China Education Alliance Announces Third Quarter 2011 Financial Results

HARBIN, China, Nov. 10, 2011 /PRNewswire-Asia-FirstCall/ -- China Education Alliance, Inc. ("China Education Alliance" or the "Company") (NYSE: CEU), a China-based education resource and services company, today announced third quarter 2011 results.  The Company will host a conference call on Thursday, November 10, 2011, at 8 a.m. EST or 9 p.m. Harbin time.

Financial Highlights for the Third Quarter ended September 30, 2011

• Total revenue decreased 33.5% year-over-year to $9.6 million.
• Gross profit declined to $6.8 million or 71.0% of sales, compared to $12.0 million, or 83.3% of sales last year.
  

"Despite the challenges we faced, as a Chinese US-listed company, in the capital market this year, we have not been discouraged by the harsh evaluation and scrutiny. In fact, we have been persistent to focus on delivering premium educational services and course materials to our students and promoting our elite teachers and effective training courses," said Xiqun Yu, Chairman and Chief executive Officer of China Education Alliance. "We are pleased to see continuous improvement in our business."

Third Quarter 2011 Review

China Education Alliance reported total revenue of $9.6 million for the third quarter ended September 30, 2011, a decrease of $4.8 million or 33.5%, compared to $14.4 million from same period in the prior year. Revenue from training centers comprised of technology training classes, language training classes, vocational training classes, etc, decreased 20.6% to $4.1 million, compared to $5.2 million in the third quarter last year. The decrease was mainly due to a decrease in revenue of approximately $1 million from technology training classes. Revenue for online education decreased 38.2% to $5.3 million, compared to revenue of $8.6 million in the same quarter last year. The decrease was due to the in progress recovery of the Company's name brand and image; however, the Company continues to see moderate improvement in enrollment numbers. Other revenue, including revenue generated from online advertising, decreased 84.6% to $80,530, compared to revenue of $0.5 million in the third quarter last year. The decrease was mainly due to the decrease in advertising income related to online education as the Company is turning away from advertising to focus on its core business lines: examination preparation courses, vocational training and language training.

Overall cost of sales increased to $2.8 million in the third quarter of 2011, compared to $2.4 million for the same period prior year. This was mainly due to continuous amortization of prepaid course materials.  

Gross profit was $6.8 million in the third quarter 2011 compared with $12.0 million in the same period prior year. As a percentage of sales, gross margin was 71.0% in the third quarter, compared with 83.3% in the third quarter of 2010.  

Gross profit for online education decreased to $3.7 million from $7.3 million in the same period in the prior year, or to 70.2% as a percentage of sales in the third quarter of 2011 from 85.1% in the same period prior year, due to lower online education revenues and higher cost of sales. Gross profit for training centers decreased 7.5% to $3.0 million compared with $4.1 million in the same period last year. Gross profit for training centers as a percentage of sales in the third quarter of 2011 was 71.8%, compared to 79.3% same period last year. The decrease was mainly due to higher amortization charges.  Gross profit for other business decreased to $69,927 from $0.49 million in the third quarter last year, or to 86.8% as a percentage of sales in the third quarter of 2011 from 93.0%, mainly due to the decrease in advertising revenue.

Selling expenses decreased 57.6% to $2.2 million in the third quarter from $5.2 million in the same period last year. As a percentage of sales, selling expenses was 23.0% of sales, compared to 36.0% in the same quarter last year. The decrease in selling expenses was a result of the decrease in revenue and the decrease in marketing and advertising expenses.

Administrative expenses increased to $1.4 million for the third quarter of 2011, compared with $0.8 million in the same quarter of the prior year. The increase in administrative expenses was a result of the increase in insurance expense, attorney professional fee and three new schools: Tianlang, Harbin Nuoya and Changchun Nuoya.

Depreciation and amortization increased to $0.5 million in third quarter, up from $0.2 million in the same quarter last year.

Net income was $3.2 million in the third quarter of 2011, or $0.3 per fully diluted share, compared with $5.4 million, or $0.51 per basic share and $0.51per fully diluted share last year.

Recent Development

On September 26, 2011, the Company implemented a one-for-three reverse stock split of its issued and outstanding common stock. As a result, the outstanding basic weighted average shares and diluted weighted average shares were 10,582,503 as of September 30, 2011.

Financial Position

As of September 30, 2011, China Education Alliance had approximately $73.7 million cash and cash equivalents, an increase from $71.1 million at December 31, 2010. Working capital was $75.2 million, an increase of $2.6 million from working capital of $72.6 million at December 31, 2010. The Company believes that current working capital and borrowing capabilities are adequate to cover its planned operating and capital requirements. Cash provided from operating activities was $8.0 million for the nine months ended September 30, 2011, a decrease of 52.7% from $16.9 million for the nine months ended September 30, 2010. This decrease was due to the decrease in net income, deferred revenue and a loss resulting from the disposal of fixed assets.

Conference Call

China Education Alliance will host a conference call and live webcast at 8 a.m. Eastern Standard Time (EST) (9 p.m. Harbin/Beijing time on Thursday, November 10, 2011).

The dial-in details for the live conference call are as follows:

- Participant Dial In (Toll Free USA): + 1-866-519-4004
- International Dial In: +1-718-354-1231
- China Toll Free: 8008190121
- Hong Kong Toll Free: +852-32475-0994
Passcode: CEU

 
A live webcast of the conference call will be available on the investor relations section of the Company's website at: http://www.chinaeducationalliance.com. A telephone replay of the call will be available for seven days after the conclusion of the conference call.

The dial-in details for the replay are as follows:

- U.S. Toll Free Number: +1-866-214-5335
- International dial-in number: +1-718-354-1232
Passcode: 25360813

About China Education Alliance, Inc.

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

Forward-Looking Statements

Statements contained in this press release, which are not historical facts, are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements include, but are not limited to, expectations of signing new customers and contracts, developing new products, projected revenues and earnings, and the success of new products. These forward-looking statements are based largely on current expectations and are subject to a number of known and unknown risks, uncertainties and other factors beyond our control that could cause actual events and results to differ materially from these statements. These statements are not guarantees of future performance, and readers are cautioned not to place undue reliance on these forward-looking statements, which are relevant as of the date of the given press release and should not be relied upon as of any subsequent date. China Education Alliance undertakes no obligation to update the forward-looking information contained in this press release.

For more information, please contact:

China Education Alliance, Inc.
Alice Lee Rogers, CFO
Tel: +1-626-379-5956
Email: [email protected]

Christensen
Jenny Wu
Telephone: +852 2232 3907
Email: [email protected]

SOURCE China Education Alliance, Inc.