Ambow Education(AMBO) - 2025 Q2 - Quarterly Report

Condensed Consolidated Balance Sheets The Group's total assets and liabilities significantly increased by June 30, 2025, driven by cash and borrowings, while equity also grew Balance Sheet Overview Total assets increased to $23,194 thousand by June 30, 2025, driven by cash and lease assets, while liabilities and equity also grew Condensed Consolidated Balance Sheets Summary (Amounts in thousands) | Item | As of Dec 31, 2024 ($) | As of June 30, 2025 ($) | Change ($) | Change (%) | | :-------------------------------- | :--------------------- | :-------------------- | :--------- | :--------- | | ASSETS | | | | | | Total current assets | 11,641 | 14,062 | 2,421 | 20.80% | | Total non-current assets | 5,730 | 9,132 | 3,402 | 59.37% | | Total assets | 17,371 | 23,194 | 5,823 | 33.52% | | LIABILITIES | | | | | | Total current liabilities | 6,847 | 8,783 | 1,936 | 28.27% | | Total non-current liabilities | 3,787 | 5,790 | 2,003 | 52.89% | | Total liabilities | 10,634 | 14,573 | 3,939 | 37.04% | | EQUITY | | | | | | Total equity | 6,737 | 8,621 | 1,884 | 27.97% | - Cash and cash equivalents increased significantly from $1,123 thousand as of December 31, 2024, to $4,064 thousand as of June 30, 2025, representing a 261.89% increase[5] - Operating lease right-of-use assets nearly doubled, increasing from $2,722 thousand to $5,793 thousand, reflecting new lease liabilities[5] - Short-term borrowings increased from $2,700 thousand to $4,904 thousand, a 81.63% rise, contributing to the increase in current liabilities[8] Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income The Group achieved significant net income and operating income in H1 2025, driven by new HybriU revenue and a large lease termination gain Operations and Comprehensive Income Overview The Group achieved significant net income and operating income in H1 2025, driven by new HybriU revenue and a large lease termination gain Key Financial Highlights (Six Months Ended June 30, Amounts in thousands) | Item | 2024 ($) | 2025 ($) | Change ($) | Change (%) | | :---------------------------------- | :------- | :------- | :--------- | :--------- | | Total net revenues | 4,773 | 5,080 | 307 | 6.43% | | Gross profit | 2,565 | 2,811 | 246 | 9.59% | | Total operating expenses | (2,980) | (2,344) | 636 | -21.34% | | Operating (loss) income | (415) | 467 | 882 | -212.53% | | Gain on lease termination | — | 1,492 | 1,492 | N/A | | (Loss) income before income tax | (289) | 1,931 | 2,220 | -768.17% | | Net income | 216 | 1,884 | 1,668 | 772.22% | | Net income per share - basic and diluted | 0.0038 | 0.0330 | 0.0292 | 768.42% | | Net income per ADS - basic and diluted | 0.0760 | 0.6600 | 0.5840 | 768.42% | - HybriU licensing and selling generated $1,178 thousand in net revenues for the six months ended June 30, 2025, a new revenue stream not present in the prior year[13] - General and administrative expenses decreased by $638 thousand, from $2,280 thousand in 2024 to $1,642 thousand in 2025, contributing to the reduction in total operating expenses[13] - A significant 'Gain on lease termination' of $1,492 thousand was recognized in 2025, which was a major contributor to the increase in total other income and overall profitability[13] Unaudited Condensed Consolidated Statements of Changes in Equity Total equity increased to $8,621 thousand by June 30, 2025, primarily due to net income, significantly reducing the accumulated deficit Equity Changes Overview Total equity increased to $8,621 thousand by June 30, 2025, primarily due to net income, significantly reducing the accumulated deficit Key Equity Changes (Amounts in thousands) | Item | As of Jan 1, 2025 ($) | As of June 30, 2025 ($) | Change ($) | | :------------------------ | :-------------------- | :-------------------- | :--------- | | Accumulated deficit | (510,325) | (508,441) | 1,884 | | Total Equity | 6,737 | 8,621 | 1,884 | - Net income for the six months ended June 30, 2025, totaling $1,884 thousand, directly contributed to the increase in total equity and reduction of the accumulated deficit[14] Unaudited Condensed Consolidated Statements of Cash Flows Operating cash flow turned positive in H1 2025, with substantial cash from financing activities, leading to a $2,883 thousand net increase in cash Cash Flow Overview Operating cash flow turned positive in H1 2025, with substantial cash from financing activities, leading to a $2,883 thousand net increase in cash Cash Flow Summary (Six Months Ended June 30, Amounts in thousands) | Cash Flow Activity | 2024 ($) | 2025 ($) | Change ($) | | :------------------------------------------ | :------- | :------- | :--------- | | Net cash (used in)/provided by operating activities | (601) | 978 | 1,579 | | Net cash provided by/(used in) investing activities | 814 | (299) | (1,113) | | Net cash (used in)/provided by financing activities | (1,239) | 2,204 | 3,443 | | Net change in cash, cash equivalents and restricted cash | (1,026) | 2,883 | 3,909 | | Cash, cash equivalents and restricted cash at end of periods | 9,029 | 11,324 | 2,295 | - Operating activities generated $978 thousand in cash in 2025, a reversal from using $601 thousand in 2024[16] - Financing activities provided $2,204 thousand in cash in 2025, primarily from proceeds from short-term borrowings, compared to using $1,239 thousand in 2024[16] Notes to Unaudited Condensed Consolidated Financial Statements This section details the Group's organization, liquidity, accounting policies, and specific financial statement components 1. ORGANIZATION AND PRINCIPAL ACTIVITIES The Group is a U.S.-based innovator of AI-powered phygital solutions, aiming to remove barriers in education, corporate collaboration, and live events - The Group is a U.S.-based innovator of AI-powered phygital solutions for education, corporate collaboration, and live events[18] - Its mission is to eliminate barriers between physical and digital environments, languages and regions, and academia and industry[18] - The Group provides high-quality, personalized, and dynamic career education services and products through its network of for-profit colleges[18] 2. LIQUIDITY AND CAPITAL RESOURCES The Group maintained positive working capital of $5,279 thousand and sufficient liquidity, but anticipates needing additional capital for long-term plans - As of June 30, 2025, the Group's consolidated current assets exceeded current liabilities by $5,279 thousand, reflecting a positive working capital balance[19] - The Group reported net cash provided by operating activities of $978 thousand for the six months ended June 30, 2025, a significant improvement from $601 thousand used in the same period of 2024[20] - The Group believes it can meet anticipated cash needs for at least the next 12 months but expects to require additional capital for its longer-term business plan, potentially through public offerings or credit facilities[22] 3. SIGNIFICANT ACCOUNTING POLICIES This section details the Group's key accounting policies, including revenue recognition, segment reporting, lease accounting, and income tax provisions a. Basis of presentation The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial reporting and SEC rules and regulations - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial reporting and SEC rules and regulations[23] - Interim results are not necessarily indicative of full fiscal year or future period results[23] b. Revenue recognition Revenue is generated from educational programs and services, and HybriU licensing and sales, following the 5-step model of ASC 606 - Revenue is generated from educational programs and services, and HybriU licensing and sales, following the 5-step model of ASC 606[24][25][26] - Revenue for educational programs is recognized over time based on school days consumed, while HybriU licensing and sales revenue is recognized at a point in time upon delivery[28][30][31] Deferred Revenue (Amounts in thousands) | Item | As of Dec 31, 2023 ($) | As of Dec 31, 2024 ($) | As of June 30, 2025 ($) | | :--------------- | :--------------------- | :--------------------- | :-------------------- | | Deferred revenue | 544 | 436 | 210 | | Recognized revenue from deferred (6 months) | 122 (2024) | 226 (2025) | N/A | c. Segment reporting The Chief Executive Officer (CEO) is identified as the chief operating decision maker (CODM) who reviews financial information of operating segments - The Chief Executive Officer (CEO) is identified as the chief operating decision maker (CODM) who reviews financial information of operating segments[35][37] - The Group has two reportable segments: Educational programs and services, and HybriU licensing and selling[26][37] d. Allowance for Credit Losses The Company estimates and records an expected lifetime credit loss on accounts receivable and long-term receivables in accordance with ASC Topic 326 - The Company estimates and records an expected lifetime credit loss on accounts receivable and long-term receivables in accordance with ASC Topic 326[39] e. Leases The Group accounts for leases under ASC 842, recognizing operating right-of-use assets and operating lease liabilities for non-short-term leases - The Group accounts for leases under ASC 842, recognizing operating right-of-use assets and operating lease liabilities for non-short-term leases[40] - Leases with initial terms of 12 months or less are classified as short-term leases and are not recognized on the consolidated balance sheet[40] f. Income taxes Deferred income taxes are recognized for temporary differences, net of operating loss carryforwards and credits, with a valuation allowance applied when realization is not likely - Deferred income taxes are recognized for temporary differences, net of operating loss carryforwards and credits, with a valuation allowance applied when realization is not likely[42][43] - Deferred tax liabilities and assets are classified as noncurrent and presented netted-off[45] g. Recently issued accounting standards The Group is evaluating the impact of ASU 2023-09 (Income Taxes) effective January 1, 2025, and ASU 2024-03 (Expense Disaggregation Disclosures) effective after December 15, 2026 - The Group is evaluating the impact of ASU 2023-09 (Income Taxes) effective January 1, 2025, and ASU 2024-03 (Expense Disaggregation Disclosures) effective after December 15, 2026[46][47] 4. CASH, CASH EQUIVALENTS AND RESTRICTED CASH Total cash, cash equivalents, and restricted cash significantly increased to $11,324 thousand by June 30, 2025, with restricted cash for regulatory and credit purposes Cash, Cash Equivalents, and Restricted Cash (Amounts in thousands) | Item | As of Dec 31, 2024 ($) | As of June 30, 2025 ($) | | :-------------------------------------------------------------------------------- | :--------------------- | :-------------------- | | Cash and cash equivalents | 1,123 | 4,064 | | Restricted cash | 7,318 | 7,260 | | Total cash, cash equivalents, and restricted cash | 8,441 | 11,324 | - Restricted cash is required by the U.S. Department of Education and serves as deposits to secure lines of credit from financial institutions[50] 5. ACCOUNTS RECEIVABLE, NET Net accounts receivable decreased to $2,052 thousand by June 30, 2025, with a stable allowance for credit losses and a small reversal Accounts Receivable, Net (Amounts in thousands) | Item | As of Dec 31, 2024 ($) | As of June 30, 2025 ($) | | :------------------------ | :--------------------- | :-------------------- | | Accounts receivable | 2,984 | 2,487 | | Less: Allowance for credit losses | (443) | (435) | | Accounts receivable, net | 2,541 | 2,052 | - Allowances for credit losses of $90 thousand and $8 thousand were reversed during the six months ended June 30, 2024 and 2025, respectively[51] 6. PREPAID AND OTHER CURRENT ASSETS Prepaid and other current assets slightly increased to $686 thousand by June 30, 2025, driven by inventories, partially offset by lower prepayments Prepaid and Other Current Assets (Amounts in thousands) | Item | As of Dec 31, 2024 ($) | As of June 30, 2025 ($) | | :-------------------------------- | :--------------------- | :-------------------- | | Inventories | 29 | 109 | | Prepayments to suppliers | 189 | 135 | | Receivables due from third-party | 880 | 880 | | Less: allowance for credit losses | (461) | (461) | | Total | 659 | 686 | - Receivables due from third-party, net of allowance for credit losses, remained constant at $419 thousand ($880k - $461k) for both periods, related to Bay State College and expected to be collected within twelve months[52] 7. OTHER NON-CURRENT ASSETS Other non-current assets increased to $1,339 thousand by June 30, 2025, primarily due to higher long-term lease deposits Other Non-Current Assets (Amounts in thousands) | Item | As of Dec 31, 2024 ($) | As of June 30, 2025 ($) | | :-------------------------------- | :--------------------- | :-------------------- | | Long-term receivables | 587 | 587 | | Long-term lease deposits | 194 | 340 | | Educational content | 810 | 720 | | Less: allowance for doubtful accounts | (308) | (308) | | Total | 1,296 | 1,339 | - Long-term receivables related to Bay State College remained at $587 thousand, with 60% expected by end of 2025 and 40% by end of 2026[54] 8. SHORT-TERM BORROWINGS Short-term borrowings increased to $4,904 thousand by June 30, 2025, due to a new Evertrust Bank loan and renewed Cathay Bank facilities Short-Term Borrowings (Amounts in thousands) | Lender | Amount ($) | Interest Rate | Repayment Due Date | | :-------------------- | :--------- | :------------ | :----------------- | | Cathay BANK (Jan 2024) | 1,200 | 6.00% | Dec 27, 2025 | | Cathay BANK (Oct 2022) | 1,500 | 6.29% | Oct 10, 2025 | | EverTrust Bank (June 2025) | 2,204 | 6.75% | Based on actual repayment | | Total as of June 30, 2025 | 4,904 | | | - The Group entered into a new loan agreement with Evertrust Bank for $2,500 thousand in April 2025, with an outstanding balance of $2,204 thousand as of June 30, 2025, secured by NewSchool's assets and guaranteed by the Company[57] - Existing Cathay Bank loans totaling $2,700 thousand were renewed in September and November 2024, extending maturities to October 10, 2025, and December 27, 2025, respectively, and are secured by restricted cash[58][56] 9. ACCRUED AND OTHER LIABILITIES Accrued and other liabilities significantly increased to $2,284 thousand by June 30, 2025, mainly due to a new lease termination liability Accrued and Other Liabilities (Amounts in thousands) | Item | As of Dec 31, 2024 ($) | As of June 30, 2025 ($) | | :-------------------------------- | :--------------------- | :-------------------- | | Accrued payroll and welfare | 578 | 558 | | Deferred revenue | 436 | 210 | | Amounts due to landlord for Lease Termination | — | 1,500 | | Total | 1,029 | 2,284 | - A new liability of $1,500 thousand for amounts due to a landlord for lease termination was recorded as of June 30, 2025, representing the current portion of a settlement agreement[59] - Deferred revenue decreased from $436 thousand to $210 thousand[59] 10. OTHER NON-CURRENT LIABILITIES Other non-current liabilities increased to $500 thousand by June 30, 2025, entirely from the non-current portion of a lease termination settlement Other Non-Current Liabilities (Amounts in thousands) | Item | As of Dec 31, 2024 ($) | As of June 30, 2025 ($) | | :-------------------------------- | :--------------------- | :-------------------- | | Amounts due to landlord for Lease Termination | — | 500 | | Total | — | 500 | - In June 2025, the Group entered into a settlement agreement with a landlord, resulting in a gain of $1.5 million and establishing a non-current liability of $500 thousand for future installment payments[62] - The settlement agreement requires an initial payment of $1.0 million and additional $1.0 million in installments over two years, starting May 2025[62] 11. CONCENTRATIONS No significant customer or supplier concentrations existed, though Company A represented 23% of accounts receivable by June 30, 2025 - No single customer or supplier represented 10% or more of the Group's total revenues or total costs of sales for the six months ended June 30, 2024 and 2025[64][65] - Company A accounted for 23% ($480 thousand) of the Group's consolidated accounts receivable as of June 30, 2025, making it a significant debtor[66] 12. SHARE-BASED COMPENSATION The Group's 2024 Equity Incentive Plan authorizes 6,500,000 ordinary shares, with no share-based compensation expense recorded in H1 2024 or 2025 - The 2024 Equity Incentive Plan, effective December 20, 2024, authorizes the grant of up to 6,500,000 ordinary shares, with an automatic annual increase to maintain 15% of total outstanding ordinary shares[68] - No share options were granted, and no restricted stock awards were granted or vested during the six months ended June 30, 2024 and 2025[69][70] - Consequently, no share-based compensation expenses were recorded for restricted stock awards for these periods, and unrecognized expenses amounted to nil as of June 30, 2025[71] 13. TAXATION The Group reported an income tax expense of $47 thousand in H1 2025, with an effective tax rate of 2%, a significant change from the prior year - The Company and its Cayman Islands subsidiaries are not subject to tax on income or capital gains[72] Income Tax Provision (Six Months Ended June 30, Amounts in thousands) | Item | 2024 ($) | 2025 ($) | | :-------------------------------- | :------- | :------- | | Current income tax | 505 | (47) | | Deferred income tax | — | — | | Provision for income tax benefit (expenses) | 505 | (47) | Effective Tax Rate Reconciliation (Six Months Ended June 30) | Item | 2024 (%) | 2025 (%) | | :-------------------------------- | :------- | :------- | | Weighted average statutory tax rate | 21% | 21% | | Changes in valuation allowance | (28)% | (17)% | | Effect of tax amendment | 177% | —% | | Effective tax rate | 175% | 2% | 14. NET INCOME PER SHARE Net income per share significantly increased to $0.0330 in H1 2025, with net income per ADS rising to $0.6600 after a ratio change Net Income Per Share (Six Months Ended June 30) | Item | 2024 ($) | 2025 ($) | | :---------------------------------------------------------------- | :------- | :------- | | Numerator for basic and diluted net income per share (thousands) | 216 | 1,884 | | Denominator (weighted average ordinary shares outstanding) | 57,127,524 | 57,127,524 | | Basic and diluted net income per share | 0.0038 | 0.0330 | | Basic and diluted net income per ADS | 0.0760 | 0.6600 | - In February 2024, the Company changed its ADS ratio from one (1) ADS representing two (2) Class A ordinary shares to one (1) ADS representing twenty (20) Class A ordinary shares[75] 15. LEASES Operating lease expense decreased to $376 thousand in H1 2025, with the weighted-average lease term increasing to 5.20 years Lease Expense and Cash Flow (Six Months Ended June 30, Amounts in thousands) | Item | 2024 ($) | 2025 ($) | | :------------------------------------ | :------- | :------- | | Operating lease expense | 1,161 | 376 | | Operating cash flows used in operating leases | 622 | 200 | Weighted-Average Lease Metrics (As of June 30) | Item | 2024 | 2025 | | :-------------------------------- | :--------- | :--------- | | Weighted-average Remaining Lease Term | 1.70 Years | 5.20 Years | | Weighted-average Discount Rate | 4.32% | 6.85% | Maturities of Lease Liabilities (As of June 30, 2025, Amounts in thousands) | Period | Amount ($) | | :-------------------------------- | :--------- | | For the six months ending Dec 31, 2025 (remaining) | 178 | | For the year ending Dec 31, 2026 | 1,339 | | For the year ending Dec 31, 2027 | 1,571 | | For the year ending Dec 31, 2028 | 1,389 | | For the year ending Dec 31, 2029 | 1,326 | | Thereafter | 1,486 | | Total lease payments | 7,289 | | Less: interest | (1,287) | | Total | 6,002 | | Less: current portion | (712) | | Non-current portion | 5,290 | 16. SEGMENT REPORTING The Group operates two segments: Educational programs and HybriU licensing, with HybriU emerging as a new revenue contributor in H1 2025 - The Group has two reportable segments: (i) Educational programs and services and (ii) HybriU licensing and selling[83] - The Chief Executive Officer (CODM) evaluates segment performance based on revenues and cost of revenues[84] Segment Net Revenues and Gross Profit (Six Months Ended June 30, Amounts in thousands) | Item | 2024 ($) | 2025 ($) | | :-------------------------------- | :------- | :------- | | NET REVENUES | | | | Educational programs and services | 4,773 | 3,902 | | HybriU licensing and selling | — | 1,178 | | Total net revenues | 4,773 | 5,080 | | GROSS PROFIT | | | | Educational programs and services | 2,565 | 1,853 | | HybriU licensing and selling | — | 958 | | Total gross profit | 2,565 | 2,811 |