New Oriental Announces Results for the Second Fiscal Quarter Ended November 30, 2007
Tuesday January 15, 4:30 am ET 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 -
News), 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.
