BEIJING, May 22 /Xinhua-PRNewswire/ -- ChinaEdu Corporation (Nasdaq: CEDU), an educational services provider in China ("ChinaEdu" or the "Company"), today announced its unaudited financial results for the fiscal quarter ended March 31, 2008(1), which is the first quarter of ChinaEdu's fiscal year 2008.
First Quarter 2008 Highlights
-- Total net revenue for the first quarter of 2008 increased by 23.8% to
RMB69.7 million ($9.9 million) from RMB56.3 million for the
corresponding period in 2007.
-- Top line growth was driven by revenue from online degree programs, the
Company's core business segment, which increased by 37.1% to RMB55.0
million ($7.8 million) for the first quarter of 2008 from RMB40.1
million for the corresponding period in 2007. This increase was
primarily due to the significant growth in revenue students(2) enrolled
in our university partners' online degree programs, with the number of
revenue students in online degree programs during the first quarter of
2008 having increased by 23% to over 91,000 from approximately 74,000
in the same period in 2007.
-- Net income for the first quarter of 2008 increased by 7096.6% to
RMB2.1 million ($0.3 million) from RMB0.03 million for the same period
in 2007. Diluted earnings per ordinary share (one American Depositary
Share, or "ADS", represents three ordinary shares) for the first
quarter of 2008 increased to RMB0.03 ($0.005) from RMB0.00 for the
first quarter of 2007.
-- Net income excluding share-based compensation and amortization of
intangible assets (non-GAAP) for the first quarter of 2008 increased by
100.4% to RMB4.6 million ($0.7 million) from RMB2.3 million for the
same period in 2007.
-- In March 2008, ChinaEdu entered into an exclusive 20-year joint
venture agreement with Beijing Forestry University (BFU) to provide
online education services to BFU. BFU is ChinaEdu's 12th long-term
partner in adult online education services.
-- Also in March 2008, ChinaEdu entered into a definitive agreement to
acquire the remaining 20% equity interest in the 101 Online School, an
online tutoring and test preparation program in which the Company
already owned the other 80% interest, in order to capitalize on the
growth potential of the online tutoring business.
"We are pleased to report another quarter of solid revenue growth for ChinaEdu, driven by healthy year-over-year growth in our online degree programs attributable to strong market demand and our continuous focus on improving service quality," said Ms. Julia Huang, ChinaEdu's Chairman and Chief Executive Officer. "Although our ongoing investment in establishing a learning center network for our online degree programs impacted our operating profit growth this quarter, we believe the long-term strategic benefit outweighs the start-up costs we have incurred in the short term."
Ms. Huang continued, "We have made substantial progress in establishing our learning center network and university collaborative alliances(3), two of our key strategic objectives. We remain focused on building organic growth in each of our four lines of business to achieve sustainable long-term growth."
Financial Results for the First Quarter Ended March 31, 2008
ChinaEdu reported total net revenue of RMB69.7 million ($9.9 million) for the quarter ended March 31, 2008, representing a 23.8% increase from the corresponding period in 2007.
Net revenue from online degree programs for the first quarter of 2008 was RMB55.0 million ($7.8 million), representing a 37.1% increase from RMB40.1 million for the corresponding period in 2007. This increase was attributable primarily to the significant growth in revenue students enrolled in our university partners' online degree programs during the quarter ended March 31, 2008 as compared to the corresponding period in 2007. In aggregate, our university partners had over 91,000 revenue students during the first quarter of 2008, representing a 23% increase from the same period in 2007.
Net revenue from the Company's non-online degree programs (international curriculum programs, private primary and secondary schools and online tutoring programs) for the first quarter of 2008 was RMB14.7 million ($2.1 million), representing a 9.3% decrease from RMB16.2 for the corresponding period in 2007. This decrease was attributable primarily to the decline in revenue from overseas student academic tours in the first quarter of 2008 as compared to the corresponding period in 2007, as a result of the lower student enrollment in the FEC program for the academic year started in September 2007.
Total cost of revenue for the first quarter of 2008 was RMB24.2 million ($3.4 million), representing an 8.5% increase from RMB22.3 million for the corresponding period in 2007. This increase is attributable to the changes discussed below.
Cost of revenue for online degree programs in the first quarter of 2008 was RMB15.3 million ($2.2 million), representing a 28.8% increase from RMB11.9 million in the first quarter of 2007. This increase was attributable primarily to an increase in the amount of services necessary to support our university partners' online degree programs, as a result of the increase in revenue students during the first quarter of 2008 as compared to the corresponding period in 2007.
Cost of revenue for non-online degree programs for the first quarter of 2008 was RMB8.9 million ($1.3 million), representing a 14.8% decrease from RMB10.4 million for the first quarter of 2007. This decrease was attributable primarily to (1) a decrease in costs related to overseas student academic tours in the FEC program in the first quarter of 2008 as a result of the lower student enrollment in the program during the academic year started in September 2007 as compared to the academic year started in September 2006, and (2) a decrease in the hiring of native English speaking teachers in response to the lower student enrollment in the FEC program during the first quarter of 2008.
As a result of the factors discussed above, gross profit for the first quarter of 2008 was RMB45.5 million ($6.5 million), representing a 33.8% increase from RMB34.0 million for the corresponding period in 2007.
General and administrative expenses for the first quarter of 2008 were RMB20.9 million ($3.0 million), representing a 33.5% increase from RMB15.7 million for the first quarter of 2007. This increase was attributable primarily to (1) the increase in the number of general and administrative employees and the related increase in discretionary bonus compensation accrued or paid to these employees, (2) an increase in depreciation and maintenance expenses of the new office space purchased in November 2007, and (3) additional expenses associated with being a newly listed public company in the U.S., including increased professional services fees, specifically increased external consultant, investor relations, accounting and legal fees.
Selling and marketing expenses for the first quarter of 2008 were RMB5.9 million ($0.8 million), representing a 107.2% increase from RMB2.8 million for the corresponding period in 2007. This increase is attributable primarily to the establishment of our own network of learning centers for online degree programs, and the hiring of additional sales and marketing personnel in first quarter of 2008 as compared to the corresponding period in 2007 in response to the ongoing expansion of our business.
Research and development expenses for the first quarter of 2008 were RMB5.9 million ($0.8 million), representing a 53.2% increase from RMB3.9 million for the corresponding period in 2007. This increase was attributable primarily to increased research and development personnel and activities in some of the Company's collaborative alliances.
Share-based compensation for the first quarter of 2008, which was allocated to the related operating cost and expense line item, was RMB0.4 million ($0.05), representing an 11.0% increase from RMB0.3 million for the corresponding period in 2007. This was attributable primarily to an increase of RMB0.8 million in share-based compensation due to an increase in the number of options granted in fiscal year 2007. This increase was partially offset by a decrease of RMB0.7 million in the forfeiture rate adjustment from 6.28% to 14.1% in the first quarter of 2008.
As a result of the factors discussed above, income from operations for the first quarter of 2008 was RMB12.8 million ($1.8 million), representing a 10.0% increase from RMB11.7 million for the corresponding period in 2007.
Interest income for the first quarter of 2008 was RMB2.7 million ($0.4 million), representing a 701.2% increase from RMB0.3 million for the corresponding period in 2007. This increase was attributable primarily to the interest income earned in the first quarter of 2008 on the net proceeds from the Company's initial public offering, which was completed in December 2007.
Income tax expense for the first quarter of 2008 was RMB4.9 million ($0.7 million), representing a 23.4% decrease from RMB6.4 million for the corresponding period in 2007. This decrease was attributable primarily to (1) a decrease in the effective income tax rate applicable to the Company for the first quarter of 2008 (32.4%), as compared to an income tax rate of 54.4% for the corresponding period in 2007, primarily due to the adoption of the new unified income tax rate, and (2) a tax credit of RMB1.0 million for one of the Company's subsidiaries, which qualified for high-tech company status, in the first quarter of 2008.
Minority interest for the first quarter of 2008 was RMB8.1 million ($1.2 million) representing a 53.0% increase from RMB5.3 million for the corresponding period in 2007. This increase was attributable primarily to the higher net profit earned by some of the Company's collaborative alliances in first quarter of 2008 as compared to the corresponding period in 2007.
Net income was RMB2.1 million ($0.3 million) for the first quarter of 2008, representing a significant increase from RMB0.03 million for the corresponding period in 2007. This was attributable primarily to the improved performance of the Company's online degree programs, as well as the other factors discussed above. Diluted earnings per ordinary share for the first quarter of 2008 increased to RMB0.03 ($0.005) from RMB0.0 per share in the corresponding period in 2007.
As of March 31, 2008, the Company had cash, cash equivalents and a term deposit of RMB440.0 million ($62.7 million). Net operating cash flows for the first quarter of 2008 were negative RMB40.1 million ($5.7 million) as compared to RMB45.3 million in the corresponding period in 2007. This change in operating cash flows is attributable primarily to the reduction in amounts payable to our university partners' online schools in the first quarter of 2008. Capital expenditures for the first quarter were RMB8.5 million ($1.2 million) which is in line with the Company's normal operations.
Outlook for the Second Quarter of 2008
For the second quarter of 2008, ChinaEdu expects its total net revenue to be in the range of RMB70 million ($10 million) to RMB73 million ($10.4 million). This forecast reflects ChinaEdu's current and preliminary view, which is subject to change.
Conference Call
ChinaEdu will host a conference call on Thursday, May 22, 2008 at 8:00 AM U.S. Eastern Time 8:00 PM Beijing/Hong Kong Time.
Dial-in information for the earnings conference call is as follows:
US/International: 1.866.700.0133 / 1.617.213.8831
The passcode for the call is: CEDU
A replay of the conference call will be available until May 29, 2008 by dialing 1.888.286.8010 or 1.617.801.6888 and entering passcode: 87081504.
Additionally, a live and archived webcast of the conference call will be available at http://ir.chinaedu.net .
(1) This announcement contains translations of certain Renminbi ("RMB")
amounts into U.S. dollar ("$") amounts at specified rates solely for
the convenience of the reader. Unless otherwise stated, all
translations from RMB to U.S. dollars were made at the rate of
RMB7.0120 to $1.00, the noon buying rate in effect on March 31, 2008
in The City of New York for cable transfers of RMB as certified for
customs purposes by the Federal Reserve Bank of New York. The Company
makes no representation that the RMB or U.S. dollar amounts referred
to 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) "Revenue students" refers to students of university online degree
programs who have paid tuition during the applicable period.
(3) "Collaborative alliance" or "Collaborative alliances" refer to the
subsidiary or subsidiaries that the Company formed with certain
university partners to provide services to their online degree
programs, which subsidiaries are majority owned by the Company.
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, which are adjusted from results based on GAAP to exclude share-based compensation and amortization of intangible assets. 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 uses both GAAP and non-GAAP information in evaluating and operating business 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 strategic relationships with twelve universities to operate online degree programs, ten of which are under long-term, exclusive contracts that vary from 15 to 50 years in length.
Forward-Looking Statements
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 final prospectus filed with the Securities and Exchange Commission on December 11, 2007, 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.
ChinaEdu Corporation
Unaudited Condensed Consolidated Balance Sheets
December March March
(in thousands) 31, 2007 31, 2008 31, 2008
RMB RMB US$
Current assets:
Cash and cash equivalents 497,114 431,979 61,606
Accounts receivable, net 1,238 1,400 200
Term deposit 6,042 8,000 1,141
Prepaid expenses and other current
assets 17,492 24,849 3,544
Amounts due from related parties 105,522 69,933 9,973
Deferred tax assets 9,521 3,313 472
Total current assets 636,929 539,474 76,936
Cost method investment 1,210 1,210 173
Land use rights, net 26,949 26,808 3,823
Property and equipment, net 130,745 136,465 19,462
Deposits paid for acquisition of
property and equipment 2,025 2,056 293
Intangible assets, net 105,852 103,597 14,774
Deferred tax assets 1,416 1,416 202
Rental deposits 1,623 795 113
Goodwill 73,319 73,319 10,456
Total assets 980,068 885,140 126,232
Liabilities, minority interest and
shareholders' equity
Current liabilities:
Accounts payable 2,773 2,626 375
Deferred revenues 83,816 24,691 3,521
Accrued expenses and other current
liabilities 42,096 31,638 4,512
Amounts due to related parties 28,316 16,264 2,319
Income taxes payable 22,455 15,273 2,178
Other taxes payable 6,666 2,359 336
Total current liabilities 186,122 92,851 13,241
Long-term debt 25,724 24,659 3,516
Deferred revenues 3,124 4,766 680
Deferred tax liabilities 24,036 23,684 3,378
Unrecognized tax benefit 4,332 4,465 637
Total liabilities 243,338 150,425 21,452
Minority interests 57,996 66,128 9,431
Shareholders' equity:
Total shareholders' equity 678,734 668,587 95,349
Total liabilities, minority interest,
and shareholders' equity 980,068 885,140 126,232
ChinaEdu Corporation
Unaudited Condensed Consolidated Statements of Operations
Three Months Ended
(in thousands, except for
percentage and share, per March 31, December March 31, March 31,
share information) 2007 31, 2007 2008 2008
RMB RMB RMB US$
Net Revenue:
Online degree programs 40,080 64,813 54,960 7,838
International curriculum
programs 9,097 6,640 7,542 1,076
Online tutoring programs 4,065 4,488 3,277 467
Private primary and
secondary schools 3,035 3,672 3,876 553
Total net revenue 56,277 79,613 69,655 9,934
Cost of revenue:
Online degree programs 11,881 15,729 15,302 2,182
International curriculum
programs 6,640 4,663 4,765 680
Online tutoring programs 1,086 720 727 104
Private primary and
secondary schools 2,661 3,414 3,361 479
Total cost of revenue 22,268 24,526 24,155 3,445
Gross profit:
Online degree programs 28,199 49,084 39,658 5,656
International curriculum
programs 2,457 1,977 2,777 396
Online tutoring programs 2,979 3,768 2,550 363
Private primary and
secondary schools 374 258 515 74
Total gross profit 34,009 55,087 45,500 6,489
Online degree programs 70.4% 75.7% 72.2% 72.2%
International curriculum
programs 27.0% 29.8% 36.8% 36.8%
Online tutoring programs 73.3% 84.0% 77.8% 77.8%
Private primary and
secondary schools 12.3% 7.0% 13.3% 13.3%
Gross profit margin 60.4% 69.2% 65.3% 65.3%
Operating expenses:
General and administrative 15,672 26,106 20,915 2,983
Selling and marketing 2,829 3,491 5,862 836
Research and development 3,851 6,818 5,898 841
Total operating expenses 22,352 36,415 32,675 4,660
Income (loss) from
operations 11,657 18,672 12,825 1,829
Operating margin 20.7% 23.5% 18.4% 18.4%
Other income 394 -- -- --
Other non operating income -- -- 151 22
Interest income 343 2,398 2,748 392
Interest expense (678) (475) (606) (86)
Income (loss) before
income tax provisions and
minority interest 11,716 20,595 15,118 2,157
Income tax expense (6,373) (2,519) (4,900) (699)
Minority interest, net of
taxes (5,314) (8,639) (8,131) (1,160)
Net income (loss) 29 9,437 2,087 298
Net margin 0.1% 11.9% 3.0% 3.0%
Net income (loss) per
share:
Basic -- 0.21 0.04 0.005
Diluted -- 0.19 0.03 0.005
Net income (loss) per ADS:
Basic -- 0.63 0.12 0.015
Diluted -- 0.57 0.09 0.015
Weighted average aggregate
number of ordinary shares
outstanding:
Basic 40,157,398 45,015,332 58,434,407 58,434,407
Diluted 44,272,203 50,477,265 62,789,582 62,789,582
ChinaEdu Corporation
Unaudited Condensed Consolidated Statements of Cash Flow
Three Months Ended
March December March March
(in thousands) 31,2007 31,2007 31,2008 31,2008
RMB RMB RMB US$
Operating activities:
Net income 29 9,437 2,087 298
Minority interest 5,314 8,639 8,131 1,160
Share-based compensation 345 1,148 383 55
Depreciation 1,994 2,285 2,734 390
Amortization of land use
rights 130 140 141 20
Amortization of intangible
assets 2,038 2,167 2,255 322
Account receivable write-off -- 3,018 -- --
Other income (394) -- -- --
Interest expense 678 475 606 86
Loss (gain) from disposal of
property and equipment -- 89 -- --
Deferred income taxes (3,143) (6,541) 5,856 835
Accounts receivable 11,788 187 (163) (23)
Prepaid expenses and other
current assets (6,225) (2,351) (7,386) (1,054)
Amounts due from related
parties 29,975 (46,120) 35,589 5,075
Accounts payable (901) (536) (147) (21)
Deferred revenues (45,074) 58,949 (57,483) (8,198)
Accrued expenses and other
current liabilities (319) 21,918 (10,114) (1,443)
Amounts due to related
parties 49,088 9,415 (12,052) (1,719)
Unrecognized tax benefit 320 134 133 19
Rental deposits (679) (236) 828 118
Other taxes payable (3,848) 2,183 (4,307) (614)
Income tax payable 4,175 9,046 (7,182) (1,024)
-- -- -- --
Net cash provided by (used in)
operating activities 45,291 73,446 (40,091) (5,718)
Investing activities:
Purchase of business (9,520) -- -- --
Purchase of land use
activities -- (1,500) -- --
Purchase of property and
equipment (5,059) (18,146) (8,485) (1,210)
Deposits paid for
acquisition of property and
equipment -- -- (31) (4)
Purchase of term deposit (5,000) 4,158 (1,958) (279)
Purchase of contract right (3,430) -- -- --
Proceeds from disposal of
property and equipment -- -- 31 4
Net cash used in investing activities (23,009) (15,488) (10,443) (1,489)
Financing activities:
Proceeds from IPO -- 348,827 -- --
Proceeds from issuance of
Series D convertible
preferred shares 54,072 -- -- --
Collection of subscription
receivable 1,117 -- -- --
Ordinary shares repurchased (50,047) -- -- --
Exercise warrants -- 1,664 -- --
Re-issuance of ordinary
shares 48,447 -- -- --
Repayment of convertible
notes (3,151) (22,650) -- --
Repayment of long-term loan
interest and principal -- (1,080) (1,671) (238)
Cash dividends paid to
minority shareholders (3,850) (12,333) -- --
Capital contributions by
minority shareholders 2,030 -- -- --
-- -- -- --
Net cash provided by (used in)
financing activities 48,618 314,428 (1,671) (238)
Effect of foreign exchange rate changes (1,551) (4,106) (12,930) (1,844)
-- --
CASH AND CASH EQUIVALENTS, beginning of
quarter 148,315 128,834 497,114 70,895
-- --
CASH AND CASH EQUIVALENTS, end of
quarter 217,664 497,114 431,979 61,606
Net increase (decrease) in cash 69,349 368,280 (65,135) (9,289)
ChinaEdu Corporation
Reconciliations of non-GAAP results of operations measures to GAAP
measures
Three Months Ended
March December March March
(in thousands, unaudited) 31,2007 31,2007 31,2008 31,2008
RMB RMB RMB US$
Income (loss) from operations
GAAP Result 11,657 18,672 12,825 1,829
Adjustment-Share-based compensation 345 1,148 383 55
Amortization of intangible assets 2,038 2,167 2,255 322
Non-GAAP Result 14,040 21,987 15,463 2,206
Net income (loss)
GAAP Result 29 9,437 2,087 298
Adjustment-Share-based compensation 345 1,148 383 55
Adjustment-Minority interest for
Share-based compensation (96) (265) (84) (12)
Amortization of intangible assets 2,038 2,167 2,255 322
Non-GAAP Result 2,316 12,487 4,641 663
