Noah Education Announces Unaudited Second Quarter Fiscal Year 2013 Results

SHENZHEN, China, Feb. 27, 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 second quarter of  fiscal year ending December 31, 2012.

Second Quarter Fiscal 2013 Financial Highlights (compared to second quarter fiscal 2012)

• Net revenue increased 39.7% year-over-year to RMB62.7 million (US$ 10.0 million)
• Gross profit increase 43.0% year-over-year to RMB28.5 million (US$4.6 million), and gross profit margin was 45.5%
• Operating income was RMB9.6 million (US$1.5 million) as compared to an operating loss of RMB2.3 million
• Net income increased 212.6% year-over-year to RMB7.1 million (US$1.1 million). Non-GAAP net income, excluding share based compensation expenses, was RMB7.6 million (US$1.2 million), up 139.3% year-over-year
• Basic and diluted earnings per share were RMB0.13 (US$0.02) as compared to basic and diluted earnings per share of RMB0.03
• Non-GAAP basic and diluted earnings per share were RMB0.14 (US$0.02) as compared to non-GAAP basic and diluted earnings per share of RMB0.06

Second Quarter Fiscal 2013 Operational Highlights

• Dai Dai Kang Enterprise Management Consulting Co., Ltd ("DDK Consulting") and Xiaoxiao Kids Arts and Education Consulting Co., Ltd ("Xiaoxiao Consulting") started contributing to the Company's net revenue this quarter
• School network (excluding franchised schools and centers) expanded from 50 schools as of September 30, 2012 to 63 schools as of December 31, 2012.

Commenting on the results, Dong Xu, Chairman and Chief Executive Officer of Noah, said, "We are pleased to report that Noah exceeded our revenue guidance in the second quarter of the fiscal year 2013. Noah is committed to providing first-class kindergarten education services, and our offering has become appreciably enhanced following the acquisitions of DDK Consulting and Xiaoxiao Consulting."

Mr. Xu continued, "While our focus in the short-term is to achieve breakeven at operating level for the fiscal year 2013, we will continue to focus on driving the growth of the Company organically and through strategic acquisitions in the long-term, delivering long-term value to our shareholders. We will continue to ramp up utilization rate of existing schools and increase operating efficiency."

Dora Li, Chief Financial Officer, added, "While the second quarter of a fiscal year is typically a strong quarter for Noah, our revenue expansion was also boosted by the contribution of DDK Consulting and Xiaoxiao Consulting, which we acquired in October 2012. We are also glad to report that our operating costs are well under control, which has further helped the Company to achieve an operating profit this quarter."

Second Quarter of Fiscal Year 2013 Financial Results

Net revenue

Net revenue for the second quarter of fiscal 2013 increased 39.7% year-over-year to RMB62.7 million (US$10.0 million) from RMB44.9 million. The year-over-year increase was driven mainly by our organic growth and revenue from the newly acquired business of DDK Consulting and Xiaoxiao Consulting.

In terms of revenue breakdown by business lines, revenue from kindergartens increased 59.6% year-over-year to RMB35.9 million (US$5.8 million) from RMB22.5 million. Revenue from primary and secondary schools increased 23.3% year-over-year to RMB18.5 million (US$3.0 million) from RMB15.0 million. Revenue from supplemental education, which includes English training courses and the sale of teaching materials, increased 12.2% year-over-year to RMB8.3 million (US$1.3 million) from RMB7.4 million.

Gross profit and gross profit margin

Gross profit for the second quarter of fiscal 2013 increased 43.0% year-over-year to RMB28.5 million (US$4.6 million) from RMB20.0 million. Gross profit margin for the second quarter of fiscal 2013 was 45.5%, compared to 44.5% in the second quarter of fiscal 2012. The modest improvement in gross profit margin was primarily due to revenue expansion, offset by an increase in staff costs and expenses associated with the ramp up of the Company's existing school network.

Operating expenses

Total operating expenses for the second quarter of fiscal 2013 were RMB24.6 million (US$3.9 million) as compared to RMB25.9 million in the second quarter of fiscal 2012, as the Company continued to make progress to improve its overall cost structure and reduce expenses in research & development, sales and marketing, as well as general and administrative expenses.

Research and development ("R&D") expenses for the second quarter of fiscal 2013 were RMB0.6 million (US$0.1 million) as compared to RMB0.8 million in the same period of fiscal 2012. As a percentage of net revenue, R&D expenses decreased to 1.0% in the second quarter of fiscal 2013 from 1.7% in the same quarter of fiscal 2012. The R&D investment is focused on the development of teaching materials.

Sales and marketing ("S&M") expenses for the second quarter were RMB1.3 million (US$0.2 million) as compared to RMB1.7 million in the same period of fiscal 2012. As a percentage of net revenue, S&M expenses decreased to 2.1% in the second quarter of fiscal 2013, compared to 3.7% in the same period of fiscal 2012.

General and administrative ("G&A") expenses for the second quarter of fiscal 2013 were RMB22.6 million (US$3.6 million) as compared to RMB23.5 million in the same period of fiscal 2012. As a percentage of net revenue, G&A expenses decreased to 36.1% in the second quarter of fiscal 2013, compared to 52.3% in the same period of fiscal 2012. The decrease in G&A expenses to net revenue continued to reflect the improvement of the Company's operational leverage with the expansion of revenue scale.

Other operating income

Other operating income for the second quarter of fiscal 2013 increased 54.1% year-over-year to RMB5.7 million (US$0.9 million) from RMB3.7 million in the second quarter of fiscal 2012. The increase was mainly due to revenue derived from training camps and interest groups.

Net operating income (loss)

Net operating income for the second quarter of fiscal 2013 was RMB9.6 million (US$1.6 million), compared to an operating loss of RMB2.3 million in the second quarter of fiscal 2012.

Non-operating income

Interest income for the second quarter of fiscal 2013 remained unchanged at RMB0.4 million (US$0.06 million), compared to the same period of fiscal 2012. Investment income for the second quarter of fiscal 2013 was RMB4.5 million (US$0.7 million), compared to RMB4.3 million in the second quarter of fiscal 2012. The Company incurred a non-operating loss for the second quarter of fiscal 2013 of RMB3.8 million (US$0.6 million), due to the recognition of a one-time impairment loss of RMB5.1 million on our investment in Franklin Electronic Publishers. In the same period of fiscal 2012, Noah reported other non-operating income of RMB1.5 million.

Income tax expenses

Income tax expenses for the second quarter of fiscal 2013 were RMB3.6 million (US$0.6 million), compared to an expense of RMB1.7 million for the same period in fiscal 2012.

Net Income

Net income for the second quarter of fiscal 2013 was RMB7.1 million (US$1.1 million), compared to a net income of RMB2.3 million in the same period of fiscal 2012. Basic and diluted earnings per share were RMB0.13 (US$0.02), compared to basic and diluted earnings per share of RMB0.03 in the second quarter of fiscal 2012.

Net income excluding share-based compensation expenses (non-GAAP) for the second quarter of fiscal 2013 was RMB7.6million (US$1.2 million), compared to non-GAAP net income of RMB3.2 million in the same period of fiscal 2012. Non-GAAP basic and diluted earnings per share for the second quarter of fiscal 2013 were RMB0.14 (US$0.02), compared to a non-GAAP basic and diluted earnings per share of RMB0.06 in the second quarter of fiscal 2012.

Liquidity

Cash and cash equivalents, and short-term investments totaled RMB486.6 million (US$78.1 million) as of December 31, 2012, compared to RMB519.3 million as of September 30, 2012. For the three months ended December 31, 2012, operating cash provided by continuing operations was RMB2.8 million (US$0.4 million).

Deferred revenue

Deferred revenue related to tuition fees and franchising fees was RMB24.2 million (US$3.9 million) as of December 31, 2012, compared to RMB51.6 million as of September 30, 2012. Deferred revenue primarily includes the tuition fees and franchising fees collected that have not yet been recognized during the quarter. It will be recognized according to the course and contract schedule.

Operational Updates

Noah operated 63 schools and kindergartens in its network at the end of the second quarter of fiscal 2013. The network includes 47 kindergartens, two of which have recently secured licenses and have already started to contribute to revenue, and 11 of which are 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 enrollment rate of 38% at end of December 31, 2012.

Noah also operates eleven directly-owned supplemental training centers.

Student enrollment totaled approximately 20,300, reflecting a year-over-year increase of about 23% due to the expansion of the network. Categorized according to business segments, more than 12,000 students are enrolled in kindergartens, while approximately 4,700 are accounted for in primary and secondary schools, and the remaining 3,600 are in directly owned supplemental training centers.

The Company plans to roll out two new kindergartens in the third quarter of fiscal 2013, and expects them to begin contributing to revenue in the third quarter of fiscal 2013.

Financial Outlook for the Third Quarter of Fiscal 2013 and Full Fiscal 2013

Based on current estimates and market conditions, for the third quarter of fiscal 2013, Noah expects to generate net revenue in the range of RMB46 million (US$7.4 million) to RMB51 million (US$8.2 million). For the full fiscal 2013, the Company maintains the revenue outlook in the range of RMB206 million (US$33.0 million) to RMB215 million (US$34.5 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 8:00 am (Eastern)/5:00 am (Pacific)/9:00 pm (China) on Thursday, February 28, 2013 to discuss its second quarter of fiscal year 2013 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" as the verbal passcode to access the call. Replay of the conference call will be available from 11:00 am US Eastern Time on February 28, 2013 until March 7, 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 RMB6.2301, the noon buying rate for US dollars in effect on December 31, 2012 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 goodwill and intangible assets impairment and 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 is a leading provider of education services in China. The Company's brands include Wentai Education, which operates and manages high-end kindergartens, primary and secondary schools, Little New Star, which provides English language training for children aged 3-12 in its directly owned and franchised training centers, and Yuanbo Education, which focuses on early childhood education services in the Yangtze Delta region. 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.

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