HARBIN, China, Nov. 14 /Xinhua-PRNewswire-FirstCall/ -- China Education Alliance, Inc. (OTC Bulletin Board: CEUA) (“China Education Alliance” or “the Company”), a leading distributor of educational resources, offering high-quality programs and training both through online networks and an on-site training center in China, today reported financial results for the third quarter ended September 30, 2007.
Third Quarter 2007 Highlights
-- Revenue increased 122.7% year over year to $5.1 million
-- Online education revenue rose 107.2% year over year to $3.6 million
-- Gross profit rose 165.6% to a record $4.1 million or 80.9% of sales,
compared to 67.9% in the prior year
-- Net income grew 80% year over year to $2.2 million or $0.11 per fully
diluted share
Third Quarter 2007 Results
Revenue in the third quarter increased to $5.1 million, up 122.7% from $2.3 million in the prior year, primarily reflecting strong growth of both the online education and training center businesses. Online education represented 71% of total revenue for the third quarter of 2007 versus 76.3% in the same period in prior year. The training center business generated the remaining 29% of total revenue for the third quarter of 2007 versus 23.7% in the third quarter last year. Net income increased 80% to $2.2 million from $1.2 million in last year’s third quarter. Earnings per share on a fully diluted basis were $0.11, compared to $0.06 per share in last year’s third quarter. China Education Alliance implemented a one-for-three reverse stock split, which became effective and began trading under the new symbol of CEUA.OB on October 12, 2007.
“We are very excited about the fast growth of our online education and training center businesses, and in particular the training center business, which grew rapidly due to an increase in vocational programs. Our online education business also performed well due to continued strong demand of our downloadable online materials, and increased advertising revenue,” commented Mr. Xiqun Yu, President, CEO and Director of China Education Alliance. “However, selling and administrative expenses rose more rapidly due to an increase in our sales team, advertising fees, debit card agency fees and consulting fees.”
Online education revenue was $3.6 million in the quarter, up 107.2% from $1.7 million in the third quarter of 2006, reflecting the increasing use of the internet for educational purposes.
Training center revenue for the third quarter were $1.5 million, up 172.7% from $540,910 in the third quarter last year. On a sequential basis, revenue from the training center increased by 133.5% as China Education Alliance offered more extensive face-to-face training courses relating to information technology.
Overall cost of sales increased by approximately $236,525 to $970,559 in the third quarter of 2007, as compared to approximately $734,034 in the third quarter of 2006. The increase in cost of sales reflected a $126,113 increase in the cost of sales for online education for the third quarter 2007 while the remaining $110,412 of the increase was from the training centers.
Gross profit increased to $4.1 million in the third quarter, up 165.6% from $1.6 million in the same quarter of 2006. Gross margin for the quarter was a record 80.9%, as compared to 67.9% in the same quarter a year ago. Gross margin was favorably impacted by the higher mix of both online education and training center revenue. The online education gross margin for the third quarter of 2007 reflected an increase in advertising revenue which has no substantial cost associated with it. The online education gross margin increased to 84.3% in third quarter of 2007 from 74.6% in the same period of 2006 because online education costs are somewhat fixed and margins increase with volume. The training center gross margin increased to 72.7% for the three months ended September 30, 2007 from 46.1% in the same period of last year due to less amortization of training center related intangible assets and decreased payments to lecturers.
Selling expenses were $1.6 million, or 30.9% of revenue, compared to $257,193, or 11.3% of revenue in the third quarter of 2006, due to increased expenses to build the marketing team and higher debit card agency expenses. General and administrative (“G&A”) expenses were $317,407, up from $75,795 in the third quarter of 2006 primarily due to an increase in salaries from overall business growth and an increase in travel and telephone expenses. As a percentage of revenue, G&A expenses increased to 6.2% in the third quarter, up from 3.3% last year.
Operating income in the third quarter was $2.1 million, up 76.2 % from $1.2 million in the same period a year ago. Operating margin was 41.2% in the third quarter, compared to 52.1% last year.
Net income for the third quarter was $2.2 million, up 80% from $1.2 million in the year earlier period. Fully diluted earnings per share were $0.11 compared to $0.06 in the comparable period for 2006.
Nine Month Financial Results
For the first nine months of 2007, total revenue was $12.5 million, up 116% from the prior year. Online education revenue was $10 million, up 124.5% from $4.4 million and represented 79.5% of total revenue. The training center business contributed 20.5% of revenue or $2.6 million, up 88.3% from $1.4 million in the first nine months of 2006. Gross profit for the first nine months of 2007 was $9.8 million, up 151.3% from gross profit of $3.9 million in the comparable period a year ago. Gross margin was 78.4% compared to 67.4% for the first nine months of 2007 and 2006, respectively. Income from operations for the nine month period was $5.2 million, up 62.6% from $3.2 million in the first nine months of 2006. Net income for the first nine months of 2007 was $4.5 million, up 43.1% from $3.2 million in the first nine months of last year. Fully diluted earnings per share were $0.22 for the first nine months of 2007, which compared to $0.16 in the same period of 2006.
Financial Condition
As of September 30, 2007, China Education Alliance had $9.3 million in cash and cash equivalents, $4.8 million in working capital, and no long-term debt. Shareholders’ equity was $12.4 million up from $7.2 million at December 31, 2006. The company generated $7.3 million in cash flow from operating activities in the first nine months of 2007.
Business Outlook
China Education Alliance’s revenue growth in the third quarter of 2007 increased dramatically due to strong demand for downloadable materials, as well as several new programs for vocational studies and certification programs, which provided new sources of income. Advertising income increased as the result of the increasing awareness of the company’s website, which resulted in more viewers coming to the Company’s website.
The Company is currently developing several new education programs and has established a research and development center for researching its educational business platform and resources. The Company has been continuously setting up new network servers each month in order to meet the fast growth of online users, which should help to provide incremental revenue and profits for the online education business.
China Education Alliance is now expanding its core business from its dominant market position in Heilongjiang Province to Jilin, Liaoning and other provinces by targeting the large and growing vocational education market nationwide. The Company has signed agreements with a few famous educational institutions regarding the vocational study programs and certification programs.
Mr. Yu said, “the Company formed a partnership with The Vocational Education Guidance Center of China last year, which enabled us to use their network to expand our business. Besides the acquisition of Harbin Nangang Compass Computer Training School and the partnership with Beida Qingniao APTEC Software Engineering in Heilongjiang Province, we are now negotiating with several new acquisition candidates to reinforce our on-site business expansion plans in other provinces. We believe the on-site training center business will gradually supplement the online education business, and we remain optimistic about both business segments in the future.”
Conference Call
The Company will host a conference call to discuss its third quarter 2007 results on November 14, 2007 at 9:00 am Eastern Standard Time. The management team will be on the call to discuss quarterly results and highlights and to answer questions. The toll-free number for U.S. participants is 888-339-2688. International participants can dial 617-847-3007. Passcode 85299117.
In addition to dial-in participation, the call will be broadcasted live over the Internet and a replay will be available for 90 days at http://phx.corporate-ir.net/playerlink.zhtml?c=178111&s=wm&e=1694458 . Audio replay of the call will be available for seven days starting Wednesday, November 14, 2007 at 11:00 a.m., Eastern Time. The audio replay may be accessed at 1-888-286-8010 (U.S.) or 1-617-801-6888 (International). The required passcode is 47016923.
About China Education Alliance, Inc.
The Company is an educational resource company offering high-quality educational programs and training through both online networks and an on-site training center. The Company’s products include online test preparation materials, researchers’ materials, study guides, and audio recordings, vocational training services and vocational certifications. The Company conducts educational services through three main channels: a large educational online portal, educational software and media, and education and vocational training centers. The Company is currently selling educational products and services to families, provincial education officials, administrators, schools and teachers in China.
Safe Harbor Statement
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release, constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding our ability to prepare the company for growth, the Company’s planned expansion in 2007 and predictions and guidance relating to the Company’s future financial performance. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs and are not a guarantee of future performance but they involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, which may include, but are not limited to, such factors as unanticipated changes in product demand especially in the education industry, pricing and demand trends for the Company’s products, changes to government regulations, risk associated with operation of the Company’s new facilities, risk associated with large scale implementation of the company’s business plan, the ability to attract new customers, ability to increase its product’s applications, cost of raw materials, downturns in the Chinese economy, and other information detailed from time to time in the Company’s filings and future filings with the United States Securities and Exchange Commission. Investors are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release, readers are cautioned not to place undue reliance on any of them and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company’s expectations.
--Financial tables below--
China Education Alliance, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2007 and 2006
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2007 2006 2007 2006
Revenues
Online education
revenues $3,613,550 $1,743,612 $9,958,203 $4,436,074
Training center
revenues 1,474,969 540,910 2,566,298 1,362,705
Total revenue 5,088,519 2,284,522 12,524,501 5,798,779
Cost of Goods Sold
Online education
costs 568,334 442,221 1,855,951 1,235,770
Training center
costs 402,225 291,813 848,314 655,627
Total cost of
goods sold 970,559 734,034 2,704,265 1,891,397
Gross Profit
Online education
gross profit 3,045,216 1,301,391 8,102,252 3,200,304
Training center
gross profit 1,072,744 249,097 1,717,984 707,078
Total gross
profit 4,117,960 1,550,488 9,820,236 3,907,382
Operating Expenses
Selling expenses 1,573,632 257,193 3,412,798 465,086
Administrative 317,407 75,795 913,073 184,026
Depreciation and
amortization 128,124 26,468 341,301 89,249
Total operating
expenses 2,019,163 359,456 4,667,172 738,361
Other Income (Expense)
Other Income 243,156 -- 298,650 --
Interest income 18,253 5,127 34,339 10,049
Interest expense (49,094) -- (542,173) --
Total other income
(expense) 212,315 5,127 (209,184) 10,049
Net Income Before
Provision for
Income Tax 2,311,112 1,196,159 4,943,880 3,179,070
Provision for Income
Taxes
Current 158,469 -- 395,214 --
Deferred -- -- -- --
158,469 -- 395,214 --
Net Income Before
Minority Interest 2,152,643 1,196,159 4,548,666 3,179,070
Minority Interest in
loss of subsidiary -- -- -- --
Net Income $2,152,643 $1,196,159 $4,548,666 $3,179,070
Basic Earnings Per
Share $0.11 $0.06 $0.24 $0.16
Basic Weighted
Average Shares
Outstanding 19,321,667 19,305,000 19,319,249 19,305,741
Diluted Earnings Per
Share $0.11 $0.06 $0.22 $0.16
Diluted Weighted
Average Shares
Outstanding 20,284,937 19,305,000 20,282,519 19,305,741
The Components of Other
Comprehensive Income
Net Income $2,152,643 $1,196,159 $4,548,666 $3,179,070
Foreign currency
translation
adjustment (210,170) 30,776 48,596 49,843
Comprehensive Income $1,942,473 $1,226,935 $4,597,262 $3,228,913
China Education Alliance, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2007 and 2006
(Unaudited)
2007 2006
Cash flows from operating activities
Net Income $4,548,666 $3,179,070
Adjustments to reconcile net cash
provided by operating activities
Depreciation and
amortization 601,441 238,621
Amortization of loan
discount 420,639 -
Stock issued for services 15,900 -
Warrants issued for
services 12,371 -
Net change in assets and liabilities
Inventories 449
Other receivables 40,535 -
Prepaid expenses and other (90,338) (65,647)
Accounts payable and
accrued liabilities 239,609 (52,008)
Advances by customers 1,468,542 180,371
Net cash provided by operating activities 7,257,365 3,480,856
Cash flows from investing activities
Purchases of fixed assets (1,738,502) (217,816)
Net cash (used in) investing activities (1,738,502) (217,816)
Cash flows from financing activities
Issuance of common stock -- 7,000
Payments on loans (1,530,000) --
Proceeds from loans 3,400,000 1,530,000
Advances from (payments to)
related parties (237,443) 163,558
Net cash provided by financing activities 1,632,557 1,700,558
Effect of exchange rate 293,316 49,843
Net increase in cash 7,444,736 5,013,441
Cash and cash equivalents at beginning of
year 1,838,339 597,444
Cash and cash equivalents at end of year $9,283,075 $5,610,885
Supplemental disclosure of cash flow
information
Interest paid $ 297,838 $ --
Taxes paid $ -- $ --
Stock issued for services $ 15,900 $ --
Value of warrants issued for services $ 12,371 $ --
Value of warrants from convertible debt $ 339,076 $ --
China Education Alliance, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
September 30, 2007
(Unaudited)
September 30,
2007
Current Assets
Cash and cash equivalents $9,283,075
Other receivables 15,000
Prepaid expenses 1,164,729
Total current assets 10,462,804
Property and equipment, net 6,909,429
Franchise rights 603,067
Goodwill 43,696
$18,018,996
Current Liabilities
Accounts payable and accrued expenses $453,891
Deferred revenues 1,782,499
Loan from shareholder
Notes payable 3,400,000
Total current liabilities 5,636,390
Minority interest --
Stockholders’ Equity
Preferred stock ($0.001 par value,
20,000,000 shares authorized,
none issued and outstanding) --
Common stock ($0.001 par value,
150,000,000 shares authorized,
19,321,667 issued and outstanding) 19,322
Additional paid-in capital 3,024,817
Accumulated other comprehensive income 671,158
Retained earnings 8,766,791
Total stockholders’ equity
before related parties offset 12,482,088
Advances to related parties (99,482)
Total stockholders’ equity net of
advances to related parties 12,382,606
Total Liabilities and SE $18,018,996
For more information, please contact:
Company Contact:
Mr. Xiqun Yu
Chairman and CEO
China Education Alliance, Inc.
Tel: +86-451-8233-5794
Email: yxq@edu-chn.com
Investor Relations Contact:
Mr. Crocker Coulson
President
CCG Elite Investor Relations
Tel: +1-646-213-1915 (NY Office)
Email: crocker.coulson@ccgir.com
