New Oriental Education & Technology Group (EDU) Q4 2024 earnings summary

Executive summary

• Fiscal year 2024 net revenues rose 43.9% year over year to $4,313.6 million, with Q4 revenues up 32.1% to $1,136.7 million, driven by strong demand and innovative business ventures.

• Operating margin was 0.9% and non-GAAP operating margin was 3.2% for Q4, impacted by investments in capacity expansion, tourism, and management incentives; FY2024 operating income increased 84.4% to $350.4 million.

• Net income attributable to shareholders for FY2024 was $309.6 million, up 74.6% year over year; Q4 net income was $27 million, down 6.9% year over year; non-GAAP Q4 net income was $36.9 million, down 40.5%.

• Completed acquisition of East Buy's online education business for RMB 1.5 billion, now consolidated under educational services.

• The number of schools and learning centers reached 1,025 as of May 31, 2024, up from 748 a year earlier.

Financial highlights

• Q4 FY2024 net revenues: $1,136.7 million (+32.1% YoY); FY2024: $4,313.6 million (+43.9% YoY).

• Q4 operating income: $10.5 million (-78.1% YoY); FY2024: $350.4 million (+84.4% YoY).

• Q4 net income: $27.0 million (-6.9% YoY); FY2024: $309.6 million (+74.6% YoY).

• Q4 non-GAAP net income: $36.9 million (-40.5% YoY); FY2024: $381.1 million (+47.2% YoY).

• Operating costs and expenses rose 38.6% YoY to $1,126.2 million; non-GAAP operating costs up 40.7%.

• Cost of revenue increased 38.5% to $542.4 million; selling and marketing expenses up 40.9% to $208.2 million.

• G&A expenses rose 37.5% to $375.5 million; non-GAAP G&A up 42.3%.

• Net cash flow from operations was $376.8 million in Q4; capital expenditure was $27.4 million.

• Cash, term deposits, and short-term investments totaled $4,944.4 million as of May 31, 2024.

Outlook and guidance

• Q1 FY2025 net revenue (excluding East Buy/private label and livestreaming) expected to be $1,254.7M–$1,283.5M, up 31%–34% year-over-year.

• Expects operating margin (excluding East Buy) to expand year-over-year in Q1 FY2025 and deliver satisfactory operating profit for FY2025.

• Plans to increase capacity by 20%–25% in FY2025, focusing on cities with strong performance.

• Margin expansion of 200 basis points expected in Q1 FY2025 for educational business (excluding East Buy).

• Tourism business revenue expected to reach RMB 1.2 billion in FY2025, with a projected loss of RMB 100 million.