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ATA Reports Preliminary 4Q Results
Jun 10, 2010 (Close-Up Media via COMTEX) --
ATA, a provider of computer-based testing and testing-related services in China, announced preliminary unaudited financial results for the fourth quarter and fiscal year ended March 31 (Fourth Quarter 2010 and Fiscal Year 2010, respectively).
In a release dated June 4, the Company said the following are estimates of the Company's preliminary unaudited financial results for Fourth Quarter 2010 and Fiscal Year 2010. These preliminary financial results are subject to change. These results may, for example, become subject to adjustment based upon, among other things, completion of the fiscal-year reporting process, and could differ materially from the estimates provided.
Preliminary Fiscal Year 2010 Highlights
-- Net revenues increased 12.6 percent year-over-year to RMB245.0 million (US$35.9 million).
-- Gross profit decreased 7.6 percent year-over-year to RMB115.5 million (US$16.9 million).
-- Loss from operations was RMB30.1 million (US$4.4 million) compared to income from operations of RMB26.4 million in the previous fiscal year. Included in the loss from operations were exceptional provisions of RMB23.7 million (US$3.5 million) for long-term accounts receivables, and share-based compensation charges of RMB2.5 million (US$0.4 million) for two members of our senior management.
-- Net loss was RMB35.3 million (US$5.2 million) compared to net income of RMB22.8 million in the previous fiscal year.
-- Net loss excluding share-based compensation expense and foreign currency exchange loss (non-GAAP) was RMB27.6 million (US$4.0 million), compared to net income excluding share-based compensation expense and foreign currency exchange gain (non-GAAP) of RMB27.7 million in the previous fiscal year.
-- Basic and diluted loss per ADS was RMB1.58 (US$0.23). Basic and diluted loss per ADS excluding share-based compensation expense and foreign currency exchange loss (non-GAAP) was RMB1.23 (US$0.18). Each ADS represents two common shares of the Company.
-- ATA delivered approximately 5.8 million tests in Fiscal Year 2010, an increase of 13.8 percent from the previous fiscal year.
Preliminary Fourth Quarter 2010 Highlights
-- Net revenues increased 59.1 percent year-over-year to RMB47.2 million (US$6.9 million).
-- Gross profit increased 35.4 percent year-over-year to RMB17.3 million (US$2.5 million).
-- Loss from operations increased to RMB38.0 million (US$5.6 million) from a loss from operation of RMB13.0 million in the same period the previous fiscal year. Included in the loss from operations were exceptional provisions of RMB22.3 million (US$3.3 million) for long-term accounts receivables, and share-based compensation charges of RMB2.5 million (US$0.4 million) for two members of our senior management.
-- Net loss increased to RMB38.1 million (US$5.6 million) from a loss of RMB11.9 million in the same period the previous fiscal year.
-- Net loss excluding share-based compensation expense and foreign currency exchange gain (loss) (non-GAAP) was RMB35.3 million (US$5.2 million), compared to a loss of RMB10.9 million in the same period the previous fiscal year.
-- Basic and diluted loss per ADS was RMB1.72 (US$0.25). Basic and diluted loss per ADS excluding share-based compensation expense and foreign currency exchange gain (non-GAAP) was RMB1.60 (US$0.23). Each ADS represents two common shares of the Company.
-- For the quarter, ATA delivered approximately 1.3 million tests, an increase of 99.0 percent year-over-year.
Kevin Ma, ATA's Chairman and Chief Executive Officer, said, "We are pleased with our operating results for the fiscal fourth quarter and year ended March 31, especially with the strong results in our testing services where revenues increased 36.6 percent in Fiscal Year 2010. Total tests taken in Fiscal Year 2010 were up 13.8 percent to about 5.8 million tests. Our average revenue per test increased 20.0 percent to RMB 32.5 per test in Fiscal Year 2010 from the previous fiscal year, mainly due to the higher values per test, especially for the English language qualification tests and the HR Select tests.
"Our strategy and actions remain on track. Our Fiscal Year 2010 was one of transition. First, we grew our testing business nicely, expanding in our testing support for the securities and banking industries, in the Test of English for International Communication, or TOEIC, and in the HR Select testing that helps to find the most qualified candidates for both hiring and internal promotions.
"Aligned with that expansion has been more aggressive marketing and business promotions, as well as other investments in our new businesses, including enriching the content of our HR Select testing services. The higher expenses did temporarily pressure our results in Fiscal Year 2010, but our actions this year were designed to help encourage and support additional revenues, not only for Fiscal Year 2010, but also in the years ahead.
"HR Select is a very good example of that long-term potential. More than 60,000 companies and organizations have been introduced and received fundamental training on that new innovative testing product since we introduced it. It does take a while for such innovative new methods to be adopted. So far, more than 50 companies and organizations have become paying customers for HR Select, so we are only in the beginning of what we believe will be a long-term growth curve for that human resources testing and evaluation business.
"On the other hand, the Chinese government has delayed implementing the national teachers' licensure program, or NTET, until the country is better prepared for the test. The delay resulted in our taking an expense provision in Fiscal Year 2010 for the related long-term NTET tutorial software accounts receivable because we do not know if the government will enforce and resume the funding for this licensing program.
"In the long term, we believe our strategy is very sound, and we are on track for delivering very good operating performances in the years ahead. We expect those attractive results should create substantial value for our shareholders."
Preliminary Financial Results for Fiscal Year 2010
For Fiscal Year 2010, ATA estimates net revenues of RMB245.0 million (US$35.9 million), representing a 12.6 percent increase over net revenues for the fiscal year ended March 31, 2009. The increase was mainly due to an estimated 36.6 percent increase in net revenues from testing services, driven in particular by growth in tests delivered for the banking and securities industry, as well as increases in net revenues from delivery of TOEIC tests to an estimated RMB19.3 million (US$2.8 million) in Fiscal Year 2010 from RMB1.2 million the previous fiscal year, and net revenues from HR Select testing services to an estimated RMB10.5 million (US$1.5 million) from nil the previous fiscal year. Test-based educational programs decreased by an estimated 25.3 percent as we continue to shift focus from this business to core testing services and newer business lines, and an estimated 55.5 percent decrease in net revenues from test preparation and training solutions primarily due to decreased net revenues from NTET software sales compared with the previous fiscal year.
The total number of tests delivered was approximately 5.8 million, an increase of 13.8 percent over the fiscal year ended March 31, 2009.
Gross profit margin for the full year is expected to be 47.1 percent compared to 57.4 percent for the fiscal year ended March 31, 2009, primarily due to higher staff salaries and compensation resulting from the increase in headcount to support the business growth, other direct cost related to TOEIC and HR Select businesses, an impairment of the prepaid royalty fee for certain course materials that the Company believes will not be used in the future, and amortization and depreciation expenses related to technology upgrades and the TOEIC royalty fee.
Operating expenses for the full year are estimated to have increased by 47.7 percent to RMB145.6 million (US$21.3 million) from RMB98.5 million in the previous fiscal year.
Research and development expenses are estimated to have increased by 39.8 percent to RMB22.7 million (US$3.3 million) from RMB16.2 million in the previous fiscal year, primarily due to the increase in employees and higher expenses for new businesses and updating current test item database.
Sales and marketing expenses are estimated to have increased by 56.3 percent to RMB39.0 million (US$5.7 million) from RMB24.9 million in the previous fiscal year, primarily due to marketing and promotion expenses to support TOEIC, HR Select and the Cambridge Young Learners English online tutorials businesses and other testing service promotions, as well as increased salaries and compensation expenses.
General and administrative expenses are estimated to have increased by 46.2 percent to RMB83.9 million (US$12.3 million) from RMB 57.4 million in the previous fiscal year, primarily due to an allowance of RMB23.7 million for doubtful accounts in relation to NTET software sales, and share-based compensation expenses.
The Company added 48 employees during the fiscal year 2010, and had a total of 537 employees as of March 31, compared with 489 as of March 31, 2009. The increase was due largely to the business development requirements of TOEIC, HR Select and the Cambridge Young Learners English online tutorials.
Loss from operations is estimated to be RMB30.1 million (US$4.4 million) compared to income from operations of RMB26.4 million in the previous fiscal year.
Net loss is estimated to be RMB35.3 million (US$5.2 million) compared to net income of RMB22.8 million in the previous fiscal year. Basic and diluted loss per common share is estimated to RMB0.79 (US$0.12), and basic and diluted loss per ADS is estimated to RMB1.58 (US$0.23).
Preliminary Financial Results for Fourth Quarter 2010
For Fourth Quarter 2010, ATA estimates net revenues of RMB47.2 million (US$6.9 million), representing a 59.1 percent increase year-over-year. This increase was mainly driven by an estimated 97.7 percent year-over-year increase in net revenues from testing services, including an estimated RMB25.4 million (US$3.7 million) net revenues from testing services for securities industry exams in Fourth Quarter 2010 compared to RMB13.6 million in the same period the previous fiscal year, an estimated RMB2.3 million (US$0.3 million) net revenues from delivery of TOEIC tests compared to RMB1.2 million in the same period the previous fiscal year, and an estimated RMB1.6 million (US$0.2 million) net revenues from HR Select testing services compared to nil in the same period the previous fiscal year. Net revenues from test-based educational programs increased an estimated 9.1 percent year-over-year, while test preparation and training solutions declined by an estimated 24.4 percent.
The overall number of tests delivered increased by 99.0 percent year-over-year to approximately 1.3 million in Fourth Quarter 2010.
Fourth Quarter 2010 gross profit is estimated to have increase by 35.4 percent year-over-year to RMB17.3 million (US$2.5 million) from RMB12.7 million in the same period the previous fiscal year. Gross margin is estimated to have decreased to 36.6 percent in Fourth Quarter 2010 from 42.9 percent in the same period the previous fiscal year, driven by an impairment of the prepaid royalty fee for certain course materials that the Company believes will not be used in the future.
Fourth Quarter 2010 operating expenses are estimated to have increased to RMB55.3 million (US$8.1 million) from RMB25.7 million in the same period the previous fiscal year, primarily due to the increase in general and administrative expenses related to an allowance of RMB22.3 million for doubtful accounts in relation to NTET software sales, and additional share-based compensation expenses.
Loss from operations is estimated to have increased to RMB38.0 million (US$5.6 million) from RMB12.9 million in the same period the previous fiscal year. Operating margin is expected to be negative 80.6 percent in the Fourth Quarter of 2010 compared to negative 43.8 percent in the same period the previous fiscal year.
Net loss for Fourth Quarter 2010 is estimated to have increased to RMB38.1 million (US$5.6 million) from RMB11.9 million in the same period the previous fiscal year. Basic and diluted loss per common share is estimated to RMB0.86 (US$0.13), and basic and diluted loss per ADS is estimated to RMB1.72 (US$0.25).
Non-GAAP Measures
Net loss excluding share-based compensation expense and foreign currency exchange loss (non-GAAP) is expected to total RMB27.6 million (US$4.0 million) for Fiscal Year 2010, compared to net income excluding share-based compensation expense and foreign currency exchange gain (non-GAAP) of RMB27.7 million in the previous fiscal year. Basic and diluted loss per common share excluding share-based compensation expense and foreign currency exchange loss (non-GAAP) for Fiscal Year 2010 is expected to be RMB0.62 (US$0.09). Basic and diluted loss per ADS excluding share-based compensation expense and foreign currency exchange loss (non-GAAP) for Fiscal Year 2010 is expected to be RMB1.23 (US$0.18).
Net loss excluding share-based compensation expense and foreign currency exchange gain (non-GAAP) is expected to total RMB35.3 million (US$5.2 million) for Fourth Quarter 2010 compared to loss of RMB10.9 million in the same period the previous fiscal year. Basic and diluted loss per common share excluding share-based compensation expense and foreign currency exchange gain (non-GAAP) for Fourth Quarter 2010 is expected to be RMB0.79 (US$0.12). Basic and diluted loss per ADS excluding share-based compensation expense and foreign currency exchange gain (non-GAAP) for Fourth Quarter 2010 is expected to be RMB1.58 (US$0.23).
Other Data
The number of weighted average ADSs used to calculate basic and diluted earnings per ADS for the quarter ended March 31, were 22.1 million. The number of weighted average ADSs used to calculate basic and diluted earnings per ADS for the year ended March 31, were 22.4 million. Each ADS represents two common shares.
ATA had 44.4 million common shares outstanding on March 31, and 45.7 million common shares outstanding on March 31, 2009.
Test centers
As of March 31, ATA had 1,988 authorized test centers located throughout China, compared with 1,925 centers as of March 31, 2009.
Guidance for Fiscal First Quarter 2011 and Fiscal Year 2011
For the fiscal first quarter 2011, ending June 30, ATA expects net revenues to be in the range of RMB78 million to RMB82 million.
For the fiscal year ending March 31, 2011, ATA expects net revenues to be in the range of RMB280 million to RMB300 million.
These are ATA's current projections, which are subject to change. You are cautioned that operating results in Fourth Quarter 2010 or Fiscal Year 2010 are not necessarily indicative of operating results for any future periods.
Correction
In our prior third quarter earnings release, we incorrectly referred to the "Chinese Certified Treasury Professional exam" for the Association of Financial Professionals. The test's correct name is "Associate Financial Planner," which is operated by FPSB China.
ATA offers services for the creation and delivery of computer-based tests, based on its proprietary testing technologies and test delivery platform. ATA's computer-based testing services are used for professional licensure and certification tests in various industries, including information technology services, banking, teaching, securities, insurance, and accounting.
The Company's financial information is stated in renminbi, the currency of the People's Republic of China. The translation of RMB amounts for Fourth Quarter 2010 and Fiscal Year 2010 into U.S. dollars is included solely for the convenience of readers and has been made at the rate of RMB 6.8258 to US$ 1.00, the noon buying rate as of March 31, in New York cable transfers of RMB per USD as set forth in the H.10 weekly statistical release of Federal Revenue Board. Such translations should not be construed as representations that RMB amounts could be converted into U.S. dollars at that rate or any other rate, or to be the amounts that would have been reported under U.S. GAAP.
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