Ambow Education Announces Third Quarter 2011 Unaudited Financial Results

Strong quarterly net revenue increase of 42.6% year-over-year

Expanding Tutoring revenue increase of 32.7% year-over-year

Record Career Enhancement revenue increase of 88.7% year-over-year

Nov 14, 2011, 17:00 ET from Ambow Education Holding Ltd.

BEIJING, Nov. 14, 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 third quarter of 2011.

Financial Highlights for the Third Quarter Ended September 30, 2011:

  • Total net revenue increased 42.6% to $72.8 million(1) from $51.1 million for the same period in 2010 and organic growth increased 25.0% year-over-year.
    • Tutoring revenue increased 32.7% to $33.9 million from $25.5 million for the same period in 2010.
    • Career Enhancement revenue increased 88.7% to $23.0 million from $12.2 million for the same period in 2010.
    • The growth layer, which consists of Tutoring and Career Enhancement, achieved 50.8% year-over-year revenue growth, of which organic growth was 26.9%.
  • Non-GAAP operating income(2) increased to $10.3 million from $8.1 million for the same period in 2010.
  • Non-GAAP net income(3) increased to $7.3 million from $6.6 million for the same period in 2010.
  • Diluted non-GAAP net income per adjusted ADS attributable to Ambow(4) increased to $0.097 as compared to $0.091 for the same period in 2010.
  • Total student enrollments increased to 301,000 from 246,000 for the same period in 2010.  
    • The growth layer's student enrollments increased 26.6% to 267,000 from 211,000 for the same period in 2010.

Financial Highlights for the Nine Months Ended September 30, 2011:

  • Total net revenue increased 32.5% to $204.5 million from $154.4 million for the same period in 2010 and organic growth increased 23.1% year-over-year.
    • Tutoring revenue increased 25.7% to $94.0 million from $74.7 million for the same period in 2010.
    • Career Enhancement revenue increased 94.5% to $56.2 million from $28.9 million for the same period in 2010.
    • The growth layer, which consists of Tutoring and Career Enhancement, achieved 44.9% year-over-year revenue growth, of which organic growth was 31.1%.
  • Non-GAAP operating income increased to $36.1 million from $27.5 million for the same period in 2010.
  • Non-GAAP net income increased to $28.0 million from $23.4 million for the same period in 2010.
  • Diluted non-GAAP net income per adjusted ADS attributable to Ambow increased to $0.372 as compared to $0.338 for the same period in 2010.
  • The growth layer's student enrollments increased 20.0% to 729,000 from 608,000 for the same period in 2010.  

Commenting on the third quarter results, Ambow's President and Chief Executive Officer Dr. Jin Huang said, "I am pleased with Ambow's performance this quarter as we continue to successfully execute our strategy to sustain strong top-line growth and improve operating profit. We remain focused on growing our Tutoring and Career Enhancement services organically and satisfying the immense demand for these services through our diversified offerings. "

Dr. Huang continued, "The initial results of our tutoring center expansion strategy are satisfying: we added 13 new tutoring centers in the third quarter and are on the way to exceeding our full-year goals. In addition, growth in Tutoring enrollments is reaccelerating and increased by 17.6% this quarter. Turning to Career Enhancement, we continue to experience strong demand for our signature programs, which combine updated hard-skill, soft-skill and project-based training. Direct enrollments from universities have grown explosively and now contribute over 55% of Career Enhancement enrollments. This is in part due to our CCEP program, launched in March this year, which has already attracted more than 17,000 students. In addition to our traditional individual-paid and IT focused programs, we have, with the acquisition of Genesis Education in the second quarter, expanded our reach to include corporate training and soft-skill training. Our strong organic growth resulted in a 50.8% year-over-year revenue increase in our growth layer. We expect student enrollments in Tutoring and Career Enhancement to exceed one million in 2011. "

"During the quarter we also closed our last acquisition of the year. Due to our strong organic growth, we expect that acquisitions will contribute to less than 10% of our annual revenue in 2011." Dr. Huang concluded.

Ambow's Chief Financial Officer, Paul Chow, added, "In the third quarter, the Growth Layer which consists of Tutoring and Career Enhancement, achieved approximately 27% year-over-year organic growth."

"Turning to operations, I am very pleased to announce that, even though we are in the investment phase of our Tutoring and Career Enhancement businesses, we achieved 27.1% year-over-year non-GAAP operating income growth.  Non-GAAP G&A expense(5) as a percentage of sales decreased to 17.9% in the third quarter from 19.8% for the same period of 2010.  This decrease is a direct result of our efforts to improve the efficiency and scalability of our business. Though we are still in the early stages of our expansion, it is our goal to maintain sustainable growth in both the top and bottom lines," concluded Mr. Chow.

Financial Results for the Third Quarter of 2011:

Net Revenues

Total net revenues for the third quarter of 2011 were $72.8 million, increasing 42.6% year-over-year from $51.1 million for the same period in 2010.

Better Schools

Tutoring revenue increased 32.7% to $33.9 million from $25.5 million for the same period in 2010. The Company noted that the revenue growth in Tutoring was primarily a result of 17.6% growth in enrollments and 12.9% growth in Average Selling Price ("ASP").

K-12 Schools revenue increased 1.0% to $7.9 million from $7.8 million for the same period in 2010.  During the quarter, enrollments decreased 7.8% while ASP increased 6%. The drop in enrollments was because we reverted the operating right for the Junior High portion of Zhenjiang Foreign Language School back to the original owner at the beginning of the third quarter. This is in line with Ambow's strategy to focus on the International High School Program, which the Company developed internally at the Zhenjiang school over the last three years. This shift will give Ambow more discretionary power over quality control, teacher management, pricing and other operations in the future.

No revenue was recognized from the Junior High business during the third quarter, and its revenue contribution over the last academic year through the second quarter of 2011 was a total of $3.38 million. The Company anticipated $0.24 million revenue from the Junior High business in the third quarter. It does not expect this adjustment to have any impact on operating profits in the future.

Total student enrollments in Better Schools for the third quarter of 2011 were approximately 252,000, with 231,000 in Tutoring and 21,000 in K-12 Schools.

Better Jobs

Career Enhancement revenue increased 88.7% to $23.0 million in the third quarter of 2011, compared to $12.2 million for the same period in 2010. The Company noted that the revenue growth in Career Enhancement was the result of an impressive 147.1% enrollments growth and 23.6% decrease in ASP.

Colleges revenue increased 45.7% to $8.1 million from $5.6 million for the same period in 2010, with $2.5 million attributable to the recognition of certain contributions from students, following the fulfillment of the related conditions.  Such revenue did not arise in 2010 but will recur in future years in a similar pattern.

Total student enrollments in Better Jobs for the third quarter of 2011 were approximately 49,000, with 37,000 in Career Enhancement and over 12,000 in Colleges.

Gross Profit and Gross Margin

Overall gross profit increased 40.6% to $41.0 million for the third quarter of 2011, compared to $29.2 million for the same period in 2010. Gross margin was 56.3% for the third quarter of 2011 compared to 57.1% for the same period in 2010. The slight decrease in gross margin was due to tutoring center expansion costs and the return of Career Enhancement's gross margin to normal levels.

Operating Expenses and Income

Operating expenses, which include selling and marketing, general and administrative and research and development expenses, were $32.3 million for the third quarter of 2011, increasing 43.6% year-over-year from $22.5 million for the same period in 2010. Operating expenses as a percentage of total net revenues were 44.3% for the third quarter of 2011, compared to 44.0% for the same period in 2010. Non-GAAP operating income increased to $10.3 million from $8.1 million for the same period in 2010.

Income Tax Expenses

Income tax expenses were $1.4 million for the third quarter of 2011, compared to income tax expenses of $1.1 million for the same period in 2010.  

Net Income and Adjusted EPS

Net income was $5.8 million for the third quarter of 2011, increasing 9.9% year-over-year from $5.3 million for the same period in 2010.

Non-GAAP net income was $7.3 million for the third quarter of 2011, increasing 10.0% year-over-year from $6.6 million for the same period in 2010.

Basic and diluted non-GAAP net income per adjusted ADS(6) attributable to Ambow was $0.102 and $0.097, respectively, compared to $0.097 and $0.091, respectively, for the same period in 2010.

Balance Sheet  

Cash and cash equivalents, restricted cash and term deposits as of September 30, 2011 were $93.8 million, compared to $86.8 million as of June 30, 2011.  

The Company's deferred revenue balances as of September 30, 2011 and September 30, 2010 were $99.1 million and $91.2 million, respectively. Included in the 2011 balance was $48.4 million of deferred revenue from the Company's growth layer, which increased by 43.9% year-over-year.

Financial Results for the Nine Months Ended September 30, 2011:

Net Revenues

Total net revenues for the nine months ended September 30, 2011 were $204.5 million, increasing 32.5% year-over-year from $154.4 million for the same period in 2010.

Better Schools

Tutoring revenue increased 25.7% to $94.0 million from $74.7 million for the same period in 2010. The Company noted that the revenue growth in Tutoring was a result of 13.9% growth in enrollments and 10.4% growth in ASP.

K-12 Schools revenue increased 4.5% to $28.7 million from $27.4 million for the same period in 2010.

Better Jobs

Career Enhancement revenue accounted for $56.2 million of total net revenues for the nine months ended September 30, 2011, compared to $28.9 million for the same period in 2010. The Company noted that Career Enhancement achieved record revenue growth of 94.5% year-over-year, with 114.9% growth in enrollments and 9.5% decrease in ASP.

Colleges achieved 10.1% growth year-over-year and accounted for $25.7 million of total net revenues for the nine months ended September 30, 2011, compared to $23.3 million for the same period in 2010, with $2.5 million attributable to the recognition of certain contributions from students, following the fulfillment of the related conditions.  Such revenue did not arise in 2010 but will recur in future years in a similar pattern.

Gross Profit and Gross Margin

Overall gross profit increased 32.2% to $116.1 million for the nine months ended September 30, 2011, compared to $87.8 million for the same period in 2010. Gross margin was 56.8% for the nine months ended September 30, 2011 compared to 56.9% for the same period in 2010.

Operating Expenses and Income

Operating expenses, which include selling and marketing, general and administrative and research and development expenses, were $83.8 million for the nine months ended September 30, 2011, increasing 30.9% year-over-year from $64.0 million for the same period in 2010. Operating expenses as a percentage of total net revenues were 41.0% for the nine months ended September 30, 2011, compared to 41.5% for the same period in 2010. Non-GAAP operating income increased to $36.1 million from $27.5 million for the same period in 2010.

Income Tax Expenses

Income tax expenses were $4.2 million for the nine months ended September 30, 2011, compared to income tax expenses of $3.0 million for the same period in 2010.  

Net Income and Adjusted EPS

Net income was $24.2 million for the nine months ended September 30, 2011, increasing 23.0% year-over-year from $19.7 million for the same period in 2010.

Non-GAAP net income was $28.0 million for the nine months ended September 30, 2011, increasing 19.4% year-over-year from $23.4 million for the same period in 2010.

Basic and diluted non-GAAP net income per adjusted ADS attributable to Ambow was $0.392 and $0.372, respectively, compared to $0.359 and $0.338, respectively, for the same period in 2010.

Financial Outlook for the Fourth Quarter and Full-Year 2011

The Company expects total net revenues in the fourth quarter of 2011 to be in the range of $81.5 million (Rmb520 million) to $83.0 million (Rmb530 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 November 15, 2011 (9:00 p.m. Beijing/Hong Kong Time on November 15, 2011).

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

U.S. Toll Free: +1-866-549-1292 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 fourth quarter and full year of 2011 and quotations from management concerning Ambow's strategic and operational plans and expectations 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 as well as risk factors identified in Ambow's latest annual report on Form 20-F and Current Reports on Form 6-K. 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-to-date 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 income, (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$1.0 to RMB6.3780, representing the noon buying rate as set forth in the H.10 statistical release of the U.S. Federal Reserve Board on September 30, 2011. No representation is made that the RMB amounts could have been, or could be, converted into US$ at such rate.

(2) Non-GAAP operating income, being operation income attributable to Ambow excluding share-based compensation expenses incurred for the respective period.

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

(4) Diluted non-GAAP net income per adjusted ADS attributed to Ambow is computed by dividing non-GAAP net income attributed to Ambow by weighted average number of common shares outstanding for the period plus (1) shares issuable upon the exercise of outstanding shares options and (2) the number of common shares 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.

(5) Non-GAAP G&A expenses, being G&A expenses excluding share-based compensation expenses incurred for the respective period.

(6) Each ADS represents two ordinary shares.

For investor and media inquiries please contact:

Ms. Mandy Li Investor Relations Manager Ambow Education Holding Ltd. Tel: +86-10-6206-8130 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 INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

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

 

 

 

 

 

 

 

 

 

 

 

As of September 30,

 

As of June 30,

 

As of September 30,

 

As of June 30,

 

 

2011

 

2011

 

2011

 

2011

 

 

 USD

 

 USD

RMB

 

RMB

ASSETS

Current assets:

Cash and cash equivalents

 

90,344

 

82,275

576,214

 

524,751

Restricted cash

 

243

 

8

1,550

 

50

Term deposits

 

3,255

 

4,500

20,760

 

28,700

Accounts receivable, net

 

33,294

 

14,774

212,348

 

94,226

Amounts due from related parties

 

32,204

 

30,702

205,394

 

195,820

Deferred tax assets, current

 

2,300

 

1,947

14,667

 

12,421

Prepaid and other current assets

 

90,126

 

82,274

574,823

 

524,744

TOTAL CURRENT ASSETS

 

251,766

 

216,480

1,605,756

 

1,380,712

Property and equipment, net

 

128,185

 

120,786

817,563

 

770,372

Land use rights, net

 

41,697

 

41,956

265,944

 

267,598

Intangible assets, net

 

96,910

 

97,188

618,095

 

619,868

Goodwill

 

206,876

 

197,818

1,319,452

 

1,261,686

Deferred tax assets, non-current

 

1,075

 

863

6,857

 

5,507

Amounts due from related parties

 

3,528

 

3,534

 

22,502

 

22,541

Other non-current assets

 

26,860

 

29,349

171,314

 

187,185

TOTAL NON-CURRENT ASSETS

 

505,131

 

491,494

 

3,221,727

 

3,134,757

TOTAL ASSETS

 

756,897

 

707,974

4,827,483

 

4,515,469

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Short-term borrowings

 

18,512

 

19,296

118,070

 

123,070

Current portion of Long-term borrowings

 

3,057

 

7,996

19,500

 

51,000

Deferred revenue

 

99,097

 

50,320

632,041

 

320,940

Accounts payable

 

7,714

 

9,280

49,201

 

59,188

Accrued expenses and other current liabilities

 

66,533

 

68,023

424,331

 

433,859

Income tax payable

 

19,318

 

17,524

123,211

 

111,766

Amount due to related parties

 

6,395

 

5,836

40,788

 

37,225

TOTAL CURRENT LIABILITIES

 

220,626

 

178,275

1,407,142

 

1,137,048

Deferred tax liabilities, non-current

 

27,930

 

27,587

178,138

 

175,951

Long-term borrowings

 

8,231

 

10,034

52,500

 

64,000

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

 

47,500

 

45,220

302,958

 

288,412

TOTAL NON-CURRENT LIABILITIES

 

83,661

 

82,841

533,596

 

528,363

TOTAL LIABILITIES

 

304,287

 

261,116

1,940,738

 

1,665,411

SHAREHOLDERS' EQUITY

 

442,871

 

437,761

2,824,630

 

2,792,038

TOTAL AMBOW EDUCATION HOLDING LTD'S EQUITY

 

442,871

 

437,761

2,824,630

 

2,792,038

Non-controlling interest

 

9,739

 

9,097

62,115

 

58,020

TOTAL SHAREHOLDER'S EQUITY

 

452,610

 

446,858

2,886,745

 

2,850,058

TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY

 

756,897

 

707,974

4,827,483

 

4,515,469

AMBOW EDUCATION HOLDING LTD

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

For the three months ended September 30,

2011

2010

2011

2010

 

USD

 

USD

 

RMB

 

RMB

Better Schools

 

 

 

 

 

 

 

Tutoring

33,877

 

25,532

 

216,067

 

162,843

K-12 Schools

7,876

 

7,800

 

50,233

 

49,747

Better Job

 

 

 

 

 

 

 

Career Enhancement

22,974

 

12,175

 

146,529

 

77,652

Colleges

8,110

 

5,567

 

51,730

 

35,506

NET REVENUES

72,837

 

51,074

 

464,559

 

325,748

Cost of revenues

(31,828)

 

(21,908)

 

(203,001)

 

(139,726)

GROSS PROFIT

41,009

 

29,166

 

261,558

 

186,022

Operating expenses:

Selling and marketing

(15,824)

 

(10,372)

 

(100,924)

 

(66,158)

General and administrative

(14,250)

 

(11,152)

 

(90,889)

 

(71,134)

Research and development

(2,198)

 

(946)

 

(14,018)

 

(6,031)

TOTAL OPERATING EXPENSES

(32,272)

 

(22,470)

 

(205,831)

 

(143,323)

OPERATING INCOME

8,737

 

6,696

 

55,727

 

42,699

 

 

 

 

 

 

 

 

OTHER EXPENSE

Interest expense, net

(995)

 

(487)

 

(6,348)

 

(3,107)

Foreign exchange loss, net

(280)

(235)

(1,787)

(1,496)

Other expense, net

62

 

(56)

 

394

 

(354)

INCOME BEFORE TAX AND NON-CONTROLLING INTEREST

7,524

5,918

47,986

37,742

Income tax expenses

(1,397)

 

(1,068)

 

(8,908)

 

(6,820)

NET INCOME

6,127

 

4,850

 

39,078

 

30,922

Add: Net income attributable to non-controlling interest

(360)

400

(2,295)

2,549

NET INCOME ATTRIBUTABLE TO AMBOW EDUCATION HOLDING LTD

5,767

 

5,250

 

36,783

 

33,471

Preferred shares redemption value accretion

-

8,495

-

54,180

Allocation of net income to participating preferred shareholders

-

(1,435)

-

(9,154)

NET INCOME ATTRIBUTABLE TO ORDINARY SHAREHOLDERS

5,767

 

12,310

 

36,783

 

78,497

 

 

 

 

Net income/(loss) per ADS attributable to ordinary shareholders

Basic

0.08

0.23

0.51

1.50

Diluted

0.08

 

0.07

 

0.49

 

0.46

Weighted average number of ADS(Note 1)

Basic

71,560,179

52,433,234

71,560,179

52,433,234

Diluted

75,068,903

72,444,551

75,068,903

72,444,551

Supplementary Information:

Share-based compensation expense included in:

Selling and marketing

286

304

1,827

1,937

General and administrative

1,198

 

1,025

 

7,640

 

6,539

Research and development

33

44

207

279

Note 1:      Each ADS represents two common 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 September 30,

 

 

2011

 

2010

2011

 

2010

 

 

USD

 

USD

RMB

 

RMB

Operating income

 

8,737

 

6,696

55,727

 

42,699

Share-based compensation expenses

 

1,517

 

1,373

9,674

 

8,755

Non-GAAP operating income

 

10,254

 

8,069

65,401

 

51,454

Net income attributable to Ambow

 

5,767

 

5,250

36,783

 

33,471

Share-based compensation expenses

 

1,517

 

1,373

 

9,674

 

8,755

Non-GAAP net income

 

7,284

 

6,623

 

46,457

 

42,226

Net income margin

 

7.9%

 

10.3%

 

7.9%

 

10.3%

Non-GAAP net income margin

 

10.0%

 

13.0%

 

10.0%

 

13.0%

Net income per adjusted ADS attributable to Ordinary Shareholders - Basic

 

0.081

 

0.235

 

0.514

 

1.497

Net income per adjusted ADS attributable to Ordinary Shareholders - Diluted

 

0.077

 

0.072

 

0.490

 

0.462

Net income per adjusted ADS attributable to Ambow - Basic

 

0.081

 

0.077

 

0.514

 

0.490

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

 

0.077

 

0.072

 

0.490

 

0.462

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

 

0.102

 

0.097

 

0.649

 

0.618

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

 

0.097

 

0.091

 

0.619

 

0.583

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

 

71,560,179

 

68,348,705

 

71,560,179

 

68,348,705

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

 

75,068,903

 

72,462,360

 

75,068,903

 

72,462,360

EBITDA (Note 1)

 

13,261

 

11,205

84,580

 

71,466

Share-based compensation expenses

 

1,517

 

1,373

 

9,674

 

8,755

Adjusted EBITDA (Note 2)

 

14,778

 

12,578

 

94,254

 

80,221

EBITDA margin

 

18.2%

 

21.9%

 

18.2%

 

21.9%

Adjusted EBITDA margin

 

20.3%

 

24.6%

 

20.3%

 

24.6%

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 in the third quarter of 2011 and 2010 were RMB 32,541 and RMB 28,068, respectively.

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

Note 3:      Net income per adjusted ADS attributable to Ambow - diluted is computed by dividing net income attributable to Ambow by weighted average number of common shares outstanding for the period plus (1) shares issuable upon the exercise of outstanding share options and (2) the number of common shares 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 INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

For the nine months ended September 30,

 

2011

 

2010

 

2011

 

2010

 

USD

 

USD

 

RMB

 

RMB

Better Schools

 

 

 

 

 

 

 

Tutoring

93,969

 

74,740

 

599,336

 

476,693

K-12 Schools

28,667

 

27,420

 

182,839

 

174,886

Better Job

Career Enhancement

56,189

 

28,883

 

358,374

 

184,218

Colleges

25,714

 

23,347

 

164,003

 

148,903

NET REVENUES

204,539

 

154,390

 

1,304,552

 

984,700

Cost of revenues

(88,417)

 

(66,582)

 

(563,933)

 

(424,653)

GROSS PROFIT

116,122

 

87,808

 

740,619

 

560,047

Operating expenses:

Selling and marketing

(38,342)

 

(28,640)

 

(244,546)

 

(182,663)

General and administrative

(40,773)

 

(32,500)

 

(260,042)

 

(207,286)

Research and development

(4,681)

 

(2,897)

 

(29,858)

 

(18,474)

TOTAL OPERATING EXPENSES

(83,796)

 

(64,037)

 

(534,446)

 

(408,423)

OPERATING INCOME

32,326

 

23,771

 

206,173

 

151,624

 

 

 

 

 

 

 

 

OTHER EXPENSE

Interest expense, net

(2,757)

 

(1,421)

 

(17,587)

 

(9,065)

Foreign exchange losses, net

(823)

 

(335)

 

(5,249)

 

(2,134)

Other income (expense), net

(65)

 

176

 

(417)

 

1,115

INCOME BEFORE TAX AND NON-CONTROLLING INTEREST

28,681

 

22,191

 

182,920

 

141,540

Income tax expense

(4,151)

 

(2,992)

 

(26,476)

 

(19,082)

NET INCOME

24,530

 

19,199

 

156,444

 

122,458

Add: Net loss attributable to non-controlling interest

(356)

 

462

 

(2,268)

 

2,949

NET INCOME ATTRIBUTABLE TO AMBOW EDUCATION HOLDING LTD

24,174

 

19,661

 

154,176

 

125,407

 

 

 

 

 

 

 

 

 

Preferred shares redemption value accretion

-

 

(14,771)

 

-

 

(94,209)

Allocation of net income to participating preferred shareholders

-

 

(8,707)

 

-

 

(55,534)

NET INCOME (LOSS) ATTRIBUTABLE TO ORDINARY SHAREHOLDERS

24,174

 

(3,817)

 

154,176

 

(24,336)

Net income (loss)  per ADS attributable to ordinary shareholders

Basic

0.34

 

(0.12)

 

2.16

 

(0.74)

Diluted

0.32

 

(0.12)

 

2.05

 

(0.74)

Weighted average number of ADS (Note 1)

Basic

71,391,596

 

32,992,231

 

71,391,596

 

32,992,231

Diluted

75,221,843

 

32,992,231

 

75,221,843

 

32,992,231

Supplementary Information:

Share-based compensation expense included in:

Selling and marketing

853

 

836

 

5,441

 

5,332

General and administrative

2,839

 

2,814

 

18,106

 

17,947

Research and development

99

 

113

 

632

 

724

Note 1:      Each ADS represents two common 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 nine months ended September 30,                        

 

2011

 

2010

 

2011

 

2010

 

USD

 

USD

 

RMB

 

RMB

Operating income

32,326

 

23,771

 

206,173

 

151,624

Share-based compensation expenses

3,791

 

3,763

 

24,179

 

24,003

Non-GAAP operating income

36,117

 

27,534

 

230,352

 

175,627

Net income attributable to Ambow

24,174

 

19,661

 

154,176

 

125,407

Share-based compensation expenses

 

3,791

 

3,763

 

24,179

 

24,003

Non-GAAP net income

 

27,965

 

23,424

 

178,355

 

149,410

 

 

 

 

 

 

 

 

 

Net income margin

 

11.8%

 

12.7%

 

11.8%

 

12.7%

Non-GAAP net income margin

 

13.7%

 

15.2%

 

13.7%

 

15.2%

Net income per adjusted ADS attributable to Ordinary Shareholders - Basic

 

0.339

 

(0.116)

 

2.160

 

(0.738)

Net income per adjusted ADS attributable to Ordinary Shareholders - Diluted

 

0.321

 

(0.116)

 

2.050

 

(0.738)

Net income per adjusted ADS attributable to Ambow - Basic

 

0.339

 

0.301

 

2.160

 

1.920

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

 

0.321

 

0.283

 

2.050

 

1.808

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

 

0.392

 

0.359

 

2.498

 

2.287

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

 

0.372

 

0.338

 

2.371

 

2.154

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

 

71,391,596

 

65,321,950

 

71,391,596

 

65,321,950

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

 

75,221,843

 

69,364,627

 

75,221,843

 

69,364,627

EBITDA (Note 1)

46,577

 

37,226

 

297,069

 

237,426

Share-based compensation expenses

 

3,791

 

3,763

 

24,179

 

24,003

Adjusted EBITDA (Note 2)

 

50,368

 

40,989

 

321,248

 

261,429

EBITDA margin

 

22.8%

 

24.1%

 

22.8%

 

24.1%

Adjusted EBITDA margin

 

24.6%

 

26.5%

 

24.6%

 

26.5%

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 for the first nine months of 2011 and 2010 were RMB 98,831 and RMB 83,872, respectively.

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

Note 3:      Net income per adjusted ADS attributable to Ambow  - diluted is computed by dividing net income attributable to Ambow by weighted average number of common shares outstanding for the period plus (1) shares issuable upon the exercise of outstanding share options and (2) the number of common shares 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

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