omniture

TAL Education Group Announces Unaudited Financial Results for the First Fiscal Quarter Ended May 31, 2019

- Net Revenues up by 27.6% Year-Over-Year
- Non-GAAP Income from Operations down by 7.3% Year-Over-Year
- Net Loss Attributable to TAL was US$7.3 million, compared to net income attributable to TAL of US$66.8 million in the same period of the prior year
-Total Student Enrollments of normal priced long-term course up by 40.6% Year-Over-Year
TAL Education Group
2019-07-25 16:00 9742

BEIJING, July 25, 2019 /PRNewswire/ -- TAL Education Group (NYSE: TAL) ("TAL" or the "Company"), a leading K-12 after-school tutoring services provider in China, today announced its unaudited financial results for the first quarter of fiscal year 2020 ended May 31, 2019.

Highlights for the First Quarter of Fiscal Year 2020

  • Net revenues increased by 27.6% year-over-year to US$702.8 million from US$550.6 million in the same period of the prior year.
  • Income from operations decreased by 23.6% year-over-year to US$57.3 million, from US$75.0 million in the same period of the prior year.
  • Non-GAAP income from operations, which excluded share-based compensation expenses, decreased by 7.3% year-over-year to US$83.4 million, from US$90.0 million in the same period of the prior year.
  • Net loss attributable to TAL was US$7.3 million, compared to net income attributable to TAL of US$66.8 million in the same period of the prior year.
  • Non-GAAP net income attributable to TAL, which excluded share-based compensation expenses, decreased by 77.0% to US$18.8 million from US$81.8 million in the same period of the prior year.
  • Basic and diluted net loss per American Depositary Share ("ADS") were both US$0.01. Non-GAAP basic and diluted net income per ADS, which excluded share-based compensation expenses, were both US$0.03. Three ADSs represent one Class A common share.
  • Cash, cash equivalents and short-term investments totaled US$1,912.2 million as of May 31, 2019, compared to US$1,515.6 million as of February 28, 2019.
  • Total Student Enrollments of normal priced long-term course increased by 40.6% year-over-year to approximately 1,718,190 from approximately 1,221,750 in the same period of the prior year.
  • Total physical network increased from 676 learning centers in 56 cities as of February 28, 2019 to 725 learning centers in 57 cities as of May 31, 2019.

 

Financial and Operating Data -- First Quarter of Fiscal Year 2020

(In US$ thousands, except per ADS data, student enrollments and percentages)



Three Months Ended


May 31,


2018

2019

Pct. Change

Net revenues

550,649

702,770

27.6%

Operating income

74,989

57,318

(23.6%)

Non-GAAP operating income

89,955

83,402

(7.3%)

Net income/(loss) attributable to TAL

66,800

(7,304)

(110.9%)

Non-GAAP net income attributable to
TAL

81,766

18,780

(77.0%)

Net income/(loss) per ADS
attributable to TAL – basic

0.12

(0.01)

(110.5%)

Net income/(loss) per ADS
attributable to TAL – diluted

0.11

(0.01)

(111.1%)

Non-GAAP net income per ADS
attributable to TAL – basic

0.14

0.03

(78.0%)

Non-GAAP net income per ADS
attributable to TAL – diluted

0.14

0.03

(77.7%)

Total Student Enrollments of normal
priced long-term course

1,221,750

1,718,190

40.6%

 

"The first quarter's topline results reflected the success of our consistent growth strategy. We recorded healthy growth of small class business in the cities we currently cover and further scaled our online courses," said Mr. Rong Luo, TAL's Chief Financial Officer.

"Looking ahead, our long-term development strategy remains unchanged. We will pursue solid, organic and sustainable expansion of our offline business. At the same time, we will continuously invest in new technology and other initiatives to accelerate our online business development and realize the promising potential of online education. These investments will also enable us to actively promote the integration of online and offline education, and contribute to the development of innovative, technology-focused education models," Mr. Luo added.

Financial Results for the First Quarter of Fiscal Year 2020

Net Revenues

In the first quarter of fiscal year 2020, TAL reported net revenues of US$702.8 million, representing a 27.6% increase from US$550.6 million in the first quarter of fiscal year 2019. The increase was mainly driven by an increase in total Student Enrollments of normal priced long-term course, which increased by 40.6% to approximately 1,718,190 from approximately 1,221,750 in the same period of the prior year. The increase in total Student Enrollments of normal priced long-term course was primarily driven by the growth of enrollments in the small class offerings and online courses.

Operating Costs and Expenses

In the first quarter of fiscal year 2020, operating costs and expenses were US$647.9 million, representing a 34.8% increase from US$480.7 million in the first quarter of fiscal year 2019. Non-GAAP operating costs and expenses, which excluded share-based compensation expenses, were US$621.8 million, a 33.5% increase from US$465.8 million in the first quarter of fiscal year 2019.

Cost of revenues increased by 21.4% to US$316.9 million from US$261.1 million in the first quarter of fiscal year 2019. The increase in cost of revenues was mainly due to an increase in teacher compensation and rental costs. Non-GAAP cost of revenues, which excluded share-based compensation expenses, increased by 21.4% to US$316.6 million, from US$260.9 million in the first quarter of fiscal year 2019.

Selling and marketing expenses increased by 64.4% to US$155.4 million from US$94.5 million in the first quarter of fiscal year 2019. Non-GAAP selling and marketing expenses, which excluded share-based compensation expenses, increased by 63.0% to US$151.4 million, from US$92.9 million in the first quarter of fiscal year 2019. The increase of selling and marketing expenses in the first quarter of fiscal year 2020 was primarily a result of more marketing promotion activities to expand our customer base and brand enhancement, as well as a rise in the compensation to sales and marketing staff to support a greater number of programs and service offerings compared to the same period in the prior year.

General and administrative expenses increased by 40.3% to US$175.6 million from US$125.2 million in the first quarter of fiscal year 2019. The increase in general and administrative expenses was mainly due to an increase of the number of our general and administrative personnel compared to the same period in the prior year and a rise in compensation to our general and administrative personnel. Non-GAAP general and administrative expenses, which excluded share-based compensation expenses, increased by 37.3% to US$153.8 million, from US$112.0 million in the first quarter of fiscal year 2019.

Total share-based compensation expenses allocated to the related operating costs and expenses increased by 74.3% to US$26.1 million in the first quarter of fiscal year 2020 from US$15.0 million in the same period of fiscal year 2019.

Gross Profit                                                                                                                                 

Gross profit increased by 33.3% to US$385.9 million from US$289.6 million in the first quarter of fiscal year 2019.

Income from Operations

Income from operations decreased by 23.6% to US$57.3 million from US$75.0 million in the first quarter of fiscal year 2019. Non-GAAP income from operations, which excluded share-based compensation expenses, decreased by 7.3% to US$83.4 million from US$90.0 million in the first quarter of fiscal year 2019.

Other Income/(Expense)

Other expense was US$31.3 million for the first quarter of fiscal year 2020, mainly related to loss from the fair value change of an equity security with readily determinable fair value.

Impairment Loss on Long-term Investments

Impairment loss on long-term investments was US$50.6 million for the first quarter of fiscal year 2020, compared to US$9.7 million for the first quarter of fiscal year 2019. Impairment loss on long-term investments was mainly due to other-than-temporary declines in the value of long-term investments in several investees.

Income Tax (Expense) /Benefit

Income tax benefit was US$2.8 million in the first quarter of fiscal year 2020, compared to US$17.3 million of income tax expense in the first quarter of fiscal year 2019.

Net Income/(Loss) Attributable to TAL Education Group

Net loss attributable to TAL was US$7.3 million, compared to net income attributable to TAL of US$66.8 million in the first quarter of fiscal year 2019. Non-GAAP net income attributable to TAL, which excluded share-based compensation expenses, decreased by 77.0% to US$18.8 million, from US$81.8 million in the first quarter of fiscal year 2019.

Basic and Diluted Net Income/(Loss) per ADS

Basic and diluted net loss per ADS were both US$0.01 in the first quarter of fiscal year 2020. Non-GAAP basic and diluted net income per ADS, which excluded share-based compensation expenses, were both US$0.03.

Capital Expenditures

Capital expenditures for the first quarter of fiscal year 2020 were US$41.4 million, an increase of US$12.7 million from US$28.7 million in the first quarter of fiscal year 2019.

Cash, Cash Equivalents, and Short-Term Investments

As of May 31, 2019, the Company had US$1,568.4 million of cash and cash equivalents and US$343.8 million of short-term investments, compared to US$1,247.1 million of cash and cash equivalents and US$268.4 million of short-term investments as of February 28, 2019.

Deferred Revenue

The Company's deferred revenue balance was US$968.4 million, compared to US$1,328.5 million as of May 31, 2018, representing a year-over-year decrease of 27.1% mainly due to the change of tuition fees collection schedule to meet certain regulatory requirement.

New Accounting Standard
The Company adopted the new lease accounting standard (ASC 842) on March 1, 2019, using the modified retrospective transition method resulting in the recording of operating lease right-of-use assets of US$1,073.0 million and operating lease liabilities of US$1,069.2 million on the balance sheet. Prior period amounts have not been adjusted and continue to be reported in accordance with the previous accounting guidance. The adoption of the new guidance did not have a material effect on the consolidated statements of operations.

Business Outlook

Based on our current estimates, total net revenues for the second quarter of fiscal year 2020 are expected to be between US$895.7 million and US$916.7 million, representing an increase of 28% to 31% on a year-over-year basis.

If not taking into consideration the impact of potential change in exchange rate between Renminbi and the U.S. Dollar, the projected revenue growth rate is expected to be in the range of 32% to 35% for the second quarter of fiscal year 2020.

These estimates reflect the Company's current expectation, which is subject to change.

Conference Call

The Company will host a conference call and live webcast to discuss its financial results for the first fiscal quarter of fiscal year 2020 ended May 31, 2019 at 8:00 a.m. Eastern Time on July 25, 2019 (8:00 p.m. Beijing time on July 25, 2019).

The dial-in details for the live conference call are as follows:

- U.S. toll free:

+1-866-519-4004

- Hong Kong toll free:

800-906-601

- International toll:

+65-6713-5090

Conference ID: 

1787553

A live and archived webcast of the conference call will be available on the Investor Relations section of TAL's website at https://ir.100tal.com/.

A telephone replay of the conference call will be available through 9:59 a.m. U.S. Eastern time, August 2, 2019 (9:59 p.m. Beijing time, August 2, 2019).

The dial-in details for the replay are as follows:

- U.S. toll free: 

+1-855-452-5696

- Hong Kong toll free: 

800-963-117

- International toll: 

+61-2-8199-0299

Conference ID:

1787553

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 for the second quarter of fiscal year 2020, quotations from management in this announcement, as well as TAL Education Group's strategic and operational plans, contain forward-looking statements. The Company may also make written or oral forward-looking statements in its reports filed with, 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. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. 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 statement, including but not limited to the following: the Company's ability to continue to attract students to enroll in its courses; the Company's ability to continue to recruit, train and retain qualified teachers; the Company's ability to improve the content of its existing course offerings and to develop new courses; the Company's ability to maintain and enhance its brand; the Company's ability to maintain and continue to improve its teaching results; and the Company's ability to compete effectively against its competitors. Further information regarding these and other risks is included in the Company's reports filed with, or furnished to the U.S. Securities and Exchange Commission. All information provided in this press release and in the attachments is as of the date of this press release, and TAL Education Group undertakes no duty to update such information or any forward-looking statement, except as required under applicable law.

About TAL Education Group

TAL Education Group is a leading K-12 after-school tutoring services provider in China. The acronym "TAL" stands for "Tomorrow Advancing Life", which reflects our vision to promote top learning opportunities for Chinese students through both high-quality teaching and content, as well as leading edge application of technology in the education experience. TAL Education Group offers comprehensive tutoring services to students from pre-school to the twelfth grade through three flexible class formats: small classes, personalized premium services, and online courses. Our tutoring services cover the core academic subjects in China's school curriculum as well as competence oriented programs. The Company's learning center network currently covers over 50 key cities in China.

We also operate www.jzb.com, a leading online education platform in China. Our ADSs trade on the New York Stock Exchange under the symbol "TAL".

About Non-GAAP Financial Measures

In evaluating its business, TAL considers and uses the following measures defined as non-GAAP financial measures by the SEC as supplemental metrics to review and assess its operating performance: non-GAAP operating costs and expenses, non-GAAP cost of revenues, non-GAAP selling and marketing expenses, non-GAAP general and administrative expenses, non-GAAP income from operations, non-GAAP net income attributable to TAL, non-GAAP basic and non-GAAP diluted net income per ADS. To present each of these non-GAAP measures, the Company excludes share-based compensation expenses. 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 table captioned "Reconciliations of non-GAAP measures to the most comparable GAAP measures" set forth at the end of this release.

TAL believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding share-based expenses that may not be indicative of its operating performance from a cash perspective. TAL believes that both management and investors benefit from 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 TAL's historical performance and liquidity. TAL computes its non-GAAP financial measures using the same consistent method from quarter to quarter and from period to period. TAL 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. A limitation of using non-GAAP measures is that these non-GAAP measures exclude share-based compensation charges that have been and will continue to be for the foreseeable future a significant recurring expense in the Company's business. 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 between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

For further information, please contact:

Echo Yan
Investor Relations
TAL Education Group
Tel: +86 10 5292 6658
Email: ir@100tal.com

Caroline Straathof
IR Inside
Tel: +31 6 5462 4301
Email: info@irinside.com

 

TAL EDUCATION GROUP

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars)



As of


As of


February 28,


May 31,


2019


2019

ASSETS








Current assets




  Cash and cash equivalents

$1,247,140


$ 1,568,429

  Restricted cash-current

9,227


3,097

  Short-term investments

268,424


343,767

  Inventory

7,750


10,880

  Amounts due from related parties-current

3,341


3,356

  Income tax receivables

7,204


16,816

  Prepaid expenses and other current assets

202,630


199,730

Total current assets

1,745,716


2,146,075

  Restricted cash-non-current

7,334


7,041

  Amounts due from related parties-non-current

1,747


1,724

  Property and equipment, net

287,877


297,493

  Deferred tax assets-non-current

29,179


34,737

  Rental deposits

56,135


60,459

  Intangible assets, net

74,776


69,657

  Land use right, net

-


13,281

  Goodwill

414,228


406,914

  Long-term investments

850,695


739,652

  Long-term prepayments and other non-current assets

267,404


251,329

  Operating lease right-of-use assets

-


1,073,048

Total assets

$ 3,735,091


$ 5,101,410





LIABILITIES AND EQUITY








Current liabilities




Accounts payable (including accounts payable of the
     consolidated VIEs without recourse to TAL Education
     Group of 98,436 and 71,131 as of February 28, 2019 and
     May 31, 2019, respectively) 

$ 106,493


$ 76,759

Deferred revenue-current (including deferred revenue-current
     of the consolidated VIEs without recourse to TAL
     Education Group of 401,027 and 898,203 as of February
     28, 2019 and May 31, 2019, respectively)

433,610


966,652

Amounts due to related parties-current (including amounts due
     to related parties-current of the consolidated VIEs without
     recourse to TAL Education Group of 18,504 and 18,259 as
     of February 28, 2019 and May 31, 2019, respectively)

24,375


24,315

Accrued expenses and other current liabilities (including
     accrued expenses and other current liabilities of the
     consolidated VIEs without recourse to TAL Education
     Group of 291,728 and 295,625 as of February 28, 2019 and
     May 31, 2019, respectively)

365,195


361,707

Income tax payable (including income tax payable of the
     consolidated VIEs without recourse to TAL Education
     Group of 36,670 and 25,472 as of February 28, 2019 and
     May 31, 2019, respectively)

38,743


5,924

Short-term debt and current portion of long-term debt
     (including short-term debt and current portion of long-term
     debt of the consolidated VIEs without recourse to TAL
     Education Group of nil and nil as of February 28, 2019 and
     May 31, 2019, respectively)

210,027


-

Bond payable, current portion (including bond payable, current
     portion of the consolidated VIEs without recourse to TAL
     Education Group of nil and nil as of February 28, 2019
    and May 31, 2019, respectively)

5,275


-

Operating lease liabilities, current portion (including 
     operating lease liabilities, current portion of the consolidated
     VIEs without recourse to TAL Education Group of nil and
     221,450 as of February 28, 2019 and May 31, 2019,
     respectively)

-


248,918

Total current liabilities

1,183,718


1,684,275

Deferred revenue-non-current (including deferred revenue-
     non-current of the consolidated VIEs without recourse to
     TAL Education Group of 2,497 and 1,729 as of February 28,
     2019 and May 31, 2019, respectively)

2,497


1,729

Amounts due to related parties-non-current (including amounts
     due to related parties-non-current of the consolidated VIEs
     without recourse to TAL Education Group of 106 and 70 as
     of February 28, 2019 and May 31, 2019, respectively)

196


115

Deferred tax liabilities-non-current (including deferred tax
     liabilities-non-current of the consolidated VIEs without
     recourse to TAL Education Group of 16,951 and 10,858 as
     of February 28, 2019 and May 31, 2019, respectively)

17,738


11,446

Other non-current liabilities (including other non-current
     liabilities of the consolidated VIEs without recourse to TAL
     Education Group of 465 and 451 as of February 28, 2019
     and May 31, 2019, respectively)

465


451

Operating lease liabilities, non-current portion (including
     operating lease liabilities, non-current portion of the
     consolidated VIEs without recourse to TAL Education
     Group of nil and 752,788 as of February 28, 2019 and May
     31, 2019, respectively)

-


820,242

Total liabilities

1,204,614


2,518,258





Equity




Class A common shares

127


129

Class B common shares

71


69

Class A common shares issuable

1,977


1,977

Additional paid-in capital

1,485,521


1,583,360

Statutory reserve

58,690


58,690

Retained earnings

920,314


913,010

Accumulated other comprehensive income/(loss)

17,047


(16,635)

Total TAL Education Group's equity

2,483,747


2,540,600

Noncontrolling interest

46,730


42,552

Total equity

2,530,477


2,583,152

Total liabilities and equity

$ 3,735,091


$ 5,101,410

 

 

TAL EDUCATION GROUP

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of U.S. dollars, except share, ADS, per share and per ADS data)



For the Three Months Ended

May 31,


2018


2019

Net revenues

$ 550,649


$ 702,770

Cost of revenues (note 1)

261,082


316,875

Gross profit

289,567


385,895

Operating expenses (note 1)




  Selling and marketing

94,507


155,399

  General and administrative

125,151


175,585

Total operating expenses

219,658


330,984

Government subsidies

5,080


2,407

Income from operations

74,989


57,318

Interest income

16,563


16,087

Interest expense

(3,865)


(3,124)

Other income/(expense)

8,686


(31,331)

Impairment loss on long-term investments

(9,713)


(50,594)

Income/(loss) before income tax and loss from equity
     method investments

86,660


(11,644)

Income tax (expense)/benefit

(17,332)


2,759

Loss from equity method investments

(3,057)


(1,331)

Net income/(loss)

66,271


(10,216)

Add: Net loss attributable to noncontrolling interest

529


2,912

Net income/(loss) attributable
  to TAL Education Group

$ 66,800


$ (7,304)

Net income/(loss) per common share




Basic

$ 0.35


$ (0.04)

Diluted

0.33


(0.04)

Net income/(loss) per ADS (note 2)




Basic

$ 0.12


$ (0.01)

Diluted

0.11


(0.01)

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




  Basic

189,017,417


197,160,090

  Diluted

200,427,699


197,160,090


Note 1: Share-based compensation expenses are included in the operating costs and expenses as follows:



For the Three Months


Ended May 31,


2018


2019

Cost of revenues

$ 163


$ 247

Selling and marketing expenses

1,626


4,040

General and administrative expenses

13,177


21,797

Total

$ 14,966


$ 26,084


Note 2: Three ADSs represent one Class A common Share.

 

 

TAL EDUCATION GROUP

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE INCOME/(LOSS)

(In thousands of U.S. dollars)



For the Three Months Ended
May 31,


2018


2019





Net income/(loss)

$ 66,271


$ (10,216)

Other comprehensive income/(loss), net of tax

86,709


(34,948)

Comprehensive income/(loss)

152,980


(45,164)

Add: Comprehensive loss attributable to
noncontrolling interest

742


4,178

Comprehensive income/(loss) attributable to
     TAL Education Group

$ 153,722


$ (40,986)

 

 

TAL EDUCATION GROUP

Reconciliation of Non-GAAP Measures to the Most Comparable GAAP Measures

(In thousands of U.S. dollars, except share, ADS, per share and per ADS data)



For the Three Months Ended

May 31,


2018


2019





Cost of revenues

$ 261,082


$ 316,875

Share-based compensation expense in cost of revenues

163


247

Non-GAAP cost of revenues

260,919


316,628





Selling and marketing expenses

94,507


155,399

Share-based compensation expense in selling and
     marketing expenses

1,626


4,040

Non-GAAP selling and marketing expenses

92,881


151,359

 

General and administrative expenses

125,151


175,585

Share-based compensation expense in general and
     administrative expenses

13,177


21,797

Non-GAAP general and administrative expenses

111,974


153,788





Operating costs and expenses

480,740


647,859

Share-based compensation expense in operating costs
     and expenses

14,966


26,084

Non-GAAP operating costs and expenses

465,774


621,775





Income from operations

74,989


57,318

Share-based compensation expenses

14,966


26,084

Non-GAAP income from operations

89,955


83,402





Net income/(loss) attributable to TAL Education
Group

66,800


(7,304)

Share-based compensation expenses

14,966


26,084

Non-GAAP net income attributable to TAL
Education Group

$ 81,766


$ 18,780

 

Net income/(loss) per ADS




Basic

$ 0.12


$ (0.01)

Diluted

0.11


(0.01)

Non-GAAP net income per ADS




Basic

$ 0.14


$ 0.03

Diluted

0.14


0.03





ADSs used in calculating net income/(loss) per ADS




Basic

567,052,251


591,480,270

Diluted

601,283,097


591,480,270

ADSs used in calculating Non-GAAP net income per
ADS




Basic

567,052,251


591,480,270

Diluted

601,283,097


619,768,119

 

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Source: TAL Education Group
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