Tarena Announces the Results for the Second Quarter of 2022 with revenues exceeding guidance and appoints New Chief Financial Officer

BEIJING, Aug. 16, 2022 /PRNewswire/ -- Tarena International, Inc. (NASDAQ: TEDU) ("Tarena" or the "Company"), a leading provider of adult professional education and childhood & adolescent quality education services in China, today announced its unaudited financial results for the second quarter ended June 30, 2022.

Highlights for the Second Quarter of 2022

• Net revenues increased by 11.4% year-over-year to RMB648.8 million (US$96.9 million), from RMB582.3 million in the same period of 2021, exceeding the high end of the company's guidance.
• Total student enrollments in childhood & adolescent quality education business in the second quarter of 2022 reached 176,500, an increase of 25.9%, compared to 140,200 in the same period of 2021.
• Total number of learning centers in childhood & adolescent quality education decreased to 227 as of June 30, 2022, from 235 as of June 30, 2021.
• Gross profit increased by 27.9% year-over-year to RMB376.5 million (US$56.2 million), from RMB294.4 million in the same period of 2021.
• Gross profit margin increased by 7.4% points year-over-year to 58.0%, from 50.6% in the same period of 2021.
• Operating income was RMB48.0 million (US$7.2 million), compared to loss of RMB90.7 million in the same period of 2021.
• Non-GAAP operating income, which excluded share-based compensation expenses, was RMB49.2 million (US$7.3 million), compared to non-GAAP operating loss of RMB86.6 million in the same period of 2021.
• Net income was RMB47.9 million (US$7.2 million), compared to net loss of RMB76.7 million in the same period of 2021.
• Non-GAAP net income, which excluded share-based compensation expenses, was RMB49.1 million (US$7.3 million), compared to non-GAAP net loss of RMB72.5 million in the same period of 2021.
• Basic income per American Depositary Share ("ADS"), each representing five Class A ordinary shares with effective date of December 23, 2021, was RMB4.36 (US$0.65), compared to loss per ADS of RMB6.97 in the second quarter of 2021. Diluted income per American Depositary Share ("ADS") was RMB4.29 (US$0.64), compared to loss per ADS of RMB6.97 in the second quarter of 2021.
• Cash, cash equivalents and time deposits, including current and non-current, and restricted cash totaled RMB425.6 million (US$63.5 million) as of June 30, 2022, compared to RMB430.4 million as of December 31, 2021.
• Net cash inflow from operating activities in the second quarter of 2022 was RMB19.4 million (US$2.9 million).

Highlights for the Six Months Ended June 30, 2022

• Net revenues increased by 14.0% year-over-year to RMB1,272.3 million (US$189.9 million), from RMB1,116.0 million in the same period in 2021.
• Total student enrollments in childhood & adolescent quality education business in the first half of 2022 reached 186,700, an increase of 26.3%, compared to the student enrollments of 147,800 in the same period of 2021.
• Gross profit increased by 35.1% year-over-year to RMB735.4 million (US$109.8 million), from RMB544.3 million in the same period in 2021.
• Gross profit margin increased by 9.0% points year-over-year to 57.8%, from 48.8% in the same period of 2021.
• Operating income was RMB76.6 million (US$11.4 million), compared to loss of RMB220.2 million in the same period in 2021.
• Non-GAAP operating income, which excluded share-based compensation expenses, was RMB79.1 million (US$11.8 million), compared to non-GAAP operating loss of RMB209.2 million in the same period in 2021.
• Net income was RMB75.0 million (US$11.2 million), compared to net loss of RMB198.5 million in the same period in 2021.
• Non-GAAP net income, which excluded share-based compensation expenses, was RMB77.5 million (US$11.6 million), compared to non-GAAP net loss of RMB187.5 million in the same period in 2021.
• Basic income per American Depositary Share ("ADS"), each representing five Class A ordinary shares with effective date of December 23, 2021, was RMB6.73 (US$1.00). Diluted income per American Depositary Share ("ADS") was RMB6.63 (US$0.99).

Key Financial Results

"In the second quarter of 2022, we maintained a healthy growth trajectory for our revenues despite a challenging COVID-19 pandemic environment and achieved growing profitability for consecutive quarters. Our net revenues increased by 11.4% year-over-year in the second quarter of 2022. Our net profit reached RMB47.9 million while operating profit was RMB48.0 million. Such financial performance resulted from the effective execution of our sound OMO-based long-term business strategy, namely, by building an integrated high-efficiency online and offline front-end customer acquisition and consultation services and integrated virtual plus brick-and-mortar course delivery services, we built a seamless value system for our students. Additionally, through optimization of management process and personnel, we controlled our costs and expenses effectively. The total costs and operating expenses decreased by 10.7% year-over-year in the second quarter." remarked Ms. Ying Sun, the Chief Executive Officer of Tarena.

"Looking ahead, we will continue to execute on our integrated growth strategy and improve operational efficiency, maintaining healthy business development and strive for sustainable profitability while coping with the COVID-19 pandemic environment." concluded Ms. Ying Sun.

Appointment of New Chief Financial Officer

The board of directors of Tarena has appointed Ms. Ping Wei as its chief financial officer, effective today.

Ms. Ping Wei has extensive experience in capital markets and the education industry. Prior to joining Tarena, Ms. Wei served as a partner and the chief financial officer of a private venture-backed company focusing on community group buying. Prior to that, Ms. Wei served as the chief financial officer of Gravitas Education Holdings, Inc. (NYSE: GEHI) from May 2017 to May 2019. Ms. Wei also served as the chief financial officer of various education and e-commerce companies including Lazada South East Asia Pte. Ltd., Meilishuo Technology Ltd. and China Distance Education Holdings Ltd., a then New York Stock Exchange-listed company since 2008. Prior to that, Ms. Wei held several positions in New Oriental Education & Technology Group Inc., Lorus Therapeutics Inc., Deloitte Touche Tohmatsu Limited and Arthur Andersen Huaqiang from October 1994 to March 2008. Ms. Wei is a US CPA from Illinois.

Financial Results for the Second Quarter of 2022

Net Revenues

Total net revenues increased by 11.4% to RMB648.8 million (US$96.9 million) in the second quarter of 2022, from RMB582.3 million in the same period of 2021. The increase was mainly driven by a higher student enrollment of childhood & adolescent quality education. In addition, net revenue from adult professional education business also increased slightly primarily due to the increase in certification revenue.

Cost of Revenues

Cost of revenues decreased by 5.4% to RMB272.3 million (US$40.7 million) in the second quarter of 2022, from RMB287.9 million in the same period of 2021. The decrease was primarily due to the decline in rental and depreciation expenses which was partially offset by higher personnel and welfare cost due to the higher performance-based bonus.

Gross Profit and Gross Margin

Gross profit increased by 27.9% to RMB376.5 million (US$56.2 million) in the second quarter of 2022, from RMB294.4 million in the same period of 2021. Gross margin was 58.0% in the second quarter of 2022, compared to 50.6% in the same period of 2021. The increase in gross profit was primarily attributable to the increase in net revenues and decrease in cost of revenues in both childhood & adolescent quality education and adult professional education businesses.

Operating Expenses

Total operating expenses decreased by 14.7% to RMB328.5 million (US$49.0 million) in the second quarter of 2022 from RMB385.1 million in the same period of 2021. Total non-GAAP operating expenses, which excluded share-based compensation expenses, decreased by 14.1% to RMB327.4 million (US$48.9 million) in the second quarter of 2022, from RMB381.2 million in the same period of 2021. Total share-based compensation expenses allocated to the related operating expenses decreased by 71.8% to RMB1.1 million (US$0.2 million) in the second quarter of 2022, from RMB3.9 million in the same period of 2021.

Selling and marketing expenses decreased by 28.3% to RMB156.9 million (US$23.4 million) in the second quarter of 2022 from RMB218.9 million in the same period of 2021. The decrease was mainly due to the drop in the number of sales staff and a decline in advertising spending as the company continued to optimize marketing spending in the second quarter of 2022.

General and administrative expenses increased by 11.1% to RMB158.7 million (US$23.7 million) in the second quarter of 2022, from RMB142.8 million in the same period of 2021. The increase was mainly due to a one-time provision for the residual amount of the anticipated settlement of a class action lawsuit net off the estimated insurance coverage in the second quarter of 2022. In addition, a one-time adjustment in the second quarter of 2021 resulted in lower comparison base and the resulting increase of payroll cost in the second quarter of 2022. Such increase was partially offset by an impairment loss on an office property held for sale in second quarter of 2021.

Research and development expenses decreased by 45.0% to RMB12.9 million (US$1.9 million) in the second quarter of 2022, from RMB23.4 million in the same period of 2021. The decrease was mainly due to the decrease in personnel-related expense in the second quarter of 2022.

Operating Income/(Loss)

Operating income was RMB48.0 million (US$7.2 million) in the second quarter of 2022, compared to operating loss of RMB90.7 million in the same period of 2021. Non-GAAP operating income, which excluded share-based compensation expenses, was RMB49.2 million (US$7.3 million) in the second quarter of 2022, compared to non-GAAP operating loss of RMB86.6 million in the same period of 2021.

Income Tax Benefit/(Expense)

The Company recorded an income tax expense of RMB0.6 million (US$0.1 million) in the second quarter of 2022, compared to income tax benefit of RMB12.3 million in the same period of 2021.

Net Income/(Loss)

As a result of the foregoing, net income was RMB47.9 million (US$7.2 million) in the second quarter of 2022, compared to net loss of RMB76.7 million in the same period of 2021. Non-GAAP net income, which excluded share-based compensation expenses, was RMB49.1 million (US$7.3 million) in the second quarter of 2022, compared to non-GAAP net loss of RMB72.5 million in the same period of 2021.

Basic and Diluted Income/(Loss) per ADS

Basic income per ADS was RMB4.36 (US$0.65) in the second quarter of 2022, compared to loss per ADS of RMB6.97 in the second quarter of 2021. Diluted income per ADS was RMB4.29 (US$0.64) in the second quarter of 2022, compared to loss per ADS of RMB6.97 in the second quarter of 2021. Non-GAAP basic income per ADS, which excluded share-based compensation expenses, was RMB4.46 (US$0.67) in the second quarter of 2022, compared to non-GAAP loss per ADS of RMB6.61 in the second quarter of 2021. Non-GAAP diluted income per ADS, which excluded share-based compensation expenses, was RMB4.39 (US$0.66) in the second quarter of 2022, compared to non-GAAP loss per ADS of RMB6.61 in the second quarter of 2021.

Cash Flow

The total balance of cash, cash equivalents and time deposits increased RMB9.2 million from RMB416.4 million as of March 31, 2022 to RMB425.6 million (US$63.5 million) as of June 30, 2022. The increase was mainly from positive net cash inflow from operating activities in the second quarter of 2022 of RMB19.4 million (US$2.9 million), which was mainly due to higher cash receipt and lower cash costs and expenses in normal business course. Capital expenditures in the second quarter of 2022 were RMB8.9 million (US$1.3 million), mainly from purchasing of office equipment and payment to renovate teaching centers. Share repurchase also contributed to the cash outflow in the second quarter of 2022.

Financial Results for the Six Months Ended June 30, 2022

Net Revenues

Total net revenues increased by 14.0% to RMB1,272.3 million (US$189.9 million) in the first half of 2022, from RMB1,116.0 million in the same period of 2021. The increase was primarily driven by a higher student enrollment of childhood & adolescent quality education business and a net revenue increase from adult professional education business primarily due to the increase in certification revenue.

Cost of Revenues

Cost of revenues decreased by 6.1% to RMB536.9 million (US$80.2 million) in the first half of 2022, from RMB571.7 million in the same period of 2021. The decrease was primarily due to the decline in rental and depreciation expenses partially offset by higher personnel and welfare cost due to an increase in the number of teaching staff and higher performance-based bonus.

Gross Profit and Gross Margin

Gross profit increased by 35.1% to RMB735.4 million (US$109.8 million) in the first six months of 2022, from RMB544.3 million in the same period of 2021. Gross margin was 57.8% in the first six months of 2022, compared with 48.8% in the same period of 2021. The increase in gross profit was primarily attributable to the increase in net revenues and decrease in cost of revenues in both childhood &adolescent quality education and adult professional education businesses.

Operating Expenses

Total operating expenses decreased by 13.8% to RMB658.8 million (US$98.4 million) in the first six months of 2022, from RMB764.5 million in the same period of 2021. Total non-GAAP operating expenses, which excluded share-based compensation expenses, decreased by 12.9% to RMB656.3 million (US$98.0 million) in the first six months of 2022, from RMB753.9 million in the same period of 2021. Total share-based compensation expenses allocated to the related operating expenses decreased by 76.6% to RMB2.5 million (US$0.4 million) in the first six months of 2022, from RMB10.7 million in the same period of 2021.

Selling and marketing expenses decreased by 23.9% to RMB329.3 million (US$49.2 million) in the first six months of 2022 from RMB432.6 million in the same period of 2021. The decrease was mainly due to the drop in the number of sales staff and a decline in advertising spending as the Company continues to control marketing spending in the first six months of 2022.

General and administrative expenses increased by 5.0% to RMB300.3 million (US$44.8 million) in the first six months of 2022, from RMB286.0 million in the same period of 2021. The increase was mainly due to a one-time provision for the residual amount of the anticipated settlement of a class action lawsuit net off the estimated insurance coverage in the first six months of 2022. In addition, the increase in bonus resulted in the increase of payroll cost in the first six months of 2022. Such increase was partially offset by an impairment loss on an office property held for sale in the first six months of 2021.

Research and development expenses decreased by 36.3% to RMB29.2 million (US$4.4 million) in the first six months of 2022, from RMB45.9 million in the same period of 2021. The decrease was mainly due to the decrease in personnel-related costs in the first six months of 2022.

Operating Income/(Loss)

Operating income was RMB76.6 million (US$11.4 million) in the first six months of 2022, compared to operating loss of RMB220.2 million in the same period of 2021. Non-GAAP operating income, which excluded share-based compensation expenses, was RMB79.1 million (US$11.8 million) in the first six months of 2022, compared to non-GAAP operating loss of RMB209.2 million in the same period of 2021.

Income Tax Benefit/(Expense)

The Company recorded an income tax expense of RMB6.0 million (US$0.9 million) in the first six months of 2022, compared to RMB19.6 million in income tax benefit in the same period of 2021.

Net Income/(Loss)

As a result of the foregoing, net income was RMB75.0 million (US$11.2 million) in the first six months of 2022, compared to net loss of RMB198.5 million in the same period of 2021. Non-GAAP net income, which excluded share-based compensation expenses, was RMB77.5 million (US$11.6 million) in the first six months of 2022, compared to non-GAAP net loss of RMB187.5 million in the same period of 2021.

Basic and Diluted Income/(Loss) per ADS

Basic income per ADS was RMB6.73 (US$1.00) in the first six months of 2022. Diluted income per ADS was RMB6.63 (US$0.99) in the first six months of 2022. Non-GAAP basic income per ADS, which excluded share-based compensation expenses, was RMB6.96 (US$1.04) in the first six months of 2022. Non-GAAP diluted income per ADS, which excluded share-based compensation expenses, was RMB6.86 (US$1.02) in the first six months of 2022.

Cash Flow

The total balance of cash, cash equivalents and time deposits decreased RMB4.8 million from RMB430.4 million as of December 31, 2021 to RMB425.6 million (US$63.5 million) as of June 30, 2022. The decrease was mainly due to capital expenditures on purchasing of office equipment and payment to renovate teaching centers, as well as payment to repurchase Company's stock, which was partially offset by the proceeds received from bank borrowing of RMB2.0 million (US$0.3 million) in the first six months of 2022. The net cash inflow from operating activities in the first six months of 2022 was RMB0.5 million (US$0.1 million).

Business Outlook

Based on the Company's current estimates, total net revenues for the third quarter of 2022 are expected to be in the range of RMB620 million and RMB650 million, which represent an increase of 0.8% to 5.7% as compared to the net revenues in the third quarter of 2021, after taking into consideration the seasonal fluctuation factor and the likely continued impact of the COVID-19.

This guidance is based on the current market conditions and reflects the Company's current and preliminary estimates of market and operating conditions, which are subject to change, particularly as to the potential impact of COVID-19 on the economy in China and elsewhere in the world.

Exchange Rate Information

All translations made in the financial statements or elsewhere in this press release made from RMB into United States dollars ("US$") are solely for convenience and calculated at the rate of US$1.00=RMB 6.6981, representing the exchange rate as of June 30, 2022, set forth in the H.10 statistical release of the U.S. Federal Reserve Board. No representation is made that the RMB amounts could have been, or could be, converted, realized or settled into US$ at that rate, or at any other rate, on June 30, 2022.

Conference Call

Company management will hold an earnings conference call and live webcast to discuss the Company's results at 8:00 AM on Aug 16, 2022, U.S. Eastern Time (8:00 PM on Aug 16, 2022, Beijing Time).

Please register in advance of the conference, using the link provided below. Upon registering, you will be provided with participant dial-in numbers, passcode and unique registrant ID.

Conference call registration link: https://register.vevent.com/register/BI9837fbfef7b846edb47630ffe1f548b2. It will automatically direct you to the registration page of "Tarena's Second Quarter 2022 Earnings Conference Call" where you may fill in your details for RSVP.

In the 10 minutes prior to the call start time, you may use the conference access information (including dial in number(s), direct event passcode and registrant ID) provided in the confirmation email received at the point of registering.

Additionally, a live and archived webcast of this call will be available on the Investor Relations section of Tarena's website at http://ir.tedu.cn.

About Tarena International, Inc.

Tarena is a leading provider of adult professional education and childhood and adolescent quality education services in China. Through its innovative education platform combining live distance instruction, classroom-based tutoring and online learning modules, Tarena offers adult professional education courses in IT and non-IT subjects. Its adult professional education courses provide students with practical skills to prepare them for jobs in industries with significant growth potential and strong hiring demand. Tarena also offers childhood and adolescent quality education programs, including computer coding and robotics programming courses, etc., targeting students aged between three and eighteen.

Safe Harbor Statement

This press release contains forward-looking statements made under the "safe harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and 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," "confident" and similar statements. Among other things, the business outlook, the quotations from management in this announcement, as well as the Company's strategic and operational plans contain forward-looking statements. Tarena 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 report to shareholders, in press releases and other written materials and in oral statements made by its officers, directors or employees to third parties. Any statements that are not historical facts, including any business outlook and statements about Tarena's beliefs and expectations, are forward-looking statements. Many factors, risks and uncertainties could cause actual results to differ materially from those in the forward-looking statements. Such factors and risks include, but not limited to the following: the impact of the COVID-19 outbreak; Tarena's goals and strategies; its future business development, financial condition and results of operations; its ability to continue to attract students to enroll in its courses; its ability to continue to recruit, train and retain qualified instructors and teaching assistants; its ability to continually tailor its curriculum to market demand and enhance its courses to adequately and promptly respond to developments in the professional job market; its ability to maintain or enhance its brand recognition, its ability to maintain high job placement rate for its students, and its ability to maintain cooperative relationships with financing service providers for student loans.

Further information regarding these and other risks, uncertainties or factors is included in Tarena's filings with the U.S. Securities and Exchange Commission. All information provided in this press release is current as of the date of the press release, and Tarena does not undertake any obligation to update such information, except as required under applicable law.

About Non-GAAP Financial Measures

To supplement Tarena's consolidated financial results presented in accordance with United States Generally Accepted Accounting Principles ("GAAP"), Tarena's management uses non-GAAP measures of cost of revenues, operating expenses, operating income, net income, and basic and diluted net income per ADS, which are adjusted from results based on GAAP to exclude the share-based compensation expenses. These non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results. In addition, calculation of the non-GAAP financial measures may be different from the calculation used by other companies, and therefore comparability may be limited.

Tarena's management believes that excluding the share-based compensation expenses provides meaningful supplemental information regarding our performance and liquidity by excluding certain items identified as non-recurring and infrequent in nature, and non-cash charges. The amount of share-based compensation expenses is not built into the Company's annual budgets and quarterly forecasts, which generally will be the basis for information Tarena provides to analysts and investors as guidance for future operating performance.

The non-GAAP financial measures are provided to enhance investors' overall understanding of Tarena's current financial performance and prospects for the future. A limitation of using non-GAAP cost of revenues, operating expenses, operating income (loss) and net income (loss), excluding the share-based compensation expense is that the share-based compensation charge has been and will continue to be a recurring expense in the Company's business for the foreseeable future. In order to mitigate the limitation, the Company has provided specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables include details on the reconciliation between GAAP financial measures that are most directly comparable to the non-GAAP financial measures the Company has presented.

For further information, please contact:

Investor Relations Contact
Tarena International, Inc.
Email: ir@tedu.cn

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