New Oriental Education Posts Mixed Q4 Earnings, Guides Q1 Revenues Above Consensus

New Oriental Education & Technology Group Inc EDU reported Q4 FY23 sales growth of 64.2% year-on-year to $860.6 million, beating the consensus of $820.1 million.

Revenue benefitted from the strong post-COVID demand recovery, with overseas test preparation and overseas study consulting businesses generating revenue growth of 52% Y/Y and 6% Y/Y, respectively. 

Operating costs and expenses rose 29.0% Y/Y to $812.5 million.

The non-GAAP operating margin for the quarter was 9.1%, compared to (14.7)% in the same period of the prior fiscal year. Non-GAAP operating income for the quarter was $78.6 million.

The company held $4.5 billion in cash and cash equivalents, term deposits, and short-term investments as of May 31, 2023. 

Operating cash flow for the three months totaled $421.6 million.

The total number of schools and learning centers was 748 as of May 31, 2023, vs 744 prior year.

Adjusted earnings per ADS of $0.37 missed the analyst consensus of $0.51.

Repurchase: As of July 25, 2023, the company repurchased approximately 5.9 million ADSs for about $191.7 million from the open market.

In June, EDU's board of directors authorized its share repurchase program extension over the next twelve months through May 31, 2024. 

Outlook: New Oriental sees Q1 FY24 total net revenues of $983.2 million - $1,005.5 million (consensus $939.47 million), representing growth of 32%-35% Y/Y.

Price Action: EDU shares are trading lower by 3.15% at $48.30 premarket on the last check Wednesday.