New Oriental Education & Technology Group, Inc.

Good evening, and thank you for standing by for New Oriental's fiscal year 2023 second quarter results earnings conference call. At this time, all participants are in 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 at this time. I would now like to turn the meeting over to your host for today's conference, Ms. Cici Zhao.

Thank you. Hello, everyone, and welcome to New Oriental's second fiscal quarter 2023 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 NewsWare services. Today, Stephen Yang, Executive President and Chief Financial Officer and I will share Nurento'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 Security Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the view expressed today. A number of potential risks and uncertainties are outlined in our public filings with the SEC. New Oriental 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 New Oriental's investor relations website at investor.neworiental.org. I'll now first turn the call over to Mr. Yang. Stephen, please go ahead.

Thank you, Cici. Hello, everyone, and thank you for joining us on the call. This second quarter is a successful phase of manifestation as we have turned over a new leaf in our business and embarked on an innovative journey for rich business opportunities since the beginning of fiscal year 2023. Before going into details of our financial performance for this quarter, I would like to take this opportunity to extend our gratitude to those who have been believing and supporting NewRental along the way. I'm delighted to share with you that after a year of restructuring process, NewRental has successfully generated fruitful yields from our new business ventures combined with our existing business and innovative business opportunity. Despite the seasonality of some major businesses, which has historically resulted in a slower period for every second quarter, it's immensely encouraging to see that we have achieved a meaningful profitability and better than expected margins in the second quarter. We have achieved a non-GAAP operating margin of 2.6% for this quarter, as compared to negative 112.0% in the same period of prior fiscal year, which was characterized by the several significant one-off expenses incurred from class cancellations, school closures, and employee layoffs. Our key remaining business have continued to demonstrate remarkable resilience. In particular, Overseas Task Force Business and Overseas Study Consulting Business have recorded remarkable year-over-year revenue increase as global COVID restriction eases and Overseas Study market is recovering. Our solid profitability, strong performing remaining business lines and emerging new business initiatives in this quarter have again strengthened our confidence in pursuing innovative endeavors and profitable growth through the rest of the year. Now, I would like to spend some time to talk about the quarter's performance across our remaining business lines and new initiatives to you in detail. Our key remaining business have achieved a promising trend while our new initiatives have shown a positive momentum. Breaking it down, the overseas test product business recorded a revenue increase of 17% in dollar terms, or 30% in RMB terms year over year for the second quarter. The overseas study consulting business recorded a revenue increase of about 14% in dollar terms, or 27% in RMB terms year over year for the second quarter. The adults and university students' business recorded a revenue decrease of 9% in dollar terms or 2% increase in RMB terms year over year for the second quarter. As for our new business initiatives, as mentioned in the past quarter, we have launched several new initiatives. which mostly revolves around facilitating students or around development. I'm glad to share with you that these new initiatives have further exceeded our expectations by sustaining a positive momentum and generating meaningful profits to the company. Firstly, the non-academic tutoring business, which we have rolled out in over 60 cities, focus on cultivating students' innovative ability and comprehensive quality, we are happy to see increased market penetration in those markets we have tapped into, especially higher tier cities, with a total of 477,000 enrollments recorded in this quarter. The top 10 cities in China have contributed about 60% of the revenue of this business. The intelligence learning system and device distance is a service designed to provide a tailored digital learning experience for students. It will utilize our past teaching experience, data, and technology to provide a personalized target learning and exercise content. Our continuous investment in technology has built a competitive edge, which drives our navigation amidst the challenges from the last year. Together with our teachers monitoring and accessing the learning curve for students at the backend system, this new innovative education service not only greatly improves students' learning efficiency, but also cultivates students' proactive learning habits. We have tested adoption in over 60 cities with 108,000 active paid users in this quarter and are delighted to see improved customer retention and scalability of this new business. The revenue contribution from top 10 cities in China is around 60%. Last but not least, our smart education business, which comprises smart teaching, smart hardware, science, technology, innovation, education, and other services, serves local governments, education authorities, schools, and kindergartens. Our educational material idealized a smart study solution, a self-learning system, which leverages advanced technology, enables students to have complete control over the pace and the flexibility of learning at an age where remote learning becomes increasingly mainstream. We also offer exam prep courses designed for students with junior college diplomas to obtain bachelor's degrees. The above mentioned business have been gaining wide traction and contribute the overall growth of the company and have attained instrumental profits since the last quarter. Coming to our OMO system, we continuously invest in developing and revamping our OMO teaching platform and have leveraged our educational infrastructure and technology strengths over the remaining business and new initiatives to provide more advanced and diversified education service to our customers for all ages. Our OMO system has been a core support to our business, especially with some of the strict social control measures were implemented in the past month. We have invested a total of $21 million in the quarter on our OMO teaching platform, which provide us the flexibility to continue to offering high quality service to students during the pandemic. Now I would like to give you all an update on CoolLearn's latest performance. In the first half of this fiscal year, CoolLearn has achieved instrumental breakthroughs in both business operations and financial performance. This significant progress was made as a result of CoolLearn's strategic transformation from focusing on online education to live streaming e-commerce. In 2021, Cooler expanded its live streaming e-commerce business and established Dongfang Zhenxuan, which has since become a well-known platform for promoting healthy, top quality, and cost-effective products to the public. The platform has formed a part of the tight supply chain management and after sales service system, which is strictly abided by a set of relevant laws and regulations. Leveraging our deep understanding of customer needs, Dongfang Zhenxuan continues to expand its product selection and SKUs through proactive cooperation with third parties, coupled with the development of our Dongfang Zhenxuan private label products. The platform's business development has gratefully benefited from the maturity of China's social infrastructure and the contributions and support from the community. To summarize the CoolLearn's fruit-bearing growth and profitability with our financial performance, for the first six months of this fiscal year, CoolLearn recorded revenue of approximately 2,080.1 million RMB. which represents a 590.2% increase from revenues from continuing operations of 301.4 million in the same period of last prior fiscal year. Cooler recorded 585.3 million RMB of net profit, a 638.5% increase from net loss from the continuing operation of 108.7 million in the same period of prior fiscal year. In the first six months of fiscal year, the gross profit of Cooler reached around 982.5 million RMB, accounting for 47.2% in terms of the GP margin. As we continuously map the platform's strategic transformation, The fast-growing Dongfang Zhenxuan is also committed to give back to customers and the community. Since its launch, Dongfang Zhenxuan has stood firm to not charge commissions from customers or any pit fees. It has always taken close reference to industry standards, focusing on establishing the mutually beneficial long-term collaboration with the various parties, so as to maximize benefits to customers. Dongfang Zhenxuan also ensures attained cost-effective performance as one of its development principles. On one hand, Dongfang Zhenxuan focuses on enhancing product capability while continuing to establish its cultural content. On the other hand, Dongfang Zhenxuan has also organized diverse outdoor live streaming activities to promote special agricultural products and contribute to the cultural tourism. Through its unyielding aspiration to create value in related industries, which has also attracted and retained a large pool of talents, cooperators, as well as followers and members, Dongfang Zhenxuan has successfully received in return millions of revenues and a loyal customer base during the reporting period. With regard to the company's latest financial position, I'm confident to share with you that the company is in a healthy financial status with cash and cash equivalent term deposits and short-term investments totaling approximately $4.2 billion. On July 26th, On July 26, 2022, the company's board of directors authorized the share repurchase of up to $400 million of the company ADS or common shares during the period from July 28, 2022 through May 31, 2023. As of January 16, 2023, the company repurchased an aggregate of approximately 3.1 million ADS for approximately $79 million from the open market and the share repurchase program. Now, I will turn the call over to Cici to share with you about the key financials. Cici, please go ahead.