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Ambow Education Announces Third Quarter 2019 Financial Results

BEIJING, Dec. 12, 2019 /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 nine-month periods ended September 30, 2019.

"We are pleased with the topline growth during this quarter. Both of our primary revenue streams, K-12 Schools and College Preparation & Continuing Education, showed 26% and 13% year-over-year increases, respectively. Furthermore our deferred revenue related to tuition and course fees and our education service platform increased 86.2% to US$33.7 million from the prior year period. As we move towards closing out fiscal 2019, we shall continue to explore innovation in our educational services portfolio, invest in new technology to build up our education service platforms, and roll out our cross-border university platform across the U.S. and China. At the same time we are making efforts to optimize and synergize resources and expenditures throughout the Company. Looking forward, we believe we are positioning Ambow to remain a leading provider of educational and career enhancement services inside China as well as a transformational cross-border leader in assisting career colleges and universities by addressing five key challenges across: curriculum development, retaining qualified faculty, practical training, job placement and international cooperation," noted Dr. Jin Huang, Ambow's President and Chief Executive Officer.

"As a leading innovator in the robust Chinese education market, Ambow continues to expand its brand presence and market positioning through the buildout of our powerful and modern learning platform. During the third quarter, the Company hosted a forum on innovation and international resource sharing across Chinese and foreign higher education, in Beijing. The International Education Expo allowed Ambow to promote its cross-border education model which not only benefits international students seeking higher education opportunities but also the institutions that fall under the credentialing standards as maintained by Global Career Quality Assurance (GCQA). In terms of initiatives and partnerships for the advancement of new technology curriculums in China, Ambow has recently partnered with Hebei Agricultural University and Beijing University of Agriculture to jointly design and build a Big Data engineering lab and Internet of Things (IoT) lab respectively, whose value proposition is in driving development of higher education initiatives which prepare students for the new technology-driven economy of today," concluded Dr. Huang.

Third Quarter 2019 Financial Highlights

  • Net revenues for the third quarter of 2019 increased by 12.7% to US$17.7 million from US$15.7 million in the same period of 2018. This increase was mainly driven by higher student enrollment.

  • Gross profit for the third quarter of 2019 increased by 4.7% to US$4.5 million from US$4.3 million in the same period of 2018. Gross profit margin was 25.4%, compared with 27.4% for the third quarter of 2018. The decrease in gross profit margin was primarily due to additional investments in new programs and new technology deployment.

  • Operating expenses for the third quarter of 2019 increased by 141.7% to US$14.5 million from US$6.0 million for the same period of 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 in US$5.4 million recorded in the third quarter.

  • Net loss attributable to ordinary shareholders was US$10.2 million, or US$0.23 per basic and diluted share, compared with a net loss of US$1.8 million, or US$0.04 per basic and diluted share, for the third quarter of 2018.

  • As of September 30, 2019, Ambow maintained strong cash resources of US$43.9 million, comprised of cash and cash equivalents of US$18.4 million and short-term investments of US$25.5 million.

  • As of September 30, 2019, the Company's deferred revenue balance was US$33.7 million, representing an 86.2% 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 2019-2020 academic year, deferred revenue collected from our education service platforms and the tuition fees collected for the fall semester of 2019.

First Nine Months 2019 Financial Highlights

  • Net revenues for the first nine months of 2019 increased by 8.7% to US$57.4 million from US$52.8 million in the same period of 2018. This increase was mainly driven by higher student enrollment.

  • Gross profit for the first nine months of 2019 decreased by 2.0% to US$19.5 million from US$19.9 million in the same period of 2018. Gross profit margin was 34.0%, compared with 37.7% for the nine months of 2018. The decrease in gross profit margin was primarily due to additional investments in new programs and new technology deployment.

  • Operating expenses for the first nine months of 2019 increased by 63.2% to US$31.0 million from US$19.0 million for the same period of 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 in US$5.4 million recorded in the third quarter of 2019.

  • Net loss attributable to ordinary shareholders was US$12.3 million, or US$0.28 per basic and diluted share, compared with a net income of US$2.0 million, or US$0.05 per basic and diluted share, for the first nine months of 2018.

The Company's third quarter and first nine months of 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.

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 third quarter and first nine months of 2019 are based on the effective exchange rate of 7.1477 as of September 30, 2019; all amounts translated from RMB to U.S. dollars for the third quarter and first nine months of 2018 are based on the effective exchange rate of 6.8680 as of September 28, 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: +86-10-6206-8000

The Piacente Group | Investor Relations
Tel: +1-212-481-2050 or +86-10-6508-0677
E-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 September 30,


As of December 31,





2019


2018





US$


RMB


RMB


ASSETS









Current assets:









Cash and cash equivalents



18,454


131,902


211,436


Restricted cash



-


-


30,072


Short term investments, available for sale



15,559


111,209


47,208


Short term investments, held to maturity



9,933


71,000


70,000


Accounts receivable, net



4,069


29,087


18,132


Amounts due from related parties



334


2,384


1,105


Prepaid and other current assets, net



19,246


137,567


134,770


Loan receivable, current



-


-


42,677


Total current assets



67,595


483,149


555,400


Non-current assets:









Property and equipment, net



21,182


151,403


165,933


Land use rights, net



248


1,770


1,804


Intangible assets, net



7,949


56,815


92,412


Goodwill



8,252


58,986


73,166


Deferred tax assets, net



1,837


13,130


10,240


Operating lease right-of-use asset



35,412


253,111


-


Finance lease right-of-use asset



923


6,600


-


Other non-current assets, net



10,201


72,914


11,264











Total non-current assets



86,004


614,729


354,819











Total assets



153,599


1,097,878


910,219











LIABILITIES









Current liabilities:









Deferred revenue *



33,735


241,130


124,250


Accounts payable *



1,634


11,682


13,583


Accrued and other liabilities *



26,503


189,438


256,325


Borrowing from third party, current



-


-


41,179


Income taxes payable *



29,982


214,305


207,114


Amounts due to related parties *



356


2,543


2,696


Operating lease liability, current *



7,511


53,687


-


Total current liabilities



99,721


712,785


645,147


Non-current liabilities:









Consideration payable for acquisitions



185


1,322


1,322


Other non-current liabilities



-


-


979


Operating lease liability, non-current *



29,337


209,692


-











Total non-current liabilities



29,522


211,014


2,301











Total liabilities



129,243


923,799


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 September 30, 2019)



-


-


-


Class A Ordinary shares









(US$0.003 par value; 66,666,667
and 66,666,667 shares authorized, 38,756,289
and 38,804,032 shares issued and
outstanding as of December 31, 2018 and
September 30, 2019, respectively)



102


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 September 30,
2019, respectively)



13


90


90


Additional paid-in capital



490,858


3,508,504


3,507,123


Statutory reserve



2,819


20,149


20,149


Accumulated deficit



(470,029)


(3,359,627)


(3,271,838)


Accumulated other comprehensive income



810


5,787


8,305


Total Ambow Education Holding Ltd.'s equity



24,573


175,632


264,557


Non-controlling interests



(217)


(1,553)


(1,786)


Total equity



24,356


174,079


262,771


Total liabilities and equity



153,599


1,097,878


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















Class A Ordinary

Class C Ordinary

Additional


Retained

Earnings

Accumulated

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,
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

-

-

-

-

-

-

-

(2,428)

-

(2,428)

adjustment











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

-

-

-

-

-

-

-

(746)

-

(746)

adjustment











Unrealized gain on

-

-

-

-

-

-

-

173

-

173

investment, net of income











taxes











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

-

-

-

-

-

-

-

(93)

-

(93)

adjustment











Unrealized gain on

-

-

-

-

-

-

-

501

-

501

investment, net of income











taxes











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























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

-

-

-

-

-

-

-

3,276

-

3,276

adjustment











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


AMBOW EDUCATION HOLDING LTD.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

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



For the nine months ended September 30,


For the three months ended September 30,


2019


2019


2018


2019


2019


2018


US$


RMB


RMB


US$


RMB


RMB













NET REVENUES












Educational program and
services

57,273


409,367


356,429


17,730


126,729


107,227

Intelligent program and
services

167


1,193


6,034


(24)


(173)


251

Total net revenues

57,440


410,560


362,463


17,706


126,556


107,478

COST OF REVENUES












Educational program and
services

(37,138)


(265,454)


(220,991)


(13,002)


(92,934)


(76,723)

Intelligent program and
services

(814)


(5,818)


(5,188)


(155)


(1,109)


(1,266)

Total cost of revenues

(37,952)


(271,272)


(226,179)


(13,157)


(94,043)


(77,989)













GROSS PROFIT

19,488


139,288


136,284


4,549


32,513


29,489

Operating expenses:












Selling and marketing

(5,705)


(40,778)


(31,967)


(2,183)


(15,607)


(12,740)

General and administrative

(19,658)


(140,510)


(96,872)


(6,732)


(48,116)


(27,717)

Research and development

(218)


(1,555)


(1,647)


(152)


(1,087)


(820)

Impairment loss

(5,422)


(38,754)


-


(5,422)


(38,754)


-

Total operating expenses

(31,003)


(221,597)


(130,486)


(14,489)


(103,564)


(41,277)













OPERATING (LOSS) INCOME

(11,515)


(82,309)


5,798


(9,940)


(71,051)


(11,788)













OTHER INCOME (EXPENSES)












Interest income

468


3,343


5,367


255


1,823


1,691

Foreign exchange gain, net

6


46


154


6


45


19

Other income (loss), net

27


193


517


1


7


(408)

Gain from deregistration of
subsidiaries

179


1,279


3,220


-


-


-

Gain on sale of investment
available for sale

59


422


759


-


3


275

Total other income

739


5,283


10,017


262


1,878


1,577

(LOSS) INCOME BEFORE
INCOME TAX AND NON-
CONTROLLING
INTEREST

(10,776)


(77,026)


15,815


(9,678)


(69,173)


(10,211)

Income tax expense

(1,543)


(11,032)


(1,939)


(508)


(3,634)


(2,113)













NET (LOSS) INCOME

(12,319)


(88,058)


13,876


(10,186)


(72,807)


(12,324)

Less: Net (loss) income
attributable to non-
controlling interest

(38)


(269)


39


1


4


89













NET (LOSS) INCOME
ATTRIBUTABLE TO
ORDINARY
SHAREHOLDERS

(12,281)


(87,789)


13,837


(10,187)


(72,811)


(12,413)













NET (LOSS) INCOME

(12,319)


(88,058)


13,876


(10,186)


(72,807)


(12,324)













OTHER
COMPREHENSIVE
INCOME, NET OF TAX












Foreign currency translation
adjustments

(457)


(3,267)


1,252


(13)


(93)


(501)

Unrealized gains on short term
investments












Unrealized holding gains
arising during period

173


1,238


446


75


538


66

Less: reclassification
adjustment for gains
included in net income

68


489


427


5


37


180

Other comprehensive (loss)
income

(352)


(2,518)


1,271


57


408


(615)













TOTAL
COMPREHENSIVE
(LOSS) INCOME

(12,671)


(90,576)


15,147


(10,129)


(72,399)


(12,939)













Net (loss) income per share -
basic

(0.28)


(2.02)


0.34


(0.23)


(1.67)


(0.29)













Net (loss) income per share -
diluted

(0.28)


(2.02)


0.34


(0.23)


(1.67)


(0.29)













Weighted average shares used
in calculating basic net
(loss) income per share

43,496,848


43,496,848


40,697,965


43,512,447


43,512,447


43,125,614













Weighted average shares used
in calculating diluted net
(loss) income per share

43,496,848


43,496,848


41,025,566


43,512,447


43,512,447


43,125,614

Discussion of Segment Operations
(All amounts in thousands)



For the nine months ended September 30,


For the three months ended September 30,


2019


2019


2018


2019


2019


2018


US$


RMB


RMB


US$


RMB


RMB













NET REVENUES












K-12 Schools *

28,431


203,214


176,176


7,311


52,256


41,507

College Preparation & CE
Programs *

29,009


207,346


186,287


10,395


74,300


65,971

Total net revenues

57,440


410,560


362,463


17,706


126,556


107,478

COST OF REVENUES












K-12 Schools *

(18,032)


(128,887)


(108,687)


(5,427)


(38,794)


(32,041)

College Preparation & CE
Programs *

(19,920)


(142,385)


(117,492)


(7,730)


(55,249)


(45,948)

Total cost of revenues

(37,952)


(271,272)


(226,179)


(13,157)


(94,043)


(77,989)

GROSS PROFIT












K-12 Schools *

10,399


74,327


67,489


1,884


13,462


9,466

College Preparation & CE
Programs *

9,089


64,961


68,795


2,665


19,051


20,023

Total gross profit

19,488


139,288


136,284


4,549


32,513


29,489













* Ambow previously had three reportable segments, including Better School, Better Job and Others for the years prior to 2019. In
2019, along with 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 & CE Programs, which provide K-12 educational services and tutoring and vocational educational services,
respectively.

SOURCE Ambow Education Holding Ltd.