China Education Alliance, Inc. (NYSE: CEU) Announces Fourth Quarter and Year End 2009 Financial Results

HARBIN, China, March 15 /PRNewswire-Asia-FirstCall/ -- China Education Alliance, Inc. (NYSE:CEU - News) today announced financial results for the fourth quarter and fiscal year ended December 31, 2009. The Company will host a conference call Wednesday, March 17, 2010, at 11:00 a.m. EDT to discuss these results.

   Financial Highlights for the Fourth Quarter ended December 31, 2009
   -- Total revenue increased 13.5% year-over-year to $10.41 million,
      compared to revenue of $9.18 million in the fourth quarter of fiscal
      2008.
   -- Net income increased 24.0% year-over-year to $4.57 million, compared to
      net income of $3.68 million in the fourth quarter of fiscal 2008.
   -- EPS was $0.15 per fully diluted share, compared to EPS of $0.14 per
      fully diluted share in the fourth quarter of fiscal 2008.
   -- Operating income totalled $4.61 million, compared to an operating
      income of $3.87 million in the fourth quarter of 2008.
   -- Gross profit rose 22.7% to $8.78 million or 84.3% of sales, compared to
      77.9% of sales, or $7.15 million, in the fourth quarter of 2008.

"We are very pleased to report another solid, profitable quarter as demand for our high-quality educational services and our vocational training programs in China continues to see strong growth," said Xiqun Yu, Chairman and Chief Executive Officer of China Education Alliance. "Both the exam-oriented educational and vocational services sectors in China continue to experience rapid growth as students and job seekers strive to improve their skills in an increasingly competitive labor market. We believe our strong results, nearly 49 percent growth in annual revenue and 52 percent in annual earnings, show that our strategy of developing both our marketing efforts and service offerings for our online educational programs as well as our vocational training programs has positioned us for a strong 2010."

Financial results for the fourth quarter ended December 31, 2009

China Education Alliance reported total revenue of $10.41 million for the fourth quarter ended December 31, 2009, an increase of 13.5% compared to $9.18 million for the fourth quarter of 2008. The Company's online education business generated 59.3% of its total revenue in the fourth quarter of 2009 compared to 70.3% for the same prior-year period. Its training center business generated 35.4% of total revenue in the fourth quarter of 2009 compared to 21.2% for the same prior-year period; its advertising business division generated the remaining 5.3% of total revenue in the fourth quarter of 2009, compared to 8.5% for the same prior-year period.

Online education revenue was $6.17 million for the fourth quarter of 2009, keeping at the same level as the fourth quarter of 2008, $6.45 million. Training center revenue in the fourth quarter of 2009 was $3.69 million, up 89.7% from $1.94 million in the fourth quarter last year. The increase was due to new programs and courses added at all sites of the Company's training centers in Northeast China.

Advertising revenue was approximately $0.55 million for the fourth quarter of 2009, a decrease of 29.2% from $0.78 million in the fourth quarter last year. Advertising comprises only about 5% of total revenue.

Net income for the fourth quarter of 2009 was $4.57 million, representing an increase of 24% over fourth quarter 2008 net income of $3.68 million. The increase was largely the result of strong development in the Company's and training center division. Diluted earnings per share was $0.15, compared with $0.14 in the same period last year.

Operating income in the fourth quarter of fiscal 2009 increased to $4.61 million, from $3.87 million in the same period a year ago. Operating margin was 44.3% in the fourth quarter of fiscal 2009.

Overall cost of sales decreased 19.3% to $1.63 million in the fourth quarter of fiscal 2009, compared to $2.02 million for the same period in fiscal 2008. Gross profit increased to $8.78 million in the fourth quarter of fiscal 2009, an increase of 22.7% from $7.15 million for the same quarter in fiscal 2008. Gross margin for the fourth quarter of fiscal 2009 was 84.3%, as compared to 77.9% for the same quarter a year ago. The online education gross margin increased to 81.7% in the fourth quarter of fiscal 2009 from 78.8% for the same period in fiscal 2008. The training center gross margin increased to 87.3% for the fourth quarter of fiscal 2009 from 69.1% for the same period last year. Advertising gross margin was 93.3% in the fourth quarter of fiscal 2009, little change from 93.7% in the fourth quarter of last year.

Selling expenses decreased 13.8% to approximately $2.16 million for the fourth quarter of fiscal 2009, compared to $2.50 million in the fourth quarter of 2008, due to decreased expenses in marketing and advertising. General and administrative ("G&A") expenses were approximately $1.8 million for the fourth quarter of fiscal 2009, an increase from $0.57 million in the fourth quarter of fiscal 2008, primarily due to an increase in some non-cash expenses (stock-based compensation) in the fourth quarter of fiscal 2009 compared to the prior year. As a percentage of revenue, G&A expenses at 17.5% increased in the fourth quarter of fiscal 2009 from 6.22% in the same period of last year.

Financial results for the year ended December 31, 2009

Revenue for the year ended December 31, 2009 was $36.97 million, representing an increase of 48.8% from $24.85 million for the same year-end period of 2008. Online education revenue was $22.2 million for the year ended December 31, 2009, representing an increase of 33.1% from $16.7 million for the same year-end period of 2008. Training center revenue for the year ended December 31, 2009, was $12.1 million, representing an increase of 117.9% from $5.6 million in the same year-end period last year. The increase was largely the result of strong development in the Company's online education and onsite training center divisions. Advertising revenue was approximately $2.6 million for the year ended December 30, 2009, representing an increase of 1.5% from $2.59 million for the same prior year-end period.

Net income for the year ended December 31, 2009 was $15.21 million, representing an increase of 51.9% over full-year 2008 net income of $10.01 million. Diluted earnings per share for the year ended December 31, 2009 was $0.59, compared with $0.41 in the same year-end period of 2008.

Financial Condition

As of December 31, 2009, China Education Alliance had approximately $65.04 million in cash and cash equivalents, $66.74 million in working capital, and no long-term debt. Shareholders' equity at December 31, 2009 was approximately $75.34 million, an increase from approximately $33.71 million at December 31, 2008. The Company generated net cash from operating activities of $18.6 million in the year ended December 31, 2009, up 90.2% from $9.8 million in the year-end period of 2008.

Business Outlook

China Education Alliance believes the education industry in China will remain a fast-growth sector. The Company has experienced rapid growth by providing online and onsite, supplemental educational training services to students ages 6 to 18 and vocational training services to adults ages 18 and up.

On February 4, 2010, the Company announced the first of several planned acquisitions for 2010, the acquisition of the Beijing Shifan Culture Communication Co., Ltd. and, as a consequence, the establishment of a new entity, Beijing New Shifan Education & Technology. Beijing Shifan's publication, the "Senior High School Students Mathematic, Physics, and Chemistry" magazine, which is endorsed by the China's Ministry of Education, and its popular nationwide academic contest for middle school and high school students, is expected to accelerate the marketing efforts of the Company and provide a platform to access markets nationwide.

For students ages 6 to 18, the Company provides downloadable course material and test papers online and classroom instructions onsite. All the online course material and test papers and onsite classroom instructions are provided by famed instructors in the People's Republic of China, with the purpose of helping the students pass the two most important exams during their academic life: the high school and college entrance exams.

For adults ages 18 and up, the Company provides various vocational training including IT and other professional training programs.

   China Education Alliance has two primary business lines:
   1. Exam-Oriented Primary and Secondary School Supplemental Education: The
      Company provides online educational resources for primary and secondary
      students to download through the Internet, and offers onsite training
      by highly regarded instructors. Currently, the Company has expanded its
      business network from Heilongjiang province to Jilin, Liaoning and
      Inner Mongolia provinces. While the Company plans to penetrate into new
      areas, it will continue to explore and increase online market share in
      these four provinces. The Company's online educational resources are
      provided through its website, http://www.edu-chn.com . This website is
      a comprehensive education network platform that utilizes
      video-on-demand technology and houses a large database that includes
      more than 350,000 exams and test papers, as well as courseware for
      college, secondary and elementary schools.
   2. Vocational Training: The Company operates various vocational training
      programs through online services and onsite training at its main center
      in Beijing, as well as through its strategic partnerships with
      professional organizations such as the National Association of Vocation
      Education Society of China (NAVEC). The Company will focus on its
      Heilongjiang-based, self-run vocational education market, which
      includes IT training and other professional training programs.

"We will continue to focus on expanding our online educational product offerings and vocational training services into more provinces of the rapidly developing Northeast region of China. We remain committed to our expansion goals in 2010, and will continue to pursue acquisitions and strategic partnerships that improve our outreach efforts and expand our brand. We remain very confident that our marketing and expansion efforts, combined with the strong demand in China's education and vocational training sectors will support continued growth in 2010," said Mr. Xiqun Yu.

Conference Call and Webcast Details

The company will hold a conference call on Wednesday, March 17, 2010 at 11:00 a.m. EDT (8:00 a.m. Pacific Daylight time) to discuss financial results for the fourth quarter and fiscal year ended December 31, 2009.

To participate in the call, please dial (888) 549-7704, or (480) 629-9857 for international calls, approximately 10 minutes prior to the scheduled start time. Interested parties may also listen via a live Internet webcast, which can be found at the Company's website at http://www.chinaeducationalliance.com .

A replay of the call will be available for two weeks from 2:00 p.m. EDT on March 17, 2010, until 11:59 p.m. EDT on March 31, 2010. The number for the replay is 303-590-3030. The passcode for the replay is 4265652. In addition, a recording of the call will be available via the company's website at http://www.chinaeducationalliance.com for one year.

About China Education Alliance, Inc.

China Education Alliance, Inc. (http://www.chinaeducationalliance.com ) is a fast-growing, leading, China-based company offering high-quality education resources and services to students ages 6 to 18 and adults (university students and professionals) ages 18 and over. For students ages 6 to 18, China Education Alliance offers supplemental, online exam-oriented training materials and onsite, exam-oriented training and tutoring services. The company provides online, downloadable famous-teacher resources and onsite, personalized instruction. All resources and tutoring services are provided by famous teachers within mainland China. The purpose of online exam-orientated resources and onsite tutoring is to help Chinese students (ages 6 to 18) pass the two most important and highly competitive exams in their educational career: the senior high school entrance and college entrance exams. For graduates and professionals age 18 and over, China Education Alliance provides vocational training including IT and several professional training programs.