ATA, Inc. :ATAI-US: Earnings Analysis: Q3, 2017 By the Numbers : March 10, 2017

ATA, Inc. reports financial results for the quarter ended December 31, 2016.

We analyze the earnings along side the following peers of ATA, Inc. – Houghton Mifflin Harcourt Company and Citrix Systems, Inc. (HMHC-US and CTXS-US) that have also reported for this period.

Highlights

  • Summary numbers: Revenues of USD 39.82 million, Net Earnings of USD 10.98 million.
  • Gross margins widened from 49.55% to 50.80% compared to the same period last year, operating (EBITDA) margins now 34.30% from 31.58%.
  • Earnings growth from operating margin improvements as well as one-time items.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2016-12-31 2016-09-30 2016-06-30 2016-03-31 2015-12-31
Relevant Numbers (Quarterly)
Revenues (mil) 39.82 9.77 14.74 6.85 34.59
Revenue Growth (%YOY) 15.12 15.42 -6.29 6.03 72.97
Earnings (mil) 10.98 -5.34 0.63 -2.35 7.71
Earnings Growth (%YOY) 42.44 -139.46 -36.29 2.08 92.69
Net Margin (%) 27.58 -54.62 4.28 -34.36 22.29
EPS 0.48 -0.23 0.03 -0.1 0.34
Return on Equity (%) 74.07 -37.11 4.17 -15.07 50.08
Return on Assets (%) 56.83 -29.9 3.51 -12.28 39.9

Access our Ratings and Scores for ATA, Inc.

Market Share Versus Profits

Revenues History
Earnings History

ATAI-US‘s change in revenue this period compared to the same period last year of 15.12% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that ATAI-US is holding onto its market share. Also, for comparison purposes, revenues changed by 307.60% and earnings by 305.78% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s earnings growth was influenced by year-on-year improvement in gross margins from 49.55% to 50.80% as well as better cost controls. As a result, operating margins (EBITDA margins) rose from 31.58% to 34.30% compared to the same period last year. For comparison, gross margins were 45.37% and EBITDA margins were -14.31% in the last reporting period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

ATAI-US‘s improvement in gross margin has been accompanied by an improvement in its balance sheet as well. This suggests that gross margin improvements are likely from operating decisions and not accounting gimmicks. Its working capital days have declined to 54.76 days from 98.79 days for the same period last year.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Margins

The company’s earnings growth has also been influenced by the following factors: (1) Improvements in operating (EBIT) margins from 31.58% to 34.30% and (2) one-time items. The company’s pretax margins are now 35.16% compared to 32.04% for the same period last year.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

Access our Ratings and Scores for ATA, Inc.

Company Profile

ATA, Inc. engages in the provision of computer-based testing services. It serves professional licensure and certification tests in various industries, which include IT services, banking, teaching, and insurance. The company was founded by Kevin Xiaofeng Ma and Walter Lin Wang in 1999 and is headquartered in Beijing, China.

CapitalCube does not own any shares in the stocks mentioned and focuses solely on providing unique fundamental research and analysis on approximately 50,000 stocks and ETFs globally. Try any of our analysis, screener or portfolio premium services free for 7 days. To get a quick preview of our services, check out our free quick summary analysis of ATAI-US.