Strong 25.4% Increase in Net Revenue Year-Over-Year with Third Quarter Net Revenue Exceeding Guidance
Live Conference Call to be Held Tuesday, November 25, 2008 at
8 a.m. (Eastern) / 5 a.m. (Pacific) / 9 p.m. (Beijing/Hong Kong)
BEIJING, Nov. 24 /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 quarter ended September 30, 2008.(1)
(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
RMB6.7899 to $1.00, the noon buying rate in effect on September 30,
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.
Third Quarter 2008 Highlights
3 Months Ended
September September Year over
Period Ending 30, 2007 30, 2008 Year %
Currency in thousands RMB RMB
Financial Data:
Net revenue 65,412 82,004 25.4%
Gross profit 35,647 50,803 42.5%
Goodwill impairment 16,192 17,857 10.3%
Income (loss) from operations (11,696) (1,484) N/A
Adjusted income (loss) from
operations (Non-GAAP) 11,874 21,442 80.6%
Adjusted EBITDA (Non-GAAP) 14,004 24,589 75.6%
Net income (loss) (19,424) (15,309) N/A
Adjusted net income (loss)
(Non-GAAP) 3,237 7,423 129.3%
Operating Data:
Revenue students for online degree
program services 100,000 125,000 25.0%
-- Total net revenue increased by 25.4% to RMB82.0 million ($12.1
million) in the third quarter, as compared to RMB65.4 million in the
corresponding quarter of 2007.
-- Net revenue from online degree programs increased by 34.4% to
RMB65.4 million ($9.6 million) in the third quarter, as compared to
RMB48.6 million in the corresponding quarter of 2007. Revenue from
online degree program services in the third quarter of 2008
continued to benefit from a 25% year-over-year increase in spring
semester enrollments to 125,000 students in 2008 from 100,000
students in the spring semester of 2007.
-- Gross margin increased to 62.0% in the third quarter, as compared to
54.5% in the corresponding period of 2007.
-- Gross margin for the online degree programs also increased to 70.5%
in the third quarter, as compared to 61.9% in the corresponding
quarter of last year.
-- A goodwill impairment charge of RMB17.9 million ($2.6 million) with
respect to our international curriculum program was incurred in the
third quarter. The goodwill impairment is a one-time, non-cash
charge and management does not believe the fundamental operations of
the program have been affected by the impairment.
-- Income (loss) from operations in the third quarter was a loss of
RMB1.5 million (-$0.2 million), which improved significantly
compared to a loss of RMB11.7 million in the corresponding period of
2007, despite being negatively impacted by a goodwill impairment
charge of RMB17.9 million ($2.6 million) with respect to the
international curriculum program.
-- Adjusted income from operations, which is a non-GAAP measure defined
as income from operations excluding certain non-cash items,
including share-based compensation, amortization, goodwill
impairment, one-time accounts receivable write-off (in the third
quarter of 2007), and currency exchange loss, increased to RMB21.4
million ($3.2 million) in the third quarter of 2008 as compared to
RMB11.9 million in the corresponding period in 2007. Adjusted
operating margin (adjusted income from operations as a percentage of
net revenue) thus expanded significantly to 26.1% in the third
quarter, as compared to 18.2% in the corresponding quarter in 2007.
-- Adjusted EBITDA, which is a non-GAAP measure defined as earnings
before minority interest, interest, taxes, depreciation,
amortization, share-based compensation, goodwill impairment, one-
time accounts receivable write-off (in the third quarter of 2007),
and currency exchange loss, increased by 75.6% to RMB24.6 million
($3.6 million) in the third quarter, as compared to RMB14.0 million
in the third quarter of 2007. Adjusted EBITDA margin (adjusted
EBITDA as a percentage of net revenue) also expanded significantly
to 30.0% as compared to 21.4% in the corresponding period in 2007.
-- Net income in the third quarter was a loss of RMB15.3 million (-$2.3
million), which improved by RMB4.1 million as compared to a loss of
RMB19.4 million in the third quarter of 2007, despite the negative
impact of the goodwill impairment charge discussed above.
-- Adjusted net income, a non-GAAP measure defined as net income share-
based compensation, amortization, goodwill impairment, one-time
accounts receivable write-off (in the third quarter of 2007), and
currency exchange loss, increased to RMB7.4 million ($1.1 million)
in the third quarter, as compared to RMB3.2 million in the
corresponding period in 2007.
-- For the nine months ended September 30, 2008, total net revenue
increased by 24.7% to RMB231.2 million ($34.0 million) and gross margin
increased to 65.9%, as compared to RMB185.4 million and 61.3%,
respectively, for the nine months ended September 30, 2007.
"We are pleased to report another quarter of strong execution and consistent growth. Despite a non-cash goodwill impairment charge incurred during the third quarter, our third quarter financial results reflect strong underlying operations and our ability to continue to deliver strong results," said Ms. Julia Huang, ChinaEdu's Chairman and Chief Executive Officer. "Our 62.0% gross margin was fueled mainly by our online degree program, which recorded a gross margin of 70.5% for the quarter and 74.1% for the first nine months of the year."
"In addition, we continued to expand our learning center network. By the end of the third quarter, we increased our franchised learning center network to 23, as compared to 12 at the end of the second quarter of 2008, and our total number of learning centers (including our 10 proprietary learning centers) increased to 33. Furthermore, as previously disclosed in July, we signed recruiting and technology contracts with eight new universities during the third quarter, and we recently signed one more contract since the end of the quarter with Xiamen University. We are also very pleased to announce that this month we signed a long-term exclusive agreement with Guangxi Radio and Television University to build learning centers, which we believe will help us build our learning center network in Guangxi province," Ms. Huang added.
Financial Results for the Third Quarter Ended September 30, 2008
Net Revenue
Total net revenue for the third quarter of 2008 was RMB82.0 million ($12.1 million), representing an increase of 25.4% as compared to the corresponding period in 2007. Net revenue from online degree programs, the Company's core business segment, was RMB65.4 million ($9.6 million) for the third quarter of 2008, representing a 34.4% increase compared with RMB48.6 million for the corresponding period in 2007. This increase was primarily attributable to the continued benefit of our strong spring semester enrollments in which revenue students(2) increased by 25% year-over-year from 100,000 students in spring semester of 2007 to 125,000 students in the spring semester of 2008.
(2) "Revenue students" refer to students of the university online degree
programs that have paid tuition during the applicable period.
Net revenue from our private primary secondary schools also recorded strong growth, primarily attributable to the completion of Anqing School's new campus construction, which resulted in increased fall semester enrollments. Net revenue for this segment for the third quarter was RMB4.9 million ($0.7 million), representing an increase of 40.5% as compared to the third quarter of 2007.
Net revenue from the online tutoring programs was RMB3.6 million ($0.5 million) for the third quarter, representing a 17.1% decrease from RMB4.4 million in the third quarter of 2007. The decrease was primarily attributable to a reorganization at the division which in the short term led to a negative impact on net revenue.
Net revenue from the international curriculum division was RMB8.2 million ($1.2 million) for the third quarter of 2008, representing an 8.7% decrease from RMB9.0 million for the corresponding period in 2007 due to a loss of certain partners as a result of the new government regulatory environment. We are seeking new partners for the international curriculum program in order to maintain future growth of the segment.
Cost of revenue
Total cost of revenue was RMB31.2 million ($4.6 million) for the third quarter, representing an increase of 4.8% as compared to RMB29.8 million in the corresponding period in 2007. Cost of revenue for online degree programs was RMB19.3 million ($2.8 million) in the third quarter, representing an increase of 3.8% as compared to RMB18.6 million in the third quarter of 2007. When compared to the 34.4% increase in revenue from online degree programs, the increase in cost of revenue was much smaller and our gross margin continued to expand significantly, which further demonstrates the scalability of our online service model. Cost of revenue for non-online degree program services was RMB11.9 million ($1.8 million) in the third quarter of 2008, representing a 6.5% increase from RMB11.2 million in the third quarter of 2007. This moderate increase was attributable primarily to a one-time benefit payment for faculty members at one of our private schools.
Gross Profit
Gross profit for the third quarter of 2008 was RMB50.8 million ($7.5 million), representing a gross margin of 62.0%, which represents a significant increase as compared to gross profit and gross margin of RMB35.6 million and 54.5%, respectively, in the third quarter of 2007. The increase in gross margin for the third quarter was primarily due to profit margin improvement in the Company's online degree program, which improved to 70.5% in the third quarter, as compared to 61.9% in the third quarter of 2007.
Operating Expenses
Total operating expenses were RMB52.3 million ($7.7 million) for the third quarter, representing a 10.4% increase as compared to RMB47.3 million for the corresponding period in 2007. This increase was attributable primarily to an increase in our selling and marketing expenses.
-- General and administrative (G&A) expenses were RMB20.2 million ($3.0
million) for the third quarter, which represented a minor decrease
from RMB20.8 million for the third quarter of 2007.
-- Selling and marketing expenses were RMB8.8 million ($1.3 million)
for the third quarter, representing an increase of 85.7% from RMB4.7
million for the corresponding period in 2007. This increase is
attributable primarily to a television marketing campaign for our
online tutoring programs as well as a one-time marketing event at
one of our collaborative alliances.(3)
(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.
-- Research and development (R&D) expenses for the third quarter were
RMB5.5 million ($0.8 million), which remained relatively flat as
compared to RMB5.6 million for the corresponding period in 2007.
-- A goodwill impairment charge was incurred with respect to the
international curriculum program in the third quarter, which
resulted in a one-time, non-cash charge of RMB17.9 million ($2.6
million). In assessing whether a charge for impairment with respect
to the international curriculum program was required, the Company
used both the income approach and market approach to determine the
fair value of the program. For the income approach, the Company
reduced its prior growth projections for the international
curriculum programs due to new government regulatory environment in
place since 2007, which caused a decrease in the number of local
school partners. Management is currently seeking new partners for
the program and believes that the long-term growth of the
international curriculum program can be maintained. For the market
approach, current stock performance of selected U.S. publicly traded
competitors was weighed in the assessment of the fair value of the
international curriculum programs. As a result of the overall stock
market decline, these competitors' lower per share stock valuations
contributed to a decreased fair value assessment of the
international curriculum program. Despite the goodwill impairment
charge, management continues to believe in the fundamentals of the
international curriculum program and the program has continued to
provide positive cash flows.
-- Share-based compensation, which was allocated to the related cost of
revenue and operating expense line item, was RMB1.5 million ($0.2
million) in the third quarter, representing a 26.6% increase from
RMB1.2 million for the corresponding period in 2007. This was
attributable to an increase in the number of options granted in the
first quarter of 2008, which in turn increased share-based compensation
for the third quarter of 2008, as compared for the corresponding period
in 2007.
Income (loss) from Operations
Loss from operations was RMB1.5 million (-$0.2 million) for the third quarter, which improved significantly as compared to a loss of RMB11.7 million for the corresponding period in 2007. Adjusted income from operations excluding share-based compensation, amortization of intangible assets, goodwill impairment, one-time accounts receivable write-off (in the third quarter of 2007), and currency exchange loss, increased by 80.6% to RMB 21.4 million ($3.2 million) for the third quarter, as compared to RMB11.9 million in the corresponding period in 2007.
Adjusted operating margin expanded significantly to 26.1% in the third quarter, as compared to 18.2% in the corresponding quarter in 2007. We believe these non-GAAP measures of adjusted income from operations and adjusted operating margin measures are helpful to investors as a measure of our operational performance.
Interest income
Interest income increased by 350.8% to RMB2.3 million ($0.3 million) in the third quarter, as compared to RMB0.5 million in the corresponding quarter of 2007. This increase was attributable primarily to the interest income earned on the net proceeds from the Company's initial public offering completed in December 2007.
Income Tax Expense and Minority Interest
Income tax expense for the third quarter was RMB8.8 million ($1.3 million), representing a 250.1% increase from RMB2.5 million for the corresponding period in 2007. Most of our subsidiaries and affiliate companies were qualified under prior tax laws and regulations as "new and high technology enterprises," and therefore received certain tax exemptions and a preferential tax rate. Under the new Chinese Enterprise Income Tax Regulation, which became effective in 2008, the statutory tax rate for all enterprises in China is 25%, except for enterprises who have obtained the newly implemented "new and high technology enterprises" status in order to qualify for the 15% preferential tax rate. We are in the process of re-applying for the newly implemented "new and high technology enterprise" status; however, until we receive official approval of this status, the Company must use the 25% statutory tax rate instead of the current preferential tax rate. As a result, the effective income tax rate applicable to the Company has been significantly higher in the third quarter of 2008 than during the corresponding period in 2007.
Minority interest was RMB7.4 million ($1.1 million) in the third quarter, representing a 46.0% increase, as compared to RMB5.1 million in the corresponding period in 2007, primarily attributable to the increased profitability of our collaborative alliances.
Net Income
ChinaEdu reported a net loss of RMB15.3 million (-$2.3 million) in the third quarter, which improved from a loss of RMB19.4 million in the corresponding period in 2007. The loss in the third quarter was attributable primarily to the goodwill impairment charge and the adoption of the new income tax rate, both as discussed above. Diluted earnings per ordinary share for the third quarter of 2008 were a loss of RMB0.26 (-$0.04) and improved by RMB0.21 per share, as compared to a loss of RMB0.47 in the corresponding period of 2007, which change was primarily attributable to higher net revenue gross margin and operating margin during the third quarter of 2008.
Adjusted net income, which is a non-GAAP measure defined as net income excluding share-based compensation, amortization, goodwill impairment, one-time accounts receivable write-off (in the third quarter of 2007), and currency exchange loss, increased to RMB7.4 million ($1.1 million) for the third quarter, as compared to RMB3.2 million in the corresponding period of 2007.
Deferred Revenue
Deferred revenue at the end of the third quarter of 2008 was RMB33.2 million ($4.9 million), with current deferred revenue of RMB25.9 million ($3.8 million) and non-current deferred revenue of RMB7.3 million ($1.1 million). Deferred revenue at the end of the third quarter decreased significantly compared to deferred revenue of RMB86.8 million at the end of the second quarter 2008, due to the seasonality of enrollments, which results in tuition being received generally during the second quarter (spring term) and the fourth quarter (fall term) of each year.
Cash and Cash Equivalents
As of September 30, 2008, ChinaEdu reported cash and cash equivalents of RMB303.3 million ($44.7 million), which primarily consisted of cash-on-hand, demand deposits and term deposits with maturity periods of three months or less.
Term Deposit 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 RMB104.5 million ($15.4 million) and RMB127.5 million ($18.8 million), respectively, at September 30, 2008.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA was RMB24.6 million ($3.6 million) for the third quarter, representing an increase of 75.6% as compared to RMB14.0 million in the third quarter of 2007. Adjusted EBITDA margin expanded significantly to 30.0% as compared to 21.4% in the corresponding period in 2007.
Year-to-Date Financial Results
For the nine months ended September 30, 2008, the Company reported total net revenue of RMB231.2 million ($34.0 million), representing an increase of 24.7%, as compared to RMB185.4 million in the corresponding period in 2007, which was primarily driven by strong enrollment growth at our online degree programs. Total net revenue for the nine months ended September 30, 2008 consisted of RMB185.4 million ($27.3 million) in net revenue from online degree programs and RMB45.7 million in net revenue from non-online degree programs. For the first nine months of 2008, total cost of revenue was RMB78.7 million ($11.6 million), representing an increase of 9.6%, as compared to RMB71.8 million in the corresponding period in 2007.
Gross profit of RMB152.4 million ($22.5 million) was 65.9% of total revenue for the first nine months of 2008, as compared to RMB113.6 million, or 61.3% of total revenue, for the first nine months of 2007. Total operating expenses were RMB118.2 million ($17.4 million), representing an increase of 28.5%, as compared to RMB92.0 million for the first nine months of 2007.
Adjusted income from operations excluding share-based compensation, amortization, goodwill impairment, one-time accounts receivable write-off (in the third quarter of 2007), and currency exchange gain or loss increased to RMB63.7 million ($9.4 million) for the nine months ended September 30, 2008, representing an increase of 25.7% from RMB50.7 million in the first nine months of 2007.
ChinaEdu reported a net loss of RMB4.0 million (-$0.6 million) in the first nine months of 2008, which improved significantly as compared to a net loss of RMB7.0 million in the first nine months of 2007. Diluted earnings per ordinary share for the nine months ended September 30, 2008 were a loss RMB0.07, which improved by RMB0.10 per share, as compared to a loss of RMB0.17 per share for the nine months ended September 30, 2007.
2008 Fourth Quarter Total Net Revenue Guidance
ChinaEdu expects its total net revenue in the fourth quarter of 2008 to be in the range of RMB82 million ($12.0 million) to RMB85 million ($12.4 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 Tuesday, November 25, 2008 at 8:00 a.m. U.S. Eastern time / 5:00 a.m. U.S. Pacific time / 9:00 p.m. Beijing/Hong Kong time.
Dial-in information for the live earnings conference call is as follows: +1-866-202-3048 (U.S.) / +1-617-213-8843 (International), and entering the passcode: CEDU. A telephone replay of the conference call will be available until December 2, 2008 by dialing +1-888-286-8010 (U.S.) or 1.617.801.6888 (International) and entering passcode: 59657267. A live and archived webcast may also 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, which are adjusted from results based on GAAP to exclude certain non-cash items of share-based compensation, amortization of intangible assets, goodwill impairment, one-time accounts receivable write-off and currency exchange loss. The Company also uses adjusted EBITDA, which is also a non-GAAP measure and is adjusted from GAAP results of net income to exclude minority interest, interest, taxes, depreciation, amortization, share-based compensation, goodwill impairment, one-time accounts receivable write-off and currency exchange loss. 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 strategic relationships with 22 universities to operate online degree programs, 12 of which are under long-term, exclusive contracts that vary from 15 to 50 years in length.
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 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 September September
(in thousands) 31,2007 30,2008 30,2008
RMB RMB US$
Current assets:
Cash and cash equivalents 497,114 303,329 44,674
Accounts receivable, net 1,238 5,555 818
Term deposit 6,042 104,500 15,391
Prepaid expenses and other current
assets 17,492 18,886 2,781
Amounts due from related parties 105,522 127,481 18,775
Deferred tax assets 9,521 597 88
Total current assets 636,929 560,348 82,527
Cost method investment 1,210 1,210 178
Land use rights, net 26,949 26,525 3,907
Property and equipment, net 130,745 161,111 23,728
Deposits paid for acquisition of
property and equipment 2,025 6,003 884
Intangible assets, net 105,852 102,746 15,132
Deferred tax assets 1,416 1,416 209
Rental deposits 1,623 1,065 157
Goodwill 73,319 61,334 9,033
Total assets 980,068 921,758 135,755
Liabilities, minority interest and
shareholders' equity
Current liabilities:
Accounts payable 2,773 8,312 1,224
Deferred revenues 83,816 25,946 3,821
Accrued expenses and other current
liabilities 42,096 35,393 5,213
Amounts due to related parties 28,316 59,070 8,700
Income taxes payable 22,455 32,473 4,783
Other taxes payable 6,666 6,721 990
Total current liabilities 186,122 167,915 24,731
Long term debt 25,724 -- --
Deferred revenues 3,124 7,254 1,068
Deferred tax liabilities 24,036 23,310 3,433
Unrecognized tax benefit 4,332 4,601 678
Total liabilities 243,338 203,080 29,910
Minority interests 57,996 74,294 10,942
Total shareholders' equity 678,734 644,384 94,903
Total liabilities, minority interest,
and shareholders' equity 980,068 921,758 135,755
ChinaEdu Corporation
Unaudited Condensed Consolidated Statements of Operations
Three Months Ended
(in thousands, except for
percentage and share, per September June September September
share information) 30,2007 30,2008 30,2008 30,2008
RMB RMB RMB US$
Net Revenue:
Online degree programs 48,647 65,124 65,359 9,626
International curriculum
programs 8,957 6,587 8,178 1,204
Online tutoring programs 4,351 4,078 3,609 532
Private primary and
secondary schools 3,457 3,732 4,858 715
Total net revenue 65,412 79,521 82,004 12,077
Cost of revenue:
Online degree programs 18,557 13,461 19,266 2,837
International curriculum
programs 7,528 5,674 5,949 876
Online tutoring programs 1,031 995 852 125
Private primary and
secondary schools 2,649 3,249 5,134 756
Total cost of revenue 29,765 23,379 31,201 4,594
Gross profit:
Online degree programs 30,090 51,663 46,093 6,789
International curriculum
programs 1,429 913 2,229 328
Online tutoring programs 3,320 3,083 2,757 407
Private primary and
secondary schools 808 483 (276) (41)
Total gross profit 35,647 56,142 50,803 7,483
Online degree programs 61.9% 79.3% 70.5% 70.5%
International curriculum
programs 16.0% 13.9% 27.3% 27.3%
Online tutoring programs 76.3% 75.6% 76.4% 76.4%
Private primary and
secondary schools 23.4% 12.9% -5.7% -5.7%
Gross margin 54.5% 70.6% 62.0% 62.0%
Operating expenses:
General and administrative 20,824 20,404 20,150 2,968
Selling and marketing 4,722 7,017 8,770 1,292
Research and development 5,605 5,830 5,510 811
Goodwill impairment 16,192 -- 17,857 2,630
Total operating expenses 47,343 33,251 52,287 7,701
Income (loss) from
operations (11,696) 22,891 (1,484) (218)
Operating margin -17.9% 28.8% -1.8% -1.8%
Other income (expense) -- -- -- --
Other non operating income -- 2,116 121 18
Interest income 516 2,605 2,326 343
Interest expense (674) (585) (106) (16)
Income (loss) before
income tax provisions and
minority interest (11,854) 27,027 857 127
Income tax expense (2,505) (9,425) (8,769) (1,291)
Minority interest, net of
taxes (5,065) (8,415) (7,397) (1,089)
Net income (loss) (19,424) 9,187 (15,309) (2,253)
Net margin -29.7% 11.6% -18.7% -18.7%
Net income (loss) per
share:
Basic (0.47) 0.16 (0.26) (0.04)
Diluted (0.47) 0.15 (0.26) (0.04)
Net income (loss) per ADS:
Basic (1.41) 0.48 (0.78) (0.12)
Diluted (1.41) 0.45 (0.78) (0.12)
Weighted average aggregate
number of ordinary shares
outstanding:
Basic 41,722,746 58,434,407 57,913,939 57,913,939
Diluted 41,722,746 61,813,068 57,913,939 57,913,939
(Cont.)
Nine Months Ended
(in thousands, except for percentage September September September
and share, per share information) 30,2007 30,2008 30,2008
RMB RMB US$
Net Revenue:
Online degree programs 137,372 185,443 27,312
International curriculum programs 24,794 22,307 3,285
Online tutoring programs 13,525 10,964 1,615
Private primary and secondary schools 9,684 12,466 1,836
Total net revenue 185,375 231,180 34,048
Cost of revenue:
Online degree programs 42,298 48,029 7,074
International curriculum programs 18,840 16,388 2,414
Online tutoring programs 3,155 2,574 379
Private primary and secondary schools 7,530 11,744 1,730
Total cost of revenue 71,823 78,735 11,597
Gross profit:
Online degree programs 95,074 137,414 20,238
International curriculum programs 5,954 5,919 871
Online tutoring programs 10,370 8,390 1,236
Private primary and secondary schools 2,154 722 106
Total gross profit 113,552 152,445 22,451
Online degree programs 69.2% 74.1% 74.1%
International curriculum programs 24.0% 26.5% 26.5%
Online tutoring programs 76.7% 76.5% 76.5%
Private primary and secondary schools 22.2% 5.8% 5.8%
Gross margin 61.3% 65.9% 65.9%
Operating expenses:
General and administrative 50,787 61,469 9,053
Selling and marketing 10,786 21,649 3,188
Research and development 14,203 17,238 2,539
Goodwill impairment 16,192 17,857 2,630
Total operating expenses 91,968 118,213 17,410
Income (loss) from operations 21,584 34,232 5,041
Operating margin 11.6% 14.8% 14.8%
Other income (expense) 394 -- --
Other non operating income -- 2,388 352
Interest income 1,720 7,679 1,131
Interest expense (1,655) (1,297) (191)
Income (loss) before income tax
provisions and minority interest 22,043 43,002 6,333
Income tax expense (12,484) (23,094) (3,401)
Minority interest, net of taxes (16,509) (23,943) (3,526)
Net income (loss) (6,950) (4,035) (594)
Net margin -3.7% -1.7% -1.7%
Net income (loss) per share:
Basic (0.17) (0.07) (0.01)
Diluted (0.17) (0.07) (0.01)
Net income (loss) per ADS:
Basic (0.51) (0.21) (0.03)
Diluted (0.51) (0.21) (0.03)
Weighted average aggregate number of
ordinary shares outstanding:
Basic 41,178,412 58,259,651 58,259,651
Diluted 41,178,412 58,259,651 58,259,651
ChinaEdu Corporation
Unaudited Condensed Consolidated Statements of Cash Flow
Three Months Ended
September June September September
(in thousands) 30,2007 30,2008 30,2008 30,2008
RMB RMB RMB US$
Operating activities:
Net income (19,424) 9,187 (15,309) (2,253)
Minority interest 5,065 8,415 7,397 1,089
Share-based compensation 1,180 1,671 1,494 220
Depreciation 1,997 2,903 3,005 443
Amortization of land use
rights 133 141 142 21
Amortization of intangible
assets 2,167 2,262 2,142 315
Goodwill impairment 16,192 -- 17,857 2,630
Accounts receivable write-
off 4,031 -- -- --
FA write down 688 -- -- --
Other income -- -- -- --
Interest expense (1,151) -- -- --
Deferred income taxes 523 1,281 787 116
Accounts receivable 625 (12,324) 8,167 1,203
Prepaid expenses and other
current assets (2,889) 8,093 3,610 532
Amounts due from related
parties 16,123 (98,677) 41,085 6,051
Rental deposits (272) (266) (4) (1)
Accounts payable (776) 91 190 28
Deferred revenues (46,668) 57,371 (53,603) (7,895)
Accrued expenses and other
current liabilities (4,542) 2,283 1,629 240
Amounts due to related
parties 6,350 24,705 12,081 1,779
Unrecognized tax benefit 134 136 -- --
Other taxes payable 437 2,156 2,206 325
Income tax payable 1,847 7,970 9,229 1,359
Net cash provided by (used in)
operating activities (18,230) 17,398 42,105 6,202
Investing activities:
Purchase of business -- (4,000) (2,700) (398)
Purchase of land use right (694) -- -- --
Purchase of property and
equipment (7,910) (11,240) (11,853) (1,746)
Deposits paid for
acquisition of property
and equipment (1,952) (979) (5,024) (740)
Purchase of term deposit 40,853 (25,000) (71,500) (10,530)
Purchase of contractual
right -- (1,225) -- --
Proceeds from disposal of
property and equipment -- -- -- --
Net cash used in investing activities 30,297 (42,444) (91,077) (13,414)
Financing activities:
Proceeds from issuance of
Series D convertible
preferred shares 18,187 -- -- --
Proceeds from excerise of
warrants 2,261 -- -- --
Collection of subscription
receivable 1,207 -- -- --
Repurchase of ordinary
shares (12,901) -- (14,725) (2,169)
Repurchase of series B (640) -- -- --
Repayment of convertible
notes -- -- -- --
Repayment of long-term loan -- (1,091) (23,568) (3,472)
Cash dividends paid to
minority shareholders -- -- (4,050) (596)
Capital contributions by
minority shareholders -- 1,225 -- --
Proceeds from excerise of
options -- -- 404 60
Prepayment for share
repurchase -- -- (5,751) (847)
Issurance of ordinary
shares -- -- -- --
Net cash provided by (used in)
financing activities 8,114 134 (47,690) (7,024)
Effect of foreign exchange rate
changes (160) (6,330) (746) (110)
CASH AND CASH EQUIVALENTS, beginning
of period 108,813 431,979 400,737 59,020
CASH AND CASH EQUIVALENTS, end of
period 128,834 400,737 303,329 44,674
Net increase (decrease) in cash 20,021 (31,242) (97,408) (14,346)
(Cont.)
Nine Months Ended
September September September
(in thousands) 30,2007 30,2008 30,2008
RMB RMB US$
Operating activities:
Net income (6,950) (4,035) (594)
Minority interest 16,509 23,943 3,526
Share-based compensation 2,495 3,548 523
Depreciation 5,998 8,642 1,273
Amortization of land use
rights 392 424 62
Amortization of intangible
assets 6,381 6,659 981
Goodwill impairment 16,192 17,857 2,630
Accounts receivable write-
off 4,031 -- --
FA write down 688 -- --
Other income (394) -- --
Interest expense (170) -- --
Deferred income taxes 5,257 7,924 1,167
Accounts receivable 11,153 (4,320) (636)
Prepaid expenses and other
current assets (10,273) 4,317 636
Amounts due from related
parties (2,341) (22,003) (3,241)
Rental deposits (951) 558 82
Accounts payable (5,104) 134 20
Deferred revenues (51,044) (53,715) (7,911)
Accrued expenses and other
current liabilities (1,041) (6,202) (913)
Amounts due to related
parties 15,630 24,734 3,643
Unrecognized tax benefit 454 269 40
Other taxes payable 731 55 8
Income tax payable 449 10,017 1,475
Net cash provided by (used in)
operating activities 8,092 18,806 2,771
Investing activities:
Purchase of business (22,520) (6,700) (987)
Purchase of land use right (694) -- --
Purchase of property and
equipment (25,018) (31,578) (4,651)
Deposits paid for
acquisition of property
and equipment (28,624) (6,034) (889)
Purchase of term deposit (200) (98,458) (14,501)
Purchase of contractual
right (3,430) (1,225) (180)
Proceeds from disposal of
property and equipment -- 31 5
Net cash used in investing activities (80,486) (143,964) (21,203)
Financing activities:
Proceeds from issuance of
Series D convertible
preferred shares 72,259 -- --
Proceeds from excerise of
warrants 2,261 -- --
Collection of subscription
receivable 2,324 -- --
Repurchase of ordinary
shares (62,948) (14,725) (2,169)
Repurchase of series B (640) -- --
Repayment of convertible
notes (3,151) -- --
Repayment of long-term
loan -- (25,724) (3,789)
Cash dividends paid to
minority shareholders (7,230) (4,050) (596)
Capital contributions by
minority shareholders 2,030 1,225 180
Proceeds from excerise of
options -- 404 60
Prepayment for share
repurchase -- (5,751) (847)
Issurance of ordinary
shares 48,447 -- --
Net cash provided by (used in)
financing activities 53,352 (48,621) (7,161)
Effect of foreign exchange rate
changes (439) (20,006) (2,947)
CASH AND CASH EQUIVALENTS, beginning
of period 148,315 497,114 73,214
CASH AND CASH EQUIVALENTS, end of
period 128,834 303,329 44,674
Net increase (decrease) in cash (19,481) (193,785) (28,540)
ChinaEdu Corporation
Reconciliations of non-GAAP results of operations measures to
GAAP measures
Three Months Ended
Septembe
September June September r
(in thousands, unaudited) 30,2007 30,2008 30,2008 30,2008
RMB RMB RMB US$
Income (loss) from operations
GAAP Result (11,696) 22,891 (1,484) (218)
Share-based compensation 1,180 1,671 1,494 220
Exchange loss -- -- 1,433 211
Amortization of intangible assets 2,167 2,262 2,142 315
Goodwill impairment 16,192 -- 17,857 2,630
Accounts receivable write-off from
prior owner of International
Curriculum Program 4,031 -- -- --
Adjusted income (loss) from
operations (Non-GAAP) 11,874 26,824 21,442 3,158
Adjusted operating margin 18.2% 33.7% 26.1% 26.1%
Net income (loss)
GAAP Result (19,424) 9,187 (15,309) (2,253)
Share-based compensation 1,180 1,671 1,494 220
Exchange loss -- -- 1,433 211
Minority interest for Share-based
compensation (273) (305) (194) (29)
Amortization of intangible assets 2,167 2,262 2,142 315
Goodwill impairment 16,192 -- 17,857 2,630
Accounts receivable write-off from
prior owner of International
Curriculum Program 4,031 -- -- --
Deferred tax benefit for accounts
receivable write-off from prior
owner of International Curriculum
Programs (636) -- -- --
Adjusted net income (loss) (Non-GAAP) 3,237 12,815 7,423 1,094
Adjusted net margin 4.9% 16.1% 9.1% 9.1%
(Cont.)
Nine Months Ended
September September September
(in thousands, unaudited) 30,2007 30,2008 30,2008
RMB RMB US$
Income (loss) from operations
GAAP Result 21,584 34,232 5,041
Share-based compensation 2,495 3,548 523
Exchange loss -- 1,433 211
Amortization of intangible assets 6,381 6,659 981
Goodwill impairment 16,192 17,857 2,630
Accounts receivable write-off from
prior owner of International
Curriculum Program 4,031 -- --
Adjusted income (loss) from
operations (Non-GAAP) 50,683 63,729 9,386
Adjusted operating margin 27.3% 27.6% 27.6%
Net income (loss)
GAAP Result (6,950) (4,035) (594)
Share-based compensation 2,495 3,548 523
Exchange loss -- 1,433 211
Minority interest for Share-based
compensation (509) (583) (86)
Amortization of intangible assets 6,381 6,659 981
Goodwill impairment 16,192 17,857 2,630
Accounts receivable write-off from
prior owner of International
Curriculum Program 4,031 -- --
Deferred tax benefit for accounts
receivable write-off from prior
owner of International Curriculum
Programs (636) -- --
Adjusted net income (loss) (Non-GAAP) 21,004 24,879 3,665
Adjusted net margin 11.3% 10.8% 10.8%
ChinaEdu Corporation
Reconciliation from net income to adjusted EBITDA (*)
Three Months Ended
September June September September
(in thousands, unaudited) 30,2007 30,2008 30,2008 30,2008
RMB RMB RMB US$
Net income/(loss) (19,424) 9,187 (15,309) (2,253)
Minority interest 5,065 8,415 7,397 1,089
Income tax provision 2,505 9,425 8,769 1,291
Exchange loss -- -- 1,433 211
Interest income and other,net 158 (4,136) (2,341) (345)
Depreciation 1,997 2,903 3,005 443
Intangible Amortization 2,167 2,262 2,142 315
Land use right amortization 133 141 142 21
Goodwill impairment 16,192 -- 17,857 2,630
Accounts receivable write-off 4,031 -- -- --
Share-based compensation 1,180 1,671 1,494 220
Adjusted EBITDA 14,004 29,868 24,589 3,622
Adjusted EBITDA margin 21.4% 37.6% 30.0% 30.0%
(Cont.)
Nine Months Ended
September September September
(in thousands, unaudited) 30,2007 30,2008 30,2008
RMB RMB US$
Net income/(loss) (6,950) (4,035) (594)
Minority interest 16,509 23,943 3,526
Income tax provision 12,484 23,094 3,401
Exchange loss -- 1,433 211
Interest income and other,net (459) (8,770) (1,292)
Depreciation 5,998 8,642 1,273
Intangible Amortization 6,381 6,659 981
Land use right amortization 392 424 62
Goodwill impairment 16,192 17,857 2,630
Accounts receivable write-off 4,031 -- --
Share-based compensation 2,495 3,548 523
Adjusted EBITDA 57,073 72,795 10,721
Adjusted EBITDA margin 30.8% 31.5% 31.5%
(*) Definition of adjusted EBITDA: earnings before interest, taxes,
depreciation, amortization, share-based compensation, exchange
loss, minority interest, goodwill impairment and accounts receivable
write-off.
For more information, please contact:
Company Contacts:
Lily Liu, CFO
ChinaEdu Corporation
Phone: +86-10-8418-6655 x1002
Email: ir@chinaedu.net
S. Jimmy Xia, IR Manager
ChinaEdu Corporation
Phone: +86-10-8418-6655 x1150
Email: ir@chinaedu.net
