Net Revenues Increased by 42.4% Year-Over-Year Net Income Increased
by 77.0% Year-Over-Year BEIJING, Jan. 15 /Xinhua-PRNewswire/ -- New
Oriental Education and Technology Group Inc. (the "Company")
(NYSE:EDU), the largest provider of private educational services in
China, today announced its unaudited financial results for the
fiscal quarter ended November 30, 2007, which is the second quarter
for New Oriental's fiscal year 2008.(1) Highlights for the Fiscal
Quarter Ended November 30, 2007 -- Total net revenues increased by
42.4% year-over-year to RMB240.6 million (US$32.6 million) from
RMB169.0 million in the same period of the prior fiscal year. --
Net income increased by 77.0% year-over-year to RMB14.5 million
(US$2.0 million) from RMB8.2 million in the same period of the
prior fiscal year, and net income attributable to holders of common
shares excluding share-based compensation expenses (non-GAAP)
increased by 83.6% year-over-year to RMB29.8 million (US$4.0
million) from RMB16.2 million in the second quarter of fiscal year
2007. -- Basic and diluted earnings per ADS were RMB0.39 (US$0.05)
and RMB0.37 (US$0.05), respectively. Basic and diluted earnings per
ADS excluding share-based compensation expenses (non-GAAP) were
RMB0.79 (US$0.11) and RMB0.76 (US$0.10), respectively. Each ADS
represents four common shares of the Company. -- Total student
enrollments in language training and test preparation courses
increased by 18.5% year-over-year to approximately 257,700 from
approximately 217,500 in the same period of the prior fiscal year.
-- Opened 1 new school, our first private kindergarten in Beijing,
and 14 new learning centers in the quarter, bringing the total
number of schools and learning centers to 38 and 164 (including the
38 schools), respectively, as of the November 30, 2007, up from 37
schools and 149 learning centers (including the 37 schools) as of
August 31, 2007, respectively. "During the second quarter of fiscal
year 2008, we experienced continued strong growth in our student
enrollments and net revenues, enabling us to beat our top line
guidance," said Michael Yu, New Oriental's Chairman and Chief
Executive Officer. "Furthermore, we continue to execute on our
strategy of leveraging our leading brand name to enter new areas
for growth by establishing our pre-school business with the opening
of our first kindergarten in Beijing. To further enhance our
content offerings in our educational programs and services, we
reached an agreement with ETS to sell their TOEFL Practice Online
in our training classes and through our bookstores. We also entered
a partnership with Heinle ELT, a part of Cengage Learning, formerly
Thomson Learning, to launch a line of custom learning materials
tailored to our iEnglish brand conversational English language
classes." New Oriental's Chief Financial Officer, Louis T. Hsieh,
stated, "During our second fiscal quarter, we continued our
strategy of foregoing short term profit in favor of rapidly
expanding our leading nationwide network by establishing 34 new
schools and learning centers in the first half of our fiscal year
2008 compared to 19 new schools and learning centers for the entire
fiscal year 2007. In order to staff our rapidly growing physical
network, we have added over 900 teachers and other employees in the
first half of our fiscal year 2008. In addition to increasing our
G&A spending, primarily due to headcount increases, we also
increased our marketing expenses in the quarter by approximately
50% year-over-year in order to drive strong student enrollment and
revenue growth. We expect to continue benefiting from this rapid
expansion strategy in the quarters and years to come. Given the
vast potential for growth in China's private education market, we
are confident that we are well-positioned to continue capturing
this lucrative market opportunity." Mr. Hsieh added, "We continue
to see surging demand for our educational programs and services,
and to the best of our knowledge, we have not as yet been adversely
impacted by the economic slowdown and related events in the US, as
almost all of our revenues are derived from the China market. We
also continue to benefit from a strengthening RMB given that
virtually all of our revenues are in RMB and are translated into US
dollars for financial reporting convenience." Mr. Hsieh noted that
the second quarter of the Company's fiscal year is typically the
slowest in terms of revenues as students are occupied with the
beginning of the formal school year. Financial Results for the
Fiscal Quarter Ended November 30, 2007 For the second fiscal
quarter of 2008, New Oriental reported net revenues of RMB240.6
million (US$32.6 million), representing a 42.4 % increase year-
over-year. Net revenues from educational programs and services for
the second fiscal quarter were RMB209.5 million (US$28.4 million),
representing a 37.9% increase year-over-year. The growth was mainly
driven by the increase in the number of student enrollments in
language training and test preparation courses. Total student
enrollments in language training and test preparation courses in
the second quarter of fiscal year 2008 increased by 18.5%
year-over-year to approximately 257,700 from approximately 217,500
in the second quarter of fiscal year 2007. Total operating costs
and expenses for the quarter were RMB241.9 million (US$32.8
million), a 43.3% increase year-over-year. Cost of revenues
increased by 35.2% year-over-year to RMB116.1 million (US$15.7
million), primarily due to the increased number of courses being
offered to a larger student base and the greater number of schools
and learning centers in operation. Selling and marketing expenses
increased by 49.9% year-over-year to RMB38.1 million (US$5.2
million), primarily due to brand promotion expenses and headcount
increase. General and administrative expenses increased by 52.6%
year-over-year to RMB87.7 million (US$11.9 million), primarily due
to increased headcount as the Company expands its network of
schools and learning centers. Total share-based compensation
expenses, which were allocated to related operating costs and
expenses, increased to RMB15.3 million (US$2.1 million) in the
second quarter of fiscal year 2008. Operating margin for the
quarter was negative 0.5%, compared to 0.2% in the corresponding
period of the previous year. Excluding share-based compensation
expenses (non-GAAP), operating margin for the quarter was 5.8%,
compared to 4.9% in the corresponding period of the prior year.
This increase was primarily due to the improved operating
efficiency as revenue growth outpaced the growth in operating costs
and expenses. Net income for the quarter was RMB14.5 million
(US$2.0 million), representing a 77.0% increase from the second
quarter of fiscal year 2007. Basic and diluted earnings per common
share amounted to RMB0.10 (US$0.01) and RMB0.09 (US$0.01),
respectively, and basic and diluted earnings per ADS were RMB0.39
(US$0.05) and RMB0.37 (US$0.05), respectively. Income attributable
to holders of common shares excluding share-based compensation
expenses (non-GAAP) was RMB29.8 million (US$4.0 million). Basic and
diluted earnings per ADS excluding share-based compensation
expenses (non- GAAP) were RMB0.79 (US$0.11) and RMB0.76 (US$0.10),
respectively. Capital expenditures for the quarter were RMB12.3
million (US$1.7 million). As of November 30, 2007, New Oriental had
cash and cash equivalents of RMB1,824.8 million (US$247.1 million),
as compared to RMB1,743.9 million as of August 31, 2007. Net
operating cash flow for the second quarter of fiscal year 2008 was
RMB63.9 million (US$8.6 million). Financial Results for the Six
Months Ended November 30, 2007 For the six months ended November
30, 2007, New Oriental reported net revenues of RMB852.6 million
(US$115.4 million), representing a 42.5% increase year-over-year.
Total student enrollments in language training and test preparation
courses in the six months ended November 30, 2007 increased by
25.8% year- over-year to approximately 698,200 from approximately
554,900 in the six months ended November 30, 2006. Operating margin
for the six months ended November 30, 2007 was 31.4%, compared to
30.2% for the six months ended November 30, 2006. Net income for
the six months ended November 30, 2007 was RMB270.5 million
(US$36.6 million), representing a 56.1% increase year-over-year.
Basic and diluted earnings per ADS for the six months ended
November 30, 2007 amounted to RMB7.23 (US$0.98) and RMB6.91
(US$0.94), respectively. Net income attributable to holders of
common shares excluding share-based compensation expenses
(non-GAAP) for the six months ended November 30, 2007 was RMB298.5
million (US$40.4 million), representing a 59.6% increase year-
over-year. Basic and diluted earnings per ADS excluding share-based
compensation expenses (non-GAAP) for the six months ended November
30, 2007 amounted to RMB7.98 (US$1.08) and RMB7.63 (US$1.03),
respectively. Outlook for Third Quarter of Fiscal Year 2008 New
Oriental expects its total net revenues in the third quarter of
fiscal year 2008 (December 1, 2007 to February 29, 2008) to be in
the range of RMB311.2 million (US$42.1 million) to RMB326.5 million
(US$44.2 million), representing year-over-year growth in the range
of 22.0% to 28.0%, respectively. This forecast reflects New
Oriental's current and preliminary view, which is subject to
change. New Oriental's third fiscal quarter 2008 revenue growth
rate will be especially challenging when compared to the third
fiscal quarter of 2007 which showed year-over-year net revenue
growth of 51.3%. The Company's third fiscal quarter 2007 benefited
from the late timing of Chinese New Year in 2007 which fell in the
third week of February 2007 allowing Chinese students an extended
winter break and a longer period of time to take language training
and test prep courses. This will not be the case in 2008 as Chinese
New Year falls in the first week of February, a more typical date
for the Lunar New Year holiday. In addition, many schools
throughout China, including those in Beijing, have decided to
shorten the 2008 winter break for students by one week or more in
return for extending the 2008 summer recess by a corresponding
length of time, in order to allow students time to study and enjoy
the Olympic Games in Beijing this summer. Conference Call
Information New Oriental's management will host an earnings
conference call at 8 AM on January 15, 2008 U.S. Eastern Time (9 PM
on January 15, 2008 Beijing/Hong Kong time). Dial-in details for
the earnings conference call are as follows: US: +1-617-213-8849
Hong Kong: +852-3002-1672 Please dial-in 10 minutes before the call
is scheduled to begin and provide the passcode to join the call.
The passcode is "New Oriental earnings call." A replay of the
conference call may be accessed by phone at the following number
until January 22, 2008: International: +1-617-801-6888 Passcode:
85473887 Additionally, a live and archived webcast of the
conference call will be available at
http://investor.neworiental.org/ . About New Oriental New Oriental
is the largest provider of private educational services in China
based on the number of program offerings, total student enrollments
and geographic presence. New Oriental offers a wide range of
educational programs, services and products consisting primarily of
English and other foreign language training, test preparation
courses for major admissions and assessment tests in the United
States, the PRC and Commonwealth countries, primary and secondary
school education, development and distribution of educational
content, software and other technology, and online education. New
Oriental's ADSs, each of which represents four common shares,
currently trade on the New York Stock Exchange under the symbol
"EDU." For more information about New Oriental, please visit
http://english.neworiental.org/ . Safe Harbor Statement This
announcement contains forward-looking statements. These statements
are made under the "safe harbor" provisions of the U.S. Private
Securities Litigation Reform Act of 1995. These forward-looking
statements can be identified by terminology such as "will,"
"expects," "anticipates," "future," "intends," "plans," "believes,"
"estimates" and similar statements. Among other things, the outlook
for third quarter of fiscal year 2008 and quotations from
management in this announcement, as well as New Oriental's
strategic and operational plans, contain forward-looking
statements. New Oriental may also make written or oral
forward-looking statements in its periodic reports to the U.S.
Securities and Exchange Commission in its annual report to
shareholders, in press releases and other written materials and in
oral statements made by its officers, directors or employees to
third parties. Statements that are not historical facts, including
statements about New Oriental's beliefs and expectations, are
forward-looking statements. Forward-looking statements involve
inherent risks and uncertainties. A number of factors could cause
actual results to differ materially from those contained in any
forward- looking statement, including but not limited to the
following: our growth strategies; our future business development,
results of operations and financial condition; our ability to
attract students without a significant decrease in course fees; our
ability to continue to hire, train and retain qualified teachers;
our ability to maintain and enhance our "New Oriental" brand; our
ability to effectively and efficiently manage the expansion of our
school network and successfully execute our growth strategy; the
outcome of ongoing, or any future, litigation or arbitration,
including those relating to copyright and other intellectual
property rights; competition in the private education sector in
China; changes in our revenues and certain cost or expense items as
a percentage of our revenues; the expected growth of the Chinese
private education market; and Chinese governmental policies
relating to private educational services and providers of such
services. Further information regarding these and other risks is
included in our registration statement on Form F-1 and other
documents filed with the Securities and Exchange Commission. New
Oriental does not undertake any obligation to update any
forward-looking statement, except as required under applicable law.
All information provided in this press release and in the
attachments is as of January 15, 2008, and New Oriental undertakes
no duty to update such information, except as required under
applicable law. About Non-GAAP Financial Measures To supplement New
Oriental's consolidated financial results presented in accordance
with GAAP, New Oriental uses the following measures defined as non-
GAAP financial measures by the SEC: net income excluding
share-based compensation expenses and basic and diluted earnings
per ADS excluding share- based compensation expenses. The
presentation of these non-GAAP financial measures is not intended
to be considered in isolation or as a substitute for the financial
information prepared and presented in accordance with GAAP. For
more information on these non-GAAP financial measures, please see
the table captioned "Reconciliations of non-GAAP measures to the
most comparable GAAP measures" set forth at the end of this
release. New Oriental believes that these non-GAAP financial
measures provide meaningful supplemental information regarding its
performance and liquidity by excluding share-based expenses that
may not be indicative of its operating performance from a cash
perspective. New Oriental believes that both management and
investors benefit from these non-GAAP financial measures in
assessing its performance and when planning and forecasting future
periods. These non-GAAP financial measures also facilitate
management's internal comparisons to New Oriental's historical
performance and liquidity. New Oriental computes its non-GAAP
financial measures using the same consistent method from quarter to
quarter. New Oriental believes these non-GAAP financial measures
are useful to investors in allowing for greater transparency with
respect to supplemental information used by management in its
financial and operational decision making. A limitation of using
non-GAAP net income excluding share-based compensation expenses,
and basic and diluted earnings per share and per ADS excluding
share-based compensation expenses is that these non-GAAP measures
exclude share-based compensation charge that has been and will
continue to be for the foreseeable future a significant recurring
expense in our business. Management compensates for these
limitations by providing specific information regarding the GAAP
amounts excluded from each non-GAAP measure. The accompanying
tables have more details on the reconciliations between GAAP
financial measures that are most directly comparable to non-GAAP
financial measures. (1) The Company's financial information is
stated in RMB. The translation of RMB amounts at and for the
quarter ended November 30, 2007 into United States dollar ("US$")
is included solely for the convenience of the readers and has been
made at the rate of RMB7.3850 to US$1.00, the approximate free rate
of exchange at November 30, 2007. Such translations should not be
construed as representations that RMB amounts could be converted
into US$ at that rate or any other rate, or to be the amounts that
would have been reported under US GAAP. NEW ORIENTAL EDUCATION
& TECHNOLOGY GROUP INC. CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands) As of November 30 As of August 31 2007 2007
(Unaudited) (Unaudited) RMB USD RMB ASSETS: Current assets: Cash
and cash equivalents 1,824,801 247,096 1,743,898 Restricted cash
3,060 414 3,057 Term deposits 18,500 2,505 20,800 Accounts
receivable, net 6,408 868 3,990 Inventory 56,642 7,670 57,258
Prepaid expenses and other current assets 59,221 8,019 68,084 Total
current assets 1,968,632 266,572 1,897,087 Property, plant and
equipment, net 695,418 94,166 696,480 Land use right, net 24,626
3,335 24,765 Amounts due from related parties 578 78 244 Deferred
tax assets 7,927 1,073 7,935 Trade mark 1,637 222 1,637 Long term
investment 15 2 15 Total assets 2,698,833 365,448 2,628,163
LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts
payable-trade 53,434 7,235 57,692 Accrued expenses and other
current liabilities 150,763 20,417 178,624 Income tax payable
34,501 4,672 38,793 Amount due to related parties 97 13 97 Deferred
revenue 278,750 37,745 201,075 Total current liabilities 517,545
70,082 476,281 Total long-term liabilities -- -- -- Total
liabilities 517,545 70,082 476,281 Minority interest 1,612 218
1,690 Total shareholders' equity 2,179,676 295,148 2,150,192 Total
liabilities and shareholders' equity 2,698,833 365,448 2,628,163
NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC. CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except for per
share and per ADS amounts) For the Three Months Ended November 30
2007 2006 (Unaudited) (Unaudited) RMB USD RMB Net Revenues:
Educational Programs and services 209,529 28,372 151,967 Books and
others 31,087 4,210 17,062 Total net revenues 240,616 32,582
169,029 Operating costs and expenses (note 1): Cost of revenues
116,140 15,726 85,903 Selling and marketing 38,076 5,156 25,409
General and administrative 87,673 11,872 57,456 Total operating
costs and expenses 241,889 32,754 168,768 Operating income (loss)
(1,273) (172) 261 Other income (expenses), net 16,982 2,299 8,085
Provision for income taxes (1,466) (199) (485) Minority interest,
net of taxes 297 40 356 Net Income 14,540 1,968 8,217 Net income
per share-basic 0.10 0.01 0.06 Net income per share-diluted 0.09
0.01 0.06 Net income per ADS-basic (note 2) 0.39 0.05 0.23 Net
income per ADS-diluted (note 2) 0.37 0.05 0.22 Notes: Note 1: Share
based compensation expenses (in thousands) are included in the
operating costs and expenses as follows: For the Three Months Ended
November 30 2007 2006 Unaudited Unaudited RMB USD RMB Cost of
revenues 2,438 330 209 Selling and marketing 504 68 118 General and
administrative 12,334 1,670 7,698 Total 15,276 2,068 8,025 Note 2:
Each ADS represents four common shares NEW ORIENTAL EDUCATION &
TECHNOLOGY GROUP INC. CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (In thousands except for per share and per ADS amounts)
For the Six Months Ended November 30 2007 2006 (Unaudited)
(Unaudited) RMB USD RMB Net Revenues: Educational Programs and
services 787,746 106,668 563,881 Books and others 64,851 8,781
34,481 Total net revenues 852,597 115,449 598,362 Operating costs
and expenses (note 1): Cost of revenues 310,208 42,005 224,540
Selling and marketing 84,363 11,424 61,141 General and
administrative 190,512 25,797 132,246 Total operating costs and
expenses 585,083 79,226 417,927 Operating income (loss) 267,514
36,223 180,435 Other income (expenses), net 29,218 3,956 6,168
Provision for income taxes (26,832) (3,633) (13,683) Minority
interest, net of taxes 644 87 356 Net Income 270,544 36,633 173,276
Net income per share-basic 1.81 0.24 1.43 Net income per
share-diluted 1.73 0.23 1.33 Net income per ADS-basic (note 2) 7.23
0.98 5.72 Net income per ADS-diluted (note 2) 6.91 0.94 5.31 Notes:
Note 1: Share based compensation expenses (in thousands) are
included in the operating costs and expenses as follows: For the
Six Months Ended November 30 2007 2006 Unaudited Unaudited RMB USD
RMB Cost of revenues 3,310 448 352 Selling and marketing 950 129
217 General and administrative 23,715 3,211 13,145 Total 27,975
3,788 13,714 Note 2: Each ADS represents four common shares NEW
ORIENTAL EDUCATION & TECHNOLOGY GROUP INC. RECONCILIATION OF
NON-GAAP MEASURES TO THE MOST COMPARABLE GAAP MEASURES (In
thousands except share and per ADS amounts) For the Three Months
Ended November 30 2007 2006 (Unaudited) (Unaudited) RMB USD RMB Net
income 14,540 1,968 8,217 Share-based compensation expense 15,276
2,068 8,025 Non-GAAP net income 29,816 4,036 16,242 Net income per
ADS - basic (note 1) 0.39 0.05 0.23 Net income per ADS - diluted
(note 1) 0.37 0.05 0.22 Non-GAAP net income per ADS - basic (note
1) 0.79 0.11 0.46 Non-GAAP net income per ADS - diluted (note 1)
0.76 0.10 0.44 Weighted average shares used in calculating basic
net income per ADS (note 1) 150,163,711 150,163,711 142,603,785
Weighted average shares used in calculating diluted net income per
ADS (note 1) 157,175,447 157,175,447 148,176,297 Note 1: Each ADS
represents four common shares NEW ORIENTAL EDUCATION &
TECHNOLOGY GROUP INC. RECONCILIATION OF NON-GAAP MEASURES TO THE
MOST COMPARABLE GAAP MEASURES (In thousands except share and per
ADS amounts) For the Six Months Ended November 30 2007 2006
(Unaudited) (Unaudited) RMB USD RMB Net income 270,544 36,633
173,276 Share-based compensation expense 27,975 3,788 13,714
Non-GAAP net income 298,519 40,421 186,990 Net income per ADS -
basic (note 1) 7.23 0.98 5.72 Net income per ADS - diluted (note 1)
6.91 0.94 5.31 Non-GAAP net income per ADS - basic (note 1) 7.98
1.08 6.17 Non-GAAP net income per ADS - diluted (note 1) 7.63 1.03
5.73 Weighted average shares used in calculating basic net income
per ADS (note 1) 149,669,791 149,669,791 121,185,489 Weighted
average shares used in calculating diluted net income per ADS (note
1) 156,594,510 156,594,510 130,565,761 Note 1: Each ADS represents
four common shares. For investor and media inquiries, please
contact: In China: Ms. Sisi Zhao New Oriental Education and
Technology Group Inc. Tel: +86-10-6260-5566 x8203 Email: Mr. Derek
Mitchell Ogilvy Public Relations Worldwide (Beijing) Tel:
+86-10-8520-6284 Email: In the United States: Mr. Jeremy Bridgman
Ogilvy Public Relations Worldwide (New York) Tel: +1-212-880-5363
Email: DATASOURCE: New Oriental Education and Technology Group Inc.
CONTACT: In China: Ms. Sisi Zhao of New Oriental Education and
Technology Group Inc., +86-10-6260-5566 x8203, or ; Or Mr. Derek
Mitchell of Ogilvy Public Relations Worldwide (Beijing),
+86-10-8520- 6284, or ; In the United States: Mr. Jeremy Bridgman
of Ogilvy Public Relations Worldwide (New York), +1-212-880-5363,
or
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