New Oriental Education F2Q08 (Qtr End 11/30/07) Earnings Call Transcript

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2008-01-15 08:22:09.0

Tags: Education, Microsoft ASP, U.S. Bancorp Piper Jaffray Inc., Call Transcript, Earnings, Scripting Languages, Marketing Research, Software/Web Development, Web Development, Marketing, Seeking Alpha

Question-and-Answer Session

Operator

(Operator Instructions) And your first question comes from the line of Mark Marostica from Piper Jaffray. Please proceed.

Mark M. Marostica - Piper Jaffray

Thank you and good evening, Louis and Sisi. I wanted to ask you a question about the big jump in revenue per enrolment this quarter. I think it was up a little over 20% year over year. What drove that jump? And perhaps if you could delineate between test prep and English language instruction it would be helpful.

Louis T. Hsieh

I think overall, ASP increases were north of 15% this last quarter and in overseas test prep, it was higher than 15%, so it was the highest driver. And also, as you know, Mark, we have continually been moving to smaller size classes, which means the ASP will naturally be higher because there’s fewer students in the class and they are priced that way. So those two factors together made ASP increases north of 15% for the current quarter.

Mark M. Marostica - Piper Jaffray

As a follow-up, would you expect that rate of ASP increase to affect the other quarters of the fiscal year?

Louis T. Hsieh

We have always sort of guided around 10%, 10% to 13% ASP growth, so we will continue to say probably conservatively 10% to 13%, although it seems that we have exceeded those numbers the last few quarters.

Mark M. Marostica - Piper Jaffray

Great. I’ll turn it over and hop back in the queue.

Operator

Your next question comes from the line of Adele Mao from SIG. Please proceed.

Adele L. Mao - Susquehanna Financial Group

Louis, could you discuss a little more in detail related to your marketing expense ramp-up, given intensified competition out there? What are the new marketing initiatives that you have put in place and would you expect further ramp-up in marketing expenses in the quarter as they come particularly before Olympic Games and when the high season, the summer vacation season for students comes around?

Louis T. Hsieh

That’s a good question, Adele. Thank you. For New Oriental, the marketing expenses are several -- the increase is about 50% year over year and that’s really a result of adding personnel and also advertising in more cities. Because at this time last year, we were in about seven or eight fewer cities, as I recall, so we have to advertise in more cities.

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