ATA CREATIVITY GLOBAL Third Quarter 2022 and Nine Months 2022 Highlights
- During Third Quarter 2022, student enrollment was 1,106 compared with 1,220 in the prior-year period. Of these students, 616 were enrolled in ACG’s portfolio training programs. 36,031 credit hours were delivered during Third Quarter 2022, compared to 44,640 in the prior-year period. From Third Quarter 2022 onward, student enrollment numbers will exclude those enrolled in foreign language training services (previously categorized under “other educational services”), which operated under a former ACG subsidiary, as majority equity interests of this former subsidiary were disposed in
July 2022 and the financials of this subsidiary was subsequently deconsolidated - Third Quarter 2022 net revenues were
RMB52.1 million (US$7.3 million ), compared toRMB55.3 million in the prior-year period, mainly due to decreased contributions from portfolio training services, which were primarily impacted by temporary training center closures in major cities includingShenzhen andChengdu , as a result of local COVID-19 resurgences and subsequent lockdowns - Third Quarter 2022 net loss attributable to ACG narrowed to
RMB12.0 million (US$1.7 million ), compared to net loss attributable to ACG ofRMB26.2 million in the prior-year period - Nine Months 2022 net revenues were
RMB128.3 million (US$18.0 million ), compared toRMB129.6 million in the prior-year period - Nine Months 2022 net loss attributable to ACG was
RMB49.9 million (US$7.0 million ), compared to net loss attributable to ACG ofRMB31.1 million in the prior-year period, primarily as a result of a one-timeRMB33.5 million investment gain related to the disposal of the K-12 education assessment business in the prior-year period, which was offset by lower general and administrative expenses ofRMB10.0 million related to funding support toTsinghua University , as well as aRMB6.0 million impairment loss of investment recorded in the prior-year period RMB59.9 million (US$8.4 million ) in cash and cash equivalents as ofSeptember 30, 2022
Management Commentary
Mr. Kevin Ma, Chairman and CEO of ACG, stated, “During Third Quarter 2022, we continued to support many of our students remotely in an ongoing pandemic environment as a result of local COVID-19 resurgences and subsequent lockdowns in some of our key cities. Our revenues for the period were impacted by a decrease in portfolio training service revenue contributions primarily due to these local lockdowns; however, we were pleased to see ongoing interest in our research-based learning programs and many of our students continuing to pursue their creative studies by applying for overseas study programs. While the pandemic environment did impact credit hours delivered for portfolio training programs during Third Quarter 2022, we were able to maintain stable revenues year over year due to a significantly larger proportion of these credit hours coming from project-based programs. In striving to improve our students’ experience at ACG, we recently introduced a new platform for students and teachers with a goal of helping them better manage their class hours and progress. We are prepared to adapt to the changing environment and will continue to support our students in their creative studies as we remain mindful of the public health situation.”
Outlook
Mr.
Operating Review
Enrollment Update
ACG student enrollment for Third Quarter 2022 was 1,106, of which 616 were enrolled in portfolio training programs, which consisted of time-based programs and project-based programs.
A total of 36,031 credit hours were delivered for portfolio training programs during Third Quarter 2022, of which 12,923 credit hours were delivered for time-based programs and 23,108 credit hours were delivered for project-based programs. These courses were delivered either in person through ACG’s nationwide training center network or via online platform.
The following is a summary of the credit hours delivered for ACG’s portfolio training programs for Third Quarter 2022, compared to those for the prior-year period:
| Third Quarter Ended | Third Quarter Ended | % Change | ||||
| No. of Credit Hours | No. of Credit Hours | |||||
| Time-based Program | 12,923 | 21,290 | (39.3%) | |||
| Project-based Program | 23,108 | 23,350 | (1.0%) | |||
| Total | 36,031 | 44,640 | (19.3%) |
During Third Quarter 2022, 490 students were enrolled in ACG’s other programs, which primarily consisted of overseas study counselling services and research-based learning services. As mentioned above, ACG deconsolidated a former subsidiary during Third Quarter 2022, which operated the foreign language training services business, as categorized under “other educational services” in prior quarters.
Third Quarter 2022 Financial Review – GAAP Results
ACG’s total net revenues for Third Quarter 2022 were
Gross profit for Third Quarter 2022 was
Total operating expenses for Third Quarter 2022 decreased to
Loss from operations for Third Quarter 2022 narrowed to
Net loss attributable to ACG for Third Quarter 2022 was
For Third Quarter 2022, basic and diluted losses per common share attributable to ACG were both
Nine Months 2022 Financial Review – GAAP Results
ACG’s total net revenues for Nine Months 2022 were
Gross profit for Nine Months 2022 was
Total operating expenses for Nine Months 2022 decreased to
Loss from operations for Nine Months 2022 improved to
Net loss attributable to ACG for Nine Months 2022 was
For Nine Months 2022, basic and diluted losses per common share attributable to ACG were both
Non-GAAP Measures
Adjusted net loss attributable to ACG for Third Quarter 2022, which excludes share-based compensation expense and foreign currency exchange loss (non-GAAP), was
Basic and diluted losses per common share attributable to ACG excluding share-based compensation expense and foreign currency exchange loss (non-GAAP) for Third Quarter 2022, were
Please see the note about non-GAAP measures and the reconciliation table at the end of this press release.
Other Data
The number of weighted average ADSs used to calculate basic and diluted earnings per ADS for Third Quarter 2022 were both 31.4 million. Each ADS represents two common shares.
Balance Sheet Highlights
As of
Conference Call and Webcast Information (With Accompanying Presentation)
ACG will host a conference call at 8 p.m. Eastern Time on
To participate in the conference call, please use the following dial-in numbers about 10 minutes prior to the scheduled conference call time:
| U.S. & | +1 (877) 407-9122 |
| International (Toll): | +1 (201) 493-6747 |
| Local Access | |
| (400) 120 2840 | |
| (800) 965561 |
A live webcast of the conference call can be accessed at: https://event.choruscall.com/mediaframe/webcast.html?webcastid=EPWYwSVj.
An accompanying slide presentation will also be made available 30 minutes prior to the conference call at the investor relations section of ACG’s website (https://ir.atai.net.cn/). To listen to the webcast, please visit ACG’s website a few minutes prior to the start of the call to register, download, and install any necessary audio software.
A Q&A session will follow management’s prepared remarks. If any individuals would prefer to email questions they’d like to ask during this session, please send emails to the investor contacts listed below, and specify whether they would like to have their names read during the Q&A session.
A replay will be available shortly after the call and will remain available for 90 days.
About
Cautionary Note Regarding Forward-looking Statements
This announcement contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and as defined in the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can be identified by terms such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “future,” “intend,” “look forward to,” “outlook,” “plan,” “should,” “will,” and similar terms and include, among other things, statements regarding ACG’s future growth and results of operations; ACG’s plans for mergers and acquisitions generally; ACG’s growth strategy, anticipated growth prospects and subsequent business activities; market demand for, and market acceptance and competitiveness of, ACG’s portfolio training programs and other education services; the impact of the COVID-19 pandemic on ACG and its operations; and ACG’s plan and anticipated benefits of the measures implemented in response to the COVID-19 pandemic.
The factors that could cause the Company’s actual financial and operating results to differ from what the Company currently anticipates may include its ability to develop and create content that could accommodate needs of potential students, its ability to provide effective creative related international education services and control sales and marketing expenses, its recognition in the marketplace for services it delivered and branding it established, its ability to integrate the acquired business, its ability to maintain market share amid increasing competition, its ability to identify and execute on M&A opportunities within the education sector, the economy of
The financial information contained in this release should be read in conjunction with the consolidated financial statements and related notes included in the Company’s annual report on Form 20-F for its fiscal year ended
The forward-looking statements in this release involve known and unknown risks and uncertainties and are based on current expectations, assumptions, estimates, and projections about ACG and the markets in which it operates. The Company undertakes no obligation to update forward-looking statements, which speak only as of the date of this release, to reflect subsequent events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that its expectations and assumptions expressed in these forward-looking statements are reasonable, the Company cannot assure you that its expectations and assumptions will turn out to be correct, and investors are cautioned that actual results may differ materially from the anticipated results.
Currency Convenience Translation
The Company’s financial information is stated in Renminbi (“RMB”), the currency of the People’s
About Non-GAAP Financial Measures
To supplement ACG’s consolidated financial information presented in accordance with
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. ACG believes these non-GAAP financial measures provide meaningful supplemental information about its performance by excluding share-based compensation expense and foreign currency exchange gain or loss, which may not be indicative of its operating performance.
ACG 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 ACG’s historical performance. ACG computes its non-GAAP financial measures using a consistent method from period to period. ACG 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 net loss excluding share-based compensation expense and foreign currency exchange gain or loss and basic and diluted losses per common share and per ADS excluding share-based compensation expense and foreign currency exchange gain or loss is that share-based compensation charges and foreign currency exchange gain or loss have been, and are expected to continue to be for the foreseeable future, a significant recurring expense in ACG’s business.
Management compensates for these limitations by providing specific information regarding the GAAP amounts excluded from each non-GAAP measure. The table captioned “Reconciliations of Non-GAAP Measures to the Most Comparable GAAP Measures” shown at the end of this news release has more details on the reconciliations between GAAP financial measures that are most directly comparable to the non-GAAP financial measures used by ACG.
For more information on our company, please contact the following individuals:
| At the Company | Investor Relations |
| Ruobai Sima, CFO | |
| +86 10 6518 1133 x 5518 | 408-538-4577 |
| simaruobai@acgedu.cn | csohn@equityny.com |
| 212-836-9610 | |
| azhang@equityny.com | |
| ATA CREATIVITY GLOBAL AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||
| 2021 | 2022 | 2022 | |||||||
| RMB | RMB | USD | |||||||
| ASSETS | |||||||||
| Current assets: | |||||||||
| Cash and cash equivalents | 71,339,361 | 59,858,096 | 8,414,718 | ||||||
| Accounts receivable | 938,189 | 332,189 | 46,698 | ||||||
| Prepaid expenses and other current assets | 3,129,600 | 6,089,522 | 856,051 | ||||||
| Total current assets | 75,407,150 | 66,279,807 | 9,317,467 | ||||||
| Long-term investments | 38,000,000 | 38,000,000 | 5,341,955 | ||||||
| Property and equipment, net | 36,503,984 | 33,851,683 | 4,758,794 | ||||||
| Intangible assets, net | 93,352,778 | 80,427,778 | 11,306,358 | ||||||
| 194,754,963 | 194,754,963 | 27,378,219 | |||||||
| Other non-current assets | 26,739,026 | 25,992,152 | 3,653,919 | ||||||
| Right-of-use assets | 42,417,409 | 33,022,696 | 4,642,257 | ||||||
| Total assets | 507,175,310 | 472,329,079 | 66,398,969 | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||
| Current liabilities: | |||||||||
| Accrued expenses and other payables | 48,174,095 | 45,274,553 | 6,364,593 | ||||||
| Lease liabilities-current | 17,351,427 | 15,673,961 | 2,203,411 | ||||||
| Deferred revenues | 202,453,092 | 237,726,731 | 33,419,095 | ||||||
| Total current liabilities | 267,978,614 | 298,675,245 | 41,987,099 | ||||||
| Lease liabilities-non-current | 23,365,840 | 16,158,650 | 2,271,547 | ||||||
| Deferred income tax liabilities | 24,931,322 | 14,996,335 | 2,108,151 | ||||||
| Total liabilities | 316,275,776 | 329,830,230 | 46,366,797 | ||||||
| Shareholders’ equity: | |||||||||
| Common shares | 4,720,147 | 4,720,147 | 663,548 | ||||||
| (9,818,754 | ) | (8,779,815 | ) | (1,234,247 | ) | ||||
| Additional paid-in capital | 540,583,564 | 540,847,718 | 76,031,169 | ||||||
| Accumulated other comprehensive loss | (37,559,847 | ) | (36,903,023 | ) | (5,187,745 | ) | |||
| Accumulated deficit | (310,156,018 | ) | (360,066,088 | ) | (50,617,289 | ) | |||
| Total shareholders’ equity attributable to ACG | 187,769,092 | 139,818,939 | 19,655,436 | ||||||
| Non-redeemable non-controlling interests | 3,130,442 | 2,679,910 | 376,736 | ||||||
| Total shareholders’ equity | 190,899,534 | 142,498,849 | 20,032,172 | ||||||
| Commitments and contingencies | — | — | — | ||||||
| Total liabilities and shareholders’ equity | 507,175,310 | 472,329,079 | 66,398,969 | ||||||
| ATA CREATIVITY GLOBAL AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | |||||||||
| Three-month Period Ended | |||||||||
| 2021 | 2022 | 2022 | |||||||
| RMB | RMB | USD | |||||||
| Net revenues | 55,297,492 | 52,099,904 | 7,324,089 | ||||||
| Cost of revenues | 26,860,241 | 28,597,917 | 4,020,232 | ||||||
| Gross profit | 28,437,251 | 23,501,987 | 3,303,857 | ||||||
| Operating expenses: | |||||||||
| Research and development | 3,490,188 | 846,423 | 118,988 | ||||||
| Sales and marketing | 16,640,530 | 20,524,556 | 2,885,296 | ||||||
| General and administrative | 30,499,054 | 18,409,028 | 2,587,900 | ||||||
| Total operating expenses | 50,629,772 | 39,780,007 | 5,592,184 | ||||||
| Other operating income, net | 5,384 | 5,505 | 774 | ||||||
| Loss from operations | (22,187,137 | ) | (16,272,515 | ) | (2,287,553 | ) | |||
| Other income (expense): | |||||||||
| Gain on deconsolidation of a subsidiary and others, net | — | 682,996 | 96,014 | ||||||
| Impairment loss from investment | (6,000,000 | ) | — | — | |||||
| Interest income, net of interest expenses | 292,710 | 181,303 | 25,487 | ||||||
| Foreign currency exchange gain (loss), net | 15,654 | (13,221 | ) | (1,859 | ) | ||||
| Loss before income taxes | (27,878,773 | ) | (15,421,437 | ) | (2,167,911 | ) | |||
| Income tax benefit | (1,569,847 | ) | (3,687,619 | ) | (518,397 | ) | |||
| Net loss | (26,308,926 | ) | (11,733,818 | ) | (1,649,514 | ) | |||
| Net income (loss) attributable to non-redeemable non-controlling interests | (107,953 | ) | 252,349 | 35,475 | |||||
| Net loss attributable to ACG | (26,200,973 | ) | (11,986,167 | ) | (1,684,989 | ) | |||
| Other comprehensive income: | |||||||||
| Foreign currency translation adjustment, net of nil income taxes | 36,873 | 332,546 | 46,749 | ||||||
| Comprehensive loss attributable to ACG | (26,164,100 | ) | (11,653,621 | ) | (1,638,240 | ) | |||
| Basic and diluted losses per common share attributable to ACG | (0.42 | ) | (0.19 | ) | (0.03 | ) | |||
| Basic and diluted losses per ADS attributable to ACG | (0.84 | ) | (0.38 | ) | (0.06 | ) | |||
| ATA CREATIVITY GLOBAL AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS | |||||||||
| Nine-month Period Ended | |||||||||
| 2021 | 2022 | 2022 | |||||||
| RMB | RMB | USD | |||||||
| Net revenues | 129,647,987 | 128,283,578 | 18,033,820 | ||||||
| Cost of revenues | 70,385,064 | 73,386,393 | 10,316,496 | ||||||
| Gross profit | 59,262,923 | 54,897,185 | 7,717,324 | ||||||
| Operating expenses: | |||||||||
| Research and development | 8,736,780 | 4,383,557 | 616,231 | ||||||
| Sales and marketing | 46,612,135 | 55,002,983 | 7,732,197 | ||||||
| General and administrative | 73,189,402 | 57,010,439 | 8,014,401 | ||||||
| Total operating expenses | 128,538,317 | 116,396,979 | 16,362,829 | ||||||
| Other operating income, net | 17,247 | 16,515 | 2,322 | ||||||
| Loss from operations | (69,258,147 | ) | (61,483,279 | ) | (8,643,183 | ) | |||
| Other income (expense): | |||||||||
| Gain on deconsolidation of subsidiaries and others, net | 33,542,154 | 682,996 | 96,014 | ||||||
| Impairment loss from investments | (6,000,000 | ) | — | — | |||||
| Interest income, net of interest expenses | 867,482 | 553,773 | 77,848 | ||||||
| Foreign currency exchange loss, net | (141,132 | ) | (3,328 | ) | (468 | ) | |||
| Loss before income taxes | (40,989,643 | ) | (60,249,838 | ) | (8,469,789 | ) | |||
| Income tax benefit | (7,976,998 | ) | (9,889,236 | ) | (1,390,207 | ) | |||
| Net loss | (33,012,645 | ) | (50,360,602 | ) | (7,079,582 | ) | |||
| Net loss attributable to redeemable non-controlling interests | (714,121 | ) | — | — | |||||
| Net loss attributable to non-redeemable non-controlling interests | (1,198,928 | ) | (450,532 | ) | (63,335 | ) | |||
| Net loss attributable to ACG | (31,099,596 | ) | (49,910,070 | ) | (7,016,247 | ) | |||
| Other comprehensive income (loss): | |||||||||
| Foreign currency translation adjustment, net of nil income taxes | (6,018 | ) | 656,824 | 92,335 | |||||
| Comprehensive loss attributable to ACG | (31,105,614 | ) | (49,253,246 | ) | (6,923,912 | ) | |||
| Basic and diluted losses per common share attributable to ACG | (0.53 | ) | (0.80 | ) | (0.11 | ) | |||
| Basic and diluted losses per ADS attributable to ACG | (1.06 | ) | (1.60 | ) | (0.22 | ) | |||
| RECONCILIATIONS OF NON-GAAP MEASURES TO THE MOST COMPARABLE GAAP MEASURES | ||||||||||||
| Three-month Period Ended | Nine-month Period Ended | |||||||||||
| 2021 | 2022 | 2021 | 2022 | |||||||||
| RMB | RMB | RMB | RMB | |||||||||
| GAAP net loss attributable to ACG | (26,200,973 | ) | (11,986,167 | ) | (31,099,596 | ) | (49,910,070 | ) | ||||
| Share-based compensation expenses | 308,150 | 365,558 | 797,448 | 1,104,692 | ||||||||
| Foreign currency exchange loss (gain), net | (15,654 | ) | 13,221 | 141,132 | 3,328 | |||||||
| Non-GAAP net loss attributable to ACG | (25,908,477 | ) | (11,607,388 | ) | (30,161,016 | ) | (48,802,050 | ) | ||||
| GAAP losses per common share attributable to ACG | ||||||||||||
| Basic and diluted | (0.42 | ) | (0.19 | ) | (0.53 | ) | (0.80 | ) | ||||
| Non-GAAP losses per common share attributable to ACG | ||||||||||||
| Basic and diluted | (0.41 | ) | (0.18 | ) | (0.52 | ) | (0.78 | ) | ||||
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