China Distance Education Holdings Limited Reports Financial Results for Third Quarter Fiscal Year 2019

BEIJING, Aug. 13, 2019 /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 2019 ended June 30, 2019.

Third Quarter Fiscal 2019 Financial and Operational Highlights

    --  Net revenue increased by 30.2% to $61.7 million from $47.4 million in
        the prior year period.
    --  Total course enrollments were 734,800, an increase of 29.2% from the
        third quarter of fiscal 2018.
    --  Cash receipts from online course registration were $50.4 million, a
        30.7% increase from the third quarter of fiscal 2018.
    --  Gross profit increased by 36.5% to $31.2 million from $22.8 million in
        the prior year period.
    --  Non-GAAP([1]) gross profit increased by 36.3% to $31.2 million from
        $22.9 million in the prior year period.
    --  Gross margin was 50.5%, compared with 48.2% in the prior year period.
        Non-GAAP([1]) gross margin was 50.5%, compared with 48.2% in the prior
        year period.
    --  Operating income increased by 527.2% to $9.9 million from $1.6 million
        in the prior year period.
    --  Non-GAAP([1]) operating income increased by 371.7% to $10.4 million from
        $2.2 million in the prior year period.
    --  Net income increased by 84.1% to $9.4 million from $5.1 million in the
        prior year period.
    --  Non-GAAP([1]) net income increased by 72.9% to $10.0 million from $5.8
        million in the prior year period.
    --  Basic and diluted net income per American Depositary Share ("ADS") were
        $0.282 and $0.281, compared with basic and diluted net income per ADS of
        $0.154 for the third quarter of fiscal 2018. Each ADS represents four
        ordinary shares.
    --  Basic and diluted non-GAAP([1]) net income per ADS were $0.299 and
        $0.296, compared with basic and diluted non-GAAP([1]) net income per ADS
        of $0.174 and $0.173 for the third quarter of fiscal 2018.
    --  Cash flow from operations increased by 41.7% to $17.6 million from $12.4
        million in the third quarter of fiscal 2018.

Mr. Zhengdong Zhu, Chairman and CEO of CDEL, said, "The second half of fiscal year 2019 commenced with a strong third quarter performance, with third quarter revenue and net income growth of 30.2% and 84.1% year-over-year, respectively. Third quarter revenue growth was driven primarily by our industry-leading accounting vertical, a significant increase in revenue from the sale of learning simulation software, and revenue from the legal vertical generated by Beijing Ruida. Total enrollment growth was 29.2% year-over-year in the third quarter, primarily due to significant enrollment growth in accounting and engineering & construction (E&C) continuing education courses. Cash receipts from online course registration grew 30.7% year-over-year in the third quarter, or 39.8% year-over-year on a constant currency basis, due to the continued popularity of our longer duration premium and elite classes."

Mr. Zhu concluded, "Our third quarter results show that our multi-pronged growth strategy is bearing fruit. All three core verticals of accounting, healthcare, and E&C, posted strong year-over-year cash receipt growth in the third quarter, demonstrating the broad appeal of our course offerings across industry verticals. Underpinning the growth of our industry verticals is the comprehensive life-long learning ecosystem we have built and continue to enhance. Our accounting vertical, for example, now encompasses a full complement of services, including professional certification exam preparation and continuing education services; practical accounting training and employment guidance services; accounting and related advisory services to corporate clients; and books and reference materials. We are focused on developing similar ecosystems across our other industry verticals, such as healthcare, E&C, and legal, in an effort to create additional avenues of growth and expand our overall growth opportunities."

Mr. Mark Marostica, Co-Chief Financial Officer of CDEL, added, "We returned to profitability in the third quarter as anticipated, and recorded non-GAAP operating margin of 16.8%, a significant year-over-year improvement due to strong third quarter revenue growth, coupled with the successful implementation of certain expense control measures and leverage of our cost structure."

Mr. Marostica, continued, "With our fourth fiscal quarter well underway, we remain steadfast in continuing to balance growth with a keen focus on profitability and prudent cost control."

Third Quarter Fiscal 2019 Financial Results

Net Revenue. Total net revenue increased by 30.2% to $61.7 million in the third quarter of fiscal 2019 from $47.4 million in the third quarter of fiscal 2018. Net revenue from online education services, books and reference materials, and other sources contributed 70.5%, 15.9% and 13.6%, respectively, of total net revenues for the third quarter of fiscal 2019.

Online education services. Net revenue from online education services increased by 25.6% to $43.5 million in the third quarter of fiscal 2019 from $34.7 million in the third quarter of fiscal 2018, mainly due to revenue growth from the accounting and healthcare verticals. Revenue from the legal vertical generated by Beijing Ruida also contributed to the growth.

Books and reference materials. Net revenue from books and reference materials increased by 84.7% to $9.8 million in the third quarter of fiscal 2019 from $5.3 million in the third quarter of fiscal 2018, mainly due to book sale revenue from the Legal Professional Qualification Examination contributed by Beijing Ruida.

Others. Net revenue from other sources increased by 12.8% to $8.4 million in the third quarter of fiscal 2019 from $7.4 million in the third quarter of fiscal 2018, primarily due to offline training revenue from the Legal Professional Qualification Examination contributed by Beijing Ruida. A significant increase in revenue from the sale of learning simulation software also contributed to the growth. This increase was partially offset by the decrease in revenue from the "Tax School Program" which the Company disposed in the first quarter of fiscal 2019.

Cost of Sales. Cost of sales increased by 24.4% to $30.6 million in the third quarter of fiscal 2019 from $24.6 million in the third quarter of fiscal 2018. Non-GAAP([1] )cost of sales increased by 24.6% to $30.6 million in the third quarter of fiscal 2019 from $24.5 million in the third quarter of fiscal 2018. The increase was mainly due to expenses associated with Beijing Ruida, including amortization expenses of intangibles arising from its acquisition of $1.7 million, cost of books and reference materials, and lecture fees. This increase was partially offset by the decrease in salaries and related expenses, and rental and related expenses.

Gross Profit and Gross Margin. Gross profit was $31.2 million in the third quarter of fiscal 2019, up 36.5% from $22.8 million in the prior year period. Non-GAAP([1]) gross profit was $31.2 million, increasing by 36.3% from $22.9 million in the prior year period. Gross margin was 50.5% in the third quarter of fiscal 2019, compared with 48.2% in the third quarter of fiscal 2018. Non-GAAP([1]) gross margin was 50.5% in the third quarter of fiscal 2019, compared with 48.2% in the third quarter of fiscal 2018.

Operating Expenses. Total operating expenses increased by 24.5% to $22.0 million in the third quarter of fiscal 2019, from $17.7 million in the prior year period. Non-GAAP([1]) total operating expenses increased by 25.8% to $21.5 million in the third quarter of fiscal 2019, from $17.1 million in the prior year period.

Selling expenses. Selling expenses increased by 31.4% to $17.0 million in the third quarter of fiscal 2019 from $13.0 million in the prior year period. Non-GAAP([1]) selling expenses increased by 31.6% to $17.0 million in the third quarter of fiscal 2019 from $12.9 million in the prior year period. The increase was primarily driven by higher advertising and promotional expenses, expenses associated with Beijing Ruida, the increase in rental and related expenses and other miscellaneous selling expenses. This increase was partially offset by the decrease in commission to agents.

General and administrative expenses. General and administrative expenses increased by 5.3% to $4.9 million in the third quarter of fiscal 2019 from $4.7 million in the prior year period. Non-GAAP([1]) general and administrative expenses increased by 7.4% to $4.4 million in the third quarter of fiscal 2019 from $4.1 million in the prior year period. The increase was mainly due to the expenses associated with Beijing Ruida.

Income Tax Expense. Income tax expense increased by 82.6% to $2.5 million in the third quarter of fiscal 2019 from $1.3 million in the prior year period, primarily due to an increase in taxable income.

Net Income. As a result of the foregoing, net income was $9.4 million in the third quarter of fiscal 2019, compared with $5.1 million in the prior year period. Non-GAAP([1]) net income was $10.0 million in the third quarter of fiscal 2019, compared with $5.8 million in the prior year period.

Operating Cash Flow. Net operating cash inflow increased by 41.7% to $17.6 million in the third quarter of fiscal 2019 from $12.4 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 2019. The increase in accrued expenses and other liabilities, income tax payable, and deferred revenue generated from the Company's professional education services segment also contributed to the operating cash inflow. The operating cash inflow was partially offset by the increase in accounts receivable, inventories, prepayments and other current assets, and other non-current assets.

Cash and Cash Equivalents, Restricted Cash and Short-term Investments. Cash and cash equivalents, restricted cash and short-term investments as of June 30, 2019 decreased by 4.0% to $124.9 million from $130.1 million as of March 31, 2019, mainly due to (i) the payment of contingent consideration for the acquisition of 11% equity interest, and purchase consideration for further acquisition of 9% equity interest in Beijing Ruida for a total of $6.6 million, (ii) the repayment of loans of $13.1 million and (iii) the capital expenditure of $1.7 million. The decrease was partially offset by the operating cash inflow generated in the third quarter of fiscal 2019 and the proceeds from disposal of an investment, Beijing Yousian Technology Co., Ltd, of $3.6 million.

First Nine Months of Fiscal 2019 Financial Results

Net Revenue. Total net revenue increased by 26.6% to $143.1 million in the first nine months of fiscal 2019 from $113.0 million in the first nine months of fiscal 2018. Net revenue from online education services, books and reference materials, and other sources contributed 67.4%, 15.1% and 17.5%, respectively, of total net revenues for the first nine months of fiscal 2019.

Online education services. Net revenue from online education services increased by 19.8% to $96.5 million in the first nine months of fiscal 2019 from $80.5 million in the first nine months of fiscal 2018.

Books and reference materials. Net revenue from books and reference materials increased by 138.0% to $21.6 million in the first nine months of fiscal 2019 from $9.1 million in the first nine months of fiscal 2018.

Others. Net revenue from other sources increased by 6.7% to $25.0 million in the first nine months of fiscal 2019 from $23.5 million in the first nine months of fiscal 2018.

Cost of Sales. Cost of sales increased by 28.9% to $79.5 million in the first nine months of fiscal 2019 from $61.6 million in the first nine months of fiscal 2018. Non-GAAP([1]) cost of sales increased by 29.1% to $79.4 million in the first nine months of fiscal 2019 from $61.5 million in the first nine months of fiscal 2018.

Gross Profit and Gross Margin. Gross profit was $63.7 million in the first nine months of fiscal 2019, up 23.9% from $51.4 million in the prior year period. Non-GAAP([1]) gross profit was $63.7 million, increasing by 23.6% from $51.5 million in the prior year period. Gross margin was 44.5% in the first nine months of fiscal 2019, compared with 45.5% in the first nine months of fiscal 2018. Non-GAAP([1]) gross margin was 44.5% in the first nine months of fiscal 2019, compared with 45.6% in the first nine months of fiscal 2018.

Operating Expenses. Total operating expenses increased by 37.7% to $63.2 million in the first nine months of fiscal 2019 from $45.9 million in the prior year period. Non-GAAP([1]) total operating expenses increased by 39.2% to $61.7 million in the first nine months of fiscal 2019 from $44.3 million in the prior year period.

Selling expenses. Selling expenses increased by 49.0% to $45.3 million in the first nine months of fiscal 2019 from $30.4 million in the prior year period. Non-GAAP([1]) selling expenses increased by 49.2% to $45.3 million in the first nine months of fiscal 2019 from $30.4 million in the prior year period.

General and administrative expenses. General and administrative expenses increased by 15.5% to $17.9 million in the first nine months of fiscal 2019 from $15.5 million in the prior year period. Non-GAAP([1]) general and administrative expenses increased by 17.3% to $16.4 million in the first nine months of fiscal 2019 from $14.0 million in the prior year period.

Change in fair value of contingent consideration payable. Change in fair value of contingent consideration payable was attributable to the increase or decrease in fair value of contingent consideration with respect to the Company's equity interest investment in Beijing Ruida.

Gain from Deconsolidation of a Subsidiary. Gain from deconsolidation of a subsidiary of $6.9 million related to the gain on the disposal of 60% equity interest, and fair value change of remaining 40% equity interest, in Champion Tax Advisory or "Tax School Program."

Income Tax Expense. Income tax expense increased by 253.5% to $2.1 million in the first nine months of fiscal 2019 from $0.6 million in the prior year period.

Net Income. As a result of the foregoing, net income was $7.5 million in the first nine months of fiscal 2019, compared with net income of $2.0 million in the prior year period. Non-GAAP([1]) net income was $9.0 million in the first nine months of fiscal 2019, compared with non-GAAP([1]) net income of $3.6 million in the prior year period.

Operating Cash Flow. Net operating cash inflow increased by 76.5% to $61.9 million in the first nine months of fiscal 2019 from $35.1 million in the prior year period.

Outlook

For the fourth quarter of fiscal 2019, the Company expects to generate total net revenue in the range of $63.3 million to $66.5 million, representing year-over-year growth of approximately 18% to 24%.

For fiscal year 2019, the Company expects to generate total net revenues in the range of $206.4 million to $209.6 million, representing year-over-year growth of approximately 23.8% to 25.8%. The Company's prior fiscal 2019 full-year total net revenue guidance range was $210.0 million to $218.3 million.

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 Wednesday, August 14, 2019 (8:00 p.m. Beijing Time on Wednesday, August 14, 2019) to discuss financial results and answer questions from investors and analysts. Listeners may access the call by dialing:

US Toll Free: +1-866-519-4004
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 21, 2019 by dialing:

US Toll Free: +1-855-452-5696
International: +61-2-8199-0299
Mainland China: 400-632-2162
Hong Kong: 800-963-117
United Kingdom: 0808-234-0072
Replay Passcode: 9789216

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


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

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, legal and other industries. The Company also offers online test preparation courses for self-taught learners pursuing higher education diplomas or degrees, practical accounting training courses for college students and working professionals, as well as third-party developed online courses. In addition, the Company provides business services to corporate clients, including but not limited to tax advisory 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 2019 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 the promotion of the Company's lifelong learning ecosystem, as well as cost control) 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: our goals and growth strategies; future prospects and market acceptance of our courses and other products and services; our future business development and results of operations; projected revenues, profits, earnings and other estimated financial information; projected enrollment numbers; our plans to expand and enhance our 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 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 items 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:

In China:

China Distance Education Holdings Limited
Jiao Jiao
Tel: +86-10-8231-9999 ext. 1826
Email: IR@cdeledu.com

The Piacente Group, Inc.
Xi Zhang
Tel: +86-10-6508-0677
E-mail: dl@tpg-ir.com

In the United States:

The Piacente Group, Inc.
Brandi Piacente
Tel: +1 212-481-2050
Email: dl@tpg-ir.com



                                                        
            
                China Distance Education Holdings Limited


                                                      
           
                Unaudited Condensed Consolidated Balance Sheets


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




                                                                                              September 30
                ,
                                                                                                   20
                18                                   June 30, 2019


                                                                                                (Derived from Audited)                                  (Unaudited)



     
     Assets:



     
     Current assets:


                                                  
           Cash and cash equivalents                                                             30,826                 61,918


                                                  
           Restricted cash                                                                       51,736                 39,355


                                                  
           Short term investments                                                                17,073                 23,578


                                                          Accounts receivable, net of allowance for doubtful accounts of
                                                           US$1,417 and US$1,342 as of June 30, 2019 and September 30, 2018,
                                                           respectively                                                                                                7,067

                                                                                                                                         7,280


                                                  
           Inventories                                                                            2,782                  4,416


                                                  
           Prepayment and other current assets                                                   17,054                 25,013


                                                  
           Deferred cost                                                                          1,125                  1,608


                                                  
           
                   Total current assets                                                 127,876                162,955





     
     Non-current assets:


                                                  
           Property, plant and equipment, net                                                    27,972                 39,016


                                                  
           Goodwill                                                                              79,516                 79,463


                                                  
           Long term investments                                                                 33,837                 32,822


                                                  
           Other intangible assets, net                                                          39,500                 33,471


                                                  
           Deposit for purchase of non-current assets                                             8,126                  9,812


                                                  
           Deferred tax assets - non-current portion                                              5,711                  4,583


                                                  
           Other non-current assets                                                               6,387                 11,420


                                                  
           
                   Total non-current assets                                             201,049                210,587




                                                  
           
                   Total assets                                                         328,925                373,542






     
     Liabilities and equity:



     
     Current liabilities:


                                                  
           Bank borrowings                                                                       50,975                 44,458


                                                          Accrued expenses and other liabilities (including accrued expenses and
                                                           other liabilities of the consolidated VIE without recourse to China
                                                           Distance Education Holdings Limited of US$33,327 and US$34,993 as of
                                                           June 30, 2019 and September 30, 2018, respectively)                                  42,141                 36,717


                                                          Income tax payable (including income tax payable of the consolidated
                                                           VIE without recourse to China Distance Education Holdings Limited of
                                                           US$6,941 and US$$4,847 as of June 30, 2019 and September 30, 2018,
                                                           respectively)                                                                         9,293                  8,621


                                                          Deferred revenue -current portion (including deferred revenue of the
                                                           consolidated VIE without recourse to China Distance Education
                                                           Holdings Limited of US$105,294 and US$77,299 as of June 30, 2019 and
                                                           September 30, 2018, respectively)                                                    78,194                106,099


                                                          Refundable fees -current portion (including refundable fees of the
                                                           consolidated VIE without recourse to China Distance Education
                                                           Holdings Limited of US$414 and US$13,837 as of June 30, 2019 and
                                                           September 30, 2018, respectively)                                                    13,837                    414


                                                  
           
                   Total current liabilities                                            194,440                196,309





     
     Non-c
                urrent liabilities
       :


                                                          Deferred revenue - non-current portion (including deferred revenue
                                                           of the consolidated VIE without recourse to China Distance Education
                                                           Holdings Limited of US$34,286 and nil as of June 30, 2019 and
                                                           September 30, 2018, respectively)                                                                          34,286


                                                          Refundable fees - non-current portion (including refundable fees of
                                                           the consolidated VIE without recourse to China Distance Education
                                                           Holdings Limited of US$2,690 and nil as of June 30, 2019 and
                                                           September 30, 2018, respectively)                                                                           2,690


                                                  
           Deferred tax liabilities- non-current portion                                         12,693                 11,287


                                                  
           Long-term bank borrowing                                                              12,027                    329



                                                                       Total 
                non-
                current liabilities                  24,720                 48,592






                                                  
           
                   Total liabilities                                                    219,160                244,901








     
     Equity:


                                                          Ordinary shares (par value of US$0.0001 per share; 500,000,000 shares
                                                           authorized; 134,212,357 and 133,275,521 shares issued and outstanding
                                                           at June 30, 2019 and September 30, 2018, respectively)                                   13                     13


                                                  
           Additional paid-in capital                                                            21,557                 23,100


                                                  
           Accumulated other comprehensive loss                                                 (7,013)               (6,223)


                                                  
           Retained Earnings                                                                     29,717                 46,899



                                                                          Total China Distance Education Holdings Limited shareholder's equity  44,274                 63,789


                                                  
           Noncontrolling interest                                                               65,491                 64,852



                                                  
           
                   Total equity                                                         109,765                128,641



                                                  
           
                   Total liabilities and equity                                         328,925                373,542


                                                                                                                                     
              
                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
                                                                                                                                                                                                                                                  3
              0
               ,


                                                                                                                                                                                                                                 2018                             2019





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


                                                                                                                                                      
              Online education services                                       34,658                           43,529


                                                                                                                                                      
              Books and reference materials                                    5,321                            9,826


                                                                                                                                                      
              Others                                                           7,437                            8,392


                                                                                                                                                      
              Sale of learning simulation software                             1,703                            2,665


                                                                                                                                                      
              -  Business start-up training services                             809                              886


                                                                                                                                                      
              -  Others                                                        4,925                            4,841


                                                                                                                                                      
              
                   Total net revenues                              47,416                           61,747





     
                Cost of sales


                                                                                                                                                      
              Cost of services and others                                   (20,250)                        (20,836)


                                                                                                                                                      
              Cost of tangible goods sold                                    (4,333)                         (9,735)



                                                                                                                                                      
              
                   Total cost of sales                           (24,583)                        (30,571)





     
                Gross profit                                                                                                                                                                                                22,833                           31,176





     
                Operating expenses


                                                                                                                                                      
              Selling expenses                                              (12,967)                        (17,043)


                                                                                                                                                      
              General and administrative expenses                            (4,698)                         (4,947)


                                                                                                                                                      
              
                   Total operating expenses                      (17,665)                        (21,990)



     Change in fair value of contingent consideration payable                                                                                                                                                                (4,420)



     Other operating income                                                                                                                                                                                                      823                              665

                                                                                                                                                                                                                                                                  ---




     
                Operating
                 income                                                                                                                                                                                1,571                            9,851





     Interest income                                                                                                                                                                                                             682                              526



     Interest expense                                                                                                                                                                                                          (906)                           (703)



     Gain from disposal of an investment                                                                                                                                                                                                       318



     Exchange gain                                                                                                                                                                                                             4,511                            1,996





     
                Income 
                before income taxes                                                                                                                                                                      5,858                           11,988



     Income tax expense                                                                                                                                                                                                      (1,347)                         (2,460)



     Loss from equity method investments                                                                                                                                                                                       (107)                           (656)

                                                                                                                                                                                                                                                                  ---




     
                Net 
                income                                                                                                                                                                                      4,404                            8,872



     
                Net loss attributable to noncontrolling interest                                                                                                                                                               727                              575

                                                                                                                                                                                                                                                                  ---


     
                Net 
                income 
                attributable to 
                China Distance Education Holdings Limited                                                                                                  5,131                            9,447

                                                                                                                                                                                                                                                                  ===




     
                Net income 
                per share
                :



     
                Net income 
                attributable to 
                China Distance Education Holdings Limited
                 
          shareholders


                                                                                                                                                      
              Basic                                                            0.039                            0.070


                                                                                                                                                      
              Diluted                                                          0.038                            0.070





     
                Net income 
                per ADS
                :



     
                Net income 
                attributable to 
                China Distance Education Holdings Limited
                 
          shareholders


                                                                                                                                                      
              Basic                                                            0.154                            0.282


                                                                                                                                                      
              Diluted                                                          0.154                            0.281





     
                Weighted average shares used in calculating net
                 income
                 per share:


                                                                                                                                                      
              Basic                                                      132,522,733                      133,037,866


                                                                                                                                                      
              Diluted                                                    133,392,776                      134,342,150

                                                                                                                                                                                                                                                                    ---


                                                                                                                                     
              
                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 
          3
               0,


                                                                                                                                                                                                                                2018                         2019





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


                                                                                                                                                      
              Online education services                                      80,487                       96,450


                                                                                                                                                      
              Books and reference materials                                   9,088                       21,632


                                                                                                                                                      
              Others                                                         23,467                       25,049


                                                                                                                                                      
              -  Sale of learning simulation software                         8,602                        9,630


                                                                                                                                                      
              -  Business start-up training services                          2,858                        2,258


                                                                                                                                                      
              -  Others                                                      12,007                       13,161


                                                                                                                                                      
              
                   Total net revenues                            113,042                      143,131





     
                Cost of sales


                                                                                                                                                      
              Cost of services and others                                  (54,138)                    (62,461)


                                                                                                                                                      
              Cost of tangible goods sold                                   (7,505)                    (16,997)



                                                                                                                                                      
              
                   Total cost of sales                          (61,643)                    (79,458)





     
                Gross profit                                                                                                                                                                                               51,399                       63,673





     
                Operating expenses


                                                                                                                                                      
              Selling expenses                                             (30,430)                    (45,327)


                                                                                                                                                      
              General and administrative expenses                          (15,459)                    (17,855)


                                                                                                                                                      
              
                Total operating expenses                        (45,889)                    (63,182)



     Change in fair value of contingent consideration payable                                                                                                                                                               (3,867)                         695



     Other operating income                                                                                                                                                                                                   2,125                        2,434

                                                                                                                                                                                                                                                             ---




     
                Operating
                 income                                                                                                                                                                               3,768                        3,620





     Interest income                                                                                                                                                                                                          1,805                        1,714



     Interest expense                                                                                                                                                                                                       (2,522)                     (2,294)



     Gain from disposal of an investment                                                                                                                                                                                                      318



     Gain from deconsolidation of a subsidiary                                                                                                                                                                                              6,869



     Exchange loss                                                                                                                                                                                                            (496)                       (104)





     
                Income 
                before income taxes                                                                                                                                                                     2,555                       10,123



     Income tax expense                                                                                                                                                                                                       (588)                     (2,077)



     Loss from equity method investments                                                                                                                                                                                      (151)                     (1,019)

                                                                                                                                                                                                                                                             ---




     
                Net 
                income                                                                                                                                                                                     1,816                        7,027



     
                Net 
                loss
                 attributable to noncontrolling interest                                                                                                                                    144                          457

                                                                                                                                                                                                                                                             ---


     
                Net 
                income 
                attributable to 
                China Distance Education Holdings Limited                                                                                                 1,960                        7,484

                                                                                                                                                                                                                                                             ===




     
                Net income 
                per share
                :



     
                Net income 
                attributable to 
                China Distance Education Holdings Limited
                 
          shareholders


                                                                                                                                                      
              Basic                                                           0.015                        0.056


                                                                                                                                                      
              Diluted                                                         0.015                        0.056





     
                Net income 
                per ADS
                :



     
                Net income 
                attributable to 
                China Distance Education Holdings Limited
                 
          shareholders


                                                                                                                                                      
              Basic                                                           0.059                        0.224


                                                                                                                                                      
              Diluted                                                         0.059                        0.223





     
                Weighted average shares used in calculating net
                 income
                 per share:


                                                                                                                                                      
              Basic                                                     132,197,650                  132,946,829


                                                                                                                                                      
              Diluted                                                   133,006,241                  134,072,148

                                                                                                                                                                                                                                                               ---


             
              
                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,


                                                                                2018                             2019


                                                 
              
                (Unaudited)                
      
     (Unaudited)





       Cost of sales                                                         24,583                           30,571


        Share-based compensation expense
         in cost of sales                                                         45



       Non-GAAP cost of sales                                                24,538                           30,571





       Selling expenses                                                      12,967                           17,043


        Share-based compensation expense
         in selling expenses                                                      20


        Non-GAAP selling expenses                                             12,947                           17,043




        General and administrative
         expenses                                                              4,698                            4,947


        Share-based compensation expense
         in general and administrative
         expenses                                                                559                              503


        Non-GAAP general and
         administrative expenses                                               4,139                            4,444





       Gross profit                                                          22,833                           31,176


        Share-based compensation
         expenses                                                                 45



       Non-GAAP gross profit                                                 22,878                           31,176





       Gross profit margin                                                    48.2%                           50.5%


        Non-GAAP gross profit margin                                           48.2%                           50.5%





       Operating income                                                       1,571                            9,851


        Share-based compensation
         expenses                                                                624                              503


        Non-GAAP operating income                                              2,195                           10,354





       Operating margin                                                        3.3%                           16.0%


        Non-GAAP operating margin                                               4.6%                           16.8%





       Net income                                                             5,131                            9,447


        Share-based compensation expense                                         624                              503



       Non-GAAP net income                                                    5,755                            9,950





       Net income margin                                                      10.8%                           15.3%


        Non-GAAP net income margin                                             12.1%                           16.1%




        Net income per share-basic                                             0.039                            0.070


        Net income per share-diluted                                           0.038                            0.070


        Non-GAAP net income per share-
         basic                                                                 0.043                            0.075


        Non-GAAP net income per share-
         diluted                                                               0.043                            0.074




        Net income per ADS attributable
         to China Distance Education
         Holdings Limited shareholders-
         basic (note 1)                                                        0.154                            0.282


        Net income  per ADS attributable
         to China Distance Education
         Holdings Limited shareholders-
         diluted (note 1)                                                      0.154                            0.281


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

                                                                               0.174                            0.299


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

                                                                               0.173                            0.296




        Weighted average shares used in
         calculating basic net income per
         share                                                           132,522,733                      133,037,866


        Weighted average shares used in
         calculating diluted net income
         per share                                                       133,392,776                      134,342,150


        Weighted average shares used in
         calculating basic non-GAAP net
         income per share                                                132,522,733                      133,037,866


        Weighted average shares used in
         calculating diluted non-GAAP
         net income per share                                            133,392,776                      134,342,150

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 
                3
                                                                                                0,


                                                                                2018                               2019


                                                 
              
                (Unaudited)                
        
     (Unaudited)





       Cost of sales                                                         61,643                             79,458


        Share-based compensation expense
         in cost of sales                                                        116                                 23



       Non-GAAP cost of sales                                                61,527                             79,435





       Selling expenses                                                      30,430                             45,327


        Share-based compensation expense
         in selling expenses                                                      60                                 10


        Non-GAAP selling expenses                                             30,370                             45,317




        General and administrative
         expenses                                                             15,459                             17,855


        Share-based compensation expense
         in general and administrative
         expenses                                                              1,505                              1,482


        Non-GAAP general and
         administrative expenses                                              13,954                             16,373





       Gross profit                                                          51,399                             63,673


        Share-based compensation
         expenses                                                                116                                 23



       Non-GAAP gross profit                                                 51,515                             63,696





       Gross profit margin                                                    45.5%                             44.5%


        Non-GAAP gross profit margin                                           45.6%                             44.5%





       Operating income                                                       3,768                              3,620


        Share-based compensation
         expenses                                                              1,681                              1,515


        Non-GAAP operating income                                              5,449                              5,135





       Operating margin                                                        3.3%                              2.5%


        Non-GAAP operating margin                                               4.8%                              3.6%





       Net income                                                             1,960                              7,484


        Share-based compensation expense                                       1,681                              1,515



       Non-GAAP net income                                                    3,641                              8,999





       Net income margin                                                       1.7%                              5.2%


        Non-GAAP net income margin                                              3.2%                              6.3%




        Net income per share-basic                                             0.015                              0.056


        Net income per share-diluted                                           0.015                              0.056


        Non-GAAP net income per share-
         basic                                                                 0.028                              0.068


        Non-GAAP net income per share-
         diluted                                                               0.027                              0.067




        Net income per ADS attributable
         to China Distance Education
         Holdings Limited shareholders-
         basic (note 1)                                                        0.059                              0.224


        Net income  per ADS attributable
         to China Distance Education
         Holdings Limited shareholders-
         diluted (note 1)                                                      0.059                              0.223


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

                                                                               0.110                              0.271


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

                                                                               0.109                              0.269




        Weighted average shares used in
         calculating basic net income per
         share                                                           132,197,650                        132,946,829


        Weighted average shares used in
         calculating diluted net income
         per share                                                       133,006,241                        134,072,148


        Weighted average shares used in
         calculating basic non-GAAP net
         income per share                                                132,197,650                        132,946,829


        Weighted average shares used in
         calculating diluted non-GAAP
         net income per share                                            133,006,241                        134,072,148

Note 1: Each ADS represents four ordinary shares

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SOURCE China Distance Education Holdings Ltd.