omniture

ChinaEdu Reports Second Quarter 2009 Results

2009-08-20 16:52 1328

11.0% Increase in Second Quarter Net Revenue Year-Over-Year with Second Quarter Net Revenue Exceeding Guidance

Live Conference Call to be held on Thursday, August 20, 2009 at 8 a.m. (Eastern) / 5 a.m. (Pacific) / 8 p.m. (Beijing/Hong Kong)

BEIJING, Aug. 20 /PRNewswire-Asia-FirstCall/ -- ChinaEdu Corporation (Nasdaq: CEDU) ("ChinaEdu" or the "Company"), an educational services provider in China, today announced its unaudited financial results for the second quarter ended June 30, 2009.(1)

Second Quarter 2009 Highlights

(in thousands, unaudited) 3 Months Ended Period

June June June over

Period Ended 30, 2008 30, 2009 30, 2009 Period

Currency in thousands RMB RMB USD %

Financial Data:

Net revenue 79,521 88,275 12,924 11%

Gross profit 56,142 55,078 8,063 -2%

Income from operations 24,862 22,020 3,223 -11%

Net income attributable to CEDU 9,187 8,860 1,297 -4%

Adjusted EBITDA (Non-GAAP) 31,839 29,518 4,321 -7%

Adjusted net income attributable

to CEDU (Non-GAAP) 12,956 12,097 1,771 -7%

EPS 0.16 0.18 0.027 13%

Adjusted EPS (Non-GAAP) 0.22 0.25 0.037 14%

Net income to CEDU per ADS 0.48 0.54 0.081 13%

Adjusted net income to CEDU per

ADS (Non-GAAP) 0.66 0.75 0.111 14%

Operating Data:

Revenue students for online

degree program 125,000 147,000 147,000 18%

(in thousands, unaudited) Six Months Ended Year

Period Ended June June June over

30, 2008 30, 2009 30, 2009 Year

Currency in thousands RMB RMB USD %

Financial Data:

Net revenue 149,176 169,445 24,809 14%

Gross profit 101,642 103,678 15,179 2%

Income from operations 37,687 39,556 5,791 5%

Net income attributable to CEDU 11,274 18,424 2,697 63%

Adjusted EBITDA (Non-GAAP) 50,177 55,106 8,067 10%

Adjusted net income attributable

to CEDU (Non-GAAP) 17,738 25,476 3,729 44%

EPS 0.19 0.38 0.055 100%

Adjusted EPS (Non-GAAP) 0.30 0.52 0.076 73%

Net income to CEDU per ADS 0.57 1.14 0.165 100%

Adjusted net income to CEDU per

ADS (Non-GAAP) 0.90 1.56 0.228 73%

Operating Data:

Revenue students for online

degree program 125,000 147,000 147,000 18%

-- Total net revenue for the second quarter of 2009 increased by 11.0% to

RMB88.3 million ($12.9 million) from RMB79.5 million for the

corresponding period in 2008, exceeding our previously disclosed

guidance for the second quarter of 2009 of RMB83 million to

RMB87 million.

-- Net revenue from online degree programs, the Company's major business

segment, increased by 9.7% to RMB71.4 million ($10.5 million) for the

second quarter of 2009 from RMB65.1 million for the corresponding

period in 2008.

-- The number of revenue students(2) in online degree programs during the

second quarter of 2009 increased by approximately 18% to over 147,000

from approximately 125,000 for the corresponding period in 2008.

-- Income from operations decreased by 11.4% to RMB22.0 million

($3.2 million) in the second quarter of 2009 from RMB24.9 million for

the corresponding period in 2008.

-- Net income attributable to ChinaEdu Corporation, which is net income

excluding net income attributable to noncontrolling interest decreased

by 3.6% to RMB8.9 million ($1.3 million) in the second quarter of 2009

from RMB9.2 million for the corresponding period in 2008.

-- Adjusted EBITDA, which is a non-GAAP measure defined as net income

before interest income, taxes, depreciation, amortization of intangible

assets and land use rights, share-based compensation and goodwill and

intangibles impairment charges, if applicable, decreased by 7.3% to

RMB29.5 million ($4.3 million) in the second quarter of 2009 from

RMB31.8 million for the corresponding period in 2008.

-- Adjusted net income attributable to ChinaEdu Corporation, which is a

non-GAAP measure defined as net income attributable to ChinaEdu

Corporation excluding share-based compensation, amortization of

intangible assets and land use rights and goodwill and intangibles

impairment charges, if applicable (all amounts are attributable to

ChinaEdu Corporation, net of noncontrolling interest), decreased by

6.6% to RMB12.1 million ($1.8 million) in the second quarter of 2009

from RMB13.0 million for the corresponding period in 2008.

-- Basic net income attributable to ChinaEdu Corporation per share ("EPS")

was RMB0.18 ($0.027) for the second quarter of 2009 compared to RMB0.16

for the corresponding period in 2008.

-- Basic net income attributable to ChinaEdu Corporation per American

Depositary Share ("ADS") was RMB0.54 ($0.081) for the second quarter of

2009 compared to RMB0.48 for the corresponding period in 2008.

-- Basic adjusted net income attributable to ChinaEdu Corporation per

share (non-GAAP) was RMB0.25 ($0.037) for the second quarter of 2009

compared to RMB0.22 for the corresponding period in 2008.

-- Basic adjusted net income attributable to ChinaEdu Corporation per ADS

(non-GAAP) was RMB0.75 ($0.111) for the second quarter of 2009 compared

to RMB0.66 for the corresponding period in 2008.

(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

RMB6.8302 to $1.00, the noon buying rate in effect on June 30, 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

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 in the applicable period.

"We are pleased to report healthy enrollment and revenue growth for the 2009 spring semester," said Ms. Julia Huang, ChinaEdu's Chairman and Chief Executive Officer. "In the second quarter of 2009, we strived for strong revenue growth from our learning centers and continued to expand our learning center network. In addition, we are pleased to report continued progress in signing additional university partners for our online degree programs, including collaborative alliance agreements with provincial radio and television universities. Our 101 online tutoring program continued to improve with new and updated courseware, stronger sales channels and improved customer services. In addition, we have continued to invest in courseware development, technology upgrade and the learning platform for both online degree and non-degree programs, which we believe will position us for continued future growth. Although there was a decline in gross profit, operating income and net income in the second quarter of 2009 compared to the second quarter of 2008, the Company's margins for EBITDA, adjusted operating income and net income remained stable in the first half of 2009 relative to the first half of 2008, which we believe reflects improvements in the Company's operations given the expansion of the learning centers network and investments in other businesses."

Financial Results for the Second Quarter Ended June 30, 2009

Net Revenue

Total net revenue for the second quarter of 2009 was RMB88.2 million ($12.9 million), representing an 11.0% increase from the corresponding period in 2008. Net revenue from online degree programs for the second quarter of 2009 was RMB71.4 million ($10.5 million), representing a 9.7% increase from RMB65.1 million for the corresponding period in 2008. The growth in net revenue was primarily due to strong enrollment growth for the Spring semester of 2009, which registered over 147,000 revenue students compared to 125,000 revenue students for the Spring semester of 2008.

Net revenue from the Company's non-online degree programs (online tutoring program, international curriculum programs and private primary and secondary schools) for the second quarter of 2009 was RMB16.8 million ($2.5 million), representing a 17.2% increase from RMB14.4 million for the corresponding period in 2008. This increase was attributable to the increase in student enrollment at Anqing School for the academic year beginning in September 2008 as a result of the completion of Phase I of the new campus construction as well as a slight increase in net revenue for the 101 online tutoring programs.

Cost of revenue

Total cost of revenue for the second quarter of 2009 was RMB33.2 million ($4.9 million), representing an increase of 42.0% as compared to RMB23.4 million for the corresponding period of 2008. Cost of revenue for online degree programs for the second quarter of 2009 was RMB22.5 million ($3.3 million), representing an increase of 67.4% as compared to RMB13.5 million for the second quarter of 2008. In addition to increase in cost of revenue corresponding to enrollment growth, the increase in cost of revenue for online degree programs was attributable primarily to (i) enrollment growth in our university partners' online degree programs in the Spring semester of 2009 compared to the Spring semester of 2008, (ii) courseware development for selected university partners at our collaborative alliances(3) and (iii) the expansion of our learning center network. Since most of the recruiting services performed by our learning centers to our university partners are recorded as cost of revenue, our total cost of revenue will continue to increase as we continue the expansion of the learning centers network. We had 56 operational learning centers by the second quarter of 2009, of which 21 were proprietary and 35 were contracted locations, compared to 22 operational learning centers as of the end of the second quarter of 2008.

Cost of revenue for non-online degree programs for the second quarter of 2009 was RMB10.7 million ($1.6 million), representing a 7.5% increase from RMB9.9 million for the corresponding period in 2008. This increase was attributable primarily to increased cost of revenue related to Anqing School's new campus and 101 online tutoring program's investment in YoYo Bear education products, which were partially offset by a decrease in cost of revenue for the international curriculum programs.

(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.

Gross Profit and Gross Margin

Gross profit for the second quarter of 2009 was RMB55.1 million ($8.1 million), representing a 1.9% decrease from RMB56.1 million for the corresponding period of 2008, as a result of the increase in cost of revenue, as discussed above. Total gross margin for the second quarter of 2009 was 62.4% as compared to 70.6% for the corresponding period of 2008. Since most of the recruiting services performed by our learning centers to our university partners are recorded as cost of revenue, our gross margin for the online degree programs segment decreased as a result of our continuous efforts in expanding the learning center network. Furthermore, gross margin for Anqing School and 101 online tutoring programs were negatively impacted by our investment in Anqing School's new campus and investment in YoYo Bear products, respectively, each of which are still in the early stages of development and thus are currently producing less income than expenses associated with such investments.

Operating Expenses

Total operating expenses were RMB33.1 million ($4.8 million) for the second quarter of 2009, representing a 5.7% increase from RMB31.3 million for the corresponding period in 2008. This increase was attributable primarily to increases in general and administrative and research and development expenses, partially offset by a decrease in selling and marketing expenses, each as discussed below.

-- General and administrative expenses for the second quarter of 2009 were

RMB19.7 million ($2.9 million), which represented a 7.1% increase from

RMB18.4 million for the corresponding period of 2008. This increase was

attributable primarily to an increase in performance-based employee

compensation.

-- Selling and marketing expenses were RMB5.4 million ($0.8 million) for

the second quarter of 2009, which represented a 22.6% decrease from

RMB7.0 million for the corresponding period in 2008. This decrease is

attributable primarily to a decrease in the amount spent on general

advertising and promotional activities for our own learning center

operations in the second quarter in 2009.

-- Research and development expenses for the second quarter of 2009 were

RMB7.9 million ($1.2 million), representing a 35.2% increase from

RMB5.8 million for the corresponding period in 2008. This increase was

attributable primarily to increased technological support and platform

upgrades for certain collaborative alliances in order to further

enhance our online degree programs.

-- Share-based compensation for the second quarter of 2009, which was

allocated to the related cost and operating expense line items, was

RMB2.1 million ($0.3 million) as compared to RMB1.7 million for the

corresponding period in 2008. The increase was attributable primarily

to costs related to the repricing of options (as previously approved by

our shareholders) during the current quarter, which resulted in the

recognition of incremental compensation costs.

Income from Operations

As a result of the factors discussed above, income from operations for the second quarter of 2009 was RMB22.0 million ($3.2 million), which decreased by 11.4% from RMB24.9 million for the corresponding period of 2008.

Adjusted income from operations, which is a non-GAAP measure defined as income from operations excluding share-based compensation, amortization of intangible assets and land use rights and goodwill and intangibles impairment charges, if applicable, was RMB25.5 million ($3.7 million) for the second quarter of 2009, which decreased by 11.8% as compared to RMB28.9 million in the corresponding period of 2008. The decrease was attributable primarily to the increase in cost of revenue as discussed above.

Interest Income

Interest income was RMB1.2 million ($0.2 million) in the second quarter of 2009, as compared to RMB2.6 million in the corresponding quarter of 2008. This decrease was attributable primarily to (i) reduced interest-bearing cash and bank deposit balance of RMB311 million as of June 30, 2009, compared to RMB434 million as of June 30, 2008, and (ii) a lower interest rate for the second quarter of 2009 compared to the corresponding period of 2008.

Income Tax Expense

Income tax income for the second quarter was RMB6.3 million ($0.9 million), as compared to income tax expense of RMB9.4 million for the corresponding period in 2008. This was attributable primarily to the fact that, in the fourth quarter of 2008, seven of our subsidiaries and affiliate companies applied and qualified for the "new and high technology enterprises" status under the new Chinese Enterprise Income Tax Regulation, which came into effect on January 1, 2008. As a result of their qualification for the "new and high technology enterprises" status, these subsidiaries received certain tax exemptions and a preferential statutory tax rate of 15%, thereby reducing the effective tax rate for the second quarter of 2009 to 26.3% as compared to 34.9% for the corresponding period in 2008.

Noncontrolling Interest

Noncontrolling interest was RMB8.7 million ($1.3 million) in the second quarter of 2009, representing a 3.5% increase from RMB8.4 million in the corresponding period in 2008, which was attributable primarily to increased profitability of our collaborative alliances related to the online degree programs.

Net Income (loss) attributable to ChinaEdu Corporation

Net income attributable to ChinaEdu Corporation, which is net income excluding net income attributable to noncontrolling interest, was RMB8.9 million ($1.3 million) for the second quarter of 2009, representing a decrease of 3.6% from net income attributable to ChinaEdu Corporation of RMB9.2 million for the corresponding period in 2008. Adjusted net income attributable to ChinaEdu Corporation (non-GAAP) decreased by 6.6% to RMB12.1 million ($1.8 million) for the second quarter of 2009, as compared to RMB13.0 million in the corresponding period of 2008. The decrease in both net income and adjusted net income attributable to ChinaEdu Corporation (non-GAAP) was primarily due to the increase in cost of revenue in the second quarter of 2009 as compared to the corresponding period in 2008.

Due to a reduction in the number of basic and diluted shares outstanding for the second quarter of 2009 compared to the corresponding period in 2008 as a result of the Company's stock repurchase in the first quarter of 2009, basic and diluted EPS were RMB0.18 ($0.027) and RMB0.17 ($0.025), respectively, for the second quarter of 2009, compared to RMB0.16 and RMB0.15, respectively, for the second quarter of 2008. Similarly, basic and diluted adjusted EPS (non-GAAP) were RMB0.25 ($0.037) and RMB0.23 ($0.034), respectively, for the second quarter of 2009, compared to RMB0.22 and RMB0.21, respectively, for the second quarter of 2008.

In addition, basic and diluted net income attributable to CEDU per ADS were RMB0.54 ($0.081) and RMB0.51 ($0.075), respectively, for the second quarter of 2009, compared to RMB0.48 and RMB0.45, respectively, for the corresponding period in 2008. Similarly, basic and diluted adjusted net income attributable to CEDU per ADS were RMB0.75 ($0.111) and RMB0.69 ($0.102), respectively, for the second quarter of 2009, compared to RMB0.66 and RMB0.63, respectively, for the corresponding period in 2008.

Adjusted EBITDA (Non-GAAP)

Adjusted EBITDA (non-GAAP) was RMB29.5 million ($4.3 million) for the second quarter of 2009, which decreased by 7.3% as compared to RMB31.8 million for the corresponding period in 2008. This decrease was attributable primarily to the increase in cost of revenue, as discussed above.

Deferred Revenue

Deferred revenue at the end of the second quarter of 2009 was RMB101.5 million ($14.9 million), with current deferred revenue of RMB95.3 million ($14.0 million) and non-current deferred revenue of RMB6.2 million ($0.9 million). Deferred revenue at the end of the second quarter of 2009 increased significantly compared to deferred revenue of RMB36.5 million at the end of the first quarter 2009 due to the seasonality of enrollments, which results in tuition being received generally during the second quarter (spring semester) and the fourth quarter (fall semester) of each year.

Cash and Cash Equivalents

As of June 30, 2009, ChinaEdu reported cash and cash equivalents of RMB231.1 million ($33.8 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 the amount due from related parties (which represents cash owed to us by our collaborative alliance partners) amounted to RMB79.5 million ($11.6 million) and RMB225.7 million ($33.0 million), respectively, on June 30, 2009.

2009 Year-to-Date Financial Results

Net Revenue

For the six months ended June 30, 2009, total net revenue was RMB169.4 million ($24.8 million), representing an increase of 13.6% from RMB149.2 million for the corresponding period in 2008. Total net revenue for the sixth months ended June 30, 2009 consisted of RMB137.2 million ($20.1 million) in net revenue from online degree programs and RMB32.3 million ($4.7 million) in net revenue from non-online degree programs. The growth in total net revenue was attributable primarily to strong enrollment growth for the online degree programs and growth in net revenue at Anqing School and 101 online tutoring programs.

Cost of Revenue

For the first six months of 2009, total cost of revenue was RMB65.8 million ($9.6 million), representing an increase of 38.4% as compared to RMB47.5 million for the corresponding period in 2008, which increase was primarily due to the expansion of our learning centers network, courseware development for selected university partners at our collaborative alliances, and the increase in cost of revenue at Anqing School and 101 online tutoring programs.

Gross Profit

Gross profit for the first six months of 2009 was RMB103.7 million ($15.2 million) as compared with RMB101.6 million for the corresponding period in 2008, representing an increase of 2.0%.

Income from Operations

Income from operations were RMB39.6 million ($5.8 million) for the first six months of 2009, representing an increase of 5.0% from RMB37.7 million for the first six months of 2008.

Net Income (loss) attributable to ChinaEdu Corporation

Net income attributable to ChinaEdu Corporation was RMB18.4 million ($2.7 million) for the first six months of 2009, representing an increase of 63.4% compared with RMB11.3 million for the corresponding period in 2008, primarily due to an increase in income from operations, as well as a decrease in income tax expenses compared to the corresponding period in 2008.

Third Quarter 2009 Total Net Revenue Guidance

For the third quarter of 2009, ChinaEdu expects its total net revenue to be in the range of RMB84 million ($12 million) to RMB88 million ($13 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 Thursday, August 20, 2009 at 8:00 a.m. U.S. Eastern time / 5:00 a.m. U.S. Pacific time / 8:00 p.m. Beijing/Hong Kong time.

The conference call may be accessed by calling (US) 866 383 7989/ (International) +1 617 597 5328/ (HK) +852 3002 1672/ (China) +86 10 800 152 1490, and entering the passcode: 48836701. A telephone replay of the conference call will be available shortly after the call until August 27, 2009 at (US) 888 286 8010/ (International) +1 617 801 6888 and entering passcode: 27031028. A live and archived webcast may be accessed via the Internet 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 Corporation, which are adjusted from results based on GAAP to exclude certain non-cash items of share-based compensation, amortization of intangible assets and land use rights and goodwill and intangibles 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, depreciation, amortization of intangible assets and land use rights, share-based compensation and goodwill and intangibles 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 12 long-term, exclusive contracts that generally vary from 15 to 50 years in length. ChinaEdu also performs recruiting services for 17 universities through our nationwide learning center 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.

ChinaEdu Corporation

Unaudited Condensed Consolidated Balance Sheets

December

31, 2008 As June 30, June 30,

(in thousands, unaudited) Adjusted(2) 2009 2009

RMB RMB US$

Current assets:

Cash and cash equivalents 353,933 231,132 33,840

Accounts receivable, net 14,854 24,965 3,655

Term deposits 63,500 79,491 11,638

Inventory -- 1,077 158

Prepaid expenses and other current

assets 20,251 15,937 2,333

Amounts due from related parties 150,472 225,734 33,049

Deferred tax assets 3,986 1,640 240

Total current assets 606,996 579,976 84,913

Cost method investment 1,210 1,210 177

Land use rights, net 28,344 28,178 4,126

Property and equipment, net 161,925 190,034 27,823

Deposits paid for acquisition of

property and equipment 8,619 8,619 1,262

Intangible assets, net 70,377 67,884 9,939

Deferred tax assets 2,096 3,043 446

Rental deposits 958 863 126

Goodwill 38,155 38,155 5,586

Total assets 918,680 917,962 134,398

Liabilities and equity

Current liabilities:

Accounts payable 8,530 6,988 1,023

Deferred revenues 96,068 95,376 13,964

Accrued expenses and other current

liabilities 51,629 52,243 7,649

Amounts due to related parties 25,769 53,872 7,887

Income taxes payable 27,917 23,458 3,434

Other taxes payable 12,008 11,724 1,716

Total current liabilities 221,921 243,661 35,673

Deferred revenues 6,073 6,156 901

Deferred tax liabilities 11,069 10,640 1,558

Unrecognized tax benefit 5,473 7,454 1,091

Total liabilities 244,536 267,911 39,223

Total shareholders' equity: 589,829 552,582 80,905

Noncontrolling interest(1) 84,315 97,469 14,270

Total equity 674,144 650,051 95,175

Total liabilities and equity 918,680 917,962 134,398

(1) Effective January 1, 2009, the Company adopted SFAS 160 (Statement of

Financial Accounting Standards No. 160, "Noncontrolling Interests in

Consolidated Financial Statements"). SFAS 160, which was

retrospectively applied, requires noncontrolling interests to be

separately presented as a component of stockholders' equity on the

unaudited condensed consolidated financial statements.

(2) December 31, 2008 balances were extracted from the form 6-K for the

quarters ended December 31, 2008, as adjusted to reflect the adoption

of SFAS 160.

ChinaEdu Corporation

Unaudited Condensed Consolidated Statements of Operations

Three Months Ended

(in thousands, except for June 30,

percentage, share, and per 2008 As March June 30, June 30,

share information) Adjusted(3) 31, 2009 2009 2009

RMB RMB RMB US$

Net Revenue:

Online degree programs 65,124 65,764 71,447 10,460

International curriculum

programs 6,587 5,583 5,213 763

Online tutoring programs 4,078 3,592 4,704 689

Private primary and

secondary schools 3,732 6,231 6,911 1,012

Total net revenue 79,521 81,170 88,275 12,924

Cost of revenue:

Online degree programs 13,461 22,683 22,537 3,300

International curriculum

programs 5,674 2,948 2,793 409

Online tutoring programs 995 1,441 1,624 238

Private primary and

secondary schools 3,249 5,498 6,243 914

Total cost of revenue 23,379 32,570 33,197 4,861

Gross profit:

Online degree programs 51,663 43,081 48,910 7,160

International curriculum

programs 913 2,635 2,420 354

Online tutoring programs 3,083 2,151 3,080 451

Private primary and

secondary schools 483 733 668 98

Total gross profit 56,142 48,600 55,078 8,063

Online degree programs 79.3% 65.5% 68.5% 68.5%

International curriculum

programs 13.9% 47.2% 46.4% 46.4%

Online tutoring programs 75.6% 59.9% 65.5% 65.5%

Private primary and

secondary schools 12.9% 11.8% 9.7% 9.7%

Gross margin 70.6% 59.9% 62.4% 62.4%

Operating expenses:

General and administrative 18,433 19,583 19,742 2,890

Selling and marketing 7,017 4,910 5,434 796

Research and development 5,830 6,571 7,882 1,154

Total operating expenses 31,280 31,064 33,058 4,840

Income from operations 24,862 17,536 22,020 3,223

Operating margin 31.3% 21.6% 24.9% 24.9%

Other income 145 626 625 92

Interest income 2,605 1,672 1,182 173

Interest expense (585) -- -- --

Income before income tax

provisions 27,027 19,834 23,827 3,488

Income tax expense (9,425) (2,708) (6,257) (916)

Net income 17,602 17,126 17,570 2,572

Net income attributable to

the noncontrolling

interest (8,415) (7,562) (8,710) (1,275)

Net income attributable to

ChinaEdu Corporation 9,187 9,564 8,860 1,297

Net margin 11.6% 11.8% 10.0% 10.0%

Net income attributable to

CEDU per share:

Basic 0.16 0.19 0.18 0.027

Diluted 0.15 0.18 0.17 0.025

Net income attributable to

CEDU per ADS:

Basic 0.48 0.57 0.54 0.081

Diluted 0.45 0.54 0.51 0.075

Weighted average aggregate

number of ordinary shares

outstanding:

Basic 58,434,407 49,983,675 48,285,473 48,285,473

Diluted 61,813,068 52,919,048 51,595,566 51,595,566

Six Months Ended

(in thousands, except for June 30,

percentage, share, and 2008 As June 30, June 30,

per share information) Adjusted(3) 2009 2009

RMB RMB US$

Net Revenue:

Online degree programs 120,084 137,211 20,089

International curriculum

programs 14,129 10,796 1,581

Online tutoring programs 7,355 8,296 1,215

Private primary and

secondary schools 7,608 13,142 1,924

Total net revenue 149,176 169,445 24,809

Cost of revenue:

Online degree programs 28,763 45,220 6,621

International curriculum

programs 10,439 5,741 841

Online tutoring programs 1,722 3,065 449

Private primary and

secondary schools 6,610 11,741 1,719

Total cost of revenue 47,534 65,767 9,630

Gross profit:

Online degree programs 91,321 91,991 13,468

International curriculum

programs 3,690 5,055 740

Online tutoring programs 5,633 5,231 766

Private primary and

secondary schools 998 1,401 205

Total gross profit 101,642 103,678 15,179

Online degree programs 76.0% 67.0% 67.0%

International curriculum

programs 26.1% 46.8% 46.8%

Online tutoring programs 76.6% 63.1% 63.1%

Private primary and

secondary schools 13.1% 10.7% 10.7%

Gross margin 68.1% 61.2% 61.2%

Operating expenses:

General and administrative 39,348 39,325 5,758

Selling and marketing 12,879 10,344 1,514

Research and development 11,728 14,453 2,116

Total operating expenses 63,955 64,122 9,388

Income from operations 37,687 39,556 5,791

Operating margin 25.3% 23.3% 23.3%

Other income 296 1,251 183

Interest income 5,353 2,854 418

Interest expense (1,191) -- --

Income before income tax

provisions 42,145 43,661 6,392

Income tax expense (14,325) (8,965) (1,313)

Net income 27,820 34,696 5,079

Net income attributable to

the noncontrolling

interest (16,546) (16,272) (2,382)

Net income attributable to

ChinaEdu Corporation 11,274 18,424 2,697

Net margin 7.6% 10.9% 10.9%

Net income attributable to

CEDU per share:

Basic 0.19 0.38 0.055

Diluted 0.18 0.35 0.052

Net income attributable to

CEDU per ADS:

Basic 0.57 1.14 0.165

Diluted 0.54 1.05 0.156

Weighted average aggregate

number of ordinary shares

outstanding:

Basic 58,434,407 49,129,883 49,129,883

Diluted 62,298,037 52,252,616 52,252,616

(3) Amounts were extracted from Form 6-K for the quarter ended June 30,

2008, as adjusted resulting from the adoption of Statement of

Financial Accounting Standards No. 160.

ChinaEdu Corporation

Unaudited Condensed Consolidated Statements of Cash Flow

Three Months Ended

June March June June

(in thousands) 30, 2008 31, 2009 30, 2009 30, 2009

RMB RMB RMB US$

Operating activities:

Net income 17,602 17,126 17,570 2,572

Share-based compensation 1,671 2,262 2,055 301

Depreciation 2,903 3,941 3,983 583

Amortization of land use rights 141 163 152 22

Amortization of intangible

assets 2,262 1,686 1,308 192

Accounts receivable write-off -- 62 347 51

Loss from disposal of property

and equipment -- 78 15 2

Deferred income taxes 1,281 1,795 (825) (121)

Accounts receivable (12,324) 10,378 (20,898) (3,060)

Inventory -- -- (1,077) (158)

Prepaid expenses and other

current assets 8,093 (1,881) 6,188 906

Amounts due from related parties (98,677) 46,384 (111,046) (16,258)

Rental deposits (266) 47 48 7

Land use right -- (949) (1,040) (152)

Accounts payable 91 1,084 1,772 259

Deferred revenues 57,371 (65,617) 65,006 9,517

Accrued expenses and other

current liabilities 2,283 (2,046) 2,648 388

Amounts due to related parties 24,705 1,005 24,840 3,637

Unrecognized tax benefit 136 348 1,633 239

Other taxes payable 2,156 (4,533) 4,249 622

Income tax payable 7,970 (9,229) 4,770 698

Net cash provided by (used in)

operating activities 17,398 2,104 1,698 247

Investing activities:

Purchase of business (4,000) -- -- --

Purchase of property and

equipment (11,240) (10,605) (29,919) (4,380)

Deposits paid for acquisition of

property and equipment (979) -- -- --

Purchase of term deposit (25,000) (31,008) 15,008 2,197

Purchase of contractual right (1,225) (500) -- --

Proceeds from disposal of

property and equipment -- -- -- --

Net cash provided by (used in)

investing activities (42,444) (42,113) (14,911) (2,183)

Financing activities:

Repurchase of ordinary shares -- (61,647) -- --

Repayment of long-term loan

interest and principal (1,091) -- -- --

Cash dividends paid to

noncontrolling shareholders -- (10,600) -- --

Capital contributions by

noncontrolling shareholders 1,225 980 -- --

Proceeds from exercise of

options -- 713 711 104

Net cash provided by (used in)

financing activities 134 (70,554) 711 104

Effect of foreign exchange rate

changes (6,330) 340 (76) (9)

CASH AND CASH EQUIVALENTS, beginning

of period 431,979 353,933 243,710 35,681

CASH AND CASH EQUIVALENTS, end of

period 400,737 243,710 231,132 33,840

Net increase (decrease) in cash (31,242) (110,223) (12,578) (1,841)

Six Months Ended

(in thousands) June June June

30, 2008 30, 2009 30, 2009

RMB RMB US$

Operating activities:

Net income 27,820 34,696 5,079

Share-based compensation 2,054 4,317 632

Depreciation 5,637 7,924 1,160

Amortization of land use rights 282 315 46

Amortization of intangible

assets 4,517 2,994 438

Accounts receivable write-off -- 409 60

Loss from disposal of property

and equipment -- 93 14

Deferred income taxes 7,137 970 142

Accounts receivable (12,487) (10,520) (1,540)

Inventory -- (1,077) (158)

Prepaid expenses and other

current assets 707 4,307 631

Amounts due from related parties (63,088) (64,662) (9,467)

Rental deposits 562 95 14

Land use right -- (1,989) (291)

Accounts payable (56) 2,856 418

Deferred revenues (112) (611) (89)

Accrued expenses and other

current liabilities (7,831) 602 88

Amounts due to related parties 12,653 25,845 3,784

Unrecognized tax benefit 269 1,981 290

Other taxes payable (2,151) (284) (42)

Income tax payable 788 (4,459) (653)

Net cash provided by (used in)

operating activities (23,299) 3,802 556

Investing activities:

Purchase of business (4,000) -- --

Purchase of property and

equipment (19,725) (40,524) (5,933)

Deposits paid for acquisition of

property and equipment (1,010) -- --

Purchase of term deposit (26,958) (16,000) (2,343)

Purchase of contractual right (1,225) (500) (73)

Proceeds from disposal of

property and equipment 31 -- --

Net cash provided by (used in)

investing activities (52,887) (57,024) (8,349)

Financing activities:

Repurchase of ordinary shares -- (61,647) (9,026)

Repayment of long-term loan

interest and principal (2,156) -- --

Cash dividends paid to

noncontrolling shareholders -- (10,600) (1,552)

Capital contributions by

noncontrolling shareholders 1,225 980 143

Proceeds from exercise of

options -- 1,424 208

Net cash provided by (used in)

financing activities (931) (69,843) (10,227)

Effect of foreign exchange rate

changes (19,260) 264 41

CASH AND CASH EQUIVALENTS, beginning

of period 497,114 353,933 51,819

CASH AND CASH EQUIVALENTS, end of

period 400,737 231,132 33,840

Net increase (decrease) in cash (96,377) (122,801) (17,979)

ChinaEdu Corporation

Reconciliations of non-GAAP results of operations measures to

GAAP measures

Three Months Ended

June March June June

(in thousands, unaudited) 30, 2008 31, 2009 30, 2009 30, 2009

RMB RMB RMB US$

Income (loss) from

operations

GAAP Result 24,862 17,536 22,020 3,223

Share-based compensation 1,671 2,262 2,055 301

Amortization 2,403 1,849 1,460 214

Adjusted income from

operations (Non-GAAP) 28,936 21,647 25,535 3,738

Adjusted operating margin 36.4% 26.7% 28.9% 28.9%

Net income (loss)

attributable to ChinaEdu

Corporation

GAAP Result 9,187 9,564 8,860 1,297

Share-based compensation 1,671 2,262 2,055 301

Share-based compensation

attributable to the

noncontrolling interest (305) (296) (278) (41)

Amortization 2,403 1,849 1,460 214

Adjusted net income

attributable to ChinaEdu

Corporation (Non-GAAP) 12,956 13,379 12,097 1,771

Adjusted net margin 16.3% 16.5% 13.7% 13.7%

Adjusted net income per

share:

Basic 0.22 0.27 0.25 0.037

Diluted 0.21 0.25 0.23 0.034

Weighted average aggregate

number of ordinary shares

outstanding:

Basic 58,434,407 49,983,675 48,285,473 48,285,473

Diluted 61,813,068 52,919,048 51,595,566 51,595,566

Six Months Ended

June June June

(in thousands, unaudited) 30, 2008 30, 2009 30, 2009

RMB RMB US$

Income (loss) from

operations

GAAP Result 37,687 39,556 5,791

Share-based compensation 2,054 4,317 632

Amortization 4,799 3,309 484

Adjusted income from

operations (Non-GAAP) 44,540 47,182 6,907

Adjusted operating margin 29.9% 27.8% 27.8%

Net income (loss)

attributable to ChinaEdu

Corporation

GAAP Result 11,274 18,424 2,697

Share-based compensation 2,054 4,317 632

Share-based compensation

attributable to the

noncontrolling interest (389) (574) (84)

Amortization 4,799 3,309 484

Adjusted net income

attributable to ChinaEdu

Corporation (Non-GAAP) 17,738 25,476 3,729

Adjusted net margin 11.9% 15.0% 15.0%

Adjusted net income per

share:

Basic 0.30 0.52 0.076

Diluted 0.28 0.49 0.071

Weighted average aggregate

number of ordinary shares

outstanding:

Basic 58,434,407 49,129,883 49,129,883

Diluted 62,298,037 52,252,616 52,252,616

Adjusted income from operations, which is a non-GAAP measure defined as income from operations excluding share-based compensation, amortization of intangible assets and land use rights and goodwill and intangibles impairment, if applicable.

Adjusted net income attributable to ChinaEdu Corporation, which is a non-GAAP measure defined as net income attributable to the ChinaEdu Corporation excluding share-based compensation, noncontrolling interest for share-based compensation, amortization of intangible assets and land use rights and goodwill and intangibles impairment charges, if applicable.

ChinaEdu Corporation

Reconciliation from net income to adjusted EBITDA (*)

Three Months Ended

June March 31, June June 30,

(in thousands, unaudited) 30, 2008 2009 30, 2009 2009

RMB RMB RMB US$

Net income 17,602 17,126 17,570 2,572

Income tax provision 9,425 2,708 6,257 916

Interest income and other, net (2,165) (2,298) (1,807) (265)

Depreciation 2,903 3,941 3,983 583

Amortization 2,403 1,849 1,460 214

Share-based compensation 1,671 2,262 2,055 301

Adjusted EBITDA 31,839 25,588 29,518 4,321

Adjusted EBITDA margin 40.0% 31.5% 33.4% 33.4%

Six Months Ended

(in thousands, unaudited) June June 30, June

30, 2008 2009 30, 2009

RMB RMB US$

Net income 27,820 34,696 5,079

Income tax provision 14,325 8,965 1,313

Interest income and other, net (4,458) (4,105) (601)

Depreciation 5,637 7,924 1,160

Amortization 4,799 3,309 484

Share-based compensation 2,054 4,317 632

Adjusted EBITDA 50,177 55,106 8,067

Adjusted EBITDA margin 33.6% 32.5% 32.5%

Adjusted EBITDA, which is a non-GAAP measure defined as earnings before interest income, taxes, depreciation, amortization of intangible assets and land use rights, share-based compensation and goodwill and intangibles impairment charges, if applicable.

For further information, please contact:

ChinaEdu Corporation

Lily Liu, CFO

Phone: +86-10-8418-6655 x1002

Email: ir@chinaedu.net

S. Jimmy Xia, IR Manager

Phone: +86-10-8418-6655 x1150

Email: ir@chinaedu.net

Source: ChinaEdu Corporation
Related Stocks:
NASDAQ:CEDU
collection