New Oriental Announces Results for the Third Fiscal Quarter Ended February 28, 2010
Group Inc. (the “Company” or “New Oriental”) (NYSE: EDU), the largest provider
of private educational services in
financial results for the fiscal quarter ended
third quarter of New Oriental’s fiscal year 2010.
Highlights for the Third Fiscal Quarter Ended February 28, 2010
-- Total net revenues increased by 36.2% year-over-year to US$89.2 million
from US$65.4 million in the same period of the prior fiscal year.
-- Net income attributable to New Oriental increased by 33.0% year-over-
year to US$13.8 million from US$10.4 million in the same period of the
prior fiscal year.
-- Non-GAAP net income attributable to New Oriental, which excludes share-
based compensation expenses, increased by 29.1% year-over-year to
US$18.7 million from US$14.5 million in the same period of the prior
fiscal year.
-- Income from operations increased by 57.0% year-over-year to US$13.6
million from US$8.7 million in the same period of the prior fiscal year.
Non-GAAP income from operations, which excludes share-based
compensation expenses, increased by 45.0% year-over-year to US$18.5
million from US$12.8 million in the same period of the prior fiscal
year.
-- Basic and diluted net income per ADS attributable to New Oriental were
US$0.37 and US$0.36, respectively. Non-GAAP basic and diluted net
income per ADS attributable to New Oriental, which exclude share-based
compensation expenses, were US$0.50 and US$0.48, respectively.
-- Total student enrollments in language training and test preparation
courses increased by 18.3% year-over-year to approximately 416,000 from
approximately 351,700 in the same period of the prior fiscal year.
-- The total number of schools and learning centers increased to 324 as of
February 28, 2010, up from 298 as of November 30, 2009. The total
number of schools remained at 48, located in 40 cities, as of February
28, 2010. The number of learning centers increased by 26 in the quarter
to 276 as of February 28, 2010, up from 250 as of November 30, 2009.
Financial and Enrollment Summary – Third Fiscal Quarter 2010 and First
Nine Months of FY2010
(US$ 000, except per ADS data and student enrollments)
Q3 of FY2010 Q3 of FY 2009 Pct. Change
Net revenues 89,167 65,449 36.2%
Net income attributable to New
Oriental 13,843 10,409 33.0%
Non-GAAP net income attributable
to New Oriental (1) 18,698 14,481 29.1%
Operating income 13,641 8,688 57.0%
Non-GAAP operating income (1) 18,496 12,760 45.0%
Net income per ADS attributable
to New Oriental - basic (2) 0.37 0.28 31.4%
Net income per ADS attributable
to New Oriental - diluted (2) 0.36 0.27 31.7%
Non-GAAP net income per ADS
attributable to New Oriental
- basic (1)(2) 0.50 0.39 27.6%
Non-GAAP net income per ADS
attributable to New Oriental
- diluted (1)(2) 0.48 0.38 27.9%
Total student enrollments in
language training and test
preparation courses 416,000 351,700 18.3%
YTD 9-Mo FY2010 YTD 9-Mo FY2009 Pct. Change
Net revenues 299,726 233,141 28.6%
Net income attributable to
New Oriental 72,016 58,376 23.4%
Non-GAAP net income
attributable to New
Oriental (1) 84,935 70,644 20.2%
Operating income 73,661 58,423 26.1%
Non-GAAP operating income (1) 86,580 70,691 22.5%
Net income per ADS
attributable to New
Oriental - basic (2) 1.91 1.57 21.9%
Net income per ADS
attributable to New
Oriental - diluted (2) 1.86 1.52 22.4%
Non-GAAP net income per ADS
attributable to New
Oriental - basic (1)(2) 2.25 1.90 18.8%
Non-GAAP net income per ADS
attributable to New
Oriental - diluted (1)(2) 2.20 1.84 19.3%
Total student enrollments in
language training and
test preparation courses 1,370,500 1,189,300 15.2%
(1) New Oriental provides net income attributable to New Oriental,
operating income, and net income per ADS attributable to New Oriental
on a Non-GAAP basis that excludes share-based compensation expenses to
reflect meaningful 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.
(2) Each ADS represents four common shares.
“As we predicted during last quarter’s earnings call, we saw an impressive
bounce back in our business this quarter after the H1N1 fears subsided,” said
revenues increased by 36.2% year-over-year to approximately
and our operating income increased by 57% year-over-year to
We are also pleased that student enrollments in language training and test
preparation courses this quarter increased more than 18% year-over-year to
416,000, notwithstanding the very difficult year-over-year comparison to the
third quarter of 2009, when the early timing of
large numbers of students signing up for Spring classes in February (third
fiscal quarter of 2009), thus driving enrollments up 31% to 351,700.”
Mr. Yu continued, “Also in this quarter, we continued to experience strong
revenue growth in three key businesses, namely (i) POP Kids English with over
50% revenue growth year-over-year, (ii) Middle and High School English and U-
Can all-subjects training with over 70% revenue growth year-over-year, and
(iii) Overseas Test Preparation with over 34% revenue growth year-over-year.
Furthermore, the blended average selling price increased approximately 10%
year-over-year.”
stated, “Demand for our non-English U-Can programs, including small and one-
to-one class offerings, continues to exceed our expectations. We had
originally targeted 80,000 to 90,000 enrollments and revenues of
for our fiscal year 2010 ending
Can enrollments in the third fiscal quarter, which brings the U-Can
enrollments during the first nine months of fiscal year 2010 to over 83,300,
representing over 80% year-over-year growth. In the first nine months of
fiscal year 2010, total revenues in non-English U-Can programs, including
small and one-to-one class offerings, reached
the year-ago figure. Thus, with one quarter remaining in fiscal year 2010, we
are very confident in our ability to exceed our
revenues.”
Financial Results for the Fiscal Quarter Ended
For the third fiscal quarter of 2010, New Oriental reported net revenues
of
Net revenues from educational programs and services for the third fiscal
quarter were
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 third
quarter of fiscal year 2010 increased by 18.3% year-over-year to approximately
416,000 from approximately 351,700 in the same period of the prior fiscal year.
Operating costs and expenses for the quarter were
increase year-over-year. Non-GAAP operating costs and expenses, which exclude
share-based compensation expenses, for the quarter were
34.1% increase year-over-year.
Cost of revenues for the quarter increased by 36.1% year-over-year to
greater number of schools and learning centers in operation.
Selling and marketing expenses for the quarter increased by 31.3% year-
over-year to
especially for programs such as U-Can and the customized learning program.
General and administrative expenses for the quarter were
a 30.1% increase year-over-year. Non-GAAP general and administrative expenses,
which exclude share-based compensation expenses, for the quarter increased by
35.3% year-over-year to
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, increased to
of fiscal year 2010 from
year. Approximately
to account for a lower-than-expected forfeiture rate in the first nine months
of fiscal year 2010 due to the fact that fewer New Oriental employees who had
received share-based compensation awards left the Company and forfeited their
unvested awards than anticipated.
Income from operations for the quarter was
increase from
Non-GAAP income from operations for the quarter was
increase from
Operating margin for the quarter was 15.3%, compared to 13.3% in the same
period of the prior fiscal year. Non-GAAP operating margin, which excludes
share-based compensation expenses, for the quarter was 20.7%, compared to
19.5% in the same period of the prior fiscal year. The rise in operating
margin was primarily due to improved operating efficiency as revenue growth
outpaced the growth in operating cost and expenses.
Net income attributable to New Oriental for the quarter was
million
fiscal year. Basic and diluted net income per ADS attributable to New Oriental
were
Non-GAAP net income attributable to New Oriental was
representing a 29.1% increase from the same period of the prior fiscal year.
Non-GAAP basic and diluted net income per ADS attributable to New Oriental
were
Capital expenditures for the quarter were
primarily used to add a net of 26 new learning centers and remodel older
learning centers during the quarter.
As of
addition, the Company had
quarter. Net operating cash flow for the third quarter of fiscal year 2010 was
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 third quarter of fiscal year 2010 was
million
quarter of fiscal year 2009.
Financial Results for the Nine Months Ended
For the nine months ended
revenues of
Total student enrollments in language training and test preparation
courses for the nine months ended
approximately 1,370,500 from approximately 1,189,300 in the same period of the
prior fiscal year.
Income from operations for the first nine months of fiscal year 2010 was
operations for the first nine months of fiscal year 2010 was
a 22.5% increase year-over-year.
Operating margin for the first nine months of fiscal year 2010 was 24.6%,
compared to 25.1% for the same period of the prior fiscal year; Non-GAAP
operating margin for the first nine months of fiscal year 2010 was 28.9%,
compared to 30.3% for the same period of the prior fiscal year.
Net income attributable to New Oriental for the first nine months of
fiscal year 2010 was
year. Basic and diluted net income per ADS attributable to New Oriental for
the first nine months of fiscal year 2010 amounted to
respectively.
Non-GAAP net income attributable to New Oriental for the first nine months
of fiscal year 2010 was
over-year. Non-GAAP basic and diluted net income per ADS attributable to New
Oriental for the first nine months of fiscal year 2010 amounted to
Outlook for Fourth Quarter of Fiscal Year 2010
New Oriental expects its total net revenues in the fourth quarter of
fiscal year 2010 (
million to US$78.4 million
27% to 32%, respectively. 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
time).
Dial-in details for the earnings conference call are as follows:
US: +1-617-213-8833
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
International: +1-617-801-6888
Passcode: 14456922
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
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
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 fourth 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
reports filed with or furnished to the U.S. Securities and Exchange Commission,
in its annual reports 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
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
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
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 attributable to New Oriental
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 attributable
to New Oriental 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 tables 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.
NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
As of As of
February 28 November 30
2010 2009
USD USD
ASSETS:
Current assets:
Cash and cash equivalents 250,792 210,574
Restricted cash 571 571
Term deposits 120,375 141,666
Accounts receivable, net 1,179 2,039
Inventory 13,883 14,577
Deferred tax assets-Current 2,291 2,043
Prepaid expenses and other current
assets 19,298 17,437
Total current assets 408,389 388,907
Property, plant and equipment, net 115,351 113,213
Land use right, net 3,425 3,445
Amounts due from related parties 579 396
Deferred tax assets 808 854
Long term deposit 3,093 3,050
Long term prepaid rent 2,253 1,138
Intangible assets 804 821
Goodwill 2,713 2,712
Long term investment 2 2
Total assets 537,417 514,538
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable-trade 6,197 9,110
Accrued expenses and other current
liabilities 39,139 32,930
Income tax payable 6,769 6,189
Amount due to related parties 14 36
Deferred revenue 69,787 71,061
Total current liabilities 121,906 119,326
Deferred tax liabilities 141 142
Total long-term liabilities 141 142
Total liabilities 122,047 119,468
Total New Oriental Education &
Technology Group Inc. shareholders'
equity 415,536 395,157
Noncontrolling interest (note 1) (166) (87)
Total equity 415,370 395,070
Total liabilities and equity 537,417 514,538
NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except for per share and per ADS amounts)
For the Three Months Ended
February 28
2010 2009
USD USD
Net Revenues:
Educational Programs and services 82,552 59,998
Books and others 6,615 5,451
Total net revenues 89,167 65,449
Operating costs and expenses (note 2):
Cost of revenues 35,430 26,035
Selling and marketing 13,848 10,547
General and administrative 26,248 20,179
Total operating costs and expenses 75,526 56,761
Operating income (loss) 13,641 8,688
Other income, net 1,561 1,927
Provision for income taxes (1,438) (206)
Less: Net income attributable to the
noncontrolling interest (note 3) 79 --
Net income attributable to New
Oriental Education & Technology
Group Inc. 13,843 10,409
Net income per share attributable to
New Oriental-Basic 0.09 0.07
Net income per share attributable to
New Oriental-Diluted 0.09 0.07
Net income per ADS attributable to
New Oriental-Basic (note 4) 0.37 0.28
Net income per ADS attributable to
New Oriental-Diluted (note 4) 0.36 0.27
Notes:
Note 1: Amount in relation to noncontrolling interest, formerly named
minority interest, as of May 31, 2009 is separately presented as a
component of stockholders' equity on the unaudited condensed
consolidated financial statements in accordance with authoritative
guidance regarding the noncontrolling interest, (formerly issued
as FASB Statement No. 160, Noncontrolling Interest, now codified
in ASC 810), 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
February 28
2010 2009
(Unaudited) (Unaudited)
USD USD
Cost of revenues 269 (135)
Selling and marketing 9 48
General and administrative 4,577 4,159
Total 4,855 4,072
Note 3: Amount in relation to noncontrolling interest, formerly named
minority interest, for the three-month period ended February 28,
2009 is reclassified in accordance with authoritative guidance
regarding the noncontrolling interest, (formerly issued as FASB
Statement No. 160, Noncontrolling Interest, now codified in ASC
810), 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
February 28
2010 2009
(Unaudited) (Unaudited)
USD USD
General and administrative expenses 26,248 20,179
Share-based compensation expense in
general and administrative expenses 4,577 4,159
Non-GAAP general and administrative
expenses 21,671 16,020
Total operating costs and expenses 75,526 56,761
Share-based compensation expenses 4,855 4,072
Non-GAAP operating costs and expenses 70,671 52,689
Operating income 13,641 8,688
Share-based compensation expenses 4,855 4,072
Non-GAAP operating income 18,496 12,760
Operating margin 15.3% 13.3%
Non-GAAP operating margin 20.7% 19.5%
Net income attributable to New
Oriental 13,843 10,409
Share-based compensation expense 4,855 4,072
Non-GAAP net income attributable to
New Oriental 18,698 14,481
Net income per ADS attributable to
New Oriental- Basic (note 1) 0.37 0.28
Net income per ADS attributable to
New Oriental- Diluted (note 1) 0.36 0.27
Non-GAAP net income per ADS
attributable to New Oriental - Basic
(note 1) 0.50 0.39
Non-GAAP net income per ADS
attributable to New Oriental -
Diluted (note 1) 0.48 0.38
Weighted average shares used in
calculating basic net income per ADS
(note 1) 150,993,483 149,185,159
Weighted average shares used in
calculating diluted net income per
ADS (note 1) 154,596,156 153,095,816
Note 1: Each ADS represents four common shares.
NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except for per share and per ADS amounts)
For the Nine Months Ended
February 28
2010 2009
(Unaudited) (Unaudited)
USD USD
Net Revenues:
Educational Programs and services 278,554 215,052
Books and others 21,172 18,089
Total net revenues 299,726 233,141
Operating costs and expenses (note 1):
Cost of revenues 110,905 86,240
Selling and marketing 41,034 28,697
General and administrative 74,126 59,781
Total operating costs and expenses 226,065 174,718
Operating income 73,661 58,423
Other income, net 4,659 6,395
Provision for income taxes (6,708) (6,843)
Less: Net income attributable to the
noncontrolling interest (note 2) 404 401
Net income attributable to New
Oriental Education & Technology
Group Inc. 72,016 58,376
Net income per share attributable to
New Oriental-Basic 0.48 0.39
Net income per share attributable to
New Oriental-Diluted 0.47 0.38
Net income per ADS attributable to
New Oriental-Basic (note 3) 1.91 1.57
Net income per ADS attributable to
New Oriental-Diluted (note 3) 1.86 1.52
Notes:
Note 1: Share-based compensation expenses (in thousands) are included in
the operating costs and expenses as follows:
For the Nine Months Ended
February 28
2010 2009
(Unaudited) (Unaudited)
USD USD
Cost of revenues 635 178
Selling and marketing 115 162
General and administrative 12,169 11,928
Total 12,919 12,268
Note 2: Amount in relation to noncontrolling interest, formerly named
minority interest, for the nine-month period ended February 28,
2009 is reclassified in accordance with authoritative guidance
regarding the noncontrolling interest, (formerly issued as FASB
Statement No. 160, Noncontrolling Interest, now codified in ASC
810), which was adopted by the Company on June 1, 2009.
Note 3: 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 Nine Months Ended
February 28
2010 2009
(Unaudited) (Unaudited)
USD USD
General and administrative expenses 74,126 59,781
Share-based compensation expense in
general and administrative expenses 12,169 11,928
Non-GAAP general and administrative
expenses 61,957 47,853
Total operating costs and expenses 226,065 174,718
Share-based compensation expenses 12,919 12,268
Non-GAAP operating costs and expenses 213,146 162,450
Operating income 73,661 58,423
Share-based compensation expenses 12,919 12,268
Non-GAAP operating income 86,580 70,691
Operating margin 24.6% 25.1%
Non-GAAP operating margin 28.9% 30.3%
Net income attributable to New
Oriental 72,016 58,376
Share-based compensation expense 12,919 12,268
Non-GAAP net income attributable to
New Oriental 84,935 70,644
Net income per ADS attributable to
New Oriental- Basic (note 1) 1.91 1.57
Net income per ADS attributable to
New Oriental- Diluted (note 1) 1.86 1.52
Non-GAAP net income per ADS
attributable to New Oriental - Basic
(note 1) 2.25 1.90
Non-GAAP net income per ADS
attributable to New Oriental -
Diluted (note 1) 2.20 1.84
Weighted average shares used in
calculating basic net income per ADS
(note 1) 150,754,539 148,906,915
Weighted average shares used in
calculating diluted net income per
ADS (note 1) 154,681,104 153,509,461
Note 1: Each ADS represents four common shares.
For investor and media inquiries, please contact:
In China:
Ms. Sisi Zhao
New Oriental Education and Technology Group Inc.
Tel: +86-10-6260-5566 x8203
Email: zhaosisi@staff.neworiental.org
Ms. Courtney Shike
Brunswick Group LLC
Tel: +86-10-6566-2256
Email: cshike@brunswickgroup.com
In the U.S.:
Ms. Kate Tellier
Brunswick Group LLC
Tel: +1-212-333-3810
Email: ktellier@brunswickgroup.com
SOURCE New Oriental Education and Technology Group Inc.