China Distance Education Holdings Limited (DL)

F4Q2010 Earnings Call Transcript

November 16, 2010 8:00 am ET


Zhengdong Zhu – Chairman and CEO

Ping Wei – CFO


Alicia Yap – Citigroup

Mark Marostica – Piper Jaffray

Jeff Lee – Signal Hill

Ella Ji – Oppenheimer



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Good evening and thank you for standing by for the China Distance Education Holdings Limited fourth quarter and full year fiscal 2010 earnings call. Today, you will hear from Mr. Zhengdong 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 the 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 the other things, the outlook for the first quarter of fiscal year 2011 and the oral statements from management on this call, as well as the company's strategic and operational plans, contain certain forward-looking statements.

Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause these 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 refer to 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

(Foreign Language)

Thank you everyone for joining us on our fourth quarter and full year fiscal 2010 results conference call. Our operating results were released earlier and available on the company’s website as well as on newswire services. We believe, we had healthy results for the fourth quarter and the full year and enrollments continued to grow across some of our key verticals. And we believe our 15% revenue growth in the year despite the fact that, we have generated virtually no revenue from our dividends that our training program Yucai due to its reorganization to 2010 and we are also pleased to providing ITAT contest related training in 2010 which together accounted for over US$2.5 million in 2009 revenue. If we look at our core business alone and exclude the impact of Yucai, our revenue and non-GAAP net profit for core business interest in 2010 increased by 21.1% and 25% respectively as compared to fiscal 2009. Additionally, we made good progress on a number of new business development fronts in fiscal 2010 including our Self-taught Higher Education Study Process Monitoring program and at the K-12 National Primary and Secondary School Educational Resource Sharing Coalition Project. I will further discuss the developments when we move to those specific verticals. Let me now walk you through our operational developments for quarter in more detail.

Starting on slide five. Net revenues for the quarter increased 11.6% year-over-year to $11.4 million excluding our guidance. For the full year, net revenues increased 15.4% year over year to $34.7 million primarily driven by online cost revenues growth in our new business initiatives, annual complementary business. In the fourth quarter, total cost enrollments were $402,000, an increase of 7.8% year-over-year, for the full year total cost enrollments reached $1.3 million, an increase of 7.1% over fiscal 2009. We achieved this healthy year-over-year growth despite the fact that we have total number of 192,000 enrollments in 2009 for ITAT contest training and Yucai business start-up training, whereas we have virtually no students for this program in 2010. In other words, if we were to exclude Yucai and ITAT with year-over-year enrollment growth while other verticals would have been 29%.

Slide seven shows some operational updates, our key service areas. Our accounting vertical performed well in the fourth quarter, with increased enrollment across the board and especially strong performance in accounting continuous education where enrollments increased at 70% year-over-year. Similar to last quarter, we continue to offer reduced prices while our accounting continuous education courses, in order to increase the overall branding awareness in our company market. This strategy has proven exciting so far as enrollment growth continues to trend strongly. APQE and CPA enrollment also registered healthy increases year-over-year while it is still low enrollment season for APQE and CPA, this is an encouraging sign that the press release we noted last quarter in our accounting test prep market has awaiting [ph] somewhat.

Moving on to slide eight, our self-taught higher education courses. As I noted earlier our self-taught higher education vertical continues to grow and it delivered a good performance in the fourth quarter. Q4 enrollments increased 136% year-over-year to 23,300. This year, we continue to expand the scope of our self-taught higher education verticals from more provinces. In addition, we are working closely with the self-taught administration office of Sichuan [ph] province as part of our platform development contract to help them to ramp the open platform to provide a steady course at long-term program as well. So as of today, we have entered into eight provinces in total including Sichuan, Yunnan, Jiangsu, Zhejiang, Hunan, Tianjin, Beijing and Hainan. On the enrollment side, four provinces have started to allow students to take advantage of the special credit course program with us. As such, enrollment for the fourth quarter of fiscal 2010 for the first time exceeded 10,000 for this program alone.

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