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Noah Education Holdings, Ltd. (NED)

Q4 2010 Earnings Call

August 31, 2010 8:00 AM ET


Dong Xu – Chairman and CEO

Jerry He – CFO and Executive Vice President

Dora Li – Vice President, Finance and Controller.


Ella Ji – Oppenheimer

Tony Kamin – Eastwood Partners



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Good day, ladies and gentlemen. And welcome to the Noah Education Fourth Quarter and Full Fiscal Year 2010 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Following managements prepared remarks there will be a Q&A session. As a reminder, this conference is being recorded.

Joining the conference today are Mr. Xu Dong, Chairman and CEO; Mr. Jerry He, CFO and Executive Vice President; and Ms. Dora Li, Vice President of Finance and Controller.

After the U.S. markets closed yesterday afternoon, Noah issued a press release announcing its fourth and full quarter fiscal year 2010 financial results. The release is available on the company's IR webpage at along with the presentation for today's call. This call is also being broadcast live over the Internet.

Before management's presentation, I would like to refer to the Safe Harbor statement in connection with today's conference call. This call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including certain expectations and goals, which are subject to numerous assumptions and risks.

Forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond our control, which may cause actual results to differ materially from any future results or achievements implied by such forward-looking statements.

The company's actual results could differ materially from those contained in the Risk Factors section of the company's final prospectus or recent filings filed with the Securities and Exchange Commission. Unless required by law, the company undertakes no obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise.

I would now like to turn the call over to Noah's Chairman and CEO, Mr. Dong Xu. Sir, please go ahead.

Dong Xu

Good morning and to some good evening. Thank you for joining us today for our fourth quarter and fiscal year 2010 results conference call. As you have seen from our earnings release our results this quarter were impacted by disruptions in our channel realignment initiative, as well as by increasing competition in China’s ELP space.

Although, revenue for the fourth quarter declined 71.9% over the same period last year and we recorded a net loss of 83.5 million Renminbi, we have actively responded to the challenges we encountered by adjusting our approach, implementing new relationship building interactions with our distributors and introducing costs reduction initiative to support our bottom line as we work through this traditional – transitional period. Jerry will provide you with additional details on this initiative in a little while.

Despite the current challenges in our ELP business, we remain committed to keeping our business healthy and seeking out avenues to maximize revenue opportunities and reach our target customers.

In addition to our assets to expedite the recovery of the ELP business, we are heavily focused on driving growth from our education services business. Little New Star continues to meet or exceed our expectations and we believe its ever expanding network of schools will provide meaningful growth to our business going forward.

Yesterday, we completed our acquisition of Wentai Education, which provides an additional revenue stream and further boost the growth prospect of our education services business. Wentai’s unique business model and reputation for academic excellence are at the forefront of the trend in China towards top quality education and we believe that Wentai’s experienced management team supported by the funds from the acquisition will fully capitalize on this trend in order to drive business expansion.

The LNS and Wentai businesses put us in a good position in China’s education services space, and we are committed to further solidifying this position through the acquisition of additional complimentary business going forward.

Although, we have encountered various challenges in recent months, I believe we have a sound strategy in place, as well as management team committed to stabilizing our business and restoring growth. We are focused on the stabilization of our ELP business and believe the measures we have taken thus far will lead to a recovery.

At the same time, we understand the dynamics of the increasingly competitive and maturing ELP industry, and as such, we are actively working to extract and drive growth from our education services business, which continues to show robust growth prospect as a highly resilient and visibility industry and offers attractive margin profile.

With that, I will now turn the call over to Dora Li to walk you through our financial performance for the quarter.

Dora Li

Thank you, Chairman. As you’ve seen from our release, net revenue in the fourth quarter declined 71.9% year-over-year to RMB33.5 million, as we experienced disruptions from our distribution channel realignment in each area, and we saw increase competitive pressure in the ELP space.

Our actual revenue for the fourth quarter was also below our estimated revenue figure reported on July 26th due to returns recorded from discontinued distributors.

DLD sales were hardest hit by these disruptions and by the increasing competition in student’s notebook. And as a result, net revenue in this segment declined to RMB0.08 million.

KLD sales fell 87.9% to RMB4 million and E-dictionary revenue declined 40.2% to RMB18.9 million. E-dictionary sales held up comparatively well due to revenue we received from ODM contracts from our partnership with Franklin Electronic Publishers.

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