Chinacast Education (NASDAQ:CAST)

Third Quarter 2011 Results

• Total revenues in the third quarter of 2011 increased 37% to $25.6 million from $18.7 million in the third quarter of 2010 partly due to the acquisition of HIUBC in the third quarter of 2010.
• Adjusted diluted earnings per share excluding share-based compensation expenses, non-cash impairment charges and amortization of acquired intangible assets (non-GAAP) in the third quarter of 2011 were $0.20 compared to $0.16 in the third quarter of 2010.

BEIJING, Oct. 10, 2011 /PRNewswire-Asia/ -- ChinaCast Education ("ChinaCast" or the "Company", Nasdaq GS: CAST), a leading post-secondary education and e-learning services provider in China, today provided a summary of relevant information provided on its shareholder update conference call with investors last Thursday, October 6, 2011, in order to maintain full disclosure practices.

• For the 2011-2012 academic year starting September 2011, post-secondary student enrollment for its Traditional University Group ("TUG") business segment increased 9% year-over-year to over 35,000 total students.  Average tuition rates are expected to increase by approximately 5% year-over-year.
• ChinaCast expects to invest approximately 200 million RMB (US$31.3 million) over the next 12 to 18 months to expand the capacity of the Foreign Trade and Business College ("FTBC") campus from 15,000 to 20,000 students and the Lijiang College ("LJC") campus from 10,000 to 15,000 students.
• The Company received the official renewal licenses from the PRC Ministry of Information Industry for its VSAT satellite and internet content provider telecom/IT services. The licenses are required for ChinaCast to operate its nationwide distance learning services which are part of the E-Learning Group business segment ("ELG").  The renewal of the licenses had no effect on the ELG service operations.

For the fiscal year ending December 31, 2011, the Company reiterates its guidance as follows:

• Total net revenue will be between $97 million to $99 million representing a year-on-year increase of at least 24%.
• Adjusted net income excluding share-based compensation, amortization of acquired intangibles, gain on disposal of property and equipment and impairment expenses (non-GAAP) is expected to be at the higher end of $32 million to $34 million representing a year-on-year increase of at least 25%.
• Based on the current weighted average shares and the higher tax rate accrual used in computation, adjusted diluted EPS (non-GAAP) is expected to be at the higher end of $0.64 to $0.68.
• Adjusted EBITDA excluding share-based compensation (non-GAAP) is expected to be at the higher end of $50 million to $52 million representing a year-on-year increase of at least 25%.

Ron Chan, Chairman and CEO of ChinaCast Education explained, "It is our intention to always maintain full transparency with our shareholders.  Since we know not everyone was able to participate in the call last Thursday, we took the proactive approach to publicly disclose the material information discussed.  Our business remains strong and we look forward to providing our shareholders further updates to our business when we report our third quarter earnings in early November.

First Quarter Results:

• Total revenues increased 43% to $22.8 million
• Adjusted net income (non-GAAP) increased 24% to $7.8 million
• Adjusted diluted EPS (non-GAAP) of $0.16
• Adjusted EBITDA (non-GAAP) increased 40% to $13.3 million
• Share buy-back to commence on May

GeoTeam® Note: 2011 First quarter analyst EPS estimates were $0.15.

"We continue to execute according to plan as both our universities and e-learning services are driving growth across our platform. We believe that the acquisition of Hubei Industrial University Business College ("HIUBC"), the launching of our China University of Petroleum e-learning joint venture, along with enrollment and tuition increases across our existing universities are providing positive momentum," commented Ron Chan, Chairman and Chief Executive Officer.

For the full year ending December 31, 2011, the Company provides the following guidance:

• Total net revenue will be between $94 million to $96 million (a year-on-year increase of 21% to 23%)
• Adjusted net income excluding share-based compensation, amortization of acquired intangibles, gain on disposal of property and equipment and impairment expenses (non-GAAP) will be between $32 million to $34 million (a year-on-year increase of 18% to 25%)
• Based on the current weighted average shares and the higher tax rate accrual used in computation, adjusted diluted EPS of between $0.64 to $0.68
• Adjusted EBITDA excluding share-based compensation (non-GAAP) will be between $50 million to $52 million (a year-on-year increase of 20% to 25%)

Fourth Quarter Highlights:

• Total revenues increased 56% to $25.7 million
• Gross profit increased 28% to $10.2 million; Gross profit margin was 40%
• Net income decreased 279% to ($5.1) million
• Adjusted net income (non-GAAP) increased 31% to $6.1 million; Adjusted net income (non-GAAP) margin was 23.5%
• Adjusted diluted EPS (non-GAAP) of $0.12

"I am pleased to report another successful year of robust growth while achieving key strategic objectives which we believe pave a clear path for future growth," commented Ron Chan, Chairman and Chief Executive Officer.  "First and foremost, we acquired our third accredited university, Hubei Industrial University Business College ("HIUBC"), bringing our total university enrollment to over 32,000 students and adding degree programs in computer engineering, industrial design and law to our curriculum. This expands our geographic presence to central China and further solidifies our position as a leading nationwide operator of accredited universities in China. We also launched our international degree programs by signing inaugural partnerships with two renowned U.S. universities, Seton Hall and The University of North Carolina at Greensboro."

For the full year ending December 31, 2011, the Company provides the following guidance:

 

• Total net revenue will be between $94 million to $96 million (a year-on-year increase of 21% to 23%)
• Adjusted net income excluding share based compensation, amortization of intangibles, gain on disposal of property and equipment, and impairment expenses (non-GAAP) will be between $32 million to $34 million (a year-on-year increase of 18% to 25%)

Third Quarter 2010 Highlights:

• Total revenues increased 55% to $18.7 million

• Gross profit increased 19% to $9.1 million; Gross profit margin was 49%

• Operating income increased 32% to $7.5 million; Operating income margin was 40%

• Net income increased 54% to $6.2 million; Net income margin was 33%

• Diluted EPS of $0.12

• Adjusted net income (non-GAAP) increased 59% to $8.0 million; Adjusted net income (non-GAAP) margin was 43%

• Adjusted diluted EPS (non-GAAP) of $0.16 compard to $0.14

• Adjusted EBITDA (non-GAAP) increased 51% to $11.7 million; Adjusted EBITDA margin (non-GAAP) was 62%

• Cash, cash equivalents and term deposits was $150.0 million.  

• Total equity was $276.1 million

Financial Outlook for 2010

For the full year ending December 31, 2010, the Company reaffirmed the following previously provided guidance:

• Total net revenue will be between $78 million to $80 million (a year-on-year increase of 53% to 57%)

• Adjusted net income excluding share based compensation, amortization of intangibles, gain on disposal of property and equipment, and impairment expenses (non-GAAP) will be between $25 million to $27 million (a year-on-year increase of 34% to 44%)

• Adjusted EBITDA excluding share based compensation (non-GAAP) will be between $45 million to $47 million (a year-on-year increase of 58% to 65%)  

This is the Company's current and preliminary view, which is subject to change.

Second Quarter 2010 Highlights:

• Total revenues increased 46% to $16.3 million
• Gross profit increased 25% to $8.6 million; Gross profit margin was 53%
• Operating income increased 22% to $6.3 million; Operating income margin was 39%
• Net income increased 26% to $4.8 million; Net income margin was 29%
• Diluted EPS of $0.10
• Adjusted net income (non-GAAP) increased 30% to $6.3 million; Adjusted net income (non-GAAP) margin was 39%
• Adjusted diluted EPS (non-GAAP) of $0.13
• Adjusted EBITDA (non-GAAP) increased 33% to $9.5 million; Adjusted EBITDA margin (non-GAAP) was 58%
• Cash and bank balances together with term deposits was $156.9 million. Total equity was $262.8 million.

"We are pleased to report another profitable quarter of strong performance," commented Ron Chan, Chairman and Chief Executive Officer. "We believe our team's performance reflects the strength of our position as a leader in the PRC for-profit, post-secondary education sector and the continued strong demand and favorable market dynamics for post-secondary education services in China. We believe our momentum going into the third quarter 2010 is strong as we expect to make additional investments to further strengthen and extend our market opportunities such as our summer and international education programs on our campuses in Chongqing and Guilin, the launching of our e-learning joint venture with China University of Petroleum and the acquisition of our third accredited university, Hubei Industrial University Business College."

Added Antonio Sena, Chief Financial Officer, "Our operating and profit margins remained quite robust as we continue to expand our business and integrate acquisitions while exercising efficient fiscal management. We've now reached a major milestone in the Company where the percentage of our total revenue from our traditional university business exceeds that of our e-learning business. While we had a substantial increase in share count primarily due to our capital raise in December 2009, we were able to offset this by a 26% increase in net income. Our cash and bank balances increased to $157 million at the end of the second quarter of 2010 and we intend to deploy $66 million of capital for our third university acquisition which we anticipate to close soon."

Financial Outlook for 2010

For the full year ending December 31, 2010, the Company reaffirmed the following previously provided guidance:

• Total net revenue will be between $78 million to $80 million (a year-on-year increase of 53% to 57%)
• Adjusted net income excluding share based compensation, amortization of intangibles, gain on disposal of property and equipment, and impairment expenses (non-GAAP), will be between $25 million to $27 million (a year-on-year increase of 34% to 44%)
• Adjusted EBITDA excluding share based compensation (non-GAAP) will be between $45 million to $47 million (a year-on-year increase of 58% to 65%) 

"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." 

Chinacast Education has reaffirmed its previous guidance.

Full Year Fiscal 2009 Guidance Ending December

^a Non-GAAP EPS Figures exclude certain non-operating gains and losses as well as certain non-cash items. Non-GAAP information should not be viewed in isolation or as a substitute for reported, or GAAP information . For a more complete explanation of the company's definition of non-GAAP please refer to their financial press releases. The GeoTeam® non-GAAP figures may, from time to time,  differ from company supplied figures.

^b The company did not provide EPS guidance.  The GeoTeam calculated an implied EPS guidance figure using the first quarter 2009 diluted outstanding share count.  The omission of company issued EPS guidance  could cause some investors to infer that the company may plan to issue shares during the coming year.   However, commentary in the company's first quarter SEC does not imply a need:

The Company believes that its cash and cash equivalents balances, together with its access to financing sources, will continue to be sufficient to meet the working capital needs associated with its current operations on an ongoing basis, although that cannot be assured. Also, it is possible that the Company’s cash flow requirements could increase as a result of a number of factors, including unfavorable timing of cash flow events, the decision to increase investment in marketing and development activities or the use of cash for acquisitions to accelerate its growth.

Source: GlobeNewswire (May 11, 2009)

Guidance Report:

 "We remain confident about our business and the growth of the education industry in China. Our strategy going forward will be to focus on further expanding our post-secondary degree programs and e-learning services and reducing our operating costs to improve margins while looking for strategic acquisitions that will further expand our footprint in China. While the global economy is experiencing a sharp downturn, we believe the post-secondary education sector in China continues to grow at a healthy pace and we look forward to increasing our market position in 2009," concluded Mr. Chan.

Full Year Fiscal 2009 Guidance Ending December

*EPS Figures exclude non-operating gains and losses. Non-GAAP information should not be viewed in isolation or as a substitute for reported, or GAAP information. For a more complete explanation of the company's definition of non-GAAP please refer to their Fourth Quarter financial press release.

**The company did not provide EPS guidance.  The GeoTeam calculated an implied EPS guidance figure using the 2008 outstanding share count.  However, the omission of company issued EPS guidance  could infer that the company may plan to issue shares during the coming year.

Source: GlobeNewswire (March 16, 2009)