Noah Education Holdings Ltd. (NED)

[antisubmarinewarfare]

Noah Education Announces Results for the Fourth Fiscal Quarter and Full Fiscal Year Ended June 30, 2008
Thursday August 21, 5:00 pm ET

SHENZHEN, China, Aug. 21 /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 fourth fiscal quarter and full fiscal year ending June 30, 2008.(1)

(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 RMB6.8591 to US$1.00, the noon buying
rate as of June 30, 2008 in The City of New York for cable transfers
of RMB as certified for customs purposes by the Federal Reserve Bank
of New York.

Highlights for the Fourth Fiscal Quarter Ended June 30, 2008

-- Noah reported net revenue of RMB97.9 million (US$14.2 million), a
17.9% increase over net revenue of RMB83.1 million during the
corresponding period of the previous year.

-- Gross profit was RMB50.1 million (US$7.3 million), or 51.1% of net
revenue, compared to RMB37.6 million, or 45.3% of net revenue during
the corresponding period of the previous year.

-- Net income was RMB31.2 million (US$4.5 million) compared to RMB4.0
million during the corresponding period of the previous year, an
increase of 681.6%.

-- Basic and diluted earnings per share were RMB0.82 (US$0.12) and
RMB0.71 (US$0.10) compared to RMB0.09 and RMB0.07 for the fourth
quarter of 2007, 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$0.12) and RMB0.77
(US$0.11), compared to RMB0.17 and RMB0.15 for the fourth quarter of
2007, respectively.

-- Total sales volume of handheld digital learning devices (DLDs) for
the fourth quarter increased 11.7% year-over-year to approximately
78,700.

-- As of June 30, 2008, over 700 schools were signed up for the "Access
Noah" program, covering more than 1.6 million students, up from
approximately 600 schools and 1.4 million students at the end of
March 2008.

"Noah produced sound results during the fourth quarter, bringing the full fiscal year to a solid close," said Mr. Dong Xu, Noah's chairman and chief executive officer. "Our core DLD business has continued to grow this quarter. The consistent strength of this business has enabled us to expand into other innovative delivery platforms and systems of content creation, allowing for more comprehensive Noah-branded offerings."

Mr. Rick Chen, Noah's executive vice president added, "We strive to provide the best possible products and services to help students learn. With the Access Noah In-school Program, we are steadily building the Noah brand while helping students increase their level of engagement in learning materials and improving in-class learning efficacy. During the last quarter, we established 50 experimental Access Noah classes in five provinces across China. Results from all the experimental classes have shown an increase in student tests scores across academic subjects. We are fully immersed in the test phase of Access Noah Online, our web 2.0 portal that will create an online knowledge-sharing community centered around the Noah brand. The site is set to launch in the first half of fiscal year 2009. In addition, in a company-wide effort to improve our operating efficiency and internal control functions, we have engaged two top-tier international consulting firms in implementing our Enterprise Resource Planning (ERP) project and Sarbanes Oxley compliance (SOX) project. We are confident that these projects will yield substantial savings and improve transparency and internal control measures for the company."

Financial Results for the Fiscal Quarter Ended June 30, 2008

For the fourth fiscal quarter of 2008, Noah reported net revenue of RMB97.9 million (US$14.2 million), a 17.9% increase over net revenue of RMB83.1 million in the corresponding period of the previous year.

Total sales volume of DLDs for the fourth quarter was approximately 78,700, an 11.7% increase from approximately 70,500 in the fourth quarter of 2007. E- dictionary sales volume decreased to approximately 105,600, a 27.5% decrease from approximately 145,600 the corresponding period last year. The sales results reflect the Company's strategy of continuous migration toward higher margin DLD products.

Total courseware titles at the end of the fourth quarter were approximately 35,000 compared to 28,000 in the fourth quarter of the previous year. DLD products with Noah's new proprietary graphic calculator technology, embedded in a number of higher-end DLD products, accounted for approximately 88% of all DLDs sold in the quarter.

Gross profit was RMB50.1 million (US$7.3 million), or 51.1% of net revenue in the fourth quarter, compared to RMB37.6 million, or 45.3% of net revenue in the corresponding period last year. The increase was primarily attributable to the Company's increased focus on selling higher-end DLDs and also attributable to a decrease in the cost of raw materials. In the fourth quarter, the Company took a charge of approximately RMB6.0 million (US$0.88 million) against dated inventory. The Company expects a reduction in this type of charge in the coming quarters.

Sales and marketing expenses were RMB30.9 million (US$4.5 million), or 31.6% of net revenue, compared to RMB20.1 million, or 24.2% of net revenue in the corresponding period of last year. The increase was primarily due to advancing the schedule of marketing efforts in preparation for the upcoming back-to-school season.

Research and development expenses for the quarter were RMB14.7 million (US$2.1 million), or 15.0% of net revenue. This compares to RMB10.2 million, or 12.3% of net revenue in the corresponding quarter of last year. The increase was primarily due to higher staff costs and third party software, and content development costs.

General and administrative expenses for the quarter were RMB12.5 million (US$1.8 million), or 12.9% of net revenue. This compares to RMB9.1 million, or 10.9% of net revenue in the corresponding quarter of last year. The increase was due to higher staff costs, accrued auditing fees and a charge of aging accounts receivable.

Operating loss for the quarter was approximately RMB1.7 million (US$0.2 million) compared to operating income of RMB3.3 million in the corresponding period last year. This was primarily due to an increase in advertising spending, accrued auditing fees and a one time RMB3.0 million donation to the Sichuan earthquake relief effort. Excluding share-based compensation expenses and the earthquake donation, operating margin for the quarter was 3.9%, compared to 6.6% in the corresponding period last year.

Total share-based compensation expenses, which were allocated to related operating costs and expenses, increased 10.3% to RMB2.5 million (US$0.4 million), up from RMB2.2 million in the corresponding period last year.

Net income for the quarter was RMB31.2 million (US$4.5 million), a 681.6% increase over RMB3.987 million in the fourth quarter of 2007. Net income excluding share-based compensation expenses and the change in the fair value of warrants (non-GAAP) was RMB30.4 million (US$4.4 million), an increase of 381.6% year-over-year. In the fourth quarter, the Company recorded a gain in the fair value of warrants of RMB3.3 million.

Basic and diluted earnings per share were RMB0.82 (US$0.12) and RMB0.71 (US$0.10), compared to RMB0.09 and RMB0.07 in the fourth quarter of 2007, 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$0.12) and RMB0.77 (US$0.11), compared to RMB0.17 and RMB0.15 in the fourth quarter of 2007, respectively. Each ADS represents one ordinary share. The weighted averaged ordinary shares outstanding in calculating basic and diluted earnings per share were 38,190,185 and 39,172,558 respectively.

Unaudited Financial Results for the Full Fiscal Year Ended June 30, 2008

For the fiscal year ended June 30, 2008, Noah reported net revenue of RMB651.9 million (US$95.0 million), a 17.4% increase from net revenue of RMB555.2 million in full fiscal year 2007.

Total sales volume for DLDs for the full year was approximately 589,000, an increase of 5.7% from approximately 557,000 in the full fiscal year of 2007. E-Dictionary sales volume decreased to approximately 630,000, an 18.7% decrease from approximately 776,000 in the previous year. Sales results for both DLDs and E-Dictionaries were in-line with the Company's expectations.

Gross profit for fiscal year 2008 was RMB333.2 million (US$48.6 million), or 51.1% of net revenue compared to RMB288.7 million, or 52% of net revenue in fiscal year 2007. The Company expects margins to remain in the range of 51% to 52% for the foreseeable future.

Sales and marketing expenses for fiscal year 2008 were RMB197.3 million (US$28.8 million), or 30.3% of net revenue, compared to RMB172.5 million or 31.1% of net revenue in the previous year.

Total operating expenses were RMB300.4 million (US$43.7 million), or 46.1% of net revenue, compared to RMB261.6 million, or 47.1% of net revenue in the previous year.

Operating profit for the fiscal year ended June 30, 2008 was RMB80.4 million (US$11.7 million), or 12.3% of net revenue, compared to RMB67.1 million, or 12.1% of net revenue in the previous year. Operating profit, excluding the one-time earthquake relief donation, was RMB83.4 million (US$12.2 million), or 12.8% of net revenue.

Total share-based compensation expenses, which were allocated to related operating costs and expenses, increased to RMB20.3 million (US$3.0 million), up 37% from RMB14.8 million in the full fiscal year of 2007.

Net income for the fiscal year ended June 30, 2008 was RMB144.9 million (US$21.1 million), a 118.0% increase from RMB66.4 million in the fiscal year ended June 30, 2007. Net income excluding, share-based compensation expenses and the change in the fair value of warrants (non-GAAP), for the fiscal year ended June 30, 2008 was RMB167.1 million (US$24.4 million), a 105.5% increase year-over-year.

Basic and diluted earnings per share amounted to RMB4.14 (US$0.60) and RMB3.95 (US$0.58), respectively. Basic and diluted earnings per share, excluding share-based compensation expenses and the change in the fair value of warrants, were RMB4.77 (US$0.70) and RMB4.56 (US$0.66), respectively.

As of June 30, 2008, Noah had cash and cash equivalents of RMB305.2 million (US$44.5 million). The Company also had approximately RMB714.9 million (US$104.2 million) in both short-term bank deposits and short-term investments.

Outlook for First Quarter of Fiscal Year 2009

Noah expects net revenue for the first quarter of fiscal year 2009 (July 1, 2008 to September 30, 2008) to be approximately RMB250.0 million compared to RMB247.0 million in the corresponding period last year. Noah expects net income for the quarter to be in the range of RMB48.0 million to RMB50.0 million compared to RMB44.5 million for the corresponding period last year. 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 August 21, 2008 U.S. Eastern Daylight Time (8 a.m. on August 22, 2008 Beijing/Hong Kong time).

Dial-in details for the earnings conference call are as follows:

U.S. Toll Free: [phone]
Hong Kong: [phone]
International: [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 September 20, 2008

U.S. Toll Free: [phone]
International: [phone]
Passcode: 24329082

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") is a leading provider of supplementary education content to China's elementary and middle school students. Noah develops and markets interactive educational content, software and delivery platforms that combine traditional education content with digital and multi-media technologies to cater to students' interests and enhance academic efficiency and performance. Noah employs a nationwide sales network, powerful brand image, and accessible and diversified delivery platforms to attract students to its innovative content. Noah delivers its education content via Noah electronic educational products, Noah's online website and after-school tutoring centers. The interactive and comprehensive structure of Noah's offerings encourages students and teachers to form knowledge-sharing communities around the Noah brand. Noah was founded in 2004 and is listed on the New York Stock Exchange under the ticker symbol NED.

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.

For investor and media inquiries, please contact:

In China:
Wendy Li
Noah Education Holdings Limited
Tel: [phone]
Email: [e-mail]

Sarah Kalhorn
Ogilvy Financial, Beijing
Tel: [phone]
Email: [e-mail]

In the United States:
Jessica Barest Cohen
Ogilvy Financial, New York
Tel: [phone]
Email: [e-mail]



Noah Education Holdings Ltd.
Condensed Consolidated Statements of Operations

Three months ended Twelve months ended
30 June 30 June
2007 2008 2007 2008
(Unaudited) (Unaudited) (Audited) (Unaudited)
RMB RMB RMB RMB
Net revenue 83,080,414 97,942,806 555,225,014 651,934,604
Cost of revenue (45,439,527) (47,868,794) (266,566,385) 318,759,778)
Gross profit 37,640,887 50,074,012 288,658,629 333,174,825
Total operating
expenses (39,396,486) (62,379,299) (261,612,206) 300,401,475)
Other operating
income 5,035,990 10,628,460 40,023,377 47,636,979
Operating income 3,280,391 (1,676,827) 67,069,800 80,410,328
Derivative gain
(loss) (55,207) 3,370,448 (55,207) (1,868,238)
Interest income 574,921 (1,002,435) 2,306,073 13,716,764
Investment income 0 11,836,546 0 11,836,546
Unrealized holding
gain/loss 0 (754,783) 0 (754,783)
Other Non-Operating
income 0 18,780,801 0 42,716,342
Income before income
taxes 3,800,105 30,553,750 69,320,666 146,056,958
Income taxes 178,132 628,483 (2,892,367) (1,127,565)
Net income 3,978,237 31,182,233 66,428,299 144,929,393
Preference stock
dividends 0 0 (17,705,374) 0
Deemed dividend (1,540,590) 0 (2,653,072) (379,092)
Net income
attributable
to ordinary
shareholders 2,437,647 31,182,233 46,069,853 144,550,300

Net income per share
Basic 0.09 0.82 2.32 4.14
Diluted 0.07 0.71 2.15 3.95

Income attributable
to shareholders
Basic 1,888,343 31,182,233 49,789,698 137,176,468
Diluted 1,573,865 27,811,785 49,315,450 137,197,683

Weighted average
ordinary shares
outstanding
Basic 21,473,442 38,190,185 21,473,442 33,155,794
Diluted 21,989,101 39,172,558 22,906,684 34,695,678



Noah Education Holdings Ltd.
Condensed Consolidated Balance Sheet

March 31, June 30,
2008 2008
(Unaudited) (Unaudited)
RMB RMB
Assets:
Current assets
Cash and cash equivalents 1,027,945,912 305,222,860
Short-term bank deposit 0 695,000,000
Short-term investment 0 19,875,217
Accounts receivables, net of
allowance 200,202,353 169,141,101
Related party receivables 2,417,793 3,483,866
Inventories 80,127,971 88,203,209
Prepaid expenses, deferred tax
assets and other current assets 44,737,650 57,533,030
Total current assets 1,355,431,678 1,338,459,282
Deposit on long-term investment 910,000
Property, plant and equipment, net 17,585,084 17,871,691
Intangible assets, net 6,868,224 5,548,611
Goodwill 0 410,803
Total assets 1,379,884,986 1,363,200,387
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable 49,110,695 34,858,000
Other payables, accruals, advances
from customers and deferred
revenues 41,458,455 35,983,555
Income taxes payable 1,271,907 874,092
Total current liabilities 91,841,057 71,715,647
Warrants 9,376,959 5,830,023
Total liabilities 101,218,015 77,545,670
Mezzanine Equity
Convertible Series A Preference
Shares 0 0
Shareholders' Equity
Ordinary shares 15,395 15,349
Additional paid-in capital 1,172,850,038 1,169,618,982
Accumulated other comprehensive loss (68,995,467) (89,958,849)
Retained earnings 174,797,004 205,979,235
Total shareholders' equity 1,278,666,971 1,285,654,717
Total liabilities and shareholders'
equity 1,379,884,986 1,363,200,387



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
30 June
2007 2008
(Unaudited) (Unaudited)
RMB % of Rev RMB % of Rev

GAAP net revenue 83,080,414 100.0% 97,942,806 100.0%

GAAP gross profit 37,640,887 45.3% 50,074,012 51.1%
Share-based compensation 73,446 0.1% 63,941 0.1%
Non-GAAP gross profit 37,714,333 45.4% 50,137,953 51.2%

GAAP operating income 3,280,391 3.9% (1,676,827) -1.7%
Share-based compensation 2,234,414 2.7% 2,466,615 2.5%
Non-GAAP operating income 5,514,805 6.6% 789,789 0.8%

GAAP net income 3,978,237 4.8% 31,182,233 31.8%
Share-based compensation 2,234,414 2.7% 2,466,615 2.5%
Change in the fair value of
warrants 55,207 0.1% (3,370,448) -3.4%
Non-GAAP net income 6,267,858 7.5% 30,278,400 30.9%

GAAP net income per share
Basic 0.09 0.82
Diluted 0.07 0.71

Non-GAAP net income per share
Basic 0.17 0.79
Diluted 0.15 0.77



Twelve months ended
30 June
2007 2008
(Audited) (Unaudited)
RMB % of Rev RMB % of Rev

GAAP net revenue 555,225,014 100.0% 651,934,604 100.0%

GAAP gross profit 288,658,630 52.0% 333,174,825 51.1%
Share-based compensation 375,825 0.1% 379,741 0.1%
Non-GAAP gross profit 289,034,455 52.1% 333,554,566 51.2%

GAAP operating income 67,069,801 12.1% 80,410,328 12.3%
Share-based compensation 14,830,714 2.7% 20,344,641 3.1%
Non-GAAP operating income 81,900,515 14.8% 100,754,969 15.5%

GAAP net income 66,428,301 12.0% 144,929,393 22.2%
Share-based compensation 14,830,714 2.7% 20,344,641 3.1%
Change in the fair value of
warrants 55,207 0.0% 1,868,238 0.3%
Non-GAAP net income 81,314,222 14.6% 167,142,272 25.6%

GAAP net income per share
Basic 2.32 4.14
Diluted 2.15 3.95

Non-GAAP net income per share
Basic 2.85 4.77
Diluted 2.66 4.56



Source: Noah Education Holdings Ltd.