China Distance Education Holdings Limited Reports Financial Results for Third Quarter Fiscal Year 2017

- Net Revenue Up 15.1% Year-Over-Year to $35.4 Million, Exceeding Guidance Range -

BEIJING, Aug. 23, 2017 /PRNewswire/ -- China Distance Education Holdings Limited (NYSE: DL) ("CDEL", or the "Company"), a leading provider of online education and value-added services for professionals and corporate clients in China, today announced unaudited financial results for the third quarter of fiscal year 2017 ended June 30, 2017.

Third Quarter Fiscal 2017 Financial and Operational Highlights

    --  Total course enrollments were 659,000, a decrease of 31.1% from the
        third quarter of fiscal 2016.
    --  Cash receipts from online course registration were $25.4 million, an
        increase of 4.5 % from the third quarter of fiscal 2016. Without the
        impact of Renminbi depreciation against the U.S. dollar, cash receipts
        from online course registration increased by 9.7% year-over-year in the
        third quarter of fiscal 2017.
    --  Net revenue increased by 15.1% to $35.4 million from $30.8 million in
        the prior year period, exceeding the Company's guidance range of $30.8
        million to $32.3 million. Xiamen NetinNet, which was acquired by the
        Company in May 2016, contributed net revenue from the sale of learning
        simulation software of $1.2 million, an increase of 8.8% from the third
        quarter of fiscal 2016.
    --  Gross profit was $19.2 million, an increase of 9.2% from $17.6 million
        in the prior year period.
    --  Non-GAAP(1) gross profit was $19.2 million, an increase of 9.2% from
        $17.6 million in the prior year period.
    --  Gross margin was 54.1%, compared with 57.1% in the prior year period.
        Non-GAAP(1 )gross margin was 54.3%, compared with 57.2% in the prior
        year period.
    --  Operating income was $4.7 million, a decrease of 21.7% from $6.0 million
        in the prior year period.
    --  Non-GAAP(1) operating income was $5.2 million, a decrease of 20.3% from
        $6.5 million in the prior year period.
    --  Net income was $2.9 million, a decrease of 60.5% from $7.4 million in
        the prior year period.
    --  Non-GAAP(1) net income was $3.4 million, a decrease of 56.9% from $7.9
        million in the prior year period.
    --  Basic and diluted net income per American Depositary Share ("ADS") were
        $0.089, compared with basic and diluted net income per ADS of $0.219 and
        $0.218, respectively, for the third quarter of fiscal 2016. Each ADS
        represents four ordinary shares.
    --  Basic and diluted non-GAAP(1) net income per ADS were $0.104 and $0.103,
        respectively, compared with basic and diluted non-GAAP(1) net income per
        ADS of $0.234 and $0.233, respectively, for the third quarter of fiscal
        2016.
    --  Cash flow from operations decreased by 11.6% to $7.8 million from $8.8
        million in the third quarter of fiscal 2016.

    (1) For more information
     about the non-GAAP
     financial measures
     contained in this press
     release, please see "Use of
     Non-GAAP Financial
     Measures" below.

Mr. Zhengdong Zhu, Chairman and CEO of CDEL, said, "Our third quarter revenue growth of 15.1% year-over-year exceeded our guidance range, primarily due to higher-than-expected revenue from books and reference materials. However, softer growth in cash receipts from online course registration of 4.5% year-over-year in the third quarter adversely impacted the revenue growth of online education services. Our third quarter total enrollment growth declined 31.1% year-over-year, primarily due to a decline in accounting continuing education course enrollments, as a result of the previously disclosed suspension of the Accounting Certificate examination. Excluding accounting continuing education and Accounting Certificate course enrollments, our third quarter total enrollment growth was 7.4% year-over-year.

"Despite softer growth in cash receipts from online course registration, our ability to quickly adapt and respond to changing market dynamics bodes well for our future development. The accounting practical skills training and employment guidance services bundles we introduced earlier this fiscal year, together with our core accounting test preparation courses, drove strong growth of cash receipts from online accounting course registration of 28.8% year-over-year in the third quarter.

"As we continue to execute on our strategic expansion initiatives, we are employing a prudent approach to further leverage our existing resources by branching into complementary services. One such strategic investment is our recently announced acquisition of 40% equity interest in Beijing Ruida, which enables us to build-out our practice in judicial examination preparation, while leveraging our proven expertise and online learning platform. In addition, in an effort to create new revenue streams that broaden our current offerings, we have extended our business services offered to corporate clients to now include bookkeeping services, which nicely complements our existing tax advisory and training business. Through this approach, we will further grow our business, and extend the breadth and depth of the life-long partnerships we are establishing with our students and corporate clients," Mr. Zhu concluded.

Mr. Mark Marostica, Co-Chief Financial Officer of CDEL, said, "We returned to profitability in our third fiscal quarter as expected, driven by our efforts to continually maintain operating efficiency while balancing our growth and profitability. The significant year-over-year decline in our third quarter non-GAAP net income of 56.9%, however, was primarily due to a foreign currency exchange loss of $1.2 million compared with a foreign currency exchange gain of $2.8 million in the year-ago period, together with the impact of Xiamen NetinNet in its seasonally weak third quarter. Excluding the impact of Xiamen NetinNet, our third quarter adjusted non-GAAP operating income declined by 7.1% year-over-year."

Third quarter Fiscal 2017 Financial Results

Net Revenue. Total net revenue increased by 15.1% to $35.4 million in the third quarter of fiscal 2017 from $30.8 million in the third quarter of fiscal 2016. Net revenue from online education services, books and reference materials, and other sources contributed 74.7%, 11.2% and 14.1%, respectively, of total net revenues for the third quarter of fiscal 2017.

Online education services. Net revenue from online education services increased by 4.8% to $26.5 million in the third quarter of fiscal 2017 from $25.3 million in the third quarter of fiscal 2016. This increase was primarily due to relatively higher revenue growth from our healthcare vertical, partially offset by weaker revenue growth from our accounting vertical, due to the impact of the suspension of the Accounting Certificate Examination and the downstream effect of this examination suspension on Accounting Continuing Education.

Books and reference materials. Net revenue from books and reference materials increased by 104.4% to $4.0 million in the third quarter of fiscal 2017 from $1.9 million in the third quarter of fiscal 2016.

Other revenues. Net revenue from other sources increased by 39.6% to $5.0 million in the third quarter of fiscal 2017 from $3.6 million in the third quarter of fiscal 2016, primarily due to revenue growth from business start-up training services.

Cost of Sales. Cost of sales increased by 22.9% to $16.3 million in the third quarter of fiscal 2017 from $13.2 million in the third quarter of fiscal 2016. Non-GAAP(1 )cost of sales increased by 23.0% to $16.2 million in the third quarter of fiscal 2017 from $13.2 million in the third quarter of fiscal 2016. This increase was primarily due to expenses associated with Xiamen NetinNet, as well as increased cost of books and reference materials, and salaries and related expenses. This increase was partially offset by decreased lecture fees.

Gross Profit. Gross profit increased by 9.2% to $19.2 million in the third quarter of fiscal 2017 from $17.6 million in the prior year period. Non-GAAP(1 )gross profit increased by 9.2% to $19.2 million in the third quarter of fiscal 2017 from $17.6 million in the prior year period. Gross margin was 54.1% in the third quarter of fiscal 2017, compared with 57.1% in the third quarter of fiscal 2016. Non-GAAP(1 )gross margin was 54.3% in the third quarter of fiscal 2017, compared with 57.2% in the third quarter of fiscal 2016.

Operating Expenses. Total operating expenses increased by 24.6% to $14.6 million in the third quarter of fiscal 2017 from $11.8 million in the prior year period. Non-GAAP(1) total operating expenses increased by 25.7% to $14.2 million in the third quarter of fiscal 2017 from $11.3 million in the prior year period.

Selling expenses. Selling expenses increased by 35.4% to $10.4 million in the third quarter of fiscal 2017 from $7.7 million in the prior year period. Non-GAAP(1) selling expenses increased by 35.5% to $10.4 million in the third quarter of fiscal 2017 from $7.7 million in the prior year period. The increase was primarily driven by increased advertising and promotional expenses, together with expenses associated with Xiamen NetinNet.

General and administrative expenses. General and administrative expenses increased by 4.2% to $4.3 million in the third quarter of fiscal 2017 from $4.1 million in the prior year period. Non-GAAP(1) general and administrative expenses increased by 5.2% to $3.8 million in the third quarter of fiscal 2017 from $3.6 million in the prior year period. The increase was mainly due to expenses associated with Xiamen NetinNet, and the provision for doubtful debts. This increase was partially offset by decreased professional fees.

Income Tax Expense. Income tax expense decreased by 58.0% to $0.7 million in the third quarter of fiscal 2017 from $1.8 million in the prior year period, primarily due to a decrease in taxable income.

Net Income. As a result of the foregoing, net income decreased by 60.5% to $2.9 million in the third quarter of fiscal 2017 from $7.4 million in the prior year period. Non-GAAP(1) net income decreased by 56.9% to $3.4 million in the third quarter of fiscal 2017 from $7.9 million in the prior year period.

Operating Cash Flow. Net operating cash inflow decreased by 11.6% to $7.8 million in the third quarter of fiscal 2017 from $8.8 million in the prior year period. The operating cash inflow was mainly attributable to net income before non-cash items generated in the third quarter of fiscal 2017. The decrease in accounts receivable, prepayment and other current assets, and the increase in amount due to a related party also contributed to the operating cash inflow. This operating cash inflow was partially offset by the increase in other non-current assets, and decrease in deferred revenue.

Cash and Cash Equivalents, Term Deposits, Restricted Cash and Short-term Investments. Cash and cash equivalents, term deposits, restricted cash and short-term investments as of June 30, 2017 increased by 7.8% to $107.4 million from $99.6 million as of March 31, 2017, mainly due to cash flow of $7.8 million generated from operating activities in the third quarter of fiscal 2017. This increase was partially offset by deposit payments for certain strategic investments of $1.7 million, and capital expenditures of $0.7 million.

First Nine Months of Fiscal 2017 Financial Results

Net Revenue. Total net revenue increased by 12.6% to $89.3 million in the first nine months of fiscal 2017 from $79.3 million in the first nine months of fiscal 2016. Net revenue from online education services, books and reference materials, and other sources contributed 71.1%, 7.7% and 21.2%, respectively, of total net revenues for the first nine months of fiscal 2017.

Online education services. Net revenue from online education services was $63.5 million in the first nine months of fiscal 2017, in-line with $63.5 million in the first nine months of fiscal 2016.

Books and reference materials. Net revenue from books and reference materials increased by 29.7% to $6.9 million in the first nine months of fiscal 2017 from $5.3 million in the first nine months of fiscal 2016.

Others. Net revenue from other sources increased by 79.9% to $18.9 million in the first nine months of fiscal 2017 from $10.5 million in the first nine months of fiscal 2016.

Cost of Sales. Cost of sales increased by 15.9% to $40.9 million in the first nine months of fiscal 2017 from $35.2 million in the first nine months of fiscal 2016. Non-GAAP(1 )cost of sales increased by 16.0% to $40.7 million in the first nine months of fiscal 2017 from $35.1 million in the first nine months of fiscal 2016.

Gross Profit. Gross profit increased by 9.9% to $48.4 million in the first nine months of fiscal 2017 from $44.1 million in the prior year period. Non-GAAP(1 )gross profit increased by 9.9% to $48.5 million in the first nine months of fiscal 2017 from $44.2 million in the prior year period. Gross margin was 54.2% in the first nine months of fiscal 2017, compared with 55.6% in the first nine months of fiscal 2016. Non-GAAP(1 )gross margin was 54.4% in the first nine months of fiscal 2017, compared with 55.7% in the first nine months of fiscal 2016.

Operating Expenses. Total operating expenses increased by 30.2% to $39.4 million in the first nine months of fiscal 2017, from $30.3 million in the prior year period. Non-GAAP(1) total operating expenses increased by 31.9% to $38.1 million in the first nine months of fiscal 2017, from $28.9 million in the prior year period.

Selling expenses. Selling expenses increased by 41.8% to $26.0 million in the first nine months of fiscal 2017 from $18.3 million in the prior year period. Non-GAAP(1) selling expenses increased by 41.9% to $25.9 million in the first nine months of fiscal 2017 from $18.3 million in the prior year period.

General and administrative expenses. General and administrative expenses increased by 12.5% to $13.4 million in the first nine months of fiscal 2017 from $11.9 million in the prior year period. Non-GAAP(1) general and administrative expenses increased by 14.5% to $12.1 million in the first nine months of fiscal 2017 from $10.6 million in the prior year period.

Income Tax Expense. Income tax expense decreased by 26.5% to $2.6 million in the first nine months of fiscal 2017 from $3.5 million in the prior year period.

Net Income. As a result of the foregoing, net income decreased by 35.5% to $9.1 million in the first nine months of fiscal 2017 from $14.1 million in the prior year period. Non-GAAP(1) net income decreased by 32.4% to $10.5 million in the first nine months of fiscal 2017 from $15.6 million in the prior year period.

Operating Cash Flow. Net operating cash inflow increased by 4.2% to $34.5 million in the first nine months of fiscal 2017 from $33.1 million in the prior year period.

Outlook

For the fourth quarter of fiscal 2017, the Company expects to generate total net revenue in the range of $40.2 million to $42.1 million, representing a year-over-year increase of approximately 5% to 10%.

For fiscal year 2017, the Company expects to generate total net revenues in the range of $129.4 million to $131.3 million, representing year-over-year growth of approximately 10.1% to 11.7%.

The above guidance reflects the Company's current and preliminary view, which is subject to change.

Conference Call

Management will hold a conference call at 8:00 a.m. Eastern time on Thursday, August 24, 2017 (8:00 p.m. Beijing Time on August 24, 2017) to discuss financial results and answer questions from investors and analysts. Listeners may access the call by dialing:


    US Toll Free:                       +1-866-5194-004

    International:                      +65-6713-5090

    Mainland China:                     400-620-8038

    Hong Kong:                          +852-3018-6771

    United Kingdom:                     +44-203-6214-779

    Passcode:                           CDEL or DL

A telephone replay will be available two hours after the call until August 31, 2017 by dialing:


    US Toll Free:                       +1-855-4525-696

    International:                      +61-2-8199-0299

    Mainland China:                     400-632-2162

    Hong Kong:                          800-963-117

    United Kingdom:                     0808-234-0072

    Replay Passcode:                                      63353422

Additionally, a live and archived webcast of the conference call will be available at http://ir.cdeledu.com.

About China Distance Education Holdings Limited

China Distance Education Holdings Limited is a leading provider of online education and value-added services for professionals and corporate clients in China. The courses offered by the Company through its websites are designed to help professionals seeking to obtain and maintain professional licenses and to enhance their job skills through our professional development courses in China in the areas of accounting, healthcare, engineering & construction, and other industries. The Company also offers professional education courses for participants in the national judicial examination, online test preparation courses for self-taught learners pursuing higher education diplomas or degrees, test preparation courses for university students intending to take the nationwide graduate school entrance exam, practical accounting training courses for college students and working professionals, as well as online language courses and third-party developed online courses. In addition, the Company provides business services to corporate clients, including but not limited to tax advisory, bookkeeping and accounting outsourcing services. For further information, please visit http://ir.cdeledu.com.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "may," "should," "potential," "continue," "expect," "predict," "anticipate," "future," "intend," "plan," "believe," "is/are likely to," "estimate" and similar statements. Among other things, the outlook for the fourth quarter and full fiscal year 2017 and quotations from management in this announcement, as well as the Company's strategic and operational plans (in particular, the anticipated benefits of strategic growth initiatives, including bundling accounting practical skills training and employment guidance services; offering bookkeeping services, tax advisory services and tax training to corporate clients; as well as acquisition and strategic investments such as the acquisition of 40% equity interest in Beijing Ruida) contain forward-looking statements. The Company may also make written or oral forward-looking statements in its periodic and annual reports to the SEC, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: goals and growth strategies; future prospects and market acceptance of the Company's courses and other products and services; future business development and results of operations; projected revenues, profits, earnings and other estimated financial information; projected enrollment numbers; plans to expand and enhance courses and other products and services; competition in the education and test preparation markets; and Chinese laws, regulations and policies, including those applicable to the Internet, Internet content providers, the education and telecommunications industries, mergers and acquisitions, taxation and foreign exchange.

Further information regarding these and other risks is included in the Company's annual report on Form 20-F and other documents filed or furnished with the SEC. All information provided in this press release is as of the date of this press release. The Company does not undertake any obligation to update any forward-looking statement, except as required under applicable law.

Statement Regarding Unaudited Financial Information

The unaudited financial information set forth in this press release is preliminary and subject to adjustments. Adjustments to the financial statements may be identified when audit work is performed for the year-end audit, which could result in significant differences from this preliminary unaudited financial information.

Use of Non-GAAP Financial Measures

To supplement the Company's consolidated financial results presented in accordance with U.S. generally accepted accounting principles, or GAAP, the Company uses the following measures defined as non-GAAP financial measures: non-GAAP net income, operating income, gross profit, cost of sales, selling expenses, general and administrative expenses, net income margin, operating margin, gross profit margin and basic and diluted earnings per ADS and per share. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of non-GAAP measures to comparable GAAP measures" set forth at the end of this release.

The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding share-based compensation expenses. However, non-GAAP financial measures may not be indicative of the Company's operating performance from a cash perspective. The Company believes that both management and investors benefit from these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to the Company's historical performance and liquidity. The Company computes its non-GAAP financial measures using the same consistent method from quarter to quarter. The Company believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. A limitation of excluding share-based compensation expenses from the above-mentioned line items and presenting these non-GAAP measures is that such charges may continue to be for the foreseeable future a significant recurring expense in our business. Management compensates for this limitation by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying table at the end of this release provides more detail on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

Contacts:


    China Distance Education Holdings           The Piacente Group |
     Limited                                    Investor Relations

    Investor Relations Department              Brandi Piacente

    Tel: +86-10-8231-9999 ext1805              Tel: +1 212-481-2050

    Email: IR@cdeledu.com                      Email: DL@tpg-ir.com

(Financial Tables on Following Pages)


                                                                                                         China Distance Education Holdings Limited

                                                                                                                Consolidated Balance Sheets

                                                                                          (in thousands of US Dollars, except number of shares and per share data)


                                                                                                           September 30, 2016                                                                                        June 30, 2017

                                                                                                         (Derived from Audited)                                                                                       (Unaudited)

    Assets:

    Current assets:

                             Cash and cash equivalents                                                                                                                                                        53,677                 68,633

                             Restricted cash                                                                                                                                                                  15,547                 34,207

                             Short term investments                                                                                                                                                            1,278                  4,573

                             Accounts receivable, net of allowance for doubtful accounts of US$976 and                                                                                                         5,454                  3,883
                             US$661 as of June 30, 2017 and September 30, 2016, respectively

                             Inventories                                                                                                                                                                         971                  1,578

                             Prepayment and other current assets                                                                                                                                               5,893                  8,800

                             Amount due from a related party                                                                                                                                                     208                     75

                             Deferred tax assets, current portion                                                                                                                                              1,676                  2,429

                             Deferred cost                                                                                                                                                                     1,118                  1,235

                                Total current assets                                                                                                                                                          85,822                125,413


    Non-current assets:

                             Property, plant and equipment, net                                                                                                                                               13,908                 14,313

                             Goodwill                                                                                                                                                                         29,392                 28,913

                             Long term investments                                                                                                                                                             3,079                  9,342

                             Other intangible assets, net                                                                                                                                                     11,675                 10,212

                             Deposit for purchase of non-current assets                                                                                                                                        1,116                    433

                             Other non-current assets                                                                                                                                                          3,928                  6,491

                                Total non-current assets                                                                                                                                                      63,098                 69,704


                                Total assets                                                                                                                                                                 148,920                195,117
                                                                                                                                                                                                           =======


    Liabilities and equity:

    Current liabilities:

                             Bank borrowings                                                                                                                                                                  15,551                 29,963

                             Accrued expenses and other liabilities (including accrued expenses and other                                                                                                     30,564                 30,788
                             liabilities of the consolidated VIE without recourse to China Distance Education
                             Holdings Limited of US$25,634 and US$26,279 as of June 30, 2017 and
                             September 30, 2016, respectively)

                             Amount due to a related party                                                                                                                                                         -                 2,920

                             Income tax payable (including income tax payable of the consolidated VIE without                                                                                                  5,308                  4,444
                             recourse to China Distance Education Holdings Limited of US$2,911 and
                             US$3,353  as of June 30, 2017 and September 30, 2016, respectively)

                             Deferred revenue (including deferred revenue of the consolidated VIE without                                                                                                     36,332                 58,864
                             recourse to China Distance Education Holdings Limited of US$57,978 and
                             US$35,437 as of June 30, 2017 and September 30, 2016, respectively)

                             Refundable fees (including refundable fees of the consolidated VIE without                                                                                                          862                    859
                             recourse to China Distance Education Holdings Limited of US$859 and US$862 as
                             of June 30, 2017 and September 30, 2016, respectively)

                                Total current liabilities                                                                                                                                                     88,617                127,838


    Non-current liabilities:

                             Deferred tax liabilities, non-current portion                                                                                                                                     3,831                  3,990
                                                                                                                                                                                                             -----

                             Total non-current liabilities                                                                                                                                                     3,831                  3,990



                                Total liabilities                                                                                                                                                             92,448                131,828
                                                                                                                                                                                                            ======




    Equity:

                             Ordinary shares (par value of US$0.0001 per share at June 30, 2017 and September                                                                                                     13                     13
                                                                                                                               30, 2016, respectively; Authorized -500,000,000 shares at June 30, 2017 and
                             September 30, 2016, respectively; Issued and outstanding -131,854,773 and
                             131,729,773 shares at June 30, 2017 and September 30, 2016, respectively)

                             Additional paid-in capital                                                                                                                                                       15,697                 18,394

                             Accumulated other comprehensive loss                                                                                                                                            (3,418)               (5,640)

                             Retained Earnings                                                                                                                                                                32,944                 27,175
                                                                                                                                                                                                            ------

                                Total China Distance Education Holdings Limited shareholder's equity                                                                                                          45,236                 39,942

                             Noncontrolling interest                                                                                                                                                          11,236                 23,347
                                                                                                                                                                                                            ------

                                Total equity                                                                                                                                                                  56,472                 63,289
                                                                                                                                                                                                            ------

                                Total liabilities and equity                                                                                                                                                 148,920                195,117
                                                                                                                                                                                                           =======


                                                                                              China Distance Education Holdings Limited

                                                                                           Unaudited Consolidated Statements Of Operations

                                                                           (in thousands of US dollars, except number of shares, per share and per ADS data)


                                                                                                                                                                 Three Months Ended June 30,

                                                                                                                                                                          2016                    2017


    Sales, net of business tax, value-added tax and related surcharges:

                                                                         Online education services                                                                        25,279                  26,482

                                                                         Books and reference materials                                                                     1,942                   3,970

                                                                         Others                                                                                            3,573                   4,987

                                                                         -      Sale of learning simulation software                                                       1,126                   1,224

                                                                         -    Business start-up training services                                                            343                   1,372

                                                                         -    Others                                                                                       2,104                   2,391

                                                                            Total net revenues                                                                            30,794                  35,439


    Cost of sales

                                                                         Cost of services and others                                                                    (11,548)               (12,965)

                                                                         Cost of tangible goods sold                                                                     (1,670)                (3,285)
                                                                                                                                                                       -------

                                                                            Total cost of sales                                                                         (13,218)               (16,250)


    Gross profit                                                                                                                                                        17,576                  19,189


    Operating expenses

                                                                         Selling expenses                                                                                (7,674)               (10,388)

                                                                         General and administrative expenses                                                             (4,080)                (4,252)

                                                                            Total operating expenses                                                                    (11,754)               (14,640)

    Other operating income                                                                                                                                                 163                     135
                                                                                                                                                                           ---                     ---


    Operating income                                                                                                                                                     5,985                   4,684


    Interest income                                                                                                                                                        370                     431

    Interest expense                                                                                                                                                     (136)                  (165)

    Exchange gain                                                                                                                                                        2,778                 (1,213)


    Income before income taxes                                                                                                                                           8,997                   3,737

    Less: Income tax expense                                                                                                                                           (1,779)                  (747)

    Less: Loss from equity method investment                                                                                                                   -                       (40)
                                                                                                                                                             ---                        ---


    Net income                                                                                                                                                           7,218                   2,950

    Net (income) loss attributable to noncontrolling interest                                                                                                              196                    (23)
                                                                                                                                                                           ---                     ---

    Net income attributable to China Distance Education Holdings Limited                                                                                                 7,414                   2,927
                                                                                                                                                                         =====                   =====



    Net income per share:

    Net income attributable to China Distance Education Holdings Limited
    shareholders

                                                                         Basic                                                                                             0.055                   0.022

                                                                         Diluted                                                                                           0.055                   0.022



    Net income per ADS:

    Net income attributable to China Distance Education Holdings Limited
    shareholders

                                                                         Basic                                                                                             0.219                   0.089

                                                                         Diluted                                                                                           0.218                   0.089


    Weighted average shares used in calculating net income per share:

                                                                         Basic                                                                                       135,084,505             131,458,587

                                                                         Diluted                                                                                     135,942,921             131,801,187
                                                                         -------                                                                                     -----------             -----------


                                                                                              China Distance Education Holdings Limited

                                                                                           Unaudited Consolidated Statements Of Operations

                                                                           (in thousands of US dollars, except number of shares, per share and per ADS data)


                                                                                                                                                                 Nine Months Ended June 30,

                                                                                                                                                                          2016                   2017


    Sales, net of business tax, value-added tax and related surcharges:

                                                                         Online education services                                                                        63,468                 63,457

                                                                         Books and reference materials                                                                     5,312                  6,887

                                                                         Others                                                                                           10,528                 18,936

                                                                         -      Sale of learning simulation software                                                       1,126                  8,592

                                                                         -    Business start-up training services                                                          3,399                  4,121

                                                                         -    Others                                                                                       6,003                  6,223

                                                                            Total net revenues                                                                            79,308                 89,280


    Cost of sales

                                                                         Cost of services and others                                                                    (31,960)              (36,027)

                                                                         Cost of tangible goods sold                                                                     (3,288)               (4,830)
                                                                                                                                                                       -------

                                                                            Total cost of sales                                                                         (35,248)              (40,857)


    Gross profit                                                                                                                                                        44,060                 48,423


    Operating expenses

                                                                         Selling expenses                                                                               (18,342)              (26,004)

                                                                         General and administrative expenses                                                            (11,937)              (13,431)

                                                                         Total operating expenses                                                                       (30,279)              (39,435)

    Other operating income                                                                                                                                                 361                  1,585
                                                                                                                                                                           ---                  -----


    Operating income                                                                                                                                                    14,142                 10,573


    Interest income                                                                                                                                                      1,764                  1,156

    Interest expense                                                                                                                                                     (436)                 (434)

    Exchange gain                                                                                                                                                        2,219                  1,556


    Income before income taxes                                                                                                                                          17,689                 12,851

    Less: Income tax expense                                                                                                                                           (3,497)               (2,569)

    Less: Loss from equity method investment                                                                                                                   -                      (118)
                                                                                                                                                             ---                       ----


    Net income                                                                                                                                                          14,192                 10,164

    Net income attributable to noncontrolling interest                                                                                                                   (127)               (1,095)
                                                                                                                                                                          ----                 ------

    Net income attributable to China Distance Education Holdings Limited                                                                                                14,065                  9,069
                                                                                                                                                                        ======                  =====



    Net income per share:

    Net income attributable to China Distance Education Holdings Limited
    shareholders

                                                                         Basic                                                                                             0.101                  0.069

                                                                         Diluted                                                                                           0.101                  0.068



    Net income per ADS:

    Net income attributable to China Distance Education Holdings Limited
    shareholders

                                                                         Basic                                                                                             0.406                  0.275

                                                                         Diluted                                                                                           0.403                  0.273


    Weighted average shares used in calculating net income per share:

                                                                         Basic                                                                                       138,127,626            131,403,456

                                                                         Diluted                                                                                     139,748,542            132,853,269
                                                                         -------                                                                                     -----------            -----------


                                                                                           China Distance Education Holdings Limited

                                                                                Reconciliations of non-GAAP measures to comparable GAAP measures

                                                                       (In thousands of US Dollars, except number of shares, per share and per ADS data)


                                                                                                                                                         Three Months Ended June 30,

                                                                                                                                                                  2016                        2017

                                                                                                                                                          (Unaudited)                (Unaudited)


    Cost of sales                                                                                                                                               13,218                      16,250

    Share-based compensation expense in cost of sales                                                                                                               40                          40

    Non-GAAP cost of sales                                                                                                                                      13,178                      16,210


    Selling expenses                                                                                                                                             7,674                      10,388

    Share-based compensation expense in selling expenses                                                                                                            21                          21

    Non-GAAP selling expenses                                                                                                                                    7,653                      10,367


    General and administrative expenses                                                                                                                          4,080                       4,252

    Share-based compensation expense in general and administrative expenses                                                                                        440                         422

    Non-GAAP general and administrative expenses                                                                                                                 3,640                       3,830


    Gross profit                                                                                                                                                17,576                      19,189

    Share-based compensation expenses                                                                                                                               40                          40

    Non-GAAP gross profit                                                                                                                                       17,616                      19,229


    Gross profit margin                                                                                                                                          57.1%                      54.1%

    Non-GAAP gross profit margin                                                                                                                                 57.2%                      54.3%


    Operating income                                                                                                                                             5,985                       4,684

    Share-based compensation expenses                                                                                                                              501                         483

    Non-GAAP operating income                                                                                                                                    6,486                       5,167


    Operating margin                                                                                                                                             19.4%                      13.2%

    Non-GAAP operating margin                                                                                                                                    21.1%                      14.6%


    Net income                                                                                                                                                   7,414                       2,927

    Share-based compensation expense                                                                                                                               501                         483

    Non-GAAP net income                                                                                                                                          7,915                       3,410


    Net income margin                                                                                                                                            24.1%                       8.3%

    Non-GAAP net income margin                                                                                                                                   25.7%                       9.6%


    Net income per share-basic                                                                                                                                   0.055                       0.022

    Net income per share-diluted                                                                                                                                 0.055                       0.022

    Non-GAAP net income per share-basic                                                                                                                          0.059                       0.026

    Non-GAAP net income per share-diluted                                                                                                                        0.058                       0.026


    Net income per ADS attributable to China Distance Education Holdings Limited                                                                                 0.219                       0.089
         shareholders-basic (note 1)

    Net income  per ADS attributable to China Distance Education Holdings Limited                                                                                0.218                       0.089
         shareholders-diluted (note 1)

    Non-GAAP net income per ADS attributable to China Distance Education Holdings
         Limited shareholders-basic (note 1)
                                                                                                                                                                 0.234                       0.104

    Non-GAAP net income per ADS attributable to China Distance Education Holdings
         Limited shareholders-diluted (note 1)
                                                                                                                                                                 0.233                       0.103


    Weighted average shares used in calculating basic net income per share                                                                                 135,084,505                 131,458,587

    Weighted average shares used in calculating diluted net income per share                                                                               135,942,921                 131,801,187

    Weighted average shares used in calculating basic non-GAAP net income per share                                                                        135,084,505                 131,458,587

    Weighted average shares used in calculating diluted non-GAAP net income per share                                                                      135,942,921                 131,801,187



    Note 1: Each ADS represents
     four ordinary shares.


                                                                                           China Distance Education Holdings Limited

                                                                                Reconciliations of non-GAAP measures to comparable GAAP measures

                                                                       (In thousands of US Dollars, except number of shares, per share and per ADS data)


                                                                                                                                                         Nine Months Ended June 30,

                                                                                                                                                                  2016                       2017

                                                                                                                                                          (Unaudited)               (Unaudited)


    Cost of sales                                                                                                                                               35,248                     40,857

    Share-based compensation expense in cost of sales                                                                                                              122                        121

    Non-GAAP cost of sales                                                                                                                                      35,126                     40,736


    Selling expenses                                                                                                                                            18,342                     26,004

    Share-based compensation expense in selling expenses                                                                                                            63                         63

    Non-GAAP selling expenses                                                                                                                                   18,279                     25,941


    General and administrative expenses                                                                                                                         11,937                     13,431

    Share-based compensation expense in general and administrative expenses                                                                                      1,328                      1,281

    Non-GAAP general and administrative expenses                                                                                                                10,609                     12,150


    Gross profit                                                                                                                                                44,060                     48,423

    Share-based compensation expenses                                                                                                                              122                        121

    Non-GAAP gross profit                                                                                                                                       44,182                     48,544


    Gross profit margin                                                                                                                                          55.6%                     54.2%

    Non-GAAP gross profit margin                                                                                                                                 55.7%                     54.4%


    Operating income                                                                                                                                            14,142                     10,573

    Share-based compensation expenses                                                                                                                            1,513                      1,465

    Non-GAAP operating income                                                                                                                                   15,655                     12,038


    Operating margin                                                                                                                                             17.8%                     11.8%

    Non-GAAP operating margin                                                                                                                                    19.7%                     13.5%


    Net income                                                                                                                                                  14,065                      9,069

    Share-based compensation expense                                                                                                                             1,513                      1,465

    Non-GAAP net income                                                                                                                                         15,578                     10,534


    Net income margin                                                                                                                                            17.7%                     10.2%

    Non-GAAP net income margin                                                                                                                                   19.6%                     11.8%


    Net income per share-basic                                                                                                                                   0.101                      0.069

    Net income per share-diluted                                                                                                                                 0.101                      0.068

    Non-GAAP net income per share-basic                                                                                                                          0.113                      0.080

    Non-GAAP net income per share-diluted                                                                                                                        0.111                      0.079


    Net income per ADS attributable to China Distance Education Holdings Limited                                                                                 0.406                      0.275
         shareholders-basic (note 1)

    Net income per ADS attributable to China Distance Education Holdings Limited                                                                                 0.403                      0.273
         shareholders-diluted (note 1)

    Non-GAAP net income per ADS attributable to China Distance Education Holdings
         Limited shareholders-basic (note 1)
                                                                                                                                                                 0.451                      0.321

    Non-GAAP net income per ADS attributable to China Distance Education Holdings
         Limited shareholders-diluted (note 1)
                                                                                                                                                                 0.446                      0.317


    Weighted average shares used in calculating basic net income per share                                                                                 138,127,626                131,403,456

    Weighted average shares used in calculating diluted net income per share                                                                               139,748,542                132,853,269

    Weighted average shares used in calculating basic non-GAAP net income per share                                                                        138,127,626                131,403,456

    Weighted average shares used in calculating diluted non-GAAP net income per share                                                                      139,748,542                132,853,269



    Note 1: Each ADS represents
     four ordinary shares

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SOURCE China Distance Education Holdings Limited