China Education Alliance, Inc. Announces Strong Second Quarter 2010 Financial Results
HARBIN, China, Aug. 11 /PRNewswire-Asia-FirstCall/ -- China Education Alliance, Inc. (NYSE: CEU) today announced strong financial results for the three and six months ended June 30, 2010. The Company will host a conference call Wednesday, August 11, 2010, at 10:00 a.m. EST to discuss these results.
Financial Highlights for the Three Months Ended June 30, 2010
-- Total revenue increased 33.7% year-over-year to $10.85 million,
compared to revenue of $8.12 million in the second quarter of fiscal
2009.
-- Net income increased 29.9% year-over-year to $4.26 million, compared to
net income of $3.28 million in the second quarter of fiscal 2009.
-- EPS was $0.14 per fully diluted share, compared to $0.13 in the second
quarter of fiscal 2009.
-- Operating income totalled $4.74 million, compared to $3.72 million same
period in fiscal 2009.
-- Gross profit rose 39.0% to $9.06 million or 83.4% of sales, compared to
80.2% of sales or $6.51 million in the second quarter of fiscal 2009.
"We are pleased to again report solid revenue and earnings growth driven largely by strong demand for our exam-oriented educational services and our vocational training programs in China," stated Xiqun Yu, Chief Executive Officer of China Education Alliance, Inc. "We remain optimistic about the opportunities for continued growth in both our supplemental education resources and in IT and professional training programs offered through our vocational centers. We remain focused on our expansion efforts into new geographic markets, which will be supported by enhanced marketing strategies to develop our core businesses. We are confident in achieving 30 percent revenue growth for the full year 2010, based on strong enrolment for our online educational services and our vocational training services."
Financial results for the three months ended June 30, 2010
China Education Alliance reported total revenue of $10.85 million for the second quarter ended June 30, 2010, an increase of 33.7% compared to $8.12 million for the second quarter of 2009. The Company's online education business generated 68.1% of its total revenue in the second quarter of 2010 compared to 67.4% for the same prior-year period. Its training center business generated 27.0% of total revenue in the second quarter of 2010 compared to 24.7% for the same prior-year period; other business, including advertising, generated the remaining 4.9% of total revenue in the second quarter of 2010, compared to 7.9% for the same prior-year period.
Online education revenue was $7.39 million for the second quarter of 2010, an increase of 35.0% compared to $5.47 million for the second quarter of 2009.
Training center revenue in the second quarter of 2010 was $2.93 million, up 46.0% from $2.01 million in the second quarter last year.
Other revenue, including advertising, was approximately $0.53 million for the second quarter of 2010, decreased by 16.6% from $0.64 million in the second quarter last year.
Net income for the second quarter of fiscal 2010 was $4.26 million, representing an increase of 29.9% over second quarter 2009 net income of $3.28 million. The increase was largely the result of strong development in the Company's online division and training center division. Diluted earnings per share were $0.14, compared with $0.13 in the same period last year. 31.36 million shares were utilized for the calculations in the second quarter of 2010 compared to 25.09 million for the year ago period.
Operating income in the second quarter of fiscal 2010 increased to $4.74 million, from $3.72 million in the same period a year ago. Operating margin was 43.7% in the second quarter of fiscal 2010.
Overall cost of sales increased 11.9% to $1.80 million in the second quarter of fiscal 2010, compared to $1.61 million for the same period in fiscal 2009. Gross profit increased to $9.06 million in the second quarter of fiscal 2010, an increase of 39.0% from $6.51 million for the same quarter in fiscal 2009. Gross margin for the second quarter of fiscal 2010 was 83.4%, as compared to 80.2% for the same quarter a year ago. The online education gross margin increased to 84.7% in the second quarter of fiscal 2010 from 81.1% for the same period in fiscal 2009. The training center gross margin increased to 78.5% for the second quarter of fiscal 2010 from 75.0% for the same period last year. Other area gross margin was 93.1% in the second quarter of fiscal 2010, up from 89.1% of the second quarter of last year.
Selling expenses increased 82.5% to approximately $3.48 million for the second quarter of fiscal 2010, compared to $1.91 million in the second quarter of 2009, due to increased expenses in our marketing team and higher debit card agency expenses. General and administrative ("G&A") expenses were approximately $0.57 million for the second quarter of fiscal 2010, a decrease from $0.64 million in the second quarter of fiscal 2009, primarily due to prudent expense control. As a percentage of revenue, selling expenses took 32.1% of the total revenue in the second quarter 2010 compared to 23.5% the same period of last year; G&A expenses at 5.3% of total revenue in the second quarter 2010 compared to 7.9% the same period of last year.
Financial results for the six months ended June 30, 2010
Revenue for the six months ended June 30, 2010 was $19.47 million, representing an increase of 19.3% compared to the same six-month period in 2009. Online education revenue was $12.62 million for the six months ended June 30, 2010, representing an increase of 22.5% from $10.30 million for the same six-month period in 2009. Training center revenue in the six months ended June 30, 2010, was $5.79 million, representing an increase of 27.1% from $4.56 million in the same six-month period last year. The increase was largely the result of strong development in the Company's online education and onsite training centers divisions.
Other revenue was approximately $1.06 million for the six months ended June 30, 2010, representing a decrease of 27.6% from $1.47 million for the same prior-year, six-month period. As other revenue, mainly advertising, is not the focus of the business, the company does not expect to see significant changes in the current level of advertising revenue during this year.
Net income for the six months ended June 30, 2010 was $7.92 million, representing an increase of 20.8% over the same six-month period in 2009 net income of $6.56 million. Diluted earnings per share for the six months ended June 30, 2010 was $0.25, compared with $0.27 in the same period of 2009. 31.38 million shares were utilized for the calculations for the first half of 2010, compared to 24.46 million for the year-ago period.
Financial Condition
As of June 30, 2010, China Education Alliance had approximately $74.69 million in cash, $75.20 million in working capital, and no long-term debt. Shareholders' equity was approximately $83.86 million, an increase of $8.52 million from approximately $75.34 million on December 31, 2009. The Company generated $10.13 million in cash flow from operating activities in the second quarter of 2009.
Business Outlook
The management team at CEU believes the domestic education industry in China will remain a fast-growth sector. The Company has experienced rapid growth by providing online and onsite, supplemental educational training services to students ages 6 to 18 and vocational training services to adults ages 18 and up.
For students ages 6 to 18, the Company provides downloadable course material and test papers online and classroom instructions onsite. All the online course material and test papers and onsite classroom instructions are provided by famed instructors in the People's Republic of China, with the purpose of helping the students pass the two most important exams during their academic life: the high school and college entrance exams.
For adults ages 18 and up, the Company provides various vocational training including IT and other professional training programs.
China Education Alliance has two primary business lines:
1. For students ages 6 to 18, the Company offers exam-oriented primary
and secondary school supplemental education, with online educational
resources available for students to download through the Internet, and
is supported by highly regarded instructors who offer onsite support.
The Company's online educational resources are provided through its
website, http://www.edu-chn.com , which is a comprehensive education
network platform that utilizes video-on-demand technology and houses a
large database that includes more than 350,000 exams and test papers,
as well as courseware for secondary and elementary schools. The
Company has expanded its business network from Heilongjiang province
to Jilin, Liaoning and Inner Mongolia provinces, and it is focused on
optimizing market share in these regions, while evaluating new
geographic areas to penetrate in the future.
2. For adults over the age of 18, the Company offers onsite vocational
training through various programs at its main center in Harbin, in
addition to online services through its strategic partnerships with
professional organizations such as the National Association of
Vocation Education Society of China (NAVEC). The Company is focused on
its Heilongjiang-based, self-run vocational education market, which
includes IT training and other professional training programs.
In addition to these primary businesses, the Company is also invested in the publishing and circulation of an educational newspaper, Scientific Discovery, which is enjoying a growing distribution, currently estimated at 60,000.
On February 4, 2010, the Company announced the acquisition of the Beijing Shifan Culture Communication Co., Ltd. and, as a consequence, the establishment of a new entity, Beijing New Shifan Education & Technology. Beijing Shifan's publication, the "Senior High School Students Mathematic, Physics, and Chemistry" magazine, which is endorsed by the China's Ministry of Education, and its popular nationwide academic contest for middle school and high school students, is expected to accelerate the marketing efforts of the Company and provide a platform to access markets nationwide.
"We continue to focus on marketing our online test-preparation materials and our vocational training efforts to new markets as we see significant growth in the areas we currently serve. We remain committed to our goals for business development, including the introduction of new materials and curriculums which will assist the students and adults we serve in meeting their education and career goals. We remain very confident in our strategy, and will utilize operating leverage in our model to generate incremental cash flow as we continue to grow our business," said Mr. Xiqun Yu.
Conference Call and Webcast Details
The Company will host a conference call to discuss financial results for the second quarter ended June 30, 2010 on Wednesday, August 11, 2010 at 10:00 a.m. Eastern Daylight Time (7:00 a.m. Pacific).
To participate in the call, please dial (877) 941-8602, or (480) 629-9811 for international calls, approximately 10 minutes prior to the scheduled start time. Interested parties may also listen via a live Internet webcast, which can be found at the Company's website at http://www.chinaeducationalliance.com .
A replay of the call will be available for two weeks from 1:00 p.m. EDT on August 11, 2010, until 11:59 p.m. EDT on August 25, 2010. The number for the replay is (877) 870-5176, or (858) 384-5517 for international calls. The passcode for the replay is 4346251. In addition, a recording of the call will be available via the company's website at http://www.chinaeducationalliance.com for one year.
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.
Safe Harbor Statement
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release, constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding our ability to prepare the company for growth, the Company's planned expansion in 2009 and predictions and guidance relating to the Company's future financial performance. We have based these forward- looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs and are not a guarantee of future performance but they involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, which may include, but are not limited to, such factors as unanticipated changes in product demand especially in the education industry, pricing and demand trends for the Company's products, changes to government regulations, risk associated with operation of the Company's new facilities, risk associated with large scale implementation of the company's business plan, the ability to attract new customers, ability to increase its product's applications, cost of raw materials, downturns in the Chinese economy, the adoption by consumers of its new game business, the unproven advertising model that is dependent on attracting a large game user base, and other information detailed from time to time in the Company's filings and future filings with the United States Securities and Exchange Commission. Investors are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release, readers are cautioned not to place undue reliance on any of them and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.
-- Financial tables follow --
China Education Alliance, Inc. and Subsidiaries
Consolidated Balance Sheets
June 30, December 31,
2010 2009
(Unaudited) (Audited)
ASSETS
Current Assets
Cash and cash equivalents $74,690,538 $65,035,332
Accounts receivable 1,546,937 1,274,727
Prepaid expenses 1,979,032 2,692,310
Total current assets 78,216,507 69,002,369
Property and equipment, net 6,038,568 6,589,982
Intangibles and capitalized
software, net 1,362,027 737,761
Advance on acquisition 932,000 932,000
Long-term investment 333,512 341,686
$86,882,614 $77,603,798
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued
expenses $2,175,755 $1,255,991
Deferred revenues 842,908 1,008,884
Total current liabilities 3,018,663 2,264,875
Stockholders' Equity
Preferred stock ($0.001 par value,
20,000,000 shares authorized, 0
and 4,502,142 issued and
outstanding, respectively,
aggregate liquidation preference
of 0 and $1,665,793, respectively) -- 1,867,644
Common stock ($0.001 par value,
150,000,000 shares authorized,
31,654,581 and 30,040,954 issued
and outstanding, respectively) 31,655 30,041
Additional paid-in capital 40,592,789 38,231,623
Statutory reserve 3,016,143 3,016,143
Accumulated other comprehensive
income 3,055,752 2,886,087
Retained earnings 37,964,599 30,044,687
Stockholders' equity - China
Education Alliance, Inc. and
Subsidiaries 84,660,938 76,076,225
Noncontrolling interests in
subsidiaries (796,987) (737,302)
Total stockholders' equity 83,863,951 75,338,923
$86,882,614 $77,603,798
The accompanying notes are an integral part of these consolidated
financial statements.
China Education Alliance, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three months ended Six months ended
June 30, June 30,
2010 2009 2010 2009
Revenues
Online education revenues $7,386,469 $5,470,628 $12,617,532 $10,300,116
Training center revenues 2,932,222 2,007,947 5,789,419 4,555,046
Other Revenues 533,405 639,798 1,062,879 1,467,290
Total revenue 10,852,096 8,118,373 19,469,830 16,322,452
Cost of Goods Sold
Online education costs 1,128,927 1,034,312 2,242,485 2,233,419
Training center costs 630,956 501,789 1,262,925 1,366,439
Other costs 37,060 69,775 77,837 124,914
Total cost of goods sold 1,796,943 1,605,876 3,583,247 3,724,772
Gross Profit
Online education gross
profit 6,257,542 4,436,316 10,375,047 8,066,697
Training center gross
profit 2,301,266 1,506,158 4,526,494 3,188,607
Other gross profit 496,345 570,023 985,042 1,342,376
Total gross profit 9,055,153 6,512,497 15,886,583 12,597,680
Operating Expenses
Selling expenses 3,478,810 1,906,494 5,719,764 4,117,182
Administrative 572,847 639,361 1,027,040 894,112
Depreciation and
amortization 264,663 244,898 497,474 490,351
Total operating expenses 4,316,320 2,790,753 7,244,278 5,501,645
Other Income (Expense)
Other income 2,245 -- 21,138 --
Interest income 50,842 25,783 97,535 48,539
Investment loss (6,076) (3,678) (7,606) (4,089)
Total other income 47,011 22,105 111,067 44,450
Net Income Before
Provision for Income Tax 4,785,844 3,743,849 8,753,372 7,140,485
Provision for Income
Taxes 549,966 507,977 893,145 675,132
Net Income 4,235,878 3,235,872 7,860,227 6,465,353
Net loss attributable to
the noncontrolling
interests (21,162) (40,964) (59,685) (90,290)
Net Income - attributable
to CEU and Subsidiaries $4,257,040 $3,276,836 $7,919,912 $6,555,643
Basic Earnings Per Share $0.14 $0.15 $0.25 $0.30
Diluted Earnings Per Share $0.14 $0.13 $0.25 $0.27
Basic Weighted Average
Shares Outstanding 31,323,734 21,930,272 31,323,734 21,930,272
Diluted Weighted Average
Shares Outstanding 31,363,255 25,085,474 31,377,877 24,459,405
The Components of Other
Comprehensive Income
Net income $4,257,040 $3,276,836 $7,919,912 $6,555,643
Foreign currency
translation adjustment 242,100 (148,642) 169,665 (186,726)
Comprehensive Income $4,499,140 $3,128,194 $8,089,577 $6,368,917
The accompanying notes are an integral part of these consolidated
financial statements.
China Education Alliance, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Six Months Ended June 30,
2010 2009
Cash flows from operating
activities
Net Income $7,860,227 $6,465,353
Adjustments to reconcile net
income to net cash provided by
Operating activities
Depreciation and amortization 913,654 663,830
Stock based compensation 157,730 332,256
Loss on equity investment 8,174 4,089
Net change in assets and
liabilities
Account receivables (272,210) (626,926)
Prepaid expenses and other 713,278 1,285,913
Advances to related parties -- 215,308
Accounts payable and accrued
liabilities 919,764 247,341
Deferred revenue (165,976) (186,509)
Net cash provided by operating
activities 10,134,641 8,400,655
Cash flows from investing activities
Purchases of property and
equipment (110,111) (348,837)
Acquisition of intangible asset (876,395) --
Long-term investment -- 227,964
Net cash used in investing activities (986,506) (120,873)
Cash flows from financing activities
Warrants exercised 298,749 --
Options exercised 38,657 --
Net cash provided by financing
activities 337,406 --
Effect of exchange rate 169,665 (188,885)
Net increase in cash 9,655,206 8,090,897
Cash and cash equivalents at
beginning period 65,035,332 23,418,098
Cash and cash equivalents at end
period $74,690,538 $31,508,995
Supplemental disclosure of cash
flow information
Taxes paid $2,719,163 $329,981
Non-cash investing and financing
activities
Conversion of preferred stock
to common $1,867,644 $125,000
The accompanying notes are an integral part of these consolidated
financial statements.
This information is intended to be reviewed in conjunction with the
Company's filings with the Securities and Exchange Commission.
For more information, please contact:
At the Company:
Zack Pan, CFO
China Education Alliance, Inc.
Phone: +1-405-315-9987
Email: [email protected]
[email protected]
SOURCE China Education Alliance, Inc.
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