ACROFAN

Tarena International, Inc. Announces Fourth Quarter and Full Year 2018 Results

BEIJING, March 12, 2019 /PRNewswire/ -- Tarena International, Inc. (NASDAQ: TEDU) ("Tarena" or the "Company"), a leading provider of professional education services in China, today announced its unaudited financial results for the fourth quarter and full year ended December 31, 2018. Fourth Quarter 2018 Highlights Net revenues decreased by 0.3% year-over-year to RMB615.3 million, from RMB617.0 million in the same period in 2017. Gross profit decreased by 26.1% year-over-year to RMB330.6 million, from RMB447.4 million in the same period in 2017. Operating loss was RMB195.7 million, compared to an operating income of RMB72.9 million in the same period in 2017. Non-GAAP operating loss, which excluded share-based compensation expenses, was RMB166.2 million, compared to a non-GAAP operating income of RMB99.6 million in the same period in 2017. Net loss was RMB164.7million, compared to a net income of RMB74.6 million in the same period in 2017. Non-GAAP net loss, which excluded share-based compensation expenses, was RMB135.2million, compared to a non-GAAP net income of RMB101.3 million in the same period in 2017. Loss per American Depositary Share ("ADS") was RMB3.07. Non-GAAP loss per ADS, which excluded share-based compensation expenses, was RMB2.52. Each ADS represents one Class A ordinary share. The Company repurchased 591,145 Class A ordinary shares from the open market for an aggregate consideration of US$4.3 million in the fourth quarter of 2018. Cash, cash equivalents and time deposits totaled RMB655.2 million as of December 31, 2018, compared to RMB1,119.7 million as of December 31, 2017. During the quarter, RMB29.4 million was used for repurchasing of Class A ordinary shares. In addition, the Company had RMB14.7 million in restricted cash as of December 31, 2018. Deferred revenue totaled RMB664.1 million as of December 31, 2018, compared to RMB302.2 million as of December 31, 2017, representing an increase of 119.9%. Kid education business has contributed RMB312.7 million to the increase in deferred revenue. Total student enrollments in adult education business, defined as the total number of new students recruited and registered, in the fourth quarter of 2018 increased by 6.3% year-over-year to 36,394. Total course enrollments in adult education business, defined as the cumulative number of courses enrolled in by our students, in the fourth quarter of 2018 decreased by 9.1% year-over-year to 31,955. Total number of learning centers in adult education business was 184 as of December 31, 2018 and December 31, 2017. Total student enrollments in kid education programs, defined as the total number of students recruited and registered in our kid education programs, in the fourth quarter of 2018 increased by 365.7% year-over-year to 15,233. Fiscal Year 2018 Highlights Net revenues increased by 13.5% year-over-year to RMB2,239.3 million, from RMB1,973.8 million in the same period in 2017. Gross profit decreased by 4% year-over-year to RMB1,319.8 million, from RMB1,374.6 million in the same period in 2017. Operating loss was RMB599.1 million, compared to an operating income of RMB169.2 million in the same period in 2017. Non-GAAP operating loss, which excluded share-based compensation expenses, was RMB474.9 million, compared to a non-GAAP operating income of RMB246.6 million in the same period in 2017. Net loss was RMB597.8 million, compared to a net income of RMB184.8 million in the same period in 2017. Non-GAAP net loss, which excluded share-based compensation expenses, was RMB473.5 million, compared to a non-GAAP net income of RMB262.2 million in the same period in 2017. Loss per American Depositary Share ("ADS") was RMB10.85. Non-GAAP loss per ADS, which excluded share-based compensation expenses, was RMB8.58. Each ADS represents one Class A ordinary share. The Company repurchased 3,768,495 Class A ordinary shares from the open market for an aggregate consideration of US$30.3 million in 2018. Total student enrollments in adult education business, defined as the total number of new students recruited and registered, during fiscal year 2018 increased by 14.7% year-over-year to 147,692. Total course enrollments in adult education business, defined as the cumulative number of courses enrolled in by our students, in fiscal year 2018 increased by 3.3% year-over-year to 124,073. Total student enrollments in kid education programs, defined as the total number of students recruited and registered in our kid education programs, in fiscal year 2018 increased by 363.1% year-over-year to 44,368. "We are pleased with the rapid growth from our kid education business during 2018. More than 100 learnings centers were added to our kid education business, including 21 from acquisition in early 2018. By the end of 2018, we have expanded to a total of 148 kid learnings centers, covering 53 cities. In this quarter, Tarena's kid education business delivered outstanding results in student enrollment, centers layout, course development, and revenue contribution. The student enrollment of kid education business continued its rapid growth of over 360% year over year increase to reach 15,233 students. Furthermore, kid education net revenues reached at RMB67.2 million this quarter, representing 11% of our total net revenues." Said Mr. Shaoyun Han, Tarena's Chairman and Chief Executive Officer. "I am also very pleased to see the enrollment of adult education business during this quarter was 36,394, achieving a year over year growth of 6.3%. The State Council recently issued the Implementation Plan for the National Vocational Education Reform, reflecting government's emphasize on the teaching quality in vocational training area and the determination to promote cooperation between schools and enterprises. In 2018, we successfully explored a Featured Program business model targeted at university students through partnerships with universities. Such a new enrollment model will become one of important drivers of our adult business growth in the future. By closing about 40 under-performing adult centers in 2018, we effectively controlled the operating costs. Looking forward into 2019, we expect our adult business to achieve significant improvement in profitability along with a steady student enrollment, and kid business to continue its momentum to grow robustly and make greater contribution to the company." Mr. Han concluded. Mr. Yuduo Yang, Tarena's Chief Financial Officer, said, "During this quarter, we continued to emphasize on resources distribution, as the Company closed or merged a total of 12 adult learning centers and opened only one center in the city of Baoding. By the end of this quarter, company operated 184 adult learning centers in 70 cities. By optimizing seating layout, our seat utilization rate improved to 71.6%, as compared to the utilization rate of 69.6% in the same period last year. In 2018, our bottom line was negatively impacted by a larger number of students enrolled through university partnership where revenue is recognized over longer period and by the fact that most of the kid education learning centers are still in the ramp up period. With great market potential and company's unique strength in IT training area, we believe that our kid education business and our university partnerships will provide a strong foundation for the Company to grow in the coming years." Fourth Quarter 2018 Results Net Revenues Net revenues decreased by 0.3% to RMB615.3 million in the fourth quarter of 2018, from RMB617.0 million in the same period in 2017. RMB67.2 million of net revenue was contributed by our kid education business in the quarter. We charge students enrolled through the retail channel our standard tuition fee and provide students enrolled through the university channel a discount of approximately RMB4,000 per person per course. Our student enrollment mix from retail and university channel was 74%/26% and 84%/16% in the fourth quarter of 2018 and 2017, respectively. Cost of Revenues Cost of revenues increased by 67.9% to RMB284.8 million in the fourth quarter of 2018, from RMB169.6 million in the same period in 2017. The increase in our adult education programs cost of revenues was mainly due to an increase in personnel cost and welfare expenses resulting from growing number of teaching and advisory staff at our learning centers, rental cost resulting from the increasing enrollment through university channel, as well as depreciation expenses and other supplier cost for the growing number of learning centers. Gross Profit and Gross Margin Gross profit decreased by 26.1% to RMB330.6 million in the fourth quarter of 2018, from RMB447.4 million in the same period in 2017. Gross margin was 53.7% in the fourth quarter of 2018, compared with 72.5% in the same period in 2017. The decrease in gross margin was mainly due to the rapid expansion of our learning centers in kid education programs and university programs. Operating Expenses Total operating expenses increased by 40.5% to RMB526.3 million in the fourth quarter of 2018, from RMB374.5 million in the same period in 2017. Total non-GAAP operating expenses, which excluded share-based compensation expenses, increased by 42.8% to RMB497.3 million in the fourth quarter of 2018, from RMB348.3 million in the same period in 2017. Total share-based compensation expenses allocated to the related operating expenses increased by 10.5% to RMB29.0 million in the fourth quarter of 2018, from RMB26.3 million in the same period in 2017. Selling and marketing expenses increased by 32.7% to RMB291.5 million in the fourth quarter of 2018, from RMB219.7 million in the same period in 2017. The increase was mainly due to an increase in personnel cost and welfare expenses related to the growth in our selling and marketing headcount, and expanded marketing efforts as we expanded our course offerings and network of learning centers. General and administrative expenses increased by 54.9% to RMB189.7 million in the fourth quarter of 2018, from RMB122.5 million in the same period in 2017. The increase was mainly due to an increase in personnel cost and welfare expenses for our increased number of general and administrative personnel to support our growing operations, as well as an increase in bad debt allowance which was based on the recent assessment of collectability. Research and development expenses increased by 39.0% to RMB45.1 million in the fourth quarter of 2018, from RMB32.4 million in the same period in 2017. The increase was mainly due to an increase in personnel cost and welfare expenses of our instructors allocated to their content development activities for our courses, as well as growing number of research and development staff as we expanded our course offerings and operations. Operating Loss Operating loss was RMB195.7 million for the fourth quarter of 2018, compared to operating income of RMB72.9 million in the same period in 2017. Non-GAAP operating loss, which excluded share-based compensation expenses, was RMB166.2 million, compared to non-GAAP operating income of RMB99.6 million in the same period in 2017. Interest Income Interest income was RMB4.1 million in the fourth quarter of 2018, compared to RMB7.5 million in the same period in 2017. Interest income in both periods consisted of interest earned on our cash, cash equivalents and time deposits in commercial banks and interest income recognized in relation to our installment payment plan for students. Other Income Other income was RMB2.3 million in the fourth quarter of 2018, compared to RMB8.7 million income in the same period in 2017. The income was mostly from bank product investment gain. Foreign Exchange Gain (Loss) Foreign exchange loss was RMB0.1 million in the fourth quarter of 2018, compared to RMB1.8million foreign exchange loss in the same period in 2017. Income Tax Expense The Company recorded an income tax benefit of RMB24.6 million in the fourth quarter of 2018, compared to RMB12.7million income tax expense in the same period in 2017. The tax benefit was due to that the Company recognized deferred tax assets for the losses incurred in this quarter. Net Loss As a result of the foregoing, net loss was RMB164.7 million in the fourth quarter of 2018, compared to net income of RMB74.6 million in the same period in 2017. Non-GAAP net loss, which excluded share-based compensation expenses, was RMB135.2 million, compared to a non-GAAP net income of RMB101.3 million in the same period in 2017. Basic and Diluted Loss per ADS Loss per ADS were RMB3.07 in the fourth quarter of 2018. Non-GAAP loss per ADS, which excluded share-based compensation expenses, were RMB2.52. Cash Flow Net cash outflow from operating activities for the fourth quarter of 2018 was RMB13.1 million. Capital expenditures for the fourth quarter of 2018 were RMB69.3 million. There was repurchase of 3,768,495 Class A ordinary shares from the open market for an aggregate consideration of US$30.3 million, an aggregate payment of cash dividends of US$6.8 million (US$0.12 per ADS) in June 2018 to shareholders of record as of the close of business on April 5, 2018, as well as an aggregate payment of RMB72.2 million for equity investments during 2018. Shares Issued and Outstanding As of December 31, 2018, the Company had 45,873,037 Class A and 7,206,059 Class B ordinary shares outstanding. Each ADS represents one Class A ordinary share. Fiscal Year 2018 Results Net Revenues Net revenues increased by 13.5% to RMB2,239.3 million in 2018, from RMB1,973.8 million in 2017. RMB175.6 million of net revenue was contributed by our kid education business in 2018. The increase in our adult education programs was primarily due to increased course enrollments and an increase in the standard tuition fees. Total course enrollments in adult education business in 2018 increased by 3.3% to 124,073, from 120,162 in 2017, which was mainly driven by the popularity of our course offerings. Cost of Revenues Cost of revenues increased by 53.5% to RMB919.5 million in 2018, from RMB599.2 million in 2017. The increase in our adult education programs cost of revenues was mainly due to an increase in personnel cost and welfare expenses resulting from growing number of teaching and advisory staff at our learning centers, depreciation expenses and other supplier cost for the growing number of learning centers. Gross Profit and Gross Margin Gross profit decreased by 4% to RMB1,319.8 million in 2018, from RMB1,374.6million in 2017. Gross margin was 58.9% in 2018, compared with 69.6% in 2017. The decrease in gross margin was mainly due to an increase in personnel cost and welfare expenses for teaching and advisory staff, as well as the rapid expansion of our learning centers in kid education programs and joint major programs. Operating Expenses Total operating expenses increased by 59.2% to RMB1,918.9 million in 2018, from RMB1,205.4 million in 2017. Total non-GAAP operating expenses, which excluded share-based compensation expenses, increased by 59.1% to RMB1,796.9 million in 2018, from RMB1,129.3 million in 2017. Total share-based compensation expenses allocated to the related operating expenses increased by 60.2% to RMB122.0 million in 2018, from RMB76.1 million in 2017. Selling and marketing expenses increased by 55.5% to RMB1,108.6 million in 2018, from RMB713.1 million in 2017. The increase was mainly due to an increase in personnel cost and welfare expenses related to the growth in our selling and marketing headcount, and expanded marketing efforts as we expanded our course offerings and network of learning centers. General and administrative expenses increased by 63.9% to RMB643.1 million in 2018, from RMB392.3 million in 2017. The increase was mainly due to an increase in personnel cost and welfare expenses for our increased number of general and administrative personnel to support our growing operations. Non-GAAP general and administrative expenses, which excluded share-based compensation expenses, increased by 68.3% to RMB558.5 million, from RMB331.8 million in 2017. Research and development expenses increased by 67.2% to RMB167.3 million in 2018, from RMB100.0 million in 2017. The increase was mainly due to an increase in personnel cost and welfare expenses of our instructors allocated to their content development activities for our courses, as well as growing number of research and development staff as we expanded our course offerings and operations. Operating Loss Operating loss was RMB599.1 million in 2018, compared to operating income of RMB169.2 million in 2017. Non-GAAP operating loss, which excluded share-based compensation expenses, was RMB474.9 million, compared to non-GAAP operating income of RMB246.6 million in 2017. Interest Income Interest income was RMB24.5 million in 2018, compared to RMB21.0 million in 2017. Interest income in both periods consisted of interest earned on our cash, cash equivalents and time deposits in commercial banks and interest income recognized in relation to our installment payment plan for students. Other (Loss)/ Income Other loss was RMB1.1 million in 2018, compared to RMB26.7 million other income in 2017. There was an investment loss of RMB10.8 million recognized in the year of 2018 related to its available for sale investment and equity method long-term investment's performance. Foreign Exchange Gain (Loss) Foreign exchange gain was RMB5.0 million in 2018, compared to RMB6.3 million foreign exchange loss in 2017. The gain was mainly attributable to the depreciation of China's RMB against U.S. Dollar. Income Tax Expense The Company recorded an income tax expense of RMB27.0 million in 2018, compared to RMB25.8 million income tax expense in 2017. There was income tax expense of RMB24.7 million arisen from payment of dividend made to offshore parent company in the second quarter of 2018, excluding which, the decrease was mainly due to a decrease in profits. Net Loss As a result of the foregoing, net loss was RMB597.8 million in 2018, compared to net income of RMB184.8 million in 2017. Non-GAAP net loss, which excluded share-based compensation expenses, was RMB473.5 million, compared to a non-GAAP net income of RMB262.2 million in 2017. Basic and Diluted Loss per ADS Basic and diluted loss per ADS were RMB10.85 in 2018. Non-GAAP basic and non-GAAP diluted loss per ADS, which excluded share-based compensation expenses, were RMB8.58. Cash Flow Net cash inflow from operating activities for 2018 was RMB114.6 million. Capital expenditures for 2018 were RMB268.5 million. Business Outlook Based on the Company's current estimates, total net revenues for the first quarter of 2019 are expected to be between RMB395.0 million and RMB415.0 million, representing a decrease of 2.9% to an increase of 2.1% on a year-over-year basis. The Company also expects its total net revenues for the full year of 2019 to be between RMB2,430.0 million and RMB2,580.0 million, representing an increase of 8.5% to 15.2% on a year-over-year basis. This guidance is based on the current market conditions and reflects the Company's current and preliminary estimates of market and operating conditions, which are subject to change. Conference Call Company management will hold an earnings conference call and live webcast to discuss the Company's results at 9:00PM U.S. Eastern Time on Monday, March 11, 2019 (9:00AM Beijing Time on Tuesday, March 12, 2019). United States: +1 845 675 0437 or +1 866 519 4004 Hong Kong: +852 3018 6771 or 800 906 601 China Mainland: 800 819 0121 or 400 620 8038 Taiwan: +886 255723895 or 0 809 091 568 Canada: +1 866 386 1016 United Kingdom: +44 203 621 4779 International: +65 6713 5090 Conference ID: 6129907 Please dial in 10 minutes before the call is scheduled to begin and provide the conference ID to join the call. A replay of the call will be available approximately 2 hours after the conclusion of the conference call through March 19, 2019. The dial-in details for the replay are: United States: +1 855 452 5696 Hong Kong: 800 963 117 China: 800 870 0206 Taiwan: 00 801232482 Canada: +1 855 759 0869 United Kingdom: 0 808 234 0072 International: +61 2 8199 0299 Conference ID: 6129907 Additionally, a live and archived webcast of this call will be available on the Investor Relations section of Tarena's website at http://ir.tedu.cn. Safe Harbor Statement This press release contains forward-looking statements made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Tarena may also make written or oral forward-looking statements in its reports filed with or furnished to the U.S. Securities and Exchange Commission, in its annual report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to fourth parties. Any statements that are not historical facts, including any business outlook and statements about Tarena's beliefs and expectations, are forward-looking statements. Many factors, risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements. Such factors and risks include, but not limited to the following: Tarena's goals and strategies; its future business development, financial condition and results of operations; its ability to continue to attract students to enroll in its courses; its ability to continue to recruit, train and retain qualified instructors and teaching assistants; its ability to continually tailor its curriculum to market demand and enhance its courses to adequately and promptly respond to developments in the professional job market; its ability to maintain or enhance its brand recognition, its ability to maintain high job placement rate for its students, and its ability to maintain cooperative relationships with financing service providers for student loans. Further information regarding these and other risks, uncertainties or factors is included in Tarena's filings with the U.S. Securities and Exchange Commission. All information provided in this press release is current as of the date of the press release, and Tarena does not undertake any obligation to update such information, except as required under applicable law. About Tarena International, Inc. Tarena International, Inc. (NASDAQ: TEDU) is a leading provider of professional education services in China. Through its innovative education platform combining live distance instruction, classroom-based tutoring and online learning modules, Tarena offers professional education courses in IT and non-IT subjects. Tarena also offers kid education programs. Its professional education courses provide students with practical skills to prepare them for jobs in industries with significant growth potential and strong hiring demand. Since its inception in 2002, Tarena has trained over 620,000 students, cooperated with approximately 800 universities and colleges and placed students with approximately accumulated 160,000 corporate employers in a variety of industries. About Non-GAAP Financial Measures Beginning in the second quarter of 2016, the Company revised its non-GAAP financial measures to exclude gain or loss on derivative instruments, goodwill impairment, impairment of intangibles via acquisitions of businesses and the related tax impact, in addition to its historical practice of excluding share-based compensation expenses for non-GAAP results. To supplement Tarena's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Tarena's management uses non-GAAP measures of cost of revenues, operating expenses, operating income, net income, and basic and diluted net income per ADS, which are adjusted from results based on GAAP to exclude the share-based compensation expenses, gain or loss on derivative instruments, goodwill impairment, impairment of intangibles via acquisitions of businesses and the related tax impact. These non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. In addition, calculation of the non-GAAP financial measures may be different from the calculation used by other companies, and therefore comparability may be limited. Tarena's management believes that excluding the share-based compensation expenses, gain or loss on derivative instruments, goodwill impairment, impairment of intangibles via acquisitions of businesses and the related tax impact provides meaningful supplemental information regarding our performance and liquidity by excluding certain items identified as non-recurring and infrequent in nature, and non-cash charges. The amount of share-based compensation expenses, gain or loss on derivative instruments, goodwill impairment, impairment of intangibles via acquisitions of businesses and the related tax impact are not built into the Company's annual budgets and quarterly forecasts, which generally will be the basis for information Tarena provides to analysts and investors as guidance for future operating performance. The non-GAAP financial measures are provided to enhance investors' overall understanding of Tarena's current financial performance and prospects for the future. A limitation of using non-GAAP cost of revenues, operating expenses, operating income (loss) and net income (loss), excluding the share-based compensation expenses, gain or loss on derivative instruments, goodwill impairment, impairment of intangibles via acquisitions of businesses and the related tax impact is that the share-based compensation charge has been and will continue to be a recurring expense in the Company's business for the foreseeable future, and gain or loss on derivative instruments, goodwill impairment, impairment of intangibles via acquisitions of businesses and the related tax impact may recur in the future. In order to mitigate these limitations the Company has provided specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables include details on the reconciliation between GAAP financial measures that are most directly comparable to the non-GAAP financial measures the Company has presented. For further information, please contact: Lei Song Investor Relations Contact Tarena International, Inc. Tel: +8610 56219451 Email: ir@tedu.cn TARENA INTERNATIONAL, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data and per share data) As of December 31 December 31 2018 2017 RMB RMB ASSETS Current assets: Cash and cash equivalents 496,103 686,691 Time deposits 158,585 432,536 Restricted cash 14,700 - Short-term investments - - Accounts receivable, net of allowance for doubtful accounts 143,932 216,700 Amounts due from a related party - 231 Inventory, net 1,774 - Prepaid expenses and other current assets 195,098 156,360 Total current assets 1,010,192 1,492,518 Time deposits 517 505 Accounts receivable, net of allowance for doubtful accounts 5,610 14,582 Property and equipment, net 647,225 519,691 Intangible assets, net 1,907 - Goodwill 63,247 - Long-term investments 94,826 101,920 Other non-current assets 207,769 153,429 Total assets 2,031,293 2,282,645 LIABILITIES AND SHAREHOLDERS'EQUITY Current liabilities: Short-term bank loans 13,726 - Accounts payable 18,541 11,351 Amounts due to related parties 413 - Income taxes payable 138,605 125,971 Deferred revenue 664,078 302,163 Accrued expenses and other current liabilities 254,330 184,646 Total current liabilities 1,089,693 624,131 Other non-current liabilities 5,606 4,329 Total liabilities 1,095,299 628,460 Commitments and contingencies — — Shareholders' equity: Class A ordinary shares 331 327 Class B ordinary shares 74 74 Treasury stock (457,169) (255,103) Additional paid-in capital 1,222,072 1,094,872 Accumulated other comprehensive income 50,477 54,122 Retained earnings 121,161 759,893 Total equity attributable to Tarena International, Inc. 936,946 1,654,185 Non-controlling interest (952) — Total liabilities and shareholders' equity 2,031,293 2,282,645 TARENA INTERNATIONAL, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands, except share data and per share data) For the Three Months Ended December 31 For the Year Ended December 31 2018 2017 2018 2017 RMB RMB RMB RMB Net revenues 615,315 616,999 2,239,328 1,973,806 Cost of revenues(a) (284,753) (169,609) (919,530) (599,199) Gross profit 330,562 447,390 1,319,798 1,374,607 Selling and marketing expenses(a) (291,517) (219,655) (1,108,565) (713,120) General and administrative expenses(a) (189,703) (122,451) (643,119) (392,296) Research and development expenses(a) (45,067) (32,427) (167,254) (100,032) Operating (loss) income (195,725) 72,857 (599,140) 169,159 Interest income 4,130 7,518 24,516 21,000 Other income (loss) 2,337 8,722 (1,144) 26,702 Foreign exchange (loss) gain (68) (1,822) 4,951 (6,284) (Loss) income before income taxes (189,326) 87,275 (570,817) 210,577 Income tax benefit (expense) 24,640 (12,684) (26,962) (25,770) Net (loss) income (164,686) 74,591 (597,779) 184,807 Less: Net loss attributable to non-controlling interests (1,258) - (2,002) - Net (loss) income attributable to Class A and Class B ordinary shareholders (163,428) 74,591 (595,777) 184,807 Net (loss) income per Class A and Class B ordinary share: Basic -3.07 1.33 -10.85 3.25 Diluted -3.07 1.28 -10.85 3.10 Weighted average number of Class A and Class B ordinary shares outstanding: Basic 53,209,594

China Distance Education Holdings Limited Reports Financial Results for First Quarter Fiscal Year 2019

- First Quarter 2019 Net Revenue Up 18.8% Year-Over-Year to $42.6 Million, Exceeding High-End of Guidance Range -- First Quarter 2019 Cash Receipts from Online Course Registration Up 50.1% Year-Over-Year to $60.5 Million -- First Quarter 2019 Cash Flow from Operations Up 101.6% Year-Over-Year to $26.6 Million -BEIJING, March 7, 2019 /PRNewswire/ -- China Distance Education Holdings Limited (NYSE: DL) ("CDEL", or the "Company"), a leading provider of online education and value-added services for professionals and corporate clients in China, today announced unaudited financial results for the first quarter of fiscal year 2019 ended December 31, 2018. First Quarter Fiscal 2019 Financial and Operational Highlights Net revenue increased by 18.8% to $42.6 million from $35.9 million in the prior year period. Total course enrollments were 1,284,000, an increase of 4.6% from the first quarter of fiscal 2018. Cash receipts from online course registration were $60.5 million, a 50.1% increase from the first quarter of fiscal 2018. Gross profit decreased by 2.8% to $17.0 million from $17.5 million in the prior year period. Non-GAAP[1] gross profit decreased by 2.9% to $17.0 million from $17.5 million in the prior year period. Gross margin was 39.9%, compared with 48.8% in the prior year period. Non-GAAP[1] gross margin was 40.0%, compared with 48.9% in the prior year period. Operating loss was $2.2 million, compared with operating income of $5.1 million in the prior year period. Non-GAAP[1] operating loss was $1.7 million, compared with non-GAAP[1] operating income of $5.6 million in the prior year period. Net income was $1.9 million, compared with net income of $94,000 in the prior year period. Non-GAAP[1] net income was $2.4 million, compared with non-GAAP[1] net income of $0.6 million in the prior year period. Basic and diluted net income per American Depositary Share ("ADS") were $0.057, compared with basic and diluted net income per ADS of $0.003 for the first quarter of fiscal 2018. Each ADS represents four ordinary shares. Basic and diluted non-GAAP[1] net income per ADS were $0.073 and $0.072, respectively, compared with basic and diluted non-GAAP[1] net income per ADS of $0.018 for the first quarter of fiscal 2018. Cash flow from operations increased by 101.6% to $26.6 million from $13.2 million in the first quarter of fiscal 2018. Disposal of Tax School Program was completed on December 29, 2018. [1] For more information about the non-GAAP financial measures contained in this press release, please see "Use of Non-GAAP Financial Measures" below. Mr. Zhengdong Zhu, Chairman and CEO of CDEL, said, "In the first quarter of fiscal 2019, net revenue increased by 18.8% year-over-year, exceeding the high end of our guidance range and reflecting the resilience of our business model in the face of a softer economic environment, as professionals seek self-improvement and career advancement through continued study. As such, we have retained strong momentum in generating cash receipts from online course registration through a portfolio of course offerings across our core verticals, designed in accordance with market demand. Total cash receipts from online course registration increased by approximately 50% year-over-year in the first quarter, primarily as a result of strong cash receipt growth in our core verticals of accounting and healthcare, and more student enrollments in our longer duration premium and elite classes compared with the year-ago period. Mr. Zhu concluded, "As China's preeminent provider of online education and value-added services for professionals and corporate clients, we strive to build industry-leading education verticals that promote our lifelong learning ecosystem. With a proven business model and powerful growth initiatives in place, we look forward to continuing our relentless efforts to grow our diversified industry verticals and broaden our course offerings and services in key academic disciplines." Mr. Mark Marostica, Co-Chief Financial Officer of CDEL, said, "While our first quarter revenue came in ahead of expectations, we recorded an operating loss in the first quarter, primarily due to the amortization expenses of intangibles arising from the acquisition of Beijing Ruida of $1.7 million, an increase in rental expenses from our new office location in Beijing, higher commissions to agents, and higher advertising and promotional expenses. Nonetheless, we are very encouraged by the strong operating cash flow in the quarter which grew over 100% year-over-year, bolstered by the robust growth in cash receipts from online course registration." Mr. Marostica, continued, "Despite the first quarter operating loss, we believe we will see year-over-year improvement in our operating margins in fiscal year 2019 as a result of our expectation of healthy revenue growth in the fiscal year, together with the implementation of certain expense control measures. As we head into our busy enrollment season, we are focused on continuing to balance growth with a strong emphasis on profitability and expense controls." CEO Share Purchase Plan As announced on June 25, 2018 by the Company, Mr. Zhengdong Zhu, Chairman and CEO of CDEL, had informed the Company of his intention to use his personal funds to purchase the Company's shares for an amount up to a maximum of $25 million within one year. As of February 28, 2019, Mr. Zhu had bought a total of approximately $8.9 million of the Company's ordinary shares and ADSs pursuant to a 10b5-1 plan in accordance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended. First Quarter Fiscal 2019 Financial Results Net Revenue. Total net revenue increased by 18.8% to $42.6 million in the first quarter of fiscal 2019 from $35.9 million in the first quarter of fiscal 2018. Net revenue from online education services, books and reference materials, and other sources contributed 58.8%, 15.0% and 26.2%, respectively, of total net revenues for the first quarter of fiscal 2019. Online education services. Net revenue from online education services increased by 11.6% to $25.0 million in the first quarter of fiscal 2019 from $22.4 million in the first quarter of fiscal 2018, mainly due to revenue growth from the accounting vertical, partially offset by a decrease in revenue from the healthcare vertical. The softer growth in revenue from online education services was mainly due to the adoption of U.S. GAAP ASC 606, Revenue from Contracts with Customers, which impacted the timing of revenue recognition related to our premium classes. Under the accounting standards in effect in the prior period, a significant portion of revenue from premium classes related to our 2017 Intermediate and Advance Level Accounting Professional Qualifications Exams, CPA Qualification Exam and National Practicing Medical Doctor Qualification Exam was considered contingent and deferred until the release of the related exam results and the expiration of the students' right to retake the course which typically occurred in the first quarter of each fiscal year. Under the new standard, revenue related to the premium classes is recognized over the expected service period using best estimates, which results in a decrease in revenue growth in the first quarter of fiscal 2019. Books and reference materials. Net revenue from books and reference materials increased by 169.5% to $6.4 million in the first quarter of fiscal 2019, from $2.4 million in the first quarter of fiscal 2018, mainly due to book sale revenue contributed by Beijing Ruida. Others. Net revenue from other sources increased by 1.0% to $11.2 million in the first quarter of fiscal 2019 from $11.1 million in the first quarter of fiscal 2018, primarily due to revenue from legal professional training courses contributed by Beijing Ruida. The increase in revenue from other sources was partially offset by the decrease in revenue from both business start-up training services and the sale of learning simulation software. Cost of Sales. Cost of sales increased by 39.3% to $25.6 million in the first quarter of fiscal 2019 from $18.4 million in the first quarter of fiscal 2018. Non-GAAP[1] cost of sales increased by 39.5% to $25.6 million in the first quarter of fiscal 2019 from $18.3 million in the first quarter of fiscal 2018. The increase was mainly due to increased salaries and related expenses, increased rental and related expenses associated with the Company's new office space in Beijing and offline training courses, and expenses associated with Beijing Ruida, including amortization expenses of intangibles arising from the acquisition of Beijing Ruida. Gross Profit and Gross Margin. Gross profit was $17.0 million in the first quarter of fiscal 2019, down 2.8% from $17.5 million in the prior year period. Non-GAAP[1] gross profit was $17.0 million, decreasing by 2.9% from $17.5 million in the prior year period. Gross margin was 39.9% in the first quarter of fiscal 2019, compared with 48.8% in the first quarter of fiscal 2018. Non-GAAP[1] gross margin was 40.0% in the first quarter of fiscal 2019, compared with 48.9% in the first quarter of fiscal 2018. Operating Expenses. Total operating expenses increased by 47.4% to $20.8 million in the first quarter of fiscal 2019, from $14.1 million in the prior year period. Non-GAAP[1] total operating expenses increased by 48.8% to $20.3 million in the first quarter of fiscal 2019, from $13.7 million in the prior year period. Selling expenses. Selling expenses increased by 58.8% to $14.5 million in the first quarter of fiscal 2019 from $9.1 million in the prior year period. Non-GAAP[1] selling expenses increased by 59.0% to $14.5 million in the first quarter of fiscal 2019 from $9.1 million in the prior year period. The increase was primarily driven by higher commissions to agents, higher advertising and promotional expenses, expenses associated with Beijing Ruida, and other miscellaneous selling expenses. General and administrative expenses. General and administrative expenses increased by 26.6% to $6.3 million in the first quarter of fiscal 2019 from $5.0 million in the prior year period. Non-GAAP[1] general and administrative expenses increased by 28.4% to $5.9 million in the first quarter of fiscal 2019 from $4.6 million in the prior year period. The increase was mainly due to the provision for doubtful debts associated with our accounting continuing education and legal education businesses, and expenses associated with Beijing Ruida. Gain on Deconsolidation of a Subsidiary. Gain on deconsolidation of a subsidiary of $6.9 million related to the gain on disposal of 60% equity interest, and fair value change of remaining 40% equity interest, in Champion Tax Advisory or "Tax School Program." Income Tax Expense. Income tax expense increased by 41.9% to $1.0 million in the first quarter of fiscal 2019 from $0.7 million in the prior year period, primarily due to an increase in taxable income. Net Income. As a result of the foregoing, net income was $1.9 million in the first quarter of fiscal 2019, compared with net income of $94,000 in the prior year period. Non-GAAP[1] net income was $2.4 million in the first quarter of fiscal 2019, compared with non-GAAP[1] net income of $0.6 million in the prior year period. Operating Cash Flow. Net operating cash inflow increased by 101.6% to $26.6 million in the first quarter of fiscal 2019 from $13.2 million in the prior year period. The operating cash inflow was mainly attributable to the decrease in accounts receivable and deferred tax assets, and the increase in deferred revenue generated from our professional education services segment, and amount due to related parties. The operating cash inflow was partially offset by the increase in inventories, prepayments and other current assets, other non-current assets, and the decrease in accrued expenses and other liabilities, and refundable fees. Cash and Cash Equivalents, Restricted Cash and Short-term Investments. Cash and cash equivalents, restricted cash and short-term investments as of December 31, 2018 increased by 10.9% to $110.5 million from $99.6 million as of September 30, 2018, mainly due to the operating cash inflow generated in the first quarter of fiscal 2019, which was partially offset by the capital expenditure of $7.5 million, mainly relating to our new office space in Beijing and new office building in Xiamen, and the repayment of an offshore loan of $5.0 million. New Revenue Accounting Standard On October 1, 2018, the Company adopted Revenue from Contracts with Customers ("Topic 606"), applying the modified retrospective method to all contracts that the performance of which were not completed as of October 1, 2018. Results for reporting periods beginning October 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior periods. The Company assessed variable consideration related to certain types of its online education services over the expected service period, as well as incremental commission fees of obtaining a contract which were capitalized and amortized over the expected service period. The cumulative effect of initially applying the new standard of $9.7 million was recorded as an adjustment to the opening balance of retained earnings upon adoption. Outlook For the second quarter of fiscal 2019, the Company expects to generate total net revenue in the range of $33.3 million to $34.8 million, representing year-over-year growth of approximately 12% to 17%. For fiscal year 2019, the Company expects to generate total net revenues in the range of $208.3 million to $216.7 million, representing year-over-year growth of approximately 25% to 30%. The above guidance reflects the Company's current and preliminary view, which is subject to change. Conference Call Management will hold a conference call at 8:00 a.m. Eastern Time on Thursday, March 7, 2019 (9:00 p.m. Beijing Time on Thursday, March 7, 2019) to discuss financial results and answer questions from investors and analysts. Listeners may access the call by dialing: US Toll Free: +1-866-519-4004 International: +65-6713-5090 Mainland China: 400-620-8038 Hong Kong: +852-3018-6771 United Kingdom: +44-203-6214-779 Passcode: CDEL or DL A telephone replay will be available two hours after the call until March 14, 2019 by dialing: US Toll Free: +1-855-452-5696 International: +61-2-8199-0299 Mainland China: 400-632-2162 Hong Kong: 800-963-117 United Kingdom: 0808-234-0072 Replay Passcode: 1583949 Additionally, a live and archived webcast of the conference call will be available at http://ir.cdeledu.com. About China Distance Education Holdings Limited China Distance Education Holdings Limited is a leading provider of online education and value-added services for professionals and corporate clients in China. The courses offered by the Company through its websites are designed to help professionals seeking to obtain and maintain professional licenses and to enhance their job skills through our professional development courses in China in the areas of accounting, healthcare, engineering & construction, legal and other industries. The Company also offers online test preparation courses for self-taught learners pursuing higher education diplomas or degrees, practical accounting training courses for college students and working professionals, as well as third-party developed online courses. In addition, the Company provides business services to corporate clients, including but not limited to tax advisory and accounting outsourcing services. For further information, please visit http://ir.cdeledu.com. Safe Harbor Statement This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "may," "should," "potential," "continue," "expect," "predict," "anticipate," "future," "intend," "plan," "believe," "is/are likely to," "estimate" and similar statements. Among other things, the outlook for the second quarter and full fiscal year 2019 and quotations from management in this announcement, as well as the Company's strategic and operational plans (in particular, the anticipated benefits of strategic growth initiatives, including the promotion of the Company's lifelong learning ecosystem, as well as cost control and year-over-year improvement of operating margins) contain forward-looking statements. The Company may also make written or oral forward-looking statements in its periodic and annual reports to the SEC, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are 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 statement, including but not limited to the following: our goals and growth strategies; future prospects and market acceptance of our courses and other products and services; our future business development and results of operations; projected revenues, profits, earnings and other estimated financial information; projected enrollment numbers; our plans to expand and enhance our courses and other products and services; competition in the education and test preparation markets; and Chinese laws, regulations and policies, including those applicable to the Internet, Internet content providers, the education and telecommunications industries, mergers and acquisitions, taxation and foreign exchange. Further information regarding these and other risks is included in the Company's annual report on Form 20-F and other documents filed or furnished with the SEC. All information provided in this press release is as of the date of this press release. The Company does not undertake any obligation to update any forward-looking statement, except as required under applicable law. Statement Regarding Unaudited Financial Information The unaudited financial information set forth in this press release is preliminary and subject to adjustments. Adjustments to the financial statements may be identified when audit work is performed for the year-end audit, which could result in significant differences from this preliminary unaudited financial information. Use of Non-GAAP Financial Measures To supplement the Company's consolidated financial results presented in accordance with U.S. generally accepted accounting principles, or GAAP, the Company uses the following measures defined as non-GAAP financial measures: non-GAAP net income, operating income, gross profit, cost of sales, selling expenses, general and administrative expenses, net income margin, operating margin, gross profit margin, and basic and diluted earnings per ADS and per share. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the table captioned "Reconciliations of non-GAAP measures to comparable GAAP measures" set forth at the end of this release. The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding share-based compensation expenses. However, non-GAAP financial measures may not be indicative of the Company's operating performance from a cash perspective. The Company believes that both management and investors benefit from these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to the Company's historical performance and liquidity. The Company computes its non-GAAP financial measures using the same consistent method from quarter to quarter. The Company believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. A limitation of excluding share-based compensation expenses from the above-mentioned line items and presenting these non-GAAP measures is that such items may continue to be for the foreseeable future a significant recurring expense in our business. Management compensates for this limitation by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying table at the end of this release provides more detail on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures. Contacts: China Distance Education Holdings Limited Investor Relations Department Tel: +86-10-8231-9999 ext. 1826 Email: IR@cdeledu.com The Piacente Group | Investor Relations Brandi Piacente Tel: +1 212-481-2050 Email: DL@tpg-ir.com (Financial Tables on Following Pages) China Distance Education Holdings Limited Unaudited Condensed Consolidated Balance Sheets (in thousands of US Dollars, except number of shares and per share data) September 30, 2018 December 31, 2018 Assets: Current assets: Cash and cash equivalents 30,826 46,064 Restricted cash 51,736 47,467 Short-term investments 17,073 16,966 Accounts receivable, net of allowance for doubtful accounts of US$1,516 and US$1,342 as of December 31, 2018 and September 30, 2018, respectively 7,280 5,638 Inventories 2,782 4,120 Prepayment and other current assets 17,054 22,063 Deferred cost 1,125 1,422 Total current assets 127,876 143,740 Non-current assets: Property, plant and equipment, net 27,972 37,849 Goodwill 79,561 79,342 Long term investments 33,837 37,328 Other intangible assets, net 39,500 37,792 Deposit for purchase of non-current assets 8,126 4,232 Deferred tax assets 5,711 4,467 Other non-current assets 6,387 10,265 Total non-current assets 201,049 211,275 Total assets 328,925 355,015 Liabilities and equity: Current liabilities: Bank borrowings 50,975 48,786 Accrued expenses and other liabilities (including accrued expenses and other liabilities of the consolidated VIE without recourse to China Distance Education Holdings Limited of US$33,309 and US$34,993 as of December 31, 2018 and September 30, 2018, respectively) 42,141 38,922 Amount due to related parties - 1,476 Income tax payable (including income tax payable of the consolidated VIE without recourse to China Distance Education Holdings Limited of US$6,584 and US$4,847 as of December 31, 2018 and September 30, 2018, respectively) 9,293 9,244 Deferred revenue, current portion (including deferred revenue of the consolidated VIE without recourse to China Distance Education Holdings Limited of US$77,407 and US$77,299 as of December 31, 2018 and September 30, 2018, respectively) 78,194 78,274 Refundable fees (including refundable fees of the consolidated VIE without recourse to China Distance Education Holdings Limited of US$2,976 and US$13,837 as of December 31, 2018 and September 30, 2018, respectively) 13,837 2,976 Total current liabilities 194,440 179,678 Non-current liabilities: Deferred tax liabilities 12,693 12,264 Deferred revenue, non-current portion (including deferred revenue of the consolidated VIE without recourse to China Distance Education Holdings Limited of US$28,565 and US$nil as of December 31, 2018 and September 30, 2018, respectively) - 28,565 Long-term bank borrowing 12,027 9,105 Total non-current liabilities 24,720 49,934 Total liabilities 219,160 229,612 Equity: Ordinary shares (par value of US$0.0001 per share; 500,000,000 shares authorized; 133,778,721 and 133,275,521 shares issued and outstanding at December 31, 2018 and September 30, 2018, respectively) 13 13 Additional paid-in capital 21,557 22,064 Accumulated other comprehensive loss (7,013) (5,227) Retained earnings 29,717 41,327 Total China Distance Education Holdings Limited shareholder's equity 44,274 58,177 Noncontrolling interests 65,491 67,226 Total equity 109,765 125,403 Total liabilities and equity 328,925 355,015 China Distance Education Holdings Limited Unaudited Condensed Consolidated Statements Of Operations (in thousands of US dollars, except number of shares, per share and per ADS data) Three Months Ended December 31, 2017 2018 Sales, net of business tax, value-added tax and related surcharges: Online education services 22,433 25,044 Books and reference materials 2,377 6,404 Others 11,068 11,175 - Sale of learning simulation software 6,160 5,003 - Business start-up training services 1,407 680 - Others 3,501 5,492 Total net revenues 35,878 42,623 Cost of sales Cost of services and others (16,339) (22,174) Cost of tangible goods sold (2,042)

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