China Education Alliance, Inc. Announces Strong Third Quarter 2009 Financial Results

HARBIN, China, Nov. 16 /PRNewswire-Asia-FirstCall/ -- China Education Alliance, Inc. (NYSE Amex: CEU) today announced strong financial results for the three and nine months ended September 30, 2009. The Company will host a conference call Tuesday, November 17, 2009, at 10:00 a.m. EST to discuss these results.

  Financial Highlights for the Three Months Ended September 30, 2009
  -- Total revenue increased 43.3% year-over-year to $10.23 million,
     compared to revenue of $7.15 million in the third quarter of fiscal
     2008.
  -- Net income increased 51.4% year-over-year to $4.17 million, compared to
     net income of $2.76 million in the third quarter of fiscal 2008.
  -- EPS was $0.16 per fully diluted share, compared to EPS of $0.11 per
     fully diluted share in the third quarter of fiscal 2008.
  -- Operating income totalled $4.44 million, compared to an operating
     income of $2.86 million in the third quarter of 2008.
  -- Gross profit rose 42.7% to $8.22 million or 80.4% of sales, compared to
     80.7% of sales or $5.76 million in the third quarter of 2008.




"We are very pleased to report another strong quarter as demand for our high-quality educational services and our vocational training programs in China remains high," said Xiqun Yu, Chief Executive Officer of China Education Alliance, Inc. "The educational sector in China continues to experience rapid growth since quality education is so vital to meeting the demands of an ever-modernizing infrastructure. We see these quarterly results as further validation of the effectiveness of our business model and our expansion plans as well as validation of our commitment to providing the highest level of quality educational services to students and adults. We expect enrollment for our online educational services and our training centers will continue to grow rapidly and will be key drivers of our growth in the coming years."

Financial results for the three months ended September 30, 2009

China Education Alliance reported total revenue of $10.23 million for the third quarter ended September 30, 2009, an increase of 43.3% compared to $7.15 million for the third quarter of 2008. The Company's online education business generated 56.4% of its total revenue in the third quarter of 2009 compared to 63.2% for the same prior-year period. Its training center business generated 37.7% of total revenue in the third quarter of 2009 compared to 28.3% for the same prior-year period; its advertising business division generated the remaining 6.0% of total revenue in the third quarter of 2009, compared to 8.5% for the same prior-year period.

Online education revenue was $5.77 million for the third quarter of 2009, an increase of 32.9% compared to $4.34 million for the third quarter of 2008. During 2008 and 2009, the Company added several new programs for vocational studies and certification programs, which provided new revenue sources for its online education business.

Training center revenue in the third quarter of 2009 was $3.85 million, up 90.8% from $2.02 million in the third quarter last year.

Advertising revenue was approximately $0.61 million for the third quarter of 2009, decreased by 22.6% from $0.79 million in the third quarter last year.

Net income for the third quarter of fiscal 2009 was $4.17 million, representing an increase of 51.4% over third quarter 2008 net income of $2.76 million. The increase was largely the result of strong development in the Company's online division and training center division. Diluted earnings per share was $0.16, compared with $0.11 in the same period last year.

Operating income in the third quarter of fiscal 2009 increased to $4.44 million, from $2.86 million in the same period a year ago. Operating margin was 43.4% in the third quarter of fiscal 2009.

Overall cost of sales increased 45.3% to $2.01 million in the third quarter of fiscal 2009, compared to $1.38 million for the same period in fiscal 2008. Gross profit increased to $8.22 million in the third quarter of fiscal 2009, an increase of 42.7% from $5.76 million for the same quarter in fiscal 2008. Gross margin for the third quarter of fiscal 2009 was 80.4%, as compared to 80.7% for the same quarter a year ago. The online education gross margin decreased to 78.8% in the third quarter of fiscal 2009 from 84.6% for the same period in fiscal 2008. The training center gross margin increased to 80.9% for the third quarter of fiscal 2009 from 67.0% for the same period last year. Advertising gross margin was 92.0% in the third quarter of fiscal 2009, down from 94.0% of the third quarter of last year.

Selling expenses increased 30.9% to approximately $3.08 million for the third quarter of fiscal 2009, compared to $2.35 million in the third quarter of 2008, due to increased expenses in building our marketing team and higher debit card agency expenses. General and administrative ("G&A") expenses were approximately $0.43 million for the third quarter of fiscal 2009, an increase from $0.29 million in the third quarter of fiscal 2008, primarily due to an increase in salaries and office expenses in the third quarter of fiscal 2009 compared to the prior year. As a percentage of revenue, G&A expenses at 4.2% in the third quarter of fiscal 2009 was almost unchanged from 4.0% in the same period of last year.

Financial results for the nine months ended September 30, 2009

Revenue for the nine months ended September 30, 2009 was $26.55 million, representing an increase of 69.4% compared to the same nine-month period in 2008. Online education revenue was $16.07 million for the nine months ended September 30, 2009, representing an increase of 56.6% from $10.26 million for the same nine month-period in 2008. Training center revenue in the nine months ended September 30, 2009, was $8.41 million, representing an increase of 133.0% from $3.61 million in the same nine-month period last year. The increase was largely the result of strong development in the Company's online education and onsite training centers divisions.

Advertising revenue was approximately $2.08 million for the nine months ended September 30, 2009, representing an increase of 14.9% from $1.81 million for the same prior-year, nine-month period.

Net income for the nine-months ended September 30, 2009 was $10.64 million, representing an increase of 68.2% over the same nine-month period in 2008 net income of $6.33 million. Diluted earnings per share for the nine months ended September 30, 2009 was $0.44, compared with $0.26 in the same period of 2008.

Financial Condition

As of September 30, 2009, China Education Alliance had approximately $38.77 million in cash and cash equivalents, $39.63 million in working capital, and no long-term debt. Shareholders' equity was approximately $47.83 million, an increase from approximately $33.71 million on June 30, 2009. The Company generated $13.43 million in cash flow from operating activities in the third quarter of 2009.

Business Outlook

China Education Alliance believes the education industry in China will remain a fast-growth sector. The Company has experienced rapid growth by providing online and onsite, supplemental educational training services to students ages 6 to 18 and vocational training services to adults ages 18 and up.

For students ages 6 to 18, the Company provides downloadable course material and test papers online and classroom instructions onsite. All the online course material and test papers and onsite classroom instructions are provided by famed instructors in the People's Republic of China, with the purpose of helping the students pass the two most important exams during their academic life:  the high school and college entrance exams.

For adults ages 18 and up, the Company provides various vocational training including IT and other professional training programs.

  China Education Alliance has two primary business lines:
  1. Exam-Oriented Primary and Secondary School Supplemental Education: The
     Company provides online educational resources for primary and secondary
     students to download through the Internet, and offers onsite training
     by highly regarded instructors. Currently, the Company has expanded its
     business network from Heilongjiang province to Jilin, Liaoning and
     Inner Mongolia provinces. While the Company plans to penetrate into new
     areas, it will continue to explore and increase online market share in
     these four provinces. The Company's online educational resources are
     provided through its website, http://www.edu-chn.com/ . This website is
     a comprehensive education network platform that utilizes
     video-on-demand technology and houses a large database that includes
     more than 350,000 exams and test papers, as well as courseware for
     college, secondary and elementary schools.
  2. Vocational Training: The Company operates various vocational training
     programs through online services and onsite training at its main center
     in Beijing, as well as through its strategic partnerships with
     professional organizations such as the National Association of Vocation
     Education Society of China (NAVEC). The Company will focus on its
     Heilongjiang-based, self-run vocational education market, which
     includes IT training and other professional training programs, such as
     secretarial training and other professions with standard exam training.



In addition to these primary businesses, the Company is also invested in the publishing and circulation of an educational newspaper, Scientific Discovery, which is enjoying a growing distribution, currently estimated at 60,000.

"We will continue to focus on marketing our online test-preparation materials and our vocational training efforts to new markets. We will expand our market both in depth and breadth. We remain committed to our goals for development, and we expect to continue to enjoy comprehensive growth in each of our business lines as we develop and strengthen our strategic partnerships and improve our outreach efforts. We remain very confident in the future growth and development of the Company," said Mr. Xiqun Yu.

Conference Call and Webcast Details

The Company will host a conference call to discuss financial results for the third quarter ended September 30, 2009 on Tuesday, November 17, 2009 at 10:00 a.m. Eastern standard time (7:00 a.m. Pacific).

To participate in the call, please dial [phone], or [phone] for international calls, approximately 10 minutes prior to the scheduled start time. Interested parties may also listen via a live Internet webcast, which can be found at the Company's website at http://www.chinaeducationalliance.com/ .

A replay of the call will be available for two weeks from 1:00 p.m. EST on November 17, 2009, until 11:59 p.m. EST on December 1, 2009. The number for the replay is [phone], or [phone] for international calls. The passcode for the replay is 337623, and the account number is 3055. You will need both the passcode and the account number to listen to the replay. In addition, a recording of the call will be available via the company's website at http://www.chinaeducationalliance.com/ for one year.

About China Education Alliance, Inc.

China Education Alliance, Inc. is a fast growing, leading China-based company offering high-quality education resources and services to students ages 6 to 18 and adults ages 18+ (University students and professionals). For students ages 6 to 18, China Education Alliance, Inc. offers supplemental online exam-oriented training materials and on-site exam-oriented training and tutoring services. The company is providing on-line downloadable famous teachers resources and on-site face to face instructions. All resources and tutoring services are provided by famous teachers within mainland China. The purpose of online exam orientated resources and on-site tutoring is to help Chinese students ages 6 to 18 to pass the two most important, and highly competitive exams in their educational career: senior high school entrance exam and college entrance exam. For graduates and professionals age 18+, China Education Alliance provides vocational training including IT and several professional training programs. For more information about China Education Alliance, please visit http://www.chinaeducationalliance.com/ .

Safe Harbor Statement

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release, constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding our ability to prepare the company for growth, the Company's planned expansion in 2008 and predictions and guidance relating to the Company's future financial performance. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs and are not a guarantee of future performance but they involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, which may include, but are not limited to, such factors as unanticipated changes in product demand especially in the education industry, pricing and demand trends for the Company's products, changes to government regulations, risk associated with operation of the Company's new facilities, risk associated with large scale implementation of the company's business plan, the ability to attract new customers, ability to increase its product's applications, cost of raw materials, downturns in the Chinese economy, the adoption by consumers of its new game business, the unproven advertising model that is dependent on attracting a large game user base, and other information detailed from time to time in the Company's filings and future filings with the United States Securities and Exchange Commission. Investors are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release, readers are cautioned not to place undue reliance on any of them and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.

  For more information, please contact:

  At the Company:
  China Education Alliance, Inc.
   Zack Pan, CFO
   Tel:   [phone]

  Investor Relations:
  RedChip Companies, Inc.
   Jon Cunningham, Investor Relations
   Tel:   [phone] x107
   Email: 
   Web:   http://www.redchip.com/



               China Education Alliance, Inc. and Subsidiaries
                         Consolidated Balance Sheet

                                            September 30,     December 31,
                                                 2009              2008
  ASSETS                                      Unaudited          Audited

  Current Assets
      Cash and cash equivalents              $38,771,932       $23,418,098
      Advances to related parties                204,569           142,006
      Account receivables                      1,195,623           469,607
      Prepaid expenses                         2,006,620         3,437,506
      Total current assets                    42,178,744        27,467,217

  Property and equipment, net                  6,585,397         6,519,229
  Intangible, net                                346,771           481,113
  Advance on acquisition                         932,000           932,000
  Long term investment                           338,056           342,357

                                             $50,380,968       $35,741,915

  LIABILITIES AND STOCKHOLDERS' EQUITY

  Current Liabilities
      Accounts payable and accrued
       expenses                               $1,295,291          $800,692
      Deferred revenues                        1,252,563         1,227,806
      Total current liabilities                2,547,854         2,028,498

  Stockholders' Equity
      Preferred stock ($0.001 par
       value, 20,000,000 shares
       authorized, 4,502,142 and
       7,597,645 issued and
       outstanding, respectively,
       aggregate liquidation preference
       of $1,665,793 and 2,811,129,
       respectively)                           1,867,644         3,010,144


      Common stock ($0.001 par value,
       150,000,000 shares authorized,
       24,732,914 and 21,892,631issued
       and outstanding, respectively)             24,733            21,893

      Additional paid-in capital              15,283,404        10,751,732
      Statutory reserve                        1,990,238         1,990,238
      Accumulated other comprehensive
       income                                  2,775,834         2,688,080
      Retained earnings                       25,891,261        15,251,330
      Total stockholders' equity before
       related parties offset                 47,833,114        33,713,417

                                             $50,380,968       $35,741,915




  The accompanying notes are an integral part of these financial statements.
               China Education Alliance, Inc. and Subsidiaries
                    Consolidated Statements of Operations
                                 (Unaudited)

                             Three months ended       Nine months ended
                               September 30,            September 30,
                              2009        2008        2009         2008
  Revenues
      Online education
       revenues            $5,768,667  $4,339,119  $16,068,783  $10,259,674
      Training center
       revenues             3,853,285   2,019,933    8,408,331    3,608,317
      Advertising revenues    609,726     787,337    2,077,016    1,807,509
      Total revenue        10,231,678   7,146,389   26,554,130   15,675,500

  Cost of Goods Sold
      Online education
       costs                1,223,984     667,373    3,457,403    1,489,653
      Training center
       costs                  736,215     667,066    2,102,654    1,321,523
      Advertising costs        48,491      47,622      173,405      133,209
      Total cost of goods
       sold                 2,008,690   1,382,061    5,733,462    2,944,385

  Gross Profit
      Online education
       gross profit         4,544,683   3,671,746   12,611,380    8,770,021
      Training center
       gross profit         3,117,070   1,352,867    6,305,677    2,286,794
      Advertising gross
       profit                 561,235     739,715    1,903,611    1,674,300
      Total gross profit    8,222,988   5,764,328   20,820,668   12,731,115

  Operating Expenses
      Selling expenses      3,079,340   2,352,018    7,196,522    4,965,036
      Administrative          425,990     288,083    1,320,102      935,830
      Depreciation and
       amortization           275,909     264,988      766,260      680,819
      Total operating
       expenses             3,781,239   2,905,089    9,282,884    6,581,685

  Other Income (Expense)
      Value-added tax
       refund                       0       5,570           --      534,067
      Interest income          36,085      37,991       84,624       94,427
      Investment loss          (1,275)         --       (5,364)          --
      Total other income       34,810      43,561       79,260      628,494

  Net Income Before
   Provision for Income
   Tax                      4,476,559   2,902,800   11,617,044    6,777,924

  Provision for Income
   Taxes                      301,980     145,889      977,112      451,097

  Net Income               $4,174,579  $2,756,911  $10,639,932   $6,326,827

  Basic Earnings Per Share      $0.18       $0.13        $0.48        $0.30
  Diluted Earnings Per
   Share                        $0.16       $0.11        $0.44        $0.26

  Basic Weighted Average
   Shares Outstanding      23,069,062  21,434,129   22,341,051   21,434,129
  Diluted Weighted Average
   Shares Outstanding      25,566,705  24,176,509   24,254,521   24,796,069

  The Components of Other
   Comprehensive Income
      Net income           $4,174,579  $2,756,911  $10,639,932   $6,326,827
      Foreign currency
       translation
       adjustment             274,480      80,723       87,754    1,412,564

  Comprehensive Income     $4,449,059  $2,837,634  $10,727,686   $7,739,391





                    Consolidated Statements of Cash Flows
                                 (Unaudited)

                                            Nine Months Ended September 30,
                                                2009              2008
  Cash flows from operating activities
      Net Income                             $10,639,932        $6,326,827
      Adjustments to reconcile net cash
       provided by
      Operating activities
      Depreciation and amortization            1,176,723         1,193,275
      Stock based compensation                   442,450                --
      Loss on equity investment                    5,132                --
      Net change in assets and
       liabilities
      Account receivables                       (724,876)         (296,276)
      Prepaid expenses and other               1,439,230          (972,961)
      Advances to related parties                (62,217)         (943,733)
      Accounts payable and accrued
       liabilities                               492,655           289,618
      Deferred revenue                            21,776           751,059
  Net cash provided by operating
   activities                                 13,430,805         6,347,809

  Cash flows from investing activities
      Purchases of fixed assets               (1,091,554)       (1,726,750)
      Long-term investment                            --          (431,831)
  Net cash (used in) investing
   activities                                 (1,091,554)       (2,158,581)

  Cash flows from financing activities
      Warrants exercised                       2,949,559         2,667,559

  Effect of exchange rate                         65,024         1,412,565

  Net increase in cash                        15,353,834         8,269,352

  Cash and cash equivalents at
   beginning of year                          23,418,098        11,778,954

  Cash and cash equivalents at end of
   year                                      $38,771,932       $20,048,306

  Supplemental disclosure of cash flow
   information
      Interest paid                                  $--               $--
      Taxes paid                                $870,797           $94,737

  Non-cash investing and financing
   activities
      Conversion of preferred stock to
       common                                 $1,142,500          $667,800


DATASOURCE: China Education Alliance, Inc.



CONTACT: At the Company - Zack Pan, CFO, China Education Alliance, Inc.,

[phone]; Investor Relations - RedChip Companies, Inc., Jon Cunningham,

Investor Relations, [phone], Ext. 107, or  



Web site:  http://www.chinaeducationalliance.com/

http://www.redchip.com/ 

Copyright