BEIJING, Sept. 8, 2023 /PRNewswire/ -- Gravitas Education Holdings, Inc. ("GEHI" or the "Company") (NYSE: GEHI), a leading early childhood education service provider in China and Singapore, today announced its unaudited financial results for the first half of 2023.

The Company's Acquisition of eLMTree and Divestiture of its PRC Business

The Company announced on April 18, 2023, that it has entered into an agreement and plan of merger (the "Merger Agreement"), dated April 18, 2023, with Bright Sunlight Limited, a Cayman Islands exempted company and a direct, wholly owned subsidiary of the Company (the "Merger Sub"), Best Assistant Education Online Limited, a Cayman Islands exempted company ("Best Assistant") and a controlled subsidiary of NetDragon Websoft Holdings Limited (HKEX: 0777, "NetDragon"), a Cayman Islands exempted company, and solely for purposes of certain named sections thereof, NetDragon. It is contemplated that Best Assistant will transfer the education business of NetDragon outside of the PRC to Elmtree Inc., a Cayman Islands exempted company limited by shares ("eLMTree") and currently a wholly owned subsidiary of Best Assistant. Pursuant to the Merger Agreement, Merger Sub will merge with and into eLMTree with eLMTree continuing as the surviving company and becoming a wholly owned subsidiary of the Company (the "Merger").

Concurrent with the execution of the Merger Agreement, the Company has entered into a share purchase agreement (the "Divestiture Agreement") with Rainbow Companion, Inc. (the "Divestiture Purchaser"), a purchaser consortium formed by Joy Year Limited, Bloom Star Limited, Ascendent Rainbow (Cayman) Limited (and its affiliates), Trump Creation Limited and China Growth Capital Limited. Pursuant to the Divestiture Agreement, immediately prior to the Closing, the Company will transfer all its education business in China to the Divestiture Purchaser (the "Divestiture"). Upon completion of the Divestiture, the Company will cease to operate any education business in China.

As the Company will divest its China business, the Company's China operations and its associated assets and liabilities have been reclassified as discontinued operations in the financial results. After the Divestiture, the Company's Singapore operations and its associated assets and liabilities will continue to remain with the Company. As the Merger has not closed, the financial information of eLMTree is not included in the Company's financial results for the first six months of 2023. For the unaudited pro forma condensed combined financial information which presents the combined financial information of the Company following the Divestiture and eLMTree after giving effect to the Merger, please refer to the proxy statement for extraordinary general meeting of the Company that was included in our current report on Form 6-K filed with the Securities and Exchange Commission on July 31, 2023.

First Six Months of 2023 Financial Results

  • Net revenues from continuing operations were US$18.0 million, compared with US$15.3 million for the first six months of 2022.
  • Gross profit from continuing operations was US$2.7 million, compared with US$1.0 million for the first six months of 2022.
  • Net loss from continuing operations attributable to ordinary shareholders of GEHI for the first six months of 2023 was US$2.2 million, compared with US$1.1 million for the same period of 2022. Adjusted net loss from continuing operations attributable to ordinary shareholders[1] of GEHI for the first six months of 2023 was US$2.1 million, compared with US$1.0 million for the same period of 2022.

    Net loss attributable to ordinary shareholders of GEHI for the first six months of 2023 was US$4.5 million, compared with US$26.8 million of net income attributable to ordinary shareholders of GEHI for the same period of 2022. Adjusted net loss attributable to ordinary shareholders[1] of GEHI for the first six months of 2023 was US$4.1 million, compared with US$27.3 million of adjusted net income attributable to ordinary shareholders[1] of GEHI for the same period of 2022.

First Six Months of 2023 Financial Results

Net Revenues from Continuing Operations

Net revenues from continuing operations for the first six months of 2023 were US$18.0 million, an increase of 17.9% from US$15.3 million for the same period of 2022.

Revenues from kindergarten services from continuing operations for the first six months of 2023 were US$9.5 million, an increase of 18.5% from US$8.0 million for the same period last year. The increase in our revenues generated from kindergarten services was primarily due to a 3.3% increase in the average number of students from 1,412 to 1,459, and a 14.7% increase in the average tuition and fees from US$933 to US$1,070 during the comparison periods.

Revenues from student care center services from continuing operations for the first six months of 2023 were US$7.8 million, an increase of 17.1% from US$6.7 million for the same period last year. The increase in our revenues generated from student care center services was primarily due to a 18.5% increase in the average number of students from 5,757 to 6,820.

Revenues from franchise services from continuing operations for the first six months of 2023 were US$0.7 million, an increase of 18.1% from US$0.6 million for the same period last year. The increase in our revenues generated from franchise services was primarily due to an increase in the number of franchise facilities.

Cost of Revenues of Continuing Operations

Cost of revenues of continuing operations for the first six months of 2023 was US$15.3 million, compared with US$14.2 million for the first six months of 2022. The increase was primarily due to an increase in staff compensation at the Company's directly operated kindergartens and higher operating cost.

Gross Profit from Continuing Operations

Gross profit from continuing operations for the first six months of 2023 was US$2.7 million, compared with US$1.0 million for the same period last year.

Operating Expenses of Continuing Operations

Total operating expenses of continuing operations for the first six months of 2023 were US$6.0 million, compared with US$3.3 million for the same period last year. Excluding share-based compensation expenses, operating expenses of continuing operations were US$5.8 million for the first six months of 2023, compared with US$3.1 million for the same period last year.

Selling expenses of continuing operations were US$0.3 million for the first six months of 2023, compared with US$0.2 million for the same period last year.

General and administrative expenses of continuing operations for the first six months of 2023 were US$5.7 million, compared with US$3.0 million for the same period last year. Excluding share-based compensation expenses, general and administrative expenses of continuing operations were US$5.5 million for the first six months of 2023, an increase of 90.9% from US$2.9 million for the same period of 2022. The increase in general and administrative expenses excluding share-based compensation expenses was primarily due to the increase in transaction cost related to the Merger.

Operating Loss from Continuing Operations

Operating loss from continuing operations for the first six months of 2023 was US$3.3 million, compared with US$2.2 million for the same period last year. Adjusted operating loss[2] from continuing operations for the first six months of 2023 was US$3.1 million, compared with US$2.1 million for the same period last year.

Net Loss from Continuing Operations

Net loss from continuing operations attributable to ordinary shareholders of GEHI for the first six months of 2023 was US$2.2 million, compared with US$1.1 million for the same period of 2022. Adjusted net loss from continuing operations attributable to ordinary shareholders of GEHI for the first six months of 2023 was US$2.1 million, compared with US$1.0 million for the same period of 2022.

Basic and diluted net loss from continuing operations per American Depositary Share ("ADS") attributable to ordinary shareholders of GEHI for the first six months of 2023 were both US$1.59, compared with both of US$0.79 for the same period of 2022. Each ADS represents twenty Class A ordinary shares.

Adjusted basic and diluted net loss from continuing operations per ADS attributable to ordinary shareholders[3] of GEHI for the first six months of 2023 were both US$1.49 compared with both of US$0.69 for the same period of 2022.

EBITDA[4] from continuing operations for the first six months of 2023 was negative US$1.6 million, compared with negative US$0.1 million for the same period of 2022. Adjusted EBITDA[5] from continuing operations for the first six months of 2023 was negative US$1.4 million, compared with US$31.0 thousand for the same period of 2022.

Net Income/loss from Discontinued Operations

Loss from discontinued operations after taxes for the first six months of 2023 was US$2.4 million, compared with US$4.1 million for the same period last year. Gain on disposal of discontinued operations after taxes for the first six months of 2023 was nil, compared with US$30.5 million for the same period of 2022. This was primarily because the company divested its directly operated kindergarten business and recognized $30.5 million disposal gain in the first half of 2022, while the Divestiture announced on April 18, 2023 has not complete in the first half of 2023 and the company has not recognized any gains from the Divestiture.

Net Income/loss

Net loss attributable to ordinary shareholders of GEHI for the first six months of 2023 was US$4.5 million, compared with US$26.8 million of net income attributable to ordinary shareholders of GEHI for the same period of 2022. This was primarily due to the decrease of US$30.5 million disposal gain the Company recognized from discontinued operation in the first half of 2022.

Adjusted net loss attributable to ordinary shareholders of GEHI for the first six months of 2023 was US$4.1 million, compared with US$27.3 million of adjusted net income attributable to ordinary shareholders of GEHI for the same period of 2022.

Basic and diluted net loss per ADS attributable to ordinary shareholders of GEHI for the first six months of 2023 were both US$3.15, compared with both US$19.11 of basic and diluted net income per ADS attributable to ordinary shareholders of GEHI for the same period of 2022. Each ADS represents twenty Class A ordinary shares.

Adjusted basic and diluted net loss per ADS attributable to ordinary shareholders[3] of GEHI for the first six months of 2023 were both US$2.93, compared with both US$19.42 of adjusted basic and diluted net income per ADS attributable to ordinary shareholders[3] of GEHI for the same period of 2022.

EBITDA for the first six months of 2023 was negative US$3.3 million, compared with US$36.3 million for the same period of 2022. Adjusted EBITDA for the first six months of 2023 was negative US3.0 million, compared with US$36.8 million for the same period of 2022.

 

[1] Adjusted net income (loss) (from continuing operations) attributable to ordinary shareholders is a non-GAAP financial measure, which is defined as net income (loss) (from continuing operations) attributable to ordinary shareholders excluding share-based compensation expenses and changes in redeemable non-controlling interests. See "Use of Non-GAAP Financial Measures" and "Reconciliations of GAAP and non-GAAP results" elsewhere in this earnings release.

[2] Adjusted operating income (loss) is a non-GAAP financial measure, which is defined as operating income (loss) excluding share-based compensation expenses. See "Use of Non-GAAP Financial Measures" and "Reconciliations of GAAP and non-GAAP results" elsewhere in this earnings release.

[3] Adjusted basic and diluted net income (loss) (from continuing operations) per ADS attributable to ordinary shareholders is a non- GAAP financial measure, which is defined as basic and diluted net income (loss) (from continuing operations) per ADS attributable to ordinary shareholders excluding share-based compensation expenses and changes in redeemable non-controlling interest. See "Use of Non-GAAP Financial Measures" and "Reconciliations of GAAP and non-GAAP results" elsewhere in this earnings release.

[4] EBITDA is defined as net income (loss) excluding depreciation, amortization and income tax expenses. See "Use of Non-GAAP Financial Measures" and "Reconciliations of GAAP and non-GAAP results" elsewhere in this earnings release.

[5] Adjusted EBITDA is a non-GAAP financial measure, which is defined as net income (loss) excluding depreciation, amortization, income tax expenses, and share-based compensation expenses. See "Use of Non-GAAP Financial Measures" and "Reconciliations of GAAP and non-GAAP results" elsewhere in this earnings release.

 

About Gravitas Education Holdings, Inc.

Founded on the core values of "Care" and "Responsibility," "Inspire" and "Innovate," Gravitas Education Holdings, Inc. (formerly known as RYB Education, Inc.) is a leading early childhood education service provider in China. Since opening its first play-and-learn center in 1998, the Company has grown and flourished with the mission to provide high-quality, individualized and age-appropriate care and education to nurture and inspire each child for his or her betterment in life. During its two decades of operating history, the Company has built itself into a well-recognized education brand and helped bring about many new educational practices in China's early childhood education industry. GEHI's comprehensive early childhood education solutions meet the needs of children from infancy to 6 years old through structured courses at kindergartens and play-and-learn centers, as well as at-home educational products and services.

Use of Non-GAAP Financial Measures

We use EBITDA, adjusted EBITDA, adjusted operating income, adjusted net income, and adjusted basic and diluted net income per ADS, each a non-GAAP financial measure, in evaluating our operating results and for financial and operational decision-making purposes.

EBITDA is defined as net income excluding depreciation, amortization and income tax expenses; adjusted EBITDA is defined as net income excluding depreciation, amortization, income tax expenses, and share-based compensation expenses; adjusted operating income is defined as operating income excluding share-based compensation expenses; adjusted net income attributable to ordinary shareholders is defined as net income attributable to ordinary shareholders excluding share-based compensation expenses and changes in redeemable non-controlling interest; and adjusted basic and diluted net income per ADS attributable to ordinary shareholders are defined as basic and diluted net income per ADS attributable to ordinary shareholders excluding share-based compensation expenses and changes in redeemable non-controlling interest.

We believe that EBITDA, adjusted EBITDA, adjusted operating income, adjusted net income, and adjusted basic and diluted net income per ADS, help identify underlying trends in our business that could otherwise be distorted by the effect of certain expenses that we include in income from operations and net income. We believe that EBITDA, adjusted EBITDA, adjusted operating income, adjusted net income, and adjusted basic and diluted net income per ADS, provide useful information about our operating results, enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making.

EBITDA, adjusted EBITDA, adjusted operating income, adjusted net income, and adjusted basic and diluted net income per ADS, should not be considered in isolation or construed as an alternative to net income or any other measure of performance or as an indicator of our operating performance. Investors are encouraged to review the historical adjusted financial measures to the most directly comparable GAAP measures. EBITDA, adjusted EBITDA, adjusted operating income, adjusted net income, and adjusted basic and diluted net income per ADS, presented here may not be comparable to similarly titled measures presented by other companies. Other companies may calculate similarly titled measures differently, limiting their usefulness as comparative measures to our data. We encourage investors and others to review our financial information in its entirety and not rely on a single financial measure.

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates," "confident" and similar statements. Statements that are not historical facts, including statements about the Company's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement, including but not limited to the following: the Company's brand recognition and market reputation; student enrollment in the Company's teaching facilities; the Company's growth strategies; its future business development, results of operations and financial condition; trends and competition in China's early childhood education market; changes in its revenues and certain cost or expense items; the expected growth of the Chinese early childhood education market; Chinese governmental policies relating to the Company's industry and general economic conditions in China. Further information regarding these and other risks is included in the Company's filings with the SEC. All information provided in this press release and in the attachments is as of the date of this press release, and the Company undertakes no obligation to update any forward-looking statement, except as required under applicable law.

For investor and media inquiries, please contact: 

In China:
Gravitas Education Holdings, Inc.
Investor Relations
Tel: 86-10-8767-5752
E-mail: ir@geh.com.cn 

 

 

 

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands of U.S. dollars)



As of


June 30,

2023

December 31, 
2022

Current assets:



Cash and cash equivalents

19,753

20,510

Accounts receivable, net 

1,097

658

Inventories

103

96

Prepaid expenses and other current assets

661

691

Amount due from related parties

526

504

Current assets for discontinued operations

12,260

18,786

Total current assets 

34,400

41,245




Non-current assets:



Property, plant and equipment, net

4,979

4,780

Intangible assets, net

5,614

5,647

Deferred tax assets

33

34

Other non-current assets

1,545

1,354

Prepayments to related parties

1,076

1,009

Operating lease right-of-use assets

4,589

5,559

Non-current assets for discontinued operations

17,839

21,045

Total assets 

70,075

80,673




Liabilities 



Current liabilities:



Prepayments from customers, current portion

32

53

Accrued expenses and other current liabilities – third
parties

5,068

3,670

Accrued expenses and other current liabilities –
related parties

344

232

Income tax payable

835

949

Operating lease liabilities, current portion

2,807

2,928

Deferred revenue, current portion

400

892

Current liabilities for discontinued operations

19,540

23,509

Total current liabilities 

29,026

32,233




Non-current liabilities:



Other non-current liabilities

3,509

3,604

Deferred income tax liabilities

950

959

Operating lease liabilities, non-current portion

1,943

2,468

Non-current liabilities for discontinued operations

13,314

16,510

Total liabilities 

48,742

55,774




Mezzanine equity



Redeemable non-controlling interests 

281

111




Equity



Ordinary shares 

29

29

Treasury stock

(6,897)

(7,445)

Additional paid-in capital

134,828

135,060

Statutory reserve

5,293

5,293

Accumulated other comprehensive loss

(1,005)

(1,625)

Accumulated deficit

(111,512)

(107,059)

Total Gravitas Education Holdings, Inc.
shareholders' equity

20,736

24,253

Non-controlling interest

316

535

Total equity

21,052

24,788

Total liabilities, mezzanine equity and total equity

70,075

80,673

 

 

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands of U.S. dollars, except share, ADS, per share and per ADS data)














Six months Ended







June 30,







2023


2022










Net revenues:









  Services









      Services-third parties






17,891


15,188

      Services-related parties





36


54

  Total services revenues





17,927


15,242

  Products









      Products-third parties





91


42

  Total products revenues





91


42

Total net revenues





18,018


15,284

Cost of revenues:








  Services






15,270


14,198

  Products






57


37

Total cost of revenues





15,327


14,235

Gross profit






2,691


1,049










Operating expenses








  Selling expenses





285


227

  General and administrative expenses




5,687


3,046

Total operating expenses




5,972


3,273










Operating loss from continuing operations



(3,281)


(2,224)

Government subsidy income




1,199


1,095

Loss before income taxes from continuing operations


(2,082)


(1,129)

Less: Income tax benefits





-


(3)










Net loss from continuing operations




(2,082)


(1,126)










Discontinued operations








Loss from discontinued operations, net of income taxes


(2,401)


(4,146)

Gain on disposal, net of income taxes




-


30,537

Net (loss) income from discontinued operations, net of





income taxes





(2,401)


26,391










Net (loss) income





(4,483)


25,265

Net income (loss) attributable to non-controlling interest from





continuing operations





167


(18)

Net loss attributable to non-controlling interest from






discontinued operations





(197)


(1,550)

Net (loss) income attributable to ordinary shareholders of





Gravitas Education Holdings, Inc.




(4,453)


26,833




























Net (loss) income per share attributable to ordinary





shareholders of Gravitas Education Holdings, Inc. – Basic





and diluted









Net loss from continuing operations




(0.08)


(0.04)

Net (loss) income from discontinued operations



(0.08)


1.00

Net (loss) income





(0.16)


0.96

Net (loss) income per ADS attributable to ordinary






shareholders of Gravitas Education Holdings, Inc. – Basic





and diluted (Note 1)








Net loss from continuing operations




(1.59)


(0.79)

Net (loss) income from discontinued operations



(1.56)


19.90

Net (loss) income





(3.15)


19.11










Weighted average shares used in calculating net (loss)





income per ordinary share







Basic and diluted





28,234,094


28,078,124









Note 1:Each ADS represents twenty Class A ordinary shares.

 

 

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands of U.S. dollars, except share, ADS, per share and per ADS data)







Six months Ended


June 30,



2023


2022

Net (loss) income


(4,483)


25,265

Other comprehensive income (loss), net of tax of nil:





Change in cumulative foreign currency translation
adjustments


(251)


(2411)

Total comprehensive (loss) income


(4,734)


22,854

Less: Comprehensive loss attributable to non-
controlling interest


(49)


(1,928)

Comprehensive (loss) income attributable to
Gravitas Education Holdings, Inc.


(4,685)


24,782

 

 

 

RECONCILIATION OF GAAP AND NON-GAAP RESULTS

(in thousands of U.S. dollars, except share, ADS, per share and per ADS data)













Six Months Ended



June 30,



2023


2022

Operating loss from continuing
operations


(3,281)


(2,224)

Share-based compensation expenses on
continuing operations


142


142

Adjusted operating loss from continuing
operations







(3,139)


(2,082)






Net loss from continuing operations
attributable to ordinary shareholders of
Gravitas Education Holdings, Inc.


(2,249)


(1,108)

Net (loss) income from discontinued
operations attributable to ordinary
shareholders of Gravitas Education
Holdings, Inc.


(2,204)


27,941

Net (loss) income attributable to
ordinary shareholders of Gravitas
Education Holdings, Inc.


(4,453)


26,833

Share-based compensation expenses on
continuing operations


142


142

Share-based compensation expenses on
discontinued operations


175


293

Adjusted net loss from continuing
operations attributable to ordinary
shareholders of Gravitas Education
Holdings, Inc.


(2,107)


(966)

Adjusted net (loss) income from
discontinued operations attributable to
ordinary shareholders of Gravitas
Education Holdings, Inc.


(2,029)


28,234

Adjusted net (loss) income attributable
to ordinary shareholders of Gravitas
Education Holdings, Inc.


(4,136)


27,268











Net loss from continuing operations


(2,082)


(1,126)

Net (loss) income from discontinued
operations


(2,401)


26,391

Net (loss) income


(4,483)


25,265

Add: Income tax benefits on continuing
operations


-


(3)

     Income tax expenses on discontinued
operations


292


6,667

Depreciation of property, plant and
equipment, and amortization of intangible
assets of continuing operations


494


1,018

Depreciation of property, plant and
equipment, and amortization of intangible
assets of discontinued operations


415


3,393

EBITDA from continuing operations


(1,588)


(111)

EBITDA from discontinued operations


(1,694)


36,451

EBITDA


(3,282)


36,340

Share-based compensation expenses on
continuing operations


142


142

Share-based compensation expenses on
discontinued operations


175


293

Adjusted EBITDA from continuing
operations


(1,446)


31

Adjusted EBITDA from discontinued
operations


(1,519)


36,744

Adjusted EBITDA


(2,965)


36,775






Net (loss) income per ADS attributable
to ordinary shareholders of Gravitas
Education Holdings, Inc.- Basic and
diluted (Note1)





Net loss from continuing operations


(1.59)


(0.79)

Net (loss) income from discontinued operations


(1.56)


19.90

Net (loss) income


(3.15)


19.11






Adjusted net (loss) income per ADS
attributable to ordinary shareholders
of Gravitas Education Holdings, Inc.-
Basic and diluted (Note1)





Net loss from continuing operations


(1.49)


(0.69)

Net (loss) income from discontinued operations


(1.44)


20.11

Net (loss) income


(2.93)


19.42






Weighted average shares used in
calculating basic and diluted net (loss)
income per ADS (Note1)


28,234,094


28,078,124

Weighted average shares used in
calculating basic and diluted adjusted net
(loss) income per ADS (Note1)


28,234,094


28,078,124






Adjusted (loss) net income per share
attributable to ordinary shareholders of
Gravitas Education Holdings, Inc.-
Basic and diluted (Note1)





Net loss from continuing operations


(0.07)


(0.03)

Net (loss) income from discontinued
operations


(0.08)


1.00

Net (loss) income


(0.15)


0.97






Note 1Each ADS represents twenty Class A ordinary shares.

 

 

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SOURCE Gravitas Education Holdings Inc.

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