BEIJING, Sept.18, 2012 /PRNewswire/ -- ChinaEdu Corporation (NASDAQ: CEDU) ("ChinaEdu" or the "Company"), a leading online educational services provider in China, today announced its unaudited financial results for the second quarter ended June 30, 2012.(1)

Second Quarter 2012 Highlights  

• Total net revenue for the second quarter of 2012 was $18.1 million, a 4.5 percent increase from $17.3 million in the corresponding period in 2011.
• Net revenue from online degree programs was $14.5 million, an increase of 4.5 percent from $13.9 million in the corresponding period of 2011.
• Net income attributable to ChinaEdu was $1.5 million.
• Adjusted net income attributable to ChinaEdu(2) was $1.9 million.
• Net income attributable to ChinaEdu per diluted ADS(3) was $0.086.
• Adjusted net income attributable to ChinaEdu per diluted ADS(4) was $0.114.
• Operating margin in the second quarter of 2012 was 19.7 percent.
• The number of revenue students(5) in online degree programs during the Spring 2012 semester increased roughly 21.4 percent year-over-year to approximately 193,000 students.

Julia Huang, executive chairman of ChinaEdu commented, "The plans we laid for the second quarter of 2012 were well executed and we encountered very few surprises during the quarter. Net revenue for online degree programs increased steadily over the corresponding period in 2011. This growth was complimented by equally steady growth in our non-degree programs, allowing the Company to meet the high end of our quarterly revenue guidance. We continue to leverage our competency in interactive learning to find scalability and persist in our push to be the market leader across our industry. As always, strict cost control measures allow us to build on our strong track record of ongoing profitability."

Financial Results for the Second Quarter Ended June 30, 2012

Net Revenue

Total net revenue for the second quarter of 2012 was $18.1 million, a 4.5 percent increase from $17.3 million in the corresponding period in 2011.

Net revenue from online degree programs for the second quarter of 2012 was $14.5 million, a 4.5 percent increase over $13.9 million in the corresponding period in 2011. As seen in the previous quarter, the increase in net revenue from online degree programs in the second quarter was primarily due to organic growth in revenue students enrolled in core online degree programs. Growth was also attributed to greater revenue contribution from our learning centers network and increased revenue contribution from our online non-degree training programs. Enrollment for online degree programs in the Spring 2012 semester was approximately 193,000 revenue students, an increase of 21.4 percent from approximately 159,000 revenue students enrolled in the Spring 2011 semester.

As of June 30 2012, ChinaEdu's learning centers network was providing recruiting services for 22 universities with 113 operational learning centers, of which 55 were proprietary centers(6) and 58 were contracted centers(7). This compares to 100 operational learning centers as of June 30, 2011, of which 57 were proprietary and 43 were contracted centers.

Net revenue from non-degree programs, including online tutoring programs, private primary and secondary schools and international and elite curriculum programs, in the second quarter of 2012 was $3.6 million, a 4.5 percent increase from $3.5 million in the second quarter of 2011. The growth was mainly driven by an increase in student enrollments at our private schools in Anqing and Pingdingshan.

Cost of Revenue

Total cost of revenue for the second quarter of 2012 was $7.4 million, representing an increase of 6.4 percent, compared to $6.9 million in the corresponding period of 2011.

Cost of revenue for online degree programs in the second quarter of 2012 was $4.9 million, an increase of 5.2 percent from $4.6 million in the corresponding period of 2011. The increase in cost of revenue was primarily due to an increase in staff costs that resulted from a headcount increase across the Company.

Cost of revenue for non-degree programs in the second quarter of 2012 was $2.5 million, an increase of 8.8 percent from $2.3 million in the second quarter of 2011. The cost of revenue increase in this area of the business was primarily related to employee costs, leasing costs and service fees associated with our 101 online tutoring programs and teaching costs, dormitory, canteen and transportation costs related to our private primary schools in Anqing and Pingdingshan.

Gross Profit and Gross Margin

Gross profit in the second quarter of 2012 was $10.7 million, compared to $10.4 million in the corresponding period of 2011. Gross margin decreased slightly to 59.2 percent, compared to 59.9 percent in the corresponding period in 2011.

Gross margin for online degree programs decreased very slightly to 66.3 percent for the second quarter of 2012, compared to 66.5 percent in the corresponding period of 2011.

Gross margin for private schools decreased to 26.1 percent, compared to 29.3 percent in the corresponding period in 2011. The decrease was primarily due to increased teaching costs as well as dormitory, canteen and transportation costs at the Anqing School and Pingdingshan School.

Gross margin for online tutoring programs decreased to 57.7 percent, from 71.4 percent in second quarter of 2011, largely due to decreased barter transaction revenue as well as increased staff and leasing costs associated with these programs.

Operating Expenses

Total operating expenses were $7.2 million in the second quarter of 2012, representing a 7.6 percent decrease from $7.7 million in the corresponding period in 2011. As a percentage of net revenue, total operating expenses decreased to 39.5 percent, compared to 44.7 percent in the corresponding period in 2011. The decrease in the total operating expense was the result of the following:

• General and administrative expenses for the second quarter of 2012 were $3.8 million, a decrease of 1.5 percent compared to $3.9 million in the corresponding period in 2011. As a percentage of net revenue, general and administrative expenses decreased to 21.1 percent, compared with 22.4 percent in the same period in 2011, the result of increased net revenue.
• Selling and marketing expenses were $1.8 million in the second quarter of 2012,a decrease of 19.6 percent compared to $2.2 million in the corresponding period in 2011. The decrease in selling and marketing expenses was primarily attributable to a significant decrease in marketing activities surrounding elite curriculum programs. As a percentage of net revenue, selling and marketing expenses decreased to 9.8 percent, compared with 12.8 percent in the same period in 2011.
• Research and development expenses for the second quarter of 2012 were $1.6 million, a decrease of 5.8 percent compared to $1.7 million in the corresponding period in 2011, primarily because we deployed some research and development employees into maintaining services in 2012.  As a percentage of net revenue, the research and development expense was 8.6 percent in the second quarter of 2012, decreasing from 9.5 percent in the same period in 2011.

Income from Operations

Income from operations in the second quarter of 2012 was $3.6 million, an increase of 35.4 percent compared to $2.6 million in the corresponding period of 2011. This significant increase was mainly due to a substantial rise in student enrollment in online degree programs in the Spring semester. Operating margin increased to 19.7 percent for the second quarter of 2012, compared to 15.2 percent in the corresponding period of 2011.

Adjusted income from operations, a non-GAAP measure defined as income from operations excluding share-based compensation, amortization of intangible assets and land use rights, was $4.0 million for the second quarter of 2012, an increase of 31.7 percent compared to $3.1 million in the corresponding period of 2011.

Adjusted operating margin, a non-GAAP measure defined as the ratio of adjusted income from operations (non-GAAP) over net revenue, for the second quarter of 2012 increased to 22.3 percent, compared to 17.7 percent in the corresponding period of 2011.

Interest and Investment Income

Interest and investment income for the second quarter of 2012 increased 57.8 percent to $0.7 million, compared to $0.4 million for the corresponding quarter of 2011.

Income Tax Expense

In the second quarter of 2012, the income tax expense was $0.9 million and the effective income tax rate was 21.4 percent. This compares with an income tax expense of $0.6 million and effective income tax rate of 20.1 percent in same period of 2011.

Net Income Attributable to Non-controlling Interests

Net income attributable to non-controlling interests increased to $1.9 million in the second quarter of 2012, compared to $1.7 million in the corresponding period in 2011.

Net Income Attributable to ChinaEdu

Net income attributable to ChinaEdu, which is net income, excluding net income attributable to non-controlling interests, was $1.5 million in the second quarter of 2012, representing an increase of 84.4 percent from $0.8 million in the corresponding period of 2011.

Net income attributable to ChinaEdu per basic and diluted ADS was $0.092 and $0.086, respectively, for the second quarter of 2012, compared to $0.050 and $0.047, respectively, for the corresponding period in 2011.

Adjusted net income attributable to ChinaEdu (non-GAAP) was $1.9 million in the second quarter of 2012 compared to $1.2 million in the corresponding period of 2011. Adjusted net margin, a non-GAAP measure defined as the ratio of adjusted net income attributable to ChinaEdu (non-GAAP) over net revenue, was 10.7 percent in the second quarter of 2012, compared to 7.0 percent in the corresponding period of 2011.

Adjusted net income attributable to ChinaEdu per basic and diluted ADS (non-GAAP) was $0.121 and $0.114, respectively, for the second quarter of 2012, compared to $0.077 and $0.072, respectively, in the corresponding period of 2011.

Deferred Revenue

As of June 30, 2012, deferred revenue was $21.7 million, consisting of current deferred revenue in the amount of $20.1 million and non-current deferred revenue in the amount of $1.6 million. Spring semester tuition is generally received during the second quarter but is recognized both in the second quarter and the third quarter of the calendar year.

Private school revenue is generally received in September, but is amortized over 6 or 12 months. Online tutoring program revenue can be received at program enrollment and is mostly amortized within 12 months.

Cash and Cash Equivalents and Term Deposits

As of June 30, 2012, the Company reported cash and cash equivalents and term deposits of $59.1 million, which primarily consisted of cash, demand deposits with original maturity terms of three months or less, and term deposits with original maturity terms of greater than three months but less than one year.

Amounts Due from Related Parties

Amounts due from related parties, which represents cash owed to the Company by collaborative alliance partners, were $47.1 million as of June 30, 2012 compared to $37.5 million as of December 31, 2011.

2012 Year-to-Date Financial Results

Net Revenue

For the six months ended June 30, 2012, total net revenue was $36.0 million, representing an increase of 13.7 percent over $31.7 million in the corresponding period in 2011. Net revenue from online degree programs for the first half of 2012 was $29.0 million, representing a 15.2 percent increase from $25.1 million in the corresponding period in 2011. Net revenue from non-online degree programs for the first half of 2012 was $7.1 million, compared to $6.6 million in 2011, an 8.0 percent increase. The growth in total net revenue was attributable to strong enrollment in online degree programs in the Fall semester of 2011 and in the Spring semester of 2012, particularly at learning centers. Growth in net revenue at the Anqing School increased, while the Company saw a decrease in revenue contributed by 101 online tutoring programs and international and elite curriculum programs.

Cost of Revenue

For the six months ended June 30, 2012, total cost of revenue was $14.6 million, an increase from $13.2 million in the corresponding period in 2011. Cost of revenue for online degree programs in the first half of 2012 was $9.7 million, an increase of 9.1 percent compared to $8.8 million in the corresponding period of 2011. The increase was primarily due to cost increases in headcount and the expansion of the Company's learning centers network.  

Cost of revenue for non-online degree programs in the first half of 2012 was $4.9 million, an increase of 12.4 percent compared to $4.4 million in the corresponding period of 2011. The cost of revenue increase was primarily related to employee costs, leasing costs associated with our 101 online tutoring programs and teaching costs, dormitory, canteen and transportation costs related to our private primary schools in Anqing and Pingdingshan. Cost of revenue for international and elite curriculum programs decreased as those programs have grown smaller.

Gross Profit

Gross profit for the six months ended June 30, 2012 was $21.5 million, an increase of 16.2 percent compared with $18.5 million for the corresponding period in 2011. The increase was primarily due to an increase in gross margin across online degree programs.

Income from Operations

Income from operations was $7.1 million for the six months ended June 30, 2012, representing an increase of 63.1 percent from $4.3 million for the corresponding period in 2011. Operating margin was 19.6 percent for the six months ended June 30, 2012 compared to 13.7 percent for the corresponding period in 2011.

Adjusted income from operations (non-GAAP) was $8.1 million for the first half of 2012, representing an increase of 55.3 percent, compared to $5.2 million in the corresponding period of 2011. Adjusted operating margin (non-GAAP) for the six months ended June 30, 2012 was 22.5 percent, compared to 16.4 percent for the corresponding period in 2011.

Interest Income and Investment Income

Interest income and investment income increased 71.7 percent to $1.3 million in the first half of 2012, compared to $0.7 million in the corresponding period of last year.

Income Tax Expense

Income tax expense for the first half of 2012 was $1.8 million, as compared with $1.0 million for the corresponding period of last year.

Net Income Attributable to Non-controlling Interests

Net income attributable to non-controlling interests was $3.6 million in first half of 2012, an increase of 27.8 percent compared to $2.8 million in the first half of 2011. The increase was primarily attributable to a non-controlling interest impact related to the increase in net income from online degree programs in the first half of 2012.

Net Income attributable to ChinaEdu

Net income attributable to ChinaEdu was $3.1 million for the six months ended June 30, 2012, representing an increase of 129.9 percent from $1.3 million for the corresponding period in 2011. Net margin was 8.6 percent for the six months ended June 30, 2012, compared to 4.2 percent for the corresponding period in 2011.

Adjusted net margin was 11.3 percent for the six months ended June 30, 2012, compared to 6.9 percent for the corresponding period of 2011.The increase was primarily due to increased net profit in the first half of 2012.

Third  Quarter 2012 Guidance

ChinaEdu management expects total net revenue in the third quarter of 2012 to range from RMB119 million to RMB122 million or $18.7 million to $19.2 million, representing a five percent to seven percent increase compared to the corresponding period in 2011. This forecast reflects ChinaEdu's current and preliminary view, which is subject to change.

Conference Call

ChinaEdu's management will hold an earnings conference call at 8:00 a.m. U.S. Eastern Time on September 19, 2012 (8:00 p.m. Beijing/Hong Kong Time on September 19, 2012).

Dial-in details for the earnings conference call are as follows:

International:	+6567239381
Hong Kong:	+85224750994
United States:	+1 (718) 354-1231
Toll-free China, Mobile:	4006208038
Toll-free China:	8008190121
Toll-free United States:	+1 (866) 519-4004
Passcode:	22035522

A live and archived webcast of the conference call will be available on the investor relations page of ChinaEdu's website at http://ir.chinaedu.net and a replay of the conference call may be accessed by phone until September 26, 2012.

Dial-in numbers for the replay are as follows:

Toll Free United States	+1 866 214 5335
International	+1 718 354 1232
Conference ID:	22035522

Non-GAAP Financial Measures

To supplement the unaudited condensed consolidated financial information presented in accordance with Generally Accepted Accounting Principles in the United States of America ("GAAP"), the Company uses non-GAAP measures of income from operations and net income attributable to ChinaEdu, which are adjusted from results based on GAAP to exclude certain non-cash items of share-based compensation and amortization of intangible assets and land use rights. Adjusted operating margin defined as the ratio of adjusted operating income from operation over net revenue. Adjusted net income attributable to ChinaEdu per basic and diluted ADS are a non-GAAP measure which are computed using adjusted net income attributable to ChinaEdu over the number of ADSs used in net income attributable to ChinaEdu per basic and diluted ADS calculation.

These non-GAAP financial measures are provided to enhance the investors' overall understanding of the Company's current and past financial performance in on-going core operations as well as prospects for the future. These measures should be considered in addition to results prepared and presented in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. Management considers the non-GAAP information as important measures internally and therefore deems it important to provide all of this information to investors.

About ChinaEdu

ChinaEdu Corporation is an educational services provider in China, incorporated as an exempted limited liability company in the Cayman Islands. Established in 1999, the Company's primary business is to provide comprehensive services to the online degree programs of leading Chinese universities. These services include academic program development, technology services, enrollment marketing, student support services and finance operations. The Company's other lines of businesses include the operation of private primary and secondary schools, online interactive tutoring services and providing marketing, support for international and elite curriculum programs and online learning community for adult students.

The Company believes it is the largest service provider to online degree programs in China in terms of the number of higher education institutions that are served and the number of student enrollments supported. The Company currently has entered into collaborative alliances with 12 universities, ranging from 10 to 50 years in length. The Company has also entered into technology agreements with 6 universities. Besides, ChinaEdu performs recruiting services for 22 universities through nationwide learning center network.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, including certain plans, expectations, goals, and projections, which are subject to numerous assumptions, risks, and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and contingencies, many of which are beyond our control which may cause actual results, levels of activity, performance or achievements to differ materially from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. The Company's actual results could differ materially from those contained in the forward-looking statements due to a number of factors, including those described under the heading "Risk Factors" in the Company's Annual Report on Form 20-F for the year ended December 31, 2011, and in documents subsequently filed by the Company from time to time with the Securities and Exchange Commission. Unless required by law, the Company undertakes no obligation to (and expressly disclaim any such obligation to) update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

For investor and media inquiries, please contact:

Helen Plummer
Senior Investor Relations Coordinator
ChinaEdu Corporation
Phone: +1 908-442-9395
E-mail: helen@chinaedu.net

Jin Yu
Investor Relations Manager
ChinaEdu Corporation
Phone: +86 15711096022
E-mail: jinyu@chinaedu.net