New Oriental Education (EDU) Tops Q4 EPS by 6c; Approves $120M Buyback

New Oriental Education & Technology (NYSE: EDU) reported Q4 EPS of $0.30, $0.06 better than the analyst estimate of $0.24. Revenue for the quarter came in at $287.5 million versus the consensus estimate of $281.58 million.

On July 22, 2014, New Oriental's board of directors authorized the repurchase of up to US$120 million of the Company's shares during the period from July 28, 2014, through March 31, 2015.

This share repurchase program authorizes the Company to purchase its ADSs or common shares from time to time on the open market at prevailing market prices, in negotiated transactions off the market, in block trades, pursuant to a 10b5-1 plan or other legally permissible ways in accordance with applicable rules and regulations. The timing and extent of any purchases will depend upon market conditions, the trading price of ADSs and other factors.

New Oriental expects to implement this share repurchase program in a manner consistent with market conditions and the interests of the shareholders. New Oriental's board of directors will review the share repurchase program periodically and may authorize adjustment of its terms and size accordingly. New Oriental plans to fund any share repurchases made under this program from the Company's available cash balance.

Updates on Online Education Strategy: Establishment of Online and Offline Integrated Education Ecosystem

New Oriental is in the process of establishing an online and offline integrated education ecosystem. This ecosystem strategy consists of three levels.

1) The core element of the ecosystem is to develop an "O2O Two-way Interactive Education System" by extending New Oriental's traditional offline classroom-teaching offerings to online educational services.

New Oriental has developed a platform featuring a series of online education modules to support classroom teaching, after-class self-learning, and interaction between students, teachers, and parents via internet-enabled devices, such as smartphones, tablets and PCs. The Company has been piloting and upgrading the platform for all major product lines since the beginning of fiscal year 2015. A newly revamped POP kids English program, called "Shuang You" will be fully launched throughout the New Oriental network in the second quarter of fiscal year 2015. A revamped U-Can all-subject after-school tutoring program, named "U-Can Visible Progress Teaching system," has been piloted in several large cities and will be rolled out to more cities in the first half of fiscal year 2015. Similar systems will also be implemented for overseas test preparation and domestic test preparation courses beginning from the second quarter of fiscal year 2015.

2) The second level above the O2O Two-way Interactive Education System is to invest in the development of supplementary online educational products and services.

New Oriental's own online education website koolearn.com now offers over 2,000 online courses in language training, overseas and domestic test preparation and vocational education with over 9.2 million cumulative registered users by the end of fiscal year 2014 and about 177,700 paying users in fiscal year 2014. Recent developments relating to koolearn.com include:

• Koolearn.com recently launched an online test preparation program, which features live broadcasts of a series of New Oriental's most popular offline test preparation classes. This program had achieved over 264,400 registrations in the second half of fiscal year 2014.
• In July 2014, Koolearn.com and ATA Inc. (NASDAQ: ATAI), a leading provider of advanced testing technologies and testing-related services in China, established a joint venture to provide online and mobile education and training to working professionals in China. The partnership aims to leverage New Oriental's expertise in online education website and its distribution channels, and ATA Inc.'s experience in assessment deliveries, student resources, learning tools, software and other technical resources.
• Koolearn.com's "DONUT" game-based mobile learning applications for children aged 2 to 8 recorded over 8 million downloads by the end of fiscal year 2014 and Koolearn.com has reached agreements for DONUT applications to be used in about 20 kindergartens by September 2014.

In addition, during the fourth fiscal quarter of 2014 New Oriental made important progress in its strategy to develop other supplementary online education products and services under the New Oriental brand, either independently or in majority-held partnerships with other companies. Recent developments in this regard include:

• In May 2014, the Company launched an English language vocabulary training application, "Le Ci", for mobile phones and tablets. Le Ci aids vocabulary memorization and language development using techniques developed by New Oriental's Chairman and CEO, Michael Yu. Over time, social networking and incentive-based learning features will be added to the application. In the two months since it was launched, the application has already recorded over 310,000 users.
• In July 2014, the Company also launched an online education platform for primary and secondary schools. The "OKAY" platform was developed in cooperation with more than 30,000 teachers from 49 public schools in China and was specifically designed to support learning activities in primary and secondary classrooms. It features an extensive database of educational content and resources, which can support intelligent, customized, interactive in-class teaching and learning on New Oriental customized tablets and digital whiteboards. The platform can also track and analyze students' after-class self-learning progress, and automatically push customized content that can improve students' learning efficiency.
• New Oriental has developed a strategic partnership with Tencent Holdings Limited ("Tencent", SEHK: 00700), a leading provider of comprehensive Internet services in China, to research and develop unique mobile-based English language learning offerings that will build on the Company's deep resources in terms of content and educational research and Tencent's technological expertise and online penetration. The first product is expected to be launched by the end of 2014, and will be promoted through Tencent's online channels and New Oriental's offline network.

3) New Oriental is also exploring opportunities to invest in selected online education companies with minority stake to further support its efforts to develop a comprehensive online and offline integrated education ecosystem.

New Oriental intends to focus on investing in online education companies that have business models or technologies that are complementary to its online education strategy.

For earnings history and earnings-related data on New Oriental Education & Technology (EDU) click here.

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