ChinaCast Education Reports Strong Third Quarter 2011 Financial Results

BEIJING, November 10, 2011 /PRNewswire-Asia-FirstCall/ -- ChinaCast Education Corporation (the "Company" or "ChinaCast") (Nasdaq GS: CAST), a leading post-secondary education and e-learning services provider in China, today announced its financial results for the third quarter ended September 30, 2011.

Financial Highlights for the Third Quarter of Fiscal Year 2011(1):

• Total revenues increased 37% year-over-year to $25.6 million
• Net income attributable to the Company increased 30% year-over-year to $8.1 million
• Diluted EPS of $0.16
• Adjusted net income (non-GAAP) increased 27% year-over-year to $10.1 million
• Adjusted diluted EPS (non-GAAP) of $0.20
• Adjusted EBITDA (non-GAAP) increased 24% year-over-year to $14.5 million
• Cash, cash equivalents and term deposits were $169.9 million
• Total shareholder equity was $292.2 million or $5.90 per share

Financial Highlights for the First Nine Months of Fiscal Year 2011:

• Total revenues increased 46% year-over-year to $74.8 million
• Net income attributable to the Company increased 30% year-over-year to $20.4 million
• Diluted EPS of $0.41
• Adjusted net income (non-GAAP) increased 31% year-over-year to $27.2 million
• Adjusted diluted EPS (non-GAAP) of $0.54
• Adjusted EBITDA (non-GAAP) increased 30% year-over-year to $40.2 million

Ron Chan, Chairman and Chief Executive Officer commented, "Our outstanding third quarter results were driven by another strong start to the 2011-2012 academic school year which commenced in September. Total average enrollment at our universities increased approximately 9% year-on-year while our average tuition rates increased 5%. We continue to reinvest in the expansion of our universities, adding faculty members, new courses, and new facilities to accommodate this growth. We believe that these improvements, which will further enhance our academic rankings, will drive sustained growth in our education business for many years to come."

Added Antonio Sena, Chief Financial Officer, "The key operating metrics that we focus on, enrollment and tuition growth, are trending well in line with our annual guidance. We will continue to carefully evaluate our investment options and deploy capital to areas where we see the greatest potential returns to shareholders."

Third Quarter 2011 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 our three universities in China: Chongqing Normal University Foreign Trade and Business College ("FTBC") in Chongqing, the Lijiang College of Guilin Normal University ("LJC") in Guilin and Hubei Industrial University Business College ("HIUBC") in Wuhan. The ELG provides distance learning services to post-secondary institutions, K-12 schools and government/corporate enterprises via the Company's nationwide satellite broadband network platform.

Total Revenues - Total revenues in the third quarter of 2011 increased 37% to $25.6 million from $18.7 million in the third quarter of 2010 partly due to the acquisition of HIUBC in the third quarter of 2010. TUG revenue in the third quarter of 2011 increased 46% to $16.4 million from $11.2 million in the third quarter of 2010. Total student enrollment in the third quarter of 2011 increased to approximately 35,100 from 32,600 in the third quarter of 2010. ELG revenue in the third quarter of 2011 increased 24% to $9.2 million from $7.4 million in the third quarter of 2010 primarily due to an increase in equipment sales. ELG total number of post-secondary students enrolled in courses using the Company's distance learning platform in the third quarter of 2011 increased to 145,000 compared to 143,000 in the third quarter of 2010. ELG total number of subscribing schools for K-12 distance learning services in the third quarter of 2011 remained stable year-over-year at 6,500.

Cost of Sales - Cost of sales in the third quarter of 2011 increased 42% to $13.6 million from $9.6 million in the third quarter of 2010 primarily due to an increase in depreciation of fixed assets and amortization costs of land use rights and other intangible assets associated with the acquisition of HIUBC in the third quarter of 2010 and an increase in equipment sales.

Depreciation - Depreciation in the third quarter of 2011 increased 14% to $2.7 million from $2.3 million in the third quarter of 2010 primarily due to the acquisition of HIUBC in the third quarter of 2010.

Amortization of Acquired Intangible Assets - Amortization of acquired intangible assets in the third quarter of 2011 increased 17% to $1.7 million from $1.5 million in the third quarter of 2010 primarily due to the acquisition of HIUBC in the third quarter of 2010.

Gross Profit and Gross Margin - Gross profit in the third quarter of 2011 increased 33% to $12.1 million from $9.1 million in the third quarter of 2010. Gross profit margin in the third quarter of 2011 was 47% compared to 49% in the third quarter of 2010 due to an increase in ELG equipment sales which typically have much lower gross margins than the ELG service revenue.

Share-Based Compensation - Share-based compensation in the third quarter of 2011 increased 7% to $0.31 million from $0.29 million in the third quarter of 2010.

Operating Expenses - Operating expenses in the third quarter of 2011 increased 59% to $2.5 million compared to $1.6 million in the third quarter of 2010 primarily due to the increase in administrative expenses related to the acquisition of HIUBC in the third quarter of 2010.

Operating Income and Operating Income Margin - Operating income in the third quarter of 2011 increased 27% to $9.5 million compared to $7.5 million in the third quarter of 2010. Operating income margin in the third quarter of 2011 was 37% compared to 40% in the third quarter of 2010.

Provision for Income Taxes - Income taxes in the third quarter of 2011 increased 25% to $1.5 million from $1.2 million in the third quarter of 2010 primarily due the increase in tax rate for the TUG business segment from 15% to 25% after the expiration of the western development preferential policy.

Net Income Attributable to the Company and Net Income Margin - Net income attributable to the Company in the third quarter of 2011 increased 30% to $8.1 million from $6.2 million in the third quarter of 2010. Net income margin in the third quarter of 2011 was 32% compared to 33% in the third quarter of 2010.

Diluted EPS - Diluted EPS in the third quarter of 2011 were $0.16 compared to $0.12 in the third quarter of 2010. The weighted average number of shares used in the computation was 49,504,442 for the third quarter of 2011 and 50,370,903 for the third quarter of 2010.

Adjusted Net Income and Adjusted Net Income Margin - Adjusted net income excluding share-based compensation, non-cash impairment charges and amortization of acquired intangible assets (non-GAAP) in the third quarter of 2011 increased 27% to $10.1 million from $8.0 million in the third quarter of 2010. Adjusted net income margin (non-GAAP) in the third quarter of 2011 was 40% compared to 43% in the third quarter of 2010.

Adjusted Diluted EPS - Adjusted diluted earnings per share excluding share-based compensation expenses, non-cash impairment charges and amortization of acquired intangible assets (non-GAAP) in the third quarter of 2011 were $0.20 compared to $0.16 in the third quarter of 2010.

Adjusted EBITDA and Adjusted EBITDA Margin - Adjusted EBITDA (non-GAAP) in the third quarter of 2011 increased 24% to $14.5 million from $11.8 million in the third quarter of 2010. Adjusted EBITDA margin (non-GAAP) in the third quarter of 2011 was 57% compared to 63% in the third quarter of 2010.

Cash and Bank Balances together with Term Deposits - Cash and bank balances together with term deposits were $169.9 million as of September 30, 2011.

Total Shareholder Equity - Total equity was $292.2 million or $5.90 per share.

First Nine Months 2011 Financial Results

Total Revenues - Total revenues in the first nine months of 2011 increased 46% to $74.8 million from $51.4million in the first nine months of 2010. TUG revenue in the first nine months of 2011 increased 61% to $48.2 million from $29.9 million in the first nine months of 2010 primarily due to the acquisition of HIUBC in the third quarter of 2010. ELG revenue in the first nine months of 2011 increased 23% to $26.5 million from $21.5 million in the first nine months of 2010 primarily due to an increase in equipment sales.

Cost of Sales - Cost of sales in the first nine months of 2011 increased 55% to $38.1 million from $24.6 million in the first nine months of 2010 primarily due to an increase in depreciation of fixed assets and amortization costs of land use rights and other intangible assets related to the acquisition of HIUBC in the third quarter of 2010 and an increase in equipment sales.

Depreciation - Depreciation in the first nine months of 2011 increased 36% to $7.5 million from $5.5 million in the first nine months of 2010 primarily due to the acquisition of HIUBC in the third quarter of 2010.

Amortization of Acquired Intangible Assets - Amortization of acquired intangible assets in the first nine months of 2011 increased 38% to $5.6 million from $4.1 million in the first nine months of 2010 primarily due to the acquisition of HIUBC in the third quarter of 2010.

Gross Profit and Gross Margin - Gross profit in the first nine months of 2011 increased 37% to $36.7 million from $26.8 million in the first nine months of 2010. Gross profit margin in the first nine months of 2011 was 49% compared to 52% in the first nine months of 2010 due to an increase in ELG equipment sales.

Share-Based Compensation - Share-based compensation in the first nine months of 2011 increased 17% to $1.1 million from $0.97 million in the first nine months of 2010.

Operating Expenses - Operating expenses in the first nine months of 2011 increased 67% to $11.2 million compared to $6.7 million in the first nine months of 2010 primarily due to the increase in administrative expenses related to the acquisition of HIUBC in the third quarter of 2010.

Operating Income and Operating Income Margin - Operating income in the first nine months of 2011 increased 27% to $25.5 million compared to $20.0 million in the first nine months of 2010. Operating income margin in the first nine months of 2011 was 34% compared to 39% in the first nine months of 2010.

Provision for Income Taxes - Income taxes in the first nine months of 2011 increased 20% to $5.0 million from $4.1 million in the first nine months of 2010 primarily due to the increase in tax rate for the TUG business segment from 15% to 25% after the expiration of the western development preferential policy.

Net Income Attributable to the Company and Net Income Margin - Net income attributable to the Company in the first nine months of 2011 increased 30% to $20.4 million from $15.7 million in the first nine months of 2010. Net income margin in the first nine months of 2011 was 27% compared to 31% in the first nine months of 2010.

Diluted EPS - Diluted EPS in the first nine months of 2011 were $0.41 compared to $0.33 in the first nine months of 2010. The weighted average number of shares used in the computation was 50,057,748 in the first nine months of 2011 and 48,176,902 in the first nine months of 2010.

Adjusted Net Income and Adjusted Net Income Margin - Adjusted net income excluding share-based compensation, non-cash impairment charges and amortization of acquired intangible assets (non-GAAP) in the first nine months of 2011 increased 31% to $27.2 million from $20.8 million in the first nine months of 2010. Adjusted net income margin (non-GAAP) in the first nine months of 2011 was 36% compared to 40% in the first nine months of 2010.

Adjusted Diluted EPS - Adjusted diluted earnings per share excluding share-based compensation expenses, non-cash impairment charges and amortization of acquired intangible assets (non-GAAP) in the first nine months of 2011 were $0.54 compared to $0.43 in the first nine months of 2010.

Adjusted EBITDA and Adjusted EBITDA Margin - Adjusted EBITDA (non-GAAP) in the first nine months of 2011 increased 30% to $40.2 million from $31.0 million in the first nine months of 2010. Adjusted EBITDA margin (non-GAAP) in the first nine months of 2011 was 54% compared to 60% in the first nine months of 2010.

Financial Outlook for Fiscal Year 2011

For the fiscal year ending December 31, 2011, the Company reiterates its guidance as follows:

• Total net revenue is expected to be between $97 million to $99 million representing a year-on-year increase of 24% to 27%.
• Adjusted net income excluding share-based compensation, amortization of acquired intangibles, gain on disposal of property and equipment and impairment expenses (non-GAAP) is expected to be at the higher end of $32 million to $34 million representing a year-on-year increase of at least 25%.
• Based on the current weighted average shares and the higher tax rate accrual used in computation, adjusted diluted EPS (non-GAAP) is expected to be at the higher end of $0.64 to $0.68.
• Adjusted EBITDA excluding share-based compensation (non-GAAP) is expected to be at the higher end of $50 million to $52 million representing a year-on-year increase of at least 25%.

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, Thursday, November 10, 2011. The dial-in details for the earnings conference call are as follows:

Earnings Call Telephone Numbers:
US/Canada Toll Free: +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: +1-855-859-2056
International: +1-404-537-3406
Replay Pass Code: 22274982

The replay will be available starting at 11:00 am ET, Thursday, November 10, 2011, through 11:59 pm ET, Thursday, November 17, 2011.

Additionally, a live and archived version of the earnings call will be available at 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 post-secondary education and e-learning services provider in China. The Company provides post-secondary degree and diploma programs through its three fully accredited universities: The Foreign Trade and Business College of Chongqing Normal University located in Chongqing; Lijiang College of Guangxi Normal University located in Guilin; and Hubei Industrial University Business College located in Wuhan. These universities offer four year and three year, career-oriented bachelor's degree and diploma programs in business, finance, economics, law, IT, engineering, hospitality and tourism management, advertising, language studies, art and music.

The Company also provides e-learning services to post-secondary institutions, K-12 schools, government agencies and corporate enterprises via its nationwide satellite broadband network. These services include interactive distance learning applications, multimedia education content delivery and vocational training courses. The Company is listed on the 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, 2010. Forward-looking statements speak only as of the date of this filing, 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.

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 J. Santos, President-International
+1-347-788-0030
mjsantos@chinacasteducation.com

MZ Group
Ted Haberfield, President
MZ North America, IR
+1-760-755-2716
thaberfield@hcinternational.net