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Noah Education Holdings Ltd. (NED)

F4Q12 Earnings Call

August 30, 2012 08:00 am ET


Dong Xu - CEO

Dora Li - CFO


Kun Tao - Roth Capital Partners



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Good morning and good evening, ladies and gentlemen. Welcome to Noah Education Holdings Ltd’s fourth quarter and full fiscal year 2012 earnings conference call. At this time, all participants are in a listen-only mode. Following management’s prepared remarks, there will be a Q&A session. As a reminder, this conference is being recorded.

Joining the conference today are Mr. Dong Xu, CEO and Ms. Dora Li, CFO. After the US markets closed yesterday afternoon, Noah issued a press release announcing its unaudited financial results for the fourth quarter and full fiscal year 2012.

The release is available on the company’s IR website 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 Factor 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.

Please take note that all numbers expressed in this conference call are in renminbi and all comparisons refer to year-on-year comparisons unless otherwise stated. I would now like to turn the call over to Noah’s Chairman and CEO, Mr. Dong Xu. Mr. Xu, please go ahead.

Dong Xu

[Foreign Language]

Thank you for joining us today on our fourth quarter and full fiscal year 2012 earnings conference call. I hope you’ve all had a chance to read our earnings press release.

[Foreign Language]

Our fourth quarter is traditionally one of our strongest quarters and I am very pleased to report that we delivered a year-over-year revenue growth of 58% exceeding the top end of our guidance by 20%.

[Foreign Language]

The robust topline growth was driven by our kindergarten operation, the largest contributor of all of our businesses with a year-over-year growth of 133% fueled by organic and acquisitive growth from Yuanbo Education.

[Foreign Language]

Excluding the impact from one-time impairment loss on goodwill and intangible assets, our operations also returned to profitability and recorded an operating income of over 6 million and achieved breakeven for the fiscal year.

[Foreign Language]

While Dora will try to walk you through our financial performance, I am excited to announce that we have expanded our kindergarten network through the acquisitions of DDK Consulting and Xiaoxiao Education. These acquisitions are in line with our kindergarten strategy which is vital entry point of our life long education model and accurately demonstrates our ability to execute to achieve a sustainable performance through organic and acquisitive growth. Kindergarten is the core of our three focus areas and will continue to be a key growth driver down the line.

[Foreign Language]

DDK Consulting and Xiaoxiao Education operated in the Zhejiang province around the Yangtze River Delta. DDK Consulting currently operates four kindergartens and one early childhood learning center and has a total enrollment of 1200. It’s total consideration is RMB 14.5 million.

[Foreign Language]

Xiaoxiao education is focused on operating kindergartens and children’s art and music training centers. It currently operates six kindergartens and one children’s art and music training centre and has a total enrollment of 1300. The total consideration of the acquisition is RMB 33.56 million

[Foreign Language]

Both transactions will be funded by our own cash reserves subject to customary closing conditions including regulatory approval. We expect revenue contributions from both acquisitions to come in the second quarter of fiscal 2013.

[Foreign Language]

Looking ahead, kindergarten will remain our focus area as we expect our top line to grow as the [ramp up] of kindergarten operations continue with utilization rate and operational efficiency is expected to improve further, we are confident that our gross margin will be sustainable at around 45% and operations will stay profitable as demonstrated in the previous quarter.

Our prudent business model is well aligned with the growth opportunity in the education space which enables us to generate a steady cash flow [throughput] our organic and acquisitive growth initiatives going into 2013.

[Foreign Language]

Dora Li, our CFO will now walk through our financial and operational performance as well as the guidance for the next quarter.

Dora Li

Thank you Mr. Xu. As the details of financial results for the fourth quarter and full fiscal 2012 are available in our earnings release, I would like to highlight a few key financial metrics and a focus on year-over-year comparison for the fourth quarter and the full fiscal 2012 with all numbers in RMB unless otherwise stated.

We're very pleased to report that Noah continued to grow in the fourth quarter with strong year-over-year improvement in both top line and the margins.

On slide five, net revenue for the quarter was up 58% to RMB47 million for the year. Net revenue was up 74% to RMB163 million. The strong improvement was mainly driven by the organic and acquisitive growth from our kindergarten operations across all brands and incremental revenue from the new school opened since September 2011.

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