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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%  8.7pp
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
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,
 
  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 


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