China Distance Education CEO Discusses Q1 2012 Results - Earnings Call Transcript

China Distance Education Holdings Limited ( DL)

Q1 2012 Earnings Call

February 29, 2012 8:00 p.m. ET


Zhengdong Zhu – Chairman, CEO

Ping Wei – Chief Financial Officer


Janice Chen – Piper Jaffray

Ella Ji – Oppenheimer

Philip Ehrmann – Jupiter



Good evening. And thank you for standing by for the China Distance Education Holdings Limited First Quarter Fiscal Year 2012 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 management will be available to answer your questions.

Before we start, we would like to remind listeners that this conference call contains forward-looking statements. These statements are made under the Safe Harbor provisions of the US Private Securities Litigation Reform Act of 1995.

Among other things, the outlook for the first quarter of fiscal year 2012 and 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 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 obligations 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 on the conference call. In addition, a webcast of this conference call is available on the company s Investor Relations website at

I will now like to 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 first quarter fiscal 2012 results conference call. Our operating results were released earlier and available on the company s website, as well as our new slide services.

We are pleased to report a strong start to the year and what s typically our lowest revenue quarter, delivering revenues far exceeding our guidance, net profit on both GAAP and non-GAAP basis. Meanwhile, total cash collections from operations in the quarter exceeded RMB100 million for the fourth time in our operating history.

Our strong performance was supported by broad based enrollment growth, of course our traditional online education services increased in average student payment in our online cash operation courses and growing contribution from our new investment.

In addition to our strong performance in the quarter, we have made significant progress in the divestment of a new added dynamic content delivery platform from educational content and services. After years of research and divestment in fiscal 2012, we rolled out mobile learning solutions for test-preparation courses at the end of calendar year 2011.

With the mobile learning platform, our students can now view our courses directly from their iPhones and android powered smartphones. With growing smartphone usage across China, our students will now have the freedom and flexibility to access our content at times and places that best suits their needs.

We also wrote out our new high definition source, this new course features fine quality high definition streaming video with teachers doing their lecture using an interactive to the blackboard.

Teachers can show prepared online, show illustrations and highlight the key points on the detailed blackboard creating a high quality visual classroom learning experience to our students.

We have also recently obtained a mobile value added telecommunication business license or ST license. In January of this year, we developed and introduced our daily mobile learning magazine for some of our main exams.

The magazine is pushed to the subscriber s smartphone everyday, providing students with learning and access among other things to help them improve their studying habits and get more out of our courses.

This new platforms and learning solutions are major improvements to our traditional formats and has been very well received by the market, resulting us in (inaudible) since their introduction.

As an innovative online education company, we re constantly seeking ways to leverage new technologies that provide our students with more comprehensive and excessive educational products and services. We will continue to leverage our strength in technology and education as we go forward to maintain our leadership position in the online education market.

Let me now walk you through our operational developments for the quarter in more detail. Starting on slide six. Net revenues from continued operations for the quarter increased 35.8% year-over-year to US$9.9 million, exceeding our guidance.

In particular, net revenues for our online education services grew approximately 49% as compared to the same period last year, a clear acceleration from prior periods. Total cost enrollments from continued operations were 828,000, an increase of 62.1% year-over-year.

The strong enrollment growth, supported in part by new platforms and solutions these costs earlier helped to drive our strong top line growth for the quarter. This results indicate to us that our efforts at improving our online learning technology and enhancing the learning experience for all our students is starting to pay off.

Let me now walk you through our verticals in more detail. Starting with our accounting vertical on slide eight. We had a strong performance in our online accounting vertical overall with total enrollment increasing 65.2% year-over-year, this was supported by especially robust performance in our company s continued education, where enrollment increased 19.6% year-over-year.

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