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New Oriental Announces Results for the First Fiscal Quarter Ended August 31, 2007
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: email@example.com Mr. Derek Mitchell Ogilvy Public Relations Worldwide (Beijing) Tel: +86-10-8520-6284 Email: firstname.lastname@example.org In the United States: Mr. Jeremy Bridgman Ogilvy Public Relations Worldwide (New York) Tel: +1-212-880-5363 Email: email@example.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 firstname.lastname@example.org, or Mr. Derek Mitchell of Ogilvy Public Relations Worldwide (Beijing), +86-10-8520- 6284, or email@example.com, or in the United States, Mr. Jeremy Bridgman of Ogilvy Public Relations Worldwide (New York), +1-212-880-5363, or firstname.lastname@example.org, 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 MM -- CNM023 -- 8177 10/15/2007 06:16 EDT http://www.prnewswire.com