Ambow Education Holding Ltd.: Form 10-Q for the period ended Mar 31, 2026

Forward-Looking Statements

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements and the related notes included elsewhere in this interim report. Our consolidated financial statements have been prepared in accordance with U.S. GAAP. The following discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including, without limitation, statements regarding our expectations, beliefs, intentions or future strategies that are signified by the words “expect,” “anticipate,” “intend,” “believe,” or similar language. All forward-looking statements included in this document are based on information available to us on the date hereof, and we assume no obligation to update any such forward-looking statements. Our business and financial performance are subject to substantial risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. In evaluating our business, you should carefully consider the information set forth under the heading “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. Readers are cautioned not to place undue reliance on these forward-looking statements.

A. Operating Results

Overview

Our current mission is to shape the future of learning, collaboration and communication through innovative, AI-powered Phygital solutions that seamlessly connect the physical and digital worlds. At the core of this mission is HybriU, a cutting-edge platform that transforms education, corporate conferencing and live events by delivering immersive, intelligent and real-time experiences across industries.

Designed to bridge the gap between in-person and remote interaction, HybriU enables AI-driven automation, deep engagement and seamless collaboration. With HybriU, Ambow is redefining how people connect, learn and grow, empowering greater access, equity and innovation in education and beyond.

For the three months ended March 31, 2026, net revenues increased by $0.5 million to $2.8 million from $2.3 million in the same period of 2025. The increases were primarily due to net revenues generated by HybriU.

Net income for the three months ended March 31, 2026, was $0.4 million, compared to $0.1 million in the same period of 2025.

Factors Affecting the Results of Operations

General factors affecting the results of operations

While our business is influenced by factors affecting the education and other industries in the U.S. generally, we believe it is more directly affected by Company-specific factors, including, among others:

• The number of student enrollments and fees we charge. The number of student enrollments is largely driven by the demand for our educational programs, the fees we charge, the effectiveness of our marketing and brand promotion efforts, the locations and capacity of our campuses, our ability to maintain the consistency and quality of our teaching, and our ability to respond to competitive pressures, as well as seasonality. We plan to continue to add new offerings to attract students of different needs and provide cross-selling opportunities. Our course fees are determined based on several factors, including market demand, the target audience, campus location and capacity, the cost of delivering our programs and the pricing of comparable courses offered by competitors.
• The number of orders and contracts we obtain. Our HybriU licensing and sales revenue is directly impacted by the number and value of orders and contracts we secure. A higher volume of confirmed orders generally results in increased revenue, as it indicates strong market demand and effective sales performance. Conversely, a decrease in order volume may adversely affect revenue, particularly if it is not offset by higher-value contracts or price increases.
• Our costs and expenses. We incur costs and expenses at both the headquarters level and at our campuses. Our most significant costs are compensation and social welfare paid to and on behalf of our teachers, and rental- and teaching-related expenses. A substantial majority of our operating expenses relate to selling and marketing, general and administrative functions and research and development.

Effects of disposals and other strategic plans

There were no acquisitions or disposals during the three-month period ended March 31, 2026.

Key financial performance indicators

Key financial performance indicators consist of net revenues, cost of revenues, gross profit and operating expenses, which are discussed in greater detail below. The following tables set forth the consolidated net revenues, cost of revenues and gross profit, both in absolute amounts and as a percentage of net revenues, for the periods indicated.

(in thousands, except percentages)

Net revenues

In the three months ended March 31, 2025 and 2026 net revenues were $2.3 million, $2.8 million, respectively. The increases were primarily due to revenues generated by HybriU.

Cost of revenues

Cost of revenues for our educational programs and services and HybriU licensing and sales primarily consists of:

• Teaching fees and performance-linked bonuses paid to our teachers. Our teachers consist of both full-time and part-time teachers. Full-time teachers deliver teaching instruction and may also be involved in management, administration and other functions at our schools. Their compensation and benefits primarily consist of teaching fees based on hourly rates, performance-linked bonuses based on student evaluations, as well as base salary, annual bonus and standard employee benefits in connection with their services other than teaching. Compensation of our part-time teachers is comprised primarily of teaching fees based on hourly rates and performance-linked bonuses based on student evaluations and other factors;
• Rental, utilities, water and other operating expenses for the operation of our school properties, as well as inventory associated with HybriU;
• Depreciation and amortization of properties, leasehold improvement and equipment used in the provision of educational services.

Gross profit and gross profit margin

Gross profit was $1.3 million, $1.7 million in the three months ended March 31, 2025, and 2026, respectively.

Gross profit margin was 57.7% and 60.2% in the three months ended March 31, 2025, and 2026, respectively. The increase in gross profit margin was primarily attributable to an increase in revenues from HybriU.

Operating expenses

Operating expenses consist of selling and marketing expenses, general and administrative expenses and research and development expenses. The following tables set forth the components of the operating expenses, both in absolute amounts and as a percentage of revenues, for the periods indicated.

(in thousands, except percentages)

18

Selling and marketing expenses. Our selling and marketing expenses primarily consisted of expenses relating to advertising, seminars, marketing and promotional trips and other community activities for brand promotion purposes. Our selling and marketing expenses increased to $0.3 million for the three months ended March 31, 2026, from $0.2 million for the same period of 2025. The increase in selling and marketing expenses for the three months ended March 31, 2026 was primarily driven by increased investment in NewSchool enrollment and the sales of HybriU.

General and administrative expenses. Our general and administrative expenses primarily consisted of compensation and benefits of administrative staff, amortization of intangibles, costs of third-party professional services, rental and utility payments relating to office and administrative functions, and depreciation and amortization of property and equipment used in our general and administrative activities, as well as bad-debt provision. Our general and administrative expenses decreased to $0.8 million for the three months ended March 31, 2026, from $0.9 million for the same period of 2025. The decreases were primarily attributed to a one-time audit fee incurred during the first quarter of 2025.

Research and development. Our research and development consisted of personnel-related expenses directly associated with our research and development organization, depreciation of equipment used in research and development, and allocated overhead. Our research and development expenses increased to $0.2 million for the three months ended March 31, 2026, from $0.1 million for the same period of 2025. The increase in research and development expenses for the three months ended March 31, 2026 was primarily driven by increased share-based compensation recognized in research and development expenses.

We are a Cayman Islands company and we currently conduct operations primarily through our U.S. subsidiaries. Under the current laws of the Cayman Islands, Ambow is not subject to taxes on its income or capital gains. In addition, the payment of dividends, if any, is not subject to withholding taxes in the Cayman Islands.

A significant component of our income tax provision is generated from our U.S. subsidiaries’ operations, which have a federal statutory income tax rate of 21%. Current income taxes are provided for in accordance with the laws and regulations in the U.S. Deferred income taxes are recognized when temporary differences exist between the tax bases and their reported amounts in the condensed consolidated financial statements.

Critical accounting estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires estimates and assumptions that affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities in the condensed consolidated financial statements and accompanying notes. The SEC has defined a company’s critical accounting policies as the ones that are most important to the portrayal of the company’s financial condition and results of operations, and which require the company to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, we have identified certain accounting policies as critical accounting policies as they require management’s highest degree of judgment, estimates and assumptions, including: 1) revenue recognition; 2) accounts receivables, net. See Note 3—Summary of Significant Accounting Policies to our condensed consolidated financial statements for the disclosure of these accounting policies in the Company’s 2025 Annual Report filed with the SEC on February 13, 2026.

Although we believe that our estimates, assumptions and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions. We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations. We consider our critical accounting estimates to include allowance for credit losses as follows:

Allowance for credit losses

Our accounts receivable, other receivables included in prepaid and other current assets are within the scope of ASC 326. We estimate and record an allowance for expected lifetime credit losses on these assets by using historical write-off rates as a starting point for estimating expected credit losses and by considering all available relevant information, including historical events, current conditions, and reasonable and supportable forecasts, as well as their impact on expected credit losses.

The allowance for expected credit losses is adjusted for current conditions and reasonable and supportable forecasts. Accounts receivable, other receivables, and long-term receivables are written off after all collection efforts have been exhausted. Because collectability of each account depends on specific facts and circumstances, particularly for customers related to HybriU sales for which the Company has limited or no prior transactional history, management exercises significant judgment in estimating expected credit losses for these assets.

Changes in economic conditions, customer credit profiles, or other assumptions could materially affect the allowance for credit losses. An increase in expected credit losses would result in higher bad debt expense and lower net income in the period of such change in estimate. The Company reassesses the allowance each reporting period, and any adjustments are recorded as changes in estimates.

Results of operations

The following table sets forth a summary of our unaudited condensed consolidated statements of operations for the periods indicated. This information should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this report. We believe that period-to-period comparisons of results of operations should not be relied upon as indicative of future performance.

Summary of Unaudited Condensed Consolidated Statements of Operations

(in thousands)

Three months ended March 31, 2026, compared with the three months ended March 31, 2025

Net revenues. Net revenues increased by $0.5 million to $2.8 million for the three months ended March 31, 2026, from $2.3 million in the same period of 2025. The increase was primarily due to revenues generated by HybriU.

Cost of revenues. Cost of revenues increased by $0.1 million to $1.1 million for the three months ended March 31, 2026, from $1.0 million in the same period of 2025.

Gross profit. Gross profit increased to $1.7 million in the three months ended March 31, 2026, from $1.3 million in the same period of 2025.

Gross profit margin. Gross profit margin increased to 60.2% in the three months ended March 31, 2026, from 57.7% in the same period of 2025.

Operating expenses. Total operating expenses were essentially unchanged for the three months ended March 31, 2026 and 2025.

• Selling and marketing expenses. Selling and marketing expenses increased to $0.3 million for the three months ended March 31, 2026, from $0.2 million for the same period of 2025. The increase in selling and marketing expenses for the three months ended March 31, 2026 was primarily driven by increased investment in NewSchool enrollment and the sales of HybriU.
• General and administrative expenses. General and administrative expenses decreased to $0.8 million for the three months ended March 31, 2026, from $0.9 million in the same period of 2025. The decreases were primarily attributable to a one-time audit fee incurred during the first quarter of 2025.
• Research and development expenses. Our research and development expenses increased to $0.2 million for the three months ended March 31, 2026, from $0.1 million for the same period of 2025. The increase in research and development expenses was primarily driven by increased share-based compensation recognized in research and development expenses.

Income. In line with the above-mentioned factors, there was an income of $0.4 million for the three months ended March 31, 2026, compared with the income of $0.1 million in the same period of 2025.

B. Liquidity and Capital Resources

As of March 31, 2026, our consolidated current assets exceeded consolidated current liabilities by $6.3 million. With certain non-cash payment adjustments excluded, there would have been a positive working capital balance as of March 31, 2026. Our consolidated net assets were $8.7 million as of March 31, 2026.

Our principal sources of liquidity were cash provided by operating activities, bank borrowings. We had net cash used in operating activities of $0.9 and $1.2 million for the three months ended March 31, 2025 and 2026, respectively. As of March 31, 2026, we had $4.2 million in unrestricted cash and cash equivalents and $2.7 million in restricted cash.

Our operating results for future periods are subject to numerous uncertainties, and it is uncertain if we will be able to maintain a net income position for the foreseeable future. If management is not able to increase revenue and/or manage costs and operating expenses in line with revenue forecasts, we may not be able to maintain profitability.

We believe that available cash and cash equivalents, restricted cash released within 12 months, and cash provided by operating activities, together with cash available from the activities mentioned above, should enable us to meet presently anticipated cash needs for at least the next 12 months after the issue date of the financial statements, and we have prepared the condensed consolidated financial statements on a going concern basis. However, we continue to have ongoing obligations, and we expect that we will require additional capital to execute our longer-term business plan. If we encounter unforeseen circumstances that place constraints on our capital resources, management will be required to take various measures to conserve liquidity, which could include, but not necessarily be limited to, initiating additional public offerings, curtailing our business development activities, suspending the pursuit of our business plan, obtaining credit facilities, controlling overhead expenses and seeking to further dispose of non-core assets. Management cannot provide any assurance that we will raise additional capital if needed.

Borrowings

Loan agreements for short-term and long-term borrowings consisted of the following:

(In thousands)

The weighted average interest rate of the borrowings outstanding was 6.28% and 6.25% per annum as of December 31, 2025 and March 31, 2026, respectively. The fair values of the borrowings approximate their carrying amounts. The weighted average borrowings for the three months ended March 31, 2025 and 2026 were $2.7 million and $3.2 million, respectively.

There was no capitalization as additions to construction in progress as of March 31, 2026.

Holding company structure

Ambow is a Cayman Islands holding company. We conduct our operations primarily through our subsidiaries in the United States. If our subsidiaries or any newly formed subsidiaries incur debt on their own behalf in the future, the instruments governing their debt may restrict their ability to pay dividends to us.

Inflation

Inflation has not materially impacted the results of operations in recent years. Although we were not materially affected by inflation in the past, we can provide no assurance that we will not be affected in the future by higher rates of inflation.

C. Research and Development, Patents and Licenses

As of March 31, 2026, we employed six full-time and part-time software and educational professionals. We spent $0.1 and $0.2 million on research and development expenses for the three months ended March 31, 2025 and 2026, respectively.

D. Trend Information

For a discussion of significant recent trends in our financial condition and results of operations, please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Operating Results” and “Condition and Results of Operations —Liquidity and Capital Resources.”

E. Off-balance sheet arrangements

We have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholders’ equity or that are not reflected in our condensed consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

There were no new off-balance sheet arrangements as of March 31, 2026.

F. Contractual Long-Term Obligations

The following table presents a summary of the contractual long-term obligations and payments by period as of March 31, 2026.

(in millions)

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal accounting and financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of the fiscal quarter ended March 31, 2026, as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act. Based on this evaluation, our principal executive officer and principal financial officer have concluded that during the period covered by this report, the Company’s disclosure controls and procedures were effective as of such date to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the fiscal quarter of 2026 covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.