Xueda Education Group Announces Second Quarter 2012 Financial Results

BEIJING, Aug. 15, 2012 /PRNewswire-Asia/ -- Xueda Education Group (NYSE: XUE) ("Xueda" or the "Company"), a leading national provider of tutoring services for primary and secondary school students in China with a focus on offering personalized tutoring services, today announced its unaudited financial results for the second quarter of 2012.

Financial Highlights for Second Quarter 2012

• Total net revenue for the second quarter of 2012 increased by 35.2% year-over-year to $96.9 million from $71.6 million for the second quarter of 2011.
• Gross profit for the second quarter of 2012 increased by 19.1% year-over-year to $34.5 million from $29.0 million for the second quarter of 2011. 
• Income from operations for the second quarter of 2012 was $12.8 million, compared to $15.6 million for the second quarter of 2011.
• Net income attributable to Xueda Education Group for the second quarter of 2012 was $13.0 million compared to net income of $15.1 million for the second quarter of 2011.
• Basic and diluted net income attributable to Xueda Education Group per American Depositary Share ("ADS") were $0.20 for the second quarter of 2012, compared to basic net income attributable to Xueda Education Group per ADS of $0.22 and diluted net income attributable to Xueda Education Group per ADS of $0.21 for the second quarter of 2011. Each ADS represents two ordinary shares of the Company.
• Cash, cash equivalents and short-term investments as of June 30, 2012 decreased to $224.6 million from $225.7 million as of December 31, 2011.
• Total cash collections in the second quarter of 2012 increased by 52.0% year-over-year to $86.8 million from $57.1 million in the second quarter of 2011.

Operational Highlights for Second Quarter 2012

• Total number of learning centers increased to 383 as of the end of the second quarter of 2012, up from 256 learning centers as of the second quarter of 2011 and 342 learning centers as of the end of the previous quarter. 
• Course hours delivered in the second quarter of 2012 increased by 20.7% year-over-year to 3.50 million hours from 2.90 million hours in the second quarter of 2011.
• Total number of students served in the second quarter of 2012 increased by 19.8% year-over-year to 79,443 students from 66,340 students in the second quarter of 2011.
• Full-time headcount of teaching staff totaled 14,275, including 10,019 instructors, 2,550 education consultants and 1,706study counselors, as of June 30, 2012.
• Average hourly course fee in the second quarter of 2012 increased by 9.5% year-over-year to $28.7 from $26.2 in the second quarter of 2011.

Commenting on the results, Mr. Xin Jin, co-founder and Chief Executive Officer of Xueda, stated, "We are pleased to report a strong quarter with revenue growth exceeding our expectation. We again achieved strong double-digit growth and delivered solid performance across our key operating metrics. In the first half of 2012, we focused strategically on reaccelerating our revenue growth and further expanding our national learning center network. For the remainder of 2012, we expect to see more positive results from the investments and initiatives that we have made. As reflected by our raised full-year guidance, we are confident in our ability to continue to strengthen our market leadership and drive greater profitability in the coming quarters on a year-over-year basis."

Mr. Jeffery Gao, Chief Financial Officer of Xueda, added, "Our second quarter gross margin continued to improve noticeably to 35.6% from 25.0% a quarter ago. The profitability from learning centers in operation for one year or longer remains strong, and we are very pleased to note that the gross margin from these learning centers was solid at 41.0% during the quarter. Looking ahead, we will remain focused on improving utilization of our learning centers and controlling overhead costs to further expand profitability."

Second Quarter 2012 Financial and Operating Results

Total net revenue in the second quarter of 2012 increased by 35.2% year-over-year to $96.9 million from $71.6 million in the second quarter of 2011. $16.2 million, or 64.2%, of the increase in net revenue was contributed by the increase in course hours delivered and the other $9.1 million, or 35.8%, of the increase was contributed by the increase in the average hourly course fee from the same period of last year to the second quarter of 2012.

Cost of revenue in the second quarter of 2012 increased by 46.1% year-over-year to $62.4 million from $42.7 million in the second quarter of 2011. This increase was primarily due to an  increase of $13.9 million in teaching staff costs and an increase of $4.9 million in rental costs and depreciation costs as a result of our expanded operations.

Gross profit in the second quarter of 2012 increased by 19.1% year-over-year to $34.5 million from $29.0 million in the second quarter of 2011. Gross margin in the second quarter of 2012 was 35.6%, compared to 40.4% in the second quarter of 2011 and 25.0% in the first quarter of 2012.

Total operating expenses in the second quarter of 2012 increased by 60.6% year-over-year to $21.7 million from $13.5 million in the second quarter of 2011. Total operating expenses accounted for 22.4% of total net revenue in the second quarter of 2012, compared to 18.9% a year ago.

General and administrative expenses in the second quarter of 2012 increased by 62.9% year-over-year to $12.9 million from $7.9 million in the second quarter of 2011. The increase was primarily due to expanded staff to support the Company's expanded operations.

Selling and marketing expenses in the second quarter of 2012 increased by 57.4% year-over-year to $8.8 million from $5.6 million for the second quarter of 2011. This increase was primarily attributable to the increase in expenses relating to advertising, marketing and brand promotion activities.

Income from operations in the second quarter of 2012 was $12.8 million, compared to income from operations of $15.6 million for the second quarter of 2011.

Interest income for the second quarter of 2012 increased by 64.6% year-over-year to $1.8 million from $1.1 million in the second quarter of 2011.

Net income attributable to Xueda Education Group for the second quarter of 2012 was $13.0 million, compared to net income attributable to Xueda Education Group of $15.1 million in the second quarter of 2011.

Non-GAAP(1) net income attributable to Xueda Education Group for the second quarter of 2012 was $13.9 million, compared to non-GAAP net income attributable to Xueda Education Group of $16.6 million for the second quarter of 2011.

Basic net income attributable to Xueda Education Group per ADS for the second quarter of 2012 was $0.20, compared to basic net income attributable to Xueda Education Group per ADS of $0.22 for the second quarter of 2011. Non-GAAP basic net income attributable to Xueda Education Group per ADS for the second quarter of 2012 was $0.21, compared to non-GAAP basic net income attributable to Xueda Education Group per ADS of $0.24 for the second quarter of 2011.

Diluted net income attributable to Xueda Education Group per ADS for the second quarter of 2012 was $0.20, compared to diluted net income attributable to Xueda Education Group per ADS of $0.21 for the second quarter of 2011. Non-GAAP diluted net income attributable to Xueda Education Group per ADS for the second quarter of 2012 was $0.21, compared to non-GAAP diluted net income attributable to Xueda Education Group per ADS of $0.23 for the second quarter of 2011.

As of June 30, 2012, the Company had cash and cash equivalents plus short-term investments totaling $224.6 million, compared to $225.7 million as of December 31, 2011.

Deferred revenues were $102.8 million as of June 30, 2012, compared to $101.4 million as of December 31, 2011.

As of August 14, 2012, under the Company's authorized plan to repurchase up to $30 million worth of the Company's outstanding ADSs approved by Board of Directors in September 2011, the Company has repurchased an aggregate of approximately 4.0 million ADSs at an average price of $3.49 per ADS for a total of $14.1 million.

Acquisition of Minority Equity Investment of Firstleap Education

In August 2012, the Company purchased, for consideration of $4.8 million, a 12.72% equity interest in Firstleap Education, a company incorporated in the Cayman Islands that has over three years of operating history in providing English tutoring services to 2- to 10-year-old children in China ("Firstleap"). The Company expects this investment in the long term to expand its service offerings, strengthen its position in the private tutoring sector and diversify its revenue contributions.  In contemplation of this investment, Beijing Xueda Information Technology Co., Ltd., the Company's variable interest entity, extended a loan of RMB20.0 million in early May 2012 to Beijing Lebai Education Consulting Co., Ltd., Firstleap's variable interest entity that operates all Firstleap's business in China ("Beijing Lebai").  This loan bears interest at a rate of 10% per annum and will be repayable in November 2012.  Firstleap's wholly owned subsidiary in China has provided a joint and severable guarantee for this loan.

Business Outlook

The Company currently expects its net revenue for the third quarter of 2012 to be in the estimated range of $65.7 million to $68.3 million, an increase of approximately 27.5% to 32.5% from the same quarter of the previous year. 

The Company raises its expectation of net revenue for the full year 2012 to the estimated range of $283.0 million to $293.0 million, an increase of approximately 27.5% to 32.0% from the full year 2011, compared to its prior expectation of $272.0 million to $282.0 million.

This guidance is based on the current market conditions and reflects the Company's current and preliminary estimates of market and operating conditions and customer demand, which are all subject to change.

Non-GAAP Financial Measures

To supplement the financial measures calculated in accordance with U.S. GAAP, this press release includes certain non-GAAP financial measures of adjusted net income and adjusted diluted earnings per ADS, each of which is adjusted to exclude share-based compensation expenses. The Company believes excluding such expenses from its non-GAAP financial measures is useful for its management and investors to assess and analyze the Company's core operating results as such expenses are not directly attributable to the underlying performance of the Company's business operations and do not impact its cash earnings. The Company also believes that these non-GAAP financial measures are important to help investors understand the Company's current financial performance and future prospects and compare business trends among different reporting periods on a consistent basis. These non-GAAP financial measures should be considered in addition to financial measures presented in accordance with U.S. GAAP, but should not be considered as a substitute for, or superior to, financial measures presented in accordance with U.S. GAAP. For a reconciliation of each of these non-GAAP financial measures to the most directly comparable U.S. GAAP financial measure, please see the financial information included elsewhere in this press release.

Conference Call

Xueda will hold a corresponding conference call and live webcast at 9:00 p.m. EDT on Wednesday, August 15, 2012 (or 9:00 a.m. Beijing Time on Thursday, August 16, 2012) to discuss the unaudited second quarter results and answer questions from investors.  Listeners may access the call by dialing:

A replay of the webcast will be accessible through August 22, 2012 on http://ir.xueda.com or by dialing:

About Xueda Education Group

Xueda Education Group ("Xueda") is a leading national provider of tutoring services for primary and secondary school students in China with a focus on offering personalized tutoring services. Since opening its first learning center in 2004, Xueda has organically built an extensive tutoring service network comprised of 383 learning centers and 14,275 full-time teaching professionals, serving customers located in 73 economically developed cities across 28 provinces and municipalities as of June 30, 2012.

Forward-looking Statements

All statements included in this press release, other than statements or characterizations of historical fact, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our current expectations, market and operating conditions, estimates and projections about our industry, management's beliefs, and certain assumptions made by us, all of which are subject to change. Forward-looking statements can often be identified by words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "may," "will," "should," "would," "could," "potential," "continue," "ongoing," "targets" and similar expressions, and variations or negatives of these words. These forward-looking statements are not guarantees of future results and are subject to risks and uncertainties beyond our control, which could cause our actual results to differ materially and adversely from those expressed in any forward-looking statement. Further information regarding these and other risks, uncertainties or factors is included in our filings with the U.S. Securities and Exchange Commission. We do not undertake any obligation to update any forward-looking statement as a result of new information, future events or otherwise, except as required under applicable law.

Contact:

Xueda Education Group
Sophia Zhou
Tel: +86-10-6427-8899 ext. 6619
Email: [email protected]

Asia Bridge Capital Limited
Wendy Sun
Tel: +86-10-8556-9033 (China)
       +1-888-550-8392 (U.S.)
Email: [email protected]

SOURCE Xueda Education Group