omniture

China Education Alliance, Inc. Announces Strong Second Quarter 2010 Financial Results

2010-08-11 15:16 1135
    HARBIN, China, Aug. 11 /PRNewswire-Asia/ -- China Education Alliance, Inc. (NYSE: CEU) today announced strong financial results for the three and six months ended June 30, 2010. The Company will host a conference call Wednesday, August 11, 2010, at 10:00 a.m. EST to discuss these results. 

    Financial Highlights for the Three Months Ended June 30, 2010

    -- Total revenue increased 33.7% year-over-year to $10.85 million, 
       compared to revenue of $8.12 million in the second quarter of fiscal 
       2009.
    -- Net income increased 29.9% year-over-year to $4.26 million, compared to 
       net income of $3.28 million in the second quarter of fiscal 2009.
    -- EPS was $0.14 per fully diluted share, compared to $0.13 in the second 
       quarter of fiscal 2009.
    -- Operating income totalled $4.74 million, compared to $3.72 million same 
       period in fiscal 2009.
    -- Gross profit rose 39.0% to $9.06 million or 83.4% of sales, compared to 
       80.2% of sales or $6.51 million in the second quarter of fiscal 2009.

    "We are pleased to again report solid revenue and earnings growth driven largely by strong demand for our exam-oriented educational services and our vocational training programs in China," stated Xiqun Yu, Chief Executive Officer of China Education Alliance, Inc. "We remain optimistic about the opportunities for continued growth in both our supplemental education resources and in IT and professional training programs offered through our vocational centers. We remain focused on our expansion efforts into new geographic markets, which will be supported by enhanced marketing strategies to develop our core businesses. We are confident in achieving 30 percent revenue growth for the full year 2010, based on strong enrolment for our online educational services and our vocational training services."
 
    Financial results for the three months ended June 30, 2010 

    China Education Alliance reported total revenue of $10.85 million for the second quarter ended June 30, 2010, an increase of 33.7% compared to $8.12 million for the second quarter of 2009. The Company's online education business generated 68.1% of its total revenue in the second quarter of 2010 compared to 67.4% for the same prior-year period. Its training center business generated 27.0% of total revenue in the second quarter of 2010 compared to 24.7% for the same prior-year period; other business, including advertising, generated the remaining 4.9% of total revenue in the second quarter of 2010, compared to 7.9% for the same prior-year period.

    Online education revenue was $7.39 million for the second quarter of 2010, an increase of 35.0% compared to $5.47 million for the second quarter of 2009. 

    Training center revenue in the second quarter of 2010 was $2.93 million, up 46.0% from $2.01 million in the second quarter last year. 

    Other revenue, including advertising, was approximately $0.53 million for the second quarter of 2010, decreased by 16.6% from $0.64 million in the second quarter last year.

    Net income for the second quarter of fiscal 2010 was $4.26 million, representing an increase of 29.9% over second quarter 2009 net income of $3.28 million. The increase was largely the result of strong development in the Company's online division and training center division. Diluted earnings per share were $0.14, compared with $0.13 in the same period last year. 31.36 million shares were utilized for the calculations in the second quarter of 2010 compared to 25.09 million for the year ago period.

    Operating income in the second quarter of fiscal 2010 increased to $4.74 million, from $3.72 million in the same period a year ago. Operating margin was 43.7% in the second quarter of fiscal 2010.

    Overall cost of sales increased 11.9% to $1.80 million in the second quarter of fiscal 2010, compared to $1.61 million for the same period in fiscal 2009. Gross profit increased to $9.06 million in the second quarter of fiscal 2010, an increase of 39.0% from $6.51 million for the same quarter in fiscal 2009. Gross margin for the second quarter of fiscal 2010 was 83.4%, as compared to 80.2% for the same quarter a year ago. The online education gross margin increased to 84.7% in the second quarter of fiscal 2010 from 81.1% for the same period in fiscal 2009. The training center gross margin increased to 78.5% for the second quarter of fiscal 2010 from 75.0% for the same period last year. Other area gross margin was 93.1% in the second quarter of fiscal 2010, up from 89.1% of the second quarter of last year.

    Selling expenses increased 82.5% to approximately $3.48 million for the second quarter of fiscal 2010, compared to $1.91 million in the second quarter of 2009, due to increased expenses in our marketing team and higher debit card agency expenses. General and administrative ("G&A") expenses were approximately $0.57 million for the second quarter of fiscal 2010, a decrease from $0.64 million in the second quarter of fiscal 2009, primarily due to prudent expense control. As a percentage of revenue, selling expenses took 32.1% of the total revenue in the second quarter 2010 compared to 23.5% the same period of last year; G&A expenses at 5.3% of total revenue in the second quarter 2010 compared to 7.9% the same period of last year.

    Financial results for the six months ended June 30, 2010

    Revenue for the six months ended June 30, 2010 was $19.47 million, representing an increase of 19.3% compared to the same six-month period in 2009. Online education revenue was $12.62 million for the six months ended June 30, 2010, representing an increase of 22.5% from $10.30 million for the same six-month period in 2009. Training center revenue in the six months ended June 30, 2010, was $5.79 million, representing an increase of 27.1% from $4.56 million in the same six-month period last year. The increase was largely the result of strong development in the Company's online education and onsite training centers divisions. 

    Other revenue was approximately $1.06 million for the six months ended June 30, 2010, representing a decrease of 27.6% from $1.47 million for the same prior-year, six-month period. As other revenue, mainly advertising, is not the focus of the business, the company does not expect to see significant changes in the current level of advertising revenue during this year. 

    Net income for the six months ended June 30, 2010 was $7.92 million, representing an increase of 20.8% over the same six-month period in 2009 net income of $6.56 million. Diluted earnings per share for the six months ended June 30, 2010 was $0.25, compared with $0.27 in the same period of 2009. 31.38 million shares were utilized for the calculations for the first half of 2010, compared to 24.46 million for the year-ago period.

    Financial Condition

    As of June 30, 2010, China Education Alliance had approximately $74.69 million in cash, $75.20 million in working capital, and no long-term debt. Shareholders' equity was approximately $83.86 million, an increase of $8.52 million from approximately $75.34 million on December 31, 2009. The Company generated $10.13 million in cash flow from operating activities in the second quarter of 2009.

    Business Outlook

    The management team at CEU believes the domestic education industry in China will remain a fast-growth sector. The Company has experienced rapid growth by providing online and onsite, supplemental educational training services to students ages 6 to 18 and vocational training services to adults ages 18 and up.  

    For students ages 6 to 18, the Company provides downloadable course material and test papers online and classroom instructions onsite.  All the online course material and test papers and onsite classroom instructions are provided by famed instructors in the People's Republic of China, with the purpose of helping the students pass the two most important exams during their academic life:  the high school and college entrance exams. 

    For adults ages 18 and up, the Company provides various vocational training including IT and other professional training programs. 

    China Education Alliance has two primary business lines: 

    1.  For students ages 6 to 18, the Company offers exam-oriented primary 
        and secondary school supplemental education, with online educational 
        resources available for students to download through the Internet, and 
        is supported by highly regarded instructors who offer onsite support. 
        The Company's online educational resources are provided through its 
        website, http://www.edu-chn.com , which is a comprehensive education 
        network platform that utilizes video-on-demand technology and houses a 
        large database that includes more than 350,000 exams and test papers, 
        as well as courseware for secondary and elementary schools. The 
        Company has expanded its business network from Heilongjiang province 
        to Jilin, Liaoning and Inner Mongolia provinces, and it is focused on 
        optimizing market share in these regions, while evaluating new 
        geographic areas to penetrate in the future. 
    2.  For adults over the age of 18, the Company offers onsite vocational 
        training through various programs at its main center in Harbin, in 
        addition to online services through its strategic partnerships with 
        professional organizations such as the National Association of 
        Vocation Education Society of China (NAVEC). The Company is focused on 
        its Heilongjiang-based, self-run vocational education market, which 
        includes IT training and other professional training programs.


    In addition to these primary businesses, the Company is also invested in the publishing and circulation of an educational newspaper, Scientific Discovery, which is enjoying a growing distribution, currently estimated at 60,000. 

    On February 4, 2010, the Company announced the acquisition of the Beijing Shifan Culture Communication Co., Ltd. and, as a consequence, the establishment of a new entity, Beijing New Shifan Education & Technology. Beijing Shifan's publication, the "Senior High School Students Mathematic, Physics, and Chemistry" magazine, which is endorsed by the China's Ministry of Education, and its popular nationwide academic contest for middle school and high school students, is expected to accelerate the marketing efforts of the Company and provide a platform to access markets nationwide.

    "We continue to focus on marketing our online test-preparation materials and our vocational training efforts to new markets as we see significant growth in the areas we currently serve. We remain committed to our goals for business development, including the introduction of new materials and curriculums which will assist the students and adults we serve in meeting their education and career goals. We remain very confident in our strategy, and will utilize operating leverage in our model to generate incremental cash flow as we continue to grow our business," said Mr. Xiqun Yu.

    Conference Call and Webcast Details

    The Company will host a conference call to discuss financial results for the second quarter ended June 30, 2010 on Wednesday, August 11, 2010 at 10:00 a.m. Eastern Daylight Time (7:00 a.m. Pacific).

    To participate in the call, please dial (877) 941-8602, or (480) 629-9811 for international calls, approximately 10 minutes prior to the scheduled start time. Interested parties may also listen via a live Internet webcast, which can be found at the Company's website at http://www.chinaeducationalliance.com .

    A replay of the call will be available for two weeks from 1:00 p.m. EDT on August 11, 2010, until 11:59 p.m. EDT on August 25, 2010. The number for the replay is (877) 870-5176, or (858) 384-5517 for international calls. The passcode for the replay is 4346251. In addition, a recording of the call will be available via the company's website at http://www.chinaeducationalliance.com for one year.

    About China Education Alliance, Inc.

    China Education Alliance, Inc. (http://www.chinaeducationalliance.com ) is a fast-growing, leading, China-based company offering high-quality education resources and services to students ages 6 to 18 and adults (university students and professionals) ages 18 and over. For students ages 6 to 18, China Education Alliance offers supplemental, online exam-oriented training materials and onsite, exam-oriented training and tutoring services. The company provides online, downloadable famous-teacher resources and onsite, personalized instruction. All resources and tutoring services are provided by famous teachers within mainland China. The purpose of online exam-orientated resources and onsite tutoring is to help Chinese students (ages 6 to 18) pass the two most important and highly competitive exams in their educational career:  the senior high school entrance and college entrance exams. For graduates and professionals age 18 and over, China Education Alliance provides vocational training including IT and several professional training programs. 
 
    Safe Harbor Statement

    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 2009 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.
 
 
                         -- Financial tables follow --


 
                 China Education Alliance, Inc. and Subsidiaries             
                           Consolidated Balance Sheets                       
                                                                            
                                                 June 30,        December 31,   
                                                   2010              2009 
                                               (Unaudited)        (Audited)    
                       ASSETS                                  
    Current Assets                                                       
      Cash and cash equivalents                $74,690,538       $65,035,332 
      Accounts receivable                        1,546,937         1,274,727 
      Prepaid expenses                           1,979,032         2,692,310 
        Total current assets                    78,216,507        69,002,369 
                                                                         
    Property and equipment, net                  6,038,568         6,589,982 
    Intangibles and capitalized                                          
     software, net                               1,362,027           737,761 
    Advance on acquisition                         932,000           932,000 
    Long-term investment                           333,512           341,686 
                                                                         
                                               $86,882,614       $77,603,798 
                                                                         
        LIABILITIES AND STOCKHOLDERS' EQUITY                   
                                                                         
    Current Liabilities                                                  
      Accounts payable and accrued                                        
       expenses                                 $2,175,755        $1,255,991 
      Deferred revenues                            842,908         1,008,884 
        Total current liabilities                3,018,663         2,264,875 
                                                                         
    Stockholders' Equity                                                 
      Preferred stock ($0.001 par value,
       20,000,000 shares authorized, 0 
       and 4,502,142 issued and 
       outstanding, respectively,                                              
       aggregate liquidation preference                                    
       of 0 and $1,665,793, respectively)               --         1,867,644 
      Common stock ($0.001 par value,                                     
       150,000,000 shares authorized,                                      
       31,654,581 and 30,040,954 issued
       and outstanding, respectively)               31,655            30,041 
      Additional paid-in capital                40,592,789        38,231,623 
      Statutory reserve                          3,016,143         3,016,143 
      Accumulated other comprehensive                                     
       income                                    3,055,752         2,886,087 
      Retained earnings                         37,964,599        30,044,687 
        Stockholders' equity - China 
         Education Alliance, Inc. and                                                   
         Subsidiaries                           84,660,938        76,076,225 
      Noncontrolling interests in                                         
       subsidiaries                               (796,987)         (737,302)
        Total stockholders' equity              83,863,951        75,338,923 
                                                                         
                                               $86,882,614       $77,603,798 
                                                                         
    The accompanying notes are an integral part of these consolidated 
    financial statements.                          



                 China Education Alliance, Inc. and Subsidiaries             
                      Consolidated Statements of Operations                  
                                   (Unaudited)                               
                                                                         
                                 Three months ended        Six months ended  
                                       June 30,                June 30,     
                                    2010       2009        2010          2009 
    Revenues                                                             
     Online education revenues $7,386,469 $5,470,628 $12,617,532   $10,300,116 
     Training center revenues   2,932,222  2,007,947   5,789,419     4,555,046 
     Other Revenues               533,405    639,798   1,062,879     1,467,290 
      Total revenue            10,852,096  8,118,373  19,469,830    16,322,452 
                                                                           
    Cost of Goods Sold                                                     
     Online education costs     1,128,927  1,034,312   2,242,485     2,233,419 
     Training center costs        630,956    501,789   1,262,925     1,366,439 
     Other costs                   37,060     69,775      77,837       124,914 
      Total cost of goods sold  1,796,943  1,605,876   3,583,247     3,724,772 
                                                                           
    Gross Profit                                                           
     Online education gross                                     
      profit                    6,257,542  4,436,316  10,375,047     8,066,697 
     Training center gross                                                 
      profit                    2,301,266  1,506,158   4,526,494     3,188,607 
     Other gross profit           496,345    570,023     985,042     1,342,376 
      Total gross profit        9,055,153  6,512,497  15,886,583    12,597,680 
                                                                           
    Operating Expenses                                                     
     Selling expenses           3,478,810  1,906,494   5,719,764     4,117,182 
     Administrative               572,847    639,361   1,027,040       894,112 
     Depreciation and                                                      
      amortization                264,663    244,898     497,474       490,351 
      Total operating expenses  4,316,320  2,790,753   7,244,278     5,501,645 
                                                                         
    Other Income (Expense)                                               
     Other income                   2,245         --      21,138            -- 
     Interest income               50,842     25,783      97,535        48,539 
     Investment loss               (6,076)    (3,678)     (7,606)       (4,089)
      Total other income           47,011     22,105     111,067        44,450 
                                                                           
    Net Income Before 
     Provision for Income Tax   4,785,844  3,743,849   8,753,372     7,140,485 
     Provision for Income 
      Taxes                       549,966    507,977     893,145       675,132 
                                                                           
    Net Income                  4,235,878  3,235,872   7,860,227     6,465,353 
     Net loss attributable to                                              
      the noncontrolling                                                    
      interests                   (21,162)   (40,964)    (59,685)      (90,290)
    Net Income - attributable                 
     to CEU and Subsidiaries   $4,257,040 $3,276,836  $7,919,912    $6,555,643 
                                                                           
    Basic Earnings Per Share        $0.14      $0.15       $0.25         $0.30 
    Diluted Earnings Per Share      $0.14      $0.13       $0.25         $0.27 
                                                                           
    Basic Weighted  Average                   
     Shares Outstanding        31,323,734 21,930,272  31,323,734    21,930,272 
    Diluted Weighted  Average                 
     Shares Outstanding        31,363,255 25,085,474  31,377,877    24,459,405 
                                                                         
    The Components of Other                                              
     Comprehensive Income                                                
     Net income                $4,257,040 $3,276,836  $7,919,912    $6,555,643 
     Foreign currency                                                    
      translation adjustment      242,100   (148,642)    169,665      (186,726)
                                                                         
                                              
    Comprehensive Income       $4,499,140 $3,128,194  $8,089,577    $6,368,917 
                                                                         
    The accompanying notes are an integral part of these consolidated 
    financial statements.                         



                 China Education Alliance, Inc. and Subsidiaries             
                      Consolidated Statements of Cash Flows                  
                                   (Unaudited)                               
                                                                         
                                                 Six Months Ended June 30,       
                                                 2010                2009 
    Cash flows from operating                                            
     activities                                                          
      Net Income                              $7,860,227          $6,465,353 
      Adjustments to reconcile net                                      
       income to net cash provided by                                    
       Operating activities                                      
          Depreciation and amortization          913,654             663,830 
          Stock based compensation               157,730             332,256 
          Loss on equity investment                8,174               4,089 
      Net change in assets and                                          
       liabilities                                                       
        Account receivables                     (272,210)           (626,926)
        Prepaid expenses and other               713,278           1,285,913 
        Advances to related parties                   --             215,308 
        Accounts payable and accrued
         liabilities                             919,764             247,341 
        Deferred revenue                        (165,976)           (186,509)
    Net cash provided by operating                                       
     activities                               10,134,641           8,400,655 
                                                                         
    Cash flows from investing activities 
      Purchases of property and                                         
       equipment                                (110,111)           (348,837)
      Acquisition of intangible asset           (876,395)                 -- 
      Long-term investment                            --             227,964 
    Net cash used in investing activities       (986,506)           (120,873)
                                                                         
    Cash flows from financing activities
      Warrants exercised                         298,749                  -- 
      Options exercised                           38,657                  -- 
    Net cash provided by financing                                       
     activities                                  337,406                  -- 
                                                                         
    Effect of exchange rate                      169,665            (188,885)
                                                                         
    Net increase in cash                       9,655,206           8,090,897 
                                                                         
    Cash and cash equivalents at                                         
     beginning period                         65,035,332          23,418,098 
                                                                         
    Cash and cash equivalents at end                                     
     period                                  $74,690,538         $31,508,995 
                                                                         
    Supplemental disclosure of cash                                      
     flow information                                                    
      Taxes paid                              $2,719,163            $329,981 

    Non-cash investing and financing                                     
     activities                                                          
      Conversion of preferred stock                                     
       to common                              $1,867,644            $125,000 
                                                                         
    The accompanying notes are an integral part of these consolidated 
    financial statements.                          


    This information is intended to be reviewed in conjunction with the 
    Company's filings with the Securities and Exchange Commission.


    For more information, please contact:

    At the Company:
     Zack Pan, CFO
     China Education Alliance, Inc.
     Phone: +1-405-315-9987
     Email: zackpan08@gmail.com
            zackpan08@edu-chn.com
Source: China Education Alliance, Inc.
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Keywords: Education
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