New Oriental Education & Technology ((EDU)) has held its Q4 earnings call. Read on for the main highlights of the call.
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New Oriental Education & Technology recently held its earnings call, revealing a mixed sentiment among stakeholders. While the company celebrated strong revenue growth in both its core and new educational segments, as well as significant advancements in AI technology, these positives were tempered by an operating loss, a sharp decrease in net income, increased operating costs, and a conservative revenue outlook for the upcoming quarter.
Revenue Growth in Core Segments
The company reported an impressive 18.7% year-over-year increase in total net revenue for Q4. Notably, the overseas test preparation business grew by 15%, overseas studies consulting by 8%, and the adults and university students segment by 17%. This growth underscores the robust demand for New Oriental’s core educational services.
Strong Performance in New Educational Initiatives
New Oriental’s new educational business initiatives have shown remarkable success, with a 33% year-over-year revenue increase. This highlights the company’s ability to innovate and expand its offerings to meet the evolving needs of students.
Significant Growth in Tourism-Related Business
The integrated tourism-related business recorded a substantial 71% year-over-year revenue increase. This surge indicates a strong recovery and growing interest in educational tourism, contributing positively to the company’s overall performance.
Advancements in AI and Intelligent Learning Systems
New Oriental has made significant strides in AI technology, launching AI-powered intelligent learning devices and AI-driven smart study solutions. These innovations are designed to enhance learning outcomes and position the company as a leader in educational technology.
Positive Non-GAAP Financial Metrics
Despite challenges, the company reported a 116.3% year-over-year increase in non-GAAP operating income and a 59.4% rise in non-GAAP net income. These metrics reflect New Oriental’s ability to maintain financial health and operational efficiency.
Shareholder Return Plan
A three-year shareholder return plan was approved, committing no less than 50% of net income to dividends and/or share repurchases. This plan aims to enhance shareholder value and demonstrate the company’s commitment to returning profits to its investors.
Operating Loss Reported
The company reported an operating loss of $8.7 million, a significant shift from the $10.5 million operating income in the same period of the previous fiscal year. This loss highlights the financial challenges faced by New Oriental.
Significant Net Income Decrease
Net income attributable to New Oriental decreased by 73.7% year-over-year, indicating a substantial decline in profitability. This decrease is a critical concern for stakeholders.
Increased Operating Costs
Operating costs and expenses rose by 11.2% year-over-year, with a $60.3 million impairment of goodwill compared to none in the previous fiscal year. These increased costs have impacted the company’s bottom line.
Conservative Revenue Guidance
The company provided conservative revenue guidance for Q1 FY ’26, with expected growth between 2% and 5%. This cautious outlook is attributed to high base comparisons and economic conditions.
Forward-Looking Guidance
Looking ahead, New Oriental projects total net revenue for fiscal year 2026 to be between $5,145.3 million and $5,390.3 million, implying a 5% to 10% year-over-year increase. For the first quarter, revenue is expected to grow by 2% to 5%. The company remains cautious due to economic conditions and international relations but anticipates strong growth in the K-12 sector. Efforts to enhance profitability through cost control and efficiency measures are expected to improve margins in fiscal year 2026.
In conclusion, New Oriental Education & Technology’s earnings call presented a mixed picture. While the company is experiencing strong growth in several areas and is making significant technological advancements, it faces challenges with operating losses and decreased net income. The conservative revenue outlook reflects the cautious approach the company is taking in navigating the current economic landscape.