New Oriental Education & Technology Group Stock

New Oriental Education & Technology Group Inc. provides educational services in the People’s Republic of China (the PRC) primarily under the New Oriental brand. The company offers a wide range of educational programs, services and products, consisting primarily of educational services and test preparation courses, overseas study consulting services and educational material and distribution, as well as provision of private label products and livestreaming e-commerce and other services.

Network

The company delivers its comprehensive educational programs, services and products to students across China through its nationwide physical network of schools, learning centers and bookstores, as well as its pure-play online learning platforms. As of May 31, 2023, the company had a physical network of 85 schools and 663 learning centers in 78 cities and approximately 26,600 teachers. The company delivers online courses through its online learning platforms, including Koolearn.com, its comprehensive online education and other services platform. Powered by its OMO system, the company has combined its offline network with online technologies and adopted different business models tailored to students in different locations to facilitate its operational efficiency. For example, for students in most cities, the company primarily delivers courses in offline classroom settings, supported with interactive online learning components. For students in lower-tier cities, the company broadcasts courses delivered by well-known teachers from top-tier cities through its OMO system, and the local assistant lecturers monitor and provide in-person guidance and interactions with students onsite.

The company distributes and sells books and other educational materials developed or licensed by it through its distribution channels, which consist of bookstores operated by the company and third-party distributors. As of May 31, 2023, the company had nine bookstores operated by it, and 241 third-party distributors, who provided the company with access to a nationwide network of online and offline bookstores. In addition, the company has an extensive network of students and alumni.

Almost all of its schools, learning centers and self-operated bookstores are operated under its New Oriental brand. The company’s schools in major cities consist of classrooms and administrative facilities with full student and administrative services, while its schools in satellite cities and its learning centers consist primarily of classroom facilities and limited course registration and management capabilities. The company selects new locations for its schools and learning centers based on various factors, including demographics, the number of schools or colleges in, and the economic condition of, the particular region. The company has opened bookstores in some of its established schools to sell educational materials relating to its courses and also sell self-help, know-how, inspirational and other books.

The company has ceased its K-9 Academic AST Services since the end of 2021 and closed certain schools and learning centers in connection with the cessation of its K-9 Academic AST Services.

Programs, Services and Products

The company provides a wide variety of educational programs, services and products. The company delivers education to its students in traditional classroom setting, in a combination of online and offline classroom setting, and through its pure-play online platforms. Other than kindergartens, its classroom-based courses are generally designed to be completed in 2 to 16 weeks. Course fees are determined based on factors, such as the length of the course, the size and the subject of the class, and the geographic location of the school. The company offers flexible class sizes for its courses, including larger classes that range from 6 to 50 students per class and small classes that range from one to five students per class. In addition, the company conducts the sale of private label products and livestreaming e-commerce business through East Buy. The company’s program, service and product offerings include six major areas: test preparation courses; non-academic tutoring; intelligent learning system and devices; private label products and livestreaming e-commerce business, and online education through East Buy; overseas study consulting services; and educational materials and distribution. In compliance with the Alleviating Burden Opinion and applicable rules, regulations and measures, the company has ceased offering K-9 Academic AST Services in China since the end of 2021. The company deconsolidateds Beijing Changping New Oriental Bilingual School and Beijing New Oriental Yangzhou Foreign Language School, two private schools that provide compulsory education, from its company in September 2021 in compliance with Amended Implementation Rules for the Private Education Law.

Test Preparation Courses

The company has evolved to provide a wide range of test preparation courses to students taking language and entrance exams used by educational institutions in the United States, the Commonwealth countries, and the PRC. The company’s overseas test preparation courses primarily include IELTS, TOEFL, SAT, AP, A LEVEL, GCSE, TOEFL Junior, SSAT, ACT, GRE, GMAT and LSAT preparation courses and its PRC test preparation courses primarily include CET 4, CET 6, Postgraduate Entrance Exam and exams for students with junior college diplomas to obtain bachelor’s degrees.

The company’s test preparation courses focus on quality instruction and test-taking techniques designed to help students achieve high scores on the admissions and assessment tests. The company recognizes that students begin test preparation at different levels, have different strengths and weaknesses, and learn at different rates. The company offers a range of basic and advanced test preparation courses tailored to students at different levels.

In its fiscal year ended May 31, 2023, the company had approximately 495,000 student enrollments in its test preparation courses, of which approximately 284,000 were in overseas test preparation courses, and 211,000 were in PRC test preparation courses. The company’s test preparation courses generally range from 6 to 40 students per class. The company also have students from its overseas test preparation courses that take its small class, in particular 1-on-1, tutoring courses. The company’s students typically enroll in a 40 to 300 hour program with classes meeting one to six times per week for approximately 1 to 3 hours per class. The company also offers intensive and condensed versions of its courses, which are compacted into shorter time periods.

Non-Academic Tutoring

The company started to expand its non-academic tutoring courses in 2021, which focuses on cultivating students’ innovative and comprehensive abilities. The company’s courses have been well-received by students since launch and the company has rolled out non-academic tutoring courses in around 60 cities in China. In its fiscal year ended May 31, 2023, the company had approximately 1,621,000 student enrollments in its non-academic tutoring courses.

Intelligent Learning Systems and Devices

The company launched its intelligent learning systems and devices in 2021, which are designed to provide a tailored digital learning experience for students. Leveraging its advanced data and technology capabilities with its abundant teaching experience, together with its teachers that monitor and assess the learning curve of each student from its backend system, the company provides customized and personalized learning materials and exercises for students. This innovative educational service not only improves students’ learning efficiency, but also cultivates students’ proactive learning habits. The company’s intelligent learning systems and devices have been tested and adopted in nearly 60 cities in China, and the company had 183,000 active paid users in the fiscal year ended May 31, 2023.

Private Label Products and Livestreaming E-commerce Business, and Online Education through East Buy

Private Label Products and Livestreaming E-commerce Business

Leveraging on the technology developed for the company’s original live-broadcast classrooms and with its existing team of talents, East Buy established an e-commerce platform under the brand name East Buy for the sale of agricultural and other products in fiscal year 2022. Since December 2021, East Buy began to pilot livestreaming events on certain short-video platforms, such as Douyin. The company provides a wide selection of high quality agricultural and other products through its supply chain management system and diversified cooperation with different third parties. The company also provides a number of private label products under East Buy brand, including fresh foods, juice, coffee, tea, bedding, among others. The company has a team of livestreaming hosts and have developed an array of livestreaming channels, such as East Buy, East Buy Book, East Buy Private Label Products, and East Buy Beautiful Life, focusing on different product categories.

Online Education

The company commenced its online education services in 2005 through the Koolearn.com platform as one of the earliest online education providers in China. The company has since evolved into a comprehensive online education services provider under East Buy Holding Limited, its majority-owned subsidiary, and offer comprehensive online education courses to students through Koolearn.com, including college educational services. The company’s college educational services primarily include college test preparation, overseas test preparation, and English language learning, targeted to college students and working professionals preparing for standardized tests or seeking to improve their English language proficiency. The company offers its courses and programs in multiple formats, including live and pre-recorded courses in different class sizes. In addition, the company uses its online education modules to provide educational content packages to schools and institutional customers, such as universities, public libraries, telecom operators and online video streaming providers.

Overseas Study Consulting Services

The company’s consultants help students through the application and admission process for overseas educational institutions and provide useful college, graduate and career counseling advice to help students make informed decisions. The company also counsel and assist students with the immigration process for overseas studies, such as obtaining visas and arranging housing.

Educational Materials and Distribution

The company develops and edits educational materials for language training and test preparation and distribute these materials through various distribution channels, consisting of its bookstores, as well as third-party distributors. In its fiscal year ended May 31, 2023, the company developed and edited approximately 516 titles and distributed approximately 17.0 million books authored or licensed by the company in China. Most of the materials distributed by the company is education-related and include the materials that it uses in its courses and titles that the company markets for use in different education areas.

The company’s extensive distribution channels have attracted international education content providers to cooperate with it in distributing localized versions of their materials in China. For example, the company has worked with Cambridge University Press, Oxford University Press, Educational Testing Service, Cengage Learning and other education content providers in distributing their education materials in China. With access to such high-quality education content, the company further develop localized products that best serve the needs for millions of students and families in the China market.

Teachers

The company has a team of passionate and high quality teachers that are essential to its success. The company has established well-developed methods for hiring, training and retaining qualified teachers, which include a rigorous recruiting process, periodic training in teaching methods and skills, school culture and philosophy, as well as a competitive base salary coupled with performance-based bonuses. The company’s teachers consist primarily of full-time teachers, and to a lesser extent, contract teachers. The number of contract teachers it employs may be subject to seasonal fluctuations as the company tend to have more student enrollments in its test preparation courses during summer school holidays.

Recruitment

Leveraging its extensive experience in the private education sector, the company has been able to recruit and retain high quality teachers across its course offerings. The company has a strong multi-step recruitment process for prospective candidates, including application; screening; qualification tests; in-person interviews; and demonstration lessons. During the recruitment process, the company focuses on the educational background, teaching experience, communication skills and performance in demonstration lessons of the prospective candidates. The company targets prospective candidates who are passionate about education and who can effectively connect with and motivate its students.

Training and supervision

The company has established systematic teacher training programs to standardize and streamline the professional training of its teachers. The company’s training focuses on standardizing and enhancing teaching methods, teaching new skills, and fostering a school culture based on innovation, inspiration and community. The systematic training programs also ensure that teachers can adapt to its innovative and inspirational instruction approach and adhere to the New Oriental culture throughout their teaching. The company offers training through its online teacher training platform and onsite training courses both in China and overseas. Throughout its operating history, the company has continually fine-tuned its teacher-training programs to strike a balance between standardized teaching to promote efficiency and creativity to foster innovation and inspiration.

Utilizing its data insights from its OMO system, the company ensures consistency in teaching quality across its courses. The company uses its Quality Assurance Development (QAD) system to monitor and evaluate the performance of teachers. The company identifies the weaknesses of its teachers and provide tailored recommendations to them to address particular areas for improvement.

Career advancement and compensation

The company is committed to the career advancement of its teachers. The company’s different business models give its teachers exposure to a broad range of educational scenarios to enhance their teaching experience for its teachers. The company motivates its teachers by providing a dual-track career development framework, under which its top quality teachers may be promoted as teacher trainers or considered for management positions in its company. The company supports its teachers in building their personal brand image and expanding their personal influence through various measures, including helping teachers publish their teaching content and providing enhanced support to teachers on their teaching platforms.

The company’s compensation package consist of a fixed base salary and performance-based bonus fees. The company offers to its teachers is among the highest in the private education industry in China.

Proprietary Teaching Content and Methodologies

The company emphasizes the quality of its teaching content which is crucial to the effectiveness of its teaching methodologies. The company had approximately 1,400 personnel involved in its content development as of May 31, 2023. The company’s proprietary seven-step teaching method ensures that the company standardize and maintain consistent teaching quality across its educational services. The company develops its proprietary educational materials for its language training and test preparation courses, and leverage its big data algorithms and massive student data base to tailor course materials based on student learning behavior and performance. The company continuously update its educational materials and expand its course offerings to ensure the company stay abreast of the latest education trends.

Marketing and Student Acquisition

The company has a variety of marketing and student acquisition channels to attract new and retain existing students. The company primarily attract prospective students through its brand name, the quality of its education services and products and its long operating history. In addition, its OMO system amplifies student acquisition effectiveness while reducing acquisition costs, enabling the company to multiply student acquisition efforts. The company integrates its offline presence with online traffic acquisition channels, media and efforts, such as providing online demonstration courses and social media promotions, to attract prospective students.

The company employs the following marketing and student acquisition channels to attract new and retain existing students:

Referrals: The company has successfully established New Oriental as one of the most trusted brands with well-established brand recognition in the private education industry. The company has focused on delivering high quality and differentiated educational services and products to across two generations of students in China. The company’s strong brand has allowed the company to generate significant organic growth in student enrollments through word-of-mouth referrals. The company expects its student enrollments to continue to grow from referrals through its extensive network of students and alumni.

Cross-Selling: As the company has presence in different markets, the company uses its programs in one market as an opportunity to advertise its programs in other markets. With a variety of programs aimed at different age groups, its goal is to encompass students’ lifelong learning journeys and cross-sell its course offerings to maximize students’ lifetime value. Outside of its network, the company has established cross-promotional relationships with a number of companies to promote its programs, services and products and awareness of its brand.

Speeches and Seminars: The company’s management, most of whom are experienced teachers and were among its earliest teachers, and its teachers give speeches at colleges, universities, high schools and middle schools and to student groups, parent groups and educational organizations. They also participate in educational seminars and workshops. Their speeches include direct program promotion speeches during which they directly explain the merits and advantages of its programs or general English learning methods, as well as inspirational speeches designed to motivate students to reach their full potential and strive for success.

Demo Courses and Advertisements: The company provides online demo courses and social media promotions to attract target students, which has enabled the company to maintain growth in student acquisition while reducing acquisition costs. The company also advertises through its own websites.

Intellectual Property

As of May 31, 2023, the company had 28 main works of art copyrights and 45 main software copyrights in China relating to various aspects of its operations, and 16 main trademark registrations in China. The company’s main websites are located at www.xdf.cn, www.neworiental.org, www.eastbuy.com and www.koolearn.com. In addition, the company has registered other domain names, including dogwood.com.cn, blingabc.com, ileci.com, 51pigai.com and steamxdf.com.

Seasonality

The company has experienced, and expects to continue to experience, seasonal fluctuations in its operations, primarily due to seasonal changes in student enrollments in educational business and some other services. The company’s test preparation courses tend to have the highest revenue in its first fiscal quarter, which runs from June 1 to August 31 of each year (year ended May 31, 2023), primarily because a significant number of students enroll in its courses during the summer vacation to prepare for admissions and assessment tests. The company expects quarterly fluctuations in its revenues and results of operations to continue.

Regulation

The company operates its business in China under a legal regime consisting of the State Council, which is the highest authority of the executive branch of the PRC central government, and several ministries and agencies under its authority, including the Ministry of Education, or the MOE, the National Press and Publication Administration, or NPPA, the Ministry of Industry and Information Technology, or the MIIT, the State Administration of Market Regulation (the SAMR), the Ministry of Civil Affairs and their respective authorized local counterparts.

History

New Oriental Education & Technology Group Inc. was founded in 1993.