Xueda Education Group (NYSE: XUE), a leading national provider of personalized tutoring services for primary and secondary school students in China, today announced its Q3 2013 financial results for the period ended September 30, 2013. Below is the commentary made by Xueda’s CEO Xin Jin in an earnings conference call held earlier today in connection with its Q3 2013 results announcement.
“I am especially pleased today to be reporting to shareholders not only robust operating results for the third quarter but for the first time in Xueda’s history, positive net earnings results in the third quarter period. These results represent a milestone for the company. I truly believe they are the turning point in the forward momentum for the company’s ongoing growth.
As you know, the third quarter of the year, for seasonal reasons, has always been a difficult quarter for Xueda. Zhongkao and Gaokao kids have finished their exams and gone, and students are just getting scheduled with the starts of new school year routines. So our course hours delivered seasonally slowly during this period.
In the past, Xueda has always reported an operating loss in the third quarter. Lastly increasing the gains in the first two quarters of the year. Breaking from the trend, during the third quarter this year, through continued execution, our gross profit increased by 74%. Our gross margin expanded by 1000 basis points to reach 29.2% and our labor and space utilization metrics increased by 16% and 6% respectively. These are indeed robust results.
I’d like to briefly add more narrative color here. In the beginning of the year, we set profitability as our main goal for 2013. We deliberately and purposely set each managers KPIs and benchmarks to support this goal. From day one, each manager clearly has to do the focus for the year and what is expected for our team offer [ph]. As the year progresses, each chaneled their energies in a fine direction. And collectively, they produced these stellar results. These results have drive us and have positioned us now better optimize our learning center network.
As an organization, we have identified two ways to better optimize our learning center network: utilize our strong student base; increasing our overall customer satisfaction and increasing the time students stay with us. The two go hand in hand. Well the key initiative in increasing students tenure with us expanding a number of services we offer them. Small group study is a bright star in this area. Defined as study with one instructor and up to 10 students, our small group study offering is now available in each of our learning centers nationwide as a complement to our core one-on-one offering. Well, our small group business is still at a small stage with 17.8% year-over-year net revenue growth in the third quarter. We are encouraged with this traction and believe there is a long runway here.
Another initiative we have fulfilling – greater internal incentives on students renewals. We believe this capitalized on what we do best – delivering personalized tutoring to meet individual needs of each students. We also look deeply and the role of technology could play in customer certification on students renewals.
In the K-12 tutoring business, parental involvement in the service delivery progress is critical. With this in mind, I am particularly happy to announce a nation-wide launch out as of September 1 of our own customer service act made available free to parents of Xueda students. The act seeks broader area of functionality, allow parents to more closely monitor their child’s progress. Building the act among other things, parents can view class attendance, check homework assignments and results, communicate with instructor and also check duration balance. We have received overwhelming positive response from parents and have already locked nearly 7000 downloads. The act also provides available window for Xueda to monitor parents as during the feedback. And with this feedback, we can more quickly adapt and tailor each child’s individual academic progress.
We are proud to be an industry pioneer with this customer service act. As you can see, we have taken a healthy approach to strengthening overall customer certification and increasing students’ renewals. We believe the combination of providing a wider service offering, particularly our small group study offering, shifting more internal resources to reward students’ renewals and enabling improved convenience way for parents to monitor, communicate and interact in a study progress with our smartphone app. We all come together to stress the quality authorities and provide more satisfied customers who stay with us as longer.
Going forward, we will highlight our students’ contract renewals as an important metric of the healthy – health of our business. In summary, our organization is healthier and leaner than it’s been in the past two years, and we have good momentum. I say again to investors that our message is simple and unchanged. We are doing what we said we will do, focusing on profitability for healthy growth. These results evidence this strategy is working and can ensure sustained profitability and invest for healthy growth ahead.”