ChinaEdu Reports Second Quarter 2010 Results
Second Quarter Net Revenue Exceeding Guidance with 12.7% Growth Year-Over-Year; Net income per diluted ADS is $0.115, Exceeding Analyst Consensus
Live Conference Call to be held on Thursday, August 19, 2010 at 8 a.m. (Eastern) / 5 a.m. (Pacific) / 8 p.m. (Beijing/Hong Kong)
BEIJING, Aug. 18 /PRNewswire-Asia-FirstCall/ -- ChinaEdu Corporation (Nasdaq: CEDU) ("ChinaEdu" or the "Company"), an educational services provider in China, today announced its unaudited financial results for the second quarter ended June 30, 2010.(1)
(in thousands, unaudited) Three Months Ended Six Months Ended
Period Year
Period ended June 30, June 30, over June 30, June 30, over
2009 2010 Period % 2009 2010 Year %
Currency USD USD USD USD
Financial Data:
Net revenue 13,017 14,675 12.7% 24,986 27,546 10.2%
Gross profit 8,122 9,519 17.2% 15,288 17,769 16.2%
Income from operations 3,247 4,215 29.8% 5,833 7,093 21.6%
Net income attributable
to ChinaEdu 1,306 1,996 52.8% 2,717 3,065 12.8%
Adjusted EBITDA (2)
(non-GAAP) 4,353 5,241 20.4% 8,126 9,306 14.5%
Adjusted net income
attributable to
ChinaEdu (3)
(non-GAAP) 1,784 2,178 22.1% 3,757 3,707 -1.3%
Net income attributable
to ChinaEdu per ADS (4) 0.080 0.125 56.3% 0.168 0.192 14.3%
Adjusted net income
attributable to
ChinaEdu per ADS (5)
(non-GAAP) 0.111 0.136 22.5% 0.230 0.232 0.9%
Net income attributable
to ChinaEdu per
diluted ADS 0.075 0.115 53.3% 0.155 0.176 13.5%
Adjusted net income
attributable to
ChinaEdu per diluted
ADS (6) (non-GAAP) 0.103 0.125 21.4% 0.215 0.213 -0.9%
Operating Data:
Revenue students (7)
for online
degree program 147,000 157,000 6.8% 147,000 157,000 6.8%
(1) The reporting currency of the Company is RMB, but for the convenience
of the reader, the amounts for the three and six months ended on June
30, 2009 and June 30, 2010 are presented in U.S. dollars. Unless
otherwise stated, all translations from RMB to U.S. dollars were made
at the rate of RMB6.7815 to $1.00, the noon buying rate in effect on
June 30, 2010 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 EBITDA" is a non-GAAP measure defined as net income before
interest income, taxes, depreciation, amortization of intangible
assets and land use rights and share-based compensation.
(3) "Adjusted net income attributable to ChinaEdu" is a non-GAAP measure
defined as net income attributable to ChinaEdu excluding share-based
compensation net of noncontrolling interest portion, and amortization
of intangible assets and land use rights.
(4) "ADS" is American Depositary Share. Each ADS represents three ordinary
shares.
(5) "Adjusted net income attributable to ChinaEdu per ADS" is a non-GAAP
measure which is computed using adjusted net income attributable to
ChinaEdu over number of ADSs used in net income attributable to
ChinaEdu per ADS calculation.
(6) "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 number of ADSs used in net income
attributable to ChinaEdu per diluted ADS calculation.
(7) "Revenue students" refer to students of university online degree
programs who have paid tuitions in spring 2009 and spring 2010.
Second Quarter 2010 Highlights
-- Total net revenue grew by 12.7% to $14.7 million for the second quarter
of 2010 from $13.0 million for the corresponding period in 2009,
exceeding our guidance for the second quarter of 2010 of $13.3 million
to $14.2 million.
-- Net revenue from online degree programs increased by 12.2% to $11.8
million for the second quarter of 2010 from $10.5 million for the
corresponding period in 2009.
-- The number of revenue students in online degree programs during 2010
spring semester increased by approximately 6.8% to over 157,000 from
approximately 147,000 for the corresponding period in 2009.
-- Adjusted EBITDA increased by 20.4% to $5.2 million in the second
quarter of 2010 from $4.4 million for the corresponding period in 2009.
-- Net income attributable to ChinaEdu increased by 52.8% to $2.0 million
in the second quarter of 2010 from $1.3 million for the corresponding
period in 2009.
-- Adjusted net income attributable to ChinaEdu increased by 22.1% to $2.2
million in the second quarter of 2010 from $1.8 million for the
corresponding period in 2009.
-- Net income attributable to ChinaEdu per diluted ADS was $0.115 for the
second quarter of 2010, as compared to $0.075 for the corresponding
period in 2009.
-- Adjusted net income attributable to ChinaEdu per diluted ADS was $0.125
for the second quarter of 2010, as compared to $0.103 for the
corresponding period in 2009.
"As you can see from our second quarter results, we have continued to execute on our stated strategy," said Ms. Julia Huang, ChinaEdu's Chairman and Chief Executive Officer. "For our online degree programs, the second quarter wrapped up a healthy 2010 spring semester enrollment period. The technology service agreements and non-degree programs at our subsidiaries have also contributed to the growth in the quarter. We are committed to continuing our research and development efforts on the technology platform, Internet and mobile applications for both the online degree and non-degree programs. All our new initiatives, including interactive online learning community for K-12 students and adult learners, and online teachers training programs, have made significant operational progress. Overall, we believe our company is strongly positioned to capture the immense market potential in online education."
Financial Results for the Second Quarter Ended June 30, 2010
Net Revenue
Total net revenue for the second quarter of 2010 was $14.7 million, representing a 12.7% increase from $13.0 million for the corresponding period in 2009. Net revenue from online degree programs for the second quarter of 2010 was $11.8 million, representing a 12.2% increase from $10.5 million for the corresponding period in 2009. Enrollment for the 2010 spring semester online degree programs was over 157,000 revenue students, which represented an increase of 6.8% as compared to 147,000 revenue students for the 2009 spring semester. The higher revenue growth compared to enrollment growth was primarily attributable to lower third-party learning centers' expenses, and increased tuition rates at selected online colleges.
The Learning centers network continued to expand both in geographic coverage and universities served. By the end of the second quarter of 2010, we had 65 operational learning centers, of which 27 were proprietary and 38 were contracted locations, as compared to 56 operational learning centers as of the end of the second quarter of 2009, of which 21 were proprietary and 35 were contracted locations. Our learning centers network was serving a total of 18 universities' online degree programs as of the end of the second quarter of 2010.
Net revenue from the Company's non-online degree programs (online tutoring programs, private primary and secondary schools and international curriculum programs) for the second quarter of 2010 was $2.9 million, representing a 14.9% increase from $2.5 million for the corresponding period in 2009. This increase was attributable to a 29.3% increase in net revenue for the 101 online tutoring programs and a 36.8% increase in net revenue at Anqing School due to an increase in student enrollment as a result of the opening of the new campus. The increases were offset by a 27.3% decrease in net revenue for the international curriculum programs, which was in line with the management expectation.
Cost of Revenue
Total cost of revenue for the second quarter of 2010 was $5.2 million, representing an increase of 5.3%, as compared to $4.9 million for the corresponding period of 2009. Cost of revenue for online degree programs for the second quarter of 2010 was $3.6 million, representing an increase of 8.3% as compared to $3.3 million for the second quarter of 2009. The increase in online degree programs' cost of revenue was primarily related to the increase in student enrollment in the 2010 spring semester as compared to 2009 spring semester, in particular at our learning centers network.
Cost of revenue for non-online degree programs for the second quarter of 2010 was $1.6 million, representing a slight decrease of 1.1% for the corresponding period in 2009. This decrease was attributable primarily to a decrease in cost of revenue for both 101 online tutoring programs and international curriculum programs, offset by an increase in staff and depreciation charges related to Anqing School's new campus.
Gross Profit and Gross Margin
Gross profit for the second quarter of 2010 was $9.5 million, representing a 17.2% increase from $8.1 million for the corresponding period of 2009. Total gross margin for the second quarter of 2010 increased to 64.9%, as compared to 62.4% for the corresponding period of 2009. Gross margin for the online degree programs increased to 69.6% for the second quarter of 2010, as compared to 68.5% for the corresponding period of 2009.
Gross margin for 101 online tutoring programs improved significantly to 75.8% for the second quarter of 2010, as compared to 65.5% for the second quarter of 2009, due to reduced courseware development cost and a reduction in the number of staff. Despite increased cost of revenue, gross margin for private schools improved significantly to 25.8%, as compared to 9.7% in the corresponding period in 2009, due to increased enrollment at Anqing School's new campus. Gross margin for the international curriculum programs remained stable at 45.9% for the second quarter of 2010, as compared to 46.4% in the corresponding period of 2009.
Operating Expenses
Total operating expenses were $5.3 million for the second quarter of 2010, representing an 8.8% increase from $4.9 million for the corresponding period in 2009. This increase was a result of the factors discussed below:
-- General and administrative expenses for the second quarter of 2010 were
$2.7 million, which represented a 6.8% decrease from $2.9 million for
the corresponding period in 2009. Excluding the impact of our share
based compensation in the second quarter of 2010, our general and
administrative expenses increased by 4.1%.
-- Selling and marketing expenses were $1.2 million for the second quarter
of 2010, which represented a 48.3% increase from $0.8 million for the
corresponding period in 2009. This increase was attributable primarily
to an increase in advertising expenses at our 101 online tutoring
programs, as well as an increase in sales and marketing staff at
selected subsidiaries in the second quarter of 2010.
-- Research and development expenses for the second quarter of 2010 were
$1.4 million, representing a 20.7% increase from $1.2 million in the
corresponding period in 2009, primarily due to increased staff and
related increased depreciation expenses associated with the new
research and development initiatives for both degree and non-degree
programs.
-- Share-based compensation for the second quarter of 2010, which was
allocated to the related cost and operating expense line items,
temporarily decreased to $0.1 million as compared to $0.3 million for
the corresponding period in 2009, due to a true-up adjustment of
forfeiture rate.
Income from Operations
As a result of the factors discussed above, income from operations for the second quarter of 2010 was $4.2 million, representing a 29.8% increase as compared to $3.2 million for the corresponding period of 2009. Operating margin increased to 28.7% for the second quarter of 2010, as compared to 24.9% in the corresponding period of 2009.
Adjusted income from operations, which is a non-GAAP measure defined as income from operations excluding share-based compensation, and amortization of intangible assets and land use rights, was $4.5 million for the second quarter of 2010, representing an increase of 18.3% as compared to $3.8 million in the corresponding period of 2009. Adjusted operating margin, which is a non-GAAP measure defined as a ratio of adjusted operating income from operations (non-GAAP) over net revenue, for the second quarter of 2010 improved to 30.3% as compared to 28.9% for the corresponding period of 2009.
Interest Income and Investment Income
Interest income and investment income for the second quarter of 2010 increased 58% to $0.28 million, as compared to $0.17 million in the corresponding quarter of 2009.
Income Tax Expense
Income tax expense for the second quarter of 2010 was $1.0 million, which remained flat from income tax expense of $1.0 million for the corresponding period in 2009.
Noncontrolling Interest
Noncontrolling interest was $1.6 million in the second quarter of 2010, representing an increase from $1.3 million in the corresponding period in 2009, which was attributable primarily to the noncontrolling interest impact related to the increased net income from the online degree programs for the second quarter of 2010, as compared to the second quarter of 2009.
Net Income attributable to ChinaEdu
Net income attributable to ChinaEdu, which is net income excluding net income attributable to noncontrolling interest, was $2.0 million for the second quarter of 2010, representing an increase of 52.8% from $1.3 million for the corresponding period in 2009. The increase was primarily due to improved gross margin across all of our business lines except for the international curriculum programs of which gross margin remained stable, as well as improved operating efficiencies.
Net income attributable to ChinaEdu per basic and diluted ADS were $0.125 and $0.115, respectively, for the second quarter of 2010, as compared to $0.080 and $0.075, respectively, for the corresponding period in 2009, which represented growth of 56.3% and 53.3%, respectively.
Adjusted net income attributable to ChinaEdu (non-GAAP) increased by 22.1% to $2.2 million for the second quarter of 2010 from $1.8 million in the corresponding period of 2009. Adjusted net margin, which is a non-GAAP measure defined as a ratio of adjusted net income attributable to ChinaEdu (non-GAAP) over net revenue, was 14.8% in the second quarter of 2010, as compared to 13.7% in the corresponding period of 2009. The increase was primarily due to improvement in operating results across our online degree programs, 101 online tutoring programs and private schools, as well as stable operating results at the international curriculum programs.
Adjusted net income attributable to ChinaEdu per basic and diluted ADS (non-GAAP) were $0.136 and $0.125, respectively, for the second quarter of 2010, as compared to $0.111 and $0.103, respectively, for the corresponding period in 2009, which represented growth of 22.5% and 21.4%, respectively.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA (non-GAAP) was $5.2 million for the second quarter of 2010, which increased by 20.4%, as compared to $4.4 million for the corresponding period in 2009. Adjusted EBITDA margin (non-GAAP) was 35.7% in the second quarter of 2010 as compared to 33.4% in the second quarter of 2009. This increase was attributable primarily to improved operating results as discussed above.
Deferred Revenue
Deferred revenue at the end of the second quarter of 2010 was $17.0 million, with current deferred revenue of $15.8 million and non-current deferred revenue of $1.2 million. Deferred revenue at the end of the second quarter of 2010 increased as compared to deferred revenue of $15.6 million at the end of the fourth quarter 2009 due to seasonality of enrollments. Tuition is received generally during the second quarter (spring semester) and the fourth quarter (fall semester) of each year.
Cash and Cash Equivalents and Term Deposits
As of June 30, 2010, ChinaEdu reported cash and cash equivalents and term deposits of $49.1 million, which primarily consisted of cash, demand deposits with original maturities of three months or less, 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 represent cash owed to us by our collaborative alliance partners) were $37.5 million as of June 30, 2010, as compared to amounts due from related parties of $26.1 million as of December 31, 2009.
2010 Year-to-Date Financial Results
Net Revenue
For the six months ended June 30, 2010, total net revenue was $27.5 million, which represented an increase of 10.2% from $25.0 million for the corresponding period in 2009. Net revenue from online degree programs for the first half of 2010 was $21.9 million, representing an 8.4% increase from $20.2 million for the corresponding period in 2009. And the net revenue from non-online degree programs for the first half of 2010 was $5.6 million, as compared to $4.8 million for the corresponding period in 2009, representing an 18.2% increase. The growth in total net revenue was attributable to strong enrollment for the online degree programs both in the fall semester of 2009 and spring semester of 2010, particularly at our learning centers, and growth in net revenue at Anqing School and 101 online tutoring programs, despite revenue decrease at the international curriculum programs.
Cost of Revenue
For the six months ended June 30, 2010, total cost of revenue was $9.8 million, which remained stable as compared to $9.7 million for the corresponding period in 2009. Cost of revenue at our online degree programs remained stable in the first half of 2010 as compared to the corresponding period of 2009. The slight decrease in cost of revenue for 101 online tutoring programs and decrease in cost of revenue at the international curriculum programs were offset by an increase in staff and depreciation charges at the Anqing School.
Gross Profit
Gross profit for the six months ended June 30, 2010 was $17.8 million as compared with $15.3 million for the corresponding period in 2009, representing an increase of 16.2%, primarily due to significantly improved gross margins for our online degree programs, 101 online tutoring programs and private schools, as well as stable gross margin at our international curriculum programs.
Income from Operations
Income from operations was $7.1 million for the six months ended June 30, 2010, representing an increase of 21.6% from $5.8 million for the corresponding period in 2009. Operating margin was 25.7% for the six months ended June 30, 2010 as compared to 23.3% for the corresponding period in 2009.
Adjusted income from operations (non-GAAP) was $7.8 million for the first half of 2010, representing an increase of 12.5%, compared to $7.0 million in the corresponding period of 2009. Adjusted operating margin (non-GAAP) for the six months ended June 30, 2010 was 28.4% as compared to 27.8% for the corresponding period in 2009.
Net Income attributable to ChinaEdu
Net income attributable to ChinaEdu was $3.1 million for the six months ended June 30, 2010, representing an increase of 12.8% from $2.7 million for the corresponding period in 2009. Net margin was 11.1% for the six months ended June 30, 2010 as compared to 10.9% for the corresponding period in 2009.
Adjusted net margin was 13.5% for the six months ended June 30, 2010 as compared to 15.0% for the corresponding period of 2009. The decrease was primarily due to the increase in income tax expenses in the first quarter of 2010.
Adjusted EBITDA (Non-GAAP)
Adjusted EBITDA (non-GAAP) was $9.3 million for the first half of 2010, which increased by 14.5%, as compared to $8.1 million for the corresponding period in 2009. Adjusted EBITDA margin was 33.8% in the first half of 2010 as compared to 32.5% in the first half of 2009. This increase was attributable primarily to improved operating results as discussed above.
Third Quarter 2010 Total Net Revenue Guidance
For the third quarter of 2010, ChinaEdu expects its total net revenue to be in the range of RMB96 million to RMB99 million or $14.2 million to $14.6 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 19, 2010 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) 800 265 0241/ (International) +1 617 847 8704/ (HK) +852 3002 1672/ (China) +86 10 800 152 1490; Passcode: 68155224. A telephone replay will be available shortly after the call until August 25, 2010 at (US) 888 286 8010/ (International) +1 617 801 6888; Passcode: 39011649. A live and archived webcast may be accessed via ChinaEdu's investor relations website 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, which are adjusted from results based on GAAP to exclude certain non-cash items of share-based compensation and amortization of intangible assets and land use rights. 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, and share-based compensation. 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 17 long-term contracts that generally vary from 10 to 50 years in length. ChinaEdu also performs recruiting services for 18 universities through its nationwide learning centers 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, 2009, 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 more information, please contact:
Lily Liu, CFO
ChinaEdu Corporation
Phone: +86-10-8418-6655 x1002
Email: [email protected]
ChinaEdu Corporation
Unaudited Condensed Consolidated Balance Sheets
December 31, June 30, June 30,
(in thousands, unaudited)
2009 2010 2010
RMB RMB US$
Current assets:
Cash and cash equivalents 203,143 153,293 22,605
Term deposits 122,304 179,645 26,490
Restricted cash 365 365 54
Short-term investments 17,706 32,565 4,802
Accounts receivable, net 28,334 32,361 4,772
Inventory 1,852 1,333 197
Prepaid expenses and other current
assets 25,315 22,616 3,335
Amounts due from related parties 176,802 254,011 37,456
Deferred tax assets 3,309 502 74
Total current assets 579,130 676,691 99,785
Long-term investments 4,210 1,210 178
Deferred tax assets 1,541 3,305 487
Rental deposits 868 990 146
Land use rights, net 27,874 27,569 4,065
Property and equipment, net 203,995 217,399 32,058
Deposits paid for acquisition of
property and equipment 13,898 -- --
Acquired intangible assets, net 66,621 65,423 9,647
Goodwill 38,155 38,155 5,626
Total assets 936,292 1,030,742 151,992
Liabilities and equity
Current liabilities:
Accounts payable (including accounts
payable of the consolidated VIEs
without recourse to ChinaEdu Group
of 5,351 and 3,780 as of December
31, 2009 and June 30, 2010) 6,467 5,719 843
Deferred revenues (including
deferred revenues of the
consolidated VIEs without recourse
to ChinaEdu Group of 17,786 and
17,692 as of December 31, 2009 and
June 30, 2010) 97,853 107,356 15,831
Accrued expenses and other current
liabilities (including accrued
expenses and other current
liabilities of the consolidated
VIEs without recourse to ChinaEdu
Group of 11,066 and 12,889 as of
December 31, 2009 and June 30, 2010) 68,917 72,779 10,732
Amounts due to related parties
(including amounts due to related
parties of the consolidated VIEs
without recourse to ChinaEdu Group
of 2,065 and 2,072 as of December
31, 2009 and June 30, 2010) 25,668 69,682 10,275
Income taxes payable (including
income taxes payable of the
consolidated VIEs without recourse
to ChinaEdu Group of 7,770 and
9,079 as of December 31, 2009 and
June 30, 2010) 33,389 37,479 5,527
Other taxes payable (including other
taxes payable of the consolidated
VIEs without recourse to ChinaEdu
Group of 2,285 and 2,255 as of
December 31, 2009 and June 30, 2010) 15,900 14,446 2,130
Total current liabilities 248,194 307,461 45,338
Deferred revenues (including
deferred revenues of the
consolidated VIEs without recourse
to ChinaEdu Group of 113 and 227
as of December 31, 2009 and June
30, 2010) 8,075 8,208 1,210
Deferred tax liabilities (including
deferred tax liabilities of the
consolidated VIEs without recourse
to ChinaEdu Group of 1,381 and
1,376 as of December 31, 2009 and
June 30, 2010) 10,143 9,854 1,453
Unrecognized tax benefit (including
unrecognized tax benefit of the
consolidated VIEs without recourse
to ChinaEdu Group of 1,145 and
1,343 as of December 31, 2009
and June 30, 2010) 7,727 8,214 1,211
Total liabilities 274,139 333,737 49,212
ChinaEdu shareholders' equity 559,973 585,035 86,269
Noncontrolling interests 102,180 111,970 16,511
Total equity 662,153 697,005 102,780
Total liabilities and equity 936,292 1,030,742 151,992
ChinaEdu Corporation
Unaudited Condensed Consolidated Statements of Operations
(in thousands, unaudited,
except for percentage,
share, and per share Three Months Ended
information) June 30, March 31, June 30, June 30,
2009 2010 2010 2010
RMB RMB RMB US$
Gross Revenue * 92,794 91,089 104,108 15,352
Business Tax and Surcharge 4,519 3,812 4,591 677
Net Revenue:
Online degree programs 71,447 68,515 80,188 11,825
Online tutoring programs 4,704 5,401 6,084 897
Private primary and
secondary schools 6,911 9,280 9,454 1,394
International curriculum
programs 5,213 4,081 3,791 559
Total net revenue 88,275 87,277 99,517 14,675
Cost of revenue:
Online degree programs 22,537 21,048 24,417 3,601
Online tutoring programs 1,624 1,165 1,473 217
Private primary and
secondary schools 6,243 6,724 7,016 1,035
International curriculum
programs 2,793 2,411 2,052 303
Total cost of revenue 33,197 31,348 34,958 5,156
Gross profit:
Online degree programs 48,910 47,467 55,771 8,224
Online tutoring programs 3,080 4,236 4,611 680
Private primary and
secondary schools 668 2,556 2,438 359
International curriculum
programs 2,420 1,670 1,739 256
Total gross profit 55,078 55,929 64,559 9,519
Online degree programs 68.5% 69.3% 69.6% 69.6%
Online tutoring programs 65.5% 78.4% 75.8% 75.8%
Private primary and
secondary schools 9.7% 27.5% 25.8% 25.8%
International curriculum
programs 46.4% 40.9% 45.9% 45.9%
Gross margin 62.4% 64.1% 64.9% 64.9%
Operating expenses:
General and administrative 19,742 19,920 18,400 2,713
Selling and marketing 5,434 7,740 8,056 1,188
Research and development 7,882 8,771 9,512 1,403
Total operating expenses 33,058 36,431 35,968 5,304
Income from operations 22,020 19,498 28,591 4,215
Operating margin 24.9% 22.3% 28.7% 28.7%
Other income 625 144 144 21
Interest income 1,182 1,057 1,345 198
Investment income -- -- 522 77
Income before income tax
provisions 23,827 20,699 30,602 4,511
Income tax expense (6,257) (8,171) (6,441) (950)
Net income 17,570 12,528 24,161 3,561
Net income attributable to
the noncontrolling
interests (8,710) (5,296) (10,616) (1,565)
Net income attributable to
ChinaEdu 8,860 7,232 13,545 1,996
Net margin 10.0% 8.3% 13.6% 13.6%
Net income attributable to
ChinaEdu per ADS:
Basic 0.54 0.45 0.84 0.125
Diluted 0.51 0.42 0.78 0.115
Weighted average aggregate
number of ADSs
outstanding:
Basic 16,095,158 15,954,875 16,029,983 16,029,983
Diluted 17,198,522 17,396,275 17,376,199 17,376,199
* Gross revenue are
detailed as follows
Online degree programs 75,522 72,458 84,365 12,441
Online tutoring programs 4,795 5,033 6,278 926
Private primary and
secondary schools 6,961 9,280 9,454 1,394
International curriculum
programs 5,516 4,318 4,011 591
ChinaEdu Corporation
Unaudited Condensed Consolidated Statements of Operations
(in thousands, unaudited, except for
percentage, share, and per share Six Months Ended
information) June 30, June 30, June 30,
2009 2010 2010
RMB RMB US$
Gross Revenue * 178,273 195,197 28,784
Business Tax and Surcharge 8,828 8,403 1,238
Net Revenue:
Online degree programs 137,211 148,703 21,928
Online tutoring programs 8,296 11,485 1,694
Private primary and secondary schools 13,142 18,734 2,763
International curriculum programs 10,796 7,872 1,161
Total net revenue 169,445 186,794 27,546
Cost of revenue:
Online degree programs 45,220 45,465 6,704
Online tutoring programs 3,065 2,638 389
Private primary and secondary schools 11,741 13,740 2,026
International curriculum programs 5,741 4,463 658
Total cost of revenue 65,767 66,306 9,777
Gross profit:
Online degree programs 91,991 103,238 15,224
Online tutoring programs 5,231 8,847 1,305
Private primary and secondary schools 1,401 4,994 737
International curriculum programs 5,055 3,409 503
Total gross profit 103,678 120,488 17,769
Online degree programs 67.0% 69.4% 69.4%
Online tutoring programs 63.1% 77.0% 77.0%
Private primary and secondary schools 10.7% 26.7% 26.7%
International curriculum programs 46.8% 43.3% 43.3%
Gross margin 61.2% 64.5% 64.5%
Operating expenses:
General and administrative 39,325 38,320 5,651
Selling and marketing 10,344 15,796 2,329
Research and development 14,453 18,283 2,696
Total operating expenses 64,122 72,399 10,676
Income from operations 39,556 48,089 7,093
Operating margin 23.3% 25.7% 25.7%
Other income 1,251 288 42
Interest income 2,854 2,402 354
Investment income -- 522 77
Income before income tax provisions 43,661 51,301 7,566
Income tax expense (8,965) (14,612) (2,155)
Net income 34,696 36,689 5,411
Net income attributable to the
noncontrolling interests (16,272) (15,912) (2,346)
Net income attributable to ChinaEdu 18,424 20,777 3,065
Net margin 10.9% 11.1% 11.1%
Net income attributable to ChinaEdu
per ADS:
Basic 1.14 1.30 0.192
Diluted 1.05 1.20 0.176
Weighted average aggregate number of
ADSs outstanding:
Basic 16,376,628 15,992,637 15,992,637
Diluted 17,417,539 17,386,445 17,386,445
* Gross revenue are detailed as
follows
Online degree programs 145,187 156,823 23,125
Online tutoring programs 8,470 11,311 1,668
Private primary and secondary schools 13,192 18,734 2,763
International curriculum programs 11,424 8,329 1,228
ChinaEdu Corporation
Unaudited Condensed Consolidated Statements of Cash Flow
Three Months Ended
(in thousands, unaudited) June 30, March 31, June 30, June 30,
2009 2010 2010 2010
RMB RMB RMB US$
Operating activities:
Net income 17,570 12,528 24,161 3,561
Adjustments to reconcile net
income to net cash provided
by operating activities:
Share-based compensation 2,055 2,138 366 54
Depreciation and
amortization of property
and equipment 3,983 4,690 4,820 711
Amortization of land use
rights 152 152 153 23
Amortization of acquired
intangible assets 1,308 1,080 1,093 161
Provision for amounts due
from related parties and
account receivables 347 -- -- --
Loss from disposal of
property and equipment 15 4 (8) (1)
Deferred income taxes (825) 485 269 40
Changes in assets and
liabilities
Accounts receivable (20,898) 12,880 (16,907) (2,493)
Inventory (1,077) 400 119 18
Prepaid expenses and
other current assets 6,188 9,500 (4,805) (709)
Amounts due from related
parties (111,046) 34,831 (112,040) (16,521)
Rental deposits 48 (11) (111) (16)
Land use rights (1,040) -- -- --
Accounts payable 1,772 (808) 1,164 172
Deferred revenues 65,006 (60,921) 70,558 10,404
Accrued expenses and
other current
liabilities 2,648 (5,446) 9,310 1,373
Amounts due to related
parties 24,840 10,730 27,653 4,078
Income tax payable 4,770 (2,311) 6,401 944
Other taxes payable 4,249 (4,834) 3,380 498
Unrecognized tax benefit 1,633 362 125 18
Net cash provided by operating
activities 1,698 15,449 15,701 2,315
Investing activities:
Purchase of property and
equipment (29,919) (6,690) (3,509) (517)
Purchase of term deposits 15,008 (2,019) (55,318) (8,157)
Purchase of investments -- -- (11,924) (1,758)
Purchase of contractual
right -- -- -- --
Proceeds from disposal of
property and equipment -- 49 59 9
Net cash used in investing
activities (14,911) (8,660) (70,692) (10,423)
Financing activities:
Proceeds from exercise of
share options 711 1,339 847 125
Prepayment for share
repurchase -- -- (1,824) (269)
Repurchase and
cancellation of ordinary
shares -- (113) (210) (31)
Cash dividends paid to
noncontrolling
shareholders -- (1,470) -- --
Capital contributions by
noncontrolling
shareholders -- -- -- --
Net cash provided by (used in)
financing activities 711 (244) (1,187) (175)
Effect of foreign exchange rate
changes (76) (4) (213) (32)
CASH AND CASH EQUIVALENTS, beginning
of period 243,710 203,143 209,684 30,920
CASH AND CASH EQUIVALENTS, end of
period 231,132 209,684 153,293 22,605
Net increase (decrease) in cash and
cash equivalents (12,578) 6,541 (56,391) (8,315)
ChinaEdu Corporation
Unaudited Condensed Consolidated Statements of Cash Flow
Six Months Ended
(in thousands, unaudited) June 30, June 30, June 30,
2009 2010 2010
RMB RMB US$
Operating activities:
Net income 34,696 36,689 5,411
Adjustments to reconcile net
income to net cash provided
by operating activities:
Share-based compensation 4,317 2,504 369
Depreciation and
amortization of property
and equipment 7,924 9,510 1,402
Amortization of land use
rights 315 305 45
Amortization of acquired
intangible assets 2,994 2,173 320
Provision for amounts due
from related parties and
account receivables 409 -- --
Loss from disposal of
property and equipment 93 (4) (1)
Deferred income taxes 970 754 111
Changes in assets and
liabilities
Accounts receivable (10,520) (4,027) (594)
Inventory (1,077) 519 77
Prepaid expenses and other
current assets 4,307 4,695 692
Amounts due from related
parties (64,662) (77,209) (11,385)
Rental deposits 95 (122) (18)
Land use rights (1,989) -- --
Accounts payable 2,856 356 52
Deferred revenues (611) 9,637 1,421
Accrued expenses and other
current liabilities 602 3,864 570
Amounts due to related
parties 25,845 38,383 5,660
Income tax payable (4,459) 4,090 603
Other taxes payable (284) (1,454) (214)
Unrecognized tax benefit 1,981 487 72
Net cash provided by operating
activities 3,802 31,150 4,593
Investing activities:
Purchase of property and
equipment (40,524) (10,199) (1,504)
Purchase of term deposits (16,000) (57,337) (8,455)
Purchase of investments -- (11,924) (1,758)
Purchase of contractual
right (500) -- --
Proceeds from disposal of
property and equipment -- 108 16
Net cash used in investing activities (57,024) (79,352) (11,701)
Financing activities:
Proceeds from exercise of
share options 1,424 2,186 322
Prepayment for share
repurchase -- (1,824) (269)
Repurchase and
cancellation of ordinary
shares (61,647) (323) (48)
Cash dividends paid to
noncontrolling
shareholders (10,600) (1,470) (217)
Capital contributions by
noncontrolling
shareholders 980 -- --
Net cash provided by (used in)
financing activities (69,843) (1,431) (212)
Effect of foreign exchange rate
changes 264 (217) (30)
CASH AND CASH EQUIVALENTS, beginning
of period 353,933 203,143 29,955
CASH AND CASH EQUIVALENTS, end of
period 231,132 153,293 22,605
Net increase (decrease) in cash and
cash equivalents (122,801) (49,850) (7,350)
ChinaEdu Corporation
Reconciliations from income from operations to adjusted income from
operations (non-GAAP) and adjusted operating margin (non-GAAP)
Three Months Ended
(in thousands, unaudited) June 30, March 31, June 30, June 30,
2009 2010 2010 2010
RMB RMB RMB US$
Net revenue 88,275 87,277 99,517 14,675
Income from operations 22,020 19,498 28,591 4,215
Adjustment:
Share-based compensation 2,055 2,138 366 54
Amortization 1,460 1,232 1,246 184
Adjusted income from
operations (non-GAAP) 25,535 22,868 30,203 4,453
Adjusted operating margin
(non-GAAP) 28.9% 26.2% 30.3% 30.3%
ChinaEdu Corporation
Reconciliations from income from operations to adjusted income from
operations (non-GAAP) and adjusted operating margin (non-GAAP)
Six Months Ended
(in thousands, unaudited) June 30, June 30, June 30,
2009 2010 2010
RMB RMB US$
Net revenue 169,445 186,794 27,546
Income from operations 39,556 48,089 7,093
Adjustment:
Share-based compensation 4,317 2,504 369
Amortization 3,309 2,478 365
Adjusted income from operations (non-
GAAP) 47,182 53,071 7,827
Adjusted operating margin (non-GAAP) 27.8% 28.4% 28.4%
ChinaEdu Corporation
Reconciliation from net income to adjusted EBITDA (non-GAAP) and adjusted
EBITDA margin (non-GAAP)
Three Months Ended
(in thousands, unaudited) June 30, March 31, June 30, June 30,
2009 2010 2010 2010
RMB RMB RMB US$
Net revenue 88,275 87,277 99,517 14,675
Net income 17,570 12,528 24,161 3,561
Adjustment:
Income tax expense 6,257 8,171 6,441 950
Share-based compensation 2,055 2,138 366 54
Amortization 1,460 1,232 1,246 184
Depreciation 3,983 4,690 4,820 711
Interest income and other, net (1,807) (1,201) (1,489) (219)
Adjusted EBITDA (non-GAAP) 29,518 27,558 35,545 5,241
Adjusted EBITDA margin (non-GAAP) 33.4% 31.6% 35.7% 35.7%
ChinaEdu Corporation
Reconciliation from net income to adjusted EBITDA (non-GAAP) and adjusted
EBITDA margin (non-GAAP)
Six Months Ended
(in thousands, unaudited) June 30, June 30, June 30,
2009 2010 2010
RMB RMB US$
Net revenue 169,445 186,794 27,546
Net income 34,696 36,689 5,411
Adjustment:
Income tax expense 8,965 14,612 2,155
Share-based compensation 4,317 2,504 369
Amortization 3,309 2,478 365
Depreciation 7,924 9,510 1,402
Interest income and other, net (4,105) (2,690) (396)
Adjusted EBITDA (non-GAAP) 55,106 63,103 9,306
Adjusted EBITDA margin (non-GAAP) 32.5% 33.8% 33.8%
ChinaEdu Corporation
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
(in thousands, unaudited) June 30, March 31, June 30, June 30,
2009 2010 2010 2010
RMB RMB RMB US$
Net revenue 88,275 87,277 99,517 14,675
Net income attributable to
ChinaEdu 8,860 7,232 13,545 1,996
Adjustment:
Share-based compensation 2,055 2,138 366 54
Share-based compensation
attributable to the
noncontrolling interest (278) (243) (381) (56)
Amortization 1,460 1,232 1,246 184
Adjusted net income
attributable to ChinaEdu
(non-GAAP) 12,097 10,359 14,776 2,178
Adjusted net margin
(non-GAAP) 13.7% 11.9% 14.8% 14.8%
Adjusted net income
attributable to ChinaEdu
per ADS (non-GAAP)
Basic 0.75 0.65 0.92 0.136
Diluted 0.70 0.60 0.85 0.125
Weighted average aggregate
number of ADSs
outstanding:
Basic 16,095,158 15,954,875 16,029,983 16,029,983
Diluted 17,198,522 17,396,275 17,376,199 17,376,199
ChinaEdu Corporation
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)
Six Months Ended
(in thousands, unaudited) June 30, June 30, June 30,
2009 2010 2010
RMB RMB US$
Net revenue 169,445 186,794 27,546
Net income attributable to ChinaEdu 18,424 20,777 3,065
Adjustment:
Share-based compensation 4,317 2,504 369
Share-based compensation
attributable to the noncontrolling
interest (574) (624) (92)
Amortization 3,309 2,478 365
Adjusted net income attributable to
ChinaEdu (non-GAAP) 25,476 25,135 3,707
Adjusted net margin (non-GAAP) 15.0% 13.5% 13.5%
Adjusted net income attributable to
ChinaEdu per ADS (non-GAAP)
Basic 1.56 1.57 0.232
Diluted 1.46 1.45 0.213
Weighted average aggregate number of
ADSs outstanding:
Basic 16,376,628 15,992,637 15,992,637
Diluted 17,417,539 17,386,445 17,386,445
SOURCE ChinaEdu Corporation
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