ATA Creativity Global

Greetings. Welcome to ATA Creativity Global Second Quarter 2024 Financial Results Call. 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. Thank you. You may begin.

Thank you, Alfredo, and hello, everyone. Thank you for joining us. The press release announcing ATA Creativity Global's, or ACG's, results for the second quarter in six months and the June 30th, 2024 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 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 contain 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 that 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 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, 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 2 of the conference call presentation for further information. All U.S. dollar amounts in this conference call relating to financial results for the second quarter and six months ended June 30, 2024. are converted from RMB using an exchange rate of 7.2672 RMB to one US dollar. The new buying rate is as of June 30th, 2024. All historical conversions are accurate as of the time reported unless otherwise noted. The company reports the financial results on the US GAAP in RMB and all percentages calculated in the presentation are based in 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're more than happy to take investor questions in today's Q&A session or via email to the company. If you wish to ask questions, you can send your questions to email address avhang 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. Robyce Sima, will provide a brief overview of operating and financial highlights for the second quarter of 2024. 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 this floor for questions. With that, I'll turn the call over to ACG CFO, Mr. Robyce Sima. Please go ahead, Mr. Sima.

Thank you, Alice, and welcome, everyone, and good evening to those in America. We appreciate everyone's time. We were pleased to see students' demand for portfolio training services continue to expand in second quarter 2024. This is our core business and primary driver of growth, contributing RMB 40.2 million in revenue during the period, up 41.9% year-over-year. As a result, we achieved significant top-line growth a 42.8% increase in total net revenue to RMB 41.8 million. During second quarter of 2024, student enrollment was 1,084, an increase of 15.8% from the prior year period. Of those students, 612 were enrolled in ACG portfolio training programs, compared to 540 in the second quarter of last year. 42,841 portfolio training credit hours were delivered during the period, up 49.3% year-over-year. We are excited to see continued expansion across all of our business, including research-based learning and overseas study counseling services. We strongly believe in the value our comprehensive offerings provide to students and expect that enrollment growth we have seen thus far in the year will spot strong performance in the second half of 2024. Our investments in expanding the teaching and sales staff have contributed to those results and serve as a foundation for future growth. With that, let's move to financials for second quarter 2024. Total net revenues for second quarter 2024 was RMB 41.8 million, an increase of 42.8% from RMB 36.2 million in the second quarter of 2023. Growth margin improved to 49.6% during the second quarter of 2024, from 39.5% in the prior year period, primarily as a result of significantly increased revenues. Net loss attributed to ACT was RMB 16.8 million during the second quarter of 2024. compared to RMB 17.2 million in the prior year period. Bottom line results were impacted by a 30.2% increase in operating expenses related to increased G&A expenses for higher professional fees and support for business retention and increased sales expense due to the performance bonus in line with increased sales and the area of additional sales personnel. During the first half of 2024, Total net revenues increased 27.2% to RMB 99.9 million compared to RMB 78.6 million in the prior year period. Growth margin improved to 47.7% from 42.1% in the prior year period. Net loss attributed to ACT was RMB 34.7 million compared to RMB 35 million. Moving to the balance sheet, we reported U.S. dollar 5.5 million in cash and cash equivalents at the end of second quarter 2024. Working capital deficit was U.S. dollar 48.7 million, and total shareholders' equity was U.S. dollar 11 million at June 30, 2024, compared to working capital deficit of U.S. dollar 34.4 million. and shareholders' equity of US$16.9 million respectively, December 34th, 2023. With that, I'd like to turn it over to Kevin, who will expand upon our outlook and growth strategy. Kevin?