New Oriental Education & Technology ((EDU)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The recent earnings call for New Oriental Education & Technology highlighted a period of stable growth, with positive developments in revenue and operational margins. Despite facing challenges in overseas segments and a slight decline in net income, the company expressed optimism with a proactive shareholder return strategy and an improved outlook for future quarters.
Stable Growth Trajectory
New Oriental has entered a stable growth trajectory, reporting a 6.1% year-over-year increase in total net revenue. The company’s non-GAAP operating margin improved by 100 basis points, reaching 22%. This growth reflects the company’s strategic focus on enhancing its core educational services and operational efficiencies.
Strong Performance in New Educational Initiatives
The company’s new educational business initiatives have shown strong performance, with a revenue increase of about 15% year-over-year for the first quarter of 2026. This growth is primarily driven by non-academic tutoring and intelligent learning systems, which have expanded to approximately 60 cities.
Positive Outlook and Shareholder Returns
Looking ahead, New Oriental projects a 9% to 12% year-over-year increase in total net revenue for the second quarter. The company has also announced a robust shareholder return plan, including a $190 million dividend and a $300 million share repurchase program, reflecting its commitment to returning value to shareholders.
Increased Deferred Revenue
Deferred revenue saw a 10% increase compared to the previous year, indicating strong upfront cash collection from customers. This increase underscores the company’s ability to secure long-term commitments from its client base.
Decreased Net Income
Net income attributable to New Oriental for the quarter was $240.7 million, representing a 1.9% decrease year-over-year. This decline highlights the challenges the company faces in maintaining profitability amidst rising costs and competitive pressures.
Increased Operating Costs
Operating costs and expenses rose by 6.1% year-over-year, with the cost of revenues increasing by 9.3%. These rising costs reflect the company’s investments in expanding its educational offerings and maintaining its competitive edge.
Challenges in Overseas Business
The overseas test prep and consulting businesses faced challenges, with expected revenue declines in the upcoming quarter due to external factors and competitive pressures. These challenges highlight the need for strategic adjustments to navigate the international market landscape.
Higher Tax Rate
The effective tax rate increased to 27%, up from the typical 25%, due to withholding tax on dividends. This increase in tax rate impacts the company’s net income and highlights the financial implications of its shareholder return strategies.
Forward-Looking Guidance
For the second quarter of fiscal year 2026, New Oriental expects total net revenue to grow between 9% and 12%, with the full fiscal year revenue anticipated to increase by 5% to 10%. The company remains committed to strategic investments, particularly in its private label portfolio, to drive future growth.
In summary, New Oriental Education & Technology’s earnings call reflected a period of stable growth with positive revenue and operational margin improvements. While challenges persist, particularly in overseas segments, the company’s proactive shareholder return strategy and optimistic outlook for future quarters provide a promising path forward.