UPDATE: New Oriental Education (EDU) Tops Q2 EPS by 9c, Revenues Beat; Offers 3Q Revenue Outlook
New Oriental Education (NYSE: EDU) reported Q2 EPS of $0.43, $0.09 better than the analyst estimate of $0.34. Revenue for the quarter came in at $887.69 million versus the consensus estimate of $885.6 million.
Financial Highlights for the Second Fiscal Quarter Ended November 30, 2020
- Total net revenues increased by 13.1% year-over-year to US$887.7 million for the second fiscal quarter of 2021.
- Operating loss was US$32.1 million for the second fiscal quarter of 2021, compared to an income of US$25.3 million in the same period of the prior fiscal year.
- Net income attributable to New Oriental was US$53.9 million, represented an increase of 0.9% in the same period of the prior fiscal year.
Operating Highlights for the Second Fiscal Quarter Ended November 30, 2020
- Total student enrollments in academic subjects tutoring and test preparation courses increased by 10.4% year-over-year to approximately 4,183,100 for the second fiscal quarter of 2021.
- The total number of schools and learning centers was 1,518 as of November 30, 2020, an increase of 214 compared to 1,304 as of November 30, 2019, and an increase of 46 compared to 1,472 as of August 31, 2020. The total number of schools was 117 as of November 30, 2020.
Michael Yu, New Oriental\'s Executive Chairman, commented, "We are pleased to see the recovery of businesses for the autumn semester after the resumption of schools and learning centers since the end of September 2020. As the pandemic situation in China has been stabilized and effectively controlled during the quarter, our businesses in most of the cities resumed and managed to deliver encouraging results. Net revenue for the second quarter was in line with our expectation, up 13.1% year over year. Our key growth driver, K-12 all-subjects after-school tutoring business, achieved year-over-year revenue growth of approximately 26%. U-Can middle and high school all-subjects after-school tutoring business grew by approximately 27%, while our POP Kids program recorded a growth of approximately 24%. Overseas related businesses are still under pressure due to the uncertainty of the pandemic situation and travel restrictions around the globe. The overseas test preparation business declined by approximately 29%, yet the overseas consulting and study tour business increased by 6%, respectively. Looking ahead, we believe our business are in good recovery progress and will gradually pickup the momentum in the coming quarters. As one of the market leaders in China, we are confident that our exceptional products and services, as well as our constantly enhanced learning experience would enable us to capture more market share and deliver long-term value for our shareholders."
Chenggang Zhou, New Oriental's Chief Executive Officer, added, "We expect the industry will undergo a wave of market consolidation once the pandemic fades away. We remain committed to ramp up our expansion effort to get prepared for further taking market share from other players post-COVID. During this quarter, we opened five new offline training schools in new cities. The total square meters of classroom area by the end of this quarter increased approximately 21% year-over-year, and 4% quarter-over-quarter. Student enrollments for K-12 after-school tutoring business during the quarter increase by 15% year-over-year. At the same time, we continued to execute our OMO (online merging offline) strategy, which enables our services to virtually reach a broader pool of students in existing cities and the surrounding satellite cities. In the autumn semester, we piloted the OMO online courses in vast majority existing cities and around 20 new surrounding satellite cities, attracting a promising number of new customers, accompanied by satisfactory student retention with low customer acquisition cost. We believe these OMO initiatives, featured with localized and differentiating content, will effectively boost enrollments and revenue with low customer acquisition cost and enable us to capture more market opportunity and improve our overall profitability over the long term. Last but not least, our pure online education platform, Koolearn.com has also invested more resources in upgrading their APP and online platforms, enhancing students' overall in-class learning experience and the teacher training system."
Stephen Zhihui Yang, New Oriental\'s Executive President and Chief Financial Officer, commented, "With the gradual recovery of our topline, our margins trended better. Our Non-GAAP operating margin for the quarter was negative 1.5%, down 620 basis points year-over-year, represented a smaller year-over-year decline comparing with the previous quarter. Non-GAAP net margin for the quarter was 7.8%, up 50 basis points year-over-year. We will continue to make efforts on cost control and reducing expenditures during pandemics period and be cautious in making investment in our OMO initiatives and pure online education platform to keep balancing the growth and profitability. We are confident in a better margin recovery when the pandemic is over. "
New Oriental Education sees Q3 2021 revenue of $1.098-1.1448 billion, versus the consensus of $1.14 billion.
Outlook for Third Quarter of Fiscal Year 2021
- New Oriental anticipates total net revenues in the third quarter of fiscal year 2021 (December 1, 2020 to February 28, 2021) to be in the range of US$ 1,098.6 million to US$1,144.8 million, representing year-over-year growth in the range of 19% to 24%.
The above figures reflect New Oriental's current and preliminary view, which is subject to change.
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