* Quarterly Revenue Increased 33% Year-Over-Year(1) * Quarterly Net Income Attributable to the Company Increased 146% Year-Over-Year * Quarterly EBITDA (non-GAAP) Increased 165% Year-Over-Year
BEIJING, May 11, 2009 (GLOBE NEWSWIRE) -- ChinaCast Education Corporation (the "Company" or "ChinaCast") (Nasdaq:CAST), a leading for-profit, post-secondary and e-learning services provider in China, today announced its financial results for the first quarter ended March 31, 2009.
Highlights for the First Quarter Ended March 31, 2009
* Total revenue for the quarter increased 33% year-over-year to $11.3 million from $8.5 million. * Gross profit for the quarter increased 67% year-over-year to $6.8 million from $4.1 million. Gross profit margin for the quarter was 60% compared to 48% in the first quarter of 2008. * Net income attributable to the Company for the quarter increased 146% year-over-year to $2.9 million from $1.2 million. Net income margin for the quarter was 26% compared to 14% in the first quarter of 2008. Adjusted net income excluding share based compensation expenses (non-GAAP) for the quarter increased 56% year-over-year to $3.9 million from $2.5 million. Adjusted net income margin excluding share based compensation expenses (non-GAAP) for the quarter was 34% compared to 29% in the first quarter of 2008. * EBITDA (non-GAAP) for the quarter increased 165% year-over-year to $6.7 million from $2.5 million. EBITDA margin (non-GAAP) for the quarter was 59% compared to 30% in the first quarter of 2008. * Diluted earnings per share for the quarter were $0.08 compared to $0.04 in the first quarter of 2008. Adjusted diluted earnings per share excluding share based compensation expenses (non-GAAP) for the quarter were $0.11 compared to $0.09 in the first quarter of 2008. * As of March 31, 2009, the Company reported cash, cash equivalents and term deposits of $86.9 million.
"ChinaCast delivered another strong quarter of revenue growth and improved profitability as we are now providing post-secondary education services to over 11,000 on-campus and 135,000 distance learning students throughout China," said Ron Chan, Chairman and Chief Executive Officer. "As in the USA and other countries, we continue to see healthy growth in the higher education sector in China as students continue to improve their job skills to compete in a tight labor market. The investments we have made in our business are yielding solid improvements in all of our financial operating metrics and we expect this momentum to accelerate with our recently announced MOU to acquire an additional accredited university in China which will further expand our degree offerings while driving future growth. We remain optimistic on the long term growth of the industry and our position as a leading for-profit, post-secondary education service provider."
First Quarter 2009 Financial Results
ChinaCast is organized into two business segments: the E-Learning Group ("ELG"), encompassing the Company's e-learning education service businesses, and the Traditional University Group ("TUG"), offering accredited bachelor and diploma degree programs to students from the Foreign Trade and Business College (FTBC) campus in Chongqing.
Total Revenues - In the first quarter of 2009, total revenue increased 33% year-over-year to $11.3 million from $8.5 million. The Company's total revenue is comprised of service and equipment revenue. Service revenue for the quarter increased 90% year-over-year to $10.9 million from $5.7 million while equipment revenue decreased 85% year-over-year to $0.4 million from $2.8 million. The Company also reports revenue by its two business segments, ELG and TUG:
* ELG Revenue - ELG revenue for the quarter decreased 18%
year-over-year to $6.9 million from $8.5 million, primarily due to
a large decrease in equipment sales. ELG revenue is further
comprised of the following three business services:
-- Post Secondary Education Distance Learning: Revenue from Post
Secondary Education Distance Learning Services increased 17%
year-over-year to $3.8 million from $3.3 million. The total
number of post-secondary students enrolled in courses using the
Company's distance learning platforms increased to 135,000 as of
September 30, 2008.
-- K-12 and Content Delivery: Revenue from K-12 and Content
Delivery Services increased 5% year-over-year to $2.4 million
from $2.3 million. The number of subscribing schools for K-12
distance learning services has stabilized at 6,500.
-- Vocational Training, Enterprise/Government Training and
Networking and English Training Services: Revenue from this
segment decreased 75% year-over-year to $0.8 million from
$3.0 million mainly due to a decrease in equipment sales and the
change of the business model in English Training service.
* TUG Revenue - TUG was newly established in the second quarter of
2008 after the acquisition of Hai Lai, the holding company of the
Foreign Trade and Business College of Chongqing Normal University
('FTBC'). TUG total revenue for the quarter was $4.4 million
comprised of $3.9 million of tuition revenue and $0.5 million of
other revenue (mainly accommodation and catering revenue). In the
first quarter of 2009, FTBC had approximately 11,000 students
enrolled.
Gross Profit and Gross Margin - Gross profit for the quarter increased 67% year-over-year to $6.8 million from $4.1 million. Gross profit margin for the quarter was 60% compared to 48% in the first quarter of 2008.
Net Income, Net Income Margin - Net income attributable to the Company for the quarter increased 146% year-over-year to $2.9 million from $1.2 million. Net income margin for the quarter was 26% compared to 14% in the first quarter of 2008. Adjusted net income excluding share based compensation expenses (non-GAAP) for the quarter increased 56% year-over-year to $3.9 million from $2.5 million. Adjusted net income margin excluding share based compensation expenses (non-GAAP) for the quarter was 34% compared to 29% in the first quarter of 2008.
EBITDA and EBITDA Margin - EBITDA (non-GAAP) for the quarter increased 165% year-over-year to $6.7 million from $2.5 million. EBITDA margin (non-GAAP) for the quarter was 59% compared to 30% in the first quarter of 2008.
Diluted EPS - Diluted earnings per share for the quarter were $0.08 compared to $0.04 in the first quarter of 2008. Diluted earnings per share excluding share based compensation expenses (non-GAAP) for the quarter were $0.11 compared to $0.09 in the first quarter of 2008. The weighted average number of shares used in the computation was 35,648,251 and 28,292,257 for the first quarter of 2009 and the first quarter of 2008, respectively.
Cash and Bank Balances together with Term Deposits - Cash and bank balances together with term deposits totaled $86.9 million as of March 31, 2009, compared to $86.7 million as of December 31, 2008.
Free Cash Flow - Free cash flow is a non-GAAP measure defined as net cash provided by operating activities minus purchase of property and equipment. Net cash provided by operating activities for the quarter decreased to $0.006 million compared to $1.9 million in the first quarter of 2008. In the first quarter of 2009, there was an increase in accounts receivables in the current period and a considerable part of the revenue recognized, in particular the revenue of the TUG, was received in previous periods. Payments received before recognition of revenue are recorded as deferred revenue while payments not received at the time goods and service have been provided are recorded as accounts receivable. Purchase of property and equipment for the quarter was $0.7 million compared to $0.09 million in the first quarter of 2008. Thus, free cash outflow (non-GAAP) for the quarter was $0.6 million compared to free cash inflow of $1.8 million in the first quarter of 2008, a 136% decrease year-over-year.
Financial Outlook for 2009
As stated previously, for the full year ending December 31, 2009, the Company estimates that total revenue will be between $49 million to $51 million and adjusted net income (non-GAAP) between $14 million to $16 million, which does not include shared-based compensation and impairment charges. In addition, this guidance does not include the anticipated contribution from the pending university acquisition. This is the Company's current and preliminary view, which is subject to change.
Conference Call Information
ChinaCast's management team will host an earnings conference call at 8 AM on Tuesday, May 12, 2009, U.S. Eastern Time (8 PM on May 12, 2009, Beijing/Hong Kong Time). The dial-in details for the earnings conference call are as follows:
U.S./Canada Toll Free: +1-877-719-9786 International: +1-719-325-4807
A replay of the conference call will be available at the following numbers from 11:00 am Tuesday, May 12, 2009, U.S. Eastern Time, until 11:30 pm Tuesday, May 26, 2009, U.S. Eastern Time.
U.S./Canada Toll Free: +1-888-203-1112 International: +1-719-457-0820 Pass Code: 7395430
Additionally, a live and archived version of the earnings call will be available at www.chinacasteducation.com. Please access the website approximately 10 minutes prior to the start time in order to download and install any necessary software.
About ChinaCast Education Corporation
Established in 1999, ChinaCast Education Corporation is a leading for-profit, post-secondary education and e-learning services provider in China. The Company provides its post-secondary degree programs through its 80% ownership in the holding company of the Foreign Trade and Business College (or "FTBC") of Chongqing Normal University. FTBC offers career-oriented bachelor's degree and diploma programs in business, economics, trade, tourism management, advertising, language, IT and music. These degree and diploma programs are fully accredited by the PRC Ministry of Education. The Company provides its e-learning services to post-secondary institutions, K-12 schools, government agencies and corporate enterprises via its nationwide satellite broadband network. These services include interactive distance learning applications, multimedia education content delivery, English language training and vocational training courses. The company is listed on the NASDAQ with the ticker symbol CAST.
Safe Harbor Statement
This press release may contain statements that are forward-looking, as that term is defined by the Private Securities Litigation Reform Act of 1995. These forward-looking statements express our current expectations or forecasts of possible future results or events, including projections of future performance, statements of management's plans and objectives, future contracts, and forecasts of trends and other matters. These projections, expectations and trends are dependent on certain risks and uncertainties including such factors, among others, as growth in demand for education services, smooth and timely implementation of new training centers and other risk factors listed in the Company's Annual Report on Form 10K for the fiscal year ended December 31, 2008. Forward-looking statements speak only as of the date of this filing, and we undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur. You can identify these statements by the fact that they do not relate strictly to historic or current facts and often use words such as "anticipate," "estimate," "expect," "believe," "will likely result," "outlook," "project" and other words and expressions of similar meaning. No assurance can be given that the results in any forward-looking statements will be achieved and actual results could be affected by one or more factors, which could cause them to differ materially. For these statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act.
About Non-GAAP Financial Measures
To supplement our consolidated financial statements, which statements are prepared and presented in accordance with GAAP, we use the following non-GAAP financial measures: adjusted net income, adjusted net-income margin, adjusted EPS (basic and diluted), EBITDA, EBITDA margin and free cash flow. The presentation of this financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP results of operations measures to the nearest comparable GAAP measures" included at the end of this release.
We use these non-GAAP financial measures for financial and operational decision making and as a means to evaluate period-to-period comparisons. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance by excluding certain expenses and expenditures that may not be indicative of our "recurring core business operating results." These non-GAAP financial measures exclude from our operating performance not only non-cash charges, such as stock-based compensation, but also discrete cash charges that are infrequent in nature. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate management's internal comparisons to our historical performance and liquidity as well as comparisons to our competitors' operating results. We believe these non-GAAP financial measures are useful to investors both because (1) they allow for greater transparency with respect to key metrics used by management in its financial and operational decision making and (2) they are used by our institutional investors and the analyst community to help them analyze the health of our business.
The accompanying tables have more details on the GAAP financial measures that are most directly comparable to non-GAAP financial measures and the related reconciliations between these financial measures.
(1) The US dollar figures presented in this release are derived from the corresponding RMB figures from the Company's Form 10Q for the quarters ended March 31, 2009, and March 31, 2008, and are based on the historical exchange rate of US$1.0 = 6.8 RMB at March 31, 2009, and US$1.0 = 7.0 RMB at March 31, 2008, respectively.
CHINACAST EDUCATION CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share-related data)
As of As of
31/3/2009 31/12/2008
US'000 US'000
----------------------
ASSETS
Current assets:
Cash and cash equivalents 12,944 32,372
Term deposits 73,927 54,265
Accounts receivable 6,902 4,791
Inventory 206 209
Prepaid expenses and other current assets 948 1,322
Amount due from related parties 248 366
----------------------
Total current assets 95,175 93,325
----------------------
Non-current assets:
Non-current deposits 144 101
Plant and equipment, net 41,149 41,762
Land use rights, net 17,814 17,909
Acquired intangible assets, net 4,006 4,607
Long term investments 729 768
Non-current advances to a related party 15,338 16,208
Goodwill 45,784 45,784
Total assets 220,139 220,464
======================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Account payable 2,012 1,686
Accrued expenses and other current liabilities 18,950 19,530
Deferred revenues 7,537 12,408
Amount due to related party 124 166
Income taxes payable 7,960 7,440
Current portion of long term bank borrowings 11,529 2,941
Current portion of capital lease obligation 200 175
Other borrowings 161 161
----------------------
Total current liabilities 48,473 44,507
----------------------
Non-current liabilities:
Long-term bank borrowings -- 8,588
Capital lease obligation, net of current
portion 180 194
Deferred tax liabilities 2,999 3,093
Unrecognized tax benefits 6,846 6,561
Total non-current liabilities 10,025 18,436
----------------------
Total liabilities 58,498 62,943
----------------------
Shareholders' equity:
Ordinary shares 4 4
Additional paid-in capital 140,431 139,464
Statutory reserve 4,135 4,134
Accumulated other comprehensive loss (920) (802)
Retained earnings 11,060 8,165
----------------------
Total ChinaCast Education Corporation
shareholders' equity 154,710 150,965
Noncontrolling interest 6,931 6,556
----------------------
Total shareholders' equity 161,641 157,521
----------------------
Total liabilities and shareholders' equity 220,139 220,464
======================
CHINACAST EDUCATION CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except share-related data)
3 months 3 months
ended ended YoY
31/3/2009 31/3/2008 %change
US'000 US'000 +(-)
Revenue
Service 10,891 5,744 90%
Equipment 423 2,755 -85%
-----------------------
11,314 8,499 33%
Cost of sales
Service (4,109) (1,712) 140%
Equipment (417) (2,730) -85%
-----------------------
(4,526) (4,442) 2%
Gross profit 6,788 4,057 67%
Operating (expenses) income:
Selling and marketing expenses (277) (498) -44%
General and administrative expenses (2,639) (2,602) 1%
Foreign exchange gain (loss) 25 (66) -138%
Management service fee 142 114 25%
Other operating income 74 --
-----------------------
Total operating expenses, net (2,675) (3,052) -12%
Income from operations 4,113 1,005 309%
Interest income 340 836 -59%
Interest expense (214) (1) 21,300%
-----------------------
Income before provision for income
taxes and loss in equity 4,239 1,840 130%
investments
Provision for income taxes (930) (551) 69%
-----------------------
Income before loss in equity
investments 3,309 1,289 157%
Loss in equity investments (39) (58) -33%
-----------------------
Net income 3,270 1,231 166%
Less: Net income attributable to
non-controlling interest (375) (55) 582%
-----------------------
Net income attributable to ChinaCast
Education Corporation 2,895 1,176 146%
=======================
Net income attributable to ChinaCast
Education Corporation per share
Basic (US$) 0.08 0.04 100%
Diluted (US$) 0.08 0.04 100%
Weighted average shares used in
computation
Basic 35,648,251 27,297,256
Diluted 35,648,251 28,292,257
CHINACAST EDUCATION CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands, except share-related data)
3 months 3 months
ended ended
31/3/2009 31/3/2008
US'000 US'000
Cash flows from operating activities
Net income 3,270 1,231
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,582 203
Share-based compensation 967 1,302
Loss in equity investments 39 58
Changes in assets and liabilities:
Accounts receivable (2,107) (2,696)
Inventory 3 3
Prepaid expenses and other current assets 373 (297)
Non-current deposits (43) 120
Amount due from related parties 118 (29)
Accounts payable 326 900
Accrued expenses and other current liabilities (320) 478
Deferred revenues (4,870) 114
Amount due to related parties (43) --
Income taxes payable 520 459
Deferred taxes liabilities (94) --
Unrecognized tax benefits 285 18
----------------------
Net cash provided by operating activities 6 1,864
----------------------
Cash flows from investing activities:
Advances to related parties (2,941) --
Repayment from advance to related parties 3,812 1,260
Purchase of property and equipment (643) (92)
Term deposits (19,662) (3,473)
----------------------
Net cash used in investing activities (19,434) (2,305)
----------------------
Cash flows from financing activities:
Exercise of warrants -- 50
Repayment of capital lease obligation -- (5)
----------------------
Net cash provided by financing activities -- 45
----------------------
Effect of foreign exchange rate changes -- (3)
Net decrease in cash and cash equivalents (19,428) (399)
Cash and cash equivalents at beginning of
period 32,372 19,801
----------------------
Cash and cash equivalents at end of period 12,944 19,402
======================
Reconciliations of non-GAAP results of operations
measures to the nearest comparable GAAP measures
3 months 3 months Year on
ended ended Year %
31/3/2009 31/3/2008 Change
US$ '000 US$ '000 +/(-)
--------------------------------
Gross Profit 6,788 4,057 67%
Gross Profit Margin 60% 48%
Net Income Attributable to the Company 2,895 1,176 146%
Depreciation and Amortization 1,582 203 679%
Shared Based Compensation 967 1,302 -26%
Interest Income (340) (836) -59%
Interest Expense 214 1 37,293%
Provision for Income Taxes 930 551 69%
Loss in Equity Investments 39 58 -33%
Non-controlling Interest 375 55 586%
EBITDA 6,662 2,510 165%
EBITDA Margin 59% 30%
Net Income Attributable to ChinaCast
Education Corporation 2,895 1,176 146%
Shared Based Compensation 967 1,302 -26%
Adjusted Net Income 3,862 2,478 56%
Net Income Margin 26% 14%
Adjusted Net Income Margin 34% 29%
Fully Diluted Shares 35,648,251 28,292,257
EPS (Diluted, US$) 0.08 0.04
Adjusted EPS (Diluted, US$) 0.11 0.09
Net Cash Provided by Operating
Activities 6 1,864 -100%
Purchase of Property and Equipment (643) (92) 601%
----- ----
Free Cash Flow (637) 1,772 -136%