Four Seasons Education Reports Second Quarter Fiscal 2021 Unaudited Financial Results

SHANGHAI,Oct. 26,2020 -- Four Seasons Education (Cayman) Inc. ("Four Seasons Education" or the "Company") (NYSE: FEDU),a leading Shanghai-based educational company dedicated to providing comprehensive after-school education services with a focus on high-quality math education,today announced its unaudited financial results for the second quarter fiscal year 2021,ended August 31,2020.

Second Quarter Fiscal Year 2021 Financial and Operational Highlights

Revenue was RMB83.8 million (US$12.2 million),compared with RMB128.8 million in the same period of last year.

Gross profit was RMB35.6 million (US$5.2 million),compared with RMB71.0 million in the same period of last year.

Operating loss was RMB2.7 million (US$0.4 million),compared with operating income of RMB28.3 million in the same period of last year.

Adjusted operating income(1) (non-GAAP) was RMB4.5 million (US$0.7 million),compared with RMB35.7 million in the same period of last year.

Net income was RMB4.0 million (US$0.6 million),compared with RMB20.3 million in the same period of last year.

Adjusted net income(2) (non-GAAP) was RMB6.8 million (US$1.0 million),compared with RMB26.9 million in the same period of last year.

Basic and diluted net income per American Depositary Share ("ADS") attributable to ordinary shareholders were both RMB0.07 (US$0.01),compared with RMB0.40 and RMB0.39,respectively,for the same period of last year. Each two ADSs represent one ordinary share.

Adjusted basic and diluted net income per ADS attributable to ordinary shareholders(3) (non-GAAP) were both RMB0.13 (US$0.02),compared with RMB0.53 and RMB0.52,for the same period of last year.

Number of learning centers was 50 as of August 31,2020,compared with 54 as of August 31,2019.

Total student enrollment(4) was 37,085,compared with 39,357 during the same period of last year.

(1) Adjusted operating income/loss is defined as operating income/loss excluding share-based compensation expenses.

(2) Adjusted net income/lossis defined as net income/loss excluding share-based compensation expenses and fair value change of investments.

(3) Adjusted basic/diluted net income/loss per ADS attributable to ordinary shareholders is defined as basic/diluted net income/loss per ADS attributable to ordinary shareholders excluding share-based compensation expenses per ADS attributable to ordinary shareholders and fair value change of investments per ADS attributable to ordinary shareholders.

For more information on these adjusted financial measures,please see the section captioned under "About Non-GAAP Financial Measures" and the tables captioned "Reconciliation of GAAP and non-GAAP Results" set forth at the end of this release.

(4) Total student enrollment is defined as the cumulative number of courses enrolled in and paid for by the Company'sstudents during the respective period,including multiple courses enrolled in and paid for by the same student.

"All of our learning centers have resumed offline classes during this quarter," said Ms. Yi (Joanne) Zuo,the Director and Chief Executive Officer of Four Seasons Education. "While our overall business continued to be impacted in the quarter by the macro challenges and regulatory changes,the tough operating environment did not slow us from continuing to execute our strategic initiatives with a keen focus on building a long-term sustainable business. We remain focused on strengthening our operational capabilities at multiple fronts in order to further optimize the learning experience of students enrolled in our diverse curricula and tutoring programs.

"With our strong track record of helping students achieve excellent learning outcomes,we have been making endeavors to enhance the quality of our educational service and launch new course products to better engage students in an evolving and dynamic industry,and to ultimately gain even broader appeal with a wider student base. Moving forward,we will continue our strategic efforts to boost the diversity of our course offerings,optimize our learning center network,increase student enrollments and engagement,while exploring new growth potential.

"It is encouraging that our second quarter financial performance improved on a quarter-over-quarter basis,highlighted by a 42.8% increase in revenue and a 430 basis points increase in gross margin. In this quarter,we are also pleased to see improving profitability sequentially,evidencing our enhanced operating efficiency. We believe our focus on our core strengths and fundamentals will set the foundation for sustainable operation. We remain confident about the recovery and robust long-term prospects," Ms. Zuo concluded.

Second Quarter Fiscal Year 2021 Financial Results

Revenuewas RMB83.8 million (US$12.2 million) for the second quarter of fiscal year 2021,compared with RMB128.8 million in the same period of last year,primarily due to latest regulatory policy and the extended impact of COVID-19.

Cost of revenuedecreased by 16.7% to RMB48.2 million (US$7.0 million) for the second quarter of fiscal year 2021 from RMB57.9 million in the same period of last year.

Gross profitwasRMB35.6 million (US$5.2 million) for the second quarter of fiscal year 2021,compared with RMB71.0 million in the same period of last year.

General and administrative expensesdecreased by 7.0% to RMB30.3 million (US$4.4 million) for the second quarter of fiscal year 2021 from RMB32.6 million in the same period of last year.

Sales and marketing expenses decreased by 20.6% to RMB8.0 million (US$1.2 million) for the second quarter of fiscal year 2021 from RMB10.0million in the same period of last year.

Operating losswas RMB2.7 million (US$0.4 million) for the second quarter of fiscal year 2021,compared with operating income of RMB28.3 million in the same period of last year. Adjusted operating income(1) (non-GAAP),which is calculated as operating income excluding share-based compensation expenses,was RMB4.5 million (US$0.7 million) for the second quarter of fiscal year 2021,compared with RMB35.7 million in the same period of last year.

Income tax expensewas RMB1.8 million (US$0.3 million) for the second quarter of fiscal year 2021,compared with RMB9.2 million in the same period of last year.

Net income was RMB4.0 million (US$0.6million) during the second quarter of fiscal year 2021,compared with RMB20.3million in the same period of last year. Adjusted net income(2) (non-GAAP),which is calculated as net income excluding share-based compensation expenses and fair value change of the Company's investments,was RMB6.8 million (US$1.0 million)for the second quarter of fiscal year 2021,compared with RMB26.9 million in the same period of last year.

Basic and diluted net income per ADS attributable to ordinary shareholders for the second quarter of fiscal year 2021 were both RMB0.07 (US$0.01),for the same period of last year.Adjusted basic and diluted net income per ADS attributable to ordinary shareholders(3)(non-GAAP),which is calculated as basic/diluted net income/loss per ADS attributable to ordinary shareholders excluding share-based compensation expenses per ADS attributable to ordinary shareholders and fair value change of investments measured at fair value per ADS attributable to ordinary shareholders,were both RMB0.13 (US$0.02) for the second quarter of fiscal year 2021,for the same period of last year.

Cash and cash equivalents. As of August 31,the Company had cash and cash equivalents of RMB423.0 million (US$61.6million),compared with RMB404.7 million as of February 29,2020.

First Six Months Fiscal Year 2021 Financial Results

Revenuewas RMB142.5 million (US$20.8 million) for the first six months of fiscal year 2021,compared with RMB214.5 million in the same period of last year,primarily due to the impact of the COVID-19 and latest regulatory policy.

Cost of revenue decreased by 18.9% to RMB84.5 million (US$12.3 million) for the first six months of fiscal year 2021 from RMB104.2 million in the same period of last year.

Gross profit was RMB58.0 million (US$8.5 million) for the first six months of fiscal year 2021,compared with RMB110.3 million in the same period of last year.

General and administrative expensesdecreased by 11.9% to RMB58.3 million (US$8.5 million) for the first six months of fiscal year 2021 from RMB66.2 million in the same period of last year.

Sales and marketing expensesdecreased by 16.6% to RMB14.9 million (US$2.2 million) for the first six months of fiscal year 2021 from RMB17.9 million in the same period of last year.

Operating loss was RMB15.2 million (US$2.2 million) for the first six months of fiscal year 2021,compared with operating income of RMB26.3 million in the same period of last year.Adjusted operating loss,which excludes share-based compensation expenses,was RMB0.3 million (US$0.0 million) for the first six months of fiscal year 2021,compared with adjusted operating income of RMB43.4 million in the same period of last year.

Net loss wasRMB7.6 million (US$1.1 million) during the first six months of fiscal year 2021,comparedwith net income of RMB24.5 million in the same period of last year. Adjusted net income,which excludes share-based compensation expenses and fair value change of the Company's investments measured at fair value,was RMB6.2 million (US$0.9 million) for the first six months of fiscal year 2021,compared with RMB38.1 million in the same period of last year.

Basic and diluted net loss per ADS attributable to ordinary shareholders for the first six months of fiscal year 2021 were both RMB0.16 (US$0.02),compared with net income of RMB0.48 and RMB0.46,for the same period of last year. Non-GAAP basic and diluted net income per ADS attributable to ordinary shareholdersfor the first six months of fiscal year 2021 were both RMB0.13 (US$0.02),compared with RMB0.77 and RMB0.74,for the same period of last year.

Business Outlook

For the third quarter of fiscal year 2021,the Company expects to generate revenue in the range of RMB62.1million to RMB67.2 million.

The above guidance reflects the Company's current and preliminary view,which is subject to change.

Conference Call

The Company's management will host an earnings conference call at 8:00 AM U.S. Eastern Time on October26,2020(8:00 PM Beijing/Hong Kong time on October26,2020)

Dial-in details for the earnings conference call are as follows:

United States (toll free):

1-888-346-8982

International:

1-412-902-4272

Hong Kong,China (toll free):

800-905-945

Hong Kong,China:

852-3018-4992

Mainland China (toll free):

400-120-1203

Participants should dial-in at least 5 minutes before the scheduled start time and ask to be connected to the call for "Four Seasons Education."

Additionally,a live and archived webcast of the conference call will be available on the Company's investor relations website athttp://ir.sijiedu.com.

A replay of the conference call will be accessible approximately one hour after the conclusion of the live call until November 2,by dialing the following telephone numbers:

United States (toll free):

1-877-344-7529

International:

1-412-317-0088

Replay Access Code:

10149342

About Four Seasons Education (Cayman) Inc.

Four Seasons Education (Cayman) Inc. is a leading Shanghai-based educational company dedicated to providing comprehensive after-school education services with a focus on high-quality math education. The Company's vision is to unlock students' intellectual potential through high quality and effective education that can profoundly benefit students' academic,career and life prospects. The Company provides educational programs that are primarily focused on elementary-level math and have expanded in recent years to also include other subjects,including physics,chemistry,and languages,and other grade levels,including kindergarten-level and middle school-level programs. The Company's proprietary educational content is designed to cultivate students' interests and enhance their cognitive and logic abilities. The Company develops its educational content through a systematic development process and updates it regularly based on student performance and feedback. Such process allows the Company to effectively drive better learning outcomes and serve students of different ages,aptitude levels and learning objectives. The Company's faculty is led by a group of experienced senior educators,including recognized scholars,award-winning teachers. Over the years,the quality of the Company's education services has been demonstrated by its studentoutstanding academic performance.

About Non-GAAP Financial Measures

In evaluating the Company's business,the Company considers and uses certain non-GAAP measures,including primarily adjusted operating income/loss,adjusted net income/loss and adjusted basic and diluted net income/loss per ADS attributable to ordinary shareholders,as supplemental measures to review and assess the Company's operating performance. Adjusted operating income/loss is defined as operating income/loss excluding share-based compensation expenses. Adjusted net income/loss is defined as net income/loss excluding share-based compensation expenses and fair value change of the Company's investments. Adjusted basic/ diluted net income/loss per ADS attributable to ordinary shareholders is defined as basic/diluted net income/loss per ADS attributable to ordinary shareholders excluding share-based compensation expenses per ADS attributable to ordinary shareholders and fair value change of investments measured at fair value per ADS attributable to ordinary shareholders.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 U.S. GAAP.

The Company believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding share-based expenses,fair value change of investments measured at fair value and impairment loss on intangible assets and goodwill (where applicable) that may not be indicative of the Company's operating performance from a cash perspective. The Company 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 the Company's historical performance and liquidity. The Company also believes these non-GAAP financial measures are useful to investors in allowing for greater transparency with respect to supplemental information used by management in the Company's financial and operational decision making. A limitation of using non-GAAP measures is that these non-GAAP measures exclude share-based compensation charges and fair value change of investments measured at fair value (where applicable) that have been and will continue to be for the foreseeable future a significant recurring expense in the Company's business. The Company 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.

Exchange Rate Information

This announcement contains translations of certain RMB amounts into U.S. dollars at a specified rate solely for the convenience of the reader. Unless otherwise noted,all translations from RMB to U.S. dollars are made at a rate of RMB6.8647 to US$1.00,the rate set forth in the H.10 statistical release of the U.S. Federal Reserve Board on August 28,2020.

Safe Harbor Statement

This press release contains statements of a forward-looking nature. These statements,including the statements relating to the Company's future financial and operating results,are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. You can identify these forward-looking statements by terminology such as "will," "expects," "believes," "anticipates," "intends," "estimates" and similar statements. Among other things,management's quotations and the Business Outlook section contain forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and are based on current expectations,assumptions,estimates and projections about the Company and the industry. Potential risks and uncertainties include,but are not limited to,those relating to its ability to attract new students and retain existing students,its ability to deliver a satisfactory learning experience and improving their academic performance,PRC regulations and policies relating to the education industry in China,general economic conditions in China,and the Company's ability to meet the standards necessary to maintain listing of its ADSs on the NYSE or other stock exchange,including its ability to cure any non-compliance with the NYSE's continued listing criteria. All information provided in this press release is as of the date hereof,and the Company undertakes no obligation to update any forward-looking statements to reflect subsequent occurring events or circumstances,or 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,it cannot assure you that its expectations will turn out to be correct,and investors are cautioned that actual results may differ materially from the anticipated results. Further information regarding risks and uncertainties faced by the Company is included in the Company's filings with the U.S. Securities and Exchange Commission,including its annual reports on Form 20-F.

For investor and media inquiries,please contact:

In China:

Four Seasons Education (Cayman) Inc.

Olivia Li

Tel: +86 (21) 6317-6678

E-mail: IR@fsesa.com

The Piacente Group,Inc.

Jenny Cai

Tel: +86 (10) 6508-0677

E-mail: fourseasons@tpg-ir.com

In the United States:

The Piacente Group,Inc.

Brandi Piacente

Tel: +1-212-481-2050

E-mail: fourseasons@tpg-ir.com

FOUR SEASONS EDUCATION (CAYMAN) INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands,except share data and per share data)

As of

February 29,

August 31,

2020

2020

2020

RMB

RMB

USD

Current assets

Cash and cash equivalents

404,652

422,983

61,617

Accounts receivable and contract assets

1,261

1,183

172

Other receivables,deposits and other assets

18,484

15,565

2,267

Short-term investments

10,000

-

-

Long-term investment under fair value - current

181,821

33,994

4,953

Total current assets

616,218

473,725

69,009

Non-current assets

Restricted cash

37,703

10,548

1,537

Property and equipment,net

19,749

17,244

2,512

Operating lease right-of-use assets

190,074

183,085

26,671

Intangible assets,net

8,765

7,808

1,137

Land and building use right,net

-

11,637

1,696

Goodwill

35,163

36,967

5,385

Deferred tax assets

13,445

18,324

2,669

Equity method investments

1,295

42,706

6,221

Long-term investments under fair value - non current

104,414

240,467

35,029

Rental deposits—non-current

10,790

12,303

1,792

Total non-current assets

421,398

581,089

84,649

TOTAL ASSETS

1,037,616

1,054,814

153,658

Current liabilities

Amounts due to related parties

1,323

2,065

301

Accrued expenses and other current liabilities

75,118

88,039

12,825

Operating lease liabilities –current

51,842

53,666

7,818

Income tax payable

12,789

12,130

1,767

Deferred revenue

71,946

75,586

11,010

Total current liabilities

213,018

231,486

33,721

FOUR SEASONS EDUCATION (CAYMAN) INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands,

2020

2020

2020

RMB

RMB

USD

Non-current liabilities

Deferred tax liabilities

2,136

1,905

278

Operating lease liabilities –non-current

147,510

136,216

19,843

Total non-current liabilities

149,646

138,121

20,121

TOTAL LIABILITIES

362,664

369,607

53,842

EQUITY

Total equity

674,952

685,207

99,816

TOTAL LIABILITIES AND EQUITY

1,658

FOUR SEASONS EDUCATION (CAYMAN) INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands,except share data and per share data)

Three Months Ended August 31,

Six Months Ended August 31,

2019

2020

2020

2019

2020

2020

RMB

RMB

USD

RMB

RMB

USD

Revenue

128,836

83,803

12,208

214,479

142,481

20,756

Cost of revenue

(57,881)

(48,199)

(7,021)

(104,171)

(84,470)

(12,305)

Gross profit

70,955

35,604

5,187

110,308

58,011

8,451

General and administrative expenses

(32,633)

(30,333)

(4,419)

(66,153)

(58,287)

(8,491)

Sales and marketing expenses

(10,016)

(7,955)

(1,159)

(17,903)

(14,938)

(2,176)

Operating income (loss)

28,306

(2,684)

(391)

26,252

(15,214)

(2,216)

Subsidy income

24

4,345

633

7,396

7,852

1,144

Interest income

1,534

905

132

2,612

1,892

276

Other income (expenses),net

(315)

3,420

498

2,052

662

96

Income (loss) before income taxes and loss from

equity method investments

29,549

5,986

872

38,312

(4,808)

(700)

Income tax expense

(9,165)

(1,782)

(260)

(13,680)

(1,395)

(203)

Loss from equity method investments

(75)

(230)

(34)

(155)

(1,364)

(199)

Net income (loss)

20,309

3,974

578

24,477

(7,567)

(1,102)

Net income attributable to non-controlling interest

1,073

916

133

1,472

61

9

Net income (loss) attributable to Four Seasons Education

(Cayman) Inc.

19,236

3,058

445

23,005

(7,628)

(1,111)

Net income (loss) per ordinary share:

Basic

0.81

0.13

0.02

0.96

(0.33)

(0.05)

Diluted

0.78

0.13

0.02

0.93

(0.33)

(0.05)

Weighted average shares used in calculating

net income (loss) per ordinary share:

Basic

23,893,557

23,131,195

23,973,239

23,195

Diluted

24,758,409

23,586,813

23,813

24,782,219

23,195

FOUR SEASONS EDUCATION (CAYMAN) INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands,

2019

2020

2020

2019

2020

2020

RMB

RMB

USD

RMB

RMB

USD

Net income (loss)

20,309

3,974

578

24,477

(7,567)

(1,102)

Other comprehensive income (loss),net of

tax of nil

Foreign currency translation adjustments

14,500

(18,359)

(2,674)

30,576

(9,633)

(1,403)

Comprehensive income (loss)

34,809

(14,385)

(2,096)

55,053

(17,200)

(2,505)

Less: Comprehensive income attributable to

non-controlling interest

1,472

61

9

Comprehensive income (loss) attributable to

Four Seasons Education (Cayman) Inc.

33,736

(15,301)

(2,229)

53,581

(17,261)

(2,514)

FOUR SEASONS EDUCATION (CAYMAN) INC.

RECONCILIATION OF GAAP AND NON-GAAP RESULTS

(in thousands,

2019

2020

2020

2019

2020

2020

RMB

RMB

USD

RMB

RMB

USD

Operating income (loss)

28,306

(2,684)

(391)

26,252

(15,214)

(2,216)

Add: share-based compensation expenses

7,344

7,226

1,053

17,159

14,915

2,173

Adjusted operating income (loss) (non-GAAP)

35,650

4,542

662

43,411

(299)

(43)

Net income (loss)

20,102)

Add: share-based compensation expenses (net of tax effect of nil)

7,173

Add: fair value change of investments,excluding foreign currency

translation adjustment (net of tax effect of nil)

(768)

(4,352)

(633)

(3,548)

(1,119)

(164)

Adjusted net income (non-GAAP)

26,885

6,848

998

38,088

6,229

907

Basic net income (loss) per ADS attributable to ordinary shareholders

0.40

0.07

0.01

0.48

(0.16)

(0.02)

Add: share-based compensation expenses per ADS attributable to

ordinary shareholders

0.15

0.15

0.02

0.36

0.32

0.05

Add: fair value change of investments per ADS attributable to

ordinary shareholders

(0.02)

(0.09)

(0.01)

(0.07)

(0.03)

(0.01)

Adjusted basic net income per ADS attributable to

ordinary shareholders (non-GAAP)

0.53

0.13

0.02

0.77

0.13

0.02

Diluted net income (loss) per ADS attributable to

ordinary shareholders

0.39

0.07

0.01

0.46

(0.16)

(0.02)

Add: share-based compensation expenses per ADS attributable to

ordinary shareholders

0.15

0.15

0.02

0.35

0.32

0.05

Add: fair value change of investments per ADS attributable to

ordinary shareholders

(0.02)

(0.09)

(0.01)

(0.07)

(0.03)

(0.01)

Adjusted diluted net income per ADS attributable

to ordinary shareholders (non-GAAP)

0.52

0.13

0.02

0.74

0.13

0.02

Weighted average ADSs used in calculating earnings per ADS

Basic

47,787,114

46,262,390

46,390

47,946,477

46,390

Diluted

49,516,818

47,173,626

47,626

49,564,438

46,390

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