Operator: Thank you for standing by for New Oriental Education & Technology Group Inc.’s FY 2026 Third Quarter Results Earnings Conference Call. At this time, participants are in a listen-only mode. After management’s prepared remarks, there will be a question-and-answer session. Today’s conference is being recorded. If you have any objections, you may disconnect. I would now like to turn the meeting over to your host for today’s conference, Ms. Sisi Zhao. Thank you.

Sisi Zhao: Hello, everyone, and welcome to New Oriental Education & Technology Group Inc.’s third fiscal quarter 2026 earnings conference call. Our financial results for the period were released earlier today and are available on the company’s website as well as on newswire services. Today, Stephen Yang, executive president and chief financial officer, and I will share New Oriental Education & Technology Group Inc.’s latest earnings results and business updates in detail with you. After that, Stephen and I will be available to answer your questions. Before we continue, please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in our public filings with the SEC. New Oriental Education & Technology Group Inc. does not undertake any obligation to update any forward-looking statements except as required under applicable law. As a reminder, this conference is being recorded. In addition, a webcast of this conference call will be available on our investor relations website at investor.neworiental.org. I will now turn the call over to Mr. Yang. Stephen, please go ahead.

Stephen Yang: Thank you, Sisi. Everyone, thank you for joining us on the call. I am glad to share with you that Q3 of this fiscal year marks another quarter of solid results and consistent growth. We are pleased to see that after several consecutive quarters of revenue growth exceeding expectations, this quarter has once again surpassed expectations. This reinforces our confidence in the correctness of our strategy and our optimism about future performance. We are even more delighted to see margin expansion in our core business along with the significant contribution from the outstanding performance of Easter byte. Our focus on operational efficiency and investment in strategic initiatives have again driven satisfactory performance and continue to lead our path to sustainable profitability.

This quarter, total net revenue grew 19.8% year over year to $1.4173 billion. Non-GAAP operating income rose 42.8% to $202.9 million, while non-GAAP net income attributable to New Oriental Education & Technology Group Inc. increased 34.3% to $152.2 million. Both our core business and new initiatives are gaining meaningful traction this quarter. Breaking down, overseas test prep recorded a revenue increase of 7% year over year for this quarter. Overseas study consulting recorded a revenue decrease of about 4% year over year for this quarter. Our adults and university students business recorded a revenue increase of 15% year over year this quarter. As for our new education initiatives, including non-academic tutoring and our intelligent learning system devices, they delivered sustainable revenue that grew 23% year over year this quarter.

Our non-academic tutoring business has been rolled out to around six existing cities. Market penetration has grown steadily, particularly across high-tier cities. The top 10 cities contribute over 60% of this business. Our intelligent learning system and device business that leverages our teaching expertise and data analytics to provide adaptive learning solutions has been launched in around 60 cities. We are encouraged by enhanced customer retention and scalability of this new business. The top 10 cities contribute over 50% of the business. Turning to our integrated tourism-related business, which includes study tours and research camps for K-12 and university students as well as new cultural tours for middle-aged and senior travelers, we are delighted that the culture travel China study tour, global study tour, and camp education product continue to be well received, providing customers with valuable knowledge, personal growth, and cultural enrichment.

Our student programs now operate in approximately 55 cities nationwide, where the top 10 cities generate over 50% of the revenue. Our other top-notch adult tourism offerings span around 30 provinces domestically and select international destinations. We are also extending into senior health and wellness tourism through partnerships with over 40 wellness facilities in Hainan, Yunnan, and Guangxi, utilizing an asset-light model to pilot the emerging opportunity. We continue to invest in our online-merge-offline teaching platform, leveraging our educational infrastructure and technology capabilities to deliver advanced personalized learning experiences across all age groups. This quarter, we invested $30.6 million to enhance and maintain our OMO platform, which enables us to provide high-quality instruction to students while adapting to their individual learning needs.

Turning to East Bay. Esterbuy remains committed to delivering premium products and services to Chinese families. It has advanced its multi-platform, multi-account strategy by launching specialized vertical live streaming channels on Douyin, including Easter by Home, Easter by Food and Vegetables, and Easter by Nutrition and Health. It also continuously optimizes live streaming content and introduced innovative engagement initiatives, including large-scale live campaigns for streamer recruitment and supplier conferences, as part of these efforts to strengthen team capabilities, supplier partnerships, and customer engagement. Looking ahead, Easterby will look to expand its private label portfolio, enhance product R&D and quality control, accelerate app membership ecosystem development, and grow its offline footprint steadily through vending machines and experience tours.

Together, these initiatives will drive greater operational efficiency and advance supply chain excellence, supporting sustainable long-term growth. Besides upgrading our OMO system, increased by the positive feedback on our AI applications, we continue to integrate AI across our offerings to strengthen core capabilities. Simultaneously, we are expanding the use of AI to streamline internal operations, thereby boosting efficiency and elevating the support for our teachers and staff. Driving innovation in product capabilities and operational excellence continues to fuel our pursuit of sustainable revenue growth. We look forward to sharing measurable results from our AI investments in the quarters ahead. I would also like to take this opportunity to share a new strategic initiative with you.

Historically, New Oriental Education & Technology Group Inc. has focused on serving our customers as each individual. Going forward, we are extending the perspective to serve the entire family unit. Given our diversified offering across different age groups and demographics, we are uniquely positioned to adopt a full life-cycle, full-spectrum approach that addresses the evolving needs of each family member, from children to parents to seniors. To support the shift, we launched New Oriental Home, a private domain platform that integrates our education services, each by used to buy offerings, and the cultural tourism product into one unified ecosystem. Through a single app, families can conveniently access, manage, and redeem services tailored to different members, enabling seamless cross-category engagement and deeper household-level relationships.

This platform is already demonstrating strong user engagement and retention through scenario-based marketing and integrated service offerings, significantly enhancing customer lifetime value. At the same time, precision-driven operations improve conversion efficiency and optimize overall operating costs. We have now launched this pilot program in 12 cities as test beds, including Hangzhou, Suzhou, Xi’an, and Wuhan. With over 330 thousand registered families, the platform has achieved campaign activation rates of 10% to 15%, significantly outperforming many public domain e-commerce platforms. This performance demonstrates the high-reach and precision advantages of our education-focused private domain ecosystem. Now I will turn the call over to Sisi to share with you the key financials.

Sisi, please go ahead.

Sisi Zhao: Thank you, Stephen. Let me now walk you through the key financial highlights for the quarter. Operating costs and expenses for the quarter were $1.237 billion, representing a 16.9% increase year over year. Cost of revenue increased 23.4% year over year to $656.2 million. Selling and marketing expenses increased 9.1% year over year to $198.8 million. General and administrative expenses for the quarter increased 10.8% year over year to $382.1 million. Total share-based compensation, which was allocated to related operating costs and expenses, increased 30.9% to $21.1 million in the third quarter of fiscal year 2026. Operating income was $180.3 million, representing a 44.8% increase year over year. Non-GAAP income from operations for the quarter was $202.9 million, representing a 42.8% increase year over year.

Net income attributable to New Oriental Education & Technology Group Inc. for the quarter was $126.8 million, representing a 45.3% increase year over year. Basic and diluted net income per ADS attributable to New Oriental Education & Technology Group Inc. were $0.80 and $0.79, respectively. Non-GAAP net income attributable to New Oriental Education & Technology Group Inc. for the quarter was $152.2 million, representing an increase of 34.3% year over year. Non-GAAP basic and diluted net income per ADS attributable to New Oriental Education & Technology Group Inc. were $0.97 and $0.85, respectively. Net cash outflow generated from operations for 2026 was approximately $7.5 million. Capital expenditure for the quarter was $68.8 million. Turning to the balance sheet, as of February 28, 2026, New Oriental Education & Technology Group Inc.

had cash and cash equivalents of $1.7834 billion. In addition, the company had $1.4917 billion in term deposits and $1.9532 billion in short-term investments. New Oriental Education & Technology Group Inc.’s deferred revenue, which represents cash collected upfront from customers and related revenue that will be recognized as the services or goods are delivered at the end of the third fiscal quarter of 2026, was $1.8859 billion, an increase of 7.8% as compared to $1.7499 billion year over year. Now I will hand over to Stephen to go through our outlook and guidance.

Stephen Yang: Thank you, Sisi. The healthy results we achieved this quarter reinforce confidence in our operational resilience and growth trajectory. Looking ahead, we remain focused on balanced growth, advancing both revenue and profitability in parallel. We will expand capacity and talent strategically, ensuring growth does not come at the expense of quality. We plan to deepen our presence in markets with proven top- and bottom-line performance while maintaining disciplined resource allocation. We will calibrate the pace and scale of new openings throughout the year, aligning expansion decisions with operational needs and financial results. Cost discipline and sustainable profitability across all business lines continue to be foundational to our strategy.

In the coming quarter—what I mean is in Q4—we expect greater cost control to be realized as a result of restructuring and consolidation of our overseas business. A certain level of fixed expense will be reduced, enabling us to pave the way for higher operational efficiency and a better margin profile next year. There will be certain one-off expenses in the coming quarter related to these structural adjustments. Even so, we remain confident in our fourth-quarter profit margin. Looking ahead to next fiscal year, we have strong confidence in our core education business and Easter buy. We will continue to drive sustainable and healthy growth through product enhancement and quality improvement while further optimizing operating costs and enhancing efficiency and profitability.

Considering the positive momentum and cost management measures across our business lines, we expect total net revenue for the group in 2026 to be in the range of $1.4296 billion to $140.6669 billion, representing a year-over-year increase in the range of 15% to 18%, driven by encouraging growth across various business lines. New Oriental Education & Technology Group Inc. raises the full-year guidance of total net revenue in fiscal year 2026, 06/01/2025 to 05/31/2026, to be in the range of $5.5614 billion to $5.5987 billion, representing a year-over-year increase in the range of 13% to 14%. These expectations reflect our current outlook based on recent levels of rate development and the prevailing market conditions. Both of the rates remain subject to change.

I would also like to give you an update on our shareholder return plan for fiscal year 2026. In October 2025, we announced that, pursuant to its privileges, we adopted a three-year shareholder return plan. The board of directors has approved the ordinary dividend of $0.12 per common share, or $1.20 per ADS, to be distributed in two installments as part of the shareholder return for fiscal year 2026. As of today, the first installment has been fully paid to shareholders and ADS holders. The second installment, $0.06 per common share, or $0.60 per ADS, will be paid to holders of common shares and holders of ADS of record as of the close of business on 05/15/2026, Beijing, Hong Kong time, and New York time, respectively. We expect the payment date to be on or around 06/02/2126 or June 5, 2026, for holders of common shares and holders of ADS, respectively.

Additionally, we announced a share repurchase program in which New Oriental Education & Technology Group Inc. is authorized to repurchase up to $300 million of its ADS or common shares over this recipient 12 months in the open market. As of 04/21/2026, we had repurchased a total of approximately 3.3 million ADS for an aggregate consideration of approximately $184.3 million from the open market under this share repurchase program. In closing, New Oriental Education & Technology Group Inc. remains firmly committed to sustainable growth, delivering exceptional value to our customers, and generating long-term returns to our shareholders. We continue to maintain close collaboration with the government authorities in China, ensuring full compliance with relevant policies and regulations and adapting our operations to evolving requirements.

This is the end of our fiscal year Q3 summary. We will now open the call for questions. Operator, please open the call for questions. Thank you.

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Operator: Thank you. The question-and-answer session of this conference call will start in a moment. In order to be fair to all callers who wish to ask questions, we will take one question at a time from each caller. If you have more than one question, please request to join the queue on your telephone keypad and wait for your name to be announced. To withdraw your question, please press the key again. We will now take our first question from the line of Jenny Yuan from UBS. Please ask your question, Jenny. Your line is open.

Jenny Yuan: Congratulations on a strong set of results this quarter. My question is about margin trends. We know that overall margins expanded meaningfully by 2.3 percentage points this quarter, which is very impressive. Could management please help us break down the key drivers behind this margin expansion? In addition, what is your outlook for margin trends in next quarter and for the next fiscal year? Thank you.

Stephen Yang: Thank you, Jenny. It is a good question about margins. Let us start with the margin analysis this quarter. Even though we missed the margin drag from the overseas-related business, we still got group margin expansion by 130 basis points. I think the margin expansion was mainly due to better utilization, operating leverage, cost control, and more profit contribution from Easter buy. As you know, we started to do cost control since March 2025. In the last 11 months, we have seen very good results, which help drive margins up. Our focus on operational efficiency and disciplined resource management has been the key driver of margin expansion. For next quarter, Q4, we remain optimistic on margin expansion, even though there will be certain one-off expenses related to structural adjustments—the consolidation between the overseas test labs and consolidation.

These are one-off expenses. Even so, we remain confident in fourth-quarter margin expansion for the whole group. As for the margin outlook for next year, the new fiscal year, we will focus on profitability across all business lines and drive to achieve margin expansion. We are quite optimistic about margin expansion for the core educational business, and we expect East Dubai will generate more profits in the coming year.

Operator: Thank you. We will now take our next question from Alice Cai from Citi. Good evening, Sisi and Stephen, and congratulations on the strong results. Please go ahead.

Alice Cai: Good evening, Sisi and Stephen, and congratulations on the strong results. May I ask about the capacity expansion plan for Q4 and also for FY 2027? Thanks.

Stephen Yang: Regarding expansion, at the start of this fiscal year, we planned to open 10% to 15% new capacity. The net adds of new learning centers in the first three quarters was 8%. That means in the first three quarters, net adds were 8%, so for the whole year, net expansion is somewhere around 10% to 13% or 14%. We only allow the cities with good performance on the top line and bottom line last year to open more learning centers. We care more about better utilization and margins for the whole group. We put new student enrollments into existing learning centers, so the utilization rate will be up for the group. Next year, we will continue to open somewhere around 10% or even a little bit more in learning centers. On the other hand, we have a lot of online and OMO products and offerings. For some online business, we even do not need existing learning centers. I believe in the coming new year, the utilization rate will continue to go up.

Operator: Thank you. We will now take our next question from Lucy Yu from Bank of America Securities. Please go ahead, Lucy. Your line is open.

Lucy Yu: Hi, Stephen. I have a question on margin as well. You mentioned there will be a one-off restructuring expense in the coming quarter. Would you please quantify how much that would be, either in U.S. dollar terms or as a percentage of revenue? Also, you mentioned a new strategy that will possibly lower the selling and distribution expense or the marketing expense next year. What is your target on the sales and marketing expense for 2027? Thank you.

Stephen Yang: The one-off expenses in the coming Q4 relate to structural adjustments of the overseas business. The negative impact on margin is roughly 50 bps to 100 bps, so roughly $10 million to $15 million. Even so, we still remain confident to get margin expansion for the whole group in Q4. We include the one-off expenses in the forecast and still get margin expansion. Regarding marketing expenses next year, we are doing cost control and we put more focus on product quality enhancements, so we do not need to spend crazy money on marketing going forward like what we did in the last three quarters. In the coming new year, we expect marketing expenses as a percentage of revenue will be down. It is another factor to drive the margin.

Operator: Thank you so much. We will now take our next question from Yikun Zheng from Citi.

Yikun Zheng: Hello, Stephen and Sisi. Thank you for taking my question, and congratulations on the strong results. My question is about the momentum of K-12 business. I remember last summer our K-12 business went through some deceleration. How do you think of the growth trend and the competition for this business in this summer? Thank you.

Stephen Yang: On the K-12 business, we beat the guidance again in Q3. We actually beat guidance two to three quarters in a row. In Q4, we are very optimistic about K-12 revenue growth. This year, we changed strategy and put more focus and resources on product quality enhancement, which drives student retention rate up and drives utilization rate up. In Q4, our K-12 business still has revenue growth of about, let us say, 15% to 20%. Grade 9 has 20% content growth plus, 20% plus top-line growth, and high school business less than 15% to 20%. Going forward, even in next year and the year after, we still expect very healthy growth of K-12 because our quality is better than last year, student retention rate is up, and we do not need to spend crazy money on marketing to recruit new enrollments. We are quite optimistic about K-12 growth going forward. Thank you.

Operator: Thank you. We will now take our next question from Elsie Sheng from CLSA.

Elsie Sheng: Thank you, Stephen and Sisi. Congratulations on the strong results. My question is about the overseas business. I noticed that revenue growth of overseas test prep has been accelerating over the past two quarters. Could you give us more color on the reason behind this? Is it because demand is coming back, or because we gained more market share? What is the outlook for overseas growth in the fourth quarter and next year? Thank you.

Stephen Yang: Due to the negative impacts of the economic environment and the international situation, our overseas business was negatively impacted by the outside environment. But our team for the overseas business has shown resilience in almost every city. In the coming Q4, overseas-related business will likely be flattish year over year or up low single digits on revenue increase. Thanks to the great team doing a great job in almost all cities. Next year, I believe we can do even better. Since last quarter, we started the consolidation of the overseas test lab and overseas consulting. Going forward, we will provide a better one-stop service and product to students. We will also do some cost control to save fixed expenses. In the coming new year, I believe the overseas-related business margin will be up.

Operator: Thank you. We will now take our next question from DS Kim of JPMorgan.

DS Kim: Hi, Stephen. Hi, Sisi. Congrats on the strong beat. Actually, all my questions have been answered already, so let me just ask a couple of follow-ups. First, you mentioned $10 million to $15 million one-off expense in Q4. Can I double check it would be purely contained in Q4, or can there be additional one-offs spilling over into next year? I think it is just one off, but, to provide some confidence and comfort to the market on margin expansion next year, just to clarify. Second, you mentioned the 10% to 13%–14% expansion. Can I double check if that is number of centers or the size of classroom—like area size expansion? And, more importantly, what does this group-level expansion mean specifically for K-9 class capacity this and next year?

Stephen Yang: On the one-off expenses, the majority will happen in Q4—one off. Even considering the one-off expense drag, we still get group margin expansion in Q4. It is better for the future because we spend some one-off expenses in Q4, but as a result, we reduce fixed costs in the coming year. That will drive the margin up for the overseas business next year. On capacity, what I am saying is square meter size—net adds. Most of the new capacity we build is in the K-12 business. The top-line growth next year—this is not official guidance, but based on our current estimation—will be somewhere around 15% to 20%, close to 20% or even more. If we open 10% to 15% new capacity, we still have the leverage to drive the average utilization rate up going forward.

As for cost and expansion discipline, the local teams will support the job. They have done a great job this year, and I believe they will do an even better job in the coming year on cost control and managing the expansion plan.

DS Kim: I absolutely agree it is necessary to make the hard decision to optimize the cost structure into next year. Just to double check—broadly speaking, when we say the one-off, it is optimization of workforce and staff. That is one off, right? It is not like we are ongoing spending on restructuring; it is really that we had to make a hard decision and there was some related cost to it in Q4. Is that a fair understanding?

Stephen Yang: Yes, correct.

DS Kim: Thank you. That is very clear. Thank you.

Stephen Yang: Thank you.

Operator: Thank you. We will now take our next question from Jane Yuan of CICC. Please ask your question, Jane. Your line is open.

Jane Yuan: Good evening, Stephen and Sisi. Congratulations on this quarter’s strong performance. I noticed that on the new education business side, revenue top-line growth remains strong, but I see a slight moderation in the number of paid users for the learning device. Could you help us understand what is behind the shift? Thanks.

Stephen Yang: On paid users, this is because of disclosure differences. One paid user pays more money and enrolls in more subjects at the same time—better than before. Secondly, we do have some seasonal or timing differences. I suggest you look at enrollment, deferred revenue, and GAAP revenue over a longer term. That is why we gave the whole-year guidance this year. The trend for the K-12 business works, and in Q4 I believe revenue growth will be very healthy and we will continue to grow the business in Q4 and the new year.

Operator: Thank you. We will now take our next question from Charlotte Wei of HSBC. Please go ahead, Charlotte. Your line is open.

Charlotte Wei: Thank you, Stephen and Sisi, for taking my question, and congrats on a really strong quarter. My question is regarding AI impact. On one hand, we can see AI clearly improves operational efficiency and supports margin expansion. On the other hand, how do you expect AI can change the core tutoring format the company is currently offering? Over the next 12 to 24 months, what kind of opportunities and risks do you see from AI? Thank you.

Stephen Yang: I will ask Sisi to answer your question. Sisi is an AI expert.

Sisi Zhao: We are excited about the opportunity to implement AI technology into our business. It is a big opportunity for companies like us with capital advantages; we can hire top people and we have the best educational experience in this industry. We are well positioned to implement AI in our area. Three things we are doing and making progress on that I want to share. Firstly, we are implementing AI technology into all key business lines. Not only online products or hardware products like our intelligent learning device—we have AI functions embedded in it and keep monetizing it and enhancing students’ learning experience and improving learning efficiency—but even offline classes for young students and all ages can implement AI functions in class.

We are collecting data and combining it with our teaching and learning experience to create more value and product opportunities in the future. Existing products are enhancing quality and competitive advantage using AI. Secondly, we use AI to enhance overall efficiency to bring healthy growth plus profitability enhancement. AI can help in each step of our daily work. For teachers, salespeople, teacher assistants, and functional department staff, the whole working process can implement AI technology to enhance efficiency. We have already seen in some businesses that labor costs or labor hours have been reduced. We are doing some restructuring for certain businesses, for example the overseas-related business and others as well. We want to implement more AI in the working process to benefit from efficiency improvement.

This is ongoing; we will closely follow the trend of AI technology and keep using it across processes. Teachers are saving more time so that utilization can also improve. Third, we have several piloting teams working on new products implementing purely AI technology so we can depend very little on human resources, combining AI with our teaching and learning experience and certain content to create innovative educational products. These are different from current offline offerings but use AI to bring students a learning experience similar to offline face-to-face teaching. We are exploring opportunities here now, and hopefully in the coming several months we can see some new products. The company is devoting a lot of resources to AI. It is an ongoing process, but together with our strategy we will implement more AI, keep catching up with the trend, and benefit more going forward.

Charlotte Wei: This is very helpful. Thank you, Sisi.

Stephen Yang: Thank you.

Operator: We will now take our next question from Timothy Zhao of Goldman Sachs. Please go ahead, Timothy. Your line is open.

Timothy Zhao: Great. Hi, Stephen. Hi, Sisi. Thank you for taking my question, and congrats on the solid results. My question is regarding your longer-term margin profile. You have discussed a lot about new initiatives, the full life cycle of customers, and how AI can help improve operating efficiency, including the overseas test prep and integration. Could you share your view on the longer-term operating margin of the EDU business and the education business? Thank you.

Stephen Yang: Thank you, Tim. On margin, as I said, in the coming new year we are optimistic about margin expansion because of higher utilization rates, better operating leverage, and cost control reducing fixed expenses. Next year, margin will be up. I believe we will get margin expansion in the next three years. We hope to get a better margin step by step in the next three years and even long term. Next quarter, I will give detailed margin guidance for next year. We are quite optimistic about long-term margin expansion going forward. Thank you, Tim.

Operator: Thank you. We are now approaching the end of the conference call. I will now turn the call over to New Oriental Education & Technology Group Inc.’s executive president and CFO, Stephen Yang, for his closing remarks.

Stephen Yang: Again, thank you for joining us today. If you have any further questions, please do not hesitate to contact me or any of our investor relations representatives. Thank you.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect your lines.

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NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC

Q3 2026

Earnings Transcript

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