Good evening, and thank you for standing by for New Oriental's FY2027 First Quarter Results Earnings Conference Call. At this time, all participants are in listen-only mode. After management's prepared remarks, there will be a question and answer session. Today's conference is being recorded. If you have any objections, you may disconnect at this time. And I'd like to turn the meeting over to your host for today's conference, Ms. Sisi Zhao. Thank you.

Hello everyone and welcome to New Oriental's first fiscal quarter 2027 earnings conference call. Our financial results for the period were released earlier today and are available on the company's website as well as on NewsWare services. Today, Stephen Yang, Executive President and Chief Financial Officer and I will share New Oriental's latest earnings results and business updates in detail with you. After that, Stephen and I will be available to answer your questions. Before we continue, please note that the discussion today will contain forward-looking statements made under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the view expressed today. A number of potential risks and uncertainties are outlined in our public filings with the SEC. New Oriental does not undertake any obligation to update any forward-looking statements, except as required under applicable law. As a reminder, this conference is being recorded. In addition, a webcast of the conference call will be available on New Oriental's Investor Relations website at investor.neworiental.org. I will now first turn the call over to Mr. Yang. Stephen, please go ahead.

Thank you, Sisi. Hello, everyone, and thank you for joining us on the call. We're pleased to start the new fiscal year with an encouraging first quarter, with revenue growth exceeding our guidance upper range. In addition to the resilience of our core business, Easter by and our new venture have also contributed outstanding results to the group this quarter. I'm glad to report our efforts across all of our business initiatives have resulted in healthy growth amid economic headwinds and external challenges. In this quarter, total net revenue grew 23.1% year-over-year to $1,874.5 million, and non-GAAP operating income rose 21.2% to $406.8 million. Our core education business and Easterby recorded year-over-year expansion in their respective operating margins, primarily attributable to the enhanced operational efficiency and improved utilization of our learning centers. I do want to highlight here that East Dubai experienced a rapid growth in the past quarter, which means it now accounts for a larger share of the group's revenue and therefore carries greater weight in our consolidated operating margin. Please rest assured that our overall margin remains very stable. Yet, we would encourage you to also look at each business on a standard loan basis. As this gives a clearer and more accurate picture of our underlying performance, as said, all of our business lines continue to maintain healthy margins. At the group level, the consolidated margin reflects both the margin of each business and its relative share of revenue. So, changes in the business mix can influence the overall figure out without indicating any deterioration in the underlying businesses. Now, I'm pleased to share the strong momentum demonstrated by our core business and new initiatives this quarter in detail. Breaking it down. Overseas test prep business recorded the revenue increase of about 8% year-over-year for this quarter. Overseas study consulting business recorded the revenue increase of about 7% year-over-year for this quarter. Our adults and university students business recorded the revenue increase of 22% year-over-year for the first quarter of 2017. Our non-academic tutoring business has been rolled out to around 60 existing cities. Market penetration has been steady growth, particularly across high-tier cities. The top 10 cities contribute over around 60% of the business. Our intelligent learning system and device business has been launched in around 60 cities. We're encouraged by continued enhancements in Customer Retention and Scalability, where the top 10 cities contribute around 50% of this business. In summary of the above, our new educational business initiatives delivered a 25% year-over-year revenue increase in the first quarter of 2017. Turning to our integrated tourism business, which spans study tours and research camps for K-12 and university students, as well as cultural tours for middle-aged and senior travelers. We have been leveraging our cultural travel, China study tour, global study tour, and CAP education products to deliver value through knowledge enrichment, personal growth, and experience for culture immersion. Our student programs now operate in about 55 cities across China. with the top 10 cities generating over 50% of the revenue. Our premium adults offerings cover around 30 provinces in China, along with selected international destinations. We're also expanding into senior health and wellness tourism through an asset light model, partnering with more than 65 wellness facilities in key destinations, such as Hainan, Yunnan, Guangxi, and Shandong. As for our OMO teaching platform, investments in revamping and upgrading system continue to be in the books. In this quarter, we invested $28.2 million to improve and maintain our OMO platform, which enable us to provide and interrupt high quality instructions to students and cater to their individual learning needs. Building on a launch of our proprietary AI-powered personalized learning platform, ongoing investments and the refinements of AI-enabled products remain our organizational priorities to which we expect progress contributions in the coming quarters. The platform has completed in the first phase of deployment, generating meaningful sales within just 25 days of launch. purpose-built as a specialized vertical learning system rather than a general-purpose large language model. It draws to New Rental's deep educational heritage and enhances the competitiveness of our product in many aspects. This encouraging early result affirms strong market traction and a product-market fit. And we will continue to advance AI-driven solutions to extend our market reach and improved operational efficiency. Now turning to the East Bay, we are hugely encouraged by its rapid growth in the first quarter of fiscal year 2027, which underscores the success of our ongoing pursuit of the evolution and optimization. We accelerated private label development and our very own three highest centers High safety, high quality taste, and high value for money. Students roll material screening, factory audits, and finish product testing before every product launch reflects our commitment to stringent quality control. Today, our private label lineup has grown beyond 1,000 SBUs across food, nutrition, and health, Apparel, Skincare, and other categories. Notably, several flagship products have managed to deliver robust sales. For its live streaming platform, the addition of professional live streamers and operational specialists has strengthened Easterby's content capabilities. The new vertical accounts launched on Douyin have now expanded our channel matrix to over 30 channels across a wide range of product categories. We also draw on user feedback to continually improve the customer experience in our live streaming platforms. Offline Sales by Network is the bi-library new Oriental's nationwide learning center to explore new retail opportunities. We currently have four offline experience stores and our advancing campus store roll out on the group level. We have also developed distance retail capabilities with the front warehouses in place and a one-hour delivery trial underway in Beijing and Shanghai. For the rest of the year, Easterby will continue its multi-channel strategy to cast the weather net, accelerate private label development in food and daily necessities, optimize membership operations on its preparatory app, and improve supply chain efficiency. Together, we're convinced that these initiatives will support sustainable growth and deliver a lasting impact. Now, I would like to share updates on a new initiative we have been piloting since fiscal year 26 Q3, and that is New Oriental Home. This family-centric app assembles our education service, Easter by Offerings, and cultural tourism products into a single platform, serving the entire household at every stage of life. New Oriental Homes scale up a full-spectrum resource hub that caters not only to learning but extensive individual needs. The point-based incentive program, which now reaches a large number of students, has become woven into the daily teaching and customer service while linking positive learning habits to product and reward redemption. were excited to share that our registered users rose substantially, with over half of them proactively redeeming points across our 10 learning and family-oriented offerings. Collectively, these results validate our educational offerings can extend naturally into a one-stop shop for the broader family, hosting customers, and all that we can offer in a synergistic ecosystem. New Oriental Home also lowers customer acquisition cost and improves cross-selling efficiency. This program has been launched across 69 cities, including Chongqing, Hangzhou, Guangzhou, and Xi'an, with over 1,678,000 religious families by the end of this quarter. New Oriental Home has achieved cumulative activity participant rate of over 90% scoring campaign activation rates for the quarter reached 33% and significantly outperforming many public domain e-commerce platforms. We're ecstatic with the opportunity to further enhance customer lifetime value and are eager to build on this encouraging momentum in the quarters ahead. Now I will turn the call over to Sisi to share with you about the key financials. Sisi, please go ahead.

Thank you, Stephen. Let me now walk you through the key financial highlights for the quarter. Operating costs and expenses for the quarter were $1,499.8 million, representing a 23.7% increase year-over-year. The increase was primarily due to the cost and expense related to the substantial growth in is-to-buy private label products and live streaming e-commerce business. Cost of revenue increased by 28.1% year-over-year to $817 million. Selling and marketing expenses increased by 30.7% year-over-year to $262.2 million. G&A expenses for the quarter increased by 12.6% year-over-year to $420.7 million. Total stock-based compensation expenses, which were allocated to related operating costs and expenses, increased by 31.3% to $30.6 million in the first quarter of 2027. Operating income was $374.7 million, representing a 20.5% increase year-over-year. Non-GAAP income from operations for the quarter, excluding share-based compensation expenses and amortization of intangible assets resulting from business acquisitions, were $406.8 million, representing a 21.2% increase year-over-year. Net income attributable to New Oriental for the quarter was $273.2 million, representing a 13.5% increase year-over-year. Basic and diluted net income per ADS attributable to New Oriental were $1.76 and $1.74, respectively. Non-GAAP net income attributable to New Oriental for the quarter was $309 million, representing a 16.5% increase year-over-year. Non-GAAP basic and diluted net income per ADS attributable to New Oriental were $1.94 and $1.92, respectively. Net cash flow generated from operation for the first fiscal quarter of 2027 was approximately $195.4 million, and capital expenditure for the quarter was $65.8 million. Turning to the balance sheet, as of August 31, 2026, New Oriental had cash and cash equivalents of $1,754.6 million. In addition, the company had $1,441.3 million in term deposits. and $2,422.7 million in short-term investments. New Oriental's deferred revenue, which represents cash collected upfront from customers and related revenue that will be recognized as the services or goods are delivered at the end of the first fiscal quarter, was $2,121.1 million, an increase of 11.2% as compared to $1,906.7 million year-over-year. Now, I'll hand over to Stephen to go through our outlook and guidance.

Thank you, Sisi. We have entered a new phase with healthy performance this quarter, which injects confidence in our operational resilience and the growth trajectory. Looking ahead, we're particularly confident in sustaining in sustaining a momentum across our core business and new endeavors with expectations that our diverse initiatives to deepen customer engagement will drive margin extension, greater operational efficiency, and strong shareholder yields. Strategic expansion of capacity and nurturing the talent remain our focus. We plan to deepen our presence in markets with solid top and bottom line performance. Expansion decisions will be carefully calibrated throughout the year, guided by the operational readiness, customer demands, and financial results. Continuous pursuit of new initiatives will not hinder our commitment in delivering promising service quality, sustainable profitability, and cost discipline. In addition to confidence in the healthy growth of our core education business, we will always support East Dubai and other new initiatives with customer-centric mindset and without compromising the quality standard. Our hope is for these efforts to collectively reinforce the new rental standing as the trusted name among Chinese households. We will also reveal are cost reduction and enhancement measures from time to time to improve our operational efficiency and margin profile. Considering the positive momentum and disciplined measures across our business lines, we're pleased to reiterate the previous provided full-year guidance of total net revenue in the fiscal year 2027 to be in the range of $6,400 to $6,680.3 million, representing a year-over-year increase in the range of 14% to 18%. These expectations reflect our current outlook and based on the recent regulatory developments and prevailing market conditions, both of which remain subject to change. To update everyone on the shareholder return for the fiscal year 2026, The company announced a share repurchase program in October 2025, in which companies authorized to repurchase up to $300 million of its ADS or common shares over the subsequent 12 months. As of October 2011 to 2026, the company has fully utilized the $300 million repurchase amounts of authorized under its 226-share repurchase program for an aggregate of approximately 56.2 million common shares, including common shares represented by ADS from the open market. Before closing my remarks, I'd like to provide an update on our shareholder return plan for this fiscal year. As part of the Implementation of the three-year shareholder return plan adopted in July 2025 for the fiscal year 2027. The board of directors of the company previously approved an ordinary cash dividend and a new share repurchase program in July 2026. The company announced today that is part of directors has also approved an ordinary cash dividend as the fiscal year 2027 of $0.2 per common share or $2.0 per ADS, which will be distributed in the US dollar in two installments. For the first installments, $0.1 per common share or $1.0 per ADS will be paid holders to the common shares of an ADS or the record as close of the business on November 18th, 2028, Beijing, Hong Kong time and New York time respectively. Then for the second installment, $0.1 per common share or $1.0 per ADS will be paid to holders of common shares and ADS of a record day that will before they're determined by the board of directors of the company in due course. The payment date for the first installment is expected to be on or around December 1st, 2026 and December 4th, 2026 for holders of common shares and holders of the ADS respectively. For the second installment, payment date is expected to be around six months after the payment date of the first installment. Further details regarding the record date and payment date for the second installment will be announced by the company in due course. The aggregate amount of the cash dividend to be paid in two installments is expected to be approximately $300 million. Pursuant to the 2027 share repurchase program, the company may repurchase up to $200 million of its ADS or common shares over the subsequent 12 months following the Board approval. As of October 27, 2026, the company has yet to repurchase any common shares under the 2027 share repurchase program. The company's proposed repurchase may be made from time to time in the open market, and the prevailing market price in privately negotiated transactions in block trades and or through other legally permissible means, depending on the market conditions and in accordance with applicable rules and regulations. The board of directors of the company will review and share repurchase program periodically and the main authorized adjustment is terms and size. The company expects to fund the repurchase out of its existing cash balance. To conclude, long-term value creation remains the fuel of the engine and we're keen to share with our shareholders' yields of the sustainable growth we're painting for the future. We continue to collaborate closely with the government authorities across China ensuring full compliance with the relevant policies and regulations while adapting our operations responsibly and to meet the evolving requirements. This is the end of the fiscal year 2027 Q1 summary. At this point, I would like to open the floor for questions. Operator, please open the call for this.

Thank you. The question and answer session of this conference call will start in a moment. In order to be fair to our callers who wish to ask questions, we will take one question at a time from each caller. If you have more than one question, please request to join the question queue again after your first question has been addressed. To ask a question now, please press star 11 on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star 11 again. We will now proceed to take our first question. And our first question comes from the line of Jenny Yuan from UBS. Please ask your question, Jenny. Your line is open.

Hi, Steven, and hi, Sisi. Thanks for taking my question. And my question is on margins. So in this quarter, the overall OP margin was broadly stable year-over-year, while both the core education and ESPI delivered year-over-year margin expansion. And you explained that the overall margin performance was more due to the changes in revenue mix. But if this trend continues, how should we think about the outlook for overall margin expansion? And what are the key drivers of margin improvement going forward? Thank you.

Thank you, Janie. Yeah, let us start with the margin analysis of this quarter. Yeah, I think you're right. Both our core education business and the East Dubai reported year-over-year margin expansion due to the enhanced operational efficiency and the improved utilization of the learning centers. And in Q1, East Dubai's rapid growth increased its share of total revenue. And typically in Q1, because of the seasonality, core education business margins is higher than they used to buy because of the seasonality. So this shift in our revenue mix caps our consolidated operating margin at a stable level for the whole group. And going forward, I think we remain confident in the margin profile of each business line, both the core educational business and East Bay. So we expect the margin of all the business line will be expanded in the new year, in this fiscal year coming silent. I think the margin expansion will come from the higher operational efficiency and even the better utilization of the learning centers. And also, we started the cost control since March last year, 2025, and now I think we have seen the good results, which helps Thank you, Stephen, for the color. Thank you. Thank you.

We will now take our next question from the line of Elsie Sheng from CLSA. Please go ahead Elsie, your line is open.

Thank you Stephen and Sisi for taking my question. So my question is mainly on revenue growth outlook because this quarter we see a really strong revenue growth and it's much higher than our full year revenue guidance. So what is the outlook for the next few quarters and maybe the possibility of raising our full-year revenue guidance. Especially if we look at by segment, I noticed that the overseas business growth actually accelerated versus the previous quarter. Wondering what is the driver and does this mean that overseas business will see a turning point or recovery? Thank you.

Okay. Yeah, thank you, Aosin. I think your question is about the revenue, the growth outlook for the whole year. And yeah, as you know, I think this quarter, the Q1, the revenue growth exceeded our expectations again. And I think the reason is because we're seeing all the business lines grow very fast. And starting from fiscal year 27, we are making a change to give the annual guidance rather than the quarter guidance. But given our positive momentum, I think in the coming Q2, even the rest of the year, I think the revenue growth will be very healthy. I will give you the breakdown of the revenue outlook of the annual guidance by different business lines. I think the oversea test prep business, this year's revenue growth will be over 5% year-over-year in dollar terms. And for our new business, I think the revenue growth will be roughly high teens, or is that close to 20% or roughly 20%. and the high school business roughly 15% top line growth year over year. And college business, I think the revenue growth will be around 20% or even maybe higher. And the Easter buys, you saw the numbers of the revenue growth in Q1 of the Easter buy. We had a very rapid growth of the Easter buy. And I believe Easter buys revenue will be accelerated in Q2. So this is the breakdown of the different business science growth of the fiscal year 27. And I think even in the coming Q2, we expect the revenue growth of the whole group will be higher than the revenue growth of the Q1. So I think we will get even more satisfied with the revenue growth in the coming Q2. And, oh, another question is about the reason of the overseas related business. I think we, in the Q1, we got the 7, 8% of the top-line growth, and yeah, I think Due to the impact of the economic environment and even the international situation, we meet some revenue growth pressure last year. But I think our team have shown the resilience even in the Q1 and in the new year. So we believe that we will take more market share from the competitors continuously in the Q2, Q3, and Q4. So I think for the overseas Tesla business, for this year, the growth will be over 5%. I think it's even stronger than we expected last year. Thank you. I'll see.

Thank you. It's very helpful.

Thank you. Our next question comes from the line of Alice Tsai from Citibank. Please go ahead, Alice. Your line is open.

Good evening, Stephen and Sisi. My question is on non-academic tutoring enrollment. because it was down about 10% year-over-year after calculation. But your initiative revenue grew about 25%. Could you help us understand the gap? Is there anything changed in how you count enrollment? Thanks.

Okay, yeah, so in terms of the revenue, you know, we're booking the enrollment on a time basis. So basically, if you look at last quarter, actually this year, the enrollment timing is earlier than last year. So if you look at last quarter, our enrollment growth is more than 25%. So it's much higher than the revenue growth of last quarter. because a lot of students this year registered earlier than last year for both the summer quarter and autumn semesters course. So you saw that the enrollments increased dramatically last quarter. And this quarter, because of the pre-enrollment, so the actual enrollment number for comparing with last year is lower. And so I would suggest you to combine these two quarters together to match with the revenue growth. So you will see the similar trends for that. So it's timing difference. One enrollment is on timing. I think the time window changes time by time.

and so that's why we guided the investors, the revenue goals by annual basis. So I want to reiterate that the K9 business, the new business, the growth rate in the whole year will be somewhere around 20% year-over-year in the dollar terms. So we have no change. Thank you, Alice.

Okay, it's very clear. Very clear and helpful.

Thank you.

Thank you.

Thank you. Our next question comes from the line of Lucy Yu from Bank of America Securities. Please go ahead, Lucy. Your line is open. Thank you. I just have one question on the learning center expansion pace.

So how many learning centers we have added this quarter, and what would that imply year-over-year growth? Thank you.

I think we add 2% new capacity in Q1. This is Q on Q. So this is the net add Q on Q, 2%. And for the whole year, we plan to open, let's say, the 10 to 15% new learning centers. I think most of them, we opened the new learning centers in the existing cities. And so we do plan to open more cities, a couple of new cities in this new year. So this is another chance because we feel quite optimistic about the business of the new educational business. But I think because we're happy to see the student retention rate improvement, that means we provide even higher quality service to students. and to the customers and the drive the utilization rate up. So I think we're quite optimistic on the new business and even the OMO business within the K-12 business. So I think in the coming new year, if we open 10 to 15% new learning centers, I think the overall utilization rate will be up in the new year. Lucy.

Understood. Very clear. Thank you, Steven.

Thank you. We'll see.

Thank you. And our next question comes from the line of DS Kim from J.P. Morgan. Please go ahead, DS. Your line is open.

Hi, Steven. Hi, Sisi. Thanks for taking my question. And by the way, congrats on the all-time high revenue and record high profits. I think the best number in China The past 33 years, so kudos to that. And despite the thorough reaction, I think on the live operating trend looks pretty solid in these two weeks. I was going to ask about enrollment, but you already explained very well. And revenue growth for new business can sustain nearly 20% anyway. So that is more telling, I think, than the enrollment trend. So maybe perhaps, let me ask, on ETH by profit, I know you can't talk about the exact number because of the disclosure, but can we comment on the high level? Say, when I look at minority interest, I think the momentum sequentially was down 8% quarter over quarter. So should we take that as a directional signal that each by-profit dollar was down sequentially or is that too simplistic way to look at it? And just as a follow-up, you just mentioned about the expansion Can I just double check, what does that 10% to 15% learning center expansion mean for K-9 or new businesses, new education businesses, classroom expansion? Does that imply, you know, much higher number given than the probability at high school? Thank you so much.

Thank you, Diaz. You know, in the Q1, the Easter buy got operating margin, you know, expanded year over year. And, yeah, you look at the number of the MI, because, you know, used to buy, you know, issue the, you know, grant the ESOPs last quarter. So I think, you know, typically based on the gap, you know, typically it's recorded to more share-based compensation in the first year. and so it's directly net profits. But if you look at the non-GAAP basis, I believe the EAST-BICE non-GAAP OP margin and the non-GAAP net margin, the Q1, is expanded. So this is my answer of your question about the EAST-BICE margin. And your second question is about the enrollment.

Can I repeat your second question again? Thank you, sir. I know that makes a lot of sense, so not yet. Just wanted to double check. 10 to 15% learning center expansion that you mentioned, what does that mean for K-9, new education business classroom in particular? If you could disclose to a degree.

I think, you know, roughly 15% for the K-9 business. It will be higher than the average.

Thank you, sir.

Thank you. We will now move to our next question from the line of Timothy Chow from Goldman Sachs. Please ask your question, Timothy. Your line is open.

Thank you. Thank you, Stephen and Sisi, for taking my question. I think just a quick follow-up on the margin question regarding eSPY. I think, Steven, in the beginning you mentioned that for this year you expect a margin expansion across all business lines. I just want to clarify here whether when you refer all business lines, whether that includes e-spice or not. And for my question, I think I want to understand more about the new Oriental Home. I think definitely a lot of the operating metrics that you share is quite encouraging, including the membership and also the activation rate. Just wondering if you can help us better understand how those new oriental home and all those operating metrics translate into the financials, i.e. whether that helps you to save the self-marketing and is there a way to quantify that? That would be very helpful. Thank you.

Thank you, Tim. I think, you know, in the Q1, the core education business, the margin is up. is expanded. And as well, EastBuy's non-GAAP OP margin is expanded. So both of the business, the margin is expanded in the Q1. And going forward, first of all, I think both of the business, core business, education business, EastBuy, we expect the margin expansion going forward. and don't forget, you know, Easter By's revenue growth, you know, we recovered big business since, you know, roughly three quarters ago. And in the Q1, you know, we got, Easter By got very fast revenue growth. And I think, I would believe in the coming Q2, the revenue growth of the Easter By will be accelerated

compared to the Q1.

And I think the margin profile of the Easter buy will be positive going forward. So this is the Easter buys and even the educational business, different business margin and even the New Oriental Home is a new platform that we started operation since second half of last year.

Actually, this platform is quite exciting. In terms of that, it's a platform that's combining all our key business lines, not only education, but also East Dubai and tourism. We're operating on each household home as a whole entity to operate. Actually attracted a lot of users already. Registered family numbers already increased to... 1.6 million, over 1.6 million already and still increasing, covering all kinds of educational products and still increasing not only our own customers, but also some related outside New Orientals, existing customers. So the user number is meaningful. And also we are operating this, in terms of using a new kinds of ways. And the participation rate is also very high. So cumulatively, 90% participation, which means customer, actually the users of the, the vast majority of the users are actively attending all kinds of activities that we organized through the platform. And also the latest, and many more. And also, you know, going forward as we have this platform bigger and bigger and have all the related customers signing in and it can start to generate, because this is a sales platform, like we can easily cross-sell our products, not only educational but already using the credit-based to have some cross-selling from education business to the live streaming business and also have the ability to generate maybe even more revenue from this new revenue from this platform. but actually it's still early stage for this new initiative and we'll keep updating everyone of the new progress of the platform and at the same time this is also a platform help us to reduce the customer acquisition cost because we used to have individual business units covering different ages of customers but now we're now in using the platform to operate and also to manage the needs of the whole family. So we can easily use the related to education action activities that customers are attending and then easily reduce the customer acquisition, cross-sell different business lines to the same group of customers. So this is also an exciting trend that we can reduce We're expecting that very, very effectively, we can reduce the customer acquisition costs and expenses. Operation expenses will be reduced because of the platform. So going forward, we'll keep updating the progress of the platform to all of you.

Thank you. Thank you, Stephen and Sisi, for the answers.

Thank you.

And our next question comes from the line of Yikun Zheng from Citix. Please go ahead, Yikun, your line is open.

Hi, Steven and Sisi. My question is about the potential for the core business margin. Since the current margin value is already very healthy, and you are still working on the cost reduction plan, so just wondering how much further there is for the margin expansion going forward. Thank you.

Yeah, I think, you know, going forward, I think the core education business margin, you know, we expect to be expanded. And, you know, because of that, you know, as I said, we opened the learning centers with the, you know, more, you know, discipline and 10 to 15%. And so we do hope to get the higher utilization rates. And even we have potential operating leverage going forward. And as I said, we started the cost control last year and we'll continue to do the cost control. So I think even like the cost and expense, the selling marketing, even the GNA profile, I think we can save some money to drop the merger up. This is my analysis of the American profile of the core education business.

Thank you. So if you look at the margin in the fiscal year 2028 or the fiscal year 2029, will the margin expansion still be our top priority?

Yes, because we changed our strategy since last year. You know, we care more about the quality improvement and even the higher student retention rate. And we don't want to open too many learning centers, and we care more about the higher utilization rate. And so even in the next two to three years, I think our plan is to drive the merger up, you know, step by step. Thank you, Steven.

Thank you. And our next question comes from the line of Jing Yuan from CICC. Please ask your question, Jing. Your line is open.

Good evening, Stephen and Sisi. I know we have discussed a lot about the margin, but my question is do you want to dive deeper about the operating margin? Like you said, you suggest that we look at the operating margin of the educational business and it's by separately. So, could you provide more color on the margin improvement for the, like, especially education business, if possible, the magnitude? And how should we look like, looking forward, how is the outlook for their separately, like, the operating margin thing?

So, as I said, in the Q1, you know, the core education business margin was, you know, expanded. and the East Dubai's margin is expanded as well. But the margin expansion of East Dubai is higher than the core education business because of different revenue growth level. And I don't want to say too much words on the seasonality, but if you look at the annual basis, it is what it is. and going forward, I do believe, Easter by first, I do believe the margin of the Easter by will be expanded in the coming year. And for the core education business, we'll do the right things, make the learning center utilization rate up, keep doing the cost control and to provide the investors more satisfied the margin profile going forward.

Got it. Thank you. Thank you. We have now approached the end of the conference call. I'll now turn the call over to New Oriental's Executive President and CFO, Steven Yang, for his closing remarks.

Again, thank you for joining us today. If you have any further questions, please do not hesitate to contact me or any of our investor relations representatives. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect your lines.