Ambow Education : Fourth Quarter 2019 Financial Results

Ambow Education Announces Fourth Quarter and Full Year 2019 Financial Results

BEIJING, April 22, 2020 -- 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 audited financial and operating results for the fourth quarter and fiscal year ended December 31, 2019.

"We are pleased to conclude fiscal year 2019 with solid fourth quarter results," said Dr. Jin Huang, Ambow's President and Chief Executive Officer. "Throughout the year, we continued our efforts and investment in new technology advancement and innovative education service offerings to strengthen our leadership in the career enhancement services market and further develop our cross-border education service platform. Looking ahead, by continuing to build and integrate our robust portfolio of international assets and partnerships, we believe we are well positioned to capture the opportunities in the underserved cross-border career education market between the U.S. and China."

"We are closely monitoring the evolving situation brought about by the COVID-19 pandemic, and have taken numerous safeguarding measures to protect our employees and support the communities in which we operate. Notably, we have rolled out new initiatives to support the Chinese government's plan of moving classroom school learning online during this period of prolonged school closures. Leveraging our expertise in online education, strong technology capabilities, and best-of-breed educational content, we promptly launched a series of online class programs, including our VIP classes focused on Big Data and Internet of Things ("IoT") taught by leading professionals from around the world. We have also added new career planning classes to enhance the competitive skills and knowledge that will be required by students in the more challenging job market emerging from the global business downturn. These initiatives underline our mission, which is to address critical demands in the education market and bridge the gaps between higher education and the career aspirations of students," concluded Dr. Huang.

Fourth Quarter 2019 Financial Highlights

• Net revenues for the fourth quarter of 2019 increased by 1.2% to US$24.9 million from US$24.6 million in the same period of 2018. This increase was mainly driven by higher student enrollment.
• Gross profit for the fourth quarter of 2019 decreased by 3.6% to US$8.0 million from US$8.3 million in the same period of 2018. Gross profit margin was 32.1%, compared with 33.7% for the fourth quarter of 2018.
• Operating expenses for the fourth quarter of 2019 increased by 47.8% to US$10.2 million from US$6.9 million for the same period of 2018. The increase of operating expenses was primarily due to a one-time bad debt expense recovery and reversal of US$2.9 million in the fourth quarter of 2018.
• Net loss attributable to ordinary shareholders in the fourth quarter of 2019 was US$1.7 million, or US$0.04 per basic and diluted share, compared with a net income of US$4.5 million, or US$0.10 per basic and diluted share, for the fourth quarter of 2018.

• As of December 31, 2019, Ambow maintained strong cash resources of US$35.3 million, comprised of cash and cash equivalents of US$22.6 million and short-term investments of US$12.7 million.
• As of December 31, 2019, the Company's deferred revenue balance was US$23.7 million, representing a 30.9% increase from US$18.1 million as of December 31, 2018, mainly attributable to the tuition and fees collected in the K-12 segment for the 2019-2020 academic year and tuition collected from our education service platforms.

Fiscal Year 2019 Financial Highlights

• Net revenues for fiscal year 2019 increased by 8.5% to US$83.9 million from US$77.3 million in 2018. This increase was mainly driven by higher student enrollment.
• Gross profit for the fiscal year 2019 decreased by 0.4% to US$28.0 million from US$28.1 million in 2018. Gross profit margin was 33.4%, compared with 36.4% in 2018. The decrease in gross profit margin was primarily due to additional investments in new programs and new technology deployment.
• Operating expenses for the fiscal year 2019 increased by 62.2% to US$42.0 million from US$25.9 million in 2018. The increase of operating expenses was primarily due to more marketing activities to promote student enrollment, additional investments in new programs and new technology deployment, increase in staff compensation and an impairment loss of goodwill and intangible assets of US$5.6 million recorded in 2019, and a one-time bad debt expense recovery and reversal of US$2.9 million in 2018.
• Net loss attributable to ordinary shareholders for the fiscal year 2019 was US$14.4 million, or US$0.33 per basic and diluted share, compared with a net income of US$6.5 million, or US$0.16 per basic and diluted share, in 2018.

The Company's fourth quarter and fiscal year 2019 financial and operating results can also be found on its Form 6-K and Form 20-F filed with the U.S. Securities and Exchange Commission at www.sec.gov.

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 fourth quarter and the twelve months of 2019 are based on the effective exchange rate of 6.9618 as of December 31, 2019; all amounts translated from RMB to U.S. dollars for the fourth quarter and the twelve months of 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]

E-mail:[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

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

Finance lease right-of-use asset

Other non-current assets, net

Total non-current assets

Total assets

LIABILITIES

Current liabilities:

Deferred revenue *

Accounts payable *

Accrued and other liabilities *

Borrowing from third party, current

Income taxes payable, current *

Amounts due to related parties *

Operating lease liability, current *

Total current liabilities

Non-current liabilities:

Consideration payable for acquisitions

Other non-current liabilities

Income taxes payable, non-current * Operating lease liability, non-current *

Total non-current liabilities

Total liabilities

	As of December 31,					As of December 31,
		2019						2018
	US$					RMB					RMB
	22,638					157,600					211,436
-	-		30,072
	8,257					57,487					47,208
4,453	31,000	70,000
	2,577					17,939					18,132
333	2,318	1,105
	19,147					133,296					134,770
-			-			42,677
	57,405					399,640					555,400
	22,618				157,463					165,933
253	1,759	1,804
	8,131				56,607					92,412
8,669	60,353	73,166
	1,464				10,195					10,240
36,968	257,361	-
	926				6,450					-
10,194	70,971	11,264
89,223	621,159	354,819
146,628	1,020,799	910,219
23,717	165,111	124,250
	2,113				14,718					13,583
27,717	192,957	256,325
	-				-					41,179
25,958	180,715	207,114
	283				1,971					2,696
7,687			53,512		-
	87,475				608,984					645,147
	-				-					1,322
-	-		979
	4,618				32,152					-
31,036			216,067		-
	35,654				248,219					2,301
	123,129				857,203					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 2019)			-				-				-
	Class A Ordinary shares
	(US$0.003 par value; 66,666,667 and
	66,666,667 shares authorized, 38,756,289
	and 38,858,199 shares issued and
	outstanding as of December 31, 2018 and
	2019, respectively)			105				730				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 2019, respectively)			13				90				90
	Additional paid-in capital	504,000	3,508,745	3,507,123
	Statutory reserve			2,899				20,185				20,149
	Accumulated deficit	(484,331)	(3,371,815)	(3,271,838)
	Accumulated other comprehensive income			911				6,341				8,305
	Total Ambow Education Holding Ltd.'s equity		23,597		164,276		264,557
	Non-controlling interests			(98)			(680)			(1,786)
	Total equity		23,499		163,596		262,771
	Total liabilities and equity			146,628			1,020,799			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
				RMB					RMB			RMB		RMB		RMB		RMB			RMB			RMB
Balance as of January 1,		38,756,289		728			4,708,415		90			3,507,123		20,149		(3,271,838)	8,305			(1,786)		262,771
2019
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
Share-based compensation	-	-	-	-	266	-	-	-	-	266

Issuance of ordinary shares
for restricted stock award	19,097	0	-	-	(0)	-	-	-	-	-
Foreign currency translation
adjustment	-	-	-	-	-	-	-	(746)	-	(746)
Unrealized gain on
investment, net of income
taxes	-	-	-	-	-	-	-	173	-	173

Addition of noncontrolling
interests resulting from
new subsidiaries	-	-	-	-	-	-	-	-	502	502
Net income/(loss)	-	-	-	-	-	-	8,778	-	(180)	8,598
Balance as of June 30,
2019	38,804,032	729	4,708,415	90	3,508,260	20,149	(3,286,816)	5,379	(1,557)	246,234
Share-based compensation	-	-	-	-	244	-	-	-	-	244
Foreign currency translation
adjustment	-	-	-	-	-	-	-	(93)	-	(93)
Unrealized gain on
investment, net of income
taxes	-	-	-	-	-	-	-	501	-	501
Net (loss)/income	-	-	-	-	-	-	(72,811)	-	4	(72,807)
Balance as of
September 30, 2019	38,804,032	729	4,708,415	90	3,508,504	20,149	(3,359,627)	5,787	(1,553)	174,079
Share-based compensation	-	-	-	-	242	-	-	-	-	242
Issuance of ordinary shares
for restricted stock award	54,167	1	-	-	(1)	-	-	-	-	-
Foreign currency translation
adjustment	-	-	-	-	-	-	-	343	-	343
Appropriation to statutory
reserves	-	-	-	-	-	36	(36)	-	-	-
Unrealized gain on
investment, net of income
taxes	-	-	-	-	-	-	-	211	-	211
Deregistration of
subsidiaries	-	-	-	-	-	-	-	-	306	306
Noncontrolling interests
from new subsidiaries	-	-	-	-	-	-	-	-	783	783
Net loss	-	-	-	-	-	-	(12,152)	-	(216)	(12,368)
Balance as of
December 31, 2019	38,858,199	730	4,708,415	90	3,508,745	20,185	(3,371,815)	6,341	(680)	163,596
Balance as of January 1,
2018	34,206,939	640	4,708,415	90	3,456,307	20,036	(3,316,715)	6,876	(1,275)	165,959
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)	10,216	(1,191)	162,937
Share-based compensation	-	-	-	-	618	-	-	-	-	618
Issuance of ordinary shares
for restricted stock award	30,187	0	-	-	(0)	-	-	-	-	-
Issuance of ordinary shares
on IPO	4,140,000	80	-	-	46,047	-	-	-	-	46,127
Foreign currency translation
adjustment	-	-	-	-	-	-	-	(1,523)	-	(1,523)
Unrealized gain on
investment, net of income
taxes	-	-	-	-	-	-	-	69	-	69
Buy-outs of noncontrolling
interests	-	-	-	-	(2,619)	-	-	-	(1,885)	(4,504)
Deregistration of
subsidiaries	-	-	-	-	-	-	-	-	(41)	(41)
Net income/(loss)	-	-	-	-	-	-	33,312	-	(143)	33,169
Balance as of June 30,
2018	38,407,313	721	4,708,415	90	3,500,968	20,036	(3,290,465)	8,762	(3,260)	236,852
Share-based compensation	-	-	-	-	655	-	-	-	-	655
Issuance of ordinary shares
for restricted stock award	29,355	0	-	-	(0)	-	-	-	-	-
Foreign currency translation
adjustment	-	-	-	-	-	-	-	(501)	-	(501)
Unrealized gain on
investment, net of income
taxes	-	-	-	-	-	-	-	(114)	-	(114)

Buy-outs of noncontrolling
interests	-	-	-	-	-	-	-	-	1	1
Net (loss)/income	-	-	-	-	-	-	(12,413)	-	89	(12,324)
Balance as of
September 30, 2018	38,436,668	721	4,708,415	90	3,501,623	20,036	(3,302,878)	8,147	(3,170)	224,569
Share-based compensation	-	-	-	-	6,232	-	-	-	-	6,232
Issuance of ordinary shares
for restricted stock award	319,621	7	-	-	(7)	-	-	-	-	-
Issuance of ordinary shares
on IPO	-	-	-	-	(725)	-	-	-	-	(725)
Foreign currency translation
adjustment	-	-	-	-	-	-	-	52	-	52
Appropriation to statutory
reserves	-	-	-	-	-	113	(113)	-	-	-
Unrealized gain on
investment, net of income
taxes	-	-	-	-	-	-	-	106	-	106
Buy-outs of noncontrolling
interests	-	-	-	-	-	-	-	-	3	3
Capital injection from
minority shareholders	-	-	-	-	-	-	-	-	1,470	1,470
Net income/(loss)	-	-	-	-	-	-	31,153	-	(89)	31,064
Balance as of
December 31, 2018	38,756,289	728	4,708,415	90	3,507,123	20,149	(3,271,838)	8,305	(1,786)	262,771

AMBOW EDUCATION HOLDING LTD.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

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

			For the years ended December 31,		For the three months ended December 31,
			2019	2019		2018		2019		2019		2018
			US$		RMB		RMB		US$		RMB		RMB
	NET REVENUES
	Educational program and
	services	83,700	582,706		525,134		24,899		173,339		168,705
	Intelligent program and
	services		173		1,203			6,374			1			10			340
	Total net revenues	83,873	583,909		531,508		24,900	173,349	169,045
	COST OF REVENUES
	Educational program and
	services	(55,106)	(383,635)		(331,939)		(16,976)	(118,181)	(110,948)
	Intelligent program and
	services		(755)		(5,259)			(6,204)			80			559			(1,016)
	Total cost of revenues	(55,861)	(388,894)		(338,143)		(16,896)	(117,622)	(111,964)
	GROSS PROFIT	28,012	195,015		193,365		8,004	55,727	57,081
	Operating expenses:
	Selling and marketing	(8,004)	(55,721)		(43,751)		(2,146)	(14,943)	(11,784)
	General and administrative		(27,926)		(194,417)			(132,718)			(7,743)			(53,907)			(35,846)
	Research and development	(545)	(3,793)		(1,513)		(321)	(2,238)	134
	Impairment loss		(5,567)		(38,754)			-			-			-			-
	Total operating expenses	(42,042)		(292,685)			(177,982)		(10,210)		(71,088)		(47,496)
	OPERATING (LOSS)
	INCOME	(14,030)	(97,670)		15,383		(2,206)	(15,361)	9,585
	OTHER INCOME
	(EXPENSES)
	Interest income		773		5,379			6,652			292			2,036			1,285
	Foreign exchange gain, net	3	23		372		(3)	(23)	218
	Other income, net		57		396			1,447			29			203			930
	Gain from derecognition of
	liabilities	-	-		15,226		-		-		15,226
	Gain on deregistration of
	subsidiaries		264		1,841			2,858			81			562			(362)
	Gain from fair value change of
	contingent consideration
	payable	190	1,322		5,444		190	1,322	5,444
	Gain on sale of investment
	available for sale		172		1,200			1,056			112			778			297
	Total other income	1,459	10,161		33,055		701	4,878	23,038
	(LOSS) INCOME BEFORE
	INCOME TAX AND NON-
	CONTROLLING
	INTEREST		(12,571)		(87,509)			48,438			(1,505)			(10,483)			32,623
	Income tax expense	(1,855)	(12,917)		(3,498)		(271)	(1,885)	(1,559)
	NET (LOSS) INCOME	(14,426)	(100,426)		44,940		(1,776)	(12,368)	31,064

Less: Net loss attributable to

	non-controlling interest
	(70)			(485)		(50)		(31)		(216)		(89)
	NET (LOSS) INCOME
	ATTRIBUTABLE TO
	ORDINARY
	SHAREHOLDERS			(14,356)					(99,941)						44,990						(1,745)						(12,152)						31,153
	NET (LOSS) INCOME			(14,426)					(100,426)						44,940					(1,776)						(12,368)						31,064
	OTHER
	COMPREHENSIVE
	INCOME, NET OF TAX
	Foreign currency translation
	adjustments	(420)		(2,924)		1,304	49		343		52
	Unrealized gains on short term
	investments
	Unrealized holding gains
	arising during period	294		2,046		776	116			808		330
	Less: reclassification
	adjustment for gains
	included in net income			156					1,086						651					86						597						224
	Other comprehensive (loss)
	income	(282)		(1,964)		1,429	79			554		158
	TOTAL
	COMPREHENSIVE
	(LOSS) INCOME	(14,708)		(102,390)		46,369	(1,697)		(11,814)		31,222
	Net (loss) income per share -
	basic	(0.33)			(2.30)		1.09	(0.04)		(0.28)			0.72
	Net (loss) income per share -
	diluted	(0.33)			(2.30)		1.08	(0.04)		(0.28)		0.71
	Weighted average shares used
	in calculating basic net
	(loss) income per share	43,505,175		43,505,175		41,342,597	43,529,884		43,529,884		43,255,473
	Weighted average shares used
	in calculating diluted net
	(loss) income per share		43,505,175			43,505,175			41,671,763			43,529,884			43,529,884			43,589,336

Discussion of Segment Operations

(All amounts in thousands)

			For the years ended December 31,		For the three months ended December 31,
			2019	2019		2018		2019	2019	2018
			US$		RMB		RMB		US$		RMB		RMB
	NET REVENUES
	K-12 Schools *	45,067	313,747		277,790		15,877	110,533	101,614
	CP&CE Programs *		38,806		270,162			253,718			9,023		62,816		67,431
	Total net revenues	83,873		583,909			531,508			24,900		173,349		169,045
	COST OF REVENUES

	K-12 Schools *	(28,306)		(197,064)		(178,645)		(9,793)		(68,177)		(69,958)
	CP&CE Programs *		(27,555)			(191,830)			(159,498)				(7,103)				(49,445)		(42,006)
	Total cost of revenues		(55,861)			(388,894)			(338,143)			(16,896)			(117,622)		(111,964)
	GROSS PROFIT
	K-12 Schools *	16,761		116,683		99,145			6,084			42,356		31,656
	CP&CE Programs *		11,251			78,332			94,220				1,920				13,371		25,425
	Total gross profit		28,012			195,015			193,365				8,004				55,727		57,081

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