Net Revenues Increased by 26.3% Year-Over-Year BEIJING, Oct. 20
/PRNewswire-Asia/ -- New Oriental Education and Technology Group
Inc. (the "Company" or "New Oriental") (NYSE:EDU), the largest
provider of private educational services in China, today announced
its unaudited financial results for the first quarter ended August
31, 2009, which is the first quarter of New Oriental's fiscal year
2010. Highlights for the First Fiscal Quarter Ended August 31, 2009
-- Total net revenues increased by 26.3% year-over-year to US$149.4
million from US$118.3 million in the same period of the prior
fiscal year. -- GAAP net income increased by 27.1% year-over-year
to US$57.1 million from US$44.9 million in the same period of the
prior fiscal year. Non-GAAP net income, which excludes share-based
compensation expenses, increased by 24.6% year-over-year to US$60.8
million from US$48.8 million in the same period of the prior fiscal
year. -- GAAP income from operations increased by 24.7%
year-over-year to US$60.9 million from US$48.9 million in the same
period of the prior fiscal year. Non-GAAP income from operations
increased by 22.5% year-over-year to US$64.6 million from US$52.7
million in the same period of the prior fiscal year. -- GAAP basic
and diluted net income per ADS were US$1.52 and US$1.47,
respectively. Non-GAAP basic and diluted net income per ADS were
US$1.61 and US$1.57, respectively. Each ADS represents four common
shares of the Company. -- Total student enrollments in language
training and test preparation courses increased by 18.7%
year-over-year to approximately 647,500 from approximately 545,400
in the same period of the prior fiscal year. -- The total number of
schools and learning centers increased to 287 as of August 31,
2009, up from 270 as of May 31, 2008. The total number of schools
remained at 48, located in 40 cities, as of August 31, 2009. The
number of learning centers increased by 17 in the quarter to 239 as
of August 31, 2009, up from 222 as of May 31, 2009. Financial and
Student Enrollments Summary - First Quarter 2010 (US$ 000, except
per ADS data and student enrollments) Q1 of FY2010 Q1 of FY2009
Pct. Change Net revenues 149,364 118,262 26.3 % Non-GAAP net income
(1) 60,767 48,787 24.6 % GAAP Net income 57,066 44,903 27.1 %
Non-GAAP operating income (1) 64,632 52,749 22.5 % GAAP Operating
income 60,931 48,865 24.7 % Non-GAAP net income per ADS basic
(1)(2) 1.61 1.31 23.0 % Non-GAAP net income per ADS diluted (1)(2)
1.57 1.27 23.9 % GAAP Net income per ADS basic (2) 1.52 1.21 25.5 %
GAAP Net income per ADS diluted (2) 1.47 1.17 26.4 % Total student
enrollments in language training and test preparation courses
647,500 545,400 18.7 % (1) New Oriental provides net income,
operating income, and net income per ADS on a Non-GAAP basis that
excludes share-based compensation expenses to reflect meaningful
supplemental information regarding its performance and liquidity.
For more information on these Non-GAAP financial measures, please
see the table captioned "Reconciliation of Non-GAAP measures to the
most comparable GAAP measures" set forth at the end of this
release. (2) Each ADS represents four common shares. "We are
pleased to finish the first quarter of fiscal year 2010 with
revenue growth of 26.3% to approximately US$149.4 million and even
higher net income growth of 27.1% to over US$57 million," said Mr.
Michael Yu, New Oriental's chairman and chief executive officer.
"Strong first fiscal quarter student enrollments, with enrollment
growth in language training and test preparation courses increasing
18.7% year-over-year to over 647,500, drove solid results despite
the global economic slowdown and challenges resulting from the H1N1
flu pandemic. We estimate that the H1N1 flu pandemic negatively
impacted our top line growth by 2-4% with a more significant
negative percentage impact on our bottom line for the quarter. In
particular, fear of the H1N1 flu adversely impacted enrollments as
we received tens of thousands of inquiries from concerned parents
and students, and a large percentage of the students decided not to
enroll in New Oriental classes during the summer as an extra
precaution. Further, we experienced record cancellations and
deferments in enrollments from registered students, and we closed
or cancelled classes and summer camps across China whenever an
enrolled student was diagnosed with the H1N1 flu, as required by
applicable local health regulations. We are hopeful that the
adverse effects on our business from the fear of H1N1 will
gradually subside as the H1N1 flu vaccine has been made available
in China this month and will become widely available across the
country with over 60 million doses planned in the months ahead. Our
strong financial results in the face of these challenging external
factors underline the strength of the New Oriental brand and the
important role we play in the lives of Chinese students." Mr. Yu
continued, "We are delighted and excited to announce that during
the quarter we officially launched our customized learning program
for 6- to 18-year-olds, offering one-to-one tutoring and small
class size tutoring (up to five students per class), in all
subjects classes required for the gaokao (Chinese National College
Entrance Examination) and zhongkao (Chinese National High School
Entrance Examination). This will complement our very successful
U-Can program, launched last year targeting class sizes of 20 to 50
students, which recorded over 55,000 enrollments in non-English
subjects in its first year. This two-pronged strategy of offering
affordable larger classes of 20 or more students and higher priced
individualized small and one-to-one classes for school aged
students will enable New Oriental to expand our leading position in
the multi-billion dollar after school training market in China,
targeting the approximately 190 million students aged 6 to 18 years
old. We are targeting over US$25 million in revenue in fiscal year
2010 from non-English U-Can and our new individualized small class
offerings, more than triple the revenue generated from U-Can last
fiscal year." Louis T. Hsieh, New Oriental's president and chief
financial officer, stated, "During the first fiscal quarter
notwithstanding the challenges to our business posed by the fear of
the H1N1 flu, we saw continued strong growth in our three key
growth segments; (i) POP Kids English with enrollments up over 34%
to approximately 131,200 and over 40% revenue growth, (ii) English
for Middle and High School Students enrollments, including U-Can,
up over 18% to approximately 157,800 and over 40% revenue growth,
and U-Can non-English all subjects enrollments up over 100% to
approximately 32,400, and (iii) Overseas Test Preparation with
enrollments up over 14% to approximately 74,800 and over 27%
revenue growth. We recorded blended average selling price growth of
approximately 9.5% for the quarter, mostly driven by students
electing higher priced smaller size class offerings." Financial
Results for the Fiscal Quarter Ended August 31, 2009 For the first
fiscal quarter of 2010, New Oriental reported net revenues of
US$149.4 million, representing a 26.3% increase year-over-year. Net
revenues from educational programs and services for the first
fiscal quarter were US$142.4 million, representing a 28.1% 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 first quarter of fiscal year
2010 increased by 18.7% year-over-year to approximately 647,500
from approximately 545,400 in the same period of the prior fiscal
year. GAAP operating costs and expenses for the quarter were
US$88.4 million, a 27.4% increase year-over-year. Non-GAAP
operating costs and expenses for the quarter were US$84.7 million,
a 29.3% increase year-over-year. Cost of revenues increased by
23.8% year-over-year to US$47.7 million, primarily due to the
increased number of courses and the greater number of schools and
learning centers in operation. Selling and marketing expenses
increased by 57.3% year-over-year to US$15.5 million, primarily due
to new program and brand promotion expenses related to POP Kids
English, U-Can and the launch of New Oriental's customized learning
program. GAAP general and administrative expenses were US$25.3
million, a 20.0% increase year-over-year. Non-GAAP general and
administrative expenses for the quarter increased by 25.0%
year-over-year to US$21.8 million, primarily due to increased
headcount as the Company expanded its network of schools and
learning centers. Total share-based compensation expenses, which
were allocated to related operating costs and expenses, decreased
slightly to US$3.7 million in the first quarter of fiscal year 2010
from US$3.9 million in the same period of the prior fiscal year.
GAAP income from operations for the quarter was US$60.9 million, a
24.7% increase from US$48.9 million in the same period of the prior
fiscal year, and Non-GAAP income from operations for the quarter
was US$64.6 million, compared to US$52.7 million in the same period
of the prior fiscal year. GAAP operating margin for the quarter was
40.8%, compared to 41.3% in the same period of the prior fiscal
year. Non-GAAP operating margin for the quarter was 43.3%, compared
to 44.6% in the same period of the prior fiscal year. This decline
in operating margin was primarily due to increased marketing
expenses related to POP Kids English, U-Can and the launch of New
Oriental's customized learning program. GAAP net income for the
quarter was US$57.1 million, representing a 27.1% increase from the
same period of the prior fiscal year. Basic and diluted net income
per ADS were US$1.52 and US$1.47, respectively. Non-GAAP net income
was US$60.8 million, representing a 24.6% increase from the same
period of the prior fiscal year. Non-GAAP basic and diluted net
income per ADS were US$1.61 and US$1.57, respectively. Capital
expenditures for the quarter were US$5.2 million, which was
primarily used to add a net of 17 new learning centers and remodel
older learning centers during the quarter. As of August 31, 2009,
New Oriental had cash and cash equivalents of US$238.7 million, as
compared to US$254.8 million as of May 31, 2009. In addition, the
Company had US$129.0 million in term deposits at the end of the
quarter. Net operating cash flow for the first quarter of fiscal
year 2010 was US$61.2 million. The deferred revenue balance (cash
collected from registered students for courses and recognized
proportionally as revenue as the instructions are delivered) at the
end of the first quarter of fiscal year 2010 was US$57.9 million,
an increase of 36.2% from US$42.6 million at the end of the first
quarter of fiscal year 2009. Outlook for Second Quarter of Fiscal
Year 2010 New Oriental expects its total net revenues in the second
quarter of fiscal year 2010 (September 1, 2009 to November 30,
2009) to be in the range of US$60.8 million to US$62.8 million,
representing year-over-year growth in the range of 23.0% to 27.0%,
respectively. We expect our student enrollments to continue to be
negatively impacted by fear of the H1N1 flu during our second
fiscal quarter. This forecast reflects New Oriental's current and
preliminary view, which is subject to change. Conference Call
Information New Oriental's management will host an earnings
conference call at 8 AM on October 20, 2009 U.S. Eastern Time (8 PM
on October 20, 2009 Beijing/Hong Kong time). Dial-in details for
the earnings conference call are as follows: US: +1-617-213-8837
Hong Kong: +852-3002-1672 UK: +44-207-365-8426 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 October 27, 2009: International:
+1-617-801-6888 Passcode: 80512116 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 the second quarter of fiscal year 2010 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 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; health epidemics and other outbreaks in
China; 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; Chinese governmental
policies relating to private educational services and providers of
such services; and general economic conditions in China. Further
information regarding these and other risks is included in our
annual report on Form 20-F 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 the date of this
press release, 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, operating income excluding share-based
compensation expenses, operating costs and expenses excluding
share-based compensation expenses, general and administrative
expenses excluding share-based compensation expenses, operating
margin excluding share-based compensation expenses, and basic and
diluted net income 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 "Reconciliation 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 compensation
expenses that may not be indicative of its operating performance
from a cash perspective. New Oriental believes that both management
and investors benefit from referring to 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 these non-GAAP financial measures is that these
non-GAAP measures exclude the 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. For investor and media inquiries,
please contact: In China: Ms. Maria Xin New Oriental Education and
Technology Group Inc. Tel: +86-10-6260-5566 x8931 Email: Ms.
Courtney Shike Brunswick Group LLC Tel: +86-10-6566-2256 Email: In
the U.S.: Ms. Kate Tellier Brunswick Group LLC Tel: +1-212-333-3810
Email: NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC. CONDENSED
CONSOLIDATED BALANCE SHEETS (In thousands) As of August 31, As of
May 31, 2009 2009 (Unaudited) (Unaudited) USD USD ASSETS: Current
assets: Cash and cash equivalents 238,709 254,772 Restricted cash
541 540 Term deposits 129,027 59,845 Accounts receivable, net 1,985
1,539 Inventory 13,672 15,188 Deferred tax assets-Current 1,855
1,621 Prepaid expenses and other current assets 16,963 14,222 Total
current assets 402,752 347,727 Property, plant and equipment, net
112,721 109,785 Land use right, net 3,464 3,485 Amounts due from
related parties 396 396 Deferred tax assets 664 1,077 Long term
deposit 2,861 2,021 Long term prepaid rent 1,223 1,331 Intangible
assets 837 866 Goodwill 2,711 2,712 Long term investment 2 2 Total
assets 527,631 469,402 LIABILITIES, MINORITY INTEREST AND
SHAREHOLDERS' EQUITY Current liabilities: Accounts payable-trade
8,300 9,295 Accrued expenses and other current liabilities 45,398
29,854 Income tax payable 7,801 3,728 Amount due to related parties
51 102 Deferred revenue 57,941 74,782 Total current liabilities
119,491 117,761 Deferred tax liabilities 149 157 Total long-term
liabilities 149 157 Total liabilities 119,640 117,918 Total New
Oriental Education & Technology Group Inc. shareholders' equity
407,991 351,246 Noncontrolling interests (note 1) 0 238 Total
equity 407,991 351,484 Total liabilities and equity 527,631 469,402
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 August 31,
2009 2008 (Unaudited) (Unaudited) USD USD Net Revenues: Educational
Programs and services 142,421 111,221 Books and others 6,943 7,041
Total net revenues 149,364 118,262 Operating costs and expenses
(note 2): Cost of revenues 47,652 38,486 Selling and marketing
15,510 9,859 General and administrative 25,271 21,052 Total
operating costs and expenses 88,433 69,397 Operating income 60,931
48,865 Other income, net 1,463 1,863 Provision for income taxes
(5,566) (6,226) Less: Net income attributable to the noncontrolling
interests (note 3) 238 401 Net income attributable to New Oriental
Education & Technology Group Inc. 57,066 44,903 Net income per
share-basic 0.38 0.30 Net income per share-diluted 0.37 0.29 Net
income per ADS-basic (note 4) 1.52 1.21 Net income per ADS-diluted
(note 4) 1.47 1.17 Notes: Note 1: Amount in relation to
noncontrolling interest, formerly named minority interest, as of
May 31, 2009 is reclassified in accordance with FASB Statement No.
160, Noncontrolling Interest, which was adopted by the Company on
June 1, 2009 Note 2: Share-based compensation expenses (in
thousands) are included in the operating costs and expenses as
follows: For the Three Months Ended August 31, 2009 2008
(Unaudited) (Unaudited) USD USD Cost of revenues 193 230 Selling
and marketing 54 62 General and administrative 3,454 3,592 Total
3,701 3,884 Note 3: Amount in relation to noncontrolling interest,
formerly named minority interest, for the three-month period ended
August 31, 2008 is reclassified in accordance with FASB Statement
No. 160, Noncontrolling Interest, which was adopted by the Company
on June 1, 2009. Note 4: 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 August 31, 2009 2008 (Unaudited) (Unaudited) USD USD General
and administrative expenses 25,271 21,052 Share-based compensation
expense in general and administrative expenses 3,454 3,592 Non-GAAP
general and administrative expenses 21,817 17,460 Total operating
costs and expenses 88,433 69,397 Share-based compensation expenses
3,701 3,884 Non-GAAP operating costs and expenses 84,732 65,513
Operating income 60,931 48,865 Share-based compensation expenses
3,701 3,884 Non-GAAP operating income 64,632 52,749 Operating
margin 40.8% 41.3% Non-GAAP operating margin 43.3% 44.6% Net income
57,066 44,903 Share-based compensation expense 3,701 3,884 Non-GAAP
net income 60,767 48,787 Net income per ADS - basic (note 1) 1.52
1.21 Net income per ADS - diluted (note 1) 1.47 1.17 Non-GAAP net
income per ADS - basic (note 1) 1.61 1.31 Non-GAAP net income per
ADS - diluted (note 1) 1.57 1.27 Weighted average shares used in
calculating basic net income per ADS (note 1) 150,592,959
148,688,611 Weighted average shares used in calculating diluted net
income per ADS (note 1) 154,875,557 154,000,783 Note 1: Each ADS
represents four common shares. DATASOURCE: New Oriental Education
and Technology Group Inc. CONTACT: In China: Ms. Maria Xin, New
Oriental Education and Technology Group Inc., +86-10-6260-5566
x8931, ,Ms. Courtney Shike, Brunswick Group LLC, +86-10-6566-2256,
; In the U.S.: Ms. Kate Tellier, Brunswick Group LLC,
+1-212-333-3810, Web site: http://investor.neworiental.org/
http://english.neworiental.org/
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