After the transformation of education enterprises, whether it is the diversified development of New Oriental or the good future of extending development in the education field, the actions of the two giants can attract attention from all parties, and the financial report is an important window to observe whether the transformation of the two companies is successful.
On the evenings of October 23rd and 24th, New Oriental and TAL Education respectively released their financial reports for the new fiscal quarter, with similar net profit growth rates for the two companies. After cutting ties with Dong Yuhui, New Oriental's performance did not show significant fluctuations, mainly due to the revenue contributions of its new education and cultural tourism businesses. However, New Oriental's performance did not meet expectations, resulting in an 8.42% decline in its US stock market on October 23; In the new fiscal quarter, TAL Education achieved a 50.4% increase in net income, with the development of its artificial intelligence learning device business being one of the main drivers of revenue growth.
Net profit growth remains unchanged
On the evening of October 24th, TAL released its unaudited financial report for Q2 of the fiscal year 2025 as of August 31, 2024. Net income increased from $412 million in the same period last year to $619 million, a year-on-year increase of 50.4%; The net profit attributable to TAL Education is 5743 The net profit attributable to TAL Education Group in the same period last year was 37.902 million US dollars, a year-on-year increase of 51.5%.
In the past quarter, the development of TAL Education's AI learning device business has been one of the main drivers of revenue growth. We are pleased to provide users with more opportunities to access high-quality learning content through these AI driven intelligent learning devices, "said Peng Zhuangzhuang, President and CFO of TAL Education
The reporter from Huaxia Times learned from exchanges with many industry insiders that the Xueersi learning machine under TAL Education Group has always been popular among parents. With the launch of the Xueersi learning and practice machine by TAL Education Group, the sales of its learning tablets are expected to further increase based on the brand effect accumulated in the past and the built-in content.
On the evening of October 23, New Oriental (EDU) submitted its Q1 report for the fiscal year 2025. As of August 31, 2024, New Oriental's Q1 revenue was $1.435 billion, a year-on-year increase of 30.5%, and its net profit was $245 million, a year-on-year increase of 48.6%.
The growth of New Oriental's performance is mainly driven by its new education business. Yu Minhong, Executive Chairman of New Oriental's Board of Directors, stated in the financial report that "the education new business maintained strong growth momentum in this quarter, recording a year-on-year increase of 49.8% in revenue
Specifically, New Oriental Education's non disciplinary tutoring services were launched in nearly 60 cities, with approximately 484000 applicants in this fiscal quarter, a decrease of 44.69% compared to the 875000 applicants in Q4 of the 2024 fiscal year; Intelligent learning systems and devices are also being adopted in about 60 cities, with approximately 323000 active paying users this quarter.
Yang Zhihui, Executive President and Chief Financial Officer of New Oriental, stated during the financial conference call on the evening of the 23rd that the year-on-year growth rate of enrollment in non academic tutoring services this quarter was relatively low, mainly due to the earlier opening of the summer enrollment window compared to previous years. This means that New Oriental counted more people in the fourth quarter of the previous fiscal year. He also stated that although the fourth and second quarters will be the off-season, the company is confident in its full year revenue growth and may even see an acceleration in revenue growth in the third and fourth quarters.
At the same time, New Oriental's traditional education business continues to grow. Yu Minhong stated in the financial report that the company's overseas exam preparation and overseas consulting services increased by approximately 18.8% and 20.7% respectively year-on-year in this fiscal quarter. Meanwhile, domestic exam preparation services for adults and college students recorded a year-on-year increase of approximately 30.4%.
It is worth noting that due to Dong Yuhui's departure from Dongfang Zhenxuan, the influence of Dongfang Zhenxuan and New Oriental has also been widely discussed and concerned by various parties. New Oriental also emphasized in this financial report the relevant data after excluding Oriental Selection.
In Q1 of fiscal year 2025, New Oriental's operating profit increased by 42.9% year-on-year to $293 million. After deducting losses from Dongfang Zhenxuan's self operated products and live streaming e-commerce business, the operating profit increased by 58.4% year-on-year to $303 million.
Yang Zhihui stated in the financial report, "Consistent with our expectations from the previous quarter, we have increased the operating profit margin of our core education business year-on-year in this fiscal quarter. Our Non GAAP operating profit margin for this quarter (excluding Dongfang Zhenxuan's self operated products and live streaming e-commerce business) was 24.4%, a year-on-year increase of 220 basis points
As the two most successful education companies in their transformation after the "double reduction" policy, TAL Education is accelerating its pursuit of New Oriental. Currently, the former's revenue is 40% of the latter's, and TAL Education's net profit is 23.27% of New Oriental's. However, the net profit growth of both parties is similar, and TAL Education even surpassed New Oriental in this fiscal quarter.
Different directions
New Oriental has entered into different fields such as live streaming e-commerce and cultural tourism, while TAL Education continues to expand its business in the field of education.
In addition to the new education business mentioned earlier, cultural tourism has also brought significant revenue contributions to New Oriental. New Oriental CEO Zhou Chenggang mentioned in the financial report that it is encouraging that the company's newly integrated cultural and tourism business recorded significant growth in this fiscal quarter.
We have launched high-quality overseas study tours and domestic study camps for K-12 and college students. In addition, the company is also organizing multiple top-level cultural and tourism projects for all age groups (including middle-aged and elderly people) in 30 characteristic provinces in China and internationally. We believe that starting from this fiscal year, this new business will bring meaningful revenue contributions, "said Zhou Chenggang.
According to the reporter's understanding, 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. 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 long-standing international study tours, domestic research and study tours, and camp education businesses into the development of the Culture and Tourism Group.
According to Yang Zhihui, in Q1 of the 2025 fiscal year, New Oriental's cultural and tourism business will generate approximately $90 million in revenue and be in a profitable state. He explained that this fiscal quarter is the peak season for cultural and tourism businesses, such as study tours, overseas study tours, and even domestic study tours.
However, Yang Zhihui also admitted that for the whole year, New Oriental's cultural and tourism business will suffer losses. Yang Zhihui previously predicted that New Oriental's cultural and tourism business would achieve profitability in the 2026 fiscal year.
Unlike New Oriental, which does not put all its income in one basket, TAL Education has been deeply rooted in its education industry, and one of the main drivers of its current revenue growth is its artificial intelligence learning device business.
According to the reporter's understanding, as early as February 2023, Xueersi, a subsidiary of TAL Education, launched its first tablet type intelligent learning machine. However, in August of this year, TAL Education extended its tentacles of learning tablets to learning and training machines. On August 29th, Xueersi officially released its new product "Xueersi Learning and Training Machine", achieving "one machine for three", which means that one machine has three modes: learning and training machine, learning machine, and reading machine. Breaking the monopoly of Yuanfudao in the field of learning and training machines.
On September 3rd, Zhao Puzheng, the head of Xueersi Intelligent Learning, stated in an interview with Huaxia Times that while hardware improvements can be achieved with determination and dedication, the built-in content needs to be accumulated over a long period of time. With the development of the industry, the core competitive point of content resources will block many learning machine manufacturers, and education companies and educational technology companies will better survive as top players in the industry evolution. When the industry develops to a certain extent, products will cross software and hardware parameters and compete for comprehensive experience. This process is similar to the development of mobile phones, but faster than the evolution of mobile phones
According to Gu Xinyu, an analyst at Bank of Communications International, it is predicted that the sales revenue of TAL Education's learning machines will maintain a high growth rate. Based on data from Cicada Mama, it is estimated that the sales volume in the second quarter will be 100000 to 150000 units. The xPad Classic Edition launched in May will drive quarterly sales in 2024, and a lower priced learning machine will be launched in September to further enrich the product line. The continuous iteration of products drives the brand and reputation of learning machines, and drives revenue growth, "said Gu Xinyu.
It is worth noting that although New Oriental achieved good results in the new fiscal quarter, with the summer peak season passing, its revenue growth expectations for the next fiscal quarter have slowed down. It is expected that the net revenue (excluding revenue from Dongfang Zhenxuan's self operated products and live streaming e-commerce business) for Q2 of fiscal year 2025 (September 1 to November 30, 2024) will be between $851 million and $872 million, with a year-on-year increase rate of 25% to 28%.