PR Newswire | Sep 15, 2020 09:02AM EDT

09/15 08:00 CDT

Ambow Education Announces Second Quarter 2020 Financial Results BEIJING, Sept. 15, 2020

BEIJING, Sept. 15, 2020 /PRNewswire/ -- 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 and six-month periods ended June 30, 2020.

Dr. Jin Huang, Ambow's President and Chief Executive Officer, said, "Since various measures that the Chinese government implemented to constrain the COVID-19 outbreak were gradually relaxed during the second quarter, the majority of our schools, tutoring centers and training offices reopened with operations gradually returning to normalcy. As such, our second quarter financial performance significantly improved on a quarter-over-quarter basis, highlighted by a 2,600 basis points increase in Gross Margin. We maintained healthy operating efficiency and profitability with a positive net income in the first half of 2020, demonstrating our capability to navigate the dynamic market during the unprecedented challenging times. Striving for increasing enrollment across all Ambow programs while also deploying stringent cost controls, we are confident in our ability to drive profitable growth and strengthen our leadership position in the career enhancement market in China."

"Amid pandemic-related and broad-based economic challenges, we remain focused on delivering high quality educational technologies and services to address personalized learning needs in a dynamic learning environment. With the outbreak of COVID-19, the integration of technology into education was further accelerated, which has significantly boosted the demand for online-based education from both students and professionals. To enhance the learning and teaching experience in the COVID-19 environment, Ambow rolled out its next-generation online-to-offline education SaaS platform, Huanyujun Education Hub, which is equipped with our proprietary technologies including hologram live streaming, AI and IoT, all of which are built on our cloud-based infrastructure. Simultaneously drawing upon our extensive educational resources and assets spanning the globe, we believe this mobile-based platform is uniquely positioned to exploit the booming trend in the e-learning industry across a wide spectrum of educational scenarios," concluded Dr. Huang.

Second Quarter 2020 Financial Highlights

* Net revenues for the second quarter of 2020 decreased by 8.7% to US$22.0 million from US$24.1 million in the same period of 2019. The decrease was primarily due to a reduction in the recognition of deferred revenue in the period as a result of the one-month extension of spring semester 2020 at the Company's K-12 schools, which used to concluded at the end of June, and fewer services provided at the Company's tutoring centers and training offices as a result of social distance and counter measures to COVID-19. This was partially offset by revenue from NewSchool of Architecture and Design, LLC ("NewSchool"), acquired in the first quarter of 2020. * Gross profit for the second quarter of 2020 decreased by 14.1% to US$8.5 million from US$9.9 million in the same period of 2019. Gross profit margin was 38.6%, compared with 41.1% for the second quarter of 2019. The decrease in gross profit and margin was mainly attributable to the decrease in net revenues. * Operating expenses for the second quarter of 2020 slightly increased by 1.2% to US$8.5 million from US$8.4 million for the same period of 2019. * Net income attributable to ordinary shareholders was US$0.7 million, or US$0.02 per basic and diluted share, compared with a net income of US$1.3 million, or US$0.03 per basic and diluted share, for the second quarter of 2019. * As of June 30, 2020, Ambow maintained strong cash resources of US$27.2 million, comprised of cash and cash equivalents of US$13.9 million and short-term investments of US$13.3 million.

First Six Months 2020 Financial Highlights

* Net revenues for the first six months of 2020 decreased by 15.9% to US$34.8 million from US$41.4 million in the same period of 2019. The decrease was primarily due to due to a reduction in the recognition of deferred revenue in the period as a result of an one-month extension of spring semester 2020 at the Company's K-12 schools, which used to conclude at the end of June, and fewer services provided at the Company's tutoring centers and training offices, as operations during the period were temporarily suspended due to the outbreak of COVID-19. This was partially offset by revenue from NewSchool, acquired in the period. * Gross profit for the first six months of 2020 decreased by 34.6% to US$10.2 million from US$15.6 million in the same period of 2019. Gross profit margin was 29.3%, compared with 37.7% for the first six months of 2019. The decrease in gross profit and margin was mainly attributable to the decrease of net revenues. * Operating expenses for the first six months of 2020 decreased by 8.7% to US$15.7 million from US$17.2 million for the same period of 2019. The decrease was primarily attributable to lower expenditures due to the temporary suspension of operations at schools and tutoring centers in the period as part of the national pandemic containment effort, as well as stringent expense controls to improve operating efficiency. * Net income attributable to ordinary shareholders was US$1.5 million, or US$0.04 per basic and diluted share, compared with a net loss of US$2.2 million, or US$0.05 per basic and diluted share, for the first six months of 2019.

The Company's second quarter and first half 2020 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.

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 second quarter and first half of 2020 are based on the effective exchange rate of 7.0651 as of June 30, 2020; all amounts translated from RMB to U.S. dollars for the second quarter and first half of 2019 are based on the effective exchange rate of 6.8650 as of June 28, 2019; all amounts translated from RMB to U.S. dollars as of December 31, 2019 are based on the effective exchange rate of 6.9618 as of December 31, 2019. 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 15 out of the 34 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: +86-10-6206-8000

The Piacente Group | Investor RelationsTel: +1-212-481-2050 or +86-10-6508-0677E-mail: ambow@tpg-ir.com

AMBOW EDUCATION HOLDING LTD. UNAUDITED CONSOLIDATED BALANCE SHEETS (All amounts in thousands, except for share and per share data)



As of June 30, As of December 31,

2020 2019

US$ RMB RMB

ASSETS

Current assets:

Cash and cash equivalents 13,935 98,455 157,600

Restricted cash 2,004 14,160 -

Short term investments, available for sale 11,160 78,849 57,487

Short term investments, held to maturity 2,123 15,000 31,000

Accounts receivable, net 2,914 20,589 17,939

Amounts due from related parties 1,030 7,274 2,318

Prepaid and other current assets, net 21,721 153,464 133,296

Total current assets 54,887 387,791 399,640

Non-current assets:

Property and equipment, net 21,159 149,489 157,463

Land use rights, net 246 1,737 1,759

Intangible assets, net 8,515 60,156 56,607

Goodwill 8,678 61,313 60,353

Deferred tax assets, net 636 4,497 10,195

Operating lease right-of-use asset 42,476 300,100 257,361

Finance lease right-of-use asset 870 6,150 6,450

Other non-current assets, net 12,419 87,743 70,971

Total non-current assets 94,999 671,185 621,159



Total assets 149,886 1,058,976 1,020,799



LIABILITIES

Current liabilities:

Short-term borrowings 1,473 10,409 -

Deferred revenue * 16,328 115,358 165,111

Accounts payable * 1,561 11,047 14,718

Accrued and other liabilities * 27,428 193,780 192,957

Income taxes payable, current * 26,787 189,253 180,715

Amounts due to related parties * 525 3,706 1,971

Operating lease liability, current * 8,254 58,314 53,512

Total current liabilities 82,356 581,867 608,984

Non-current liabilities:

Income taxes payable, non-current * 4,785 33,803 32,152

Operating lease liability, non-current * 36,954 261,087 216,067

Total non-current liabilities 41,739 294,890 248,219



Total liabilities 124,095 876,757 857,203



EQUITY

Preferred shares

(US$ 0.003 par value;1,666,667 shares authorized, nil issued and outstanding as of - - - December 31, 2019 and June 30, 2020)

Class A Ordinary shares

(US$0.003 par value; 66,666,667 and 66,666,667 shares authorized, 38,858,199 and 38,883,199 shares issued and 103 731 730 outstanding as of December 31, 2019 and June 30, 2020, respectively)

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 13 90 90 December 31, 2019 and June 30, 2020, respectively)

Additional paid-in capital 496,698 3,509,224 3,508,745

Statutory reserve 667 4,712 20,185

Accumulated deficit (473,608) (3,346,090) (3,371,815)

Accumulated other comprehensive income 2,115 14,941 6,341

Total Ambow Education Holding Ltd.'s equity 25,988 183,608 164,276

Non-controlling interests (197) (1,389) (680)

Total equity 25,791 182,219 163,596

Total liabilities and equity 149,886 1,058,976 1,020,799



* 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 OPERATIONS

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

For the six months ended June 30, For the three months ended June 30,

2020 2020 2019 2020 2020 2019

US$ RMB RMB US$ RMB RMB

NET REVENUES

Educational program and 34,771 245,659 282,638 21,994 155,392 164,453 services

Intelligent program and 12 83 1,366 10 71 905 services

Total net revenues 34,783 245,742 284,004 22,004 155,463 165,358

COST OF REVENUES

Educational program and (24,391) (172,324) (172,520) (13,431) (94,891) (94,323) services

Intelligent program and (206) (1,458) (4,709) (23) (160) (2,851) services

Total cost of revenues (24,597) (173,782) (177,229) (13,454) (95,051) (97,174)

GROSS PROFIT 10,186 71,960 106,775 8,550 60,412 68,184

Operating expenses:

Selling and marketing (3,426) (24,206) (25,171) (1,933) (13,657) (11,083)

General and administrative (11,924) (84,243) (92,394) (6,375) (45,042) (46,776)

Research and development (382) (2,698) (468) (222) (1,567) (300)

Total operating expenses (15,732) (111,147) (118,033) (8,530) (60,266) (58,159)

OPERATING (LOSS) (5,546) (39,187) (11,258) 20 146 10,025INCOME

OTHER INCOME (EXPENSES)

Interest income 585 4,135 1,520 304 2,145 1,132

Foreign exchange gain, net 5 35 1 1 9 32

Other income (loss), net 220 1,552 186 21 146 (474)

Gain from deregistration of 552 3,897 1,279 552 3,897 - subsidiaries

Gain on the bargain purchase 5,700 40,273 - - - -

Gain on sale of investment 149 1,056 419 75 530 140 available for sale

Total other income 7,211 50,948 3,405 953 6,727 830

INCOME (LOSS) BEFORE INCOME TAX AND NON- 1,665 11,761 (7,853) 973 6,873 10,855 CONTROLLING INTEREST

Income tax expense (230) (1,623) (7,398) (334) (2,362) (2,257)

NET INCOME (LOSS) 1,435 10,138 (15,251) 639 4,511 8,598

Less: Net loss attributable to (100) (708) (273) (42) (296) (180) non-controlling interest

NET INCOME (LOSS) ATTRIBUTABLE TO 1,535 10,846 (14,978) 681 4,807 8,778 ORDINARY SHAREHOLDERS

NET INCOME (LOSS) 1,435 10,138 (15,251) 639 4,511 8,598

OTHER COMPREHENSIVE INCOME, NET OF TAX

Foreign currency translation 1,179 8,328 (3,174) 1,117 7,895 (746) adjustments

Unrealized gains on short term investments

Unrealized holding gains 133 940 700 71 499 420 arising during period

Less: reclassification adjustment for gains 95 668 452 54 381 247 included in net income

Other comprehensive income 1,217 8,600 (2,926) 1,134 8,013 (573) (loss)

TOTAL COMPREHENSIVE 2,652 18,738 (18,177) 1,773 12,524 8,025 INCOME (LOSS)

Net income (loss) per share - 0.04 0.25 (0.34) 0.02 0.11 0.20 basic

Net income (loss) per share - 0.04 0.25 (0.34) 0.02 0.11 0.20 diluted

Weighted average shares used in calculating basic net 43,577,168 43,577,168 43,469,610 43,583,418 43,583,418 43,503,109 income (loss) per share

Weighted average shares used in calculating diluted net 43,577,168 43,577,168 43,469,610 43,583,418 43,583,418 43,647,645 income (loss) per share

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, 38,858,199 730 4,708,415 90 3,508,745 20,185 (3,372,409) 6,341 (680) 163,002 2020

Share-based compensation - - - - 238 - - - - 238

Issuance of ordinary shares 12,500 0 - - (0) - - - - - for restricted stock award

Foreign currency translation adjustment - - - - - - - - 433 433

Unrealized gain on investment, net of income - - - - - - - - 154 taxes 154

Net income/(loss) - - - - - - 6,039 - (412) 5,627

Balance as of March 31, 38,870,699 730 4,708,415 90 3,508,983 20,185 (3,366,370) 6,928 (1,092) 169,454 2020

Share-based compensation - - - - 242 - - - - 242

Issuance of ordinary shares 12,500 1 - - (1) - - - - - for restricted stock award

Foreign currency translation - - - - - - - 7,895 - 7,895 adjustment

Unrealized gain on investment, net of income - - - - - - - - 118 taxes 118

Deregistration of - - - - - (15,473) 15,473 - - - subsidiaries

Net income/(loss) - - - - - - 4,807 - (297) 4,510

Balance as of June 30, 2020 38,883,199 731 4,708,415 90 3,509,224 4,712 (3,346,090) (1,389) 182,219 14,941

Balance as of January 1, 2019 38,756,289 728 4,708,415 90 3,507,123 20,149 (3,271,838) (1,786) 262,771 8,305

Share-based compensation - - - - 872 - - - - 872

Issuance of ordinary shares 28,646 1 - - (1) - - - - - for restricted stock award

Foreign currency translation adjustment - - - - - - - - (2,428) (2,428)

Unrealized gain on investment, net of income - - - - - - - - 75 taxes 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) (1,879) 237,441 5,952

Share-based compensation - - - - 266 - - - - 266

Issuance of ordinary shares 19,097 0 - - (0) - - - - - for restricted stock award

Foreign currency translation adjustment - - - - - - - - (746) (746)

Unrealized gain on investment, net of income - - - - - - - - 173 taxes 173

Addition of noncontrolling interests resulting from - - - - - - - - 502 502 new subsidiaries

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) (1,557) 246,234 5,379

Discussion of Segment Operations

(All amounts in thousands)

For the six months ended June 30, For the three months ended June 30,

2020 2020 2019 2020 2020 2019

US$ RMB RMB US$ RMB RMB

NET REVENUES

K-12 Schools 17,948 126,800 150,958 12,086 85,389 87,165

CP&CE Programs 16,835 118,942 133,046 9,918 70,074 78,193

Total net revenues 34,783 245,742 284,004 22,004 155,463 165,358

COST OF REVENUES

K-12 Schools (10,550) (74,542) (90,093) (5,820) (41,113) (47,797)

CP&CE Programs (14,047) (99,240) (87,136) (7,634) (53,938) (49,377)

Total cost of revenues (24,597) (173,782) (177,229) (13,454) (95,051) (97,174)

GROSS PROFIT

K-12 Schools 7,398 52,258 60,865 6,266 44,276 39,368

CP&CE Programs 2,788 19,702 45,910 2,284 16,136 28,816

Total gross profit 10,186 71,960 106,775 8,550 60,412 68,184

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SOURCE Ambow Education Holding Ltd.