ATA Creativity Global

Greetings. Welcome to ATA Creativity Global's third quarter 2022 financial results. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to Alice Zhang of the Equity Group. Please go ahead.

Thank you, Sherry. And hello, everyone. Thank you for joining us. The press release announcing ATA Creativity Globals, or ACGs, results for the third quarter ended September 30th, 2022, is available at the IR section of the company's website at www.atai.net.cn. As part of this conference call, the company has an accompanying slide presentation available on its website. A replay of this broadcast would also be made available at ACJ's website for the next 90 days. Before we get started, I would like to remind everyone that this conference call and any accompanying information discussed herein contain certain forward-looking statements within the meaning of the state public provision of 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, intent, 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 prospect, 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 planned and anticipated benefits of the measures implemented in response to the COVID-19 pandemic. Although the company believes that the expectations reflected in its forward-looking statements are reasonable as of today, those statements are subject to risks and uncertainties that could cause the actual results to differ dramatically from those projected. There can be no assurance that those expectations will prove to be correct. Information about the risk associated with investing in ACG is included in filings with the Securities and Exchange Commission, which we encourage you to review before making an investment decision. The company does not assume any obligation to update any forelooking statements as a result of new information for future events, changes in market conditions, or otherwise, except as required by law. Regarding the disclaimer language, I would also like to refer you to slide two of the conference call presentation for further information. All US dollar amounts in this conference call relating to financial results for third quarter ended September 30th, 2022 are converted from RMB using an exchange rate of 7.1135 RMB to one US dollar. The noon buying rate as of September 30th, 2022. All historical conversions are accurate as of the time reported unless otherwise noted. The company reports its financial results under U.S. GAAP in RMB, and all percentages calculated in the presentation are based on RMB unless otherwise noted. For those of you following along with accompanying a PowerPoint presentation, there is an overview of the company on slide three. In addition, we're more than happy to take investor questions during today's Q&A session or via email to the company. If you wish to ask questions, you can send your emails to the email address azhang at equityny.com, and please specify whether you would like to have your name read during the Q&A session. On today's call, the company's CFO, Mr. Ruobai Sima, will provide a brief overview of operating and financial highlights for the third quarter of 2022. Chairman and CEO, Mr. Kevin Ma, and President, Mr. Jun Zhang, will follow with an update on the company's outlook and its long-term growth strategy before opening the floor for questions. With that, I'll turn the call over to ACG CFO, Mr. Ruobai Sima. Please go ahead, Mr. Sima.

Thank you, Alice, and welcome everyone. Good evening to those in America. We appreciate your time. We remain focused on providing quality arts education and services for our students during third quarter 2022, which is when the busy overseas study application season begins. Total revenue for the period was impacted by decreased contributions from portfolio training services as a result of periodical lockdowns in some of our key cities in response to local COVID-19 resurgence. However, demand for our research-based learning programs remained steady as students have consistently expressed how important personalizing their creative education experience to them with money regarding it as part of their unique overseas study application package. Our primary offering, the portfolio training program, enrolled 616 students during the period, which is stable compared to the same period last year. We delivered 36,031 credit hours for portfolio training programs a decrease from the prior year period primarily due to the occasional lockdowns in key cities such as Shenzhen and Chengdu. Although total credit hours went down, project-based program credit hours increased noticeably as a proportion of total credit hours. As a result of our ongoing efforts to shift more students to project-based versus time-based program credit hours, project-based programs are designed with more flexibility and customization to allow our students to achieve their goals more effectively with potentially fewer credit hours needed in comparison to time-based programs. Therefore, total revenues did not decrease as drastically as the decline in total credit hours. During third quarter 2022, we introduced a new platform for students and teaching staff to keep them managed and track their progress. The platform aims to help both students and ACG teachers follow study goals easier and make timely adjustments. During the period, we also launched multiple new programs in different subject areas. Many of which feature a combination of online and offline study experience and lectures from overseas prestigious art school professors. We expect to make this offering available to students with developing new programs in mind. With that, let's move to financials for the third quarter and fourth nine months of the year. Total net revenue for the third quarter of 2022 were RMB 52.1 million compared to RMB 55.3 million in the third quarter of 2021. The decrease was primarily due to decreased revenue contributions from portfolio training services. caused by the local COVID-19 resurgence and subsequent lockdowns that I noticed earlier. Growth margin was 45.1% during the 2022 third quarter compared to 51.4% in the prior year period, primarily due to decreased revenue from portfolio training services, which is impacted by local COVID-19 resurgence in certain core cities during the quarter. net loss attributed to ACG improved to RMB 12 million, which compared to a net loss attributed to ACG of RMB 26.2 million in the prior year period. This improvement was primarily a result of decreased general and administrative expenses related to the final one-time funding support of RMB 10 million to Tsinghua University that was paid in the prior year period. as well as RMB 6 million impairment loss of investment recorded in the prior year period. During the first nine months of 2022, net revenue was RMB 128.3 million compared to RMB 129.6 million in the same period of 2021. Growth margin was 42.8% compared to 45.7% in the prior year period. Net loss attributed to ACG was RMB 49.9 million, compared to net loss of RMB 31.1 million, primarily due to one-time RMB 33.5 million investment gains resulting from disposal of the company's K-12 education assessment business in June 2021. The investment gain was partially offset by equity and expenses of RMB 10 million related to the funding support to Tsinghua University incurred in prior year period, as well as RMB 6 million impairment loss in relation to investment recorded in the prior year period that I had noticed earlier. Moving back to balance sheet, we believe we are in a solid financial position with US dollar 8.4 million in cash and cash equivalent. Working capital deficit was US$32.7 million, and the total shareholder's equity was US$20 million at September 30, 2022, compared to working capital deficit of US$30.2 million and shareholder's equity of US$30 million, respectively, at December 34, 2021. With that, I'd like to turn it over to Kevin, who will expand upon our outlook and growth strategy.