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On July 31, New Oriental released its fourth quarter financial report for fiscal year 2024: net revenue increased by more than 30%, but net profit declined year-on-year. Perhaps because its performance did not meet market expectations, New Oriental's US stocks fell by more than 7% before the market opened. In fact, judging from the overall performance in fiscal year 2024, New Oriental's annual revenue exceeded US$4 billion, and it has returned to the track of business recovery. In this process, New Oriental is also accelerating the pace of opening learning centers. In this regard, industry insiders analyzed that the investment in offline learning centers and equity rewards after the fiscal year may be the main reason for New Oriental's "increased revenue but not increased profits." In the long run, New Oriental's business and stock price are still worth looking forward to.

The financial report shows that in the three months ending May 31, 2024, New Oriental achieved a net revenue of US$1.137 billion, a year-on-year increase of 32.1%; the net profit attributable to New Oriental shareholders was US$26.972 million, a year-on-year decrease of 6.9%. In terms of full-year performance, New Oriental achieved a total net revenue of US$4.314 billion in fiscal year 2024, a year-on-year increase of 43.9%; the net profit attributable to New Oriental shareholders was US$310 million, a year-on-year increase of 74.6%.

Regarding the performance of rising revenue, the financial report explained that the increase in revenue was driven by New Oriental's new educational business, Oriental Select's proprietary products, and live e-commerce business. Yu Minhong, executive chairman of New Oriental's board of directors, also stated in the financial report that in the last quarter of fiscal year 2024, New Oriental's various education businesses all showed year-on-year growth. Among them, overseas test preparation and overseas consulting businesses grew by approximately 17.7% and 17.3% respectively, and domestic test preparation business for adults and college students grew by approximately 16.4%.

In addition, in the latest fiscal quarter, New Oriental's new education business revenue increased by 50.3% year-on-year. Among them, the number of applicants for non-subject tutoring business this fiscal quarter was about 875,000, and the number of active paying users of intelligent learning systems and devices was 188,000.

Ge Wenwei, partner of Duojing Capital, said in an interview with Beijing Business Daily that after New Oriental completed the divestiture of its K12-related businesses, its performance recovery is accelerating. Whether it is learning machines, books, or overseas language training, cultural tourism and study, New Oriental's revenue is also on the rise thanks to the increase in market demand.

Although New Oriental handed in an annual report showing an increase in both revenue and net profit, the market did not buy it. Before the U.S. stock market opened on July 31, New Oriental's stock price fell by more than 7%, which may be related to its net profit failing to meet market expectations for two consecutive quarters. According to New Oriental's third quarter financial report for fiscal year 2024, New Oriental's net revenue was US$1.207 billion, a year-on-year increase of 60.1%; net profit attributable to shareholders was US$87.2 million, a year-on-year increase of only 6.8%.

In Ge Wenwei's view, New Oriental's "increased revenue but not increased profits" is caused by two factors. First, New Oriental's expansion of offline learning centers. These businesses are still in the investment period, and hardware facilities and labor costs require a large amount of capital injection, but it is difficult to make a profit in the short term; second, it is related to New Oriental's reward mechanism. After the end of each fiscal year, New Oriental will cash out some equity rewards to employees, which will also be included in the cost.

The data disclosed in New Oriental's financial report also confirms some of Ge Wenwei's analysis. Specifically, in the fourth quarter of fiscal year 2024, New Oriental's operating costs and expenses were US$1.126 billion, an increase of 38.6% year-on-year. When talking about the main reasons for the increase in costs, New Oriental explained that it was the continued growth of Oriental Select's self-operated products and live e-commerce business, as well as the increase in related costs and expenses brought about by the accelerated expansion of teaching space.

Although New Oriental's capital investment has not yet paid off, industry insiders believe that New Oriental is one of the fastest recovering listed companies in the education industry. Data shows that as of May 31, 2024, the total number of New Oriental schools and learning centers is 1,025, an increase of 277 from 748 at the end of the previous fiscal year.

Ge Wenwei analyzed that New Oriental's business investment in the current fiscal quarter is expected to get feedback in the second quarter of fiscal year 2025. According to New Oriental's fiscal year calculation method, the second quarter of fiscal year 2025 is the three months ending November 30, 2025. Ge Wenwei said that more parents and students may sign up in this fiscal quarter, bringing business and profit growth to New Oriental.

Beijing Business Daily reporter Zhao Boyu