Wah Fu Education Group Ltd. Announces Financial Results for the First Half of Fiscal Year 2021


BEIJING, China, March 31, 2021 (GLOBE NEWSWIRE) -- Wah Fu Education Group Limited (“Wah Fu” or the “Company”) (NASDAQ:WAFU), a provider of online education and exam preparation services, as well as related training materials and technology solutions for both institutions and individuals, today announced its unaudited financial results for the six months ended September 30, 2020.

Financial Highlights for the Six Months Ended September 30, 2020

  For the Six Months Ended 
September 30,
 
($’000, except per share data) 2020  2019  % Change 
Revenue $4,302  $2,500   72.1%
Gross profit $2,430  $986   146.5%
Gross margin  56.5%  39.4%  17.1pp
Income (loss) from operations $687  $(1,038)  -166.2%
Operating profit (loss) margin  16.0%  -41.5%  57.5pp
Net income (loss) $511  $(1,183)  -143.2%
Basic and diluted earnings (loss) per share $0.09  $(0.29)  -131.0%

* pp: percentage points            

 Revenue increased by 72.1% year-over-year to $4.30 million for the six months ended September 30, 2020 from $2.50 million for the same period of the prior fiscal year. The increase in revenue is primarily attributable to the increased revenue from online education services due to the impact of the COVID-19.
   
 Gross profit increased by 146.5% to $2.43 million for the six months ended September 30, 2020 from $0.99 million for the same period of the prior fiscal year. Gross margins were 56.5% and 39.4% for the six months ended September 30, 2020 and 2019, respectively. The increased gross profit was mainly due to (i) the sharply increased revenue from online education service due to the impact of the COVID-19, which had a higher gross margin; (ii) the decreased salary expense for IT service personnel since the Company shifted focus to online education service.
   
 Income from operations was $0.69 million for the six months ended September 30, 2020, compared to loss from operations of $1.04 million for the same period of the prior fiscal year. Operating profit margin was 16.0% for the six months ended September 30, 2020, compared to operating loss margin of 41.5% for the same period of the prior fiscal year.
   
 Net income was $0.51 million or, income per share of $0.09 for the six months ended September 30, 2020, compared to net loss of $1.18 million, or loss per share of $0.29, for the same period of the prior fiscal year.

Unaudited Financial Results for the Six months Ended September 30, 2020

Revenue

For the six months ended September 30, 2020, revenue increased by $1.80 million, or 72.1%, to $4.30 million from $2.50 million for the same period of the prior fiscal year. The increase in revenue is primarily attributable to the increase of revenue from online education services.

For the six months ended September 30, 2020, revenue from online education services increased by $1.74 million, or 71.0%, to $4.19 million from $2.45 million for the same period of the prior fiscal year. The increase was primarily due to increase in B2B2C revenues. The increase in B2B2C revenues was due to the increased revenue from online continuing education and examination service. Due to the impact of the COVID-19, the daily offline education and teaching activities of colleges and universities across the country were suspended due to government’s regulations. The online courses we provided during the six months ended September 30, 2020 thus increased sharply. As a consequence, revenue from online education services increased, compared to the same period of the prior fiscal year. The number of courses provided increased by 41,231 from 244,422 courses for the six months ended September 30, 2019 to 285,653 courses for the six months ended September 30, 2020.

Cost of revenue

Cost of revenue increased by $0.36 million, or 24.2%, to $1.85 million for the six months ended September 30, 2020 from $1.49 million for the same period of the prior fiscal year. The increase in overall cost of revenue was mainly due to increased cost of revenue for online education services. Because revenue from the online education services increased, the cooperation fee paid to collaborators increased. The increase was partially offset by payroll expense due to the decrease of the total number of employees during the six months ended September 30, 2020.

Cost of revenue for online education services increased by $0.34 million, or 22.8%, to $1.83 million for the six months ended September 30, 2020 from $1.49 million for the same period of the prior fiscal year. The increase in cost of revenue for online education services was primarily due to increased collaboration fees resulting from business expansion in Hunan Province. As the total numbers of adult education course increased, the collaboration fees paid to collaborator increased accordingly.

Gross profit

Gross profit increased by $1.44 million, or 146.5%, to $2.43 million for the six months ended September 30, 2020 from $0.99 million for the same period of the prior fiscal year. As a result, gross margin increased by 17.1 points to 56.5% for the six months ended September 30, 2020 from 39.4% for the same period of the prior fiscal year.
  
Gross profit for online education services increased by $1.40 million or 148.9% to $2.34 million for the six months ended September 30, 2020 from $0.94 million for the same period of the prior fiscal year. As the online courses we provided during the six months ended September 30, 2020 increased sharply, the revenue from online education services increased compared to the same period of the prior fiscal year. As the operation of our platform remained stable, the cost of online education services, such as collaboration fees paid to universities, depreciation and amortization expenses, didn’t increase exactly in line with increase in revenue. As a result, gross margin for online education services increased to 56.0% for the six months ended September 30, 2020 from 38.4% for the same period of the prior fiscal year.

Operating expenses

Selling expenses increased by $0.05 million, or 6.6%, to $0.81 million for the six months ended September 30, 2020 from $0.76 million for the same period of the prior fiscal year. The increase was mainly due to the increased effort the company put in marketing in current period.

General and administrative expenses decreased by $0.33 million, or 26.2%, to $0.93 million for the six months ended September 30, 2020 from $1.26 million for the same period of the prior fiscal year. The decrease was primarily because the government claimed the company exempt from social insurance during the six months ended September 30, 2020 due to the impact of COVID-19.

Total operating expenses decreased by $0.28 million, or 13.9%, to $1.74 million for the six months ended September 30, 2020 from $2.02 million for the same period of the prior fiscal year.

Income (loss) from operations

Income from operations was $0.69 million for the six months ended September 30, 2020, compared to loss from operations of $1.04 million for the same period of the prior fiscal year. We realized profit mainly due to the increase of revenue during the six months ended September 30, 2020. For details reasons, please see above.

Other income (expenses)

Total other income, including interest income, loss from investments in unconsolidated entity, net of other expenses, were $0.04 million and $0.04 million for the six months ended September 30, 2020 and the same period of the prior fiscal year, respectively.

Income (loss) before income taxes

Income before income taxes was $0.72 million for the six months ended September 30, 2020, compared to loss before income taxes of $1.00 million for the same period of the prior fiscal year.

Net income (loss) and earnings (loss) per share

Net income was $0.51 million for the six months ended September 30, 2020, compared to net loss of $1.18 million for the same period of the prior fiscal year. Net profit margin was 11.9% for the six months ended September 30, 2020, compared to net loss margin of 47.3% for the same period of the prior fiscal year.

After deducting non-controlling interests, net profit attributable to the Company was $0.37 million, or profit of $0.09 basic and diluted share, for the six months ended September 30, 2020. This compared to net loss of $1.23 million, or loss of $0.29 per basic and diluted share, for the same period of the prior fiscal year.

Weighted average number of shares outstanding was 4,381,033 for the six months ended September 30, 2020, compared to 4,199,336 for the same period of last fiscal year.

Financial Condition

As of September 30, 2020, the Company had cash of $9.27 million, compared to $6.83 million as of March 31, 2020. Total working capital was $8.64 million as of September 30, 2020, compared to $7.34 million as of September 30, 2019.

Net cash provided by operating activities was $1.59 million for the six months ended September 30, 2020, compared to net cash provided by operating activities of $1.13 million for the same period last year. Net cash provided by investing activities was $0.68 million for the six months ended September 30, 2020, compared to net cash used in investing activities $0.06 million for the same period last year. Net cash used in financing activities was $0.09 million for the six months ended September 30, 2020, compared to net cash provided by financing activities $4.89 million for the same period of last year.

About Wah Fu Education Group Limited

Headquartered in Beijing, China, Wah Fu Education Group Limited provides online training and exam preparation services, as well as related training materials and technology solutions for both institutions, such as universities and training institutions, and students. For more information about Wah Fu, please visit www.edu-edu.cn.

Safe Harbor Statement

This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are not statements of historical facts. When the Company uses words such as “may, “will, “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate” or similar expressions that do not relate solely to historical matters, it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the actual results to differ materially from the Company’s expectations discussed in the forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, the following:  the Company’s goals and strategies; the Company’s future business development; product and service demand and acceptance; changes in technology; economic conditions; the growth of the online training industry in China and the other markets the Company serves or plans to serve; reputation and brand; the impact of competition and pricing; government regulations; fluctuations in general economic and business conditions in China and the other markets the Company serves or plans to serve and assumptions underlying or related to any of the foregoing and other risks contained in reports filed by the Company with the Securities and Exchange Commission (the “SEC”).  For these reasons, among others, investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Additional factors are discussed in the Company’s filings with the SEC, which are available for review at www.sec.gov. The Company undertakes no obligation to publicly update these forward-looking statements to reflect events or circumstances that arise after the date hereof.

For more information, please contact:

Raincy Du
ir@edu-edu.com.cn

WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

  As of September 30,  As of 
March 31,
 
  2020  2020 
ASSETS      
CURRENT ASSETS:      
Cash $9,266,310  $6,833,891 
Accounts receivable, net  1,149,926   542,913 
Other receivables, net  74,601   143,920 
Loan to third parties, current  666,669   42,316 
Loan to related parties  1,832,051   2,537,532 
Other current assets  199,543   150,213 
TOTAL CURRENT ASSETS  13,189,100   10,250,785 
         
Loan to third parties, noncurrent  -   579,335 
Right-of-use assets  494,963   603,553 
Rent deposit  76,123   73,049 
Property and equipment, net  743,552   775,465 
Investments in unconsolidated entities  11,439   10,977 
Deferred tax assets, net  338,191   272,115 
TOTAL  ASSETS $14,853,368  $12,565,279 
         
CURRENT LIABILITIES:        
Due to related parties $297,855  $286,353 
Deferred revenue  2,399,981   1,524,918 
Operating lease liabilities, current  265,610   254,332 
Taxes payable  580,341   314,052 
Other payables  200,716   189,201 
Accrued expenses and other liabilities  808,483   335,699 
TOTAL CURRENT LIABILITIES  4,552,986   2,904,555 
         
Operating lease liabilities, noncurrent  242,695   361,595 
TOTAL LIABILITIES  4,795,681   3,266,150 
         
COMMITMENTS AND CONTINGENCIES        
         
EQUITY        
Common stock, $0.01 par value, 30,000,000 shares authorized; 4,381,033 and 4,381,033 shares issued and outstanding as of September 30, 2020 and March 31, 2020 respectively  43,810   43,810 
Additional paid-in capital  4,799,384   4,799,384 
Statutory reserve  231,424   231,424 
Retained earnings  5,098,639   4,723,999 
Accumulated other comprehensive loss  (505,639)  (734,028)
Total shareholders’ equity  9,667,618   9,064,589 
Non-controlling interest  390,069   234,540 
TOTAL EQUITY  10,057,687   9,299,129 
TOTAL LIABILITIES AND EQUITY $14,853,368  $12,565,279 

WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

  For the Six Months Ended
September 30,
 
  2020  2019 
       
REVENUE $4,302,082  $2,500,195 
         
COST OF REVENUE AND RELATED TAX        
Cost of revenue  1,853,601   1,491,384 
Business and sales related tax  18,634   22,509 
         
GROSS PROFIT  2,429,847   986,302 
         
OPERATING EXPENSES        
Selling expenses  812,877   764,179 
General and administrative expenses  929,998   1,259,784 
Total operating expenses  1,742,875   2,023,963 
         
INCOME (LOSS) FROM OPERATIONS  686,972   (1,037,661)
         
OTHER INCOME (EXPENSE)        
Interest income  82,864   46,447 
Other expenses  (46,389)  (5,726)
Total other income, net  36,475   40,721 
         
INCOME (LOSS) BEFORE INCOME TAX PROVISION  723,447   (996,940)
         
PROVISION FOR INCOME TAXES  212,024   186,434 
         
NET INCOME (LOSS)  511,423   (1,183,374)
         
Less: net income attributable to non-controlling interest  136,783   41,653 
         
NET INCOME (LOSS) ATTRIBUTABLE TO WAH FU EDUCATION GROUP LIMITED $374,640  $(1,225,027)
         
COMPREHENSIVE INCOME (LOSS)        
Net income (loss)  511,423   (1,183,374)
Other comprehensive loss: foreign currency translation loss  247,135   (388,073)
Total comprehensive loss  758,558   (1,571,447)
Less: Comprehensive income (loss) attributable to non-controlling interest  18,746   (26,088)
         
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO WAH FU EDUCATION GROUP LIMITED $739,812  $(1,545,359)
         
Earnings (loss) per common share - basic and diluted $0.09  $(0.29)
Weighted average shares - basic and diluted  4,381,033   4,199,336 

  

WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATION STATEMENTS OF CHANGES IN EQUITY

  Ordinary Shares  Additional 
Paid-in
  Statutory  Retained  Accumulated Other Comprehensive  Shareholders’  Non-controlling  Total 
  Shares  Amount  Capital  Reserves  Earnings  Income (Loss)  Equity  Interest  Equity 
                            
Balance at March 31, 2020  4,381,033  $43,810  $4,799,384  $231,424  $4,723,999  $(734,028) $9,064,589  $234,540  $9,299,129 
                                     
Net income (loss)  -   -   -   -   374,640   -   374,640   136,783   511,423 
Foreign currency translation adjustment  -   -   -   -   -   228,389   228,389   18,746   247,135 
                                     
Balance at September 30, 2020  4,381,033  $43,810  $4,799,384  $231,424  $5,098,639  $(505,639) $9,667,618  $390,069  $10,057,687 
                                     
Balance at March 31, 2019  3,200,000  $32,000  $217,395  $222,180  $6,421,944  $(407,169) $6,486,350  $211,353  $6,697,703 
                                     
Common stock issued net of stock issuance costs of $1,266,326  1,181,033   11,810   4,627,029   -   -   -   4,638,839   -   4,638,839 
Net income (loss)  -   -   -   -   (1,225,027)  -   (1,225,027)  41,653   (1,183,374)
Foreign currency translation adjustment  -   -   -       -   (361,985)  (361,985)  (26,088)  (388,073)
Balance at September 30, 2019  4,381,033  $43,810  $4,844,424  $222,180  $5,196,917  $(769,154) $9,538,177  $226,918  $9,765,095 

  

WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

  For the six months ended,
September 30
 
  2020  2019 
Cash flows from operating activities:      
Net Income (loss) $511,423  $(1,183,374)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:        
Depreciation and amortization  70,124   113,767 
Non-cash lease expense  130,173   78,861 
Loss from disposal of property and equipment  -   88 
Provision for doubtful accounts  241,551   59,242 
Provision for investments in unconsolidated entities  23,329   - 
Interest income from loan to third parties  (72,600)  (15,610)
Deferred tax benefit  (53,069)  91,148 
Changes in operating assets and liabilities:        
Accounts receivable, net  (645,705)  929,249 
Other receivable, net  150,959   (155,658)
Other current assets  (44,446)  67,131 
Rent deposit  (77,731)  (74,856)
Deferred revenue  787,789   1,157,842 
Taxes payable  245,863   108,238 
Other payable  4,074   - 
Operating lease liabilities  (129,738)  (56,131)
Accrued expenses and other liabilities  445,590   13,928 
Net cash provided by operating activities  1,587,586   1,133,865 
         
Cash flows from investing activities:        
Purchase of property and equipment  (7,417)  (63,111)
Proceeds made for loans to related party  (1,650,000)  - 
Proceeds from loans to related party  2,355,481   - 
Payments made for loans to third parties  (18,321)  - 
Net cash provided by (used in) investing activities  679,743   (63,111)
         
Cash flows from financing activities:        
Changes in due to related parties  (88,510)  26,040 
Net proceeds from initial public offering (“IPO”)  -   4,866,512 
Net cash provided by (used in) financing activities  (88,510)  4,892,552 
         
Effect of exchange rate fluctuation on cash  253,600   (293,494)
         
Net increase in cash  2,432,419   5,669,812 
Cash at beginning of the period  6,833,891   3,927,718 
Cash at end of the period $9,266,310  $9,597,530 
         
Supplemental cash flow information        
Cash paid for income taxes $29,066  $11,228 
         
Non-cash financing activities        
Right of use assets obtained in exchange for operating lease obligations $816,057  $823,554 
Deferred offering cost netted with proceeds from IPO $-  $227,673