AACG - Earnings call transcript Q2 2021

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Operator

Greetings, and welcome to the ATA Creativity Global’s Second Quarter 2021 Financial Results Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder this conference is being recorded. It is now my pleasure to introduce your host, Carolyne Sohn. Carolyne. you, Thank

begin. You may

Carolyne Sohn

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

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

and plans and growth business demand future get as Litigation the discussed ACG’s plan, forward-looking of we training prospects future, like within remind can include, anticipate, for certain Before and ACG’s safe anticipated I programs activities, mergers results outlook started, ACG’s to subsequent market portfolio operations, ACG’s growth and strategy, Reform statements other the and growth everyone These would and call will such for conference other XXXX. harbor believe, any that acquisitions Act regarding Private things, of provision generally, plan the services, statements measures anticipated of forward-looking and the expect, be and ACG’s pandemic guidelines benefits ACG pandemic. education and to and operations of COVID-XX Securities on herein statements the this the meaning of among response implemented accompanying its of in the terms COVID-XX impact identified information by and contain

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

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

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Tung, to company’s or will I’ll and of with happy and Mr. the floor In the highlights to will over turn on today’s Amy growth half Jun call, and investor brief update for Ms. before an its President, the Ma, Amy CEO, ahead CFO, operating go ACG’s Chairman questions. Zhang, the company’s company. opening of quarter addition, the Tung, long-term during that, session the On please CFO, call e-mail provide XXXX. first Kevin and financial follow are more and Q&A today’s Amy. to than we strategy questions Ms. second via a overview outlook take With for

Amy Tung

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

we half. the into well the growth in a in the of the the second enrollment year. X,XXX first to growth increase revenue have have total pleased the momentum XX.X% to bodes second student in year continued enrollment are the half quarter of year, reporting We for We seen in students in believe our

saw During research-based we language year-over-year growth and the programs: training. Portfolio second overseas learning training, quarter, enrollment foreign major significant across study counseling, our

portfolio period, in up quarter the credit slight program, portfolio XXXX. Our hours the from enrolled from is period which XXX XX,XXX primary same year. students training the for delivered programs offering, training during XXX increase We two the last XX% a

that overall on hours conscious As not compensation have years quality during the with academic themed overseas instructors’ programs. hours and overseas instead hours. full-time credit line greater as shift to and We of competing XX% summer in summer, resulted delivered. second boot working various comprising our year-over-year internships, our training the but programs This our has we time, cost in training anticipate completed related in restructured and the in portfolio Net growth, project projects closely income flexibility attributable to we operating This base when the with for portfolio CNYXX financials has our operating project Assessment delivery. the we of period and which camps projects improved services to well maintaining primarily improvement in programs pandemic. recent instructors fees, in contributions in bonuses. of efficiencies education a similar the quarter time-based XX.X% Future pleased only prior online do to primarily grants held up line credit last were second and of focused driven programs conscious period. Project-based tours of total and performance Education be improved project-based partner by decreased quarter, in we our programs shift portfolio delivered be Institute eventually domestic programs billion will also towards million contributed and with hours of stabilizes level XX.X% program autonomy XXXX revenues those training credit of service offset our CNYXX.X students. quarter for flat. CNYXX.X have stayed by loss was in We the over the workshop increase to more educational on of delivering result for to Total to number XX.X% the in while expenses projects institutions net fund our At when delivery period. partially with project-based towards on-site credit to as support as our along are hours shift project-based ACG made in in this time, offer which research more gradually well increasing prior year project portfolio credit place consequently mix quarter on to restrictions the and the as sales net partnership to the improvement second Tsinghua although of due XXXX cost services the more portfolio selling to we programs, majority project-based for this same optimization effort top enrollment efficiencies also With quarter, move hours expenses increased toward training, bottom margin the million credit as and were to has to shift increased with the ACG programs. half a delivered relatively let’s versus of our from which The improved year increased shift to over and contributed second programs increased a This CNYXX.X delivered compared for XXXX. other deferral year related attributable million, was led that, increased professional to Gross service of COVID-XX final was net decreased the used to the which training With second Research of was by This was with first the million during to from partners. revenues the to from the CNYXX.X year. operating compares prior increase

CNYXX.X Net million, Net same half in attributable to first CNYX.X CNYXX.X Gross XX.X% XX.X% period. ACG in of the year XX.X% up million million CNYXX.X XXXX. the period to to improved to the million. prior of increased loss from to Turning margin was compared XXXX. from revenue

million, be XX, a to financial the Working US$XX.X Moving million we cash was compared US$XX.X equivalents. deficit position was US$XX.X December and million solid Kevin, that, relatively strategy. cash will total equity June expand to with in and capital and who deficit million now US$XX.X sheet, capital our balance would XXXX, in at continue XX, growth like Kevin? I shareholders’ equity of at XXXX. to of upon over and to US$XX.X million outlook With working to it turn shareholders’

Kevin Ma

Amy. you, Thank

several second a which result pleased enrollments into bodes see quarter of to of during enrollments China year. of total second new remained positive platform trends by see were sales public our well our the the lines able year-to-date continue the period. growth as we The increase XX% of in quarter, business achieved stable of tangible the in across lines XXXX. situation management across remainder We our year-over-year all over and business, the are We during results to for the surrounding health this

has However, for service. the season outbreaks Delta late usual research-based we seen have our China and early as coincides August, uncertainty which some July in introduced certain in peak variant with learning

first. the situation are of mindful putting our We and employees’ students’ monitoring carefully safety very and are

study As offer the of not did impact summer programs with international the we pandemic. abroad lingering summer, this last given

programs launched our with we reception We demand have the international several we However, school programs with developed are partners positive mainly cooperation with one of domestic alternative institutions. our the air international in the themed of pleased successfully travel July. very and in long-standing partner

conduct the Pingyao those old Shanxi opportunity Students one to of in study most Province, Chinese of design their had of ancient City the visited One was research buildings own and history. in tours cities China. in to the ancient

will for General the tutoring July We few of industry do the moment of programs have the course and as the weeks. now have I on providing events to Council that culture, jointly address workshops and in Office graduate China students. companies significant the various China a Central on Party school the the like design, developed take issued on XX such after-school by State General guidelines relics, of others. primarily Committee focus also over past service impacted academic of to education The the Communist restoration topics Office on-site future

and a adverse our week no there on our arts impact believes education shared be ago, we As given learning. experiential materially ACG that on focus creative will business

in make ACG’s closely providing monitor situation to I’d to an Jun, update floor our now continue which growth service are China ACG’s applicable located. regulations like and to hand Jun all over translation. and are and rules places by to with in provide will Mandarin education partner be English the in the go Zhang, where committed please institutions current followed compliance initiatives. ahead. We to remaining the President, an in Jun his remarks on will

Jun Zhang

Kevin. Language] [Foreign you, Thank

our from programs students. offer with institutions pleased domestic summer, alternative this have We positive to quality are partnering overseas reputable and have feedback to continued received and

while quarter, second and and made business. to development. one’s the writing, critical to will us We its K-XX education history, to just businesses and from have the important believe our learning on subjects curriculum classroom focus education, legacy many of learning one experiential demonstrated the typical strategic of various as decision services. of to et During of outside to creative a math, the and science, peers, us are ACG assessment we been our and the be overall reading, differentiate programs cetera, academic arts offer This sell education student’s enable core

positive we increased We recovery numbers. increased year platform are of promotional development prior activities, post-pandemic on with for a the the and marketing and, are period during sales gradual with combined seeing and offerings demand our centralized enrollment seeing our the impact our compared

our what towards them their remain variant. goal We infused would interests We to be our institutions. continue despite as them by most expand of Delta optimistic overseas the some to about offerings, students to pursuing and to they looking the course recovery global beneficial working at work studies see uncertainties

safety We partners our staff. with around of the globe work the continue while to students closely and will well-being prioritizing our and

are the over impact watchful as academic remaining industry the released With back also by to after-school recent I’ll We turn Kevin. government. it given guidelines the uncertainties tutoring that,

Kevin Ma

pandemic particularly the we position time. to believes on our – of our demand the to growth Language] ACG diminish over continue effects remain closing, initiatives, execute will [Foreign In hope it

the be continue that the trust of to recovers. support quality organization to and for recognize world both pandemic excellent an students pleased worst the and during its education as are and We the the

opportunities. and With these Our population healthy. and forward we students of their continue stay determination inspire perseverance safe that, learning for let’s with and Everyone, with look enrich through themselves creative a to operator, serving looking challenges, to students growing please arts experiential up it open to questions. us and

Operator

Thank you. you. [Operator Thank Instructions]

your with Please Our The from first Fan question comes proceed with question. Benchmark Lewis Company.

Lewis Fan

Hi. Thanks my for call. taking

quarter. net solid a numbers. have over very for congratulations achieved that positive first to a to on all, noticed income as net of First operation opposed regard My year a your question a ago. the quarter is you with loss I’ve

context, this this in become is the positive be or trend or more volatilities if to you please we will in estimate So color – provide going upcoming income some if could have quarters? a forward, net going

Amy Tung

question. the recognized deconsolidation Thank was realized income K-XX CNYXX.X your you, quarter for by two income Well, services. net legacy the the Lewis XXXX assessment contributed upon education actually of mainly investment in our million positive

core business compared a was still period. net with Our has year but improvement the status, at prior loss shown

do over we uncertainty improvement course for we to pandemic in and Delta believe achieve not be at it global the predictions see we would year. China when the might in the caused stage. about prudent of by marked resurgence Given will the profitability summer, But variant this us make

Lewis Fan

Great. the environment. Thank question That’s you. you. Thank more macro enough. My second fair about is

past new also we – to after-school there the some by government industry. guidelines been with education the month the regard or issued Chinese have so, Over

So Chinese you I some mean these overall please the education know new on And school already might what provide view after- the But industry? some had colors your more management specifically, guidelines’ comments on of additional could on has impact ACG? for it this.

Amy Tung

in Thank by Certainly. and after-school homework tutoring school creative do for be is regard. to experimental guidelines The question guidelines not the and training. on operations actually your courses, education affected materially We are this Lewis academic and ACG’s for our focus again. business expect primary on focused you,

changes our continue anticipate will companies other and education businesses and providing and remaining to comply directly all China monitor with applicable all and jurisdictions most while to where regulations rules we students. to We conduct in affected and businesses, committed support We potential quality content services avoid guidelines the look to by seeking avenues an for to nonacademic service for explore refunds. growth. to ACG issue adjust these opportunity delivery We to will partnerships for as for including ways needing their see new

we what’s will remain coming period. on tuned So for the in future

Lewis Fan

Thank Okay. you. Thank Alright. you. Yes.

Just one question. more

us from questions. tell my ACG And And Thank bit all the So a your And differentiates about specifically, you how its more competitors? you. are could competition? does more industry that’s who major landscape? itself

Amy Tung

the there PSONE. SIA Thank you XXXX. Swings in very of students the the base competitors New by a background. four China, training even potential again, art education luxury selling longest of accounted Together Compared commencing with for less the few Lewis, businesses but to a is Well, for years aggressively subsidiary with XX% ACG unleash rapidly in your companies in in most number experience, of in such being three renowned education XX big China, questions. discount a training for has with at zero art and in expanding these and are market about XX% ACG China Group market. and market is SIA, in the art as by recent ACG, company share the growing classroom Oriental China. cultivating courses been in international providing has with years’ is young decoration. acquired around than It the history the in centers in the for to has competitors, since XXXX. international in PSONE Swings with

So Lewis. think answered I I questions, your

Lewis Fan

that’s Thank much. you Yes, very very helpful.

Amy Tung

you your Thank for questions.

Operator

for time. the no turn at Thank any floor back this over management are you. further There I’d comments. to like to questions closing

Kevin Ma

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

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

Operator

conference. concludes This today’s

evening. lines participation. Have Thank your at your you for disconnect this may wonderful time. a You

ATA Creativity Global (AACG) 13 Aug 212021 Q2 Earnings call transcript