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New Oriental Announces Results for the First Fiscal Quarter Ended August 31, 2007
October 15, 2007 at 6:18 AM EDT
                Net Revenues Increased by 42.5% Year-Over-Year

                 Net Income Increased by 55.1% Year-Over-Year

BEIJING, Oct. 15 /Xinhua-PRNewswire-FirstCall/ -- New Oriental Education and Technology Group Inc. (the ''Company'') (NYSE: EDU), the largest provider of private educational services in China, today announced its unaudited financial results for the fiscal quarter ended August 31, 2007, which is the first quarter for New Oriental's fiscal year 2008.(1)

    Highlights for the Fiscal Quarter Ended August 31, 2007

    -- Total net revenues increased by 42.5% year-over-year to RMB612.0
       million (US$81.1 million) from RMB429.3 million in the same period of
       the prior fiscal year.

    -- Net income increased by 55.1% year-over-year to RMB256.0 million
       (US$33.9 million) from RMB165.1 million in the same period of the prior
       fiscal year, and net income attributable to holders of common shares
       excluding share-based compensation expenses (non-GAAP) increased to
       RMB268.7 million (US$35.6 million) from RMB170.7 million in the first
       quarter of fiscal year 2007.

    -- Basic and diluted earnings per ADS were RMB6.86 (US$0.91) and RMB6.56
       (US$0.87), respectively. Excluding share-based compensation expenses
       (non-GAAP), basic and diluted earnings per ADS were RMB7.20 (US$0.95)
       and RMB6.89 (US$0.91), respectively.  Each ADS represents four common
       shares of the Company.(2)

    -- Total student enrollments in language training and test preparation
       courses increased by 30.5% year-over-year to approximately 440,500 from
       approximately 337,400 in the same period of the prior fiscal year.

    -- Opened two new schools and 17 new learning centers in the quarter,
       bringing the total number of schools and learning centers to 37 and 149
       (including the 37 schools), respectively, as of the August 31, 2007.

''We are delighted to start our 2008 fiscal year with such strong financial results for the quarter ended August 31, 2007. The first fiscal quarter is the Company's most important quarter because it includes the two month summer holidays for Chinese students, a time when many of those students choose to study languages at New Oriental and prepare for future tests. In fact, this summer we exceeded 440,500 student enrollments in our language training and test preparation courses, a 30% increase over the same period last year,'' said Mr. Michael Yu, New Oriental's Chairman and Chief Executive Officer. ''Furthermore, we continue to leverage our widely recognized brand name to expand our geographic network. In the first fiscal quarter we opened two new schools, one in Dalian and one in Jingzhou, along with 17 new learning centers, bringing our physical school network to 149 schools and learning centers, up from 115 a year ago. We also recently added mathematics for kids and middle school students in addition to our renowned English language programs. I am pleased to report that more than 4,800 students enrolled in our math programs in the first fiscal quarter.''

New Oriental's Chief Financial Officer, Mr. Louis T. Hsieh, added, ''We are very pleased with our financial results in the first quarter of fiscal year 2008. Increased enrollments in our leading test preparation and language training segments allowed us to exceed our revenue guidance by a substantial margin. As we execute our strategy of pursuing strong organic growth while exploring valuable partnerships to expand our product offerings, we expect to see continued top- and bottom-line growth in the coming quarters."

Mr. Hsieh noted that the first quarter of the Company's fiscal year is typically the strongest quarter in terms of revenue and net income due to the seasonality of the Company's business. For example, in the first fiscal quarter of 2007 (June 1 to August 31, 2006), the Company generated net revenues of RMB429.3 million as compared to net revenues of RMB169.0 million in the second fiscal quarter (September 1 to November 30, 2006). In addition, net income for the first fiscal quarter of 2007 was RMB165.1 million compared to net income of RMB8.2 million in the second fiscal quarter of 2007.

Financial Results for the Fiscal Quarter Ended August 31, 2007

For the first fiscal quarter of 2008, New Oriental reported net revenues of RMB612.0 million (US$81.1 million), representing a 42.5% increase year- over-year.

Net revenues from educational programs and services for the first fiscal quarter were RMB578.2 million (US$76.6 million), representing a 40.4% increase year-over-year. The growth was mainly driven by the increase in the number of student enrollments in language training and test preparation courses. Total student enrollments in language training and test preparation courses in the first quarter of fiscal year 2008 increased by 30.5% year-over-year to approximately 440,500 from approximately 337,400 in the first quarter of fiscal year 2007.

Total operating costs and expenses for the quarter were RMB343.2 million (US$45.5 million), a 37.7% increase year-over-year.

Cost of revenues increased by 40.0% year-over-year to RMB194.1 million (US$25.7 million), primarily due to the increased number of courses being offered to a larger student base and the greater number of schools and learning centers in operation.

Selling and marketing expenses increased by 29.5% year-over-year to RMB46.3 million (US$6.1 million), primarily due to brand promotion expenses.

General and administrative expenses increased by 37.5% year-over-year to RMB102.8million (US$13.6 million), primarily due to increased headcount as the Company expands its network of schools and learning centers.

Total share-based compensation expenses, which were allocated to related operating costs and expenses, increased to RMB12.7 million (US$1.7 million) in the first quarter of fiscal year 2008.

Operating margin for the quarter was 43.9%, compared to 42.0% in the corresponding period of the previous year. Excluding share-based compensation expenses (non-GAAP), operating margin for the quarter was 46.0%, compared to 43.3% in the corresponding period of the prior year. This increase was primarily due to the improved operating efficiency as revenue growth outpaced the growth in operating costs and expenses.

Net income for the quarter was RMB256.0 million (US$33.9 million), representing a 55.1% increase from the first quarter of fiscal year 2007. Basic and diluted earnings per common share amounted to RMB1.72 (US$0.23) and RMB1.64 (US$0.22), respectively, and basic and diluted earnings per ADS were RMB6.86 (US$0.91) and RMB6.56 (US$0.87), respectively.

Income attributable to holders of common shares excluding share-based compensation expenses (non-GAAP) was RMB268.7 million (US$35.6 million). Basic and diluted earnings per ADS excluding share-based compensation expenses (non-GAAP) were RMB7.20 (US$0.95) and RMB6.89 (US$0.91), respectively.

Capital expenditures for the quarter were RMB23.1 million (US$3.1 million).

As of August 31, 2007, New Oriental had cash and cash equivalents of RMB1,743.9 million (US$231.1 million), as compared to RMB1,563.8 million as of May 31, 2007. Net operating cash flow for the first quarter of fiscal year 2008 was RMB212.4 million (US$28.2 million).

Outlook for Second Quarter of Fiscal Year 2008

New Oriental expects its total net revenues in the second quarter of fiscal year 2008 (September 1, 2007 to November 30, 2007) to be in the range of RMB211.2 million (US$28.0 million) to RMB224.8 million (US$29.8 million), representing year-over-year growth in the range of 25.0% to 33.0%, respectively. This forecast reflects New Oriental's current and preliminary view, which is subject to change.

Conference Call Information

New Oriental's management will host an earnings conference call at 8 AM on October 15, 2007 U.S. Eastern Time (8 PM on October 15, 2007 Beijing/Hong Kong time).

    Dial-in details for the earnings conference call are as follows:


     US:                 +1-617-213-8844
     Hong Kong:          +852-3002-1672

Please dial-in 10 minutes before the call is scheduled to begin and provide the passcode to join the call. The passcode is ''New Oriental earnings call.''

A replay of the conference call may be accessed by phone at the following number until October 22, 2007:


     International: +1-617-801-6888
     Passcode:      93078606

Additionally, a live and archived webcast of the conference call will be available at http://investor.neworiental.org .

About New Oriental

New Oriental is the largest provider of private educational services in China based on the number of program offerings, total student enrollments and geographic presence. New Oriental offers a wide range of educational programs, services and products consisting primarily of English and other foreign language training, test preparation courses for major admissions and assessment tests in the United States, the PRC and Commonwealth countries, primary and secondary school education, development and distribution of educational content, software and other technology, and online education. New Oriental's ADSs, each of which represents four common shares, currently trade on the New York Stock Exchange under the symbol ''EDU.''

For more information about New Oriental, please visit http://english.neworiental.org .

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the ''safe harbor'' provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as ''will,'' ''expects,'' ''anticipates,'' ''future,'' ''intends,'' ''plans,'' ''believes,'' ''estimates'' and similar statements. Among other things, the outlook for second quarter of fiscal year 2008 and quotations from management in this announcement, as well as New Oriental's strategic and operational plans, contain forward-looking statements. New Oriental may also make written or oral forward-looking statements in its periodic reports to the U.S. Securities and Exchange Commission in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about New Oriental's beliefs and expectations, are forward-looking statements. Forward- looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: our growth strategies; our future business development, results of operations and financial condition; our ability to attract students without a significant decrease in course fees; our ability to continue to hire, train and retain qualified teachers; our ability to maintain and enhance our ''New Oriental'' brand; our ability to effectively and efficiently manage the expansion of our school network and successfully execute our growth strategy; the outcome of ongoing, or any future, litigation or arbitration, including those relating to copyright and other intellectual property rights; competition in the private education sector in China; changes in our revenues and certain cost or expense items as a percentage of our revenues; the expected growth of the Chinese private education market; and Chinese governmental policies relating to private educational services and providers of such services. Further information regarding these and other risks is included in our registration statement on Form F-1 and other documents filed with the Securities and Exchange Commission. New Oriental does not undertake any obligation to update any forward-looking statement, except as required under applicable law. All information provided in this press release and in the attachments is as of October 15, 2007, and New Oriental undertakes no duty to update such information, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement New Oriental's consolidated financial results presented in accordance with GAAP, New Oriental uses the following measures defined as non- GAAP financial measures by the SEC: net income excluding share-based compensation expenses and basic and diluted earnings per ADS excluding share- based compensation expenses. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table captioned ''Reconciliations of non-GAAP measures to the most comparable GAAP measures'' set forth at the end of this release.

New Oriental believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding share-based expenses that may not be indicative of its operating performance from a cash perspective. New Oriental believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to New Oriental's historical performance and liquidity. New Oriental computes its non-GAAP financial measures using the same consistent method from quarter to quarter. New Oriental believes these non- GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. A limitation of using non-GAAP net income excluding share-based compensation expenses, and basic and diluted earnings per share and per ADS excluding share-based compensation expenses is that these non-GAAP measures exclude share-based compensation charge that has been and will continue to be for the foreseeable future a significant recurring expense in our business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

     (1) The Company's financial information is stated in RMB. The translation
         of RMB amounts at and for the quarter ended August 31, 2007 into
         United States dollar ("US$") is included solely for the convenience
         of the readers and has been made at the rate of RMB7.5462 to US$1.00,
         the approximate free rate of exchange at August 31, 2007. Such
         translations should not be construed as representations that RMB
         amounts could be converted into US$ at that rate or any other rate,
         or to be the amounts that would have been reported under US GAAP.

     (2) Common shares used in calculating basic and diluted earnings per ADS
         increased in the first quarter of fiscal year 2008 as compared to the
         first quarter of fiscal year 2007 due to a total of 36.9 million
         common shares (equivalent to 9.225 million ADS) issued and sold by
         the company in its initial public offering and follow-on offering in
         September 2006 and February 2007, respectively.



                  NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                  (In thousands)

                                               As of August 31    As of May 31
                                                    2007              2007
                                                 (Unaudited)       (Unaudited)
                                                RMB        USD         RMB
    ASSETS:
    Current assets:
    Cash and cash equivalents               1,743,898    231,096    1,563,819
    Restricted cash                             3,057        405        3,057
    Term deposits                              20,800      2,756       23,000
    Accounts receivable, net                    3,990        529        4,109
    Inventory                                  57,258      7,588       49,028
    Prepaid expenses and other current
     assets                                    68,084      9,022       47,149

    Total current assets                    1,897,087    251,396    1,690,162

    Property, plant and equipment, net        696,480     92,295      693,045
    Land use right, net                        24,765      3,282       24,903
    Amounts due from related parties              244         32          244
    Deferred tax assets                         7,935      1,052        8,345
    Trade mark                                  1,637        217        1,637
    Long term investment                           15          2           15

    Total assets                            2,628,163    348,276    2,418,351

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current liabilities:
    Accounts payable-trade                     57,692      7,645       43,282
    Accrued expenses and other current
     liabilities                              178,624     23,669      137,455
    Income tax payable                         38,793      5,141       15,343
    Amount due to related parties                  97         13           97
    Deferred revenue                          201,075     26,646      330,763

    Total current liabilities                 476,281     63,114      526,940

    Total long-term liabilities                   --          --           --

    Total liabilities                         476,281     63,114      526,940

    Minority interest                           1,690        224        1,818

    Total shareholders' equity              2,150,192    284,938    1,889,593

    Total liabilities and shareholders'
     equity                                 2,628,163    348,276    2,418,351





                 NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC.
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
            (In thousands except for per share and per ADS amounts)

                                                For the Three Months Ended
                                                         August 31
                                                   2007              2006
                                                (Unaudited)       (Unaudited)
                                               RMB         USD        RMB
    Net Revenues:
    Educational Programs and services        578,217     76,624     411,914
    Books and others                          33,764      4,474      17,419
    Total net revenues                       611,981     81,098     429,333

    Operating costs and expenses
     (note 1):
    Cost of revenues                         194,068     25,717     138,637
    Selling and marketing                     46,287      6,134      35,732
    General and administrative               102,839     13,628      74,790

    Total operating costs and expenses       343,194     45,479     249,159
    Operating income                         268,787     35,619     180,174

    Other income (expenses), net              12,236      1,622      (1,917)

    Provision for income taxes               (25,366)    (3,361)    (13,198)
    Minority interest, net of taxes              347         46          --

    Net Income                               256,004     33,926     165,059

    Net income per share-basic                  1.72       0.23        1.65
    Net income per share-diluted                1.64       0.22        1.46

    Net income per ADS-basic (note 2)           6.86       0.91        6.60
    Net income per ADS-diluted (note 2)         6.56       0.87        5.84



    Notes:

    Note 1: Share based compensation expenses (in thousands) are included in
            the operating costs and expenses as follows:


                                       For the Three Months Ended August 31
                                               2007            2006
                                             Unaudited       Unaudited
                                            RMB       USD        RMB
     Cost of revenues                        872       116        143
     Selling and marketing                   446        59         99
     General and administrative           11,381     1,508      5,447
      Total                               12,699     1,683      5,689


    Note 2: Each ADS represents four common shares



                  NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC.
     RECONCILIATION OF NON-GAAP MEASURES TO THE MOST COMPARABLE GAAP MEASURES
                 (In thousands except share and per ADS amounts)

                                          For the Three Months Ended August 31
                                                    2007               2006
                                                 (Unaudited)        (Unaudited)
                                              RMB          USD          RMB

    Net income                              256,004       33,926      165,059
    Share-based compensation expense         12,699        1,683        5,689
    Non-GAAP net income                     268,703       35,609      170,748

    Net income per ADS - basic (note 1)        6.86         0.91         6.60
    Net income per ADS - diluted (note 1)      6.56         0.87         5.84

    Non-GAAP net income per ADS - basic
     (note 1)                                  7.20         0.95         6.83
    Non-GAAP net income per ADS -
     diluted (note 1)                          6.89         0.91         6.04

    Weighted average shares used in
     calculating basic net income per
     ADS (note 1)                       149,181,240  149,181,240  100,000,000
    Weighted average shares used in
     calculating diluted net income
     per ADS (note 1)                   156,018,940  156,018,940  113,131,319


    Note 1: Each ADS represents four common shares




    For investor and media inquiries, please contact:

    In China:
     Ms. Sisi Zhao
     New Oriental Education and Technology Group Inc.
     Tel:   +86-10-6260-5566 x8203
     Email: zhaosisi@staff.neworiental.org

     Mr. Derek Mitchell
     Ogilvy Public Relations Worldwide (Beijing)
     Tel:   +86-10-8520-6284
     Email: derek.mitchell@ogilvy.com

    In the United States:
     Mr. Jeremy Bridgman
     Ogilvy Public Relations Worldwide (New York)
     Tel:   +1-212-880-5363
     Email: jeremy.bridgman@ogilvypr.com
SOURCE  New Oriental Education and Technology Group Inc.
    -0-                       10/15/2007
    /CONTACT: In China, Ms. Sisi Zhao of New Oriental Education and Technology
Group Inc., +86-10-6260-5566 x8203, or zhaosisi@staff.neworiental.org, or Mr.
Derek Mitchell of Ogilvy Public Relations Worldwide (Beijing), +86-10-8520-
6284, or derek.mitchell@ogilvy.com, or in the United States, Mr. Jeremy
Bridgman of Ogilvy Public Relations Worldwide (New York), +1-212-880-5363, or
jeremy.bridgman@ogilvypr.com, both for EDU /
    /Web Site:  http://english.neworiental.org
                http://investor.neworiental.org /
    (EDU)

CO:  New Oriental Education & Technology Group Inc.
ST:  China
IN:  MLM EDU PUB
SU:  ASI ERN CCA



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8177 10/15/2007 06:16 EDT http://www.prnewswire.com