One week after Dongfang Zhenxuan cut ties with Dong Yuhui and his colleagues, New Oriental submitted its financial report for the 2024 fiscal year (June 1, 2023 to May 31, 2024).
On the evening of July 31st, New Oriental released its fiscal year 2024 results, showing a year-on-year increase of 43.9% in net revenue to $4.314 billion. The net profit attributable to New Oriental shareholders for the fiscal year 2024 was $310 million, a year-on-year increase of 74.6%. In Q4 of fiscal year 2024, New Oriental's net revenue increased by 32.1% year-on-year to $1.1367 billion; During the same period, the net profit attributable to New Oriental shareholders decreased by 6.9% year-on-year to $27 million.
Yu Minhong, Executive Chairman of New Oriental's Board of Directors, stated that we are pleased to summarize the last quarter of the 2024 fiscal year with a steady revenue growth of 32.1%; New Oriental's new education businesses all maintained strong growth momentum in this quarter, with a year-on-year increase of 50.3% in revenue; We firmly believe that New Oriental has the ability to seize various new opportunities in the market with the development space and brand advantages of its new education business.
Q4 net profit decreased by 6.9%
In Q4 of fiscal year 2024, New Oriental's net revenue was $1.1367 billion, a year-on-year increase of 32.1%. The net profit attributable to New Oriental shareholders was $27 million, a year-on-year decrease of 6.9%.
Regarding the net revenue growth for this fiscal quarter, New Oriental stated, "Mainly due to our new education related business and the increase in revenue driven by Dongfang Zhenxuan's self operated products and live streaming e-commerce business
This fiscal quarter, New Oriental's operating profit was $10.5 million, a year-on-year decrease of 78.1%, while Non GAAP's operating profit was $36.3 million, a year-on-year decrease of 53.8%; The operating profit margin for this quarter was 0.9%, compared to 5.6% for the same period in the previous fiscal year.
Correspondingly, New Oriental's Q4 operating costs and expenses for the 2024 fiscal year amounted to $1.126 billion, a year-on-year increase of 38.6%. The non GAAP operating costs and expenses (excluding share based compensation expenses) for this quarter were $1.1 billion, an increase of 40.7% year-on-year.
Yang Zhihui, Executive President and Chief Financial Officer of New Oriental, stated, "In addition to Dongfang Zhenxuan's investment in self operated products and the costs and expenses related to the Hui peer platform, our investment in accelerating the expansion of education space and newly integrated cultural and tourism business, as well as improving the compensation and rewards of management and employees, has shown a short-term impact on our operating profit margin for this fiscal quarter
We expect that with the continuous improvement of facility utilization and operational efficiency, the profit pressure on the education business will decrease in the next fiscal year, "Yang Zhihui also said.
From a specific business perspective, in the traditional education sector, the Q4 fiscal quarter's overseas exam preparation and consulting services saw year-on-year growth of approximately 17.7% and 17.3%, respectively; Meanwhile, domestic exam preparation services for adults and college students recorded a year-on-year increase of approximately 16.4%.
In addition, New Oriental's new education business also maintained strong growth momentum in the Q4 fiscal quarter, with a year-on-year increase of 50.3% in revenue. According to the official website of New Oriental, the education new business includes non subject tutoring courses, such as story performance, eloquence, handwriting, programming, art, robotics, and science quality courses.
As of May 31, 2024, the total number of New Oriental schools and learning centers was 1025, an increase of 114 compared to 911 as of February 29, 2024; Compared to 748 as of May 31, 2023, there has been an increase of 277. As of May 31, 2024, the total number of schools is 81.
Regarding the current new competitive situation in the education industry, Yang Zhihui stated during the earnings conference call on the evening of July 31st that some competitors have invested some funds or opened more learning centers in top cities, but the current competitive situation is relatively reduced compared to before the policy was introduced a few years ago, and newly built learning centers will occupy more market share.
From the fiscal year 2024, New Oriental's revenue was $4.314 billion, an increase of 43.9% year-on-year; The net profit attributable to shareholders was 310 million US dollars, an increase of 74.6% year-on-year. New Oriental expects its net revenue for Q1 of fiscal year 2025 (excluding its self operated product live streaming e-commerce business) to be between $1.255 billion and $1.284 billion, with a year-on-year increase rate of between 31% and 34%.
However, the above performance did not satisfy the secondary market, and New Oriental's US stock closed down 9.29% to $62.82 on July 31; On August 1st, New Oriental Hong Kong stocks closed down 7.85% to HKD 50.45, with a drop of over 17% at one point during trading.
In addition, as of July 30, 2024, New Oriental has repurchased approximately 7.3 million American depositary shares in the public market under its share repurchase plan, with a total value of approximately $296 million.
Tourism is expected to generate profits in the 2026 fiscal year
A week before the disclosure of the transcript, the entire New Oriental department was embroiled in an incident of "breaking up" with well-known anchor Dong Yuhui and his colleagues.
On July 25th, Dongfang Zhenxuan divested extremely important IP assets. On the same day, Dongfang Zhenxuan announced that Dong Yuhui had resigned and bought him for 76.59 million yuan. Faced with a purchase price of 76.59 million yuan, Yu Minhong publicly stated, "Yuhui holds the necessary equity purchase funds for its peers, and I will arrange for payment in accordance with the rules of the listed company and the company's articles of association." The meaning of this sentence is that I have arranged the money for Yuhui to purchase the company, and the company is giving it to Yuhui
Yang Zhihui mentioned in the financial report that "the compensation fee for Dong Yuhui will be incurred in the fourth quarter of this fiscal year and the first quarter of the next fiscal year. It is a one-time expense, and the specific amount will be announced at the next analyst meeting
The rise of Dongfang Zhenxuan from obscurity to prosperity is inseparable from the core figure Dong Yuhui. Any personal movement of Dong Yuhui can trigger fluctuations in the secondary market. Although the breakup between the two parties did not exceed expectations, his departure is bound to bring significant impact.
Goldman Sachs has released a research report stating that it has downgraded Dongfang Zhenxuan's rating from "neutral" to "sell", with a target price cut of 55% from HKD 15.9 to HKD 7.1. Goldman Sachs believes that after Dong Yuhui's resignation and the sale of "Tonghui Tongyi", Dongfang Zhenxuan's recent growth outlook has become unclear, and lower operating leverage may further put pressure on profit recovery.
Ding Daoshi, an Internet analyst, analyzed with our reporter and said, "Although Dong Yuhui is not equal to the whole brand selected by Orient or with Hui, he is undoubtedly the core figure in the system; Dong Yuhui's resignation has a huge impact on the organization both in terms of capital level imagination and actual performance."
At a time when risks are accumulating in Eastern Selection, New Oriental is also actively increasing its cultural and tourism business beyond education. As early as the 2023 fiscal year, when it achieved a turnaround from losses to profits, Yu Minhong had already laid out the cultural and tourism track. On July 21, 2023, New Oriental announced on its official WeChat account that it would officially expand its cultural and tourism business.
As it continues to explore, New Oriental Culture and Tourism also serves all age groups, including middle-aged and elderly people, teenagers, and parents and children. It is worth noting that in February of this year, the "New Oriental Culture and Tourism" brand was officially launched, and New Oriental Culture and Tourism also explicitly merged its international study tours, domestic study tours, and camp education businesses, which have been operated by New Oriental for many years, into the development of the Culture and Tourism Group.
Starting from November 2023, New Oriental Culture and Tourism will also establish subsidiaries across the country and continuously establish strategic partnerships with cultural and tourism departments in various regions. Leveraging the cultural and tourism resources available in each region, they will jointly create a series of high-quality cultural and tourism products and services. On the 4th of last month, Beijing New Oriental Wokaide Cultural and Creative Co., Ltd. was established, which also means that New Oriental Culture and Tourism has entered the cultural and creative field.
However, the rapidly developing cultural and tourism industry is still in the stage of burning money. Yang Zhihui revealed in a conference call that in the fiscal year 2024 and last year (2023), the revenue of cultural and tourism business was 380 million yuan, and it is expected that the revenue of cultural and tourism business in the fiscal year 2025 will be about 1.2 billion yuan, with a loss of about 100 million yuan; But by the 2026 fiscal year, the cultural and tourism business will be profitable.
Zhang Yi, the chief analyst of iMedia Consulting, analyzed to the reporter of the Huaxia Times that New Oriental's cultural tourism has expanded to all age groups, especially the direction of research and study. The future growth space will expand and the growth will be better. With the increase of China's per capita income level and per capita education, culture and entertainment expenditure, people are more willing to participate in and sign up for their children to participate in research and study tours.