Thank you. Hello, everyone, and welcome to New Oriental's third 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 views 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 law. 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'll 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.

I'm glad to share with you that Q3 of this fiscal year marks another quarter of solid results and consistent growth. We're pleased to see that after several consecutive quarters of the revenue growth exceeding expectations, this quarter has once again surpassed expectations.

This reinforces our confidence in the correctness of our strategy and our optimism about future performance. We're even more delighted to see the margin expansion in our core business, along with the significant contribution from the outstanding performance of East Buy.

Our focus on operational efficiency and investment on strategic initiatives have again driven satisfactory performance and continue to lead our path to sustainable profitability. This quarter, total net revenue grew by 19.8% year-over-year to $1,417.3 million.

Non-GAAP operating income rose 42.8% to $202.9 million, while non-GAAP net income attributable to New Oriental increased 34.3% to $152.2 million. Both our core business and new initiatives are gaining meaningful traction this quarter.

Breaking down, overseas test prep business recorded a revenue increase of 7% year-over-year for this quarter. Overseas study consulting business recorded revenue decrease of about 4% year-over-year for this quarter.

Our adults and university students business recorded a revenue increase of 15% year-over-year this quarter. As for our new education initiatives, including non-academic tutoring and our intelligent learning system and devices, they delivered sustainable revenue that grew 23% year-over-year this quarter.

Our non-academic tutoring business have been rolled out to around 60 existing cities. Market penetration has grown steadily, particularly across higher-tier cities.

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

We're encouraged by enhanced customer retention and scalability of this new business. The top 10 cities contribute over 50% of the business.

Turning to our integrated tourism-related business, which includes study tours and research camp for K-12 and university students, as well as new cultural tours for middle-aged and senior travelers. We're delighted that the culture tour, China study tour, global study tour, and camp education products continues to be well-received, providing customers with valuable knowledge, personal growth, and cultural enrichment.

Our student programs now operate in approximately 55 cities nationwide, with the top 10 cities generates over 50% of the revenue. Our other top-notch adults tourism offerings span around 30 province domestically and select international destinations.

We're also extending into senior health and wellness tourism through partnership with over 40 wellness facilities in Hainan, Yunnan, and Guangxi, utilizing an asset-light model to pilot the emerging opportunity. We're continuing to investing in our online-merge-offline teaching platform, leveraging our educational infrastructure and technology capabilities to deliver advanced personalized learning experience across of all age groups.

This quarter, we invested $30.6 million to enhance and maintain our OMO platform, which enabled us to provide high-quality instruction to students while adapting to their individual learning needs. Turning to East Buy.

East Buy remains committed to delivering premium products and service to Chinese families. It has advanced its multi-platform, multi-account strategy by launching specialized vertical livestreaming channels on Douyin, including East Buy Home, East Buy Food and Vegetables, and East Buy Nutrition and Health.

It also continuously optimized its livestreaming content and introduced innovative engagement initiatives, including large-scale live campaigns for streamer recruitment and supplier conferences as part of its efforts to strengthen team capabilities, supplier partnership, and customer engagement. Looking ahead, East Buy will look to expand its private label portfolio, enhance product R&D and quality control, accelerate app membership ecosystem development, and grow its offline footprint steadily through vending machines and experience stores.

Together, these initiatives will drive greater operational efficiency and advance supply chain excellence, supporting sustainable long-term growth. Besides upgrading our OMO system, encouraged by the positive feedback on our AI applications, we continue to integrate AI across our offerings to strengthen core capabilities.

Simultaneously, we're expanding the use of AI to streamline internal operation, thereby boosting efficiency and elevating the support for our teachers and staff. Driving innovation in product capabilities and operational excellence continue to fuel our pursuit of sustainable revenue growth.

We look forward to sharing measurable results from our AI investment in the quarters ahead. I would also like to take this opportunity to share a new strategic initiative with you.

Historically, New Oriental has focused on serving our customers as each individual. Going forward, we're expanding the perspective to serve the entire family unit.

Given our diversified offerings across different age group and demographics, we are uniquely positioned to adopt full life cycle, full spectrum approach that addresses the evolving needs of each family member, from children to parents to seniors. To support this shift, we launched the New Oriental Home, a private domain platform that integrates our education service, East Buy offerings, and culture tourism products into one unified ecosystem.

Through a single app, families can conveniently access, manage, and redeem service tailored to different members, enabling seamless cross-category engagement and deeper household-level relationships. This platform is already demonstrating strong user engagement and retention through scenario-based marketing and integrated service offerings, significantly enhancing customer lifetime value.

At the same time, the precision-driven operations improve conversion efficiency and optimize overall operating cost. We have now launched this pilot program in 12 cities as testbeds, including Hangzhou, Suzhou, Xi'an, and Wuhan, with over 330,000 registered families.

The platform has achieved campaign activation rates of 10% to 15%, significantly outperforming many public domain e-commerce platforms. This performance demonstrate the high reach and precision advantages of our education-focused private domain ecosystem.

Now, I will turn the call over to Sisi to share with you about the key financials. Sisi, please go ahead.

Yeah. Thank you, Stephen.

Let me now walk you through the key financial highlights for the quarter. Operating costs and expenses for the quarter were $1,237 million, representing a 16.9% increase year-over-year.

Cost of revenue increased by 23.4% year-over-year to $656.2 million. Selling and marketing expenses increased by 9.1% year-over-year to $198.8 million.

General and administrative expenses for the quarter increased by 10.8% year-over-year to $382.1 million. Total share-based compensation, which were allocated to related operating costs and expenses, increased by 30.9% to $21.1 million in the third quarter of fiscal year 2026.

Operating income was $180.3 million, representing a 44.8% increase year-over-year. Non-GAAP income from operations for the quarter was $202.9 million, representing a 42.8% increase year-over-year.

Net income attributable to New Oriental for the quarter was $126.8 million, representing a 45.3% increase year-over-year. Basic and diluted net income per ADS attributable to New Oriental were 80 cents and 79 cents, respectively.

Non-GAAP net income attributable to New Oriental for the quarter was $152.2 million, representing an increase of 34.3% year-over-year. Non-GAAP basic and diluted net income per ADS attributable to New Oriental were 97 cents and 95 cents, respectively.

Net cash outflow generated from operation for the third quarter of fiscal year 2026 was approximately $7.5 million, and capital expenditure for the quarter were $68.8 million. Turning to the balance sheet.

As of February 28th, 2026, New Oriental had cash and cash equivalents of $1,783.4 million. In addition, the company had $1,491.7 million in term deposits and $1,953.2 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 third fiscal quarter of 2026 was $1,885.9 million, an increase of 7.8% as compared to $1,749.9 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 achieved this quarter reinforce confidence in our operational resilience and growth trajectory.

Looking ahead, we remain focused on balanced growth, advancing both revenue and profitability in parallel. We will expand capacity and talent strategically, ensuring that growth does not come at the expense of quality.

We plan to deepen our presence in markets with proven top- and bottom-line performance, while maintaining disciplined resource allocation. We will calibrate the pace and scale of new openings throughout the year, aligning expansion decisions with operational needs and financial results.

Cost discipline and sustainable profitability across all business line continue to be foundational to our strategy. In the coming quarter, what I mean is in the coming Q4, we expect greater cost control to be realized as a result of restructuring and consolidation of our overseas business.

A certain level of fixed expense will be reduced, enabling us to pave the way for higher operational efficiency and a better margin profile next year. There will be certain one-off expenses in the coming quarter relate to the structural adjustments.

Even so, we remain confident in our fourth quarter profit margin. Looking ahead next fiscal year, we have strong confidence in our core education business and East Buy.

We will continue to drive sustainable and healthy growth through product enhancement and quality improvement, while further optimizing operational cost and enhance the efficiency and profitability. Considering the positive momentum and cost management measures across our business lines, we expect the total net revenue for the group in fourth quarter of fiscal year 2026 to be in the range of $1,429.6 million to $1,466.9 million, representing year-over-year increase in the range of 15% to 18%.

Driven by the encouraging growth across various business lines, New Oriental raise the full-year guidance of total net revenue in fiscal year 2026, June 1st, 2025 to May 31st, 2026, to be in the range of $5,561.4 million to $5,598.7 million, representing year-over-year increase in the range of 13% to 14%. These expectations reflect our current outlook based on recent regulatory developments and prevailing market conditions, both of which remain subject to change.

I'll also like to give you an update on our shareholder return plan for fiscal year 2026. In October 2025, we announced that pursuant to its previously adopted three-year shareholder return plan, the board of directors had approved an ordinary dividend of $0.12 per common share, or $1.20 per ADS, to be distributed in two installments as part of the shareholder return for fiscal year 2026.

As of today, the first installment has been fully paid to shareholders and ADS holders. The second installment, $0.06 per common share, or $0.60 per ADS, will be paid to holders of common shares and holders of ADS of record as of the close of business on May 15th, 2026, Beijing, Hong Kong time, and New York time, respectively, with expected payment date to be on or around June 2nd, 2026, or June 5th, 2026, for holders of common shares and holders of ADS, respectively.

Additionally, we announced a share repurchase program, in which New Oriental is authorized to repurchase up to $300 million of its ADS or common shares over the subsequent 12 months in open market. As of April 21st, 2026, yesterday, we had repurchased a total of approximately 3.3 million ADS for an aggregate consideration of approximately $184.3 million from the open market under this share repurchase program.

In closing, New Oriental remains firmly committed to sustainable growth, delivering exceptional value to our customers, and generating long-term returns to our shareholders. We continue to maintain close collaboration with government authorities in China, ensuring full compliance with relevant policies and regulations, and adapting our operations to evolving requirements.

This is the end of our fiscal year 2026 Q3 summary. At this point, I would like to open the floor for questions.

Operator, please open the call for this. Thank you.

好，感谢提问机会，那也恭喜管理层这个季度再度交出亮眼的一个业绩表现。那我想要请教一下关于利润率的一个问题，因为本季度公司经营利润率大幅提升了2.3个百分点，盈利改善表现十分突出。那想请管理层拆解一下这次盈利利润率上升背后的一些核心驱动因素，那同时也想了解一下公司对于四季度以及说下一个财年的利润率走势有何展望，谢谢。So let me translate myself. Go ahead.

Congrats on a strong set of results this quarter. My question is about margin trends.

We noted OP margin expanded meaningfully by 2.3 percentage points this quarter, which is very impressive. Could management please help us break down the key drivers behind this margin expansion?

In addition, what is your outlook for margin trends in next quarter and for the next fiscal year? Thank you.

Thank you, Jenny. I think this is a good question about margin.

Let us start with the margin analysis of this quarter. Even though we meet some margin drag from the overseas-related business, but it was still got good margin expansion by 230 basis points.

I think the margin expansion was mainly due to the better utilization, operating leverage, and the cost control, and as well the more profit contributions from East Buy. As we started to do the cost control since March 2025 last year.

In the last 11 months, I think we have seen the very good results, and which helps to drive the margin up. Our focus on operational efficiency and disciplined resource management has been the key driver of the margin expansion.

Next quarter margin, Q4, I think we remain optimistic on margin expansion in Q4. Even though there will be certain one-off expenses in the coming quarter in Q4 relate to the structural adjustments, the consolidation between the overseas test prep and consulting, this is one-off expenses.

Even so, we still remain confidence in the fourth quarter margin expansion for the whole group. This is Q4 margin guidance.

As for the margin outlook for the next year, the new fiscal year, I think we will focus on the profitability across all the business lines and drive to achieve the margin expansion in the coming new year. I think we're quite optimistic about the margin expansion for core educational business, and we expect East Buy will generate more profits in the coming new year.

Jenny.

Thank you. That's clear.

Thank you.

Good evening, Sisi and Stephen, and congratulation on the strong result. May I ask the question on capacity expansion plan for Q4 and also for FY2027?

Thanks.

Yeah. The expansion, I think, as we guided, at the starting time of this fiscal year, we planned to open 10% to 15% new capacities.

I think the net adds of the new learning centers in first three quarters was 8%. This is, that means in the first three quarters, the net adds 8%.

I think the whole year is the net expansion is somewhere around 10% to like 13%, 14%. As I said, we only allow the the cities with the good performance of the top line, bottom line last year to open more the learning centers.

We care more about the better utilization and to and the the margins of the whole group. I think the we still focus on the we put the new student enrollments into the existing learning centers.

I think if you show the utilization rate, it will be up for the group. Next year, I think we will continue to open somewhere around 10% or even a little bit more learning centers in the in the new year.

On the other hand, don't forget, we do have a lot of online and OMO products and offerings. For some online business, we even don't need existing learning centers.

I do believe in the coming new year, the utilization rate will continuously, go up going forward. Alice, thank you.

Thanks. It's very helpful.

Thank you.

Thank you. Hi, Stephen.

This is Lucy from Bank of America. I have a question on margin as well.

You mentioned that there'll be one-off restructuring expense in the coming quarter. Would you please quantify how much would that be in either US dollar term or in margin or as a percentage of revenue for the coming May quarter?

Also, you mentioned a new strategy that will possibly lower the selling and distribution expense or the marketing expense next year. What's our target on the sales and marketing expense for '27?

Thank you.

I think the one-off expenses in the coming Q4 relate to the structural adjustments of the overseas-related business. I think the negative impact on margin is roughly 50 bps to 100 bps, roughly $10 million to $15 million as one-off.

Even so, we still remain the confidence to get the margin expansion for the whole group in the coming Q4. What I mean is even though we include the one-off expenses into the forecast, we still get margin expansion in Q4.

A question about marketing expenses plan next year. I think we're doing the cost control, and also we put more focus on the product quality enhancement.

We don't need to spend crazy money on marketing going forward like what we did in the last three quarters. In the coming new year, we expect that the marketing expenses as the percentage of the revenue will be down.

It's another factor to drive the margin up. Lucy.

Thank you so much, Stephen. That's very clear.

Hello, Stephen, Sisi. Thank you for taking my question, and congratulation on the strong results.

My question is about the momentum of K-12 business. I remember last summer, our K-12 business has gone through some deceleration.

How do we think of the growth trend and the competition for K-12 business in this summer? Thank you.

The K-12 business. I think we beat the guidance again of the K-12 business in Q3.

I think actually we beat the guidance in the two to three quarters in a row. I think in the Q4, we're very the optimistic about the K-12 revenue growth.

I think the reason is this year we changed the strategy. We put more focus and resource on the product quality enhancement.

I think it drives the student retention rate up and drive the utilization rate up. In the Q4, I think our K-12 business still got the revenue growth about, let's say, the 15% to 20%, K-9 the 20% top-line growth plus, 20% plus top-line growth, and high school business, let's say, 15% to 20%.

I think going forward, even in the next year or next year after, I think we still get a very healthy growth of the K-12 business. Because now I think our quality is better than that of last year, and also the student retention rate is up, and so that's why we don't need to spend crazy money on marketing to recruit new student enrollments.

I think we're quite optimistic about the K-12 business growth going forward. Yikuan,

thank you. Thank you, Stephen.

It's very clear.

Thank you, Stephen and Sisi, and congratulations on the strong results. My question is about the overseas business.

I noticed that the revenue growth of this overseas test prep has been accelerating over the past two quarters. Could you give us more color on the reason behind?

Is it because the demand is coming back or is it because we take more market share? What's the outlook for the overseas growth in the fourth quarter and next year?

Thank you. Yeah.

Due to the negative impact of the economic environment and the international situation, I think, yeah, our overseas business was negatively impact by the outside environment. I think our team of the overseas have shown the resilience in almost every city.

Even in the coming Q4, I think the overseas-related business the year-over-year will be flattish or low single digit up. What I mean is the revenue increase.

We have a great team to do the great job in almost all the cities. Next year, I do believe we can do even better, because since last quarter, we started to the consolidation of the overseas test prep and the overseas consulting.

Going forward, I think we will provide a better one-stop service and product to the students, and also we'll do some cost control to save some fixed cost expenses. Also, in the coming new year, I do believe the overseas-related business margin will be up.

Very clear. Thank you.

Thank you.

Hi, Stephen. Hi, Sisi.

Congrats on the strong beat. Actually, all my questions have been answered already, let me just ask a couple of follow-ups.

First, you mentioned a $10 million to $15 million one-off expense in 4Q. Can I just double-check, it would be purely contained in 4Q, or can it be additional one-off spilling over into next year?

I think it's just one-off, but just to provide some confidence and comfort to the market on the margin expansion next year, just to clarify. Second, you mentioned the expansion, 10% to 13%, 14% expansion.

Can I double check is that number of centers or the size of classroom, area size expansion? More importantly, what does this group-level expansion mean specifically for K-9, class capacity, if you will, this and next year?

I think the one-off expenses, I think majority of the one-off expenses will be happened in Q4, it's a one-off. Even we consider the one-off expenses drag, but we still get the whole group margin expansion in Q4.

It is better to the future, because we spend some the one-off expenses in Q4, but as a result, we reduce the fixed cost expenses in the coming new year. That's why, as I said, we will drive the margin up of the overseas-related business in the coming new year.

Your second question is about the capacity. Yeah.

What I'm saying is in square meter size. This is net add.

Then most of the new capacity we build up is in the K-12 business. Don't forget, K-12 business, the top-line growth let's say, it's not official guidance, but based on our current estimation, I think the next year top-line growth will be somewhere around 15% or 20%.

Let's say, close to 20% or even more. We still have the leverage.

If we open the 10% to 15% of the new capacity, we still have the leverage to drive the average utilization rate up going forward. I think as for the cost and the expansion discipline, I think the local teams support my job.

I believe they will do the better job in the coming new year, even they have done a great job in this year, I do believe they will do more or better job in the coming new year on the cost control and the control of the expansion plan. Yes.

Thank you, sir. I think I absolutely agree with you that we need to make the hard decision to optimize our cost structure into next year.

Just to double-check, I know it could be a little sensitive, but broadly speaking, the one-off, when we say it, is kind of optimization of our workforce and the staff, that's one-off, right? It's not like we are ongoing spending money on restructuring.

It's just really that we had to make hard decision, and there was some related cost to it in 4Q. Is that fair understanding?

Yes, correct. Yeah.

Thank you, sir. That's very clear.

Thank you.

Thank you. Yes.

Good evening, Stephen and Sisi. Congratulations on this quarter's strong performance.

I noticed that on the new education business side, revenue top-line growth remains strong, but I see a slight moderation in the number of paid user growth for the learning device. Could you help us understand what's behind the shift?

Thanks.

The paid user. I think it's because of some disclosure difference.

I think the paid user, what I'm saying is the one paid users pay more money and enroll more subjects at the same time. It's better than before.

Secondly, we do have some seasonal or the timing difference issue. I suggest you are look at the enrollment and the deferred revenue and the GAAP revenue in more long term.

That's why we give the whole-year guidance since this year. I think the trend is good of the K-12 business.

The Q4, I do believe the revenue growth will be very healthy and will continue to grow the business even in the Q4 and the new year.

Great. Thanks.

That's very clear.

Yeah.

Thank you, Stephen and Sisi, for taking my question, and congrats on a really strong quarter of results. My question is regarding AI impact.

On one hand, we can see AI clearly improve operational efficiency and support margin expansion. On the other hand, how do we expect AI can change the core tutoring formats that EDU is currently offering?

Over the next 12 to 24 months, what kind of opportunities and threats do you see from the AI? Thank you.

I will ask Sisi to answer your question. Sisi is an AI expert.

Okay. Actually, we are exciting about the opportunity to implement AI technology into our our business.

It's a big opportunity for companies like us with capital advantages, and also we can hire top people, and also have the vast educational experience in this industry. We have the best position to implement AI technology into our area.

Three things we're doing, and we're making progress, and also want to share with each of you. Firstly, we are implementing AI technology into all key business lines.

For not only those online products or hardware products like our intelligent learning device, we have all the AI functions in it, embedded in into it, and keep monetizing it and enhancing students' learning experience and improve the learning efficiency of our customers as well. Even offline classes for young people, for for young students and all ages actually, they can implement some AI functions in in the class.

We're collecting the data and combining it with our teaching and learning experience to have all the data to possess more and more value to help us to to to even explore even more product opportunities in the future. Existing products are enhancing the quality and also enhancing the comparative competitive advantage using the AI, implementing the AI technology.

Second thing we're doing is to help us this year, especially this year and coming 1 to 2 years, our key theme is to enhance the overall efficiency, bring the healthy growth plus the the profitability enhancement. The AI can can put a lot of can can give us a lot of help.

For each progress of our daily work, for all the teachers, sales people, and teacher assistants, even functional departments staff, the whole working process can implement AI technology to enhance the efficiency. We have already seen some certain business, labor costs got reduced or the labor hours got reduced, and also, we're doing some restructuring for certain business, for example, the overseas-related business and also some other business as well.

We want to use implement more and more AI technology into the working process to to benefit from this efficiency improvement. This is the second thing.

It's an ongoing work. We will continue closely following the trend of AI technology's evolvement and keep using it into the whole working process.

Teachers are saving more and more time so that our teachers' utilization can also improve together with the trend. Third biggest thing actually we're we're also exciting and waiting for for the results is that we have several piloting team.

They're working on some new products implementing purely AI technology so we can get rid of or depend very, very little on human resource, but we can combine the AI technology with our teaching and learning experience and certain content so that we can come up with some innovative actually educational products, which is different from currently what we're doing for offline, but using the AI technology to bring students the learning experience similar with offline face-to-face teaching, but using AI technology. We're exploring some opportunities here now, and hopefully in in in coming several months, maybe we can see some new products coming.

Actually, the company are devoting a lot of new resources into the AI area. It's an ongoing process, but definitely together with our strategy, we will put more implement more of the AI technology, keep catching up the trend and benefit more going forward.

Okay.

This is very helpful. Thank you, Sisi.

Great. Hi, Stephen.

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

My question is regarding your longer-term margin profile. As you have discussed a lot about the new initiatives, expanding the full life cycle to customers, and AI can help improve the overall operating efficiency and including the overseas test prep and consulting integration, just wondering if you can share any updates on your view on the longer-term operating margin of EDU business and EDU's educational business?

Thank you.

Thank you, Tim. The margin question, as I said, the coming new year, I think we're quite optimistic about the margin expansion because of the higher the utilization rates and even the better operating leverage, and also because of the cost control will reduce the fixed cost and expenses.

In the next year, the margin will be up, and I do believe we will get the margin expansion in next three years. We do hope we can get the better margin, step-by-step in next three or even long term.

I think next quarter, I will give the detail guidance of the margin next quarter for the next year. We're quite optimistic about the long-term margin expansion going forward.

Thank you, Tim.

Sure. Thank you, Stephen.

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

Thank you.