TAL Education : Fourth Quarter Fiscal Year 2021 Earnings Release

TAL Education Group Announces Unaudited Financial Results for the

Fourth Fiscal Quarter and the Fiscal Year 2021

- Quarterly Results:

Net Revenues up by 58.9% Year-Over-Year for the Fourth Fiscal Quarter Non-GAAP Loss from Operations was US$216.9 million, compared to Non-GAAP Loss

from Operations of US$8.4 million in the Same Period of Prior Year

Total Student Enrollments of Normal Priced Long-term Course up by 44.0% Year-Over- Year

- Fiscal Year Results:

Net Revenues up by 37.3%

Non-GAAP Loss from Operations was US$233.3 million, compared to Non-GAAP Income from Operations of US$255.4 million in Fiscal Year 2020

Non-GAAP net income attributable to TAL, which excluded share-based compensation expenses, was US$89.0 million, compared to non-GAAP net income attributable to TAL of US$7.7 million in fiscal year 2020

Quarterly Average Student Enrollments of Normal Priced Long-term Course up by 54.4% Year-Over-Year

(Beijing-April 22, 2021)-TAL Education Group (NYSE: TAL) ("TAL" or the "Company"), a leading K-12after-school tutoring services provider in China, today announced its unaudited financial results for the fourth quarter and the fiscal year ended February 28, 2021.

Highlights for the Fourth Quarter of Fiscal Year 2021

• Net revenues increased by 58.9% year-over-year to US$1,362.7 million from US$857.7 million in the same period of the prior year.
• Loss from operations was US$297.2 million, compared to loss from operations of US$41.3 million in the same period of the prior year.
• Non-GAAPloss from operations, which excluded share-based compensation expenses, was US$216.9 million, compared to non-GAAP loss from operations of US$8.4 million in the same period of the prior year.
• Net loss attributable to TAL was US$169.0 million, compared to net loss attributable to TAL of US$90.1 million in the same period of the prior year.
• Non-GAAPnet loss attributable to TAL, which excluded share-based compensation expenses, was US$88.7 million, compared to non-GAAP net loss attributable to TAL of US$57.2 million in the same period of the prior year.
• Basic and diluted net loss per American Depositary Share ("ADS") were both US$0.27. Non-GAAP basic and diluted net loss per ADS, which excluded share-based compensation expenses, were both US$0.14. Three ADSs represent one Class A common share.
• Cash, cash equivalents and short-term investments totaled US$5,937.5 million as of February 28, 2021, compared to US$2,219.3 million as of February 29, 2020.

- Total student enrollments of normal priced long-term course increased by 44.0% year- over-year to approximately 6,690,950 from approximately 4,646,040 in the same period of the prior year.

Highlights for the Fiscal Year Ended February 28, 2021

• Net revenues increased by 37.3% year-over-year to US$4,495.8 million from US$3,273.3 million in fiscal year 2020.
• Loss from operations was US$438.2 million, compared to income from operations of US$137.4 million in fiscal year 2020.
• Non-GAAPloss from operations, which excluded share-based compensation expenses, was US$233.3 million, compared to non-GAAP income from operations of US$255.4 million in fiscal year 2020.
• Net loss attributable to TAL was US$116.0 million, compared to net loss attributable to TAL of US$110.2 million in fiscal year 2020.
• Non-GAAPnet income attributable to TAL, which excluded share-based compensation expenses, was US$89.0 million, compared to non-GAAP net income attributable to TAL of US$7.7 million in fiscal year 2020.
• Basic and diluted net loss per ADS were both US$0.19. Non-GAAP basic and diluted net income per ADS, excluding share-based compensation expenses, were US$0.15 and US$0.14, respectively.
• Average student enrollments of normal priced long-term course per quarter during fiscal year 2021 increased by 54.4% year-over-year to approximately 4,669,140 from approximately 3,023,840 in fiscal year 2020.
• Total physical network increased from 871 learning centers in 70 cities as of February 29, 2020 to 1,098 learning centers in 110 cities as of February 28, 2021.

Financial and Operating Data--Fourth Quarter and Fiscal Year 2021 (In US$ thousands, except per ADS data, student enrollments and percentages)

	Three Months Ended
		February 29/28,
	2020	2021	Pct. Change
Net revenues	857,682	1,362,689	58.9%
Operating loss	(41,256)	(297,210)	620.4%
Non-GAAP operating loss	(8,392)	(216,872)	2,484.3%
Net loss attributable to TAL	(90,074)	(169,002)	87.6%
Non-GAAP net loss attributable to TAL	(57,210)	(88,664)	55.0%
Net loss per ADS attributable to TAL - basic	(0.15)	(0.27)	76.0%
Net loss per ADS attributable to TAL - diluted	(0.15)	(0.27)	76.0%
Non-GAAP net loss per ADS attributable to TAL -	(0.10)	(0.14)	45.4%
basic
Non-GAAP net loss per ADS attributable to TAL -	(0.10)	(0.14)	45.4%
diluted
Total Student Enrollments of normal priced long-term
course	4,646,040	6,690,950	44.0%

	Fiscal Year Ended
	February 29/28,
	2020	2021	Pct. Change
Net revenues	3,273,308	4,495,755	37.3%
Operating income/(loss)	137,443	(438,224)	(418.8%)
Non-GAAP operating income/(loss)	255,386	(233,279)	(191.3%)
Net loss attributable to TAL	(110,195)	(115,990)	5.3%
Non-GAAP net income attributable to TAL	7,748	88,955	1,048.1%
Net loss per ADS attributable to TAL -	(0.19)	(0.19)	2.5%
basic
Net loss per ADS attributable to TAL -	(0.19)	(0.19)	2.5%
diluted
Non-GAAP net income per ADS	0.01	0.15	1,017.5%
attributable to TAL - basic
Non-GAAP net income per ADS	0.01	0.14	1,024.9%
attributable to TAL - diluted
Average Student Enrollments of normal
priced long-term course	3,023,840	4,669,140	54.4%

"In the fiscal year 2021, despite the challenges of the COVID-19 pandemic, TAL realized 37.3% revenue growth. Our strength in both offline and online education capabilities enabled us to offer tutoring support to our students under the changing circumstances," said Rong Luo, TAL's chief financial officer.

"Looking ahead, we will keep investing in the quality of our products, service and technology as well as in sustainable marketing efforts. We will also further diversify our products, content and service while improving operational efficiency to meet our students and parents evolving needs at affordable prices," Mr. Luo added.

Financial Results for the Fourth Quarter of Fiscal Year 2021

Net Revenues

In the fourth quarter of fiscal year 2021, TAL reported net revenues of US$1,362.7 million, representing a 58.9% increase from US$857.7 million in the fourth quarter of fiscal year 2020. The increase was mainly driven by an increase in total student enrollments of normal priced long-term course, which increased by 44.0% to approximately 6,690,950 from approximately 4,646,040 in the same period of the prior year. The increase in total student enrollments of normal priced long-term course was primarily the result of the growth of enrollments in the small class offerings and online courses.

Operating Costs and Expenses

In the fourth quarter of fiscal year 2021, operating costs and expenses were US$1,662.0 million, representing an 84.8% increase from US$899.3 million in the fourth quarter of fiscal year 2020. Non-GAAP operating costs and expenses, which excluded share-based compensation expenses, were US$1,581.7 million, representing an 82.5% increase from US$866.5 million in the fourth quarter of fiscal year 2020.

Cost of revenues increased by 43.3% to US$581.4 million from US$405.9 million in the fourth quarter of fiscal year 2020. The increase in cost of revenues was mainly due to an increase in teacher compensation, rental costs and learning materials. Non-GAAP cost of revenues, which excluded share-based compensation expenses, increased by 43.2% to US$580.8 million, from US$405.6 million in the fourth quarter of fiscal year 2020.

Selling and marketing expenses increased by 171.6% to US$660.5 million from US$243.2 million in the fourth quarter of fiscal year 2020. Non-GAAP selling and marketing expenses, which excluded share-based compensation expenses, increased by 168.4% to US$635.5 million, from US$236.8 million in the fourth quarter of fiscal year 2020. The increase of selling and marketing expenses in the fourth quarter of fiscal year 2021 was primarily a result of more marketing promotion activities to expand our customer base and brand enhancement, as well as a rise in the compensation to sales and marketing staff to support a greater number of programs and service offerings compared to the same period in the prior year.

General and administrative expenses increased by 57.6% to US$348.6 million from US$221.2 million in the fourth quarter of fiscal year 2020. The increase in general and administrative expenses was mainly due to an increase of the number of our general and administrative personnel compared to the same period in the prior year and a rise in compensation to our general and administrative personnel. Non-GAAP general and administrative expenses, which excluded share-based compensation expenses, increased by 50.7% to US$293.9 million, from US$195.0 million in the fourth quarter of fiscal year 2020.

Total share-based compensation expenses allocated to the related operating costs and expenses increased by 144.5% to US$80.3 million in the fourth quarter of fiscal year 2021 from US$32.9 million in the same period of fiscal year 2020.

Impairment loss on intangible assets and goodwill was US$71.5 million for the fourth quarter of fiscal year 2021, compared to US$29.0 million for the fourth quarter of fiscal year 2020. Impairment loss on goodwill was mainly due to the decline in reporting units' fair value.

Gross Profit

Gross profit increased by 72.9% to US$781.2 million from US$451.8 million in the fourth quarter of fiscal year 2020.

Loss from Operations

Loss from operations was US$297.2 million in the fourth quarter of fiscal year 2021, compared to loss from operations of US$41.3 million in the fourth quarter of fiscal year 2020. Non-GAAP loss from operations, which excluded share-based compensation expenses, was US$216.9 million, compared to Non-GAAP loss from operations of US$8.4 million in the same period of the prior year.

Other (expense)/Income

Other income was US$7.9 million for the fourth quarter of fiscal year 2021, compared to other expense of US$4.7 million in the fourth quarter of fiscal year 2020. Other income in the fourth quarter of fiscal year 2021 primarily consisted of the value-added tax and social security expense exemption offered by the government during the COVID-19 impacted period, and partially offset by impairment loss of non-current assets.

Impairment Loss on Long-term Investments

Impairment loss on long-term investments was US$6.2 for the fourth quarter of fiscal year 2021, compared to US$2.8 million for the fourth quarter of fiscal year 2020. Impairment loss on long-term investments was mainly due to declines in the value of long-term investments in several investees.

Income Tax (expense)/Benefit

Income tax benefit was US$80.5 million in the fourth quarter of fiscal year 2021, compared to US$63.6 million of income tax expense in the fourth quarter of fiscal year 2020.

Net Loss Attributable to TAL Education Group

Net loss attributable to TAL was US$169.0 million in the fourth quarter of fiscal year 2021, compared to net loss attributable to TAL of US$90.1 million in the fourth quarter of fiscal year 2020. Non-GAAP net loss attributable to TAL, which excluded share-based compensation expenses, was US$88.7 million, compared to Non-GAAP net loss attributable to TAL of US$57.2 million in the fourth quarter of fiscal year 2020.

Basic and Diluted Net Loss per ADS

Basic and diluted net loss per ADS were both US$0.27 in the fourth quarter of fiscal year 2021. Non-GAAP basic and diluted net loss per ADS, which excluded share-based compensation expenses, were both US$0.14, in the fourth quarter of fiscal year 2021.

Cash Flow

Net cash flow used in operating activities for the fourth quarter of fiscal year 2021 was US$626.5 million. Capital expenditures for the fourth quarter of fiscal year 2021 were US$81.8 million, an increase of US$19.5 million from US$62.3 million for the fourth quarter of fiscal year 2020. The increase of capital expenditures was mainly due to leasehold improvement.

Cash, Cash Equivalents, and Short-Term Investments

As of February 28, 2021, the Company had US$3,243.0 million of cash and cash equivalents and US$2,694.5 million of short-term investments, compared to US$1,873.9 million of cash and cash equivalents and US$345.4 million of short-term investments as of February 29, 2020.

Deferred Revenue

The Company's deferred revenue balance was US$1,417.5 million, compared to US$781.0 million as of February 29, 2020, representing a year-over-year increase of 81.5%, which was mainly contributed by the tuition collected in advance of part of the spring semester of Xueersi Peiyou small classes and online courses through www.xueersi.com, as well as deferred revenue related to other businesses.