Ambow Education Announces Second Quarter 2011 Unaudited Financial Results

BEIJING, Aug. 24, 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 second quarter of 2011.

Financial Highlights for the Quarter Ended June 30, 2011:

• Total net revenues increased 26.1% to $77.8 million(1) from $61.7 million for the same period in 2010.
  • Tutoring revenues increased 20.3% to $33.7 million from $28.0 million for the same period in 2010.
  • Career Enhancement revenues increased 90.0% to $20.8 million from $11.0 million for the same period in 2010.
  • The growth layer, which consists of Tutoring and Career Enhancement, achieved 39.9% year-over-year revenue growth. Excluding revenue of $6.2 million from acquisition, our organic growth is 24.0%.
• EBITDA(2) increased 27.3% to $25.2 million from $19.8 million for the same period in 2010.
• Operating income increased 33.3% to $20.4 million from $15.3 million for the same period in 2010.
• Net income(3) increased 22.2% to $16.7 million from $13.6 million for the same period in 2010.
• Diluted non-GAAP net income per adjusted ADS attributable to Ambow(4) increased to $0.24 as compared to $0.22 for the same period in 2010.
• Total student enrollments increased to 298,000.

Financial Highlights for the Six Months Ended June 30, 2011:

• Total net revenues increased 27.5% to $130.0 million from $102.0 million for the same period in 2010.
  • Tutoring revenues increased 22.1% to $59.3 million from $48.6 million for the same period in 2010.
  • Career Enhancement revenues increased 98.8% to $32.8 million from $16.5 million for the same period in 2010.
  • The growth layer, which consists of Tutoring and Career Enhancement, achieved 41.5% year-over-year revenue growth. Excluding revenue of $8.3 million from acquisition, our organic growth is 28.8%.
• EBITDA increased 28.0% to $32.9 million from $25.7 million for the same period in 2010.
• Operating income increased 38.1% to $23.3 million from $16.9 million for the same period in 2010.
• Net income increased 27.7% to $18.2 million from $14.2 million for the same period in 2010.
• Diluted non-GAAP net income per adjusted ADS attributable to Ambow increased to $0.27 as compared to $0.25 for the same period in 2010.
• Total student enrollments increased to 497,000.

Commenting on the second 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 growth and profitability in our growth layer. We will continue to focus on growing our Tutoring and Career Enhancement services organically and satisfying the immense demand for these services through our diversified offerings. Turning to acquisitions, we are going to continue our disciplined strategy to expand Ambow's footprint and offerings throughout China. We completed one acquisition during the quarter and we are in the process of closing another. We expect our acquisition will contribute less than 10% of our annual revenue."

Dr. Huang continued, "Looking at our growth layer, we are pleased to report a 41.5% combined year-over-year revenue growth rate in the first half of 2011, with much of this increase driven by organic revenue growth in Career Enhancement. During the second quarter, we maintained our market leadership position in Career Enhancement, experiencing strong revenue and enrollment growth for consecutive quarters. We continue to experience growth in the demand for our broad range of Career Enhancement products and services, which are tailor made to improve an individual's competitive edge in the job market. In addition, we announced new joint cooperation agreements with Cisco, Apple and Microsoft."

"I also want to mention a notable accomplishment during the quarter. Two of our Changsha K-12 School students, one Science and one Fine Arts major, received the highest scores on the Chinese National University Entrance Exam in Hunan Province. As part of our strategic plan, we have been developing international programs in two of our K-12 schools since 2008. We are excited to report that we have achieved excellent academic results in these programs, with over 40% of our first-year international program graduates admitted to top 100 global universities. These are exceptional achievements, especially for private K-12 Schools, and a true reflection of our commitment to improving teaching quality," Dr. Huang concluded.

Ambow's Chief Financial Officer Paul Chow added, "Turning to our business segments, I am very pleased that our growth layer achieved 24% organic growth this quarter and 28.8% organic growth for the first half of 2011. In the second quarter of 2011, we made progress in increasing our operating efficiency and improved our operating margins by 1.4% and our EBITDA margin by 0.3%, primarily as a result of better economies of scale related to general and administrative expenses.

"During the quarter, we accelerated our investment in our Tutoring segment by adding 12 new learning centers, which supports our goal to open 30 centers by the end of 2011. The majority of our new learning centers have been concentrated in cities where we plan to establish a market leadership position. We expect to see revenue contribution from these new centers as they ramp up over the coming quarters. At of end of the second quarter, we had 121 Tutoring learning centers, 25 Career Enhancement centers and one campus across 18 provinces, covering 25 cities. We will open one more campus in Dalian in the third quarter," concluded Mr. Chow.

Financial Results for the Second Quarter of 2011:

Net Revenues

Total net revenues for the second quarter of 2011 were $77.8 million, increasing 26.1% year-over-year from $61.7 million for the same period in 2010.

Better Schools

Tutoring revenue increased 20.3% to $33.7 million from $28.0 million in the same period in 2010. The Company noted the revenue growth in Tutoring was a result of balanced 11.9% growth in enrollment and 7.5% growth in Average Selling Price ("ASP").

K-12 Schools revenue increased 5.5% to $12.2 million from $11.5 million in the same period in 2010.

Total student enrollments in Better Schools for the second quarter of 2011 was approximately 262,000, with 239,000 in Tutoring and 23,000 in K-12 Schools.

Better Jobs

Career Enhancement revenue accounted for $20.8 million of total net revenues for the second quarter of 2011, compared to $11.0 million for the same period in 2010. The Company noted Career Enhancement revenue grew a record 90.0% year-over-year, with an impressive 82.3% growth in enrollments and a 4.2% increase in ASP. The growth in enrollments was driven by the expansion of entry-level products and services. The Company also expanded its advanced level products and services to enlarge its market coverage and improve its market leadership position.

Colleges accounted for $11.1 million of total net revenues for the second quarter of 2011, remaining flat compared to the same period in 2010.

Total student enrollments in Better Jobs for the second quarter of 2011 was approximately 36,000, with 24,000 in Career Enhancement and over 12,000 in Colleges.

Gross Profit and Gross Margin

Overall gross profit increased 27.1% to $47.4 million for the second quarter of 2011, compared to $37.3 million for the same period in 2010. Gross margin was 60.9% for the second quarter of 2011 compared to 60.4% for the same period in 2010. The Company noted that the improvement was primarily attributable to a larger portion of revenue contributed by Career Enhancement which has the highest gross margin.

Operating Expenses

Operating expenses, which include selling and marketing, general and administrative and research and development expenses, were $26.9 million for the second quarter of 2011, increasing 22.8% year-over-year from $21.9 million for the same period in 2010. Operating expenses as a percentage of total net revenues were 34.6% for the second quarter of 2011, compared to 35.6% for the same period in 2010. The Company noted that the decrease in operating expenses as a percentage of total revenue was mainly due to decreased general and administrative expenses associated with improved economies of scale.

Income Tax Expenses

Income tax expenses were $2.5 million for the second quarter of 2011, compared to income tax expenses of $1.3 million for the same period in 2010.

Net Income and EBITDA

Net income was $16.7 million for the second quarter of 2011, increasing 22.2% year-over-year from $13.6 million for the same period in 2010.

Non-GAAP net income(5) was $17.9 million for the second quarter of 2011, increasing 18.2% year-over-year from $15.1 million for the same period in 2010.

Basic and diluted non-GAAP net income per adjusted ADS(6) attributable to Ambow was $0.25 and $0.24, respectively, compared to $0.24 and $0.22, respectively, for the same period in 2010.

EBITDA was $25.2 million for the second quarter of 2011, increasing 27.3% year-over-year, compared to $19.8 million for the same period in 2010. EBITDA margin was 32.4%, compared to 32.1% for the same period in 2010.

Balance Sheet

Cash and cash equivalents, restricted cash and term deposits as of June 30, 2011 were $85.6 million, compared to $127.0 million as of March 31, 2011. This change is primarily due to seasonality, capital expenditures and acquisition related costs made during the quarter.

The Company's deferred revenue balances as of June 30, 2011 and June 30, 2010 were $49.7 million and $39.4 million, respectively.

Financial Results for the Six Months Ended June 30, 2011:

Net Revenues

Total net revenues for the six months ended June 30, 2011 were $130.0 million, increasing 27.5% year-over-year from $102.0 million for the same period in 2010.

Better Schools

Tutoring accounted for $59.3 million of total net revenues for the six months ended June 30, 2011, compared to $48.6 million for the same period in 2010. The Company noted the revenue growth in Tutoring was a result of balanced 12.0% growth in enrollments and 9.0% growth in Average Selling Price ("ASP").

K-12 Schools accounted for $20.5 million of total net revenues for the six months ended June 30, 2011, compared to $19.4 million for the same period in 2010.

Total student enrollments in Better Schools during the six months ended June 30, 2011 was approximately 443,000, with 420,000 in Tutoring and 23,000 in K-12 Schools.

Better Jobs

Career Enhancement accounted for $32.8 million of total net revenues for the six months ended June 30, 2011, compared to $16.5 million for the same period in 2010. The Company noted Career Enhancement revenue grew a record 98.8% year-over-year, with an impressive 93.1% growth in enrollment and a 3.0% increase in ASP. The growth in enrollment was driven by the expansion of the Company's entry-level products and services. Ambo also expanded its advanced level products and services to enlarge its market coverage and improve its market leadership position.

Colleges accounted for $17.4 million of total net revenues for the six months ended June 30, 2011, compared to $17.5 million for the same period in 2010.

Total student enrollments in Better Jobs during the six months ended June 30, 2011 was approximately 54,000, with 42,000 in Career Enhancement and over 12,000 in Colleges.

Gross Profit and Gross Margin

Gross profit increased 28.1% to $74.1 million for the six months ended June 30, 2011, compared to $57.9 million for the same period in 2010. Gross margin was 57.0% for the six months ended June 30, 2011, compared to 56.8% for the same period in 2010. The Company noted that the improvement was primarily attributable to a larger portion of revenue contributed by Career Enhancement which has the highest margin.

Operating Expenses

Operating expenses, which include selling and marketing, general and administrative and research and development expenses, were $50.8 million for the six months ended June 30, 2011, increasing 24.0% year-over-year from $41.0 million for the same period in 2010. Operating expenses as a percentage of total net revenues were 39.1% for the six months ended June 30, 2011, compared to 40.2% for the same period in 2010. The Company noted that the decreased operating expense as a percentage of total revenue was mainly due to decreased general and administrative expenses associated with improved economies of scale.

Income Tax Expenses

Income tax expenses were $2.7 million for the six months ended June 30, 2011, compared to income tax expenses of $1.9 million for the same period in 2010.

Net Income and EBITDA

Net income was $18.2 million for the six months ended June 30, 2011, increasing 27.7% year-over-year from $14.2 million for the same period in 2010.

Non-GAAP net income was $20.4 million for the six months ended June 30, 2011, increasing 23.1% year-over-year from $16.6 million for the same period in 2010.

Basic and diluted non-GAAP net income per adjusted ADS attributable to Ambow was $0.29 and $0.27, respectively, compared to $0.26 and $0.25, respectively, for the same period in 2010.

EBITDA was $32.9 million for the six months ended June 30, 2011, increasing 28.0% year-over-year, compared to $25.7 million for the same period in 2010. EBITDA margin was 25.3%, compared to 25.2% for the same period in 2010.

Financial Outlook for the Third Quarter and Full-Year 2011

The Company expects total net revenues in the third quarter of 2011 to be in the range of $64 million (Rmb415 million) to $67 million (Rmb430 million).

The Company expects net revenue for 2011 full-year to be in the estimated range of $276 million (Rmb1,785 million) to $280 million (Rmb1,810 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 August 25, 2011 (8:00 p.m. Beijing/Hong Kong Time on August 25, 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 third 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 annual report on Form 20-F filed on April 14, 2011. 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 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.

SOURCE Ambow Education Holding Ltd.