New Oriental Education & Technology Group’s (EDU) Management on Q4 2018 Results – Earnings Call Transcript

New Oriental Education & Technology Group Inc. (NYSE:EDU) Q4 2018 Earnings Conference Call July 24, 2018 8:00 AM ET Executives Sisi Zhao – Director-Investor Relations Stephen Yang – Chief Financial Officer Analysts Jin Yoon – …

New Oriental Education & Technology Group Inc. (NYSE:EDU) Q4 2018 Earnings Conference Call July 24, 2018 8:00 AM ET

Executives

  • Sisi Zhao – Director-Investor Relations
  • Stephen Yang – Chief Financial Officer

Analysts

  • Jin Yoon – New Street
  • Tallan Zhou – Deutsche Bank
  • Thomas Chong – Credit Suisse
  • Lucy Yu – Bank of America
  • John Choi – Daiwa
  • Tianli Wen – Blue Lotus
  • Sheng Zhong – Morgan Stanley
  • Edwin Chen – UBS Securities
  • Wendy Huang – Macquarie
  • Julia Pan – UOB
  • Eric Qiu – CCB International
  • Jeffrey Chan – CLSA

Operator

Good evening, and thank you for standing by for New Oriental’s Fourth Quarter and Fiscal Year 2018 Earnings Conference Call. [Operator Instructions]. Today’s conference is being recorded. If you have any objections, you may disconnect your line now.

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

Sisi Zhao

Thank you. Hello, everyone, and welcome to New Oriental’s fourth fiscal quarter 2018 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, you will hear from Stephen Yang, Chief Financial Officer. After his prepared remarks, Stephen 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 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. 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.

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

Stephen Yang

Thank you, Sisi. Hello, everyone and thank you for joining us on the call. We’re very pleased to conclude the fiscal year 2018 with sustained acceleration ofour top-line growth, as well as sustained enrollments.

Net revenues in fiscal year 2018 increased by 36% to $2,447.4 million. Total student enrollments in academic subjects tutoring test prep courses in the fiscal year 2018 increased by 30.3% to approximately 6,329,500.

For the year 2018, we added a total of 226 new facilities, which include 200 new learning centers in existing cities, 11 off-line training facilities in three new cities, 14 dual-teacher model facilities in six low-tier cities, and one kindergarten. Altogether, our total square meters of classroom area by the end of fiscal year, has expanded by approximately 40% year-over-year. Strategic expansion was an important focus in fiscal year 2018, which yielded very positive results.

In the fourth quarter, we continue to execute our Optimize the Market strategy and stepped up our capacity expansion efforts in cities with robust growth momentum, supported by our highly efficient operational capabilities. This enables us to seize tremendous market opportunities with our standardized online and off-line integrated education system. As we continue to expand our capacity, we remain focused by improving utilization rate and investing, enhancing teaching quality in line with our long-term strategies.

Net revenues in the fourth quarter increased to $701.0 million, which is a 44.1% growth year-on-year. Once again, delivering outstanding results exceeding our target. In the fourth quarter, our student enrollments were up approximately 44.9% during the period. The top-line growth was driven by the continued momentum of our K-12 after-school tutoring business achieving a revenue growth of approximately 52% year-over-year.