Ambow Education Announces Strong Fourth Quarter and Full-Year 2010 Unaudited Financial Results

2010 Net Revenues Increased 55.7% Year-Over-Year

2010 Net Income Increased 56.3% Year-Over-Year

Mar 01, 2011, 05:30 ET from Ambow Education Holding Ltd.

BEIJING, March 1, 2011 /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 2010.

Financial Highlights for the Year Ended December 31, 2010:

  • Total net revenues increased 55.7% to $212.9 million(1) from $136.7 million for the same period in 2009.
  • Operating income increased 77.5% to $40.0 million compared to the same period in 2009.
    • Operating margin improved to 18.8% compared to 16.5% for the same period in 2009.
  • Adjusted EBITDA margin(2) was 29.8% compared to 25.9% for the same period in 2009.
  • Net income(3) increased 56.3% to $32.7 million compared to the same period in 2009.

Financial Highlights for the Quarter Ended December 31, 2010:

  • Total net revenues increased 17.9% to $63.7 million from $54.0 million for the same period in 2009.
  • Operating income increased 30.4% to $17.0 million compared to the same period in 2009.
    • Operating margin improved to 26.7% compared to 24.1% for the same period in 2009.
  • Adjusted EBITDA margin was 37.4% compared to 33.2% for the same period in 2009.
  • Net income increased 8.6% to $13.7 million compared to the same period in 2009.

Commenting on the fourth quarter and year end results, Ambow's President and Chief Executive Officer Dr. Jin Huang said, "We are happy to report that Ambow made significant progress in executing its business strategy during the fourth quarter and full year. Ambow continues to expand across the country through its innovative intelligence systems and service platform, further establishing itself as a market leader and the preeminent provider of education and career enhancement services in China.  We remain dedicated to helping our students achieve their educational goals and improve their ability to contribute meaningfully in the work place; fulfilling our mission to create a better school, better job and better life."

Dr. Huang continued, "It is important to understand that our long-term objectives are sustained revenue growth, acquisition integration and expense control. Throughout the year, each of these goals was achieved to our satisfaction.  Based on the success of these efforts, our strategy in 2011 is to drive positive revenue expansion through strong growth in our Tutoring and Career Enhancement segments."

"Of particular note, we are excited by a new development in our Career Enhancement segment.  Together with the Ministry of Education we have developed and launched a Career Competence Enhancement Program (CCEP). Offered as a credit program, we see great opportunities for CCEP to satisfy the unique demands of Chinese students, providing them with an advanced curriculum that focuses on soft skills training and integrates expert in-class teaching and online learning."

Ambow's Chief Financial Officer Paul Chow added, "In addition to strong top- and bottom-line performance, we achieved record operating margins of 26.7% and 18.8% in the fourth quarter and full-year 2010, respectively, compared to 24.1% and 16.5% in the same periods in 2009.  As it pertains to the six exclusivity agreements mentioned in our IPO prospectus, as of today, we have successfully acquired four and expect to close on the remaining two in the first half of year. In addition, we have signed exclusivity agreements in the fourth quarter to acquire two additional companies.  We expect the four completed acquisitions to contribute positively to Ambow in 2011."

Financial Results for the Full-Year 2010

Net Revenues

Total net revenues for the year ended December 31, 2010 were $212.9 million, increasing 55.7% year-over-year from $136.7 million for the same period in 2009.

Net Revenue Breakdown by Key Operating Segments:

Better Schools

Better Schools increased to $135.8 million, with Tutoring and K-12 Schools accounting for $97.7 million and $38.1 million of total net revenues, respectively, for the full-year 2010.

The Company noted that the increase in Tutoring was primarily due to strategic growth by acquisition and strong demand for its learning engine.  Ambow's learning engine is a proprietary intelligence system designed to provide students with an individualized learning experience.

Total student enrollment in Better Schools during 2010 was approximately 791,000.

Better Jobs

Better Jobs increased to $77.1 million, with Career Enhancement and Colleges accounting for $43.1 million and $34.0 million of total net revenues, respectively, for the full-year 2010.

The Company noted that the increase in Career Enhancement was primarily attributable to its CCEP, which teaches students soft skills, including innovation ability, time management, effective communication, and workplace etiquette, through a blended learning approach that integrates offline expert teachers and online learning.

Total student enrollment in Better Jobs during 2010 was approximately 67,000.

Gross Profit and Gross Margin

Gross profit increased 67.1% to $124.8 million for the full-year 2010, compared to $74.7 million for the same period in 2009. Gross margin was 58.6% for the full-year 2010 compared to 54.7% for the same period in 2009. The Company noted that the improvement in gross margin was attributable to increased demand for premium services as well as better utilization of facilities in the Tutoring and Career Enhancement segments.

Income Tax Expenses

Income tax expenses were $5.8 million for full-year 2010 compared to income tax expenses of $0.2 million for the same period in 2009. The Company noted that the increased income tax expenses were due to one of its entities, which was previously entitled to a full tax exemption in 2008 and 2009, only being entitled to a 50% income tax rate reduction in 2010.

Operating Expenses

Operating expenses, which include selling and marketing, general and administrative and research and development expenses, were $84.9 million for the full-year 2010, increasing 62.6% year-over-year from $52.2 million for the same period in 2009. Operating expenses as a percentage of total net revenues were 39.9% for the full-year 2010 compared to 38.2% for the same period in 2009. The Company noted that the increase was primarily due to the ongoing costs of being a public company, including the costs of regulatory compliance and expenses related to improving the visibility of the Company brand.

Net Income and Adjusted EBITDA

Net income was $32.7 million for the full-year 2010, increasing 56.3% year-over-year from $20.9 million for the same period in 2009.

Non-GAAP net income(4) was $37.9 million for the full-year 2010, increasing 64.9% year-over-year from $23.0 million for the same period in 2009. Non-GAAP net income margin(5) was 17.8% for the full-year 2010 compared to 16.8% for the same period in 2009. Basic and diluted non-GAAP net income per adjusted ADS(6) attributable to Ambow was $0.57 and $0.53, respectively, compared to $0.38 and $0.36, respectively for the same period in 2009.

Adjusted EBITDA was $63.4 million for the full-year 2010, increasing 79.1% year-over-year compared to $35.4 million for the same period in 2009. Adjusted EBITDA margin was 29.8% compared to 25.9% for the same period in 2009.

Financial Results for the Fourth Quarter of 2010

Net Revenues

Total net revenues for the fourth quarter of 2010 increased 17.9% to $63.7 million, from $54.0 million for the same period in 2009.  This improvement was primarily the result of strong revenues contribution from Tutoring.

Net Revenue Breakdown by Key Operating Segments:

Better Schools

Better Schools increased to $37.1 million, with Tutoring and K-12 Schools accounting for $25.5 million and $11.6 million of total net revenues, respectively, for the fourth quarter of 2010.

The Company noted that the increase in Tutoring was primarily due to strong demand for premium tutoring services.

Better Jobs

Better Jobs increased to $26.6 million, with Career Enhancement and Colleges accounting for $15.2 million and $11.4 million of total net revenues, respectively, for the fourth quarter of 2010.

The Company noted that the increase in Career Enhancement was primarily driven by strong enrollment growth and demand for its CCEP.

Gross Profit and Gross Margin

Gross profit was $40.0 million for the fourth quarter of 2010, increasing 26.1% year-over-year from $31.7 million for the same period in 2009. Gross margin was 62.8% for the fourth quarter of 2010 compared to 58.7% for the same period in 2009. The Company noted that the improvement in gross margin was generated by increased sales of online services in the Tutoring and Career Enhancement segments.

Operating Expenses

Operating expenses, which include selling and marketing, general and administrative and research and development expenses, were $23.0 million for the fourth quarter of 2010, increasing 23.0% year-over-year from $18.7 million for the same period in 2009. Operating expenses as a percentage of total net revenues were 36.1% for the fourth quarter of 2010 compared to 34.6% for the same period in 2009. The Company noted that the increase was primarily due to the ongoing costs of being a public company, including the costs of regulatory compliance and expenses related to improving the visibility of the Company brand.

Net Income and Adjusted EBITDA

Net income was $13.7 million for the fourth quarter of 2010, increasing 8.6% year-over-year from $12.6 million for the same period in 2009.

Non-GAAP net income was $15.3 million for the fourth quarter of 2010, increasing 15.8% year-over-year compared to $13.2 million for the same period in 2009. Non-GAAP net income margin was 24.0% for the fourth quarter of 2010 compared to 24.4% for the same period in 2009.  Basic and diluted non-GAAP net income per adjusted ADS attributable to Ambow was $0.21 and $0.20, respectively, compared to $0.21 and $0.20, respectively for the same period in 2009.

Adjusted EBITDA was $23.8 million for the fourth quarter of 2010, increasing 33.1% year-over-year compared to $17.9 million for the same period in 2009. Adjusted EBITDA margin was 37.4% compared to 33.2% for the same period in 2009.

Balance Sheet

Cash and cash equivalents, restricted cash and term deposits as of December 31, 2010 were $140.7 million, compared to $81.8 million as of December 31, 2009.

The Company's deferred revenue balances as of December 31, 2010 and December 31, 2009 were $67.6 million and $64.3 million, respectively. Deferred revenue includes tuition fees from enrolled students for courses not yet delivered as of the fourth quarter ended December 31, 2010.

Financial Outlook for the First Quarter of Full-Year 2011

Ambow expects total net revenues in the first quarter of full-year 2011 to be in the range of $49.7 million (Rmb328.0 million) to $52.7 million (Rmb348.0 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 a.m. U.S. Eastern Time on March 1, 2011 (9:00 p.m. Beijing/Hong Kong Time on March 1, 2011).

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

U.S. Toll Free: 1866 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 2011 and quotations from management concerning Ambow's strategic and operational plans and expectations, including without limitation, regarding driving positive revenue expansion through strong growth in Ambow's tutoring and career enhancement segments, 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. 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 end 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 expenses, (ii) Non-GAAP net income, (iii) Non-GAAP net income attributable to Ambow per ADS basic and diluted and (iv) Adjusted EBITDA. 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.

(1) The reporting currency of the Company is Renminbi ("RMB"), but for the convenience of the reader, the amounts presented throughout the release are in US dollar ("$"). Unless otherwise stated, all translations from RMB to US$ are based on the historical exchange rate of US$1.0 to RMB6.6, representing the noon buying rate as set forth in the H.10 statistical release of the U.S. Federal Reserve Board on December 31, 2010. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.

(2) Adjusted EBITDA margin, a non-GAAP measure, being net income attributable to Ambow excluding net interest expenses, income tax expenses, depreciation and amortization and share-based compensation expenses as a percentage of total net revenues. The Company provides certain non-GAAP financial measures to reflect meaningful supplemental information regarding its operating performance.  For more information on these non-GAAP financial measures, please see the section captioned "Non-GAAP Financial Measures" and the tables captioned "Reconciliations of Non-GAAP Financial Measures to the Most Comparable GAAP Measures" set forth at the end of this release.

(3) Net income, being net income attributable to Ambow.

(4) Non-GAAP net income, being net income attributable to Ambow excluding share-based compensation expenses incurred for the respective periods.

(5) Non-GAAP net income margin, being Non-GAAP net income as a percentage of total net revenues.

(6) Each ADS represents two ordinary shares

For investor and media inquiries please contact:                               

Mr. Paul Sham

Director, Investor Relations & Corporate Communications

Ambow Education Holding Ltd.

Tel: +86-10-6206-8131

Email: ir@ambow.com

Mr Jeffrey Goldberger

KCSA Strategic Communications

Tel: +1-212-896-1249

Email: jgoldberger@kcsa.com

***** Tables to Follow *****

AMBOW EDUCATION HOLDING LTD

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(ALL AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)

As of December 31,

2010

2009

2010

2009

USD

USD

RMB

RMB

ASSETS

Current assets:

Cash and cash equivalents

131,712

62,110

869,300

409,926

Restricted cash

-

1,515

-

10,000

Term deposits

8,970

18,125

59,200

119,623

Accounts receivable, net

7,316

3,262

48,287

21,528

Amounts due from related parties

22,755

35,225

150,182

232,482

Deferred tax assets, current

1,199

256

7,916

1,689

Prepaid and other current assets

80,137

51,253

528,897

338,267

TOTAL CURRENT ASSETS

252,089

171,746

1,663,782

1,133,515

Property and equipment, net

102,021

91,942

673,341

606,820

Land use rights, net

39,007

39,965

257,445

263,771

Intangible assets, net

80,300

82,523

529,979

544,655

Goodwill

151,599

155,847

1,000,555

1,028,592

Deferred tax assets, non-current

654

76

4,315

503

Other non-current assets

16,527

14,324

109,080

94,538

TOTAL ASSETS

642,197

556,423

4,238,497

3,672,394

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Short-term borrowings

17,889

17,121

118,070

113,000

Current portion of Long-term borrowings

9,242

13,485

61,000

89,000

Deferred revenue

67,588

64,262

446,084

424,131

Accounts payable

5,995

12,725

39,568

83,987

Accrued expenses and other current liabilities

46,009

54,838

303,666

361,934

Income tax payable

13,564

7,207

89,521

47,567

Amount due to related parties

2,044

1,861

13,493

12,282

TOTAL CURRENT LIABILITIES

162,331

171,499

1,071,402

1,131,901

Deferred tax liabilities, non-current

23,453

24,753

154,793

163,373

Long-term borrowings

8,182

11,061

54,000

73,000

Non-current portion of consideration payable for acquisitions  and other liabilities

34,138

32,477

225,309

214,351

TOTAL NON-CURRENT LIABILITIES

65,773

68,291

434,102

450,724

TOTAL LIABILITIES

228,104

239,790

1,505,504

1,582,625

MEZZANINE EQUITY

-

195,175

-

1,288,147

SHAREHOLDERS' EQUITY

406,056

112,901

2,679,951

745,147

TOTAL AMBOW EDUCATION HOLDING LTD'S EQUITY

406,056

308,076

2,679,951

2,033,294

Non-controlling interest

8,037

8,557

53,042

56,475

TOTAL SHAREHOLDER'S EQUITY

414,093

316,633

2,732,993

2,089,769

TOTAL LIABILITIES, MEZZANINE EQUITY AND SHAREHOLDER'S EQUITY

642,197

556,423

4,238,497

3,672,394

AMBOW EDUCATION HOLDING LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(ALL AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)

For the year ended December 31,

2010

2009

2010

2009

USD

USD

RMB

RMB

Better Schools

Tutoring

97,673

54,554

644,636

360,059

K-12 Schools

38,127

19,911

251,635

131,413

Better Job

Career Enhancement

43,104

40,349

284,496

266,304

Colleges

33,957

21,856

224,117

144,250

NET REVENUES

212,861

136,670

1,404,884

902,026

Cost of revenues

(88,035)

(61,967)

(581,029)

(408,985)

GROSS PROFIT

124,826

74,703

823,855

493,041

Operating expenses:

Selling and marketing

(36,847)

(20,973)

(243,193)

(138,423)

General and administrative

(43,800)

(28,563)

(289,082)

(188,518)

Research and development

(4,207)

(2,647)

(27,769)

(17,470)

TOTAL OPERATING EXPENSES

(84,854)

(52,183)

(560,044)

(344,411)

OPERATING INCOME

39,972

22,520

263,811

148,630

OTHER EXPENSE

Interest expense, net

(1,915)

(1,842)

(12,639)

(12,165)

Foreign exchange losses, net

(562)

(90)

(3,711)

(591)

Other income, net

406

562

2,680

3,709

INCOME BEFORE TAX AND NON-CONTROLLING INTEREST

37,901

21,150

250,141

139,583

Income tax expense

(5,825)

(237)

(38,442)

(1,562)

NET INCOME

32,076

20,913

211,699

138,021

Add: Net loss attributable to non-controlling  interest

657

33

4,333

215

NET INCOME ATTRIBUTABLE TO AMBOW EDUCATION HOLDING LTD

32,733

20,946

216,032

138,236

Preferred shares redemption value accretion

(14,274)

(23,921)

(94,209)

(157,877)

Allocation of net income to participating preferred shareholders

(8,414)

(14,183)

(55,534)

(93,611)

NET INCOME (LOSS) ATTRIBUTABLE TO ORDINARY SHAREHOLDERS

10,045

(17,158)

66,289

(113,252)

Net income (loss)  per ADS attributable to ordinary shareholders

Basic

0.23

(0.88)

1.55

(5.78)

Diluted

0.19

(0.88)

1.26

(5.78)

Weighted average number of ADS (Note 1)

Basic

42,775,706

19,596,546

42,775,706

19,596,546

Diluted

56,061,022

19,596,546

56,061,022

19,596,546

Supplementary Information:

Share-based compensation expense included in:

Selling and marketing

1,092

668

7,204

4,411

General and administrative

3,944

1,309

26,029

8,640

Research and development

149

73

981

480

Total share-based compensation expense

5,185

2,050

34,214

13,531

Note 1: Each ADS represents two ordinary shares.

AMBOW EDUCATION HOLDING LTD

RECONCILIATION OF NON-GAAP MEASURES TO THE MOST COMPARABLE GAAP MEASURES

(ALL AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)

For the year ended December 31,

2010

2009

2010

2009

USD

USD

RMB

RMB

Operating expenses

84,854

52,183

560,044

344,411

Share-based compensation expenses

5,185

2,050

34,214

13,531

(i)

Non-GAAP operating expenses

79,669

50,133

525,830

330,880

Net income attributable to Ambow

32,733

20,946

216,032

138,236

Share-based compensation expenses

5,185

2,050

34,214

13,531

(ii)

Non-GAAP net income

37,918

22,996

250,246

151,767

Net income margin

15.4%

15.3%

15.4%

15.3%

Non-GAAP net income margin

17.8%

16.8%

17.8%

16.8%

Net income per adjusted ADS attributable to Ambow - Basic

0.49

0.35

3.24

2.30

Net income per adjusted ADS attributable to Ambow – Diluted  (Note 3)

0.46

0.33

3.05

2.17

Non-GAAP Net income per adjusted ADS attributable to Ambow - Basic

0.57

0.38

3.73

2.53

(iii)

Non-GAAP Net income per adjusted ADS attributable to Ambow – Diluted  

0.53

0.36

3.51

2.39

Adjusted weighted average number of ADS used in calculating net income and non GAAP net income attributable to Ambow per ADS - basic

66,670,499

59,974,322

66,670,499

59,974,322

Adjusted weighted average number of ADS used in calculating net income and non GAAP net income attributable to Ambow per ADS - diluted

70,846,120

63,562,149

70,846,120

63,562,149

EBITDA (Note 1)

58,258

33,374

384,501

220,269

Share-based compensation expenses

5,185

2,050

34,214

13,531

(iv)

Adjusted EBITDA (Note 2)

63,443

35,424

418,715

233,800

EBITDA margin

27.4%

24.4%

27.4%

24.4%

Adjusted EBITDA margin

29.8%

25.9%

29.8%

25.9%

Note 1: EBITDA, a non-GAAP measure,  being net income attributable to Ambow excluding interest expense, income tax expenses, depreciation and amortization.  The depreciation and amortization changes in 2010 and 2009 were RMB 117,388 and RMB 68,306 respectively.

Note 2: Adjusted EBITDA being EBITDA excluding share based compensation.

Note 3: Net income per adjusted ADS attributable to Ambow  - basic and diluted are computed by dividing net income attributable to Ambow by weighted average number of ADS outstanding for the period plus (1) ADS issuable upon the exercise of outstanding share options and (2) the number of ADS resulting from the assumed conversion of all the outstanding redeemable convertible preferred share and exercise of warrants upon closing of the initial public offering as if the conversion or exercise had occurred at the beginning of the period.

AMBOW EDUCATION HOLDING LTD

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(ALL AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)

For the three months ended December 31,

2010

2009

2010

2009

USD

USD

RMB

RMB

Better Schools

Tutoring

25,446

18,308

167,943

120,834

K-12 Schools

11,629

11,120

76,749

73,389

Better Job

Career Enhancement

15,194

13,065

100,278

86,229

Colleges

11,396

11,512

75,214

75,980

NET REVENUES

63,665

54,005

420,184

356,432

Cost of revenues

(23,693)

(22,300)

(156,376)

(147,176)

GROSS PROFIT

39,972

31,705

263,808

209,256

Operating expenses:

Selling and marketing

(9,171)

(7,462)

(60,530)

(49,251)

General and administrative

(12,393)

(10,130)

(81,796)

(66,859)

Research and development

(1,408)

(1,081)

(9,295)

(7,133)

TOTAL OPERATING EXPENSES

(22,972)

(18,673)

(151,621)

(123,243)

OPERATING INCOME

17,000

13,032

112,187

86,013

OTHER EXPENSE

Interest expense, net

(542)

(414)

(3,574)

(2,734)

Foreign exchange loss, net

(239)

(36)

(1,577)

(237)

Other income, net

237

337

1,565

2,221

INCOME BEFORE TAX AND NON-CONTROLLING INTEREST

16,456

12,919

108,601

85,263

Income tax expenses

(2,933)

(275)

(19,360)

(1,815)

NET INCOME

13,523

12,644

89,241

83,448

Add: Net loss attributable to non-controlling interest

210

5

1,384

33

NET INCOME ATTRIBUTABLE TO AMBOW EDUCATION HOLDING LTD

13,733

12,649

90,625

83,481

Preferred shares redemption value accretion

-

(5,093)

-

(33,611)

Allocation of net income to participating preferred shareholders

-

(3,573)

-

(23,583)

NET INCOME ATTRIBUTABLE TO ORDINARY SHAREHOLDERS

13,733

3,983

90,625

26,287

Net income per ADS attributable to ordinary shareholders

Basic

0.19

0.17

1.27

1.14

Diluted

0.18

0.10

1.20

0.67

Weighted average number of ADS(Note 1)

Basic

71,283,488

23,081,927

71,283,488

23,081,927

Diluted

75,685,145

42,246,429

75,685,145

42,246,429

Supplementary Information:

Share-based compensation expense included in:

Selling and marketing

284

211

1,872

1,392

General and administrative

1,224

314

8,082

2,070

Research and development

39

23

257

149

Total share-based compensation expense

1,547

548

10,211

3,611

Note 1: Each ADS represents two ordinary shares.

AMBOW EDUCATION HOLDING LTD

RECONCILIATION OF NON-GAAP MEASURES TO THE MOST COMPARABLE GAAP MEASURES

(ALL AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)

For the three months ended December 31,

2010

2009

2010

2009

USD

USD

RMB

RMB

Operating expenses

22,972

18,673

151,621

123,243

Share-based compensation expenses

1,547

548

10,211

3,611

(i)

Non-GAAP operating expenses

21,425

18,125

141,410

119,632

Net income attributable to Ambow

13,733

12,649

90,625

83,481

Share-based compensation expenses

1,547

548

10,211

3,611

(ii)

Non-GAAP net income

15,280

13,197

100,836

87,092

Net income margin

21.6%

23.4%

21.6%

23.4%

Non-GAAP net income margin

24.0%

24.4%

24.0%

24.4%

Net income per adjusted ADS attributable to Ambow - Basic

0.19

0.20

1.27

1.32

Net income per adjusted ADS attributable to Ambow – Diluted  (Note 3)

0.18

0.19

1.20

1.24

Non-GAAP net income per adjusted ADS attributable to Ambow - Basic

0.21

0.21

1.41

1.37

(iii)

Non-GAAP net income per adjusted ADS attributable to Ambow – Diluted

0.20

0.20

1.33

1.29

Adjusted weighted average number of ADS used in calculating net income and non GAAP net income attributable to Ambow per ADS - basic

71,283,488

63,459,703

71,283,488

63,459,703

Adjusted weighted average number of ADS used in calculating net income and non GAAP net income attributable to Ambow per ADS - diluted

75,685,145

67,301,444

75,685,145

67,301,444

EBITDA (Note 1)

22,284

17,360

147,073

114,579

Share-based compensation expenses

1,547

548

10,211

3,611

(iv)

Adjusted EBITDA (Note 2)

23,831

17,908

157,284

118,190

EBITDA margin

35.0%

32.1%

35.0%

32.1%

Adjusted EBITDA margin

37.4%

33.2%

37.4%

33.2%

Note 1: EBITDA, a non-GAAP measure, being net income attributable to Ambow excluding interest expense, income tax expenses, depreciation and amortization.  The depreciation and amortization changes in the fourth quarter of 2010 and 2009 were RMB 33,514 and RMB 26,549 respectively.

Note 2: Adjusted EBITDA being EBITDA excluding share based compensation.

Note 3: Net income per adjusted ADS attributable to Ambow  - basic and diluted are computed by dividing net income attributable to Ambow by weighted average number of ADS outstanding for the period plus (1) ADS issuable upon the exercise of outstanding share options and (2) the number of ADS resulting from the assumed conversion of all the outstanding redeemable convertible preferred share and exercise of warrants upon closing of the initial public offering as if the conversion or exercise had occurred at the beginning of the period.

SOURCE Ambow Education Holding Ltd.



RELATED LINKS

http://investors.ir.ambow.com/us/AMBO/irwebsite