HARBIN, China, Nov. 16 /PRNewswire-Asia-FirstCall/ -- China Education Alliance, Inc. (NYSE Amex: CEU) today announced strong financial results for the three and nine months ended September 30, 2009. The Company will host a conference call Tuesday, November 17, 2009, at 10:00 a.m. EST to discuss these results. Financial Highlights for the Three Months Ended September 30, 2009 -- Total revenue increased 43.3% year-over-year to $10.23 million, compared to revenue of $7.15 million in the third quarter of fiscal 2008. -- Net income increased 51.4% year-over-year to $4.17 million, compared to net income of $2.76 million in the third quarter of fiscal 2008. -- EPS was $0.16 per fully diluted share, compared to EPS of $0.11 per fully diluted share in the third quarter of fiscal 2008. -- Operating income totalled $4.44 million, compared to an operating income of $2.86 million in the third quarter of 2008. -- Gross profit rose 42.7% to $8.22 million or 80.4% of sales, compared to 80.7% of sales or $5.76 million in the third quarter of 2008. "We are very pleased to report another strong quarter as demand for our high-quality educational services and our vocational training programs in China remains high," said Xiqun Yu, Chief Executive Officer of China Education Alliance, Inc. "The educational sector in China continues to experience rapid growth since quality education is so vital to meeting the demands of an ever-modernizing infrastructure. We see these quarterly results as further validation of the effectiveness of our business model and our expansion plans as well as validation of our commitment to providing the highest level of quality educational services to students and adults. We expect enrollment for our online educational services and our training centers will continue to grow rapidly and will be key drivers of our growth in the coming years." Financial results for the three months ended September 30, 2009 China Education Alliance reported total revenue of $10.23 million for the third quarter ended September 30, 2009, an increase of 43.3% compared to $7.15 million for the third quarter of 2008. The Company's online education business generated 56.4% of its total revenue in the third quarter of 2009 compared to 63.2% for the same prior-year period. Its training center business generated 37.7% of total revenue in the third quarter of 2009 compared to 28.3% for the same prior-year period; its advertising business division generated the remaining 6.0% of total revenue in the third quarter of 2009, compared to 8.5% for the same prior-year period. Online education revenue was $5.77 million for the third quarter of 2009, an increase of 32.9% compared to $4.34 million for the third quarter of 2008. During 2008 and 2009, the Company added several new programs for vocational studies and certification programs, which provided new revenue sources for its online education business. Training center revenue in the third quarter of 2009 was $3.85 million, up 90.8% from $2.02 million in the third quarter last year. Advertising revenue was approximately $0.61 million for the third quarter of 2009, decreased by 22.6% from $0.79 million in the third quarter last year. Net income for the third quarter of fiscal 2009 was $4.17 million, representing an increase of 51.4% over third quarter 2008 net income of $2.76 million. The increase was largely the result of strong development in the Company's online division and training center division. Diluted earnings per share was $0.16, compared with $0.11 in the same period last year. Operating income in the third quarter of fiscal 2009 increased to $4.44 million, from $2.86 million in the same period a year ago. Operating margin was 43.4% in the third quarter of fiscal 2009. Overall cost of sales increased 45.3% to $2.01 million in the third quarter of fiscal 2009, compared to $1.38 million for the same period in fiscal 2008. Gross profit increased to $8.22 million in the third quarter of fiscal 2009, an increase of 42.7% from $5.76 million for the same quarter in fiscal 2008. Gross margin for the third quarter of fiscal 2009 was 80.4%, as compared to 80.7% for the same quarter a year ago. The online education gross margin decreased to 78.8% in the third quarter of fiscal 2009 from 84.6% for the same period in fiscal 2008. The training center gross margin increased to 80.9% for the third quarter of fiscal 2009 from 67.0% for the same period last year. Advertising gross margin was 92.0% in the third quarter of fiscal 2009, down from 94.0% of the third quarter of last year. Selling expenses increased 30.9% to approximately $3.08 million for the third quarter of fiscal 2009, compared to $2.35 million in the third quarter of 2008, due to increased expenses in building our marketing team and higher debit card agency expenses. General and administrative ("G&A") expenses were approximately $0.43 million for the third quarter of fiscal 2009, an increase from $0.29 million in the third quarter of fiscal 2008, primarily due to an increase in salaries and office expenses in the third quarter of fiscal 2009 compared to the prior year. As a percentage of revenue, G&A expenses at 4.2% in the third quarter of fiscal 2009 was almost unchanged from 4.0% in the same period of last year. Financial results for the nine months ended September 30, 2009 Revenue for the nine months ended September 30, 2009 was $26.55 million, representing an increase of 69.4% compared to the same nine-month period in 2008. Online education revenue was $16.07 million for the nine months ended September 30, 2009, representing an increase of 56.6% from $10.26 million for the same nine month-period in 2008. Training center revenue in the nine months ended September 30, 2009, was $8.41 million, representing an increase of 133.0% from $3.61 million in the same nine-month period last year. The increase was largely the result of strong development in the Company's online education and onsite training centers divisions. Advertising revenue was approximately $2.08 million for the nine months ended September 30, 2009, representing an increase of 14.9% from $1.81 million for the same prior-year, nine-month period. Net income for the nine-months ended September 30, 2009 was $10.64 million, representing an increase of 68.2% over the same nine-month period in 2008 net income of $6.33 million. Diluted earnings per share for the nine months ended September 30, 2009 was $0.44, compared with $0.26 in the same period of 2008. Financial Condition As of September 30, 2009, China Education Alliance had approximately $38.77 million in cash and cash equivalents, $39.63 million in working capital, and no long-term debt. Shareholders' equity was approximately $47.83 million, an increase from approximately $33.71 million on June 30, 2009. The Company generated $13.43 million in cash flow from operating activities in the third quarter of 2009. 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. 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, such as secretarial training and other professions with standard exam training. In addition to these primary businesses, the Company is also invested in the publishing and circulation of an educational newspaper, Scientific Discovery, which is enjoying a growing distribution, currently estimated at 60,000. "We will continue to focus on marketing our online test-preparation materials and our vocational training efforts to new markets. We will expand our market both in depth and breadth. We remain committed to our goals for development, and we expect to continue to enjoy comprehensive growth in each of our business lines as we develop and strengthen our strategic partnerships and improve our outreach efforts. We remain very confident in the future growth and development of the Company," said Mr. Xiqun Yu. Conference Call and Webcast Details The Company will host a conference call to discuss financial results for the third quarter ended September 30, 2009 on Tuesday, November 17, 2009 at 10:00 a.m. Eastern standard time (7:00 a.m. Pacific). To participate in the call, please dial (877) 407-0789, or (201) 689-8562 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 1:00 p.m. EST on November 17, 2009, until 11:59 p.m. EST on December 1, 2009. The number for the replay is (877) 660-6853, or (201) 612-7415 for international calls. The passcode for the replay is 337623, and the account number is 3055. You will need both the passcode and the account number to listen to the replay. 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. is a fast growing, leading China-based company offering high-quality education resources and services to students ages 6 to 18 and adults ages 18+ (University students and professionals). For students ages 6 to 18, China Education Alliance, Inc. offers supplemental online exam-oriented training materials and on-site exam-oriented training and tutoring services. The company is providing on-line downloadable famous teachers resources and on-site face to face instructions. All resources and tutoring services are provided by famous teachers within mainland China. The purpose of online exam orientated resources and on-site tutoring is to help Chinese students ages 6 to 18 to pass the two most important, and highly competitive exams in their educational career: senior high school entrance exam and college entrance exam. For graduates and professionals age 18+, China Education Alliance provides vocational training including IT and several professional training programs. For more information about China Education Alliance, please visit http://www.chinaeducationalliance.com/ . Safe Harbor Statement Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release, constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding our ability to prepare the company for growth, the Company's planned expansion in 2008 and predictions and guidance relating to the Company's future financial performance. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs and are not a guarantee of future performance but they involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, which may include, but are not limited to, such factors as unanticipated changes in product demand especially in the education industry, pricing and demand trends for the Company's products, changes to government regulations, risk associated with operation of the Company's new facilities, risk associated with large scale implementation of the company's business plan, the ability to attract new customers, ability to increase its product's applications, cost of raw materials, downturns in the Chinese economy, the adoption by consumers of its new game business, the unproven advertising model that is dependent on attracting a large game user base, and other information detailed from time to time in the Company's filings and future filings with the United States Securities and Exchange Commission. Investors are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release, readers are cautioned not to place undue reliance on any of them and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations. For more information, please contact: At the Company: China Education Alliance, Inc. Zack Pan, CFO Tel: +1-405-315-9987 Investor Relations: RedChip Companies, Inc. Jon Cunningham, Investor Relations Tel: +1-800-733-2447 x107 Email: Web: http://www.redchip.com/ China Education Alliance, Inc. and Subsidiaries Consolidated Balance Sheet September 30, December 31, 2009 2008 ASSETS Unaudited Audited Current Assets Cash and cash equivalents $38,771,932 $23,418,098 Advances to related parties 204,569 142,006 Account receivables 1,195,623 469,607 Prepaid expenses 2,006,620 3,437,506 Total current assets 42,178,744 27,467,217 Property and equipment, net 6,585,397 6,519,229 Intangible, net 346,771 481,113 Advance on acquisition 932,000 932,000 Long term investment 338,056 342,357 $50,380,968 $35,741,915 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable and accrued expenses $1,295,291 $800,692 Deferred revenues 1,252,563 1,227,806 Total current liabilities 2,547,854 2,028,498 Stockholders' Equity Preferred stock ($0.001 par value, 20,000,000 shares authorized, 4,502,142 and 7,597,645 issued and outstanding, respectively, aggregate liquidation preference of $1,665,793 and 2,811,129, respectively) 1,867,644 3,010,144 Common stock ($0.001 par value, 150,000,000 shares authorized, 24,732,914 and 21,892,631issued and outstanding, respectively) 24,733 21,893 Additional paid-in capital 15,283,404 10,751,732 Statutory reserve 1,990,238 1,990,238 Accumulated other comprehensive income 2,775,834 2,688,080 Retained earnings 25,891,261 15,251,330 Total stockholders' equity before related parties offset 47,833,114 33,713,417 $50,380,968 $35,741,915 The accompanying notes are an integral part of these financial statements. China Education Alliance, Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited) Three months ended Nine months ended September 30, September 30, 2009 2008 2009 2008 Revenues Online education revenues $5,768,667 $4,339,119 $16,068,783 $10,259,674 Training center revenues 3,853,285 2,019,933 8,408,331 3,608,317 Advertising revenues 609,726 787,337 2,077,016 1,807,509 Total revenue 10,231,678 7,146,389 26,554,130 15,675,500 Cost of Goods Sold Online education costs 1,223,984 667,373 3,457,403 1,489,653 Training center costs 736,215 667,066 2,102,654 1,321,523 Advertising costs 48,491 47,622 173,405 133,209 Total cost of goods sold 2,008,690 1,382,061 5,733,462 2,944,385 Gross Profit Online education gross profit 4,544,683 3,671,746 12,611,380 8,770,021 Training center gross profit 3,117,070 1,352,867 6,305,677 2,286,794 Advertising gross profit 561,235 739,715 1,903,611 1,674,300 Total gross profit 8,222,988 5,764,328 20,820,668 12,731,115 Operating Expenses Selling expenses 3,079,340 2,352,018 7,196,522 4,965,036 Administrative 425,990 288,083 1,320,102 935,830 Depreciation and amortization 275,909 264,988 766,260 680,819 Total operating expenses 3,781,239 2,905,089 9,282,884 6,581,685 Other Income (Expense) Value-added tax refund 0 5,570 -- 534,067 Interest income 36,085 37,991 84,624 94,427 Investment loss (1,275) -- (5,364) -- Total other income 34,810 43,561 79,260 628,494 Net Income Before Provision for Income Tax 4,476,559 2,902,800 11,617,044 6,777,924 Provision for Income Taxes 301,980 145,889 977,112 451,097 Net Income $4,174,579 $2,756,911 $10,639,932 $6,326,827 Basic Earnings Per Share $0.18 $0.13 $0.48 $0.30 Diluted Earnings Per Share $0.16 $0.11 $0.44 $0.26 Basic Weighted Average Shares Outstanding 23,069,062 21,434,129 22,341,051 21,434,129 Diluted Weighted Average Shares Outstanding 25,566,705 24,176,509 24,254,521 24,796,069 The Components of Other Comprehensive Income Net income $4,174,579 $2,756,911 $10,639,932 $6,326,827 Foreign currency translation adjustment 274,480 80,723 87,754 1,412,564 Comprehensive Income $4,449,059 $2,837,634 $10,727,686 $7,739,391 Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 2009 2008 Cash flows from operating activities Net Income $10,639,932 $6,326,827 Adjustments to reconcile net cash provided by Operating activities Depreciation and amortization 1,176,723 1,193,275 Stock based compensation 442,450 -- Loss on equity investment 5,132 -- Net change in assets and liabilities Account receivables (724,876) (296,276) Prepaid expenses and other 1,439,230 (972,961) Advances to related parties (62,217) (943,733) Accounts payable and accrued liabilities 492,655 289,618 Deferred revenue 21,776 751,059 Net cash provided by operating activities 13,430,805 6,347,809 Cash flows from investing activities Purchases of fixed assets (1,091,554) (1,726,750) Long-term investment -- (431,831) Net cash (used in) investing activities (1,091,554) (2,158,581) Cash flows from financing activities Warrants exercised 2,949,559 2,667,559 Effect of exchange rate 65,024 1,412,565 Net increase in cash 15,353,834 8,269,352 Cash and cash equivalents at beginning of year 23,418,098 11,778,954 Cash and cash equivalents at end of year $38,771,932 $20,048,306 Supplemental disclosure of cash flow information Interest paid $-- $-- Taxes paid $870,797 $94,737 Non-cash investing and financing activities Conversion of preferred stock to common $1,142,500 $667,800 DATASOURCE: China Education Alliance, Inc. CONTACT: At the Company - Zack Pan, CFO, China Education Alliance, Inc., +1-405-315-9987; Investor Relations - RedChip Companies, Inc., Jon Cunningham, Investor Relations, +1-800-733-2447, Ext. 107, or Web site: http://www.chinaeducationalliance.com/ http://www.redchip.com/

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