Good evening and thank you for standing by for New Oriental’s FY2022 Fourth Quarter Results Earnings Conference Call. At this time, all participants will be in listen-only mode. After management prepared remarks, there will be a question-and-answer session. Today’s conference call is being recorded. If you have any objections, you may disconnect at this time. I would now like to turn the meeting over to your host for today’s conference, Ms. Sisi Zhao.

Thank you, operator. Hello everyone and welcome to New Oriental’s fourth fiscal quarter 2022 earnings conference call. Our financial results for the periods were released earlier today and are available on the company’s website, as well as on Newswire Services. Today, you will hear from Stephen Yang, Executive President and Chief Financial Officer. After his prepared remarks, Stephen and I 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 views 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 statements, except as required under applicable law. As a reminder, this conference is being recorded. In addition, a webcast of conference call will be available on New Oriental’s Investor Relations website at investor.neworiental.org. I will now turn the call over to Mr. Yang. Stephen, please go ahead.

Thank you, Sisi. Hello everyone and thank you for joining us on the call. Before going into details of our financial performance, I would like to take this opportunity to extend our gratitude to those who have been supporting and still believing in New Oriental. While our business in the previous quarters were largely affected by the government policies introduced last year, I’m glad to announce that we are now paving a new path in new business opportunity as the company embarks on a journey – a fresh journey that strives to encourage all round development of students and for the betterments of this society and at the same time focus on generating profit and returns for our shareholders. Now, I would like to spend some time to talk about the quarter performance across our remaining business lines and introducing our new initiatives to you in detail. Our key remaining business have shown remarkable resilience and achieved the promising trends breaking down the overseas test prep business recorded the revenue increase of 6% in dollar terms for the fiscal year 2022. The overseas study consulting business recorded a revenue increase of about 16% in dollar terms year-over-year for the fiscal year 2022. The adults and university students business recorded a rapid growth of approximately 30% year-over-year for the fiscal year 2022. As for our new business initiatives, as mentioned in past quarter, we have launched the several new initiatives throughout the year, which mostly revolve around facilitating students around development. I’m glad to share with you that these new initiatives have shown positive momentum. Firstly, the non-academic tutoring business, which we have rolled out in over 50 existing cities focused on cultivating students’ innovative ability and comprehensive ability. We’re happy to see increased market penetration in both markets we have…

Okay. Now, I’d like to walk you through the other key financial details for the fourth quarter. Operating costs and expenses for the quarter were $629.7 million, representing a 52.1% decrease year-over-year. Non-GAAP operating costs and expenses for the quarter, which exclude share-based compensation expenses, were $600.9 million, representing a 53.6% decrease year-over-year. The decrease was mainly because of the reduction of the facilities and numbers of staff as the results of the restructuring in fiscal year. Cost of revenue decreased by 57.2% year-over-year to $247.8 million. Selling and marketing expenses decreased by 50.7% year-over-year to $95.8 million. G&A expenses for the quarter decreased by 43.9% year-over-year to $286.1 million. Non-GAAP G&A expenses, which exclude share-based compensation were $257.2 million, represents a 47.4% decrease year-over-year. Total share-based compensation expenses, which were allocated to related operating costs and expenses, increased by 42.9% to $28.8 million in the fourth quarter. The increase is due to the grant of restricted shares of the company to employees and directors in May 2021 with graded vesting over three years. Operating loss was $105.6 million, compared to the loss of $102.4 million in the same period of the last fiscal year. Non-GAAP operating loss for the quarter was $76.9 million, compared to the loss of $82.2 million in the same period of the prior fiscal year. Net loss attributable to New Oriental for the quarter was $189.3 million, compared to the loss of $45.5 million in the same period of the last year. Basic and diluted net loss per ADS attributable to New Oriental were $1.12 and $1.12, respectively. Non-GAAP net loss attributable to New Oriental for the quarter was $160.3 million, compared to the loss of $27.9 million in the same period of last year. Non-GAAP basic and diluted net loss per ADS attributable to New Oriental were $0.94 and $0.94, respectively. Net operating cash flow for the quarter was approximately $29.3 million and CapEx for the quarter was $22.3 million. Turning to the balance sheet. As of May 31, 2022, New Oriental had cash, and cash equivalents of $1,148.6 million. In addition, the company had $1,140.1 million in term deposits and $1,902.3 million in the short-term investment. New Oriental’s deferred revenue balance, which is cash collected from the registered students for courses and recognized proportionally as revenue as the instructions were delivered, at the end of this quarter was $933.1 million, a decrease of 51.6% as compared to $1,926.4 million at the end of this quarter. The decrease is primarily due to the cessation of K-9 academic after-school tutoring services was compliance with the government’s policy in China. Now, I’ll hand over to Stephen to go through the outlook and guidance.

Thank you, Sisi. Looking ahead into the first quarter of fiscal year 2023, with the process of school closures now largely completed. We expect that our school network to become stabilized. The company has now entered a stage of starting a fresh exploring new opportunities with a greater flexibility and strong cash flows. We’re confident in the sustainable profitability of all our remaining key business, as well as the growth and profits potential of our new initiatives. For new businesses, it’ll take time for them to come to full fruition, but as we saw in this quarter, the encouraging performance, they have already achieved to showing proofs that we are heading towards the right direction. And we’re confident that the business will be starting to contribute meaningful revenue from the next fiscal year onwards. As for the recent pandemic development in China, thanks to our OMO system would believe that the overall impact that would cost to our business and financials will be limited. We have also had measured in place to control and handle and handle lockdown situations should they ever arrest again. In sum, we expect the total net revenues in the first quarter of fiscal year 2023 to be in the range of $641.3 million to $680.6 million, representing year-over-year decline in the range of 51% to 48%. Bottom line wise, we’re confident that we will achieve the turnaround and profitable in the first quarter as well as achieving operating profit in the full year of 2023 fiscal year. To conclude, we’re now taking all kinds of operational actions to promote our key remaining business and cautiously investing in new business, which will be the new growth engines that’s accelerate our recovery and to seek profitable growth. At the same time, we will continue to seek guidance from, and incorporate with government authorities in various provinces in China, in connection with these efforts to comply with relevant policies, guidelines, and any related implementation rules, regulations and measures and to further adjust our business operations required. I must say that this expectations and forecasts reflect our considerations of the latest regulatory measure, as well as our current and limited review, which is subject to change. This is the end of our fiscal year 2022 Q4 summary. At this point, Sisi and I like to open the floor for questions. Operator, please open the call for this. Thank you.

Yes. Thank you. And the first question comes from Mark Li with Citi.

Hi, Stephen. May I ask – for one is, would you have any breakdown of revenue for the guidance that you provide by the major categories?

Sorry, Mark, as before, we’d want to give the breakdown of the revenue breakdown in next quarter.

Got it. So maybe, I follow up with a quick question is, I notice, we have around 744 campus and it should be stabilized going forward. It looks like, it’s higher than the previous mention 650 to 700 when you bottom. So would it mean, there is a positive difference from the time we last spoke and what would be your outlook for this size?

Yes. First of all I must mention that, our remaining business you can call the traditional business, like the oversea related business in the consulting business and the adults and university students business, I think they are all are remarkable resilience, because, you saw the numbers of this fiscal year 2022. So, we do hope we can do better in fiscal year to 2023 the New Year. And on the other hand, we launch the some new , like the non-academic tutoring courses and some new, like the intelligent learning system and devices, the service to these students, or and as well the study tour and research camp. So, I think, the market demand is always there, and even for the new business, we started in fiscal year – it is just a couple of months ago, but we have seen the customer retention rate is very high and we do hope they can do better in the fiscal year – in the new fiscal year. So that’s why we do keep the, a little bit more number were higher number of the learning centers than we expect the – three months ago. And yeah, Mark.

Just, I have a quick follow up is, how many of the learning center you have both non-academic tutoring and existing business?

We don’t have the detail number, but as in more than 50 cities, we don’t have the new business, like the non-academic courses. So, you can say the non-academic courses will be the new growth engine going forward.

Thank you, Stephen.

Okay. Thank you. Thank you, Mark.

Thank you. And the next question comes from Felix Liu with UBS.

Thank you, Stephen. Thank you for taking my question and congratulations on the very resilient quarter post restructuring. I, first, I wanted ask a question about the new initiatives. You mentioned good progress on the non-academic tutoring as well as study camp. So, if we look at this from any one year to two to three year horizon, which one of these new initiatives do you expect the biggest revenue contribution, or could you rank your expectation on the revenue contribution from the bigger to the lower initiative? My second question is on don’t DONG FANG ZHEN XUAN, I know this is a very good initiative that we launch under Koolearn. Have we seen any positive synergies between the live streaming e-commerce with our education businesses? Thank you.

Okay. As for the non-academic children courses, we launched these courses is focused on cultivating the students in this – the innovative ability and comprehensive ability. And so, we do have a lot of courses like the courses to improve the students reading and the presentation skill, and some like the programming web out the art, sports. Yes, we have a lot of courses, but we have seen the extremely the revenue growth in the last couple of months. And because you, as the market demand is always there. And after the government policy, last year, we saw some students they do have a more spare time. So, the students love to, the parents and students love to enroll our new classes. And yes, it is new business. The revenue contribution is very small, but is grows very fast. So, we do believe the new business will contribute more and more revenue going forward. And DONG FANG ZHEN XUAN, yes, I share with you more information about DONG FANG ZHEN XUAN, and but I have to say, I can’t share the business of performance in detail with you. I will leave the DONG FANG ZHEN XUAN’s management, the Koolearn management to share with you more information in their the earnings release or in our sense in this month, right in next month. But, as I mentioned earlier DONG FANG ZHEN XUAN reinvents innovative the blend of the knowledge sharing and that the agriculture product promotion, you can check the numbers like the followers and the GMA on third party the data platforms as referenced. But, and we are also grateful to be widely recognized across the media in China and even in the other countries. And behind – beyond the financial gains, I think we’re pleased to see you, we have also generated intangible returns while, which is to fulfill our, the social responsibility by helping the farmers and some like the agriculture product producers. And so this new business model has been our expectations, you saw what happens in last month. And we expect the Koolearn will become a key growth driver and gradually the deliver meaningful contribution to the new rentals, revenue and profit margin in the New Year where even in the next two to three years. And yes, I think, the audience loves the DONG FANG ZHEN XUAN platforms. So, I think the DONG FANG ZHEN XUAN’s performance helps our these local schools and the learning centers to get more students into our classrooms, even for the traditional business or the new business. So this is very good for us, Felix.

Okay, great. Thank you for the color.

Yes. Thank you.

Thank you. And the next question comes on Liping Zhao with CICC.

Good evening, Stephen, Sisi. Thanks for taking my questions. I got two here. First, could you please share the revenue contribution of the new initiatives in the 4Q FY 2022, and also in first quarter, FY 2023 guidance? And second question is about the GP margin. Are we expecting the around 53% GP margin in 4Q FY 2022 to be in the relatively stable state for the coming quarters? Thank you.

Okay. The new business, I think the revenue contribution from the new business will contribute around 20% of total revenue. This is not includes the revenue from the DONG FANG ZHEN XUAN from the Koolearn. So this is all the, on the EDU side, like the non-academic course where the research, the summer camp, something like that, where some, the other – the new business, this is not include the DONG FANG ZHEN XUAN. And yes, the only GP margin side, I think we got the, we got a lock in this quarter in Q4, but we do believe we can get the higher gross margin in Q1 in the next quarter, or even for the next full year, fiscal year 2023. So that’s why I said, as the bottom line wise, we’re confident we will achieve turnaround and profitable in the first quarter next quarter. And also, I think we expect, we will be profitable in the full year of fiscal year 2023.

Okay. Thanks. That’s helpful.

Thank you.

Thank you. And the next question comes from Tian Houon with T.H. Capital, LLC.

Hi, Stephen, can you guys hear me?

Thank you.

Hello?

Yes.

Yes. We can hear you.

Yes, I can hear you.

Yes. The question is that, if you guys have move to the new business and what is the new season now with you will be going forward?

Yes, actually as we structure, restructured all the business lines, terminated K-9 academic training. The remaining business, remaining key businesses like overseas related business and also domestic test prep for university students. These business are much more seasonal than the K-12. So actually you will see going forward since next fiscal quarter, our Q1 revenue contribution for full year will increase comparing with previous years. So, Q1 will be peak season, continue to be the peak season and also Q3 will be set in peak season and Q2 and Q4 will be relatively less in terms of the revenue contribution for full year. Yes.

Okay. Thank you. That’s helpful.

Thanks. Thank you. And the next question comes from Lucy Yu with Bank of America.

Thank you, Stephen. Thank you, Sisi for taking my question. My question is on the GP margin. So, can you please elaborate the margin expansion in the fourth quarter up from the 39% in the third quarter? And you also mentioned that a GP margin going forward might be higher than the 53%. And what is the driver behind that? Thank you.

Yes. Lucy, we have already, we almost have just done the learning center closure and some layoffs in the last year, last three quarters. So, as I said, we will keep the same number of the learning centers, and we want to hire more like new people. And so that means, the fixed cost is there. And we’re seeing the revenue growth is, the revenue growth is get be recovered. And I think we will do, we will see more and more the operating leverage going forward. And in the Q4 because the oversea consulting business typically contribute more revenue in Q4. So, we do have the seasonality in Q4 for the overseas consulting business. So, let’s do the analysis year-over-year. So, we do believe, we do believe the in fiscal year 2023, the both in GP margin and profit margin, we will get better for the New Year. As I said, we will be profitable in fiscal year 2023, Lucy.

Thank you, Stephen.

Thank you. And the next question comes from Elsie Sheng with Morgan Stanley.

Thank you, management and congratulations. I want to ask about the new business that you see positive momentum in your new business. Could you – do you have any operation data that you could share about for example, the non-academic tutoring, the new children recruitment in summer and the retention, and also like the student acquisition any detailed that you could share. And also, how do you see the competition is the public schools because they also offer some non-academic courses or after school service? Thank you.

Yes, some business did data for the new business. Yes, even though, we started business a couple quarters ago, but as I said, the business side developed, very good. And these student retention rates for some like the reading and the presentation skill courses is almost closely to the traditional K-12 academic courses. So it sounds very good. Right. And yes, on the margin side, I remember, last earnings call, we guided the, our targets is to get breakeven, even for the new business, but this time, we feel better. So, I think we do believe, we can gather the profits for the new business. And, but it is too early to say the detail numbers where they, what is the margin for the new business, but we do believe we can get profitable in the new fiscal year.

Okay. Thank you. And then also on the with the public schools, do you have any view or on other advantage with them?

Yes, because we are – we do have a lot of datas and system and the teaching experience where even some datas in hand. So, we set up a new departments to sell the product to the public schools where even the kindergartens primary and secondary schools. And it’s just a new start, but we do believe we can do better. And because I do believe the public schools in kindergartens, they need our service because, if you follow us for so many years and we spend a lot of money and they invest a lot of the human resource ID workers and content writers to build our system and the, even the questionnaire base. So, I think the, we will find a new way to monetize this. Yes.

Okay. Thank you.

Thank you.

Thank you. And we are now approaching the end of the conference call. I’ll now turn the call over to New Oriental’s Executive President and CFO, Stephen Yang for his closing remarks.

Again, thank you for joining us today. If you have any further questions, please do not hesitate to contact me or any of our Investor Relation representatives. Thank you.

Thank you. This concludes today’s teleconference. Thank you for attending today’s presentation. You may now disconnect your lines.