China Distance Sends Stock Up 8% on Third Quarter Results

CDEL's Online education service reached $49.5 million and accounted for 73% of its revenue, which sent it stock soaring on Wednesday.

Anthony Russo
    Nov 20, 2019 2:00 PM  PT
China Distance Sends Stock Up 8% on Third Quarter Results
author: Anthony Russo   

The stock in China Distance Education Holdings Ltd. (NYSE: DL) or CDEL sprung nearly 8% to $7.79 per American depositary share on Wednesday after the company announced strong results from its education service revenue in the fourth fiscal quarter.

The Beijing-based online education provider said in a statement after markets closed on Tuesday that in the three months through September its revenue reached $68.7 million, up 28% year-over-year. Net income was $13.8 million, or 41 cents per ADS, compared with $9.7 million, or 29 cents per ADS, a year ago.

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(Image: CDEL)

Online education service revenue drove the growth in the period, at $49.5 million, which represented an increase of 34% year-over-year. That accounted for 73% of the company's revenue in the fourth quarter, the report said.

In addition, CDEL said its legal education vertical, Beijing Ruida Chengtai Education Technology Co. Ltd., helped with the growth in the quarter. In July 2017, CDEL acquired a 40% stake in Beijing Ruida and increased its equity interest to 60% in August, as noted by Zhengdong Zhu, the co-founder, chairman and chief executive officer of the company.

"Turning to Beijing Ruida, our leading provider of exam preparation services for participants in China's legal professional qualification examination as previously disclosed, we completed the acquisition of an additional 9% equity interest in Beijing Ruida on August 7, 2019, bringing the company's total equity interest in Beijing Ruida to 60%," Zhu said in a conference call today.

According to CDEL's website, it operates 20 platforms and offers 13 subjects including accounting, health care, engineering & construction and business start-up training. As of September, student enrollments in its courses reached 1.1 million, an increase of 41% compared with a year ago, CDEL's statement said.

The company also sells training materials on its website and on one of China's largest online retailers, JD.com Inc. (Nasdaq: JD). It said it achieved "record cash receipts" during China's largest shopping event, Singles' Day,  which traditionally takes place of Nov. 11.

"We achieved record cash receipts from course purchases and books and reference material sales on our official websites and flagship stores on JD.com and T-MO," Zhu said in the conference call.

He added, "Also on the Double 11 Shopping Festival, our flagship accounting store ranks number one among all education businesses on that based on sales and volume."

Going forward, CDEL said it expects to generate revenue in the range of $51.1 million to $53.3 million in the first quarter of fiscal 2020, representing year-over-year growth of approximately 20% to 25%.

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