Noah Education Announces Unaudited First Quarter 2014 Results

SHENZHEN, China, Nov. 20, 2013 /PRNewswire/ -- Noah Education Holdings Ltd. ("Noah" or the "Company") (NYSE: NED), a leading provider of education services in China, today announced its unaudited financial results for the first quarter fiscal 2014 ended September 30, 2013.

First Quarter Fiscal 2014 Financial Highlights (compared to first quarter fiscal 2013)

• Net revenue increased 26.8% to RMB49.2 million (US$8.0 million)
• Gross profit increased 12.2% to RMB16.9 million (US$2.8 million), and gross profit margin was 34.4%
• Net operating loss was RMB4.9 million (US$0.8 million) as compared to an operating loss of RMB5.2 million
• Net loss was RMB0.4 million (US$0.06 million), compared to a net loss of RMB0.07 million
• Non-GAAP net loss, excluding share based compensation expenses, was RMB0.4 million (US$0.06 million), compared to a Non-GAAP net income of RMB0.4 million
• Basic and diluted losses per share were RMB0.02 (US$0.003) as compared to basic and diluted earnings per share of RMB0.01
• Non-GAAP basic and diluted losses per share were RMB0.02 (US$0.003) as compared to non-GAAP basic and diluted earnings per share of RMB0.03

Dong Xu, Chairman and Acting Chief Executive Officer of Noah, said, "We are pleased to deliver a strong first quarter for our fiscal year 2014, although the first quarter is a seasonally low season for our business. This is in line with our growth strategy as we have seen a significant increase in our revenues for this quarter through our expanded kindergartens operations, and strong organic growth in primary and secondary schools operations."

Mr. Xu continued, "Going forward, we remain focused on driving growth organically and through acquisitions. The education services industry is one of the few that have a strong resilient nature against economic cycles and we are confident that Noah will reap the full benefits with continuous organic growth through the increasing ramp up of our existing kindergartens and schools, diversifying our service offerings such as early childhood education, and collaborating with real estate developers to explore opportunities to roll out new schools and kindergartens. With our strong cash position, we are also actively pursuing acquisition opportunities to expand our geographic reach in other parts of China."

Dora Li, Chief Financial Officer of Noah, said, "Our margin for the first quarter is typically lower since kindergartens and schools are on summer break, with no revenue being recognized. In addition, costs associated with new kindergarten openings and expansion have increased as expected, causing further pressure on our gross margin in the first quarter. However, we expect this to normalize in the subsequent quarters."

First Quarter Fiscal 2014 Financial Results

Net revenue

Net revenue for the first quarter of fiscal 2014 increased 26.8% year-over-year to RMB49.2 million (US$8.0 million) from RMB38.8 million. The increase was driven mainly by the organic growth from existing kindergartens and schools, and incremental revenue from acquisition and newly opened kindergartens.

In terms of revenue breakdown by business service for the first quarter of fiscal 2014, revenue from kindergartens increased 36.2% year-over-year to RMB21.8 million (US$3.6 million) from RMB16.0 million, mainly driven by incremental revenue contribution from DDK Consulting and Xiaoxiao Consulting, which were acquired in the second quarter of fiscal 2013. Revenue from primary and secondary schools increased 45.3% year-over-year to RMB17.0 million (US$2.8 million) from RMB11.7 million due to revenue contribution from the ramping up school and expansion of existing mature schools. Revenue from supplemental education, which includes franchised fees, English training courses and sale of teaching materials, decreased 6.3% year-over-year to RMB10.4 million (US$1.7 million) from RMB11.1 million, primarily due to a decrease in tuition fees collected during the summer term.

Gross profit and gross profit margin

Gross profit for the first quarter of fiscal 2014 increased 12.2% year-over-year to RMB16.9 million (US$2.8 million) from RMB15.1 million. The increase in gross profit was primarily driven by the continued strong growth of the kindergarten, as well as the primary and secondary schools operations.

Gross profit margin for the first quarter of fiscal 2014 was 34.4%, compared to 38.9% in the first quarter of fiscal 2013. The contraction in margin was mainly due to an expanded portfolio of revenue contributed by kindergartens, which has a lower gross profit margin, accounted for 44.4% of total revenue for the first quarter 2014, compared to 41.1% of total revenue for the first quarter 2013, as well as the incremental cost incurred from DDK Consulting and Xiaoxiao Consulting and newly opened kindergartens.

Operating expenses

Total operating expenses for the first quarter of fiscal 2014 was RMB26.3 million (US$4.3 million) as compared to RMB23.9 million in the first quarter of fiscal 2013.

Research and development ("R&D") expenses for the first quarter of fiscal 2014 was RMB0.5 million (US$0.09 million) as compared to RMB0.6 million in the same period of fiscal 2013. As a percentage of net revenue, R&D expenses decreased to 1.1% in the first quarter of fiscal 2014 from 1.5% in the same quarter of fiscal 2013. The R&D investment is focused on the development of teaching materials.

Sales and marketing ("S&M") expenses for the first quarter were RMB2.0 million (US$0.3 million) as compared to RMB1.6 million in the same quarter of fiscal 2013. The increase in S&M expenses was due to the increase in promotion expenses and marketing staff remuneration of the Company's supplemental education business segment. As a percentage of net revenue, S&M expenses decreased to 4.1% in the first quarter of fiscal 2014, compared to 4.2% in the same period of fiscal 2013. S&M expenses as a percentage of revenue is expected to maintain at a similar level in following quarters while the Company sustains its initiatives in brand promotion.

General and administrative ("G&A") expenses for the first quarter of fiscal 2014 were RMB23.7 million (US$3.9 million) as compared to RMB21.6 million in the same period of fiscal 2013. The increase in G&A expenses was mainly due to the incremental expenses from DDK Consulting and Xiaoxiao Consulting which were acquired in the second quarter of fiscal 2013, as well as increased costs from newly opened kindergartens. As a percentage of net revenue, G&A expenses decreased to 48.3% in the first quarter of fiscal 2014, compared to 55.7% in the same period of fiscal 2013. The lower percentage of G&A expenses to net revenue primarily reflected the improvement of the Company's operational leverage with the expansion of revenue scale.

Other operating income

Other operating income for the first quarter of fiscal 2014 increased 24.7% year-over-year to RMB4.5 million (US$0.7 million) from RMB3.6 million in the first quarter of fiscal 2013. The increase was primarily due to the increase in government subsidies and rental income.

Net operating income/loss

Net operating loss for the first quarter of fiscal 2014 was RMB4.9 million (US$0.8 million), compared to a net operating loss of RMB5.2 million in the first quarter of fiscal 2013

Non-GAAP net operating loss for the first quarter of fiscal 2014 was RMB4.9 million (US$0.8 million), compared to a Non-GAAP net operating loss of RMB4.8 million in the same quarter of fiscal 2013.

Non-operating income

Impairment loss of other investment for the first quarter of fiscal 2014 was RMB0.13 million (US$0.02 million), compared to RMB0.10 million in the first quarter of fiscal 2013.  The impairment loss reflected the fair value change of the Company's investment in Franklin Electronic Publishers.  Interest income for the first quarter of fiscal 2014 was RMB0.7 million (US$0.1 million), compared to RMB0.4 million in the first quarter of fiscal 2013. Investment income for the first quarter of fiscal 2014 was RMB5.3 million (US$0.8 million), compared to RMB4.7 million in the first quarter of fiscal 2013. Other non-operating income for the first quarter of fiscal 2014 was RMB0.9 million (US$0.1 million), compared to RMB0.1 million in the same period of fiscal 2013. The increase was due to the effect on exchange rates.

Income tax expenses

Income tax expenses for the first quarter of fiscal 2014 were RMB2.2 million (US$0.4 million), compared to an income tax credit of RMB0.1 million for the same period in fiscal 2013. The increase was mainly because there was a RMB0.9 million deferred tax credit in the first quarter 2013 and that more schools and kindergartens are making profit this quarter.

Net income/loss

Net loss for the first quarter of fiscal 2014 was RMB0.4 million (US$0.06 million), compared to a net loss of RMB0.07 million in the same period of fiscal 2013. Basic and diluted losses per share were RMB0.02 (US$0.003), compared to basic and diluted earnings per share of RMB0.01 in the first quarter of fiscal 2013.

Net loss excluding share-based compensation expenses (non-GAAP) for the first quarter of fiscal 2014 was RMB0.4 million (US$0.06 million), compared to a non-GAAP net income of RMB0.4million in the same period of fiscal 2013. Non-GAAP basic and diluted losses per share for the first quarter of fiscal 2014 were RMB0.02 (US$0.003), compared to a non-GAAP basic and diluted earnings per share of RMB0.03 in the first quarter of fiscal 2013.

Liquidity

Cash and cash equivalents, and short-term other investments totaled RMB572.4 million (US$93.5 million) on September 30, 2013, compared to RMB530.9 million on June 30, 2013. For the three months ended September 30, 2013, operating cash from continuing operations was RMB51.8 million (US$8.5 million).

Deferred revenue

Deferred revenue related to tuition fees and franchising fees as of September 30, 2013 was RMB71.5 million (US$11.7 million). This compares to deferred revenue related to tuition fees and franchising fees of RMB37.4 million as of June 30, 2013. Deferred revenue primarily includes the tuition fees and franchising fees collected but has not yet recognized during the quarter. It will be recognized according to course and contract schedule. September is the beginning of school terms, therefore there is usually a higher deferred revenue balance at the end of the first quarter.

Operational Updates

Noah operates 63 schools, kindergartens, and training centers in its network at the end of the first quarter fiscal 2014. The network includes 48 kindergartens, with 11 kindergartens in their respective ramp up periods.

Noah's network also includes five primary and secondary schools. One of them opened in the first quarter of fiscal 2012 and remains in its ramp up stage, with an enrollment rate of 63% as of September 30, 2013.

Noah also operates ten directly-owned supplemental training centers.

Student enrollment totaled over 22,000, reflecting a year-over-year increase of about 24% due to the expansion of the network. Categorized according to business service, more than 12,700 students are enrolled in kindergartens, while approximately 5,700 are accounted for in primary and secondary schools, and the remaining 3,600 are in directly owned supplemental training centers.

Financial Outlook for the Second Quarter and Full Fiscal 2014

Based on current estimates and market conditions, for the second quarter of fiscal 2014, Noah expects to generate net revenue in the range of RMB66 million (US$9.8 million) to RMB70 million (US$11.4 million). For the full fiscal 2014, the Company expects to generate revenue between RMB237 million (US$38 million) and RMB251 million (US$41 million). This forecast reflects Noah's current and preliminary view, which is subject to change.

Conference Call

Noah's senior management will host a conference call at 7:30 am (Eastern)/4:30 am (Pacific)/8:30 pm (China) on Thursday, November 21, 2013 to discuss its first quarter fiscal year 2014 financial results and recent business activities. The conference call may be accessed by calling:

Please dial in 10 minutes before the scheduled starting time. An operator will answer your call and please use "Noah Education" as the verbal passcode to access the call. Replay of the conference call will be available from 10:00 am US Eastern Time on November 21, 2013 until 9:00 am US Eastern Time on November 29, 2013 by dialing the following numbers:

A live webcast can also be accessed through the investor relations section of the Company's website at http://ir.noaheducation.com.

Statement Regarding Unaudited Financial Information

The unaudited financial information set forth above is subject to adjustments that may be identified when audit work is performed on our year-end financial statements, which could result in significant differences from this unaudited financial information.

Currency Convenience Translation

For the convenience of readers, certain RMB amounts in the statement of operations, balance sheet and cash flow statements have been translated into US dollars at the rate of RMB6.1200, the noon buying rate for US dollars in effect on September 30, 2013 for cable transfers of RMB per US dollar as certified for customs purposes by the Federal Reserve Bank of New York.

Use of Non-GAAP Financial Measures

In addition to consolidated financial results under GAAP, the Company also provides non-GAAP financial measures, including non-GAAP net income which excludes non-cash share-based compensation. The Company believes that the non-GAAP financial measures provide investors with another method for assessing the Company's operating results in a manner that is focused on the performance of its ongoing operations. Readers are cautioned not to view non-GAAP results on a stand-alone basis or as a substitute for results under GAAP, or as being comparable to results reported or forecasted by other companies. The Company believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing the performance of the Company's liquidity and when planning and forecasting future periods.

About Noah Education Holdings Ltd

Noah Education Holdings Ltd ("Noah" or "the Company") is a leading provider of education services in China. The Company operates in three different segments, with a focus on English language training, high-end kindergartens, primary and secondary schools, and supplemental education.

Noah owns and operates 48 high-end kindergartens located in the Guangdong Province, Hunan Province and Yangtze River Delta. It owns and operates five primary and secondary schools, which are all based in Guangdong Province. The Company also owns and operates 10 supplemental education centers in Hunan Province and Shanxi Province, which focuses on English language training for children aged 3-12.

Noah was founded in 2004 and is listed on the New York Stock Exchange under the ticker symbol NED. For more information about Noah, please visit http://ir.noaheducation.com.

Safe Harbor Statement

This press release contains forward-looking statements that reflect Noah's current expectations and views of future events that involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Noah has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. You should understand that our actual future results may be materially different from and worse than what Noah expects. Information regarding these risks, uncertainties and other factors is included in Noah's most recent Annual Report on Form 20-F and other filings with the SEC.

Investor Contacts
Noah Education Holdings Ltd.
Email: [email protected]

SOURCE Noah Education Holdings Ltd.

WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?

440k+
Newsrooms &
Influencers

9k+
Digital Media
Outlets

270k+
Journalists
Opted In

GET STARTED