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China Distance Education CEO Discusses F3Q2010 Results - Earnings Call Transcript

China Distance Education CEO Discusses F3Q2010 Results - Earnings Call Transcript

China Distance Education Holdings Limited (DL)

F3Q2010 Earnings Call Transcript

August 19, 2010 8:00 am ET


Zhengdong Zhu – Chairman and CEO

Ping Wei – CFO


Alicia Yap – Citigroup

Mark Marostica – Piper Jaffray

Bella [ph] – Oppenheimer



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Good evening and thank you for standing by for the China Distance Education Holdings Limited third quarter fiscal 2010 earnings conference call. Today, you will hear from Mr. Zhu, Chairman and CEO of the company; and Ms. Ping Wei, the CFO. During the prepared remarks, all participants will be in listen-only mode. After that, the company management will be available to answer your questions.

Before we start, we would like to remind listeners that this conference contains forward-looking statements. These statements are made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Among other things, the outlook for the fourth quarter of fiscal year 2010 and oral statements from management on this call, as well as the company's strategic and operational plans, contain forward-looking statements.

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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 statements. Further information regarding these and other risks is included in the company's annual report on Form 20-F and other documents of the company as filed with the Securities and Exchange Commission. The company does not undertake any obligation to update any forward-looking statements, except as required under applicable law.

As a reminder, this conference call is being recorded. A summarized presentation can be downloaded from the company's IR website and which we will be referring during the course of the call. In addition, a webcast of this conference call is available on the company's Investor Relations website at

I will now turn the call over to Mr. Zhu to discuss the operational highlights. Mr. Zhu, please go ahead.

Zhengdong Zhu

[Interpreted] Thank you everyone for joining us on our third quarter fiscal 2010 results conference call. Our operating results were released earlier and available on the company’s Website as well as on newswire services.

As you would have seen from our earnings release, we delivered a good standoff results, with revenue growing 25% and non-GAAP net income increasing 80.6% as compared to the same quarter of last year, in line with our guidance. This result is driven by the continued enrollment growth in our healthcare and construction engineering verticals and a steady performance from our core accounting process, including accounting continuous education.

In addition, we continue to make progress on some of our newer initiatives. Our self-taught higher education vertical continued to expand in the quarter as the program increasingly gains acceptance among both students and government bodies. And we recorded $1.1 million in revenue in the quarter from our courseware production contracts for the National Primary and Secondary Educational Resources Sharing Coalition Project.

As you will recall from last quarter, we see the government-sponsored project providing access with others to courses taught by leading teachers and students and throughout the country. We won the official date to undertake the platform development and courseware production part of this project in April and look forward participating in the important initiative moving forward.

Let me now walk you through our operational development for the quarter in more detail. Starting on slide 5, revenue for the quarter increased 25% year-over-year to $10.3 million. Total course enrollments were 242,000, an increase of 13% year-over-year. In total, online course revenue increased 16.6% year-over-year to $6.3 million.

Slide 7 shows some operational update on our key service areas. We experienced steady enrollment growth in most of our core accounting courses. Our accounting continuous education, with a 42% increase in enrollment compared to the third quarter of 2009. CPA enrollment increased a modest 7%, while APQE or Accounting Professional Qualification Exam enrollment decreased slightly.

In general, we are seeing slight softness in participations for the professional accounting test preparation courses. We think that changes made to the test registration process had made it more difficult for test preparation training course providers such as DL to promote the courses to the test takers at the point of registration, which had been one of our promotional methods up to this point.

In addition, ASP for most of our accounting test preparation courses remains stable as compared to the same period of last year. Even though with lowered prices for continuous education courses in order to extend market reach of this program. Also despite these changes and uncertainties, based on our preliminary market surveys, we believe we continue to maintain our product leadership position and our strong market share.

In addition, we are happy to report that yet again our students this year achieved superior results for our entry level and intermediate level APQE exams, the results of which came out recently. As a result, we saw increased interest and heightening enrollment trends in those two exams.

Moving on to slide 8, our self-taught higher education courses, the self-taught vertical continue to pick up momentum, with enrollments for self-taught higher education reaching about 11,300 in the quarter, a 37% increase from the same period of last year. In particular, we have registered a steady and meaningful increase in enrollments for the study process monitoring program in Tianjin. This quarter, we enrolled about 4,200 students in Tianjin in this particular program. Based on the feedbacks from our partner in Tianjin, this number we will continue to raise steadily going forward.

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