Fourth Quarter Net Revenue Exceeding Guidance with 10.4% Increase
Year-Over-Year; Net income per diluted ADS is $0.075
Live Conference Call to be held on Friday, March 12, 2010 at 8 a.m. (Eastern)
/ 5 a.m. (Pacific) / 9 p.m. (Beijing/Hong Kong)
BEIJING, March 11 /PRNewswire-Asia-FirstCall/ -- ChinaEdu Corporation ("ChinaEdu" or the "Company"), an educational services provider in China, today announced its unaudited financial results for the fourth quarter ended December 31, 2009.(1)
(in thousands, unaudited) Three Months Ended Twelve Months Ended December December Period December December Year Period Ended 31, 2008 31, 2009 over 31, 2008 31, 2009 over Currency USD USD Period % USD USD Year % Financial Data: Net revenue 12,678 13,993 10.4% 46,546 51,965 11.6% Gross profit 6,965 8,481 21.8% 29,298 31,695 8.2% Income from operations (7,216) 2,913 N/A (1,912) 11,635 N/A Net income attributable to ChinaEdu (5,711) 1,326 N/A (6,302) 5,096 N/A Adjusted EBITDA (2) (non-GAAP) 1,539 4,004 160.2% 12,492 16,011 28.2% Adjusted net income attri- butable to ChinaEdu (3) (non-GAAP) 2,491 1,722 -30.9% 6,198 6,904 11.4% Net income (loss) attributable to ChinaEdu per ADS (4) (0.308) 0.082 N/A (0.330) 0.313 N/A Adjusted net income per ADS (5) (non-GAAP) 0.133 0.107 -19.5% 0.322 0.424 31.7% Net income per diluted ADS (0.308) 0.075 N/A (0.330) 0.291 N/A Adjusted net income per diluted ADS (6) (non- GAAP) 0.130 0.098 -24.6% 0.308 0.394 27.9% Operating Data: Revenue students (7) for online degree program 118,000 140,000 18.6% 243,000 287,000 18.1% (1) The reporting currency of the Company is RMB, but for the convenience of the reader, the amounts for the three and twelve months ended December 31, 2009 and the years ended December 31, 2008 and 2009 are presented in U.S. dollars. Unless otherwise stated, all translations from RMB to U.S. dollars were made at the rate of RMB6.8259 to $1.00, the noon buying rate in effect on December 31, 2009 in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or U.S. dollar amounts referred could be converted into U.S. dollars or RMB, as the case may be, at any particular rate or at all. For analytical presentation, all percentages are calculated using the numbers presented in the financial statements contained in this earnings release. An explanation of the Company's non-GAAP financial measures is included in the section entitled "Non-GAAP Financial Measures" below, and the related reconciliations to GAAP financial measures are presented in the accompanying financial statements. (2) "Adjusted EBITDA" is a non-GAAP measure defined as net income before interest income, taxes, exchange loss, depreciation, amortization of intangible assets and land use rights, share-based compensation and goodwill and intangible assets impairment charges, if applicable. (3) "Adjusted net income attributable to ChinaEdu" is a non-GAAP measure defined as net income attributable to ChinaEdu excluding share-based compensation, exchange loss, noncontrolling interest for share-based compensation, amortization of intangible assets and land use rights and goodwill and intangible assets impairment charges, if applicable. (4) "ADS" is American Depositary Share. Each ADS represents three ordinary shares. (5) "Adjusted net income per ADS" is a non-GAAP measure which is computed using adjusted net income attributable to ChinaEdu over number of ADSs used in net income (loss) attributable to ChinaEdu per ADS calculation. (6) "Adjusted net income per diluted ADS" is a non-GAAP measure which is computed using adjusted net income attributable to ChinaEdu over number of ADSs used in net income per diluted ADS calculation. (7) "Revenue students" refer to students of university online degree programs who have paid tuitions in the applicable period. Fourth Quarter 2009 Highlights -- Total net revenue for the fourth quarter of 2009 increased by 10.4% to $14.0 million from $12.7 million for the corresponding period in 2008, exceeding our previously disclosed guidance for the fourth quarter of 2009 of $12.9 million to $13.5 million. -- Net revenue from online degree programs, the Company's major business segment, increased by 9.3% to $11.2 million for the fourth quarter of 2009 from $10.3 million for the corresponding period in 2008. -- The number of revenue students in online degree programs during the fourth quarter of 2009 increased by approximately 18.6% to over 140,000 from approximately 118,000 for the corresponding period in 2008. -- Adjusted EBITDA increased by 160.2% to $4.0 million in the fourth quarter of 2009 from $1.5 million for the corresponding period in 2008. -- Net income attributable to ChinaEdu increased to $1.3 million in the fourth quarter of 2009 from a loss $5.7 million for the corresponding period in 2008. -- Adjusted net income attributable to ChinaEdu decreased by 30.9% to $1.7 million in the fourth quarter of 2009 from $2.5 million for the corresponding period in 2008. -- Net income per diluted ADS was $0.075 for the fourth quarter of 2009 as compared to a loss of $0.308 for the corresponding period in 2008. -- Adjusted net income per diluted ADS was $0.098 for the fourth quarter of 2009 as compared to $0.130 for the corresponding period in 2008. Fiscal Year 2009 Highlights -- Total net revenue for the fiscal year 2009 increased by 11.6% to $52.0 million from $46.5 million for the fiscal year 2008. -- Net revenue from online degree programs for the fiscal year 2009 increased by 11.7% to $41.8 million from $37.4 million for the fiscal year 2008. -- The number of revenue students in online degree programs for the fiscal year 2009 increased by approximately 18.1% to over 287,000 from approximately 243,000 for the fiscal year 2008. -- Adjusted EBITDA for the fiscal year 2009 increased by 28.2% to $16.0 million from $12.5 million for the fiscal year 2008. -- Net income attributable to ChinaEdu increased to $5.1 million in the fiscal year 2009 from a loss $6.3 million for the fiscal year 2008. -- Adjusted net income attributable to ChinaEdu increased by 11.4% to $6.9 million in the fiscal year 2009 from $6.2 million for the fiscal year 2008. -- Net income per diluted ADS was $0.291 for the fiscal year 2009 as compared to a loss of $0.330 for the fiscal year 2008. -- Adjusted net income per diluted ADS was $0.394 for the fiscal year 2009 as compared to $0.308 for the fiscal year 2008.
"We are pleased to report solid results for the fourth quarter of 2009, completing the fiscal year 2009 with 11.6% total net revenue growth over 2008. Adjusted net income per diluted ADS for the fiscal year 2009 increased 27.9% over 2008. In 2009, all of our major business lines have recorded strong growth and we are very confident of our future prospects," said Ms. Julia Huang, ChinaEdu's Chairman and Chief Executive Officer. "In 2009, we announced several strategic partnerships for our online degree programs, which we believe will contribute significantly to our company's future growth. Our learning centers network continued to expand, reaching 60 learning centers at the end of 2009, contributing to over 5% of our total net revenue in the fourth quarter of 2009. We are also very pleased with our 101 online tutoring segment's performance, which recorded nearly 27% of net revenue growth in 2009. Looking ahead, we are committed to continuing research and development efforts of the technology platform and the internet & mobile applications for the online degree and non-degree programs, while continue to maintain a tight control over our expenses. Overall, we believe our company is positioned strongly to capture the immense potential that online education can offer in the future."
Financial Results for the Fourth Quarter Ended December 31, 2009 Net Revenue
Total net revenue for the fourth quarter of 2009 was $14.0 million, representing a 10.4% increase from the corresponding period in 2008. Net revenue from online degree programs for the fourth quarter of 2009 was $11.2 million, representing a 9.3% increase from $10.3 million for the corresponding period in 2008. The growth in net revenue was due to strong enrollment growth for the 2009 fall semester, which registered over 140,000 revenue students representing an increase of 18.6% as compared to 118,000 revenue students for the 2008 fall semester.
Net revenue from the Company's non-online degree programs (online tutoring programs, international curriculum programs and private primary and secondary schools) for the fourth quarter of 2009 was $2.8 million, representing a 14.9% increase from $2.4 million for the corresponding period in 2008. This increase was attributable to a 23.2% increase in net revenue for the 101 online tutoring programs from increased sales and a 43.9% increase in net revenue at Anqing School due to increase in student enrollment from the academic year beginning in September 2008 as a result of the completion of construction of the new campus, but offset by a 29.6% decrease in net revenue for the international curriculum programs due to the termination of our New Zealand contract.
A refund of valued-added tax ("VAT") of $0.6 million in the fourth quarter of 2009 and $0.9 million in the corresponding period in 2008 was recognized as net revenue primarily in online degree programs.
Cost of Revenue
Total cost of revenue for the fourth quarter of 2009 was $5.5 million, representing a decrease of 3.5% as compared to $5.7 million for the corresponding period of 2008. Cost of revenue for online degree programs for the fourth quarter of 2009 was $3.9 million, representing a decrease of 5.8% as compared to $4.1 million for the fourth quarter of 2008. The decrease in online degree programs' cost of revenue was primarily due to a decrease in special courseware development in the fourth quarter of 2009 as compared to the fourth quarter of 2008, as well as a decrease in employee and recruiting commission related costs.
By the end of the fourth quarter of 2009, we had 60 operational learning centers of which 22 were proprietary and 38 were contracted locations, as compared to 37 operational learning centers as of the end of the fourth quarter of 2008, of which 16 were proprietary and 21 were contracted locations.
Cost of revenue for non-online degree programs for the fourth quarter of 2009 was $1.6 million, representing a 2.3% increase for the corresponding period in 2008. This increase was attributable primarily to an increase in cost of revenue related to Anqing School's new campus, which was partially offset by a decrease in cost of revenue for the international curriculum programs and our 101 online tutoring programs.
Gross Profit and Gross Margin
Gross profit for the fourth quarter of 2009 was $8.5 million, representing a 21.8% increase from $7.0 million for the corresponding period of 2008. Total gross margin for the fourth quarter of 2009 was 60.6% as compared to 54.9% for the corresponding period of 2008. Gross margin for the online degree programs increased to 65.2% for the fourth quarter of 2009 as compared to 59.7% for the corresponding period of 2008. Gross margin for Anqing School improved significantly, due to increased enrollment at the new campus, as compared to the corresponding period in 2008 despite additional depreciation expenses resulting from the construction of the new campus. Gross margin for 101 online tutoring programs also improved due to tight cost controls.
Operating Expenses
Total operating expenses were $5.6 million for the fourth quarter of 2009, representing a 60.7% decrease from $14.2 million for the corresponding period in 2008. This decrease was attributable primarily to the factors discussed below:
-- General and administrative expenses for the fourth quarter of 2009 were $3.4 million, which represented a 16.0% decrease from $4.0 million for the corresponding period of 2008. This decrease was primarily attributable to a decrease in headquarter employee related expenses of approximately $0.3 million in the fourth quarter of 2009 as compared to the corresponding period of 2008. General and administrative expenses for the fourth quarter of 2008 were also higher due to an account receivables write-off of approximately $0.2 million. -- Selling and marketing expenses were $1.0 million for the fourth quarter of 2009, which represented a 19.8% decrease from $1.2 million for the corresponding period in 2008. This decrease was attributable primarily to a decrease in the amount spent on conferences and other sales activities at our 101 online tutoring programs in the fourth quarter of 2009. -- Research and development expenses, mainly contributing to technology platform upgrade and the internet & mobile applications development, for the fourth quarter of 2009 were $1.2 million, representing a 6.0% decrease from $1.3 million for the corresponding period in 2008. The decrease was attributable primarily to a reduction in employee related expenses in the fourth quarter of 2009 as compared to the fourth quarter of 2008. However, research and development expenses for fiscal year 2009 increased by 16.0% compared with fiscal year 2008. -- There was no impairment charge of goodwill and intangible assets in the fourth quarter of 2009, while such charge was $7.7 million in the corresponding period of 2008. -- Share-based compensation for the fourth quarter of 2009, which was allocated to the related cost and operating expense line items, remained flat at $0.2 million as compared to $0.2 million for the corresponding period in 2008. Income from Operations
As a result of the factors discussed above, income from operations for the fourth quarter of 2009 was $2.9 million, as compared to a loss of $7.2 million for the corresponding period of 2008. Operating margin was 20.8% for the fourth quarter of 2009 as compared to a loss of 56.9% in the corresponding period of 2008. The increase in income from operations and operating margin was primarily because there was not an impairment charge of goodwill and intangible assets in the fourth quarter of 2009, while such charge was $7.7 million in the corresponding period of 2008.
Adjusted income from operations, which is a non-GAAP measure defined as income from operations excluding share-based compensation, exchange loss, amortization of intangible assets and land use rights and goodwill and intangible assets impairment charges, if applicable, was $3.3 million for the fourth quarter of 2009, which increased by 228.3% as compared to $1.0 million in the corresponding period of 2008. Adjusted operating margin, which is a non-GAAP measure defined as a ratio of adjusted operating income from operations (non-GAAP) over net revenue, for the fourth quarter of 2009, was 23.9% as compared to 8.0% for the corresponding period of 2008.
Interest Income
Interest income was $0.2 million in the fourth quarter of 2009, as compared to $0.4 million in the corresponding quarter of 2008. This decrease was attributable primarily to (i) reduced interest-bearing cash and bank deposit balance of $47.7 million as of December 31, 2009, as compared to $61.2 million as of December 31, 2008, and (ii) a lower interest rate for the fourth quarter of 2009 as compared to the corresponding period of 2008.
Income Tax Expense
Income tax expense for the fourth quarter of 2009 was $0.8 million, as compared to income tax benefit of $2.9 million for the corresponding period in 2008. In December 2008, seven of our subsidiaries and affiliate companies obtained the "high and new technology enterprises" or "HNTE" status under the new PRC Enterprise Income Tax Law, which came into effect on January 1, 2008. The HNTE entities enjoy a 15% tax rate, which is lower than the statutory tax rate of 25%. A catch-up adjustment was recorded in the fourth quarter of 2008 to adjust our 2008 income tax expenses based on a decrease in tax rate from 25% to 15%. As a result, we had an income tax benefit in the fourth quarter of 2008.
Noncontrolling Interest
Noncontrolling interest was $1.1 million in the fourth quarter of 2009, representing a decrease from $1.8 million in the corresponding period in 2008, which was attributable primarily to the noncontrolling interest impact related to the reduction in our deferred tax liabilities for the fiscal year 2008 resulted from a change of tax rate from 25% to 15%.
Net Income (Loss) attributable to ChinaEdu
Net income (loss) attributable to ChinaEdu, which is net income excluding net income attributable to noncontrolling interest, was $1.3 million for the fourth quarter of 2009, as comparable to a net loss of $5.7 million for the corresponding period in 2008. The increase was primarily because there was not an impairment charge of goodwill and intangible assets in the fourth quarter of 2009, while such a charge was $7.7 million in the corresponding period of 2008.
Net income per basic and diluted ADS were $0.082 and $0.075, respectively, for the fourth quarter of 2009, which have improved significantly as compared to losses of $0.308 and $0.308, respectively, for the corresponding period in 2008.
Adjusted net income attributable to ChinaEdu (non-GAAP) decreased by 30.9% to $1.7 million for the fourth quarter of 2009, as compared to $2.5 million in the corresponding period of 2008. Adjusted net margin, which is a non-GAAP measure defined as a ratio of adjusted net income attributable to ChinaEdu (non-GAAP) over net revenue, was 12.3% in the fourth quarter of 2009 as compared to 19.6% in the corresponding period of 2008. The decrease in adjusted net income attributable to ChinaEdu (non-GAAP) was primarily due to a one-time reduction in income tax expenses in the fourth quarter of 2008.
Adjusted net income per basic and diluted ADS were $0.107 and $0.098, respectively, for the fourth quarter of 2009.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA (non-GAAP) was $4.0 million for the fourth quarter of 2009, which increased by 160.2% as compared to $1.5 million for the corresponding period in 2008. This increase was attributable primarily to improved operating results from our learning centers network, 101 online tutoring programs and Anqing School.
Deferred Revenue
Deferred revenue at the end of the fourth quarter of 2009 was $15.5 million, with current deferred revenue of $14.3 million and non-current deferred revenue of $1.2 million. Deferred revenue at the end of the fourth quarter of 2009 increased significantly as compared to deferred revenue of $6.1 million at the end of the third quarter 2009 due to seasonality of enrollments, which results from tuition received generally during the second quarter (spring semester) and the fourth quarter (fall semester) of each year.
Cash and Cash Equivalents
As of December 31, 2009, ChinaEdu reported cash and cash equivalents of $29.8 million, which primarily consisted of cash-on-hand, demand deposits and term deposits with maturity periods of three months or less.
Term Deposits and Amount Due from Related Parties
Term deposits and amount due from related parties (which represents cash owed to us by our collaborative alliance partners) were $17.9 million and $25.9 million, respectively, on December 31, 2009.
Financial Results for the Fiscal Year Ended December 31, 2009 Net Revenue
Total net revenue for the fiscal year ended December 31, 2009 was $52.0 million, representing an 11.6% increase from $46.5 million for the fiscal year 2008. Net revenue from online degree programs for the fiscal year 2009 was $41.8 million, representing an 11.7% increase from $37.4 million for the fiscal year 2008. This increase was attributable primarily to enrollment growth at our university partners' online degree programs in fiscal year 2009 as compared to fiscal year 2008. In the aggregate, our university partners had approximately 287,000 revenue students during fiscal year 2009, representing an 18.1% increase from approximately 243,000 revenue students in fiscal year 2008.
Net revenue from the Company's non-online degree programs for the fiscal year 2009 was $10.2 million, representing an 11.5% increase compared to $9.1 million for the fiscal year 2008. This result was attributable primarily to the increase in student enrollment at the Anqing School and increase in net revenue from the 101 online tutoring programs in fiscal year 2009, which was offset by a decrease in net revenue from international curriculum programs.
Cost of Revenue
Total cost of revenue for the fiscal year 2009 was $20.3 million, representing an increase of 17.5% as compared to $17.2 million for the fiscal year 2008. Cost of revenue from our online degree programs for fiscal year 2009 was $14.0 million, representing a 25.2% increase from $11.2 million in fiscal year 2008. The increase was primarily due to the cost increase related to the expansion of our learning centers network and increase in employee related costs throughout fiscal year 2009.
Cost of revenue for non-online degree programs for the fiscal year 2009 was $6.3 million, representing a 3.5% increase from $6.1 million for the fiscal year 2008. This increase was attributable primarily to the increase in cost of revenue at Anqing School and 101 online tutoring programs, but was offset by a decrease in cost of revenue for the international curriculum programs.
Gross Profit
Gross profit for the fiscal year 2009 was $31.7 million as compared with $29.3 million for the fiscal year 2008, representing an increase of 8.2%.
Gross margin for the fiscal year 2009 was 61.0%, as compared with gross margin of 62.9% for the fiscal year 2008. Gross margin for the online degree programs was 66.5% in 2009 as compared with gross margin for the online degree programs of 70.2% for 2008. The decrease in gross margin was primarily due to investment in our learning centers network.
Operating Expenses
Total operating expenses for the fiscal year 2009 were $20.1 million, representing a 35.7% decrease from $31.2 million for fiscal year 2008. This decrease was attributable primarily to the factors discussed below:
-- General and administrative expenses for the fiscal year 2009 were $12.1 million, representing a 4.7% decrease from $12.7 million for fiscal year 2008. The decrease was primarily because there was almost no account receivables write off and exchange loss in 2009 as well as a reduction in rent in fiscal year 2009 as compared to fiscal year 2008. -- Selling and marketing expenses for the fiscal year 2009 were $3.5 million, representing a 20.6% decrease from $4.4 million for the fiscal year 2008. The decrease was attributable primarily to a shift from conducting general sales and marketing activities to focusing on direct recruiting related activities at our learning centers network. -- Research and development expenses for the fiscal year 2009 were $4.5 million, representing a 16.0% increase from $3.8 million for the fiscal year 2008. This increase was attributable primarily to technology platform upgrade and the internet & mobile applications development for the online degree and non-degree programs. -- There was not an impairment charge of goodwill and intangible assets in the fiscal year 2009, while such charge was $10.3 million in the fiscal year 2008. -- Share-based compensation for the fiscal year 2009, which was allocated to the related cost of revenue and operating expense line items, was $1.1 million, representing an increase of $0.3 million from $0.8 million for the fiscal year 2008. This increase was attributable primarily to the re-pricing for under-water options and an increase in the number and fair value of options granted in fiscal year 2009 as compared to fiscal year 2008. Income (Loss) from Operations
Income from operations was $11.6 million for the fiscal year 2009, as compared to a loss of $1.9 million for the fiscal year 2008. Operating margin was 22.4% for the fiscal year 2009 as compared to a negative 4.1% for the fiscal year 2008. The increase was primarily because there was not an impairment charge of goodwill and intangible assets in the fiscal year 2009, while such charge was $10.3 million in the fiscal year 2008.
Adjusted income from operations was $13.6 million for fiscal year 2009, representing a 26.9% increase from $10.7 million for the fiscal year 2008. Correspondingly, adjusted operating margin for the fiscal year 2009 was 26.1% for the fiscal year 2009 as compared to 23.0% for the fiscal year 2008. The increase was primarily due to improved operating results from our learning centers network, 101 online tutoring programs and Anqing School.
Interest Income
Interest income decreased by 53.2% to $0.7 million in the fiscal year 2009, as compared to $1.6 million in the fiscal year 2008. This decrease was attributable primarily to (i) the reduced interest bearing cash and bank deposit balance of $47.7 million as of December 31, 2009, as compared to $61.2 million as of December 31, 2008, and (ii) a lower interest rate for the fiscal year 2009 as compared to the fiscal year 2008.
Income Tax Expense
Income tax expense for the fiscal year 2009 was $2.8 million, representing a significant increase from $0.5 million for the fiscal year 2008. In December 2008, seven of our subsidiaries and affiliate companies obtained the HNTE status under the new PRC Enterprise Income Tax Law, which came into effect on January 1, 2008. The HNTE entities enjoy a 15% tax rate, which is lower than the statutory tax rate of 25%. An adjustment was recorded in the fourth quarter of 2008 to adjust our deferred income tax expenses based on the decrease in tax rate from 25% to 15%, which resulted in a low deferred income tax expense in 2008.
In addition, 2008 income tax was lower because there was a significant decrease in deferred tax liabilities related to impairment of acquired intangible assets in our international curriculum programs, while there was no such charge in 2009.
Noncontrolling Interest
Noncontrolling interest was $4.7 million in the fiscal year 2009, representing an 11.9% decrease, as compared to $5.3 million in the fiscal year 2008, which was attributable primarily to the noncontrolling interest impact related to the reduction in our deferred tax liabilities for the fiscal year 2008 resulted from change of tax rate from 25% to 15%.
Net Income (Loss) attributable to ChinaEdu
Net income attributable to ChinaEdu was $5.1 million for the fiscal year 2009, compared with a loss of $6.3 million for the fiscal year 2008, primarily because there was not an impairment charge of goodwill and intangible assets in the fiscal year 2009, while such charge was $10.3 million in the fiscal year 2008.
Net income per basic and diluted ADS were $0.313 and $0.291, respectively for the fiscal year of 2009, which improved significantly as compared to losses of $0.330 and $0.330, respectively, for the fiscal year 2008.
Adjusted net income attributable to ChinaEdu (non-GAAP) increased by 11.4% to $6.9 million for the fiscal year 2009, as compared to $6.2 million in the fiscal year 2008. Adjusted net margin remained flat at 13.3% for the fiscal year 2009.
Adjusted net income per basic and diluted ADS were $0.424 and $0.394, respectively for the fiscal year 2009, which increased by 31.7% and 27.9% from $0.322 and $0.308, respectively, for the fiscal year 2008.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA (non-GAAP) was $16.0 million for the fiscal year 2009, which increased by 28.2% as compared to $12.5 million for the fiscal year 2008. This increase was attributable primarily to the increased net revenue and decreased general and administrative expenses and selling and marketing expenses as discussed above. Adjusted EBITDA margin was 30.8% for the fiscal year 2009 as compared to 26.8% for the fiscal year 2008.
First Quarter 2010 Total Net Revenue Guidance
For the first quarter of 2010, ChinaEdu expects its total net revenue to be in the range of RMB87 million to RMB90 million or $12.7 million to $13.2 million. This forecast reflects ChinaEdu's current and preliminary view, which is subject to change.
Conference Call
ChinaEdu senior management will host a conference call on Friday, March 12, 2010 at 8:00 a.m. U.S. Eastern time / 5:00 a.m. U.S. Pacific time / 9:00 p.m. Beijing/Hong Kong time.
The conference call may be accessed by calling (US) 866 396 2384/ (International) +1 617 847 8711/ (HK) +852 3002 1672/ (China) +86 10 800 152 1490, and entering the passcode: 76490238. A telephone replay of the conference call will be available shortly after the call until March 19, 2010 at (US) 888 286 8010/ (International) +1 617 801 6888 and entering passcode: 86606775. A live and archived webcast may be accessed via ChinaEdu's investor relations website at http://ir.chinaedu.net/ .
Non-GAAP Financial Measures
To supplement the unaudited condensed consolidated financial information presented in accordance with Accounting Principles Generally Accepted in the United States of America ("GAAP"), the Company uses non-GAAP measures of income from operations and net income attributable to ChinaEdu, which are adjusted from results based on GAAP to exclude certain non-cash items of share-based compensation, exchange loss, amortization of intangible assets and land use rights and goodwill and intangible assets impairment charges, if applicable. The Company also uses adjusted EBITDA, which is also a non-GAAP measure and is adjusted from GAAP results of net income to exclude interest income, taxes, exchange loss, depreciation, amortization of intangible assets and land use rights, share-based compensation and goodwill and intangible assets impairment charges, if applicable. These non-GAAP financial measures are provided to enhance the investors' overall understanding of the Company's current and past financial performance in on-going core operations as well as prospects for the future. These measures should be considered in addition to results prepared and presented in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. Management considers the non-GAAP information as important measures internally and therefore deems it important to provide all of this information to investors.
About ChinaEdu
ChinaEdu Corporation is an educational services provider in China, incorporated as an exempted limited liability company in the Cayman Islands. Established in 1999, the Company's primary business is to provide comprehensive services to the online degree programs of leading Chinese universities. These services include academic program development, technology services, enrollment marketing, student support services and finance operations. The Company's other lines of businesses include the operation of private primary and secondary schools, online interactive tutoring services and providing marketing and support for international curriculum programs.
The Company believes it is the largest service provider to online degree programs in China in terms of the number of higher education institutions that are served and the number of student enrollments supported. The Company currently has 15 long-term, exclusive contracts that generally vary from 10 to 50 years in length. ChinaEdu also performs recruiting services for 15 universities through its nationwide learning centers network.
Forward-Looking Statement
This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including certain plans, expectations, goals, and projections, which are subject to numerous assumptions, risks, and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and contingencies, many of which are beyond our control which may cause actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. The Company's actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including those described under the heading "Risk Factors" in the Company's Annual Report on Form 20-F for the year ended December 31, 2008, and in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission. Unless required by law, the Company undertakes no obligation to (and expressly disclaim any such obligation to) update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
For more information, please contact: Lily Liu, CFO ChinaEdu Corporation Phone: +86-10-8418-6655 x1002 Email: ir@chinaedu.net S. Jimmy Xia, IR Manager ChinaEdu Corporation Phone: +86-10-8418-6655 x1150 Email: ir@chinaedu.net ChinaEdu Corporation Unaudited Condensed Consolidated Balance Sheets December 31, 2008 December December (in thousands, unaudited) As Adjusted(1) 31, 2009 31, 2009 RMB RMB US$ Current assets: Cash and cash equivalents 353,933 203,143 29,761 Term deposits 63,500 122,304 17,918 Restricted cash -- 365 53 Accounts receivable, net 14,854 28,334 4,151 Inventory -- 1,852 271 Prepaid expenses and other current assets 20,251 25,315 3,709 Amounts due from related parties 150,472 176,802 25,902 Deferred tax assets 3,986 3,309 485 Investments -- 17,706 2,594 Total current assets 606,996 579,130 84,844 Cost method investment 1,210 1,210 177 Investment -- 3,000 440 Land use rights, net 28,344 27,874 4,084 Property and equipment, net 161,925 203,995 29,885 Deposits paid for acquisition of property and equipment 8,619 13,898 2,036 Intangible assets, net 70,377 66,621 9,760 Deferred tax assets 2,096 1,541 226 Rental deposits 958 868 127 Goodwill 38,155 38,155 5,590 Total assets 918,680 936,292 137,169 Liabilities and equity Current liabilities: Accounts payable 8,530 6,467 947 Deferred revenues 96,068 97,853 14,336 Accrued expenses and other current liabilities 51,629 68,917 10,096 Amounts due to related parties 25,769 25,668 3,760 Income taxes payable 27,917 33,389 4,892 Other taxes payable 12,008 15,900 2,329 Total current liabilities 221,921 248,194 36,360 Deferred revenues 6,073 8,075 1,183 Deferred tax liabilities 11,069 10,143 1,486 Unrecognized tax benefit 5,473 7,727 1,132 Total liabilities 244,536 274,139 40,161 ChinaEdu shareholders' equity 589,829 559,973 82,039 Noncontrolling interest 84,315 102,180 14,969 Total equity 674,144 662,153 97,008 Total liabilities and equity 918,680 936,292 137,169 (1) Amount in relation to noncontrolling interest, formerly named minority interest, as of December 31, 2008 is reclassified in accordance with ASC 810 (formerly FASB Statement No. 160, Noncontrolling Interest), which was adopted by the Company on January 1, 2009. ChinaEdu Corporation Unaudited Condensed Consolidated Statements of Operations Three Months Ended (in thousands, except December 31, for percentage, share, 2008 As September December December and per share Adjusted (1) 30, 2009 31, 2009 31, 2009 information) RMB RMB RMB US$ Gross Revenue (2) 89,441 94,303 95,871 14,045 Business Tax and Surcharge 2,901 4,559 354 52 Net Revenue: Online degree programs 69,945 71,510 76,457 11,201 Online tutoring programs 4,472 5,778 5,510 807 Private primary and secondary schools 6,823 7,669 9,816 1,438 International curriculum programs 5,300 4,787 3,734 547 Total net revenue 86,540 89,744 95,517 13,993 Cost of revenue: Online degree programs 28,195 23,633 26,575 3,893 Online tutoring programs 1,443 1,426 1,222 179 Private primary and secondary schools 5,828 7,070 7,298 1,069 International curriculum programs 3,532 2,840 2,531 371 Total cost of revenue 38,998 34,969 37,626 5,512 Gross profit: Online degree programs 41,750 47,877 49,882 7,308 Online tutoring programs 3,029 4,352 4,288 628 Private primary and secondary schools 995 599 2,518 369 International curriculum programs 1,768 1,947 1,203 176 Total gross profit 47,542 54,775 57,891 8,481 Online degree programs 59.7% 67.0% 65.2% 65.2% Online tutoring programs 67.7% 75.3% 77.8% 77.8% Private primary and secondary schools 14.6% 7.8% 25.7% 25.7% International curriculum programs 33.4% 40.7% 32.2% 32.2% Gross margin 54.9% 61.0% 60.6% 60.6% Operating expenses: General and administrative 27,410 20,519 23,014 3,372 Selling and marketing 8,202 6,766 6,578 964 Research and development 8,947 7,522 8,410 1,232 Goodwill and intangible assets impairment 52,236 -- -- -- Total operating expenses 96,795 34,807 38,002 5,568 Income (loss) from operations (49,253) 19,968 19,889 2,913 Operating margin -56.9% 22.2% 20.8% 20.8% Other income (expense) 145 (264) 761 111 Interest income 2,973 1,041 1,085 159 Interest expense (1) (1) (1) -- Income (loss) before income tax provisions (46,136) 20,744 21,734 3,183 Income tax expense 19,621 (4,835) (5,487) (804) Net income (loss) (26,515) 15,909 16,247 2,379 Net income attributable to the noncontrolling interest (12,469) (8,610) (7,191) (1,053) Net income (loss) attributable to ChinaEdu (38,984) 7,299 9,056 1,326 Net margin -45.0% 8.1% 9.5% 9.5% Net income (loss) attributable to ChinaEdu per ADS: Basic (2.10) 0.45 0.56 0.082 Diluted (2.10) 0.41 0.51 0.075 Weighted average aggregate number of ADSs outstanding: Basic 18,650,558 16,227,267 16,148,719 16,148,719 Diluted 18,650,558 17,604,567 17,589,699 17,589,699 (2) Gross revenue are detailed as follows Online degree programs 72,411 75,564 76,441 11,199 Online tutoring programs 4,643 6,002 5,658 829 Private primary and secondary schools 6,853 7,671 9,821 1,439 International curriculum programs 5,534 5,066 3,951 579 Twelve Months Ended December (in thousands, except 31, 2008 December December for percentage, share, As Adjusted (1) 31, 2009 31, 2009 and per share information) RMB RMB US$ Gross Revenue (2) 327,903 368,447 53,978 Business Tax and Surcharge 10,183 13,741 2,013 Net Revenue: Online degree programs 255,388 285,178 41,779 Online tutoring programs 15,436 19,584 2,869 Private primary and secondary schools 19,289 30,627 4,487 International curriculum programs 27,607 19,317 2,830 Total net revenue 317,720 354,706 51,965 Cost of revenue: Online degree programs 76,224 95,428 13,980 Online tutoring programs 4,017 5,713 837 Private primary and secondary schools 17,572 26,109 3,825 International curriculum programs 19,920 11,112 1,628 Total cost of revenue 117,733 138,362 20,270 Gross profit: Online degree programs 179,164 189,750 27,799 Online tutoring programs 11,419 13,871 2,032 Private primary and secondary schools 1,717 4,518 662 International curriculum programs 7,687 8,205 1,202 Total gross profit 199,987 216,344 31,695 Online degree programs 70.2% 66.5% 66.5% Online tutoring programs 74.0% 70.8% 70.8% Private primary and secondary schools 8.9% 14.8% 14.8% International curriculum programs 27.8% 42.5% 42.5% Gross margin 62.9% 61.0% 61.0% Operating expenses: General and administrative 86,908 82,858 12,139 Selling and marketing 29,851 23,688 3,470 Research and development 26,185 30,385 4,451 Goodwill and intangible assets impairment 70,093 -- -- Total operating expenses 213,037 136,931 20,060 Income (loss) from operations -13,050 79,413 11,635 Operating margin -4.1% 22.4% 22.4% Other income (expense) 562 1,748 256 Interest income 10,652 4,980 730 Interest expense (1,298) (2) -- Income (loss) before income tax provisions (3,134) 86,139 12,621 Income tax expense (3,473) (19,287) (2,826) Net income (loss) (6,607) 66,852 9,795 Net income attributable to the noncontrolling interest (36,412) (32,073) (4,699) Net income (loss) attributable to ChinaEdu (43,019) 34,779 5,096 Net margin -13.5% 9.8% 9.8% Net income (loss) attributable to ChinaEdu per ADS: Basic (2.25) 2.14 0.313 Diluted (2.25) 1.99 0.291 Weighted average aggregate number of ADSs outstanding: Basic 19,226,501 16,281,535 16,281,535 Diluted 19,226,501 17,506,561 17,506,561 (2) Gross revenue are detailed as follows Online degree programs 263,727 297,192 43,539 Online tutoring programs 16,058 20,130 2,949 Private primary and secondary schools 19,319 30,684 4,495 International curriculum programs 28,799 20,441 2,995 ChinaEdu Corporation Unaudited Condensed Consolidated Statements of Cash Flow Three Months Ended December September December December (in thousands) 31, 2008 (1) 30, 2009 31, 2009 31, 2009 RMB RMB RMB US$ Operating activities: Net income (loss) (26,515) 15,909 16,247 2,379 Share-based compensation 1,683 1,488 1,611 236 Depreciation 3,570 4,119 4,560 668 Amortization of land use rights 182 152 152 22 Amortization of intangible assets 2,087 1,114 1,129 165 Goodwill and intangible assets impairment 52,236 -- -- -- Accounts receivable write- off 1,215 16 (61) (9) Loss from disposal of property and equipment 1,663 110 310 45 Deferred income taxes (16,310) (613) (51) (7) Accounts receivable (10,341) 11,797 (15,121) (2,215) Inventory -- (722) (53) (8) Prepaid expenses and other current assets (7,287) (6,582) (2,800) (410) Amounts due from related parties (22,991) 26,821 11,511 1,686 Rental deposits 107 (67) 62 9 Land use right (160) -- -- -- Accounts payable (1,084) (1,368) (1,373) (201) Deferred revenues 68,925 (60,114) 64,517 9,452 Accrued expenses and other current liabilities 16,213 8,437 10,043 1,472 Amounts due to related parties (29,096) 11,946 (37,523) (5,497) Unrecognized tax benefit 872 89 184 27 Other taxes payable 5,287 2,122 2,054 301 Income tax payable (4,556) 4,800 5,131 752 Net cash provided by operating activities 35,700 19,454 60,529 8,867 Investing activities: Purchase of business -- -- -- -- Purchase of property and equipment (4,745) (10,270) (6,277) (920) Deposits paid for acquisition of property and equipment (2,616) 2,616 (13,987) (2,049) Redeem (purchase) of term deposits 41,000 (8,988) (33,825) (4,955) Purchase of investments -- (14,083) (6,495) (952) Purchase of contractual right -- -- (735) (108) Change in restricted cash -- -- (365) (53) Proceeds from disposal of property and equipment -- -- -- -- Net cash provided by (used in) investing activities 33,639 (30,725) (61,684) (9,037) Financing activities: Repurchase of ordinary shares (13,714) -- (14,740) (2,159) Cancellation fee of repurchased ordinary shares -- (249) -- -- Short term loan -- 2,117 (2,117) (310) Repayment of long-term loan interest and principal -- -- -- -- Cash dividends paid to noncontrolling shareholders (7,269) -- (4,098) (600) Capital contributions by noncontrolling shareholders -- -- 735 108 Proceeds from exercise of options 1,383 2,463 274 40 Net cash provided by (used in) financing activities (19,600) 4,331 (19,946) (2,921) Effect of foreign exchange rate changes 865 48 4 1 CASH AND CASH EQUIVALENTS, beginning of period 303,329 231,132 224,240 32,851 CASH AND CASH EQUIVALENTS, end of period 353,933 224,240 203,143 29,761 Net increase (decrease) in cash 50,604 (6,892) (21,097) (3,090) Twelve Months Ended December December December (in thousands) 31, 2008 (1) 31, 2009 31, 2009 RMB RMB US$ Operating activities: Net income (loss) (6,607) 66,852 9,795 Share-based compensation 5,231 7,416 1,086 Depreciation 12,212 16,603 2,432 Amortization of land use rights 606 619 91 Amortization of intangible assets 8,746 5,237 767 Goodwill and intangible assets impairment 70,093 -- -- Accounts receivable write- off 1,215 364 53 Loss from disposal of property and equipment 1,663 513 75 Deferred income taxes (8,387) 306 45 Accounts receivable (14,658) (13,844) (2,028) Inventory -- (1,852) (271) Prepaid expenses and other current assets (2,970) (5,075) (743) Amounts due from related parties (44,950) (26,330) (3,857) Rental deposits 665 90 13 Land use right (160) (1,989) (291) Accounts payable (950) 115 17 Deferred revenues 15,210 3,792 556 Accrued expenses and other current liabilities 10,011 19,082 2,796 Amounts due to related parties (4,368) 268 39 Unrecognized tax benefit 1,141 2,254 330 Other taxes payable 5,342 3,892 570 Income tax payable 5,462 5,472 802 Net cash provided by operating activities 54,547 83,785 12,277 Investing activities: Purchase of business (6,700) -- -- Purchase of property and equipment (36,323) (57,071) (8,361) Deposits paid for acquisition of property and equipment (8,650) (11,371) (1,666) Redeem (purchase) of term deposits (57,458) (58,813) (8,616) Purchase of investments -- (20,578) (3,015) Purchase of contractual right (1,225) (1,235) (181) Change in restricted cash -- (365) (53) Proceeds from disposal of property and equipment 31 -- -- Net cash provided by (used in) investing activities (110,325) (149,433) (21,892) Financing activities: Repurchase of ordinary shares (34,190) (76,387) (11,191) Cancellation fee of repurchased ordinary shares -- (249) (36) Short term loan -- -- -- Repayment of long-term loan interest and principal (25,724) -- -- Cash dividends paid to noncontrolling shareholders (11,319) (14,698) (2,153) Capital contributions by noncontrolling shareholders 1,225 1,715 251 Proceeds from exercise of options 1,787 4,161 610 Net cash provided by (used in) financing activities (68,221) (85,458) (12,519) Effect of foreign exchange rate changes (19,182) 316 44 CASH AND CASH EQUIVALENTS, beginning of period 497,114 353,933 51,851 CASH AND CASH EQUIVALENTS, end of period 353,933 203,143 29,761 Net increase (decrease) in cash (143,181) (150,790) (22,090) ChinaEdu Corporation Reconciliations from income (loss) from operations to adjusted income from operations (non-GAAP) and adjusted operating margin (non-GAAP) Three Months Ended December September December December (in thousands, unaudited) 31, 2008 30, 2009 31, 2009 31, 2009 RMB RMB RMB US$ Income (loss) from operations GAAP Result (49,253) 19,968 19,889 2,913 Share-based compensation 1,683 1,488 1,611 236 Exchange loss -- -- -- -- Amortization 2,269 1,266 1,281 187 Goodwill and intangible assets impairment 52,236 -- -- -- Adjusted income from operations (non-GAAP) 6,935 22,722 22,781 3,336 Adjusted operating margin (non-GAAP) 8.0% 25.3% 23.9% 23.9% Twelve Months Ended December December December (in thousands, unaudited) 31, 2008 31, 2009 31, 2009 RMB RMB US$ Income (loss) from operations GAAP Result (13,050) 79,413 11,635 Share-based compensation 5,231 7,416 1,086 Exchange loss 1,433 -- -- Amortization 9,352 5,856 858 Goodwill and intangible assets impairment 70,093 -- -- Adjusted income from operations (non-GAAP) 73,059 92,685 13,579 Adjusted operating margin (non-GAAP) 23.0% 26.1% 26.1% ChinaEdu Corporation Reconciliation from net income (loss) to adjusted EBITDA (non-GAAP) and adjusted EBITDA margin (non-GAAP) Three Months Ended December September December December (in thousands, unaudited) 31, 2008 30, 2009 31, 2009 31, 2009 RMB RMB RMB US$ Net income (loss) (26,515) 15,909 16,247 2,379 Income tax expense (19,621) 4,835 5,487 804 Share-based compensation 1,683 1,488 1,611 236 Exchange loss -- -- -- -- Amortization 2,269 1,266 1,281 187 Depreciation 3,570 4,119 4,560 668 Interest income and other, net (3,117) (776) (1,845) (270) Goodwill and intangible assets impairment 52,236 -- -- -- Adjusted EBITDA (non-GAAP) 10,505 26,841 27,341 4,004 Adjusted EBITDA margin (non-GAAP) 12.1% 29.9% 28.6% 28.6% Twelve Months Ended December December December (in thousands, unaudited) 31, 2008 31, 2009 31, 2009 RMB RMB US$ Net income (loss) (6,607) 66,852 9,795 Income tax expense 3,473 19,287 2,826 Share-based compensation 5,231 7,416 1,086 Exchange loss 1,433 -- -- Amortization 9,352 5,856 858 Depreciation 12,212 16,603 2,432 Interest income and other, net (9,916) (6,726) (986) Goodwill and intangible assets impairment 70,093 -- -- Adjusted EBITDA (non-GAAP) 85,271 109,288 16,011 Adjusted EBITDA margin (non-GAAP) 26.8% 30.8% 30.8% ChinaEdu Corporation Reconciliations from net income (loss) attributable to ChinaEdu to adjusted net income attributable to ChinaEdu (non-GAAP), adjusted net margin (non-GAAP) and adjusted net income per ADS (non-GAAP) Three Months Ended (in thousands, unaudited) December September December December 31, 2008 30, 2009 31, 2009 31, 2009 RMB RMB RMB US$ Net income (loss) attri- butable to ChinaEdu GAAP Result (38,984) 7,299 9,056 1,326 Share-based compensation 1,683 1,488 1,611 236 Exchange loss -- -- -- -- Share-based compensation attributable to the noncontrolling interest (203) (168) (183) (27) Amortization 2,269 1,266 1,281 187 Goodwill and intangible assets impairment 52,236 -- -- -- Adjusted net income attributable to ChinaEdu (non-GAAP) 17,001 9,885 11,765 1,722 Adjusted net margin (non- GAAP) 19.6% 11.0% 12.3% 12.3% Adjusted net income per ADS (non-GAAP) Basic 0.91 0.61 0.73 0.107 Diluted 0.89 0.56 0.67 0.098 Weighted average aggregate number of ordinary shares outstanding: Basic 18,650,558 16,227,267 16,148,719 16,148,719 Diluted 19,187,923 17,604,567 17,589,699 17,589,699 Twelve Months Ended (in thousands, unaudited) December December December 31, 2008 31, 2009 31, 2009 RMB RMB US$ Net income (loss) attributable to ChinaEdu GAAP Result (43,019) 34,779 5,096 Share-based compensation 5,231 7,416 1,086 Exchange loss 1,433 -- -- Share-based compensation attributable to the noncontrolling interest (786) (925) (136) Amortization 9,352 5,856 858 Goodwill and intangible assets impairment 70,093 -- -- Adjusted net income attributable to ChinaEdu (non-GAAP) 42,304 47,126 6,904 Adjusted net margin (non-GAAP) 13.3% 13.3% 13.3% Adjusted net income per ADS (non-GAAP) Basic 2.20 2.89 0.424 Diluted 2.10 2.69 0.394 Weighted average aggregate number of ordinary shares outstanding: Basic 19,226,501 16,281,535 16,281,535 Diluted 20,162,529 17,506,561 17,506,561 Adjusted income from operations, which is a non-GAAP measure defined as income from operations excluding share-based compensation, exchange loss, amortization of intangible assets and land use rights, and goodwill and intangible assets impairment charges, if applicable. Adjusted net income attributable to ChinaEdu, which is a non-GAAP measure defined as net income attributable to the ChinaEdu excluding share-based compensation, exchange loss, noncontrolling interest for share-based compensation, amortization of intangible assets and land use rights, and goodwill and intangible assets impairment charges, if applicable.
ChinaEdu Corporation
CONTACT: Lily Liu, CFO, +86-10-8418-6655 x1002, or S. Jimmy Xia, IR
Manager, +86-10-8418-6655 x1150, both of ChinaEdu Corporation,
ir@chinaedu.net
Web site: http://ir.chinaedu.net/
