AACG - Earnings call transcript Q3 2020

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Operator

Greetings and welcome to ATA Creativity Global 2020 Third Quarter and Nine Months Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Carolyne Sohn of The Equity Group. Please proceed.

Carolyne Sohn

Thank you, operator and hello everyone. us. joining for you Thank company’s The press for XX, or results of Creativity is announcing three and ATA the section the IR September at Global’s at nine www.atai.net.cn. available ACG’s the release website months XXXX ended

call, of replay XX the A accompanying company part ACG’s next broadcast this will available As made the its website available the presentation at on has days. conference this website. of slide also be for

COVID-XX ACG’s acquisitions training market repurchase acquisition, mergers subsequent financial growth of activities, benefits the and and anticipated and under efficiently of ACG’s operations, operate for conference unusual the the will These be to we and ACG’s maintain of strength within things, as by other and strategy generally, on any service for call Act get believe, the Safe this ability growth and started, in to benefits statements implemented forward-looking regarding the everyone termination Before Huanqiuyimeng Reform contain the such a statements other circumstances, Securities XXXX. ACG’s and leading results plan ACG’s business a the implementation, of programs or Private terms strategy the and include, ACG’s identified of demand portfolio ACG’s share of the can outbreak education like provider, information of forward-looking remind herein would of ACG plans operations, future among discussed services, expect, Harbor impact continued to response accompanying provision statements of Litigation education that anticipate, I and outbreak certain international and suspension becoming COVID-XX and its program. outlook future, plan, the meaning measures

included the today, that with no the Although about cause will expectations its those of which statements uncertainties we encourage results prove statements to with as from those can ACG forward-looking believes The subject Securities changes in except does risks update the that Information be to to assurance be new investment information, any a are in before of There filings law. obligation decision. statements and projected. result is company associated the that dramatically conditions any investing as are to in not you review reasonable market could and an actual correct. or differ assume required as reflected future making to events, those risks by forward-looking company in expectations Exchange the Commission, otherwise,

for of XXXX. of otherwise to of its results conversions as based All accurate time XX, RMBX.XXXX noon from noted. in are U.S. in financial I under months as call reported, also rate in nine to September on the noted. GAAP call conference language, $X, buying presentation are calculated and presentation information. company the RMB XXXX, XX, disclaimer and exchange the Slide using are the converted would further dollar like All three for the all X rate relating unless reported financial RMB, Regarding you percentages September U.S. amounts results otherwise to RMB, of unless refer to ended conference this the historical The

deck you of referring For an accompanying on and management X company PowerPoint following those along to of will overview there presentation, the the back is Slide this remarks. the with be prepared throughout

the quarter the call, Amy Ms. via investor questions. On e-mail highlights today’s outlook of opening through With strategy the to the we to remarks CFO, company’s Amy long-term floor turn of Jun well for the overview Mr. ACG’s growth ahead, call go with a Kevin months of before and the Amy. Tung, company’s Mr. nine questions brief CEO, the addition, will its Zhang, first Tung. CFO, financial ACG’s take company. third Chairman over Ma our portal than XXXX as operating more and for provide conclude a will discussion webcast and President, and happy to as that, In and are Please then or Ms. I will

Amy Tung

and We everyone. in appreciate Good Carolyne those evening time. America. Thank to everyone’s welcome you,

situation the continuing China improve, since With our in-person coursework centers of late the all training resumed of in public delivery quarter. in second health to have traditional nearly

once However, necessary of of resurgence will again. some continued any that to online-only pursue online quarter we it Should see during third revert students cases, be a their the coursework positive to XXXX. location delivery

pandemic that each beginning enrollment So the have continue poses to health passing precautions prioritize virus we with and our portfolio our and at increase quarter. faculty, employees. within to safety we staff threat remain XXXX, mindful the the of the students, of taken and seen training started the Since extra of have program

postpone centers While training ability and have coursework, decided needs found forth for impressive several we many while unusual to which have are demonstrated have months. emotional some students to academic adapt the that fulfilling were ensure we circumstances their And we our to to put their ourselves. an closed in efforts have

results quarter segment educational to canceled. services mainly as the continued of Our XXXX travel impacted pandemic all the almost by for environment, our ongoing third were be tours

prestigious to offering online some continued boot different institutions We short-term camps. in with partner

During launched the programs our at globally world the recognized third students allow we in to also working new gain companies. internship to quarter, certain experience

reflection quarter our year third which decreased from the portfolio of period, continuing hours the prior XXXX, a primarily was for COVID-XX the training of deliveries credit For programs environment.

Later is XX.X% enrolled credit quarter The program of which online the students remotely. a Jun traditional will provide these as credit And breakdown increase on stand. during hour a X, training out breakout the metrics an training credit were in believe the of delivered a presentation, was training delivery of year-over-year per and presentation. recognized the operations our result studies period slide. proportionately hours the the many X,XXX, We current the in-person was operating sequential reported quarter becoming the available where portfolio there However, and hours to programs and on hours the in additional XXX the delivered. in delivered they from we their program. for increasingly prior next Student of as provide which platform speaks the continue pursue and compared also number of update to comparable was in time-based during consists credit Revenue and year Kevin provide period enrollment portfolio period we to project-based of our of portfolio programs. effectiveness

credit acquired each and of credit annual the compared the remind period, project-based the However, hours to to total allocation as total results delivered financial acquisition measured the With the against shown at is the credit that made date. liabilities acquisition. reporting hours from determined, everyone be hours project-based not to quarterly which that, price too are of various programs wanted Huanqiuyimeng purchase program, let’s this by quarter. move for to the for reevaluated PPA, the have assumed of is applied we I expected and and assets progress delivered, adjustments, financials accounting

of contributions whereas XX.X% a adjustments where comparable quarter results X It third August XXXX XXXX note the adjustment RMBXX.X through RMBX quarter and we the items XX, for for due of a the will million. this quarter million acquisition. Gross schedule million assessed fair to portion from third revenues PPA XX.X% for PPA result, the Total the from we of adjustment As period. the includes have carrying for PPA in Huanqiuyimeng a full also certain was I value quarter. to period. of third from line in XXXX applied in revenues the decrease Huanqiuyimeng’s is compared a to XXXX process of September year this in on amortization the some compared saw the to to Net that only our book important include quarter XXXX during quarter prior RMBXX.X third were for highlight from financial the include the of financials impact quarter the net difference the XXXX. margin third value between will Huanqiuyimeng

completed by fair new the a markup of one-time net change the gross in prior PPA would for the to gain the compared value of ACG attributable period. which RMBXX.X for of primarily funding million one the million XX.X%. during a have year XXXX million been net RMBXX.X margin for RMBXX.X to quarter. was investments, period income the a This third was to recognized strategic quarter of company’s round Excluding loss Net revenues, contributed adjustment

first million XXXX include compared Moving the compared RMBXXX.X months PPA period of highlights net to the for prior of in adjustment to revenues first a in total nine to margin XX.X% was XXXX, for decrease the year the net were Gross XX.X% RMBXX.X period. the year-to-date, for YTD, months financial million nine Total million. the year prior period revenues for RMBXX period. of

attributable would prior And the months the to to year adjustment nine have Excluding million first compared net RMBXX.X loss from XX.X%. continuing was loss RMBXX.X XXXX operations of gross XXXX been first net to the in months million margin revenues, for PPA net ACG nine of period. in the of

the to XXXX continue capital in sheet. equity was to we position equivalents cash million $XX.X with of outstanding Working solid the deficit million Finally, be and total compared $XX.X was negotiated financial shareholders’ September capital balance billion the deficit cash our This Directors time-to-time million $X past market and and of up XXXX. privately million authorized Board shareholders’ open equity and May, company’s at repurchase from respectively of $XX.X December million in of ADS XX, $XX.X on in and $XX.X at a to XX, transactions. of issued working

had company of XXX,XXX effect growth additional upon Kevin share As at plan repurchased With price who stock in by remains an were December strategy. to like August, over now repurchase ADS X, the I XX, XXXX. $X.XXXX that, since outlook will to shares would expand average it turn November our XXXX. This and no purchased until

Kevin Ma

two initial of support the challenges pandemic key coursework our created successful see leveraged of Throughout our devastating platform. the the the way new technology we to acquisition daily Amy. the pandemic. then found world elements months environment. when just finance, ACG situation to needing leadership country city Huanqiuyimeng online completed management substantially were having country. the made ways we online We as Huanqiuyimeng’s by to played develop all XXXX, thinking a companies fortunate of of faced of a the position in pandemic. leverage completely that and you, grim as XXXX, the to analysis, to adapt platform adapt to its to those a was increased early our role XXXX was had to system operations foreign successful while with of and At pandemic Having impact of would conditions, the to have in to Thank transitioning and our ourselves China our assimilated in Timing beginning all the continued city the from end of crucial which began by navigation before contributing worked

of at is based other centers in For have teacher within in a online feel be and evolution pandemic who that only learning. cities highly has learning remote This a first-tier can city China. this our of served recognized example, subject a expert of to environment an viable in our teacher to The is accelerate platform. students’ one training students certain available acceptance we a a We also vehicle. made as interest natural in

at in of growth As China drive the nearly training anticipate to has the periods. improved enrollment resumed Amy have all situation beginning health help call, we public future will traditional of where coursework centers in mentioned in-person this delivery and of point our our this a

not as that growth we is is future his of our current by we be an the in opportunities to over. growth students, financially we operationally an floor provide our ACG over the Zhang, to Mandarin, and the for our would optimistic will to XXXX. on update and faculty which to it will to followed when initiatives. positioned translation. and safety want capitalize cautious like ensuring are emphasize Jun I now make Jun head well comes believe We employees the ACG’s I on as into English President, However, pandemic to hand remain remarks

Jun Zhang

Language] [Foreign

Carolyne Sohn

Kevin. you, Thank

many from a of hours centers significant headcount sequential time, delivered XXXX, the by delivery in-person increased traditional For of to resumption increased their the We believe at the students quarter XX%, by of training online. QX. and training third prior portfolio XX.X% quarter. more the Enrollment same program of number by coursework of pursue this continued saw the enrollments in quarter. portfolio during improvement third credit while more At we result studies training from for was the the

The global on situation our health being. we anticipate overseas to travel for in season, travel improved, public winter business. to be China institutions the traditional placed for abroad note the in on impact we following well-known continue have have continue circumstances the has work lighter to students’ a our many offering that and will hold pandemic educational few to demand While art interest schools pandemic like would remains an the alternatives high. a with in time do plans program. the and of tend to travel international But studying but I

short-term As camp fields various Amy design. in programs firms boot and mentioned, these and architectural recognized online include like at internships fashion

While we and increased able have traction are new as students mobile resume to marketing are marketing would initiatives. diversified traditionally, seeing we online now to prospective from the we

strengthen We offering continue lead of resources of campuses will be an working to sharing and teaching development, of implementation online ongoing between coursework. what

of an ways have element to in efforts platform partners whether subsided. overseas with our turn pandemic online the to we Technology support our and resources be can our they continue online, important our or together this access to person which it in are improving has continue the work necessary back As priority. maintaining the on focus we will growth in about With environment. offerings, to key that, conversations pandemic will our in initiatives impact the ensuring after Kevin. is a need, students I And and even we

Kevin Ma

conclude, Carolyne. close. a year about is ahead comes To the Thanks, as optimistic ACG to Jun the opportunities XXXX and

continue operating be increased a in and financial our to solid this over of position course the We have year. efficiency

am under and able And proven hopefully pleased months. students the resilient I to have past over the our several expectations most was circumstance. institution of to exceed challenging Our adapt meet that

places being world. healthy. of monitor you and families safe around well support. Thank it and that, in as as and let’s our continue impact our still questions. to up Everyone, global is We students the their as With closely pandemic many to hardworking employees heartfelt for operator, for the our situation open please the associates, stay the ongoing friends

Kevin Ma

to joining to for anyone or Relations to free our has reach us please of Equity feel you for directly questions again us. all Thanks firm, If The Investor Group. us, out

speak to you call. available quarterly to We investors our to all forward and look are next you. always during speaking with Thank

Operator

This today’s does teleconference. conclude

you and your may lines thank and have for disconnect You your time day. at this a great participation

ATA Creativity Global (AACG) 17 Nov 202020 Q3 Earnings call transcript