Gravitas Education Holdings, Inc. Reports First Half 2022 Financial Results

BEIJING, Dec. 19, 20,22 /PRNewswire/ -- Gravitas Education Holdings, Inc. (NYSE: GEHI) announced today its unaudited financial results. Net loss from continuing operation attributable by ordinary shareholders of GEHI was $3.1million, compared to $2.7 million net income from continuing operation attributable for the same period in 2021. For the first six month of 2022, the adjusted net loss from continuing operation attributable by ordinary shareholders[1] was $2.6 million. This compares with $3.8 million in adjusted net income from continued operations attributable for ordinary shareholders for the same period in 2021. Net income attributable for ordinary shareholders of GEHI was $26.8million, compared to $4.4 million for that same period in 2021.
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The adjusted net income attributable by ordinary shareholders[1] for the first six month of 2022 was $27.3million, compared to $5.6 million in the same period 2021. We followed the government's policies and completed the divestiture our directly-operated kindergartens in the first half 2022. To mark our transition into a new stage of development, Gravitas Education was rebranded as Gravitas Education. We continued to build our core business through research, curriculum development, supervision and training programs. In addition, we adopted a multi-brand strategy in our day-today operations for our products.
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We have been able to keep our leadership position in the pre-school education sector thanks to these efforts. We also launched a number of new business ventures including directly-operated Chinese children's dance and arts centers, and a range of childcare solutions. Faced with a falling birth rate in China we will continue to innovate and put our efforts into creating long-term value for the Company. Ms.
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Yanlai Shi is the Co-founder, Director, and Chief Executive Officer at GEHI. "Years to date, we've faced significant business problems due to COVID-19 epidemics in the country. This has mainly affected kindergarten operations in Beijing, Shanghai, and Shanghai. These issues have slowed our topline growth and made us underperform compared to our budget. We implemented a number of measures to reduce the negative effects, including strict cost control, to ensure that our teams were stable and confident.
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Our team's morale grew stronger as we faced six months of challenges. We will continue to push forward with new business ventures as kindergarten operations resume in July. "In GEHI's business and strategic planning, children's growth has always been our top priority. We have remained true and faithful to our mission. We will continue to develop this phase under the guidance of government policies and serve as a central brain platform for facilities in our network.
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Our core business model which combines our PLC, kindergarten, and childcare operational expertise with our continuous innovation will make us the one stop solution for operators and institutions. We also believe that our continued innovations will contribute to the long-term development of preschool education and Chinese health. Ms. Shi concluded. Ms. Shi concluded.
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This was due in part to lower tuition fees. Company's directly managed facilities were temporarily closed during the first six month of 2022 because of COVID-19 recurrence, while those facilities were still in operation for the same period in 2021. A decrease in tuition fees was partly offset by an increase of education services revenues of $1.3million for the first six month of 2022. The decline in franchise services revenues was partly due to the slowdown in play-and learn franchise expansion. Also, lower revenues from franchisees were affected by the impact of COVID-19 recurrence for the first 6 months of 2022. However, the majority of franchised play and-learn centers reopened during the first 6 months of 2021.
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This was due to a decline in merchandise sales through the Company’s franchise network. The vast majority of franchised facilities were temporarily shut down for part of the first 6 months of 2022 because of COVID-19 recurrence, while they were normally operating during the first half 2021. Cost of Revenues from Continuing Operations. The cost of continuing operations revenues for the first six month of 2022 was $24.0million, compared to $26.9million for the first six of 2021. The cost of continuing operations services for the first six month of 2022 was $22.8million, compared to $25.2 million in the same period 2021.
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This was due to a drop in the cost for enrichment courses at directly-operated facilities, which was due to their temporary closure in the first half 2022. All of them were still in operation in the first six months 2021. The cost of products revenues in the first six months 2022 was $1.2million, compared to $1.6 million in the same period last years. This decrease is in line with the decline in product revenues. The first six months of the year saw a decrease of $1.2 million in cost. It was $1.6 million less than the $1.6 million recorded last year. Operating expenses for continuing operations, which exclude share-based compensation expenses, were $8.3 million for their first six month period. This compares with $9.5 million for last year.
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General and administrative expenses for continuing operations, which exclude share-based compensation expenses, were $6.9m for the first six months in 2022. This is a 10.9% decrease from the $7.7m for the same period in 2021. The Company's stringent cost control measures after the COVID-19 pandemic resulted in a decrease in general and administrative costs, which was 10.9% lower than the $7.7 million recorded for the same period last fiscal year. The adjusted operating loss[2] for continuing operations in the first six months of 2022 totaled $2.2 million compared to $3.9 million from the same period last years.
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Net Income/loss From Continuing OperationsNet loss attributable GEHI to continuing operations for the first six month of 2022 was $3.1million, compared to $2.7 million net income attributable GEHI to continuing operations for the same period in 2021. The adjusted net loss from continued operations attributable ordinary shareholders to GEHI was $2.6million for the first six month period. This compares with $3.8 million of adjusted income from continuing operation attributable ordinary shareholders to GEHI during the same period in 2021. Each ADS represents 20 Class A ordinary shares. The adjusted net loss per ADS attributable by ordinary shareholders of GEHI for six months ended June 2022 was $1.85 and $1.83 respectively. This compares with the basic and diluted net income per ADS attributable for ordinary shareholders of GEHI, which were $2.65 for the same period in 2021 and $2.60 for the same period.
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The adjusted EBITDA[5] for continuing operations in the first six months of 2022 stood at $0.8 million, as compared to $7.2 million in the same period 2021. [1] Adjusted Net Income (loss), (from continuing operation) attributable by ordinary shareholders is a non–GAAP financial measure. It is net income (loss), (from continuing operation) attributable only to ordinary shareholders, excluding share-based compens expenses and changes to redeemable non-controlling interest. This earnings release contains the sections "Use Non-GAAP Financial Metrics" and "Reconciliations between GAAP and Non-GAAP Results".
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[2] Adjusted Operating Income (loss), which is non-GAAP, is operating income (loss), excluding share-based Compensation expenses. This earnings release also contains "Non-GAAP Financial Measures" as well as "Reconciliations between GAAP and non GAAP Results" elsewhere. [3] Adjusted net income (loss), basic and/or diluted (from continuing operation) per ADS attributed to ordinary shareholders is non-GAAP financial measure. It is the basic and/or diluted net earnings (loss), per ADS attributed to ordinary shareholders, excluding share-based compens expenses and changes to redeemable non-controlling interests
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This earnings release contains the sections "Use Non-GAAP Financial Measures” and "Reconciliations between GAAP and non GAAP results". [4] EBITDA refers to net income (loss), excluding depreciation and amortization, as well as income tax expenses. This earnings release contains the sections "Use Non-GAAP Financial Measures” and "Reconciliations between GAAP and Non-GAAP Results".
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[5] Adjusted EBITDA (non-GAAP financial measure) is net income (loss), excluding depreciation and amortization. It excludes income tax expenses and share-based compensation expense. This earnings release also contains "Use Non-GAAP Financial Metrics" and "Reconciliations between GAAP and non–GAAP Results" elsewhere. Net Income/loss From Discontinued OperationsThe loss from discontinued operations after taxes was $2.1million in the first six months of 2022, compared to $2.5 million after taxes for that same period last year.
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The gain on disposal of discontinued operations after taxes was $30.5 million for the first six month of 2022, compared to nil in the same period 2021. Net Income/lossThe net income attributable for ordinary shareholders of GEHI was $26.8million, compared with $4.4million for the same period 2021. For the first six month of 2022, adjusted net income attributable ordinary shareholders to GEHI was $27.3 million. This compares with $5.6 million for 2021. Each ADS represents twenty Class A Ordinary Shares.
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For the first six month of 2022, adjusted basic and diluted net income per ADS attributed to ordinary shareholders[3] were $19.42, $19.16 respectively. This compares with the $3.94 and $3.86 for the same period in 2021. EBITDA for 2022 was $36.3million, compared to $15.8 million for 2021. The adjusted EBITDA for 2022's first six months was $36.8million compared to $17.0 million in 2021. Gravitas Education Holdings, Inc. Gravitas Education Holdings, Inc. was founded on the core values "Care" & "Responsibility," and "Inspire" and is a top provider of early childhood education services in China.
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The Company was founded in 1998 with its first play-and learn center. Since then, it has expanded and prospered. Its mission is to provide high-quality education and care to each child to help them succeed in their lives. The Company's 20-year history has made it a respected education brand. It also helped to create many innovative educational practices in China's early education sector. GEHI's comprehensive early education solutions cater to children aged 6 months to 6 years. They have been a well-recognized brand over the past two decades.
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Investors are advised to compare historical adjusted financial measures with the most comparable GAAP measures. EBITDA and adjusted EBITDA as well as adjusted operating income and adjusted net income and adjusted basic and modified net income per ADS are not comparable to similar titles presented by other companies.
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Others may use similar titles to calculate comparable measures, which can limit their utility as comparative measures with our data. Forward-looking statements are included in this announcement. These statements are made pursuant to the U.S. "safe harbor" provisions.
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Private Securities Litigation Reform Act of 1996. These forward-looking statements are identified using terminology such as "will", "expects," and "anticipates," future," future," plans," intends," plans," believes," estimates," confident, "plans," and similar statements. Forward-looking statements include statements that are not historical facts and statements regarding the Company's beliefs, expectations, and plans.
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Forward-looking statements are subject to inherent risks and uncertainties. There are many factors that could cause actual results not to be as expected. These include, but are not limited to: brand recognition and market reputation of the Company; student enrollment at the Company’s teaching facilities; future business development, results and financial condition of the Company; changes in revenues and certain cost items; growth in China's early education market; Chinese government policies regarding the Company's sector and general economic conditions in China. Additional information about these and other risks can be found in the Company's filings to the SEC
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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 RelationsTel: 86-10-8767-5752E-mail: EMAIL.cnUNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands of U.S. dollars) As of June 30, 2022 December 31, 2021 Current assets: Cash and cash equivalents 36,678 33,322 Accounts receivable, net 1,175 1,282 Accounts receivable 1,376 - Inventories 5,721 6,130 Prepaid expenses and other current assets 2,066 2,405 Consideration receivables - related parties, current 8,290 - Loan receivables - related parties, current portion 3,030 - Current assets for discontinued operations - 39,113 Total current assets 58,336 82,252 Non-current assets: Property, plant and equipment, net 6,396 6,396 Goodwill 19,147 19,177 Intangible assets, net 10,170 11,099 Long-term investment 139 169 Deferred tax assets 5,342 7,662 Other non-current assets 3,612 4,188 Consideration receivables - related parties, non- 14,040 - Loan receivables - related parties, non-current 20,157 - Operating lease right-of-use assets 18,017 24,840 Non-current assets for discontinued operations - 127,293 Total assets 155,356 283,076 Liabilities Current liabilities: Prepayments from customers, current portion 1,853 3,429 Accrued expenses and other current liabilities 14,059 15,671 Income tax payable 6,371 1,465 Operating lease liabilities, current portion 4,718 5,619 Deferred revenue, current portion 5,912 10,037 Current liabilities for discontinued operations - 86,137 Total current liabilities 32,913 122,358 Non-current liabilities: Prepayments from customers, non-current portion 1,079 921 Deferred revenue, non-current portion 989 999 Other non-current liabilities 8,809 9,575 Deferred income tax liabilities 1,610 1,755 Operating lease liabilities, non-current portion 13,079 18,707 Non-current liabilities for discontinued operations - 49,605 Total liabilities 58,479 203,920 Mezzanine equity Redeemable non-controlling interests 4,436 4,942 Equity Ordinary shares 29 29 Treasury stock (8,009) (8,667) Additional paid-in capital 135,123 136,504 Statutory reserve 5,293 5,164 Accumulated other comprehensive (loss)/ income (1,794) 257 Accumulated deficit (38,854) (65,559) Total Gravitas Education Holdings, Inc. shareholders' equity 91,788 67,728 Non-controlling interest 653 6,486 Total equity 92,441 74,214 Total liabilities, mezzanine equity and total equity 155,356 283,076 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands of U.S
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Dollars, other than share, ADS per share and per ADS Data) Six months Ended June 30, 2022. Net revenues: Services 25,930, 35,405 Services-related Parties 1,331 – Total services revenues 27,261 35.405 Products 2,262 3,547 Products-related Parties 45 - Total net revenues 29,568 39.152 Gross profit 5,577 12,296 Operating expenses Sales 884 706 General administrative expenses 7,409 8,781 Total expenses 8,293 9,487 (Lo) Income before income taxes (1,328), 3,284) Income before loss in equitymethod investments (3,129) Lo