ChinaEdu Reports Third Quarter 2013 Results

BEIJING, Dec. 16, 2013 /PRNewswire/ -- ChinaEdu Corporation CEDU ("ChinaEdu" or the "Company"), a leading online educational services provider in China, today announced its unaudited financial results for the third quarter ended September 30, 2013.[1]

Third Quarter 2013 Highlights

• Total net revenue was $23.0 million for the third quarter of 2013, exceeding the Company's guidance range for the quarter and representing a 13.6 percent increase from $20.2 million in the corresponding period of 2012.
• Net revenue from online degree programs was $18.4 million, an increase of 13.6 percent from $16.2 million in the corresponding period of 2012.
• Net income attributable to ChinaEdu was $1.6 million, an increase of 207.3 percent from $0.5 million in the corresponding period of 2012.
• Adjusted net income attributable to ChinaEdu[2] was $2.1 million, an increase of 7.2 percent from $2.0 million in the corresponding period of 2012.
• Net income attributable to ChinaEdu per diluted ADS[3] was $0.167, an increase of 436.8 percent from $0.031 million in the corresponding period of 2012.
• Adjusted net income attributable to ChinaEdu per diluted ADS[4] was $0.224, an increase of 90.3 percent from $0.118 in the corresponding period of 2012.
• The number of revenue students[5] enrolled in online degree programs during the Spring 2013 semester increased by 14.5 percent year-over-year to approximately 221,000 students.

Julia Huang, executive chairman of ChinaEdu commented, "We are pleased with our financial performance in the third quarter of 2013, particularly our ability to increase gross margin to 61.9 percent. We continue to see healthy growth in our core online degree programs as well as our K-12 offerings. Following execution of technological upgrade plans laid out at the beginning of 2013, we have developed a trial version of our next generation technology platform and associated interactive and mobile learning applications. Once rolled out, these should enable us to penetrate the market further. At the same time, we continue to closely monitor and control costs across our businesses. As we look towards the close of 2013, we are confident in our full year results while we maintain a conservative outlook on the upcoming Fall enrollment."

Financial Results for the Third Quarter Ended September 30, 2013

Net Revenue

Total net revenue for the third quarter of 2013 was $23.0 million, a 13.6 percent increase from $20.2 million in the corresponding period of 2012.

Net revenue from online degree programs for the third quarter of 2013 was $18.4 million, a 13.6 percent increase over $16.2 million in the corresponding period of 2012. The increase in net revenue from online degree programs was primarily due to organic growth in revenue students enrolled in online degree programs, and continued expansion and optimization of the Company's learning centers network. Enrollment for 2013 Spring semester online degree programs was approximately 221,000 revenue students, a 14.5 percent increase from approximately 193,000 revenue students enrolled in the Spring semester in 2012.

By the end of the third quarter of 2013, ChinaEdu's learning centers network was providing recruiting services for 23 universities with 131 operational learning centers, of which 59 were proprietary centers[6] and 72 were contracted centers[7]. This compares to 118 operational learning centers as of September 30, 2012, of which 57 were proprietary and 61 were contracted centers.

Net revenue from non-degree programs, including online tutoring programs, private primary and secondary schools and international curriculum programs in the third quarter of 2013 was $4.6 million, a 13.5 percent increase from $4.0 million in the third quarter of 2012. Of that, approximately $0.4 million was attributable to enrollment growth and increased tuition at our private school in Anqing.

Cost of Revenue

Total cost of revenue for the third quarter of 2013 was $8.8 million, an increase of 10.8 percent, from $7.9 million in the corresponding period of 2012.

Cost of revenue for online degree programs in the third quarter of 2013 was $6.3 million, an increase of 13.8 percent compared to $5.6 million in the corresponding period of 2012. The increase in cost of revenue was primarily related to staff costs increasing by $0.2 million, service station fees increasing by $0.1 million and conference costs increasing by $0.3 million.

Cost of revenue for non-degree programs in the third quarter of 2013 was $2.4 million, a slight increase of 3.7 percent from $2.3 million in the third quarter of 2012. The increase in cost of revenue for non-degree programs was primarily related to increased maintenance costs associated with our private primary and secondary schools programs.

Gross Profit and Gross Margin

Gross profit for the third quarter of 2013 was $14.2 million, compared to $12.3 million in the corresponding period of 2012. Gross margin increased to 61.9 percent, compared to 61.0 percent for the corresponding period of 2012.

Gross margin for online degree programs was 65.7 percent, flat with the corresponding period of 2012.

Gross margin for online tutoring programs increased to 64.7 percent from 63.9 percent in the third quarter of 2012.

Gross margin for private schools in the third quarter of 2013 increased to 41.8 percent, compared to 40.3 percent in the corresponding period of 2012. The increase in gross margin was primarily the result of increased net revenue at our Anqing school.

Operating Expenses

Total operating expenses were $8.8 million in the third quarter of 2013, a decrease of 3.9 percent from $9.2 million in the corresponding period of 2012. As a percentage of net revenue, total operating expenses decreased to 38.5 percent, compared to 45.5 percent in the corresponding period in 2012. The decrease in total operating expense was the result of the following:

• General and administrative expenses for the third quarter of 2013 were $4.7 million, an increase of 6.0 percent from $4.4 million in the corresponding period of 2012. As a percentage of net revenue, general and administrative expenses decreased to 20.5 percent from 22.0 percent in the same period in 2012. The increase in general and administrative expenses was primarily related to an early repayment charge related to a bank loan.
• Selling and marketing expenses were $1.9 million in the third quarter of 2013, a decrease of 4.9 percent compared to $2.0 million in the corresponding period of 2012. As a percentage of net revenue, selling and marketing expenses decreased to 8.3 percent from 9.9 percent in the same period in 2012. The decrease in selling and marketing expense was primarily related to decreased advertising expenses associated with our online tutoring programs.
• Research and development expenses for the third quarter of 2013 were $2.2 million, an increase of 24.2 percent compared to $1.8 million in the corresponding period of 2012. As a percentage of net revenue, the research and development expense increased to 9.6 percent in the third quarter of 2013, compared to 8.8 percent in the corresponding period of 2012. The increase in the research and development expenses was primarily the result of increased staff costs associated with the company's investment in technology upgrades.

Income from Operations

Income from operations in the third quarter of 2013 was $5.4 million, an increase of 72.2 percent compared to $3.1 million in the corresponding period of 2012. Operating margin increased to 23.5 percent in the third quarter of 2013, compared to 15.5 percent in the corresponding period of 2012.

Adjusted income from operations, a non-GAAP measure defined as income from operations excluding share-based compensation, amortization of intangible assets, land use rights and intangible assets impairment, increased 29.0 percent in the third quarter of 2013 compared to $4.6 million in the corresponding period of 2012.

Adjusted operating margin, a non-GAAP measure defined as the ratio of adjusted income from operations (non-GAAP) over net revenue, for the third quarter of 2013 increased to 25.8 percent, compared to 22.7 percent in the corresponding period of 2012.

Interest expense

Interest expense for the third quarter of 2013 was $0.9 million, which was primarily related to loans of $36.0 million with The Bank of East Asia, Limited.

Income Tax Expense

In the third quarter of 2013, the income tax expense was $1.0 million and the effective income tax rate was 21.2 percent.

Net Income Attributable to ChinaEdu

Net income attributable to ChinaEdu, which is net income, excluding net income attributable to non-controlling interests, was $1.6 million in the third quarter of 2013, representing an increase of 207.3 percent from $0.5 million in the corresponding period of 2012. The increase was primarily the result of a significant increase in gross profit, as well as effective cost and expense control.

Net income attributable to ChinaEdu per basic and diluted ADS was $0.187 and $0.167, respectively, for the third quarter of 2013, compared to $0.033 and $0.031, respectively, for the corresponding period of 2012. The increase was the result of a significant increase in net income attributable to ChinaEdu as well as a significant decrease in the number of diluted ADS after a share repurchase of 23,624,376 ordinary shares in aggregate between January and July 2013.

Adjusted net income attributable to ChinaEdu (non-GAAP) was $2.1 million in the third quarter of 2013, compared to $2.0 million in the corresponding period of 2012. Adjusted net margin, a non-GAAP measure defined as the ratio of adjusted net income attributable to ChinaEdu (non-GAAP) over net revenue, was 9.2 percent in the third quarter of 2013, compared to 9.7 percent in the corresponding period of 2012.

Adjusted net income attributable to ChinaEdu per basic and diluted ADS (non-GAAP) was $0.251 and $0.224 respectively, for the third quarter of 2013, compared to $0.124 and $0.118, respectively, for the corresponding period of 2012.

Deferred Revenue

As of September 30, 2013, deferred revenue was $10.1 million, consisting of current deferred revenue in the amount of $8.4 million and non-current deferred revenue in the amount of $1.7 million.

In general, Spring semester tuition for online degree programs is received during the second quarter but is recognized both in the second quarter and the third quarter of the fiscal year. Private school revenue is received in September, but amortized over 6 or 12 months while online tutoring program revenue is mostly received at program enrollment and is amortized within 12 months.

Cash and Cash Equivalents and Term Deposits

As of September 30, 2013, the Company reported cash and cash equivalents and term deposits of $59.0 million, which primarily consisted of cash and cash equivalents, and term deposits with original maturity terms of greater than three months but less than one year.

Amounts Due from Related Parties

Amounts due from related parties, which represents cash owed to the Company by collaborative alliance partners, were $51.4 million as of September 30, 2013 compared to $49.4 million as of December 31, 2012.

2013 Year-to-Date Financial Results

Net Revenue

For the nine months ended September 30, 2013, total net revenue was $65.4 million, representing an increase of 13.5 percent over $57.6 million in the corresponding period of 2012. Net revenue from online degree programs for the first nine months of 2013 was $52.4 million, representing a 13.3 percent increase from $46.3 million in the corresponding period of 2012. Net revenue from non-online degree programs for the first nine months of 2013 was $13.0 million, compared to $11.4 million in 2012, a 14.3 percent increase. Growth in total net revenue in the first nine months of 2013 was the result of strong enrollment in online degree programs in the Fall semester of 2012 as well as the Spring semester of 2013. Net revenue at the Anqing School increased by $1.1 million compared to the corresponding period in 2012, while the Company saw a continued decrease in revenue contributed by international and elite curriculum programs.

Cost of Revenue

For the nine months ended September 30, 2013, total cost of revenue was $24.7 million, an increase of 7.4 percent compared to $23.0 million in the corresponding period of 2012. Cost of revenue for online degree programs in the first nine months of 2013 was $17.4 million, an increase of 11.9 percent compared to $15.6 million in the corresponding period of 2012. The increase in cost of revenue in the first nine months of 2013 was primarily the result of cost increases associated with a larger headcount and the expansion of the Company's learning centers network.

Cost of revenue for non-online degree programs in the first nine months of 2013 was $7.3 million, a slight decrease of 2.0 percent compared to $7.4 million in the corresponding period of 2012. The decrease in cost of revenue was primarily related to the decrease in leasing costs and the decrease in depreciation and amortization costs associated with international curriculum programs.

Gross Profit

Gross profit for the nine months ended September 30, 2013 was $40.7 million, an increase of 17.5 percent compared with $34.6 million for the corresponding period in 2012.

Income from Operations

Income from operations was $16.5 million for the nine months ended September 30, 2013, representing an increase of 57.5 percent from $10.5 million for the corresponding period of 2012. Operating margin was 25.2 percent for the nine months ended September 30, 2013 compared to 18.2 percent for the corresponding period of 2012. The increase was primary due to increase in total net revenue as well as the intangible assets impairment in the third quarter of 2012.

Adjusted income from operations (non-GAAP) was $18.2 million for the first nine months of 2013, representing an increase of 39.6 percent, compared to $13.0 million in the corresponding period of 2012. Adjusted operating margin (non-GAAP) for the nine months ended September 30, 2013 was 27.7 percent, compared to 22.6 percent for the corresponding period in 2012.

Interest expense

Interest expense for the first nine months of 2013 was $1.6 million, which was primarily related to loans with The Bank of East Asia, Limited.

Income Tax Expense

Income tax expense for the first nine months of 2013 was $3.6 million, as compared with $3.4 million for the corresponding period of in 2012.

Net Income Attributable to Non-controlling Interests

Net income attributable to non-controlling interests was $6.3 million in the first nine months of 2013, an increase of 12.0 percent compared to $5.6 million in the same period of 2012. The increase was primarily attributable to the non-controlling interest impact related to the increase in net income from online degree programs in the first nine months of 2013.

Net Income attributable to ChinaEdu

Net income attributable to ChinaEdu was $6.2 million for the nine months ended September 30, 2013. This represents an increase of 68.2 percent from $3.7 million for the corresponding period of 2012. Net margin was 9.6 percent for the nine months ended September 30, 2013, compared to 6.4 percent for the corresponding period of 2012.

Adjusted net margin was 12.1 percent for the nine months ended September 30, 2013, compared to 10.7 percent for the corresponding period of 2012. The increase was primarily due to increased net income in the first nine months of 2013.

Fourth Quarter 2013 Guidance

ChinaEdu management expects total net revenue in the fourth quarter of 2013 to range from RMB145 million to RMB150 million or $23.7 million to $24.5 million, representing a 7 to 10 percent increase from RMB136 million or $22.1 million recorded in the fourth quarter of 2012.

Conference Call

ChinaEdu's management will hold an earnings conference call at 8:00 a.m. U.S. Eastern Time on December 17, 2013 (9:00 p.m. Beijing/Hong Kong Time on December 17, 2013).

Dial-in details for the earnings conference call are as follows:

A live and archived webcast of the conference call will be available on the investor relations page of ChinaEdu's website at http://ir.chinaedu.net and a replay of the conference call may be accessed by phone until December 24, 2013.

Dial-in numbers for the replay are as follows:

Non-GAAP Financial Measures

To supplement the unaudited condensed consolidated financial information presented in accordance with Generally Accepted Accounting Principles in the United States of America ("GAAP"), the Company uses non-GAAP measures of income from operations and net income attributable to ChinaEdu, which are adjusted from results based on GAAP to exclude certain non-cash items of share-based compensation, amortization of intangible assets and land use rights and intangible assets impairment. Adjusted operating margin is defined as the ratio of adjusted income from operations over net revenue. Adjust net margin is defined as the ratio of adjusted net income attributable to ChinaEdu over net revenue. Adjusted net income attributable to ChinaEdu per basic and diluted ADS are a non-GAAP measure which are computed using adjusted net income attributable to ChinaEdu over the number of ADSs used in net income attributable to ChinaEdu per basic and diluted ADS calculation.

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, support for international curriculum programs and online learning community for adult students.

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 provides technical, recruiting and other services to 27 universities with online degree programs and provides services and support to 11 additional universities that are awaiting regulatory approval to launch their online programs. Of these 38 universities, 13 of them have entered into collaborative alliances with ChinaEdu, ranging from 15 to 50 years in length. Eight of them have entered into technology service agreements, ranging from 3 to 20 years in length. ChinaEdu also performs recruiting services through its nationwide learning center network for 23 universities, including 6 with which the Company has either established collaborative alliances or entered into technology service agreements.

Forward-Looking Statements

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 Annual Report on Form 20-F for the year ended December 31, 2012, 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.

For investor and media inquiries, please contact:

Helen Plummer
Senior Investor Relations Coordinator
ChinaEdu Corporation
Phone: +1 908-442-9395
E-mail: helen@chinaedu.net

Simon Mei
Chief Financial Officer
ChinaEdu Corporation
Phone: +86 (10) 84187301
E-mail: simon@chinaedu.net

 

 

 

 

 

 

SOURCE ChinaEdu Corporation