EXHIBIT 99.1
ChinaCast Education Corporation Announces 2008 First Quarter Results
BEIJING, May 12, 2008 (PRIME NEWSWIRE) -- ChinaCast Education Corporation ("ChinaCast" or the "Company") (Nasdaq:CAST), one of the PRC's leading publicly listed for-profit, post-secondary education and e-learning services providers, today announced results for the first quarter of 2008.
2008 First Quarter Highlights(1):
* Total revenues for the first quarter of 2008 increased 49% to RMB59.5 million (US$8.5 million) compared with the first quarter of 2007. * Net income totaled RMB8.2 million (US$1.2 million) down 36.5% compared with the first quarter of 2007. * Net income excluding share-based compensation increased by 33.7% to RMB17.3 million (US$2.5 million) compared to the first quarter of 2007. * Cash and bank balances together with term deposits increased from RMB735.4 million (US$100.7 million) as at December 31, 2007, to RMB756.9 (US$108.1) million as at March 31, 2008. * The Company announced the consummation of its acquisition of 80% of the holding company of the Foreign Trade and Business College ("FTBC") of Chongqing Normal University. The revenues and earnings of FTBC will be consolidated with the Company's results starting with the second quarter of 2008. * ChinaCast also announced that that its Board of Directors has authorized a stock repurchase program under which the Company may repurchase up to $5 million worth of the company's outstanding common shares.
Ron Chan, Chairman and CEO of ChinaCast commented, "We are very pleased with our financial performance during the first quarter. The fundamentals of our business continue to strengthen as reflected in our 49% increase in first quarter revenues as compared with the first quarter of 2007, driven primarily in the growth of our post-secondary, vocational/career and English language training businesses. Our momentum is being driven by the continued growth of the post-secondary and vocational education market in China. We fully expect to continue to reap the benefits of this growth when our new university acquisition, FTBC, begins contributing to our earnings growth starting in the second quarter and we remain comfortable with our previously issued annual guidance."
Financial Results for the three months ended March 31, 2008:
Total revenues for the first quarter of 2008 came to RMB59.5 million (US$8.5 million), up 49% over the same period last year. Services revenues were up by 20% at RMB40.2 million (US$5.7 million) while equipment revenues expanded to reach RMB19.3 million (US$2.8 million), up from RMB 6.3 million in the first quarter of last year. The Company also tracks revenue broken out along the following three education sectors shown in the table below:
--------------------------------------------------------------------- In millions First Quarter --------------------------------------------------------------------- 2008 2008 2007 US$ RMB RMB --------------------------------------------------------------------- Post-Secondary Distance Learning $3.3 22.8 14.7 --------------------------------------------------------------------- K-12 Educational Content $2.3 15.9 15.7 --------------------------------------------------------------------- Vocational/Career Training & English training services $2.9 20.8 9.5 --------------------------------------------------------------------- Total Revenue $8.5 59.5 39.9 ---------------------------------------------------------------------
Net revenue from post-secondary education distance learning services increased by 55% to reach RMB22.8 million (US$3.3 million) for the first quarter of 2008 as compared with the same period in 2007. The total number of post-secondary students enrolled in courses using the Company's distance learning platforms increased to 127,000 at March 31, 2008, up 9.5% from the 116,000 enrolled at the same time last year. This increase was due to the continuous growth of students enrolled in distance learning degree courses with the universities.
The K-12 and content delivery business' net revenues increased slightly from RMB15.7 million for the first quarter of last year to RMB15.9 (US$2.3 million) for the same quarter in 2008. The number of schools subscribed to the Company's K-12 distance learning services has stabilized at 6,500.
Net revenue from vocational and career training services and enterprise government training and networking, and English training services increased by 119% to RMB20.8 million (US$2.9 million) for the first quarter of 2008 from the RMB9.5 million (US$1.2 million) registered for the same period in 2007. This strong increase is attributed largely to a high level of equipment sales and the establishment of the English training service which contributed RMB1.4 million in revenue (US$0.2 million) for the first quarter of 2008.
Cost of sales of the Company increased by 83%, from RMB 17 million (US$2.2 million) during the first quarter of 2007 to RMB31.1 million (US$4.4 million), during the first quarter of 2008. This increase was due to the increase in equipment sales and the establishment of the English training service. Cost of materials increased from RMB6.2 million (US$0.8 million) during the first quarter of 2007 to RMB19.1 million (US$2.7 million) during the first quarter of 2008. The newly established English training service has incurred a cost of service of RMB2.4 million (US$0.3 million) in the first quarter of 2008.
The Company's gross profit margin decreased by 9.7 percentage points, from 57.4% in the first quarter of 2007 to 47.7% in the first quarter of 2008. The reduction was due to the increase in equipment sales, which has a low margin, and the establishment of the English training service in the third quarter of 2007.
Selling and marketing expenses increased from RMB0.7 million (US$0.09 million) in the first quarter of 2007 to RMB3.5 million (US$0.5 million) in the first quarter of 2008. The increase was due to the granting of employee share options under the Company's share incentive plan, which led to a share-based compensation of RMB1.3 million (US$0.2 million), in the selling and marketing expenses for the first quarter of 2008. The establishment of the English training business line also led to an increase of RMB0.7 million (US$0.1 million) in the selling and marketing expenses for the first quarter of 2008.
General and administrative expenses increased by 80.9% to RMB18.2 million (US$2.6 million) in the three months ended March 31, 2008 from RMB10.1 million (US$1.3 million) during the three months ended March 31, 2007. The increase was due to the granting of restricted shares to directors of the Company and employee share options to employees under the Company's share incentive plan, which led to a share-based compensation of RMB7.8 million (US$1.1 million) in the general and administrative expenses for the first quarter of 2008.
Overall, profit before income tax decreased from RMB18.8 million (US$2.4 million) in the three months ended March 31, 2007, to RMB12.9 million (US$1.8 million) in the three months ended March 31, 2008, a reduction of 31.6%. The decrease was mainly due to the share-based compensation amounting to RMB9.1 million (US$1.3 million) in the first quarter of 2008.
Income taxes increased by 10.5% from RMB3.5 million (US$0.5 million) in the first quarter of 2007 to RMB3.9 million (US$0.6 million) in the first quarter of 2008.
Net income decreased by 36.5% to RMB8.2 million (US$1.2 million) in the three months ended March 31, 2008 from RMB13.0 million (US$1.7 million) in the three months ended March 31, 2007. The decrease was mainly due to the share-based compensation amounting to RMB9.1 million (US$1.3 million) in the first quarter of 2008. Net income, excluding share-based compensation plans, was RMB17.3 million (US$2.5 million) for the first quarter of 2008, up 33.1% compared with the same period last year.
On March 16, 2007, the National People's Congress of China enacted a new tax law, under which foreign-invested enterprises and domestic companies will be subject to enterprise income tax at a uniform rate of 25%. The new tax law will become effective on January 1, 2008. There will be a transition period, during which enterprises may continue to enjoy existing preferential tax treatment or in which their tax rates may be gradually adjusted to 25%. Following the effectiveness of the new tax law, one of our major PRC operating subsidiaries, CCT Shanghai, which was previously subject to the preferential rate of 15%, is now subject to the phased-in rate, which is 18% in 2008, 20% in 2009, 22% in 2010, 24% in 2011, 25% in 2012 and thereafter.
Cash and bank balances together with term deposits increased from RMB735.4 million (US$100.7 million) as at December 31, 2007, to RMB756.9 (US$108.1) million as at March 31, 2008. The increase of approximately 2.9% was because of the profit earned and the repayment by CCLBJ.
Business Outlook for Fiscal Year 2008
As stated previously, ChinaCast estimates total revenue for the 2008 fiscal year ending December 31, 2008, to be in the range of RMB234 million to RMB256 million (US$33.4 million to US$36.5 million)(2). ChinaCast estimates net income for the 2008 fiscal year ending December 31, 2008, to be in the range of RMB80 million to RMB95 million (US$11.4 million to US$13.6 million)(1). This forecast reflects ChinaCast's current and preliminary view, which is subject to change.
Conference Call Information
A conference call, to discuss the first quarter financial results, will be held at 8:30 am U.S. Eastern Time on Tuesday, May 13, 2008 (8:30 pm on May 13, 2008, Beijing/Hong Kong Time). The discussion will feature remarks by Ron Chan, Chairman and CEO, and Tony Sena, CFO.
Conference Call Information Replay Details Date: Tuesday, May 13, 2008 The replay will be available from Time: 8:30 am ET* 11:30 am ET* May 13, 2008 until midnight ET* May 27, 2008 Conference Dial In Numbers: Conference Replay Dial In Numbers: U.S./Canada Toll Free: U.S./Canada Toll Free: +1 877 545-1491 1 888-203-1112 International: +1 719 325-4848 International: +1 719 457-0820 Pass Code: 4666680 Live Webcast: Web Replay: www.chinacasteducation.com www.chinacasteducation.com *ET=U.S. Eastern Daylight Savings Time
Please access the website approximately 10 minutes prior to the start time in order to download a copy of the company's earnings results presentation and to install any necessary software.
About ChinaCast Education Corporation
Established in 1999, ChinaCast is one of the PRC's leading publicly listed for-profit, post-secondary education and e-learning services providers. With over 1,200 employees, ChinaCast serves 127,000 students over its e-learning network and more than 10,400 students in traditional education settings. The Company provides 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 finance, 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 education 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 cont ent 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 t hat 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) Dollar amounts for the first quarter of 2008 are based on the exchange rate of 1USD = 7.0 RMB.
(2) This estimate is based on the exchange rate of 1USD = 7.0 RMB.
CHINACAST EDUCATION CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except share-related data) For the three months ended March 31, ----------------------------------- 2008 2008 2007 ----------- ----------- ----------- US$ RMB RMB Revenues: Service 5,744 40,205 33,535 Equipment 2,755 19,289 6,320 ----------- ----------- ----------- 8,499 59,494 39,855 ----------- ----------- ----------- Cost of revenues: Service (1,712) (11,986) (10,756) Equipment (2,730) (19,105) (6,243) ----------- ----------- ----------- (4,442) (31,091) (16,999) ----------- ----------- ----------- Gross profit 4,057 28,403 22,856 Operating (expenses) income: Selling and marketing expenses (including share-based compensation of RMB1,281 and RMBnil for the three-month periods ended March 31 for 2008 and 2007, respectively) (498) (3,487) (679) General and administrative expenses (including share-based compensation of RMB7,834 and RMBnil for the three-month periods ended March 31 for 2008 and 2007, respectively) (2,602) (18,216) (10,068) Foreign exchange loss (66) (465) (844) Management service fee 114 798 4,701 ----------- ----------- ----------- Total operating expenses, net (3,052) (21,370) (6,890) ----------- ----------- ----------- Income from operations 1,005 7,033 15,966 Interest income 836 5,852 2,905 Interest expense (1) (4) (28) Income before provision for income taxes, earnings in equity investments, and minority interest and discounted operations 1,840 12,881 18,843 Provision for income taxes (551) (3,859) (3,492) ----------- ----------- ----------- Income before earnings in equity investments, minority interest, and discontinued operations 1,289 9,022 15,351 Loss in equity investments (58) (408) (239) Minority interest (55) (384) (1,775) ----------- ----------- ----------- Income from continuing operations 1,176 8,230 13,337 ----------- ----------- ----------- Discontinued operations: Income (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 1,176 8,230 12,968 =========== =========== =========== Net income per share Basic 0.04 0.30 0.52 =========== =========== =========== Diluted 0.04 0.29 0.50 =========== =========== =========== Weighted average shares used in computation: Basic 27,297,256 27,297,256 24,725,116 =========== =========== =========== Diluted 28,292,257 28,292,257 26,162,379 =========== =========== =========== CHINACAST EDUCATION CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands, except share-related data) As of As of Dec. 31, March 31, 2008 2007 ------------------- -------- US$ RMB RMB Assets Current assets: Cash and cash equivalents 19,402 135,814 138,610 Term deposits 88,725 621,076 596,768 Accounts receivable, net of allowance of RMB148 for both 2008 and 2007 7,669 53,682 35,316 Inventory 285 1,993 2,015 Prepaid expenses and other current assets 1312 9,187 7,127 Amounts due from related parties 493 3,448 3,248 -------- -------- -------- Total current assets 117,886 825,200 783,084 Non-current deposits 155 1,087 1,948 Property and equipment, net 1,484 10,387 11,107 Acquired intangible assets, net 3,031 21,218 21,781 Long-term investments 1,537 10,757 11,165 Non-current advances to a related party 15,871 111,097 119,914 Goodwill 236 1,652 1,715 -------- -------- -------- Total assets 142,200 981,398 950,714 ======== ======== ======== Liabilities, minority interest, and shareholders' equity Current liabilities: Accounts payable 2,751 19,256 13,027 Accrued expenses and other current liabilities 8,119 56,831 53,376 Amounts due to related parties -- -- -- Income taxes payable 4,920 34,441 31,237 Current portion of capital lease obligation -- -- 34 -------- -------- -------- Total current liabilities 15,790 110,528 97,674 -------- -------- -------- Non-current liabilities: Unrecognized tax benefits 4,002 28,016 27,892 -------- -------- -------- Total non-current liabilities 4,002 28,016 27,892 -------- -------- -------- Total liabilities 19,792 138,544 125,566 -------- -------- -------- Minority interest 2,985 20,896 20,512 -------- -------- -------- Commitments and contingencies Shareholders' equity: Ordinary shares (US$0.0001 par value; 100,000,000 shares authorized in 2008 and 2007; 27,297,641 and 27,292,641 shares issued and outstanding in 2008 and 2007, respectively) 3 21 21 Additional paid-in capital 111,161 778,119 768,844 Statutory reserve 2,490 17,433 16,087 Accumulated other comprehensive loss (770) (5,388) (5,205) Retained earnings 4,539 31,773 24,889 -------- -------- -------- Total shareholders' equity 117,423 821,958 804,636 -------- -------- -------- Total liabilities, minority interest, and shareholders' equity 142,200 981,398 950,714 ======== ======== ======== CHINACAST EDUCATION CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) For the three months ended March 31, ----------------------------- 2008 2008 2007 -------- -------- -------- US$ RMB RMB Cash flows from operating activities: Net income 1,176 8,230 12,968 Adjustments to reconcile net income to net cash provided by operating activities: Minority interest in continuing operations 55 384 1,775 Minority interest in discontinued operations -- -- 230 Depreciation and amortization 203 1,421 2,119 Share-based compensation 1,302 9,115 -- Loss in equity investments 58 408 239 Changes in assets and liabilities: Accounts receivable (2,696) (18,869) (1,214) Inventory 3 22 10 Prepaid expenses and other current assets (297) (2,078) (4,109) Non-current deposits 120 837 -- Amounts due from related parties (29) (200) (389) Accounts payable 900 6,300 4,149 Accrued expenses and other current liabilities 592 4,143 (42,879) Amounts due to related parties -- -- (253) Income taxes payable 459 3,210 2,279 Deferred taxes -- -- 43 Unrecognised tax benefits 18 124 36 -------- -------- -------- Net cash used in operating activities 1,864 13,047 (24,996) -------- -------- -------- Cash flows from investing activities: Repayment from advance to related parties 1,260 8,817 1,811 Purchase of property and equipment (92) (642) (703) Term deposits (3,473) (24,308) (42,622) Proceeds from disposal of discontinued operations, net of cash disposed of -- -- (9,113) -------- -------- -------- Net cash provided by (used in) investing activities (2,305) (16,133) (50,627) -------- -------- -------- Cash flows from financing activities: Exercise of unit purchase options 50 347 -- Repayment of capital lease obligation (5) (33) (38) Repayment of advances from related parities -- -- (4,251) -------- -------- -------- Net cash provided by (used in) financing activities 45 314 (4,289) -------- -------- -------- Effect of foreign exchange rate changes (3) (24) (1,450) Net decrease in cash and cash equivalents (399) (2,796) (81,362) Cash and cash equivalents at beginning of the period 19,801 138,610 278,067 -------- -------- -------- Cash and cash equivalents at end of the period 19,402 135,814 196,705 ======== ======== ========
CONTACT: ChinaCast Education Corporation Michael J. Santos, Chief Marketing Officer & Investor Relations Officer (86-10) 6566-7788 mjsantos@chinacasteducation.com www.chinacasteducation.com 15/F Reignwood Center, No. 8 Yong An-Dongli, Jianguomenwai Avenue Beijing 100022, PRC Advanced Investor Relations, L.L.C. U.S. Investor Relations Contact: Miranda Weeks (703) 485-6067 miranda@advancedinvestorrelations.com