New Oriental Announces Results for the Third Fiscal Quarter Ended February 28, 2023

BEIJING, April 19, 2023

Financial Highlights for the Third Fiscal Quarter Ended February 28, 2023

• Total net revenues increased by 22.8% year over year to US$754.2 million for the third fiscal quarter of 2023.
• Operating income increased by 147.1% year over year to US$66.5 million for the third fiscal quarter of 2023.
• Net income attributable to New Oriental increased by 166.7% year over year to US$81.6 million for the third fiscal quarter of 2023.

Key Financial Results

(in thousands US$, except per ADS(1) data)	3Q FY2023	3Q FY2022	% of change ARIVA.DE Börsen-Geflüster Kurse New Oriental Education & Technology Group Inc. ADR 87,43 $ +3,87%
Net revenues	754,153	614,091	22.8 %
Operating income/ (loss)	66,491	(141,194)	147.1 %
Non-GAAP operating income/ (loss) (2)(3)	87,895	(111,232)	179.0 %
Net income/ (loss) attributable to New Oriental	81,648	(122,439)	166.7 %
Non-GAAP net income/ (loss) attributable to New Oriental (2)(3)	95,362	(95,503)	199.9 %
Net income/ (loss) per ADS attributable to New Oriental - basic	0.49	(0.72)	167.8 %
Net income/ (loss) per ADS attributable to New Oriental - diluted	0.48	(0.72)	166.5 %
Non-GAAP net income/ (loss) per ADS attributable to New Oriental - basic (2)(3)(4)	0.57	(0.56)	201.5 %
Non-GAAP net income/ (loss) per ADS attributable to New Oriental - diluted (2)(3)(4)	0.56	(0.56)	199.7 %
(in thousands US$, except per ADS(1) data)	9M FY2023	9M FY2022	%of change
Net revenues	2,137,189	2,581,223	-17.2 %
Operating income/ (loss)	141,992	(876,864)	116.2 %
Non-GAAP operating income/ (loss) (2)(3)	201,242	(772,680)	126.0 %
Net income/ (loss) attributable to New Oriental	148,382	(998,419)	114.9 %
Non-GAAP net income/ (loss) attributable to New Oriental (2)(3)	196,818	(885,899)	122.2 %
Net income/ (loss) per ADS attributable to New Oriental - basic	0.88	(5.89)	114.9 %
Net income/ (loss) per ADS attributable to New Oriental - diluted	0.86	(5.89)	114.6 %
Non-GAAP net income/ (loss) per ADS attributable to New Oriental - basic (2)(3)(4)	1.17	(5.22)	122.3 %
Non-GAAP net income/ (loss) per ADS attributable to New Oriental - diluted (2)(3)(4)	1.14	(5.22)	121.9 %
(1)  Each ADS represents ten common shares. The Hong Kong-listed shares are fully fungible with the ADSs listed on NYSE. The weighted average number of ADS and earnings per ADS have been retrospectively adjusted to reflect the ADS ratio change from one ADS representing one common share to one ADS representing ten common shares, which became effective on April 8, 2022.
(2)  GAAP represents Generally Accepted Accounting Principles in the United States of America.
(3)  New Oriental provides net income / (loss) attributable to New Oriental, operating income / (loss) and net income / (loss) per ADS attributable to New Oriental on a non-GAAP basis that excludes share-based compensation expenses and gain / (loss) from fair value change of investments to provide supplemental information regarding its operating performance. For more information on these non-GAAP financial measures, please see the section captioned "About Non-GAAP Financial Measures" and the tables captioned "Reconciliations of Non-GAAP Measures to the Most Comparable GAAP Measures" set forth at the end of this release.
(4)  The Non-GAAP net income / (loss) per ADS attributable to New Oriental is computed using Non-GAAP net income / (loss) attributable to New Oriental and the same number of shares and ADSs used in GAAP basic and diluted EPS calculation.

Operating Highlights for the Third Fiscal Quarter Ended February 28, 2023

• The total number of schools and learning centers was 712 as of February 28, 2023, an increase of 4 compared to 708 as of November 30, 2022, and a decrease of 135 compared to 847 as of February 28, 2022, respectively. The total number of schools was 91 as of February 28, 2023.

Michael Yu, New Oriental's Executive Chairman, commented, "In the third fiscal quarter, we continued to make solid progress in all key business lines given a favorable environment of recovery as the pandemic subsides. Our overseas test preparation and overseas study consulting businesses increased by approximately 13% and 5% year-over-year, respectively. Simultaneously, our educational new business initiatives have sustained a strong momentum and generated meaningful profit in this fiscal quarter. As of February 28, 2023, our non-academic tutoring courses were offered in over 60 cities, with 218,000 student enrollments in this fiscal quarter, while the intelligent learning system and devices were adopted in around 60 cities, with 108,000 active paid users in this fiscal quarter. We are confident that these new businesses have a huge market potential, and we will leverage our brand advantage and rich educational resources to capture these new market opportunities."

Chenggang Zhou, New Oriental's Chief Executive Officer, added, "By the end of this fiscal quarter, the total number of schools and learning centers remained at 712. At the same time, our continued investment in maintaining the online-merge-offline teaching system has not only supported our high quality services amid the pandemic, but also helped us enhance operational efficiency as businesses gradually recover. East Buy(东方甄选) has made significant progress in its private label products and livestreaming e-commerce business, and has achieved breakthroughs in our business operations and financial performance. While East Buy has become a well-known platform for promoting healthy, top-quality and cost-effective products to the public, it continues to expand its product selection and SKUs through proactive cooperation with third parties, coupled with increased variety of our private label products. By focusing on improving product capabilities and developing diverse cultural content, East Buy has yielded millions of revenues and a loyal customer base in the first three quarters of this fiscal year. During the quarter, East Buy continued to devote substantial resources to invest in improving products, services and content."

Stephen Zhihui Yang, New Oriental's Executive President and Chief Financial Officer, commented, "We are pleased to deliver continued improvement in profitability in this quarter. Our GAAP operating margin and Non-GAAP operating margin for the quarter were 8.8% and 11.7% respectively. GAAP net margin and non-GAAP net margin for the quarter were 10.8% and 12.6% respectively. We recorded a positive operating cash flow of US$190.5 million and by the end of this fiscal quarter, our cash and cash equivalents, term deposits and short-term investments totaled approximately US$4.3 billion. We are determined in pursuing profitable growth for all business lines and maintaining a healthy growth with improving operational efficiency and service quality. We are confident in creating sustainable value for our customers and shareholders in the long term."

Share Repurchase

On July 26, 2022, the Company's board of directors authorized a share repurchase program, under which the Company may repurchase up to US$400 million of the Company's ADSs or common shares during the period from July 28, 2022 through May 31, 2023. As of April 18, 2023, the Company repurchased an aggregate of approximately 5.1 million ADSs for approximately US$157.6 million from the open market under the share repurchase program.

Financial Results for the Third Fiscal Quarter Ended February 28, 2023

Net Revenues

For the third fiscal quarter of 2023, New Oriental reported net revenues of US$754.2 million, representing a 22.8% increase year over year. The growth was mainly driven by the increase in revenues from our educational new business initiatives and East Buy private label products and livestreaming e-commerce business.

Operating Costs and Expenses

Operating costs and expenses for the quarter were US$687.7 million, representing a 9.0% decrease year over year. Non-GAAP operating costs and expenses for the quarter, which exclude share-based compensation expenses, were US$666.3 million, representing an 8.1% decrease year over year. The decrease was primarily due to the reduction of facilities and number of staff as a result of the downsizing in fiscal year 2022.  

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