ChinaEdu Reports Third Quarter 2013 Results

Net Revenue Increases 13.6 Percent Year-Over-Year to $23.0 Million

Net Income Attributable to ChinaEdu per Diluted ADS Reaches 16.7 Cents

16 Dec, 2013, 17:00 ET from ChinaEdu Corporation

BEIJING, Dec. 16, 2013 /PRNewswire/ -- ChinaEdu Corporation (NASDAQ: 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.

[1] The reporting currency of the Company is RMB, but for the convenience of the reader, the amounts for the three months ended September 30, 2013 are presented in U.S. dollars. Unless otherwise stated, all translations from RMB to U.S. dollars were made at the rate of RMB6.1200 to $1.00, the noon buying rate in effect on September 30, 2013 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 non-controlling interests' portion, amortization of intangible assets and land use rights, and intangible assets impairment.

[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 the 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 September 30, 2013 and 2012 are revenue students in Spring 2013 and Spring 2012, respectively.

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.

[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.

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:

China

400 120 0539

Hong Kong

800 905 927

United Kingdom

0800 015 9725

United States

1 855 298 3404

New York City (Toll)

1 631 514 2526

Conference Title:

ChinaEdu Q3 2013 Earnings Conference Call

Conference Passcode:

ChinaEdu

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:

China

4001842240

Hong Kong

800 966 697

United Kingdom

0800 169 7301

United States 

1 866 846 0868

Conference Title:

ChinaEdu Q3 2013 Earnings Conference Call

Replay Passcode:

3208385

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

ChinaEdu Corporation

Unaudited Condensed Consolidated Balance Sheets

(in thousands, unaudited)

December 31, 2012

September 30, 2013

September 30, 2013

RMB

RMB

US$

Current assets:

Cash and cash equivalents

385,922

234,976

38,395

Term deposits

92,028

126,373

20,649

Short-term investments

23,575

9,498

1,552

Accounts receivable

34,917

30,340

4,958

Prepaid expenses and other current assets

23,455

24,998

4,085

Amounts due from related parties-current

260,184

272,431

44,515

Deferred tax assets-current

9,571

2,479

405

Total current assets

829,652

701,095

114,559

Term deposits -non current

-

95,850

15,662

Property and equipment, net

238,563

235,409

38,466

Amounts due from a related party-non-current

41,979

41,979

6,859

Land use rights

26,049

25,593

4,182

Deposits paid for acquisition of property and equipment

3,873

-

-

Deferred tax assets-non-current

2,085

2,607

426

Long-term investments

801

731

119

Rental deposits

1,497

1,483

242

Acquired intangible assets, net

54,499

52,148

8,521

Goodwill

43,255

43,255

7,068

Total assets

1,242,253

1,200,150

196,104

Liabilities and equity

Current liabilities:

Short-term loan

-

4,578

748

Accounts payable (including accounts payable of the consolidated VIE without recourse to the Group of RMB2,007 and RMB11,093 as of December 31, 2012 and September 30, 2013, respectively)

2,401

11,611

1,897

Deferred revenues-current (including deferred revenues of the consolidated VIE without recourse to the Group of RMB23,518 and RMB26,725 as of December 31, 2012 and September 30, 2013, respectively)

134,175

51,659

8,441

Accrued expenses and other current liabilities (including accrued expenses and other current liabilities of the consolidated VIE without recourse to the Group of RMB22,113 and RMB26,161 as of December 31, 2012 and September 30, 2013, respectively)

113,558

131,669

21,515

Amounts due to related parties-current (including amounts due to related parties of the consolidated VIE without recourse to the Group of RMB1,926 and RMB1,892 as of December 31, 2012 and September 30, 2013, respectively)

35,507

41,678

6,810

Income taxes payable (including income taxes payable of the consolidated VIE without recourse to the Group of RMB10,004 and RMB11,256 as of December 31, 2012 and September 30, 2013, respectively)

49,294

43,237

7,066

Other taxes payable (including other taxes payable of the consolidated VIE without recourse to the Group of RMB4,442 and RMB3,964 as of December 31, 2012 and September 30, 2013, respectively)

27,294

24,285

3,968

Total current liabilities

362,229

308,717

50,445

Long-term loan

-

215,516

35,215

Deferred revenues-non-current (including deferred revenues of the consolidated VIE without recourse to the Group of RMB29 and RMB29 as of December 31, 2012 and September 30, 2013, respectively)

10,654

10,342

1,690

Deferred tax liabilities-non-current (including deferred tax liabilities of the consolidated VIE without recourse to the Group of RMB978 and RMB949 as of December 31, 2012 and September 30, 2013, respectively)

13,473

13,319

2,176

Unrecognized tax benefit (including unrecognized tax benefit of the consolidated VIE without recourse to the Group of RMB3,555 and RMB4,591 as of December 31, 2012 and September 30, 2013, respectively)

8,795

10,666

1,743

Total liabilities

395,151

558,560

91,269

Total ChinaEdu Corporation shareholders' equity

650,191

418,089

68,315

Noncontrolling interests

196,911

223,501

36,520

Total equity

847,102

641,590

104,835

Total liabilities and equity

1,242,253

1,200,150

196,104

 

ChinaEdu Corporation

Unaudited Condensed Consolidated Statements of Operations 

Three Months Ended 

Nine Months Ended 

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

September 30, 2012

September 30, 2013

September 30, 2013

September 30, 2012

September 30, 2013

September 30, 2013

RMB

RMB

US$

RMB

RMB

US$

Gross Revenue *

129,012

143,116

23,385

368,163

408,880

66,811

Business Tax

5,192

2,440

399

15,383

8,507

1,391

Net Revenue:

Online degree programs

99,097

112,620

18,402

283,113

320,751

52,410

Online tutoring programs

6,025

7,160

1,170

18,423

21,538

3,519

Private primary and secondary schools

16,311

18,776

3,068

43,662

51,205

8,367

International curriculum programs

2,387

2,120

346

7,582

6,879

1,124

Total net revenue

123,820

140,676

22,986

352,780

400,373

65,420

Cost of revenue:

Online degree programs

33,982

38,676

6,320

95,336

106,666

17,429

Online tutoring programs

2,178

2,529

413

7,599

7,452

1,218

Private primary and secondary schools

9,740

10,930

1,786

29,751

33,132

5,414

International curriculum programs

2,422

1,417

232

8,105

3,967

648

Total cost of revenue

48,322

53,552

8,751

140,791

151,217

24,709

Gross profit:

Online degree programs

65,115

73,944

12,082

187,777

214,085

34,981

Online tutoring programs

3,847

4,631

757

10,824

14,086

2,301

Private primary and secondary schools

6,571

7,846

1,282

13,911

18,073

2,953

International curriculum programs

(35)

703

114

(523)

2,912

476

Total gross profit

75,498

87,124

14,235

211,989

249,156

40,711

Online degree programs

65.7%

65.7%

65.7%

66.3%

66.7%

66.7%

Online tutoring programs

63.9%

64.7%

64.7%

58.8%

65.4%

65.4%

Private primary and secondary schools

40.3%

41.8%

41.8%

31.9%

35.3%

35.3%

International curriculum programs

(1.5%)

33.2%

33.2%

(6.9%)

42.3%

42.3%

Gross margin

61.0%

61.9%

61.9%

60.1%

62.2%

62.2%

Operating expenses:

General and administrative

27,182

28,825

4,710

77,243

77,927

12,733

Selling and marketing

12,315

11,711

1,914

34,094

33,668

5,501

Research and development

10,914

13,554

2,215

30,585

36,494

5,963

Intangible assets impairment

5,901

-

-

5,901

-

-

Total operating expenses

56,312

54,090

8,839

147,823

148,089

24,197

Income(loss) from operations

19,186

33,034

5,396

64,166

101,067

16,514

Operating margin

15.5%

23.5%

23.5%

18.2%

25.2%

25.2%

Interest income 

3,352

1,600

261

9,923

8,191

1,338

Interest expense

-

(5,403)

(883)

-

(10,082)

(1,647)

Gain on disposal of assets

1,303

-

-

1,303

-

-

Investment income

-

-

-

1,460

368

60

Other income

404

487

80

917

1,350

221

Foreign exchange loss

-

(592)

(97)

-

(2,728)

(446)

Income before income tax and equity method investments

24,245

29,126

4,757

77,769

98,166

16,040

Income tax expense

(9,510)

(6,172)

(1,008)

(20,824)

(22,015)

(3,597)

Net income before income from equity method investments

14,735

22,954

3,749

56,945

76,151

12,443

Income from equity method investments, net of taxes

-

(93)

(15)

-

410

67

Net income

14,735

22,861

3,734

56,945

76,561

12,510

Net income attributable to the noncontrolling interests

(11,611)

(13,262)

(2,167)

(34,204)

(38,315)

(6,261)

Net income attributable to ChinaEdu

3,124

9,599

1,567

22,741

38,246

6,249

Net margin

2.5%

6.8%

6.8%

6.4%

9.6%

9.6%

Net income attributable to ChinaEdu per ADS:

  Basic 

0.20

1.15

0.187

1.44

3.93

0.642

  Diluted 

0.19

1.02

0.167

1.36

3.56

0.582

Weighted average aggregate number of ADSs outstanding:

  Basic 

15,884,264

8,373,355

8,373,355

15,827,795

9,730,559

9,730,559

  Diluted 

16,625,395

9,374,564

9,374,564

16,771,477

10,745,260

10,745,260

* Gross revenue are detailed as follows

Online degree programs

103,920

114,723

18,746

297,506

328,482

53,674

Online tutoring programs

6,181

7,398

1,209

18,849

22,046

3,602

Private primary and secondary schools

16,382

18,839

3,078

43,777

51,329

8,387

International curriculum programs

2,529

2,156

352

8,031

7,023

1,148

 

ChinaEdu Corporation

Unaudited Condensed Consolidated Statements of Cash Flow

Three Months Ended 

Nine Months Ended 

(in thousands, unaudited)

September 30, 2012

September 30, 2013

September 30, 2013

September 30, 2012

September 30, 2013

September 30, 2013

RMB

RMB

US$

RMB

RMB

US$

Operating activities:

  Net income 

14,735

22,861

3,734

56,945

76,561

12,510

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

  Share-based compensation 

1,885

2,371

387

5,996

7,217

1,179

  Depreciation and amortization of property and equipment 

6,355

6,370

1,041

18,963

19,126

3,125

  Amortization of land use rights 

152

152

25

456

456

75

  Amortization of acquired intangible assets 

1,035

758

124

3,056

2,351

384

  Intangible assets impairment 

5,901

-

-

5,901

-

-

  Investment income 

-

-

-

(227)

(368)

(60)

  Amortization of debt discount 

-

3,014

492

-

3,601

588

  Exchange loss 

-

592

97

-

2,728

446

  Gain on disposal of assets 

(1,303)

-

-

(1,303)

-

-

  Loss from equity method investment 

-

93

15

-

70

11

  Provision for accounts receivables 

-

-

-

340

261

43

  Loss(gain) from disposal of property and equipment

586

15

2

1,414

(29)

(5)

  Changes in assets and liabilities 

  Accounts receivable 

8,242

8,125

1,328

(7,851)

4,316

705

  Prepaid expenses and other current assets 

1,239

6,662

1,090

(1,351)

3,584

586

  Amounts due from related parties 

40,792

79,645

13,015

(23,351)

(12,290)

(2,008)

  Rental deposits 

296

(99)

(16)

733

14

2

  Accounts payable 

2,951

3,118

509

7,789

9,210

1,505

  Deferred revenues 

(74,887)

(86,903)

(14,200)

(74,508)

(82,787)

(13,527)

  Accrued expenses and other current liabilities 

17,532

20,872

3,410

26,673

18,619

3,041

  Amounts due to related parties 

8,265

7,944

1,298

11,621

(13,728)

(2,243)

  Income taxes payable

3,462

2,121

347

(3,119)

(6,056)

(990)

  Other taxes payable

5,559

(5,119)

(836)

2,157

(3,009)

(492)

  Deferred income taxes 

2,909

870

142

5,873

6,416

1,048

  Unrecognized tax benefit 

637

680

111

1,863

1,871

306

Net cash provided by operating activities

46,343

74,142

12,115

38,070

38,134

6,229

Investing activities:

  Purchase of property and equipment 

(6,283)

(4,810)

(786)

(9,157)

(12,209)

(1,995)

  Proceeds from discontiued operations 

4,000

-

-

4,000

-

-

  Purchase of term deposits 

(3,000)

(6,635)

(1,084)

(100,865)

(130,254)

(21,283)

  Purchase of investments 

-

-

-

(12,571)

-

-

  Proceeds from sale of investments 

-

-

-

24,952

5,482

896

  Proceeds from disposal of exclusive partnership with universities 

-

-

-

(980)

-

-

  Proceeds from disposal of property and equipment 

94

2

-

95

140

23

  Proceeds from disposal of equity method investments 

-

-

-

-

8,000

1,307

Net cash used in investing activities

(5,189)

(11,443)

(1,870)

(94,526)

(128,841)

(21,052)

Financing activities:

  Cash dividends paid to noncontrolling shareholders 

(16,799)

(7,533)

(1,231)

(21,441)

(7,533)

(1,231)

  Capital contributions by noncontrolling shareholders 

-

-

-

980

-

-

  Proceeds from exercise of share options 

16

2,524

412

3,738

2,790

456

  Financing cost in connection with loans 

-

(4,806)

(785)

-

(8,557)

(1,398)

  Prepayment for shares repurchase 

-

-

-

(886)

-

-

  Proceeds from borrowings of short-term debt 

-

-

-

-

68,410

11,178

  Proceeds from borrowings of long-term debt 

-

220,511

36,031

-

380,261

62,134

  Repurchase and cancellation of ordinary shares 

(2,343)

(32,316)

(5,280)

(2,728)

(285,603)

(46,667)

  Repayment of borrowings of short-term debt 

-

(62,815)

(10,264)

-

(62,815)

(10,264)

  Repayment of borrowings of long-term debt 

-

(159,750)

(26,103)

-

(159,750)

(26,103)

  Repayment of loan from related party 

(5,500)

(68,900)

(11,258)

(5,500)

(68,900)

(11,258)

  Loan from related party 

-

55,200

9,020

5,500

81,200

13,268

Net cash used in financing activities

(24,626)

(57,885)

(9,458)

(20,337)

(60,497)

(9,885)

Effect of foreign exchange rate changes

9

(179)

(29)

(2)

258

44

Cash and cash equivalents, beginning of period

180,414

230,341

37,637

273,746

385,922

63,059

Cash and cash equivalents, end of period

196,951

234,976

38,395

196,951

234,976

38,395

Net decrease (increase) in cash and cash equivalents

16,537

4,635

758

(76,795)

(150,946)

(24,664)

 

ChinaEdu Corporation

Unaudited Condensed Consolidated Statements of Comprehensive Income 

Three Months Ended

Nine Months Ended 

(in thousands, unaudited)

September 30, 2012

September 30, 2013

September 30, 2013

September 30, 2012

September 30, 2013

September 30, 2013

RMB

RMB

US$

RMB

RMB

US$

Net income (loss)

14,735

22,861

3,734

56,945

76,561

12,510

Other comprehensive income, net of taxes

 Foreign currency translation adjustments

(121)

504

82

6

3,834

626

 Change in fair value of available for sale investments

515

215

35

957

(787)

(129)

Comprehensive income

15,129

23,580

3,851

57,908

79,608

13,007

Less: comprehensive income attributable to the noncontrollng interest

13,591

13,842

2,262

35,143

41,923

6,850

Comprehensive income attributable to ChinaEdu 

1,538

9,738

1,589

22,765

37,685

6,157

 

 

ChinaEdu Corporation

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

Three Months Ended 

Nine Months Ended 

(in thousands, unaudited)

September 30, 2012

September 30, 2013

September 30, 2013

September 30, 2012

September 30, 2013

September 30, 2013

RMB

RMB

US$

RMB

RMB

US$

Net revenue

123,820

140,676

22,986

352,780

400,373

65,420

Income(loss) from operations 

19,186

33,034

5,396

64,166

101,067

16,514

Adjustments:

 Share-based compensation

1,885

2,371

387

5,996

7,217

1,179

 Amortization of intangible assets and land use rights

1,187

910

149

3,512

2,807

459

 Intangible assets impairment

5,901

-

-

5,901

-

-

Adjusted income from operations (non-GAAP)

28,159

36,315

5,932

79,575

111,091

18,152

Adjusted operating margin (non-GAAP)

22.7%

25.8%

25.8%

22.6%

27.7%

27.7%

ChinaEdu Corporation

Unaudited 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 

Nine Months Ended 

(in thousands, unaudited)

September 30, 2012

September 30, 2013

September 30, 2013

September 30, 2012

September 30, 2013

September 30, 2013

RMB

RMB

US$

RMB

RMB

US$

Net revenue

123,820

140,676

22,986

352,780

400,373

65,420

Net income(loss) attributable to ChinaEdu

3,124

9,599

1,567

22,741

38,246

6,249

Adjustments:

 Share-based compensation

1,885

2,371

387

5,996

7,217

1,179

 Share-based compensation attributable to the noncontrolling interest

(82)

-

-

(369)

-

-

 Amortization of intangible assets and land use rights

1,187

910

149

3,512

2,807

459

 Intangible assets impairment

5,901

-

-

5,901

-

-

Adjusted net income attributable to ChinaEdu (non-GAAP)

12,015

12,880

2,103

37,781

48,270

7,887

Adjusted net margin (non-GAAP)

9.7%

9.2%

9.2%

10.7%

12.1%

12.1%

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

  Basic 

0.76

1.54

0.251

2.39

4.96

0.811

  Diluted 

0.72

1.37

0.224

2.25

4.49

0.734

Weighted average aggregate number of ADSs outstanding:

  Basic 

15,884,264

8,373,355

8,373,355

15,827,795

9,730,559

9,730,559

  Diluted 

16,625,395

9,374,564

9,374,564

16,771,477

10,745,260

10,745,260

 

SOURCE ChinaEdu Corporation



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