TAL Education Group Announces Unaudited Financial Results for the First Fiscal Quarter Ended May 31, 2020

-Net Revenues up by 35.2% Year-Over-Year

-Income from Operations decreased by 26.8% Year-Over-Year

-Non-GAAP Income from Operations decreased by 7.8% Year-Over-Year

-Total Student Enrollments of Normal Priced Long-term Course up by 72.1% Year-Over-Year

BEIJING,July 30,2020 -- TAL Education Group (NYSE: TAL) ("TAL" or the "Company"),a leading K-12 after-school tutoring services provider in China,today announced its unaudited financial results for the first quarter of fiscal year 2021 ended May 31,2020.

Highlights for the First Quarter of Fiscal Year 2021

Net revenues increased by 35.2% year-over-year to US$910.7 million from US$673.4 million in the same period of the prior year.

Income from operations decreased by 26.8% year-over-year to US$35.5 million,from US$48.5 million in the same period of the prior year.

Non-GAAP income from operations,which excluded share-based compensation expenses,decreased by 7.8% year-over-year to US$68.8 million,from US$74.6 million in the same period of the prior year.

Net income attributable to TAL was US$81.7 million,compared to net loss attributable to TAL of US$16.2 million in the same period of the prior year.

Non-GAAP net income attributable to TAL,was US$114.9 million,compared to Non-GAAP net income attributable to TAL of US$9.9 million in the same period of the prior year.

Basic and diluted net income per American Depositary Share ("ADS") were US$0.14 and US$0.13,respectively. Non-GAAP basic and diluted net income per ADS,were US$0.19 and US$0.18,respectively. Three ADSs represent one Class A common share.

Cash,cash equivalents and short-term investments totaled US$2,914.4 million as of May 31,2020,compared to US$2,219.3 million as of February 29,2020.

Total student enrollments of normal priced long-term course increased by 72.1% year-over-year to approximately 2,956,380 from approximately 1,718,190 in the same period of the prior year.

Total physical network increased from 871 learning centers in 70 cities as of February 29,2020 to 936 learning centers in 90 cities as of May 31,2020.

Financial and Operating Data——First Quarter of Fiscal Year 2021

(In US$ thousands,except per ADS data,student enrollments and percentages)

Three Months Ended

May 31,

2019

2020

Pct. Change

Net revenues

673,414

910,664

35.2%

Operating income

48,466

35,491

(26.8%)

Non-GAAP operating income

74,550

68,756

(7.8%)

Net (loss)/ income attributable to TAL

(16,156)

81,651

(605.4%)

Non-GAAP net income attributable to TAL

9,928

114,916

1057.5%

Net (loss)/income per ADS attributable to TAL – basic

(0.03)

0.14

(598.4%)

Net (loss)/income per ADS attributable to TAL –

diluted

(0.03)

0.13

(578.3%)

Non-GAAP net income per ADS attributable to TAL –

basic

0.02

0.19

1041.4%

Non-GAAP net income per ADS attributable to TAL –

diluted

0.02

0.18

1045.9%

Total Student Enrollments of normal priced long-term

course

1,190

2,380

72.1%

"The first fiscal quarter revenue results were driven by a solid performance of online courses and the healthy growth of Xueersi Peiyou business," said Rong Luo,TAL's chief financial officer. "Our offline business may still face some continued pressure due to the COVID-19 outbreak,but as progress is made in containing the spread of COVID-19,we are working on the gradual resumption of our offline activities across different business segments."

"We continue to follow the necessary and appropriate guidelines and protect the safety and health of all our students and employees. We believe our business operations are prepared to offer TAL's services under any circumstance and make any short-term adjustments when needed. We remain fully confident about the market potential of China's education industry and the general progress towards resumption of regular work and school activities," Mr. Luo continued.

Financial Results for the First Quarter of Fiscal Year 2021

Net Revenues

In the first quarter of fiscal year 2021,TAL reported net revenues of US$910.7 million,representing a 35.2% increase from US$673.4 million in the first quarter of fiscal year 2020. The increase was mainly driven by an increase in total student enrollments of normal priced long-term course,which increased by 72.1% to approximately 2,190in the same period of the prior year. The increase in total student enrollments of normal priced long-term coursewas primarily driven by the growth of enrollments in the small class offerings and online courses.

Operating Costs and Expenses

In the first quarter of fiscal year 2021,operating costs and expenses were US$880.0 million,representing a 40.3% increase from US$627.4 million in the first quarter of fiscal year 2020. Non-GAAP operating costs and expenses,were US$846.8 million,a 40.8% increase from US$601.3 million in the first quarter of fiscal year 2020.

Cost of revenues increased by 44.9% to US$429.5 million from US$296.4 million in the first quarter of fiscal year 2020. The increase in cost of revenues was mainly due to an increase in teacher compensation,rental costs and learning materials. Non-GAAP cost of revenues,increased by 45.0% to US$429.2 million,from US$296.1 million in the first quarter of fiscal year 2020.

Selling and marketing expenses increased by 41.0% to US$219.1 million from US$155.4 million in the first quarter of fiscal year 2020. Non-GAAP selling and marketing expenses,increased by 39.6% to US$211.2 million,from US$151.4 million in the first quarter of fiscal year 2020. The increase of selling and marketing expenses in the first quarter of fiscal year 2021 was primarily a result of more marketing promotion activities to expand our customer base and brand enhancement,as well as a rise in the compensation to sales and marketing staff to support a greater number of programs and service offerings compared to the same period in the prior year.

General and administrative expenses increased by 31.6% to US$231.1 million from US$175.6 million in the first quarter of fiscal year 2020. The increase in general and administrative expenses was mainly due to an increase of the number of our general and administrative personnel compared to the same period in the prior year and a rise in compensation to our general and administrative personnel. Non-GAAP general and administrative expenses,increased by 33.9% to US$206.0 million,from US$153.8 million in the first quarter of fiscal year 2020.

Total share-based compensation expenses allocated to the related operating costs and expenses increased by 27.5% to US$33.3 million in the first quarter of fiscal year 2021 from US$26.1 million in the same period of fiscal year 2020.

Gross Profit

Gross profit increased by 27.6% to US$481.1 million from US$377.0 million in the first quarter of fiscal year 2020.

Income from Operations

Income from operations decreased by 26.8% year-over-year to US$35.5 million,from US$48.5 million in the first quarter of fiscal year 2020. Non-GAAP income from operations,decreased by 7.8% to US$68.8 million from US$74.6 million in the first quarter of fiscal year 2020.

Other (expense)/Income

Other income was US$42.1 million for the first quarter of fiscal year 2021,compared to other expense of US$31.3 million in the first quarter of fiscal year 2020.

Impairment Loss on Long-term Investments

Impairment loss on long-term investments was US$2.3 million for the first quarter of fiscal year 2021,compared to US$50.6 million for the first quarter of fiscal year 2020. Impairment loss on long-term investments was mainly due to declines in the value of long-term investments in several investees.

Income Tax Benefit/(expense)

Income tax expense was US$22.0 million in the first quarter of fiscal year 2021,compared to US$2.8 million of income tax benefit in the first quarter of fiscal year 2020.

Net (loss)/Income Attributable to TAL Education Group

Net income attributable to TAL was US$81.7 million in the first quarter of fiscal year 2021,compared to net loss attributable to TAL of US$16.2 million in the first quarter of fiscal year 2020. Non-GAAP net income attributable to TAL,compared to Non-GAAP net income attributable to TAL of US$9.9 million in the first quarter of fiscal year 2020.

Basic and Diluted Net (loss)/Income per ADS

Basic and diluted net income per ADS were US$0.14 and US$0.13,respectively,in the first quarter of fiscal year 2021. Non-GAAP basic and diluted net income per ADS,in the first quarter of fiscal year 2021.

Cash Flow

Net operating cash flow for the firstquarter of fiscal year2021was US$799.6 million. Capital expenditures for the first quarter of fiscal year 2021were US$53.2 million,compared to US$41.4 million for the first quarter of fiscal year 2020. The capital expenditures for the first quarter of fiscal year 2021 was expenditure in relation to our construction project.

Cash,Cash Equivalents,and Short-Term Investments

As of May 31,the Company had US$2,323.8 million of cash and cash equivalents and US$590.6 million of short-term investments,compared to US$1,873.9 million of cash and cash equivalents and US$345.4 million of short-term investments as of February 29,2020.

Deferred Revenue

The Company's deferred revenue balance was US$1,495.4 million,compared to US$968.4 million as of May 31,2019,representing a year-over-year increase of 54.4%. Deferred revenue primarily consisted of the tuition collected in advance of Xueersi Peiyou small classes and online courses through www.xueersi.com,as well as deferred revenue related to other businesses.

Business Outlook

Based on our current estimates,total net revenues for the second quarter of fiscal year 2021 are expected to be between US$1,077.6 million and US$1,105.0 million,representing an increase of 18% to 21% on a year-over-year basis.

If not taking into consideration the impact of potential change in exchange rate between Renminbi and the U.S. Dollar,the projected revenue growth rate is expected to be in the range of 20% to 23% for the second quarter of fiscal year 2021.

These estimates reflect the Company's current expectation,which is subject to change.

Conference Call

The Company will host a conference call and live webcast to discuss its financial results for the first fiscal quarter of fiscal year 2021 ended May 31,2020 at 8:00 a.m. Eastern Time on July 30,2020 (8:00 p.m. Beijing time on July 30,2020).

Please note that you will need to pre-register for conference call participation,using the link provided below. Upon registering,you will be sent participant dial-in numbers,Direct Event passcode and unique registrant ID by email.

Conference call registration link: http://apac.directeventreg.com/registration/event/6360713. It will automatically direct you to the registration page of "TAL Education Group First Quarter of Fiscal Year 2021 Earnings Conference Call",where you may fill in your details for RSVP. When you are requested to submit a participant conference ID,please enter the number "6360713".

In the 10 minutes prior to the call start time,you may use the conference access information (including dial-in number(s),Direct Event passcode and unique registrant ID) provided in the confirmation email that you have received following your pre-registration.

A live and archived webcast of the conference call will be available on the Investor Relations section of TAL's website at https://ir.100tal.com/.

A telephone replay of the conference call will be available through 9:59 a.m. on August 7,U.S. Eastern time (9:59 p.m. on August 7,Beijing time,2020).

The dial-in details for the replayare as follows:

- U.S. toll free:

+1-855-452-5696

- Hong Kong toll free:

800-963-117

- International toll:

+61-2-8199-0299

Conference ID:

6360713

Safe Harbor Statement

This announcement contains forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by terminology such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things,the outlook for the second quarter of fiscal year 2021,quotations from management in this announcement,as well as TAL Education Group's strategic and operational plans,contain forward-looking statements. The Company may also make written or oral forward-looking statements in its reports filed with,or furnished to,the U.S. Securities and Exchange Commission,in its annual reports to shareholders,in press releases and other written materials and in oral statements made by its officers,directors or employees to third parties. Statements that are not historical facts,including statements about the Company's beliefs and expectations,are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of factors could cause actual results to differ materially from those contained in any forward-looking statement,including but not limited to the following: the Company's ability to continue to attract students to enroll in its courses; the Company's ability to continue to recruit,train and retain qualified teachers; the Company's ability to improve the content of its existing course offerings and to develop new courses; the Company's ability to maintain and enhance its brand; the Company's ability to maintain and continue to improve its teaching results; and the Company's ability to compete effectively against its competitors. Further information regarding these and other risks is included in the Company's reports filed with,or furnished to the U.S. Securities and Exchange Commission. All information provided in this press release and in the attachments is as of the date of this press release,and TAL Education Group undertakes no duty to update such information or any forward-looking statement,except as required under applicable law.

About TAL Education Group

TAL Education Group is a leading K-12 after-school tutoring services provider in China. The acronym "TAL" stands for "Tomorrow Advancing Life",which reflects our vision to promote top learning opportunities for Chinese students through both high-quality teaching and content,as well as leading edge application of technology in the education experience. TAL Education Group offers comprehensive tutoring services to students from pre-school to the twelfth grade through three flexible class formats: small classes,personalized premium services,and online courses. Our tutoring services cover the core academic subjects in China's school curriculum as well as competence oriented programs. The Company's learning center network currently covers 90 cities.

We also operate www.jzb.com,a leading online education platform in China. Our ADSs trade on the New York Stock Exchange under the symbol "TAL".

About Non-GAAP Financial Measures

In evaluating its business,TAL considers and uses the following measures defined as non-GAAP financial measures by the SEC as supplemental metrics to review and assess its operating performance: non-GAAP operating costs and expenses,non-GAAP cost of revenues,non-GAAP selling and marketing expenses,non-GAAP general and administrative expenses,non-GAAP income from operations,non-GAAP net income attributable to TAL,non-GAAP basic and non-GAAP diluted net income per ADS. To present each of these non-GAAP measures,the Company excludes share-based compensation expenses. 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. For more information on these non-GAAP financial measures,please see the table captioned "Reconciliations of non-GAAP measures to the most comparable GAAP measures" set forth at the end of this release.

TAL believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding share-based expenses that may not be indicative of its operating performance from a cash perspective. TAL 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 TAL's historical performance and liquidity. TAL computes its non-GAAP financial measures using the same consistent method from quarter to quarter and from period to period. TAL 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 measures is that these non-GAAP measures exclude share-based compensation charges that have been and will continue to be for the foreseeable future a significant recurring expense in the Company's business. Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The accompanying tables have more details on the reconciliations between GAAP financial measures that are most directly comparable to non-GAAP financial measures.

For further information,please contact:

Echo Yan

Investor Relations

TAL Education Group

Tel: +86 10 5292 6658

Email: ir@100tal.com

Caroline Straathof

IR Inside

Tel: +31 6 5462 4301

Email: info@irinside.com

TAL EDUCATION GROUP

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars)

As of

February 29,

2020

As of

May 31,

2020

ASSETS

Current assets

Cash and cash equivalents

$ 1,873,866

$ 2,323,778

Restricted cash-current

28,084

26,575

Short-term investments

345,457

590,644

Inventory

25,832

32,980

Amounts due from related parties-current

3,642

2,095

Income tax receivables

11,548

15,317

Prepaid expenses and other current assets

207,352

189,219

Total current assets

2,495,781

3,180,608

Restricted cash-non-current

13,235

13,934

Property and equipment,net

366,656

396,599

Deferred tax assets-non-current

79,534

87,610

Rental deposits

72,721

79,629

Intangible assets,net

58,985

77,287

Land use right,net

204,853

199,676

Goodwill

378,913

542,870

Long-term investments

571,601

604,992

Long-term prepayments and other non-current assets

85,275

59,669

Operating lease right-of-use assets

1,243,692

1,326,530

Total assets

$ 5,571,246

$ 6,569,404

LIABILITIES AND EQUITY

Current liabilities

Accounts payable (including accounts payable of the

consolidated VIEs without recourse to TAL Education

Group of 104,231and 140,300 as of February 29,2020 and

May 31,respectively)

$ 117,770

$ 151,970

Deferred revenue-current (including deferred revenue-current

of the consolidated VIEs without recourse to TAL

Education Group of 733,253and 1,362,996 as of February

29,2020 and May 31,respectively)

780,167

1,445,072

Amounts due to related parties-current (including amounts due

to related parties-current of the consolidated VIEs without

recourse to TAL Education Group of 4,264 and 2,838 as of February

29,respectively)

4,361

2,890

Accrued expenses and other current liabilities (including

accrued expenses and other current liabilities of the

consolidated VIEs without recourse to TAL Education

Group of 470,519 and 558,949 as of February 29,2020

and May 31,respectively)

552,650

658,305

Income tax payable (including income tax payable of the

consolidated VIEs without recourse to TAL Education

Group of 43,233 and 25,402 as of February 29,respectively)

46,650

19,976

Short-term debt and current portion of long-term debt

(including short-term debt and current portion of long-term

debt of the consolidated VIEs without recourse to TAL

Education Group of nil and 2,383 as of February 29,respectively)

-

2,383

Operating lease liabilities,current portion (including

operating lease liabilities,current portion of the consolidated

VIEs without recourse to TAL Education Group of 276,712

and 299,120 as of February 29,

respectively)

304,960

327,360

Total current liabilities

1,806,558

2,607,956

Deferred revenue-non-current (including deferred revenue-

non-current of the consolidated VIEs without recourse to

TAL Education Group of 833 and 50,339 as of February 29,

2020 and May 31,respectively)

833

50,339

Deferred tax liabilities-non-current (including deferred tax

liabilities-non-current of the consolidated VIEs without

recourse to TAL Education Group of 7,197 and 11,977 as of

February 29,respectively)

7,789

12,678

Long-term debt (including long-term debt of the consolidated

VIEs without recourse to TAL Education Group of nil and

nil as of February 29,respectively)

261,950

263,000

Operating lease liabilities,non-current portion (including

operating lease liabilities,non-current portion of the

consolidated VIEs without recourse to TAL Education

Group of 883,603 and 950,083 as of February 29,respectively)

949,919

1,018,471

Total liabilities

3,027,049

3,952,444

Mezzanine equity

Redeemable non-controlling interests

-

1,775

Equity

Class A common shares

133

133

Class B common shares

67

67

Additional paid-in capital

1,675,640

1,699,808

Statutory reserve

82,712

82,632

Retained earnings

786,097

861,177

Accumulated other comprehensive loss

(28,913)

(53,876)

Total TAL Education Group's equity

2,515,736

2,589,941

Noncontrolling interest

28,461

25,244

Total equity

2,544,197

2,615,185

Total liabilities,mezzanine equity and equity

$ 5,404

TAL EDUCATION GROUP

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands of U.S. dollars,except share,ADS,per share and per ADS data)

For the Three Months Ended

May 31,

2019

2020

Net revenues

$ 673,414

$ 910,664

Cost of revenues (note 1)

296,371

429,515

Gross profit

377,043

481,149

Operating expenses (note 1)

Selling and marketing

155,399

219,077

General and administrative

175,585

231,136

Impairment loss on intangible assets and goodwill

-

304

Total operating expenses

330,984

450,517

Government subsidies

2,407

4,859

Income from operations

48,466

35,491

Interest income

16,087

26,489

Interest expense

(3,124)

(3,596)

Other (expense)/income

(31,331)

42,111

Impairment loss on long-term investments

(50,594)

(2,300)

(Loss)/income before income tax and loss from equity method

investments

(20,496)

98,195

Income tax benefit/(expense)

2,759

(22,000)

(Loss)/income from equity method investments

(1,331)

3,340

Net (loss)/income

$ (19,068)

$ 79,535

Add: Net loss attributable to noncontrolling interest

2,912

2,116

Total net (loss)/income attributable to TAL Education

Group

$ (16,156)

$ 81,651

Net (loss)/income per common share

Basic

$ (0.08)

$ 0.41

Diluted

(0.08)

0.39

Net (loss)/income per ADS (note 2)

Basic

$ (0.03)

$ 0.14

Diluted

(0.03)

0.13

Weighted average shares used in calculating net (loss)/income

per common share

Basic

197,160,090

199,942,865

Diluted

197,090

208,308,474

Note1: Share-based compensation expenses are included in the operating costs and expenses as follows:

For the Three Months

Ended May 31,

2019

2020

Cost of revenues

$ 247

$ 264

Selling and marketing expenses

4,040

7,853

General and administrative expenses

21,797

25,148

Total

$ 26,084

$ 33,265

Note 2: Three ADSs represent one Class A common Share.

TAL EDUCATION GROUP

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF

COMPREHENSIVE (LOSS)/INCOME

(In thousands of U.S. dollars)

For the Three Months Ended

May 31,

2019

2020

Net (loss)/income

$ (19,535

Other comprehensive loss,net of tax

(34,956)

(25,435)

Comprehensive (loss)/income

(54,024)

54,100

Add: Comprehensive loss attributable to

noncontrolling interest

4,178

2,588

Comprehensive (loss)/income attributable to

TAL Education Group

$ (49,846)

$ 56,688

TAL EDUCATION GROUP

UNAUDITED CONDENSED CONSOLIDATEDSTATEMENTSOF

CASH FLOWS

(In thousands of U.S. dollars)

For the Three Months Ended

May 31,

2019

2020

Net cash provided by operating activities

$ 568,464

$ 792,910

Net cash used in investing activities

(115,840)

(330,549)

Net cash used in financing activities

(140,025)

(9,728)

Effect of exchange rate changes

2,267

(3,531)

Net increase in cash,cash equivalents and restricted cash

314,866

449,102

Cash,cash equivalents and restricted cash at beginning of period

1,263,701

1,915,185

Cash,cash equivalents and restricted cash at end of period

$ 1,578,567

$ 2,364,287

TAL EDUCATION GROUP

Reconciliation of Non-GAAP Measures to the Most Comparable GAAP Measures

(In thousands of U.S. dollars,

2019

2020

Cost of revenues

$ 296,371

$ 429,515

Share-based compensation expense in cost of

revenues

247

264

Non-GAAP cost of revenues

296,124

429,251

Selling and marketing expenses

155,077

Share-based compensation expense in selling and

marketing expenses

4,853

Non-GAAP selling and marketing expenses

151,359

211,224

General and administrative expenses

175,136

Share-based compensation expense in general and

administrative expenses

21,148

Non-GAAP general and administrative expenses

153,788

205,988

Operating costs and expenses

627,355

880,032

Share-based compensation expense in operating costs

and expenses

26,084

33,265

Non-GAAP operating costs and expenses

601,271

846,767

Income from operations

48,491

Share-based compensation expenses

26,265

Non-GAAP income from operations

74,550

68,756

Net (loss)/income attributable to TAL Education

Group

(16,156)

81,651

Share-based compensation expenses

26,265

Non-GAAP net income attributable to TAL

Education Group

$ 9,928

$ 114,916

Net (loss)/income per ADS

Basic

$ (0.03)

$ 0.14

Diluted

(0.03)

0.13

Non-GAAP net income per ADS

Basic

$ 0.02

$ 0.19

Diluted

0.02

0.18

ADSs used in calculating net (loss)/income per

ADS

Basic

591,480,270

599,828,595

Diluted

591,270

624,925,422

ADSs used in calculating Non-GAAP net income

per ADS

Basic

591,595

Diluted

618,664,848

624,422

View original content:/news-releases/tal-education-group-announces-unaudited-financial-results-for-the-first-fiscal-quarter-ended-may-31-2020-301102814.html