New Oriental Education & Technology Group Inc. F4Q10 (Qtr End 05/31/10) Earnings Call Transcript

New Oriental Education & Technology Group Inc. F4Q10 (Qtr End 05/31/10) Earnings Call Transcript
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New Oriental Education & Technology Group Inc. (EDU)

F4Q10 (Qtr End 05/31/10) Earnings Call

June 19, 2010 8:00 am ET


Sisi Zhao – Senior IR Manager

Louis Hsieh – President and CFO


Philip Wan – Morgan Stanley

Chenyi Lu – Cowen and Company

Marisa Ho – Credit Suisse

Ingrid Yin – Brean Murray

Mark Marostica – Piper Jaffray

James Mitchell – Goldman Sachs

Amy Junker – Robert W. Baird

Brandon Dobell – William Blair

Ella Ji – Oppenheimer



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Good evening and thank you for standing by for New Oriental's fourth fiscal quarter 2010 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. (Operator Instructions).

I would now like to turn the meeting over to your host for today's conference, Ms. Sisi Zhao.

Sisi Zhao

Hello, everyone and welcome to New Oriental's fourth fiscal quarter 2010 earnings conference call. Our fourth fiscal quarter earnings results were released earlier today and are available on the company's website, as well as on newswire services.

Today, you will hear from Louis Hsieh, New Oriental's President and Chief Financial Officer. After his prepared remarks, Louis 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 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 statement, 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

I would now turn the call over to New Oriental's President and CFO, Louis Hsieh. Louis, please.

Louis Hsieh

Thank you, Sisi. Hello, everyone and thanks for being with us today. I will start by taking you through the quarterly and yearly highlights and then move into financial results. After that, we will finish with some Q&A.

As many of you are aware, Q4 is seasonally a slower quarter for us as students look to year-end examinations. Nonetheless, we reported continued strong revenue growth and even stronger bottom line growth for the quarter, beating the high-end of our guidance.

As we mentioned last quarter, since Chinese New Year was relatively late this year, the vast majority of student enrollment for spring courses, which is our Q4, were logged in the quarter, which boosted quarterly enrollments compared to past years where a significant portion of the spring quarter pre-enrollments occurred in the winter or Q3 period.

Overall enrollments across the businesses in the fourth quarter were very healthy, increasing more than 32% year-over-year to 437,000. The blended average selling price increased about 13% year-over-year to about $235.

Full-year results were also outstanding, especially given the disruption caused by the H1N1 flu outbreak last summer and fall and the ongoing impact of the global financial crisis. Total student enrollments for the year increased 19% to approximately 1.8 million, driving top line growth of 32% to $386 million, exceeding our 25% to 30% revenue growth target for fiscal year 2010.

Driving growth this quarter were our three key business segments. Let me take you through some highlights for each of these. POP Kids English continued to be a top performer with enrollments growing more than 50% in the fourth quarter and quarterly revenue growth of 43%. Full fiscal year enrollment for POP Kids was over 40% to a total of more than 434,000 enrollments with yearly revenues up over 44% to approximately $50 million.

As many of you know, one of the reasons POP Kids is so successful is parents' trust in New Oriental to begin their often single son or daughter on the right education path from early age, giving them the best possible educational experience and helping them attain the skills they need to succeed throughout their education careers.

On the back of our success with POP Kids English program and with the continued high demand for early childhood education options, the first of our two large-scale initiatives for fiscal year 2011 is to expand our offering for kids aged six to 12 with the addition of Kids' Math and Kids' Chinese writing classes under the POP Kids brand.

With the wide and growing base of POP Kids students, we expect these new offerings to be a natural next step for parents looking to start their kids off on the right track. We have actually been piloting the program in several cities and feedback and demand so far has been extremely positive. So we are looking forward to rolling this out across our entire nationwide network in fiscal year 2011.

Another significant growth driver, non-English U-Can courses for middle and high school students, also outperformed over the quarter. Enrollments in Q4 were up 150% to 36,800, making a total of approximately 120,000 enrollments for fiscal year 2010, well above our target of 80,000 to 90,000. And non-English U-Can revenue in the quarter grew more than 200%, bringing us to $34 million for the full fiscal year, significantly higher than our $25 million target.

The success we've seen with U-Can since its launch in 2008 underlines the strength of the New Oriental brand and the trust that our students and their families have in our course offerings. It also demonstrates our ability to serve as a more robust and versatile education partner for our large student base, meaning a student can come to us for English language training and decide to stay for other subjects, test preparation, and tutoring as well.

As of the end of fiscal year 2010, U-Can has been deployed across 39 of our 40 cities or schools, forming a central part of our nationwide offering. As U-Can continues to track new enrollments in cities throughout the country, we recognize the need to enhance our systems to add additional value to our hundreds of thousands of students taking advantage of this program.

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