ATA Creativity Global

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.

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.

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.