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Ambow Education Announces Fourth Quarter and Full Year 2018 Financial Results

BEIJING, April 5, 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 audited financial and operating results for the fourth quarter ended December 31, 2018 and fiscal year 2018.

Fourth Quarter 2018 Financial Highlights

  • Net revenues for the fourth quarter of 2018 increased by 10.8% to US$24.6 million from US$22.2 million in the same period of 2017. This increase was due primarily to higher student enrollment for the 2018-2019 academic year in the Company's K-12 schools and revenues from Boston-based Bay State College ("BSC", acquired in November 2017).
  • Gross profit for the fourth quarter of 2018 was US$8.3 million, compared with US$9.8 million for the same period of 2017. Gross profit margin was 33.7% for the fourth quarter of 2018, compared to 44.1% in the same period of 2017. The decrease in gross profit margin was primarily attributable to lower profit margin at BSC, as the Company is in the process of consolidating its business operations.
  • Operating expenses in the fourth quarter of 2018 decreased by 5.5% to US$6.9 million from US$7.3 million for the same period of 2017. Operating expenses as a percentage of net revenues for the quarter decreased to 28.0% from 33.0% in the same period of 2017, primarily due to a one-time bad debt expense recovery and reversal of US$2.9 million in the fourth quarter of 2018.
  • Net income attributable to ordinary shareholders for the fourth quarter of 2018 was US$4.5 million, or US$0.10 per basic and diluted share, compared with a net income of US$3.3 million for the fourth quarter of 2017, or US$0.09 per basic share and US$0.08 per diluted share.
  • As of December 31, 2018, Ambow maintained strong cash resources of US$52.2 million, comprising cash and cash equivalents of US$30.8 million, short-term investments of US$17.0 million, and restricted cash of US$4.4 million.
  • As of December 31, 2018, the Company's deferred revenue balance was US$18.1 million, representing a 2.8% increase from US$17.6 million as of December 31, 2017, mainly attributable to the tuition and course fees collected in the K-12 business segment for the 2018-2019 academic year, and the tuition and fees collected at BSC for the spring semester of 2019.

Fiscal Year 2018 Financial Highlights

  • Net revenues for fiscal year 2018 increased by 13.3% to US$77.3 million from US$68.2 million in 2017, due primarily to higher student enrollment for both 2017-2018 and 2018-2019 academic years in the Company's K-12 schools and revenues from BSC.
  • Gross profit for fiscal year 2018 decreased by 2.4% to US$28.1 million from US$28.8 million in 2017. Gross profit margin was 36.4%, compared to 44.2% in 2017. The decrease in gross profit margin was primarily attributable to lower profit margin at BSC, as the Company is in the process of consolidating its business operations.
  • Operating expenses for fiscal year 2018 were US$25.9 million, a 9.1% decrease from US$28.5 million in 2017. Operating expenses as a percentage of net revenues for the year decreased to 33.5% from 41.8% in 2017, primarily due to a one-time bad debt expense recovery and reversal of US$2.9 million in the fourth quarter of 2018.
  • Operating income for fiscal year 2018 was US$2.2 million, compared with an operating income of US$0.4 million for 2017.
  • Net income attributable to ordinary shareholders for fiscal year 2018 was US$6.5 million, or US$0.16 per basic and diluted share, compared with a net income of US$7.1 million, or US$0.18 per basic and diluted share, in the prior year. A one-time gain of US$5.7 million from the sale of subsidiaries was recorded in 2017.

"We are pleased to report a solid fourth quarter; with year-over-year revenue growth across our two primary business segments, Better Schools and Better Jobs, up 12.8 percent and 38.3 percent, respectively," said Dr. Jin Huang, Ambow's President and Chief Executive Officer. "While tuition fees from Bay State College contributed significantly to Ambow's Better Jobs revenue throughout the fiscal year, transition expenses related to BSC's acquisition pressured margins and impacted the Company's financial results for the year. However, with higher enrollments to be expected across all business segments in 2019, we will remain focused on managing costs and improving margins to boost operational efficiency and generate greater overall profitability."

Dr. Huang further commented on the strategic value of Bay State College to Ambow's long-term success, "Through international expansion, Ambow is now uniquely positioned to address the pressing needs of smaller private U.S. colleges that are experiencing declining enrollments and tuition revenue. In launching Ambow's first Cross-Border College Program between China and U.S. colleges, we are optimizing BSC's course offerings while simultaneously providing talented and financially qualified students from China who are eager to earn a bachelor's degree in the United States."

"We are confident that the implementation of the Cross-Border Program at Bay State will serve as an excellent model that is scalable and can be adopted by many U.S. colleges facing enrollment and tuition challenges."

The Company's fourth quarter and fiscal year 2018 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 2018 are based on the effective exchange rate of 6.8755 as of December 31, 2018; all amounts translated from RMB to U.S. dollars for the fourth quarter and the twelve months of 2017 are based on the effective exchange rate of 6.5063 as of December 31, 2017. 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 10-5730-6200
Email: 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  December 31,


As of December 31,


2018


2017


US$


RMB


RMB

ASSETS






Current assets:






Cash and cash equivalents

30,752


211,436


195,303

Restricted cash

4,374


30,072


2,350

Short term investments, available for sale

6,866


47,208


128,042

Short term investments, held to maturity

10,181


70,000


93,000

Accounts receivable, net

2,637


18,132


24,511

Amounts due from related parties

161


1,105


-

Prepaid and other current assets, net

19,601


134,770


129,517

Loan receivable, current

6,207


42,677


-

Total current assets

80,779


555,400


572,723

Non-current assets:






Property and equipment, net

24,134


165,933


168,423

Land use rights, net

262


1,804


1,848

Intangible assets, net

13,441


92,412


96,769

Goodwill

10,642


73,166


73,166

Deferred tax assets, net

1,490


10,240


8,222

Long-term loan receivables

-


-


42,677

Other non-current assets, net

1,638


11,264


13,592







Total non-current assets

51,607


354,819


404,697







Total assets

132,386


910,219


977,420







LIABILITIES






Current liabilities:






Deferred revenue  *

18,071


124,250


114,396

Accounts payable  *

1,977


13,583


23,414

Accrued and other liabilities  *

37,270


256,325


418,998

Borrow from third party, current 

6,000


41,179


-

Income taxes payable  *

30,123


207,114


202,314

Amounts due to related parties  *

392


2,696


3,430

Total current liabilities

93,833


645,147


762,552

Non-current liabilities:






Long-term borrowings from third party

-


-


39,205

Consideration payable for acquisitions

192


1,322


6,766

Other non-current liabilities

142


979


2,938







Total non-current liabilities

334


2,301


48,909







Total liabilities

94,167


647,448


811,461







EQUITY






Preferred shares






(US$ 0.003 par value;1,666,667 shares authorized, nil issued and outstanding as of December 31, 2017 and 2018) 

-


-


-

Class A Ordinary shares






(US$0.003 par value; 66,666,667 and 66,666,667 shares authorized, 34,206,939 and 38,756,289 shares issued and outstanding as of December 31, 2017 and 2018, respectively)

106


728


640

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, 2017 and September 30, 2018, respectively)

13


90


90

Additional paid-in capital

510,090


3,507,123


3,456,307

Statutory reserve

2,931


20,149


20,036

Accumulated deficit

(475,869)


(3,271,838)


(3,316,715)

Accumulated other comprehensive income

1,208


8,305


6,876

Total Ambow Education Holding Ltd.'s equity

38,479


264,557


167,234

Non-controlling interests

(260)


(1,786)


(1,275)

Total equity

38,219


262,771


165,959

Total liabilities and equity

132,386


910,219


977,420







*  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 years ended December 31,


For the three months ended December 31,


2018


2018


2017


2018


2018


2017


US$


RMB


RMB


US$


RMB


RMB













NET REVENUES












 Educational program and services

76,378


525,134


432,754


24,537


168,705


141,685

Intelligent program and services

927


6,374


11,170


49


340


2,514

Total net revenues

77,305


531,508


443,924


24,586


169,045


144,199

COST OF REVENUES












 Educational program and services

(48,279)


(331,939)


(249,400)


(16,137)


(110,948)


(79,739)

Intelligent program and services

(902)


(6,204)


(6,995)


(148)


(1,016)


(936)

Total cost of revenues

(49,181)


(338,143)


(256,395)


(16,285)


(111,964)


(80,675)













GROSS PROFIT

28,124


193,365


187,529


8,301


57,081


63,524

Operating expenses:












Selling and marketing

(6,363)


(43,751)


(36,710)


(1,714)


(11,784)


(8,505)

General and administrative

(19,303)


(132,718)


(142,252)


(5,214)


(35,846)


(37,238)

Research and development

(220)


(1,513)


(6,262)


19


134


(1,609)

Total operating expenses

(25,886)


(177,982)


(185,224)


(6,909)


(47,496)


(47,352)













OPERATING INCOME

2,238


15,383


2,305


1,392


9,585


16,172













OTHER INCOME (EXPENSES)












Interest income

967


6,652


5,191


187


1,285


1,181

Foreign exchange gain (loss), net

54


372


(522)


32


218


(1,262)

Other income (loss), net

210


1,447


1,652


135


930


1,668

Gain from derecognition of liabilities

2,215


15,226


-


2,215


15,226


-

Gain on disposal of subsidiaries

-


-


38,145


-


-


-

Gain (loss) from deregistration of subsidiaries

416


2,858


-


(53)


(362)


-

Gain from fair value change of contingent consideration payable

792


5,444


-


792


5,444


-

Gain on sale of investment available for sale

154


1,056


8,768


43


297


4,048

Total other income

4,808


33,055


53,234


3,351


23,038


5,635

INCOME BEFORE INCOME TAX AND NON-CONTROLLING INTEREST

7,046


48,438


55,539


4,743


32,623


21,807

Income tax expense

(509)


(3,498)


(9,614)


(227)


(1,559)


(615)













NET INCOME

6,537


44,940


45,925


4,516


31,064


21,192

Less: Net loss attributable to non-controlling interest

(7)


(50)


(538)


(13)


(89)


(338)













NET INCOME ATTRIBUTABLE TO ORDINARY SHAREHOLDERS

6,544


44,990


46,463


4,529


31,153


21,530













NET INCOME

6,537


44,940


45,925


4,516


31,064


21,192













OTHER COMPREHENSIVE INCOME, NET OF TAX












Foreign currency translation adjustments

190


1,304


3,876


8


52


2,895

Unrealized gains on short term investments












  Unrealized holding gains arising during period

113


776


2,901


48


330


1,395

  Less: reclassification adjustment for gains included in net income

95


651


5,606


33


224


2,916

Other comprehensive income

208


1,429


1,171


23


158


1,374













TOTAL COMPREHENSIVE INCOME

6,745


46,369


47,096


4,539


31,222


22,566













Net income per share – basic

0.16


1.09


1.20


0.10


0.72


0.55













Net income per share - diluted

0.16


1.08


1.18


0.10


0.71


0.55













Weighted average shares used in calculating basic net income per share

41,342,597


41,342,597


38,826,800


43,255,473


43,255,473


38,895,416













Weighted average shares used in calculating diluted net income per share

41,671,763


41,671,763


39,303,760


43,589,336


43,589,336


39,282,462

 

 

Discussion of Segment Operations



For the year ended December 31,


For the three months ended December 31,


2018


2018


2017


2018


2018


2017


US$


RMB


RMB


US$


RMB


RMB


(All amounts in thousands)

NET REVENUES












Better Schools

47,213


324,610


287,804


16,234


111,618


91,058

Better Jobs

29,165


200,524


144,950


8,303


57,087


50,627

Others

927


6,374


11,170


49


340


2,514

Total net revenues

77,305


531,508


443,924


24,586


169,045


144,199

COST OF REVENUES












Better Schools

(30,022)


(206,415)


(178,935)


(10,911)


(75,018)


(54,243)

Better Jobs

(18,257)


(125,524)


(70,465)


(5,226)


(35,930)


(25,496)

Others

(902)


(6,204)


(6,995)


(148)


(1,016)


(936)

Total cost of revenues

(49,181)


(338,143)


(256,395)


(16,285)


(111,964)


(80,675)

GROSS PROFIT












Better Schools

17,191


118,195


108,869


5,323


36,600


36,815

Better Jobs

10,908


75,000


74,485


3,077


21,157


25,131

Others

25


170


4,175


(99)


(676)


1,578

Total gross profit

28,124


193,365


187,529


8,301


57,081


63,524

 

Cision

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