China Distance Education Holdings Limited Reports Financial Results for Third Quarter Fiscal Year 2019

BEIJING,Aug. 14,2019 -- 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 third quarter of fiscal year 2019 ended June 30,2019.

Third Quarter Fiscal 2019 Financial and Operational Highlights

Net revenue increased by 30.2% to $61.7 million from $47.4 million in the prior year period.

Total course enrollments were 734,800,an increase of 29.2% from the third quarter of fiscal 2018.

Cash receipts from online course registration were $50.4 million,a 30.7% increase from the third quarter of fiscal 2018.

Gross profit increased by 36.5% to $31.2 million from $22.8 million in the prior year period.

Non-GAAP[1] gross profit increased by 36.3% to $31.2 million from $22.9 million in the prior year period.

Gross margin was 50.5%,compared with 48.2% in the prior year period. Non-GAAP[1] gross margin was 50.5%,compared with 48.2% in the prior year period.

Operating income increased by 527.2% to $9.9 million from $1.6 million in the prior year period.

Non-GAAP[1] operating income increased by 371.7% to $10.4 million from $2.2 million in the prior year period.

Net income increased by 84.1% to $9.4 million from $5.1 million in the prior year period.

Non-GAAP[1] net income increased by 72.9% to $10.0 million from $5.8 million in the prior year period.

Basic and diluted net income per American Depositary Share ("ADS") were $0.282 and $0.281,compared with basic and diluted net income per ADS of $0.154 for the third quarter of fiscal 2018. Each ADS represents four ordinary shares.

Basic and diluted non-GAAP[1] net income per ADS were $0.299 and $0.296,compared with basic and diluted non-GAAP[1] net income per ADS of $0.174 and $0.173 for the third quarter of fiscal 2018.

Cash flow from operations increased by 41.7% to $17.6 million from $12.4 million in the third quarter of fiscal 2018.

Mr. Zhengdong Zhu,Chairman and CEO of CDEL,said,"The second half of fiscal year 2019 commenced with a strong third quarter performance,with third quarter revenue and net income growth of 30.2% and 84.1% year-over-year,respectively. Third quarter revenue growth was driven primarily by our industry-leading accounting vertical,a significant increase in revenue from the sale of learning simulation software,and revenue from the legal vertical generated by Beijing Ruida. Total enrollment growth was 29.2% year-over-year in the third quarter,primarily due to significant enrollment growth in accounting and engineering & construction (E&C) continuing education courses. Cash receipts from online course registration grew 30.7% year-over-year in the third quarter,or 39.8% year-over-year on a constant currency basis,due to the continued popularity of our longer duration premium and elite classes."

Mr. Zhu concluded,"Our third quarter results show that our multi-pronged growth strategy is bearing fruit. All three core verticals of accounting,healthcare,and E&C,posted strong year-over-year cash receipt growth in the third quarter,demonstrating the broad appeal of our course offerings across industry verticals. Underpinning the growth of our industry verticals is the comprehensive life-long learning ecosystem we have built and continue to enhance. Our accounting vertical,for example,now encompasses a full complement of services,including professional certification exam preparation and continuing education services; practical accounting training and employment guidance services; accounting and related advisory services to corporate clients; and books and reference materials. We are focused on developing similar ecosystems across our other industry verticals,such as healthcare,E&C,and legal,in an effort to create additional avenues of growth and expand our overall growth opportunities."

Mr. Mark Marostica,Co-Chief Financial Officer of CDEL,added,"We returned to profitability in the third quarter as anticipated,and recorded non-GAAP operating margin of 16.8%,a significant year-over-year improvement due to strong third quarter revenue growth,coupled with the successful implementation of certain expense control measures and leverage of our cost structure."

Mr. Marostica,continued,"With our fourth fiscal quarter well underway,we remain steadfast in continuing to balance growth with a keen focus on profitability and prudent cost control."

Third Quarter Fiscal 2019 Financial Results

Net Revenue. Total net revenue increased by 30.2% to $61.7 million in the third quarter of fiscal 2019 from $47.4 million in the third quarter of fiscal 2018. Net revenue from online education services,books and reference materials,and other sources contributed 70.5%,15.9% and 13.6%,respectively,of total net revenues for the third quarter of fiscal 2019.

Online education services. Net revenue from online education services increased by 25.6% to $43.5 million in the third quarter of fiscal 2019 from $34.7 million in the third quarter of fiscal 2018,mainly due to revenue growth from the accounting and healthcare verticals. Revenue from the legal vertical generated by Beijing Ruida also contributed to the growth.

Books and reference materials. Net revenue from books and reference materials increased by 84.7% to $9.8 million in the third quarter of fiscal 2019 from $5.3 million in the third quarter of fiscal 2018,mainly due to book sale revenue from the Legal Professional Qualification Examination contributed by Beijing Ruida.

Others. Net revenue from other sources increased by 12.8% to $8.4 million in the third quarter of fiscal 2019 from $7.4 million in the third quarter of fiscal 2018,primarily due to offline training revenue from the Legal Professional Qualification Examination contributed by Beijing Ruida. A significant increase in revenue from the sale of learning simulation software also contributed to the growth. This increase was partially offset by the decrease in revenue from the "Tax School Program" which the Company disposed in the first quarter of fiscal 2019.

Cost of Sales. Cost of sales increased by 24.4% to $30.6 million in the third quarter of fiscal 2019 from $24.6 million in the third quarter of fiscal 2018. Non-GAAP[1] cost of sales increased by 24.6% to $30.6 million in the third quarter of fiscal 2019 from $24.5 million in the third quarter of fiscal 2018. The increase was mainly due to expenses associated with Beijing Ruida,including amortization expenses of intangibles arising from its acquisition of $1.7 million,cost of books and reference materials,and lecture fees. This increase was partially offset by the decrease in salaries and related expenses,and rental and related expenses.

Gross Profit and Gross Margin. Gross profit was $31.2 million in the third quarter of fiscal 2019,up 36.5% from $22.8 million in the prior year period. Non-GAAP[1]gross profit was $31.2 million,increasing by 36.3% from $22.9 million in the prior year period. Gross margin was 50.5% in the third quarter of fiscal 2019,compared with 48.2% in the third quarter of fiscal 2018. Non-GAAP[1]gross margin was 50.5% in the third quarter of fiscal 2019,compared with 48.2% in the third quarter of fiscal 2018.

Operating Expenses. Total operating expenses increased by 24.5% to $22.0 million in the third quarter of fiscal 2019,from $17.7 million in the prior year period. Non-GAAP[1] total operating expenses increased by 25.8% to $21.5 million in the third quarter of fiscal 2019,from $17.1 million in the prior year period.

Selling expenses. Selling expenses increased by 31.4% to $17.0 million in the third quarter of fiscal 2019 from $13.0 million in the prior year period. Non-GAAP[1] selling expenses increased by 31.6% to $17.0 million in the third quarter of fiscal 2019 from $12.9 million in the prior year period. The increase was primarily driven by higher advertising and promotional expenses,expenses associated with Beijing Ruida,the increase in rental and related expenses and other miscellaneous selling expenses. This increase was partially offset by the decrease in commission to agents.

General and administrative expenses. General and administrative expenses increased by 5.3% to $4.9 million in the third quarter of fiscal 2019 from $4.7 million in the prior year period. Non-GAAP[1] general and administrative expenses increased by 7.4% to $4.4 million in the third quarter of fiscal 2019 from $4.1 million in the prior year period. The increase was mainly due to the expenses associated with Beijing Ruida.

Income Tax Expense. Income tax expense increased by 82.6% to $2.5 million in the third quarter of fiscal 2019 from $1.3 million in the prior year period,primarily due to an increase in taxable income.

Net Income. As a result of the foregoing,net income was $9.4 million in the third quarter of fiscal 2019,compared with $5.1 million in the prior year period. Non-GAAP[1] net income was $10.0 million in the third quarter of fiscal 2019,compared with $5.8 million in the prior year period.

Operating Cash Flow.Net operating cash inflow increased by 41.7% to $17.6 million in the third quarter of fiscal 2019 from $12.4 million in the prior year period. The operating cash inflow was mainly attributable to net income before non-cash items generated in the third quarter of fiscal 2019. The increase in accrued expenses and other liabilities,income tax payable,and deferred revenue generated from the Company's professional education services segment also contributed to the operating cash inflow. The operating cash inflow was partially offset by the increase in accounts receivable,inventories,prepayments and other current assets,and other non-current assets.

Cash and Cash Equivalents,Restricted Cash and Short-term Investments. Cash and cash equivalents,restricted cash and short-term investments as of June 30,2019 decreased by 4.0% to $124.9 million from $130.1 million as of March 31,2019,mainly due to (i) the payment of contingent consideration for the acquisition of 11% equity interest,and purchase consideration for further acquisition of 9% equity interest in Beijing Ruida for a total of $6.6 million,(ii) the repayment of loans of $13.1 million and (iii) the capital expenditure of $1.7 million. The decrease was partially offset by the operating cash inflow generated in the third quarter of fiscal 2019 and the proceeds from disposal of an investment,Beijing Yousian Technology Co.,Ltd,of $3.6 million.

First Nine Months of Fiscal 2019 Financial Results

Net Revenue. Total net revenue increased by 26.6% to $143.1 million in the first nine months of fiscal 2019 from $113.0 million in the first nine months of fiscal 2018. Net revenue from online education services,and other sources contributed 67.4%,15.1% and 17.5%,of total net revenues for the first nine months of fiscal 2019.

Online education services. Net revenue from online education services increased by 19.8% to $96.5 million in the first nine months of fiscal 2019 from $80.5 million in the first nine months of fiscal 2018.

Books and reference materials. Net revenue from books and reference materials increased by 138.0% to $21.6 million in the first nine months of fiscal 2019 from $9.1 million in the first nine months of fiscal 2018.

Others. Net revenue from other sources increased by 6.7% to $25.0 million in the first nine months of fiscal 2019 from $23.5 million in the first nine months of fiscal 2018.

Cost of Sales. Cost of sales increased by 28.9% to $79.5 million in the first nine months of fiscal 2019 from $61.6 million in the first nine months of fiscal 2018. Non-GAAP[1]cost of sales increased by 29.1% to $79.4 million in the first nine months of fiscal 2019 from $61.5 million in the first nine months of fiscal 2018.

Gross Profit and Gross Margin. Gross profit was $63.7 million in the first nine months of fiscal 2019,up 23.9% from $51.4 million in the prior year period. Non-GAAP[1]gross profit was $63.7 million,increasing by 23.6% from $51.5 million in the prior year period. Gross margin was 44.5% in the first nine months of fiscal 2019,compared with 45.5% in the first nine months of fiscal 2018. Non-GAAP[1]gross margin was 44.5% in the first nine months of fiscal 2019,compared with 45.6% in the first nine months of fiscal 2018.

Operating Expenses. Total operating expenses increased by 37.7% to $63.2 million in the first nine months of fiscal 2019 from $45.9 million in the prior year period. Non-GAAP[1] total operating expenses increased by 39.2% to $61.7 million in the first nine months of fiscal 2019 from $44.3 million in the prior year period.

Selling expenses. Selling expenses increased by 49.0% to $45.3 million in the first nine months of fiscal 2019 from $30.4 million in the prior year period. Non-GAAP[1] selling expenses increased by 49.2% to $45.3 million in the first nine months of fiscal 2019 from $30.4 million in the prior year period.

General and administrative expenses. General and administrative expenses increased by 15.5% to $17.9 million in the first nine months of fiscal 2019 from $15.5 million in the prior year period. Non-GAAP[1] general and administrative expenses increased by 17.3% to $16.4 million in the first nine months of fiscal 2019 from $14.0 million in the prior year period.

Change in fair value of contingent consideration payable. Change in fair value of contingent consideration payable was attributable to the increase or decrease in fair value of contingent consideration with respect to the Company's equity interest investment in Beijing Ruida.

Gain from Deconsolidation of a Subsidiary. Gain from deconsolidation of a subsidiary of $6.9 million related to the gain on the disposal of 60% equity interest,and fair value change of remaining 40% equity interest,in Champion Tax Advisory or "Tax School Program."

Income Tax Expense. Income tax expense increased by 253.5% to $2.1 million in the first nine months of fiscal 2019 from $0.6 million in the prior year period.

Net Income. As a result of the foregoing,net income was $7.5 million in the first nine months of fiscal 2019,compared with net income of $2.0 million in the prior year period. Non-GAAP[1] net income was $9.0 million in the first nine months of fiscal 2019,compared with non-GAAP[1] net income of $3.6 million in the prior year period.

Operating Cash Flow.Net operating cash inflow increased by 76.5% to $61.9 million in the first nine months of fiscal 2019 from $35.1 million in the prior year period.

Outlook

For the fourth quarter of fiscal 2019,the Company expects to generate total net revenue in the range of $63.3 million to $66.5 million,representing year-over-year growth of approximately 18% to 24%.

For fiscal year 2019,the Company expects to generate total net revenues in the range of $206.4 million to $209.6 million,representing year-over-year growth of approximately 23.8% to 25.8%. The Company's prior fiscal 2019 full-year total net revenue guidance range was $210.0 million to $218.3 million.

The above guidance reflects the Company's current and preliminary view,which is subject to change.

Conference Call

Management will hold a conference call at 8:00 a.m. Eastern Time on Wednesday,August 14,2019 (8:00 p.m. Beijing Time on Wednesday,2019) to discuss financial results and answer questions from investors and analysts. Listeners may access the call by dialing:

US Toll Free: +1-866-519-4004

International: +65-6713-5090

Mainland China: 400-620-8038

Hong Kong: +852-3018-6771

United Kingdom: +44-203-6214-779

Passcode: CDEL or DL

A telephone replay will be available two hours after the call until August 21,2019 by dialing:

US Toll Free: +1-855-452-5696

International: +61-2-8199-0299

Mainland China: 400-632-2162

Hong Kong: 800-963-117

United Kingdom: 0808-234-0072

Replay Passcode: 9789216

Additionally,a live and archived webcast of the conference call will be available at http://ir.cdeledu.com.

[1]

For more information about the non-GAAP financial measures contained in this press release,please see "Use of Non-GAAP Financial Measures" below.

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,engineering & construction,legal and other industries. The Company also offers online test preparation courses for self-taught learners pursuing higher education diplomas or degrees,practical accounting training courses for college students and working professionals,as well as third-party developed online courses. 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://ir.cdeledu.com.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. 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,the outlook for the fourth quarter and full fiscal year 2019 and quotations from management in this announcement,as well as the Company's strategic and operational plans (in particular,the anticipated benefits of strategic growth initiatives,including the promotion of the Company's lifelong learning ecosystem,as well as cost control) 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: 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; 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 U.S. generally accepted accounting principles,or GAAP,the Company uses the following measures defined as non-GAAP financial measures: non-GAAP net income,operating income,gross profit,cost of sales,selling expenses,general and administrative expenses,net income margin,operating margin,gross profit margin,and basic and diluted earnings per ADS and per share. 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. 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 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: IR@cdeledu.com

The Piacente Group,Inc.

Xi Zhang

Tel: +86-10-6508-0677

E-mail: dl@tpg-ir.com

In the United States:

The Piacente Group,Inc.

Brandi Piacente

Tel: +1 212-481-2050

Email: dl@tpg-ir.com

China Distance Education Holdings Limited

Unaudited Condensed Consolidated Balance Sheets

(in thousands of US Dollars,except number of shares and per share data)

September 30,2018

June 30,2019

(Derived from Audited)

(Unaudited)

Assets:

Current assets:

Cash and cash equivalents

30,826

61,918

Restricted cash

51,736

39,355

Short term investments

17,073

23,578

Accounts receivable,net of allowance for doubtful accounts of US$1,417and US$1,342 as of June 30,2019 and September 30,2018,respectively

7,280

7,067

Inventories

2,782

4,416

Prepayment and other current assets

17,054

25,013

Deferred cost

1,125

1,608

Total current assets

127,876

162,955

Non-current assets:

Property,plant and equipment,net

27,972

39,016

Goodwill

79,516

79,463

Long term investments

33,837

32,822

Other intangible assets,net

39,500

33,471

Deposit for purchase of non-current assets

8,126

9,812

Deferred tax assets– non-current portion

5,711

4,583

Other non-current assets

6,387

11,420

Total non-current assets

201,049

210,587

Total assets

328,925

373,542

Liabilities and equity:

Current liabilities:

Bank borrowings

50,975

44,458

Accrued expenses and other liabilities (including accrued expenses and other liabilities of the consolidated VIE without recourse to China Distance Education Holdings Limited of US$33,327and US$34,993 as of June 30,2019and September 30,respectively)

42,141

36,717

Income tax payable (including income tax payable of the consolidated VIE without recourse to China Distance Education Holdings Limited of US$6,941and US$$4,847 as of June 30,respectively)

9,293

8,621

Deferred revenue - current portion (including deferred revenue of the consolidated VIE without recourse to China Distance Education Holdings Limited of US$105,294and US$77,299 as of June 30,respectively)

78,194

106,099

Refundable fees - current portion (including refundable fees of the consolidated VIE without recourse to China Distance Education Holdings Limited of US$414and US$13,837 as of June 30,respectively)

13,837

414

Total current liabilities

194,440

196,309

Non-current liabilities:

Deferred revenue - non-current portion (including deferred revenue of the consolidated VIE without recourse to China Distance Education Holdings Limited of US$34,286and nil as of June 30,respectively)

-

34,286

Refundable fees - non-current portion (including refundable fees of the consolidated VIE without recourse to China Distance Education Holdings Limited of US$2,690and nil as of June 30,respectively)

-

2,690

Deferred tax liabilities-non-current portion

12,693

11,287

Long-term bank borrowing

12,027

329

Total non-current liabilities

24,720

48,592

Total liabilities

219,160

244,901

Equity:

Ordinary shares (par value of US$0.0001 per share; 500,000,000 sharesauthorized;134,212,357 and 133,275,521 sharesissued and outstandingat June 30,respectively)

13

13

Additional paid-in capital

21,557

23,100

Accumulated other comprehensive loss

(7,013)

(6,223)

Retained Earnings

29,717

46,899

Total China Distance Education Holdings Limited shareholder's equity

44,274

63,789

Noncontrolling interest

65,491

64,852

Total equity

109,765

128,641

Total liabilities and equity

328,542

China Distance Education Holdings Limited

Unaudited Consolidated Statements Of Operations

(in thousands of US dollars,except number of shares,per share and per ADS data)

Three Months Ended June 30,

2018

2019

Sales,net of business tax,value-added tax and related surcharges:

Online education services

34,658

43,529

Books and reference materials

5,321

9,826

Others

7,437

8,392

Sale of learning simulation software

1,703

2,665

- Business start-up training services

809

886

- Others

4,925

4,841

Total net revenues

47,416

61,747

Cost of sales

Cost of services and others

(20,250)

(20,836)

Cost of tangible goods sold

(4,333)

(9,735)

Total cost of sales

(24,583)

(30,571)

Gross profit

22,833

31,176

Operating expenses

Selling expenses

(12,967)

(17,043)

General and administrative expenses

(4,698)

(4,947)

Total operating expenses

(17,665)

(21,990)

Change in fair value of contingent consideration payable

(4,420)

-

Other operating income

823

665

Operatingincome

1,571

9,851

Interest income

682

526

Interest expense

(906)

(703)

Gain from disposal of an investment

-

318

Exchange gain

4,511

1,996

Income before income taxes

5,858

11,988

Income tax expense

(1,347)

(2,460)

Loss from equity method investments

(107)

(656)

Net income

4,404

8,872

Net loss attributable to noncontrolling interest

727

575

Net income attributable to China Distance Education Holdings Limited

5,131

9,447

Net income per share:

Net income attributable to China Distance Education Holdings Limitedshareholders

Basic

0.039

0.070

Diluted

0.038

0.070

Net income per ADS:

Net income attributable to China Distance Education Holdings Limitedshareholders

Basic

0.154

0.282

Diluted

0.154

0.281

Weighted average shares used in calculating netincomeper share:

Basic

132,522,733

133,037,866

Diluted

133,392,776

134,342,150

China Distance Education Holdings Limited

Unaudited Consolidated Statements Of Operations

(in thousands of US dollars,per share and per ADS data)

Nine Months Ended June 30,value-added tax and related surcharges:

Online education services

80,487

96,450

Books and reference materials

9,088

21,632

Others

23,467

25,049

- Sale of learning simulation software

8,602

9,630

- Business start-up training services

2,858

2,258

- Others

12,007

13,161

Total net revenues

113,042

143,131

Cost of sales

Cost of services and others

(54,138)

(62,461)

Cost of tangible goods sold

(7,505)

(16,997)

Total cost of sales

(61,643)

(79,458)

Gross profit

51,399

63,673

Operating expenses

Selling expenses

(30,430)

(45,327)

General and administrative expenses

(15,459)

(17,855)

Total operating expenses

(45,889)

(63,182)

Change in fair value of contingent consideration payable

(3,867)

695

Other operating income

2,125

2,434

Operatingincome

3,768

3,620

Interest income

1,805

1,714

Interest expense

(2,522)

(2,294)

Gain from disposal of an investment

-

318

Gain from deconsolidation of a subsidiary

-

6,869

Exchangeloss

(496)

(104)

Income before income taxes

2,555

10,123

Income tax expense

(588)

(2,077)

Loss from equity method investments

(151)

(1,019)

Net income

1,816

7,027

Net lossattributable to noncontrolling interest

144

457

Net income attributable to China Distance Education Holdings Limited

1,960

7,484

Net income per share:

Net income attributable to China Distance Education Holdings Limitedshareholders

Basic

0.015

0.056

Diluted

0.015

0.056

Net income per ADS:

Net income attributable to China Distance Education Holdings Limitedshareholders

Basic

0.059

0.224

Diluted

0.059

0.223

Weighted average shares used in calculating netincomeper share:

Basic

132,197,650

132,946,829

Diluted

133,006,241

134,072,148

China Distance Education Holdings Limited

Reconciliations of non-GAAP measures to comparable GAAP measures

(In thousands of US Dollars,per share and per ADS data)

ThreeMonths Ended June 30,

2018

2019

(Unaudited)

(Unaudited)

Cost of sales

24,583

30,571

Share-based compensation expense in cost of sales

45

-

Non-GAAP cost of sales

24,538

30,571

Selling expenses

12,967

17,043

Share-based compensation expense in selling expenses

20

-

Non-GAAP selling expenses

12,947

17,043

General and administrative expenses

4,698

4,947

Share-based compensation expense in general and administrative expenses

559

503

Non-GAAP general and administrative expenses

4,139

4,444

Gross profit

22,176

Share-based compensation expenses

45

-

Non-GAAP gross profit

22,878

31,176

Gross profit margin

48.2%

50.5%

Non-GAAP gross profit margin

48.2%

50.5%

Operating income

1,851

Share-based compensation expenses

624

503

Non-GAAP operating income

2,195

10,354

Operating margin

3.3%

16.0%

Non-GAAP operating margin

4.6%

16.8%

Net income

5,447

Share-based compensation expense

624

503

Non-GAAP net income

5,755

9,950

Net income margin

10.8%

15.3%

Non-GAAP net income margin

12.1%

16.1%

Net income per share—basic

0.039

0.070

Net income per share—diluted

0.038

0.070

Non-GAAP net income per share—basic

0.043

0.075

Non-GAAP net income per share—diluted

0.043

0.074

Net income per ADS attributable to China Distance Education Holdings Limited shareholders—basic (note 1)

0.154

0.282

Net income per ADS attributable to China Distance Education Holdings Limited shareholders—diluted (note 1)

0.154

0.281

Non-GAAP net income per ADS attributable to China Distance Education Holdings Limited shareholders—basic (note 1)

0.174

0.299

Non-GAAP net income per ADS attributable to China Distance Education Holdings Limited shareholders—diluted (note 1)

0.173

0.296

Weighted average shares used in calculating basic net income per share

132,866

Weighted average shares used in calculating diluted net income per share

133,150

Weighted average shares used in calculating basic non-GAAP net income per share

132,866

Weighted average shares used in calculating diluted non-GAAP net income per share

133,150

Note 1: Each ADS represents four ordinary shares.

China Distance Education Holdings Limited

Reconciliations of non-GAAP measures to comparable GAAP measures

(In thousands of US Dollars,

2018

2019

(Unaudited)

(Unaudited)

Cost of sales

61,643

79,458

Share-based compensation expense in cost of sales

116

23

Non-GAAP cost of sales

61,527

79,435

Selling expenses

30,430

45,327

Share-based compensation expense in selling expenses

60

10

Non-GAAP selling expenses

30,370

45,317

General and administrative expenses

15,459

17,855

Share-based compensation expense in general and administrative expenses

1,505

1,482

Non-GAAP general and administrative expenses

13,954

16,373

Gross profit

51,673

Share-based compensation expenses

116

23

Non-GAAP gross profit

51,515

63,696

Gross profit margin

45.5%

44.5%

Non-GAAP gross profit margin

45.6%

44.5%

Operating income

3,620

Share-based compensation expenses

1,681

1,515

Non-GAAP operating income

5,449

5,135

Operating margin

3.3%

2.5%

Non-GAAP operating margin

4.8%

3.6%

Net income

1,484

Share-based compensation expense

1,515

Non-GAAP net income

3,641

8,999

Net income margin

1.7%

5.2%

Non-GAAP net income margin

3.2%

6.3%

Net income per share—basic

0.015

0.056

Net income per share—diluted

0.015

0.056

Non-GAAP net income per share—basic

0.028

0.068

Non-GAAP net income per share—diluted

0.027

0.067

Net income per ADS attributable to China Distance Education Holdings Limited shareholders—basic (note 1)

0.059

0.224

Net income per ADS attributable to China Distance Education Holdings Limited shareholders—diluted (note 1)

0.059

0.223

Non-GAAP net income per ADS attributable to China Distance Education Holdings Limited shareholders—basic (note 1)

0.110

0.271

Non-GAAP net income per ADS attributable to China Distance Education Holdings Limited shareholders—diluted (note 1)

0.109

0.269

Weighted average shares used in calculating basic net income per share

132,829

Weighted average shares used in calculating diluted net income per share

133,148

Weighted average shares used in calculating basic non-GAAP net income per share

132,829

Weighted average shares used in calculating diluted non-GAAP net income per share

133,148

Note 1: Each ADS represents four ordinary shares

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