TAL Education Group Announces Unaudited Financial Results for the Third Fiscal Quarter Ended November 30, 2021

BEIJING,Feb. 22,2022 -- TAL Education Group (NYSE: TAL) ("TAL" or the "Company"),a smart learning solutions provider in China,today announced its unaudited financial results for the third quarter of fiscal year 2022 ended November 30,2021.

Highlights for the Third Quarter of Fiscal Year 2022

Net revenues decreased by 8.8% year-over-year to US$1,020.9 million from US$1,119.1 million in the same period of the prior year.

Loss from operations was US$108.4 million,compared to loss from operations of US$127.4 million in the same period of the prior year.

Non-GAAP loss from operations,which excluded share-based compensation expenses,was US$67.6 million,compared to non-GAAP loss from operations of US$73.4 million in the same period of the prior year.

Net loss attributable to TAL was US$99.4 million,compared to net loss attributable to TAL of US$43.6 million in the same period of the prior year.

Non-GAAP net loss attributable to TAL,was US$58.6 million,compared to non-GAAP net income attributable to TAL of US$10.4 million in the same period of the prior year.

Basic and diluted net loss per American Depositary Share ("ADS") were both US$0.15. Non-GAAP basic and diluted net loss per ADS,were both US$0.09. Three ADSs represent one Class A common share.

Cash,cash equivalents and short-term investments totaled US$2,837.2 million as of November 30,2021,compared to US$5,937.5 million as of February 28,2021.

Highlights for the NineMonths Ended November30,2021

Net revenues increased by 22.9% year-over-year to US$3,849.8 million from US$3,133.1 million in the same period of the prior year.

Loss from operations was US$615.2 million,compared to loss from operations of US$141.0 million in the same period of the prior year.

Non-GAAP loss from operations,was US$440.5 million,compared to non-GAAP loss from operations of US$16.4 million in the same period of the prior year.

Net loss attributable to TAL was US$1,028.0 million,compared to net income attributable to TAL of US$53.0 million in the same period of the prior year.

Non-GAAP net loss attributable to TAL,was US$853.3 million,compared to non-GAAP net income attributable to TAL of US$177.6 million in the same period of the prior year.

Basic and diluted net loss per ADS were both US$1.60. Non-GAAP basic and diluted net loss per ADS,excluding share-based compensation expenses,were both US$1.33.

Financial Data——Third Quarter and First Nine Months of Fiscal Year 2022

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

Three Months Ended

November 30,

2020

2021

Pct. Change

Net revenues

1,119,135

1,020,932

(8.8%)

Loss from operations

(127,389)

(108,429)

(14.9%)

Non-GAAP loss from operations

(73,354)

(67,611)

(7.8%)

Net loss attributable to TAL

(43,608)

(99,368)

127.9%

Non-GAAP net income/(loss) attributable to TAL

10,427

(58,550)

(661.5%)

Net loss per ADS attributable to TAL – basic

(0.07)

(0.15)

114.5%

Net loss per ADS attributable to TAL – diluted

(0.07)

(0.15)

114.5%

Non-GAAP net income/(loss) per ADS attributable to TAL – basic

0.02

(0.09)

(628.5%)

Non-GAAP net income/(loss) per ADS attributable to TAL – diluted

0.02

(0.09)

(647.5%)

Nine Months Ended

November 30,

2020

2021

Pct. Change

Net revenues

3,133,066

3,849,755

22.9%

Loss from operations

(141,014)

(615,160)

336.2%

Non-GAAP loss from operations

(16,407)

(440,463)

2,584.6%

Net income/(loss) attributable to TAL

53,012

(1,027,992)

(2,039.2%)

Non-GAAP net income/(loss) attributable to TAL

177,619

(853,295)

(580.4%)

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

0.09

(1.60)

(1,914.2%)

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

0.08

(1.60)

(1,985.8%)

Non-GAAP net income/(loss) per ADS attributable to TAL – basic

0.29

(1.33)

(549.4%)

Non-GAAP net income/(loss) per ADS attributable to TAL – diluted

0.28

(1.33)

(567.2%)

Financial Results for the Third Quarter of Fiscal Year 2022

Net Revenues

In the third quarter of fiscal year 2022,TAL reported net revenues of US$1,020.9 million,representing an 8.8% decrease from US$1,119.1 million in the third quarter of fiscal year 2021.

Operating Costs and Expenses

In the third quarter of fiscal year 2022,operating costs and expenses were US$1,139.3 million,representing a 9.3% decrease from US$1,255.9 million in the third quarter of fiscal year 2021. Non-GAAP operating costs and expenses,were US$1,098.5 million,representing an 8.6% decrease from US$1,201.8 million in the third quarter of fiscal year 2021.

Cost of revenues increase by 0.8% to US$519.5 million from US$516.0 million in the third quarter of fiscal year 2021. Non-GAAP cost of revenues,increase by 0.8% to US$519.2 million,from US$515.2 million in the third quarter of fiscal year 2021.

Selling and marketing expenses decreased by 35.0% to US$273.6 million from US$420.7 million in the third quarter of fiscal year 2021. Non-GAAP selling and marketing expenses,decreased by 36.4% to US$258.6 million,from US$406.4 million in the third quarter of fiscal year 2021.

General and administrative expenses increased by 5.7% to US$300.0 million from US$283.8 million in the third quarter of fiscal year 2021. Non-GAAP general and administrative expenses,increased by 12.2% to US$274.4 million,from US$244.5 million in the third quarter of fiscal year 2021.

Total share-based compensation expenses allocated to the related operating costs and expenses decreased by 24.5% to US$40.8 million in the third quarter of fiscal year 2022 from US$54.0 million in the same period of fiscal year 2021.

Impairment loss on intangible assets and goodwill was $46.2 million for the third quarter of fiscal year 2022,compared to US$35.7 million for the third quarter of fiscal year 2021.

Gross Profit

Gross profit decreased by 16.9% to US$501.4 million from US$603.6 million in the third quarter of fiscal year 2021.

Loss from Operations

Loss from operations was US$108.4 million in the third quarter of fiscal year 2022,compared to loss from operations of US$127.4 million in the third quarter of fiscal year 2021. Non-GAAP lossfrom operations was US$67.6 million,compared to Non-GAAP loss from operations of US$73.4 million in the same period of the prior year.

Other Income

Other incomewas US$9.5 million for the third quarter of fiscal year 2022,compared to other income of US$45.5 million in the third quarter of fiscal year 2021.

Impairment Loss on Long-term Investments

Impairment loss on long-term investments was nil for the third quarter of fiscal year 2022,compared to US$11.5 million for the third quarter of fiscal year 2021.

Income Tax Benefit/(expense)

Income tax expense was US$25.6 million in the third quarter of fiscal year 2022,compared to US$13.9 million of income tax benefit in the third quarter of fiscal year 2021.

Net Loss/(income) Attributable to TAL Education Group

Net loss attributable to TAL was US$99.4 million in the third quarter of fiscal year 2022,compared to net loss attributable to TAL of US$43.6 million in the third quarter of fiscal year 2021. Non-GAAP net loss attributable to TAL,compared to Non-GAAP net income attributable to TAL of US$10.4 million in the third quarter of fiscal year 2021.

Basic and Diluted Net Loss per ADS

Basic and diluted net loss per ADS were both US$0.15 in the third quarter of fiscal year 2022. Non-GAAP basic and diluted net loss per ADS,were both US$0.09,in the third quarter of fiscal year 2022.

Cash,Cash Equivalents,and Short-Term Investments

As of November 30,the Company had US$1,347.9 million of cash and cash equivalents and US$1,489.3 million of short-term investments,compared to US$3,243.0 million of cash and cash equivalents and US$2,694.5 million of short-term investments as of February 28,2021.

Financial Results for the First Nine Months of Fiscal Year 2022

Net Revenues

For the first nine months of fiscal year 2022,TAL reported net revenues of US$3,849.8 million,representing a 22.9% increase from US$3,133.1 million in the first nine months of fiscal year 2021.

Operating Costs and Expenses

In the first nine months of fiscal year 2022,operating costs and expenses were US$4,480.0 million,a 36.1% increase from US$3,291.5 million in the first nine months of fiscal year 2021. Non-GAAP operating costs and expenses,were US$4,305.3 million,a 35.9% increase from US$3,166.9 million in the first nine months of fiscal year 2021.

Cost of revenues increased by 36.7% to US$2,005.3 million from US$1,467.1 million in the first nine months of fiscal year 2021. Non-GAAP cost of revenues,increased by 36.7% to US$2,004.3 million from US$1,466.0 million in the first nine months of fiscal year 2021.

Selling and marketing expenses decreased by 0.5% to US$1,014.7 million from US$1,019.6 million in the first nine months of fiscal year 2021. Non-GAAP selling and marketing expenses,decreased by 3.7% to US$951.2 million from US$988.0 million in the first nine months of fiscal year 2021.

General and administrative expenses increased by 28.5% to US$987.6 million from US$768.7 million in the first nine months of fiscal year 2021. Non-GAAP general and administrative expenses,increased by 29.6% to US$877.3 million from US$676.9 million in the first nine months of fiscal year 2021.

Total share-based compensation expenses allocated to the related operating costs and expenses increased by 40.2% to US$174.7 million in the first nine months of fiscal year 2022 from US$124.6 million in the same period of fiscal year 2021.

Impairment loss on intangible assets and goodwill was US$472.4 million for the first nine months of fiscal year 2022,compared to US$36.0 million for the same period of fiscal year 2021.

Gross Profit

Gross profit grew by 10.7% to US$1,844.5 million from US$1,666.0 million in the first nine months of fiscal year 2021.

Loss from Operations

Loss from operations was US$615.2 million in the first nine months of fiscal year 2022,compared to loss from operations of US$141.0 million in the same period of the prior year. Non-GAAP loss from operations,was US$440.5 million for the first nine months of fiscal year 2022,compared to non-GAAP loss from operations,was US$16.4 million in the first nine months of fiscal year 2021.

Other Income

Other income was US$17.6 million for the first nine months of fiscal year 2022,compared to other income of US$132.9 million for the first nine months of fiscal year 2021.

Impairment Loss on Long-term Investments

Impairment loss on long-term investments was US$178.1 million for the first nine months of fiscal year 2022,compared to US$18.4 million for the first nine months of fiscal year 2021.

Income Tax Expense

Income tax expense was US$367.1 million in the first nine months of fiscal year 2022,compared to US$10.6 million of income tax expense in the first nine months of fiscal year 2021.

Net Loss/(income) Attributable to TAL Education Group

Net loss attributable to TAL was US$1,028.0 million in the first nine months of fiscal year 2022,compared to net income attributable to TAL of US$53.0 million in the first nine months of fiscal year 2021. Non-GAAP net loss attributable to TAL,was US$853.3 million in the first nine months of fiscal year 2022,compared to Non-GAAP net income attributable to TAL,was US$177.6 million in the first nine months of fiscal year 2021.

Basic and Diluted Net Loss per ADS

Basic and diluted net loss per ADS were both US$1.60,in the first nine months of fiscal year 2022. Non-GAAP basic and Non-GAAP diluted net loss per ADS,were both US$1.33,in the first nine months of fiscal year 2022.

Recent Development

On November 12,the Company issued a press release to announce that in response to the regulatory developments relating to after-school tutoring services,including the Opinions on Further Alleviating the Burden of Homework and After-School Tutoring for Students in Compulsory Education,published in July 2021 by the General Office of the CPC Central Committee and the General Office of the State Council (the "Opinion") and the related implementation rules,regulations and measures promulgated by competent authorities,the Company decided to cease offering academic subjects to students from kindergarten through grade nine ("K9 Academic AST Services") in the mainland of China by the end of December 2021.

The Company has completed the cessation by the due date and expects that the cessation will have a substantial adverse impact on the Company's revenues for the fiscal year ending February 28,2022 and subsequent periods. In the fiscal year ended February 28,the revenues from offering K9 Academic AST Services accounted for a substantial majority of the Company's total revenues in the year. Therefore,the Company believes that the financial results for the fiscal periods ended November 30,2021 would not be indicative for its performance going forward.

By leveraging its leading-edge education technology,high quality content and extensive experience,the Company will continue to operate and develop the portion of its business other than K9 Academic AST Services,and will also explore other opportunities to provide learning solutions in accordance with relevant rules and regulations.

The Company will continue to seek guidance from and cooperate with government authorities in various provinces and municipalities in China in connection with its efforts to comply with the policy directives in the Opinion and any related implementation rules,regulations and measures. The Company will further adjust its business operations as required,and provide updates to its shareholders as appropriate.

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,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 provide competitive learning services and products; the Company's ability to continue to recruit,train and retain talents; the Company's ability to improve the content of current course offerings and 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 Groupis a smart learning solutions provider in China. The acronym "TAL" stands for "Tomorrow Advancing Life",which reflects our vision to promote top learning opportunities for students through both high-quality teaching and content,as well as leading edge application of technology in the education experience.TAL Education Groupoffers comprehensive learning services to students from pre-school to the twelfth grade primarily through three flexible class formats: small classes,personalized premium services,and online courses. Our learning services mainly cover enrichment learnings programs and some academic subjects in and out of China. Our ADSs trade on theNew York Stock Exchangeunder 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.

TAL EDUCATION GROUP

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands of U.S. dollars)

As of

February 28,

2021

As of

November 30,

2021

ASSETS

Current assets

Cash and cash equivalents

$ 3,242,953

$ 1,347,934

Restricted cash-current

1,758,937

1,110,112

Short-term investments

2,694,555

1,489,245

Inventory

38,675

22,239

Amounts due from related parties-current

2,964

2,093

Income tax receivables

15,641

20,926

Prepaid expenses and other current assets

403,110

178,349

Total current assets

8,156,835

4,170,898

Restricted cash-non-current

16,094

377,898

Property and equipment,net

511,415

358,914

Deferred tax assets

317,189

8,524

Rental deposits

102,555

94,234

Intangible assets,net

66,041

16,776

Land use right,net

216,702

216,942

Goodwill

454,413

18,836

Amounts due from related parties- non-current

-

63

Long-term investments

667,636

557,974

Long-term prepayments and other non-current assets

57,694

19,943

Operating lease right-of-use assets

1,545,735

828,980

Total assets

$ 12,112,309

$ 6,669,982

LIABILITIES AND EQUITY

Current liabilities

Accounts payable

$ 353,778

$ 150,867

Deferred revenue-current

1,387,493

538,979

Amounts due to related parties-current

3,488

312

Accrued expenses and other current liabilities

911,283

928,463

Income tax payable

65,138

33,297

Current portion of long-term debt

270,000

-

Operating lease liabilities,current portion

382,671

247,344

Total current liabilities

3,373,851

1,899,262

Deferred revenue-non-current

30,005

20

Deferred tax liabilities

10,333

17,898

Bond payable

2,300,non-current portion

1,193,564

634,295

Total liabilities

6,907,753

2,551,475

Mezzanine equity

Redeemable non-controlling interests

1,775

-

Equity

Class A common shares

148

166

Class B common shares

67

49

Additional paid-in capital

4,369,125

4,358,131

Statutory reserve

121,285

111,151

Retained earnings/(accumulated deficit)

624,883

(392,975)

Accumulated other comprehensive income

86,321

68,888

Total TAL Education Group's equity

5,201,829

4,145,410

Noncontrolling interest

952

(26,903)

Total equity

5,202,781

4,118,507

Total liabilities,mezzanine equity and equity

$ 12,982

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

November 30,

For the Nine Months Ended

November 30,

2020

2021

2020

2021

Net revenues

$ 1,135

$ 1,932

$ 3,066

$ 3,755

Cost of revenues (note 1)

515,560

519,483

1,467,112

2,005,252

Gross profit

603,575

501,449

1,665,954

1,844,503

Operating expenses (note 1)

Selling and marketing

420,747

273,629

1,019,598

1,014,666

General and administrative

283,827

299,963

768,719

987,595

Impairment loss on intangible

assets and goodwill

35,727

46,247

36,031

472,437

Total operating expenses

740,301

619,839

1,824,348

2,474,698

Government subsidies

9,337

9,961

17,380

15,035

Loss from operations

(127,389)

(108,429)

(141,014)

(615,160)

Interest income

28,879

12,747

79,065

84,644

Interest expense

(2,714)

(1,821)

(9,378)

(7,871)

Other income

45,507

9,520

132,948

17,611

Impairment loss on long-term

investments

(11,472)

-

(18,357)

(178,063)

(Loss)/income before provision

for income tax and income

from equity method investments

(67,189)

(87,983)

43,264

(698,839)

Income tax benefit/(expense)

13,887

(25,562)

(10,556)

(367,120)

Income from equity method

investments

411

6,423

6,352

10,471

Net (loss)/income

(52,891)

(107,122)

39,060

(1,055,488)

Add: Net loss attributable to

noncontrolling interest

9,283

7,754

13,952

27,496

Total net (loss)/income

attributable to TAL

Education Group

$ (43,608)

$ (99,368)

$ 53,012

$ (1,992)

Net (loss)/income

per common share

Basic

$ (0.22)

$ (0.46)

$ 0.26

$ (4.79)

Diluted

(0.22)

(0.46)

0.25

(4.79)

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

Basic

$ (0.07)

$ (0.15)

$ 0.09

$ (1.60)

Diluted

(0.07)

(0.15)

0.08

(1.60)

Weighted average shares used in

calculating net (loss)/income

per common share

Basic

202,039,751

214,672,624

200,786,811

214,619,651

Diluted

202,624

208,710,216

214,651

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

For the Three Months

For the Nine Months

Ended November 30,

Ended November 30,

2020

2021

2020

2021

Cost of revenues

$ 404

$ 262

$ 1,158

$ 996

Selling and marketing expenses

14,322

15,008

31,644

63,440

General and administrative expenses

39,309

25,548

91,805

110,261

Total

$ 54,035

$ 40,818

$ 124,607

$ 174,697

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

TAL EDUCATION GROUP

UNAUDITED CONDENSED CONSOLIDATEDSTATEMENTS OF

COMPREHENSIVE INCOME/(LOSS)

(In thousands of U.S. dollars)

For the Three Months Ended

November 30,

For the Nine Months Ended

November 30,

2020

2021

2020

2021

Net (loss)/income

$ (52,891)

$ (107,122)

$ 39,060

$ (1,488)

Other comprehensive income/(loss),net of tax

54,944

6,053

87,834

(17,796)

Comprehensive income/(loss)

2,053

(101,069)

126,894

(1,073,284)

Add: Comprehensive loss

attributable to noncontrolling

interest

8,581

8,106

12,872

27,855

Comprehensive income/(loss) attributable to TAL Education Group

$ 10,634

$ (92,963)

$ 139,766

$ (1,045,429)

TAL EDUCATION GROUP

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

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

For the Three Months

Ended November 30,

For the Nine Months

Ended November 30,

2020

2021

2020

2021

Cost of revenues

$ 515,560

$ 519,483

$ 1,112

$ 2,252

Share-based compensation expense in cost of revenues

404

262

1,158

996

Non-GAAP cost of revenues

515,156

519,221

1,465,954

2,004,256

Selling and marketing expenses

420,666

Share-based compensation expense

in selling and marketing expenses

14,440

Non-GAAP selling and marketing expenses

406,425

258,621

987,954

951,226

General and administrative expenses

283,595

Share-based compensation expense

in general and administrative

expenses

39,261

Non-GAAP general and administrative expenses

244,518

274,415

676,914

877,334

Operating costs and expenses

1,255,861

1,139,322

3,291,460

4,479,950

Share-based compensation expense in operating

costs and expenses

54,035

40,818

124,607

174,697

Non-GAAP operating costs and expenses

1,826

1,098,504

3,166,853

4,305,253

Loss from operations

(127,160)

Share based compensation expenses

54,697

Non-GAAP loss from operations

(73,354)

(67,611)

(16,407)

(440,463)

Net (loss)/income attributable

to TAL Education Group

(43,608)

(99,368)

53,012

(1,992)

Share based compensation expenses

54,697

Non-GAAP net income/(loss) attributable

to TAL Education Group

$ 10,427

$ (58,550)

$ 177,619

$ (853,295)

Net (loss)/income per ADS

Basic

$ (0.07)

$ (0.15)

$ 0.09

$ (1.60)

Diluted

(0.07)

(0.15)

0.08

(1.60)

Non-GAAP Net income/(loss) per ADS

Basic

$ 0.02

$ (0.09)

$ 0.29

$ (1.33)

Diluted

0.02

(0.09)

0.28

(1.33)

ADSs used in calculating net (loss)/income per ADS

Basic

606,253

644,017,872

602,360,433

643,858,953

Diluted

606,872

626,130,648

643,953

ADSs used in calculating Non-GAAP income/(loss) per ADS

Basic

606,953

Diluted

627,950,637

644,953

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