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ATA Reports Record Fiscal 2017 Third Quarter Financial Results

BEIJING, Feb. 20, 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 unaudited financial results for its fiscal third quarter ended December 31, 2016 (“Third Quarter 2017”).

Third Quarter 2017 Financial and Operating Highlights (percentage changes and comparisons against the fiscal third quarter ended December 31, 2015 (“Third Quarter 2016”))

  • Net revenues increased 23.5% to RMB273.5 million (US$39.4 million), compared to RMB221.4 million, which was driven by increased volumes from both new and existing exams in both public and private sector, as well as revenue contributions from the National Tax Adviser Occupational Qualification Exam (“CTA exam”) held in Third Quarter 2017 (held during the fiscal fourth quarter ended March 31, 2016 (“Fourth Quarter 2016”), in the previous year).
  • Gross profit increased 26.6% to RMB138.9 million (US$20.0 million), compared to RMB109.7 million.
  • Income from operations of RMB93.8 million (US$13.5 million), an increase of 34.1%.
  • Net income attributable to ATA Inc. of RMB75.4 million (US$10.9 million), an increase of 52.8%.
  • Adjusted net income attributable to ATA Inc. excluding share-based compensation expense and foreign currency exchange loss (non-GAAP) increased 48.9% to RMB76.5 million (US$11.0 million), from RMB51.4 million.
  • Basic and diluted earnings per ADS attributable to ATA Inc. were both RMB3.30 (US$0.48). Basic and diluted earnings per ADS attributable to ATA Inc. excluding share-based compensation expense and foreign currency exchange loss (non-GAAP) for Third Quarter 2017 were both RMB3.34 (US$0.48).
  • Delivered approximately 7.0 million billable tests, compared to 5.1 million billable tests in Third Quarter 2016.
  • RMB247.7 million (US$35.7 million) in cash and cash equivalents as of December 31, 2016.

Fiscal Year 2017 Outlook

  • For the fiscal year ending March 31, 2017 (“Fiscal Year 2017”), ATA expects net revenues of between RMB455.0 million and RMB475.0 million and non-GAAP net income attributable to ATA Inc. (adjusted net income, which excludes share-based compensation expense and foreign currency exchange gain/loss) of between nil and RMB10.0 million.
  • The Company is exploring growth opportunities and plans to invest around RMB20.0 million in the K-12 education assessment and recruitment sectors during Fiscal Year 2017. By the end of Third Quarter 2017, this investment mainly included developing the K-12 education assessment item pool, specifically focus on the subject areas of mathematics, Chinese and English for students from Grades 7-12 in China. In the first week of January 2017, the Company successfully delivered the first formal education assessment exam authorized by the Tianjin Nankai Education Bureau.
  • For the quarter ending March 31, 2017 (“Fourth Quarter 2017”), ATA expects net revenues of between RMB26.0 million and RMB31.0 million.

Mr. Kevin Ma, ATA’s Chairman and Chief Executive Officer, stated, “We were pleased to continue delivering strong operating results in the Third Quarter 2017, as exam volumes from our traditional testing services business continued to grow with substantial growth in the Fund Practitioner Certification Exam, the National Unified Certified Public Accountants (“CPA”) exam, and the National Tour Guide Qualification Examination, among others. On October 15-16, 2016, we successfully delivered the CPA exam to about 2.2 million test takers. This marks the fifth consecutive year ATA has administered the CPA exam through its nationwide test delivery platform. On November 5, 2016, we also successfully delivered the National Tour Guide Qualification Examination, which was the first exam administered by the China National Tourism Administration nationwide, across 32 provinces, municipalities and autonomous regions in China. With these recent positive developments, we remain confident in our superior ability to administer large-scale computer-based tests across China. During the quarter, revenue from the Fund Practitioner Certification Exam doubled from the prior-year quarter, and we continued to see steady growth in our private sector due to our strengthening partnerships with large enterprises that have come to rely on ATA’s quality service and excellent reputation to better serve our customers during their external/internal recruiting and selection process.”

Operating Review
In Third Quarter 2017, ATA delivered a total of 7.0 million billable tests, compared to 5.1 million billable tests in Third Quarter 2016. The Company had a network of 3,105 authorized test centers throughout China as of December 31, 2016, which the Company believes is the largest test center network in China operated by a commercial testing service provider. ATA has delivered approximately 87.7 million billable tests since it began operations in 1999.

GAAP Results

Third Quarter 2017
For Third Quarter 2017, ATA’s total net revenues increased 23.5% to RMB273.5 million (US$39.4 million), from RMB221.4 million in Third Quarter 2016. This was driven by increased volumes from both new and existing exams such as the Fund Practitioners Certification Exam, the CPA exam, the National Tour Guide Qualification Exam, the Qualification Exam for Housing and Urban-Rural Construction Field Professionals, and revenue contributions from the CTA exam, which was held in Third Quarter 2017 versus Fourth Quarter 2016 in the previous fiscal year.

Gross profit for Third Quarter 2017 was RMB138.9 million (US$20.0 million), an increase of 26.6% from RMB109.7 million in the Third Quarter 2016.

Gross margin was 50.8% in the Third Quarter 2017, compared to 49.5% in the Third Quarter 2016. The increase in gross margin was primarily due to the change in revenue mix.

Income from operations in Third Quarter 2017 was RMB93.8 million (US$13.5 million), an increase of 34.1% from RMB69.9 million in Third Quarter 2016.

Net income attributable to ATA Inc. for Third Quarter 2017 was RMB75.4 million (US$10.9 million), an increase of 52.8% from RMB49.4 million in Third Quarter 2016.

For the Third Quarter 2017, basic and diluted earnings per common share attributable to ATA Inc. were both RMB1.65 (US$0.24), compared to RMB1.08 in the Third Quarter 2016. Basic and diluted earnings per ADS attributable to ATA Inc. were both RMB3.30 (US$0.48) in Third Quarter 2017, compared to RMB2.16 in Third Quarter 2016.

Non-GAAP Measures
Adjusted net income attributable to ATA Inc. for Third Quarter 2017, which excludes share-based compensation expense and foreign currency exchange loss (non-GAAP), increased 48.9% to RMB76.5 million (US$11.0 million), from RMB51.4 million in the prior-year period. Basic and diluted earnings per common share attributable to ATA Inc. excluding share-based compensation expense and foreign currency exchange loss (non-GAAP) for the Third Quarter 2017 were both RMB1.67 (US$0.24).

Basic and diluted earnings per ADS attributable to ATA Inc. excluding share-based compensation expense and foreign currency exchange loss (non-GAAP) for Third Quarter 2017 were both RMB3.34 (US$0.48), compared to RMB2.24 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 Third Quarter 2017 was 22.9 million. Each ADS represents two common shares.

Balance Sheet Highlights
As of December 31, 2016, ATA’s cash and cash equivalents were RMB247.7 million (US$35.7 million); working capital was RMB206.7 million (US$29.8 million); and total shareholders’ equity was RMB442.6 million (US$63.7 million), compared to RMB247.7 million, RMB245.8 million, and RMB394.2 million, respectively, as of March 31, 2016.

Guidance for Fiscal Year 2017 and for Fourth Quarter 2017
For the Fourth Quarter 2017, ATA expects net revenues of between RMB26.0 million and RMB31.0 million.

For Fiscal Year 2017, ATA expects net revenues of between RMB455.0 million and RMB475.0 million and non-GAAP net income attributable to ATA Inc. of between nil and RMB10.0 million, primarily due to the impairment loss of RMB21.9 million related to the previously announced equity method investment in an associated company as well as impact from the Company’s planned investment of around RMB20.0 million in the abovementioned K-12 education assessment project in Fiscal Year 2017.

Estimated Financial Results
(RMB in millions)

Estimated for the year ending
March 31, 2017
Actual for the year ended
March 31, 2016
Net Revenues 455.0-475.0 417.1
Non-GAAP Net Income attributable to ATA Inc. 0-10.0 36.7
Estimated for the quarter ending
March 31, 2017
Actual for the quarter ended
March 31, 2016
Net Revenues 26.0-31.0 44.7

These are ATA’s current projections, which are subject to change. You are cautioned that the operating results in Third Quarter 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 a.m. Eastern Time on Tuesday, February 21, 2017, during which management will discuss the results of Third Quarter 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-Free Local Access
China:(800) 990 1344 (400) 881 1630
Hong Kong:(800) 96 3844 3002 1672
Participant Passcode:31129395

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/274/19455 .

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 December 31, 2016, ATA's test center network comprised 3,105 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 more than 87.7 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 Fourth Quarter 2017 and Fiscal Year 2017 and statements regarding market demand and trends, the delivery of and expansion of region coverage for various new exams including the Qualification Exam for Housing and Urban-Rural Construction Field Professionals, the anticipated benefits of listing of ATA Online on the New Third Board and the completion of its private placement transaction, the plan of investment in the K-12 education assessment and recruitment sectors, the anticipated benefits of investment by a strategic investor in ATA Learning Data & Technology (Beijing) Limited 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 the 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, 2016, 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, 2016.

The preliminary results for Third Quarter 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 Third Quarter 2017 ended December 31, 2016, into U.S. dollars are included solely for the convenience of readers and have been made at the rate of RMB6.9430 to US$1.00, the noon buying rate as of December 30, 2016, 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 gains or losses, 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 gains or losses 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 gains or losses 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 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.

ATA INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, December 31, December 31,
2016 2016 2016
RMB RMB USD
ASSETS
Current assets:
Cash and cash equivalents 247,667,737 247,709,208 35,677,547
Accounts receivable, net 50,552,034 70,542,211 10,160,192
Receivable due from shareholder 10,000,000 10,000,000 1,440,300
Prepaid expenses and other current assets 11,932,244 8,968,327 1,291,707
Total current assets 320,152,015 337,219,746 48,569,746
Long-term investments 50,685,846 103,373,113 14,888,825
Property and equipment, net 57,229,727 53,615,797 7,722,281
Goodwill 31,011,902 32,523,983 4,684,428
Intangible assets, net 750,895 7,806,240 1,124,332
Restricted cash - 30,000,000 4,320,899
Other assets 10,630,745 9,967,758 1,435,656
Total assets 470,461,130 574,506,637 82,746,167
Current liabilities:
Accrued expenses and other payables 57,739,627 113,808,369 16,391,815
Short term loans - 3,468,500 499,568
Deferred revenues 16,612,164 13,285,968 1,913,577
Total current liabilities 74,351,791 130,562,837 18,804,960
Deferred revenues 1,878,751 1,380,767 198,872
Total liabilities 76,230,542 131,943,604 19,003,832
Shareholders’ equity:
Common shares 3,530,704 3,533,912 508,989
Treasury shares (27,737,073) (27,737,073) (3,994,969)
Additional paid-in capital 395,876,282 398,753,371 57,432,431
Accumulated other comprehensive loss (25,174,129) (24,999,213) (3,600,636)
Retained earnings 47,734,804 91,712,703 13,209,377
Total equity attributable to ATA Inc. 394,230,588 441,263,700 63,555,192
Noncontrolling interests - 1,299,333 187,143
Total shareholders’ equity 394,230,588 442,563,033 63,742,335
Total liabilities and shareholders’ equity 470,461,130 574,506,637 82,746,167


ATA INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Three-month Period Ended
December 31,
December 31, December 31,
2015 2016 2016
RMB RMB USD
Net revenues:
Testing services 210,064,404 256,936,425 37,006,543
Online education services 2,089,850 3,293,757 474,400
Other revenue 9,283,546 13,230,369 1,905,569
Total net revenues 221,437,800 273,460,551 39,386,512
Cost of revenues 111,724,333 134,537,262 19,377,396
Gross profit 109,713,467 138,923,289 20,009,116
Operating expenses:
Research and development 10,202,749 13,980,905 2,013,669
Sales and marketing 11,560,698 13,083,485 1,884,414
General and administrative 18,019,413 18,054,222 2,600,349
Total operating expenses 39,782,860 45,118,612 6,498,432
Income from operations 69,930,607 93,804,677 13,510,684
Other income (expense):
Share of net loss of equity
method investments (3,088,379) (3,758,373) (541,318)
Gain from disposal of long-term investment - 1,600,000 230,448
Interest expense - (28,326) (4,080)
Interest income 1,025,961 802,603 115,599
Foreign currency exchange loss, net (12,050) (29,575) (4,260)
Total other loss (2,074,468) (1,413,671) (203,611)
Income before income taxes 67,856,139 92,391,006 13,307,073
Income tax expense 18,503,128 17,012,911 2,450,369
Net income 49,353,011 75,378,095 10,856,704
Net loss attributable to
oncontrolling interests - (34,001) (4,897)
Net income attributable to ATA Inc. 49,353,011 75,412,096 10,861,601
Other comprehensive income (loss):
Foreign currency translation adjustment, net
of nil income taxes 597,630 (64,497) (9,290)
Comprehensive income 49,950,641 75,313,598 10,847,414
Basic and diluted earnings
per common share attributable to ATA Inc. 1.08 1.65 0.24
Basic and diluted earnings per ADS
attributable to ATA Inc. 2.16 3.30 0.48


ATA INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Nine-month Period Ended
December 31, December 31, December 31,
2015 2016 2016
RMB RMB USD
Net revenues:
Testing services 346,587,320 402,549,438 57,979,179
Online education services 4,638,311 7,069,577 1,018,231
Other revenue 21,176,847 25,817,411 3,718,481
Total net revenues 372,402,478 435,436,426 62,715,891
Cost of revenues 184,167,192 218,885,233 31,526,031
Gross profit 188,235,286 216,551,193 31,189,860
Operating expenses:
Research and development 27,378,953 33,319,876 4,799,060
Sales and marketing 31,830,665 37,246,963 5,364,679
General and administrative 62,502,235 50,275,748 7,241,214
Total operating expenses 121,711,853 120,842,587 17,404,953
Income from operations 66,523,433 95,708,606 13,784,907
Other income (expense):
Share of net loss of equity
method investments (5,582,625) (11,868,714) (1,709,450)
Impairment loss of equity method investment - (21,904,611) (3,154,920)
Gain from disposal of long-term investment - 1,600,000 230,448
Interest expense - (47,288) (6,811)
Interest income 2,460,998 2,527,462 364,030
Foreign currency exchange loss, net (1,501,766) (75,718) (10,906)
Total other loss (4,623,393) (29,768,869) (4,287,609)
Income before income taxes 61,900,040 65,939,737 9,497,298
Income tax expense 20,477,612 21,995,839 3,168,060
Net income 41,422,428 43,943,898 6,329,238
Net loss attributable to
oncontrolling interests - (34,001) (4,897)
Net income attributable to ATA Inc. 41,422,428 43,977,899 6,334,135
Other comprehensive income:
Foreign currency translation adjustment, net
of nil income taxes 2,101,615 174,916 25,193
Comprehensive income 43,524,043 44,118,814 6,354,431
Basic and diluted earnings
per common share attributable to ATA Inc. 0.90 0.96 0.14
Basic and diluted earnings per ADS
attributable to ATA Inc. 1.80 1.92 0.28


RECONCILIATIONS OF NON-GAAP MEASURES
TO THE MOST COMPARABLE GAAP MEASURES
Three-month Period Ended Nine-month Period Ended
December 31, December 31, December 31, December 31,
2015 2016 2015 2016
RMB RMB RMB RMB
GAAP net income attributable to ATA Inc.49,353,011 75,412,096 41,422,428 43,977,899
Share-based compensation expenses2,000,717 1,032,107 7,756,287 3,080,342
Foreign currency exchange loss, net12,050 29,575 1,501,766 75,718
Non-GAAP net income attributable to ATA Inc.51,365,778 76,473,778 50,680,481 47,133,959
GAAP earnings per common share
attributable to ATA Inc.
Basic and diluted1.08 1.65 0.90 0.96
Non-GAAP earnings per common share
attributable to ATA Inc.
Basic and diluted1.12 1.67 1.10 1.03

For more information on our company, please contact the following individuals: At the Company ATA Inc. Shelly Jiang, Interim CFO +86 10 6518 1122 x 5500 jiangyan@atai.net.cn Investor Relations The Equity Group Inc. Adam Prior, Senior Vice President 212-836-9606 aprior@equityny.com

Source:ATA, Inc.