-- Total revenue increased by 58% year-over-year
-- Operating income increased by 59% year-over-year
BEIJING, Nov. 10, 2008 (GLOBE NEWSWIRE) -- ChinaCast Education Corporation ("ChinaCast" or the "Company") (Nasdaq:CAST), one of China's leading for-profit, post-secondary education and e-learning services providers, today announced results for the third quarter ended September 30, 2008.
2008 Third Quarter Highlights(1):
* Total revenue was RMB72.8 million (US$10.7 million), a 58%
increase year-over-year.
* Gross profit for the third quarter was RMB42.0 million (US$6.2
million), a 62% increase year-over-year. The gross profit margin
for the third quarter was 58%.
* Operating income for the third quarter was RMB25.1 million
(US$3.7 million), a 59% increase year-over-year. Operating
margin for the third quarter was 34%.
* Net income for the third quarter was RMB19.7 million (US$2.9
million), a 17% increase year-over-year. Net income margin for
the third quarter was 27%.
* Basic and diluted earnings per share for the quarter were RMB0.63
(US$0.09) and RMB0.63 (US$0.09) respectively. Weighted average
shares used in the computation of basic and diluted earnings per
share for the third quarter were 31.4 million and 31.4 million,
respectively.
* Cash flow from operations for the third quarter was RMB96.7
million (US$14.2 million), a 203% increase year-over-year.
* As at September 30, 2008, ChinaCast had cash, cash equivalents
and term deposits of RMB496.9 million (US$73.0 million).
Chairman and Chief Executive Officer of ChinaCast, Ron Chan, commented, "I am very pleased with the performance of the whole Company. Our third quarter results show increased revenues and profits thanks to growth in our e-learning segment and the contribution of the Foreign Trade and Business College of Chongqing Normal University, which was acquired earlier this year. We continue to work to develop the synergies between our e-learning business and our traditional university business and seek opportunities to grow the Company. Our balance sheet remains strong and provides sufficient means to allow us to expand the Company should the right opportunity arise."
Financial Results for the Third Quarter ended September 30, 2008
ChinaCast is organized into two business divisions: the E-Learning Group ("ELG"), encompassing the Company's core e-learning education service businesses, and the Traditional University Group ("TUG"), offering accredited bachelor and diploma programs to students from the Foreign Trade and Business College (FTBC) campus in Chongqing.
Revenue. Total revenue for the third quarter was RMB72.8 million (US$10.7 million), a 58% increase year-over-year. The increase was mainly due to the addition of the TUG business, which was newly established in the second quarter of 2008, and an increase and in ELG services revenue (up 17%). Total revenue from the ELG for the third quarter came to RMB46.3 million (US$6.8 million) compared to RMB46.0 million (US$6.8 million) for the third quarter of 2007, mainly due to the decrease in equipment sales which were somewhat offset by the increase in service revenues. Revenue from the TUG for the third quarter of 2008 was RMB26.5 million (US$3.9 million) and does not compare with the prior year when this business line was not yet part of the company.
Cost of Sales. Cost of sales for the third quarter was RMB30.8 million (US$4.5 million), a 53% increase year-over-year, primarily due to the addition of the TUG business.
Gross Profit. Gross profit for the third quarter amounted to RMB42.9 million (US$6.2 million), a 62% increase year-over-year. The gross profit margin for the third quarter was 58%.
Share-Based Compensation. Share-based compensation for the third quarter, which was allocated to related selling and marketing expenses and to general administrative expenses, was RMB2.2 million (US$0.3 million).
Operating Expenses. Operating expenses for the third quarter were RMB16.9 million (US$2.5 million), a 67% increase year-over-year, primarily due to the addition of the TUG business division, payment of the Delaware Franchise Tax amounting to RMB1.9 million (US$0.3 million), share-based compensation expenses and a reduction in management service fees.
Operating Income. Operating income for the third quarter was RMB25.1 million (US$3.7 million), a 59% increase year-over-year. Operating margin for the third quarter was 34%.
Income Tax. Income tax expense for the third quarter was RMB6.7 million (US$1.0 million), a 49% increase year-over-year, mainly due to the addition of the TUG business.
Net Income. Net income for the third quarter increased 17% year-over-year to RMB19.7 million (US$2.9 million). The net income margin for the third quarter was 27%.
Basic and Diluted Earnings Per Share (EPS). Basic and diluted earnings per share for the third quarter were RMB0.63 (US$0.09) and RMB0.63 (US$0.09), respectively. Weighted average shares used in the computation of basic and diluted earnings per share for the third quarter were 31.4 million and 31.4 million, respectively.
Cash Flow from Operations. Cash flow from operations for the third quarter was RMB96.7 million (US$14.2 million), a 203% increase year-over-year.
Cash. As of September 30, 2008, ChinaCast had cash, cash equivalents and term deposits of RMB496.9 million (US$73.0 million), up from the RMB393.2 million (US$57.8 million) as at June 30, 2008.
Outlook for the Year Ending December 31, 2008
ChinaCast reaffirms its earlier guidance of total revenue for the full year ending December 31, 2008, in the range of RMB234 million (US$34.4 million) to RMB256 million (US$37.7 million), representing year-over-year total revenue growth in the range of 25% to 36%, respectively, based on Company estimates in RMB.
ChinaCast estimates net income for the full year ending December 31, 2008, excluding share-based compensation expenses, to be in the range of RMB80 million (US$11.8 million) to RMB95 million (US$14.0 million), representing year-over-year net income growth in the range of 36% to 62%, respectively, based on Company estimates in RMB. This forecast reflects ChinaCast's current and preliminary view, which is subject to change.
Conference Call Information
A conference call to discuss the third quarter financial results will be held at 8:00 am U.S. Eastern Time on Tuesday, November 11, 2008 (9:00 pm on November 11, 2008, Beijing/Hong Kong Time). The discussion will feature remarks by Ron Chan, Chairman and Chief Executive Officer, and Tony Sena, Chief Financial Officer.
The dial-in details for the earnings conference call are as follows:
US/Canada Toll Free: +1-877-675-4756 International: +1-719-325-4894
A replay of the conference call will be available at the following numbers from 11:30 am US Eastern Time, Nov. 11, 2008, until midnight US Eastern Time, Nov. 25, 2008.
US/Canada Toll Free: +1-888-203-1112 International: +1-719-457-0820 Pass Code: 3159341
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 (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 corporations 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.
Cautionary Statement for Purposes of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995
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 10KSB for the fiscal year ended December 31, 2007. 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.
(1) Unaudited. All US Dollar amounts are based on the exchange rate of USD $1.0 = 6.8 RMB.
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share-related data)
(All US dollar amounts are based on the exchange rate of 1US$=6.8 RMB)
As of September 30, As of
-------------------- Dec. 31,
2008 2008 2007
--------- --------- ---------
US$ RMB RMB
Assets
Current assets:
Cash and cash equivalents 12,924 87,884 138,610
Term deposits 60,147 409,000 596,768
Accounts receivable 8,712 59,242 35,316
Inventory 303 2,057 2,015
Prepaid expenses and other current
assets 1,428 9,720 7,127
Amounts due from related parties 336 2,288 3,248
--------- --------- ---------
Total current assets 83,850 570,191 783,084
Non-current deposits 116 788 1,948
Deposit for business acquisition 2,794 19,000 --
Property and equipment, net 33,458 227,514 11,107
Land use rights, net 18,007 122,448 --
Acquired intangible assets, net 7,403 50,338 21,781
Long-term investments 1,549 10,531 11,165
Non-current advances to a related
party 16,040 109,072 119,914
Goodwill 45,790 311,369 1,715
--------- --------- ---------
Total assets 209,007 1,421,251 950,714
========= ========= =========
Liabilities, minority interest, and
shareholders' equity
Current liabilities:
Accounts payable 2,882 19,595 13,027
Accrued expenses and other current
liabilities 28,420 193,261 53,376
Income taxes payable 7,423 50,477 31,237
Other borrowings 632 4,298 --
Current portion of long-term bank
loans 11,529 78,400 --
Current portion of capital lease
obligations 177 1,202 34
--------- --------- ---------
Total current liabilities 51,063 347,233 97,674
--------- --------- ---------
Non-current liabilities:
Capital lease obligation, net of
current portion 357 2,430 --
Deferred tax liabilities 3,189 21,685 --
Unrecognized tax benefits 5,332 36,258 27,892
--------- --------- ---------
Total non-current liabilities 8,878 60,373 27,892
--------- --------- ---------
Total liabilities 59,941 407,606 125,566
--------- --------- ---------
Minority interest 6,283 42,723 20,512
--------- --------- ---------
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) - continued
(In thousands, except share-related data)
(All US dollar amounts are based on the exchange rate of 1US$=6.8 RMB)
As of September 30, As of
-------------------- Dec. 31,
2008 2008 2007
--------- --------- ---------
US$ RMB RMB
Commitments and contingencies
Shareholders' equity:
Ordinary shares (US$0.0001 par value;
100,000,000 shares authorized in
2008 and 2007; 31,389,251 and
27,292,641 shares issued and
outstanding in 2008 and 2007,
respectively) 3 24 21
Additional paid-in capital 129,674 881,785 768,844
Statutory reserve 3,775 25,671 16,087
Accumulated other comprehensive loss (813) (5,526) (5,205)
Retained earnings 10,144 68,968 24,889
--------- --------- ---------
Total shareholders' equity 142,783 970,922 804,636
--------- --------- ---------
Total liabilities, minority interest,
and shareholders' equity 209,007 1,421,251 950,714
========= ========= =========
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except share-related data)
(All US dollar amounts are based on the exchange rate of 1US$=6.8 RMB)
For the three months ended
September 30,
----------------------------------
2008 2008 2007
---- ---- ----
US$ RMB RMB
Revenues:
Service 10,420 70,856 37,992
Equipment 283 1,923 8,038
---------- ---------- ----------
10,703 72,779 46,030
---------- ---------- ----------
Cost of revenues:
Service (4,248) (28,887) (12,178)
Equipment (279) (1,898) (7,967)
---------- ---------- ----------
(4,527) (30,785) (20,145)
---------- ---------- ----------
Gross profit 6,176 41,994 25,885
---------- ---------- ----------
Operating (expenses) income:
Selling and marketing expenses
(including share-based
compensation of RMB1,506 and
RMB170 for the nine months ended
September 30 for 2008 and 2007,
respectively, share-based
compensation of RMB114 and RMB170
for the three months ended
September 30 for 2008 and 2007,
respectively) (294) (2,001) (1,731)
General and administrative expenses
(including share-based
compensation of RMB12,079 and
RMB360 for the nine months ended
September 30 for 2008 and 2007,
respectively, share-based
compensation of RMB2,115 and
RMB360 for the three months ended
September 30 for 2008 and 2007,
respectively) (2,438) (16,577) (12,425)
Foreign exchange loss (58) (392) (1,114)
Management service fee 274 1,864 5,138
Other operating income 34 232 --
---------- ---------- ----------
Total operating expenses, net (2,482) (16,874) (10,132)
---------- ---------- ----------
Income from operations 3,694 25,120 15,753
Interest income 616 4,191 6,140
Interest expense (37) (251) (4)
Income before provision for income
taxes, earnings in equity
investments, and minority interest
and discontinued operations 4,273 29,060 21,889
Provision for income taxes (990) (6,733) (4,527)
---------- ---------- ----------
Income before earnings in equity
investments, minority interest,
and discontinued operations 3,283 22,327 17,362
Gain in equity investments 27 182 (232)
Minority interest (415) (2,820) (295)
---------- ---------- ----------
Income from continuing operations 2,895 19,689 16,835
---------- ---------- ----------
For the nine months ended
September 30,
----------------------------------
2008 2008 2007
---- ---- ----
US$ RMB RMB
Revenues:
Service 26,745 181,869 106,014
Equipment 3,577 24,327 22,144
---------- ---------- ----------
30,322 206,196 128,158
---------- ---------- ----------
Cost of revenues:
Service (10,497) (71,369) (33,267)
Equipment (3,543) (24,093) (22,378)
---------- ---------- ----------
(14,040) (95,462) (55,645)
---------- ---------- ----------
Gross profit 16,282 110,734 72,513
---------- ---------- ----------
Operating (expenses) income:
Selling and marketing expenses
(including share-based
compensation of RMB1,506 and
RMB170 for the nine months ended
September 30 for 2008 and 2007,
respectively, share-based
compensation of RMB114 and RMB170
for the three months ended
September 30 for 2008 and 2007,
respectively) (937) (6,370) (4,496)
General and administrative expenses
(including share-based
compensation of RMB12,079 and
RMB360 for the nine months ended
September 30 for 2008 and 2007,
respectively, share-based
compensation of RMB2,115 and
RMB360 for the three months ended
September 30 for 2008 and 2007,
respectively) (6,908) (46,976) (33,423)
Foreign exchange loss (153) (1,043) (4,257)
Management service fee 685 4,655 16,967
Other operating income 34 232 --
---------- ---------- ----------
Total operating expenses, net (7,279) (49,502) (25,209)
---------- ---------- ----------
Income from operations 9,003 61,232 47,304
Interest income 2,319 15,764 12,962
Interest expense (64) (437) (34)
Income before provision for income
taxes, earnings in equity
investments, and minority interest
and discontinued operations 11,258 76,559 60,232
Provision for income taxes (2,441) (16,601) (12,559)
---------- ---------- ----------
Income before earnings in equity
investments, minority interest,
and discontinued operations 8,817 59,958 47,673
Gain in equity investments (93) (634) (711)
Minority interest (832) (5,661) (2,719)
---------- ---------- ----------
Income from continuing operations 7,892 53,663 44,243
---------- ---------- ----------
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited) - continued
(In thousands, except share-related data)
(All US dollar amounts are based on the exchange rate of 1US$=6.8 RMB)
For the three months ended
September 30,
----------------------------------
2008 2008 2007
---------- ---------- ----------
US$ RMB RMB
Discontinued operations:
Loss from discontinued operations,
net of tax RMBnil for both 2008
and 2007 -- -- --
---------- ---------- ----------
Minority interest in discontinued
operations, net of tax RMBnil for
both 2008 and 2007 -- -- --
---------- ---------- ----------
Loss on discontinued operations -- -- --
---------- ---------- ----------
Net income 2,895 19,689 16,835
========== ========== ==========
Net income per share
Basic 0.09 0.63 0.62
========== ========== ==========
Diluted 0.09 0.63 0.61
========== ========== ==========
Weighted average shares used in
computation:
Basic 31,373,482 31,373,482 27,266,564
========== ========== ==========
Diluted 31,373,482 31,373,482 27,783,672
========== ========== ==========
For the nine months ended
September 30,
----------------------------------
2008 2008 2007
---------- ---------- ----------
US$ RMB RMB
Discontinued operations:
Loss from discontinued operations,
net of tax RMBnil for both 2008
and 2007 -- -- (139)
---------- ---------- ----------
Minority interest in discontinued
operations, net of tax RMBnil for
both 2008 and 2007 -- -- (230)
Loss on discontinued operations -- -- (369)
---------- ---------- ----------
Net income 7,892 53,663 43,874
========== ========== ==========
Net income per share
Basic 0.28 1.87 1.67
========== ========== ==========
Diluted 0.27 1.85 1.60
========== ========== ==========
Weighted average shares used in
computation:
Basic 28,695,241 28,695,241 26,315,541
========== ========== ==========
Diluted 29,026,908 29,026,908 27,491,941
========== ========== ==========
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
(All US dollar amounts are based on the exchange rate of 1US$=6.8 RMB)
For the nine months
ended September 30,
-------------------------------
2008 2008 2007
---- ---- ----
US$ RMB RMB
Cash flows from operating
activities:
Net income 7,892 53,663 43,874
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Minority interest in continuing
operations 832 5,661 2,719
Minority interest in discontinued
operations -- -- 230
Depreciation and amortization 3,395 23,083 3,878
Share-based compensation 1,998 13,585 530
Gain on disposal of property, plant
and equipment (34) (232) --
Loss in equity investments 93 634 711
Changes in assets and liabilities:
Accounts receivable (3,650) (24,822) 5,604
Inventory (6) (42) (164)
Prepaid expenses and other current
assets (339) (2,302) (1,779)
Non-current deposits 241 1,640 --
Amounts due from related parties 141 960 745
Accounts payable (444) (3,022) (4,761)
Accrued expenses and other current
liabilities 9,575 65,113 (42,039)
Amounts due to related parties -- -- (115)
Income taxes payable 2,019 13,728 4,098
Deferred taxes assets 129
Deferred taxes liabilities (237) (1,611) --
Unrecognized tax benefits 224 1,529 3,443
------- ------- -------
Net cash provided by (used in)
operating activities 21,700 147,565 (17,103)
------- ------- -------
Cash flows from investing activities:
Repayment from advance to related
parties 1,616 10,991 9,170
Advance to related parties (22) (149) (1,443)
Purchase of subsidiaries, net of
cash acquired (68,457) (465,507) --
Purchase of property and equipment (2,093) (14,235) (1,548)
Term deposits 27,613 187,768 15,378
Disposal of property, plant and
equipment 38 256 --
Deposit for business acquisition (2,794) (19,000) --
Advance received from disposal of
cost method investment -- -- 12,000
Proceeds from disposal of
discontinued operations, net of
cash disposed of -- -- (9,113)
------- ------- -------
Net cash used in investing activities (44,099) (299,876) 24,444
------- ------- -------
Cash flows from financing activities:
Other borrowings raised 779 5,298 --
Repayment of other borrowings (1,118) (7,600) --
Exercise of warrants, net of expense
of RMB600 2,467 16,778 --
Repayment of capital lease
obligations (27) (184) (111)
Repayment of advances from related
parities -- -- (4,251)
Collection of subscription
receivable 12,893 87,670 --
Capital distribution -- -- (5,793)
------- ------- -------
Net cash provided by (used in)
financing activities 14,994 101,962 (10,155)
------- ------- -------
Effect of foreign exchange rate
changes (55) (377) (1,707)
Net (decrease) increase in cash and
cash equivalents (7,460) (50,726) 29,685
Cash and cash equivalents at beginning
of the period 20,384 138,610 278,067
------- ------- -------
Cash and cash equivalents at end of
the period 12,924 87,884 307,752
======= ======= =======