New Oriental Announces Results for the Fourth Fiscal Quarter and Fiscal Year Ended May 31, 2018

BEIJING, July 24, 2018

Quarterly Student Enrollments Increased by 44.9% Year-Over-Year

Fiscal Year Net Revenues Increased by 36% Year-Over-Year

Fiscal Year Student Enrollments Increased by 30.3 % Year-Over-Year

BEIJING, July 24, 2018 /PRNewswire/ -- 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 fourth fiscal quarter ended May 31, 2018.

Financial Highlights for the Fourth Fiscal Quarter Ended May 31, 2018

• Total net revenues increased by 44.1% year-over-year to US$701.0 million for the fourth fiscal quarter of 2018.
• Operating income increased by 9.2% year-over-year to US$56.6 million for the fourth fiscal quarter of 2018.
• Non-GAAP operating income, which excludes share-based compensation expenses, increased by 29.6% year-over-year to US$78.8 million for the fourth fiscal quarter of 2018.
• Net income attributable to New Oriental increased by 17.4% year-over-year to US$65.1 million for the fourth fiscal quarter of 2018.
• Non-GAAP net income attributable to New Oriental, which excludes share-based compensation expenses, increased by 35.6% year-over-year to US$87.3 million for the fourth fiscal quarter of 2018.

Key Financial Results ARIVA.DE Börsen-Geflüster Kurse New Oriental Education & Technology Group Inc. ADR 81,85 $ +2,75%
(in thousands US$, except per ADS(1) data)	4Q FY2018	4Q FY2017	% of change
Net revenues	701,001	486,353	44.1%
Operating income	56,585	51,836	9.2%
Non-GAAP operating income (2)(3)	78,800	60,808	29.6%
Net income attributable to New Oriental	65,082	55,416	17.4%
Non-GAAP net income attributable to New Oriental (2)(3)	87,297	64,388	35.6%
Net income per ADS attributable to New Oriental - basic	0.41	0.35	17.0%
Net income per ADS attributable to New Oriental - diluted	0.41	0.35	16.9%
Non-GAAP net income per ADS attributable to New Oriental - basic(3)(4)	0.55	0.41	35.0%
Non-GAAP net income per ADS attributable to New Oriental - diluted(3)(4)	0.55	0.41	35.0%
(in thousands US$, except per ADS(1) data)	FY2018	FY2017	% of change
Net revenues	2,447,430	1,799,509	36.0%
Operating income	262,959	262,149	0.3%
Non-GAAP operating income(2)(3)	320,402	282,436	13.4%
Net income attributable to New Oriental	296,130	274,457	7.9%
Non-GAAP net income attributable to New Oriental(2)(3)	353,573	294,744	20.0%
Net income per ADS attributable to New Oriental - basic	1.87	1.74	7.5%
Net income per ADS attributable to New Oriental - diluted	1.87	1.74	7.5%
Non-GAAP net income per ADS attributable to New Oriental - basic(3)(4)	2.24	1.87	19.5%
Non-GAAP net income per ADS attributable to New Oriental - diluted(3)(4)	2.23	1.87	19.5%

Operating Highlights for Fourth Fiscal Quarter Ended May 31, 2018

• Total student enrollments in academic subjects tutoring and test preparation courses increased by 44.9% year-over-year to approximately 2,058,000 for the fourth fiscal quarter of 2018.
• The total number of schools and learning centers was 1,081 as of May 31, 2018, an increase of 226 compared to 855 as of May 31, 2017, and an increase of 81 compared to 1,000 as of February 28, 2018. The total number of schools was 87 as of May 31, 2018.

Michael Minhong Yu, New Oriental's Executive Chairman, commented, "We are pleased to conclude the final quarter of fiscal year 2018 with sustained acceleration in our top line growth as well as student enrollments. In the fourth quarter, we recorded a top line growth of 44.1%, while student enrollments were up approximately 44.9% during the period. The strong top line performance was driven by the continued momentum of our K-12 after-school tutoring business with enrollment and revenue growth of approximately 52% and 52% year-over-year, respectively. For the full fiscal year, net revenues grew by 36%, with total enrollments up by 30.3%. Our key growth driver, K-12 after-school tutoring business, achieved approximately 46% increase in revenue in fiscal year 2018, contributing approximately 59% of our total revenue. Furthermore, our U-Can middle and high school all-subjects after-school tutoring business had a revenue growth of approximately 44%, while the POP Kids program grew by approximately 51% year-over-year. It is particularly encouraging that we have achieved consistent increase in our customer retention rate this year, which is a clear testament to our consistent high quality of service. We are confident about the overall market prospect, and well-placed to continue gaining market share over the long term."

Chenggang Zhou, New Oriental's Chief Executive Officer, added, "During the fiscal year, we continued to implement our 'Optimize the Market' strategy and step up our capacity expansion efforts in cities with robust growth momentum, while maintaining high operational efficiency. This enabled us to seize tremendous market opportunities with our standardized online and offline integrated education system. During the quarter, we added a net total of 81 learning centers in 37 existing cities. For fiscal year 2018, we added a total of 226 new facilities, including 200 new learning centers in existing cities, 11 offline training facilities in three new cities, 14 dual-teacher model facilities in six low-tier cities, and one kindergarten in Hong Kong. Altogether, our total square meters of classroom area by the end of fiscal 2018 increased by approximately 40% year-over-year. Furthermore, we proved highly successful in leveraging our online and offline integrated standardized teaching system in our core offline business including K-12 tutoring and overseas test preparation businesses."

Stephen Zhihui Yang, New Oriental's Chief Financial Officer, commented, "We are encouraged by the fact that even with the increase in our overall capacity by approximately 40% year-over-year, we had a constant year-over-year operating margin in our language training and test preparation business in this quarter, indicating that the margin pressure in the previous three quarters has eased off. Looking ahead into fiscal year 2019, we aim to add approximately 20-25% new teaching facilities in existing cities mainly in our K-12 after-school tutoring business. In addition, we will continue to expand our businesses into remote areas in China through the rolling out of dual-teacher model schools and new initiatives in our pure online K-12 after-school tutoring. We will continue to uphold the healthy balance between our strong growth momentum and cost control with our efforts in improving the utilization rate of our facilities. With these strategies in place, we are confident in our endeavor in delivering sustainable long-term value to our customers and shareholders."

Financial Results for the Fourth Fiscal Quarter Ended May 31, 2018

Net Revenues

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