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ATA Reports Financial Results for Three-Month Period Ended September 30, 2017
[November 09, 2017]

ATA Reports Financial Results for Three-Month Period Ended September 30, 2017


BEIJING, Nov. 09, 2017 (GLOBE NEWSWIRE) -- ATA Inc. ("ATA" or the "Company") (Nasdaq:ATAI), a leading provider of advanced testing technologies and testing-related services in China, today announced preliminary unaudited financial results for the three months ended September 30, 2017 (“Quarter ended September 30, 2017”).

As previously disclosed on the Company’s Form 6-K filing with the SEC on June 2, 2017, ATA’s Board of Directors approved a change in the Company’s fiscal year end from March 31 to December 31. This change was made to better reflect the business cycle of the Company as well as to allow ATA to manage and streamline its financial reporting processes by aligning its reporting schedule with statutory requirements in China. The Company will file a transition report on Form 20-F after December 31, 2017, to account for the transition period from April 1, 2017, to December 31, 2017 (“Nine-month Transition Period 2017”), as a result of this change. The Company will continue to report financial results on a quarterly basis during this transition period.

Financial and Operating Highlights for the Quarter Ended September 30, 2017 (percentage changes and comparisons against the quarter ended September 30, 2016)

  • Net revenues of RMB69.6 million (US$10.5 million), up 6.8%
  • Gross profit of RMB30.8 million (US$4.6 million), compared to RMB29.6 million
  • Loss from operations of RMB16.7 million (US$2.5 million), compared to RMB9.3 million, primarily due to increased operating expenses related to labor costs for new hires and incremental remuneration packages, as well as higher share-based compensation expense
  • Net loss attributable to ATA Inc. of RMB16.0 million (US$2.4 million), compared to RMB35.6 million, an improvement due to the RMB21.9 million impairment loss taken in the prior-year period
  • Adjusted net loss attributable to ATA Inc. excluding share-based compensation expense and foreign currency exchange gain (non-GAAP) of RMB11.0 million (US$1.6 million), compared to RMB34.6 million
  • Basic and diluted losses per ADS attributable to ATA Inc. were both RMB0.68 (US$0.10). Basic and diluted losses per ADS attributable to ATA Inc. excluding share-based compensation expense and foreign currency exchange gain (non-GAAP) were RMB0.46 (US$0.06).
  • Delivered approximately 1.4 million billable tests, compared to 1.8 million billable tests in prior-year period
  • RMB166.2 million (US$25.0 million) in cash and cash equivalents as of September 30, 2017

Mr. Kevin Ma, ATA’s Chairman and Chief Executive Officer, stated, “We were pleased to achieve top line growth for the Quarter ended September 30, 2017. After successfully administering the junior level Accounting Professional and Technical Qualification Exam in the city of Nanchang last quarter, we delivered the mid-level version of this exam title in Nanchang and other major cities and provinces, including Beijing, Shanghai and Fujian, during the period. In addition, we delivered new exams and related services for events such as the National and Local Tax Law Knowledge Contests, which were launched in various provinces in China including Shanxi, Yunnan, Hunan, Guizhou, and Inner Mongolia. ATA also provided HR Select services to local financial institutions, including the Sichuan Rural Credit Cooperative in Sichuan province, with which we forged a partnership this year. Furthermore, we announced in August that ATA has entered into a test preparation partnership with ACT, Inc. (‘ACT’) this past April. In September, ATA successfully delivered the ACT test in Jeju Island, Korea, and Global Assessment Certificate schools in mainland China. The seamless execution of the exam was notable as ACT cancelled a number of their scheduled tests across Asia due to a suspected security breach of test materials.”

Mr. Ma continued, “ATA is undertaking several initiatives to strengthen our core testing services business. We have been adding resources to our research and development team, and actively evaluating our platforms as we aim to bring our clients the latest technologies in test delivery and preparation. In addition, we have decentralized our sales and marketing functions to enable ATA to take better advantage of local business opportunities. With new provincial representative offices, we believe we are well positioned to become a major market player in more geographically focused exams. As a result of all these initiatives, as well as costs associated with incremental remuneration packages, increased operating expenses ultimately impacted our bottom line for the Quarter ended September 30, 2017. The last quarter of the calendar year has generally been our strongest due to the timing of campus recruitment and client exams. As we anticipate a strong quarter for the three-month period ending December 31, 2017, we are reiterating our previously provided net revenue guidance for the Nine-Month Transition Period 2017.”

Update on Preliminary Proposal to Acquire ATA Online
ATA provided an update on the previously announced preliminary non-binding proposal (the “Proposal”) from Mr. Kevin Ma to acquire ATA’s 100% equity interest in ATA Online (Beijing) Education Technology Co., Ltd. (“ATA Online”), a wholly-owned subsidiary of the Company, for a total consideration of US$150 million. The Board-established special committee, comprising two of ATA’s independent directors Mr. Alec Tsui and Ms. Hope Ni, has retained a financial advisor and U.S. legal counsel, and continues working with these advisors in reviewing and evaluating the Proposal.

Operating Review
In the Quarter ended September 30, 2017, ATA delivered a total of approximately 1.4 million billable tests, compared to 1.8 million billable tests in the three months ended September 30, 2016. The Company had a network of 3,256 authorized test centers throughout China as of September 30, 2017, which the Company believes is the largest test center network in China operated by a single commercial testing service provider. ATA has delivered a total of approximately 93.4 million billable tests since it began operations in 1999.

GAAP Results for the Quarter Ended September 30, 2017
ATA’s total net revenues for the Quarter ended September 30, 2017 were RMB69.6 million (US$10.5 million), a 6.8% increase from RMB65.1 million in the prior-year period.

Gross profit for the Quarter ended September 30, 2017 was RMB30.8 million (US$4.6 million), compared to RMB29.6 million in the prior-year period. Gross margin was 44.3% during the period, compared to 45.4% in the prior-year period. The decrease in gross margin was primarily due to increased costs related to the delivery of the Accounting Professional and Technical Qualification Exam, a new exam title in a number of major cities and provinces that incurred higher expenses during the initial implementation phase, as well as increased licensing fees and higher share-based compensation expense related to new share options issued in January 2017.

Loss from operations for the Quarter ended September 30, 2017 was RMB16.7 million (US$2.5 million), compared to RMB9.3 million, primarily due to increased operating expenses related to labor costs for new hires and incremental remuneration packages, as well as higher share-based compensation expense.

Net loss attributable to ATA Inc. for the Quarter ended September 30, 2017 improved to RMB16.0 million (US$2.4 million), compared to RMB35.6 million in the prior-year period when the Company recorded an RMB21.9 million impairment loss related to an equity method investment in an associated company.

For the Quarter ended September 30, 2017, basic and diluted losses per common share attributable to ATA Inc. were both RMB0.34 (US$0.05), compared to RMB0.78 for the prior-year period. Basic and diluted losses per ADS attributable to ATA Inc. were both RMB0.68 (US$0.10) in the Quarter ended September 30, 2017, compared to RMB1.56 in the prior-year period.

Non-GAAP Measures
Adjusted net loss attributable to ATA Inc. for the Quarter ended September 30, 2017, which excludes share-based compensation expense and foreign currency exchange gain (non-GAAP), was RMB11.0 million (US$1.6 million), compared to RMB34.6 million in the prior-year period.

Basic and diluted losses per common share attributable to ATA Inc. excluding share-based compensation expense and foreign currency exchange gain (non-GAAP) for the Quarter ended September 30, 2017 were both RMB0.23 (US$0.03). Basic and diluted losses per ADS attributable to ATA Inc. excluding share-based compensation expense and foreign currency exchange gain (non-GAAP) for the Quarter ended September 30, 2017 were both RMB0.46 (US$0.06), compared to RMB1.50 in the prior-year period.

Please see the note about non-GAAP measures and the reconciliation table at the end of this press release.

Other Data

The number of weighted average ADSs used to calculate both basic and diluted earnings per ADS for the Quarter ended September 30, 2017 was 22.9 million. Each ADS represents two common shares.

Balance Sheet Highlights

As of September 30, 2017, ATA’s cash and cash equivalents were RMB166.2 million (US$25.0 million), working capital was RMB156.1 million (US$23.5 million), and total shareholders’ equity was RMB308.6 million (US$46.4 million); compared to RMB222.4 million, RMB192.9 million, and RMB392.5 million, respectively, as of March 31, 2017.

Guidance for Nine-month Transition Period 2017 and Quarter Ending December 31, 2017

For the quarter ending December 31, 2017, ATA expects net revenues of between RMB312.0 million and RMB317.0 million.  

For the nine months ending December 31, 2017, ATA is reiterating its expectation of net revenues between RMB490.0 million and RMB510.0 million.

Estimated Financial Results
(RMB in millions)

   
 Estimated for the nine months ending
December 31, 2017
Actual for the nine months ended
December 31, 2016
   
Net Revenues490.0-510.0435.4
   
 Estimated for the quarter ending
December 31, 2017
Actual for the quarter ended
December 31, 2016
   
Net Revenues312.0-317.0273.5
   

These are ATA’s current projections, which are subject to change. You are cautioned that the operating results in the Quarter ended September 30, 2017, are not necessarily indicative of operating results for any future periods.

Conference Call and Webcast Information (With Accompanying Presentation)

ATA will host a conference call at 8 p.m. Eastern Time on Thursday, November 9, 2017, during which management will discuss the results of the Quarter ended September 30, 2017. To participate in the conference call, please use the following dial-in numbers about 10 minutes prior to the scheduled conference call time:

   
U.S. & Canada (Toll-Free):+1 (888) 419-5570 
International (Toll):+1 (617) 896-9871 
   
 Toll-FreeLocal Access
China:(800) 990 1344(400) 881 1630
Hong Kong: 3002 1672
   
Participant Passcode:41083271 
   

A live webcast of the conference call can be accessed at the investor relations section of ATA’s website at www.atai.net.cn or by clicking the following link: https://www.webcaster4.com/Webcast/Page/274/23187.  

An accompanying slide presentation in PDF format will also be made available 30 minutes prior to the conference call on the same investor relations section of ATA’s website. To listen to the webcast, please visit ATA’s website a few minutes prior to the start of the call to register, download, and install any necessary audio software.

A replay will be available shortly after the call on the investor relations section of ATA's website and will remain available for 90 days.

About ATA Inc.

ATA is a leading provider of advanced testing technologies in China. The Company offers comprehensive services for the creation and delivery of assessments based on its proprietary testing technologies and test delivery platform. ATA’s testing technologies are used for professional licensure and certification tests in various industries, including information technology services, banking, teaching, asset management, insurance, and accounting. As of September 30, 2017, ATA's test center network comprised 3,256 authorized test centers located throughout China. The Company believes that it has the largest test center network of any commercial testing service provider in China.

ATA has delivered approximately 93.4 million billable tests since ATA started operations in 1999. For more information, please visit ATA’s website at www.atai.net.cn.

Cautionary Note Regarding Forward-looking Statements

This announcement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995.

These forward-looking statements can be identified by terms such as "anticipate," "believe," "could," "estimate," "expect," "forecast," "future," "intend," "look forward to," "outlook," "plan," "should," "will," and similar terms and include, among other things, the Company’s guidance relating to anticipated financial and operating results for the quarter and nine months ending December 31, 2017, and statements regarding market demand and trends, the delivery of various new exams and related services including the National and Local Tax Law Knowledge Contests, the HR Select services provided for Sichuan Rural Credit Cooperative, the junior level and mid-level Accounting Professional and Technical Qualification Exam, the ACT test preparation services, and the Company’s future growth and results of operations.

The factors that could cause the Company’s actual financial and operating results to differ from what the Company currently anticipates can include its ability to meet challenges associated with its rapid expansion, its ability to meet the expectations of current and future clients, its ability to deploy new test titles, its ability to win new enterprise contracts, its ability to convert its existing contracts into actual revenues, the economy of China, uncertainties with respect to China’s legal and regulatory environments, and other factors stated in the Company’s filings with the U.S. Securities and Exchange Commission (“SEC”).

The financial information contained in this release should be read in conjunction with the consolidated financial statements and related notes included in the Company’s annual report on Form 20-F for its fiscal year ended March 31, 2017, and other filings that ATA has made with the SEC. The filings are available on the SEC’s website at www.sec.gov and at ATA’s website at www.atai.net.cn. For additional information on the risk factors that could adversely affect the Company’s business, financial condition, results of operations, and prospects, please see the "Risk Factors" section of the Company's Form 20-F for the fiscal year ended March 31, 2017.

The preliminary results for the Quarter ended September 30, 2017 remain subject to the finalization of the Company’s year-end closing and reporting processes.

The forward-looking statements in this release involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates, and projections about ATA and the markets in which it operates. The Company undertakes no obligation to update forward-looking statements, which speak only as of the date of this release, to reflect subsequent events or circumstances, or to changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, the Company cannot assure you that its expectations and assumptions will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results.  

Currency Convenience Translation
The Company's financial information is stated in Renminbi (“RMB”), the currency of the People’s Republic of China. The translation of RMB amounts for the Quarter ended September 30, 2017 into U.S. dollars are included solely for the convenience of readers and have been made at the rate of RMB6.6533 to US$1.00, the noon buying rate as of September 30, 2017, in New York for cable transfers in RMB per U.S. dollar as set forth in the H.10 weekly statistical release of the Federal Reserve Board. Such translations should not be construed as representations that RMB amounts could be converted into U.S. dollars at that rate or any other rate, or to be the amounts that would have been reported under U.S. GAAP.

About Non-GAAP Financial Measures
To supplement ATA's consolidated financial information presented in accordance with U.S. generally accepted accounting principles ("GAAP"), ATA uses the following non-GAAP financial measures: net income (loss) excluding share-based compensation expense and foreign currency exchange gain or loss, and basic and diluted earnings (losses) per common share and ADS excluding share-based compensation expense and foreign currency exchange gain or loss.

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. ATA believes these non-GAAP financial measures provide meaningful supplemental information about its performance by excluding share-based compensation expense and foreign currency exchange gain or loss, which may not be indicative of its operating performance.

ATA believes that both management and investors benefit from 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 ATA's historical performance. ATA computes its non-GAAP financial measures using a consistent method from period to period. ATA 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. A limitation of using non-GAAP net income (loss) excluding share-based compensation expense and foreign currency exchange gain or loss and basic and diluted earnings (losses) per common share and per ADS excluding share-based compensation expense and foreign currency exchange gain or loss is that share-based compensation charges and foreign currency exchange gain or loss have been, and are expected to continue to be for the foreseeable future, a significant recurring expense in ATA's business.

Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The table captioned "Reconciliations of Non-GAAP Measures to the Most Comparable GAAP Measures" shown at the end of this news release has more details on the reconciliations between GAAP financial measures that are most directly comparable to the non-GAAP financial measures used by ATA.  

For more information on our company, please contact the following individuals:

At the Company    
ATA Inc.                                                                                                                      
Amy Tung, CFO                                                                                                             
+86 10 6518 1122 x 5518                                                                                              
amytung@atai.net.cn                                                                                                  

Investor Relations
The Equity Group Inc.
Carolyne Y. Sohn, Senior Associate
415-568-2255
csohn@equityny.com 

Adam Prior, Senior Vice President   
212-836-9606
aprior@equityny.com

 
 
ATA INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 
  March 31,  September 30,  September 30,  
    2017
  2017
  2017
  
  RMB  RMB  USD  
ASSETS          
Current assets:          
Cash and cash equivalents 222,448,413  166,219,394  24,983,000  
Accounts receivable, net 56,161,255  61,896,441  9,303,119  
Receivable due from shareholder 10,000,000      
Prepaid expenses and other current assets 7,335,824  25,315,871  3,805,010  
Total current assets 295,945,492  253,431,706  38,091,129   
        
Long-term investments 88,891,687  92,288,740  13,871,123  
Property and equipment, net 51,868,914  51,197,629  7,695,073  
Goodwill 32,523,983  32,523,983  4,888,399  
Intangible assets, net 11,326,513  10,012,340  1,504,868  
Restricted cash 30,000,000      
Deferred income tax assets 3,388,760  2,695,449  405,130  
Other assets 5,894,767  14,684,870  2,207,155  
Total assets 519,840,116  456,834,717   68,662,877   
        
LIABILITIES AND SHAREHOLDERS’ EQUITY       
Current liabilities:       
Short-term loan 3,449,650      
Accrued expenses and other payables 89,358,847  60,404,354  9,078,857  
Deferred revenues 10,221,897  36,949,709  5,553,591  
Total current liabilities   103,030,394  97,354,063  14,632,448  
        
Deferred revenues 1,731,622  1,841,952  276,848  
Deferred income tax liabilities 22,620,872  12,403,596  1,864,277  
Other non-current liabilities   1,015,826  152,680  
Total liabilities 127,382,888  112,615,437  16,926,253  
        
Mezzanine equity-redeemable non-controlling interests   35,606,818  5,351,753  
        
Shareholders’ equity:       
Common shares 3,533,912  3,534,871  531,296  
Treasury shares (27,737,073) (27,737,073) (4,168,920) 
Additional paid-in capital 402,631,430  382,818,572  57,538,150  
Accumulated other comprehensive loss (25,069,771) (26,345,701) (3,959,794) 
Retained earnings 38,018,802  (24,418,428) (3,670,124) 
Total shareholders’ equity attributable to ATA Inc. 391,377,300  307,852,241  46,270,608   
Non-controlling interests 1,079,928  760,221  114,263  
Total shareholders’ equity 392,457,228  308,612,462  46,384,871  
Commitments and contingencies       
Total liabilities, mezzanine equity and shareholders’ equity 519,840,116  456,834,717   68,662,877   
 
 


ATA INC. AND SUBSIDIARIES 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) 
  
  Three-month Period Ended 
  September 30,  September 30,  September 30,  
    2016  2017  2017  
  RMB  RMB  USD  
 Net revenues:          
Testing services 56,059,335  56,923,543  8,555,686  
Online education services 2,712,937  2,105,360  316,438  
Other revenue 6,359,584  10,524,777  1,581,888  
Total net revenues 65,131,856  69,553,680  10,454,012  
Cost of revenues 35,580,720  38,738,765  5,822,489  
Gross profit 29,551,136  30,814,915  4,631,523  
           
Operating expenses:          
Research and development  10,191,341  13,087,567  1,967,079  
Sales and marketing 12,489,548  14,263,117  2,143,766  
General and administrative 16,187,709  20,132,554  3,025,950  
Total operating expenses 38,868,598  47,483,238   7,136,795   
Loss from operations (9,317,462) (16,668,323) (2,505,272) 
           
Other income (expense):          
Share of net loss of equity method investments (3,980,587) (768,114) (115,449) 
Impairment loss of equity method investment (21,904,611)     
Interest income, net of interest expenses 732,121  921,450  138,495  
Foreign currency exchange gain (loss), net (14,733) 2,281  343  
Loss before income taxes (34,485,272) (16,512,706) (2,481,883) 
           
Income tax expense 1,092,287  8,782  1,320  
Net loss (35,577,559) (16,521,488) (2,483,203 ) 
Net loss attributable to non-controlling interests   (138,007) (20,743) 
Net loss attributable to redeemable non-controlling interests   (424,615) (63,820) 
Net loss attributable to ATA Inc. (35,577,559) (15,958,866) (2,398,640) 
           
Other comprehensive income (loss):          
Foreign currency translation adjustment, net of nil income taxes (1,713) (154,844) (23,273) 
Comprehensive loss attributable to ATA Inc. (35,579,272) (16,113,710 ) (2,421,913) 
           
Basic and diluted losses          
per common share attributable to ATA Inc. (0.78) (0.34) (0.05) 
Basic and diluted losses          
per ADS attributable to ATA Inc. (1.56) (0.68) (0.10) 
           
           


ATA INC. AND SUBSIDIARIES 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) 
  
  Six-month Period Ended 
  September 30,  September 30,  September 30,  
    2016  2017  2017  
  RMB  RMB  USD  
 Net revenues:       
Testing services 145,613,013  155,374,915  23,353,060  
Online education services 3,775,820  2,617,976  393,485  
Other revenue 12,587,042  15,618,157  2,347,430  
Total net revenues 161,975,875  173,611,048  26,093,975  
Cost of revenues 84,347,971  96,452,598  14,496,956  
Gross profit 77,627,904  77,158,450  11,597,019  
           
Operating expenses:          
Research and development 19,338,971  23,734,320  3,567,300  
Sales and marketing 24,163,478  28,001,446  4,208,655  
General and administrative 32,221,526  47,454,473  7,132,472  
Total operating expenses 75,723,975  99,190,239   14,908,427   
Income (loss) from operations 1,903,929  (22,031,789) (3,311,408) 
           
Other income (expense):          
Gain from disposal of long-term investment   457,236  68,723  
Share of net loss of equity method investments (8,110,341) (1,612,158) (242,310) 
Impairment loss of equity method investment (21,904,611)     
Interest income, net of interest expenses 1,705,897  1,940,811  291,707  
Foreign currency exchange losses, net (46,143) (638,826) (96,016) 
Loss before income taxes (26,451,269) (21,884,726) (3,289,304) 
        
Income tax expense 4,982,928  3,397,879  510,706  
Net loss (31,434,197) (25,282,605) (3,800,010) 
Net loss attributable to non-controlling interests   (319,707) (48,052) 
Net loss attributable to redeemable non-controlling interests   (544,469) (81,834) 
Net loss attributable to ATA Inc. (31,434,197) (24,418,429) (3,670,124) 
           
Other comprehensive income (loss):          
Foreign currency translation adjustment, net of nil income taxes 239,413  (1,275,930) (191,774) 
Comprehensive loss attributable to ATA Inc. (31,194,784) (25,694,359 ) (3,861,898) 
           
Basic and diluted losses          
per common share attributable to ATA Inc. (0.69) (0.66) (0.10) 
Basic and diluted losses          
per ADS attributable to ATA Inc. (1.38) (1.32) (0.20) 
           
           


RECONCILIATIONS OF NON-GAAP MEASURES 
TO THE MOST COMPARABLE GAAP MEASURES
 
  Three-month Period Ended Six-month Period Ended
  September 30,  September 30,  September 30,  September 30, 
    2016  2017    2016  2017 
  RMB  RMB  RMB  RMB 
         
GAAP net loss attributable to ATA Inc. (35,577,559) (15,958,866) (31,434,197) (24,418,429)
Share-based compensation expenses 1,008,925  4,995,707  2,048,235  10,207,815 
Foreign currency exchange loss (gain), net 14,733  (2,281) 46,143  638,826 
Non-GAAP net loss attributable to ATA Inc. (34,553,901) (10,965,440) (29,339,819) (13,571,788)
         
GAAP losses per common share attributable to ATA Inc.            
Basic and diluted (0.78) (0.34) (0.69) (0.66)
         
Non-GAAP losses per common share attributable to ATA Inc.           
Basic and diluted (0.75) (0.23) (0.64) (0.43)
             

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