* Quarterly Revenue Increased by 75% Year-Over-Year * Quarterly Net Income Increased by 83% Year-Over-Year
BEIJING, Aug. 12, 2008 (PRIME 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 second quarter of 2008.
2008 Second Quarter Highlights(1):
* Total revenues for the quarter increased 75% year-over-year to
RMB73.9 million (US$10.7 million) from RMB42.3 million (US$6.1
million).
* Net income for the quarter increased 83% year-over-year to RM25.7
million (US$3.7 million) from RMB14.1 million (US$2.0 million).
* Income from operations for the quarter increased 87%
year-over-year to RM29.1 million (US$4.2 million) from RMB15.6
million (US$2.3 million).
* Gross, operating and net margins for the quarter were 55%, 39%
and 35% respectively.
* Basic and diluted earnings per share for the quarter were RMB0.94
(US$0.14) and RMB0.94 (US$0.14) respectively.
* On April 11, 2008, the Company consummated the acquisition of 80%
of Hai Lai, the holding company of the Foreign Trade and Business
College (FTBC) of Chongqing Normal University. The revenues and
earnings of FTBC began consolidating with the Company's
financials starting with the second quarter.
"We are very pleased to report robust revenue and net income growth in the second quarter that resulted from the execution of our strategy to augment the growth of our e-learning business by acquiring post-secondary educational institutions," said Ron Chan, ChinaCast's Chairman and CEO.
"Our core e-learning business had another strong quarter of profitable growth, driven by the increase in post-secondary enrollments, which now number over 128,000 university students using our distance-learning service. With our recently completed acquisition of the Foreign Trade and Business College, which has over 10,000 on-campus students, we now have an additional high-growth business that also provides us a platform to expand into new education services such as adult and international education programs.
"Looking forward to the new academic year, we are very excited about the growth prospects created from the synergies between our e-learning and university businesses to address the increasing demand for post-secondary education in China. Our balance sheet remains strong and we plan to acquire additional universities in the future that will create value for ChinaCast Education shareholders."
Financial Results for the Second Quarter ended June 30, 2008
After the acquisition of 80% of Hai Lai in the second quarter, ChinaCast is now organized into two business divisions: the E-Learning Group ("ELG"), encompassing the Company's core e-learning education service businesses before the acquisition, and the Traditional University Group ("TUG"), offering accredited bachelor and diploma programs to students from the FTBC campus in Chongqing.
For the second quarter, ChinaCast reported total revenue of RMB73.9 million (US$10.7 million), an increase of 75% year-over-year. The increase was mainly due to an increase in ELG service revenue and the addition of the TUG business revenue. Total revenue is also reported in two segments, service income and equipment sales. Service income, mainly of a recurring nature, for the quarter was RMB70.8 million (US$10.3 million), a 105% increase year-on-year. Equipment sales, mainly project based, for the quarter were RMB3.1 million (US$0.5 million), a decrease of 60%.
Cost of revenues for the quarter was RMB33.6 million (US$4.9 million), an 82% increase year-over-year, primarily due to the addition of the TUG business division. Gross profit for the quarter amounted to RMB40.3 million (US$5.9 million), a 70% increase year-over-year.
Selling and marketing expenses for the quarter were RMB0.9 million (US$0.1 million), a 58% decrease year-on-year, due mainly to the reduction in selling and marketing expenses of the ELG English language training service.
General and administrative expenses for the quarter were RMB12.2 million (US$1.8 million), an increase of 12% year-on-year, primarily due to share-based compensation expenses.
Total share-based compensation expenses for the quarter, which were allocated to related selling and marketing expenses and general and administrative expenses, were RMB2.2 million (US$0.3 million) compared to nil in the corresponding period in 2007.
Income from operations for the quarter was RMB29.1 million (US$4.2 million), an 87% increase year-on-year.
Net income for the quarter was RMB25.7 million (US$3.7 million), an 83% increase year-over-year, mainly due to the increase in ELG service business and the addition of the TUG business. Basic and diluted earnings per share for the quarter were RMB0.94 (US$0.14) and RMB0.94 (US$0.14), respectively.
As of June 30, 2008, ChinaCast had cash, cash equivalents and term deposits of RMB393.2 million (US$57.0 million) as compared to RMB756.9 million (US$109.7 million) as of March 31, 2008. The decrease in the cash balance was mainly due to the payment for the acquisition of 80% of Hai Lai.
Financial Results for the First Half ended June 30, 2008
For the first half of 2008, ChinaCast reported total revenue of RMB133.4 million (US$19.3 million), representing an increase of 63% year-over-year.
Cost of revenues for first half of 2008 was RMB64.7 million (US$9.4 million), an 82% increase year-over-year. Gross profit for the first half of 2008 amounted to 68.7 million (US$10.0 million), a 47% increase year-over-year.
Selling and marketing expenses for the first half of 2008 were RMB4.4 million (US$0.6 million), a 58% increase year-on-year. General and administrative expenses for the first half of 2008 were RMB30.4 million (US$4.4 million), an increase of 45% year-on-year.
Total share-based compensation expenses for the first half of 2008, which were allocated to related selling and marketing expenses and general and administrative expenses, were RMB11.4 million (US$1.7 million) compared to nil in the corresponding period in 2007.
Income from operations for the first half of 2008 was RMB36.1 million (US$5.2 million), a 15% increase year-on-year.
Net income for the first half of 2008 was RMB34.0 million (US$4.9 million), a 26% increase year-over-year. Basic and diluted earnings per share for the first half of 2008 were RMB1.24 (US$0.18) and RMB1.22 (US$0.18) respectively.
The Company generated RMB50.9 million (US$7.4 million) in net cash from operating activities in the first half of 2008 as compared with a net cash used in operating activities of RMB14.8 million (US$2.1 million) for the same period last year. This was mainly due to profit earned. There were also substantial settlements of professional fees after the consummation of the acquisition exercise of ChinaCast Communications Holdings in the first quarter of 2007.
Net cash used in investment activities in the first half of 2008 was RMB185.2 million (US$26.8 million) mainly reflecting the net effect of payment for the acquisition of the holding company of FTBC of RMB413.7 million (US$60.0) and transfer from term deposit of RMB223.4 million (US$32.4 million). For the six months ended June 30, 2007, transfer from term deposit amounted to RMB41.5 million (US$6.0 million).
Net cash provided by financing activities in the first six months of 2008 was RMB15.7 million (US$2.3 million) as a result of the exercise of warrants.
Business Outlook for 2008
As stated previously, ChinaCast estimates total revenue for the full year 2008 ending December 31, 2008, to be in the range of RMB234 million to RMB256 million (US$33.9 million to US$37.1 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 2008 ending December 31, 2008, to be in the range of RMB80 million to RMB95 million (US$11.6 million to US$13.8 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
ChinaCast's management will host an earnings conference call on Wednesday, August 13, 2008, at 8:30 a.m. U.S. Eastern Time (8:30 p.m. Beijing/Hong Kong Time). The dial-in details for the earnings conference call are as follows:
US/Canada Toll Free: +1-877-604-9671 International: +1-719-325-4900
A replay of the conference call will be available at the following numbers from 11:30 a.m. U.S. Eastern Time, Aug. 13, 2008, until midnight U.S. Eastern Time, Aug. 27, 2008.
US/Canada Toll Free: +1-888-203-1112 International: +1-719-457-0820 Pass Code: 8994753
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 one of China's leading for-profit, post-secondary education and e-learning services providers in China. With over 1,200 employees, the company provides undergraduate degree courses to more than 10,000 on-campus students and e-learning services to over 7,000 post-secondary distance learning centers, K-12 schools and government/corporate training sites over its nationwide distance learning network. The Company provides its undergraduate degree programs through its 80% ownership in the Foreign Trade and Business College (FTBC) of Chongqing Normal University. FTBC offers career-oriented 4-year bachelor's degree and 2-year 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 via its nationwide satellite broadband network to leading post-secondary educational institutions, K-12 schools, government agencies and corporate enterprises. These services include interactive distance learning applications, multimedia education content delivery, English language training and vocational/career 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) All U.S. Dollar amounts are based on the exchange rate of USD $1.0 = 6.9 RMB.
CHINACAST EDUCATION CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share-related data)
As of
------------------------------
Dec. 31,
June 30, 2008 2007
-------------------- -------
US$ RMB RMB
(Note 1)
Assets
Current assets:
Cash and cash equivalents 2,869 19,799 138,610
Term deposits 54,115 373,396 596,768
Accounts receivable, net
of allowance of RMB148
for both 2008 and 2007 5,664 39,078 35,316
Inventory 288 1,986 2,015
Prepaid expenses and
other current assets 1,397 9,644 7,127
Amounts due from related
parties 303 2,088 3,248
-------- --------- -------
Total current assets 64,636 445,991 783,084
Non-current deposits 195 1,350 1,948
Property and equipment, net 32,893 226,959 11,107
Land use rights 19,780 136,485 --
Acquired intangible assets, net 8,775 60,546 21,781
Long-term investments 1,500 10,349 11,165
Non-current advances to a
related party 16,123 111,246 119,914
Goodwill 42,184 291,069 1,715
-------- --------- -------
Total assets 186,086 1,283,995 950,714
======== ========= =======
Liabilities, minority interest,
and shareholders' equity
Current liabilities:
Accounts payable 3,473 23,965 13,027
Accrued expenses and other
current liabilities 24,217 167,099 53,376
Income taxes payable 6,576 45,374 31,237
Other borrowings 1,200 8,280 --
Current portion of long-
term bank loans 10,638 73,400 --
Current portion of capital
lease obligation -- -- 34
-------- --------- -------
Total current liabilities 46,104 318,118 97,674
-------- --------- -------
Non-current liabilities:
Long-term bank loans 725 5,000 --
Deferred tax liabilities 4,076 28,123 --
Unrecognized tax benefits 5,032 34,723 27,892
-------- --------- -------
Total non-current liabilities 9,833 67,846 27,892
-------- --------- -------
Total liabilities 55,937 385,964 125,566
-------- --------- -------
Minority interest 5,783 39,902 20,512
-------- --------- -------
Commitments and contingencies
(Note 14)
Shareholders' equity:
Ordinary shares (US$0.0001 par
value; 100,000,000 shares authorized
in 2008 and 2007; 31,289,742 and
27,292,641 shares issued and
outstanding in 2008 and 2007,
respectively) 3 24 21
Subscription receivable (12,706) (87,670) --
Additional paid-in capital 126,932 876,724 768,844
Statutory reserve 3,118 21,513 16,087
Accumulated other comprehensive
loss (790) (5,451) (5,205)
Retained earnings 7,809 52,989 24,889
-------- --------- -------
Total shareholders' equity 124,366 858,129 804,636
-------- --------- -------
Total liabilities, minority
interest, and shareholders' equity 186,086 1,283,995 950,714
======== ========= =======
CHINACAST EDUCATION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except share-related data)
For the three months ended June 30,
------------------------------------
2008 2008 2007
---------- ---------- ----------
US$ RMB RMB
(Note 1)
Revenues:
Service 10,262 70,808 34,487
Equipment 451 3,115 7,786
---------- ---------- ----------
10,713 73,923 42,273
---------- ---------- ----------
Cost of revenues:
Service (4,419) (30,496) (10,333)
Equipment (448) (3,090) (8,168)
---------- ---------- ----------
(4,867) (33,586) (18,501)
---------- ---------- ----------
Gross profit 5,846 40,337 23,772
---------- ---------- ----------
Operating (expenses)
income:
Selling and marketing expenses
(including share-based
compensation of RMB1,392 and
RMBnil for the six months
ended June 30 for 2008 and
2007, respectively, share-based
compensation of RMB111 and
RMBnil for the three months
ended June 30 for 2008 and
2007, respectively) (128) (882) (2,086)
General and administrative
expenses (including share-based
compensation of RMB9,964 and
RMBnil for the six months ended
June 30 for 2008 and 2007,
respectively, share-based
compensation of RMB2,130 and
RMBnil for the three months
ended June 30 for 2008 and
2007, respectively) (1,766) (12,183) (10,930)
Foreign exchange loss (27) (186) (2,299)
Management service fee 289 1,993 7,128
---------- ---------- ----------
Total operating expenses,
net (1,632) (11,258) (8,187)
---------- ---------- ----------
Income from operations 4,214 29,079 15,585
Interest income 829 5,721 3,917
Interest expense (26) (182) (2)
Income before provision
for income taxes,
earnings in equity
investments, and
minority interest and
discontinued operations 5,017 34,618 19,500
Provision for income taxes (871) (6,009) (4,540)
---------- ---------- ----------
Income before earnings in
equity investments,
minority interest, and
discontinued operations 4,146 28,609 14,960
Loss in equity investments (59) (408) (240)
Minority interest (356) (2,457) (649)
---------- ---------- ----------
Income from continuing
operations 3,731 25,744 14,071
---------- ---------- ----------
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 3,731 25,744 14,071
========== ---------- ==========
Net income per share
Basic 0.14 0.94 0.52
========== ========== ==========
Diluted 0.14 0.94 0.49
========== ========== ==========
Weighted average shares
used in computation:
Basic 27,385,554 27,385,554 26,954,945
========== ========== ==========
Diluted 27,385,554 27,385,554 28,463,653
========== ========== ==========
For the six months ended June 30,
------------------------------------
2008 2008 2007
---------- ---------- ----------
US$ RMB RMB
(Note 1)
Revenues:
Service 16,089 111,013 68,022
Equipment 3,247 22,404 14,106
---------- ---------- ----------
19,336 133,417 82,128
---------- ---------- ----------
Cost of revenues:
Service (6,156) (42,482) (21,089)
Equipment (3,217) (22,195) (14,411)
---------- ---------- ----------
(9,373) (64,677) (35,500)
---------- ---------- ----------
Gross profit 9,963 68,740 46,628
---------- ---------- ----------
Operating (expenses) income:
Selling and marketing expenses
(including share-based
compensation of RMB1,392 and
RMBnil for the six months ended
June 30 for 2008 and 2007,
respectively, share-based
compensation of RMB111 and
RMBnil for the three months
ended June 30 for 2008 and 2007,
respectively) (633) (4,369) (2,765)
General and administrative
expenses (including share-based
compensation of RMB9,964 and
RMBnil for the six months ended
June 30 for 2008 and 2007,
respectively, share-based
compensation of RMB2,130 and
RMBnil for the three months
ended June 30 for 2008 and 2007,
respectively) (4,407) (30,399) (20,998)
Foreign exchange loss (94) (651) (3,143)
Management service fee 405 2,791 11,829
---------- ---------- ----------
Total operating expenses, net (4,729) (32,628) (15,077)
---------- ---------- ----------
Income from operations 5,234 36,112 31,551
Interest income 1,677 11,573 6,822
Interest expense (27) (186) (30)
Income before provision for
income taxes, earnings in equity
investments, and minority
interest and discontinued
operations 6,884 47,499 38,343
Provision for income taxes (1,430) (9,868) (8,032)
---------- ---------- ----------
Income before earnings in
equity investments,
minority interest, and
discontinued operations 5,454 37,631 30,311
Loss in equity investments (118) (816) (479)
Minority interest (412) (2,841) (2,424)
---------- ---------- ----------
Income from continuing
operations 4,924 33,974 27,408
---------- ---------- ----------
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 4,924 33,974 27,039
========== ========== ==========
Net income per share
Basic 0.18 1.24 1.05
========== ========== ==========
Diluted 0.18 1.22 0.99
========== ========== ==========
Weighted average shares used in
computation:
Basic 27,341,405 27,341,405 25,840,030
========== ========== ==========
Diluted 27,838,906 27,838,906 27,313,016
========== ========== ==========
CHINACAST EDUCATION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
For the six months ended
June 30,
---------------------------
2008 2008 2007
------- ------- -------
US$ RMB RMB
(Note 1)
Cash flows from operating activities:
Net income 4,924 33,974 27,039
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Minority interest in continuing
operations 412 2,841 2,424
Minority interest in discontinued
operations -- -- 230
Depreciation and amortization 1,789 12,348 2,921
Share-based compensation 1,646 11,356 --
Loss in equity investments 118 816 479
Changes in assets and liabilities:
Accounts receivable (665) (4,586) (7,698)
Inventory 4 29 (145)
Prepaid expenses and other current
assets (322) (2,223) (2,076)
Non-current deposits 157 1,081 --
Amounts due from related parties 168 1,160 1,087
Accounts payable 194 1,338 4,717
Accrued expenses and other current
liabilities (2,052) (14,165) (46,918)
Amounts due to related parties -- -- (292)
Income taxes payable 1,117 7,707 2,623
Deferred taxes assets -- -- 86
Deferred taxes liabilities (118) (816) --
Unrecognised tax benefits (1) (6) 750
------- ------- -------
Net cash provided by (used in)
operating activities 7,371 50,854 (14,773)
------- ------- -------
Cash flows from investing activities:
Repayment from advance to related
parties 1,278 8,817 1,811
Advance to related parties (22) (149) (1,443)
Purchase of subsidiaries, net of
cash acquired (59,950) (413,657) --
Purchase of property and equipment (513) (3,536) (1,298)
Term deposits 32,373 223,372 41,487
Proceeds from disposal of dis-
continued operations, net of
cash disposed of -- -- (9,113)
------- ------- -------
Net cash used in investing
activities (26,834) (185,153) 31,444
------- ------- -------
Cash flows from financing
activities:
Other borrowings raised 243 1,680 --
Exercise of warrants, net of
expense of RMB600 2,038 14,064 --
Repayment of capital lease
obligation (5) (32) (76)
Repayment of advances from
related parities -- -- (4,251)
------- ------- -------
Net cash provided by (used in)
financing activities 2,276 15,712 (4,327)
------- ------- -------
Effect of foreign exchange
rate changes (32) (224) (1,704)
Net decrease in cash and
cash equivalents (17,219) 118,811) 10,640
Cash and cash equivalents at
beginning of the period 20,088 138,610 278,067
------- ------- -------
Cash and cash equivalents at
end of the period 2,869 19,799 288,707
======= ======= =======