New Oriental Q4 revenue increased by 32% year-on-year, operating profit declined by 78% | Financial Report Insights

On Wednesday, July 31, New Oriental released the unaudited financial performance for the fourth quarter of the 2024 fiscal year, with increased revenue but not increased profit in the fourth quarter.

1) Key Financial Data

Revenue: Net revenue for Q4 was USD 1.137 billion, a year-on-year increase of 32.1%, in line with market estimates;

Net Profit: Shareholders' net profit for Q4 was USD 26.972 million, a year-on-year decrease of 6.9%;

Operating Profit: Operating profit for Q4 was USD 10.527 million, a year-on-year decrease of 78.1%, lower than the market estimate of USD 34.5 million.

The increase in net revenue was mainly driven by the new education-related business and self-operated products of EAST BUY, as well as the live e-commerce business.

2) Segment Business

Preparation for overseas exams and overseas consulting business grew by approximately 17.7% and 17.3% year-on-year, respectively;

Domestic exam preparation for adults and college students recorded a year-on-year growth of about 16.4%;

Revenue from new education-related businesses increased by 50.3% year-on-year. Among them, non-subject tutoring services were offered in nearly 60 cities this fiscal quarter, with approximately 875,000 registrations; intelligent learning systems and devices were also adopted in about 60 cities; the number of active paying users this fiscal quarter was 188,000.

3) Operational Situation

As of May 31, 2024, the total number of schools and learning centers was 1,025, an increase of 114 from the previous quarter and 277 from the same period last year, with a total of 81 schools.

After the financial report was released, New Oriental's US stocks initially fell by 3% in pre-market trading before rising. As of the time of writing, New Oriental's pre-market trading had risen by 3.97%.

It is worth noting that on July 25, EAST BUY announced on the Hong Kong Stock Exchange that Dong Yuhui had decided to no longer serve as an employee of the company and a senior management of an associated entity of the company. Following this announcement, New Oriental's US stocks plunged in pre-market trading, falling by more than 8% at one point.

Furthermore, the board of directors of New Oriental authorized a share repurchase plan in July 2022, allowing the company to repurchase up to USD 400 million of its American depositary shares or ordinary shares over the next 12 months. The authorization has been further extended to May 31, 2025.

As of July 30, 2024, New Oriental had repurchased approximately 7.3 million shares of its American depositary shares in the open market under the share repurchase plan, totaling approximately USD 296.1 million In terms of outlook, New Oriental expects the net revenue for the first quarter of the 2025 fiscal year (from June 1, 2024, to August 31, 2024), excluding self-operated product live e-commerce business of EAST BUY, to be between USD 1.255 billion and USD 1.284 billion, with a year-on-year growth rate between 31% and 34%.

Yang Zhihui, CEO and CFO of New Oriental, stated:

"The GAAP operating margin for this quarter is 0.9%, and the Non-GAAP operating margin is 3.2%. Due to accelerated investments in expanding educational space, newly integrated cultural and tourism businesses, as well as increased compensation and rewards for management and employees, our operating margin for this fiscal quarter shows a short-term impact. We expect that with our continuous improvement in facility utilization and operational efficiency, the profit pressure on the education business will decrease in the next fiscal year."