China Distance Education Holdings Limited Reports Financial Results for Fourth Quarter and Fiscal Year 2020

- Fourth Quarter 2020 Net Revenue was $65.5 Million, Exceeding Guidance -
- Fourth Quarter 2020 Gross Profit was $36.7 Million, with Gross Margin of 56.0% -
- Fourth Quarter 2020 Operating Income was $12.9 Million, with Operating Margin of 19.7% -
- Fourth Quarter 2020 Net Income Attributable to CDEL was $4.9 Million, with Net Income Margin of 7.4% -

BEIJING, Dec. 16, 2020 /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 fourth quarter and fiscal year 2020 ended September 30, 2020.

Fourth Quarter Fiscal 2020 Financial and Operational Highlights

    --  Net revenue decreased by 4.6% to $65.5 million from $68.7 million in the
        prior year period.
    --  Total course enrollments were 931,500, a decrease of 17.7% from the
        fourth quarter of fiscal 2019.
    --  Cash receipts from online course registration were $38.2 million, a
        12.8% decrease from the fourth quarter of fiscal 2019.
    --  Gross profit decreased by 15.4% to $36.7 million from $43.4 million in
        the prior year period.
    --  Non-GAAP([1]) gross profit decreased by 15.3% to $36.8 million from
        $43.4 million in the prior year period.
    --  Gross margin was 56.0%, compared with 63.2% in the prior year period.
        Non-GAAP([1]) gross margin was 56.1%, compared with 63.2% in the prior
        year period.
    --  Operating income decreased by 32.9% to $12.9 million from $19.2 million
        in the prior year period.
    --  Non-GAAP([1]) operating income decreased by 36.0% to $13.6 million from
        $21.2 million in the prior year period.
    --  Net income attributable to CDEL was $4.9 million, compared with net
        income attributable to CDEL of $13.8 million in the prior year period.
    --  Non-GAAP([1]) net income attributable to CDEL was $6.2 million, compared
        with non-GAAP([1] )net income attributable to CDEL of $18.6 million in
        the prior year period.
    --  Basic and diluted net income per American Depositary Share ("ADS")
        attributable to CDEL were $0.144 and $0.143, respectively, compared with
        both basic and diluted net income per ADS attributable to CDEL of
        $0.411, for the fourth quarter of fiscal 2019. Each ADS represents four
        ordinary shares.
    --  Basic and diluted non-GAAP([1]) net income per ADS attributable to CDEL
        were $0.185 and $0.184, respectively, compared with basic and diluted
        non-GAAP([1]) net income per ADS attributable to CDEL of $0.558 and
        $0.554, respectively, for the fourth quarter of fiscal 2019.
    --  Cash outflow from operations was $1.7 million, compared with cash inflow
        from operations of $20.0 million in the fourth quarter of fiscal 2019.

Fiscal Year 2020 Financial and Operational Highlights

    --  Net revenue decreased by 1.1% to $209.6 million from $211.8 million in
        fiscal year 2019.
    --  Total course enrollments were 4,255,000, an increase of 12.2% from
        fiscal year 2019.
    --  Cash receipts from online course registration were $179.0 million, a
        15.4% decrease from fiscal year 2019.
    --  Gross profit increased by 0.8% to $108.0 million from $107.1 million in
        fiscal year 2019.
    --  Non-GAAP([1]) gross profit increased by 0.9% to $108.1 million from
        $107.1 million in fiscal year 2019.
    --  Gross margin was 51.5%, compared with 50.6% in fiscal year 2019.
        Non-GAAP([1]) gross margin was 51.6%, compared with 50.6% in fiscal year
        2019.
    --  Operating income decreased by 17.8% to $18.8 million from $22.8 million
        in fiscal year 2019.
    --  Non-GAAP([1]) operating income decreased by 18.8% to $21.4 million from
        $26.4 million in fiscal year 2019.
    --  Net income attributable to CDEL decreased by 50.9% to $10.4 million from
        $21.3 million in fiscal year 2019.
    --  Non-GAAP([1]) net income attributable to CDEL decreased by 50.3% to
        $13.7 million from $27.6 million in fiscal year 2019.
    --  Both basic and diluted net income per ADS attributable to CDEL were
        $0.309, compared with both basic and diluted net income per ADS
        attributable to CDEL of $0.635 for fiscal year 2019.
    --  Basic and diluted non-GAAP([1]) net income per ADS attributable to CDEL
        were $0.410 and $0.406, respectively, compared with basic and diluted
        non-GAAP([1]) net income per ADS attributable to CDEL of $0.830 and
        $0.823, respectively, for the fiscal year 2019.
    --  Cash flow from operations decreased by 51.1% to $40.0 million from $81.8
        million in the fiscal year 2019.

Mr. Zhengdong Zhu, Chairman and CEO of CDEL, said, "We concluded fiscal 2020 with fourth-quarter revenue of $65.5 million, exceeding the upper end of our guidance range. This quarter's revenue outperformance was primarily driven by a less-severe than previously expected impact from the pandemic-related postponement or suspension of certain professional certification examinations. The appreciation of the Renminbi against U.S. dollar also contributed to the fourth quarter revenue performance. However, our cash receipts from online course registration have declined year-over-year for the past three consecutive quarters due to the COVID-19 pandemic."

"We believe in the long-term growth prospects of China's online education industry and are well prepared to serve a growing student demographic. We remain dedicated to consistently delivering knowledge to an even broader student constituency and extending convenience, flexibility and engagement to their learning experiences. Meanwhile, we will continue to integrate cutting-edge technologies into our educational solutions, and diversify our course offerings to fulfill the needs of students at different stages of their study and career development. With our 20-year track record and an unwavering commitment to education, we have proven to be the premier partner of choice for students in their journey of lifelong learning," Mr. Zhu concluded.

Mr. Mark Marostica, Co-Chief Financial Officer of CDEL, added, "Despite our efforts to control costs amid revenue weakness stemming from the COVID-19 pandemic, our fourth quarter non-GAAP operating profit declined year-over-year. With fiscal 2021 well underway, we remain committed to our balanced growth strategy, and deeply focused on improving both revenue growth and profitability."

Fourth Quarter Fiscal 2020 Financial Results

Net Revenue. Total net revenue decreased by 4.6% to $65.5 million in the fourth quarter of fiscal 2020 from $68.7 million in the fourth quarter of fiscal 2019. Net revenue from online education services, books and reference materials, and other sources contributed 78.4%, 9.6% and 12.0%, respectively, of total net revenues for the fourth quarter of fiscal 2020.

Online education services. Net revenue from online education services increased by 3.9% to $51.4 million in the fourth quarter of fiscal 2020 from $49.5 million in the fourth quarter of fiscal 2019, mainly due to the revenue growth from the accounting vertical.

Books and reference materials. Net revenue from books and reference materials increased by 9.9% to $6.3 million in the fourth quarter of fiscal 2020 from $5.7 million in the fourth quarter of fiscal 2019, primarily attributable to the publication of certain Legal Professional Qualification Examination books in the fourth quarter of fiscal 2020, which were previously expected to be published in the third quarter of fiscal 2020.

Others. Net revenue from other sources decreased by 41.9% to $7.8 million in the fourth quarter of fiscal 2020 from $13.5 million in the fourth quarter of fiscal 2019, primarily due to the significant decrease in revenue from the sale of college-related learning simulation software, and the significant decrease in the provision of offline training courses due to COVID-19.

Cost of Sales. Cost of sales increased by 14.0% to $28.8 million in the fourth quarter of fiscal 2020, from $25.3 million in the fourth quarter of fiscal 2019. Non-GAAP([1] )cost of sales increased by 13.8% to $28.8 million in the fourth quarter of fiscal 2020, from $25.3 million in the fourth quarter of fiscal 2019. The increase in cost of sales was mainly due to the increase in cost of books and reference materials, and salaries. This increase was partially offset by the decrease in rental and related expenses, and lecture fees.

Gross Profit and Gross Margin. Gross profit was $36.7 million in the fourth quarter of fiscal 2020, a decrease of 15.4% from $43.4 million in the prior year period. Non-GAAP([1] )gross profit was $36.8 million, decreasing by 15.3% from $43.4 million in the prior year period. Gross margin was 56.0% in the fourth quarter of fiscal 2020, compared with 63.2% in the fourth quarter of fiscal 2019. Non-GAAP([1] )gross margin was 56.1% in the fourth quarter of fiscal 2020, compared with 63.2% in the fourth quarter of fiscal 2019.

Operating Expenses. Total operating expenses increased by 5.3% to $26.0 million in the fourth quarter of fiscal 2020, from $24.7 million in the prior year period. Non-GAAP([1]) total operating expenses increased by 11.8% to $25.4 million in the fourth quarter of fiscal 2020, from $22.7 million in the prior year period.

Selling expenses. Selling expenses increased by 8.9% to $17.6 million in the fourth quarter of fiscal 2020 from $16.1 million in the prior year period. Non-GAAP([1]) selling expenses increased by 8.8% to $17.6 million in the fourth quarter of fiscal 2020, from $16.1 million in the prior year period. The increase was primarily driven by higher advertising and promotional expenses, and the increase in commission to agents. This increase was partially offset by the decrease in rental and related expenses.

General and administrative expenses. General and administrative expenses increased by 19.8% to $8.5 million in the fourth quarter of fiscal 2020 from $7.1 million in the prior year period. Non-GAAP([1]) general and administrative expenses increased by 19.2% to $7.8 million in the fourth quarter of fiscal 2020, from $6.6 million in the prior year period. The increase was mainly due to the professional fees associated with the Company's going private transaction. This increase was partially offset by the significant decrease in provision for doubtful debts, compared with the prior year period. In the prior year period, significant provision for doubtful debts was made mainly associated with the Company's investee company, Hangzhou Wanting Technology Co., Ltd., and the sale of learning simulation software.

Impairment loss from long-term investments. Impairment loss from long-term investments in the fourth quarter of fiscal 2020 was $0.9 million, compared with $6.9 million in the prior year period, due to impairment of the value of the investee company, Beijing Xinrui Education Technology Co., Ltd.

Income Tax Expenses. Income tax expense decreased by 30.5% to $4.2 million in the fourth quarter of fiscal 2020 from $6.0 million in the prior year period, primarily due to the decrease in taxable income in the fourth quarter of fiscal 2020.

Net Income Attributable to CDEL. As a result of the foregoing, net income attributable to CDEL was $4.9 million in the fourth quarter of fiscal 2020, compared with net income attributable to CDEL of $13.8 million in the prior year period. Non-GAAP([1]) net income attributable to CDEL was $6.2 million in the fourth quarter of fiscal 2020, compared with non-GAAP([1]) net income attributable to CDEL of $18.6 million in the prior year period.

Operating Cash Flow. Net operating cash outflow was $1.7 million in the fourth quarter of fiscal 2020, compared with net operating cash inflow of $20.0 million in the prior year period. The operating cash outflow was mainly attributable to the decrease in deferred revenue, and partially due to the decrease in cash receipts from online course registration, lease liability, and the decrease/increase in amount due to/from related parties. The operating cash outflow was partially offset by net income before non-cash items generated in the fourth quarter of fiscal 2020, the decrease in inventories, and the increase in accrued expenses and other liabilities, and income tax payable.

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 September 30, 2020 increased by 0.9% to $134.9 million from $133.7 million as of June 30, 2020, mainly due to the appreciation of the Renminbi against the U.S. dollar. The increase was partially offset by (i) the operating cash flow used in the fourth quarter of fiscal 2020, (ii) the capital expenditure of $1.9 million, (iii) the repayment of an onshore loan of $3.3 million, and (iv) the dividend distribution by an affiliated entity to its noncontrolling interests' shareholders of $1.7 million.

Fiscal Year 2020 Financial Results

Net Revenue. Total net revenue decreased by 1.1% to $209.6 million in fiscal year 2020 from $211.8 million in fiscal year 2019. Net revenue from online education services, books and reference materials, and other sources contributed 76.0%, 10.6% and 13.4%, respectively, of total net revenues for fiscal year 2020.

Online education services. Net revenue from online education services increased by 9.2% to $159.3 million in fiscal year 2020 from $145.9 million in fiscal year 2019.

Books and reference materials. Net revenue from books and reference materials decreased by 19.4% to $22.1 million in fiscal year 2020 from $27.4 million in fiscal year 2019.

Others. Net revenue from other sources decreased by 26.9% to $28.2 million in fiscal year 2020 from $38.5 million in fiscal year 2019.

Cost of Sales. Cost of sales decreased by 3.0% to $101.6 million in fiscal year 2020 from $104.7 million in fiscal year 2019. Non-GAAP([1] )cost of sales decreased by 3.1% to $101.5 million in fiscal year 2020, from $104.7 million in fiscal year 2019.

Gross Profit and Gross Margin. Gross profit was $108.0 million in fiscal year 2020, up 0.8% from $107.1 million in fiscal year 2019. Non-GAAP([1] )gross profit was $108.1 million, increasing by 0.9% from $107.1 million in fiscal year 2019. Gross margin was 51.5% in fiscal year 2020, compared with 50.6% in fiscal year 2019. Non-GAAP([1] )gross margin was 51.6% in fiscal year 2020, compared with 50.6% in fiscal year 2019.

Operating Expenses. Total operating expenses increased by 8.5% to $95.3 million in fiscal year 2020, from $87.9 million in fiscal year 2019. Non-GAAP([1]) total operating expenses increased by 10.0% to $92.8 million in fiscal year 2020, from $84.4 million in fiscal year 2019.

Selling expenses. Selling expenses increased by 13.6% to $69.8 million in fiscal year 2020 from $61.5 million in fiscal year 2019. Non-GAAP([1]) selling expenses increased by 13.6% to $69.8 million in fiscal year 2020, from $61.5 million in fiscal year 2019.

General and administrative expenses. General and administrative expenses increased by 2.2% to $25.5 million in fiscal year 2020 from $24.9 million in fiscal year 2019. Non-GAAP([1]) general and administrative expenses increased by 0.5% to $23.1 million in fiscal year 2020, from $22.9 million in fiscal year 2019.

Impairment loss from long-term investments. Impairment loss from long-term investments in fiscal 2020 was $0.9 million, compared with $6.9 million in fiscal year 2019, due to impairment of the value of the investee company, Beijing Xinrui Education Technology Co., Ltd.

Income Tax Expenses. Income tax expense was $5.5 million in fiscal year 2020, compared with income tax expense of $8.1 million in fiscal year 2019.

Net Income Attributable to CDEL. As a result of the foregoing, net income attributable to CDEL was $10.4 million in fiscal year 2020, compared with net income attributable to CDEL of $21.3 million in fiscal year 2019. Non-GAAP([1]) net income attributable to CDEL was $13.7 million in fiscal year 2020, compared with non-GAAP([1]) net income attributable to CDEL of $27.6 million in fiscal year 2019.

Operating Cash Flow. Net operating cash inflow decreased by 51.1% to $40.0 million in fiscal year 2020 from $81.8 million in fiscal year 2019.

China Distance Education Holdings Limited Enters into Definitive Merger Agreement for Going Private Transaction

On December 1, 2020, the Company announced that it had entered into a definitive Agreement and Plan of Merger (the "Merger Agreement") with Champion Distance Education Investments Limited ("Parent") and China Distance Learning Investments Limited ("Merger Sub"), a wholly owned subsidiary of the Parent, pursuant to which, subject to the terms and conditions thereof, Merger Sub will merge with and into the Company, with the Company continuing as the surviving entity and becoming a wholly-owned subsidiary of Parent (the "Merger"), in a transaction in which the Company will be acquired by a group of certain of the Company's existing shareholders (including Mr. Zhu, Ms. Baohong Yin, co-founder of the Company, deputy chairman of the Board and the spouse of Mr. Zhu, and their affiliated entity) and certain other existing shareholders of the Company and equity investors. Upon the effectiveness of the Merger, all outstanding ordinary shares of the Company (each, an "Ordinary Share"), including Ordinary Shares represented by American depositary shares, each representing four Ordinary Shares ("ADSs"), other than Excluded Shares (as defined in the Merger Agreement) and ADSs representing Excluded Shares, will be cancelled in exchange for the right of the holders thereof to receive $2.45 in cash per Ordinary Share, or $9.80 in cash per ADS.

The Company cautions its shareholders and others considering trading in its securities that there remain risks and uncertainties with respect to the Merger, including the possibility that the Merger will not occur as planned if events arise that result in the termination of the Merger Agreement, or if one or more of the various closing conditions to the Merger are not satisfied or waived or if requisite shareholder approval is not obtained, and other risks and uncertainties regarding the Merger Agreement and the Merger.


                        [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, and practical accounting training courses for college students and working professionals. 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, quotations from management in this announcement, the Company's strategic and operational plans (in particular, the impact of COVID-19 on our businesses including the postponement or suspension of certain professional certification examinations; balancing growth and profitability; the growth prospects of online professional education in China; as well as the anticipated benefits of our strategic growth initiatives, including the promotion of the Company's life-long learning ecosystem) as well as the risks and uncertainties of the Merger, 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: the impact of COVID-19, together with the postponement or suspension of certain professional certification examinations; the results and impact of the Merger; 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; anticipated benefits of acquisition or disposal of businesses, 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 attributable to CDEL, operating income, gross profit, cost of sales, selling expenses, general and administrative expenses, net income margin attributable to CDEL, operating margin, gross profit margin, and basic and diluted earnings per ADS and per share attributable to CDEL. 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, impairment loss from long-term investments net of noncontrolling interests and taxes calculated using specific tax treatments applicable to the adjustments based on their respective jurisdictions, and impairment of goodwill. 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, impairment loss from long-term investments net of noncontrolling interests and taxes calculated using specific tax treatments applicable to the adjustments based on their respective jurisdictions, and impairment of goodwill 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.
Jenny Cai
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

(Financial Tables on Following Pages)


                                                                                                           
              
                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, 2019          
       
       September 30, 2020


                                                                                                                                                                                    
            
       (Derived from Audited)            
       
            (Unaudited)



     
     Assets:



     
     Current assets:


                                                
              Cash and cash equivalents                                                                                                                                      67,977                             80,056


                                                
              Term deposits                                                                                                                                                                                    13,440


                                                
              Restricted cash                                                                                                                                                38,358                              4,212


                                                
              Short term investments                                                                                                                                         22,118                             20,343


                                                
              Accounts receivable, net of allowance for doubtful accounts of US$1,864 and                                                                                     7,330                              6,154
                                                US$1,282 as of September 30, 2020 and 2019, respectively


                                                
              Inventories                                                                                                                                                     4,232                              4,863


                                                
              Prepayment and other current assets                                                                                                                            26,732                             31,316


                                                
              Amounts due from related parties                                                                                                                                  515                              3,580


                                                
              Deferred costs                                                                                                                                                  1,427                              1,657


                                                
              
                Total current assets                                                                                                                             168,689                            165,621





     
     Non-current assets:


                                                
              Restricted cash                                                                                                                                                                                  16,849


                                                
              Property, plant and equipment, net                                                                                                                             37,935                             42,331


                                                
              Operating lease right of use asset                                                                                                                                                               30,029


                                                
              Goodwill, net                                                                                                                                                  74,829                             78,966


                                                
              Long term investments                                                                                                                                          25,379                             26,324


                                                
              Other intangible assets, net                                                                                                                                   30,113                             23,161


                                                
              Deposit for purchase of non-current assets                                                                                                                      4,448                              2,186


                                                
              Deferred tax assets                                                                                                                                             3,865                              5,690


                                                
              Other non-current assets                                                                                                                                       10,092                              7,490


                                                
              
                Total non-current assets                                                                                                                         186,661                            233,026




                                                
              
                Total assets                                                                                                                                     355,350                            398,647






     
     Liabilities and equity:



     
     Current liabilities:


                                                
              Bank borrowings                                                                                                                                                38,502                              4,012


                                                
              Accrued expenses and other liabilities (including accrued expenses and other                                                                                   38,267                             55,454
                                                liabilities of the consolidated VIE without recourse to China Distance Education
                                                Holdings Limited of US$49,232 and US$35,491 as of September 30, 2020 and 2019,
                                                respectively)


                                                
              Amount due to related parties                                                                                                                                     600                              1,309


                                                
              Income tax payable (including income tax payable of the consolidated VIE without                                                                               10,899                             17,378
                                                recourse to China Distance Education Holdings Limited of US$14,451 and
                                                US$8,188 as of September 30, 2020 and 2019, respectively)


                                                
              Deferred revenue - current portion (including deferred revenue of the consolidated                                                                             94,202                            105,953
                                                VIE without recourse to China Distance Education Holdings Limited of US$104,929
                                                and US$93,364 as of September 30, 2020 and 2019, respectively)


                                                
              Refundable fees - current portion (including refundable fees of the consolidated VIE                                                                              435                              1,729
                                                without recourse to China Distance Education Holdings Limited of US$1,729 and
                                                US$435 as of September 30, 2020 and 2019, respectively)


                                                
              Operating lease liability - current portion (including operating lease liability of the                                                                                                           4,160
                                                consolidated VIE without recourse to China Distance Education Holdings Limited
                                                of US$3,835 and nil as of September 30, 2020 and 2019, respectively)


                                                
              
                Total current liabilities                                                                                                                        182,905                            189,995





     
     Non-c
                urrent liabilities
     :


                                                
              Deferred revenue - non-current portion (including deferred revenue of the                                                                                      33,564                             33,928
                                                consolidated VIE without recourse to China Distance Education Holdings Limited
                                                of US$33,928 and US$33,564 as of September 30, 2020 and 2019, respectively)


                                                
              Refundable fees - non-current portion (including refundable fees of the consolidated                                                                            2,440                              2,602
                                                VIE without recourse to China Distance Education Holdings Limited of US$2,602
                                                and US$2,440 as of September 30, 2020 and 2019, respectively)


                                                
              Deferred tax liabilities                                                                                                                                       12,695                              6,088


                                                
              Long-term bank borrowing                                                                                                                                                                         16,000


                                                
              Operating lease liability - non-current portion (including operating lease liability of                                                                                                          23,089
                                                the consolidated VIE without recourse to China Distance Education Holdings
                                                Limited of US$22,749 and nil as of September 30, 2020 and 2019, respectively)



                                                
              
                Total 
                non-
                current liabilities                                                                                           48,699                             81,707


                                                
              
                Total liabilities                                                                                                                                231,604                            271,702









     
     Equity:


                                                
              Ordinary shares (par value of US$0.0001 per share; 500,000,000 shares authorized;                                                                                  13                                 14
                                                135,320,433 and 134,210,745 shares issued and outstanding at September 30, 2020
                                                and 2019, respectively)


                                                
              Additional paid-in capital                                                                                                                                     24,507                             27,318


                                                
              Accumulated other comprehensive loss                                                                                                                         (12,357)                             (833)


                                                
              Retained Earnings                                                                                                                                              60,668                             51,477



                                                
              
                Total China Distance Education Holdings Limited shareholder's equity                                                                              72,831                             77,976


                                                
              Noncontrolling interests                                                                                                                                       50,915                             48,969



                                                
              
                Total equity                                                                                                                                     123,746                            126,945



                                                
              
                Total liabilities and equity                                                                                                                     355,350                            398,647


                                                                                                                       
              
                China Distance Education Holdings Limited


                                                                                                  
              
                Unaudited 
                Condensed Consolidated Statements Of 
                Operations


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




                                                                                                                                                                                                                          Three Months Ended
                                                                                                                                                                                                                             September
                3
                                                                                                                                                                                                                                0
                ,


                                                                                                                                                                                                                   2019                     2020





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


                                                                                                                                
              Online education services                                               49,467                   51,399


                                                                                                                                
              Books and reference materials                                            5,740                    6,310


                                                                                                                                
              Others                                                                  13,484                    7,837


                                                                                                                                
              -  Sale of learning simulation software                                  3,366                    2,225


                                                                                                                                
              -  Business start-up training services                                     483                      331


                                                                                                                                
              -  Others                                                                9,635                    5,281


                                                                                                                                
              
                Total net revenues                                         68,691                   65,546





              
                Cost of sales


                                                                                                                                
              Cost of services and others                                           (22,791)                (24,080)


                                                                                                                                
              Cost of tangible goods sold                                            (2,492)                 (4,740)



                                                                                                                                
              
                Total cost of sales                                      (25,283)                (28,820)





              
                Gross profit                                                                                                                                                                         43,408                   36,726





              
                Operating expenses


                                                                                                                                
              Selling expenses                                                      (16,133)                (17,574)


                                                                                                                                
              General and administrative expenses                                    (7,064)                 (8,462)


                                                                                                                                
              Impairment of goodwill                                                 (1,517)


                                                                                                                                
              
                Total operating expenses                                 (24,714)                (26,036)



              Other operating income                                                                                                                                                                               535                    2,222

                                                                                                                                                                                                                                            ---




              
                Operating
                 income                                                                                                                                                        19,229                   12,912





              Impairment loss from long-term investments                                                                                                                                                       (6,920)                   (910)



              Interest income                                                                                                                                                                                      493                      603



              Interest expense                                                                                                                                                                                   (525)                   (120)



              Exchange gain (loss)                                                                                                                                                                               3,399                  (4,107)





              
                Income 
                before income taxes                                                                                                                                              15,676                    8,378



              Income tax expense                                                                                                                                                                               (6,044)                 (4,201)



              (Loss) gain from equity method investments                                                                                                                                                         (465)                     292

                                                                                                                                                                                                                                            ---




              
                Net 
                income                                                                                                                                                               9,167                    4,469



              
                Net loss attributable to noncontrolling interests                                                                                                                                   (4,602)                   (396)

                                                                                                                                                                                                                                            ---


              
                Net 
                income 
                attributable to 
                China Distance Education Holdings Limited                                                                          13,769                    4,865

                                                                                                                                                                                                                                            ===




              
                Net income 
                per share
                 attributable to China Distance Education Holdings
    Limited:



              
                Net income 
                attributable to 
                China Distance Education Holdings Limited
    shareholders


                                                                                                                                
              Basic                                                                    0.103                    0.036


                                                                                                                                
              Diluted                                                                  0.103                    0.036





              
                Net income 
                per ADS
                 attributable to China Distance Education Holdings
    Limited:



              
                Net income 
                attributable to 
                China Distance Education Holdings Limited
    shareholders


                                                                                                                                
              Basic                                                                    0.411                    0.144


                                                                                                                                
              Diluted                                                                  0.411                    0.143





              
                Weighted average shares used in calculating net income per share
    attributable to 
                China Distance Education Holdings Limited
                :


                                                                                                                                
              Basic                                                              133,399,392              134,510,192


                                                                                                                                
              Diluted                                                            134,333,486              135,537,758

                                                                                                                                                                                                                                              ---


                                                                                          
              
                China Distance Education Holdings Limited


                                                                     
              
                Unaudited 
                Condensed Consolidated Statements Of 
                Operations


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




                                                                                                                                                                                                        Year
     Ended 
     September
          3
                                                                                                                                                                                                                                         0,


                                                                                                                                                                              2019                 2020





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


                                                                                                                                             Online education services                 145,917                                       159,338


                                                                                                                                             Books and reference materials              27,372                                        22,061


                                                                                                                                  
              Others                                     38,533                                        28,159


                                                                                                                                             - Sale of learning simulation
                                                                                                                                              software                                  12,996                                         9,520


                                                                                                                                             -  Business start-up training
                                                                                                                                              services                                   2,741                                         2,158


                                                                                                                                  
              -  Others                                  22,796                                        16,481


                                                                                                                                                          Total net revenues           211,822                                       209,558





              
                Cost of sales


                                                                                                                                             Cost of services and others              (85,252)                                     (81,976)


                                                                                                                                             Cost of tangible goods sold              (19,489)                                     (19,622)



                                                                                                                                                          Total cost of sales        (104,741)                                    (101,598)





              
                Gross profit                                                                                                                                   107,081              107,960





              
                Operating expenses


                                                                                                                                  
              Selling expenses                         (61,460)                                     (69,848)


                                                                                                                                             General and administrative
                                                                                                                                              expenses                                (24,919)                                     (25,478)


                                                                                                                                  
              Impairment of goodwill                    (1,517)


                                                                                                                                                          Total operating expenses    (87,896)                                     (95,326)



              Change in fair value in connection with business combination                                                                                                    695                    -



              Other operating income                                                                                                                                        2,968                6,155






              
                Operating
                 income                                                                                                                   22,848               18,789





              Impairment loss from long-term investments                                                                                                                  (6,920)               (910)



              Interest income                                                                                                                                               2,207                2,555



              Interest expense                                                                                                                                            (2,819)             (1,021)



              Gain from disposal of an investment                                                                                                                             318                    -



              Gain from deconsolidation of a subsidiary                                                                                                                     6,869                    -



              Exchange gain (loss)                                                                                                                                          3,296              (5,261)





              
                Income 
                before income taxes                                                                                                         25,799               14,152



              Income tax expense                                                                                                                                          (8,121)             (5,460)



              Loss from equity method investments                                                                                                                         (1,484)               (555)






              
                Net 
                income                                                                                                                         16,194                8,137



              
                Net loss attributable to noncontrolling interests                                                                                              (5,060)             (2,293)




              
                Net income attributable to 
                China Distance Education Holdings Limited                                                               21,254               10,430






              
                Net income 
                per share
                 attributable to China Distance Education Holdings
    Limited:



              
                Net income 
                attributable to 
                China Distance Education Holdings Limited
    shareholders


                                                                                                                                  
              Basic                                       0.159                                         0.077


                                                                                                                                  
              Diluted                                     0.159                                         0.077





              
                Net income 
                per ADS
                 attributable to China Distance Education Holdings
    Limited:



              
                Net income 
                attributable to 
                China Distance Education Holdings Limited
    shareholders


                                                                                                                                  
              Basic                                       0.635                                         0.309


                                                                                                                                  
              Diluted                                     0.635                                         0.309





              
                Weighted average shares used in calculating net income per share
    attributable to China Distance Education Holdings Limited:


                                                                                                                                  
              Basic                                 133,060,900                                   133,984,929


                                                                                                                                  
              Diluted                               134,138,117                                   135,232,224

                                                                                                                                                                                                                                        ---




                                                                                                      
            
                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 
       September 30,


                                                                                                                                                                                                                    2019         2020


                                                                                                                                                                                              
              
       (Unaudited) (Unaudited)





              Cost of sales                                                                                                                                                                                      25,283       28,820



              Share-based compensation expense in cost of sales                                                                                                                                                                  45



              Non-GAAP cost of sales                                                                                                                                                                             25,283       28,775





              Selling expenses                                                                                                                                                                                   16,133       17,574



              Share-based compensation expense in selling expenses                                                                                                                                                               18



              Non-GAAP selling expenses                                                                                                                                                                          16,133       17,556





              General and administrative expenses                                                                                                                                                                 7,064        8,462



              Share-based compensation expense in general and administrative expenses                                                                                                                               490          626



              Non-GAAP general and administrative expenses                                                                                                                                                        6,574        7,836





              Gross profit                                                                                                                                                                                       43,408       36,726



              Share-based compensation expenses                                                                                                                                                                                  45



              Non-GAAP gross profit                                                                                                                                                                              43,408       36,771





              Gross profit margin                                                                                                                                                                                 63.2%       56.0%



              Non-GAAP gross profit margin                                                                                                                                                                        63.2%       56.1%





              Operating income                                                                                                                                                                                   19,229       12,912



              Share-based compensation expenses                                                                                                                                                                     490          689



              Impairment of goodwill                                                                                                                                                                              1,517



              Non-GAAP operating income                                                                                                                                                                          21,236       13,601





              Operating margin                                                                                                                                                                                    28.0%       19.7%



              Non-GAAP operating margin                                                                                                                                                                           30.9%       20.8%





              Net income attributable to CDEL                                                                                                                                                                    13,769        4,865



              Share-based compensation expenses                                                                                                                                                                     490          689



              Impairment loss from long-term investments, net of tax effect of US$228 and nil                                                                                                                     6,920          682
         for the year ended September 30, 2020 and 2019, respectively



              Impairment of goodwill                                                                                                                                                                              1,517



              Noncontrolling interests impact on adjustments                                                                                                                                                    (4,094)



              Non-GAAP net income attributable to CDEL                                                                                                                                                           18,602        6,237





              Net income margin attributable to CDEL                                                                                                                                                              20.0%        7.4%



              Non-GAAP net income margin attributable to CDEL                                                                                                                                                     27.1%        9.5%





              Net income per share attributable to CDEL-basic                                                                                                                                                     0.103        0.036



              Net income per share attributable to CDEL-diluted                                                                                                                                                   0.103        0.036



              Non-GAAP net income per share attributable to CDEL-basic                                                                                                                                            0.139        0.046



              Non-GAAP net income per share attributable to CDEL-diluted                                                                                                                                          0.138        0.046





              Net income per ADS attributable to China Distance Education Holdings Limited                                                                                                                        0.411        0.144
         shareholders-basic (note 1)



              Net income per ADS attributable to China Distance Education Holdings Limited                                                                                                                        0.411        0.143
         shareholders-diluted (note 1)



              Non-GAAP net income per ADS attributable to China Distance Education                                                                                                                                0.558        0.185
         Holdings Limited shareholders-basic (note 1)



              Non-GAAP net income per ADS attributable to China Distance Education                                                                                                                                0.554        0.184
        Holdings Limited shareholders-diluted (note 1)





              Weighted average shares used in calculating basic net income per share                                                                                                                        133,399,392  134,510,192
         attributable to China Distance Education Holdings Limited



              Weighted average shares used in calculating diluted net income per share                                                                                                                      134,333,486  135,537,758
        attributable to China Distance Education Holdings Limited



              Weighted average shares used in calculating basic non-GAAP net income per                                                                                                                     133,399,392  134,510,192
        share attributable to China Distance Education Holdings Limited



              Weighted average shares used in calculating diluted non-GAAP net income per                                                                                                                   134,333,486  135,537,758
        share attributable to China Distance Education Holdings Limited

    ---




              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)


                                                                                                                                                                              Year
               Ended
                                                                                                                                                                                   September
            3
                                                                                                                                                                                                0,


                                                                                                                                                                                     2019                        2020


                                                                                                                                                                          
     
     (Unaudited)           
      
     (Unaudited)





             Cost of sales                                                                                                                                                       104,741                     101,598



             Share-based compensation expense in cost of sales                                                                                                                        23                         139



             Non-GAAP cost of sales                                                                                                                                              104,718                     101,459





             Selling expenses                                                                                                                                                     61,460                      69,848



             Share-based compensation expense in selling expenses                                                                                                                     10                          58



             Non-GAAP selling expenses                                                                                                                                            61,450                      69,790





             General and administrative expenses                                                                                                                                  24,919                      25,478



             Share-based compensation expense in general and administrative expenses                                                                                               1,972                       2,421



             Non-GAAP general and administrative expenses                                                                                                                         22,947                      23,057





             Gross profit                                                                                                                                                        107,081                     107,960



             Share-based compensation expenses                                                                                                                                        23                         139



             Non-GAAP gross profit                                                                                                                                               107,104                     108,099





             Gross profit margin                                                                                                                                                   50.6%                      51.5%



             Non-GAAP gross profit margin                                                                                                                                          50.6%                      51.6%





             Operating income                                                                                                                                                     22,848                      18,789



             Share-based compensation expenses                                                                                                                                     2,005                       2,618



             Impairment of goodwill                                                                                                                                                1,517



             Non-GAAP operating income                                                                                                                                            26,370                      21,407





             Operating margin                                                                                                                                                      10.8%                       9.0%



             Non-GAAP operating margin                                                                                                                                             12.4%                      10.2%





             Net income attributable to CDEL                                                                                                                                      21,254                      10,430



             Share-based compensation expenses                                                                                                                                     2,005                       2,618



             Impairment loss from long-term investments, net of tax effect of US$228 and                                                                                           6,920                         682
        nil for the year ended September 30, 2020 and 2019, respectively



             Impairment of goodwill                                                                                                                                                1,517



             Noncontrolling interests impact on adjustments                                                                                                                      (4,094)



             Non-GAAP net income attributable to CDEL                                                                                                                             27,602                      13,730





             Net income margin attributable to CDEL                                                                                                                                10.0%                       5.0%



             Non-GAAP net income margin attributable to CDEL                                                                                                                       13.0%                       6.6%





             Net income per share attributable to CDEL-basic                                                                                                                       0.159                       0.077



             Net income per share attributable to CDEL-diluted                                                                                                                     0.159                       0.077



             Non-GAAP net income per share attributable to CDEL-basic                                                                                                              0.207                       0.102



             Non-GAAP net income per share attributable to CDEL-diluted                                                                                                            0.206                       0.102





             Net income per ADS attributable to China Distance Education Holdings                                                                                                  0.635                       0.309
        Limited shareholders-basic (note 1)



             Net income per ADS attributable to China Distance Education Holdings                                                                                                  0.635                       0.309
        Limited shareholders-diluted (note 1)



             Non-GAAP net income per ADS attributable to China Distance Education                                                                                                  0.830                       0.410
        Holdings Limited shareholders-basic (note 1)



             Non-GAAP net income per ADS attributable to China Distance Education                                                                                                  0.823                       0.406
        Holdings Limited shareholders-diluted (note 1)





             Weighted average shares used in calculating basic net income per share                                                                                          133,060,900                 133,984,929
        attributable to China Distance Education Holdings Limited



             Weighted average shares used in calculating diluted net income per share                                                                                        134,138,117                 135,232,224
        attributable to China Distance Education Holdings Limited



             Weighted average shares used in calculating basic non-GAAP net income per                                                                                       133,060,900                 133,984,929
        share attributable to China Distance Education Holdings Limited



             Weighted average shares used in calculating diluted non-GAAP net income per                                                                                     134,138,117                 135,232,224
        share attributable to China Distance Education Holdings Limited

    ---




             Note 1: Each ADS represents four ordinary shares

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SOURCE China Distance Education Holdings Ltd.