該季度歸屬於新東方的淨利潤為3010萬美元，年增4007.4%。新東方每股ADS基本淨利和稀釋後淨利分別為0.18美元和0.18美元。

Non-GAAP net income attributable to New Oriental for the quarter was $50.2 million, representing 182.6% increase year-over-year. Non-GAAP basic and diluted net income per ADS attributable to New Oriental were $0.30 and $0.29, respectively.

本季歸屬於新東方的非美國通用會計準則淨利潤為 5,020 萬美元，年增 182.6%。非公認會計準則下新東方每股美國存託股基本淨利及攤薄淨利分別為 0.30 美元及 0.29 美元。

Net cash flow generated from operations for the second fiscal quarter of 2024 was approximately $300.6 million and capital expenditure for the quarter were $43.4 million.

2024 年第二財季營運產生的淨現金流量約為 3.006 億美元，該季度的資本支出為 4,340 萬美元。

Turning to the balance sheet. As of November 30, 2023, New Oriental had cash and cash equivalents of $1,942.6 million. In addition, the company had $1,324.1 million in term deposits and $1,571.2 million in short-term investments.

轉向資產負債表。截至2023年11月30日，新東方擁有現金及現金等價物19.426億美元。此外，該公司還有13.241億美元的定期存款和15.712億美元的短期投資。

New Oriental's deferred revenue, which represent cash collected upfront from customers and related revenue that will be recognized as the services or goods are delivered, at the end of the second quarter of fiscal year 2024 was $1,645 million, an increase of 44.4% as compared to $1,139.1 million at the end of the second fiscal quarter of 2023.

截至2024財年第二季末，新東方的遞延收入為16.45億美元，較上年同期增長44.4%，即預先向客戶收取的現金以及將在服務或商品交付時確認的相關收入。截至2023 年第二財季末為11.391 億美元。

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

現在我將交給史蒂芬來介紹我們的展望和指導。

As we enter the new quarter, we look forward to delivering student growth and ongoing margin expansion, building on the blend of our brand advantage, rooted history, influential teaching, content and resources, and solid foundation. We're also committed to working 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 possibility across all business lines and creative endeavors.

當我們進入新的季度時，我們期待在我們的品牌優勢、根深蒂固的歷史、有影響力的教學、內容和資源以及堅實的基礎的基礎上，實現學生的成長和持續的利潤擴張。我們也致力於勤奮工作，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，進一步揭示我們在所有業務線和創意活動中的可能性。

With regard to the learning center and classroom space, we plan to increase our capacity moderately by about 20% year-over-year. We will keep monitoring the pace and scale of new openings according to the local operation and our financial results in this fiscal year. The groundwork we have laid and the progress we have made thus far have fueled our optimism (technical difficulty). We remain dedicated to achieving margin expansion throughout the whole year.

在學習中心和教室空間方面，我們規劃年比適度增加20%左右的容量。我們將根據當地營運狀況和本財年的財務業績，持續監控新店的開業速度和規模。我們所奠定的基礎和迄今為止所取得的進展激發了我們的樂觀情緒（技術難度）。我們仍然致力於全年實現利潤率擴張。

In the coming quarter, we expect total net revenue to be in the range of $1,070.9 million to $1,093.5 million, representing year-over-year increase in the range of 42% to 45%.

在下一季度，我們預計總淨收入將在 10.709 億美元至 10.935 億美元之間，年增 42% 至 45%。

To conclude, we're delighted to share our latest set of the results to all of you. We are confident in our ability to drive our business toward an even more positive trajectory and enhance profitability throughout the remainder of the fiscal year 2024. While we cultivate new endeavors to build upon our capabilities, we will also devote reasonable (technical difficulty) research and application of new technologies such as AI and ChatGPT into our educational and product offerings to uplift our strengths and pursue further growth and operating efficiency.

最後，我們很高興與大家分享我們的最新結果。我們對在2024 財年剩餘時間內推動我們的業務走向更加積極的軌道並提高盈利能力充滿信心。在我們培育新的努力以增強我們的能力的同時，我們還將致力於合理的（技術難度）研究並將人工智慧和 ChatGPT 等新技術應用到我們的教育和產品中，以提升我們的優勢並追求進一步的成長和營運效率。

At the same time, we will continue to seek guidance from and coverage with government authorities in various provinces in China in alignment with its efforts to comply with the relevant policies, guidelines, and regulations, as well as to further adjust our business operations as required. I must say that these expectations and forecasts reflect our considerations of the latest regulatory measures, as well as our current and preliminary view, which is subject to change.

同時，我們將繼續尋求中國各省份政府部門的指導和覆蓋，努力遵守相關政策、指引和法規，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，以及我們當前和初步的觀點，這些觀點可能會改變。

This is the end of our fiscal year 2024 Q2 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 財年第二季總結的結尾。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 the line of Felix Liu from UBS.

（操作員說明） 我們的第一個問題來自UBS 的Felix Liu。

Congratulations again on the strong set of results. My question is on your very good third quarter guidance of over 40% revenue growth. Could you give us a rough breakdown of what's driving that strong growth?

再次恭喜我們取得如此強勁的成績。我的問題是關於你們非常好的第三季營收成長超過 40% 的指導。您能為我們大致介紹一下推動這種強勁成長的因素嗎？

Okay. Thank you, Felix. I think we give the top line guidance in this quarter a lot as we did in previous quarters. So as for the revenue guidance for the Q3, I think we are still taking a conservative approach in giving the Q3 growth guidance, which will be in the range of 42% to 45% in dollar terms year-over-year,

好的。謝謝你，菲利克斯。我認為我們在本季度給出了很多頂線指導，就像我們在前幾個季度所做的那樣。因此，對於第三季的收入指引，我認為我們在給出第三季度的成長指引時仍然採取保守的態度，以美元計算，同比增長將在 42% 至 45% 之間，

Given the strong demand in education sector and growth momentum we have seen so far in this fiscal year. So we're quite confident about the whole year's revenue growth will be better than we originally expected, especially in the coming Q3.

鑑於本財年迄今為止我們看到的教育產業的強勁需求和成長勢頭。所以我們對全年的營收成長將好於我們最初的預期非常有信心，特別是在即將到來的第三季。

And so, for the -- all the business lines, the overseas related business, on the demand side, we have seen very strong demand for overseas test prep and the consulting business. And on the supply side, we have seen some players disappear from the market during the COVID. And so that means we're facing less competition in the market.

因此，對於所有業務線，海外相關業務，在需求方面，我們看到對海外準備和諮詢業務的需求非常強勁。在供應方面，我們看到一些參與者在新冠疫情期間從市場上消失。因此，這意味著我們面臨的市場競爭較少。

And for our -- the other -- other revenue contributor, the new businesses, I think the incurring performance in this quarter, in Q2, proves that we are heading towards the right direction. And so we believe this business will be able to maintain the very good top line growth in the Q3. And yes, so in overall -- so, that's why we give the guidance of the top line growth by 42% to 45%. And Sisi, you want to add the breakdown...

對於我們的另一個收入貢獻者，新業務，我認為本季第二季的業績證明我們正在朝著正確的方向前進。因此，我們相信該業務將能夠在第三季保持非常好的營收成長。是的，所以總的來說，這就是為什麼我們給了 42% 到 45% 的營收成長指引。西西，你想添加細分......

Yes. Actually, the revenue contribution from key business lines is pretty consistent in this year, very similar to last quarter. Like, overseas-related business contributes like 20% to 21% of total revenue; like, domestic test prep 2% to 3%. And also the K-12 newly developed educational initiatives for K-9 and also some remaining other training -- tutoring business for high school together contribute over 41%, 42% of total revenue. So the key drivers are growing very, very well. And we are seeing continued trend for all the key business lines as well.

是的。事實上，今年主要業務線的營收貢獻相當穩定，與上季非常相似。例如，海外相關業務貢獻了總收入的20%到21%；例如，國內備考2%到3%。還有K-12新開發的K-9教育課程以及剩下的一些其他培訓——高中輔導業務合計貢獻了總收入的41%、42%以上。因此，關鍵驅動因素的成長非常非常好。我們也看到所有關鍵業務線的持續趨勢。

Our next question comes from the line of Yiwen Zhang from China Renaissance.

我們的下一個問題來自華興資本的張藝文。

Congrats on another strong quarter result. So my question is about our learning center expansion. You mentioned about whole year 20% capacity growth. If I calculate correctly, that actually imply second half net add would slow down a bit. So could you discuss what our consideration is there given the very strong demand?

祝賀又一個強勁的季度業績。我的問題是關於我們學習中心的擴展。您提到全年產能成長 20%。如果我計算正確，這實際上意味著下半年淨增加速度會有所放緩。那麼您能否討論一下，鑑於需求非常強勁，我們有什麼考慮？

Yes. This quarter, we added around 7% new capacity. And at this time -- last quarter, we guided the capacity expansion will be somewhere around 15% to 20%. So this time we'll raise the expansion guidance to somewhere around 20%. So -- and I think we will open a reasonable amount of the new learning centers, while some in the new classroom areas or some existing learning centers will be expanded in the second half of the year. And I think most of the new openings will be in the cities with the better top-line and bottom line performance.

是的。本季度，我們新增產能約 7%。此時—上個季度，我們指導產能擴張將在 15% 至 20% 左右。所以這次我們將擴張指導提高到20%左右。因此，我認為我們將開設合理數量的新學習中心，而一些新的教室區域或一些現有的學習中心將在下半年進行擴建。我認為大多數新開業的酒店將位於營收和利潤表現較好的城市。

And I think we will keep monitoring the pace and scale of the new openings according to the operation and financial results in the second half of the year. And I think maybe in the next quarter or just in Q4, I think we will share with you about the new -- our new decision of the learning center expansion, maybe we'll raise again.

我認為我們將根據下半年的營運和財務表現繼續監控新店開幕的速度和規模。我認為也許在下個季度或第四季度，我想我們將與您分享我們關於學習中心擴建的新決定，也許我們會再次提出。

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

我們的下一個問題來自美國銀行證券公司的 Lucy Yu。

So this is Lucy from BofA. So a follow-up on earlier question on expansion. So actually we have seen very, very strong demand on the ground. Many of my friends trying to enroll to a learning center, but was told it's already full, even the learning center is still under reservation at the moment. So I'm wondering what is the bottleneck for us to expand faster at the moment. Is it teacher recruitment or is it like finding the right location or get the license? So what is the bottleneck from preventing us expanding even faster?

這是美國銀行的露西。這是之前關於擴展的問題的後續。所以實際上我們看到了非常非常強勁的實地需求。許多朋友想報名學習中心，卻被告知已經滿員，甚至學習中心目前還在預約。所以我想知道目前我們要更快擴張的瓶頸是什麼？是招聘教師還是像找到合適的地點或獲得許可證？那麼阻礙我們更快擴張的瓶頸是什麼呢？

Yes. Thank you, Lucy. I think the reason that we give the guidance of the learning center expansion about 20% because, I think, we do have the OMO system and the OMO model. So that means the online site will help us to, like, take over more students into the existing classrooms and learning centers. So OMO model help us a lot.

是的。謝謝你，露西。我認為我們之所以給予學習中心擴張約20%的指導，是因為我們確實有OMO系統和OMO模式。因此，這意味著該線上網站將幫助我們吸引更多學生進入現有的教室和學習中心。所以OMO模式對我們幫助很大。

And secondly, education is typically a long-term business. So we care more about the top line growth and the bottom line growth, that means the margin expansion. So we don't want to grow the business too fast. So what we're carrying is that the top line growth scenario, actually, we have already gave the guidance of 45% top line growth in Q3. And also -- we also care about the margin expansion. So it's the growth balance between the top line and bottom line, Lucy.

其次，教育通常是一項長期事業。因此，我們更關心營收成長和利潤成長，這意味著利潤率擴張。所以我們不想讓業務成長得太快。因此，我們所提出的是營收成長情景，實際上，我們已經給出了第三季營收成長 45% 的指導。而且──我們也關心利潤率的擴張。所以這就是營收和利潤之間的成長平衡，露西。

Just to follow up, you mean the OMO model, I know it's adopted for the high school, but for the non-curricular training, we are also using OMO at the moment?

跟進一下，你指的是OMO模式，我知道高中採用的是OMO模式，但對於課外培訓，我們目前也在使用OMO？

Yes.

是的。

So what's the percentage of, like, online versus offline at the moment?

那麼，目前線上與線下的比例是多少呢？

Yes. Yes, Lucy. For some of the non-academic courses and the overseas test prep, even for some college students business, we do -- in all of the business, we do have the OMO model. Yes.

是的。是的，露西。對於一些非學術課程和海外考試準備，甚至對於一些大學生業務，我們也這樣做——在所有業務中，我們確實有OMO模式。是的。

And also the intelligent learning devices, which is also the one that we don't require too many new locations.

還有智慧學習設備，這也是我們不需要太多新地點的設備。

Our next question comes from the line of Timothy Zhao from Goldman Sachs.

我們的下一個問題來自高盛的趙蒂莫西。

This is Timothy from Goldman. My question is on the margins. I saw this quarter the non-GAAP OP margin expanded by around 3.3 percentage points. Just wondering if you provide -- can provide any color in terms of breakdown because on the other hand, I think, for East Buy, there was some pressure on the margin. Just wondering, if we exclude the margin impact from East Buy, what kind of margin expansion that we are seeing for the core business? And then after this quarter, how do we think about the full-year OP margin guidance?

我是高盛的蒂莫西。我的問題是邊緣問題。我看到本季非 GAAP 營運利潤率擴大了約 3.3 個百分點。只是想知道您是否可以提供細分方面的任何顏色，因為另一方面，我認為，對於東買來說，利潤率存在一些壓力。只是想知道，如果我們排除東買的利潤率影響，我們會看到核心業務的利潤率擴張是什麼樣的？那麼在本季之後，我們如何看待全年營運利潤率指引？

Yes. Let us start with the quarter -- this quarter margin analysis. Even though, yes, as you said, even though, East Buy saw margin drag in this quarter, we're still guiding non-GAAP OP margin expansion by 330 basis points. And I think the margin increase was mainly driven by the following reasons. Number one is the utilization rates improving of our facilities and the teaching resources increased the learning center margins on average. So that means we have the lower fixed cost and expenses compared to the -- that of last year.

是的。讓我們從本季開始—本季的利潤率分析。儘管，是的，正如您所說，儘管東買本季的利潤率受到拖累，但我們仍指導非 GAAP 營運利潤率擴大 330 個基點。我認為利潤率的成長主要是由以下原因推動的。第一是我們的設施和教學資源利用率的提高提高了學習中心的平均利潤。因此，這意味著與去年相比，我們的固定成本和費用較低。

And number two is, the new business margin is over -- is around like the 19%, 20%. So, we just started the new business two years ago. So that means the ramping-up pace is much faster than we expected. And also the -- our remaining business such as the overseas-related business and the college business generated higher margin than that of last year. So in the Q2, if we take out the East Buy's impact for education in non-GAAP OP margins, Sisi, what was that?

第二點是，新業務利潤率已經結束——大約在 19%、20% 左右。所以，我們兩年前才開始新業務。因此，這意味著成長速度比我們預期的要快得多。而且，我們剩餘的業務，例如海外相關業務和大學業務，其利潤率比去年更高。因此，在第二季度，如果我們剔除東買對教育的非 GAAP OP 利潤率的影響，Sisi 那是什麼？

Increased, actually is much higher than the overall margin. Yes. Because they don't -- actually, East Buy don't release quarterly earnings. So you can look at the results after first half. So you can roughly get the calculation of the educational business margin expansion.

增加後，實際上遠高於整體利潤率。是的。因為他們不——實際上，東買不發布季度收益。所以你可以在上半場結束後看看結果。這樣就可以粗略地得到教育業務利潤擴張的計算結果。

And (technical difficulty). And as we head into the Q3 with operating leverage and the higher utilization control, I think (technical difficulty) will get the margin expansion continuously in the Q3 and in Q4. So that means in the second half of the year, I think you will see the margin expansion in education business.

並且（技術難度）。隨著我們進入第三季度，營運槓桿和更高的利用率控制，我認為（技術難度）將在第三季和第四季持續實現利潤率擴張。因此，這意味著在今年下半年，我認為您將看到教育業務的利潤率擴張。

Our next question comes from the line of Tian Hou from T.H. Capital.

我們的下一個問題來自 T.H. 的天后台詞。首都。

Sisi, Stephen, congratulations for the good quarter. I have actually two questions. One is, how does culture and tourism business is conducted? How do you record revenue from that? That's number one.

塞西、史蒂芬，恭喜這個季度的出色表現。我其實有兩個問題。一是文化旅遊業務如何開展？您如何記錄由此產生的收入？這是第一名。

Number two, can you break down the result and guidance into different segments for both revenues and margin profiles? That's two.

第二，您能否將結果和指導分解為收入和利潤狀況的不同部分？那是兩個。

Thank you, Tian. I will take the question about tourism business. Okay. Tian, as mentioned in the last quarter, we have started the tourism business as the one of our innovative ventures. And this -- the tourism business includes our well-grounded study tour and research camp business for the students, as well as the -- our new tourism business that serves the middle-aged and senior people. We do have a lot of teachers. And I think our new tourism business will utilize our strength in knowledge sharing of those teachers. And as well, we have abundant sales channel, including (inaudible) and online, offline channels in New Oriental.

謝謝你，田。我將回答有關旅遊業務的問題。好的。田先生，正如上個季度所提到的，我們已經將旅遊業務作為我們的創新業務之一。而這個——旅遊業務包括我們為學生做的紮實的遊學、研學營業務，以及——我們服務於中老年的新旅遊業務。我們確實有很多老師。我認為我們新的旅遊業務將利用我們在這些教師知識共享方面的優勢。還有，我們有豐富的銷售管道，包括（聽不清楚）新東方的線上、線下管道。

So during this quarter, we piloted a number of tourism offerings to expand the -- to reach all ages people. And the top line growth is very good in this quarter because last year we did have the negative impact from the COVID. And we set up the new company named the New Oriental Cultural Tourism Group. And also this group company set up the 100% the subsidiaries in all cities. So we divided the revenue and the financial statement from the education through the tourism business. So that means going forward, we will record the two business lines in two parts.

因此，在本季度，我們試行了一系列旅遊產品，以擴大涵蓋所有年齡層的人的範圍。本季的營收成長非常好，因為去年我們確實受到了新冠疫情的負面影響。我們成立了新公司，命名為新東方文旅集團。而該集團公司在全國各城市設立了100%的子公司。因此，我們將教育業務的收入和財務報表分為旅遊業務。因此，這意味著今後我們將把這兩條業務線分成兩部分。

And so, going forward, I think our goal is to be the leading the cultural tourism company in China and to provide the best service to the customers as much as we can. And I do hope the -- going forward, the tourism business will contribute more revenues and the profit to the whole group, Tian.

因此，展望未來，我認為我們的目標是成為中國領先的文化旅遊公司，並盡可能為客戶提供最好的服務。我確實希望，未來，旅遊業務將為整個集團貢獻更多的收入和利潤，田。

Yes, Tian, your second question on the guidance breakdown, as I mentioned earlier, for overseas-related business, for Q3, roughly [distribution] are similar with previous quarter, about 21%, 22%. And the domestic test prep is about 2% to 3%. And the K-12, including the new educational initiatives for K-9 and also remaining high school business together contribute over 40% of total revenue. Yes. So that's the key business line mix.

是的，田，你的第二個問題關於指導細目，正如我之前提到的，對於海外相關業務，第三季度，大致[分佈]與上季度相似，大約為21%、22%。而國內的備考大概是2%到3%。 K-12（包括 K-9 的新教育計劃以及剩餘的高中業務）合計貢獻了總收入的 40% 以上。是的。這就是關鍵的業務線組合。

(Operator Instructions) Our next question comes from Candis Chan from Daiwa.

（操作員說明）我們的下一個問題來自 Daiwa 的 Candis Chan。

Sisi and Stephen, congratulations on a very strong quarter and also the revenue guidance. My question is on the margins for longer term. So I think you just mentioned that for the new education businesses that actually we are looking at around 19% to 20% operating margin, which is pretty impressive as compared to what you mentioned in the previous quarters. And I just wondering -- I just wonder for -- in the longer term that we are talking about like 2 to 3 years down the road, what should we expect for this new education business in terms of their operating margins? And also for the overseas test prep business, what kind of margin should we be expecting, given that very strong demand out of the revenue here?

塞西和史蒂芬，祝賀季度的強勁表現以及收入指引。我的問題是關於長期的邊緣問題。因此，我認為您剛才提到，對於新的教育業務，我們實際上正在考慮19% 至20% 左右的營業利潤率，與您在前幾個季度提到的相比，這相當令人印象深刻。我只是想知道——我只是想知道——從我們談論的未來兩到三年的長期來看，我們對這個新的教育業務的營業利潤率應該有什麼期望？對於海外考試準備業務來說，考慮到這裡的收入需求非常強勁，我們應該期待什麼樣的利潤率？

Yes. As you know, we started the new education business 2 years ago. And in this quarter, the margin of this business is roughly 19%. And going forward, I think, the margin will be over 20%. So that means we expand the margin of this business. We will expand the margin of this business in the second half of this year. And even in the new year, fiscal year '25, we expect the margin of the education business overall will be expanded, because of the -- yes, as I said, because of the lower fixed cost and the higher utilization of the learning centers and the cost control.

是的。如您所知，我們兩年前開始了新的教育業務。本季度，該業務的利潤率約為 19%。展望未來，我認為利潤率將超過 20%。這意味著我們擴大了這項業務的利潤。我們將在今年下半年擴大這項業務的利潤率。即使在新的一年，即 25 財年，我們預計教育業務的整體利潤率也會擴大，因為——是的，正如我所說，因為固定成本較低，學習中心利用率較高以及成本控制。

I think both the existing business, such as the overseas related business and the college business and the new business, new initiatives will expand the margin. So going forward, even in the second half of this fiscal year and the fiscal year '25, I think the margin will be expanded. Yes. So, yes. And you know, we care more about the top line growth and the margin expansion. So we believe we will create more value to the shareholders. Yes. That's the bottom line wise.

我認為現有業務，例如海外相關業務和大學業務以及新業務、新措施都會擴大利潤。因此，展望未來，即使在本財年下半年和'25財年，我認為利潤率也會擴大。是的。所以，是的。你知道，我們更關心營收成長和利潤率擴張。所以我們相信我們將為股東創造更多的價值。是的。這是明智的底線。

Great. Another question is about our cash. I think we are having almost $5 billion cash right now. So in terms of shareholder returns, what are we going to do with the cash in the following years?

偉大的。另一個問題是關於我們的現金。我認為我們現在擁有近 50 億美元的現金。那麼就股東回報而言，未來幾年我們要如何使用現金呢？

Yes. We announced $400 million share buyback program. And so far we finished $194 million. And I think we will buy the share back from the open markets going forward. And this round we choose to buy the share back. And -- but historically, we paid the several times special dividend and did several times share buyback. So going forward, next round, maybe we will choose the dividend again and worthy share buyback.

是的。我們宣布了 4 億美元的股票回購計畫。到目前為止，我們已完成 1.94 億美元。我認為我們將在未來從公開市場回購股票。而本輪我們選擇回購股票。而且——但從歷史上看，我們支付了幾次特別股息，並進行了幾次股票回購。因此，展望未來，下一輪，也許我們會再次選擇股利和值得回購的股票。

(Operator Instructions) Our next follow-up question comes from the line of Felix Liu from UBS.

（操作員指令）我們的下一個後續問題來自瑞銀集團的Felix Liu。

I have a follow-up question on competition. You mentioned that the supply-demand dynamics of the sector is very strong. So do you see any risk in competition intensifying? Do you see smaller players also ramping up capacity expansions or if not what is happening [on the graph]?

我有一個關於競爭的後續問題。您提到該產業的供需動態非常強勁。那麼您認為競爭加劇有風險嗎？您是否看到較小的參與者也在加大產能擴張，或者如果沒有的話，[圖表上]正在發生什麼？

Felix, we have seen a lot of the competitors disappear from the market, since 2, 3 years ago. And especially (technical difficulty) we are facing less competition. And so, I think this is true, both for the K-12 business and the overseas-related business, even with the college business. And going forward, I think we expect the competition environment will be stabilized.

Felix，從兩三年前開始，我們已經看到很多競爭對手從市場上消失了。尤其是（技術難度）我們面臨的競爭較少。所以，我認為無論是K-12業務還是海外相關業務，甚至大學業務，都是如此。展望未來，我認為我們預期競爭環境將會穩定。

(Operator Instructions) Our next follow-up question comes from the line of Timothy Zhao from Goldman Sachs.

（操作員指令）我們的下一個後續問題來自高盛的趙蒂莫西。

Just a follow-up question, I think on the intelligent learning system and devices. I saw the number of active users, I think for the past quarter is actually quite similar to the summer semester. Just wondering if you can share some color in terms of the seasonality of these business lines and what is the, I think, profitability that we are seeing? And how to think about, I think, the Q-on-Q growth, I think, into the third quarter, fourth quarter? That would be very helpful.

我想問一個後續問題，關於智慧學習系統和設備。我看到了活躍用戶的數量，我認為上個季度實際上與夏季學期非常相似。只是想知道您是否可以分享一些有關這些業務線的季節性的信息，以及我認為我們所看到的盈利能力是多少？我認為如何看待第三季、第四季的環比成長？這將非常有幫助。

Yes. Actually, the intelligent learning device business are developing also very well. The growth is pretty strong. And we're seeing actually not very seasonal pattern for this business, quite similar with previous tutoring business, especially for middle school students. And this year, the year-over-year increase of user is very high. And also, we have prepared a lot of new devices to cater the needs of customers.

是的。事實上，智慧學習設備業務發展也非常好。成長相當​​強勁。事實上，我們看到這項業務的季節性模式並不明顯，與先前的輔導業務非常相似，尤其是針對中學生。而今年，用戶年增幅非常高。此外，我們也準備了許多新設備來滿足客戶的需求。

The key drivers -- growth drivers are new customers and also we're making efforts on expanding to more subjects for existing customers as well, because this is a very good product that helping kids to enhance their self-study ability, even without our teacher's instruction, but using the device and also benefiting from our very, very good content, differentiating content embedded in the device that kids can also prepare for the academic study and do the process by themselves. So this is a good solution after the policy change and all the new -- the restructuring of the whole company.

關鍵的驅動力－增長驅動力是新客戶，我們也在努力為現有客戶擴展更多科目，因為這是一個非常好的產品，可以幫助孩子們提高自學能力，即使沒有我們老師的指導指導，但使用該設備並受益於我們非常非常好的內容，區分設備中嵌入的內容，孩子們也可以為學術學習做好準備並自己完成該過程。因此，在政策變化和所有新的事情——整個公司的重組之後，這是一個很好的解決方案。

So we're confident in the development of this new product. And also the profitability is also currently we're seeing the margins are similar with our tutoring business like the non-academic tutoring business for -- mostly for elementary school students. And also, we're seeing the potential for this kind of learning device business. The margin potential is also quite strong. We can leverage more of our teacher resources and also we don't need to spend a lot of cost on the learning center openings. Yes.

所以我們對這個新產品的開發充滿信心。目前，我們看到獲利能力與我們的輔導業務類似，例如主要針對小學生的非學術輔導業務。而且，我們也看到了這種學習設備業務的潛力。利潤潛力也相當強勁。我們可以利用更多的教師資源，而且我們不需要在學習中心的開設上花費大量的成本。是的。

Our next follow-up question comes from the line of Tian Hou from T.H. Capital.

我們的下一個後續問題來自 T.H. 的天后台詞。首都。

Yes. Sisi and Stephen, just a follow-up question. It's also related to the seasonality. So just not quite sure what's the seasonality under the current business structure. So can you share some color?

是的。塞西和史蒂芬，只是一個後續問題。跟季節也有關係。所以只是不太確定目前業務結構下的季節性是什麼。那你能分享一些顏色嗎？

Yes. The seasonality becomes more smooth than many years ago. And -- but the Q2 is still the lowest season. And so the strongest season is Q1, then followed by the Q3 and Q4, and then the Q2 is the lowest season.

是的。季節性變得比很多年前更加平滑。而且 - 但第二季度仍然是最低的季節。因此最強的季節是 Q1，然後是 Q3 和 Q4，然後 Q2 是最低的季節。

Is the margin also follow the same trend?

利潤率也遵循同樣的趨勢嗎？

I think so, yes. If you look at the margin, in Q2, the non-GAAP OP margin is roughly 5.9%. I think the margin in Q3 definitely will be higher than Q2.

我想是的，是的。如果你看一下利潤率，第二季的非 GAAP 營運利潤率約為 5.9%。我認為第三季的利潤率肯定會高於第二季。

We are now approaching the end of the conference call. I'll turn the call over to New Oriental's Executive President and CFO, Mr. Stephen Yang, for his closing remarks.

我們現在電話會議即將結束。我將把電話轉給新東方執行總裁兼財務長楊先生做總結發言。

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. That 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。您現在可以斷開連線。