GEO Investing

ata inc computer based testingOn February 18, 2016, ATA Inc (NASDAQ:ATAI) reported record fiscal Q3 2016 financial results and raised full year guidance.  Below are some highlights from its earnings release and our take on recent events:

  • Net revenues were RMB 221.4 million (US$34.2 million), an increase of 80.0% compared to RMB 123.0 million (US$19.8 million) in the same period last year. The revenue increase in this quarter is mainly due to the fact that the “CPA” exam was held in fiscal Q3 2016.
  • Non-GAAP EPADS (earnings per ADS) was US$0.34, which is more than doubled of the EPADS of US$0.16 in the same period last year.
  • For the fiscal year 2016 ending March 31, 2016, the company raised its net revenue guidance to between RMB 410.0 million and RMB 420.0 million, from the previously provided range of RMB 360.0 million and RMB 380.0 million, and narrowing its non-GAAP net income guidance to between RMB 29.0 million and RMB 34.0 million, from the previously provided range of between RMB 28.0 million and RMB 38.0 million, which takes into account the operating results of ATA’s joint venture and associated companies focused on the consumer market, all of which are at an early stage of business development, as well as unbudgeted expenses related to the listing of ATA Online’s shares on the New Third Board in China.
  • By January 26, 2016, the company had completed the US$3 million worth of sahare repurchase plan authorized by its Board of Directors in September 2015. In total, the company repurchased 567,132 ADSs at an average stock price of US$5.29 per ADS.
  • The company appointed Mr. Zhilei Tong, founder and chairman of Chinese All Digital Publishing Group Co. Ltd. (China A share listed company: 300364), as a new director to ATA’s Board on February 17, 2016.

Ata Inc. Share Repurchases Convey Optimism

The fact that the company had repurchased $3 million worth of stock at average price of $5.29 per ADS, and that the company’s Chairman and CEO, Mr. Xiaofeng Ma purchased 7.57 million ADSs (about 33% of the total outstanding ADSs) from other shareholders at a price of $9.50 per ADS, are indications to us that both the Board of Directors and the core management are optimistic about the future of the company.

Cash Balance to Materially increase

In addition, as the company announced on February 3rd, a subsidiary called ATA Online that is listed on the New Three Board in China, is planning to do a private placement of no more than $US57.5 million. The subsidiary’s PIPE shouldn’t have a negative effect on ATAI’s overall share structure. After the completion of the transaction ATA Inc will own about 77% of the subsidiary, versus the 100% they own now. However, the cash raised from this private placement will be consolidated onto the ATA Inc balance sheet, which will boost ATAI’s cash and cash equivalents from its current US$43.8 million to about US$101 million (without any debt), and be close to the company’s current market cap of US$115 million.

Furthermore, during the conference call held today, management stated that with the company’s current client base and newly partnered and prospective clients, it will be able to make up a significant portion of the revenue that will be lost due to the discontinuation of testing services for the Securities Association of China (SAC) in fiscal 2017.

You can read our previous notes on ATAI here.

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