ChinaEdu Reports Second Quarter 2011 Results Second Quarter Net Revenue Grows 10.6 Percent Year-Over-Year, Exceeds Company Guidance

Net Income Attributable to ChinaEdu per Diluted ADS is $0.046

BEIJING, Sept. 7, 2011 /PRNewswire-Asia/ -- ChinaEdu Corporation (NASDAQ: CEDU) ("ChinaEdu" or the "Company"), a leading online education services provider in China, today announced its unaudited financial results for the second quarter and six months ended June 30, 2011.(1)

Key Quarterly Financial and Operating Data

  • Total net revenue for the second quarter of 2011 was $17.0 million, a 10.6 percent increase from $15.4 million in the corresponding period in 2010, exceeding Company guidance of $15.7 million to $16.2 million.
  • Net revenue from online degree programs was $13.6 million, an increase of 9.8 percent from $12.4 million in the corresponding period of 2010.
  • Net income attributable to ChinaEdu was $0.8 million.
  • Adjusted net income attributable to ChinaEdu(2) was $1.2 million.
  • Net income attributable to ChinaEdu per diluted ADS(3) was $0.046, compared to $0.121 in the corresponding period in 2010.
  • Adjusted net income attributable to ChinaEdu per diluted ADS(4) was $0.070, compared to $0.132 in the corresponding period in 2010.
  • The number of revenue students(5) in online degree programs was approximately 159,000 during the Spring 2011 semester.

"Revenue growth of ChinaEdu's four core business lines tracked according to expectation in the second quarter of 2011," said Julia Huang, chairman and chief executive officer of ChinaEdu. Ms. Huang added, "Investment in promising new business initiatives continues to put pressure on our margins; however, we have implemented control measures aimed at reducing costs in the coming quarters. Our foundation in online degree programs allows us to explore strategic initiatives, leveraging our expertise to capture the tremendous opportunities in China's education market."

Ms. Huang continued, "We are pleased with our progress as we ramp up our new business initiatives. During the second quarter, our 101 online program team launched several successful new interactive knowledge-based products. These new product offerings attracted new users, growing our user base. Our interactive Q&A tutoring website logged more than twenty million page views this past quarter and we have launched an in-depth user feedback program to help us improve the offering to drive continued growth."

Recent Developments

Julia Huang, chairman and chief executive officer of ChinaEdu Corporation, has taken on the role of acting chief financial officer, effective immediately. Ms. Huang has served as the Company's chairman since 2007 and as chief executive officer since 2000. Ms. Huang holds an MBA from Columbia Business School with concentrations in finance and international business, and a master's degree in chemical engineering and microbiology from the University of Tennessee in Knoxville.

Financial Results for the Second Quarter Ended June 30, 2011

Net Revenue

Total net revenue for the second quarter of 2011 was $17.0 million, a 10.6 percent increase from $15.4 million in the corresponding period in 2010. Net revenue from online degree programs for the second quarter of 2011 was $13.6 million, a 9.8 percent increase from $12.4 million for the corresponding period in 2010. The increase was primarily due to the continued expansion of the learning center network, with organic growth in revenue students enrolled in our online degree programs contributing as well. Enrollment for 2011 spring semester online degree programs was approximately 159,000 revenue students, a 1.3% increase from approximately 157,000 revenue students in the Spring 2010 semester.

As of June 30, 2011, the ChinaEdu learning center network was providing online degree programs for 21 universities with 100 operational learning centers, of which 57 were proprietary centers(6) and 43 were contracted centers(7). This compares to 65 operational learning centers as of the end of the second quarter of 2010, of which 27 were proprietary and 38 were contracted centers.

Net revenue from non-degree programs, including online tutoring programs, private primary and secondary schools and international and elite curriculum programs, in the second quarter of 2011 was $3.4 million, a 13.5 percent increase from $3.0 million in the second quarter of 2010. The $0.4 increase was mainly attributable to increased student enrollment at our private school in Anqing.

Cost of Revenue

Total cost of revenue for the second quarter of 2011 was $6.8 million, an increase of 26.3 percent, up from $5.4 million in the corresponding period of 2010. Cost of revenue for online degree programs in the second quarter of 2011 was $4.6 million, an increase of 20.8 percent compared to $3.8 million in the corresponding period of 2010. Continued expansion of the Company's learning center network, as well as spending related to the development of teacher training programs hosted by collaborative alliance partners, drove the increase in cost of revenue for online degree programs.

Cost of revenue for non-degree programs in the second quarter of 2011 was $2.3 million, an increase of 38.9 percent from $1.6 million in the second quarter of 2010. The rise in cost was related to an increase in staff and rental costs associated with the expansion of international and elite programs as well as the development of interactive and personalized learning products for online tutoring programs. The increase was also related to increased costs associated with the Anqing School, including increased teaching staff costs, cafeteria related costs and an increased depreciation charge for the new campus.

Gross Profit and Gross Margin

Gross profit for the second quarter of 2011 was $10.2 million, compared to $10.0 million in the corresponding period of 2010. Total gross margin decreased to 59.9 percent, compared to 64.9 percent for the corresponding period in 2010. Gross margin for online degree programs decreased to 66.5 percent for the second quarter of 2011, compared to 69.6 percent in the corresponding period of 2010. The decrease in gross margin was primarily due to the expansion of our learning centers network and was also due to increased costs associated with developing teacher training programs. In the future, we expect gross margin for online degree programs to continue to decrease somewhat as the percentage of total net revenue contributed by the Company's learning centers network increases. This is because the learning centers network's sales and service scope results in a higher cost of sales for that area of our business.

Gross margin for online tutoring programs decreased slightly to 71.4 percent, down from 75.8 percent in second quarter of 2010, largely due to increased staff costs associated with expanding interactive course offerings and adding additional off-line personalized tutoring services. Despite increased cost of revenue, gross margin for private schools improved to 29.3 percent, compared to 25.8 percent in the corresponding period in 2010. The improvement was due to increased enrollment at the Anqing School's new campus.

With a new program launched in our international division this fiscal year, gross margin for the international curriculum and elite programs was negative 48.0 percent for the second quarter of 2011, compared to 45.9 percent for the second quarter of 2010. This was primarily due to investments in staff and rental costs related to the expansion of international and elite programs.

Operating Expenses

Total operating expenses were $7.6 million in the second quarter of 2011, a 36.8 percent increase from $5.6 million for the corresponding period in 2010. As a percentage of net revenue, total operating expenses increased to 44.7 percent, compared with 36.1 percent in the corresponding period in 2010. The increase in total operating expenses resulted from the following:

  • General and administrative expenses for the second quarter of 2011 were $3.8 million, a 33.8 percent increase from $2.8 million for the corresponding period in 2010. As a percentage of net revenue, general and administrative expenses increased to 22.4 percent, from 18.5 percent in the same period in 2010. Increased staff costs and rising costs associated with leased facilities were the primary reasons for the increase. ChinaEdu's donation of approximately RMB1 million, or $0.2 million, in supplies to the Beijing Language and Culture University, in line with the Company's corporate social responsibility efforts, was also included in the quarterly general and administrative expense.
  • Selling and marketing expenses were $2.2 million in the second quarter of 2011, an increase of 74.8 percent compared to $1.2 million for the corresponding period in 2010. As a percentage of net revenue, selling and marketing expenses increased to 12.8 percent, up from 8.1 percent in the same period in 2010. The increase in selling and marketing expenses were mainly related to growth in sales force headcount for online tutoring programs in Beijing and expenses related to national promotion and branding activities.
  • Research and development expenses for the second quarter of 2011 were $1.6 million, an increase of 10.4 percent from $1.5 million in the corresponding period in 2010. The increase was primarily attributable to an increase in research and development headcount in connection with upgrading learning management systems and enhancing courseware development, particularly for the development of interactive products. As a percentage of net revenue, research and development expense was 9.5 percent in the second quarter 2011, a slight decrease from 9.6 percent in the same period of 2010.
  • Share-based compensation for the second quarter of 2011, which is allocated to the related cost and operating expense line items, increased to $0.3 million from $0.1 million in the corresponding period in 2010, due to a true-up adjustment of forfeiture rate that occurred in second quarter of 2010.

Income from Operations

Income from operations for the second quarter of 2011 was $2.6 million, a decrease of 41.6 percent compared to $4.4 million in the corresponding period of 2010. Operating margin decreased to 15.2 percent for the second quarter of 2011, compared to 28.7 percent in the corresponding period of 2010.

Adjusted income from operations, a non-GAAP measure defined as income from operations excluding share-based compensation, and amortization of intangible assets and land use rights, was $3.0 million for the second quarter of 2011, a decrease of 35.4 percent compared to $4.7 million in the corresponding period of 2010.

Adjusted operating margin, a non-GAAP measure defined as the ratio of adjusted operating income from operations (non-GAAP) over net revenue, for the second quarter of 2011 decreased to 17.7 percent, compared to 30.3 percent for the corresponding period of 2010.

Interest Income and Investment Income

Interest income and investment income for the second quarter of 2011 increased 48.3 percent to $0.4 million, compared to $0.3 million for the corresponding quarter of 2010.

Income Tax Expense

In the second quarter of 2011, income tax expense was $0.6 million and the effective income tax rate was 20.1 percent, compared with a tax rate of 21.0 percent in same period of 2010.

Net Income Attributable to Non-controlling Interests

Net income attributable to non-controlling interests remained stable at $1.7 million in the second quarter of 2011, compared to $1.6 million in the corresponding period in 2010.

Net Income Attributable to ChinaEdu

Net income attributable to ChinaEdu, which is net income, excluding net income attributable to non-controlling interests, was $0.8 million in the second quarter of 2011, representing a decrease of 62.8 percent from $2.1 million in the corresponding period of 2010.

Net income attributable to ChinaEdu per basic and diluted ADS was $0.049 and $0.046, respectively, for the second quarter of 2011, as compared to $0.130 and $0.121, respectively, for the corresponding period in 2010.

Adjusted net income attributable to ChinaEdu (non-GAAP) was $1.2 million in the second quarter of 2011 compared to $2.3 million in the corresponding period of 2010. Adjusted net margin, a non-GAAP measure defined as the ratio of adjusted net income attributable to ChinaEdu (non-GAAP) over net revenue, was 7.0 percent in the second quarter of 2011, compared to 14.8 percent in the corresponding period of 2010.

Adjusted net income attributable to ChinaEdu per basic and diluted ADS (non-GAAP) was $0.076 and $0.070, respectively, for the second quarter of 2011, compared to $0.142 and $0.132, respectively, in the corresponding period of 2010.

Deferred Revenue

At the end of the second quarter of 2011, deferred revenue was $20.0 million, consisting of current deferred revenue in the amount of $18.5 million and non-current deferred revenue in the amount of $1.5 million. Spring semester tuition is generally received during the second quarter but is recognized both in the second quarter and the third quarter of the year.

Cash and Cash Equivalents and Term Deposits

As of June 30, 2011, the Company reported cash and cash equivalents and term deposits of $46.3 million, which primarily consisted of cash, demand deposits with original maturity terms of three months or less, 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 $41.9 million as of June 30, 2011 as compared to $38.2 million as of December 31, 2010.

2011 Year-to-Date Financial Results

Net Revenue

For the six months ended June 30, 2011, total net revenue was $31.2 million, which represented an increase of 7.8 percent over $28.9 million in the corresponding period in 2010. Net revenue from online degree programs for the first half of 2011 was $24.7 million, representing a 7.4 percent increase from $23.0 million in the corresponding period in 2010. And net revenue from non-online degree programs for the first half of 2011 was $6.4 million, compared to $5.9 million in 2010, a 9.3 percent increase. The growth in total net revenue was attributable to strong enrollment for the online degree programs both in the Fall semester of 2010 and Spring semester of 2011, particularly at learning centers. Growth in net revenue at the Anqing School and for 101 online tutoring programs also contributed to the net revenue increase, despite a decrease in revenue for international and elite curriculum programs.

Cost of Revenue

For the six months ended June 30, 2011, total cost of revenue was $13.0 million, an increase from $10.3 million for the corresponding period in 2010. Cost of revenue for online degree programs in the first half of 2011 was $8.7 million, an increase of 23.6 percent compared to $7.0 million in the corresponding period of 2010. The increase was primarily due to cost increases related to the expansion of the Company's learning centers network and increases in headcount across business lines.  

Cost of revenue for non-online degree programs in the first half of 2011 was $4.3 million, an increase of 32.8 percent compared to $3.2 million in the corresponding period of 2010. The increase was primarily attributable to an increase in teaching and recruiting costs related to the expansion of international and elite programs to meet market demand for study-abroad opportunities. This increase was also due to an increase in depreciation charges at the Anqing School as well as additional headcount required to develop interactive and personalized learning products for online tutoring programs.

Gross Profit

Gross profit for the six months ended June 30, 2011 was $18.2 million, a slight decrease of 2.5 percent compared with $18.6 million for the corresponding period in 2010. The decrease was primarily due to a decrease in gross margin for international and elite curriculum programs.

Income from Operations

Income from operations was $4.3 million for the six months ended June 30, 2011, representing a decrease of 42.7 percent from $7.4 million for the corresponding period in 2010. Operating margin was 13.7 percent for the six months ended June 30, 2011 compared to 25.7 percent for the corresponding period in 2010.

Adjusted income from operations (non-GAAP) was $5.1 million for the first half of 2011, representing a decrease of 37.6 percent, compared to $8.2 million in the corresponding period of 2010. Adjusted operating margin (non-GAAP) for the six months ended June 30, 2011 was 16.4 percent, compared to 28.4 percent for the corresponding period in 2010.

Interest Income and Investment Income

Interest income and investment income increased 60.0 percent to $0.7 million in the year 2011, compared to $0.5 million in the year 2010.

Income Tax Expense

Income tax expense for the year 2011 was $1.0 million, as compared with $2.3 million for the year 2010.

Net Income Attributable to Non-controlling Interests

Net income attributable to non-controlling interests was $2.7 million in first half of 2011, an increase of 11.1 percent compared to $2.5 million in the first half of 2010. The increase was primarily attributable to a non-controlling interest impact related to the increase in net income from online degree programs in the first half of 2011.

Net Income attributable to ChinaEdu

Net income attributable to ChinaEdu was $1.3 million for the six months ended June 30, 2011, representing a decrease of 58.9 percent from $3.2 million for the corresponding period in 2010. Net margin was 4.2 percent for the six months ended June 30, 2011, compared to 11.1 percent for the corresponding period in 2010.

Adjusted net margin was 6.9 percent for the six months ended June 30, 2011, compared to 13.5 percent for the corresponding period of 2010.The decrease was primarily due to the decreased net profit in the second quarter of 2011.

Third Quarter 2011 Total Net Revenue Guidance

ChinaEdu expects total net revenue in the third quarter of 2011 to range from RMB112 million to RMB116 million or $17.4 million to $18.0 million. This forecast reflects ChinaEdu's current and preliminary view, which is subject to change.

Conference Call

ChinaEdu's management will hold an earnings conference call at 8:00 a.m. U.S. Eastern Time on September 8, 2011 (8:00 p.m. Beijing/Hong Kong Time on September 8, 2011).

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

U.S. Toll Free Number:

+1 866 519 4004

International Dial-in Number:

+1 718 354 1231

China Domestic (Mobile Callers):

400 620 8038

China Domestic:

800 819 0121

Hong Kong:

+852 2475 0994

Conference ID:

95956555



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 at the following numbers until September 29, 2011.

Dial-in numbers for the replay are as follows:

U.S. Toll Free Number

+1 866 214 5335

International Dial-in Number

+1 718 354 1232

Conference ID:

95956555



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 and amortization of intangible assets and land use rights. 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 and elite 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 has 19 long-term contracts that generally vary from 10 to 50 years in length. ChinaEdu also performs recruiting services for 21 universities through nationwide learning center network.

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 Annual Report on Form 20-F for the year ended December 31, 2010, 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.

Notes:

(1) The reporting currency of the Company is RMB, but for the convenience of the reader, the amounts for the three and six months ended on June 30, 2010 and June 30, 2011 are presented in U.S. dollars. Unless otherwise stated, all translations from RMB to U.S. dollars were made at the rate of RMB6.4635 to $1.00, the noon buying rate in effect on June 30, 2011 in the H.10 statistical release of the Federal Reserve Board. The Company makes no representation that the RMB or U.S. dollar amounts referred 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.

(2) "Adjusted net income attributable to ChinaEdu" is a non-GAAP measure defined as net income attributable to ChinaEdu excluding share-based compensation net of noncontrolling interest portion, and amortization of intangible assets and land use rights.

(3) "ADS" is American Depositary Share. Each ADS represents three ordinary shares.

(4) "Adjusted net income attributable to ChinaEdu per diluted ADS" is a non-GAAP measure which is computed using adjusted net income attributable to ChinaEdu over number of ADSs used in net income attributable to ChinaEdu per diluted ADS calculation.

(5) "Revenue students" refers to students of university online degree programs who have paid tuitions. The numbers for the three months ended 30 June 2011 are revenue students in spring 2011.

(6) Proprietary centers refer to self-owned learning centers operated either under the Company's own brand name or the brand name of a university pursuant to a licensing arrangement with that university.

(7) Contracted centers refer to agreement with third party learning centers pursuant to which the Company only provides assistance applying for approval from provincial level education authorities as well as securing additional university online degree programs. In return, the Company receives a percentage of the tuition earned by these third party learning centers.

For investor and media inquiries, please contact:

Helen Plummer
Senior Investor Relations Coordinator
ChinaEdu Corporation
Phone: +86 13911672124
E-mail: helen@chinaedu.net

Jin Yu
Investor Relations Manager
ChinaEdu Corporation
Phone: +86 15711096022
E-mail: jinyu@chinaedu.net

ChinaEdu Corporation 

Unaudited Condensed Consolidated Balance Sheets 






(in thousands, unaudited) 

December
31, 2010

June
30, 2011

June
30, 2011



RMB

RMB

US$






Current assets:





Cash and cash equivalents

190,493

172,875

26,746


Term deposits

120,500

126,099

19,509


Short-term investments

32,469

38,237

5,916


Accounts receivable

35,091

37,787

5,846


Inventories

358

-

-


Prepaid expenses and other current assets

30,966

33,111

5,123


Amounts due from related parties

246,925

270,626

41,870


Deferred tax assets-current

5,003

1,209

187

Total current assets

661,805

679,944

105,197


Deferred tax assets-non-current

3,470

7,075

1,095


Rental deposits

936

2,528

391


Land use rights

27,265

26,961

4,171


Property and equipment, net

227,507

231,347

35,793


Deposits paid for acquisition of property and equipment

19,792

27,314

4,226


Acquired intangible assets, net

65,849

63,815

9,873


Goodwill

43,255

43,255

6,692

Total assets

1,049,879

1,082,239

167,438






Liabilities and equity




Current liabilities:





Accounts payable (including accounts payable of the consolidated VIE without recourse to the
 Group of 10,277 and 8,410 as of December 31, 2010 and June 30, 2011)

11,410

10,151

1,571


Deferred revenues-current (including deferred revenues of the consolidated VIE without recourse to
 the Group of 18,762 and 19,282 as of December 31, 2010 and June 30, 2011)

105,891

119,279

18,454


Accrued expenses and other current liabilities (including accrued expenses and other current
 liabilities of the consolidated VIE without recourse to the Group of 12,486 and 17,723
 as of December 31, 2010 and June 30, 2011)

83,486

93,613

14,482


Amounts due to related parties (including amounts due to related parties of the consolidated VIE
 without recourse to the Group of 2,201 and 1,174 as of December 31, 2010 and June 30, 2011)

31,177

40,025

6,192


Income taxes payable (including income taxes payable of the consolidated VIE without recourse to the
 Group of 8,432 and 8,768 as of December 31, 2010 and June 30, 2011)

44,612

36,888

5,707


Other taxes payable (including other taxes payable of the consolidated VIE without recourse to the
 Group of 2,482 and 2,760 as of December 31, 2010 and June 30, 2011)

20,508

16,935

2,620

Total current liabilities

297,084

316,891

49,026


Deferred revenues-non-current (including deferred revenues of the consolidated VIE without recourse
 to the Group of 71 and 47 as of December 31, 2010 and June 30, 2011)

9,804

9,799

1,516


Deferred tax liabilities-non-current (including deferred tax liabilities of the consolidated VIE without
 recourse to the Group of 1,057 and 1,037 as of December 31, 2010 and June 30, 2011)

9,836

9,615

1,488


Unrecognized tax benefit (including unrecognized tax benefit of the consolidated VIE without
 recourse to the Group of 1,251 and 1,794 as of December 31, 2010 and June 30, 2011)

3,691

4,949

766

Total liabilities

320,415

341,254

52,796






   ChinaEdu Corporation shareholders’ equity

595,979

599,307

92,722


Noncontrolling interests

133,485

141,678

21,920

Total  equity

729,464

740,985

114,642

Total liabilities and equity

1,049,879

1,082,239

167,438



ChinaEdu Corporation 

Unaudited Condensed Consolidated Statements of Operations



Three Months Ended

Six Months Ended

(in thousands, except for percentage, share, and per share information)


June
30, 2010

March
31, 2011

June
30, 2011

June
30, 2011

June
30, 2010

June
30, 2011

June
30, 2011



RMB

RMB

RMB

US$

RMB

RMB

US$










Gross Revenue *


104,108

95,862

115,327

17,843

195,197

211,189

32,675










Business Tax


4,591

4,512

5,296

819

8,403

9,808

1,517










Net Revenue:









Online degree programs


80,188

71,665

88,085

13,628

148,703

159,750

24,716

Online tutoring programs


6,084

5,656

7,250

1,122

11,485

12,906

1,997

Private primary and secondary schools


9,454

11,240

11,880

1,838

18,734

23,120

3,577

International and elite curriculum programs


3,791

2,789

2,816

436

7,872

5,605

868

Total net revenue


99,517

91,350

110,031

17,024

186,794

201,381

31,158










Cost of revenue:









Online degree programs


24,417

26,712

29,500

4,564

45,465

56,212

8,697

Online tutoring programs


1,473

2,013

2,077

321

2,638

4,090

633

Private primary and secondary schools


7,016

8,361

8,395

1,299

13,740

16,756

2,592

International and elite curriculum programs


2,052

2,665

4,168

645

4,463

6,833

1,057

Total cost of revenue


34,958

39,751

44,140

6,829

66,306

83,891

12,979










Gross profit:









Online degree programs


55,771

44,953

58,585

9,064

103,238

103,538

16,019

Online tutoring programs


4,611

3,643

5,173

801

8,847

8,816

1,364

Private primary and secondary schools


2,438

2,879

3,485

539

4,994

6,364

985

International and elite curriculum programs


1,739

124

(1,352)

(209)

3,409

(1,228)

(189)

Total gross profit


64,559

51,599

65,891

10,195

120,488

117,490

18,179










Online degree programs


69.6%

62.7%

66.5%

66.5%

69.4%

64.8%

64.8%

Online tutoring programs


75.8%

64.4%

71.4%

71.4%

77.0%

68.3%

68.3%

Private primary and secondary schools


25.8%

25.6%

29.3%

29.3%

26.7%

27.5%

27.5%

International and elite curriculum programs


45.9%

4.4%

(48.0%)

(48.0%)

43.3%

(21.9%)

(21.9%)

Gross margin


64.9%

56.5%

59.9%

59.9%

64.5%

58.3%

58.3%










Operating expenses:









General and administrative


18,400

21,897

24,612

3,808

38,320

46,509

7,196

Selling and marketing


8,056

9,068

14,083

2,179

15,796

23,151

3,582

Research and development


9,512

9,758

10,501

1,625

18,283

20,259

3,134

Total operating expenses


35,968

40,723

49,196

7,612

72,399

89,919

13,912

Income from operations


28,591

10,876

16,695

2,583

48,089

27,571

4,267

Operating margin


28.7%

11.9%

15.2%

15.2%

25.7%

13.7%

13.7%










Other income


144

123

299

46

288

422

65

Interest income


1,345

1,910

2,139

331

2,402

4,049

626

Investment income


522

-

629

97

522

629

97

Income before income tax


30,602

12,909

19,762

3,057

51,301

32,671

5,055










Income tax expense


(6,441)

(2,475)

(3,981)

(616)

(14,612)

(6,456)

(999)

Net income


24,161

10,434

15,781

2,441

36,689

26,215

4,056

Net income attributable to the noncontrolling interests


(10,616)

(6,940)

(10,741)

(1,662)

(15,912)

(17,681)

(2,736)

Net income attributable to ChinaEdu


13,545

3,494

5,040

779

20,777

8,534

1,320

Net margin


13.6%

3.8%

4.6%

4.6%

11.1%

4.2%

4.2%










Net income attributable to ChinaEdu per ADS:









     Basic


0.84

0.22

0.32

0.049

1.30

0.54

0.083

     Diluted


0.78

0.20

0.30

0.046

1.20

0.50

0.077










Weighted average aggregate number of ADSs outstanding:









     Basic


16,029,983

15,910,224

15,853,838

15,853,838

15,992,637

15,881,875

15,881,875

     Diluted


17,376,199

17,229,640

17,000,614

17,000,614

17,386,445

17,114,971

17,114,971



















* Gross revenue are detailed as follows









Online degree programs


84,365

75,809

93,028

14,393

156,823

168,837

26,122

Online tutoring programs


6,278

5,850

7,414

1,147

11,311

13,264

2,052

Private primary and secondary schools


9,454

11,252

11,905

1,842

18,734

23,157

3,583

International curriculum programs


4,011

2,951

2,980

461

8,329

5,931

918



ChinaEdu Corporation 

Unaudited Condensed Consolidated Statements of Cash Flow 



Three Months Ended


Six Months Ended

(in thousands, unaudited)


June
30, 2010


March
31, 2011


June
30, 2011


June
30, 2011


June
30, 2010


June
30, 2011


June
30, 2011



RMB


RMB


RMB


US$


RMB


RMB


US$
















Operating activities:















      Net income


24,161


10,434


15,781


2,441


36,689


26,215


4,056

      Adjustments to reconcile net income to net cash provided by operating activities:















          Share-based compensation


366


1,555


1,649


255


2,504


3,204


496

          Depreciation and amortization of property and equipment


4,820


5,787


5,748


889


9,510


11,535


1,785

          Amortization of land use rights


153


152


152


24


305


304


47

          Amortization of acquired intangible assets


1,093


1,017


1,017


158


2,173


2,034


316

          Gain on sale of investment


(522)


-


(687)


(106)


(522)


(687)


(106)

          Loss on sale of bonds


-


-


58


9


-


58


9

          Loss on discontinued operations


-


16


-


-


(4)


16


2

          Loss from disposal of property and equipment  


(8)


65


17


3


-


82


13

          Deferred income taxes


269


1,047


(1,079)


(167)


754


(32)


(5)

     Changes in assets and liabilities















          Accounts receivable


(16,907)


19,796


(22,492)


(3,480)


(4,027)


(2,696)


(417)

          Inventory


119


(2)


360


56


519


358


55

          Prepaid expenses and other current assets


(4,805)


(489)


(1,576)


(244)


4,695


(2,065)


(319)

          Amounts due from related parties


(112,040)


72,795


(96,759)


(14,970)


(77,209)


(23,964)


(3,708)

          Rental deposits


(111)


(1,317)


(275)


(43)


(122)


(1,592)


(246)

          Accounts payable


1,164


1,321


3,261


505


356


4,582


709

          Deferred revenues


70,558


(61,272)


74,726


11,561


9,637


13,454


2,082

          Accrued expenses and other current liabilities


9,310


(6,952)


17,173


2,657


3,864


10,221


1,581

          Amounts due to related parties


27,653


(10,005)


8,368


1,295


38,383


(1,637)


(253)

          Income tax payable  


6,401


(11,259)


3,535


547


4,090


(7,724)


(1,195)

          Other taxes payable


3,380


(6,974)


3,401


526


(1,454)


(3,573)


(553)

          Unrecognized tax benefit


125


596


662


102


487


1,258


195

Net cash provided by operating activities


15,179


16,311


13,040


2,018


30,628


29,351


4,544
















Investing activities:















          Purchase of property and equipment


(3,509)


(7,921)


(6,355)


(983)


(10,199)


(14,276)


(2,209)

          Proceeds from discontinued operations


-


233


-


-


(57,337)


233


36

          Deposits paid for acquisition of property and equipment


-


-


(14,546)


(2,250)


-


(14,546)


(2,250)

          Purchase of term deposits


(55,318)


(43,000)


37,401


5,786


-


(5,599)


(866)

          Purchase of investments


(19,924)


(6,000)


(11,000)


(1,702)


(19,924)


(17,000)


(2,630)

          Proceeds from the sale of investment


8,522


-


8,687


1,344


8,522


8,687


1,344

          Proceeds from the sale of bonds


-


-


2,859


442


-


2,859


442

          Proceeds from disposal of property and equipment


59


-


1


-


108


1


-

Net cash (used in) provided by investing activities


(70,170)


(56,688)


17,047


2,637


(78,830)


(39,641)


(6,133)
















Financing activities:















          Proceeds from exercise of share options


847


280


94


15


2,186


374


58

          Prepayment for shares repurchase


(1,824)


-


(130)


(20)


(1,824)


(130)


(20)

          Repurchase and cancellation of ordinary shares


(213)


-


(5,723)


(885)


(326)


(5,723)


(885)

          Repayment of related party's loan


-


-


(25,000)


(3,868)


-


(25,000)


(3,868)

          Loan from related party


-


35,500


-


-


-


35,500


5,492

          Cash dividends paid to noncontrolling shareholders


-


(13,461)


-


-


(1,470)


(13,461)


(2,083)

          Capital contributions by noncontrolling shareholders


-


1,000


-


-


-


1,000


155

Net cash (used in) provided by financing activities


(1,190)


23,319


(30,759)


(4,758)


(1,434)


(7,440)


(1,151)
















Effect of foreign exchange rate changes


(210)


151


(39)


(7)


(214)


112


14
















CASH AND CASH EQUIVALENTS, beginning of period


209,684


190,493


173,586


26,856


203,143


190,493


29,472
















CASH AND CASH EQUIVALENTS, end of period


153,293


173,586


172,875


26,746


153,293


172,875


26,746
















Net  increase (decrease) in cash and cash equivalents


(56,391)


(16,907)


(711)


(110)


(49,850)


(17,618)


(2,726)



ChinaEdu Corporation 

Reconciliations from income from operations to adjusted income from operations (non-GAAP) and adjusted operating margin (non-GAAP)


















Three Months Ended


Six Months Ended

(in thousands, unaudited)


June
30, 2010


March
31, 2011


June
30, 2011


June
30, 2011


June
30, 2011


June
30, 2011


June
30, 2011



RMB


RMB


RMB


US$


RMB


RMB


US$
















Net revenue


99,517


91,350


110,031


17,024


186,794


201,381


31,158

Income from operations


28,591


10,876


16,695


2,583


48,089


27,571


4,267

Adjustment:















 Share-based compensation


366


1,555


1,649


255


2,504


3,204


496

 Amortization of intangible assets and land use rights


1,246


1,169


1,169


182


2,478


2,338


363

Adjusted income from operations (non-GAAP)


30,203


13,600


19,513


3,020


53,071


33,113


5,126

Adjusted operating margin (non-GAAP)


30.3%


14.9%


17.7%


17.7%


28.4%


16.4%


16.4%


















ChinaEdu Corporation















Reconciliations from net income attributable to ChinaEdu to adjusted net income attributable to ChinaEdu (non-GAAP), adjusted net margin (non-GAAP) and adjusted net income per ADS (non-GAAP)


















Three Months Ended


Six Months Ended

(in thousands, unaudited)


June
30, 2010


March
31, 2011


June
30, 2011


June
30, 2011


June
30, 2011


June
30, 2011


June
30, 2011



RMB


RMB


RMB


US$


RMB


RMB


US$
















Net revenue


99,517


91,350


110,031


17,024


186,794


201,381


31,158

Net income attributable to ChinaEdu


13,545


3,494


5,040


779


20,777


8,534


1,320

Adjustment:















 Share-based compensation


366


1,555


1,649


255


2,504


3,204


496

 Share-based compensation attributable to the noncontrolling interest


(381)


(134)


(122)


(19)


(624)


(256)


(40)

 Amortization of intangible assets and land use rights


1,246


1,169


1,169


182


2,478


2,338


363

Adjusted net income attributable to ChinaEdu (non-GAAP)


14,776


6,084


7,736


1,197


25,135


13,820


2,139

Adjusted net margin (non-GAAP)


14.8%


6.7%


7.0%


7.0%


13.5%


6.9%


6.9%
















Adjusted net income attributable to ChinaEdu per ADS (non-GAAP)















     Basic


0.92


0.38


0.49


0.076


1.57


0.87


0.135

     Diluted


0.85


0.35


0.46


0.070


1.45


0.81


0.125
















Weighted average aggregate number of ADSs outstanding:















     Basic


16,029,983


15,910,224


15,853,838


15,853,838


15,992,637


15,881,875


15,881,875

     Diluted


17,376,199


17,229,640


17,000,614


17,000,614


17,386,445


17,114,971


17,114,971



SOURCE ChinaEdu Corporation



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