BEIJING, Nov. 9, 2010 /PRNewswire-Asia-FirstCall/ -- ChinaCast Education Corporation (the "Company" or "ChinaCast") (Nasdaq GM:CAST), a leading for-profit, post-secondary and E-learning services provider in China, today announced its financial results for the third quarter ended September 30, 2010.
-- Third Quarter 2010 Highlights(1): -- Total revenues increased 55% to $18.7 million -- Gross profit increased 19% to $9.1 million; Gross profit margin was 49% -- Operating income increased 32% to $7.5 million; Operating income margin was 40% -- Net income increased 54% to $6.2 million; Net income margin was 33% -- Diluted EPS of $0.12 -- Adjusted net income (non-GAAP) increased 59% to $8.0 million; Adjusted net income (non-GAAP) margin was 43% -- Adjusted diluted EPS (non-GAAP) of $0.16 -- Adjusted EBITDA (non-GAAP) increased 51% to $11.7 million; Adjusted EBITDA margin (non-GAAP) was 62% -- Cash, cash equivalents and term deposits was $150.0 million. Total equity was $276.1 million. -- Nine Months 2010 Highlights: -- Total revenues increased 49% to $51.4 million -- Gross profit increased 26% to $26.8 million; Gross profit margin was 52% -- Operating income increased 33% to $20.1 million; Operating income margin was 39% -- Net income increased 47% to $15.7 million; Net income margin was 31% -- Diluted EPS of $0.32 -- Adjusted net income (non-GAAP) increased 45% to $20.8 million; Adjusted net income margin (non-GAAP) was 40% -- Adjusted diluted EPS of $0.43 -- Adjusted EBITDA (non-GAAP) increased 44% to $31.0 million; Adjusted EBITDA margin (non-GAAP) was 60%
(1) See financial tables below and the GAAP to non-GAAP reconciliation attached to this press release. The US dollar figures presented in this release are derived from the corresponding RMB figures from the Company's Form 10-Q for the period ended September 30, 2010, and are based on the historical exchange rate of US$1.0 = 6.8 RMB on September 30, 2009, and US$1.0 = 6.7 RMB on September 30, 2010.
"We are pleased to report another strong quarter as we continue to successfully execute our growth strategy to be a leader in the China post-secondary education sector," commented Ron Chan, Chairman and Chief Executive Officer. "During the third quarter we completed the purchase of Hubei Industrial University Business College (HIUBC), which expands our on-campus enrollments by approximately 10,000 students and brings a number of new degree programs including industrial design, computer engineering and law. Overall growth in enrollments and tuition for the beginning of the 2011 academic school year, which began in September, boosted our cash position to $150 million. We are now providing accredited degree programs to approximately 32,700 traditional university students and 143,000 e-learning students throughout China."
"We have also made significant progress in launching our international degree programs with our US education partners such as Seton Hall University and our new distance learning joint venture with the China University of Petroleum (CUP), which will add another 40,000 distance learning students and provides us an entry to the adult continuing education sector. With these new initiatives and the continued long term growth of the post-secondary education sector in China, we believe that we will have tremendous opportunities to accelerate future operating results."
Added Antonio Sena, Chief Financial Officer, "Due to the timing of the HIUBC acquisition which we completed in August, we only recognized one month of revenue contribution during the third quarter. Despite ongoing investments in growth initiatives such as the international degree programs and ongoing campus expansion and one-time costs related to the Hubei acquisition and joint venture with China University of Petroleum, we still generated 62% EBITDA margins and we believe that we are well-capitalized for future acquisitions. In our view, this underscores the high incremental cash flow and profit generation capacity inherent in our business model."
Third Quarter 2010 Financial Results
ChinaCast is organized into two business segments, the Traditional University Group ("TUG") and the E-Learning Services Group ("ELG"). The TUG offers fully-accredited bachelor and diploma degree programs to students from three universities in China: the Foreign Trade and Business College ("FTBC") campus in Chongqing, the Lijiang College ("LJC") campus in Guilin and Hubei Industrial University Business College ("HIUBC) in Wuhan. The ELG encompasses the Company's E-learning education service businesses.
Total Revenues - Total revenues for the quarter increased 55% to $18.7 million from $12.1 million in the third quarter of 2009. TUG revenue for the quarter increased 143% to $11.2 million from $4.6 million in the third quarter of 2009, primarily due to the acquisition of LJC in the fourth quarter of 2009 and the acquisition of HIUBC in the third quarter of 2010. TUG total student enrolment for the quarter increased to approximately 32,700 from approximately 12,200 in the third quarter of 2009. Average revenue per student for the quarter amounted to $463 per student per quarter as compared to $397 per student per quarter in the third quarter of 2009. ELG revenue for the quarter remained flat year-over-year at $7.4 million. ELG total number of post-secondary students enrolled in courses using the Company's distance learning platform in the quarter increased to 143,000 compared to 141,000 in the third quarter of 2009. ELG total number of subscribing schools for K-12 distance learning services for the quarter remained stable year-over-year at 6,500. TUG revenue as a percentage of total revenue for the quarter increased to 60% compared to 38% in the third quarter of 2009.
Cost of Sales - Cost of sales for the quarter increased 115% to $9.6 million from $4.5 million in the third quarter of 2009 primarily due to the acquisition of LJC and HIUBC.
Gross Profit and Gross Margin - Gross profit for the quarter increased 19% to $9.1 million from $7.6 million in the third quarter of 2009. Gross profit margin for the quarter was 49% compared to 63% in the third quarter of 2009 primarily due to the increase in percentage of total revenue attributed to the TUG business which has a lower gross margin than the ELG business. The gross profit margin of the TUG business for the quarter was 27% compared to 39% in the third quarter of 2009 primarily due to the acquisition of LJC and HIUBC. The gross profit margin for the ELG business was 81% compared to 78% primarily due to the decrease in cost of the satellite platform usage fee.
Share Based Compensation - Share based compensation for the quarter decreased 38% to $0.3 million from $0.5 million in the third quarter of 2009.
Amortization of Acquired Intangible Assets - Amortization of acquired intangible assets for the quarter increased 178% to $1.5 million from $0.5 million in the third quarter of 2009 primarily due to the acquisition of LJC and HIUBC.
Operating Expenses - Operating expenses for the quarter decreased 18% to $1.6 million from $2.0 million in the third quarter of 2009 primarily due to a one-time gain of $1.4 million due to an adjustment in the purchase price of the acquisition of LJC partially offset by an increase in administration expenses due to the acquisition of JLC and HIUBC.
Operating Income and Operating Income Margin - Operating income for the quarter increased 32% to $7.5 million from $5.7 million in the third quarter of 2009. Operating income margin for the quarter was 40% compared to 47% in the third quarter of 2009 primarily due to the large increase in percentage of total revenue attributed to the TUG business which has a lower operating income margin than the ELG business. The operating income margin of the TUG business for the quarter was 18% compared to 35% in the third quarter of 2009 primarily due to the acquisition of LJC and HIUBC. The operating income margin of the ELG business for the quarter was 74% compared to 54% in the third quarter of 2009 primarily due to the decrease in cost of the satellite platform usage fee.
Income Taxes - Income taxes for the quarter increased 4% to $1.2 million from $1.1 million in the third quarter of 2009 primarily due to the one-time gain of $1.4 million due to an adjustment in the purchase price of the acquisition of LJC which is not taxed but partially offset by an increase in business.
Net Income and Net Income Margin - Net income attributable to the Company for the quarter increased 54% to $6.2 million from $4.0 million in the third quarter of 2009. Net income margin for the quarter remained flat year-over-year at 33%.
Diluted EPS - Diluted earnings per share for the quarter were $0.12 compared to $0.11 in the third quarter of 2009 despite a large year-over-year increase in shares used in the computation. The weighted average number of shares used in the computation was 50,370,903 for the third quarter of 2010 and 36,379,884 for the third quarter of 2009. The increase in the diluted share count is primarily due to the capital raise in December 2009 and in June 2010 related to the acquisition of HIUBC.
Adjusted Net Income and Adjusted Net Income Margin - Adjusted net income excluding share based compensation and amortization of acquired intangible assets (non-GAAP) for the quarter increased 59% to $8.0 million from $5.0 million in the third quarter of 2009. Adjusted net income margin (non-GAAP) for the quarter was 44% compared to 42% in the third quarter of 2009.
Adjusted Diluted EPS - Adjusted diluted earnings per share excluding share based compensation expenses and amortization of acquired intangible assets (non-GAAP) for the quarter were $0.16 compared to $0.14 in the third quarter of 2009 despite a large year-over-year increase in shares used in the computation.
Adjusted EBITDA and Adjusted EBITDA Margin - Adjusted EBITDA (non-GAAP) for the quarter increased 51% to $11.7 million from $7.7 million in the third quarter of 2009. Adjusted EBITDA margin (non-GAAP) for the quarter was 62% compared to 63% in the third quarter of 2009.
Cash and Bank Balances together with Term Deposits - Cash and bank balances together with term deposits was $150.0 million as of September 30, 2010. Total equity was $276.1 million.
Nine Months 2010 Financial Results
Total Revenues - Total revenues for the first nine months increased 49% to $51.4 million from $34.5 million in the first nine months of 2009. TUG revenue for the first nine months increased 126% to $29.9 million from $13.2 million in the first nine months of 2009 primarily due to the acquisition of LJC in the fourth quarter of 2009 and the acquisition of HIUBC in the third quarter of 2010. ELG revenue for the first nine months remained flat at $21.5 million primarily due to a decrease in equipment sales. TUG revenue as a percentage of total revenue for the first nine months increased to 58% compared to 38% in the first nine months of 2009.
Cost of Sales - Cost of sales for the first nine months increased 87% to $24.6 million from $13.2 million in the first nine months of 2009 primarily due to the acquisition of LJC and HIUBC.
Gross Profit and Gross Margin - Gross profit for the first nine months increased 26% to $26.8 million from $21.3 million in the first nine months of 2009. Gross profit margin for the first nine months was 52% compared to 62% in the first nine months of 2009 primarily due to the large increase in percentage of total revenue attributed to the TUG business which has a lower gross margin than the ELG business. The gross profit margin of the TUG business for the first nine months was 30% compared to 37% in the first nine months of 2009. The gross profit margin of the ELG business for the first nine months was 84% compared to 78% in the first nine months of 2009.
Share Based Compensation - Share based compensation for the first nine months decreased 49% to $1.0 million from $1.9 million in the first nine months of 2009.
Amortization of Acquired Intangible Assets - Amortization of acquired intangible assets for the first nine months increased 133% to $4.1 million from $1.7 million in the first nine months of 2009 due to the acquisition of LJC and HIUBC.
Operating Expenses - Operating expenses for the first nine months increased 7% to $6.7 million from $6.3 million in the first nine months of 2009 primarily due to an increase in administration expenses due to the acquisition of LJC and HIUBC but partially offset by a one-time gain of $1.4 million due to an adjustment in the purchase price of the acquisition of LJC.
Operating Income and Operating Income Margin - Operating income for the first nine months increased 33% to $20.1 million from $15.1 million in the first nine months of 2009. Operating income margin for the first nine months was 39% compared to 44% in the first nine months of 2009 primarily due to the large increase in percentage of total revenue attributed to the TUG business which has a lower operating income margin than the ELG business. The operating income margin of the TUG business for the first nine months was 23% compared to 34% in the first nine months of 2009 primarily due to the acquisition of LJC and HIUBC. The operating income margin of the ELG business for the first nine months was 62% compared to 50% in the first nine months of 2009 primarily due to the decrease in cost of the satellite platform usage fee.
Income Taxes - Income taxes for the first nine months increased 33% to $4.1 million from $3.1 million for the first nine months 2009 primarily due to an increase in business but partially offset by the one-time gain of $1.4 million due to an adjustment in the purchase price of the acquisition of LJC which is not taxed.
Net Income and Net Income Margin - Net income attributable to the Company for the first nine months increased 47% to $15.7 million from $10.7 million in the first nine months of 2009. Net income margin for the first nine months was 31% compared to 31% in the first nine months of 2009 despite the large increase in percentage of total revenue attributed to the TUG business which has a lower net income margin than the ELG business.
Diluted EPS - Diluted earnings per share for the first nine months were $0.32 compared to $0.30 in the first nine months of 2009 despite a large year-over-year increase in shares used in the computation. The weighted average number of shares used in the computation was 48,176,902 for the first nine months of 2010 and 35,945,254 for the first nine months of 2009. The increase in the diluted share count is primarily due to capital raises in December 2009 and in June 2010 related to the acquisition of HIUBC.
Adjusted Net Income and Adjusted Net Income Margin - Adjusted net income excluding share based compensation expenses and amortization of acquired intangible assets (non-GAAP) for the first nine months increased 45% to $20.8 million from $14.3 million in the first nine months of 2009. Adjusted net income margin excluding share based compensation expenses and amortization of acquired intangible assets (non-GAAP) for the first nine months was 40% compared to 42% in the first nine months of 2009 primarily due to the large increase in percentage of total revenue attributed to the TUG business which has a lower net income margin than the ELG business.
Adjusted Diluted EPS - Adjusted diluted earnings per share excluding share based compensation expenses and amortization of acquired intangible assets (non-GAAP) for the first nine months were $0.43 compared to $0.40 despite a large year-over-year increase in shares used in the computation.
Adjusted EBITDA and Adjusted EBITDA Margin - Adjusted EBITDA (non-GAAP) for the first nine months increased 44% to $31.0 million from $21.4 million in the first nine months of 2009. Adjusted EBITDA margin (non-GAAP) for the first nine months was 60% compared to 62% in the first nine months of 2009 primarily due to the large increase in percentage of total revenue attributed to the TUG business which has a lower adjusted EBITDA margin (non-GAAP) than the ELG business.
Financial Outlook for 2010
For the full year ending December 31, 2010, the Company reaffirmed the following previously provided guidance:
-- Total net revenue will be between $78 million to $80 million (a year-on-year increase of 53% to 57%) -- Adjusted net income excluding share based compensation, amortization of intangibles, gain on disposal of property and equipment, and impairment expenses (non-GAAP) will be between $25 million to $27 million (a year-on-year increase of 34% to 44%) -- Adjusted EBITDA excluding share based compensation (non-GAAP) will be between $45 million to $47 million (a year-on-year increase of 58% to 65%)
This is the Company's current and preliminary view, which is subject to change.
Conference Call Information
ChinaCast's management team will host an earnings conference call at 8:00 am ET, Wednesday, November 10, 2010. The dial-in details for the earnings conference call are as follows:
Earnings Call Telephone Numbers: US/Canada Toll Free: +1-877-303-9226 International: +1-760-666-3566
A replay of the earnings conference call will be available at the following numbers:
Replay Telephone Numbers: US/Canada Toll Free: +1-800-642-1687 International: +1-706-645-9291 Replay Pass Code: 20345209
The replay will be available starting at 11:00 am ET, Wednesday, November 10, 2010, through 11:59 pm ET, Wednesday, November 24, 2010.
Additionally, a live and archived version of the earnings call will be available at http://www.chinacasteducation.com/. Please access the website approximately 10 minutes prior to the start time in order to download and install any necessary software.
About ChinaCast Education Corporation
Established in 1999, ChinaCast Education Corporation is a leading for-profit, post-secondary education and e-Learning services provider in China. The Company provides post-secondary degree and diploma programs through its three universities in China: The Foreign Trade and Business College of Chongqing Normal University, the Lijiang College of Guangxi Normal University and Hubei Industrial University Business College. These universities offer fully accredited, career-oriented bachelor's degree and diploma programs in business, economics, law, IT/computer engineering, hospitality and tourism management, advertising, language studies, art and music. The Company provides its e-Learning services to post-secondary institutions, K-12 schools, government agencies and corporate enterprises via its nationwide satellite/fiber broadband network. These services include interactive distance learning applications, multimedia education content delivery, English language training and vocational training courses. The Company is listed on NASDAQ Global Select Market with the ticker symbol CAST.
Safe Harbor Statement
This press release may contain statements that are forward-looking, as that term is defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements express our current expectations or forecasts of possible future results or events, including projections of future performance, statements of management's plans and objectives, future contracts, and forecasts of trends and other matters. These projections, expectations and trends are dependent on certain risks and uncertainties including such factors, among others, as growth in demand for education services, smooth and timely implementation of new training centers and other risk factors listed in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009. Forward-looking statements speak only as of the date of this press release, and we undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur. You can identify these statements by the fact that they do not relate strictly to historic or current facts and often use words such as "anticipate," "estimate," "expect", "believe," "will likely result," "outlook," "project" and other words and expressions of similar meaning. No assurance can be given that the results in any forward-looking statements will be achieved and actual results could be affected by one or more factors, which could cause them to differ materially. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
About Non-GAAP Financial Measures
To supplement our consolidated financial statements, which statements are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: adjusted net income, adjusted net-income margin, adjusted EPS (basic and diluted), adjusted EBITDA and adjusted EBITDA margin. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, 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 results of operations measures to the nearest comparable GAAP measures" included at the end of this release.
We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenses and expenditures that may not be indicative of our recurring core business operating results." These non-GAAP financial measures exclude from our operating performance not only non-cash charges, such as stock-based compensation, but also discrete cash charges that are infrequent in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to our historical performance and liquidity as well as comparisons to our competitors' operating results. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business. The accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.
Contact: ChinaCast Education Michael Santos, President-International +1-202-361-3403 mjsantos@chinacasteducation.com HC International Ted Haberfield, Executive Vice President +1-760-755-2716 thaberfield@hcinternational.net CHINACAST EDUCATION CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share-related data) As of September 30, ------------- 2010 2010 ---- ---- US$ RMB (Note 1) Assets Current assets: Cash and cash equivalents 60,471 405,153 Term deposits 89,552 600,000 Accounts receivable 7,470 50,050 Inventory 215 1,438 Prepaid expenses and other current assets 4,303 28,825 Amounts due from related parties 513 3,438 Deferred tax assets 102 682 Current portion of prepaid lease payments for land use rights 484 3,246 --- ----- Total current assets 163,110 1,092,832 Non-current deposits 1,815 12,159 Property and equipment, net 109,179 731,498 Prepaid lease payments for land use rights - non-current 26,758 179,281 Acquired intangible assets, net 17,471 117,055 Long-term investments 450 3,015 Non-current advances to related party 14,874 99,665 Goodwill 114,737 768,741 ------- ------- Total assets 448,394 3,004,246 ======= ========= Liabilities and equity Current liabilities: Accounts payable (including accounts payable of the 5,938 39,782 consolidated VIE without recourse to ChinaCast Education Corporation of RMB1,705 and RMB719 as of September 30, 2010 and December 31, 2009, respectively) Accrued expenses and other current liabilities 39,290 263,241 (including accrued expenses and other liabilities of the consolidated VIE without recourse to ChinaCast Education Corporation of RMB18,210 and RMB16,740 as of September 30, 2010 and December 31, 2009, respectively) Deferred revenues (including deferred revenues of the 47,626 319,097 consolidated VIE without recourse to ChinaCast Education Corporation of nil as of September 30, 2010 and December 31, 2009) Income taxes payable (including income taxes payable 13,998 93,793 of the consolidated VIE without recourse to ChinaCast Education Corporation of RMB4,179 and RMB2,293 as of September 30, 2010 and December 31, 2009, respectively) Current portion of long-term bank borrowings 25,075 168,000 Current portion of capital lease obligation 196 1,313 Other borrowings 224 1,500 --- ----- Total current liabilities 132,347 886,726 ------- ------- Non-current liabilities: Long-term bank borrowings 16,418 110,000 Deferred tax liabilities - non- current 8,150 54,606 Unrecognized tax benefits - non- current (including 15,111 101,244 unrecognized tax benefits of the consolidated VIE without ------ ------- recourse to ChinaCast Education Corporation of RMB5,662 and RMB5,257 as of September 30, 2010 and December 31, 2009, respectively) Total non-current liabilities 39,679 265,850 ------ ------- Total liabilities 172,026 1,152,576 ------- --------- Commitments and contingencies (Note 15) Equity: Ordinary shares (US$0.0001 par value; 100,000,000 5 36 shares authorized; 49,778,952 and 45,170,698 shares issued and outstanding as of September 30, 2010 and December 31, 2009, respectively) Additional paid-in capital 228,379 1,530,140 Statutory reserve 5,842 39,139 Accumulated other comprehensive loss (599) (4,011) Retained earnings 36,093 241,822 ------ ------- Total ChinaCast Education Corporation shareholders' equity 269,720 1,807,126 Noncontrolling interest 6,648 44,544 ----- ------ Total equity 276,368 1,851,670 ------- --------- Total liabilities and equity 448,394 3,004,246 As of December 31, --------- 2009 ---- RMB (Note 1) Assets Current assets: Cash and cash equivalents 327,628 Term deposits 507,000 Accounts receivable 53,828 Inventory 1,386 Prepaid expenses and other current assets 19,212 Amounts due from related parties 6,388 Deferred tax assets 1,010 Current portion of prepaid lease payments for land use rights 3,246 ----- Total current assets 919,698 Non-current deposits 14,550 Property and equipment, net 516,938 Prepaid lease payments for land use rights - non-current 144,818 Acquired intangible assets, net 71,286 Long-term investments 3,101 Non-current advances to related party 99,727 Goodwill 503,771 ------- Total assets 2,273,889 ========= Liabilities and equity Current liabilities: Accounts payable (including accounts payable of the 16,061 consolidated VIE without recourse to ChinaCast Education Corporation of RMB1,705 and RMB719 as of September 30, 2010 and December 31, 2009, respectively) Accrued expenses and other current liabilities 215,631 (including accrued expenses and other liabilities of the consolidated VIE without recourse to ChinaCast Education Corporation of RMB18,210 and RMB16,740 as of September 30, 2010 and December 31, 2009, respectively) Deferred revenues (including deferred revenues of the 156,645 consolidated VIE without recourse to ChinaCast Education Corporation of nil as of September 30, 2010 and December 31, 2009) Income taxes payable (including income taxes payable 68,731 of the consolidated VIE without recourse to ChinaCast Education Corporation of RMB4,179 and RMB2,293 as of September 30, 2010 and December 31, 2009, respectively) Current portion of long-term bank borrowings 104,400 Current portion of capital lease obligation 1,323 Other borrowings 200 --- Total current liabilities 562,991 ------- Non-current liabilities: Long-term bank borrowings 134,000 Deferred tax liabilities - non- current 30,923 Unrecognized tax benefits - non- current (including 62,457 unrecognized tax benefits of the consolidated VIE without ------ recourse to ChinaCast Education Corporation of RMB5,662 and RMB5,257 as of September 30, 2010 and December 31, 2009, respectively) Total non-current liabilities 227,380 ------- Total liabilities 790,371 ------- Commitments and contingencies (Note 15) Equity: Ordinary shares (US$0.0001 par value; 100,000,000 33 shares authorized; 49,778,952 and 45,170,698 shares issued and outstanding as of September 30, 2010 and December 31, 2009, respectively) Additional paid-in capital 1,290,651 Statutory reserve 39,139 Accumulated other comprehensive loss (6,055) Retained earnings 136,583 ------- Total ChinaCast Education Corporation shareholders' equity 1,460,351 Noncontrolling interest 23,167 ------ Total equity 1,483,518 --------- Total liabilities and equity 2,273,889 CHINACAST EDUCATION CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited) (In thousands, except share-related data) For the three months ended September 30, -------------------------- 2010 2010 2009 ---- ---- ---- US$ RMB RMB (Note 1) (Note 1) Revenues: Service 18,238 122,195 80,289 Equipment 436 2,924 1,896 --- ----- ----- 18,674 125,119 82,185 ------ ------- ------ Cost of revenues: Service (9,157) (61,358) (28,468) Equipment (423) (2,832) (1,875) ---- ------ ------ (9,580) (64,190) (30,343) ------ ------- ------- Gross profit 9,094 60,929 51,842 ----- ------ ------ Operating (expenses) income: Selling and marketing expenses (including share-based (59) (394) (899) compensation of RMB nil and RMB267 for the three months ended September 30 for 2010 and 2009, respectively, share-based compensation of RMB410 and RMB1,373 for the nine months ended September 30 for 2010 and 2009, respectively) General and administrative expenses (including share-based (2,957) (19,817) (12,964) compensation of RMB1,922 and RMB2,868 for the three months ended September 30 for 2010 and 2009, respectively, share- based compensation of RMB6,114 and RMB11,474 for the nine months ended September 30 for 2010 and 2009, respectively) Foreign exchange gain (loss) (1) (4) (51) Management service fee - - 510 Gain from change in contingent consideration 1,413 9,467 Other operating income (5) (34) 41 --- --- --- Total operating expenses, net (1,609) (10,782) (13,363) Income from operations 7,485 50,147 38,479 Interest income 572 3,829 2,134 Interest expense (606) (4,058) (2,421) ---- ------ ------ Income before provision for income taxes and earnings in equity 7,451 49,918 38,192 method investments Provision for income taxes (1,163) (7,792) (7,619) ------ ------ ------ Net income before earnings in equity investments 6,288 42,126 30,573 Loss in equity investments (4) (26) (793) --- --- ---- Income from continuing operation, net of tax 6,284 42,100 29,780 Discontinued operations Loss from discontinued operations, net of taxes of RMB nil for the - - (388) three months and nine months ended September 30 for 2010 and --- --- ---- 2009: Net income 6,284 42,100 29,392 Less: Net income attributable to noncontrolling interest (84) (559) (2,036) --- ---- ------ Net income attributable to ChinaCast Education Corporation 6,200 41,541 27,356 ===== ====== ====== Net income 6,284 42,100 29,392 Foreign currency translation adjustments 50 338 39 Comprehensive income 6,334 42,438 29,431 Comprehensive income attributable to noncontrolling interest (76) (510) (2,036) --- ---- ------ Comprehensive income attributable to ChinaCast Education 6,258 41,928 27,395 Corporation ===== ====== ====== Net income per share Net income attributable to ChinaCast Education Corporation per share: Basic 0.12 0.83 0.76 ==== ==== ==== Diluted 0.12 0.82 0.75 ==== ==== ==== Weighted average shares used in computation: Basic 49,834,291 49,834,291 36,133,233 ========== ========== ========== Diluted 50,370,903 50,370,903 36,379,884 ========== ========== ========== See notes to unaudited condensed consolidated financial statements. For the nine months ended September 30 ------------------------- 2010 2010 2009 ---- ---- ---- US$ RMB RMB (Note 1) (Note 1) Revenues: Service 50,921 341,170 228,391 Equipment 441 2,955 6,065 --- ----- ----- 51,362 344,125 234,456 ------ ------- ------- Cost of revenues: Service (24,136) (161,713) (83,479) Equipment (423) (2,832) (6,001) ---- ------ ------ (24,559) (164,545) (89,480) ------- -------- ------- Gross profit 26,803 179,580 144,976 ------ ------- ------- Operating (expenses) income: Selling and marketing expenses (including share-based (254) (1,702) (3,442) compensation of RMB nil and RMB267 for the three months ended September 30 for 2010 and 2009, respectively, share- based compensation of RMB410 and RMB1,373 for the nine months ended September 30 for 2010 and 2009, respectively) General and administrative expenses (including share-based (7,816) (52,369) (43,603) compensation of RMB1,922 and RMB2,868 for the three months ended September 30 for 2010 and 2009, respectively, share- based compensation of RMB6,114 and RMB11,474 for the nine months ended September 30 for 2010 and 2009, respectively) Foreign exchange gain (loss) (83) (557) 65 Management service fee - - 3,806 Gain from change in contingent consideration 1,413 9,467 Other operating income 27 180 548 --- --- --- Total operating expenses, net (6,713) (44,981) (42,626) Income from operations 20,090 134,599 102,350 Interest income 1,540 10,316 6,922 Interest expense (1,585) (10,623) (5,591) ------ ------- ------ Income before provision for income taxes and earnings in equity 20,045 134,292 103,681 method investments Provision for income taxes (4,110) (27,540) (21,090) ------ ------- ------- Net income before earnings in equity investments 15,935 106,752 82,591 Loss in equity investments (13) (86) (1,370) --- --- ------ Income from continuing operation, net of tax 15,922 106,666 81,221 Discontinued operations Loss from discontinued operations, net of taxes of RMB nil for the - - (1,441) three months and nine months ended September 30 for 2010 and --- --- ------ 2009: Net income 15,922 106,666 79,780 Less: Net income attributable to noncontrolling interest (213) (1,427) (6,945) ---- ------ ------ Net income attributable to ChinaCast Education Corporation 15,709 105,239 72,835 ====== ======= ====== Net income 15,922 106,666 79,780 Foreign currency translation adjustments 298 1,994 (697) Comprehensive income 16,220 108,660 79,083 Comprehensive income attributable to noncontrolling interest (206) (1,377) (6,945) ---- ------ ------ Comprehensive income attributable to ChinaCast Education 16,014 107,283 72,138 Corporation ====== ======= ====== Net income per share Net income attributable to ChinaCast Education Corporation per share: Basic 0.32 2.21 2.03 ==== ==== ==== Diluted 0.32 2.18 2.03 ==== ==== ==== Weighted average shares used in computation: Basic 47,693,969 47,693,969 35,814,325 ========== ========== ========== Diluted 48,176,902 48,176,902 35,945,264 ========== ========== ========== See notes to unaudited condensed consolidated financial statements. CHINACAST EDUCATION CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) For the nine months ended September 30, ------------------------- 2010 2010 2009 ---- ---- ---- US$ RMB RMB (Note 1) (Note 1) Cash flows from operating activities: Net income 15,922 106,666 79,780 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 5,497 36,832 18,268 Amortization of acquired intangible assets 4,064 27,231 11,833 Amortization of land use rights 375 2,510 1,973 Share-based compensation 973 6,522 12,847 Loss on disposal of property, plant and equipment - - 519 Loss in equity investments 13 86 1,370 Changes in assets and liabilities: Accounts receivable 720 4,823 (23,080) Inventory (8) (52) (570) Prepaid expenses and other current assets (538) (3,607) 3,019 Non-current deposits 804 5,390 (133) Amounts due from related parties 440 2,950 5,751 Accounts payable (397) (2,657) 6,587 Accrued expenses and other current liabilities (1,964) (13,158) (13,856) Deferred revenues 23,836 159,699 23,120 Amount due to related party - - (599) Income taxes payable 2,934 19,656 13,415 Deferred tax assets 139 931 - Deferred tax liabilities (710) (4,765) (1,816) Unrecognized tax benefits 1,987 13,320 5,791 ----- ------ ----- Net cash provided by operating activities 54,085 362,377 144,219 ------ ------- ------- Cash flows from investing activities: Advance to related party - - (20,000) Purchase of subsidiaries, net of cash acquired (55,876) (374,374) Cash received from noncontrolling interest for establishing joint venture 2,985 20,000 Repayment from advance to related party 9 62 27,544 Purchase of property and equipment (8,165) (54,708) (26,153) Disposal of property, plant and equipment 120 801 Term deposits (13,881) (93,000) 89,000 Deposits for investments (448) (3,000) (103,000) ---- ------ -------- Net cash used in investing activities (75,376) (505,020) (32,609) ------- -------- ------- Cash flows from financing activities: Other borrowings raised 13,955 93,500 10,350 Other borrowings raised from related party - - 500 Repayment of other borrowings (13,761) (92,200) (11,367) Bank borrowings raised 11,940 80,000 128,400 Bank borrowings repaid (14,090) (94,400) (58,400) Guarantee deposit paid - - (3,000) Repayment of capital lease obligation (1) (10) 88 Proceeds from issuance of shares, net of issuance costs 34,772 232,970 - ------ ------- --- Net cash provided by financing activities 32,815 219,860 66,571 ------ ------- ------ Effect of foreign exchange rate changes 46 308 - Net increase in cash and cash equivalents 11,524 77,217 178,181 Cash and cash equivalents at beginning of the period 48,901 327,628 220,131 ------ ------- ------- Cash and cash equivalents at end of the period 60,471 405,153 398,312 ====== ======= ======= See notes to unaudited condensed consolidated financial statements. ChinaCast Education Third Quarter and 9 Months FY2010 Reconciliations of Non-GAAP Results of Operations Measures to the Nearest Comparable GAAP Measures 3 months 3 months ended ended YoY 30/9/2010 30/9/2009 %change US$'000 US$'000 +/(-) Adjusted Net Income (Non-GAAP) Net income attributable to ChinaCast Education Corporation 6,200 4,023 54.11 Share-based Compensation 287 461 (37.74) Amortization of Acquired Intangible Assets 1,492 537 177.84 Adjusted Net Income (non-GAAP) 7,979 5,021 194 Adjusted Net Margin (non-GAAP) 43% 42% Adjusted Diluted EPS (Non-GAAP) 0.16 0.14 14.29 Adjusted EBITDA (Non-GAAP) Net income attributable to ChinaCast Education Corporation 6,200 4,023 54.11 Depreciation 2,333 965 141.76 Amortization of Acquired Intangible Assets 1,492 537 177.84 Amortization of Land Use Rights 132 98 34.69 Share-based Compensation 287 461 (37.74) Interest Income (571) (314) 81.85 Interest Expense 606 356 70.22 Provision for income taxes 1,163 1,120 3.84 Earnings in equity investments 4 117 (96.58) Net income attributable to noncontrolling interest 83 299 (72.24) Adjusted EBITDA (non-GAAP) 11,729 7,662 371 Adjusted EBITDA Margin (non-GAAP) 62% 63% 9 months 9 months ended ended YoY 30/9/2010 30/9/2009 %change US$'000 US$'000 +/(-) Adjusted Net Income (Non-GAAP) Net income attributable to ChinaCast Education Corporation 15,709 10,711 46.66 Share-based Compensation 973 1,889 (48.49) Amortization of Acquired Intangible Assets 4,064 1,740 133.56 Adjusted Net Income (non-GAAP) 20,744 14,340 132 Adjusted Net Margin (non-GAAP) 40% 42% Adjusted Diluted EPS (Non-GAAP) 0.43 0.40 7.50 Adjusted EBITDA (Non-GAAP) Net income attributable to ChinaCast Education Corporation 15,709 10,711 46.66 Depreciation 5,497 2,686 104.65 Amortization of Acquired Intangible Assets 4,064 1,740 133.56 Amortization of Land Use Rights 375 290 29.31 Share-based Compensation 973 1,889 (48.49) Interest Income (1,540) (1,018) 51.28 Interest Expense 1,586 822 92.94 Provision for income taxes 4,110 3,101 32.54 Earnings in equity investments 13 201 (93.53) Net income attributable to noncontrolling interest 213 1,021 (79.14) Adjusted EBITDA (non-GAAP) 31,000 21,443 266 Adjusted EBITDA Margin (non-GAAP) 60% 62%
ChinaCast Education Corporation
CONTACT: Michael Santos, President-International of ChinaCast Education,
+1-202-361-3403, mjsantos@chinacasteducation.com; or Ted Haberfield, Executive
Vice President of HC International, +1-760-755-2716,
thaberfield@hcinternational.net
Web Site: http://www.chinacasteducation.com/
