omniture

China Education Alliance, Inc. Announces Strong Fourth Quarter and Fiscal Year 2008 Results

2009-04-02 03:57 690


HARBIN, China, April 2 /PRNewswire-Asia/ -- China Education Alliance, Inc. (OTC Bulletin Board: CEUA; "China Education Alliance" or "the Company"), a leading distributor of educational resources, offering

high-quality programs and training both through online networks and an on-site training center in the People's Republic of China, today reported strong financial results for the fourth quarter and fiscal year ended December 31, 2008.

Fourth Quarter 2008 Highlights

-- Total Revenue increased 91.2% year over year to $9.2 million

-- Gross profit rose 80.6% to $7.2 million or 85.3% of sales, compared to

92.7% of sales in the fourth quarter of 2007

-- Operating income totaled $3.9 million, versus an operating income of

$1.1 million in the fourth quarter of 2007

-- Net income was $3.6 million, versus net loss of $1.4 million in the

fourth quarter of 2007

-- Net income grew to a record $0.15 per fully diluted share, versus net

loss of $0.06 per fully diluted share in the fourth quarter of 2007

Fiscal Year 2008 Highlights

-- Total revenue increased 43.5% in 2008 to $24.9 million

-- Gross profit increased 44.3% to $20 million; gross margin was 80.%

versus 79.6% in fiscal year 2007

-- Operating income increased 59.7% in fiscal year 2008 to $10 million

-- Net income was $9.9 million, or $0.40 per fully diluted share

-- In 2008, the Company signed a series of acquisition agreements:

- On April 18, 2008, our subsidiary, Harbin Zhong He Li Da Education

Technology, Inc. entered into an agreement and supplementary

agreement with Harbin Daily Newspaper Group to establish a joint

venture, Harbin New Discovery Media Co., Ltd ("New Discovery"). New

Discovery publishes a newspaper, "Scientific Discovery," which

promotes primary and secondary education resources.

- On April 27, 2008, the Company entered into an agreement with Mr.

Yuli Guo and World Exchanges, Inc ("WEI") to acquire 70% of WEI. On

December 23, 2008, WEI incorporated Beijing Wei Shi Yi Tong Education

Technology Co., Inc in the PRC to be involved in the English language

training business.

Fourth Quarter 2008 Results

China Education Alliance's on-line business generated 70.3% of its total revenue for the fourth quarter of 2008 versus 65.4% for the same period the prior year. Its training center business generated 21.2% of its total revenue for the fourth quarter of 2008 versus 23.6% for the same period the prior year and its advertising business generated the remaining 8.5% of its total revenue for the fourth quarter of 2008 versus 10.9% for the same period the prior year.

"Our online education, training center, and advertising businesses have experienced rapid growth during the fourth quarter of 2008; the training center business generated particularly dramatic growth due to our rapid expansion of our vocational education business," commented Mr. Xiqun Yu, Chairman and CEO of China Education Alliance. "The strong growth of our online education business was mainly driven by our success in replicating our online business model in the other provinces of the PRC from our dominant position in the Heilongjiang province."

Online education revenue was $6.4 million for the fourth quarter of fiscal 2008, an increase of 105.3% from $3.1 million for the fourth quarter of fiscal 2007, reflecting the strong demand for our downloadable education materials on the Internet. Training center revenue for the fourth quarter of fiscal 2008 was $1.9 million, up 71.6% from $1.1 million in the fourth quarter last year, mainly driven by more extensive face-to-face tutoring courses for middle and high school students, as well as strong demand for our on-site vocational education services. Advertising revenue was $0.8 million for the fourth quarter of fiscal 2008, an increase of 49.3% from $0.5 million for the fourth quarter the prior year, due to the rapid development of the Internet as an important media for advertising. The favorable exchange rate between US$ and RMB has also contributed to our net income and increase in our advertising revenue.

Overall cost of sales increased 141.4% to $2.0 million in the fourth quarter of fiscal 2008, compared to $0.8 million for the same period in fiscal 2007. Gross profit increased to $7.2 million in the fourth quarter of fiscal 2008, an increase of 80.6% from $4.0 million for the same quarter in fiscal 2007. Gross margin for the fourth quarter of fiscal 2008 was 78%, as compared to a record 82.6% for the same quarter a year ago. The online education gross margin decreased to 78.8% in fourth quarter of fiscal 2008 from 84.2% for the same period in fiscal 2007. The training center gross margin decreased to 69.1% for the fourth quarter of fiscal 2008 from 73.6% for the same period last year. Advertising gross margin increased to 93.7% in the fourth quarter of fiscal 2008 from 91.9% for the same period in 2007.

Selling expenses increased 40.2% to $2.5 million for the fourth quarter in fiscal 2008, compared to $1.8 million in the fourth quarter of 2007, due to increased expenses in building our marketing team and higher debit card agency expenses. General and administrative ("G&A") expenses were $0.6 million for the fourth quarter in fiscal 2008, a decrease from $0.9 million in the fourth quarter of fiscal 2007, primarily due to a decline in bonuses paid in the fourth quarter of 2008 compared to the prior year. As a percentage of revenue, G&A expenses decreased to 6.2% in the fourth quarter of fiscal 2008, down from 19% in the same period of last year.

Operating income in the fourth quarter of fiscal 2008 increased to $3.9 million, from $1.1 million in the same period a year ago. Operating margin was 42.2% in the fourth quarter of fiscal 2008.

Net income for the fourth quarter of fiscal 2008 was $3.6 million, as a result of strong development in our three business segments and $0.11 million in warrants and stock option compensation for services as well as $0.13 million in non-cash liquidation damages related to the May 2007 private placement financing, compared to a loss of $1.4 million for the fourth quarter of fiscal 2007. Adjusting for non-cash expenses, fourth quarter of fiscal 2008 non-GAAP net income was $0.24 million, or $0.01 per fully diluted share.

Fiscal Year 2008 Financial Results

For the fiscal year 2008, total revenue was $24.9 million, an increase of 43.5% from the prior year. Online education revenue was $16.7 million, an increase of 45.2% from $11.5 million, which represented 67.2% of our total revenue. The training center business contributed 22.3% of revenue or $5.6 million, an increase of 50.1% from $3.7 million in fiscal 2007. Our advertising business contributed 10.4% of revenue or $2.6 million, an increase of 22.3% from $2.1 million in fiscal 2007.

Gross profit for fiscal year 2008 was $20 million, an increase of 44.3% from gross profit of $13.8 million in fiscal 2007. Gross margin was 80% for fiscal 2008 compared to 79.6% for fiscal 2007. Income from operations was $10 million for fiscal 2008, an increase of 59.7% from $6.3 million in fiscal 2007. Net income for the fiscal 2008 was $9.9 million, or $0.40 per fully diluted share, compared to $3.1 million, or $0.14 per fully diluted share in fiscal 2007.

Financial Condition

As of December 31, 2008, China Education Alliance had $23.4 million in cash and cash equivalents, $25.4 million in working capital, and no long-term debt. Shareholders' equity was $33.7 million, an increase from $18.6 million on December 31, 2007. We generated $9.8 million in cash flow from operating activities in fiscal 2008.

Business Outlook

China Education Alliance has three main business components:

1) The Company provides downloadable resources to primary and secondary

students via the Internet and also provides on-site teaching services.

At present, the Company has expanded its Internet business to Jilin,

Liaoning and Inner Mongolia. In 2009, the Company will try to develop

its online business in Beijing, Hebei, Henan and other places as well

as maintain its existing market share. We will endeavor to expand

our on-site training services to more areas to allow more students

receive instruction from our teachers. In addition, we will strongly

expand circulation of our newspaper, "Scientific Discovery," to

strengthen our brand name recognition.

2) In the field of vocational education, on the one hand, we plan to

expand our vocational education in the Heilongjiang province by

providing IT and clerical training.

On the other hand, the Company, through a strategic cooperation with

the Chinese Vocational Education Society (NAVEC), aims to address the

high unemployment rate among college students. We introduced the

"Millions of College Students Employment Crossroad" program, which

received positive support from the public and universities. We plan to

promote the program, which comprises nine modules: the living

environment, business analysis and business strategy, marketing

management, enterprise management, enterprise management philosophy,

human resources management, corporate culture construction, finance and

capital management, supply chain and production management,

entrepreneurs, self-cultivation arts and so on. This program runs for

60 days and well known management gurus such as Wen Yuankai, Chen Fang,

Ai Feng, Qu Min Li, and Wang Zhongqiu are invited to lecture. This

program is carried out in Beijing and we have year-round training

contracts with a lot of well-known domestic Chinese companies.

In the first quarter of 2009, China Education Alliance will help

the Chinese Vocational Education Society (NAVEC) and the world's

largest professional certification, the United Kingdom's City & Guilds

London Association, achieve strategic and cooperative relations. In

addition, NAVEC will obtain the exclusive right in the People's

Republic of China to conduct the International Trainer, Automotive

Engineers, International English Teacher Qualification, Foreign-related

Clerical and Administrative Qualifications and Qualifications of the

International Institute for Management Level examinations.

3) In the field of foreign language training, we plan to set up new WEI

operations centers nationwide to carry out high-end English language

training. In addition, we have reached a verbal agreement with the

world's largest professional certification authority, the United

Kingdom's City & Guilds London Association (formal agreement will be

signed in the first quarter of 2009). WEI is expected to promote

International Professional English and Oral English Level Examinations

beginning the second quarter of 2009. The program aims to help

university students and professional people obtain professional

knowledge and professional skills certificates.

"In 2009, we will maintain and expand our market, because we have three educational business segments that are complementary of each other. We will continue our development and are very optimistic about the prospects in 2009," said China Education Alliance's CEO, Mr. Xiqun Yu.

Investor Conference Call / Webcast Details

The Company will host a conference call to discuss its fourth quarter and fiscal year 2008 results at 9:00 a.m. Eastern Time on Thursday, April 02, 2009. The management team will be on the call to discuss quarterly results and highlights and to answer questions. The toll-free number for U.S. participants is +1-888-686-9685. International participants can dial +1-913-312-1523. Please ask for the Chinese Education Alliance Earnings Results Conference Call, confirmation code 4914130.

The playback will be available beginning two hours after the conclusion of the conference call and will be accessible by dialling +1-719-457-0820 (international) and +1-888-203-1112 (U.S. domestic). The passcode number to access the replay is 4914130.

About China Education Alliance, Inc.

China Education Alliance, Inc. is a fast growing, leading China-based company offering high-quality education resources and services to students ages 7 to 18 and adults ages 18+. For students ages 7 to 18, China Education Alliance, Inc. offers supplemental online exam-oriented training materials and on-site exam-oriented training and tutoring services. The Company is providing on-line downloadable famous teachers resources and on-site face to face instructions. All resources and tutoring services are provided by famous teachers within mainland China. The purpose of online exam orientated resources and on-site tutoring is to help Chinese students ages 7 to 18 to pass the two most important, and highly competitive exams in their educational career: senior high school entrance exam and college entrance exam. For graduates and professionals age 18+, China Education Alliance provides vocational training including IT and several professional training programs. In addition, as of April 2008, the Company has acquired 70% of the "World Exchange College of Language" English training business, headquartered in Toronto with sites expanding across China. Their comprehensive English programs are designed to assist graduates and professionals in learning the English language, both written and conversational in order to better able them to work for a foreign corporation or work-study abroad. For more information about CEUA, please visit http://www.chinaeducationalliance.com .

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995:

Certain statements in this press release, constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding our ability to prepare the Company for growth, the Company's planned expansion in 2008 and predictions and guidance relating to the Company's future financial performance. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs and are not a guarantee of future performance but they involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, which may include, but are not limited to, such factors as unanticipated changes in product demand especially in the education industry, pricing and demand trends for the Company's products, changes to government regulations, risk associated with operation of the Company's new facilities, risk associated with large scale implementation of the Company's business plan, the ability to attract new customers, ability to increase its product's applications, cost of raw materials, downturns in the Chinese economy, the adoption by consumers of its new game business, the unproven advertising model that is dependent on attracting a large game user base, and other information detailed from time to time in the Company's filings and future filings with the United States Securities and Exchange Commission. Investors are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release, readers are cautioned not to place undue reliance on any of them and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the Company's expectations.

China Education Alliance, Inc. and Subsidiaries

Consolidated Statements of Operations

Three months ended December 31, Year Ended December 31,

2008 2007 2008 2007

Revenues

Online

education

revenues $6,447,243 $3,140,590 $16,706,917 $11,505,336

Training

center

revenues 1,944,652 1,133,529 5,552,969 3,699,827

Advertising

revenues 783,622 524,914 2,591,131 2,118,371

Total

revenue 9,175,517 4,799,033 24,851,017 17,323,534

Cost of

Goods Sold

Online

education

costs 1,369,940 495,702 2,859,593 2,227,196

Training

center

costs 601,318 299,050 1,922,841 1,147,364

Advertising

costs 49,296 42,292 182,505 166,749

Total cost

of goods

sold 2,020,554 837,044 4,964,939 3,541,309

Gross Profit

Online

education

gross

profit 5,077,303 2,644,888 13,847,324 9,278,140

Training

center

gross

profit 1,343,334 834,479 3,630,128 2,552,463

Advertising

gross

profit 734,326 482,622 2,408,626 1,951,622

Total gross

profit 7,154,963 3,961,989 19,886,078 13,782,225

Operating

Expenses

Selling

expenses 2,502,082 1,785,213 7,467,118 5,198,011

Administrative 570,581 912,191 1,506,411 1,825,264

Depreciation

and

amortization 213,293 143,342 894,112 484,643

Total

operating

expenses 3,285,956 2,840,746 9,867,641 7,507,918

Other Income

(Expense)

Other Income 2,809 561,387 536,876 860,037

Interest

income 33,324 20,592 127,751 54,931

Interest

expense -- (3,060,924) -- (3,603,097)

Investment

loss (95,331) -- (95,331) --

Total other

income

(expense) (59,198) (2,478,945) 569,296 (2,688,129)

Net Income

Before

Provision

for Income

Tax 3,809,809 (1,357,702) 10,587,733 3,586,178

Provision

For Income

Taxes 218,100 86,057 669,197 481,271

Net Income $3,591,709 $(1,443,759) $9,918,536 $3,104,907

Basic

Earnings

Per Share $0.17 $(0.07) $0.46 $0.16

Basic

Weighted

Average

Shares

Outstanding 21,549,381 19,345,543 21,549,381 19,325,872

Diluted

Earnings

Per Share $0.15 $(0.06) $0.40 $0.14

Diluted

Weighted

Average

Shares

Outstanding 24,099,330 25,642,543 24,662,830 22,549,837

The

Components

of Other

Comprehensive

Income

Net Income $3,591,709 $(1,443,759) $9,918,536 $3,104,907

Foreign

currency

translation

adjustment 31,975 917,112 1,444,539 965,708

Comprehensive

Income $3,623,684 $(526,647) $11,363,075 $4,070,615

China Education Alliance, Inc. and Subsidiaries

Consolidated Balance Sheets

December 31,

2008 2007

ASSETS

Current Assets

Cash and cash equivalents $23,418,098 $11,778,954

Advances to related parties 142,006 108,536

Accounts receivables 469,607 --

Prepaid expenses 3,437,506 1,612,779

Total current assets 27,467,217 13,500,269

Property and equipment, net 6,136,252 6,186,824

Intangibles and capitalized software,

net 864,089 623,560

Advance on acquisition 932,000 --

Long term investment 342,357 --

$35,741,915 $20,310,653

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

Accounts payable and accrued

expenses $800,692 $423,109

Deferred revenues 1,227,806 1,245,507

Total current liabilities 2,028,498 1,668,616

Stockholders' Equity

Preferred stock ($0.001 par value,

20,000,000 shares authorized, of

7,597,645 and 9,397,645 issued

and outstanding, respectively,

aggregate liquidation preference

of $2,811,129 and $3,383,152,

respectively) 3,010,144 3,677,944

Common stock ($0.001 par value,

150,000,000 shares authorized, 21,893 19,410

21,892,631 and 19,409,830,

issued and outstanding,

respectively)

Additional paid-in capital 10,751,732 6,378,110

Statutory reserve 1,990,238 1,151,885

Accumulated other comprehensive

income 2,688,080 1,243,541

Retained earnings 15,251,330 6,171,147

Total stockholders' equity 33,713,417 18,642,037

$35,741,915 $20,310,653

China Education Alliance, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Year Ended December 31,

2008 2007

Cash flows from operating activities

Net Income $9,918,536 $3,104,907

Adjustments to reconcile net income to

net cash provided by operating

activities

Depreciation and

amortization 1,598,624 975,470

Amortization of loan

discount - warrants

attached to loans -- 1,969,163

Beneficial conversion

feature -- 1,512,400

Warrants issued for services 103,420 264,401

Stock issued for services -- 15,900

Preferred stock issued for

liquidation damages -- 277,944

Interest on convertible note

accounted for as capital

contribution -- 40,427

Stock based compensation 5,326 --

Loss on equity investment 95,331 --

Net change in assets and liabilities

Account receivables (469,607) --

Other receivables -- 54,723

Prepaid expenses and other (1,824,727) (291,331)

Advances to related parties (33,470) (244,480)

Accounts payable and accrued

liabilities 377,583 211,960

Deferred revenue (17,701) 936,141

Net cash provided by

operating activities 9,753,315 8,827,625

Cash flows from investing activities

Purchases of fixed assets (996,434) (1,722,718)

Acquisition of intangibles

and capitalized software (792,147) --

Long-term investment (437,688) --

Net Cash used in investing activities (2,226,269) (1,722,718)

Cash flows from financing activities

Warrants exercised 2,667,559 --

Proceeds from loans -- 3,400,000

Payments on loans -- (1,530,000)

Net cash provided by financing

activities 2,667,559 1,870,000

Effect of exchange rate 1,444,539 965,708

Net increase in cash 11,639,144 9,940,615

Cash and cash equivalents at beginning

of year 11,778,954 1,838,339

Cash and cash equivalents at end of

year $23,418,098 $11,778,954

Supplemental disclosure of cash flow

information:

Interest paid $-- $297,838

Taxes paid $550,938 $408,749

Value of equity granted and

issued $108,436 $280,301

Value of preferred stock

issued for liquidation

damages $-- 277,944

Non-cash investing and financing

activities:

Conversion of preferred

stock to common $667,800 $--

Conversion of notes payable

to preferred stock $-- $3,400,000

Cashless exercise of

warrants $-- $88

Common stock issued for

advance of acquisition $932,000 $--

Source: China Education Alliance, Inc.
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