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Carl Yeung, 30, is CFO of ATA. He was formerly an analyst with Merrill Lynch.

BEIJING-BASED ATA (Nasdaq: ATAI) has a formula for success regardless of how fast China’s economy is growing.

The company is China’s largest professional services provider for testing, assessment and related services, as well as a highly effective e-learning solutions provider based on advanced assessment technologies.

It has been giving professionals and government bureaucrats across the country the tools and credentials they need to succeed for over a decade.

In a bear market, ATA (www.ata.net.cn/english/) caters to nervous job holders looking to keep holding on.

And in brisker times, it appeals to test-o-philia in China, which thanks to Confucius and exam-based meritocracy over two millennia strong, is again alive and well in The People’s Republic.

When NextInsight recently asked CFO Carl Yeung if ATA were seeing a hit from the global financial crisis, he said it was actually helping boost some of its business – both from career-conscious clients and enhanced regulatory measures following the meltdown on Wall Street.

“In the financial year-to-March, our top line was up 26.4% and our net profit rose 13%. Our performance is more subject to variables in the Chinese work force. As long as many people vying for jobs, our business will be good.

“The Wall Street crash led to tougher regulations, and therefore more cautious regulators. At the same time, most test takers of ours are currently employed and looking to keep current jobs.”

He added: "This financial crisis drew a lot of attention to regulators to make sure the qualified people work in the qualified places, which in turn results in more tests and drives our business further."

Therefore, the company’s performance could be considered “somewhat countercyclical.”

“When people are insecure about their jobs, and as long as there is a strong labor imbalance, we have a job to do,” Mr. Yeung said.
  
 

The business of ATA:

* Founded in 1999. Leader in providing computer-based testing (CBT) and education services in China.

* Through its 1,900 authorized test centers, the largest CBT service network across the country, ATA delivers millions of tests each year for governments, professional bodies, academic institutions, IT vendors and corporate clients.

* Leading provider of performance-based testing technologies globally. Its proprietary Dynamic Simulation Testing Technology is used everyday in over 7,000 test centers in 161 countries around the globe in eight languages.

* HQ in Beijing, major operation center in Shanghai. 13 offices in China.

 

Running rings around the white collar market

ATA’s major operation is providing certification and assessment tests for professionals and government officials.

It is also still an e-learning firm to be reckoned with, but it decided to shift emphasis to the former segment a few years ago, and the decision has reaped major dividends for the Nasdaq-listed firm.

“Our main clientele are in the professional sector, especially in the banking and securities areas. They are our biggest customers. We help people get licenses in the commercial and retail banking sector,” Mr. Yeung said.

He said ATA’s banking and financial firm contacts are exclusive to the company.

“Agricultural Bank of China, Bank of China, HSBC, Shenzhen Development Bank and (insurer) PICC are all clients. We have over 25,000 companies registered to use our software.

“Most tests are limited to employed professionals at banks and brokerages. One mln people take the banking test each year, and China’s goal is to have 90% of bank employees passing certification tests.”

Mr. Yeung said he joined ATA in 2006, at which point the company was going through a “discovery process,” finding its calling in a potentially huge testing and certification market.

“At the time, we decided we would focus more on professional testing rather than the educational market. It was a very wise decision, and we began making a slow exit from the educational testing side.”

ATA expects to administer 1.5 mln tests this year, up from 677,000 last year. ATA’s success and software and testing knowhow garnered the attention of a well-known multinational.

“In 2006 we began licensing technology to Microsoft, and are one of a few Chinese firms to do so. It’s a major achievement. We’re a Platinum partner of theirs,” he said, adding that this accomplishment is “very, very important” to ATA’s image enhancement.

“We are a ‘software as a service’ firm. We rely very little on hardware. We develop the logic behind scoring systems and Microsoft was very impressed.”
  
ATA IncQ1 FY10
(ended 30 June 09)
% change
Net revenueRMB79.8 m16.8
Gross profitRMB44.9 m13.9
Net incomeRMB12.7 m1.9

China and testing: A love story

ATA feels as if it is preaching to the choir when it extols the virtues of test-taking in China.

In that way, it is almost exclusively focused on the China market for now, with some testing services offered in nearby places like Hong Kong, Taiwan and Southeast Asia.

He pointed to the country’s most famous sage, Confucius, as getting the ball in motion some two thousand years ago.

“You have to remember that China invented testing as it needed a way to legitimize meritocracy. We’ve always had a big population, so there had to be a way to work out how to discover the best talent in the country. ATA tested five mln people last year, while the government tested over 100 mln people last year," Mr. Yeung said.

While the country is currently moving up the industrial value chain, inspired and educated members of its massive workforce are also eager to improve their station in life.

This meant that people were eager to move from the factory floor to the trading room floor.

“Young Chinese don’t want to make Nike sneakers anymore. A lot of them want professional jobs. We want to be at the forefront of this movement,” Mr. Yeung said.

He added that the government’s opening of the professional certification testing market to private operators a few years ago was the beginning of bountiful times for firms like ATA.

“When the government opened the market to private test service firms, this generated tremendous positive feedback. Just last year, there were some five mln government test takers in China.”

And ATA was not only interested in educating and preparing clients via tests and training, but also kept its eyes and ears open to learn from its seasoned customers.

“We have been trained by the best exam takers in the world …the Chinese. We learn from them, and from our mistakes. Most test-takers are looking to work in the private sector, but most still look for jobs in SOEs as well,” he said.

ATA relied heavily on word of mouth and referrals from satisfied test-takers, but was also allotting more funds to traditional marketing practices.

“We are spending money to advertise our brand, and we advertise online and to HR firms in major companies. Our bonus is that we can assist companies by finding more reliable candidates, that is, those who have been tested successfully.”


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