New Oriental Education & Technology Group Inc. (EDU), a provider of private educational services in China, today announced its unaudited financial results for the fourth fiscal quarter and fiscal year ended May 31, 2022.
Financial Highlights for the Fourth Fiscal Quarter Ended May 31, 2022
- Total net revenues decreased by 56.8% year over year to US$524.0 million for the fourth fiscal quarter of 2022.
- Operating loss was US$105.6 million for the fourth fiscal quarter of 2022.
- Net loss attributable to New Oriental was US$189.3 million for the fourth fiscal quarter of 2022.
Key Financial Results
(in thousands US$, except per ADS(1) data) | 4Q FY2022 | 4Q FY2021 | % of change |
Net revenues | 524,023 | 1,211,986 | -56.8 % |
Operating loss | (105,649) | (102,362) | 3.2 % |
Non-GAAP operating loss (2)(3) | (76,865) | (82,217) | -6.5 % |
Net loss attributable to New Oriental | (189,302) | (45,466) | 316.4 % |
Non-GAAP net loss attributable to New Oriental (2)(3) | (160,339) | (27,872) | 475.3 % |
Net loss per ADS attributable to New Oriental - basic | (1.12) | (0.27) | 314.7 % |
Net loss per ADS attributable to New Oriental - diluted | (1.12) | (0.27) | 314.7 % |
Non-GAAP net loss per ADS attributable to New Oriental - basic(3)(4) | (0.94) | (0.16) | 472.9 % |
Non-GAAP net loss per ADS attributable to New Oriental - diluted(3)(4) | (0.94) | (0.16) | 472.9 % |
(in thousands US$, except per ADS(1) data) | FY2022 | FY2021 | % of change |
Net revenues | 3,105,246 | 4,276,539 | -27.4 % |
Operating (loss) / income | (982,513) | 117,266 | -937.8 % |
Non-GAAP operating (loss) / income (2)(3) | (849,545) | 186,146 | -556.4 % |
Net (loss) / income attributable to New Oriental | (1,187,721) | 334,414 | -455.2 % |
Non-GAAP net (loss) / income attributable to New Oriental (2)(3) | (1,046,238) | 389,030 | -368.9 % |
Net (loss) / income per ADS attributable to New Oriental - basic | (7.00) | 2.03 | -444.5 % |
Net (loss) / income per ADS attributable to New Oriental - diluted | (7.00) | 2.02 | -445.9 % |
Non-GAAP net (loss) / income per ADS attributable to New Oriental - basic(3)(4) | (6.17) | 2.36 | -360.9 % |
Non-GAAP net (loss) / income per ADS attributable to New Oriental - diluted(3)(4) | (6.17) | 2.35 | -361.9 % |
(1) Each ADS represents ten common shares. The Hong Kong-listed shares are fully fungible with the ADSs listed on NYSE. The weighted average number of ADS and earnings per ADS have been retrospectively adjusted to reflect the ADS ratio change from one ADS representing one common share to one ADS representing ten common shares, which became effective on April 8, 2022. |
(2) GAAP represents Generally Accepted Accounting Principles in the United States of America. |
(3) New Oriental provides net (loss) / income attributable to New Oriental, operating (loss) / income and net (loss) / income per ADS attributable to New Oriental on a non-GAAP basis that excludes share-based compensation expenses and gain / (loss) from fair value change of investments to provide supplemental information regarding its operating performance. For more information on these non-GAAP financial measures, please see the section captioned "About Non-GAAP Financial Measures" and the tables captioned "Reconciliations of Non-GAAP Measures to the Most Comparable GAAP Measures" set forth at the end of this release. |
(4) The Non-GAAP net (loss) / income per ADS attributable to New Oriental is computed using Non-GAAP net (loss) / income attributable to New Oriental and the same number of shares and ADSs used in GAAP basic and diluted EPS calculation. |
Operating Highlights for the Fourth Fiscal Quarter Ended May 31, 2022
- The total number of schools and learning centers was 744 as of May 31, 2022, a decrease of 103 and 925 compared to 847 as of February 28, 2022 and 1,669 as of May 31, 2021, respectively. The total number of schools was 107 as of May 31, 2022.
Michael Yu, New Oriental's Executive Chairman, commented, "Fiscal year 2022 has been a year full of challenges and opportunities. We restructured our core businesses and operations to comply with the government policies in China and stepped onto a new stage. Our remaining key businesses are seeing a stable trend that lays a solid foundation for our future development. In this fiscal year, the overseas test preparation and overseas study consulting businesses increased by 6% and 16% year over year, respectively. Our domestic test preparation business targeting adults and university students witnessed a record rapid growth of approximately 30% year over year. At the same time, various new businesses that we embarked on earlier this year achieved promising results.
The non-academic tutoring business was rolled out in over 50 cities, same as the intelligent learning system and devices that were adopted and tested in around 60 cities. Both have achieved positive customer feedback and improved customer retention. Other businesses, including study tour and research camp, educational materials and digitalized smart study solutions, as well as exam preparation courses designed for students with junior college diplomas to obtain bachelor's degrees, are making remarkable progress. We are confident that by leveraging our brand recognition and educational resources accumulated over our operating history, these new businesses will start to generate notable revenue from the next fiscal year."
Chenggang Zhou, New Oriental's Chief Executive Officer, added, "By the end of this fiscal year, the total number of schools and learning centers was reduced to 744. As we focus more on business opportunities in the major markets of higher-tier cities, we are committed to leveraging our well-developed educational infrastructure, human resources, and state-of-the-art technology across our remaining key businesses. We are also actively looking into new initiatives to provide high-quality and diversified educational services for our customers of all ages. Our online-merge-offline teaching system helped us to maintain a high teaching quality to our customers amid the pandemic – especially in major cities such as Shanghai and Beijing. Koolearn.com, our online education platform, continues to expand its online educational offerings to adults and university students, and actively seeks business opportunities in new areas. In this fiscal year, Koolearn established an e-commerce platform under the brand name DONG FANG ZHEN XUAN(东方甄选) for the sale of agricultural and other products. Koolearn also began to pilot livestreaming events on some famous short-video social platforms such as Douyin. DONG FANG ZHEN XUAN has made notable progress and received wide recognitions from tens of millions of subscribers and members alike."
Stephen Zhihui Yang, New Oriental's Executive President and Chief Financial Officer, commented, "We maintained a strong cash position throughout the whole restructuring process. By the end of this fiscal year, our cash and cash equivalents, term deposits and short-term investments totaled approximately US$4.2 billion. The additional costs and expenses due to the termination of lease agreements in relation to the closure of our learning centers and employee layoffs were largely absorbed in fiscal year 2022. The Company's management team will continue to make great efforts to resume overall profitability of the Company as early as possible and proactively seek profitable growth. Our continued commitment to high quality services and operational efficiency will deliver more value to our customers, society and shareholders over the long term."
Adoption of Share Repurchase Program
On July 26, 2022, New Oriental's board of directors authorized the repurchase of up to US$400 million of the Company's common shares during the period from July 28, 2022 through May 31, 2023.
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 privately negotiated transactions, in block trades or through 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 its common shares, as well as other factors.
New Oriental's board of directors will review the share repurchase program periodically and may authorize adjustment to its terms and size accordingly. New Oriental plans to fund any share repurchases made under this program from the Company's available cash balance.
Financial Results for the Fourth Fiscal Quarter Ended May 31, 2022
Net Revenues
For the fourth fiscal quarter of 2022, New Oriental reported net revenues of US$524.0 million, representing a 56.8% decrease year over year. The decline was mainly due to the cessation of K-9 academic after-school tutoring services in compliance with the government policies in China.
Operating Costs and Expenses
Operating costs and expenses for the quarter were US$629.7 million, representing a 52.1% decrease year over year. Non-GAAP operating costs and expenses for the quarter, which exclude share-based compensation expenses, were US$600.9 million, representing a 53.6% decrease year over year. The decrease was primarily due to the reduction of facilities and number of staff as a result of the restructuring in fiscal year 2022.
- Cost of revenues decreased by 57.2% year over year to US$247.8 million.
- Selling and marketing expenses decreased by 50.7% year over year to US$95.8 million.
- General and administrative expenses for the quarter decreased by 43.9% year over year to US$286.1 million. Non-GAAP general and administrative expenses, which exclude share-based compensation expenses, were US$257.2 million, representing a 47.4% decrease year over year.
Total share-based compensation expenses, which were allocated to related operating costs and expenses, increased by 42.9% to US$28.8 million in the fourth fiscal quarter of 2022. The increase is due to the grants of restricted share units of the Company to employees and directors in May 2021 with graded vesting over three years.
Operating Loss and Operating Margin
Operating loss was US$105.6 million, compared to the loss of US$102.4 million in the same period of the prior fiscal year. Non-GAAP loss from operations for the quarter was US$76.9 million, compared to the loss of US$82.2 million in the same period of the prior fiscal year.
Operating margin for the quarter was negative 20.2%, compared to negative 8.4% in the same period of the prior fiscal year. Non-GAAP operating margin, which excludes share-based compensation expenses, for the quarter was negative 14.7%, compared to negative 6.8% in the same period of the prior fiscal year.
Net Loss and Net Loss per ADS
Net loss attributable to New Oriental for the quarter was US$189.3 million, compared to the loss of US$45.5 million in the same period of the prior fiscal year. Basic and diluted net loss per ADS attributable to New Oriental were US$1.12 and US$1.12, respectively.
Non-GAAP Net Loss and Non-GAAP Net Loss per ADS
Non-GAAP net loss attributable to New Oriental for the quarter was US$160.3 million, compared to the loss of US$27.9 million in the same period of the prior fiscal year. Non-GAAP basic and diluted net loss per ADS attributable to New Oriental were US$0.94 and US$0.94, respectively.
Cash Flow
Net operating cash flow for the fourth fiscal quarter of 2022 was approximately US$29.3 million and capital expenditures for the quarter were US$22.3 million.
Balance Sheet
As of May 31, 2022, New Oriental had cash and cash equivalents of US$1,148.6 million. In addition, the Company had US$1,140.1 million in term deposits and US$1,902.3 million in short-term investment.
New Oriental's deferred revenue balance, which is cash collected from registered students for courses and recognized proportionally as revenue as the instructions are delivered, at the end of the fourth quarter of fiscal year 2022 was US$933.1 million, a decrease of 51.6% as compared to US$1,926.4 million at the end of the fourth quarter of fiscal year 2021. The decrease is primarily due to the cessation of K-9 academic after-school tutoring services in compliance with the government policies in China.
Financial Results for the Fiscal Year Ended May 31, 2022
For the fiscal year 2022 ended May 31, 2022, New Oriental reported net revenues of US$3,105.2 million, representing a 27.4% decrease year over year.
Loss from operations for the fiscal year 2022 was US$982.5 million, compared to an income of US$117.3 million in the same period of the prior fiscal year. Non-GAAP loss from operations for the fiscal year 2022 was US$849.5 million, compared to an income of US$186.1 million in the same period of the prior fiscal year.
Operating margin for the fiscal year 2022 was negative 31.6%, compared to 2.7% for the same period of the prior fiscal year. Non-GAAP operating margin, which excludes share-based compensation expenses for the fiscal year 2022, was negative 27.4%, compared to 4.4% for the same period of the prior fiscal year.
Net loss attributable to New Oriental for the fiscal year 2022 was US$1,187.7 million, compared to an income of US$334.4 million in the same period of the prior fiscal year. Basic and diluted net loss per ADS attributable to New Oriental for the fiscal year 2022 amounted to US$7.00 and US$7.00, respectively.
Non-GAAP net loss attributable to New Oriental for the fiscal year 2022 was US$1,046.2 million, compared to an income of US$389.0 million in the same period of the prior fiscal year. Non-GAAP basic and diluted net loss per ADS attributable to New Oriental for the fiscal year 2022 amounted to US$6.17 and US$6.17, respectively.
Outlook for the First Quarter of the Fiscal Year 2023
New Oriental expects total net revenues in the first quarter of the fiscal year 2023 (June 1, 2022 to August 31, 2022) to be in the range of US$641.3 million to US$680.6 million, representing year-over-year decline in the range of 51% to 48%.
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 July 27, 2022, U.S. Eastern Time (8 PM on July 27, 2022, Beijing/Hong Kong Time).
Please register in advance of the conference, using the link provided below. Upon registering, you will be provided with participant dial-in numbers, passcode and unique registrant ID.
Conference call registration link: https://s1.c-conf.com/diamondpass/10023381-cbs76d.html. It will automatically direct you to the registration page of "New Oriental Fourth Fiscal Quarter 2022 Earnings Conference Call" where you may fill in your details for RSVP.
In the 10 minutes prior to the call start time, you may use the conference access information (including dial in number(s), direct event passcode and registrant ID) provided in the confirmation email received at the point of registering.
A replay of the conference call may be accessed by phone at the following number until August 3, 2022:
Mainland China: | 400 1209 216 |
Hong Kong: | 800 930 639 |
US/Canada: | 1855 883 1031 |
Passcode: | 10023381 |
Additionally, a live and archived webcast of the conference call will be available at https://investor.neworiental.org.