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Second Quarter 2009 Highlights
(in thousands, unaudited) 3 Months Ended Period
June June June over
Period Ended 30, 2008 30, 2009 30, 2009 Period
Currency in thousands RMB RMB USD %
Financial Data:
Net revenue 79,521 88,275 12,924 11%
Gross profit 56,142 55,078 8,063 -2%
Income from operations 24,862 22,020 3,223 -11%
Net income attributable to CEDU 9,187 8,860 1,297 -4%
Adjusted EBITDA (Non-GAAP) 31,839 29,518 4,321 -7%
Adjusted net income attributable
to CEDU (Non-GAAP) 12,956 12,097 1,771 -7%
EPS 0.16 0.18 0.03 13%
Adjusted EPS (Non-GAAP) 0.22 0.25 0.04 14%
Net income to CEDU per ADS 0.48 0.54 0.09 13%
Adjusted net income to CEDU per
ADS (Non-GAAP) 0.66 0.75 0.12 14%
Operating Data:
Revenue students for online
degree program 125,000 147,000 147,000 18%
(in thousands, unaudited) Six Months Ended Year
Period Ended June June June over
30, 2008 30, 2009 30, 2009 Year
Currency in thousands RMB RMB USD %
Financial Data:
Net revenue 149,176 169,445 24,809 14%
Gross profit 101,642 103,678 15,179 2%
Income from operations 37,687 39,556 5,791 5%
Net income attributable to CEDU 11,274 18,424 2,697 63%
Adjusted EBITDA (Non-GAAP) 50,177 55,106 8,067 10%
Adjusted net income attributable
to CEDU (Non-GAAP) 17,738 25,476 3,729 44%
EPS 0.19 0.38 0.05 100%
Adjusted EPS (Non-GAAP) 0.30 0.52 0.08 73%
Net income to CEDU per ADS 0.57 1.14 0.15 100%
Adjusted net income to CEDU per
ADS (Non-GAAP) 0.90 1.56 0.24 73%
Operating Data:
Revenue students for online
degree program 125,000 147,000 147,000 18%
-- Total net revenue for the second quarter of 2009 increased by 11.0% to
RMB88.3 million ($12.9 million) from RMB79.5 million for the
corresponding period in 2008, exceeding our previously disclosed
guidance for the second quarter of 2009 of RMB83 million to
RMB87 million.
-- Net revenue from online degree programs, the Company's major business
segment, increased by 9.7% to RMB71.4 million ($10.5 million) for the
second quarter of 2009 from RMB65.1 million for the corresponding
period in 2008.
-- The number of revenue students(2) in online degree programs during the
second quarter of 2009 increased by approximately 18% to over 147,000
from approximately 125,000 for the corresponding period in 2008.
-- Income from operations decreased by 11.4% to RMB22.0 million
($3.2 million) in the second quarter of 2009 from RMB24.9 million for
the corresponding period in 2008.
-- Net income attributable to ChinaEdu Corporation, which is net income
excluding net income attributable to noncontrolling interest decreased
by 3.6% to RMB8.9 million ($1.3 million) in the second quarter of 2009
from RMB9.2 million for the corresponding period in 2008.
-- Adjusted EBITDA, which is a non-GAAP measure defined as net income
before interest income, taxes, depreciation, amortization of intangible
assets and land use rights, share-based compensation and goodwill and
intangibles impairment charges, if applicable, decreased by 7.3% to
RMB29.5 million ($4.3 million) in the second quarter of 2009 from
RMB31.8 million for the corresponding period in 2008.
-- Adjusted net income attributable to ChinaEdu Corporation, which is a
non-GAAP measure defined as net income attributable to ChinaEdu
Corporation excluding share-based compensation, amortization of
intangible assets and land use rights and goodwill and intangibles
impairment charges, if applicable (all amounts are attributable to
ChinaEdu Corporation, net of noncontrolling interest), decreased by
6.6% to RMB12.1 million ($1.8 million) in the second quarter of 2009
from RMB13.0 million for the corresponding period in 2008.
-- Basic net income attributable to ChinaEdu Corporation per share ("EPS")
was RMB0.18 ($0.03) for the second quarter of 2009 compared to RMB0.16
for the corresponding period in 2008.
-- Basic net income attributable to ChinaEdu Corporation per American
Depositary Share ("ADS") was RMB0.54 ($0.09) for the second quarter of
2009 compared to RMB0.48 for the corresponding period in 2008.
-- Basic adjusted net income attributable to ChinaEdu Corporation per
share (non-GAAP) was RMB0.25 ($0.04) for the second quarter of 2009
compared to RMB0.22 for the corresponding period in 2008.
-- Basic adjusted net income attributable to ChinaEdu Corporation per ADS
(non-GAAP) was RMB0.75 ($0.12) for the second quarter of 2009 compared
to RMB0.66 for the corresponding period in 2008.
(1) This announcement contains translations of certain Renminbi ("RMB")
amounts into U.S. dollar ("$") amounts at specified rates solely for
the convenience of the reader. Unless otherwise stated, all
translations from RMB to U.S. dollars were made at the rate of
RMB6.8302 to $1.00, the noon buying rate in effect on June 30, 2009 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
to 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) "Revenue students" refers to students of university online degree
programs who have paid tuition in the applicable period.
"We are pleased to report healthy enrollment and revenue growth for the 2009 spring semester," said Ms. Julia Huang, ChinaEdu's Chairman and Chief Executive Officer. "In the second quarter of 2009, we strived for strong revenue growth from our learning centers and continued to expand our learning center network. In addition, we are pleased to report continued progress in signing additional university partners for our online degree programs, including collaborative alliance agreements with provincial radio and television universities. Our 101 online tutoring program continued to improve with new and updated courseware, stronger sales channels and improved customer services. In addition, we have continued to invest in courseware development, technology upgrade and the learning platform for both online degree and non-degree programs, which we believe will position us for continued future growth. Although there was a decline in gross profit, operating income and net income in the second quarter of 2009 compared to the second quarter of 2008, the Company's margins for EBITDA, adjusted operating income and net income remained stable in the first half of 2009 relative to the first half of 2008, which we believe reflects improvements in the Company's operations given the expansion of the learning centers network and investments in other businesses."
Financial Results for the Second Quarter Ended June 30, 2009
Net Revenue
Total net revenue for the second quarter of 2009 was RMB88.2 million ($12.9 million), representing an 11.0% increase from the corresponding period in 2008. Net revenue from online degree programs for the second quarter of 2009 was RMB71.4 million ($10.5 million), representing a 9.7% increase from RMB65.1 million for the corresponding period in 2008. The growth in net revenue was primarily due to strong enrollment growth for the Spring semester of 2009, which registered over 147,000 revenue students compared to 125,000 revenue students for the Spring semester of 2008.
Net revenue from the Company's non-online degree programs (online tutoring program, international curriculum programs and private primary and secondary schools) for the second quarter of 2009 was RMB16.8 million ($2.5 million), representing a 17.2% increase from RMB14.4 million for the corresponding period in 2008. This increase was attributable to the increase in student enrollment at Anqing School for the academic year beginning in September 2008 as a result of the completion of Phase I of the new campus construction as well as a slight increase in net revenue for the 101 online tutoring programs.
Cost of revenue
Total cost of revenue for the second quarter of 2009 was RMB33.2 million ($4.9 million), representing an increase of 42.0% as compared to RMB23.4 million for the corresponding period of 2008. Cost of revenue for online degree programs for the second quarter of 2009 was RMB22.5 million ($3.3 million), representing an increase of 67.4% as compared to RMB13.5 million for the second quarter of 2008. In addition to increase in cost of revenue corresponding to enrollment growth, the increase in cost of revenue for online degree programs was attributable primarily to (i) enrollment growth in our university partners' online degree programs in the Spring semester of 2009 compared to the Spring semester of 2008, (ii) courseware development for selected university partners at our collaborative alliances(3) and (iii) the expansion of our learning center network. Since most of the recruiting services performed by our learning centers to our university partners are recorded as cost of revenue, our total cost of revenue will continue to increase as we continue the expansion of the learning centers network. We had 56 operational learning centers by the second quarter of 2009, of which 21 were proprietary and 35 were contracted locations, compared to 22 operational learning centers as of the end of the second quarter of 2008.
Cost of revenue for non-online degree programs for the second quarter of 2009 was RMB10.7 million ($1.6 million), representing a 7.5% increase from RMB9.9 million for the corresponding period in 2008. This increase was attributable primarily to increased cost of revenue related to Anqing School's new campus and 101 online tutoring program's investment in YoYo Bear education products, which were partially offset by a decrease in cost of revenue for the international curriculum programs.
(3) "Collaborative alliance" or "Collaborative alliances" refer to the
subsidiary or subsidiaries that the Company formed with certain
university partners to provide services to their online degree
programs, which subsidiaries are majority owned by the Company.
Gross Profit and Gross Margin
Gross profit for the second quarter of 2009 was RMB55.1 million ($8.1 million), representing a 1.9% decrease from RMB56.1 million for the corresponding period of 2008, as a result of the increase in cost of revenue, as discussed above. Total gross margin for the second quarter of 2009 was 62.4% as compared to 70.6% for the corresponding period of 2008. Since most of the recruiting services performed by our learning centers to our university partners are recorded as cost of revenue, our gross margin for the online degree programs segment decreased as a result of our continuous efforts in expanding the learning center network. Furthermore, gross margin for Anqing School and 101 online tutoring programs were negatively impacted by our investment in Anqing School's new campus and investment in YoYo Bear products, respectively, each of which are still in the early stages of development and thus are currently producing less income than expenses associated with such investments.
Operating Expenses
Total operating expenses were RMB33.1 million ($4.8 million) for the second quarter of 2009, representing a 5.7% increase from RMB31.3 million for the corresponding period in 2008. This increase was attributable primarily to increases in general and administrative and research and development expenses, partially offset by a decrease in selling and marketing expenses, each as discussed below.
-- General and administrative expenses for the second quarter of 2009 were
RMB19.7 million ($2.9 million), which represented a 7.1% increase from
RMB18.4 million for the corresponding period of 2008. This increase was
attributable primarily to an increase in performance-based employee
compensation.
-- Selling and marketing expenses were RMB5.4 million ($0.8 million) for
the second quarter of 2009, which represented a 22.6% decrease from
RMB7.0 million for the corresponding period in 2008. This decrease is
attributable primarily to a decrease in the amount spent on general
advertising and promotional activities for our own learning center
operations in the second quarter in 2009.
-- Research and development expenses for the second quarter of 2009 were
RMB7.9 million ($1.2 million), representing a 35.2% increase from
RMB5.8 million for the corresponding period in 2008. This increase was
attributable primarily to increased technological support and platform
upgrades for certain collaborative alliances in order to further
enhance our online degree programs.
-- Share-based compensation for the second quarter of 2009, which was
allocated to the related cost and operating expense line items, was
RMB2.1 million ($0.3 million) as compared to RMB1.7 million for the
corresponding period in 2008. The increase was attributable primarily
to costs related to the repricing of options (as previously approved by
our shareholders) during the current quarter, which resulted in the
recognition of incremental compensation costs.
Income from Operations
As a result of the factors discussed above, income from operations for the second quarter of 2009 was RMB22.0 million ($3.2 million), which decreased by 11.4% from RMB24.9 million for the corresponding period of 2008.
Adjusted income from operations, which is a non-GAAP measure defined as income from operations excluding share-based compensation, amortization of intangible assets and land use rights and goodwill and intangibles impairment charges, if applicable, was RMB25.5 million ($3.7 million) for the second quarter of 2009, which decreased by 11.8% as compared to RMB28.9 million in the corresponding period of 2008. The decrease was attributable primarily to the increase in cost of revenue as discussed above.
Interest Income
Interest income was RMB1.2 million ($0.2 million) in the second quarter of 2009, as compared to RMB2.6 million in the corresponding quarter of 2008. This decrease was attributable primarily to (i) reduced interest-bearing cash and bank deposit balance of RMB311 million as of June 30, 2009, compared to RMB434 million as of June 30, 2008, and (ii) a lower interest rate for the second quarter of 2009 compared to the corresponding period of 2008.
Income Tax Expense
Income tax income for the second quarter was RMB6.3 million ($0.9 million), as compared to income tax expense of RMB9.4 million for the corresponding period in 2008. This was attributable primarily to the fact that, in the fourth quarter of 2008, seven of our subsidiaries and affiliate companies applied and qualified for the "new and high technology enterprises" status under the new Chinese Enterprise Income Tax Regulation, which came into effect on January 1, 2008. As a result of their qualification for the "new and high technology enterprises" status, these subsidiaries received certain tax exemptions and a preferential statutory tax rate of 15%, thereby reducing the effective tax rate for the second quarter of 2009 to 26.3% as compared to 34.9% for the corresponding period in 2008.
Noncontrolling Interest
Noncontrolling interest was RMB8.7 million ($1.3 million) in the second quarter of 2009, representing a 3.5% increase from RMB8.4 million in the corresponding period in 2008, which was attributable primarily to increased profitability of our collaborative alliances related to the online degree programs.
Net Income (loss) attributable to ChinaEdu Corporation
Net income attributable to ChinaEdu Corporation, which is net income excluding net income attributable to noncontrolling interest, was RMB8.9 million ($1.3 million) for the second quarter of 2009, representing a decrease of 3.6% from net income attributable to ChinaEdu Corporation of RMB9.2 million for the corresponding period in 2008. Adjusted net income attributable to ChinaEdu Corporation (non-GAAP) decreased by 6.6% to RMB12.1 million ($1.8 million) for the second quarter of 2009, as compared to RMB13.0 million in the corresponding period of 2008. The decrease in both net income and adjusted net income attributable to ChinaEdu Corporation (non-GAAP) was primarily due to the increase in cost of revenue in the second quarter of 2009 as compared to the corresponding period in 2008.
Due to a reduction in the number of basic and diluted shares outstanding for the second quarter of 2009 compared to the corresponding period in 2008 as a result of the Company's stock repurchase in the first quarter of 2009, basic and diluted EPS were RMB0.18 ($0.03) and RMB0.17 ($0.03), respectively, for the second quarter of 2009, compared to RMB0.16 and RMB0.15, respectively, for the second quarter of 2008. Similarly, basic and diluted adjusted EPS (non-GAAP) were RMB0.25 ($0.04) and RMB0.23 ($0.03), respectively, for the second quarter of 2009, compared to RMB0.22 and RMB0.21, respectively, for the second quarter of 2008.
In addition, basic and diluted net income attributable to CEDU per ADS were RMB0.54 ($0.09) and RMB0.51 ($0.09), respectively, for the second quarter of 2009, compared to RMB0.48 and RMB0.45, respectively, for the corresponding period in 2008. Similarly, basic and diluted adjusted net income attributable to CEDU per ADS were RMB0.75 ($0.12) and RMB0.69 ($0.10), respectively, for the second quarter of 2009, compared to RMB0.66 and RMB0.63, respectively, for the corresponding period in 2008.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA (non-GAAP) was RMB29.5 million ($4.3 million) for the second quarter of 2009, which decreased by 7.3% as compared to RMB31.8 million for the corresponding period in 2008. This decrease was attributable primarily to the increase in cost of revenue, as discussed above.
Deferred Revenue
Deferred revenue at the end of the second quarter of 2009 was RMB101.5 million ($14.9 million), with current deferred revenue of RMB95.3 million ($14.0 million) and non-current deferred revenue of RMB6.2 million ($0.9 million). Deferred revenue at the end of the second quarter of 2009 increased significantly compared to deferred revenue of RMB36.5 million at the end of the first quarter 2009 due to the seasonality of enrollments, which results in tuition being received generally during the second quarter (spring semester) and the fourth quarter (fall semester) of each year.
Cash and Cash Equivalents
As of June 30, 2009, ChinaEdu reported cash and cash equivalents of RMB231.1 million ($33.8 million), which primarily consisted of cash-on-hand, demand deposits and term deposits with maturity periods of three months or less.
Term Deposits and Amount Due from Related Parties
Term deposits and the amount due from related parties (which represents cash owed to us by our collaborative alliance partners) amounted to RMB79.5 million ($11.6 million) and RMB225.7 million ($33.0 million), respectively, on June 30, 2009.
2009 Year-to-Date Financial Results
Net Revenue
For the six months ended June 30, 2009, total net revenue was RMB169.4 million ($24.8 million), representing an increase of 13.6% from RMB149.2 million for the corresponding period in 2008. Total net revenue for the sixth months ended June 30, 2009 consisted of RMB137.2 million ($20.1 million) in net revenue from online degree programs and RMB32.3 million ($4.7 million) in net revenue from non-online degree programs. The growth in total net revenue was attributable primarily to strong enrollment growth for the online degree programs and growth in net revenue at Anqing School and 101 online tutoring programs.
Cost of Revenue
For the first six months of 2009, total cost of revenue was RMB65.8 million ($9.6 million), representing an increase of 38.4% as compared to RMB47.5 million for the corresponding period in 2008, which increase was primarily due to the expansion of our learning centers network, courseware development for selected university partners at our collaborative alliances, and the increase in cost of revenue at Anqing School and 101 online tutoring programs.
Gross Profit
Gross profit for the first six months of 2009 was RMB103.7 million ($15.2 million) as compared with RMB101.6 million for the corresponding period in 2008, representing an increase of 2.0%.
Income from Operations
Income from operations were RMB39.6 million ($5.8 million) for the first six months of 2009, representing an increase of 5.0% from RMB37.7 million for the first six months of 2008.
Net Income (loss) attributable to ChinaEdu Corporation
Net income attributable to ChinaEdu Corporation was RMB18.4 million ($2.7 million) for the first six months of 2009, representing an increase of 63.4% compared with RMB11.3 million for the corresponding period in 2008, primarily due to an increase in income from operations, as well as a decrease in income tax expenses compared to the corresponding period in 2008.
Third Quarter 2009 Total Net Revenue Guidance
For the third quarter of 2009, ChinaEdu expects its total net revenue to be in the range of RMB84 million ($12 million) to RMB88 million ($13 million). This forecast reflects ChinaEdu's current and preliminary view, which is subject to change.
Conference Call
ChinaEdu senior management will host a conference call on Thursday, August 20, 2009 at 8:00 a.m. U.S. Eastern time / 5:00 a.m. U.S. Pacific time / 8:00 p.m. Beijing/Hong Kong time.
The conference call may be accessed by calling (US) 866 383 7989/ (International) +1 617 597 5328/ (HK) +852 3002 1672/ (China) +86 10 800 152 1490, and entering the passcode: 48836701. A telephone replay of the conference call will be available shortly after the call until August 27, 2009 at (US) 888 286 8010/ (International) +1 617 801 6888 and entering passcode: 27031028. A live and archived webcast may be accessed via the Internet at http://ir.chinaedu.net .
Non-GAAP Financial Measures
To supplement the unaudited condensed consolidated financial information presented in accordance with Accounting Principles Generally Accepted in the United States of America ("GAAP"), the Company uses non-GAAP measures of income from operations and net income attributable to ChinaEdu Corporation, 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 goodwill and intangibles impairment charges, if applicable. The Company also uses adjusted EBITDA, which is also a non-GAAP measure and is adjusted from GAAP results of net income to exclude interest income, taxes, depreciation, amortization of intangible assets and land use rights, share-based compensation and goodwill and intangibles impairment charges, if applicable. 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 and support for international curriculum programs.
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 12 long-term, exclusive contracts that generally vary from 15 to 50 years in length. ChinaEdu also performs recruiting services for 17 universities through our 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, 2008, 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.
ChinaEdu Corporation
Unaudited Condensed Consolidated Balance Sheets
December
31, 2008 As June 30, June 30,
(in thousands, unaudited) Adjusted(2) 2009 2009
RMB RMB US$
Current assets:
Cash and cash equivalents 353,933 231,132 33,840
Accounts receivable, net 14,854 24,965 3,655
Term deposits 63,500 79,491 11,638
Inventory -- 1,077 158
Prepaid expenses and other current
assets 20,251 15,937 2,333
Amounts due from related parties 150,472 225,734 33,049
Deferred tax assets 3,986 1,640 240
Total current assets 606,996 579,976 84,913
Cost method investment 1,210 1,210 177
Land use rights, net 28,344 28,178 4,126
Property and equipment, net 161,925 190,034 27,823
Deposits paid for acquisition of
property and equipment 8,619 8,619 1,262
Intangible assets, net 70,377 67,884 9,939
Deferred tax assets 2,096 3,043 446
Rental deposits 958 863 126
Goodwill 38,155 38,155 5,586
Total assets 918,680 917,962 134,398
Liabilities and equity
Current liabilities:
Accounts payable 8,530 6,988 1,023
Deferred revenues 96,068 95,376 13,964
Accrued expenses and other current
liabilities 51,629 52,243 7,649
Amounts due to related parties 25,769 53,872 7,887
Income taxes payable 27,917 23,458 3,434
Other taxes payable 12,008 11,724 1,716
Total current liabilities 221,921 243,661 35,673
Deferred revenues 6,073 6,156 901
Deferred tax liabilities 11,069 10,640 1,558
Unrecognized tax benefit 5,473 7,454 1,091
Total liabilities 244,536 267,911 39,223
Total shareholders' equity: 589,829 552,582 80,905
Noncontrolling interest(1) 84,315 97,469 14,270
Total equity 674,144 650,051 95,175
Total liabilities and equity 918,680 917,962 134,398
(1) Effective January 1, 2009, the Company adopted SFAS 160 (Statement of
Financial Accounting Standards No. 160, "Noncontrolling Interests in
Consolidated Financial Statements"). SFAS 160, which was
retrospectively applied, requires noncontrolling interests to be
separately presented as a component of stockholders' equity on the
unaudited condensed consolidated financial statements.
(2) December 31, 2008 balances were extracted from the form 6-K for the
quarters ended December 31, 2008, as adjusted to reflect the adoption
of SFAS 160.
ChinaEdu Corporation
Unaudited Condensed Consolidated Statements of Operations
Three Months Ended
(in thousands, except for June 30,
percentage, share, and per 2008 As March June 30, June 30,
share information) Adjusted(3) 31, 2009 2009 2009
RMB RMB RMB US$
Net Revenue:
Online degree programs 65,124 65,764 71,447 10,460
International curriculum
programs 6,587 5,583 5,213 763
Online tutoring programs 4,078 3,592 4,704 689
Private primary and
secondary schools 3,732 6,231 6,911 1,012
Total net revenue 79,521 81,170 88,275 12,924
Cost of revenue:
Online degree programs 13,461 22,683 22,537 3,300
International curriculum
programs 5,674 2,948 2,793 409
Online tutoring programs 995 1,441 1,624 238
Private primary and
secondary schools 3,249 5,498 6,243 914
Total cost of revenue 23,379 32,570 33,197 4,861
Gross profit:
Online degree programs 51,663 43,081 48,910 7,160
International curriculum
programs 913 2,635 2,420 354
Online tutoring programs 3,083 2,151 3,080 451
Private primary and
secondary schools 483 733 668 98
Total gross profit 56,142 48,600 55,078 8,063
Online degree programs 79.3% 65.5% 68.5% 68.5%
International curriculum
programs 13.9% 47.2% 46.4% 46.4%
Online tutoring programs 75.6% 59.9% 65.5% 65.5%
Private primary and
secondary schools 12.9% 11.8% 9.7% 9.7%
Gross margin 70.6% 59.9% 62.4% 62.4%
Operating expenses:
General and administrative 18,433 19,583 19,742 2,890
Selling and marketing 7,017 4,910 5,434 796
Research and development 5,830 6,571 7,882 1,154
Total operating expenses 31,280 31,064 33,058 4,840
Income from operations 24,862 17,536 22,020 3,223
Operating margin 31.3% 21.6% 24.9% 24.9%
Other income 145 626 625 92
Interest income 2,605 1,672 1,182 173
Interest expense (585) -- -- --
Income before income tax
provisions 27,027 19,834 23,827 3,488
Income tax expense (9,425) (2,708) (6,257) (916)
Net income 17,602 17,126 17,570 2,572
Net income attributable to
the noncontrolling
interest (8,415) (7,562) (8,710) (1,275)
Net income attributable to
ChinaEdu Corporation 9,187 9,564 8,860 1,297
Net margin 11.6% 11.8% 10.0% 10.0%
Net income attributable to
CEDU per share:
Basic 0.16 0.19 0.18 0.03
Diluted 0.15 0.18 0.17 0.03
Net income attributable to
CEDU per ADS:
Basic 0.48 0.57 0.54 0.09
Diluted 0.45 0.54 0.51 0.09
Weighted average aggregate
number of ordinary shares
outstanding:
Basic 58,434,407 49,983,675 48,285,473 48,285,473
Diluted 61,813,068 52,919,048 51,595,566 51,595,566
Six Months Ended
(in thousands, except for June 30,
percentage, share, and 2008 As June 30, June 30,
per share information) Adjusted(3) 2009 2009
RMB RMB US$
Net Revenue:
Online degree programs 120,084 137,211 20,089
International curriculum
programs 14,129 10,796 1,581
Online tutoring programs 7,355 8,296 1,215
Private primary and
secondary schools 7,608 13,142 1,924
Total net revenue 149,176 169,445 24,809
Cost of revenue:
Online degree programs 28,763 45,220 6,621
International curriculum
programs 10,439 5,741 841
Online tutoring programs 1,722 3,065 449
Private primary and
secondary schools 6,610 11,741 1,719
Total cost of revenue 47,534 65,767 9,630
Gross profit:
Online degree programs 91,321 91,991 13,468
International curriculum
programs 3,690 5,055 740
Online tutoring programs 5,633 5,231 766
Private primary and
secondary schools 998 1,401 205
Total gross profit 101,642 103,678 15,179
Online degree programs 76.0% 67.0% 67.0%
International curriculum
programs 26.1% 46.8% 46.8%
Online tutoring programs 76.6% 63.1% 63.1%
Private primary and
secondary schools 13.1% 10.7% 10.7%
Gross margin 68.1% 61.2% 61.2%
Operating expenses:
General and administrative 39,348 39,325 5,758
Selling and marketing 12,879 10,344 1,514
Research and development 11,728 14,453 2,116
Total operating expenses 63,955 64,122 9,388
Income from operations 37,687 39,556 5,791
Operating margin 25.3% 23.3% 23.3%
Other income 296 1,251 183
Interest income 5,353 2,854 418
Interest expense (1,191) -- --
Income before income tax
provisions 42,145 43,661 6,392
Income tax expense (14,325) (8,965) (1,313)
Net income 27,820 34,696 5,079
Net income attributable to
the noncontrolling
interest (16,546) (16,272) (2,382)
Net income attributable to
ChinaEdu Corporation 11,274 18,424 2,697
Net margin 7.6% 10.9% 10.9%
Net income attributable to
CEDU per share:
Basic 0.19 0.38 0.05
Diluted 0.18 0.35 0.05
Net income attributable to
CEDU per ADS:
Basic 0.57 1.14 0.15
Diluted 0.54 1.05 0.15
Weighted average aggregate
number of ordinary shares
outstanding:
Basic 58,434,407 49,129,883 49,129,883
Diluted 62,298,037 52,252,616 52,252,616
(3) Amounts were extracted from Form 6-K for the quarter ended June 30,
2008, as adjusted resulting from the adoption of Statement of
Financial Accounting Standards No. 160.
ChinaEdu Corporation
Unaudited Condensed Consolidated Statements of Cash Flow
Three Months Ended
June March June June
(in thousands) 30, 2008 31, 2009 30, 2009 30, 2009
RMB RMB RMB US$
Operating activities:
Net income 17,602 17,126 17,570 2,572
Share-based compensation 1,671 2,262 2,055 301
Depreciation 2,903 3,941 3,983 583
Amortization of land use rights 141 163 152 22
Amortization of intangible
assets 2,262 1,686 1,308 192
Accounts receivable write-off -- 62 347 51
Loss from disposal of property
and equipment -- 78 15 2
Deferred income taxes 1,281 1,795 (825) (121)
Accounts receivable (12,324) 10,378 (20,898) (3,060)
Inventory -- -- (1,077) (158)
Prepaid expenses and other
current assets 8,093 (1,881) 6,188 906
Amounts due from related parties (98,677) 46,384 (111,046) (16,258)
Rental deposits (266) 47 48 7
Land use right -- (949) (1,040) (152)
Accounts payable 91 1,084 1,772 259
Deferred revenues 57,371 (65,617) 65,006 9,517
Accrued expenses and other
current liabilities 2,283 (2,046) 2,648 388
Amounts due to related parties 24,705 1,005 24,840 3,637
Unrecognized tax benefit 136 348 1,633 239
Other taxes payable 2,156 (4,533) 4,249 622
Income tax payable 7,970 (9,229) 4,770 698
Net cash provided by (used in)
operating activities 17,398 2,104 1,698 247
Investing activities:
Purchase of business (4,000) -- -- --
Purchase of property and
equipment (11,240) (10,605) (29,919) (4,380)
Deposits paid for acquisition of
property and equipment (979) -- -- --
Purchase of term deposit (25,000) (31,008) 15,008 2,197
Purchase of contractual right (1,225) (500) -- --
Proceeds from disposal of
property and equipment -- -- -- --
Net cash provided by (used in)
investing activities (42,444) (42,113) (14,911) (2,183)
Financing activities:
Repurchase of ordinary shares -- (61,647) -- --
Repayment of long-term loan
interest and principal (1,091) -- -- --
Cash dividends paid to
noncontrolling shareholders -- (10,600) -- --
Capital contributions by
noncontrolling shareholders 1,225 980 -- --
Proceeds from exercise of
options -- 713 711 104
Net cash provided by (used in)
financing activities 134 (70,554) 711 104
Effect of foreign exchange rate
changes (6,330) 340 (76) (9)
CASH AND CASH EQUIVALENTS, beginning
of period 431,979 353,933 243,710 35,681
CASH AND CASH EQUIVALENTS, end of
period 400,737 243,710 231,132 33,840
Net increase (decrease) in cash (31,242) (110,223) (12,578) (1,841)
Six Months Ended
(in thousands) June June June
30, 2008 30, 2009 30, 2009
RMB RMB US$
Operating activities:
Net income 27,820 34,696 5,079
Share-based compensation 2,054 4,317 632
Depreciation 5,637 7,924 1,160
Amortization of land use rights 282 315 46
Amortization of intangible
assets 4,517 2,994 438
Accounts receivable write-off -- 409 60
Loss from disposal of property
and equipment -- 93 14
Deferred income taxes 7,137 970 142
Accounts receivable (12,487) (10,520) (1,540)
Inventory -- (1,077) (158)
Prepaid expenses and other
current assets 707 4,307 631
Amounts due from related parties (63,088) (64,662) (9,467)
Rental deposits 562 95 14
Land use right -- (1,989) (291)
Accounts payable (56) 2,856 418
Deferred revenues (112) (611) (89)
Accrued expenses and other
current liabilities (7,831) 602 88
Amounts due to related parties 12,653 25,845 3,784
Unrecognized tax benefit 269 1,981 290
Other taxes payable (2,151) (284) (42)
Income tax payable 788 (4,459) (653)
Net cash provided by (used in)
operating activities (23,299) 3,802 556
Investing activities:
Purchase of business (4,000) -- --
Purchase of property and
equipment (19,725) (40,524) (5,933)
Deposits paid for acquisition of
property and equipment (1,010) -- --
Purchase of term deposit (26,958) (16,000) (2,343)
Purchase of contractual right (1,225) (500) (73)
Proceeds from disposal of
property and equipment 31 -- --
Net cash provided by (used in)
investing activities (52,887) (57,024) (8,349)
Financing activities:
Repurchase of ordinary shares -- (61,647) (9,026)
Repayment of long-term loan
interest and principal (2,156) -- --
Cash dividends paid to
noncontrolling shareholders -- (10,600) (1,552)
Capital contributions by
noncontrolling shareholders 1,225 980 143
Proceeds from exercise of
options -- 1,424 208
Net cash provided by (used in)
financing activities (931) (69,843) (10,227)
Effect of foreign exchange rate
changes (19,260) 264 41
CASH AND CASH EQUIVALENTS, beginning
of period 497,114 353,933 51,819
CASH AND CASH EQUIVALENTS, end of
period 400,737 231,132 33,840
Net increase (decrease) in cash (96,377) (122,801) (17,979)
ChinaEdu Corporation
Reconciliations of non-GAAP results of operations measures to
GAAP measures
Three Months Ended
June March June June
(in thousands, unaudited) 30, 2008 31, 2009 30, 2009 30, 2009
RMB RMB RMB US$
Income (loss) from
operations
GAAP Result 24,862 17,536 22,020 3,223
Share-based compensation 1,671 2,262 2,055 301
Amortization 2,403 1,849 1,460 214
Adjusted income from
operations (Non-GAAP) 28,936 21,647 25,535 3,738
Adjusted operating margin 36.4% 26.7% 28.9% 28.9%
Net income (loss)
attributable to ChinaEdu
Corporation
GAAP Result 9,187 9,564 8,860 1,297
Share-based compensation 1,671 2,262 2,055 301
Share-based compensation
attributable to the
noncontrolling interest (305) (296) (278) (41)
Amortization 2,403 1,849 1,460 214
Adjusted net income
attributable to ChinaEdu
Corporation (Non-GAAP) 12,956 13,379 12,097 1,771
Adjusted net margin 16.3% 16.5% 13.7% 13.7%
Adjusted net income per
share:
Basic 0.22 0.27 0.25 0.04
Diluted 0.21 0.25 0.23 0.03
Weighted average aggregate
number of ordinary shares
outstanding:
Basic 58,434,407 49,983,675 48,285,473 48,285,473
Diluted 61,813,068 52,919,048 51,595,566 51,595,566
Six Months Ended
June June June
(in thousands, unaudited) 30, 2008 30, 2009 30, 2009
RMB RMB US$
Income (loss) from
operations
GAAP Result 37,687 39,556 5,791
Share-based compensation 2,054 4,317 632
Amortization 4,799 3,309 484
Adjusted income from
operations (Non-GAAP) 44,540 47,182 6,907
Adjusted operating margin 29.9% 27.8% 27.8%
Net income (loss)
attributable to ChinaEdu
Corporation
GAAP Result 11,274 18,424 2,697
Share-based compensation 2,054 4,317 632
Share-based compensation
attributable to the
noncontrolling interest (389) (574) (84)
Amortization 4,799 3,309 484
Adjusted net income
attributable to ChinaEdu
Corporation (Non-GAAP) 17,738 25,476 3,729
Adjusted net margin 11.9% 15.0% 15.0%
Adjusted net income per
share:
Basic 0.30 0.52 0.08
Diluted 0.28 0.49 0.07
Weighted average aggregate
number of ordinary shares
outstanding:
Basic 58,434,407 49,129,883 49,129,883
Diluted 62,298,037 52,252,616 52,252,616
Adjusted income from operations, which is a non-GAAP measure defined as income from operations excluding share-based compensation, amortization of intangible assets and land use rights and goodwill and intangibles impairment, if applicable.
Adjusted net income attributable to ChinaEdu Corporation, which is a non-GAAP measure defined as net income attributable to the ChinaEdu Corporation excluding share-based compensation, noncontrolling interest for share-based compensation, amortization of intangible assets and land use rights and goodwill and intangibles impairment charges, if applicable.
ChinaEdu Corporation
Reconciliation from net income to adjusted EBITDA (*)
Three Months Ended
June March 31, June June 30,
(in thousands, unaudited) 30, 2008 2009 30, 2009 2009
RMB RMB RMB US$
Net income 17,602 17,126 17,570 2,572
Income tax provision 9,425 2,708 6,257 916
Interest income and other, net (2,165) (2,298) (1,807) (265)
Depreciation 2,903 3,941 3,983 583
Amortization 2,403 1,849 1,460 214
Share-based compensation 1,671 2,262 2,055 301
Adjusted EBITDA 31,839 25,588 29,518 4,321
Adjusted EBITDA margin 40.0% 31.5% 33.4% 33.4%
Six Months Ended
(in thousands, unaudited) June June 30, June
30, 2008 2009 30, 2009
RMB RMB US$
Net income 27,820 34,696 5,079
Income tax provision 14,325 8,965 1,313
Interest income and other, net (4,458) (4,105) (601)
Depreciation 5,637 7,924 1,160
Amortization 4,799 3,309 484
Share-based compensation 2,054 4,317 632
Adjusted EBITDA 50,177 55,106 8,067
Adjusted EBITDA margin 33.6% 32.5% 32.5%
Adjusted EBITDA, which is a non-GAAP measure defined as earnings before interest income, taxes, depreciation, amortization of intangible assets and land use rights, share-based compensation and goodwill and intangibles impairment charges, if applicable.
For further information, please contact:
ChinaEdu Corporation
Lily Liu, CFO
Phone: +86-10-8418-6655 x1002
Email: ir@chinaedu.net
S. Jimmy Xia, IR Manager
Phone: +86-10-8418-6655 x1150
Email: ir@chinaedu.net
SOURCE ChinaEdu Corporation
http://ir.chinaedu.net
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