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

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:

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.

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

SOURCE Ambow Education Holding Ltd.