China Distance Education Holdings CEO Discusses F2Q11 Results - Earnings Call Transcript

China Distance Education Holdings, Ltd. (DL)

F2Q11 (Qtr End 03/31/2011) Earnings Call

May 17, 2011 8:00 am ET


Zhengdong Zhu - Chairman and CEO

Ping Wei - CFO


Grace Lam - Citi

Mark Marostica - Piper Jaffray

Julie Chen - TriPoint



Good evening, and thank you for standing by for the China Distance Education Holdings Limited second quarter fiscal 2011 earnings conference 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's management will be available to answer your questions.

Before we start, we would like to remind the listeners that this conference call 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 of the second quarter of fiscal year 2011 and oral statements from management on this call, as well as the company's strategic and operational plans, contain forward-looking statements.

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 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 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.

Zhengdong Zhu

Thank you, everyone for joining us on our second quarter fiscal 2011 results conference call. Our operating results were released earlier and available on the company's website as well as on Newswire services. We are pleased to report strong second quarter results with steady revenue growth exceeding our guidance range and increasing profitability on both our GAAP and on non-GAAP basis.

Our performance was driven by ASP and enrollment growth in our online verticals with especially from performance from our new verticals including healthcare and accounting continuous education. Good collection on our test preparation book sales also contributed to this quarter's revenue growth, as we recognized most of our book sales on a cash collection basis.

By delivering a second consecutive quarter of steadily improving financial and operational results, we are demonstrating the variability of our strategy to provide a comprehensive lifelong online learning system for students and professionals.

The investments we have made over the years to extend our reach across verticals from professional education to self-taught education in K-12 and business startup training have taken shape and are beginning to payoff. And we have recently entered into a new partnership, which greatly will open up new market opportunities and further strengthen our offering in existing markets.

By levering our stable IT platform and our centralized marketing, distribution and student service processes, we have begun to integrate this broad range of verticals and business line into a comprehensive offering. And basically, we are well positioned to deliver a new (phase) of growth with multiple revenue streams moving forward.

Well I would say, in our strategy modeled way, our investment progress provide us with increased confidence in our ability to do reportable growth in the near and the long-term.

Let me now walk you through our operational development for the quarter in more detail, starting on Slide 5. Net revenues for the quarter increased 27.2% year-over-year to US$1.5 million exceeding our guidance. And total cost enrollments were US$230,000, an increase of 12.3% year-over-year.

As noted, this result was supported by steady enrollments and ASP growth across our online verticals, especially healthy performance from our accounting certificate exams, accounting continuous education, healthcare and self-taught higher education courses, as well as effective cash collection.

I will discuss these items in more detail in the coming slides.

Zhengdong Zhu

Starting with our accounting vertical on Slide 7. Our accounting vertical performed well in the second quarter, with total accounting enrollment increasing 10.2%, and accounting continuous education enrollment growing at impressive 54.9%. APQE exam was held last weekend. This quarter online APQE enrollments were lower than the same period of last year. However, on a test season basis, online APQE enrollments were comparable year-over-year.

This quarter online CPA enrollments increased about 20% as compared to the same period of last year. While we are precautious on all our enrollment chains and will appear a highly enrollment season for CPA exams, we are encouraged by the positive trend we have seen so far.

More importantly, we are happy to report to our investors that ASP increased by 23% across our online, regular and premium accounting test preparation courses, proving that with our premium brand, we reduced prices and generated high ASP from online test preparation courses, differentiating us from other low price providers.

Let's turn to Slide 8, about our non-accounting cost offering. We have made steady progress over the past few quarters with our self-taught higher education vertical, evident by a 24.1% enrollment growth year-over-year, as we continue to expand our Study Process Monitoring Program.

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