New Oriental Education & Techno (NYSE:EDU)

Friday, September 24, 2010

Preliminary Financial and Student Enrollments Results – First Quarter of Fiscal Year 2011

(US$ in Millions, except per ADS data, student enrollments and percentages)

Q1 of FY2011 Q1 of FY2010 Year-on-Year
Percentage
Increase (1)
Net revenues 191.4 - 192.9 149.4 29%
Cost of revenues 65.7 - 66.6 47.7 39%
Selling and marketing expenses 23.1 - 23.6 15.5 51%
General and administrative expenses 36.3 - 37.2 25.3 45%
Operating income 65.1 - 66.6 60.9 8%
Net income attributable to New Oriental 62.2 - 63.5 57.1 10%
Net income per ADS attributable to New Oriental - basic (2) 1.64 - 1.68 1.52 9%
Net income per ADS attributable to New Oriental - diluted (2) 1.60 - 1.64 1.47 10%
Total student enrollments in language training and test preparation courses 685,000 - 715,000 647,500 8%
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(1) Calculated based on mid-point of the range for Q1 FY2011.
(2) Each ADS represents four common shares.

GeoTeam® Note: Analysts had been exptecting EPS of $1.90

 "Although we experienced disappointing student enrollment growth of approximately 8% to approximately 700,000 enrollments for the summer quarter, we managed to achieve net revenues of approximately $192 million or revenue growth of approximately 29%, within our guidance range of 26% to 32% stated in the last earnings release," said Michael Yu, New Oriental's Chairman and Chief Executive Officer. "There are several reasons for the enrollments shortfall. Firstly, this year's summer break for Chinese students was about a week shorter than usual due to a relatively long winter break earlier this year to accommodate a late Chinese New Year. Secondly, the Shanghai World Expo adversely affected student enrollments in our Shanghai school which experienced a 6% decrease in enrollments, compared to an 11% increase in the summer of 2009, from approximately 68,000 enrollments last summer to approximately 64,000 enrollments this summer. We believe that thousands of students from outside Shanghai elected not to study in Shanghai this past summer in order to avoid the crowds visiting the Shanghai Expo and the associated elevated lodging and meal expenses. We further believe that of the estimated 20 million to 30 million school-aged students who did visit the Shanghai Expo this summer, many of them did so by deciding to spend their time and money at the Expo instead of enrolling in summer classes. Thirdly, we experienced a greater than expected decrease of 11% to approximately 110,000 in our adult English program enrollments this summer, compared to approximately 124,000 in the year ago period."