New Oriental Announces Results for the Second Fiscal Quarter Ended November 30, 2018

BEIJING,Jan. 22,2019 --New Oriental Education & Technology Group Inc. (the "Company" or "New Oriental") (NYSE: EDU),the largest provider of private educational services in China,today announced its unaudited financial results for the second fiscal quarter ended November 30,2018,which is the second quarter of New Oriental's fiscal year 2019.

Financial Highlights for the Second Fiscal Quarter Ended November 30,2018

Total net revenues increased by 27.8% year-over-year to US$597.1 million for the second fiscal quarter of 2019.

Operating loss increased by 118.5% year-over-year to US$28.6 million for the second fiscal quarter of 2019.

Non-GAAP operating loss,which excludes share-based compensation expenses,was US$14.9 million,an increase of 295.7% year-over-year compared to US$3.8 million in the same period of the prior fiscal year.

Net loss attributable to New Oriental was US$25.8 million for the second fiscal quarter of 2019,compared to an income of US$4.3 million in the same period of the prior fiscal year.

Non-GAAP net income attributable to New Oriental,which excludes share-based compensation expenses and loss from fair value change of long-term investments,was US$23.0 million,an increase of 69.2% year-over-year compared to US$13.6 million in the same period of the prior fiscal year.

Key Financial Results

(in thousands US$,except per ADS(1) data)

2Q FY2019

2Q FY2018

% of change

Net revenues

597,072

467,183

27.8%

Operating loss

28,553

13,070

118.5%

Non-GAAP operating loss(2)(3)

14,866

3,757

295.7%

Net (loss)/ incomeattributable to New Oriental

(25,826)

4,279

-

Non-GAAP net income attributable to New Oriental (2)(3)

22,996

13,592

69.2%

Net (loss)/ income per ADS attributable to New Oriental-

basic

(0.16)

0.03

-

Net (loss)/ incomeper ADS attributable to New Oriental-

diluted

(0.16)

0.03

-

Non-GAAP net income per ADS attributable to New Oriental-

basic(3)(4)

0.14

0.09

68.6%

Non-GAAP net income per ADS attributable to New Oriental-

diluted(3)(4)

0.14

0.09

68.4%

(in thousands US$,except per ADS(1) data)

1H FY2019

1H FY2018

% of change

Net revenues

1,456,918

1,128,348

29.1%

Operating income

132,782

148,007

-10.3%

Non-GAAP operating income(2)(3)

160,389

160,446

0.0%

Net incomeattributable to New Oriental

97,406

162,672

-40.1%

Non-GAAP net income attributable to New Oriental(2)(3)

207,132

175,111

18.3%

Net income per ADS attributable to New Oriental- basic

0.61

1.03

-40.3%

Net income per ADS attributable to New Oriental- diluted

0.61

1.03

-40.4%

Non-GAAP net income per ADS attributable to New Oriental-

basic(3)(4)

1.31

1.11

17.9%

Non-GAAP net income per ADS attributable to New Oriental-

diluted(3)(4)

1.30

1.11

17.7%

(1)

Each ADS represents one common share.

(2)

GAAP represents Generally Accepted Accounting Principles in the United States of America.

(3)

New Oriental provides net (loss)/income attributable to New Oriental,operating (loss)/ income and net (loss)/income per ADS attributable to New Oriental on a non-GAAP basis that excludes share-based compensation expenses and loss from fair value change of long-term investments to provide supplemental information regarding its operating performance. For more information on these non-GAAP financial measures,please see the section captioned "About Non-GAAP Financial Measures" and the tables captioned "Reconciliations of Non-GAAP Measures to the Most Comparable GAAP Measures" set forth at the end of this release.

(4)

The Non-GAAP net income per ADS is computed using Non-GAAP net income and the same number of shares and ADSs used in GAAP basic and diluted EPS calculation.

Operating Highlights for the Second Fiscal Quarter Ended November 30,2018

Total student enrollments in academic subjects tutoring and test preparation courses increased by 23.6% year-over-year to approximately 2,320,800 for the second fiscal quarter of 2019.

The total number of schools and learning centers was 1,125 as of November 30,an increase of 185 compared to 940 as of November 30,2017,and an increase of 25 compared to 1,100 as of August 31,2018. The total number of schools was 89 as of November 30,2018.

Michael Minhong Yu,New Oriental's Executive Chairman,commented,"We are pleased to see our overall business continue its strong momentum in the second quarter of fiscal year 2019 and achieve a top line growth of 27.8%,or 33.6% if computed in Renminbi. This was driven largely by our key business unit,K-12 all-subjects after-school tutoring,which recorded a remarkable year-over-year revenue growth of approximately 38%,or 44% if computed in Renminbi,reflecting a combination of a solid high-quality product portfolio and a sustained market demand. Furthermore,our U-Can middle and high school all-subjects after-school tutoring business grew by approximately 39%,or 46% if computed in Renminbi,and the POP Kids program achieved a growth of approximately 35%,or 41% if computed in Renminbi."

Chenggang Zhou,New Oriental's Chief Executive Officer,added,"As we execute our well-proven 'Optimize the Market' strategy',we continued to progress our capacity expansion plan in this quarter. We added a net of 24 learning centers in existing cities,and opened a new training school in the city of Jinhua. Altogether,this increased the total square meters of classroom area by approximately 30% year-over-year and 5% quarter-over-quarter by the end of this quarter. At the same time,we continued to refine and leverage our online and offline integrated standardized teaching system for the K-12 business across the nation,and particularly in some of the larger cities for our overseas test preparation business. Starting from the fiscal year 2019,we initiated a pilot program to standardize teaching content and methodology in the U-Can middle and high school tutoring business,which has started to bear fruit as we achieved a remarkable increase of customer retention. As we develop best practices gradually,we will begin to roll out the pilot program in our online and offline K-12 tutoring business to further improve teaching quality. We believe this will in turn boost our competitive advantages as we offer the best learning experience to our students. Moreover,we continued to make strategic investments in our dual-teacher model classes and new initiatives for K-12 tutoring on our pure online education platform,Koolearn.com,which is expected to see increasing demand in cities of lower tiers and in remote areas."

Stephen Zhihui Yang,New Oriental's Chief Financial Officer,"In this quarter we continued to see a healthy ramping up of the new facilities we built in the previous fiscal year,which is highly encouraging. Our Non-GAAP operating margin and the utilization rate in the offline language training and test preparation business remained flattish year-over-year in the second quarter. Going forward,we will remain focused on improving our operational efficiency and ensuring consistently-high quality of education across all business lines,through a standardized,modular and systematic approach. We believe that,altogether,these will enable us to leverage our existing capability to capture growth opportunities and generate sustainable long-term value for our customers and shareholders."

Recent Development

In December 2018,New Oriental entered into a 3-year US$200 million term and revolving facilities agreement with a group of arrangers led by Credit Suisse AG,Singapore Branch. The facilities consist of a US$100 million 3-year bullet maturity term loan and a US$100 million 3-year revolving facility. The use of proceeds of the facilities is for the Company's existing share repurchase program and other general corporate purposes.

Financial Results for the Second Fiscal Quarter Ended November 30,2018

Net Revenues

For the second fiscal quarter of 2019,New Oriental reported net revenues of US$597.1 million,representing a 27.8% increase year-over-year. Net revenues from educational programs and services for the second fiscal quarter were US$543.6 million,representing a 28.6% increase year-over-year. The growth was mainly driven by increases in student enrollments in K-12 after-school tutoring courses.

Total student enrollments in academic subjects tutoring and test preparation courses in the second fiscal quarter of 2019 increased by 23.6% year-over-year to approximately 2,800.

Operating Cost and Expenses

Operating cost and expenses for the quarter were US$627.3 million,representing a 30.6% increase year-over-year. Non-GAAP operating cost and expenses for the quarter,which exclude share-based compensation expenses,were US$613.7 million,representing a 30.3% increase year-over-year.

Cost of revenues increased by 32.1% year-over-year to US$300.1 million,primarily due to increases in teachers' compensation for more teaching hours and rental cost for increased number of schools and learning centers in operation.

Selling and marketing expenses increased by 27.1% year-over-year to US$91.6 million,primarily due to increases in brand promotion expenses and selling and marketing staff's compensation.

General and administrative expenses for the quarter increased by 30.3% year-over-year to US$235.6 million. Non-GAAP general and administrative expenses,were US$222.0 million,representing a 29.4% increase year-over-year. The increase was primarily due to increased headcount as the Company expanded its network of schools and learning centers,as well as increases in R&D expenses and human resources expenses related to the development of the Company's online and offline integrated education ecosystem.

Total share-based compensation expenses,which were allocated to related operating cost and expenses,increased by 47.0% to US$13.7 million in the second fiscal quarter of 2019.

Operating Lossand Operating Margin

Operating lossfor the quarter was US$28.6million,representing a 118.5% increase year-over-year. Non-GAAP loss operating loss for the quarter was US$14.9 million,representing a 295.7% increase year-over-year.

Operating margin for the quarter was negative 4.8%,compared to negative 2.8% in the same period of the prior fiscal year. Non-GAAP operating margin,for the quarter was negative 2.5%,compared to negative 0.8% in the same period of the prior fiscal year.

Loss from Fair Value Change of Long-Term Investments

Loss from fair value change of long term investments for the quarter was US$35.1million.

Net (Loss) / Income and EPS

Net loss attributable to New Oriental for the quarter was US$25.8 million,compared to an income of US$4.3 million. Basic and diluted loss per ADS attributable to New Oriental were US$0.16 and US$0.16,respectively.

Non-GAAP Net Income and Non-GAAP EPS

Non-GAAP net income attributable to New Oriental,for the quarter was US$23.0 million,representing a 69.2% increase from the same period of the prior fiscal year. Non-GAAP basic and diluted earnings per ADS attributable to New Oriental were US$0.14 and US$0.14,respectively.

Cash Flow

Net operating cash flow for the second fiscal quarter of 2019 was approximately US$125.3 million. Capital expenditures for the quarter were US$43.1 million,which were primarily attributable to the opening of 48 facilities and renovations at existing learning centers.

Balance Sheet

As of November 30,New Oriental had cash and cash equivalents of US$842.9 million,compared to US$983.3 million as of May 31,2018. In addition,the Company had US$94.6 million in term deposits,US$1,700.7 million in short-term investments.

New Oriental's deferred revenue balance,which is cash collected from registered students for courses and recognized proportionally as revenue as the instructions are delivered,at the end of the second quarter of fiscal year 2019 was US$1,250.3 million,an increase of 9.9% from US$1,137.3 million at the end of the second quarter of fiscal year 2018. The lower than usual increase is due to the change of tuition fees collection schedule for K-12after-school tutoring courses.

Financial Results for the Six Months Ended November 30,2018

For the first six months of fiscal year 2019,New Oriental reported net revenues of US$1,456.9 million,representing a 29.1% increase year-over-year.

Total student enrollments in academic subjects tutoring and test preparation courses in the first six months of fiscal year 2019 increased by 18.9% to approximately 4,056,100.

Income from operations for the first six months of fiscal year 2019 was US$132.8 million,representing a 10.3% decrease year-over-year. Non-GAAP income from operations for the first six months of fiscal year 2019 was US$160.4 million,representing a 0.04% decrease year-over-year.

Operating margin for the first six months of fiscal year 2019 was 9.1%,compared to 13.1% for the same period of the prior fiscal year. Non-GAAP operating margin,which excludes share-based compensation expenses for the first six months of fiscal year 2019,was 11.0%,compared to 14.2% for the same period of the prior fiscal year.

Net income attributable to New Oriental for the first six months of fiscal year 2019 was US$97.4 million,representing a 40.1% decrease year-over-year. Basic and diluted net income per ADS attributable to New Oriental for the first six months of fiscal year 2019 amounted to US$0.61 and US$0.61,respectively.

Non-GAAP net income attributable to New Oriental for the first six months of fiscal year 2019 was US$207.1 million,representing an 18.3% increase year-over-year. Non-GAAP basic and diluted net income per ADS attributable to New Oriental for the first six months of fiscal year 2019 amounted to US$1.31 and US$1.30,respectively.

Outlook for Third Quarter of Fiscal Year 2019

New Oriental expects total net revenues in the third quarter of fiscal year 2019 (December 1,2018 to February 28,2019) to be in the range of US$769.9million to US$793.2 million,representing year-over-year growth in the range of 25% to 28%.

The projected growth rate of revenue in Renminbi is expected to be in the range of 32% to 36% for the third quarter of fiscal year 2019.

This forecast reflects New Oriental's current and preliminary view,which is subject to change.

Conference Call Information

New Oriental's management will host an earnings conference call at 8 AM on January 22,2019,U.S. Eastern Time (9 PM on January 22,Beijing/Hong Kong Time).

Dial-in details for the earnings conference call are as follows:

US:

+1-845-675-0437

Hong Kong:

+852-3018-6771

UK:

+44-20-3621-4779

Please dial in 10 minutes before the call is scheduled to begin and provide the passcode to join the call. The passcode is "3990216".

A replay of the conference call may be accessed by phone at the following number until January 31,2019:

International:

+61-2-8199-0299

Passcode:

3990216

Additionally,a live and archived webcast of the conference call will be available at http://investor.neworiental.org.

About New Oriental

New Oriental is the largest provider of private educational services in China based on the number of program offerings,total student enrollments and geographic presence. New Oriental offers a wide range of educational programs,services and products consisting primarily of language training and test preparation,primary and secondary school education,online education,content development and distribution,overseas study consulting services,pre-school education and study tour. New Oriental's ADSs,each of which represents one common share,currently trade on the New York Stock Exchange under the symbol "EDU."

For more information about New Oriental,please visit http://www.neworiental.org/english/.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things,the outlook for the third quarter of fiscal year 2019,quotations from management in this announcement,as well as New Oriental's strategic and operational plans,contain forward-looking statements. New Oriental may also make written or oral forward-looking statements in its reports filed or furnished to the U.S. Securities and Exchange Commission,in its annual reports to shareholders,in press releases and other written materials and in oral statements made by its officers,directors or employees to third parties. Statements that are not historical facts,including statements about New Oriental's beliefs and expectations,are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement,including but not limited to the following: our ability to attract students without a significant decrease in course fees; our ability to continue to hire,train and retain qualified teachers; our ability to maintain and enhance our "New Oriental" brand; our ability to effectively and efficiently manage the expansion of our school network and successfully execute our growth strategy; the outcome of ongoing,or any future,litigation or arbitration,including those relating to copyright and other intellectual property rights; competition in the private education sector in China; changes in our revenues and certain cost or expense items as a percentage of our revenues; the expected growth of the Chinese private education market; Chinese governmental policies relating to private educational services and providers of such services; health epidemics and other outbreaks in China; and general economic conditions in China. Further information regarding these and other risks is included in our annual report on Form 20-F and other documents filed with the Securities and Exchange Commission. New Oriental does not undertake any obligation to update any forward-looking statement,except as required under applicable law. All information provided in this press release and in the attachments is as of the date of this press release,and New Oriental undertakes no duty to update such information,except as required under applicable law.

About Non-GAAP Financial Measures

To supplement New Oriental's consolidated financial results presented in accordance with GAAP,New Oriental uses the following measures defined as non-GAAP financial measures by the SEC: net (loss) / income excluding share-based compensation expenses and loss from fair value change of long-term investments,operating income excluding share-based compensation expenses,operating cost and expenses excluding share-based compensation expenses,general and administrative expenses excluding share-based compensation expenses,operating margin excluding share-based compensation expenses,and basic and diluted net income per ADS and per share excluding share-based compensation expenses and loss from fair value change of long-term investments. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures,please see the tables captioned "Reconciliations of non-GAAP measures to the most comparable GAAP measures" set forth at the end of this release.

New Oriental believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding share-based compensation expenses and loss from fair value of long-term investments that may not be indicative of its operating performance from a cash perspective. New Oriental believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to New Oriental's historical performance and liquidity. New Oriental believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. A limitation of using these non-GAAP measures is that they exclude share-based compensation charge and loss from fair value change of long-term investments that has been and will continue to be for the foreseeable future a significant recurring expense in our business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

Contacts

For investor and media inquiries,please contact:

Ms. Joyce Wu

FTI Consulting

Tel: +852-3768-4548

Email: NewOriental@fticonsulting.com

Ms. Sisi Zhao

New Oriental Education and Technology Group Inc.

Tel: +86-10-6260-5568

Email: zhaosisi@xdf.cn

NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands)

As of November 30

As of May 31

2018

2018

(Unaudited)

(Audited)

USD

USD

ASSETS:

Current assets:

Cash and cash equivalents

842,860

983,319

Restricted cash

43

47

Term deposits

94,569

107,741

Short-term investments

1,700,650

1,623,763

Accounts receivable,net

5,351

3,179

Inventory,net

35,141

40,175

Prepaid expenses and other current assets,net

207,768

182,095

Amounts due from related parties,current

20,261

1,595

Total current assets

2,906,643

2,941,914

Restricted cash,non-current

3,683

3,399

Property and equipment,net

488,941

449,592

Land use rights,net

12,941

3,785

Amounts due from related parties,non-current

2,006

2,226

Long-term deposits

44,431

40,099

Long-term prepaid rents

535

191

Intangible assets,921

8,544

Goodwill,net

66,365

31,729

Long-term investments,net

391,334

433,333

Deferred tax assets,non-current,net

47,175

43,323

Other non-current assets

25,668

19,577

Total assets

4,002,643

3,977,712

LIABILITIES,MEZZANINE EQUITY AND EQUITY

Current liabilities:

Accounts payable (including accounts payable of the

consolidated variable interest entities without recourse to New

Oriental of US$39,279 and US$35,450 as of May 31,2018 and

November30,respectively)

36,126

39,889

Accrued expenses and other current liabilities (including accrued

expenses and other current liabilities of the consolidated variable

interest entities without recourse to New Oriental of US$335,955

and US$414,654 as of May 31,2018 and November30,

respectively)

456,406

373,537

Income taxes payable (including income tax payable of the

consolidated variable interest entities without recourse to New

Oriental of US$54,844 and US$69,305 as of May 31,respectively)

66,610

67,233

Amounts due to related parties (including amounts due to related

parties of the consolidated variable interest entities without

recourse to New Oriental of US$30 and US$393 as of May 31,

2018 andNovember30,respectively)

393

30

Deferred revenue (including deferred revenue of the

consolidated variable interest entities without recourse to New

Oriental of US$1,244,748 and US$1,039 as of May 31,2018

and November 30,respectively)

1,250,262

1,270,195

Total current liabilities

1,809,797

1,750,884

Deferred tax liabilities,non-current (including deferred tax

liabilities of the consolidated variable interest entities without

recourse to New Oriental of US$13,782 and US$7,745 as of May

31,respectively)

18,170

12,133

Total liabilities

1,827,967

1,763,017

Mezzanine equity

Redeemable non-controlling interests

206,624

206,624

Equity

New Oriental Education & Technology Group Inc. shareholders'

equity

1,951,653

1,991,589

Non-controlling interests

16,399

16,482

Total equity

1,968,052

2,008,071

Total liabilities,mezzanine equity and equity

4,712

NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except for per share and per ADS amounts)

For the Three Months Ended November 30

2018

2017

(Unaudited)

(Unaudited)

USD

USD

Net revenues

597,072

467,183

Operating cost and expenses (note 1)

Cost of revenues

300,105

227,258

Selling and marketing

91,597

72,091

General and administrative

235,647

180,904

Total operating cost and expenses

627,349

480,253

Gain on disposal of a subsidiary

1,724

-

Operating loss

(28,553)

(13,070)

Loss from fair value change of long-term investments

(35,135)

-

Other income,783

23,578

Provision for income taxes

(11)

(2,973)

Income from equity method investments

1,575

224

Net (loss) income

(26,341)

7,759

Add: Net loss (income) attributable to non-controlling interests

515

(3,480)

Net (loss) income attributable to New Oriental

Education & Technology Group Inc.'s shareholders

(25,826)

4,279

Net (loss) income per common share

- Basic

(0.16)

0.03

- Diluted

(0.16)

0.03

Net (loss) income per ADS (note 2)

- Basic

(0.16)

0.03

- Diluted

(0.16)

0.03

NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC.

RECONCILIATION OF NON-GAAP MEASURES TO THE MOST COMPARABLE GAAP MEASURES

(In thousands except for per share and per ADS amounts)

For the Three Months Ended November 30

2018

2017

(Unaudited)

(Unaudited)

USD

USD

General and administrative expenses

235,904

Less: Share-based compensation expenses in

general and administrative expenses

13,687

9,313

Non-GAAP general and administrative

expenses

221,960

171,591

Total operating cost and expenses

627,253

Less: Share-based compensation expenses

13,313

Non-GAAP operating cost and expenses

613,662

470,940

Operating loss

(28,070)

Add: Share-based compensation expenses

13,313

Non-GAAP operating loss

(14,866)

(3,757)

Operating margin

-4.8%

-2.8%

Non-GAAP operating margin

-2.5%

-0.8%

Net (loss) income attributable to New Oriental

(25,279

Add: Share-based compensation expenses

13,313

Add: Loss from fair value change of long-

term investments

35,135

-

Non-GAAP net income attributable to New

Oriental

22,996

13,592

Net (loss) income per ADS attributable to

New Orienta l- Basic (note 2)

(0.16)

0.03

Net (loss) income per ADS attributable to

New Oriental - Diluted (note 2)

(0.16)

0.03

Non-GAAP net income per ADS

attributable to New Oriental - Basic (note 2)

0.14

0.09

Non-GAAP net income per ADS

attributable to New Oriental - Diluted (note 2)

0.14

0.09

Weighted average shares used in calculating

basic net income per ADS (note 2)

158,690,714

158,119,910

Weighted average shares used in calculating

diluted net income per ADS (note 2)

159,030,698

158,322,404

Non-GAAP income per share - basic

0.14

0.09

Non-GAAP income per share - diluted

0.14

0.09

Notes:

Note 1: Share-based compensation expenses (in thousands) are included in the operating cost

and expenses as follows:

For the Three Months Ended November 30

2018

2017

(Unaudited)

(Unaudited)

USD

USD

General and administrative expenses

13,313

Total

13,313

Note 2: Each ADS represents one common share.

NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except for per share and per ADS amounts)

For the Six Months Ended November 30

2018

2017

(Unaudited)

(Unaudited)

USD

USD

Net Revenues:

1,918

1,348

Operating cost and expenses (note 1):

Cost of revenues

667,504

497,452

Selling and marketing

190,898

145,994

General and administrative

469,309

336,895

Total operating cost and expenses

1,327,711

980,341

Gain on disposal of a subsidiary

3,575

-

Operating income

132,782

148,007

Loss from fair value change of long-term investments

(82,119)

-

Other income,net

69,292

48,511

Provision for income taxes

(25,695)

(29,851)

Income from equity method investments

522

249

Net income

94,782

166,916

Add: Net loss (income) attributable to non-controlling interests

2,624

(4,244)

Net income attributable to New Oriental Education &

Technology Group Inc.

97,406

162,672

Net income per share attributable to New Oriental -

Basic

0.61

1.03

Net income per share attributable to New Oriental -

Diluted

0.61

1.03

Net income per ADS attributable to New Oriental -

Basic (note 2)

0.61

1.03

Net income per ADS attributable to New Oriental -

Diluted (note 2)

0.61

1.03

NEW ORIENTAL EDUCATION & TECHNOLOGY GROUP INC.

RECONCILIATION OF NON-GAAP MEASURES TO THE MOST COMPARABLE GAAP MEASURES

(In thousands except for per share and per ADS amounts)

For the Six Months Ended November 30

2018

2017

USD

USD

General and administrative expenses

469,895

Share-based compensation expense in

general and administrative expenses

27,607

12,439

Non-GAAP general and administrative

expenses

441,702

324,456

Total operating cost and expenses

1,341

Share-based compensation expenses

27,439

Non-GAAP operating cost and

expenses

1,300,104

967,902

Operating income

132,007

Share-based compensation expenses

27,439

Non-GAAP operating income

160,389

160,446

Operating margin

9.1%

13.1%

Non-GAAP operating margin

11.0%

14.2%

Net income attributable to New Oriental

97,672

Share-based compensation expenses

27,439

Add: Loss from fair value change of

long-term investments

82,119

-

Non-GAAP net income to New Oriental

207,132

175,111

Net income per ADS attributable to

New Oriental - Basic (note 2)

0.61

1.03

Net income per ADS attributable to

New Oriental - Diluted (note 2)

0.61

1.03

Non-GAAP net income per ADS

attributable to New Oriental - Basic

(note 2)

1.31

1.11

Non-GAAP net income per ADS

attributable to New Oriental - Diluted

(note 2)

1.30

1.11

Weighted average shares used in

calculating basic net income per ADS

(note 2)

158,631,953

158,051,290

Weighted average shares used in

calculating diluted net income per ADS

(note 2)

159,111,883

158,277,981

Non-GAAP income per share - basic

1.31

1.11

Non-GAAP income per share - diluted

1.30

1.11

Notes:

Note 1: Share-based compensation expenses (in thousands) are included in the operating

cost and expenses as follows:

For the Six Months Ended November 30

2018

2017

(Unaudited)

(Unaudited)

USD

USD

General and administrative expense

27,439

Total

27,439

Note 2: Each ADS represents one common share.

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