Noah Education Holdings Ltd. (NED)

[antisubmarinewarfare]

Noah Education Announces Results for the Second Fiscal Quarter Ended December 31, 2007
Tuesday February 19, 5:00 pm ET

SHENZHEN, China, Feb. 19 /Xinhua-PRNewswire/ -- Noah Education Holdings Ltd. ("Noah") (NYSE: NED - News), a leading provider of interactive education content in China, today announced its unaudited financial results for the fiscal quarter ended December 31, 2007, which is the second quarter for Noah's fiscal year ending June 30, 2008.(1)

Highlights for the Second Fiscal Quarter Ended December 31, 2007

-- Total net revenues were RMB122.4 million (US$16.8 million), a decrease
of 2.6% over the corresponding period last year.

-- Net income was RMB13.8 million (US$1.9 million), an increase of 199.9%
year-over-year. Net income excluding share-based compensation expenses
and the change in the fair value of warrants (non-GAAP) was RMB27.7
million, an increase of 75.5% year-over-year.

-- Basic and diluted earnings per share were RMB0.40 (US$0.05) and RMB0.38
(US$0.05), compared to RMB1.58 (US$0.21) and RMB1.50 (US$0.20) of the
previous quarter, respectively. Basic and diluted earnings per share
excluding share-based compensation expenses and the change in the fair
value of warrants (non-GAAP) were RMB0.79 (US$0.11) and RMB0.77
(US$0.11), compared to RMB1.85 (US$0.25) and RMB1.83 (US$0.24) of the
previous quarter, respectively.

-- Total sales volume of handheld Digital Learning Devices (DLDs) for the
second quarter decreased 16.5% year-over-year to approximately 111,000.

-- E-dictionary sales volume decreased to approximately 173,000 from
229,000 in the second quarter of the previous year.

-- Total coursewares available increased to approximately 32,000 from
30,000 in the previous quarter and 21,000 in the second quarter of the
previous year. During the quarter, Noah rolled out China's first
graphic calculator technology in DLDs.

-- During the quarter, the company opened 6 new after-school tutoring
centers in Chengdu, Chongqing and Beijing, bringing the total number of
such centers to 9.

"Overall this quarter has been a solid one for Noah,'' said Mr. Dong Xu, Noah's Chairman and Chief Executive Officer. ''Sales of our DLDs were down primarily due to the market reaction to a missing environmental compliance sticker on one of our products and our subsequent voluntary action to address customer concerns regarding this issue (''the missing label issue''). In response, we implemented a comprehensive review of our quality-control programs to ensure that such an occurrence does not take place again, and we also launched an aggressive brand-building campaign to assure students and their families that all of our products meet the highest quality standards. By the end of the quarter, sales of our DLDs were back on track. We are confident that the missing label issue is behind us and that with the introduction of new product offerings such as graphic calculator technology, revenue growth in the coming quarters will be strong.''

Mr. Xu continued, ''We are also very pleased to announce the launch of a new school initiative during the last quarter, which has placed Noah products, content and services directly in front of students and teachers in a number of primary and middle schools across China, reaching over a half million students so far. Going forward we plan to roll out this initiative in many more schools with a goal of reaching millions more. Not only is this new initiative successful in raising visibility and strengthening brand-loyalty, it also helps students to better understand the breadth and depth of our superior content offerings and is exceedingly cost effective in terms of utilizing our marketing and sales dollars. This and other initiatives continue to build upon our vision of becoming the number one provider of supplemental education products, content and services in China.''

Financial Results for the Fiscal Quarter Ended December 31, 2007

For the second fiscal quarter of 2008, Noah reported net revenues of RMB122.4 million (US$16.8 million), a 2.6% decrease over net revenues of RMB125.7 million in the second quarter of the previous year. The decrease was primarily attributable to the negative impact caused by the missing label issue.

Total sales volume of DLDs for the quarter was 111,000, a 16.5% decrease from approximately 133,000 in the second quarter of fiscal year 2007.

E-dictionary sales volume decreased to approximately 173,000, a 24.5% decrease over 229,000 sold in the same year-ago period.

Total coursewares available increased to approximately 32,000 from 30,000 in the previous quarter and 21,000 in the second quarter of the previous year and graphic calculator technology was added to certain DLD products used to teach mathematics.

Gross profit margins were 46.7% compared to 47.6% in the corresponding period last year. The decrease was primarily attributable to the write down of the NP800 due to the missing label issue.

Total operating expenses as a percentage of net revenue were 50.9%, compared to 50.8% in the corresponding period last year. Sales and marketing expenses were RMB40.0 million, or 32.7% of revenues, compared to RMB34.2 million, or 27.2% of revenues in the corresponding period last year.

Operating margin for the quarter was 5.3% compared to 6.7% in the corresponding period last year. Excluding share-based compensation expenses, operating margin for the quarter was 16.4%, compared to 15.5% in the corresponding period last year.

Total share-based compensation expenses, which were allocated to related operating costs and expenses, increased 21.6% to RMB13.6 million (US$1.9 million) up from RMB11.2 million in the corresponding period last year.

Net income for the quarter was RMB13.8 million (US$1.9 million), a 199.9% increase over RMB4.6 million in the second fiscal quarter of 2007. Net income excluding share-based compensation expenses and the change in the fair value of warrants (non-GAAP) was RMB27.7 million, an increase of 75.5% year-over- year.

Basic and diluted earnings per share amounted to RMB0.40 (US$0.05) and RMB0.38 (US$0.05) compared to RMB 1.58 (US$0.21) and RMB 1.50 (US$0.20) of the previous quarter, respectively. Each ADS represents one ordinary share. The weighted averaged ordinary shares outstanding in calculating basic and diluted earnings per share were 34,925,840 and 36,022,820, respectively.

Net income excluding share-based compensation expenses and the change in the fair value of warrants was RMB27.7 million (US$3.8 million). Basic and diluted earnings per share excluding share-based compensation expenses and the change in the fair value of warrants were RMB0.79 (US$0.11) and RMB0.77 (US$0.11), respectively.

As of December 31, 2007, Noah had cash and cash equivalents of RMB1.05 billion (US$144.1 million).

Financial Results for the Six Months Ended December 31, 2007

For the six months ended December 31, 2007, Noah reported net revenues of RMB369.9 million (US$50.6 million), a 22.3% increase over net revenues of RMB302.5 million in the corresponding period last year.

Operating margin for the six months ended December 31, 2007 was 15.5% compared to 13.6% in the six months ended December 31, 2006.

Net income for the six months ended December 31, 2007 was RMB58.3 million (US$8.0 million), a 59.7% increase over RMB36.5 million in the six months ended December 31, 2006. Basic and diluted earnings per share amounted to RMB1.69 (US$0.23) and RMB1.63 (US$0.22), respectively.

Net income excluding share-based compensation expenses and the change in the fair value of warrants (non-GAAP) for the six months ended December 31, 2007 was RMB79.8 million (US$10.9 million), representing a 67.4% increase year-over-year. Basic and diluted earnings per share excluding share-based compensation expenses and the change in the fair value of warrants were RMB2.39 (US$0.33) and RMB2.30 (US$0.31), respectively.

Outlook for Fiscal Year 2008

Noah expects its total net revenue for fiscal year 2008 (July 1, 2007 to June 30, 2008) to be in the range of RMB680 million (US$93 million) to RMB690 million (US$94 million), representing year-over-year growth in the range of 22% to 24%, respectively. Noah expects net profits in fiscal year 2008 to be in the range of RMB115 million (US$15.7) to RMB120 million (US$16.4), representing year-over-year growth in the range of 74% to 81%. This forecast reflects Noah's current and preliminary view, which is subject to change.

Conference Call Information

Noah's management will host an earnings conference call at 8 p.m. on February 19, 2008 U.S. Eastern Standard Time (9 a.m. on February 20, 2008 Beijing/Hong Kong time).

Dial-in details for the earnings conference call are as follows:
US: [phone]
Hong Kong: [phone]

Please dial-in 10 minutes before the call is scheduled to begin and provide the passcode to join the call. The passcode is "Noah earnings call".

A replay of the conference call may be accessed by phone at the following number until March 19, 2007:

International: [phone]

Passcode: 51558775

Additionally, a live and archived webcast of this conference call will be available at http://ir.noahtech.com.cn .

About Noah

Noah Education Holdings Limited (''Noah'') (NYSE: NED - News) is a leading provider of interactive education content in China. Noah develops and markets interactive multimedia learning materials mainly to complement prescribed textbooks used in China's primary and secondary school curricula. Noah delivers content primarily through handheld digital learning devices, or DLDs. In 2007, Noah opened its first after-school tutoring center in Chengdu, China as part of its strategy to become China's leading brand in supplemental education content and service. For more information about Noah, please visit http://www.noahtech.com.cn .

Safe Harbor Statement

This press release contains forward-looking statements that reflect Noah's current expectations and views of future events that involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Noah has based these forward-looking statements largely on its current expectations and projections about future events and financial trends that it believes may affect its financial condition, results of operations, business strategy and financial needs. You should understand that our actual future results may be materially different from and worse than what Noah expects. Information regarding these risks, uncertainties and other factors is included in Noah's filings with the SEC.


Noah Education Holdings Ltd.
Condensed Consolidated Statements of Operations

Three months ended Six months ended
31 December 31 December
2006 2007 2006 2007
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
RMB RMB RMB RMB
Net revenue 125,668,894 122,411,495 302,499,073 369,897,102
Cost of revenue (65,889,000) (65,248,283) (137,682,782) (188,504,372)
Gross profit 59,779,894 57,163,212 164,816,291 181,392,730
Total operating
expenses (63,781,905) (62,272,756) (146,971,969) (150,123,836)
Other operating
income 12,383,454 11,575,260 23,200,514 25,897,848
Operating income 8,381,443 6,465,716 41,044,836 57,166,741
Derivative loss -- (285,783) -- (6,062,347)
Interest income 296,648 8,353,742 1,150,208 8,547,124

Income before income
taxes 8,678,091 14,533,675 42,195,044 59,651,518

Income taxes (4,071,389) (718,624) (5,672,297) (1,338,848)

Net income 4,606,702 13,815,051 36,522,747 58,312,670

Deemed dividend (379,093) -- (758,186) (379,092)
Preference stock
dividends -- -- (17,705,374) --

Net income
attributable to
ordinary
shareholders 4,227,609 13,815,051 35,764,561 57,933,578

Net income per share
Basic 0.18 0.40 1.28 1.69
Diluted 0.16 0.38 1.27 1.63
Income attributable
to shareholders
Basic 3,824,269 13,815,051 27,432,662 47,655,485
Diluted 4,606,702 14,100,834 27,256,033 47,655,485
Weighted average
ordinary shares
outstanding
Basic 21,473,442 34,925,840 21,473,442 28,145,005
Diluted 28,202,872 36,022,820 27,578,246 29,252,074




Noah Education Holdings Ltd.
Condensed Consolidated Balance Sheet

September 30, December 31,
2007 2007
(Unaudited) (Unaudited)
RMB RMB
Assets:
Current assets
Cash and cash equivalents 77,493,046 1,052,686,157
Accounts receivables, net of
allowance 149,471,911 138,828,764
Related party receivables 553,434 3,113,771
Inventories 99,353,642 95,475,567
Prepaid expenses, deferred tax assets
and other current assets 46,525,425 50,753,154
Total current assets 373,397,458 1,340,857,413
Property, plant and equipment, net 17,086,715 17,715,849
Intangible assets, net 7,150,397 8,045,998
Total assets 397,634,570 1,366,619,260
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable 67,200,483 51,616,818
Other payables, accruals, advances
from customers and deferred revenues 38,362,041 40,573,588
Income taxes payable 1,418,528 902,058
Total current liabilities 106,981,052 93,092,464
Warrants 10,614,465 10,605,494
Total liabilities 117,595,517 103,697,958
Mezzanine Equity
Convertible Series A Preference Shares 129,754,379 --
Shareholders' Equity
Ordinary shares 8,888 15,395
Additional paid-in capital 50,587,326 1,171,639,152
Accumulated other comprehensive loss (5,859,000) (28,095,758)
Retained earnings 105,547,460 119,362,513
Total shareholders' equity 280,039,053 1,262,921,302
Total liabilities and shareholders'
equity 397,634,570 1,366,619,260



About Non-GAAP Financial Measures

To supplement its financial information presented in accordance with accounting principles generally accepted in the United States (''GAAP''), Noah uses the following measures defined as non-GAAP measures by the SEC: adjusted gross profit, adjusted operating income and adjusted net income, each excluding share-based compensation expenses and changes in the fair value of warrants issued to Lehman Brothers Commercial Corporation Asia Limited to purchase additional ordinary shares. Noah believes that gross profit, operating income and net income measures on non-GAAP basis indicate Noah's baseline performance before subtracting those charges. In addition, these non-GAAP measures are among the primary indicators management uses as a basis for its planning and forecasting of future periods. By disclosing the non- GAAP amounts, management intends to provide investors with additional information to analyze Noah's performance and underlying trends. The presentation of these non-GAAP measures is not intended to be considered in isolation or as for financial information prepared and presented in accordance with GAAP. See the table below for a reconciliation of non-GAAP amounts to amounts reported under GAAP.

Noah Education Holdings Ltd.
Reconciliation of Non-GAAP to GAAP

Three months ended
31 December
2006 2007
(Unaudited) (Unaudited)
RMB % of Rev RMB % of Rev
GAAP net revenue 125,668,894 100% 122,411,495 100%
GAAP gross profit 59,779,894 47.6% 57,163,212 46.7%
Share-based compensation 228,932 0.2% 50,408 0.0%
Non-GAAP gross profit 60,008,826 47.8% 57,213,620 46.7%
GAAP operating income 8,381,443 6.7% 6,465,716 5.3%
Share-based compensation 11,156,819 8.9% 13,567,890 11.1%
Non-GAAP operating income 19,538,262 15.5% 20,033,606 16.4%
GAAP net income 4,606,702 3.7% 13,815,051 11.3%
Share-based compensation 11,156,819 8.9% 13,567,890 11.1%
Change in the fair value of
warrants -- -- 285,783 0.2%
Non-GAAP net income 15,763,521 12.5% 27,668,724 22.6%
GAAP net income per share
Basic 0.18 0.40
Diluted 0.16 0.38
Non-GAAP net income per share
Basic 0.58 0.79
Diluted 0.56 0.77


Six months ended
31 December
2006 2007
(Unaudited) (Unaudited)
RMB % of Rev RMB % of Rev
GAAP net revenue 302,499,073 100% 369,897,102 100%
GAAP gross profit 164,816,291 54.5% 181,392,730 49.0%
Share-based compensation 228,932 0.1% 252,157 0.1%
Non-GAAP gross profit 165,045,223 54.6% 181,644,887 49.1%
GAAP operating income 41,044,836 13.6% 57,166,741 15.5%
Share-based compensation 11,156,819 3.7% 15,417,277 4.2%
Non-GAAP operating income 52,201,655 17.3% 72,584,018 19.7%
GAAP net income 36,522,747 12.1% 58,312,670 15.8%
Share-based compensation 11,156,819 3.7% 15,417,277 4.2%
Change in the fair value of
warrants -- 0.0% 6,062,347 1.6%
Non-GAAP net income 47,679,566 15.8% 79,792,294 21.6%
GAAP net income per share
Basic 1.28 1.69
Diluted 1.27 1.63
Non-GAAP net income per share
Basic 1.67 2.39
Diluted 1.66 2.30



This announcement contains translations of certain RMB amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise noted, all translations from RMB to U.S. dollars are made at a rate of RMB7.3040 to US$1.00, the effective noon buying rate as of December 28, 2007 in The City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York.

(1) This announcement contains translations of certain RMB amounts into
U.S. dollars at specified rates solely for the convenience of the
reader. Unless otherwise noted, all translations from RMB to U.S.
dollars are made at a rate of RMB7.3040 to US$1.00, the effective noon
buying rate as of December 28, 2007 in The City of New York for cable
transfers of RMB as certified for customs purposes by the Federal
Reserve Bank of New York.


For investor and media inquiries, please contact:

In China:
Rick Chen
Noah Education Holdings Limited
Tel: [phone]
Email: [e-mail]

Helen Plummer
Ogilvy Public Relations Worldwide (Beijing)
Tel: [phone]
Email: [e-mail]

In the United States:
Jessica Barist Cohen
Ogilvy Public Relations Worldwide (New York)
Tel: [phone]
Email: [e-mail]


Source: Noah Education Holdings Limited