New Oriental Education & Technology ((EDU)) has held its Q3 earnings call. Read on for the main highlights of the call.
The recent earnings call of New Oriental Education & Technology presented a mixed sentiment, reflecting both optimism and challenges. While there are promising developments in certain sectors like integrated tourism and AI investments, the overall revenue decrease and difficulties in overseas markets cast a shadow over the positive aspects. The financial performance indicates progress in some areas, yet highlights the need for improvement, offering a balanced outlook for the future.
Revenue Growth in Core Educational Business
Despite an overall revenue decrease of 2%, New Oriental’s core educational business showed resilience. Excluding Eastbuy, net revenue increased by 21.2% year over year, driven by new ventures, signaling robust growth in this segment.
Strong Performance in Integrated Tourism-Related Business
The integrated tourism-related business was a standout performer, recording an exceptional revenue increase of 85% year over year for the quarter. This growth underscores the potential of diversifying into tourism-related ventures.
Investment in AI-Powered Education Solutions
New Oriental made significant strides in AI integration, investing $29.7 million in AI-powered education solutions. This investment aims to enhance student outcomes and operational efficiency, positioning the company at the forefront of educational innovation.
Share Repurchase Program
The company extended its share repurchase program, increasing it to $700 million, with $695.5 million already repurchased. This move reflects confidence in the company’s future prospects and commitment to returning value to shareholders.
Steady Growth Across Various Business Lines
New Oriental reported steady growth across various business lines, with the overseas study consulting business increasing by 21% and the adults and university students business growing by 17% year over year.
Decrease in Overall Revenue
Overall revenue saw a decrease of 2% year over year, highlighting challenges in specific segments. This decline suggests areas where the company needs to focus on improving performance.
Increased Operating Costs in Certain Areas
The company faced increased operating costs, with selling and marketing expenses rising by 13.13% and G&A expenses by 19.8% year over year. These increases indicate areas where cost control measures are necessary.
Slowdown in Overseas-Related Business
The overseas-related business is projected to grow only by 5% to 10% in the upcoming quarter, due to macroeconomic and international relation challenges. This slowdown reflects the broader difficulties faced in the global market.
Non-GAAP Income Decrease
Non-GAAP net income decreased by 14.3% year over year, pointing to financial pressures during the quarter. This decrease highlights the need for strategic adjustments to improve profitability.
Forward-Looking Guidance
Looking ahead, New Oriental provided guidance for the next quarter, forecasting total net revenue, excluding Eastbuy, to be between $1,009.1 million and $1,036.6 million, representing a year-over-year increase of 10% to 13%. The company emphasized a focus on cost control and efficiency enhancements, which are expected to positively impact the non-GAAP operating margin. Strategic investments, particularly in AI and technology integration, are anticipated to drive sustainable growth.
In conclusion, New Oriental’s earnings call reflected a balanced sentiment, with both positive developments and challenges. While certain segments like integrated tourism and AI investments show promise, the overall revenue decline and overseas market difficulties highlight areas needing attention. The company’s forward-looking guidance suggests optimism for future growth, supported by strategic investments and efficiency improvements.