HQ Global Education Announces Second Quarter Fiscal Year 2011 Results

CHANGSHA, China, April 15, 2011 /PRNewswire-Asia/ -- HQ Global Education Inc. (OTCBB: HQGE) ("HQ" or the "Company"), which operates 10 vocational schools in China under the "HQ" brand and is one of China's leading providers of customized vocational education, today announced its financial results for the fiscal year 2011 second quarter ended February 28, 2011 and detail for its earnings call on Monday, April 18, 2011 at 10:30 a.m. (EDT).

Financial Highlights for the Second Quarter of Fiscal 2011 versus the Second Quarter of Fiscal 2010

• Revenue increased 82.0% year over year to $12.5 million
• Gross profit increased 74.4% to $5.6 million; gross profit margin for the quarter totaled 44.8%
• Net Income increased 78.6% to $4.6 million
• $.14 per share basic and diluted earnings based on 33 million shares outstanding for the quarter

"Our fiscal 2011 second quarter financial results were highlighted by an increase in revenue of 82.0%, gross profit of 74.4% and net income of 78.6%, driven by an increase in student enrollment, increased tuition and an expanded curriculum offering for students," stated Mr. Guangwen He, Chairman and CEO of HQ Global Education. "Our student enrollment for the first semester increased to 37,408, or 16.0% as compared to the first semester of the prior year. Our unique "Order- oriented" business model, excellent job placement rate and great reputation has attracted an increased number of enrolled students each semester. For that reason, we have begun enhancing our offering for students in the two years vocational program by providing the option to receive a two year junior college education. For the first semester, students enrolled in this program totaled 3,756 for an increase of 113.0% year over year. Although this initiative increased our costs slightly during the quarter, we strongly believe that this program will attract a greater number of students and ultimately give them more job opportunities," Mr. He added.

Second Quarter Fiscal Year 2011 Results of Operations

Revenue for the three months ended February 28, 2011 totaled $12.5 million, an increase of 82.0% compared to $6.9 million for the same period in 2010. Approximately 70.5% of our revenue, or $8.8 million, was generated from vocational education services, primarily tuition, as compared to 58.6%, or $4 million, for the same period the prior year. Year over year the enrollments for the first semester of fiscal 2011 increased 16.0% to 37,408 as compared to 32,238 in the first semester of fiscal 2010. Tuition rates increased approximately 12.0% year over year for the first semester of fiscal 2011. Campus service fee improved to $2.3 million for the three months ended February 28, 2011, an increase of 47.8% compared to $1.5 million in the same period of 2010. Order-oriented services, including off-campus internship and job placement fee, generated $1.4 million for the three months end February 28, 2011, an increase of 8.4% as compared to $1.3 million in fiscal 2010.

Gross profit increased by 74.4% to $5.6 million for the three months ended February 28, 2011 compared to $3.2 million for the same period of fiscal 2010. The gross profit margin was 44.8% and 46.7% for the three months ended February 28, 2011 and 2010, respectively. Cost of sales totaled $6.9 million compared to $3.7 million for the three month period in 2010, an increase of 88.7%. During the quarter, HQ Global increased the educational opportunities for its students beyond the standard two years vocational education to offer a two year junior college education. This effort contributed to higher costs during the quarter as compared to the year prior and thus decreased gross profit margin. The management believes that in the long run this effort will prove to be financially beneficial for the Company.

Income from operations increased 78.0% to $4.7 million for the three months ended February 28, 2011 compared to $2.6 million for the same period of fiscal 2010. Operating margin was 37.4% for the three months of 2011 compared to 38.2% for the three months of 2010.

Net income for the three months ended February 28, 2011 increased 78.6% to $4.6 million compared to $2.6 million for the same period in 2010. Basic and diluted earnings per share were $0.14 per share based on 33 million shares outstanding for the quarter, compared with basic and diluted earnings per share of $0.11 achieved in the same period a year ago.

Liquidity and Capital Resources

As of February 28, 2011, HQ Global Education had approximately $10.7 million in cash, up $5.5 million from $5.2 million as of August 31, 2010. Total current assets and total assets were $28.9 million and $62.9 million as of February 28, 2011. Total current liabilities and total liabilities were $10.4 million and $10.5 million as of February 28, 2011. Working capital totaled $18.4 million, an increase of $7.9 million compared to $10.5 million as of August 31, 2010. Total shareholders' equity was approximately $52.4 million, or $1.59 per share based on 33 million shares outstanding, as of February 28, 2011, an increase of $11.7 million compared to $40.6 million as of August 31, 2010.

Conference Call and Webcast Details

The Company will host a conference call to discuss the financial results for the fiscal 2011 second quarter on Monday, April 18, 2011 at 10:30 a.m. Eastern. To participate in the call, please dial (877) 941-2068, or (480) 629-9712 for international calls, approximately 10 minutes prior to the scheduled start time. Interested parties may also listen live online under the Investor Relations section of the Company's website at http://en.hq-education.com/.

A replay of the call will be available until May 2, 2011. Please dial (877) 870-5176, or (858) 384-5517 for international calls. The passcode for the replay is 4433803. A recording of the call will be available under the Investor Relations section of the Company's website at http://en.hq-education.com/.

About HQ Global Education Inc. ("HQ")

HQ Global Education, Inc. provides customized vocational training and private education services to students through private and public vocational schools in China. The HQ Global brand has become increasingly synonymous throughout China with superior vocational training to meet employer needs and career fulfillment for students who aspire to become technical and skilled workers. As of the first semester of fiscal 2011, the enrollment totaled 37,408 students from 25 provinces throughout China. Through HQ Global's "Order-oriented" customized educational model have been established contractual relationships with approximately 128 employers to provide training and internship arrangements for students. HQ Global has maintained 100% job placement for graduates. HQ Global generates revenue from tuition, campus service and order-oriented service.

For more information please visit: http://www.hq-education.com

Information Regarding Forward-Looking Statements

Except for historical information contained herein, the statements in this press release are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause our actual results in future periods to differ materially from forecasted results. These risks and uncertainties include, among other things, product demand, market competition, and risks inherent in our operations. These and other risks are described in our filings with the U.S. Securities and Exchange Commission.