Ambow Education Announces Record Fourth Quarter and Full-Year 2011 Unaudited Financial Results

BEIJING, March 5, 2012 /PRNewswire-Asia/ -- Ambow Education Holding Ltd. ("Ambow" or the "Company") (NYSE: AMBO), a leading national provider of educational and career enhancement services in China, today reported its unaudited financial results for the fourth quarter and full-year of 2011.

Financial Highlights for the Fourth Quarter Ended December 31, 2011:

• Total net revenue from continuing operations increased 58.5% to $89.2 million(2) from $56.2 million for the same period in 2010 and organic growth increased 42.6 % year-over-year.
  • The growth assets from continuing operations, which consists of Tutoring and Career Enhancement, achieved 77.7 % year-over-year revenue growth, of which organic growth was 54.9%.
  • Tutoring revenue from continuing operations increased 47.6% to $35.7 million from $24.2 million for the same period in 2010, of which organic growth was 35.0%.
  • Career Enhancement revenue from continuing operations increased 126.7% to $33.8 million from $14.9 million for the same period in 2010, of which organic growth was 87.2%.
• Non-GAAP operating income(3) from continuing operations increased 41.2% to $21.6 million from $15.3 million for the same period in 2010.
• Non-GAAP net income from continuing operations increased over 54.6% to $18.4 million from $11.9 million for the same period in 2010.
• Diluted non-GAAP net income from continuing operations per adjusted ADS attributable to Ambow(4) increased to $0.25 as compared to $0.16 for the same period in 2010.
• Total student enrollments(5) from continuing operations increased 40% to 341,000 from 243,000 for the same period in 2010.
  • The student enrollments from continuing operations for growth assets increased 46.5% to 312,000 from 213,000 for the same period in 2010.

Financial Highlights for the Full-Year 2011:

• Total net revenue from continuing operations increased 44.4% to $279.3 million from $193.4 million in 2010 with 39.3% increase year-over-year from organic growth.
  • The growth assets from continuing operations, which consists of Tutoring and Career Enhancement, achieved 58.3% year-over-year revenue growth, of which organic growth was 38.7%.
  • Tutoring revenue from continuing operations increased 35.2% to $127.9 million from $94.6 million in 2010, of which organic growth was 27.3%
  • Career Enhancement revenue from continuing operations increased 109.0% to $90.1 million from $43.1 million for the same period in 2010, of which organic growth was 63.6%.
• Non-GAAP operating income from continuing operations increased 52.1% to $58.1 million from $38.2 million in 2010.
• Non-GAAP net income from continuing operations increased 49.0% to $46.2 million from $31.0 million in 2010.
• Diluted non-GAAP net income from continuing operations per adjusted ADS attributable to Ambow increased to $0.61 as compared to $0.44 in 2010.
• The student enrolments from continuing operations in the growth assets increased 27.3% to 1,034,000 from 812,000 in 2010.

Ambow's President and Chief Executive Officer Dr. Jin Huang added additional color to the fourth quarter results by providing the following statement:

This was a remarkable and the most profitable quarter in our history. Our growth assets, consisting of Tutoring and Career Enhancement, set records in enrollment and revenue. Our total enrollment for growth assets surpassed one million in 2011. Looking at our Tutoring line of business, we opened 10 new tutoring centers in the fourth quarter of 2011 alone, which pushes our total national coverage to 138 centers in 17 provinces. The results of the new centers have exceeded our expectations. The tutoring enrollment from continuing operations organically grew by 20% year-over-year.

Turning to Career Enhancement, we continue to experience explosive growth and demand in this segment. The enrollment increased over 300% year-over-year in the fourth quarter of 2011, led by our Career Competence Enhancement Program (CCEP)(6), which is designed to teach students soft skills. This soft-skill based college credit course has attracted around 57,000 students since its launch in March 2011. Not factoring in CCEP, revenue from the rest of Career Enhancement organically grew 70% year-over-year in the fourth quarter of 2011. After the impressive growth in 2011, our results for Q4 show that revenues between Career Enhancement and Tutoring were almost evenly split. As both of our growth engines meet and exceed our expectations, we see 2012 ripe for continued organic growth and our leadership position be firmly reinforced in the Chinese education industry.

"To implement our current growth strategy, we reviewed our business portfolios, and subsequently, divested non-strategic assets at the end of 2011," added Ms. Jenny Zhan, Ambow's Chief Strategy Officer. "This strategic move reflects our commitment to business lines with stronger growth potential, greater capital efficiency, and better asset turnover." She continued, "We expect to see substantial improvement of our Return on Equity in 2012."

"It is also worth noting that Campus Holdings, in which both Dr. Jin Huang and Baring Asia have a shared economic interest through October 2015," added Ms. Zhan. "spent approximately $50 million to acquire 5.972 million shares of ADS or its equivalent of common shares, both publicly and privately, from November 2011 through January 2012. "She concluded, "This purchase demonstrates the confidence and commitment of our management team, and moreover, the endorsement of our business model from a private equity leader in China's education sector."

Shedding more light on the financial picture, the Chief Financial Officer of Ambow Education, Mr. Gareth Kung added, "Turning to operations, I am very pleased to announce that even though we are in the investment phase of our Tutoring and Career Enhancement businesses, we achieved outstanding growth in both top and bottom lines." He continued, "Our non-GAAP operating income from continuing operations grew over 41% year-over-year while 2011 adjusted EBIDTA margin(7) was around 27% which is one of the highest in the industry." Furthermore, "These results show that our resolve to improve the efficiency and scalability of our business remains strong." Mr. Kung concluded by stating, "Though we are still in the early stages of our expansion, it is our goal to maintain sustainable growth in both top and bottom lines."

Financial Results for the Fourth Quarter of 2011:

Net Revenues

Total net revenues from continuing operations for the fourth quarter of 2011 increased 58.5% to $89.2 million from $56.2 million for the same period in 2010.

Better Schools

Tutoring revenue from continuing operations increased 47.6% to $35.7 million from $24.2 million for the same period in 2010. The revenue growth in Tutoring was due to a 22.1% increase in enrollments and a 20.9% increase in Average Selling Price ("ASP"). In the fourth quarter of 2011, the Company divested three tutoring subdivisions, which generated revenue of $1.2 million for the quarter. This result is reflected in the discontinued operations.

K-12 Schools revenue increased 13.6% to $13.9 million from $12.2 million for the same period in 2010. During the quarter, enrollments decreased 7.8% while ASP increased 23.2%. The drop in enrollments resulted from returning the operating rights for the Zhenjiang Foreign Language School's Junior High to the original owner in the third quarter of 2011.

Total student enrollments in Better Schools from continuing operations for the fourth quarter of 2011 were approximately 260,000 of which 239,000 were in Tutoring and 21,000 were in K-12 Schools.

Better Jobs

Career Enhancement revenue from continuing operations increased 126.7% to $33.8 million in the fourth quarter of 2011, compared to $14.9 million for the same period in 2010. The Company noted that the revenue growth in Career Enhancement was the result of an impressive 315.8% increase in enrollment and a 45.5% decrease in ASP. Career Enhancement enrollments significantly increased primarily due to the success of the CCEP. Excluding the 37,000 enrollments in CCEP, Career Enhancement enrollments from continuing operations increased 105.3% while ASP increased 2.2%.

Colleges revenue from continuing operations increased 18.4% to $5.8 million from $4.9 million for the same period in 2010. The Company divested Beijing Century College, which had enrollments of about 5,400, and generated revenue of $6.9 million in the fourth quarter of 2011. This result is reflected in the discontinued operations.

Total student enrollments in Better Jobs from continuing operations for the fourth quarter of 2011 were about 81,000 with approximately 74,000 in Career Enhancement and over 6,800 in Colleges.

Gross Profit and Gross Margin

Overall gross profit increased 59.0% to $56.1 million for the fourth quarter of 2011, compared to $35.3 million for the same period in 2010. Gross margin was 62.9% for the fourth quarter of 2011, compared to 62.8% for the same period in 2010.

Operating Expenses and Non-GAAP Operating Income from Continuing Operations

Operating expenses, which include selling and marketing, general and administrative, and research and development expenses, were $36.0 million for the fourth quarter of 2011, a 66.5% year-over-year increase from $21.6 million for the same period in 2010. Operating expenses as a percentage of total net revenues were 40.4% for the fourth quarter of 2011, compared to 38.4% for the same period in 2010. Selling and marketing expenses as a percentage of total net revenue increased to 20.0% for the fourth quarter of 2011, compared to 16.6% for the same period in 2010 due to the Company's continued promotion of its Tutoring brand. General and administrative expenses as a percentage of total net revenue decreased to 18.9% in the fourth quarter of 2011 from 19.2% for the same period in 2010 as the Company continued to improve its operating efficiency.

Non-GAAP operating income from continuing operations increased to $21.6 million from $15.3 million for the same period in 2010, representing a 41.2% year-over-year increase.

Income Tax Expenses from Continuing Operations

Income tax expenses from continuing operations were $3.8 million for the fourth quarter of 2011, compared to income tax expenses of $3.0 million for the same period in 2010.

Net Income and Adjusted EPS from Continuing Operations

Net income from continuing operations was $13.0 million for the fourth quarter of 2011, a 26.2% increase from $10.3 million for the same period in 2010.

Non-GAAP net income from continuing operations was $18.4 million for the fourth quarter of 2011, representing a 54.6% increase from $11.9 million for the same period in 2010.

Basic and diluted non-GAAP net income from continuing operations per adjusted ADS(8) attributable to Ambow was $0.26 and $0.25, respectively, compared to $0.17 and $0.16, respectively, for the same period in 2010.

Loss from Discontinued Operations

Loss from discontinued operations arose from the divestment of Beijing Century College and four Tutoring and Career Enhancement subdivisions (Xian Tutoring, Shandong Software Companies, Guangzhou HP Tutoring and Tianjin Holding) in the fourth quarter of 2011 in order to sharpen the Company's focus on its growth assets. Net loss from discontinued operations was $19.6 million for the fourth quarter of 2011, compared to a net income of $4.1 million in the same period 2010. The discontinued operations generated $8.3 million in revenue in the fourth quarter of 2011.

Balance Sheet

Cash and cash equivalents, restricted cash and term deposits as of December 31, 2011 were $69.5 million, compared to $95.1 million as of September 30, 2011. Following the divestment of Beijing Century College, 21^st Century School and four Tutoring and Career Enhancement subdivisions during the fourth quarter, cash balances of $35.3 million held by these entities were no longer included on the balance sheet as of December 31, 2011, which is the primary reason for this noted decrease in cash and cash equivalents, restricted cash and term deposits.

Other non-current assets increased to $53.2 million as of December 31, 2011 from $27.2 million as of September 30, 2011. This increase primarily reflects a prepayment made for a long-term lease on a property, which will be used for the development of a career enhancement campus in Beijing.

Deferred revenue balance as of December 31, 2011 and 2010 was $69.7 million and $70.9 million, respectively. Deferred revenue balance from the Company's growth assets was $52.1 million as of December 31. 2011 which represents a 52.8% increase relative to the balance as of December 31, 2010. With the divestment of Beijing Century College, 21^st Century School and four Tutoring and Career Enhancement subdivisions, deferred revenue associated with these entities was excluded from the balance sheet as of December 31, 2011, while $11.6 million of deferred revenue associated with these entities was included in the comparative figure as of December 31, 2010.

Non-current portion of consideration payable for acquisition and other liabilities was $18.3 million as of December 31, 2011 compared to a balance of $48.1 million as of September 30, 2011. The decline in the outstanding balance was because part of the consideration payable has been waived following the divestment of Beijing Century College and 21st Century School in the fourth quarter of 2011.

Financial Results for the Full-Year 2011:

Net Revenues

Total net revenues from continuing operations for the year ended December 31, 2011 increased 44.4% to $279.3 million from $193.4 million in 2010.

Better Schools

Tutoring revenue from continuing operations increased 35.2% to $127.9 million from $94.6 million in 2010. The Company noted that the revenue growth in Tutoring was a result of a 16.1% increase in enrollments and a 13.2% increase in ASP. The Company has divested three tutoring subdivisions, which generated revenue of $4.1 million in 2011. This result is reflected in the discontinued operations.

K-12 Schools revenue increased 7.3% to $42.9 million from $40.0 million for the same period in 2010.

Better Jobs

Career Enhancement revenue from continuing operations was $90.1 million for the year ended December 31, 2011, compared to $43.1 million in 2010. The Company noted that Career Enhancement achieved record revenue growth of 109.0% increase year-over-year. Enrollments increased 192.4% while ASP decreased 27.9%. Excluding the 57,000 enrollments for CCEP in 2011, Career Enhancement enrollments from continuing operations increased 82.5% and ASP increased 8.9%.

Colleges revenue from continuing operations increased 17.2% year-over-year to $18.4 million for the year ended December 31, 2011, compared to $15.7 million in 2010. The Company divested Beijing Century College in the fourth quarter of 2011. This college had enrollments of around 5,400 and generated revenue of $20.4 million in 2011. This result is reflected in discontinued operations.

Gross Profit and Gross Margin

Overall gross profit increased 49.3% to $167.7 million for the year ended December 31, 2011, compared to $112.4 million in 2010. Gross margin was 60.0% for the year ended December 31, 2011, compared to 58.1% in 2010. The Company's gross margin on Colleges from continuing operations improved to 69.1% in 2011 from 57.2% in 2010 due to recognition of certain service fee income

Operating Expenses and Non-GAAP operating Income from continuing operations

Operating expenses, which include selling and marketing, general and administrative, and research, and development expenses, were $115.0 million for the year ended December 31, 2011, a 44.5% increase from $79.6 million in 2010. Operating expenses as a percentage of total net revenues were 41.2% for the year ended December 31, 2011, compared to 41.1% in 2010. General and administrative expenses as a percentage of total net revenue decreased from 19.5% in 2010 to 18.9% in 2011 as the Company continued to improve operating efficiency.

Non-GAAP operating income from continuing operations increased 52.1% to $58.1 million in 2011 from $38.2 million in 2010.

Income Tax Expenses from continuing operation

Income tax expenses from continuing operation were $8.3 million for the year ended December 31, 2011, compared to income tax expenses of $6.0 million for in 2010.

Net Income and Adjusted EPS from continuing operations

Net income from continuing operations was $36.9 million for the year ended December 31, 2011, a 44.2% increase year-over-year from $25.6 million in 2010.

Non-GAAP net income from continuing operations was $46.2 million for the year ended December 31, 2011, a 49.0% increase year-over-year from $31.0 million in 2010.

Basic and diluted non-GAAP net income from continuing operations per adjusted ADS attributable to Ambow was $0.65 and $0.61, respectively, compared to $0.47 and $0.44, respectively, in 2010.

Loss from discontinued operations

Net loss from discontinued operations was $19.0 million for the full year of 2011, arising from the divestment of Beijing Century College and four Tutoring and Career Enhancement subdivisions in the fourth quarter of 2011 in order to sharpen the focus on its growth assets. The discontinued operations generated revenue of $25.4 million in full year 2011.

Financial Outlook for the First Quarter 2012

The Company expects total net revenues in the first quarter of 2012 to be in the range of $62.8 million (Rmb395 million) to $64.3 million (Rmb405 million).

This is the Company's current view and it is subject to change.

Conference Call Information

Ambow's management will host an earnings conference call at 8:00 p.m. U.S. Eastern Time on March 4, 2012 (9:00 a.m. Beijing/Hong Kong Time on March 5, 2012).

The dial-in number and passcode for the conference call are as follows:

U.S. Toll Free: +1-866-549-1292
China Toll Free: +400-681-6949
International: +852-3005-2050

The passcode for the call is "657079 #".

Additionally, a live and archived webcast of this call will be available on the Investor Relations section of Ambow's website at: http://investors.ir.ambow.com/us/AMBO/irwebsite/

About Ambow Education Holding Ltd.

Ambow Education Holding Ltd. (NYSE: AMBO) is a leading national provider of educational and career enhancement services in China, offering high-quality, individualized services and products. Ambow has two business divisions: "Better Schools," which includes K-12 schools and tutoring centers; and "Better Jobs," which includes colleges and career enhancement centers. 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.

Forward Looking Statements

Certain statements in this press release, including statements regarding the outlook for the first quarter of 2012 and quotations from management concerning Ambow's strategic and operational plans and expectations are forward-looking statements within the meaning of the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. Ambow uses words such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates", "target" and similar expressions to identify forward-looking statements, although not all forward-looking statements contain these words. These forward-looking statements are based on management's current expectations and involve risks and uncertainties. The following important factors, without limitation, could cause actual results to differ materially from those contained in these forward-looking statements: Ambow's ability to manage its business expansion and operations effectively, to make strategic acquisitions and investments and to successfully integrate acquired businesses; significant competition; Ambow's ability to continue to attract students to enroll in its programs, to continually enhance its programs, services and products, to successfully develop and introduce new services and products in time and to adequately and promptly respond to changes in curriculum, testing materials and standards; economic conditions; and changes in government policies, laws and regulations. More information on factors that could affect Ambow's results is included from time to time in Ambow's Securities and Exchange Commission filings and reports, including the risks described under the heading "Risk Factors" in Ambow's final prospectus relating to its initial public offering filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended, on August 5, 2010 as well as risk factors identified in Ambow's latest annual report on Form 20-F and Current Reports on Form 6-K. Other unknown or unpredictable factors also could have material adverse effects on Ambow's future results. In light of these risks, uncertainties and factors, you are cautioned not to place undue reliance on forward-looking statements. Ambow disclaims any obligation to update information contained in forward-looking statements, whether as a result of new information, future events or otherwise.

Statement Regarding Unaudited Financial Information

The Company has prepared the unaudited consolidated financial information on the same basis as its audited consolidated financial statements. The unaudited consolidated financial information includes all adjustments, consisting only of normal recurring adjustments, which the Company considers necessary for a fair presentation of its financial position and results of operations for the quarters presented. Quarterly and year-to-date results may not be indicative of the Company's results of operations for future quarterly periods.

About Non-GAAP Financial Measures

To supplement Ambow's unaudited consolidated financial results presented in accordance with GAAP, Ambow uses the following measures defined as non-GAAP financial measures by the SEC: (i) Non-GAAP operating income from continuing operations, (ii) Net income from continuing operations excluding disposal loss from continuing operations (iii) Non-GAAP net income from continuing operations excluding disposal loss from continuing operations, (iv) Non-GAAP net income from continuing operations, (v) EBITDA from continuing operations excluding disposal loss from continuing operations, (vi) Adjusted EBITDA from continuing operations excluding disposal loss from continuing operations, (vii) Non-GAAP net income from continuing operations per ADS basic and diluted, (viii) Organic growth. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned "Reconciliations of non-GAAP measures to the most comparable GAAP measures" set forth at the end of this release.

Ambow believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity that may not be indicative of its operating performance from a cash perspective. Ambow believes that both management and investors benefit from referring to these non-GAAP financial measures in assessing its performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management's internal comparisons to Ambow's historical performance and liquidity. Ambow computes its non-GAAP financial measures using the same consistent method from quarter to quarter. These non-GAAP measures do not have any standardized meaning prescribed by GAAP and are therefore unlikely to be comparable to similar measures presented by other issuers. These measures should be considered as supplemental in nature and not as a substitute for the related financial information prepared in accordance with GAAP. Ambow believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision making. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations with GAAP financial measures that are most directly comparable to non-GAAP financial measures.

For investor and media inquiries please contact:

Ms. Mandy Li
Investor Relations Manager
Ambow Education Holding Ltd.
Tel: +86-10-6206-8130
Email: ir@ambow.com