--- title: "EDU (Trans): Mktg. spend optimization is another driver of future margin expansion" type: "Topics" locale: "en" url: "https://longbridge.com/en/topics/40104114.md" description: "Below is Dolphin Research's Trans of $New Oriental EDU & Tech(EDU.US) FY26 Q3 earnings call. For the earnings read, please see 'Study-Abroad Headwinds, Skills Training Profitable: EDU Steadies Again'.I. Core results recap 1) Shareholder returns: Under the previously announced shareholder return plan, the FY2026 ordinary dividend totals $0.12/share ($1.2/ADS), to be paid in two tranches. The first tranche has been distributed. The second, $0.06/share ($0.6/ADS), has a record date of May 15, 2026 (Beijing/Hong Kong time and New York time)..." datetime: "2026-04-22T14:31:59.000Z" locales: - [en](https://longbridge.com/en/topics/40104114.md) - [zh-CN](https://longbridge.com/zh-CN/topics/40104114.md) - [zh-HK](https://longbridge.com/zh-HK/topics/40104114.md) author: "[Dolphin Research](https://longbridge.com/en/news/dolphin.md)" --- # EDU (Trans): Mktg. spend optimization is another driver of future margin expansion **Dolphin Research compiled the FY26 Q3 earnings call Trans for** $New Oriental EDU & Tech(EDU.US)**. For our earnings take, see:** [**Study-Abroad Hit a Wall, Skills Training Drove Profit; EDU Stayed Solid**](https://longbridge.cn/topics/40101506?channel=SH000001&invite-code=355628&app_id=longbridge&utm_source=longbridge_app_share&locale=zh-CN&share_track_id=b951e57f-04f1-4d3f-b1b7-69d11efb7e70)**.** **I. Key takeaways** 1\. **Shareholder returns**: Under the previously announced plan, FY2026 total common dividend is $0.12/share ($1.2/ADS), paid in two tranches. The first has been paid; the second $0.06/share ($0.6/ADS) has a record date of May 15, 2026 (Beijing/HK and New York time), with payment on Jun 2 and Jun 5 to common and ADS holders, respectively. The company also launched a 12‑month ADS/common share repurchase program of up to $300mn; as of Apr 21, 2026, it had bought back ~3.3mn ADS for ~$184.3mn. 2\. **Next-quarter guide**: FY2026 Q4 total net revenue is guided to $1,429.6mn–$1,466.9mn, +15%–18% YoY. 3\. **Full-year guidance raised**: FY2026 (Jun 1, 2025–May 31, 2026) total net revenue is now $5,561.4mn–$5,598.7mn, +13%–14% YoY. 4\. **Core financials**: \- Total net revenue $1,417.3mn, +19.8% YoY; Non‑GAAP OP $202.9mn, +42.8% YoY; Non‑GAAP net profit attributable to shareholders $152.2mn, +34.3% YoY; OPM expanded ~230bps YoY. - Opex $1,237mn, +16.9% YoY; COGS $656.2mn (+23.4%); S&M $198.8mn (+9.1%); G&A $382.1mn (+10.8%); SBC $21.1mn (+30.9%). - Operating cash outflow $7.5mn; capex $68.8mn; OMO platform investment $30.6mn this quarter. - As of Feb 28, 2026: cash & equivalents $1,783.4mn, time deposits $1,491.7mn, ST investments $1,953.2mn; deferred revenue $1,885.9mn, +7.8% YoY. 5\. **Q4 one-offs**: Due to restructuring/integration of overseas test-prep and study-abroad consulting, Q4 will book ~$10mn–$15mn one-off charges (50–100bps OPM impact). Even including these, the group still expects YoY margin expansion in Q4. **II. Call details** **2.1 Management remarks** 1\. **Overall operations** a. Q3 delivered another beat after multiple quarters of outperformance, with notable margin expansion in core businesses and a meaningful profit contribution from East Buy. b. Execution combines efficiency gains with strategic investment, sustaining a balanced path of simultaneous revenue and profit growth. c. Capacity and talent will be expanded with discipline to avoid quality dilution, focusing on markets already showing solid profitability. 2\. **Overseas-related businesses** a. Overseas test-prep revenue +7% YoY; study-abroad consulting revenue -4% YoY. b. The two lines are being integrated to offer one-stop products and services, while cutting fixed costs to improve margins; related one-off restructuring charges will be taken in Q4. 3\. **Adult and college businesses** a. Revenue +15% YoY. 4\. **New education businesses (non-academic training + intelligent learning systems & devices)** a. Aggregate revenue +23% YoY. b. Non-academic training covers ~60 cities, with steady penetration gains in top-tier locations; top 10 cities contribute 60%+ of segment revenue. c. Intelligent learning systems/devices deliver adaptive learning based on pedagogy and data analytics, now in ~60 cities with 50%+ from the top 10; retention and scalability are healthy. 5\. **Integrated culture & tourism** a. Study tours/camps for K-12 and college students cover ~55 cities, with 50%+ revenue from the top 10. b. Culture-tourism offerings for middle-aged/elderly customers span ~30 provinces and select overseas destinations. c. Using a light-asset model, partnered with 40+ wellness providers in Hainan, Yunnan, and Guangxi to pilot senior wellness tourism. 6\. **OMO and AI deployment** a. Invested $30.6mn this quarter to upgrade and maintain the OMO platform to deliver differentiated, personalized learning. b. AI is permeating all biz lines and internal ops to enhance products and student experience, and to lift teacher and staff efficiency. Quantifiable outcomes from AI investments will be shared over the coming quarters. 7\. **East Buy** a. Advancing a multi-platform, multi-account strategy, launching vertical live rooms on Douyin such as East Buy Home, East Buy Food and Vegetables, and East Buy Nutrition and Health. b. Strengthened teams, supply chain, and customer ties via large-scale streamer recruitment events and supplier conferences. c. Next steps include expanding private-labels, enhancing R&D and quality control, accelerating the app-based membership ecosystem, and steadily scaling offline via vending machines and experience stores. 8\. **New strategy: 'EDU Home'** a. Strategic upgrade from serving individual customers to serving the entire household, addressing full lifecycle and category needs via a portfolio for children, parents, and seniors. b. Rolled out the 'EDU Home' private-domain platform to integrate education services, East Buy merchandise, and culture-tourism into a single app, enabling cross-category, household-level membership operations. c. Pilots in 12 cities (incl. Hangzhou, Suzhou, Xi'an, Wuhan) with 330k+ registered households; activation rate 10%–15%, well above major public e-commerce platforms. This validates the precision and high-touch value of an education-scene private domain. **2.2 Q&A** **Q: OPM expanded 2.3pp YoY this quarter. What drove the improvement? What is the outlook for Q4 and next fiscal year?** A: Despite some drag from integrating study-abroad related businesses, group OPM still expanded 230bps YoY. Key drivers were better capacity utilization, operating leverage, tighter cost control, and a larger profit contribution from East Buy. We rolled out cost control from Mar 2025 and have seen strong results over the past 11 months, a crucial factor in margin gains. For Q4, while one-off restructuring costs will be booked for overseas study-abroad, we remain positive on YoY margin expansion. Looking to next year, we will focus on profitability across all lines; we are confident in margin expansion in core education, with East Buy contributing more profit. **Q: What are the capacity expansion plans for Q4 and FY27?** A: We guided 10%–15% new capacity at the start of the year; net additions of new learning centers were 8% in the first three quarters, with full-year net expansion expected at ~10%–13%, ~14%. We only open in cities that delivered strong revenue and profit last year, prioritizing utilization and group margins, and channel more new students to existing centers. Utilization is tracking up at the group level. Next year we still plan to add ~10% or a bit more learning centers, and remember we also have online and OMO products, some of which do not rely on physical centers, so utilization should keep rising. **Q: Can you quantify the Q4 one-off restructuring charges? What is the FY27 target for S&M as a % of revenue?** A: Q4 one-off charges related to overseas restructuring will impact OPM by roughly 50–100bps, or about $10mn–$15mn. They are one-time. Even including them, the group expects YoY margin expansion in Q4. On marketing, we are enforcing cost control and focusing more on product quality; we will not need the same level of marketing spend as in the past three quarters. We expect S&M ratio to decline next fiscal year, another driver of margin improvement. **Q: K-12 decelerated last summer. How do you view growth this summer and the competitive landscape?** A: K-12 beat again in Q3; in fact, we have beaten expectations for 2–3 straight quarters. We remain optimistic on K-12 revenue in Q4. The key this year is a strategic pivot—allocating more resources to product quality to lift student retention and capacity utilization. Q4 K-12 revenue growth is expected at 15%–20%; K9 at 20%+, and high school at 15%–20%. Looking into next year and the year after, K-12 should sustain healthy growth. With better product quality and higher retention, we do not need heavy marketing to acquire students, so we are very positive on K-12. **Q: Overseas test-prep growth has accelerated for two quarters. Is it demand recovery or share gains? Outlook for Q4 and next year? (Elsie Sheng, CLSA)** A: Macros and geopolitics are pressuring the study-abroad ecosystem, but local teams have shown resilience. For Q4, we expect overseas-related businesses to be roughly flat to low single-digit growth YoY. Since last quarter we have been integrating overseas test-prep and study-abroad consulting to deliver a fuller one-stop offering and to save fixed costs via cost control. Therefore, margins in overseas will improve next year, and we believe the overall study-abroad business will do better. **Q: Will the Q4 one-off charges be confined to Q4, with no spillover into next year? Does the 10%–13%, ~14% capacity expansion refer to center count or classroom area? What does expansion imply for K9 capacity?** A: Most one-off costs will be booked in Q4 and are truly one-time. Even with these, we still expect YoY margin expansion in Q4, and it positions us better ahead—because fixed costs/expenses will decline next year, lifting study-abroad margins. Capacity refers to net increase in classroom area (square meters), with most additions going to K9/K-12. Also consider K-12 revenue growth—while not formal guidance, we estimate next-year top-line growth at ~15%–20%, near 20% or higher. Thus, even with 10%–15% new capacity, there is enough leverage to drive higher Avg. utilization. Local teams executed well on cost and discipline this year and should do even better next year. Supplement: Regarding workforce optimization, these headcount adjustments and related costs are one-off, not recurring restructuring expenses. **Q: New businesses show strong revenue, but growth in paid users of learning devices slowed. Why?** A: This mainly reflects disclosure methodology. Among so-called 'paid users', each user is paying more and taking more subjects, which is actually better than before. Also, there was no notable seasonal or timing mismatch this quarter. We suggest focusing on enrollments, deferred revenue, and GAAP revenue on a medium- to long-term view—that is also why we started giving full-year guidance this fiscal year. Overall trends are very healthy, and we expect solid revenue growth in Q4 and next year. **Q: AI can lift efficiency and margins, but how do you assess AI's opportunities and threats to core formats such as one-to-many/classroom teaching over the next 12–24 months?** A: We are confident about deploying AI. With capital, access to top talent, and the industry’s richest education experience, we are well positioned for AI at scale, and we are advancing on three fronts. First, embed AI across major biz lines. It is not only in online products and intelligent devices—those already come with rich AI features—but also in offline classrooms for young students and other age groups. We are deploying AI, capturing data, and combining it with pedagogy so data can create more value and unlock new product opportunities, improving existing products and our competitive edge. Second, to deliver 'higher overall efficiency, healthy growth + margin improvement' over the next 1–2 years, AI is being applied to the daily workflows of teachers, sales, TAs, and functions. We already see lower labor costs or hours in some areas and have initiated restructuring in certain businesses (e.g., overseas). We will keep tracking AI trends, embed more tech into workflows, and free up teachers' time to lift productivity. Third, we are incubating AI-native education products—minimizing human reliance by combining AI with teaching know-how and content, to offer students a near in-person experience. Dedicated teams are working on this, with innovations targeted for the coming months. We are investing consistently; AI will be a core part of our strategy. **Q: With the full-lifecycle strategy, AI efficiency gains, and overseas integration, what is the long-term margin outlook for education? (Timothy Zhao, Goldman Sachs)** A: As noted, we are positive on margin expansion next fiscal year—higher utilization, better operating leverage, and ongoing cost control reducing fixed costs will all help. We believe margins can improve each year over the next three years and aim to lift margins over the medium to long term. We will provide detailed guidance next quarter, but we are confident in long-term margin expansion. **Risk disclosure and disclaimer:**[**Dolphin Research Disclaimer and General Disclosure**](https://support.longbridge.global/topics/misc/dolphin-disclaimer) ### Related Stocks - [300376.CN](https://longbridge.com/en/quote/300376.CN.md) - [EAST.US](https://longbridge.com/en/quote/EAST.US.md) - [01797.HK](https://longbridge.com/en/quote/01797.HK.md) - [09901.HK](https://longbridge.com/en/quote/09901.HK.md) - [EDU.US](https://longbridge.com/en/quote/EDU.US.md)