China Education Alliance Inc. (fka CEAI)

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CEU 1Q Conference Call May 10 Highlights


Looking to educate the highly populated provinces of China and expand exam prep in certain provinces

Exam prep and vocational training are the two main businesses

Revenue $8.62m 1Q10 – 8.2m (2009) = 5% increase YoY
Gross Profit = 12.3% increase
Operating Income $3.9m 1Q10 -3.37m (2009)
Operating Margin increased 45.3% for 1Q10
Net Income $3.66m 1Q10 = a 11.7% increase ($3.28m in 2009)
Diluted EPS 0.12 compared to 0.13 to last yr
High demand in vocational training

Stock option compensation and office rent increased costs for Company

Cash of $68.57m ? lays a good foundation for expansion and they plan on acquisitions within 9 months

Working Capital $70.2m

Educational industry in China is a an extreme growth sector, focused on building brand and capturing more market share in 2 business markets (online education and vocational training)
Accelerating marketing efforts by the alliance with Beijing Magazine

Expect to experience growth in their business line organically
Confident in growth and increased earnings in 2010.Looking for revenue and EPS growth of 30% (most being organic growth) in 2010 (not implying any expansions with the 30% figure)

1Q is slowest business quarter due to Chinese holidays – in future quarters they expect increased growth in remaining quarters

Expect continually higher Gross Margins for remaining Q’s

It must be emphasized that 1Q is always the least productive quarter due to Chinese holiday

Not planning on purchasing back stock with the cash...only planning on making investments and acquisitions

When looking at 2010 figures you should compare it to 2008 not 2009 because 2009 they experienced rapid growth throughout provinces.

Cash use: 25% for self expansion of sales (internal expenditure) and 25% investment on new project (new business lines/entities) , keep 25% for working capital, 25% for acquisitions

Online education tax rate is 15% due to “high technology” status (vocational is 0%)

Pleased with the quarter overall and excited about growth potential in 2010”