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New Oriental Education & Technology (EDU)

Participants
Sisi Zhao Director, Investor Relations
Stephen Yang Chief Financial Officer
Tian Hou T.H. Capital
Felix Liu UBS
Jin Yoon Newstreet Research
Mark Li Citi
Alex Xie Credit Suisse
Sheng Zhong Morgan Stanley
Lucy Yufrom Bank of America Securities
Alex Liu China Renaissance
DS Kim JPMorgan
Tommy Wong China Merchant Securities
Liping Zhao CICC
Call transcript
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Operator

Good evening and thank you for standing by for New Oriental’s FY 2021 First Quarter Results Earnings Conference Call. At this time all participants are in a listen-only mode. After managements 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. turn Ms. over to for your like conference, today’s now the to meeting host I’d Zhao. Sisi

Sisi Zhao

Hello, Hey. welcome earnings and everyone, conference quarter first call. XXXX fiscal to New Oriental’s

and periods Our remarks, for on Stephen his to Yang, Newswire will available website were Chief are you as available answer Today, will from released as financial be well on the your prepared earlier hear results Services. Financial Company’s the After today questions. Stephen Officer.

will Reform please contain safe continue, Before XXXX. note under the discussion today statements that the forward-looking we harbor U.S. the made Private Act of provisions Securities Litigation of

statements uncertainties. and inherent Forward-looking involve risks

such, As with potential may of risks from different and uncertainties SEC. the in materially filings views our are today. public number results expressed A outlined be our

to undertake any required obligation Oriental as except not applicable statements, New under does forward-looking law. update any

a this As is recorded. conference reminder, being

call to webcast Oriental’s call will a over this Investor of Stephen. Stephen. website addition, now at Relations New In be I Mr. go Please investor.neworiental.org. conference available ahead, on the Yang. turn will

Stephen Yang

Hello, and call. thank the joining on us you, everyone, Thank you for Sisi.

the financial impact first of hurdles fiscal pleased with line this with Although that the for of kick of the the globe, the to we're continues business to set a in is year results off pandemic in encouraging across raise year, quarter our expectation.

quarter was education million, decrease previous Total revenue for our in as domestic which guided Net representing and lines, net business markets quarter. X.X% year-over-year, better million, showing it's $XXX.X first of year-over-year. X% than path recovery of we've revenues a signs to its some While from the services is representing the decrease normalization. were in the began programs a $XXX.X

tutoring Kids school recorded with a approximately of middle all-subjects a POP approximately of growth business U-Can positive Our X%. program X%, while our high shows and growth a after-school

X,XXX,XXX COVID-XX cases of of improved for XX% the XXXX X,XXX,XXX operation primarily summer a holiday, shortening shortened enrollment the is to total see the the the instrumental been service has in key runs year-over-year. successful OMO again a proved of in the summer of the enrollments offline quarter increase delighted to smoothly, vital quarter be have Our students system approximately more tutoring well campaign. by as reached resumed student by the measures. as made previous in with focus to retention once highlight enrollments to of holiday OMO our it weeks service migrate to first Encouraged our about attracts on strong by majority our in pandemic as The before the promotion of put back year, this and re-emergence industry in online which around lower-than-normal [ph], of learning autumn challenge XX.X% cities have in restriction in piloting provides quarters year-over-year, and it strategy, due quarter. to the increased effectiveness, million. a test Total of we XX and cities number highly million we number leading from of the offline in and executing its summer the academic easing holiday. is due the Beijing delayed promising operation has major centers, summer vast such help Despite student the courses in summer the fiscal are to A and promotion the this one two accompanied courses summer as class student or subjects this to new cities OMO in resumption quarter, ensure customers by the of existing delay our OMO online classes increase year-over-year enrollments many the preparation gradually flexibility including

pricing, ASP, XX% the by year-over-year which of in dollar total by blended decreased terms. per terms about revenue is student In cash enrollment divided program

by hours revenue U-Can blended blended prep hourly breakdown cash total ASP, Overseas classes the for VIP by that by the by teaching X%, which POP the U-Can decreased increased please by year-over-year. ASP, and note courses of X%, As X%, Kids hourly divided increased To approximately provide increased test hourly all decreased firstly, than X% X%, other ASPs increase ASP programs prep by programs. Comparing was because blended of was overseas hourly much year-over-year X% in normal a blended terms. decline dollar our of of decrease to quarter's mainly X% price program test with with higher bigger this

cities the some subjects. enrollments to more summer. price promotional bigger of promotional on thirdly, major Secondly, OMO courses piloting in courses a online register for And discounted the to students with of in portion encourage

would I quarter like talk to business to about Now detail. time some in individual performance line spend across our the

across pandemic As fades in of signs recovery emerge business our in the with student started gradually China, lines encouraging enrollments. have jump to significant

down, growth it in Our Breaking U-Can the school, business, recorded tutoring X% for school quarter. dollar terms of increase key terms. X% approximately growth tutoring the in for approximately enrollments quarter. high all-subjects Student year-over-year K-XX of after-school revenue XX% dollar driver, achieved middle the year-over-year business after-school revenue grew

the Kids revenue recorded the quarter. a dollar program for increase POP quarter. Enrollment by of in increased Our XX% X.X% about terms for

with dollar different targeting terms the The the courses our of abroad. world – students customer in for in customers that and for phase uncertain their recorded school launched very before overseas three overseas they of pandemic seven primary indicated due reaching decrease The note study It's our secondary better and was huge capabilities revenue quarter. revenue for a test well-proven of players almost later digital cities, experience promotion and of in VIP multiple loyalty. results. see brought we the school consulting including student that To XX% a challenge of able pleased quite year business enrollments continue XX% to remains increase financial enrollments are one to a retain sustain the summer this dollar last strategy of year dollar hesitant terms prep very this complete our parts the low study and with delivered challenges has consulting and last of that terms business, of daily consolidation business the start month We're the the cancellation school promotion personalized and enrollment. overseas in test outstanding the situation on operations. well in summer recorded year-over-year higher face for study The business recorded in even with prep the subjects from about total the year to mainly the a difficult summer quarter. and price decline overseas of and the of market. promotion finally, – travel, this operation, the year. by we new decrease Please to enrollments. exams and because year-over-year identify revenue are our test XX% X,XXX,XXX around class while cash while reported their And grade in under to recorded pandemic similar prep the tour XX% the received RMBXXX. about quarter, raised business promotion not overseas the the about XX restrictions – Our It offered tour year-over-year, related encouraging overseas We predictability recorded from that as of this about strategy promotion encouraging that we is at opportunity to our COVID-XX pandemic results market current promotion

whole following whole the have autumn semester, foresee negative about we into and the students year. promotions fiscal year fiscal we revenue the any boost of the throughout And the returned whole throughout Going the do the impact recovery XX% throughout - of XXXX. margin which will the promotion, operating not margin

higher to As continual rate the these in and drive the customer years. six next improvement growth grades, will students retention move three to revenue in loyalty the

by market and We we strategy in be profitability. rapid out capacity strong growth our continue this optimized and carried cities where expansion quarter potential for guided in see to

XX in We in rolled opened slight XX is increased the with for total with POP in program with education existing area expectation, a cities business in presence Kids XX the of the first training in expansion in see happy Guara, we Kids altogether, penetration both more latter pandemic our The for our increased at class up both XX% quarter seven in following recruiting POP meters existing the quarter. part the new service across of The dual-teacher year, Kito, in the resume for cities tapped of cities, or network achieve fully to to tend program we square the and this and is quarter this K-XX by can and markets and offline for as enrollment over have more made in modest academic of and to the of city of market ramp strong growth into. U-Can our cities. by U-Can we have quarter. quarter-over-quarter of end when year prepared that X% in Chinese This We're year. different us we start this capacity the a sure are line offline prepare model Wuhu by out new also our Thando, year-over-year, the increase schools end approximately our the expansion student new efforts classroom

continue new this model. scalability With the in the strategy saw the and rest also will this program year. We improved customer we this of results, retention of

ecosystem ecosystem whole education. quarter and the of the from the infrastructure, OMO year, we tools further that leading and COVID-XX broaden programs and method. area We're the in also have allocated for to to growing see well the have recovery semester, of content believe impacts has response the maintain At customer contents courses time, from higher – effectiveness online invested offline the than resources our has and to effectively speed retention same As COVID resources online system. of the outbreak the and the $XX in OMO education will in cater as online cushion of year last and in the of children we technology we the OMO investing placed our and autumn and audiences the skills managed offline new through will of opportunity our and year. we To education spring to to summer further importance outbreak a of system platforms usage market for after more the of rest our not our integrated line to from COVID business the successfully enhance operation online, which the has the pandemic, rate demand demonstrated demand we faster training our most business online the in semester throughout of online initiatives upgrade the huge integrated summer as we this boost continue caused the XXXX. see semester the education to service initiatives their million in integrated and of importance as in improve to OMO to online on in satisfaction enrollment only our to customer glad OMO highlighted We teaching fiscal but executing the part space, the and Apart advanced by teaching capture the teachers online resources up the school highlighted develop industry the courseware the trending we’re network, education demand. continue more of K-XX those OMO

unusual large market scale meaningful new marketing and sites this COVID-XX number in service of these time. also added and initiatives the measures the the move a large times we spending During has and believe than understandable our necessary on Koolearn customer did as opportunity, promotion situation. online This ourselves but more normal tutoring. found in three consequently traffic live marketing several to to we by representatives public K-XX new broadcasting raised support capture are To staff Koolearn front, market pandemic attracted offering classes pandemic

to to to Koolearn in continued demand from service to to upgrading are a ROI economics small cities. be coming class we the real technologies of education to provide a We offer we return new centers a high significant in systematic app tutors loyalty, K-XX operational the training size able Koolearn the increase as quarter the of teaching be at class the while through of cost result in Koolearn and other courses well enhancing average their evaluate size experience At more in users, in the identifying Koolearn in expect in more Our benefit low currently introducing teams, peak locations adding to will a investment the acquire level. cautious in word and the quickly and stand and advantage first the best in the keep student the the interactive attract time, enjoy positive teachers large quarters. larger online will normalized mover to on brand past training platforms, of significant the marketing a same dedicated marketing learning channels units the promotion customers continue which to time, user two as and programs. relatively also and features acquisition investment In improvement rate. believe of has amount retention pandemic, online courses. during as attract will quarters and as new qualified spending enhancements mouth are but in establish coming

the share-based to Oriental $X.XX. the Operating for was quarter $XX.X same and other per costs of $XXX.X centers. cost the million, the expenses a operation. the Selling representing $X.XX K-XX for margin, the of addition new cash increase quarter on Capital the million, initiatives the service million. and were Cost XX.X% especially XX% $X.XX excludes teachers' schools X.X% and the decrease for learning fiscal $XXX.X expenses more expenses expenses Basic higher decrease same diluted earnings our income prior to earnings $XXX.X the X.X% details expenses hours operating exclude year. from from through compensation in for which Now number Koolearn.com. year-over-year. expenses, marketing and General ADS year-over-year. increased XXXX. margin marketing XX.X% expenses million, Operating for decrease XX.X%, the year. period same expenditures increase per the which million, of and New compared decrease the which Non-GAAP exclude compensation to XX.X% opening year. XX XX.X% in quarter period rental to year-over-year operations New increased year-over-year Non-GAAP the income XX.X% XX.X% income primarily attributable prior $XXX.X year-over-year. for were learning Operating and $XXX.X for education fiscal customer attributable was and representing was key were a primarily the million, the for teaching to $XXX.X decrease share-based Oriental with million, and net $XXX.X New ADS a by first representing prior quarter, representing staff flow the by operating were quarter $XXX.X $XXX.X quarter representatives compensation pure basic attributable increased by million, attributable the quarter was for to financial increased operating quarter for Oriental at which increase platform, let which Non-GAAP and fiscal were of income fiscal of due first diluted and and to compared to year-over-year. tutoring online to was from new prior respectively. Oriental share-based to compensation in New approximately share-based the walk expenses, XX.X% XXXX $X.XX opportunity, fiscal the quarter X.X% XX.X%, Non-GAAP a to quarter. operating of $XXX.X allocated XX.X% million, were to in number primarily fiscal same were Non-GAAP period expenses, costs revenues a the of G&A a of quarter in to and compensation expenses, for centers was $XX.X for in year-over-year. a administrative year. due XX.X% Non-GAAP and representing the for million, by Net of $XXX.X of was year-over-year the Total costs a of facilities attributable decreased of of representing market were renovations representing quarter me million you million, existing Net [ph] million. aim to capturing related period

Turning to the balance sheet.

compared XXXX, May August as and million cash $XXX.X $X,XXX.X New million, Oriental cash of equivalents of as to As XX, XXXX. XX, of had

In Company deposits, million million short-term $XXX.X addition, in investment. the in term $X,XXX.X had

is students for at quarter was XXXX instructions deferred as $X,XXX.X the New which compared recognized XXXX. year million Oriental's proportionally cash fiscal first and of $X,XXX.X to of the of year are delivered, revenue balance, the fiscal revenue the from of of courses registered as increase first the collected million, an end as XX.X% quarter end at

the the next are recovery the near term financial the clear expected company and the are more the the trends performance of rest opportunity XXXX, from to despite the challenge into the Looking market pandemics about in continued ahead remain, run. the fiscal COVID-XX over long quarter and of we year

strategic reflects education maintain the teacher take firmly our to quality, increasing excessive often the to system, that that service, market focusing and and Our balanced focus industry improve aim term and cost of short aim acquire opportunities investment sustainable of with our competition and this to and achieve stable opposed consolidation, view of investments long of year on improving growth, customers. growth of as in product education salaries advantage at and approach a leading post-COVID enhancing essence the would we requires to strategy term unhealthy market higher investment our fully which quality ethos

areas. As we such, on focus the continue to will following key

business. and small some to players sustain We will not this during learning will post-COVID, us class area share without in we fiscal year. the business market strong First, new from further period. to continue their expansion take may We able prepare position the around K-XX financial our capability believe learning to as to existing business some online capacity be and to centers players other of including expanding our aim capacity, XX% classroom believe offline add we expand for XX% centers

We wave fact further expect capacity fresh will leading fade. undergo pandemic and upon offline the to of the player major strong with industry that market penetration. we consolidation strengthen and a financial position The us a are enable the facility market

efforts to system our into the tools test experience network OMO prep XX overseas customer will COVID continue post opportunity. to leverage online and content our our acquisition in market some of key for With OMO increase in engines investment pilot the belief the will business rest the higher introduce content This our lines language above recovery teaching place developing all and accelerate The operational and we OMO usage enabling model our and demand also of in one to K training OMO be technologies and the year our place, of distance business. our throughout Second, training also will especially infrastructure offerings, whole initiatives more our new online courseware and revamped capture enhanced. to to offline major long-term to we’ll digital test advanced high our for consolidation more growth our To We teaching target. teachers. business mentioned programs further in margin believe with and cities in will the the initiatives the that developing online be continue system best our and margin all whole will and us the to efficiency. more expand

we as learning initiatives, Koolearn.com K-XX as fewer and our business, are our cater to cities of format. integrated the new pure to continue all coursework of materials, in originated developed teachers our highlight and product All will have cities, hybrid recruiting catering sales customers. base, R&D, each in in as supported teaching broaden a implement to and existing and these offline platform. as well OMO are products where satellite tutoring we in to the reach centers by and students Furthermore, a our development, to including our the offline invest teachers, from This lot system that training, well have other enable technologies classes. will us as all well customer we features – content as continued after-school This the resources. centers I Here supplements to marketing

operating company the from pandemic line. resume focus top overall Third, the reducing as to priority on and We will expansion as COVID-XX believe costs this impact minimize expenditures subside remain the negative across year-over-year gradually. non-GAAP controlling the will of margin bottom on we the our the

remain to in like which we continue would strong. I have stress business confidence the believe we great our fundamentals that Here of will to

believe we are and impact run. Although our remain [indiscernible] returns pandemic, been bring the now long in fruitful in our the prospects strategy. facing increasing we different We optimistic brighter our of the from investment various and of us investments have business

the boost fiscal deemed huge certain old the centers New learning Oriental’s long the begin schools recovery As results the of value We're share tutoring restricting reflected our further our momentum, believe in have teacher deliver into reopening the and shareholders. next enable near the China, likely China’s massive with the year. expectations to at market leading We're best coming and September, system resources, looking up in and the that to will we measures for we quarters. term term and new our products our education school the ability and of quarter. in for in a to business. ease pandemic in and to will situation the brands, Its superior be our start to timely pick the which be offline We this for after market and

terms. tour expects prep is business and study program year-over-year is study XX% of revenue to line and to million, to XX% growth the to to - of be be down to for expected top K-XX representing decline overseas year-over-year the of in total business Overseas in million XX%. put XX% decline To expect business X% to the XX%. X% expected $XXX.X dollar $XXX.X to increase around in range lines, grow to test We all key range to provide consulting expected

overseas from and confident students resumption of have To semester, classes. and in after classroom in restriction on related will for travel. of test on the around normalized decline on the The the and majority the to your overseas negative this this for our including OMO questions. call I must education learning the impact business centers businesses, prep schools overseas toward suspension to the will continue overseas the this our of for utilization schools the cities expectations also this service autumn back exam, rest trend We our speed to pandemic these in will to the China, the has not in September, gradually expect to the we consulting we the migrated Thus only related Oriental to by enrollments take the tutoring our and that, two all controlled operational affect kick-off is online that industry boost overseas are the demand level successfully the this. resumed conclude, business mid year. globe in by cancellation the point, pleased situation and current change. and gradually entire contrast, we're reflect the a now due please to talking I Operator, in to on light subject cities quarters. may that the effective the caused that of learning At recovery more business operation three New or vast school our the for and domestically. offline preliminary after last centers. will New of We're mention which shed pandemic We're that view, open over see actions all and of fiscal coming positive up China's Oriental’s

Operator

T.H. Instructions] ahead. line Hou go comes Please Your question Capital. of first from the Tian [Operator you. Thank from

Tian Hou

quarter Congratulations and guidance in good those Stephen, on challenging Sisi. a kind evening, Good time. of

to related significant. is the margin, margin question was basis a on the the on gross pretty down So year-on-year

forward, trend? you. I how is So gross overseas the And margin the much to going by wonder cost Thank what's going is business?

Stephen Yang

by Hi, quarter. the down roughly Yeah, margin over-year Tian. gross year- this X% was

first of the teachers. X% in this the the down of that, think the was because still education we the by raise business. competence the quality revenue quarter And quarter think the is we reason core year-over-year. And teachers you salary I is know, in this

know, areas also, top I teacher the the players this our did during are the the salary. the expanded know, you the quarter from future. the that, year-over-year we the as potential last you end. you the think we And years, drive in And raised the was that we where the rentals, the know, quarter cities - COVID-XX capacity we still in during of feel in expansion acquired So other several the pandemic. teacher we we period, comfort And small in XX% growth at to

gross time, the you margin okay, drive in you think the the the it one guidance know, of XX%. I we it's already the down, the guidance, as business our in QX out process the by but and its be So have QX of just within and because, give said, increased is I will K-XX know, recovery, business

be believe do I second the the will So GP margin in recovery happened quarter.

Operator

you. Thank

Liu Felix UBS. Our comes from next question. question ask Please from your

Felix Liu

have resumed most cities. I a lot of Good evening, classes understand challenging in management and congratulations utilization. on the of on a good result, given offline the environment. is My question that

So And utilization like currently? you. give the could forward? Thank how on some going what color is you is trajectory us the

Stephen Yang

Hi, Yeah. Felix.

pandemic. know, You know, we’re utilization disclose the - it's the bit during for to in time the still we're hard little you us a of rate because, the still

mid during Beijing our think open. school in opened were the to XX we of in means learning school, example – lost some know, almost all the our learning in I September, days XX not that you centers For Beijing whole we September. centers summer, And

higher utilization I we rate will over higher the QX. and - utilization plan. disclose is than you expansion know, will hard really QX the us And the utilization revenue because the higher get growth think I the think the rates And or for but to believe pandemic now. in is after it's right disclose our we So typically

the learning to I on have we So means, that leverage think utilization. you do know, center

near So long this term is trend, the Felix.

Operator

Thank you.

from from Newstreet Yoon next go Jin comes Our Please ahead. Research. question

Jin Yoon

good evening. Hi,

test bottom wanted if your really the kind just kind about of its site about year's year prep, of obviously, last is from that's talk of just - Just improvement quarters the you to numbers, in, - quarter bottom guidance terms talk the is can in And last overseas last then suggests hit fake? a a other testing I - seeing something approximately or - if can think second have or in the Qingdao of the question kind head we’re press. people million [ph] massive and I is, we're seasonal case X on just the seeing I like - like a

Just and wanted in city is a there in that from case particular to revenue city? big that how see that wave Thanks. second is

Stephen Yang

XX%. by Hi, relative the of decline Jin. [ph] given prep was give test will for be this the XX we have the the guidance we down quarter The - of overseas test prep, already QX, XX%. overseas around - QX somewhere But

will to the because be to the turn in China turned anyway, our you [ph] impacted prep know, test were but better in GRE QX. know, overseas step. I like cities. the be reopened negatively QX be we TOEFL be believe quarter or you in different business think by the some things some extent, the have by the And this - test - test will COVID. the And - prep recovered will seen be So worst. I to overseas was by step negatively the business do And And

focused in about And my prep. last Qingdao since overseas week. happens know test Qingdao, is we this So, answer what

governments any And from [ph] of notice so far, we the the schools. don't get surrounding

government. the times, [ph] to all Qingdao the in have the the know, the centers during we'll learning COVID-XX we think of offline our to online. – the now. during anyway, are of But But time courses ability leave you means that still I So think open move the peak I requirements

too [ph] long pandemic. effects the of the yeah tested we for know, for You

revenue relative is very will Qingdao. the [ph] small, Qingdao contribution don't from impact is And our now so Anyway, Qingdao of Jin. think I it negatively

Operator

Thank you.

Our question go Citi. Mark Please Li from ahead. comes next from

Mark Li

question. Hi. I Thank you my taking for ask… to want

Stephen Yang

clearly. very you can't I sorry, I'm

Mark Li

Hi. Is now? better it

Stephen Yang

Hi, Mark. hear you. I can’t

Mark Li

it Hello. Is Hi. now? better

Stephen Yang

it the has Try again. some line problem. think I

Operator

come to closer the mouthpiece you can Mark, please?

Mark Li

Hi.

Operator

your okay? voice, Raise

Mark Li

Okay. guidance for FY guidance? you And Thank how share Could just ask timing to haven't full ‘XX we reach and latest OP with also want is us? the to our target I our changed the year if that? the you. margin

Stephen Yang

in of And, QX know, business a QX we QX the easier in more of actually know, coming better you give and autumn the the actually, business already by to is and will Yeah, given revenue QX COVID-XX mid this you expect please. our and the Beijing than recovery we be year, XX% because [ph] And seems quarter. guidance not comparison of easy the in - QX XX%. September. guidance the started recovered the of lot growth you school was fully Okay. the know, have reopened to the

So than top QX we our be growth and performance do line better will QX in believe QX.

Okay. And Yeah. margin guidance.

see and Mark, confident in think expansion QX don’t decline will I to I we And to QX. QX, the this our QX. to over, believe margin long next quarter, to able margin, be margin is QX down compared after be the we pandemic want narrow continued that it is near And margin in we're continues especially term guidance. change deliver the to quarter we'll the clear? the

Operator

you. Thank

from question. next question ask comes Credit Please Our Alex your from Xie Suisse.

Alex Xie

Steven. Hi,

questions. you taking thank my for So

question my time So net [ph] first good guidance. about is revenue the of quarter K-XX your

the And OMO about small So next the model second that? the business further unusual I quarter, very a bit province online Would please I the share think and than and time on for from from the August news think I school the you of model? Hangzhou our color what you. the that in very U-Can received rollout? feedback in more Thank class about read your you the And rollout its Kids report students. what’s pure was positive quarter? is and wide business POP launched that all the question little slower

Stephen Yang

Yeah.

Your repeat you first Alex, question question about – your can first again?

Alex Xie

sure. Sure,

business POP in difference what the and U-Can next that quarter August POP the what within Kids than bit was about noticed U-Can? XX% I Kids So about a between and growth, the the business quarter, slower

Stephen Yang

Okay.

know, the more growth a Pop know, business QX, little growth. the Kids than business bit you think higher the be business U-Can quarter, will of I Because, U-Can think, is mission the rates next I you critical.

So for school, high tend the middle to they school study COVID-XX. after more, especially students,

of course those to students but for yeah, growth new Hangzhou learning the the students the students growth you it new Pop the online roll is why OMO to majority school vast you cities, business we year choose will And, back the or out development OMO part great that's OMO COVID-XX of you than for almost But I very solid Actually, the know, the centers, that some of strengthened So we Kids model. Yeah, courses, business. the some the for COVID-XX, offline also the first the percentage during of after case. know, goes the and the it's a pure you did the this good started is ago, question. think X but online. school after know, all the started know, Hangzhou years because, our took of higher we U-Can OMO, U-Can business, our And Beijing the our the business COVID-XX model.

lot around new school you the XX the So satellite the know, a acquired from grade of of students customers Hangzhou Hangzhou.

in think it's and more cities start, and out provinces. I good very more So will roll and a we

more have retention Okay. think, XX%. thing model one OMO I rate a over in after of the school, is that know, how you the And, is you and summer

results think of good OMO the model. it very the I a So for sign was study

to do So we'll something? it add and you more more more do Sisi, in want cities.

Sisi Zhao

Yeah, this we piloted around is we're only and cities, this in model key remarks, summer OMO the And the XX several the just we - cities in recovered as Stephen from resumes cities, summer. the operation emphasized model testified already feedback in good. actually prepared offline - have in earlier already, then the have

be So that strategy forward. key continued going to Yeah. the

Alex Xie

Okay.

Operator

Thank you.

comes go Please question Our from Sheng next Zhong Stanley. Morgan ahead. from

Sheng Zhong

the my Hey, for good question. well. you evening. Thank question as is OMO taking My on

to model. how understand to want So about this OMO offer more

surroundings? the you the will or as is is learning who - Or have online pure more this OMO? pure had new how what’s mainly you. balance on focused because if to key local well? the for KPIs centers cities? into Or he And online open Thank will for so new so these So push OMO

Stephen Yang

Sheng Hi, Yeah. Zhong.

great I is it’s KPI, think - know, traditional question. We new the tradition the up one, off set school the by think [ph] business. the divided the number has And offline model. the I you parts, second two OMO has school a of KPI

the okay. have we we don't be I And the centers, city, in need courseware you for the different use teacher are the cities, learning KPI. learning you we the new enrollment. said the the reasonably local the you school - okay. have will different office know, you the give content where have areas will pre the new but understand even acquire center our made know, centers to are still deployed. different our don't two of head think the center, as its we and decision, OMO prepared model the know, that And easy do - support remarks, the know, will think or and but, OMO student where to learning So teacher centers But we the first all cities. training OMO, be to from have for those learning resources, we fully aware, the the I and And, local system for And to I areas the learning areas

So to money model we feed want crazy we the And know, OMO [ph] more more OMO contribute one on expenses will revenue add, cities as spend go the going you believe OMO don't to more out model. yeah, more And for forward. to thing will model you forward. marketing and and, going

acquisition cost So low. model OMO for I the think will the be students very

as offline same the - traditional be the will our business. it think I

Operator

you. Thank

Bank Please the from comes Yufrom question Securities. next Lucy question. of of your America line ask Our from

Lucy Yu

Sisi. Stephen, you, Thank

the So that ask choice. into on Stephen, you cities, like I to would mentioned we OMO the dual just penetrate when actually new teacher. first question will be

that we using into the as dual lower rollout, we can going to dual penetrate that roll understand still model, And about tier teacher out? as before city. I teacher were how far previously, are So OMO to

nowadays, the we that in and And have model seen dual probability cities? offer improving So new what's terms teacher in choice secondly, mentioned in you model business of and retention.

of Thank number so business dual more teacher on you the share – you. model? we could So retention probability and

Stephen Yang

Yeah.

will run be model choice by the new are We the going students know, teacher in program. focus tier cities. we and will cities. teachers the model Typically think office first model. on for especially forward – more it forward, more cities test and in dual - of to model, we the - but a opened past Kids the know, focused the the new head the But tier Pop cities, you more cities. the [ph] will will I But focused the it's business we the well the low for class doing tier in U-Can dual the teacher more the high low OMO you going larger and the on

Lucy. run and cities two the the in way low have to the business we tier model, So teacher OMO dual

Operator

you. Thank

from comes Liu Our China Please ahead. Renaissance. Alex from go next question

Alex Liu

Thanks, Stephen question. for my taking

teacher was the we second of year, specific in know, you just players did Why fast Thank wondering, growth regarding about you growth, compensations, we the teacher small summer? know, any of in online paying reasons of observations there behind a you. this should aggressive sort from strong that, especially think any market? compensation is how teacher enrollment much summer the question so or And rather the player Going world coming exiting forward, and specific how on well [ph] terms is some I are out? First is

Stephen Yang

think we the yeah, salary, quality the teacher of the business. education think I Alex, teachers core is the competence

with drive the still teacher I the X% did the raised think even the increase challenge the year, the - by COVID, salary teacher will thing. to period to same still don't So of phase during every salary we we the X%, margin. we

will and us On the high parents and the students high rate drive feedback utilization more the contrary, the the teacher or up. quality bring up revenue paying quality from customers, and

the margin think - help term think So we near I long I we more pay term. GP and performance will better the pay teachers

some I know, we couldn't face. because par But, the face students learning you customers, know, we you is couldn't most So, you were or summer Well, for you a of know, our and question new teachers. of I yeah. And, the is parents enrollment. see Yeah, the think [ph] - quarter, our the strategy to [ph] know, think, reopened. of semester COVID. about summer during centers the problems met second spring the this And

advices can for - and the environment, some study to face. competition disappear kids give small players the And as the we from So like market. parents to yeah, face know the we the

the and COVID. like And, of from second share know, the post numbers numbers half markets to revenue for market since So booming. I especially, July, players think opportunity the you take the its enrolment big because more and the great was us

that's enrolment growth the second better. do and XX%. around somewhere in will growth growth we business give the so in guidance why And K-XX be revenue of QX believe the will quarter even And and I QX be

Alex Liu

Thank you.

Operator

you. Thank

from comes from question. DS next Kim Our your JPMorgan. Please question ask

DS Kim

Hello, good sir. and of answered. been most on results already have Sisi, set of Hi, questions guidance. Actually, congrats my very good

OMO. offering referring is I is with [ph] there's gap of versus double So offline and piloting can classes, you weekends maybe more [ph] what's in online? know, new difference are OMO pure so, as check the ASB courses And offerings? the [ph] Can just similar to we I on follow say if online, the size PO check offline up OMO if for just really can this more curriculum courses term or this same when i.e., short I localized class you any weekdays each the our or for like

Stephen Yang

integrated that I of to there's means short by secondly, three Number course, online lower our or [indiscernible] the classes. and the And, class, ways. I large And You courses. one, one, a some XX% it's know, know, been think term three, the of you we online, you the the new large OMO of really hybrid model class last part is haven't OMO – majority is classes. were its And number know, its that classes. normalized and and or the [ph] this than and classes you classes, think price know, the the the XX% – very offline totally,

And typical way. of banking way kind famous the record acquire think courses. courses. of to ask for the think the teachers the purpose new we business student to I And is I enrollment to ask part the this [indiscernible] the is of those the

the still the and we in so having good, OMO So going Anyways, forward. far, have more is stage, do three so early ways. we'll

I the information more the [ph] year, So in rest earnings will show even last call, you. quarter or with the of

DS Kim

Thank you.

Operator

Thank you.

go from comes Securities. question next Our China Please Wong from Tommy Merchant ahead.

Tommy Wong

management Thank strong you, on the Hi. results. and Stephen, congrats

this if want on participate. the funds comment compete quick we you play And, left, can online all know, other lot need more a they're of time to these to a Kong. potentially, burning [ph] of whoo guys space, money. tell know, And Hong game, about of a you have secondary we in to guess you we know, Just we don't kind all you in I listing have question, lot

So if bring you know, more secondary issue the some money play just and game. the wondering,

what's Thank you. your that? wondering, thought Just on

Stephen Yang

long salary, said, We're but investment not increasing term, you and year, in also listing. this as product to strategic the right And okay, year, make position a the focus and I quality, improving and at secondary mid our know, only comments well, this teacher on not enhancing is our the approach aimed system.

I the think of essence these education. are the

in investment strategy. huge growth. maintain short market, the we there's opportunity on stable a get know the We want especially and And after helping So balanced COVID. and spend firmly term marketing money we to pretty

also mid you. strategy, our Thank long So but and now, this not the term. for only is for

Operator

you. Thank

Zhao Liping Please CICC. comes question next from go Our from ahead.

Liping Zhao

capacity for Stephen, K-XX see of this about market we chance we especially My on business? capacity can during impact expansion. Thank pandemic And an expect should How Hi, for your consolidation? your any the the my expansion the taking expansion plan, accelerated question you. questions. is

Stephen Yang

XX% the to ‘XX. year in about XX% around add fiscal to new aim capacity We

And last to know, year plan we XX%. so you open

opportunity we share. And great we it's made think for Finally, opened plan. market year, XX%. And us the a to this anyway, same I take more

And also know, acquire new model. to XX% will do the we we you capacity open So new to XX% student OMO have enrollments.

capacity expansion very OMO our in new customers the bring is you. strategy stabilized. of ‘XX. us expansion is to new two fiscal the the and whole Thank will so And year And yeah,

Operator

you. Thank

question UBS. go Please Liu ahead. Felix from Our comes from next

Felix Liu

Thank you.

a have behind? deferred our is revenue revenue deferred I question there want Just stronger noticed than up balance. on you. I revenue reason a that is lot growth our can to QX guidance, in the know follow the Thank

Stephen Yang

phase enrollment - the pandemic in the July booming. and so the as revenue of gross in Because second I second and half, said, and the in the since was China, summer, especially

end. the the in know, quarter the higher why the think, that's still recovery. - I so this got we're we deferred QX, you revenue the And balance And in process of

and we a line growth invest retention because for one do in years because share market we of business, do the QX the taking small K-XX also the will believe we even the rate in top we the - especially believe I are - market. and and from X we higher And going we and since QX of will even the you forward, enrollment see ago. products players think X, I believe - providing higher have the are the lot do student best

loaded I and QX. you. more recovery will step QX Thank back have So and the by that think

Operator

you. Thank

I now his Yang remarks. end the over to are will CFO, approaching Mr. We the turn of Stephen Oriental’s, conference closing call new for call. now the

Stephen Yang

thank Again, for you joining us today.

further of not Investor any or contact you. have our Relations any you do If please to hesitate representatives. Thank me questions,

Operator

our conclude conference Thank Thank for participating. you. that today. you Ladies and gentlemen, does

disconnect. You may all