Thank you. Hello, everyone, and welcome to New Oriental's fourth fiscal quarter 2026 earnings conference call.

Our financial results for the period were released earlier today and are available on the company's website as well as on newswire services. Today, Stephen Yang, Executive President and Chief Financial Officer, and I will share New Oriental's latest earnings results and business updates in detail with you.

After that, Stephen and I will be available to answer your questions. Before we continue, please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S.

Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties.

As such, our results may be materially different from the view expressed today. A number of potential risks and uncertainties are outlined in our public filings with the SEC.

New Oriental does not undertake any obligation to update any forward-looking statements, except as required under applicable laws. As a reminder, this conference is being recorded.

In addition, a webcast of this conference call will be available on New Oriental's investor relations website at investor.neworiental.org. I will now first turn the call over to Mr.

Yang. Stephen, please go ahead.

Thank you, Sisi. Hello, everyone, and thank you for joining us on the call.

We're pleased to bring you another quarter of remarkable results, with revenue and income growth that have once again exceeded expectations. Our performance this quarter reflects not only the continued strength of our core business, but also the outstanding contributions of East Buy and our new creative ventures.

Taken together, these assets have energized our strategic ambitions as we look ahead with confidence in the year to come. We're particularly pleased that, despite the economic headwinds and external challenges, our relentless efforts to deliver the very best to our customers are yielding strong results.

In this quarter, total net revenue grew 23% year-over-year to $1,529.5 million. Non-GAAP operating income rose 34.7% to $110 million, while operating margins for both the quarter and the fiscal year 2026 showed healthy increments.

Both our core business and new initiatives continued to score meaningful tractions this quarter. Breaking it down: overseas test prep business recorded a revenue increase of 6% year-over-year for the fourth quarter of 2026; overseas study consulting business recorded revenue increase of about 1% year-over-year for this quarter; our adults and university students business recorded a revenue increase of 29% year-over-year for this quarter.

Our non-academic children business have been rolled out to around 60 existing cities. Market penetration has shown steady growth, particularly across high-tier cities.

The top 10 cities contributed around 60% of this business. Our intelligent learning system and device business that leveraged our teaching expertise and data analytics to provide adaptive learning solutions has been launched in around 60 cities.

We're encouraged by the enhanced customer retention and scalability, with top 10 cities contributing over 50% of this business. In summary, our new educational business initiatives delivered a 25% year-over-year revenue increase in this quarter.

Moving on to our integrated tourism-related business. Encompassing study tours and research camp for K-12 bus—for K-12 and university students, as well as cultural tours for middle-aged and senior travelers, our cultural travel, Chinese study tour, global study tour, and camp education products continued to deliver meaningful value to customers through knowledge enrichment, personal growth, and deep cultural immersions.

Our student programs now operate in about 55 cities nationwide, with the top 10 cities generating over 50% of the segment revenue. Our premium adult tourism offerings span around 30 provinces domestically and select international destinations.

We're also expanding into senior health and wellness tourism with an asset-light model, forging partnerships with over 45 wellness facilities across key destinations, including Hainan, Yunnan, and Guangxi. With our OMO teaching platform, we have continued to invest in revamping and upgrading the system.

During this quarter, we invested $31.2 million to improve and maintain our OMO platform, which enable us to provide uninterrupted high-quality instructions to students that cater to their individual learning needs. Beyond upgrading the OMO system, we continue to embedded AI across our ecosystem, including driving product innovation and transforming our internal operations to enhance capabilities, improve efficiency, and provide greater support to our staff—staff.

In terms of the product innovation, we're proud to share that our proprietary AI-powered personalized learning platform has successfully completed its first phase of deployment, achieving meaningful sales with just 25 days of inauguration. Unlike a general-purpose large language model, our AI platform is built on a highly specialized vertical learning system purposefully designed to reflect rooted assets of New Oriental.

This encouraging initial performance is a validation of the platform's market traction and product-market fit. We look forward to propelling the development of the AI-driven product—products and solutions to further broaden our operational excellence and market impact.

Turning to the East Buy's fiscal year 2026 performance. East Buy remains firmly committed to the three high product standards: high safety standards, high product quality, and high cost performance, while delivering attentive customer service for families.

On the platform front, East Buy made significant strides in its multi-platform livestreaming strategy on Douyin, launching 11 new vertical livestreaming accounts and extending its channel matrix to 18 channels in total. East Buy also launched a pseudo-the—a suite of the innovative operational programs, including streamer recruitments campaigns and annual supplier summits, that has proven effective to strengthen internal operational teams, deepen long-term strategic partnerships with suppliers, and elevate customer engagement.

Charting a new course in fiscal year 2027, East Buy will accelerate its expansion of its private-label portfolio across food and daily necessities, scale up product R&D and quality control to uphold three high standards, and advance its app memberships ecosystem. Leveraging New Oriental's extensive nationwide network, East Buy will further expand its offline experience footprint to engage a broader customer base, collectively optimizing operational efficiency, its supply chain network, and laying a solid foundation for sustainable long-term growth.

Now, I would like to share the latest updates of an exciting new strategic initiative that we have been piloting since the last quarter: New Oriental Home, a platform designed to serve the entire family unit from children to parents to seniors through a full lifecycle, full spectrum approach. New Oriental Home assembled our education service, East Buy offerings, and cultural tourism products into one unified ecosystem in a single app.

Families can conveniently access, manage, and redeem services tailored to each member, enabling seamless cross-category engagement and deeper household-level relationships. The platform has demonstrated strong early traction, with scenario-based marketing and integrated service anchoring solid user activation, retention, and acquisition.

Notably, we have seen retention for grade seven students increase by 10 basis points from summer to autumn—to autumn this year. Customers found the earn-and-redeem experience rewarding and are engaged to explore broader range of the offerings within our ecosystem, thereby lowering our cost of spend on customer acquisition as well.

This integrated loyalty framework has been particularly effective, as it not only strengthen retention, but also transform customer engagements into actionable data, enabling us to create incentives for customers and staff. At the same time, the vibrant synergies New Oriental Home generated across all business lines, including East Buy, combined with highly personalized offerings, have overall accelerated cross-selling, improved conversion efficiency, and optimized overall operating cost.

We have launched this pilot program in 69 cities as testbeds, including Hangzhou, Suzhou, Xi'an, and Wuhan, with over 950,000 registered families by the end of this quarter. The platform has achieved cumulative activity participation rate of around 70%, and the latest campaign activation rates is 23%, significantly outperforming many public domain e-commerce platforms.

This results affirmed the high reach and precision advantage of our education-focused private domain ecosystem, and we look forward to build on the promising momentum in the quarter ahead. Now, I will turn the call over to Sisi to share with you about the key financials.

Sisi, please go ahead.

Okay. Thank you, Stephen.

Let me now walk you through the key financial highlights for the quarter. Operating costs and expenses for the quarter were $1,443.7 million, representing a 15.3% increase year-over-year.

Cost of revenues increased by 25.9% year-over-year to $717.3 million. Selling and marketing expenses increased by 23.9% year-over-year to $262.5 million.

G&A expenses for the quarter increased by 13.2% year-over-year to $463.9 million. Impairment of goodwill was nil compared to $60.3 million in the same period of the prior fiscal year.

Total share-based compensation expenses, which were allocated to related operating costs and expenses, decreased by 20.7% to $22.7 million in this quarter. Operating income was $85.8 million compared to an operating loss of $8.7 million in the prior year period.

Non-GAAP income from operations for the quarter, excluding share-based compensation expenses, amortization of intangible assets resulting from business acquisition, and impairment of goodwill, was $110 million, representing a 34.7% increase year-over-year. Net income attributable to New Oriental for the quarter was $62.2 million, representing a 775.8% increase year-over-year.

Basic and diluted net income per ADS attributable to New Oriental were 40 cents and 39 cents, respectively. Non-GAAP net income attributable to New Oriental for the quarter was $87.8 million, representing a decrease of 10.5% year-over-year.

Non-GAAP basic and diluted net income per ADS attributable to New Oriental were 56 cents and 55 cents, respectively. Net cash inflow generated from operations for the fourth quarter of 2026 was approximately $518.7 million, and capital expenditure for the quarter were $99 million.

Turning to the balance sheet, as of May 31, 2026, New Oriental had cash and cash equivalents of $1,821.2 million. In addition, the company had $1,366.8 million in term deposits and $2,372.3 million in short-term investments.

New Oriental's deferred revenue, which represents cash collected upfront from customers and related revenue that will be recognized as the services or goods are delivered, at the end of the fourth quarter of fiscal year 2026 was $2,242.9 million, an increase of 14.8% as compared to $1,954.5 million year-over-year. Now, I'll hand over to Stephen to go through our outlook and guidance.

Thank you, Sisi. The healthy results we have delivered in fiscal year 2026 have given us both the fuel and conviction to pursue resilient, sustainable growth and ever-improving services in the year ahead.

Approaching summer vacation, we're particularly confident in sustaining momentum for the coming first quarter of fiscal year 2027, with expectations that improving enrollment trends will drive an accelerated revenue growth, and a higher overall operational efficiency will bolster our optimism in growing our margins. We will continue to strategically expand capacity and talents, deepening our presence in markets with proven top and bottom line performance, while maintaining rigorous resource allocation.

Expansion decisions will be carefully calibrated throughout the year, guided by the operational readiness and financial results. Alongside our pursuits of new creative initiatives, sustainable profitability and cost discipline remain cornerstones of our business.

In the coming quarter, we expect meaningful cost improvement to emerge from the restructuring of our overseas business, which will pave the way for the greater operational efficiency and stronger margin profile in the new year. Looking ahead, we enter fiscal year 2027 with deep confidence in our core education business and new initiatives, driven by a genuine passion to create lasting value.

We will continue to drive sustainable and healthy growth through product enhancements and quality improvement, while further optimizing cost structure and to enhance efficiency and profitability. Our focus remains on long-term value creation, offering investors a clearer view of our strategic trajectory and durable growth we're building for the future.

Considering the positive momentum and cost management measures across our business line, we expect total net revenue for the group in fiscal year 2027 to be in the range of $6,453.9 million to $6,680.3 million, representing a year-over-year increase in the range of 14% to 18%. This expectations reflect our current outlook based on the recent regulatory developments and prevailing market conditions, both of which remain subject to change.

Additionally, we announce a share repurchase program, under which New Oriental is authorized to repurchase up to $300 million of its ADS or common shares over the subsequent 12 months. As of July 28, 2026, yesterday, we had repurchased a total of approximately 51.5 million common shares, including common shares represented by ADS, for aggregate consideration of the approximately $274 million from the open market and the share repurchase program.

We expect to roll out the share repurchase program for the remainder of the duration in accordance with its terms. Furthermore, to implement our three-year shareholder return plan adopted in July 2025 for fiscal year 2027, the board of director of the company has approved an ordinary cash dividend and a new share repurchase program, with the total amount of the capital return for the fiscal year 2027 is expect to be approximately $500 million.

I would like to go through details in the following. The aggregate amount of the cash dividend for the fiscal year 2027 is expect to approximately $300 million, to be paid in two installments in December 2026 and June 2027, respectively.

Further details regarding the cash dividend program will be decided by the board of directors and announced by the company in due course. Pursuant to the share repurchase program for fiscal year 2027, the company may repurchase up to $200 million of its ADS or common shares over the subsequent 12 months following the board approval.

The company's proposed repurchase may be made from time to time in open market at prevailing market price, in privately negotiated transactions, in block trades, and/or through other legally permissible means, depending on market conditions and in accordance with the applicable rules and regulations. The board of directors of the company will review this share repurchase program periodically, and may authorize adjustments of term and size.

The company expects to fund the repurchase out of its existing cash balance. To conclude, New Oriental is steadfastly committed to driving sustainable growth, promising exceptional value to our customers and shareholders, and generating long-term returns to our shareholders.

We continue to collaborate closely with government authorities across province and municipalities in China, ensuring full compliance with the relevant policies and regulations, while adapting our operations responsibly to meet evolving requirements. This is the end of our fiscal year 2026 Q4 summary.

At this point, I would like to open the floor for questions. Operator, please open the call for this.

Thank you.

Thank you, Stephen and Sisi, and congratulation on the very strong results, and I think the guidance on the 2027 financial year is also higher than expectation. My question is can you help us break down the financial year 2027 guidance into quarters, especially the trend that you expect in the first quarter of the financial year 2027 in terms of revenue and margins?

Thank you.

Thank you. As I think our strategy in fiscal year 2026 is to enhance the product and service quality.

I think we have seen the good results. The better quality drives the student retention rate up, and the Q4 marks another quarter of the solid result.

Given the positive momentum, I think, including the healthy growth of our K-12 business and the recovery of the East Buy, I think we are now in a more optimistic position regarding our business outlook in fiscal year 2027. We'll give the guidance of the annual guidance in fiscal year 2027 in the range of 14% to 18%.

I must mention that, as always, we're still conservative to give the annual guidance. We do expect to beat our annual guidance in fiscal year '27.

From this year, we are making the change to give the guidance on annual basis. I think we believe this change better reflects our long-term strategic focus and encourage the investors to evaluate our business performance over longer term rather than the quarter-to-quarter.

I believe you're still interested in the Q1 forecast. I must say that we're quite confident in sustaining a momentum for the coming first quarter of fiscal year 2027.

You saw our deferred revenue at the Q4 end was increased by roughly 15%. I think it's a good sign of the coming quarter of the revenue growth.

We expect the improving summer enrollment trends that we have seen will drive an accelerated revenue growth of the education business and the higher operational efficiency. Also, I do believe the East Buy the revenue will be accelerated in Q1.

East Buy will contribute more profit and revenue to the group. I'll repeat again, we're quite optimistic about the Q1 performance.

Thank you. Oh, this is for...

Thank you. It's very helpful.

...revenue. Your questions about the margin, yeah, as well.

The margin, we got the margin expansion in Q4, in this quarter, even though we meet some margin drag from the overseas-related business and one-off expenses, roughly $10 million to $15 million from our internal management restructuring in this quarter. We still get the group margin expansion by 60 basis points up in this quarter.

As for the margin outlook for the next year, fiscal year 2027, I think we'll continue to focus on profitability across all business lines. We'll keep doing the cost control, and I think we will improve the operational efficiency and to bring more operating leverage in the coming new year.

We expect the margin will be expanded in the coming new year. The Q1 margin outlook, I think we're quite confident on the margin expansion in the coming Q1.

Thank you, Stephen.

Thanks.

Thank you, Stephen and Sisi, for taking my question, and congrats on a strong quarter results. My question regarding our revenue outlook specifically for our K-12 business.

After the acceleration in the fourth quarter, how should we project the revenue growth outlook for the upcoming first quarter and fiscal year 2027? Thank you.

I think we had the strong year of the K-12 business growth in fiscal year '26. As for the guidance of the K-12 business in the new year, I think I would like to guide the K-12 business in total, the K-9 and high school in total, roughly will be expected to increase roughly close to 20% or around 20% year-over-year.

Because I think this enrollment growth trend is good. Also, I think the Q1 revenue growth will be stronger.

This is my guidance of the K-12 business. Don't forget, I think the K-12 business will bring us the higher margin in the coming new year.

Jenny.

Thank you. Thank you so much.

Thank you. Thank you for taking my question.

Good evening, management team, and congratulations on the solid and strong results. My question is about the capacity expansion in FY 2027.

Because you've talk about disciplining capacity expansion in FY 2026, and that's been part of the margin story. Wondering what's the plan for FY 2027?

Where is the utilization running now? Also, I have another question about the compliance.

Because we've seen some reports about inspections at individual learning centers, wondering if there is any risk we should be aware of. Thanks.

Okay.

Thank you, Alice. In fiscal year 2026, we added 13% new capacity in total.

I think it's based on the expansion control, and I think we did well in the last year. In the coming new year, we plan to open 10% to 15% new capacity.

I think most of the new openings will be with the top performance of the bottom line and top line in the last year. I think we're happy to see the student retention rate improvements, which will drive the utilization rate up in the existing learning centers.

I think we're quite optimistic on the OMO or some online business developments. That means we don't need to open too many learning centers in coming new year.

In one word, I think the top-line growth in the coming new year will be higher than the learning center expansion. It will drive the average utilization rate up again in the coming new year.

Oh, your second question is about the regulation. I think, yeah, anyway, I think we obey the rules, the policy requirements.

I think it's fine because in last four, five years, we passed all the requirements of the government. I think going forward, my personal view is on the regulation side, I think for me is neutral to positive on the regulatory environment.

Thank you.

Thanks, very helpful.

Sure. Thank you, Stephen.

Thank you, Sisi. Thank you for taking my question, and congrats on the very solid results.

I think my question is regarding the overseas test prep and consulting business. Just wondering if can give us updates on what are you seeing on the ground and what do you have seen from the summer vacation period in terms of the overseas test prep growth and how do you think about the growth trajectory for this year for this specific segment?

I believe last year you did a segment merger or integration between the two separate business. Just wondering if you can give us some margin outlook for this business line.

What was the operating margin or contribution margin for the overseas business related last year, and what is your expectation for this year? Thank you.

Thank you, Tim. Your question is about the overseas-related business.

I think, yeah, everybody knows due to the impact of the economic environment and the international situation, our overseas-related business meets some, gross pressure in last year. I think we have shown the resilience in last year.

We believe that we're taking I think we were taking the market share as a fact, as always. In the coming new year, we expect we expect our overseas-related business will be flattish or low single-digit growth in the coming new year.

I think the Q1, roughly the Q1, we I think we still believe that we can get some, low single-digit the growth of the overseas-related business. We merged the overseas test prep business and the consulting business in in Q3 last year.

I think the reason that we put it together is to, restructuring the two different the management team and to provide the customers one-stop service and to enhance the cost control, reduce some costs and expenses. Roughly the margin of the overseas-related business last year is roughly 15%, roughly, last year.

Including both test prep and consulting.

We put it together. In the coming new year, we believe the margin will be expanded for the overseas-related business because of the cost control, because of the merge of the restructuring, the new team.

I think we have done a lot of jobs, and we will keep doing the cost control in the coming new year. It will drive the margin up of the overseas-related business in the coming new year.

Great. Thank you, Stephen.

Hi, Stephen, Sisi. I have a question on the sales and marketing distribution expense in the last quarter.

It was up a bit, both on a Q-on-Q and a Y-o-Y basis. Could you elaborate why is that, and how should we think about the selling distribution expense in FY 2027, especially we have the Oriental Home in place?

Thank you.

I think in Q4, the East Buy spent a little bit more money on the marketing, but it's driven the revenue growth up a lot. In the coming new year, I do believe the selling marketing expenses as the percentage of the revenue for the whole group will be down.

It will drive the margin up in the coming new year. Lucy.

Oh, thank you. Maybe a bit more.

For the fourth quarter, non-GAAP operating margin expansion, if we excluding East Buy, how about the rest of the education? Is it flattish or expand as well?

Thank you.

If we take out the East Buy's contribution of the Q4, the margin contribution from the East Buy, I think the our education business margin, roughly flattish. Don't forget, we take the one-off expenses of the the restructuring merge of the overseas-related business in Q4.

Roughly we recorded $10 million to $15 million as one-off expense expenses in Q4. If you add it back, the margin is up of the core business.

Lucy.

Understood. Very clear.

Thank you.

Yeah. Thank you.

Thank you. Hello, sir.

Thanks for another strong beat and raise. I think this is now third time in a row.

I have a very quick two questions, if okay. First, we just mentioned about that cost optimization initiative.

Can I ask if this is already done behind us, or shall we expect, I don't know, $5 million, $10 million or some more of this one-off in first quarter? More importantly, can we try to quantify roughly how much a fixed cost savings can we enjoy in 2027 from this?

I have one small follow-up.

Thank you, DS. Your question is about the cost control.

We started to do the cost control since March last year. I think we did great job in the whole year, fiscal year 2026.

Roughly, we saved $100 million roughly in fiscal year 2026. Now we closely to the end of the phase one cost control.

We're stepping into the phase two. As I said, in the cost control phase two, we will do more like the restructuring of the management teams to do more cost control, and we will use more AI to save the staff costs or extra.

I think in coming new year, we expect the cost control can save more amount than that of last year. This is our target.

Thank you, DS.

Thank you, sir. That's very helpful.

Second, a small question. I saw we spent $250 million CapEx, capital expenditure, last year.

Can I check if we have a budget for 2027?

Yeah. The CapEx, yeah, last year, roughly $250 million.

In the coming new year, roughly $250 million to $300 million, as the new capacity or the CapEx on the learning pad model or on some others. Roughly $250 million to $300 million.

Yeah.

Got it. Thank you.

Just on that, not to nitpick on this, but last year, I think our new opening, absolute number of stores, were down 40% from a year ago. I think we opened 170 stores, the year before was 270.

Yet CapEx was flat. This coming year, CapEx to go up.

Is that the delta, the gap because of East Buy? Can I understand that way, or if you could comment on that?

Is it related to new initiative of the East Buy offline store, or anything else I'm missing?

No, East Buy's offline store, the CapEx is very tiny. It's very small number.

I think, yeah, as I said, last year we opened 13% new capacity in terms of the square meters. The coming new year, we plan to open 10% to 15% new capacity.

We believe the new capacity growth or the new capacity numbers will be lower than the top-line growth. That means it will drive the utilization rate up.

Your question is about the CapEx. We're building up the new headquarters in Changping, and it's cost a little bit more money.

The CapEx in the new year will be a little bit more higher than that of last year.

That makes a lot of sense, sir. That makes a lot of sense.

Thank you. Yeah.

Good evening, Stephen and Sisi. Thank you for taking my question, and congrats on the strong results.

My question is about the competition. Last year, the competition in summer season is quite strong.

How do you think of the competition for this summer? Considering the impacts of the decline population and the competition, can we have a three-year outlook for the K-12 business?

Yeah. In this summer, I think the competition is less than that of last year.

I remember in last year's summer, the competition situation. This year, I think it's better.

That's why we can give the Q1 guidance in a higher revenue acceleration in the coming Q1. The K-12 business in the coming Q1 and even the whole new year will be accelerate a little bit than that of last year.

As for the population, I think, yeah, it's an issue. I think the parents will choose the education company for their kids will be more carefully.

I think the parents love to give their kids the best education in the coming new the three or five years. That means the big players will take more market share from the market.

This is, in my opinion, based on the current estimation.

Thank you, Stephen. That's helpful.

Good evening, management. Thank you for taking my question.

My question is about the AI adoption. With the rapid development of AI technology, and could management share how the company is leveraging AI in its teaching and learning process?

Do you see AI primarily as a tool to transform the teaching model or a way to improve operational efficiency? Thanks.

Yeah.

Actually, as for the AI, we have been devoting a lot of efforts and resources into implementing the AI technology into education sector. In total, for three aspects.

One is that for all the existing educational products, we are implementing AI technology to enhance the product quality, and also enhance the students' learning experience. For example, we embedded AI new functions into our learning device business, and also even in-class, we use the AI tools to help students to improve the teaching and learning efficiency and the learning experience.

Also after school, they can use the AI new tools to enhance the learning efficiency. All these are differentiating us much more than before, more differentiating from all the other competitors, because we have enough capital and also we have the technology and also the teaching knowledge to use the AI technology make our products better.

This is one aspect. The other thing that we're using AI is even more exciting is that we are piloting a lot of new AI products.

It's not only products, but as we announced this quarter that we have a new platform launched recently and to use the AI technology and also using our teaching and learning experience and all the teaching and learning settings that we have all these combined together to come up with some new solution. It's based on to help students how to learn and how to use our teaching knowledge and using all the new AI tools to have some new products.

This is something that we are piloting, and still in early stage, but we believe that the platform will be more and more better in the future, and also we have a series of new products coming. That's some exciting ones.

Also third thing that we're doing is using the AI technology to improve the working efficiency, so that we can save more labor cost for all functions, like all the teachers, and also our teacher assistants, and for all aspects of their working process, we can use AI tools to help them to improve the efficiency, so that we don't need to hire as many as new staff as before, so that they can handle more work than before. The HR cost can be saved more, and efficiency can be improved.

Also functional supporting staff as well. That's all the things that we're using AI to do.

I think in total, we are more differentiating and have more advantage than other competitors in terms of using AI. We have the good solution, and also can have the AI technology used more and more, better and better in the education sector.

Yeah.

Thank you. That's very comprehensive.

Again, thank you for joining us today. If you have any further questions, please do not hesitate to contact me or any of our investor relations representatives.

Thank you very much.