Ambow Education Announces Second Half and Full Year 2021 Financial Results

BEIJING, May 3, 2022 /PRNewswire/ -- Ambow Education Holding Ltd. ("Ambow" or the "Company") (NYSE American: AMBO), a leading cross-border career educational and technology service provider, today announced its financial and operating results for the third and fourth quarters of 2021, which have not been audited or reviewed by the Company's independent registered accounting firm, as well as its audited financial and operating results for the full fiscal year, ended December 31, 2021.

"We remained focused on strengthening our core competencies during the second half of 2021: creating and providing high-quality, technology-driven educational and career enhancement products and services," noted Dr. Jin Huang, Ambow's President and Chief Executive Officer. "Amid the fast-evolving environment, we skillfully adapted our business to new PRC regulatory requirements and achieved total revenues of RMB 496.9 million (US$ 78.0 million) in the full year 2021."

"I firmly believe that our long-standing ability to innovate and advance technology will continue to drive our sustainable growth. Our valuable patent portfolio encompassing a wide spectrum of educational technologies is unparalleled in the industry. Notably, our cutting-edge multimedia blackboard technology received a new U.S. patent in September 2021, underscoring our industry-leading technology capabilities. As both a pioneer and veteran in the career educational services sector, we also remain dedicated to the development of Industry-University collaborative and coordinated education. In October 2021, the Ministry of Education ("MoE") again added Ambow to its list of approved enterprises for the Industry-University Cooperation and Collaborative Education Project. Furthermore, in December 2021, MoE selected Ambow to its first group of companies for participation in its Education Program for Connecting Talent Supply and Demand to Promote Employment, affirming the exceptional quality of our collaborative projects," Dr. Huang added.

"Looking ahead, we will continue to deepen our commitment to addressing the career education sector's critical demands and harnessing our core capabilities to meet those needs with innovative services and products. Building on our 20-year proven track record, resilient business model and strategic efforts, we believe we are well positioned to deliver sustainable, long-term growth to our shareholders," concluded Dr. Huang.

Third Quarter 2021 Financial Highlights

• Net revenues in the third quarter of 2021 were RMB 76.2 million (US$ 11.8 million), compared with RMB 112.7 million (US$ 16.6 million) in the same period of 2020. The decrease was primarily due to the impact of the 2021 Implementing Rules for the Law for Promoting Private Education (the "2021 Implementing Rules") on the Company's compulsory education business ("K-9 business") from September 1, 2021, as well as a high base effect resulting from the one-month extension of the spring semester at the Company's K-12 schools in the third quarter of 2020 and fewer services provided at the Company's tutoring centers and training offices during the third quarter of 2021.
• Gross profit in the third quarter of 2021 was RMB 2.8 million (US$ 0.4 million), compared with RMB 6.5 million (US$ 1.0 million) in the same period of 2020. Gross profit margin was 3.7%, compared with 5.8% in the third quarter of 2020. The decreases in gross profit and gross margin were mainly attributable to the impact of the 2021 Implementing Rules on the Company's K-12 schools business.
• Operating expenses in the third quarter of 2021 decreased by 29.9% to RMB 66.7 million (US$ 10.4 million) from RMB 95.1 million (US$ 14.0 million) in the same period of 2020. The decrease was primarily attributable to reduced impairment loss on long-lived assets and stringent expense controls to improve operating efficiency.
• Operating loss in the third quarter of 2021 was RMB 63.9 million (US$ 9.9 million), compared with RMB 88.6 million (US$ 13.1 million) in the same period of 2020.
• Net income attributable to ordinary shareholders was RMB 31.9 million (US$ 4.9 million), or RMB 0.68 (US$ 0.11) per basic and diluted share, compared with a net loss of RMB 84.5 million (US$ 12.5 million), or RMB 1.94 (US$ 0.29) per basic and diluted share, in the same period of 2020. The income was mainly attributable to the gain on disposal of the Company's subsidiaries of RMB 10.8 million (US$ 1.7 million), the gain on the forgiven PPP loan of RMB 9.3 million (US$ 1.4 million), as well as a reversal of income tax payable of RMB 62.8 million (US$ 9.7 million) due to the expiration of its five-year claw-back period during the third quarter of 2021.

Fourth Quarter 2021 Financial Highlights

• Net revenues in the fourth quarter of 2021 were RMB 118.9 million (US$ 18.7 million), compared with RMB 173.5 million (US$ 26.6 million) in the same period of 2020. The decrease was primarily due to the 2021 Implementing Rules to the Company's K-12 schools business from September 2021 being brought into effect, as well as the regulatory changes to our tutoring business in the second half of 2021.
• Gross profit in the fourth quarter of 2021 was RMB 33.9 million (US$ 5.3 million), compared with RMB 66.1 million (US$ 10.1 million) in the same period of 2020. Gross profit margin was 28.5%, compared with 38.1% in the third quarter of 2020. The decreases in gross profit and gross margin were mainly attributable to the decrease in net revenues.
• Operating expenses in the fourth quarter of 2021 increased by 8.9% to RMB 68.4 million (US$ 10.7 million) from RMB 62.8 million (US$ 9.6 million) in the same period of 2020. The increase was primarily due to additional research and development expenditures.
• Operating loss in the fourth quarter of 2021 was RMB 34.4 million (US$ 5.4 million), compared with an operating income of RMB 3.3 million (US$ 0.5 million) in the same period of 2020.
• Net loss attributable to ordinary shareholders was RMB 37.0 million (US$ 5.8 million), or RMB 0.79 (US$ 0.12) per basic and diluted share, compared with a net income of RMB 11.0 million (US$ 1.7 million), or RMB 0.23 (US$ 0.04) per basic and diluted share, in the same period of 2020. The net loss was mainly caused by the decrease in the gross profit stemming from the impact of the 2021 Implementing Rules on the Company's K-12 schools business.
• As of December 31, 2021, Ambow maintained strong cash resources of RMB 177.0 million (US$ 27.8 million), comprised of cash and cash equivalents of RMB 157.4 million (US$ 24.7 million), short-term investments of RMB 17.8 million (US$ 2.8 million) and restricted cash of RMB 1.8 million (US$ 0.3 million).

Full Fiscal Year 2021 Financial Highlights

• Net revenues in fiscal year 2021 decreased by 6.6% to RMB 496.9 million (US$ 78.0 million) from RMB 532.0 million (US$ 81.5 million) in 2020. The decrease was primarily due to the 2021 Implementing Rules to the Company's K-12 schools business coming into effect, as well as the regulatory changes to our tutoring business in the second half of 2021.
• Gross profit in fiscal year 2021 increased by 8.9% to RMB 157.3 million (US$ 24.7 million) from RMB 144.5 million (US$ 22.1 million) in 2020. Gross profit margin was 31.7%, compared with 27.2% in 2020. The increases in gross profit and gross margin were mainly attributable to stringent cost controls during 2021.
• Operating expenses in fiscal year 2021 decreased by 6.9% to RMB 250.5 million (US$ 39.3 million) from RMB 269.0 million (US$ 41.2 million) in 2020. The decrease was primarily attributable to reduced impairment loss on long-lived assets during 2021.
• Operating loss in fiscal year 2021 was RMB 93.2 million (US$ 14.6 million), compared with RMB 124.6 million (US$ 19.1 million) in 2020.
• Net income attributable to ordinary shareholders was RMB 3.0 million (US$ 0.5 million), or RMB 0.06 (US$ 0.01) per basic and diluted share, compared with a net loss of RMB 62.7 million (US$ 9.6 million), or RMB 1.41 (US$ 0.22) per basic and diluted share, in 2020. The income was mainly attributable to the gain on the disposal of the Company's subsidiaries of RMB 12.2 million (US$ 1.9 million), the gain on the forgiven PPP loan of RMB 9.3 million (US$ 1.5 million), as well as a reversal of income tax payable of RMB 62.8 million (US$ 9.7 million) due to the expiration of its five-year claw-back period during 2021.

Impact of 2021 Implementing Rules for the Law for Promoting Private Education

On May 14, 2021, the People's Republic of China's State Council promulgated the 2021 Implementing Rules for the Law for Promoting Private Education (the "2021 Implementing Rules"), which became effective on September 1, 2021. The Implementing Rules prohibit foreign-invested enterprises established in China and social organizations whose actual controllers are foreign parties from controlling private schools that provide compulsory education by means of mergers, acquisitions, contractual arrangements, etc., and private schools providing compulsory education are prohibited from conducting transactions with their related parties.

To comply with the 2021 Implementing Rules, the Company planned to sell its business providing compulsory education services at its three K-12 schools to a third party on September 1, 2021. The Company has found a third party buyer and signed a definitive sales agreement, which is currently under registration process and expected to be completed within one year from December 31, 2021. As the transaction was not closed as of December 31, 2021, and such business did not meet the definition of a "component" under US GAAP to be presented as a discontinued operation, the Company recorded the assets and liabilities of the K-9 business as "Held for Sale" in accordance with ASC 360. The assets and liabilities of the K-9 business classified as held for sale were presented separately in the asset and liability sections, respectively, of the Consolidated Balance Sheet as of December  31, 2021.

The Company's financial and operating results for the third quarter and fourth quarters of 2021, as well as the full fiscal year ended December 31, 2021 can also be found on its Form 6-K and 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 third quarter and first nine months of 2021 are based on the effective exchange rate of 6.4434 as of September 30, 2021; all amounts translated from RMB to U.S. dollars for the third quarter and first nine months of 2020 are based on the effective exchange rate of 6.7896 as of September 30, 2020; all amounts translated from RMB to U.S. dollars for the fourth quarter and fiscal year of 2021 are based on the effective exchange rate of 6.3726 as of December 30, 2021; all amounts translated from RMB to U.S. dollars for the fourth quarter and fiscal year of 2020 are based on the effective exchange rate of 6.5250 as of December 31, 2020. 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. Fluctuations in financial highlights are based on RMB amounts.

About Ambow Education Holding Ltd.

Ambow Education Holding Ltd. is a leading cross-border career educational and technology service provider, 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 China and the United States of America.

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, the general economic and business conditions in the regions where the Company provides its solutions and services, and continued compliance with governmental regulations regarding education industry in the People's Republic of China and any other jurisdiction in which the Company conducts its operations. 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.

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Ambow Education Holding Ltd.
Tel: +86-10-6206-8000

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