Lucy Yu: Thank you, Stephen. Just to follow-up, you mean the OMO model, I know it’s adopted for the high school, but for the non-curricular training, we are also using OMO at the moment?
Stephen Yang: Yes.
Lucy Yu: So what’s the percentage of, like, online versus offline at the moment?
Stephen Yang: Yes. Yes, Lucy, for some — the non-academic courses and the overseas test prep, even for some college students business, we do all of the businesses, we do have the OMO model, yes.
Sisi Zhao: And also the intelligent learning devices, which is also the one that we don’t require too many new locations.
Lucy Yu: I see. Thank you so much.
Stephen Yang: Thank you, Lucy.
Operator: Thank you, Lucy. Our next question comes from the line of Timothy Zhao from Goldman Sachs. Please ask your question, Timothy.
Timothy Zhao: Thank you. Hi, Stephen. Hi, Sisi. This is Timothy from Goldman. My question is on the margins. I saw this quarter the non-GAAP Op margin expanded by around 3.3 percentage points. Just wondering if you provide — can provide any color in terms of breakdown because on the other hand, I think, for East Buy, there was some pressure on the margin. Just wondering, if we exclude the margin impact from East Buy, what kind of margin expansion that we are seeing for the core business? And then after this quarter, how do we think about the full-year Op margin guidance? Thank you.
Stephen Yang: Okay. Yes, let us start with the quarter — this quarter margin analysis. Even though, yeah, as you said, even though, East Buy saw margin drag in this quarter. We still got the non-GAAP Op margin expansion by 330 basis points. And I think the margin increase was mainly driven by the following reasons. Number one is the utilization rates improving of our facilities and the teaching resources increased the learning center margins on average. So that means we have the lower fixed cost and expenses, compared to the — that of last year. And number two is the new business margin is over — is around like the 19%, 20%. So we just started the new business two years ago. So that means the ramping-up pace is much faster than we expected.
And also the remaining business such as the overseas-related business and the college business generated higher margin than that of last year. So in the Q2, if we take out the East Buy’s impact for education in non-GAAP margins for that.
Sisi Zhao: Increased, actually is much higher than the overall margin, yes. Because they don’t — actually, East Buy don’t release quarterly earnings. So you can look at the results after first half. So you can roughly get the calculation of the educational business margin expansion.
Stephen Yang: [Technical Difficulty] and as we head into the Q3 with operating leverage and the higher utilization control, I think [Technical Difficulty] will get the margin expansion continuously even in the Q3 and in Q4. So that means in the second-half of the year, I think you will see the margin expansion in education business.
Timothy Zhao: Thank you, Stephen and Sisi. This is very helpful.
Stephen Yang: Thank you.
Operator: Thank you, Tim. Our next question comes from the line of Tian Hou from T.H. Capital. Please ask your question, Tian.
Tian Hou: Hi, Sisi, Stephen. Congratulations for the good quarter. I have actually two questions; one is, how does culture and tourism business is conducted? How do you record revenue from that? That’s number one. Number two, can you break down the result and guidance into different segments for both revenues and margin profiles? That’s two. Thank you.
Stephen Yang: Thank you, Tian. I will take the question about tourism business, okay. Tian, as mentioned in the last quarter, we have started the tourism business as the — one of our innovative ventures. And this — the tourism business includes our well-grounded study tour and research camp business for the students, as well as the — our new tourism business that serves the middle-aged and senior people. We do have a lot of teachers. And I think our new tourism business will utilize our strength in knowledge sharing of those teachers. And as well, we have abundant sales channels including Dongfang, JingYuan and online, offline channels in New Oriental. So during this quarter, we piloted a number of tourism offerings to expand the — to reach all ages people.
And the top-line growth is very good in this quarter because last year we did have the negative impact from the COVID. And we set up the new company named the New Oriental Cultural Tourism Group. And also this group company set up the 100% — the subsidiaries in all cities. So we divided the revenue and the financial statement from the education through the tourism business. So that means going forward, we will record the two business lines in two parts. And so, going forward, I think our goal is to be the leading the cultural tourism company in China and to provide the best service to the customers as much as we can. And I do hope the, going forward, the tourism business will contribute more revenues and the profit to the whole group, Tian.
Tian Hou: That’s good. Yes.
Sisi Zhao: Yes, Tian, your second question on the guidance breakdown, as I mentioned earlier, for overseas-related business, for Q3, roughly distribution are similar with previous quarter, about 21%, 22%. And the domestic test prep is about 2% to 3%. And the K-12, including the new educational initiatives for K-9 and also remaining high school business together contribute over 40% of total revenue. Yeah, so that’s the key business line mix.
