New Oriental Education & Technology Group, Inc.

Thank you for standing by for New Oriental's FY2026 Third Quarter Results Earnings Conference Call. At this time, all 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 at this time. And I'd 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 third fiscal quarter 2026 earnings conference call. Our financial results for the period were released earlier today and 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 New Oriental'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 uncertainty. 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 findings 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. I'm glad to share with you that Q3 of this fiscal year marks another quarter of solid results and consistent growth. We're pleased to see that after several consecutive quarters of the revenue growth exceeding expectations, this quarter has once again surpassed expectations. This reinforced our confidence in the correctness of our strategy and our optimism about future performance. We're even more delighted to see the margin expansion in our core business, along with the significant contribution from the outstanding performance of East Dubai. Our focus on operational efficiency and investment on strategic initiatives have again driven satisfactory performance and continue to lead our path to sustainable profitability. This quarter, TotalNet's revenue grew by 19.8% year-over-year to $1,417.3 million. Non-GAAP operating income rose 42.8% to $202.9 million, while non-GAAP net income attributed to new rental increased 34.3% to $152.2 million. Both our core business and new initiatives are gaining meaningful traction this quarter. Breaking it down. Overseas test drive business recorded the revenue increase of 7% year-over-year for this quarter. Overseas study consulting business recorded revenue decrease of about 4% year-over-year for this quarter. Our adults and university students business record the revenue increase of 15% year-over-year this quarter. As for our new education initiatives, including non-academic tutoring and our intelligent learning system and devices to deliver sustainable revenue that grew 23% year-over-year this quarter. Our non-academic tutoring business have been rolled out to around 60% 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're 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 Asian senior travelers. We're delighted that the Cultural Travel China Study Tour, Global Study Tour, and Camp Education products continues 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. And our other top-notch adult tourism offerings span around 30 provinces domestically and select international destinations. We're also expanding into senior health and wellness tourism through partnership with over 40 wellness facilities in Hainan, Yunnan, and Guangxi, utilizing an asset-light model to pilot the emerging opportunity. We continue to be investing in our online-merge offline teaching platform, leveraging our educational infrastructure and technology capabilities to deliver advanced personalized learning experience across all age groups. This quarter, we invested $30.6 million to enhance and maintain our OMO platform, which enabled us to provide high-quality instruction to students while adapting to their individual learning needs. Turning to East Dubai, East Dubai remains committed to delivering premium products and service 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 its efforts to strengthen team capabilities, supplier partnership, 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 stores. Together, these initiatives will drive greater operational efficiency and advance supply chain excellence, supporting sustainable long-term growth. Besides upgrading our OMO system, encouraged by the positive feedback on our AI applications, we continue to integrate AI across our offerings to strengthen core capabilities. We're expanding the use of AI to streamline internal operation, thereby boosting efficiency and elevating the support from our teachers and staff. Driving innovation in product capabilities and operational excellence continue to fuel our pursuits of the 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 has focused on serving our customers as each individual. Going forward, we're extending the perspective to serve the entire family unit. Given our diversified offering across different age groups and demographics, we're uniquely positioned to adopt 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 the new Oriental Home, a private domain platform that integrates our education service, Easter by offerings, and cultural tourism products into one unified ecosystem. Through a single app, families can conveniently access, manage, and redeem service 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, The precision-driven operations improve conversion efficiency and optimize overall operating cost. We have now launched this pilot program in 12 cities as testbeds, including Hangzhou, Suzhou, Xi'an, and Wuhan. With over 330,000 registered families, the platform has achieved campaign activation rates of 10% to 15%, significantly outperforming outperforming many public domain e-commerce platforms. This performance demonstrates the high reach and precision advantages of our education folks private domain ecosystem. Now I will turn the call over to Cici to share with you about the key financials. Cici, please go ahead.

Thank you, Stephen. Let me now work you through the key financial highlights for the quarter. Operating costs and expenses for the quarter. or $1,237 million representing a 16.9% increase year-over-year. Cost of revenue increased by 23.4% year-over-year to $656.2 million. Setting and marketing expenses increased by 9.1% year-over-year to $198.8 million. General and administrative expenses for for the quarter increased by 10.8% year-over-year to $382.1 million. Total share-based compensation, which were allocated to related operating costs and expenses increased by 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 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 were 80 cents and 79 cents, respectively. Non-GAAP net income attributable to New Oriental 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 were $0.97 and $0.95, respectively. Net cash outflow generated from operation for the third quarter of fiscal year 2026 was approximately $7.5 million, and capital expenditure for the quarter was $68.8 million. Turning to the balance sheet, as of February 28, 2026, New Oriental had cash and cash equivalents of $1,783.4 million. In addition, the company had $1,491.7 million in term deposits and $1,953.2 million in short-term investments. New Oriental'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 $1,885.9 million, an increase of 7.8% as compared to $1,749.9 million year over year. Now I'll hand over to Steven to go through our outlook and guidance.

Thank you, Cici. 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 the 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 of discipline and sustainable profitability across all business lines continue to be foundational to our strategy. In the coming quarter, what I mean is in the coming 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 the structural adjustment. Even so, we remain confident in our fourth quarter profit margin. Looking ahead to next fiscal year, we'll 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 operational costs and enhance the efficiency and profitability. Considering the positive momentum and cost management measures across our business lines, we expect the total net revenue for the group in the fourth quarter of fiscal year 2026 to be in the range of $1,429.6 million to $1,466.9 million, representing year-over-year increase in the range of 15% to 18%. Driven by the encouraging growth across various business lines, New Oriental raised the full year guidance of total net revenue in fiscal year 2026, June 1st, 2025 to May 31st, 2026, to be in the range of $5,561.4 million to $5,598.7 million. representing 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'd 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 privilege to adopt a three-year shareholder return plan, the Board of Directors had approved the auxiliary dividend of $0.12 per common share, or $1.2 per ADS, to be distributed in two installments as part of the shareholder's return for the 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 $0.6 per ADS, will be paid to holders of common shares and holders of ADS of the report as of the close of business on May 15, 2026, Beijing, Hong Kong time, and New York time, respectively. We've expected the payment date to be on or around June 2, 2026, or June 5, for holders of common shares and holders of ADS, respectively. Additionally, we announced that a share repurchase program in which New Oriental is authorized to repurchase up to $300 million of its ADS or common shares over the subsequent 12 months in the open market. As of April 21st, 2026, yesterday, we had repurchased a total of approximately 3.3 million ADS, but aggregated consideration of approximately $184.3 million from the open market, and this share repurchase program. In closing, New Oriental 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 2026 Q3 summary. At this point, I would like to open the floor for questions. Operator, please open the call for these. Thank you.

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 question queue again after your first question has been addressed. To ask a question now, please press star 1 1 on your telephone keypad and wait for your name to be announced. To withdraw your question, please press .11 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.

感谢提问机会, 那也恭喜管理层这个季度再度交出亮眼的一个业绩表现。 那我想请教一下关于利润率的一个问题, 因为本季度公司经营利润率大幅提升了2.3个百分点, 盈利改善表现十分突出, So let me translate myself. Okay, go ahead. Go ahead. And congrats on a strong set of results this quarter. My question is about margin trends. So we know that OT margin spans meaningful by 2.3 percentage points this quarter, which is very impressive. So could management please help us break down the key drivers behind this margin expansion? And in addition, what is your view, your outlook for margin trends in next quarter and for the next fiscal year? Thank you.

Yeah, thank you, Jenny. I think this is a good question about margin. You know, let us start with the margin analysis of this quarter. You know, even though we meet some margin drag from the overseas-related business, but we still got the group margin expansion by 230 basis points up. And I think the margin expansion was mainly due to the better utilization, operating leverage, and the cost control. And as well, the more profit contributions from Easter by. As you know, we started to do the cost control since March 2025 last year. So in the last 11 months, I think we have seen the very good results and which helps to drive the margin up. And so our focus on operational efficiency and discipline the resource management has been the key driver of the margin expansion. Next quarter margin, the Q4, I think we remain optimistic on margin expansion in Q4, even though there will be some certain one-off expenses in the coming quarter in Q4 related to the structural adjustment, you know, the consolidation between the oversea test web and the consulting. This is one of expenses. Even so, we still remain confident in the fourth quarter margin expansion for the whole group. So this is Q4 margin guidance. As for the margin outlook for the next year, the new fiscal year, I think we will focus on the profitability across all the business lines and drive to the achieved margin expansion in the coming new year, you know. I think we're quite optimistic about the margin extension for core educational business. And we expect the Easter bite will generate more profits in the coming year. Jenny.

Thank you, Dr. Le.

Thank you.

Thank you. We will now take our next question from Alice Cai from City. Please go ahead, Alice. Your line is open.

Good evening, Cece and Stephen. Congratulations on the strong result. May I ask the question on capacity expansion plan for Q4 and also for FY27? Thanks.

Yeah. You know, the expansion, I think, you know, as we got it, you know, at the starting time of this fiscal year, you know, we plan to open 10 to 15% new capacities. I think the net at of the new learning centers in first three quarters was 8%. So this is, you know, that means in the first three quarters, the net at 8%. So I think that the whole year is the net extension is somewhere around the 10 to like the 13, 14%. Yeah, as I said, we only allow the cities with the good performance of the top line and bottom line last year to open more the learning centers. And we care more about the better utilization and the margins of the whole group. So I think we still focus on the, we put the new student enrollment into the existing learning centers. And so I think if you show the utilization rate, it will be up for the group. And next year, I think we will continue to open somewhere around 10% or even a little bit more learning centers in the new year. But on the other hand, don't forget, we do have a lot of online and the OMO products and offerings. For some online, we even don't need the existing learning centers. So I believe in the coming new year, the utilization rate will continuously go up going forward. Alice, thank you.

Thank you for being so helpful. 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.

Thank you. Hi, students. This is Lucy from Bank of America. I have a question on margin as well. So you mentioned that there will be one of restructuring expense in the coming quarter. Would you please quantify how much would that be in either U.S. dollar term or in the margin or as a percentage of revenue. So that's in the May quarter. And also, you mentioned a new strategy that will possibly lower the selling and distribution expense or the marketing expense next year. So what's our target on sales and the marketing expense for 2017? Thank you.

Yeah, I think the one-off, the expenses in the coming Q4 relate to the structural adjustments of the overseer of the business. I think the negative impact on margin is roughly 50 bps to 100 bps. So roughly $10 to $15 million is one-off. But even so, but we still remain the confidence to get the margin extension for the whole group in the coming Q4. What I mean is we include the, even though we include the one-off expenses into the forecast, we still get the margin extension in Q4. And your question about marketing expenses plan next year, you know, yeah, I think the next, you know, we're doing the cost control, and also we put more focus on the product quality has been. So we do need to spend crazy money on marketing going forward, like what we did in the last three quarters. And in the coming year, we expect that the marketing expenses as the percentage of the revenue will be down. So it's another factor to grab the margin up. Lucy.

Thank you so much, Stephen. That's very clear.

Thank you. We will now take our next question from Yikun Zheng from Citix. Please go ahead, Yikun. Your line is open.

Hello, Stephen, sister. Thank you for taking my question and congratulations on the strong results. My question is about the momentum of K2Tel business. I remember last summer our K2Tel business has gone through some deceleration. So how do we think of the growth trend and the competition for K-12 business in this summer? Thank you.

On the K-12 business. Yeah, I think we would be the guidance again of the K-12 business in Q3. I think actually we'd be the guidance in like the two to three quarters in a row. And I think in the Q4, we are very optimistic about the K-12 revenue growth. I think the reason is, you know, this year we changed the strategy. We put more focus and resources on the product quality enhancement. And so I think it drives the student retention rate up and drives the utilization rate up. And so in the Q4, I think our K-12 business, you know, still got the revenue growth about, let's say the 15 to 20%. K-9, that's the 20% top-line growth plus, 20% plus top-line growth. And high school business, let's say the 15 to 20%. So I think going forward, even in the next year, next year after, I think we still get the very healthy, growth of the case hall business because you know now I think our quality is better than that of last year and also the student retention rate is up and so that's why we don't need to spend crazy money on marketing to recruit the new student enrollment and so I think we're quite optimistic about the case hall business the growth going forward. Thank you.

Thank you. It's clear.

Thank you. And we will now take a next question from Elsie Sheng from CLFA. Please go ahead, Elsie. Your line is open.

Thank you, Stephen, and congratulations on the strong result. My question is about overseas business. So I noticed that the revenue growth of the overseas tax prep has been accelerating over the past two quarters. Could you give us more color on the reason behind and Is it because the demand is coming back, or is it because we take more market share? And what's the outlook for the overseas growth in the fourth quarter and next year? Thank you.

Yeah. You know, due to the negative impacts of the economic environment and the international situation, I think, yeah, our overseas business was negatively impact by the outside environment. But I think our team of the overseas have shown the resilience in almost everything. And so even in the coming Q4, I think the overseas businesses will get likely year over year will be flattish or low single digits up. What I mean is the revenue increase. And so thanks for the, you know, we have a great team to do the great job in almost all the cities. And next year, I do believe we can do even better. Because, you know, since last quarter, we started to be consolidation of the overseas test lab and the overseas consulting. So going forward, I think we will provide a better one-stop service and product to the students. And also, we'll do some cost control to save some fixed cost and expenses. And also, in the coming year, I do believe the overseas business margin will be up.

Very clear. Thank you.

Thank you.

Well, thank you. We will now take our next question from DS Kim of JPMorgan. Please go ahead, DS. Your line is open.

Hi, Steven. Hi, Cece. Congrats on the strong bid. Actually, all my questions have been answered already, so let me just ask a couple of follow-up. First, you mentioned a $10-15 million one-off expense in 4Q. Can I just double-check it would be purely contained in 4Q, or can it be additional one-off spilling over into next year. I think it's just one off, but just to provide some confidence and comfort to the market on a margin expansion next year, just to clarify. Second, you mentioned the expansion, you know, 10 to 13, 14% expansion. Can I double check is that number of centers or the size of a classroom, like area size expansion? And more importantly, what does this group level expansion mean specifically for K-9, you know, like class capacity, if you will, this and next year?

I think the one-off expenses, you know, what I said is I think majority of the one-off expenses will be high-banding to Q4. So it's a one-off. But even we consider the one-off expenses strike, but we still get the whole group margin extension in Q4. But it is better to the future because we spend some of the one-off expenses in Q4. But as a result, we reduce the fixed cost and expenses in the coming year. So that's why I said we will drive the merger up of the overseas business in the coming year. And your second question is about the capacity. Yeah, what I'm saying is in square meter size. So this is in that app. And then most of the capacity we build up is in the K-12 business. But don't forget, the K-12 business, the top line growth will lessen know it's not an official guidance but you know based on the our current estimation i think the next year top line growth will be somewhere around 15 or 20 let's say the close to 20 or even more so we still have the leverage if we open like the 10 to 15 of the new capacity we still have the leverage to drive the the average utilization rate up going forward so and uh i think the As for the cost and the expansion discipline, I think the local teams support my job. I believe they will do the better job in the coming year. Even they have done a great job in this year, so I do believe they will do more or better job in the coming year. On the cost control, I need to be in control of the expansion plan.

Yes. Thank you, sir. I think I absolutely agree with you that we need to make the hard decision to optimize our cost structure into next year. But just to double check, I know it could be a little sensitive, but broadly speaking, the one-off, when we say this kind of optimization of our workforce and the staff, That's one of, right? So it's not like we are ongoing spending money on restructuring. It's just really that we had to make hard decision and there was some related cost to it in 4Q. Is that fair understanding?

Yes. Yes, correct.

Yeah. Thank you, sir. Very clear. Thank you. Thank you. Yes.

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

Good evening, Steve and Cece. Congratulations on this quite strong performance. I noticed that on the new allocation business side, revenue top line growth remains strong, but I see a slight moderation in the number of paid user growth for the learning device. So could you help us understand what's behind the shift thing?

The paid user. Yeah, I think because of the disclosure, the difference. So I think the paid user, what I'm saying is the one paid users pay more money and enroll more subjects. at the same time, so it's better than before. And secondly, we do have some like the seasonal or the timing difference issue. And so I suggest you look at the enrollment and the deferred revenue and the gap revenue in more long term. So that's why we give the whole year guidance things this year. And so I think the trend is good of the K-12 business And the Q4, I don't believe the revenue growth will be very healthy and will continue to grow the business even in the Q4 and the new year.

Okay, great. Thanks. That's very clear.

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

Thank you, Stephen and Sisu for taking my question and congrats on a really strong quarter of results. So my question is regarding AI impact. On one hand, we can see AI clearly improve like operational efficiency and the support margin expansion. On the other hand, so how do we expect like AI can change the core tutoring formats the EDU is currently offering? So like over the next 12 to 24 months, what kind of opportunities and threats do you see from the AI? Thank you.

I've got the CC to answer a question. You know, CC is a expert.

OK. Yeah. So actually, we are excited about the opportunity to implement technology into our business. You know, it's a big opportunity for companies like us with capital advantages and also we can hire top people and also have the best educational experience in this industry. So we have the best position to implement AI technology into our area. And three things we're doing and we're making progress and also want to share with each of you. Firstly, we are implementing AI technology into all key business lines. So for not only those online products or hardware products like our intelligent learning device, we have all the AI functions in it, embedded into it and keep monetizing it and enhancing students' learning experience and improve the learning efficiency of our customers as well. And even offline classes. for young people, for young students and all ages actually they can implement some AI functions in the class and we're collecting the data and combining it with our teaching and learning experience to have all the data to possess more and more value to help us to even explore even more product opportunities in the future. So existing products are enhancing the quality and also enhancing the comparative advantage using the AI, implementing the AI technology. And second thing we're doing is to help us. You know, this year, especially this year and coming one to two years, our key theme is to enhance the overall efficiency you know bring the healthy growth plus the the profitability enhancement uh you know the ai can can put a lot of uh uh can can give us a lot of help uh you know for each progress of our daily work for all the teachers, salespeople, and teacher assistants, even functional department staffs. The whole working process can implement AI technology to enhance the efficiency. So we have already seen some certain business, you know, labor costs got reduced or the labor hours got reduced. And also, you know, we're doing some restructuring for certain business, for example, the overseas related business and also some other business as well. So we want to use, implement more and more AI technology into the working process to benefit from these efficiency improvements. So this is the second thing. It's an ongoing work, so it will continue closely following the trend of AI technologies involvement and keeping using it into the whole working process. Teachers are saving more and more time so that our teachers' utilization can also improve together with the trends. And third biggest thing, actually, we're also exciting and waiting for the results is that we have several piloting team. They're working on some new products, implementing purely AI technology so we can get rid of or depends very, very little on humorous source, but we can combine the AI technology with our teaching and learning experience and certain content. so that we can come up with some innovative actually educational products which is different from currently what we're doing for offline but using the AI technology to bring students the learning experience similar with offline face-to-face teaching but using AI technology so we're exploring some opportunities here now. And hopefully in coming several months, maybe we can see some new products coming. Yeah. So actually the company are devoting a lot of new resources into the AI area. It's an ongoing process, but definitely together with our strategy, we'll put more, implement more of the AI technology, keep catching up. the trend and benefit more going forward.

That is very helpful. Thank you, Sisi. Thank you. We will now take our next question from Timothy Zhao of Goldman Sachs. Please go ahead, Timothy. Your line is open.

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. As you have discussed a lot about the new initiatives, expanding the full lifecycle, the customers, and AI can help improve the overall operator efficiency and including the overseas test prep and consulting integration. I'm just wondering if you can share any updates on your view on the longer-term operating margin of EDU business and EDU's educational business. Thank you.

Thank you, Tim. You know, the margin question, you know, as I said, you know, the coming year, I think we're quite optimistic about the margin extension because of the higher utilization rates and even the better leverage, operation leverage. And also, you know, because of the cost control, we reduce the fixed cost and expenses. And so in the next year, the margin will be up. And I don't believe we will get the margin expansion in the next three years. So we do hope we can get a better margin step by step in the next three or even long term. And I think next quarter I will give the guidance of the detailed guidance of margin next quarter for the next year, but we're quite optimistic about the long-term margin expansion going forward. Thank you. Tim.

Tim Stenzelman- Sure.

Thank you, Steven.

Thank you. And we are now approaching the end of the conference call. I'll now turn the call over to New Oriental's Executive President and CFO, Stephen Young, for his closing remarks.

Again, thank you for joining us today. If you have any further questions, please don't hesitate to contact me or any of our investor relations representatives. Thank you.

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