Ambow Education Announces Strong First Quarter 2011 Unaudited Financial Results
Net Revenues Increased 29.6% Year-Over-Year
Net Income Attributable to Ambow Increased 151.6% Year-Over-Year
BEIJING, May 18, 2011 /PRNewswire-Asia/ -- Ambow Education Holding Ltd. ("Ambow" or the "Company") (NYSE:AMBO - News), a leading national provider of educational and career enhancement services in China, today reported its unaudited financial results for the first quarter of 2011.
Financial Highlights for the Quarter Ended March 31, 2011:
Total net revenues increased 29.6% to $51.5 million(1) from $39.7 million for the same period in 2010. Existing business contributed 24.2% growth, while 5.4% came from acquisitions.
Tutoring revenues increased 24.6% to $25.3 million from $20.3 million for the same period in 2010.
Career Enhancement revenues increased 116.2% to $11.8 million from $5.5 million for the same period in 2010.
Net income(2) increased 151.6% to $1.5 million from $0.6 million for the same period in 2010.
Operating income increased 86.5% to $2.8 million from $1.5 million for the same period in 2010.
Adjusted EBITDA(3) increased 28.9% to $8.6 million from $6.7 million for the same period in 2010.
Total student enrollments increased 16% year-over-year to 234,000.
Commenting on the first quarter results, Ambow's President and Chief Executive Officer Dr. Jin Huang said, "We are pleased to report that Ambow started the year with a strong quarter, highlighted by impressive revenue and net income growth. Ambow is the only listed company in the education sector that is able to address two fundamental market demands in China - the desire to get into a better school and the desire to get a better job. Our business objective is to acquire more and more students and retain them through Ambow's education services platform."
Dr. Huang continued, "We continue to execute our strategy to maintain sustained growth in order to provide quality services to more students. A highlight of our first quarter was the robust growth in our Career Enhancement segment, where we experienced a 116.2% increase in revenues and a 110.2% increase in enrollment year-over-year. We have seen great demand in our Career Enhancement segment, where Ambow is a clear market leader. Our strategy is to continue to increase market penetration with a broad range of products and services tailored to meet the demands of people pursuing career development."
"Turning to acquisitions, we closed five acquisitions during the quarter, which is in line with our strategy to expand Ambow's footprint and offerings throughout China. Given the nature of China's highly fragmented education market and our proven ability to successfully identify and integrate acquisition targets, we believe we are well positioned to consolidate this market," said Dr. Huang.
Ambow's Chief Financial Officer Paul Chow added, "I'm pleased to report that our net revenues increased 29.6% year-over-year, with 24.2% of revenues growth attributable to existing business and 5.4% attributable to acquisitions. Our net income attributable to the Company increased by 151.6% year-over-year, despite the seasonal effect of school and public holidays, which always makes the first quarter challenging. In addition, our operating margin improved 1.7% to 5.4% in the first quarter of 2011."
Mr. Chow continued, "Turning to margins, net income margin(4) improved 1.4% to 2.9% in the first quarter of 2011. The Company's net margin is traditionally lowest in the first quarter as it is subject to seasonality. Adjusted EBITDA margin was 16.7% in the first quarter of 2011. Ambow's depreciation and amortization constitute a relatively high percentage of revenue, so adjusted EBITDA is a particularly useful metric for understanding Ambow's profitability."
Financial Results for the First Quarter of 2011
Net Revenues
Total net revenues for the first quarter of 2011 increased 29.6% to $51.5 million from $39.7 million for the same period in 2010. This improvement was primarily the result of strong revenues contribution from Career Enhancement and Tutoring.
Net Revenue Breakdown by Key Operating Segments:
Better Schools
Better Schools increased 19.7% to $33.5 million, with Tutoring and K-12 Schools accounting for $25.2 million and $8.3 million of total net revenues, respectively, for the first quarter of 2011.
The Company noted that Tutoring revenues grew 24.6% year-over-year, with a balanced 12.2% growth in enrollments and 11.1% growth in Average Selling Price ("ASP").
Total student enrollments in Better Schools during the first quarter of 2011 was approximately 204,000, with 181,000 in Tutoring and 23,000 in K-12 Schools. Compared with the same period in 2010, there was a 11.4% increase in total Better Schools enrollments, with an increase of 12.2% and an increase of 5.4% for Tutoring and K-12 Schools enrollments, respectively.
Better Jobs
Better Jobs increased 53.2% to $18.0 million, with Career Enhancement and Colleges accounting for $11.8 million and $6.2 million of total net revenues, respectively, for the first quarter of 2011.
The Company noted that Career Enhancement revenues grew a record 116.2% year-over-year, with an impressive 110.2% growth in enrollments to 18,000 and a 2.8% increase in ASP. This revenue increase was primarily driven by strong growth in existing business (83%) with the remaining growth attributable to acquisition activities.
Total student enrollments in Better Jobs during the first quarter of 2011 was approximately 30,000, with 18,000 in Career Enhancement and over 12,000 in Colleges. Compared with the same period in 2010, there was a 44.0% increase in total Better Jobs enrollments, with an increase of 110.2% in Career Enhancement enrollments, while enrollments in Colleges remained flat.
Gross Profit and Gross Margin
Gross profit was $26.4 million for the first quarter of 2011, increasing 29.8% year-over-year from $20.3 million for the same period in 2010. Gross margin was 51.2% for the first quarter of 2011, compared to 51.1% for the same period in 2010.
Operating Expenses
Operating expenses, which include selling and marketing, general and administrative and research and development expenses, were $23.6 million for the first quarter of 2011, increasing 25.3% year-over-year from $18.8 million for the same period in 2010. This increase is mainly attributable to the increased expense of being a public company, costs related to recent acquisitions and a higher number of centers as compared to the first quarter of 2010. The increased operating expenses are primarily due to the Company's continued investment in growth, which is necessary to support Ambow's continued business expansion.
Operating expenses, as a percentage of revenues, improved 1.6%, from 47.4% in the first quarter of 2010 to 45.8% in the same period in 2011. Selling and marketing expenses, as a percentage of revenues, decreased 2.2%, from 19.9% to 17.7%, as a result of operating efficiency contributing to revenues growth. General and administrative expenses, as a percentage of revenue, remained nearly flat at 25.8%, a slight increase compared to 25.5% for the same period in 2010. General and administrative expenses include increased expenses attributable to being a public company. Research and development expenses, as a percentage of revenues, were 2.3%, a slight increase compared to 2.0% for the same period in 2010. The research and development expenses are consistent with the Company's strategy to support future business growth. The Company believes that continued investments in growth, and the associated increases in operating expenses, will support its continued business expansion.
Income Tax Expenses
Our income tax expenses were $236,000 for the first quarter of 2011 compared to income tax expenses of $570,000 for the same period in 2010. The Group anticipates that in 2011 it will be able to utilise certain tax losses brought forward and take advantage of tax exemptions for a recently established entity, resulting in a full-year effective tax rate of 10% compared to 15% in 2010.
Net Income
Net income was $1.5 million for the first quarter of 2011, increasing 151.6% year-over-year from $0.6 million for the same period in 2010. Net income margin was 2.9%, improving 1.4%, compared to net income margin of 1.5% for the same period in 2010. Basic and diluted net income per adjusted ADS(5) attributable to Ambow was $0.02, compared to net income per adjusted ADS of $0.01 for the same period in 2010.
Non-GAAP net income(6) was $2.5 million for the first quarter of 2011, increasing 72.4% year-over-year, compared to $1.5 million for the same period in 2010. Non-GAAP net income margin(7) was 4.9% for the first quarter of 2011, compared to 3.7% for the same period in 2010. Basic and diluted non-GAAP net income per adjusted ADS attributable to Ambow(8) was $0.04 and $0.03, respectively, compared to $0.02 for the same period in 2010.
Adjusted EBITDA
Adjusted EBITDA was $8.6 million for the first quarter of 2011, increasing 28.9% year-over-year, compared to $6.7 million for the same period in 2010. Depreciation and amortization in the first quarter of 2011 was $5.0 million as compared to $4.2 million in the same period 2010.
Adjusted EBITDA margin(9) was 16.7%, compared to 16.8% for the same period in 2010. Depreciation and amortization as a percentage of revenue was 9.7%.
Balance Sheet and Cash Flow Information
Cash and cash equivalents, restricted cash and term deposits as of March 31, 2011 were $125.3 million, compared to $141.8 million as of December 31, 2010. The reduction in cash is mainly due to payments for acquisitions and deposits in connection with establishing the Company's Career Enhancement Center.
The Company's deferred revenue balance as of March 31, 2011 was $72.9 million compared to $68.1 million as of March 31, 2010, an increase of 7.1%. Deferred revenue includes tuition fees from enrolled students for courses not yet delivered as of the period ended March 31, 2011.
Financial Outlook for the Second Quarter of Full-Year 2011
Ambow expects total net revenues for the second quarter of 2011 to be in the range of $74.8 million (Rmb490 million) to $76.4 million (Rmb500 million).
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