Ambow Education Announces Third Quarter 2020 Financial Results

AMBOW EDUCATION HOLDING LTD.

UNAUDITED CONSOLIDATED BALANCE SHEETS

(All amounts in thousands, except for share and per share data)

As of September 30,

As of December 31,

2020

2019

US$

RMB

ASSETS

Current assets:

Cash and cash equivalents

12,677

86,072

157,600

Restricted cash

2,006

13,621

–

Short term investments, available for sale

26,898

182,629

57,487

Short term investments, held to maturity

4,419

30,000

31,000

Accounts receivable, net

3,616

24,549

17,939

Amounts due from related parties

907

6,159

2,318

Prepaid and other current assets, net

23,150

157,177

133,296

Total current assets

73,673

500,207

399,640

Non-current assets:

Property and equipment, net

21,603

146,678

157,463

Land use rights, net

254

1,726

1,759

Intangible assets, net

8,168

55,458

56,607

Goodwill

3,787

25,710

60,353

Deferred tax assets, net

538

3,653

10,195

Operating lease right-of-use asset

38,704

262,787

257,361

Finance lease right-of-use asset

884

6,000

6,450

Other non-current assets, net

12,429

84,388

70,971

Total non-current assets

86,367

586,400

621,159

Total assets

160,040

1,086,607

1,020,799

LIABILITIES

Current liabilities:

Short-term borrowings  *

2,948

20,013

–

Deferred revenue  *

37,906

257,368

165,111

Accounts payable  *

2,284

15,500

14,718

Accrued and other liabilities  *

27,277

185,203

192,957

Income taxes payable, current  *

27,060

183,729

180,715

Amounts due to related parties  *

718

4,876

1,971

Operating lease liability, current  *

7,459

50,642

53,512

Total current liabilities

105,652

717,331

608,984

Non-current liabilities:

Income taxes payable, non-current  *

5,094

34,589

32,152

Operating lease liability, non-current  *

34,723

235,756

216,067

Total non-current liabilities

39,817

270,345

248,219

Total liabilities

145,469

987,676

857,203

EQUITY

Preferred shares

(US$ 0.003 par value;1,666,667 shares
  authorized, nil issued and outstanding as of
  December 31, 2019 and September 30,
  2020) 

–

–

–

Class A O
rdinary shares

(US$0.003 par value; 66,666,667 and
  66,666,667 shares authorized, 38,858,199
  and 38,895,700 shares issued and
  outstanding as of December 31, 2019 and
  September 30, 2020, respectively)

108

731

730

Class C O
rdinary shares

(US$0.003 par value; 8,333,333 and 8,333,333
  shares authorized, 4,708,415 and 4,708,415
  shares issued and outstanding as of
  December 31, 2019 and September 30,
  2020, respectively)

13

90

90

Additional paid-in capital

516,868

3,509,330

3,508,745

Statutory reserve

620

4,210

20,185

Accumulated deficit

(505,202)

(3,430,122)

(3,371,815)

Accumulated other comprehensive income

2,420

16,429

6,341

Total Ambow Education Holding Ltd.’s equity

14,827

100,668

164,276

Non-controlling interests

(256)

(1,737)

(680)

Total equity

14,571

98,931

163,596

Total liabilities and equity

160,040

1,086,607

1,020,799

*  All of the VIE’s assets can be used to settle obligations of their primary beneficiary. Liabilities recognized as a result of
consolidating these VIEs do not represent additional claims on the Company’s general assets.

AMBOW EDUCATION HOLDING LTD.

UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS

(All amounts in thousands, except for share and per share data)

For the nine months ended September 30,

For the three months ended September 30,

2020

2020

2019

2020

2020

2019

US$

RMB

RMB

US$

RMB

RMB

NET REVENUES

 Educational program and 
  services

52,742

358,098

409,367

16,560

112,439

126,729

Intelligent program and 
  services

52

352

1,193

40

269

(173)

Total net revenues

52,794

358,450

410,560

16,600

112,708

126,556

COST OF REVENUES

 Educational program and 
  services

(40,898)

(277,683)

(265,454)

(15,518)

(105,359)

(92,934)

Intelligent program and 
  services

(345)

(2,340)

(5,818)

(130)

(882)

(1,109)

Total cost of revenues

(41,243)

(280,023)

(271,272)

(15,648)

(106,241)

(94,043)

GROSS PROFIT

11,551

78,427

139,288

952

6,467

32,513

Operating expenses:

Selling and marketing

(5,576)

(37,861)

(40,778)

(2,011)

(13,655)

(15,607)

General and administrative

(18,739)

(127,230)

(140,510)

(6,331)

(42,987)

(48,116)

Research and development

(656)

(4,456)

(1,555)

(259)

(1,758)

(1,087)

Impairment loss

(5,405)

(36,699)

(38,754)

(5,405)

(36,699)

(38,754)

Total operating expenses

(30,376)

(206,246)

(221,597)

(14,006)

(95,099)

(103,564)

OPERATING LOSS

(18,825)

(127,819)

(82,309)

(13,054)

(88,632)

(71,051)

OTHER INCOME (EXPENSES)

Interest income

1,053

7,150

3,343

444

3,015

1,823

Foreign exchange gain (loss),
  net

5

31

46

(1)

(4)

45

Other income (loss), net

124

840

193

(105)

(712)

7

Gain from deregistration of
  subsidiaries

584

3,967

1,279

10

70

–

Gain on disposal of
  subsidiaries

111

752

–

111

752

–

Gain on the bargain purchase

5,932

40,273

–

–

–

–

Gain on sale of investment
  available for sale

365

2,477

422

209

1,421

3

Total other income

8,174

55,490

5,283

668

4,542

1,878

LOSS BEFORE INCOME
  TAX AND NON-
  CONTROLLING
  INTEREST

(10,651)

(72,329)

(77,026)

(12,386)

(84,090)

(69,173)

Income tax expense

(353)

(2,399)

(11,032)

(114)

(776)

(3,634)

NET LOSS

(11,004)

(74,728)

(88,058)

(12,500)

(84,866)

(72,807)

(153)

(1,040)

(269)

(49)

(332)

4

NET LOSS ATTRIBUTABLE
  TO ORDINARY
  SHAREHOLDERS

(10,851)

(73,688)

(87,789)

(12,451)

(84,534)

(72,811)

NET LOSS

(11,004)

(74,728)

(88,058)

(12,500)

(84,866)

(72,807)

OTHER
  COMPREHENSIVE
  INCOME, NET OF TAX

Foreign currency translation
    adjustments

1,581

10,731

(3,267)

354

2,403

(93)

Unrealized gains on short term
    investments

  Unrealized holding gains
    arising during period

224

1,518

1,238

85

578

538

  Less: reclassification
    adjustment for gains
    included in net income

318

2,161

489

220

1,493

37

Other comprehensive income
    (loss)

1,487

10,088

(2,518)

219

1,488

408

TOTAL
  COMPREHENSIVE
  LOSS

(9,517)

(64,640)

(90,576)

(12,281)

(83,378)

(72,399)

Net loss per share – basic and
  diluted

(0.25)

(1.69)

(2.02)

(0.29)

(1.94)

(1.67)

Weighted average shares used
  in calculating basic and
  diluted net loss per share

43,583,448

43,583,448

43,496,848

43,595,871

43,595,871

43,512,447

AMBOW EDUCATION HOLDING LTD.

UNAUDITED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(All amounts in thousands, except for share and per share data)

Attributable to Ambow Education Holding Ltd.’s Equity

Retained

Accumulated

 Class A Ordinary

Class C Ordinary

Additional

Earnings

other

Non-

shares

shares

paid-in

Statutory

(Accumulated

comprehensive

controlling

Total

Shares

Amount

Shares

Amount

capital

reserves

deficit)

income

Interest

Equity

RMB

RMB

RMB

RMB

RMB

RMB

RMB

RMB

Balance as of January 1,
  2020

38,858,199

730

4,708,415

90

3,508,745

20,185

(3,372,409)

6,341

(680)

163,002

Share-based compensation

–

–

–

–

238

–

–

–

–

238

Issuance of ordinary shares 
  for restricted stock award

12,500

0

–

–

(0)

–

–

–

–

–

Foreign currency translation
  adjustment

–

–

–

–

–

–

–

433

–

433

Unrealized gain on
  investment, net of income
  taxes

–

–

–

–

–

–

–

154

–

154

Net income/(loss)

–

–

–

–

–

–

6,039

–

(412)

5,627

Balance as of March 31,
  2020

38,870,699

730

4,708,415

90

3,508,983

20,185

(3,366,370)

6,928

(1,092)

169,454

Share-based compensation

–

–

–

–

242

–

–

–

–

242

Issuance of ordinary shares
  for restricted stock award

12,500

1

–

–

(1)

–

–

–

–

–

Foreign currency translation
  adjustment

–

–

–

–

–

–

–

7,895

–

7,895

Unrealized gain on
  investment, net of income
  taxes

–

–

–

–

–

–

–

118

–

118

Deregistration of
  subsidiaries

–

–

–

–

–

(15,473)

15,473

–

–

–

Net income/(loss)

–

–

–

–

–

–

4,807

–

(297)

4,510

Balance as of June 30,
  2020

38,883,199

731

4,708,415

90

3,509,224

4,712

(3,346,090)

14,941

(1,389)

182,219

Share-based compensation

–

–

–

–

239

–

–

–

–

239

Issuance of ordinary shares
  for restricted stock award

12,501

0

–

–

(0)

–

–

–

–

–

Foreign currency translation
  adjustment

–

–

–

–

–

–

–

2,403

–

2,403

Unrealized gain on
  investment, net of income
  taxes

–

–

–

–

–

–

–

(915)

–

(915)

Deregistration of subsidiary

–

–

–

–

–

–

–

–

(16)

(16)

Disposal of subsidiaries

–

–

–

–

(133)

(502)

502

–

–

(133)

Net loss

–

–

–

–

–

–

(84,534)

–

(332)

(84,866)

Balance as of
  September 30, 2020

38,895,700

731

4,708,415

90

3,509,330

4,210

(3,430,122)

16,429

(1,737)

98,931

Balance as of January 1,
  2019

38,756,289

728

4,708,415

90

3,507,123

20,149

(3,271,838)

8,305

(1,786)

262,771

Share-based compensation

–

–

–

–

872

–

–

–

–

872

Issuance of ordinary shares
  for restricted stock award

28,646

1

–

–

(1)

–

–

–

–

–

Foreign currency translation
  adjustment

–

–

–

–

–

–

–

(2,428)

–

(2,428)

Unrealized gain on
  investment, net of income
  taxes

–

–

–

–

–

–

–

75

–

75

Net loss

–

–

–

–

–

–

(23,756)

–

(93)

(23,849)

Balance as of March 31,
  2019

38,784,935

729

4,708,415

90

3,507,994

20,149

(3,295,594)

5,952

(1,879)

237,441

Share-based compensation

–

–

–

–

266

–

–

–

–

266

Issuance of ordinary shares
  for restricted stock award

19,097

0

–

–

(0)

–

–

–

–

–

Foreign currency translation
  adjustment

–

–

–

–

–

–

–

(746)

–

(746)

Unrealized gain on
  investment, net of income
  taxes

–

–

–

–

–

–

–

173

–

173

Addition of noncontrolling
  interests resulting from
  new subsidiaries

–

–

–

–

–

–

–

–

502

502

Net income (loss)

–

–

–

–

–

–

8,778

–

(180)

8,598

Balance as of June 30,
  2019

38,804,032

729

4,708,415

90

3,508,260

20,149

(3,286,816)

5,379

(1,557)

246,234

Share-based compensation

–

–

–

–

244

–

–

–

–

244

Foreign currency translation
  adjustment

–

–

–

–

–

–

–

(93)

–

(93)

Unrealized gain on
  investment, net of income
   taxes

–

–

–

–

–

–

–

501

–

501

Net (loss) / income

–

–

–

–

–

–

(72,811)

–

4

(72,807)

Balance as of
  September 30, 2019

38,804,032

729

4,708,415

90

3,508,504

20,149

(3,359,627)

5,787

(1,553)

174,079

Discussion of Segment Operations

(All amounts in thousands)

For the nine months ended September 30,

For the three months ended September 30,

2020

2020

2019

2020

2020

2019

US$

RMB

RMB

US$

RMB

RMB

NET REVENUES

K-12 Schools

27,360

185,766

203,214

8,685

58,966

52,256

CP&CE Programs 

25,434

172,684

207,346

7,915

53,742

74,300

Total net revenues

52,794

358,450

410,560

16,600

112,708

126,556

COST OF REVENUES

K-12 Schools

(17,670)

(119,972)

(128,887)

(6,692)

(45,430)

(38,794)

CP&CE Programs 

(23,573)

(160,051)

(142,385)

(8,956)

(60,811)

(55,249)

Total cost of revenues

(41,243)

(280,023)

(271,272)

(15,648)

(106,241)

(94,043)

GROSS PROFIT

K-12 Schools

9,690

65,794

74,327

1,993

13,536

13,462

CP&CE Programs 

1,861

12,633

64,961

(1,041)

(7,069)

19,051

Total gross profit

11,551

78,427

139,288

952

6,467

32,513