Evening, and thank you for standing by for New Oriental's FY 2027 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. 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 Newswire 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, East Buy 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 East Buy 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 Buy 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 stand-alone 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. Changes in the business mix can influence the overall figure 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 a revenue increase of about 8% year-over-year for this quarter. Overseas study consulting business recorded revenue increase of about 7% year-over-year for this quarter. Our adults and university students business recorded a revenue increase of 22% year-over-year for the first quarter of 2027. 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 around 60% of the business. Our intelligent learning system and devices business has been launched in around 60 cities. We're encouraged by continued enhancement in customer retention and scalability, with the top 10 cities contribute around 50% of this business. In summary of above, our new educational business initiatives delivered a 25% year-over-year revenue increase in the first quarter of 2027.
Turning to our integrated tourism business, which spans study tours and research camps for K12 and university students, as well cultural tours for middle-aged and senior travelers. We have been leveraging our cultural travel, China study tour, global study tour, and camp education products to deliver value through knowledge enrichment, personal growth, and experience for culture immersion. Our students programs now operates in about 55 cities across China, with the top 10 cities generating over 50% of the revenue. Our premium adult 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 the 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 the 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 uninterrupted high-quality instructions to students and cater to their individual learning needs. Building on our launch of our proprietary AI-powered personalized learning platform, ongoing investment, 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 the 25 days of launch. Purposely built as a specialized vertical learning system rather than a general-purpose large language model. It's close to New Oriental's deep educational heritage and enhance the competitiveness of our product in many aspects. This encouraging early result affirms strong market traction and product-market fit, and we will continue to advance AI-driven solutions to extend our market reach and improve operational efficiency.
Now, turning to East Buy. 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 accelerate private-label development in our very own three highest standard: high safety, high quality taste, and high value for money. Stringent raw material screening, factory audits, and finished product testing before every product launch reflects our commitment to stringent quality control. Today, our private-label lineup has grown beyond 1,000 SPUs across food, nutrition, and health, apparel, skincare, and other categories. Notably, several flagship products have managed to deliver robust sales. For its livestreaming platform, the addition of professional live streamers and operational specialists has strengthened East Buy'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 livestreaming platforms. Offline sales by network. East Buy leverage New Oriental's nationwide learning center network to explore new retail opportunities. We currently have four offline experience stores and are advancing campus store rollout on the group level. We have also developed instant retail capabilities with front warehouses in place and one-hour delivery trial underway in Beijing and Shanghai. For the rest of the year, East Buy will continue its multi-channel strategy to cast the wider net, accelerate private-label development in food and daily necessities, optimize membership operations on its proprietary 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 2026 Q3, and that is New Oriental Home. This family-centric app assembles our education service, East Buy offerings, and cultural tourism product into a single platform, serving an entire household at every stage of life. New Oriental Home 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 large number of students, has become woven into the daily teaching and customer service, while linking positive learning habits to product and reward redemption. We're 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 education offerings can extend naturally into a one-stop shop for the broader family. Hosting customer and all that we can offer in a synergistic ecosystem. New Oriental Home also lowers customer acquisition costs 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 registered families by the end of this quarter. New Oriental Home has achieved cumulative activity participant rates of over 90%, scoring a 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.
Yeah. 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 East Buy private-label products and livestreaming 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, was $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 $300.9 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 were $65.8 million. Turning to the balance sheet. As of August 31st, 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 2027, 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. Stephen.
Thank you, Sisi. We have entered a new phase with healthy performance this quarter, which injects confidence in our operational resilience and growth trajectory. Looking ahead, we're particularly confident in sustaining our momentum across our core business and new endeavors. With expectations that our diverse initiatives to deepen customer engagement will drive margin expansion, greater operational efficiency, and strong shareholder yields. Strategic expansion of capacity and nurturing the talents 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 Buy and other new initiatives with customer-centric mindsets and without compromising the quality standard. Our hope is for these efforts to collectively reinforce New Oriental's standing as a trusted name among Chinese households. We will also reveal our 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 are pleased to reiterate the previously provided full year guidance of total net revenue in the fiscal year 2027, to be in the range of $6,453.9 million to $6,680.3 million, representing a year-over-year increase in the range of 14%-18%. These expectations reflect our current outlook and based on the recent regulatory development 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 company is authorized to repurchase up to $300 million of its ADS or common shares over the subsequent 12 months. As of October 27, 2026, the company has fully utilized the $300 million repurchase amount authorized under its 2026 share repurchase program from aggregate of approximately 56.2 million common shares, including common shares represented by ADS from the open market. Before closing my remarks, I would 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 its board 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 U.S. 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 of the record as close of the business on November 18th, 2026, Beijing, Hong Kong time and New York time, respectively. 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 be fully 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 dates of the first installments. 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 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 at 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 on the share repurchase program periodically and may authorize adjustment to 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 evolving requirement.
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 all 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 one one on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star one one again. We will now proceed to take our first question. Our first question comes from the line of Jenny Yuan from UBS. Please ask your question, Jenny, your line is open.
Hi, Stephen, and hi, Sisi. Thanks for taking my question. My question is on margins. In this quarter, the overall OP margin was broadly stable year-over-year, while both the Core Education and East Buy delivered year-over-year margin expansion. You explained that the overall margin performance was more due to the changes in revenue mix. If this trend continues, how should we think about the outlook for overall margin expansion? What are the key drivers of margin improvement going forward? Thank you.
Thank you, Jenny. Yeah, let us start with the margin analysis of this quarter. Yeah, I think you are right. Both our Core Education business and East Buy reported year-over-year margin expansion due to the enhanced operational efficiency and the improved utilization of the learning centers. In Q1, East Buy's rapid growth increased its share of total revenue. Typically in Q1, because of the seasonality, Core Education business margins is higher than East Buy, because of the seasonality. This shift in our revenue mix kept our consolidated operating margin at a stable level for the whole group. Going forward, I think we remain confident in the margin profile of each business line, both the Core Educational business and East Buy. So we expect the margin of all the business line will be expanded in the new year, in this fiscal year 2027.
I think the margin expansion will come from the higher operational efficiency and even the better utilization of the learning centers. Also, we started the cost control since March 2025. Now I think we have seen the good result, which helps us to drive the margin up. I will continue to be cost control, going forward. So it will help the margin profile going forward. Jenny, thank you.
Thank you, Stephen, for the color. They are clear. 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. My question is mainly on revenue growth outlook, because this quarter we see a really strong revenue growth, and it is much higher than our full year revenue guidance. What is the outlook for the next few quarters and maybe the possibility of raising our full year revenue guidance? Especially if you 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, Elsie. I think your question is about the revenue, the growth outlook for the whole year. Yeah, as you know, I think, this quarter, the Q1, the revenue growth exceeded our expectations again. I think the reason is because we are seeing all the business lines grow very fast. Starting from fiscal year 2027, 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 overseas test prep business, this year's revenue growth will be over 5% year-over-year in U.S. dollar terms.
For our new business, I think the revenue growth will be roughly high teens, or where it is close to 20% or roughly 20%. The high school business, roughly 15% top line growth year-over-year. College business, I think the revenue growth will be around 20% or even slightly higher. East Buy, you saw the numbers of the revenue growth in Q1 of the East Buy. We had a very rapid growth of the East Buy. I believe East Buy's revenue will be accelerated in Q2. This is the breakdown of the different business lines growth of the fiscal year 2027. 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.
I think you will get even more satisfied with the revenue growth in the coming Q2. Another question is about the reason of the overseas related business. I think in the Q1, we got the 7.8% the top line growth. Yeah, I think, due to the impact of the economic environment and even the international situation headwinds, we met 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. I think for the overseas test prep business, for this year, the growth will be over 5%. I think it is even stronger than we expected last year. Thank you, Elsie.
Thank you. It's very helpful.
Okay.
Thank you. Our next question comes from the line of Alice Cai 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 new initiative revenue grew about 25%. Could you help us understand the gap? Thanks.
Okay. Yeah. In terms of the revenue, we're booking the enrollments on time basis. Basically, if you look at last quarter, this year, the enrollments timing is earlier than last year. If you look at last quarter, our enrollments 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. You saw that the enrollments increased dramatically last quarter. This quarter, because of the pre-enrollment, the actual enrollment number comparing with last year, is lower. I would suggest you to combine these two quarters together, to match with the revenue growth. You will see the similar trends for that. It's a timing difference.
One enrollment is on time basis, but revenue is on accrual basis. If you take two quarters together, put together to do the calculation, you will see it's much more reasonable. That's the key reason.
The time window changes time by time. That's why we guided the investors, the revenue growth by annual basis. I want to reiterate that the K9 business, the new business, the growth rate in the whole year will be similar around 20% year-over-year in the dollar terms. We have no change. Thank you, Alice Cai.
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. How many learning centers we have added this quarter? What is your full year-over-year growth? Thank you.
The learning center. I think we added 2% new capacity in Q1. This is
Q-on-Q.
Q-on-Q. This is the net add Q-on-Q, 2%. For the whole year, we plan to open, let's say, 10%-15% new learning centers. I think most of them, we open the new learning centers in the existing cities. We do plan to open more cities, a couple of new cities in this new year. This is another change because we feel quite optimistic about the business of the new educational business. I think, because we're happy to see the student retention rate improvement, that means we provide even higher quality service to the students and to the customers, and drive the utilization rate up. I think we're quite optimistic on the new business and even the OMO business within the K-12 business.
I think in the coming new year, if we open 10%-15% new learning centers, I think the overall utilization rate will be up in the new year. Lucy?
Understood. Very clear. Thank you, Stephen.
Thank you, Lucy.
Thank you. Our next question comes from the line of DS Kim from JP Morgan. Please go ahead, DS, your line is open.
Hi, Stephen. Hi, Sisi. Thanks for taking my question. By the way, congrats on the all-time high revenue and record high profits. I think the best number in the past 33 years, so kudos to that. Despite the share reaction, I think underlying operating trend looks pretty solid, at least to me. 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. Perhaps, let me ask on East Buy profits. I know you can't talk about an 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.
Should we take that as a directional signal that East Buy profit dollar was down sequentially, or is that too simplistic way to look at it? Just as a follow-up, you just mentioned about expansion. Can I just double-check, what does that 10%-15% learning center expansion mean for K9 or new businesses, new education businesses, classroom expansion? Does that imply a much higher number given that we probably wouldn't add high school? Thank you so much.
Yeah, thank you, D.S. In the Q1, the East Buy's Non-GAAP operating margin is expanded year-over-year. You look at the number of the MI, because East Buy issued the grant, the ESOPs last quarter. I think typically based on the GAAP, typically it's recorded more share-based compensation in the first of the year. It drags the net profits. But if you look at the Non-GAAP basis, I believe the East Buy's Non-GAAP OP margin and the Non-GAAP net margin in the Q1 is expanded. So this is my answer of your question about the East Buy's margin. Your second question is about the enrollment. Can you repeat your second question again?
Sorry. Thank you, sir. I know that makes a lot of sense on Non-GAAP.
Yeah.
Just wanted to double-check, 10%-15% learning center expansion that you mentioned, what does that mean for K9 new education business classroom in particular? If you could disclose to a degree.
I think roughly 15% for the K9 business.
Got it.
Because 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 Zhao 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 East Buy. I think Stephen, in the beginning, you mentioned that for this year, you expect margin expansion across all business lines. Just want to clarify here whether when you refer all business line, whether that includes East Buy or not. 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 sales marketing, and is there a way to quantify that? That will be very helpful. Thank you.
Thank you, Tim. In the Q1, the core education business, the margin is up, it is expanded. As well, East Buy's Non-GAAP OP margin is expanded. Both of the business, the margin is expanded in the Q1. Going forward, first of all, I think both of the business, core business, education business and East Buy, we expect the margin expansion going forward. Do not forget, East Buy's revenue growth, we recovered a big business since roughly three quarters ago. In the Q1, East Buy got very fast revenue growth. I think, I would believe in the coming Q2, the revenue growth of the East Buy will be accelerated compared to the Q1. I think the margin profile of the East Buy will be positive going forward.
This is the East Buy, and even the educational business different business margin, and even the revenue growth, the forecast. I will ask Sisi to answer a question about the New Oriental Home.
Yes. Actually, New Oriental Home is a new platform that we start operation since second half of last year. Actually, this platform is quite exciting in terms of that it is a platform that is combining all our key business lines, not only education, but also East Buy and tourism. We are operating on each household home as a whole entity to operate. Actually attracted a lot of users already. Registered family numbers already increased to 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 Oriental's existing customers. The user number is meaningful. Also, we are operating this using a new kind of ways. The participation rates is also very high.
Cumulatively, 90% participation, which means vast majority of the users are actively attending all kinds of activities that we organized through the platform. Also, the latest activation rates is over 30%. These numbers are exciting. Also, going forward, as we have this platform bigger and bigger and have all the related customers signing in, it can start to generate. Because this is a sales platform, we can easily cross-sell our products, not only educational, but already using the credit-based operation to have some cross-selling from education business to East Buy, the live streaming business. Also have the ability to generate maybe even more new revenue from this platform. Actually it is still early stage for this new initiative, and we will keep updating everyone of the new progress of the platform.
This is also a platform to help us reduce the customer acquisition cost. We used to have individual business units covering different ages of customers, but now we are using the platform to operate and also to manage the needs of the whole family. We can easily use the related education activities that customers are attending, then easily reduce the customer acquisition, cross-sell different business lines to the same group of customers. This is also an exciting trend that we are expecting that very effectively we can reduce the customer acquisition costs. Operation expenses will be reduced because of the platform. Going forward, we will keep updating the progress of the platform to all of you.
Thank you. Thank you, Stephen and Sisi, for the answers.
Thank you. Our next question comes from the line of Yiku n Zheng from CITICS. Please go ahead, Yikun, your line is open.
Hi, Stephen 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 rolling out a cost reduction plan. Just wondering how much further room there is for the margin expansion going forward. Thank you.
Yeah. Going forward, I think the core education business margin, we expect to be expanded. As I said, we open the learning centers with the more discipline and 10%-15%. We do hope to get the higher utilization rate, and even we have potential operating leverage going forward. As I said, we started the cost control last year, and we'll continue to do the cost control. I think even the cost and expense, the selling, marketing, even the G&A profile, I think we can save some money to drive the margin up. Yeah. This is my analysis of the margin profile of the core education business. Yeah.
Thank you. 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. We care more about the quality improvement and even the higher student retention rate. We don't want to open too many learning centers, and we care more about the higher utilization rate. Even in the next two to three years, I think our plan is to drive the margin up step by step.
Thank you, Stephen.
Thank you. 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? You said, you suggest that we look at the operating margin of the educational business and East Buy separately. Could you provide more color on the margin improvement for the, especially education business, if possible, the magnitude? Looking forward, how is the outlook for theirs separately, like the operating margin? Thanks.
So yeah, as I said, in the Q1, the core education business margin was expanded. The East Buy's margin is expanded as well. But the margin expansion of East Buy is higher than the core education business because of different revenue growth level. Yeah, 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. Going forward, I do believe East Buy first. I do believe the margin of the East Buy will be expanded in the coming new year. 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 will now turn the call over to New Oriental's Executive 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 relation representatives. Thank you.
This concludes today's conference call. Thank you for participating. You may now disconnect your lines.