Wah Fu Education Group Ltd. Announces Financial Results for the First Half of Fiscal Year 2023
BEIJING, March 30, 2023 (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, 2022.
Financial Highlights for the Six Months Ended September 30, 2022
| For the Six Months Ended September 30, | ||||||||||||
| ($'000, except per share data) | 2022 | 2021 | % Change | |||||||||
| Revenue | $ | 5,453 | $ | 5,805 | (6.1 | )% | ||||||
| Gross profit | $ | 2,788 | $ | 3,406 | (18.1 | )% | ||||||
| Gross margin | 51.1 | % | 58.7 | % | (7.6 | )pp | ||||||
| Income (loss) from operations | $ | 1,117 | $ | 688 | 62.4 | % | ||||||
| Operating profit (loss) margin | 20.5 | % | 11.8 | % | 8.7 | pp | ||||||
| Net income (loss) | $ | 1,056 | $ | 594 | 77.8 | % | ||||||
| Basic and diluted earnings (loss) per share | $ | 0.19 | $ | 0.11 | 72.7 | % | ||||||
* pp: percentage points
- Revenue decreased by 6.1% year-over-year to $5.45 million for the six months ended September 30, 2022 from $5.81 million for the same period of the prior fiscal year. The decrease in revenue is primarily attributable to a decrease in one course offering from our online education services.
- Gross profit decreased by 18.1% to $2.79 million for the six months ended September 30, 2022 from $3.41 million for the same period of the prior fiscal year. Gross margins were 51.1% and 58.7% for the six months ended September 30, 2022 and 2021, respectively. The decrease in gross profit of online education services is primarily due to the decrease in revenue. The minor decrease in gross margins as compared to revenue in the six months ended September 30, 2022 compared to the same period last year was due to the fact that our online education service is comprised of fixed expenses, which include salaries and related expenses for our teaching support, course and content development.
- Incomes from operations were $1.12 million and $0.69 million for the each of six months ended September 30, 2022 and 2021. Operating profit margin was 20.5% for the six months ended September 30, 2022, compared to operating profit margin of 11.8% for the same period of the prior fiscal year.
- Net income was $1.06 million or, income per share of $0.19 for the six months ended September 30, 2022, compared to net income of $0.59 million, or income per share of $0.11, for the same period of the prior fiscal year.
Unaudited Financial Results for the six months ended September 30, 2022
Revenue
For the six months ended September 30, 2022, revenue decreased by $0.35 million, or 6.1%, to $5.45 million from $5.81 million for the same period of the prior fiscal year. The decrease in revenue was primarily due to the decrease of revenue from a decrease in one course offering from our online education services.
For the six months ended September 30, 2022, revenue from providing online education services decreased by $0.35 million, or 6.2%, to $5.38 million from $5.73 million for the same period of the prior fiscal year. The decrease was mainly due to a decrease in one course offering our Business-to-Business-to-Customer ("B2B2C") revenues and online training services ("B2C"). During the six months ended September 30, 2022, Hubei province cancelled one examination, thus the number of courses we can provide for self-study deceased. The decrease in revenue was offset by our new paperless examination service, which generated $9.0 million in revenue for the six months ended September 30, 2022, and is now part of our B2B2C service. With the introduction of our paperless examination platform, which integrates key aspects for testing by most universities in China, such as management of questions database, test paper, examination, grading, management of examination paper monitoring, and related technical services for educational institutions, we have several universities utilizing such platform and we expect more universities in China to adopt in the near future.
Cost of revenue
Cost of revenue increased by $0.29 million, or 12.1%, to $2.65 million for the six months ended September 30, 2022 from $2.36 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. Cost of revenue mainly comprised of salaries and related expenses for our teaching support, course and content development, website maintenance and information technology engineers and other employees, fees paid to our course lecturers, depreciation and amortization expenses, server relocation and bandwidth leasing fees paid to third-party providers and other miscellaneous expenses. During this period in order to develop new courses to expand our market and customer base, we increased the number of employees to focus on new course development.
Gross profit
Gross profit decreased by $0.62 million, or 18.1%, to $2.79 million for the six months ended September 30, 2022 from $3.41 million for the same period of the prior fiscal year. As a result, gross margin decreased by 7.6 percent to 51.1% for the six months ended September 30, 2022 from 58.7% for the same period of the prior fiscal year. The decrease of gross profit was mainly due to the decrease of on-line education service revenue from a decrease in one course offering. The minor decrease in gross margins as compared to revenue in the six months ended September 30, 2022 compared to the same period last year was due to the fact that our online education service is comprised of fixed expenses, which include salaries and related expenses for our teaching support, course and content development.
Operating expenses
Selling expenses decreased by $0.42 million, or 42.5%, to $0.57 million for the six months ended September 30, 2022 from $1.00 million for the same period of the prior fiscal year. The decrease was mainly due to the Company reducing marketing expenses for this period.
General and administrative expenses decreased by $0.62 million, or 36.2%, to $1.10 million for the six months ended September 30, 2022 from $1.72 million for the same period of the prior fiscal year. Bad debt expense decreased $0.26 million due to the Company's enhanced collection of accounting receivable during this period. Salary expenses decreased $0.08 million due to the reduction of employees.
Total operating expenses decreased by $1.05 million, or 38.5%, to $1.67 million for the six months ended September 30, 2022 from $2.72 million for the same period of the prior fiscal year.
Income (loss) from operations
Incomes from operations were $1.12 million and $0.69 million for each of the six months ended September 30, 2022 and 2021. Please see above for a detailed description of such Income (loss) from operations.
Other income (expenses)
Total other income, including interest income, loss from investments in unconsolidated entity, net of other expenses, were $0.1 million and $0.01 million for the six months ended September 30, 2022 and the same period of the prior fiscal year, respectively.
Income before income taxes
Income before income taxes was $1.22 million for the six months ended September 30, 2022, compared to income before income taxes of $0.70 million for the same period of the prior fiscal year.
Net income and earnings per share
Net income was $1.06 million for the six months ended September 30, 2022, compared to net income of $0.59 million for the same period of the prior fiscal year. Net profit margin was 19.4% for the six months ended September 30, 2022, compared to net profit margin of 10.2% for the same period of the prior fiscal year.
After deducting non-controlling interests, net profit attributable to the Company was $0.86 million, or profit of $0.19 basic and diluted share, for the six months ended September 30, 2022. This compared to net profit of $0.47 million, or profit of $0.11 per basic and diluted share, for the same period of the prior fiscal year.
Weighted average number of shares outstanding was 4,440,085 for the six months ended September 30, 2022, compared to 4,430,243 for the same period of last fiscal year.
Financial Condition
As of September 30, 2022, the Company had cash of $10.83 million, compared to $11.76 million as of March 31, 2021. Total working capital was $10.46 million as of September 30, 2022, compared to $10.21 million as of March 31, 2021.
Net cash provided by operating activities was $0.30 million for the six months ended September 30, 2022, compared to net cash used in operating activities of $2.42 million for the same period last year. Net cash used in investing activities was $0.18 million for the six months ended September 30, 2022, compared to net cash used in investing activities $1.70 million for the same period last year. Net cash provided by financing activities was $0.04 million for the six months ended September 30, 2022, compared to net cash used in financing activities $0.06 million for the same period of last year.
Subsequent Events
On October 13, 2022, Huaxia Dadi Distance Learning Services Co., Ltd. ("Distance Learning"), our wholly owned subsidiary, loaned $20,000,000 (approximately $USD2,811,555) on an interest-free and unguaranteed basis to Beijing Haohua Haoxin Assets Management Consultant Co. Ltd. ("Haohua Haoxin") with a maturity date of March 31, 2023. On March 30, 2023, Haohua Haoxin fully repaid the above-mentioned loan to the Company.
On January 31, 2023, Distance Learning, our wholly owned subsidiary, signed an equity transfer agreement with Hubei Education Investment Co., Ltd. ("Hubei Education") to acquire the 20% equity interests of Huaxia MOOC Internet Technology Co., Ltd. ("Huaxia MOOC") owned by Hubei Education. The total consideration of the acquisition was RMB 714,984 (approximately $100,511 dollars). After the transaction, the Distance Learning's equity interest of Huaxia MOOC increased from 51% to 71%.
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
[email protected]
WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
| As of September 30, | As of March 31, | |||||||
| 2022 | 2022 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 10,827,786 | $ | 11,763,445 | ||||
| Accounts receivable, net | 2,506,760 | 1,712,430 | ||||||
| Other receivables, net | 263,109 | 320,784 | ||||||
| Loan to third parties, current | 648,124 | 569,532 | ||||||
| Loan to related parties | 1,753,729 | 1,745,479 | ||||||
| Other current assets | 130,534 | 90,630 | ||||||
| TOTAL CURRENT ASSETS | 16,130,042 | 16,202,300 | ||||||
| Loan to third parties, noncurrent | 148,566 | 149,673 | ||||||
| Right-of-use assets | 491,201 | 158,697 | ||||||
| Rent deposit | 64,528 | 72,409 | ||||||
| Property and equipment, net | 567,774 | 710,727 | ||||||
| Investments in unconsolidated entities | 23,195 | 12,277 | ||||||
| Deferred tax assets, net | 651,324 | 697,823 | ||||||
| TOTAL ASSETS | $ | 18,076,630 | $ | 18,003,906 | ||||
| CURRENT LIABILITIES: | ||||||||
| Due to related parties | $ | 315,512 | $ | 315,512 | ||||
| Deferred revenue | 3,376,462 | 3,980,132 | ||||||
| Operating lease liabilities, current | 204,654 | 136,467 | ||||||
| Taxes payable | 1,143,453 | 983,869 | ||||||
| Other payables | 180,382 | 199,066 | ||||||
| Accrued expenses and other liabilities | 447,210 | 372,657 | ||||||
| TOTAL CURRENT LIABILITIES | 5,667,673 | 5,987,703 | ||||||
| Operating lease liabilities, noncurrent | 286,138 | 6,063 | ||||||
| TOTAL LIABILITIES | 5,953,811 | 5,993,766 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| EQUITY | ||||||||
| Common stock, $0.01 par value, 30,000,000 shares authorized; 4,440,085shares issued and outstanding as of September 30, 2022 and March 31, 2022, respectively | 44,401 | 44,401 | ||||||
| Additional paid-in capital | 4,798,793 | 4,798,793 | ||||||
| Statutory reserve | 657,329 | 657,329 | ||||||
| Retained earnings | 6,643,158 | 5,722,151 | ||||||
| Accumulated other comprehensive loss | (1,028,627 | ) | (1,190 | ) | ||||
| Total shareholders' equity | 11,115,054 | 11,221,484 | ||||||
| Non-controlling interest | 1,007,765 | 788,656 | ||||||
| TOTAL EQUITY | 12,122,819 | 12,010,140 | ||||||
| TOTAL LIABILITIES AND EQUITY | $ | 18,076,630 | $ | 18,003,906 | ||||
WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
| For the Six Months Ended September 30, | ||||||||
| 2022 | 2021 | |||||||
| REVENUE | $ | 5,453,052 | $ | 5,804,552 | ||||
| COST OF REVENUE AND RELATED TAX | ||||||||
| Cost of revenue | 2,650,570 | 2,364,854 | ||||||
| Business and sales related tax | 14,379 | 33,506 | ||||||
| GROSS PROFIT | 2,788,103 | 3,406,192 | ||||||
| OPERATING EXPENSES | ||||||||
| Selling expenses | 573,881 | 998,720 | ||||||
| General and administrative expenses | 1,097,104 | 1,719,664 | ||||||
| Total operating expenses | 1,670,985 | 2,718,384 | ||||||
| INCOME FROM OPERATIONS | 1,117,118 | 687,808 | ||||||
| OTHER INCOME (EXPENSE) | ||||||||
| Interest income | 104,846 | 32,483 | ||||||
| Other income (expenses) | 1,596 | (16,336 | ) | |||||
| Total other income, net | 106,442 | 16,147 | ||||||
| INCOME BEFORE INCOME TAX PROVISION | 1,223,560 | 703,955 | ||||||
| PROVISION FOR INCOME TAXES | 167,071 | 109,829 | ||||||
| NET INCOME | 1,056,489 | 594,126 | ||||||
| Less: net income attributable to non-controlling interest | 193,622 | 123,208 | ||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO WAH FU EDUCATION GROUP LIMITED | $ | 862,867 | $ | 470,918 | ||||
| COMPREHENSIVE INCOME (LOSS) | ||||||||
| Net income (loss) | 1,056,489 | 594,126 | ||||||
| Other comprehensive loss: foreign currency translation loss | (1,044,121 | ) | 129,926 | |||||
| Total comprehensive loss | 12,368 | 724,052 | ||||||
| Less: Comprehensive income attributable to non-controlling interest | (16,687 | ) | 10,486 | |||||
| COMPREHENSIVE INCOME ATTRIBUTABLE TO WAH FU EDUCATION GROUP LIMITED | $ | 29,055 | $ | 713,566 | ||||
| Earnings per common share - basic and diluted | $ | 0.19 | $ | 0.11 | ||||
| Weighted average shares - basic and diluted | 4,440,085 | 4,430,243 | ||||||
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, 2022 | 4,440,085 | $ | 44,401 | $ | 4,798,793 | $ | 657,329 | $ | 5,722,151 | $ | (1,190 | ) | $ | 11,221,484 | $ | 788,656 | $ | 12,010,140 | ||||||||||||||||||
| Capital contribution | - | - | - | - | - | - | - | 42,174 | 42,174 | |||||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | 921,007 | - | 921,007 | 193,622 | 1,114,629 | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | - | (1,027,437 | ) | (1,027,437 | ) | (16,687 | ) | (1,044,124 | ) | |||||||||||||||||||||||
| Balance at September 30, 2022 | 4,440,085 | $ | 44,401 | $ | 4,798,793 | $ | 657,329 | 6,643,158 | $ | (1,028,627 | ) | $ | 11,115,054 | $ | 1,007,765 | $ | 12,122,819 | |||||||||||||||||||
| Balance at March 31, 2021 | 4,381,033 | $ | 43,810 | $ | 4,799,384 | $ | 323,820 | $ | 5,312,654 | $ | (278,180 | ) | $ | 10,201,488 | $ | 606,936 | $ | 10,808,424 | ||||||||||||||||||
| Common stock | 59,052 | 591 | (591 | ) | - | - | - | - | - | - | ||||||||||||||||||||||||||
| Net income (loss) | - | - | - | - | 470,788 | - | 470,788 | 123,338 | 594,126 | |||||||||||||||||||||||||||
| Foreign currency translation adjustment | - | - | - | - | - | 153,129 | 153,129 | 10,486 | 163,615 | |||||||||||||||||||||||||||
| Balance at September 30, 2021 | 4,440,085 | $ | 44,401 | $ | 4,798,793 | $ | 323,820 | $ | 5,783,442 | $ | (125,051 | ) | $ | 10,825,405 | $ | 740,760 | $ | 11,566,165 | ||||||||||||||||||
WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the six months ended, September 30 | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net Income | $ | 1,056,489 | $ | 594,126 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 81,492 | 68,190 | ||||||
| Non-cash lease expense | 519,099 | 252,897 | ||||||
| Loss from disposal of property and equipment | 818 | 4,444 | ||||||
| Provision for doubtful accounts | 19,658 | 265,965 | ||||||
| Interest income from loan to third parties | 27,558 | (24,956 | ) | |||||
| Deferred tax benefit | (31,120 | ) | (139,442 | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable, net | (1,056,061 | ) | (404,495 | ) | ||||
| Other receivable, net | 15,891 | (3,583,568 | ) | |||||
| Other current assets | (50,228 | ) | (23,352 | ) | ||||
| Rent deposit | 8,746 | - | ||||||
| Deferred revenue | (180,174 | ) | 583,009 | |||||
| Taxes payable | 281,809 | 259,051 | ||||||
| Other payable | 708 | 12,825 | ||||||
| Operating lease liabilities | (518,667 | ) | (250,247 | ) | ||||
| Accrued expenses and other liabilities | 121,649 | (37,742 | ) | |||||
| Net cash provided by (used in) operating activities | 297,667 | (2,423,295 | ) | |||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | (4,205 | ) | (69,923 | ) | ||||
| Payments made for loans to related party | - | (1,650,000 | ) | |||||
| Payments made for l loans to related party | (8,250 | ) | - | |||||
| Payments made for loans to third parties | (164,607 | ) | 23,513 | |||||
| Net cash provided by (used in) investing activities | (177,062 | ) | (1,696,410 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Changes in due to related parties | - | 58,250 | ||||||
| Capital contribution by shareholders of non-controlling interest | 42,174 | - | ||||||
| Net cash provided by (used in) financing activities | 42,174 | 58,250 | ||||||
| Effect of exchange rate fluctuation on cash | (1,098,438 | ) | 182,215 | |||||
| Net increase in cash | (935,659 | ) | (3,879,240 | ) | ||||
| Cash at beginning of the period | 11,763,445 | 12,054,015 | ||||||
| Cash at end of the period | $ | 10,827,786 | $ | 8,174,775 | ||||
| Supplemental cash flow information | ||||||||
| Cash paid for income taxes | $ | (6,745 | ) | $ | (9,678 | ) | ||
| Non-cash financing activities | ||||||||
| Right of use assets obtained in exchange for operating lease obligations | $ | 766,584 | $ | 793,531 | ||||
