- Fourth Quarter 2020 Net Revenue was $655 Million Exceeding Guidance -
- Fourth Quarter 2020 Gross Profit was $367 Million with Gross Margin of 560% -
- Fourth Quarter 2020 Operating Income was $129 Million with Operating Margin of 197% -
- Fourth Quarter 2020 Net Income Attributable to CDEL was $49 Million with Net Income Margin of 74% -

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 fourth quarter and fiscal year 2020 ended September 30 2020

Fourth Quarter Fiscal 2020 Financial and Operational Highlights

• Net revenue decreased by 46% to $655 million from $687 million in the prior year period
• Total course enrollments were 931500 a decrease of 177% from the fourth quarter of fiscal 2019
• Cash receipts from online course registration were $382 million a 128% decrease from the fourth quarter of fiscal 2019
• Gross profit decreased by 154% to $367 million from $434 million in the prior year period
• Non-GAAP^[1] gross profit decreased by 153% to $368 million from $434 million in the prior year period
• Gross margin was 560% compared with 632% in the prior year period Non-GAAP^[1] gross margin was 561% compared with 632% in the prior year period
• Operating income decreased by 329% to $129 million from $192 million in the prior year period
• Non-GAAP^[1] operating income decreased by 360% to $136 million from $212 million in the prior year period
• Net income attributable to CDEL was $49 million compared with net income attributable to CDEL of $138 million in the prior year period
• Non-GAAP^[1] net income attributable to CDEL was $62 million compared with non-GAAP^[1] net income attributable to CDEL of $186 million in the prior year period
• Basic and diluted net income per American Depositary Share (ADS) attributable to CDEL were $0144 and $0143 respectively compared with both basic and diluted net income per ADS attributable to CDEL of $0411 for the fourth quarter of fiscal 2019 Each ADS represents four ordinary shares
• Basic and diluted non-GAAP^[1] net income per ADS attributable to CDEL were $0185 and $0184 respectively compared with basic and diluted non-GAAP^[1] net income per ADS attributable to CDEL of $0558 and $0554 respectively for the fourth quarter of fiscal 2019
• Cash outflow from operations was $17 million compared with cash inflow from operations of $200 million in the fourth quarter of fiscal 2019

Fiscal Year 2020 Financial and Operational Highlights

• Net revenue decreased by 11% to $2096 million from $2118 million in fiscal year 2019
• Total course enrollments were 4255000 an increase of 122% from fiscal year 2019
• Cash receipts from online course registration were $1790 million a 154% decrease from fiscal year 2019
• Gross profit increased by 08% to $1080 million from $1071 million in fiscal year 2019
• Non-GAAP^[1] gross profit increased by 09% to $1081 million from $1071 million in fiscal year 2019
• Gross margin was 515% compared with 506% in fiscal year 2019 Non-GAAP^[1] gross margin was 516% compared with 506% in fiscal year 2019
• Operating income decreased by 178% to $188 million from $228 million in fiscal year 2019
• Non-GAAP^[1] operating income decreased by 188% to $214 million from $264 million in fiscal year 2019
• Net income attributable to CDEL decreased by 509% to $104 million from $213 million in fiscal year 2019
• Non-GAAP^[1] net income attributable to CDEL decreased by 503% to $137 million from $276 million in fiscal year 2019
• Both basic and diluted net income per ADS attributable to CDEL were $0309 compared with both basic and diluted net income per ADS attributable to CDEL of $0635 for fiscal year 2019
• Basic and diluted non-GAAP^[1] net income per ADS attributable to CDEL were $0410 and $0406 respectively compared with basic and diluted non-GAAP^[1] net income per ADS attributable to CDEL of $0830 and $0823 respectively for the fiscal year 2019
• Cash flow from operations decreased by 511% to $400 million from $818 million in the fiscal year 2019

Mr Zhengdong Zhu Chairman and CEO of CDEL said We concluded fiscal 2020 with fourth-quarter revenue of $655 million exceeding the upper end of our guidance range This quarter's revenue outperformance was primarily driven by a less-severe than previously expected impact from the pandemic-related postponement or suspension of certain professional certification examinations The appreciation of the Renminbi against US dollar also contributed to the fourth quarter revenue performance However our cash receipts from online course registration have declined year-over-year for the past three consecutive quarters due to the COVID-19 pandemic

We believe in the long-term growth prospects of China's online education industry and are well prepared to serve a growing student demographic We remain dedicated to consistently delivering knowledge to an even broader student constituency and extending convenience flexibility and engagement to their learning experiences Meanwhile we will continue to integrate cutting-edge technologies into our educational solutions and diversify our course offerings to fulfill the needs of students at different stages of their study and career development With our 20-year track record and an unwavering commitment to education we have proven to be the premier partner of choice for students in their journey of lifelong learning Mr Zhu concluded

Mr Mark Marostica Co-Chief Financial Officer of CDEL added Despite our efforts to control costs amid revenue weakness stemming from the COVID-19 pandemic our fourth quarter non-GAAP operating profit declined year-over-year With fiscal 2021 well underway we remain committed to our balanced growth strategy and deeply focused on improving both revenue growth and profitability

Fourth Quarter Fiscal 2020 Financial Results

Net Revenue Total net revenue decreased by 46% to $655 million in the fourth quarter of fiscal 2020 from $687 million in the fourth quarter of fiscal 2019 Net revenue from online education services books and reference materials and other sources contributed 784% 96% and 120% respectively of total net revenues for the fourth quarter of fiscal 2020

Online education services Net revenue from online education services increased by 39% to $514 million in the fourth quarter of fiscal 2020 from $495 million in the fourth quarter of fiscal 2019 mainly due to the revenue growth from the accounting vertical

Books and reference materials Net revenue from books and reference materials increased by 99% to $63 million in the fourth quarter of fiscal 2020 from $57 million in the fourth quarter of fiscal 2019 primarily attributable to the publication of certain Legal Professional Qualification Examination books in the fourth quarter of fiscal 2020 which were previously expected to be published in the third quarter of fiscal 2020

Others Net revenue from other sources decreased by 419% to $78 million in the fourth quarter of fiscal 2020 from $135 million in the fourth quarter of fiscal 2019 primarily due to the significant decrease in revenue from the sale of college-related learning simulation software and the significant decrease in the provision of offline training courses due to COVID-19

Cost of Sales Cost of sales increased by 140% to $288 million in the fourth quarter of fiscal 2020 from $253 million in the fourth quarter of fiscal 2019 Non-GAAP^[1] cost of sales increased by 138% to $288 million in the fourth quarter of fiscal 2020 from $253 million in the fourth quarter of fiscal 2019 The increase in cost of sales was mainly due to the increase in cost of books and reference materials and salaries This increase was partially offset by the decrease in rental and related expenses and lecture fees

Gross Profit and Gross Margin Gross profit was $367 million in the fourth quarter of fiscal 2020 a decrease of 154% from $434 million in the prior year period Non-GAAP^[1] gross profit was $368 million decreasing by 153% from $434 million in the prior year period Gross margin was 560% in the fourth quarter of fiscal 2020 compared with 632% in the fourth quarter of fiscal 2019 Non-GAAP^[1] gross margin was 561% in the fourth quarter of fiscal 2020 compared with 632% in the fourth quarter of fiscal 2019

Operating Expenses Total operating expenses increased by 53% to $260 million in the fourth quarter of fiscal 2020 from $247 million in the prior year period Non-GAAP^[1] total operating expenses increased by 118% to $254 million in the fourth quarter of fiscal 2020 from $227 million in the prior year period

Selling expenses Selling expenses increased by 89% to $176 million in the fourth quarter of fiscal 2020 from $161 million in the prior year period Non-GAAP^[1] selling expenses increased by 88% to $176 million in the fourth quarter of fiscal 2020 from $161 million in the prior year period The increase was primarily driven by higher advertising and promotional expenses and the increase in commission to agents This increase was partially offset by the decrease in rental and related expenses

General and administrative expenses General and administrative expenses increased by 198% to $85 million in the fourth quarter of fiscal 2020 from $71 million in the prior year period Non-GAAP^[1] general and administrative expenses increased by 192% to $78 million in the fourth quarter of fiscal 2020 from $66 million in the prior year period The increase was mainly due to the professional fees associated with the Company's going private transaction This increase was partially offset by the significant decrease in provision for doubtful debts compared with the prior year period In the prior year period significant provision for doubtful debts was made mainly associated with the Company's investee company Hangzhou Wanting Technology Co Ltd and the sale of learning simulation software

Impairment loss from long-term investments Impairment loss from long-term investments in the fourth quarter of fiscal 2020 was $09 million compared with $69 million in the prior year period due to impairment of the value of the investee company Beijing Xinrui Education Technology Co Ltd

Income Tax Expenses Income tax expense decreased by 305% to $42 million in the fourth quarter of fiscal 2020 from $60 million in the prior year period primarily due to the decrease in taxable income in the fourth quarter of fiscal 2020

Net Income Attributable to CDEL As a result of the foregoing net income attributable to CDEL was $49 million in the fourth quarter of fiscal 2020 compared with net income attributable to CDEL of $138 million in the prior year period Non-GAAP^[1] net income attributable to CDEL was $62 million in the fourth quarter of fiscal 2020 compared with non-GAAP^[1] net income attributable to CDEL of $186 million in the prior year period

Operating Cash Flow Net operating cash outflow was $17 million in the fourth quarter of fiscal 2020 compared with net operating cash inflow of $200 million in the prior year period The operating cash outflow was mainly attributable to the decrease in deferred revenue and partially due to the decrease in cash receipts from online course registration lease liability and the decrease/increase in amount due to/from related parties The operating cash outflow was partially offset by net income before non-cash items generated in the fourth quarter of fiscal 2020 the decrease in inventories and the increase in accrued expenses and other liabilities and income tax payable

Cash and Cash Equivalents Term Deposits Restricted Cash and Short-term Investments Cash and cash equivalents term deposits restricted cash and short-term investments as of September 30 2020 increased by 09% to $1349 million from $1337 million as of June 30 2020 mainly due to the appreciation of the Renminbi against the US dollar The increase was partially offset by (i) the operating cash flow used in the fourth quarter of fiscal 2020 (ii) the capital expenditure of $19 million (iii) the repayment of an onshore loan of $33 million and (iv) the dividend distribution by an affiliated entity to its noncontrolling interests' shareholders of $17 million

Fiscal Year 2020 Financial Results

Net Revenue Total net revenue decreased by 11% to $2096 million in fiscal year 2020 from $2118 million in fiscal year 2019 Net revenue from online education services books and reference materials and other sources contributed 760% 106% and 134% respectively of total net revenues for fiscal year 2020

Online education services Net revenue from online education services increased by 92% to $1593 million in fiscal year 2020 from $1459 million in fiscal year 2019

Books and reference materials Net revenue from books and reference materials decreased by 194% to $221 million in fiscal year 2020 from $274 million in fiscal year 2019

Others Net revenue from other sources decreased by 269% to $282 million in fiscal year 2020 from $385 million in fiscal year 2019

Cost of Sales Cost of sales decreased by 30% to $1016 million in fiscal year 2020 from $1047 million in fiscal year 2019 Non-GAAP^[1] cost of sales decreased by 31% to $1015 million in fiscal year 2020 from $1047 million in fiscal year 2019

Gross Profit and Gross Margin Gross profit was $1080 million in fiscal year 2020 up 08% from $1071 million in fiscal year 2019 Non-GAAP^[1] gross profit was $1081 million increasing by 09% from $1071 million in fiscal year 2019 Gross margin was 515% in fiscal year 2020 compared with 506% in fiscal year 2019 Non-GAAP^[1] gross margin was 516% in fiscal year 2020 compared with 506% in fiscal year 2019

Operating Expenses Total operating expenses increased by 85% to $953 million in fiscal year 2020 from $879 million in fiscal year 2019 Non-GAAP^[1] total operating expenses increased by 100% to $928 million in fiscal year 2020 from $844 million in fiscal year 2019

Selling expenses Selling expenses increased by 136% to $698 million in fiscal year 2020 from $615 million in fiscal year 2019 Non-GAAP^[1] selling expenses increased by 136% to $698 million in fiscal year 2020 from $615 million in fiscal year 2019

General and administrative expenses General and administrative expenses increased by 22% to $255 million in fiscal year 2020 from $249 million in fiscal year 2019 Non-GAAP^[1] general and administrative expenses increased by 05% to $231 million in fiscal year 2020 from $229 million in fiscal year 2019

Impairment loss from long-term investments Impairment loss from long-term investments in fiscal 2020 was $09 million compared with $69 million in fiscal year 2019 due to impairment of the value of the investee company Beijing Xinrui Education Technology Co Ltd

Income Tax Expenses Income tax expense was $55 million in fiscal year 2020 compared with income tax expense of $81 million in fiscal year 2019

Net Income Attributable to CDEL As a result of the foregoing net income attributable to CDEL was $104 million in fiscal year 2020 compared with net income attributable to CDEL of $213 million in fiscal year 2019 Non-GAAP^[1] net income attributable to CDEL was $137 million in fiscal year 2020 compared with non-GAAP^[1] net income attributable to CDEL of $276 million in fiscal year 2019

Operating Cash Flow Net operating cash inflow decreased by 511% to $400 million in fiscal year 2020 from $818 million in fiscal year 2019

China Distance Education Holdings Limited Enters into Definitive Merger Agreement for Going Private Transaction

On December 1 2020 the Company announced that it had entered into a definitive Agreement and Plan of Merger (the Merger Agreement) with Champion Distance Education Investments Limited (Parent) and China Distance Learning Investments Limited (Merger Sub) a wholly owned subsidiary of the Parent pursuant to which subject to the terms and conditions thereof Merger Sub will merge with and into the Company with the Company continuing as the surviving entity and becoming a wholly-owned subsidiary of Parent (the Merger) in a transaction in which the Company will be acquired by a group of certain of the Company's existing shareholders (including Mr Zhu Ms Baohong Yin co-founder of the Company deputy chairman of the Board and the spouse of Mr Zhu and their affiliated entity) and certain other existing shareholders of the Company and equity investors Upon the effectiveness of the Merger all outstanding ordinary shares of the Company (each an Ordinary Share) including Ordinary Shares represented by American depositary shares each representing four Ordinary Shares (ADSs) other than Excluded Shares (as defined in the Merger Agreement) and ADSs representing Excluded Shares will be cancelled in exchange for the right of the holders thereof to receive $245 in cash per Ordinary Share or $980 in cash per ADS

The Company cautions its shareholders and others considering trading in its securities that there remain risks and uncertainties with respect to the Merger including the possibility that the Merger will not occur as planned if events arise that result in the termination of the Merger Agreement or if one or more of the various closing conditions to the Merger are not satisfied or waived or if requisite shareholder approval is not obtained and other risks and uncertainties regarding the Merger Agreement and the Merger

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 and practical accounting training courses for college students and working professionals 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://ircdeleducom

Safe Harbor Statement

This announcement contains forward-looking statements These statements are made under the safe harbor provisions of the US 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 quotations from management in this announcement the Company's strategic and operational plans (in particular the impact of COVID-19 on our businesses including the postponement or suspension of certain professional certification examinations; balancing growth and profitability; the growth prospects of online professional education in China; as well as the anticipated benefits of our strategic growth initiatives including the promotion of the Company's life-long learning ecosystem) as well as the risks and uncertainties of the Merger 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: the impact of COVID-19 together with the postponement or suspension of certain professional certification examinations; the results and impact of the Merger; 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; anticipated benefits of acquisition or disposal of businesses 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 US generally accepted accounting principles or GAAP the Company uses the following measures defined as non-GAAP financial measures: non-GAAP net income attributable to CDEL operating income gross profit cost of sales selling expenses general and administrative expenses net income margin attributable to CDEL operating margin gross profit margin and basic and diluted earnings per ADS and per share attributable to CDEL 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 by excluding share-based compensation expenses impairment loss from long-term investments net of noncontrolling interests and taxes calculated using specific tax treatments applicable to the adjustments based on their respective jurisdictions and impairment of goodwill 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 impairment loss from long-term investments net of noncontrolling interests and taxes calculated using specific tax treatments applicable to the adjustments based on their respective jurisdictions and impairment of goodwill 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:

In China:

China Distance Education Holdings Limited
Jiao Jiao
Tel: +86-10-8231-9999 ext 1826
Email: [email protected]

The Piacente Group Inc 
Jenny Cai 
Tel: +86-10-6508-0677
E-mail: [email protected]

In the United States: 

The Piacente Group Inc
Brandi Piacente
Tel: +1 212-481-2050
Email: [email protected]

(Financial Tables on Following Pages)