Ambow Education : First Quarter 2019 Financial Results

Ambow Education Announces First Quarter 2019 Financial Results

BEIJING, June 5, 2019 -- Ambow Education Holding Ltd. ("Ambow" or the "Company") (NYSE American: AMBO), a leading national provider of educational and career enhancement services in China, today announced its unaudited financial and operating results for the three-month period ended March 31, 2019.

First Quarter 2019 Financial Highlights

• Net revenues for the first quarter of 2019 increased by 6.0% to US$17.7 million from US$16.7 million in the same period of 2018. This increase was due primarily to higher student enrollment for the 2018- 2019 academic year.
• Gross profit for the first quarter of 2019 slightly increased to US$5.8 million from US$5.6 million in the same period of 2018. Gross profit margin was 32.8%, compared with 33.5% for the first quarter of 2018.
• Operating expenses for the first quarter of 2019 increased by 27.1% to US$8.9 million from US$7.0 million for the same period of 2018. The increase of operating expenses was primarily due to the additional investments to set up education-to-employment service centers.
• Net loss attributable to ordinary shareholders was US$3.5 million, or US$0.08 per basic and diluted share, compared with a net loss of US$1.1 million, or US$0.03 per basic and diluted share, for the first quarter of 2018. The first quarter is always a traditionally soft quarter for the Company due to school closures for winter break.
• As of March 31, 2019, Ambow maintained strong cash resources of US$48.3 million, comprised of cash and cash equivalents of US$23.3 million, short-term investments of US$20.9 million, and restricted cash of US$4.1 million.
• As of March 31, 2019, the Company's deferred revenue balance was US$22.1 million, representing a 22.1% increase from US$18.1 million as of December 31, 2018, mainly attributable to the tuition and course fees collected in the K-12 business segment for the 2018-2019 academic year, the increase in deferred revenue collected from our service centers and the tuition fees collected at Bay State College for the spring semester of 2019.

"2019 will be a transformational year for Ambow, we're excited over our 2019 outlook and the opportunities afforded to us in the cross-border education market. Combining the momentum of the last 12 months; from going public to the launches of a college cross-border program and mutual credit recognition alliance between Chinese and U.S. colleges, we have the necessary infrastructure in place to further our mission, which is to address critical demands in the education market and bridge the gaps between higher education and career aspirations of students," noted Dr. Jin Huang, Ambow's President and Chief Executive Officer.

"We continue to strengthen capabilities in the education technology and service space, and expand our international reach through a series of agreements and program launches including: the signing of a collaborative agreement with ITU to jointly develop a cross-border U.S. master's degree curriculum and a partnership with GCQA to establish a credit recognition alliance between Chinese and U.S. colleges. We are pleased to have set a good foundation in order to build up progressive developments for the year ahead," concluded Dr. Huang.

The Company's first quarter 2019 financial and operating results can also be found on its Form 6-K filed with the U.S. Securities and Exchange Commission at www.sec.gov.

Adoption of ASC 842 Leases

On February 25, 2016, the FASB issued ASU 2016-02, Leases. The new standard creates Topic 842, Leases, in the FASB Accounting Standard Codification and supersedes FASB ASC 840, Leases. It requires a lessee to recognize the assets and liabilities that arise from operating and finance leases. Accordingly a lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset ("ROU asset") representing its right to use the underlying asset for the lease term. We adopted this guidance in the first quarter of 2019 using the modified retrospective approach, and elected the optional transition method that permits adoption of the new standard prospectively, as of the effective date, without adjusting comparative periods presented. Adoption of the standard resulted in the recognition of US$5.7 million of operating lease ROU asset current, US$0.1 million of finance lease ROU asset current, US$15.0 million of operating lease ROU asset non-current, US$0.9 million of finance lease ROU asset non-current, US$5.0 million of operating lease liabilities current, and US$16.9 million of operating lease liabilities non-current on the consolidated balance sheet as of March 31, 2019 at adoption related to classrooms, dormitories, service campus and centers, and other operational and office space.

Exchange Rate Information

This announcement contains translations of certain RMB amounts into U.S. dollars at a specified rate solely for the convenience of the reader. Unless otherwise noted, all amounts translated from RMB to U.S. dollars for the first quarter of 2019 are based on the effective exchange rate of 6.7112 as of March 29, 2019; all amounts translated from RMB to U.S. dollars for the first quarter of 2018 are based on the effective exchange rate of 6.2726 as of March 30, 2018; all amounts translated from RMB to U.S. dollars as of December 31, 2018 are based on the effective exchange rate of 6.8755 as of December 31, 2018. The exchange rates were according to the middle rate as set forth in the H.10 statistical release of the U.S. Federal Reserve Board.

About Ambow Education Holding Ltd.

Ambow Education Holding Ltd. is a leading national provider of educational and career enhancement services in China, offering high-quality, individualized services and products. With its extensive network of regional service hubs complemented by a dynamic proprietary learning platform and distributors,

Ambow provides its services and products to students in 30 out of the 31 provinces and autonomous regions within China.

Follow us on Twitter: @Ambow_Education

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," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the outlook and quotations from management in this announcement, as well as Ambow's strategic and operational plans, contain forward-looking statements. Ambow may also make written or oral forward-looking statements in its reports filed or furnished to the U.S. Securities and Exchange Commission, in its annual reports to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. 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 statements, including but not limited to the following: the Company's goals and strategies, expansion plans, the expected growth of the content and application delivery services market, the Company's expectations regarding keeping and strengthening its relationships with its customers, and the general economic and business conditions in the regions where the Company provides its solutions and services. Further information regarding these and other risks is included in the Company's filings with the U.S. Securities and Exchange Commission. All information provided in this press release is as of the date of this press release, and Ambow undertakes no duty to update such information, except as required under applicable law.

For investor and media inquiries please contact:

Ambow Education Holding Ltd.

Tel: [phone]

The Piacente Group | Investor Relations

Tel: [phone] or [phone]

Email:[e-mail]

AMBOW EDUCATION HOLDING LTD.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(All amounts in thousands, except for share and per share data)

ASSETS

Current assets:

Cash and cash equivalents

Restricted cash

Short term investments, available for sale

Short term investments, held to maturity

Accounts receivable, net

Amounts due from related parties

Prepaid and other current assets, net

Loan receivable, current

Operating lease right-of-use asset, current

Finance lease right-of-use asset, current

Total current assets

Non-current assets:

Property and equipment, net

Land use rights, net

Intangible assets, net

Goodwill

Deferred tax assets, net

Operating lease right-of-use asset, non-current

Finance lease right-of-use asset, non-current

Other non-current assets, net

Total non-current assets

Total assets

LIABILITIES

Current liabilities:

Deferred revenue *

Accounts payable *

Accrued and other liabilities *

Borrow from third party, current

Income taxes payable *

Amounts due to related parties *

Operating lease liability, current *

Total current liabilities

Non-current liabilities:

Consideration payable for acquisitions

Other non-current liabilities

Operating lease liability, non-current *

	As of March 31,							As of December 31,
2019							2018
	US$	RMB					RMB
	23,311						156,447					211,436
4,136					27,757	30,072
	7,496						50,308					47,208
13,410					90,000	70,000
	2,523						16,932					18,132
235					1,577	1,105
	20,134						135,125					134,770
6,359					42,677	42,677
	5,650						37,915					-
89					600	-
83,343				559,338	555,400
	23,245						156,005				165,933
267					1,793	1,804
	8,813						59,145				92,412
10,902					73,166	73,166
	1,346						9,038				10,240
15,016					100,778	-
	939						6,300				-
2,594					17,408	11,264
63,122					423,633	354,819
146,465					982,971	910,219
22,131					148,523	124,250
	1,827						12,277				13,583
27,121					181,881	256,325
	6,000						40,401				41,179
31,423					210,883	207,114
	434						2,911				2,696
5,046					33,865		-
	93,982						630,741				645,147
	197						1,322				1,322
-						-		979
	16,907						113,467				-

		Total non-current liabilities		17,104		114,789		2,301
		Total liabilities		111,086		745,530		647,448
		EQUITY
		Preferred shares
		(US$ 0.003 par value;1,666,667 shares authorized,
		nil issued and outstanding as of December 31,
		2018 and March 31, 2019)		-		-		-
		Class A Ordinary shares
		(US$0.003 par value; 66,666,667 and
		66,666,667 shares authorized, 38,756,289
		and 38,784,935 shares issued and
		outstanding as of December 31, 2018 and
		March 31, 2019, respectively)		109		729		728
		Class C Ordinary shares
		(US$0.003 par value; 8,333,333 and 8,333,333
		shares authorized, 4,708,415 and 4,708,415
		shares issued and outstanding as of
		December 31, 2018 and March 31, 2019,
		respectively)		13		90		90
		Additional paid-in capital	522,707	3,507,994	3,507,123
		Statutory reserve		3,002		20,149		20,149
		Accumulated deficit	(491,059)	(3,295,594)	(3,271,838)
		Accumulated other comprehensive income		887		5,952		8,305
		Total Ambow Education Holding Ltd.'s equity		35,659		239,320		264,557
		Non-controlling interests		(280)		(1,879)		(1,786)
		Total equity		35,379		237,441		262,771
		Total liabilities and equity		146,465		982,971		910,219

• All of the VIE's assets can be used to settle obligations of their primary beneficiary. Liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company's general assets.

			AMBOW EDUCATION HOLDING LTD.
		UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
		(All amounts in thousands, except for share and per share data)
			Attributable to Ambow Education Holding Ltd.'s Equity
							Retained	Accumulated
	Class A Ordinary	Class C Ordinary	Additional		Earnings	other	Non-
	shares	shares	paid-in	Statutory	(Accumulated	comprehensive	controlling	Total
	Shares	Amount	Shares	Amount	capital	reserves	deficit)	income	Interest	Equity
Balance as of January 1,		RMB		RMB	RMB	RMB	RMB	RMB	RMB	RMB
2019	38,756,289	728	4,708,415	90	3,507,123	20,149	(3,271,838)	8,305	(1,786)	262,771
Share-based compensation	-	-	-	-	872	-	-	-	-	872
Issuance of ordinary shares
for restricted stock award	28,646	1	-	-	(1)	-	-	-	-	-
Foreign currency translation
adjustment	-	-	-	-	-	-	-	(2,428)	-	(2,428)
Unrealized gain on
investment, net of income
taxes	-	-	-	-	-	-	-	75	-	75
Net loss	-	-	-	-	-	-	(23,756)	-	(93)	(23,849)
Balance as of March 31,
2019	38,784,935	729	4,708,415	90	3,507,994	20,149	(3,295,594)	5,952	(1,879)	237,441

Balance as of January 1,		34,206,939		640		4,708,415		90		3,456,307		20,036		(3,316,715)	6,876		(1,275)		165,959
	2018
Share-based compensation	-	-		-	-		616		-	-		-		-		616
Issuance of ordinary shares
	for restricted stock award		30,187		1		-		-		(1)	-		-		-		-			-
Foreign currency translation
	adjustment	-	-		-	-		-		-	-		3,276		-		3,276
Unrealized gain on
	investment, net of income
	taxes		-		-		-		-		-		-		-		64		-			64
Deregistration of
	subsidiaries	-	-		-	-		-		-	-		-		(9)	(9)
Net	(loss)/income		-		-		-		-		-		-		(7,062)	-		93			(6,969)
Balance as of March 31,
2018		34,237,126		641		4,708,415		90		3,456,922		20,036		(3,323,777)	10,126		(1,191)	162,937

AMBOW EDUCATION HOLDING LTD.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(All amounts in thousands, except for share and per share data)

				For the three months ended March 31,
2019		2019			2018
			US$			RMB			RMB
	NET REVENUES
	Educational program and services	17,610	118,185			101,411
	Intelligent program and services			69		461			3,368
	Total net revenues		17,679	118,646			104,779
	COST OF REVENUES
	Educational program and services	(11,652)	(78,197)			(68,076)
	Intelligent program and services			(277)		(1,858)			(1,426)
	Total cost of revenues		(11,929)		(80,055)			(69,502)
	GROSS PROFIT		5,750	38,591			35,277
	Operating expenses:
	Selling and marketing	(2,099)	(14,088)			(10,205)
	General and administrative			(6,797)		(45,618)			(33,292)
	Research and development	(25)	(168)			(443)
	Total operating expenses			(8,921)		(59,874)			(43,940)
	OPERATING LOSS			(3,171)		(21,283)			(8,663)
	OTHER INCOME (EXPENSES)
	Interest income	58	388			2,090
	Foreign exchange gain (loss), net			(5)		(31)			14
	Other income, net	98	660			214
	Gain from deregistration of subsidiaries			191		1,279			2,797
	Gain on sale of investment available for sale	42	279			298
	Total other income			384		2,575			5,413
	LOSS BEFORE INCOME TAX AND NON-
	CONTROLLING INTEREST			(2,787)		(18,708)			(3,250)
	Income tax expense	(766)	(5,141)			(3,719)
	NET LOSS	(3,553)	(23,849)			(6,969)
	Less: Net (loss)/ income attributable to non-
	controlling interest			(14)		(93)			93
	NET LOSS ATTRIBUTABLE TO
	ORDINARY SHAREHOLDERS			(3,539)		(23,756)			(7,062)
	NET LOSS			(3,553)		(23,849)			(6,969)
	OTHER COMPREHENSIVE INCOME, NET
	OF TAX

		Foreign currency translation adjustments	(362)		(2,428)		3,276
		Unrealized gains on short term investments
		Unrealized holding gains arising during period	42		280		207
		Less: reclassification adjustment for gains
		included in net income		31			205			143
		Other comprehensive (loss)/income	(351)		(2,353)		3,340
		TOTAL COMPREHENSIVE LOSS	(3,904)		(26,202)		(3,629)
		Net loss per share - basic and diluted		(0.08)			(0.55)			(0.18)
		Weighted average shares used in calculating
		basic and diluted net loss per share		43,474,571			43,474,571			38,925,752

Discussion of Segment Operations

				For the three months ended March 31,
2019		2019			2018
			US$			RMB	RMB
					(All amounts in thousands)
	NET REVENUES
	K-12 Schools *	9,505	63,793			52,177
	College Preparation & CE Programs *			8,174		54,853			52,602
	Total net revenues		17,679	118,646			104,779
	COST OF REVENUES
	K-12 Schools *	(6,302)	(42,296)			(36,106)
	College Preparation & CE Programs *			(5,627)		(37,759)			(33,396)
	Total cost of revenues		(11,929)		(80,055)			(69,502)
	GROSS PROFIT
	K-12 Schools *	3,203	21,497			16,071
	College Preparation & CE Programs *			2,547		17,094			19,206
	Total gross profit		5,750	38,591			35,277

• Ambow previously had three reportable segments, including Better School, Better Job and Others for the years before 2019. In 2019, along with the shift of business development focus, Ambow changed its management approach in the way to organize reportable segments to make operating decisions and assess performance. New reportable segments include K-12 schools and College Preparation & CE Programs, which provide K-12 educational service and tutoring and vocational educational services respectively.