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spk00: Greetings and welcome to the ATA Creativity Global fourth quarter at year-end 2023 financial results. At this time, all participants are in a listen-only mode. A brief 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Carolyn Fong, Vice President. Thank you, Carolyn. You may begin.
spk01: Thank you, Operator, and hello, everyone. Thank you for joining us. The press release announcing ATA Creativity Global's, or ACG's, results for the fourth quarter and year ended December 31, 2023 is available at the IR section of the company's website at www.ata.net.cn. As part of this conference call, the company has an accompanying slide presentation available on its website. A replay of this broadcast will also be made available at ACG'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 contains certain forward-looking statements within the meaning of the safe harbor 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, intend, look forward to, outlook, guidance, 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, ACG's 2024 guidance, market demand for and market acceptance and competitiveness of ACG's portfolio training programs and other education services. 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 risks associated with investing in ACG is included in its 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 forward-looking statements as a result of new information, future events, changes in marketing 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 U.S. dollar amounts in this conference call relating to financial results for the fourth quarter and year ended December 31st, 2023 are converted from RMB using an exchange rate at 7.0999 RMB to one U.S. dollar. The noon buying rate as of December 31st, 2023. All historical conversions are accurate as of the time reported unless otherwise noted. The company reports its financial results under U.S. GAAP and RMB and all percentages calculated in the presentation are based on RMB unless otherwise noted. For those of you following along with the company PowerPoint presentation, there is an overview of the company on slide three. In addition, we are 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 questions 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. Robite, Sima will provide a brief overview of operating financial highlights for the fourth quarter and full year of 2023. As Chairman and CEO, Mr. Kevin Ma is unable to be here today. Mr. Sima will join President Mr. Jun Tsang in providing an update on the company's 2024 guidance, 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. Rohabai Sima. Please go ahead, Mr. Sima.
spk02: Thank you, Charity, and welcome, everyone. and good evening to those in America, and we appreciate your time. 2023 was an important year for ACC. It was the fourth year since the COVID-19 pandemic. Where we were able to deliver a complete year of in-person class delivery, we are continuing to make select courses available via online delivery. I'm pleased to report that the company achieved RMB $221.6 million in revenues for full year 2023. a 7.2% increase year-over-year. This was a result of renewed student interest in ELR portfolio training, overseas study counseling, and research-based learning services as COVID-related travel restrictions and local shutdowns were lifted at the start of 2023, enabling students to return on an on-campus experience and resume planning for overseas study. Over the course of 2023, we also continued to realign operating costs and were able to marginally decrease overall operating expenses. As a result of the increased revenues and decreased operating expenses, we significantly improved our bottom line, narrowing net loss by 29.7% for full year 2023. We were excited to host overseas summer camps for the fourth time since the pandemic. and were pleased that students continued to find their offerings valuable to their overall experience at ACT. Enriching their academic studies while reinforcing their desire to pursue a career in the arts. Total student enrollment for fourth quarter 2023 was 1,011 compared to 908 in the prior year period. Student enrollment increased 11.3% year over year. mainly as a result of more students who enrolled in our portfolio training services and overseas study counseling services. During the period, portfolio training credit hours delivered an increase of 3.3% to 48,421. At the same time, we continue to deliver a variety of experiential programs to our students as we have received positive student feedback on these offerings. We expect to introduce additional relevant hands-on type of programs in the future. With that, I will quickly reveal financials. Total net revenues for fourth quarter 2023 increased 6.5% to RMB $83.6 million, compared to RMB $78.5 million in the fourth quarter of 2022. This was primarily driven by increased revenues from portfolio training and overseas study counseling services. Portfolio training services represented 77.4% of total net revenues during the period. Growth margin improved to 62.6% during fourth quarter 2023, compared to 60.6% in the prior year period. The increase in growth margin was primarily due to increased net revenue. We reported net income attributed to ACG of RMB 8.6 million during fourth quarter 2023. an increase of 324.1% from RMB 2 million in the prior year period. During the full year result of 2023, net revenues increased 7.2% to RMB 221.6 million from RMB 206.8 million in the prior year period. Gross margin improved to 51.7% from 49.6% in the prior year. Net loss attributed to ACP narrowed to RMB 33.7 million compared to net loss of RMB 47.9 million primarily due to increased revenue and decreased operating expenses. Move to balance sheet, we continue to strengthen our financial positions ending the year U.S. $8.5 million in cash and cash equivalents, a 9.4% increase from the end of 2022. Working capital deficit was US$34.4 million, and total shareholders' equity was US$15.9 million at December 34, 2023, compared to working capital deficit of US$33 million and shareholders' equity of US$20.8 million respectively at December 34, 2022. Now turning to our attention to ACG's outlook and growth strategy.
spk04: With the lifting of pandemic-related component of our business.
spk02: This is also the key part of our curriculum that prepares students to create a complete portfolio of their work while they are at ACG, which is a request to applying to our arts college and grad schools. Through portfolio training services, we promote our offerings in research-based learning and overseas study counseling services, which make for a comprehensive and well-rounded student experience here at HCP. In addition to focusing on growing our business, we are also proactively exploring partnerships with creative arts institutions around the world. During fourth quarter 2023, we successfully hosted multiple winter programs, including our regular master class The October Shanghai Fashion Week program and the part-time assist program. This program allows participating students to put some of their academic knowledge into practice by providing opportunities to work in a professional setting and gaining a better understanding of how the concepts they have explored in the classroom and applied in real-world scenarios. We were pleased with the positive reception by both our students and our enterprise partners, with whom our students worked closely. As of March 2024, many of our students have received favorable admission results from renowned arts institutions and programs worldwide. These positive outcomes inspire our continuous efforts in helping students achieve their academic goals. We look forward to hearing more good news from our students who have demonstrated and paralyzed determination and creativity throughout their journeys. Last slide, we are pleased to provide the following revenue guidance for fiscal year 2024. For the year end, December 24th, 2024, we expect total net revenue of between RMB $233 million to RMB 255 million, which represents a 5% to 15% increase from fiscal year 2023. Please note that the revenue guidance for fiscal year 2024 does not configure any potential acquisitions or other business transactions we may complete in 2024. As any material developments arise, we will be sure to update the market and evaluate guidance I'd now like to hand the floor over to Jun Zhang, ACG's president, to provide an update on our current growth initiatives. Jun will make his remarks in Mandarin, which will be followed by an English translation. Jun, please go ahead.
spk03: Thank you, Mr. Zhang. Thank you, Mr. Sima. Thank you to our students. Thank you for their perseverance and trust in ACG. We are very proud to be able to provide high-quality services to all kinds of students. Without the risk spirit of our entire staff and the relationship network of strong institutional partners, this is impossible to achieve. Since the beginning of 2024, our regular research projects, including OpenHack Shanghai Fashion Week 2024 Fashion Challenge Camp, have recruited new students. The students who participated will have the opportunity to interview fashion designers, understand the global trend, customize brand upgrades, and fashion look box design. The project will also provide internship opportunities and recommendations. The first Shanghai Fashion Week project will be held at the end of March this year. The second plan is in October. We also held a grand opening, inviting professors and lecturers from London University of Art, London University of Design, and other famous art schools. It covers a wide range of art themes, including architectural design, user interaction design, animation, and comics. Through continuous collection of feedback from students, we try to propose products that students are interested in and need, and ensure that we are confident in the new trend of the art academic world and industry. We believe that these products are not only relevant and leading in the industry, but also bring value to students who are interested in various forms of art. Since the pandemic, for the first time this year, we have resumed the U.S. art school project, bringing 12 students to Los Angeles, New York, Los Angeles, and other eight top art schools, including Prince Design School, Los Angeles Design School, and Prater Art School. We are very happy to be able to provide students with experiences in different school environments and opportunities, so that they can better plan their future study life. 我们还想强调我们在扩大我们所服务的学生群体方面所做的努力,为来自非传统学术背景的学生提供额外的服务。 例如,我们与2021年成立的ACG国际预科中心和新加坡LIFE市高等教育学院合作推出了 一个新的文凭课程,为初中毕业生推出了四年制学士学位课程,在校学生将在预科中心学习一年的预科课程。 and then study in Singapore for three years to get a master's degree. This new curriculum and other courses provided by the pre-school center will lay a solid foundation for students and ultimately help them apply and get admission to English, Italian and Japanese schools. Developing new cooperation projects and recruiting more students to enter the pre-school center of ACD has strengthened our ability to provide services to the current student community that we are constantly growing. We are confident in bringing positive results for them. In 2024, we will continue to focus on student services. We believe that our comprehensive quality projects and various extension services, the records of those who helped students achieve good results in the past, and our constantly expanding partners, relationships, institutions, and networks, all represent the core competitiveness of our core competition in the Chinese creative art education market. We are fully prepared to continue to expand our share in this scattered market, and look forward to continuing to seek better development for all of our interests and relevant people. Next, I will hand it over to Sima.
spk01: Thank you, Mr. Sima. 2023 was a fantastic year for our students, and we were pleased to be able to deliver a full year of stable operation, which we believe is important to our community's peace of mind and capacity for delivering outstanding work. I would like to take a moment to thank our teaching staff for their commitment to driving positive student outcomes and our students for their perseverance and entrusting ACG with their creative arts journeys. We are proud to have served all types of students with our quality offerings, which would not have been possible without the dedication of our entire staff and our strong network of institutional partnerships. Since the beginning of 2024, we have enrolled students into our regular research-based learning programs, such as the March Open Hack Shanghai Fashion Week program. Participating students will have the opportunity to interview designers and explore global fashion trends while creating branding proposals and fashion lookbook designs. The program also provides internship opportunities and reference letters. The first Shanghai Fashion Week program takes place in late March, and the second will be in October. We also offered several master classes with professors and lecturers from prestigious art schools such as the University of Arts London and Rhode Island School of Design, covering a wide range of arts topics including architecture design, user interface design, animation and comics, and so on. We strive to introduce offerings that reflect student interests and demand by listening continuous feedback from the student community and ensuring that we understand new trends in arts academia and industry with the belief that such offerings are not only relevant and state of the art, but also bring value for students interested in various art forms. In addition, for the first time since the pandemic, we resumed our art study tour to U.S. universities this winter break and brought 12 students to the campuses of eight top arts institutions in Rhode Island, New York, and Los Angeles, including Parsons' new School for Design, Rhode Island School of Design, and Pratt Institute, etc. We were pleased to provide participating students with an opportunity to experience a variety of different campuses, allowing them to better envision what it would be like to study at these institutions. I would also like to highlight our efforts in expanding the student population we serve by providing additional offerings to students coming from nontraditional academic backgrounds. The ACG International Arts Foundation Program Center, which we founded in 2021, initiated a new diploma program in cooperation with Singapore-based Raffles College of Higher Education, introducing a four-year bachelor's program for junior high school graduates. Enrolled students will spend a year in our Beijing Center Foundation Program and then study in Singapore for a three-year bachelor's program, after which they will receive a bachelor's degree. This new diploma program as well as other offerings currently available at the Foundation Center support students in building a solid foundation with an ultimate goal of applying and gaining admission to select colleges in the UK, Italy, and Japan. The ability to expand these programs and enroll more students into the ACG Foundation Center has strengthened our confidence in serving a growing group of potential students and driving positive outcomes for them. In 2024, we remain focused on serving our students. We believe our comprehensive portfolio of quality academic and ancillary offerings, our history of enabling excellent student outcomes, and our growing network of institutional partnerships represent our core competency in the creative arts education market in China. We are well positioned to continue growing our share in this fragmented market and look forward to continuing to strive for better on behalf of all our stakeholders. With that, I'll turn it back over to Mr. Sima.
spk02: Thanks, June and Caroline. In closing, we are excited about OCG's outlook for 2024. As a leading player in the China Creative Arts education space, we are committed to providing high-quality, relevant, and valuable experience for our students. We also continue to explore opportunities to enhance our business and value proposition, which we believe will increase shareholders' value and enthusiasm about some of these prospects. With that, operator, let's open it up for questions.
spk00: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. There are no further questions at this time. I'd like to turn the floor back over to Mr. Shima for closing comments.
spk02: Thanks again to all of you for joining us. If anyone has questions for us, please feel free to reach out directly to us or our investor relations from the Equity Group. We are always available to speak to investors and look forward to speaking with you all during our next earning call. Thank you.
spk00: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
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