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New Oriental Education & Technology's Management Presents Q4 2012 Results - Earnings Call Transcript

I would like to spend a couple of minutes talking about the key drivers of this growth and highlight some of the exciting trends that we’re building on. First and foremost, I want to address the tremendous growth opportunity beyond China’s Tier-1 cities. This has been a major factor in our success in fiscal year 2012 and I’m confident this will be a vital engine of our growth in fiscal year 2013 and beyond.

As we’ve stated previously that in addition to enhancing our market leading brand name and maintaining the highest standards in teaching and content quality. One of our other primary goals is to establish New Oriental as the number one or number two language and test prep tutoring service providers for K-12 in every one of our lucrative and fast growing city markets.

To achieve this strategic imperative, we must invest in growing learning centers at a rapid pace to achieve critical mass and economies of scale, which will drive long-term sustained and increasing profitability.

In fiscal year 2012, second and third tier cities achieved about 43% of revenue growth, contributing around 48% of our total revenue, whereas Beijing and Shanghai collectively recorded about 29% revenue growth and accounted for about 37% of total revenue.

The cities around Beijing like [Shijiazhuang and Zhangjiakou] are good examples of an emerging paradigm within student attitude. Previously many students from these cities would take – would have traveled to Beijing during the summer and winter break to take classes at one of boarding schools in the capital. But now New Oriental has branches across these cities where we offer the same or comparable premium standard education that a student can get in Beijing. So, now more and more students choose to stay in their home town, taking New Oriental courses locally instead of traveling into Beijing during the holidays. A similar behavior and it is occurring with New Oriental Shanghai schools and in the surrounding areas.

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