BEIJING, Nov. 8, 2009 (PRNewswire-Asia-FirstCall) -- ATA Inc. ("ATA" or the "Company") (Nasdaq: ATAI), the leading provider of computer-based testing and testing-related services in China, today announced unaudited financial results for its second fiscal quarter ended September 30, 2009 ("Second Quarter 2010").
Second Quarter 2010 Highlights
-- Net revenues decreased by 19.6% year-over-year to RMB41.6 million
(US$6.1 million).
-- Gross profit decreased by 54.3% year-over-year to RMB15.7 million
(US$2.3 million).
-- Loss from operations was RMB17.2 million (US$2.5 million) compared to
an operating income of RMB8.8 million in the same period last year.
-- Net loss was RMB16.4 million (US$2.4 million) compared to a net income
of RMB8.3 million in the same period last year.
-- Net loss excluding share-based compensation expense and foreign
currency exchange gain (losses) (non-GAAP) was RMB15.2 million (US$2.2
million).
-- Basic and diluted loss per ADS was RMB0.74 (US$0.11). Basic and diluted
loss per ADS excluding share-based compensation expense and foreign
currency exchange gain (losses) (non-GAAP) was RMB0.68 (US$0.10). Each
ADS represents two common shares of the Company.
-- For the quarter, revenue from testing services increased 88.8% from the
same period last year. ATA delivered approximately 0.7 million tests, a
decrease of 49.1% year-over-year while average revenue per test
increased to RMB36.2 from RMB9.8 in the same period last year.
"We are pleased with our results for the quarter, as we were able to meet our guidance despite the challenging economic environment and pressure from the H1N1 virus that delayed some of our tests," commented Kevin Ma, ATA's Chairman and Chief Executive Officer. "Measures put in place to prevent the spread of the H1N1 virus caused the postponement of 23,000 Securities, Broker, Futures and Fund professional licensure tests in certain areas of China during the quarter, but we were still able to deliver strong organic growth as measured by number of test takers for these exams, which was up 94.9% compared to the same period of last year. The Test of English for International Communication ("TOEIC") contributed RMB3.8 million to net revenue in this quarter with average revenue per test of RMB309.1. Additionally, we are very pleased that the Agriculture Bank of China ("ABC") and the People's Insurance Company (Group) of China ("PICC") adopted our HR select services this quarter with approximately 84,000 candidates taking our staff assessment exam. This is a very important milestone for our business and reflects our ability to successfully leverage our technology platform and distribution capabilities to broaden our service offerings and diversify into the non-government sponsored testing areas to reduce our dependency on government decisions. We have so far registered 32,000 companies with trial accounts and converted 15 companies to HR Select service under contract, including ABC, PICC, Accenture China, China Telecom Tianjin Branch, Servier China, among others. With both TOEIC and HR Select making a solid contribution to our revenue we feel we are well positioned to continue to increase our penetration of the private sector. However, fiscal 2010 remains a transition year for ATA as we ramp up operation resources for our private sector efforts while revenue takes time to build. While these efforts may cause short term margin pressures for ATA, we are confident they will increase shareholder value over the long term."
ATA's Chief Financial Officer, Carl Yeung, stated, "Our results for the second quarter were impacted by the H1N1 virus as well as postponement of government spending that depressed our NTET sales. Despite these setbacks we were able to meet our guidance due to strong test-taker volume for tests we delivered for the Securities Association of China as well as the deployment of the HR select and the TOEIC exam offerings. The overall number of test takers for the Securities, Brokers, Futures and Fund Sales Professionals exam increased by 207,000 compared to the same period of last year. The HR Select services for ABC and PICC contributed RMB4.2 million while the TOEIC added RMB3.8 million to net revenues in this quarter. Offsetting the strong results from our testing service business were declines in net revenue from our test preparation and training solutions as well as from our test-based education services. We expect our test preparation and training solutions business to recover in the months ahead, but net revenues from our test-based education services is expected to continue to decline, as we made the strategic decision to redirect most of our sales and marketing efforts from our test-based education services towards our newly developed testing services such as HR Select and TOEIC, which we believe have bigger and more attractive market opportunities. We believe the revenue opportunity from TOEIC and HR Select will become increasingly more visible in the quarters ahead as these services gain wider recognition and acceptance. While this quarter's results met guidance, we are concerned about the development of the H1N1 virus and how that affects our business. Because our large scale tests require the gathering of large groups of test takers at school campuses and our testing centers, we believe it is likely our business over the next two quarters will continue to be affected by the virus. Therefore, we would like to be more conservative and lower our next two quarters expectations as we enter the winter months."
Financial Results for the Second Quarter 2010
For Second Quarter 2010, net revenues were RMB41.6 million (US$6.1 million), representing a 19.6% decrease compared to the same period last year. This decrease was mainly driven by declines in test preparation and training solutions as well as test-based educational programs which offset strong results from our testing services. Net revenue from testing services was up 88.8% to RMB26.8 million (US$3.9 million) in the quarter from RMB14.2 million in the same period last year, primarily due to the tests delivered for the Securities Association of China, HR select services and TOEIC. Net revenue from test preparation and training solutions was RMB3.9 million (US$0.6 million), down 81.5% from RMB21.2 million in the same period of last year, as the Company recorded no sales of NTET software in the quarter. Net revenues from test-based educational programs declined by 41.2% year-over-year to RMB6.4 million (US$0.9 million) from RMB10.9 million. Other revenue decreased 16.8% year-over-year to RMB4.5 million (US$0.7 million) from RMB5.4 million.
The overall number of tests delivered decreased by 49.1% year-over-year to approximately 0.7 million in the quarter as we did not conduct close to 1 million lower end tests such as provincial high school exams and NTET tests, while the average revenue per test delivered increased 270.9% to RMB36.2 from RMB9.8 in the same period of last year. The increase in average revenue per test was driven by a higher value test mix that included HR select and TOEIC tests, which have higher average per test revenue and were not offered in the comparable period last year.
Gross profit decreased by 54.3% to RMB15.7 million (US$2.3 million) from RMB34.4 million in the same period last year. Gross margin was 37.8% in the Second Quarter 2010 down from 66.5% in the same period last year, mainly driven by the lack of sales of NTET software which enjoyed high margins, and the effect of the amortization of intangible assets such as the TOEIC royalty fee and certain software, which were acquired and capitalized in the third and fourth quarter of fiscal year 2009.
Operating expenses increased by 28.6% to RMB32.9 million (US$4.8 million) up from RMB25.6 million in the same period last year. Research and development expenses increased by 15.5% to RMB5.5 million (US$0.8 million) from RMB4.8 million in the comparable period of last year primarily driven by an increase in headcount and higher associated compensation expense.
