Ladies and gentlemen, good evening and thank you for standing by for New Oriental Third Fiscal Quarter 2015 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. I would now like to turn the call over to your host for today's conference, Ms. Sisi Zhao, New Oriental's Investor Relations Director. Ms. Zhao, please proceed.

Thank you. Hello, everyone and welcome to New Oriental’s third fiscal quarter 2015 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 Newswire services. Today, you will hear from Louis Hsieh, New Oriental’s President; and Stephen Yang, New Oriental’s new Chief Financial Officer. After their prepared remarks, Louis and Stephen 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 views 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 this conference call will be available on New Oriental's Investor Relations website at investor.neworiental.org. I will now turn the call over to Louis Hsieh.

Thank you, Sisi. Hello, everyone, and thanks for joining us today. As announced earlier today after almost 10 years serving New Oriental’s CFO, I and our Board of Directors have decided it was time to transition this role to Mr. Stephen Yang. I am delighted to congratulate Stephen on his new position as our CFO. Since I hired him in 2006 Stephen and I have worked closely together for more than nine years and I am confident that he will make significant contributions to the company in his new position. I will remain President of the Company and will continue to be a member of the Board of Directors focusing on overall corporate strategy and online education initiatives. I want to express my sincere gratitude to Michael Yu and our Board of Directors for the opportunity it has been a great privilege and honor to serve as New Oriental CFO the past decade. I would also like to thank New Oriental’s more than 33,000 teachers and staff for their dedication through good times and challenging ones. We have accomplished a great deal growing revenues for approximately $90 million in fiscal year 2006 to almost $1.2 billion. A nine-year CAGR of about 37% and net income CAGR of over 55% to over $215 million. This tremendous financial performance has been reflected in New Oriental share price. Since our successful IPO on the New York Stock Exchange in September 2006 pricing at $15 per ADS, our share price has risen to almost $100 closing last night at $24.68 and accounting for a four-for-one stock split. I believe New Orientals best days lay ahead as China’s preeminent private education services leader. Finally, I want to thank New Orientals shareholders and equity research analyst for your tremendous support these past many years. And I look forward to continuing our professional relationship. Now, I would like to pass to CFO at the time over to New Orientals new CFO and my good friend Stephen Yang. Stephen, please.

Thanks very much Louis. I’d like to thank Michael Yu, Louis Hsieh and our Board members giving me this great opportunity. All of you have been given me full supports and trust during the past nine years and I look forward to working with you continuously as we move forward. Turning to a summary of our third-quarter results, we’re pleased that we complete another solid quarter with the revenue out by 13.1% year-over-year to US$287.7 million. This increase was mainly driven by strong performance of our K-12 all-subjects after-school tutoring business, which grew 22% year-over-year to approximately US$143 million contributing almost half of our revenues. One of our key segments the U-Can business saw an increase of approximately 29% in gross revenue and 12.4% in enrollment growth. As we discussed in the second quarter the company has started to implement new customer loyalty programs to encourage repeat business and for the third quarter this results in deferred revenue of about US$3.7 million, which is expect to be recognized within two years without any additional expenses associate such revenues. So including this is our top line growth would have been 14.6%. As mentioned this will be just temporarily temptingour revenue. After six months of implementation the Company has decide to narrow down the scope for loyalty programs to K-12 only starting in the month of April. By doing so we will be better able to capture the benefit of this program because K-12 much higher lower rates than any other business lines. That said, we expect the impacts of loyalty programs on quarterly revenue will be reduced which will be reflected in the performance in the first quarter of fiscal year 2016. Turning back to the business performance, one of most exciting news for the quarter expect our revamped POP Kids…

[Operator Instructions] The first question comes from Fei Fang from Goldman Sachs. Please ask.

Hi, Louis, Stephen and Sisi, thank you for taking my question. Would you mind share with us more color along your investment plan on the online education initiatives and then the potential impact on your margins in the fourth quarter and the fiscal year 2016. How should we expect the margin trend in the coming quarters and also can I how quickly confirm with you that if we combine on the third quarter and the first six weeks the revenue growth would be 9.5% year-on-year growth. Thank you.

Thanks. I will answer the second question from you if you combine the student enrollments in the third quarter and with the first six weeks in the fourth quarter. The student enrollments will be increased by 9.5% and for our online initiatives I think the most important parts is our O2O initiatives, in the almost past year we roll out our new revamped POP Kids program successfully and you can see the number in the Q3 our GAAP revenue for the POP Kids was up by 7% and going forward we are doing the same thing in U-Can and overseas test prep. And we spent US$8 million to US$9 million on the online - online O2O things in the third quarter and we will spend the same amount in the fourth quarter, but in the next whole fiscal year what I mean in 2016 we hope we spend not as much as this year. So that means it will help to improve the margins of next fiscal year. Does it answer your question?

Thank you. Thank you, Stephen.

Okay.

The next question comes from Alice Yang from Macquarie. Please ask your question.

Hi, Sisi, Louis, and Stephen. This is Alice from Macquarie. Thank you very much for taking my question and congratulations for a solid quarter and Stephen for new position. My question is also related to the pure online part. So can you share with us what is the online revenue as a percent of total revenue in this quarter and how do you see the trend going forward saying fiscal years 2016 or 2017. How do differentiate your online versus offline costs I mean will you have any kind of concern or any kind of potential cannibalization between the two going forward. Thanks.

Okay, thanks Alice. Our pure online revenue which means the koolearn.com the GAAP revenue of the Q3 was up by 39% so it’s much faster than our offline business. And I think going forward it will contribute more than before and because the big classes are not mission-critical test prep takers for example for the domestic and overseas test prep. On purpose, we moved the students from offline to online and so the online revenue is moving, but the online revenue is account for the 4% to 5% of the total revenue and in the next fiscal year it will be more than this year. So I think the difference between the online and offline classes - the first difference is the age. I think for the adult students or the college students are suitable for the pure online study for the K-12 most of them is suitable for studies offline. And so we moved most of the short-term not mission-critical of offline class from offline to online. So you will see the pure online revenue growth faster than our offline classes in the future, okay.

Thank you very much. Very, very quick follow-up, [indiscernible] fiscal year 2016 or 2017, do you think that the online revenue will contribute like high single-digit percentage of total revenue you have...

Yes, we haven’t finished the budget yet, but I think the trends will go up. So in the next two to three years I think the percentage of the online revenue will meet high single-digits, but maybe the 7% or 8% or 9% of the total revenue.

Thank you very much, great.

Okay.

The next question comes from Ella Ji from Oppenheimer. Please ask your question.

Good evening, management. Louis, thank you for everything you’ve done for New Oriental, we will miss you and Stephen congratulations on a new role. I have two questions. The first question is relating to your POP Kids programs, it seems that you have seen such strong enrollment to performance with program, could you talk about your thoughts on price increases in future quarters? And secondarily also relating to your total OpEx spending I noticed the dollar amount for both sales and marketing in G&A declined sequentially from fiscal 2Q. Could you give us some colors why you spent a less money in the last quarter and how should we think about the dollar amount spending for the fourth quarter? Thank you.

Okay, thank you Ella. And the first question about the POP Kids, the ASP and yes you are right. I think it’s a little more difficult for increase the ASP for the POP Kids because the class is not mission-critical, but we successfully rollout the new revamped product. So it makes us differentiate with any other competitors and our strategy is to seek the market share first and so we just keep the ASP interest rates by only 5%, but we still have the price power. That means I think we need more student to take the new product classes as early as they can and after they get forth we can continue before to increase the price. .:

Sure, then how about the dollars spending level for the fourth quarter?

I think the amount is almost same as this quarter. So we will keep spend US$8 million to US$9 million OpEx for online.

Okay, got it. Let me just have a quick follow-up relating to yourself in a marketing spending and since you have rolled out some product by end of last year such as uDA, we have not observed strong promotions relating to such online product. And as you will roll out more products throughout the calendar year 2015? How should we think about yourself in the marketing spending for the online product?

Yes, uDA brand new so in kind of the test launch within English and a little bit math. So it has now being blown across the [indiscernible] so we think to do a lot of the promotions for the uDA and the aim for us is to put all the subjects in it, it will be a long-term program. So I think it’s just like the koolearn.com, once the product got to mature we doubled paid users like that - we double paid users in Q3 and once we fill the product with uDA as mature and accurate, but were used Q3 innovation channel besides our old ones and to blot and we will spend more on marketing expenses. So I think our strategy for the marketing is the product first and then the marketing promotions.

Got it. Thank you Stephen they are helpful.

Thank you, Ella.

And thank you Ella for your compliment. I miss you too.

The next question comes from Tian Hou from T.H. Capital.

Hi, Louis. So thank you for working with us and let us know your new enter and Steve congratulation on your new role and the question is related to actually not this quarter we are in, but rather related to your summer quarter and last year I do remember the summer quarter was kind of hit by multiple negative factors such as the misunderstanding the English examination policies as well as your summer boarding school and now we are approaching the summer and those issue maybe raised again, so I wonder what could be the situation this year?

Okay, thanks Tian and for the summer it’s just - now it's April so as along which goal, but I hope that - I think in the coming summer we will not the same policy problem with the last year, I think well likely this year. And for the Spring classes I don't think we will hope the numbers will go up, but I think the class revenue will kept be flat with the last year. And yes you are right for the Q1 our K-12 business - the Q1 is not the peak season, but I think we will do as much as we can to get more to the enrollment and so, but I think to think about the student enrollments of the first to six week in the Q4 we are in the new trend. So I hope the trend will keep going forward. So we can - I don't know the detail number in the coming Q1, but I hope is much better than the Q1 last year.

Okay, thank you Stephen.

Okay, thanks Tian.

The next question comes from Jialong Shi from Credit Suisse.

Hi, good evening management and thanks for taking my call. Congratulation on the solid results. I have a quick follow-up and I think Stephen just mentioned the normalized enrollment growth would be 9.5% if we combine Q3 and the first six weeks in Q4. I just wonder if management can provide more colors on the normalized enrollment growth rate for a different tutoring programs and also given the strong momentum your K-12 program just wonder what will be the revenue growth rate you guys are looking at for next fiscal year? Thank you.

Okay, thanks Jialong. Our growth is going to be driven by three parts, the U-Can, the POP Kids and overseas test prep with oversea consulting. So let me start with the U-Can, the U-Can is increased by about 30% in Q3 and student enrollment is up by 12%. So we add back the first six weeks in Q4 it will have been significant since growth with more than 30%. So in the long-term our U-Can will be the future of new rental, the student enrollment growth rate will be about 20% at least. And for the POP Kids we rolled the new product successfully and the kids for the three months and six weeks the enrollments was up by 20%. So in the long-term it will have the almost same the like student enrollment growth rate as U-Can maybe a little bit lower than U-Can. And for the overseas test prep the student enrollment growth will be flat because the whole market have been growth as fast as before and but I think the good news for us is the more and more Chinese parents rather to send their kids to study abroad in their younger age. So it’s not like before that means more and more young kids will take our overseas test prep program and it will help us to improve the ASP because you know the ASP for the SAT and TOEFL Junior is much higher than the GRE and GMAT. And overall the revenue of the oversea test prep will be 10% or 10% to 15% in the future and with zero student enrollment increase with the ASP increase by 10%. But if we combine the oversea test prep with oversea consulting business, the overseas consulting business was bulling in last four, five years and going forward the business overseas consulting will be increased at least to 25%. So the business line overseas will be increased by at least 15%. The only drag of our businesses adult English and domestic test prep, but it will decline by 10% in the last three years in a row anyway so and we moved most of the student to big class of the domestic classes from offline to online. So overall if you see the company as a whole and the overall student enrollment growth will be probably around 8% to 10% and price increase I think it will be like between the 5% to 10%, if you breakout the U-Can will be - the ASP for U-Can will be increased by 5% to 10% and for the POP Kids it’s 5%.

Thank you for the...

So that's we got these revenue increased by 15% to 20% in the future.

Thank you for the color.

Okay.

The next question comes from Leon Chik from J.P. Morgan.

Hi, congrats on the results, just a couple of quick questions first on the U-Can enrollment is close to 12%, can I just confirm the enrollment does not include pure online students?

Yes, not much include the pure it’s just the pure offline student enrollment of 12%.

And I guess it works up to around 15% or so ASP growth, because your sales was up 29%. So what’s the breakdown between tuition increase and just student taking more courses is about half.

Yes, we increased the price for U-Can is about 8% to 9%.

Okay.

And yes, so it’s timing difference of the Chinese New Year. So the trend is that to apple-to-apple comparison the basis, the student enrollment was up by 20% and the price increase is by 8% to 10%.

Okay, thank you.

Thanks.

The next question comes from Trace Urdan from Wells Fargo. Please ask your question.

Yes, thank you. I wondered if you could talk about the POP Kids ASP in a little bit more detail and specifically I’m interested in understanding what the trend is in class hours on a year-over-year basis.

Yes, thanks Trace, good question. And we almost finished the rollouts of the new product of the POP Kids and the new POP Kids had used the - I think this is successful strategy to - I think that the strategy is to go after the market share first and increase the price later. So we will control the ASP increase of this fiscal year, what I mean in the coming Q4 maybe within the coming Q1 within the 5%, but after that we will increase the price of POP Kids above 5% it will be above the 10% year-over-year.

Right, but my question isn’t about the price increase you described that before it has to do with what the average number of class hours per student is, because that trend was down in the prior quarter and I am wondering if that still the case and when you’d expect that trend to level out?

Okay, yes in the two quarters before we changed some of the class hours for some cities, so from the - like the half year class per course to three months and I think the trend will be continued, but it will - not the big changes as before. So I think the class length will be - we’ll keep stable in the future.

Just I understand, so the shorter length program which requires more repeated renewals on the part of the families, that’s part of the new rollout, am I correct about that?

Yes, you are correct.

Okay, so will that - so we see that trend stabilized in the first quarter of next year?

Yes.

For the second quarter of next year?

Yes, the class lengths will be stable, because we almost finished all the O2O reference initiatives of the product of POP Kids, so the trend will be stable the class lengths.

All right, thank you.

Okay. Thanks, Trace.

The next question comes from Alvin Jiang from Morgan Stanley.

Hi, Louis, Stephen, Sisi thank you for taking my question. My question is on investments as you mentioned, this year will be investments year especially for those online initiative. So what’s your plan for next few years and do you have some kind of targets after achieving those targets you would consider to slowdown such investments?

Yes, thanks that’s a good question I think and yes this year is the investing year for online and we almost finished the O2O reform for the POP Kids and we are doing for U-Can and overseas test prep or the business lines. Yes, we spent US$30 million to US$35 million in OpEx for online. The next year I think the number of investment will be as same as this year or little bit less because this year we hire lot of IT people and content writers and we cannot fire them after the job, so they will do a lot of follow-up jobs and but this year we spend some money on these third-parties as you saw this from outside the company. So next year we do need by parts. So I think the - in the next year the total spending will be little bit less than this year. Okay.

Okay thank you.

The next question comes from [Alan Lee] from Deutsche Bank. Please ask your question.

out :

Okay, we needed to - I mentioned last year and launch uDA and I think the first step of the corporation between New Oriental and Tencent and as you know we have the best content and teachers and they have the most advanced distributors channels and so we are exciting to seek corporation between us and I think you will see some announcements in the future. But it’s too early to say because it’s been confidential. And for the uDA you know as I said earlier because you know we only have the subject English and a little bit more in math. So we just want to put all the subjects all grades the questionnaire, the question and answers into the uDA and then we will use the - like the Weixin or QQ to blow all the products. So I think the Tencent will help us to distribute our new product online. Okay.

Okay, thanks.

Thanks.

The next question comes from Clara Fan from Jefferies. Please ask your question.

Hi, hello, thank you for taking my question. I got two questions first is I guess the ASP growth this quarter was better than last two quarters is it due to the late Chinese New Year that’s why there were less enrollment this year that ended up with 13% increase in ASP. So I am just wondering if what would be the ASP growth - if we do it on a normalized basis and what is the ASP growth expected in the next quarter. And my next question is on your operating profit margin its better than expected and in particular we see that the selling and marketing expenses in actual amount it was less than last quarter and if we look at it as a percentage of revenue on a year-on-year basis is also down 0.4 percentage point. I am just wondering what is the reason behind the lower selling and marketing expenses this quarter and what should we expect going forward. Thank you.

Okay I will answer the second question first. For the selling expenses I think the first driven for the selling expenses not increased so much is because we just opened six learning centers net in Q3. So that means we don’t need so much - the market expenses for the new learning centers. The second one is we almost finished the O2O reform for the POP Kids, so that’s - we do need so much market expenses. Once we roll out - like the overseas test preps in the U-Can we will spend little bit more but not as much as the like the two or three callers before as the POP Kids because more and more students and parents will know the product, the quality of the products are much better than the older versions. And your first question is about the POP Kids the ASP and I think you might misunderstand about our the ASP because I think you know the GAAP revenue is 13% in Q3 and the enrollment is flat, but the cash revenue of the Q3 will be also flat. So the ASP of the Q3 will be flat but as I said earlier if we added back to the first six weeks. The ASP will be like 4% to 5% is on purpose. So in the coming Q4 I think the ASP will be lying between 5% to 10% and next year will be much higher than this year.

Thank you.

Okay thanks.

We are now approaching the end of the conference call. I will now turn the call over to New Oriental's President and CFO, Stephen 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. Thanks.