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.